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2022 (7) TMI 1089
Deceleration under Direct Tax Vivad Se Vishwas Act, 2020 - Revival of original declaration / order - validity of second and revised declaration - - Treatment to appeal pending before ITAT or Commissioner (Appeals) in respect of the disputed amount and/or tax arrears - HELD THAT:- As after going through the documents available on record including the provisions of ‘The Direct Tax Vivad Se Vishwas Act, 2020’ i.e. the Scheme, we are of the considered opinion that revised/fresh declaration filed by Petitioner/declarant dated 23.01.2021 is non-est in the eyes of law and any consequential order passed thereto is of no significance for the reasons stated hereunder.
Once a certificate under sub-section (1) of Section 5 is issued by the Designated Authority, any appeal pending before ITAT or Commissioner (Appeals) in respect of the disputed amount and/or tax arrears shall be deemed to have been withdrawn. Meaning thereby, in the instant case, after the declaration of the Petitioner-declarant was accepted by issuance of certificate under Section 5(1) of the Act, dated 20.01.2021 (Annexure-14), appeal pending before ITAT, Ranchi filed on 13.03.2019 (Annexure-9) and the appeal pending before the CIT (Appeals), Ranchi filed on 24.02.2020 pertaining to Assessment Year 2012-13 were deemed to have been withdrawn.
Once the said appeals are deemed to have been withdrawn by operation of law, the same cannot be revived or restored merely because a declarant, under mistaken notion, has filed a fresh declaration, which was, subsequently, rejected by the Designated Authority. If the said situation is allowed to operate, the same would have devastating effects and would prejudice the entire Scheme framed by the Parliament. If filing of one declaration after another is permitted, then even the provisions of Section 7 of the Scheme would be rendered futile which provides, inter alia, that any amount paid in pursuance of a declaration, shall not be refundable under any circumstances. An assessee, taking advantage of filing second declaration and its rejection by the Authority, can contend, inter alia, that its original declaration has lost its force in the eyes of law and can claim refund of the amount paid pursuant to the original declaration, which is clearly not the mandate of the Scheme.
We have no hesitation in observing that the revised fresh declaration dated 23.01.2021 filed by the petitioner was not maintainable in the eye of law and consequently the order passed thereto is non est in the eye of law. An alternative contention has been raised on behalf of the petitioner it is entitled to the benefit of original declaration filed by it. Since we have held that the second declaration filed by the petitioner was not maintainable and non est in the eye of law, we refrain ourselves from observing further on the others issues raised by the parties including the issue as to whether revised declaration of the petitioner company could have been rejected due to initiation of the criminal prosecution against one of the Directors of the company.
Since, admittedly, Respondents, pursuant to filing of revised/fresh declaration by the Petitioner dated 23rd January, 2021, entertained the said declaration and examined the same on merits and, thereafter, rejected it vide order dated 15.03.2021 which is our opinion has no legal effect, we are of the opinion that equities would be balanced if we direct the parties to comply with the certificate dated 20.01.2021 issued in favour of the petitioner pursuant to original declaration as per section 5(2) of the scheme i.e. within a period of fifteen days from today. If petitioner makes deposit of an amount of Rs.9,08,075/- being the amount determined as payable by the petitioner under the certificate dated 20.01.2021 within fifteen days from today, the same shall be accepted by Respondent-authorities and the declaration filed by the petitioner would be deemed to have been satisfied in terms of provisions of the Direct Tax Vivad Se Vishwas Act, 2020.
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2022 (7) TMI 1088
Taxability of Interest received u/s.244A - Whether CIT (A) erred in confirming that the interest received u/s 244A is taxable when the right to receive is under dispute in view of the appeals filed by the department? - CIT (A) held that the interest under Section 244(A) is taxable, pending final determination of the assessments by the Income-Tax Authorities / Appellate Authorities - HELD THAT:- Undisputed facts are that the assessee has received interest u/s.244A of the Act on refund and total interest is Rs.48,46,557/-. The ld.counsel for the assessee stated that this taxability of interest u/s.244A of the Act was allowed in favour of assessee by ITAT in assessment year 1984-85 but he very fairly conceded that this issue is covered against assessee in assessee’s own case [2009 (3) TMI 901 - ITAT CHENNAI] for assessment year assessment years 2001-02 & 2002-03. Since, the issue is covered in favour of Revenue and against assessee, respectfully following the Tribunal’s decision for assessment years 2001-02 & 2002-03, we dismiss this issue of assessee’s appeal.
Disallowance of business expenditure to the extent of 75% and allowing only 25% - CIT-A disallowing the claim for extra-ordinary business expenditure as it is incurred out of commercial expediency and for the purpose of the business of the appellant - HELD THAT:- We noted that the CIT(A) has not doubted the purpose of business i.e., purposes but he has estimated for the reason that the assessee has not maintained separate accounts in respect of these expenditures and the details of employees or visiting officials are not provided. Accordingly, he restricted the allowance of expenditure at 25% and confirmed disallowance of 75% of expenditure. Even now before us, the assessee could not substantiate its claim beyond allowing of expenditure at 25% as allowed by CIT(A). Hence, we dismiss this issue of assessee’s appeal and confirm the order of CIT(A).
Nature of expenditure - addition of write off of investments made in Ponni Sugars (Orissa) Ltd, claimed by assessee as commercial expediency and business compulsion but authorities below considered this as capital in nature - assessee has made investment in Ponni Sugars (Orissa) Ltd. in the equity capital, non-convertible debentures and zero coupon redeemable preference shares - HELD THAT:- From the above facts and the decision of Hon’ble Madras High Court in the case of Tamilnau Industrial Investment Corp. Ltd. [2017 (7) TMI 1048 - MADRAS HIGH COURT] and Electronic Corporation of Tamilnadu Ltd., [2018 (12) TMI 47 - MADRAS HIGH COURT] we are also of the view that the claim of loss accruing or arising as investment in equity shares, non-convertible debentures and zero coupon redeemable preference shares is not capital loss but eligible for deduction in computation of business income as business loss, as held by Hon’ble Madras High Court in the case of Electronic Corporation of Tamilnadu Ltd., for the sale of shares and amount advanced by assessee to various industries towards working capital, the real character of the transaction was those akin to loans and not equity investment. Respectfully following Hon’ble Madras High Court decision in the above two cases, we reverse the orders of lower authorities and allow this issue of assessee’s appeal.
