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Showing 181 to 200 of 324 Records
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2025 (3) TMI 144
Liability for making TCS on compounding fees received from illegal miners, illegal transporters and for illegal storage of minerals on which royalty is payable - CIT(A) confirmed AO order - HELD THAT:- Authorized Representatives of both the parties in the backdrop of the order passed by the Tribunal in the case of District Mining Officer, Bemetara [2023 (8) TMI 31 - ITAT RAIPUR] as held that the assessee in the case before us had not only received royalty from the illegal miners/transporters of minerals as it would have in the normal course received in case of a regular lease or license, but in fact was in receipt of 10 times of royalty amount from them, therefore, the contention of the Ld. AR that the assessee was not exigible for collection of tax at source (TCS) on the amounts received from the illegal miners/transporters of minerals being devoid and bereft of any substance is liable to be rejected.
We, thus, in terms of our aforesaid observations, finding no infirmity in the view taken by the lower authorities that the assessee who was liable to collect tax at source (TCS) on the amounts received from illegal miners/transporters, having failed to do so, was to be treated as 'assessee-in-default' u/s. 206C(6) of the Act, uphold the same.
As the CIT(Appeals) had followed the view taken by the Tribunal qua the identical issues, therefore, finding no infirmity in the same, we uphold his order. Decided against assessee.
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2025 (3) TMI 143
Revision u/s 263 - capital gain on sale of residential house -determination of cost of acquisition in respect of residential property sold by the assessee - valuation of the fair market value (FMV) of the property as on April 1, 2001 - HELD THAT:- In the instant case, where the assessee’s father acquired the property prior to the 01/04/1981 and thereafter the property has been gifted to the assessee which has been sold in the year under consideration while computing capital gain the term “first year in which the asset was held by the assessee” as so interpreted by the Courts to means the year in which asset was first held by the previous owner and not the year in which the assessee became the owner of the asset in terms of the gift deed.
We therefore find that even on this account, where the assessee has computed the Index cost of acquisition by taking into consideration cost of inflation index for the year beginning first day of April 2001, the same is in consonance with the stated provision in the statute and where the AO has verified and allowed the same, the order so passed by the AO cannot be held to be erroneous in so far as prejudicial to the interest of the Revenue.
Valuation report of a registered valuer so submitted by the assessee during the course of assessment proceedings and the findings of the Ld. PCIT - We find force in the contention so advanced by the Ld AR as what is relevant for determining the fair market value is the comparative sale instance not just in terms of land area, built up structure, proximity of location but also the ownership rights and inherent risks associated with such ownership and therefore, where the assessee has sold a property having 100% ownership rights, the comparative sale instance where the seller holds 25% undivided share has to be suitably grossed up rather than discounted as currently done by the Valuer and where the adjusted value is considered, there is no prejudice which is caused to be Revenue as the same is on a higher side as compared to what has been considered by the assessee.
AO, after calling for required information/documentation and after duly considering the explanations and documentation submitted before him, reached a rightful conclusion in terms of determining the indexed cost of acquisition while working out the capital gains in the hands of the assessee.
Such a view is clearly a plausible view which a reasonable and prudent officer could have taken and the view so taken and order so passed by the Assessing officer cannot be held to be erroneous in so far as prejudicial to the interest of the Revenue and the exercise of revisional jurisdiction by the Ld. PCIT u/s 263 cannot be sustained in the eyes of law. Appeal of the assessee is allowed.
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2025 (3) TMI 142
Reopening of assessment - returned loss under the head “income from other sources” on account of interest income earned, having claimed huge interest expenses against the same, and further noting that as per section 57(iii) this interest expenses were allowable only when they were incurred for the purpose of earning interest income - case of the CIT was that the assessee’s claim of interest expenses was not examined by the AO in the light of the provisions of section 57(iii) while passing his order u/s 147 allowing the entire claim of interest expenses.
HELD THAT:- PCIT, we find has completely misdirected himself in his finding of error in the order of the AO. While he finds the order erroneous for the AO not having examined claim of the assessee to interest expenses against interest income earned, in terms of section 57(iii) of the Act, the scope of which is to allow only those expenses incurred wholly and exclusively to earn income, the error found by him actually relates to genuineness of the said expenses, which is not the concern of section 57(iii) - PCIT records no error in the order with regards to eligibility of claim of interest expenses u/s 57(iii) of the Act.
Even from the standpoint of genuineness, considering the facts noted by him, we find there is no error found by the PCIT. He notes the assessee to have deducted TDS on interest expenses and thereafter directs the AO to verify whether the interest expenses have been returned to tax by the recipients of the same.
When the only fact noted by him is of TDS having been deducted on the interest expenses, how does it by any way create any doubt on the genuineness of the claim, we fail to understand. In fact there is no doubt about the genuineness of the claim of interest expenses also. He has only directed the AO to verify further, which the Ld. PCIT, we hold, has no power to do u/s 263. Section 263 of the Act requires the Ld. PCIT to record finding of error in the order. Without himself recording any error he cannot exercise any power u/s 263 of the Act.
