TMI Tax Updates - e-Newsletter
February 4, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise Indian Laws

Articles

1. AMENDMENTS TO CUSTOMS ACT BY FINANCE BILL, 2021

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Webinar on furnishing of details in IFF and payment of tax (Form GST PMT-06) by Taxpayers in QRMP Scheme

2. 14th Instalment of ₹ 6,000 crore released to the States to meet the GST compensation shortfall

3. MCA initiates process of De-criminalisation of compoundable offences under Limited Liability Act, 2008

4. MCA revises threshold for paid up capital and turnover for Small Companies

5. MCA amends One Person Companies (OPCs) rules

6. India’s Trade Policy

7. Trade Deficit Between India and China

8. Increase in Exports

9. Foreign Direct Investment

10. Growth Rate in Core Sectors

11. One District One Product Scheme

12. MAKE IN INDIA 2.0

13. Improvement in Ranking of States

14. APEDA organizes 1st Product Committee Meeting for Floriculture, Seeds and Cereals meeting

15. Commerce Secretary Dr Anup Wadhawan says the Budget 2021-22 will enhance India’s growth in manufacturing, trade and other sectors

16. Udyog Manthan: Focused Webinars being conducted for Promoting Quality and Productivity in Indian Industry

Notifications

Customs

1. 13/2021 - dated 2-2-2021 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Silver

2. 13/2021-Customs (N.T./CAA/EXTENSION/DRI) - dated 1-2-2021 - Cus (NT)

Appointment of CAA by DGRI

GST - States

3. 54/2020 – State Tax - dated 29-1-2021 - Delhi SGST

Amendment in Notification No. 29/2020–State Tax, dated the 19th October, 2020

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/DF2/CIR/P/2021/17 - dated 2-2-2021

Setting up of Limited Purpose Clearing Corporation (LPCC) by Asset Management Companies (AMCs) of Mutual Funds

2. SEBI/HO/ITD/ITD/CIR/P/2021/16 - dated 2-2-2021

Revised Framework for Innovation Sandbox

Customs

3. 03/2021 - dated 3-2-2021

Systemic improvements regarding modification in the Bond (B-17) Execution process

Highlights / Catch Notes

Income Tax

• High Court Quashes Penalty Order for Section 269ST Violation, Cites Lack of Jurisdiction Due to Pre-2019 Application.

  Case-Laws - HC : Penalty u/s 271DA for violating the provisions of Section 269ST - Settlement Commission, under the proviso to Section 245F(2), with effect from 1st November, 2019 when the petitioner admittedly made the application under Section 245C before it, had the exclusive jurisdiction to deal with the matter relating to violation of Section 269ST of the Act also and the respondent, on 4th November, 2019 did not have the jurisdiction to impose penalty for violation of Section 269ST on the petitioner and the impugned order is without jurisdiction and liable to be set aside and is hereby quashed. - HC
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• Reopening Assessment u/s 147: No Obligation to Disclose Beyond Prescribed ITR Form Requirements.

  Case-Laws - HC : Reopening of assessment u/s 147 - failure to file the ITR - while filing a return an assessee is not bound or obliged to disclose any information in relation to any fact other than what is required to be supplied and furnished by him in the various columns of the prescribed form of return of income or which he is bound under the provisions of the Act to furnish even though that fact may otherwise be relevant for the purpose of his assessment. For the simple reason that such information has not been furnished in the return it would not mean that the assessee had failed or omitted to disclose fully and truly all material facts which are necessary for the purpose of his assessment. - HC
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• Court Upholds Validity of Reassessment u/s 147 Based on Sufficient Tangible Evidence by Assessing Officer.

  Case-Laws - HC : Reopening of assessment u/s 147 - As examined the belief of the Assessing Officer to a limited extent to look into whether there was sufficient or any tangible materials available on the record for the Assessing Officer to form the reasonable belief and whether there was 'live link' existing of the material and the income chargeable to tax that escaped assessment. The case on hand is not one, where it can be argued that the Assessing Officer on absolutely vague or unspecific information, initiated the proceedings of re-assessment without taking pains to form his own belief in respect of such materials. - HC
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• High Court Quashes Reopening of Assessment u/s 147 Due to Lack of Evidence for Income Escapement.

  Case-Laws - HC : Validity of Reopening of assessment u/s 147 - The entire basis for reopening the assessment is on the premise that there was a cash transaction of a huge amount, and having regard to the same, there was no true and full disclosure. We have already explained that this issue of cash transaction is nothing but a mere guess - There is no escapement of income chargeable to tax. - Notices quashed - HC
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• Penalty u/s 271(1)(c) Deleted After Assessee's Inadvertent Error in Tax Computation Acknowledged, No Benefit Gained.

  Case-Laws - AT : Penalty levied u/s 271(1)(c) - deferred tax asset written off debited in the profit and loss account as exceptional item but the same has not been disallowed in the computation of taxable income - In the instant case, the assessee had made an inadvertent computation error while filing its return of income and accordingly the same was accepted by them in the course of assessment. The assessee has not in any way taken any benefit by carrying forward a higher loss. - Penalty deleted - AT
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• Company Challenges Disallowance of Deduction u/s 35(1)(ii) After Donee's Approval Rescinded; No Refund Evidence Found.

  Case-Laws - AT : Disallowance of weighted deduction claimed u/s 35(1)(ii) - approval granted to the donee organization was rescinded with retrospective effect - There is no conclusive evidence on record to show that the appellant company had received back the money from the donee made either in cash or any other or through banking channels. - The intent of the Legislature is clear that the donors should not be made suffer on account of fraud committed by the donee organization - AT
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• Late Miscellaneous Applications u/s 254(2) of Income Tax Act Are Not Acceptable Due to No Delay Condonation Provision.

  Case-Laws - AT : Miscellaneous application maintainability as filed beyond the limitation period as provided u/s 254(2) - where there is no provision for condonation of delay for filing of the miscellaneous application, then the miscellaneous application filed belatedly is not maintainable being barred by limitation provided under section 254(2) of the Act. - AT
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• Assessing Officer's claim on Permanent Establishment's business risks lacks specific FAR analysis; coordinate benches disapprove generalization.

  Case-Laws - AT : Income accrued or deemed to accrues/arise in India - Permanent Establishment (PE) - While the Assessing Officer has proceeded on sweeping generalizations about the risks assumed by the PE but there is no specific FAR analysis which could support that the agent’s remuneration not being an arm’s length remuneration, and the Assessing Officer has proceeded on the basis that all the business risks of the assessee (i.e. the foreign company) are borne by the PE as PE is the content provider and responsible for up linking activity. That’s too sweeping a generalization to meet any judicial approval, and, on the same set of findings, the coordinate benches have disapproved the stand of the Assessing Officer. - AT
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Customs

• Court Orders Refund of Duties Paid Under Protest; No Proof of "Unjust Enrichment" Required Per Sections 129E and 35F.

  Case-Laws - HC : Refund of amount paid by the petitioner during the pendency of its appeal - duty paid under protest - unjust enrichment - amounts deposited in terms of Section 131 of the Customs Act, 1962 or Section 35N of the Central Excise Act, 1944 has to be refunded without insisting on such importer or manufacturer satisfying the requirement of “unjust enrichment” as in the case of pre deposit under Section 129E of the Customs Act, 1927/Section 35F of the Central Excise Act, 1944. - HC
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• Court Denies 12% Interest on Refund, Grants Interest per Section 129EE of Customs Act for Pre-Deposits.

  Case-Laws - HC : Claim of interest on refund of amount deposited during the pendency of its appeal - The petitioner is not entitled to interest at 12% as was prayed by the petitioner. The petitioner is entitled to interest at the rates prevailing for refund under notifications issued from time to time under Section 129EE of the Customs Act, 1962 for refund of pre-deposit made under Section 129E - HC
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• High Court Confirms Tribunal's Decision: No Misrepresentation in License Use, Export Obligations Met, No Breach of User Condition.

  Case-Laws - HC : Advance licence - advance licence had been obtained by misrepresentation or not - importing a different material than one permitted under the licence - violation of the conditions of licence or mis-utilization of the licence - The tribunal on the basis of meticulous appreciation of evidence on record has held that the respondent has not violated the conditions of exemption Notification and has discharged its export obligations. It has further been held that there has been no violation of actual user condition. - Order of tribunal confirmed - HC
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Indian Laws

• Court Orders GNCTD to Pay Outstanding Retainership Fees to Lawyer Within One Month.

  Case-Laws - HC : Non-payment of professional fee/retainership fee bills of empanelled lawyers - The fact that the Petitioner was forced to approach this Court is extremely unfortunate. Though the professional bills of the Petitioner are stated to have now been cleared, his retainership fee is still not being paid. Since there is no dispute on the factum that retainership fee is to be paid, this Court directs the GNCTD to clear the pending retainership payments to the Petitioner within one month from today. - HC
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IBC

• Section 21(2) of IBC: Related Party Financial Creditors Barred from CoC to Prevent Manipulation and Ensure Fairness.

  Case-Laws - SC : CIRP proceedings - Financial Creditors - Related party - while the default rule under the first proviso to Section 21(2) is that only those financial creditors that are related parties in praesenti would be debarred from the CoC, those related party financial creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder. Mr Kaul has argued, correctly in our opinion, that if this interpretation is not given to the first proviso of Section 21(2), then a related party financial creditor can devise a mechanism to remove its label of a ‘related party’ before the Corporate Debtor undergoes CIRP, so as to be able to enter the CoC and influence its decision making at the cost of other financial creditors. - SC
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Service Tax

• Assessment Required Before Service Tax Demand u/s 73A(3) of Finance Act, 1994, Says Review of Section 73A(5.

  Case-Laws - HC : Interpretation of statute - whether determination of service tax by the Central Excise Officer, is necessary before making a demand under Section 73A(3) of the Finance Act, 1994? - perusal of Section 73A(5) of the Act, it is evident that the assessment must precede the demand - HC
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• Tool Kits Taxability Dispute: No Service Tax Demand Due to Exclusive Use by Associated Companies, Revenue Lacks Contrary Evidence.

  Case-Laws - AT : Taxability - supply of tangible good for use or not - tool kits provided by the appellant to associated companies - The submission of the appellant that tool kits were in possession of the associated companies with the right to use the kits to the exclusion of appellant and the appellant could also not have passed the right to any other person has not be controverterd in the impugned order nor has any material been provided by the Revenue - Demand set aside - AT
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Central Excise

• Debate on Valuation Rules: Should Rule 4 or Rule 8 Apply to Goods Cleared to Sister Units?

