Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 25, 2022
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Interest payable on delayed payment of taxes - section 50 read with section 75(12) of JGST Act - The Respondents have failed to follow the procedure prescribed in law before issuing Summary of the Order in Form GST DRC-07 holding the petitioner liable to pay interest under section 50(1) of the Act due to late filing of GSTR-3B and not depositing the due interest on its own. As such, writ petition succeeds only on the point of failure to follow the principles of natural justice and the procedure prescribed in law - HC
Income Tax
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Set off of refunds against tax remaining payable / outstanding demand - The respondents are not empowered to adjust the refund amount automatically without complying the provisions of Section 245 of the Act. Adjustment made against the refund due to the petitioner for the relevant year therefore have to be set aside. Accordingly, they are set aside. - HC
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Prosecution for commission of offence u/s 276B r/w 278B - Sanction u/s 279(1) - TDS deducted but not deposited in time - The amount has already been deposited with interest and there is no reason why the criminal proceeding shall proceed and the criminal proceeding was launched after receiving the said amount with interest, had it been a case that the case was immediately instituted and thereafter the TDS amount has been deposited with interest, the matter would have been different. As such the continuation of the proceedings will amount to an abuse of the process of the Court. - HC
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Eligibility to file settlement application - benefit of extension of time to file application for settlement - Admittedly, in this case, application for settlement under Section 245C(1) of the Act was filed on 17th March, 2021 while the Settlement Commission had ceased to operate w.e.f. 1st February, 2021 in view of the aforesaid Finance Act, 2021 amending the provisions of the Act. - So far as challenged to the legality and validity of the order of the aforesaid order of Central Board of Direct Taxes dated 28th September, 2021, on the ground of discrimination in exercise of power under Section 119 (2) (b) of the Income Tax Act, 1961 is concerned, we hold the said order of the Board as constitutionally valid and legal and is perfectly within the power conferred upon it - HC
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Reopening of assessment u/s 147 - The argument that the objections have not been considered may not hold water as the annexure does deal with the crux of the objections but it may be too early a stage in the proceedings to express any opinion on this aspect of the mater. As rightly pointed out by learned Revenue Counsel, reassessment notice under Section 148 of IT Act i.e, impugned notice if carried to its logical end, in the facts and circumstances of the case, will clearly neutralize all these arguments and the writ petitioner assessee bank will not be aggrieved in any manner. - HC
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Disallowance of Incubation Expenses - The two streams of income were shown as ‘other income’ and therefore, the same were non-operational income - As per statutory mandate, the expenditure expanded by the assessee to earn such an income would be an allowable deduction u/s 57(iii). - AT
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Disallowance of expenses u/s.40(a)(ia) - Non deduction of TDS u/s 195 - at the time of payment made by the assessee to non-residents, there was an ambiguity in the definition of royalty and because of this the assessee could not deduct TDS as per provisions of section 195 - Although, the definition has been amended by the Finance Act, 2012, with retrospective effect, but because there was an ambiguity in the definition, the assessee cannot do impossible things by foreseeing an amendment to the definition of royalty and deduct TDS on payment made to non-residents. - AT
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Disallowance of Professional fees paid to non-residents - Non deduction of TDS u/s 195 - the assessee cannot be expected to deduct TDS on payment made to non-residents on the basis of subsequent amendment to the law with retrospective effect from earlier date, because the assessee cannot foresee the amendment and deduct TDS and hence, we are of the considered view that the AO was erred in disallowing the payment made to non-residents u/s. 40(a)(i) of the Act, for failure to deduct TDS u/s. 195 of the Act. - AT
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Addition u/s 69D - Hundies - The documents were in English and the transactions were not between three parties. They were bilateral. The transactions were on the lines of a promissory note. The documents had waived the notice of dishonor and no grace period was granted. This was also indicative of the transaction not being a hundi transaction. Section 69D was not applicable. - AT
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Disallowance of expenditure while processing the return u/s 143(1) by the CPC - the CPC has erred in disallowing the assessee’s claim of expenditure while processing the return of income u/s. 143(1) - Revenue cannot in unilateral proceedings disallow expenditure without affording an opportunity to the assessee. What cannot be done u/s. 154 on the ground of debatability ,cannot be done u/s. 143(1) of the Act to the assessee’s claim on which two views are possible A debatable issue cannot be a subject matter of adjustment u/s. 143(1) of the Act. - AT
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Income accrued In India - 'Royalty' or 'Fees for Technical Services' under Section 9(l)(vi) and 9(l)(vii) - the payment made by SCB to assessee- company does not fall within the realm of ‘fees for technical services’ as contained in Sec. 9(1)(vii), albeit the assessee has only provided a standard facility for data processing without any human intervention. - the said payment is not taxable in India as ‘fees for technical services’ in terms of Sec. 9(1)(vii) of the Act. - AT
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Exempted capital gain wrongly shown in the belated return as taxable - just because the assessee inadvertently or by ignorance has shown the exempt income as exigible to tax, the AO/CPC ought not to have treated the same as taxable income and thereby taxed the exempt income because Article 265 of the Constitution, title reads " Taxes not to be imposed saved by authority of law'' and the Article reads 'No tax shall be levied or collected except by authority of law'. Here in this case the Parliament has exempted this compensation (for acquiring land) from taxation as per Section 96 of RFCTLARR Act. So the CPC/AO ought not to have taxed the same at the first place. - AT
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Capital Gain - Transfer of capital asset u/s 2(47) - year of assessment - since the property was actually transferred in A.Y. 2013-14 the computation of short-term capital gain holding the transfer took place in the A.Y. 2012-13 is not sustainable. In the present facts and circumstance of the case the deed since not registered in A.Y. 2012-13 it has no effect in law for the purpose of invocation of the provision of Section 53A of the Act. There is no profit or gain arose as there was no transfer in the year under consideration. - Additions deleted - AT
Customs
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Demand of duty - denial of benefit of DFIA license - Once the licence is made transferable, the same are traded by the parties through brokers, which is permitted under the DGFT Policy and Foreign Trade Policy. There was no reasons to disbelief the licences issued by the Competent Authority/DGFT. Thus, the same were duly reflected on the website of the DGFT. It is not the case of the Department that the licences itself were forged/fabricated. It is an admitted fact that the licences were genuinely issued by the DGFT after due diligence and were valid at the time of imports made by the appellants. - AT
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Revocation of Customs Broker/ CHA License - The plea of the appellant that suspension of her license is disproportionate punishment. It is held that not merely the negligence on the part of the appellant but the concealment of relevant facts as is unjustly enrich his client on the expenses of Government exchequer. Not only this, the appellant is a person already found involved in illegal offence as grave of smuggling narcotics drugs, the revocation of licence of the appellant in view of the duty as has been cased upon the Customs Broker and the way the Customs Broker is appointed is held to be proportionate to the violation committed by the appellant. - Appeal rejected - AT
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Rejection of claim for duty free benefits - import of Vital Wheat Gluten - As per Board Circular No. 46 of 2007 and DGFT Circular 50 of 2008, no correlation is required for technical characteristics/quality and technical specification between imported goods and export goods unless item is specified under Para 4.55.3 of HBP (New Para 4.30 of FTP). Neither Wheat Flour nor Wheat Gluten Flour is a specified item under Para 4.30 of FTP. - In this case, it is evident from the DFIA that the Exporter has used both Wheat Gluten as well as Wheat Gluten Flour in the Export goods i.e. Biscuits. - Benefit of exemption / DFIA allowed - AT
DGFT
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Amendment in Para 2.54 of Handbook of Procedures, 2015-2020 - The timelines for installation and operationalisation of Radiation Portal Monitors and Container Scanners in the designated sea ports - Public Notice
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Amendment in Policy condition of Sl. No. 55 & 57, Chapter 10 Schedule-2, ITC(HS) Export Policy, 2018 - Export of Rice (Basmati and Non-Basmati) - Notification
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Amendment in Export Policy and insertion of Policy Condition under Chapter 29 and 38 of ITC (HS), 2018 - Export Policy of Hydrofluorocarbons (HFCs) - Notification
IBC
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Corporate insolvency resolution process (CIRP) - claims filed under a CIRP by "decree holder" - Once admitted as a creditor, the efforts must be to preserve and maximise the assets of a corporate debtor. The resolution professional cannot look behind the decree. In the resolution process, he must acknowledge and admit the decree as an admitted claim, unless such decree has been set aside. - The distinction of decree holders as creditors from "financial creditors" and "operational creditors", as seen aforesaid is intelligible and take forward the purpose of the IBC. The same cannot be stated to be discriminatory or arbitrary. - HC
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Approval of the resolution plan - ascertaining the liquidation value of the Corporate Debtor - The Appellant did not raise any objection regarding assessment of the liquidation value before the Adjudicating Authority - there is no organic error in the calculation of liquidation value of the corporate debtor and, therefore, the payment proposed in the successful resolution plan keeping the liquidation value so arrived at cannot be found fault with. - The Resolution Plan was approved by the CoC in its commercial wisdom and later by the Adjudicating Authority. - AT
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Seeking extension of CIRP period - The members of CoC and the Resolution Professional are responsible for the loss of time prescribed under the Code, which is valuable and limited for completion of CIRP - In order to facilitate such resolution, Suo moto exclusion is granted of the time consumed in pursuing this application, i.e., from 1st March 2022 till the date of this Order. In default, the CoC shall resort to the next step as provided under IBC, without consuming any further time on pursuing the existing conditional plans, since any further delay in taking necessary steps will result in further deterioration of the already eroded asset value. - Tri
SEBI
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Change in control of Sponsor and/or Manager of Alternative Investment Fund involving scheme of arrangement under Companies Act, 2013 - Circular
Service Tax
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Scope of contractual agreement - Reimbursement of Service Tax and Environmental Compensation Cess - Arbitral Tribunal’s interpretation of Clause 37(i) of the GCC to the extent it includes reimbursement of Service Tax levied in connection with contracts / arrangements between CEC and third parties, is fundamentally flawed and vitiates the impugned award by patent illegality - there is merit in the petitioner’s contention that the award of reimbursement of Service Tax is contrary to the express terms of Clause 37(i) of the GCC. - HC
Central Excise
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CENVAT Credit - availment of fraudulent credit without receipt of goods - It is on the record that neither the department have produced evidence beyond doubt that the alleged inputs were not received in the unit and it was only a paper transaction nor able to prove that any other raw material was received and used by the appellant for production of their final product. - Credit allowed - AT
Case Laws:
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GST
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2022 (3) TMI 1048
Levy of GST - mining activity w.e.f. 01.07.2017 as contained in item H6 of the Press Release issued pursuant to the 45th meeting of the GST Council on 17.09.2021 - Section 74(1) of the GST Act - HELD THAT:- Since in similar matters, interim orders have been passed by this Court in the light of interim orders passed by Hon'ble Supreme Court, therefore, the petitioner is also entitled for interim relief. As an interim measure, it is provided that until further orders of this Court, the demand notices dated 07.01.2022 and 18.01.2022 for the months July 2017 to March 2018 under Section 74(1) of the CGST/UPGST Act, shall remain stayed - Learned counsel for the respondents pray for and are granted three weeks' time to file counter affidavit. Petitioner shall have a week thereafter to file rejoinder affidavit.
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2022 (3) TMI 1047
Interest payable on delayed payment of taxes - section 50 read with section 75(12) of JGST Act - Financial Years 2017-18, 2018-19 and 2019-20 - validity of Garnishee notice issued in Form GST DRC-13 for three different financial years - HELD THAT:- A perusal of Rule 142 (1A), shows that the proper officer may, before service of notice to the person chargeable with tax, interest and penalty under sub-section (1) of Section 73 or sub-Section (1) of Section 74 or sub-section (2) of Section 76, as the case may be, communicate the details of such tax, interest and penalty, as ascertained by the State Officer in Part-A of Form GST DRC-01. Sub-rule (2A) provides that where the person referred to in sub-rule (1A) has made partial payment of the amount communicated to him or desires to file any submissions against the proposed liability, he may make such submission in Part-B of Form GST DRC-01A. In the present case, the Proper Officer has issued the statement in Form GST DRC-01A upon the petitioner intimating him to pay the amount of tax ascertained along with the amount of applicable interest in full by 05.02.2020, failing which show-cause notice will be issued under section 73(1). Petitioner instead of making the payment, filed a reply before the proper officer which has been enclosed and acknowledged by the Respondent in their counter affidavit also. However, no show-cause notice under section 73(1) was issued thereafter. It is clear that though the petitioner did not pay the amount of tax and interest intimated to him in Form GST DRC-01A and instead submitted his reply thereto, the Respondent despite the stipulation contained in Form GST DRC-01 failed to issue any show-cause notice upon him under section 73(1) of JGST Act, 2017. When the petitioner had disputed the demand of interest intimated to him, the adjudication order could not have been passed without proper show-cause notice. Thus, Respondents have failed to follow the principles of natural justice and the procedure prescribed under section 73(1) of JGST Act before issuing the Summary of the Order in Form GST DRC-07. The writ petition is therefore, maintainable under Article 226 of Constitution of India. Whether liability of interest under section 50 of the Act could be raised without initiating any adjudication proceeding either under section 73 or 74 of JGST Act in the event Assessee raising a dispute towards liability of interest? - HELD THAT:- It has been held in the case of Mahadeo Construction [ 2020 (4) TMI 666 - JHARKHAND HIGH COURT] that if an Assessee disputes the liability of interest i.e. either disputes its calculation or even the leviability of interest, then the only option left for the Assessing Officer is to initiate proceeding either under Section 74 or 74 of the Act for adjudication of the liability of interest. In the present case, petitioner has disputed the interest liability by filing reply. Respondent had also indicated that in case petitioner fails to deposit the amount of tax and interest by 05.02.2020, show-cause notice under section 73(1) shall be issued. Respondent have themselves failed to follow the procedure stipulated under the Act as indicated by them in Form GST DRC-01A containing the intimation of the tax ascertained against the petitioner. Summary of the Order has been issued upon the petitioner in Form GST DRC-07 on his GSTN portal without following the principles of natural justice. The Respondents have failed to follow the procedure prescribed in law before issuing Summary of the Order in Form GST DRC-07 holding the petitioner liable to pay interest under section 50(1) of the Act due to late filing of GSTR-3B and not depositing the due interest on its own. As such, writ petition succeeds only on the point of failure to follow the principles of natural justice and the procedure prescribed in law - Since the proceedings have been held to be vitiated on failure to follow the principles of natural justice and the procedure prescribed under section 73(1) of JGST Act, 2017, no comments on the merits of this contention raised by the petitioner is made at this stage. The impugned Summary of the Order contained in Form GST DRC-07 dated 26.02.2020 in the respective writ petitions relating to different tax periods in question are accordingly quashed. Petition allowed.
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2022 (3) TMI 1046
Seeking grant of anticipatory bail - availment of fake Input Tax Credit on the basis of fake invoices without accompanying goods - HELD THAT:- In the instant case, it is a glaring act, where the petitioners themselves being accused, by concealing their status are levelling allegations against the co-accused and officials by posing themselves as whistle blowers, in fact, which is contrary to the record. Application filed for grant of anticipatory bail to the petitioners, is dismissed.
