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TMI Tax Updates - e-Newsletter
March 21, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Revised Form-A Prescribed in Manual on Exchange of Information issued by CBDT Officers dealing with Exchange of information Foreign Tax Authorities - Circular
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Large number of penny stock companies, whose share prices were artificially raised on the Stock Exchanges in order to book bogus claims of Long Term Capital Gains or Short Term Capital Loss by various beneficiaries.
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Direction to issue necessary instructions to the field formations to effectively utilise NMS and AIMS of EFS module to achieve the targets for the widening of the tax base.
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Guidance Notes on Implementation of Reporting Requirements under Rules 114F to 114H of the Income -Tax Rules - Circular
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Denial of credit of TDS - the sub-contractor has not made any claim for being given credit for the tax deducted at source by the Government from the bills of the petitioner herein - Revenue cannot be allowed to retain the amounts representing the tax deducted at source without credit being given to anybody. - HC
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TDS u/s 195 - TDS on the bank guarantee commission paid to a foreign bank - no income can be said to have accrued or arisen in India to the VTB bank u/s 4, 5 and 9 of the Act. - AT
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Disallowance of the premium paid - Since the assessee has ignored the premium paid on purchase of bonds and claimed the same also as interest, it is not an allowable expenditure - AT
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Applicability of section 292C - Presumption as to assets, books of account, etc - AO could not have attributed the entries in the seized documents to the assessee - the presumption u/s 292 C of the Act, in the given facts and circumstances of the case, stand rebutted - AT
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Deemed dividend addition u/s 2(22) - Loan or Advance - The fact that the rents payable by PIPL to the Assessee were adjusted against the monies refundable by the Assessee to PIPL is a matter of adjustment between the parties. That adjustment cannot be the basis to hold that PIPL has given a “loan or advance” to the Assessee - AT
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TDS u/s 192 or 194J - The difference between this clause in two types of agreements itself goes to prove that doctors who are engaged on retainership basis are not the servants of the assessee since they are allowed to do whatever they want except joining the similar business while other doctors who are on the pay roll of the assessee are debarred from doing any other activity apart from that of the assessee - AT
Customs
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Refund of excess amount erroneously collected - while making payment the portal displayed a message "Bank away server application error", whereby, the payment got debited nine times - refund allowed - HC
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Test of Unjust enrichment - Refund consisting differential fine and penalty - proviso to sub-section (2) of Section 27 of Customs Act, 1962 deals with applicability of test of unjust enrichment to the duty and interest element but not to differential fine or penalty. - Refund allowed - AT
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Validity of Commissioner's order - Revokation of CHA licence - the order is invalid, as there is a clear and fatal violation of the clear procedure mandated for revocation of the appellant's licence authorised under Regulation 20, qua the mandated procedure under Regulation 22 - AT
RBI
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Scheme for Collection of Dues of (i) Central Board of Direct Taxes (ii) Central Board of Excise and Customs (iii) Departmentalised Ministries Account - Reporting and Accounting of March Transactions - Special Arrangements
Service Tax
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Taxability - Section 65 (105) (zb) - Photography services - It is pertinent to mention that bona fide belief is the belief of a reasonable person operating in an appropriate environment and is not some sort of hallucinatory belief. Thus the contention of the appellants that they were under a reasonable belief that the impugned service was not taxable is untenable and the extended period is invocable - AT
Central Excise
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Cenvat credit disallowed - These returns do not require listing of the goods on which the credit has been taken and therefore the respondent cannot be held guilty of suppression on the ground that it had not listed the goods on which credit was taken in the monthly return. - AT
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Eligible to avail CENVAT Credit on cascades, various compressors installed at DBS for dispensing the CNG into the vehicles or otherwise - the credit of duty paid on cascades and compressor used at DBS, were not indicated as being installed and commissioned at DBS - credit denied - AT
Case Laws:
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Income Tax
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2016 (3) TMI 651
Denial of credit for the tax deducted at source by the Government of Andhra Pradesh from their bills - Held that:- On being asked how the Revenue could retain the amount representing the tax deducted at source from the petitioners’ bills, and not pay it either to the petitioner or to the sub-contractor, Sri T.Vinod Kumar, learned Senior Standing Counsel for Income Tax, would submit that, as the income is assessable in the hands of the sub-contractor, it is they, and not the petitioner, who can claim credit and, whenever any such claim is made, the Department would give them credit for the TDS, and refund the amount in accordance with Rule 37BA of the Rules. It is, however, not in dispute that the sub-contractor has not made any claim for being given credit for the tax deducted at source by the Government from the bills of the petitioner herein. It is not as if there were conflicting claims by the petitioner-JV on the one hand, and its constituent sub-contractor on the other, both seeking credit for the tax deducted at source by the Government, necessitating retention of these amounts by the Revenue till resolution of the conflicting claims. As held by the Division Bench of this Court, in Bhooratnam and Co.[2013 (1) TMI 478 - ANDHRA PRADESH HIGH COURT ] the Revenue cannot be allowed to retain the amounts representing the tax deducted at source without credit being given to anybody. If credit of tax is not allowed to the petitioner-assessee, and the sub-contractor has not made any claim for refund, it would result in credit of the TDS not being taken by anybody and this, as has been rightly pointed out by the Division Bench in Bhooratnam and Co. is not the spirit and the intention of the law. To the limited extent the assessing authority denied credit to the petitioner, for the tax deducted at source from their bills by the Government, the impugned assessment orders/rectification orders are set aside. The assessing authority shall determine the quantum of credit for TDS which the petitioners are entitled to in terms of this order, and refund the amount so computed to the petitioners herein in accordance with law. The entire exercise, culminating in final orders being passed, shall be completed within a period of three month from the date of receipt of a copy of this order. It is made clear that this order shall not preclude the assessing authority, if he so chooses, from reopening the assessments, and in passing orders thereafter in accordance with Sections 147 and 148 of the Act.
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2016 (3) TMI 650
Validity of revision orders u/s 263 - Held that:- t is settled law that the commissioner of Income Tax can exercise his jurisdiction under Section 263 of the Income Tax Act only in cases where no enquiry is made by the Assessing Officer. In the instant case, it is admitted by the Income Tax Department that the Assessing Officer had made some enquiries though according to them it was not a proper enquiry. In our view of the fact that some enquiry was made is sufficient to debar the authorities from exercising the powers under Section 263 of the Income Tax Act.The Tribunal was accordingly justified in setting aside the order passed under Section 263 of the Act - Decided in favour of assessee
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2016 (3) TMI 649
Deemed dividend addition u/s 2(22)(e) - Held that:- We find from the record that assessee derives salary income from M/s. Gad Fashions (India) Pvt. Ltd. and remuneration interest income from M/s. Gad Fashions (India) Pvt. Ltd. and M/s. R. Fashions. The transaction is not in the nature of loan or advance but it is only a reimbursement of amount paid by the assessee to M/s. Manpasnd Textile Processors (P) Ltd. on behalf of M/s. Gad Fashions (India) (P) Ltd. It is further observed that the amount of ₹ 20.00 lacs so received by the assessee from M/s. Gad Fashions India Pvt. Ltd. was with reference to the advance given by the assessee to M/s. Manpasad Textile Processors (P) Ltd. considering the business interest. It is further observed that the transaction between assessee and M/s. Gad Fashions India Pvt. Ltd. is a mutual, open, current and running account which is not a loan or advance as envisaged u/s 2(22)(e). In view of the above facts and circumstances of the, case the orders of the lower authorities are reversed and Ground No. 1 of the assessee is allowed. We find from the record that when transaction between M/s. GAD Fashions India Pvt. Ltd. and M/s. Ecotune India Ltd. is not in the nature of loan or advance as envisaged u/s 2(22)(e) of the Act then it does not arise to make any further addition in the hands of the assessee. - Decided in favour of assessee
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2016 (3) TMI 648