  Case-Laws - AT : Valuation - clearance to sister unit - applicability of Rule 4 of the Valuation Rules or Rule 8 - the Ld. Commissioner, in his impugned order in para 3.8, while justifying the valuation adopted by him has clearly noted that both the goods which were cleared by the appellant to their sister unit as well as those cleared to independent buyers are the same - AT
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Case Laws:

• GST

• 2021 (2) TMI 109
  Provisional attachment of Bank Accounts of petitioner - fraudulent availing of and passing on of ineligible Input Tax Credit (ITC) - HELD THAT:- We have considered disposing of the present petition, giving time bound directions to the GST Authorities for taking a decision on the proposal made by the Petitioner. Alternatively, we have called upon Mr. Sethi to argue the matter. However, he requests that first the Respondents may consider the proposal and in case the same is agreed to, he will be satisfied, and there will be no need to decide the present petition. In the event the proposal is rejected; he will address arguments on the merits of the case. It is directed that the Petitioner shall within a period of 7 days from today, submit a proposal to the Respondents, giving the complete particulars along with copies of the complete chain of title documents of the immovable property offered as a security. The immovable property should be of value not less than the tax amount in dispute. It should also be free from any subsisting charge, liens, mortgages or encumbrances, property tax fully paid up to date and not involved in any legal conflicts. As and when required, Petitioner shall produce the original title deeds, provide all necessary information relating to the property, for the satisfaction of the concerned officer. List on 15th April, 2021.

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• 2021 (2) TMI 108
  Principles of Natural Justice - no opportunity of hearing has been granted to the petitioner - case of petitioner is that Rule 86A suffers from vice of not prescribing for any procedure or opportunity of hearing for taking the drastic step of blocking the input tax credit of registered person - Validity of blocking Input Tax Credit - HELD THAT:- Issue notice. Mr. Satyakam, Senior Standing Counsel accepts notice for respondent- GNCTD. Mr. Avnish Singh, Advocate accepts notice for respondent No.3-UOI. They pray and are granted six weeks time to file their respective counter-affidavit. Rejoinder, if any, be filed within a period of two weeks thereafter. List on 5th April, 2021.

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• Income Tax

• 2021 (2) TMI 112
  Entitled to deduction u/s 35(2AB) - expenses eligible for deduction under the said provisions pertained to unit entitled for deduction under Section 10B of the Act - HELD THAT:- ITAT relied upon case of this Court in YOKOGAWA INDIA LTD [ 2011 (8) TMI 845 - KARNATAKA HIGH COURT] held that Section 10B of the Act is in the nature of the exemption provision and therefore, the Assessing Officer was right in reducing the profits of the units eligible for deduction under Section 10B to the extent of additional 50% deduction available under Section 35(2AB) - subsequently the decision of this Court in YOKOGAWA INDIA LTD insofar as it pertains to nature of provision of Section 10B of the Act is concerned, was reversed by the Supreme Court in CIT VS. YOKOGAWA[ 2016 (12) TMI 881 - SUPREME COURT] and it was held that Section 10B of the Act is in the nature of deduction provision. It is also pertinent to mention here that Section 10B is a provision which deals with deduction of income whereas Section 35(2AB) deals with deduction on expenditure. The restriction contained in sub-Section (6) of Section 10B of the Act operate only upto 1st day of April 2001. Therefore, the restrictions contained in sub-Section (6) of Section 10B of the Act have no application to the obtaining factual matrix of the case as the Assessment Year is subsequent to 1st April 2001. It is also noteworthy that the bar contained in Section 35(2AB)(2) does not apply to the fact situation of the case as the same provides that no deduction shall be allowed in respect of expenditure mentioned in clause(1) under any provisions of the Act. As stated supra, the deduction under Section 10B of the Act is on the income and not on the expenditure. Disallowance u/s 14A - whether assessee has not determined the expenditure incurred in relation to exempt income and Assessing Authority has rightly held that even though there is no dividend income from the investment? - HELD THAT:- Supreme Court in CIT VS. WALFORT SHARE AND STOCK BROKERS (P). LTD , [ 2010 (7) TMI 15 - SUPREME COURT] has held that mandate of Section 14A is clear and the same is aimed to curb the practice to claim deduction of expenses incurred in relation to exempt income against taxable income and at the same time, avail of the tax incentive by way of exemption of exempt income without making apportionment of expenses incurred in relation to exempt income. In the instant case, no exempt income has accrued to the assessee, therefore, the provisions of Section 14A of the Act are not attracted.

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• 2021 (2) TMI 107
  Migrate / merge / transfer / integrate all the data and appeals linked to the new PAN to the old PAN No. - widow of deceased assessee, seeks mandamus directing the respondents to merge/integrate/transfer all the data and the appeals linked to the old PAN to the new PAN of her deceased husband, so as to enable the petitioner to avail the benefit of the Direct Tax Vivad Se Vishwas Scheme, 2020 - HELD THAT:- The computer systems are meant to be facilitators and not impediments. If the computer system, instead of facilitating, is impeding the operation in any particular case, resort to manual acceptance and processing of the application, has to be taken to. The counsel for the respondents seeks time to obtain instructions. Considering the nature of the dispute, no purpose will be served in issuing notice or giving an opportunity for filing a reply. The matter, in view of being time bound, is required to be expeditiously dealt with. We accordingly allow the petition, issuing mandamus to the respondents in terms of prayer paragraphs (a) and (b) of the writ petition as aforesaid. However, since the matter is being allowed at the admission stage, liberty is given to the respondents to, if require any further direction/s, clarification/s or otherwise make any other representation/s, approach this Court, on or before the end of February, 2021.

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• 2021 (2) TMI 106
  Jurisdiction of Settlement Commission to deal with the matter relating to violation of Section 269ST - Penalty u/s 271DA for violating the provisions of Section 269ST - HELD THAT:- The words in relation to the case and with respect to the case used in the provisions stated, are words of wide amplitude and which, in our opinion, in the facts of the present case may allow the Settlement Commission to, notwithstanding the petitioner having not expressly referred to the notice dated 30th September, 2019 and proceedings for violation of Section 269ST pending against it in its application, pass such orders as it may thinks fit in relation / with respect thereto and the said powers of the Settlement Commission cannot be permitted to be interdicted by the impugned order. We reiterate that the proceedings of violation of Section 269ST, as per the notice dated 30th September, 2019, are a result of what was found in the search and survey qua the petitioner and are capable of being treated as part and parcel of the case taken by the petitioner by way of application to the Settlement Commission. The stand of the respondent in its e-mail dated 7th November, 2019 that the Settlement Commission assumes jurisdiction from the day when an order under Section 245D(1) is made when the application under Section 245C(1) is ordered to be proceeded with further, and which in the present case was on 8th November, 2019 and before the said date the Settlement Commission did not have exclusive jurisdiction and the respondent remained entitled to impose penalty, was / is not only contrary to the provisions of the proviso to Section 245F(2) but also contrary to the law laid down by this Court in Commissioner of Income Tax Vs. Income Tax Settlement Commission [ 2013 (7) TMI 95 - DELHI HIGH COURT] Settlement Commission, under the proviso to Section 245F(2), with effect from 1st November, 2019 when the petitioner admittedly made the application under Section 245C before it, had the exclusive jurisdiction to deal with the matter relating to violation of Section 269ST of the Act also and the respondent, on 4th November, 2019 did not have the jurisdiction to impose penalty for violation of Section 269ST on the petitioner and the impugned order is without jurisdiction and liable to be set aside and is hereby quashed. It should be left to the Settlement Commission to, in exercise of its powers under Section 245D(4), Section 245F and Section 245H, consider whether the matter of penalty for violation of Section 269ST of the Act is to be looked into by the Settlement Commission while deciding the application of the petitioner, or not. We accordingly direct, that without prejudice to the right of the Income Tax Authorities to contend before the Settlement Commission that the petitioner having not disclosed the aforesaid facts before the Settlement Commission, has not made a full and true disclosure within the meaning of Section 245C(1), the proceedings initiated by the respondent against the petitioner for violation of Section 269ST of the Act should await the decision of the Settlement Commission on the application of the petitioner and to abide by the same.

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• 2021 (2) TMI 105
  Reopening of assessment u/s 147 - partnership firm failed to file its return of income for the relevant year - Purchase of immovable property - HELD THAT:- In the instant case, originally, the assessee filed his return in Form ITR-4 wherein the disclosure of investment is not requires to be disclosed as writ applicant had disclosed his income on presumptive basis under Section 44AD of the Act and his assessment was completed accordingly for the relevant assessment year. We are of the view that the writ applicant was was not obliged to furnish any information as regards the partnership firm or the investment if any in the partnership firm. This issue, according to us, is not, at all, germane for the purpose of Section 148 of the Act. The observations made by the Supreme Court [ 1969 (2) TMI 16 - SUPREME COURT] clearly make out that while filing a return an assessee is not bound or obliged to disclose any information in relation to any fact other than what is required to be supplied and furnished by him in the various columns of the prescribed form of return of income or which he is bound under the provisions of the Act to furnish even though that fact may otherwise be relevant for the purpose of his assessment. For the simple reason that such information has not been furnished in the return it would not mean that the assessee had failed or omitted to disclose fully and truly all material facts which are necessary for the purpose of his assessment. There is no escapement of income chargeable to tax. The conditions precedent for resorting to reassessment under Section 147 of the Act are not satisfied in the present case. Just because the partnership firm failed to file its return of income for the relevant year, by itself, will not confer jurisdiction upon the authority concerned to issue notice against the individual partners of the firm with respect to their individual return of income for the relevant year in consideration. Reassessment permissible under sub-section (1) of section 150 - The entire object of Section 150 (2) is to bar the proceedings under Sub-Section (1) in the matter of assessment/re-assessment or re-computation, which has become the subject matter of the reference or revision by reason of any other provisions limiting the time limit. Section 150 (1) provides that the power to issue notice under Section 148 in consequence of or giving effect to any finding or direction of the Appellate/Revisional Authority or the Court, is subject to the provision contained in Section 150(2), which provides that directions under Section 150(1) cannot be given by the Appellate/Revisional Authority or the Court if on the date on which the order impugned in the appeal/revision was passed, the re-assessment proceedings had become time barred. As per section 150(2), the Appellate Authority could give directions for the re-assessment only in respect of an assessment year, which was within the limitation stipulated under Section 148 in respect of which re-assessment proceedings could be initiated on the date of passing of order under appeal. The argument canvassed on behalf of the Revenue that this Court may permit the Department to invoke Section 150 of the Act for the purpose of proceeding against the partnership firm for the relevant year is not at all palatable or rather sustainable in law.