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2022 (7) TMI 1087
Foreign Tax Credit (FTC) under Article 24(2) of the India-UK DTAA read with Section 90 of the Income-tax Act, 1961 (the Act), while computing the income of the appellant - HELD THAT:- We find that the assessee has filed original return of income which has been ignored by the Central processing centre, Bangalore as well as the National faceless appeal Centre. Even before the National faceless appeal Centre the assessee made a detailed written submission wherein in paragraph number 5 the complete facts are mentioned which is also been reproduced by the National faceless assessment centre but did not consider that assessee has also filed original return of income.
As the assessee has filed original return of income before the due date of filing of the return and form number 67 was also filed prior to the due date of filing of the return, the learned AO Central processing centre as well as the learned CIT – A has grossly erred in holding that assessee has not filed return of income and form number 67 before the due date of filing of the return. These are on record but lower authorities have ignored it for the reasons best known to them.
Further before the National faceless appeal Centre, the learned CIT (A) the assessee submitted the complete facts along with the statement and the acknowledgement number of original return filed, despite this, the learned CIT appeal dismissed the appeal of the assessee by noting wrong facts and giving wrong reasons. Therefore we reverse the orders of the lower authority and direct the learned assessing officer to grant credit of foreign tax credit to the assessee as form number 67 has been filed by the assessee on or before the due date prescribed for filing of the return of income. In the result ground number 1 – 2 of the appeal are allowed.
Depreciation while processing the tax return - Disallowance of claim as assessee mentioned it in serial number 12 (ii) of the schedule BP that relates to the computation of business profit but the depreciation is with respect to the assets of an undertaking engaged in generation and generation and distribution of the power - HELD THAT:- CIT – A held that in a filing of the return of income the onus is on the assessee to correctly fill up the return of income and make appropriate claims in the correct return. If incorrect claims are made in the return of income there liable to be rejected. Accordingly the action of the learned assessing officer is upheld. We find that assessee has made an incorrect claim in the return of income by filling up the incorrect column, the Central processing centre found that assessee is not engaged in the business of power generation et cetera and therefore is not entitled to depreciation and therefore disallowed. We find that the learned CIT – A has given a correct reason that in e filing of the return it is the duty of the assessee to put the correct amount in the correct column. Thus ground number 3 of the appeal is dismissed.
Charging of interest u/s 234A - HELD THAT:- We find that assessee has filed his return of income in time and therefore the interest charged u/s 234A deserves to be deleted. Hence, we delete the same. Ground number 4 of the appeal is allowed.
Charging of interest u/s 234B and 234C of the act, which is consequential in nature, and therefore the learned assessing officer is directed to compute the same in accordance with the law.
Charging of fees u/s 234F - We find that as the assessee has filed his return of income within the due date prescribed for the impugned assessment year, the above fee is not leviable. Hence, we delete the same.
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2022 (7) TMI 1086
Disallowance u/s 14A r.w.r. 8D - Suo -motto addition made by assessee - Addition of expenses relatable to exempt income by invoking the provisions of section 14A - HELD THAT:- As noted that the assessee has own interest free funds in the shape of share capital and Reserves & Surplus to the tune of Rs.97068.63 lakhs and non-current investment i.e., investment giving rise to exempt income is only Rs.114.05 lakhs. It means that the assessee has more interest free funds available with it for making investment in instruments giving rise to exempt income.
Neither the AO nor the CIT(A) has recorded any finding that the interest bearing funds have been invested in the instruments giving rise to exempt income. Once the AO has not established that the interest bearing funds have gone into these investments which give exempt income, no disallowance can be made in case the assessee has more interest free funds available with it and claims that the investment is out of those funds which give rise to exempt income. The presumption in view of HDFC Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] clearly goes in favour of the assessee. Hence, respectfully following Hon’ble Bombay High Court’s decision, we allow this ground of assessee’s appeal.
Receipt of carbon credit - nature of receipt - capital or revenue receipt - HELD THAT:- As this issue is fully covered in favour of assessee and against Revenue by the decision of Hon’ble Madras High Court in the case of Chemplast Sanmar Ltd. [2021 (12) TMI 713 - MADRAS HIGH COURT] wherein the Hon’ble Madras High Court has categorically held that carbon credit is in the nature of capital receipts and it cannot be added to the return of income of the assessee or it cannot be part of profit & loss account and in any case, it is part of profit & loss account, then it can be claimed as deduction. Accordingly, we reverse the orders of lower authorities on this issue and allow this ground of assessee’s appeal.
Nature of expenditure - Addition of forex forward premium charges - capital or revenue expenditure - HELD THAT:- As none of the authorities below had adjudicated this issue or gone into the details filed before us by assessee now i.e., page Nos.1 to 3 in Annexure ‘A’. The assessee is directed to file these details before AO and the AO will go into these details and decide this issue accordingly. Hence, this issue of assessee’s appeal is allowed for statistical purposes.
Disallowance of expenses relatable to Corporate Social Responsibility (CSR) - HELD THAT:- We noted that this issue stand covered in favour of assessee and against Revenue by the decision of Infosys Technologies Ltd. [2013 (7) TMI 451 - KARNATAKA HIGH COURT] as held that CSR expenditure is our expenditure which facilitates the business hence allowable expenditure under section 37.
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2022 (7) TMI 1085
Reopening of assessment u/s 147 - JD agreement entered - Exemption u/s 54F - provisions of section 2(47)v) and 2(47)(vi) are clearly attracted in this case and the capital gains are to be worked out in the impugned A.Y.- additional ground raised before him for the first-time claiming exemption u/s 54F - HELD THAT:- It is an admitted fact that the assessee had not filed the return of income despite issuance and service of notice u/s 148 of the I.T. Act. As per provisions of section 54F, the assessee is not entitled to deduction u/s 54F, if he has more than one residential flat other than the new asset on the date of transfer of the capital asset. However, it is not known as to whether the assessee owns more than one house other than the new asset since no return was filed and no enquiry was conducted either by the AO or the CIT(A).
