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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter January 30, 2019 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws Articles A view: Why ‘Intermediary Service provided to recipient located outside India’ cannot fall under ‘Inter-State Supply’ and Why IGST is not leviable there against? And alternatively, why such provision treating it as ‘Inter-State Supply’ will be unconstitutional? Comparative insight into the amended CGST and IGST Acts applicable w.e.f. 01.02.2019 News 15th Finance Commission Meets Representative of PRIs of Punjab 15th Finance Commission meets representatives of Urban Local Bodies of Punjab Ministry of Statistics and Programme Implementation signs a MoU with National Council of Applied Economic Research for improving the official statistical system in the country Banks to step up credit support to economy while consolidating 4R’s gains New Delhi Notifications Customs 06/2019 - dated 28-1-2019 - ADD Seeks to impose definitive anti-dumping duty on "Fluoroelastomers (FKM)" originating in or exported from China PR. 03/2019 - dated 29-1-2019 - Cus Seeks to further amend notification No. 50/2017-Customs dated 30th June, 2017 to prescribe effective BCD rate on Electric Vehicle (EV) and their specified part and raw material for manufacture of Lithium ion cells 02/2019 - dated 29-1-2019 - Cus Seeks to further amend notification No. 57/2017-Customs dated 30th June, 2017 to prescribe effective BCD rate on parts of power bank of Lithium ion and Battery pack of cellular mobile phones GST - States 77/2018-State Tax - dated 31-12-2018 - Himachal Pradesh SGST Amendment in Notification No. 73/2017-State Tax, dated the 16th January, 2017 76/2018-State Tax - dated 31-12-2018 - Himachal Pradesh SGST Notification to specify the late fee payable for delayed filing of FORM GSTR-3B and fully waive the amount of late fees leviable on account of delayed furnishing of FORM GSTR-3B for the period July, 2017 to September, 2018 in specified cases under the HPGST Act, 2017 75/2018-State Tax - dated 31-12-2018 - Himachal Pradesh SGST Amendment in Notification No. 4/2018– State Tax, dated the 30th January, 2018 73/2018-State Tax - dated 31-12-2018 - Himachal Pradesh SGST Amendment in Notification No. 50/2018-State Tax dated the 17th September, 2018 71/2018-State Tax - dated 31-12-2018 - Himachal Pradesh SGST Amendment in Notification No. 43/2018- State Tax, dated the 11th September, 2018 70/2018-State Tax - dated 31-12-2018 - Himachal Pradesh SGST Amendment in Notification No. 34/2018-State Tax, dated the 9th August, 2018 69/2018-State Tax - dated 31-12-2018 - Himachal Pradesh SGST Amendment in Notification Nos. EXN-F(10)-32/2017, dated the 9th October, 2017 and EXN-F(10)-32/2017, dated the 23rd October, 2017 68/2018-State Tax - dated 31-12-2018 - Himachal Pradesh SGST Amendment in Notification Nos. EXN-F(10)-22/2017, dated the 26th August, 2017 and 56/2017-State Tax, dated the 15th November, 2017 67/2018-State Tax - dated 31-12-2018 - Himachal Pradesh SGST Amendment in Notification No. 31/2018-State Tax, dated the 6th August, 2018 30/2018-State Tax (Rate) - dated 31-12-2018 - Himachal Pradesh SGST Insert Explanation in the Notification No. 11/2017- State Tax (Rate), dated the 30th June, 2017 29/2018-State Tax (Rate) - dated 31-12-2018 - Himachal Pradesh SGST Amendment in Notification No. 13/2017- State Tax (Rate), dated the 30th June, 2017 28/2018-State Tax (Rate) - dated 31-12-2018 - Himachal Pradesh SGST Amendment in Notification No. 12/2017- State Tax (Rate), dated the 23thJune, 2017 27/2018-State Tax (Rate) - dated 31-12-2018 - Himachal Pradesh SGST Amendment in Notification No. 11/2017- State Tax (Rate), dated the 30th June, 2017 26/2018-State Tax (Rate) - dated 31-12-2018 - Himachal Pradesh SGST Exempts the intra-State supply of gold falling in-heading 7108 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) 25/2018-State Tax (Rate) - dated 31-12-2018 - Himachal Pradesh SGST Amendment in Notification No. 2/2017-State Tax (Rate), dated the 30th June, 2017 24/2018-State Tax (Rate) - dated 31-12-2018 - Himachal Pradesh SGST Amendment in Notification No. 1/2017-State Tax (Rate), dated the 30th June, 2017 2/2018-State Tax - dated 31-12-2018 - Himachal Pradesh SGST Himachal Pradesh Goods and Services Tax (Second Removal of Difficulties) Order, 2018 04/2018-State Tax - dated 31-12-2018 - Himachal Pradesh SGST Himachal Pradesh Goods and Services Tax (Fourth Removal of Difficulties) Order, 2018 03/2018-State Tax - dated 31-12-2018 - Himachal Pradesh SGST Himachal Pradesh Goods and Services Tax (Third Removal of Difficulties) Order, 2018 Circulars / Instructions / Orders SEZ Instruction No. 92 - dated 17-1-2019 Request for permission to issue Provisional Membership Certificate to members of EPCES till the RCMC portal issue is resolved Highlights / Catch Notes GST Profiteering - major manufacturers of Fast Moving Consumer Goods (FMCG) - the Respondent had not passed on the benefit of tax reduction in respect of the 109 products supplied by him during the period - penalty proceedings initiated. Visit to Get Source Input Tax Credit (ITC) on vehicles - Whether they can utilize/ refund the ITC which is readily available in GST Portal, for the vehicles purchased by them for the purpose of their core business activity? - Held No. Visit to Get Source Income Tax Addition towards reimbursement of the salary and related expenses u/s 40(a)(ia) - the assessee merely reimbursed the expenditure in terms of salary structure of the employees to the employer company - not liable to TDS - no additions u/s 40(a)(ia) Visit to Get Source Nature of loss - capital loss or business loss - company in liquidation - assesssee claimed the same as business loss - Tribunal allowed the same as capital loss - decided against the revenue. Visit to Get Source Charitable activity - letting out of premises for Technical education to the trainees of Jet Airways, Tata Sky only and not to the public in general - It cannot be stated that the Assessee had undertaken any activity in the nature of commercial venture. Visit to Get Source Revision u/s 263 - AO has not applied his mind to the issue of share transactions for which the detailed information is available regarding the suspicious nature of the transactions - it is a case of absolute lack of enquiry but not a case of inadequate enquiry by him - revision order sustained. Visit to Get Source Penalty u/s. 271AAA - undisclosed income of the ‘specified previous year’ - the year in which search is conducted has also to be seen as the year in which the search is initiated and not the year in which it is concluded. Visit to Get Source Bogus share transactions - Addition u/s. 68 r.w.s. 115BBE - If it is to be held that assessee has routed his own unaccounted money, then there has to be some material to provide live link nexus to show that the unaccounted money has been routed under the garb of transaction of purchase and sale of shares - Additions deleted. Visit to Get Source Assessment of trust - Anonymous donations - CIT(A) in his order has noted that the Trust is totally religious charitable trust, hence, the provision of section 115BBC(1) shall not apply. Still he has proceeded to invoke the provision of section 115BBC(1) - Demand set aside. Visit to Get Source Deprecation on capital spares - spares have not been put to use during the relevant period - it is not in dispute that the capital spares were purchased and kept ready for use in case of emergency by the assessee and as such allowable expenses on account of depreciation Visit to Get Source Short-fall OR excess of TDS payment - the excess amount of tax can be claimed in the following quarters of the relevant year and the balance amount, if any, can be carried forward to the next year for claim in the TDS statement. Visit to Get Source Penalty imposed u/s 271AAB(1)(a) - The provisions of Section 271AAB automatically attracts and the proceedings are to be carried out/completed where a search and seizure operation is carried out in which the assessees have surrendered the amount u/s 132(4) Visit to Get Source Penalty u/s 271(1)(c) - loss on account of foreign exchange fluctuation - Mere rejection of claim made by the AO would not by itself lead to imposition of penalty under Section 271(1)(c) of the Act. Visit to Get Source Customs Effective BCD rate on Electric Vehicle (EV) and their specified part and raw material for manufacture of Lithium ion cells Visit to Get Source Effective BCD rate on parts of power bank of Lithium ion and Battery pack of cellular mobile phones Visit to Get Source Corporate Law Defaulting director of a ‘Vanishing Company’ - Restrictions / Penalties imposed by the SEBI - Non-executive director, not holding any share - there is material to indicate that the petitioner is an officer in default - respondent directed to remove the petitioner’s name as a defaulting director of a ‘Vanishing Company’, including from the list as published on its website. Visit to Get Source Indian Laws Enforcement of a foreign award - The Awards are enforceable against the respondents. The petitioner may proceed in execution of the Awards Visit to Get Source Dishonor of Cheque - Vicarious liability of Director u/s 141 of NI Act - it not being a case of the complainant that the petitioners were the signatories to the cheques in question, the order summoning them as accused merely on the allegations that they were “the directors” in the company accused at the relevant point of time is bad in law Visit to Get Source Dishonor of Cheque - Vicarious criminal liability u/s 141 NI Act, 1881 - the petitioners concededly being non-executive directors, in absence of any further averments as to their role in the company at the time of commission of the offences, the presumption u/s 141 NI Act cannot be raised against them. Visit to Get Source Service Tax Suo-moto Adjustment of excess service tax paid - The excess amount paid in the month of May, 2011 adjusted by the appellants in the subsequent months tax liability is absolutely in order. Visit to Get Source Reverse charge mechanism - Though the statute can, and does, deem the recipient to be the provider, there is no provision that deems the recipient to be the possessor of the intellectual property which, unlike the other services in the omnibus provision, is determined by the laws governing intellectual property - a strictly legal acknowledgement that cannot be disaggregated from the definition of a taxable service. Visit to Get Source Central Excise Penalty - failure to export the goods cleared without payment of duty under bond for exportation - In case revenue failed to monitor the submission of proof of export, the appellant cannot be saddled with the responsibility of suppression of fact - Demand confirmed, but no penalty. Visit to Get Source CENVAT Credit - returned goods - Rule 16 of CCR - When the ‘returned goods’ are subjected to process, which does not result into manufacture, the manufacturer shall pay an amount equal to the CENVAT Credit taken under sub-rule (1) of the said rules. Visit to Get Source CENVAT Credit - Job work - while the mould and dies were with the job worker, appellant sold it with adequate payment of VAT - Such a transfer with physical delivery of possession was not made but appellant had earned profit on sale of such mould and dyes in the guise of recovering the cost from General Motors. - Demand confirmed, but penalty set aside. Visit to Get Source CENVAT Credit - capital goods - moulds and dyes - even if the moulds and dies are kept with job worker for production of goods on behalf of manufacturer, such credit can be availed for an indefinite period. Visit to Get Source Case Laws: GST 2019 (1) TMI 1419 Profiteering - major manufacturers of Fast Moving Consumer Goods (FMCG) - benefit of reduction in the GST rate not passed on - contravention of provisions of Section 171 of the CGST Act, 2017 - Held that:- It is established that the Respondent had denied benefit of reduction in the rate of tax to his customers by increasing the base price exactly by the amount by which the tax was reduced and therefore, he had resorted to profiterring in violation of the provisions of