TMI Tax Updates - e-Newsletter
January 6, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax

TMI SMS

• Parallel enquiry proceedings by the officers of different jurisdiction - the subject-matter is different - the prohibition u/s 6(2)(b) not apply - HC

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Articles

1. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

News

1. Webinar for taxpayers on Communication Channel between Taxpayers.

2. World Bank Signs $105 Million Project to Improve Waterways in West Bengal

3. A Marathon of Focused Webinars for Promoting Quality and Productivity in Indian Industry “Udyog Manthan” begins

4. Auction for Sale (Re-issue) of ‘3.96% GS 2022’, ‘5.15% GS 2025’, ‘5.85% GS 2030’ and ‘6.80% GS 2060’

Notifications

Customs

1. 02/2021-Customs (N.T./CAA/DRI) - dated 4-1-2021 - Cus (NT)

Seeks to amendment in Notification No. 82/2016-Customs (N.T.) dated 07.06.2016 - Appointment of Common Adjudicating Authority

2. 02/2021 - dated 4-1-2021 - Cus (NT)

Central Government rescinds Customs (Advance Rulings) Rules 2002

3. 01/2021-Customs (N.T./CAA/DRI) - dated 4-1-2021 - Cus (NT)

Appointment of CAA by DGRI

4. 01/2021 - dated 4-1-2021 - Cus (NT)

Customs Authority for Advance Rulings Regulations, 2021.

GST - States

5. 38/1/2017-Fin(R&C)(187) - dated 4-1-2021 - Goa SGST

Amendment in Notification No. 38/1/2017-Fin(R&C)(148), dated 5th June, 2020

6. 38/1/2017-Fin(R&C)(186) - dated 15-12-2020 - Goa SGST

Seeks to waive penalty payable for non-compliance of the provisions of notification No. 38/1/2017-Fin(R&C)(134), dated 30th March, 2020 - Non issuance of invoice having Dynamic Quick Response (QR) code

7. 01/2021-State Tax - dated 1-1-2021 - Gujarat SGST

Gujarat Goods and Services Tax (Amendment) Rules, 2021

8. 92/2020-State Tax - dated 31-12-2020 - Gujarat SGST

Seeks to bring into force sections 3-4-5-6-7-8-9-10 and 15 of GGST(Amendment) Act 2020

9. (19/2020)-KGST.CR.01/17-18 - dated 31-12-2020 - Karnataka SGST

Seeks to extend the time limit for furnishing of the annual return specified under section 44 of KGST Act, 2017 for the financial year 2019-20 till 28.02.2021.

10. 92/2020—State Tax - dated 4-1-2021 - Maharashtra SGST

Seeks to bring into force Sections 3, 4, 5, 6, 7, 8, 9, 10 and 13 of MGST (Second Amendment) Act, 2020 (Mah. Act No. XXIII of 2020) w.e.f. 1.1.2021

11. GST-2020-21/F.No-509/59/Commercial Tax - dated 31-12-2020 - Uttar Pradesh SGST

Seeks to extend the time limit for furnishing of the annual return specified under section 44 of UPGST Act, 2017 for the financial year 2019-20 till 28.02.2021

Circulars / Instructions / Orders

IBC

1. IBBI/CIRP/37/2021 - dated 4-1-2021

Retention of records relating to Corporate Insolvency Resolution Process

Highlights / Catch Notes

GST

• Officers Can Conduct Parallel Inquiries Under U.P.G.S.T. and C.G.S.T. Acts; Section 6(2)(b) Prohibition Not Applicable Here.

  Case-Laws - HC : Parallel enquiry proceedings by the officers of different jurisdiction - Proper officer under the U.P.G.S.T. Act or the C.G.S.T. Act may invoke power under Section 70 in any inquiry. Prohibition of Section 6(2)(b) of the C.G.S.T. Act shall come into play only when any proceeding on the same subject-matter has already been initiated by a proper officer under the U.P.G.S.T. Act - In the present case, since the subject-matter is different, the prohibition does not come into play - HC
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Income Tax

• NGC India Distribution Rights Not Classified as Royalty under Article 12 of India-USA DTAA. No Fees for Included Services.

  Case-Laws - AT : Accrual of income - Royalty - the distribution rights granted by the assessee to NGC India is only a commercial right / Broad Cast reproduction right and not copyright and consequently consideration received by the assessee for the same cannot be treated as royalty or fees for included services under Article 12 of India-USA DTAA - AT
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• LIBOR Plus 200 Basis Points Set as Rate for Overdue Receivables in Transfer Pricing Case; Credit Periods Considered.

  Case-Laws - AT : TP Adjustment - Impute interest on receivables - LIBOR + 200 basis point rate is most appropriate rate and hence, direct the AO/TPO to adopt LIBOR + 200 basis point for imputing interest on overdue receivable. - Further, AO is directed to allow normal credit period allowed by the assessee, if any agreed credit period between assessee and AE. If there is no agreed credit period, then the AO is directed to allow standard credit period that the industry is allowing in this line of business. - AT
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• Reassessment Scope Unjustifiably Expanded, Contravening Section 147 Procedures Despite Valid Section 148 Notice in Tax Case.

  Case-Laws - AT : Reopening of assessment u/s 147 - it is evident that assessing officer has para-wise dealt with the objections of the appellant. We do not feel the need to delve into the issue of sufficiency of reasoning given by the assessing officer while rejecting the objections as the same is of academic nature since we have already upheld the validity of notice u/s 148. - However, AO was not justified in expanding the scope of reassessment proceedings u/s 147 without following the due course and as such the addition is in the teeth of provisions of section 147. - AT
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• Assessee to Present Evidence in Sale Agreement Dispute u/s 37(1) and 2(14) of Income Tax Act.

  Case-Laws - AT : Claim of expenditure u/s 37(1) - Cancellation of sale agreement - assessee has claimed an expenditure as advance made for purchase of property forfeited - AO treated the same as capital asset transaction u/s 2(14) - We considering the principle of natural justice, shall provide one more opportunity to the assessee to substantiate with the evidence before the Assessing Officer. - AT
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Customs

• Court Rules Stamp Duty on Bills of Entry Unlawful; Orders Refund to Importers Under Article 24.

  Case-Laws - HC : Refund of amounts collected from the Petitioners as stamp duty on Bills of Entry filed for the goods imported - Legality and validity of collecting the stamp duty on the Bills of Entry - n bill of entry, the authorities cannot charge stamp duty under Art. 24. - Refund allowed - HC
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• Skimmed Milk Powder Complies with FSSAI and BIS Standards; No Absolute Confiscation or Penalty under Customs Act.

  Case-Laws - AT : Absolute Confiscation - penalty - Skimmed Milk Powder - prohibited goods or not - The technical specification of the impugned goods clearly falls under the FSSAI regulation as per the direction issued under Section 16(8) of the Food Safety Standards Act, 2006 regarding operationalisation of amended regulation regarding revised standards for milk and milk products etc., which includes essential parameters such as Milk fat (%), Milk Protein, Titrable acidity, Total ash content etc. Undisputedly FSSAI standards and BIS standards are complementary to each other and are not contrary. - The impugned goods in question are neither liable for confiscation nor for any penalty under the Customs Act - AT
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IBC

• Insolvency Resolution Process Termination Dismissed: Application Not Filed by Operational Creditor as per Regulation 30A Requirement.

  Case-Laws - Tri : Seeking termination of Insolvency Resolution Process / proceedings initiated - the Operational creditor has not filed the application in terms of Regulation 30A rather it has been filed by the Suspended Board of Directors of the Corporate Debtor - application dismissed - Tri
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• Unregistered Documents Invalid for Claims in Insolvency; Must Register Before Claim Date as per Registration Act.

