TMI Tax Updates - e-Newsletter
March 31, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Service Tax CST, VAT & Sales Tax Indian Laws

News

1. THE FINANCE ACT, 2021

2. Sale of Electoral Bonds 2018 at Authorised Branches of State Bank of India (SBI)

3. Upgradation of paperless process for grant of Industrial Entrepreneur Memorandum (IEM)

Notifications

Customs

1. 18/2021 - dated 27-3-2021 - ADD

Seeks to impose anti-dumping duty on imports of Polyethylene Terephthalate (PET) resin originating in or exported from China PR for a period of 5 years

2. 36/2021 - dated 29-3-2021 - Cus (NT)

Notifying amendment for self approval under Section 149 of the Customs Act, 1962

3. 35/2021 - dated 29-3-2021 - Cus (NT)

Bill of Entry (Forms) Amendment Regulations, 2021.

4. 34/2021 - dated 29-3-2021 - Cus (NT)

Bill of Entry (Electronic Integrated Declaration and Paperless Processing) Amendment Regulations, 2021.

5. 33/2021 - dated 29-3-2021 - Cus (NT)

Common Customs Electronic Portal

Circulars / Instructions / Orders

SEBI

1. SEBI/ HO/ IMD/ FPI&C/ CIR/ P/ 2021/ 045 - dated 30-3-2021

Guidelines pertaining to Surrender of FPI Registration

DGFT

2. Trade Notice No. 49/2020-21 - dated 30-3-2021

Online Filing of requests for Closure of Advance Authorizations

3. 46/2015-20 - dated 30-3-2021

Implementation of the Track and Trace system for export of Pharmaceuticals and drug consignments alongwith maintaining the Parent-Child relationship in the levels of packaging and their movement in supply chain - Extension of date of implementation regarding

4. 47/2015-20 - dated 30-3-2021

Procedure / modalities for import of 1.5 Lakh MT of Moong, 4 Lakh MT of Tur and 4 Lakh MT of Urad for the fiscal year 2021 – 2022.

Customs

5. 08/2021 - dated 29-3-2021

Clarifications on the legislative changes in Section 46 of Customs Act, 1962

Highlights / Catch Notes

GST

• High Court Stays Bank Guarantee Order in CGST Act Case; Petitioner Must Not Sell or Alienate Assets.

  Case-Laws - HC : Attachment of Bank Accounts - Search and inspection under Section 67 of the CGST Act - The order directing furnishing of the bank guarantee needs to be stayed till disposal of the writ petition, by directing the petitioner to execute the undertaking that he will not sell, alienate or dealt with any of his assets as seen from the balance sheet produced by him - HC
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Income Tax

• Section 40A(3) Cash Payment Disallowance Overturned; Section 6DD(k) Provides Relief for Genuine Expenses Unquestioned by AO.

  Case-Laws - AT : Additions u/s 40A(3) - Payment made in Cash - Since the AO has not doubted the genuineness of the expenses as no such disallowance has been made and the AO has made only disallowance u/s. 40A(3) of the Act on the basis of the bills/vouchers/ledger account produced before him, we are of the considered opinion that the disallowance u/s. 40A(3) made by the AO under the facts and circumstances of this case is not justified and the provisions of 6DD(k) will come to the rescue of the assessee. - AT
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• Section 41(1) Inapplicable: Advances Misclassified as Bogus Creditors, Not Claimed as Allowance or Deduction for Loss or Liability.

  Case-Laws - AT : Addition u/s 41(1) on bogus creditors - amount received from 10 parties are not sundry creditors as they have advances for booking of plot of lands of which few have been transferred to sales account as and when the registry of plot of land is completed. Provision of Section 41(1) are not applicable on this case as the assessee has not claimed the alleged amount of advances from customers as an allowance or deduction in any assessment year in respect of loss, expenditure or trading liability. - AT
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• Assessee's Section 12A Registration Cancellation Valid from March 20, 2015; Cannot Be Forced to Maintain It Pre-12AA.

  Case-Laws - AT : Exemption u/s 11 - effective date of cancellation of registration u/s 12AA(3)/(4) - an assessee unwilling to avail the “benefit” of registration “obtained” under section 12A cannot be, directly or indirectly and by actions or by inactions, compelled by the revenue authorities, to continue with the said registration “obtained’ by the assessee, particularly when it pertained to the registration obtained in a period prior to the insertion of section 12AA. The present cancellation of registration under section 12A must, therefore, be held to be effective from 20th March 2015. - AT
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• Cash Deposit Source Confirmed: AO Failed to Verify Agricultural Income, Section 68 Addition Deleted.

  Case-Laws - AT : Addition u/s 68 r.w.s. 115BBE - The assessee had explained the source of deposits of cash and the AO did not discharge the burden by examining the family members. Since the assessee stated that he looks after the entire agricultural operations which is common in joint families, we, do not find any reason to suspect the source of cash deposits in the bank account and the same stands explained, hence, we set aside the orders of the lower authorities and delete the addition made by the AO. - AT
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• Performance Guarantees Are Corporate Guarantees: No Separate Treatment Required, Says Transfer Pricing Document.

  Case-Laws - AT : Transfer pricing addition on account of Corporate guarantee - performance guarantees in the instant case are a specie of the genus of corporate guarantee and cannot be given a treatment different from the corporate guarantee as urged by the assessee. Ex consequenti, we hold that the so-called performance guarantee transactions at sr. nos. 3 and 4 are in the nature of corporate guarantee transactions and do not require any separate treatment vis-à-vis the remaining eight transactions - AT
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• IRS Officer's Contempt Appeal Dismissed; Court Rules No Standing After Information Submission.

  Case-Laws - HC : Intra-court appeal against rejection of Contempt proceedings against the IRS officer / Deputy Commission of Income Tax - if the appellant's role is only that of an informant and upon information given, the Court is convinced that no proceedings for contempt is required to be initiated, then the appellant cannot be heard to say that he should be permitted to maintain an intra-court appeal against the finding of the Contempt Court especially when, his role terminates the moment the information is placed before the Court. - HC
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• High Court Confirms Reassessment Notice Validity u/s 147; Sanction Obtained Simultaneously with Notice Issuance.

  Case-Laws - HC : Reopening of assessment u/s 147 - the competent authority has given the satisfaction in hand writing and has expressed his satisfaction with regard to reasons recorded and accorded the sanction to issue impugned notice. Therefore, the approval for reassessment was granted on the date on which the impugned notice was issued. In this circumstances, the contention raised by the learned advocate for the writ applicant that sanction was not obtained before issuance of the notice cannot be accepted. - HC
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• Assessment Valid Despite Late Handover of Seized Materials; Jurisdiction Upheld u/s 153A.

  Case-Laws - HC : Assessment u/s 153A - The undisputed position in this case is that the IO and AO are not one and the same. The last of the authorisations in this case is on 04.09.2018 and the seized materials ought to have been handed over, in terms of Section 132(9A) on or before 03.11.2018. Admittedly, the handing over has been only on 20.08.2019, more than nine months beyond the stipulated date. Though this constitutes a gross procedural irregularity, it does not, in my considered view, vitiate the notices issued, as assuming a situation where the handover had been within time, the notices might still have been issued only on 01.11.2019. Thus, the jurisdiction assumed cannot be faulted on this score. - HC
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• Tax Notice Error: Assessment Reopening Under Sec 147 Challenged Due to Notice Sent to Wrong Address, Violating Sec 148.

  Case-Laws - HC : Reopening of assessment u/s 147 - The only mistake that the department committed was to dispatch the notice u/s 148 of the Act to the address at the address of Agriculture land and not to the residential address of the writ applicant - In such circumstances, it is obvious that the writ applicant could never be said to have receive such notice. - HC
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• Revenue Must Specify Conditions for Reopening Assessment u/s 147; New Material Required Post Section 143(1) Intimation.

  Case-Laws - HC : Reopening of assessment u/ 147 - Revenue has to prima facie indicate as to which of the conditions of Section 10(10D) of the Act are not fulfilled. In other words, how the amount in question is not exempted u/s 10(10D) - even an assessment under Section 143(1), in the form of an intimation, cannot be reopened under Section 147 unless some new / fresh tangible material comes into possession of the Assessing Officer, subsequent to the intimation under Section 143(1) of the Act. - HC
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• Department Advised to Carefully Assess Before Denying Trust's Tax Exemption Due to Lost Records from 1978 Floods u/s 11.

  Case-Laws - HC : Exemption u/s 11- The department is expected to undertake some homework in this regard seriously. The Trust should not be denied the benefit of exemption under Section 11 of the Act only on account of its disability to produce the necessary records, which got destroyed during the floods of 1978. We do not find anything doubtful or fishy as regards the Trust. - HC
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• Court Questions Validity of Sanction Order in Reopened Tax Assessment u/ss 147 and 151 of Income Tax Act.

  Case-Laws - HC : Reopening of assessment u/s 147 - validity of sanction-order passed u/s 151 - because of the failure on the part of respondent no.1 to correlate the information received with the ostensible formation of belief by him, respondent no.2 attempted to connect, via her counter-affidavit, that the escaped income with the “suspicious” unsecured loan entries reflected in the assessee's returns for AY 2010-2011 and 2011-2012. As correctly argued by Mr. Kochar, the counter-affidavit and the submissions made across the bar cannot be used to sustain the impugned actions. - HC
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Customs

• Customs Broker License Revoked, Penalty Imposed for Fraudulent Activities and Ignoring Document Discrepancies in Customs Operations.

  Case-Laws - AT : Cancellation of Customs Broker License - forfeiture of security deposit - imposition of penalty - time limitation - as per the Revenue, it is apparent case of fraud where four different firms got established based upon fake documents. - The appellant has admitted that despite the discrepancies in the documents of these importers, the CHA /appellant opted to not to bring the same to the notice of the competent Customs officers with the sole motive to safeguard his business with these importers. - Punishment imposed on Respondent, by Commissioner of Customs, of revocation of their license, when viewed in light of grave and serious acts of misconduct held established, was held justified. - AT
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Corporate Law

• Court Supports Tata Sons, Overturns Past Rulings; SP Group and CPM's Arguments on Conversion Provisions Dismissed.

  Case-Laws - SC : Oppression and Mismanagement - The real reason why SP group and CPM are aggrieved by the conversion is, that most of their arguments are traceable to provisions which apply only to public and listed public companies. If re­conversion goes, they may perhaps stand on a better footing. But that would tantamount to putting the cart before the horse. One may be entitled to a collateral benefit arising out of a substantial argument. But one cannot seek to succeed on a collateral issue so as to make the substantial argument sustainable - the question is answered in favour of Tata Sons and as a consequence, all the observations made against the appellants and the Registrar of companies of the impugned judgment are set aside. - SC
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IBC

• Supreme Court Confirms CIRP Application Timely Filed; Fresh Limitation Period Starts with Each Debt Acknowledgment.

  Case-Laws - SC : Initiation of CIRP - corporate guarantor - Period of limitation - A fresh period of limitation is required to be computed from the date of acknowledgment of debt by the principal borrower from time to time and in particular the (corporate) guarantor/corporate debtor vide last communication dated 08.12.2018. Thus, the application under Section 7 of the Code filed on 13.02.2019 is within limitation. - SC
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• Guarantor Faces Insolvency Proceedings Under CIRP After Principal Borrower Defaults on Loan.

