TMI Tax Updates - e-Newsletter
December 9, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy CST, VAT & Sales Tax

Articles

1. FORM GSTR – 2B – AUTO DRAFTED ITC STATEMENT

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Online filing of application by Taxpayers for unblocking E-Way Bill generation facility

2. DGGI Gurugram arrests man for illegally availing input tax credit on invoices without goods

3. Winners of GST-n-You Contest, 2020 on Benefits of GST held by GSTN

4. Income Tax Department conducts searches in Odisha

5. United Nations Declares Invest India The Winner of the Investment Promotion Award 2020

6. Income Tax Department conducts searches in Assam

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

Notifications

Customs

1. 46/2020 - dated 7-12-2020 - ADD

Seeks to further amend notification No. 47/2015-Customs (ADD), dated 8th September 2015 to extend the levy of ADD on imports of "Float Glass" originating in or exported from China PR, for a period of two months, upto and inclusive of 6th February 2021

FEMA

2. S.O. 4441 (E) - dated 8-12-2020 - FEMA

Foreign Exchange Management (Nondebt Instruments) (Fourth Amendment) Rules, 2020

GST - States

3. 78/2020 – State Tax - dated 7-12-2020 - Delhi SGST

Seeks to amend Notification No. 12/2017 – State Tax, dated the 30th June,2017

4. (18/2020)-KGST.CR.01/17-18 - dated 2-12-2020 - Karnataka SGST

Seeks to make amendment to Notification no. (12/2017) No.KST.GST.CR.01/2017-18, dated the 29th June, 2017

5. F.1-11(19)-TAX/GST/2020 (Part-II) - dated 2-12-2020 - Tripura SGST

Corrigendum to Notification published in the Tripura Gazette, Extraordinary Issue, vide number 2403, dated 23.11.2020

6. 1-11 (96)-TAX /GST/2020 - dated 25-11-2020 - Tripura SGST

Notification regarding Tripura Appellate Authority for Advance Ruling

7. F.1-11(19)-TAX/GST/2020 (Part-II) - dated 23-11-2020 - Tripura SGST

Seeks to notify amendment carried out in sub-section (2) of section 1 of TSGST Act, 2020 (Tripura Act No.01 of 2020)

8. F.1-11(19)-TAX/GST/2020 (Part-II) - dated 23-11-2020 - Tripura SGST

Seeks to extend the due date for FORM GSTR-1

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CFD/DIL1/CIR/238/2020 - dated 8-12-2020

Additional Payment Mechanism (i.e. ASBA, etc.) for Payment of Balance Money in Calls for partly paid specified securities issued by the listed entity

DGFT

2. ECA Circular No. 36/2015-20 - dated 7-12-2020

Providing documents sought by investigating agencies like CBI, ED, DRI, etc.

Customs

3. 53/2020 - dated 8-12-2020

Third Party Invoicing in case of Preferential Certificates of Origin issued in terms of DFTP for "wholly obtained goods"

4. PUBLIC NOTICE NO. 652020 - dated 3-11-2020

Manufacturing and other operations undertaken in bonded warehouses under Section 65 of the Customs Act, 1962- certain clarifications

5. PUBLIC NOTICE NO. : 70/2020 - dated 22-10-2020

Faceless Assessment - Measures for timely assessment of Bills of Entry and clarification on defacement of physical documents

Highlights / Catch Notes

GST

• Classification of Nonwoven Fabric Made from PP Granules Unchanged by Production Unit's Location; HSN Depends on End Product.

  Case-Laws - AAR : Classification of goods - Non Woven Fabric, which is made using PP granules - The fact whether the raw material is manufactured in the same unit or different does not have any effect on the classification of final product. In the first process, the final product will be PP spun bonded nonwoven fabric whereas in second process, nonwoven fabric will be used as raw material for manufacturing final product such as bags, surgical masks, gowns, shoe cover etc and HSN will be applicable accordingly. - AAR
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• Advance Ruling Denies Input Tax Credit: Tax Not Paid Properly, Highlights Correct Payment Importance.

  Case-Laws - AAR : Scope of Advance Ruling application - Input Tax Credit - When the applicant is sure as is evident in the application that tax has not been paid in cash or has been paid through ineligible input tax credit, it clearly implies that either tax has not been paid or deemed not to have been paid. Therefore, in all the mentioned cases, it can not be regarded as tax paid to the government by any stretch of mind. - Application rejected - AAR
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• High Court Restores Case Due to Lack of Notice Under GST Act Section 129, Breaching Natural Justice Principles.

  Case-Laws - HC : Principles of Natural Justice - petitioner argues that none of the notices as are required to be served under Section 129 of the GST Act have been served upon the petitioner, as such the proceedings initiated and concluded against the petitioner are ex-parte proceeding - on a plain reading, a failure of natural justice has been occasioned to the petitioner. - Matter restored - HC
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• High Court Grants Bail to GST Evasion Accused Held for Over Two Years; Maximum Sentence is Five Years.

  Case-Laws - HC : Grant of Bail - GST evasion - Although in the present case allegations levelled against the petitioner are serious in nature but the fact remains that the petitioner is in custody for the last more than two years and admittedly maximum punishment to be imposed on the accused, if convicted, is five years. - Bail Granted - HC
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• Registration Cancellation Revoked After Verification Confirms Timely Returns and Cleared Dues; Registration Restored from Application Date.

  Case-Laws - HC : Revocation of cancellation of registration - failure to file the return for a continuous period of six months - In the present case along with the application, the petitioner had filed a statement to the effect that all the requisite returns have been filed and the dues are cleared and thus it was incumbent upon the Department to have verified the correctness of averments made in the application - now the Department has accepted that the returns were filed within time and no dues remain payable - the order cancelling the registration stands revoked from the date of filing of the application - HC
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• Bail Granted in CENVAT Credit Case Due to Unreasonable Detention; Evidence Already Secured by Investigators.

  Case-Laws - DSC : Grant of Bail - Irregular CENVAT Credit - Further, the investigating agency is having the possession of all the documentary evidence collected so far and all other relevant material which is in the form of stamps, cheque books, debit cards, digital signatures and other material like invoices which they can scrutinize and for such scrutiny which is time consuming the further detention without any justification seems to be unreasonable. - Bail granted subject to conditions - DSC
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Income Tax

• Assessee Challenges Tribunal's Focus on Legal Grounds Over Substantial Justice u/ss 158BC and 158BD Jurisdiction.

  Case-Laws - AT : Rectification u/s 254 - Assessment proceedings u/s 158BC - jurisdiction questioned by the assessee with reference to Section 158BD - it is the Tribunal which has committed error in restricting itself to legal ground and in not addressing itself on certain other grounds of substantial nature without any fault attributable to the assessee. In such a situation, the cause of substantial justice deserves to be preferred over the technical considerations pitted against it by way of limitation, to shun an apparent miscarriage of justice. - Remedy sought by the assessee can not be frustrated on the grounds of bar of limitation without weighing the circumstances of the case. - AT
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• Delhi High Court Rules Mesne Profits from Sale Cancellation Not Taxable u/s 56(2)(ix) of Income Tax Act.

  Case-Laws - AT : Additions u/s 56(2)(ix) - Mesne profit / liquidated damages - Amount remained with assessee after cancellation of the said sale in terms of the decree order of the Hon’ble jurisdictional Delhi High Court - the same was in the nature of mesne profit and beyond the provisions of section 56(2)(ix) - the said section is also not applicable as the twin conditions mentioned therein have not been met on the facts - AT
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• Court Rules Section 153A Assessment Invalid if Based on Non-Incriminating Statements u/s 132(4.

  Case-Laws - AT : Assessment u/s 153A - Addition u/s 68 - since we have already held that statements recorded u/s 132(4) are not incriminating in nature, therefore, the addition made by the AO being not based on any incriminating material, the addition cannot be sustained in the orders passed u/s 153A/143(3) of the Act. - AT
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• Loan Transactions Not Deemed Income: Section 68 Not Applicable as Loan Creditor Status and Documentation Unchallenged by Officer.

  Case-Laws - AT : Addition u/s 68 and 69C - It is neither the AO’s case that the loan creditors are not income-tax assessee’s nor has he alleged that the documents and evidences furnished by the appellant in support of loan transactions were false or suffered from defects or do not tally with the Department’s records. - Aggregate additions being principal loan amount received by the appellant from the fifteen bodies corporate did not constitute its income chargeable u/s 68 of the Act. - AT
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• Indo-UK DTAA Shields Assessee: No Technology Transfer in Commission Income u/s 40(a)(ia) and Section 195.

  Case-Laws - AT : Addition u/s. 40(a)(ia) r.w. 195 - The rendition of services for earning commission cannot be of such a nature that there is a transfer of technology, in the sense it is required to fulfil the 'make available' clause in the Indo UK DTAA. - even if the commission income in the hands of the recipient is taxable under the provisions of Section 9, the provisions of the Indo UK DTAA will come to the rescue of the assessee. - AT
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• Penalty u/s 271(1)(c) of Income Tax Act deleted due to lack of approval from Joint/Additional Commissioner.

