TMI Tax Updates - e-Newsletter
March 4, 2021

Case Laws in this Newsletter:

Income Tax Customs Insolvency & Bankruptcy FEMA Service Tax CST, VAT & Sales Tax Wealth tax Indian Laws

Articles

1. POST COVID ECONOMIC RECOVERY AND GST COLLECTIONS

   By: Dr. Sanjiv Agarwal

News

1. Shri Piyush Goyal emphasizes on integration of road, rail and waterways to achieve One nation, One market;

2. Government amends Insurance Ombudsman Rules for better resolution of policyholders’ complaints regarding insurance service deficiencies

3. Central Revenues Control Laboratory gets recognised as a Regional Customs Laboratory (RCL) of the World Customs Organisation

Notifications

Indian Laws

1. G.S.R. 147 (E) - dated 2-3-2021 - Indian Law

Insurance Ombudsman (Amendment) Rules, 2021

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/MRD/DCAP/CIR/P/2021/23 - dated 3-3-2021

Code of Conduct & Institutional mechanism for prevention of Fraud or Market Abuse

DGFT

2. Trade Notice No. 45/2020-21 - dated 2-3-2021

Procedure and Criteria for submission and approval of applications for export of Diagnostic Kits and their components/laboratory reagents

Highlights / Catch Notes

Income Tax

• High Court Rules Revenue Unjustified in Denying Trust Registration & Approval; CIT's Scrutiny u/s 12AA(3) Needed.

  Case-Laws - HC : Exemption u/s 11 - registration filed under Section 12 AA and approval under Section 80G(5) denied - When the genuineness of the objects of the Trust were not questioned by the CIT and when the Trust was yet to commence its operation and when a subject matter of scrutiny by the CIT as contemplated under section 12 AA(3) of the Income Tax Act, the Revenue would not be justified in refusing the registration at the threshold. - HC
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• Petitioner Challenges Lack of Interim Stay in Settlement Case u/s 245C; Conditional Stay Granted by Single Judge Bench.

  Case-Laws - HC : Settlement of cases - Application of petitioner under Section 245C - grievance of petitioner against not granting interim stay while granting statutory right available to an assessee to move for settlement of cases under Chapter XIX-A - Order of Single Judge Bench - conditional Stay granted - HC
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• High Court Confirms Income Additions Based on 26AS Statement; Petitioner Failed to Dispute Entries or Maintain Proper Records.

  Case-Laws - HC : Additions based on 26AS statement - undisclosed income - Petitioner has not made any complaint at any stage regarding any fictitious or wrong entries in the 26AS statement reflecting tax deduction at source against receipt of payments from these three concerns. It further appears that the assessing officer had undertaken inquiries from these three concerns who confirmed the payments made to the petitioner during the financial year 2010-11. Since the petitioner's books of account were not maintained or audited and the receipts were not only confirmed by the three concerns as above, but 26AS statement and Form-16A submitted by them revealed undisclosed income - Additions confirmed - HC
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• Court Upholds Section 206AA: Everyone, Including Those with Non-Taxable Income, Must Obtain a PAN.

  Case-Laws - HC : Constitutional validity of Section 206AA - Requirement to furnish Permanent Account Number (PAN) - Applicability for the person having non-taxable income - Conclusion recorded by the learned Single Judge that the persons whose total income do not exceed maximum amount and are not chargeable to tax need not obtain Permanent Account Number to the exclusion of others cannot be upheld. - HC
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• Company Wins Approval to Remit Superannuation Fund Contributions Under IT Act Section 40A(9.

  Case-Laws - AT : Disallowance of claims of superannuation fund u/s. 40A(9) and gratuity fund u/s. 40A(7) - the company had applied for the approval of Superannuation Fund as well as Gratuity Fund which is administered by the LIC in March 1999. The assessee remits the contribution to LIC in respect of Superannuation Fund governed by the provision of section 40A(9). - The claim cannot be denied - AT
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• Section 263 Revision Order Set Aside: Pr.CIT Finds No Error in AO's Assessment Despite Lack of Expense Verification.

  Case-Laws - AT : Revision u/s 263 - CIT observed that, AO had accepted the assessee's claim without making any verification with respect to the various expenses claimed against the capital gains and against its business income and since the same needed verification, the order passed by the Assessing Officer was, therefore, erroneous - there is no finding by the Ld. Pr.CIT of the assessment order being erroneous - Revision order set aside - AT
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• Company's Reimbursement of Sub-distributor Expenses Not Managerial Services; No Tax Deduction Required u/s 194J.

  Case-Laws - AT : TDS u/s 194J - A&M expenses - Non deduction of TDS - The claims made for selling and distribution network of sub-distributors was settled by HUL and reimbursed the same by the appellant company. - the genuineness of business expenditure is beyond the doubt. - neither the impugned expenditure falls within the ambit of “managerial services” as defined in section 9(1)(vii) of the Act nor liable to deduct tax at source u/s 194J - AT
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• Interest Rate Variance on FCCDs Within Limits; Tax Officer's Adjustment Unwarranted, Income Addition to Be Removed.

  Case-Laws - AT : TP adjustment - interest paid by the assessee to its Associated Enterprise [AE] - variance does not exceed 5% for the FCCDs issued during the FYs 2008-09 and 3% for the FCCDs issued subsequently interference by the Ld. TPO with the value of the international transaction. The addition, therefore, cannot be sustained and shall be directed to be deleted. - AT
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• Appellate Authority Upholds Use of TNMM Over Resale Price Method for Transfer Pricing Adjustment in ALP Calculation.

  Case-Laws - AT : TP Adjustment - re-computation of ALP by combining both Import of material and Export of Finished goods and applying TNMM and thereby upward adjustment - The order of AP/TPO directing the DRP in rejecting the resale price method adopted by the assessee and adopting transactional net margin method as the most appropriate method sustained - AT
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Customs

• Petitioner Denied MEIS Reward Due to Declaration Error; Entitled to Rewards for Exporting Notified Goods Under FTP 2015-20.

  Case-Laws - HC : Rejection of applications filed under the Merchandise Exports from India Scheme (MEIS) - petitioner had inadvertently committed an error while filing up the claim form on the DGFT portal and entered its declaration of intent as “N” (for No) instead of “Y” (for Yes) resulting in rejection of petitioner's claim for reward under MEIS. - The petitioner is entitled to the reward under MEIS in respect of its shipping bills wherein exports of notified goods / products with ITC(HS) code to the notified markets have been carried out by the petitioner under the FTP 2015-20 - HC
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IBC

• IBC Moratorium: Cheque Dishonor Cases Barred for Corporate Debtors, Continue Against Individuals Per Section 141 of Negotiable Instruments Act.

  Case-Laws - SC : Dishonor of Cheque - insufficiency of funds - Proceedings under IBC versus offence under the NI Act - for the period of moratorium, since no Section 138/141 proceeding can continue or be initiated against the corporate debtor because of a statutory bar, such proceedings can be initiated or continued against the persons mentioned in Section 141(1) and (2) of the Negotiable Instruments Act. This being the case, it is clear that the moratorium provision contained in Section 14 of the IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act. - SC
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Service Tax

• Court Dismisses Appeal as Time-Barred u/s 85(3A) of Finance Act, 1994; Indian Limitation Act Section 5 Not Applicable.

  Case-Laws - HC : Maintainability of appeal - appeal was rejected as being time-barred - section 85(3A) of the Finance Act, 1994 - It is trite that when the statute prescribes a period of limitation alongwith the period for extending the period of limitation, provision of section 5 of the Indian Limitation Act, 1963 would not be applicable - HC
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• High Court Dismisses Petition Alleging Bias in Preventive Show-Cause Notice Under Master Circular Paragraph 5.0.

  Case-Laws - HC : Principles of natural justice - allegation is that SCN issued with a pre- determined and closed mind - it prima-facie appears that the SCN fell into the category of preventive show-cause notice falling under the exception under para-5.0 of the master circular dated 10th March 2017. Had the proceedings not been initiated, the liability of paying service tax might have been evaded - thus, the case of the petitioner comes within the exception to para-5.0 of the master circular dated 10th March 2017. The adjudication order has already been passed on 16th February 2021. - Petition dismissed - HC
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VAT

• Writ Petition Maintainability Challenged: Procedural Lapses in 2008-09 Penalty Order; Dealer Denied Personal Hearing Under Article 226.

  Case-Laws - HC : Maintainability of writ petition - It is worthwhile to point out that the order levying penalty for the assessment year 2008-09 is dated 30.1.2014. Though the dealer's objections were received on 16.10.2012, the Assessing Officer did not afford any opportunity of personal hearing to the appellant though more than one year had lapsed. This, in our considered view, is a serious issue because the dealer has taken a specific stand that the software is being used in the manufacture. - the exceptional circumstances as mentioned above warranting exercise of jurisdiction under Article 226 - HC
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Case Laws:

• Income Tax

• 2021 (3) TMI 90
  Settlement of cases - Application of petitioner under Section 245C - grievance of petitioner against not granting interim stay while granting statutory right available to an assessee to move for settlement of cases under Chapter XIX-A - Order of Single Judge Bench - HELD THAT:- As rightly argued by Senior Advocate Aravind P Datar the consideration of stay vis-a- vis Exts.P1 and P2 by this Court would not also cause prejudice or hardship to the Department, in view of Section 153B explanation (i). At this junction Exts.P1 and P2 result in assessment orders, then the claim or right of petitioner is adversely affected. Department, as on date, has not challenged the order of learned Single Judge directing receipt of application of petitioner under Section 245C of the Act - objections raised by Advocate P.K.R. Menon appearing for the Department that the application of petitioner is taken on file, and in such an event the Settlement Commissioner has to withdraw the case relating to the subject Assessment Year from the assessing officer, but the stay on Exts.P1 and P2 would preclude the Commissioner from summoning the file and this is an avoidable situation as well in the total circumstances of the case The order under appeal could be modified and is accordingly modified as follows: (a) There shall be an interim stay of Exts.P1 and P2 series during the pendency of the writ petition, subject to the following: (b) The interim order granted by this Court shall not be understood as, in any manner, restricting the discretion available to the authorities under Chapter XIX-A of the Income Tax Act, either to admit or process the application of petitioner for settlement, and/or withdraw and summon the subject assessment files to the Office of the Settlement Commissioner from the Office of the Assessing Officer.