In the present case therefore, we find that there is no error found by the Ld. PCIT in the order passed in the case of the assessee u/s 147 of the Act, vis-a-vis allowability of claim of interest expenses either in terms of section 57(iii) of the Act, for which purpose the case of the assessee was initially reopened, or for that matter with respect to the genuineness of the claim. Appeal of the assessee is allowed.
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2025 (3) TMI 141
Revision u/s 263 - while calculating the net profit from the business and deductions u/s 80IC, the amount of duty draw back was also included by the assessee in contravention of the provisions of the Act as the amount of duty draw back was to be added to the total income separately after excluding it from the profit and loss account and net profit, thus AO has not considered and examined the above mentioned issue
HELD THAT:- Invoking the provision u/s 263 of the Act, it is necessary to establish the twin conditions i.e., firstly, order in question must be erroneous and secondly it must be prejudice to the interest of the Revenue and fulfillment of about twin conditions is mandatory prior to invoked power u/s 263 of the Act and it is also relevant here that the PCIT while invoking the power u/s 263 of the Act, supposed to enquire into or examine the matter before reaching any conclusion.
Bare perusal of the material available on record, with regard and also in the light of the aforesaid well established principle of law, lead us to draw inference that the issue which was before the AO regarding duty draw back was properly examined by the AO and decided in favour of the assessee and PCT has not taken any enquiry as required by law or site any plausible or cogent reason to reach conclusion that the impugned assessment order was erroneous and prejudice to interest of Revenue and instead of enquiry himself, the PCIT observe that it was incumbent to the officer to investigate the matter stated in the return and only on this basis the Ld. PCIT directed to examine the issue and send back to the Ld. AO. Explanation 2 to Section 263 does not give unfettered power to Ld. PCIT to revise each and every order to examine the issue which is already been properly examined by the Ld. AO. Impugned order passed by the PCIT void ab initio and beyond the jurisdiction and liable to set aside and quashed. Decided in favour of assessee.
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2025 (3) TMI 140
Penalty u/s 271DA - assessee has violated the provisions of Section 269ST - AO is of the view that since the assessee has received sale consideration over and above Rs. 2 lakhs in cash from the purchasers - HELD THAT:- The assessee was also under bona fide belief in view of the language of section 269ST which uses the expression “single transaction” and thus, at any given point of time the assessee has recorded transaction of Rs. 2 lakhs alone which was entered into provisions of section 269ST were introduced to prevent unaccounted income and black money. Assessee was under bona fide belief that cash could be accepted at any point of time not exceeding Rs. 2 lakhs and that is how cash was accepted at any given point of time within this limit of Rs. 2 lakhs.
It was quite plausible to entertain this belief in view of language of section 269ST which refers to ‘single transaction’ and whereas section 40A(3), 269SS, 269T used the expression ‘aggregate’. Even at one place, section 269ST too uses the expression ‘aggregate’. Section 269ST was the new provision and this was the first year and therefore to entertain this belief was not something which was impossible.
There is no allegation by the Assessing Officer that the unaccounted income and black money was introduced by the assessee in the form of cash sales. Assessee duly accounted for cash receipts, particulars of farmers are kept proving their identity, aadhar, land revenue record and agricultural land holding of all the farmers, Form 60, etc. and all the statements in this regard were duly and regularly filed by the assessee. In such circumstances it cannot be said that there is any intention to evade tax.
As held in the case of Hindustan Steel Ltd. Vs. State of Orissa [1969 (8) TMI 31 - SUPREME COURT] penalty is quasi criminal in character and therefore it should not be imposed for technical or venial breach.
We hold that the assessee had bona fide reasons to receive cash over and above Rs. 2 lakhs and the assessee has reasonable cause in accepting cash over and above Rs. 2 lakhs from the farmers against sale of tractors. Penalty cannot be levied for the technical and venial breach. Therefore, we direct the AO to delete the penalty levied u/s 271DA of the Act. Decided in favour of assessee,
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2025 (3) TMI 139
Rejecting the approval u/sec. 80G(v)(i) - as per DR assessee trust has huge amounts in bank FDs from preceding two assessment years and 82% of it’s donations not utilized for the objects of the trust and failed to substantiate it’s claim of non-utilization of funds for the objects of the trust - HELD THAT:- Assessee trust has displayed it’s utilization of funds from assessment years 2021-2023- 24 to meet out it’s objects by complying with the statutory requirements under the Act. CIT(E) observations to the effect that the funds are idle in FDRs in banks and as such, they are not being utilized for the objects of the assessee trust is not justified.
In this connection, it is relevant to note here that the Tiger is a National Animal of India. Already the number of Tigers in India is in alarming/depleting level/status. Therefore, if any trust like the assessee-trust in the instant case, come forward to protect, conserve and do research on the Tigers to increase it’s number, such activities of the trust shall be encouraged.
