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TMI Tax Updates - e-Newsletter January 20, 2022 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Central Excise Indian Laws Articles Application of Section 16(4) to ITC in GSTR-3B of a particular month filed after due date for filing GSTR-3B of September of next Financial Year News Cabinet approves infusion of ₹ 1,500 crore in Indian Renewable Energy Development Agency Limited (IREDA) Cabinet approves Scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts Notifications Customs 01/2022 - dated 18-1-2022 - Cus Seeks to exempt BCD and IGST on goods imported for the purpose of AFC Women's Asian Cup India, 2022 GST - States 9/2021– State Tax (Rate) - dated 6-1-2022 - Delhi SGST Amendment in Notification No. 02/2017-State Tax (Rate), dated the 30th June, 2017 34/2021– State Tax - dated 5-1-2022 - Delhi SGST Seeks to extend timelines for filing of application for revocation of cancellation of registration to 30.09.2021, where due date for filing such application falls between 01.03.2020 to 31.08.2021, in cases where registration has been canceled under clause (b) or clause (c) of section 29(2) of the DGST Act. 30/2021– State Tax - dated 5-1-2022 - Delhi SGST Delhi Goods and Services Tax (Sixth Amendment) Rules, 2021. Income Tax 09/2022 - dated 18-1-2022 - IT Securities Transaction Tax (1st Amendment), Rules, 2022 08/2022 - dated 18-1-2022 - IT Income tax (2nd Amendment) Rules, 2022. - New Rule 8AD Computation of capital gains for the purposes of sub-section (1B) of section 45 07/2022 - dated 18-1-2022 - IT e-advance rulings Scheme, 2022 SEZ S.O. 267 (E) - dated 17-1-2022 - SEZ Central Government de-notifies an area of 9.255 hectares thereby making the total area of the Special Economic Zone as 69.783 hectares at State Industries Promotion Corporation of Tamil Nadu Limited, Industrial Growth Centre, Perundurai Village, Erode District, in the State of Tamil Nadu Circulars / Instructions / Orders Income Tax 02/2022 - dated 19-1-2022 Guidelines under clause (10D) section 10 of the Income-tax Act, 1961 DGFT Policy Circular No. 38/2015-2020 - dated 19-1-2022 Clarification regarding SIMS. Customs 01/2022 - dated 18-1-2022 Retention of ISO Containers to meet future requirements Highlights / Catch Notes GST Input tax Credit - entitlement to avail and utilize ITC of GST - Air Separation Unit (ASU) - ASP is installed and commissioned with foundation and structural support, embedded on the land, the leasehold rights of which is obtained by the appellant by receiving the service of agreeing to withdraw the lease hold rights held by IPL in their favour. Without the appellant having the leasehold rights. they cannot undertake 'construction' of the manufacturing Plant, ASP. - the taxes paid is restricted as per Section 17(5)(d) of the CGST/TNGST Act 2017 - AAAR Visit to Get Source Classification of goods - product Rodent Feed - classified under the HSN 2309 90 10 or not - Description to Sl.No.102 does not include rodent feed and hence taxable under Sl.No.453 of Schedule III of Notification No. 01/2017 dated: 28.06.2017 at the rate of 9% CGST & SGST each. - AAR Visit to Get Source Levy of GST - claim of expenses incurred to handle the Cost Free Distribution Sarees & Dhothies and Cost Free School Uniform Scheme - pure services or not - supply to Revenue Department/Social Welfare Department - The services rendered by the applicant towards handling of Dhothies & Sarees/ School Uniforms from Co-operative Societies to Public Distribution System / Revenue Department is exempted from payment of GST - AAR Visit to Get Source Levy of GST - marine engines pertaining to HS code 8407 and its spare parts - engine forms a part of fishing vessel or not - Applicability of GST rate 5% on marine engines pertaining to HS code without considering its general tax rate as per the entry of Schedule I, SI.No.252 of GST Act dated 28.06.2017, being this engine forms a part of boats of HS code 8906 being supplied to defence department and Naval base, Cochin is available to the applicant when such engines are fit in vessels used for patrolling/flood relief and rescue purposes. Applicability of GST rate at 5% under SI.no.252 cited above is not available for spare parts of marine engines. - AAR Visit to Get Source Classification of goods - Fusible Interlining Fabrics of Cotton (FIFC) - The applicant during the personal hearing held on 11.02.2020 has stated that their product provides a stiffness; when the garment manufacturers use this, they pass through rollers which fuses to any other cloth placed beneath, i.e., these are capable of providing a bond to other fabric on the application of heat and pressure, which as per the explanatory notes is squarely covered under CTH 5903. Therefore, there are no hesitation to hold that the products in hand merits classification under CTH 5903 only. - AAR Visit to Get Source Income Tax Validity of reopening of assessment u/s 147 - re-assessment notice issued under the erstwhile section147/148 after 1.4.2001 without following the mandate of new section 148A - Keeping in view the aforesaid conclusions, Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are declared to be ultra vires the Relaxation Act, 2020 and are therefore bad in law and null and void. All the impugned notices under Section 148 of the Income Tax Act are quashed with liberty to the Assessing Officers concerned to initiate fresh re-assessment proceedings in accordance with the relevant provisions of the Act as amended by Finance Act, 2021 and after making compliance of the formalities as required by the law. - HC Visit to Get Source Disallowance of expenses u/s 37(1) - Pharmaceutical Companies - proportionate expenditure incurred on medical practitioners - It has been held therein that while beneficial circulars have to be applied retrospectively, oppressive circulars would have prospective application. In view of this it is clear that C.B.D.T. Circular No.5 of 2012 imposes a new kind of imparity and thus the view taken in the aforesaid decisions by the Tribunal is in consonance with the law laid down by the Hon’ble Supreme Court. It is thus clear that the said Circular could not have been applied retrospectively and especially to Assessment Year 2010-11 in the present case. - HC Visit to Get Source Unexpalined Cash deposited in bank account - unsatisfactory explanation - The accounts, as noted, do not reveal the activity being pursued by the assessee, much less of it being at Mumbai, or the purpose for which cash is/was being withdrawn and accumulated, much less thereat. In the context of the case, it rather also raises the question if the cash withdrawn during earlier years, assuming so, was also at Mumbai and, where so, its relevance - Additions confirmed - AT Visit to Get Source Reopening of assessment u/s 147 v/s assessment u/s 153C - proceedings initiated u/s 132 - The correct course of reassessment is under section 153C not under section 147 of the Act. The Assessing Officer has no options to choose the proceedings except following the due procedure laid down in the Act particularly in the case of search, in which clear procedures are laid down by the legislature. Therefore, Assessing Officer has no jurisdiction to initiate proceedings under section 147/148 in the case of proceedings initiated under section 132 of the Act - AT Visit to Get Source VAT subsidy - Characterization of receipts - taxability of receipts - The refund now VAT as given to the industrial undertakings only for the purpose of fulfilling the best industrialization of the State by establishment of new industries. Thus, incentive provided under the Uttar Pradesh Industrial Scheme is nothing, but capital subsidy not liable to be taxed - The VAT subsidy is a capital receipt and hence not liable for tax and it cannot be treated as revenue receipt liable for tax. - AT Visit to Get Source Unexplained Cash deposited into Bank Accounts - income from unexplained source u/s 69B - Onus to prove - Onus cast on the Appellant has not been discharged.addition u/s 68 on account of cash deposited in bank was correct when Assessee failed to give explanation regarding the source of cash. In the case of Appellant, it is seen that no details of any of the parties from whom it claims to have received the cash along with confirmation and other details to establish the identity, creditworthiness and genuineness of the transaction has been submitted. - Additions confirmed - AT Visit to Get Source Unexplained investment u/s. 69 - Non maintenance of books of accounts - When the AO accepted part of her explanation and required the assessee to prove the sources of the remaining deposits, the assessee took a different stand and canvassed that her income is from real estate business and it is covered u/s 44AD etc. However, she has not let any material/ evidences before the lower authorities to prove that she was in the real estate business. It is clear that the assessee has been inconsistent about the nature of sources of the impugned cash credits. - Additions confirmed - AT Visit to Get Source Customs 100% EOU - demand of duty on wastage/ breakage, over and above the permissible limit, of raw materials imported duty free, during the course of manufacture of final products by the EOU - in view of the decisions dated 23/9/2008 and 26/11/2008 of the Commerce Ministry, in the appellant’s case the wastage norms were fixed at 15 percent as against the earlier norms of 9.09 percent. The Revenue is bound by the norms fixed by SION norms fixed by the Ministry of Commerce and therefore the benefit of the same has to accrue to the appellants. - AT Visit to Get Source Corporate Law Scope of Deposits - amounts collected by the petitioners for sale of immovable property as advance - would come under the purview of ‘deposits’ or would exempt from the purview of ‘deposits’ by virtue of Rule 2(1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014? - the advances received by the 1st petitioner for sale of immovable property are exempted from the purview of the deposits - in view of the proviso to Rule 2 (1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014, the continuation of proceedings against the petitioners/A-1 to A-5 would amount to abuse of process of the Court. - HC Visit to Get Source IBC Nomination of IRP/RP for R-3 company - The appointment of an IRP is clearly provided under Section 22 and the replacement of IRP under Section 27 and therefore, this Application is disposed off with a direction to the CoC to proceed in accordance with law. There is no provision under the Code which empowers one of the Members of the CoC to approach this Tribunal seeking replacement of the IRP or RP when the same is rejected by a majority of Members of the CoC. - AT Visit to Get Source Maintainability of application - initiation of CIRP - The Adjudicating Authority has also recorded finding that claim for interest on the delayed payment is a disputed fact by the Corporate Debtor and it can only be adjudicated by a court of competent jurisdiction. The claim of interest being disputed, no error has been committed by the Adjudicating Authority in rejecting the Application under Section 9 of the Code. - AT Visit to Get Source Seeking withdrawal of application for initiation of CIRP - On a bare reading of the provision of section 7(5) clauses (a) and (b) it is amply clear that the Adjudicating Authority has two courses of action available to it. The Adjudicating Authority must either admit the application under section 7(5)(a) or it must reject the application under section 7(5)(b) of IBC, 2016. Whereas, in the present case in hand the settlement agreement agreed between the parties is only a subsequent arrangement which cannot negate the occurrence of default much earlier. Therefore, the applicants' contention regarding change or rescheduling in date of default in lieu of the settlement Agreement holds no merit. Hence, the prayers by the applicant in the present application stands dismissed. - Tri Visit to Get Source Delay in implementation of approved Resolution Plan - In the present case, the Approved Resolution Plan has been alleged to be contravened by the Successful Resolution Applicant and therefore an application could have been made to the Adjudicating Authority for liquidation. In the present case, no such application for liquidation has been made by the Appellants or any other stakeholder, but on the contrary the Appellants (and also the financial creditors)have sought the re-initiation of CIRP and invitation of fresh EOIs after its (CIRP’s) extension by 90 days. There is no express provision regarding re-initiation of CIRP in the IBC. - AT Visit to Get Source Case Laws: GST 2022 (1) TMI 751 Provisional attachment of the bank(Cash Credit) account - provisions of Section 83 of the CGST Act, 2017 - HELD THAT:- The law is well-settled that a cash credit account of the assessee cannot be provisionally attached in exercise of powers under Section 83 of the CGST Act. This writ-application succeeds and is hereby allowed. The order of provisional attachment of the cash credit account of the writ-applicant is hereby quashed and set-aside. 