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• 2021 (3) TMI 87
  Validity of seizure / requisition by income tax authority - assessment proceedings initiated by the jurisdictional Assessing Officer at Kolkata - HELD THAT:- Assessment proceedings have been opened before the jurisdictional Assessing Officer of the petitioner at Kolkata in respect of the seized money. The proceedings would lead to a conclusion as to whether petitioner or any other person is its rightful claimant. This Court in writ jurisdiction is not in a position to determine a question of fact as to whom does the money belong to lawfully. Respondent department has on instructions fairly stated that assessment proceedings would be concluded within a time-frame and if the assessment proceedings leads to a finding that the amount in question falls within the taxable income of a concerned person/assessee and the tax thereupon stands paid or partly paid, the admissible amount or part of it could be refunded to the person / assessee concerned. This Court is of the opinion that the stand of the respondent department is fair. In those circumstances, the assessment proceedings initiated by the jurisdictional Assessing Officer at Kolkata be concluded within a time-frame of preferably 3 (three) months. Petitioner and any other person including Mr. Sanjay Agarwal and Mr. Sashi Kant Jha should appear and cooperate in the proceedings. Let this petitioner and others be noticed to appear on 10th of March, 2021 before the jurisdictional Assessing Officer at Kolkata. On conclusion of the assessment proceedings against the respective persons and the petitioner herein, in case the Assessing Officer finds that the amount in question has rightly been claimed by the petitioner or any other person, and that the income tax or part of the tax have already been paid, and that refund is admissible as the case may be, the same be refunded to the concerned person in accordance with law and as per the provisions of Chapter XIX of the Act without any delay thereafter, with statutory interest, if any.

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• 2021 (3) TMI 86
  Revision u/s 264 in favor of assessee - Additions based on 26AS statement - undisclosed income - Assessee contended that additions made by the AO is not correct as he as not received the amount as alleged by the AO - Lack of proper inquiry by the Commissioner, IT in respect of the payments allegedly made by the three concerns, while rejecting the application - HELD THAT:- Petitioner has not made any complaint at any stage regarding any fictitious or wrong entries in the 26AS statement reflecting tax deduction at source against receipt of payments from these three concerns. It further appears that the assessing officer had undertaken inquiries from these three concerns who confirmed the payments made to the petitioner during the financial year 2010-11. Since the petitioner s books of account were not maintained or audited and the receipts were not only confirmed by the three concerns as above, but 26AS statement and Form-16A submitted by them revealed undisclosed income The conduct of the petitioner taken as a whole, therefore, does not appear to be clean and bonafide in disclosing proper income in his IT return. Further the contention of the petitioner relying upon the decision in the case of M/s Kishinchand Chellaram [ 1980 (9) TMI 3 - SUPREME COURT] that the letter of confirmation relied upon by the AO and the revisional authority were not furnished to him, does not appear to be correct as the AO had confronted the assessee with these findings through letters dated 21 st January 2014 and 11th February 2014. Moreover, 26AS statements are maintained by the Department under Section 203AA of the Act and are not generated by the concerns from whom the petitioner has received the payments. As such, such arguments also do not cut ice. There is no quarrel about the scope of revisional jurisdiction of the CIT under Section 264 of the Act in support of which reliance has been placed by the petitioner upon the judgment of Delhi High Court in the case of Paradigm Geophysical Pty. Ltd. [ 2017 (11) TMI 1157 - DELHI HIGH COURT] . No grounds made out for interference in the order of the learned CIT passed in revision. - Petition dismissed - Decided against the assessee.

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• 2021 (3) TMI 83
  Exemption u/s 11 - registration filed under Section 12 AA and approval under Section 80G(5) denied - as per CIT-A Trust is not genuine and they are not engaged in any charitable activities - Tribunal setting aside the order of the Commissioner of Income Tax and direct the Commissioner of Income Tax to grant registration under Section 12AA - HELD THAT:- It is not in dispute that the Trust was constituted on 09.02.2009 whereas they sought for registration and approval on 09.06.2009 under Section 12AA and 80G(5) of the Income Tax Act respectively. The CIT, while rejecting the registration and approval, found that it was too early to give a finding with regard to the genuineness of the objects of the Trust for the reason that the activities were not commenced on the date of application. When the genuineness of the objects of the Trust were not questioned by the CIT and when the Trust was yet to commence its operation and when a subject matter of scrutiny by the CIT as contemplated under section 12 AA(3) of the Income Tax Act, the Revenue would not be justified in refusing the registration at the threshold. The said ratio was laid down in a judgment reported in CIT Vs. Arulmighu Sri Kamatchi Amman Trust [ 2012 (2) TMI 159 - MADRAS HIGH COURT ] Following the ratio laid down in the judgment, the Hon ble Division Bench of this Court directed the CIT to register the Trust. The ratio laid down by the Hon ble Division Bench of this Court squarely applies to the facts of the present case. We do not find any error or irregularity in the order passed by the Income Tax Appellate Tribunal - approval under Section 80G(5) also to be granted - Decided against revenue.

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• 2021 (3) TMI 80
  Constitutional validity of Section 206AA - Requirement to furnish Permanent Account Number (PAN) - Applicability for the person having non-taxable income - Single Judge while dealing with a challenge to the constitutional validity of Section 206AA held that it is inapplicable to the persons whose income is less than taxable limit as per Finance Act, 1991 and the Banking and Financial Institutions shall not invariably insist upon Permanent Account Number (PAN) from small investors like respondent Nos.1 to 3 as well as from persons who intend to open an account in a Bank or Financial Institution HELD THAT:- Section 206AA of the Act is enacted as a measure to prevent the tax evasion. The Government of India is trying to eliminate circulation of unaccounted money and is intending to set up a database which contains and monitor all the transactions which take place in India. In order to gather the information for the aforesaid database, the appellants are insisting on furnishing of Permanent Account Number in all the transactions. The contention of the petitioner that Section 206AA of the Act takes away the benefit conferred by Sections 139A(1)(i) and 197A of the Act is misplaced. Section 139A(1)(i) of the Act provides that a person shall apply for allotment of Permanent Account Number if his total income or total income of any other person in respect of which he is assessable under the Act during the Previous Year exceeded the maximum amount which is not chargeable to income tax. Section 139(1)(i) is not absolute and apart from persons mentioned in the aforesaid clause, there are number of instances in Section 139A itself where persons are required to obtain Permanent Account Number even if they do not fulfill the conditions mentioned in Section 139A(1)(i) of the Act. For instance, a person is required to obtain Permanent Account Number if turnover of his business is exceeded Rs. 5 Lakhs irrespective of the fact whether his total income exceeded maximum amount chargeable to tax or not. Conclusion recorded by the learned Single Judge that the persons whose total income do not exceed maximum amount and are not chargeable to tax need not obtain Permanent Account Number to the exclusion of others cannot be upheld. Single Judge has neither recorded a finding that the parliament do not have the legislative competence to enact Section 206AA of the Act nor has not recorded a finding that the aforesaid provision is violative of fundamental rights. The Principle of reading down a provision can be applied for the limited purpose of making a particular provision workable and to bring it in harmony with the other provisions of the statute and has to be used keeping in view the scheme of the Act and to fulfill its purposes [See: CALCUTTA GUJ. EDUCATION SOCIETY ANR. VS. CALCUTTA MUNICIPAL CORPORATION ORS. 2003 (8) TMI 476 - SUPREME COURT ]. In the fact situation of the case, since, the provision was either not unworkable nor was inconsistent with other provisions of the Act, therefore, the learned Single Judge could not have applied the principle of reading down merely on the basis of hardship or equity which are not relevant in interpretation of the law relating to taxation. The impugned order passed by the learned Single Judge cannot be sustained in the eye of law

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• 2021 (3) TMI 78
  Revision u/s 263 - TP adjustment - HELD THAT:- Since the order giving effect to ITAT order for AY 2008-09 was not passed at the time of passing the order giving effect to 263 order on 28.9.2015, the AO had not considered it. However, this was noticed by the CIT(Appeals) and he has given a direction to reduce the original TP adjustment from Rs. 97,82,11,238 to Rs. 14,18,47,658. AO is directed by the CIT(A) to start the computation of total income as mentioned in Order Giving Effect to the ITAT order dated 20.1.2016. Disallowance of warranty provision - contention of the ld. DR is that the assessee had not furnished requisite details before the lower authorities for claiming such deduction in AY 2010-11 - Admittedly, this deduction cannot be allowed in the assessment year under consideration as warranty provision was allowed on actual basis. However, the actual claim of assessee that it should be allowed as a deduction in AY 2010-11 on the ground that it was offered to tax in AY 2011-12, requires examination of the records by the AO on production of the same by the assessee in the relevant AY 2010-11. This claim of assessee cannot be considered in the present AY 2008-09, as the AY 2010-11 or 2011-12 is not before us for adjudication. The assessee may take appropriate remedial action in the relevant assessment year, if so advised. With these observations, we dismiss the ground relation to allowability of warranty provisions in this assessment year.

