Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 18, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Seeking release of goods alongwith vehicle - having regard to the perishable nature of the subject goods involved in the present petition, in the peculiar / special facts and circumstances of the instant case, the respondents are directed to release the Conveyance along with the goods contained therein in favour of the petitioner, within a period of 48 hours - HC
Income Tax
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Gain on sale of shares - long-term capital gain or profits and gains of business - distinction between “investment” and “stock-in-trade” - the circulars can be referred to by the assessee and they being at least partially beneficial to the assessee has to be held to be retrospectively applicable in so far as the instructions/clarifications which enure in favour of the assessee’s. - HC
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Validity of Assessment u/s 144B - Amalgamated company - once assessment order is passed against non-existing company, there would be no cure, even for filing of the appeal. Once it is found that the assessment is framed, in the instant case, in the name of the non-existing company, as held hereinabove, that surely does not remain the procedural irregularity, which can be cured under the provision of section 292B - The assessment framed in the name of the existing company requires to be quashed. - HC
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Revision u/s 263 - the defects noticed by the ld. PCIT in respect of computation of LTCG and advance payment received - No question has been asked on the above aspects and no reply was given by the assessee. Even under section 142(1) of the Act, the Assessing Officer has not issued any questionnaire in respect of LTCG and advance payments received - Revision order sustained - AT
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Reopening of assessment u/s 147 - Reasons to believe - When the AO has not created any link between tangible material and the formation of reason to believe that income had escaped assessment, then, the information received from Investigation Wing cannot be said to be tangible material per se without further inquiry being undertaken by the AO. - AT
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Royalty - Payment link charges / IPLC charges - there is no transfer of the right to use, either to the assessee or to CIS. The assessee has merely procured a service and provided the same to CIS, no part of equipment was leased out to CIS. Even otherwise, the payment is in the nature of reimbursement of expenses and accordingly not taxable in the hands of the assessee. - AT
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TP Adjustment - Recover of salary expenses - benefit to the assessee with the deputation of technical expert - DRP has mentioned that the deputation of the technical expert can only be for a definite purpose to benefit the AE and benefit from the expertise and productivity of these experts while depriving the assessee of their services. - order of DRP sustained - AT
Customs
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Smuggling - Betel nuts (foreign Origin goods) - the Tribunal came to the conclusion that the department has failed to establish that the said goods are smuggled goods. The respondent in claimed ownership of the seized goods and prayed for a direction to return the goods to him and the Tribunal analysed the documents and directed return of the goods - The entire case is fully factual and, no substantial question of law arises for consideration - Revenue appeal dismissed - HC
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Provisional release of the goods for the purpose of re-export only - dyed polyester with modified twill - The adjudicating authority is directed to consider the request of the importer-appellant for provisional release of the goods for re-export only within a period of one month from the date of receipt of this order, subject to reasonable conditions, if necessary, for safeguarding the revenue. - AT
FEMA
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Foreign Direct Investment Policy - permit foreign investment by a foreign airline - PIL against approving M/s Air Asia Investment Ltd. (a Malaysian Company) to incorporate a new Joint Venture Company with foreign equity of 49% amounting to USD 15 Million and the balance 51% equity share was to be held in the ratio of 30% by M/s Tata Sons Ltd. and 21% by M/s Telestra Trade Pvt. Ltd. - In view of the fact that there is no foreign investment as of today, the prayers made in the writ petition have become purely academic. - HC
Indian Laws
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Dishonor of Cheque - CIRP - dissolution of company as per resolution plan - where the proceedings under Section 138 of the NI Act had already commenced with the Magistrate taking cognizance upon the complaint and during the pendency, the company gets dissolved, the signatories/directors cannot escape from their penal liability under Section 138 of the NI Act by citing its dissolution. What is dissolved, is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act. - SC
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Dishonor of Cheque - insufficient funds - compounding of offences - Since in the instant case, the petitioner-accused after being convicted under Section 138 of the Act, has compromised the matter with the respondent-complainant vide Compromise Deed - the parties are permitted to get the matter compounded in light of the compromise arrived inter se them. - HC
Service Tax
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Maintainability of petition - alternative and efficacious remedy of appeal - Levy of Service Tax - amount paid by the Petitioner to the State of Maharashtra for irrigation restoration charges - the Petitioner has the option to file a statutory appeal to the Appellate Tribunal where the Petitioner can present all of its contentions. There is no reason why the Petitioner cannot avail of the statutory remedy of appeal - HC
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Extended period of limitation - Non-payment of service tax - translation services received by the appellant from the various individuals - when the tax is paid under reverse charge mechanism, the appellant would be entitled to avail credit of the same, which invariably leads to a revenue neutral situation. Thus, there is no scope to allege fraud, suppression, etc., to invoke the extended period of limitation for non-payment of tax. - AT
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Levy of service tax - business auxiliary service - appellant engages professional/doctors/ consultants on contractual basis - the arrangement was for joint benefit of both the parties with shared obligations, responsibilities and benefits and, therefore, no service was provided by the hospital to the doctors. - Demand set aside - AT
Central Excise
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Maintainability of the appeal - validity of review order was signed separately by the two members of the Committee of Commissioners - It is submitted that the review order is bad as there is no formation of opinion in terms of section 35B(2) of CEA - Tribunal while acting as an appellate authority has no jurisdiction to strike down a decision taken by the Committee of Commissioners on the administrative side - AT
VAT
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Lifting of attachment on properties - right to service of assessment orders - As a regular dealer, it had filed returns not only for AY 2005-06 to 2008-09 but also later periods (i.e., AY 2009-10 and 2010-11) - The revenue however, pointed out to the High Court, that the representations never alleged that assessment orders were not served and that the attachments were therefore not compliant with provision of law. - Decided in favor of revenue - SC
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Validity of order of tribunal in Review Appeal - Denial of benefit which was allowed earlier - Power to Review - Therefore, this Court holds that the Review by the Tribunal in exercise of the power under Section 36(6) of TNGST Act is maintainable, since important facts has come to light after verification of CST files and it was not been brought to the notice of the Tribunal when the earlier order dated came to be passed. - HC
Case Laws:
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GST
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2023 (3) TMI 728
Maintainability of petition - GST Tribunal has not been constituted under Section 109 of the CGST Act - order passed by the first appellate authority under Section 107(1) of the CGST Act - Cancellation of GST registration of petitioner - non-filing of returns - HELD THAT:- This is an order passed by the first appellate authority under Section 107(1) of the CGST Act. As per sub-section (1) of Section 107 of the CGST Act, limitation for filing appeal is three months from the date of communication of the order appealed against. Under sub-section (4) of Section 107 of the CGST Act, the appellate authority may allow the appeal to be presented within a further period of one month, provided sufficient cause is shown by the appellant. Though the lower appellate authority may be right in holding that while it may allow filing of an appeal beyond the limitation of three months for a further period of one month, therefore, by extension of limitation beyond the extended period of one month delay beyond the extended period of one month cannot be condoned, we are of the view that such a stand taken by respondent No.1 may adversely affect the petitioner. This is more so because respondent No.2 had suo motu cancelled the GST registration of the petitioner on the ground of non-filing of returns and as GST Tribunal has not been constituted under Section 109 of the CGST Act, petitioner would be left without any remedy. The issue pertains to cancellation of GST registration of the petitioner. In the facts and circumstances of the case, it would be just and proper if the entire matter is remanded back to respondent No.2 to reconsider the case of the petitioner and thereafter to pass appropriate order in accordance with law. Appeal allowed by way of remand.
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2023 (3) TMI 727
Maintainability of petition - availability of equally efficacious and alternative remedy by way of appeal - Seeking release of goods alongwith vehicle - HELD THAT:- Without expressing any opinion on the merits / demerits of the rival contentions, it is deemed just and appropriate to dispose of this petition reserving liberty in favour of the petitioner to take recourse to such remedies as available in law including approaching the First Appellate Authority by way of challenge to the Annexure A and B and in accordance with law. It is further directed that having regard to the perishable nature of the subject goods involved in the present petition, in the peculiar / special facts and circumstances of the instant case, the respondents are directed to release the Conveyance No.GJ-03-AX-7785 and GJ-03- BY-8577 along with the goods contained therein in favour of the petitioner, within a period of 48 hours from the date of receipt of a copy of this order. It is made clear that the present order is passed in the peculiar / special facts and circumstances of the instant case and shall not be treated as a precedent nor have any precedential value for any purpose whatsoever Subject to the aforesaid directions, petition stands disposed of.
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2023 (3) TMI 726
Validity of action of the respondent appellate authority concerned in not disposing his appeal in question which was filed on 27th March, 2019 - hearing of the appeal in question has already been concluded on 18th January, 2021 but till date no final order has been passed on the said appeal - HELD THAT:- This writ petition is disposed of by directing the authority concerned to pass a final order on the aforesaid appeal in question within 8 weeks from the date of communication of this order. Petition disposed off.
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2023 (3) TMI 684
Grant of bail -Grant of bail - Direction for a deposit of sum of Rs.2 crores - HELD THAT:- The facts of this case are identical to SUBHASH CHOUHAN VERSUS UNION OF INDIA ANR. [ 2023 (1) TMI 1168 - SC ORDER] . Following the reasons given in the said judgment and order, it is hereby provided that the condition directing the appellant to deposit a sum of Rs.2 crores is not liable to be sustained and is hereby set aside - appeal allowed.
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Income Tax
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2023 (3) TMI 725
Gain on sale of shares - long-term capital gain or profits and gains of business - distinction between investment and stock-in-trade - material significance of intention at the time of purchase of the shares -period of holding of the shares - tribunal held that the sum should be assessed as long-term capital gains - HELD THAT:- Tribunal was fully justified in coming to the conclusion that not only capital and reserve of the assessee was several times more than the investment in shares in respect of which STT was paid, but even the profit of one year was several times more than the investment. Therefore, in our view, the fact situation has been clearly brought on record by the tribunal which was failed to be taken into consideration by the CIT(A). Therefore, the conclusion arrived at by the tribunal in this regard cannot be faulted. Consequently, we hold that the CIT(A) would not have drawn a presumption that merely because the fund flow was from a cash credit account, it pre-supposes that borrowed funds were utilised for the purchase of shares especially when it is a specific case of the assessee that it is a mixed account which has not been shown to be wrong by the revenue. Correctness of the observations of the CIT(A) that the shares were thinly traded and highly illiquid and that the companies have not declared dividends - It is only when the genuineness of the transactions is doubted, there would be an occasion to examine whether the shares were penny stocks or not, what was the percentage of appreciation, the period during which the appreciation took place and was the appreciation beyond the normal person s expectations etc. Thus, in the absence of any doubt raised either by the assessing officer or by the CIT(A) as regards the genuineness of the transactions, the CIT(A) could not have held that the transaction was in the nature of business transaction as the companies have not declared dividend. Such finding rendered by the CIT(A) in our opinion was rightly reversed by the tribunal. Principle of consistency - The gains from the remaining long-term shares of the sixth company sold during the previous year relevant to the assessment year 2006-2007 was treated as business income by the assessing officer which order was reversed by the CIT(A) and affirmed by the tribunal by order dated 11.02.2011. The assessing officer once again for the assessment years 2007-2008 and 2008-2009 sought to treat the same as business income which was reversed by the CIT(A) and the tribunal dismissed the revenue s appeal by the orders dated 11.05.2011 and 18.08.2011 and those orders have attained finality. Therefore, for the solitary year, the year under consideration, a departure from the consistent manner in which the department viewed the transactions, cannot be disturbed. In the absence of any doubt raised by the department with regard to the purchase of shares treated as investment for the preceding years and the subsequent years, a departure cannot be made by the department for the year under consideration. Circular No. 4 of 2007 dated 15.06.2007 was issued with regard to the distinction between shares held as stock-in-trade and shares held as investment and the tests for such a distinction were laid down. Effects of the circulars issued by the CBDT dated 29.02.2016 and 02.05.2016 - Circulars dated 29.02.2016 was with regard to the issues of taxability of surplus on sale of shares and securities-capital gains of business income-instruction in order to reduce the litigation. The need for issuing such a circular arose on account of a disputes on the applications of the principles laid down by the courts mentioning different parameters to distinguish the shares held as investments from the shares held as stock-in-trade. In terms of the circular the assessee s precluded from taking a contrary stand in the subsequent years. If that be so, the same embargo can also be placed on the department, by holding that the department cannot take a different view in the subsequent years in the absence of any fresh materials warranting such departure. Reading the circular in its entirety will show that on account of dispute which had arisen while interpreting the directions issued by the courts and tribunal the Board thought fit to issue appropriate instructions to the field formation. Therefore, it is to be understood that the circular would be retrospective in operation. In any event, as rightly contended by the learned senior advocate for the assessee in the event the matter is remanded for fresh consideration to the assessing officer either by the CIT(A) or by the tribunal nothing prevents the assessee from referring to the circulars and the theory of prospectivity or retrospectivity loses its significance. Thus, we hold that the circulars can be referred to by the assessee and they being at least partially beneficial to the assessee has to be held to be retrospectively applicable in so far as the instructions/clarifications which enure in favour of the assessee s.