We find the learned CIT (A) without ascertaining the basic requirement was carried away by the arguments advanced by the assessee before him and allowed the additional ground raised by the assessee which is not a legal one but requires verification of fact. Neither she has verified the facts herself nor called for a remand report and for the reasons best known to her has allowed the claim of exemption u/s 54F of the I.T. Act in respect of 52 flats without addressing the various issues raised by the Assessing Officer in the assessment order. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the learned CIT (A) with a direction to decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. If required, the learned CIT (A) shall call for a remand report from the Assessing Officer. The learned CIT (A) is also directed to consider as to how the assessee is entitled to the benefit of section 54F of the Act when as per the development agreement traced during the course of search and seizure operation in the case of SNR Nirman India Pvt. Ltd the assessee has received 52 constructed flats and whether that will amount to construction of a residential flat. The grounds raised by the Revenue are accordingly allowed for statistical purposes.
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2022 (7) TMI 1084
Reopening of assessment u/s 147 - information received from Investigation Wing - information received from the Investigation Wing that the assessee has accepted accommodation entry - Addition u/s 68 - HELD THAT:- It is obvious from the reasons recorded by the AO for reopening the assessment under section 147 that notice under section 148 has been issued to the assessee only on the basis of the information received from Investigation Wing. Under identical facts and circumstances of the case, the Tribunal has consistently held that the reassessment proceedings are not valid. In the assessee’s own case for AY 2010-11.
Since the facts of the case are identical to the facts of the case decided by the Tribunal in the case of Nihal Chand Rakyan [2017 (12) TMI 1813 - ITAT DELHI] as also in the assessee’s own case we hold that the reassessment proceedings initiated by the Ld. AO is invalid. Therefore, assessment framed consequent thereto is ab-initio-void. In the result, appeal filed by the assessee is allowed on the issue of validity of the reassessment proceedings. Since the assessee succeeds on this legal ground, we refrain from adjudicating the issues on merit. - Decided in favour of assessee.
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2022 (7) TMI 1083
Allowable business expenditure - legal and travel expenses incurred as eligible for deduction u/s 37 or not? - AO has disallowed the expenses claimed by the assessee on the ground that the expenditures incurred by the assessee was not for the business purposes and it was relating to 2G Spectrum case and the Directors and shareholders are involved and the expenditures incurred are not for the business of the assessee and it was only relating to legal and travelling expenses to persue the Directors and shareholders’ case before the Special CBI Court, New Delhi
HELD THAT:- As at the time of assessment proceedings, the CBI judgement was not available before the Assessing Officer as the assessment order under section 143(3) of the Act was posted on 27.03.2015 and therefore, there was no occasion for the Assessing Officer to examine the judgement of the CBI Court and consider the issue of legal and travelling expenses incurred by the assessee company are eligible under section 37(1) - Whereas, the ld. CIT(A) passed the appellate order on 30.05.2018 by the time the judgement dated 21.12.2017 of the Hon’ble Special CBI Court was available.
However, the ld. CIT(A), without considering the same, confirmed the order of the Assessing Officer by noting that the expenses are relating to 2G Spectrum Scam. In our opinion, both the authorities below have disallowed the expenditure claimed by the assessee on the ground that it was relating to 2G Spectrum case. Both the authorities below have not examined the outcome of the Special CBI Court judgement. Further, we are of the opinion that whether the expenses incurred by the assessee relating to business and eligible for claiming deduction or not, one must look into the judgement of the Special CBI Court, where, the Directors and shareholders of the assessee company are accused and both the authorities below have failed to consider the judgement of the Hon’ble Special CBI Court.
We set aside the order of the ld. CIT(A) and remit the matter back to the Assessing Officer to decide the issue afresh in accordance with law after examining the judgement of Hon’ble Special CBI Court. Appeal allowed for statistical purposes.
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2022 (7) TMI 1082
Revision u/s 263 by CIT - appellant had made purchases which is nearly 45% of the total purchases and no form 3CEB was obtained, to examine the arm’s length price - HELD THAT:- As it is clear that the show cause notice issued in this regard was incorrect on facts, and there was only a suspicion that there is requirement of TPO was required, and even after all details being provided, there is no conclusion about requirement of such reference to TPO. On the contrary the PCIT had also himself stated that if there is no such transaction with associated enterprises no reference to TPO is required to determine Arms Length Price. The proceedings u/s 263 cannot be initiated just to make any fishing or roving enquiries - selection of the case of the appellant was not on the basis of TP risk parameters, and therefore even in a case where there are international transactions with the associated enterprises, and no reference was made to TPO, the proceedings u/s 263 cannot be initiated simply on this reasons unless there are material facts to indicate that the transactions were not at arms length price.
As in the present case, there are no transactions with the associated enterprises, and therefore on this ground of reference to TPO, valid jurisdiction u/s 263 cannot be invoked.
Verification of the sundry creditors - In the order u/s 263, nothing adverse has been pointed out in relation to any of the creditors or any irregularities in the account. Simply on the basis of suspicion the order cannot be said to be erroneous when proper enquiry was duly made.
It the view taken by the AO after verification is a plausible and permissible view, the CIT cannot exercise the powers under s. 263. Even from the impunged order it is seen that various past assessments had been also made under scrutiny and some of the creditors which are regular creditors, nothing adverse had been stated in relation to these creditors. Even from Glory Exports confirmation from the said party was submitted during the assessment. In the present issue the AO has made proper enquiry on this issue and it is not denied that notices u/s 133(6) had been issued to certain creditors, the nature of assessment order does not bring the case of the revenue within the purview of s.263 and cannot be said to be prejudicial to the interest of revenue.
Payment of commission and assortment charges - Nothing material has been pointed out in the impunged order about the inadmissibility of any of the expenditure being incurred by the appellant. All payments are also through banking channel, and due tax deduction at source on such payments had also been made by the appellant, which was also submitted during the assessment proceedings. Thus the issues stands duly examined at the time of assessment, and nothing material has been placed on record to show the error in such judgment.