Addition u/s 69 on account of unexplained investment - AO relied on the deeming provision of section 50C for drawing an inference that the property in question was transacted at the market value and the consideration received by the seller was based on such market value which was not shown in the sale deed for transfer of this property - Held that:- Section 50C creates a legal fiction for taxing capital gains in the hands of the seller and it cannot be extended for taxing the difference between apparent consideration and valuation done by Stamp Authority is undisclosed income in the hands of the purchaser. It cannot be invoked for charging to tax an undisclosed investment in the hands of the transferee. It is also a point to mention, that Section 50C does not authorize addition with reference to the stamp value as an amount paid by the purchaser, so as to require him to explain the source thereof. Section 50C has a limited operation for assessment of the vendor and not buyer. Therefore, the reliance of the Assessing Officer on the deeming provisions of section 50C for his inference that the property was purchased for a consideration which is much lower than the market value is not justified when the purchase transactions are recorded on the sale deed which was executed before the Sub-Registrar and the identity of the vendor u/s 69 of the I.T. Act, 1961. The Hon’ble High Court of Gujarat in the case of CIT vs. Usha Kant W Patel (2005 (12) TMI 63 - GUJARAT High Court ) have held that the Revenue must establish that there was an unrecorded investment in the relevant financial year and a presumption raised in the assessment proceedings on the basis of provisions of section 50C is not sufficient. The burden is on the Assessing Officer to establish an understatement of consideration which in this case has not been discharged by the Assessing Officer. The Assessing Officer did not make any independent enquiry to bring on record any cogent evidence to establish that the purchase consideration shown in the registered sale deed is much lesser than the market value of the property. - Decided in favour of assessee
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2016 (3) TMI 647
TDS u/s 194H - disallowance u/s 40(a)(ia) - non deduction of tds - Held that:- Unless the assessee decided to procure less than 27 acres of land through Vikram Electric Equipment P. Ltd. Vikram Electric Equipment P. Ltd. was to procure 27 acres of land for the assessee, failing which, no payment was to be made by the assessee to Vikram Electric Equipment P. Ltd. This clearly shows that Vikram Electric Equipment P. Ltd. was transacting on a principle to principle basis and it cannot be said that the payment was made by the assessee to Vikram Electric Equipment P. Ltd. for rendering of any service. The provisions of sec. 194H of the Act are, therefore, not at all applicable. Moreover, the amount paid to Vikram Electric Equipment P. Ltd. was duly reflected by the assessee in the purchases closing stock. No sales had been made during the year under consideration. It has not been shown to be otherwise. In such a scenario, in our considered opinion, no disallowance is called for. The provisions of section 40(a)(ia) of the Act in any case do not apply, the assessee having not claimed any deduction for any expenses on account of payment to Vikram Electric Equipment P. Ltd. either in its profit and loss account or in the computation of taxable income filed. It was only that the Assessing Officer recorded a loss of ₹ 19,700/-. This obviously, did not include any addition of either ₹ 4.02 crores or ₹ 1.24 crores. - Decided in favour of assessee
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2016 (3) TMI 646
Penalty u/s 271(1)( c) - depreciation on assets claimed at a higher value - Held that:- Admittedly in the case before us, the assessee was in receipt of capital subsidy which had to be adjusted against the cost of assets purchased during the year and the depreciation on such assets had to be allowed on reduced value. The assessee had declared the complete information in respect of the said transaction in the return of income. However, under bona fide impression, the depreciation on assets had been claimed at a higher value but that itself would not establish that the assessee had furnished inaccurate particulars of income. The claim made by the assessee was bona fide. Where the assessee had submitted complete information and merely because the claim of depreciation had been made on a higher figure, does not make the assessee exigible to levy of penalty under section 271(1 )(c) of the Act. - Decided in favour of assessee
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2016 (3) TMI 645
Revision u/s 263 - Held that:- There is no discussion of whatsoever in his assessment order. He accepted the return of income of ₹ 9,49,940/- as income determined by the assessee. We cannot say what enquiry the AO has made to accept the return of income as true and correct. There are no details what kind of enquiry AO has made, how he has formed the opinion to accept the return of income as filed by the assessee. Then, the CIT empowered to initiate the suo moto proceedings u/s.263 of the Act either where AO takes wrong decision without considering material available on record or he takes a decision without making an enquiry into matters, where such enquiry was prima facie warranted. In the present case, the CIT has invoked the provisions of the section 263 of the Act on the reason that there was utter failure on the part of the AO to carry out necessary enquiry while completing he assessment on 30.12.2012 because of non-enquiry and non-application of mind by the AO. The Ld. CIT is justified in invoking the jurisdiction u/s.263 of the Act. Further, the CIT has not formed any opinion and he has cancelled the order of AO by directing to redo the assessment afresh after giving assessee a reasonable opportunity of being heard. Being so, we are of the opinion that the Ld. CIT is justified in invoking the jurisdiction u/s.263 of the Act. Since we have confirmed the invoking of jurisdiction u/s.263 of the Act, there is no finding by CIT on merit; whatever grievance of assessee on merit of issue raised by the CIT, to be considered by AO while framing assessment and AO shall not influence by anyway by the observation of CIT in his order. - Decided against assessee
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2016 (3) TMI 644
Rectification of assessment order u/s 154 for withdrawal of claim of bad debts - Held that:- The AO has disallowed the claim of the assessee on the ground that the submissions are not supported by contemporary evidence. It is pertinent to note that the entire record was available with the AO and particularly the ledger accounts of the debtors wherein entries for bad debts written off has been carried out by the assessee along with provision for bad and doubtful debts made during the financial year 2003-04 relevant to assessment year 2004-05. Therefore, as per provisions of sec.36(1)(vi), the assessee is not required to establish that debts actually gone bad once the assessee has written off the amounts in the books of account. The CIT(A) has allowed the claim of the assessee by taking note of the fact that in the books of account, assessee has made entries in respect of reversal of provision for bad and doubtful debts made in the assessment year 2004-05. Therefore, in view of the above facts and circumstances of the case, we do not find any error or illegality in the impugned order of the CIT(A). The same is upheld.
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2016 (3) TMI 643
Revision u/s 263 - Held that:- AO has applied his mind or not need not necessarily be determined from what has been stated in the assessment order alone, it has to be examined as to whether any inquiry was at all conducted by the AO. There exists a difference between lack of inquiry and inadequate inquiry. If there were any inquiry, even inadequate that would not give an occasion to exercise jurisdiction u/s 263 of the said Act. Accordingly, order passed by Ld. CIT u/s 263 of the Act is reversed hence, ground No. 1 to 6 raised by assessee is allowed. Regarding the issue of remuneration paid to the employees CIT found that necessary enquiries were not made by AO at the time of assessment as required u/s. 40A(2)(b) of the Act. However we find that the provisions of section 40A(2)(b) does not apply in the instant case as the payment has not been made to the persons referred in the said section. Besides the ld. AR submitted that the necessary enquiry has been made by the AO at the time of assessment. On the other hand the ld. DR failed to controvert the arguments of the ld. AR. In view of we reverse the order of the ld. CIT(A) under section 263 of the Act. - Decided in favour of assessee
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2016 (3) TMI 642
Penalty proceedings u/s 271(1)(c) - defective notice - Held that:- On the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Thus hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. - Decided in favour of assessee
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2016 (3) TMI 641
Penalty u/s 271(1)(c ) - whether the assessee is entitled for immunity from levy of penalty on account of Explanation 5 to Section 271(1)(c ) of the Act in respect of income offered after the search but in the return filed u/s 153C of the Act - Held that:- The assessee has cumulatively satisfied all the conditions stipulated in Clause 2 of Explanation 5 to Section 271(1)( c) of the Act and hence entitled for immunity from levy of penalty for all the assessment years under appeal. The assessee had filed the returns u/s 153C and u/s 139(1) of the Act as the case may be, and the same has been accepted in the search assessments and regular assessment, no penalty u/s 271(1)(c ) of the Act could be levied. The expression ‘to be furnished’ mentioned in Clause 2 of Explanation 5 to Section 271(1)(c ) has to be construed as ‘required to be furnished u/s 153A of the Act. No satisfaction with regard to specific charge of concealment, as contemplated in section two limbs of section 271(1)(c ) of the Act , was recorded by the Learned AO and the same is not discernible either from the show cause notice or from the assessment order. - Decided in favour of assessee
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2016 (3) TMI 640
TDS u/s 195 - TDS on the bank guarantee commission paid to a foreign bank - Held that:- When the Revenue authorities have failed to lay hands on any cogent material that the bank guarantee commission paid by the assessee company paid on account of business transaction between assessee company and VTB bank particularly in the face of the fact that VTB bank has no PE in India, the question of attracting provision contained u/s 195 of the Act does not arise. In other words, when the assessee company has directly made the payments to VTB bank, Russia through its banker in India, no income can be said to have accrued or arisen in India to the VTB bank u/s 4, 5 and 9 of the Act. So, in the given circumstances, Assessee Company was not liable to deduct the tax at source on the bank guarantee commission paid to a foreign bank. - Decided in favour of assessee.
