TMI Tax Updates - e-Newsletter
November 4, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Securities / SEBI Insolvency & Bankruptcy Service Tax

Articles

1. MAINTAINABILITY OF APPLICATIONS FOR INITIATION OF CORPORATE INSOLVENCY RESOLTUION PROCESS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. 8th Meeting of the India-UAE High Level Joint Task Force on Investments

2. INDIA’S MERCHANDISE TRADE: Preliminary Data, October 2020

3. Factual position in respect to Service Charges levied by banks

4. CCI approves acquisition of General Insurance Business of Bharti AXA by ICICI Lombard

Notifications

Customs

1. 104/2020 - dated 3-11-2020 - Cus (NT)

Seeks to amend Notification No. 99/2020-CUSTOMS (N.T.), dated 15th October, 2020

GST - States

2. 79/2020 - State Tax - dated 23-10-2020 - Maharashtra SGST

Maharashtra Goods and Services Tax (Twelfth Amendment) Rules, 2020.

3. 77/2020-State Tax - dated 23-10-2020 - Maharashtra SGST

Seeks to make filing of annual return under section 44 (1) of MGST Act for F.Y. 2019-20 optional for small taxpayers whose aggregate turnover is less than ₹ 2 crores and who have not filed the said return before the due date.

4. 74/2020 State Tax - dated 23-10-2020 - Maharashtra SGST

Seeks to prescribe the due date for furnishing FORM GSTR-1 for the quarters October, 2020 to December, 2020 and January, 2021 to March, 2021 for registered persons having aggregate turnover of up to 1.5 crore rupees in the preceding financial year or the current financial year.

5. 05/2020 State Tax (Rate) - dated 23-10-2020 - Maharashtra SGST

To amend notification No. 12/ 2017- State Tax (Rate) so as to exempt satellite launch services provided by ISRO, Antrix Co. Ltd and NSIL as recommended by GST Council in its 42nd meeting held on 05.10.2020.

Income Tax

6. 89/2020 - dated 2-11-2020 - IT

U/s 10(23FE) of Income Tax Act 1961 - Central Government specifies the sovereign wealth fund namely, the MIC Redwood 1 RSC Limited, Abu Dhabi, United Arab Emirates

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CFD/DIL1/CIR/P/2020/215 - dated 3-11-2020

Schemes of Arrangement by Listed Entities and (ii) Relaxation under Sub-rule (7) of Rule 19 of the Securities Contracts (Regulation) Rules, 1957

Customs

2. 49/2020 - dated 3-11-2020

Scheme for Rebate of State Levies (RoSL)

Highlights / Catch Notes

Income Tax

• High Court Rules DGIT Exceeded Authority in Issuing SCN; ITSC Jurisdiction Clarified u/s 245C.

  Case-Laws - HC : Settlement Application under Section 245C - DGIT jurisdiction to issue the SCN - While the DGIT is deemed to be an 'Income Tax Authority' for the purposes of the Act, by virtue of Section 116, the ITSC is a statutory body created under Section 245B of the Act. It is rather unfortunate that a high ranking official as that of DGIT, was ignorant to understand the basic powers vested on him. - The DGIT had shockingly exceeded its powers and therefore, the impugned order cannot be sustained. - HC
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• High Court's Legal Proposition Effective from Start; Pr. CIT's Revision u/s 263 Deemed Unjustified Due to AO's Valid View.

  Case-Laws - AT : Revision u/s 263 - It is settled principle of law that once the High Court lays down particular the proposition of law, the same is deemed to be in existence from the inception. Fact would clearly suggest that there was no material on record to hold that the legal and professional expenses are not allowable as revenue expenditure. AO only took one of the possible views and, therefore, the Pr. CIT was not justified in exercising the power of revision - AT
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• Share Warrant Forfeiture u/s 43(5) Deemed Capital Receipt, Not Taxable as Income (5.

  Case-Laws - AT : Forfeiture of amount - Addition of amount forfeited by assessee on share warrants u/s 43(5) - amount received on account of forfeiture of amount due to non payment towards warrants issue has to be treated as capital receipt and since the assessee has also transferred it to the capital reserve account in the balance sheet, the amount cannot be taxed as income. - AT
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• Provisions for gratuity and leave encashment excluded from MAT calculation u/s 115JB; only unascertained liabilities added back.

  Case-Laws - AT : Computation of MAT u/s 115JB - Addition towards delayed payment of gratuity and leave encashment - in computation of book profit only provision for unascertained liability is required to be added back. Provision for gratuity and leave encashment, being ascertained liabilities are not required to be added back to book profits u/s. 115JB - AT
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• Assessment u/s 153A Invalidated Due to Lack of Incriminating Evidence; No Contradiction Found in Assessee's Position.

  Case-Laws - AT : Assessment u/s. 153A - income earned from undisclosed sources - unexplained investment u/s. 69 - AO has not referred to any incriminating material found during the course of search in the assessment order. Nothing is found contrary to the stated position of the assessee, therefore, the assessment framed u/s. 153A of the Act is not sustainable - AT
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• Appellate authority can't uphold Section 68 additions without reasoning; CIT(A) failed to address evidence properly. Addition deleted.

  Case-Laws - AT : Additions u/s 68 - Any appellate authority cannot reject the evidences without any discussion or reason. The CIT (A) has not mentioned as to what more evidence were needed to be produced by the assessee to substantiate its contention or what are the material or information to rebut the assessee’s explanation and evidences as discussed above. AO as well as the CIT(A) failed to appreciate or consider the more than sufficient evidences placed on record by the assessee to discharge the onus u/s 68 - Addition made u/s 68 of the Act is hereby deleted. - AT
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• Court Rules: No Addition for Unexplained Cash Credits Due to Insufficient Proof and Reliance on Suspicion.

  Case-Laws - AT : Unexplained cash credit received from bogus entities - discharge of onus - we are unable to find any such material except for the fact that additions were made merely on suspicious, conjectures and surmises. - No addition can sustain - AT
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• Court Rules Depreciation on Goodwill Acquired via Amalgamation is Allowable, Directs AO to Approve Taxpayer's Claim.

  Case-Laws - AT : Disallowance of depreciation on the intangible assets/goodwill acquired in the scheme of amalgamation - AO directed to allow the claim of the assessee for the depreciation on the impugned goodwill. - AT
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• Section 234E: No Fees for Late TDS Filing Before June 1, 2015, Due to Lack of Enabling Provision.

  Case-Laws - AT : Levy fee u/s 234E - processing the TDS statement - Intimation u/s 200A - Late filing of TDS returns / statement - even-though section 234E of the Act was in the statute prior to 01.06.2015, however, in absence of any enabling provision, no fee under section 234E of the Act can be levied for late filing of TDS statement for any period prior to 01.06.2015. - AT
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• Taxpayer Manipulates Capital Gains u/s 50C; Unreliable Valuation Report and Missing Purchase Deed Signal Tax Evasion.

  Case-Laws - AT : Addition on account of capital gains - addition u/s 50C - In the absence of production of the Purchase Deed and source of construction made on the impugned property, would clearly show that the valuation report have been manipulated by assessee just to avoid payment of capital gains tax to the Revenue Department. The valuation report is of no reliance. - AT
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• Tax Authority Must Provide Evidence for Disallowing Related Entity Purchases; Suspicion Alone Insufficient for Action.

  Case-Laws - AT : Disallowance of 10% of the purchases made by the assessee from the sister concern - No addition can be made basing on suspicion, when the books are available before the assessing officer to bring out material sufficient to support his suspicion. In the absence of any such evidence, no ad hoc disallowance could be sustained - AT
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• High Court Confirms Carry Forward of Unused Additional Depreciation for Future Years, Clarifying Taxpayer Benefits.

  Case-Laws - HC : Carry forward of balance additional depreciation to the following years - whether tribunal was right in holding additional depreciation can be allowed in the next year in case the same cannot be allowed in the earlier year? - Held Yes - HC
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Customs

• Conviction Based Solely on Confession Under NDPS Act Section 67: Constitutional Concerns and Evidence Act Implications.

  Case-Laws - SC : Validity of conviction made - conviction based solely on the purported confessional statement recorded under Section 67 of the NDPS Act - evidentiary value present or not - to arrive at the conclusion that a confessional statement made before an officer designated under section 42 or section 53 can be the basis to convict a person under the NDPS Act, without any non obstante clause doing away with section 25 of the Evidence Act, and without any safeguards, would be a direct infringement of the constitutional guarantees contained in Articles 14, 20(3) and 21 of the Constitution of India. - SC
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IBC

• Court Rules Banks Can Pursue Guarantors During Borrower's Insolvency; Sections 14 and 31 Don't Impose Restrictions.

  Case-Laws - HC : Neither Section 14 nor Section 31 of the IB Code place any fetters on Banks/Financial Institutions from initiation and continuation of the proceedings against the guarantor for recovering their dues. That being the position, the plea taken by the counsel for the petitioner that all proceedings against the petitioner, who is only a guarantor, ought to be stayed under the SARFESI Act during the continuation of the Insolvency Resolution process qua the Principal Borrower, is rejected as meritless. - HC
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SEBI

• Court Dismisses Writ Petition: Credit Rating Downgrade by Private Entity Not Addressable Under Article 12. Alternative Remedies Available.

  Case-Laws - HC : Downgrading petitioner's bank loans' rating to 'IND BB+' from 'IND BBB - As third respondent is a private body and not a “State” within the meaning of Article 12 of the Constitution and by rating its clients, the third respondent is not discharging any public function and the subject matter involves analysis by financial experts and the petitioner is having effective alternative remedies, we dismiss this writ petition as not maintainable. - HC
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Case Laws:

• GST

• 2020 (11) TMI 72
  Levy of tax - estimated by-products value, which are retained by the millers as part of custom milling activity, treating these compensatory products value as part of value of supply - HELD THAT:- The value of by-products so retained by the appellant yielded during CMR milling, which were allowed to be retained by the appellant to meet the CMR activity cost shall obviously be included as part of value of supply and also to be termed as a bona fide form of consideration, hence the levy of tax on the resultant value of these products treating as value of supply need to be upheld as legitimate and tax so levied and impugned orders passed by the assessing authority is confirmed and the appeal on this aspect stands dismissed. Levy of tax on estimated sale value of rice bran - HELD THAT:- The appellant has not put-forth any arguments and also not pressed for any relief through hearings. However, the levy on this aspect has also been examined by exploring the provisions of Act. It is to be observed in this connection that bran is not exempted under CGST/APGST Act, 2017, resultantly the levy of tax on the sale value of such bran is to be upheld as sustainable and the tax so levied and impugned orders passed by the assessing authority is confirmed and the appeal to this extent is dismissed. The levy of tax by the assessing authority is confirmed - Appeal dismissed.

