TMI Tax Updates - e-Newsletter
January 13, 2021

Case Laws in this Newsletter:

GST Income Tax Corporate Laws Insolvency & Bankruptcy Central Excise Indian Laws

Articles

1. Budget suggestions: Simplification of S.80C of the Income-tax Act, 1961 and to make tax saver fixed deposits more user friendly and flexible.

   By: DEVKUMAR KOTHARI

News

1. Auto-population of e-invoice details into GSTR-1

2. CCI approves acquisition of stake in Ecom by PG Esmeralda

3. CCI approves Proposed Combination in acquisition of 100% equity interest and joint control in Virtusa Corporation by Austin HoldCo., GIC Investor and CPPIB Investor

4. Corrigendum to order under section 119 of the Income-tax Act dated 11/01/2021

5. Manipur becomes the 4th State to complete urban local bodies reforms Additional borrowing permission of ₹ 75 crore issued

6. CCI approves acquisition by Total SE through its subsidiary Total Renewables SAS in share capital of Adani Green Energy Limited

Notifications

FEMA

1. FEMA 23(R)/(4)/2021-RB - dated 8-1-2021 - FEMA

Foreign Exchange Management (Export of Goods and Services) (Amendment) Regulations, 2021

SEBI

2. 105 - dated 12-1-2021 - SEBI

Central Government designates the Court of Additional District and Sessions Judge, Patna as the Special Court

3. SEBI/LAD-NRO/GN/2021/04 - dated 11-1-2021 - SEBI

Securities and Exchange Board of India (Investment Advisers) (Amendment) Regulations, 2021

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CDMRD/DRMP/CIR/P/2021/08 - dated 11-1-2021

Review of Volatility Scan Range (VSR) for Option contracts in Commodity Derivatives Segment

2. SEBI/HO/CDMRD/DNPMP/CIR/P/2021/9 - dated 11-1-2021

Revision in Daily Price Limits (DPL) for Commodity Futures Contracts

Highlights / Catch Notes

GST

• GST Ruling: "Un-fried Fryums" Not Classified as "Papad" Under Tariff Item 1905 90 40, Different GST Rate Applies.

  Case-Laws - AAR : Classification of goods - rate of GST - PAPAD of different shapes and sizes - PAPAD is a thing entirely different and distinct from FRYUMS. Therefore, in common parlance or in market, Fryums are not sold as “PAPAD” instead of “PAPAD” sold as papad and Fryums are sold as Fryums. Both products are different and have their individual identity. Accordingly, in common parlance test, the applicant’s product i.e. “different shapes and sizes of Papad” is not “Papad” but is “Un-fried Fryums” - the ‘Un-fried Fryums’ are not classifiable as ‘Papad’ under Tariff Item 1905 90 40. - AAR
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• Forfeited Advance Money Deemed 'Supply' Under CGST Act; Exiting Contract Classified as Service Per Schedule II, Clause 5(e).

  Case-Laws - AAR : Levy of GST - forfeited advance money - The impugned transaction is also a ‘supply’ under the provisions of the CGST Act and therefore taxable. In our view, therefore, this transaction of the applicant agreeing to the obligation of refrain or tolerate or to do an act (exiting from the contract) on the part of Mr. B (customer), for payment of a sum, will be covered under Clause 5(e) to Schedule II to CGST Act 2017, as a declared service - AAR
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• Supply of Medical Staff and Services to Corporates Not Exempt Under Sr. No. 74, Now Taxable as Non-Healthcare Services.

  Case-Laws - AAR : Taxable Service or Exempt Service - The service of supply of doctor, nursing staff, ambulances and other administrative staff to the corporate entity for medical care of their staff does not get covered under the Sr. No.74 of exemption Notification - Therefore, the said services of the applicant do not qualify under the definition of ‘healthcare service’. - AAR
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• Concessional 5% GST Rate Not Applicable to Bulk Drugs Supplied as Raw Materials for Human Use.

  Case-Laws - AAR : Classification of goods - Bulk Drugs - the product being supplied by the applicant cannot be directly administered in a human being. The concessional rate of GST is applicable only to the medicine or drugs, which are ready for administering in the human being or person. In the instant case, the applicant supplies bulk drug to their customers and hence the said bulk drug becomes raw material to the said customers - Concessional rate of 5% GST is not applicable to the bulk drug Danuorubicin, Epirubicin, Idarubicin and Zoledronin Acid - AAR
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• Gold Refining and Purity Testing Not a Composite Supply u/s 2(30) of CGST Act 2017, AAR Rules.

  Case-Laws - AAR : Job Work or not - Classification of services - rate of tax - Refining of gold from old jewellery and coins/biscuits - it is not possible to assume one of supply as principal supply and other one as to ancillary supply - it is concluded that the applicant’s service of refining of pure gold from old jewellery and coins/biscuits and testing of purity of gold are not covered under the definition of Composite supply, as defined in Section 2(30) of CGST Act, 2017. - AAR
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• Non-returnable Common Maintenance Fund for Repairs Qualifies as Supply of Service, Subject to GST.

  Case-Laws - AAR : Levy of GST - built -up area received from each member as “Common Maintenance Fund / Deposit” - Such deposit is never to be returned to the members, but same along with its interest will be used as and when required in future for maintenance, repair etc. of the common amenities, facilities, services, conveniences, utilities and common infrastructure of the Scheme meant for its members. Thus, the applicant, in addition to maintenance charges, also collected amount as Common Maintenance Fund (Deposit) from their members which is non-returnable. Since, the said amount is collected as non-returnable common maintenance fund, such deposits can be considered for such supply of service as mentioned above and, hence, will be liable to tax / GST. - AAR
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• IGST not applicable on direct foreign transactions from Feb 1, 2019; previously applied until Jan 31, 2019.

  Case-Laws - AAR : Scope of GST - levy of IGST on out and out transactions taking place beyond the Customs frontiers of India - Applicable IGST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendor’s premises (located outside India) to the customer’s premises (located outside India) for such transactions effected upto 31.01.2019. However, no IGST is payable on such transactions effected from 01.02.2019 onwards - AAR
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Income Tax

• Court Rules Hostel Facilities as "Imparting Education" for Tax Exemption u/s 2(15) of Income Tax Act.

  Case-Laws - AT : Exemption u/s 11 - whether providing hostel facility to the needy students by appellant-trust is to be considered as imparting education within the meaning of section 2(15) or it would fall within the clause "advancement of any other object of general public utility" provided in the proviso appended to section 2(15)? - HELD Yes - AT
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• Assessment Reopening u/s 147 Deemed Invalid: Lack of Reassessment Reasons Voids Order, Says Hon'ble Third Member.

  Case-Laws - AT : Validity of Reopening of assessment u/s 147 - Hon'ble Third Member concurred with the view taken by Hon'ble Judicial Member, who observed that, order dated 28/02/2014 passed by Ld. AO under section 143(3) read with 147 of the Act, without furnishing reasons recorded for initiating proceedings for reassessment under section 147 of the Act is void and of no effect. - AT
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• Tax Case: Cash Payments to Transporters Disallowed u/s 40A(3) Without Examining Farmers' Claims or Rule 6DD(e) Evidence.

  Case-Laws - AT : Disallowance u/s 40A(3) - payment to transporters in cash - The assessee has demonstrated before the authorities below that the payments were made for purchase of agricultural produce. On the other hand, there is no evidence on record to conclude that the questioned payments do not come within the ambit of rule 6DD(e) of the Income Tax Rules. Even the AO did not examine the concerned farmers or sought their explanation to verify the contention of the assessee. - AT
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• Section 40A(3) Cash Payment Restrictions Not Applicable for Unrecorded Land Purchase Cost; Tax Authorities' Disallowance Overturned.

  Case-Laws - AT : Addition u/s 40A - Payment in cash for purchase of land - when the assessee has not debited the amount of cost of land in the profit & loss account nor claimed any deduction in respect of cost of land by way of computation, provisions contained u/s 40A(3) are not attracted, so AO/CIT(A) have erred in making / confirming the disallowance - AT
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• AO Must Decide if Expense is Capital; Filing Forms 15G/15H Affects TDS Obligations u/s 40(a)(ia.

  Case-Laws - AT : Non-deduction of TDS - Disallowing u/s. 40(a)(ia) - If the AO accepts the contention of assessee that expenditure was capitalized, then there is no necessity to examine the filing of Form 15G & 15H. The AO is therefore directed to verify whether the expenditure claimed is capital expenditure and if so, delete the addition. If the same has been claimed as revenue expenditure, then the assessee should be permitted to file Form 15G & 15H so that TDS obligation can be said to be non-existent. - AT
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• Rental Income from Unsold Shops as Stock in Trade Should Be 'Income from Business,' Not 'House Property'.

  Case-Laws - AT : Assessment of rental income - ‘Income from House Property’ OR ‘Income from Business’ - notional annual letting value on unsold shops held as stock in trade by the assessee - Since the flats shops where held as stock in trade, addition of income as house property is not correct - AT
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• Court Questions Validity of Section 68 Addition for Alleged Bogus LTCG; Dematerialized Shares Serve as Key Evidence.

  Case-Laws - AT : Bogus LTCG - Addition u/s 68 - the assessee dematerialized the shares in the D-mat account which is also an independent material and evidence cannot be manipulated. The holding of the shares by the assessee cannot be doubted and the finding of the AO is based merely on the suspicion and surmises without any cogent material to show that the assessee has introduction his unaccounted income in the shape of long term capital gain. - AT
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Corporate Law

• Director Disqualified for Failing to File Returns; Government Circular Clarifies New Compliance Format Under Companies Act 2013.

  Case-Laws - HC : Disqualification of Director - Non filing of annual returns - Scope of the circular - Provisions of Schedule II and Schedule III of the Act of 2013 also came into effect from April 1, 2014 - Such a Government circular cannot be construed and read to mean that, defaults committed by a company or an individual in filing financial statements and annual returns for the period prior to April 1, 2014 stood condoned or that, such legal entity or the individual should not be prosecuted for non-filing of financial statements and annual returns for the period prior to April 1, 2014. All that the Circular did was to clarify that the financial statements and annual returns were required to be filed in the new format from April 1, 2014. - HC
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Case Laws:

• GST

• 2021 (1) TMI 376
  Scope of GST - activity carried out by the applicant in which goods are shipped directly from the vendor located outside India (in the instant case M/s. SPX Flow Technology, Poland) to the customer located outside India (in the instant case M/s. BRAC Dairy and Food Project, Bangladesh) - whether the activity undertaken by the applicant is covered by Entry No.7 in Schedule 3 of the CGST Act, 2017 - levy of IGST on out and out transactions taking place beyond the Customs frontiers of India - HELD THAT:- The integrated tax on goods imported into India shall be levied and collected at the point when duties of customs are levied on the said goods under Section 12 of the Customs Act, 1962 and on the date determined as per provisions of Section 15 of the Customs Act, 1962 - Further, it is found that the issue has already been decided by Authority for Advance Ruling, Kerala in IN RE : M/S SYNTHITE INDUSTRIES LTD., ERNAKULAM [ 2018 (4) TMI 583 - AUTHORITY FOR ADVANCE RULING - KERALA ] wherein it was held that the goods are liable to IGST when they are imported into India and the IGST is payable at the time of importation of goods into India; The applicant is neither liable to GST on the sale of goods procured from China and directly supplied to USA nor on the sale of goods stored in the warehouse in Netherlands, after being procured from China, to customers, in and around Netherlands as the goods are not imported into India at any point. Circular No. 33/2017 Customs dated August 1, 2017 issued in the context of High Sea Sales , wherein it has been clarified that sub section (12) of section 3 of the Customs Tariff Act, 1975 specifies that all duties, taxes, cesses etc shall be collected at the time of importation i.e. when the import declarations are filed before the customs authorities for the custom clearance purposes - the circular is applicable in the present case. Similarly, it is found that, where, Bill of Entry/import declarations are not being filed with respect to the goods so procured, GST would not be leviable. Further, as far as the leviability of GST on outward supply from place of vendor to customer is concerned, it is to mention that the thumb-rule for determining the taxability of any transaction is to ascertain whether the transaction tantamount to supply in terms of the provisions of law. Thus, in the instant case, the applicant, who is the third party in the transaction involved in the instant case, is acting as an agent on behalf of the supplier i.e. SPX Flow Technology, Poland and is therefore covered under the definition of supplier as mentioned in Section 2(105) of the CGST Act, 2017. It is also found that the applicant who is the supplier in the instant case, is selling goods for a consideration in the course or furtherance of business and such transaction tantamount to supply in terms of the definition of supply - In the instant case, it is an undisputed fact that the supply involves movement of goods and therefore the place of supply would be the termination for delivery to the recipient. The goods under consideration are supplied to overseas buyers as declared by the applicant and as such the place of supply will be a place outside India. Further, the supplier is the applicant who has declared the principal place of business within India and issues the invoices for sale of such goods. In view of the amendment in Schedule-III of the CGST Act, 2017, supply of goods from a place in the nontaxable territory to another place in the non-taxable territory without such goods entering into India shall be treated neither as a supply of goods nor a supply of services with effect from 01.02.2019. Since in the instant case, the supply of goods takes place from Poland (which is a non-taxable territory) directly to Bangladesh (which is also a non-taxable territory) without the said goods entering into India, the transactions mentioned in the instant case are similar to that as mentioned in Entry No.7 of Schedule-III of the CGST Act, 2017 - it can be concluded that no GST is leviable on such type of transactions which have taken place with effect from 01.02.2019 and onwards. The activity undertaken by the applicant M/s. SPX Flow Technology (India) Pvt. Ltd., Ahmedabad is covered under Entry No.7 in Schedule 3 of the CGST Act, 2017 in respect of the transactions undertaken for the period from 01.02.2019 onwards - Applicable IGST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendor s premises (located outside India) to the customer s premises (located outside India) for such transactions effected upto 31.01.2019. However, no IGST is payable on such transactions effected from 01.02.2019 onwards.

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• 2021 (1) TMI 375
  Levy of GST - built -up area received from each member as Common Maintenance Fund / Deposit - time of supply for such transaction - HELD THAT:- The taxable event in GST is supply of goods or services or both - the GST Laws have provided certain exceptions to the requirement of supply being made for consideration and in the course of furtherance of business. The definition of consideration is inclusive and consideration may be in cash or kind. The payment received will not be treated as consideration, if there is no direct link between the payment and supply. From the close scrutiny of above definition, it is clear that there should be a close nexus between the payment and supply and thus, any payment/exchange/barter etc. would be treated as consideration for supply and liable to GST. Prima facie a conclusion can be drawn without much difficulty that a deposit given in respect of the supply shall not be considered as payment made for such supply unless the supplier appropriates such deposit as consideration for the said supply. In the instant case, we find that the applicant is a registered entity as an Association of Persons and has a legal existence separate from its members. The applicant is collecting the amounts towards Common Maintenance Fund (Deposit) @ Rs. 250/- per square foot of built-up area for future supply of services viz. maintenance, repair etc. of the common amenities, facilities, services, conveniences, utilities and common infrastructure of the Scheme meant for its members. It is a fact that the Common Maintenance Fund (Deposit) is mandatory under the Bye-laws of the Co-operative Societies/Resident Welfare Associations and is in the nature of a non-returnable deposit towards unforeseen events or planned events. Such deposit is never to be returned to the members, but same along with its interest will be used as and when required in future for maintenance, repair etc. of the common amenities, facilities, services, conveniences, utilities and common infrastructure of the Scheme meant for its members. Thus, the applicant, in addition to maintenance charges, also collected amount as Common Maintenance Fund (Deposit) from their members which is non-returnable. Since, the said amount is collected as non-returnable common maintenance fund, such deposits can be considered for such supply of service as mentioned above and, hence, will be liable to tax. It is worthwhile to mention that the applicant themselves stated in the application that sometimes, maintenance deposit standing the name of the person who is leaving this society shall get transferred to new person who is coming in as new member of this society in his place. Thus, in this case, said deposit is also not refunded but transferred the same into account of new member by making accounting entry - the said deposit cannot be considered as non-refundable and, hence, will be taxable under GST. Time of supply for such transaction - HELD THAT:- The proviso to the clause (31) of the Section 2 of the CGST Act, 2017, as discussed in foregoing paras, states that the deposit given in respect of a future supply shall not be considered as payment made for such supply until the supplier applies such deposit as consideration. In the instant case, the common maintenance fund/deposit so collected is the amount collected towards the future supply of service of maintenance, repair etc. and accordingly, gets applied as consideration towards supply of services only at the time of actual supply of services. Therefore, the amount collected towards the common maintenance fund/deposit do not form part of consideration towards supply of services at the time of collection, however, the amounts so utilized for provision of service are liable to GST at the time of actual supply of service.

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• 2021 (1) TMI 374
  Job Work or not - Classification of services - rate of tax - Refining of gold from old jewellery and coins/biscuits - Conversion of old gold jewellery into coins/biscuits as per specification given by service recipient - classification and rate of tax for services of testing of purity of gold - composite supply or not - What are the consequence if, the applicant charged more or less the rate of services of refining gold than the actual rate? HELD THAT:- The applicant received gold jewellery or coins/ biscuits (after melting old jewellery) from service recipient/customer to refine pure gold and testing of purity of gold. All old gold jewellery or coins/biscuits collected by applicant are placed in vessel made up of magnesium and heated and melted at a temperature between roughly 1000 and 12000 degree Celsius in furnace. During the process, all metals absorb in the alloy leaving behind only gold and silver. The available gold and silver is heated in Nitric acid to separate the silver from gold. The remaining pure gold is weighted to determine the percentage of purity. Upon completion of process and analysis, the applicant issues the certificate of purity of gold. After that, a certificate of purity with pure gold has been given to the recipient of service/customer. This pure gold is used by service recipient/customer in the further process of making new jewellery or coins/biscuits. Whether the activity Refining of gold from old jewellery and coins/biscuits and Conversion of old gold jewellery into coins/biscuits as per specification given by service recipient provided to registered person will be covered under the definition of job work under section 2 (68) of CGST Act, 2017 and also what is the classification of Service and rate for the service provided to registered and unregistered person? - HELD THAT:- It is clear from definition of Job-work that job work involves (i) two persons, (ii) goods and (iii) process/treatment on the goods. Also, the procedure for job work is prescribed under Section 143 of CGST Act and Rule 45 of the CGST Rules - In the instant case, the applicant is a person, who is carrying out the process of refining the pure gold from old gold jewellery and coins/biscuit and converting the old gold jewellery into coins/biscuits, as per the specification of the customer. Both the said processes are being done on old jewellery and/or coins/biscuits i.e. on the goods and the goods i.e. old jewellery and/or coins/biscuits belonging to another registered person. The applicant being a job worker satisfies all the necessary ingredients to carry out job work activity. Hence, we can conclude that the said process of refining of pure gold on old jewellery or coins/biscuits and converting the old gold jewellery into coins/biscuits, as per the specification of the recipient, who is a registered person, gets covered under the definition of Job work . The service of refining pure gold from old jewellery and coins/biscuits and converting the jewellery into coins/biscuits, as per the specification of the registered person and un-registered person, merits classification under Service Accounting Code (SAC) 9988 - Board Circular has clarified that the entry at item (iv) covers only such services, which are carried out on physical inputs (goods) owned by persons other than those registered under the CGST Act. Hence, service of refining of pure gold from old jewellery and coins/biscuits owned by unregistered person is covered under entry No. (iv) of aforesaid Notification No. 11/2017-CT (rate) dated 28.06.2017 and accordingly, GST rate would be 18 %. Classification and rate of tax for services of testing of purity of gold - HELD THAT:- The applicant receive gold jewellery or coins/ biscuits (after melting old jewellery) from service recipient/customer for testing of purity of gold. All old gold jewellery or coins/biscuits collected by applicant are placed in vessel made up of magnesium and heated and melted at a temperature between roughly 1000 and 12000 degree Celsius in furnace. In this process, all metals absorbs in the alloy and left only gold and silver. The available gold and silver is heated in Nitric acid to separate the silver from gold. The remaining pure gold is weighted to determine the percentage of purity. Upon completion of process and analysis, the applicant issues the certificate of purity of gold. After that, a certificate of purity with pure gold has been given to the recipient of service/customer - Hence, service of testing of purity of Gold merits classification under Service Accounting Code (SAC) 9983 - In view of the entry No 21 of Notification No. 11/2017-CT (Rate) dated 28.06.2017, the rate of GST for the service of testing of purity of gold would be 18 % Whether the service of refining of old gold jewellery or coins/ biscuit as well as testing of purity of gold, will be considered as composite supply? If yes, what is the rate of tax applicable on it? - HELD THAT:- Under the GST Act, a composite supply would mean a supply consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. We find that applicant proposes to provide more than two taxable supplies to the recipient. In respect of supply, which consists of more than two taxable supplies and to fall within the ambit of composite supply, it will be necessary for us to determine whether a particular supply is naturally bundled in the ordinary course of business or otherwise. As per the definition of Principal supply, one of the supply of goods or service should have predominant element and other supply of goods or service should be of ancillary of principal supply. In the instant case, both the supply of service refining of pure gold and testing of purity of gold are equivalent to principal supply. Therefore, in such a scenario, it is not possible to assume one of supply as principal supply and other one as to ancillary supply - it is concluded that the applicant s service of refining of pure gold from old jewellery and coins/biscuits and testing of purity of gold are not covered under the definition of Composite supply, as defined in Section 2(30) of CGST Act, 2017. Whether the aforesaid supply of services is covered under Mixed supply or otherwise? - HELD THAT:- There is no dispute that applicant s supplies consist of two supplies. It is also not in dispute that the supplies are made in conjunction with each other if customer demands. We have already observed in aforesaid paras that each of the supplies can be supplied separately as they are not dependent on each other and one supply of goods does not occasion the supply of other goods. Further, in the foregoing paras, it has already been ruled out that both the supply of services do not get covered under the definition of Composite Supply as defined in Section 2(30) of CGST Act, 2017. As the transaction put before us satisfies all the ingredient of mixed supply , we conclude that the transaction would get covered under the definition of mixed supply as defined in Clause 74 of Section 2 of the GST Act. In view of the Section 8(b) of CGST Act, 2017, the rate of tax for a mixed supply would be the rate of a particular supply, which attracts higher rate of tax out of two supplies of service - tt is observed that the higher GST rate of tax of a particular supply of Service is 18 %. Hence, the supply of service of refining of pure gold and testing of purity of gold is a mixed supply and GST rate would be 18 %. What are the consequence if, the applicant charged more or less the rate of services of refining gold than the actual rate? - HELD THAT:- The above question on which applicant sought advance ruling is very vague and hypothetical question because the applicant in his advance Ruling application has not submitted any facts with regard to the said question. Therefore, in absence of any facts in this regard, we members of authority are not in position to give any ruling in respect of this question. Therefore, the members of the authority restrict ourselves to give any ruling on the said question.

