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TMI Tax Updates - e-Newsletter
January 22, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
GST
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Recovery of dues - blocking the input tax credit available in the credit ledger account of the writ applicant for recovering dues - invocation of Rule 86A of the Central Goods & Service Tax Rules, 2017 - We fail to understand how Rule 86A could have been invoked in the present matter. - The respondent No.2 is directed to unblock the input tax credit available in the credit ledger account of the writ applicant at the earliest - HC
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Provisional attachment of Bank Accounts of petitioner - Although the provisions of Section 281B of the Income Tax Act is pari materia to Section 83 of the State GST Act, yet one pertinent feature of Section 281B of the Income Tax Act is that it gives guidelines for making the provisional attachment. Such guidelines are missing so far as Section 83 of the State GST Act is concerned - having regard to the fact that there is hardly a balance of ₹ 22,065/- in the two bank accounts, we see no good reason to continue the provisional attachment. - HC
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Validity of prosecution proceedings under GST - fake invoices - In view of the scheme of the Act, this Court has no hesitation to hold that in the cases of present nature, both adjudication and prosecution can be started simultaneously. Further, the aforesaid special provisions shall prevail over the provisions of the Code of Criminal Procedure and it cannot be said that all the provisions of the Code of Criminal Procedure like Sections 154 and 173 of he Code of Criminal Procedure need to be followed for prosecution under the Act. - HC
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Provisional attachment of other accounts of petitioner alongwith the cash credit account - As the PAN Card number is common, no sooner the authority concerned instructed the bank to provisionally attached the cash credit account, then the Bank, on its own, freezed all other accounts - The provisional attachment of the cash credit account maintained with the Kotak Bank is not sustainable in law - HC
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Supply of Works Contract - contract entered into with AVVNL as per two work orders combine of supply, erection, testing and commissioning of materials/ equipments for providing rural electricity infrastructure - the work undertaken by the applicant in the instant case is an original work which is incidental or meant predominantly for use for commerce, industry, or any other business or profession. - AAAR
Income Tax
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Refusal of request for Extension of due date for filing income tax returns for the assessment year 2020-21 - Power exercised by the CBDT under section 119 of the Act is discretionary. On careful consideration of the order passed by the CBDT on 11th January, 2021 under the said provision, we are of the considered view that it cannot be said that CBDT had failed to exercise its discretion or that CBDT had acted in an arbitrary or unreasonable manner in refusing to grant further extension of the due dates. - HC
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Depreciation on Gym Equipment - At the most if any equipment has been placed for exclusive use of Managing Director the same should be added as perquisite in the hands of the said Director but cannot be disallowed in the hands of the assessee company when this asset already forms part of the block of the assets and depreciation has been allowed earlier. - AT
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Penalty u/s 271(1)(c) - disallowance of the deduction u/s 80IA - the computation of the cost of steam was a highly technical and complicated issue and further, the said exercise had been undertaken while passing the consequential order and also during the proceedings u/s 154. In such circumstances, we do not agree with the AO that there is any suppression of income or furnishing of incorrect information. - AT
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Depreciation on xerox machine - at the rate of 15% OR 60% as claimed by the assessee - CIT(A) has granted this rate of depreciation on all other assets, which are treated as peripheral of the computer. To our mind, this asset cannot be excluded for the reasons assigned by ld.CIT(A). It is to be treated as an integral part of the computer system which helps printing from the computer connected with it. - AT
Corporate Law
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Jurisdiction - power of NCLT to appoint Special Officer - allegations and grievances among the management/ owners - Since the pleadings were pending and in order to protect and preserve the assets of the Company from being depleted, NCLT had appointed the special officer in the interregnum and also for the detailed verification of the various allegations imposed by the parties against each other, it was correct to appoint an officer - The matter is pending before the NCLT, Kolkata, there are no reason to entertain the present Appeal. - AT
IBC
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Initiation of CIRP - pre-existence of dispute - There was no dispute existing prior to the first demand notice and only disputes raised prior to the first demand notice are relevant to determine its pre-existence and disputes raised thereafter are totally irrelevant for the same - Also the arbitration was invoked after the first demand notice. Thus the Adjudicating Authority have rightly concluded that there was no dispute existing prior to the demand notice issued under section 8 of I&B Code. - AT
Central Excise
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Violation of principles of Natural Justice - Clandestine removal - relied upon documents were not supplied - the lapse on the part of the Revenue is a curable defect. In the interest of Justice, reasonable opportunity needs to be given to the Revenue to cure the defect and to conduct the adjudication adhering to the principles of natural Justice. - AT
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Recovery of erroneous refund - If the department was aggrieved by the refund order passed by the Assistant Commissioner, it was open for the department to file appeal against such order as is provided in Section 35 of the Central Excise Act, 1944. - Section 11A of the Central Excise Act does not authorize the Assistant Commissioner to revise or review his own order. - HC
VAT
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Recovery of VAT from the purchaser of property in Auction - Attachment of mortgaged properties - It is hereby declared that the respondent No.2 had the first charge over the property mortgaged by M/s. Krisha Industries by virtue of Section 26E of the SARFAESI Act, and in such circumstances, they were entitled in law to put the property to auction. The writ applicants, being the auction purchasers, have a right to get their names mutated in the record of rights as the true and lawful owners of the property. - HC
Case Laws:
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GST
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2021 (1) TMI 801
Supply of Works Contract - contract entered into with AVVNL as per two work orders combine of supply, erection, testing and commissioning of materials/ equipments for providing rural electricity infrastructure - whether such supply, erection, testing and commissioning of materials/equipments for providing rural electricity infrastructure made to AVVNL would be taxable at the rate of 12% in terms of Sr. no 3 (vi)of Notification N/N. 11/2017- C.T.(Rate) as amended w.e.f. 25.01.2018? - challenge to AAR decision. HELD THAT:- There is no dispute regarding the ruling of RAJAAR that the supplies rendered by them to AVVNL are in nature of Composite Supply of Works Contract. The only dispute to be decided is whether the said composite supply of works contract is covered under Entry No. 3 (vi)(a) of Notification No. 11/2017-Central Tax(Rate) dated 28.06.2017(as amended) or not. The RAJAAR has concluded that all the conditions prescribed implicitly by Entry No. 3 (vi)(a) of the Notification No.11/ 2017- Central Tax (Rate) dated 28.06.2017, as amended, are satisfied by the applicant except one, viz. that the activity is meant predominantly to be used other than commerce, industry, or any other business or profession - RAJAAR has disallowed the benefit of concessional rate of GST under Entry No. 3 (vi)(a) of Notification No. 11/2017-Central Tax(Rate) dated 28.06.2017(as amended) on the premise that M/s AVVNL is involved in the business of supplying goods hence the work undertaken by the appellant cannot be said to have been used predominantly for use other than for commerce, industry, or any other business or profession. Hence the only dispute remains to be decided before us is whether the work undertaken by the appellant have been used predominantly for use other than for commerce, industry, or any other business or profession. The work order under the discussion is for providing rural electricity infrastructure under Rajiv Gandhi Grameen Vidhyutikaran Yojana, hence before reaching any conclusion, it would be better to have a look at the objective and scope of RGGVY. From the perusal of Guidelines for Preparation of DPRs under XII Plan of RGGVY submitted by the appellant along with written submission during PH and Evaluation Report on RGGVY(PEO Report No. 224 published in May, 2014) prepared by Planning Commission (now Niti Aayog), both available in public domain, we find that RGGVY was launched with the principal objective of 100% rural village electrification and eventually providing electricity to all households in next five years. Broadly the scheme, at introduction, intended to accelerate rural development, generate employment and eliminate poverty through development in areas of irrigation, small scale industries, KVI industries, cold chains, health care, education and IT and other services. Rural Electrification Corporation Ltd (REC), was the Nodal agency for implementing Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). Under this Yojana, 90% grant is provided by Government of India and 10% as loan by Rural Electrification Corporation (REC) to the State Governments. The RGGVY was launched during 10th five year plan vide Ministry of Power order of 18th March 2005 and continued in 11th plan vide Ministry of Power order of Feb 2008.Under XII plan, only those villages habitations having population 100 and above are eligible to be covered - the scheme is aimed at electrifying all villages and habitation as per revised definition; providing access to electricity to all rural households; providing electricity connection to Below Poverty Line (BPL) households free of cost of service connection with single light point. However, from the Evaluation Report on RGGVY of Planning Commission, we note that only the connection was free and the consumption of the electricity by the beneficiaries of the Yojna was chargeable. Though the beneficiaries of RGGVY are getting free electricity connection but they will have to pay for the consumption of electricity to AVVNL. In other terms, the work being undertaken by the Appellant will ultimately increase the consumer base of AVVNL resulting in more revenue to AVVNL. We find force in the contention of the RAJAAR that M/s AVVNL is involved in supply of electricity to the consumers and are collecting consideration in lieu of the said supply. The Electricity as per GST is classified under the category of goods and thus M/s AVVNL is supplying goods to consumers and is receiving consideration against the same, hence they are involved in the business of supplying goods. They also receive consideration for the supply of electricity. The predominant activity of M/s. AVVNL is to supply electricity and the civil structure or original work being under taken by the Appellant shall be used for transmission of electricity which is predominant activity of AVVNL and is chargeable - the work undertaken by the applicant in the instant case is an original work which is incidental or meant predominantly for use for commerce, industry, or any other business or profession. The AVVNL, though a Government Entity, is engaged in the business activity i.e. purchase and sale of electricity. As per the Memorandum of Association of the AVVNL, one of the main objective of formation of AVVNL is to carry on the business of purchasing, selling, importing, exporting, wheeling, system operation, trading of power, including formulation of tariff, billing and collection thereof - thus, the work being undertaken by the Appellant is predominantly used for or incidental to the main activity of AVVNL i.e. transmission (sale) of electricity. Appeal dismissed.
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2021 (1) TMI 800
Freezing of and/or provisional attachment of the bank account of the petitioner - father of the petitioner is the Chief Financial Officer (C.F.O.) and the petitioner is not even mentioned as a taxable person within the meaning of Section 2(107) of the CGST Act, 2017 - HELD THAT:- The counsel for the respondent seeks time till Friday, i.e. 22 nd January, 2021, to take instructions. List on 22nd January, 2021.
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2021 (1) TMI 799
Release of attached Bank Accounts - it is informed that there is an amount of about ₹ 40,000 odd in the bank account which has been frozen but monies are due from the overseas buyers to the petitioner and receipt whereof also is held up owing to the account having been frozen - HELD THAT:- The amount already lying in the account may be ordered to remain frozen in the account and/or be directed to be kept in a fixed deposit and the operation of the account can otherwise be permitted. We would like to hear the counsels on, whether in pursuance to the order under Section 83 of the Central Goods and Services Tax Act, 2017, the respondents are entitled to any further monies also received in the account beyond the date on which the order of freezing is made. List for hearing of the petition as well as also on this aspect on 24 th February, 2021.
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2021 (1) TMI 798
Attachment of Bank Accounts of petitioner - refund sought for the amount which was got deposited by him without there being any Show Cause Notice or demand - Section 83 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- As per the counsel for the respondents the order itself reveals that it was passed with the consent of the Commissioner. However, this would not be a complete answer because under Rule 159 a person whose property has been provisionally attached can file objections and if the written order of the Commissioner is not communicated to him he would not be in a position to know what are the reasons which the Commissioner had, to arrive at the conclusion that it was in the interest of the Revenue to attach the property. If what is stated by the learned counsel for the respondent is accepted then such a person would never have the benefit of the reasons which weighed with the Commissioner and consequently not be able to file any effective objection - Resultantly, the order of attachment has to go and is consequently set aside. As regards the second plea of refund it is the case of the respondents that the amount was voluntarily deposited by the petitioner and now a Show Cause Notice has been sent demanding more duty. Reliance placed in the Division Bench Judgment of this Court in Concepts Global Impex Vs. Union of India, [ 2018 (11) TMI 688 - PUNJAB AND HARYANA HIGH COURT] in that case also there was an identical fact situation where that person had deposited certain amount of money which as per him were taken by coercion but which as per the respondents was deposited voluntarily. However, at the time of deposit, 2 of 3 just like in the present case neither any demand or Show Cause Notice was pending and just like in the present case when that writ petition came up for hearing a Show Cause Notice had already been issued. This Court however directed the refund of the amount after retaining 10% of the duty demanded. The judgment of the Division Bench of this Court would be binding on this Bench - the prayer for refund also disposed off - application disposed off.
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2021 (1) TMI 797
Provisional attachment of other accounts of petitioner alongwith the cash credit account - Section 83 of GST Act - learned counsel pointed out that the order of provisional attachment is specifically confined to the cash credit account only and not to the other accounts including the fixed deposits - HELD THAT:- As the PAN Card number is common, no sooner the authority concerned instructed the bank to provisionally attached the cash credit account, then the Bank, on its own, freezed all other accounts The provisional attachment of the cash credit account maintained with the Kotak Bank is not sustainable in law - the order of provisional attachment dated 23rd September 2020 passed in the Form GST DRC - 22 annexed at page : 51A of the writ application, is set aside - application disposed off.