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• 2021 (3) TMI 77
  TDS u/s 194C - Addition u/s 40(a)(ia) - assessee failed to deduct tax at source - payment made for purchase of contract material - HELD THAT:- AO did not make any inquiry into the break-up of expenses and unknown to the assessee, the assessee s authorized representative did not volunteer further information. Also, though these submissions have been mentioned in the impugned order of Ld. CIT(A); we find that the Ld. CIT(A) has not commented on it. We also find that vide letter dated 14/07/2014 the assessee made application for admission of additional evidence during appellate proceedings before Ld. CIT(A). On perusal of order of Ld. CIT(A), we find that she has not made any recording under Rule 46(2) of Income Tax Rules, 1962. In view of the foregoing, there is lack of clarity about facts. As submissions made before us on assessee s behalf by the Ld. Counsel for the assessee are factual in nature; and require detailed factual verification. As we do not have the benefit of such detailed factual verification in the orders passed by either the AO or the Ld. CIT(A); we are inclined to remand the matter to AO for detailed verification of facts of the case; under the facts and circumstances of the present appeal before us.

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• 2021 (3) TMI 75
  Disallowance of claims of superannuation fund u/s. 40A(9) and gratuity fund u/s. 40A(7) - AO was of the view that the provision of approved superannuation and Gratuity Fund in Part B and C in IV Schedule run similar and alike while the provisions for approval of provident fund in Part A of the 4th Schedule is totally distinct different from those in Part B C - HELD THAT:- As decided in [ 2018 (4) TMI 553 - ITAT VISAKHAPATNAM] the assessee has made the payments to the LIC towards group gratuity scheme directly in approved schemes. The assessee has also obtained the policy in favour of the bank. The assessee has no control over the funds contributed to LIC towards the gratuity. The assessee is receiving the gratuity payment directly from the LIC of India as per the scheme which is paid to the employee on happening of the event i.e. retirement or death or resignation. See Warner Hindustan Ltd [ 1987 (8) TMI 52 - ANDHRA PRADESH HIGH COURT] . Since the facts are identical, respectfully following the view taken by the coordinate benches, we hold that the assessee is entitled for the deduction for payment of gratuity to LIC and accordingly, we set aside the order of the lower authorities and allow the appeal of the assessee.

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• 2021 (3) TMI 74
  Jurisdiction of AO framing assessment on a non-existing entity - Scheme of merger conducted - HELD THAT:- National Company Law Tribunal [NCLT] Bangalore Bench and Delhi Bench have approved the merger of the appellant company with M/s. GE India Industrial Private Ltd. and as per the order of NCLT, Bangalore Bench - We have no hesitation to hold that the assessment order has been framed in the name of nonexistent company inspite of notices. Thus we hold that the assessment order dated 31.08.2017 framed u/s. 143(3) r.ws. 144C of the Act is in the name of non-existent company and, accordingly, void ab initio, making all subsequent proceedings non-est. Challenge to the jurisdiction of the Assessing Officer is allowed.

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• 2021 (3) TMI 73
  Revision u/s 263 - CIT observed that, AO had accepted the assessee s claim without making any verification with respect to the various expenses claimed against the capital gains and against its business income and since the same needed verification, the order passed by the Assessing Officer was, therefore, erroneous - HELD THAT:- The basis for holding the assessment order erroneous by the Ld. PCIT, we find is that the details, evidences and explanation filed by the assessee in support of its claim of capital gains and business loss returned were accepted as such by the AO without conducting any inquiry and or verification. The entire thrust of the Ld. Pr.CIT is on this aspect of non-verification of the evidences, details and explanations filed by the assessee as is evident from the findings of the Ld. Pr.CIT. AO can be satisfied about the veracity and genuineness of the transaction basis the supporting documentary evidences and explanations filed with respect to the same. But at the same time if the evidences and documents raise suspicion then a case for further verification is compulsorily made out and the absence of the same surely makes the order erroneous so as to cause prejudice to the Revenue. But in the present case, sadly the Ld. Pr.CIT has failed to make out a case for further verification of the details and explanations filed by the assessee. Undisputedly the AO had examined the claim of capital gains and business losses returned by the assessee, during assessment proceedings. Even with regard to the issues flagged by the Ld. Pr.CIT, the AO had examined the same with the evidences, details and explanations filed by the assessee. There is no dispute with regard to the aforesaid. Even before the Ld. Pr.CIT the assessee had referred to the said evidences and explained the queries raised by the Ld. Pr.CIT. Without pointing out fallacy in the same so as to raise doubt regarding the veracity of the claim, thus calling for further verification, we cannot agree with the findings of the Ld. Pr.CIT that the issues required further verification and the absence of the same resulted in the assessment order so passed being erroneous. The order of the Ld. Pr.CIT, in the impugned case, falls grievously short of this requirement of pointing out the absence of enquiry which should have been made in the present case. And therefore, we hold, that there is no finding by the Ld. Pr.CIT of the assessment order being erroneous. The jurisdiction assumed by the Ld. Pr.CIT, therefore u/s. 263 of the Act for revising the assessment order therefore, is, we hold, not as per law and the order so passed by the Ld. Pr.CIT is accordingly set aside. - Decided in favour of assessee.

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• 2021 (3) TMI 72
  Deduction u/s. 80IC denied - non filing of audited accounts in Form 10CCB along with the return of income - HELD THAT:- Referring to material on record and the decision of case of CIT vs. G.M. Knitting Industries Pvt. Ltd. [ 2015 (11) TMI 397 - SC ORDER ] find that the assessee has filed Form 10CCB and the books of account during the course of assessment proceedings. AO ought to have considered the same before disallowing the claim of deduction u/s. 80IC of the Act. The order of the CIT(A) is ex-parte, and the assessee s appeal was not considered on merits. In view of the same, deem it fit and proper to remand the issue to the file of the AO for verification and reconsideration of the issue. Assessee s appeal is treated as allowed for statistical purposes.

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• 2021 (3) TMI 71
  TDS u/s 194J - A M expenses - Non deduction of TDS - whether the impugned expense falls within the meaning of managerial services thereby attracting the provisions of section 194J ? - HELD THAT:- This expenditure was incurred on running of various trade promotion schemes which is designed and controlled by the appellant company. However, these schemes were administered through the selling and distribution network of the HUL. The claims made for selling and distribution network of sub-distributors was settled by HUL and reimbursed the same by the appellant company. It is vehemently contended that the expenses were wholly and exclusively incurred by the appellant company in order to promote the sales of products and the genuineness of the expenditure had not been doubted by the Assessing Officer. The very fact that the Assessing Officer had invoked the provisions of section 40(a)(2b) of the Act goes to suggest that the genuineness of business expenditure is beyond the doubt. Whether the subject payment was made for managerial services or not is of no relevance in view of the fact that the expenditure is only in the nature of reimbursement of cost to HUL. It had not resulted in any income to the HUL. Therefore, in the absence of income in the hands of the payee, the question of deduction of tax at source does not arise having regard to the ratio of the judgement in the case of CIT vs. Siemens Aktiongesellschaft [ 2008 (11) TMI 74 - BOMBAY HIGH COURT] as held the reimbursement of expenses cannot be regarded as a revenue receipt and as the assessee received nothing in excess of the actual expenditure incurred. Therefore, the question of deduction of tax at source does not arise. Thus neither the impugned expenditure falls within the ambit of managerial services as defined in section 9(1)(vii) of the Act nor liable to deduct tax at source u/s 194J of the Act. Therefore, the Assessing Officer was not justified in invoking the provisions of section 40(a)(ia) of the Act to disallow the A M expenses. TDS u/s 194J - Addition on account of management cost - AO disallowed the expenditure for non-deduction of tax at source treating the same as expenditure under the provision of managerial services - HELD THAT:- Mere reimbursement of salary of employees does not constitute provision of managerial services. When the expenditure is a mere reimbursement of salary of employees deputed, the question of deduction of tax at source does not arise. Therefore, we are of the considered opinion that the provisions of section 194J of the Act have no application to the subject payment. Accordingly, the Assessing Officer is not justified in invoking the provisions of section 40(a)(ia). TDS u/s 194H - Disallowance on account of selling discount given to HUL - HELD THAT:- The relationship between the appellant and the distributor was that of the principal to principal. No services were rendered by the distributor to the appellant company and what was offered to the distributor was discount under the sales promotion schemes and, therefore, it cannot be said that the discount is in the nature of commission within the meaning of Explanation 1 to section 194H of the Act as held by the Hon ble Jurisdictional High Court in the case of Intervet India Pvt. Ltd.. [ 2014 (4) TMI 353 - BOMBAY HIGH COURT] and CIT vs. Piramal Healthcare [ 2015 (1) TMI 873 - BOMBAY HIGH COURT] - thus we are of the considered opinion that the impugned expenditure does not fall within the meaning of commission thereby attracting the provisions of section 194H. Transfer Pricing adjustment in respect of A M expenses - international transaction - HELD THAT:- The Revenue had failed to discharge the initial burden upon it with regard to showing the existence of international transactions between the assessee and its AE and apparently there is no material referred to by the lower authorities to show that the assessee had incurred the expenditure in advertising and marketing expenses in order to promote the brand value of the foreign AE. The reference made in clause 15 of the agreement is misplaced as rightly submitted by the ld. Sr. Counsel, the incurring of expenditure on advertising is only with regard to the protection of patent and trade mark of the AE and not to promote brand value of foreign AE. In the absence of existence of international transaction, the question of determination of arm s length price of the transactions does arise.