  Case-Laws - AT : Penalty u/s 271(1)(c) - As the penalty under section 271(1)(c) of the Act leviable without taking the approval from the Joint/Additional Commissioner of Income Tax, under section 271(1)(c) of the Act was not justified, accordingly the same is deleted. - AT
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• Disallowance of Commission Expenses Due to Non-Deduction of TDS u/s 195; Arm's Length Deemed Irrelevant.

  Case-Laws - AT : Commission expenses paid to its holding company - Whether such payments were at arm's length or were for business expediency? - Revenue has accepted the identical expenses incurred by the assessee in the other assessment years - The disallowance was made on account of non-deduction of TDS under section 195 of the Act. Thus it can be inferred that the question of arm length and business expediency does not arise in the given facts and circumstances. - AT
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Corporate Law

• Court Denies Petition to Contest Directorship Election Without Mandatory Rs. 1 Lakh Deposit, Upholds Legal Requirement.

  Case-Laws - HC : Permission to contest election for directorship without insisting on deposit - When the law requires that there should be deposit of ₹ 1 lakh to contest for directorship of a company, we fail to understand as to how the same can be waived off at the instance of the petitioner. In such circumstances, we are not inclined to accede to the prayer for interim relief made by the petitioner. - HC
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VAT

• High Court Overturns Tribunal's Stay Order, Citing Failure to Consider Prima Facie Case in Decision Process.

  Case-Laws - HC : Maintainability of appeal - appeal dismissed arising out of stay order of appellate authority - the order of the Tribunal is ex facie erroneous, inasmuch as, it refuses even to consider prima facie case while deciding the stay application, thus, there are no hesitation in holding that the order of Tribunal is clearly contrary to the settled law and is liable to be set aside.- HC
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Case Laws:

• GST

• 2020 (12) TMI 275
  Classification of goods - Non Woven Fabric, which is made using PP granules - Non Woven Fabric like Non Woven Fabric bag, 3 ply mask, surgical cap, gown, shoe cover and other disposable items - HELD THAT:- In the instant case fiber grade polypropylene granules are processed to form PP Spun bonded Non woven fabrics which is classified under Chapter Heading 5603 in First Schedule to the Custom Tariff Act, 1975 - In the instant case, non-woven bag is produced by processing non-woven fabric. The non-woven fabric is cut to size and stitched to give it a shape of the bag. Therefore, in view of Section Note 7 of Section Xl of Custom Tariff, the non- woven fabric bags are made-up textile articles . The sacks and bags made up of textile material including those made of man-made textile material such as polypropylene strip or the like used for packing of goods would be covered under Chapter Heading 6305 - non-woven fabric bags will be classifiable under Tariff item 6305 33 00. The Disposable surgical cap resembles a shower cap with an elastic opening. The applicable subheading for the disposable surgical cap will be 6505 90 which provides for Hats and other headgear, knitted or crocheted, or made up from lace, felt or other textile fabric, in the piece (but not in strips), whether or not lined or trimmed; hair-nets of any material, whether or not lined or trimmed - others - The applicable subheading for the disposable surgical mask and shoe cover will be 6307 which provides for Other made up articles, including dress patterns . The fact whether the raw material is manufactured in the same unit or different does not have any effect on the classification of final product. In the first process, the final product will be PP spun bonded nonwoven fabric whereas in second process, nonwoven fabric will be used as raw material for manufacturing final product such as bags, surgical masks, gowns, shoe cover etc and HSN will be applicable accordingly.

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• 2020 (12) TMI 274
  Maintainability of application - prescribed fee not submitted - Levy of GST - services received by HPHDS (A Govt owned controlled society) from service provider outside India - HELD THAT:- Since the application in this case is not accompanied by requisite fee of Rs. 10,000/-, therefore the same is rejected.

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• 2020 (12) TMI 273
  Scope of Advance Ruling application - section 97(2) of the CGST Act, 2017 - Input Tax Credit - rejection solely on the ground that the tax collected by the supplier of the raw material from the applicant is not paid to the government in cash and also on the ground that the tax collected by the supplier of the raw material from the applicant is paid to the government through utilization of ineligible input tax credit - HELD THAT:- All the cases pertain to a scenario where tax has not actually been paid. Even in cases where tax has been paid by the supplier to the government through in-eligible input tax credit it would always deemed not to have been paid as tax has not actually been paid to the government. When the applicant is sure as is evident in the application that tax has not been paid in cash or has been paid through ineligible input tax credit, it clearly implies that either tax has not been paid or deemed not to have been paid. Therefore, in all the mentioned cases, it can not be regarded as tax paid to the government by any stretch of mind. Thus, in view of the provisions laid down in section 97(2) of the CGST Act, 2017 encompassing the specific questions, which are sought under advance ruling, it can decisively be inferred that the questions raised by the respondent before Advance Ruling Authority were beyond the scope and jurisdiction of Advance Ruling, and hence do not warrant any ruling thereon and therefore in view of the provisions of Section 97 of the CGST Act, 2017, this authority is not allowed to answer the subject question. The subject application filed for advance ruling is rejected, as being non-maintainable as per the provisions of the CGST Act, 2017 and Rules made there thereunder.

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• 2020 (12) TMI 272
  Principles of Natural Justice - petitioner argues that none of the notices as are required to be served under Section 129 of the GST Act have been served upon the petitioner, as such the proceedings initiated and concluded against the petitioner are ex-parte proceeding - HELD THAT:- A perusal of the provisions of Section 169 makes it clear that a manner is specifically provided for service of notices. It is well settled that whenever a manner is prescribed, the thing should be done in that manner alone. A perusal of the impugned order shows that at no point of time, was the petitioner granted an opportunity of submitting his reply and the grounds taken by the petitioner before the Appellate Authority were not considered recording them to be an afterthought. Thus, on a plain reading, a failure of natural justice has been occasioned to the petitioner. Petition disposed off.

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• 2020 (12) TMI 271
  Grant of Bail - pre-charge evidence - offences under Sections 132(1), (b), (c), (f), (h), (j) and (k) read with Section 132(1)(i) of Central Goods and Services Tax Act, 2017 - HELD THAT:- Case is listed for pre-charge evidence before the trial court and statements of fifteen witnesses out of forty-five prosecution witnesses have been recorded so far. There is no possibility of conclusion of trial at an early date. Although in the present case allegations levelled against the petitioner are serious in nature but the fact remains that the petitioner is in custody for the last more than two years and admittedly maximum punishment to be imposed on the accused, if convicted, is five years. Now the case is listed before the trial court for recording of pre-charge evidence and the trial may not be concluded at an early date - Considering the custody period of the petitioner, but without commenting on the merits of the case, it would be just and expedient to order release of the petitioner on bail. Petitioner be admitted to bail subject to furnishing bail bond in the sum of Rs. 10,00,000/- with one surety in the like amount to the satisfaction of the Trial Court - petition allowed.

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• 2020 (12) TMI 270
  Direction to respondents to make the inventory of the goods and issue a copy of the GST MOV-04 to the respondent - HELD THAT:- The statement/assurance given by Mr. Satyakam is accepted by this Court and the respondents are held bound by the same - The respondents are also directed to decide the issue of parking charges/ haltage charges in the assessment order to be passed. Petition disposed off.

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• 2020 (12) TMI 269
  Direction to the respondents to credit the refund amounts - Section 54 of Central Goods and Services Taxes Act, 2017 read with Section 54 of Kerala Goods Service Tax Act and Section 16 (3) of the Interstate Goods and Services Taxes Act, 2017 - HELD THAT:- The writ petition is disposed of directing the 5th respondent to release the amount of 40,58,435/- in accordance with law, within a period of one month from the date of receipt of a copy of this judgment, after affording an opportunity of hearing to the petitioner, if need be. Petitioner is at liberty to seek the implementation of the order in case the above directions are not complied with.

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• 2020 (12) TMI 268
  Provisional attachment of bank accounts - Section 83 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Since as per the provisional attachment dated 9th November, 2020, claim of the respondents is to the tune of Rs. 6,83,85,272.00, we are of the view that without entering into other aspects of the matter at this stage, it would meet the ends of justice, if the savings account Nos.8611761716 and 6011787626 having deposits of Rs. 2,04,404.00 and Rs. 5,07,642.71 respectively are unfrozen while the other accounts remain frozen. This we feel will balance the interest of both the sides for the moment. The respondents are directed to unfreeze the other accounts of the petitioner lying with the Kotak Mahindra Bank except current account No.2511818181 which shall remain frozen till the next date - Stand over to 17th December, 2020.

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• 2020 (12) TMI 267
  Provisional attachment of bank accounts - Section 83 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Since as per the provisional attachment dated 9th November, 2020, claim of the respondents is to the tune of Rs. 2,71,40,055.00, we are of the view that without entering into other aspects of the matter at this stage, it would meet the ends of justice if the current account No.2511818181 having deposit of Rs. 2,69,16,462.51 remains frozen whereas the other accounts are unfrozen. This we feel will balance the interest of both the sides for the moment. The respondents are directed to unfreeze the other accounts of the petitioner lying with the Kotak Mahindra Bank except current account No.2511818181 which shall remain frozen till the next date - Stand over to 17th December,2020.