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• 2020 (11) TMI 53
  Seeking a direction to the Respondents to allow/extend the time limit for submitting Forms GSTR-9 and 9C for the Financial Year 2018-19 upto 31st December, 2020 without any adverse consequences to the assessees - HELD THAT:- Today when the matter is called upon, learned counsel for the petitioner has circulated a press release issued by the Central Board of Indirect Taxes and Customs on 24th October, 2020 extending the due dates for filing of annual return and reconciliation statement for the financial year 2018-19. The due dates for filing annual return (Form GSTR - 9 /GSTR - 9A) and reconciliation statement (Form GSTR 9C) for the financial year 2018-19 has been extended from 31st October, 2020 to 31st December, 2020. It is stated therein that notification to give effect to the said decision would follow. Petition closed.

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• 2020 (11) TMI 42
  Refund claim of accumulated ITC - rejected on the ground that the appellant had generated ARN for NIL amount, as such no amount had been Debited from their Electronic Credit Ledger, whereas the appellant was required to Debit the amount of refund being claimed as per Rule 89(3) of the CGST Rules, 2017 - HELD THAT:- The appellant was unable to Debit their ITC Ledger through FORM GST DRC-03 because of error in system, GST common portal did not allow to Debit the amount from their available balance in ITC ledger and for this they have made several complaints at various appropriate platforms i.e. help desk, vide Ticket No. 201908196732382, 201908276814243 201909026862788 and also filed the complaint to adjudicating authority and also O/o the Principal Commissioner, CGST but no solution were found. The appellant vide letter dated 20-11-2019 and on 9-1-2020 at the time of personal hearing has also submitted a letter Ref No. SSC/GST(Appeal)/019/19-20, dated 9-1-2020 stated therein that GST common portal has been rectified and they have filed FORM GST DRC-03 and Debited their electronic ledger by Rs. 23,60,340/- (IGST Rs. 10,10,890/-. CGST Rs. 6,74,725/- and SGST Rs. 6,74,725/-) vide ARN AD081119002254F, dated 20-11-2019 and submitted the copy of Form GST DRC-03 and the appellant also requested to send back the claim to the adjudicating authority for further process. The appeal is disposed off with the direction that the appellant to submit FORM GST DRC-03 and other related documents before the adjudicating authority in order to verify the same and process the refund claim as per provisions of Section 54 of the CGST Act, 2017 and rules made thereunder.

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• Income Tax

• 2020 (11) TMI 71
  Reopening of assessment u/s 147 - reasons recorded by DCIT whereas notice issued by ITO - Notice issued by an officer other than the officer who recorded the reasons for reopening - curable defect u/s 292B - HELD THAT:- Special leave petition is dismissed. However, the question of law is left open.

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• 2020 (11) TMI 70
  Addition u/s 14A - sufficiency of own funds - HELD THAT:- Disallowance u/s 14A cannot be more than the exempt income earned by the Assessee during the assessment year in question. In this case, there is no dispute that the dividend i.e. the exempt income earned by the Assessee during the relevant Assessment Year, was only Rs. 45,371/-. Accordingly, the disallowance in this case could not have exceeded Rs. 45,371/-. It is only because the Assessees voluntarily offered a disallowance to the extent of Rs. 65,000/-, that the Commissioner (Appeals) made a disallowance to the extent of Rs. 65,000/-. First substantial question of law is required to be answered against the Revenue and in favour of the Assessee. Disallowance of cash purchases - HELD THAT:- We are unable to agree with the contentions of Ms. Razaq. The record indicates that the total purchases of the Assessees during the relevant assessment year were in the range of Rs. 29.97 crores. As against this, cash purchases were of Rs. 60,20,080/- which corresponds to around 2% of the total purchases. The purchases were in a series of transactions, involving an amount of less than Rs. 20,000/-. This is not a case where the books of account of the Assessees were rejected by the AO. The record also establishes that the Assessees obtained H Form concerning these purchases. Assessees have also offered a plausible explanation that such purchases were from smaller traders or mining contractors who would collect residual iron ore spilled on land and then sold for a cheaper price based on on the spot cash payments. Both, the Commissioner (Appeals) and the ITAT have recorded concurrent findings on the issue of cash purchases and it cannot be said that such findings suffer from perversity to warrant interference in this Appeal. Second substantial question of law is also required to be answered against the Revenue and in favour of the Assessee. Additions made under 41(1) - assessee had not filed any confirmation of trade creditors and existence of liabilities - Commissioner (Appeals) and the ITAT deleting the addition made u/s 41(1) - HELD THAT:- Even the reasonings of the Commissioner (Appeals) and the ITAT suffer from no perversity whatsoever. The view taken is consistent with the law laid down by this court in Chase Bright Steel Ltd [ 1988 (12) TMI 80 - BOMBAY HIGH COURT] . There is material on record, which also suggests that the confirmations were indeed received and filed by the Assessees though, there are contradictory findings by the AO on this issue. Third substantial question of law is required to be decided against the Revenue and in favour of the Assessee. Undervaluation of closing stock merely by passing journal entries - Commissioner (Appeals) and the ITAT deleted the addition - HELD THAT:- We detect neither any perversity in the concurrent findings of fact recorded by the Commissioner (Appeals) and the ITAT, nor can we say that the two authorities misconstrued the legal position in this regard. Revenue, on one hand, cannot accept rendering of service as genuine and tax the transactions based on the same and the other hand, urge that there has been undervaluation of the closing stock and on such basis make additions to the returned income. Accordingly, even the fourth substantial question of law is required to be answered against the Revenue Additions towards staking and handling expenses and blending and screening charges - assessee has failed to prove genuineness of rendering any service by sister concern - ITAT deleted the addition - HELD THAT:- Sister concern M/s. Karishma Goa Mineral Trading Pvt. Ltd. had rendered similar types of services to M/s. Karishma Global Mineral Exports Pvt. Ltd. during the assessment year 2010-11 and the said expenditure was never disallowed by the Revenue during the assessment of M/s. Karishma Global Mineral Exports Pvt. Ltd. even though such assessment was completed under Section 143(3) - there was a factual error on the part of the AO in holding that the sister-concern was never involved in this type of activity. We are satisfied that both Commissioner (Appeals) and the ITAT did scrutinize the transaction with required care and caution and only thereafter recorded the concurrent findings of fact. Therefore, even the fifth substantial question of law is required to be answered against the Revenue

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• 2020 (11) TMI 69
  Settlement Application under Section 245C - DGIT jurisdiction to issue the SCN - Withdrawal of the approval under Section 10(23C) (iv) - ITSC rejected the said application under Section 245D(1) of the Act for non-payment of taxes on the additional income disclosed in the Settlement Application and did not allow the same to be proceeded with - jurisdiction of the DGIT to issue show cause notice (SCN), in view of the bar under Section 245F(2) of the Act and the powers of the DGIT to reopen the matters covered under the award of the ITSC - HELD THAT:- The Trust had filed an application under Section 245C of the Act on 26.11.2012 and the same was allowed to be proceeded with under Section 245D(1) of the Act through an order dated 10.12.2012. At this stage, the DGIT had issued the SCN on 22.04.2013 proposing for withdrawal of the approval granted under Section 10(23C)(iv) of the Act, for the period AYs 2006-07 to 2011- 12. By virtue of Section 245F(2), the DGIT was not empowered to steps into the shoes of the ITSC and issue the show cause notice. One of the issue which was pending before the ITSC at that point of time against the Trust, was for violation of the conditions of Section 11/Section 10 (23C). While that being so, when the DGIT was clearly without jurisdiction to issue the SCN, there is no justification on his part to proceed further on the SCN and pass the impugned order. When the foundation to the entire proceedings culminating to the impugned order itself is illegal, the impugned order cannot be legally sustained. ITSC had dealt with the issues pertaining to suppression of income and anonymous donations, collection of unaccounted capitation fee, diversion of unaccounted capitation fee to relatives of founder and application of accounted income of trust to benefit the relatives of founder. When such issues have already been dealt and had become conclusive, Section 245I of the Act prohibits the DGIT to reopen the issues in any proceeding under the Act. On this ground also, the impugned order cannot be sustained. When the DGIT is wholly without jurisdiction to initiate proceedings for withdrawal of the approval under Section 10(23C) (iv) of the Act, the entire proceedings, culminating to the impugned order is illegal and therefore deserves to be quashed. Apart from lacking jurisdiction, the DGIT had grossly exceeded his powers while passing the impugned order by overruling the findings of the ITSC and rendering his opinion based on the materials which were available before the ITSC. DGIT had attempted to sit on appeal against the order of ITSC. While the DGIT is deemed to be an Income Tax Authority for the purposes of the Act, by virtue of Section 116, the ITSC is a statutory body created under Section 245B of the Act. It is rather unfortunate that a high ranking official as that of DGIT, was ignorant to understand the basic powers vested on him. On this aspect also, the DGIT had shockingly exceeded its powers and therefore, the impugned order cannot be sustained. - Decided in favour of assessee.