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• 2021 (3) TMI 70
  TP adjustment - interest paid by the assessee to its Associated Enterprise [AE] M/s. Twilzon Limited on Fully and Compulsorily Convertible Debentures [FCCDs] issued by the assessee to such AE - FCCDs were issued on 26.07.2011 i.e. in F.Y. 2011-12 relevant to A.Y. 2012-13 and no FCCDs were issued in A.Y. 2013-14 and 2014-15. Therefore, A.Y. 2012-13 is taken as the lead year - HELD THAT:- On similar circumstances, in group company, namely, Granite Gate Properties Ltd., the Tribunal for A.Y. 2012-13 [ 2018 (9) TMI 964 - ITAT DELHI] has considered similar quarrel where FCCDs were issued to same AE and there also SBI PLR rate + 300 basis points were taken into consideration for payment of interest. Tribunal in assessee s own case for the immediately preceding years, we are of the considered opinion that the issue is no longer res integra and this bench is required to follow the same in the absence of any change of circumstances. No change of circumstances is pleaded before us. We, therefore, while respectfully following the above decision, reach a conclusion that it is reasonable on facts and also permissible under law to include 300 points basis while calculating the interest rate. Further, in view of the fact that the variance does not exceed 5% for the FCCDs issued during the FYs 2008-09 and 3% for the FCCDs issued subsequently interference by the Ld. TPO with the value of the international transaction. The addition, therefore, cannot be sustained and shall be directed to be deleted. We accordingly direct the learned AO/TPO to delete the same - we direct the Assessing Officer/TPO to delete the impugned adjustments. - Decided in favour of assessee.

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• 2021 (3) TMI 69
  TP Adjustment - re-computation of ALP by combining both Import of material and Export of Finished goods and applying TNMM and thereby upward adjustment - In respect of the import of materials and export of Finished goods TPO applied TNMM as the MAM for both the aforesaid transactions on combined basis and recomputed the ALP by considering 5.15% as Arm s Length Margin and made addition of INR 3.42 crores to the returned losses - HELD THAT:- As decided in own case [ 2020 (10) TMI 933 - ITAT DELHI] it is not the case that assessee has resold the same goods with only minor modifications to justify the adoption of RPM as the most appropriate method. In the present case the assessee has assembled the goods partly purchased from its associated enterprise and partly developed by its own vendor. Therefore, the decision relied upon by the learned authorised representative MSS INDIA (P) LIMITED. [ 2009 (5) TMI 600 - ITAT PUNE-A] does not help the case of the assessee. In view of the above facts we do not find any infirmity in the order of the learned assessing officer/transfer pricing officer as well as the direction of the learned dispute resolution panel in rejecting the resale price method adopted by the assessee and adopting transactional net margin method as the most appropriate method. - Decided against assessee. Working capital adjustment - Addition while applying TNMM on account of difference in working capital of the comparable companies and that of the assessee - HELD THAT:- There is no denial of the fact that in the earlier assessment years, namely, assessment years 2011-12 and 2012-13 TPO allowed the working capital adjustment since the facts and circumstances involved in this year are similar to the facts and circumstances for the earlier assessment years, there is no justification for not allowing the same for this particular year. Having regard to this anomalous situation, we are of the considered opinion that the working capital adjustment should have been allowed for this year also. We therefore while answering ground No. 2 in favour of the assessee, direct the learned Assessing Officer/Ld. TPO to allow working capital adjustment to the assessee for this assessment year also. Recomputation of the arm s-length price by applying the entity level margins of tested party - ignoring segmental margins in respect of marketing support services and also by selecting six new companies why rejecting two companies selected by the assessee for such comparison - There is no dispute that the assessee has maintained segmental records in relation to the Management Support Services. It is not decipherable from the orders of the authorities below that these segmental records are rejected for any explicit reasons. Ld. TPO adopted the entity level margins of the assessee as well as the comparables. There is no denial as to the submissions of the ld. AR that the segment of Management Support Services is different from other activities performed by the comparables. In Technimount ICB Pvt. Ltd. [ 2013 (9) TMI 595 - ITAT MUMBAI] as held that as per the provisions contained in Chapter-X vide provisions 92-94, international transactions are to be taken into consideration for determination of Arm s Length Price and for such purpose wherever it is practicable and available, the segmental results have to be considered and not to the profit at entity level. In view of the undisputed availability of the segmental results in the case of the assessee as well as the comparable companies, in respect of Management support services, we are of the considered opinion that the ld. TPO should have taken them into consideration. For this purpose, we set aside the issue to the file of ld. Assessing Officer/TPO for comparison of the segmental results and not the margin at entity level. Rejection of two entities, namely, Best Mulyankan Consultants Ltd. and Indus Technical Financial Consultants Ltd. from the list of comparables holding those to be functionally dissimilar - It is seen from the record that the assessee has not produced the material to capture functional profile of these two companies with reference to the agreements for provision of services and the material produced before us in the shape of relevant extracts of annual report is insufficient to reach a definite conclusion on this aspect. When we have to compare the functional profile in the teeth of the objection taken by the ld. TPO, to retain these two entities in the list of comparables, matter requires deeper analysis. No such material is forthcoming. Hence, we hold that the assessee failed to substantiate their claim that Best Mulyankan Consultants Ltd. and Indus Technical Financial consultants Ltd. are good comparables to the assessee. Companies functionally dissimilar with that of assessee need to be deselected from final list. Non-comparable of certain companies in view of their huge and disproportionate turnover more than 200 times to that of the assessee when compared to the entities like assessee.

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• 2021 (3) TMI 68
  Correct head of income - income from let out of various properties in the mall - Income from House Property OR Income from Business and Profession - HELD THAT:- Similar fact has been adjudicated by the ITAT in earlier years [ 2019 (8) TMI 1431 - ITAT AHMEDABAD ] AND [ 2019 (11) TMI 1078 - ITAT AHMEDABAD ] in favour of the assessee treating the said income as profit and gain from business or profession, therefore, we direct the Assessing Officer to assessee the income earned by the assessee under the head profit and gain from business or profession. Accordingly, this appeal of the assessee is allowed.

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• 2021 (3) TMI 67
  Rectification u/s 154 - rental payment was wrongly typed as Rs. 1,88,49,478/- thereby quantum addition of Rs. 1,49,33,115/- was made, after verification of the records, the Assessing Officer rectified the mistake apparent from record - assessee has not deducted TDS on the rent paid - HELD THAT:- We find that as per section 154 of the Act, the Assessing Officer is fully empowered to rectify the mistake apparent from records either of his own motion or rectification application filed by the assessee. Thus, since the Assessing Officer has rightly exercised his jurisdiction in rectifying the mistake apparent from the records, the ground raised by the assessee stands dismissed. Disallowance made u/s 40(a)(ia) - We find force in the arguments of the ld. Counsel that since the assessee has not directly paid the rent to the land lord and therefore, the question of deducting TDS would not arise. In view of the above, we remit the matter back to the file of the Assessing Officer to verify as to whether M/s. RMKV Silks Private Limited paid the entire rent to the land lord after deducting TDS and the assessee has only reimbursed the rent to M/s. RMKV Silks Pvt. Ltd. and decide the issue in accordance with law after allowing an opportunity of being heard to the assessee. Thus, the ground raised by the assessee is allowed for statistical purposes.

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• Customs

• 2021 (3) TMI 91
  Rejection of applications filed under the Merchandise Exports from India Scheme (MEIS) - rejection on the ground of mis-declaration of intent by the petitioner and thereby depriving the petitioner benefit under the said scheme - HELD THAT:- It is an admitted position that petitioner committed an error while filling the shipping bills. Petitioner had actually intended to claim benefit under what is known as MEIS but while filling the shipping bills, petitioner had inadvertently marked N (for No) instead of Y (for Yes) in the declaration of intent column. Since the EDI system was followed online, corrections could not be done. In the case of non-EDI cases, under the provisions of section 149 of the Customs Act only manual corrections can be made by a party. Respondents only contention is that since the entire procedure is followed by the system portal there can be no amendment in the shipping bills. Save and except this submission on behalf of the respondents there is no other challenge to the petitioner s case on merit. The facts in the present case are identical to the facts of Pasha International [ 2019 (2) TMI 1187 - MADRAS HIGH COURT ] decided by the Madras High Court and there are no reason as to why the petitioner herein should not be extended the benefit under MEIS considering that the only lapse on the part of the petitioner was that it had inadvertently mentioned in the reward column N (for No) instead of Y (for Yes). This is a procedural defect and is curable considering the fundamental objective of the scheme under Chapter 3 of the FTP 2015-20. The basic objective of the Exports from India Schemes is to provide reward to the exporters and to promote manufacture and export of notified goods / products to notified markets. Once this is done, the party is entitled and eligible to claim its reward - In the instant case, while doing so, petitioner had inadvertently committed an error while filing up the claim form on the DGFT portal and entered its declaration of intent as N (for No) instead of Y (for Yes) resulting in rejection of petitioner s claim for reward under MEIS. Except for this inadvertent mistake, petitioner is otherwise eligible and entitled to the reward under MEIS. Such a procedural mistake on the part of petitioner should not deprive the petitioner from the benefit of the reward under MEIS. A similar situation was in fact considered by the respondents in respect of shipping bills for the period 01.04.2015 to 31.05.2015 at the time of inception of the FTP, when exporters had inadvertently marked N in the reward item box and wished to seek MEIS benefit. Public Notice 47/2015-20 dated 08.12.2015 was issued by the DGFT to give the benefit of MEIS reward in such cases. The petitioner is entitled to the reward under MEIS in respect of its shipping bills wherein exports of notified goods / products with ITC(HS) code to the notified markets have been carried out by the petitioner under the FTP 2015-20 - Petition allowed.

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• 2021 (3) TMI 84
  Maintainability of petition - availability of alternative remedy of appeal - Violation of principles of natural justice - validity of Order of adjudication passed by the Principal Commissioner of Customs (Prev.) - HELD THAT:- This Court is of the view that the bar of alternative remedy does not operate in the event an appellable order is challenged on the ground of jurisdiction and violation of principles of natural justice. This issue in the instant case requires more detailed hearing which can be done only after calling for affidavits. Let affidavit-in-opposition be filed within four weeks from date; reply thereto, if any, within two weeks thereafter. Liberty to mention after eight weeks for inclusion in the list under the heading Hearing .