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• 2021 (2) TMI 104
  Condonation of delay - reasons for delay - Whether appellant has demonstrated that the lapses were not voluntary and there was reasonable cause for the delay on the facts and circumstance of the case? - HELD THAT:- It is well settled in law that the expression sufficient cause should receive liberal consideration so as to advance the cause of justice and the same should not be used as a penal statute to punish the erring parties. (See: PERUMON BHAGAVATHY DEVSWOM V. BHARGAVI AMMA (DEAD) BY LRS [ 2008 (7) TMI 836 - SUPREME COURT ] The assessee is admittedly an agriculturist and is required to closely monitor the agricultural activity in the field. The son of the assessee was preparing for board exam and assessee was required to stay in Hassan to ensure that his son attends extra classes. Therefore, the assessee was unable to contact his counsel for the reasons which were beyond his control. Thus, in the fact situation of the case, the Tribunal should have taken a liberal view with regard to the cause shown by the assessee seeking condonation of delay. We hold that the finding recorded by the Tribunal that in the fact situation of the case, sufficient cause for condonation of delay was not made out by the assessee, is perverse. Decided in favour of the assessee and against the revenue.

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• 2021 (2) TMI 103
  Reopening of assessment u/s 147 - only information received from the Investigation Wing relied upon or independent enquiry done by AO - Proof of on application of mind by AO - HELD THAT:- Having regard to the materials on record, it cannot be said that there is total non-application of mind on the part of the Assessing Officer while recording the reasons for reopening of the assessment. It also cannot be said that his conclusion was merely based on the observations and information received from the Investigation Wing as the Assessing Officer could be said to have applied his mind to the same. The Assessing Officer could not be said to have merely concluded without verifying the fact that it is the case of reopening of the assessment. No merit in the submission of Mr. Divatia, the learned counsel appearing for the writ applicant that the contents of the reasons recorded by the Assessing Officer for reopening of the assessment is merely an introduction to the investigation conducted by the Investigation Wing, the sum up of inquiry of the investigation wing or the information received from the Investigation Wing etc. As examined the belief of the Assessing Officer to a limited extent to look into whether there was sufficient or any tangible materials available on the record for the Assessing Officer to form the reasonable belief and whether there was live link existing of the material and the income chargeable to tax that escaped assessment. The case on hand is not one, where it can be argued that the Assessing Officer on absolutely vague or unspecific information, initiated the proceedings of re-assessment without taking pains to form his own belief in respect of such materials. We are convinced that we should not interfere in this matter. In the result, present writ application fails and is hereby rejected.

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• 2021 (2) TMI 102
  Validity of Reopening of assessment u/s 147 - reassessment after four years - validity of reason to believe - cash transaction of a huge amount - HELD THAT:- There cannot be any action under Section 147 of the Act after the expiry of a period of four years from the end of the relevant assessment year until and unless the income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make disclosure of all the material facts truly and fully necessary for assessment. In the present case, we have already held that initiation of the proceedings under Section 147 of the Act was based on the borrowed satisfaction. AO has not applied his mind to arrive at the conclusion that there was of failure on the part of the assessee to disclose fully and truly all the material facts - mentioning by the Assessing Officer that the assessee has failed to disclose all material facts in the reasons recorded is not sufficient enough. Rather the Assessing Officer is under the obligation to arrive at such conclusion that the assessee failed to disclose all material facts necessary for the assessment after applying his mind and verification of the facts. But the Assessing Officer has not done so. The entire basis for reopening the assessment is on the premise that there was a cash transaction of a huge amount, and having regard to the same, there was no true and full disclosure. We have already explained that this issue of cash transaction is nothing but a mere guess, and at the cost of repetition, the transaction of sale was not with K.Star Corporation. M/s. K.Star Corporation, in the present case, is the second buyer. There is no escapement of income chargeable to tax. The conditions precedent for resorting to reopening of the assessment under Section 147 of the Act 1961 are not satisfied in the present case. We are not convinced with the satisfaction arrived at by the respondent for the purpose of reopening of the assessment for the relevant Assessment Year 2011-12. - Decided in favour of assessee.

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• 2021 (2) TMI 101
  Deduction u/s 80P - AO was of the opinion that interest earned from Pragati Gramina bank is not an income which is chargeable under the head profit and gains of business or profession but the same was to be offered under the head income from other sources - Primary plea raised before this Tribunal is that interest earned from Pragati Gramina bank cannot be treated as income from other sources - HELD THAT:- Amount invested with Pragati Gramina bank was neither due to any members nor a liability. The said money was temporarily parked with Pragati gramina bank, in order to maintain the overdraft limit available to assessee with state bank of Mysore. Respectfully following the decision in case of Tumkur Merchants Souharda Credit Co-operative Society Ltd vs ITO [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT ], we are of the opinion that interest earned on such deposit would partake the character of business income attributable to carrying on business of banking and is eligible for deduction under section 80P - Decided in favour of assessee.

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• 2021 (2) TMI 100
  Levy of penalty under section 271(1)(c) - Defective notice - Non specification of charge - additions on account of short term and long term capital gains - HELD THAT:- AO making the additions on account of short term / long term capital gains initiated the penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income and concealing the facts. A.O, however, levied the penalty under section 271(1)(c) for concealing the particulars of income. A.O. in the show cause notice issued for levy of penalty has mentioned Have concealed the particulars of your income or furnished inaccurate particulars of such income in terms of Explanation 1, 2, 3, 4 and 5. It would, therefore, show that notice issued before levy of the penalty is bad in Law and it did not specify under which limb of Section 271(1)(c) of the Act, penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing inaccurate particulars of income. The Hon ble Delhi High Court in its recent decision in the case of Pr. CIT vs. M/s. Sahara India Life Insurance Company Ltd. [ 2019 (8) TMI 409 - DELHI HIGH COURT] observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1) (c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. Case followed M/S MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] - Decided in favour of assessee.

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• 2021 (2) TMI 99
  Reopening of assessment u/s 147 - case reopened beyond 4 years after completion of original assessment U/s 143(3) - live link between the reason recorded and the formation of the belief - HELD THAT:- It is established law that to reopen an assessment beyond a period of 4 years, where the original assessment has been completed u/s 143 (3) the reasons recorded has to show the escapement of income, is due to failure on part of the assessee to disclose fully and truly all material facts necessary for the assessment for the year under consideration. There must be a live link between the reason recorded and the formation of the belief that income chargeable to tax has escaped assessment because of the failure on the part of the assessee. Both the conditions must coexist in order to confer jurisdiction on the assessing officer. In the present case, the reasons recorded clearly reveals that all facts were available before the Ld.AO, when he completed the original assessment proceedings under section 143(3) of the Act, and no new materials were available on record for reopening the present assessment after expiry of 4 years. Initiation of reassessment proceedings beyond 4 years will have to be held invalid for the reason that the reasons recorded by the Ld.AO, do not spell out that the escapement of income was due to assessee not fully and truly disclosing all material facts necessary for completion of assessment for relevant assessment years. Also seen that the evidences were raised before the Ld.AO and the course of original assessment proceedings under section 143(3) of the Act and the same was not chosen to draw any conclusion. Therefore in the given circumstances we are of the view that Explanation 1 cannot be resorted by the revenue. Therefore, in the absence of the statutory requirement of income chargeable to tax have escaped assessment due to failure on part of assessee to disclose fully and truly all material facts, the notice of reopening of assessment stands invalid. - Decided in favour of assessee.

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• 2021 (2) TMI 98
  Penalty levied u/s 271(1)(c) - deferred tax asset written off debited in the profit and loss account as exceptional item but the same has not been disallowed in the computation of taxable income - inadvertent human error or mens rea - HELD THAT:- Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon as held in D.M. Dahanukar v. CIT[ 1967 (2) TMI 9 - BOMBAY HIGH COURT] and M. Hussain Ali Sons v. CIT [ 1965 (2) TMI 112 - MADRAS HIGH COURT] . In the instant case, the assessee had made an inadvertent computation error while filing its return of income and accordingly the same was accepted by them in the course of assessment. The assessee has not in any way taken any benefit by carrying forward a higher loss. It is relevant to mention here that the financial statements of the AY 2012-13 were on record which reflect the deferred tax asset written off in the profit loss account and also a Note to that effect in the Schedule of significant accounting policies. The observation made by the AO that there was no independent evidence and the finding that the same has been revealed in the assessment proceedings only is not correct. We find that the carried forward loss has not been set off subsequently and the assessee has huge carry forward assessed losses of earlier years which were otherwise available for set off Deferred tax asset written off was reported in the financials, however, the same was inadvertently left to be added back to the net loss before tax while making the tax computation. This error is only a computation error made in the return of income which occurred due to overlooking the contents of the profit and loss account. The contents of the financial statements do not conceal any particulars. The error committed by the appellant is a bona fide and inadvertent one. The obtaining factual matrix in the instant case is broadly similar to the decision in Price Waterhouse Coopers Pvt. Ltd. [ 2012 (9) TMI 775 - SUPREME COURT] , instead of Dharmendra Textiles Processors [ 2008 (9) TMI 52 - SUPREME COURT] . - Penalty deleted - Decided in favour of assessee.

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• 2021 (2) TMI 97
  Disallowance of weighted deduction claimed u/s 35(1)(ii) - approval granted to the donee organization was rescinded with retrospective effect - HELD THAT:- There is no conclusive evidence on record to show that the appellant company had received back the money from the donee made either in cash or any other or through banking channels. Nor is there any other material to show that the appellant company is also a party to the fraud committed by the donee organization. No doubt the doctrine of promissory estoppels has no application to tax concession granted by the Legislature. However, keeping in view the provisions of Explanation inserted to section 35(1)(ii) by Finance Act, 2006, w.e.f. 01.04.2006 providing that the deduction in the hands of the donor shall not be denied merely because of the fact that an approval granted to the University which is the Research University, Colleges and other University which has been withdrawn subsequently to the payment of donations, the donors should not suffer on account of withdrawal of the approval to done organization. The intent of the Legislature is clear that the donors should not be made suffer on account of fraud committed by the donee organization Hon ble Supreme Court in the case of CIT vs. Chotatingrai Tea Ors.[ 2002 (10) TMI 3 - SUPREME COURT] following the decision of CIT vs. Bhartia Cutler Hammer Co.,[ 1997 (12) TMI 91 - CALCUTTA HIGH COURT] held that notwithstanding the fact that the approval granted earlier to the Research Organization was withdrawn subsequent to the payment of donation, the deduction cannot be withdrawn in the hands of the donors. Also see National Leather Cloth Manufacturing Co. vs. Indian Council of Agricultural Research Ors., [ 1999 (10) TMI 55 - BOMBAY HIGH COURT] The above judgements of the Hon ble Supreme Court in the case of Chotatingrai Tea Ors. (supra) was rendered much prior to the insertion of the Explanation to section 35(1)(ii) of the Act and the Explanation inserted by the Finance Act, 2006 w.e.f. 01.04.2006 which means that the Parliament is deemed to have knowledge of the above judicial precedents and accepted the dictum laid therein. Therefore, this clearly establishes the legislative intent of Parliament to allow the deduction u/s 35(1)(ii) in the hands of the donors, notwithstanding the fact that the approval granted earlier to the Research Organization was withdrawn retrospectively. Therefore, the very fact that the approval granted to the donee organization i.e. SHGPH was rescinded with retrospective effect has no relevance to decide the allowability of deduction in the hands of the donors.. The claim made by the assessee company towards deduction u/s 35(1)(ii) of the Act on account of donation made to SHGPH is clearly allowable. Accordingly, the grounds of appeal filed by the assessee are allowed.