Disallowance out of expenses made - PCIT himself in his order u/s 263 stated that the submissions of the assessee on this issue is found to be acceptable and the adhoc disallowance as made by the AO in the assessment order u/s 143(3) of the Act for A.Y. 2016-17 is not disturb and the same will remain as it is. Thus on this issue the contention of the appellant was accepted by the PCIT, and therefore would not be the subject matter of 263. Even in the case of JR Industries [2022 (5) TMI 351 - ITAT JAIPUR] it was held by Bench that if an issue is decided by CIT(A) in an appeal against the assessment order passed by the AO, then, that issue cannot be subject-matter of proceedings under s. 263.
Thus we find that there was no lack of proper enquiry and the original assessment was made after due verification, and PCIT was not justified in invoking the powers under s. 263. The Hon’ble Rajasthan High Court also in the case of Laxmi Narayan [2017 (11) TMI 1622 - RAJASTHAN HIGH COURT, JAIPUR] following the decision of Malabar Industrial Corporation [2000 (2) TMI 10 - SUPREME COURT] had held that if the enquiry has been duly made, the revision proceeding cannot be initiated. In view of the same the order u/s 263 is quashed. Appeal of assessee allowed.
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2022 (7) TMI 1081
Net profit estimation - undisclosed income - unrecorded receipts / sales - estimated rate of 8% on alleged undisclosed Toll Receipts - assessee is engaged in activity of collection of toll from the commercial vehicles entering in the state of Delhi - HELD THAT:- As perused the material placed available in record including the paper books filed by the assessee. It is settled legal position that unrecorded receipts found during the course of search or otherwise cannot be just added in toto and it cannot be considered as unrecorded income in toto unless there are evidence to that effect.
Our attention was drawn by the ld. AR towards the various decisions of Paharganj Grah Nirman Sahkari Samiti Ltd. & Ors. [2005 (10) TMI 237 - ITAT JAIPUR] wherein profit was estimated on the unrecorded receipts / sales and same was added as income. Considering the various decisions and the facts and in the circumstances of the case, it is held that the profit element embedded in the unrecorded receipts has to be considered as income and not the entire unrecorded receipts. Accordingly, appeal of the revenue on these grounds is dismissed.
Appellant company has offered undisclosed income earned out of unaccounted toll business - CIT(A) has estimated the unrecorded profit @ 8% on unrecorded receipts - On careful consideration of the argument of ld. AR and order of ld. CIT(A) it is seen that the appellant is in business of toll collection and during the course of search evidence of under recording of toll collection was admittedly found. The appellant has offered net profit of Rs. 14 crores in its return filed in response to notice u/s 153A and has stated it is earned out of its under recorded toll collection business. CIT(A) has rightly estimated the income from such unrecorded toll collection receipt @ 8% of the unrecorded receipts.
However, there is no merit in the finding of the ld. CIT(A) that this amount is to be added separately and no benefit of telescoping is to be given. It is seen by us that when the appellant has itself offered Rs. 14 crores as income from such unrecorded receipts which is quite more than the estimation of profit so made by ld. CIT(A), therefore separate addition of the aforesaid amount over and above the amount of Rs. 14 crore so declared in the return will tantamount to double addition of the same income and therefore, the same is hereby deleted. Accordingly, the appeal of the appellant company is allowed.
CIT-A accepting revised return of income filed by the appellant before the AO - CIT(A) allowed the appeal of the appellant company by considering direct judgement of Gujarat High Court namely CIT Vs. Himgiri Foods Ltd. [2010 (3) TMI 756 - GUJARAT HIGH COURT] wherein the Hon’ble Court has held that if after the issuance of an intimation, a revised return is filed u/s 139(5), it is incumbent upon the AO to process the revised return and amend the intimation issued u/s 143(1)(a) on the basis of revised return. The Hon’ble Court has also held that an intimation u/s 143(1)(a) of the Act cannot be equated with an assessment framed u/s 143(3) of I.T. Act.
Considering the above decision, another decision namely S.R. Koshti [2004 (12) TMI 62 - GUJARAT HIGH COURT] and also Kiran Infra Engineering Ltd. [2013 (9) TMI 226 - ITAT CHANDIGARH] CIT(A) ordered to consider the revised return and income shown therein. The department is in appeal before us. Same argument has been taken as mentioned in the assessment order. We have gone through the facts of the case and legal position on the issue under consideration. Considering the various decisions as referred by the ld. AR and also considered by CIT(A) and there being no contrary decision so cited on behalf of revenue, we find no infirmity in the order of ld. CIT(A) particularly when the revised return was filed within the statutory time limits provided under the Act. In view of the above discussion the ground of appeal taken by the revenue is rejected.
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2022 (7) TMI 1080
Delayed payment of employees' contribution to ESI & PF account - impact of amendment brought into section 36(1) as well as 43B by Finance Act, 2021 - HELD THAT:- As Relying on SHRACHI BURDWAN DEVELOPERS (P) LIMITE [2022 (3) TMI 961 - ITAT KOLKATA] if employees' contribution received by an assessee and paid to ESI and PF accounts before the due date of filing of the return, then the assessee will be eligible to claim the deduction of such amounts. With the assistance of ld. representatives, we have specifically gone through the record and find that payments have been made within the due dates of filing of the return. With the above observation, these appeals of the assessee are treated as allowed. The disallowances stand deleted - Decided in favour of assessee.
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2022 (7) TMI 1079
Depreciation on Temporary Structure - expenditure in relation to renovation of leasehold premises - assessee submitted that these are purely temporary structures on which 100% depreciation has to be allowed - HELD THAT:- Assessee has incurred certain expenditure in relation to renovation of leasehold premises. The details of the same have been mentioned in the AO’s order. The items mentioned by no stretch of imagination can be said to be building construction material, hence the Explanation-1 referred by the ld. DR is not applicable.