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• 2021 (3) TMI 81
  Maintainability of appeal - Section 130 of the Customs Act, 1962 - HELD THAT:- The appeal was admitted by a Bench on the substantial questions of law. The substantial question of law framed in this appeal are answered against the appellant and in favour of the respondent - Appeal dismissed.

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• Insolvency & Bankruptcy

• 2021 (3) TMI 94
  Dishonor of Cheque - insufficiency of funds - Proceedings under IBC versus offence under the NI Act - Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 - scope of Moratorium provision - whether the institution or continuation of a proceeding under Section 138/141 of the Negotiable Instruments Act can be said to be covered by the moratorium provision, namely, Section 14 of the IBC? - Interpretation of section 14 of IBC - Application of the Noscitur A Soccis Rule of Interpretation - Object of Section 14 of the IBC - Section 14 in relation to other Moratorium sections in the IBC - Interplay between Section 14 and Section 32A of the IBC - Nature of proceedings under Chapter XVII of the NI Act - Quasi-Criminal proceedings - Nature of proceedings under Chapter XVII of the NI Act - Case Laws under provisions of other statutes - Whether Natural Persons are covered by Section 14 of the IBC? Interpretation of section 14 of IBC - HELD THAT:- The expression institution of suits or continuation of pending suits is to be read as one category, and the disjunctive or before the word proceedings would make it clear that proceedings against the corporate debtor would be a separate category. What throws light on the width of the expression proceedings is the expression any judgment, decree or order and any court of law, tribunal, arbitration panel or other authority . Since criminal proceedings under the Code of Criminal Procedure, 1973 (CrPC) are conducted before the courts mentioned in Section 6, CrPC, it is clear that a Section 138 proceeding being conducted before a Magistrate would certainly be a proceeding in a court of law in respect of a transaction which relates to a debt owed by the corporate debtor. Application of the Noscitur A Soccis Rule of Interpretation - HELD THAT:- The ejusdem generis and noscitur a sociis, being rules as to the construction of statutes, cannot be exalted to nullify the plain meaning of words used in a statute if they are designedly used in a wide sense. Importantly, where a residuary phrase is used as a catch-all expression to take within its scope what may reasonably be comprehended by a provision, regard being had to its object and setting, noscitur a sociis cannot be used to colour an otherwise wide expression so as to whittle it down and stultify the object of a statutory provision. Object of Section 14 of the IBC - HELD THAT:- The regard being had to the object sought to be achieved by the IBC in imposing this moratorium, a quasi-criminal proceeding which would result in the assets of the corporate debtor being depleted as a result of having to pay compensation which can amount to twice the amount of the cheque that has bounced would directly impact the corporate insolvency resolution process in the same manner as the institution, continuation, or execution of a decree in such suit in a civil court for the amount of debt or other liability. Judged from the point of view of this objective, it is impossible to discern any difference between the impact of a suit and a Section 138 proceeding, insofar as the corporate debtor is concerned, on its getting the necessary breathing space to get back on its feet during the corporate insolvency resolution process. Given this fact, it is difficult to accept that noscitur a sociis or ejusdem generis should be used to cut down the width of the expression proceedings so as to make such proceedings analogous to civil suits - clause (b) of Section 14(1) also makes it clear that during the moratorium period, any transfer, encumbrance, alienation, or disposal by the corporate debtor of any of its assets or any legal right or beneficial interest therein being also interdicted, yet a liability in the form of compensation payable under Section 138 would somehow escape the dragnet of Section 14(1). While Section 14(1)(a) refers to monetary liabilities of the corporate debtor, Section 14(1)(b) refers to the corporate debtor s assets, and together, these two clauses form a scheme which shields the corporate debtor from pecuniary attacks against it in the moratorium period so that the corporate debtor gets breathing space to continue as a going concern in order to ultimately rehabilitate itself. Any crack in this shield is bound to have adverse consequences, given the object of Section 14, and cannot, by any process of interpretation, be allowed to occur. Section 14 in relation to other Moratorium sections in the IBC - HELD THAT:- When the language of Section 14 and Section 85 are contrasted, it becomes clear that though the language of Section 85 is only in respect of debts, the moratorium contained in Section 14 is not subject specific. The only light thrown on the subject is by the exception provision contained in Section 14(3)(a) which is that transactions are the subject matter of Section 14(1) - A legal action or proceeding in respect of any debt would, on its plain language, include a Section 138 proceeding. This is for the reason that a Section 138 proceeding would be a legal proceeding in respect of a debt. In respect of is a phrase which is wide and includes anything done directly or indirectly. Where individuals or firms are concerned, the recovery of any property by an owner or lessor, where such property is occupied by or in possession of the individual or firm can be recovered during the moratorium period, unlike the property of a corporate debtor. For all these reasons, therefore, given the object and context of Section 14, the expression proceedings cannot be cut down by any rule of construction and must be given a fair meaning consonant with the object and context. It is conceded before us that criminal proceedings which are not directly related to transactions evidencing debt or liability of the corporate debtor would be outside the scope of this expression. Interplay between Section 14 and Section 32A of the IBC - HELD THAT:- The expression prosecution in the first proviso of Section 32A(1) refers to criminal proceedings properly so-called either through the medium of a First Information Report or complaint filed by an investigating authority or complaint and not to quasi-criminal proceedings that are instituted under Sections 138/141 of the Negotiable Instruments Act against the corporate debtor, the object of Section 14(1) of the IBC gets subserved, as does the object of Section 32A, which does away with criminal prosecutions in all cases against the corporate debtor, thus absolving the corporate debtor from the same after a new management comes in. Nature of proceedings under Chapter XVII of the NI Act - HELD THAT:- The gravamen of a proceeding under Section 138, though couched in language making the act complained of an offence, is really in order to get back through a summary proceeding, the amount contained in the dishonoured cheque together with interest and costs, expeditiously and cheaply. We have already seen how it is the victim alone who can file the complaint which ordinarily culminates in the payment of fine as compensation which may extend to twice the amount of the cheque which would include the amount of the cheque and the interest and costs thereupon. Given our analysis of Chapter XVII of the Negotiable Instruments Act together with the amendments made thereto and the case law cited hereinabove, it is clear that a quasi-criminal proceeding that is contained in Chapter XVII of the Negotiable Instruments Act would, given the object and context of Section 14 of the IBC, amount to a proceeding within the meaning of Section 14(1)(a), the moratorium therefore attaching to such proceeding. Quasi-Criminal proceedings - HELD THAT:- In criminal contempt cases, cognizance in contempts other than those referred to in Section 14 of the Act is taken by the Supreme Court or the High Court in the manner provided by Section 15. Section 17 then lays down the procedure that is to be followed after cognizance is taken. Finally, by Section 23, the Supreme Court and the High Courts are given the power to make rules, not inconsistent with the provisions of the Act, providing for any matter relating to its procedure - the hybrid nature of a civil contempt proceeding, described as quasi-criminal by several judgments of this Court, there is nothing wrong with the same appellation quasi-criminal being applied to a Section 138 proceeding for the reasons given by us on an analysis of Chapter XVII of the Negotiable Instruments Act. We, therefore, reject the learned Additional Solicitor General s strenuous argument that the appellation quasi-criminal is a misnomer when it comes to Section 138 proceedings and that therefore some of the cases cited in this judgment should be given a fresh look. Other sections of IBC in relation to Section 14 of IBC - HELD THAT:- Contrasted with Section 25(2)(b) and Section 33(5), an argument could be made that the absence of the expressions prosecution and criminal proceedings in Section 25(2)(b) and Section 33(5) would show that they were designedly eschewed by the legislature. We have seen how inelegant drafting cannot lead to absurd results or results which stultify the object of a provision, given its otherwise wide language. Thus, nothing can be gained by juxtaposing various provisions against each other and arriving at conclusions that are plainly untenable in law. Case Laws under provisions of other statutes - HELD THAT:- Given the object of Section 22(1) of the SICA, which was amended in 1994 by inserting the words that were interpreted by this Court, parliament restricted proceedings only to suits for recovery of money etc., thereby expressly not including prosecution proceedings, as was held by this Court. The observations contained in paragraph 20, that Section 138 of the Negotiable Instruments Act is a penal provision in a criminal proceeding cannot now be said to be good law given the march of events, in particular, the amendments of 2002 and 2018 to the Negotiable Instruments Act. The winding-up court under Section 446(2) is to take up all matters which the company court itself can conveniently dispose of rather than exposing a company which is under winding up to expensive litigation in other courts. This being the object of Section 446(2), the expression proceeding was given a limited meaning as it is obvious that a company court cannot dispose of an assessment proceeding in income tax or a criminal proceeding. Whether Natural Persons are covered by Section 14 of the IBC - HELD THAT:- As far as the Directors/persons in management or control of the corporate debtor are concerned, a Section 138/141 proceeding against them cannot be initiated or continued without the corporate debtor - This is because Section 141 of the Negotiable Instruments Act speaks of persons in charge of, and responsible to the company for the conduct of the business of the company, as well as the company - Since the corporate debtor would be covered by the moratorium provision contained in Section 14 of the IBC, by which continuation of Section 138/141 proceedings against the corporate debtor and initiation of Section 138/141 proceedings against the said debtor during the corporate insolvency resolution process are interdicted. The legal impediment contained in Section 14 of the IBC would make it impossible for such proceeding to continue or be instituted against the corporate debtor. Thus, for the period of moratorium, since no Section 138/141 proceeding can continue or be initiated against the corporate debtor because of a statutory bar, such proceedings can be initiated or continued against the persons mentioned in Section 141(1) and (2) of the Negotiable Instruments Act. This being the case, it is clear that the moratorium provision contained in Section 14 of the IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act. The Section 138/141 proceedings in this case will continue both against the company as well as the appellants for the reason given as well as the fact that the insolvency resolution process does not involve a new management taking over - Appeal allowed - decided in favor of appellant.