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2023 (3) TMI 724
Reopening of assessment u/s 147 - seeking to reopen the income tax assessment of the petitioner for the assessment year 2013-14 on the ground that the notice and order are bad in law and without jurisdiction - HELD THAT:- Since the issue is covered by the decision of this Court in case of Keenara Industries Private Limited [ 2023 (3) TMI 104 - GUJARAT HIGH COURT] issue Urgent Notice to be made returnable forthwith. We have requested learned senior standing counsel, Mrs.Kalpana Raval assisted by the learned advocate, Mr.Karan Sanghani to appear for the respondent. Focusing on the issue of the limitation, as the assessment year here is 2013-14, without giving the separate reasoning those given in case of Keenara Industries Private Limited (supra) this petition deserves to be allowed. This petition is allowed. Notice under section 148 and impugned order under section 148A(d) dated 27.07.2022 are quashed and set aside.
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2023 (3) TMI 723
Validity of Assessment u/s 144B - scheme of arrangement sanctioned by NCLT approved - notice in the name of company non existing - whether the assessment order in the name of a non-existing entity was a substantive illegality and answered in affirmation? - HELD THAT:- The show cause notice-cum-draft assessment order when was issued in the name of the non-existing company giving a very short period for the company to reply, the very objection was raised by the amalgamated company pointing out that the assessment was in the name of the non-existing company. Repeated objections on the part of the petitioner had fallen on deaf ears and no heed was paid to various correspondences addressed to the respondent department. It is not being disputed that the order of NCLT and all the requisite documents were furnished to the authority by the amalgamated company and it had virtually implored to discontinue the proceedings against the nonexisting company. When the proceedings continued against the non-existing company, if fort was held for some time by the amalgamated company to ensure that no further damage is caused, this participation surely cannot be held against it. Moreover, amalgamated company, with all its obligations, would file return of income and also continue the process, but once assessment order is passed against non-existing company, there would be no cure, even for filing of the appeal. Once it is found that the assessment is framed, in the instant case, in the name of the non-existing company, as held hereinabove, that surely does not remain the procedural irregularity, which can be cured under the provision of section 292B of the Act. The assessment framed in the name of the existing company requires to be quashed. This Court has chosen to invoke the jurisdiction under Article 226 of the Constitution of India although the plea of alternative remedy of an appeal, is much emphasized upon by the respondent. There is a non-existing company and the amalgamated company is a separate legal entity, these arguments cannot be endorsed by the Court and, moreover, despite being aware of the settled position of the law, when all facts in the instant case can be equated with those existing in the case of Maruti Suzuki India Ltd [ 2019 (7) TMI 1449 - SUPREME COURT] and when the respondent authorities have chosen to ignore them despite reiterative requests on the part of the petitioner, the same would warrant interference at the hands of the Court.
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2023 (3) TMI 722
Assessment of trust - Addition of corpus donation - Second round of litigation before the AO, the assessee has not produced any new material or evidence, therefore, the AO once again made the addition - HELD THAT:- Since the assessee has not brought any fresh evidence/material before the AO or before the CIT(A) and also before us. Considering the fact that in compliance of the Tribunal s order the report was submitted by the AO after considering all the contentions of the assessee in the rejoinder, the order has been passed by the AO and in the absence of any new material brought before us, we do not find any infirmity or error in the findings of the lower authorities. Accordingly, the grounds of appeal of the assessee failed and the appeal filed by the assessee is dismissed.
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2023 (3) TMI 721
Additions u/s. 69C as unexplained investment - assessee purchased jointly with Shri Pradeep Parmar who was a cousin of the assessee and agricultural land for the total consideration - HELD THAT:- The assessee through bank details and the details given by the co-owner established that at the time of the transaction the assessee paid only Rs. 21,68,000/-, though his share was 50%. This aspect was totally overlooked by the AO. AO ignore the statement given by the co-owner that is cousin of the assessee and simplicitor made addition. AO presume that the assessee paid his share of purchase price but from the records the same appears to be that the assessee at that particular time paid only and the balance was paid by the co-owner Shri Pradeep Parmar. The co-owner i.e. Shri Pradeep Parmar also established the source of the said amount of Rs. 1 crore thereby stating that the same was borrowed from Shri Kanjibhai Fulabhai Koli and to that extent has given the details that GIDC has compensated to Shri Kanjibhai Filabhai Koli and from that fund the co-owner received a loan from the said party. This crucial aspect were not taken into account by the AO as well as by the CIT(A) and ignored the evidences produced by the assessee. Thus, the addition made by the Assessing Officer does not sustain. Hence, appeal of the assessee is allowed. Penalty u/s 271(1)(c) - HELD THAT:- The assessee has given explanation about the addition of Rs. 42,84,150/- to the Assessing Officer and as the assessee has paid only Rs. 21,68,000/- at the time of transaction and his cousin paid the rest of the amount. Thus, the invocation of Section 271(1)(c) of the Act was not justified by the Assessing Officer. Hence, the penalty under Section 271(1)(c) does not sustain.
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2023 (3) TMI 720
Grant of registration under section 12AB 80G(5)(ii) denied - Cancellation of registration u/s 12A(1)(ac)(iii) and cancellation of application u/s 12AB (1) - HELD THAT:- The assessee specifically mentioned that assessee has suffered technical glitches for submission of the documents before the revenue. Assessee was not able to perform his duty for submission of the relevant evidence before the CIT(E). We find that there is a reasonable opportunity was denied for the assessee to submit its claim. Thus, we are of the considered opinion that application filed by the assessee trust under section12A(1)(ac)(iii) 12AB(1)were not properly considered for grant of registration under section 12AB 80G(5)(ii) of the Act. Accordingly, we direct the ld. CIT(E) to de novo consider the application of the assessee trust applied under section 12A(1)(ac)(iii) 12AB(1) of the Act and grant the registration as per law. Needless to say, the assessee should get a reasonable opportunity of hearing in set aside proceeding before the ld. CIT(E).
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2023 (3) TMI 719
Foreign Tax Credit (FTC) u/s 90 - Denial of due to late filing of Form 67 prescribed for eligibility of such credit under Rule 128 of the Income Tax Rules, 1962 - assessee contends that a combined reading of Section 90 of the Act read with Article 24(3)(a) of DTAA provides in no uncertain terms that Italian tax paid shall be allowed as credit against Indian Tax - HELD THAT:- Co-ordinate Bench of Tribunal in the case of Ms. Brinda Ramakrishna [ 2022 (2) TMI 752 - ITAT BANGALORE] clearly held that filing of Form 67 is a directory requirement and having regard to the position that DTAA overrides the provisions of the Act and Rule cannot be contrary to the Act, the assessee is fully entitled to the FTC. The Tribunal also observed that issue of allowability of FTC is not a debatable issue and only one view is possible and thus seeking rectification under Section 154 could be resorted by the assessee. We hold that claim of FTC does not get controlled solely by the delay in filing of Form 67 prescribed under Rule 128(9) of the Income Tax Rules. Hence, we set aside the action of the CIT(A) and direct the Assessing Officer to take cognizance of Form 67 so filed and grant FTC as may be entitled to the assessee in accordance with law. Appeal of the assessee is allowed.
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2023 (3) TMI 718
Deduction u/s.80P(2)(d) - interest and dividend income from another cooperative bank - HELD THAT:- Assessee is a co-operative society which earned interest and dividend from Pune Central District Cooperative Bank. It is seen that the Pune Benches of the Tribunal in Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr.CIT [ 2022 (1) TMI 419 - ITAT PUNE] has held, vide its order dated 07-01-2022, that though co-operative banks, other than primary agricultural credit society or a primary co-operative agricultural and rural development bank, are not eligible for deduction pursuant to insertion of section 80P(4) w.e.f. 1.4.2007, but this provision does not dent the otherwise eligibility u/s 80P(2)(d) of the Act of a co-operative society on interest income on investments/deposits parked with a co-operative bank, which is a registered co-operative society as per section 2(19) of the Act, defining co-operative society to mean a co-operative society registered under the Co-operative Societies Act, 1912 or under any law for the time being in force. Pune District Central Co-operative Bank is also a co-operative society, being, registered as such. Respectfully following the decision of the Division Bench, we overturn the impugned order and direct to grant deduction u/s.80P(2)(d) of the Act on the amount of interest and dividend income earned from Pune District Central Co-operative Bank, a co-operative society. Assessee appeal is allowed.
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2023 (3) TMI 717
Unexplained investment in the purchase of property - HELD THAT:- The assessee had purchased the piece of land measuring 18 kanal at Amritsar on 23.11.2006 for an amount of Rs.1,13,00,000/- and another piece of land measuring 16 kanal 1 marla at Amritsar on 05.12.2006 a sum of Rs. 50 lacs. The grievance of the AO was that the value was reduced during registration of the property. There is a huge difference in between agreement to sale and the registration of the property. The difference amount was taken as unexplained investment and added back the amount u/s 69 amount of Rs.3,40,00,000/-. After the agreement the dispute is occurred in acquisition of land and accordingly further bargain was taken place. The fact that the assessee clearly mentioned that this agreement was rejected, and the assessee further made a separate deal about the property and paid the value as decided during the registration. Copy of the ITR audited balance sheet as proof of payment is annexed - The issue was already dealt before the DCIT and the submission is annexed. We find that there is a reasonable explanation about the assessee for reduction of the value of the property as prior agreement to sale. We are not intervening in the order of the CIT(A). Accordingly, the appeal of the revenue is dismissed.
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2023 (3) TMI 716
Revision u/s 263 - short computation in the sale consideration being difference between the sale consideration offered for LTCG and market value of the property sold as per sale deed - HELD THAT:- On perusal of the assessment order passed under section 143(3) of the Act dated 28.12.2017, the Assessing Officer has not discussed anything about the defects noticed by the ld. PCIT. Assessing Officer issued notice under section 143(2) of the Act. However, the defects noticed by the ld. PCIT in respect of computation of LTCG and advance payment received from M/s. Harmony Residences Pvt. Ltd. No question has been asked on the above aspects and no reply was given by the assessee. Even under section 142(1) of the Act, the Assessing Officer has not issued any questionnaire in respect of LTCG and advance payments received from M/s. Harmony Residences Pvt. Ltd. and even no reply was given by the assessee on these aspects. From the above, it is very clear that the Assessing Officer has not examined the above two defects noticed by the ld. PCIT. Therefore, we are of the opinion that the assessment order passed under section 143(3) of the Act is erroneous and prejudicial to the interest of Revenue and the ld. PCIT has rightly invoked the provisions of section 263 of the Act and directed the Assessing Officer to redo the assessment. Thus, we find no infirmity in the order passed by the ld. PCIT.Appeal filed by the assessee is dismissed.