  Case-Laws - Tri : Assignment of Debt - The unregistered documents cannot be taken into account for admission of the claim. The document must have been registered on the date on which the claim is made. No doubt for registration, four months are available under Section 23 of the Registration Act. The question is whether Assignment Agreement was registered on the date on which claim was made before the Resolution Professional. The documents must have been registered by the date the claim was made before the Resolution Professional. So when claim was made, the documents was not registered. Therefore, the document cannot be looked into. - Tri
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Service Tax

• Court Rules Rejection of Petitioner's SVLDRS Declaration Inappropriate; Sections 123(e) & 121(c) Not Applicable.

  Case-Laws - HC : Rejection of declaration under SVLDRS - the petitioner has filed return under the service tax law prior to 30th June, 2019 and deposited the amount of duty along with the returns which was filed belatedly. Therefore, clause (e) of Section 123 read with clause (c) of Section 121 of the SVLDR Scheme is not applicable on the facts of the present case. - HC
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• Rent-a-Cab Lease Agreements Classified as "Deemed Sale," Exempt from Additional Taxation Under Finance Act, 1994.

  Case-Laws - AT : Rent-a-cab scheme operator Service - Deemed Sale - Agreements/contracts of ‘lease’ are, acknowledgedly, taxable as ‘deemed sale’; it is not the case of Revenue that any portion of the consideration for ‘lease’ is not ‘deemed sale’. As the entire rental is subject to tax as ‘deemed sale’, there is no scope for any portion thereof to be leviable to tax by the Union and, thereby, under Finance Act, 1994 - AT
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Case Laws:

• GST

• 2021 (1) TMI 132
  Maintainability of Advance Ruling application - requisite fee has not been deposited by the applicant - section 97 of Central Goods and Service Tax Act, 2017 and Himachal Pradesh Goods and Service Tax Act, 2017 - HELD THAT:- Section 97 (1) of CGST Act, 2017 provides that an applicant desirous of obtaining an advance ruling may make an application in such form and manner and accompanied by such fee as may be prescribed, stating the question on which the advance ruling is sought. Similar provision is provided under section 97(1) of the HPGST Act, 2017. The prescribed fee as per provisions of Rule 104 of CGST Rules, 2017 is Rs. 5000/- under CGST head. Rule 104 of HPGST Rules, 2017 also provides for a fee of Rs. 5000/- under SGST head. Since the Advance Ruling has been sought with regards to applicability of provisions of CGST Act and HPGST Act, therefore the prescribed fee would be Rs. 5000/- each under CGST SGST heads. Since the application in this case is not accompanied by requisite fee of Rs. 10,000/- therefore the same is rejected - This ruling however does not in any way affect the right of the applicant to file a fresh application for seeking ruling on the same points provided it satisfies the provisions of section 97(1) of the CGST/ HPGST Act, 2017. Application dismissed.

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• 2021 (1) TMI 131
  Maintainability of Advance Ruling application - requisite fee has not been deposited by the applicant - HELD THAT:- Section 97(1) of CGST Act, 2017 provides that an applicant desirous of obtaining an advance ruling may make an application in such form and manner and accompanied by such fee as may be prescribed, stating the question on which the advance ruling is sought. Similar provision is provided under section 97(1) of the HPGST Act, 2017. The prescribed fee as per provisions of Rule 104 of CGST Rules, 2017 is Rs. 5000/- under CGST head. Rule 104 of HPGST Rules, 2017 also provides for a fee of Rs. 5000/- under SGST head. Since the Advance Ruling has been sought with regards to applicability of provisions of CGST Act and HPGST Act, therefore the prescribed fee would be Rs. 5000/- each under CGST SGST heads. Since the application in this case is not accompanied by requisite fee of Rs. 10,000/-, therefore the same is rejected - This ruling however does not in any way affect the right of the applicant to file a fresh application for seeking ruling on the same points provided it satisfies the provisions of section 97(1) of the CGST/ HPGST Act, 2017.

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• 2021 (1) TMI 130
  Parallel enquiry proceedings by the officers of different jurisdiction - Issuance of summon in case survey has been conducted once, even if basis of material of inquiry/ investigation may be different - Section 70 of the C.G.S.T. Act - HELD THAT:- Section 6(2)(b) prohibits initiation of proceedings by the proper officer under U.P.G.S.T. Act on the same subject-matter where a proper officer under the C.G.S.T. Act has initiated any proceedings on the same subject-matter subject to the conditions specified in the notification issued under sub-Section (1). Section 6(2)(b) of C.G.S.T. Act imposes similar prohibition upon the proper officer under the C.G.S.T. Act. Thus, Section 6(2)(b) of the C.G.S.T. Act/ U.P.G.S.T. Act prohibits initiation of any proceedings on the same subject-matter by a proper officer under the C.G.S.T. Act/ by a proper officer under the State G.S.T. Act, as the case may be, on the same subject-matter - Section 70 of the U.P.G.S.T. Act or C.G.S.T. Act is part of Chapter XIV which contains provisions for inspection, search, seizure and arrest. Section 70 of both the Acts are pari materia which empowers the proper officer under the Act to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry. Proper officer under the U.P.G.S.T. Act or the C.G.S.T. Act may invoke power under Section 70 in any inquiry. Prohibition of Section 6(2)(b) of the C.G.S.T. Act shall come into play only when any proceeding on the same subject-matter has already been initiated by a proper officer under the U.P.G.S.T. Act - Thus, the words any proceeding on the same subject-matter used in Section 6(2)(b) of the Act, which is subject to conditions specified in the notification issued under sub-Section (1); means any proceeding on the same cause of action and for the same dispute involving some adjudication proceedings which may include assessment proceedings, proceedings for penalties etc., proceedings for demands and recovery under Sections 73 and 74 etc. Thus, there is no proceeding by a proper officer against the petitioner on the same subject-matter referable to Section 6(2)(b) of the U.P.G.S.T. Act. It is merely an inquiry by a proper officer under Section 70 of the C.G.S.T. Act - petition dismissed.

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• 2021 (1) TMI 129
  Profiteering - supplies of Fortune ADW Detergent 1Kg and Fortune Rinse Aid 500 ml. - allegation that the benefit of reduction in the rate of tax has not been passed on - violation of the provisions of Section 171 (1) of CGST Act - Penalty - HELD THAT:- It has been revealed that the Respondent has not passed on the benefit of reduction in GST rate from 28% to 18% on the above products w.e.f 15.11.2017 to 31.03.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. It is also revealed from the perusal of the CGST Act and the Rules framed under it that no penalty had been prescribed for violation of the provisions of Section 171 (1) of the above Act, therefore, the Respondent was issued show cause notice to state why penalty should not be imposed on him for violation of the above provisions as per Section 122 (1) (i) of the above Act as he had apparently issued incorrect or false invoices while charging excess consideration and GST from the buyers. However, from the perusal of Section 122 (1) (i) it is clear that the violation of the provisions of Section 171 (1) is not covered under it as it does not provide penalty for not passing on the benefit of rate reduction and hence the above penalty cannot be imposed for violation of the anti-profiteering provisions made under Section 171 of the Act. Since, no penalty provisions were in existence between the period from 15.11.2017 to 31.03.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, the notice dated 28.03.2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.