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2021 (1) TMI 796
Validity of prosecution proceedings under GST - fake invoices - It is contended that all cooperation was given by the department to the Petitioners and when even summons was not issued, they rushed to the Court to prevent the officers from exercising their powers. Thus, it is the contentions of the department that there is admission on the part of the Petitioners that fake transactions were shown for aforesaid purpose and inadmissible ITC was availed in respect of fake transactions HELD THAT:- In the present matters, there are allegations against the Petitioners and Munot that they created record of false invoices for input tax credit and by deceiving the authority they have committed the fraud of amount of more than ₹ 84,00,000/-. There are statements given under section 70 of the Act showing admissions given by concerned like one director of Petitioner's company and one Munot. It is the case of the department that after seizure of record, the company of he Petitioners voluntarily deposited the aforesaid amount and it was not deposited under protest. In Section 135 of the Act, it is provided that the presumption of culpable mental state is available against such persons. In Section 136 of the Act, it is made clear that the statement recorded under section 70 of the Act can be used in proceeding like prosecution as whey would be relevant. Thus, apparently, there is material to make out prima-facie case of fraud against the Petitioners. The provision of Section 138 of the Act shows that compounding of the offence is possible either before or after institution of prosecution. There are some provisos, which show that in some circumstances the compounding may not be possible. The proviso to Section 138(1) of the Act shows that such compounding shall not affect the proceeding, if any, instituted under any other law and the compounding can be done only after making payment of tax, interest and penalty involved in such offences - In view of the scheme of the Act, this Court has no hesitation to hold that in the cases of present nature, both adjudication and prosecution can be started simultaneously. Further, the aforesaid special provisions shall prevail over the provisions of the Code of Criminal Procedure and it cannot be said that all the provisions of the Code of Criminal Procedure like Sections 154 and 173 of he Code of Criminal Procedure need to be followed for prosecution under the Act. This Court is limiting the scope of discussion only to the extent of the offences committed under the Act and the observations are made only from that angle. If offences under the Indian Penal Code also are committed then different and more serious view can be taken. It needs to be kept in mind that the allegations make out the case of forgery. In the present matter, admittedly, no summons was issued against the Petitioners though one director gave statement of the nature mentioned and the amount of ₹ 84,00,000/- came to be deposited by the company of the Petitioners. Even when the matter could have been filed before the regular Court as search and seizure took place in November 2020, the matter came to be filed before the Vacation Court. This circumstance also cannot be ignored. Attempt is made to give explanation that the consultant of the company was infected due to Covid-19 virus. Such submission ordinarily cannot be accepted by the Court. On 11th January, 2021, there was insistence to grant interim relief and adjournment was sought. The interim relief was vacated by this Court by order dated 11th January, 2021. On 14th January, 2021 also, initially an attempt was made by the counsel, who argued the matter that only the Petitioner from Criminal Writ Petition No. 1716 of 2020 had instructed him to argue the matter. When the Court expressed that the Court will dispose of all the matters on merits if the Court finds that admission is not possible, then only argument was advanced in all the matters. Due to all these circumstances, this Court holds that some costs needs to be imposed on the Petitioners. Petition dismissed.
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2021 (1) TMI 795
Provisional attachment of Bank Accounts of petitioner - Section 83 of Gujarat GST Act - HELD THAT:- During the pendency of any proceedings under Sections 62, 63, 64, 67, 73 and 74, the Commissioner can provisionally attach any property including the bank account belonging to the taxable person. For this purpose, the Commissioner has to form an opinion that it is necessary to do so for protecting the interest of the Government Revenue. These steps have to be taken in such manner as prescribed. Rule 159(1) of the CGST Rules, 2017, deals with the provisional attachment of the property. The form of the order shows that it is to be addressed to the taxable person. The sections under which the proceedings are launched against such a taxable person are to be referred and then a direction is to be issued for not allowing any debit. Although the provisions of Section 281B of the Income Tax Act is pari materia to Section 83 of the State GST Act, yet one pertinent feature of Section 281B of the Income Tax Act is that it gives guidelines for making the provisional attachment. Such guidelines are missing so far as Section 83 of the State GST Act is concerned - having regard to the fact that there is hardly a balance of ₹ 22,065/- in the two bank accounts, we see no good reason to continue the provisional attachment. The impugned order of provisional attachment of the two bank accounts is hereby quashed and set-aside - Application allowed.
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2021 (1) TMI 794
Recovery of dues - blocking the input tax credit available in the credit ledger account of the writ applicant for recovering dues - invocation of Rule 86A of the Central Goods Service Tax Rules, 2017 - HELD THAT:- Rule 86A can be invoked only if the conditions stipulated therein are fulfilled. In other words, it is only if the Commissioner or an Officer authorized by him has reasons to believe that the credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible for the reasons stated in Rule 86A(1)(a) to (d) that the authority would get the jurisdiction to exercise the power under Rule 86A of the Rules - We fail to understand how Rule 86A could have been invoked in the present matter. The issue, as such, stands squarely covered by three decisions of this High Court, i.e, CHOKSI VERSUS STATE OF GUJARAT [ 2012 (3) TMI 392 - GUJARAT HIGH COURT] , DIFFERENT SOLUTION MARKETING PRIVATE LTD AND 2 VERSUS ASSISTANT COMMISSIONER OF COMMERCIAL TAXES AND 2 [ 2016 (7) TMI 121 - GUJARAT HIGH COURT] as well as PARAS SHANTILAL SAVLA VERSUS STATE OF GUJARAT [ 2019 (7) TMI 350 - GUJARAT HIGH COURT] where it was held that Unlike section 179 of the Income-tax Act, 1961, there is no provision in the Sales Tax Act fastening the liability of the company to pay its sales tax dues on its directors. The respondent No.2 is directed to unblock the input tax credit available in the credit ledger account of the writ applicant at the earliest - application allowed.
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Income Tax
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2021 (1) TMI 793
Revision u/s 264 - revised capital gain u/s 50C of the Act - writ applicant submit that he is confining his case only to Section 50C as according to him Principal Commissioner has not recorded any finding, as regards Section 50C of the Act and for this limited purpose, the matter may be remitted so that the issue of Section 50C can be considered - HELD THAT:- For the forgoing reasons, this writ application succeeds in part. The impugned order passed by the Principal Commissioner, Ahmedabad dated 19th March, 2018, Annexure H to this writ application, is hereby quashed and set aside. The matter is remitted to the Principal Commissioner of Income Tax-4, Ahmedabad for the purpose of adjudicating the issue with regard to Section 50C of the Act. At this stage, we may once clarify again so that there may not be any confusion in future that the issue with regard to limitation stands concluded. The issue with regard to limitation shall not be re-opened by the Principal Commissioner while adjudicating the claim of the writ applicant with respect to Section 50C of the Act. In this regard, we clarify that we have not expressed any opinion on merits.
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2021 (1) TMI 792
Extension of due date for filing income tax returns for the assessment year 2020-21 till 31st March, 2021 and to extend the due date for filing tax audit reports for the said assessment year to 28th February, 2021 - COVID- 19 pandemic and lock down difficulties - HELD THAT:- We find from the order dated 11th January, 2020 passed by the CBDT under section 119 of the Act that across the board three extensions of the due dates have been granted. In so far filing of tax audit report is concerned, the original due date was 30th September, 2020, which was first extended to 31st October, 2020, thereafter to 31st December, 2020 and now to 15th January, 2021. In respect of filing of income tax return in those cases where tax audit report is required to be filed the original due date was 31st October, 2020 which was first extended to 30th November, 2020, thereafter to 31st January, 2021 and finally to 15th February, 2021. Thus, we find that CBDT had considered the evolving situation in the country and thereafter, had extended the due dates on three occasions. Now CBDT says that filing of audit reports and income tax reports cannot be delayed indefinitely. Therefore, a line has been drawn that no further extension of the due dates would be granted. Power exercised by the CBDT under section 119 of the Act is discretionary. On careful consideration of the order passed by the CBDT on 11th January, 2021 under the said provision, we are of the considered view that it cannot be said that CBDT had failed to exercise its discretion or that CBDT had acted in an arbitrary or unreasonable manner in refusing to grant further extension of the due dates. We therefore do not find any good ground to invoke our writ jurisdiction under Article 226 of the Constitution of India to direct CBDT for further extension of the due dates. Having regard to the above, we are not inclined to entertain the writ petition.
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2021 (1) TMI 791
Revision u/s 263 - Disallowance of deduction u/s 80IA(7) - assessee had not filed Form No.10CCB as required u/s 80IA(7) along with the return of income which is mandatory and therefore, assessee is not entitled to deduction under Section 80IA - AO without examining the aforesaid aspect permitted the deduction and therefore, the order passed by the Assessing Officer is erroneous and is prejudicial to the interest of the revenue - HELD THAT:- The assessee had filed Form No.10CCB of the Act along with written submissions before the CIT (Appeals), which was acknowledged by him in the order dated 11.03.2008. A bench of this court in 'CIT V. ACE MULTIAXES SYSTEMS (P.) LTD.' [ 2009 (1) TMI 260 - KARNATAKA HIGH COURT] has taken a view that assessee is entitled to deduction under Section 80IA of the Act even if the audit report is filed at the appellate stage. Similar view has been taken by Madras High Court in A.N. Arunachalam [ 1994 (1) TMI 65 - MADRAS HIGH COURT] . Thus, the view taken by the assessing officer with regard to eligibility of the assessee to claim deduction under section 80IA of the Act was one of the possible views. We are fortified in our aforesaid conclusion in view of the order passed by the Commissioner of Income Tax under section 263. Thus the order passed by the Commissioner of Income Tax itself discloses that two views are possible. Therefore it is not necessary for us to deal with various contentions made by learned counsel for the parties. In the result the substantial questions of law are answered in favour of the assessee and against the revenue.
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2021 (1) TMI 790
Disallowance u/s 37 of commission payment - HELD THAT:- Material was produced by the assessee which has not been considered by the tribunal. It is also noteworthy that the tribunal has not considered its order passed in respect of AY 2006-07 by which it had restored the case back to the file of the AO who after appreciation of material on record had allowed the claim of the assessee for deduction. Tribunal has upheld the disallowance u/s 37 of the Act merely on the basis of order passed in respect of preceding year. The order passed by the tribunal is cryptic and suffers from the vice of non application of mind. Substantial question of law is answered in favour of the assessee and against the revenue.
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2021 (1) TMI 789
Eligibility of Proportionate deduction u/s 80IB(10) - housing projects - satisfaction of the requirements as laid down in clauses (a) to (d) of sub-Section (1) of Section 80IB - individual units measuring less than 1500 sq.ft. one of the conditions to be fulfilled for claiming deduction is that the total built up area of the residential units in the housing project shall not exceed 1500 square feet in the city of Bangalore - HELD THAT:- On close scrutiny of the judgment rendered by this Court in BRIGADE ENTERPRISES LTD. [ 2020 (9) TMI 1137 - KARNATAKA HIGH COURT] it is evident that the first substantial question of law involved in this appeal is no longer res integra. Therefore, the first substantial question of law is answered against the revenue and in favour of the assessee. Method of accounting - percentage completion method or project completion method - Whether the assessee is entitled to the project completion method in the absence of regular books of accounts required to be maintained by the assessee? - HELD THAT:- The Tribunal relied upon the decision in the case of PRESTIGE ESTATES PROJECTS LTD. [ 2020 (5) TMI 239 - KARNATAKA HIGH COURT] rendered by it and held that for the Assessment Year 2005- 06 the Accounting Standard 7 was not applicable to the real estate developers. Therefore, percentage completion method cannot be thrust upon the assessee and the assessee was right following the project completion method of accounting as per Accounting Standard 9. Besides it, once the first substantial question law is answered in favour of the assessee, the second substantial question of law is otherwise even rendered academic. The Institute of Chartered Accountants has issued a clarification wherein it has been clarified that revised Accounting Standard 7 is not applicable to the enterprises undertaking construction activities. Therefore, the second substantial question of law is also answered against the revenue and in favour of the assessee.
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2021 (1) TMI 788
Reopening of assessment u/s 147 - re-opening the assessment beyond the period of four years under Section 147 - Undisclosed interest on capital' or 'remuneration' from the partnership firm - HELD THAT:- It is the settled position of law that the condition precedent for the purpose of resorting to re-opening of the assessment is that the Assessing Officer should be satisfied based on some cogent or tangible material, that the case is one of escapement of income chargeable to tax. In the absence of escapement of any income chargeable to tax, it is not open for the department to re-open the case of the assessee. Mr.Hemani is right in his submission that mere incorporation of interest on partners capital and remuneration does not necessarily mean or should be construed as mandatory. There has to be some material on record to indicate that the writ-applicant had actually received any 'interest on capital' or 'remuneration' from the partnership firm. Where no such income has been earned by the writ-applicant, the question of taxing the same does not arise at all. Applying the very same dictum of law as laid in the case of Alidhara Taxspin Engineers [ 2017 (5) TMI 1684 - GUJARAT HIGH COURT] we have no hesitation in arriving at the conclusion that the re-opening of the assessment is not justified. - Decided in favour of assessee.