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• 2020 (12) TMI 266
  Revocation of cancellation of registration - Registration certificate of the petitioner cancelled mainly on the ground that the petitioner has failed to file the return for a continuous period of six months - application for revocation of cancellation of registration filed on the ground that the petitioner had submitted all the pending returns under GSTR-3B and GSTR-1 and, thus, the entire tax liability stood clear with the late fees - Section 13 of U.P. GST Act 2017 - HELD THAT:- A perusal of Section 29 (2)(c) of GST Act 2017, with which the present case is concerned clearly provides for cancellation of registration if the assessee fails to furnish the returns for a continuous period of six months and invoking the said clause the registration of the petitioner was cancelled as on 30.11.2019. Section 30 with the said Act provides a remedy to the person whose registration has been cancelled and in terms of the remedy so provided the petitioner approached the authority for revocation of the registration within the times specified therein - In terms of the proviso to Rule 23(1) a burden is cast upon the assessee to furnish returns and and to ensure that the tax due is paid along with any due interest penalty and late fees no further burden is cast upon the assessee or the persons seeking revocation. In the present case along with the application, the petitioner had filed a statement to the effect that all the requisite returns have been filed and the dues are cleared and thus it was incumbent upon the Department to have verified the correctness of averments made in the application - order dated 30.1.2020 passed by the Assistant Commissioner rejecting the application of the petitioner is wholly arbitrary and demonstrates the lack of legally trained mind as there appears to be no effort to verify the correctness of the assertions made by the petitioner at the end of the Department. Considering the fact that now the Department has accepted that the returns were filed within time and no dues remain payable, the order dated 30.11.2019 as well as the appellate order dated 06.07.2020 deserves to be set aside with a direction to allow the application for revocation of registration filed by the petitioner - Consequently, the order cancelling the registration stands revoked from the date of filing of the application before the respondent no. 2. Petition allowed.

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• 2020 (12) TMI 265
  Grant of Bail - Irregular CENVAT Credit - applicant submitted that passing of ineligible ITC and not of being the ultimate beneficiary of the alleged ineligible ITC and not of being the ultimate beneficiary of the alleged ineligible ITC and not of being the ultimate beneficiary of the alleged ineligible ITC - HELD THAT:- In the given facts, accused is a young man apparently having clean antecedents as no evidence has been brought forth by the department to show that he has previously been involved/engaged in similar offences. Further, the conduct of the accused seems to be reasonable during investigation as it as not come from the department that he evaded arrest or remained defiant to the directions of the IO. The accused is in custody since 29.10.2020 and during this time the department has got ample opportunity to interrogate him. However, same was not done by the department which makes it clear that his custodial interrogation is no more required and it is pertinent to note that the time line for filing the charge sheet is drawing near, however, despite this no request has come from the department to seek his interrogation. The frail health of the mother of accused and his own bad health are relevant consideration in the backdrop of the fact that he never acted as an obstructionist during investigation. Being sole bread earner and provider of the family is also a valid consideration for seeking bail where it is found that on account of his incarceration the entire family is subject to hardship. Further, the investigating agency is having the possession of all the documentary evidence collected so far and all other relevant material which is in the form of stamps, cheque books, debit cards, digital signatures and other material like invoices which they can scrutinize and for such scrutiny which is time consuming the further detention without any justification seems to be unreasonable. At the same time, interest of the department can be safeguarded by putting conditions on the accused so that he should not come in the way of fair and proper investigation in future also. Bail granted subject to conditions imposed - application allowed.

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• 2020 (12) TMI 264
  Grant of Interim Bail - it is contended that, the applicant has been made accused for causing huge revenue loss of several crores to the department/DGGI, but not even a single penny has been released to the applicant by government and the entire theory of cheating of such a huge amount is speculative - HELD THAT:- The relaxations granted by the High Powered Committee vide the said guidelines were not to be made applicable in certain cases like cases pertaining to recovery of intermediary and large quantity of drugs under NDPS Act, cases under Sections 4 6 of the POCSO Act, cases of rape under different Sections as stated in the guidelines, cases of foreign nationals and also the cases under PC Act/PMLA and those investigated by CBI/ED/NIA/Special Cell Police/Crime Branch/SIFO and terror related cases under Anti-national Activities and Unlawful Activities (Prevention Act) etc. The allegations against the applicant are that she was an active director of the above company and was involved in passing and issuance of fake ITCs valuing around Rs. 274 crores and it has been alleged that against the Inward supply of Rs. 355 corers involving ITC amounting to Rs. 65 crores, they had shown Outward supply of Rs. 1560 corers attracting ITC of Rs. 274 crores. It has also been alleged that on the basis of above fake ITCs of Rs. 274 crores, certain other companies had also availed refund/adjustment of the above amount of tax in relation to their import and export transactions and thus, a huge financial loss has been caused to the department. It has also been brought to notice of this court that previously also the applicant has been involved in a case of banking fraud valuing more than Rs. 2 corers at Gurugram, Haryana, though she stated to be on bail in the said case. Application for interim bail is dismissed.

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• Income Tax

• 2020 (12) TMI 263
  Assessment of AOP - Addition adopting net profit ratio @ 11.59% of the gross receipts - distribution of business receipts directly among its constituents members - requirements of CBDT circular referred to hereinabove are duly satisfied in the case of the assessee and hence, once the amount has been offered to tax by its members, the assessee could not be saddled with the liability to pay tax in respect of the same amount - HELD THAT:- SLP dismissed.

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• 2020 (12) TMI 262
  Disallowance u/s 14A r/w Rule 8D(2)(iii) - expenditure incurred in relation to income not includible in the total income - CIT (A) restricted to 0.5% of the average investment income - HELD THAT:- CIT(A) deleted the disallowance of interest under Section 14 A r/w Rule 8D (2)(ii), considering the factual position and the fact that the Respondent-Assessee had interest-free funds in the form of share capital and reserves surplus. As regards the disallowance under Rule 8D(2)(iii), it was observed that Respondent-Assessee s claim that no expenditure was incurred is not correct - expenditure was to be estimated under Rule 8D(2)(iii) being 0.5% of the average investment income which is exempt. It was noticed that value of average investment had been calculated as the average of total investments, mentioned in Schedule F. CIT (A) noted that since all the investments mentioned in Schedule F do not yield exempt income, disallowance under Section 14A read with Rule 8D(2)(iii) has been restricted only to 0.5% of the average investment income which is exempt, irrespective of whether such exempt income was received during AY 2011-12. This approach has been upheld by the learned ITAT. We do not find any perversity in the same or find any reason to entertain the present appeal to interfere with this finding that is based on facts. Addition with respect to the prior period income - HELD THAT:- As noticed that the profit and loss account of the Respondent-Assessee shows that it has neither taken the prior period income in its taxable profit, nor has considered the prior period expenses i.e. the prior period adjustments have been made by the Respondent-Assessee on below the line profit. On this issue, since factual aspects have to be verified, the learned ITAT has remanded back this issue with a direction to the AO to net off prior period income and the prior period expenditure and tax only the net income. This direction calls for no interference by this Court. No substantial question of law.

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• 2020 (12) TMI 261
  Addition u/s 68 - unsecured loan treating the same as unexplained income - HELD THAT:- No doubt the assessee has filed all the documentary evidences for substantiating the claim in dispute before the AO as well as Ld. CIT(A). Ld. CIT(A) has also sought the Remand Report on the evidences filed by the assessee, but AO has not commented negatively in his Remand Report on the claim of the assessee. We are not commenting upon the merits of the case because this will prejudice the mind of the Ld. CIT(A) and in the interest of justice, we are of the considered view that the issues involved in the present appeal require reconsideration at the level of the Ld. CIT(A). Therefore, in the interest of justice, we are setting aside the issues mentioned in the grounds of appeal to the file of the Ld. CIT(A) with the directions to decide the same afresh, after giving adequate opportunity of being heard to the assessee. Assessee s Appeal is allowed for statistical purposes.