Thus, we find that the assessee society is utilizing it’s funds to meet out it’s objects and the CIT(E), Pune in his order is not justified in cancelling the approval granted to the assessee trust. Appeal of the assessee trust is allowed.
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2025 (3) TMI 138
Rejection of application for approval u/s 10(23C)(vi) - status of assessee changed from society to Section 8 Company as filed an application in Form no.56D, on 11/04/2008, seeking grant of fresh approval u/s 10(23C)(vi) - HELD THAT:- It is undisputed fact that the assessee was a Society an approved educational institution under section 10(23C)(vi). The said society is converted into Section 8 Company on 18/02/2024 as going concern under section 366 to 374 of Part 1- Chapter XXI of the Companies Act, 2013. The learned CIT(E) has compared object clauses of both the entities i.e., Society (prior to conversion) and Section 8 Company (after conversion) and noticed that certain objects like Rehabilitation Centre, Medical Centre, Medical Institutions, Clinics, providing free medical services to poor people have been added in the present object clauses which were not there in the previous object clauses of the Society. He held that these objects are related to medical facilities and not related to education hence assessee is not eligible for approval under section 10(23C)(vi).
As upon conversion of Society into Section 8 Company there is no change in activities of the assessee. There is no finding in the impugned order passed by learned CIT(E) that the assessee is carrying on any activity other than education and more importantly the conversion has been made on the basis of going concern implying that the entire activities of the erstwhile society has been taken over by the assessee company and the assessee company is carrying on exactly the same operations as were being performed by the erstwhile society.
The main objection of the learned CIT(E) that the words used “Rehabilitation Centre, Medical Centre, Medical Institutions, Clinics, providing free medical services to poor people” and nowhere has the learned CIT(E) either brought on record as to whether these activities are actually being performed by the Assessee or that the Assessee is undertaking any activity other than imparting of education. The learned CIT(E), in our opinion, has lost sight of the fact that the Assessee is solely engaged in the activity of providing education and is running educational institutes as mentioned herein above which is in the field of Engineering apart from also running certain Junior Colleges.
CIT(E) has further misinterpreted the said activities mentioned in the object clause as not being related to imparting education losing sight of the fact that in case of imparting medical education it is imperative that the institute also operates medical centres apart from running medical colleges wherein the students undergoing medical education get practical exposure which is essential in providing quality medical education. We find those in the argument of the Ld. Counsel that all medical institutions imparting education also parallelly operate a medical college wherein patients are treated and the medical students are given practical training in the field of education and as such running such medical centres are part and parcel of imparting medical education and as such cannot be read in isolation as has wrongly been interpreted by the learned CIT(E).
Thus, firstly wherein the assessee has not undertaken any of the objects which formed the basis for rejection of the approval under section 10(23C), coupled with the fact that the said objects are akin to imparting medical education and further the objects of the Assessee having been suitably modified by removing the words which were held to be objectionable by the learned CIT(E), in our opinion, there remains no reason for the approval under section 10(23)(vi) to be withheld and consequently, relying on the findings given hereinabove, we remit the matter back to the file of learned CIT(E) solely for the reason to verify the revised objects of the Assessee to ensure that the words earlier held objectionable by the learned CIT(E) have been deleted and after taking the revised objects on record grant the approval under section 10(23C)(vi) as claimed by the assessee. Assessee ground allowed for statistical purposes.
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2025 (3) TMI 137
Rejection of approval u/clause (iii) of the first proviso to Section 80G(5) alleging beyond limitation - whether the CIT(E) rejected Form 10AB dated 26.03.2024 in which approval under clause (iii) of first proviso to section 80G was sought by assessee, filed belatedly or not ? - CIT(E) observed that activities of the applicant Trust has commenced prior much before obtaining provisional approval and the present application has not filed within time prescribed
HELD THAT:- There is material substance in the submissions advanced on behalf of the assessee/ appellant that the trust was not migrating from old regime to new regime as its approval had lapsed on 31.03.2009, which was not renewed upto 31.03.2021, so it was allowed provisional approval on 02.10.2021 for the period from 02.10.2021 to AY 2024-25 and then the trust filed application for final approval on 21.09.2023 under clause (iii) of the first proviso to Section 80G(5), which was definitely within prescribed time limit as it is covered by the first limb of clause (iii) i.e. at least six months prior to expiry of the period of the provisional approval and not covered by the 2nd limb of clause (iii), as the activities already been commenced on 05.09.1980.
We are of the considered opinion that rule of procedure are just to handmade to administration of justice and not to penalise anybody and object of procedure only for interest of justice and same should be dealt with in just manner in order to fulfil the end’s of justice. In conclusion, we are inclined to accept the plea of assessee / appellant and remitting the matter back to the file of the CIT(E) to decide the issue afresh on merit, in accordance with law.
Thus, the impugned order of the CIT(E) is hereby set aside and quashed on this point and matter be remitted back to file of the Ld. CIT(E) with the direction to decide expeditiously afresh in accordance with law treating the application as filed within statutory time limit.