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• 2021 (1) TMI 128
  Profiteering - supply of Gamier Nat Shade 3 - allegation that the benefit of reduction in the rate of tax has not been passed on - violation of the provisions of Section 171 (1) of CGST Act - Penalty - HELD THAT:- It has been revealed that the Respondent had not passed on the benefit of reduction in the rate of tax to the customers by way of commensurate reduction in the price of the product Gamier Nat Shade 3 during the period from 15.11.2017 to 31.03.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. It is also revealed from the perusal of the CGST Act and the Rules framed under it that no penalty had been prescribed for violation of the provisions of Section 171 (1) of the above Act, therefore, the Respondent was issued show cause notice to state why penalty should not be imposed on him for violation of the above provisions as per Section 122 (1) (i) of the above Act as he had apparently issued incorrect or false invoices while charging excess consideration and GST from the buyers. However, from the perusal of Section 122 (1) (i) it is clear that the violation of the provisions of Section 171 (1) is not covered under it as it does not provide penalty for not passing on the benefit of rate reduction and hence the above penalty cannot be imposed for violation of the anti-profiteering provisions made under Section 171 of the Act. Since, no penalty provisions were in existence between the period from 15.11.2017 to 31.03.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, the notice dated 28.03.2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.

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• 2021 (1) TMI 127
  Profiteering - supply of Matchless Plus TTWG Grinder - allegation that the benefit of reduction in the rate of tax has not been passed on - violation of the provisions of Section 171 (1) of CGST Act - Penalty - HELD THAT:- It has been revealed that the Respondent had not passed on the benefit of rate reduction to the customers who had purchased the Matchless Plus TTWG Grinder for the period from 15.11.2017 to 31.07.2018 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. It is also revealed from the perusal of the CGST Act and the Rules framed under it that no penalty had been prescribed for violation of the provisions of Section 171 (1) of the above Act, therefore, the Respondent was issued show cause notice to state why penalty should not be imposed on him for violation of the above provisions as per Section 122 (1) (i) of the above Act as he had apparently issued incorrect or false invoices while charging excess consideration and GST from the buyers. However, from the perusal of Section 122 (1) (i) it is clear that the violation of the provisions of Section 171 (1) is not covered under it as it does not provide penalty for not passing on the benefit of rate reduction and hence the above penalty cannot be imposed for violation of the anti-profiteering provisions made under Section 171 of the Act. Since, no penalty provisions were in existence between the period from 15.11.2017 to 31.07.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, the notice dated 28.03.2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.

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• Income Tax

• 2021 (1) TMI 126
  Deduction claimed towards bad and doubtful debts u/s 36(viia) - provision for bad and doubtful debts in excess of provision made in the account - Whether tribunal was right in holding that the creation of a requisite reserve in the books of account is a condition precedent for allowance of the claim under Section 36(1)(viia) of the Act? - HELD THAT:- The substantial questions of law framed in this appeal have already been answered against the assessee in M/S. SYNDICATE BANK [ 2020 (2) TMI 1020 - KARNATAKA HIGH COURT] and M/S. VIJAYA BANK [ 2014 (10) TMI 1015 - KARNATAKA HIGH COURT] - Decided in favour of the revenue.

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• 2021 (1) TMI 125
  Income accrued in India - Taxability of advertisement revenue as business income - AO held that SIPL constitutes PE of the assessee by holding it as a dependant agent as per para 4(c) of the Article 5 of India-USA DTAA and taxed the advertisement revenue earned by the assessee as business income on a net basis - HELD THAT:- We find that SIPL had been remunerated by way of 15% commission from the assessee for the activities performed by it. On perusal of the order of the ld. AO and the ld. CIT(A), we find that the authorities had not disputed this fact that a commission retained by SIPL is at arm s length. So, once the arm s length payment is made, nothing further remains to be taxed in the hands of the non-resident. We find lot of force in the alternative argument advanced by the ld. AR that even assuming that SIPL constitutes a PE of the assessee in India under Article 5(5) of India-USA DTAA, considering the fact that SIPL had been remunerated at arm s length price by the assessee, no further profit could be attributed in the hands of the assessee. In fact, similar view has also been expressed by the Hon ble Apex Court in the case of ADIT vs. E-Funds IT Solutions Inc. [ 2017 (10) TMI 1011 - SUPREME COURT] even if such agent is treated as a dependent agent PE. DR was not able to provide any contrary evidences to prove that the fact of SIPL s commission from assessee was less than 1% of total income is incorrect. Hence, we hold that there is no need for this issue to go back to the file of the ld. AO and accordingly, the argument of the ld. DR in this regard is hereby rejected considering the fact that the issue involved is more than 20 years old as of now and hence the matter is not remanded back to the file of ld AO. Thus we hold that assessee has paid arm s length commission to SIPL @15% which has been accepted to be at arm s length also by the lower authorities by not disputing the same and also by the ld. TPO for subsequent assessment years i.e. A.Yrs. 2002-03, 2003-04, 2004-05 in the orders passed u/s.92CA(3) of the Act and also considering the fact that the commission rate of 15% is fair and reasonable in the light of the CBDT Circular No.742 dated 02/05/1996 and is accepted by the various Courts as mentioned above, no further attribution of profits should be done in the hands of the assessee as the agent has been remunerated on arm s length basis. Accordingly, the ground Nos. 1-3 raised by the assessee are allowed. Distribution revenues earned by the assessee falls within the meaning of Royalty under Article 12 of India USA DTAA and accordingly, such distribution revenues are taxable in India - HELD THAT:- Definition of royalty as per India-USA DTAA, in para 3(a), payment received by an enterprise can be construed as royalty only if, they are for the use or right to use of any copy right of a literary, artistic or scientific work. We had already held that no right in respect of any copy right is given to NGC India and infact this is specifically set out in Clause 2.3 (a),(b),(c),(d),(e) and (g) of the agreement. We also find that the term copy right is not defined in the treaty. That is why we had to resort to the definition of copy right given under the Copy Right Act, 1957. We also find the alternative argument advanced by the ld. AR to be fair and reasonable that even if it is contended that the channel has copy right, what NGC India is paying for is a right to use the copy righted article (i.e. if the channel could be considered to be so) by virtue of being permitted to distribute the channel. Accordingly, since NGC India does not acquire any right in the underlying copy right (i.e. right to modify / reproduce channel / content). Hence any contention that NGC India is making a payment for copy right would be erroneous. We hold that the distribution rights granted by the assessee to NGC India is only a commercial right / Broad Cast reproduction right and not copyright and consequently consideration received by the assessee for the same cannot be treated as royalty or fees for included services under Article 12 of India-USA DTAA. Accordingly, the ground Nos. 2 3 raised by the assessee for A.Y.2001-02 are allowed. Charging of interest u/s.234B - assessee is a non-resident whose entire income is subject to deduction of tax at source u/s.195 - HELD THAT:- We find that the issue in dispute is squarely addressed by the decision of the Hon ble Jurisdictional High Court in the case of DCIT vs. NGC Network Asia LLC [ 2009 (1) TMI 174 - BOMBAY HIGH COURT] wherein held that when the duty is cast on the payer to deduct and pay the tax at source and on payer s failure to do so, interest u/s.234B of the Act cannot be imposed on the payee assessee. Moreover, we also find that the proviso to Section 209(1) of the Act, which has been heavily relied upon by the ld. DR at the time of hearing was inserted in the statute only w.e.f. A.Y.2013-14 onwards and the same is not applicable for the year under consideration. Accordingly, we hold that no interest u/s.234B of the Act could be charged in the hands of the assessee as the entire income is subject to deduction of tax at source. Accordingly, the ground No.4 raised by the assessee is allowed.