As regards the nature of expenditure, it is clearly emanating that the same is relating to interior design, electrification charges, furniture charges, wallpaper, toughened glass etc. These items are certainly revenue fixtures when used in the rented premises. How they are not temporary is beyond comprehension. Further, AO’s hypothesis that these are “probably” addition in furniture and fixture is a guess-work, not sustainable in law.
CIT(A)’s observation that the construction made does not appear to be temporary in nature is similar to the guesswork of the AO de hors the facts on record which show that these are temporary furnishing and fixtures in its premises. Such expenditure were duly held to be allowable in the matter of Girdhari Dass & Sons [1975 (4) TMI 19 - ALLAHABAD HIGH COURT], and in the case of Peri India Pvt. Ltd. [2016 (5) TMI 426 - ITAT MUMBAI]. Accordingly, we set aside the orders of authorities below on this issue and decide the issue in favour of the assessee.
Disallowance of depreciation - as argued the Appellant company engage in the business of tour and travel and vehicles have actually been used for carrying the travelers - HELD THAT:- We find that the orders of authorities below in denying depreciation @ 30% on commercial vehicles being used by the assessee in operating touring services leaves no doubt that Revenue authorities have failed to apply any mind. Moreover, even after submitting the RC Book of registration as taxi, ld. CIT (A) has made a bizarre remark that it was obtained with ulterior motives without any material having been brought on record. It is also noted that such depreciation rate was allowed in succeeding years i.e. AYs 2015-16, & 2017-18 u/s 143(3). Hence, we set aside the orders of the authorities below on this issue and decide the issue in favour of the assessee.
Disallowance of loss incurred on foreign exchange - HELD THAT:- We find that the claim of the assessee has to be examined on the touchstone of Hon’ble Supreme Court decision in Woodward Governor India Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT] as affirmed the allowability as revenue expenditure of the foreign exchange fluctuation determined on the basis of Accounting Standard-11 consistently on mercantile basis. Here, no case has been made out that the claim of assessee is not in consonance of this exposition. Hence, respectfully following the precedent, the assessee’s ground is allowed.
Nature of expenditure - legal & professional expenses - Revenue or capital expenditure - HELD THAT:-. We note that we have already set aside the orders of the authorities below on the issue of interior expenditure on interiors held by the authorities below as capital in nature herein above. On the same reasoning, this expenditure is also allowable as revenue expenditure. Hence we set aside the order of the authorities below on this issue and allow the issue in favour of the assessee.
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2022 (7) TMI 1078
Unexplained expenditure for purchase of land - Reliance on seized loose paper - HELD THAT:- We find force in the arguments of ld. AR, we hold the AO is not justified in applying the provisions of section 132(4A) to the assessee. We note from the letter of ADIT (Inv.), which is at Page No. 2 of AO, that itself explains that purchasers have paid amount of Rs.63 lacs and the remaining amount was paid by cheques and RTGS, of which clearly establishes that the appellant-revenue is not clear about the allegation of cash payment by the assessee.
Therefore, cash payment of Rs.2 crores as alleged by the Revenue in terms of the seized loose paper cannot be believed. Further, there is no conclusive evidence brought on record by the AO in support of its allegation of that the assessee paid cash of Rs.2 crores to Mr. Zaheeruddin Sallauddin Kokani and there is no indication of assessee’s name in the seized loose papers nor in the statement recorded u/s. 132(4A) vide Q. No. 12. Therefore, the addition is made by the AO is not justified in view of discussion made by us hereinabove and the order of CIT(A) in this regard is justified. Thus, the ground No. 1 raised by the Revenue is dismissed.
Addition of cash payment to various persons u/s. 40A(3) - HELD THAT:- We find that the transaction in respect of purchase of plot at Adgaon Shivar, Gat No. 598/1, did not materialize and the payment made in cash of Rs.15,00,000/- was refunded to the assessee by way of bank cheques by Mr. Virendra Vijaysingh Pardeshi. Therefore, no addition is justified in this regard and we find no infirmity in the order of CIT(A).
Further, payment in cash was made on bank holidays and claim of exception provided in Rule 6DD(j) of the Rules. We note that no expenditure claimed as the said payment was made on cancellation of shathekhat (agreement to purchase). On perusal of impugned order at Page No. 24, we note that the assessee filed calendar for relevant period showing bank holiday, Office Circular No.07/2010 dated 24-11-2010 issued by Chief General Manager (HRD). The CIT(A) considering the bank holidays and circular relied there upon deleted the addition made by the AO. The ld. DR did not bring on record any evidence rebutting the finding rendered by the CIT(A) in terms of exception contemplated in Rule 6DD(j) of the Rules. Therefore, we find no infirmity in the order of CIT(A) in this regard.
Regarding the payment made to Mr. Gend Sagar Parasharam and Mr. Kamal Singh Sohansingh Chitodiya we note that the said two payments were made before the Sub-Registrar, Nashik which are part of sale consideration. We find the CIT(A) discussed the said issue in his order at Page No. 25 and by placing reliance on the order of this Tribunal in the case of Dnyaneshwar Jagannath Dhamne [2016 (7) TMI 1313 - ITAT PUNE] which held that the provisions of section 40A(3) of the Act are not attracted as the cash payments are part of sale consideration which are paid before Sub-Registrar i.e. State Government Office. The ld. DR did not bring on record any view contrary to the finding of CIT(A). Therefore, we find no infirmity in the order of CIT(A) and it is justified.
DR challenging the finding of CIT(A). In the absence of which, we find no infirmity in the order of CIT(A). Thus, ground No. 2 raised by the Revenue is dismissed.
Addition on account of payment made to Kokani family u/s. 40A(3) - HELD THAT:- We note that the payment in cash to an extent of Rs.45,00,000/- were confirmed by the Kokani family before the Sub-Registrar and the said cash payment for forming part of total consideration vide registered sale deed. A contention was raised by the assessee that the said payments were added to the value of closing stock and the same were not claimed as expenditure during the year under consideration. We note that the AO discussed the issue in detailed of the assessment order. On perusal of the same, we note that the cash payments amounting to Rs.45,00,000/- made on insistence of Kokani family members which is part and parcel of total sale consideration vide the registered sale deed. We note that it is a settled position of law that the purchase price is a part of stock-in-trade and no expenditure claimed as deduction in this regard, therefore, in our opinion, no disallowance u/s. 40A(3) is justified. The transaction being genuine no disallowance u/s. 40A(3) of the Act is maintainable. Further, it is also not disputed by the ld. DR that the said cash payment was part of closing stock and no expenditure concerning the same was claimed in the year under consideration. Therefore, we find no infirmity in the order of CIT(A) in this regard and it justified. Thus, the ground No. 3 raised by the Revenue is dismissed.