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2016 (3) TMI 639
Disallowance of bad debts - Held that:- in the AY 2002-03, the AO disallowed the bad debt on the reasons that party wise break up was not furnished before him and further it was also alleged by the AO in that year that the assessee had made an ad hoc adjustment in the provision for bad debt account and further the value of the sundry debtors had not been reduced at the year end. The allegation of the AO in relation to disallowance in regard to bad debt for the assessment years 2002-03 was totally different than the allegation raised by the AO in the instant years. However, Tribunal has to set aside the said issue to the file of the AO with a direction to verify as to whether the provision made for bad debts had been ever claimed by assessee. The AO has also allowed the bad debt after verification as directed by Tribunal in AY 2002-03. We find from the facts in entirety that the assessee had written off actual bad debt in the profit and loss account through the provision for bad debt created earlier, the details of which are filed by assessee at page 4 of assessee’s paper book and further at the year end the balance sheet of assessee has disclosed the sundry debtors at net of provision figure. In view of the facts and circumstances of the case and precedent cited above, we are of the view that bad debts claimed by the assessee are allowable and we allow accordingly. - Decided in favour of assessee Disallowance of write off on account of reduction in the value of stock - Held that:- he allegation of the lower authorities that the assessee company has not filed the details to substantiate that in the next year the obsolete stock of raw material were sold at reduced price as included in the closing stock in the AY 2003-04 has no basis as the assessee had not included the value of obsolete stock in the valuation of closing stock for the year ended 31.03.2003. This was done for the reason that such stock has become of nil value and question of selling the same in the next year does not arise. In view of these facts and circumstances, we are of the view that the action of the lower authorities in making addition and confirming the same in regard to provision for obsolete stock with the value of closing stock correspondingly increasing the value of opening stock in the immediate next year would lead to double taxation as the assessee company has to pay tax on the additional amount without getting the benefit of increased value of stock in the immediate next year. Accordingly, we delete this addition - Decided in favour of assessee Disallowance of annual contribution of gratuity to Group Gratuity Scheme of LIC - Held that:- We find from the facts of the case that the assessee during the relevant previous year created a provision with respect to gratuity amounting to ₹ 12,52,861/- and provision was debited to the P&L Account for the year ended 31.03.2003 and added back the same to the computation of total income. The assessee during the relevant assessment year made payment of gratuity amount of ₹ 31,89,486/- to gratuity fund being maintained by LIC. This fact is very much available in the accounts and tax audit report. We find that the assessee during the course of assessment proceedings filed details in regard to gratuity payment and provision made in the books of account and difference was only to the extent of ₹ 8116/- only. In view of the above reconciliation statement, we are of the view that the disallowance should be restricted to the extent of ₹ 8116/- only and that that extent the addition is confirmed and balance is deleted. - Decided in favour of assessee in part Transfer pricing adjustment - international transactions covered by the TNMM analysis (including the intra-group service charge paid /payable to Nalco Pacific) adhered to the arm’s length principle Transfer Pricing Regulation - Held that:- The first ground for confirming disallowance by CIT (A) that no independent documentary evidence had been furnished by assesse to show that the fact of actual services having been rendered to assessee and Nalco Pacific too could not substantiate the claim for provision of actual services with documentary evidence, has no leg to stand. Disallowance of intra-group service charge under the agreement between assessee and Nalco Pacific was fixed not with reference to any particular service - Held that:- The only alternative pricing arrangement available to Nalco Pacific was indirect-charge method. Ld. Counsel referred to page no. 190 and 191 of the assessee’s paper book, wherein 11 cost centre were engaged in rendering intragroup services to 14 group companies located in Australia, New Zealand, China, Malaysia, Taiwan, South Korea, Thailand, Japan, Philippines, Indonesia and India (i.e. the assessee) and the costs incurred by the respective cost centre were allocated to the group companies based on percentage of sales agreed between Nalco Pacific and the group companies. For instance, the assessee, under the agreement, agreed a net remittance to Nalco Pacific for the intra-group services up to a maximum of 2% of net sales for each calendar year. This method of allocation has been approved by the OECD Guidelines. Accordingly, the second ground of CIT (A) that the intra-group service charge under the agreement between the assessee and Nalco Pacific was fixed not with reference to any particular service and the intra-group service charge was calculated at a fixed percentage of sales of assessee, irrespective of which services were actually received by assessee or whether any services were received by it or not, has no leg to stand. Assesse made application dated 14th March, 2001 to the General Manager, Exchange Control Department, Reserve Bank of India. In the aforesaid application, assesse explained the scope of services receivable from Nalco Pacific under the aforesaid agreement, the benefits to be received by it from entering into the aforesaid agreement with Nalco Pacific and the maximum amounts to be remitted as consultancy charge to Nalco Pacific under the aforesaid agreement. In reply, the RBI intimated their "in-principle" approval for remittance of consultancy charge to Nalco Pacific @ 2% of net sales for the calendar year 2001. In view of this, weare of the view that the aforesaid payment (Rs. 1,51,74,980/-) made to Nalco Pacific @ 2% of net sales, having been the rate of consultancy charge approved by the RBI, are at arm's length price. Accordingly, we delete the addition and allow this issue of assessee’s appeals - Decided in favour of assessee Adjustment made by TPO in respect to disallowance of export of chemicals to associated enterprises - Held that:- We are of the view that characteristics of EC3210A/198 transferred in the uncontrolled transaction between assessee and Haldia Petrochemicals Ltd were not at all comparable to the characteristics of EC3210A/198 transferred in controlled transactions between assessee and Ondeo Nalco Thailand. The TPO did not adjust the price charged by assessee in the uncontrolled transaction in order to account for the aforesaid differences between controlled transaction and uncontrolled transaction. Hence, the application of the CUP Method made by the TPO in the above case was inappropriate.the assessee was bound to sell the chemicals at low prices to its associated enterprises to recover a part of the costs incurred in manufacturing the chemicals. Thus there was no room for the prices of the aforesaid chemicals to be determined by the free interplay of demand and supply forces in the open market. On the other hand, EC5300A/180 was sold to Bongaigaon Refinery Petrochemicals Ltd and EC3210A/198 was sold to Haldia Petrochemicals Ltd when the chemicals were in good physical condition and had demand from various customers. The prices at which the chemicals were sold to the aforesaid independent parties were determined by the free interplay of demand and supply forces in the open market. We further find that the TPO did not adjust the prices charged by assessee in uncontrolled transactions with Bongaigaon Refinery Petrochemicals Ltd and Haldia Petrochemicals Ltd on account of the differences in quality, reliability and availability of chemicals, volume of supply, geographical location, availability of raw material, demand and supply equation between the respective controlled transactions and the uncontrolled transactions in chemicals EC5300A/180 and EC3210A/198.Hence, we delete the addition/adjustment - Decided in favour of assessee Disallowance of ad hoc on the basis of amalgamation of Acqa Chemicals & Systems (Mfg.) Ltd. - Held that:- the changes as per the scheme of amalgamation approved by the Hon’ble High Courts were given effect to in the books of account for the AY 2003-04. Even Hon’ble ITAT in assessee’s own case for AY 2001-02 has held that the effect of amalgamation should be given effect to from the AY 2001-02 and not from AY 2003-04. and held that the AO should consider the revised return filed by assessee consolidating the financial results of both the entities for AY 2001-02. In view of these facts, we are of the considered view that the allegation of the lower authorities that the assessee has not given effect to the scheme of amalgamation in AY 2001-02 and 2002-03 is without any basis and accordingly, the ad hoc disallowance made by AO and confirmed by ld. CIT(A) to the extent of ₹ 5 Cr. is deleted.- Decided in favour of assessee
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2016 (3) TMI 638
Computation of long term capital gain - sale of immoveable land bearing Khasra No.1583 Ka, Rakba 1.986 Hectare and the other Khasra No.1584 Kha, Rakba 0.101 Hectare, totaling 2.087 Hectare situated at village Aurangabad Khalsa, Tehsil and Zila Lucknow - Held that:- The onus is upon the assessee to establish through documents that the impugned land was purchased by the assessee and his wife. The, onus is also upon the assessee to establish that the other land bearing Khasra No.1584 ख for land measuring 0.101 hectare is still owned by them or it was also disputed by some other party as the order of the Tehsildar talks about the land bearing Khasra No.1584 क for the land measuring 1.986 Hectare. It is also for the assessee to establish as to whether he has refunded the entire amount to M/s Sanskar Foundation to whom he sold the land. If not, is there any claim raised by them for refund of the sale consideration on the ground that the assessee did not own the land, pending before any of the judicial forum. If no claim in this regard is raised by M/s Sanskar Foundation and the assessee has not refunded the sale consideration to M/s Sanskar Foundation, having realized that he is not the owner of the land, the assessee would be responsible to pay tax on the income realized on this alleged transfer. According to us, if provisions of section 50C of the Act cannot be invoked on account of illegal transfer of land for want of legal ownership of the land, the difference in investment and sale consideration would be treated as income from other sources of the assessee. As per the sale deed, the assessee has received sale consideration on 3.2.2006 and till dateaccording to the ld. counsel for the assessee, no claim is raised by M/s Sanskar Foundation, therefore, the difference in investment and sale consideration would be the income from other sources, as the so called buyer, M/s Sanskar Foundation cannot recover the said amount, as it has already barred by limitation. All these aspects were neither examined by the Assessing Officer nor by the ld. CIT(A). Therefore, we are of the view that these aspects should be examined by the Assessing Officer after affording proper opportunity of being heard to the assessee. Accordingly, we set aside the order of the ld. CIT(A) and restore the matter to the Assessing Officer to re-adjudicate the issue in terms indicated above. Appeal of the assessee as well as the Revenue are allowed for statistical purposes.
