TMI Tax Updates - e-Newsletter
March 5, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

• Supreme Court ruling backs taxpayers in software royalty case
• AGRICULTURE AND INFRASTRUCTURE DEVELOPMENT CESS

News

• Income Tax Department conducts searches in Mumbai

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• Income Tax Department conducts searches in Tamil Nadu

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• India attracted total FDI inflow of US$ 67.54 billion during April to December 2020;

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• Clarification in respect of residency under Income-tax Act, 1961

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Notifications

Customs

• 11/2021 - dated 3-3-2021 - ADD
  Seeks to further amend notification No. 6/2016-Customs (ADD) dated 8th March, 2016 to extend the levy of Anti-Dumping duty on Phenol originating in or exported from European Union and Singapore, up to and inclusive of 7th June, 2021.

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• 26/2021 - dated 4-3-2021 - Cus (NT)
  Exchange rate Notification No.26/2021-Cus (NT) dated 04.03.2021.

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Circulars / Instructions / Orders

Income Tax

• 02 of 2021 - dated 3-3-2021
  Residential status of certain individuals under Income-tax Act, 1961

Highlights / Catch Notes

GST

• Classification of goods - rate of GST - supply of food inside the restaurant (branch) situated in zoological garden - the applicant has to pay GST @ 5%, on the supplies made at the impugned premises at Zoological garden, Mysuru, subject to conditions i.e. not availing ITC for the impugned activity - AAR
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• Classification of goods - Hand Sanitizer - The product in question, no doubt is used as an alternative to soap, it can't be said to have a prophylactic use in COVID Infection as the impugned produce is not specific to COVID-19 infection. The same cannot be compared with Polio drops or covaxin, wherein the Polio drops have a prophylactic use in preventing Polio myelitis disease or covaxin helps in preventing COVID -19 infection. In the instant case, the impugned product is not specific to any disease. Hence the goods in question cannot be covered under HSN 3004. - AAR
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• Classification of goods - hand sanitizers - Isopropyl rubbing alcohol IP - Chlorhexidine Gluconate - Isopropyl Alcohol solution - The applicant is of the understanding that as per common parlance, hand sanitizers are bought as drugs. We do not accept this contention. We observe that, people buy hand sanitizzers as an alternative to soap and for disinfecting purpose. In the present case, it is seen that the alcohol-based hand sanitizers, as the name itself suggests is to sanitize the hands and disinfect them and hence cannot be covered under Medicaments. - AAR
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• Seeking Grant of bail - availment of fraudulent ITC - connection of accused with the offence - Considering the facts and circumstances of the case, gravity of offence, role of accused and evidence surfaced against the accused till date, I do not find that this is a fit case to grant bail to the accused/applicant at this stage - DSC
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Income Tax

• TDS u/s 195 - Royalty - amounts paid by the concerned persons resident in India to non-resident, foreign software suppliers - Given the definition of royalties contained in Article 12 of the DTAAs it is clear that there is no obligation on the persons mentioned in section 195 of the Income Tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income Tax Act (section 9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases. - SC
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• Waiver of Interest - From the cumulative reading of the contents of the applications it is revealed that the applications were filed at the drop of the hat just to avail the remedy as provided under the Act, whereas the conditions enumerated therein are mutually to be complied with and not exclusive u/s 220(2A) of Act, 1967. - The writ petition is dismissed. - HC
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• Rejection of books of accounts - rejection of books of account by invoking the provisions of section 145(3) - the AO has categorically noted in the assessment order found many glaring discrepancies and defects in the books of account of the assessee as well as conduct of the assessee during assessment proceedings, thus the assessee’s purchase and expenditures shown were not verifiable from books of account and same should be rejected and income has to be estimated. - AT
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• Disallowance u/s 36(1)(iii) on account of interest expense on borrowings - it was neither prudent for the assessee to divert any part of borrowed funds for nonbusiness purposes; nor was it prudent to make pre-payment of loan repayments even if the assessee had its own interest free funds. In these specific and peculiar facts and circumstances, there is no case for any disallowance of interest U/s 36(1)(iii) of I.T. Act. - AT
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• Accommodation entries - Estimation of income - the addition cannot be made on the basis of any hypothesis presumption albeit it has to be based on evidences or material or enquiry conducted. The addition here in this case has purely been made on surmises and presumption that assessee might have earned 2% commission on accommodation entry. This approach is unsustainable in law and on facts. At least, there has to be a concrete finding with material that assessee was found to be carrying out shady accommodation entry transaction. - AT
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• Reopening of assessment u/s 147 - the AO has merely gone by the CIB report and was not even in possession of the sale deed and the exact specifics of the transaction at the time of recording of reasons and therefore, it is a case where the proceedings are vitiated for want of tangible material in possession of the AO and lack of reason to believe which is more in the realm of suspicion rather than formation of opinion that income has escaped assessment. The reasons thus recorded and/or the documents available on record, therefore, don’t show a link/nexus and relevancy to the opinion formed by the Assessing Officer regarding escapement of income. - AT
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Customs