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• 2020 (11) TMI 68
  Capital gain on sale of land - year of assessment - deemed buy back by the assessee on the date of arbitration award - as per assessee all four sale deeds executed in F. Y. 2009-10 were cancelled as per the Arbitration Award dated 02.09.2015, it should be held that there was no sale of land in F. Y. 2009 -10 relevant to the present Assessment Year 2010 -11 - HELD THAT:- This cannot be said that as per the effect of Arbitration Award dated 02.09.2015 and consequent cancellation of Sale Deeds, there was no sale in A. Y. 2010 11 and the ends of justice will be met and full effect will also be given to Arbitration Award dated 02.09.2015 and consequent cancellation of four sale deeds executed in F. Y. 2009 10 and execution of three new sale deeds in F. Y. 2015 16. If we hold that sale of 50 Acres of land for Rs. 100 Crores was complete in F. Y. 2009 10 relevant to A. Y. 2010 11 and therefore, resultant capital gain on this entire sale is liable to tax in A. Y. 2010 11 and on account of cancellation of those four sale deeds as per the Arbitration Award dated 02.09.2015, it should be held that out of the said 50 Acres of Land, land equal to 26 Acres 10 Guntas is deemed to be Bought Back by the Assessee on 02.09.2015 for same consideration Rs. 2 Crores per Acre because same lands to the extent of 23 Acres 30 Guntas are sold by various sale deeds executed in F. Y. 2015 16 also and in fact, sale of only 26 Acres 10 Guntas of land is not ultimately made as per various sale deeds executed in F. Y. 2015 16 and for such deemed buy back of 26 Acres 10 Guntas of land, Cost of acquisition should be considered at Rs. 2 Crores per Acre (Total Cost Rs. 52.50 Crores) with date of acquisition as 02.09.2015 for computing capital gain, when any land out of this 26 Acres 10 Guntas Land is sold by the assessee in future. This will give full effect to cancellation of four sale deeds executed in F. Y. 2009 10 and execution of three new sale deeds executed in F. Y. 2015 16 as per which, 23 Acres 30 Guntas of the same lands were transferred by the assessee vendor to the buyer M/s Manipal University and 55 Acres 31.89 Guntas of new lands (Out of Total 79 Acres 21.89 Guntas of Contiguous land for Rs. 150 Crores as per three Sale Deeds executed in F. Y. 2015 16) were transferred at the balance consideration of Rs. 102.50 Crores being Total sale consideration of Rs. 150 Crores minus sale consideration of 23 Acres 30 Gunta Land @ Rs. 2 Crores per Acre Rs. 47.50 Crores because this much land is not deemed to be bought back by the assessee as these are part of sale deeds executed in F. Y. 2015 16 also. We have ensured that full effect is given to the arbitration award dated 02.09.2015. Effect to cancellation of Executed Sale Deed as per Arbitration award is fully given once we hold that the land which is not ultimately sold as per new sale deeds executed in F. Y. 2015 16 is deemed buy back by the assessee on the date of arbitration award. Regarding double taxation of capital gain in respect of 23 Acres 30 Guntas land which is common in the sale deeds executed in F. Y. 2009 10 2015 16, this is up to the assessee (if so advised) to make claim before the department and since, that year is not before us, we do not feel it proper to give any direction in respect of that year. - Decided against assessee.

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• 2020 (11) TMI 67
  Revision u/s 263 - allowability of legal and professional charges incurred in connection with the acquisitions of New Ship Lift System - revenue or capital expenditure - HELD THAT:- As during the course of assessment proceedings, AO had called for the details regarding the true nature of legal and professional expenses and the same was explained by the assessee on being satisfied the Assessing Officer had chosen not to make any addition. The fact that the assessment order does not discuss about this item of the expenditure does not mean that the AO had not examined the issue. In the circumstances, it cannot be said that there was no enquiry by the AO on this issue of allowability of legal and professional charges. Madras High Court in the case of Bush Boake Allen India Ltd. [ 1981 (10) TMI 32 - MADRAS HIGH COURT ] wherein following the decision of India Cements Ltd. [ 1965 (12) TMI 22 - SUPREME COURT ] held that merely because the expenditure was incurred in connection with the capital assets, the same cannot be treated as capital in nature. It is settled principle of law that once the High Court lays down particular the proposition of law, the same is deemed to be in existence from the inception. Fact would clearly suggest that there was no material on record to hold that the legal and professional expenses are not allowable as revenue expenditure. AO only took one of the possible views and, therefore, the Pr. CIT was not justified in exercising the power of revision - Decided in favour of assessee.

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• 2020 (11) TMI 66
  Reopening of assessment u/s 147 - Tangible material - HELD THAT:- Reopening of assessment being based on a mere change of opinion, the assumption of jurisdiction on the part of the A.O. lacks validity and the notice u/s 148 of the Act cannot be sustained. AO has power to reopen the assessment, provided there is tangible material to come to the conclusion that there is escapement of income from assessment and the reasons must have a live link with the formation of belief. In the present case, there is no tangible material. The issuance of the impugned notice u/s.148 is nothing but mere change of opinion. In absence of any new tangible material available with the A.O., it is not open to the A.O. to change his opinion by issuing the notice of re-assessment. From the reasons recorded it can be said that the original assessment is sought to be reopened in exercise of powers under section 147/148 of the Act on change of opinion by the AO, which is not permissible more particularly when the original assessment is sought to be reopened after a period of four years from the end of the assessment year. Under the circumstances, the conditions stipulated under first proviso to section 147 are not satisfied and therefore, on the aforesaid ground alone, the impugned notice deserves to be quashed and set aside. There was no full and true disclosure at the end of the Assessee of the material fact necessary for the purpose of assessment. In such circumstances, it can be said that there was no tangible material for the purpose of reopening the assessment except change of opinion. Hence in our opinion, there was no fault on the part of assessee to disclose full and truly all the material facts necessary for the assessment. Reopening of assessment which is already concluded under Section 143(3) of the Act of the assessment cannot be reopened without any allegation by the Assessing Officer that there was non-disclosure of true and correct facts by the assessee while framing the original assessment. Hence we are inclined to annul the assessment. Disallowance of expenditure relating to design and development expenses - Revenue or capital expenditure - HELD THAT:- The assessee incurred this expenditure towards design and development. The assessee itself treated it as capital expenditure by amortising the same over a period of use of an asset or five years whichever is lower. Contrary to this the learned Authorised Representative made an argument that this is an expenditure incurred in day to day running of the business and eligible for deduction under Section 37 of the Act. Being so, the expenditure is in capital nature and it cannot be allowed as revenue expenditure. However he submitted that alternative argument that the assessee is entitled for depreciation on the same at applicable rate. Accordingly, we direct the Assessing Officer to grant depreciation at applicable rate since he has treated as capital expenditure. This ground of assessee is partly allowed. Disallowance of R D expenses on the ground that the said expenditure brings value addition and benefit of enduring nature - contention of the assessee that these Books of Accounts cannot be conclusive for the purpose of Income Tax assessment and the entire R D expenditure is in the revenue filled and entire expenditure has to be allowed - HELD THAT:- Assessee is not able to substantiate the above expenditure on in-house is related to carrying out day to day business of the assessee. Being so, in our opinion the capital portion of the R D expenditure cannot be allowed as revenue expenditure. However the assessee has raised alternative contention that it is regarded as a capital expenditure, the same has to be allowed as deduction under Section 35(1)(iv) of the Act, the same be allowed as deduction or grant depreciation on the said expenditure. Regarding deduction under Section 35(1)(iv) of the Act, the assessee has not placed any evidence in support of the claim. The same is rejected. However we consider the alternative ground of the assessee and set aside the matter to the file of Assessing Officer to grant depreciation on it. Accordingly, this ground of appeal is partly allowed for all the Assessment Years under consideration. Disallowance of sales commission - HELD THAT:- The assessee made provision towards sales commission and same is disallowed by the Assessing Officer on the reason that no evidences and documents were submitted to substantiate the claim of the assessee or how the prices are created towards unknown liability which does not exist at the time of creation.Before us, no evidence is furnished to show that the basis towards non-existing liability. Interest disallowance - additional ground admission - HELD THAT:- This interest expenditure was with regard to on account of loans availed which was invested in capital work in progress and as an addition to fixed assets. Being so, this is in capital field and no interest could be allowed as revenue expenditure. The lower authorities are justified in treating the claim of the assessee as capital work in progress. Considering the additional ground on the reason that there is good and sufficient reason for not raising this additional ground inadvertently. Accordingly, we admit the additional ground and accede to the belief of the ld. AR and the assessee is entitled for consequential depreciation on capitalization in the year capital work in progress by the assessee at applicable rate. We direct the Assessing Officer to allow consequential depreciation. This ground of assessee is partly allowed. Disallowance of reimbursement of expenses - tax has not been withheld on the reimbursement of expenses - HELD THAT:- Before us, the assessee has not substantiated that the assessee has deducted tax on the said reimbursement of expenditure. Being so, we are not in a position to allow this expenditure.

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• 2020 (11) TMI 65
  Penalty u/s 271(1)(c) OR u/s 271AAB - HELD THAT:- CIT(A) has reversed AO s action for the sole reason that since the instant lis involves a search case covered under a specific provision u/s 271AAB of the Act, the impugned proceedings u/s. 271(1)(c) ought not to have been initiated. This clinching aspect has gone unrebutted from the Revenue side that the AO had indeed involved sec. 271(1)(c) proceedings only. The tribunal s co-ordinate bench decision(s) (supra) have already made it clear that the specific provision dealing with such penalty i.e. sec. 271AAB has overriding effect over the general one that the sec. 271(1)(c) in other words. We adopt the same reasoning mutatis mutandis and confirm the CIT(A) s action deleting the impugned penalty.

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• 2020 (11) TMI 64
  Disallowance u/s 14A r.w.r. 8D - HELD THAT:- In the case of the assessee own case [ 2017 (5) TMI 1745 - ITAT MUMBAI] assessee has incurred administrative expenses purely for administration of its affairs. We do not agree with the submission of Ld. AR that assessee has not incurred any expenditure and not warranted to remit this issue back to AO. The investment does require constant monitoring even though it is made within the group concern. Sometimes, the method applied as per rule 8D(2)(iii) gives absurd result, like the disallowance is more than the actual administrative expenses. We are directing AO to determine the total administrative expenses and also determine the total income earned by assessee including taxable and exempt income, apply the ratio of income to determine the administrative expenses and can be apportioned to exempt income. Simultaneously, calculate 0.5% of the investment as per rule 8D(2)(iii) of the rule, in applying the rules, he should consider only those investments which has actually earned dividend /exempt income. Then compare the both method of calculation and in order to apply provision of section 14A, he should consider the amount calculated above said two methods whichever is less. Accordingly, ground no. 1 raised by assessee is allowed for statistical purposes. TDS u/s 194J/194H - disallowance under section 40(a)(ia) in respect of commission on credit card companies paid to various banks for non-deduction of tax at source - HELD THAT:- Since facts of the case are exactly similar [ 2017 (5) TMI 1745 - ITAT MUMBAI] for which we have already given our finding. Accordingly the disallowance made by the Assessing Officer cannot be sustained and the Order of the CIT (Appeals) deleting the aforesaid disallowance, is upheld. Accordingly these grounds stands dismissed. Addition of amount forfeited by assessee on share warrants u/s 43(5) - HELD THAT:- As decided in own case[ 2017 (5) TMI 1745 - ITAT MUMBAI] basic nature of the transaction relates to raising of capital through convertible warrants. The amount forfeited on account of non payment of subsequent amounts cannot be treated as a income of the assessee in view of the various judicial pronouncements as well as the basic nature of the receipt. Thus, we hold that amount received on account of forfeiture of amount due to non payment towards warrants issue has to be treated as capital receipt and since the assessee has also transferred it to the capital reserve account in the balance sheet, the amount cannot be taxed as income. AO has observed in the assessment order that this addition should be treated as income from other sources as the assessee has become richer but the Departmental Representative could not throw any light on this aspect. It solely indicates that AO was not certain about the nature of these receipts. Thus, considering the above facts, we come to the conclusion that the nature of receipt in this case has clearly been established as being the capital receipt. The provision of Income Tax Act does not provide for taxation of such capital receipt, even if it is forfeiture of amount.- Decided against revenue.