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• 2021 (2) TMI 96
  Miscellaneous application maintainability as filed beyond the limitation period as provided u/s 254(2) - Tribunal power to condone the delay in filing the misc. application - HELD THAT:- When the miscellaneous application is barred by limitation and following the earlier order of this Tribunal in case of ITO vs. Shri Ram Ratan Modi [ 2018 (2) TMI 589 - ITAT JAIPUR] we dismissed the miscellaneous application as not maintainable being barred by limitation. Accordingly, where there is no provision for condonation of delay for filing of the miscellaneous application, then the miscellaneous application filed belatedly is not maintainable being barred by limitation provided under section 254(2) of the Act.

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• 2021 (2) TMI 95
  Income taxable in India - Income accrued or deemed to accrues/arise in India - Permanent Establishment (PE) - Presence in India through agent - HELD THAT:- It s an admitted position that the assessee does not have any office or place of management of its own, and its presence in India is only through its agents. Assessing Officer did not find specific fault in the agent s remuneration not being in accordance with the FAR analysis. He has rather proceeded to, in a way, disregard the foreign entity altogether by suggesting that no business risk is assumed by the foreign company, i.e. the assessee, as the content is provided by the Indian agent and the viewership is Indian, and, for that reason, the viewership is linked to the Indian PE. Mere existence of a physical location is not enough. This location should also be at the disposal of the foreign enterprise and it must be used for the business of foreign enterprise as well. A place of business should be at the disposal of the foreign enterprise for the purpose of its own business activities. This place has to be owned, rented or otherwise at the disposal of the assessee, and a mere occasional factual use of place does not suffice . Even a case is not made out for the satisfaction of this condition by the Assessing Officer, and, as such, there is no case for the existence of a permanent establishment under Article 5(1). As for the permanent establishment under Article 5(2), even by definition, there cannot be a permanent establishment under Article 5(2) unless it is at least alleged to be covered by one of the specific clauses in article 5(2). Assessing Officer has specifically picked up the aspect of functions and risk taken by the PE under that heading and title in the assessment year 2002-03 noted that there is no reason as to why the assessee should assume risk after having acquired the content in a working state from the content provider , that all risks for up linking and finally relaying the signals in India is borne by the transponder company and not the assessee , and, therefore, concluded that in view of the above discussions, it can be seen that major part of the risk in terms of market risk and technology risks are borne by the ZTL/El Zee and that almost 85% to 90% revenues from advertisement and subscription of the assessee comes through Indian viewership which is undoubtedly linked with the PE i.e., ZTL/El Zee . This is not the Indian viewership which is relevant in this context. What was relevant was the role played by the agent in India and whether the remuneration paid by the assessee company, for the services of the agent, was a fair and arm s length remuneration vis- -vis the functions performed, assets employed and risks assumed by the Indian agent. No issues are raised on the inadequacy of agent s remuneration by the Assessing Officer, and now a fresh inning is sought to find these inadequacies and improve the case of the revenue. That is impermissible. In his analysis. While the Assessing Officer has proceeded on sweeping generalizations about the risks assumed by the PE but there is no specific FAR analysis which could support that the agent s remuneration not being an arm s length remuneration, and the Assessing Officer has proceeded on the basis that all the business risks of the assessee (i.e. the foreign company) are borne by the PE as PE is the content provider and responsible for up linking activity. That s too sweeping a generalization to meet any judicial approval, and, on the same set of findings, the coordinate benches have disapproved the stand of the Assessing Officer. The limited argument before us is that here is a case of dependent agency permanent establishment, and the existence of a DAPE, in the light of these discussions, is wholly tax-neutral- particularly in the light of the legal position regarding profit attribution to the DAPE. We need not, therefore, deal with the question about the existence of a DAPE, as it is an academic exercise with no tax effect involved. The related grounds of appeal are thus infructuous.

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• 2021 (2) TMI 80
  Eligible for deduction u/s 80IB(10) - total area of the land on which the project was undertaken is only 40 ares or 4000 sq.mtrs. which is just less than the one acre of land - AO denied deduction u/s 80IB(10) for the reason that the appellant firm had not satisfied one of the conditions to be eligible for claiming deduction i.e. the project should be under the size of plot of land with minimum area of one acre - HELD THAT:- For the present, it is sufficient to refer to those observations for the limited purpose saying that the actual area is 4722.45 sq.mtrs. which is available with the appellant for the purpose of housing project. It is also part of record that the Pune Municipal Corporation had sanctioned the housing project with reference to the 4722.45 sq.mtrs. before leaving portion of land area for road widening. In support of this, the Architect s certificate who actually measured the land in the presence of the Assessing Officer. Assessing Officer placed heavily reliance on the copies of 7/12 extracts. Municipal Corporation had not come to the conclusion that the area of land on which the residential project was undertaken was less than one acre. It is settled proposition of law that the eligibility conditions of section 80IB(10) of the Act does not prescribe that a developer of the land i.e. need not be the owner of the land. Hon ble Gujarat High Court in the case of CIT vs. Radhe Developers[ 2011 (12) TMI 248 - GUJARAT HIGH COURT] clearly held that for the purpose of claiming deduction u/s 80IB(10) of the Act, it is not necessary that the assessee should be owner of the land. It is neither for the Municipal Corporation nor for the Assessing Authority to look into the title of the property. There is no material on record to show that the land which is physically available in excess of the area mentioned in 7/12 extracts is claimed by any other third party nor is there any substituting the dispute in this regard. The requirement of the provisions of section 80IB(10) of the Act stands satisfied if the area on which the project was undertaken is one acre or more. It is not open to the Assessing Officer to act as an Arbitrator of land disputes. The concept of ownership of the land is alien to the provisions of section 80IB(10) of the Income Tax Act. Therefore, we do not see any reason for Assessing Officer to go into the issue of ownership at all. Assessing Officer had given finding of fact that the Municipal Authority had sanctioned the permissible area of construction with reference to the area of 4000 sq.mtrs. But the Assessing Officer had failed to take note of the fact that the application for grant of approval of the housing project was made by the appellant with reference to 4722.45 sq.mtrs. It is different matter that the municipal authority had determined the permissible area of the construction with reference to 4000 sq.mtrs. Nowhere, the municipal authorities have mentioned that the land of 4722.45 sq.mtrs. was not available. Even the land earmarked for the purpose of widening of the road forms part of the housing project as held by the Mumbai Bench of the Tribunal in the case of Vidhi Builders 2011 (4) TMI 1373 - ITAT MUMBAI] and quoted with approval in the case of CIT vs. Brigade Enterprises Ltd. . [ 2020 (9) TMI 1137 - KARNATAKA HIGH COURT] The Assessing Officer also lost sight of the settled position of law that any housing project which has been approved by the local authority as a housing project should be considered as appropriate housing project u/s 80IB(10) of the Act as held by the Hon ble Bombay High Court in the case of Vandana Properties [ 2012 (4) TMI 54 - BOMBAY HIGH COURT] Either the Assessing Officer or the CIT(A) did not meet the contention of the appellant that 4000 sq.mtrs. with reference to which the permissible of construction area was granted by the municipal authorities is equivalent to one acre in metric system. Thus, there is no material on record to say that the area of land on which the housing project was taken up was less than one acre. The Assessing Officer merely went by the entries made in he 7/12 extracts which are in the nature of mutation entries made in the land records of the State Government. The mutation entries in the records of the State does not confer any title on the property. We dispel the reasoning of the lower authorities in denying the exemption u/s 80IB(10) of the Act. Accordingly, we set-aside the order of the lower authorities and direct the Assessing Officer to allow the deduction u/s 80IB(10) - Decided in favour of assessee.

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• Customs

• 2021 (2) TMI 111
  Jurisdiction - power to issue SCN - Whether the CESTAT committed an error in not holding that in view of amendment to Section 28 of the Customs Act by insertion of subsection 11 would empower the officers of DRI to perform the functions of proper officers under the Customs Act? - HELD THAT:- From the material on record, it is evident that the decision of the Supreme Court in Mangali Impex (supra) was stayed by the Supreme Court in the decision in [ 2016 (8) TMI 1181 - SC ORDER ]. Therefore, instead of relying on the aforesaid judgment and remanding the matter, the Tribunal ought to have awaited for adjudication of the issue by the Supreme Court. Therefore, we are inclined to quash the order dated 03.05.2017 passed by the Tribunal and to direct the Tribunal to await the decision of the Supreme Court in the decision in [ 2016 (8) TMI 1181 - SC ORDER ] and thereafter, to decide the appeal after affording an opportunity to the parties in accordance with law. Appeal disposed off.