Section 171 of the CGST Act, 2017. The Respondent had further compelled the recipients to pay additional GST on the increased price @ 18% and had he not increased the base price and charged additional GST his customers would have got benefit of further reduction in the MRP. Therefore, the additional amount of tax collected also amounts to profiteering made by the Respondent. It is quite clear that the Respondent had not passed on the benefit of tax reduction in respect of the 109 products supplied by him during the period between 15.11.2017 to 31.05.2018 and hence, it is established beyond doubt that the Respondent had resorted to profiteering of ₹ 6,06,752.72/-, as has been elaborated in Annexure-Il of the DGAP’s Report. The Respondent has not raised any objection against the calculation of the profiteered amount by the DGAP and hence this Authority determines the above amount as the profiteered amount. It has also been found that all the supplies were made by the Respondent in the NCT of Delhi. Imposition of penalty - Held that:- It is clear from the facts of the present case that the Respondent was fully aware of the provisions of Section 171 of the COST Act, 2017 as well as the Notification dated 14.11.2017 whereby he was bound to pass on the benefit arising due to reduction in the rate of tax to his customers. However, the Respondent has deliberately acted in defiance of the above law and hence he is guilty of the conduct which is contumacious and violative of the provisions of the above Section - appellant has committed offence under Section 122 (1) (i) of the CGST Act, 2017. Therefore, notice be issued asking him to explain why penalty should not be imposed on him. Application disposed off. 2019 (1) TMI 1418 Maintainability of condonation of delay application - period of limitation in filing first appeal - Section 107 of the UPGST Rules, 2017 - Held that:- In the instant case, there is no dispute as to the date of the communication order passed by the Assessing Authority which may be relevant for the purpose of start point of period of limitation to file an appeal - Consequently and clearly the first appeal filed by the petitioner against the order dated 03.12.2018 was beyond the period for which delay may have been condoned, by about nine days - there is no error in the order of the appellate authority dismissing the appeal as time barred. Process amounting to manufacture or not - activity of running a brick klin and that the entire production of bricks - Held that:- In the very nature of the activity of running that business, various qualities of bricks emerge in the manufacturing process, for various reasons - matter requires consideration - Notices issued. 2019 (1) TMI 1389 Admissibility of input tax credit of tax paid or deemed to have been paid on vehicles - Whether they can utilize/ refund the ITC which is readily available in GST Portal, for the vehicles purchased by them for the purpose of their core business activity? Held that:- The Input Tax Credit on the vehicles purchased by the applicant for the purpose of their business will fall under Section 17(5) - It is clear from the plain reading of the section, that the goods referred by the applicant do not fall under the exceptions referred in Section 17(5) of CGST / APGST Act, 2017. Hence the applicant is not entitled for claim of ITC. Income Tax 2019 (1) TMI 1417 Addition towards reimbursement of the salary and related expenses u/s 40(a)(ia) - TDS liability - Held that:- The facts on record would suggest that the amount in question was paid by way of reimbursement of expenditure. The employees and personnel deputed by the company giving such workers on loan to the assessee company continued to be the employer, the assessee merely reimbursed the expenditure in terms of salary structure of the employees to the employer company. There was, therefore, no question of deducting tax at source while reimbursing such costs. We notice that the Tribunal by the impugned judgment relied on its decision in case of this very assessee for earlier assessment year. This issue had travelled before this Court in CIT Vs. M/s. ITD CEM India Ltd which was dismissed by the High Court [2017 (9) TMI 740 - BOMBAY HIGH COURT] - No question of law. 2019 (1) TMI 1416 Reopening of assessment u/s 147 - notice issued beyond the period of four years from the end of the relevant Assessment Year as assessment completed under section 143(3) - change of opinion - Tribunal held that the reopening of the assessment u/s. 147 of the Act, was unjustified and incorrect?Held that:- Order of the Tribunal is not on account of change of opinion but on account of no failure to disclose fully and truly all material facts necessary for assessment in regular assessment proceeding, leading to an order under Section 143(3) of the Act. This the Tribunal held bars the Revenue from issuing reopening notice under Section 143(3) of the Act beyond a period of four years from the end of the relevant Assessment Year in terms of the proviso to Section 147 of the Act. In the above facts, no fault can be found with the setting aside of the reopening notice dated 28th March, 2011 issued in respect of an assessment completed under section 143(3) of the Act beyond the period of four years from the end of the Assessment Year 2004-05 in the absence of failure to disclose all material facts truly and fully in the regular assessment proceedings. Thus, no fault can be found with the impugned order of the Tribunal as it only follows the settled law. - Decided in favour of assessee 2019 (1) TMI 1415 TDS u/s 172 OR 194 - freight charges paid to agents of foreign shipping companies, under section 40(a)(ia) - Held that:- Payments made to agents of foreign shipping companies to whom Section 172 of the Act applies are subject to tax deduction at source under Section 195 of the Act. In support reliance was placed upon the decision of this Court in case of Commissioner of Income Tax, Panaji, Goa Vs. Orient (Goa) P. Ltd.(2009 (10) TMI 575 - BOMBAY HIGH COURT) wherein it was held that before the provisions of Section 172 of the act can be made applicable, the person making the payment has to be nonresident. A subsequent division bench of this Court in CIT vs. V.S.Dempo & Co. (P.) Ltd (2016 (2) TMI 308 - BOMBAY HIGH COURT) was not able to agree with the view of this Court in Orient (Goa) P. Ltd. Therefore made a reference to the full bench of this Court. Though the full bench of this Court in V.S.Dempo & Co. (P) Ltd. (supra) held that if the receiptant of the income is covered by Section 172 of the Act, then no occasion to deduct tax at source can be foisted upon the Indian company making the Revenue very fairly states that in view of the full bench decision in V.S. Dempo & Co. (P) Ltd. (supra) and the subsequent decision of this Court on an identical issue in Elve Corporation Vs. Assistant Commissioner of Income Tax 12(3), Mumbai and anr. (2018 (11) TMI 648 - BOMBAY HIGH COURT), the issue stands concluded in favour of the assessee and against the respondent-Revenue. 2019 (1) TMI 1414 Nature of loss - capital loss or business loss - company in liquidation - assesssee claimed the same as business loss - Tribunal allowed the same as capital loss - Held that:- the assessee having made investment and suffered losses in the process, had claimed such loss as a business loss. The Tribunal instead treated such loss on capital account and was urged to examine the alternative contention of the assessee that such loss in any case, would be recognized as a capital loss. The Tribunal merely accepted the same making reference to the decisions of the Supreme Court and also referring to Section 46(2) of the Act. No error in the view of the Tribunal. If the loss suffered by the assessee was treated as capital loss, there is nothing on record to hold that the assessee was not entitled to claim the same as such. Claim of the assessee would also get support from Section 46(2) of the Act. Section 46(1) of the Act provides that notwithstanding anything contained in Section 45, where the assets of a company are distributed to its shareholders on its liquidation, such distribution shall not be regarded as a transfer by the company for the purposes of Section 45. Disallowance of depreciation by adjusting the Written Down Value (WDV) of certain assets of the company - Held that:- The assessee has pointed out that in any case, such adjustment was carried out in the subsequent year. The Tribunal noted that in the later year, the assessee had suomoto made necessary adjustment and reduced its cost of depreciable asset. The Tribunal, therefore, held that there would be no revenue loss. The Tribunal, therefore, while accepting the assessee's contention, directed the Assessing Officer to verify necessary facts before granting relief. We do not find any reason to interfere. The Revenue does not dispute that the assessee had made adjustment in the claim of its depreciable asset in the later year. In the later year, the Revenue having accepted such adjustment, enforcing such adjustment in the present year also may amount to taxation the same income twice. In any case, the Tribunal recorded the issue is remained neutral. No question of law arises. - Revenue appeal dismissed. 2019 (1) TMI 1413 Addition of gift u/s 68 - AO did not accept the assessee's version of having received a gift and added the same as his income - Held that:- The perusal of the order of the CIT(A) would show that after taken into account the evidence on record, the Commissioner found that the source of gift, genuineness as well as creditworthiness of the donor were duly established. The entire issue is thus based on facts. The Revenue does not seem to have raised any objection before the Commissioner regarding placing reliance on additional evidence. In any case, the documents produced by the assessee were from the department itself or in the nature of bank statements. If the Assessing Officer who was admittedly participating in the appeal proceedings wanted to rebut such evidence, he could have insisted for such an opportunity being granted. 2019 (1) TMI 1412 Condonation of delay preferred under Section 119(2)(b) - reason for delay - Held that:- Authority ought to have put the information to the applicant/petitioner herein and ought to have afforded an opportunity to the petitioner to explain the information that was made available to the Authority by the AO. The very fact that the AO had reported the fact of the petitioner taking treatment makes out a prima facie case for the petitioner. That being the case, if the Authority desires to adversely infer based on the information furnished by the AO, then he ought to have put it to the petitioner before relying upon the said information to infer adversely. In that view of the matter, this Court is of the opinion that the 1st respondent-Authority ought to have disclosed and discussed the gist of the information that had been obtained by the Assessing Officer and upon which reliance has been placed. In that view of the matter, this Court is of the opinion that the order impugned is a non-speaking order. 2019 (1) TMI 1411 Charitable activity - letting out of premises for Technical education to the trainees of Jet Airways, Tata Sky only and not to the public in general - charitable activity v/s business activity - Held that:- The main object of the Trust is to impart education. For better utilization of its infrastructure, Assessee allowed the training programme of Jet Airways and Tata Sky, to be conducted at its premises and in the process, also participated in imparting training. It cannot be stated that the Assessee had undertaken any activity in the nature of commercial venture. As decided in assessee own case Assessee, was engaged in imparting education in the area of presea and postsea training to seamen and was not carrying out activity in nature of running coaching class. The first question as proposed by the Revenue is, therefore, not entertained. Accumulation u/s 11(2) - loan to other Trust of same objects without investing in modes specified in section 11(5) of the Act even though there is specific provision in section 13(1)(d) - Held that:- Delhi High Court in Director of Income Tax (Exemptions) v/s. ACME Educational Society [2010 (7) TMI 159 - DELHI HIGH COURT] held that grant of interest free loan by the Assessee Society, to another society for carrying on same activity, does not amounts either investment or deposit. Assessee would be entitled to exemption under the Act. This question, therefore, also is not required to be entertained. 