  Case-Laws - SC : CIRP - Action against corporate person (being a corporate debtor) concerning guarantee offered by it in respect of a loan account of the principal borrower, who had committed default - Upon default committed by the principal borrower, the liability of the company (corporate person), being the guarantor, instantly triggers the right of the financial creditor to proceed against the corporate person (being a corporate debtor) - SC
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Service Tax

• Cenvat Credit Reversal Demand Unfounded; No Allegation of Non-Compliance with Rule 6(3A) Notification Procedure in Show Cause Notice.

  Case-Laws - AT : Reversal of Cenvat Credit - There are no merits in the confirmation of demand. Though in the Order in Original as well as in the first appellate authority’s order, the department has discussed that the appellant has not put forward evidence to show that they had intimated the department as to the reversal of credit, there is no allegation in the Show Cause Notice that the appellant has not complied with the procedure of intimating the department as required under Rule 6(3A) of CENVAT Credit Rules. - AT
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• CENVAT Credit Entitlement Affirmed for Input Service Distributor in Tour Operator Services Case.

  Case-Laws - AT : CENVAT Credit - input service distribution - tour operator service - entitlement of credit to ISD when the credit has been availed by the unit company - the appellant is only an Input Service Distributor who only distributed the credit - Demand set aside - AT
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Case Laws:

• GST

• 2021 (3) TMI 1156
  Detention of goods - the person incharge of the conveyance, carrying the consignment of goods, was carrying with him the documents and invoice as described under rule 138(A) of the Central Goods and Services Tax Rules, 2017, or not - HELD THAT:- Today, when the matter is taken up for hearing, we are informed that the final order of confiscation in Form MOV-11 has been passed by the concerned authority. However, the learned counsel appearing for the writ-applicants is not aware of the same - Be that as it may, nothing further is required to be adjudicated in the present writ-application as the writ-application came to be virtually allowed by way of the aforesaid interim order. If the final order of confiscation has been passed, then it shall be open for the writ-applicants to challenge the same by preferring an appeal under Section 107 of the Act. Application allowed.

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• 2021 (3) TMI 1155
  Attachment of Bank Accounts - Search and inspection under Section 67 of the CGST Act - HELD THAT:- In the case in hand, search was conducted on 09.06.2020 and the further proceedings thereof are still pending. Claiming to be necessary in the interest of revenue, by orders at For information purpose only Exts.P6, P6A and P6B, bank accounts of the petitioner came to be attached and subsequently, on the basis of objection (Ext.P7), the provisional attachment order has been modi ed by the order at Ext.P9. The petitioner is directed to furnish the security in the form of bank guarantee in the name of the Hon ble President of India, equivalent to the credit balance available as on 20.08.2020 which according to the learned counsel for the petitioner, is about Rs. 30 crores. Neither the order at Exts.P6(series) nor the order at Ext.P9 re ects anything which substantiate that interest of revenue requires this action to be taken in the matter. What is the reasonable apprehension with the authority is not disclosed in the order at Ext.P6(Series) or in the order at Ext.P9 - Furnishing bank guarantee of about Rs. 30 crores would certainly block that much amount from the business of the petitioner. The petitioner, on account of an order by the adjudicating authority has no remedy of appeal under Section 107 of the CGST Act in the matter. The order directing furnishing of the bank guarantee needs to be stayed till disposal of the writ petition, by directing the petitioner to execute the undertaking that he will not sell, alienate or dealt with any of his assets as seen from the balance sheet produced by him at Ext.P16 - Petition disposed off.

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• 2021 (3) TMI 1154
  Maintainability of petition - HELD THAT:- The petition is dismissed as not calling for adjudication in light of the stand taken by learned HCGP as reflected in the memo.

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• Income Tax

• 2021 (3) TMI 1177
  Reopening of assessment u/s 147 - validity of sanction-order passed u/s 151 - whether it was a fit case in which sanction should be accorded for issuance of notice under Section 148 of the Act and, thus, triggering the process of reassessment under Section 147? - HELD THAT:- There is no explanation by the revenue as to why approval of ACIT was taken in the instant case. Even if we were to assume for the moment that the approval of the ACIT was rightly taken, a bare perusal of the endorsement would show that there is no application of mind as to whether the information received by the AO had any nexus with the formation of honest belief that the assessee s taxable income had escaped. What is glaring is that the ACIT notes that income to the tune of Rs. 27,60,838/- had escaped taxation whereas, in the order recording reasons, the taxable income has been quantified as Rs. 26,93,500/-. As noted above, based on the arguments of Mr. Singh that the escaped income should be related to unsecured loans, there is in play a third figure which is Rs. 25,95,277/-. In the instant case, because of the failure on the part of respondent no.1 to correlate the information received with the ostensible formation of belief by him, respondent no.2 attempted to connect, via her counter-affidavit, that the escaped income with the suspicious unsecured loan entries reflected in the assessee s returns for AY 2010-2011 and 2011-2012. As correctly argued by Mr. Kochar, the counter-affidavit and the submissions made across the bar cannot be used to sustain the impugned actions. The order recording reasons and the order granting sanction should speak for themselves. See GORDHANDAS BHANJI. [ 1951 (11) TMI 17 - SUPREME COURT] and MOHINDER SINGH GILL ANR. [ 1977 (12) TMI 138 - SUPREME COURT] Notice issued under Section 148 was barred by limitation - This submission advanced on behalf of the assessee is not sustainable. As noticed above, the limitation provided under Section 149 of the Act for issuance of notice commences from the date when the notice is issued and not when the notice served. The record presently, before us shows that the notice was issued on 31.03.2018. Therefore, this submission made on behalf of the petitioner is rejected. Notice under Section 148 was issued by an AO Ward No.22(4) while the order recording reasons was issued by another officer is not borne out from the record. Huge time lag between the issuance of the impugned notice under Section 148 of the Act and the date when the order recoding reasons was furnished to the authorized representatives of the petitioner - While the assessee is, in our view, right in contending that if the time lag is huge, it does point in the direction that the order was ante-dated, a final view on this aspect could have only been taken if the original record was examined by us. Since the revenue has denied the allegation levelled against it and Mr. Kochar did not press this issue during the hearing, we can t reach a definitive view on this aspect of the matter based on the record available before us Therefore, this submission, made on behalf of the assessee, cannot be accepted. Since respondent no.1 was unable to link the information received with the formation of belief, a jurisdictional error did occur, which, this Court, is empowered to correct, by exercising its powers under Article 226 of the Constitution of India (See: Calcutta Discount Co. Ltd. vs. Income Tax Officer, Companies District I Calcutta and Another [ 1960 (11) TMI 8 - SUPREME COURT] Relegating a party to an alternative remedy is a selfimposed limitation which, however, does not denude the court of its powers under Article 226. The Court is duty-bound to exercise its powers under Article 226 where ever it finds that a statutory authority has exercised its jurisdiction either irregularly or acted in a matter in which it had no jurisdiction or committed a breach of the principles of natural justice. Conclusion - We are inclined to quash the impugned notice dated 31.03.2018 issued under Section 148 of the Act as well as the order granting sanction issued by respondent no.2.

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• 2021 (3) TMI 1176
  Exemption u/s 11 - details as regards the registration of Trust under Section 12A / 12AA not furnished - HELD THAT:- We are at one with Revenue that in the absence of the registration number, to be mentioned in the course of E-filing of the return, the benefit of exemption under Section 11 of the Act cannot be granted, but, at the same time, we find it difficult to accept the stance of the department that as the record is not available with the Trust as well as with the department, it should be presumed that at no point of time, the certificate of registration under Section 12A of the Act was granted. We take notice of the fact that there is contemporaneous record available with the Trust, which should be looked into minutely by the department so as to satisfy itself that the Trust had been issued a registration certificate under Section 12A and had been availing the benefit of exemption over a period of time under Section 11 of the Act. The department is expected to undertake some homework in this regard seriously. The Trust should not be denied the benefit of exemption under Section 11 of the Act only on account of its disability to produce the necessary records, which got destroyed during the floods of 1978. We do not find anything doubtful or fishy as regards the Trust. We are of the view that whatever record is available with the Trust, as on date, should be produced before the department and the department should look into the records minutely and also give an opportunity of hearing to the Trust or its legal representative and take an appropriate decision in accordance with law. We dispose of this writ application with a direction that the writ applicant Trust shall produce the entire record available with it as on date before the department and the department shall look into the entire record closely and threadbare and ascertain whether the Trust being a registered charitable Trust had been issued the registration certificate under Section 12A.

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• 2021 (3) TMI 1174
  Reopening of assessment u/ 147 - surrender value of pension plan claimed as exempted from tax u/s 10(10D) - a s per revenue interest/bonus on premature of surrender of pension plan / annuity plan is not exempted as per the provisions of Section 80CCC(2) or under any other sections of the I.T. Act . - tangible material necessary to reopen an assessment made without scrutiny under Section 143(1) - HELD THAT:- From the reasons assigned by the Revenue it is not clear as to how the basic conditions are not fulfilled so as to even prima facie suggest that the benefit of Section 10(10D) of the Act is not available to the assessee. The only thing, which seems to have weighed heavily with the Revenue, is that the assessee has not offered the amount being the excess sum received over and above the premium paid for tax. In view of this, this amount is nothing, but, bonus, which is otherwise covered under Section 10(10D) of the Act. However, for this amount to be taxable, the Revenue has to prima facie indicate as to which of the conditions of Section 10(10D) of the Act are not fulfilled. In other words, how the amount in question is not exempted under Section 10(10D) The reference to Section 80CCC(2) is thoroughly misconceived for two reasons: first, Section 80CCC deals with annuity plans whereas we are concerned with life insurance policy; secondly, Section 80CCC(2) of the Act makes any sum received by the assessee from the insurer towards contract for any annuity plan, taxable provided premium paid for such plan is claimed as allowable deduction under Section 80CCC(1) of the Act. In the facts of the present case, there is no such averment or findings that the amount of premium paid has been claimed and allowed as deduction under Section 80CCC(1) of the Act. Where the original assessment is without scrutiny i.e. under Section 143(1), even in such cases tangible material is necessary to reopen the assessment.Explanation 2 to Section 147 is more elaborate and cover those cases where the assessments have been completed (called as the scrutiny cases) as well as those cases where no assessments have been completed (called as the non scrutiny cases). As per the aforesaid Explanation 2, no distinction has been made between the cases where assessment has been made after scrutiny and those cases where no assessment has been made viz. cases where assessment has been made under Section 143(1) only. From the aforesaid Circular of the CBDT, it is quite evident that no distinction under Section 147 is contemplated between the assessment under Section 143(3) called as the scrutiny assessment and the assessment accepted under Section 143(1) called as the non scrutiny assessment. Therefore, a tangible material is necessary to reopen even an assessment made without scrutiny under Section 143(1) of the Act. Even where the proceedings under Section 147 of the Act are sought to be initiated with reference to an intimation under Section 143(1), the ingredients of Section 147 are required to be fulfilled. Therefore, even in such a case there should exist reason to believe that income chargeable to tax has escaped assessment. Hence, in the absence of any tangible material in possession of the Assessing Officer, subsequent to the intimation under Section 143(1), the reopening will not be sustainable. In other words, even an assessment under Section 143(1), in the form of an intimation, cannot be reopened under Section 147 unless some new / fresh tangible material comes into possession of the Assessing Officer, subsequent to the intimation under Section 143(1) of the Act. - Decided in favour of assessee.