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2021 (1) TMI 787
Eligibility for deduction under Section 54F - denial of deduction as capital asset transferred was not long term capital asset in view of Section 2(29A) read with Section 2(42A) - whether ITAT erred in treating the asset held by the assessee for less than four months as long term capital gain asset as against stipulation in Section 2(29A) read with Section 2(42A) is holding for more than 36 months? - HELD THAT:- CIT(A), who found from the sale deed dated 24.3.1995 that the property owned by the assessee at Secundrabad was indeed a commercial property situated in a complex called 'Diamond Towers'. The relevant clauses in the said sale deed had been referred to by the CIT(A) in paragraph 7 of the order dated 28.3.2018. This issue was also considered by the Tribunal on the appeal filed by the Revenue and noting the factual position, the Tribunal confirmed the finding of the CIT(A). Though this issue, which is argued by Mr.Karthik Ranganathan, learned Standing Counsel appearing for the Revenue, is not raised as a substantial question of law for consideration, yet we have tested the correctness of the finding and we find that the CIT(A) and the Tribunal are right in concluding that the property was a commercial property as could be seen from the conditions contained in the said sale deed dated 24.3.1995. Therefore, there is no ground made out by the Revenue to interfere with the order passed by the Tribunal and we also hold that no substantial question of law arises for consideration in this appeal. - Decided against revenue.
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2021 (1) TMI 786
Rectification of mistake u/s 154 - AO disallowed the cost of steam considered as nil value and denied deduction u/s 80IA in respect of the power division due to which in the Sugar Division, the expenditure towards the cost of steam purchased from power division was also disallowed - assessee s contention is that the correct value of the steam is ₹ 1,54,17,891 and not ₹ 1,15,27,642/- which is the value taken by the AO in the consequential order dated 22.07.2014 - HELD THAT:- In the order u/s 154, the cost of steam transferred from power division to sugar division has been computed at ₹ 1,59,00,541/- which is more than the prayer of the assessee in application u/s 154. When we enquired whether the computation of the value of steam for this A.Y would have any consequential affect in the subsequent A.Ys, the learned Counsel for the assessee submitted that in the subsequent years, there was no disallowance and these calculations would not in any way affect the computation of income in the subsequent years. Since the relief granted by the Add. CIT u/s 154, was more than the relief claimed by the assessee in its application u/s 154 of the Act, we do not see any prejudice being caused to the assessee. We do not see any reason to interfere with the order of the Add. CIT dated 11.8.2014 u/s 154 of the Act. Penalty u/s 271(1)(c) - disallowance of the deduction u/s 80IA - HELD THAT:- After hearing both the parties and in view of our findings in the assessee s appeal against the order of the AO u/s 154, dated 11.8.2014, we find that the computation of the cost of steam was a highly technical and complicated issue and further, the said exercise had been undertaken while passing the consequential order and also during the proceedings u/s 154. In such circumstances, we do not agree with the AO that there is any suppression of income or furnishing of incorrect information. It cannot be treated as a deliberate wrong claim, it is a debatable issue. Therefore, the penalty levied by the AO is set aside and the assessee s appeal is accordingly allowed.
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2021 (1) TMI 785
Disallowance of depreciation on rental assets - assessee company is not using the assets for self use and the assets were hired out for a fixed period and the agreements provided that on payment on all instalments the title of the assets passes on to the hirer - CIT-A deleted the addition - HELD THAT:- A perusal of the order of the Ld. CIT(A) shows that while deleting the disallowance he has followed the decision of the Tribunal in assessee s own case in the preceding assessment year [ 2016 (11) TMI 1362 - ITAT DELHI] Since the AO while disallowing the depreciation has followed the order of his predecessor and disallowed the depreciation holding that the order of the Ld. CIT(A) deleting the disallowance has been challenged by the revenue before the Tribunal and since the Tribunal has already deleted such disallowance, therefore we do not find any infirmity in the order of the Ld. CIT(A) deleting such disallowance of depreciation. Ld. DR could not point out any distinguishing features so as to take a contrary view from the view taken by the Ld. CIT(A) on this issue. - Decided against revenue.
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2021 (1) TMI 784
Disallowance of payment of commission - rendition of services by the payees - whether in the year under consideration there was any rendition of services by the payees? - HELD THAT:- No doubt, payments are supported by invoices and confirmations but the moot point is that no evidence has been submitted for rendition of services by the payees. It is true that in earlier assessment years, similar commissions were allowed to some parties and also in subsequent assessment year - Merely because the payees have shown commission income in their respective return of incomes and transactions have been done through banking channels would not suffice, as rendition of services have to be proved. Where similar commission has been allowed, we are of the considered view that in those years the assessee must have established/proved the rendition of services. Considering the facts in totality, in our considered opinion, 50% of the commission disallowed by the Assessing Officer needs to be allowed. Addition on account of unsecured loans received - Ungenuineness of the loans taken in light of section 68 - HELD THAT:- Sapebelle Trader Linkers Pvt Ltd - The bank statement of this company shows transactions in crores. Therefore, it can be safely concluded that this company has sufficient credit worthiness to give the impugned loan. Considering the fact that there was opening balance and part of loan has been repaid during the year and full loan has been repaid in subsequent year, we are of the considered view that the appellant has discharged the initial onus cast upon him by provisions of section 68 of the Act. Therefore, no addition is called for. Ishwar Dass Gupta - Documents referred to and relied upon by AR show that Shri Ishwar Das Gupta is HUF. The income tax return is also that of HUF and bank statement is also that of HUF. Since the facts are not clearly coming out from the orders of the authorities below, we restore this addition to the file of the Assessing Officer. AO is directed to examine this transaction afresh in light of the statement made by the ld. counsel for the assessee that the loan has been taken from Shri Ishwar Das Gupta, HUF. The assessee is directed to furnish necessary evidences before the AO and the Assessing Officer is directed to examine the same after giving reasonable opportunity of being heard to the assessee. Shri Binod Choudhary - We find that the assessee has only filed copy of ledger account of Shri Binod Choudhary in the books of Delhi Sugar Company which has not been confirmed by Shri Binod Choudhary though the PAN is mentioned there. No other evidence has been brought to our notice. Therefore, we do not find any merit in the submissions of the learned counsel which have been duly considered by the CIT(A) during the first appellate proceedings. Addition on account of loan from Shri Binod Choudhary is, accordingly, confirmed. Addition relates to interest paid on unsecured loan - HELD THAT:- Qua our findings given hereinabove, we direct the Assessing Officer to allow interest payment to Sapebelle Traders Linkers Pvt Ltd keeping in abeyance the allowance of interest in respect of Ishwar Das Gupta after deciding the issue as per our directions given hereinabove and disallow the interest paid to Shri Binod Choudhary. Ground is accordingly decided.
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2021 (1) TMI 783
Assessment framed u/s 153A - HELD THAT:- It is an undisputed fact that search u/s 132 of the Act has taken place at the premises of the Assessee on 10.02.2009 and on that date the assessment for A.Y. 2007-08 was pending and therefore as per the provisions of Section 153A, the assessment for A.Y. 2007-08 stood abated and in such a situation the total income of the assessee for that assessment year will have to be computed by the AO as a fresh exercise. As per KABUL CHAWLA [ 2015 (9) TMI 80 - DELHI HIGH COURT] we find that since it is on undisputed fact that assessment for the year had abated and in such a situation, as per the mandate of the provisions of the Act, the AO is required to compute the total income as a fresh exercise. In such a situation we find no reason to interfere with the order of CIT(A) and thus the grounds of Assessee are dismissed. Disallowance of personal expenses - Expenses on foreign travelling of family members of the Directors for which no proper explanation was provided - expenses have been disallowed for the reason that the assessee did not substantiate the nature of expenses and did not file the required details - HELD THAT:- AR has pointed to the details that have been filed by the assessee before the AO. The submissions of these details have not been controverted by the Revenue. Further Ld. AR has pointed to the fact that the expenses have been incurred for the travelling (including related foreign travel) expenses of the Directors and have been incurred for the purpose of the business of the assessee. These submissions have not been controverted by Revenue. Considering the totality of the aforesaid facts and the submissions of Ld. AR, we are of the view that the disallowance of expenses was not called for in the present case. Levy of interest u/s 234A - Delay in filing return of income - HELD THAT:- In the present case, it is an undisputed fact that notice u/s 153A was issued to the assessee on 07.10.2009 directing the assessee to file the return of income within 16 days of the service of the aforesaid notice. It is the contention of the assessee that the aforesaid notice was served on the assessee on 19.10.2009. The 16 days period to file the return of income expired on 04.11.2009 but the return of income was filed on 11.12.2009. There has been delay on the part of the assessee in filing the return of income and that the assessee was liable for payment of interest u/s 234A from immediately following the due date i.e. 20.10.2009. We finding no infirmity in the order of AO and thus the ground of appeal of the assessee is dismissed. Disallowance made u/s 40A(3) - Special Auditor in the Special Audit report noted that assessee has made payments in excess of ₹ 20,000 in cash - disallowance expenses paid as freight charges to transporters and truck operators - HELD THAT:- On identical issue in the case of the group company of the assessee namely L. T. Food Ltd., the Co-ordinate Bench of Tribunal while deciding the appeal for A.Y. 2007-08 [ 2020 (10) TMI 88 - ITAT DELHI] has held that the payment cannot be covered under sub rule (k) of rule 6DD. Disallowance of the depreciation on the capital expenditure - HELD THAT:- AO has disallowed the depreciation on the capital expenditure which has been stated to have been incurred by the assessee in cash. We find that in the case of Kansi Ram Madan Lal vs. ITO [ 1982 (9) TMI 120 - ITAT DELHI-D] held that the provision of Section 40A(3) are not attracted in the case of capital expenditure. Before us, Revenue has not pointed any contrary binding decision in his support nor has placed any material on record to demonstrate that the aforesaid decision of Delhi Tribunal has been set aside, stayed or overruled by higher judicial forum. In view of these facts, we hold that AO was not justified in disallowing the depreciation u/s 40A(3) of the Act. Payment made to Rakesh Gaur - As contention of the Learned AR that salary payment in subsequent months have been made through cheque - HELD THAT:- The aforesaid contention of the Learned AR has not been controverted by the Revenue. Further no material has been placed by Revenue to demonstrate that the genuineness of the payment and the identity of the payee was in doubt. Considering the totality of the aforesaid facts, we are of the view that the AO was not justified in disallowing the aforesaid expenses. Disallowance of Diwali expenses - HELD THAT:- Contention of the assessee that the payments have been made to various parties and no individual payment exceeds ₹ 20,000/- has not been found to be incorrect nor the genuineness of expenditure has been doubted by Revenue. Considering the aforesaid facts, we are of the view that no disallowance of Diwali expenses is called for. Advance payment - assessee s contention that the amount was paid to the contractor which in turn was to be distributed as daily wages to the labourers - HELD THAT:- Considering the aforesaid contention of the assessee it has been found that genuineness of the expenditure has not been doubted. We are of the view that no disallowance is called for. Thus the grounds of the assessee are partly allowed. Disallowance of additional depreciation in respect of plant and machinery and pre-operative expenses - HELD THAT:- Before us, no material has been placed by the Revenue to demonstrate that the pre-operative expenses consist of indirect expenses which are not directly attributable for bringing the asset to its working condition. We are of the view that once the AO has accepted the pre-operative expenses to be a part of cost of capital asset and has allowed the depreciation u/s 32 of the Act, there remains no reason for disallowing the claim of additional depreciation. Direct the AO to allow the claim of additional depreciation on such pre-operative expenses which are capitalized by the assessee. Since the AR is not claiming the additional depreciation on old plant and machinery, we direct the AO to recompute the additional depreciation by including the preoperative expenses as part of cost of fixed asset. Thus the ground of appeal of the assessee is partly allowed. Disallowance under section 40(a)(ia) - non - deduction of tax at source by the assessee on the payment made on account of freight charges, repairing charges etc. - HELD THAT:- As relying in the case of Shree Chowdhary [ 2020 (8) TMI 23 - SUPREME COURT] uphold the disallowance u/s 40(a)(ia) of the Act to the cases of non deduction of TDS is concerned. Short deduction of TDS - It is not the case of the Revenue that assessee has not deducted tax from the payment on which the same was deductable under Chapter XVIII-B of the Act or it is also not the Revenue s case that tax was deducted at source but was not deposited in the Government account within the prescribed time. It is only the issue that assessee should have deducted TDS at a higher rate than the rate at which it deducted by the assessee. In the case of S. K. Tekriwal [ 2012 (12) TMI 873 - CALCUTTA HIGH COURT] has held that if there is any shortfall in deduction at source due to difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, no disallowances can be made under section 40(a)(ia) of the Act. We further find that identical issue arose in the case of L T Food, a group company and the Co-ordinate Bench of Tribunal in the case of S. K. Tekriwal (supra) has decided the issue in favour of the assessee.
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2021 (1) TMI 782
Deduction u/s 80IA - assessee is engaged in the business of providing Cargo handling at Bangalore International Airport Ltd. (BIAL) - As per revenue assessee did not satisfy the condition of entering into an agreement with Central or State Governments or local authorities or statutory body - HELD THAT:- Vide order [ 2015 (11) TMI 401 - ITAT BANGALORE ] observed that the Hon ble High Court of Karnataka in the case of M/s. Flemingo Dutyfree Shops (P) Ltd [ 2008 (12) TMI 807 - KARNATAKA HIGH COURT ] held that BIAL is a statutory body and therefore the order of the Tribunal dated 30.1.2014 was recalled to consider this aspect of the matter and the issue was decided in favour of the assessee. Similarly for AY 2010-11 in assessee s own case, both the issues were decided in favour of the assessee by the Tribunal by order [ 2016 (6) TMI 1408 - ITAT BANGALORE ] and the revenue s appeal was dismissed. For the year under consideration the facts and circumstances being identical to that of the earlier years, we find no reason to take a contrary view. Accordingly the appeal of the revenue is dismissed.