2019 (1) TMI 1410 Deduction u/s 80IA - assessee-company is engaged in the business of paddy milling and sale of rice and its bi-products, apart from generation of bio-mass - AO has disallowed excess claim made by the assessee under section 80IA and the same is added to the total income of the assessee - Held that:- As decided in assessee own case [2017 (12) TMI 1396 - ITAT VISAKHAPATNAM] it is clear that for the purpose of 80IA, profit of eligible undertaking has to be determined on the basis of actual lending cost of electricity purchased by the assessee from Tamilnadu Electricity Board and the tribunal has come to a conclusion by following the decision in the case of Jindal Steel and Power Ltd. [2007 (6) TMI 308 - ITAT DELHI] and also the case Bombay Bench of the Tribunal in the case of West Coast Paper Mills Ltd. Vs. JCIT [2005 (6) TMI 547 - ITAT MUMBAI]. Reopening of assessment - Held that:- In this year, it is a third round of assessment, whereas for the remaining two assessment years, this is a second round of litigation. By observing the above, the ld. CIT(A) quashed the reopening by following the decision of the Tribunal. Before us, DR has not pointed out any error committed by the ld. CIT(A). He simply relied on the grounds. For the Assessment Year 2009-10 original assessment was completed under section 143(3) on 30/12/2010. Subsequently, the order was revised under section 143(3) r. w. s. 153C and 263 dated 17/05/2013 again assessment was reopened and assessment is completed under section 143(3) r. w. s. 147 of the Act dated 31/08/2016. For the remaining assessment years, assessments were completed under section 143(3) of the Act. Therefore, the CIT(A) came to a conclusion that it is a change of opinion and therefore, notice issued under section 148 of the Act is not valid. We find no reason to interfere with the order passed by the ld. CIT(A). 2019 (1) TMI 1409 Penalty u/s 271(1)(c) - validity of notice - whether Assessing Officer has initiated penalty proceedings for concealment of particulars of income or for furnished inaccurate particulars? - Held that:- The notice issued by the Assessing Officer is a vague notice and is liable to be quashed in the light of the decision of Smt. Baisetty Revathi [2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT] and also SSA’s Emerald Meadows [2016 (8) TMI 1145 - SUPREME COURT]. The coordinate bench in the case of Konchada Sreeram Vs. ITO [2017 (11) TMI 1164 - ITAT VISAKHAPATNAM]has considered the validity of notice by following the above referred to judgments and held that notice issued by the Assessing Officer is not a valid notice and accordingly quashed. Thus we hold that the notice issued under section 271 read with section 274 is invalid and, therefore penalty imposed by the Assessing Officer is cancelled. - Decided in favour of assessee 2019 (1) TMI 1408 Revision u/s 263 - lack of inquiry - exemption claimed u/s 10(38) disallowed due to the fault of the company - allowability of the exemption of the Long Term Capital Gain - Held that:- AO has not applied his mind regarding the allowability of the exemption of the Long Term Capital Gain. This is not the case of inadequate enquiry but is a clear case of lack of enquiry which makes it different from the case of Nirav Modi [2016 (6) TMI 1004 - BOMBAY HIGH COURT]. Obtaining of the information about the transaction cannot be taken as akin to enquiring about the information. This is a clear case of no enquiry for which the PCIT has rightly invoked the provisions of Section 263. PCIT has clearly brought about the error in the assessment order and has also directed the Assessing Officer to take remedial action to take action as per the law after providing due opportunity to the assessee. Thus, it can be said that the PCIT has not exceeded his jurisdiction nor directed the AO to pass the assessment order in any particular way thus not interfering in the judicial function of the AO. It can be observed that the AO has not conducted any enquiry and this is a clear case of lack of enquiry not a case inadequate enquiry. Further non application of mind by the AO can be easily gauzed from the fact that the information available with the AO has not been utilised during the assessment proceedings which makes the case fit for applying the provisions of explanation 2 (a) of section 263. The judgment of the Apex Court in the case of Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] wherein the action under section 263 is upheld when the Assessing Officer has accepted the statement of account filed by the Assessee without making any enquiry, the judgment of Hon’ble Supreme Court in the case of Daniel Merchants Pvt. Ltd. [2017 (12) TMI 476 - SUPREME COURT] which held that in the case where AO did not make any proper enquiry, the PCIT is correct in directing the Assessing Officer to carry thorough and detailed enquiry. On going through the questionnaire, assessment order, we have no hesitation to say that the Assessing Officer has not applied his mind to the issue of share transactions for which the detailed information is available regarding the suspicious nature of the transactions. Accordingly to us, based on the facts and circumstances, the case before us is a case of absolute lack of enquiry but not a case of inadequate enquiry by him. Hence, order passed u/s 263 of the act by the Id CIT is upheld and appeal of the assessee is dismissed. 2019 (1) TMI 1407 Revision u/s 263 - rectification of mistake - jurisdiction of section 254(2) - Held that:- Where during the course of hearing, the attention of the Bench was drawn to the written submissions or certain specific facts stated therein and then, in such a scenario, the Tribunal has not considered the same, it can be a case while may fall under jurisdiction of section 254(2). However, where there is nothing on record that attention of the Bench was drawn to the written submissions during the course of hearing and where the Tribunal has considered the verbal contentions so advanced by the ld AR, in our view, there is no interference which is called for in terms of section 254(2) of the Act. In the instant case, the attention of the Co-ordinate Bench was drawn to the decision passed by the AO u/s 143(3) for AY 2006-07 and in the said order, there is no discussion regarding the issues which have come up for consideration before the Co-ordinate Bench being the subject matter of impunged order u/s 263, we donot think there is any mistake which has been committed by the Coordinate Bench where it states that the contention regarding the past history and rule of consistency doesn’t help the case of the assessee. In light of above discussions, we are of the considered view that the contention of the ld AR where accepted will amount to a review of the order passed by the Co-ordinate Bench and will fall outside the jurisdiction of the Tribunal u/s section 254(2) of the Act. 2019 (1) TMI 1406 Rejection of books of accounts - addition u/s 40(a)(ia) and 40A(3) - Estimation of N.P. rate - Held that:- Once books of account are rejected u/s 145(3) of the Act and income is derived at certain %age of gross receipt then there is no further scope for any further disallowance including u/s 40(a)(ia) and 40A(3) of the Act as made in the instant case. Hence, we do not have any hesitation to delete the additions. Being a subcontractor, the assessee firm was supposed to work on terms and conditions where maximum part of the receipts was taken by the main contractor as the conditions of contract work vary from contract to contract as also the profitability changes depending upon such conditions. Moreover, depreciation and interest charges debited in the accounts never been considered by the Assessing Officer. It is undisputed fact that the working in the state of J&K is not congenial and all the time depends upon the natural calamities as well as terrorist activities, hence in the aforesaid circumstances, in our considered opinion the estimation of net profit rate @6% on the gross receipt would be quite reasonable and would meet the ends of the justice. Induction of capital from partners - rectification of mistake - Held that:-CIT(A) while deleting the addition of ₹ 3,00,000/- and ₹ 5,00,000/- relied upon the enquiry independently held by the A.O. in which Sh. P.K. Zalpuri has confirmed the transactions and further ld. CIT(A) has observed that the partners have inducted this amount in the books of account of the appellant firm but there was a mistake on the part of the Accountant of the appellant firm who has shown these amounts as loan to the appellant firm from Sh. P.K. Zalpuri instead of showing them as induction of capital from partners. It was further observed by the ld. CIT(A) that it was stated by the appellant that mistake was subsequently rectified in the F.Y.2009-10. Finally, finding the explanation as reasonable and convincing and since the identity, creditworthiness and genuineness of transactions from Sh. P.K. Zalpur has been established, the ld. CIT(A) deleted the said addition correctly - Decided against assessee. 2019 (1) TMI 1405 Penalty u/s. 271AAA - undisclosed income of the ‘specified previous year’ - "Sakhare” is a person different from the assessee - Held that:- In the absence of any specific prefix used to the term ‘search’ in clause (b) of the Explanation defining ‘specified previous year’, we can assign only one meaning to the word ‘search’ in both the sub-clauses. Going with our interpretation, the year in which search is conducted has also to be seen as the year in which the search is initiated and not the year in which it is concluded. The word 'conduct’ means to execute. A search is conducted when it actually takes place. We cannot say that a search is conducted on its conclusion. The ‘specified previous year’ under clause (b)(ii) of the Explanation to section 271AAA means the previous year in which the search was initiated. As the search in this case was initiated on 11-02-2009, which falls in the previous year ending 31-03-2009, the assessment year 2009-10 becomes the relevant previous year. It is thus held that the assessment year 2009-10 under consideration is the ‘specified previous year’ in terms of Explanation (b)(ii), being, the previous year in which the search was conducted. In that view of the matter, we do not find any infirmity in the passing of the instant penalty order u/s.271AAA for the assessment year 2009-10. The contention raised by the assessee in this regard is thus repelled. AO did not impose any penalty u/s 271AAA on the income ₹ 2.07 crore. Further, there is no whisper whatsoever on this score in the penalty order passed by the AO u/s 271AAA of the Act. In fact, the AO considered such income of ₹ 2.07 crore in his penalty order separately passed u/s 271(1)(c) of the Act. Under such circumstances, the enhancement power of the ld. CIT(A) cannot be extended to income of ₹ 2.07 crore. This legal issue is settled in favour of the assessee. It is observed from the relevant seized document that the income, representing figures which appear under the name of the assessee totaling up to ₹ 2.77 crore, was promptly offered for taxation. Then there are certain figures appearing under the name of 'Sakhare’, which total up to ₹ 2.07 crore. It is this item of income on which the assessee has disputed the imposition of penalty on the ground that it did not pertain to him. There is no dispute on the fact that 'Sakhare’ is a person different from 'Kakade’, namely, the assessee. Page number 57 onwards of the paper book is a copy of registered Transfer deed dated 20th September 2011 in respect of a bungalow at Jalbaug Co-operative Housing Society Mumbai. This Transfer deed has been executed between “Sakhare” and the 'Kakade’, namely, the assessee on one hand and one Shrimati Anita J. Suri, on the other. This Transfer deed also mentions Permanent Account Number of Sh. Sakhare as distinct from the assessee. Not only that, even photographs of Shri Sakhare and the assessee have been incorporated on such a Transfer deed. It thus becomes crystal clear that “Sakhare” is a person different from the assessee. If there is certain undisclosed income pertaining to “Sakhare”, the same cannot be included in the income qualifying for penalty imposable on the assessee u/s 271AAA even though such an income got assessed in his hands. We therefore, order to delete penalty on income of ₹ 2.77 crore. Appeal of the assessee is partly allowed. 