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• 2021 (2) TMI 94
  Refund of amount paid by the petitioner during the pendency of its appeal - duty paid under protest - unjust enrichment - petitioner had imported certain machineries for its printing purpose and availed the benefit of Customs Notification No.114/1980-Cus dated 19.6.1980 - HELD THAT:- This Court has jurisdiction to entertain a writ petition even if it is assumed that provisions of the Section 27 of the Customs Act, 1962 are attracted or an alternate remedy exist. It would be unfair to relegate the petitioner to an alternate remedy at this distant point of time after a lapse of 13 years since the filing of this writ petition either to CESTAT or to the 2nd respondent to comply with the directions of the 1st respondent in the facts of this case. Hence, this case is examined on merits and disposed. In SUVIDHE LTD. VERSUS UNION OF INDIA [ 1996 (2) TMI 136 - BOMBAY HIGH COURT ], the Bombay High Court had held that the claim raised by the Department in the show cause notice is thoroughly dishonest and baseless - It held that in respect of a deposit made under Section 35-F, provisions of Section 11-B can never be applicable. A deposit under Section 35-F is not a payment of duty but only a pre-deposit for availing the right of appeal. Such amount is bound to be refunded when the appeal is allowed with consequential relief. No order was required either under Section 129E or Section 35F of the respective enactments for deposit the disputed duty or penalty as a condition for hearing the appeal. Only when a person seeks for waiver or partial waiver, an order was required to be passed. These provisions have been liberalized in 2014. Now the maximum amount of pre-deposit has now been capped to 7.5% at the stage of first appeal and 10% at the stage of second appeal before the CESTAT - When the appeals were filed by the petitioner before the Hon ble Supreme Court, the petitioner was enjoined to pay the sums due to the Government as a result of an order passed under sub-section (1) of Section 129-B of the Customs Act, 1962 and 35C of Central Excise Act, 1944 in accordance with the order so passed by CESTAT. Deposits under Section 129E and Section 35F of the Central Excise Act, 1944 are made as a condition for hearing. Whereas, payments under Section 131 of the Customs Act, 1962 and Section 35N of the Central Excise Act, 1944 are not made as a condition for hearing appeal or reference before the High Courts or the Supreme Court. There are payments which were required to be made at the stage of first appeal and 2nd appeal before the Appellate Commissioner and the Tribunal (CESTAT formerly CEGAT) but were waived by these appellate bodies under the scheme of the Act - Therefore, the payments under Section 131 of the Customs Act, 1962 and Section 35N of the Central Excise Act, 1944 are payments which were delayed. Payments under all these provisions are also in the nature of pre-deposit are under the Act pending disposal of the appeals whether before the Appellate Commissioner and CESTAT or the High Court. They are not paid as duties. Section 27 of the Customs Act, 1962 as it reads could be pressed into service only in the case of refund of the any amount paid as duty in pursuance of an order of assessment or on the interest borne thereon by such person. It must be also recalled that Section 17 of the Customs Act, 1962 provides a machinery for assessment of duty. Under the scheme of the Act, customs duty is payable only pursuant to an order of assessment or final assessment where pre-assessment is resorted under Section 18 of the Customs Act, 1962 - Though in the present case there was no provisional assessment but only revision of assessment long after clearance under Section 28 of the Customs Act, 1962, it is to be noticed that even if duty was paid provisionally pending final assessment under Section 18 of the Customs Act, 1962, provisions of Section 27(5) of the Custom Act, 1962 would not have been attracted to the petitioner when the petitioner became entitled to refund. The Hon ble Supreme Court in MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1996 (12) TMI 50 - SUPREME COURT ] while dealing with payment of duty under protest under Rule 233B of the Central Excise Rules, 1944 as it stood in the context of Rule 9B of the aforesaid Rules held that both recoveries and refunds are to be not be governed by Section 11A and 11B of the Central Excise Act, 1944 . The amount paid by the petitioner on 21.03.2001 as a consequence of the recovery notice issued by the office of the Customs Department long after the completion of assessment and clearance of the imported goods pending its appeals before the Honourable Supreme Court cannot be said to be a duty for the purpose of Section 27 of the Customs Act, 1962. Therefore, presumption under section 28D of the Customs Act 1962 that the incidence of duty paid has been passed on to the buyer cannot be inferred - Amounts paid pursuant to an adverse order passed under Section 28 of the Customs Act, 1962 whether under Section 129E or under Section 131 of the Customs Act, 1962 are not duty for the purpose of Section 27 of the Customs Act.1962. From a reading of the provisions, it is clear that only refund of duty or interest thereon under Section 27 of the Customs Act, 1962 are governed by the doctrine of unjust enrichment under Section 27 of the Customs Act, 1962 - Pre-deposits as a condition under Section 129E of the Customs Act, 1962 or under Section 35F of the Central Excise Act, 1944 are not governed by the Section 27 and 11B of the respective enactments. In this case, it cannot be said that the amount that was paid pending the appeals was pursuant to an order of assessment before clearance of the goods from the customs barriers. The imported goods were not assessed to duty provisionally under Section 18 of the Customs Act, 1962 and cleared later. Imported machines were assessed to duty under Section 17 and cleared on the duty assessed by the proper officer - The amount that was paid by the petitioner was the amount that was affirmed as payable by the CESTAT pending the appeal before the Hon ble Supreme Court. The amount that was paid under protest at the appellate stage was long after the imported goods were cleared and assessed to duty. The petitioner has not sought for refund of amount paid as duty under Section 17 of the Customs Act, 1962. There is no evidence to suggest that the imported goods were also sold to a third party - Therefore, amounts deposited in terms of Section 131 of the Customs Act, 1962 or Section 35N of the Central Excise Act, 1944 has to be refunded without insisting on such importer or manufacturer satisfying the requirement of unjust enrichment as in the case of pre deposit under Section 129E of the Customs Act, 1927/Section 35F of the Central Excise Act, 1944. This Court is of the view that the 2nd respondent was not justified in subjecting the petitioner to limitation prescribed under Section 27 of the Customs Act, 1962. Therefore, the impugned order is liable to be interfered in this Writ Petition - The petitioner is however not entitled to interest at 12% as was prayed by the petitioner. The petitioner is entitled to interest at the rates prevailing for refund under notifications issued from time to time under Section 129EE of the Customs Act, 1962 for refund of pre-deposit made under Section 129E of the Customs Act, 1962 as the amount paid by the petitioner on 21.03.2001 was in the nature of pre-deposit under Section 131 of the Customs Act, 1961. Petition allowed in part.

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• 2021 (2) TMI 93
  Advance licence - advance licence had been obtained by misrepresentation or not - importing a different material than one permitted under the licence - violation of the conditions of licence or mis-utilization of the licence - whether mported material can be disposed of or utilized in any manner including local sale once the export obligations are fulfilled and if such view is not in the teeth of Condition No.7 imposed under the advance licence in terms of customs N/N. 30 of 1997 dated 1-4-1997? - HELD THAT:- It is pertinent to note that none of the terms and conditions of Notification No.30/1997 envisgge physical incorporation of imported material in the goods that are exported towards fulfillment of export obligations. The aforesaid Notification grants exemption from the whole of the custom duty and whole of the additional duty to the materials imported against an Advance Licence subject to conditions stipulated therein. The word material has been defined in Explanation II to mean raw materials, components, intermediates, consumables, computer software and parts required for manufacture of resultant product specified in Part E of the said certificate. It is also pertinent to note that phrase required to manufacture as stated in the Notification contemplates possible or intended use and not actual use as clarified in Circular No.36/97 dated 16.09.1997. Thus, the material need not be directly used in the manufacture of resultant product and proof of actual use is not a condition attached to the exemption Notification. The aforesaid position has been explained in the Circular 36/1997-Cus dated 16.09.1997 which was issued specifically in the context of difficulties faced by garment exporters as the custom field formations were insisting that nexus between export product and duty free material imported was required to be established. The imported goods need not be physically used in the manufacture of goods that are exported. Condition (vii) of Notification No.30/97-Cus permitted discharge of export obligation either by usage of imported duty free material or by replenishment material. The only requirement as per condition No.(vii) is that such inputs should not be sold or transferred in the market. In other words, the replenished inputs can be used in manufacture of other products and not necessarily incorporate in export of goods - thus, it is evident that the respondent has not violated the conditions of the Notification No.30/97-Cus and has rightly imported the material and has discharged its export obligations. From perusal of clause 3.4 and 3.45 of export import policy 1997-2002, it is evident that licence holder is free to get in the material processed through not just supporting manufacturers specified in the licence but also through other job workers as imported goods and exported goods are properly accounted for. This requirement has been duly fulfilled by the respondent inasmuch as there has been a proper account of imported material as well as exported goods details of which were furnished to the officer which were duly accepted. Therefore, there is no violation of actual user condition - In the instant case, the licensing authority competent to grant licences allowed the respondent to import polyester / cotton blended fabrics without payment of duty against the export of men s shirts. The Directorate General of Foreign Trade has issued the advance licence for duty free import after due Notification that materials can be used for production of export goods. The respondent fulfilled the export obligations in respect of exporting men s full sleeve shirts of specified value, which was examined by Joint Director of Foreign Trade and Export Obligation Discharge Certificate (EODC) was issued. Thereafter, it is not open for the officers of the customs department to contend that the imported material cannot be used for manufacture of shirts and that respondent has not discharged its export obligation by violating the conditions of the exemption Notification. The tribunal on the basis of meticulous appreciation of evidence on record has held that the respondent has not violated the conditions of exemption Notification No.30/97-Cus and has discharged its export obligations. It has further been held that there has been no violation of actual user condition. The findings recorded by the tribunal have been recorded after appreciation of evidence on record, by which no stretch of imagination can be said to be perverse. The substantial questions of law framed by a bench of this court are answered against the revenue and in favour of the assessee - appeal dismissed.