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• 2021 (1) TMI 124
  TP Adjustment - delay in realization of receivables from AE beyond credit period - indirect funding to AE which constitutes separate international transactions - appropriate rate for benchmarking international transactions for delay in realization of AE receivables - HELD THAT:- Once delay in realization of AE receivables constitute an international transaction, whether or not, assessee charges interest on receivables from AE or not, has no relevance because any understanding or arrangement between the assessee and its AE which is detrimental to Revenue and against the principles of scheme of Chapter X of the Act, cannot come to the rescue of the assessee. We further note that merely because there is no provision to chargeability of interest in the agreement between the assessee and its AE for delayed realization and merely because assessee does not pay any interest to the AE on the security deposit, the Revenue cannot be deprived on its legitimate share in accordance with the scheme of Chapter X of the Act and the purpose behind the Chapter X. Therefore, we are of the considered view that there is no error in the finding recorded by the AO as well as the TPO and the CIT(A) to come to the conclusion that delay in realization of receivables from AE beyond credit period tantamount to indirect funding to AE which constitutes separate international transactions. Impute interest on receivables - It would be most appropriate if the LIBOR rate is applied as most appropriate rate of interest for imputing interest on delay in receivables from AE. In this case, the AO has imputed notional interest by adopting PLR as the base rate whereas the ld.CIT(A) has directed the AO to adopt LIBOR rate as the base rate for imputing the interest with an appropriate spread befitting the credit standing of the AE. LIBOR + 200 basis point rate is most appropriate rate and hence, direct the AO/TPO to adopt LIBOR + 200 basis point for imputing interest on overdue receivable. As regards, the argument of ld.AR for assessee that the TPO has not given any credit period, we find that in any trade there is a credit period for payment to services or goods. Therefore the AO is directed to allow normal credit period allowed by the assessee, if any agreed credit period between assessee and AE. If there is no agreed credit period, then the AO is directed to allow standard credit period that the industry is allowing in this line of business. Disallowance of expenditure for earning exempt income u/s.14A - AO disallowed interest expenditure under Rule 8D2(ii) and other expenditure under Rule 8D2(iii) of the IT Rules, 1962 - HELD THAT:- There is no dispute with regard to the fact that the assessee has not earned any exempt income from investments for the year under consideration. It is a well settled principle of law from various decisions of High Court and Supreme Court that when there is no exempt income for the impugned assessment year then there cannot be any disallowance of expenditure in relation to said exempt income u/s.14A. CIT(A) after considering the fact that the assessee has not earned any exempt income for the year under consideration, by following the decision of the jurisdictional High Court of Madras in the case of Redington (India) Ltd [ 2017 (1) TMI 318 - MADRAS HIGH COURT] has deleted the addition made by the AO towards disallowance of expenditure u/s.14A of the Act. The Revenue has failed to bring on record any contrary judgment which is in favour of the Revenue to counter the findings of facts recorded by the CIT(A) in the light of binding decision of jurisdictional High Court of Madras. Therefore, we are of the considered view that there is no error in the findings recorded by the CIT(A) .

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• 2021 (1) TMI 123
  Reopening of assessment u/s 147 - Validity of reasons recorded by acquiring jurisdiction u/s.147 - Addition u/s. 68 being share capital received during the year - HELD THAT:- On careful perusal of reasons, it emerges that assessing officer received detailed information from DCIT Circle 2(2), Mumbai as per which search action was undertaken on Shrish C Shah and it was found that the said person engaged in the business of providing accommodation entries. The reasons also make reference to impounded material wherein the name of assessee has been mentioned as beneficiary. In addition to above, the assessing officer also examined the return of the appellant company to corroborate the information from Investigation Wing and only thereafter the reasons were recorded - fact that M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.) is a listed company has no relevance as being listed on a stock exchange is not a certificate of sainthood and even the listed companies have been found to be engaged in unholy practices. The argument of the appellant tat reasons are based on borrowed satisfaction is devoid of any merits as the assessing officer has recorded the reasons only after analysing the information from investigation wing and matching the same with return of income filed by the appellant. Even though we agree that assessing officer should have also carried out preliminary enquiry vis- -vis M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.) so as to verify the allegations of accommodation entry, however, in our view, non carrying of out such exercise will have little effect on validity of notice u/ 147 which is based on specific information from investigation wing. In view of above, we find that the reasons recorded for issue notice u/s 148 satisfies the jurisdictional requirement of section 147 of the Act and as such the validity of notice u/s 147 is upheld. AO has not properly disposed off the objections to notice u/s 148 - It is also the contention of Ld. AR that assessing officer has not properly disposed off the objections to notice u/s 148 of the Act. On examination of order disposing objections, it is evident that assessing officer has para-wise dealt with the objections of the appellant. We do not feel the need to delve into the issue of sufficiency of reasoning given by the assessing officer while rejecting the objections as the same is of academic nature since we have already upheld the validity of notice u/s 148. Addition u/s. 68 - Issuance of share at premium is prerogative of the board and wisdom of the investor. Moreover, in absence of any prohibition with regard to share premium in the Income tax Act, 1961 as relevant for the year under reference i.e. AY 2010-11, no adverse inference is warranted. In any case, the assessing officer having not disputed the value of shares or premium, we fail to see any merit in the contention of Ld DR particularly when the identity, creditworthiness and genuineness of transaction stood established - Appellant has discharged the onus u/s 68 to prove the identity, genuineness and creditworthiness of investor company M/s. Prraneta Industries Ltd. (now known as M/s. Aadhaar Ventures India Ltd.). Accordingly, the assessing officer is directed to delete the addition u/s 68. Reassessment proceedings - Addition u/s 68 - bogus share capital - Whether CIT(A) has grossly erred in confirming the addition even though the same is neither part of reasons nor in respect of which any evidence or material is on record in support of allegation of any undisclosed income - HELD THAT:- In the present case, in respect of share capital of Rs. 5,12,40,000/- received from 18 parties, the assessing officer initiated fresh enquiry during the course of reassessment proceedings on the basis of books of account of the appellant. There is no dispute that very same material was in existence when assessing officer recorded reasons and it is neither the case of the assessing officer that there was any failure or omission on part of the appellant in disclosing any information nor any case of fresh information coming to the notice of the assessing officer. The original action u/s 148 was on the basis of some information which was has already been affirmed by us. However, in respect of other items, the assessing officer himself made random enquiry which is absolute misuse of power in the context of scope of section 147 as well as settled legal principle. There is no iota of material or information with regard to share capital of Rs. 5,12,40,000/- received from 18 parties. In fact the assessing officer gathered the information after calling for bank statement from the bank as evident from para 10 of the assessment order. It is classic case of roving enquiry where the assessing officer is exceeding its jurisdiction in total disregard to scheme and intent of section 147 of the act. Such action of the assessing officer not only renders the purpose of approval u/s 151 otiose but also strikes at the root of section 147 of the Act. We are of the view that assessing officer was not justified in expanding the scope of reassessment proceedings u/s 147 without following the due course and as such the addition is in the teeth of provisions of section 147.

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• 2021 (1) TMI 122
  Non production of books of accounts - disallowance of expenses - estimate the income from business of the appellant by rejecting the financial statements - HELD THAT:- Assessee was asked to produce the books of accounts and proof for the expenses claimed but in spite of this, the assessee has neither produced the books of accounts nor produced the proof for expenses claimed. A categorical finding is given by learned CIT(A) that as per the Assessment Order, the assessee failed to produce the books of accounts despite several opportunities provided by the AO. Before the Tribunal also, this is not the claim of the assessee that even if the matter is restored back to the file of AO, the assessee can produce the books of accounts and the proof for the expenses claimed. Under these facts, we find no reason to interfere in the order of learned CIT(A) and AO on this issue and accordingly, ground Nos.2.1 to 2.4 raised before the Tribunal are rejected. Unexplained cash deposit in the Bank account of the assessee - HELD THAT:- As per the summary of cash deposit in these bank accounts, we are satisfied that the total cash deposits in the bank account of the assessee is explained and under these facts, on factual aspect also, we find that this addition is not justified.