2022 (1) TMI 750 Seeking grant of Bail - Input Tax Credit - issue of invoices and bills without physical supply of materials - Section 132(1)(b),(c) (l) the OGST Act, 2017 - HELD THAT:- Grant of bail or refusal is always a discretionary exercise which is to be guided by judicial application of mind. No inexorable formula is in place for considering a plea of bail which depends on variety of factors as has been propounded by the Supreme Court on number of occasions. In so far as economic offences are concerned, definitely, a different approach is to be adopted but then, the basic principles of bail shall have to be borne in mind. It is well known that there is no straight jacket formula for considering the matters of bail which varies from individual case to case. In the instant case, the petitioner was arrested on 02.09.2021 for offences under Section 132(1)(b),(c) (l) of OGST Act, 2017 having availed fake ITC by a firm M/s. S.S. Syndicate during the period under consideration. As is made to understand, the petitioner being the proprietor of a fictitious firm availed passed on bogus ITC without physical receipt and supply of goods on the strength of fake invoices issued in the name of non-existing suppliers which could be revealed after extensive investigation. The allegation is also to the effect that the petitioner in collusion with other accused persons were involved in operation of fictitious firms and availed bogus ITC of ₹ 4.16 crore and passed on ITC for an amount of ₹ 47.99 crore. No doubt, the materials on record prima facie suggest the involvement of the petitioner and others in engaging themselves in activities whereby bogus ITC was claimed on the strength of fake invoices without physical receipt and supply of goods and also passed on to others. In other words, all the necessary materials which are required to prosecute the petitioner can be said to have been substantially collected during investigation. The petitioner happens to be a local inhabitant of Bhubaneswar. Being a permanent resident of Bhubaneswar, the Court is of the view that there is a less chance of petitioner absconding or fleeing from justice. Since reasonably sufficient material evidence appears to have been gathered and taking into account the period of detention and the fact that the alleged offences are punishable with a maximum imprisonment of five years and as the accused not being an outsider but a local of Balianta situate within the jurisdiction of Bhubaneswar, the Court is of the humble view that the petitioner, who has remained in judicial custody for four months, should be enlarged on bail with stringent conditions which are as follows - the petitioner is directed to be released on bail on furnishing a bail bond of ₹ 50,00.000/- with two solvent sureties for the like amount to the satisfaction of the learned court below, and subject to the conditions imposed. Application allowed. 2022 (1) TMI 749 Input tax Credit - entitlement to avail and utilize ITC of GST Charged by IPL - supply or not - Air Separation Unit (ASU) - transfer of the leasehold rights for the remainder period of 72 years in respect of part of the property along with superstructures, for setting up of State of the art medical and industrial gases plant - restriction under Section 17(5)(d) of the GST Act 2017 - HELD THAT:- The explanation of 'Contraction' for the purposes of 'Construction' mentioned in Section 17(5)(c) and (d), is an inclusive definition and includes re-construction, renovation, additions or alterations or repairs to the extent of capitalisation to the immovable property. This inclusive explanation states specific activities covered under the term 'construction' apart from the 'Original' activity of 'Construction', the cost of which is capitalised to the said immovable property. The appellant has Erected, Installed and commissioned the various components of the Air Separation Unit interconnected with Pipes and other necessary components, put up administration units, other utilities required for manufacturing of the Industrial and Medical gases with the required foundations and structural supports, i.e., have undertaken 'original' activities of 'construction' - even if only Installation of various components were' made in setting up the manufacturing plant, such installation, commissioning are original works of construction. From the various photographs furnished by the appellant, it is evident that the appellant has set up the manufacturing plant with all the required utilities and therefore, there is no doubt that the appellant has taken lease of the land and have undertaken 'Construction' of the manufacturing Plant. Whether the services received by the appellant from IPL i.e., withdrawing the leasehold rights of the land held in favour of the appellant, thereby facilitating the appellant to enter into lease with SICOT for the remaining period of lease can be construed as services received 'for construction'? - HELD THAT:- The appellants' interpretation is that for construction' is to be read as 'for the purpose of construction' and only those services which have a direct nexus to 'construction' such as works contract, services of engineer/contractor, services of architect or interior decorators etc., are covered under this phrase. In this connection, the appellant has relied on the decisions of the Apex Court. When the statute expresses clearly, the same is to be interpreted as per the words of the statute - it is evident that the services received enables the appellant to procure the lease of land for the remaining lease period and set up the manufacturing facility. Without IPL agreeing to withdraw its leasehold rights in appellants' favour, the appellant cannot get the leasehold on the land and cannot construct the manufacturing plant. Further, the amount paid to IPL for service of agreeing to withdraw the leasehold right to use the land is an integral part of the cost of the ASP. It has been stated by the appellant that the amount paid to IPL for grant of leasehold right in their favour stands capitalised along with the ASP in their books. Therefore it is clear that the service received from IPL is a service received 'for construction'. Whether the manufacturing facility, the ASP is an immovable property or a movable 'plant and machinery', for the construction of which the impugned services are used? - HELD THAT:- The appellant has taken on lease the land from SIPCOT for a period of 72 years with the intention to put up the manufacturing facility in the said place for generation of various Industrial grade gas and it is not a temporary facility. Hence the 'ASP' set up by the appellant is not a 'movable property' as claimed by the appellant but is an immovable property'. Whether the entire manufacturing plant is to be construed as a 'Plant and machinery'? - HELD THAT:- In the case at hand the impugned services are received by the appellant 'for construction' of the manufacturing plant which is an immovable property and even if the said plant is considerable as 'Plant and Machinery', the restriction on the services received towards the leasehold of the 'Land' is restricted by Section 17(5)(d) of the Act read with the Explanation for 'Construction' and 'Plant and Machinery'. ASP is installed and commissioned with foundation and structural support, embedded on the land, the leasehold rights of which is obtained by the appellant by receiving the service of agreeing to withdraw the lease hold rights held by IPL in their favour. Without the appellant having the leasehold rights. they cannot undertake 'construction' of the manufacturing Plant, ASP. Also, ASP is an immovable property and not mere 'Plant' or 'machinery' but can be termed as 'Plant and Machinery', the Explanation of which specifically excludes land. Thus, it is clear that intention of law maker is to restrict ITC on services related to land, received for construction - the services received from IPL, the cost of which is capitalised along with ASP, is a service received 'for construction' of an immovable property, and therefore the taxes paid is restricted as per Section 17(5)(d) of the CGST/TNGST Act 2017. 2022 (1) TMI 748 Classification of goods - product Rodent Feed - classified under the HSN 2309 90 10 or not - exemption under the Serial Number 102 of N/N. 02/2017 - HELD THAT:- This exemption notification has grouped various tariff items under a single Serial no. 102 and has given an inclusive description for the same. Further neither the specific word rodent feed nor the general words such as animal feed are used. In this connection a reference need to be made to the law declared by the Hon ble Supreme Court of India in the case of N.D.P. NAMBOODRIPAD VERSUS UNION OF INDIA ORS. [ 2004 (4) TMI 583 - SUPREME COURT] wherein it has been held that the word includes can be used to connote a specific meaning i.e., as in means and includes or comprises or consists of . Therefore the description is exhaustive, and no further extension of the words used in the Notification can be made to include any other word. The Hon ble Apex Court of India in the case of STATE OF GUJARAT OTHERS VERSUS ESSAR OIL LIMITED AND ANOTHER [ 2012 (1) TMI 47 - SUPREME COURT] held that the principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee, does not apply to the construction of an exception or an exempting provision, which must be construed strictly, and in case of any doubt or ambiguity, the benefit must go to the State - The Hon ble Apex court of India in the case of COMMISSIONER OF CENTRAL EXCISE, SURAT-I VERSUS M/S FAVOURITE INDUSTRIES [ 2012 (4) TMI 65 - SUPREME COURT] held that an exemption notification must be interpreted in light of the words employed by it and not on any other basis and there cannot be any addition or subtraction from the words used in the exemption notification as it requires strict interpretation by the Courts. The wordings of the exemption notification have to be given its natural meaning when the wordings are simple, clear and unambiguous. Therefore in the absence of any specific reference to other animal feed or rodent feed, this exemption notification cannot be extended to the commodity dealt by the applicant. 2022 (1) TMI 747 Levy of GST - claim of expenses incurred to handle the Cost Free Distribution Sarees Dhothies and Cost Free School Uniform Scheme - pure services or not - supply to Revenue Department/Social Welfare Department - taxable at 18% GST or not - functions entrusted to a Panchayat under Article 243G/ municipality under Article 243W of the constitution of India - whether the Handling Charges related to Pre-GST period 2015-16 and 2016-17 will also attract GST or not? - HELD THAT:- In the case at hand, it is seen that the applicant is entrusted with the work of undertaking quality check of the clothes, procurement, storage of the goods in warehouses and transport the uniforms/ sarees and dhothies for distribution to the designates places. For undertaking all these activities, they are paid 'Handling charges' as fixed by the Committee set up by the State Government. It is opined by the State Jurisdictional Officer, that the activities undertaken are 'Composite supply' and is not 'Pure service', therefore the applicant is not eligible for the benefit of the exemption at SI.No. 3 above. 'Pure Service' is not per-se defined under GST, the same can be constituted in general term as any supply which is either deemed as service under schedule II of CGST Act or which are not covered under the definition of Goods shall be categorized as pure services - the activity of supply of various services under the gamut of 'Handling' by the applicant without any involvement of goods either as supply or consumed while undertaking such services are 'Pure Services' even if the supply is a composite supply of such services. It is also seen that the supply is made to the Departments of Tamilnadu, therefore, supply is made to the State Government. Whether the said activity is undertaken by the applicant 'in relation to' any function entrusted to a Panchayat under article 243G of the Constitution or Municipality under article 243W of the Constitution? - HELD THAT:- In the case at hand, the activities of the applicant, i.e., handling of Dhoties and Sarees/ School Uniforms from Co-Operative societies to public distribution system/ Revenue Department are definitely 'in relation to' the functions entrusted to a Panchayat under Article 243G/ municipality under Article 243W of the constitution of India - the activities of 'Handling' carried out by the applicant in respect of Free distribution of Sarees and Dhothies and the School Uniform to the students of class 1 to 8 under 'Noon Meal Scheme' are activities in relation to the functions entrusted to Panchayats/Municipality in the Article 243 G/243W and the applicant supplies these services to the State Government and therefore, the exemption at SI.No.3 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 as amended is available to the applicant. 2022 (1) TMI 746 Levy of GST - marine engines pertaining to HS code 8407 and its spare parts - engine forms a part of fishing vessel or not - to be classified under HS code 8407 or HS code 8902? - engine forms a part of boats of HS code 8906 being supplied to defence department and other agencies used for patrolling/flood relief and rescue purposes or not - HELD THAT:- Applicant had not filed any documentary evidences along with the application to substantiate that the engines they supply are being used in fishing vessels or for boats used by defence departments. During the Personal Hearing held on 05.10.2021, they were called upon to submit Bills of entries, invoices, purchase orders for the products imported and Tax invoices issued by the applicant. Further to that they submitted bills of entries, invoices for purchase and not for sale made by them. When contacted for clarification on these documents, they submitted that the buyers are individual fishermen and mostly they are walk in customers. Hence no purchase orders from fishermen for engines sold for fishing vessels were available with them. The applicant has not furnished any purchase orders for supply of engines at present or for proposed supplies. It is observed that the supplies made for fishing vessels have not been supported with documentary evidences - this authority is constrained to pass any ruling on the question raised about eligibility to avail rate of 5% as prescribed at Sl.no. 252 of Annexure-I of Notification No. 01/2017-C.T (Rate) dated 28.06.2017. Applicability of GST rate 5% on marine engines pertaining to HS code 8407 and its spare parts without considering its general tax rate as per the entry of Schedule I, SI.No.252 of GST Act dated 28.06.2017 - this engine forms a part of boats of HS code 8906 being supplied to defence department and other agencies used for patrolling/flood relief and rescue purposes - HELD THAT:- It is seen that the applicant has effected sale of engines to defense department and Naval base at Cochin. The vessels used by the defence and other agencies for patrol, relief and rescue operations fall under Customs Tariff Heading 8906- Other vessels including warships and lifeboats other than rowing boats. As per entry at Sl.no. 252 of Annexure-I of Notification No. 01/2017-C.T (Rate) dated 28.06.2017, parts of goods of headings 8901,8902,8904,8906,8907 falling under any chapter of the customs Tariff attracts GST @5%. Therefore if the marine engines supplied for use as part of vessel falling under tariff heading 8906, which are used by the department of defence and Naval base for patrol, relief and rescue operations, then such engines as part of such vessels will only attract GST at the rate of 5% as per the above entry. The applicant has not established sale of Outboard motors/marine engines to fishing vessels with substantiating documents. Hence no ruling could be offered in this respect. With respect to the Outboard motors/marine engines being supplied to defence department and Naval Base, applicant has submitted invoices and purchase orders to establish the supply and hence it is found that such marine engines supplied being part of Other vessels including warships and lifeboats other than rowing boats falling under Customs Tariff Heading 8906-are chargeable to 5% GST as per entry at Sl.no. 252 of Annexure-I of Notification No. 01/2017-C.T (Rate) dated 28.06.2017. However spare parts are not found to be eligible to avail for this reduced rate specified in the entry. 