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2023 (3) TMI 715
Revision u/s 263 by CIT - applicability of section 56(2)(viib) - share premium received - HELD THAT:- In this case, PCIT simply noted that the assessment order passed by the AO is cryptic. PCIT ought to have been examined the entire record, particularly, notice issued under section 142(1), wherein, the AO has called for various details from the assessee and specifically, all the details were filed before the Assessing Officer. Thus, we are of the opinion that the order passed by the AO is not erroneous and therefore, revision order under section 263 of the Act is not warranted and accordingly, the order passed u/s 263 of the Act is liable to be quashed. Assessee company has determined the fair market value at ₹.33/- per share on the basis of Net Assets method which is in accordance with the second method i.e., as per Explanation (a)(ii) to section 56(2)(viib) of the Act. The said value is duly substantiated by the valuation certificate issued by the Chartered Accountant, which is already filed in the form of paper book. Valuation of a subsidiary company is also supported by the valuation certificate issued by a Chartered Accountant. Moreover, the ld. PCIT did not find fault with the fair market value of ₹.33 per share determined by the assessee company on the basis of second method. Therefore, shares were issued at a consideration of ₹.33/- per share which is in line with the fair market value of ₹.33/- per share determined as per Explanation (a0(ii) to section 56(2)(viib) of the Act. Hence, the assessee company has not received any consideration exceeding the fair market value of its shares. Thus, the question of making any addition under section 56(2)(viib) of the Act does not arise. The ld. PCIT arrived at a fair market value of ₹.15.14/- per share as per Rule 11UA which is as per Explanation (a)(i) and the same is irrelevant since the assessee company had opted for determination on the basis of Net Assets method. In view of the above, we are of the opinion that the order passed by the AO is neither erroneous nor prejudicial to the interest of Revenue. Thus, the revision order passed by the ld. PCIT under section 263 of the Act is quashed. Appeal filed by the assessee is allowed.
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2023 (3) TMI 714
TP Adjustment - Addition on account of purchase of MS Ingots - HELD THAT:- As we find no infirmity in the order of Ld. CIT(Appeals) in the instant set of facts. CIT(Appeals) has categorically observed that there is a qualitative difference between the MS ingots sold by the AE to the assessee as compared to those sold by the AE to third parties. Assessee has been able to produce substantial evidence to prove that the difference in prices is due to the quality of products sold. TPO has accepted the contention of the assessee for the months of December 2013, February 2014 and March 2014 and the TPO has not made any addition, and TPO has made addition only for the month of January 2014 and that too only on the basis that during the month of January 2014 sales made by the AE to third parties were significantly higher as compared to other months, and therefore, there is in our view no rationale in making the adjustment only for the month of January 2014. Accordingly, we find no infirmity in the order of CIT(Appeals),who after detailed discussion in the order, has deleted the adjustment made by the TPO on this issue. Depreciation on expenses incurred for increase in share capital - assessee admitted that such expenditure was treated as part of fixed assets and depreciation has been claimed of such expenditure, since expenditure is not allowed as revenue expenditure on increase in authorized capital, the assessee cannot claim such expenditure by capitalising the same and claiming depreciation thereon - HELD THAT:- The assessee is in appeal before us against the aforesaid addition confirmed by Ld. CIT(Appeals). In the case of International Computers Indian Manufacture Ltd. [ 2015 (3) TMI 502 - BOMBAY HIGH COURT ] the Bombay High Court held that Depreciation is not allowable on capitalised expenditure on issue of shares; such expenditure would fall within provision of section 35D. Similar view was held in the cases of Autolite India Ltd Vs CIT [ 2003 (7) TMI 53 - RAJASTHAN HIGH COURT ] and CIT Vs Mahindra Ugine and Steel Co Ltd [ 2000 (2) TMI 26 - BOMBAY HIGH COURT ] where the Courts have denied depreciation on such expenses which were capitalised. Accordingly, we find no infirmity in the order of Ld. CIT(Appeals) on this issue so as to call for any interference. Ground number 1 of the assessee s appeal is dismissed. Addition on account of interest on the basis of Form 26AS offered to tax in subsequent year - HELD THAT:- We are in agreement with the view of the Ld. CIT(Appeals) that since the assessee follows mercantile system of accounting, this interest income should have been offered to tax in assessment year 2014-15 as well. However, in the interest of justice, once this interest income is subject to tax in assessment year 2014-15, then consequential relief may be allowed to the assessee by the Revenue if the said interest income has been offered to tax by the assessee in assessment year 2015-16, after carrying out the necessary verifications.
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2023 (3) TMI 713
Interest on housing loans given to employees - income from core shipping activity - core shipping income - Why not to be categorised as from core shipping activity as per provisions of section 115VI(2) ? - HELD THAT:- We find that while dealing with the interest income on loans/advances to employees for vehicles and computers, the coordinate bench of the Tribunal in assessee‟s own case in the Shipping Corporation of India Ltd vs ACIT [ 2011 (7) TMI 588 - ITAT, MUMBAI] , held that this income cannot be brought to tax separately and it is business income from core activity.Thus interest income on housing loans given to the employees is held to be income from core shipping activity and thus, is not separately chargeable to tax. Insurance and P I claims - It is an undisputed fact that all the ships owned and in-chartered by the assessee are qualified ships. From the aforesaid facts, it is evident that the receipt of Insurance and P I claim by the assessee is in respect of its 2 ships, which were damaged in preceding years but post-tonnage tax era. The assessee first incurred the cost of the repair, which was thereafter claimed as per the insurance policy. Since the receipt of the Insurance and P I claim is directly in relation to the core shipping activity of the assessee in respect of its ships, which are qualifying ships, therefore the receipt is covered under section 115VI of the Act. Course fees - As per the assessee though the said receipt is in incidental income in accordance with clause (iv) of Rule 11R of the Income Tax Rules, 1962, since the threshold of 0.25% of the turnover from core activities is already crossed, the said amount would be chargeable to tax. Accordingly, the same is held to be taxable under the provisions of the Act as per proviso to section 115 VI(1) of the Act. Recovery of the container-related cost credited as prior period income was treated as income of the pre-tonnage tax era and taxable as income from the incidental activity - Since the aforesaid receipt is mere reimbursement of expenditure, therefore respectfully following the judicial precedent rendered in assessee‟s own case assessment year 2007-08 [ 2011 (7) TMI 588 - ITAT, MUMBAI] the same is not in the nature of income. Terminal handling charges and commission on disbursement CIT(A) vide impugned order deleted the addition on account of income under normal provisions of the Act of the pre-tonnage tax era. Since the terminal handling charges and commission on disbursement are essentially part of core shipping activities, therefore we find no infirmity in the impugned order on this issue. Addition in respect of sundry receipts - AO held tonnage tax scheme is applicable for the income earned from the operation of qualified ships and that too from the activities which have been listed as the core activity of operation of ships - Since the assessee does not have any other business other than the business of operating qualifying ships and as it has no other activity as contemplated under Chapter XII-G, we are of the considered opinion that the income cannot be brought to tax separately and it is the income from the core activity. Receipt of rent on furniture, company's bus service, contribution for employees' new post-retirement medical scheme, and penal charges levied on employees are is in respect of employees involved in the core activity of the business of the assessee, we are of the considered opinion that same is not taxable under the normal provisions of the Act. Refund of Director's fees - Such Directors are paid their remuneration and as per the terms of employment, Directors‟ sitting fees are recovered. Since the assessee‟s only business is operating the qualifying ships therefore the aforesaid refund is also related to its core activity and thus cannot be taxed under the normal provisions of the Act. Commission on disbursement which the assessee earned over and above the disbursement amount paid to the agents, Captain, and crew of ships when the ship is abroad - Since this commission is also of a similar nature and that too pertaining to the post tonnage tax era, therefore, same forms part of core shipping activity. Receipt on account of Insurance and P I claims , which relates to the qualifying ship also forms part of the core shipping activity. Liquidated damages are recoveries from the shipyard or maintenance agencies. The entire dry-dock expenses incurred on the operation of qualifying ships are debited to the revenue account, whereas the liquidated damages are credited. Since the liquidated damages on account of delay or deficiency in service in respect of the qualifying ships, therefore, we are of the considered opinion that such receipt is part of the core shipping activity of the assessee. Sundry receipts - Assessee submitted additional evidences in relation to volume incentives from CFS, additional free days charges, container damage/maintenance charges, documentation charges, ship-owners expenses recovery, additional terminal handling charges, non-manifested charges, and other receipts - We allow the admission of the additional evidence filed by the assessee. Since the aforesaid evidence was not placed before the lower authorities, therefore the same could not be examined during the assessment proceedings. Accordingly, we deem it appropriate to remand this issue of taxability of sundry receipts under Chapter XII-G to the file of the AO for de novo adjudication after the necessary examination of details filed by the assessee. Profit on bar plus shop sale are held as incidental activity of the operation of the qualified ship. Adjusting the turnover by reducing the sundry receipts and profit on sale of assets - We find that the coordinate bench of the Tribunal in assessee‟s own case for the assessment year 2007-08 [ 2011 (7) TMI 588 - ITAT, MUMBAI] held that the profit on the sale of assets is taxable under the head capital gains and thus the same cannot be considered as turnover in view of the provisions of section 115VA of the Act and consequently, out of the purview of chapter XII-G. Thus the reduction of profit on sale of assets from turnover is upheld. Considering income by way of interest and dividend as income from core shipping activity - We find that in CIT vs Varun Shipping Co Ltd [ 2008 (9) TMI 591 - BOMBAY HIGH COURT] held that where the assessee borrowed certain amount for its business purpose and earn interest on unutilised portion of the loan, interest income is taxable as business income. Thus, since the funds are nothing but the funds required for running the shipping business, which has been invested by the assessee, and interest income is earned, therefore, we are of the considered opinion that income by way of interest arising from the said deposits is in the nature of business income and relates to the core shipping activity. Levy of interest under sections 234D - We deem it appropriate to remand this issue to the file of the Assessing Officer for de novo adjudication, after verification of whether any refund was granted to the assessee. If the claim of the assessee is found to be true, the Assessing Officer is directed to delete the interest levied under section 234D. Taxability of reimbursement of overheads for managed vessels - Since the receipt pertains to the managed vessels, therefore, the same is from the core activity of shipping and thus will form part of the turnover for the purpose of working out incidental income in excess of 0.25% of the turnover of the core activity.
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2023 (3) TMI 712
Reopening of assessment u/s 147 - Reasons to believe - no return has been filed by the assessee - link between the information received from the Investigation Wing and the formation of reason to believe - HELD THAT:- AO grossly erred in mentioning in the column No.8(a) of the format pertaining to approval of the ld.PCIT, Ghaziabad by mentioning that no return has been filed by the assessee. It is pertinent to mention that the copy of the return reveals that the assessee did file the return with ITO-2(1), Ghaziabad and reason has been recorded by the very Income-tax Officer which shows clear nonapplication of mind by the AO. When the AO has proceeded to initiate reassessment proceedings on the wrong premise that the assessee has not filed return of income for relevant assessment year and, in fact, the assessee did file the return of income, then, this is a clear case of non-application of mind and non-consideration of relevant material by the AO. When the AO has not created any link between tangible material and the formation of reason to believe that income had escaped assessment, then, the information received from Investigation Wing cannot be said to be tangible material per se without further inquiry being undertaken by the AO. In the present case also the AO initiated reassessment proceedings on the wrong premise that the assessee has not filed return of income for AY 2009-10 and the AO, without verifying and creating a link between the information received from the Investigation Wing and the formation of reason to believe that income has escaped assessment, initiated reassessment proceedings u/s 147 of the Act and issued notice u/s 148 of the Act and, therefore, the issue is squarely covered in favour of the assessee
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2023 (3) TMI 711
Existence of a PE in India - Profit attribution - CIT-A held that CIS did not constitutes a dependent agent PE of the appellant in Indian and does not have a service PE but sustained the fix placed PE in India and that assessee has business connection in India to be covered under the provisions of Section 9 of the Act - HELD THAT:- The issue of holding fixed place permanent establishment of the assessee in India, in assessee s own case the Tribunal for assessment year 2013-14[ 2020 (11) TMI 1101 - ITAT DELHI] and 2014-15 [ 2023 (1) TMI 1234 - ITAT DELHI] has upheld the following findings of Ld. CIT(A) wherein on the proposition of PE deserves to be upheld. The employees of the assessee frequently visited the premises of CIS to provide supervision, direction and control over the operations of CIS and such employees had a fixed place of business at their disposal. CIS was practically the projection of assessee s business in India and carried out its business under the control and guidance of the assessee and without assuming any significant risk in relation to such functions. Besides assessee has also provided certain hardware and software assets on free of cost basis to CIS. Thus, the findings of the CIT(A) that assessee has a fixed place PE in India Article 5(1) of the DTAA is upheld. Decided against assessee. Dependent agent PE - Business model of the Appellant and in absence of any material on record that the conditions mentioned in Article 5(4) of the DTAA is satisfied viz. habitually exercising authority to conclude contracts or maintaining stock of goods or habitually securing orders. CIS did not constitute a dependent agent PE of the Appellant in India. Payment link charges / IPLC charges being taxable under royalty - We hold that there is no transfer of the right to use, either to the assessee or to CIS. The assessee has merely procured a service and provided the same to CIS, no part of equipment was leased out to CIS. Even otherwise, the payment is in the nature of reimbursement of expenses and accordingly not taxable in the hands of the assessee. Therefore, it is held, that the said payments do not constitute Royalty under the provisions of Article 12 of the tax treaty and the ground is allowed in favour of assessee.