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2025 (3) TMI 136
Smuggling of Gold jewellery - Baggage rules - despite repeated representations, petitioner did not receive any communication regarding show cause notices or orders against him - HELD THAT:- The present petition being a writ petition under Article 226, non-disclosure of relevant facts would go to the root of the matter. The Supreme Court in Shri K Jayaram & Ors vs Bangalore Development Authority [2021 (12) TMI 1439 - SUPREME COURT] has held that non-disclosure of past & present litigations concerning dispute amounts to suppression of material facts which would disentitle a litigant from discretionary remedy under Article 226 of the Constitution.
Thus, a Petitioner who approaches the Court with unclean hands by suppressing litigation and his involvement therein is disqualified from seeking discretionary relief under Article 226 of the Constitution.
On a query from the Court as to why the copy of the authority letter and the fact that the authorized representative had received the order, was not stated in the petition, it is submitted that the authority letter has been cancelled, however, no copy is being placed on record. Also no convincting answer is forthcoming - The receipt of the Order in Original by the said authorised representative has been placed on record by the Respondent. A perusal of the same would show that the Petitioner had complete knowledge of the said order and that he has failed to avail of his remedies in accordance with law.
Since the order has itself permitted the Petitioner to redeem the goods subject to the payment of a fine of Rs. 58,000/- and a penalty of Rs. 47,000/-, let the Petitioner deposit the same with the Customs Department within a period of four weeks from the date of release of this order.
Conclusion - Petitioner had complete knowledge of the order and that he has failed to avail of his remedies in accordance with law. The deposit of the fine and penalty for the release of the goods ordered.
Petition disposed off.
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2025 (3) TMI 135
Maintainability of petition - availability of alternative remedy - Challenge to an order demanding duty drawback and interest under the Customs Act, 1962, and Customs and Central Excise Drawback Rules, 2017 - petitioner had undergone a corporate insolvency resolution process (CIRP) and was acquired by QVC Exports Ltd - HELD THAT:- In the present case the respondents did not lodge their demand in respect of the duty drawbacks against the petitioner during the CIRP. Admittedly, the claim of the respondents is not a part of the approved resolution plan. It is therefore, abundantly clear that a claim brought to the fore during the pendency of the moratorium period after the claims have been recorded by the adjudicating authority would stand waived off in terms of Section 31A of the code.
It is not inclined to relegate the petitioner to the remedy of an appeal as the case of the petitioner is squarely covered by the decisions of the Hon’ble Supreme Court in Ghanashyam [2021 (4) TMI 613 - SUPREME COURT] and in the view of the well-settled position of law.
Conclusion - Once a resolution plan is approved, all claims not part of the plan are waived. The duty drawback demand was raised after the moratorium period during CIRP, which precluded such actions. The impugned order demanding duty drawbacks is quashed.
Petition allowed.
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2025 (3) TMI 134
Seeking issuance of an appropriate writ for quashing of the impugned Order-in-Original - suspected misdeclaration and undervaluation in the import of rubber compound, un-vulcanized rubber compound and nylon chords - HELD THAT:- On the basis of the allegations stated in the impugned SCN, the DRI raised various demands against the Petitioners including interest and penalty. The impugned SCN was however not adjudicated for a substantial period of time by the concerned assessing authority.
Petition disposed off.
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2025 (3) TMI 133
Time limitation - Smuggling of gold bars and gold ornaments - burden to proof towards the gold being smuggled on the Revenue - delayed passing of the de novo adjudication order - HELD THAT:- Both under the Section 128A (4A) of the Customs Act 1962 as well as under the Customs Manual, it is specified that within the time-frame given to the Commissioner (Appeals), he ‘shall’ and ‘would’ decide the appeal within 6 months. This is subject to the clause ‘wherever possible’. It is to be noted that the word ‘may’ is not used in both the places. This shows that the Commissioner (Appeals) is required to follow the time-frame given to him for passing the OIA.
In the present case, it is seen at para 12 above that both Section 128A(4A) and the Customs Manual [Chapter 31], gives the time frame of six months to the Commissioner (Appeals) to pass the Order in Appeal.
In the Kopertek Metals Pvt Ltd., decided by the Principal Bench – Delhi Tribunal [2024 (12) TMI 269 - CESTAT NEW DELHI], it has been held that non adjudication of the order, with no reason being given to the effect that the order could not be passed within specified time limit due to circumstance beyond control, would be fatal to the legality of the order.
In the present case, it has taken nearly Two years for the Commissioner (Appeals) to even take up the Personal Hearing proceedings on 28.08.2020 for the Appeal filed on 06.09.2018. The appellant has attended the same. Hence, there is no delay on their part. After this, the OIA was passed on 24.09.2020. No reason whatsoever has been given as to what necessitated the Commissioner (Appeals) to wait for nearly two years to grant the Personal Hearing and as to why the OIA could not be passed within the time frame of Six Months. The OIA has been passed after 2 years as against the time-frame of Six months given under Section 128A(4A).