2022 (1) TMI 745 Classification of goods - Fusible Interlining Fabrics of Cotton (FIFC) - to be classified under HSN Code 5903 or under Chapter 52(heading depending upon weightage of cotton in the fabrics)? - HELD THAT:- The applicant purchases Fusible Inter-lining Fabrics of cotton (FIFC) from various manufactures like Madura Coats Limited, Ruby Mills Lts, TALCO, etc. The said products are purchased under a Tax Invoice from the manufacturers, i.e., the goods stands assessed at the initial stage. However, the applicant has sought classification of the already assessed products stating that all these products are similar but is classified by the manufacturers under Chapter 52 or CTH 5903. Their concern is though at the manufacturer end, the products are classified differently, when they are dealing with such goods, they intend to know the correct classification applicable to the said products - On observing the samples furnished, it is found that the dot printing is visible. Also it is seen the printing is available in one side of the fabric and follows a set pattern. Thus, the products supplied by the applicant have similar properties and purpose and therefore we proceed to find the appropriate classification. Whether the fabrics in hand satisfies the exclusions prescribed in chapter Note 2(a) of Chapter 59 and therefore is not classifiable under CTH 5903 or otherwise? - HELD THAT:- As per the Explanatory notes to CTH 5903, Textile fabrics which are spattered by spraying with visible particles of thermoplastic material and are capable of providing a bond to other fabrics or materials on the application of heat and pressure are covered under CTH 5903. The applicant during the personal hearing held on 11.02.2020 has stated that their product provides a stiffness; when the garment manufacturers use this, they pass through rollers which fuses to any other cloth placed beneath, i.e., these are capable of providing a bond to other fabric on the application of heat and pressure, which as per the explanatory notes is squarely covered under CTH 5903. Therefore, there are no hesitation to hold that the products in hand merits classification under CTH 5903 only. Thus, the Fusible Interlining Fabrics of Cotton (FIFC) fall under CTH 5903 for the reasons that they are not covered under the exclusions stated at Chapter Note 2(a) of Chapter 59 of the Customs Tariff made applicable to GST. 2022 (1) TMI 744 Carry forward of credit - Refund claim - Other Category of Cesses which was carry forwarded in TRAN-1 and later on, the said amount was reversed in GSTR-3B return - adjudicating authority has rejected the refund claim by taking the main ground that credit of cesses could not be carried forward as per amended explanation 3 of Section 140 of CGST Act, 2017 - Section 54(1) of the CGST Act, 2017 - HELD THAT:- There is no iota of doubt in the fact that after insertion of explanation 3 of Section 140 of CGST Act vide S. 28 of the CGST (Amendment) Act, 2018 (31 of 2018) which were made effective from 1-7-2017, accumulated credit of cesses could not be carry forwarded and also could not be utilized for payment of outward supply. The Hon ble Madras High Court in ASSISTANT COMMISSIONER OF CGST AND CENTRAL EXCISE, COMMISSIONER CGST AND CENTRAL EXCISE, UNION OF INDIA, CENTRAL BOARD OF EXCISE AND CUSTOMS VERSUS SUTHERLAND GLOBAL SERVICES PRIVATE LIMITED, GOVERNMENT OF TAMIL NADU, THE CHAIRMAN GSTN [ 2020 (10) TMI 804 - MADRAS HIGH COURT] hold that the assessee was not entitled to carry forward and set off of unutilized Education Cess, Secondary Higher Education Cess and Krishi Kalyan Cess against the GST output liability with reference to explanation 3 in Section 140 of CGST Act of the CGST Act, 2017. Further, it is observed that there is no explicit provision has been provided under Section 54 of CGST Act, 2017 for refund of such credit. From the provision of GST Law as well as in the light of the above Hon ble Madras High Court judgment it is abundantly clear that once transition of cesses to GST credit ledger is held as inadmissible, as natural corollary, cash refund of the same would also not be permissible. The issue whether the balance of credit of cesses was liable to be refunded or not, was also raised in case of BANSWARA SYNTEX LTD. VERSUS THE COMMISSIONER, CENTRAL EXCISE SERVICE TAX [ 2018 (10) TMI 1064 - RAJASTHAN HIGH COURT] before the Hon ble Rajasthan High Court wherein also given the answered in negative. In view of the provision of Section 140 (explanation 3 of the said section), Section 54 of the CGST Act, 2017 and various judgments in favour of the department, it is held that the adjudicating authority has rightly rejected the said refund claim and there are also no infirmity in the said order - appeal dismissed. 2022 (1) TMI 743 Refund of excess payment of tax - export of goods on payment of IGST - zero-rated supplies or deemed export - Interpretation of Rule 86 of CGST Rules, 2017 read with Circular No. 135/05/2020, dated 31-3-2020 - whether the appeal has been filed within the prescribed time limit? - HELD THAT:- In the instant case, the appeal in the prescribed Form GST APL-01 has been filed by the appellant on 23-11-2020 i.e. the delay of 26 days from the normal period of three months as per Section 107(1) of CGST Act, 2017. The reason for delay has been mentioned by the appellant in their appeal memo that the office of the authorized representative of the appellant was closed due to COVID-19 cases, hence the appeal could not be prepared in time - Delay up to 30 days is condonable, hence condonation of delay is requested. In view of the reason given by the appellant, the delay in filing the appeal as per provision of sub-section (4) of Section 107 of CGST Act, 2017 is condoned. Rejection of refund on the ground that the refund claim cannot be sanctioned in cash as per Rule 86 of CGST Rules, 2017 read with Circular No. 135/05/2020, dated 31-3-2020 - HELD THAT:- The appellant has filed the refund application GST-RFD-01 with ARN No. AA0807200379253, dated 16-7-2020 for the disputed period January, 2020 on account of Excess Payment of Tax - amendment in Rule 86(4)(A) and sub-rule (1)(1A) of Rule 92 of the CGST Rules, 2017 has been made and same was made effective from 31-3-2020 whereas, the period of refund claim in the instant case is pertains to the period of January, 2020. Thus, the amended rule is not applicable in the instant case. Appeal dismissed. Income Tax 2022 (1) TMI 742 Validity of reopening of assessment u/s 147 - re-assessment notice issued under the erstwhile section147/148 after 1.4.2001 without following the mandate of new section 148A - Notice as barred by limitation - enforcement of the Enabling Act and the Finance Act, 2021 - scope of provisions of Section 148 read with Section 148A as substituted by Finance Act, 2021 - substituting the provisions of the Act by means of the Finance Act, 2021 with effect from 01.04.2021, the old provisions were omitted from the statute book and replaced by fresh provisions with effect from 01.04.2021 - time limitation existing under the Act had been extended under the Ordinance - relaxation of limitation granted on account of general hardship existing upon the spread of pandemic COVID -19 - as argued respondent Income Tax Authority concerned, before issuing the impugned notices under Section 148 of the Income Tax Act, have not observed the statutory formalities under Section 148 A of the Income Tax Act as prescribed by the Finance Act, 2021 which are applicable with effect from 1st April, 2021 before issuance of notices under Section 148 of the Act on or after 1st April, 2021 - HELD THAT:- As decided in Ashok Kumar Agarwal vs- Union of India [ 2021 (10) TMI 697 - ALLAHABAD HIGH COURT ], Bpip Infra Private Limited vs- Income Tax Officer, Ward 4 (1), Jaipur [ 2021 (12) TMI 207 - RAJASTHAN HIGH COURT ] and Man Mohan Kohli vs- Assistant Commissioner of Income Tax Anr.[ 2021 (12) TMI 664 - DELHI HIGH COURT ] Ordinance, the Enabling Act and Sections 2 to 88 of the Finance Act 2021, as enforced w.e.f. 01.04.2021, are not conflicted. Insofar as the Explanation appended to Clause A(a), A(b), and the impugned Notifications dated 31.03.2021 and 27.04.2021 (respectively) are concerned, we declare that the said Explanations must be read, as applicable to reassessment proceedings as may have been in existence on 31.03.2021 i.e. before the substitution of Sections 147, 148, 148A, 149, 151 151A of the Act. Consequently, the reassessment notices in all the writ petitions are quashed. Keeping in view the aforesaid conclusions, Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are declared to be ultra vires the Relaxation Act, 2020 and are therefore bad in law and null and void. All the impugned notices under Section 148 of the Income Tax Act are quashed with liberty to the Assessing Officers concerned to initiate fresh re-assessment proceedings in accordance with the relevant provisions of the Act as amended by Finance Act, 2021 and after making compliance of the formalities as required by the law. 2022 (1) TMI 741 Validity of reopening of assessment u/s 147 - re-assessment notice issued under the erstwhile section147/148 after 1.4.2001 without following the mandate of new section 148A - Notice as barred by limitation - enforcement of the Enabling Act and the Finance Act, 2021 - scope of provisions of Section 148 read with Section 148A as substituted by Finance Act, 2021 - substituting the provisions of the Act by means of the Finance Act, 2021 with effect from 01.04.2021, the old provisions were omitted from the statute book and replaced by fresh provisions with effect from 01.04.2021 - time limitation existing under the Act had been extended under the Ordinance - relaxation of limitation granted on account of general hardship existing upon the spread of pandemic COVID -19 - as argued respondent Income Tax Authority concerned, before issuing the impugned notices under Section 148 of the Income Tax Act, have not observed the statutory formalities under Section 148 A of the Income Tax Act as prescribed by the Finance Act, 2021 which are applicable with effect from 1st April, 2021 before issuance of notices under Section 148 of the Act on or after 1st April, 2021 - HELD THAT:- As decided in Ashok Kumar Agarwal vs- Union of India [ 2021 (10) TMI 697 - ALLAHABAD HIGH COURT ] , Bpip Infra Private Limited vs- Income Tax Officer, Ward 4 (1), Jaipur [ 2021 (12) TMI 207 - RAJASTHAN HIGH COURT ] and Man Mohan Kohli vs- Assistant Commissioner of Income Tax Anr. [ 2021 (12) TMI 664 - DELHI HIGH COURT ] Ordinance, the Enabling Act and Sections 2 to 88 of the Finance Act 2021, as enforced w.e.f. 01.04.2021, are not conflicted. Insofar as the Explanation appended to Clause A(a), A(b), and the impugned Notifications dated 31.03.2021 and 27.04.2021 (respectively) are concerned, we declare that the said Explanations must be read, as applicable to reassessment proceedings as may have been in existence on 31.03.2021 i.e. before the substitution of Sections 147, 148, 148A, 149, 151 151A of the Act. Consequently, the reassessment notices in all the writ petitions are quashed. Keeping in view the aforesaid conclusions, Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are declared to be ultra vires the Relaxation Act, 2020 and are therefore bad in law and null and void. All the impugned notices under Section 148 of the Income Tax Act are quashed with liberty to the Assessing Officers concerned to initiate fresh re-assessment proceedings in accordance with the relevant provisions of the Act as amended by Finance Act, 2021 and after making compliance of the formalities as required by the law. 2022 (1) TMI 740 Disallowance of expenses u/s 37(1) - Pharmaceutical Companies - proportionate expenditure incurred on medical practitioners - Disallowance in view of Circular No.5 of 2012 as well as regulations framed by the Medical Council of India - applicability of the Medical Council of India Regulations dated 10.12.2009 and the C.B.D.T. Circular No.5 of 2012 to pharmaceutical companies like the assessee - ITAT deleted the addition - HELD THAT:- In the present case, the Assessment Year is 2010-11. If it is found that the Circular cannot be given retrospective effect it would not be necessary to then go into the question of its applicability to pharmaceutical companies from 01.08.2012 onwards. It is seen that the Tribunal through its various benches has consistently held that C.B.D.T. Circular No.5 of 2012 would not have any retrospective effect but would operate prospectively from 01.08.2012. C.B.D.T. Circular No.5 of 2012 which creates a burden or liability or imposes a new kind of imparity has thus to be applied prospectively, reliance has been placed by the Tribunal on the decision of SRMB Dairy Farming Pvt. Ltd. [ 2017 (11) TMI 1494 - SUPREME COURT ] It has been held therein that while beneficial circulars have to be applied retrospectively, oppressive circulars would have prospective application. In view of this it is clear that C.B.D.T. Circular No.5 of 2012 imposes a new kind of imparity and thus the view taken in the aforesaid decisions by the Tribunal is in consonance with the law laid down by the Hon ble Supreme Court. It is thus clear that the said Circular could not have been applied retrospectively and especially to Assessment Year 2010-11 in the present case. On this count it is not necessary to interfere with the impugned order passed by the Tribunal in this appeal. Substantial question of law no.