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• 2020 (11) TMI 63
  Installation of an ERP package - Nature of expenses - revenue or capital expenses - HELD THAT:- As during the previous year under consideration, the assessee recognized an expenditure in its profit and loss account. The said amount pertained towards an unsuccessful attempt to install an ERP package called SCALA. The said package failed to meet the requirements of the assessee and hence the project had to be abandoned midway. The expenditure incurred on said package was recognized in profit and loss account and was claimed as a revenue deduction u/s. 37(1) of the Act. That being so, we decline to interfere in the order of ld CIT(A), his order on this issue is hereby accepted and the grounds of appeal raised by the Revenue is dismissed. Disallowance of commission - main point to be satisfied is Rendering of service - CIT(A) deleted the addition - HELD THAT:- During the course of assessment proceedings, the appellant duly furnished all the details of commission expense alongwith documentary evidence. Further, the Ld. AO also verified the transactions by issuing notice u/s. 133(6) of the Act against which he received positive confirmation from the agents regarding the transactions. Hence, the disallowance made by the Ld. AO is on mere surmise and conjecture and the order of Ld. CIT(A) in deleting the said addition is to be sustained. Accordingly, we dismiss the ground raised by the Revenue. Computation of MAT u/s 115JB - Addition on account of Provision for Doubtful Debt - computation sheet of book profit u/s. 115JB - AO was of the view that the above provisions as well as Interest u/s. 234C of the Act are required to be added back to the book profit as per Explanation below second proviso to section 115JB - HELD THAT:- We have gone through the order of ld CIT(A), it is a speaking order in respect of provision for doubtful debts/bad debts both under normal provision and section 115JB of the Act. Therefore, the reasoned order passed by the ld CIT(A) does not require any interference. That being so, we decline to interfere with the order of ld. C.I T.(A) in deleting the aforesaid additions. His order on these additions are, therefore, upheld and the grounds of appeal of the Revenue are dismissed. Computation of MAT u/s 115JB - Addition towards delayed payment of gratuity and leave encashment - HELD THAT:- AO added back provision for gratuity and leave encashment to the book profits of the assessee stating that provision for liability is to be added back while computing book profit - CIT(A) held that in computation of book profit only provision for unascertained liability is required to be added back. Provision for gratuity and leave encashment, being ascertained liabilities are not required to be added back to book profits u/s. 115JB of the Act. CIT(A) relied on the judgment of Bharat Earth Movers vs CIT [ 2000 (8) TMI 4 - SUPREME COURT] , therefore we do not find any infirmity in the order of ld CIT(A).That being so, we decline to interfere with the order of C.I T.(A) in deleting the aforesaid additions. His order on these additions are, therefore, upheld and the grounds of appeal of the Revenue are dismissed. TP adjustment on account of payment of Royalty by considering the payment of Royalty by the assessee @ 4.53% of the net sales - HELD THAT:- Liability for payment of R D Cess is that of the assessee and the same should not be covered within the contractual payment of royalty or as income of the foreign company. Tribunal in the case of Kirloskar Ebara Pumps Ltd. [ 2009 (7) TMI 862 - ITAT, PUNE] held that since research and development cess liability is payable by the assessee who imports technology no adjustment in the same can be made in the computation of arm s length price for royalty. Therefore, as the amount of cess could not be considered as an income for the foreign company, it should accordingly not be considered while computing the amount of royalty paid to the foreign company by the assessee. Considering the facts narrated above and the case law applicable to the facts we note that order of the CIT(A) does not require any interference. That being so, we decline to interfere with the order of ld. C.I T.(A) in deleting the aforesaid additions. His order on these additions are, therefore, upheld and the grounds of appeal of the Revenue are dismissed.

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• 2020 (11) TMI 52
  Carry forward of balance additional depreciation to the following years - whether tribunal was right in holding additional depreciation can be allowed in the next year in case the same cannot be allowed in the earlier year? - HELD THAT:- Substantial questions of law raised for consideration have been answered against the revenue in C.I.T. Vs. Aztec Auto (P.) Ltd., [ 2020 (9) TMI 541 - MADRAS HIGH COURT] wherein held that where the assessee had claimed arrears on depreciation under Section 32(1)(iia) in respect of asset under head plant and machinery acquired in second half of the financial year 2007-2008, for which additional depreciation at ten percentage was allowed for the assessment year 2008-2009, the same held to be eligible. - Decided against the revenue.

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• 2020 (11) TMI 50
  Disallowance u/s 36 (1)(iii) - interest paid on the loan - HELD THAT:- Loans taken were utilised for advancing the loans in furtherance of their business and, therefore, the assessee is entitled to claim that the difference between the interest paid and interest received alone has to be considered towards the claim of interest expenditure and any disallowance of the interest expense has to be made only with reference to the difference amount and not with reference to the entire interest amount paid. With this view of the matter, we direct the AO to limit the disallowance of 15% and to delete the balance amount. Ground of assessee s appeal is accordingly allowed in part. Disallowance u/s 14A read with Rule 8D - Non recording of satisfaction - HELD THAT:- AO did not record any satisfaction towards the expenditure incurred by the assessee for earning the exempt income, not any such satisfaction is it is discernible from the assessment order. Ld. CIT(A) rightly followed the binding precedent of the Hon ble jurisdictional High Court, and therefore, we find it difficult to hold that the impugned findings of the Ld. CIT(A) suffer any legal infirmity. We, therefore, uphold the findings of the Ld. CIT(A) and dismiss ground No. 1 of the Revenue s appeal. Disallowance of 10% of the purchases made by the assessee from the sister concern - HELD THAT:- We are in agreement with the Ld. CIT(A) that one cannot disallow the purchases on suspicion alone, while ignoring that the corresponding sales would have to be treated as bogus also, in which event it would result in zero-sum outcome. Without rejecting the sales, it would be unreasonable to suspect the purchases alone. AO did not make out any discrepancy in the statutorily mandated audited accounts of the assessee. AO merely proceeded on suspicion in view of the declaration of Rs. 25 crores under section 132 (4) of the Act by one Sh. HS Bedi on behalf of the assessee group of companies for an earlier year, which is quite impermissible in view of the decisions referred to by the Ld. CIT(A). CIT(A) is right in observing that however grave the suspicion is, it is not equivalent to evidence or proof. No addition can be made basing on suspicion, when the books are available before the assessing officer to bring out material sufficient to support his suspicion. In the absence of any such evidence, no ad hoc disallowance could be sustained and, accordingly, we decline to interfere with the findings of the Ld. CIT(A). - Decided against revenue.

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• 2020 (11) TMI 49
  Addition on account of capital gains - addition u/s 50C - reference should have been made to the DVO - HELD THAT:- The assessee has not produced copy of the Purchase Deed of the property in question by father of the assessee despite it was a registered document. Therefore, cost of acquisition of asset is not proved by assessee. Further, no evidence have been produced by assessee to prove cost of the improvement in the property either by the assessee or by her father. No benefit under section 48 could be given to the assessee. Therefore, claim of assessee that assessee suffered capital loss on sale of the property in question cannot be accepted in any manner. Therefore, A.O. has rightly computed the capital gain on sale of transfer of capital asset. Addition made u/s 50C - Assessee has been making different statements at different stages in order to avoid payment of capital gains tax. Assessee has not objected to the stamp valuation under section 50C before A.O. when A.O. has given specific show cause notice to the assessee u/s 50C, A.O. was not obliged to make a reference to the DVO under section 50C. Such explanation was considered to be the highest prevailing market price and as such it was directed that reference should have been made to the DVO under section 50C. In the present case of the assessee, the assessee had made a specific statement before A.O. that since the land in question is an agricultural land or that assessee suffered capital loss, therefore, provisions of Section 50C are not applicable. The assessee has never pleaded such fact before the A.O. for making any reference to the DVO under section 50C therefore, this decision would not support the case of the assessee. In the absence of production of the Purchase Deed and source of construction made on the impugned property, would clearly show that the valuation report have been manipulated by assessee just to avoid payment of capital gains tax to the Revenue Department. The valuation report is of no reliance.- Decided against assessee.

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• 2020 (11) TMI 48
  Levy fee u/s 234E - processing the TDS statement - Intimation u/s 200A - Late filing of TDS returns / statement - scope of amendment - HELD THAT:- By Finance Act 2015 Clause-(c) to section 200A(1) was introduced w.e.f. 01.06.2015 empowering the authority concerned to levy fee under section 234E of the Act while processing the TDS statement under section 200A - Prior to 01.06.2015 there was no specific provision under section 200A of the Act for levy of late filing fee under section 234E. Different benches of the Tribunal consistently held that prior to 01.06.2015 provisions of section 200A of the Act did not contemplate levy of fee under section 234E of the Act. Therefore, it was held, even-though section 234E of the Act was in the statute prior to 01.06.2015, however, in absence of any enabling provision, no fee under section 234E of the Act can be levied for late filing of TDS statement for any period prior to 01.06.2015. The same view was expressed in case of Fatheraj Sanghvi Ors [ 2016 (9) TMI 964 - KARNATAKA HIGH COURT] - In fact, in case of Emsons Exim Pvt. Ltd. [ 2019 (8) TMI 1461 - ITAT MUMBAI] by majority view it was held that levy of fee under section 234E of the Act cannot be made in respect of a period prior to 01.06.2015 while processing the TDS statement under section 200A of the Act. Admittedly, no decision of the Hon ble Jurisdictional High Court on the disputed issue is available as on date. CIT(A) is correct in observing that there are contrary decisions from other High Courts, however, following the well-settled legal principle that in case of contrary views being expressed by different courts on a particular issue, the view favourable to the assessee has to be taken . We direct the Assessing Officer to verify the relevant facts and not to charge any fee under section 234E of the Act for any period which is prior to 01.06.2015. - Appeals of the assessee are allowed