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• 2020 (12) TMI 260
  Rectification u/s 254 - Assessment proceedings u/s 158BC - jurisdiction questioned by the assessee with reference to Section 158BD - period of limitation - adjudication of grounds remaining undecided at the time of disposal of the substantive appeal - HELD THAT:- Admittedly, limitation period when reckoned from the date of Tribunal order stands time barred. The assessee, however, insists that starting point of limitation for the purpose of rectification of Tribunal order should be reckoned from the date when a bonafide cause of action arose non- disposal of grounds of substantial nature regardless of the date of order of the Tribunal. Facts of case confronts a peculiar and rare situation indeed. In the instant case, the doctrine of merger of the order of ITAT with that of Hon ble High Court would apply only to the extent, the subject matter of the order of ITAT and that of Hon ble High Court is the same. The order of ITAT in respect of legal point thus stands merged with the appellate order of the Hon ble High Court passed under S. 260A and as a consequence, no rectification of the existing order of the Tribunal rendered only on point of jurisdiction is permissible. However, the doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject matter of challenge as extensively dealt with by Hon ble Supreme Court in the case of Kunhayammed vs. State of Kerala [ 2000 (7) TMI 67 - SUPREME COURT] - Thus, doctrine of merger would not extend to issues on merits remaining undecided by the Tribunal or by the Hon ble High Court. There appears to be no bar exercising its inherent and statutory powers of Tribunal in revisiting its earlier action with a limited purpose of adjudication of grounds which remained undecided. In the instant case, it is the Tribunal which has committed error in restricting itself to legal ground and in not addressing itself on certain other grounds of substantial nature without any fault attributable to the assessee. In such a situation, the cause of substantial justice deserves to be preferred over the technical considerations pitted against it by way of limitation, to shun an apparent miscarriage of justice. Rectification application in the instant case has been filed promptly with reference to the judgment of Hon ble Gujarat High Court and thus there can be no presumption that delay is occasioned deliberately in the instant case. No culpable neglizance or malafide can be presumed in the peculiar facts. It is an admitted position that mistake is apparent and has been committed by the Tribunal. It is manifest that the denial to rectify the own mistake of ITAT on the grounds of limitation would cause grave miscarriage of justice. Thus, befittingly, it is the obligation of the Tribunal to set right the injustice by recalling earlier order with a view to pass order on remaining points. Remedy sought by the assessee can not be frustrated on the grounds of bar of limitation without weighing the circumstances of the case. An incomplete order wholly attributable to the Tribunal itself should not ordinarily cause miscarriage of justice. Fair play is one of the most essential facets of any judicial process. When the principles laid down by Hon ble Supreme Court in S. Nagraj [ 1993 (8) TMI 292 - SUPREME COURT] and other precedents are applied, in our thoughtful consideration, the obligation is cast upon the Tribunal to set right and remove the error of an incomplete disposal in conformity with judicial functions endowed upon it. The Tribunal, in our view, is competent to do so. Miscellaneous application of the assessee is allowed and the order of the Tribunal is recalled for the limited purpose of adjudication of grounds remaining undecided at the time of disposal of the substantive appeal.

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• 2020 (12) TMI 259
  Income accrued in India - income attributable to the PE - India-Sweden Tax Treaty - offshore supply of train control and signaling equipment to DMRC under Contract BS02 - HELD THAT:- As decided in own case [ 2020 (10) TMI 1205 - ITAT DELHI] intermediary services rendered by the appellant do not make available any technical knowledge, skill etc to BTIN and BTIN is not a equipped to apply technology contained in services rendered by the appellant. Therefore, the intermediary services provided by the appellant to BTIN do not tantamount to FTS and accordingly, shall not be taxable in India. TPO has examined the international transactions and has accepted the same to be at ALP, we do not find any merit the additions made by the DRP. We accordingly, direct the Assessing Officer to delete the addition of income attributable to PE On identical facts and in view of the order of the Co-ordinate Bench on the issue being in favour of the assessee in assessee s own case in Assessment Year 2011-12, we are in agreement with the contentions of the Ld. AR. However, the only thing remaining to be verified is whether there was no secondment of any employee to India for the contract BS-02. The AO/TPO is directed to verify the same and if no such secondment of any employee is there, the AO/TPO is to delete the addition with respect to PE. The AO/TPO shll allow adequate opportunity to the assessee in this regard.

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• 2020 (12) TMI 258
  Validity of reopening of assessment - Unexplained investment u/s. 69 - such amount was allegedly paid in cash outside its books of accounts to M/s. V.K. Tours Transport - HELD THAT:- During the hearing proceedings, the revenue has been asked whether they would in a position to furnish the reasons recorded even at this juncture for which the reply received has been in negative. Having gone through the factum of the case, we hereby allow the appeal of the assessee as the reasons recorded for reopening have not been furnished to the assessee or produced before the Tribunal with a liberty to the revenue to approach the Tribunal whenever the reasons are traced and made available. Appeal of the assessee is allowed.

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• 2020 (12) TMI 257
  Reopening of assessment u/s 147 - change of opinion - addition holding the claimed long term capital gain arising on sale of a property being 2 contiguous plots of land and building thereon as short term capital gain u/s 50 - HELD THAT:- We agree with the contention of the assessee that the assessment order cannot contain each and every fact verified by the assessing officer. What has been verified by him forms part of the assessment record. All the information regarding long term capital gain, depreciation, sale of asset was part of the return of income as well as the assessment record which only was later on referred to by the assessing officer to record reasons of escapement of income. Thus, the said facts were on the record of the assessing officer and verified by him. CIT(A) also verified the said information as has been mentioned in its order. Even, we have verified the said information from the documents placed in the paper book and have come to a conclusion that no depreciation was ever claimed or allowed on the land of building under consideration. Undisputedly, the said property was held by the assessee for more than three years as it was receiving the rent on the said property w.e.f. 1/5/2005 and no depreciation, was claimed thereon. There was true and full disclosure of the facts and no new information came to the knowledge of the assessing officer. On these facts and material already on record, the reopening of the assessment was invalid and the assessment so made on the basis of an invalid notice was correctly quashed by the CIT(A). Thus, ground no. 1 of the department is hereby dismissed. Section 50C Applicability - Documentary evidence clearly shows that the property in question was let out since the date of its acquisition and was never used for the purpose of business by the assessee. On perusal of the returns of income filed for the AY 2006-07 to 2009-10 and the depreciation charts submitted under Rule 5 of the Income-tax Rules, it is clearly evident that no depreciation was ever claimed on the said property since the date of its acquisition. Since no depreciation was claimed by the assessee and allowed by the department on this property, the provisions of section 50 cannot be invoked in this case. Hence, there would not be any change in the value of the block of assets as shown by the assessee as on 31/03/2009. Hence, the action of the assessing officer to assess the said surplus as Short-Term Capital Gain against the law and otherwise is not sustainable and the assessee is entitled to depreciation claimed on value of the block of assets as declared and the disallowance of depreciation is hereby deleted because this property was never part of the said block of assets eligible for depreciation. Thus, the ground nos. 2 and 3 of the revenue are dismissed. Accordingly, the appeal of the revenue is dismissed. Rectification of mistake u/s 154 - writing off of long-term capital gain on account of order of the Hon ble Jurisdictional Delhi High Court - whether the long-term capital gain on sale of two properties declared by the assessee in its return of income has to be excluded from taxable income of the assessee for this assessment year in view of the cancellation of sale deeds of the said property in pursuance of the decree order passed by the Hon ble Delhi High Court - HELD THAT:- Substantive justice must be rendered to the assessee to meet both the ends of law and justice - AO has made a grave error apparent from record by ignoring the documentary evidences including the Hon ble jurisdictional Delhi High Court s order placed on his record for cancellation of the sale even though the same was brought to his notice by the assessee and thereby including the long term capital gain on sale of the property in the taxable income of the assessee. The letter dated 29.02.2016 filed before the AO is to be treated an application u/s 154 to rectify the assessment order passed u/s 143(3) on 28.12.2011 as the application has to be considered in respect of LTCG assessed therein, because the said application was within 4 years as held above. We hold that the long- term capital gain of Rs. 143,85,67,404/- on sale of the said property is not at all taxable in the hands of the assessee as the sale deeds were cancelled. We hereby direct the assessing officer to exclude the long term capital gain on sale of the said property from the computation of taxable income for the A.Y. 2009-10 by passing an order u/s 154 of the Act within a period of three months from the receipt of this order to avoid undue harassment to the assessee and to refund the incometax paid thereon as per law. Thus, the issue raised in these grounds is decided in favour of the assessee. Mesne profit - As regards the Taxability of the amount of Rs. 36 crores remained with assessee after cancellation of the said sale in terms of the decree order of the Hon ble jurisdictional Delhi High Court, we agree that the same was in the nature of mesne profit and beyond the provisions of section 56(2)(ix) - as explained by the Ld. AR, the said section is also not applicable as the twin conditions mentioned therein have not been met on the facts, because as per the contention of the AR the said amount was in the nature of liquidated damages for affecting the title of the assessee on the property for nearly 7 years.

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• 2020 (12) TMI 256
  Assessment u/s 153A - Addition u/s 68 - HELD THAT:- Since no incriminating material was found as a result of the search conducted on the assessee, therefore, the notice issued for initiation of proceedings u/s 153A and the assessment framed subsequently are without jurisdiction and deserves to be quashed. We hold and direct accordingly. Since the assessee succeeds on this first legal ground, therefore, the validity of the assessment in absence of any proper approval u/s 153D does not require any separate adjudication being academic in nature. Similarly, since the assessee succeeds on the first legal ground, the order of the CIT(A) deleting the addition on merit also become academic in nature and does not require any adjudication. The CO filed by the assessee is accordingly allowed and the appeal filed by the Revenue is dismissed. Since the additions in the other appeals also are not based on any incriminating material found during the course of search and since we have already held that statements recorded u/s 132(4) are not incriminating in nature, therefore, the addition made by the AO being not based on any incriminating material, the addition cannot be sustained in the orders passed u/s 153A/143(3) of the Act. - Decided in favour of assessee.