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• 2021 (1) TMI 121
  Rectification of mistake u/s 254 - Scope of assessment u/s 153 A/ 153C - HELD THAT:- In the present case, originally, the issue was decided by the Tribunal by dismissing the appeals of the Revenue on the reason that the addition in pursuance to notice issued u/s. 153A of the I.T. Act can be made only if incriminating material is found and seized in case where there is also abatement of regular assessment proceedings Revenue has not at all raised the constitutional validity of the assessment proceedings u/s. 153A of the I.T. Act or provisions of other sections namely, 139, 142, 148, 151 and 153 of the I.T. Act before the Tribunal in the first round of litigation.This Tribunal is not a competent authority to decide the constitutional validity of any provisions of the Income Tax Act and it cannot be said that the Department s case falls under the exceptions provided in CBDT Circular No.3/2018 dated 11/07/2018. Hence, in our humble opinion, there is no mistake apparent from record in the order of the Tribunal dated 26/06/2019 so as to recall the order u/s. 254(2) of the I.T. Act.

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• 2021 (1) TMI 120
  Claim of expenditure u/s 37(1) - Cancellation of sale agreement - assessee has claimed an expenditure as advance made for purchase of property forfeited - AO treated the same as capital asset transaction u/s 2(14) - Advance paid for the purchase of property was forfeited and claimed as deduction in the profit and loss account - assessee never intended to hold the property but due to adverse market conditions and financial difficulties has to cancel the agreement - HELD THAT:- From facts which are narrated before the Tribunal and sequence of events as referred by the assessee do not find a place in the assessment order and there is no clarity with respect to details. CIT (Appeals) has also observed that no evidence was filed before the lower authorities in respect of serious efforts made by the assessee. We on perusal of the legal notices and facts narrated by the assessee are of the opinion that these facts are not discussed by the Assessing Officer or the CIT (Appeals) and the assessee firm could substantiate serious efforts made for recovery of advance amount. We considering the principle of natural justice, shall provide one more opportunity to the assessee to substantiate with the evidence before the Assessing Officer. Assessee s appeal is allowed for statistical purposes.

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• Customs

• 2021 (1) TMI 119
  Refund of amounts collected from the Petitioners as stamp duty on Bills of Entry filed for the goods imported - Legality and validity of collecting the stamp duty on the Bills of Entry - HELD THAT:- The issue is no longer res-integra in view of the pronouncement of this Court in the case of State of Gujarat and others Vs. Reliance Industries Ltd. [ 2011 (9) TMI 1208 - GUJARAT HIGH COURT ], to which, one of us (J.B. Pardiwala, J.) was a party. In the said litigation also, the writ petitioners had challenged the notices issued by the authorities and the guidelines issued for charging the stamp duty on the Bills of Entry. The State of Gujarat lost before the learned Single Judge and accordingly, various appeals were filed and it was finally held that on bill of entry, the authorities cannot charge stamp duty under Art. 24. The respondents are directed to refund the amount of Rs. 22,41,866/- to the writ applicant No.1 (M/s. Ramratna Wires Ltd.) and Rs. 1,18,47,859/- to the writ applicant No. 2 (M/s. R.R. Kabel Ltd.). These two amounts were collected from the respective writ applicants as a stamp duty on the Bills of Entry filed for the goods imported by them, which otherwise could not have been recovered - application allowed.

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• 2021 (1) TMI 118
  Absolute Confiscation - penalty - Skimmed Milk Powder - imports under Duty Free Import Authorisation - prohibited goods or not - non-production of BIS Certificate at the time of assessment - HELD THAT:- It is not disputed that the department did not ask for redemption fine and rather went for complete confiscation of the goods under the guise of prohibited goods, which is not correct as per discussions already made. The Hon ble Supreme Court in the matter of COMMISSIONER OF CUSTOMS VERSUS M/S. ATUL AUTOMATIONS PVT. LTD., AND PARAG DOMESTIC APPLIANCES [ 2019 (1) TMI 1324 - SUPREME COURT] has specifically laid down that there exist a fundamental distinction between what is prohibited and what is restricted. In the present case also the absence of BIS certificate can t made the skimmed milk power as prohibited goods and since the goods in question are not prohibited therefore its complete confiscation is not warranted - It is not disputed that the appellants/importer did not possess the required BIS certificate, but that itself would not make it prohibited goods. The authorities could have given opportunity to the appellants for its redemption. As the same was not offered to the appellants now they can t ask for it, as no new case can be made at this stage. The goods in issue are not prohibited goods under the Customs Act, 1962 or under the provisions of Foreign Trade Policy and under any other law. Learned Counsel for the Appellant rightly submitted that if the department is so much concerned, then in the meantime it could have got the skimmed milk powder tested at the cost of the appellants in order to verify whether it meet the standards or not but nothing of the sort has been done. The learned counsel has specifically submitted that as per domestic laws the goods were sent to FSSAI for mandatory tests in terms of the provisions of The Food Safety and Standards Act, 2006. The FSSAI clearance was given by the authorities and it can very well be said that that the appellants have complied with the mandatory food safety standard under the Food safety standards Act, 2006 under the domestic law. The technical specification of the impugned goods clearly falls under the FSSAI regulation as per the direction issued under Section 16(8) of the Food Safety Standards Act, 2006 regarding operationalisation of amended regulation regarding revised standards for milk and milk products etc., which includes essential parameters such as Milk fat (%), Milk Protein, Titrable acidity, Total ash content etc. Undisputedly FSSAI standards and BIS standards are complementary to each other and are not contrary. The impugned goods in question are neither liable for confiscation nor for any penalty under the Customs Act - Appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2021 (1) TMI 117
  Seeking grant of anticipatory bail under Section 438 Cr.P.C - increase in the price of shares on the basis of valuation certificate - Allegation that the investors were allured and induced on the basis of forged valuation certificate/report allegedly prepared by Kamini Sehgal, CA, while Kamini Sehgal has denied her signature on Annexure P-2 i.e. valuation certificate - Learned Public Prosecutor further submitted that the forged original valuation certificate has not been recovered from the petitioner so far, therefore, question of comparison of signature appearing on the said valuation certificate vis-a-vis. the admitted signatures of Kamini Sehgal, CA does not arise. HELD THAT:- Both the parties have argued the case with reference to numerous documents. While dealing with the anticipatory bail, I refrain myself from commenting upon legality and veracity of these documents, lest it may prejudice the case of the parties during trial - At this stage, I would not like to comment upon genuineness of the assertion and denial by the parties based on these documents, but in any case, keeping in view the nature of allegations surfaced in respect of forged valuation certificate, I deem it appropriate not to grant any indulgence in favour of the petitioner. Custodial interrogation of the petitioner is required. Therefore, this petition is found to devoid of merits and is accordingly dismissed.