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• 2020 (11) TMI 47
  Assessment on non entity - Order framed in the name of non-existent company - entity that ceased to exist pursuant to the order of amalgamation - HELD THAT:- Assessment was made by the AO on non-existing entity which is void ab-initio and nullity in the eye of law. The assessment framed against a non-existing entity goes to the root of the matter and it is not a procedural irregularity but a jurisdictional defect and there cannot be any assessment against a non-existing entity or a dead person. Decision of Maruti Suzuki India Ltd. [ 2019 (7) TMI 1449 - SUPREME COURT] squarely applies to the facts of the assessee s case. We hold that the assessment made by the Assessing Officer in the name of the Urmin Marketing Pvt. Ltd. u/s143(3) read with section 144C of the Act vide order dated 27thDecember 2018 for the year under consideration is void ab-initio and bad in law - Decided in favour of assessee. Disallowance of depreciation on the intangible assets/goodwill acquired in the scheme of amalgamation - HELD THAT:- The higher profit before tax shown by the UPPL before amalgamation for the year ending 31stMarch 2014 is mainly due to reduction in the purchase price of the materials consumed in comparison to the earlier years which was supplied by the group concern. Reasonableness of cost of purchase is not known. Employee cost in relation to the revenue from operation of UPPL is negligible which suggests that the primary operations were carried out by the directors of the companies who are common. There is no future benefit available to the assessee attributable to the employees. Similarly UPPL was not having any intangible assets such as patents, copyrights or any other unique intellectual property or rights which would yield future benefit. Thus in the circumstances valuation of UPPL at such huge amount is not justifiable. AO was of the opinion that the goodwill is not a difference between purchase consideration and net book value of assets taken over by the assessee rather it (goodwill) represents the difference between purchase consideration and market value of assets acquired. As such the value of the land was not revalued though it keeps on appreciating. If same would have been done then the amount of goodwill would have been low. It accordingly suggests that the entire scheme of generating goodwill in the scheme of amalgamation was based on for tax benefit in a dubious manner. AO was of the opinion that the valuation of UPPL at Rs. 555.75 crores against net assets of Rs. 87,01,43,087/- resulting goodwill of Rs. 468,73,56,913/- has been managed by the directors of the companies which is nothing but a colourable device in order to reduce taxable profit by claim huge depreciation. Depreciation on goodwill emerged due to scheme of amalgamation is not allowable in view of legal provisions - HELD THAT:- Revenue was conscious about the fact that there was the possibility of misusing the provisions of the Income Tax Act in the name of the scheme of amalgamation as provided under section 2(1B) causing prejudice to the Revenue. Revenue despite having the opportunity in its hand did not raise any objection within the time allowed by the MCA or subsequently by raising the objection in the impugned scheme of amalgamation. Thus from the conduct of the Revenue, it is revealed that there was no grievance in the impugned scheme of amalgamation. Had there been any grievance of the Revenue, the same could have been brought to the notice of the regional director of the MCA, then the suitable action should have been initiated against the impugned scheme of the amalgamation. We note that recently the Mumbai bench of NCLT in one of the petition for amalgamation in case of Gabs Investment Pvt Ltd (Transferor) and Ajanta Pharma limited (Transfree)in CPS No 995 and 996/2017 has not approved the scheme of amalgamation on the objection raised by the revenue. Income Tax Department, being aggrieved with the scheme of amalgamation, raised the objection which was duly accepted by the NCLT and accordingly, the scheme of amalgamation was disapproved in the above case. Whether the scheme once approved by the Hon ble Gujarat High Court after receiving no objection from the Income Tax Department, the AO/revenue has authority to challenge the same? - Revenue on one hand is issuing circulars to its officers to object the scheme of amalgamation if it is found prejudicial to the interest of revenue but on the other hand it remains silent when such opportunity was afforded to it and raising the same issue during the assessment proceedings which in our considered view is not desirable. No dispute in the amount of the purchase consideration and the NAV determined between the companies, as available in the scheme of amalgamation, which was approved by the Hon ble Gujarat High Court as well - lower authority held the value of goodwill at NIL for the purpose of taxation during the assessment proceedings for the reasons as discussed above in their respective orders. But, in the backdrop of above discussion, we are not convinced with the orders of the authorities below on this preliminary issue. Whether the value of goodwill should be taken at NIL under the provision of Income Tax Act in the books of amalgamated company as no such goodwill was available in the books of amalgamating company prior to amalgamation and such goodwill emerged in the books of amalgamated company? - Section 32 of the Act has limited the amount of depreciation available to the amalgamated company post amalgamation to the extent of the amount of depreciation which would have been available to the amalgamating company, had there not been any amalgamation. Indeed there was no entry in the books of the transferor/amalgamating company for the intangible assets/ goodwill being self-generated assets. However, we note that all the relevant provisions of the Act as discussed above deal with respect to the assets available/recorded in the books of the transferor/amalgamating company. In other words, the assets which have been acquired by the assessee in the scheme of amalgamation would continue at the book value in the books of the amalgamated company. No ambiguity that the goodwill generated in the scheme of amalgamation is acquired by the assessee. Thus, in our considered view the assessee has complied all the conditions provided under section 32 of the Act. Accordingly, we are not convinced with the finding of the authorities below. Contradiction and inconsistency in the valuation report filed by the assessee - Admittedly the valuation report was prepared by the RBSA capital advisors LLP which is the approved valuer. The valuation of the business being a technical matter, in our view, the assistance of the expert is required. The AO himself cannot determine such value. If he was not satisfied with the valuation report, then the only recourse available to the AO is to refer the matter to the technical person. There is no dispute with regard to the fact that property in question is an industrial land which cannot be compared with the residential properties. Admittedly, neither the Assessing Officer nor the Commissioner (Appeals) called for report from the Departmental Valuation Officer and proceeded to make their own estimation. It is incumbent upon the assessing authority to call for report from Departmental Valuation Officer for ascertaining the fair market value of the asset, in the event he is not satisfied about the claim of the assessee. Both the authorities below are not justified in adopting the rate as the assessee had furnished a report from an expert, i.e., Government approved valuer. All the necessary details about the management of the both companies were disclosed in the scheme of amalgamation and nothing was hidden. The scheme contained all the information related to purchase consideration, its valuation, mode of payment and accounting treatment. The Hon ble High Court approved such scheme after inviting comment from ROC, MCA, and official liquidator including the income tax department. Thus in the given fact and circumstances the reasonableness of scheme cannot be doubted. Accordingly, no inference cannot be drawn that the assessee has employed colorable device in order to recordhigh value of purchase considerationwhich is resulting goodwill. Scheme of the amalgamation can be approved under the provisions of section 2(1B) of the Act where shareholders holding not less than 75% in the value of shares of the amalgamating company become the shareholders of the amalgamated company. It is possible only when the shares are issued to the shareholders of the amalgamating company. Not impressed with the finding of the AO that there was no cash payment for the acquisition of the goodwill by the assessee rather it was recognized in the books of accounts by way of accounting entries. Thus we hold that the impugned transaction cannot be regarded as colorable device merely on the reasoning that the assessee claimed the depreciation on the goodwill in the scheme of amalgamation. Direct the AO to allow the claim of the assessee for the depreciation on the impugned goodwill. Hence, the ground of appeal of the assessee is allowed.

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• 2020 (11) TMI 46
  Unexplained cash credit received from bogus entities - discharge of onus - HELD THAT:- As decided in ITO Vs Nextgen Construction Pvt. Ltd sister concern of the assessee [ 2020 (6) TMI 634 - ITAT MUMBAI] assessee has discharged the primary onus to demonstrate fulfilment of primary ingredients of Sec.68 and it was incumbent upon revenue to dislodge the assessee s claim by bringing on record, cogent material to establish that the assessee s unaccounted money was routed in its books of account in the garb of unsecured loans. However, we are unable to find any such material except for the fact that additions were made merely on suspicious, conjectures and surmises. Therefore, no infirmity could be found, in the impugned order, in this regard - Decided in favour of assessee.

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• 2020 (11) TMI 45
  Additions u/s 68 - loans taken from the two group lender companies u/s 68 r.w.s 115BBE - evidences necessary to discharge the onus u/s 68 placed on record to prove the identity, creditworthiness of the lenders and genuineness of the transactions OR not? - HELD THAT:- A company can be creditworthy even if a company gives a loan out of the loans taken from others if the said loans have been obtained on the basis of its creditworthiness / value. It is not a case where the lender companies have obtained loans without any basis from unknown lenders but it is a case where the lender companies have obtained loans from reputed NBFCs by pledging their own valuable securities and intimated to the ROC in time and disclosed in the audited annual accounts. Thus, the creditworthiness of the lenders to grant loans to the appellant stands established. On perusal of the relevant evidences and reconciliation placed on record, the contention of the Ld. Counsel is found to be correct, because the figures of loans mentioned against Jindal Saw Ltd. were for the preceding financial year i.e. AY 2016-17. Further, only the figure of loans given has been mentioned therein and the figure of loans refunded during the year have not at all been mentioned therein. Thus, this list is misleading and does not give a correct picture of the amounts of loans given by the lender companies and cannot be relied upon at all. Lender companies owned listed equity shares worth market value of thousands of Crores of Rupees, had bank as well as demat accounts, have taken loans from the NBFCs, filed their returns of income declaring huge income in tens of crores of Rupees for the last 3 years and paid necessary applicable and due income-tax thereon, got their books audited under Companies as well as Income-tax Acts. These two lenders were assessed u/s 143(3) of the Act not only for the AY 2017-18 but also for the earlier 2 assessment years wherein substantial addition u/s 14A of the Act was made for the AY 2017-18. Thus, if an entity which is duly assessed by the Income-tax department cannot be presumed as non-existing in other assessment. In view of the all these evidences, the physical existence of the lender companies stands proved beyond doubt. On perusal of the impugned order of Ld. CIT (A), it is seen that the CIT (A) has only reiterated the averments in the assessment order, submissions of the appellant, remand report, rejoinder, synopsis, case laws etc. Even while drawing conclusion, these things have been reiterated again. CIT (A) has not brought on record his any findings to rebut the evidences placed on record by the assessee. The Ld. CIT (A) has not given any finding regarding the authenticity of the commissioner s report, its admission as evidence, why the onus cast on the appellant was not discharged in view of the evidences placed on record. Any appellate authority cannot reject the evidences without any discussion or reason. The CIT (A) has not mentioned as to what more evidence were needed to be produced by the assessee to substantiate its contention or what are the material or information to rebut the assessee s explanation and evidences as discussed above. AO as well as the CIT(A) failed to appreciate or consider the more than sufficient evidences placed on record by the assessee to discharge the onus u/s 68 - Addition made u/s 68 of the Act is hereby deleted. - Decided in favour of assessee. Disallowance of interest on loans taken from group companies - HELD THAT:- Since we have held that the loans taken from the said two lender companies are genuine in the above grounds of appeal, the interest on these loans has to be held as genuine payment. Undisputedly, these loans were used for the purpose of business, due income-tax has been deducted at source on the said interest, which has also been declared as income by the lenders, the amount of interest cannot be disallowed. The loans were also used only for the purpose of its business by the assessee. In fact the authorities below have not adverted that the said loans for not used for its business by the assessee. Thus, since the loans were used by the assessee for its business, the disallowance of interest is hereby deleted. Disallowance of Education cess as a deduction while computing the assessable income - assessee submitted that Education Cess is an allowable expenditure and therefore the Education Cess paid should be allowed as deduction - HELD THAT:- In view of the above judicial position, we are of the view that the education cess has to be allowed as deduction. In a recent decision in the case of M/s Agrawal Coal Corporation (P) Ltd. [ 2020 (8) TMI 719 - ITAT INDORE] has also held that education cess is an allowable expenditure. The same is not allowable to the assessee during this year as the assessee has not paid any education cess on the income-tax for this assessment year as the returned income under the normal as well MAT provisions was at loss.