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• 2021 (3) TMI 1173
  Reopening of assessment u/s 147 - no valid service of notice on the assessee strictly in terms of Section 148 read with Section 282(1) - HELD THAT:- In the case on hand, the pivotal question is whether Section 148 notice was actually served upon the writ applicant or not. The Revenue itself has conceded that it was not served upon the writ applicant at any point of time. In such circumstances, this decision in the case of Rajesh Sunderdas Vaswani [ 2016 (6) TMI 701 - GUJARAT HIGH COURT] is hardly of any avail. In the case on hand, the assessee has no PAN. As noted above, this is a case of Non PAN. The picture is now abundantly clear. The Revenue may be justified in taking cognizance of the sale transaction of the agricultural land, which, at one point of time, was owned by the assessee herein. This agricultural land we are talking about is situated at Kalol, District : Gandhinagar. The only mistake that the department committed was to dispatch the notice under Section 148 of the Act to the address at Kalol, Gandhinagar and not to the residential address of the writ applicant at village : Khorsam, Taluka : Chanasma, District : Patan. In such circumstances, it is obvious that the writ applicant could never be said to have receive such notice. - Decided in favour of assessee.

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• 2021 (3) TMI 1172
  Assessment u/s 153A - Time limit for authorizations for search under Section 132 or for requisition under Section 132A - whether the provisions of Section 132(9A) are mandatory or directory? - HELD THAT:- The provisions of Section 153B set out the limitation by when an order of assessment under Section 15A is to be passed as being twenty-one months from the end of the month when the last of the authorizations for search under Section 132 or for requisition under Section 132A was executed. The period set out under Section 132(9A) is a measure to enable the respective parties to adhere to the process in an orderly fashion facilitating the completion of the assessment in time. It is relevant to note that there is no time stipulated for the issuance of notice under Section 153A and instances are rife when notices are issued long after the seized material is handed over to the AO. The integrity of the assessment process would thus be dependent upon the principles of natural justice being observed and proper sequence of procedure being followed. Time limits set out under Section 132 (9A) are not only for the purposes of Section 132 (8) (9) but also to facilitate reasonable time to the AO to complete the assessment where the identity of the IO and AO is different. The undisputed position in this case is that the IO and AO are not one and the same. The last of the authorisations in this case is on 04.09.2018 and the seized materials ought to have been handed over, in terms of Section 132(9A) on or before 03.11.2018. Admittedly, the handing over has been only on 20.08.2019, more than nine months beyond the stipulated date. Though this constitutes a gross procedural irregularity, it does not, in my considered view, vitiate the notices issued, as assuming a situation where the handover had been within time, the notices might still have been issued only on 01.11.2019. Thus, the jurisdiction assumed cannot be faulted on this score.

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• 2021 (3) TMI 1171
  Reopening of assessment u/s 147 - assessment beyond the period of 4 years - sanction of the competent authority as provided under Section 151 granted or not? - bogus transactions -HELD THAT:- As during the course of previous assessment proceedings, the assessee failed to disclose material particulars with regard to alleged transactions and the true facts of the transactions having been discovered by the Assessing Officer on the basis of the information received from the concerned department. Law in this regard has been settled by various decisions of this Court as well as the Apex Court that burden is on the assessee to make true and full disclosure. Therefore, where the transaction itself on the basis of the subsequent information is found to be a bogus transactions, mere a disclosure of said transaction at the time of original proceedings, cannot be said to be a disclosure of true and full facts in the case. As assessee was aware that the transaction with M/s. Agni Pvt Ltd was not business transaction but in the form of bogus purchase, it was only an accommodation entries and the company was one of the beneficiaries of the transactions, despite of this, the assessee failed to disclose true and correct facts at the relevant time and therefore, the Assessing Officer is entitled to initiate reassessment proceedings on the basis of tangible material came in his hand, which tends to expose the untruthfulness of the entry of purchase made in the books of accounts. Whether reassessment proceedings could be said to have been initiated mechanically on the basis of third party information? - Assessing Officer has verified the information and after application of mind and upon due satisfaction, he formed an opinion that income has escaped assessment. While according the sanction under Section 151 of the Act, the authority concerned has not applied his mind properly and mechanically accorded the sanction - As perused the papers of the approval, which shows that the competent authority has given the satisfaction in hand writing and has expressed his satisfaction with regard to reasons recorded and accorded the sanction to issue impugned notice. Therefore, the approval for reassessment was granted on the date on which the impugned notice was issued. In this circumstances, the contention raised by the learned advocate for the writ applicant that sanction was not obtained before issuance of the notice cannot be accepted. It cannot be said that there was no tangible material before the Assessing Officer and that he proceeded mechanically based on the sole information and the impugned notice is without jurisdiction and contrary to Section 147 - Decided against assessee.

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• 2021 (3) TMI 1170
  Intra-court appeal against rejection of Contempt proceedings against the IRS officer / Deputy Commission of Income Tax - Prosecution for offence punishable under Section 276C - undisclosed deposit in a foreign bank account - appellant filed a petition under Section 279(1) of the I.T.Act for compounding the offence - HELD THAT:- Admittedly, the learned Contempt Court found that there is no merit in the contempt petition and in order to maintain an appeal under Section 19 of the 1971 Act, the party on whom a punishment has been imposed alone could have approached the Court. In the instant case, the appellant was the petitioner in the contempt petition and he sought for punishing the respondents for wilful disobedience of the order in the writ petition. The learned Contempt Court found that there is no violation, rather the portions of the order passed in the writ petitions, which were heavily relied on by the appellant, were held to be observations made by the learned Writ Court. The informant, who is the appellant before us, does not have a right of filing an appeal under Section 19 of the 1971 Act or against an order refusing to initiate contempt proceedings or disposing of the application or petition filed for initiating such proceedings and he cannot be called an aggrieved party. Therefore, the appellant could not have maintained an appeal under Section 19 of the 1971 Act. If such is the situation, can the appellant invoke Clause 15 of the Letters Patent and seek for maintaining this intra-court appeal. The answer to the question should be answered in the negative and against the appellant. To put it plainly, the appellant is seeking to indirectly achieve what he could not achieve in terms of the provisions of the 1971 Act. The facts in the decision in Ashis Chakraborty [ 1991 (12) TMI 289 - CALCUTTA HIGH COURT ] which was referred to in Tamil Nadu Mercantile Bank Shareholders Welfare Association [ 2008 (12) TMI 676 - SUPREME COURT ] is couched on an entirely different factual background and would not be applicable to the case of the appellant. That apart, if the appellant s role is only that of an informant and upon information given, the Court is convinced that no proceedings for contempt is required to be initiated, then the appellant cannot be heard to say that he should be permitted to maintain an intra-court appeal against the finding of the Contempt Court especially when, his role terminates the moment the information is placed before the Court. Intra-court appeal filed by the appellant is not maintainable and consequently, the objection raised by the Registry is sustained and the writ appeal is dismissed as not maintainable in the SR stage itself.

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• 2021 (3) TMI 1169
  Bogus LTCG - addition u/s 68 - long term on sale of equity share and 3% commission on sale value of shares through registered stock exchange - eligibility for exemption u/s 10(38) denied - HELD THAT:- As the assessee has successfully discharged the onus cast upon him by provisions of section 68 of the Act and such discharge is purely a question of fact. We, accordingly, direct the Assessing Officer to accept the long term capital gain declared as such and allow exemption u/s 10(38) of the Act. In light of the above, we delete the impugned addition made on account of unexplained cash credits u/s 68 - Decided in favour of assessee.

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• 2021 (3) TMI 1163
  Revision u/s 263 - AO made no extensive verification of all the documents and had made no requisite enquiries thereon - HELD THAT:- PCIT does not in any manner suggest as to what enquiries the ld. AO should have conducted. In fact, the ld. PCIT does not bring out any basis for arriving at the conclusion as to how the order of the ld. AO dated 02/05/2018 in granting reliefs to the assessee is erroneous. We find that the ld. PCIT had merely directed the ld. AO to directly withdraw the reliefs given by him in the order dated 02/05/2018 in respect of five issues as tabulated. We find that this action of the ld. PCIT is grossly unsustainable in the eyes of law in view of the fact that the impugned grievance of the ld. PCIT is that the ld. AO had not carried out proper enquiries on the aforesaid 5 issues as tabulated supra. While it is so, how and on what basis the ld. PCIT comes to a conclusion that those five issues deserve to be decided against the assessee by way of withdrawal of relief. At best, the ld. PCIT could have only directed the ld. AO to conduct enquiries even if he is of the opinion that enquiries were not carried out properly by the ld. AO. The entire action of the ld. PCIT goes to prove that the entire issue has been addressed with a pre-conceived notion in order to reach a pre-conceived destination by forgetting the legal tenets, factual verifications, verification of documents carried out by the ld. AO, improperly applying provisions of Explanation-2 to Section 263, not respecting the judicial hierarchy by ignoring the order of this Tribunal dated 14/01/2019 wherein the Tribunal had already quashed the assessment order dated 15/03/2016 but also granting relief to the assessee on merits on each of the five issues that were subject matter of revision proceedings, thereby proving his highhandedness. Hence, it could be safely concluded that proper and requisite enquiries were indeed carried out by the ld. AO while passing the order dated 02/05/2018 giving effect to the order of the ld. CIT(A) dated 28/06/2017 and hence, the ld. PCIT grossly erred in invoking revisionary jurisdiction u/s.263 of the Act on the ground that the order of the ld. AO is erroneous and prejudicial to the interest of the revenue because proper enquiries were not carried out by the ld. AO. No hesitation in quashing the revision order passed by the ld. PCIT u/s.263 - Decided in favour of assessee.