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• 2021 (1) TMI 116
  Approval of Amalgamation scheme - seeking to dispense with the convening and holding the meeting of the Shareholders, Sole Secured Creditor of the Transferor Company and Shareholders of the Transferee Company and to direct for convene the meeting of the Unsecured Creditors of the Transferor Company - Sections 230 to 232 of the Companies Act, 2013 R/ w Companies (CAA) Rules, 2016 - HELD THAT:- The Companies have followed extant provisions of Companies Act in framing the Scheme in question, which are duly approved by the Board of Directors of the Companies involved. The Statutory Auditors/ Chartered Accountants of the Company have also issued respective Certificates by inter-alia certifying that the details of shareholders, creditors, and compliance of accounting treatment as prescribed U/ s. 133 of the Companies Act, 2013 with reference to the Scheme in question. The Applicant Companies have disclosed all the material facts relating to the Scheme in question and filed necessary documents along with the Application. Therefore, we are convinced with the case made out by the Applicants so as to grant relief as sought for, by dispensing with meetings of the Shareholders and Sole Secured Creditors of Transferor Company and Shareholders of the Transferee Company , to convene and holding the meeting of the Unsecured Creditors of the Transferor Company by appointing the Chairperson and Scrutinizer for convening the meeting, fixing venue, time, quorum etc. It is hereby dispensed with the convening and holding the meetings of the Shareholders and Sole Secured Creditor of the Transferor Company and Shareholders of the Transferee Company - Application disposed off.

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• 2021 (1) TMI 115
  Rectification of order - rectification of the Register of Members of the Respondent Company by re-entering the total number of 100 equity shares belonging to the Petitioner in the share register of the Company - restoration of total shareholding of the Petitioner as it is existed prior to 08.02.2019 forthwith - restraint from conducting tender for sale of 100 shares from allotting or effecting transfer of any shares belonging to the Petitioner without his express consent to any members or non-members till rectification of share register - clerical or arithmetical mistakes - Section 420 of the Companies Act, 2013. HELD THAT:- As per the provision of Rule 154 of the NCLT Rules, 2016, the Tribunal is only entitled to rectify the clerical or arithmetical mistakes or error arising from accidental slip or omission. In the present application the applicants sought to correct a factual error in the order passed by this Tribunal. Considering the above mentioned Rule, the Tribunal can exercise the power for correction of a mistake and not to substitute a view which was made while deciding a matter. In the instant case, I do not find that the present Application which has been filed similar to a Review Application cannot be entertained, as the Application for rectification of order does not show any clerical or arithmetical mistakes. This Tribunal cannot travel beyond the record to see whether the order is correct or not. Application dismissed.

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• 2021 (1) TMI 114
  Prayer to declare the Lease Agreement as null and void, directing the respondents not to give effect to the lease deed dated 03.12.2019 - Section 167 of the Companies Act, 2013 - HELD THAT:- The petitioners fails to convince us that petitioners have prima facie case and the balance of conveyance also lies in favor of the petitioners and the irreparable loss will be caused to the petitioners rather we are of the view that at the time of filing of this application, the possession was with the R-1 Company, thereafter, during the pendency of this application registered lease deed was executed on 29th June 2020 and on the basis of that R-5 claimed that they came into the possession over the land from 01/12/2019, which is also not liable to be accepted because a lease deed shall not be executed and registered from the retrospective effect and on the basis of that a person cannot claim his possession from the retrospective effect. Therefore, the decisions upon which the petitioners and respondents placed reliance under the facts and circumstances of the case are not applicable. Section 52 of TP Act, which says that during the pendency of the suit or proceedings no new thing could be introduced, we shall consider this at the time of final hearing but at this juncture, we came to a conclusion that no prima facie case is made out by the petitioners, the balance of conveyance is also not in favor of petitioners and no irreparable loss will be caused to the petitioners, therefore, we are not inclined to grant any interim relief to the petitioners. Hence prayer of the petitioners to grant interim relief is hereby rejected. In which the respondent No. 2 to 7 acted and got the lease deed executed and registered for 29 years whereas the unregistered lease deed was for five years that compelled us to form an opinion that act of respondents No. 2 to 7 are prejudicial to the interest of R-l company and in order to protect the interest of R-l Company, it is necessary to pass the following order that on the basis of the unregistered lease deed dt 03/12/2019 and Registered lease deed dt. 29/06/2020 no construction work shall be done and no new thing shall be installed over the land in question by the R-5 or by any other persons on or their behalf and the possession shall remain with the Respondent no 1 company during the pendency of this application and neither respondent No. 2 to 7 nor the petitioners shall interfere with the possession of the R-l company. List the case on 19/08/2020 for filing the reply to the main application on behalf of respondents.

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• 2021 (1) TMI 113
  Approval of the Scheme of Arrangement - Section 230 to 232 and other applicable provisions of the Companies Act, 2013 read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- The Petitioner Company has filed the certificate of the Independent Statutory Auditor in relation to compliance with the Accounting Standards with respect to the Scheme. Thus, the Petitioner Company has complied with proviso to Section 230 (7)/Section 232 (3) of the Companies Act, 2013 - The Petitioner Company has submitted that no investigation proceedings are pending against them under the provisions of the Companies Act, 1956 or the Companies Act, 2013 and no proceedings are pending against the Petitioner Company under Section 235 to 251 of the Companies Act, 2013 or under relevant provision of the Companies Act, 1956. In view of absence of any other objections having been placed on record before this Tribunal and since all the requisite statutory compliances having been fulfilled, this Tribunal, sanctions the Scheme of Arrangement, annexed at pages 312 to 348 of the typed set filed along with the Company Petitions as well as the prayer made therein - the scheme is sanctioned - application allowed.

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• Insolvency & Bankruptcy

• 2021 (1) TMI 112
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditor - existence of debt and dispute or not - HELD THAT:- Since the Parties themselves have settled the issue by way of Settlement dated 21.12.2020, we are inclined to dispose of the instant Company Petition by directing the Parties to strictly adhere the terms and conditions of the settlement. The Parties are hereby directed to strictly adhere to the terms and conditions of Settlement dated 21.12.2020, failing which, the Petitioner is at liberty to approach the Adjudicating Authority by way filing fresh Company Petition as per law - Petition disposed off.

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• 2021 (1) TMI 111
  Dissolution of the Corporate Person through voluntary liquidation - Section 59(8) of the I B Code, 2016 - HELD THAT:- The Applicant Company had not conducted any business or operations for quite some time, the scope of business that the Company was expecting from its parent Company had reduced and therefore it was no longer viable to run the business and that the Board of Directors upon discussions, approved the proposal to voluntarily liquidate the Company. The Liquidator has complied with all the conditions and procedural requirements as specified under various provisions of Section 59 of the Insolvency and Bankruptcy Code, 2016 and of the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017, before initiating Voluntary Liquidation Process of the Corporate Person, and the due Liquidation process is completed. Thus, the Petition / Application deserves to be allowed, as prayed for. The Corporate Person, M/s. Flocare Labs India Private Limited, is hereby dissolved, with immediate effect - Application disposed off.

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• 2021 (1) TMI 110
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Financial Creditor or not - existence of debt and dispute or not - HELD THAT:- The Applicant has filed the present Application for the alleged breach of Share Purchase Agreement dated 21.11.2012. Under the agreement the amount of Rs. 30,00,00,000/- was agreed to be paid by the Financial Creditor to Corporate Debtor for acquiring the Company. On the above said date an addendum to the agreement was also executed wherein the Financial Creditor agreed to make payment to the creditors of the Corporate Debtor. On 27.11.2012 the Corporate Debtor issued a letter requesting to hand over an advance amount of Rs. 1,00,00,000 to Dr. J. J R Justin. Thereafter on 05.09.2014 and 17.03.2015 Financial Creditor issued letter agreeing to refund of the advance amount. It can be seen that the Corporate Debtor acknowledged the debt of the Financial Creditor lastly on 28.11.2018. Hence, the instant application filed under Section 7(4) of the I B Code on 21.01.2020 is not barred by limitation - Objection of the Corporate Debtor regarding the validity of Share Purchase Agreement due to non -registration is not under our jurisdiction. Hence, the Tribunal need not delve into that issue. Further, the objection of the Corporate Debtor regarding there being no common seal of the company and hence the said agreement is invalid document, even assuming without a common seal of the company the Managing Directors agreed into an agreement, the Company is liable for the acts committed by its directors and is bound to honour the agreement entered by the Directors on behalf of the Company. This Application is filed by the applicant for alleged breach of Share Purchase Agreement dated 21.11.2012. Corporate Debtor failed to honour the share purchase Agreement, and no payment was made - ince the present debt arises out of the Share Purchase agreement dated 21.11.2012, the said amount is a debt disbursed against the consideration for advance payment as per the agreement and hence is covered under the definition of financial debt and Applicant will be treated as Financial Creditor. Application on behalf of Financial Creditor/ Applicant filed U/S 7 of the I B Code 2016 for initiation of Corporate Insolvency Resolution Process is admitted - the order of moratorium u/s 14 shall have effect from the date of this order till the completion of corporate insolvency resolution process or until this Bench approves the resolution plan under Sub Section (1) of Section 31 or passes an order for liquidation of Corporate Debtor under Section 33.