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2022 (3) TMI 1045
Classification of goods - rate of tax - namkeens or not - Jack Fruit Chips and Banana Chips (salted and masala varieties) made out of raw as wen as ripe banana and sold without brand name - Roasted and salted / salted / roasted preparations such as of Ground-nuts, Cashew nut and other seeds - Roasted and salted / salted / roasted preparations such as of Ground-nuts, Cashew nut and other seeds - salted and masala chips of Potato and Tapioca - Sharkaraivaratty sold without brand name classifiable as sweet meats or not - covered by HSN Code 2106.90.99 and taxable under Entry 101 A of Schedule of Central Tax (Rate) Notification 1 of 2017 or not - HELD THAT:- From the plain reading of the contents of chapter 21, it reveals that it includes the food preparations which are not elsewhere specified in the customs tariff. Those food preparations not specified or included elsewhere in the tariff being preparations for use either directly or after processing for human consumption are to be classified under this heading 2106. Further the heading 2106 specifically excludes the preparations made from fruit, nuts or other edible parts of plants of heading 20.08, provided that the essential character of the preparations is given by such fruit, nuts or other edible parts of plants. Therefore, it is evident that the entry 2106.90 is a residuary entry in respect of edible preparations and hence the edible preparations shall be classified under this entry only if the same are not classifiable under any of the other specific entries for edible preparations. It is noticed that as per chapter note 1(a) to chapter 20, the chapter does not cover vegetables, fruits or nuts prepared or preserved by the processes specified in chapter 7, 8 or 11. It means that these items not being processed or preserved by the said processes shall be covered in chapter 20. The processes specified in chapter, 7, 8 or 11 are freezing, steaming, boiling, drying, provisionally preserving and milling. Chapter heading 2008 covers roasted, salted or roasted nuts and fruits such as ground nuts, cashew nuts, other seeds and nuts and these are specifically covered under said heading vide sl. No. 40 of schedule II to notification No. 1/2017-CT (rate) - there remains no doubt that the roasted/salted/roasted and salted ground nuts, cashew nuts and other seeds/nuts shall be appropriately classifiable under heading 2008 of customs tariff. Even otherwise also, heading 2106.90 being a residuary heading shall not stand against a specific heading 2008 as per Rules of interpretation of the tariff. Banana chips - tapioca chips - potato chips - jackfruit chips - sharkara varatty - HELD THAT:- These chips are made by slicing, frying, adding salt or masala or jaggery syrup before packing and supply. It is not the case of the appellant that the essential characteristics of the fruits or vegetables are getting changed by applying the processes. As far as the essential nature of the products remains unchanged, the edible parts of plants are appropriately classifiable under heading 2008. In this case, the raw banana or potato or jackfruit or tapioca even after going through the process of frying and salting remain as vegetables and fruits only. The process of frying in oil and roasting are cooking methods wherein high temperature is used for processing of the edible parts of the fruit or vegetables as in this case - The process of roasting and frying has not been excluded in Note 1 to Chapter 20 and as such Note 1 is applicable to Roasted and fried vegetables, fruits, nuts and edible parts of plants. Further the explanatory notes to heading 2008 specify that this heading covers fruit, nuts and other edible parts of plants, whether whole, in pieces or crushed, including mixtures thereof, prepared or preserved otherwise than by any of the processes specified in other Chapters or in the preceding headings of this Chapter. When there is a specific entry providing for the most specific description in the heading 2008 to the impugned products over the residuary heading description of heading 2106.90, the said impugned goods is held appropriately classifiable under heading 2008, by virtue of rule 3(a) of the rules for interpretation. In view of clear provisions in GST laws for interpretation of tariff, the contention of the appellant regarding common parlance understanding of a goods does not hold water, as is therefore rejected. The impugned goods viz. Jackfruit Chips, Banana Chips, Tapoica Chips, Potato Chips, Chembu Chips and Pavakka Chips (Bittergourd) (Whether salted/ masala or otherwise) are held classifiable under Tariff Heading 2008 19 40 of the Customs Tariff Act, 1975. Regarding classification of roasted/salted/roasted and salted Cashew nuts, Ground nuts, and other nuts, there are specific headings under Chapter 20 that covers the products. Accordingly, roasted /salted / roasted and salted Cashew nuts are held classifiable under Tariff Heading 2008 19 10, and other roasted/ salted / roasted and salted nuts and seeds are classifiable under 2008 19 20 of the Customs Tariff Act, 1975 - it is evident that all the products that fall under Chapter Heading 2008 of the Customs Tariff Act, 1975 attract GST at the rate of 12%.
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Income Tax
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2022 (3) TMI 1044
Reopening of assessment u/s 147 - Reasons to believe - purchase of immovable property - HELD THAT:- AO re-opened the assessment on the ground that the petitioner had purchased immovable property; the fact which is contrary to the record, inasmuch as, it was not a case of purchase of immovable property by the petitioner; rather the petitioner along with co-sharers sold their ancestral land. This fact is further corroborated with the averments made wherein the revenue had admitted that due to typographical error/oversight the sale of land has been typed as purchase of land. This is not permissible in the eye of law. It is well settled principles with regard to reassessment. A reassessment proceeding is to be adjudged on the basis of reason to believe disclosed to the Assessee and the said reasons cannot be supplemented by the revenue as the reasons have to speak for themselves. The law is now no more res-integra that the reasons are required to be read as they were recorded by the assessing officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded by the AO cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced. Admittedly, in the instant case the AO has referred that the Assessee had purchased immovable property valued on 9.3.2017; whereas the fact is divergent. As such, the notice issued for initiation of reassessment proceeding does not have any legs to stand in the eye of law. This Court is conscious about the fact that from Schedule A of the sale deed dated 22.03.2017 (Annexure-2 to the writ petition) it appears that the nature of the land sold by the petitioner and cosharers was a residential land and not agricultural land as claimed by the petitioner in its computation of income and also in the instant writ petition. This fact is also admitted by the petitioner, inasmuch as, the petitioner himself in para-10 of its rejoinder affidavit had submitted that it can be case of the revenue that the petitioner wrongly claimed exemption but it cannot be any case of non-disclosure of any true or material facts by the Assessee. The revenue can initiate a fresh proceeding on the basis of the materials available on record for claiming wrong exemption by the petitioner. WP allowed.
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2022 (3) TMI 1043
Unexplained expenditure u/s 69C - ITAT has erred in upholding the decision passed by CIT(A), whereby it has deleted the additionHELD THAT:- This Court finds that in the questions of law framed by appellant the emphasis is on the factum that the entities from whom the purchases had been shown to have been made by the respondent-assessee were bogus and non-existent, on the ground that such entities were not found existing during the search and post search proceeding. Both, CIT(A) as well as ITAT, have given concurrent findings of fact that purchases made by the respondent-assessee were genuine and the Assessing Officer had neither doubted the receipt of goods by the appellant nor the payment made for the same through banking channels. Since the assessee has shown the purchases and the quantification is based on the evidences/documents placed on record. CIT(A) was right in deleting the protective assessment as in both the years, the purchases cannot be held unexplained u/s 69C in light of the observations made hereinabove para while giving finding to A.Y. 2011-12 by us. This Court is of the opinion that no question of law arises for consideration in the present appeal and the same is dismissed.
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2022 (3) TMI 1042
Validity of reopening of assessment - reasons to believe - provision was not allowable expense and contingent in nature and it was required to be disallowed while computing book Profit under section 115JB - HELD THAT:- As held by this Court time and again and particularly in Aroni Commercials Ltd. [ 2014 (2) TMI 659 - BOMBAY HIGH COURT ] once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. We are satisfied that the issue of year end identified provision for expenses was a subject of consideration of the Assessing Officer during the original assessment proceedings - reopening of assessment by the impugned noticeis merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings leading to the assessment order dated 27.12.2019. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. - Decided in favour of assessee.
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2022 (3) TMI 1041
Depreciation on assets leased merely on the basis that lease agreements - whether the transactions involved in the case are lease or financial arrangement? - HELD THAT:- Tribunal was examining the matter in the second round but that itself would not preclude the assessee to place on record the copies of the lease agreements for the examination of the Tribunal notwithstanding certain clauses of the lease agreements extracted by the AO in the assessment order. Assessee instead of furnishing the lease agreement copies has taken a circuitous method of defending its action of having submitted the copies of the lease agreements in the first round of litigation, so in the Miscellaneous Petition. In the absence of furnishing the relevant lease agreements, the Tribunal had no other option but to give weightage to the finding of the Assessing Officer as recorded in the order impugned. In view of the undertaking given by the learned Senior Counsel appearing for the appellant-assessee that the copies of the lease agreements would be furnished before the Tribunal within a period of four weeks from today, which is sine qua non for deciding the issue whether the transactions are lease or financial arrangement, we are of the considered opinion that the interest of justice and equity would be met in setting aside the impugned orders and restoring the matters to the file of the Tribunal to provide an opportunity to the appellant-assessee to furnish the lease agreements before the Tribunal. If such lease agreements are furnished before the Tribunal within a period of four weeks from today, the Tribunal shall consider the same in accordance with law and shall take a proper decision in an expedite manner after providing an opportunity of hearing to the appellant-assessee. It is needless to observe that all the rights and contentions of the parties are left open to be urged before the Tribunal including the issues raised in the form of substantial questions of law before this Court. After considering all these issues, the Tribunal shall pass appropriate orders in accordance with law in an expedite manner. - Decided in favour of assessee.
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2022 (3) TMI 1040
Set off of refunds against tax remaining payable - issuance of statutory intimation required under Section 245 of I.T Act - whether adjustment for those refunds due to the petitioner could be made against the relevant years on merits? - HELD THAT:- As an offshoot of the aforesaid discussions, it is clear that adjustments have been made by the department for assessment years 2014-15, 2015-16 without any intimation and that too within 30 days of the intimation for the assessment year 2016-17. There has been no intimation for adjustment of refund due for the assessment year 2005-06, 2006- 07 and 2007-08 against outstanding demand of the year 2014-15. We have consciously refrained from commenting upon merits of the case of the parties as regards to what extent such adjustments would be made even after intimation. The case is being decided only on the narrow point of lack of intimation under Section 245 of the I.T. Act. The respondents are not empowered to adjust the refund amount automatically without complying the provisions of Section 245 of the Act. Adjustment made against the refund due to the petitioner for the relevant year therefore have to be set aside. Accordingly, they are set aside. However, department is at liberty to act in accordance with law after due intimation and opportunity to file response, as contemplated under Section 245 of the I.T. Act for undertaking adjustment against any refund admissible to the petitioner for any assessment year against the outstanding demand for relevant assessment years. Accordingly, the writ petitions are allowed in the manner and to the extent indicated hereinabove.
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2022 (3) TMI 1039
Reopening of assessment u/s 147 - deduction u/s 80IA - HELD THAT:- Proceeding under Section 148 were not issued based on revenue audit objection, hence, the appeal filed by the appellant before the ITAT has rightly been dismissed under the CBDT circular No. 03/2018 dated 11.07.2018. The first appellate authority has also held that aforesaid notice u/s 148 was issued on 03.03.2014 i.e. after four years from the end of the assessment year 2007 08. This notice nowhere says that it is issued based on revenue audit objection, hence, this case does not fall under exception 10(c) of Circular No.03/2018 dated 11.07.2018. ITAT has not committed any error of law by dismissing the MA filed for recalling of the consolidated order dated 22.08.2019 disposed of relying on circular No. 03/2018 dated 11.07.2018
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2022 (3) TMI 1038
Prosecution for commission of offence u/s 276B r/w 278B - Sanction u/s 279(1) - TDS deducted but not deposited in time - offence allegedly committed under section 276(B) and 278(B) - HELD THAT:- It is an admitted fact that the TDS amount in all these cases were deposited with interest and the chart with respect to the same is also annexed with the counter affidavit of the Income Tax Department, wherein the date of deduction and date of depositing the said amount has been mentioned - some delay occurred in depositing the TDS. Apart from one or two cases, the deducted amount are not more than 50,000/-. While passing the sanction u/s 279(1) the sanctioning authority has not considered the CBDT instructions, bearing F. No. 255/339/79-IT (Inv.) dated 28.05.1980, issued in this regard by the CBDT. In CBDT instructions, it is mentioned that prosecution u/s 276(B) of the Act shall not normally be proposed when the amount involved and / or the period of default is not substantial and the amount in default has also been deposited in the meantime to the credit of Government. No such consideration will, of course, apply to levy of interest u/s 201(1A) - This is quoted in the case of Sonali Autos (P) Ltd. (Supra). Moreover after receiving the deducted amount with interest, the prosecution has been launched against the petitioners, which is not in accordance with law. If the petitioners failed to deposit the amount in question within the stipulated time, i.e. by the 7th day of the subsequent month, it was required to launch the prosecution immediately, which has not been done in the cases in hand. Moreover Section 278(AA) of the Act clearly states that no person for any failure referred to under Section 276(B)of the Act shall be punished under the said provisions, if he proves that there was reasonable cause for such failure. The judgment relied by Ms Amrita Sinha, the CBDT guidelines were not considered. On this ground these cases are distinguishable in view of the facts and circumstances of the cases relied upon by Ms. Amrita Sinha. The amount has already been deposited with interest and there is no reason why the criminal proceeding shall proceed and the criminal proceeding was launched after receiving the said amount with interest, had it been a case that the case was immediately instituted and thereafter the TDS amount has been deposited with interest, the matter would have been different. As such the continuation of the proceedings will amount to an abuse of the process of the Court. The entire criminal proceedings and the cognizance orders in their respective cases, passed by the learned Special Economic Offices, Dhanbad, in the respective C.O. Cases, whereby cognizance has been taken against the petitioners for the offences u/s 276(B) and 278(B) of the Income Tax Act, pending in the Court of learned Special Judge, Economic Offences, Dhanbad, are hereby, quashed.
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2022 (3) TMI 1037
Eligibility to file settlement application - benefit of extension of time to file application for settlement - Petitioner in support of his contention that his aforesaid application should have been accepted or entertained by the Settlement Commission since assessment proceeding shall be deemed to have been commenced only after issuance of notice under Section 153A of the Act which was issued in case of the petitioner on 2nd February, 2021 that is the date when the Settlement Commission had ceased to operate w.e.f. 1st February, 2021 in view of the aforesaid amended Finance Act - HELD THAT:- Admittedly, in this case, application for settlement under Section 245C(1) of the Act was filed on 17th March, 2021 while the Settlement Commission had ceased to operate w.e.f. 1st February, 2021 in view of the aforesaid Finance Act, 2021 amending the provisions of the Act. In view of this admitted position of the petitioner himself that notice under Section 153A of the Act was issued to the petitioner on 2nd February, 2021 which according to the petitioner is the date of commencement of assessment proceeding, question of petitioner being eligible to file settlement application on 31st January, 2021 by virtue of said order of the Board does not arise since the case of the petitioner is not covered by the aforesaid order of the Board upon which the petitioner wants to rely to take benefit which was issued by the Board on 28th September, 2021 which is much after 1st February, 2021 and had the Board intended to consider the difficulties in respect of the cases like of the petitioner the aforesaid order would have covered it. The writ court is only to see that every statutory authority acts within the four corners of law and that the law is properly implemented and it is not the duty of the Court to legislate the law or to issue any circular, notification of like nature or to take such type of policy decision granting relief to the petitioner beyond the scope of the aforesaid order of the Board amounting to amend the aforesaid order of the Central Board of Taxes acting under the power conferred upon under Section 119 of the Income Tax Act, 1961. In view of the discussion made above,we hold that the impugned order dated 14th January, 2022 passed by the Settlement Commission is in accordance with law and is legal and valid and in rightful exercise of the jurisdiction conferred upon it - we do not find any legal infirmity in the said impugned order of the Commission and accordingly not inclined to interfere with the aforesaid impugned order dated 14th January, 2022. So far as challenged to the legality and validity of the order of the aforesaid order of Central Board of Direct Taxes dated 28th September, 2021, on the ground of discrimination in exercise of power under Section 119 (2) (b) of the Income Tax Act, 1961 is concerned, we hold the said order of the Board as constitutionally valid and legal and is perfectly within the power conferred upon it under the aforesaid provision of law and the same is not discriminatory for the reason that the petitioner does not stand on the equal footing as of the class of person covered under the said order of the Board.
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2022 (3) TMI 1036
Review petition - capital gain tax on revalued capital asset - Conversion of partnership firm and the firm into a Private Limited Company - revaluation of land belonging to the firm and the enhanced value of the land was credited to the current account of the partners of the firm - Whether enhanced value of land held by the firm credited to the current account of partners does not attract capital gain? - HELD THAT:- The scope of appeal is governed by Section 260A of the Income Tax Act, 1963. The instant review is filed under Order XLVII Rule 1 read with Sections 114 and 151 of the Code of Civil Procedure. The jurisdiction of the review court is fairly well established and one of the principle objections against the review of judgment is that the error if is to be arrived at upon consideration of grounds of review, it accounts to re-appreciation of the core or totality of circumstances considered by the Division Bench. Such exercise is not termed as correcting the error apparent on the face of record or review jurisdiction exercised. The re-appreciation of circumstance for finding out the error apparent on record is avoided by this Court. The review petitioner failed to bring the grounds for review within the jurisdiction of applicable provision of law. The learned Standing Counsel though made a strenuous effort to decast the circumstances considered by this Court in the judgment under review, we are afraid we may be treading into the path of re-appreciation and would amount to exceeding the review jurisdiction of this Court. The grounds for review raised are not held as coming within the scope of Order XLVII Rule 1 of Code of Civil Procedure and we are satisfied that by examining these grounds, the judgment under review need not be recalled. Review petition dismissed.
