Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 23, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
GST
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Profiteering - restaurant service supplied by the Respondent - allegation that the reduction in the rate of tax not passed on by way of commensurate reduction in price - the Respondent has been dealing with a total of 137 items during the period from 15.11.2017 to 30.06.2019. The DGAP has reported that the GST rate of 5% has been charged w.e.f. 15.11.2017 however the base prices of 133 products have been increased more than their commensurate prices w.e.f. 15.11.2017 which establishes that because of the increase in the base prices the cum-tax prices paid by the consumers were not fixed commensurately, despite the reduction in the GST rate. - Allegation proved - NAPA
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Levy of GST - Reverse Charge Mechanism - salary paid to Director of the company who is paid salary as per employment contract, after deduction of TDS as well as PF - situation if the Director also is a part time Director in other company also - the part of Director’s remuneration which are declared as Salaries in the books of the appellant and subjected to TDS under Section 192 of the IT Act, are not taxable being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017. The part of employee Director’s remuneration which is declared separately other than “salaries” in the appellant’s accounts and subjected to TDS under Section 194J of the IT Act as Fees for professional or Technical Services shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and is therefore, taxable under GST - AAAR
Income Tax
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Addition u/s 40A(2) - remuneration paid to the Managing Director nearly 90% of the returned income of the assessee company - CIT (Appeals) as well as the Tribunal have completely failed to establish that no material was produced by the assessee to demonstrate that the Managing Director had secured the business of the company from Italy and other European countries. The provisions of Section 40A(2) which are applicable to the fact situation of the case have also not been taken into account by the CIT (Appeals) as well as the tribunal. - HC
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Reopening of assessment u/s 147 - Claim of deduction made u/s 10A and 10B - the applicability of Clauses (ii) and (iii) of Sub Clause (2) to Section 10B of the Act, the impugned order passed by the Income Tax Appellate Tribunal is proper. As the assessee Company would be entitled to deduction under Section 10A and disallowance made by the Assessing Officer was not correct. Since the order passed under Section 263 itself has been set aside, the cause of action for re-assessment does not survive. - HC
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Disallowance on additional deprecation claimed as plant and machinery other than milk can equipments - The extra depreciation allowable u/s 32{1) (iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage. The so earned incentive must be made available in the subsequent year. The overall deduction of depreciation u/s 32 shall definitely not exceed the total cost of plant machinery. In view of this matter, we set aside the orders of the authorities below and direct to extend the benefit.- AT
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TDS u/s 194A - Associate Members of Co-operative Society - the assessee is able to collect deposit from them and also lend the money to them. Hence, we are of the view that the associate members should be construed as “members” only for the purpose of sec.194A since the definition of the term “member” should be construed as given in sec. 2(f) of the Karnataka Co-operative Societies Act, 1959. - AT
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Addition u/s 68 - Cash deposits of special Bank notes of ₹ 500/- and ₹ 1000/- made during the demonetization period - in the peculiar facts narrated above, including the past history taken note of and the pattern of money deposited pre-demonetization and post that event as discussed, addition was not warranted and it is directed to be deleted - AT
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Disallowance of wage arrears u/s 40a(ia) - contingent liability or not - non deduction of TDS - assessee created an adhoc provision for wage arrears - Liability has been provided in books of accounts when it was accrued for the impugned assessment years for the services rendered and hence the same cannot be considered as contingent in nature or unascertained liability, merely for the reason that the said liability was quantified and paid in subsequent financial years - No additions - AT
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Rectification u/s 254 - Both CBDT Circular no. 23 of 2019 and special order dated 16.09.2019 were not in existence and thus not part of the record at the time when the matter was heard on 20.08.2019 or at the time of passing of order by the Tribunal on 22.08.2019 and therefore, non-consideration of subsequent CBDT Circular and the special order so passed by the CBDT is not a mistake apparent from record which can be rectified within the narrow compass of section 254(2) of the Act. - AT
Customs
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Refund of Rubber Cess - The appellate tribunal, on its own, should have looked into the matter on its own merits. For the purpose of considering the case-law referred to in the impugned order, the matter should not have been remanded. - HC
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Confiscation of goods - For the period from 14.08.2018 to 06.02.2019, respondent No. 1 is under a legal obligation not to charge any rent or demurrage on the goods of the petitioner or on the container in which the goods have been stored and kept under its custody. Following the certificate dated 31.01.2019, it was also under a legal obligation to release the goods kept under its custody on or before 06.02.2019 to enable the petitioner to re-export the goods. Failure to do so has not only caused prejudice to the petitioner but would also disentitle respondent No. 1 from claiming any rent and demurrage for the period beyond 06.02.2019 till release of the goods because such retention of goods would be clearly unlawful being in violation of Regulation 6(1)(l) of the Regulations and the public notice dated 02.03.2010. - HC
Corporate Law
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Validity of de-activation of the Director Identification Number (DIN) - The writ petition for challenge to the de-activation of the Director Identification Number is allowed. It was de-activated on account of dis-qualification in one company effecting Director Identification Number for the other companies. The opposite parties are directed to activate the Director Identification Number for use for other company. - HC
Indian Laws
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Dishonor of Cheque - insufficiency of funds - The Court below has materially erred in not properly appreciating and considering the presumption in favour of complainant-appellant herein that there exists a legally enforceable subsisting debt or liability as per Section 139 of the Act. Further, it is relevant to note here that the trial Court has committed a serious error in shifting the burden of proof to prove the debt or liability and the existence of a debt without appreciating the mandate of legislation as laid down in Section 139 of the Act. Section 139 of the Act is an example of reverse onus clause and therefore once issuance of cheque has been admitted and signature on the cheque has been admitted and in this case transaction of loan is also admitted. There is always a presumption in favour of appellant-complainant - HC
IBC
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Initiation of CIRP - The existence of debt and default is established and no winding up proceedings against the appellant and appellant is not covered by the ineligibilities provided under Section 11 of the I&B Code. However, the adjudicating authority has rejected the application on extraneous grounds. Therefore, the impugned order is set aside. - AT
Case Laws:
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GST
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2021 (1) TMI 849
Levy of GST - Reverse Charge Mechanism - salary paid to Director of the company who is paid salary as per employment contract, after deduction of TDS as well as PF - situation if the Director also is a part time Director in other company also - Challenge to AAR decision - HELD THAT:- The Rajasthan Authority for Advance Ruling (AAR) in IN RE: M/S. CLAY CRAFT INDIA PVT. LTD., [ 2020 (4) TMI 228 - AUTHORITY FOR ADVANCE RULING RAJASTHAN] pronounced that the consideration paid to the Directors by the applicant company will attract GST under reverse charge mechanism and the situation will remain the same if the director is also a part time director in another company. The CBIC has recently issued a Circular No. 140/10/2020 - GST dated 10.06.2020 under File No. CBEC-20/10/05/2020 -GST and clarified the issue in appeal. It has been clarified that (i) remuneration paid by companies to the independent directors or those directors who are not the employee of the said company is taxable in hands of the company, on reverse charge basis; and (ii) the part of Director s remuneration which are declared as Salaries in the books of a company and subjected to TDS under Section 192 of the IT Act, are not taxable being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017 - it is further clarified that the part of employee Director s remuneration which is declared separately other than salaries in the Company s accounts and subjected to TDS under Section 194J of the IT Act as Fees for professional or Technical Services shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and is therefore, taxable. Further, in terms of notification No. 13/2017 - Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis. The remuneration, if any, paid by the appellant to the independent directors or those directors who are not the employee of the appellant is taxable in hands of the appellant, on reverse charge basis. Further, the part of Director s remuneration which are declared as Salaries in the books of the appellant and subjected to TDS under Section 192 of the IT Act, are not taxable being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017. The part of employee Director s remuneration which is declared separately other than salaries in the appellant s accounts and subjected to TDS under Section 194J of the IT Act as Fees for professional or Technical Services shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and is therefore, taxable and in terms of notification No. 13/2017 - Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the appellant, is liable to discharge the applicable GST on it on reverse charge basis.
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2021 (1) TMI 848
Validity of restriction imposed under amended Rule 89(5) of the Central Goods and Services Tax Rules, 2017 vide para 2(i) of the Notification No.21/2018-Central Tax dated 18.4.2018 - ultra vires to the Section 54(3) of the Central Goods and Services Tax Act, 2017 or not - refund claim of the credit availed on input services - HELD THAT:- Since vires of Rule 89(5) of the Central Goods and Services Tax Rules, 2017 and Uttar Pradesh Goods and Services Tax Rules, 2017 has been challenged, let the notices be issued to the Attorney General of India and the Advocate General of the State. Let the case be listed in the week commencing 8.3.2021 in the additional cause list. When the case is next listed the name of Shri Sanjay Kumar Om be shown as counsel for the respondent no.1.
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2021 (1) TMI 847
Validity of notice (DRC-3) for reversal of Input Tax Credit - attachment of Bank accounts of petitioner - seeking return of the original documents seized under Section 67(2) of CGST Act - HELD THAT:- This writ petition is dismissed as withdrawn, (i) granting liberty to the petitioner to, on or before 22nd January, 2021 prefer objections under Rule 159(5) supra and directing the Commissioner to dispose of the said objections by an order in writing, on or before 22nd February, 2021; and, (ii) by directing the petitioner to, in response to the summons already issued to the petitioner and mentioned in the short affidavits (two in number) filed by the respondent no.2, along with its objections under Rule 159(5), submit the requisite information/documents, and binding the Managing Director of the petitioner to, appear before the Commissioner in Rule 159(5) proceedings on whatever date is given along with all further information, if any, sought and by clarifying that if the petitioner and/or its Managing Director default, the Commissioner in the order to be passed under Rule 159(5) supra to give particulars thereof along with the dates and directions issued for production of further records/information and communication thereof to the petitioner/its Managing Director. The respondents cannot have any claim to further overdraft, if any, availed of by the petitioner in the overdraft account with the SBI. We thus deem it apposite to, while disposing of this petition as aforesaid, direct that while the ICICI Bank account and the SBI account with monies therein as on the date of attachment shall continue to be attached till further orders in pursuance to the objections to be filed under Rule 159(5) supra, the petitioner shall be entitled to avail of further overdraft in the SBI account and to withdraw and/or disburse by cheques or otherwise the further overdraft amount so availed of by the petitioner.
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2021 (1) TMI 846
Maintainability of petition - availability of alternate remedy of appeal - imposing liability upon the petitioner for payment of service tax along-with interest and penalties - HELD THAT:- Once the efficacious remedy is available to the petitioner then there is no reason or occasion to bypass the statutory provisions. Consequently, the present writ petition stands disposed of, asking the petitioner to prefer an appeal within one month's time from today. In case, any such appeal is preferred alongwith other statutory requirements, the same would be entertained by the appellate authority in accordance with law, ignoring the delay and latches in the matter.
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2021 (1) TMI 845
Confiscation of goods and conveyance - Section 130 of the Central Goods and Services Tax Act, 2017 and Section 130 of the Karnataka Goods and Services Tax Act, 2017 read with Section 20 of Integrated Goods and Service Tax Act, 2017 and Section 11 of the GST (Compensation to States) Act, 2017 - HELD THAT:- Taking note of the statement of learned counsel for the respondents that they would abide by the directions as contained in W.P.No.10832/2020, insofar as the procedure for taking forward the proceedings under Sections 129 and 130 are concerned, the present writ petitions could be disposed off in terms of the observations and directions made in W.P.No.10832/2020. The respondents to proceed further and consider the reply made by the petitioner insofar as notice under Section 129 and also with respect to the reply to be submitted to the show cause notice under Section 130. The respondents to also consider the further proceedings under Section 130 after reply is furnished by the petitioner in that regard. Learned counsel for the petitioner is permitted to seek for incriminatory material by addressing the representation within three days from today and said request to be considered as per law by the respondent - authority. Thereafter, within three days from such date of the respondent sharing information as requested and permissible to be shared, reply to the show cause to be furnished by the petitioner and the respondent - authority to take decision thereafter in terms of the observations made above within a period of one week thereafter. Petition disposed off.