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• Corporate Laws

• 2021 (2) TMI 92
  Validity of convened Board Meeting - validity of proposed interim dividend - seeking restraint on Respondent No. 4 and 5 from entering into the premises of the company - eligibility of Respondents 4 and 5 to be appointed as Chief Executive Officer and Executive Director - restraint on Respondent Nos 2 and 3 not to remove the petitioner from the post of Managing Director - appointment of independent Chartered Accountant to conduct special audit on the affairs of the company - seeking direction to Respondent No. 4 to hand over the property of the company including documents and keys of bungalows with immediate effect. Whether the Board of Directors Meeting of the 1st Respondent company dated 14.10.2019 is validly held complying with the clauses of the Articles of Association and provisions of the Companies Act and whether the proceedings of the meeting and the resolutions passed therein are valid in the eyes of law? - HELD THAT:- This Tribunal came to a conclusion that as per Section 241 and 242 of the Companies Act, every member who comes before the court must have a grievance, either that he has been oppressed or that the company is being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company. This grievance must be a personal grievance of member who comes before the court. It cannot be a vicarious grievance, a grievance of his beneficiary. In the present case, it has not been proved that the appointment of R4 as CEO can be attributed as an act oppressive against the petitioner or prejudicial to public interest but for the flourishment of the Company and the same is to be equivalent with the objects that has been set out in the Memorandum of Association, which has been followed by the management of R4 for past three decades. Regarding the resolution passed in regard to the signatory powers to R4 over the company s bank accounts, dematerialized account and applicable mutual fund accounts as also the signatory power to R5 over the Company s Bank account, this Tribunal finds that as both R4 and R5 were ceased to be Directors of the Company, they are not eligible to be appointed as sole signatories of bank accounts/ demat accounts. It is found that thereafter, Respondent No.2 convened another Board of Directors Meeting on 18.10.2019 and passed another resolution to bypass the action taken by them. The legality of the Board Meeting held on 14.10.2019 can be decided - By concluding the first issue, this Tribunal is of the view that the meeting held on 14.10.2019 has been conducted with due notice, quorum and therefore, the said meeting is a valid meeting. Whether the Board of Directors Meetings of the R1 Company held on 18.10.2019, 01.11.2019, 04.02.2020, 21.08.2020 are valid? Whether the proceedings of that meetings and resolutions passed therein are aimed to oppress and abuse the other shareholders including the petitioner and consequently to effect a change in the control and management of Respondent No.1 Company? - HELD THAT:- This Tribunal is of the view that the Respondent Nos. 2 3 have conducted an alleged meeting of the Board on 18.10.2019 under the guise of the request of the petitioner. It is evident from the email dated 11.10.2019 and 12.10.2019 that the meeting which was proposed by the petitioner on 18.10.2019 was advanced to 14.10.2019. That being the position, it is clear from admission of R2 R3 that the meeting was held without proper notice. Therefore, the alleged meeting held on 18.10.2019 by Respondent Nos. 2 3 is declared as illegal. Hence, the resolutions passed in the said meeting is not having any relevance and no legs to stand. This Tribunal is of the view that Directors present through video conferencing or other audio-visual means would suffice for the quorum requirement as their presence shall be counted for the purpose of quorum. Section 173 of the Companies Act, 2013 does not restrict a company from holding any meeting of its Board of Directors at some other place within or outside India. Further, as per Rule 3(6) of the Companies (Meetings of Board and its powers) Rules, 2014, with respect to meetings conducted through video conferencing or other audio-visual means - This Tribunal is of the view that in case the Chairman of the Meeting is participating through video conferencing, he/she should, while transacting any restricted items of business, vacate the Chair and entrust the conduct of the proceedings in respect of such items to any other Non-interested Director attending the Meeting physically and should not participate in the meeting in respect of such items and not for other matters. The meeting was conducted on 01.11.2019 and 04.02.2020 complying the basic provisions for conducting a meeting and the same is valid. But the resolutions passed in the said meetings are similar to that which were taken in the Board of Directors Meeting held on 14.10.2019. Therefore, the resolutions passed are considered to be invalid - With regard to the Board of Directors Meeting held on 21.08.2020, since no evidence has been produced to show that notice was given and, it is considered to be void ab initio and all the resolutions passed in that meeting are invalid. Whether the petitioner in CP/117/KOB/2019, who acted in his capacity as Director of the Company has failed to comply with the fiduciary duty towards the shareholders? - HELD THAT:- It is a well settled principle that if the Directors exercise their powers for the purposes other than those for which they were conferred, it may be said that they have exceeded their authority. It is evident that the malafide intention of the petitioner to remove R4 and R5 from the Company has been done with undue haste for the purpose of grabbing power in the Respondent No.1 Company. This clearly depicts that petitioner s son was hand-in-glove and supporting the actions of the petitioner and gives credence to the allegations of the Respondents. Therefore, we are of the view that the petitioner is acting against the interest of Respondent Company and other shareholders, for making material changes in the management of the Respondent company - During the pendency of the case before this Tribunal, it has been observed that unilateral action being taken by the petitioner, without reference to the Board as per the prevailing mandate. These matters as well clearly demonstrate that the Petitioner has not approached this Tribunal with clean hands and he has filed this petition to assume total control over R 1 Company trying to oust the other Respondents. Whether the issue of oppression and/ or mis-management on the part of the Respondents herein in running the affairs of the Company towards the Petitioners No. 1 had been proved or not? - HELD THAT:- The record shows that the Petitioner in CP/117/KOB/2019 has diverted the funds of the company to his son and he has purchased motor-car in his personal name from the funds of the company for his own use, where General Body approval through special resolution is required to approve additional compensation to Director, and also done acts in breach of his fiduciary duty vice versa, the Respondents were also acting without complying the provisions of the Act or without applying the mind. Even if certain Board Meetings were conducted complying with the provisions of the Act, each of them depicts the same agenda mainly for ratification. Regarding the prayer of the petitioner to order and direct Respondent No 4 to hand over property of the Company including documents and keys of bungalows with immediate effect, the learned counsel for the respondents submitted that the Respondent No 2 is willing to return the property papers, even though advance notice was given to the petitioner. Two cars along with the keys and documents have already been handed over to the Respondent No 1 Company in November 2019. Thus, both the petitioners in CP/117/KOB/2019 and CP/19/KOB/2020 failed to prove oppression and mismanagement on the part of the respondents therein in carrying on the affairs of the company for the full satisfaction of the directors/ shareholders of the Company. Object and purpose of Sections 241 and 242 of the Act is two-fold. Firstly, to set right the wrongs and secondly, take remedial action to prevent the occurrence of wrongs in future. Since we found that there is no oppression or mismanagement for the reasons stated in the above paragraphs, it is not necessary for this Tribunal to consider any other points raised by the parties. Petition disposed off.