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• 2021 (3) TMI 1162
  Transfer pricing addition on account of Corporate guarantee - TPO observed that the assessee gave Corporate guarantee for its Associated Enterprises (AEs) but just reported in its Transfer Pricing report that it had not incurred any costs in providing guarantees - Whether furnishing of Corporate guarantee is an international transaction ? - HELD THAT:- On going through the ambit of Shareholder activity as given in the OECD guidelines on a general perspective, it becomes imminent that such activities are certain acts performed by a company SOLELY because of its shareholding in other group companies, which is obviously not the case here. Au contraire, the effect of furnishing Corporate guarantee directly percolated to the principal debtor, namely, the AEs for whom the assessee stood surety. Thus, the ground urging that the act of furnishing guarantee be treated as a shareholder s activity, is devoid of merits. Moreover, now with the statutory amendment specifically treating `guarantee as an international transaction, there remains no doubt whatsoever that the furnishing of corporate guarantee by an assessee is an international transaction. This ground is thus dismissed. Performance guarantee vs. Corporate guarantee - A corporate guarantee is ordinarily a legal agreement between a principal debtor, creditor and guarantor, whereby the guarantor takes responsibility for the debt repayment in case of repayment by the principal debtor to the creditor. A performance guarantee provides an assurance of compensation in the event of inadequate or delayed performance on a contract. If performance guarantee entails financial consequences, that is, on the failure of the other party to perform his obligation and the guarantor becoming liable to pay some amount, then it cannot be placed at a pedestal different from the regular corporate guarantee given for obtaining loan by the AE. In that sense, performance guarantees in the instant case are a specie of the genus of corporate guarantee and cannot be given a treatment different from the corporate guarantee as urged by the assessee. Ex consequenti, we hold that the so-called performance guarantee transactions at sr. nos. 3 and 4 are in the nature of corporate guarantee transactions and do not require any separate treatment vis- -vis the remaining eight transactions, which we will discuss infra . ALP of the Corporate guarantee transactions - As observed that when commercial banks issue bank guarantee, which is easily encashable in the event of default, higher commission is justified. On the other hand, where a Corporate guarantee is issued, the guarantor needs to make good the amount and repay the loan if the subsidiary defaults. It further observed that the considerations which apply for issuance of Corporate guarantee are distinct and separate from Bank guarantee. It, therefore, approved the rate of 0.5% as arm s length rate of Corporate guarantee fee. We have seen above that in some of the cases in which the assessee stood guarantor, it had to incur certain charges varying between 0.75% to 1.75%, whilst in other cases, nothing was required to be paid. Drawing support from Everest Kento Cylinders Ltd. [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] we hold that the arm s length price of the international transaction of rendering service of furnishing guarantee is 0.5%. All out-of-pocket expenses incurred by the assessee guarantor in furnishing guarantee will go to swell the ALP accordingly. In other words, where the assessee has not incurred any cost in furnishing guarantee, the ALP of the international transaction of furnishing guarantee will be 0.5%. If however, the assessee has incurred expenses at, say, 1.75%, then ALP will be 2.25% (consisting of compensation for rendering service of giving guarantee at 0.5% plus out of pocket expenses incurred at 1.75%). The effective arm s length rate of guarantee transaction is 0.50% plus actual expenses incurred by the assessee in furnishing the guarantee. The impugned order in confirming uniform rate of 2% as arm s length guarantee fee is set aside and the matter is restored to the AO to decide the issue in the terms held above. The assessee will be allowed a reasonable opportunity of hearing in this exercise. Transfer pricing addition in the Manufacturing activity - HELD THAT:- The position would be entirely different if the AO invokes Explanation 5 to section 32 and allows full depreciation as per the original return. In that scenario, the contention of the assessee for considering only the reduced amount of depreciation in the revised return for the ALP determination would fail. As the AO in the instant case has computed the total income by considering the reduced claim of depreciation by Rs. 19.11 crore, we hold that only such reduced amount of depreciation be included in the operating cost base for determining the ALP of the transaction of `Manufacturing activity . We want to clarify that the position as discussed hereinabove is about the effects of a suo motu disallowance offered by the assessee and not a disallowance made by the AO. CIT(A) not considering bank charges and commission/brokerage as non-operating cost - We find that the break-up of `Bank charges and commission/brokerage has been given on page 29 of the TPO s order, which comprises of Brokerage and commission on fixed deposits Rs. 10.42 lakh; Bank charges Rs. 178.48 lakh; Loan processing fee Rs. 338.32 lakh; and SBLC commission Rs. 216.26 lakh. On a perusal of the detail of Rs. 743.48 lakh, it is discernible that this expenditure is nothing but part and parcel of the overall Finance cost. It is rather an extension of the Finance cost.We, therefore, hold that the ld. CIT(A) was justified in excluding Rs. 743.48 lakh from the operating costs base. The ground fails. Proportionate transfer pricing adjustment allowed by the ld. CIT(A) - TPO, while computing the transfer pricing adjustment, took into account the entity level figures and not the transactions with the AEs. The ld. CIT(A) directed to restrict the transfer pricing adjustment in respect of transactions with AEs alone - This issue is fairly settled by judgment of Hon ble jurisdictional High court in CIT Vs. Phoenix Mecano (India) Pvt. Ltd. [ 2018 (7) TMI 798 - SC ORDER] , holding that the transfer pricing adjustment made at entity level should be restricted to the international transactions only. It is pertinent to mention that the Department s SLP against this judgment has since been dismissed by the Hon ble Supreme Court in CIT Vs. Phoenix Mecano (India) Pvt. Ltd - Similar view has been taken by the Hon ble Bombay High Court in CIT Vs. Thyssen Krupp Industries Pvt. Ltd. [ 2015 (12) TMI 1076 - BOMBAY HIGH COURT] and CIT Vs. Tara Jewels Exports (P). Ltd.[ 2015 (12) TMI 1130 - BOMBAY HIGH COURT] - We, therefore, uphold the impugned order on this score.

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• 2021 (3) TMI 1161
  Addition of unexplained cash credit - Addition u/s 68 r.w.s. 115BBE - AO did not believe the sources of agricultural income in the absence of corroborative evidence - HELD THAT:- In this case, the assessee submitted before the AO, that the assessee is looking after the entire agricultural operations and managing the agricultural operations, which was not disputed by the AO. There is no dispute that the assessee along with his family members own more than 16 acres of agricultural land, where the mango crop was grown . The AO also did not dispute that 16 acres of agricultural land yield the crop worth Rs. 5,00,000/-. AO did not examine the family members with regard to deposit of sale proceeds of mango garden in his account, though assessee had furnished the details of land owned along with pattadar passbooks copies of which are furnished in page No.3 of the paper book. The assessee had explained the source of deposits of cash and the AO did not discharge the burden by examining the family members. Since the assessee stated that he looks after the entire agricultural operations which is common in joint families, we, do not find any reason to suspect the source of cash deposits in the bank account and the same stands explained, hence, we set aside the orders of the lower authorities and delete the addition made by the AO. Assessee s appeal on this ground is allowed. Unexplained deposits in the bank account - AO found mismatch of dates mentioned in the sale deed and withdrawals made by the vendor from his bank account and disbelieved the payment to the assessee and accordingly made the addition - HELD THAT:- In the instant case, the vendor has confirmed the payment of Rs. 37,50,000/- on various dates and also filed rectification deed before the Ld.CIT(A). The AO and the Ld.CIT(A) were of the view that it was an afterthought. However, the rectification deed was registered before the SRO which is a valid piece of evidence. AO landed in a wrong confusion without considering the rectification deed. In the rectified deed, the vendor has clearly mentioned that a sum of Rs. 30,75,000/- was paid on 26.12.2013 and Rs. 6,75,000/- was paid on 13.1.2014 and the balance amount was paid on date of registration. The total sum paid by the vendor to the assessee was Rs. 49,47,000/- for sale of land. AO did not examine the vendor and made the addition brushing aside the explanation offered by the assessee. Since, the assessee has admitted the total sale consideration for capital gains and paid the taxes and furnished the evidence with regard to receipt of the amount by confirmation as well as rectification deed, we find no reason to disbelieve the contention of the assessee that a sum of Rs. 30,75,000/- was paid to the assessee on 26.12.2013 and Rs. 6,75,000/- was paid on 01.01.2014. In the instant case, though the assessee has discharged his burden, the AO did not make any enquiry and bring evidence to controvert the submission of the assessee. Therefore, we set aside the orders of the lower authorities and delete the addition made by the AO and allow the appeal of the assessee.

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• 2021 (3) TMI 1160
  Government subsidy receipt - revenue or capital - HELD THAT:- Since no change of facts or law could be pointed out by the Revenue on this issue which has been decided in assessee s own case for A.Y 2011-12 wherein the Ld. CIT(A) has held that sales tax incentive enjoyed by the assessee was for setting up industry in the backward areas in the State and hence it is a Capital Receipt not taxable as per the provisions of the Act and the case law relied by the A.O in the case of Sahany Steel Press Works Limited [ 1997 (9) TMI 3 - SUPREME COURT] has also been considered by the Tribunal in the above case of assessee on this issue, we respectfully follow the order of the Tribunal in assessee s own case for A.Y 2011-12 , we confirm the order of Ld. CIT(A) and dismiss both grounds of appeal. Employee s contribution to PF/ESI which was not paid before the due date - HELD THAT:- We note that the Ld. CIT(A) allowed the grounds of appeal of the assessee on this issue by relying on the decision of the Hon ble Jurisdictional High Court in the case of Vijay Shree Ltd. [ 2011 (9) TMI 30 - CALCUTTA HIGH COURT] - We confirm the order of the Ld. CIT(A) and dismiss the ground of the Revenue. Interest on delay payment of excise duty and payment of service tax - HELD THAT:- We note that he Ld. CIT(A) has given relief to the assessee by relying on the decision of the Tribunal in the case of Narayani Ispat Pvt. Ltd. [ 2017 (10) TMI 67 - ITAT KOLKATA] which he did so correctly. And since the relief has been given by relying on the ratio of decision of the Tribunal in the case of Narayani Ispat Pvt. Ltd. (supra), we find no infirmity in the order of the ld. CIT(A), therefore, we confirm the order of the Ld. CIT(A) and dismiss the grounds of Revenue. Delay payment of lease rent - HELD THAT:- Since Revenue could not demonstrate that the interest on delay payment of lease rent of Haldia plant was in the nature of penalty or an infraction of law, the Ld. CIT(A) s view was plausible view and we find no infirmity in the order of the Ld. CIT(A) and so we confirm the order of the Ld. CIT(A), therefore, this ground of the Revenue is dismissed. Prior period expenses disallowance - CIT-A deleted the addition - HELD THAT:- According to the assessee, all these expenses are genuine expenditure otherwise deductible from the income of the assessee. It is also noted that for the AY 2013-14 AY 2014-15 the assessee has paid tax under MAT and the tax rate under MAT is same for both the year, hence it is noted that the assessee will not gain any benefit by deferring the tax liability. The assessee had relied on the decision of Hon ble Delhi High Court in the case of CIT vs. Vishnu Industrial Gases (P) Ltd. [ 2008 (5) TMI 636 - DELHI HIGH COURT] and CIT vs. Shri Ram Pistons Rings Ltd. [ 2008 (5) TMI 631 - DELHI HIGH COURT] It was held by the Hon ble Delhi High Court that unless it is noticed that the assessee has deliberately claimed prior period expenses by deliberate deferment to reduce tax liability in the subsequent years, there is no reason to disallow the prior period expenses in a summary manner. In the light of the aforesaid discussion, we find no infirmity in the order of the Ld. CIT(A) and we confirm the order of the Ld. CIT(A), therefore, this ground of the Revenue is dismissed.

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• 2021 (3) TMI 1159
  Assessment u/s 153A - Addition on the basis of statement recorded u/s 132(4) - Revenue has challenged finding of the Ld. CIT(A) that no addition could be made under section 153A of the Act on the basis of the statement recorded under section 132(4) of the Act as there was no incriminating material found during the course of the search - HELD THAT:- No assessment was pending as on the date of the search - the assessee had filed his original return of income on 30/09/2009 declaring total income of Rs. 1,89,72,710/-. No notice under section 143(2) of the Act was issued till 30/09/2010, which was the limitation under which notice u/s 143(2) of the Act could have been issued. The search action in the case of assessee was carried out on 09/10/2014, therefore, no assessment proceeding was pending in the case of the assessee as on date of the search. This position has not been disputed by the Revenue also. Incriminating material found during the course of the search - We find that Hon ble Delhi High Court in the case of PCIT Vs Best Infrastructure Private Limited, [ 2017 (8) TMI 250 - DELHI HIGH COURT] has held that statement under section 132(4) in the itself does not constitute incriminating material. As per HARJEEV AGGARWAL [ 2016 (3) TMI 329 - DELHI HIGH COURT] statement of Sh. Mulchand Malu under section 132(4) of the Act alone cannot be considered as incriminating material unless any corroborating incriminating material is found during the course of the search from the premises of the assessee. We do not find any error in the order of the Ld. CIT(A) on the issue in dispute. Following the finding of the Hon ble Delhi High Court in the case of Kabul Chawal [ 2015 (9) TMI 80 - DELHI HIGH COURT] we, accordingly, uphold the same. The ground No. 1 of the appeal of the Revenue is accordingly dismissed.