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2021 (1) TMI 844
Profiteering - restaurant service supplied by the Respondent - allegation that the reduction in the rate of tax not passed on by way of commensurate reduction in price - contravention of section 171 of CGST Act - penalty - HELD THAT:- It is revealed from the record that the Respondent is running a restaurant as a franchisee of M/S Subway Systems India Private Limited in Maharashtra and is supplying various food products to customers. It is also revealed from the plain reading of Section 171 (1) of the CGST Act, 2017 that it deals with two situations, one relating to the passing on the benefit of reduction in the rate of tax and the second about the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the record that there has been a reduction in the rate of tax from 18% to 5% w.e.f. 15.11.2017, on the restaurant service being supplied by the Respondent, vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 without the benefit of ITC. Therefore, the Respondent is liable to pass on the benefit of tax reduction to his customers in terms of Section 171 (1) of the above Act. It is also apparent that the present investigation has been carried out w.e.f. 15.11 .2017 to 30.06.2019. It is also evident that the Respondent has been dealing with a total of 137 items during the period from 15.11.2017 to 30.06.2019. The DGAP has reported that the GST rate of 5% has been charged w.e.f. 15.11.2017 however the base prices of 133 products have been increased more than their commensurate prices w.e.f. 15.11.2017 which establishes that because of the increase in the base prices the cum-tax prices paid by the consumers were not fixed commensurately, despite the reduction in the GST rate. As per the provisions of Sec 171 (1) read with Rule 133 (1) the profiteered amount is determined as ₹ 6,85,531/- as has been computed in Annexure-15 of the DGAP s Report dated 27.12.2019. Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the above Rules. Further, since the recipients of the benefit, as determined, are not identifiable, the Respondent is directed to deposit an amount of ₹ 6,85,531/- in two equal parts of ₹ 3,42,766/- each in the Central Consumer Welfare Fund and the Maharashtra State Consumer Welfare Fund as per the provisions of Rule 133 (3) (c) of the CGST Rules 2017, along with interest payable @ 18% to be calculated from the dates on which the above amount was realized by the Respondent from his recipients till the date of its deposit. The above amount of ₹ 6,85,531/- shall be deposited, as specified above, within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned CGST/SGST Commissioners. Penalty - HELD THAT:- The Respondent has denied the benefit of GST rate reduction to the customers of his products w.e.f. 15.11.2017 to 30.06.2019, in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence under Section 171 (3A) of the CGST Act, 2017, and therefore, he is liable for imposition of penalty under the provisions of the above Section. However, a perusal of the provisions of Section 171 (3A) under which penalty has been prescribed for the above violation shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 15.11.2017 to 30.06.2019 when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, notice for the imposition of penalty is not required to be issued to the Respondent.
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Income Tax
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2021 (1) TMI 850
Addition u/s 68 - unsecured loan obtained - CIT(A) confirmed this addition on the ground that assessee has failed to prove identity, creditworthiness and genuineness of the transaction - HELD THAT:- The assessee has explained the fact that this loan was taken in the preceding year and it is only an opening balance as on 01.04.2013. This fact has not been examined by the ld. CIT(A) while confirming the addition. If the loan was introduced in the preceding year and the AO while passing the assessment order u/s. 143(3) for the AY 2013-14 has not doubted the genuineness of the loan then the same cannot be held as a bogus sundry creditor for the year under consideration. Neither the AO nor the CIT(A) has verified and consider this explanation of the assessee that this amount is only a brought forward amount and shown as opening balance and no new loan was taken from Smt. Sharda Singh during the year under consideration. Hence, this issue is remanded to the record of the ld. CIT(A) for limited purpose to verify this fact from the record whether this amount was only an opening balance and brought forward from the preceding year and then decide the issue afresh. Disallowances of expenses - assessee has failed to furnish any satisfactory explanation for the downfall of the GP and NP during the year under consideration as well as supporting evidence of the expenses - Addition confirmed by the CIT(A) to the extent of 5% as against 25% made by the Assessing Officer - HELD THAT:- From the details of the expenditure, it is noted that the expenditure under the head shop and office rent cannot be doubted as it is a recurring expenditure and the amount debited in the P L account cannot be disallowed on percentage basis. Accordingly, the disallowance of 5% as confirmed by the ld. CIT(A) on the shop and office rent is deleted. So far as the disallowance of 5% in respect of the other expenditure is concerned since, the assessee has failed to produce the supporting bills and vouchers to establish that the said expenditure has been incurred wholly and exclusively for the business purpose the 5% disallowance is reasonable and proper. Accordingly, the disallowance made by the ld. CIT(A) is restricted to the expenses other than shop and office rent.
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2021 (1) TMI 843
Claim of deduction made u/s 10A and 10B - Denial of claim on the ground that an undertaking was formed by splitting up/reconstruction of the business already in existence - Reopening of assessment u/s 147 for AY 2000-01 and 2001-02 - For the Assessment Year 2002-03, the CIT, Chennai-II, passed an order under Section 263, setting aside the issue of deduction under Section 10A and directed the Assessing Officer to decide the issue de novo - HELD THAT:- For the Assessment Year 2000-01, the assessee had filed its return of income on 29.11.2000. The assessee claimed that it was eligible for deduction under Section 10B. The return was processed on 28.03.2002. Subsequently, the Assessing Officer had reason to believe that income chargeable to tax had escaped assessment on account of the assessee Company being ineligible for deduction under Section 10A. Subsequently, a notice dated 22.03.2007 was issued under Section 148 and after giving an opportunity of hearing, the scrutiny assessment order was passed on 17.12.2007, disallowing the entire claim of deduction under Section 10B - expenditure incurred for the renovation and repairs of the rented premises of the assessee Company was disallowed by AO on the ground that such expenses were in the nature of capital expenditure. AO in his re-assessment order noted that in terms of Section 10B(ii) an undertaking in order to be eligible for deduction under Section 10B must not be formed by splitting up or reconstruction of a business already in existence. Further, the Assessing Officer held that deduction under Section 10B was not available to the assessee Company in view of the provisions of Section 10B(iii) which stipulate that eligible business is not formed by transfer to a new business of plant and machinery previously used for any purpose. AO found that the assessee had not complied with both these conditions, hence, it was not entitled to any deduction under Section 10B. In view of the judgment of the Hon'ble Division Bench of this Court [ 2019 (2) TMI 57 - MADRAS HIGH COURT] it is clear that the applicability of Clauses (ii) and (iii) of Sub Clause (2) to Section 10B of the Act, the impugned order passed by the Income Tax Appellate Tribunal is proper. As the assessee Company would be entitled to deduction under Section 10A and disallowance made by the Assessing Officer was not correct. Since the order passed under Section 263 itself has been set aside, the cause of action for re-assessment does not survive. Levy of interest under Section 234D - Scope of amendment - HELD THAT:- The amended provision shall come into force only after the commencement of the Assessment Year and cannot be applied retrospectively unless it is specifically mentioned. Therefore, the law to be applied is the law as on the date of commencement of the Assessment Year and not the change in law amended subsequent to that date. Section 234D having come into force only on 01.06.2003 (i.e.) after the commencement of the Assessment Year, interest could be levied only from 01.04.2004 (i.e.) from the Assessment Year 2004-05 and no interest under Section 234D could be chargeable prior to the Assessment Year 2004-05. Since all the three Assessment Years are prior to the Assessment Year 2004-05, the provisions of Section 234D cannot be applied. Following the judgment in Karimthuravi Tea Estate Ltd. Vs. State of Kerala [ 1965 (12) TMI 35 - SUPREME COURT] we are of the considered view that the provisions of Section 234D cannot be applied to the case of the assessee in respect of the Assessment Years 2000-01, 2001-02 and 2002-03 which are prior to the insertion of Section 234D.
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2021 (1) TMI 842
Non filling of appeal electronically within the period of limitation - prayer made by the assessee to reckoned the date of filing as on date on which the appeal was actually filed - HELD THAT:- As decided in A.A. ANTONY, SHRI K.G. SRINIVASAN, SHRI RAVI PRABAKAR case [ 2021 (1) TMI 170 - MADRAS HIGH COURT ] the substantive right of appeal should not be denied to the assessees on hand on a technical ground. However, we make it clear that this observation cannot be taken advantage by the assessees, as of now, when the procedure has been in vogue ever since the year 2016 and stood the test of time and in all probabilities, as of now, all teaching problems would have been solved. Therefore, bearing in mind the fact situation in the year 2016, we are of the view that the appeals need not have been rejected by the CIT-A on the ground that they were not e-filed within the period of limitation. Appeal filed by the Revenue is dismissed
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2021 (1) TMI 841
Addition u/s 40A(2) - remuneration paid to the Managing Director nearly 90% of the returned income of the assessee company - MD s physical presence was only 15 days in the year and when the Managing Director was not aware of the existence and termination of agreement in favour of SEL wherein huge payments were made by the assessee company - CIT-A and Tribunal deleted addition on the ground that the Managing Director is directly responsible for the business of the company an in fact, has brought the sale from Italy and other European countries and therefore, is entitled to remuneration - HELD THAT:- CIT (Appeals) as well as the Tribunal have completely failed to establish that no material was produced by the assessee to demonstrate that the Managing Director had secured the business of the company from Italy and other European countries. The provisions of Section 40A(2) which are applicable to the fact situation of the case have also not been taken into account by the CIT (Appeals) as well as the tribunal. We deem it appropriate to quash the order passed by the Commissioner of Income Tax (Appeals) and the tribunal and remit the matter to the CIT (Appeals) to decide the appeal afresh by taking into account the provisions of Section 40A(2) of the Act and the fact that the assessee had failed to adduce any material to show that the Director of the company had procured business for the company from Italy and other European countries. Decided in favour of revenue by way of remand.
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2021 (1) TMI 840
Penalty u/s 271(1)(c) - Defective notice - non specification of charge - HELD THAT:- Inappropriate words in the penalty notice has not been struck off and the notice does not specify as to under which limb of the provisions, the penalty u/s 271(1)(c) has been initiated, therefore, we are of the considered opinion that the penalty levied u/s 271(1)(c) is not sustainable and has to be deleted. Although the Ld. DR submitted that mere non-striking off of the inappropriate words will not invalidate the penalty proceedings, however, the decision of the Hon ble Karnataka High Court in the case of SSA S Emerald Meadows [ 2015 (11) TMI 1620 - KARNATAKA HIGH COURT] where the SLP filed by the Revenue has been dismissed [ 2016 (8) TMI 1145 - SC ORDER] is directly on the issue contested herein by the Assessee. Further, when the notice is not mentioning the concealment or the furnishing of inaccurate particulars, the ratio laid down by the Hon ble High Court in case of M/s. Sahara India Life Insurance Company Ltd. [ 2019 (8) TMI 409 - DELHI HIGH COURT] will be applicable in the present case. Thus, notice under Section 271(1)(c) r.w.s. 274 of the Act itself is bad in law. - Decided in favour of assessee.
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2021 (1) TMI 839
Bogus LTCG - Addition u/s 68 - exemption claimed u/s 10(38) was denied and sale proceeds of shares were considered as unexplained cash credit - CIT-A deleted the addition - HELD THAT:- Onus casted upon Ld. AO to corroborate the impugned additions by controverting the documentary evidences furnished by the assessee and by bringing on record, any cogent material to sustain those additions, could not be discharged. The whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said parties. As against this, the assessee s position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. We are of the considered opinion that the additions thus made by Ld. AO had no legs to stand and therefore, the same has rightly been deleted by Ld. CIT(A). Finding no reason to interfere in the impugned order, we dismiss the appeal.
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2021 (1) TMI 838
Addition being cash deposits in the assessee s bank account - addition u/s 68 or 69A - As argued additions were made under erroneous section, i.e., section 69A which is not applicable in the instant case and addition if at all ought to have been made u/s 68 - HELD THAT:- The total addition made on account of unexplained cash deposits in the bank account is amounting to ₹ 10,83,000. The A.O. has not even given credit to the cash withdrawals made on 10.05.2014 amounting to ₹ 2,85,000. The financials for the period 31.03.2012, 31.03.2013 and 31.03.2014 have not been properly considered by the CIT(A). CIT(A) has also not taken into account the audit report concerning assessment year 2010-2011.Therefore, in the interest of justice and equity, one more opportunity should be granted to the assessee. Accordingly, the issues raised in this appeal are restored to the files of the AO. The assessee shall cooperate with the Revenue and shall furnish the necessary details. The assessee shall not seek unnecessary adjournment. The A.O. shall pass an order after affording reasonable opportunity for hearing. Appeal filed by the assessee is allowed for statistical purposes.