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• Insolvency & Bankruptcy

• 2021 (2) TMI 91
  CIRP Proceedings - Scope of the term related parties - Financial creditors - Corporate Debtor failed to make repayment of its dues - Exclusion form Committee of Creditors (CoC) formed in relation to the Corporate Insolvency Resolution Process (CIRP) - HELD THAT:- The CoC was constituted on 22 May 2018. On 25 May 2018, the IRP rejected the claim of Spade, inter alia, on the ground that the claim was not in the nature of a financial debt in terms of Section 5(8) of IBC since there was an absence of consideration for the time value of money, i.e., the period of repayment of the claimed ICDs was not stipulated. The IRP also rejected the claim of AAA on the ground that its claim as a financial creditor in Form C was filed after the expiry of the period for filing such a claim. Proceedings before NCLT - HELD THAT:- NCLAT came to the conclusion that the Adjudicating Authority had rightly excluded both Spade and AAA from participation in the CoC since Mr. Anil Nanda, in concert with Mr. Arun Anand and his family, had created a web of companies which were related parties to the Corporate Debtor, and was now trying to gain a backdoor entry into the CoC through them. Transactions of the Corporate Debtor - HELD THAT:- Development Agreement dated 1 March 2012, through which the Corporate Debtor sold to 38.3% of its development rights in its real estate project, AKME RAAGA, to AAA for a consideration of Rs. 32.80 crores - Agreement to Sell dated 25 October 2012, which superseded the Development Agreement dated 1 March 2012, through which AAA bought a saleable area of 313,928 sq. ft. in AKME RAAGA at a price of Rs. 43.06 crores - Side Letter dated 25 October 2012, which was to be read as a part of the Agreement to Sell, which noted that the area bought by AAA was 38.3% of AKME RAAGA, and AAA would provide for the cost of its development accordingly. Relationship between Anil Nanda and Arun Anand - HELD THAT:- Since February 2013, Mr. Arun Anand has no association with Corporate Debtor in any manner whatsoever. Whether Spade and AAA are financial creditors of the Corporate Debtor - HELD THAT:- The Memorandum of Understanding is unenforceable, collusive and is merely an eye-wash. An amount of only Rs. 26.55 Crores was allegedly advanced to Spade and other companies . No Board resolution was passed by Spade approving the grant of ICDs of Rs. 26.55 Crores. In any case, the alleged claim is grossly time barred - The claim of Spade was rejected by the IRP in a letter dated 25 May 2018 on the following basis: (a) The essential element of a financial debt in terms of Section 5(8) of the IBC is absent, which is the consideration for the time value of money. The exact period of repayment of the ICDs has not been stipulated in the Memorandum of Understanding; (b) The calculation sheet provided by Spade to ascertain the interest rate and payment of interest does not reflect adjustment of any part of payment against the payment of interest; (c) The ledger provided by Spade does not stipulate the interest claimed on the alleged debt; (d) ICDs were allegedly granted to the Corporate Debtor by Spade in 2013; however, no valid financial contract was entered between the Corporate Debtor and Spade to stipulate the consideration in terms of the time value of money against each transaction. A financial contract is essential for considering a debt as financial debt; (e) The calculation sheet reflects that the inflow and outflow of funds are in the nature of a running account, indicating that the debit and credit balances lack any commercial effect of borrowing, which is an essential element in terms of Section 5(8)(f) of IBC; and (f) The emails relied on by Spade dated 16/17 January 2013 mention that documents in relation to an extension of a loan of Rs. 2 Crores were to be executed. No such documents have been produced on record. Assessment of preliminary submissions - Res Judicata - HELD THAT:- The order was passed without hearing financial creditors such as Phoenix and YES Bank. Hence, they were legitimately within their rights in seeking a direction for the exclusion of AAA and Spade from the CoC, if they were aggrieved by the terms of that order. The earlier order was passed without furnishing them with an opportunity of being heard. Assessment of preliminary submissions - Issues before NCLAT - HELD THAT:- The application filed by Phoenix adverted to its submission that NCLT s order dated 31 May 2018 was obtained by Spade and AAA on a concealment of material facts, circumstances and the real nature of the transactions. In addition, Mr Anil Nanda, the suspended director of the Corporate Debtor, had filed an application before the NCLT alleging that Spade and AAA have not financed any amount to the Corporate Debtor. He submitted that there was no loan facility against the time value of money. In addition, he argued that the Agreement to Sell between the Corporate Debtor and AAA was a part of series of acts of fraud, and is null and void. The NCLT s order dated 19 July 2019 was passed after arguments were led on the real nature of transactions between the parties. Assessment of preliminary submissions - Remand to NCLAT - HELD THAT:- Having held that the transactions between the corporate debtor on one hand and AAA and Spade on the other did not qualify as a financial debt, the Adjudicating Authority commenced its discussion on the second issue by stating that it does not require a reply in view of the finding on the first issue. However, it then noted that the first proviso to Section 21(2) has been substituted with effect from 6 June 2018, the effect of which is to exclude a financial creditor who is a related party of the corporate debtor from being represented in and from participating or voting in a meeting of the CoC. After adverting to the definition of the expression related party in Section 5(24) - On the second issue, the Adjudicating Authority was of the view that it was not really necessary for it to consider what should be the date with reference to which a related party should be determined. But it is evident that the NCLT did come to the conclusion that Mr. Arun Anand and his various companies namely AAA and Spade were related parties to the corporate debtor though after 2013, Mr Arun Anand resigned from all the companies of the Anil Nanda Group. we do not agree with the submission that NCLAT exceeded its jurisdiction by considering the second issue relating to the determination of the status of AAA and Spade as related parties. Thus, we hold that there is no reason to remand the matter to NCLAT for reconsideration. An order of remand cannot be passed in a routine manner, and it should be passed only if a re-consideration is necessary. An unwarranted order of remand does not serve the cause of justice and merely extends the life of litigation. Remands in commercial matters should not become a ruse to subserve litigation luxuries. The dispute fell into a quagmire when the NCLAT proceeded on the basis that it was an admitted position that AAA and Spade are financial creditors. The finding of fact in paragraph 11 of the decision of the NCLAT that this is the admitted position is plainly erroneous since there was an express finding of the NCLT to the contrary. The fact that it necessitated an appeal by AAA and Spade would indicate that this was not an admitted position. It is also evident from the contents of the appeal filed by Spade and AAA, and the reply filed by Phoenix before the NCLAT, that the status of Spade and AAA as financial creditors was in dispute. Having said that, the issue that now falls for our consideration is whether AAA and Spade can be considered as financial creditors. Analysis - Financial Creditor and Financial Debt - HELD THAT:- The current definition of financial debt Under Section 5(8) of the Code uses the words includes , thus the kinds of financial debts illustrated are not exhaustive. The phrase disbursed against the consideration for the time value of money has been the subject of interpretation only in a handful of cases under the Code. The words time value have been interpreted to mean compensation or the price paid for the length of time for which the money has been disbursed. This may be in the form of interest paid on the money, or factoring of a discount in the payment. Analysis - Collusive Transactions - HELD THAT:- The IBC has made provisions for identifying, annulling or disregarding avoidable transactions which distressed companies may have undertaken to hamper recovery of creditors in the event of the initiation of CIRP. Such avoidable transactions include: (i) preferential transactions under Section 43 of the IBC; (ii) undervalued transactions under Section 45(2) of the IBC; (iii) transactions defrauding creditors under Section 49 of the IBC; and (iv) extortionate transactions under Section 50 of the IBC. The IBC recognizes that for the success of an insolvency regime, the real nature of the transactions has to be unearthed in order to prevent any person from taking undue benefit of its provisions to the detriment of the rights of legitimate creditors. Analysis - Spade and AAA - HELD THAT:- It appears that the parties converted the Development Agreement into an Agreement to Sell executed along with a Side Letter to circumvent the legal prohibition on splitting a development license in two parts. The transaction between AAA and the Corporate Debtor was collusive in nature - Since the commercial arrangements between Spade and AAA, and the Corporate Debtor were collusive in nature, they would not constitute a financial debt . Hence, Spade and AAA are not financial creditors of the Corporate Debtor. Whether Spade and AAA are related parties - HELD THAT:- The Appellate Tribunal has affirmed the decision of the NCLT to exclude Spade and AAA from the CoC on the ground that they are related parties. As we have seen earlier, there was a specific finding in the decision of the NCLT on the close business relationship between AAA and Spade on one hand and the Corporate Debtor on the other, in terms of the provisions contained in Section 5(24). The decision of the NCLT spoke of a deep entanglement in the business affairs. The NCLT came to the specific finding that Spade and AAA were related parties of the corporate debtor but, that the relationship had ended by the time the initiation of the CIRP took place. It is this aspect which now merits consideration. Mr Arun Anand, Spade and AAA were related parties of the Corporate Debtor during the relevant period when the transactions on the basis of which Spade and AAA claim their status as financial creditors took place. Interpretation of the phrase is a related party in the first proviso - submission is that Spade and AAA are no longer related parties of the Corporate Debtor (even though in terms of the earlier finding they were so during the relevant period when the transactions constituting their alleged financial debt took place) - Whether Spade and AAA can be excluded from the CoC? - HELD THAT:- Since the IBC attempts to balance the interests of all stakeholders, such that some stakeholders are not able to benefit at the expense of others, related party financial creditors are disqualified from being represented, participating or voting in the CoC, so as to prevent them from controlling the CoC to unfairly benefit the corporate debtor - It is pertinent to note that disqualification of related parties from being members of the CoC, has also been recommended in the UNCITRAL Legislative Guide on Insolvency law - In interpreting the legislation, which represents a Parliamentary effort to bring about structural changes in the resolution of corporate insolvencies, the effort of the court must be to aid the fulfilment of the objects of the IBC. Amendment to First Proviso of Section 21(2) - HELD THAT:- The first proviso to Section 21(2) was amended, to extend the disqualification to the specified authorised representatives, in case that these representatives happened to be related parties of the corporate debtor. The introduction of the phrase is along with related party was not a guiding factor behind the Parliamentary amendment. Related Parties - Interpretation In Praesenti - HELD THAT:- The use of the simple present tense in the first proviso to Section 21(2) indicates that the disqualification applies in praesenti. Furthermore, this interpretation would also be supported by a reading of the first proviso to Section 21(2), in light of the definition of related party under Section 5(24), which uses phrases such as is accustomed to act or is associated to define a related party in the present tense. It could be stated that where a financial creditor seeks a position on the CoC on the basis of a debt which was created when it was a related party of the corporate debtor, the exclusion which is created by the first proviso to Section 21(2) must apply. For, it is on the strength of the financial debt as defined in Section 5(8) that an entity claiming as a financial creditor under Section 5(7) seeks a position on the CoC under Section 21(2). If the definition of the expression related party under section 5(24) applies at the time when the debt was created, the exclusion in the first proviso to Section 21(2) would stand attracted - However, if such an interpretation is given to the first proviso of Section 21(2), all financial creditors would stand excluded if they were a related party of the corporate debtor at the time when the financial debt was created. This may arguably lead to absurd conclusions for entities which have legitimately taken over the debt of related parties, or where the related party entity had stopped being a related party long ago. Thus, it has been clarified that the exclusion under the first proviso to Section 21(2) is related not to the debt itself but to the relationship existing between a related party financial creditor and the corporate debtor. As such, the financial creditor who in praesenti is not a related party, would not be debarred from being a member of the CoC. However, in case where the related party financial creditor divests itself of its shareholding or ceases to become a related party in a business capacity with the sole intention of participating the CoC and sabotage the CIRP, by diluting the vote share of other creditors or otherwise, it would be in keeping with the object and purpose of the first proviso to Section 21(2), to consider the former related party creditor, as one debarred under the first proviso. Hence, while the default rule under the first proviso to Section 21(2) is that only those financial creditors that are related parties in praesenti would be debarred from the CoC, those related party financial creditors that cease to be related parties in order to circumvent the exclusion under the first proviso to Section 21(2), should also be considered as being covered by the exclusion thereunder. Mr Kaul has argued, correctly in our opinion, that if this interpretation is not given to the first proviso of Section 21(2), then a related party financial creditor can devise a mechanism to remove its label of a related party before the Corporate Debtor undergoes CIRP, so as to be able to enter the CoC and influence its decision making at the cost of other financial creditors. It is evident that there existed a deeply entangled relationship between Spade, AAA and Corporate Debtor, when the alleged financial debt arose. While their status as related parties may no longer stand, we are inclined to agree with Mr Kaul that this was due to commercial contrivances through which these entities seek to now enter the CoC. The pervasive influence of Mr Anil Nanda (the promoter/director of the Corporate Debtor) over these entities is clear, and allowing them in the CoC would definitely affect the other independent financial creditors. Appeal disposed off.

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• 2021 (2) TMI 90
  Seeking extension of time beyond 330 days - Section 60(5) read with Section 12A of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- After hearing learned counsel for the parties and for reasons stated in the appeal that the discretion should have been exercised by the Adjudicating Authority in acceding to the request of the Resolution Professional in extending the time beyond 330 days, we are of the considered opinion that this being a fit case where indulgence of this Appellate Tribunal is warranted for extending the timelines to prevent the Corporate Debtor from being pushed into liquidation and a viable Resolution Plan being approved by the COC, allowing of appeal will promote the interest of justice - The appeal is allowed and after excluding the period of judicial intervention viz. from 25th September, 2020 till today, grant extension of time by two weeks from today.

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• 2021 (2) TMI 89
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - pre-existing dispute or not - HELD THAT:- From the facts and records it is emphatically clear that there exists a dispute between the parties which are prior to issuance of Demand Notice. Neither the Adjudicating Authority nor this Appellate Tribunal, in summary jurisdiction, can go into those issues which otherwise require a regular trial - it is clear that the moment there is an existence of dispute, the Corporate Debtor gets out of clutches of the rigour of the Court. Further, the adequacy of dispute is only to be seen where the dispute raised by the Corporate Debtor specify as a dispute as defined under Section 5(6) of IBC. There is a record of dispute existing between the parties prior to issuance of Demand Notice and prior to filing of Section 9 Application. Hence, the same cannot be either entertained by the Adjudicating Authority or this Tribunal in a Summary Proceeding as held by the Hon ble Supreme Court in the matter of Mobilex Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd. [ 2017 (9) TMI 1270 - SUPREME COURT]. There are no reason to interfere with the order passed by the Adjudicating Authority - appeal dismissed.

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• 2021 (2) TMI 88
  Seeking rectification of order by modifying the directions in clause iii of Paragraph 10 of the order by directing only the directors of the appellant Company (not the entire shareholder) to jointly submit to the Registrar of Companies an undertaking stating therein that the accounts of the Company were not used as means to transact tainted money during the period of demonetization - Rule 154 of National Company Law Tribunal Rules, 2016. Rule 154 of the National Company Law Tribunal Rules, 2016 - HELD THAT:- The present case of the applicant falls within the meaning of error therein arising from any accidental slip or omission of this Tribunal. As correctly stated by the Applicant, it is not possible to give an undertaking as ordered by this Tribunal, by all the shareholders. Hence, this Tribunal pass the following order by correcting point No.(iii) in the Order dated 09.10.2020 as under:- The shareholders/Directors of the appellant Company shall jointly submit an Undertaking to the Registrar of Companies stating therein that the accounts of the Company were not used as means to transact tainted money during the period of demonetization . Application disposed off.

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• 2021 (2) TMI 87
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - settlement deed for withdrawal of application - HELD THAT:- The Applicant/Operational Creditor filed a withdrawal memo stating that in terms of the settlement agreed between the parties in the Deed of Settlement dated 7th January, 2021, this Tribunal may be pleased to permit the Operational Creditor to withdraw the above application under Rule of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. In view of the settlement arrived between the parties and in view of the Memo filed by the Operational Creditor, nothing survives for further consideration in this matter - Application disposed off as withdrawn.

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• 2021 (2) TMI 86
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - record of contractual agreement or not - copy of invoices not produced - nature of professional services rendered by the Operational Creditor not clear - proof of service of demand notice ot provided - HELD THAT:- There is no record of any contractual arrangement between the Operational Creditor and the Corporate Debtor - Copy of the invoice has not been attached. What has been attached at p.49 is only a calculation sheet mentioning the principal amount of the invoice, the interest calculation. There is no record of the invoice having been served on the Corporate Debtor - There is no record of what professional services have been rendered by the Operational Creditor - Proof of service of Demand Notice has not been attached to the Petition. However, proof of posting in the form of Speed Post receipt No.EM779732264IN dated 12.04.2019 has been attached as Exhibit D at p.59. The tracking receipt attached at p.51 only records that Item Dispatched. This is not enough to satisfy the requirement of section 9(5)(ii)(c) of the IBC read with rule 5(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, both of which use the term delivered. The pre-requisites of section 9 of the IBC have not been satisfied. Therefore, the present petition fails and therefore, the same is rejected in terms of section 9(5)(ii)(c) of the IBC.