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2022 (3) TMI 1035
Penalty issued u/s 271(1)(c) - assessment proceedings having been initiated pursuant to the proceedings under section 263 - HELD THAT:- It is profitable to bear in mind the distinction between the proceedings under section 263 and the initiation of penalty under section 271(1)(c). There is no quarrel that while issuing orders under section 263 Principal Commissioner of Income Tax cannot direct penalty to be imposed. However, when in the exercise of powers under section 263 of the Act, an assessment order was set aside and remanded back to the assessing officer, all the powers of an original assessing officer gets vested by operation of law. In such proceedings, if the assessing officer expresses his satisfaction that penalty proceedings can be initiated, the same is, in my considered view, within his jurisdiction and authority. The satisfaction recorded by the assessing officer in Ext.P3 that proceedings for penalty must be initiated under section 271(1)(c) is clearly within his jurisdiction, despite the fact that the original assessment order did not mention anything about initiating penalty proceedings. Ext.P3 assessment order issued after remand, is a proceeding under this Act and satisfies the ingredients of section 271(1)(c) and hence, the assessing officer was vested with the jurisdiction to record his satisfaction and thereafter initiate penalty proceedings. Coming to the instant case, nowhere in Ext.P2 order has the Principal Commissioner of Income Tax expressed his satisfaction for initiating penalty proceedings. On the contrary, he merely set aside the assessment order in its entirety and remanded the case for a fresh consideration by the assessing officer. Thus, while issuing the order of assessment, as per Ext.P3, the assessing officer was bestowed with all powers as in an original assessment, including the power to express his satisfaction for initiating penalty proceedings. In such a view of the matter, I find that the initiation of proceedings for imposing penalty and the consequent imposition was within the jurisdiction and authority of the assessing officer. Hence there is no merit in the challenge raised.
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2022 (3) TMI 1034
Reopening of assessment u/s 147 - Addition u/s 14A - HELD THAT:- Four years embargo has three exceptions and one of the exceptions is failure to disclose fully and truly all material facts necessary for assessment. That is the bone of contention in the writ petitioner's campaign against the impugned order and therefore it tantamounts to begging the question. Therefore, the limitation point is clearly a non-starter. Turning to the argument on Section 14-A read with Rule 8D which has been captured supra as well as the argument on non-consideration of objections besides audit objections not being a valid piece of information, all these three points can be answered in one go and that one answer is the annexure to Section 142(1) notice. As articulated in the annexure that disallowance under 14A of IT Act should be made as per the methodology prescribed in Rule 8D of the IT Rules and it is seen that Section 14-A read with Rule 8D was not adhered to by the assessee in computation of income Disallowance under 14A of IT Act should be made as per the methodology prescribed in Rule 8D of the IT Rules and it is seen that Section 14-A read with Rule 8D was not adhered to by the assessee in computation of income. Therefore, this matter turns on facts. To be noted, annexure also makes it clear that the writ petitioner assessee bank itself made disallowance to the tune of over 69.23 lakhs under Section 14A and it is in that context that there is a reference to Section 14A read with Rule 8D. The second paragraph of the annexure also deals with this aspect of the matter and makes it clear that disallowance of interest / expenditure ought to have been computed at a particular quantum where as the assessee bank has disallowed an amount of only 69.23 lakhs and odd. These need to be disallowed is the point raised. All this turns heavily on facts. These are all questions of fact. Therefore, it cannot be gainsaid that Section 14 A and Rule 8D have not been applied. The argument that the objections have not been considered may not hold water as the annexure does deal with the crux of the objections but it may be too early a stage in the proceedings to express any opinion on this aspect of the mater. As rightly pointed out by learned Revenue Counsel, reassessment notice under Section 148 of IT Act i.e, impugned notice if carried to its logical end, in the facts and circumstances of the case, will clearly neutralize all these arguments and the writ petitioner assessee bank will not be aggrieved in any manner. This Court has taken into account all the facts and circumstances of the case and has also noticed that the writ petitioner assessee itself is a bank and this Court is unable to persuade itself to believe that the impugned notice is either bad calling for interference in writ jurisdiction (much less demanding to be a situation of being dislodged under writ jurisdiction) or a notice which causes undue hardship having the writ petitioner aggrieved.
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2022 (3) TMI 1033
Reopening of assessment u/s 147 - estimation of income on bogus purchases - retention of the addition to the extent of 12.5% of the bogus purchases - whether such notice has been received by the assessee in time or not? - HELD THAT:- The notice for assessment year 2010 11 could have been issued up to 31st of March 2017. Though the notice have been issued on 7/10/2016 but as it has been served on the assessee on 16/2/2017, we do not find any infirmity in the reopening proceedings. Accordingly we uphold the reopening of the assessment made by the learned holding that assessee has e been served notice u/s 148 of the Act in time. Assessee has not been served the notice as there was no reference that notice u/s 148 of the act on 16/2/17 have been served on whom - The signature placed on the above notice as well as the signature of the assessee completely matches, we are of the opinion that notice u/s 148 of the act has been served on the assessee himself on 16/2/2017. Assessee has challenged that the approval was mechanical - AR could not show that there is any infirmity in the reasons recorded. The satisfaction has been recorded by the learned principal Commissioner of income tax as per performa at serial number 12 has clearly recorded his satisfaction which shows that he has gone through the reasons recorded by the learned assessing officer and then he is satisfied with the proposal of issuing notice u/s 148 and thereafter he granted his approval. Naturally, when reasons recorded are sound enough to stand on its own legs, clear, unassailable, manner or language of recording approval does not matter much. More so, as there is no specific manner and language of recording such approval prescribed by law, therefore approval granted if shows application of sound mind, deserves to be upheld. All decision cited before us shows flawed reasons and consequently approval also failed. In view of this, we are not in agreement with the argument of the learned authorised representative that the approval granted by the learned principal Commissioner of income tax is cryptic and does not show application of mind. - Decided against assessee. Bogus purchases - The amount of purchase consideration paid to above 4 parties are through account payee cheques and the sale consideration received by assessee from bill Power Ltd is also through account payee cheques. As held by the honourable Bombay High Court in case of principal Commissioner of income tax versus Muhammad Haji Adam and Co and others [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] that when compared the purchases and sale statement of the assessee, revenue accepted the sale, there is no reason to reject the purchases because without purchases there could not have been sale of goods. As the fact of purchases from hawala parties is not disputed, the additions limited to the extent of bringing the gross profit rate on purchases at the same rate of other genuine purchases were upheld. In the present case, the gross profit rate on total purchases of ₹ 1,064,411,721 at the rate of 0.35% We direct the learned assessing officer to retain the addition in the hands of the assessee on account of the bogus purchases of ₹ 906,090 against the addition confirmed by ld CIT (A) of ₹ 32,819,832/ . Accordingly, ground number 2 of the appeal of the assessee is partly allowed.
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2022 (3) TMI 1032
PE in India - Taxability of advertisement revenue and distribution revenue - assessee is a foreign company registered under the Mauritian Law and is engaged in the business of telecasting its sports channel Ten Sports - whether the assessee has a Permanent Establishment ( P.E. ) in India in respect of advertisement revenue and distribution revenue received by the assessee? - India Mauritius DTAA - HELD THAT:- In the present case, the Revenue, except merely referring t clause of the Addendum, has neither established nor brought anything on record, either at the assessment stage or before us, that Taj India had habitually exercised the authority to conclude the contract on behalf of the assessee. Revenue has failed to discharge the burden casted on it to prove that the twin conditions provided in Article 5(4)(i) of the DTAA are satisfied in the facts of the present case. As held in the case of Motorola Inc.[ 2005 (6) TMI 226 - ITAT DE LHI-A] that DTAA is only an alternative tax regime and not an exemption regime and therefore, the burden is first on the Revenue to show that the assessee had a taxable income under the DTAA, and then the burden is on the assessee to show that its income is exempt under DTAA. Similarly, was held by the Co-ordinate Bench of the Tribunal in ITO v. Right Florists (P) Ltd. [ 2013 (4) TMI 338 - ITAT KOLKATA] . In view of the above, Taj India cannot be held to be dependent agent P.E. of the assessee in India under Article 5(4)(i) of the India Mauritius DTAA with respect to the distribution revenue. Accordingly, to this extent order passed by the CIT(A) is upheld and the grounds raised by the Revenue are dismissed. P.E. in India in respect of advertisement revenue - Revenue has not been denied that Taj India was remunerated at arm‟s length price with respect to advertisement revenue and transfer pricing analysis was also accepted by the Transfer Pricing Office passed under section 92CA(3) - we accept the alternative plea of the assessee and held that as Taj India was remunerated at arm‟s length price in respect of advertisement revenue, no further profit needs to be attributed to same for the purpose of taxation in India. Further, as regards the issue of existence of P.E. with respect to advertisement revenue, same is left open. Accordingly to this extent, order passed by the CIT(A) is set aside and addition made by Assessing Officer with respect to advertisement revenue is directed to be deleted. As a result, the appeal filed by the assessee is allowed on the alternative plea. Disallowance of transponder fees and uplinking charges under section 40(a)(i) - HELD THAT:- As the facts and circumstances of the present case are similar to the earlier assessment years, wherein transponder fees and uplinking charges were paid by the assessee and India USA DTAA provisions were considered, respectfully following the decision of the Co ordinate Bench rendered in assessee‟s own case [ 2016 (8) TMI 504 - ITAT MUMBAI] we hold that the aforesaid payments are not in the nature of Royalty within the meaning of Article 12 of the India USA DTAA. the provisions of Article 3(2) of India US DTAA are similar to India Singapore DTAA, which were considered by Co-ordinate Bench of the Tribunal in aforesaid decision. Accordingly, respectfully following the judicial precedence in assessee‟s own case, the order passed by the CIT(A), deleting the disallowance made by the Assessing Officer under section 40(a)(i) of the Act, is affirmed. Consequently, the grounds raised by the Revenue are dismissed.
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2022 (3) TMI 1031
TDS u/s 194A - AO acquired land from the land owners under compulsory acquisition for public purposes as per the directions of Haryana Urban Development Authority (HUDA) and land owners got enhanced compensation which was awarded by the court on which they received interest - whether the impugned interest received by the land owners on enhanced compensation is income from other sources under section 56 of the Act attracting the TDS provision enshrined under section 194A? - HELD THAT:- Compulsory acquisition of capital asset under any law is transfer under section 2(47)(iii) - any profit or gain arising from transfer of such a capital asset is exigible to capital gains tax under section 45 of the Act in the previous year in which the transfer took place. However, capital gains arising from transfer of agricultural land situate in any area referred to in item (a) or item (b) of section 2(14)(iii) by way of compulsory acquisition under any law is exempt from tax under section 10(37) - Accordingly, any income by way of capital gains engrained in the receipt of compensation and/ or enhanced compensation is exempt in the hands of the recipient land owners. This is obvious from the reading of the provisions of section 10(37) of the Act. Following the judgment of the Hon ble Supreme Court in Ghanshyam (HUF) [ 2009 (7) TMI 12 - SUPREME COURT ], we hold that interest received by the land owners on enhanced compensation awarded to them by the court under section 28 of the LA Act is not in the nature of income from other sources in the hands of the recipient land owners under section 56 of the Act and therefore, the LAO was not under any legal obligation to comply with the TDS provisions of section 194A of the Act. Accordingly, we allow the grounds raised by the assessee by way of additional grounds taken before the Tribunal. The assessee succeeds
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2022 (3) TMI 1030
Employees contribution to PF and ESI prior to the due date of filing of the return u/s 139(1) - HELD THAT:- Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company [ 2021 (10) TMI 1196 - ITAT BANGALORE] by following the dictum laid down by the Hon ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] had held that the assessee would be entitled to deduction of employees contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) of the I.T.Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory. The amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration - the employees contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee.
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2022 (3) TMI 1029
Correct head of income - Capital Gains or Business Income - AO held that the land was purchased for the purpose of carrying on business and not as an investment - HELD THAT:- It is seen that the assessee purchased the land in the financial year ending 31-03-2006. Development expenses were also incurred in that year. Before the close of the year ending on 31.3.2006, the assessee came to know about a litigation going-on on this plot. Development cost incurred from August, 2005 to October, 2005, was before the assessee coming to know of the litigation on the plot. The assessee did not undertake any business activity. Before close of the very first year itself, the assessee declared the cost of purchase of land and development expenses as `Investment under the head `Fixed Assets in its balance sheet. The position continued to remain the same in its balance sheets on 31-03-2007, 31-03-2008, during which the assessee continued to declare such Plot as `Investment . The assessee could manage to sell the property by involving the other party to the litigation on the same property, namely, Maruti Builders and Developers, signing as a Consenting Party . Thus it is clear that the assessee continued to treat such land as Investment ab initio , by showing it under the head `Fixed assets in its balance sheets from year to year and not as Stock in trade , which position has not been disputed by the AO in any of the earlier years. Land purchased by the assessee in the year 2005 has rightly been treated as Capital asset by the assessee, income from whose transfer is liable to be taken under the head `Capital Gains and not as Business Income.
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2022 (3) TMI 1028
Penalty u/s 271A - appellant Doctor had failed to maintain books of accounts - HELD THAT:- As per Income Tax Rule 6F the appellant i.e. Doctor has to maintain the books of accounts mentioned in the Rule 6F. AR submitted that the appellant is maintaining cash book and petty cash book. Even before the ld.CIT(A) the appellant had submitted that the appellant maintained cash book and petty cash, thus, it is a fact that the appellant had failed to maintain books of accounts mentioned in the Rule 6F. Rule 6F(3) specifically provides for additional books and documents to be maintained by Medical Professionals in addition to their regular books mentioned in Sub-Rule 2 of Rule 6F. Thus, medical professionals has to maintain daily case register and inventory of the medicine stock. On a specific enquiry from the Bench, the ld.AR could not answer the question whether appellant Doctor had maintained the daily case register and medicine stock register. Appellant is liable for penalty under section 271A of the Act for non-maintenance of the books of accounts. No reason has been provided for non-maintenance of the books. Therefore, the penalty order under section 271A is hereby confirmed. - Decided against assessee.
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2022 (3) TMI 1027
Claim of deduction of Incubation Expenses from Income from Other Sources - The two streams of income were shown as other income and therefore, the same were non-operational income - CIT(A) allowed the claim - HELD THAT:- Assessee had not debited any expenditure towards incubation expenses . It was also observed by the bench that the assessee had not carried out any Segment-I business activity i.e. incubation of new entities during the year under appeal and it had carried out only Segment-II business activity. This vital fact was lost sight by the lower authorities. The allowability of the expenses in the Profit Loss account was to be adjudicated based on the findings to be given with regard to various streams of income in the form of shared services / infrastructure services etc. by the lower authorities and the head of income thereon. AO was directed to go through relevant agreements and give findings as to whether the same would fall within the objects of the assessee trust so as to fall within the ambit of business income of the assessee. If the same was to construed as income from other sources even then the allowability of expenses would have to be considered in the light of the provisions of Sec.57(iii) of the act. It was agreed position that findings given in earlier years with regard to incubation of new entities would not apply to the facts during the years under appeal. Accordingly, entire assessment was restored to the file of Ld. AO for de-novo adjudication. Ignoring the same and without making due examination / verification as directed by the Tribunal, Ld. AO merely held that the activities undertaken by the assessee were in continuation of incubation activities. The two streams of income were shown as other income and therefore, the same were non-operational income. The two streams of income were shown as other income and therefore, the same were non-operational income. Another allegation was that the assessee was exercising significant control over related parties and since the expenses were already claimed by its 100% subsidiaries, the assessee could not claim these expenses as the same would be against the principle that one could not profit from trading with oneself. These findings are mere allegations and not fact-based findings. Nothing has been brought on record to support this conclusion. The Ld. AO did not follow the directions of the Tribunal and did not make any efforts to go through the agreements etc. to render a finding as to whether the streams of income as earned by the assessee could be considered as business income of the assessee. It merely held that these activities were in continuation of incubation activities as evident from the website. Further, the allowability of expenses u/s 57(iii) was not considered by Ld. AO. Therefore, the findings of Ld. AO are bereft of any merits and contrary to the directions of the Tribunal CIT(A), in our opinion, has clinched the issue in correct perspective and diligently examined the main objects of the assessee. Since Ld. AO had failed to carry out the directions of Tribunal, Ld. CIT(A) rightly went ahead to examine the activities carried out by the assessee. After analyzing the Trust Deed, concrete findings were rendered that shared and Infrastructure activities could not be held to be in the nature of business activities and therefore, the same would be assessable under the head income from other sources . As per statutory mandate, the expenditure expanded by the assessee to earn such an income would be an allowable deduction u/s 57(iii). Since the directions of Ld. CIT(A) are in accordance with law, we concur with the findings of Ld. CIT(A) in the impugned order and accordingly, dismiss the appeal of the revenue.
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2022 (3) TMI 1026
Reopening of assessment u/s 147 - bogus purchases - case was reopened on the basis of information received from DGIT (Investigation) Mumbai - During the course of search, blank cheque books signed by dummy partners / directors /proprietor of entities was found seized and as informed that assessee is one of the beneficiaries of bogus purchase from three entities managed by Bhanwarlal Jain Group - addition on merit to the extent of 25% of purchases - HELD THAT:- Considering the decision of this Tribunal for [ 2021 (10) TMI 653 - ITAT SURAT] wherein we have upheld the validity of reopening and sustained the additions of disputed purchase/ bogus purchase @ 6%. For the year under consideration the ld CIT(A) has already granted substantial relief in sustain the addition of said bogus purchase to the extent of 5% only. Thus, following the order of Tribunal in all the aforesaid years, the grounds of appeal raised by the assessee is dismissed.