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• 2020 (12) TMI 255
  Reopening of assessment u/s 147 - Borrowed satisfaction - long term capital gain addition - proceedings on the basis of borrowed information only without there being any reason to believe based on tangible material that the tax payer s income liable to be assessed had escaped assessment - HELD THAT:- No merit in the Revenue s stand that the Assessing Officer had rightly set section 148/148 machinery in motion against this tax payer. We afforded ample opportunities to the departmental representative to place on record all necessary details indicating the assessee s Assessing Officer to have independently verified all the documents coming from Merrut. No such records forms part of the case file to this effect. We notice in this factual backdrop that the impugned reopening is not based on any independent application of mind at the assessee s Assessing Officer s end. Reopening forming subject matter of our consideration in the instant case is not sustainable in law in absence of the Assessing Officer s having made his independent enquiry or due application of mind. The same stands quashed therefore. - Decided in favour of assessee.

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• 2020 (12) TMI 254
  Addition in the proceedings u/s 153A - Unexplained cash credit u/s 68 - third party statements relied upon - addition based incriminating material recorded in the course of the search conducted upon the appellant or not - HELD THAT:- On perusal of the notices issued u/s 142(1) we note that the AO had initially requisitioned several details documents from the assessee, inter alia including the details of the unsecured loans raised during the relevant years. It is noted that in none of these notices issued u/s 142(1) the AO did not mention of any incriminating material , which was found in the course of search, based on which such details of unsecured loans had been requisitioned. Upon obtaining the details of unsecured loans, it is noted that the AO made enquiries from the loan creditors u/s 131 of the Act, and some of the notices went un-served. From the contents of the show cause, it is nowhere discernible as to what was the incriminating material unearthed in the course of search , which led the AO to make the impugned additions u/s 68 69C of the Act. It is noted from the show cause that the AO only made a passing reference to statements of alleged entry operators who had admitted to providing accommodation entries through these loan creditors. AO without giving the copy of entry operators to the assessee, could not have relied upon the same for drawing any adverse inference against the assessee and made the additions. So, the additions made by Assessing Officer itself is bad in law. We having examined the contents of the statements, it is noted that none of them were neither recorded in the course of the search conducted upon the appellant nor by the AO on his own during re-assessment proceedings. Moreover it is noted that, in none of these statements did these persons name the assessee nor in the sworn statements had the so-called entry operators admitted of providing accommodation entries to the appellant or issuing cheques in lieu of cash received from the appellant. Such third party statements could not be said to constitute incriminating material found in the course of search upon the assessee . , we hold that the material referred to by the lower authorities for justifying the additions made in the unabated assessments for AYs 2011-12 to 2013-14 did not constitute incriminating material and therefore no additions were legally permissible in the assessments framed u/s 153A - Decided in favour of assessee. Addition u/s 68 and 69C - From financial position of the loan creditors, we note that the lower authorities did not objectively take into consideration the financial net worth of the creditors and the facts and figures available in the audited accounts. On examination of the financial statements of the loan creditors, we find that each loan creditor possessed sufficient investible funds out of which the creditors had advanced the loans to the assessee. We also find that in each case, the loan creditor had reported substantial interest income and they are income taxpayees. Further, compared with the gross interest accounted in the books of the creditor, the amount of interest paid by the appellant was relatively lower. We also note that the interest paid by the appellant was accounted in the books of the loan creditor and before payment of interest, the tax was duly deducted u/s 194A - Having regard to the totality of the facts and circumstances of the case therefore, we do not find merit in the conclusion of the lower authorities that the loan creditors did not have financial credentials to advance loans and on that ground justify the addition u/s 68 69C of the Act. It is neither the AO s case that the loan creditors are not income-tax assessee s nor has he alleged that the documents and evidences furnished by the appellant in support of loan transactions were false or suffered from defects or do not tally with the Department s records. Aggregate additions being principal loan amount received by the appellant from the fifteen bodies corporate did not constitute its income chargeable u/s 68 of the Act. Consequently, for the same reason we also do not find any justification in sustaining the disallowance being the interest on such loans u/s 69C - Decided in favour of assessee.

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• 2020 (12) TMI 253
  Addition on account of transfer pricing adjustment - international transaction as per the provision of section 92E - assessee company is engaged in the business of trading in natural gas - HELD THAT:- The assessee has stated that all the above international transaction was at arms length price. The BGEH is the associated company of the assessee incorporated in the United Kingdom and it has negotiated with the Cairn Group for purchasing of gas from Laxmi field which was located in India. The average price of natural gas in the international market was at USD dollar 3.9975 per Giga Joule whereas the price paid as per the agreement by the assessee company was at USD 3.9414 per Giga Joule including 1% commission paid to its associate company. It is also demonstrated from the copies of agreement placed in the paper book that associate concern of the assessee company BGEH had no agreement with Cairn for the purchase of gas from Laxmi filed and BGEH has provided only negotiation services. The assessee has purchased the gas from Cairn and from other operators from Laxmi field, ONGC, World Tata Petrodyne Ltd on the same price therefore it cannot be said that assessee has not made transaction according to arms length principles. Ground of appeal of the revenue is dismissed. Addition u/s. 40(a)(ia) r.w. 195 - payment of purchase commission and guarantee commission by the assessee company to British Gas Energy Holding Ltd. a group holding company situated in United Kingdom - CIT-A deleted addition - HELD THAT:- As decided in the case of the assessee itself for assessment year 2007-08 Payment of consideration would be regarded as fee for technical/included services only if the twin test of rendering services and making technical knowledge available at the same time is satisfied. The rendition of services for earning commission cannot be of such a nature that there is a transfer of technology, in the sense it is required to fulfil the make available clause in the Indo UK DTAA. It is also elementary that in a case in which the provisions of the DTAA are applicable, the provisions of the Income Tax Act apply only to the extent the same are beneficial to the assessee. In view of these discussions, quite clearly, even if the commission income in the hands of the recipient is taxable under the provisions of Section 9, the provisions of the Indo UK DTAA will come to the rescue of the assessee. Whichever way one looks at it, whether in the light of the provisions of the Act or the Indo UK DTAA, the conclusions of the CIT(A) do not call for any interference. Disallowance of expenses u/s. 14A - HELD THAT:- This is the year in which the Rule 8D had admittedly come into force and as per assessee s claim that it had sufficient interest free funds. No disallowance is made by the Assessing Officer in respect of interest payments.

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• 2020 (12) TMI 252
  Penalty u/s 271(1)(c) - no approval from the Joint/Additional Commissioner of Income Tax taken before issuing notice - HELD THAT:- In the present case, no approval from the Joint/Additional Commissioner of Income Tax was sought, therefore the penalty levied by the A.O. was not justified. In the present case it appears that the penalty of Rs. 17,242/- was levied by the A.O. but the said penalty was different from the penalty under section 271(1)(c) to be levied. It is also relevant to point out that there is no provision under section 271(1)(c) of the Act to impose the penalty less than the 100% of the tax sought to be evaded and in the present case, this amount was at Rs. 25,051/-. As the penalty under section 271(1)(c) of the Act leviable without taking the approval from the Joint/Additional Commissioner of Income Tax, under section 271(1)(c) of the Act was not justified, accordingly the same is deleted. - Decided in favour of assessee.

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• 2020 (12) TMI 251
  Commission expenses paid to its holding company - Whether such payments were at arm s length or were for business expediency? - As per assessee has not furnished the necessary details about the quantification of the amount of commission - It is the 2nd round of litigation - HELD THAT:- AO was directed to verify the quantum of the commission expenses. But he has not done so despite having all the details furnished by the assessee in connection with the quantum of commission expenses. These details can be verified from the submission of the assessee before the ld. CIT-A. AO has not pointed out any defect in the contentions of the assessee as well as the documents filed by it. Thus it can be transpired that the AO has accepted the quantum of the commission expenses as claimed by the assessee. Similarly, it was also directed by the ITAT to verify the nature of services obtained by the assessee from the company namely BG Energy Holding Limited which were discernable from the copies of the agreements. But the AO has not made any comment on such services which implies that he has accepted all the contentions of the assessee. Assessee in the set-aside proceedings has duly complied with the direction of the ITAT as discussed above and the AO has not pointed out any infirmity in the submission of the assessee. Thus in the present facts and circumstances, the AO has no power to make the disallowance of the commission expenses as claimed by the assessee for any other reason i.e. Non deduction of TDS which is beyond his power in the given facts and circumstances. Revenue has accepted the identical expenses incurred by the assessee in the other assessment years, more particularly in the assessment years 2007-08 to 2012-13. As such these assessment years, the disallowance was made on account of non-deduction of TDS under section 195 of the Act. Thus it can be inferred that the question of arm length and business expediency does not arise in the given facts and circumstances. Accordingly we do not find any merit in the grounds of appeal raised by the revenue. Hence the ground of appeal of the revenue is dismissed. TDS u/s 195 - payment of commission expenses - HELD THAT:- We find that the learned CIT (A) has deleted the addition made by the AO after having reliance on the order of his predecessor for the assessment year 2011-12 wherein the issue was related to the TDS - we find that authorities below have not adjudicated the issue in terms of the directions issued by the ITAT which was binding upon them. Therefore, we are of the view that the issue raised by the revenue for non-deduction of TDS does not require any separate adjudication. Thus we dismiss the same as infructuous.