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• 2020 (11) TMI 43
  Assessment u/s. 153A - income earned from undisclosed sources - unexplained investment u/s. 69 - assessee has challenged legal issue regarding no incriminating material found during the course of search by the searched team and the addition is not on the basis of any incriminating material - Diversified views - HELD THAT:- There is no reference of any incriminating material on record. There is no any whisper in the assessment order that there was any undisclosed materials discovered by the search team. We also observed that the assessee had filed return of income u/s. 139(1) of the Act for both the above assessment years prior to the search, therefore, these two assessment years will become unabated. Therefore, it would be presumed that these two assessment years were completed assessments, which can be interfered only when there would be any incriminating material found during the course of search. It is a well settled position of law that when there are conflicting decisions of High Courts none of which is the jurisdictional High Court, then the decision favouring the assessee should be followed. For this, we derive support from the decision in the case of CIT vs. Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME COURT] - Therefore, we are of the considered view that the addition made by the taxing authorities are without correlating to any incriminating material found during the course of search, cannot be sustained. As per the decision of Kabul Chawla, [ 2015 (9) TMI 80 - DELHI HIGH COURT] completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. AO has not referred to any incriminating material found during the course of search in the assessment order. Nothing is found contrary to the stated position of the assessee, therefore, the assessment framed u/s. 153A of the Act is not sustainable - Decided in favour of assessee. Addition made on estimation of profit - Whether no material in this respect relating/pertaining to the assessment year under consideration was found/seized during the course of search seizure operation u/s. 132? - AY: 2010-2011 2011-2012 - HELD THAT:- On perusal of the assessment order, we noticed that the assessee has filed return of income for the said assessment year on 28.08.2014, which is much after the search. Similar is the position in the assessment year 2011-2012. Therefore, the contention of assessee is not acceptable that there was no incriminating material found during the course of search. Further we observe that the assessee had filed return of income for A.Y. 2011-2012 on 28.03.2013. In this assessment year the selection for scrutiny period and issue of notice u/s. 143(2) of the Act was also not expired on the date of search i.e. 21.08.2013. Therefore, these two assessment years are not to be treated as unabated assessment year as per the decision of many courts. Therefore, the case of the assessee shall be made on the normal course of the provisions as per Section 153A/143(3) of the Act. Accordingly, the CIT(A) has rightly held that the assessment has been completed by the AO on the basis of materials found during the course of search proceedings. NP estimation - net taxable profit calculation - HELD THAT:- We are in agreement with the views taken by the authorities below in estimating the net profit of the assessee in absence of production of books of accounts, however, with the consent of both the parties and looking to the business of the assessee, it will be just and proper to estimate the net taxable profit @15% of the total gross receipt by the assessee. Accordingly, we direct the AO to apply the net taxable profit @15% of the gross receipt. We further make it clear that after calculation of net taxable profit @15% by the AO, no further any deduction or depreciation, interest on capital and salary to partners or towards any other expenditure, shall be allowed and the net taxable profit should not be exceeded to the addition made by the AO.

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• 2020 (11) TMI 41
  Settlement Application u/s 245C - Maintainability of awards of the ITSC - ITSC rejected the said application under Section 245D(1) of the Act for non-payment of taxes on the additional income disclosed in the Settlement Application and did not allow the same to be proceeded with - whether the awards of the ITSC or the decision making process culminating to the award, are in violation of the provisions of the Act or not? - HELD THAT:- A perusal of the award of the ITSC in the present cases reveal that the procedures under Section 245C 245D of the Act have been duly followed and the terms of the Settlement have been arrived at on mutual acceptance, after perusing the offers made by the Department and the Assessee. Hence, it cannot be said that the award of the ITSC is in violation of the statutory provisions or the decision making process. If that be so, the ground raised by the Department in the present Writ Petition are merely factual in nature and since there are no procedural lapses on the part of the ITSC in adjudicating and arriving at the terms of the settlement. While Section 245C(1) refers to disclosure of income before the ITSC, Section 245HA(3) refers to the use of information produced before the ITSC. The term disclosed income is conspicuously absent in Section 245HA(3). When a taxing law, does not provide or empower the Assessing Officer to rely on or take into consideration the income disclosed by the Assessee in the earlier application that had abated in view of Section 245HA(1)(i) of the Act, the attempt of the Department to make a comparison between the income disclosed in the abated proceedings and the second settlement application to establish that the assessee has not fully and truly disclosed their income, is not based on intelligible differentia. When the Income Tax law does not empower the Assessing Officer to rely on the income disclosed in the earlier proceedings that had abated before the ITSC, the Department is not justified in making a comparison with such an income and thereby find fault with the ITSC s decision making process in the impugned proceedings. Whether additional amount of income tax payable on the disclosed income in the second Settlement Application has not exceeded, at least by Rs. 50 lakhs as contemplated under proviso (i) of Section 245C(1) of the Act, the second application ought not to have been entertained by the ITSC? - A perusal of the impugned awards also reveal that the assesses have declared a sum of Rs. 1.65 and Rs. 1.67 crores respectively as income in their respective settlement applications before the ITSC and the additional amount of income tax payable on such income exceeds Rs. 50 lakhs. Thus, the ground raised by the Department in this regard, cannot be sustained. Amounts towards capitation fees have been disclosed and offered as voluntary contribution in the hands of the assessee - Apparently, the ground raised is purely a factual finding rendered by the ITSC and such factual findings is not permissible to be reviewed by this Court under Article 226 of the Constitution of India, as held in the aforesaid cited decisions. As there was no defect on the part of ITSC in the decision making process leading to the impugned Awards, the preliminary objection raised to the Department by this Court, with the regard to the maintainability of the Writ Petition, challenging the award of a Settlement Commission, gains significance. In the present case, it is not the stand of the department that there was fraud and misrepresentation of facts, owing to which, the disclosure requires to be treated as not true or fair. Rather, the disclosure was voluntary and the manner in which a major portion of the additional income has been derived was also explained. As a matter of fact, the department had not raised any objections during the stage of the case under Section 245D(1) or 245D(2C) of the Act. As such, the aforesaid decision is clearly distinguishable on the facts of the case, as well as the consequential ratio and hence may not be applicable. Both the impugned awards of the ITSC are neither in violation of any statutory provisions of the Income Tax Act nor is there any defect in the decision making process. As such the Writ Petitions, challenging the awards of the ITSC cannot be maintained.