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2023 (3) TMI 710
CIT (Appeals) dismissed the appeal of the assessee for non-prosecution - HELD THAT:- We are of the considered view that this appeal should go back to the CIT (A) for fresh adjudication after hearing the assessee. Thus, we restore this appeal to the file of the CIT (A) who shall adjudicate the appeal on merits after providing adequate opportunity to the assessee. Assessee is directed to co-operate with the proceedings without taking un-necessary adjournments. Grounds raised by the assessee are allowed for statistical purposes.
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2023 (3) TMI 709
Revision u/s 263 - deduction allowed u/s 80IA - According to PCIT, brought forward unabsorbed depreciation should have been deducted from the profits generated before computing deduction u/s 80IA - HELD THAT:- In the instant case, we notice that the method of claiming deduction u/s 80IA without adjusting losses of the years prior to the initial year would get support from the decision rendered by Ahmedabad bench of ITAT in the case of DCIT vs. Chhotabhai Jethabhai Patel Co. [ 2020 (7) TMI 525 - ITAT AHMEDABAD ] CBDT has clarified in the Circular referred above that the losses arising in 'eligible business', if any, subsequent to earmarking of 'initial assessment year' shall however continue to be governed by embargo placed in Section 80IA(5) of the Act, i.e., the losses incurred in the years prior to the initial year need not be adjusted while computing the deduction u/s 80IA in the initial year. Hence the view expressed by Ld PCIT goes against the Circular of CBDT referred above. There should not be any doubt that the circulars issued by CBDT are binding on the tax authorities. In the instant case, it can be noticed that the view expressed by Ld PCIT is contrary to the Circular issued by CBDT. On the contrary, the deduction allowed by the AO is in accordance with the view expressed in the Circular issued by the CBDT. The view expressed by Ld PCIT with regard to the computation of deduction u/s 80IA cannot be sustained. Accordingly, we quash the impugned revision order passed by Ld PCIT on this issue. Exemption allowed to the assessee u/s 10(38) of the Act in respect of gains arising on sale of JM Arbitrage Advantage Annual Bonus Plan - We notice that the AO has issued notice u/s 142(1) of the Act, wherein he has called for details of exempt income and also the details of expenses incurred in relation to the above said exempt income. If so claimed, the justification for claiming it was also called for. AO has asked for justification for various exemptions and deduction claimed in the return of income including the profit on sale of investments, being securities chargeable to STT. In reply to thereto, the assessee has furnished the break-up details of exempt income, which included exemption of long term capital gain claimed u/s 10(38) of the Act to the tune of Rs.1.42 crores (as against Rs.5.77 crores mentioned by AO). Be that as it may, before Ld PCIT, the assessee has also submitted that the JM Arbitrage advantage fund is a equity oriented fund and the sale transactions have suffered STT, which is the condition for claiming exemption u/s 10(38) of the Act. The said submission has not been examined by Ld PCIT. Accordingly, we are of the view that the Ld PCIT was not justified in initiating revision proceedings on this issue. Accordingly, we quash his order passed on this issue. Disallowance to be made u/s 14A - In the notice issued u/s 142(1), AO has asked break-up details of long term investments, the expenses incurred in relation to exempt income, details of availability of non-interest bearing funds. Further, vide notice u/s 142(1) dated 09-08-2019, the AO has asked clarification on the note given by tax auditor as under on the expenses related to exempt income - Hence, the AO has asked explanations on the above said observation. The assessee replied that it has not earned any expenditure relating to exempt income. With regard to the interest expenses, perusal of the Balance sheet would show that the assessee is having capital balance of Rs.229.34 crores, as against the investments of around Rs.130 crores. Hence no part of interest expenses is liable to be disallowed in terms of the decision rendered by Hon ble Bombay High Court in the case of HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT ] The foregoing discussions would show that the AO has made enquiries during the course of assessment proceedings with regard to the disallowance to be made u/s 14A of the Act. Further, since the assessee is having enough own funds, no disallowance out of interest expenses is also called for. On these reasoning, the order passed by Ld PCIT on this issue is also liable to be quashed. Appeal of the assessee is allowed.
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2023 (3) TMI 708
Income received or deemed to be received in India - royalty receipts - assessee is a non resident company incorporated in Malaysia. It is engaged in the business of provision of distant education courses to individuals for various post-graduation courses - HELD THAT:- A perusal of Article 12(3) shows that, it brings within the ambit of the definition of 'Royalty', payment made for use of, or the right to use any copyright of a literary, artistic, or scientific work. As in case of Engineering Analysis Centre of Excellence Pvt.Ltd. vs CIT [ 2021 (3) TMI 138 - SUPREME COURT] has analysed the provisions of Income tax Act vis-a-vis provisions of DTAA. We note that the details that were filed before the DRP were neither remanded nor has been verified by the DRP themselves and observes that assessee could not furnish any documents which has been reproduced hereinabove in the preceding paras. We note that the various agreements / documents that has been filed in piece meal before the AO and the DRP has not thoroughly verified the materials / document that were filed by the assessee. Infact before the DRP, various documents filed by the assessee has not been considered. As has been submitted by Ld.CIT.DR that identical issue has been remanded to the Ld.AO for fresh consideration for A.Y. 2014-15 [ 2022 (3) TMI 1509 - ITAT BANGALORE] we do not wish to express our opinion in the present facts as it would prejudice the rights of assessee as well as the revenue. In the interest of justice, we deem it proper to remand this issue back to Ld.AO to be decided along with A.Y. 2014- 15 as there are voluminous details available in the present assessment year under consideration before us. It is appropriate to remit the issue in dispute to the file of the Ld.AO for deciding the comparability of these transactions in the light of the judgment of the Hon ble Supreme Court in Engineering Analysis Centre of Excellence Private Limited (supra) and the decisions relied by the Ld.AR reproduced herein above. Accordingly, the issue in dispute is remitted to the Ld.AO for fresh decision with the above directions. In the result the appeal of the assessee is partly allowed for statistical purposes.
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2023 (3) TMI 707
TP Adjustment - comparable selection - HELD THAT:- Companies functionally dissimilar with that of Assessee s IT services segment need to be delsected.
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2023 (3) TMI 706
TP Adjustment - not considering the losses on account of foreign exchange fluctuation as operating in nature and not allowing purchase price adjustment - HELD THAT:- Admittedly, similar issue came for consideration before this Tribunal in assessee s own case [ 2022 (5) TMI 34 - ITAT BANGALORE ] as held TPO and the DRP have not properly analyzed the submissions of the Assessee. There is no analysis whether there was any adverse foreign exchange fluctuations during the relevant assessment year, which is abnormal in nature and what is its effect on the operating margin of the Assessee and the comparables - we are inclined to remit the issue to the file of TPO on similar directions. Non-allowing adjustment on account of custom duty and surcharge incurred by the assessee - Similar issue was considered by Bangalore bench in the case of Continental Automotive Components India Pvt. Ltd. [ 2021 (11) TMI 1059 - ITAT BANGALORE ] as held issue should be set aside to the files of the TPO with direction to examine the claim of the assessee relating to the import cost factor and eliminate the difference if any. However, the TPO/AO/DRP shall see to it that the difference in question is 'likely to materially affect' the price/profit in the open market as envisaged in sub rule (3) of Rule 10B of the Income tax Rules, 1962 - thus we remit the issue to the file of AO/TPO for fresh consideration on similar lines. Depreciation adjustment - DRP not excluding depreciation while computing the operating margin of the Appellant and the comparable companies - HELD THAT:- As decided in assessee own case [ 2022 (5) TMI 34 - ITAT BANGALORE ] we observe that there is no analysis with respect to depreciation policy of the assessee and comparable cases. Therefore, we are of the view that let this matter be reexamined by the TPO / AO afresh. The assessee should demonstrate whether there is any difference in depreciation policy of the assessee and the comparable companies and what is its impact on the computation of arm's length price. If the assessee is able to demonstrate the same, the TPO may allow reasonable depreciation adjustment while determining the ALP for the international transactions. Thus we remit the issue to the AO/TPO for fresh consideration. Capacity utilization adjustment - As we direct the TPO to exercise powers under section 133(6) of the Act to call for information on capacity utilization of the comparable companies such as Installed Capacity, Actual Production in Units,Break-up of Fixed Cost and Variable Cost, Segmental/ product wise information, if any. Post obtaining the information, he is requested to provide the assessee an opportunity by sharing the details so obtained, and accordingly, grant the adjustment for capacity under-utilized - we remit the issue to the file of AO/TPO on similar direction. Working capital adjustment - We of the opinion that similar issue came for consideration before this Tribunal in assessee s own case [ 2022 (5) TMI 34 - ITAT BANGALORE ] held keeping with the OECD guidelines, endeavor should be made to bring in comparable companies for the purpose of broad comparison. Respectfully following the decision of the Coordinate Bench in the case of Huawei Technologies India (P)Ltd. [ 2018 (10) TMI 1796 - ITAT BANGALORE ] we also hold that the working capital adjustment is to be allowed as per actual on the final set of comparables - Therefore the working capital adjustment as claimed by the Assessee should be allowed. thus we remit the issue to the file of AO/TPO on similar lines. Admission of additional grounds accepted - transfer pricing adjustment should be restricted only to the AE related transactions of the assessee - we remit this issue to the file of AO/TPO for fresh consideration.