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2016 (3) TMI 637
Adoption of 5% gross profit rate - Held that:- It is noted by CIT(A) that the assessee has not furnished the details of sales and sundry debtors and the assessee has also not maintained any stock register from which the sales made by the assessee could be verified. He has also noted that in earlier two years, the gross profit rate declared by the assessee was 6.88% and 7.44% and against this factual background, adoption of 5%, gross profit rate in the present year is quite reasonable in the facts of the present case and hence, on this issue, we do not find any reason to interfere in the order of CIT(A). Disallowance of telephone expenses to the extent of only 5% - Held that:- It is not the case of the assessee that the assessee is maintaining separate telephone for use for personal purposes and therefore, in the facts of the present case, we do not find any infirmity in the order of CIT(A) on this issue also. Disallowance of travelling expenses - Held that:- assessee neither furnished any bill/ticket nor explained the purpose of the travels undertaken nor submitted the copies of his passport and those of his family members. This is settled position of law that when the assessee makes claim of deduction of an expenditure, he has to establish that the expenditure was in fact incurred and the same was for business purposes. When the assessee has not furnished the copy of passport of self and family members and has not explained the purpose of travel, it cannot be accepted that the expenses incurred are for business purpose. Hence, on this issue also, we find no infirmity in the order of learned CIT(A) in making disallowance Disallowance of depreciation - Held that:- Disallowance of depreciation on old assets i.e. computer and generator is not justified when the business was not closed in the present year and it was carried out by way of sale of pending stock. Hence, this disallowance is deleted but disallowance of depreciation on furniture is confirmed because this is the claim of the assessee that the addition of ₹ 64,46,016/- was made to furniture in the present year and the entire payment was made in cash. The objection of the Assessing Officer is quite strong that when the assessee is closing down the business then what is the purpose of making such huge investment. Hence, we confirm the disallowance of ₹ 1,57,633/- being depreciation on furniture in view of facts discussed above. Disallowance of legal and professional expenses - Held that:- CIT(A) correctly allowed part relief of ₹ 32,000/- being the amount paid to Arsan and Company, Chartered Accountants and the auditor of the assessee. Regarding the balance amount of ₹ 1.85 lac, it is noted by CIT(A) that it is not known as to whether the expenses have been incurred for business purpose and are of revenue nature. Considering the facts of the present case, we find no infirmity in the order of CIT(A) on this issue also. Disallowance u/s 40a(ia) - applicability of provision of section 194C - whether assessee liable to get his accounts audited u/s 44AB? - Held that:- As per explanation below sub section 7 of section 194C, an individual assessee who is liable to get his accounts audited u/s 44AB during the financial year immediately preceding the financial year in which such sum credited or paid to a contractor is liable to deduct TDS u/s 194C. Hence, the provision of section 194C was applicable to the assessee because a clear finding has been given by CIT(A) that in financial year 2006-07, the assessee was liable to get his accounts audited u/s 44AB. On this issue, we do not find any infirmity in the order of CIT(A). Addition on account of difference in capital account - Held that:- We find that the Assessing Officer has noted in Para 8 of his order that as per capital account of the assessee, submitted by assessee’s counsel Shri Swadhin Mishra, Chartered Accountant on 10/12/2010, the amount of net profit transferred to capital account is ₹ 10,39,279/- while as per profit & loss account, the net profit has been shown at ₹ 9,14,248/- resulting in difference of ₹ 1,25,030/-. Neither before the Assessing Officer nor before CIT(A), this difference could be reconciled by the assessee and the same was not explained by the assessee.
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2016 (3) TMI 636
Unexplained unsecured loan - failure to prove the creditworthiness and genuineness of the person lending Unsecured loan u/s 68 - Held that:- We find that this issue was decided by CIT(A) in favour of the assessee on the basis that this amount of ₹ 16,28,868/- added by the Assessing Officer u/s 68 is regarding opening balance of three outgoing partners and therefore, the same is not justified. We find no infirmity in the order of CIT(A) on this issue because opening balance cannot be added in the present year u/s 68 and hence, we decline to interfere in the order of learned CIT(A) on this issue. - Decided against revenue Addition on unexplained sundry creditors - Held that:- in the present case, the assessee has not established this also that the creditors are for goods or expenses and mere crediting the amounts in the account with the nomenclature “Creditors for material and labour etc.” as per copy available on pages 47 to 64 of the paper book does not establish the contention that there are creditors for goods and/or expenses particularly in the absence of name and address of the said creditors. Hence, we reverse the order of CIT (A) on this issue and restore that of the A.O - Decided against assessee Disallowance of salary of partners - Held that:- Disallowance of salary to partners has been deleted by CIT(A) on the basis that during the year in question, fresh partnership deed was prepared in which salary to partners was settled to be paid on the basis of profit sharing ratio and this was done to give boost to the partners to work more diligently and honestly for the upliftment of the firm. He has further noted that the partners were also reduced from 8 to 5. Regarding this allegation that the partnership deed was not filed, it is noted by CIT(A) that the same was filed before the Assessing Officer and this finding of CIT(A) could not be controverted by Learned D. R. of the Revenue and therefore, on this issue, we do not find any infirmity in the order of CIT(A) and therefore, we uphold his order on this issue - Decided against revenue Addition u/s 40A(3) - Held that:- This disallowance was deleted by CIT(A) on the basis of submissions of the assessee before him stating that on each day, purchases were made in cash from different persons/parties on several occasions but the payment made to single party on single purchase did not exceed the limit of ₹ 20,000/-. No such instance has been noted by CIT(A). In the paper book filed before us also, no such evidence has been brought on record to establish that the date-wise cash payment noted by the Assessing Officer is not payment to one party but to different parties. Hence, on this issue also, we feel that the order of CIT(A) is not sustainable and therefore, we reverse the same and restore that of the Assessing Officer. - Decided against assessee Addition of various expenses - Held that:- This disallowance was partly deleted by CIT(A) on the basis that the disallowance of 2.5% was made by the Assessing Officer on ad hoc basis and in the opinion of CIT(A), the disallowance of 1% is reasonable. In this manner, he reduced the disallowance to ₹ 15,55,749/- as against disallowance of ₹ 38,89,360/- made by the Assessing Officer. Considering the facts of the present case, we feel that there is no infirmity in the order of CIT(A) on this issue. Hence, we decline to interfere in the order of learned CIT(A) - Decided against revenue Addition of damage and storage expenses - Held that:- CIT(A) held that right from loading, unloading till the material is used at its final stage, there is shortage at every stage and the damage to material is caused by natural factors i.e. by passersby, by theft, by wastage, by short weighing and measuring and so many other factors. After noting down these facts, it is noted by CIT(A) that the disallowance should be restricted to ₹ 25,000/- and in this manner, he allowed relief of ₹ 5,77,731/- on this issue. Considering the facts of the present case, we find no infirmity in the order of CIT(A) on this issue.- Decided against revenue
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2016 (3) TMI 635
Addition u/s 68 - undisclosed cash deposited in bank account - Held that:- In the instant case though the assessee has furnished list of persons from whom he has collected advances given by the company on behalf of the company, but no confirmation letter of these persons were filed. The assessee has filed copy of the company’s account to corroborate his contentions but to explain the source of deposit, the assessee is required to place evidence or confirmation of the persons who has made payment to the assessee, but no evidence was filed in this regard. Therefore, we are of the view that the assessee has not discharged his onus which primarily lay upon him to explain the source of deposit. We accordingly find ourselves in agreement with the order of the ld. CIT(A) and we confirm the same. So far as another deposit of ₹ 13.20 lakhs is concerned, we find that when the Assessing Officer has asked the assessee to explain the source of these deposits, the assessee has taken a plea that he has received this much of amount as gift from various guests at the time of his marriage. This aspect was examined by the lower authorities in the light of the human probability and came to the conclusion that the assessee does not belong to that family with such a status in which huge amount of ₹ 13.20 lakhs can be received as gift. Moreover, the assessee could not furnish any evidence with regard to the marriage performed at the relevant point of time. During the course of hearing, our attention was invited to the crucial dates on which this amount was received. The amount of ₹ 20 lakhs was deposited in the bank account of the assessee on 29.3.2010, another amount of ₹ 20,000/- was deposited on 29.3.2010 and an amount of ₹ 13 lakhs was deposited on 31.3.2010. The entire amount of ₹ 33.20 lakhs was deposited within a span of three days. During the course of hearing of the appeal the ld. counsel for the assessee was asked to furnish any evidence either in the form of photograph or invitation card with regard to the marriage of the assessee at the relevant point of time, but he could not file any evidence except oral submission. In the absence of any evidence, the story of marriage of the assessee at the relevant point of time cannot be accepted. Therefore, this addition of ₹ 13.20 lakhs can also be made under section 69 of the Act if not under section 68 of the Act relying upon the legal proposition discussed in the foregoing paragraphs. - Decided against assessee
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2016 (3) TMI 634