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• 2021 (1) TMI 373
  Classification of goods - Urine collection bags - to be classified under HSN Code 90189099 or otherwise - whether covered under Serial No.E(8) of List 3 of Entry 257 of Schedule I of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 issued under the Central Goods and Services Tax Act, 2017 and corresponding Notifications issued under the Gujarat Goods and Services Tax Act, 2017 and the Integrated Goods and Services Tax Act, 2017 OR under Serial No.218 of Schedule-II of the Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 attracting GST rate of 12%. HELD THAT:- The Urine Collection Bags manufactured and supplied by the applicant are instruments/appliances, which are used in medical sciences, are classificiable under heading 9018 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and appear at Entry No.218 of Schedule-II to the Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 on which GST liability is 12% (6% CGST + 6% SGST). We also find that there is another entry i.e. Entry No.257 of Schedule-I of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 which covers Assistive devices, rehabilitation aids and other goods for disabled, specified in List 3 appended to this Schedule and the product Urine Collection Bag finds mention at Entry No.8 of List 3(E). The GST liability under the said entry is 5%(2.5% CGST and 2.5% SGST). We also find that Urine Collection Bag is an assistive device and that it would be covered under Entry No.257 of Schedule-I of the said notification, irrespective of the fact as to whether the said product is used for disabled people or otherwise. In this regard, since there are 2 separate entries available to the applicant falling under different Schedules of the Notification No.01/2017-Central Tax (Rate) dated 28.06.2017. As per Rule 3 of the General Rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975, the heading which provides the most specific description shall be preferred to headings providing a more general description - In this case, it is found that the entry No.257 of Schedule-I of Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 provides a more specific description of the product manufactured and supplied by the applicant as there is a specific entry of Urine Collection Bag at Entry No.8 of List 3(E) appended to the said Schedule whereas the Entry No.218 in Schedule-II of aforementioned Notification provides only a general description i.e. instrument/appliance used in the medical sciences. Thus, the product Urine Collection Bags manufactured and supplied by the applicant fall under Entry No.257 of Schedule-I of Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 and the GST liability on it is 5%.

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• 2021 (1) TMI 372
  Classification of goods - Bulk Drugs - whether the bulk drugs are eligible of GST rate @5% in terms of Sr. No. 180 of Schedule I of Notification No.01/2017 (Rate) dated 28.06.2017, as amended? - HELD THAT:- Sr. No. 180 of Schedule-I of Not. No. 01/2017-Ct (Rate) dated 28.06.2017, as amended, only such medicine and drugs are covered, which can be used for or in diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings. The term bulk drugs is not defined in CGST, Act 2017. Therefore, DRUGS (PRICES CONTROL) ORDER, 1979 is ordered - From the plain reading of said definition, it is crystal clear that bulk drugs are raw material /ingredient of pharmaceutical and they are the Active Pharmaceutical Ingredients (i.e. API) of the medicine. In other words, it is the substance responsible for the product being a medicine. The bulk drug would inevitably remain the same as it is the identity of the medicine. When the bulk drug is absent, the product is no longer a medicine and when it is changed, it is a new medicine. Bulk dugs is not defined in GST, therefore, in common parlance we can say that Bulk drugs is basically an Active Pharmaceutical Ingredients (API) meaning any pharmaceutical, chemical, biological or plant product, which is used as such or as an ingredient in any formulation. Thus, it is an admitted fact that the product being supplied by the applicant cannot be directly administered in a human being. The concessional rate of GST is applicable only to the medicine or drugs, which are ready for administering in the human being or person. In the instant case, the applicant supplies bulk drug to their customers and hence the said bulk drug becomes raw material to the said customers - The applicant contention is that their bulk drug i.e. Danuorubicin, Epirubicin, Idarubicin and Zoledronin Acid is covered under the entry No. 180 of Not. No. 01/2017-CT (Rate) dated 28.06.2017 and eligible for concessional rate of GST. In the said entry No. 180 of said Notification word Bulk Drugs would have been included, had the intention of the Government been to extend the benefit of concessional rate to the bulk drugs/raw material. Therefore 5% GST is not applicable to the bulk drug Danuorubicin, Epirubicin, Idarubicin and Zoledronin Acid, in terms of List I to Entry No. 180 of Schedule I to the Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017.

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• 2021 (1) TMI 371
  Taxable Service or Exempt Service - Specified services of appointing Doctors, Nursing Staffs, Ambulances and relating administrative services to corporate entities (Factory/ plant) - HELD THAT:- The applicant is a service provider and engaged in the service of supply/ appointing doctors, nurses and administrative staff to corporate entities (Factory/ plant). The applicant contention is that the said service covered under Sr. No.74 of the Notification No. 12/2017-CT(Rate) dated 28.06.2017 and is exempted from payment of GST. Any services of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India provided by a hospital, nursing home, sanatorium or any other institution is exempted from GST in terms of the entry No. 74 of Notification No. 12/2017-CT (Rate) dated 28.06.2017. Whereas the applicant is supplying doctors, nursing staff and other administrative staff to the factory/for their staffs for medical care and he himself is not providing any such medical related services or health care services as defined in para (zg) of the Notification No. 12/2017-CT (Rate) dated 28.06.2017. Also the applicant s office/establishment does not get covered under the category of clinical establishment as defined in para (s) of the said Notification No. 12/2017-CT (Rate) dated 28.06.2017. The service of supply of doctor, nursing staff, ambulances and other administrative staff to the corporate entity for medical care of their staff does not get covered under the Sr. No.74 of exemption Notification No. 12/2017-CT (Rate) dated 28.06.2017. Therefore, the said services of the applicant do not qualify under the definition of healthcare service . Further, applicant s office/ establishment does not get qualified under the definition of clinical establishment given in the para (zg) and (s) respectively of Notification No. 12/2017-CT (Rate) dated 28.06.2017. Therefore, the services provided by the applicant are taxable under GST.

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• 2021 (1) TMI 370
  Benefit of reduced rate of GST - Sr. No. 3 item (v) sub-item (da) of Notification No. 01/2018-CT (Rate) Dated 25.01.2018 - construction services provided by the applicant under the project SAMANVAY RESIDENCY - HELD THAT:- It is found that Ahmedabad Urban Development Authority has approved Samnvay Residency under the Affordable Housing Project and Architect has given certificate that land area of the said scheme is 3465 Sq. Mtrs. This scheme is having total 5 blocks namely A to E. The total FSI of the scheme is 9342.61 Sq. Mtrs. and out of which 9084.81 Sq. Mtr. of FSI consumed in the flats having carpet area below 60 Sq. Mtrs. On perusal of clarification, notification and the clause (da) of item (v) of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 and facts on record, we find that the applicant s case is covered under the tax rate of 12%, under Heading 9954 (Construction Services), (v) (da) of above mentioned Notification No. 11/2017, as amended since the project undertaken by them falls under the definition of Affordable Housing as stated by them in the application - The benefit of reduced rate would be available to them only in the cases of supply effected after 25-1-2018 i.e. the date on which Notification 1/2018-Central Tax (Rate) dated 25-01-2018 was issued and the benefit of this reduced rate would be applicable in case of only those flats which are having carpet area upto 60 sq mtrs. in this scheme which is covered in the category of affordable housing. In case of other flats which have carpet area more than 60 Sq. Mtrs. the applicant would be required to pay GST at normal applicable rate. The construction services provided by the applicant under the project SAMANVAY RESIDENCY qualifies for the reduced CGST rate of 6% as provided in Sr. No. 3 item (v) sub-item (da) of Notification No. 01/2018-CT (Rate) Dated 25.01.2018.

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• 2021 (1) TMI 369
  Classification of goods - applicable rate of tax - Hybrid Hydraulic Servo System which is prepared by assembling various parts and is used as part in different type of machines - whether the said product falls under Chapter Heading 8479 or any other suitable Chapter Heading of the Customs Tariff Act, 1975? - HELD THAT:- On the basis of the classification of the said product, it will be leviable to appropriate rate of Goods and Services Tax prescribed under Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017 issued under the Central Goods and Services Tax Act, 2017 (herein after referred to as the CGST Act, 2017 ) and corresponding Notification issued under the Gujarat Goods and Services Tax Act, 2017 (hereinafter referred to as the GGST Act, 2017 ) or the Integrated Goods and Services Tax Act, 2017 - From Note 2 of Section XVI of the Customs Tariff Act, 1975 and General Note of Parts of Section XVI of Harmonised System of Nomenclature, it can be seen that parts suitable for use of any particular machine or class of machine would be classified in the same heading of the particular machine or class of machine. Further, parts which can be used as such and are not suitable for any particular machine or class of machine and may be common to a number of machine falling in different headings are to be classified in heading 84.87 (if not electrical) or in heading 85.48 (if electrical). The applicant has contended that the product viz. Hybrid Hydraulic Servo System may merit classification under 8479 with description Machines and mechanical appliances having individual functions, not specified or included elsewhere in this Chapter [other than Composting Machines] - It is found that Tariff Heading 8479 of custom Tariff Act, 1975 covers the Machine and Mechanical appliances having individual functions, not specified or included elsewhere in this chapter. Tariff Heading 8479 as per Harmonised System of Nomenclature. The applicant has submitted the catalogue of the product, wherein design and scientific parameter of manufacture of the product is given. However, they did not mention the usage of the said product in the different type of machines or class of machines. Further, it is seen that applicant in the application has submitted that, Hybrid Hydraulic Servo System as such Servo System or Drive give right solution for Servo pump control, providing precise pressure and flow control and avoiding the energy waste thus creating added value for customers in terms of energy efficiency and higher mould quality . Hence, it appears that the product does not have any individual functions or it can be stated that the said product cannot perform itself which is the prime condition for classification under Heading 8479 of Custom Tariff Act, 1965. Therefore, the said product cannot be classified in the Chapter heading of 8479 of Customs Tariff Act, 1975. Thus, the product viz. Hybrid Hydraulic Servo System merits classification in terms of Note 2 of Section XVI of the Customs Tariff Act, 1975 and General Note of Parts of Section XVI of Harmonised System of Nomenclature. Accordingly, the rate of GST of the said product would be determined according to the classification of the product.

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• 2021 (1) TMI 368
  Levy of GST - forfeited advance money - amount forfeited on the ground of breach of agreement of sale of land - Service Receiver and Service Provider - sale of land - supply as per Schedule III of GST Act, 2017 - whether forfeiture of advance pertaining to sale of land will be treated as supply and accordingly attract GST? - HELD THAT:- The words agreeing to the obligation appearing in clause (e) applies to all the 3 activities. As per the contract, the provider of service here agrees to refrain or tolerate or to do an act. There is specific agreement by the provider to carry out obligation specified in the contract. In case obligation/condition of the contract is not fulfilled by the recipient, then such act is squarely covered under clause 5(e) of Schedule-II. Therefore, this activity constitutes supply in terms of Section 7(1) of CGST Act, 2017 and accordingly is taxable. As per Section 7(1) of the CGST Act, 2017, activities referred to in Schedule II are covered under the scope of supply of goods and service. Clause 5(e) to Schedule II to CGST Act 2017, declares that agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act shall be treated as supply of service. The amount, which was received from Mr. B and forfeited by the applicant, was a part of the terms and condition of an agreement held between the applicant and Mr. B (customer). This means that while entering into the agreement, Mr. B was well aware about the terms and condition of the contract that in absence of breach of agreement or non-fulfillment of terms and condition of payment as per the contract, the amount given as an advance would become forfeited by the applicant being settlement of exit of the contract. In other words, Mr. B (customer) has understood and accepted the condition that in the contingency of his inability to fulfill the transaction, applicant can exercise the option of forfeiting the amount received as an advance to agree to the obligation of letting him go, which Mr. B is bound to do as it is part of the terms and conditions of contract already agreed to and settled between them. Thus, the appellant has refrained from taking subsequent action/ tolerated an act of the Mr. B (customer), for which consideration has been received by hm. The purpose of payment of amount is an act of tolerance in the sense that when there is breach of the contract, the appellant is put to certain hardships, which he tolerates in return of the payment received as advance being forfeited. The impugned transaction is also a supply under the provisions of the CGST Act and therefore taxable. In our view, therefore, this transaction of the applicant agreeing to the obligation of refrain or tolerate or to do an act (exiting from the contract) on the part of Mr. B (customer), for payment of a sum, will be covered under Clause 5(e) to Schedule II to CGST Act 2017, as a declared service - the GST is leviable on the amount forfeited by the applicant in terms of clause 5(e) of Schedule II to CGST Act 2017.