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2021 (1) TMI 837
Addition u/s 68 - Cash deposits of special Bank notes of ₹ 500/- and ₹ 1000/- made during the demonetization period - According to Ld. A.R, a perusal of bank statement would reveal that there were regular bank deposits of cash and payment to the creditors (tea vendors) - HELD THAT:- As explained,the deposit of ₹ 8,75,000/- [₹ 2,00,000/-accepted by AO] cannot be said to be as result of non-genuine business receipt or a case of black money and therefore, in the peculiar facts narrated above, including the past history taken note of and the pattern of money deposited pre-demonetization and post that event as discussed, addition was not warranted and it is directed to be deleted; and further, profit embedded in ₹ 8,75,500/- need to be taxed @ 8% and it is ordered accordingly. Appeal of the assessee is partly allowed.
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2021 (1) TMI 836
Penalty u/s 271(1)(c) - defective notice u/s 274 - As argued notice does not spell out the exact charge against the assessee i.e., whether the assessee is guilty in furnishing inaccurate particulars of income or concealing particulars of income - HELD THAT:- On the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed - imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. - Decided in favour of assessee.
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2021 (1) TMI 835
Disallowance of salary and remuneration paid to one of the partners - altered and amended clause 4 and 10 of the original deed of partnership and authorized payment of interest and salary / remuneration to fulfill in accordance to the provision of Section 40(b) - HELD THAT:- Authorities below erred in disallowing the claim and misdirected themselves by looking into the clause 8 of the old partnership deed which in no way conflict with that of the subject matter discussed in clause 10 - As brought to our notice that after the supplementary deed has been executed on 10.05.1996 i.e. from AY 1997-98 till AY 2014-15, the assessee Firms expenditure on account of salary / remuneration to Smt. Sharmila Dugar has not been disallowed. On the principle of consistency also the claim which was rightly claimed should not have been disallowed. So we find force in the submission of the Ld. AR Shri S. P. Bhati that the assessee Firm has rightly claimed the salary and remuneration to its partner Smt. Sharmila Dugar at ₹ 2.50 lakhs as provided for in amended supplementary deed dated 10.05.1996 and so, I direct the AO to allow ₹ 2.50 Lakhs claimed by the assessee Firm for salary/ remuneration to Smt. Sharmila Dugar. We direct the AO to allow the claim of expenditure in respect of remuneration/salary partner Smt. Sharmila Dugar.
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2021 (1) TMI 834
Penalty u/s 271(1)(c) - Assessee failed to substantiate the details of all the assets held by him with the explainable sources and adopted Net Wealth Accretion Method to arrive at his undisclosed income - whether the charge against the assessee is concealing of particulars of income or furnishing of inaccurate particulars of income? - defective notice u/s 274 - income so declared by the assessee was accepted by the AO and assessment was completed for the aforesaid Assessment Year under section 153A - HELD THAT:- Show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee, which is based on the decisions referred to in the earlier part of this order, has to be accepted. We therefore hold that imposition of penalty in the present cases cannot be sustained - Decided in favour of assessee.
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2021 (1) TMI 833
Disallowance for depositing the employees contribution to PF ESI beyond the prescribed time limited provided in the respective Acts - employees contribution to PF and ESI are governed by the provisions of Section 43B or 36(1)(va) r.w.s. 2(24)(x) - CIT(A) has deleted the disallowances - HELD THAT:- As decided in own case Jaipur Vidyut [ 2020 (8) TMI 127 - ITAT JAIPUR ] contribution towards Provident Fund and ESI and the said issues have already been decided against the Revenue as relyig on M/S. STATE BANK OF BIKANER JAIPUR AND JAIPUR VIDYUT VITARAN NIGAM LTD. [ 2014 (5) TMI 222 - RAJASTHAN HIGH COURT ] - Decided against revenue.
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2021 (1) TMI 832
Income from other sources u/s 56 - Purchase of agricultural land situated outside 8 KM of municipal area - capital asset u/s 2(14) or agricultural land - assessee and Sh. Anil Parwal have jointly purchased this property - HELD THAT:- It is undisputed fact that there is no dispute to the fact that the land purchased by the assessee is an agricultural land outside 8 Km of municipal limits. Therefore, keeping in view the facts and circumstances of the case, we are of the view that the agricultural land purchased by the assessee is not a capital asset, therefore, provisions of Section 56(2)(vii)(b) of the Act are not applicable in the present case. Therefore, we direct the A.O. to delete the addition so made. - Decided in favour of assessee.
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2021 (1) TMI 831
TDS u/s 194A - Associate Members of Co-operative Society - assessee has not deducted tax at source from the payment of interest made on deposits - Demand u/s 201(1) 201(1A) - assessee submitted that it has paid interest to its members only and hence, as per the provisions of section 194A(3)(v) the assessee is not required to deduct TDS - AO noticed that the assessee is having two types of members, viz., Regular Members and Associate Members AND the associate members are not eligible for exemption u/s 194A(3)(v) as they are not entitled to voting rights in the general body meetings - HELD THAT:- We are concerned with the liability of the assessee for deduction of tax at source u/s 194A of the Act from the interest paid by the assessee. The assessee herein has paid interest to its associate members without deduction of tax at source. As per the definition of the term member given in sec. 2(f) of the Karnataka Co-operative Societies Act, 1959, member includes an associate member. Hence the assessee is able to collect deposit from them and also lend the money to them. Hence, we are of the view that the associate members should be construed as members only for the purpose of sec.194A since the definition of the term member should be construed as given in sec. 2(f) of the Karnataka Co-operative Societies Act, 1959. In the case of M/s The Government Employees Co-Operative Bank Limited [ 2021 (1) TMI 748 - ITAT BANGALORE] liability to deduct tax at source u/s 194A of the Act cannot be equated with the provisions of sec.80P of the Act. This view combined with the decision of Hon ble Supreme Court holding that the term members should be construed as defined in the respective co-operative societies Act would lead us to the conclusion that the associate members should be considered as included in the term members used in sec.194A(3)(v) of the Act. We notice that paragraph 3 of CBDT Circular No.9/2002 dated 11.9.2002 has been quashed by Hon ble Bombay High Court in the case of Jalagaon District Central Co-operative Bank Ltd. Vs. Union of India [ 2003 (9) TMI 56 - BOMBAY HIGH COURT] . Accordingly, we hold that the assessee is not liable to deduct tax at source from the interest payments made to Associate members as per sec.194A(3)(v) of the Act - We set aside the orders passed by Ld CIT(A) and direct the AO to delete the demand raised u/s 201(1) and 201(1A) of the Act. - Decided in favour of assessee.
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2021 (1) TMI 830
Deduction u/s 35(2AB) - in-housing Scientific Research and development expenditure of the Sipaigachhi Unit, where the DSIR does not approve of such expenditure in the Form 3CL - Whether the CIT(A) was correct in holding that in order to avail up the deduction u/s 35(2AB) irrespective of the date of recognition and the cut off date mentioned in the certificate of the prescribed authority the existence of recognition is required? - scope of amendment - HELD THAT:- The provision we note nowhere suggests or implies that R D facility should be approved from a particular date and in other words, it is nowhere suggested that date of approval only will be cut off date for eligibility of weighted deduction on the expenses incurred from that date onwards. The statute does not say that and therefore, AO erred in prescribing something which is not in the statute and thus not allowing the claim on this reason also is erroneous. It is only w.e.f 01.07.2016 with the amendment to Rule 6(7a)(b) of the Rules that the quantification of the weighted deduction u/s 35(2AB) of the Act has significance. We note that for claiming deduction u/s 35(2AB) the assessee should be engaged in manufacture of certain articles or things as stipulated in that provision. It is not in dispute that the assessee is engaged in the business to which Section 35(2AB). It is not in dispute that the assessee in this case received recognition of its R D unit at Sipaigachi vide letter dated 26.03.2013 vide page 73 of PB. In the aforesaid facts and circumstances we are of the view that the deduction u/s 35(2AB) of the Act ought to have been allowed as weighted deduction at 200% of the expenditure as claimed by the assessee. Neither the prescribed authority (Refer page 82 83 of PB) nor the AO has applied the mind as to the expenditure, actually incurred for the R D facility at Sipaigachi. Merely because the prescribed authority (DSIR) failed to send intimation in Form 3CL in respect of expenditure incurred by R D unit at Sipaigachi would not be reason enough to deprive the assessee s claim of deduction u/s 35(2AB) - Since the verification has not been done by the prescribed authority (DSIR) or the AO, we set aside the impugned order of the Ld. CIT(A) and remand this issue for the limited purpose to the file of AO to verify the actual expenditure incurred by the assessee in respect of its R D establishment at Sipaigachi - Appeal of the revenue is partly allowed.
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2021 (1) TMI 829
Disallowances u/s 80P(2)(d) - assessee has claimed exempted interest and dividend income u/s. 80P(2)(d) - HELD THAT:- As decided in own case [ 2013 (9) TMI 1114 - ITAT AHMEDABAD] The plain language of section did not speak of any such adjustment. The only requirement was that income should be received from investment in co-operative societies and co-operative banks. Since in the present case, it was undisputed fact that income claimed u/s. 80P(2)(d) was received from the investment made in co-operative societies and co-operative banks, therefore assessee was eligible for deduction u/s. 80P(2)(d) - even otherwise since assessee was having mixed funds and the interest free funds were more than investment in co-operative banks and cooperative societies no disallowance was called for from eligible deduction u/s 80P(2(d) of the Act. - Decided against revenue. Disallowance on additional deprecation claimed as plant and machinery other than milk can equipments - HELD THAT:- As decided in own case [ 2018 (6) TMI 415 - ITAT AHMEDABAD] this additional benefit is to give impetus to industrialization and the basic intention and purpose of these provisions can be reasonably and liberally held that the assessee deserves to get the benefit in full when there is no restriction in the statute lo deny the benefit of balance of 50% when the new plant and machinery were acquired and use for less than 180 days. One time benefit extended to assesses has been earned in the year of acquisition of new plant and machinery. It has been calculated @ 15% but restricted to 50% only on account of usage of these plant machinery in the year of acquisition. In section 32(1 (iia) the expression used is shall be allowed . Thus the assessee had earned the benefit as soon as he had purchased the new plant and machinery in full but it is restricted to 50% in that particular year on account of period of usages. Such restrictions cannot divest the statutory right, Law docs not prohibit that balance 50% will not be allowed in succeeding year. The extra depreciation allowable u/s 32{1) (iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage. The so earned incentive must be made available in the subsequent year. The overall deduction of depreciation u/s 32 shall definitely not exceed the total cost of plant machinery. In view of this matter, we set aside the orders of the authorities below and direct to extend the benefit. Disallowance of additional depreciation on milk equipment - CIT- A allowed claim - HELD THAT:- As decided in own case [ 2018 (6) TMI 415 - ITAT AHMEDABAD] A perusal of the order of the ld.CIT(A) would indicate that there is no distinction between the expression plant for allowing normal depreciation vis-a-vis additional depreciation on that item. The ld AO has created an artificial distinction on that ground. After going through the order of the ld.CIT(A) we are satisfied that the ld.CIT(A) has examined the issue with all possible angle, and thereafter held that depreciation is admissible to the assessee.