2019 (1) TMI 1404 Bogus share transactions - Addition u/s. 68 r.w.s. 115BBE on account of sale of equity shares - assessee had declared Long Term Capital Gain on sale of shares which was claimed as exempt u/s. 10(38) - Held that:- Nowhere there is any discussion or whisper that there is any material or information with the Department that assessee’s name has appeared as a beneficiary of accommodation entry in any kind of inquiry or investigation conducted by the Department or assessee has routed his unaccounted money in the garb of Long Term Capital Gain. In this case, addition has been sought to be made u/s.68 which postulates that assessee has to prove the nature and source of credit appearing in his books of account. Here, from the perusal of the nature of credit, it is seen that the same has come through sales of shares which fact has also not been doubted by the Department. The source of money is through broker who has undertaken the transaction of the shares lying with the assessee purchased in the earlier years and same has been sold after paying due taxes in the form of STT. Thus, nature of the credit stands fully explained. If it is to be held that assessee has routed his own unaccounted money, then there has to be some material to provide live link nexus to show that the unaccounted money has been routed under the garb of transaction of purchase and sale of shares. If the availability of shares is not in doubt then the sale of the same also cannot be doubted in wake of the evidences as discussed above. - Decided in favour of assessee. 2019 (1) TMI 1403 Penalty u/s 271(1)(c) - Revision u/s 263 - accepting the claim of the assessee that the lease rent was rightly shown by it under the head “Income from House property”, had thus allowed excess claim of deduction under Sec. 24(a) - Held that:- CIT-A had merely initiated penalty proceedings for furnishing of inaccurate particulars of income, but had nowhere recorded his satisfaction as to furnishing of inaccurate particulars of income by the assessee, therefore, the same suffers from a jurisdictional defect, which in our considered view renders the penalty imposed by him under Sec. 271(1)(c) as invalid in the eyes of law. As observed the provisions of Sec. 271(1B) would not be applicable in the case before us wherein penalty proceedings under Sec. 271(1)(c) had been initiated by the Pr. CIT in his order passed under Sec. 263, therefore, the aforesaid judicial pronouncements would hold the ground in respect of the abovementioned proposition of law. We thus in terms of our aforesaid observations are of the considered view that the Pr. CIT-2, Jalandhar had wrongly assumed jurisdiction and imposed penalty under Sec. 271(1)(c) in the hands of the assessee. We thus in terms of our aforesaid observations conclude that as the imposition of penalty under Sec. 271(1)(c) by the Pr. CIT-2, Jalandhar suffers from a jurisdictional defect, therefore, the same cannot be sustained and is herein quashed. 2019 (1) TMI 1402 Assessment of trust - Anonymous donations to be taxed in certain cases u/s 115BBC - assessee is a charitable Trust duly registered u/s.12A - Held that:- CIT(A) in his order has noted that the Trust is totally religious charitable trust, hence, the provision of section 115BBC(1) shall not apply. Still he has proceeded to invoke the provision of section 115BBC(1). We find that this is quite contradictory when the ld. CIT(A) has found that the assessee is falling under section 115BBC(2), then the provision of section 115BBC(1) are not applicable. Hence, the impugned amount cannot be subject to tax u/s. 115BBC. Hence, we set aside the orders of the authorities below and decide the issue in favour of the assessee. 2019 (1) TMI 1401 Disallowance of Employee stock option scheme Compensation - allowable revenue expenditure - Held that:- ESOP has been treated as Revenue expenditure. The Revenue did not bring any contrary decision against the Special Bench decision in case of Biocon Ltd. (2013 (8) TMI 629 - ITAT BANGALORE). It is not the case of Revenue that the decision of Special Bench of ITAT has been either set aside or reversed by Hon’ble Karnataka High Court. Keeping all we find that the CIT(A) has rightly decided the issue in favour of the assessee with certain directions to the AO. - Decided against assessee. Addition u/s 14A - relevant factor in determining the deduction - dominant object for which the investment into the shares made - Held that:- Hon’ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT (2018 (3) TMI 805 - SUPREME COURT OF INDIA) has categorically held that the dominant object for which the investment into the shares is made by the assessee may not be relevant. It is also held that the investment made in order to gain control of the investee company would not be relevant factor in determining the issue u/s. 14A. We, however, observe from the order of the Assessing Officer that the assessee in his computation of disallowance u/s. 14A filed before the AO has not even included such investments, from which he has earned the exempted income. The matter back to the file of the Assessing Officer to recomputed the disallowance u/s. 14A read with Rule 8D, after considering the decision of Hon’ble Apex Court in the case of Maxopp Investment (supra). The assessee is also directed to furnish complete details of investments as required by the assessing officer for correct computation of disallowance u/s. 14A. Accordingly, this ground is allowed for statistical purposes. 2019 (1) TMI 1400 Addition u/s 36(1)(iii) - loans given to the related parties/ corporate bodies without charging any interest - proof of commercial expediency - Held that:- CIT-A, has given a categorical finding that the amount of INR 3,500,000 were part of the original business advances given by the assessee to the sister concern for the purchase of refrigerated vehicle as a business advance. Even otherwise the finding of the learned CIT – A, cannot be disputed by the learned departmental representative that the above order was given by the assessee out of the door interest-bearing funds. No infirmity in the order of the learned CIT – A, in deleting the disallowance out of the interest expenditure on account of advances given to unrelated party. Accordingly, ground number 1 of the appeal of the revenue is dismissed. Non-deduction of TDS u/s 195 - tds on commission payment to its foreign agent for rendering sales and marketing services abroad assessee had deducted TDS on part payment but not on balance payment - Held that:- Undisputedly the assessee has made commission payment to its foreign agent for rendering sales and marketing services abroad for the purposes of the products to be sold to the dairy development Board, Nepal. It is also undisputed that the foreign agents have rendered the services abroad and none of the agent has any fixed base in India. Therefore, it, it can be concluded that the amount paid to them was not taxable in India and thus there was no requirement to deduct tax at source. Therefore, it is apparent that such payment did not entail any tax liability under the income tax act, as well as the double taxation avoidance agreement between India and Nepal. Further the honourable Gujarat High Court has held that the fundamental principle of deducting the tax at source in connection with the payment only arises when the sum is chargeable to tax under the act. Therefore respectfully following the decision of NOVA TECHNOCAST PVT LTD [2018 (5) TMI 1182 - GUJARAT HIGH COURT]. We confirm the finding of the learned CIT – A, where the disallowance has rightly been deleted - decided in favour of assessee. 2019 (1) TMI 1399 Deprecation on capital spares - Held that:- deprecation u/s 32 of the Act on capital spares is allowable expenses even though they have not been put to use during the relevant period. In the instant case, it is not in dispute that the capital spares were purchased and kept ready for use in case of emergency by the assessee and as such allowable expenses on account of depreciation claimed by the assessee on capital spares. Disallowance of expenses on the ground that the business has not been commenced during the previous year and as such not allowable - expenditure from the date of commencement of its business or from the date of setting up of the business? - Held that:- In the instant case, business of the assessee was set up from the date of entering into agreement for acquisition of the fertilizer plant and without expert legal and financial opinion the entire deal would not have been through. The moment the assessee has taken first step for setting up the business, it is established that the business has been set up and the assessee became entitled for expenses of the previous year. Such expenses are to be treated as business expenses from the date of setting up of the business which is certainly 03.11.2005. Moreover, finance of the assessee company are audited one and no mistake has been pointed out. So, we are of the considered view that the AO as well as CIT (A) have erred in disallowing the expenses, hence expenses of ₹ 29,68,000/- are ordered to be allowed as business expenses incurred for setting up the business of the assessee company during the previous year Addition on account of prior period income - invoking provisions contained u/s 154 to make the addition as noticed that in the computation of income, assessee has reduced the prior period income from the total income during the year under assessment - Held that:- This addition made by the AO is not sustainable for two reasons : one, that when the computation of income was there before the AO at the time of completion of assessment u/s 143 (3) of the Act, the same cannot be treated as a mistake apparent on record as it needs detailed investigation by providing an opportunity of being heard to the assessee; and two, that it is still a debatable issue if the prior period income can be added as income u/s 154 of the Act. Moreover, it is revenue neutral because the assessee company is running into loss. So, in these circumstances, the addition made by the AO is not sustainable Addition u/s 14A read with Rule 8D (iii) - Sufficiency of own funds - Held that:- As assessee was in possession of sufficient interest free funds at its disposal to make investment. In these circumstances, we are of the considered view that disallowance u/s 14A in this case cannot be more than ₹ 5,403, the exempt income earned during the year under assessment. So, AO is directed to disallow the amount of ₹ 5,403/- only instead of ₹ 1,25,000/-. Addition invoking the provisions u/s 43B - non-payment of statutory dues of outstanding sales-tax pertaining to the month of March, 2010 before the due date of filing the return of income - Held that:- In the instant case, since assessee has got outstanding dues on account of salestax converted into loan by the Government of UP (through PICUP), the assessee is held to have complied with the provisions contained u/s 43B of the Act. So, we are of the considered view that the assessee is entitled for deduction thereof Entitled for depreciation on intangibles as well as depreciation on assumed intangibles - slump sale - AO disallowed the depreciation on the sole ground that when depreciation on the tangible assets has already been availed of by the assessee, no depreciation on intangible is allowable - Held that:- When in the valuation report, which is given by PDIL, a Government of India Undertaking, intangibles assets and their benefits have been specifically valued and the assessee had paid a sum of ₹ 125 crores in a slump sale agreement for approvals, licences, permits, registration