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• 2020 (12) TMI 236
  Bogus LTCG - Addition u/s 68 - HELD THAT:- The company is showing huge profits year after year starting from A.Y. 2004-05 running into crores and assessments have been completed u/s 143(3) from a.Y. 2004-05 till A.Y. 2014-15 except for A.Y. 2005-06 which is under 143(1) - AO had analysed the holding of shares of the applicant companies and had given a finding that all these companies are group companies and are directly or indirectly operated by the promoters of the assessee company. Therefore, in our view decision relied on by the ld. DR is not applicable to the facts of the present case - assessee has discharged the onus cast on it by proving the three ingredients of section 68 - Accordingly the grounds raised by the Revenue challenging the addition under section 68 of the Act for both years are dismissed. Addition on account of income from undisclosed source - addition made by the AO on the basis of the search that has taken place under section 132 of the Act in the case of SEL Manufacturing Company and the survey conducted in the premises of the assessee subsequent to the search - HELD THAT:- A perusal of the assessment order shows that the assessee filed its return of income declaring total income - AO has not rejected the book results nor passed the order under section 144 - Since the assessee has shown income of Rs. 31,41,11,880/- which is much more than the amount of Rs. 20,24,39,341/-, therefore, such income, even if treated as bogus, has already been taxed and therefore, the addition of the same again will amount to double taxation which the ld. CIT(A) has rightly deleted. There is nothing on record to suggest that the assessee has booked any other part of expenditure in the Profit Loss Account, therefore, we find merit in the argument of the ld. counsel that the addition is a double addition which the ld. CIT(A) has rightly deleted - Decided in favour of assessee.

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• 2020 (12) TMI 235
  TP Adjustment - comparable selection - HELD THAT:- Assessee-company is engaged in the business of sale of user license of enterprise application software, software development and rendering software related services to the group companies and external parties thus companies functionally dissimilar with that of assessee need to be deselected. Exclusion of Comparable with turnover huge and uncomparable - TPO has excluded the loss companies and also the companies which are with lowest margins - Companies rejected as persistent loss company. Charging of interest on receivables - A.R argued that credit period of 150 days need to be allowed in assessee s case, since, the industry average is 150 days as against the average period allowed by the AO for 30 days - HELD THAT:- After the amendment of law inserting Explanation to section 92B of the Act, the interest on trade receivables also became an international transaction and therefore, the ALP adjustment is required to be made in respect of trade receivables also. Accordingly ITAT has decided the issue against the assessee in the earlier years in assessee s own case for the A.Y.2013-14 and 2014-15 - Accordingly, we direct the TPO (AO) to allow credit period of 90 days or the industry average and only in respect of the deviation, the interest to be considered for ALP adjustment. Interest to be charged as per Libor or SBI interest rate - HELD THAT:- The issue has already been considered by the Tribunal in the earlier year and held that interest to be charged as per SBI short term deposit rates. Since there are no changes in the facts, respectfully following the view taken by this tribunal in assessee s own case, we hold that interest is to be charged at the rates of short term deposits of SBI as decided by the ITAT in it s earlier year orders. Accordingly, this issue is remitted back to the file of TPO (AO) to recompute the interest. Appeal of the assessee on this ground is treated as allowed for statistical purposes.

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• Customs

• 2020 (12) TMI 250
  Reexport of the confiscated goods - imports of old and used goods - appellant concedes that there is no cavil with confiscation under section 111(d) of Customs Act, 1962 arising from non-production of authorisation required for effecting imports of old and used goods as prescribed in paragraph no. 2.31 of Foreign Trade Policy (2015-20) notified under the Foreign Trade (Development Regulation) Act, 1992 - HELD THAT:- The order of the original authority had restricted the options to that of re-export on redemption or of destruction at the cost of the appellants herein. In determining the fate of the cross-appeals filed against that order, the first appellate authority was required to decide the competing claims for permitting clearance for home consumption or absolute confiscation as the exhaustive options available under the law. Neither the reviewing authority nor the importer had favoured reexport. It is, indeed, moot if, in the absence of request from an importer and of authority conferred under Customs Act, 1962 or any other law, the proper officer of customs was empowered to insist on such and in the proceedings leading to this appeal, it is only Customs Act, 1962 that has been invoked - in affording the option to redeem goods, absolute confiscation is the consequence of default thereof. From section 125 of Customs Act, 1962, it is seen that confiscated goods vest with the Central Government and, in the absence of authority under law, or by delegation, to destroy, the adjudicating authority is required to protect such goods till appropriate disposition as prescribed by the Central Government. Learned Counsel submits that the goods have been pending for a substantially long period of time; this, undoubtedly, is a matter of concern and we concur that needless prolonging of detention is to be avoided. Accordingly, we direct that the de novo proceedings be completed within eight weeks from the date of receipt of this order by the original authority. Matter remanded to the original authority for deciding afresh on the scope for stipulating reexport in circumstances of plea for clearance for home consumption with the direction that the time limit specified supra be adhered to.

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• Corporate Laws

• 2020 (12) TMI 249
  Permission to contest election for directorship of Respondent No.3 without insisting on deposit - Section 160 of the Companies Act, 2013 - HELD THAT:- As per this provision, a person is eligible for election to the office of directorship at any general meeting, provided that his name is proposed not less than 14 days from the meeting by notice in writing along with deposit of Rs. 1 lakh or such higher amount as may be prescribed which is refunded if the person proposed gets elected as director or gets more than 25% of the total valid votes cast. When the law requires that there should be deposit of Rs. 1 lakh to contest for directorship of a company, we fail to understand as to how the same can be waived off at the instance of the petitioner. In such circumstances, we are not inclined to accede to the prayer for interim relief made by the petitioner. Accordingly, prayer for interim relief is declined. Stand over to 2nd February, 2021.

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• 2020 (12) TMI 248
  Rectification of order - mistakes apparent on the face of the record or not - case of respondent is that the applicant is demanding altogether a larger relief which was not within the contours of Section 420 of the Companies Act, 2013 r/w Rule 154 of the NCLT Rules, 2016 - cancellation of shares - allegation of abuse of process of law - HELD THAT:- As per Rule 154 of the National Company Law Tribunal Rules, 2016 the Tribunal is only entitled to rectify the clerical or arithmetical mistakes or error arising from accidental slip or omission - In the present application the applicants sought to correct a factual error in the order passed by this Tribunal. Considering the Rule, the Tribunal can exercise the power for correction of a mistake and not to substitute a view which was made while deciding a matter. It is not that the present Application which has been filed similar to a Review Application cannot be entertained, as the Application for rectification of order does not show any clerical or arithmetical mistakes - this Tribunal cannot travel beyond the record to see whether the order is correct or not - application rejected.

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• Insolvency & Bankruptcy

• 2020 (12) TMI 247
  Restoration of electricity connections (i) HT Service No. 328 and (ii) HT Service No. 375 issued to M/s. Kalpatru Steel Rolling Mills Ltd. without insisting upon for payment of any past dues and without insisting for any fresh security deposit from the Resolution Applicant - power dues arose before CIRP period - to be paid by the Corporate Debtor/Resolution Applicant to SPDCL or not - HELD THAT:- In IBC, there will be two outcomes, either (1) resolving the company liabilities and give fresh lease of life to company making it free from the past baggage or (2) dissolving company after liquidation of its assets. In both the cases, either giving new life or winding up of a company - either way liabilities of a Company once for all will be determined. So to give such kind of determination, a company cannot be left over with past liabilities, therefore after approval of the Resolution to the company u/s 31 of the Code, the Resolution in respect to the past dues will remain binding over all the stakeholders falling u/s 31 of the Code. So, once plan is approved, the parties upon which the plan is binding, cannot rake up past liabilities by invoking law that is inconsistent with the provisions of the Code - SPDCL cannot make its claim after plan has been approved. Restoration of power supply - HELD THAT:- Since power was disconnected somewhere in 2013 -several years before initiation of CIRP proceedings against this company, the Applicant cannot say that the Resolution Applicant is entitled to restoration of connection of HT service No. 328 and HT service No. 375 of the corporate debtor without making payment of security deposit, because security deposit is a precondition to sanction of High Tension power connection to Industries. Without making such security deposit, giving HT Connection will become in violation of Electricity Act, tomorrow if any problem comes, that security deposit can meet that eventuality provided deposit is there. It cannot be assumed that once plan is approved, corporate debtor is free to violate the laws in existence and this Authority shall grant reliefs blindfolded without looking at noncompliance of other laws. Moreover waiver of past liabilities will not tantamount to freeing the Resolution Applicant from following other laws after approval of plan. Moreover, it is not the case of the applicant that security deposit is still lying with the Department. Waiver is limited to past liabilities, assuming if any concession is granted by this Authority while approving the plan, such concession will come into force to the extent permissible under other laws. It cannot be said that if HT connections are not given, ongoing business will suffer. Here use of power is not something like water and light that is required to have living in the world. It is a business that consumes huge power supply like any other power intensive industry, that being so, unless it is bought like any other raw material, it cannot have manufacturing. The Applicant tried to hold out that electricity is essential part of the Resolution, therefore HT connections shall be restored without being insisted upon to pay security deposit, but one thing the applicant has to understand is, the CIRP period and moratorium ends with the approval of the plan u/s 31 of the Code and the nature of power connection sought in this case does not fall within the category of essential supplies because the usage of power in the industry is not for getting light, which is considered as essential supply to modern living - Thus, it cannot therefore be said that it is like any other renewal approval taken from various departments. It is part of the business, the only difference is this power supply business in some places rests with governments, in some places with private industries. Application disposed off.