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2021 (1) TMI 781
Taxability of interest income - Netting of interest expenditure - interest income received from the Fixed Deposit created out of the loan Fund received from NEDFI - AO noted that the assessee has claimed TDS credit in respect of interest income from banks but corresponding interest income is not shown while computing total income for the year under consideration - HELD THAT:- The assessee received interest income from the said Fixed Deposits and at the same time the assessee had incurred the interest expenditure to NEDFI, which has been netted by the assessee in its computation/books and the net amount was capitalized and shown as work in progress (WIP) which action of assessee has not been accepted by the AO and the AO has taxed the interest income under the head other income and taxed it. According to Ld. Advocate since the assessee has commenced the project, the interest expenditure should be netted with that of the interest received and only the net amount should be brought to tax. CIT(A) has noted that the assessee has commenced its project (Tarun nagar Project) and since the interest amount from the fixed deposits are intrinsically linked to the business/project which has admittedly commenced, therefore the interest expenditure need to be allowed u/s 36(1)(iii) and in that event only the net amount can be taxed [i.e. the interest received minus interest expenditure]. Therefore, the impugned orders are set aside and it is directed that only the net interest amount should be taxed and it can only be brought to tax in accordance to law. Appeals of the assessee are partly allowed.
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2021 (1) TMI 780
Payment of salary to Senior Directo r Mrs. Sonali Nanda - Allowable business expenditure or not? - assessee has filed copies of various documents before the AO as well as the Ld. CIT (A) to demonstrate that Mrs. Sonali Nanda was appointed in terms of appointment letter containing terms and conditions of service and also these documents substantiated that Mrs. Sonali Nanda had vast experience in areas of food and beverage, baking and promotional events - CIT-A deleted the disallowance - HELD THAT:- It is seen that the AO has proceeded to disallow the salary paid on the ground that she was employed only by virtue of her being the daughter of Mr. Suresh Nanda and that she had not been selected thorough her open offer. To our mind this cannot be considered a valid ground for making the impugned disallowance in as much as there is no law against employing the relatives or sons or daughters of a shareholder/owner if they are otherwise duly qualified/ experienced to hold the position - AO has not pointed out that the expenditure was not incurred for the purpose of business. In such a situation the disallowance made by the AO has been rightly deleted by the CIT (A). AO cannot decide on the reasonableness and commercial expediency of a particular expenditure incurred by the assessee as has been laid down by the Hon ble Apex Court in case of S.A. Builders [ 2006 (12) TMI 82 - SUPREME COURT] . CIT (A), while deleting disallowance in Assessment Year 2011-12, has noted that the payment of salary has not been disputed, it is not disputed that the salary paid has been taxed in the hands of Mrs. Sonali Nanda and there was no evidence to suggest that the payment of salary was without any service rendered. The Ld. CIT (A) also observed that the argument that the salary paid was on account of Mrs. Sonali Nanda being daughter of Mr. Suresh Nanda holds no matter in view of the overwhelming evidence produced and that the Revenue cannot proceed on consideration not based on any evidence. - Decided against revenue. Disallowance u/s 14A - Assessee has made suo moto disallowance - HELD THAT:- As per the Hon ble Delhi High Court in Maxopp Investment Ltd.[ 2011 (11) TMI 267 - DELHI HIGH COURT] it is incumbent on the Assessing Officer to indicate cogent reason for rejecting the claim of the assesee with regard to expenditure or no expenditure, as the case may be, while proceeding to compute disallowance u/s 14A r.w. Rule 8D - such satisfaction in precariously absent in the assessment order. In such a situation, the disallowance made by the Assessing Officer cannot be upheld. Similarly, the action of the Ld. CIT (A) in restricting the disallowance to the exempt income also has no basis as there is no recording of satisfaction by the Assessing Officer as aforesaid. Department challenging the deletion of disallowance u/s 14A in Assessment Year 2012-13 and 2013-14, it is seen that, undisputedly, in both these years the assessee has not earned any exempt income. The Ld. CIT (A) has deleted the disallowance by duly noting the same. The issue of disallowance u/s 14A of the Act in absence of exempt income earned is no longer res integra. In the case of Cheminvest Ltd. vs. ACIT [ 2015 (9) TMI 238 - DELHI HIGH COURT] has held that where the assessee does not earn any exempt income during the year, no disallowance u/s 14A of the Act can be made. Depreciation of cars - disallowance by AO on the ground that these cars were found to be parked at the residences of Mr. Suresh Nanda and Mr. Sanjeev Nanda who held majority stake directly or indirectly inthe assessee company - HELD THAT:- Similar addition was made in Assessment Yea₹ 2009-10 and 2010-11 [ 2017 (11) TMI 1067 - ITAT DELHI] which was subsequently deleted by the ITAT as held mere parking of cars at the premises of these persons, cannot ipso facto lead to an inference that the depreciation has to be disallowed which otherwise are the assets of the assessee company. Assessee had also submitted that these cars were used purely and wholly for the purpose of hotel business and in absence of rebuttal of this explanation, depreciation cannot be disallowed and accordingly, we held Ld. CIT (A) has rightly allowed depreciation. Disallowance of depreciation on Gym Equipment - HELD THAT:- As relying on own case [ 2017 (11) TMI 1067 - ITAT DELHI] it is not in dispute that the equipment has been bought by the company and is appearing at the fixed assets in the balance sheet of the assessee company and said assets has been acquired during the running of hotel business. Then simply because it is being used by Managing Director it cannot be held to be for private use so as to warrant disallowance of depreciation. At the most if any equipment has been placed for exclusive use of Managing Director the same should be added as perquisite in the hands of the said Director but cannot be disallowed in the hands of the assessee company when this asset already forms part of the block of the assets and depreciation has been allowed earlier. TDS u/s 195 - Disallowance being payment made to M/s Apex Enterprises - contention of the AO that no tax had been deducted at source while making the payment and that the assessee could not justify the payment - CIT- A deleted the addition - HELD THAT:- It is undisputed that no tax was required to be deducted at source on the impugned payment in view of Articles, 14, 7 and 22.1 of the DTAA between India and UAE. CIT (A), while deleting the addition, observed that the agreements were found during the course of search and seizure and that, undisputedly, there was evidence to indicate that efforts were made by M/s Apex Enterprises towards the fulfilment of the terms of the agreement. The Ld. CIT (A) also observed that although the efforts did not result into any concrete proposal materialising, failure to procure business does not lead to the conclusion that the transaction was not genuine. We agree with the observations of the Ld. CIT (A) on the issue. We also negate the allegation of the Assessing Officer that the contract was awarded only by virtue of Mr. Sanjeev Nanda being the Son of Mr. Suresh Nanda. Having perused the records and the evidences as well as assessment order, it is apparent that the Assessing Officer chose to ignore these evidences and proceeded to make the disallowance without any cogent reason. Unexplained cash found during the course of search - assessee s submission that this cash pertained to cash received from sale of scrap generated during the renovation work as well as normal operations of the business - CIT-A deleted the addition - HELD THAT:- CIT (A) while deleting the addition, has noted that although no specific explanation was given at the time of search, the seized cash had been separately reflected in the audited balance sheet and has also been included in the income from sale of scrap offered to tax and, thus, the cash found and seized stood duly accounted for. This finding of fact has not been controverted as being perverse by the Ld. Sr. DR. In such a situation, this being a finding of fact by the Ld. CIT (A), we find no reason to interfere with such finding. - Assessee appeal allowed.
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2021 (1) TMI 779
Estimation of income - Suppressed turnover/ sales - NP estimation - Additions based on deposits made in the bank account of the assessee - HELD THAT:-The income of the assessee is required to be estimated by adopting some proper and reasonable criteria being GP/NP on the turnover of the assessee. The assessee has surrendered the income at N.P. rate of 2% on the total turnover as detected by the AO whereas AO has estimated the income of the assessee by adopting NP at 5% on such turnover. There is no quarrel on the point that while estimating the income come the Assessing Officer has to apply some reasonable and proper criteria and the comparative rate of profit in the same trade/business is a proper guidance for estimation of income. t is settled preposition of law that the past history of the assessee regarding GP/NP is a proper guidance and in the absence of past history the prevailing GP/NP in the same trade/business is also considered as a proper guidance. Therefore, there cannot be different para meters for estimation of income in case of assessee who is maintaining books of account but were rejected by the Assessing Officer and in the case where the assessee is not maintaining the books of account. Estimation of the income of the assessee should be based on some reasonable and proper criteria and not based on an arbitrary rate adopted by the Assessing Officer. The Assessing Officer has not given any reasonable basis of adopting NP rate at 5% except the fact that the assessee is not maintaining the books of account. Non maintenance on books of account cannot be a ground leading to higher NP to be adopted by the Assessing Officer . Hence, the income of the assessee ought to have been estimated by adopting the prevailing rate of N.P. in the same trade/business. Looking into the comparative cases produced by the assessee, it is found that the N.P. declared by those entities/persons in the same trade is less than 2%, whereas the assessee has offered the income at N.P. of 2% which in line with the prevailing rate of NP in the business of wholesale trading of cloth. Hence, the income offered by the assessee by applying NP at 2% is proper and is reasonable - Decided in favour of assessee.
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2021 (1) TMI 778
Non deduction of TDS on expenditure on account of Advertisement Publicity expenses - HELD THAT:- As amount of ₹ 42,340/- consists of an amount of ₹ 17,340/- paid on account of advertisement and since the amount is less than ₹ 20,000/-, the provisions of Section 194C are not attracted. Further, out of ₹ 42,340/- an amount of ₹ 25,000/- has been paid on account of car expenses and Section 194C does not impose a liability on the payer to deduct TDS as there is no contract between the assessee and recipient. Hence, the disallowance made by the AO is hereby directed to be deleted. Addition made under the head unverifiable sundry creditors - HELD THAT:- Payment which is due to be paid to an entity namely, M/s Infotech Services is no more a liability owing to non-furnishing of details. We find from the record before us at page no. 102 of paper book, the confirmation and the copy of account filed by the assessee with regard to M/s Infotech Services. Since, it cannot be said that the liability has ceased, the addition made by the revenue is hereby deleted. Addition on account u/s 41(1) - HELD THAT:- We find from the record that these receipts are in the nature of security deposit and also have been paid subsequently to all the three parties mentioned above. Hence, considering the entire factum and since the payment have already been made, no addition u/s 41(1) is called for. Appeal of the assessee is allowed.
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2021 (1) TMI 777
Granting the exemption u/s. 10(26B) - CIT-A allowed deduction - As per revenue since as per ITR-7 of the e-filed return, the assessee has himself denied the claim of exemption u/s.10 and therefore, Ld. CIT(A) has erroneously allowed exemption to the assessee, which was never claimed by the assessee - HELD THAT:- The assessee is claiming that same is by way of typographical error only. We are of the opinion that when in the main schedule, the amount claimed under section 10 has been duly mentioned, the error while typing on front page of the return of income should be ignored. The assessee cannot be penalized merely for unintentional typographical error while filling information in the return of income. Substance should be preferred over the form while exercising the quasi judicial function by the Assessing Officer. CIT(A) has duly forwarded the additional evidences to the Assessing Officer and after taking into consideration his comments and rejoinder of the assessee and the history of past and subsequent years, has allowed the appeal of the assessee. In our opinion, there is no infirmity in the order of the Ld. CIT(A) on the issue in dispute and we, accordingly, we uphold the same. The ground No. 1 of the appeal of the Revenue is accordingly dismissed.
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2021 (1) TMI 776
Estimation of income - As contended by the assessee that the AO has not pointed out any discrepancies in the seized material on the basis of which he rejected assessee's business result and also did not provide any reason for estimating income @10% besides what the assessee has stated in his statement - CIT-A applied the rate of 8% - HELD THAT:- As per Section 44AD of the Act, the prescribed rate as a thumb rule in assessee's line of business is 8% of turnover. In case an assessee claims that his profits are below 8%, he must maintain books of account and get them audited. These exercises were not done by the assessee. Therefore, in the interest of justice, the Ld. CIT(Appeals) had applied the rate of 8% as per Section 44AD of the Act to the income of the assessee considering his area of business. Thus, the findings of the Ld. CIT(Appeals) are absolutely reasonable and as per law. Therefore, the same does not call for any interference. Hence, the findings of the Ld. CIT(Appeals) are upheld. - Decided against assessee.
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2021 (1) TMI 775
TP Adjustment - Comparable selection - HELD THAT:- Assessee is a company engaged in the business of software development. It rendered software development services to its Associated Enterprise (AE), thus companies functionally dissimilar with that of assessee need to be deselected. CIT(A) directed computation of margins of company on a segmental basis - The plea of revenue is that the profit margin at the entity level should be taken, which in our view, cannot be accepted. In the TNMM, what is to be compared is only the transaction and margin from the transaction. The transaction for which the ALP is sought to be determined is rendering of software development services and therefore the plea of revenue to take the enterprise level profit margin is devoid of any merit. Whether working capital adjustment should be given or not? - We find that the reasons given by the CIT(A) for not allowing working capital adjustment are not the same reasons as was given in the case of Huawei Technologies India Pvt. Ltd. v. JCIT [ 2018 (10) TMI 1796 - ITAT BANGALORE] wherein Tribunal held that working capital adjustment has to be given. Deduction u/s 10A - Computation of deduction - HELD THAT:- Taking into consideration the decision rendered by the Hon'ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] we are of the view that communication charges should be excluded both from export turnover and total turnover. We are of the view that as of today, law declared by the Hon'ble High Court of Karnataka which is the jurisdictional High Court is binding on us.