(i) is answered accordingly by holding that the Tribunal was justified in deleting the dis-allowance as made by the Commissioner of Income Tax (Appeals). 2022 (1) TMI 739 Reopening of assessment u/s 147 - Eligibility of reasons to believe - Change of opinion - provision for sales return as the expenditure was not incurred during the previous year (as also the amortization of other operating expenses) - HELD THAT:- Reasons recorded only indicate a change of opinion by the Jurisdictional Assessing Officer (JAO) based on the same set of facts and documents. Moreover, the JAO has proceeded on the incorrect premise that the amount of provision for sales return as the expenditure incurred was not incurred during the relevant year but the following year. Infact this has been accepted in the order dated 16th November 2019 rejecting petitioner's objections, which order is also impugned in this petition. The JAO, though he admits that he has erred, states that that issue of difference is not of prime relevance or contention is not of relevance at this stage. When the primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled on change of opinion to commence proceedings for reassessment. As held in 3i Infotech Limited [ 2010 (6) TMI 372 - BOMBAY HIGH COURT] where on consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not be open to the Assessing Officer to reopen the assessment based on the very same material with a view to take another view. In the reasons recorded also the JAO in effect says, as could be seen from paragraph 5 therein, that it was a change of opinion - we are unable to cull out what were the material facts necessary for assessment that were not disclosed by petitioner truly and fully at the time of assessment. - Decided in favour of assessee. 2022 (1) TMI 738 Revenue recognition - Adoption of the Accounting Standard AS-7 for determination of revenue - bogus purchases - HELD THAT:- In the present case, both the learned ITAT as well as the learned CIT(A) have placed reliance on and upheld the adoption of the Accounting Standard AS-7 by the respondent-assessee for determination of its revenue. The learned counsel for the appellant does not deny that incase the case of the Revenue is to be accepted, it will also impact the revenue determination for the respondent-assessee and its profits. In any case, the dispute involved is factual in nature and no substantial question of law arises for consideration in the present appeal. 2022 (1) TMI 737 Deduction u/s 80 IA - HELD THAT:- As recorded in the preceding paragraphs, consistently the Tribunal and the Hon ble High Court holding the issue relating to the claim of the assessee under section 80IA of the Act in favour of the assessee and the same stands undisturbed for the assessment year 2010-11 also. In this year also, Ld. CIT(A) granted relief to the assessee by following this consistent view taken in assessee s own case for the earlier assessment years by his predecessor as well as the higher fora, namely, the Tribunal and the Hon ble High Court. Both the authorities below recorded a finding that the facts are similar for this year also as those are for the assessment years 2005-06 to 2011-12. In these circumstances we are of the considered opinion that in the absence of any compelling changed circumstances, the consistent view taken in assessee s own case for the earlier years are not be disturbed. While respectfully following the same, we hold the issue in favour of the assessee and return a finding that the deletion of the disallowance of claim of assessee under section 80IA of the Act by the Ld. CIT(A) is neither illegal nor irregular and the same has to be upheld. Consequently, we dismiss ground No. 1 of Revenue s appeal. Disallowance of the expenses - AR submitted that in view of the fact that the assessee is entitled to claim the deduction under section 80IA of the Act, no adjudication is necessary on this aspect and as rightly observed by the Ld. CIT(A) in his order the assessee would otherwise be exempt under section 80IA (4) (iii) of the Act and therefore, this issue becomes academic. We agree with him and find that no adjudication is necessary on this issue. 2022 (1) TMI 736 Unexpalined Cash deposited in bank account - unsatisfactory explanation as to the nature and source thereof - HELD THAT:- The assessee s explanation is phony. Not only there is no evidence as to source (other than withdrawal from bank during the current year), there is also no explanation for holding the same. Equally discrediting of her explanation is the time of deposit; it being also doubtful if she was in Jabalpur on 19.12.2016, the date of deposit inasmuch as she is stated to have left Jabalpur immediately after her marriage on 08.12.2016, which is also cited as the reason for an affidavit qua cash deposit having been furnished by her father. The cash withdrawal of rs. 66,000 during the year (prior to 09/11/2016) is undisputed. No part of it; the last withdrawal being at rs. 10,000 on 30/7/2016, however, can be regarded as held on 08/11/2016, considering her forthcoming marriage for which cash is stated to be withdrawn. In fact, the entire withdrawal is from April to July, 2016, at Mumbai to which place there is no reference in the assessee s explanation, from her accounts with PNB Axis Bank, making it clear that the full facts in relation to the same have not been stated/clarified. No credit in its respect could thus be allowed. The assessee s explanation for the impugned cash deposit has in my view been therefore rightly regarded as unsatisfactory by the Revenue, finding her case as wholly unevidenced. Affidavit of the assessee s father (dated 10.10.2019), stating that no cash had been deposited (on 19.12.2016) in old currency, found false, could not be held against the assessee as he was not cross-examined - The said affidavit stood retracted on 14.10.2019, stating that some of it may have been in old currency. In this regard, even as observed during hearing, what value the said affidavit when it is an undisputed fact that cash (in old currency) at rs.2.47 lacs was deposited in bank on 19.12.2016, and toward which the assessee had in fact also furnished a disclosure on 07.02.2017 (PB pgs. 36-38). Nothing, thus, turns on the said affidavit, apart from speaking very poorly of the assessee s father, who issued the statement without confirming the facts. In fact, the affidavit being admittedly and materially incorrect, the argument is also without merit. Cash deposited with bank stands duly recorded in the assessee s books of account, no addition u/s. 69A could be made - First, where recorded in account books, it is the truth of those entries that section 68 requires the assessee to prove. And, where not, section 69/69A, likewise, requires an assessee to prove the nature and source of an asset found, as against the sum credited, signifying receipt, that he is required to explain u/s. 68. The two sections are thus in pari materia , and it would therefore matter little whether the books of account are maintained or not as either way an assessee is required to explain the nature and source of the sum under reference. Though that represents trite law, reference in this regard be usefully made to CIT v. Jauharimal Goel [ 2005 (4) TMI 52 - ALLAHABAD HIGH COURT] As explained in CIT v. Kamaraja Pandian [ 1983 (9) TMI 65 - MADRAS HIGH COURT] the genuineness of a credit transaction is to be, in view of section 68, established by the assessee inspite of entries to that effect in his books of account. The second reason, which may not be required to be dilated upon in view of the first, is if a compilation of bank entries, in any case available in the form of bank account statement, could by itself, i.e., without any supporting documents, be regarded as valid books of account in law. The accounts, as noted, do not reveal the activity being pursued by the assessee, much less of it being at Mumbai, or the purpose for which cash is/was being withdrawn and accumulated, much less thereat. In the context of the case, it rather also raises the question if the cash withdrawn during earlier years, assuming so, was also at Mumbai and, where so, its relevance. - Decided against assessee. 2022 (1) TMI 735 Reopening of assessment u/s 147 v/s assessment u/s 153C - proceedings initiated u/s 132 - AO jurisdiction to reopen the assessment based on the document found and seized during search action when the IT Act prescribes completely separate mechanism under section 153A to 153C dealing with the search cases which should have been followed - addition being alleged cash loan taken u/s 69D - HELD THAT:- We observe from the reasons recorded for initiation of reassessment proceedings that the proceedings u/s 148 of the Act were initiated heavily relying on the documents found during search conducted in the group concerns of the Lodha group in which the employee, Shri Somnath Nair, of the group is also covered. The documents found in his position were confiscated and the Assessing Officer has fully satisfied that these documents are belongs to assessee. After recording the satisfaction, he proceeded to initiate the proceedings u/s 148/147 instead of section 153C of the Act. The assessee has raised the separate ground before Ld.CIT(A) and Ld.CIT(A) conveniently did not address this issue and he only dealt with the procedure adopted to initiate and completion of the reassessment u/s 147. He has not even whispered on this aspect. See cases BATTA YADAMMA [ 2018 (11) TMI 1694 - ITAT HYDERABAD] and SRI SURYADEVARA AVINASH [ 2019 (9) TMI 898 - ITAT HYDERABAD] . The correct course of reassessment is under section 153C not under section 147 of the Act. The Assessing Officer has no options to choose the proceedings except following the due procedure laid down in the Act particularly in the case of search, in which clear procedures are laid down by the legislature. Therefore, Assessing Officer has no jurisdiction to initiate proceedings under section 147/148 in the case of proceedings initiated under section 132 of the Act - Decided in favour of assessee. 2022 (1) TMI 734 Penalty u/s 271(1)(c) - disallowances of sub standard/non standard NPA Assets, loss on sale of furniture s and fixtures, and disallowance of deduction u/s 80P(2) (d) on dividend receipt - HELD THAT:- Before the Assessing Authority, it was stated that it was mandatory on the part of the assessee bank as per RBI Guidelines to make provision for NPA Assets. Hence the claim was made as per the RBI guidelines. Therefore, in our considered view, this claim of the assessee was debatable. The authorities below ought not to have imposed the penalty and confirmed the same. The Assessing Officer is directed to delete penalty imposed in respect of disallowance of Standard/Sub Standard NPA assets. In respect of the other items, it is seen that the assessee claimed loss on sale of furniture s and fixtures and in respect of the claim of deduction u/s 80P (2)(d), both these expenses were rightly disallowed hence, the penalty on these items is sustained. The ground of appeal of the assessee is partly allowed. 2022 (1) TMI 733 Disallowance u/s 14A r.w.r. 8D - assessee submitted that the corporation had earned dividend income during the year and no expenditure had been incurred to earn the dividend income as the investments have been made out of own funds comprising share capital and accumulated profits - The HELD THAT:- Disallowance under rule 8D(2)(ii), on examination of the financial statements for the relevant AY as well as previous FYs, we find that the assessee has sufficient own funds to make the investments on which the assessee had earned exempt income during the AY. We find that there is increase in the non-current investments and further, there is increase in the own funds, which is evident from trading and P L Account of the assessee, which is more than the investments made during the year. After considering the sale of investments and also perusing the orders of coordinate bench for AYs quoted supra wherein the coordinate bench held that the assessee had made the investments out of own funds of the assessee company, we direct the AO to delete the addition made under rule 8D(2)(ii). Disallowance under rule 8D(2)(iii) - contention of the assessee is that it has not incurred any expenditure for earning exempt income is also not tenable because for earning of income maintaining portfolio, administrative involvement and expenditure cannot be denied. We therefore remit this issue back to the file of the AO with a direction to compute the disallowance under this limb by considering the investments which yielded exempt income only during the year instead of taking average value on entire investments. The assessee is directed to substantiate its claim before the AO for true and correct calculation of the disallowance under rule 8D(2)(iii) of the Act. Profit on sale of investments - Addition u/s Capital gain - assessee submitted that the matter may be restored to the file of the AO to substantiate its claim by way of documentary evidence to enable the AO to calculate the exact capital gains - HELD THAT:- We remit this issue to the file of the AO with a direction to decide the issue after examining the documentary evidence which will be put-forth by the assessee before him and in accordance with law after providing reasonable opportunity of hearing to the assessee. The assessee is directed to substantiate its claim before the AO with all the relevant evidences; at its own risk and responsibility to be followed by three effective opportunities of hearing. Accordingly, this ground is allowed for statistical purposes. 