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• 2020 (12) TMI 246
  Liquidation of Corporate Debtor - in the 6th CoC meeting the resolution plan for revival of the Corporate Debtor had failed to get the approval of the CoC - HELD THAT:- This matter needs a further hearing but prima facie the liquidation process cannot be halted for indefinite period. As a part of the liquidator process shares have to be sold after making offer to the other parties i.e., the applicant and WBIDC - We, therefore, grant ad interim stay only by restraining the Liquidator from selling the shares of the Corporate Debtor to outsiders for a period of two weeks only when the issue would possibly be heard and decided finally. Matter stands adjourned to 22/09/2020 for further consideration.

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• 2020 (12) TMI 245
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - time limitation - Ex-parte order - HELD THAT:- It is found that the instant petition filed on 23rd January, 2020 was notified for the first time on 11.02.2020. Thereafter, despite giving number of opportunities, the respondent has not filed any reply. As per the records respondent appeared through counsel after lockdown when the matter was fixed on 05.08.2020 and again prayed for time. Two weeks time was granted, but, having failed to file reply, the matter is heard on 27.08.2020 ex-parte. On perusal of the record it is found that the demand notice issued by the applicant under section 8 of the I B Code on 17.12.2019 has been served upon the corporate debtor, but, no dispute has been raised. Therefore, the petitioner has also filed affidavit of no dispute dated 18.01.2020 - the instant petition filed by the applicant is well within limitation and there is no denial of the operational debt or any pre-existing dispute regarding the operational debt from the side of the corporate debtor. The documents produced by the operational creditor clearly establish the debt and there is default on the part of the Corporate Debtor in payment of the operational debt . This Authority is satisfied that the application is complete in all respect and the Corporate Debtor committed default in paying the operational debt due and payable to the Applicant - Application admitted.

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• 2020 (12) TMI 244
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- Instant Company Petition is filed to recover the outstanding amount in question. As per the Purchase Orders, the terms of payment is 60 days credit from Date of receipt of material and cause of action started to arise from the year 2016. The provisions of the Code cannot give any cause of action and cause of action rise with reference to facts of given case. Therefore, demand notice issued under the provisions of Code would not give cause of action to file the instant Petition. The Respondent has addressed a letter dated 14th December, 2017 to the Petitioner by inter alia confirming that they would clear the dues before 5th of January, 2018 with 24% interest Per annum. It is to be stated that the provisions of Code can be invoked to initiate CIRP on justified reasons, and it cannot be invoked with an attempt to recover outstanding amount. The Petitioner has not averred and substantiated that the Corporate Debtor has become insolvent. It is a settled position of law that the provisions of Code cannot be invoked for recovery of outstanding amount. The instant Company Petition is filed with an intention to recover the outstanding amount rather than to initiate CIRP in respect of the Corporate Debtor, which is against the object of the Code and the Petitioner also failed to substantiate the insolvency of the Corporate Debtor. Though the instant Petition is not a fit case to initiate CIRP for the aforesaid reasons, the Respondent is prima facie liable to be pay the admitted outstanding amount, and thus it would be just and proper for the Corporate Debtor to settle the admitted debt, instead of forcing the Petitioner again to approach judicial forum. Application dismissed.

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• 2020 (12) TMI 243
  Liquidation of the Corporate Debtor - Section 33(2) of the IBC, 2016 - HELD THAT:- It is found that CoC decided to send the company under liquidation as the company has no business and assets except loans, advances and bank balances. Under such circumstances, if expression of interest will be invited, in that event it will be extra burden on the CoC/RP. Hence, to minimise the cost, the CoC has taken decision to liquidate the Company. It is also to be noted that this Adjudicating Authority has no jurisdiction to interfere in the commercial wisdom of the CoC as observed in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT] . The application filed by the RP under Section 33 of the IB Code, 2016 is allowed and the Adjudicating Authority passes an order for initiation of liquidation of the Corporate Debtor viz., Devansh International Private Limited.

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• 2020 (12) TMI 242
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - pre-existing dispute or not - dishonor of Cheque - service of demand notice. Dishonor of Cheque - Operational Creditor has firstly claimed that cheque for Rs. 50 Lacs was issued by the Corporate Debtor which was dishonoured and returned by the Bank on 17.01.2018 and this action of the Corporate Debtor was in itself sufficient to make this application admissible as value of cheque was of more than the threshold limit of Rs. 1 lakh and issuance of this cheque was an admission of its liability to pay - HELD THAT:- This plea goes against the Corporate Debtor because if after considering the disputes, a cheque is issued which is dishonoured for insufficient funds this goes to show that the Corporate Debtor, being issuer of the cheque, issued the cheque and delivered the cheque after fully analyzing the issues that this amount was, in fact, payable in spite of such disputes - this application is liable to be admitted. Unqualified work done certificate was issued by the Corporate Debtor at the request of the Operational Creditor - HELD THAT:- This certificate has been given after leaving of the project by the Operational Creditor and all e-mails written by Corporate Debtor up to 07.03.2017 which have been claimed as proof of pre-existing dispute. Confirmation of certificate has been given as late as on 23.10.2018 wherein again amount of actual work done and actual date of completion has been mentioned. Further, in the certificate dated 17.04.2017, it has also been certified by Corporate Debtor that the Corporate Debtor has carried out the above work satisfactorily. Thus, considering the material which has been brought on record by the Corporate Debtor itself, there remains no substance or merit in the claims of the Corporate Debtor that it is a case of preexisting dispute, thus, for this reason also, this petition is liable to be admitted. Corporate Debtor had made an excess payment to the tune of Rs. 2.07 crores approximately - HELD THAT:- The deductions for defective work in structure and lining stand at Rs. 10 lacs and 3 lacs respectively. Most of other deductions are for non-submissions of documents or some charges to be recovered by the Corporate Debtor which cannot be termed as a dispute much less than pre-existing dispute for the simple reason that no back up documents have been attached nor any other evidence such as deduction for the same by end client (Government of Andhra Pradesh) from the bills of Corporate Debtor has been brought on record. It is further noted that even contractual provisions are not mentioned under which such deductions/recoveries have been made except in case of retention money. Having said so, it may not be out of place to mention that from the perusal thereof it appears that such deductions have been worked out just to justify the non-payment as no steps for the recovery of the same have been taken - claim of amount excess paid by corporate debtor becomes null and void and such working of the Corporate Debtor itself leads to an inevitable conclusion that there is an undisputed outstanding balance which is payable by the Corporate Debtor to the Operational Creditor which is more than Rs. 1 Lac. Operational Creditor abandoned the project in between even without informing the Corporate Debtor on 25.01.2017 as mail written on 03.03.2017 - HELD THAT:- We are unable to accept this fact that Corporate Debtor had no knowledge of such abandonment until it received such mail for the reason that Corporate Debtor is Principal Contractor and it is supervising, coordinating, monitoring and controlling the project. Further, Corporate Debtor after such abandonment has made substantial payments to the Operational Creditor, issued work done certificate as well and did not file any claim for damages, penalties etc. against the Operational Creditor, hence, its plea that it resulted into adverse consequences remains shallow. Further, abandonment as such has no bearing on the admissibility of this application, because what is claimed by the Operational Creditor is the amount due and payable in respect of work done by the Operational Creditor and consequences of such abandonment, if any, have to be dealt in accordance with the terms and conditions of the contract between the parties and, as stated earlier so, no material has been brought on record to show that any action has been taken by the Corporate Debtor against the Operational Creditor on this score. Thus, such plea has got no bearing on the present proceedings. Payment was to be released by the Corporate Debtor to the Operational Creditor within the seven days from the receipt of payment from the Government of Andhra Pradesh - HELD THAT:- Modus operandi of the payment to be released only after receipt of payment has been provided for proper cash flow management. Apart from this, it has not been disputed by the Corporate Debtor that it has not received the payments from the Government of Andhra Pradesh for the milestones of working completed and achieved by Operational Creditor which has been subject of billing and invoicing in all 14 running account bills raised by the Operational Creditor. Thus, this plea also has got no bearing on the admissibility of the application filed by the Operational Creditor. Pre-existing dispute or not - HELD THAT:- It may not be out of place to state that first core aspect of admission of an application u/s 9 is prima facie whether there is any dispute or otherwise. If it is shown that there exists a dispute between the Operational Creditor and Corporate Debtor prior to service of notice u/s 8 of IBC, 2016 then the Adjudicating Authority may reject the Application filed u/s 9 of Insolvency and Bankruptcy Code, 2016 - The extent of ascertainment/examination of such parameters defines the scope of exercise of jurisdiction by Adjudicating Authority. It has been pleaded that Adjudicating Authority has limited jurisdiction as compared to a Trial Court and Civil Court. We do not have any quarrel or dispute with this proposition. However, intensity of the examination would depend upon the facts and documentary evidences produced by each of the parties in support of their claims. Having said so, it would also be an endeavor of the Corporate Debtor to prove that there is preexisting dispute to avoid its obligation. In what circumstances a fact situation can be categorized as dispute i.e. when does a disagreement or difference of opinion become a dispute - HELD THAT:- A threshold or stage is to be crossed to convert a difference/disagreement into dispute. In other words, normally commercial/legal differences per se are not dispute unless such differences are ascertained into a claim on which both the parties have opposite/different views and want to settle the same through some legal process or otherwise. Thus, in our view, routine correspondence in commercial relationship cannot automatically or necessarily be considered and admitted as dispute unless such stage is reached. It is noted that in this case the Corporate Debtor is a principal contractor who has given the subcontract or practically assigned contract on back to back basis to the Operational Creditor. The Operational Creditor would bear the liquidated damages, penalties and could face other legal actions which can be imposed on the Corporate Debtor for the failure of Operational Creditor. Thus, the risk and rewards are shared and, therefore, it may not be out of place to mention that Operational Creditor, being sub-contractor face severe consequences for nonperformance. However, the corporate debtor is responsible for execution of contract which also provides for supervision, coordination, monitoring and control for efficient execution of the project by the Corporate Debtor - It has also not been established that any payment had been withheld by the Government in respect of work done by Operational Creditor. Further, if these facts are considered with work experience certificate issued by the Corporate Debtor and subsequent payments made by the Corporate Debtor then it can be safely concluded that difference which existed earlier had already been resolved and only outstanding amount due to Operational Creditor remained pending for payment. Thus, the basis of this application is, in fact, non-payment of such amount. Demand notice - HELD THAT:- The Operational Creditor has categorically stated that he had received notice of dispute but not within stipulated time. Thus, there is no misstatement by the Operational Creditor as the Corporate Debtor has itself admitted that such notice was delivered beyond 10 days from the date of receipt of notice of demand u/s 8 of IBC, 2016. The application filed by Operational Creditor u/s 9 of the Insolvency Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, Ketan Construction Limited, is hereby admitted.