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• PMLA

• 2021 (2) TMI 85
  Grant of Anticipatory Bail - Smuggling - Money Laundering - siphoning of funds - predicate offence - proceeds of crime - argument of the learned Senior Counsel that the predicate offence has not been identified and that the prosecution initially started with the proceeds of crime as that from the act of smuggling has later gone to kickbacks in LIFE Mission project - HELD THAT:- This Court had the opportunity to consider the application for anticipatory bail filed by the applicant and it was held that the materials suggested the complicity of the applicant and that the prosecution has to get opportunity to delve further into the allegations in the light of the statements recorded. The applicant was confronted with the statements of the co-accused in this case pertaining to his involvement and he has not been able to give a satisfactory explanation regarding the variance between his version and the versions of the other witnesses as an accused. The applicant could not give a satisfactory explanation regarding why he was anxious to introduce the 2nd accused to the witness Venugopal to facilitate parking of her money in a locker. A2 has given statements to the effect that the applicant was aware of the deposits and withdrawals from the locker. It is true that the prosecution may not have been able to establish with precision how the proceeds of crime was generated. But indications about the applicant having knowledge of the smuggling activities in which A2 was involved suggests that he also had a share in the proceeds of crime. The term proceeds of crime is wide enough to include proceeds which have been directly or indirectly obtained as a result of criminal activities mentioned as scheduled offences. Reverting to the rigour of the twin test under section 45 of the PMLA, it has to be considered whether the applicant would qualify to get bail. There is no doubt about the complicity of the applicant and there are no reasonable grounds to believe that he is not guilty. However, it should also be considered whether there is a likelihood of the applicant committing any offence while on bail. I am afraid that the prosecution has not been able to establish this fact. Going by the allegations made by the ED, the applicant was indulged in laundering of Rs. 64 lakhs which was seized from the SBI locker. There is no indication that the applicant had anything to do with the locker belonging to A2 in Federal Bank. Thus the proviso to Section 45 (1) of the PMLA would operate in view of the fact that the money allegedly laundered is less than rupees one crore. The fact that the applicant is suffering from various illness would also come to his benefit as the proviso to Section 45 exempts a sick person from the rigours of the Section - The accused may not be detained just to give him a taste of imprisonment is what the Supreme Court held. The applicant has been in custody since 28/10/2020. He has been subjected to interrogation including custodial interrogation in a number of times. The present pandemic times also does not encourage incarceration of an accused indefinitely. There are no rationale for continuing the applicant s judicial custody as an undertrial in this case The applicant is therefore, entitled to be released on regular bail on stringent conditions. The bail application is allowed and the applicant is directed to be released on bail on execution of bond for Rs. 5,00,000/- with two solvent sureties for like amount each to the satisfaction of the jurisdictional Court, and on further conditions imposed.

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• Service Tax

• 2021 (2) TMI 84
  Interpretation of statute - whether determination of service tax by the Central Excise Officer, is necessary before making a demand under Section 73A(3) of the Finance Act, 1994? - HELD THAT:- From perusal of Section 73A(5) of the Act, it is evident that the amount paid to the credit of the Central Government under sub-section (1) or sub-section (2) or sub-section (4) shall be adjusted against the service tax payable by the person on finalization of assessment or any other proceedings for determination of service tax relating to the taxable service deferred to in sub-section (1). Thus, from perusal of Section 73A(5) of the Act, it is evident that the assessment must precede the demand. After taking note of the provisions of Section 73 of the Act, the learned Single Judge of this Court has held that the power to create a demand under Section 87 of the Act can be exercised only after adjudication namely on assessment of the amount - The aforesaid view has been upheld by the Division bench of this Court in the case of UNION OF INDIA VERSUS MRS. PRASHANTHI [ 2016 (7) TMI 131 - KARNATAKA HIGH COURT] . The substantial question of law framed by this Court is answered in favour of the assessee and against the revenue - Appeal dismissed.

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• 2021 (2) TMI 83
  Taxability - supply of tangible good for use or not - tool kits provided by the appellant to associated companies - supply of tangible goods without transferring right of possession and effective control - Levy of service tax on rental charges for baked oven under STGU. Whether the tool kits provided by the appellant to associated companies would be a service of supply of tangible good for use - STGU and would be a taxable service contemplated under section 65 (105)(zzzzj) of the Finance Act, which is any service provided to any person, by any other person, in relation to supply of tangible goods without transferring right of possession and effective control? - HELD THAT:- There is no dispute with the regard to the first two conditions. The dispute revolves around the third condition, namely whether the transaction between the Appellant and the associated companies involves transfer of right of possession and effective control. This is for the reason that any transaction involving transfer of right to use would result in a deemed sale , which would be beyond the purview of service tax. The term transfer of right to use goods was interpreted by the Supreme Court in BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA [ 2006 (3) TMI 1 - SUPREME COURT] , wherein five attributes for a transaction to constitute a transfer of right to use goods were highlighted - It is, therefore, clear that sales tax/VAT can be levied if there is a transfer of possession and effective control in goods, while for levy of service tax there is no transfer of possession and effective control. The submission of the appellant that tool kits were in possession of the associated companies with the right to use the kits to the exclusion of appellant and the appellant could also not have passed the right to any other person has not be controverterd in the impugned order nor has any material been provided by the learned Authorized Representative of the Department to controvert this fact - it is not possible to sustain the finding recorded by the Principal Commissioner. Whether service tax would be leviable on rental charges for baked oven under STGU? - HELD THAT:- This issue relates to levy of service tax under the category of STGU on the tools imported by the appellant. The appellant had imported baking oven from its foreign associated companies. The appellant claims that it discharged the applicable customs duty and freight charges were also paid by the Appellant. It would be seen that the Principal Commissioner has confirmed the demand by holding that the ownership of the baking oven continued with the foreign supplier, as a result in which the transaction would qualify as a service involving STGU - There is no discussion in the order passed by the Principal Commissioner as to why the possession and control of the baking oven continued to be with foreign companies. According the Appellant, the baking ovens were imported and they were in exclusive possession of the Appellant. Thus, when the possession and exclusive control over the imported goods was in the hands of the Appellant, the transaction would qualify as deemed sale by foreign companies. The Principal Commissioner was, therefore, not justified in holding that the transaction would result in levy of service tax under the category of STGU. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2021 (2) TMI 110
  Applicability of Rule 8(3A) of the Central Excise Rules, 2002 - Levy of penalty - default in the payment of Central Excise Duty - Revenue was of the view that during the default period, the appellant was required to make payment of Central Excise duty on consignment to consignment basis, in cash, without making use of the credit accumulated in Cenvat account, on the removals of excisable goods made during 05.02.2008 to 11.03.2008 - HELD THAT:- The jurisdictional High Court at Calcutta, in the case of Goyal MG Gases Pvt.Ltd. [ 2017 (8) TMI 1515 - CALCUTTA HIGH COURT ] has followed the decision of the Gujarat High Court in Indsur Global Ltd. vs. UOI [ 2014 (12) TMI 585 - GUJARAT HIGH COURT ] and has held the portion of Rule 8(3A) as ultra vires. Thus, there is no bar in making use of the accumulated Cenvat Credit in making payment of Central Excise duty even during default period - appeal allowed - decided in favor of appellant.

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• 2021 (2) TMI 82
  Valuation - applicability of Rule 4 of the Valuation Rules or Rule 8 - appellant has cleared Matrix Emulsion from its manufacturing unit located at Napara, Barabani, Burdwan to its sister unit at Dhanbad - HELD THAT:- The appellant has duly filed reply to SCN on 16.10.2015 which is appearing at Page no. 249 of the Appeal Book. The Ld. Commissioner without taking into cognizance of the said Reply, has passed the impugned order wherein he has recorded that no Reply has been submitted till 29.09.2015. We find that since the impugned order has been passed after more than 3 months, the Ld. Commissioner was not justified in not considering the written reply submitted by the appellant. The duty demand has been raised on Matrix Emulsion (input) by considering the price at which output, Site Mixed Explosive, has been cleared from their Dhanbad unit, which is not permissible under Rule 4 of the Valuation Rules. However, the Ld. Commissioner, in his impugned order in para 3.8, while justifying the valuation adopted by him has clearly noted that both the goods which were cleared by the appellant to their sister unit as well as those cleared to independent buyers are the same - in the Reply filed the appellant, which has not been considered by the Ld. Commissioner while adjudicating the matter, has submitted the production process involved in the manufacture and delivery thereof to the independent buyers. The appellant has also submitted the license issued by concerned department under Explosives Act to justify their claim that goods in question, i.e., Matrix Emulsion is not an explosive and they are not entitled to sell such goods to any third party and hence do not have any market. it would be just and proper that matter is remanded back to the Ld. Commissioner who would examine the said facts and pass a reasoned order by considering all the contentions raised by the appellant as above as well as that may be further submitted duly supported with documents in the remand proceedings. Extended period of limitation - HELD THAT:- There are no specific instance or allegation to show that the demanded duty amount has not been deliberately paid for reasons on account of fraud or suppression to justify the invocation of extended period of limitation - The Department was at its liberty to examine the aspect of correct valuation in normal course and having not done, the demand of differential duty cannot be raised by invoking extended period of limitation. Thus, the demand pertaining to extended period of limitation is set aside. Penalty - HELD THAT:- Penalty as imposed in the impugned order is also set aside in entirety in absence of any element of fraud or suppression. In the remand proceedings, the Ld. Commissioner will decide the issue afresh, limited to the duty demand raised for the period covered within the normal limitation. Appeal allowed by way of remand.

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• Indian Laws

• 2021 (2) TMI 81
  Non-payment of professional fee/retainership fee bills of empanelled lawyers of the GNCTD - Clearance of outstanding dues - HELD THAT:- Lawyers and counsels who are engaged by various Governments/Departments render their professional services to the said Departments and Governments. The respective Governments /Departments are expected to clear the professional bills of the lawyers within a reasonable time. Under no circumstances should a counsel who has been engaged by the Government/Department be forced to sue his/her own client, especially a government or its agency, and seek legal remedies for seeking clearance of his/her professional fee. The fact that the Petitioner was forced to approach this Court is extremely unfortunate. Though the professional bills of the Petitioner are stated to have now been cleared, his retainership fee is still not being paid. Since there is no dispute on the factum that retainership fee is to be paid, this Court directs the GNCTD to clear the pending retainership payments to the Petitioner within one month from today. Petition disposed off.

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