2022 (1) TMI 732 Depreciation on computer softwares - forming part of the block of assets of computers at the rate of 25% OR rate of 60% claimed by the appellant - restricting the claim of depreciation on computer softwares forming part of the block of assets - AO was of the view that software license is not the computer - whether the software purchased by the assessee is part of computer for the purpose of depreciation or the same can be treated as intangible asset? - HELD THAT:- Software is part of computer. Hence, the depreciation on the same is allowable at the rate applicable for computer. In this regard we also find support and guidance from the judgment in case of CIT vs. Computer Age Management Services (P.) Ltd.[ 2019 (7) TMI 1153 - MADRAS HIGH COURT] as held software application, which was acquired by the assessee would fall under Entry 5 of Part A of New Appendix I, which states that computers including computer software are entitled to depreciation at 60% - Decided against revenue. Addition under the provisions of section 35D OR 37(1) - nature of expenses incurred were travelling expenses, legal and professional expenses, salary expenses for employees appointed especially for the project, insurance, electricity charges, and security charges - As per assessee expenses were incurred after the commencement of business but before the commencement of the commercial production. - HELD THAT:- We note that the provisions of section 35D are applicable for the expenditures incurred before the commencement of the business or after the commencement of the business in connection with the extension of the undertaking/setting up of new unit. There is no allegation of the AO whether the expenditure were incurred by the assessee were before the commencement of the business or after the commencement of the business in connection with the extension of undertaking/setting up of a new unit. Thus in the absence of such finding of the AO, we are of the view that the provisions of section 35D cannot be invoked in the given facts and circumstances. As there are certain categories of expenses for which the provisions of section 35D of the Act can be applied. These expenses have been specified under subsection 2 of section 35D of the Act. But in the present case, we note that none of the expenses claimed by the assessee was in the category of such expenses. Likewise, the AO has also not brought anything on record suggesting that the nature of the expenses claimed by the assessee are those expenses mention under section 35D(2) of the Act. On this count only, the order of the AO is not sustainable. CIT (A) has given very clear finding that the expenses were incurred by the assessee to increase the capacity of the plant. The learned DR at the time of hearing has not controverted the finding of the learned CIT (A). Assessee has also claimed identical expenses in the return of income in the immediate preceding assessment year i.e. assessment year 2012-13 which seems to have been allowed by the revenue. Our view is based on the fact that the learned DR at the time of hearing has not brought anything on record suggesting that the impugned expenses were disallowed by the revenue in the earlier year as well.- Decided against revenue. 2022 (1) TMI 731 Disallowance u/s 14A r.w.r. 8D - Mandation of recording of satisfaction - HELD THAT:- We find that the Assessing Officer has nowhere recorded his satisfaction as to why the assessee s claim that no expenditure has been incurred for earning of exempt income especially when majority of dividend income has come from holding company and has mechanically proceeded to make the disallowance under Rule 8D(2)(iii). Now it is well settled proposition that recording of satisfaction as contemplated in Section 14A(2) of the Act is a condition precedent for determination of the amount of expenditure for earning the exempt income as formulated - See H.T. MEDIA LIMITED [ 2017 (8) TMI 962 - DELHI HIGH COURT] and MAXOPP INVESTMENT LTD. [ 2018 (3) TMI 805 - SUPREME COURT] . Since no satisfaction has been recorded by the Assessing Officer as per the mandate of section 14A (2), then no disallowance under Section 14A can be made and accordingly, disallowance worked out by the Assessing Officer under Rule 8D is deleted - Decided in favour of assessee Eligibility for deduction u/s 80-IB - nature of subsidy has treated the incentive by way of central excise refund (generally called CENVAT credits) in relation to the Jammu unit - HELD THAT:- The refund of CENVAT credit on the facts of the present case is capital subsidy in view of the principle laid down by the Hon ble apex court in case of Shree Balaji Alloys [ 2016 (4) TMI 1161 - SC ORDER] and also the judgement of the Tribunal in the group concern of the assessee as cited Montage Enterprises Pvt. Ltd [ 2018 (7) TMI 209 - ITAT DELHI] and Ultimate Flexipack Ltd. [ 2019 (3) TMI 1298 - ITAT DELHI] MAT computation u/s 115JB - Since we have already held that the CENVAT credit, as received by the appellant, in accordance with the incentive scheme for J K as formulated by the Central Government is a capital receipt not liable to tax, accordingly the same cannot be part of book profit under Section 115JB also Characterization of receipts - taxability of receipts - VAT subsidy being capital in nature - HELD THAT:- For the year under consideration the assessee has placed on record relevant assessment passed by the authorities under the Uttar Pradesh VAT Act, 2008 where the refund has been worked out at ₹ 19,12,31,759/- The nature of the incentive provided under the Uttar Pradesh Industrial Scheme by way of giving exemption was refund of VAT has to be seen with reference to the object and purposes for which Uttar Pradesh Industrial Scheme was framed. A perusal of the salient features as reproduced hereinabove it is quite evident that incentive under the Scheme has been provided for taxing capital investment and the State for the purpose of industrialization and setting up of new industries to generate more employment opportunities. The refund now VAT as given to the industrial undertakings only for the purpose of fulfilling the best industrialization of the State by establishment of new industries. Thus, incentive provided under the Uttar Pradesh Industrial Scheme is nothing, but capital subsidy not liable to be taxed - The VAT subsidy is a capital receipt and hence not liable for tax and it cannot be treated as revenue receipt liable for tax. Accordingly, the additional ground raised by the assessee is allowed. 2022 (1) TMI 730 Reopening of assessment u/s 147 - Addition u/s 69 on account of unexplained investment - HELD THAT:- We note that Ld CIT(A) observed that assessee has objected to the reopening of assessment. But Ld. CIT(A) did not accept, the contention of the assessee. The ld CIT(A) noticed that on the basis of copy of FIR, A.O. had valid reason to believe that income has escaped assessment. However in the FIR, the year of payment was not mentioned. Therefore AO had no option but to reopen the assessment. Hence, the A.O.'s action for reopening the assessment was upheld by the Ld.CIT(A). On merits, Ld. CIT(A) noted that so far as bringing the amount mentioned in the FIR is concerned, this cannot be taxed in the assessment year in question as the payment has been made by the assessee, during the previous year 2005-06 relevant to A.Y. 2006-07. This fact was brought to the notice of the A.O. during the assessment proceedings itself and the same has been mentioned by the. A.O - Therefore, Ld. CIT(A) deleted the addition and also stated in his order that AO is free to take action to bring this amount under taxation in AY 2006-07, if he deems fit. Addition u/s 69 - unexplained investment - HELD THAT:- It is a list of 104 persons from whom the assessee has claimed to have received advances amounting ₹ 1,85,00,000. This list is not accompanied by any details; the said list is of no evidentiary value towards explaining of the sources of the said ₹ 1,85,00,000/-. Hence, the Id. AO is correct in his conclusion that the said amount claimed to be advanced by assessee for purchase of land is unexplained investment. Even in the appeal proceedings, the AR has been able to file affidavits in only 29 out of said 104 lenders. There is no corroborative evidence/details to support the assertion made in the said affidavits. AR has not given copy of bank accounts or the income tax details of the said lenders. It is a trite law that in case of unsecured loans in books of account, the primary onus is on the assessee to establish the identity and creditworthiness of lender and genuineness of transaction. However, in the present case, the assessee has not furnished only details to establish the above, in spite of opportunities provided by AO. So the assessee failed to discharge the onus of proof, the addition u/s 69 on account of unexplained investments is confirmed. - Decided against assessee. 2022 (1) TMI 729 Unexplained Cash deposited into Bank Accounts - income from unexplained source u/s 69B - Onus to prove - assessee had made an application for admission of additional evidences - HELD THAT:- The assessee could not substantiate its claim by filing material evidences - CIT(A) has rightly rejected the application as the same did not meet the requirement of law. As per Rule 46A of the Income Tax Rules, 1962, the assessee is required to demonstrate the cause of non-submission of evidences that is sought to be placed before Ld.CIT(A) for admission Onus cast on the Appellant has not been discharged.addition u/s 68 on account of cash deposited in bank was correct when Assessee failed to give explanation regarding the source of cash. In the case of Appellant, it is seen that no details of any of the parties from whom it claims to have received the cash along with confirmation and other details to establish the identity, creditworthiness and genuineness of the transaction has been submitted. Therefore, in view of the facts and circumstances of the case, it is held that Appellant has not been able to explain the source of cash deposits in its bank account - Decided against assessee. Disallowing loss from business - HELD THAT:- The assessee has neither given any justification regarding loss nor filed any supporting evidences. Therefore, we do not see any reason to interfere in the finding of authorities below, the same is hereby affirmed. Non admitting the additional evidences - HELD THAT:- The assessee has not substantiated as to how the application for filing additional evidence was maintainable as per Rules. In the absence of the same, no reason to interfere in the finding of Ld. CIT(A). This ground of appeal is thus, dismissed. Failure to accept cash in hand - HELD THAT:- In the absence of any supporting evidences and in the form of cash flow etc., the plea of the assessee cannot be accepted that it had cash in hand. Hence, we find no interference in the finding of authorities below, the same is hereby affirmed. Thus, Ground raised by the assessee are dismissed. Debit entries of the bank account i.e. the assessee withdrew the cash from bank to make the payments to the farmers - HELD THAT:- As the onus was upon the assessee to explain the debit and credit entries in the bank accounts. In the absence of supporting evidences, we do not see any infirmity in the order of authorities below, the same is thereby affirmed. Non-providing the sufficient opportunity to the assessee - HELD THAT:- It is seen that the assessee has been negligent in not pursuing its case before the authorities below. Even before the Assessing Officer and after seeking adjournment, no one attended the proceedings. Therefore, the assessment was framed ex-parte to the assessee. Even before Ld.CIT(A), there was no appearance on behalf of the assessee. Even before this Tribunal, there was no appearance on behalf of the assessee. Hence, the conduct of the assessee had been grossly negligent - The authorities below were justified in making the addition and sustaining the same. Ground No.10 hence, is devoid of any merit, the same is dismissed. 2022 (1) TMI 728 Estimation of income - Bogus purchases - HELD THAT:- CIT(A) has given a finding that out of disallowance of ₹ 9,04,800/- ₹ 5,04,800/- relating to M/s. Sumeet Sales has already been offered to tax in AY 2012-13 on account of creditors written off. Hence, Ld.CIT(A) has held that the same amount cannot be subject to tax twice. Hence, he has reduced this amount. Thus find that basis of this adjustment is cogent. Nothing contrary has been submitted by revenue. As regards, the rest of the disallowance, note that AO has not doubted the sales. Hence, 100% disallowance is not sustainable on the fact and circumstances of the case. Ld.CIT(A) is correct in disallowing 12.5% of the balance amount. For this proposition, we drew support from Hon ble Bombay High Court decision in Nikunj Eximp Enterprises[ 2014 (7) TMI 559 - BOMBAY HIGH COURT] and Shapoorji Pallonji Co. Ltd[ 2020 (3) TMI 552 - BOMBAY HIGH COURT ] - Decided against revenue. 2022 (1) TMI 727 Addition u/s 68 - Bogus share transactions - onus to prove - absence of any adequate enquiry made by the Revenue - HELD THAT:- There must be more than the bare suspicion to support the assessment. Mere suspicion cannot take place of evidence, neither on the basis of procedural lapse on addition of share capital is sought to be justified. When the basic evidences are on record, as provided by the assessee to the Revenue mere failure of the creditor to appear cannot be the basis for making addition. In fact, the assessee has discharged its onus to prove credit-worthiness of the share holders and genuineness of the transaction by providing the documents and/or information to the AO. The documents filed in support of identity and credit-worthiness of the share holders and genuineness of the transactions being the balance sheet, bank statement, audited accounts, and the affidavit of the companies provided share premium were not doubted as non-genuine. The Ld. AO accepted genuineness of the share capital to the extent of its par value, it can be concluded that the Ld. AO was satisfied with three ingredients required to be proved under Section 68 of the Act. In fact, the addition even thereafter is not sustainable in the absence of any adequate enquiry made by the Revenue. As relying on decision of the ITAT, Kolkata Bench in the case of ITO Vs. Savera Towers P.Ltd., [ 2019 (1) TMI 1328 - ITAT KOLKATA ] wherein it was observed that all the share subscribers are duly assessed to income tax and the transaction with the assessee company are duly routed through banking channels and are duly reflected in their respective audited balance sheets, as were placed on record. Once the receipt of share capital has been accepted as genuine within the purview of section 68 of the Act, there is no reason for the ld.AO to doubt the share premium component received from the very same shareholders as bogus. This fact is identical to that of the fact available with us. At the cost of repetition, we would like to mention that addition under section 68 cannot be justified in the absence of any inquiry done by the ld.AO by exercising powers conferred under the statutory provisions as already observed by us hereinabove. Thus, in the absence of proper inquiry made by the ld.AO, impugned addition cannot be sustained and the same is hereby deleted. The ground of appeal filed by the assessee is allowed. 