to run the business over and above the total price of fertilizer plant i.e. ₹ 1,444 crores, the same are intangibles and deprecation thereon is allowable u/s 32(1)(ii) of the Act apart from the depreciation claimed by the assessee on tangible assets Claim of preliminary expenses made u/s 35D - Held that:- No ambiguity that the amount claimed by the assessee u/s 35D(2)(c)(iii) was incurred towards registration of the company as a new concern and not for increasing authorized share capital. So, in these circumstances, the decision rendered in CIT vs. Hindustan Insecticides Ltd. [2001 (2) TMI 75 - DELHI HIGH COURT], relied upon by the AO, is not applicable to the facts and circumstances of the case. So, ld. CIT (A) has rightly deleted the addition made by the AO qua claim of preliminary expenses made u/s 35D and as such, there is no scope to interfere into the findings returned by the ld. CIT (A). Addition going through the confirmation of the creditors, namely, Indian Oil Corporation (IOC) on the ground that the same has not been accounted for credit note dated 31.1.2007 till 31.03.2007. - CIT (A) deleted the addition on the ground that when the same amount has been accounted for in the subsequent years and in both the assessment years, the net result is loss then there is no justification in disallowing the amount in question in assessment year in question - This is a factual issue decided by the ld. CIT (A) and there is no need to interfere into the findings returned by the ld. CIT (A), Allowability of prior period expenses - assessee itself has admitted before AO when confronted that the amount was erroneously netted and offered to be added for computation of taxpayer’s income Held that:- As when the assessee has erroneously netted the amount of prior period expenses the question of allowing the same as prior period expense does not arise. Addition @10% as expenses under the head ‘vehicle repair and maintenance’ in order to exclude personnel expenses booked under it - Held that:- Order passed by the ld. CIT (A) deleting the addition of ₹ 7,96,706/- shows that the ld. CIT (A) after appreciating the fact that the assessee company is situated at Shahjahanpur and its headquarter is at Noida and assessments are made at Bareilly and its appellate jurisdiction is at Delhi and Lucknow and it is having large work force, the travelling is commercial necessity. Moreover, the ld. CIT (A) has rightly observed that there is no evidence or material available with the AO to work out personnel use of vehicle rather he has proceeded to estimate the same which is not permissible when accounts of the assessee are audited one and has been duly accepted by the Revenue Penalty u/s 271(1)(c) - addition on account of sales-tax not paid & disallowed u/s 43B and disallowance of depreciation on spare parts - Held that:- Perusal of penalty order goes to show that the penalty has been levied by the AO for concealment of particulars of its income and furnishing of inaccurate particulars of income. It is settled principle of law that in order to initiate the penalty proceedings, a valid show-cause notice as required u/s 271(1)(c) read with section 274 is required to be issued to the assessee so as to make him aware as to under which limb of section 271(1)(c) the penalty is going to be levied. But, in the instant case, AO even at the time of passing the penalty order was not aware “if the assessee has concealed the income or has furnished inaccurate particulars of its income rather preferred to levy the penalty on both the accounts”. See CIT vs. Manjunatha Cotton and Ginning Factory & Ors. [2013 (7) TMI 620 - KARNATAKA HIGH COURT]. CIT (A) has rightly deleted the penalty on this account. Furthermore, when as per our findings returned in the preceding paras while deciding the grounds in the respective appeal filed by the assessee, the addition on the basis of which penalty has been levied, has been deleted, penalty cannot survive and as such, has to be deleted. 2019 (1) TMI 1398 Addition made u/s 41(1) - CIT-A deleted the addition accepting fresh evidence such as detailed ledger extracts of all the sundry creditors as well as the copies of the civil suits - whether violation of Rule 46A of the Income Tax Rule - Held that:- AO treated the sundry creditors as income of the assessee and added to the total income returned. During the course of appellate proceedings, the assessee filed detailed schedules of outstanding sundry creditors as on 31.03.2014 in the books of accounts. The assessee also furnished detailed ledger extracts of all the sundry creditors as well as the copies of the civil suits filed by a large number of creditors for recovery of their dues from the assessee company. By considering the above details furnished by the assessee and without obtaining any remand report from the Assessing Officer, the ld. CIT(A) deleted the addition which is, in violation of Rule 46A. Accordingly, we set aside the order of the ld. CIT(A) and remit the entire issue to the file of Assessing Officer to examine and verify the evidences - Decided in favour of assessee for statistical purposes. 2019 (1) TMI 1397 Carry forward of unabsorbed depreciation - limitation of six years - Held that:- Special Leave Petition is dismissed. 2019 (1) TMI 1396 Reopening of assessment - additional ground raised - validity of reasons recorded by the AO - bogus purchases - Held that:- SLP dismissed. 2019 (1) TMI 1395 Reopening of assessment - taxability of anonymous donations received in Hundies maintained by the temple trust under Section 115BBC - eligible reason to believe that income had escaped assessment - Held that:- The grievance that the High Court ought to have dealt with the challenge to the reopening of the assessment on the ground that there was no reason to believe that income had escaped assessment has to be appreciated in the context of the facts of the present case. The applicability of Section 115BBC is the central issue which is pending before the CIT (A) for Assessment Year 2015-16. In this view of the matter, we are of the view that the High Court has justifiably held that it would not be appropriate to exercise jurisdiction under Article 226 when the same issue is already pending before the CIT (Appeals) for Assessment Year 2015-16. As Mr. Ganesh urged that if an order of assessment is passed in the present case, the appellant would inevitably be relegated to pursue the remedies to seek a stay of recovery and hence it would be appropriate if the High Court is directed to decide the issue afresh we are not inclined to accede to that submission. We find that the High Court was justified in deciding not to enter upon a decision on an issue which is pending before the Commissioner of Income Tax (Appeals). Thus we direct as Assessing Officer shall complete the assessment for Assessment Year 2013-14 pursuant to the notice for reassessment which has been issued on 23 March 2018, in accordance with law. The issue as to whether the notice under Section 148 for reopening the assessment for Assessment Year 2013-14 is valid is kept open to be urged in appropriate proceedings after the assessment order is passed 2019 (1) TMI 1394 Penalty levied u/s 271(1)(c) - loss on account of foreign exchange fluctuation - claim as revenue expenditure disallowed - Held that:- This was a case where there was difference of opinion in the manner in which loss on account of foreign exchange fluctuation is to be treated. This being a pure difference of opinion is further corroborated by the fact that all details of the claim made were available with the Assessing Officer at the time of regular assessment proceedings. Mere rejection of claim made by the AO would not by itself lead to imposition of penalty under Section 271(1)(c) of the Act. The explanation offered by the respondent was found to be reasonable No suppression of facts and all particulars of its income were disclosed by the respondent in its regular assessment proceedings. Thus, merely disallowance of claim made by the Assessing Officer cannot by itself justify an imposition of penalty as held by the Apex Court in Reliance Petro Products Ltd (2010 (3) TMI 80 - SUPREME COURT). - Decided in favour of assessee. 2019 (1) TMI 1393 Disallowance u/s 36(1)(iii) - providing loan to its subsidiary and not reporting interest on it - commercial expediency - Held that:- As decided in Commissioner of Income Tax vs. Dalmia Cement (Bharat) Ltd [2001 (9) TMI 48 - DELHI HIGH COURT] once it is business, revenue cannot justifiable claim to put itself in the armchair of the businessman and assume the role to decide how much is reasonable expenditure having regarding to the circumstances of the case, No businessman can be compelled to maximize its profits. The authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. We have to see the transfer of the borrowed funds to the sister concern from the point of view of commercial expediency and not form the point of view whether the amount was advances for earning the profit The grounds of commercial expedience are now well established in tax jurisprudence. The position of the CIT(A) and its affirmation by the ITAT are essentially based upon a fact appreciation that the assessee forewent interest. As to whether there was an element of sacrifice and if so, for what purpose, is not for the Court to consider, given that the loans obtained by the assessee were for its business purposes. There is nothing on record to dispel/undermine the findings of the lower Appellate Authorities that commercial expedience dictated the nature of the transactions. - Decided against revenue 2019 (1) TMI 1392 Penalty imposed u/s 271AAB(1)(a) - amount admitted under disclosure statement u/s 132(4) - amount offered by the assessee suo motto to buy peace of mind - Penalty where search has been initiated - Held that:- As discussed the provisions containing u/s 271AAB of the Act, it is justified to hold that ₹ 75,00,000/- is undisclosed amount, that the assessee shall pay penalty u/s 271AAB of the Act @ 10% under clause (a) of sub-section (1) of section 271AAB of the Act for the reasons set out hereunder under:- [1]. Search action u/s 132 initiated u/s 132 on or after 01.06.2012; [2]. The assessee has made disclosure of undisclosed income during the course of search action, has paid the tax together with interest and filed return of income; and [3]. The assessee substantiated the manner in which the undisclosed income and in view of the above, the order of CIT(A) is justified, sole Ground raised by the assessee is dismissed. Regarding the decisions relied on by the Ld.AR, which were considered by us and the principles canvassed by the Ld.AR does not come to the rescue of the present case in view of our discussion made herein above at para 15 of this order. Regarding striking out relevant charge, the notice issued u/s 274 of the Act is of no relevance in view of our finding at para 17. - Decided against assessee 2019 (1) TMI 1391 Short-fall OR excess of TDS payment - interest payable under section 201(1A) and 220(2) - adjustment of the excess deposit of TDS made in the earlier year against the TDS payable for the subsequent year - assessee in the present case is a Government of India Undertaking, which undertook modernisation work - as per assessee he had paid excess TDS at any stage during the relevant period of eleven financial years, but the Assessing Officer selected only five years, wherein there was a short-fall in the deposits of TDS on yearly basis and charged interest under section 201(1A) without considering that the excess amount of TDS deposited by the assessee for the earlier year/(s) was available for adjustment Held that:- D.R. case, is that the position is required to be considered year-wise and the short-fall in deposit of TDS is required to be considered in respect of each year separately without adjusting the excess deposit of TDS made by the assessee in the earlier years. In our opinion, this stand taken by the revenue authorities is contrary to the communication issued by the CPC(TDS) on 10.09.2014, which has clarified with an example that in case tax has been deposited more than the required tax deducted at source for a particular assessment year, the excess amount of tax can be claimed in the following quarters of the relevant year and the balance amount, if any, can be carried forward to the next year for claim in the TDS statement. As observed that section 245 of the Act duly authorises the concerned Income Tax Authority to set off the amount of refund or any part of that amount due to any person under any of the provisions of the Act against the sum, if any, remaining payable by the Act by the person to whom the refund is due. It is thus clear that the refund due to any person under the provisions of the Act for one year can be adjusted against the tax liability for the other year and the concerned authorities are duly authorized to make such adjustment. In the case of Motion –vs.