The ownership of the gold was being claimed by the Appellant right from the beginning when the first statement was recorded. He also named the persons from whom he had procured the gold. The very fact that these persons are residents of the area gets proven from the Election Records and Gram Panchayat Certificates brought in by the appellant - the initial onus to prove its smuggled nature cast upon the Revenue, has not been discharged by the Revenue as also noted by the first Commissioner (Appeals) while he remanded the matter to the Adjudicating Authority.
One glaring visible error on the part of the Revenue is seizure of gold ornaments. The quantity seized is to the tune of 86.230 grams. From the Jewelry, it cannot be ascertained that the same is of foreign origin or not. Admittedly no chemical examination was undertaken either for the gold bars or for the ornaments. But still the appellant was made to run from pillar to post for the next more than 13 years, having to approach CESTAT and having to wait for the adjudication of the de novo proceedings for release of the gold ornaments. The very fact that the Dept did not file any appeal on the gold jewelry released to the appellant shows that it is an admitted error on the part of the Revenue - in spite of the foreign markings in the gold bars, without verifying the claim of the appellant about their purchase from three persons and making a sweeping statement that the licit purchase claim by the appellant is an ‘after thought’, does not carry the case of the Revenue any further, when the appellant has made these claims on the date of seizure itself.
Conclusion - i) The delay in adjudication and appeal proceedings, without plausible explanation, invalidated the orders. ii) The Department failed to discharge its burden of proof regarding the smuggling allegations, as the appellant provided credible evidence of licit possession.
The impugned Order is not sustainable even on merits - Appeal allowed.
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2025 (3) TMI 132
Classification of imported ‘Mixed Hydrocarbon Oil’ - to be classified under Customs Tariff Item (CTI) 27011990 or as Automotive Diesel Fuel' under CTI 27101944 - applicability of the relevant import conditions prescribed under ITC-HS policy of FTP - restricted item or not - HELD THAT:- From the specific report of the samples of the impugned goods, it transpires that the imported goods under dispute are mixture of hydrocarbon oil, though containing diesel fraction, does not fulfil the standard requirements as specified under IS:1460:2005 to be considered as Automotive Diesel Fuel. In view of the above specific factual record establishing that the classification of impugned goods cannot be categorised under CTI 2710 1944, inasmuch as these goods do not fulfil the criteria mentioned for Automotive Diesel Fuel as per IS:1460:2005, the conclusion arrived at in the original order and which is confirmed in the impugned order, by the authorities below does not stand the scrutiny of law.
There are force in the argument advanced by the learned Advocate for the appellants that statements given by the appellantsimporter alone cannot form the basis to confirm the charge of misclassification and to re-classify the goods from ‘Mixed Hydrocarbon oil’ to ‘Automotive Diesel Fuel’. The law is well settled in these matters as the Hon’ble Supreme Court in the case of H.P.L. Chemicals Limited (supra) have held that classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify the goods under a particular heading or sub-heading or tariff item different from that claimed by the assessee, the Department has to adduce proper evidence and discharge the burden of proof.
From the test report given by the CRCL laboratory and from relevant tariff entries in First Schedule to the Customs Tariff Act, it is quite clear that the goods are classifiable as ‘other’ residuary goods‘ including ‘Mixed Hydrocarbon oil’ under CTI 2719 1990 and not as ‘Automotive Diesel Fuel’ under CTI 2710 1944. Department’s own Chemical Examiner of CRCL laboratory after examining the chemical composition of the representative samples of imported goods has said that it is not fulfilling the requirements of Automotive Diesel Fuel. On the other hand, after examining the chemical composition he has opined that the impugned is to be treated as mixture of hydrocarbon oil.
It is also a settled position of law that merely because an assessee has, under the stress of investigation, signed a statement admitting tax liability, it cannot lead to self-assessment or self-ascertainment. In the case of Vinod Solanki Vs. Union of India [2008 (12) TMI 31 - SUPREME COURT], the Hon’ble Supreme Court has ruled that the initial burden to prove that the confession was voluntary is upon the department andthat evidence brought by confession if retracted, must be corroborated by other independent and cogent evidence.
It is made clear that none of the evidences relied upon by the department, to allege the misclassification and mis-declaration of the description resorted to by the appellants, stand the scrutiny of Law. The department failed to substantiate the allegations by cogent and legally admissible evidences. Hence, under the facts and in the circumstances of the case, there are no hesitation in allowing the appeal in favour of the appellants by setting aside the impugned order.
Conclusion - i) The classification of goods must be based on conformity to relevant standards and supported by evidence. ii) The classification of the goods under CTI 27101990 as 'Mixed Hydrocarbon Oil' upheld.
The appeal is allowed by setting aside the impugned order.