2022 (1) TMI 726 Unexplained investment u/s. 69 - Non maintenance of books of accounts - assessee had returned her income from real estate business u/s. 44AD - assessee argued that once the provisions of section 44AD is covered , she is not required to maintain books of account and she was not under any obligation to explain individual cash deposits in the bank account - HELD THAT:- Though, the assessee admitted the income u/s. 44AD, with regard to the sources of cash deposits made in the bank account , initially, she submitted that her nature of business of Spoken English Coaching Class Profession and gave certain sources for the cash deposits made on 18.10.2010 and explained the sources for the cash deposits made on 21.10.2010. When the AO accepted part of her explanation and required the assessee to prove the sources of the remaining deposits, the assessee took a different stand and canvassed that her income is from real estate business and it is covered u/s 44AD etc. However, she has not let any material/ evidences before the lower authorities to prove that she was in the real estate business. It is clear that the assessee has been inconsistent about the nature of sources of the impugned cash credits. She has not let in any material/ evidence either before the lower authorities or before us to establish that the nature of her activities are falling within the realm of business etc and the impugned transactions are part and parcel of her turnover etc but for a fact that she was a trustee in a school which was brought on record through an enquiry . Therefore, the sources of the impugned deposits were not explained by the assessee - assessee has not dislodged the findings recorded by the AO on the inconsistencies in her stand , supra. In the facts and circumstances, we do not find any reason to interfere with the orders of the lower authorities and hence the assessee s appeal is dismissed. 2022 (1) TMI 725 Penalty u/s 271(1)(c) on estimated income - estimation of income on bogus purchases - CIT-A deleted the penalty - HELD THAT:- When this was confronted to the learned Sr. DR, he could not controvert the findings of CIT(A) deleting the penalty for all the Assessment Years. Even before us now, the learned Sr. DR could not point out any concealment of income or furnishing of inaccurate particulars of income, hence, we find no infirmity in the order of CIT(A) for all these Assessment Years. All the three appeals of Revenue are dismissed. 2022 (1) TMI 705 Disallowance u/s 41(1) - bogus sundry creditors - HELD THAT:- From the perusal of the orders of the lower authorities, it would be clear that on account of failure of the assessee to produce the confirmations from the said parties, addition was made. We need not delve into the aspect whether mere non-production of confirmation from the sundry creditors entails the addition or not as both sides had agreed to remand the matter to the file of the Assessing Officer for the purpose of verification of fact whether or not the payments were made to the sundry creditors in subsequent period through banking channels. Once, it is found that the sundry creditors were paid in subsequent year it would undoubtedly establish the genuineness nature of the sundry creditors. Therefore, this ground of appeal no.5 is remanded to the file of the Assessing Officer with a direction to verify the evidence of payment made to the sundry creditors in subsequent year, if found so, not to make any addition as bogus credits in the present assessment year. As a result, this ground of appeal no.5 raised by the is partly allowed for statistical purposes. Ad-hoc disallowance of 30% of the labour charges - Addition made doubting the genuineness of the expenditure - it is a case of the Assessing Officer that the labour payments are subject to provisions of TDS. For non-compliance of TDS provisions, made the disallowance u/s 40(a)(ia) of the Act and also invoked section 40A(3) - CIT-A reasoning of the Assessing Officer was turned down by the ld. CIT(A) by holding that the provisions of section 40A(3) have no application since no single payment exceeded ₹ 20,000/- in single day. Further, the ld. CIT(A) also ruled out the applicability of the provisions of section 40(a)(ia) - HELD THAT:- In the present case, nothing is discernable from the perusal of the order of the ld. CIT(A) that the ld. CIT(A) had made an attempt to test the reality of the expenditure. Nor can be it said that he doubted the reality of the expenditure, it cannot be also said that the total labour charges incurred is excessive or unreasonable having regard to the fact that tender documents computed 30% of the contract value as a labour component and the actual charges only 33% of the contract value which is merely 10% excess. Thus, in any event, it cannot be said that the labour charges incurred are excessive or unreasonable. Therefore, the decision of the ld. CIT(A) making the ad-hoc disallowance of labour charges at 30% cannot be sustained in the eyes of law. Accordingly, this ground of appeal no.6 stands allowed. TDS u/s 194C - Addition of blasting charges u/s 40(a)(ia) - HELD THAT:- We remit this ground of appeal to the file of the Assessing Officer to examine the applicability of second proviso to section 40(a)(ia) after due verification of the evidence. Thus, this ground of appea stands partly allowed for statistical purposes. Disallowance of interest u/s 36(1)((iii) towards proportionate interest cost attributable to interest free advance given to sister concern - HELD THAT:- Law is settled to the extent when the mixed funds is used for the purpose of making the advance to sister concern on which no interest was charged, presumption should be drawn that interest free loan was made out of the free reserves. In such circumstances, no disallowance u/s 36(1)(iii) is required to be made. This proposition of law laid down initially by the Hon ble Bombay High Court in the case of CIT vs. Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT ] wherein it has been held that in a situation where the assessee has mixed funds partly of interest free funds and partly interest bearing funds, presumption is to be drawn that investments or interest free loan is made out of the own funds and this decision of of Reliance Utilities Power Ltd. (supra) was affirmed by the Hon ble Supreme Court in the case of CIT vs. Reliance Industries Ltd., [ 2019 (1) TMI 757 - SUPREME COURT ] wherein it is held that presumption is drawn that the interest free loan is made out of own funds, the question of disallowance of proportionate interest of loans advanced to sister concern does not arise. The order of the ld. CIT(A) is based on proper appreciation of fact and law as laid down by the Hon ble Supreme Court (supra). Therefore, we do not find any reason to interfere with the order of the ld. CIT(A). Rejection of books of accounts - gross fall in the net profit rate for the current assessment year as compared to preceding year - HELD THAT:- In the present case, the Assessing Officer considered it fit to estimate 8% of net of depreciation and interest without there being anything on record. This is nothing but a complete guess work without referring to any material on record for arriving at the same. For above reasons, we are of the considered opinion that the ld. CIT(A) is justified in holding that the rejection of book results is not just and proper. Accordingly, the ground of appeal no.1 raised by the Revenue stands dismissed. Addition towards negative stock of coal - assessee has made unaccounted purchase of coal on some dates and made addition of unexplained investment - CIT(A) accepted the alternative submissions of the assessee that if it is assumed that 1280 MT was purchased on 23.11.2011 and question of negative stock of 1070 MT would not arise on 23.11.2011 and addition, if any, is warranted out in respect of out of ₹ 40,96,000/- and in view of the fact that the additions made on account of labour charges can be telescoped against the addition of unexplained investment in purchase of stock then a question of addition does not arise - HELD THAT:- From the order of the ld. CIT(A), it appears that the ld. CIT(A) had considered the additional evidence without giving an opportunity of being heard to the Assessing Officer. Therefore, this issue is remanding to the file of the Assessing Officer for fresh consideration in accordance with law. Thus, this ground of appeal no.3 raised by the Revenue is partly allowed for statistical purposes. Customs 2022 (1) TMI 724 Classification of imported goods - Base Oil SN50 - classified under the CTH 27101960 or not - onus to establish the cargo as High-Speed Diesel discharged by Revenue or not - confiscation of prohibited goods - levy of penalty - maintainability of appeal for determination of any question having a relation to the rate of duty of Customs or to the value of goods for purposes of assessment - HELD THAT:- Application admitted on substantial questions of law. Notify all the three Tax Appeals for final hearing on 12th January 2022 on top of the Board. 2022 (1) TMI 723 100% EOU - demand of duty on wastage/ breakage, over and above the permissible limit, of raw materials imported duty free, during the course of manufacture of final products by the EOU - whether the appellants would be eligible for the higher norms fixed by Ministry in respect of wastage/ loss/ breakage of raw materials? - whether the demand is premature? - HELD THAT:- The appellants have represented to the Ministry to revise the SION norms in blanks imported by them. Ministry after considering the request of the appellants have communicated to the development commissioner that a wastage of 15 percent has been fixed and the development commissioner may take necessary action under para 6.7(e) of Hand Book of Procedures Volume-I. Thus, in view of the decisions dated 23/9/2008 and 26/11/2008 of the Commerce Ministry, in the appellant s case the wastage norms were fixed at 15 percent as against the earlier norms of 9.09 percent. The Revenue is bound by the norms fixed by SION norms fixed by the Ministry of Commerce and therefore the benefit of the same has to accrue to the appellants. Bombay High Court in the case of SARLA PERFORMANCE FIBRES LTD. VERSUS UNION OF INDIA [ 2008 (2) TMI 68 - HIGH COURT BOMBAY] held that there is always an inherent power in the Tribunal to do justice; in these circumstances technicalities by themselves should not stand in the way if otherwise there is merit in the contention of the petitioners. Appeal allowed - decided in favor of appellant. Corporate Laws 2022 (1) TMI 722 Scope of Deposits - amounts collected by the petitioners for sale of immovable property as advance - would come under the purview of deposits or would exempt from the purview of deposits by virtue of Rule 2(1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014? - HELD THAT:- The proviso to Rule 2 (1) (c) (xii) (b) makes it very clear that only when the amount becomes refundable (with or without interest) due to the reasons that the company accepting the money does not have necessary permission or approval wherever required, to deal in the goods or properties or services for which the money is taken, then the amount received shall be deemed to be a deposit under the respective rules. Admittedly, the 1st petitioner company had purchased the agricultural land and after obtaining the permission from the competent authorities for conversion of agricultural land into non-agricultural land, the 1st petitioner also obtained permission for development of the land into layout of plots for residential/commercial housing. To unlock the funds invested in development of the lay outs etc., the 1st petitioner company had offered to sell the land in its possession and for this purpose entered into written agreement/arrangement. By virtue of proviso to Rule 2 (1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014, the advances received by the 1st petitioner for sale of immovable property are exempted from the purview of the deposits - in view of the proviso to Rule 2 (1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014, the continuation of proceedings against the petitioners/A-1 to A-5 would amount to abuse of process of the Court. Petition allowed. 