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2021 (1) TMI 828
Revision u/s 263 - Allowability of Corporate Social Responsibility Expenses - AO not enquired into the nature of these expenses to determine allowability of these expenses u/s. 37(1) - lack of enquiry OR Inadequate enquiry - HELD THAT:- We hold that it is not a case of lack of enquiry. The allegation is only of inadequate enquiry, which cannot be a ground for revision u/s. 263 of the Act. Thus on this ground the order passed u/s. 263 of the Act is bad in law. The AO had examined the issue and taken a possible view. In addition to the case law cited above, the direction of Pr. CIT that only expenditure incurred for the benefit of the assessee is allowable u/s. 37(1) of the Act is against the propositions of law laid down in P. BALAKRISHNAN, COMMISSIONER OF INCOME-TAX [ 1999 (10) TMI 33 - KERALA HIGH COURT] , SPINNING AND WEAVING MILLS LIMITED. [ 2004 (9) TMI 10 - RAJASTHAN HIGH COURT] , COATS VIYELLA INDIA LTD. [ 2000 (11) TMI 24 - MADRAS HIGH COURT] Applying the propositions of law laid down in the decision of the Tribunal in Bengal NRI Complex Ltd.[ 2018 (12) TMI 744 - ITAT KOLKATA] we have to hold that the expenditure incurred by the assessee to fulfil the obligations of Section 135 of Companies Act, 2013 is allowable as deduction and consequently there is no error in the order passed by the AO u/s. 143(3) of the Act much less an error which is prejudicial to the interest of the Revenue. We quash the order of the Pr. CIT passed u/s. 263 of the Act as bad in law.- Decided in favour of assessee.
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2021 (1) TMI 827
Deemed dividend addition u/s 2(22) - advances to sister concerns - HELD THAT:- AR has taken the pain to demonstrate before us that these are regular sale and purchase of goods between both the sister concerns and this amount of ₹ 10.10 cr. given by M/s. Rohit Jeweller Pvt. Ltd. to M/s. Suman Jeweller Pvt. Ltd. was in the nature of trade advance and cannot be termed as advance as envisaged u/s. 2(22)(e) of the Act. Relying on the ratio-decidendi decision of the Hon'ble Delhi High Court in CIT Vs. Creative Dyeing Printing [ 2009 (9) TMI 43 - DELHI HIGH COURT] and the ratio of the decision of Hon'ble Punjab Haryana High Court in CIT Vs. Amrik Singh [ 2015 (2) TMI 731 - PUNJAB AND HARYANA HIGH COURT] we find that on the facts discussed by the Ld. CIT(A), and noted by us, we agree that the advance given by M/s. Rohit Jeweller to M/s. Suman Jeweller is trade advance in the normal course of business/commercial activity which happened due to business expediency and so the facts of the assessee's case falls in the exemption given in the CBDT circular No. 19/2017 (supra) and the ratio of case law discussed therein. - Decided against revenue.
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2021 (1) TMI 826
Revision u/s 263 - Error in allowing set off of loss - HELD THAT:- The total loss of the assessee for A.Y. 2009-10 was determined in the assessment completed under section 143(3)/147 at ₹ 10,67,21,089/- as against the loss of ₹ 19,10,76,892/- declared by the assessee and since the entire loss so determined was already set off against the income of the assessee for A.Y. 2011-12 and 2012-13, no loss as determined in the assessment for A.Y. 2009-10 was available for set off against the income of the assessee for A.Y. 2015-16 when the assessment order under section 143(3) for A.Y. 2015-16 came to be passed by the Assessing Officer on 18.12.2017. Thus an error in the order of the Assessing Officer passed under section 143(3) in allowing the set off of loss of ₹ 3,99,13,429/- pertaining to A.Y. 2009-10 and the same being prejudicial to the interest of the Revenue, the order passed by the Assessing Officer under section 143(3) dated 18.12.2017 was liable to the revised as rightly held by the ld. Principal CIT in his impugned order passed under section 263. Working made by the ld. Principal CIT regarding the excess set off of loss pertaining to A.Y. 2009-10 alleged to be wrongly allowed by the Assessing Officer is not correct and this matter should have been left open by him to the Assessing Officer for making the working on the basis of actual loss pertaining to A.Y. 2009-10 as determined in the relevant assessment. We accordingly modify the impugned order of the ld. Principal CIT passed under section 263 to this extent. Appellate order passed by the ld. CIT (Appeals) for A.Y. 2009-10 allowing the entire claim of the assessee for depreciation and the effect given by the Assessing Officer to the said order finally determining the loss of the assessee-company for A.Y. 2009-10 on which a strong reliance was placed by assessee at the time of hearing before us, we may clarify that the Assessing Officer after having given the effect to the order of the ld. Principal CIT and determined the loss of the assessee for A.Y. 2009-10 at ₹ 19,10,76,892/-, which, inter alia, included business loss of ₹ 3,99,13,429/-, which was available for set off against the income of the assessee for A.Y. 2015-16 as claimed by the assessee, is duty bound to allow such set off by passing a consequential order. Appeal of the assessee is partly allowed.
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2021 (1) TMI 825
Claim of deduction for the payment made towards education cess and secondary and higher education cess - prohibition on the deduction of any amount paid towards cess in Sec. 40(a)(ii), while computing the income chargeable under the head profits and gains of business or profession - HELD THAT:- Respectfully following the decision in Sesa Goa Ltd. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT ] and Chambal Fertilizers Chemicals Ltd. [ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT ] we hold that the assessee shall be entitled for deduction of education cess and higher secondary education cess while computing income chargeable under the head profits and gains of business or profession . - Decided in favour of assessee.
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2021 (1) TMI 824
Addition u/s. 68 on account of difference in amount realized from trade debtors as against amount outstanding - HELD THAT:- Being a trade debtor, creditworthiness and genuineness of the transaction is not disapproved by the Ld. A.O. particularly when the amount has been advanced to the said company and realized subsequently leaving only a balance of ₹ 4,93,383/- similar to the transaction made in the case of the earlier addition in respect of M/s. Kwality Dairy Ltd. which has been rightly taken into consideration by the ld. CIT(A) without any ambiguity so as to warrant any interference. Hence, we confirm the same. The challenge made by the Revenue is thus without any basis and thus rejected. In the absence of any merit, the appeal preferred by the Revenue stands dismissed.
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2021 (1) TMI 823
Rectification u/s 254 - non-consideration of subsequent CBDT Circular and the special order so passed by the CBDT - Maintainability of appeal on low tax effect - whether mistake apparent from record? - HELD THAT:- The appeal was filed by the Revenue on 11.02.2019 and therefore, the present appeal was not filed pursuant to special order of the CBDT dated 16.09.2019 and as the matter didn t fall in any exception as so prescribed by the CBDT in its earlier circular dated 8.8.2019 and the special order doesn t apply in the instant case, the appeal was rightly dismissed by the Coordinate Bench on account of low tax effect in light of CBDT s circular dated 8.8.2019. Both CBDT Circular no. 23 of 2019 and special order dated 16.09.2019 were not in existence and thus not part of the record at the time when the matter was heard on 20.08.2019 or at the time of passing of order by the Tribunal on 22.08.2019 and therefore, non-consideration of subsequent CBDT Circular and the special order so passed by the CBDT is not a mistake apparent from record which can be rectified within the narrow compass of section 254(2) of the Act. In the result, miscellaneous application so filed by the Revenue is not maintainable.
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2021 (1) TMI 822
Disallowance of wage arrears u/s 40a(ia) - contingent liability or not - non deduction of TDS - assessee created an adhoc provision for wage arrears - HELD THAT:- There is no dispute with regard to the fact that there was negotiations between the assessee bank and employees unions for wage revision on the basis of recommendation of 6th Pay Commission of State Government w.e.f. 01.01.2006. It is also not in dispute that the State Government has constituted a committee to examine the demands of employees union and accordingly, a committee has been constituted under the leadership of Registrar of Co-operative Societies, Government of Tamil Nadu. After negotiations and deliberations with employees union, a settlement had been reached, as per which the assessee bank and employees unions have agreed to revise the wages w.e.f 01.01.2006, but monetary benefit arising out of revision shall be w.e.f 01.01.2007. Based on the above inputs, the assessee has anticipated liability in respect of wage arrears to its employees for the impugned assessment years the said liability is contingent liability. We find that the findings of the AO appears to be misplaced both facts and in law because liability of wage arrears is a real one for the services which have already been rendered and therefore, was definitely in the nature of arrears for such unpaid salary and had definitely arisen and therefore, in fact, it had a present obligation as a result of past events of the works or services already carried out by the employees entailing an outflow of resources to settle such obligation as per contractual agreement between employees and management. Liability has been provided in books of accounts when it was accrued for the impugned assessment years for the services rendered and hence the same cannot be considered as contingent in nature or unascertained liability, merely for the reason that the said liability was quantified and paid in subsequent financial years. The learned CIT(A) after considering the relevant facts has rightly deleted the addition made by the AO towards disallowance of provision for wage arrears. - Decided in favour of assessee.
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Customs
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2021 (1) TMI 821
Confiscation of goods - rent / demurrage charged on the goods seized / detained / confiscated by the proper officer of customs - It was pointed out that this was a violation of Regulation 6(1)(l) of the Handling of Cargo in Customs Areas Regulations, 2009 which stipulates that Customs Cargo Service Providers including custodians of container freight stations should not charge any rent or demurrage on the goods seized or detained or confiscated by the proper officer - HELD THAT:- It is not in dispute that respondent No. 1 is a Customs Cargo Service Provider as defined in Regulation 2(1) (b) of the Regulations. Being so, it is under a legal obligation to discharge the responsibilities as mandated under Regulation 6, more particularly in clause (l) thereof which clearly says that a Customs Cargo Service Provider shall not charge any rent or demurrage on the goods seized or detained or confiscated by the Superintendent of Customs or Appraiser or Inspector of Customs or Preventive Officer or Examining Officer as the case may be. This position has been clarified by the Commissioner of Customs (Export) in the public notice dated 26/2010 with the further clarification that Customs Cargo Service Providers shall allow the goods on production of a certificate issued from the proper officer certifying such period of seizure or detention or confiscation without charging and collecting any rent or demurrage for such period. It is also not disputed that the goods imported by the petitioner vide bill of entry No. 7540462 dated 07.08.2018 were detained by the proper officer of the customs department for the period from 14.08.2018 to 06.02.2019 which has been certified by the Superintendent of Customs in the prescribed format further mentioning that the certificate was issued as per public notice No. 26/2010 dated 02.03.2010 - for the period from 14.08.2018 to 06.02.2019, respondent No. 1 is under a legal obligation not to charge any rent or demurrage on the goods of the petitioner or on the container in which the goods have been stored and kept under its custody. Following the certificate dated 31.01.2019, it was also under a legal obligation to release the goods kept under its custody on or before 06.02.2019 to enable the petitioner to re-export the goods. Failure to do so has not only caused prejudice to the petitioner but would also disentitle respondent No. 1 from claiming any rent and demurrage for the period beyond 06.02.2019 till release of the goods because such retention of goods would be clearly unlawful being in violation of Regulation 6(1)(l) of the Regulations and the public notice dated 02.03.2010. The respondent No.1 is directed to release the goods imported by the petitioner forthwith to enable the petitioner to re-export the same in terms of letter dated 28.11.2018 of the Deputy Commissioner of Customs, Special Investigation and Intelligence Branch.
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2021 (1) TMI 820
Refund of Rubber Cess - Validity of CESTAT order to Remand of the proceedings to the adjudicating authority - neither the Appellant nor the Respondent requested for remand of the proceedings - Appellant was not paid in pursuance of any assessment order and no factual aspect was required to be reexamined by the adjudicating authority - HELD THAT:- The appellate tribunal, on its own, should have looked into the matter on its own merits. For the purpose of considering the case-law referred to in the impugned order, the matter should not have been remanded. The impugned order passed by the appellate tribunal is hereby quashed and set-aside and the matter is remitted to the tribunal for being considered afresh on its own merits in accordance with law - Appeal allowed in part.
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2021 (1) TMI 819
Smuggling - Prohibited Goods - Gold - foreign origin goods or not - presumption under section 123 of Customs Act - HELD THAT:- Admittedly the seized gold coins are of Indian origin even the approved valuer have not certified the seized gold coins as of foreign origin. Further, it is found that the inscription on the coins evidently prove that the gold coins are of Indian origin, and were part of the monetary system and were in circulation during the British India period. Admittedly, Kind Edward VII, was the emperor of U.K. and India was under British Rule during the relevant period, and thus there is no anomaly as to the Indian origin of the gold coins. The allegation by Revenue that the gold coins are of foreign origin has got no basis, and is a wild guess work. The inscription on the gold coins ipso fact prove that the gold coins as are of Indian origin. The impugned order is vitiated for placing selective reliance on the statement of appellant under Section 108 - also the presumption in favour of Revenue under Section 123 is not attracted in the facts and circumstances. Appeal allowed.