- CIT [2013 (3) TMI 316 - DELHI HIGH COURT] as taken note of this procedure prescribed under section 245 of the Act and directed the Assessing Officer to adjust the past arrears due to the assessee against the tax liability of the subsequent years. We hold that the assessee is entitled for adjustment of the excess deposit of TDS made in the earlier year against the TDS payable for the subsequent year/(s). We accordingly set aside the impugned order of the ld. CIT(Appeals) on this issue and direct the Assessing Officer to recompute the amount payable/ refundable to the assessee on account of TDS for the years under consideration after making such adjustment. Claiming interest under section 244A on the refund, if any, due to the assessee for excess deposit of TDS - additional ground - Held that:- Since this issue raised by the assessee is purely a legal issue and all the facts relevant to decide the said issue are available on record, the additional ground raised by the assessee is admitted by considering case of National Thermal Power Corporation Limited [1996 (12) TMI 7 - SUPREME COURT]. Since this issue is raised by the assessee for the first time before the Tribunal and the Assessing Officer is required to be given an opportunity to examine/verify the same from the relevant facts available on record as rightly contended by the ld. D.R., we restore this issue to the file of the Assessing Officer for consideration in accordance with law. 2019 (1) TMI 1390 Addition on account of excess debit of discount in Profit & Loss A/c - admissibility of additional evidences even after lapse of 6 years’ time - Held that:- The additional evidences were sent to the Assessing Officer for remand report, but he did not send any remand report on the admissibility of additional evidences even after lapse of 6 years’ time. Therefore, the CIT(A), after giving several reminders, has rightly observed that the AO had nothing to say on the admissibility of additional evidences. CIT(A) has rightly deleted the additions after relying on various judicial precedents. As a result, the appeal of the Revenue deserves to be dismissed. Customs 2019 (1) TMI 1388 Levy of Safeguard Duty - capacity utilisation of the applicant is 85% - injury on account of imports - Held that:- Issue Notice returnable on 23rd January, 2019. By way of ad-interim relief, the sixth respondent is directed to assess the provisional safeguard duty payable by the petitioner relating to bills of entries referred to at Annexure-P-14 to the petition, and further import of solar cells and modules in accordance with section 18 of the Customs Act and release the goods without insisting upon payment of safeguard duty on executing a bond. Such bond shall be executed by an authorised officer of the company. Direct service is permitted qua the respondent No. 6. Corporate Laws 2019 (1) TMI 1387 Defaulting director of a ‘Vanishing Company’ - Restrictions / Penalties imposed by the SEBI - Non-executive director, not holding any share - Held that:- It is apparent from the averments made in the petition that the petitioner cannot be held as a defaulting director of a vanishing company. In this view, the petition is allowed and respondent no.1 is directed to remove the petitioner’s name as a defaulting director of a ‘Vanishing Company’, including from the list as published on its website. However, if the respondent no.1 is of the view that there is material to indicate that the petitioner is an officer in default, it will be open for respondent no.1 to issue a separate show cause notice indicating the material on which such a view is premised and take an appropriate decision after hearing the petitioner. All contentions of the parties in this regard are reserved. 2019 (1) TMI 1386 Disqualifying the petitioners in striking off the name of the company from the register of companies - Mandatory requirement under Section 248(1), upon the Registrar of Companies to send a notice - Held that:- Mandatory requirement under Section 248(1), upon the Registrar of Companies to send a notice to the company and all directors of the company, it has been contended by the petitioners that such notice had to be issued and served in the manner prescribed by law i.e. in compliance with Rule 3(2) of the Companies (Removal of Names of Companies from the Registrar of Companies) Rules, 2016. The petitioners contend that this has not been done and that the action of the respondents in disqualifying the petitioners in striking off the name of the company from the register of companies cannot be sustained for this reason as well. On behalf of the respondents, the learned counsel disputes all these submissions made on behalf of the petitioners. It is submitted, upon instructions from the Registrar of Companies, that notices under Section 248(1) have been sent to the Companies and the directors. It cannot be denied that the issues raised in this writ petition require adjudication and are of grave importance so far as the working of the spirit, intendment and object of the Companies Act, 2013, more specifically the manner in which the respondents would operate Sections 164 and 248 of the enactment. Issue notice to the respondents. The learned counsel accepts notice on behalf of the respondents. Till the next date of hearing, there shall be a stay of the notices dated 6th September, 2017 and 12th September, 2017 whereby the petitioners were declared disqualified as Director under Section 164(2)(a) of the Companies Act, 2013. The DIN numbers as well as digital signatures of the petitioners shall be forthwith revived. It also cannot be denied that so far as the legal submissions are concerned, several other writ petitions have raised identical questions of law and for this reason, are required to be heard together. We, therefore, direct that an individual counter affidavit dealing with the factual averments in this writ petition shall be filed separately within a period of two weeks from today. The full details of the issuance and service of the notice(s) shall be placed on record with copies of the supporting documents. Rejoinder thereto, if any, shall be filed before the next date of hearing. Service Tax 2019 (1) TMI 1385 Maintainability of petition - requirement with the pre-deposit - availability of appellate remedy - section 35F of the Central Excise Act, 1944 read with the provisions of section 86 of the Act - percentage of completion (POC) sales - validity of SCN - Held that:- Issue Notice returnable on 23.01.2019 - By way of adinterim relief, the respondents are restrained from making any coercive recovery pursuant to the impugned order-in-original dated 31.10.2018. 2019 (1) TMI 1384 Suo-moto Adjustment of excess service tax paid - appellant had adjusted an amount of ₹ 5,67,000/- and ₹ 15,00,000/- in the months of December, 2013 and March, 2014. The adjustment was on account of excess service tax paid in the months of March and April 2011 - Rule 6A of the Service Tax Rules, 1994 - Held that:- The issue arising out of the present appeal is no more res integra in view of the Co-ordinate Bench of this Tribunal in the case of Schwing Stetter (India) Pvt. Ltd. [2016 (6) TMI 239 - CESTAT CHENNAI], where it was held that Section 13 of the General Clauses Act, 1897 provides that singular include the plural. Accordingly, month includes months. Further the various case laws relied on by the appellants are squarely applicable to the facts of the present case. The excess amount paid in the month of May, 2011 adjusted by the appellants in the subsequent months tax liability is absolutely in order. The impugned order passed by the learned Commissioner (Appeals) in upholding the adjudged demand against the appellant cannot be sustained for judicial scrutiny - appeal allowed - decided in favor of appellant. 2019 (1) TMI 1383 Validity of SCN - Daughter notice - mother notice issued by the Department had already been adjudicated - business auxiliary service - management, maintenance or repair service - health and fitness service - demand of service tax - Held that:- Both the daughter and the mother notices have alleged that the services provided by the appellant are confirming to the definition of taxable services under the category of ‘business auxiliary service’, ‘management, maintenance or repair service’ and ‘health and fitness service’ - Since the appeal filed by the appellant against the adjudication order 20.1.2012 has already been set aside by the Tribunal vide order dated 12.6.2017, in allowing the appeal in favor of the appellant, different stand cannot be taken at this juncture for deciding the appeal differently - appeal allowed - decided in favor of appellant. 2019 (1) TMI 1370 Reverse charge mechanism - Intellectual property service - scope of the levy - section 66A of Finance Act, 1994 - Held that:- Doubtlessly, section 66A of Finance Act, 1994 deems the recipient of a taxable service to be the provider to fasten the obligation to discharge tax. Undoubtedly, the taxable services that are not covered by the first two of the groupings in rule 3 of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 deems service to have been brought within India when the recipient is located in India. It is, thus, amply clear that this is a residuary clubbing that does not specify the specific services. At the same time, it cannot be ignored that the said Rules are notified, inter alia, in exercise of powers under section 93 of Finance Act, 1994 which enables the Central Government to exempt taxable services from the levy. Consequently, such of those transactions that are not amenable to inclusion as provision of services from outside to India are to be considered as exempt. In the decision, in re Catapro Technologies Ltd, [2016 (12) TMI 100 - CESTAT MUMBAI], the essentiality of coverage under the Indian laws for 'intellectual property' to be acknowledged has been articulated. The nature of the 'intellectual property' and its enforceability in the present dispute does not find a place in the records commencing with the show cause notice. The crystalisation of the tax liability on the appellant does not have the authority of law - appeal allowed - decided in favor of appellant. Central Excise 2019 (1) TMI 1382 Application for permission for open Court hearing - Waiver of Interest - Recovery of Excise Duty - BIFR Scheme - the excise duty had been collected by the petitioner from its customers but not paid to Government - Held that:- There are no error, much less apparent, in the Order impugned, warranting its reconsideration - review petition is, accordingly, dismissed. 