2022 (1) TMI 716 Approval of the Scheme of Amalgamation - Sections 230 to 232 of the Companies Act, 2013 - HELD THAT:- Section 230(2)(a) of the Act read with Rule 6(3)(viii) of the Rules shows that the scope and intent is to require Companies to disclose all investigations/proceedings which are material and relating to the Company. We are of the considered view that the wording of Section 230(2)(a) should be interpreted as all material facts relating to the Companies, such as, pendency of any investigation of any proceeding against the Company - as per Clause 6 of the Scheme upon this implementation, all proceedings in the name of the Transferor Company shall be continued and enforced against the Transferee Company and such proceedings shall not be discontinued or prejudicially affect anyone by reason of the Scheme. Accordingly, the requirements of Section 230(2)(a) of the Act read with Rule 6(3)(viii) of the Rules are met. This Tribunal in a catena of Judgements has dispensed with the Meeting of the Shareholders wherein the case is of a merger of a Wholly Owned Subsidiary and Parent Company, wherein, the net worth of both Companies is positive and Unsecured Creditors are paid off in the ordinary course of business and their liability is not affected as it is neither reduced nor extinguished - the material disclosed in the Affidavit is in compliance of Section 230(2)(a) of the Act read with Rule 6(3)(viii) of the Rules. Appeal allowed - decided in favor of appellant. Insolvency & Bankruptcy 2022 (1) TMI 721 Appointment of the Liquidator or restraining the Liquidator from discharging the employees etc. - Section 61 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The CoC agreed to accept the EOI of SREI and further extended the date of submission of the Resolution Plan from 02.03.2019 to 25.03.2019. However, SREI submitted the Resolution Plan on 16.04.2019 which was rejected by the CoC on 07.05.2019 by approx.98% vote. SREI went on improving the proposal just by a minuscule amounts and finally CoC decided to put the resolution plan to vote on 24.07.2019. However, the Resolution Plan was rejected by the CoC by approx.71% of the vote and rejection was communicated to the SREI. On 25.07.2019, SREI further sent a standalone financial offer raising its proposal from ₹ 395 Crore to ₹ 401 Crore - The issue was why we are going on endlessly with the same firm as IBC is a time bound programme. No other members informed RP of any of its comments. Similarly, the RP received proposal from employee trust which are unregistered on the date of application and he could not verify the sources of funding authenticity etc. It is observed that the RP has forwarded the proposal of employee trust to the members of the CoC as directed by the Adjudicating Authority. No response was received from any members of the CoC - IBBI (Liquidation Process) Regulations 2016 vide Chapter VI Regulation 32 provides the sale of the CD as a going concern. Regulation 33 of the same Regulation also provides the methodology to sale. All this provides going concern sale. It is very much clear there is no viable plan for the consideration of the CoC and CIRP period has expired long back - All this suggests for that the Adjudicating Authority has no options but to pass order of Liquidation on completion of Insolvency Period and accordingly, the Adjudicating Authority has passed the liquidation order. There are no infirmity in the impugned order to set it aside. However, the RP is directed to make all attempts to sale the CD as a going concern or the business of the CD as a going concern in consultation with stakeholders consultations committee as constituted under Regulation 31A of the IBBI (Liquidation Process) Regulations 2016, in order to protect the livelihood of 550 families - application disposed off. 2022 (1) TMI 720 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Non-performing assets - Financial Creditors - prohibition under the doctrine / principle of Nullssuss Commodum Capere Postest De Injuria Sua Propria - existence of debt and dispute or not - HELD THAT:- It is a settled law that default is committed first and second stage comes as NPA, if it is not regularized in between the period of default and within 90 days thereafter. The Code is a complete Act itself. What Section 7 of the Code requires that a Financial Creditor by filing an application in the requisite format can initiate CIRP against the CD when a Debt is due and payable in law and has not been paid and a default has occurred, the Adjudicating Authority is to initiate CIRP if, he finds default recorded in the Information Utility or evidence of default. So, the criteria for initiation of the CIRP under the Code is limited to three things, (i) there is a debt due and payable in law and has not been paid (ii)Default has occurred (iii) Default is recorded with the Information Utility. Here all the three criteria s are met and hence initiation of CIRP by the Adjudicating Authority is in order. As far as issue of limitation is concerned the default has been committed on 03.09.2016 and the Application has been filed on 12.03.2019 hence, it is within a period of 3 years as required under Section 238A of the Code R/w 137 of the Limitation Act. Application allowed. 2022 (1) TMI 719 Liquidation/sale proceedings under process - seeking to allow the Liquidator to keep windmill assets of the Corporate Debtor outside the sale purview of Liquidation Estate - seeking to allow the liquidator to distribute the sale proceeds from the sale of windmill - Liquidator also seeking to get himself impleaded as a party - Whether the title of windmill asset has passed to Appellants is sub-judice before the Calcutta High Court? - HELD THAT:- It is apparent that whether the title of windmill assets has been passed to the Appellants is to be decided in the Civil Suit which is pending before the HC. Thus, we are unable to convince with the argument of Ld. Sr. Counsel that the Adjudicating Authority has wrongly concluded that the Civil Suit is for determining rights of the parties over the windmill assets. Whether the order for keeping the windmill asset out of the liquidation estate is beyond the jurisdiction of Adjudicating Authority? - HELD THAT:- Before initiation of CIRP the creditors of the Corporate Debtor and the Corporate Debtor have decided to sale the windmill assets belonging to the Corporate Debtor as contemplated under the MRA dated 18.09.2014 and the supplemental MRA dated 02.03.2015. The same were executed by the Corporate Debtor and the creditors forming part of JLF of the Corporate Debtor constituted in October, 2013. As agreed between the Corporate Debtor and the JLF lenders an asset sale committee was formed and pursuant to a bid process on a private treaty basis commencing in August, 2016 and considering this fact, the Adjudicating Authority vide order dated 22.08.2017 directed that the windmill assets to keep outside the CIRP. Thus, the case comes within the exclusion clause (a) and (e) of sub-Section (4) of Section 36 of IBC. Whether the Adjudicating Authority has exceeded its jurisdiction in passing an order for allowing the liquidator to implead in Civil Suit No. 39 of 2019 pending before the Calcutta High Court? - HELD THAT:- The Adjudicating Authority has only permitted the Liquidator to file an Application before the Hon ble Calcutta High court to get impleaded as party. It cannot hold that the Adjudicating Authority has exceeded its jurisdiction and encroached in the jurisdiction of the Hon ble Calcutta High Court. The Adjudicating Authority has only permitted the Liquidator to file the Appropriate Application. Whether the order of corrigendum dated 23.03.2021 is without jurisdiction? - HELD THAT:- It seems that it is an accidental slip or omission by the Adjudicating Authority and the Adjudicating Authority can rectify such mistakes under Rule 154 of NCLT Rules 2016. Thus, we find no substance in the argument of Ld. Sr. Counsels for the Appellants that the Adjudicating Authority vide order dated 23.03.2021 reviewed its own order and exceeded its jurisdiction. Appeal dismissed. 2022 (1) TMI 718 Seeking replacement of Liquidator - grounds pleaded in the appeal for replacing the liquidator are that the liquidator did not carryout the process of liquidation insofar as sale of assets through the e-auction is concerned, in a fair and transparent manner - it is also alleged that the liquidator did not discuss the process and details of liquidation with the stakeholders as well as Appellants, who are also stakeholders in the liquidation proceedings - HELD THAT:- In the present case, from third meeting of SCC onwards, it was decided that the Corporate Debtor or its business is not to be sold as a going concern. Hence, a period of prescribed time limit for completion of liquidation of 365 days should be counted from the date of 3rd meeting of SCC held on 9.11.2020. Since there was no lockdown enforced by the authorities in the period after 9.11.2020, no exclusion of time under Regulation 47-A is necessary. With passage of more than 365 days after 9.11.2020 now, we feel that the liquidation of the Corporate Debtor should have been completed by now. Therefore, liquidation of the Corporate Debtor should be done as quickly as possible to ensure that the assets of the Corporate Debtor do not undergo deterioration resulting in loss of their value. The concerns of the stakeholders, who are Appellants in this appeal, are not entirely misplaced and that the liquidation process has gone over a long time with rather sketchy results - the appellants have not been able to convincingly advance their arguments for replacement of the liquidator, particularly when no material irregularities have been found in the functioning of the liquidator. The liquidation process which has now gone on for a long time should be completed as early as possible, if not already completed. The inordinate and unexplained delay between the dates decisions are taken in SCC meetings regarding e-auctions and holding of e-auctions are a cause of concern, and they should be reduced to the minimum. Since the liquidation process has been prolonged and the record of SCC meetings show there is a substantial amount of funds that are being spent in liquidation, the liquidation costs should be restricted to the payment of actual costs incurred in liquidation process. Appeal disposed off. 2022 (1) TMI 717 Seeking exclusion of 87 days from the calculation of 180 days (CIRP period) - requirement of approval of the CoC - Section 12 of Insolvency Bankruptcy Code, 2016 - whether the approval of the CoC under Section 12(2) of the Code is mandatory for seeking exclusion of time even if it is sought on grounds of lockdown/time lost during the period of any Stay /Status Quo /or for any other reason? - HELD THAT:- Section 12(2) speaks about extension of the time ; Regulation 40C of the Regulations speaks about exclusion of time ; the fact that the Adjudicating Authority had exercised its Discretionary Powers under Rule 11 of the NCLT Rules, 2016, that the period sought for excluding the time period lost is based on the reasons mentioned in the table in para 10; the fact that had this period not been excluded, the Company would have gone into Liquidation, which stage of Corporate Death should be the last resort as envisaged by the Hon ble Supreme Court in a catena of Judgements; that keeping in view the scope, spirit and objective of the Code and reading Section 12 together with Regulation 40C and also the unforeseen pandemic in mind, the Adjudicating Authority has rightly excluded the period of 87 days from the CIRP period - Appeal dismissed. Nomination of IRP/RP for R-3 company - seeking a direction to remove the first Respondent as the IRP and forward the name of Mr. Munish Kumar Sharma to IBBI for its confirmation as the IRP - HELD THAT:- It is not in dispute that in the 1st CoC Meeting held on 18.03.2021, 6 out of the 9 Members of the CoC present at the Meeting voted in favour of the first Respondent to appoint him as RP of the Corporate Debtor . In the 2nd CoC Meeting held on 07.04.2021, 7 out of the 9 Members of the CoC voted in favour of the first Respondent to appoint him as the Resolution Professional of the Corporate Debtor. But it is seen that the first Respondent was neither appointed as the RP nor was he replaced. Hence, he has been continuing as the RP as per the provisions of Section 16(5) of the Code. The resolution for appointment of the IRP as the RP was not approved and the other resolutions for the appointment of another Insolvency Professional, nominated by the Applicant, RP was also put to vote, but was not approved as it could not receive the requisite majority of 66%. Sections 22 and 27 of the Code lay down pre-requisites for replacing the IRP. The appointment of an IRP is clearly provided under Section 22 and the replacement of IRP under Section 27 and therefore, this Application is disposed off with a direction to the CoC to proceed in accordance with law. There is no provision under the Code which empowers one of the Members of the CoC to approach this Tribunal seeking replacement of the IRP or RP when the same is rejected by a majority of Members of the CoC. It is alleged that the IRP conducted the Meeting of the CoC in blatant contravention of the Order of this Tribunal which has directed for maintenance of Status Quo - HELD THAT:- The material on record also establishes that the notice for the Meeting of the CoC was admittedly given on 13.08.2021 but was later postponed due to repeated requests by various creditors, including the Applicant and was finally convened on 23.08.2021. Additionally, it is observed that the Order of this Tribunal dated 03.08.2021 states, in the meanwhile, Status Quo as exists today qua the Impugned Order shall be maintained . It was interpreted by the IRP that as on 19.08.2021, 87 days has already been excluded from the CIRP period of 180 days. We also note that considering the Order passed by this Tribunal no items on the agenda were put to vote in the CoC Meeting held on 23.08.2021 - this Contempt Case No. 20 of 2021 fails and is dismissed. 2022 (1) TMI 715 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - rejection of Operational Debt - existence of debt and dispute or not - HELD THAT:- There is no dispute that before issuance of notice in the Company Petition filed by the Appellant, the principal amount as claimed by the Appellant of ₹ 18,07,373/- was paid on 15th December, 2018. The claim of interest was refuted in the reply filed before the Adjudicating Authority by the Respondent. It was specifically a case of the Respondent that there was no agreement between the parties to make any payment of interest and the claim of interest by the Appellant is mala-fide and without any basis. In the present case, when the Corporate Debtor in its reply to Section 9 Application has clearly and categorically denied it liability to pay any interest, there was no case of payment of any agreed interest. The Adjudicating Authority has also recorded finding that claim for interest on the delayed payment is a disputed fact by the Corporate Debtor and it can only be adjudicated by a court of competent jurisdiction. The claim of interest being disputed, no error has been committed by the Adjudicating Authority in rejecting the Application under Section 9 of the Code. The provisions of Code cannot be allowed as a recovery mechanism or to recover the claim of interest by Operational Creditor. The Application under Section 9 cannot be converted into proceedings for recovery of interest by Operational Creditor on delayed payment, that is not the object of IBC. The object of the IBC is to resolve the insolvency of the Corporate Debtor and to bring back the Corporate Debtor on its feet. The present is not a case where there is any insolvency resolution of Corporate Debtor. The Adjudicating Authority has rightly rejected the Application of the Appellant filed under Section 9 of the Code, which warrants no interference in this Appeal - appeal dismissed. 