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2022 (7) TMI 1077
Interest u/s 244A - non-grant of interest for delayed period of 29 months in granting the tax refund - HELD THAT:- Interest u/s 244A shall be granted to the assessee on delayed refund subject to the provision of said section - A.O. while granting refund u/s 237 ought to have calculated interest u/s 244A for the delayed refund, unless the delay is caused by the assessee’s fault. The CBDT in its Instruction No.7/2013 dated 15th July, 2013, has endorsed the observation in case of Own motion v. UOI & Others in [2013 (3) TMI 316 - DELHI HIGH COURT] wherein, the Hon’ble High Court had held that the assessee cannot be denied interest on refund unless the delay is caused by the assessee’s fault.
When the refund was finally given on 27.07.2020, the A.O. ought to have calculated interest u/s 244A of the I.T.Act while granting refund (For the delayed refund by 29 months).
The rectification order dated 31.07.2020 having failed to calculate interest u/s 244A (which is automatic unless delay is attributable to assessee’s fault), the first appellate authority was within his jurisdiction to have entertained the claim of interest on delayed refund u/s 244A which was repeatedly requested by the assessee vide its letters dated 05.04.2018, 01.05.2018, 25.05.2018, 02.08.2018, 08.06.2020, 29.10.2020 and 28.02.2022.
In the interest of justice and equity, we restore the issue to the files of the A.O. The A.O. is directed to take a decision in accordance with law and grant interest u/s 244A of the I.T.Act with reference to the delayed refund amount (refund credited to assessee’s bank account on 27.07.2020). The A.O. shall afford a reasonable opportunity of being heard to the assessee before a decision is taken in the matter. Appeal filed by the assessee is allowed for statistical purposes.
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2022 (7) TMI 1076
Disallowance of interest interest paid to Bank of Baroda and Andhra Bank - purpose of advances given - HELD THAT:- Issue is same as in the AY 2014-15 [2018 (5) TMI 799 - ITAT DELHI] The Tribunal in its order (supra) has recorded the finding that sum given as advance to Gaursons Realtech Pvt. Ltd. was for the purpose of the acquisition of the land and sum deposited as share application with Gaursons Realtech Pvt. Ltd. was for the purpose of the business of the assessee company and therefore, interest applicable to these advances cannot be disallowed. Moreover, it is the contention of the assessee that the Revenue has not established any nexus between the borrowed funds and interest free advances to the related party. The impugned disallowance of interest is entirely based on the assessment order of the preceding AY 2014-15. Not only this, no finding has been recorded by the Ld. AO that the money borrowed has been utilised by the assessee company for purposes other than its business.
It has been brought to our notice that the Revenue had gone in appeal before the Hon’ble High Court of Delhi against the order of the Tribunal for AY 2014-15 in the case of the assessee and Hon’ble High Court [2020 (2) TMI 1099 - DELHI HIGH COURT] upheld the order of tribunal observing there were sufficient interest- free funds available with the assessee, allowing them to advance the loans in question. Thus, the Tribunal, in our view was correct in concluding that it could not be said that it was the interest-bearing loan obtained from Bank of Baroda and Andhra Bank which had been advanced as interest-free loan to M/s Gaursons India Ltd.
Thus we hold that the appeal of the Revenue on the issue is without any substance. The Ld. CIT(A) was perfectly justified in deleting the impugned disallowance. We uphold the order of the Ld. CIT(A) on the point and reject ground No. 1 and 2 of the Revenue.
Delayed deposit of employee’s contribution towards Provident Fund - violation of the provision of section 36(1)(va) of the Act and CBDT Circular No. 22/2015 dated 17.12.2015 - HELD THAT:- As relying on Aimil Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT] where the assessee company made payment of employee’s contributions to Employee’s Provident Fund (EPF) after due date of payment under EPF Act but before date of filing of return, the assessee company would be entitled to deduction of such payment. We, therefore, endorse the findings of the Ld. CIT(A) and decide the issue against the Revenue
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2022 (7) TMI 1075
Validity of order of Settlement Commission - Petition by revenue - Gross misdeclaration in the description, quantity and value of imported goods - Secondary Defective High Speed Drills/Rods - Respondent approached the Settlement Commission under Section 127 B of the Customs Act, 1962, on receiving the SCN - Whether disclosure made by Respondent No.1 was neither full nor true? - HELD THAT:- It is settled law that this court is not the court of appeal while exercising its jurisdiction under Article 226 of the Constitution of India against the order of Settlement Commission. The Hon’ble Apex Court in SANTOGEN TEXTILE MILLS LTD. VERSUS UNION OF INDIA [2002 (5) TMI 883 - SC ORDER] upheld the view expressed by Division Bench of this Court in SANTOGEN TEXTILE MILLS LTD. VERSUS UNION OF INDIA [2002 (3) TMI 59 - HIGH COURT OF JUDICATURE AT BOMBAY] that this court would only be permitted to examine legality of the procedure and not validity of the order of Settlement Commission. Even in the case that was before this court (Bombay judgment) in Santogen Textile Mills, the court observed that the Hon’ble Apex Court in JYOTENDRASINHJI VERSUS SI TRIPATHI AND OTHERS [1993 (4) TMI 1 - SUPREME COURT] while considering the scope of writ jurisdiction of the High Court, cautioned the writ court and permitted it to examine the legality of the procedure followed, not the validity of the order, it not being a court of appeal. The court also noted that the Hon’ble Apex Court had laid down that the writ court should not be concerned with the decision but with the decision making process.