Validity of reopening of assessment - basis of a letter received from Investigation Wing - Held that:- It is clear from the reasons recorded by the AO that the AO acted only on the basis of a letter received from Investigation Wing , New Delhi. The reasons recorded does not give as to who has given the bogus entries to the assessee. The reasons recorded also does not mention as to on which dates and through which mode the bogus entries were made by the assessee. The reasons recorded which are extracted in the earlier part of the order does not show, what was the information given by DIT(Inv.),New Delhi. The date of the information received by the AO were not spelt out in the reasons recorded. The involvement of the assessee is also not spelt out, except mentioning the corporate bodies who had subscribed to the share capital of the assessee were non-existent and not creditworthy. On identical facts the Hon’ble Dlehi High Court in the case of CIT vs Insecticides (India) Ltd (2013 (5) TMI 691 - DELHI HIGH COURT ) has taken a view that the reasons recorded were vague and uncertain and cannot be construed as satisfaction on the basis of the relevant material on the basis of which a reasonable person can form a belief that income has escaped assessment. Also the reasons recorded did not disclose the AO’s mind regarding escapement of income. The Hon’ble Delhi High Court ultimately held that initiation of proceedings u/s 148 of the Act was not valid and justified in the eyes of law. Following the said decision we hold that initiation of re-assessment proceedings is not valid. On this ground, the assessment is liable to be annulled. - Decided in favour of assessee
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2016 (3) TMI 633
Disallowance of the premium paid - Held that:- Since the assessee has ignored the premium paid on purchase of bonds and claimed premium portion also as interest, the Assessing Officer has not accepted and therefore, the difference of income payable of ₹ 20,35,000/- was added to the income of the assessee under the head "income from other sources". After considering the submissions of the assessee and also considering the facts of the case, the ld. CIT(A) has observed that the assessee has already paid the interest component of ₹ 0.24 crores and ₹ 1.14 crores along with the face value and premium on the date of maturity, the assessee has received an amount equal to the immaturity value of the bonds. Since the assessee has already paid interest to the previous bond holders, the difference amount between the interest received by the assessee on the maturity date and interest paid on the purchase date by the assessee was treated as income in the hands of the assessee. Further, while redeeming the bonds, the ICICI Ltd. has also done TDS on the maturity value minus face value. Since the assessee has ignored the premium paid on purchase of bonds and claimed the same also as interest, the ld. CIT(A) has rightly observed that it is not an allowable expenditure. Accordingly, the ld. CIT(A) correctly sustained the addition made by the Assessing Officer. Under the above facts and circumstances, we find no infirmity in the order passed by the ld. CIT(A). - Decided against assessee
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2016 (3) TMI 632
Cash consideration on sale of tenancy rights - Held that:- CIT(A) was that it was highly probable that when a deed of conveyance was executed in favour of the tenant by the trust, consideration paid otherwise than in cash would have been pocketed by the assessee. The CIT(A) in coming to the above conclusion has proceeded on the presumptions without sufficient evidence to justify such conclusion. In our view circumstantial evidence in this case by no stretch of imagination can lead to a conclusion that the assessee would have received the cash consideration on sale of tenancy rights. In this regard it is also seen that none of the transferee were examined with reference to the seized documents. In our view therefore neither the addition of ₹ 10 lakhs nor addition of ₹ 2.30 lakhs which is agitated by the revenue in its appeal can be sustained.- Decided in favour of assessee Applicability of section 292C - Presumption as to assets, books of account, etc - Held that:- Though the transactions might relate to M/s. BCL Financial Services the assessee in his capacity as Managing Director had received the moneys set out in the form of notings in the seized papers. He has pointed out that when similar situation prevailed in respect of moneys received by the assessee on behalf of Brijlal Todi Charitable Trust, the AO drew an inference that the assessee being in complete control of the activities of the trust ought to have received on money from the transferees. According to him such an inference had to be drawn even the seized document is attributable to M/s. BCL because the assessee was the Managing Director in complete control of BCL. Again reference was made to provision to section 292C of the Act. The learned counsel for the assessee relied on the order of CIT(A). We have given a careful consideration to the rival submissions, The first aspect as we have already noticed, is that the AO was convinced that seized documents NT/1 34 to 38 belong to BCL and that appropriate proceedings will be initiated against BCL in respect of transactions. Having come to such a conclusion the AO could not have attributed the entries in the seized documents to the assessee. As far as page 34 of the seized document is concerned we find that this contains more of a memorandum of things to be done which is in the form of computer print out. There is nothing brought on record as to who is the author of the documents. Besides the above no adverse inference can be been drawn from the seized documents because many of the writing has been struck out in the seized paper. As far as page 35 is concerned, again there are several entries which have been scored off. On the top of page 35 a list of five names and certain figures against these names are found. As to whether the sum shown against the names are monies receivable or payable by the assessee, has not been brought out on record. As rightly held by the CIT(A), the document does not speak for itself. There is nothing to show that the seized documents actually evidence sale of cars and that these payments had to be received by the assessee. As far as pages 36 to 38 are concerned again these documents seem to record approximate sale price realizable and the course of action to be adopted and time frame within which certain actions are to be taken. This cannot be the basis to come to a conclusion that there was sale and the figures mentioned in the documents were in fact realized by the assessee. Besides the above all these entries are not attributable to the assessee and were that of BCL. We are also of the view that the presumption u/s 292 C of the Act, in the given facts and circumstances of the case, stand rebutted - Decided in favour of assessee
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2016 (3) TMI 631
Share trading loss treated as speculation loss - application of provisions of Explanation to Section 73 - Held that:- When the principal business is that of granting loans and advances and if such company also engages itself in purchase and sale of shares, then the purchase and sale of shares activity would fall under the exception to Explanation to Section 73 of the Act. We have already held that one of the main objects of the assessee company is lending activity and more so the assessee is a NBFC registered with RBI having valid certificate of registration and the fund deployed in lending activity is much more than the fund deployed in share trading activity on a consistent basis over a period of time. Hence the principal business of assessee company is that of granting loans and advances and thereby outside the ambit of Explanation to Section 73 of the Act. Accordingly, the share trading loss claimed by the assessee cannot be construed as speculation loss and accordingly we find no infirmity in the order of the Learned CIT(A) in this regard. - Decided against revenue
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2016 (3) TMI 630
Deemed dividend addition u/s 2(22) - whether there was any “Loan or Advance” by PIPL to the Assessee? - Held that:- There is no reason whatsoever to doubt the plea put forth by the Assessee that the sum of ₹ 9 lacs was mistaken paid to RBI in the name of the Assessee instead of PIPL. The reason being that the returned income of the Assessee for the relevant AY was only ₹ 4,26,150/-. The Assessee would get credit of TDS of ₹ 70,480 which was allowed by the AO in the order of assessment. It thus becomes clear that there could not be advance tax liability to the extent of ₹ 9 lacs for the Assessee. The contention of the Assessee therefore that the sum in question was mistaken paid to RBI in the name of Assessee instead of PIPL deserves to be accepted. It is a fact that the sum in question i.e., ₹ 9 lacs never reached the hands of the Assessee and was not available for use by the Assessee. In such circumstances can it be said that there was any “Loan or Advance” by PIPL to the Assessee. The fact that the rents payable by PIPL to the Assessee were adjusted against the monies refundable by the Assessee to PIPL is a matter of adjustment between the parties. That adjustment cannot be the basis to hold that PIPL has given a “ loan or advance” to the Assessee. The primarily requirement of flow of funds for use by the Assessee from PIPL is essential to say that PIPL gave “Loan or Advance” to the Assessee. Such a requirement being absent in the present case, it cannot be said that the conditions for applicability of Sec.2(22)( e) of the Act were satisfied. - Decided in favour of assessee
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2016 (3) TMI 629
TDS u/s 192 or 194J - payments to doctors appointed on retainership basis - assessee in default u/s 201(1) of the Act for short deduction of tax at source - Held that:- As from the perusal of the agreements with the doctors, we do not see any relationship that of master and servant between the assessee and the doctors on retainership basis. It is also seen from these agreements that the doctors who are on the pay roll of the assessee are debarred from taking up any other work for remuneration part time or otherwise or work in advisory capacity or on interest directly or indirectly in any other trade or business during the employment with the assessee without permission of the assessee, while the doctors on retainership basis are only debarred from not getting in similar or any capacity for any other company engaged in a business similar to that of the assessee. The difference between this clause in two types of agreements itself goes to prove that doctors who are engaged on retainership basis are not the servants of the assessee since they are allowed to do whatever they want except joining the similar business while other doctors who are on the pay roll of the assessee are debarred from doing any other activity apart from that of the assessee. From the perusal of all the material placed before us we see that no relationship of master and servant exists between the assessee and the retainer doctors. The intention of the Legislature to frame different provisions in the form of sections 192 and 194J of the Act is that the persons to receive salary are liable to be deducted tax at source under section 192 of the Act while those to receive payment for professional services, the TDS has to be deduction under section 194J of the Act. The learned CIT (Appeals) while discussing in detail the agreements between different types of doctors engaged by the assessee and placing reliance on the other material on record only has given his finding. In view of the above, we uphold the order of the learned CIT (Appeals) and dismiss the appeal of the Department. - Decided against revenue