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• 2021 (3) TMI 66
  Maintainability of application - initiation of CIRP - corporate debtor unable to liquidate their claim - applicant is Corporate Debtor - existence of debt - HELD THAT:- Notice was issued to the corporate debtor vide order dated February 28, 2020 of the Adjudicating Authority and the reply was filed by the corporate debtor as on March 16, 2020. The corporate debtor submitted that at the time of availing the services from the operational creditor, the corporate debtor had full intentions to pay for the services availed by it, however due to bad shape of economy and demonetization the business of the corporate debtor had suffered huge losses, therefore the corporate debtor was unable to pay the said amount. The order was reserved on November 26, 2020 learned counsel for the corporate debtor submitted that the corporate debtor has admitted its liability and inability to pay the amount hence, it clearly establishes the existence of debt. In the above circumstances this Tribunal initiates CIRP of the respondent-company.

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• 2021 (3) TMI 65
  Seeking extension of period of corporate insolvency resolution process for further period of 90 days from the date of expiry of 180 days from CIRP - section 12(2) of the Insolvency and Bankruptcy Code, 2016 read with regulation 40(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - HELD THAT:- In the facts of the present case, it is to be noted that the IBBI vide its notification dated March 29, 2020 has issued clarification regarding the period of exclusion for corporate insolvency resolution process. Through the issuance of the abovementioned notification, the IBBI has amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 to include that Regulation 40C-the period of lockdown imposed in the wake of COVID-19 outbreak shall not be counted for the purposes of the timeline for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016. In the facts of the present case, it is evident from the records that CIRP of 180 days expired on March 8, 2020. Thus, it can be inferred from the second proviso to sub-section (3) of section 12 of the IBC, 2016 that one more extension of 90 days can be granted. The decision of the hon ble Supreme Court as rendered in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta [ 2019 (11) TMI 731 - SUPREME COURT] and the provision of law, the application stands allowed and the period of 90 days stands allowed from the CIRP timeline with an exclusion of time period arising of COVID-19 lockdown in consonance with the third amendment made to IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2020, dated March 29, 2020. The period from March 25, 2020 to October 31, 2020 is excluded. Application allowed.

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• 2021 (3) TMI 64
  Seeking approval of resolution plan - section 30(6) read with section 31 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Looking to the entire facts of the case, it is found that the CoC has approved the plan with 100 per cent. voting in favour of the approval of the plan. More so, the resolution applicant fulfils the mandatory contents of the resolution plan as provided under regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Further, from the object of the IBC, it is amply clear that the resolution is rule and the liquidation is an exception . Liquidation brings the life of a corporate to an end. It destroys organizational capital and renders resources idle till reallocation to alternate uses. Further, it is inequitable as it considers the claims of a set of stakeholders only, if there is any surplus after satisfying the claims of a prior set of stakeholders fully. The IB Code, therefore, does not allow liquidation of a corporate debtor directly. It allows liquidation only on failure of corporate insolvency resolution process. It rather facilitates and encourages resolution in several ways - Keeping in view such object behind the enactment of the Code, intention of the Legislature, that the priority is to be given to the resolution than liquidation in the larger interests of the public, workmen, stakeholders and the other employees of the corporate debtors in the interest of justice and in order to achieve the object of the Code and liquidation of a company can be only as a last resort, wherein, all efforts for bringing resolution plan were failed or it cannot be found workable in the larger public interest. The hon ble Supreme Court in its recent judgment in K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS [ 2019 (2) TMI 1043 - SUPREME COURT] comprising of the hon ble Justice A. M. Khanwilkar and hon ble Justice Ajay Rastogi observed that the Adjudicating Authority has no jurisdiction to interfere with the commercial wisdom of the CoC. On the backdrop of the decision taken by the hon ble Supreme Court, it is pertinent to note that commercial wisdom of the CoC cannot be interfered into by the Adjudicating Authority. The Adjudicating Authority, is of the considered opinion and also being satisfied that the resolution plan as approved by the committee of creditors (CoC) meets the requirements as referred to under section 30(2) of the Code - Application allowed.

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• 2021 (3) TMI 63
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - service of demand notice in proper form and manner - section 8 of IBC code - HELD THAT:- The notice issued by the petitioner on September 25, 2016 is a statutory notice under the Companies Act, 2013. An ordinary scanning of the demand notice reveals that the petitioner has demanded sum of Rs. 2,12,704 as due from the corporate debtor. It is to be noted that the notice is a notice under the Companies Act, 2013 and nowhere in the notice it is mentioned that this notice is issued under section 8 of the IBC, 2016 - This Bench is of the view that for initiating CIRP against the corporate debtor, section 8 of the Code mandates that the demand notice has to be issued in such a form and manner as may be prescribed. The demand notice issued by the petitioner is not in the form as mandated in the rule and hence this notice is a defective notice - Petition dismissed.

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• 2021 (3) TMI 62
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of loans - Financial Debt - scope of section 7 of the Insolvency and Bankruptcy Code, 2016 as compared to section 9 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Although, the corporate debtor claimed that the present application is not maintainable but in paragraph 7(c), he admits that he executed the loan agreement of Rs. 1 crore as sanctioned is received by the company and also issued the cheques. In paragraph 7(f) of reply, the corporate debtor admit that the financial creditor got transferred Rs. 20 lakhs on January 30, 2019 to the corporate debtor and thereafter Rs. 25 lakhs were also transferred on February 25, 2019. He further claimed in the same paragraph that total amount of Rs. 65 lakhs were transferred by the financial creditor to the account of corporate debtor. He further stated in the reply that the financial creditor has not released the entire loan amount. He further stated in paragraph 7(l) of the reply that in the sanction letter dated January 23, 2019 (in clause 15) it is mentioned that bullet payment of entire loan at the end of six (6) months from the debt of disbursement, hence the corporate debtor has not committed the default in repayment and so there is no default in repayment of loan. Mere plain reading of the provision show that under section 7 of the Insolvency and Bankruptcy Code, 2016, the Adjudicating Authority to see whether there is a financial debt and default has occurred in repayment of that debt or not, the application is complete or whether any disciplinary proceedings is pending against the proposed RP or not. So far dispute is concerned like section 9 of the Insolvency and Bankruptcy Code, 2016, in section 7 of the Insolvency and Bankruptcy Code, 2016, proceedings, there is no scope to raise the disputes. Therefore, the averments made in the reply regarding the dispute raised by the corporate debtor is concerned, is not liable to accepted. Thus, the application is complete and the loan has been disbursed and the same has not been not paid by the corporate debtor, therefore there is default in payment of debt, there is no disciplinary proceedings pending against the RP. Therefore, there are no option but to admit the application under section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016. Petition admitted - moratorium declared.

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• FEMA

• 2021 (3) TMI 92
  Transaction entered into by a foreign citizen of Indian origin , to deal with real estate in India on certain conditions - transaction (specified in Section 31 of the 1973 Act) entered into in contravention of that provision is void or is only voidable and it can be voided at whose instance - Mandation to get general or special permission of the RBI for transfer or disposal of immovable property situated in India by sale or mortgage by a person, who is not a citizen of India - HELD THAT:- Foreigners should not be permitted/allowed to deal with real estate in India; the peremptory condition of seeking previous permission of the RBI before engaging in transactions specified in Section 31 of the 1973 Act and the consequences of penalty in case of contravention, the transfer of immovable property situated in India by a person, who is not a citizen of India, without previous permission of the RBI must be regarded as unenforceable and by implication a prohibited act. That can be avoided by the RBI and also by anyone who is affected directly or indirectly by such a transaction. There is no reason to deny remedy to a person, who is directly or indirectly affected by such a transaction. He can set up challenge thereto by direct action or even by way of collateral or indirect challenge. Until permission is accorded by the RBI, it would not be a lawful contract or agreement within the meaning of Section 10 read with Section 23 of the Contract Act. For, it remains a forbidden transaction unless permission is obtained from the RBI. The fact that the transaction can be taken forward after grant of permission by the RBI does not make the transaction any less forbidden at the time it is entered into. It would nevertheless be a case of transaction opposed to public policy and, thus, unlawful. In this view of the matter, the appellant must succeed and would be entitled for the reliefs claimed in O.S. No. 10079 of 1984 for declaration that the gift deed dated 11.03.1977 and supplementary deed dated 19.04.1980 in favour of respondent No.1 are invalid, unenforceable and not binding on the plaintiff. A fortiori , the plaintiff is entitled for possession of the suit property from respondent no.1 and persons claiming through him, admeasuring 12,306 square feet and also mesne profits for the relevant period for which a separate inquiry needs to be initiated under Order 20 Rule 12 of the Code of Civil Procedure, 1908. In the present case, the land was owned by a foreign citizen. For which reason, the rigours of Section 31 must apply with full force. Additionally, it must be kept in mind that the stated notification was issued in 1993, around which time a change in policy regarding the investment opportunities for non-resident Indians and foreigners had been crystallised, by opening up of economy in India. In the present case, we are dealing with the transaction effected close to the coming into force of the 1973 Act i.e., in the year 1977 when considerations were different and governed by different policy manifested in the form of enactment of Section 31 of the 1973 Act, spoken to by the then Finance Minister in the Lok Sabha, forbidding foreigners from dealing with real estate in India. The condition predicated in Section 31 of the 1973 Act of obtaining previous general or special permission of the RBI for transfer or disposal of immovable property situated in India by sale or mortgage by a person, who is not a citizen of India, is mandatory. Until such permission is accorded, in law, the transfer cannot be given effect to; and for contravening with that requirement, the concerned person may be visited with penalty under Section 50 and other consequences provided for in the 1973 Act. Hence, the Trial Court as well as the High Court committed manifest error in dismissing the suit filed by the plaintiff for a declaration in respect of suit property admeasuring 12,306 square feet and for consequential reliefs referred to therein. A priori, we conclude that the decisions of concerned High Courts taking the view that Section 31 of the 1973 Act is not mandatory and the transaction in contravention thereof is not void or unenforceable, is not a good law . However, transactions which have already become final including by virtue of the decision of the court of competent jurisdiction, need not be reopened or disturbed in any manner because of this pronouncement. This declaration/direction is being issued in exercise of our plenary power under Article 142 of the Constitution of India. For, there has been a paradigm shift in the general policy of investment by foreigners in India and more particularly, the 1973 Act itself stands repealed. Accordingly, we deem it appropriate to overrule the decisions of the High Courts, taking contrary view, albeit, prospectively. The appeal is allowed. The impugned judgment and decree of the Trial Court, as confirmed by the High Court, is set aside.