2022 (1) TMI 714 Seeking withdrawal of application for initiation of CIRP - maintainability of case in view of the settlement and in view of the provisions of section 10A of the IBC, 2016 - HELD THAT:- No application for initiation of CIRP of a Corporate Debtor under section 7,9 and 10 of IBC, 2016 shall be filed for any default arising on or after 25th March, 2020 along with that it was also clarified that provisions of this section shall not apply to any default committed under the said sections before 25th March, 2020. Whereas, in the present case in hand the main matter has been filed under section 7 of IBC, 2016 and the default as well as the filing of the application under section 7 has taken place prior to 25th March 2020. The applicant's contention that as both the parties entered into a settlement therefore, there has been novation of the MOU/Agreement dated 28.08.2017 and as a result the previous date of default be rescheduled cannot be accepted since the liability to pay has occurred much before the settlement and before the moratorium under section 10A set in. On a bare reading of the provision of section 7(5) clauses (a) and (b) it is amply clear that the Adjudicating Authority has two courses of action available to it. The Adjudicating Authority must either admit the application under section 7(5)(a) or it must reject the application under section 7(5)(b) of IBC, 2016. Whereas, in the present case in hand the settlement agreement agreed between the parties is only a subsequent arrangement which cannot negate the occurrence of default much earlier. Therefore, the applicants' contention regarding change or rescheduling in date of default in lieu of the settlement Agreement holds no merit. Hence, the prayers by the applicant in the present application stands dismissed. Application dismissed. 2022 (1) TMI 713 Implementation of approved Resolution Plan - delay because of the time for litigation and in making initial payments as required in the approved Resolution Plan - grant of more time for extension of CIRP for invitation of fresh EOIs or liquidation of the Corporate Debtor, in the event the Respondent No. 1 is found in default of implementation of the Resolution Plan - HELD THAT:- Effective implementation of the Successful Resolution Plan started only after 5.4.2019, when Hon ble Supreme Court dismissed the appeal of former promoter/directors of the Corporate Debtor. It is quite apparent that the bank guarantee submitted by Respondent No. 1 was not enforced properly because it was not submitted in SWIFT mode. Respondent No. 1 has claimed that it is not responsible for non-enforceability of the Bank guarantee because it was due to the international banking practices. While bank guarantees were submitted later, they were not to the satisfaction of monitoring agency. Moreover, Respondent No. 1 failed to take steps towards implementation of the Resolution Plan, which included payment of CIRP costs and workmen dues and infusion of cash. The issue of non-adherence of the timelines in accordance with the Approved Resolution Plan is quite apparent. The failure to provide valid bank guarantee in terms of Section 5 clause 12 (ii) of the Approved Resolution Plan to the satisfaction of the monitoring agency and the financial creditors is also a major default. Since the approved Resolution Plan is under implementation since its approval on 28.2.2018, the moot point is whether the Successful Resolution Applicant is serious about implementation of the plan - the Successful Resolution Applicant has claimed to be unsecured Financial Creditor of the Corporate Debtor, and therefore has interest in maintaining the Corporate Debtor as a going concern. The Appellants Edelweiss and SBI are also interested that the Corporate Debtor continues to be a going concern and have, therefore, urged that its resolution should be attempted rather than put it in liquidation. Under section 33(3), where the resolution plan approved by the Adjudicating Authority is contravened by the concerned Corporate Debtor, any person other than the Corporate Debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for liquidation order - In the present case, the Approved Resolution Plan has been alleged to be contravened by the Successful Resolution Applicant and therefore an application could have been made to the Adjudicating Authority for liquidation. In the present case, no such application for liquidation has been made by the Appellants or any other stakeholder, but on the contrary the Appellants (and also the financial creditors)have sought the re-initiation of CIRP and invitation of fresh EOIs after its (CIRP s) extension by 90 days. There is no express provision regarding re-initiation of CIRP in the IBC. In partial modification of the Impugned Order, it is directed that an enforceable bank guarantee of ₹ 10 crores, as is required to be submitted under the Approved Resolution Plan, should be submitted by the Successful Resolution Applicant within 30 days of this order. The payments as are already overdue in the Approved Resolution Plan should be done by the Successful Resolution Applicant within two months of this order. In case ₹ 10 crores has been deposited with the Corporate Debtor by the Successful Resolution Applicant in lieu of the bank guarantee, that amount will be either adjusted against the pending amounts to be paid by the Successful Resolution Applicant or refunded to him within a period of 30 days. Appeal disposed off. 2022 (1) TMI 712 Maintainability of application - initiation of CIRP - Corporate Debtor committed default in making payment to the Financial Creditor in view of the term loan and working capital facilities availed by them - Financial Creditors - existence of debt and dispute or not - HELD THAT:- The counsel for the Financial Creditor submits that since the debt is admitted, the defences taken by the Corporate Debtor cannot be appreciated. The counsel for the Corporate Debtor also does not raise any serious argument against the said contention. He only makes an attempt to submit that the inability to pay was due to the pandemic and due to the incidents mentioned in the counter. When debt is admitted, the reasons for the inability to pay, cannot help the Corporate Debtor however valid they are. It is for the Corporate Debtor to settle the matter with Financial Creditor. As it failed to do so, the Petition made to be allowed. It is a fit case to admit and order initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - Petition admitted - moratorium declared. 2022 (1) TMI 711 Release of retention money as per the Contract Agreement - Section 60(5) of Insolvency and Bankruptcy Code, 2016 Read with Rule 11 and 13 of the National Company Law Tribunal Rules, 2016 - HELD THAT:- It is clear from the arguments made by the counsel for the Applicant that the contract that assigned to the Corporate Debtor was executed and certificate was issued to that effect with regard to defect liability period extended up to 30.06.2022. The counsel for the Applicant draws the attention of the Tribunal to the notification dated 03.06.2020 wherein it is notified that retention money from the period 3 months but paid to 6 months, may not be deducted from the raised bills. In view of the said notification the application is allowed and Applicant would be entitled for the refund of retention money. The Respondent No. 2 shall release the retention money of ₹ 2,62,74,514/- forthwith. Petition disposed off. Central Excise 2022 (1) TMI 710 CENVAT Credit - duty paying documents - ISD invoices - management and repair services - clearance of waste and scrap (old empty soda bags), guddar, old PVC drum, old empty bags, etc. - scrap cleared by the appellant are not manufactured scrap or scrap arising in the course of manufacture of final products or bye-products - demand under the provisions of Rule 9 (6) of CCR - HELD THAT:- The disallowance by the Court Below is for vague reasons. The cenvat credit received by the appellant unit through ISD invoices is wholly allowable in respect of the repair and maintenance services received. Further, the Court Below have erred in allowing part of such services and have disallowed the part of amount for no ostensible reasons - the amount disallowed is bad and the ground is allowed in favour of the appellant. Demand of 6% on clearance of waste and scrap - Rule 6 of CCR - HELD THAT:- The provisions of Rule 6 is attracted, only where the manufacturer clears both manufactured dutiable and exempted goods. Admittedly, the scrap cleared by the appellant are not manufactured scrap or scrap arising in the course of manufacture of final products or bye-products - the provisions of Rule 6 are not attracted in the facts and circumstances - this ground is also allowed in favour of the appellant. The demand of duty and penalty as well as interest set aside - appeal allowed - decided in favor of appellant. 2022 (1) TMI 709 CENVAT Credit - inputs - ingots - allegation of fake sales and transfer of inadmissible CENVAT credit, without actual transfer or delivery of goods - penalty - HELD THAT:- In the case of similarly situated co-appellant (arising from the common impugned order), the coordinate Bench of this Tribunal in the case of M/S ARYA ALLOYS PRIVATE LIMITED, ROMY BANSAL, DIRECTOR, RAJ KUMAR BANSAL, DIRECTOR (FORMER) , AMIT GUPTA VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, CUSTOMS CENTRAL EXCISE, ALWAR [ 2020 (3) TMI 148 - CESTAT NEW DELHI] where it was held that In the absence of the inputs, it is not possible to manufacture final product, which the appellant have shown to have manufactured and cleared on payment of duty. Penalty also cannot be levied. Appeal allowed - decided in favor of appellant. Indian Laws 2022 (1) TMI 708 Dishonor of Cheque - dispute is settled between the parties and the complainant has no objection if the complaint is set aside - HELD THAT:- Having gone through the material placed on record, it has emerged that the applicant has been convicted by the concerned Criminal Court for the offence punishable under Section 138 of the N.I. Act. However, now, the parties have amicably settled the dispute and, therefore, the complainant has filed an affidavit stating that if the order of conviction passed against the applicant is quashed and set aside, he has no objection. When the parties have settled the dispute amicably, compounding of the offence is required to be permitted - reliance can be placed in the case of DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT] . Respondent No.2 filed a complaint under Section 138 of the N.I. Act for dishonour of the cheque amounting to ₹ 1,32,,000/-. Therefore, as per the decision rendered by the Honourable Supreme Court, the applicant is required to deposit 15% of the amount of the cheque with the Gujarat State Legal Services Authority - application allowed. 2022 (1) TMI 707 Dishonor of Cheque - insufficiency of funds - discharge of legally enforceable debt or not - rebuttal of statutory presumption - HELD THAT:- Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable probability of the non-existence of the presumed fact. During cross-examination, it is noticed by this court that the complainant did not make any attempt to deny about the said factual aspects, as surfaced from the chief-examination of DW-2. During cross-examination, it has further come to light that the said amount of ₹ 14 lakh was paid to the complainant out of the liability of the entire partnership firm. Both DW- 1 and DW-2 have affirmed that though the payment of ₹ 14 lakh to the complainant was out of the liability of the partnership firm, but, since there was no sufficient fund in the account of the partnership firm, the respondent no. 1 had issued a cheque of ₹ 14 lakh to the complainant from his personal account - during examination under Section 313 Cr.P.C., the respondent no. 1 has specifically stated that he had issued two cheques to the complainant on good faith and the complainant had returned the cheque being no. 648413, but, he did not return the cheque being no. 648416. Moreso, this plea of the respondent no. 1 has been proved when he adduced evidence to support his plea. In the instant case, the respondent no. 1 came forward to adduce evidence and in the opinion of this court, the respondent no. 1 had successfully rebutted the presumption of law, which is supposed to be drawn in favour of the appellant-complainant - Since this court is satisfied that the view taken by the learned trial court is a probable one, then, this court is not inclined to disturb or dislodge the findings of the learned trial court. It is settled proposition of law that when there are two probable views, the view favourable to the accused should be accepted by the court. Appeal dismissed. 2022 (1) TMI 706 Dishonor of Cheque - It is the case of the petitioner that even though in Annexure- A4 order the petitioner was directed to remit the amount of fine in the trial court, the amount paid directly to the complainant who is the 2 nd respondent herein - HELD THAT:- Admittedly, there is substantial compliance of the direction issued by this Court in Annexure-A4 order in as much as the total amount of fine was directed to be paid as compensation to the complainant and in fact the complainant has received the amount also. An affidavit endorsing the said fact was also placed before this Court by the 2 nd respondent. The court is directed below to make necessary entry in the fine register recording the factum of settlement between the parties, as if fine is realised and paid to the complainant - petition disposed off. Application disposed off.
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