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Customs
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2016 (3) TMI 611
Rejection of claim for recovery of demurrage charges - Writ petition - Validity of order - Seeking invokation of Article 226 of the Constitution of India - Held that:- when there is a dispute with regard to demurrage charges claimed by the petitioner as against the 2nd respondent, the same cannot be decided by this Court in the Writ Petition, when the 2nd respondent had paid the duty payable to the 1st respondent and the Dock officials had issued out of charge orders. The 1st respondent had rightly observed that once the customs duty was realized, the goods cannot be included in the Lot for fresh auction. The Writ Petition is filed in public law remedy. While exercising the power of judicial review is concerned with illegality, irrationality and procedural impropriety of an order passed by the State or a Statutory Authority, the remedy under Article 226 of the Constitution cannot be invoked for resolution of a private law dispute as contra-distinguished from a dispute involving public law character. The petitioner cannot force the 1st respondent to conduct an auction so as to recover the demurrage charges from the 2nd respondent, even though the 1st respondent does not have any control over the goods. - Decided against the petitioner
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2016 (3) TMI 610
Seeking refund of excess amount erroneously collected - Principles of natural justice - Import of "Electro Plating Process" and paid duty by online e-payment mode, while making payment the portal displayed a message "Bank away server application error", whereby, the payment got debited nine times , thereby collecting an excess amount - Held that:- since the third respondent is withholding the amount, excessively paid by the petitioners and when the second respondent himself has stated that the provisions of Sec.27 of the Customs Act are not applicable, the contentions, now raised by the learned counsel for the respondents, cannot be accepted. Therefore, the third respondent is liable to refund the amount excessively paid to the petitioner and the impugned order is set aside. - Decided in favour of petitioner
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2016 (3) TMI 609
Violation of principles of natural justice - Contravention of Regulations 11 and 18 of Customs Brokers Licensing Regulations, 2013 - Whether Commissioner of Customs in exercise of the powers conferred under Regulation 23 prohibited respondent from working in any section or sections of the Customs Commissionerate and Customs station, under the jurisdiction of Chennai Customs Zone, with immediate effect without giving an opportunity - Held that:- we are not inclined to accept the challenge made to the order passed by the Writ Court, which has rightly set aside a prohibition order passed by the Commissioner of Customs under Regulation 23 of the Customs Brokers Licensing Regulations, 2013 and granted liberty to the Commissioner of Customs, Chennai ‘ VIII ‘ Commissionerate, Customs Broker Section, Custom House, Chennai / Appellant No.3, to proceed in accordance with law, after providing a reasonable opportunity. - Decided against the appellant
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2016 (3) TMI 608
Seeking modification of sentence order - Concealment of drugs - Holding appellant guilty for committing offences punishable under Sections 21(c) & 29 of NDPS Act - Held that:- taking into consideration of Section 30 of Cr.P.C. and the judgment of Shahejadkhan Mahebubkhan Pathan vs. State of Gujarat [2012 (10) TMI 518 - SUPREME COURT], as the appellant had already undergone almost the entire substantive sentence awarded to her, the sentence order is modified to the extent that default sentence for non-payment of fine ₹ 1 lac each shall be SI for one month each under both the offences. - Decided partly in favour of appellant
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2016 (3) TMI 607
Confiscation under Section 111 (d) of the Customs Act, 1962 - Import of car other than manufacturing country - Levy of Redemption fine - Held that:- as the import of car is not prohibited and by taking a note of various decisions of the Tribunal similar to the facts of the case, order of absolute confiscation is not justified. Therefore, it is modified in to an order of confiscation with an option to redeem the vehicle on payment of appropriate redemption fine and customs duty alongwith the penalty under Section 112 ibid. - Decided in favour of appellant
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2016 (3) TMI 606
Validity of order - Test of Unjust enrichment - Refund consisting differential fine and penalty - Held that:- proviso to sub-section (2) of Section 27 of Customs Act, 1962 deals with applicability of test of unjust enrichment to the duty and interest element but not to differential fine or penalty. Therefore, the action of the authority below to deny the refund to the appellant to the extent indicated above on the ground that unjust enrichment shall apply to differential fine and penalty is not the sanction of the law. - Decided in favour of appellant
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2016 (3) TMI 605
Validity of Commissioner's order - Revokation of CHA licence - Violation of clear procedure under Regulation 20 and mandated procedure under Regulation 22 - Held that: there was no notice contemplated under Regulation 22(1) or the nomination of enquiry authority as specified therein, ever emanated from the respondent, who is the jurisdictional Commissioner. Also the inquiry report dated 20.09.2012 by Shri KGVN Surya Teja, Dy Commissioner of Customs, SUB, Mumbai was wholly unauthorised as the respondent admittedly did not nominate him as the enquiry officer. It is this enquiry report which formed the basis for Notice dated 07.11.2012 issued by the respondent and this notice is one clearly falling within the ambit of Regulation 22(6) and not 22(1). Therefore, the order is invalid, as there is a clear and fatal violation of the clear procedure mandated for revocation of the appellant's licence authorised under Regulation 20, qua the mandated procedure under Regulation 22. - Decided in favour of appellant
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2016 (3) TMI 604
Imposition of penalty under Section 112 of the Customs Act, 1962 - Acts of omission and commission - Held that:- appellant issued delivery order to a company non- existent without verification and not mentioned in the IGM filed but also did not seek permission from Customs Department for amending IGM's containing names of other consignees. Also, it issued NOC dated 22/2/2007 to non-consignee company on the basis of an undated letter written to it by non-consignee company signed by one Amit whose signature on the said letter differ from the signature of Amit on the letters dated 22/2/2007 addressed to Deputy Commissioner of Custom on which Amit signed under the word "Received" (meaning he received those letters). Therefore, the appellant is clearly covered within the scope of section 112 of the Customs Act, 1962 inviting penalty thereunder. - Decided against the appellant
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Corporate Laws
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2016 (3) TMI 603
Scheme of Amalgamation - Held that:- The report confirms that the affairs of the Transferor Company are not conducted in a manner prejudicial to the interest of its members or to the public interest. The Official Liquidator, however, has requested this Court to direct the petitioner to preserve its books of accounts, papers and records and not to dispose of the records without the prior permission of the Central Government under Section 396A of the Companies Act,1956. Having heard Mr. Navin K Pahwa, learned Counsel for the petitioner company, Mr. Kshitij Amin, learned Central Government Standing Counsel for Mr. Devang Vyas, learned Assistant Solicitor General of India for the Regional Director and upon perusal of the report of the Official Liquidator and the Regional Director and having considered the Scheme of Amalgamation together with relevant documents on record, this Court finds it appropriate to grant sanction to the present Scheme of Amalgamation.
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2016 (3) TMI 602
Amalgamation and restructuring - Held that:- This Court is of the view that the observations made by the Regional Director, Ministry of Corporate Affairs, do not have been suitably redressed. This Court is of the view that based upon the material on record, it can be concluded that the present Scheme of Arrangement, in its modified form, is in the interest of the shareholders and creditors of all the companies as well as in the public interest, therefore, the same deserves to be sanctioned. Hence the following order: The prayers in terms of paragraph 21 (a) of Company Petition No.17 of 2016, and paragraph 18 (a) of Company Petition No.18 of 2016 are hereby granted. The petitions are disposed of, accordingly. So far as the costs to be paid to the Central Government Standing Counsel are concerned, they are quantified at ₹ 7,500/- per petition. The same may be paid to Mr.Devang Vyas, learned Assistant Solicitor General of India. Costs to be paid to the Office of the Official Liquidator are quantified at ₹ 7,500/- per petition, payable only by the Transferor Company. The same may be paid to the Office of the Official Liquidator. The petitioner companies are further directed to lodge a copy of this order, the schedule of immovable assets of the Windmill Undertaking being transferred and that of the remaining undertaking of the Transferor company, being transferred to Transferee Company, as on the date of this order and the Scheme duly authenticated by the Registrar, High Court of Gujarat, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty, if any, on the same within 60 days from the date of the order. The Petitioner companies are directed to file a copy of this order along with a copy of the Scheme with the concerned Registrar of Companies, electronically, along with INC28 in addition to physical copy as per relevant provisions of the Act.