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• 2021 (3) TMI 1158
  Income from house property - expenditure for which deduction @ 30% is allowed - CIT (Appeals) as well as ITAT did not consider the fact that there are several expenditure for which deduction @ 30% is allowed under the income from house property as well as the expenses claimed by the assessee under the head business income are over-lapping - HELD THAT:- In assessee s own case in the previous year did not consider the fact that the expenses allowed as a deduction at the rate of 30% and many other expenses claimed by the assessee for maintenance are overlapping. However he failed to exhibit that what are those expenses are overlapping. Even, the judicial discipline also requires us to follow the order of the coordinate bench. Even otherwise the learned departmental representative could not show us any reason to deviate from the order of the coordinate bench in assessee s own case for earlier years where the identical issue has been decided. Where the order of the coordinate bench was not shown to us is decided on incorrect facts or incorrect law, we are duty-bound to follow the same - Decision of the coordinate bench in assessee s own case in earlier years, we hold that assessee has correctly offered the income as income from house property and it is not chargeable to tax as income from business and profession as held by the learned and CIT A. CIT A was not justified in rejecting the claim of the standard deduction u/s 24 in respect of income from letting out of the property by the classified the same Under the head income from business and profession. The maintenance and service income are backed by the agreement with reference to the left out properties, the characterization of the same cannot be disturbed without any cogent reasons. CIT A has also and hence the income of the assessee without giving a notice u/s 251 of the income tax act, which is not in accordance with the law. Thus, we reverse the orders of the lower authorities. In the result ground number one three of the appeal of the assessee are allowed.

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• 2021 (3) TMI 1153
  Disallowance u/s 43B on interest expenditure - HELD THAT:- It is not in dispute that the CIT(A) herein has granted part relief to the assessee qua interest payments made to APRDC and APCSC only that they fall in the exemption mechanism in Section43B(d) of the Act. Since the payees are already covered by his order in said preceding assessment year and also they fall in the exempt category of recipients only. We make it clear that the Revenue is fair enough in its grounds in not disputing the status of the twin recipients hereinabove. We thus quote the hon ble apex court s larger bench s decision in CIT Vs. K.Y.Pilliah[ 1966 (10) TMI 35 - SUPREME COURT] that the tribunal need not record independent findings on its own if it expresses its complete agreement with the first appellate authority s conclusion(s) under challenge. We hold in this factual backdrop that the CIT(A) has rightly deleted the impugned 43B disallowance pertaining to these twin payees/corporations. The Revenue s sole substantive grievance fails accordingly.

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• 2021 (3) TMI 1152
  Exemption u/s 11 - rejecting the application filed seeking registration u/s. 12AA - HELD THAT:- We note from the impugned order as rightly pointed by the ld. AR that the CIT(Exemption) did not point out the activities of the assessee are non-genuine and he rejected only on the ground that the assessee accumulated funds and kept the same in FDs not utilizing the same for the objects of the trust. This Tribunal in the case of Sant Zolebaba Sansthan Chikhali [ 2021 (1) TMI 999 - ITAT PUNE] held the issue of grant of registration and the assessment of income of trust are distinct and separate, by placing reliance in the case of Ananda Social and Educational Trust [ 2020 (2) TMI 1293 - SUPREME COURT] held the mandate of the provisions u/s. 12AA of the Act is to examine whether objects of the trust are charitable in nature are not and the activities of the trust are genuine. In the present case as discussed above the CIT(Exemption) did not point out anything against the objects and genuineness of the activities of the trust but however rejected the registration on examination of financial statements of the assessee for the last four years by holding the assessee has made surplus and no taxes paid thereon on such surplus funds. We find that it is a settled principle that the grant of registration and the issue of assessment or exemption u/s. 11 of the Act are separate and distinct. The process of registration is not on occasion for deciding the issue of exemption of donation u/s. 11 of the Act. The issue of exemption cannot be examined during the process of registration. Therefore, in our opinion, the order of CIT(Exemption) in denying the registration u/s. 12AA of the Act cannot be sustained and the impugned order is set aside. The assessee is entitled to have registration u/s. 12AA - Decided in favour of assessee.

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• 2021 (3) TMI 1151
  TP adjustment - Inappropriately combining of export of service spare and export of parts and components in global sourcing segment - HELD THAT:- Tribunal in assessee s own case for assessment year 2008-09 [ 2014 (12) TMI 1 - ITAT PUNE] after going through the findings for assessment year 2006-07 observed and held that in relation to the international transactions of export to the associated enterprises relating to the spares and components required in servicing of vehicle manufactured and sold by the assessee, the Tribunal found that even on an application of internal TNM mechanism the international transactions undertaken with associated enterprises was at an arm s length price. Even in the present assessment year i.e. 2013-14, the same position holds good as can be seen from the tabulation enumerated by the TPO at Para 6 of his order. Therefore, following the aforesaid precedent, the adjustment computed by the TPO with regard to the export to associated enterprises of spares and components required for the purpose of servicing of vehicles sold by assessee is untenable, as the transactions undertaken with third-party distributors are comparable to the transaction with the associated enterprises. Other part of the transactions relating to export of spares and components which are required by the associated enterprises for manufacture of two and three wheelers undertaken by them and the components which are required by the overseas associated enterprises for manufacture of four wheelers, namely, New, Quadracycle Poker. For these two categories of transactions, the Tribunal negated the invoking of internal TNM mechanism by the TPO and instead remanded the matter back to the file of the Assessing Officer to examine the plea setup by the assessee. We restore the issue back to the file of the Assessing Officer who shall carry requisite verification/exercise and re-adjudicate the matter while complying with the principles of natural justice. We direct the Assessing Officer to redetermine the ALP of the impugned international transaction of export of spares and components on the basis of the decision of the Tribunal in assessee s own case for assessment year 2006-07 (supra.). Thus, Ground Nos. 2, 3 and 4 raised by the assessee are allowed for statistical purposes. Whether education cess can be allowed as deduction? - HELD THAT:- this additional ground in respect of Education cess is also remanded to the file of the Assessing Officer to adjudicate the issue in view of the principles laid down by the Hon ble Jurisdictional High Court in the case of Pr. Commissioner of Income Tax, Kota Vs. Sesa Goa Limited Vs. JCIT [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] and M/s. Chambal Fertilizers and Chemicals Ltd.[ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT] . Thus, additional ground No. 1 raised in appeal by the assessee is allowed for statistical purposes. Verification in respect of the various DTAA agreements - HELD THAT:- Taking totality of facts and circumstances into consideration wherein the DTAA agreements has to be looked into and factual aspects needs to be verified. Therefore, these additional grounds are also remanded to the file of the Assessing Officer who shall adjudicate these issues while complying with the principles of natural justice. Thus, Additional Ground Nos. 8.1 8.2 raised in appeal by the assessee are allowed for statistical purposes.

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• 2021 (3) TMI 1150
  Addition invoking the provisions of Section 40A(3) - payment made in cash on account of vehicle expenses be disallowed - Assessee submission that incurring of such expenses in cash are necessary because such drivers/running staff are unable to avail banking facilities during the transit period and that such persons are illiterate and not exposed to routine banking activities - HELD THAT:- The assessee in terms of its contract is bound to deliver the goods within the stipulated time. In the course of such transportation, the assessee is bound to incur expenses for putting fuel in the vehicle, payment of toll gate charges, incurring of expenses for routine and exceptional repairs and maintenance apart from fooding expenses of the staff. Since the AO has not doubted the genuineness of the expenses as no such disallowance has been made and the AO has made only disallowance u/s. 40A(3) of the Act on the basis of the bills/vouchers/ledger account produced before him, we are of the considered opinion that the disallowance u/s. 40A(3) made by the AO under the facts and circumstances of this case is not justified and the provisions of 6DD(k) will come to the rescue of the assessee. In this view of the matter, we set aside the order of the CIT(A) and direct the AO to delete the addition. The grounds raised by the assessee are accordingly allowed.

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• 2021 (3) TMI 1149
  Addition of business promotion expenses u/s. 40(a)(ia) - Non-deduction of TDS - CIT(A) has not given relief in respect of expenditure the assessee seeks verification in respect of two items of expenditure i.e. in respect of M/s. Rakshit Company and M/s. Choicest Enterprises Ltd. to whom the assessee had made payment - HELD THAT:- We find force in the said contention of the Ld. AR and we direct the AO to verify from these two concerns as to whether they (M/s. Rakshit Company and M/s. Choicest Enterprises Ltd.) have shown these amounts/receipts in their trading receipts in this assessment year and have paid due taxes thereon. The assessee to give all the details to the AO regarding their identity. And, the AO to verify from these concerns the veracity of the payment made by assessee and if the AO finds that both the concerns have shown these two payments made by the assessee as their receipts and have paid taxes thereon in this assessment year, then no deduction u/s. 40(a)(ia) of the Act is warranted, if not, the same may be confirmed. In respect of other items confirmed by the Ld. CIT(A), the Ld. AR does not want to press taking into account the smallness of the amount and, therefore, those expenses to be disallowed u/s. 40(a)(ia) of the Act. So, this ground is partly allowed for statistical purposes. Disallowance on account of interest on office loan - AO disallowed it since this office was not utilized/put to use - as demonstrated that assessee has its own fund to the tune of Rs. 8,28,88,111/- and the loan amount is only to the tune of Rs. 1.3 cr. and, therefore, according to the Ld. AR, the assessee possessed mixed fund which includes its own fund in sufficient quantity - HELD THAT:- CIT(A) has found that the assessee has got the office in question registered next year i.e. F.Y 2016-17 i.e. AY 2017-18, which fact corroborates the finding of AO and therefore, the proviso to section 36(1)(iii) of the Act is attracted. And in this case, the presumption as per the ratio of the decision rendered by Hon ble Bombay High Court in Reliance Utilities [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] and HDFC [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] cannot be applied because in those cases, there was mixed funds in the hands of assessee i.e. both own and borrowed funds and allocation of borrowed funds could not be specifically determined. In the case in hand, the loan amount was allocated for its office/capital which is a factual finding, which could not be disproved by the assessee, so the presumption based on mixed fund cannot be applied. So, we confirm the action of Ld. CIT(A). Therefore, this ground of appeal of assessee is dismissed. Addition on inflated purchases - According to the Ld. AR, promoter and directors of both the companies were same during that period and the entire business of both the companies were run by the same directors and since the indirect taxes has already been levied and paid by the sister concern and once this figure is deducted it is not more than the purchase price of the assessee i.e. Rs. 123 cr., therefore, according to him, there is no inflated purchase as alleged by the Ld. CIT(A) - HELD THAT:- CIT(A) has not enquired properly which fact is discernible from the show cause notice wherein the Ld. CIT(A) gave enhancement notice to assessee only alleging total inflated purchase to the tune of Rs. 4.99 cr. However, after receiving replies of assessee (supra), the Ld. CIT(A) has made an addition of Rs. 20,35,94,402/-. According to us, the action of the Ld. CIT(A) is bad for not conducting proper enquiry and for non-application of mind. Therefore, we set aside the order of the Ld. CIT(A) and remand this issue to the file of AO for verification of the details given (supra) and if the assessee has not inflated any purchase as contended by it, then no adverse view may be taken. With the aforesaid observation, we direct the AO to enquire into this limited issue raised by the Ld. CIT(A) and the assessee is directed to produce all documents pertaining to this issue to the AO and the AO to decide in accordance to law.