2019 (1) TMI 1381 Cenvat credit disallowed - Clearance of goods directly from the job worker premises - Unregistered premises / division of the same assessee - Notification No. 39/2001 dated 03.07.2001 - Penalty - Confiscation of raw material - Trade Notice 36/2003 dt. 27.03.2003 - Held that: - from the letter dated 05.05.2005 of the appellant that they have stated all the facts of job work right from the setting up the Jamnagar Mobile Plant upto discharge of duty by SP and SSTP Division. The revenue has alleged that even though they had permitted the clearance of the finished goods directly from the job worker but their objection to direct receipt of raw material at job worker premises i.e. Jamnagar mobile Plant and the clearance of the finished goods directly to customer is only paper transaction. We are of the view that the principal manufacturer as well as the job worker both are merely Division of RTML. It is only a case where one division allotted the work to another. The demand of cenvat on the one hand from the principal manufacturer on raw material which reached to the job worker and demand of duty from the job worker on the finished goods manufactured from such raw material itself proves that the raw material was used for the intended purpose only. Thus in such case the cenvat credit to the principal manufacturer i.e SP and SSTP Division cannot be denied. We also find that one of the reason for demanding duty from the job worker unit is that the certificates issued under Notification No. 108/95 – CE dated 28.08.1995 did not contain its name. In this context we find that it is not disputed that the job workers had manufactured finished goods on job work basis on behalf of principal who has cleared the goods to the intended recipient. In such case we do not find any reason to demand duty from the job worker. As far as demand of cenvat credit against SSTP plant and SP plant is concerned we find that it is not in dispute that the goods were manufactured on their behalf by Jamnagar Mobile Plant who is job worker. Thus for all purposes it is SSTP and SP Plant who are the principal manufacturer and the credit has been rightly availed by them. Further once both the plants were given permission to clear the job work goods directly from the premises of the job worker, it itself shows that both the divisions were considered as principal manufacturer and eligible for credit of the raw material so used by the job worker. As regard contention of the Appellant that the demands are time barred, we find that the issue involved is interpretation of job work rules and procedure and not of causing intentional loss of revenue. Whatever goods were cleared were either exempted from duty under Notification No. 108/95- CE dated 28.08.1995 or were cleared for exports or were cleared into domestic market on payment of applicable duty. All the receipts of raw material and the clearance of finished goods stands recorded in statutory books. Moreover it is also a fact that all the division which availed credit or from which the finished goods were cleared belong to the same company and the duty if payable by one division was availed as credit to other division or was refundable - decided in favor of the assessee. 2019 (1) TMI 1380 CENVAT Credit - capital goods - moulds and dyes - credit on depreciated value of goods - Rule 3(5)(a) of the Cenvat Credit Rules 2004 - Held that:- CENVAT credit in respect of capital goods can be taken up to 50% in the same financial year and the balance of cenvat credit in the subsequent year except component spares, accessory refractories and refractory material, moulds and dies and goods falling under heading 6805, 6804 of the First Schedule of the Central Excise Tariff Act. Likewise under subrule 5A such cenvat credit is allowed even if capital goods is sent to job worker provided the same is received back in the factory within 180 days of their being sent to job worker. Sub-rule 5(b) which is applicable to the instant case does not prescribe such 180 days stipulation in availing such credit. Therefore, even if the moulds and dies are kept with job worker for production of goods on behalf of manufacturer, such credit can be availed for an indefinite period. Consequent upon such removal to another factory though available in the same premises, would have the effect of reversal of entire cenvat credit availed had the appellant not shown him as job worker, but while the mould and dies were with the job worker, appellant sold it to M/s. General Motors with adequate payment of VAT. Going by the definition of sale as found in the Central Excise Act under section 2(h), sale means any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration. Such a transfer with physical delivery of possession was not made but appellant had earned profit on sale of such mould and dyes in the guise of recovering the cost from General Motors. Considering the fact that such an exercise was carried out by the appellant is in exercise of erroneous legal interpretation of the provisions of the Cenvat Credit Rules 2004 and credit was availed by reflecting the same in the cenvat credit accounts, no mala fide can be attributed to the appellant so as to call for imposition of any penalty. Accordingly while upholding the demand along with interest, the penalty is set aside - appellant is liable to pay balance duty amount of ₹ 6,04,090/-/- along with applicable interest with effect from 19.12.2011 - Penalty under section 11AC(c) is hereby set aside - appeal allowed in part. 2019 (1) TMI 1379 Vires of Rule 8(3A) of Central Excise Rules, 2002 - reliance was placed on the ruling by Hon’ble Gujarat High Court in the case of Indsur Global Ltd. vs. Union of India [2014 (12) TMI 585 - GUJARAT HIGH COURT] - Held that:- The said issue in respect of Rule 8(3A) of Central Excise Rules, 2002 is no more res integra in view of the decisions in the case of M/S BAKEWELL AGRO LTD., M/S INDIA SHOES LTD., RISHI MAHAJAN, DIRECTOR, M/S ENERSHELL ALLOYS & STEEL PVT. LTD., M/S S.P. METALTECH INDIA PVT. LTD., M/S MOHIT PAPER MILLS LTD. VERSUS CCE, MEERUT-I, CCE, KANPUR, CCE, NOIDA, CCE & ST, MEERUT [2018 (12) TMI 156 - CESTAT ALLAHABAD] passed by this Tribunal - While passing the said final order this Tribunal have taken into consideration the fact of Hon’ble Supreme Court admitting SLP challenging the said ruling by Hon’ble Gujarat High Court in the case of Indsur Global Ltd. This Tribunal has also taken note of the fact that said ruling has been stayed by Hon’ble Supreme Court. Appeal dismissed - decided against Revenue. 2019 (1) TMI 1378 CENVAT Credit - returned goods - Rule 16 of CCR - whether on clearance of the ‘returned goods’ received under Rule 16(1) of the Central Excise Rules, 2002, it is required to reverse the amount of credit availed on the quantum of duty initially paid or the rate of duty prevalent on the date of clearance of the returned goods? Held that:- When the ‘returned goods’ are subjected to process, which does not result into manufacture, the manufacturer shall pay an amount equal to the CENVAT Credit taken under sub-rule (1) of the said rules. In the present case, no evidence has been brought on record that the returned goods were subjected to process amounting to manufacture, therefore, the appellant is required to reverse the credit availed on the returned goods, at the time of its initial clearance from the factory. Thus, there is no discrepancy in the impugned order in confirming the demand of differential credit and interest - However, as far as penalty is concerned, the appellant could make out a case that the returned excisable goods were cleared second time from the factory on payment of duty, at lower rate, and demand notice has been issued for normal period - penalty set aside. The appeal is partly allowed. 2019 (1) TMI 1377 Penalty u/r 25(1)(d) of the Central Excise Rules, 2002 - failure to export the goods cleared without payment of duty under bond for exportation - no suppression of facts - rule 19 of Central Excise Rules, 2002 - Held that:- It is an admitted fact that the goods were cleared after following due procedure in law and were after clearance stored in their godown located in Bhiwandi. From the Bhiwandi godown these goods were to be further transported for exportation from the relevant port. However, certain goods could not have been exported and proof of export in respect of some goods (ARE-1) were not submitted by the appellant within the prescribed time. Export under rule 19 of Central Excise Rules, 2002 is a well documented process. It cannot be the case of the department that the appellant had clandestinely cleared the goods for exportation from their manufacturing unit. These goods have been cleared after following due process and preparation of relevant documents. The export should have been properly accounted for and properly monitored by the Revenue also. In case of delay in submission of proof of export, Revenue itself should have asked for recovery of duty in terms of the bond executed. In case they have failed to monitor the submission of proof of export, the appellant cannot be saddled with the responsibility of suppression of fact. The penalty under Rule 25(1)(d) would be imposable but not equivalent to the amount of duty short paid - Since the provisions of section 11AC are not attracted in the present case, in our view, the ends of justice will be met if the penalty imposed is reduced to ₹ 5,00,000/-. The appeal of the appellant partly allowed to the extent of reduction of penalty to ₹ 5,00,000/-. Indian Laws 2019 (1) TMI 1376 Appointment of Mr. J. P. Bansal, retired District Judge as the sole arbitrator - imposition of transit penalty - delay in transportation of containers - non-payment of handling charges of containers for various period of time - When the proceedings before the arbitrator was pending, whether the respondent was right in filing arbitration petition approaching the High Court under Section 11 and Section 15 of the Arbitration Act, 1996 for appointment of a substitute arbitrator? Held that:- The respondent having participated in the proceedings before the arbitral tribunal for quite some time and also having expressed faith in the sole arbitrator, is not justified in challenging the appointment of the Managing Director of the appellant-Corporation as the sole arbitrator. The respondent has not placed any material to show that it has reason to believe that the arbitrator had not acted independently or impartially. The respondent has not brought on record any material to entertain an apprehension that the Managing Director of the appellant-Corporation is not likely to act independently or impartially - The fact that the sole arbitrator is the Managing Director of the appellant-Corporation is not a ground to raise a presumption of bias or lack of independence on his part. The arbitration Clause 4.20.1 of Schedule-4 (General Conditions) stipulates a high official i.e. - Managing Director of the Corporation not connected with the contract or the work executed by the respondent. Having participated in the entire arbitration proceedings and acquiesced in the proceedings, the respondent is estopped from challenging the competence of the arbitrator. The respondent was not justified in filing the arbitration petition seeking appointment of an independent arbitrator. Mere neglect of an arbitrator to act or delay in passing the award by itself cannot be the ground to appoint another arbitrator in deviation from the terms agreed to by the parties. The present Managing Director of the appellant-Rajasthan Small Industries Corporation Limited shall be the sole arbitrator and the Managing Director is directed to take up the matter and continue the proceedings and afford sufficient opportunity to both the parties to adduce further evidence and to make oral submissions and pass the final award within a period of four months - appeal allowed - decided in favor of appellant. 2019 (1) TMI 1375 Dishonor of Cheque - Vicarious liability u/s 141 of NI Act - prosecution of the parties - Held that:- This court considered more or less similar issues in the context of a batch of similar prosecutions for offence under Section 138 of the Negotiable Instruments Act, 1881 in decision reported as Jwala Devi Enterprises Pvt. Ltd. vs. Fadi El Jaouni, [2018 (7) TMI 1568 - DELHI HIGH COURT]. While construing the penal clause under Section 138 of the N.I.Act, this court observed that The dishonor of a cheque which had been issued by the person (who is sought to be prosecuted) in favour of the complainant must be followed by a notice of demand within the stipulated period. It is the non-payment of the amount of the cheque within the statutory period after service of the notice of demand which constitutes the offence that is punishable under the aforementioned provision of law. Going by the averments in the complaint at hand, it not being a case of the complainant that the petitioners were the signatories to the cheques in question, the order summoning them as accused merely on the allegations that they were “the directors” in the company accused at the relevant point of time is bad in law - petition allowed. 