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• 2020 (12) TMI 241
  Direction to Respondent to handover the Original Share Certificates to the Corporate Debtor in relation to its shareholding - Jurisdiction to entertain the applications filed by the Resolution Professional - HELD THAT:- As per the provisions of the IBC, 2016, the moment the CIR Process is initiated against the Corporate Debtor, the moratorium under Section 14(1) of IBC 2016 is declared. By virtue of that, all proceedings, which are civil in nature, relating to the Corporate Debtor shall be prohibited to be proceed with, till the time the moratorium remains in force. The proceedings under Section 241-242 of Companies Act 2013 cannot stand as an exception to the moratorium. During the period of moratorium, the Adjudicating Authority under IBC 2016 is vested with jurisdiction to decide any issue arising out of CIR Process of the Corporate Debtor. Further as per Section 60(5)(a) of IBC 2016, this adjudicating authority can entertain or dispose of any application or proceeding by or against the Corporate Debtor - Further, by virtue of Section 238 of IBC 2016, the proceedings under IBC 2016, are having overriding effect over all the other inconsistent laws - Thus, this Bench is having the jurisdiction to entertain the applications filed by the Resolution Professional. As from the plain reading of Clause 6 of the Agreements dated 08.10.2018, it is evident that the Respondent was only having the temporary physical possession of the share certificates and other original documents. No ownership rights were transferred in favour of the Respondent at the time of signing the said agreements - The Respondent, who was given temporary physical possession of the original Share Certificates has not paid the consideration as stipulated in the Agreements dated 08.10.2018. Hence, this Bench is of the view that the Share Certificates along with other original documents possessed by both the Companies, namely, M/s. Hacienda Infosoftech Private Limited and M/s. Challengerz Web Solutions Private Limited, are assets of the Corporate Debtor and the Applicant is well within its rights to claim possession of these certificates along with other original documents with a view to maximize value of the assets of the Corporate Debtor. This Adjudicating Authority directs the Respondent to handover the original Share Certificates along with other original documents of M/s. Hacienda Infosoftech Private Limited and M/s. Challengerz Web Solutions Private Limited to the Resolution Professional of the Corporate Debtor within 7 days from the date of the pronouncement of this order - Application allowed.

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• 2020 (12) TMI 240
  Liquidation of the Corporate Debtor - Section 33(2) of the IBC, 2016 - HELD THAT:- It is found that there is no asset or Plant Machinery or any inventories or any investments of the Corporate Debtor and neither the Corporate Debtor is carrying on any projects or business operations. Therefore, the CoC has resolved for liquidation of the Corporate Debtor vide its Second meeting dated 12.12.2019. It is also to be noted that this Adjudicating Authority has no jurisdiction to interfere in the commercial wisdom of the CoC as observed in the case of COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT] . Application filed by the RP under Section 33 of the IB Code, 2016 is allowed and the Adjudicating Authority passes an order for initiation of liquidation of the Corporate Debtor viz., Bansal International Private Limited. The RP i.e. Bhavi Shreyans Shah, shall act as the Liquidator for the purpose of liquidation of the Corporate Debtor.

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• 2020 (12) TMI 239
  Maintainability of application - initiation of CIRP - Corporate Debtor has committed default for a total outstanding amount - Existence of debt and dispute or not - HELD THAT:- There is a delay in making payment to the Petitioner. However, there are no document that indicates the existence of any agreement between the parties with regard to the terms of the payment. Similarly, but for the Invoices, there is nothing to show that interest was agreed upon to be charged at 24%, in case of delay in payment, as being charged by the Petitioner. In the absence of any Agreement and expressly laid out terms, there is no right to payment of interest at a certain rate, created in the hands of the Petitioner as per terms of its choice, and there cannot be any debt and default in respect of such interest, within the meaning of the Code, even if some interest is otherwise payable. Also, in the absence of any Agreement, there cannot be a default for delayed or non-payment of the amounts raised through invoices. One sided Invoices or E-mails cannot be a substitute for a mutual agreement. In any case there is no clear and undisputed debt, which is a sine qua non for proceeding under Section 9 of the Code as the Respondent has attributed the late payments to delayed delivery of supplies and also the exorbitant interest charged. In the present case the Petitioner has attempted to use the Code only to recover its amounts from an otherwise solvent company with a healthy turnover, having a large number of employees, and having on-going projects in hand. No case has been made out that the Corporate Debtor has become insolvent or has lost its substratum, such that it is unable to pay its debts or run its business. This is clearly against the spirit of the Code. Petition dismissed.

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• CST, VAT & Sales Tax

• 2020 (12) TMI 238
  Maintainability of appeal - appeal dismissed arising out of stay order of appellate authority, without considering prima facie merits - grant of full protection (towards unpaid VAT dues) - rejection of books of accounts - HELD THAT:- It is well settled that while deciding the application for grant of stay the Appellate Authority or the Tribunal is bound to consider prima facie case as pleaded by any assessee and the financial hardship , if pleaded by the assessee, while deciding stay application, it cannot refuse to exercise the discretion by refusing to consider prim facie case solely on the ground that any finding recorded at this stage may ultimately affect the outcome of the appeal. Needless to add that prima facie satisfaction which is liable to be recorded cannot have any effect on the final decision which is to be taken by the Appellate Authority as the prima facie consideration, as the names suggest is only prima facie and, ultimately, the appeal has to be decided on its own merits after hearing the parties. The Tribunal cannot escape or refuse to consider the prima facie case at the time of considering the stay application as it is well settled that the parameters for deciding the stay application include prima facie case and financial hardship. In the present case, the order of the Tribunal is ex facie erroneous, inasmuch as, it refuses even to consider prima facie case while deciding the stay application, thus, there are no hesitation in holding that the order of Tribunal is clearly contrary to the settled law and is liable to be set aside. The questions framed are answered in favour of the assessee and against the revenue.

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• 2020 (12) TMI 237
  Principles of Natural justice - jurisdiction of Respondent to levy tax only on such transaction of sale or purchase - non application of mind - HELD THAT:- As seen from the impugned assessment orders, the respondent has not applied its mind to the VAT Form-201 A filed by the petitioner before the Commercial Tax Department at Gujarat. The respondent has also not applied its mind to the tax invoices enclosed by the petitioner along with the reply dated 19.09.2020. In the impugned order passed by total non application of mind, the respondent has observed that the petitioner had submitted only the annexure details, but, has not submitted the details of the tax paid by the petitioner to the Gujarat Government through their VAT return. However, the petitioner has infact submitted the details sought for by the respondent as per their notice dated 27.08.2020. As seen from the impugned assessment orders, the respondent has not afforded personal hearing to the petitioner before passing of the assessment orders. This Court is of the considered view that the impugned assessment orders have been passed against the petitioner by total non application of mind and by violation of principles of natural justice - matter is remanded back to the respondent for fresh consideration and the respondent shall pass final orders after giving sufficient opportunity to the petitioner - Petition allowed by way of remand.

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