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• 2021 (3) TMI 1148
  Addition u/s 68 - unexplained cash credit - assessee received cash from some parties to which advances were given in the preceding years. but A.O was not satisfied with the genuineness of the cash received - CIT- A deleted the addition - HELD THAT:- The alleged amount added is actually the refund of the advances given by the assessee to various parties for purchase of land in preceding years which were given through banking channel and duly disclosed in the audited financial statements placed before the revenue authorities in the preceding years and no addition/discrepancy have been noticed. We therefore find no reason to interfere in the finding of Ld. CIT(A) and the same stands confirmed. In the result Ground No.1 raised by the revenue is dismissed. Addition u/s 41(1) on bogus creditors - addition deleted by Ld. CIT(A) - HELD THAT:- As the alleged amount of bogus creditors are not in the form of sundry creditors. These amounts are advances against booking of plots. When the plots are developed and the parties who have booked the plots give the remaining amount if any, then the advance given at the time of booking is transferred to sales account. As regards the amount outstanding in the name of Maggy Publicity, no addition can be made u/s 41(1) of the Act since it has offered to tax in the return of income filed for Assessment Year 2014-15. All the remaining 10 parties are not sundry creditors but are the advances for booking of developed plots of which some have already been transferred to the sales account when the registry was completed. These 10 parties cannot be termed as sundry creditors as there is no supply of goods or services by these parties. Ledger account shows that the assessee has received the sum through banking channel from these parties. Such sum received can either be in the form of unsecured or advance for sale/booking of plots. In the instant case out of the 10 parties in two cases the registry have been done and the advances received during the preceding years have been transferred to sales account. This fact asserts that all the sum received from 10 parties is advances for booking of plots and not balance of sundry creditors. As decided in NITIN S. GARG [ 2012 (5) TMI 30 - GUJARAT HIGH COURT] Merely because the liabilities are outstanding for last many years, it cannot be inferred that the said liabilities have seized to exist. The Appellate Tribunal has rightly observed that the Assessing Officer shall have to prove that the assessee has obtained the benefits in respect of such trading liabilities by way of remission or cessation . We are of the considered view that out of the alleged sum outstanding in the name of Maggi Publicity has been offered to income for Assessment Year 2014-15 and all the remaining amount received from 10 parties are not sundry creditors as they have advances for booking of plot of lands of which few have been transferred to sales account as and when the registry of plot of land is completed. Provision of Section 41(1) are not applicable on this case as the assessee has not claimed the alleged amount of advances from customers as an allowance or deduction in any assessment year in respect of loss, expenditure or trading liability. We thus confirm the finding of Ld. CIT(A) - Decided against revenue.

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• 2021 (3) TMI 1147
  Addition of undisclosed stock - HELD THAT:- AR has cited an order of ITAT Jaipur Bench in the matter of Stone Age (P.) Ltd.. [ 2019 (6) TMI 388 - ITAT JAIPUR] wherein it is held that where there was practically no difference in physical inventory taken by survey team viz-a-viz inventory as per books of account, impugned addition made on account of difference in value of stock was to be deleted and merely on the basis of statement recorded of the Director of the assessee-company with no corroborative material on record, had no legal force and thus same deserved to be deleted. The affidavits of the parties were rejected by the lower authorities on the basis of treating those affidavits as self-serving documents but documents submitted by the persons who were doing business from the same premises were not thoroughly examined and their Income Tax Returns were not considered by the lower authorities, wherein all the details with regard to their income were mentioned and no material was provided, on that basis addition was made and assessee was not allowed to cross-examine whose statements were relied for making addition in the hands of the assessee. In our considered opinion, whatever material or statement had been basis of the addition that should have been made available to the assessee and ought to have given opportunity to cross-examine the person and inspect the document, but in this case, such exercise was not carried out by the Department to the assessee and same amounts to miscarriage of justice. Since books of accounts were not rejected and no opportunity was provided to the assessee for cross-examination of persons who have given their statements against the assessee, so we have to give benefit of doubt to the assessee. In view of the foregoing discussion and respectfully following aforesaid judgments, we allow appeal of the assessee.

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• 2021 (3) TMI 1146
  Exemption u/s 11 - cancellation of registration under section 12AA(3)/(4) - effective date of cancellation of registration - Authority to cancel the registration under section 12AA(3)/(4) - Principal Commissioner of Income-Tax-17 cancelling the registration of the Appellant - Whether power of cancellation of registration vests in the authority who has the jurisdiction to grant registration? - HELD THAT:- There is no dispute that certain investments made by this Trust donot qualify the benefit of exemption under section 11, and that precisely was the reason that the assessee had requested the Commissioner for cancellation of registration under section 12A. The question of whether the assessee had the powers, under the trust deed, to seek cancellation or withdrawal of registration under section 12A or not is wholly irrelevant because once the assessee informs the Commissioner of the assessee becoming ineligible for exemption under section 11, it is power, as indeed duty, of the Commissioner to cancel the said registration and that power of the Commissioner is not dependent on the assessee having powers, under the trust deed, to seek cancellation of registration. On this aspect of the matter also, we are unable to find ourselves in agreement with the learned ASG. It is difficult to understand on the first principles, much less approve, any legitimate justification for the income tax authorities to insist that the assessee must have continue with the registration under section 12A when the assessee does not want it. It is nobody s case that there were certain specific obligations on the part of the assessee which the assessee must perform as a quid pro quo for the registration per se. Whatever obligations a charitable institution has towards the income tax authorities, these obligations are a quid pro quo for exemption and not a foundational requirement for the exemption. All these things are, however, academic in the light of our findings that the Commissioner had the duty, much more than the power, to cancel the registration under section 12A upon the fact of admitted violation of section 13(1) coming to his notice, and that such cancellation had to effective from the date on which the disability for exemption under section 11 is attracted (which is not ascertained on the facts of this case), the date of this fact coming to the notice of the Commissioner (i.e.11th March 2015), from the date on which the first show-cause notice was issued (i.e. 13th March 2015), or,at the minimum, from the date on which hearing in this regard was concluded and the order thereon was reserved (i.e. 20th March 2015). Conclusions: The impugned order of cancellation of registration granted to the assessee under section 12A must be held to be effective from the date on which the hearing on first show-cause notice was concluded and the show cause notice issued by the Commissioner was formally acquiesced by the assessee in the said hearing, i.e., 20th March 2015, since, without disposing of the said matter, the Commissioner, or his successors, could not have started other parallel proceedings for cancellation of registration obtained under section 12A. The registration having been obtained under section 12A was in the nature of a benefit to the assessee, and it was, therefore, entirely at the option of the assessee. In our considered view, an assessee unwilling to avail the benefit of registration obtained under section 12A cannot be, directly or indirectly and by actions or by inactions, compelled by the revenue authorities, to continue with the said registration obtained by the assessee, particularly when it pertained to the registration obtained in a period prior to the insertion of section 12AA. The present cancellation of registration under section 12A must, therefore, be held to be effective from 20th March 2015. To this limited extent, we uphold the plea of the assessee.

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• Customs

• 2021 (3) TMI 1167
  Levy of penal charges for late presentation of Bill-of-Entry - HELD THAT:- This has considered similar issue in the case of M/S. BLUELEAF TRADING COMPANY VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE [ 2019 (5) TMI 672 - CESTAT CHENNAI] where it was held that Appellant is clearly not the first importer, there is request for amendment in IGM on record, allowed by the Revenue after collecting requisite fees and these are clearly post-import developments. The subsequent developments, were perhaps necessitated because of the goods being perishable. Clearly, no mala fide is found in the above developments by the Revenue and therefore, it can be safely assumed that the Revenue was otherwise satisfied with sufficient cause . Demand set aside - appeal allowed - decided in favor of appellant.

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• 2021 (3) TMI 1166
  Levy of penal charges for late presentation of Bill-of-Entry - HELD THAT:- This has considered similar issue in the case of M/S. BLUELEAF TRADING COMPANY VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE [ 2019 (5) TMI 672 - CESTAT CHENNAI] where it was held that Appellant is clearly not the first importer, there is request for amendment in IGM on record, allowed by the Revenue after collecting requisite fees and these are clearly post-import developments. The subsequent developments, were perhaps necessitated because of the goods being perishable. Clearly, no mala fide is found in the above developments by the Revenue and therefore, it can be safely assumed that the Revenue was otherwise satisfied with sufficient cause . Demand set aside - appeal allowed - decided in favor of appellant.

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• 2021 (3) TMI 1165
  Deletion of redemption fine - re-export of goods - HELD THAT:- Under similar circumstances, the Tribunal has deleted the redemption fine imposed on the assessee in a number of case - In the case of M/S. ROSE MARY INTERNATIONAL VERSUS COMMISSIONER OF CUSTOMS, TUTICORIN [ 2020 (6) TMI 262 - CESTAT CHENNAI] , it was held that the redemption fine imposed for re-export of the goods cannot sustain and requires to be set aside - thus, the redemption fine charged under Section 125(1) of the Customs Act, 1962 is unsustainable. Levy of penalty under Section 112 (a) of the Customs Act, 1962 - HELD THAT:- A proportionate penalty of Rs. 1,25,000/- is confirmed as against Rs. 5 Lakhs, following he above mentioned decision. Appeal allowed in part.

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• 2021 (3) TMI 1164
  Fulfillment of obligations by the Customs broker - Cancellation of Customs Broker License - forfeiture of security deposit - imposition of penalty - time limitation - as per the Revenue, it is apparent case of fraud where four different firms got established based upon fake documents. HELD THAT:- The appellant has admitted that despite the discrepancies in the documents of these importers, the CHA /appellant opted to not to bring the same to the notice of the competent Customs officers with the sole motive to safeguard his business with these importers. This admission of appellant is sufficient for us to hold the violation of regulation 10(d) 10(e) on part of the appellant. The said violation has been pleaded as inadvertent and unintentional mistake but this amounts to rather conspiring into commission of the offence of evasion of duty by illegally diverting goods from Customs warehouse to domestic market. Once there is acknowledged and admitted violation of CBLR Regulations, the Revenue has the option to follow the discipline governing the Customs House Agents and as such, the Commissioner of Customs is empowered to revoke the license of Customs House Agent and also to forfeit his security if such agent fails to comply with the provisions of Regulation or gets involved in the Act which would amount to mis-conduct/ offence under the Act. The concealment by the appellant about the act of commission of criminal offence as that of fraud from the Customs authorities is held to be an act as that of forfeiting the entire purpose of the licence which was given in favour of the appellant - Interference with punishment imposed would be justified only when it shocks conscience of CESTAT. No indulgence can be shown to persons indulging in acts of corruption. Punishment imposed on Respondent, by Commissioner of Customs, of revocation of their license, when viewed in light of grave and serious acts of misconduct held established, was held justified. There is no irregularity committed by the Adjudicating Authority below while revoking the license of appellant - Appeal dismissed.