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2023 (3) TMI 704
TP Adjustment - MAM - CUP OR TNMM is the most appropriate method for the purpose of benchmarking of the international transactions - HELD THAT:- Respectfully, following the decision of the Tribunal for A.Y. 2009-10 [ 2021 (10) TMI 605 - ITAT HYDERABAD ] we are of the opinion that the international transactions of the assessee are required for benchmarking by applying TNMM method as most appropriate method instead of CUP method and accordingly TPO is directed to apply TNMM as most appropriate method for benchmarking. Further on perusal of the record, we found that the TPO had no occasion to benchmark the transactions by applying TNMM, and thereafter applied CUP method. We accordingly send back these issues to the file of AO / TPO with the direction to work out the international transactions by applying TNMM as most appropriate method and determine the ALP. Addition towards cash discounts - assessee has not filed any proof in respect of discounts given and in view of the same, the assessee s claim is disallowed - admission of the additional documents at this stage - HELD THAT:- In our view, sufficient opportunities were given by the lower authorities however despite grant of opportunities, the assessee had failed to file any document/claim before the lower authorities, no for the first time the assessee had filed the document and sought to claim the deduction on account of cash discount. In our view such it plea at belated stage cannot be accepted more particularly when the assessee is a company and is run by the professionals and also advised by the professionals. The assessee has given the reasons for not filing the said document before the lower authorities and had submitted that this additional document be permitted to be file on record. As noted hereinabove the assessee was negligent in not following the claim before the lower authorities by seeking deduction on account of cash discount either before the AO or before the DRP and also failed to file any documentary evidence in support thereof before lower authorities. Records shows that DRP had passed directions on 25/11/2013 and Assessing Officer passed order on 30.1.2014 for Assessment Year -2009-10, however despite that nothing was done for the current assessment year by the assessee by way of bringing on record the document of cash discount before the lower authorities. Admittedly assessee had filed the application for admission of additional document on 9/5/ 2018 after passage of two years from the date of institution of the present appeal, therefore in our view the assessee was not able to make out a case for admission of the additional documents at this stage more particularly when no offered for made by the assessee either before the assessing officer or before the DRP at the first instance. Accordingly the application for admission of the additional document is rejected and hence the ground raised by the assessee is also rejected by relying upon the decision of the direction High Court in the case of A.K. Babu Khan [ 1974 (9) TMI 31 - ANDHRA PRADESH HIGH COURT ] Depreciation on goodwill - HELD THAT:- The valuation report, which was filed by the assessee was required to be considered with respect to computation of valuation of the goodwill for the A.Y. 2007-08 i.e year of acquisition. However, it was informed to us that as the issue is pending for adjudication before the lower authorities and the same has not attained finality. In the light of the above, we deem it appropriate to remand back this issue to the file of Assessing Officer with a direction that if the Assessing Officer on consideration of the evidences filed on record for A.Y. 2007-08 comes to a definite figure of valuation of goodwill, then accordingly depreciation shall be allowed to the assessee for the year under consideration in accordance with law. However, with respect to the effect of amendment which changed the definition of tangible asset and depreciation on the tangible asset, we are of the opinion that the change in law has brought into book w.e.f 01.04.2022, as is clear from Explanation to the Budget at page 107 where it is categorically mentioned that the change in law will came into effect w.e.f. 01.04.2022 . There will not be any effect of the amendment in the Act for the current set of appeals as amendment will operate prospective, hence the valuation of the goodwill and depreciation thereon shall be computed on the basis of the existing law as applicable for the A.Y. 2007-08 and thereafter. In the light of the above, we deem it appropriate to remand back the issue of depreciation pertain to the goodwill to the file of jurisdictional Assessing Officer with a direction to give depreciation on the valuation of the intangible asset on the basis of valuation of goodwill if any for A.Y. 2007-08. Admission of additional grounds before DRP - HELD THAT:- Once the additional grounds were raised by the assessee before DRP, then it is required to be adjudicated by the DRP. Accordingly, we are of the view that these grounds are required to be remanded back to the file of AO for passing an order in accordance with the law as provided under Chapter X of the I.T. Act. Needless to say that before passing an order, the AO shall pass a draft assessment order and thereafter, if the assessee is aggrieved with the draft assessment order, then assessee may prefer proceedings before DRP or in any forum as provided and thereafter, the final assessment order shall be passed by the Assessing Officer. Recover of salary expenses - benefit to the assessee with the deputation of technical expert - HELD THAT:- On perusal of the orders of lower authorities, we had considered that there is no reason to interfere with the order passed by the DRP and we considered the view of the DRP whereby the DRP has mentioned that the deputation of the technical expert can only be for a definite purpose to benefit the AE and benefit from the expertise and productivity of these experts while depriving the assessee of their services. Therefore, we conclude that there should be some benefit to the assessee with the deputation of technical expert and therefore, we do not find any reason to interfere with the decision of learned lower authorities. Accordingly, this ground is dismissed. Disallowance of forex loss - assessee has not claimed the forex loss in the return of income or in the revised return of income, therefore, this claim is not sustainable - HELD THAT:- In our view, this issue of adjudication of fresh grounds by the appellate authority / Tribunal is no more res integra as the Hon ble Supreme Court recently in the case of Wipro [ 2022 (4) TMI 694 - SUPREME COURT ] - Thus we have no doubt that the lower authorities are duty bound to decide the issue even if the claim has not been filed in the return of income or in the revised return of income. We deem it appropriate to remand the matter back to the file of Assessing Officer with a direction to examine the case afresh after considering the decision of Hon ble Supreme Court in the case of CIT Vs. Woodward Governor India Pvt. Ltd [ 2009 (4) TMI 4 - SUPREME COURT ] as well as the decision of Wipro [ 2022 (4) TMI 694 - SUPREME COURT ] and also the provision of section 43A of the Income Tax Act. Disallowance of provision for site restoration fund - HELD THAT:- As the assessee willing to provide the necessary scientific information to show that the expenditure was incurred by it in reclaiming and rehabilitating the affected land. In the light of the above, we remand back this issue to the file of Assessing Officer with a direction to the assessee to provide all the information, documents / evidences showing the actual expenditure incurred for restoration / reclaiming of the site. Addition of rendering of services u/s 37(1) - actual rendition of services - HELD THAT:- Once the TPO/AO benchmarked the transactions by applying TNMM then this alternative ground / disallowance would not survive as it will be subsumed in TP bench marking and therefore, no separate addition u/s 37 can be made by the Assessing Officer. However, in case, the AO / TPO concludes otherwise, then the Assessing Officer may examine the issue under section 37 of the Act and in that eventuality the assessee will provide all the documentary evidence etc to demonstrate that the services were provided wholly and exclusively for the purpose of carrying out the international transactions. We are of the opinion that this issue is required to be remand back to the file of Assessing Officer with a direction to the assessee to provide the necessary evidence for rendering of services etc to the satisfaction of Assessing Officer. Accordingly, this issue is allowed for statistical purposes.
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Customs
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2023 (3) TMI 703
Smuggling - Betel nuts (foreign Origin goods) - goods notified under Section 123 of the Customs Act or not - burden to prove - reliability on statements which were subsequently retracted - HELD THAT:- Based on presumptions and assumptions, it cannot be held that the goods were smuggled goods and in the absence of any evidence produced by the revenue to discharge the burden cast upon them, the Tribunal noting the facts of the case had rightly granted the relief in favour of the respondents. Furthermore, there was no testing of the seized goods through any accredited Agency for determining any constituent property or characteristic that would indicate or establish foreign origin of the said goods. The Tribunal noted that the only evidence on the basis of which the proceedings were initiated and the order of adjudication was passed against the nine respondents is based on a statement recorded from the respondent in CUSTA 22 of 2022. All the respondents were arrested and produced before the learned Chief Judicial Magistrate, Siliguri before whom the so-called voluntary statements were retracted. Furthermore, the Tribunal noted that there was no discussion on the retraction of statements made on oath by the respondents and the witnesses who implicated the respondents were not produced for cross-examination in spite of a specific request made by the concerned respondent and this request was rejected on the ground that the occupants of the trucks had allegedly described the true facts in course of the statements recorded under Section 108 of the Act which were affirmed by the respondent. Whether the request of cross-examination could have been rejected? - HELD THAT:- On a thorough factual analysis and noting the legal position, the Tribunal came to the conclusion that the department has failed to establish that the said goods are smuggled goods. The respondent in claimed ownership of the seized goods and prayed for a direction to return the goods to him and the Tribunal analysed the documents and directed return of the goods - The entire case is fully factual and, no substantial question of law arises for consideration Return of the goods - HELD THAT:- Admittedly, the goods are perishable in nature and the goods were seized on 1st march, 2016 and the question of returning the goods to the respondent in CUSTA 22 of 2022 at this juncture does not arise as the goods would be unfit for human consumption and it will be against the public interest to direct return of the goods. Therefore, to that extent, the order passed by the Tribunal stands modified giving liberty to the respondent, namely, Md. Tashin Shah to seek for payment of the value of the goods by making an application before the concerned authority and if such application is made within a period of thirty days from the date of receipt of server copy of this order, the said application shall be processed in accordance with law. Appeal dismissed.
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2023 (3) TMI 702
Classification of goods - bhusi/ bhuki of pulses / pulses waste cleared from Kandla SEZ - classifiable under Chapter heading 07139099 or 11061000 of Customs Tariff Act, 1975? - eligibility for exemption Notification No. 12/2012-Cus dated 07.03.2012 - case of the department is that the goods cleared by the appellants from Kandla SEZ is Pulses Grinding (Atta of Pulses)- Powder hence the same is not classifiable under Chapter heading 07139099 but classifiable under heading 11061000. HELD THAT:- The appellant declared the product as Pulses Grinding (Atta of pulses)-Powder and with this description, it prima-facie appears that the goods are not in the form of pulses but in the form of Atta or Powder. However, the learned Counsel submits that the same is not arising out of milling process as they do not have milling industry. The learned Counsel submitted a detailed affidavit of the Director of the Appellant Company. However, the said affidavit was not seen by the Adjudicating Authority. Therefore, in the interest of principle of natural justice, the Adjudicating Authority should re-consider the matter in the light of the affidavit submitted by the appellant s Director. The matter remanded to the Adjudicating Authority for fresh decision, after affording sufficient opportunity of personal hearing to the appellants. Appeals are allowed by way of remand.
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2023 (3) TMI 701
Provisional release of the goods for the purpose of re-export only - dyed polyester with modified twill - dyed polyester fabric coated/laminated with Polyurethane - classifiable under CTH 54076190 and 59032090 - dyed Poly vinyl chloride coated polyester fabric - dyed polyester fabric coated / laminated with Polyurethane - classifiable under CTH 59031090 and 59032090 or not - Section 110A of the Customs Act, 1962. HELD THAT:- It is clear that samples have been drawn and sent for testing to the Textile Committee. The report has been received on the basis of which the goods have been seized. There is misdeclaration of the goods as to their description, classification and quantity. The Ld. Counsel has submitted that the appellant has undertaken not to contest the classification, identity and quantity of the goods in the proceedings. The Ld. A.R has not been able to put forth any reason as to the necessity to still keep the goods in custody. The request is to provisionally release the goods for re-export only. We also take note that the appellant has paid Rs.50 lakhs. The Hon ble jurisdictional High Court in the case of KAUSALYA IMPEX VERSUS CHIEF COMMISSIONER OF CUSTOMS, CHENNAI [ 2001 (6) TMI 73 - HIGH COURT OF JUDICATURE AT MADRAS] held that when the goods are freely importable, refusing the request to re-export is not legal or proper. The goods in the present case are freely importable and not prohibited goods. The appellant has undertaken not to contest the classification, description or quantity of the goods. The appellant has also made payment of Rs.50 lakhs. After appreciating these facts and following the ratio laid in the above decisions, refusal to provisionally release the goods for the purpose of re-export only is not justified. The impugned order (letter refusing to provisionally release the goods for re-export) is set aside. The adjudicating authority is directed to consider the request of the importer-appellant for provisional release of the goods for re-export only within a period of one month from the date of receipt of this order, subject to reasonable conditions, if necessary, for safeguarding the revenue. Appeal allowed.
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2023 (3) TMI 700
Direct appeal to Tribunal bypassing the appellate remedy before Commissioner (Appeals) - provisional release of goods - exorbitant amount of bank guarantee which is five times of the differential duty, is imposed by the adjudicating authority - classification of goods - Optical PLC Splitter - to be classified under chapter sub-heading 8517 79 90 as claimed by the appellant, or to be classified, as proposed by the Department under 8517 62 90 of Customs Tariff Act, 1975 - HELD THAT:- The appellant ought to have filed appeal before the learned Commissioner(Appeals), instead of approaching this Tribunal directly. However, in the interest of justice, we therefore direct the appellant to approach the learned Commissioner(Appeals), if so advised and the learned Commissioner(Appeals) would consider to condone the delay of the period consumed before this Tribunal in pursuing the remedy, if the appeal before him is filed by the appellant within a reasonable period. Appeal disposed off.