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• 2021 (1) TMI 367
  Classification of goods - rate of tax - HSN Code - grinding of plastic material - HELD THAT:- The applicant purchase the plastic scrap of different colors and thereafter said scrap is sorted color-wise. The applicant undertakes the further process on said plastic scrap and new product plastic grinding in small pieces emerges. It is evident that adopting certain process on plastic scrap, plastic scrap loses its identity and new product i.e. plastic grinding comes into existence. The new product plastic grinding in small pieces does not fall under the category of plastic scrap; as such it is the primary form of plastic. In view of the Notes 6 (b) of Chapter 39 of HSN, primary form of plastic covers blocks or irregular shapes of lumps, powders, granules, flakes and similar bulk forms. The product plastic grinding in small pieces are in irregular shapes of lumps and flakes. Therefore, said product i.e. plastic grinding in small pieces is no more scrap and is primary forms of plastic. Therefore, in terms of Notes 6 of Chapter 39 of Harmonised System of Nomenclature product grinding of plastic in small pieces is merit classifiable under heading 39.01 to 39.14 - the HSN code of goods viz plastic of grind would depend upon the type of primary form of polymers of said goods. Accordingly, GST rate of the goods viz. grind of plastic would be determined according to the classification of the product. To determine the GST rate of plastic grind of small pieces in primary form, we refer to the Notification No. 01/2017-Ct (Rate) dated 28.06.2017. The relevant entry of the said product i.e. plastic grind, which would fall under the Tariff Heading 3901 to 3914 The goods viz. grind of plastic in small pieces merit classifiable under HSN code of 3901 to 3914 depends upon the primary form of polymer of the goods and GST rate for the heading No. 3901 to 3914 is 18% as per the entry No. 100 and 101 of Notification No. 01/2017-CT (Rate) dated 28.06.2017 and corresponding SGST Notification.

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• 2021 (1) TMI 366
  Classification of goods - rate of GST - PAPAD of different shapes and sizes manufactured/ supplied by the applicant - to be classified under Chapter Tariff Heading 1905 or otherwise? - classification of Unfried Fryums - HELD THAT:- What is Papad has not been defined or clarified under Customs Tariff Act, 1975, the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act, 2017), the Gujarat Goods and Services Tax Act, 2017, Integrated Goods and Services Tax Act, 2017 or the Notifications issued under the CGST Act, 2017/GGST Act, 2017/IGST Act, 2017 - It is now well settled principle of interpretation of statute that the word not defined in the statute must be construed in its popular sense, meaning that sense which people conversant with the subject matter with which the statute is dealing would attribute to it . It is to be construed as understood in common language. PAPAD is a thing entirely different and distinct from FRYUMS. Therefore, in common parlance or in market, Fryums are not sold as PAPAD instead of PAPAD sold as papad and Fryums are sold as Fryums. Both products are different and have their individual identity. Accordingly, in common parlance test, the applicant s product i.e. different shapes and sizes of Papad is not Papad but is Un-fried Fryums - the Un-fried Fryums are not classifiable as Papad under Tariff Item 1905 90 40. Appropriate classification of Unfried Fryums - HELD THAT:- Heading 2106 is an omnibus heading covering all kind of edible preparations, not elsewhere specified or included. Chapter Note 5 provides an inclusive definition of this heading and covers preparations for use either directly or after processing, for human consumption. Chapter Note 6 pertaining to Tariff Item 2106 90 99 also provides inclusive definition and products mentioned therein are illustrative only - the product different shapes and sizes un-fried Fryums is appropriately classifiable under Tariff Item 2106 90 99. Sl. No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017, as amended vide Notification No. 41/2017-Central Tax (Rate), dated 14-11-2017 issued under the CGST Act, 2017 and corresponding Notification No. 1/2017-State Tax (Rate), dated 30-6-2017, as amended, issued under the GGST Act, 2017 covers Food preparations not elsewhere specified or included [other than roasted gram, sweetmeats, batters including idli/dosa batter, namkeens, bhujia, mixture, chabena and similar edible preparations in ready for consumption form, khakhra, chutney powder, diabetic foods] falling under Heading 2106. Therefore, Goods and Services Tax rate of 18% is applicable to the product Un-fried Fryums as per Sl. No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017, as amended, issued under the CGST Act, 2017 and Notification No. 1/2017-State Tax (Rate), dated 30-6-2017, as amended, issued under the GGST Act, 2017 or IGST Act, 2017.

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• 2021 (1) TMI 365
  Attachment of Bank Accounts of petitioner - contention of petitioner is that the respondent authorities have taken action against the petitioner under Section 83 of the Act, pursuant to proceedings initiated under Section 71 of the Act, whereas Section 83 of the Act, on its terms, cannot be invoked in such a situation - Section 83 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- The impugned order cannot be sustained. It is clear from a plain reading of Section 83 that action thereunder is predicated upon pendency of proceedings under Sections 62, 63, 64, 67, 73 or 74 of the Act. The attachment of bank account entails serious consequences to the assessee, particularly in the case of a running concern such as the petitioner herein. The power to attach the bank account must therefore be exercised only in strict compliance with the statutory power, and cannot be extended to cover situations which are not expressly contemplated by the section. Absent the statutory precondition for exercise of the power of attachment, any order under Section 83 is wholly illegal and unsustainable. In the present case, without going into the merits of the allegations made against the petitioner, the admitted position is that no proceedings under any of the provisions mentioned in Section 83 of the Act were in fact initiated against the petitioner. In these circumstances, the impugned order is ultra vires the statutory powers of the respondent no. 2, and is hereby quashed. Petition allowed.

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• 2021 (1) TMI 364
  Grant of Bail - Fraudulent availment of Input Tax Credit - evasion of GST - Section 132 of GST Act - HELD THAT:- Even if the allegation made against the respondents are serious and true, I am unable to gather from the petitioner as to any violation by the respondents of the bail conditions imposed vide order dated 21.09.2019. Unless there is violation of the said conditions, it is not permissible to cancel the bail already granted - Even if there is any violation of bail condition, this Court would not have jurisdiction to cancel the bail. Such a violation would have to be brought to the notice of the Court which has granted bail to pass necessary orders thereon. In the event of any additional conditions being required for the purpose of effective investigation, the same could also be brought to the notice of the trial Court for consideration in accordance with law. If at all there is any grievance by the petitioner as regard the respondents having violated any or all conditions of the bail, it is always open for the petitioner to approach the said Court seeking for cancellation of the bail - Petition dismissed.

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• Income Tax

• 2021 (1) TMI 363
  Recovery proceedings - notices under Section 226(3) was issued to its banker, viz., Axis Bank Limited, the Petitioner - HELD THAT:- As brought to notice that after the filing of the Writ Petition, assessment of liability for income tax of M/s. Stylog Infrastructure Private Limited has been set aside by Income Tax Tribunal and the matter had been remitted for fresh determination and thereafter, another order of assessment has been passed on 06.02.2020 raising fresh demand for payment against which the said Company has filed appeal before the Commissioner of Income Tax (Appeal) on 20.10.2020, which is pending. In view of the subsequent events after the filing of the Writ Petition, the impugned orders raising demand for payment from Petitioners based upon the assessment orders of M/s. Stylog Infrastructure Private Limited cannot survive and accordingly, the same are set aside. However, this would not preclude the concerned authority to pursue the claim for recovery based on the fresh assessment in the manner recognized by law.

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• 2021 (1) TMI 362
  Deduction u/s 80IB(10) - whether the deduction under section 80IB(10) can be allowed on proportionate basis in respect of residential units having a built up area of 1500 sq.ft. or less? - HELD THAT:- The factual background was that the assessee was engaged in the business of real estate development. The assessee deduction under Section 80IB(10) of the Act to the extent of Rs. 25,08,21,669/- in respect of profits of two projects viz., Brigade Gateway and Brigade Metropolis. Commissioner of Income Tax (Appeals) who by an order dated 14.11.2012 allowed the claim of the assessee for deduction under Section 80IB(10) of the Act. On further appeal by the revenue the Income Tax Appellate Tribunal upheld the order of the CIT(A). On further appeal by the Revenue, the Hon ble Karnataka High Court answered the question of law in favour of the Assessee by following order in the case of Commissioner of Income Tax vs. Brigade Enterprises Ltd [ 2020 (9) TMI 1137 - KARNATAKA HIGH COURT] .On plain reading of clause (c) of Section 80IB(10) of the Act, it is evident that the same does not exclude the principle of proportionality in any manner. Therefore, we hold that the Commissioner of Income Tax (Appeals) as well as the Tribunal have rightly found that the assessee has complied with the requirement contained in clause (c) of Section 80IB(10) of the Act. Submissions of the assessee before CIT(A) that the DVO has not considered the units in County I project and therefore the report of the DVO cannot be said to be final in the matter - We do not find any merit in the ground No.3 raised by the Revenue. In any event, the physical measurement has to be taken by the AO and the AO is at liberty to take physical measurement in an appropriate manner and therefore there cannot be any grievance to the Revenue. For the reasons given above, we find no merit in the appeal by the Revenue.

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• 2021 (1) TMI 361
  Bogus LTCG - Addition u/s 68 - Deduction u/s 10(38) denied - LTCG on sale of shares of the scrip with assessee is having acquaintance with the entry provider - HELD THAT:- As relying on MR. RAMPRASAD AGARWAL case [ 2018 (12) TMI 561 - ITAT MUMBAI] and KAMLA DEVI S. DOSHI [ 2017 (5) TMI 1578 - ITAT MUMBAI] Assessee has produced the relevant record to show the allotment of shares by the company on payment of consideration by cheque and therefore, it is not a case of payment of consideration by in cash. But the transaction is established from the evidence and record which cannot be manipulated as all the entries are part of the bank account of the assessee and the assessee dematerialized the shares in the D-mat account which is also an independent material and evidence cannot be manipulated. The holding of the shares by the assessee cannot be doubted and the finding of the AO is based merely on the suspicion and surmises without any cogent material to show that the assessee has introduction his unaccounted income in the shape of long term capital gain. The order of the AO treating the long term capital gain as bogus and consequential addition made to the total income of the assessee is not sustainable. - Decided in favour of assessee.

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• 2021 (1) TMI 360
  Assessment of rental income - Income from House Property OR Income from Business - notional annual letting value on unsold shops held as stock in trade by the assessee - HELD THAT:- As decided in own case [ 2018 (7) TMI 655 - ITAT MUMBAI] wherein hold that the unsold flats which are stock in trade when they were sold they are assessable under the head income from business when they are sold and therefore the AO is not correct in bringing to tax notional annual letting value in respect of those unsold flats under the head income from house property . We direct the AO to delete the addition made under Section 23 of the Act as income from house property. Admittedly in this case on hand the unsold property being shops were held as stock in trade. In the circumstances, respectfully following the above decision we uphold the order of the Ld.CIT(A) and reject the ground raised by the Revenue.