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2022 (3) TMI 1025
Reopening of assessment u/s 147 - Addition treating the deposits in bank account as unexplained income - HELD THAT:- When we look into the cash flow statement, we observe that the assessee has made a single cash withdrawal on 21.12.2011, which shows that the assessee is making high cash withdrawals too, though there are small withdrawals of course as stated by CIT(A) - to say that the assessee is making only small withdrawals, is baseless. We also note from the cash flow statement that the assessee has shown a closing cash balance which supports the fact that the assessee is keeping high cash balance as well. Another observation made by Ld. CIT(A) and emphasized by Ld. DR too that the assessee is declaring only ₹ 10,000/- per month and the household expenses cannot be as low as ₹ 300/- per day, is also a self-drawn inference for the sake of argument and does not have much substance unless the lower authorities would have found substantial household expenditure of the assessee on the basis of some material. With these facts on record, we observe that the assessee has submitted cash flow statement wherein the sources of deposits in bank account are well explained and this statement is not conclusively and adequately rebutted by the lower authorities. Hence we are inclined to hold that the assessee has explained the source of deposits and the same deserves to be accepted. Therefore, we allow this Ground of assessee.
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2022 (3) TMI 1024
Revision u/s 263 - Correct head of income - whether the profit on sale of plots was actually in the nature of capital gain or adventure in the nature of trade? - HELD THAT:- We observe that in assessment-order, as clearly stated that the assessee has made written submissions and filed not only the working of capital gain but also the purchase and sale deeds. AO has clearly mentioned in the assessment-order that he has perused those submissions and documents and thereafter accepted the long-term capital gain declared by the assessee. We also observe that during assessment proceedings, hearings were conducted from time to time and attended by the assessee and the assessment-order has not been passed in haste. It would have been better if the Ld. AO had made an elaborate discussion which he did not make, but still the assessment-order clearly transpires that the Ld. AO has perused the working of capital gain as well as the evidences of capital gain in the form of purchase and sale deeds and it is thereafter that he accepted the long-term capital gain. Thus, there is no lack of enquiry on the part of Ld. AO. As out of 42 plots allotted by Bhopal Development Authority, the assessee sold a few plots in the immediately preceding assessment-year 2014-15 and declared the profit arising therefrom as long-term capital gain, which stand accepted by Ld. AO and also not disturbed by Ld. PCIT in revision-proceedings of that year. As the assessee has sold 11 plots during the assessment-year 2015-16 under consideration out of the very same bunch of 42 plots, the nature of income being long-term capital gain as accepted by revenue in the assessment-year 2014-15 must be accepted in the assessment-year 2015-16 under consideration too. We are of the considered view that the Ld. PCIT was not justified in invoking section 263 to the present matter of assessee. - Decided in favour of assessee.
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2022 (3) TMI 1023
Disallowance of expenses u/s.40(a)(ia) - Non deduction of TDS u/s 195 - payment towards Internet Private Line Charges (IPLC) - AO considering amendment to provisions of section 9(1)(vi) / 9(1)(vii) by the Finance Act, 2012, with retrospective effect from 01.06.1976, held that payment made by the assessee to non-resident is in the nature of royalty within the meaning of section 9(1)(vi) read with Article 12 of the DTAA between India and USA - HELD THAT:- In the present case, payment made by the assessee to non-residents was prior to amended definition of royalty by the Finance Act, 2012. Further, at the time of payment made by the assessee to non-residents, there was an ambiguity in the definition of royalty and because of this the assessee could not deduct TDS as per provisions of section 195 - Although, the definition has been amended by the Finance Act, 2012, with retrospective effect, but because there was an ambiguity in the definition, the assessee cannot do impossible things by foreseeing an amendment to the definition of royalty and deduct TDS on payment made to non-residents. This principle is supported by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd . [ 2021 (3) TMI 138 - SUPREME COURT] where it was held that person mentioned in section 195 of the Income Tax Act cannot be expected to do the impossible, namely, to apply the expanded definition of royalty inserted by Explanation 4 to section 9(1)(vi) of the Income Tax Act, for the assessment years in question, at a time when such explanation was not actually and factually in the statute. Therefore, we are of the considered view that the Assessing Officer was erred in making addition towards payment made to non-residents u/s.40(a)(ia) of the Act, for non-deduction of TDS u/s.195 - Assessee appeal allowed.
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2022 (3) TMI 1022
Disallowance of Professional fees paid to non-residents - Non deduction of TDS u/s 195 - Amendment with retrospective effect - whether the payment made to the non-residents was a professional fee or a commission? - HELD THAT:- We find that an identical issue has been considered by the Tribunal in the case of M/s. TVS Electronics Ltd. [ 2021 (10) TMI 210 - ITAT CHENNAI] for wherein, on identical circumstances held that liability towards TDS cannot be fastened on the assessee on the basis of subsequent amendment to law with retrospective effect, because which was impossible on the part of the assessee to do the impossible things and deduct TDS on payment made to non-residents, because, the assessee cannot foresee the amendment and deduct TDS on said payment and consequently, payment made to non-residents, cannot be disallowed u/s. 40(a)(i) of the Act, for failure to deduct TDS u/s. 195. Thus the assessee cannot be expected to deduct TDS on payment made to non-residents on the basis of subsequent amendment to the law with retrospective effect from earlier date, because the assessee cannot foresee the amendment and deduct TDS and hence, we are of the considered view that the AO was erred in disallowing the payment made to non-residents u/s. 40(a)(i) of the Act, for failure to deduct TDS u/s. 195 of the Act. The Ld. CIT(A) without considering the relevant facts, simply sustained the additions made by the AO. Hence, we are reversed the findings of the Ld. CIT(A) and direct the AO to delete the additions made towards disallowance of payment made to non-residents u/s. 40(a)(i). Disallowance of compensation paid to employees' under 'Welfare Oriented VRS Scheme' - HELD THAT:- In this case, the assessee has made payment directly to employees under 'Welfare Oriented VRS Scheme', but not to a Trust or Fund and thus, we are of the considered view that payment made by the assessee cannot be disallowed u/s. 40A(9) - VRS Scheme provided by the assessee to five employees is on welfare oriented basis by considering their health, which is not covered under Rule 2BA and thus, employee's cannot claim exemption u/s. 10(10C) - Once payment made to employees, is not exempted u/s. 10(10C) of the Act, then it partakes the nature of expenses incurred for the purpose of business and thus, assessee can claim deduction u/s. 37(1) of the Act. However, the facts with regard to the claim of deduction u/s. 10(10C) of the Act by the employees of the assessee, were not forthcoming from the records. Therefore, for the limited purpose to ascertain the facts with regard to claim of benefit u/s. 10(10C) by the employees to allow the deduction claimed by the assessee needs to be re-examined by the AO in light of claim of the assessee that employees did not avail the benefit of exemption u/s. 10(10C) of the Act. Disallowance of expenditure relatable to exempt income u/s. 14A - HELD THAT:- We find that the assessee has not disputed the applicability of Rule 8D of Income Tax Rules, 1962, for computing disallowance of expenses u/s. 14A of the Act. We find that the AO has determined the disallowance u/s. 14A r.w.r. 8D of Income Tax Rules, 1962 @ 0.5% on average value of investments. In our considered view, disallowance determined by the AO is in accordance with law and thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the assessee.
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2022 (3) TMI 1021
Validity of Revision u/s 263 - Period of limitation - date from which limitation begin to run - issue covered by the original order of assessment under section 143(3) or from reassessment - whether order of Ld. PCIT is barred by limitation under the Act as the period of two years under section 263(1) of the Act is to be reckoned from the date of original assessment framed under section 143(3) dated 31.03.2016 and not from the dated reassessment order passed under section 143(3) read with section 147 of the Act dated 31.12.2018? - HELD THAT:- Hon'ble Bombay High Court in the case of CIT vs. ICICI Bank Limited [ 2012 (2) TMI 308 - BOMBAY HIGH COURT] as held that where the jurisdiction under section 263(1) of the Act is sought to be exercised with reference to an issue which is covered by the original order of assessment under section 143(3) of the Act and which does not form the subject matter of the reassessment, the limitation must necessarily begin to run from the date of order passed under section 143 The issue on which the Ld. PCIT proposed the revision of reassessment order dated 31.12.2018, we note that the issue of payment of bogus commission was not the subject matter of reassessment proceedings. Therefore, the period of limitation has to run from the date of assessment as framed under section 143(3) dated 31.03.2016. In view of this, we incline to hold that the revisionary jurisdiction exercised by the Ld. PCIT is hopelessly barred by limitation. The appeal of the assessee is allowed.
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2022 (3) TMI 1020
Penalty u/s 271(1)(c) - Defective notice u/s 274 - disallowance of depreciation and disallowance of brought forward losses and unabsorbed depreciation - HELD THAT:- On perusal of the notice it is clear that Assessing Officer has not specified whether the penalty is being levied on account of concealment of particulars of income or furnishing of inaccurate particulars of income. See case of Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] - thus we delete the penalty on account of invalid notice issued under section under section 274 read with section 271(1)(c) - Decided in favour of assessee.
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2022 (3) TMI 1019
Income accrued In India - Royalty receipts - taxation of the revenue from online database of text journals and books as royalty income under the provisions of Article 12 of the India USA Double Taxation Avoidance Agreement [DTAA] - beneficial provisions of the tax treaty to see whether the contention of the assessee that the alleged revenue is not royalty income - HELD THAT:- On an understanding of the entire factual matrix of the business of the assessee shows that there is no transfer of legal title in the copy righted article as the same rests with the assessee. The user has no authority to reproduce the data in any material form to make any translation in the data or to make adaptation in the data. The end user cannot be said to have acquired a copyright or right to use the copyright in the data. In our considered view, for determining whether or not a payment is for use of copy right, it is important to distinguish between a payment for right to use copy right in a program and right to use program itself . In the case in hand, the revenue derived by the assessee from granting limited access to its data base is akin to sale of book, wherein purchaser does not acquire any right to exploit the underlying copyright. When the purchaser reads the book, he only enjoys the content. Similarly, user of the data base does not receive the right to exploit the copyright in the database, he only enjoys the product in the normal course of his business. Facts on record show that the appellant is granting access to its data base. Transaction under consideration is for provision of accessing data base of the assessee. Hence the same cannot be considered as royalty under Article 12 of the India USA - DTAA. While taxing the revenue as royalty, the Assessing Officer has relied upon the decision of the AAR in the case of Skillsoft Ireland Limited wherein the AAR has followed the decision of the Hon'ble Karnataka High Court in the case of Synopsis International Ltd. [ 2013 (2) TMI 448 - KARNATAKA HIGH COURT] - we set aside the findings of the ld. CIT(A) and direct the Assessing Officer to delete the impugned addition. Appeal of assessee allowed.
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2022 (3) TMI 1018
Addition u/s 69D - Hundies - Search seizure operation - Unsigned hundies and promissory note found in search - theory of probability adopted by the investigation wing of Delhi - Hon'ble Settlement Commission observed that it is inconceivable that a person (Shri Satish Shahwney) would allow an amount of ₹ 3.80 crores to remain outstanding for such a long period - HELD THAT:- In the instant case, the Revenue has not brought on record any material establishing that the assessee has actually received the sum of ₹ 3,80,00,000/- during the period relevant to assessment year 2012-13. Therefore, we find from the perusal of the receipts promissory note (unsigned) that the receipts relied upon do not fall in the category of hundis in any manner We find that the Revenue was not convinced with as regard to the transaction, if any, carried out and the period during which such transaction was carried out. Thus, the theory being hypothesis was not conclusive. Therefore, application of Section 69D was unjustified. The documents were in English and the transactions were not between three parties. They were bilateral. The transactions were on the lines of a promissory note. The documents had waived the notice of dishonor and no grace period was granted. This was also indicative of the transaction not being a hundi transaction. Section 69D was not applicable. We find that the facts of the assessee s case are identical to the above reported case of Dexan Pharmaceuticals Pvt. Ltd [ 1995 (1) TMI 54 - ANDHRA PRADESH HIGH COURT] and therefore, the provisions of sec. 69D were not applicable in the case of the assessee. Thus addition made by the Assessing Officer by invoking section 69D was bad in law and the action of Ld. Commissioner of Income Tax (Appeals) deleting this addition contains no infirmity and the same deserves no interference. Thus, the only ground raised by the Revenue stands dismissed. Penalty u/s 271D - contravention to the provisions of section 269SS - HELD THAT:- While deciding the quantum addition above we have held that at no point of time, it was proved that the assessee had actually received any loan or deposit specifically during the period relevant to Assessment Year 2012-13 as there was no material evidence in respect of the same. Since we have already confirmed the deletion of quantum addition by ld. CIT(A) while deciding the very foundation for initiation of penalty under section 271D has now become baseless.
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2022 (3) TMI 1017
Assessment u/ 153A - Addition based of the consumption/use of demineralized water(DM Water) - CIT(A) deleted the addition holding that DM water has been used by the assessee for washing of tanks, besides, ld CIT(A) also observed that assessing officer has not considered opening stock of DM water, closing stock of DM water, DM water in process in pipes and DM water in blending tanks and other many uses of DM water for different other purposes - HELD THAT:- There was no incriminating material found by the department in the process of search action. The ld CIT(A) also observed that there is no incriminating material unearthed during the search. CIT(A) has categorically observed that there is no substance in the allegations of the A.O. Even after a thorough search action under section 132, not a single instance of sale outside books, purchase of basic raw material or even packing material or any instance of discrepancy in the stock of finished goods, spirit, bottles or even bottles etc was detected. The relevant observations in the appellate order. AO had drawn an adverse inference merely relying on the register maintained by the Assessee to have control on demineralized water and the statements recorded during the course of search without pointing how the said material shows any suppressed production and sales on the part of the Assessee. A.O. failed to demonstrate the nexus between the seized material and the addition made during the relevant years. Thus, the allegation of the Ld. A.O. that there was a suppressed production or sale was without any basis and merely on the basis of conjecture and surmises. Thus in case of unabated / concluded assessment, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search and accordingly the addition made by the assessing officer has been rightly deleted by the ld CIT(A). Addition of capital gain - HELD THAT:- We note that assessee has shown capital gain in his books of accounts in respect of impugned property and we also observe that assessee has shown such capital gain in the computation of total income for the assessment year 2010-11. The assessee computed capital gain and paid the due taxes, therefore, the property which is disclosed in the books of accounts cannot be an incriminating material. Hence, admittedly the search team did not find any incriminating material. We note that in absence of incriminating material, addition should not be made under section 153A of the Act, hence we cannot take judicial notice about such unfounded allegation of the assessing officer. We note that property has been got valued by the bank for the purposes of loan applied by the purchaser. The valuation is for fair market value as on 21.05.2012 i.e., more than two years after the date of transfer. CIT(A) further observed that no incriminating document showing transfer of money, above the consideration, shown has been found even after the search action. It is to be noted that even when the valuation is by departmental valuer u/s 50C(3); and the valuation of property referred according to the valuation officer comes out more than that taken by the Stamp Valuation Authority s even then section 50C(3) mandates that maximum deemed consideration can be taken to be equal to the valuation adopted by the stamp valuation authority only and not the higher value estimated by the departmental valuer. Therefore, even by the spirit of the Act, when the valuation is of the same property, for the date of transfer, that too for the purposes of taxation of capital gains only; the legislature does not intend even then to take the deemed consideration higher than the value adopted by the stamp valuation authority. In such circumstances, taking a different value (much higher than value adopted by Stamp Valuation Authority) as consideration just on the basis of a third-party valuation, done on the instances of a bank which is giving a loan, without even a reference to any comparative instances, cannot be justified. Based on this factual position, we note that ld CIT(A) has rightly deleted the addition. The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A).