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Insolvency & Bankruptcy
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2023 (3) TMI 699
Eviction order - tri-partite agreement - right or interest that the Corporate Debtor has over the property in question, for the purpose of deciding the inclusion of the same in the Information Memorandum prepared by the Resolution Professional under Regulation 36 of the Regulations - Seeking direction to Energy Properties Others (including Victory) not to obstruct the sole and exclusive possession of the property - issuance of direction to the local district administration to give proper assistance to the Resolution Professional in taking possession of the property so as to discharge his duties under the Code. What is the nature of the right or interest that the Corporate Debtor has over the property in question, for the purpose of deciding the inclusion of the same in the Information Memorandum prepared by the Resolution Professional under Regulation 36 of the Regulations? - HELD THAT:- A bundle of rights and interests were created in favour of the Corporate Debtor, over the immovable property in question. The creation of these bundle of rights and interests was actually for a valid consideration. But for the payment of such consideration, Energy Properties would not even have become the owner of the property in dispute. Therefore, the development rights created in favour of the Corporate Debtor constitute property within the meaning of the expression under Section 3(27) of IBC. At the cost of repetition, it must be recapitulated that the definition of the expression property under Section 3(27) includes every description of interest, including present or future or vested or contingent interest arising out of or incidental to property . Since the expression asset in common parlance denotes property of any kind , the bundle of rights that the Corporate Debtor has over the property in question would constitute asset within the meaning of Section 18(f) and Section 25(2)(a) of IBC. In Sushil Kumar Agarwal [ 2018 (10) TMI 1822 - SUPREME COURT ], this Court brought out the distinction between different types of Development Agreements, with particular reference to Section 14(3)(c) of the Specific Relief Act, 1963. After summarizing the different types of Development Agreements, this Court held that An essential incident of ownership of land is the right to exploit the development potential to construct and to deal with the constructed area. In some situations, under a development agreement, an owner may part with such rights to a developer. This in essence is a parting of some of the incidents of ownership of the immovable property. Therefore, it is not very difficult to conclude, that a bundle of rights and interests were created in favour of the Corporate Debtor, by a series of documents such as (i) the MoU dated 24.01.2008; (ii) the shareholders agreement dated 24.01.2008; (iii) the flow of the consideration from the Corporate Debtor to the UCO Bank and to Energy Properties; (iv) the Development Agreement dated 16.06.2008; (v) the Memorandum Recording Possession dated 02.03.2010 executed by the original shareholders of Energy Properties; (vi) the Memorandum Recording Possession dated 24.06.2010 executed by Energy Properties in favour of the Corporate Debtor; and (vii) the Leave and License Agreement primarily executed by the Corporate Debtor in favour of Victory, which was merely confirmed by Energy Properties as a confirming party. Some of these bundle of rights and interests, partake the character and shade of ownership rights. Therefore, these rights and interests in the immovable property are definitely liable to be included by the Resolution Professional in the Information Memorandum and the Resolution Professional is duty bound under Section 25(2)(a) to take custody and control of the same. Whether NCLT and NCLAT have exercised a jurisdiction not vested in them in law by seeking to recover/protect the possession of the Corporate Debtor? - HELD THAT:- As a matter of fact, the only decision of this Court which may probably come close to the facts of the present case, is the one in RAJENDRA K. BHUTTA VERSUS MAHARASHTRA HOUSING AND AREA DEVELOPMENT AUTHORITY AND ANOTHER [ 2020 (3) TMI 34 - SUPREME COURT ]. In the said case, there was a tripartite joint development agreement entered into between (i) a Society representing a large number of persons occupying 672 tenements in the property; (ii) Maharashtra Housing and Area Development Authority (MHADA) , which was the owner of the land; and (iii) the corporate debtor. After initiation of CIRP against the corporate debtor, MHADA issued a notice for the termination of the joint development agreement. NCLAT refused to treat the property as the asset of the corporate debtor. But this Court reversed the said decision, by holding that Section 14(1)(d) stood attracted in the facts and circumstances of the said case and that even a reference to Sections 18 and 25 may not be necessary. Though the said case arose out of a fact situation where the termination of the joint development agreement was hit by Section 14, the said decision clinches the issue on what constitute a property and the distinction between occupation and possession of a property. The fact that there were security guards posted in the property is borne out by records. This is why NCLT as well as NCLAT have done a delicate act of balancing, by protecting the interests of Victory to the extent of the land permitted to be occupied. In fact, Victory does not even have the status of a lessee, but is only a licensee. A license does not create any interest in the immovable property - NCLT as well as NCLAT were right in holding that the possession of the Corporate Debtor, of the property needs to be protected. This is why a direction under Regulation 30 had been issued to the local district administration. The impugned orders do not call for any interference. Hence, the appeals are dismissed.
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2023 (3) TMI 698
E-auction - submission which has much pressed by learned counsel for the Appellant is that the Appellant has made a higher offer of more than 10% from the offer of Respondent No.2 which was sufficient ground to accept the offer of the Appellant, maximisation of the value of the Corporate Debtor being the main objective of the I B Code. HELD THAT:- There can be no dispute that maximisation of the value of the Corporate Debtor is one of the objectives of the I B Code. However, the said objective has to be achieved within timelines. There has been already five failed e-auctions and the Respondent No.2 was an entity who had been interested in the Corporate Debtor from very beginning by submitting Resolution Plan. Respondent No.2 was objecting to the liquidation and even filed an appeal in this Tribunal, where this Tribunal observed that Liquidator should explore the possibility for a scheme for compromise and arrangement. The Respondent No.2 has also filed a scheme for compromise which came to be considered by the Stakeholder Consultation Committee, which was not approved having received only 64% voting share. The Stakeholder Consultation Committee have thus well aware of the plan and scheme submitted by Respondent No.2 and Stakeholders has given their express approval to the proposal of Respondent No.2. The acceptance of proposal of Respondent No.2, which was more than the last Reserve Price of the failed auction, after due deliberation was accepted by the Stakeholders. The Respondent No.2 was not a stranger to the above process and he has already filed Resolution Plan and a scheme which was not earlier approved. Financial Creditors were aware of the credentials of the Respondent No.2 and must have interacted with the Respondent No.2 even earlier - there are no error in exercise of jurisdiction by the Adjudicating Authority in approving the proposal of Respondent No.2 and judgment of this Tribunal in Rimjhim Ispat Ltd. was on its own facts. There are no illegality in the order of the Adjudicating Authority which may warrant interference in the impugned order in exercise of our appellate jurisdiction - appeal dismissed.
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2023 (3) TMI 697
E-auction - seeking direction to declare the applicant as successful bidder and cancel the bid of Appellant which was accepted by the Liquidator - It is submitted that since the Respondent No.1 has given the equal bid of Rs.38,40,00,000/- within two minutes of the bid submitted by the Appellant, by virtue of the E-auction Process Information Document, the Respondent No.1 was to be declared as Successful Bidder and the Liquidator committed error in declaring the Appellant as Successful Bidder. HELD THAT:- The document clearly indicate that if bid under option 1 and 2 are equal, then bidder under option 1 as going concern shall be declared as successful bidder. The system of bidding and various entries shows that bid of Appellant and Respondent No.1 were of equal amount, whereas the system of bidding as was applied by the bidding forum rejected the bid of Respondent No.1, which was required to be analysed by the Liquidator. It is on the record that the last bid given by the Appellant was of Rs.38,40,00,000/- and since there is no incremental increase by Respondent No.1, its bid of same amount was rejected by the system. The requirement in the Process Document that if the both the bids in option 1 and 2 are equal, bidder under option 1 for sale as going concern shall be successful bidder, there was no measure to apply said provision in the system. System proceeded on its own basis as per terms and conditions. There is no dispute that one of the participant i.e. Respondent No.1 has submitted bids under option 1 i.e. sale of Corporate Debtor as going concern and bid by the Appellant was under option 2 and preference to bid under option 1 has to be given since sale of Corporate Debtor as going concern is audible objection in an insolvency proceeding for revival of the Corporate Debtor. The bidding was closed after receiving aforesaid bid and it was duty of the Liquidator to apply the relevant conditions to find out who should be declared as the successful bidder. The Liquidator instead of looking into the relevant conditions, acted mechanically and followed the auction platform in declaring the Appellant as the highest bidder. The Liquidator is the best person, in facts of the present case, to appreciate the requirements and interpretation of the Information Document and E-auction Document issued by him. In the present case, the Liquidator has not given effect to the requirement in the Information Document that in event bid under option 1 and 2 are equal, the bidder under option 1 shall be declared as successful bidder. The liquidation process has to be conducted as per the Liquidation Regulation and as per the Process Document issued by the Liquidator. When the process was completed, highest bidder was to be chosen as per the terms and conditions. Present is not a case where this Tribunal should allow the bidding process to again commence. The question before the Adjudicating Authority was as to whether in the facts and circumstances of the present case, on an application, Respondent No.1 was required to be declared as successful bidder, which decision has been taken by the Adjudicating Authority after considering the relevant Process Document. This Tribunal in the case of Y. SHIVRAM PRASAD AND ASSET RECONSTRUCTION COMPANY (INDIA) LTD. VERSUS S. DHANAPAL ORS. AND SERVALAKSHMI PAPER LTD. ORS [ 2019 (5) TMI 386 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] has held that it is clear that during the liquidation process, steps required to be taken for its revival and continuance of the Corporate Debtor by protecting the Corporate Debtor from its management and from a death by liquidation. The Adjudicating Authority has also permitted to refund the amount of deposited by the Appellant with the accrued interest as accrued - no grounds have been made to interfere with the impugned order. Appeal dismissed.
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FEMA
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2023 (3) TMI 705
Foreign Direct Investment Policy - permit foreign investment by a foreign airline - Public Interest Litigation (PIL) challenging the decision passed by the Ministry of Finance, Department of Economic Affairs, Government of India approving M/s Air Asia Investment Ltd. (a Malaysian Company) to incorporate a new Joint Venture Company with foreign equity of 49% amounting to USD 15 Million and the balance 51% equity share was to be held in the ratio of 30% by M/s Tata Sons Ltd. and 21% by M/s Telestra Trade Pvt. Ltd. - HELD THAT:- It is stated that the name of Air Asia (India) Pvt. Ltd. was changed to AIX Connect Pvt. Ltd. It is also stated that on 12.08.2020, Talace Pvt. Ltd. was incorporated as 100% wholly owned subsidiary of Tata Sons Pvt. Ltd. which holds 100% shares of Air India Ltd. Material on record further discloses that vide an Order dated 11.07.2019, the Central Bureau of Investigation (CBI) was impleaded as Respondent No.6 in the writ petition and the CBI was directed to file the Status Report in a sealed cover. Similarly, this Court vide Order dated 23.01.2020, permitted the Petitioner to implead Enforcement Directorate (ED), Ministry of Finance as Respondent No.8 and the ED was also directed to file the Status Report in a sealed cover. Status Reports in sealed covers have been filed before this Court and this Court has perused the Status Reports. In view of the fact that there is no foreign investment as of today, the prayers made in the writ petition have become purely academic. The Petitioner, who appears in person, has stated that he is no longer interested in pursuing the writ petition. In view of the statement made by the Petitioner appearing in person, the writ petition stands disposed of.
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Service Tax
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2023 (3) TMI 696
Maintainability of petition - alternative and efficacious remedy of appeal - Levy of Service Tax - amount paid by the Petitioner to the State of Maharashtra for irrigation restoration charges - whether the writ petition should be entertained, given the availability of the alternative remedy of appeal, as argued by the Respondents? - violation of principles of natural justice. HELD THAT:- It is well established that the availability of an alternate remedy does not necessarily preclude a writ petition under article 226 of the Constitution of India. The rule of non-interference in writ jurisdiction when an alternate remedy is available, is self-imposed. Whether a writ petition should be entertained in such circumstances depends on various factors. In the decisions of Godrej Sara Lee [[ 2023 (2) TMI 64 - SUPREME COURT] ] and in Greatship [[ 2022 (9) TMI 896 - SUPREME COURT] ], Supreme Court has made a distinction between the maintainability of the writ petition and the entertainability. In the case at hand, the Respondents do not contend that the Petition is not maintainable, but they contend that it should not be entertained. This objection is based not only on the availability of an alternate remedy, but that factual enquiry is necessary for which appeal is provided under the statute. Whether the Petitioner's argument presents a purely legal question that can be decided without any further adjudication? - HELD THAT:- The show cause notice was issued based on information received that the Water Resources Department of the State of Maharashtra was collecting non-irrigation charges from various customers for the use of water for non-irrigation purposes. The Respondents contend that the irrigation restoration charges are simply the recovery of costs for the construction of the distribution network. During the investigation, a representative of the Petitioner stated that the irrigation restoration charges were the recovery of costs for the construction of the distribution network. Whether the services received by the Petitioner way of restoration of the command area, against payment of consideration as non-irrigation charges? - whether the extended period specified in the proviso to sub-section (1) of Section 73 of the Finance Act, 1994, read with Sections 142 174 of the CGST Act, 2017, should be invoked for the recovery of the Service tax? - HELD THAT:- Section 83 of the Finance Act, 1994 makes certain provisions of sections of the Central Excise Act, 1944, as in force from time to time applicable in relation to service tax as they would apply in relation to a duty of excise. One of them is Section 35L of the Act of 1944. Section 35L(b) provides that an appeal from any order passed by the Appellate Tribunal relating to, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purpose of assessment would lie to the Supreme Court. Section 35L(2) provides that determination of any question having a relation to the rate of duty shall include the determination of taxability or excisability of goods for the purpose of assessment. Reliance was placed on the decisions of the Hon'ble Supreme Court in the case of the Coastal Container Transporters Association [[ 2019 (2) TMI 1497 - SUPREME COURT] ]. The petitioner therein sought to distinguish the decision of the Coastal Container Transport Association, submitting that in that case, the petition was filed at the stage of show cause notice and not when the order on show cause notice was passed. The Division Bench did not accept this distinction and found that the writ petition ought not to be entertained. The Division Bench also found that there was no breach of principles of natural justice, and no case was made out. It was held that the Finance Act 1994 provided complete machinery to challenge the order of the assessment in appeals, the last one being before the Supreme Court. This decision is, thus, directly applicable to the case at hand. Further, even assuming that the first appeal would lie in this court and not the Supreme court, this is not a case where writ jurisdiction needs to be entertained when the petitioner has a remedy of a substantive appeal. There is no patent lack of jurisdiction or complete absence of jurisdictional facts in the impugned order that would allow us to declare that there is no liability upon the Petitioner to pay the service tax. The issue at hand requires adjudication and the applicability of the provisions to the facts is disputed. The Adjudicating Officer had the jurisdiction to decide whether a particular activity attracts service tax or not, and the Petitioner has the option to file a statutory appeal to the Appellate Tribunal where the Petitioner can present all of its contentions. There is no reason why the Petitioner cannot avail of the statutory remedy of appeal - the preliminary objection raised by the Respondents that the writ petition should not be entertained, is upheld. The Writ Petition is dismissed.