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• 2021 (1) TMI 359
  Addition u/s 69 - unexplained investment made in purchase of land at Shaikpet - Assessee entitled to claim the credit for the opening balance or not? - HELD THAT:- We are unable to accept the argument of the ld. DR that merely because the case was taken up for limited scrutiny, the AO is barred from verifying the other entries in the cash flow statement. Since the assessee has furnished cash flow statement during the assessment proceedings for the AY 2008-09, the entries in the cash flow statement, which were already reflected in AY 2008-09, cannot be disturbed by revisiting the same statements in later years. For income tax, each year is independent and what is to be examined in the impugned AY is the entries made in the relevant AY i.e. receipts and payments during the year under consideration, but, not the entries that were made in the earlier year. Thus, the closing balance declared by the assessee as at the end of the FY2007- 2008 stands explained and the assessee is entitled to claim the credit for the opening balance in the year under consideration. Hence, we hold that the assessee is permitted to take opening balance as source. Sources for receipts during the year - From the order of CIT(A), it is observed that during the appellate proceedings, G. Balkishna Rao and G. Narayana Rao have confirmed the payment to the assessee u/s 131 of the Act. Therefore, there is no reason to reject the credit. If the AO was not convinced with the explanation offered by the creditors, the same is required to be brought to tax in the hands of the creditors, since, they have confirmed the credit and explained the source, but, not in the hands of the assessee. Thus we hold that there is no case for rejection of opening balance and the loans from G.Balakrishna Rao and G.Narayana Rao and accordingly we direct the AO to accept the same. Amount received from Shri E. Madan Mohan Rao - Creditor has issued the legal notice for recovery of the loan with the dates of amounts lent. Since the legal notice is available the AO should have caused necessary enquiries instead of pressing the assessee to produce the creditor. Having not caused the enquiries and did not bring any material to show that the advance received from E.Madan Mohan Rao was bogus, the AO is not permitted to make the addition in the hands of the assessee. Thus we direct the AO to accept the credit from E.Madan Mohan Rao. Amount received from her husband, the same was reflected in the balance sheet of her husband and he is assessed to tax. Her husband Shri Ram Gopal Rao also filed confirmation having given the loans to the assessee, therefore, there is no reason to suspect the source. Even if it is to be suspected, the same is required to be examined in the AY 2005-06, but, not in the impugned assessment year. From the cash flow statement, we find that the payment of Rs. 97 lakhs on account of advance for land was clearly explained by the assessee and therefore, we hold that there is no case for making the addition, hence, we delete the addition made by the AO on this count and set aside the order of the Ld.CIT(A) and appeal of the assessee is allowed. Receipt as advance from the tenant - HELD THAT:- In the instant case, the assessee has claimed rent advance of Rs. 20 lakhs received from Shri M. Venkata Shiva Prasad for letting out the house at MLA Colony, Banjara Hills. Lease agreement was placed on record. However, the details of date of receipt and mode of payment were not furnished by the assessee. Similarly, the lessee has not responded to the notice issued u/s 133(6) of the Act. However, there was a civil case filed by the assessee in the Civil Court wherein the sum of Rs. 20 lakhs stated to have been adjusted towards monthly rentals. Therefore, the issue needs to be considered after verification of the details and genuineness of the transaction. Both the parties have agreed to remit the issue back to the file of the AO to examine the receipt of Rs. 20 lakhs as advance from the tenant. This issue is treated as allowed for statistical purposes.

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• 2021 (1) TMI 358
  TP Adjustment - Comparable selection - HELD THAT:- The assessee is engaged in the business of developing software titled as computer radiated designing and development of commercial vehicle systems . The assessee is developing specific software for its Associated Enterprises, i.e., it is captive software developer. Acropetal Technologies Ltd - As revenue from Information Technology transactions services is less than 75% and consequently this company does not satisfy the filter of information technology revenue applied by the TPO itself. E-infochips Ltd - There is no segmental information available as regards the revenue from sale of products and revenue from software development segment. As the assessee is simply engaged in rendering software development services and there is no sale of any software products, this company, in our considered opinion, ceases to be comparable. It is obvious that from the common pool of income from both the streams of software products and software services, one cannot deduce the revenue from software services and no one knows the impact of revenue from Products on the overall kitty of profit, which may be significant. Since no segmental data of this company is available indicating operating profit from software development services, we order to exclude this company from the list of comparables. Persistent Systems and Solutions Ltd - As per Schedule 11, the entire revenue has been shown under one segment i.e., sale of software services and products. Therefore, no separate segment has been given in respect of software services. Accordingly, the composite data of revenue as well as margins of this company pertaining to the sale of software services and products cannot be considered as comparable with the software development services segment of the assessee. In view of the above facts and circumstances, we do not find any error or illegality in the directions of the DRP in excluding this company from the list of comparables. Include M/s. CG VAK Software and Export Ltd. as a comparable company ALP of the transactions relating to Software segment requires to be re-determined. Accordingly, we restore this issue to the file of AO/TPO with the direction to re-compute the ALP of Software development Services segment.

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• 2021 (1) TMI 357
  Disallowing provision made for privileged leave encashment - provision was made on actual valuation, treating the same as contingent liability - assessee is a regional rural bank established under Rural Banks Act and is a scheduled bank classified under second Schedule of RBI, having several Rural Branches - According to the AO, the claim for deduction cannot be allowed in view of clause (f) to section 43B which was inserted by Finance Act, 2003 - HELD THAT:- We find that the Hon ble Supreme Court has reversed the decision of the Hon ble Calcutta High Court in the case of Exide Industries Ltd. Anr. [2007 (6) TMI 175 - CALCUTTA HIGH COURT ] and has upheld the constitutional validity of section 43B(f) of the Act. In view of the provision of section 43B(f) of the Act, which provides that any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee shall not be allowed as deduction, unless it is actually paid and deduction is allowed only in the previous year in which the sum is actually paid, the claim made by the assessee for deduction cannot be sustained. We therefore uphold the order of CIT (Appeals) and dismiss ground No. 2. Disallowance provision made for bad and doubtful debts u/s. 36(1)(viia) - CIT (Appeals) confirmed the order of AO as the assessee could not produce the required evidence before the CIT(A) also - HELD THAT:- As assessee, however, pointed out that in AYs 2011-12 to 2012-13 ITAT remanded the issue with a direction to the assessee to file the required details in the prescribed form and directed the AO to examine the issue afresh. In such circumstances, we set aside the order of CIT (Appeals) and restore the issue to the AO with a direction to the assessee to file the necessary details to establish its claim for deduction as required under Rule 6ABA of the Rules. Disallowing u/s. 40(a)(ia) - Payment to contractors AND Payment of professional fee - AO was of the view that the aforesaid payments fall under the provisions of section 194C and 194J of the Act respectively - assessee has contended that it had obtained Form 15G 15H in respect of amount paid to contractors - HELD THAT:- If the AO accepts the contention of assessee that expenditure was capitalized, then there is no necessity to examine the filing of Form 15G 15H. The AO is therefore directed to verify whether the expenditure claimed is capital expenditure and if so, delete the addition. If the same has been claimed as revenue expenditure, then the assessee should be permitted to file Form 15G 15H so that TDS obligation can be said to be non-existent. Accordingly, ground No. 5 is treated as allowed for statistical purposes.

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• 2021 (1) TMI 356
  Dismissal of appeal due to non-appearance by the assessee - AO passed the order u/s 143(3) r.w. section 144 determining the total income of the assessee as against loss wherein he made addition u/s 68 - HELD THAT:- As per the provisions of the Income-tax Act, the ld.CIT(A) has to decide the appeal on merit and cannot dismiss the appeal on account of non-prosecution. 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 CIT(A) with a direction to grant one final opportunity to the assessee to substantiate its case and decide the issue as per fact and law. The assessee is also hereby directed to appear before the ld. CIT(A) and substantiate its case, failing which the ld.CIT(A) is at liberty to pass appropriate order as per law. - Appeal is allowed for statistical purposes

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• 2021 (1) TMI 355
  Addition u/s 40A - Payment in cash for purchase of land from farmers and villagers in excess of the limit provided u/s 40A(3) - HELD THAT:- Inter alia that when the assessee has not debited the amount of cost of land in its profit loss account, available and when no expenses relatable to the addition in question have been claimed, provisions contained u/s 40A(3) of the Act are not attracted. Assessee company has proved on record that the payment in question was mere reimbursement made by CWPPL. Purchase of land in the instant case was not treated as stock-in-trade. Moreover, para 3(b) of the Collaboration Agreement, available categorically provides that CWPPL shall reimburse all costs and expenses incurred by the assessee with respect to the acquisition of the said land and accordingly in the books of account which have otherwise been accepted by the Revenue, the said amount received from CWPPL was shown as reimbursement. Thus when the assessee has not debited the amount of cost of land in the profit loss account nor claimed any deduction in respect of cost of land by way of computation, provisions contained u/s 40A(3) are not attracted, so AO/CIT(A) have erred in making / confirming the disallowance - Decided in favour of assessee.

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• 2021 (1) TMI 354
  Disallowance u/s 40A(3) - payment to transporters - as pep AO the assessee had made payment of Rs. 5,52,455/- to 13 such transporters above Rs. 35,000/- in cash - assessee submitted that the assessee is a trader in onion and potato and as a matter of practice, the farmers used send the produce from villages through transporters arranged by them after giving advance - HELD THAT:- Admittedly, in the present case, the revenue has not disputed the payments made to the transporters - assessee has explained the circumstances under which the questioned payments were made to the transporters. We notice that the AO made addition u/s 40A(3) of the Act rejecting the contention of the assessee that the payments were made on behalf of the farmers and subsequently deducted from sale proceeds given to the farmers, therefore the said expenditure is in the nature of payment made to the farmers for purchase of agriculture goods. As pointed out by the Ld. counsel for the assessee in the case of ITO vs. M/s Dhanshree Ispat, [ 2017 (6) TMI 170 - ITAT PUNE] and the Tribunal has dismissed the appeal of the revenue and deleted the addition made u/s 40A(3) of the Act, holding that the assessee has explained the circumstances under which the payments were made. Hon ble Supreme Court in the case of Attar Singh Gurmukh Singh vs. ITO [ 1991 (8) TMI 5 - SUPREME COURT] has held that the provisions of section 40A(3) read with rule 6DD(e) cannot be said to be intended to restrict business activities. The provisions of section 40A(3) apply for payments made for acquiring stock-in trade and other materials. In our considered view, the assessee has explained the circumstances under which the payments were made to the transporters. The assessee has demonstrated before the authorities below that the payments were made for purchase of agricultural produce. On the other hand, there is no evidence on record to conclude that the questioned payments do not come within the ambit of rule 6DD(e) of the Income Tax Rules. Even the AO did not examine the concerned farmers or sought their explanation to verify the contention of the assessee. Hence, we direct the AO to delete the addition made u/s 40A(3) - Decided in favour of assessee.

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• 2021 (1) TMI 353
  Non appearance by assessee - HELD THAT:- Undisputedly, assessee did not appear before both the lower authorities and has wasted precious time of the Revenue. In such case, we cannot set aside the matter to the lower authorities without any cost. Thus, in the interest of justice, we impose a cost of Rs. 10,000/- which shall be deposited by the assessee to the Revenue and matter is set aside to the file of the Ld. CIT(A) to decide the matter after giving an opportunity of being heard to the assessee. Appeal filed by the Assessee is allowed for statistical purposes.