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2022 (3) TMI 1016
Interest Disallowance u/s 36(1)(iii) - As assessee said interest expenditure has been apportioned between the various properties on pro-rata basis and the properties were held as current assets for re-sale / development and not as a capital asset - HELD THAT:- We find that the assessee is engaged in real estate and procure land for business purposes. The interest paid by the assessee has been added on pro-rate basis to various land owned by it. In the year of sale, cost of land including interest has been debited in the Profit Loss Account. The assessee has consistently followed this method of accounting for various years and the same has been accepted by the revenue. If the interest cost is not allowed to the assessee, the same would never be allowed to the assessee since it is not the case of Ld. AO that the assessee is claiming double deduction of interest expenditure. It could also be seen that interest cost is a period cost and allowable to the assessee in the year in which it has been incurred - assessee has chosen to claim the same only in the year when the land is sold. Thus, no infirmity could be found in the impugned order, on this issue. The ground thus raised stand dismissed. Disallowance of compensation Paid - joint-owners of this property entered into joint development agreement (JDA) with another entity GHLPL which was unable to progress with development, the agreement was cancelled and the owners entered into another MOU with the assessee for development of the property and compensation was stated to be paid by the assessee to GHLPL and the same was claimed as project expenditure - claim was rejected by AO on the ground that it was the duty of land owners to give possession of the land free from any claim or encumbrance payment was nothing but charity and the payment was not supported by the terms of the agreement / MOU - HELD THAT:- We find that the amount was paid by the assessee in the regular course of its business to settle the claim of the earlier developer. It is also undisputed fact that the amount was subsequently recovered by the assessee and offered to tax during AY 2011-12. Therefore, impugned order does not call for any interference on our part. The grounds thus raised stands dismissed. Bad-Debts written-off - Expenditure was held to be allowable expenditure u/s 37(1) - HELD THAT:- We find that this amount has been lost by the assessee in the regular course of its business. Any such loss has rightly been held to be allowable u/s 37(1). Finding no infirmity in the impugned order on this issue, we dismiss the grounds thus raised by the revenue.
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2022 (3) TMI 1015
Disallowance of expenditure while processing the return u/s 143(1) by the CPC - Return of income was processed u/s. 143(1) and Expenditure incurred towards club membership, entrance fee and subscription fee disallowed - No opportunity was granted to the assessee to put forth his stand - The assessee filed rectification petition u/s. 154 of the Act before the CPC. - The CPC rejected assessee s petition for rectification. - HELD THAT:- In the instant case since return of the assessee was processed u/s. 143(1) of the Act, no opportunity was granted to the assessee to put forth his stand before disallowing the expenditure. In the First Appellate proceedings, the CIT(A) dismissed the appeal of assessee against the order passed u/s. 154 of the Act on the ground that the issue raised is debatable. If that be so, the CPC has erred in disallowing the assessee s claim of expenditure while processing the return of income u/s. 143(1) - Revenue cannot in unilateral proceedings disallow expenditure without affording an opportunity to the assessee. What cannot be done u/s. 154 on the ground of debatability ,cannot be done u/s. 143(1) of the Act to the assessee s claim on which two views are possible A debatable issue cannot be a subject matter of adjustment u/s. 143(1) of the Act. In the case of Bajaj Auto Finance Ltd. vs. CIT [ 2018 (2) TMI 1716 - BOMBAY HIGH COURT] has held that debatable claim cannot be disallowed by way of an intimation u/s.143(1) Thus we find that the authorities below have erred in disallowing assessee s claim of expenditure in proceedings u/s. 143(1) of the Act and thereafter, rejecting assessee s application u/s. 154 of the Act. Ergo, the impugned order is set-aside and appeal by the assessee is allowed.
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2022 (3) TMI 1014
Foreign exchange fluctuation loss - AO during the course of scrutiny assessment proceedings noticed that the assessee has claimed deduction / loss on account of difference between actual exchange amount and exchange amount accounted - HELD THAT:- This factual matrix remained uncontroverted and unchallenged. In the course of hearing, a query was also raised before assessee to demonstrate the accounting procedure adopted for the reversal of reinstatement of assets and liabilities as on 31st March of every year on account of exchange fluctuations, for which the ld. Counsel referred to the paper-book compilation submitted before us and demonstrated the accounting methodology adopted by the assessee for the same. As gone through the judgment in the case of Woodward Governor India P. Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] wherein it was held that the loss suffered by assessee on account of foreign exchange difference as on the date of balance sheet is an item of expenditure allowable u/s.37(1) - it was held that the accounting method followed by an assessee continuously for a given period of time needs to be presumed to be correct till AO comes to conclusion for reasons to be given that said systems does not reflect true and correct profits. Disallowance of provision made towards stock - HELD THAT:- On perusal of records and on specific query to the ld. Counsel of the assessee, we noted that provision for stock made by assessee is totally on adhoc basis, contingent in nature and that there is no historic trend explained before us. In the case of Rotork Controls India P. Ltd.[ 2009 (5) TMI 16 - SUPREME COURT] has noted the issue regarding contingent liability like warranty provision and held that the value of contingent liability, like the warranty expenses, if properly ascertained and discounted on accrual basis can be claimed as item of deduction u/s.37(1) - But, Hon ble Supreme Court stated that the principle of estimation of contingent liability is not the normal rule. It would depend on the nature of the business, the nature of sales, the nature of the product manufactured and sold and the scientific method of accounting adopted by the assessee. It would also depend upon the historical trend and upon the number of articles produced. All the parameters indicated by the Hon ble Supreme Court while dealing with accounting for similar aspects like warranty provisions are not at all satisfied in the present case.
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2022 (3) TMI 1013
Late payments towards EPF and ESI under section 36(1)(va) - amount deposited after the due date but before the due date of filing of return of income - AO made the additions of the impugned amounts for the reasons that the assessee did not deposit the amounts of employees contribution as per the provisions of section 36(1)(va) - HELD THAT:- As decided in M/S MOHANLAL KHATRI VERSUS A.C.I.T., CIRCLE-2 AJMER [ 2021 (11) TMI 1035 - ITAT JAIPUR] we do not accept the Ld. CIT(A) s stand denying the claim of assessee since assessee delayed the employees contribtion of EPF ESI fund and as per the binding decision of the Hon ble High Court in Vijayshree Ltd. [ 2011 (4) TMI 63 - ITAT KOLKATA] u/s 36(1)(va) of the Act since assessee had deposited the employees contribution before filing of Return of Income. Therefore, the assessee succeeds. Thus the impugned addition on account of deposits of employees contribution of ESI PF prior to filing of the return of income u/s 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.
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2022 (3) TMI 1012
Income accrued In India - taxability of payment received from assessee from Standard Chartered Bank India(SCB) - 'Royalty' or 'Fees for Technical Services' under Section 9(l)(vi) and 9(l)(vii) - as held receipts from SCB, India are Royalty/FTS specially after the retrospective amendments section 9 - HELD THAT:- As assessee is = providing similar services to other clients like Hong Kong Government and other big MNEs and there is nothing special or exclusive about the services which are being rendered to SCB. In view of the entire gamut of facts as discussed above, we are of the opinion that the payment made by SCB to assessee- company does not fall within the realm of fees for technical services as contained in Sec. 9(1)(vii), albeit the assessee has only provided a standard facility for data processing without any human intervention. Accordingly, we hold that the said payment is not taxable in India as fees for technical services in terms of Sec. 9(1)(vii) of the Act. Thus, the issue raised in favour of the assessee.
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2022 (3) TMI 1011
Deduction claimed u/s. 80IC - transport subsidy, central interest subsidy, power subsidy and central excise refund - Addition on the ground that the same were not derived from manufacturing activities and thus the deduction claimed is totally illegal, illegitimate - HELD THAT:- As in the case of CIT vs Meghalaya Steels Ltd [ 2016 (3) TMI 375 - SUPREME COURT] whereby the appeal of the Hon'ble Guwahati High Court upheld [ 2013 (7) TMI 175 - GAUHATI HIGH COURT] holding that the amounts received by the assessee in respect of transport, central interest subsidy, power subsidy and central excise refund are in the nature of reimbursement of cost to the assessee for setting up industries in the backward areas as per the policy of government. In our opinion the issue is settled in favour of the assessee and we, therefore, respectfully following the aforesaid decision set aside the order of CIT and direct the AO allow the claim of deduction u/s. 80IC - Appeal of assessee is allowed.
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2022 (3) TMI 1010
Exempted capital gain wrongly shown in the belated return as taxable - Revision of ITR on allowed being belated return - Capital gain from the compensation received pursuant to compulsory acquisition of land - assessee's land which is residential has been acquired by the Bihar State Govt. for development of National High Way by virtue of notification dated 7.5.2014 of Govt. of India - whether the action of the CPC in accepting the tax returned by the assessee dated 07.02.2017 (belatedly filed on 2.2.2017) declaring total income wherein the assessee had inadvertently shown the capital gain from the compensation received pursuant to compulsory acquisition of its land is legally sustainable or not? - HELD THAT:- We have carefully gone through the Section 96 as well as Section 46 of the RFCTLARR Act and we find that the assessee's case does not fall in the ken of Section 46 of RFCTLARR Act; and therefore the compensation received by the assessee to the tune is exempt as per Section 96 of the RFCTLARR Act even though the land in question is residential and since it is exempt from tax it and consequently need not have to be included in the total income of the assessee. We note that inadvertently the assessee had filed the return of income declaring this amount as capital gain. So the CPC while processing the ROI filed by the assessee, accepted the capital gain offered by the assessee. However we note that the Ld. CIT(A) while passing the impugned order against the action of CPC has not considered the claim of the assessee that it has inadvertently reflected the same as capital gain in ROI and the whole amount it received as compensation was exempt from tax as per Section 96 of the RFCTLARR Act as well as the CBDT Circular. We do not countenance such an action of the Ld. CIT(A). We note that the Ld. CIT(A) denied the claim to the assessee by misdirecting himself that assessee's claim u/s. 10(37) of the Act cannot be allowed because the land acquired of assessee was not agricultural land, so has sustained the taxation on it. We note that just because the assessee inadvertently or by ignorance has shown the exempt income as exigible to tax, the AO/CPC ought not to have treated the same as taxable income and thereby taxed the exempt income because Article 265 of the Constitution, title reads Taxes not to be imposed saved by authority of law'' and the Article reads 'No tax shall be levied or collected except by authority of law'. Here in this case the Parliament has exempted this compensation (for acquiring land) from taxation as per Section 96 of RFCTLARR Act. So the CPC/AO ought not to have taxed the same at the first place. Thus we hold that the capital gain shown by the assessee in its original ROI need not to be taxed being exempt. - Decided in favour of assessee.
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2022 (3) TMI 1009
Determination of Short Term Capital Gain - Transfer of capital asset u/s 2(47) - year of assessment - AO sought to invoke Section 53A of the Transfer of Property Act, 1882 - case of the Revenue is this that the Vaibhav Industires have given the possession of land and/or property 22.09.2011 against the total sale price pertaining to F.Y. 2011-12 - HELD THAT:- It is a fact that assessee is an ultimate purchaser received the total consideration during the F.Y. 2012-13 i.e. for A.Y. 2013- 14 upon completion of all formalities in terms of the order passed by the Hon ble High Court finally and the property got transferred. Therefore, it was practically transferred in the F.Y. 2012-13 and not F.Y. 2011-12 i.e. the assessment year under consideration. In that view of the matter the invocation of Section 53A of the Transfer of Property Act, 1882 is wrong. Thus, no profit or gain which arose from transfer of a capital asset which could be brought to tax under Section 45 r.w.s. 48 of the Act As decided in Balbir Singh Maini [ 2017 (10) TMI 323 - SUPREME COURT] where it has been held that where for want of permission in that transaction of development of land envisaged in Joint Development Agreement (JDA) failed through, there were no profit or gain which arose from transfer of capital asset which could be brought to tax under Section 45 r.w.s 48 of the Act. Thus we hold that since the property was actually transferred in A.Y. 2013-14 the computation of short-term capital gain holding the transfer took place in the A.Y. 2012-13 is not sustainable. In the present facts and circumstance of the case the deed since not registered in A.Y. 2012-13 it has no effect in law for the purpose of invocation of the provision of Section 53A of the Act. There is no profit or gain arose as there was no transfer in the year under consideration. Hence, the impugned order of addition passed by the authorities below is not sustainable in law and, thus, hereby quashed. Addition of interest income on mercantile basis - amount received during the year accounted on cash basis without allowing the expenditure as claimed by the appellant - HELD THAT:- Having heard the Ld. Counsel appearing for the parties, having regard to the facts and circumstances of the case we remit the issue to the file of the Ld. AO to consider that if the impugned income has been offered to tax in the subsequent year then the relief is also to be given to the assessee in the respective Assessment Year. The Ld. AO will consider the issue as directed hereinabove upon considering the evidence to be produced by the assessee and after affording opportunity of being herd to the assessee. Assessee s this ground of appeal is, therefore, allowed for statistical purposes.
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Benami Property
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2022 (3) TMI 1008
Benami transaction - preliminary decree passed by the learned Civil Judge - Trial Judge passed a decree disregarding the amendments made in Sections 3 and 4 of the Prohibition of Benami Property Transactions Act, 1988 - HELD THAT:- Trial Judge has failed to appreciate that the property was purchased by the father in the name of the mother and accordingly, the said property should be treated as the property of the father. On the demise of the father, the parties shall inherit the property in equal measure. It is true, that the learned Trial Judge has relied upon the unamended Sections 3 and 4 of the Prohibition of Benami Property Transactions Act, 1988 in arriving at a finding that the plaintiff no.1 is the co-owner of 8 anas share of the 'kha' schedule property. However, by reason of amendment, to which our attention is drawn by Mr. Prasad, the mother becomes the absolute owner of the 'kha' schedule property which was purchased in her name by her husband. Mr. Prasad submits that the property was purchased in the joint names of the plaintiff no.1 and her husband. Although, the learned Trial Judge has referred to the unamended provision but the new amended provision conclusively vested the right in favour of her towards her 8 anas claim in 'kha' schedule property. In view thereof, the order of the learned Trial Judge is upheld, however, for the reason recorded in this order. The appeal fails.
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2022 (3) TMI 1007
Benami transaction - absolute owner of suit property - Respondent No.2 in his written statement denied and disputed the Suit of the Appellant as being based on falsity and concealment of facts - Whether the Defendant No.1 is the bona fide and absolute owner of the suit property having purchased the same from her Stridhan and had the right to sell the suit property to Defendant No.2? - HELD THAT:- As perused documents Exhibit P1 to Exhibit P206 relied on by the Appellant. The documents have no connection whatsoever with the instant matter in which the Appellant is primarily to prove that he is the owner of the suit premises as claimed by him. Appellant is neither the applicant nor does the document mention him. Exhibit P194 is a money receipt executed between Respondent No.1 and Respondent No.2 for purchase of the suit properties for a consideration value of ₹ 3,00,00,000/- (Rupees three crores) only. The Appellant is a witness to the execution of this document of his own volition, thereby well aware of what transpired between the Respondents regarding sale and purchase of the suit property. He lodged no complaint of having been coerced by the Respondents to execute any document before any authority. The other documents relied on by the Appellant being Exhibit 1 to Exhibit 187 pertain to the lottery business of M/s. Bindhya Agency with its Office in Lajpat Nagar, New Delhi, and lend no credence to the claim of the Appellant with regard to purchase and ownership of the suit properties. Similarly, Exhibit 189 to Exhibit 206 are of no assistance whatsoever to establish even the prima facie case of the Appellant, this despite walking meticulously through the evidence and documents relied on by him. It thus emerges with clarity that he has no documentary evidence whatsoever to verify his claim of ownership over the suit property. To a large extent the documents indicate amounts of money received by the Appellant from his lottery business, but this alone does not suffice to establish that he purchased the suit property sans specific trail of income, investment, viz., purchase of the suit property, and registration of it in his name. It thus stands to conclude that the Appellant failed to establish even a prima facie case and his Suit was rightly dismissed. The concurrent findings of the Learned Courts below are upheld. The impugned Judgment and Decree of the Learned First Appellate Court warrants no interference.Appeal dismissed.