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2021 (1) TMI 818
Revocation of Customs Broker License - forfeiture of security deposit - whether the customs broker has failed to follow the Regulations CBLR, 2013 CBLR, 2018 and whether the same should entail in the revocation of the license and forfeiture of security deposit in addition to imposition of penalty? - HELD THAT:- In the instant case the employees of the appellant s firm have accepted the documents on behalf of the seven importers and filed a number of check lists in a short span; the customs broker in his statement before D.R.I has accepted the documents from Shri Santhosh Pandey even when he told them that bank related documents and authority letter could be given before carting the goods; they did not receive any documents in original; they have not cross-verified the documents submitted with any reasonable means; they never spoke to or interacted with any of the IEC holders. Where the custom Broker prima facie has some documents; the person who handed over the documents to the Broker is available; it is not alleged that the exporters were fictitious and the fraudulent persons used the high security IDs and passwords of departmental officers, the omission on the part of the Customs Broker becomes a bit less serious. Under the circumstances, there was lapse on the part of the Customs Broker, the same is not at the root of the occurrence of the fraud - the Customs Broker erred inasmuch as non-verifying the antecedents of the exporters and has not obtained authorization. However, the punishment meted out to the Custom Broker should be commensurate with such omission. It is a settled law that penalty should be proportionate to the offence committed. It would be too harsh to revoke the license of the Customs Broker and to leave the right to livelihood of the Customs Broker as well as his employees to the wind. The license has been under the orders of revocation / suspension for more than two years. Under the circumstances, the customs broker has been sufficiently penalized. For the commission of an offence on the part of the customs broker, the livelihood of many other employees of the firm cannot be put to jeopardy - the ends of justice would be met if the security deposited is forfeited and penalty imposed is upheld, while setting aside the order as far as the revocation of the license is concerned. Appeal allowed in part.
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Corporate Laws
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2021 (1) TMI 817
Validity of de-activation of the Director Identification Number - invocation of Section 164(2) of the Companies Act, 2013 - seeking direction to activate the Director Identification Number allotted to the petitioner - HELD THAT:- Similar controversy was raised in other High Courts and after considering the issue at length, the Gujarat High Court in GAURANG BALVANTLAL SHAH S/O BALVANTLAL SHAH VERSUS UNION OF INDIA [ 2019 (1) TMI 27 - GUJARAT HIGH COURT] . The Special Civil Application has been allowed. Therein also, the name of the petitioner was struck off from the list of Director of various companies. The publication of which was made under Section 248 of the Act of 2013. A direction to activate the Director Identification Number of the petitioner forthwith has been given, if not activated so far. It was however with the liberty to take legal action against the petitioner for any statutory default or non-compliance of the provisions of the Companies Act. The writ petition for challenge to the de-activation of the Director Identification Number is allowed . It was de-activated on account of dis-qualification in one company effecting Director Identification Number for the other companies. The opposite parties are directed to activate the Director Identification Number for use for other company.
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2021 (1) TMI 816
Seeking modification and/or clarification and also for further direction in support of the interim orders earlier passed - Seeking direction that the voting in relation to resolution no. 5 and 6 of the notice dated 1st July, 2019 for convening the Annual General Meeting of Birla Corporation Ltd. be stayed - HELD THAT:- From Section 247 it appears that a probate Court also takes the responsibility to administer the properties as left by the deceased and to preserve the status quo of such properties left by the Will through Administrator Pendente lite and such Administrator Pendente Lite shall be subject to the immediate control of the Court and shall always act under the Court's direction by which it has been appointed. In the present case such Administrator Pendenti Lite was appointed consisting of three members. Two nominated by plaintiffs and defendants and the third member was being a neutral person, a retired Judge of the Supreme Court was appointed initially and lastly Justice Mohit S. Shah, a retired Chief Justice of Calcutta and Bombay High Court. Administrator Pendenti Lite adopted various resolution and lastly on 19th July, 2019 and 30th July, 2019 in the interest of the estate so that the estate is preserved in its original form and it can be distributed to the rightful person. Since the Administrator Pendente Lite is under the immediate control of the court and its decision has not been implemented or could not be implemented by reason of objection by the nominee member of the plaintiff and while it is argued by the plaintiffs that the decision not being unanimous the plaintiffs are not inclined to implement the same the defendant/petitioner have come up with a prayer for a direction upon the parties to implement the decision of APL holding that the decision passed by the APL by majority is a good decision for all purpose and it should be carried out. The deceased had controlling shareholding in the investment Companies either by direct investment or along with other Investment companies. APL while exercising its authority over the estate of the deceased does not appear to have violated the order dated 23rd August, 2012 and therefore, it cannot be said that parties are not bound by the decision of the APL unless a contrary is proved. If a party is aggrieved by the decision of APL, it can reasonably be concluded now that since, the APL without any specific order from the Court has taken decision by majority instead of unanimity the same could have been agitated long before but having accepted the same and having subjected itself to the jurisdiction of the APL Committee recognizing that APL has got the authority to exercise within the scope of the order dated 23rd August, 2012, it is now an absurd proposition raised by the plaintiffs that since the APL has not taken any unanimous decision the same cannot be either implemented or be made binding upon the parties. Once the parties allowed themselves and they participated in the meeting without raising any objection that its decision if not unanimous cannot be deliberated in the meeting and after resolution has been adopted by majority it is no more open for the plaintiffs to agitate that the APL's decision 'by majority' is not binding on them - It is apparent that within its power and authority APL Committee, have right to exercise all such powers and perform all such acts as late PDB would have exercised had she been alive. PDB had controlling shareholding in the investment companies either by direct investment or along with other investment companies and PDB as the investment companies together with manufacturing companies through cross shareholding had controlling interest in all those manufacturing companies. This view has been confirmed by both Division and Single Bench of this Court and in view thereof APL Committee is well within its power to ask all entities which were under the control of PDB to exercise their voting right in regard to their investment in the share capital of any of the companies which were under the control of PDB, in the manner considered by the APL as beneficial to the interest of the Estate. All these entities of the group would have exercised their voting right in accordance with the directions of PDB had she been alive. Accordingly, now such entities would exercise voting right flowing from their investment in the companies controlled by PDB in the manner to be guided by the APL Committee. The phrases, Prima facie case , balance of convenience and irreparable loss are to be considered based on the facts of each particular case and to meet myriad situations presented by man's ingenuity in given facts and circumstances, it is to be decided with sound exercise of judicial discretion to meet the ends of justice. Prima facie case is that which raises substantial question, of course bona fide, which needs investigation and, ultimately, a decision on merits - A case of temporary injunction is an action preventive in nature and a specie of precautionary justice intended to prevent apprehended wrong or anticipated mischief which if allowed to happened may not be un done and cannot be compensated by money. This Court is of the view that the defendant/petitioners have made out sufficient case to get an interim order/temporary injunction to preserve and protect the interest of the ultimate beneficiaries under the Will of PDB concerning the estate of the deceased and this Court in aid of the final relief in the Testamentary Suit in exercise of the power conferred under section 247 of Indian Succession Act, passes the following orders: (a) The plaintiffs shall implement the decision dated 19th July, 2019 and 30th July, 2019 of the APL Committee taken by majority as also all consequential decisions of the APL in furtherance of the said decisions and shall be restrained from drawing any benefit personally from out of the assets of the estate of the deceased during pendency of the Testamentary Suit. (b) Plaintiffs are also restrained from interfering with the decisions of the APL and any decision which might be taken by it in future by majority if the same directly or indirectly relates to the estate of the deceased and further the plaintiff no. 1, Harsh Vardhan Lodha is restrained from holding any office in any of the entities of M.P. Birla Group during pendency of the Suit. (c) Defendants are also restrained by an order of temporary injunction from interfering with the APL's decision by majority during pendency of the suit. Application disposed off.
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2021 (1) TMI 815
Oppression and Mismanagement - Legality of notice - holding of EGM within 3 months of date of requisition - holding of EGM - dissenting members - difference of opinion - HELD THAT:- The orders were reserved on 20.11.2020 by this bench, the order was pronounced today, the lead judgement was rendered by Shri Chandra Bhan Singh, Member, Technical and the dissenting judgement is passed by Member Judicial. The members are divided on the following legal issues: a) Whether the notice dated 06.01.2020 and 05.02.2020 amounts to valid requisition as defined under section 100 of the Companies Act, 2013? b) Whether the law mandates holding of EGM within 3 months of date of requisition as prescribed under section 100(4) of the Companies Act, 2013? c) Whether issuing of notice on 13.07.2020 can be considered as requisition under section 100(2) of the Companies Act, 2013? d) Whether the EGM held on 10.08.2020 and the resolution passed there under are bad in law? e) Whether there are any acts of oppression and mismanagement by majority shareholders? The Registry is directed to place the record before the Hon ble Acting President for constituting appropriate 3rd member for his opinion, so that the order in IA is rendered in accordance with the opinion of majority.
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2021 (1) TMI 814
Restoration of the name of the company in the Register of the ROC - name has been struck off on the ground of failure in filing Financial Statements Annual Return - section 252(3) of the Companies Act, 2013 - HELD THAT:- On perusal of the record, it is found that the appeal is filed under section 252(3) of the Companies Act, 2013. While, going through the section 252(3) of the Companies Act, it is found that the instant provision is made when the company is struck of voluntarily on the behest of the Promoter(s)/Director(s), whereas, section 252(1) of the Companies Act, provides that, when the company is struck of by the Registrar of Companies on the failure in filing of statutory returns by the Company. Hence, instant application would not lie under section 252(3) of the Companies Act, 2013; rather, it would lie under section 252(1) of the Companies Act, 2013 - When the Company is struck off for non-compliance of the statutory requirement, in that event, the application ought to be filed under section 252(1) of the Companies Act, 2013, however, the Appellant filed this application under section 252(3) of the Companies Act, 2013, which is applicable when the Company is struck off on the request of the Company by filing an application under section 248(2) of the Act. Time Limitation - HELD THAT:- It is pertinent to mention herein that the Hon'ble Supreme Court has extended the period of limitation, who's limitation is getting expired in the lockdown period. The said order of the Hon'ble Supreme Court passed on 23.03.2020 in Suo Motu Writ Petition (Civil) No. 3/2020 [ 2020 (5) TMI 418 - SC ORDER ]. The order passed by the Hon'ble Supreme Court, the instant Appeal is conditionally allowed i.e. to dispose off the available assets and to discharge the unsettled obligations of the Company and after that the Appellant will get the name of the Company Struck off from the register of companies maintained by the ROC - the instant Appeal is partially allowed and the Registrar of Companies, Ahmedabad, Gujarat is directed to restore the name of the Company in the Register of Companies upon Appellant's complying with the conditions imposed - application allowed in part.
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2021 (1) TMI 813
Approval of the scheme of amalgamation - Section 230-232 of Companies Act, 2013 - HELD THAT:- Upon considering the approval accorded by the Members and Creditors of all Companies to the proposed Scheme, and no sustainable objections having been raised by the Office of the Regional Director, Income Tax Department or any other interested party, there does not appear to be any impediment in granting sanction to the Scheme. Accordingly, in sequel to the above, sanction is hereby granted to the Scheme of Amalgamation under section 230-232 of the Companies Act, 2013. The sanctioned Scheme of Amalgamation shall be binding on the Transferor and Transferee Company, and their Shareholders and Creditors. The Parties shall also be bound to comply with the requisite statutory requirements in accordance with law. While approving the Scheme, it is clarified that this Order should not be construed as an order in any way granting exemption from payment of stamp duty, taxes or any other statutory dues, if any, and payment in accordance with law or in respect to any permission/compliance with any other requirement which may be specifically required under any law. Further the approval of the scheme would in no manner affect the tax treatment of the transactions under Income Tax Act, 1961 or serve as any exemption or defense for the applicant companies against tax treatment in accordance with the provisions of Income Tax Act, 1961. The scheme is approved - application allowed.