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2021 (1) TMI 774
Computation of income/profit - not excluding sales and corresponding profit thereon in computing the total income as per normal provisions as well as u/s 115 JB - HELD THAT:- The issue involved for this assessment year is directly and substantially involved for the assessment year 2007-08 and there is no change is in facts or in law, we find it difficult to take a different view that was taken for the assessment year 2007-08. Ld. CIT(A) dealt with this issue in extenso to reach a conclusion that the starting point for computing of the profits is the audited financial statement as prepared under the Companies Act, which is subject to further additions/deductions in terms of various upward and downward adjustments provided in various clauses of explanation given below subsection (2) of section 115 JB of the Act, and such a finding is well fortified by the findings of the Tribunal in assessee s own case for the assessment year 2007-08.Findings of the Ld. CIT(A), therefore, cannot be found fault with and are to be confirmed. Addition u/s 2(22)(e) - deemed dividend - loan advanced by RSML to the assessee and Mr. Sanjiv Arora is a common shareholder holding substantial interest in both the companies i.e., RSML and the assessee - HELD THAT:- Shareholding pattern of the assessee during the relevant previous year, a perusal of which reveals that Mr. Arora merely held 1633632 equity shares in the assessee, which constitutes merely 14.09 % of the total voting power, and therefore, Mr. Arora did not hold 20% of the voting power in the assessee and consequently, the assessee cannot be regarded as a company in which Mr. Arora has substantial interest. We, therefore, find that the relationship as contemplated in section 2(22)(e) of the Act, to apply the mischief of the said section is not at all satisfied in the facts of the present case. Thus the provisions of section 2(22)(e) of the Act are not at all attracted in the present case since the assessee was not a concern in which any of the shareholders of RSML had substantial interest. Disallowance u/s 14A read with Rule 8D - HELD THAT:- There is no dispute that during the relevant previous year, the assessee did not earn any exemptdividend income from investments held in subsidiaries. When no exempt income is actually earned by an assessee from investments held during the year, no portion of expenses incurred during the year can be disallowed under section 14A of the Act - we are of the considered opinion that where there is no dispute of fact that no dividend has been earned by the assessee during the year, no disallowance is called for under section 14 A - Decided in favour of assessee. Disallowance of foreign travel expenses - CIT-A upholding disallowance on the ground that the said expenditure was incurred for foreign travel for personal purposes - HELD THAT:- As factually the assessee failed to establish the nexus between the travel and the business purpose for this year and, therefore, we do not find any ground to interfere with the findings of the Ld. CIT(A) on this aspect. While upholding the findings of the Ld. CIT(A), we dismiss Ground No. 1 of assessee s appeal.
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2021 (1) TMI 773
Penalty u/s 271(1)(c) - Mandation of recording satisfaction - disallowance u/s 14A - HELD THAT:- It is a settled law that while levying penalty for concealment, the AO has to record satisfaction and thereafter come to a finding in respect of one of the limbs, which is specified under section 271(1)(c) of the Act. The first step is to record satisfaction while completing the assessment as to whether the assessee had concealed its income or furnished inaccurate particulars of income. Thereafter, notice u/s 274 read with Section 271(1)(c) of the Act is to be issued to the assessee. AO has to levy penalty under Section 271(1)(c) for non-satisfaction of either of the limbs. While completing the assessment, the Assessing Officer has to come to a finding as to whether the assessee has concealed its income or furnished inaccurate particulars of income. For the imposition of penalty u/s 271(1)(c) of the Act either concealment of particulars of income or furnishing inaccurate particulars of such income are since qua non. It is a settled law that penalty cannot be imposed for alleged breach of one limb of Section 271(1)(c) while penalty proceedings are initiated for breach of other limb of the section. - Decided in favour of assessee.
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2021 (1) TMI 772
Depreciation on xerox machine - at the rate of 15% OR 60% as claimed by the assessee - HELD THAT:- Assessee is entitled for depreciation at the rate of 60% of this alleged xerox machine WV-5745. The simple reason is that CIT(A) failed to comprehend true nature of this asset. It has been treated as photo-state machine without going through literature of the machine supplied by the manufacturer. According to the manual, it is multi-functional printer. Its feature to make photo-state of a paper is an added activity. It is also pertinent to observe that admissibility of depreciation at the rate of 60% is not disputed by the ld.CIT(A). CIT(A) has granted this rate of depreciation on all other assets, which are treated as peripheral of the computer. To our mind, this asset cannot be excluded for the reasons assigned by ld.CIT(A). It is to be treated as an integral part of the computer system which helps printing from the computer connected with it. Therefore, allow this appeal, and delete disallowance.- Decided in favour of assessee.
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2021 (1) TMI 771
Revision u/s 263 - Addition of prior period expenses - AR made a claim of expenses relating to the previous assessment year to be allowed in this assessment year without producing an iota of evidence to show that the impugned expenses is relating to the assessment year under consideration - HELD THAT:- From the statement of income filed along with revised return, the business income was taken at ₹ 1,86,65,990/-. However, in the computation statement, the gross income was taken at ₹ 2,79,26,864/- even after claiming expenses of ₹ 45,14,322/- and village development expenses of ₹ 16,40,706/- which were not added again in the order passed u/s. 143(3) r.w.s. 263 of the I.T. Act. The assessee has filed audit report u/s. 44AB of the I.T. Act along with the revised return wherein indirect expenses was claimed as expenses relating to prior period. It is seen that the assessee has not come up with any strong evidence in support of his arguments against the order u/s. 143(3) r.w.s. 263 of the I.T Act. It is also seen that there is no proper explanation as to why these expenses were to be allowed when mercantile system of accounting was being followed - genuineness of the claim along with the returns and statements of income itself was not proved in view of various contradictions and discrepancies mentioned above. In the facts and circumstances of the case, the contention of the assessee stands on a weak footing and is without merits. Thus, the addition made by the Assessing Officer is sustained. Claim of the assessee is not supported by any evidence to show that the said expenses are relating to the assessment year under consideration. Being so, we have no hesitation to confirm the addition made by the AO. Accordingly, this ground of appeal of the assessee is dismissed.
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2021 (1) TMI 770
Reopening of assessment u/s 147 - unexplained deposits - HELD THAT:- It is in respect of deposit of ₹ 10 lac in Smt. Amarpreet Kaur and such FIR information does not mention or pertain to the assessee. Thus, the reasons recorded are based on factually incorrect information which admittedly does not belong to the assessee. The action of the AO for reopening the case u/s 147 is mechanical and without any application of mind, and therefore, the entire reasons recorded on such erroneous presumption of information or material cannot clothe Assessing Officer with jurisdiction u/s.147 and same is therefore bad in law and is quashed. - Decided in favour of assessee.
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2021 (1) TMI 748
TDS u/s 194A - Assessee society had paid interest on deposits - Non deduction of TDS - whether any interest was paid to members less than ₹ 10,000/- so that the provisions of section 194A of the Act will not apply to such payments? - HELD THAT:- We are of the view that the analogy so drawn by the CIT(A) is erroneous. The provisions of Sec.194A which are in relation to deduction of tax at source cannot be equated with the provisions of Sec. 80P(2)(a)(i) of the Act, which deals with deduction while computing total income. The admitted position is that the sum has been paid to Associate Members and CIT(A) has equated it and named them as non-members. In our view this approach is erroneous. For the AY 2015-16, there is no obligation to deduct tax at source by a Co-operative Society u/s.194A of the Act as laid down by the Hon ble Karnataka High Court in the case of CIT Vs Karnataka State Apex Cooperative Bank Ltd. [ 2016 (6) TMI 1409 - KARNATAKA HIGH COURT] - We therefore delete the addition sustained by the CIT(A). - Decided in favour of assessee.
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Customs
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2021 (1) TMI 769
Seeking clearance of the imported goods for home consumption - old and reusable MFDs - HELD THAT:- We are not going into the issue as regards the reason for detention of the goods and the rights and liabilities of the writ applicant with regard to the imported of the goods. We are informed that this issue is at large before the Supreme Court in one another litigation. The rights and liabilities of the writ applicant shall be governed accordingly by the final verdict of the Supreme Court. However, the limited question we need to look into, as on date, is with respect to the plea of the writ applicant to provisional release of the goods. It appears from the materials on record that the writ applicant preferred an application dated 3rd October 2019 addressed to the ADG of the Directorate of Revenue Intelligence, Zonal Unit, Ahmedabad for provisional release of the goods - the respondent No.2 should immediately look into the application dated 3rd October 2019 filed by the writ applicant (Annexure : 'F' to this writ application) and take an appropriate decision as regards the plea for provisional release of the goods. Such decision shall be taken within a period of eight days from the date of receipt of the writ of this order. Application disposed off.
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2021 (1) TMI 768
Smuggling - Baggage Rules - concealment of dutiable/contraband goods - 20 yellow metal discs concealed in 10 lids of Tiger Balm - 4 cartons of Gudang Garam International Cigarettes - Gold - N/N. 12/2012-Cus. dated 17 March, 2012 - HELD THAT:- It is found that the appellant had brought a small quantity of 233.00 gms. of gold in the shape of 20 disc (about 11.66 gm. per disc) for personal use. Further, it is found that there is no commercial quantity either of gold or cigarettes. Further it is found that the appellant is an eligible passenger, as defined in condition No. 35 of the Notification No. 12/2012-Cus and entitled to import gold up to one kilogram, on returning to India on payment of concessional duty. It is further held that the appellant is eligible to pay concessional duty as provided under Notification No. 12/2012-Cus read with the provisions of Customs Tariff Act and there is no case of alleged violation of the provisions of Section 111(d), (i), (j), (l) and (m) so far gold is concerned. Accordingly, it is directed that the seized gold is to be released to the appellant on payment of concessional duty under Notification No. 12/2012-Cus. Confiscation of gold is set aside. Cigarettes - HELD THAT:- It is not a commercial quantity. However, the appellant was entitled to import only 100 sticks (duty free). Accordingly, the absolute confiscation of the cigarettes (being 960 sticks in quantity) valued at ₹ 10,000/- is upheld - Further, the penalty under Section 112(a)(i) is reduced to ₹ 10,000/. The penalty under Section 114AA is set aside, as the condition precedent for imposition under the said section are not found under the facts and circumstances of this case. Appeal allowed in part.
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2021 (1) TMI 767
Levy of penalty under regulation 5 of Customs (Provisional Duty Assessment) Regulations, 2011 - levy on the ground that the appellants had not submitted all the import documents, timely, as was required to be filed within 30 days in terms of regulation 3(3) of the Regulations - HELD THAT:- This is a case of delay in furnishing of certain documents. There is no revenue implication. The department has not been able to establish any deliberate delay or any malafide intention on the part of the appellant. As and when the appellant could gather the requisite documents they were presented before the assessing officers for finalising the provisional assessments. In fact, out of the 35 Bills of Entry involved, 27 could be finalised even before passing of the adjudication order. Keeping all this in view, the adjudicating authority took a fair decision and imposed a nominal penalty of ₹ 20,000/- which comes to ₹ 2,500/- for each of the remaining 8 Bills of Entry yet to be finalised for want of all the documents. This amount has already been paid by the appellant. The order of the Commissioner (Appeals) does not establish any ground for enhancing the penalty to the maximum of ₹ 50,000/- per Bill of Entry yet to be finalised. In the case of Essar Oil Ltd. vs Commissioner of Customs (Prev), Jamnagar [ 2015 (5) TMI 942 - CESTAT AHMEDABAD ], it was held by the Tribunal that when there is some delay in furnishing the documents and there is no revenue implication, penalty is not called for. Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2021 (1) TMI 766
Jurisdiction - power of NCLT to appoint Special Officer - allegations and grievances among the management/ owners - HELD THAT:- Under the Company Petition filed before the NCLT, Kolkata being CP. No. 42 of 2016 there were allegations and grievances among the management/ owners. The NCLT, Kolkata had felt the need that the various documents adduced from all the parties require an in-depth and physical inspections/ verification on the ground. For this NCLT, Kolkata have appointed a Special Officer to make a detailed report and to ensure there is no deadlock in management by ensuring implementation of the resolutions passed in the Board Meetings which shall be presided by such Special Officer. The contentions of the Appellants that NCLT, have exceeded its jurisdiction by appointing a Special Officer has been taken down as Section 242(4) have given general power to the NCLT to make any interim order which it thinks fit for regulating the conduct of the company s affairs upon such terms and conditions as appear to it to be just and equitable. Since, there were numerous allegations made under the Company Petition it was needed to be verified and no order could be passed abruptly until the allegations and grievances are examined completely. The Special Officer being an officer appointed by the Tribunal was given the power under the impugned order to supervise, conduct and preside over the Board meetings and ensuring the implementation of the resolutions passed in the said Board meetings. The Special Officer was ordered to ensure that such resolutions shall not be prejudicial to the interest of Respondent No. 1 Company so that frivolous litigations may be avoided and for this Special Officer was asked to make the complete Minutes of the meetings and get it signed by all the participants mandatorily. The Special officer was asked to submit its report within 60 days from the date of taking the charge. Therefore, the contention on behalf of the Appellant that the report of Special Officer will further escalate the issues among the parties is a matter of speculation and cannot be given due consideration. In fact, the report will give a true and fair picture of the state of affairs of the Respondent No. 1 Company. The Contention of the Appellants that the petition under section 422 of the Companies Act are required to be disposed of within a specified time frame and by appointing the Special Officer it is defeating the purpose of Section 422 of the Companies Act, 2013. This Contention of the Appellant is duly considered but since there were pleadings going on and various applications were filed before the NCLT, Kolkata, no order could have been passed abruptly. Since the pleadings were pending and in order to protect and preserve the assets of the Company from being depleted, NCLT had appointed the special officer in the interregnum and also for the detailed verification of the various allegations imposed by the parties against each other, it was correct to appoint an officer - Nothing has been brought on record in relation to the report of the Special Officer. There is nothing on record what are the actions taken by the NCLT, Kolkata on the basis of such report. Also, inspite of the directions parties have not filed any Written Submissions. The matter is pending before the NCLT, Kolkata, there are no reason to entertain the present Appeal. Appeal dismissed.