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2023 (3) TMI 695
Extended period of limitation - Non-payment of service tax - translation services received by the appellant from the various individuals taxable with effect from 01.05.2006, under Business Support Services or not - HELD THAT:- The period of dispute is from 2006-07 to 2010-11 and the tax demand was raised under reverse charge mechanism. Hence, when the tax is paid under reverse charge mechanism, the appellant would be entitled to avail credit of the same, which invariably leads to a revenue neutral situation. Thus, there is no scope to allege fraud, suppression, etc., to invoke the extended period of limitation for non-payment of tax. The demand is possible only for the normal period. The Show Cause Notice in this case having been issued on 08.05.2014, the demand proposed and confirmed for the period prior to October 2009, is barred by limitation. It is deemed proper to set aside the above demand by agreeing with the contentions of the Learned Consultant for the appellant that the same is hit by limitation - demand for the normal period upheld - matter remanded to the file of the Adjudicating Authority to the limited extent of working out the demand for the normal period. Penalty under Section 78 and penalty under Section 77 of the Finance Act, 1994 - HELD THAT:- The Revenue has not made out any case of fraud, suppression, etc., and therefore, the impugned order is set aside to this extent of levying penalty under Section 78 ibid. - there are no allegations as to the violation of any of the provisions of Section 77. Hence, the penalty appears to have been imposed mechanically. Further, the Adjudicating Authority has ordered for appropriation of the amount paid including interest and there is no allegation further as to non-registration, etc., by the appellant. Thus, the appellant has made out a case for intervention for invoking the provisions of Section 80 of the Act, as it stood then. Thus, to this extent also, the impugned order stands set aside and the grounds-of-appeal, stand allowed. The appeal filed by the assessee allowed in part and part matter on remand.
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2023 (3) TMI 694
Maintainability of appeal - appeal dismissed for failure to comply with Section 35F (pre-deposit) - simultaneously imposition of penalty under Section 76, 77 78 which the Commissioner (Appeals) allowed - service tax alongwith interest was paid on being pointed out - HELD THAT:- It is seen that payment of Service Tax on reverse charge mechanism using CENVAT is a valid payment. The impugned order has failed to consider merit for the appellant s case and dismissed only for noncompliance of Section 35F. In this circumstances, the impugned order does not dealt with the entire defense of the appellant. The said order is also set aside and matter remanded to the Commissioner (Appeals) for fresh adjudication. Appeal allowed by way of remand.
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2023 (3) TMI 693
Levy of service tax - business auxiliary service - appellant engages professional/doctors/ consultants on contractual basis - HELD THAT:- This precise issue had come up for consideration before two Benches of the Tribunal in Ganga Ram Hospital. The first decision rendered on M/S SIR GANGA RAM HOSPITAL, BOMBAY HOSPITAL MEDICAL RESEARCH CENTRE, APPOLLO HOSPITALS, M/S MAX HEALTH CARE INSTITUTE LTD VERSUS CCE DELHI-I, CCE ST INDORE, CCE ST RAIPUR, CST NEW DELHI AND CST DELHI VERSUS M/S INDRAPRASTHA MEDICAL CORPORATION LTD [ 2017 (12) TMI 509 - CESTAT NEW DELHI] was considered in the subsequent decision in M/S SIR GANGA RAM HOSPITAL VERSUS COMMISSIONER OF SERVICE TAX, NEW DELHI [ 2020 (11) TMI 536 - CESTAT NEW DELHI] . Paragraphs 5,6,9 and 11 of the first decision rendered by the Tribunal on December 06, 2017 relate to the period before and after July 01,2012. The Tribunal, after a consideration of the conditions prescribed in the agreement held that the arrangement was for joint benefit of both the parties with shared obligations, responsibilities and benefits and, therefore, no service was provided by the hospital to the doctors. The Commissioner was not justified in confirming the demand of service tax under the head business support services . The order dated March 20, 2017, passed by the Commissioner, therefore, cannot be sustained and is set aside - Appeal allowed.
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2023 (3) TMI 692
Short payment of service tax - SVLDR Scheme - suppression of facts from the Department regarding pending investigation against them - HELD THAT:- The issue herein is squarely covered by the ruling of Hon ble Bombay High Court in the case of M/s. New India Civil Erectors Pvt. Ltd. [ 2021 (3) TMI 545 - BOMBAY HIGH COURT ] where it was held that whenever and wherever the scheme talks about an enquiry or investigation or audit, the date 30.06.2019 carries considerable significance and becomes relevant. The enquiry or investigation or audit should commence prior to 30.06.2019. Though Clause (f) of subsection (1) of Section 125 does not mention the date 30.06.2019 by simply saying that a person making a voluntary disclosure after being subjected to any enquiry or investigation or audit would not be eligible to make a declaration, the said provision if read and understood in the proper context would mean making of a voluntary disclosure after being subjected to an enquiry or investigation or audit on or before 30.06.2019. Such a view if taken would be a reasonable construct consistent with the objective of the scheme. Further, it is observed that no mis-declaration has been found in the declaration filed under the Scheme by the appellant. Further, no enquiry was pending against the appellant as on the date of filing of the declaration under the scheme. Appeal allowed.
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Central Excise
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2023 (3) TMI 691
Sanctionability of refund - rejection to the effect that certificate as envisaged in the corresponding Customs Notification No. 21/2002 dated 01.03.2002 was required to be produced and further, that as duties were charged in the supply invoices, the claim would be hit by unjust enrichment. Whether the respondent is required to produce a certificate from a duly authorized officer of the Directorate General of Hydrocarbons, as prescribed under Customs Notification No. 21/2002-Cus.? HELD THAT:- On scrutiny of the entire records in the appeal and on the basis of very submissions made, it is very clear that the shutdown valves were supplied to M/s. ONGC on payment of duty. Though initially, the area of operation was informed as Non-Petroleum Exploration Licence / Mining Lease, subsequently the area of operation was changed to Petroleum Exploration Licence / Mining Lease. The issue is squarely covered by the decision rendered by the Hon ble West Zonal Bench of the CESTAT at Mumbai in KENT INTROL PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2014 (2) TMI 633 - CESTAT MUMBAI] where it was held that the appellant has satisfied condition No.19 of the Excise Notification which stipulates that the goods are exempt from duties of Customs leviable under the First Schedule to the Customs Tariff and the Additional Duty leviable under Section 3 of the Customs Tariff Act when imported into India. As regards the condition No. 29 referred to in Notification No. 21/2002, those conditions have been stipulated to be complied by the importers of goods and do not apply to domestic manufacturers. On going through the evidences given regarding granting of lease to M/s. ONGC vide Letter No. 12012/17/2010-ONG-II issued by the Ministry of Petroleum Natural Gas, Government of India and the Project Authority Certificate No. MR/MH/MM/HTP/48/08-09/Y18AC09001 dated 24.09.2010 for the supply of various shutdown valves by the respondent and also M/s. ONGC s letter dated 02.03.2012 informing that as the Central Excise duty on the shutdown valves was not payable as the supplies were meant for Petroleum Exploration Leased / Mining Leased areas where licences had been renewed after 01.04.1999 in view of Central Excise Notification No. 06/2006-C.E., the Central Excise duty paid by the appellant was not reimbursed to them. They have also intimated that they would not have any objection to the appellant claiming refund for the Central Excise duty already paid. The appeal filed by the Revenue cannot sustain and so, rejected.
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2023 (3) TMI 690
Maintainability of the appeal - validity of review order was signed separately by the two members of the Committee of Commissioners - It is submitted that the review order is bad as there is no formation of opinion in terms of section 35B(2) of CEA - CENVAT Credit - passing on the CENVAT Credit to manufacturing units of M.S. Ingots (either directly or through second stage dealers) on the basis of Central excise invoices issued by some non- existing/existing manufacturers - Opportunity of cross-examination not granted - principles of natural justice - HELD THAT:- Though at the time of the hearing of the appeal the counsel for the respondent had chosen not to argue this point, however we would like to briefly address this issue as the same stands concluded by the decision of the Larger Bench of the Delhi High Court in COMMISSIONER OF SERVICE TAX VERSUS JAPAN AIRLINES INTERNATIONAL CO. LTD. [ 2015 (7) TMI 824 - DELHI HIGH COURT ]. The issue raised therein was identical and the Court concluded that the decision rendered by the Committee of Commissioner is an administrative function and, therefore, a meeting or a consultation is not mandatory so long as each member of the Committee has the requisite material placed before him. It was further observed that the Tribunal while acting as an appellate authority has no jurisdiction to strike down a decision taken by the Committee of Commissioners on the administrative side and the only requirement is to ensure that there is a decision of the Committee of Commissioners to institute an appeal - The objection taken by the respondent in this regard is unsustainable and needs to be rejected. The relied upon documents in the show cause notice are mainly the statements of the manufacturers and dealers including the Director and General Manager of the assessee company which were recorded during the course of investigation - during the adjudication proceedings the assessee requested for cross examination of the persons who made these statements, however, the same was rejected by the adjudicating authority as according to him no evidence has been used against the assessee behind their back as the Director and the General Manager was given ample opportunity to examine the evidences corroborated by the statements recorded by the DGCEI and it is only after perusing the statements placed before them that they gave their testimony and further admitted the facts of wrongly availing the CENVAT credit. In fact they reversed the CENVAT credit of Rs 2,03,000/- and also assured to pay the remaining amount towards the CENVAT credit. The adjudicating authority, therefore concluded that principles of natural justice have been satisfied. In the decision of High Court of Gujarat in COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD - II VERSUS GUJARAT CYPROMET LTD. [ 2013 (7) TMI 245 - GUJARAT HIGH COURT ] the revenue had challenged the order of the Tribunal remanding the matter back to the adjudicating authority as no opportunity of cross examination was granted. Thus, in the interest of justice it would be appropriate to remand the matter before the adjudicating authority to grant necessary opportunity in compliance with the provisions of Section 9D of CEA to the respondent to cross examine the witnesses relied upon by the revenue - appeal disposed of by way of remand to the original authority.
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2023 (3) TMI 689
Non-payment of Central Excise duty by debiting from the account - contravention of Rule 8(3A) of the Central Excise Rules, 2002 read with Section 11AB of the Central Excise Act, 1944 - HELD THAT:- The issue is no more res integra and is squarely covered by the judgement of the Hon ble Calcutta High Court in the case of M/S. GOYAL MG GASES PVT. LTD VERSUS UNION OF INDIA OTHERS [ 2017 (8) TMI 1515 - CALCUTTA HIGH COURT ], wherein it is categorically held that when Rule 8 (3A) is declared ultra vires by the different High Courts then the Revenue cannot take a different stand contrary to the said judgements. The Hon ble Court further declared Rule 8(3A) as invalid which is not stayed by the Hon ble Supreme Court. The Hon ble Gujarat High Court in the case of INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 [ 2014 (12) TMI 585 - GUJARAT HIGH COURT ] has declared the words without utilizing Cenvat Credit under Rule 8(3A) as ultra vires which means that the assessee can discharge duty by utilizing Cenvat Credit which is what exactly has been done in the instant case by the Appellant. The demand in the instant case has been raised for contravention of Rule 8(3A) ibid restricting utilization of Cenvat credit during the period of default which provision has been declared ultra vires/invalid by Court, hence the demand cannot be sustained and the Appeal, thus, succeed on this count. Appeal allowed.