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Insolvency & Bankruptcy
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2021 (1) TMI 812
Maintainability od application - initiation of CIRP - borrower defaulted in its repayment obligations to the financial creditor - Existence of debt and default or not - Whether Rule 7 of Adjudicating Authority Rules empowers the Adjudicating Authority to examine the documents filed with the application under section 10 of I B Code? - HELD THAT:- The Adjudicating Authority is satisfied that there is a debt and a default has occurred, the application must be admitted unless it is incomplete. Section 10 of I B Code does not empower the Adjudicating Authority to go beyond the records as prescribed under Section 10 and the information as required to be submitted in Form 6 of Adjudicating Authority Rules. Rule 7 provides the procedure for filing the application under Section 10 of I B Code. It does not empower the Adjudicating Authority to examine the financial statements annexed with the application - The applicant being a guarantor has filed the application under Section 10 of I B Code hence the Adjudicating Authority has drawn an inference that the corporate applicant has filed the application under Section 10 with an intention to defeat the SARFAESI measures initiated by the financial creditor. Thus the application is filed with an ulterior motive. We are unable to agree with the finding of ld. Adjudicating Authority and hold that this fact is unrelated and beyond the requirement under I B Code or forms prescribed under the Adjudicating Authority Rules. Therefore, the application cannot be rejected on this ground. The existence of debt and default is established and no winding up proceedings against the appellant and appellant is not covered by the ineligibilities provided under Section 11 of the I B Code. However, the adjudicating authority has rejected the application on extraneous grounds. Therefore, the impugned order is set aside. The case is remitted back to the adjudicating authority (NCLT, Chennai) to admit the application under Section 10 after notice to the parties if there is no defect. In case of any defect, appellant may be allowed time to remove the defects - Appeal allowed.
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2021 (1) TMI 811
Liquidation of Corporate Debtor - Section 33 (1) (2) of the Insolvency and Bankruptcy Code 2016 - HELD THAT:- Considering the fact that the 2nd CoC with 100% voting right resolved to approach the Adjudicating Authority for liquidation under Section 33(2) of IBC, this Tribunal can pass an order for liquidation as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of subsection (1) of IBC. The Corporate Debtor M/s Goodwin Packpet Private Limited is hereby put under liquidation with immediate effect under Section 33(2) of IBC, 2016 - Application disposed off.
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2021 (1) TMI 810
Issuance of the Corporate guarantee - creation of second charge on all assets - admission of COC in the capacity of being a financial creditor of the Corporate Debtor - Resolution Professional submits that such uninvoked Corporate Guarantee holder cannot form part of the Creditors of the Company - HELD THAT:- The orders were reserved on 27.11.2020 by this bench, the order was pronounced today, the lead judgement was rendered by Shri Chandra Bhan Singh, Member, technical and the dissenting judgement is passed by Member Judicial. The members are divided on two legal issue: a. Whether the issuance of the Corporate guarantee in favour of Respondent No. 1(being a Creditor of Related party/Holding Company) and creation of second charge on all assets including moveable, immoveable assets and oil blocks of the Corporate Debtor in favour of Respondent No. 1 is a preferential transaction under section 43 of IBC. b. Whether the Respondent No. 1 UTI can be admitted to COC in the capacity of being a financial creditor of the Corporate Debtor. The Registry is directed to place the record before the Hon ble Acting President for constituting appropriate 3rd member for his opinion, so that the order in application is rendered in accordance with the opinion of majority.
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2021 (1) TMI 809
Contraventions of section 208(2)(a) and (e) of the Insolvency and Bankruptcy Code, 2016 (Code), Regulation 13 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2017 (CIRP Regulations) and Regulation 7(2)(a) and (h) of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) and clause 1, 2, 3, 10 and 14 of the Code of Conduct under regulation 7(2) thereof. Mr. Kamalesh Kumar Singhania replied to the SCN vide letter dated 15thJune, 2020. Claims and admission of PNB's revised claim by Mr. Singhania during CIRP - HELD THAT:- The DC notes that one of the core duties of the IP is to receive, collate and verify claims. His conduct have a substantial bearing on his performance and outcome of the processes under the Code, i.e., in resolution or liquidation. He, therefore, is expected to function with diligence - The DC notes the submission of Mr. Singhania that for claim after the commencement of CIRP, he relied upon the proviso to section 29A of the Code and that under the Code applicable at that time, guarantors had the option to submit the resolution plan after making payment of overdues and interest thereon. However, DC is of the opinion that this submission of Mr. Singhania still does not explain the rationale behind accepting the interest post CIRP commencement period as revised claim. Claims can be accepted only as on insolvency commencement date. Allegation of providing amount of ₹ 10.38 crore to PNB as against the revised claim of ₹ 1.27 crore - HELD THAT:- The DC noted that the revised claim was a new claim for the interest amount from 1st June, 2017 to 10th April, 2018. However, Mr. Singhania did not give extra voting rights to PNB on account of new claim. Therefore, DC finds that acceptance of claim in respect of the interest for the period from 1st June, 2017 to 20th September, 2017 is as per Regulation 13 of the CIRP regulations. However, acceptance of any claim for the post CIRP period i.e. 21st September, 2017 to 10th April, 2018 is in violation of Regulation 13 of the CIRP Regulation. Deferment of publication of EoI by Mr. Singhania - HELD THAT:- The DC notes that the provisions of section 208(2), Regulations made under the Code require an IP to follow, at all times, the provisions of the Code and Regulations and the bye-laws of Agency of which the IP is a member - In the present matter, the DC notes that the submission of Mr. Singhania in his reply that in the 4th CoC meeting dated 9th February, 2018, it was proposed by him that the advertisement inviting EOI be published in the newspapers by 13th February, 2018 and the last date of submission be kept at 28th February, 2018. During this meeting, CD/Mr. Mintri has submitted a proposal to Punjab National Bank to settle and pay outstanding dues of the Bank, Mr. Mintri has requested to defer the date of publication - In the meeting, it was decided that if Mr. Mintri's proposal for OTS is not accepted by the Bank within 20th February, 2018, the advertisement shall be published on 23rd February, 2018 and the last date of submission of EoI shall be 10th March, 2018. DC further notes the submissions of Mr. Singhania that the decision to defer publication of EoI after 23rd February, 2018 was taken at the 4th meeting by CoC and not by Mr. Singhania and that too in the context of limited purpose of the outcome of settlement proposal submitted by the promoter of the CD. Therefore, regarding deferring of the publication of EoI in that context, the DC is of the opinion that lenient view may be taken. Incorrect statements made by Mr. Singhania in the Information Memorandum - HELD THAT:- The Code has clearly outlined the duties which must be performed by RP during the insolvency resolution process. One of the key functions of RP with respect to conduct of CIRP include preparation of IM. An IM is a very crucial document and provides a financial position about the Corporate Debtor. Section 25(2)(g) of the Code clearly provides that the resolution professional shall prepare the information memorandum in accordance with section 29. Section 29 of the Code provides that the resolution professional shall prepare an information memorandum in such form and manner containing such relevant information as may be specified by the Board for formulating a resolution plan - It is RP's duty to provide an updated and verified IM to all resolution applicants. In this regard, DC takes on record the submission of Mr. Singhania that he had not suppressed any material information and that the error in the date mentioned in page no. 17 as on 20th September, 2017 is an inadvertent typographical error. He acted in the interest of the CD to save it from going into liquidation. The DC notes that the non-cooperation from the KMPs of the CD is evident from the orders of AA in that regard. Hence, DC takes a lenient view. Making public announcement of initiation of CIRP at the place of principal office - HELD THAT:- The DC notes that when a corporate debtor undergoes corporate insolvency resolution process, an IP is vested with the management of its affairs and he manages its operations as a going concern. He complies with the applicable laws on behalf of the corporate debtor. He conducts the entire CIRP. Such responsibilities of an IP require the highest level of professional excellence and integrity. Section 15(2) of the Code provides for the Public announcement of corporate insolvency resolution process to be made in such manner as may be specified - In the present matter, the DC notes that the submission of Mr. Singhania who acted on the information of the Advertisement agency that the Financial express and Dainik Statesman (vernacular daily) were circulated across West Bengal including Siliguri, where the corporate office is located. Mr. Singhania has also produced the report of the Audit Bureau of Circulations for July to December, 2017 certifying publication of the Dainik statesman in Kolkata and Siliguri. Thus, the DC notes that the Public Announcement in Form A was in compliance to section 13(2) of the Code. Failure to provide details of Land and Building etc. to the one of the Registered valuers - HELD THAT:- The DC notes that regulation 27 of the CIRP regulations provides that the resolution professional shall appoint two registered valuers to determine the fair value and the liquidation value of the corporate debtor in accordance with regulation 35 - In the instant matter, the DC has noted that Mr. Singhania accepted the Report of M/s Adroit Tech Services Pvt. Ltd. with the limitation that in the absence of the details pertaining to the Land and Building and Plant and Machinery we haven't added any such value to the vauation. This shows that Mr. Singhania has not taken care of the observations made by the valuer. However, Mr. Singhania has clarified that the Reports of valuers were based on internationally accepted valuation standards and the promoter directors did not cooperate with him in providing the details of the assets. DC notes that since there being no significant variation in the two reports, it appears that the limited details as available with Mr. Singhania were provided to both the valuers. Mr. Singhania should have made some more efforts to get the details of the assets. However, in view of his submissions that due to non-cooperation of the directors of the CD, the details of individual assets were not available with Mr. Singhania. Therefore, the clarification given by Mr. Singhania is accepted. The DC finds that Mr. Kamalesh Kumar Singhania, as an RP, has contravened section 208(2)(a) and (e) of the Code read with Regulation 13 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2017 and Regulation 7(2)(a) and (h) of the IBBI (Insolvency Professionals) Regulations, 2016, and clause 1, 2, 3, 10 and 14 of the Code of Conduct under regulation 7(2) thereof - the SCN is disposed off with following directions: (i) Mr. Kamalesh Kumar Singhania shall undergo pre-registration educational course from the IPA of which he is a member. (ii) Mr. Kamlesh Kumar Singhania shall not take any new assignment/process under the Code without compliance of the above direction. (iii) Mr. Kamlesh Kumar Singhania shall, however, continue to conduct and complete the assignments/processes he has in hand, if any, as on the date of this order. (iv) This order shall come into force on expiry of 30 days from the date of its issue. (v) A copy of this order shall be forwarded to the ICSI institute of Insolvency Professionals where Mr. Kamalesh Kumar Singhania is enrolled as a member. (vi) A copy of this order shall also be forwarded to the Registrar of the Principal Bench of the National Company Law Tribunal, New Delhi, for information.
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2021 (1) TMI 808
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, the DC notes that, Mr. Somani had given his written consent to CoC in its meeting held on 22nd November 2019 to act as Liquidator in terms of Section 34(4) and accordingly the same was filed with NCLT on 28th November 2019 prior to the requirement of AFA for accepting or undertaking assignment under Regulation 7A of the IP Regulations which came into effect from 1st January 2020, i.e., after 31st December 2019. The Hon'ble NCLT, Principal Bench, had passed the Liquidation. Order dated 14-1-2020 due to failure of CIRP in this matter. Mr. Somani's appointment was confirmed as Liquidator based on his Written Consent to act as Liquidator and also on the recommendation of CoC.
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2021 (1) TMI 807
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues to Financial Creditors - existence of debt and dispute or not - HELD THAT:- It is apparent that no resolution has been passed as regard to proceeding with the liquidation of Corporate Debtor which is required in terms of Regulation 39C of Corporate Insolvency Resolution Process Regulations, 2016. Even percentage of voting has not been mentioned though this may not be of much significance as there is a sole Financial Creditor but still it is a requirement of law. It is apparent that no efforts at all have been made to find resolution Applicant as within period of less than two months from the insolvency commencement date, the application for liquidation of the Corporate Debtor has been filed and that too without bringing any material on record in support of its claims. Even from other business conducted in the said meeting of COC, nothing appears which could throw light for necessity of liquidation at first meeting of Committee of Creditors (COC) itself. Further, as per the explanation of Section 33(2) of Insolvency and Bankruptcy Code, 2016, Committee of Creditors (COC) is empowered to take decision to liquidate the Corporate Debtor at any time after its constitution but the relevant material and resolution is required in that regard - application dimissed.