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2022 (3) TMI 1006
Benami Transaction - suit filed claiming the suit property as Joint Hindu Family Property - whether under Order 7 Rule 11 or under Order 14 Rule 2 of Code of Civil Procedure if the same can be decided without taking evidence of the parties? - HELD THAT:- This is a well settled legal position as expounded by Hon'ble Supreme Court in the case of Nusli Neville Wadia Vs. Ivory Properties and Others [ 2019 (10) TMI 1314 - SUPREME COURT ] that, for disposal of an application filed under Order 7 Rule 11 of CPC, the averment of plaint can only be taken into consideration. The version of defendant (s), either in their application or written statement, cannot be looked into for the purpose. Further, the suit or the part thereof, can be disposed of on the basis of pure legal issue whether under Order 7 Rule 11 or under Order 14 Rule 2 of Code of Civil Procedure if the same can be decided without taking evidence of the parties. However, the mixed issues of law and facts cannot be decided preliminarily and in that situation, the court has to decide all the issues after the evidence is adduced by the parties. Indisputedly, present suit has been filed claiming the suit property as Joint Hindu Family Property and as per the legal position expounded in the judgment cited on behalf of the respondent/plaintiff, the bar of Section 4 of Benami Transaction Act 1988 is not attracted in case of joint family property. The judgments cited on behalf of the petitioners are not related to the joint family property, therefore, the same are not applicable to this case. Thus, the objection in this regard is not tenable. Trial court after taking into consideration the averments of plaint has rightly concluded that the issue of limitation is a mixed question of law and fact which can be decided only after evidence of the parties. The supportive facts raised with regard to limitation by the petitioners cannot be taken into consideration at this initial stage. Therefore, the trial court has not committed any illegality on this count also. Trial court has primarily concluded that the valuation of the suit has been made properly and adequate court fee has been paid accordingly. The issue of court fee has also been kept open for the later stage, therefore, looking to the frame of plaint, the finding with regard to court fee cannot be faulted with at this stage. Though maintainability of the present suit has been questioned but such objection as to maintainability of the suit has not been taken before the trial court and no written statement has been filed as yet, therefore, this court refrains to consider the same straight way in this petition. While maintaining the impugned order, the petition is disposed of with a direction that the defendants/petitioners shall file written statement by the next date fixed by the trial court in the matter. They may take all the grounds as to maintainability of the present suit. The trial court shall not grant any further adjournment for the purpose. After filing of written statement, the trial Court, without further loss of time, shall frame the issues
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Customs
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2022 (3) TMI 1005
Demand of duty - denial of benefit of DFIA license - whether the license(s) has been obtained by the exporters on the basis of fake export documents? - extended period of limitation - HELD THAT:- Nowhere it is the case of the Department that these appellants colluded with any of the persons concerned, for alleged fraud/ forgery/ manipulation of the documents on the basis of which, licenses were obtained. Nor it is the case of the Department that these appellants wilfully mis-stated any of the material facts with regard to their import consignments. Neither it is the case that these appellants suppressed any facts with intent to evade payment of duty. The only observation in the show cause notice and the impugned order is that these appellants did not exercise due diligence in checking the correctness of exports on the basis of which documents DEPB/DFIA licences were issued. Once the DGFT makes the licences transferrable and negotiable on fulfilment of the export obligation, the licences are transferable by delivery and/or endorsement to the transferee. Once the licence is made transferable, the same are traded by the parties through brokers, which is permitted under the DGFT Policy and Foreign Trade Policy. There was no reasons to disbelief the licences issued by the Competent Authority/DGFT. Thus, the same were duly reflected on the website of the DGFT. It is not the case of the Department that the licences itself were forged/fabricated. It is an admitted fact that the licences were genuinely issued by the DGFT after due diligence and were valid at the time of imports made by the appellants. It is further observed that the Adjudicating Authority have erred in not appreciating that these appellants were bonafide purchaser of DIFA licences, which were validly issued and made transferable by DGFT, as well as registered by the Customs Department on their website, on the date of purchase and utilisation by these appellants. Further, admittedly, the licenses in question have been cancelled much thereafter in the month of May, 2012 by the DGFT. In the case of COMMISSIONER OF CUSTOMS VERSUS LEADER VALVES LTD. [ 2007 (3) TMI 166 - PUNJAB HARYANA HIGH COURT] , the similar issue came for consideration in respect of DEPB license purchased from open market under the bonafide belief of being genuine. In the facts and circumstances, the extended period of limitation is not invokable, as admittedly, there is no case of fraud, mis-statement or contumacious conduct on the part of these appellants - as these appeals are allowed on merits, it is not necessary to consider the question of jurisdiction. Appeal allowed - decided in favor of appellant.
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2022 (3) TMI 1004
Levy of penalty u/s 112 (a) and (q) of the Customs Act, 1962 - allegation is also that documents pertaining to its firm have illegally been used in the impugned import - evidence on record proving involvement in the alleged illegal import or not - HELD THAT:- It is an admitted fact that the import export code (IEC) was applied for by M/s. Pico Trading Co. in December, 2010 with the help of Shri Deepak Rishi. All relevant documents were provided by Shri Sanjay Arora the proprietor of M/s. Pico Trading Co. to said Shri Deepak. Admittedly, the said IEC Code was received in the month of January, 2011. The consignment in question entered into Indian Territory in the month of October, 2011 - No explanation is produced by Sanjay Arora about several calls being made between him and Mr. Deepak in the month of October, 2011 that too for the durations as long as of 599 seconds. The only evidence relied upon is the FIR lodged by Shri Sanjay Arora but the said FIR is after the import and after Shri Sanjay Arora had joined the investigation. The possibility of said FIR as an after-thought to manipulate defence cannot be ruled out. Further, no outcome of the investigation in the said FIR have been brought on record, though original adjudicating authority has held Shri Sanjay Arora to be the victim of identity theft whereby his identity has been used to cause the fraudulent imports. But his association with Shri Deepak Rishi is very much established on record. From the testimony of all the noticees herein the transaction which appears in corroboration is that Shri Deepak Rishi was the mastermind for the impugned imports and every other noticee has acted at his instance - Sanjay Arora has not been the victim of identity theft. He rather allowed his papers to be used by Shri Deepak Rishi. Hence, he cannot walk out of being called as abater/ conspirator. Penalty upon him under section 112 of Customs Act, 1962 has therefore rightly been imposed - We are in agreement with the original adjudicating authority that after imposition of penalty on proprietor the simultaneous penalty on his firm for the same offence has been correctly dropped. The order under challenge to that extent stands upheld. The modus operandi for operating such imports has also been disclosed by said Deepak Rishi in his statement as was recorded on 30.11.2011. He has specifically named Nawal Kishore Singh to rather be the mastermind of the impugned import and that Mr. Nawal Kishore Singh had clear knowledge about the consignment to contain branded luxury items instead of unbranded glassware. Shri Nawal Kishore Singh has not brought anything on record to falsify said testimony. His association with Deepak Rishi rather stands corroborated from the testimony of Bhupinder Singh even the call records of Shri Deepak Rishi proved association of Nawal Kishore Singh with Deepak Rishi - even Sanjay Arora is not the victim of identity theft. He sent his documents for the impugned imports and was constantly in touch with Shri Deepak Rishi during the period of import. Hence the findings against the second appellant, namely, Shri Nawal Kishore Singh are also hereby upheld. As a result of entire above discussion, we hereby uphold the order under challenge except for the separate penalty on M/s. Pico Trading Co. Consequent thereto, both the appeals stand dismissed. Appeal disposed off.
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2022 (3) TMI 1003
Revocation of Customs Broker/ CHA License - forfeiture of Security Deposit - levy of penalty - Mis declaration of value of export goods - over-valuation of goods - availment of excess drawback in respect of past clearance of similar goods - violation to advise clients to comply with laws and inform Customs in case of non compliance - violation to verify the KYC of the clients using authentic means - conceal records or destroy information - transact business in more than one firm - HELD THAT:- In the present case the appellant had deliberately filed 3 shipping bills on 23.11.2018 for import of rubber insulated data cable/data cable for exporter M/s. Elegant exports. The goods were seized in the presence of H card holder of the appellant on the ground of being over valued. The appellant Ms. Bharti Chawla being the proprietor and owner of Online cargo and her statement dated 11.12.1990 had expressed her acknowledgement suggestions with the market inquiry, the way it was conducted and the value at which it arrived at i.e. ₹ 10.67 per piece of data cable - From the statement of the appellant as has been relied upon by the Adjudicating Authority, it is clear that she only acknowledged about verifying of the quantity and quality of the goods. This particular acknowledgement is definitely in furtherance of her duty as has been cast upon under Regulation 10(d). However, this verification does not amounts to the knowledge of the CB about the actual price for the goods and that the goods were overvalued by the exporter. There is nothing on record produced by the department to prove that Customs Broker was already aware of the factum of over valuation of goods by the exporter. Simultaneous apparent fact on record is that the exporter never joined investigation inspite of the summons were repeatedly issued to him which was received back undelivered from the postal authorities. The postal report is sufficient to hold that the exporter was no more existing on the address as was provided by the Customs Broker to the authorities . Not only this it amounts to non verification about the correctness of the ICE /GSTIN number also functioning of Customs Broker office at the declared address. There is nothing on record brought by the appellant to show and prove that there were deliberate efforts on her part to comply with Regulation 10(n) - there is no efforts apparent on record on the part of the appellant to make her client available before the Inquiry Officer. To our opinion, the above observed facts are sufficient violation of Regulation 10(d) and 10(n) of CBLR Regulations 2018. Present is the case not only of the concealment on the part of the Customs broker about the proper value of the goods while filing the shipping bills but is also the case where the appellant had rather tried to change the shipping bills in terminal handling agency, CELBI Delhi, Cargo Management India Ltd. - the appellant unreasonably and illegally supported his clients for filing new shipping bills when the old shipping bills were still existed in the system. With reply to those same goods of old shipping bills which, by then were allowed even for provisional release and were exported against the Shipping Bill No. 1070451, 1070492 and 1070464 all dated 03.01.2019. it is the appellant who facilitated not only the provisional release of the goods but also re-export on 03.01.2019. The plea of the appellant that suspension of her license is disproportionate punishment. It is held that not merely the negligence on the part of the appellant but the concealment of relevant facts as is unjustly enrich his client on the expenses of Government exchequer. Not only this, the appellant is a person already found involved in illegal offence as grave of smuggling narcotics drugs, the revocation of licence of the appellant in view of the duty as has been cased upon the Customs Broker and the way the Customs Broker is appointed is held to be proportionate to the violation committed by the appellant. There are no infirmity in the order under challenge vide which the licence of the appellant has been revoked and the penalty has been imposed upon the appellant - appeal dismissed.
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2022 (3) TMI 1002
Rejection of claim for duty free benefits - import of Vital Wheat Gluten - It is submitted that the appellant has imported Vital Wheat Gluten Flour on the strength of a Transferable DFIA which clearly mentions Wheat Gluten Flour under the description of Wheat Flour in the said authorisation - applicability of Custom Notification No. 19 of 2015 - HELD THAT:- Once the DFIA is made transferable, the Exporter is permitted to transfer the inputs to any third party as per the provisions of Para 4.29 of the FTP- 2015-2020. Both wheat gluten and wheat gluten flour is mentioned in the DFIA. Therefore, it can be fairly accepted that both wheat flour and wheat gluten is used for manufacturing Biscuits which is Exported. Since both the inputs are used in the resultant export goods, the licensing authorities have correctly issued the DFIA to that extent. The department is also not disputing this aspect except for the sole contention that the ITC (HS) Number of wheat gluten flour is not mentioned in the DFIA. Compliance of Para 4.12 (i) and (ii) of FTP - HELD THAT:- It is fairly agreed that Wheat Flour/Wheat Gluten are specific items and not Generic or alternative inputs. A single quantity is mentioned in the DFIA. The provision of Para 4.12 (ii) of FTP can be applied only when SION prescribes alternative inputs with relevant quantities, which shall be allowed in proportion to the quantities actually used in export product. No such inputs or quantities are mentioned against the input item. Therefore the above provision cannot be applied in the present case. As per Board Circular No. 46 of 2007 and DGFT Circular 50 of 2008, no correlation is required for technical characteristics/quality and technical specification between imported goods and export goods unless item is specified under Para 4.55.3 of HBP (New Para 4.30 of FTP). Neither Wheat Flour nor Wheat Gluten Flour is a specified item under Para 4.30 of FTP. It is settled law that Board Circulars are binding on the department. Further DGFT Policy Circular 72 of 2008 allows import of alternative inputs either used or capable of using in the export goods. In this case, it is evident from the DFIA that the Exporter has used both Wheat Gluten as well as Wheat Gluten Flour in the Export goods i.e. Biscuits. Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2022 (3) TMI 1000
Oppression and mismanagement - Diversion of business purchase orders to the 2nd respondent and their personal enterprise - grant of injunction restraining the Respondent Nos.3 and 4 from making transfer of funds and confirmed orders of the respondent - seeking restoration of rightful position and the authority of the Petitioner to direct and control the operations of the Respondent No.1 Company - investigation and assessment of sums of money of Respondent No.1 Company misappropriated by the 3rd and 4th respondent - direction to 1st Respondent Company to pay the salary of the Petitioners promptly each month. Whether the acts of Respondents as alleged by the Petitioner would indeed constitute an act of oppression, mismanagement or misappropriation in the company which will affect the public interests at large, warranting intervention of this Tribunal? - HELD THAT:- In the present case, the petitioner has not proved the act of oppression and mismanagement, as no documents have been attached with the petition to show that Respondents 3 and 4 are routing the funds of the 1st Respondent Company to Respondent No.2 Company. The copies attached with the counter shall be presumed as true, that all the 3 signatories of the Memorandum of Association are the authorized signatories in the Axis Bank Limited, Mulanthuruthy Branch. But in such a case, the petitioner has not prayed for any forensic investigation of his signature. In the absence of any prayers being sought by the petitioner, no such relief can be granted by this Tribunal. No documents were produced to show that the Company has not conducted its statutory meetings from time to time. Neither Financial Statements nor Annual Returns were produced to substantiate any mismanagement by these Respondents. It is also noted that Respondent No. 1 Company did not conduct any meetings since its incorporation. A perusal of Section 241(1) of the Act would show that a petition field may be based on a complaint that the affairs of the Company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member of members including any one or more of themselves. Thus it will be clear that the foundation of a petition under Section 241 (1) will be the allegation or complaint that the affairs of the Company were being conducted in a manner prejudicial to public interest which will necessarily and naturally involve giving particulars as to how it was prejudicial to public interest. Similarly, an averment or allegation as to the affairs of the Company being conducted in a manner oppressive to any member must necessarily involve giving particulars as to what constituted oppressive manner - Mere allegation as to the affairs of this Company being conducted in a manner oppressive to any member must necessarily involve giving particulars as to what constituted oppressive and prejudicial; to the interest of the Company. Normally, the petitions are filed invoking provisions of Section 241/242 of the Act and in such petitions the Court may see the distinction between the two provisions and examine the position, i.e., to see as to whether a particular allegation is an oppression or of the mismanagement under Section 241. In the instant case, the Respondents have stated that they have no intention to push the petitioner out of the company or dissolve the company. Moreover, since the petitioner has failed to prove the continuing oppressive acts conclusively producing the relevant required documents, this Tribunal cannot rely upon a single act of the Respondents as oppressive. In view of the above, this Tribunal do not find any reason to entertain this Company Petition. Petition dismissed.
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Insolvency & Bankruptcy
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2022 (3) TMI 1001
Implementation of Resolution Plan - HELD THAT:- One of the submissions which was sought to be raised by Learned Counsel for the Appellant was that an amount of ₹ 20 Crores was the purchase consideration. As per H-1 bid, the purchase consideration was the subject matter of consideration before the Board of Directors as well as Justice D.K Jain (Retd.) which was approved. In exercise of limited jurisdiction of the judicial review of an order of approval of the Resolution Plan, there are no reason to interfere with the order of approval of the Resolution Plan by the Adjudicating Authority, which got approval of each stage of Resolution Framework. No grounds have been made to interfere with the impugned order in this Appeal - Appeal dismissed
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2022 (3) TMI 999
Restoration of their electricity connection - disconnection by the respondent-distribution licensee on November 29, 2014 because of non-payment of electricity dues by the petitioner - HELD THAT:- Upon a consideration of the law on the subject, it is amply clear that Section 56 of the Electricity Act, 2003 confers power on the licensee to cut off the supply of electricity and for that purpose cut off or disconnect any electric supply line or other works being the property of such license through which electricity may have been supplied, transmitted, distributed or wheeled and may discontinue the supply until such charge or other sum, together with any expenses incurred by him in cutting off and reconnecting the supply, are paid. The IBC, in its scheme, contemplates a Corporate Insolvency Resolution Proceeding (CIRP), where a resolution plan is submitted which, after passing through the scrutiny of the Resolution Professional and Committee of Creditors, is submitted to the Adjudicating Authority (NCLT). Under Section 31 (1) of the IBC, upon approval by the Adjudicating Authority, the resolution plan becomes binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan - Section 238 of the IBC stipulates that the provisions of the Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. There cannot be any doubt that the WBSEDCL, discharging the function of the State, comes within the purview of State under Article 12 of the Constitution of India. The State Government is the executive authority through which the State primarily discharges its functions under the law. Hence, dues payable to the WBSEDCL squarely fall within the ambit of operational debt as defined under the IBC. Hence, the provisions of the IBC are attracted to dues payable to the WBSEDCL - Admittedly, in the present case, the electric supply of the petitioner no. 1-company was cut off by the WBSEDCL on November 29, 2014, for non-payment of electricity charges. For restoring such connection, the licensee, under Section 56 (1) of the 2003 Act, can claim as a precondition the payment of such charge and other sum, together with any expenses incurred by the licensee in cutting off and reconnecting the supply. The only reasonable conclusion which can be reached in the instant case is that the WBSEDCL is duty-bound to restore the electric connection of the petitioner no.1-company immediately upon the petitioner no.1 making payment of reconnection charges to the WBSEDCL - direction to WBSEDCL to restore electric supply to the petitioner no. 1, subject to the petitioner no. 1 paying only the reconnection charges, as expeditiously as possible, preferably within a fortnight from after the deposit of such charges. Application allowed.