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2025 (3) TMI 131
Interpretation of Section 212(15) and sub-section (5) of Section 223 - Legality of investigation Report submitted by the Serious Fraud Investigation Office (SFIO) under Section 212(12) of the Companies Act, 2013 - admissible as legal evidence or not, as SFIO Report have been equated as report prepared under Section 173 of the Code of Criminal Procedure (CrPC) 1973 - relevance of 2nd SFIO Report and the Compilation of Documents filed by the Respondent on 07.02.2024 before the NCLT - no sufficient pleadings in the Company Petition/ Miscellaneous Application filed by the Respondent with respect to the SFIO Report and documents and Compilation of the Documents.
HELD THAT:- Section 212 provides for investigation into affairs of Company by Serious Fraud Investigation Office and contains detailed provisions pertaining to investigation to be carried out by the SFIO. Section 212(1) provides that where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company by the Serious Fraud Investigation Office by order, assign the investigation into the affairs of the said company to the Serious Fraud Investigation Office.
On looking into the scheme of Section 212, it is clear that after investigation report is received under sub-section (11) or sub-section (12) of Section 212, Central Government may direct the SFIO to initiate prosecution against the company and its officers or its employees. Sub-section (15) is in reference to the SFIO Report which provided that investigation report filed with the Special Court for framing of charges shall be deemed to be a report filed by the police officer under Section 173. Thus, investigation report submitted by the SFIO and filed in the Special Court has to be deemed to be a report filed by the police officer under Section 173 of the CrPC. It is on the basis of the report submitted by police officer under Section 173 of the CrPC charges are framed by Special Court in offences alleged in the charge-sheet. When SFIO Report is deemed to be a report filed by police officer (for framing of charges) sub-section (15) begins with notwithstanding clause and deeming fiction is created to treat the report as report submitted under Section 173 of the CrPC so that charges may be framed in the prosecution which has been directed by the Central Government under sub-section (14) after receipt of the investigation report.
There can be no quarrel to the proposition that the police report is not legal evidence. The present is a case it is required to examine the purpose and object of Section 212 and whether the statutory scheme indicate that the SFIO Report which is submitted after the investigation as directed by the Central Government is not to be looked into in any material or evidence for any purpose as contemplated under the Act apart from framing of charges and legal fiction under sub-section (15) of Section 212 was engrafted for the purpose that SFIO Report be not treated as legal evidence.
The legislature is well aware about the provisions of law and when sub-section (14A) was added in Companies Act by Act 22 of 2019 legislature was well aware about existing provisions of Section 212(15). When legislature specifically provides SFIO Report to take a proceeding against any director, key managerial personnel and other officers of the company, obviously the said report is to be relied for the said purpose and in event, the submission of the Appellant is accepted that the said report cannot be looked into it not being the legal evidence, the purpose and object of sub-section (14A) becomes meaningless and otiose - The statutory interpretation on legal fiction as noticed above has repeatedly laid down that deeming fiction should not be extended beyond language of the section and must be limited to the context it was introduced. Deeming fiction was introduced to make the SFIO Report as a Report of police officer under Section 173 of the CrPC for framing the charges. Thus, object of legal fiction was to make the SFIO Report as report within the meaning of Section 173. Legal fiction was not for the purpose that SFIO Report be treated as inadmissible for the purposes of Companies Act, 2013.
Section 212 also contain a provision where any person concerned by making an application may obtain a report. Thus, sub-sections (1), (2) and (3) are already reflected in provisions of Section 212. Thus, when we come to sub-section (5) which says that nothing in this section shall apply to the report referred to in Section 212, the said sub-section obviously is relating to sub-section (4) where authentication is required for inspector’s report to be admissible in a legal proceeding - Section 223 which provision dealt with the inspector’s report there was no occasion to include any provision which is contrary to the scheme of Section 212. We, thus, are of the view that sub-section (5) of Section 223 in no manner has effect on the admissibility of the SFIO Report in proceeding under sub-section (14A) and the interpretation which was put by the Appellant under Section 223(5) cannot be accepted.
The ground which was raised by the Appellant for rejecting the compilation of documents and SFIO Report submitted by the SFIO cannot be accepted at this stage to throw out the compilation of documents and the SFIO Report. The issue as to what has been pleaded in the application or the petition and what is the material or evidence on the record are issues which are to be examined when applications are decided on merits. Thus, on the submission that there are no pleadings with regard to compilation of documents cannot be a reason to accept the prayers made in CA No.65 of 2024.
Conclusion - The SFIO Report is admissible in proceedings under Section 212(14A), and the NCLT did not err in considering the report and associated documents.
No grounds have been made out to interfere with the impugned order. All the appeals are dismissed.
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2025 (3) TMI 130
Seeking to challenge the order passed by the National Company Law Appellate Tribunal (NCLAT), Chennai - rejection of Section 7 application due to a delay in filing a rejoinder affidavit - HELD THAT:- Both NCLT and NCLAT committed an egregious error in taking a very technical or rather pedantic view of the matter.