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• 2021 (1) TMI 109
  Seeking termination of Insolvency Resolution Process / proceedings initiated - section 9 of the Insolvency and Bankruptcy Code 2016 - HELD THAT:- Bare perusal of the provisions shows that Section 12A is inserted by the amendment dated 06.06.2018 under which an application which was admitted under Section 7, 9 or 10 can be withdrawn and regulation 30A, which has been amended recently with effect from 25.07.2019, after the decision of Swiss Ribbons, which provides how the withdrawal applications filed under Section 12A can be entertained by the Adjudicating Authority while considering the prayer of withdrawal of applications, which have been admitted under Section 7, 9 or 10 - Bare perusal of the amended provision made in the regulation 30A shows that there are two circumstances under which withdrawal is permissible. One is before the admission of the application under Section 7, 9 or 10 and before the constitution of COC and second one is after admission of the application under Section 7, 9 or 10 and after constitution of the COC and appointment of IRP. The present application herein was admitted on 13.02.2020 and IRP was appointed and the Operational Creditor was also directed to deposit of Rs. 2 lacs to meet the immediate expense of the IRP but here in place of IRP, the Suspended Board of Directors have filed the present application under Rule 11 of the NCLT Rules, 2016. In the present case, even the application has not been filed by the Operational Creditor rather it has been filed by the Suspended Board of Directors of the Corporate Debtor. There is a specific provision under Section 12A for withdrawal of application admitted U/S 7, 9 10 of IB Code and the procedures are prescribed under regulation 30A for withdrawal of applications after the admission of application and before and after the Constitution of the COC, therefore, we can say that before the constitution of the COC the application must be filed by the applicant through the IRP, in view of Regulation 30A (1)(a) and application under Sub Rule (1) shall be made in Form-FA accompanied with bank guarantee and when such application is filed under Clause (a) of Regulation (1) then the IRP is required to submit the application to the Adjudicating Authority within 3 days of its receipt but in this case, the Operational creditor has not filed the application in terms of Regulation 30A rather it has been filed by the Suspended Board of Directors of the Corporate Debtor. Application dismissed.

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• 2021 (1) TMI 108
  Assignment of Debt - Seeking directions to Resolution Professional / 1st Respondent herein who is Resolution Professional to admit claim - Section 60 (5) of Insolvency Bankruptcy Code - HELD THAT:- The Learned Counsel for Applicant would contend that the Applicant is assignee of the debt which was payable to the 2nd Respondent, the Assignor by the Corporate Debtor. The Learned Counsel would contend, there is an Assignment Agreement duly executed by the Assignor/the second Respondent herein namely, SREI Infrastructure Finance Limited. The Learned Counsel would contend, the debt transferred under Assignment Agreement is permitted to be recognised. In this connection the Learned Counsel for Applicant relied on Regulation 28 of CIRP Regulations. The Learned Counsel contended, the 2nd Respondent transferred / assigned the debt of Rs. 60,47,38,233/- on 18.05.2020. The Learned Counsel contended, soon after assigning the debt in favour of Applicant by the Assignor, the Applicant/Assignee filed claim before the 1st Respondent/ Resolution Professional of the Corporate Debtor. The Learned Counsel contended, the Resolution Professional being administrator and facilitator is bound to accept the claim transferred in favour of Applicant, declaring him as Financial Creditor and include in the CoC for the Corporate Debtor. The Learned Counsel contended, the Resolution Professional has not admitted the claim raising unnecessary objections and acted as adjudicator, which he is not empowered to do so. The Learned Counsel contended, the Resolution Professional rejected the claim by adjudicating the claim filed by the Applicant, as if the same cannot be admitted. It is true the debt of Rs. 60,47,38,233/- was assigned to the Applicant with the underlying securities which is for a sum of Rs. 10 lakhs. I agree with the contention of the Assignor that the inadequacy of consideration is not by itself a ground to entertain a doubt about the transaction. There are other circumstances pointed out by the Resolution Professional. The contention of the Resolution Professional that he has relied on Section 5 (7) of the Code and decided the claim on administrative side. The Resolution Professional would contend, the Applicant is a non-financial institution and non-ARC. How this Applicant being a non financial institution and non-ARC is entitled to purchase the debt with underlying immovable and movable securities from Respondent No.2 which is a Non-Banking financial institution and holding net worth of Rs. 2987.08 crores as on 31.03.2018 can assign its debts with underlying immovable and movable securities to non-financial institution and non-ARC, the Applicant herein, whose paid up capital is just Rs. 47.63 lakhs and how the debt of Rs. 60.47 crores was assigned for a sum of Rs. 10 lakhs. Certainly, this is an important circumstance which ought not to be ignored while assessing genuiness of this transaction. The question is whether claim can be admitted basing on the un-registered document when it was filed before the Resolution Professional. The unregistered documents cannot be taken into account for admission of the claim. The document must have been registered on the date on which the claim is made. No doubt for registration, four months are available under Section 23 of the Registration Act. The question is whether Assignment Agreement was registered on the date on which claim was made before the Resolution Professional. The documents must have been registered by the date the claim was made before the Resolution Professional. So when claim was made, the documents was not registered. Therefore, the document cannot be looked into. The Resolution Professional had not committed any error by not relying the unregistered Assignment Agreement because it was not registered and claim could not be admitted. The Resolution Professional has rightly observed a serious suspicious circumstance in the alleged transaction. The Applicant is a non-financial institution and non-ARC, then how the Applicant purchased the debt with underlying movable and immovable securities from the Assignor which is an NBFC and holding net-worth of Rs. 2987.08 crores as on 31.03.2018, which can assign its debts with underlying immovable and movable security to a non-financial institution and non-ARC, the Applicant herein, whose paid up capital is Rs. 47.63 lakhs. This certainly is an important circumstance which cannot be ignored and it casts a serious doubt on the transaction - The debt is stated to have been transferred to the Applicant, the Assignee. Now the prayer by the Applicant is to recognise him as financial creditor and further to include it in the CoC. The Resolution Professional has taken a right decision that Assignment Agreement is not registered. Therefore, he has not recognised the claim of the Applicant basing on the unregistered Assignment Agreement. Secondly, the Applicant cannot be included in the CoC even if transfer is treated as a valid transfer since the Assignee got the debt transferred from the related party. The Assignee is stepping into the shoes of the Assignor. Therefore, the Applicant cannot be included in the CoC having acquired the debt by transfer from the related party to the Corporate Debtor. The transaction on the face of it appear to be not a genuine transaction with regard to the transfer of debt in favour of Assignee. Already Resolution Professional recognised the debt of the Assignor and only a part of debt was not admitted because of pending reconciliation. Thus, there is no error committed by the Resolution Professional for not accepting transfer and not including the Applicant in the CoC. The Assignor continued to be a financial creditor of the Corporate Debtor. If transfer is not recognised by the Resolution Professional, the status of the Assignor/2nd Respondent herein, does not change and Assignor continues to be financial creditor of the Corporate Debtor - application dismissed.