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2022 (3) TMI 998
Constitutional validity of provisions of Section 3(10) of the Insolvency and Bankruptcy Code, 2016 read with Regulations 9A - claims filed under a CIRP by decree holder under Regulation 9(a) of the CIRP Regulations, be considered at par with claims filed by ''financial creditors - HELD THAT:- In effect, an unexecuted decree, in the hands of a decree holder under the IBC regime, cannot be executed. At best, a decree signifies a claim that has been judicially determined and in that sense is an admitted claim against the corporate debtor. Therefore, the IBC rightly categorises a decreeholder, as a creditor in terms of the definition contained in Section 3(10). Execution of such a decree, is however subject to the fetters expressly imposed by the IBC (in addition to and over and above the requirements and limitations of the execution process under the CPC), which cannot be wished away. Looked at from another angle, the decree-holder gets a statutory status as a creditor under Section 3(10) of the IBC, by virtue of the decree. Since the decree cannot be executed by operation of the moratorium under Section 14, the IBC makes a provision to protect the interests of a decree holder by recognizing it as a creditor. The interest recognized is that in the decree and not in the dispute that leads to the passing of the decree. This is apparent from the fact that decree holders as a class of creditors are kept separate from financial creditors and operational creditors - The inescapable conclusion from the aforesaid discussion is, that the IBC treats decree holders as a separate class, recognized by virtue of the decree held. The IBC does not provide for any malleability or overlap of classes of creditors to enable decree holders to be classified as financial or operational creditors. Once a decree holder is recognized as a creditor, all provisions of the IBC that apply to creditors, including the waterfall provisions are applicable in all their force. The rights like each and every other creditor are subject to the overall objective of maximization of assets of the corporate debtor for the benefit of all stake holders in line with the commercial wisdom of the Committee of Creditors - Once admitted as a creditor, the efforts must be to preserve and maximise the assets of a corporate debtor. The resolution professional cannot look behind the decree. In the resolution process, he must acknowledge and admit the decree as an admitted claim, unless such decree has been set aside. Membership of the Committee of Creditors has to be seen in context of its role under the IBC. The IBC, therefore, put the onus of taking key decisions in a graded manner putting foremost the interest of the creditor concerned to bring a corporate debtor back on its feet. Financial creditors who have large exposure to a corporate debtor therefore get the first preference, followed by operational creditors, who are also interested in contained operations and therefore the revival of the corporate debtor. A decree holder on the other hand, holds a decree as a result of crystallizing and determining a dispute through an adversarial process of litigation. Writ petition stands dismissed.
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2022 (3) TMI 997
Fraudulent transaction or not - seeking necessary directions for cancellation of the transaction of sale of Plant and Machinery of Corporate Debtor to Respondent No.3 - HELD THAT:- Section 46(2) empowers the Adjudicating Authority to require an independent expert to assess evidence relating to the value of the transactions. The power under Section 46(2) is enabling power and the expression used may require indicates that it is not necessary that for all applications filed under Section 46(1) there has to be mandatory expert appointed by the Adjudicating Authority - we are not persuaded to accept the submissions of the counsel for the Appellant that it was mandatory for the Adjudicating Authority to require an independent expert to assess evidence relating to the value of the transactions. Thus, no error has been committed by the Adjudicating Authority in accepting the case of the Resolution Professional that transaction was undervalued. The scheme of Section 49 indicates that where the corporate debtor has entered into an undervalued transaction and the Adjudicating Authority is satisfied that such transaction was deliberately entered into by such corporate debtor for keeping assets of the corporate debtor beyond the reach of any person who is entitled to make a claim against the corporate debtor or in order to adversely affect the interests of such a person in relation to the claim, the Adjudicating Authority is required to make an order- (i) restoring the position as it existed before such transaction as if the transaction had not been entered into; and (ii) protecting the interests of persons who are victims of such transactions - the provision as contemplated in Section 49(b)(ii) protecting the interests of persons who are victims of such transactions obviously does not relate to the Appellant who was party to the transaction. Appellant cannot in any manner be said to be victim of such transaction. Hence, there is no question of protecting his interests by the Adjudicating Authority in exercise of powers under Section 49(b)(ii). The Appellant was in fact the beneficiary of the undervalued transaction and he cannot claim himself to be victim of the transaction. The Appeal is dismissed.
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2022 (3) TMI 996
Approval of the resolution plan - resolution plan approved by the CoC which was approved by the Adjudicating Authority - Whether the commercial wisdom of the CoC has taken into account the feasibility and viability of the proposed resolution plan which does not treat the operational and financial debts on parity? - Whether the process assessment of liquidation value is vitiated as the registered valuers were appointed beyond the stipulated time period stipulated in the CIRP regulations rendering the approval of resolution plan defective? - H ELD THAT:- The operational creditors have been paid an amount in accordance with section 30(2)(b) of the IBC, when the liquidation value of the Corporate Debtor was assessed as ₹ 6.52 crores. Hence the successful resolution plan is in consonance with the provisions of IBC, wherein the payment to the operational and financial creditors and other stakeholders is according to the commercial wisdom of the CoC. The judgment of Hon ble Supreme Court in the matter of India Resurgence ARC Pvt. Ltd. [ 2021 (6) TMI 684 - SUPREME COURT ], wherein in para 14 the Hon ble Supreme Court has held that business decision taken in exercise of the commercial wisdom of CoC does not call for interference unless creditors belonging to a class being similarly situated are denied fair and equitable treatment also provides strength and support to the contention of the Respondents. There is no other allegation against the valuation done by registered valuers who were appointed to determine the fair and liquidation value of the corporate debtor in accordance with regulation 35 which calls in question the assessment of liquidation value. The mere fact that the appointment was done two days after the 47th day from the insolvency commencement date, does not make the process vitiated because no other irregularity has been urged by the Appellant in the process of valuation of the corporate debtor s assets. Moreover Form-H (attached at pp. 56-64 of the reply affidavit filed on behalf of Respondent No. 2) in which the compliance certificate under Regulation 39(4) of the CIRP Regulations is given, and which is obligatory to be submitted before the Adjudicating Authority, the fair value is mentioned as ₹ 8.68 crores and liquidation value as ₹ 6.52 crores. The Appellant did not raise any objection regarding assessment of the liquidation value before the Adjudicating Authority - there is no organic error in the calculation of liquidation value of the corporate debtor and, therefore, the payment proposed in the successful resolution plan keeping the liquidation value so arrived at cannot be found fault with. Therefore, in accordance with section 238, when the resolution plan is proposed under the provisions of IBC during the currency of CIRP and considered by the CoC and subsequently approved by the Adjudicating Authority, all these actions taking place during the currency of CIRP, section 238 provides full protection to the actions taken under IBC against any other law or instrument, which may be inconsistent with the provisions of IBC. Therefore, the payments of operational debt as proposed in the successful resolution plan is completely legitimate and having the force of law. The Resolution Plan was approved by the CoC in its commercial wisdom and later by the Adjudicating Authority. The feasibility and viability of the resolution plan is established and the payments to operational creditors and financial creditors, particularly to the Appellant/Operational Creditor, is in accordance with the provisions of IBC - Appeal dismissed.
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2022 (3) TMI 995
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - time limitation - existence of forged signatures and creation/fabrication of documents, to establish a Debt when no Debt is owed by the Corporate Debtor to the 1st Respondent/Operational Creditor/Applicant or not - existence of debt and pre-existing dispute or not - contention of 1st Respondent is that the failure of the Company to pay its dues is a Continuing Breach and hence it is a continuous cause of action as per Section 22 of the Limitation Act 1963 - Whether the application filed by the first Respondent herein is within the period of limitation or barred by limitation? - Difference of Opinion. HELD THAT:- In view of the divergent judgments delivered by the Hon ble Members, on 21st March, 2022, the Registrar of NCLAT , Principal Bench, New Delhi, is to place the record in Company Appeal (AT) (CH) (INS) No. 29 of 2022 together with the copies of the said judgments before the Hon ble Chairperson of NCLAT , Principal Bench, New Delhi, for constituting an appropriate Bench / nominating the Hon ble Third Member for rendering his Opinion / Decision in Appeal .
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2022 (3) TMI 994
Direction to provide all required information to RP and to assist the RP in completing and signing the financials - providing the accurate details of debtors against whom the Corporate Debtor advanced money and supplied goods as required by RP - furnishing all required information relating to ECGC claim - furnishing all required information for filing DGFT claim - assisting the RP in the identification of machineries and reconcile the same with the invoices - assisting RP in complying with all statutory requirements - direction to provide all other assistance and cooperation required by the RP during the CIRP Process - HELD THAT:- It appears from the record that vide order dated 27.07.2021 this Tribunal directed the parties to sit together and sort out the issues so as to enable the Resolution Professional to discharge her duties. The Resolution Professional was directed to file a report before this Tribunal stating what transpired in the meeting. As per the direction, the meeting was convened on 04.08.2021. In the meeting counsel for both the Respondents and Applicant have suggested the Suspended Directors visit to the factory and sit with the Resolution Professional, to provide the necessary assistance to the Resolution Professional. However, one of the suspended Directors informed that as his father is not well and he was attending the meeting from Hospital at Calicut, Kerala traveling from there to the factory premises cost him additional expenses. The defence of the Respondents is that, they have already handed over the documents to the Interim Resolution Professional and that since their part of the job is already completed, no further assistance to the Resolution Professional is required. Upon the direction of this Tribunal, a meeting was conducted in which the counsel for both the parties suggested the ex-management to visit the premises of the Corporate Debtor to provide further assistance. However, the Respondents were unwilling to go to the premises to provide any assistance; instead, they have sent an e-mail providing certain documents. If the Respondents/Suspended Directors were unable to go to the premises they should have arranged some other persons to make means to make necessary arrangements for carrying out the functions of the Resolution Professional. There was default on the part of the suspended Directors in compliance with the provisions of Section 19 of the IBC Code. To implement the intention of the Code up to this extent, it is obvious that the Suspended Directors and Managerial persons should extend full cooperation to the Resolution Professional and to furnish all information about their accounts and financial facilities availed from various financial creditors - No assistance was provided by them to identify the debtors of the Corporate Debtor, instead, they have submitted a letter to financial creditors to write off the dues. No action was taken to recover those dues and no claim was made before ECGC prior to giving such instructions. All these pieces of information are mainly in the knowledge and possession of the Directors, and therefore they are held responsible for non-submission of the information as well as non-cooperation as prescribed under Section 19 of the I B Code. The respondents are directed to assist the Resolution Professional and provide the required details to carry out her duties for completion of the Corporate Insolvency Resolution Process within two weeks from the date of receipt of this Order - application allowed.
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2022 (3) TMI 993
Seeking permission to appoint Mr. Parameswaran Nair as the RP of the Corporate Debtor M/s. Samson and Sons Builders and Developers Pvt. Ltd. - HELD THAT:- On going through the Minutes of the 2ndMeeting of the CoC held on 10.01.2022 and the written consent in Form AA-Under Regulation 3(1A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 of Mr. K Parameswaran Nair who agreed to act as the Resolution Professional and the CoC resolved to appoint him - In the 1st meeting of CoC held on 23.12.2021 as Item No. B5 the appointment of Resolution Professional and to fix his fee was discussed in which it is stated that the IRP informed the members of CoC that he is eligible to be appointed as Resolution Professional on a Professional fee of ₹ 5,00,000/- per month. It is also stated that since all the Coc members disagreed to the professional fee quoted by the IRP, the IRP may reconsider or revive the fee, however IRP informed that if a competitive fee is not offered the IRP shall decline to be appointed as an RP. In the 2nd CoC meeting held on 10.01.2022, the CoC as Resolution No. B3 resolved that Shri. K. Parameswaran Nair be appointed as the RP of M/s. Samson and Sons Builders and Developers Pvt. Ltd. (Corporate Debtor). Under Section 22 (3) (b) of IBC in order to replace the IRP and appoint another professional as RP, the CoC is competent to file an application before the Adjudicating Authority for the appointment of the proposed Resolution Professional along with his written consent. Since the CoC did not accept the fee quoted by the IRP, which is on the higher side, they have resolved to appoint another Insolvency Professional as RP and filed this application enclosing the written consent of Shri. K Parameswaran Nair. Application disposed off.
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2022 (3) TMI 992
Seeking extension of CIRP period by 60 days as per the decision taken in the 18th COC meeting - there is no clarity from the NITHM/Govt. of Telangana on terms of renewal of lease - HELD THAT:- Admittedly, this application seeking one more extension of 60 days for competition of CIRP, has been filed in the backdrop of availing of the two exclusions for a total period of 159 days and one extension of 90 days, once again reiterating the same ground, which is nothing but one of the conditions put forth by the two out of the four prospective resolution applicants, Viz., M/s. Anirudh Agro Farms and M/s. Shreemukh Builders that the lease should be allowed be renewed by another 33 years lest, the first payment will not be made, on the premise that the director of NITHM, who is one of the members of CoC has 'informed' the CoC that the clause enabling renewal of lease by another term is under consideration by the Government of Telangana. Hon'ble Supreme Court of India, in Committee of Creditors of Essar Steel vs. Satish Kumar Gupta Ors. [ 2019 (11) TMI 731 - SUPREME COURT ], while striking down, the word mandatorily used in the amended proviso as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant's right to carry on business under Article 19(1)(g) of the Constitution. A prospective Resolution Applicant is required to submit an unconditional EOI within the time stipulated under the invitation, which shall not be less than fifteen days from the date of the issue of invitation. Form G (IFEI), in this case has been published on 04.04.2021 by the RP clearly discloses that the property which is in a 4 star hotel is in a leased land. Form-G/IFEI admittedly did not contain any assurance of incorporation of renewal clause in the existing lease document - In the case on hand, since the plans submitted by the above Prospective Resolution Applicants being conditional, the Resolution Professional ought to have insisted the Prospective Resolution Applicants to make their plans un-conditional and ought not to have included in the provisional list of eligible Prospective Resolution Applicants. However, the Resolution Professional treated these two conditional plans as eligible and included them in the list of eligible Prospective Resolution Applicants. Thus, it as clear as crystal that the CoC, instead of rejecting at the threshold the resolution plans submitted by the prospective resolution applicants Viz., M/s. Anirudh Agro Farms and M/s. Shreemukh Builders, as the same being conditional (sic), has been rigorously pursuing the cause of the prospective resolution applicants by seeking exclusion and also extension of time, so that the condition; by these prospective applicants could be complied with. Therefore, allowing an application of this nature results in extending time to perpetuate a 'wrongful act' by the CoC and the Resolution Professional, which is neither the intent nor the object of IBC, hence relief prayed for is liable to be rejected out-rightly. The members of CoC and the Resolution Professional are responsible for the loss of time prescribed under the Code, which is valuable and limited for completion of CIRP - In order to facilitate such resolution, Suo moto exclusion is granted of the time consumed in pursuing this application, i.e., from 1st March 2022 till the date of this Order. In default, the CoC shall resort to the next step as provided under IBC, without consuming any further time on pursuing the existing conditional plans, since any further delay in taking necessary steps will result in further deterioration of the already eroded asset value. This petition is therefore disposed of.
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2022 (3) TMI 991
Seeking revival of the BIFR - direction to Respondent No. 1 and 2 to release the FDR deposited by the applicant in terms of order passed AIFR - HELD THAT:- It may be noted that respondent No. 4 and 5 (being Bankers) have been impleaded vide order dated 15.09.2021 by this Adjudicating Authority and the respondent No. 4 and 5 were directed to trace out the original record pertaining to FDRs. On 02.12.2021, it was stated by Mr. Gurpreet Singh, Branch Manager on behalf of respondent No. 4 5 that above said original FDRs are not available in the Bank record, however scanned copies of FDRs have been handed over to the learned counsel for the applicant. It can be safely concluded that original FDRs have been misplaced and are not traceable despite all efforts and sources. It is expedient in the interest of justice, that when the applicant is admittedly entitled to encash the said FDRs then respondent Nos. 4 5 are directed to prepare duplicate FDRs from scanned copies of FDRs and encash the said amount to be transferred to Bank account of applicant which in turn is required to be paid to Respondent No. 3. Application allowed.