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Service Tax
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2016 (3) TMI 628
Whether show cause notice issued is erroneous or not - Matter decided without bothering for petitioner's explanation as he has not given any explanation of show cause notice - Held that:- the impugned notice is only a show case notice and it is not an order passed by the first respondent. Without filing their explanation and producing the necessary documents to substantiate their case, the first respondent will not be in a position to decide the matter in accordance with law. When the first respondent has stated that the petitioner is liable for service tax, it is for the petitioner to explain their contention by producing all the records before the first respondent stating that they are not liable for payment of service tax. The petitioner can be given a reasonable time for filing their explanation to the show cause notice raising all their objections and also all the documents to substantiate their contention. Therefore, the petitioner is at liberty to file their objections to the show cause notice issued by the first respondent. - writ petition dismissed - Decided against the assessee.
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2016 (3) TMI 625
Recovery of Refund - GTA service - Appeal for quashing a show cause notice for recovery of refund already made dismissed - Held that:- the show cause notice was issued on 20.7.2000. Section 117 of the Finance Act, 2000 made it clear that any refund already made could be recovered only within the period of 30 days from the date on which Finance Act, 2000 received the assent of the President and brought-forth of an amendment under Sections 116 and 117 of the Finance Act, 2000, to Section 65 of the Finance Act, 1994 received the assent on 12.5.2000. Therefore, the show cause notice was not in accordance with Section 117. Hence, the substantial questions of law need not be answered at all as the claim for recovery of the refund was not been made in accordance with Section 117. Therefore, the order passed by Tribunal is valid. - Decided against the revenue
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2016 (3) TMI 624
Admissibility - Refund claim - Unutilised CENVAT credit of service tax paid on input services - Rule 5 of the CENVAT Credit Rules 2004 read with Notification No.5/2006-CE(NT) dt. 14/03/2006 - Held that:- when the definition of inputs had a wider ambit as it included almost all services within its purview as the definition included activities relating to business. As per Coca Cola India Pvt. Ltd. Vs. CCE, Pune-III [2009 (8) TMI 50 - BOMBAY HIGH COURT], KPMG Vs CCE. [2013 (4) TMI 493 - CESTAT NEW DELHI] etc., the Hon'ble High Courts as well as Tribunal, all the services listed are eligible for credit. Therefore, in view of the above judgments, the impugned services qualify as input services and the refund of credit is admissible. - Decided in favour of appellant with consequential relief
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2016 (3) TMI 622
Rejection of refund claim - Doctrine of Unjust enrichment - Vocational training - Impart of training courses in foreign languages to individuals and corporates - Claimed exemption under notification no. 24/2004-ST dated 10.09.2004 - the value of service remained the same in all the three periods namely before it paid service tax during the period when it paid service tax and after that when it stopped paying service tax. This fact certainly provides a lot of gravitas to the appellant's claim that the burden was not passed on to the customers. Also there is a certificate of Chartered Accountant certifying that the burden of tax was not passed on the service recipient. Further, the invoices did not show the component of service tax at all. All these factors put together constitute sufficient weight of evidence to infer that the appellant has been able to discharge of its onus to establish that it did not pass on the burden of Service tax (which is being claimed as refund) to the service recipient. Therefore, the refund is not hit by the doctrine of unjust enrichment. - Decided in favour of appellant with consequential relief
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2016 (3) TMI 621
Waiver of pre-deposit - Renting of immovable Property Service from 19.4.2008 to 30.7.2010 - Premium received for leasing the property for continuous enjoyment - Held that:- appellant was not a part of the lease agreement and was also not the provider of the impugned service. Though the service was rendered by State Government and not by the appellant, the appellant has fairly made a good case in its favour but not entirely so. Therefore, make pre-deposit of 7.5% of the impugned service tax liability. - stay granted partly.
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2016 (3) TMI 619
Rejection of Cenvat Credit availed only on the ground that section 66A has not been specified in Rule 3 of CENVAT Credit Rules - denial of an amoun being the Cenvat Credit for the period prior to 18.04.2006 citing that Section 66A was brought into the statute book with effect from 18.04.2006 and there was no charge of service tax on the services received from outside India prior to 18.04.2006 - payment of service tax under reverse charge mechanism in case of services received from foreign party - Held that:- There is only one charging section in the service tax i.e. Section 66. Section 66A is merely a deeming provision which deems that the services provided by various service providers are provided by service recipients in India. Section 66A is not a charging section and the same has also been made clear by circular 354/148/2009-TRU dated 16.07.2009 and in the said circular CBEC has made it clear that there is no mistake or omission in that relevant provision of CENVAT Credit Rules, 2004 and credit of tax paid on imported services should be allowed if they are in the nature of input services. Further in this case the tax was paid under Section 66 of the Finance Act, and hence the credit is admissible to the appellant. Further as per the department impugned order though the tax itself was not required to be paid then in that case credit is nothing but a refund of the tax erroneously paid by the appellant in their Cenvat Credit account. Further, in the case of Bajaj Allianz General Insurance (2014 (8) TMI 787 - CESTAT MUMBAI) the bench of this Tribunal by relying upon the judgment of the Supreme Court in the case of CIT vs Mahalakshmi Textile Mills Ltd. (1967 (5) TMI 4 - SUPREME Court ) has held that the Cenvat Credit taken by the appellant is nothing but refund of the service tax paid by them on the services which were not required to pay service tax. The above said decision is squarely applicable in the facts and circumstances of the present case. Further, in this case extended period cannot be invoked as the appellant have been disclosing the credits in their ER-1 returns and they were under a bonafide belief that they are liable to pay tax in terms of Rule 2(1)(d)(iv) and also entitled to take credit and the issue involved in the present case was with regard to interpretation of statutory provision and moreover the ld. Commissioner has also not given any finding that the appellant have suppressed anything from the department. - Decided in favour of assessee
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Central Excise
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2016 (3) TMI 620
Differential duty demand - Penalty imposed challenged - grievance of the assessee is that no option to pay reduced penalty of 25% under Section 11 AC was given to them, and that penalty on M/s Garden Silk Mils Limited under Rule 25 is not sustainable as the said unit was only a job worker, and that the penalty of ₹ 2 Lakhs on Shri Bipin Modi is too harsh as he is only a Director of M/s Alfino Fashions Pvt Limited. - Held that:- Imposition of penalty, in addition to demand of duty with interest on the appellants are sustainable and appropriate. However we find that the option to pay 25% of the equivalent penalty imposed under Section 11 AC was not extended to M/s Alfino Fashions Pvt Ltd., by the lower authorities. As they were rightly eligible for the same, while upholding the imposition of penalty of ₹ 28,00,951/- under Section 11 AC on M/s Alfino Fashions pvt Ltd, we hold that they are eligible for the option of payment of reduced penalty of 25%, provided they pay the same within 30 days of receipt of this order. We also find that under the facts and Circumstances of the case, there is merit in the argument of the learned Counsel for the appellants that the penalty on M/s Garden Silk Mills Limited and Shri Bipin Modi should be reduced, and hence the penalty of ₹ 1 Lakh on M/s Garden Silk Mills Limited is reduced to ₹ 50,000/- and the penalty of ₹ 2 Lakh on Shri Bipin Modi is reduced to ₹ 1 Lakh. The impugned orders of the lower authorities are upheld with the said modification.
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2016 (3) TMI 618
Cenvat credit disallowed - credit ordered to be recovered along with interest; mandatory equal penalty was also imposed - Held that:- It is not in dispute that the respondent had been submitting its monthly returns clearly showing availment of the impugned credit. Thus it is incorrect to say that it did not disclose the fact of availment of Cenvat credit on the impugned goods. These returns do not require listing of the goods on which the credit has been taken and therefore the respondent cannot be held guilty of suppression on the ground that it had not listed the goods on which credit was taken in the monthly return. No provision of law has been brought to our notice by ld. DR which requires the respondent to give list of goods on which credit is taken. The allegation relating to wilful mis-statement / suppression of acts is not sustainable and consequently extended period and mandatory penalty are not invocable. Allow the appeal by way of remand to the primary adjudicating authority for de novo adjudication with the following direction/observations -(i) Cenvat credit is not admissible in respect of the impugned goods, (ii) Extended period of 5 years and mandatory equal penalty are not attracted. and (iii) The de novo adjudication should therefore be confined to only normal period of one year.