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• Customs

• 2020 (11) TMI 55
  Validity of conviction made - conviction based solely on the purported confessional statement recorded under Section 67 of the NDPS Act - evidentiary value present or not - punishment and sentences under NDPS Act - powers of officers to investigate any offences. As per J. (R. F. Nariman) FUNDAMENTAL RIGHTS AND THE NDPS ACT - HELD THAT:- The NDPS Act is to be construed in the backdrop of Article 20(3) and Article 21, Parliament being aware of the fundamental rights of the citizen and the judgments of this Court interpreting them, as a result of which a delicate balance is maintained between the power of the State to maintain law and order, and the fundamental rights chapter which protects the liberty of the individual. Several safeguards are thus contained in the NDPS Act, which is of an extremely drastic and draconian nature, as has been contended by the counsel for the Appellants before us. Also, the fundamental rights contained in Articles 20(3) and 21 are given pride of place in the Constitution. After the 42nd Amendment to the Constitution was done away with by the 44th Amendment, it is now provided that even in an Emergency, these rights cannot be suspended see Article 359(1). The interpretation of a statute like the NDPS Act must needs be in conformity and in tune with the spirit of the broad fundamental right not to incriminate oneself, and the right to privacy, as has been found in the recent judgments of this Court. CONFESSIONS UNDER SECTION 25 OF THE EVIDENCE ACT - HELD THAT:- Whereas a formal accusation is necessary for invoking the protection under Article 20(3), the same would be irrelevant for invoking the protection under section 25 of the Evidence Act - Section 26 of the Evidence Act extends the protection to confessional statements made by persons while in the custody of a police-officer, unless it be made in the immediate presence of a Magistrate. Custody is not synonymous with arrest , as has been held in a number of judgments of this Court custody could refer to a situation pre-arrest - section 46 of the CrPC speaks of a submission to the custody by word or action , which would, inter alia, refer to a voluntary appearance before a police officer without any formal arrest being made. PROVISIONS CONTAINED IN THE NDPS ACT - HELD THAT:- Under section 63, which contains the procedure in making confiscations, the first proviso to sub- section (2) makes it clear that no order of confiscation of an article or thing shall be made until the expiry of one month from the date of seizure, or without hearing any person who may claim any right thereto and the evidence which he produces in respect of his claim - Given the stringent provisions of the NDPS Act, together with the safeguards mentioned in the provisions discussed above, it is important to note that statutes like the NDPS Act have to be construed bearing in mind the fact that the severer the punishment, the greater the care taken to see that the safeguards provided in the statute are scrupulously followed. SCOPE OF SECTION 67 OF THE NDPS ACT - HELD THAT:- The Constitution Bench s focus was on a completely different point, namely, whether the complainant and the investigator of an offence could be the same. From the point of view of this question, section 53A of the NDPS Act is not relevant and has, therefore, not been referred to by the Constitution Bench. As has been pointed, in order to determine the questions posed, section 53A becomes extremely important, and would, as has been pointed out by us, be rendered otiose if Shri Lekhi s submission, that a statement under section 67 is sufficient to convict an accused of an offence under the Act, is correct. WHETHER AN OFFICER DESIGNATED UNDER SECTION 53 OF THE NDPS ACT CAN BE SAID TO BE A POLICE OFFICER - HELD THAT:- Having regard to the statutory scheme contained in the Central Excise Act, more particularly sections 21(1) and proviso (a) to section 21(2), the Court held that a Central Excise officer had no power to submit a charge-sheet under section 173(2) of the CrPC, as such officer is only empowered to send persons who are arrested to a Magistrate under these provisions. The designated officer under section 53, invested with the powers of an officer in charge of a police station, is to forward a police report stating the particulars that are mentioned in section 173(2) CrPC. Because of the special provision contained in section 36A(1) of the NDPS Act, this police report is not forwarded to a Magistrate, but only to a Special Court under section 36A(1)(d) - It is obvious that section 36A(1)(d) is inconsistent with section 2(d) and section 190 of the CrPC and therefore, any complaint that has to be made can only be made under section 36A(1)(d) to a Special Court, and not to a Magistrate under section 190. Shri Lekhi s argument, that the procedure under section 190 has been replaced only in part, the police report and complaint procedure under section 190 not being displaced by section 36A(1)(d), cannot be accepted. Section 36A(1)(d) specifies a scheme which is completely different from that contained in the CrPC. Whereas under section 190 of the CrPC it is the Magistrate who takes cognizance of an offence, under section 36A(1)(d) it is only a Special Court that takes cognizance of an offence under the NDPS Act. Secondly, the complaint referred to in section 36A(1)(d) is not a private complaint that is referred to in section 190(1)(a) of the CrPC, but can only be by an authorised officer. Thirdly, section 190(1)(c) of the CrPC is conspicuous by its absence in section 36A(1)(d) of the NDPS Act the Special Court cannot, upon information received from any person other than a police officer, or upon its own knowledge, take cognizance of an offence under the NDPS Act. Further, a Special Court under section 36A is deemed to be a Court of Session, for the applicability of the CrPC, under section 36C of the NDPS Act. A Court of Session under section 193 of the CrPC cannot take cognizance as a Court of original jurisdiction unless the case has been committed to it by a Magistrate. However, under section 36A(1)(d) of the NDPS Act, a Special Court may take cognizance of an offence under the NDPS Act without the accused being committed to it for trial. It is obvious, therefore, that in view of section 36A(1)(d), nothing contained in section 190 of the CrPC can be said to apply to a Special Court taking cognizance of an offence under the NDPS Act. Thus, to arrive at the conclusion that a confessional statement made before an officer designated under section 42 or section 53 can be the basis to convict a person under the NDPS Act, without any non obstante clause doing away with section 25 of the Evidence Act, and without any safeguards, would be a direct infringement of the constitutional guarantees contained in Articles 14, 20(3) and 21 of the Constitution of India. Thus, the officers who are invested with powers under section 53 of the NDPS Act are police officers within the meaning of section 25 of the Evidence Act, as a result of which any confessional statement made to them would be barred under the provisions of section 25 of the Evidence Act, and cannot be taken into account in order to convict an accused under the NDPS Act - a statement recorded under section 67 of the NDPS Act cannot be used as a confessional statement in the trial of an offence under the NDPS Act. AS PER Indira Banerjee, J. - I have gone through the draft judgment prepared by my esteemed brother, Rohinton F. Nariman, J. but have not been able to persuade myself to agree that the officers invested with powers under Section 53 of the Narcotic Drugs and Psychotropic Substances Act (NDPS Act) are police officers within the meaning of Section 25 of the indian Evidence Act, 1872 or that any confessional statement made to them would be barred under the provisions of Section 25 or 26 of the Evidence Act. In my view, any statement made or document or other thing given to an authorised officer referred to in Section 42 of the NDPS Act or an officer invested under Section 53 with the powers of an Officer in Charge for the purpose of investigation of an offence under the said Act, in the course of any inquiry, investigation or other proceeding, may be tendered in evidence in the trial of an offence under the said Act and proved in accordance with law. I am also unable to agree that a statement recorded under Section 67 of the NDPS Act cannot be used against an accused offender in the trial of an offence under the NDPS Act. The NDPS Act has been enacted, inter alia, to implement International Conventions relating to narcotic drugs and psychotropic substances to which India has been a party and also to implement the Constitutional policy enshrined in Article 47 of the Constitution of India, which casts a duty upon the State to improve public health and also to prohibit consumption, except for medicinal purposes, of drugs which are injurious to health - As stated in its Preamble, the NDPS Act has been enacted to consolidate and amend the law relating to narcotic drugs, to make stringent provisions for the control and regulation of operations relating to narcotic drugs and psychotropic substances, to provide for the forfeiture of property derived from, or used in, illicit traffic in narcotic drugs and psychotropic substances, to implement the provisions of the International Conventions on Narcotic Drugs and Psychotropic Substances and for matters connected therewith. It is not a penal statute like the Indian Penal Code (IPC). It is a well settled principle of criminal jurisprudence that an accused is presumed innocent, unless proved guilty beyond reasonable doubt, except where the statute, on existence of certain circumstances, casts a reverse burden on the accused, to dispel the presumption of guilt, as in the case of Section 304B of the Indian Penal Code and many other statutes, particularly those dealing with socio economic offences. The Legislature may, in public interest, create an offence of strict liability where mens rea is not necessary. There are presumptive provision in the NDPS Act, such as Sections 35, 54 and 66. Under Section 54 of the NDPS Act presumption of commission of an offence may, inter alia, be drawn from the possession of any narcotic drug or psychotropic substance, or any apparatus for manufacture or preparation thereof. The presumption is rebuttable. Having regard to the meaning of the expressions investigate/investigation and enquire/enquiry given in the Dictionary referred to above, the use of the expressions in the statutes referred to above and having regard to the language and tenor of Sections 53, 53A, and Section 67 of the NDPS Act, the expression inquiry may reasonably be construed as a generic expression, which could include the investigation of an offence. An inquiry as contemplated in Section 67 is the collection of information generally, to find out if there has been any contravention of the NDPS Act, whereas investigation is the probing of an offence under the NDPS Act and collection of materials to find out the truth of the case sought to be made out against an accused offender. However investigation may follow an enquiry or be part of an enquiry. This is evident from a reading of the NDPS Act as a whole. Officers under the NDPS Act not being police officers, Sections 161/162 of the Cr.P.C have no application to any statement made before any officer under the NDPS Act, in the course of any inquiry or other proceedings under the NDPS Act - In any case, Section 53A is clearly contrary to and thus overrides Section 162 of the Cr.P.C. While Section 162(1) of the Cr.P.C. provides that no statement made by any person to a police officer, when reduced to writing shall be signed by the person making it, or used for any purpose, save as provided in the proviso to the said section, that is, to confront the person making the statement, if he gives evidence as a witness, Section 53A(1) provides that a statement made and signed by a person before any officer empowered under Section 53 for the investigation of offences, during the course of any inquiry or proceedings by such officer, shall be relevant for the purpose of proving, in any prosecution for an offence under this Act in certain circumstances specified in the said section. A statute may expressly make Section 173 of the Cr.P.C applicable to inquiries and investigations under that statute. However, in the case of a statute like the NDPS Act, where the provisions of the Cr.P.C do not apply to any inquiry/investigation, except as provided therein, it cannot be held that the officer has all the powers of a police officer to file a report under Section 173 of the Cr.P.C. The NDPS Act does not even contain any provision for filing a report in a Court of law which is akin to a police report under Section 173 of the Cr.P.C. - As per the well established norms of judicial discipline and propriety, a Bench of lesser strength cannot revisit the proposition laid down by at least three Constitution Benches, that an officer can be deemed to be a police officer within the meaning of Section 25 of the Evidence Act only if the officer is empowered to exercise all the powers of a police officer including the power to file a report under Section 173 of the Cr.P.C. With the greatest of respect, Counsel appearing in support of the appeals have made general arguments with regard to the differences between provisions of the Central Excise Act or the Customs Act with the NDPS Act. However, they have not specifically shown how exactly the powers of NDPS officers conducting an investigation of an offence under the NDPS Act are different from those of the Central Excise Officers, Customs officers and/or Railway Protection Force Officers conducting an inquiry into an offence under the provisions of those Acts - As observed above, the provisions of the Cr.P.C do not apply to an inquiry/investigation under the NDPS Act except to the limited extent provided in Section 50(5) and 51. Section 173 of the Cr.P.C has not been made applicable to the NDPS Act.

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• 2020 (11) TMI 51
  Condonation of delay for filing appeal - sufficient cause for for delay or not - HELD THAT:- There is no acceptable explanation from the Petitioner for not having resorted to that alternative remedy provided under the statute. In this context, it has to be recapitulated here that the Hon ble Supreme Court of India in ASSISTANT COLLECTOR OF CENTRAL EXCISE, CHANDAN NAGAR VERSUS DUNLOP INDIA LIMITED AND OTHER [ 1984 (11) TMI 63 - SUPREME COURT] has succinctly explained the legal position relating to the exercise of discretionary powers under writ jurisdiction. This Court does not express any view on the correctness or otherwise on the merits of the controversy involved in the matter - Petition dismissed.

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• Corporate Laws

• 2020 (11) TMI 62
  Revival of Credit facility - Oppression and mismanagement - sections 241, 242 244 of the Companies Act - HELD THAT:- There have been serious differences of opinion between the Petitioners and the Investor Directors over various issues including certain Board resolutions of the year 2018. The nitty gritty thereof would require a detailed and comprehensive hearing. The present ad interim prayers refer to the continuance of the credit facilities from the Banks. It is not controverted that the credit facilities have been continuing since 2007-08 and has been approved as recently as in September, 2018. The borrowing and lending limits have been approved in the Board meeting dated 1st August, 2019 and AGM dated 24th September, 2019. It is also not disputed that the borrowing limits are essential to carry forward the Company s activities and objects of the AoA. The allegation of financial bungling by the Petitioners should not prima facie come in the way of availing the credit facilities. Since the credit facilities are essential for the survival of the Company, in our considered opinion the Petitioners have a prima facie case in their favour. The question of mismanagement and oppression as envisaged under Sections 241 and 242 of the Act would come within the exclusive domain of this Tribunal. While considering the same, if the decisions taken in the Board meeting are called in question the Tribunal would be within its competence to decide upon the validity or otherwise of the proceedings in the Board meeting. Therefore, in our considered opinion the decisions of the Tribunal would not be taken as conflicting to the decision of any other Court including the Hon ble High Court of Bombay. The decisions relied on by the Respondents would not be applicable to the present case. The conduct of the Respondents ex-facie could not be held in the best interests of the Company where they also have substantial stake. The balance of convenience accordingly leans in favour of the Petitioners. Allegations of financial irregularities and mismanagement of Company s funds require incisive inquiry and elaborate legal appraisal. But the so called alleged irregularities or impropriety in dealing with funds when established can be compensated in monetary terms. Therefore, no irreparable injury would be caused in case the credit facilities are continued and availed by the Company. There is no material on record that the Company has been in default in servicing the credit facilities. The Bank has been ready and willing to extend the credit facility but for the non-cooperation of the Respondents. Continuance of an existing credit facility would not come within the purview of financial indebtedness indicated supra. A dispute resolution mechanism between the parties under a contract would not foreclose the party s prerogative of approaching a statutory authority for redressal of its grievances. Therefore, the provision of deadlock under Article 247 of the AoA cannot prevent the Petitioners from seeking reliefs before this Tribunal. Besides the time spent on resorting to the mechanism under Article 247 might have an adverse impact on the ultimatum given in the letter dated 26th May, 2020 of the Bank of Baroda - Respondent nos. 2 to 6 are injuncted form corresponding with others relating to matters covered in the present Company Petition. They are injuncted from preventing or inferring in the ongoing credit facility form Bank of Baroda and renewal thereof and credit facility form the Axis Bank, notwithstanding their objections in the Board meeting dated 18th December, 2019 and 2nd May, 2020. Appeal allowed in part.