Having permitted the Bank to file their rejoinder after condoning the delay, it was too much for the NCLT to say that the Bank shall not be permitted to rely on any assertions made in the rejoinder. It was expected of the NCLAT to correct such an error. Unfortunately, the Appellate Tribunal also fell into the same error.
Appeal allowed.
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2025 (3) TMI 129
Rejection of Section 7 Application filed by the appellant - demand of amount of Interest Free Maintenance Security (IFMS) from the corporate debtor, towards maintenance of common area services, installation, common passage, etc. - financial debt or not - HELD THAT:- The Hon’ble Supreme Court in ‘Global Credit Capital Limited & Anr.’ Vs. ‘Sach Marketing Pvt. Ltd. & Anr.’ [2024 (4) TMI 1067 - SUPREME COURT], has laid down that for finding out the character of the debt, nature of the transaction entered between the parties has to be captured and find out and it is only after determining the real nature of transaction, issue can be answered as to whether there is a financial debt or not.
The amount which is paid by the allottee towards IFMS security is the amount which is paid towards obtaining services and the amount is payable to the vendors/nominated maintenance agencies. The services thus are to be provided by vendor or maintenance agencies. For being a financial debt within meaning of Section 5(8), the amount needs to be disbursed against the consideration of time value of money and includes thus disbursement for time value of money is a condition precedent for falling any transaction within a definition of financial debt.
Conclusion - The finding of the Adjudicating Authority holding that amount in question i.e., IFMS does not amount to financial debt, suffers from no infirmity.
Appeal dismissed.
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2025 (3) TMI 128
Admission of Section 9 application - whether there is any infirmity in the impugned order passed by the Adjudicating Authority in allowing the Section 9 application on the ground that operational debt which was due and payable stood established by the Operational Creditor and that a default had been committed by the Corporate Debtor in respect of the said debt, the liability having been admitted without disputing the debt? - HELD THAT:- It cannot be construed in any manner that there was a categorical admission of debt and default by the Corporate Debtor. The first letter of 09.03.2020 clearly states that freight is payable subject to receipt of debit payment note as per shipping bill compliant with RBI guidelines and C.A. guidelines. Besides not confirming the demurrage, the said letter also states that they would like to arrange meeting to discuss and try to resolve the issue. It cannot be unmindful of the fact that the Operational Creditor had been asked to provide documents and debit note as per RBI and other guidelines for the vessel/freight charges.
That the issue of the debt was embroiled in dispute is also evident from the fact the Operational Creditor had themselves issued a Legal Notice 11.10.2022. Moreover, pursuant to the Legal Notice, replies were sent by the Corporate Debtor dated 17.10.2022 and 19.11.2022 wherein it has been asserted that the outstanding claimed by the Operational Creditor is not in their records. Further payment was stated to have been already done by Samruddha as freight negotiation and payment of the vessel were activities handled by Samruddha. This letter dated 19.11.2022 clearly mentioned that the matter of outstanding debt would be resolved with the help of Samruddha. It is pertinent to note that these letters addressed to the Operational Creditor by the Corporate Debtor were also endorsed to Samruddha and BST.
Once plausibility of a pre-existing dispute is noticed, what has to be looked into is whether the dispute needs further adjudication by a competent court. The Adjudicating Authority is not to enter into final adjudication with regard to existence of dispute between the parties regarding the operational debt in terms of the statutory construct of the IBC. In the present case too, the freight charges having not been admitted by the Corporate Debtor, it is not a case wherein debt and default has been unequivocally established which is essential for entertaining a Section 9 application.
Demurrage charges - HELD THAT:- It is found from the impugned order that the Adjudicating Authority noted that on 25.05.2017, the Corporate Debtor had raised an invoice for USD 22,942.74 towards Address Commission earned and that the Operational Creditor had also raised a Debit Note on 27.12.2017 for USD 242,772.19 towards demurrage dues. It was also noted by the Adjudicating Authority that the laytime calculations in support of their demurrage dues were confirmed by the broker of the Corporate Debtor vide email dated 11.10.2017. The Adjudicating Authority has further concluded after noticing the communication from the Corporate Debtor dated 09.03.2020 that the Corporate Debtor has admitted that there exist demurrage charges to be paid to the Operational Creditor, however, the same only needed to be confirmed after arranging a meeting with the Operational Creditor.
The Corporate Debtor had not admitted the liability to pay demurrages. It is therefore, clear that payment on account of demurrage was disputed by the Corporate Debtor. Under such circumstances, we are not inclined to agree that there was any admission of liability on the part of the Corporate Debtor on payment of demurrage and hence this defence taken by the Corporate Debtor cannot be disregarded as vexatious or feeble in nature. In the present factual matrix, the defence raised by the Corporate Debtor therefore cannot be held to be moonshine, spurious, hypothetical or illusory.