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2021 (1) TMI 802
Validity of Sections 3, 4 and 10 of the Insolvency and Bankruptcy Code (Amendment) Act 2020 - petitioners are allottees under real estate projects - calculation for number of allottees - Is the total number of the allottees, to be calculated qua the Units promised? or Is it to be based on the number of units constructed or is it to be the number of units allotted or units where the agreement to sell is entered into? HELD THAT:- The instant case, it is necessary to analyse the limbs of Section 11. Sections 7, 9 and 10, read with Section 5, provide for the procedure to be adopted by the Adjudicating Authority in dealing with applications for initiating CIRP by the financial creditor, operational creditor and corporate debtor. It is after that Section 11 makes its appearance in the Code. It purports to declare that an application for initiating CIRP cannot be made by categories expressly detailed in Section 11. Section 11(a) vetoes an application by a corporate debtor, which is itself undergoing a CIRP. An argument sought to be addressed by the petitioner is that the purport of the said provision is that it prohibits not only a corporate debtor, which is undergoing a CIRP, from initiating a CIRP against itself, which, but for the fact, it is undergoing a CIRP, would be maintainable under Section 10 of the Code, but it also proscribes an application by a corporate debtor for initiating a CIRP against another corporate debtor. It appears to be clear to us, and this will be corroborated by the further provisions as well, that the real intention of the Legislature was that the prohibition was only against the corporate debtor, which is already faced with the CIRP filed by either a financial creditor or operational creditor, jumping into the fray with an application under Section 10. Finally, coming to Section 11(d), it disentitles the making of an application to initiate CIRP by a corporate debtor in respect of whom a liquidation order has been made. We have already noticed the scheme of the Code. The Legislature intends to have a two-stages approach to the problem of insolvency as regards the corporate debtor. On the basis of an application by the eligible person, a CIRP is initiated. If it is admitted, a Committee of Creditors is constituted before the curtains are wrung down on the insolvency resolution process by the inexorable passage of time, which is fixed under Section 12. If a resolution plan finds approval at the hands of the Committee of Creditors and also the Adjudicating Authority, liquidation is staved off. Should there be no resolution plan within the time limit or the resolution plan is not approved, the curtains rise for the process of liquidation process to be played out in terms of the Code. The first act of the drama consists of the order of liquidation to be passed under Section 33 of the Code. It is this order which is referred to in Section 11(d). There is also an order of liquidation permissible earlier, under Section 33(4). No doubt after the introduction of the explanation to Section 33(2), an order of liquidation may be passed in terms thereof. Once, this order is passed, the Legislature intended that a corporate debtor, in regard to whom the CIRP was initiated and which has culminated in the order of liquidation being passed after no resolution of the insolvency took place, cannot again initiate a fresh CIRP, putting under the carpet, as it were, a whole process in the recent past - to use the words recent past may not be correct for unlike Section 11(b) and 11(c), in a case, where there is an order for liquidation under Section 33, then, an application under Section 10, would not be maintainable. The person disentitled under Section 11(d) would be the corporate debtor and the disentitlement is qua itself. Apparently, interpreting Section 11, there appears to have been some cleavage of opinion. This is apparent from the case set up on behalf of the petitioners and the case set up on behalf of the Union of India. The intention of the Legislature was always to target the corporate debtor only insofar as it purported to prohibit application by the corporate debtor against itself, to prevent abuse of the provisions of the Code. It could never had been the intention of the Legislature to create an obstacle in the path of the corporate debtor, in any of the circumstances contained in Section 11, from maximizing its assets by trying to recover the liabilities due to it from others. Not only does it go against the basic common sense view but it would frustrate the very object of the Code, if a corporate debtor is prevented from invoking the provisions of the Code either by itself or through his resolution professional, who at later stage, may, don the mantle of its liquidator. The provisions of the impugned Explanation, thus, clearly amount to a clarificatory amendment. A clarificatory amendment, it is not even in dispute, is retrospective in nature. The Explanation merely makes the intention of the Legislature clear beyond the pale of doubt. The argument of the petitioners that the amendment came into force only on 28.12.2019 and, therefore, in respect to applications filed under Sections 7, 9 or 10, it will not have any bearing, cannot be accepted. The Explanation, in the facts of these cases, is clearly clarificatory in nature and it will certainly apply to all pending applications also. We must record our understanding of the efforts of the petitioner in the light of the application which is pending and the appeal also which is preferred by the petitioner in NCLAT. We are really concerned and can be called upon only to pronounce on the vires of the Statute on the score that it is unconstitutional on any ground known to law. The only ground which is urged before us is the violation of Article 14. This ground does not merit acceptance. The challenge is repelled. Is Section 32A unconstitutional? - HELD THAT:- No case whatsoever is made out to seek invalidation of Section 32A. The boundaries of this Court s jurisdiction are clear. The wisdom of the legislation is not open to judicial review. Having regard to the object of the Code, the experience of the working of the code, the interests of all stakeholders including most importantly the imperative need to attract resolution applicants who would not shy away from offering reasonable and fair value as part of the resolution plan if the legislature thought that immunity be granted to the corporate debtor as also its property, it hardly furnishes a ground for this this Court to interfere. It must be remembered that the immunity is premised on various conditions being fulfilled. There must be a resolution plan. It must be approved. There must be a change in the control of the corporate debtor. The new management cannot be the disguised avatar of the old management. It cannot even be the related party of the corporate debtor. The new management cannot be the subject matter of an investigation which has resulted in material showing abetment or conspiracy for the commission of the offence and the report or complaint filed thereto. These ingredients are also insisted upon for claiming exemption of the bar from actions against the property. Significantly every person who was associated with the corporate debtor in any manner and who was directly or indirectly involved in the commission of the offence in terms of the report submitted continues to be liable to be prosecuted and punished for the offence committed by the corporate debtor - As to what priority must be accorded to which interest must remain a legislative value judgement and if seemingly the legislature in its pursuit of the greater good appears to jettison the interests of some it cannot unless it strikingly ill squares with some constitutional mandate suffer invalidation. Vested Right; Retrospectivity; 3rd proviso in section 7 - HELD THAT:- The third proviso is a one-time affair. It is intended only to deal with those applications, under Section 7, which were filed prior to 28.12.2019, when, by way of the impugned Ordinance, initially, the threshold requirements came to be introduced by the first and the second impugned provisos. In other words, the legislative intention was to ensure that no application under Section 7 could be filed after 28.12.2019, except upon complying with the requirements in the first and second provisos. The Legislature did not stop there. It has clearly intended that the threshold requirement it imposed, will apply to all those applications, which were filed, prior to 28.12.2019 as well, subject to the exception that the applications, so filed, had not been admitted, under Section 7(5) - the Legislature intended that in every application, filed under Section 7, by the creditors covered by the first proviso and by the allottees governed by the second proviso, should also be embraced by the newly imposed threshold requirement for which, it was intended, should be complied within 30 days from the date of the Ordinance. However, this restriction was not to apply to those applications which stood admitted as on the date of the Ordinance. It is also clear that the consequence of failure to comply with the threshold requirement, in regard to applications, which have been filed earlier, was that they would stand withdrawn. Whether the right under the unamended Section 7 was a vested right of the financial creditors or allottees covered by the provisos 1 and 2, respectively? - HELD THAT:- Legal rights are, in a wider sense, of four distinct kinds. They are rights, liberties, powers and immunities. Duty is the correlative of a right, while, no rights correspond to liberties. Liabilities have a nexus with the power exercised by another person, with regard to whom, the liability exists in another party. When somebody has an immunity against another, it disables the latter, and thus, it constitutes a disability for him. Salmond notes further that the term right is often used in the wide sense to include liberty by which it is meant to have one left free to do as he pleases - It may be asked whether a right of action is a right or a power. Is there a duty with anyone in the case of a right to an action? We need not probe this further as a power is also a right in the wider sense. The right to sue and right to appeal has been so recognized as we will notice. It is clear that the institution of a suit leads to the inference that the right of appeal is preserved. There is a vested right of appeal. The vested right of appeal accrues to the litigant and exists from the day of the institution of the lis (suit). Therefore, while the remedy of an appeal may be provided under the statute that right becomes a vested right only from the point of time that the suit is filed either by the appellant or the opposite party. All of this undoubtedly is subject to a subsequent enactment not interfering with the right of an appeal - Thus, what is relevant, this Court went on to find under the Saurashtra Act, there was no requirement of any notice to terminate the tenancy. It was found that the landlord was entitled to recover the possession under the said Act, if there was subletting. In other words, the Court went on to hold that a right accrued to the landlord under the Saurashtra Act upon the appellant subletting the premises. It was during the pendency of the Saurashtra Act. This right survived the repeal of the Saurashtra Act and thus the suit under the Saurashtra Act was maintainable. This Court also held that the application filed in 2016 or 2017 cannot suddenly revive a debt which is no longer due as it is time barred. Apparently, the petitioners are seeking to lay store by the principle that a new law cannot extinguish a vested right of action even if it be pertaining to the period of limitation - The right to sue clearly could be said to arise, immediately upon the condition being broken. We may, in this context also, notice that one of the five characteristics for a legal right to exist, is that every legal right has a title. It is further stated, in Salmond on Jurisprudence that every legal right has a title, which are apparently the facts or events by reason of which the right has become vested in its owner. Now, it must be noticed also, at this stage that the Limitation Act, in fact, contemplates the time, within which the suit must be brought, beginning necessarily on the supposition, that at least, on the very first day of the period of time, from which a plaintiff can sue, the right is already vested in him. This would reinforce us in our view that a vested right to sue could be said to accrue, and it would always precede the institution of the suit. At any rate, it could be said to exist from the very first day, on which the time begins to run, under the Limitation Act. Thus, a vested right to sue could be tested with reference not to the date on which the suit is filed as would be the case where a question arises, whether a right of appeal exists. Thus, a right to sue is not created by the statute. It is an inherent right unless is barred by some law. Therefore, the principle that a right to take advantage of a statute not being an accrued right may not apply - We are unable to accept the stand of the learned ASG, that a vested right to emerge still require an order under Section 7(5) of the Code. It is no doubt a stage, when the authority finds there is default and takes the matter forward including appointing to begin with the IRP and ordering a moratorium. In this regard, it is to be noted that in the scheme of the Code, what takes place before admission, is that the applicant tries to establish the debt and default. This is akin to the stage of a trial in a suit. No doubt, this happens only if the application is free from defects. But this is a far cry from saying that a vested right of action did not inhere even on the version of the ASG upon the act of the creditor invoking the Code. Section 6 of General Clauses Act, 1897 - HELD THAT:- No support can be drawn from Section 6 of the General Clauses Act, 1897. Section 6 makes it clear that the rights or privileges which may be asserted are subject to the law not being couched contrary to such rights/privileges. In this case it is precisely because the 3rd proviso covers the applications filed prior to the amendment which had not been admitted, that the petitioners have challenged the provision. It is open to the Adjudication Authority to reject the application but that does not mean that the applicants had no vested right of action. The possibility of a plaint being rejected under Order VII Rule 11 or an appeal being dismissed under Order XLI Rule 11 without notice being issued to the respondent or the fact that the suit can be dismissed at later stages, cannot detract from the right of the plaintiff or the appellant, being a substantive right. The same principle should suffice to reject the contention, based on admission under Section 7(5) alone, giving rise to the vested right in regard to an applicant under Section 7 of the Code - A vested right is not limited to property rights. A right of action should conditions otherwise exist, can also be a vested right. Such a right can be created by a Statute and even on a repeal of such a Statute, should conditions otherwise exist, giving a right under the repealed Statute, the right would remain an accrued right. When a Statute made by the sovereign Legislature is found to have retrospective operation and the challenge is made under Article 14 of the Constitution, (i) the Court must consider whether the law, in its retrospectivity, manifests forbidden classification. (ii) Whether the law, in its retrospectivity, produces manifests arbitrariness, (iii) if a law is alleged to be violative of Article 19(1)(g), firstly, the Court, in an action by a citizen, would, in the first place, find whether the right claimed, falls, within the ambit of Article 19(1)(g). The Court will further enquire as to whether such a law is made, inter alia, by way of placing reasonable restrictions by looking into the public interest. In the case of law, which is found to be not unfair, it would also not fall foul of Article 21 - Where the law is challenged on the ground that it is violative of Fundamental Rights under Article 14, necessarily the Court must enquire whether