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• Corporate Laws

• 2021 (3) TMI 1181
  Oppression and Mismanagement - Validity of proceedings of the sixth meeting of the Board of Directors of TATA Sons Limited held on 24.10.2016 in so far as it relates to the removal of Shri Cyrus Pallonji Mistry (CPM) - seeking restoration of position of CPM as the Executive Chairman of Tata Sons Limited and consequently as a Director of the Tata Companies for the rest of the tenure - seeking to declare as illegal the appointment of someone else in the place of CPM as Executive Chairman - seeking restraint on Shri Ratan N. Tata (RNT) and the nominees of Tata Trust from taking any decision in advance - seeking restraint on the Company, its Board of Directors and Shareholders from exercising the power under Article 75 of the Articles of Association against the minority members except in exceptional circumstances and in the interest of the Company - seeking to declare as illegal, the decision of the Registrar of Companies for changing the status of Tata Sons Limited from being a public company into a private company - sections 241 and 242, Companies Act, 2013. Whether the formation of opinion by the Appellate Tribunal that the company s affairs have been or are being conducted in a manner prejudicial and oppressive to some members and that the facts otherwise justify the winding up of the company on just and equitable ground, is in tune with the well settled principles and parameters, especially in the light of the fact that the findings of NCLT on facts were not individually and specifically overturned by the Appellate Tribunal? - HELD THAT:- For invoking the just and equitable standard, the underlying principle is that the Court should be satisfied either that the partners cannot carry on together or that one of them cannot certainly carry on with the other, The advantage that the English courts have is that irretrievable breakdown of relationship is recognised as a ground for separation both in a matrimonial relationship and in commercial relationship, while it is not so in India - In the case in hand there was never and there could never have been a relationship in the nature of quasi partnership between the Tata Group and S.P. Group. S.P. Group boarded the train half way through the journey of Tata Sons. Functional dead lock is not even pleaded nor proved. Tata Sons is a principal investment holding Company, of which the majority shareholding is with philanthropic Trusts. The majority shareholders are not individuals or corporate entities having deep pockets into which the dividends find their way if the Company does well and declares dividends. The dividends that the Trusts get are to find their way eventually to the fulfilment of charitable purposes. Therefore, NCLAT should have raised the most fundamental question whether it would be equitable to wind up the Company and thereby starve to death those charitable Trusts, especially on the basis of un charitable allegations of oppressive and prejudicial conduct. Therefore, the finding of NCLAT that the facts otherwise justify the winding up of the Company under the just and equitable clause, is completely flawed. Whether the reliefs granted and the directions issued by the Appellate Tribunal, including the reinstatement of CPM into the Board of Tata Sons and other Tata companies, are in consonance with the pleadings made, the reliefs sought and the powers available under Sub section (2) of Section 242? - HELD THAT:- Fundamentally, the object for the achievement of which, the Tribunal is entitled to pass an Order under Section 242(1) of the 2013 Act, remains just the same, as in the 1956 Act. The words the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit , found in the last limb of Sub section (2) of Section 397 of the 1956 Act, is also repeated in the last limb of Sub section (1) of Section 242 of the 2013 Act. These words also found a place in the last limb of Sub section (4) of Section 153C of the 1913 Act - Even Section 210 of the English Companies Act of 1948 used the very same words namely the Court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit . Though the English Law made a paradigm shift from oppressive conduct to unfairly prejudicial conduct under the Companies Act, 1985, the object to be kept in mind by the Court while passing an order under Section 461 of the English Companies Act, 1985 continued to be almost similar. Section 461(1) enabled the Court to make such order as it thinks fit for giving relief in respect of the matters complained of . Section 996 of the English Companies Act, 2006 retained the very same wordings. The purpose of an order both under the English Law and under the Indian Law, irrespective of whether the regime is one of oppressive conduct or unfairly prejudicial conduct or a mere prejudicial conduct , is to bring to an end the matters complained of by providing a solution. The object cannot be to provide a remedy worse than the disease. The object should be to put an end to the matters complained of and not to put an end to the company itself, forsaking the interests of other stakeholders. It is relevant to point out that once upon a time, the provisions for relief against oppression and mismanagement were construed as weapons in the armoury of the shareholders, which when brandished in terrorem, were more potent than when actually used to strike with. While such a position is certainly not desirable, they cannot today be taken to the other extreme where the tail can wag the dog. The Tribunal should always keep in mind the purpose for which remedies are made available under these provisions, before granting relief or issuing directions. It is on the touchstone of the objective behind these provisions that the correctness of the four reliefs granted by the Tribunal should be tested. If so done, it will be clear that NCLAT could not have granted the reliefs of (i) reinstatement of CPM (ii) restriction on the right to invoke Article 75 (iii) restraining RNT and the Nominee Directors from taking decisions in advance and (iv) setting aside the conversion of Tata Sons into a private company. Whether the Appellate Tribunal could have, in law, muted the power of the Company under Article 75 of the Articles of Association, to demand any member to transfer his ordinary shares, by simply injuncting the company from exercising such a right without setting aside the Article? - HELD THAT:- It is no doubt true that the Tribunal has the power under Section 242 to set aside any amendment to the Articles that takes away recognised proprietary rights of shareholders. But this is on the premise that the bringing up of amendment itself was a conduct that was oppressive or prejudicial. It was contended that Article 75 was repugnant to Sections 235 and 236 of the Companies Act, 2013. We do not know how these provisions would apply. Section 235 deals with a scheme or contract involving transfer of shares in a Company called the transferor company, to another called the transferee company. Similarly, Section 236 deals with a case where an acquirer acquired or a person acting in concert with such acquirer becomes the registered holder of 90% of the equity share capital of the Company, by virtue of amalgamation, share exchange, conversion of securities etc. These provisions have no relevance to the case on hand - Even the contention revolving around Section 58(2) is wholly unsustainable, as Section 58(2) deals with securities or other interests of any member of a Public Company. Therefore, the order of NCLAT tinkering with the power available under Article 75 of the Articles of Association is wholly unsustainable. It is needless to point out that if the relief granted by NCLAT itself is contrary to law. Whether the characterisation by the Tribunal, of the affirmative voting rights available under Article 121 to the Directors nominated by the Trusts in terms of Article 104B, as oppressive and prejudicial, is justified especially after the challenge to these Articles have been given up expressly and whether the Tribunal could have granted a direction to RNT and the Nominee Directors virtually nullifying the effect of these Articles? - HELD THAT:- Whether the re conversion of Tata Sons from a public company into a private company, required the necessary approval under section 14 of the Companies Act, 2013 or at least an action under section 43A(4) of the Companies Act, 1956 during the period from 2000 (when Act 53 of 2000 came into force) to 2013 (when the 2013 Act was enacted) as held by NCLAT? - HELD THAT:- The right to claim proportionate representation is not available for the S.P. group even contractually, in terms of the Articles of Association. Neither S.P. Group nor CPM can request the Tribunal to rewrite the contract, by seeking an amendment of the Articles of Association. The Articles of Association, as they exist today, are binding upon S.P. Group and CPM by virtue of Section 10(1) of the Act - Realising the fact that they have no right, statutorily or contractually or otherwise to demand proportionate representation on the Board, S.P. Group has come up with a very novel idea, namely the claim of existence of a quasi partnership between the Tata group and SP group. It is contended by S.P. Group that there existed a personal relationship between those in management of the S.P. Group and those in management of Tata Sons for over several decades and that the relationship was one of trust and mutual confidence. According to S.P. Group, they acted as the guardian of the Tata Group when the Tata Trust had no voting rights. Therefore, it is claimed that there is a right and a legitimate expectation to have a representation on the Board of Tata Sons. But we do not think that there ever existed a relationship in the nature of quasi partnership. As we have pointed out elsewhere, the company was incorporated in the year 1917 and S.P. Group became a shareholder in 1965, namely after 50 years. A berth on the Board of Tata Sons was granted only in the year 1980 to CPM s father. Therefore, there is nothing on record in the form of pleadings or proof, to show that there was either (i) a pre existing relationship before the incorporation of the company or (ii) a living in relationship picked up half way through, by entering into an agreement in the nature of a partnership - In fact, CPM s father was inducted into the Board in 1980, after 15 years of acquisition of shares and such induction was not in recognition of any statutory or contractual right. After his father s exit in 2004, CPM was inducted in 2006, neither in recognition of a contractual right nor in recognition of a hereditary or statutory right. Placing reliance upon section 163 of the Companies Act, 2013, it was contended that proportionate representation is statutorily recognised. But this argument is completely misconceived. Section 163 of the 2013 Act corresponds to section 265 of the 1956 Act. It enables a company to provide in their Articles of Association, for the appointment of not less than two-thirds of the total number of Directors in accordance with the principle of proportionate representation by means of a single transferable vote. First of all, proportionate representation by means of a single transferable vote, is not the same as representation on the Board for a group of minority shareholders, in proportion to the percentage of shareholding they have. It is a system where the voters exercise their franchise by ranking several candidates of their choice, with first preference, second preference etc. Moreover, it is only an enabling provision and it is upto the company to make a provision for the same in their Articles, if they so choose. There is no statutory compulsion to incorporate such a provision. The fourth question of law is also to be answered in favour of the Tata group and the claim in the cross appeal relating to affirmative voting rights and proportionate representation are liable to be rejected. Whether the re conversion of Tata Sons from a public company into a private company, required the necessary approval under section 14 of the Companies Act, 2013 or at least an action under section 43 A(4) of the Companies Act, 1956 during the period from 2000 (when Act 53 of 2000 came into force) to 2013 (when the 2013 Act was enacted) as held by NCLAT? - HELD THAT:- Once the company had become a deemed public company with effect from 1 2 1975, the privileges of a private company stood withdrawn and the company was entitled in law to allow renunciation of shares under rights issue. In any case, the validity of what was done in 1995 was not in question. That they accepted deposits from public till September 2002, is the reason why they were not reconverted as a private company at that time. Once a new definition of the expression private company came into force with effect from 12 09 2013 under section 2(68) of the 2013 Act, the only test to be applied is to find out if the company fits into the scheme under the new Act or not. We need not go to the circulars issued by the department or the RBI when statutory provisions show the path with clarity. The description of the company in the forms filed under Rule 10, reflected the true position that prevailed then and they would not act as estoppel when the company was entitled to take advantage of the law. That the ability of the company to raise funds has now gone and that the company will have to repay the investments made by insurance companies, are all matters which the shareholders and the Directors are to take care. The question before the court is whether the reconversion is in accordance with law or not. The question is not whether it is good for the company or not. The real reason why SP group and CPM are aggrieved by the conversion is, that most of their arguments are traceable to provisions which apply only to public and listed public companies. If re conversion goes, they may perhaps stand on a better footing. But that would tantamount to putting the cart before the horse. One may be entitled to a collateral benefit arising out of a substantial argument. But one cannot seek to succeed on a collateral issue so as to make the substantial argument sustainable - the question is answered in favour of Tata Sons and as a consequence, all the observations made against the appellants and the Registrar of companies of the impugned judgment are set aside. Appeal allowed.