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2022 (3) TMI 990
Seeking withdrawal of CIRP application - Section 12A of the Insolvency and Bankruptcy Code, 2016 read with Regulation 30A(1)(b) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - HELD THAT:- In view of the Resolution passed by the CoC in the 1st CoC Meeting dated 11th February 2022 and filing of Form-FA by the Interim Resolution Professional seeking withdrawal of CP(IB)/34/KOB/2021 with 100% voting right, nothing further to be decided in the matter. Since nothing has been stated by the IRP regarding the payment received by him, it is presumed that he has received the fee and expenses from the CoC. The Corporate Debtor is relieved from the rigors of CIRP and consequently the IRP is discharged of his duties. The Powers of the Board of Directors stand restored and the Company is directed to operate under the management of its Board of Directors - Application allowed.
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2022 (3) TMI 989
Seeking admission of claim as Financial Creditor - seeking reconstitution of COC with revised voting rights - seeking to pass necessary advisory/instruction to the respondent IRP not to show any further partiality, biasness, delinquency and non-professional approach against the present applicant - verification of claim of the applicant - HELD THAT:- From the bare perusal of the records, it is seen that the Respondent has not verified the documents sent by the applicant and has not passed any order regarding approval or rejection of claim of the applicant. The CIR Process is a time bound process and the IRP should have verified the claim of all the claimants as soon as possible for timely completion of the CIR Process. The present application stands disposed of with the direction to the applicant herein to provide all the information and related documents in respect of its claim before Respondent within seven days and in return the IRP shall examine the same within seven days, after giving due opportunity to the present applicant - the process should be completed within 15 days from today.
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2022 (3) TMI 988
Approval of scheme of amalgamation - Condonation of delay under Regulation 2B of Insolvency and Bankruptcy Board of India (Liquidation Process), Regulation, 2016 - time limit under this specified regulation of 90 days has already been expired - Seeking dispensation with convening separate meeting of the Creditors of the Corporate Debtor - approval of Scheme of Compromise or Arrangement for merger of the Corporate Debtor - dissolution of the Corporate Debtor under Section 54 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- On a bare perusal of the provisions of Section 54, it is clear that both the prayers (b) and (c) cannot be granted by way of filing one application and therefore the present application cannot be entertained under Section 54 of the Code. However, the applicant is at liberty to file separate applications for approval of the scheme of Compromise or arrangement for merger with the reasons for delay in filling the application and for Dispensing with convening separate meeting of the Creditors. If the scheme of Merger is approved by the Bench then another application may be filed for Dissolution of the Corporate Debtor complying the conditions laid down under the provisions of companies Act, 2013, stating therein that the assets of the Corporate Debtor has been completely liquidated. Application disposed off.
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PMLA
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2022 (3) TMI 987
Grant of anticipatory bail - possession of huge cash and jewelleries - Creation of shell companies - constitutional validity of Section 45 of PMLA Act 2002 - HELD THAT:- It is well settled that law framed by legislature is having presumption of its constitutionality, unless and until Constitutional Courts declared such law to be unconstitutional, it will have its force and therefore in the opinion of this Court, as twin conditions are still there in the Statute book after amendment in Section 45 of the Act of 2002, underlined principle and rigor of Section 45 of the Act of 2002 may get triggered once prayer for anticipatory bail is made in connection with offence under the Act of 2002. Merely because case is registered on complaint and cognizance of complaint is taken by Court after about two years, will in itself is not a ground considering entitlement of anticipatory bail but it is to be considered on merits of each case. In case at hand, there is allegation of involvement of applicants for committing offence under the Act of 2002 and amount involved is more than ₹ 39 Crores. Considering the entire facts and circumstances of case, nature of allegations levelled against applicants; rulings relied upon by learned counsel for both sides, this is not found to be a fit case where applicants can be enlarged on anticipatory bail - bail application is rejected.
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Service Tax
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2022 (3) TMI 986
Scope of contractual agreement - Reimbursement of Service Tax and Environmental Compensation Cess - period between October, 2013 to June, 2017 - Section 34 of the Arbitration and Conciliation Act, 1996 - HELD THAT:- The Service Tax was included in the tax invoices raised by the service providers to CEC. CEC had made payment of the said invoices and sought reimbursement of the Service Tax charged by the service provider. In terms of a Notification dated 01.03.2016, the services pertaining to construction of flyovers was also exempted from Service Tax - CEC was exempted from payment of any tax in respect of any service rendered by it for execution of the Agreement in question. As mentioned above, the Agreement was essentially an Item Rate Contract and CEC was not assessed to Service Tax in respect of any of the items executed by it for performance of its obligations under the Agreement. Undisputedly, CEC s claim is for reimbursement of Service Tax included in the services availed by it and not the services rendered by it. The Arbitral Tribunal had proceeded on the basis that since CEC was assessed to Service Tax, albeit, on a Reverse Charge Mechanism, in respect of certain services, it was entitled to reimbursement in terms of Clause 37(i) of GCC read with Clause 14 of the Instructions to Bidders - CEC is not claiming reimbursement of Service Tax in respect of the Agreement executed by it or the works performed by it; CEC claims the Service Tax levied in respect of the services availed by it from third party service providers. This is, obviously, the Service Tax chargeable in respect of contracts between the third-party service providers and CEC. Clearly, this is outside the scope of Clause 37(i) of GCC. Although, it is well settled that matter regarding interpretation of a contract falls within the jurisdiction of Arbitral Tribunal and the Courts would not normally interfere with such interpretation. However, in the present case, this Court is of the view that Arbitral Tribunal s interpretation of Clause 37(i) of the GCC to the extent it includes reimbursement of Service Tax levied in connection with contracts / arrangements between CEC and third parties, is fundamentally flawed and vitiates the impugned award by patent illegality - there is merit in the petitioner s contention that the award of reimbursement of Service Tax is contrary to the express terms of Clause 37(i) of the GCC. The impugned award to the extent of a sum of ₹ 1,38,58,095/- awarded in favour of CEC in respect of Claim no. 1, is set aside. Consequently, no interest is also payable on the said amount - The petition is partly allowed.
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2022 (3) TMI 985
Refund/rebate claim of excess service tax paid - applicability of N/N. 30/2012 ST dated 06.09.2004 - HELD THAT:- In the case of WAY2WEALTH BROKERS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL TAX (EARLIER COMMISSIONER OF SERVICE TAX, BANGALURU [ 2021 (10) TMI 488 - KARNATAKA HIGH COURT] , the Hon ble jurisdictional High Court of Karnataka had an occasion to consider a similar dispute and it was held that Mere payment made by the assessee will neither validate the nature of payment nor the nature of transaction. The same could not make it a service tax. When there is a lack of authority to collect such service tax not liable to be paid by the assessee, it would not give the Department the authority to retain the amount paid by the assessee. Therefore, mere nomenclature would not be an embargo on the right of the petitioner to demand refund of payment made under a mistaken notion. In view of the decision of the Hon ble Jurisdictional High Court of Karnataka, the action of the adjudicating authority in sanctioning refund is held to be in order. Appeal allowed - decided in favor of appellant.
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2022 (3) TMI 984
Refund of CENVAT Credit - rejection on the ground of time limitation - rejection of few input service without issue of notice under Rule 14 of Cenvat Credit Rules is justified or not - HELD THAT:- In their own case M/S. RMS RISK MANAGEMENT SOLUTIONS INDIA PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, NOIDAS [ 2019 (3) TMI 1962 - CESTAT ALLAHABAD] , wherein the Allahabad Bench under similar facts and circumstances have taken notice that by subsequent amendment Notification No. 14/2016-CE (NT) dated 01.03.2016, the Notification No. 27/2012-CE was amended to the effect that the time limit fixed one year for claiming such refund of accumulated cenvat credit shall be calculated from the date of receipt of payment in convertible foreign exchange - the Court below have erred in rejecting the part of refund on the ground of limitation. Accordingly, this ground is decided in favour of the appellant. CENVAT Credit - photocopy charges - vehicle parking charges - rent-a-cab service - HELD THAT:- The Court below have not followed the prescribed procedure i.e. issue of notice under Section 14 of Cenvat Credit Rules for rejection of cenvat credit taken - rejection of cenvat credit in part is bad and accordingly the same is set aside and this ground is decided in favour of the appellant. The appellant is held entitled to grant of refund of ₹ 16,14,152/-. The Adjudicating Authority is directed to grant the balance amount of refund with interest as per rules within a period of 45 days from the date of receipt of a copy of this order, with interest under Section 11BB of the Central Excise Act - the appeal is allowed.
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Central Excise
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2022 (3) TMI 983
CENVAT Credit - availment of fraudulent credit without receipt of goods - denial of request of cross-examination of Director and employee of the Company - relevance of statement as evidences - HELD THAT:- In Cenvat credit rules some minimum precaution was prescribed to ascertain the bona fide on the part of consignor of input or capital goods i.e. under Rule 4 and Rule 9 of Cenvat Credit Rules, 2004 - the credit can be taken on the basis of Invoice after the inputs covered by such Invoice is received. It is important that goods covered by the invoices are received by the manufacturer. In the facts of the present case we find that the appellant have received the goods on duty paying documents and recorded the receipt of the goods in their raw material account and cenvat account i.e. RG-23A-Pt. I and Pt. II and the said disputed inputs used in manufacture of dutiable goods. The purchase of the goods under the invoices in question were booked in books of account. The payment against the said invoices were made through cheque. For confirmation of cenvat demand the learned Adjudicating Authority relied upon the admission of Director of Appellant recorded during the Panchanama dated 21.01.2011, wherein he admitted that they did not receive these goods physically but availed the Cenvat credit only on the basis invoices and Statement dated 28.01.20211 of Bhavani Shankar Vasu, Induction Furnace In-charge. It is on record that in the present matter Appellant also requested for cross -examination of Director and aforesaid Employee which has been denied by the adjudicating authority and for this only the separate appeal also filed by the Appellant. It is found that this denial of cross-examination has resulted in denial of principle of natural justice. In the present matters, the case of revenue also on the ground of transporters admission that the goods were not supplied to the appellant and according to their statements the vehicle number shown in invoices are not capable of transporting the goods. During the Cross- Examination the transporter has clearly stated that the goods have been delivered to the appellant - there is no allegation by the department regarding the financial flow back that against the invoices for which the payments were made through cheque, any cash payment was received by the appellant. It is further noticed that nothing objectionable has been mentioned in the panchnama of search dated 21-01-2011 at the factory premises of Appellant in respect of the stock of finished goods/inputs. Nothing has been brought on record to show as to how Appellant produced their final products in the event of not having received the inputs in their factory. It is on the record that neither the department have produced evidence beyond doubt that the alleged inputs were not received in the unit and it was only a paper transaction nor able to prove that any other raw material was received and used by the appellant for production of their final product. Also, the records produced by the Appellant shows bona fide transaction on their part. Thus the contentions of the adjudicating authority in absence of any positive and tangible evidences are not tenable - Further, from the records of cross-examination of suppliers and some transporters, it is found that they have admitted that the goods were delivered to Appellant. Hence, there are no reason to deny the Cenvat credit to Appellant. Cenvat demands and penalties imposed against M/s Rajputana Stainless Ltd. are not sustainable - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (3) TMI 982
Revision of Appellate Authority s order beyond the time prescribed under Section 64 (3)(c) of the KVAT Act - subcontractors turnovers were not disclosed, while verifying e-filing system, even though the law to file returns electronically in Form-100/Form-120 was introduced only from September, 2010 by Notifications No.KSA/CR-60/2010-11(I) No.KSA/CR-60/2010/11(II) both dated 30.09.2010 - non-disclosure of turnover of work executed to the appellant in their e-returns - HELD THAT:- It is not in dispute that the filing of monthly returns electronically was introduced vide Notification No.KSA/CR-60/2010- 11(I), dated 30.9.2010. The revisional authority has proceeded to set aside the order of the first appellate authority mainly on the ground that on verification of the departmental VAT e-filing system, it was noticed that, the sub-contractors of the assessee had not declared the turnover in their monthly returns. Having regard to the mandatory requirement of electronic filing of returns having come into force w.e.f., 30.9.2010, denying the claim of the appellant assessee sans examining the monthly returns filed manually cannot be countenanced. Atleast for the tax period from May to August 2010 it was incumbent on the part of the revisional authority to examine whether returns were filed by the sub-contractors manually disclosing the turnover. The matter is restored to the file of Addl. Commissioner to re-consider the matter and pass appropriate orders keeping in mind the monthly returns said to have been filed by the sub contractors for the tax periods in question more particularly for the tax periods from May 2010 to August 2010 manually - appeal allowed in part.
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2022 (3) TMI 981
Interpretation of statute - notification No.FD 116 CSI 2006 (9) dated 31.03.2006 vis-a-vis the notification dated 09.10.2013 issued by the office of the Commissioner of Commercial Taxes (Karnataka) - documents necessarily required to accompany the goods - Levy of penalty - transportation of Spectrum Analyzer without being accompanied by e-sugam as prescribed under the Notification dated 09.10.2013 - Whether the Tribunal has erred in holding that the Spectrum Analyzer is a product without examining the question as to whether the said goods are electronic goods or not falling within the scope of the notification dated 09.10.2013? HELD THAT:- Indisputably, by virtue of the notification dated 31.03.2006, the Spectrum Analyzer is classified under Entry No.53 of the III schedule to the Act. IT products do not find a place in the notification dated 09.10.2013. However, an endeavor has been made by the department to bring this Spectrum Analyzer under the category of electronic goods of all kinds to levy penalty under Section 53(12) of the Act for non compliance of accompanying the e-sugam along with the goods carried in the goods vehicle. This exercise of the Revenue certainly runs counter to the FD notification dated 31.03.2006. The Spectrum Analyzer having classified as IT product in terms of the said notification ought not to have been brought under the Entry 13 - electronic goods of all kinds as per the notification dated 09.10.2013 by the Revenue to levy penalty under Section 53(12). Even otherwise, it is not in dispute that the assessee has subsequently raised esugam and produced the same along with the reply. The Tribunal has rightly analyzed the matzerial facts and arrived at a conclusion that the Spectrum Analyzer being an IT product, included under the notification dated 31.03.2006, the department ought not to have insisted for e-sugam to be accompanied with the goods moving in the goods vehicle. There are no irregularity or perversity being found with the order impugned, the same deserves to be confirmed - Sales Tax Revision Petition stands dismissed.
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Indian Laws
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2022 (3) TMI 980
Dishonor of Cheque - insufficient funds - rebuttal of evidence - invocation of revisional jurisdiction - Whether the Courts below have committed an error in convicting and sentencing the petitioners and both the Courts orders suffers from legality and correctness and whether it requires invoking of revisional jurisdiction? - HELD THAT:- Both the Trial Court as well as the Appellate Court in detail discussed each and every documents and taken note of particularly Exs.P.18 to 25, 26 and 44 and no doubt in Exs.P.50 to 52, the complainant/respondent has also given the complaint and though the learned counsel for the petitioners mainly relied upon the documents Exs.D.4 to 7 regarding the amount, which he has received and admitted in earlier documents and those documents are no consequence in view of execution of Ex. P.2, subject matter of cheque and hence there are no reasons to come to other conclusion that the judgments of the Trial Court as well as the Appellate Court surfers from legality and correctness. This Court can only exercise the revisional powers, if the order suffers from any legality and correctness. The scope of revision is very limited. The voluminous documents marked in favour of the complainant/respondent establishes the case of the complainant. There are no merit to invoke the revisional powers to set aside the order of conviction and sentence as well as confirmation made by the Appellate Court - petition dismissed.
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2022 (3) TMI 979
Dishonor of Cheque - discharge of legally enforceable debt or not - rebuttal of accused - control of cases under the Negotiable Instruments Act - HELD THAT:- On perusal of the lower Court record it is found that the complainant produced the challans and invoices issued in the name of M/s. Sangeeta Construction which were marked as exhibit-2 collectively. On perusal of the cross-examination of the complainant who deposed during trial as P.W. 1. It is found that no suggestion was even put to the P.W. 1 to the effect that the cheques in question were issued by the respondent No. 2 as security deposit. On the contrary, it is specifically asked on behalf of the defence to P.W. 1 through his cross-examination as to whether he had documents in support of his claim that ₹ 3,45,781/- was issued from the accused. The witness replied to the said question in the affirmative - The learned Magistrate also did not consider the legality, validity, sufficiency and service of demand notice issued by the complainant before the filing of the case. This Court is of the view that the learned Magistrate failed to consider the basic tenets of control of cases under the Negotiable Instruments Act. Therefore, this Court is of the view that the learned Magistrate should undergo a training in the State Judicial Academy on the control of cases under Negotiable Instruments Act. In view of the fact that the learned Magistrate did not discuss the validity and service of demand notice in the impugned judgment, while setting aside the judgment, this Court is of the view that the complaint case should be remitted back to the trial Court for delivery of judgment within one month from the date of receipt of the lower Court record and communication of the judgment passed by this Court. Appeal allowed.
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