It is true that the finality clause contained in Section 245-I does not and cannot bar the jurisdiction of the High Court under Article 226 or the jurisdiction of this court under Article 32 or under Article 136, as the case may be. But that does not mean that the jurisdiction of this Court in the appeal preferred directly in this court is any different than what it would be if the assessee had first approached the High Court under Article 226 and then come up in appeal to this court under Article 136. A party does not and cannot gain any advantage by approaching this Court directly under Article 136, instead of approaching the High Court under Article 226. This is not a limitation inherent in Article 136; it is a limitation which this court imposes on itself having regard to the nature of the function performed by the Commission and keeping in view the principles of judicial review - Be that as it may, the fact remains that it is open to the Commission to accept an amount of tax by way of settlement and to prescribe the manner in which the said amount shall be paid. It may condone the defaults and lapses on the part of the assessee and may waive interest, penalties or prosecution, where it thinks appropriate. Indeed, it would be difficult to predicate the reasons and considerations which induce the commission to make a particular order, unless of course the commission itself chooses to, give reasons for its order. Even if it gives reasons in a given case, the scope of enquiry in the appeal remains the same as indicated above viz., whether it is, contrary to any of the provisions of the Act.
The appellate power under Article 136 was equated with the power of judicial review, where the appeal is directed against the orders of the Settlement Commission - the only ground upon which this Court can interfere in these appeals is that order of the Commission is contrary to the provisions of the Act and that such contravention has prejudiced the appellant.
Petition dismissed.
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2022 (7) TMI 1074
Issues involved: Petitioners seeking interim relief due to separate adjudication orders arising from a single show-cause notice.
Analysis: The High Court, comprising Hon'ble Mr. Justice Rajiv Shakdher and Hon'ble Ms. Justice Tara Vitasta Ganju, heard the matter involving Mr. Rakesh Prasad Singh, Advocate as the Petitioner and Mr. Anurag Ojha, Sr. Standing Counsel for the Respondents. The Court allowed the applications filed by the petitioners subject to filing legible copies of annexures three days before the next hearing date in W.P.(C) 10390/2022 and W.P.(C) 10403/2022. The principal grievance raised by the petitioners was the issuance of two separate adjudication orders on different dates, 14.02.2022 and 26.03.2022, stemming from a single show-cause notice dated 22.05.2019. The Court acknowledged the correctness of this assertion on the face of it.
Mr. Anurag Ojha, representing the respondents, informed the Court that he needed to seek instructions and would return. Consequently, the Court issued notice on the issue. Mr. Ojha accepted the notice on behalf of the respondents. The Court directed the filing of a counter-affidavit within the next four weeks, with any rejoinder to be filed before the subsequent hearing. The matters were listed for further proceedings on 05.09.2022. Additionally, the Court ordered that no coercive measures should be taken against the petitioners in connection with the aforementioned adjudication orders during the interim period.
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2022 (7) TMI 1073
Seeking grant of regular bail - allegation is that the applicant has played an active role in the fraud committed by the company along with ex-promoters and its associates as he was the statutory auditor for 18 companies - fraud of siphoning of money availed through Credit facilities from banks and then investing the same in the preference shares of BSL for managing its debt equity ratio - HELD THAT:- As regards the legal embargo of Section 212(6), Sub-section-(i) has duly been complied with, as the Public Prosecutor (Ld. CGSC) has been given a chance to oppose the bail application. The Applicant is not guilty of the offence of which he are charged with, and therefore, it is also opined, that he is not likely to commit any further offence while on bail. Hence, sub-section (ii) of Section 212(6) is also complied with, notwithstanding the observations of JAINAM RATHOD VERSUS STATE OF HARYANA & ANR [2022 (4) TMI 1421 - SUPREME COURT], where it was held that While the provisions of Section 212(6) of the Companies Act 2013 must be borne in mind, equally, it is necessary to protect the constitutional right to an expeditious trial in a situation where a large number of accused implicated in a criminal trial would necessarily result in a delay in its conclusion. The role of the appellant must be distinguished from the role of the main accused.
The Applicant is enlarged on bail subject to the terms and conditions imposed - application disposed off.
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2022 (7) TMI 1072
CIRP proceedings - NCLT admitted the application - dispute was existing or not - service of demand notice - It is submitted that firstly, it has not been the case of the corporate debtor before the Tribunal and has been raised for the first time by the suspended Director in this appeal - Whether notice was duly served at the address of the registered office of the corporate debtor situated in the State of Bihar, taken from the company master data and also upon one of the Director R.K. Gupta who had been participating in the whatsapp chat which satisfies the mandate of Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016?
HELD THAT:- From the perusal of the provisions i.e. Section 8 and 9 of the Code, it is apparent that a notice of the unpaid amount to the corporate debtor is a sine qua non. The form and manner of the demand notice is provided in Rule 5 of the Rules of 2016 which says that an operational creditor has to deliver to the corporate debtor a demand notice in Form III or a copy of the invoice attached with notice in Form IV. The demand notice, referred to Section 8(2) of the Code has to be delivered to the corporate debtor at the registered office by hand, registered post or speed post with acknowledgement due or by electronic email service to the Whole Time Director or designated partner or key managerial personnel, if any, of the corporate debtor. The legislature has used the word “or” in Rule 5(2)(a&b) which means that the demand notice could be served either at the registered office or upon the Whole Time Director. It means that service upon one of the entities is the sufficient compliance of Section 8(2) of the Code and both are not necessary.
In the case of JYOTI STRIPS PRIVATE LIMITED VERSUS JSC ISPAT PRIVATE LIMITED [2021 (2) TMI 204 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI PRINCIPAL BENCH], it has been held that Section 8 of the Code read with Rule 5 of the Rules provides that service of demand notice has to be served upon the corporate debtor at its registered address. But no such issue was involved in it that in case it is not served upon a Whole Time Director then it would be an insufficient compliance. It is not the case of the appellant that notice was not served upon the whole Time Director. As a matter of fact the notice was served upon R.K. Gupta who is the Director of the Company and had been in conversation with the representative of the operational creditor on whatsapp.