2019 (1) TMI 1374 Enforcement of a foreign award - the case of the respondents in a nutshell is that the awards are not enforceable under the Act because the respondents were deprived of an opportunity to present their case and because the awards are contrary to public policy - scope for resisting enforcement pursuant to 2015 Amendment Arbitration Act - principles of natural justice - Held that:- The process adopted by the tribunal is transparent and across the three PFAs and the final award. Different views may have been possible, but merely because the tribunal adopted an unfavourable one, the award cannot be rendered unenforceable. Dealing with the respondents contention that merely because the respondents had not challenged the award at the seat of the arbitration did not prevent challenge resistance to enforcement, I have no hesitation in agreeing with that line of reasoning. Chapter I of Part II which deals with New York Convention Awards does not differentiate between enforcement of awards that have been unsuccessfully challenged at the seat or those which being not except for Section 48(1)(e) and Section 48(3). There is no doubt that failure to challenge the award in the seat of Arbitration would in any manner impact the right of a party to resist enforcement in this country. The Arbitration & Conciliation Act, 1996 in its current avatar also does not support the view that resisting enforcement would be subject to a prior challenge at the seat of arbitration. It does not support the view that absent a challenge in the seat of the Arbitration, a party could not resist enforcement of the award in a different jurisdiction. If that were to be so the legislature would have provided for appropriate pre-conditions to resist enforcement of foreign award and justifiably so because if an award were to be set aside in the seat, there may be no occasion to resist enforcement. On the other hand if a challenge at the seat is repelled, a losing party could still resist enforcement on available grounds. In order to succeed on the ground of being deprived of an opportunity of being heard, one has to establish that the tribunal did not offer an aggrieved party an opportunity of presenting their case. In the facts of the case at hand, it is obvious that ACPL declined to submit the documents on the ground of confidentiality. It is another matter that the petitioners apparently had control over ACPL and could have had a say in the response of ACPL especially since it was open for the petitioners to collect the information from ACPL which it had declined to do. Had it been the petitioners case it had no control over ACPL, there was no question of obtaining the response. Principles of natural justice - counter claims were not considered - Held that:- There is nothing in my view that obliged the tribunal to place before the parties of the view that it intended to take and I am unable to find any support from the submissions canvassed at the bar alluding to appointment of a conflicted party as a valuer to the extent the challenge concerned alleged inconsistencies in the first and second PFA’s. There is no merit in the contention that the tribunal shifted the goal post between the first and second PFA. The alleged inconsistencies only indicate that the Arbitral tribunal was actively considering all contentions on both sides. The respondents contention cannot be appreciated that the arbitrator was bound to express his views on expert evidence. It is open for the a tribunal to consider expert evidence without being obliged to express his views on the veracity of such evidence. The arbitrator in the instant case was under no obligation of respond to expert evidence led by the parties. No doubt it was open to the arbitrator to seek clarifications if he felt necessary. The Arbitrator was not bound to do so. More often than not consideration of witness statements, their relevancy, veracity and the impact would be considered not only when the evidence is recorded but that is at a later date prior to making of an award. An arbitrator would garner his thoughts not necessarily on being presented with the evidence but later, having considered the entire gamut of the proceedings. The scope of enquiry under Section 48 did not permit a review on merits and that under Section 48(2)(b) enforcement of a foreign award could be refused only if it is found to be contrary to (i)the fundamental policy of Indian Law; (ii) to the interest of India and (iii) justice of morality - Application of the doctrine of public policy in the field of contract laws is more limited than in the case of domestic law and the courts are slower to invoke public policy in cases involving a foreign element. The contention that failure to make and averment as to readiness and willingness to perform the contract is fatal since grant of relief in the absence of such mandatory averments would be against the fundamental policy of Indian law is misconceived since the effect of absence of such averments would depend on the facts of a case - In the case at hand, the respondents had not raised this contention before the tribunal. Although in the affidavit in reply one of the contentions taken up was that no oral hearing was granted, this has not been canvassed as an instance of lack of a proper opportunity to present the respondents case probably because written submissions were on the record of the tribunal. No other ground has been canvassed - the objections sought to be raised are in the nature of seeking a review on merits of the lis and calls for appreciation of evidence which cannot be done. The Awards are enforceable against the respondents. The petitioner may proceed in execution of the Awards - Till the Awards are enforced, there will be an order in terms of prayer clause (b) (vii)(a) - petition allowed. 2019 (1) TMI 1373 Dishonor of Cheque - Vicarious criminal liability under Section 141 NI Act, 1881 - Held that:- Under the articles of association of the company accused, the petitioners being the non-executive directors nominated by the investor company have some role to play on the board of directors. It may also be that no meeting of board of directors could be convened without at least one of them being present. But then, there is some distinction between being privy to what were the affairs of the company and being responsible for its day-to-day affairs or conduct of its business. The complaints are conspicuously silent on this score. Rather the complaints would not even acknowledge receipt of the said replies. Same is the position with the affidavits which were filed during the pre-summoning inquiry. The complaints, insofar as they are directed against the petitioners, would, thus, fail even on the averment test - the petitioners concededly being non-executive directors, in absence of any further averments as to their role in the company at the time of commission of the offences, the presumption under Section 141 NI Act cannot be raised against them. Petition allowed. 2019 (1) TMI 1372 Refund of security deposit - whether in view of the facts of the case, claim for refund of security deposit (given against the licensed premises) by the Bank in the proceedings before the Debt Recovery Tribunal under the provisions of the Recovery of the Debts Due to Banks and Financial Institutions Act, 1993, can be said to be a “debt” due and recoverable by the Bank from the respondents, under Section 19 of the said Act? Held that:- It is settled law that the definition clause must be read in the context of subject matter and scheme of the Act and consistently with the objects and other provisions of the Act. It is well settled that, words of a statute when there is a doubt about their meaning, are to be understood in the sense in which they best harmonise with the subject of enactment and the object which the Legislature has in view Their meaning is not much found in strictly grammatical language - the expression “debt” is to be assigned meaning and understood in reference to the object and subject matter of scheme of the Act and further it is to be interpreted consistently with the objects and other provisions of the Act. Undisputedly, the Recovery Act was enacted primarily for the reasons that, the Banks and financial institutions should be able to recover their dues without unnecessary delay, so as to avoid any adverse consequences in relation to the public funds. The Statement of Objects and Reasons of this Act clearly state that Banks and financial institutions were experiencing considerable difficulties in recovering loans and enforcements of securities charged with them. The then existing procedure for recovery of dues of the Bank and the financial institutions blocked significant portion of their funds in un-productive assets, the value of which deteriorated with the passage of time. The Act provided for the establishment of Tribunals and Appellate Tribunals and modes for expeditious recovery of dues to the Banks and financial institutions. The expeditious recovery; Providing provisions for taking such measures which would prevent wastage of securities available with the Bank and enforcement of such securities is the object of the Act. Thus, whole object of the said Act is to recover debts by enforcing available security by a mechanism provided under the Act - If the petitioner’s contention is upheld, it may not attain the object of the said act. This, may also, enlarge the jurisdiction of the Tribunal. The Apex Court in the case of Axis Bank v. SBS Organics (P.) Ltd. [2016 (4) TMI 917 - SUPREME COURT] while dealing with the provisions of the SARFAESI Act has held that the Act was intended to facilitate easy and faster recovery of loans advanced by banks and financial institutions and thus the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was introduced for a special and speedier mechanism for the recovery. The unpaid security deposit is not a “debt” within the meaning of Section 2(g) of the said Act and therefore the proceedings instituted under Section 17 of the said Act by the Bank for recovery of the said amount were not maintainable - Petition dismissed. 2019 (1) TMI 1371 Arbitral award - scope of the arbitral reference - whether or not GMB’s claim before the learned Arbitrators/learned Umpire was restricted to ₹ 2 crores? - Held that:- It is not in dispute that there was no specific reference of disputes by either of the parties when they nominated their respective Arbitrators. In other words, specific heads and amounts claimed under each head were not enumerated in the letters whereby Arbitrators were nominated. Hence, in our opinion, the learned Umpire rightly held that the disputes that formed the subject matter of the reference would have to be gathered from the pre-reference correspondence exchanged by and between the parties. It is trite law that so long as the meaning given by an Arbitrator/Umpire to a document or a series of documents is a plausible one, the Court will not interfere and substitute such meaning with its own understanding of such documents even if the Court differs from the Arbitrator or Umpire. The Court in exercise of an application under Secs. 30 and 33 of the Arbitration Act, 1940 does not act as an Appellate Court - there was no reason for the learned Judge to restrict the award under Schedule E to ₹ 37,34,090/- while in principle upholding the learned Umpire’s award of ₹ 346.45 lacs on that count. There are no justification in the learned Judge disallowing the learned Umpire’s award of ₹ 203.43 lacs on account of damages for preventing GMB to use the logo GMB-Neycer - A Court hearing an application for setting aside an arbitral award does not have the power to reappraise the evidence before the Arbitrator/Umpire. So long as there is some evidence on the basis of which an award has been made, the Court shall not go in the sufficiency or otherwise of such evidence. The impugned judgment and order is set aside to the extent it interferes with the award of the Ld. Umpire. The Ld. Umpire’s award is upheld - appeal allowed - decided in favor of appellant.
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