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2021 (1) TMI 765
Validity of increase in share capital - rectification of the Register of Members of the Company to reflect the issued and paid up capital of the company - time limitation - whether the increased authorised capital of first respondent company from 3,40,000 shares to 7,90,000 shares on 30.12.2011 is illegal and void? - HELD THAT:- We agree with the finding of learned tribunal that if the alleged wrongful act is such that its effect in continuous course of oppression and there was no prospect of remedying the same then the tribunal is entitled to interfere by passing an appropriate order. The alleged increase of authorized share capital and allotment of share without proper notice to the petitioner is a wrongful act which has a recurring effect on the rights of the petitioners who are the shareholders - the petition is not barred by law of limitation and is maintainable. The interest of the company is of paramount importance as far as Section 397 398 of the Companies Act, 1956 as also Section 241 242 of the Companies Act, 2013 is concerned. The same purpose in just and equitable manner can be served, if additional shares are issued to the Respondent No.1 2 to bring to their shareholding level to the same level as it was existing as on 07.07.2007 / 30.09.2011 and it will not hurt the company either in the form of additional financial burden or health of their overall business or to the Members/Shareholders for the relief they have sought. The purpose of Section 397 and 398 of the Companies Act, 1956 as also Section 241 and 242 of the Companies Act, 2013, the Tribunal may with a view to bring to an end the matters complained of make such order as it thinks fit for the regulations of Conduct of affairs of the company in future. However, the issue for consideration is whether annulling the allotment of shares and filing of all reports and returns with RoC from 30.09.2011 till date including setting aside the shares allotment which will affect the cushion of the bank for its Security for Loan will be in the interest of the company or not. The purpose equally can be served if shareholding pattern what was there as on 2007 is to be maintained by the company in the same proportion amongst the shareholders by issue of further shares to the aggrieved shareholders or others at the same rate at which it has been taken over by the Appellant will suffice the same purpose and will bring Respondents No. 1 2 at par at the level of its percentage Shareholding in 2007. To bring the matter to an end, complained of in the interest of the Company in future the best course of action is to issue further shares to the Respondent No.1 2 at the level at which they are claiming to be in 2007 at the same price at which the appellant has purchased those shares as their shareholding has drastically come down from 21%+ to less than 10%. This is to be complied with by Appellants within a period of 3 months. The order of the Tribunal is set aside.
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2021 (1) TMI 764
Amalgamation scheme - seeking to dispense with convening a meeting of the Shareholders and Creditors of the Demerged Company and Resulting Company for the purpose of considering the proposed Scheme etc. - Sections 230 to 232 of the Companies Act, 2013 R/w the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- The Companies have disclosed material information with regard to the Scheme in question. In the normal circumstances, it is the prerogative of concerned Companies to take decisions dictated by commercial expediency and evolve Scheme in their mutual business interest, and the Tribunal is only empowered to examine the Scheme broadly, so as to ensure that the Scheme is prepared in accordance with the provisions law and the interest of all the stakeholders of Companies involved, are taken care of by affording due notice of Scheme, etc. Therefore, in view of the no objections to the Scheme and consents given by the different stakeholders for dispensing with the meetings, as mentioned in the preceding paragraphs, there is no necessity to convene the meetings for the same purpose. In the instant case, all the Companies involved in the case, have filed necessary Certificates given by the Chartered Accountants duly certifying the number of Shareholders, constituting 100% of Equity Shareholding of the Applicant Companies, Secured and Unsecured Creditors of the Demerged Company, Unsecured Trade Creditors of the Applicant Companies constituting greater than 90% in value of the total amount due, and they have also furnished their consent affidavits. There would not serve any purpose to direct to convene the meetings in question. Therefore, it would be just and appropriate to dispense with the meetings as sought for, on the principle of ease of doing business, and to facilitate the Company to file necessary second stage Petition seeking to sanction the Scheme, subject to fulfillment of all statutory conditions, after ordering notices to respective Statutory Authorities. Appeal is disposed of with the following directions: (1) It is hereby dispensed with convening and holding of the meetings of the Equity Shareholders of the Applicant Companies. (2) It is hereby dispensed with convening and holding of the meeting of the Secured Creditors of the Demerged Company. (3) It is hereby dispensed with convening and holding of the meeting of the Unsecured Creditors of the Demerged Company. (4) It is hereby dispensed with convening and holding of the meetings of the Unsecured Trade Creditors of the Applicant Companies. (5) The Applicant Companies are directed to issue paper notification one in English language 'The Hindu' and one in vernacular language 'Udayavani' about the dispensation of the meetings by this Tribunal, within a period of 10 (Ten) days from the date of receipt of copy of this Order. (6) Any party, aggrieved by this Order, is entitled to file miscellaneous application, in the instant Company Application, by seeking appropriate direction(s). (7) The Company is permitted to file necessary Company Petition for the sanction of Scheme of Arrangement in question, in accordance with law.
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2021 (1) TMI 763
Levy of Penalty - manipulation in price of the scrip of Blue Blends by employing/adopting a strategy of trading called 'Advancing the Bid' - HELD THAT:- The nature/pattern of trading adopted by the appellants is not in the nature of what a rational investor would do. A large number of sell orders were placed repeatedly on several trading dates at less than the LTP; it is illogical. Therefore, the contention of the appellants that it was following momentum trading has no meaning as by placing a large number of orders below the LTP the appellants themselves were creating a momentum. Of course we notice that a number of orders of the appellants were placed on or marginally above LTP, but that is the rational behaviour expected from a seller and no fault can be found for SEBI in not considering such trades as violative of the PFUTP Regulations. Further, it is also on record that in 124 out of 166 times sell orders were placed in single digits of 1, 2, 3 etc shares, which defies the submission of the appellants that they were placing orders below the LTP because only if sell orders are placed a bit below the LTP large quantities could be sold in a falling market. Therefore, clearly the strategy of trading [momentum trading] adopted by the appellants was creating its own momentum inimical to the interest of the securities market. Even if it affected only about 10 % of the market volume in the scrip of Blue Blends, as contended by the appellants, it is no consolation since influencing 10% of the market by 2 entities is a significant deviation from market equilibrium. Therefore, de hors the connectivity issue itself the appellants are in violation of the PFUTP regulations by the very nature of their trading strategy and trading pattern. Mitigating factors are inbuilt in the given punishments. 4 weeks restrain from the securities market as directed by the WTM and ₹ 5 lakhs joint and several penalty imposed by the AO are not harsh or disproportionate in the given facts and circumstances for us to interfere with the impugned orders. However, if the appellants so desire they may pay ₹ 2.5 lakh each - Appeal dismissed.
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2021 (1) TMI 762
Validity of grant of registration/recognition to PVAI-VPO as a registered valuer organisation - It had come to the notice of the IBBI that PVAI-VPO enrolled Mr. Dhaval Chheda as its member and issued him a certificate on completion of 50 hours of educational course as a member, despite Mr Chheda not being eligible to become a registered valuer. PVAI-VPO also allowed the application of Mr. Nikhil Chandak and Mr. Kapadia Jai Vikram to be forwarded to the IBBI for registration as registered valuers even though they were neither eligible to be enrolled as members of PVAI-VPO nor were eligible to be registered as registered valuers as per clause 9 of Model Bye-Laws of a Registered Valuers Organisation under Part-II of Annexure-III of the Valuer Rules - contravention of Valuer Rules read with section 247 and section 458 of the Companies Act, 2013. HELD THAT:- It is noted that during CIRP process, the valuation is to be done by the registered valuers. Regulation 27 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides that in all CIRPs the resolution professional has to appoint two registered valuers within seven days of his appointment but not later than fourty-seventh day of insolvency commencement date. A valuer to be registered with the IBBI has to first enrol himself/herself with RVO recognized by the IBBI and complete the 50 hours mandatory educational programme. Subsequently, the valuer has to clear the valuation examination conducted by the IBBI and thereafter he may register with IBBI - The CIRP Regulations further envisage under regulation 35(1)(a) that estimation of fair value and liquidation value of the assets of the corporate debtor is required to be done in accordance with internationally accepted valuation standards after physical verification of the inventory and fixed assets of the corporate debtor. These values serve as a reference for evaluation of choices, including liquidation and selection of the choice decides the fate of the corporate debtor. In consequence of an error in valuation, a viable corporate debtor could be liquidated. Further, if market participants undertake transactions at a value which is not reflective of market or different from market price, the resources in the economy could be misallocated. Such outcomes are disastrous for the economy and also impinge economic growth. Thus, there exists a need for transparent and credible determination of value of the assets of the corporate debtor to facilitate comparison of choices and for taking informed decisions. Valuation standards and ethical principles ensure accountability and uniformity in valuation services. India has adopted a two-tier mechanism for regulation for valuer professionals where valuers are enrolled with an RVO as a member, and thereafter registered with the Authority. They are subject to a detailed Code of Conduct to maintain credibility of the process of valuation and ultimately the resolution process. Case of Mr. Nikhil Chandak - HELD THAT:- It is found that PVAI-VPO enrolled him as a member while he was in active service and imparted 50 hours educational course to him. Thereafter, PVAI-VPO recommended his application for registration as a registered valuer to the IBBI. At the time of his registration as a registered valuer, he was engaged in employment and this was admitted by him also in Part C of Form A of his application for registration. He also submitted an affidavit to the IBBI mentioning that he would resign from his employment on receiving the registration from the IBBI. In this regard, submission on behalf of PVAI-VPO that initially, it was unaware of the fact of employment of Mr. Chandak and later, when this information came to the knowledge of PVAI-VPO, his application was forwarded on compassionate humanitarian grounds is not tenable. The Companies (Registered valuers and Valuation) Rules, 2017 do not provide for recommendation of an application for registration on humanitarian grounds. It only provides for meeting the requirements of eligibility in terms of qualification, experience and other conditions. It is not a question of human survival and dignity where humanitarian grounds are to be applied - It has been clarified by the IBBI that RVOs can grant membership and provide educational course to those individuals who are eligible under the Valuer Rules and should not be in employment while applying for registration. In the present case, Mr. Chandak was in employment at the time of submission of his application and he also submitted an affidavit to that effect. Case of Mr. Dhaval Chheda - HELD THAT:- It is noted that the contention on behalf of PVAI-VPO during personal hearing that Mr. Chheda was granted membership of PVAI-VPO only for the limited purpose of imparting knowledge and he further admitted that the certificate was granted erroneously to him. It was also admitted by Mr. Chheda in his email dated 26th August, 2019 to the IBBI that he completed his graduation in the year 2018 and would be completing his post-graduation in the year 2020 whereas the certificate was issued to him in August 2019 by RVO without having the requisite years of experience. Case of Mr. Vikram Jai Kapadia - submission of Mr. Pendse, on behalf of PVAI-VPO, that Mr. Kapadia was simultaneously working with two firms at the relevant time is impractical and implausible - HELD THAT:- PVAI-VPO has not provided any justification for removal of the earlier experience certificate dated 23rd March, 2019 by the applicant, nor was he able to explain the contradiction in the experience certificate from Delta valuers dated 23rd March, 2019 and from Mr. Davendra Rangrej dated 2nd January, 2020. This shows that PVAI-VPO had been casual while verifying the contents of the experience certificate and thereafter recommending the application to the IBBI for registration. In the present case, PVAI-VPO is an RVO recognized under sub-rule (5) of rule 13 of the Valuer Rules. It allowed ineligible candidates to be enrolled as members of its organization even though they did not have proper credentials as per the eligibility norms, qualification and forwarded the applications of candidates who did not meet the length of experience required for an individual to be registered as a valuer to the IBBI. It failed in its institutional obligations in not scrutinizing the credentials of some of the candidates in a professional manner while enrolling, granting certificate of completion of educational course and forwarding the applications to IBBI for registration - it is also noted that PVAI-VPO took corrective course of action after taking notice of the aforesaid irregularities. In case of Mr. Nikhil Chandak, when PVAI-VPO came to know about his engagement in service, it refused to process his application initially, however, PVAI-VPO took his resignation letter with an affidavit and processed it further. Mr. Chandak was relieved within three days from service much before further processing by the IBBI. Thus, PVAI-VPO took corrective course of action. In the case of Mr. Dhaval Chheda, the contention that he joined the organization only for knowledge purpose and admission on behalf of PVAI-VPO that the certificate was issued erroneously due to oversight by PVAI-VPO for the first time is accepted. In case of Mr. Kapadia Jai Vikram, PVAI-VPO refused to entertain his application based on the period of experience after post-graduation. Subsequently, Mr. Kapadia submitted his experience after graduation but PVAI-VPO stopped supporting his application and advised Mr. Kapadia to directly approach the IBBI for representing himself due to variation in his statements. Further, the admission on behalf of the RVO that procedural irregularity committed by it for the first time was a bonafide and inadvertent error and occurred due to haste, lack of experience and understanding to deal with the procedural issues relating to emerging profession of valuers, calls for a lenient view. The Authority, in exercise of powers conferred under section 458 of the Companies Act, 2013 read with rule 17 of the Companies (Registered Valuers and Valuation) Rules, 2017 hereby warns the PVAI-VPO that it should be extremely careful, diligent and take effective steps to improve the process of enrolling the members, providing educational course and certificate thereof as also recommending the applications to the IBBI for registration as valuers in accordance with the Companies (Registered Valuers and Valuation) Rules, 2017 - SCN disposed off.