Thus, there has been sufficient compliance of Section 8(2) of the Code and even if it is presumed, for the sake of arguments, that no notice was served upon at the registered address i.e. East of Kailash though the operational creditor has been continuously insisting that the registered address of the corporate debtor, obtained from the master data, is of the State of Bihar where the notice was sent.
There is no quarrel with the law laid down by this Tribunal that the electronic evidence i.e. email or even whatsapp can also be looked into in order to find out the fact about an existing dispute between the parties which can be used as a shield by the corporate debtor to avoid the attack of the operational creditor with the filing of an application under Section 9 of the Code but in the present case, operational creditor has been shown in the books of accounts of the corporate debtor as sundry creditor and had admitted the debt even in the whatsapp chat but has selectively referred to the chat regarding defect in the supplied goods and raised this issue when the application under Section 9 was filed - the findings recorded by the Tribunal does not call for any interference and are hereby upheld.
Appeal dismissed.
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2022 (7) TMI 1071
Appellant is subsidiaries or affiliate of the Unitech Limited or not - Unitech Holdings Limited a wholly owned subsidiary of Unitech Limited has shareholding to the extent of 41.95% in the Appellant. - appointment of Directors in the Appellant Company by the Board of Directors of Unitech Limited - appellant was a joint venture holding of Unitech Holdings Limited - whether the order of Moratorium does not apply to the joint venture? - HELD THAT:- From the facts of the present case, it is clear that Unitech Holdings Limited a wholly owned subsidiary of Unitech Limited has shareholding to the extent of 41.95% in the Appellant.
The Appellant is clearly an ‘affiliate’. Thus, subsequent events which have been brought on the record by Appellant clearly indicate that Unitech Holdings Limited exercises control over the Appellant and Board of Directors of the Unitech Limited has nominated Directors in the Board of Directors of the Appellant. In view of the order dated 20.01.2020, the Resolution Plan with regard to Unitech Limited was to be filed in the Hon’ble Supreme Court. Learned Counsel for the Appellant submitted that the Resolution Plan with regard to group entities of Unitech are also being filed before the Hon’ble Supreme Court which is under consideration.
There are no doubt that the Appellant is an affiliate of Unitech Group and Moratorium imposed by the Hon’ble Supreme Court by order dated 20.01.2020 as clarified by further order dated 24.03.2021 was applicable on the Appellant who was also entitled for the benefit of the said orders. Learned Adjudicating Authority committed error in holding that orders dated 20.01.2020 and 24.03.2021 are not applicable to the Appellant who is a joint venture of Unitech Holdings Limited. The new Board of Directors of Unitech Limited has also taken steps for appointment of Nominee Directors of Board of Directors of the Appellant - the order dated 06.04.2022 passed by the Adjudicating Authority in I.A No. 5608 of 2021 cannot be sustained and is set aside.
Section 7 Application filed by the Respondent stands adjourned sine die till the currency of Moratorium as imposed by the orders of the Hon’ble Supreme Court dated 20.01.2021 and 24.03.2021.
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2022 (7) TMI 1070
Seeking direction to proposed Resolution Applicant to approach the Committee of Creditors (CoC) for deciding his eligibility under section 29A to submit a resolution plan for consideration - MSME status of the corporate debtor - Eligibility under section 29A to furnish a resolution plan in CIRP of the CD - HELD THAT:- It is noted that the CIRP was initiated against the corporate debtor GEI Industrial Systems Ltd. vide order dated 20.7.2017. While the CIRP was continuing, resolution plans were sought from proposed resolution applicants, and during this process the appellant Mr. C.E. Fernandes, who is a promoter of the corporate debtor, was considered ineligible to submit a resolution plan.
The Resolution Professional filed an additional affidavit before the Adjudicating Authority on 22.6.2020, wherein he stated that the corporate debtor would be eligible to be classified as MSME prospectively w.e.f. 1.7.2020. This averment was based on the information received from District Industries Centre, Bhopal vide letter dated 23.5.2019 (attached at pg. 139 of the appeal paperbook) and letter dated 27.5.2019 (attached at pg. 140 of the appeal paperbook). The Resolution Professional also took into account the total investment in the plant and machinery by the corporate debtor to be as Rs. 45.90 crores, and also the definition of MSME which had been modified vide gazette notification dated 1.6.2020 for classification of the corporate debtor as an MSME w.e.f. 1.7.2020.
Again, in the 9th meeting of CoC held on 10.2.2020, the CoC deliberated on the feasibility and viability of modified resolution plan dated 30.1.2020 presented by Mr. C.E. Fernandes. The minutes record that while the representatives of ICICI bank and Axis Bank did raise the issue of ineligibility of Mr. C.E. Fernandes under section 29-A of the IBC, the CoC as a body went ahead to consider the modified resolution plan presented by Mr. Fernandes. Thereafter the proposed resolution plan was put for electronic voting and the result of the electronic voting is tabulated at page 43 of the reply of Respondent No. 2/CoC, whereby the resolution plan was rejected with a voting share of 70.60%. Thus it is unambiguously clear from the consideration of the proposed resolution plan of Mr. C.E. Fernandes in its many modified forms which were duly discussed by the CoC in detail.
It is worth noting that the CIRP against the corporate debtor was initiated vide order dated 20.7.2017 and the 10th meeting of the CoC took place on 16.6.2020, which is after almost 3 years of the initiation of the CIRP. This time period spent in the CIRP is much more than the time period stipulated under the IBC. Moreover, the CoC, which is constituted of the financial creditors of the corporate debtor, decided in the 10th meeting of the CoC to go for CD’s liquidation, directing the Resolution Professional to take next steps as considerable time had already been lost after the completion of stipulated CIRP period, which has resulted in increase in CIRP costs and erosion of assets value of the corporate debtor. As sufficient opportunity had been given to Mr. C.E. Fernandes for presenting a feasible and viable resolution plan but he eventually failed and withdrew his proposed plan, the next step under section 33 of IBC was undertaken by the Resolution Professional.
Thus, the CoC, without any prejudice regarding the eligibility of the Appellant under section 29A of IBC, did consider the resolution plan submitted by Mr. C.E. Fernandes and offered suggestions for its modifications/improvements - appeal dismissed.
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