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• Service Tax

• 2021 (3) TMI 88
  Maintainability of appeal - appeal was rejected as being time-barred - section 85(3A) of the Finance Act, 1994 - HELD THAT:- An appeal relating to service tax, interest or penalty is required to be presented within two months from the date of receipt of the decision or order of the adjudicating authority if the decision or order has been made after the Finance Bill, 2012 had received the assent of the President. There is no dispute that the order in original dated 03.09.2019 had been passed after receipt of the assent of the President to the Finance Bill, 2012. However, as per the proviso, the appellate authority may allow the appeal to be presented beyond the limitation period of two months within a further period of one month if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the stipulated period of two months. On a careful reading of the aforesaid provision what is discernible is that an appeal is required to be filed within two months from the date of receipt of the decision or order which period can be extended for a further period of one month on sufficient cause being shown. Thus, in any event an appeal has to be filed within a maximum period of three months - The appeal was required to be filed within two months from 07.09.2019 i.e. within 07.11.2019. If we add one more month to this to bring in the additional period of limitation, then the outer date for fling the appeal would be 07.12.2019. In the instant case petitioner filed the appeal on 17.07.2020 way beyond 07.12.2019; thus accompanied by an application for condonation of delay of 253 days - Referring to the provisions of sub-section (3A) of section 85 of the Finance Act, 1994 respondent No.3 held that he has no power or there is no provision for condonation of delay beyond the additional one month. It is trite that when the statute prescribes a period of limitation alongwith the period for extending the period of limitation, provision of section 5 of the Indian Limitation Act, 1963 would not be applicable - In the instant case, what is under impugnment is the order of respondent No.3 rejecting the appeal of the petitioner as being time barred. There are no error or infirmity in the view taken by respondent No.3. In such circumstances, we do not think that the present is a fit case where we should exercise our extra ordinary jurisdiction under Article 226 of the Constitution of India to interfere with the impugned order passed by respondent No.3 - petition dismissed.

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• 2021 (3) TMI 85
  Principles of natural justice - allegation is that SCN issued with a pre- determined and closed mind without appreciating the statutory provisions - time limitation - primary thrust of the challenge is on non-compliance of the consultative exercise prior to the issuance of show-cause notice as per para-5.0 of the master circular dated 10th March 2017 - HELD THAT:- Para 5.0 of the master circular dated 10th March 2017 appears to have been incorporated to facilitate trade and promote voluntary compliance and to reduce the necessity of issuing show-cause notice in such cases where the demand of duty is above Rs. 50 lakhs. In a way the rigors of adjudication proceedings was intended to be avoided if the case of the assessee does not fall within the exceptions i.e. preventive / offence related SCNs which has a more serious import. The SCN also indicates that had the third party information not been received by the department and investigation initiated, the case could not have come to light. As such, it appeared that it is a case of wilful suppression of material facts from the department. Para-21 of the SCN indicates that the Managing Director of the assessee and noticee no.2 was also asked to explain as to why he be not held liable for penalty under Section 78A of the Finance Act, 1994 for his complicity in the aforesaid evasion of service tax since he had not given satisfactory answers to the queries made - Proceedings for adjudication in such matters are initiated by the office of the Commissioner of GST and Central Service tax as has been informed by the learned counsel for the respondents, though notices are issued to the assessees by the preventive branch upon third party information and investigation asking them to explain the discrepancy in the taxable value received by them for the relevant period upon comparison of other materials available with the department. In this case, the investigation was initiated upon inputs received from the Income Tax Department regarding discrepancy in the taxable value received by the petitioner as per TDS and income Tax Return and that shown in ST-3 Return filed by them for the period 2012-13. Upon consideration of the facts and circumstances discussed, it prima-facie appears that the SCN fell into the category of preventive show-cause notice falling under the exception under para-5.0 of the master circular dated 10th March 2017. Had the proceedings not been initiated, the liability of paying service tax might have been evaded - thus, the case of the petitioner comes within the exception to para-5.0 of the master circular dated 10th March 2017. The adjudication order has already been passed on 16th February 2021. Petition dismissed.

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• CST, VAT & Sales Tax

• 2021 (3) TMI 93
  Exemption from Building Tax - residential accommodations for nuns - hostel accommodations which are attached to various educational institutions - Section 3(1)(b) of the Kerala Building Tax Act, 1975 - HELD THAT:- The object for exempting buildings which are used principally for religious, charitable or educational purposes would be for core religious, charitable or educational activity as well as purposes directly connected with religious activity. One example will suffice to show the difference between a purpose that is directly connected with religious or educational activity and a purpose which is only indirectly connected with such activity. Take a case where the neighbouring building to the convent is let out on rent to any member of the public, and the rent is then utilised only for core religious activity. Can it be said that the letting out at market rent would be connected with religious activity because the rental that is received is ploughed back only into religious activity? Letting out a building for a commercial purpose would lose any rational connection with religious activity. The indirect connection with religious activity being the profits which are ploughed back into religious activity would obviously not suffice to exempt such a building. But if on the other hand, nuns are living in a neighbouring building to a convent only so that they may receive religious instruction there, or if students are living in a hostel close to the school or college in which they are imparted instruction, it is obvious that the purpose of such residence is not to earn profit but residence that is integrally connected with religious or educational activity. A reading of the other provisions of the Act strengthens the aforesaid conclusion. Residential building is defined separately from building in Section 2(l). A residential building means a building or any other structure or part thereof built exclusively for residential purpose. It is important to note that residential building is not the subject matter of exemption under Section 3 of the Act. Quite the contrary is to be found in Section 5A of the Act, which starts with a non-obstante clause, and which states that a luxury tax is to be charged on all residential buildings having a plinth area of 278.7 square meters and which have been completed on or after 1.4.1999. If we were to accept the contention of the State, buildings in which nuns are housed and students are accommodated in hostels which have been completed after 1.4.1999 and which have a plinth area of 278.7 square meters would be liable to pay luxury tax as these buildings would now no longer be buildings used principally for religious or educational purposes, but would be residential buildings used exclusively for residential purposes - However, there is another line of authority which states that even in tax statutes, an exemption provision should be liberally construed in accordance with the object sought to be achieved if such provision is to grant incentive for promoting economic growth or otherwise has some beneficial reason behind it. It is obvious that the beneficial purpose of the exemption contained in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of these cases being the line of authority which deals with beneficial exemptions as opposed to exemptions generally in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand is to be eschewed. We must first ask ourselves what is the object sought to be achieved by the provision, and construe the statute in accord with such object. And on the assumption that any ambiguity arises in such construction, such ambiguity must be in favour of that which is exempted. Appeal dismissed.

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• 2021 (3) TMI 89
  Audit assessment - Violation of Principles of Natural Justice - non-issuance of proper Notice by the respondent Department prior to completion of assessments order under section 37 of the AVAT Act 2003 - Eligibility and Entitlement Certificates for claiming incentives under the Industrial Policy of Assam 2008 and for claiming exemption of tax under the Assam Industries (Tax Exemption) Scheme 2009 - HELD THAT:- The petitioner has not been able to demonstrate as to how it has been prejudiced by the non-issuance of Notice under section 37 to render entire proceedings illegal, inasmuch as, the petitioner admitted to the receipt of Notice under section 36 as well as show causes prior to issuance of penalty. As such, it is not denied by the petitioner that it was not aware of the Audit Assessments pending before the department. As it is seen from the pleadings that the petitioner has received Eligibility Certificate on 26-08-2013 and entitlement certificate on 25-10-2013, i.e. well after the impugned order being passed in any event the petitioner could not have submitted the said certificate prior to passing of the impugned order. As such, non issuance of Notice contemplated under section 37 of the AVAT Act, 2003 in the facts of the present case did not cause the petitioner any prejudice to render on that count alone, the impugned order declared to be illegal as the petitioner was served notice under section 36 at an earlier point of time. There is no challenge to the impugned order on any other grounds other than violation of Principle of Natural Justice. While there is no quarrel with the proposition that the Principle of Natural Justice is required to adhered to, however, the party claiming to be affected by any violation of such principle must necessarily demonstrate the prejudice caused to it by non-issuance of any such notice. In the facts of the present case, the petitioner was well aware that audit assessment for the relevant assessment year is being proceeded with by the department however, in view of the alleged non-cooperation from the petitioner in respect of furnishing of necessary books of accounts/evidences, which is reflected in the recital of the impugned order, the department closed the assessments by resorting to Best Judgment assessment under section 37 of the AVAT Act. It is also seen from the provisions of the AVAT Act, 2003 that there is a limitation statutorily provided under section 39 of the Act in respect of Assessments required to be made. Under section 39 of the Act, it is provided that no assessments under the forgoing provisions of the Act shall be made after expiry of five (5) years from the end of which the assessment relates. The non issuance of prior Notice before completing the assessment under section 37 cannot be treated to be sufficient alone to interfere with the orders and demands Notices impugned in the absence of manifest prejudice shown to have been suffered by the petitioner more particularly, when it is the petitioner s pleaded case that the concerned exemption certificate and the certificate of entitlement was received by the petitioner well after the assessment orders passed. It can be summarised that where procedural or substantive provision of law provide for issuance of prior Notice, their infraction ipso-facto does not always lead to the invalidity of the order passed unless prejudice caused to the litigant is shown except in cases where public interest is involved. The prejudice caused to the litigant should not be a mere apprehension or even a reasonable suspicion apprehend. It should exist as a matter of fact and/or based upon a definite inference of likelihood of prejudice flowing from the non-observance of Natural Justice - although the Notice contemplated under section 37 was not served upon the petitioner as contended, in the facts of the present case, no prejudice is seen to have been caused to the petitioner inspite of prior Notice not being issued requiring interference of the impugned assessment order dated 20-07-2013 passed by the Assessing Officer only on the ground of violating/non-adherence of the Principles of Natural Justice. Upon perusal of the provisions of the AVAT Act, 2003, it is seen that under Section 83, there is a power of rectification under section 83 of the AVAT Act 2003, any authority including Appellate /Revisional Authority or the Appellate Tribunal may on an application or otherwise at any time within three (3) years from the date of any order passed by it, rectify any error apparent on the face of the record. It is also seen from the record that this Court by order dated 24-05-2017 while directing the respondent Department to obtain required instruction, by way of an interim order directed that no coercive against shall be taken against the petitioner on the basis of the order dated 20-07-2003 (Annexure-X) of the writ petition passed by the respondent no. 3 - The department will adequately address the grievances of the petitioner in terms of the representation dated 28-01-2014 filed before the Department and which is presently pending before the Department as fairly submitted by the department counsel. The Department will pass appropriate orders thereon as may be permitted under the provisions of AVAT Act including section 83, read with the Rules as well as per the provisions of the Policy of 2008 and the Scheme of 2009. Petition disposed off.