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Securities / SEBI
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2021 (1) TMI 761
Fraud by the company - Liability of directors - Concealing and suppressing the material facts as in violation of the provisions of Section 12A of SEBI Act - Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market - WTM directing the company to take steps for refund of the money from Banco and also debarred the appellant from accessing the securities market for a period of 5 years - HELD THAT:- The submissions so made are beyond the pleadings and cannot be taken into consideration. The respondent cannot be allowed to better their case and rely upon such documents which are not part of the record. There is no finding that the appellant, being a director for more than 10 years, was deemed to be involved in the day-to-day affairs and management of the Company nor there is any finding that the appellant was chairman of various committees and therefore deemed to be involved in the day-to-day affairs of the Company. There is no finding that the credit agreement and the charge account agreement were in the knowledge of the appellant. On the other hand, it is the consistent case of the appellant that he was a practicing chartered accountant and a non-executive independent director and was only involved in policy decisions. These facts have not been disputed nor controvert by any documentary evidence before the WTM. Reliance of section 27 of the SEBI Act is patently erroneous. Section 27 is not applicable if the offence is committed without the knowledge of the incumbent. We have already held that there is no finding given by the WTM that the appellant was involved in the day-to-day affairs and management of the Company. On the other hand, a specific case was stated by the appellant that the fraud was committed by the mastermind, namelyly, the chairman, managing director and the authorized signatory/director Mr. Rajinder Singh Negi and that he had no knowledge of the violation committed by the masterminds of the PFUTP Regulations. This fact has not been denied by the respondent. In our view Section 27 of the SEBI Act has no application. The impugned order insofar as it relates to the appellant cannot be sustained and is quashed.
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Insolvency & Bankruptcy
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2021 (1) TMI 760
Maintainability of appeal - time limitation - claim filed by ex-employee of the Corporate Debtor/ORG Informatics Ltd. for recovery of arrears - time barred debts or not - HELD THAT:- It is clear that the writers of law were conscious that there could be situation where time-barred debts are claimed before the IRP/RP. In the present matter, it does not appear that before the IRP/RP claim was filed. At the stage of Liquidation, the Appellant suddenly woke up to make a claim of salary of 2012, without showing as to how it is within limitation - it does not appear that the Adjudicating Authority erred in rejecting the Application of the Appellant. Appeal dismissed.
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2021 (1) TMI 759
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditor under section 9 of I B Code - whether the pre-existence of dispute shall be seen from the date of the first demand notice dated 2nd December 2017 or the second demand notice dated 23rd August, 2018? - HELD THAT:- From the decision of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [ 2017 (9) TMI 1270 - SUPREME COURT] it is clear that the existence of the dispute must be pre-existing i.e., it must exist before the receipt of the demand notice or invoice. Section 9 of the IBC makes it very clear for the Adjudicating Authority to admit the application if no notice of dispute is received by the Operational Creditor and there is no record of the dispute in the information utility. In the absence of any existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid Operational Debt . Consequently, the application cannot be rejected under section 9 and is required to be admitted. It is apparent from the records that the Corporate Debtor had not raised any objection pertaining to the work performed by the Operational Creditor prior to the first demand notice dated 2nd December, 2017. It was on 13th December, 2017 when the Corporate Debtor responded for the first time in its reply to the notice issued by the Operational Creditor under Section 8(1) of I B Code - It is noted that a large number of email communications has been made by the Operational Creditor and not even a single response was made by the Corporate Debtor raising such disputes. It is apparent from the records placed before this tribunal that Corporate Debtor have sent a legal notice on 13th March, 2018 setting out several preexisting disputes as to quality of work and delay in completion of work and also raised a counter claim against the Operational Creditor. The Corporate Debtor also sent a notice invoking arbitration on 10th April, 2018. These issues were raised after the issuance of the first demand notice. Thus there were no disputes existing prior to the issuance of first demand notice - The arbitration notice was sent after the issuance of the first demand notice but prior to the issuance of second demand notice when the Operational Creditor was busy in removing the defects in its first petition. This exhibits that the intention of the Appellant behind this was to misuse the provisions under the Code and to intentionally delaying the process of law. There were no objections raised in relation to quality of work prior to the issuance of first demand notice and the work done by the Operational Creditor was in fact certified by the architect appointed by the Corporate Debtor. Moreover, the Municipal Corporation in September, 2016 issued Occupation Certificate to the Appellant. If there were any discrepancies, the appellant could not have obtained Occupation Certificate from municipality. This also shows that all the defects pointed out by the architect have been timely rectified within the appropriate time, so that the Municipal Corporation found it appropriate to issue the Occupation Certificate. There was no dispute existing prior to the first demand notice and only disputes raised prior to the first demand notice are relevant to determine its pre-existence and disputes raised thereafter are totally irrelevant for the same - Also the arbitration was invoked after the first demand notice. Thus the Adjudicating Authority have rightly concluded that there was no dispute existing prior to the demand notice issued under section 8 of I B Code. Thus, there is no reason for interference with the impugned order passed by the Adjudicating Authority - appeal dismissed.
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2021 (1) TMI 758
Dissolution of the Corporate Debtor - section 54 of the IBC, 2016 and under Regulation 38(1) of IBBI (Liquidation Process) Regulations, 2016 - HELD THAT:- The liquidator filed compliance affidavit confirming that after depositing the entire available amount in the liquidation account, the net balance of ₹ 35,987.67/- is left in the company's liquidation account towards remaining/provisional liquidation expenses of the liquidator till dissolution of the corporate debtor and after payment of the said amount, NIL balance will be available with the liquidator who undertakes to submit the details of all the expenses after dissolution to IBBI and to the Hon'ble Adjudicating Authority and close the account after depositing the balance, if any remaining with the liquidator in the liquidation bank account - Further in pursuance of Regulation 46 (5), the liquidator, has again submitted the details of undistributed amount along with the details of deposits made into the Corporate Liquidation Account in Form -I with IBBI, a copy of which is enclosed as Annexure V (Diary No. 982 dated 5-2-2020) and also as Annexure A-3 (Dy. No. 00659 dated 31-7-2020). Thus, it is established that due process of Liquidation, as per extant provisions, was followed by the Liquidator to liquidate the assets of Company and the realized amounts were also distributed to the respective claimants. Therefore, the liquidation process was deemed to have been completed under Chapter III of Part II of Code, and thus it would be just and appropriate for the Adjudicating Authority to dissolve the Company, by directing the Liquidator to close the Liquidation Account and other accounts of the Company, on receipt of this order. No party is going to be affected by dissolving the company. M/s. Tirupati Ceremics Limted, the Corporate Debtor, is hereby dissolved with immediate effect - application disposed off.
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2021 (1) TMI 757
Allegation of disobedience of order filed against officials/employees of the Corporate Debtor - section 19(2) read with Section 34(3) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It appears that the matter requires a detailed hearing for an overall view of the situation. Therefore, we are giving them further time for a detailed hearing, before taking any coercive steps in this matter. Hence, list the matter on 14/10/2020. In the meantime, the parties are directed to complete their pleadings by exchanging affidavit-in-reply and rejoinder without fail. The Registry is directed to send e-mail copies of the order forthwith to all the parties inclusive of the Counsel.
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2021 (1) TMI 756
Undertaking of assignment by IP without holding a valid Authorisation for Assignment (AFA) - contraventions of sections 208(2)(a) and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016 (Code), regulations 7(2)(a), 7(2)(h) and 7A of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) read with clauses 1, 2, 11, 12 and 14 of the Code of Conduct contained in the First Schedule of the IP Regulations - HELD THAT:- It is clear from Regulation 7A of IP regulations that one of the essential conditions for undertaking any assignment by an IP is that he should have a valid AFA which is issued by the IPA with which he is enrolled. In other words, without AFA, an IP is not eligible to undertake assignments or conduct various processes thereof. Regulation 7A was inserted in the IP Regulations vide notification dated 23rd July 2019, much before 31st December, 2019. Adequate time was given to the professionals to obtain AFA from respective IPAs - The bye laws of ICSI Institute of Insolvency Professionals defines in para 4(1)(aa) the expression authorisation for assignment as an authorisation to undertake an assignment, issued by an insolvency professional agency to an insolvency professional, who is its professional member, in accordance with IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016. An application for grant of AFA can be made to the IPA under para 12A of said bye-laws. The credibility of the processes under the Code depends upon the observance of the Code of conduct by the IRP/RP/Liquidator during the process. Section 208(2) of the Code provides that every IP shall take reasonable care and diligence while performing his duties and to perform his functions in such manner and subject to such conditions as may be specified. Further, the Code of Conduct specified in the First Schedule of the IP regulations enumerates a list of code of conduct for insolvency professionals including maintaining of integrity and professional competence for rendering professional service, representation of correct facts and correcting misapprehension, not to conceal material information and not to act with mala fide or with negligence. In the present matter it is observed that, Mr. Rajagopal had provided his consent to accept the assignment in Form-2 to Indian Overseas Bank on 1-3-2019 prior to the amendment made to IP regulation for CIRP of Coastal Energy Private Limited, before 31st December, 2019. However, it is observed that the date of commencement of the CIRP is 6-1-2020 and the Regulation 7A of IP regulations clearly and unambiguously states that an insolvency professional shall not accept or undertake an assignment after 31st December, 2019 unless he holds a valid AFA. In consequence, he has contravened code of conduct under section 208(2)(a) and(e) of the Code and regulations 7(2)(a) and (h), 7A of the IP Regulations read with clauses 1, 2, 11, 12 and 14 of the Code of Conduct contained in the First Schedule of the IP Regulations - DC finds that an SCN dated 24-7-2020 was issued by IPA also and order has been passed against Mr. Rajagopal on 7-9-2020 by the Disciplinary Committee of IPA for accepting assignment as IRP after 31st December, 2019 without holding a valid AFA in the matter of Coastal Energy Private Limited, and warned him to be extremely careful, diligent, strictly act as per law and similar action should not be repeated. In view of the fact that ICSI Institute of Insolvency Professionals has already taken disciplinary action against Mr. S Rajagopal, for accepting assignment as IRP after 31st December, 2019 without holding a valid AFA in the matter of Coastal Energy Private Limited and had issued a warning, the DC, in exercise of the powers conferred under Regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, disposes of the SCN without any direction against Mr. S Rajagopal - SCN disposed off.
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2021 (1) TMI 755
Accepting the assignment in the capacity of Insolvency Resolution Professional (IRP) without holding a valid Authorisation for Assignment (AFA) from his IPA - contraventions of sections 208(2)(a) (e) of the Insolvency and Bankruptcy Code, 2016 (Code), regulations 7(2)(a) (h) and 7A of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) read with clauses 1, 2, 11, 12 and 14 of the Code of Conduct contained in the First Schedule of the IP Regulations - HELD THAT:- It is clear from Regulation 7A of IP regulations that one of the essential conditions for undertaking any assignment by an IP is that he should have a valid AFA which is issued by the IPA with which he is enrolled. In other words, without AFA, an IP is not eligible to undertake assignments or conduct various processes thereof after 31st December, 2019. Regulation 7A was inserted in the IP Regulations vide notification dated 23rd July, 2019, much before 31st December, 2019. The same was widely publicized in various programmes. Adequate time was given to the professionals to obtain AFA from respective IPAs. This information was made available on the websites of the IBBI as well as the IPAs. The bye-laws of ICSI Institute of Insolvency Professionals defines in para 4(1)(aa) the expression authorisation for assignment as an authorisation to undertake an assignment, issued by an insolvency professional agency to an insolvency professional, who is its professional member, in accordance with its bye-laws regulation. An application for grant of AFA can be made to the IPA under para 12A of said bye-laws. Every professional member of the IPA with which he is enrolled should keep himself abreast with new professional developments - The credibility of the processes under the Code depends upon the observance of the Code of conduct by the IRP/RP during the process. Section 208(2) of the Code casts an obligation to abide by the code of conduct, take reasonable care and diligence while performing his duties and comply with all requirements and terms and conditions specified in the byelaws of the insolvency professional agency of which he is a member. The Code of Conduct specified in the First Schedule of the IP regulations enumerates a list of code of conduct for insolvency professionals including maintaining of integrity and professional competence for rendering professional service, representation of correct facts and correcting misapprehension, not to conceal material information and not to act with mala fide or with negligence. In the present matter, the DC notes that Mr. Joshi accepted the assignment of CIRPs in matter of Indian M/s Govindam Metals and Alloys Private Limited on 30th September, 2019 and M/s Rajit Rolling Mills Private Limited on 8th November, 2019, which is evident from the consent form (Form 2) submitted along with the application for initiating CIRPs. However, due to administrative issues, the CIRPs commenced after 31st December, 2019, viz., 17th January, 2020 and 25th February, 2020. It is also noted that he is more than 70 years of age, is ineligible to apply for AFA and does not intend to take further assignments under the Code - DC finds that an order has been passed against Mr. Joshi on 7th September, 2020 by the Disciplinary Committee of IPA with respect to the issue raised in this SCN, i.e., accepting assignment as an Interim Resolution Professional after 31st December, 2019. The Disciplinary Committee of IPA has issued warning to Mr. Joshi in view of the fact that the date of commencement of the CIRPs is after 31st December, 2019 but the acceptance for the assignments has been given by Mr. Joshi prior to 31st December, 2019. In view of the fact that Mr. Arun Rajabhau Joshi being more than 70 years of age is ineligible to apply for AFA under the Code and that Disciplinary Committee of ICSI Institute of Insolvency Professionals has already taken disciplinary action against Mr Joshi with regard to the issue of undertaking assignments without holding valid AFA, the DC, in exercise of the powers conferred under Regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, disposes of the SCN without any direction against Mr. Arun Rajabhau Joshi - SCN disposed off.