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• 2021 (1) TMI 107
  Seeking grant of injunction on the holding of the EGM - power to appoint Directors and the power to regulate them by passing a resolution for removal - HELD THAT:- There were several prayers by the applicants in this matter. Representation was made by the counsels on behalf of Respondents 07 and 09. Accordingly, this Bench makes the following observations: 1. The prayer of the applicants that this bench should grant injunction on the holding of the EGM cannot be granted because it is not in the jurisdiction of the courts to grant such relief. Therefore, we do not intend to stop the EGM which is going to be held tomorrow i.e. on 07.08.2020. 2. Also, the prayer sought by the applicant that the director should not be removed can also not be granted as the Companies Act itself makes it clear that the power to remove the director is inherent and is a corporate decision which is correctly stated by the counsel for the Respondent No. 07. The applicants also mention their fear that they may be removed in the meeting scheduled for tomorrow. But we would like to mention here that even if this happens, they can at any time make representation for restoration to that effect according to the provisions of law. Application dismissed.

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• 2021 (1) TMI 106
  Liquidation of the Corporate Debtor - section 33 34 of the Insolvency and Bankruptcy Code, 2016 - Seeking appointment of the Liquidator - HELD THAT:- It is found that no viable Resolution Plan was received and the Corporate Debtor does not possess significant assets. Also, the bank balance available in the Bank account of the Corporate Debtor was insignificant/inadequate to pay the fees/ remuneration of professionals. Therefore, the CoC has resolved for liquidation of the Corporate Debtor vide its Fourth meeting dated 19.03.2020. It is also to be noted that this Adjudicating Authority has no jurisdiction to interfere in the commercial wisdom of the CoC as observed in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT] . The application so filed by the RP under Section 33 34 of the IB Code, 2016 is allowed and the Adjudicating Authority passes an order for initiation of liquidation of the Corporate Debtor viz., Aditya Exim Limited. The RP i.e. Shri Gordhanbhai Ratnabhai Godhani, shall act as the Liquidator for the purpose of liquidation of the Corporate Debtor - moratorium declared under Section 14 of the IB Code shall cease to have effect from the date of the order of liquidation.

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• 2021 (1) TMI 105
  Seeking exclusion of 54 days from CIRP - permission to Resolution Professional to call for CoC meetings to deliberate and vote on the Resolution Plan received from M/s. Earthin Projects Ltd and file necessary application/memos before this Tribunal within 60 days from the date of orders of this Tribunal - HELD THAT:- It is observed that after the initiation of CIRP, a period of 69 days was lost due to various reasons as stated in the application out of which a period of 15 days was already excluded by this Adjudicating Authority on various dates i.e., 27.01.2020 and 04.02.2020, now that the applicant has sought for exclusion of remaining 54 days from CIRP. It is pertinent to note that the judgment of the Hon ble Supreme Court has held in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta Ors. [ 2019 (11) TMI 731 - SUPREME COURT ] where it was held that while leaving the provision otherwise intact, we strike down the work mandatorily as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant s right to carry on business under Article 19(l)(g) of the Constitution. The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. Keeping the guidance of the Hon ble Supreme Court in view and considering the submissions, facts and circumstances of case, interest envisaged by the Prospective Resolution Applicant for resolution of Corporate Debtor and in view of the decision of CoC through email, as well as the economic scenario emerging due to COVID-19 pandemic and it s fall out, this Adjudicating Authority observes that exclusion of time period enabling for completion of CIRP would be in the interest of all stakeholders, to allow the completion of CIRP rather than going for liquidation of the Corporate Debtor which should only be initiated as a last resort - exclusion of period of another 54 days from calculation of CIRP period is approved. This exclusion is granted on having considered the steps already been taken by the RP, approval by the CoC with 74.05% acceptance through email and the current stage of CIRP in the case of the present Corporate Debtor i.e.. M/s. Indu Projects Limited - application disposed off.

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• Service Tax

• 2021 (1) TMI 104
  Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - rejection of declaration on the ground that as per report of the division vide letter dated 13.01.2020, no duty amount has been declared in return as payable but not paid - HELD THAT:- The admitted facts of the present case are that the petitioner has filed return under the service tax law prior to 30th June, 2019 and deposited the amount of duty along with the returns which was filed belatedly. Therefore, clause (e) of Section 123 read with clause (c) of Section 121 of the SVLDR Scheme is not applicable on the facts of the present case. The circular relied by learned counsel for the petitioner has no application to the facts of the present case inasmuch as the circulars dated 25th September, 2019 and 29th October, 2019 relied by learned counsel for the petitioner is referable to subclause (iii) of clause (c) of Section 121 of the SVLDR Scheme. Perusal of the various provisions of the Scheme shows that the Scheme is a complete Code in itself. In substance, it is a scheme for recovery of duty/indirect tax to unlock the frozen assets and to recover the tax arrears at a discounted amount. Thus, Sabka Vishwas Scheme , although a beneficial scheme for a declarant, is statutory in nature, which has been enacted with the object and purpose to minimise the litigation and to realise the arrears of tax by way of settlement at discounted amount in an expeditious manner. In other words the scheme is a step towards the settlement of outstanding disputed tax liability. Petition dismissed.

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• 2021 (1) TMI 103
  Rent-a-cab scheme operator Service - Deemed Sale - constitutionally demarcated exclusion of the authority of the Union that precluded statutory enactment of tax on transactions of sale - section 73(1A) of Finance Act, 1994 - HELD THAT:- It is not in dispute that the tax liability confirmed in the impugned order were demanded in statements issued, under section 73(1A) of Finance Act, 1994, by reference to facts, and evidence, elaborated in the first show cause notice for the period from 1st April 2008 to 30th September 2012 which straddles the service enumerated in section 65(105)(o) of Finance Act, 1994 and the successor negative list regime. The disputed tax in the present appeal pertains to leviability in the negative list regime as provider of service relating to lease of motor vehicles and on the entire consideration received as rentals from customers. The fitment for taxability under Finance Act, 1994, ignoring the scheme of distribution of exclusive tax jurisdictions in the lists of the Seventh Schedule of the Constitution, within the definitions therein was considered by the Tribunal in ARVAL INDIA PRIVATE LIMITED VERSUS PRINCIPAL COMMISSIONER OF SERVICE TAX IV AND (VICE-VERSA) MR CJ MATHEW, MEMBER (TECHNICAL) [ 2020 (9) TMI 125 - CESTAT MUMBAI] that decided the appeal against the demands for the earlier periods with the core of the dispute and, drawing upon the judgement of the Hon ble Supreme Court on the constitutional constraints in taxing that part of works contract transaction deemed to be sale, to hold that the jurisdiction enabled by articulation of legislative intent specifically to tax service component - not deemed as sale - in works contract could not be appropriated by applying a non-specific description in Finance Act, 1994 to transactions that were taxed entirely as sale . As decided in earlier decision of the appellant, Agreements/contracts of lease are, acknowledgedly, taxable as deemed sale ; it is not the case of Revenue that any portion of the consideration for lease is not deemed sale . As the entire rental is subject to tax as deemed sale , there is no scope for any portion thereof to be leviable to tax by the Union and, thereby, under Finance Act, 1994 Appeal allowed - decided in favor of appellant.

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