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• 2020 (11) TMI 61
  Approval of scheme of amalgamation - sections 230 to 232 of the Companies Act, 2013, and other applicable provisions of Companies Act, 2013 - HELD THAT:- From the material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy - Since all the requisite statutory compliances have been fulfilled, Company Petition No.77/MB.V/2020 is made absolute in terms of the prayer clauses (a) (b) in the said Company Petition. The Scheme is hereby sanctioned, with the Appointed Date fixed as 1st April 2019. The Transferor Companies be dissolved without winding up.

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• 2020 (11) TMI 60
  Approval of Scheme of Arrangement - Sections 230-232 read with other applicable provisions of the Companies Act, 2013 and Rules framed thereunder - HELD THAT:- From the material on record, the Scheme appears to be fair and reasonable and does not violate any provisions of law, nor contrary to the public policy, nor prejudicial to the interest of shareholders or detrimental to public interest at large - Since all statutory compliances have been fulfilled or further undertaken to be fulfilled, the Company Scheme Petition No. 1263/2019 filed by the Petitioner Company is made absolute in terms of prayer clause (a) of the said Petition and the Scheme of Arrangement annexed to the said Petition is duly approved and sanctioned. The scheme is sanctioned.

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• 2020 (11) TMI 59
  Approval of Scheme of Amalgamation - Sections 230, 232 and other applicable provisions of the Companies Act, 2013 R/w Rule 3 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and Rules 11, 23 and 34 of the National Company Law Tribunal Rules, 2016 - HELD THAT:- It is a settled position of law that any Scheme of Arrangement or Amalgamation, under the extant provisions of Companies Act, would not contemplate to waive any liability or legal action for any violation of provisions of Companies Act, so as to prevent Statutory Authorities from initiating any action against violation of provisions of Companies Act, in respect of the Companies involved, in accordance with law. In the instant case, the Transferee Company would hold all such responsibilities. With reference to various observations made by the Statutory Authorities, as briefly detailed supra, they are at liberty to initiate appropriate legal action against the Companies, for any violation of any provisions of Law. The Tribunal, in the instant proceedings, cannot examine the alleged violations by Applicant Company, since the issue here is only sanction of the Scheme, subject to compliance of extant provisions of Companies Act and to make them to comply all terms and conditions as mentioned in the proposed Scheme in question, and other consequential actions, after sanction of the Scheme. By perusal of instant Scheme of Amalgamation of the Companies involved here, the Scheme in question is comprehensive one complying with the provisions of Sections 230 to 232 of the Companies Act, 2013 and the Rules made thereunder and the Petition Application is filed in accordance with law - the scheme is sanctioned.

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• 2020 (11) TMI 58
  Oppression and mismanagement - siphoning of funds - Section 242 of the Companies Act, 2013 - It is alleged that Respondents 2 to 4 have done gross violation of laws and fabricated various documents with the forged signature of Petitioner as well as other directors of the company from time to time with the sole motive to grab the control of the company and to siphon off the funds of the company, which lead the company into various litigations - HELD THAT:- Without giving any opportunity to the Respondents to submit their explanation or to submit rebuttal/confronting document as per the principle of natural justice. Hence, the issue in involve in the Present Company Petition needs to deal with as per material available on record and on its merit. It is also matter of record the petitioner has made some short of vague allegation but has not established the actual damage quantify the amount of loss by giving cogent reasons and material proof of liability of such alleged loss, which caused alone by present Respondents and no one else. Thus, it may be seen that the Petitioner made allegation stating that Respondents were in illegal possession of the R-1 Company s Bio Medical Waste Treatment Plant at Jaipur and Swami Madhopur, they spoiled the plant, practically ruined the conditions of the plant and as there were series of complaint against their working, Nagar Nigam Jaipur cancelled the lease in 2016 and they run away from the plant in the fear of Police arrest. It is also matter of record that the petitioner has enclosed a copy of the pending criminal case (Annexure-C page 39) which were filed by the petitioner against the respondents or some other complaint against the respondent including R-1 Company. The chart goes to show that there were twelve cases filed against the present respondents. It is pertinent to note here that such cases were filed against the present respondent Mr. Ganesh Singh under Section 420, 406 and other offences under the IPC. This bench in exercise of the power conferred it to under Section 242 of the companies act to do the justice with the parties with a view to the bringing to an end the matter complained and to ensure smooth function of the Company as going concern - respondent company is directed to convene its AGM/EGM as the case may be to consider the report of the independent Chartered Accountant submitted before the CLB as per its direction and the shareholders/members of the company can discussed acceptability otherwise and take appropriate decision in accordance with law or its merits. Requisite measure and opportunity to take legal action in accordance law before appropriate forum. Further the company is granted liberty to make suitable amendments/corrections in its statutory returns. Petition disposed off.

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• 2020 (11) TMI 57
  Approval of Scheme of Merger by Absorption - Sections 230 to 232 of the Companies Act, 2013 and other relevant provisions of the Companies Act, 2013 and the rules framed there under - HELD THAT:- In response to the observations made by the Regional Director, the Petitioner Companies clarifying as that so far as the observation in paragraph II of the Report of the Regional Director is concerned, the Petitioner Companies submitted that the amalgamation will enable the Transferee Company to consolidate the businesses and lead to synergies in operation and create a stronger financial base and that it would be advantageous to combine the activities and operations of all companies into a single Company for synergistic linkages and the benefit of combined financial resources. This will be reflected in the profitability of the Transferee Company - From the material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy. Scheme sanctioned.

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• Securities / SEBI

• 2020 (11) TMI 56
  Validity of Downgrading petitioner s bank loans rating to IND BB+ from IND BBB - Covid-19 pandemic outbreak - Reserve Bank of India has announced moratorium for the period upto 31st May, 2020 vide Circular dated 27.03.2020 - objection regarding territorial jurisdiction - whether third respondent cannot be characterised as State within the meaning of Article 12 of the Constitution of India? - HELD THAT:- Even though the third respondent may be located in Mumbai, in as much as part of the cause of action arose within the territorial limits of this Court, this writ petition cannot be dismissed on the ground of lack of territorial jurisdiction. Likewise, reliance on the ouster clauses in the rating agreement is equally misplaced. As third respondent is a private body and not a State within the meaning of Article 12 of the Constitution and by rating its clients, the third respondent is not discharging any public function and the subject matter involves analysis by financial experts and the petitioner is having effective alternative remedies, we dismiss this writ petition as not maintainable. The petitioner is at liberty to avail the in-house remedy available to them or move Securities and Exchange Board of India(SEBI) directly by filing a complaint against the third respondent.

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• Insolvency & Bankruptcy

• 2020 (11) TMI 54
  Whether a bank/financial institution can institute or continue with proceedings against a guarantor under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, when proceedings under the Insolvency and Bankruptcy Code 2016 have been initiated against the principal borrower and the same are pending adjudication? HELD THAT:- Since the liability of a guarantor is co-extensive with that of the principal debtor and not in the alternative, it cannot be said that proceedings in the NCLT against the principal debtor can be a bar to institution or continuation of proceedings against the guarantor under the SARFAESI Act. The question as to whether the respondent/Bank can proceed against a guarantor even after initiation of proceedings under the IB Code also stands settled. Neither Section 14 nor Section 31 of the IB Code place any fetters on Banks/Financial Institutions from initiation and continuation of the proceedings against the guarantor for recovering their dues. That being the position, the plea taken by the counsel for the petitioner that all proceedings against the petitioner, who is only a guarantor, ought to be stayed under the SARFESI Act during the continuation of the Insolvency Resolution process qua the Principal Borrower, is rejected as meritless. Petition dismissed.

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• Service Tax

• 2020 (11) TMI 44
  Non-payment of service tax - Revenue share - Fun factory - Reversal of Cenvat Credit on common input - Renting of immovable property - Parking fee - penalty. Revenue Share - HELD THAT:- The issue of service tax on share of revenue from Joint commercial activity Food Court is already settled in favour of the appellant by the precedent order of this Tribunal dated 18.03.2019 in their own case [ 2019 (3) TMI 1182 - CESTAT HYDERABAD ]. Accordingly, the demand of Rs. 37,31,953/- is set aside. Rent from immovable property - HELD THAT:- The value of Rs. 49,82,795/- is the amount of municipal taxes paid which is not taxable and is deductable amount from the rent receipt in terms of exemption granted vide Notification No. 29/2012-ST dated 20.06.2012 - the demand of Rs. 6,15,873/- is set aside. Taxability of receipts on Fun Factory - HELD THAT:- This issue is already adjudicated in favour of the appellant in the precedent decision of this Tribunal dated 01.01.2019 [ 2019 (1) TMI 71 - CESTAT HYDERABAD ] wherein the Tribunal held that receipts under this head are in the nature of receipt towards entertainment provided and the same is taxable under the State Entertainment Tax Act and hence not exigible to service tax. Parking receipts - HELD THAT:- The appellant had paid the admitted tax of Rs. 22,17,764/- against the demand of Rs. 12,62,642/-. Hence, we hold that the service tax demanded vide the impugned order is not disputed, is taxable and paid. Further, admitted tax is more than the assessed tax. CENVAT Credit - Rule 6(3) of CCR - HELD THAT:- Appellant have maintained separate account of input services and there is no utilisation of common input services towards providing of exempt services - Further it is found that although the appellant had prayed for verification of their records to verify the correctness of their claim, but no such opportunity was provided and by adopting a pedantic approach the demand was confirmed - Hence, this demand is set aside and the matter remanded without expressing any opinion on merits leaving the issue open to the adjudicating authority after following the principles of natural justice. Penalty - HELD THAT:- The issue being wholly interpretational and there being no case of suppression, fraud etc., Penalty imposed under Section 76 and Rule 15(1) of Cenvat Credit Rules are fit to be set aside. Appeal allowed in part and part matter on remand.

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