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Service Tax
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2021 (1) TMI 754
CENVAT Credit - input services - services provided by the Insurance Corporation for insuring the deposits of public with the banks - HELD THAT:- This very same issue was referred to Larger Bench and vide order in the case of M/s. South Indian Bank (supra) dated 20.03.2020 [ 2020 (6) TMI 278 - CESTAT BANGALORE ] , the Larger Bench of the Tribunal had held that credit is eligible on the service tax paid on such premiums. The learned AR has relied upon the decision of CESTAT Bench at Mumbai in the case of M/s. Bank of America [ 2020 (11) TMI 582 - CESTAT MUMBAI ]. The very same issue has again been referred to the Hon ble President to resolve the issue by constituting a Larger Bench. The reason for such reference and doubting of the order rendered by the Larger Bench is that the decision rendered by the Hon ble Apex Court in Dilip Kumar Co. [ 2018 (7) TMI 1826 - SUPREME COURT ] was not considered by the Larger Bench and therefore the Larger Bench decision is per incuriam. When the issue has been decided by Larger Bench, judicial discipline binds us to follow the same - Further, the judgement in Dilip Kumar Co. [ 2018 (7) TMI 1826 - SUPREME COURT ] is with regard to interpretation of exemption notifications and would not be relevant for application to the issue under consideration which is the eligibility of Cenvat Credit. Application of judicial discipline is necessary to give uniformity certainty decisions. Thus, we are bound to follow the decision of the Larger Bench which is placed before us. Appeal allowed - decided in favor of appellant.
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Central Excise
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2021 (1) TMI 753
Recovery of erroneous refund - Section 11A of the Central Excise Act, 1944 along with interest - Education and Higher Education cess were interpreted as exempt by petitioners in view of available exemption under notification dated 25.04.2000 - petitioner has questioned the very jurisdiction of the Assistant Commissioner to raise a demand for recovery of the refund already released - HELD THAT:- Section 11A makes a distinction between the cases of duty of excise not having been levied, paid or short levied or short paid or erroneously refunded for the reason of fraud, collusion or any misstatement or suppression of facts or contravention of the provisions of the Act or the rules with intent to evade payment of duty and in cases where none of these elements is present. Under sub-section 1 of Section 11A when any such duty of excise has not been levied, paid or short levied or short paid or erroneously refunded for reasons other than fraud, collusion etc. the Central Excise Officer would within 2 years from the relevant date serve a notice on the person chargeable to the duty calling upon him to show cause why the amount specified in the notice along with interest not be recovered. Sub-section 1 of Section 11A thus authorizes the Central Excise Officer to recover any duty of excise, besides others, which has been erroneously refunded. It is in this context that the term erroneously refunded assumes significance. When the Excise Officer passed the order of refund, he was applying the law laid down by the Supreme Court which by virtue of Article 142 of the Constitution is the law of the land. He had no other choice but to follow the decision of the Supreme Court in case of M/S. SRD NUTRIENTS PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE GUWAHATI [ 2017 (11) TMI 655 - SUPREME COURT] . Any other action on his part would be wholly illegal. His order of refund thus was in consonance with the law declared by the Supreme Court at the time when he was passing the order. In our view any subsequent change in the legal position, would not permit him to invoke the powers under Section 11A of the Central Excise Act. As is well settled, all legal proceedings on the date when they are being decided by any Court, would be governed by the law laid down by the Supreme Court which prevails on such date. As is often happens, a decision of the Supreme Court is reviewed, reconsidered or overruled by larger Bench. Such subsequent decision would undoubtedly clarify the position in law and such declaration would undisputedly apply to all pending proceedings, the proceedings which are closed in the meantime , cannot be reopened on the basis of subsequent declaration of law by the Supreme Court - Any other view would lead to total anarchy. Based on the judgment of the Supreme Court several proceedings would have been decided. If years later such view is reversed, the parties who had not carried the proceedings in higher forum and thus not kept the proceedings alive, cannot trigger a fresh look at the decision already rendered by the competent court on the basis of the previous judgment of the Supreme Court which was correctly applied at the relevant time. If the department was aggrieved by the refund order passed by the Assistant Commissioner, it was open for the department to file appeal against such order as is provided in Section 35 of the Central Excise Act, 1944. It is well settled that under section 35 even the department can be stated to the person aggrieved against an order that the competent authority may pass. Thus the order of assessing officer is open to challenge at the hands of the department under Central Excise Act unlike in case of Income Tax Act, 1961 where the assessing officer s order of assessment cannot be appealed against by the department and a limited review is available under Section 263 of the Income Tax Act, 1961 - Section 11A of the Central Excise Act does not authorize the Assistant Commissioner to revise or review his own order. In the show cause notice effectively what he proposes to do is revise and recall his own order on the ground that the law that he applied when he passed order of refund, has since been changed. This in our opinion is wholly impermissible. The impugned show cause notice issued by the Assistant Commissioner of Central Goods Service Tax, Agartala is set aside - Petition allowed.
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2021 (1) TMI 752
Violation of principles of Natural Justice - Clandestine removal - relied upon documents were not supplied within 30 days in violation of Rule 24A of Central Excise Rules, 2002 - whether the impugned order needs to be set aside on the premise that there has been gross violation of the principles of natural justice or if such violations or defects in the impugned order are curable?. Violation of principles of Natural Justice or not - HELD THAT:- The very fact that personal hearing was fixed 4 times, in a span of about 2 months, even when the adjudicating authority was aware that the appellants did not receive all the documents, is itself a proof that principles of natural justice were not followed - A huge case of evasion of 64 Cr by 4-5 units, involving a number of searches, number of statements recorded and humungous number of documents recovered definitely calls for a more careful and responsible handling by the department in adhering to rules instructions and provisions of law. It is very easy to brush aside the claims of the appellant as delaying tactics. Understandably, the charged appellants would see their interest in getting things delayed. However, department should have taken commensurate steps so that the appellants could not raise such a claim in the first instance. Understandably, replying to such a big case takes some time after receiving the records and to this extent the appellants are within their rights. We find that the revenue erred seriously in sleeping over one year, in rushing through the motions thereafter through a period of mere 2-3 months, in fixing personal hearing on 4 dates while correspondence for handing over documents is going on etc. Consequentially, the fact remains that the appellants were not provided with the RUDs/ Non-RUDs completely or in even time; the appellants were denied a right that was available to them as per Rule 24A of Central Excise Rules, 2002 and CBEC instructions contained in Circular No. 171/5/96-CX.6 dated 02/02/1996, Instruction No. 207/09 /2006-CX.6 and Circular No. 42/88-CX.6 dated 24/05/1988. Therefore, we find that they were not given opportunity to represent themselves - thus, this is a clear case of not following principles of natural justice. Whether the impugned order needs to be set aside on the premise that there has been gross violation of the principles of natural justice or if such violations or defects in the impugned order are curable? - HELD THAT:- It is found that while the learned counsel for the appellants requests for setting aside the order and allowing the appeals; learned Authorised Representative, while not accepting that there has been any such violation, submits that in case the bench finds that the principles of natural justice have been violated, the next course would be remand of case to the authorities. It is found that even in the cases relied upon by the appellants, the appeals were allowed only by way of Remand. We find, as per our discussion above, that the department did not properly adhere to the procedures in a case involving alleged evasion of 64 Cr of duty; the proceedings were rushed through after lying low for about a year of issuance of SCN, even though the adjudicating authority was aware that efforts were on for obtaining the records seized. We find that the appellants were not provided the non-relied upon documents and thus were denied an opportunity to file a written reply to their satisfaction and to represent themselves during the personal hearing. However, we find that the lapse on the part of the Revenue is a curable defect. The appellants were not provided the non-relied upon documents and thus were denied an opportunity to file a written reply to their satisfaction and to represent themselves during the personal hearing. However, we find that the lapse on the part of the Revenue is a curable defect. In the interest of Justice, reasonable opportunity needs to be given to the Revenue to cure the defect and to conduct the adjudication adhering to the principles of natural Justice. Such an opportunity is only possible when the case is remanded back to the adjudicating authority so that the defects are cured and rectified and an opportunity is given to the respondents to file a reply and to attend the personal hearing. Tribunal cannot set aside the order for curable defects and more so when huge evasion of duty is alleged. It is pertinent to note that neither the Appellants and nor the Department have submitted anything in their defence as far as the merits of the case are concerned. Under the circumstances, we find that it would be travesty of justice if the Tribunal decides the matter on merits. The only course, available is to send the case back to the adjudicating authority for passing the order after curing the defects i.e. after observing principles of natural justice in letter and spirit. The appeals are allowed by way of remand to the adjudicating authority for de novo consideration after observing the principles of natural justice - The concerned authorities are directed to make available documents/copies, a request for which is already made, to the appellants, within 4 weeks of receipt of this order.
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2021 (1) TMI 751
CENVAT Credit - capital goods - certain items viz. HR coils, MS angles, MS channels, MS plates, etc. - HELD THAT:- The Assistant Commissioner passed the Order-in-Original on 18/03/2019 but the same was not actually delivered to the appellant. The appellant only came to know on 12/03/2020 when they received a letter from the Superintendent informing them about the passing of the Order-in-Original and ordered to recover the credit of ₹ 15,52,986/- along with interest and penalties. Thereafter the appellant vide their letter dt. 16/03/2020 informed the Superintendent that they have not received the Order-in-Original and requested him to provide the certified copy of the said Order-in-Original and the appellant also requested the Department to provide the proof of service of the said order on them; but the Superintendent vide his email dt. 17/03/2020 only provided scanned copy of the Order-in-Original but did not provide any proof of service of the said Order-in-Original on the appellant. Since the Department has failed to prove the delivery of the Order-in-Original on the appellant, the date on which the appellant has actually received the scanned copy will be considered as the actual receipt and from that date, the appeal filed before Commissioner (Appeals) was within time. This issue has been considered in various decisions and it has been consistently held that the Department has to give proof of actual receipt of the order by the assessee and in the absence thereof, the date of obtaining copy of the order by the appellant will be considered as the date of receipt of the order. The impugned order dismissing the appeal on time bar is not sustainable in law - Case remanded to the Commissioner (Appeals) with a direction to decide the appeal on merits - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2021 (1) TMI 750
Recovery of VAT from the purchaser of property in Auction - Attachment of mortgaged properties - first charge of the Bank over the properties mortgaged with the Petitioners - recovery of sales tax dues from the assets of the defaulter by State Government - SARFAESI Act - HELD THAT:- The issue raised in this writ application is no longer res integra in view of the judgement of this Court in the case of Kalupur Commercial Cooperative Bank Limited vs. State of Gujarat [2019 (9) TMI 1018 - GUJARAT HIGH COURT] . It is now well settled that in view of Section 26E of the SARFAESI Act, 2002, the State cannot claim any first priority or precedence over the property in question on the strength of Section 48 of the Gujarat Value Added Tax Act, 2003. The security interest over the property was created in favour of the Bank much before the dues of M/s. Krishna Industries came to be determined under the VAT Act. It is hereby declared that the respondent No.2 had the first charge over the property mortgaged by M/s. Krisha Industries by virtue of Section 26E of the SARFAESI Act, and in such circumstances, they were entitled in law to put the property to auction. The writ applicants, being the auction purchasers, have a right to get their names mutated in the record of rights as the true and lawful owners of the property. In such circumstances, the Sub-Registrar of the Bhavnagar district is directed to register the document of sale deed executed between the Bank and the writ applicants. Once the sale deed is registered, it shall be open for the writ applicants to thereafter get their names mutated in the record of right - Application allowed.
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2021 (1) TMI 749
Maintainability of appeal - appeal dismissed on the ground of non-payment of 20 % of the total dues towards pre-deposit as provided under Section 74 of the Act, 2003 - HELD THAT:- No error not to speak of any error of law could be said to have been committed by the Tribunal in passing the impugned order. No case is made out to interfere on any of the grounds raised in this writ application. With a view to give one chance to the writ applicants, we inquired with Mr. Gandhi, the learned counsel appearing for the writ applicants, whether his clients would be in a position to furnish some tangible security in lieu of deposit of 20 % of the total tax dues. However, Mr. Gandhi submitted that his clients are not in a position to offer any tangible security of any nature. Application dismissed.
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