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CST, VAT & Sales Tax
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2023 (3) TMI 688
Lifting of attachment on properties - right to service of assessment orders - revenue averred that the allegation of not furnishing of copies of assessment orders passed, was an after-thought, to thwart the proceeding initiated by the respondent for recovery of tax dues - HELD THAT:- The High Court s reasoning is based entirely on the effect of Rule 64 of the rules. There can be no doubt that when any statutory or administrative order, visits a citizen or entity with adverse consequences, such an order has to be served upon the concerned person; especially so, when that order is appealable or subject to revision by higher authorities. That is the substance of the requirement under Rule 64. The High Court, in the present case, drew a distinction between two periods; for AY 2005-06 to 2008-09 it was held that the assessments could not be called in question. So far as AY 2009-10 and 2010-11 were concerned, the court held that the attachment orders were invalid, since the assessment orders were not served. The findings of the High Court, on the facts would not normally have required a second look by this court; however, the peculiar circumstances of this case compel scrutiny. After the disposal of the writ petition filed by the assessee (on 15.04.2010) concededly, it made no attempt to file objections or even deposit the amounts the court had required it to. As a regular dealer, it had filed returns not only for AY 2005-06 to 2008-09 but also later periods (i.e., AY 2009-10 and 2010-11) - The revenue however, pointed out to the High Court, that the representations never alleged that assessment orders were not served and that the attachments were therefore not compliant with provision of law. In the present case, arguendo if the assessee was unaware, in the first instance regarding the issuance of assessment orders against it, at least when the revenue filed a writ petition complaining about Canara Bank s proposal to auction the assessee s properties, it had impleaded the assessee too - The High Court, with due respect, fell into error, in holding that since the subject matter of the revenue s writ petition (W.P. No. 25943/2011) was different, the assessee could not be faulted for highlighting that it had not received a copy of the assessment order. In fact, the entire premise of that writ petition was that the assessee owed tax dues, to the extent of ₹5,59,58,758/- and that the bank could not sell the assessee s properties. The revenue s appeal has to succeed - Appeal allowed.
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2023 (3) TMI 687
Validity of order of tribunal in Review Appeal - Denial of benefit which was allowed earlier - Power to Review - Penultimate sale - Disallowance of claim of exemption and levy of penalty - Inter-State stock transfer of goods purchased for foreign country export - declaration accompanied with appropriate Form-H not present, instead goods were transferred accompanying Form-XX and Form-H only - also, dealer at Tamil Nadu for the purchase within Tamil Nadu from unregistered dealer and subsequent transfer of goods to its Branch Office, has not produced agreement or order for or in relation to such export, which is mandatory for giving exemption from tax under Section 5(3) of CST Act, 1956. HELD THAT:- On review the Tribunal has found that the reasoning given by the Appellate Authority is incorrect and the judgment cited by the dealer and relied by the Appellate Authority are not relevant. It held that the Appellate Authority has come to an erroneous conclusion that the purchase within the State of Tamil Nadu and transport of the coffee seeds to Karnataka are not two distinct acts of the dealer and it has to be considered as inseparable continuous action. The Tribunal has taken note of the fact that the dealer has raised purchase bills while procuring coffee seeds from the planters in Tamil Nadu and thereafter, the goods were transported to the Branch Office at Kushal Nagar, Karnataka, under Form-XX Delivery Note issued to the dealer in the State of Tamil Nadu. Therefore, the contention of the dealer as well as the reasoning of the Appellate Authority was held to be factually incorrect - The actual portion of the raw seeds procured in Tamil Nadu, transported to Karnataka and thereafter, exported to foreign after processing, has not been specifically stated under Form-H, which would reflect the quantum of the seeds procured actually transported to the foreign countries. In the absence of purchase order from the Karnataka Branch and export order from foreign buyer or contract between foreign buyer and Karnataka Unit, exemption cannot be granted to the dealer. On considering the order passed in Review Appeal, it is found that a new fact on verifying the CST files of the assessee, the inconsistent stand of the assessee under the State Act and the Central Act has come to light. This is not a case of intra-State transaction or transfer of goods uninterrupted to the exporter, based on specific agreement for export. The legal position of transaction of this nature is well explained by the Tamil Nadu Taxation Special Tribunal in Razack Trading Co. Vs State of Tamil Nadu [ 1999 (2) TMI 720 - TAMIL NADU TAXATION SPECIAL TRIBUNAL ] where it was held that By declaring the penultimate sale or purchase in the State as a sale in the course of export, the powers of the State Legislature to tax the transactions completed within its territory was taken away and to this extent, this sub-section infringes on these powers. The validity of Subsection (3) of this section was upheld by the apex Court in CONSOLIDATED COFFEE LTD. VERSUS COFFEE BOARD, BANGALORE (AND OTHER CASES) [ 1980 (4) TMI 278 - SUPREME COURT] on the ground that this sub-section does not create a legal fiction but only lays down a principle of general applicability in accordance with Article 286(2) and hence it is valid. Therefore, this Court holds that the Review by the Tribunal in exercise of the power under Section 36(6) of TNGST Act is maintainable, since important facts has come to light after verification of CST files and it was not been brought to the notice of the Tribunal when the order dated 18.10.2004 in M.T.S.A.No.382 of 2004 came to be passed. It is clear that for exemption from levy of tax, the dealer is bound to furnish the agreement or order for or in relation to the export. In this case, the dealer has failed to furnish any agreement or order. The transfer of goods from Tamil Nadu to Karnataka done only by furnishing Form-XX and not by furnishing Form-H. Therefore, on facts also, the dealer cannot seek exemption from tax liability for its turnover of Rs.2,24,00,783/-. The Tax Case is dismissed.
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Indian Laws
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2023 (3) TMI 686
Dishonor of Cheque - CIRP - dissolution of company as per resolution plan - Liability of Director / Managing Director - non-payment of legally enforceable debt - submission of appellant is that once recovery is made partly by the receipt of money and partly by waiver, Section 138 of the NI Act should not be permitted to be continued - It was lastly urged that if the debt of the company is resolved then the payment would be governed under the Resolution Plan - HELD THAT:- The scope of nature of proceedings under the two Acts (IBC Act and NI Act) and quite different and would not intercede each other. In fact, a bare reading of Section 14 of the IBC would make it clear that the nature of proceedings which have to be kept in abeyance do not include criminal proceedings, which is the nature of proceedings under Section 138 of the N.I. Act. We are unable to appreciate the plea of the learned counsel for the Appellant that because Section 138 of the N.I. Act proceedings arise from a default in financial debt, the proceedings under Section 138 should be taken as akin to civil proceedings rather than criminal proceedings - It cannot be said that the process under the IBC whether under Section 31 or Sections 38 to 41 which can extinguish the debt would ipso facto apply to the extinguishment of the criminal proceedings. No doubt in terms of the Scheme under the IBC there are sacrifices to be made by parties to settle the debts, the company being liquidated or revitalized. We are unable to accept the plea that if proceedings against the company come to an end then the Appellant as the Managing Director cannot be proceeded against. We are unable to accept the plea that Section 138 of the N.I. Act proceedings are primarily compensatory in nature and that the punitive element is incorporated only at enforcing the compensatory proceedings. The criminal liability and the fines are built on the principle of not honouring a negotiable instrument, which affects trade. This is apart from the principle of financial liability per se. To say that under a scheme which may be approved, a part amount will be recovered or if there is no scheme a person may stand in a queue to recover debt would absolve the consequences under Section 138 of the N.I. Act, is unacceptable. The impugned order takes the correct view in law. Rejection of application filed by the appellant herein seeking discharge from the criminal proceedings instituted by the respondent-complainant under Section 138 of the NI Act - complainant having participated in the proceedings under the IBC, 2016 by putting forward its claim and consenting to accept some share as a creditor - approval of the resolution plan under Section 31 of the IBC, 2016 - signatory/director in charge of the day-to-day affairs would stand discharged/relieved from the penal liability under Section 138 of the NI Act or not - HELD THAT:- The creditor has no option but to join the process under the IBC. Once the plan is approved, it would bind everyone under the sun. The making of a claim and accepting whatever share is allotted could be termed as an Involuntary Act on behalf of the creditor. The making of a claim under the IBC and accepting the same and not making any claim, will not make any difference in light of Section 31 of the IBC. Both the situations will lead to Section 31 and the finality and binding value of the resolution plan - it could be said that from the cheque amount under Section 138 of the NI Act, the amount received under the resolution plan may be deducted. It is equally true that once the corporate debtor comes under the resolution process, its erstwhile managing director(s) cannot continue to represent the company. Section 305(2) of the CrPC states that where a corporation is the accused person or one of the accused persons in an inquiry or trial, it may appoint a representative for the purpose of the inquiry or trial and such appointment need not be under the seal of the corporation. Therefore, it is only the Resolution Professional who can represent the accused company during the pendency of the proceedings under IBC. After the proceedings are over, either the corporate entity may be dissolved or it can be taken over by a new management in which event the company will continue to exist. When a new management takes over, it will have to make arrangements for representing the company. If the company is dissolved as a result of the resolution process, obviously proceedings against it will have to be terminated - where the proceedings under Section 138 of the NI Act had already commenced and during the pendency the plan is approved or the company gets dissolved, the directors and the other accused cannot escape from their liability by citing its dissolution. What is dissolved is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act. Thus, where the proceedings under Section 138 of the NI Act had already commenced with the Magistrate taking cognizance upon the complaint and during the pendency, the company gets dissolved, the signatories/directors cannot escape from their penal liability under Section 138 of the NI Act by citing its dissolution. What is dissolved, is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act. After passing of the resolution plan under Section 31 of the IBC by the adjudicating authority in the light of the provisions of Section 32A of the IBC, the criminal proceedings under Section 138 of the NI Act will stand terminated only in relation to the corporate debtor if the same is taken over by a new management - Section 138 proceedings in relation to the signatories/directors who are liable/covered by the two provisos to Section 32A(1) will continue in accordance with law. Appeal dismissed.
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2023 (3) TMI 685
Dishonor of Cheque - insufficient funds - compounding of offences - Section 147 of NI Act - HELD THAT:- Having taken note of the fact that entire amount of compensation stands paid to the respondent-complainant and the respondent-complainant has no objection in compounding the offence, this Court sees no impediment in accepting the prayer made on behalf of the petitioneraccused for compounding of offence while exercising power under Section 147 of the Act as well as in terms of guidelines issued by the Hon ble Apex Court in DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT ], wherein the Hon ble Apex Court has held that since Section 147 was inserted by way of an amendment to a special law, the same will override the effect of Section 320(9) of the CrPC, especially keeping in mind that Section 147 carries a non obstante clause. In K. SUBRAMANIAN VERSUS R. RAJATHI REP. BY P.O.A.P. KALIAPPAN [ 2009 (11) TMI 1013 - SUPREME COURT ], it has been held by the Hon ble Apex Court that in view of the provisions contained in Section 147 of the Act read with Section 320 of Cr.P.C., compromise arrived at can be accepted even after recording of the judgment of conviction. Since in the instant case, the petitioner-accused after being convicted under Section 138 of the Act, has compromised the matter with the respondent-complainant vide Compromise Deed, annexed with the petition and in terms thereof, he has already paid the entire amount of compensation, prayer for compounding the offence can be accepted in terms of the aforesaid judgments passed by the Hon ble Apex Court - in view of the detailed discussion made hereinabove as well as law laid down by the Hon ble Apex Court, the parties are permitted to get the matter compounded in light of the compromise arrived inter se them. The present matter is ordered to be compounded and the impugned judgment of conviction dated 22.04.2022 and order of sentence dated 25.04.2022, passed against the petitioner-accused by the learned Chief Judicial Magistrate, Lahaul-Spiti at Kullu, H.P. and affirmed by the learned Sessions Judge, Kullu, District Kullu, H.P., vide judgment dated 12.12.2022, are quashed and set-aside and the petitioner-accused is acquitted of the charge framed against him under Section 138 of the Act. Petition disposed off.
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