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• 2021 (1) TMI 352
  Validity of Reopening of assessment u/s 147 - difference of opinion arose between Hon ble Accountant Member and Hon ble Judicial Member - matter referred to Hon ble Third Member - Escapement of long-term capital gain s - Whether the order of assessment passed under section 147 on 28/12/2012 was without furnishing reasons recorded for initiating the proceedings under section 147 and therefore was void and of no effect? - Whether there was transferred took place during previous year relevant to assessment year 2006-07? - HELD THAT:- Hon ble Third Member concurred with the view taken by Hon ble Judicial Member, who observed that, order dated 28/02/2014 passed by Ld. AO under section 143(3) read with 147 of the Act, without furnishing reasons recorded for initiating proceedings for reassessment under section 147 of the Act is void and of no effect. Whether transfer of property occurred u/s. 2(47)(v)? - JDA entered - Hon ble Third Member concurred with the view taken by Hon ble Judicial Member, who held that there was no transfer of property during the previous year relevant to assessment year 2006-07. Computation of capital gains being erroneous and excessive - The present proceedings pertains to asst. year 2006-07 and not for the asst. Year 2009-10. It is an admitted position in law that the tax is to be charged in the year it accrued. Therefore the finding of the lower authorities is devoid of merit. We hold that authorities below erred in computing capital gains in the hands of assessee during year under consideration. Interest under section 234 A, B, C - This ground to be consequential in nature.

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• 2021 (1) TMI 351
  Exemption u/s 11 - whether providing hostel facility to the needy students by appellant-trust is to be considered as imparting education within the meaning of section 2(15) or it would fall within the clause advancement of any other object of general public utility provided in the proviso appended to section 2(15)? - HELD THAT:- As decided in own case [ 2018 (7) TMI 1084 - ITAT AHMEDABAD] no hesitation to find the assessee activities towards providing hostel facilities to the student is purely an educational activities and, therefore, not coming under the proviso to Sec. 2(15) of the Act. Hence, the Ld. AO is directed to give relief to the assessee on this issue. Assessee s appeal is allowed

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• Corporate Laws

• 2021 (1) TMI 350
  Disqualification of Director - Non filing of annual returns - Scope of the circular - Validity of action of including the petitioner in the list of Directors of Companies who had defaulted in filing Annual Returns - sections 164 and 167 of the Companies Act, 2013 - petitioner has submitted that, all High Courts for different reasons have taken the view that defaults prior to April 2014 cannot be taken into consideration and in support of such contention, he has relied upon MUKUT PATHAK ORS., YOGESH KHANTWAL, AARTI KHANTWAL, AND VINEET WADHWA VERSUS UNION OF INDIA AND ANR. [ 2019 (11) TMI 319 - DELHI HIGH COURT] - petitioner has relied upon a judgment in SUBHAS KUMAR BISWAS, BANKIM KUMAR BISWAS, GAUTAM KUMAR BISWAS, SANJAY DAS, RAMESH KUMAR AGARWAL, RAMKRISHNA DAS, SUBHAM AGARWAL AND ANOTHER, VIJAY KUMAR SINGHAL AND ANOTHER, RADHEYSHYAM JAJOO VERSUS UNION OF INDIA AND OTHERS [ 2020 (3) TMI 806 - CALCUTTA HIGH COURT] and CHETAN CHOKHANI VERSUS UNION OF INDIA AND OTHERS [ 2019 (11) TMI 1388 - CALCUTTA HIGH COURT] and submitted that the penalty introduced under section 164 through the proviso therein came into effect from May 7, 2018 and therefore, a person cannot be held to be disqualified on the basis of events happening prior to May 7, 2018. On the other hand, respondents has relied upon an Order dated August 31, 2018 passed in MUKUL SOMANY ANR. VERSUS REGISTRAR OF COMPANIES, WEST BENGAL ANR. [ 2018 (5) TMI 2032 - CALCUTTA HIGH COURT] and submitted that, the Court refused to extend the interim order. He has submitted that, in a writ petition, where the issue of disqualification of Director was involved and where there subsisted an interim Order, the Court, upon finding that the issue of this qualification of Director was pending before the Supreme Court from a judgment of the Bombay High Court, refused to extend the interim Order. HELD THAT:- The defaults for non filing of annual returns are in respect of a company which is governed by the provisions of the Act of 2013 in as much as, the definition of a company as has been provided in Section 2 (20) of the Act of 2013 includes a company incorporated under any previous company law. The Act of 1956 being a previous law governing the affairs of the company will come within the meaning of the phrase under any previous company law as has been provided in Section 2 (20) of the Act of 2013. In the facts of the present case, the defaults of not filing of the annual returns of the defaulting company are for the period on and from the commencement of the unamended provisions of Sections 164 and 167 of the Act of 2013. Both Sections 164 and 167 of the Act of 2013 have come into effect on and from April 1, 2014. The period of default taken into consideration by the Registrar of Companies, in the facts of the present case, had commenced from April 1, 2014. Therefore, the Registrar of Companies has taken into consideration defaults in respect of a company governed by the provisions of the Act of 2013 and in respect of a period which is also governed by the Act of 2013 - In the facts of the present case, as on the date of Section 164 of the Act of 2013 having come into effect, the petitioner was a director of the defaulting company. The petitioner had continued to remain as a director of the defaulting company till the cessation of his directorship on June 27, 2016. The petitioner did not continue to remain as a director of the defaulting company for a continuous period of three financial years for which the defaulting company was in default in filing the annual returns. In the facts of the present case, the defaults are for periods from April 1, 2014 till March 31, 2017. Therefore, the defaults are for a period subsequent to Section 164 of the Act of 2013 coming into force. The decision on the topic as to why, events occurring prior to April 1, 2014 can be taken into consideration for the purpose of considering whether a person suffered disqualification under section 164 of the Act of 2013 need not detain the Court in considering the reliefs to be granted to the petitioner - In the facts of the present case, since, the given period for which the defaults committed by the defaulting company is under consideration for the petitioner to suffer a disqualification under section 164 of the Act of 2013, is subsequent to Section 164 of the Act of 2013 coming into force, the action of the respondent authorities in treating the petitioner to be disqualified under section 164 of the Act of 2013 cannot be faulted. The petitioner is therefore not entitled to any relief on such score. The Government Circular No. 8/2014 dated April 14, 2014 has clarified the position that, financial statements and documents required to be attached thereto, auditor s reports and board s report in respect of financial years commencing earlier than April 1, 2014 shall be governed by the relevant provisions/schedules/rules of the Act of 1956 and that in respect of the financial years commencing on or after April 1, 2014 the provisions of the Act of 2013 shall apply. Such Government Circular has to be read in the context in which it was issued. The relevant all provisions of the Act of 2013, including those relating to the maintenance of books of accounts, preparation, detention and filing of financial statements and documents required to be attached thereto, auditor s reports and board director s report came into effect from April 1, 2014. Provisions of Schedule II and Schedule III of the Act of 2013 also came into effect from April 1, 2014 - Such a Government circular cannot be construed and read to mean that, defaults committed by a company or an individual in filing financial statements and annual returns for the period prior to April 1, 2014 stood condoned or that, such legal entity or the individual should not be prosecuted for non-filing of financial statements and annual returns for the period prior to April 1, 2014. All that the Circular did was to clarify that the financial statements and annual returns were required to be filed in the new format from April 1, 2014. Principles of natural justice should not be applied mechanically in facts and circumstances of every case. Although, every action taken by an authority which entails civil consequences to the party affected, should adhere to the principles of natural justice, and where a statute does not bar the application of principles of natural justice or is silent as to its application, the principles of natural justice can be read into such statute, one of the principles thereof, namely, audi alterm partem, is not to be mechanically applied. A decision of an authority, need not be struck down mechanically on the sole ground that, such authority did not hear the affected party prior to taking the decision. In a given case, the number of parties may be such that, it may not be possible for the decision-making authority to hear each and every party affected by the decision - In the present case, the fact that, the defaulting company was in default in filing annual returns for continuous three financial years commencing from April 1, 2014 till March 31, 2017 has not been disputed. The decision of the Registrar of Companies is of November 2017 that is subsequent to the period of continuous three financial years having elapsed from April 1, 2014. In such factual matrix, no other inference than as expressed by the Registrar of Companies impugned herein can be legitimately drawn. The petitioner had suffered the disqualification as prescribed under section 164 (2) of the Act of 2013 by the time the Registrar of Companies intimated its decision - the contention that the decision of the Registrar of Companies stand vitiated by breach of the principles of natural justice cannot be accepted. In the facts of the present case, the petitioner is not entitled to any relief as he has failed to explain the delay in approaching the Court, he has not explained as to why the defaulting company did not avail of the condonation of delay schemes in vogue from time to time, he stood disqualified to be a director by operation of provisions of Section 164(2)(a) of the Act of 2013 for the failure of the defaulting company to file financial statements and annual returns for the period from April 1, 2014 to March 31, 2017, his DIN stood cancelled immediately upon the defaulting company failing to comply with Section 164(2)(a) of the Act of 2013 and the decision of the Registrar of Companies in placing the petitioner in the list of disqualified directors does not suffer from the vice of breach of principles of natural justice. The views expressed are in conflict with Chetan Chokhani [ 2019 (11) TMI 1388 - CALCUTTA HIGH COURT ] and Subhas Kumar Biswas [ 2020 (3) TMI 806 - CALCUTTA HIGH COURT ] but in consonance with MUKUL SOMANY ANR. VERSUS REGISTRAR OF COMPANIES, WEST BENGAL ANR. [ 2018 (5) TMI 2032 - CALCUTTA HIGH COURT] and Sourajit Ghosh [ 2020 (8) TMI 432 - CALCUTTA HIGH COURT ] - there are therefore, conflicting views of this Court on the same issue. It would therefore be appropriate to invoke the provisions of Rule 26 of the writ rules of the High Court and refer the present writ petition to the Division Bench. Matter referred to Division Bench.

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• 2021 (1) TMI 349
  Approval of Scheme of Arrangement - Sections 230 to 232 read with Section 234 and other applicable provisions of the Companies Act, 2013 read with The Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- Directions regarding holding and convening of various meetings issued - various directions with regard to issuance of notices for the meetings also issued. The scheme is approved - Application allowed.

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• 2021 (1) TMI 348
  Approval of Scheme of Amalgamation - Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 - HELD THAT:- From the material on record, the Scheme appears to be fair and reasonable and does not violate any provisions of law and is not contrary to public policy - Since all the requisite statutory compliances have been fulfilled, petition is made absolute in terms of prayer made in the Petition. The scheme is sanctioned - application allowed.

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• 2021 (1) TMI 347
  Restoration of name of Respondent company in the ROC - Section 252 (3) of the Companies Act, 2013 - HELD THAT:- Section 252 (3) of the Companies Act, 2013 confers on this Tribunal powers to Order to restore the name of the Company in the Register maintained, provided such application is filed by (i) the Company or (ii) by any Member or (iii) any creditor or (iv) any workmen of the Company within 20 years from the date of publication of the notices under Section 248 (5) in Official Gazette about striking off name of such Company provided further that it is seen from the material on record that at the time its name being struck off, the Company was doing its business or carrying its operations - In this case, the applicant produced on record the copy of Audited Annual Accounts for all defaulting years. As per the audited reports of the Profit and Loss accounts of the Company, it is evident that the Company has not been generating any revenue from its operations and has incurred losses in all the defaulting years. Financial Statements do not suggest any business transactions for which the Company was incorporated. There is no material consumed, or work in progress or debtors or Finance cost. There are no expenses in respect of the Employee benefits, which indicate that the Company had nobody in its employment during the defaulting years - The Appellant has not submitted the details of Bank Account or GST Certificate, Rent Agreement, any document in relation to existence of its registered office nor any Income Tax Return or any sale and purchase invoices details, which support his contention that the company was a running entity when the name of the company was struck off. This prima facie suggests that the Company was not doing any business activities. Application dismissed.