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2016 (3) TMI 617
CENVAT credit on capital good utilised only for manufacture of finished goods, namely, cotton yarn, which was cleared under Notification No.30/2004-CE, dated 09.07.2004 without payment of duty - Held that:- It is seen that the impugned credit was reversed on 13.06.2005, i.e., before even the Show Cause Notice (dated 25.10.2005) was issued. Also it is just that in the initial phase the appellant cleared yarn duty free under Notification No.30/2004-CE. Both Notifications, i.e., Notifications No.30/2004-CE and No.29/2004-CE could be availed of simultaneously by the appellant and it could have cleared one small consignment of say mere ₹ 100/- on payment of duty under Notification No.29/2004-CE on the date it took the impugned Cenvat credit, in which case arguably, there would have remained no basis to initiate these proceedings. Thus, it is evident that there was no mala fide on the part of the appellant in the present case. Further, it is seen that the recovery of the impugned amount was ordered in terms of Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A of Central Excise Act, 1944. As the impugned amount was reversed even prior to issuance of Show Cause Notice in this case, even issuance of Show Cause Notice to demand the impugned credit was not necessary. In these circumstances, imposition of penalty is not warranted in this case. The appeal is allowed by way of remand to the primary adjudicating authority for de novo adjudication with the direction that the appellant's contention that from 02.02.2006, the capital goods were utilised for manufacture of dutiable goods also should be examined and if found to be correct, then the impugned CENVAT credit should be allowed w.e.f. 02.02.2006.
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2016 (3) TMI 616
Rebate claim – non-following of procedure - lapse or willful omission committed - authorities below have not carried out the direction given in terms of para 8 of the judgement - Held that:- The Assistant Commissioner has not doubted the factum of export of final products carried out by the appellant during the period from May, 2000 to Mar. 01. It was also noticed in para 8 by Hon’ble High Court that it is not the case of the authority that there was any other lapse or willful omission committed by the appellant in making the claim or the factum of export was not proved. When a clear fact finding is made in favour of appellant nothing more is left to the Adjudicating authority to doubt the conduct of the appellant. Therefore, the Adjudicating Authority is directed to carry out direction of the Hon’ble High Court in its letter and spirit to conclude the issue following the ratio laid down by the apex court in the case of Union of India Vs Kamlakshi Finance Corporation Ltd. Reported (1991 (9) TMI 72 - SUPREME COURT OF INDIA ). It is expected that the authority carrying out the direction shall dispose the matter within a month of receipt of this order.
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2016 (3) TMI 615
Cenvat credit of tax paid on inputs utilized for fabrication of machineries or capital - Held that:- When supporting structures are essential part of the machinery, in order to manufacture taxable output, the Cenvat credit is available. Further, in view of the finding already Commissioner (Appeals) that there is no element of concealment or contumacious conduct on the part of the appellant and the issue is wholly interpretational In nature, and also in view of the fact that the revenue also had information of taking of Cenvat credit in view of the earlier show cause notice for the preceding period, hold without entering into the merits, that the demand for extended period, cannot be sustained. - Decided in favour of assessee
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2016 (3) TMI 614
Eligible to avail CENVAT Credit on cascades, various compressors installed at DBS for dispensing the CNG into the vehicles or otherwise - Held that:- It is undisputed that the compression of natural gas takes place at Mother Station where the appellants have installed various machines where the compression of natural gas is considered as an activity of manufacturing. Hence, CENVAT Credit availed on such capital goods at mother station is quite rightly undisputed. Subsequent to compression, the CNG which comes into existence is filled in the cascades into bottle/cylinder which is used for transporting the CNG to DBS, wherein the same are filled by using compressors into the vehicles. These cascades are only transporting the CNG which has already come into existence as a manufactured product and is a marketable commodity. The argument of the learned Counsel that the CNG needs recompression into DNS in order to fill the product into vehicle is without any merits inasmuch CNG is already a marketable commodity, and the activity of recompression is neither incidental nor ancillary for manufacture of CNG at DBS as the recompression is of CNG. Secondly, reliance was placed on the Chapter Note 5 to the Chapter 27. The said Chapter Note will not be of any help to the appellant's case as the said Chapter Note talks about the compression of natural gas for the purpose of marketing the CNG would amount to manufacture, in the case in hand, the compression of natural gas takes place at mother station. At DBS the recompression of CNG does not bring into existence any new product which is distinct. It is his further submission that on limitation, the appellant having filed excise return was within the department's knowledge whey they granted the centralized registration to DBS. We find that this argument is without any merits inasmuch as the availment of CENVAT Credit of the capital goods at the Mother Station is only declared to the Revenue authorities but the credit of duty paid on cascades and compressor used at DBS, were not indicated as being installed and commissioned at DBS. - Decided against assessee
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2016 (3) TMI 613
Benefit of exemption Notification No.6/2002-CE denied - demand of duty alongwith interest and imposed penalty - Held that:- We have already observed that the Condition of the notification is that the goods covered in any Chapter supplied through international competitive biddings is exempted, subject to the conditions, if the goods are exempted from custom duty. In the present case, the Adjudicating authority has accepted the fact that the Compressors are exempted from Customs duty and therefore, there is no reason to deny the benefit of exemption notification.- Decided in favour of assessee
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2016 (3) TMI 612
Stock of finished goods and raw materials found short at the time of physical verification - appellant assessee is in appeal against confirmation of duty whereas the revenue is in appeal against waiver of penalty allowed by the impugned order - Held that:- The manner of stock taking on the date of inspection, have given an approximate figure of the stock and some variation is bound to happen. The question for consideration is whether the variation found is normal calling for no adverse inference, or the variation is abnormal. In view of there being, no instance of any clandestine removal and nor there is found existence of fudging of the records, hold that the discrepancy or variation in the physical stock found, is a normal variation and does not call for any adverse inference. Further find that the appellant assessee also have not made any attempt to explain the variation found at the time of inspection, except alleging that there is discrepancy in the manner of stock taking. Also take note of the fact that the appellant have not protested the deposit of duty pursuant to investigation and maintained silence, till the issue of show cause notice. In this view of the matter reduce the duty confirmed by 50% and further uphold the waiver of penalty by the ld. Commissioner (Appeals). - Decided in favour of assessee in part
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Indian Laws
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2016 (3) TMI 601
Debenture-trustee initiation proceedings before the Debt Recovery Tribunal - Whether a debenture trustee suing on behalf of the debentureholder for recovery of sums payable to the debentureholder can file a suit on the original side of this Court since suit is for recovery of the debt? - Held that:- On plain reading of clause (g) of section 2 it appears that the word `Debt' has been given a very wide meaning. It means any liability which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of their business activity. In the decision of the Apex Court in the case of Eureka Forbes Limited Vs. Allahabad Bank relied upon by the first defendant, it was held that the word debt in the RDB Act cannot be given a restricted meaning and the legislature has not intended to restrict it to the relationship of creditor and debtor. However, subsection 1 of section 17 confers jurisdiction on the DRT to deal with the applications made by the banks and financial institutions for recovery of debts “due to such banks and financial institutions”. Thus, DRT can entertain an application for recovery provided the application is made by a bank or a financial institution for the recovery of debt due to such bank or financial institution. If recovery is sought of a debt which is not due to a bank or a financial institution, the DRT will not get jurisdiction under section 17. It will be necessary to make a reference to the Regulations framed by the Securities and Exchange Board of India under section 30 of the Security and Exchange Board of India Act,1992. The said Regulations are the Securities and Exchange Board of India (Debenture Trustees) Regulations,1993 (for short “the Regulations”). Clause (bb) of the Regulation 2 defines a debenture trustee to mean a trustee of a trust deed for securing any issue of debentures of a body corporate. Clause (ba) of Regulation 2 defines a debenture by giving the same meaning to it which is provided in subsection 12 of section 2 of the Companies Act,1956. It is the obligation of the debenture trustee to enforce the security in the interest of the debenture holders. Moreover, it is the obligation of the debenture trustee to carry out such acts as are necessary for the protection of the debenture holders and to do all the things necessary in order to resolve the grievances of the debenture holders. On plain and simple reading thereof a bank or a financial institution can file applications before the DRT for “recovery of debts due to such bank or financial institution”. If a bank files an application for recovery of an amount which is not due and payable to itself, the DRT will not get jurisdiction under section 17. For example, a suit filed by a bank acting as an executor of a will seeking to recover amounts due to the estate of the deceased will not come under the purview of section 17. Such proceedings will not be the one to recover the debt due and payable to the bank itself. In such a case, the jurisdiction of a Civil Court is not excluded. After the decision of the Division Bench in the case of Krishna Filaments, section 17 has not undergone any amendments. The definition of financial institution was amended for including therein a securitisation company or a reconstruction company which has obtained a certificate under section 3(4) of the Securitisation Act
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