In a Section 9 petition, the Corporate Debtor enjoys the right to dispute the debt including the quantum of payment. From the correspondence placed on record it is clear that dispute was continuing between the parties regarding outstanding claim both in respect of freight and demurrage. Once the debt has been disputed, the question of default does not arise. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor - When Operational Creditor seeks to initiate insolvency process against a Corporate Debtor, it can only be done in clear cases where no real dispute exists between the two which is not so borne out given the facts of the present case. The conditions laid down in Section 9 having not been fulfilled, the application deserved to be rejected.
Conclusion - The Corporate Debtor was not liable for the claimed debt due to the existence of a dispute and lack of admission of liability. The Adjudicating Authority has erroneously allowed the application filed under Section 9 of the IBC by the Respondent.
The impugned order is set aside. The Appeal is allowed.
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2025 (3) TMI 127
Money Laundering - Seeking grant of bail - Practicing chartered accountant (CA) - assisting the co-accused to convert the tainted money into untainted money and connived in the laundering thereto - petition dismissed primarily on the ground that the petitioner has failed to meet the threshold of Section 45 of PMLA - it was held by High Court that 'The petitioner is admitted to bail on furnishing personal bond in the sum of Rs. 5 lakhs with a surety of the like amount to the satisfaction of the trial court on the terms and conditions imposed' - HELD THAT:- There are no good ground to interfere with the impugned order passed by the High Court in view of the pendency of trial.
SLP dismissed.
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2025 (3) TMI 126
Exemption from service tax - services provided by the petitioners, specifically related to Solid Waste Management, are exempt from Service Tax under the Finance Act, 1994 - Section 66-B of the Finance Act, 1994 - validity of SCN - notice proposing to levy service tax, can be construed as a notice for recovery while affirming a final demand or not? - HELD THAT:- The Section 65-B (44) of the Finance Act 1994, defines the term ‘service’. Section 65-B (51) of the Finance Act, defines taxable service as – ‘taxable service’ means any service on which service tax is leviable under section 66B. Section 66B of the Finance Act provides that there shall be levied a tax on the value of all services other than those specified in the Negative List - Section 66D of Finance Act, 1994, provides for the negative list, while Section 93 of the Finance Act provides power to the Central Government to grant exemption for taxable service from service tax. Accordingly, unless the service is one that falls in the negative list or a notification of exemption, the same would fall within the service tax net.
This Court in M/s Sapthagiri Cleaning Services Versus The Joint Commissioner of Central Tax Bengaluru, The Deputy Commissioner of Central Tax Bengaluru [2024 (9) TMI 1418 - KARNATAKA HIGH COURT], while considering setting aside of the show cause notice in an identical factual matrix had declined to issue a writ as sought for while observing that the relief sought for required interpretation of work order in the context of the exemption notification and accordingly, relegated the matter to the stage of post show cause notice. There is no reason that the present writ petitions seeking setting aside of show cause notice on the ground of exemption or non-chargability to service tax are to be disposed off on different grounds.
The interpretation of the work orders/ contracts would be necessary in order to arrive at a conclusion as regards non chargeability or as regards the application of exemption notification. It is relevant to note the observations made by the Apex Court in Union of India and another v. VICCO Laboratories [2007 (11) TMI 21 - SUPREME COURT], wherein it is held that the Writ Courts could interfere at the stage of show cause notice only under exceptional circumstances and when factual adjudication is warranted, the interference by the Writ Court is ruled out.
While the writ petitions challenging validity of the show cause notice are disposed of by relegating the petitioners to the stage post show cause notice reserving liberty to file additional reply and to file reply if not already filed permitting the assessees to raise all other contentions in support of their case of being within the exemption notification or outside the service tax net, the other writ petitions raising identical grounds assailing the adjudicating order (Order-in-Original) are also allowed by setting aside the adjudicating order and relegating the assessees to the same stage of post show cause notice. Such order is passed noticing substantial contentions are raised in matters where show cause notices are assailed.
In light of the contention of the revenue that the receiver of service i.e., BBMP/ local authority or Government is not a business entity registered as body corporate, such aspect is also kept open for consideration by the authority upon remand of the matters to the stage of post-show cause notice.
Conclusion - The writ jurisdiction is not the appropriate forum for resolving complex factual disputes involving tax assessments. The court set aside adjudicating orders and remanded the matters to the stage of post-show cause notice to ensure uniformity and consistent adjudication by the tax authorities.
Petition disposed off.
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2025 (3) TMI 125
Levy of service tax - amounts collected as damages/penalties for breach of contract - Section 66E(e) of the Finance Act, 1994 - HELD THAT:- The amount recovered by the appellant towards penalty is not a consideration for any activity which has been undertaken by the appellant and as a result there is no ‘service’ in terms of Section 65B(44) of the Act. The facts of the present case do not suggest that there is any other independent agreement to refrain or tolerate, or to do an act between the parties hence the issue is decided in favour of the appellant. The other issues related to invocation of extended period of limitation, penalty and interest are not required to be gone into as the issued on merits stands decided in favour of the appellant.
The impugned order deserves to be set aside - The appeal is, accordingly allowed.
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