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• 2021 (1) TMI 346
  Restoration of name of respondent company in the ROC - Section 252 (3) of the Companies Act, 2013 - HELD THAT:- Section 252(3) of the Companies Act, 2013 confers on this Tribunal powers to order to restore the name of the Company in the Register maintained, provided such application is filed by (i) the Company or (ii) by any Member or (iii) any creditor or (iv) any workmen of the Company within 20 years from the date of publication of the notices under Section 248 (5) in Official Gazette about striking off of the name of such Company provided further that it is seen from the material on record that at the time of its name being struck off, the Company was doing its business or carrying its operations - In this case, Registrar of Companies also did not have objection for restoration of the Company s name in the Register. Moreover, the appellant produced on record the copies of Audited Annual Accounts, for all defaulting years. The appellant submitted that the Company will comply with all the statutory obligations. The Registrar of Companies, Odisha may be directed to restore the Company s name in the Register. We accept the contention of the appellant that the Company was a going concern when its name was struck off. Therefore, in the facts and circumstances of the matter and the documents/details on record, we accept the request of the appellant and direct the Registrar of Companies, Odisha to restore name of the Company in Register. Application allowed.

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• 2021 (1) TMI 345
  Restoration of the name of the Company in the ROC - Section 252 of the Companies Act, 2013 Read with Rule 87A of the NCLT (Amendment) Rules, 2017 - HELD THAT:- It is not in dispute that the Registrar of Companies is conferred with power U/s.248(3) to strike off the Company, if the Company has failed to commence its business within one year of its incorporation or a Company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any Application within such period for obtaining the status of a dormant Company U/s. 455. However, Section 248(6) states that the Registrar of Companies, before finally striking off Company, has to satisfy himself that sufficient provision has been made for the realization of all amounts due to the Company and for the payment or discharge of its liabilities and obligations by the Company within a reasonable time, and, if necessary, obtain necessary undertakings from the Managing Director, Director or other persons in charge of the management of the Company - Though, the impugned order striking off the Company was in accordance with law, the Tribunal has to take into consideration the bona fide contentions of Petitioner seeking to restore the name of Company, by taking a lenient view of the issue in the interest of justice and ease of doing business, instead of rigidly interpreting the law on the issue. It is also not in dispute that the instant Company Petition is filed in accordance with law; there are no investigations pending against the Company; the Respondent has not opposed the Petition and has left the issue to the Tribunal to consider the case subject to certain terms and conditions. The Registrar of Companies, Karnataka, the Respondent herein, is directed to restore the name of the Company in the Register maintained by the Registrar of Companies, Karnataka as if its name had not been struck off from the rolls of the Register, with restoration of all consequential action taken by Registrar of Companies, which includes restoration of DINs of its Directors - Company is directed to file all the statutory document(s) along with prescribed fees/additional fee/fine as decided by Registrar of Companies within 30 days from the date on which its name is restored on the Register of Companies by the Registrar of Companies. Application allowed.

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• Insolvency & Bankruptcy

• 2021 (1) TMI 344
  Maintainability of application - Corporate Debtor failed to make repayment of its debt - operational creditor/applicant - applicant has stated that despite repeated reminders the respondent has not paid the outstanding operational debt - issuance of demand notice - HELD THAT:- The demand notice issued by the applicant under section 8 of the I B Code on 18.12.2019 has been served upon the corporate debtor - On perusal of the reply filed by the corporate debtor it is found that the contentions raised in defence of the operational debt are vague, ambiguous and up-through merely to raise unnecessary and false dispute to escape the provisions of Insolvency and Bankruptcy Code, 2016. Moreover, no documentary proof is provided by the corporate debtor in support to the averments which thus makes it evident that the dispute is an after-thought post the issuance of the demand notice. Other contentions raised in the reply by the corporate debtor appears to be a part of moonshine defence which devoid of merits. On perusal of the record it is also found that the instant petition filed by the applicant is well within limitation and there is no denial of the operational debt or any pre-existing dispute regarding the operational debt from the side of the corporate debtor - In the instant application, from the material placed on record by the Applicant, this Authority is satisfied that the application is complete in all respect and the Corporate Debtor committed default in paying the operational debt due and payable to the Applicant - The documents produced by the operational creditor clearly establish the debt and there is default on the part of the Corporate Debtor in payment of the operational debt . Thus, this adjudicating authority is of the considered view that operational debt is due to the Applicant and it fulfilled the requirement of I B Code. No dispute has been raised by the respondent at any point of time. That, Applicant is an Operational Creditor within the meaning of Section 5 sub-section 20 of the Code. From the aforesaid material on record, petitioner is able to establish that there exists debt as well as occurrence of default and the amount claimed by operational creditor is payable in law by the corporate debtor as the same is not barred by any law of limitation and/or any other law for the time being in force - it is evident that the corporate debtor has committed default in payment of operational debt and, therefore, it is a fit case to initiate Insolvency Resolution Process by admitting the Application under Section 9(5)(1) of the Code. The petition admitted - moratorium declared.

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• 2021 (1) TMI 343
  Permission for withdrawal of petition - Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- Since the Company Petition is not yet admitted and the Parties have settled the issue by way of Settlement, we are inclined to permit the Petitioner to withdraw the instant Company Petition by reserving liberty to the Petitioner to file fresh Company Petition in accordance with law. The petition is hereby disposed of as withdrawn in terms of the settlement dated 08.09.2020 by directing the Respondent to strictly adhere to the terms of settlement, failing which, the Petitioner is at liberty to file a fresh Company Petition in accordance with law.

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• 2021 (1) TMI 342
  Seeking extension Corporate Insolvency Resolution Process period by 60 days - Section 60(5) of Insolvency Bankruptcy Code (IBC), 2016, Read with Rule 11 of National Company Law Tribunal Rules, 2016 - HELD THAT:- The Adjudicating Authority already extended CIRP by 90 days as per Section 12 of the Code. It is true the lockdown period due to Covid-19 pandemic is allowed to be excluded from the CIRP. The lockdown started from 25.03.2020 and in the State of Telangana it was extended up to 07.06.2020. Therefore, CIRP of 270 days was expired by 19.06.2020. However, second proviso to Section 12 of IBC allows CIRP to be completed within 330 days. Even though there is no question of another extension, however, by virtue of second proviso to Section 12 of the Code, the CIRP to be completed within 330 days from the insolvency commencement date after exclusion of lockdown period. So, a direction can be given to the Resolution Professional to complete the CIRP within 330 days which will be over by 19.08.2020 after excluding the lockdown period. The Resolution Professional is directed to complete the CIRP by 19.08.2020 relying on second proviso to Section 12 of the Code - application allowed.

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• 2021 (1) TMI 341
  Direction to respondent to complete the sale transaction and/or make payment of the balance amount - Section 32A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016 - Whether in a going concern sale all the assets and liabilities are to be taken by the successful bidder as per Regulation 32-A of IBBI (Liquidation Process) Regulations, 2016? - HELD THAT:- It is an admitted fact that a bidder before bidding has to buy the said bidding document which is valued for 5 lakh. The bidder in the instant case had one copy by paying the said amount. It is also significant to note here that the bidder is not a stranger to the CD. From the records it is understood that the very same bidder was an unsuccessful resolution applicant who had submitted a resolution plan which was rejected by the then CoC during the CIRP. So the conduct of the bidder in this case clearly leads to a conclusion that knowing well the existing liabilities of the CD and the terms of e auction the bidder participated in the bidding and therefore, it appears to me that the bidder could not place a conditional offer contrary to the terms of auction held in this case. The bidding document never permits the bidder to place a conditional offer. Even before the commencement of I B Code, the concept of transferring a company as a going concern was entertained by various High Courts - The Supreme Court in Allahabad Bank v ARC Holding [ 2000 (9) TMI 931 - SUPREME COURT ] held that if the company is sold off as a going concern, then along with the assets of the company, if there are any liabilities relevant to the business or undertaking, the liabilities too are transferred . The above said position of law and the discussions lead to a legitimate conclusion that in a going concern sale all the assets and liabilities are to be taken by the successful bidder as per Regulation 32-A of IBBI (Liquidation Process) Regulations, 2016. This point is answered accordingly. Can a bidder raise unilateral terms and conditions in the form of conditional offer inconsistent with the terms in the bidding document published? - Can a successful bidder upon writing a letter to liquidator before the date of E-auction date, stating that his bid is on the conditions that other liabilities will not be foisted upon the bidder amount to conditional offer and in case non acceptance of the said offer, the bidder is entitled to withdraw from the bid with refund of EMD as claimed? - HELD THAT:- It is significant to note here that the bidding document has not been permitted to make a conditional offer by a bidder. In view of that, I do not find any force in the argument advanced on the side of the bidder that a bidder can in any case of e auction sale make a conditional offer suitable to his choice. Even if the letter dated 4th September, 2019 is styled as a conditional offer, that offer was not accepted by the liquidator and liquidator s letter dated 5th September, 2019 makes it clear that he could not make any changes to the terms. Therefore, even if it is a conditional offer it was rejected by the liquidator before the bidder accepted the bid offered by the liquidator as per the terms of the bidding document. At this juncture the declaration given by the bidder makes it more clear that the bidder accepted the bid as per the terms and conditions stipulated in the bidding documents. A bidder cannot raise unilateral terms and conditions contrary to the terms of the bidding document published. The law is settled as to the power of a Tribunal/Court that the terms of tender are not open to judicial scrutiny and that the authority calling for the tender is the best judge to prescribe the terms and conditions of the tender, therefore, in the light of these, a bidder may also not raise unilateral terms and conditions in a case of this nature - it is clear that when the bidder had participated in the e auction and had deposited the EMD, then he cannot ask for waiver of tax liabilities and other relief which were not permissible as per the bidding documents. Whether the bidder is to be permitted to withdraw from the bid with a direction to the liquidator to refund the EMD as claimed by the bidder? - HELD THAT:- The conditional offer as alleged being found has no legal force he cannot as of right withdraw from the bid as per the terms of bid accepted by the bidder. It is significant to note here that the conditional offer raised by the bidder has been rejected by the liquidator and the letter dated 04.05.20 is superseded by the declaration dated 05.09.2020. Therefore, the bidder is disentitled to withdraw on his own as per the terms of bidding - whenever a bid is submitted it is done so only after knowing the terms of bidding. Even the amount of EMD is to be deposited in accordance with the terms of bidding. If there is any clarification on the terms of bidding including the EMD, it has to be made prior to submission of their bid. The clarification asked for was answered in the negative. Knowing fully well, by signing a declaration the bidder submitted their bid. In the declaration signed by the bidder he agreed unconditionally to abide by the terms of e auction inclusive of forfeiture of EMD in case he did not perform his part of obligation after acceptance of the bid in his favour. To sum up, the fact that the bidder/Visisth Services Limited was an unsuccessful resolution applicant, that the bidder cannot withdraw from the bid in contravention of the bidding terms as per the position of law discussed above, that the terms of e caution provide for forfeiture of EMD upon withdrawal, and that the bidder has signed a declaration agreeing to forfeit in case of default on his side and since it becomes a binding contract once his bid is accepted the bidder is disentitled to claim back the EMD. He does not have a right to withdraw his offer at any time after the acceptance is conveyed to him - there are no hesitation in holding that the bidder is disentitled to get any relief as prayed for and therefore the unnumbered IA filed by the bidder is liable to be dismissed. In regards to the application filed by the liquidator, it appears to me that filing an application like the one is unwarranted and untimely. As per Section 35 of the Code read with Regulation 32-A and 33, of Liquidation Process Regulations, a liquidator is at liberty to confirm the sale following the procedure as laid down under Schedule I of the Regulations. Upon completion of sale what is expected to be from the liquidator is to submit a final report for closure of the liquidation process of the CD as per Regulation 45(3) ( a). The liquidator shall issue fresh invitation to the bidder to provide balance sale consideration within such time as per clause (12) of Schedule I of Regulation 33 - In case of payment of the full amount the liquidator shall execute certificate of sale or sale deed to transfer the assets in the manner specified in the terms of sale as per bidding document following clause (13) of the Schedule I of Regulation 33 - In case of failure to pay the balance sale consideration he is at the liberty to cancel the sale in favour of the bidder by forfeiting the EMD and the amount paid towards the price of bidding document and to proceed with sale as per Regulation 32-A Application dismissed.