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• 2021 (3) TMI 82
  Maintainability of petition - petition was dismissed on the ground that the Court could not exercise its jurisdiction under Article 226 of The Constitution of India - Levy of penalty respectively for the assessment years 2008- 09 and 2013-14 as well as the consequential garnishee orders - HELD THAT:- It would be highly beneficial to refer to the celebrated decision of the Constitution Bench of the Hon ble Supreme Court in the case of Mafatlal Industries Ltd. Vs. Union of India [ 1996 (12) TMI 50 - SUPREME COURT ] wherein it was held that the jurisdiction of the High Courts under Article 226 and that of the Hon ble Supreme Court under Article 32 of The Constitution of India could not be circumscribed by the provisions of the Enactment (Central Excise Act) and they would certainly have due regard to the legislative intent evidenced by the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the Act. Further, the Court directed that the writ petition would be considered and disposed of in the the light of and in accordance with the provisions of Section 11B of the Central Excise Tax Act and for such a reason, the power under Article 226 of The Constitution of India has to be exercised to effectuate rule of law and not for abrogating it. Thus, the observation of the learned Single Judge to the effect that there is absolute bar for entertaining a writ petition does not reflect the correct legal position. Hence, we are inclined to interfere with the observation made in the impugned order. Whether the appellant s case would fall under any one of the exceptions, which have been carved out by various decisions of the Hon ble Supreme Court for exercise of jurisdiction under Article 226 of The Constitution of India, when there is a statutory appellate/revisional remedy available to the aggrieved person? - Violation of principles of Natural Justice - HELD THAT:- On a perusal of both the orders dated 30.1.2014 and 16.9.2014 respectively for the assessment years 2008-09 and 2013- 14 passed under the provisions of the Central Sales Tax Act, 1956 (for short, the CST Act), we find that the Assessing Officer had issued the notices respectively dated 06.8.2012 and 28.7.2014 proposing to levy penalty on the ground that the dealer purchased SAP software at concessional rate of tax against C Form Declarations without having included the same in the registration certificate issued under the CST Act. Hence, the Assessing Officer was of the prima facie view that the software was not capable of being used in manufacturing and therefore, had proposed to levy penalty under Section 10A(1) of the CST Act. It is worthwhile to point out that the order levying penalty for the assessment year 2008-09 is dated 30.1.2014. Though the dealer s objections were received on 16.10.2012, the Assessing Officer did not afford any opportunity of personal hearing to the appellant though more than one year had lapsed. This, in our considered view, is a serious issue because the dealer has taken a specific stand that the software is being used in the manufacture. Furthermore, the dealer s case is that in their registration certificate issued under the CST Act, as mentioned in Clause 9 in the annexure, computer software is also one of the items mentioned in their certificate of registration. Had an opportunity of hearing been granted to the dealer, especially when the Assessing Officer took more than one year to complete the assessment, the dealer would have explained the same. The case of hand having fallen under one of the exceptional circumstances as mentioned above warranting exercise of jurisdiction under Article 226 of The Constitution of India and as the defect, which has occurred by levying penalty without affording an opportunity of personal hearing would go to the root of the very levy itself, we are inclined to interfere with the impugned order, the assessment orders and remand the matters to the Assessing Officer for a fresh consideration - Appeal allowed.

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• Wealth tax

• 2021 (3) TMI 76
  Wealth tax assessment - whether the lands owned by the assessee and leased to trusts comes under the definition of asset , as defined u/s.2(ea) of the WT Act, or the assets held by him under the trusts or legal obligation for any public purpose of a charitable or religious nature in India, which is exempt u/s.5(i) of the WT Act? - Admission of additional evidences - HELD THAT:- In the present case, the lands are leased to trusts and trusts utilized the lands by constructing buildings on which educational institutions are running. Hence, by no stretch of imagination, the said lands can be construed as non-productive assets. Lands occupied by any building which has been constructed with the approval of appropriate authority is excluded from the definition of urban land and on plain reading of the said clause, it is clear that in order to avail the benefit, only condition required to be satisfied is, land is occupied by any building and such building has been constructed with the approval of appropriate authority. In the present case, the impugned lands are occupied by buildings and said construction was approved by appropriate authority Lands on which any building is constructed with the approval of appropriate authority cannot be considered as urban land, which comes under the definition of asset as defined u/s.2(ea) of WT Act. But, the assessee has taken this argument in light of various additional evidences for the first time before us and further, the AO had no occasion to verify the facts with regard to the arguments of the assessee in light of the definition of section 2(ea) of the WT Act. Hence, we are of the considered view that for the limited purpose of verification of facts with regard to additional evidences filed by the assessee to prove that buildings were constructed on the land with the approval of appropriate authority, the issue has been set aside to the AO and direct him to verify additional evidences filed by the assessee, to ascertain the facts whether building has been constructed with the approval of appropriate authority or not. In case, the AO finds that on the impugned lands any building was constructed with the approval of appropriate authority, then the AO is directed to exclude those lands for the purpose of Wealth Tax. AO himself has allowed the exemption u/s.5(i) for some of the assessment years wherever the trust deeds are registered, but the ld.CIT(A) has rejected the exemptions only on the ground that the impugned lands are vacant urban lands. But, fact remains that the lands in question as on the date of valuation are not a vacant urban lands but lands on which building was constructed with the approval of competent authority. Therefore, once any land on which building was constructed with the approval of appropriate authority, the same cannot be considered as vacant land. Therefore, even on this count, exemption claimed by the assessee on lands is in accordance with provisions of section 5(i) of the WT Act. AO as well as the CIT(A) were erred in levying taxes on lands owned by the assessee and given on lease for 99 years, even though, the assessee has proved with necessary evidences that the trusts have constructed buildings on the impugned lands with the approval of appropriate authority. In this case, evidences filed by the assessee clearly proves that these are not urban vacant lands, but lands on which buildings are constructed with the approval of appropriate authority and hence, in our considered view these lands cannot be brought to tax as urban lands within the meaning of asset, as defined u/s. 2(ea) of the WT Act. Therefore, we are of the considered opinion that the assessee is also entitled for exemption u/s.5(i) of the WT Act, because the lands are held by him under a trust for charitable purpose because said lands were given on lease to a trust and the trust has used the lands for running various educational institutions, which comes under the definition of charitable purpose. Therefore, for all reasons the impugned lands are outside the scope of the Wealth Tax. But, the fact remains that certain additional evidences filed by the assessee including copies of sanction plan, copies of approval letters issued for running educational institutions are not submitted before the AO. Therefore, for limited purpose of verification of additional evidences filed by the assessee, the matter has been set aside to the file of the AO and direct him to verify the additional evidences filed by the assessee and allow appropriate relief to the assessee.

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• Indian Laws

• 2021 (3) TMI 79
  Seeking condonation of delay in filing claim affidavit - Order of Debt Recovery Appellate Tribunal (DRAT) - HELD THAT:- The order dated January 16, 2018 cannot be said to be an order passed in adjudication on merits. Order impugned in the present petition passed by the DRAT has considered the same and records the background of the lis between the parties. It records that on June 29, 2020 learned counsel appearing on behalf of the petitioner (applicant No. 2 therein) had itself submitted that since the record in the case was bulky and it required detail arguments, instead of virtual hearing, physical hearing may be taken in the case and had in fact, consented for a short adjournment. Further on July 20, 2020 matter before the DRAT came to be adjourned on the request of both the parties. According to the petitioner delay was required to be calculated from January 16, 2018 and would therefore amount to a delay of two years as against the delay of 269 days argued by respondent No. 1, the DRAT has taken an overall view while observing that though there were some lapses on the part of respondent No. 1 in not filing the claim affidavit, but since the claim affidavit was ready, no prejudice whatsoever would be caused to the petitioner (financial institution). It is to be noted that ultimately the case was required to be decided on the basis of the material evidence placed before the DRAT. The appellants shall file their claim affidavit in the DRT within one week from the date on which the present order is uploaded on the website after duly serving a copy of the same on the opposite party - The application for cross-examination of the witnesses of respondent-financial institution filed by the appellants in main O. A. shall be decided within a period of four weeks including witness action, if any, from today.

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