it is a capricious, irrational, disproportionate, excessive and, finally, without any determining principle. As far as the nature of the right in question is concerned, which would include the value of the rights, it is a right of action. The right of action is, undoubtedly, a vested right. The role of the applicant essentially fades out after the admission of the application is made under Section 7(5). The scheme of the Code has been unraveled by us. The right, which is given, is a right in rem. It is not a mere personal right, in the sense that it is right in rem. The applicant is not even required to plead the default qua him as the default to any financial creditor, in the requisite sum, provided it is not barred under Article 137, suffices. The consequences of the application would be that it may land the applicant and also all the stakeholders, in liquidation of the corporate debtor - The only area where any ambiguity can be said to exist is the effect of the application being treated as withdrawn. The further aspect, which is to be borne in mind, is the circumstances in which the legislation is created. It is here that the mischief rule and the aspect of public interest looms large. At the end of the day, the tussle is between the individual right versus the public interest. Now, public interest is a concept, which is capable of embracing, within its scope, the interest of different sections of the public. This would include the sections of the public to which the applicant himself belongs. Public interest would, undoubtedly, also encompass, the economy of the country, which can be understood in terms of all the objects, for which the Code was enacted. They would include the speed with which the Code is worked. It would include, also, safeguarding the interests of all the stakeholders. This may necessarily include the corporate debtor as a stakeholder, being protected from applications, which are perceived as frivolous or not representing a critical mass. Clarity regarding 'withdrawal' under the third proviso - HELD THAT:- The third proviso does not indicate as to whether a fresh application after complying with the requirement of the ingredients of the first and second proviso is maintainable. It does not also indicate what would be the position even if such application is maintainable by the same applicant, with regard to the periods spent in the context of ruling of this Court that the Limitation Act applies and the relevant Article is Article 137 and therefore, any application filed beyond the period of three years from the date of the default is barred - the other way of looking at these issues is that Order XXIII(1) applies only in the case of a civil suit. In regard to the application under Article 137 which is what an application under Section 7 of the Code is, it could it be said that Order XXIII(1) is inapplicable. Secondly, could it not be said that it is not a case of a voluntary withdrawal by the applicant and the withdrawal of the application is declared by the Legislature, and therefore, Order XXIII(1) would not apply. The application made under Rule 4 is the application under Section 7 by the financial creditor. However, rule 8 is silent as to any similar prohibition as is contained in Order XXIII(1)4(b). Unless the principle of Order XXIII Rule 1 which is based on public policy, is applied, a fresh application, compliant with the first two provisos in Section 7, may not be barred. In this regard, since under the Explanation in Section 7(1), default occurs when default qua any financial creditor is made out, the cause of action can become different, in which case, even the principle of Order XXIII Rule 1, may not apply - since withdrawal is ordained by the third proviso, it would not be a withdrawal under Rule 8 on request. Secondly, even for the principle based on public policy to apply to a withdrawal under Rule 8, there must be a request and withdrawal. We do not pronounce on the effect of the same, viz., withdrawal on request. Suffice it to conclude and hold that the withdrawal under the third proviso would not bar a fresh application by the same party after complying with the provision of the first or second proviso as the case may be on the same default. Limitation - HELD THAT:- Having regard to the Explanation in Section 7, it will always be open to the applicant to set up a different default to any financial creditor and move afresh. This unique feature of the Code is highly relevant in determining the validity of the Amendment. The application under Section 7 is not meant to be a recovery mechanism. The Code, as is clear from its title, deals with insolvency resolution, to begin with. If there is insolvency, the application, with reference to any of the large number of creditors, suffices. Withdrawal under the third proviso would not be bar a fresh application even on the same cause of action. It can, at any rate, be condoned under Section 5 of the Limitation Act. It is here we would also exercise our power under Article 142 to direct that if fresh applications are filed by the petitioners after complying with the first and second proviso, then on applications being filed under Section 5, of the Limitation Act, in regard to the period of pendency of applications, the authority shall condone the delay - Finally, the actual time provided. Is it manifestly unfair? Would not six weeks, two months or even more lengthier periods, be more fair? Undoubtedly, it would be, from the point of view of the applicants. Another way to approach the problem is, was it impossible for the creditor/creditors to seek information, get into touch with the other creditors and persuade them to join him/them. As far as court fees is concerned, there is no extra liability as the amount remains the same, viz., ₹ 25,000/-, irrespective of the number of applicants. If the condition in the third proviso was impossible to comply with, then, it would also be manifestly arbitrary. If there is insolvency and it affects creditors, ordinarily, self-interest would guide them into following the best course available to them. We have also seen the presence of plural remedies. No doubt, calculation of one-tenth in a case, may, undoubtedly, require the quantification of total number of creditors. This would be necessary, no doubt, only if hundred creditors cannot be found to support the application. The withdrawal under the third proviso, will not stand in the way of the applicant, invoking the same default and filing the application and even the principle of Order XXIII Rule 1 of the CPC will not apply and will not bar such application. As far as limitation is concerned, we have explained as to what is to be the impact. The nature of the vested right and the impact of the law, the public interest, the sublime objects, which would be fulfilled, would, in the facts of this case, constrain us from interfering, even though, this Court may have a different view about the period of time, which is allowed to the applicant. Court fees - HELD THAT:- The time limit of two months is fixed only for conferring the benefits of exemption from court fees and for condonation of the delay caused by the applications pending before the Adjudicating Authority. In other words, it is always open to the petitioners to file applications, even after the period of two months and seek the benefit of condonation of delay under Section 5 of the Limitation Act, in regard to the period, during which, the applications were pending before the Adjudicating Authority, which were filed under the unamended Section 7, as also thereafter. Petition dismissed.
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Service Tax
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2021 (1) TMI 806
Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - allegation that no return had been filed by the Petitioner for the period from 1st April, 2016 to 30th September, 2016 - Petitioner contends that the decision of the Respondent to reject the Petitioner s application is completely baseless, inasmuch as the Petitioner had indeed filed its return for the relevant period on 12th July, 2017 - HELD THAT:- There is no surviving factual controversy, as indeed the returns filed by the Petitioner are available with the Respondents. Certainly, the technical infraction at the end of the Respondent cannot be a ground to deprive the Petitioner the benefit of the Scheme. Thus, clearly, the ground on the basis of which the Petitioner s application has been rejected does not survive, and is liable to be set-aside. There is no impediment for the Court in allowing the Petitioner s request and we accordingly do so and set aside the impugned Statement dated 28th February, 2020 passed by the Respondent No. 2. Further direction is issued to the Respondent No. 4 to accept the Petitioner s Form SVLDRS-I and process the same under Section 126 of the Finance Act, 2019 - Petition allowed.
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Central Excise
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2021 (1) TMI 805
Actual export taken place or not - It is the case of the Revenue that when the goods liable to excise duty came to be exported by the appellant, the appellant was required to follow the procedure for export without payment of duty as prescribed under the Notification No.42/2001-CE (N.T.) dated 26th June 2001, as amended, issued under Rule 19 of the Central Excise Rules, 2002 - HELD THAT:- There was no good reason for the appellate tribunal to remand the matter to the adjudicating authority. We take notice of the fact that during the pendency of the adjudication proceedings certain information was called for by the Deputy Commissioner from the Superintendent, Central Excise Range-I, Navsari - The Superintendent has, in no uncertain terms, stated in his report that the goods were actually exported and the same is evidenced by the documents in the form of shipping bills and BRC for the entire period covering the show-cause notice. The goods were exported under the drawback scheme and focus license. The appellate tribunal, on its own, could have looked into the report instead of remitting the entire matter to the adjudicating authority for the purpose of passing a fresh order, more particularly, being convinced as regards the export of goods - appeal allowed by way of remand.
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Indian Laws
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2021 (1) TMI 804
Condonation of delay in filing statements - Booked flats not delivered in time - Section 38(2)(a) of the Consumer Protection Act, 2019 - HELD THAT:- In the present matter, it is an admitted fact that the period of limitation of 30 days to file the written statement had expired on 12.08.2020 and the extended period of 15 days expired on 27.08.2020. This period expired when the order dated 23.03.2020 passed by this Court in SMW(C) No.3 of 2020 was continuing - the limitation for filing the written statement in the present proceedings before the National Commission would be deemed to have been extended as it is clear from the order dated 23.03.2020 that the extended period of limitation was applicable to all petitions/ applications/suits/appeals and all other proceedings. As such, the delay of four days in filing the written statements in the pending proceedings before the National Commission deserves to be allowed, and is accordingly allowed. It is directed that the written statement filed by the appellant shall be taken on record and the matter shall thereafter be proceeded with expeditiously and in accordance with law - appeal allowed.
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2021 (1) TMI 803
Dishonor of Cheque - insufficiency of funds - Respondent had not repaid the amount despite receipt of notice and neither did he reply to the said legal notice - acquittal of accused - Rebuttal of presumption - Whether the appellant has proved the guilt of accused thereby warranting a conviction of the respondent? - HELD THAT:- This Court will have to adjudicate on the theory putforth by the respondent as to a theory which is probable in defence and whether the same has been accepted and admitted by the appellant. When respondent tries to disprove the version of appellant he cannot merely make a statement of denial or posing certain suggestions that he does not owe any money to the appellant. The burden cast on the respondent is so heavy in view of the presumption under section 139 of the Act that while raising the probable defence it has to be more than a mere statement of denial, but it has to be a theory which can be believed by the Court and which is probable to the normal prudent man's understanding. Further, even if, such theory is not putforth by way of any document, the same should be accepted and admitted by appellant in cross-examination therefore, the presumption cast on the respondent under section 139 of the Act clearly says that unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability . Unless the contrary is proved it is for the respondent to establish by way of cogent evidence either orally or through document to the contrary thereby rebutting the presumption cast under section 139 of the Act. In the present case, it is the case of appellant that right from the date of issuance of legal notice on 15-9-2008, there is clarity when the loan amount was given, in what manner loan amount was given and the post dated cheque having been issued by the respondent on 1-8-2008 by mentioning the date as 16-8-2008 and in order to show abundant caution, the appellant has got indorsed behind the back of cheque, wherein the respondent has countersigned stating that he has received ₹ 3,00,000/- in cash and promises to honour this cheque. This fact of the matter of admitting the signature by respondent and cheque being drawn on the account of respondent and the countersignature at the backside of the cheque has not been disputed - In the present case on hand, it is an admitted fact with regard to issuance of cheque, signature on the cheque and the loan transaction thereby raising a presumption under section 139 of the Act that there exists a legal enforceable debt or liability. No doubt, the said presumption under section 139 of the Act is a rebuttable presumption. In the present case, there is no evidence by respondent which can show that the presumption has been rebutted and the theory put forward by the respondent with regard to Ex.D.1 is a believable theory. Ex.D.1 document is not an admitted document though the signature on the document is not denied. Merely admitting the signature on the document Ex.D.1, it does not prove the admission of contents and proof of the document. The other theory putforth by the respondent that Ex.P.1 was issued as security towards an earlier transaction is not a believable theory. In the absence of any material to show that there is existed any earlier transaction other than the present one stated by the appellant. The Court below has materially erred in not properly appreciating and considering the presumption in favour of complainant-appellant herein that there exists a legally enforceable subsisting debt or liability as per Section 139 of the Act. Further, it is relevant to note here that the trial Court has committed a serious error in shifting the burden of proof to prove the debt or liability and the existence of a debt without appreciating the mandate of legislation as laid down in Section 139 of the Act. Section 139 of the Act is an example of reverse onus clause and therefore once issuance of cheque has been admitted and signature on the cheque has been admitted and in this case transaction of loan is also admitted. There is always a presumption in favour of appellant-complainant that there exists a legally enforceable debt or liability and thereby the burden is on the respondent-accused to rebut such presumption by leading cogent evidence either oral of documentary. The appellant has proved the necessary ingredients of section 138 of the Act for conviction of respondent-accused for the offence punishable under section 138 of the Act - Respondent-accused herein is held guilty for the offence punishable under section 138 of the Act and he is convicted for the offence punishable under section 138 of the Act.
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