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• 2021 (3) TMI 1180
  Concession Agreement - Operation of rapid metro link - debt due as per the financing documents in terms of their respective Concession Agreements - whether the consequences envisaged in the consent order of the High Court dated 20 September 2019 can stand obviated? - HELD THAT:- At the very outset, it is important to note that the FIR in respect of IL FS group of companies was lodged on 6 December 2018. The termination notices of June and August 2019, and the institution of the writ proceedings, took place thereafter. Evidently the appellants on the one hand, as well as HSVP/HMRTC on the other, were conscious of the developments which were taking place in respect of the IL FS group of companies in the proceedings before Justice D K Jain on 19 August 2019. When the consent order was passed before the High Court, HSVP was represented by counsel as well as the Chief Administrator of HSVP and Managing Director of HMRTC who were also present. The financial institutions including Andhra Bank were also in appearance. The consent order before the High Court on 20 September 2019 was also preceded by mutual discussions between the parties and the exchange of written proposals. which have been referred to expressly by the High Court. Clause (ii) of the order dated 20 September 2019 makes it abundantly clear that the basic purpose underlying the entrustment of the reference to the CAG was the determination of the debt due as defined under the Concession Contract . The High Court, it must be emphasized, was seized of a proceeding under Article 226 of the Constitution, and its writ jurisdiction had been invoked to challenge the notices of termination issued by RMGL and RMGSL, and for ensuring that the consequence which would emanate on the expiry of the notice period of 90 days by the cessation of the metro operations could be prevented by the judicial intervention in the course of the public law jurisdiction - there was an evident interface between this element of public interest on the one hand and the contractual rights of the parties to the Concession Agreements on the other. However, when HMRTC and HSVP moved the High Court under Article 226, they did so in view of the impending threat which was looming large on the horizon of the rapid metro operations being brought to a standstill as a result of the proximate expiry of the notice of 90 days preceding termination. In the present case, the High Court was evidently concerned over a fundamental issue of public interest, which was the hardship that would be caused to commuters who use the rapid metro as a vehicle for mass transport in Gurgaon. As such, the High Court s exercise of its writ jurisdiction under Article 226 in the present case was justified since non-interference, which would have inevitably led to the disruption of rapid metro lines for Gurgaon, would have had disastrous consequences for the general public. However, as a measure of abundant caution, we clarify that ordinarily the High Court in its jurisdiction under Article 226 would decline to entertain a dispute which is arbitrable - It is also important to note that the termination of the Concession Agreements had consequences in terms of the provisions contained in the Agreement requiring a deposit of 80 per cent of the debt due under Article 24.4. The contesting parties agreed to an independent third-party determination of this amount by a neutral entity, namely the CAG. The primary function of CAG was to appoint a team of auditors for conducting a financial audit of the debt due and in that process of also examine the scope of the audit. HMRTC and HSVP are themselves to blame if they did not submit their responses. CAG has specifically rebutted the objections to the audit report submitted by HMRTC on the ground that as a constitutional authority, CAG decided upon the scope of the audit of the debt in terms of the Concession Agreements, which it submitted to the High Court. Moreover, it has clarified that this was a financial audit of the debt due and the auditors reported their findings in terms of the Concession Agreements - The Escrow Account Agreement has been entered into in pursuance of the Concession Agreement, and to effectuate the funding of the Project No 2. As on 31 July 2019, the lenders of RMGSL have an outstanding of Rs. 1651 crores approx. Hence, the Projects which have been executed by RMGL and RMGSL, involved an outlay of funds from Andhra Bank and Canara Bank, who have a vital stake in the financials of the Projects. The intervention of this Court under Article 136 of the Constitution was sought having regard to the manner in which the proceedings before the High Court were being derailed. On 12 October 2020, after HMRTC filed its affidavit, the High Court noted the appellant s submission that the matter does not brook any delay and yet adjourned the matter to 16 October 2020. Thereafter, when the proceedings came up on 16 December 2020, and the response filed by CAG was taken on the record, the hearing of the writ petitions was again deferred to 8 April 2021. This course of events indicates that the whole object and purpose behind setting down the timelines in the order dated 20 September 2019 stood the risk of being defeated. This Court has been constrained to intervene in the process in order to ensure that the sanctity of the understanding that was arrived at before the High Court on 20 September 2019 is duly maintained. The invocation of the writ jurisdiction of the High Court under Article 226 of the Constitution by HMRTC and HSVP was to challenge the termination notices dated 17 June 2019, and to obviate the consequence of the cessation of the rapid metro operations, which would have ensued on the expiry of the notice period. The arbitration clause of the Concession Agreements provides sufficient recourse to remedies which can be availed of. That apart, the order of the High Court dated 4 October 2019 has also clarified that the rest of the dispute that remains after the deposit of 80 per cent of the debt due, either arising out of the CAG report, the validity of the termination notices issued by both the parties and any past or future inter se claims and liabilities shall be agitated and decided in the arbitration proceedings. Appeal disposed off.

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• 2021 (3) TMI 1178
  Seeking appointment of Arbitrator so as to to constitute an Arbitral Tribunal to adjudicate upon the disputes that have arisen between the petitioner and the respondent - HELD THAT:- A perusal of the arbitration agreement indicates that the arbitration shall be held at Mumbai and be conducted by three arbitrators. For the purpose of appointment KIVF I, KEIT and KIVL are to jointly appoint one arbitrator and the promoters of Indus Biotech Private Limited, to appoint their arbitrator. In the second agreement dated 20.07.2007, KMIL as the Investor is on the other side. In the third agreement dated 20.07.2007, KIVFI as the Investor is on the other side and in the fourth agreement dated 09.01.2008 it has the same clause as in the first agreement. The two arbitrators who are thus appointed shall appoint the third arbitrator who shall be the Chairperson. Since Indus Biotech Private Limited had nominated Mr. Justice V.N. Khare, former Chief Justice of India through their letter dated 15.10.2019 the said learned Arbitrator is treated as having been proposed jointly by the Company and the promoters. Mr. Justice R.M. Lodha, former Chief Justice of India is appointed as the second arbitrator since the respondents had failed to nominate. The said learned arbitrators shall mutually nominate a third arbitrator to be the Chairperson of the Arbitral Tribunal. Arbitration petition allowed.

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• Service Tax

• 2021 (3) TMI 1168
  CENVAT Credit - input service distribution - tour operator service - entitlement of credit to ISD when the credit has been availed by the unit company - HELD THAT:- Admittedly, the very issue of denying credit availed on input service in the nature of tour operator service, provided to their dealers as an encouragement, has already been decided by this Bench in appellant own case M/S. CHETTINAD CEMENTS CORPORATION PVT. LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE CHENNAI NORTH [ 2019 (10) TMI 10 - CESTAT CHENNAI] . It is also not in dispute that the appellant is only an Input Service Distributor who only distributed the credit. The appeal of the assessee stands allowed.

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• 2021 (3) TMI 1157
  CENVAT Credit - input services - case of Revenue is that appellant has not reversed the correct amount and that they have not furnished the workings for arriving at the amount reversed by them - period April 2016 to June 2017 - HELD THAT:- The issue is confined to the lack of knowledge of the department as to how the amount of Rs. 43,979/- has been arrived by the assessee for reversing the proportionate credit. The department does not contend that the appellant has to reverse any other amount or that the amount reversed is incorrect. It only confines as to how the appellant has worked out the said amount. There are no merits in the confirmation of demand. Though in the Order in Original as well as in the first appellate authority s order, the department has discussed that the appellant has not put forward evidence to show that they had intimated the department as to the reversal of credit, there is no allegation in the Show Cause Notice that the appellant has not complied with the procedure of intimating the department as required under Rule 6(3A) of CENVAT Credit Rules. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2021 (3) TMI 1175
  Concessional rate of duty - issuance of C-forms - purchase of High Speed Diesel from suppliers in other States - HELD THAT:- Issue is covered by a decision of this Court in M/S. THE RAMCO CEMENTS LTD. VERSUS THE COMMISSIONER OF COMMERCIAL TAXES, THE ADDITIONAL COMMISSIONER (CT) [ 2018 (10) TMI 1529 - MADRAS HIGH COURT ] where it was held that respondents are directed to permit these petitioners to download C forms, as has been done in the past for the purpose of purchasing petroleum products against the issuance of C declaration forms. Petition allowed - decided in favor of petitioner.

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• Indian Laws

• 2021 (3) TMI 1179
  Maintainability of application - initiation of CIRP - Action against corporate person (being a corporate debtor) concerning guarantee offered by it in respect of a loan account of the principal borrower (a proprietorship firm), who had committed default - application under Section 7 of the Code filed after three years from the date of declaration of the loan account as NPA, being the date of default - time barred or not. Action against corporate person (being a corporate debtor) concerning guarantee offered by it in respect of a loan account of the principal borrower, who had committed default - HELD THAT:- In law, the status of the guarantor, who is a corporate person, metamorphoses into corporate debtor, the moment principal borrower (regardless of not being a corporate person) commits default in payment of debt which had become due and payable. Thus, action under Section 7 of the Code could be legitimately invoked even against a (corporate) guarantor being a corporate debtor. The definition of corporate guarantor in Section 5(5A) of the Code needs to be so understood - there are no substance in the argument that since the loan was offered to a proprietary firm (not a corporate person), action under Section 7 of the Code cannot be initiated against the corporate person even though it had offered guarantee in respect of that transaction. Whereas, upon default committed by the principal borrower, the liability of the company (corporate person), being the guarantor, instantly triggers the right of the financial creditor to proceed against the corporate person (being a corporate debtor) - first question stands answered against the appellant. Whether an application under Section 7 of the Code filed after three years from the date of declaration of the loan account as NPA, being the date of default, is not barred by limitation? - HELD THAT:- In the present case, the NCLT as well as the NCLAT have adverted to the acknowledgments by the principal borrower as well as the corporate guarantor corporate debtor after declaration of NPA from time to time and lastly on 08.12.2018. The fact that acknowledgment within the limitation period was only by the principal borrower and not the guarantor, would not absolve the guarantor of its liability flowing from the letter of guarantee and memorandum of mortgage. The liability of the guarantor being coextensive with the principal borrower under Section 128 of the Contract Act, it triggers the moment principal borrower commits default in paying the acknowledged debt. This is a legal fiction. Such liability of the guarantor would flow from the guarantee deed and memorandum of mortgage, unless it expressly provides to the contrary. The fact that the principal borrower had availed of credit/loan and committed default and that the (corporate) guarantor/corporate debtor had offered guarantee in respect of the loan account is not disputed. What is urged by the appellant is that the acknowledgment of liability to pay the amount in question was by the principal borrower and that acknowledgment cannot be the basis to proceed against the corporate guarantor (corporate debtor). Section 18 of the Limitation Act, however, posits that a fresh period of limitation shall be computed from the time when the party against whom the right is claimed acknowledges its liability. The financial creditor has not only the right to recover the outstanding dues by filing a suit, but also has a right to initiate resolution process against the corporate person (being a corporate debtor) whose liability is coextensive with that of the principal borrower and more so when it activates from the written acknowledgment of liability and failure of both to discharge that liability. A fresh period of limitation is required to be computed from the date of acknowledgment of debt by the principal borrower from time to time and in particular the (corporate) guarantor/corporate debtor vide last communication dated 08.12.2018. Thus, the application under Section 7 of the Code filed on 13.02.2019 is within limitation. Appeal disposed off.

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