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• Central Excise

• 2021 (1) TMI 340
  Clandestine removal - allegation of clandestine use of one extra Pouch Packing Machine for manufacture and clearance by evading excise duty - period from 01-11-2013 to 30-09-2014 - Interpretation of Compounded Levy scheme under section 3A of Central Excise Act 1944 and Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules 2010 - Determining rate of duty and Quantification of duty under Notification No. 16/2010-CE dated 27.02.2010 - seized machine found excess - Operating Machine or not - evidentiary value of statements in term of section 9D of Central Excise Act 1944 with without examining witnesses - Confiscation of PPM is sustainable when it is not manufactured and removed by M/s Hasmukh Tobacco Products - absence of seizure of goods manufactured or cleared by Assessee - penalty under section 11AC of the Central Excise Act. HELD THAT:- M/s Hasmukh Tobacco Products engaged in manufacture of OM brand unmanufactured tobacco falling under CTH 24011090 of Central Excise Tariff Act 1985 with Registered Central Excise ECC No. ACSPP9687QM001. Assessee had filed their last declaration on 27-12-2012 and had declared RSP of Rs. 3/- on pouch and they were paying duty for one PPM, under section 3A of Central Excise Act, 1944 and Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. Central Excise officers, visited factory premises of Assessee on 03.09.2014 and found one undeclared Pouch Packing Machine [PPM] having packing material roll on with printed RSP Rs. 4/-, which was seized. Duty in respect of seized PPM - HELD THAT:- Compounded levy under section 3A is on deemed production and excise duty is leviable as notified on number of packing machines in factory of manufacturer under Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 read with section 3A (2) and (3) of the Central Excise Act, 1944. The monthly deemed production per PPM is prescribed on the basis of average speed of machines and average working hours of factory. Central Excise duty is at rates notified on the basis of Retail Sale Price (RSP) slabs on per machine, Notification No. 16/2010-CE dated 27.02.2010 refers. The number of packing machines installed in factory has been notified to be factor relevant to production of notified goods under the above Rules 2010. Duty is required to be determined on deemed production determined in accordance with the prescribed parameters, i.e. number of operating PPM in factory during month and RSP on the pouches. Rule 5 of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 specifies quantity of notified goods deemed to have been produced by use of one operating packing machine per month and such deemed quantity varies on RSP shown by manufacturer per pouch - Rule 8 specifies that in case of any addition or installation or removal or un-installation of a packing machine in the factory during month, number of operating packing machines for month shall be taken as maximum number of pouch packing machines installed on any day during month, provided that in case of non-working of installed packing machine during month, for any reason whatsoever, same shall be deemed to be an operating pouch packing machine for the month. Rule 9 ibid provides the manner of payment of the duty and the interest. In the present case, the SCN dated 19-02-2015 has demanded total duty of Rs. 300.02 lakhs from November 2013 to September 2014, based on statements. The O-I-O dated 27-12-2019 has confirmed duty of Rs. 1,76,47,000/- from 01-04-2014 to 30-09-2014. Rest of demand of duty of totally Rs. 1,23,55,000/- has been dropped. O-I-O has given just and fair findings in O-I-O Para 54 to 57 for his conclusion that seized PPM was not operating Machine w.e.f. 01-11-2013. We upheld the same as correct view. There is no dispute about detection and seizure of extra PPM from factory of Assessee on 03-09-2014. Both the side have agreed to this fact. Therefore, it remains to be ascertained as to from which date it was brought in the factory and installed or not installed. Statements of 03-09-2014, 21-10-2014 by Hasmukhbhai Patel, and Maheshbhai Patel, shows date of receipt of seized PPM as 01-08-2014. The entire case is based on statements. Hence, critical analysis of statements would be very relevant - It is found that it is not a simple bald statement in their cross examination that seized PPM was brought in factory on 01-08-2014. These depositions in cross examination seems to be their true statements. We also find from statements recorded initially and depositions of relevant witnesses under section 9D of Central Excise Act 1944 before the learned Commissioner, it becomes amply clear that the seized PPM was brought in the factory on 01-08-2014. We have also perused relevant affidavits and relied upon pages of diaries seized from the premises of supplier of PPM. The objective of cross examination was to ascertain actual date of receipt of seized PPM in the factory of assessee and installation thereof. We have also considered all argument and submission made by Authorized Representative (AR) on behalf of the Revenue. We do not agree with contentions of AR that statement in cross examination without any documentary evidences cannot be accepted as evidence that Such depositions in cross examination are retractions and after thoughts only without having any basis to give date of receipt of PPM on 01-08-2014 - the recording of statement in inquiry is not enough but it has to be with fully conscious application of mind by adjudicating authority that statement is required to be admitted allowing opportunity of cross examination of witness. This provision could not be done away with by the adjudicating authority, if he is inclined to take into consideration the statement recorded earlier during investigation by Investigation officers. Without examination and cross examination of person as required under Section 9D for cross examination as mandated under CEA 1944, statement recorded by Investigation Officer would not constitute relevant and admissible evidence and has to be ignored when procedure u/s 9D ibid is not followed by adjudicating authority. We hold that adjudicating authority in this case committed gross error in not placing reliance upon depositions of witnesses recorded during their cross examination which was before him in proceedings in this Show Cause Notice. We are of the view that depositions made by concerned witness before learned Commissioner in cross examination are original evidences adduced on record during the adjudication proceedings. When depositions were made by concerned witness in cross examination, learned Commissioner or revenue had not raised objection during their deposition. Therefore, such depositions before Commissioner during cross examination of witnesses have become the original evidence, which can not be objected merely on assumptions and presumptions or pointing out the unsustainable infirmities related to such depositions - It is Settled that quantification of alleged clandestine clearance on theoretical estimation of the production cannot be sustained. Depositions made in cross examination would become original and valid evidence and adjudicating authority had to rely it without any reservations. There is no duty liability outstanding except interest liability for a few days to be calculated by the Central Excise Officers for September 2014. We hold that there can not be any penalty for September 2014. However, we also make it clear that at the same time the Assessee would also not be eligible to claim any consequential benefit for amount of Rs. 36,82,000/- deposited towards duty for September 2014, which is even otherwise their duty liability and it has also to be appropriated. Imposition of Redemption Fine - HELD THAT:- The Rule 18(1) ibid provides that notified goods produced or removed shall only be liable to confiscation. We agree with the contention of the Assessee that the seized PPM is brought in their factory and it has not been manufactured by Assessee or removed from factory by Assessee. Therefore, we find that seized PPM is not at all liable to confiscation under Rule 18(1) ibid. The confiscation of PPM and fine of Rs. 10,000/- deserves to be vacated and set aside. We vacate confiscation of seized PPM and set aside Redemption fine of Rs. 10,000/- imposed by the impugned order. Imposition quantification of Penalty - HELD THAT:- The provisions in Central Excise Act 1944 provides that even if short payment or non-payment of excise duty detected by self or pointed out by officers, voluntary duty compliance of duty is encouraged to reduce litigation. In this case, entire duty determined and interest stand deposited. Appellant deserves leniency on penalty. Assessee on payment of duty with interest is eligible to reduced penalty @ 10 % u/s 11AC(1)(a) ibid. Assessee is eligible for closure of proceedings only on payment of duty and interest for September 2014. But, for August 2014, the penalty u/s 11AC(1)(a) shall be ten per cent of duty. Thus, for August 2014, duty of Rs. 29,56,000/- is payable with interest and penalty @ 10 %. This entire case is based on statements without clinching, corroborative independent positive evidences on record produced by the Revenue officers. Depositions by witnesses in cross-examination before Commissioner u/s 9D ibid in adjudication proceedings are original evidences and have passed test of correctness of statement given in investigation. Therefore, depositions u/s 9D ibid are original evidence and can never be considered as a retraction from statement given in investigation - Also, Assessee have given their due comments against almost all such decisions. We find that the said decisions are not related to the facts of this case and hence they are not applicable in this case. Accordingly, the Revenue s Appeal deserves to be rejected. The demand of Central Excise duty of Rs. 29,56,000/- against M/s. Hasmukh Tobacco Products, towards duty leviable for the month of August, 2014 is confirmed - M/s. Hasmukh Tobacco Products, Ahmedabad shall pay interest under Section 11AA of Central Excise Act, 1944 on the above confirmed demand of Rs. 29,56,000/- - the confiscation of seized PPM under Rule 18(1) of Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 is vacated and Redemption fine of Rs. 10,000/- also set aside - penalty @ 10 % of Rs. 29,56,000/- on M/s Hasmukh Tobacco Products, u/s 11AC(1)(a) of Central Excise Act, 1944, which will come to Rs. 2,95,600/- - penalty on Shri Hasmukhbhai Ugarchand Patel, Authorized Signatory of M/s Hasmukh Tobacco Products, Ahmedabad U/R 26 of Central Excise Rules, 2002 is seta aside - the appropriation of duty amount of Rs. 36,82,000/- with interest u/s 11AA as deposited in the month of September for September 2014 and also order appropriation of confirmed demand of Central Excise duty of Rs. 29,56,000/- with interest as per Section 11AA of CEA; 10% of Penalty on Rs. 29,56,000/- imposed on M/s. Hasmukh Tobacco Products[which comes to Rs. 2,95,600/-] in terms of Section 11AC(1)(e) of the said Act from the amounts which the said assessee has deposited during pendency of proceedings, is ordered - remaining demand of duty and corresponding penalty and interest over and above mentioned are set aside. Appeal allowed in part.

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• Indian Laws

• 2021 (1) TMI 339
  Dishonor of Cheque - insufficiency of funds - expert opinion for cross-examination of cheques, sought - It is contended that the expert opinion would have aided the petitioner in setting up rebuttal evidence - HELD THAT:- A perusal of the impugned order reveals that the petitioner had executed Exhibit P14 agreement acknowledging the liability and had entered the particulars of the cheques issued towards discharge of the liability in that document. The petitioner has not disputed his signature in the agreement. Further, the petitioner has not disputed his signature in the cheques or the amount entered in words. Therefore, as rightly found by the learned Magistrate, no purpose would be served by sending the cheques for expert opinion, other than delaying the trial unnecessarily. Application dismissed.

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