• Rejection of declaration under SVLDRS - when a discretion is conferred upon an authority to decide an issue which has civil consequences upon the party concerned, such discretion has to be exercised in a just, fair and reasonable manner complying with the principles of natural justice. Thus, while deciding eligibility, the designated committee is required to consider all relevant materials and also hear the concerned declarant. - This is a matter which should be best left to the designated committee to decide after granting opportunity of hearing to the petitioner. - HC
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Indian Laws

• Arbitral Award - Time Limitation for filing petition - the period of limitation for filing objections would have to be reckoned from the date on which the signed copy of the award was made available to the parties i.e. on 19.05.2018 in the instant case. - SC
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IBC

• Initiation of CIRP - Period of limitation - NPA - it appears that the bank had asserted, the bar of limitation did not apply as the corporate debtor had made acknowledgments in its balance-sheets, acknowledgments as in section 18 of the Limitation Act, for the period of limitation being extended - The court is convinced that the mandate of the Limitation Act is for dismissal of, inter alia, an application such as the bank's, on having been brought more than three years after right to sue accrued. The Tribunal, on the facts, lacked jurisdiction to admit it. - HC
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• Stay of CIRP - Its clear that debt and default are not disputed. The financial woes of the Appellant and the liquidity problems faced by it, whether forced upon it or of its own making, have no bearing on commencement of insolvency resolution and cannot be permitted to be a stumbling block in triggering of CIRP at the instance of Financial Creditor. - AT
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• Corporate Debtor, going concern or not - interim funds to run the concern - On going through Section 28(1)(a), Section 28(3) and Section 28(4), it is clear that the Resolution Professional can raise Interim Finance only subject to approval of the Committee of Creditors by a vote of 66 % under Section 28. In the instant case it is an admitted fact that the CoC have not approved the raising of any interim funds. - It is reiterated by the Resolution Professional that the Corporate Debtor is not a going concern - the direction given by the Adjudicating Authority in MA 4002/2019 are contrary to the provisions of IBC and are hereby set aside. - AT
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Service Tax

• Rejection of declaration under the SVLDRS - duty demand or duty liability admitted by the person - It is a settled proposition of law that when an authority relies upon a document, copy of the same should be made available to the aggrieved party so that the aggrieved party can respond to such document and effectively make its defence. Therefore, non-furnishing of report dated 20.02.2020 to the petitioners was in violation of the principles of natural justice which, therefore, vitiated the impugned decision taken. - HC
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• CENVAT Credit - service tax paid by them prior to registration with the Department - the service tax registration was not mandatory for refund of accumulated CENVAT credit of service tax paid on input service used for export of service. - HC
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Central Excise

• Claim of interest on delayed refund, from the date of deposit till the refund of the pre-deposit of principal amount - the assessee is entitled to claim interest from the date of payment of initial amount till the date of its refund - Therefore, the appellants are entitled to claim the interest on delayed refund from the date of deposit till its realization @ 12% per annum. - AT
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• Scope of the adjudication proceeding where the case has been remanded back by the tribunal - The fact of duplication of demand has been specifically examined in both the tribunal’s order and the finding of both the orders are very clear and precise leaving no scope for interpretation. - In case the commissioner was aggrieved by the observation of the second tribunal order dated 24.01.2019 the right course of action was to take the matter to the higher forum and not to ignore the same. - The impugned order passed directly in violation of two tribunal’s orders is bad in law and is therefore set aside. - AT
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VAT

• Levy of Interest - the default arising on non-payment of tax on an admitted liability in the case of a self-assessment will attract an automatic levy of interest, whereas, default in filing an incomplete or incorrect return would attract interest only based on the adjudication by the Assessing Officer. The present assessment is based on a self-assessment and liability to AST is thus automatic. The question of determination is not relevant in the present case. - HC
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• Levy of penal interest - delayed pament of tax - the appellant disputes the allegation of the Department that they are a defaulter, i.e. there has been a turnover suppression. Unless the said issue is decided, the aspect of delay in payment of taxes cannot be decided. Only after deciding the delay which is alleged to have occurred, interest can be levied. Therefore, in the factual circumstances of the case, issuance of notice on the appellant was absolutely necessary. - HC
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Case Laws:

• GST

• 2021 (3) TMI 143
  Classification of goods - rate of GST - supply of food inside the restaurant (branch) situated in zoological garden - HELD THAT:- The applicant, as admitted, is already registered under GST, providing accommodation, food beverage services, falling under SAC 9963 and is discharging GST @ 18% on the said services, in terms of entry number 7 (vi) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended - The authorised representative during the personal hearing expressed that they intend to obtain separate registration for the impugned services at the Zoo premises, as the said service is a different vertical of business, in which case the impugned services are covered under 'Restaurant Service other than at specified premises', under SAC 9963 and is exigible to GST @ 2.5%, in terms of entry number 7 (ii) of the Notification No.11/2017-Central Tax (Rate) dated 28.06.2017, as amended; subject to condition that credit of input tax charged on goods and services used in supplying the service has not been taken tax and also subject to explanation (iv). Alternately, if the applicant intends to amend the existing registration to include the premises at Zoological garden, Mysuru, then two options are available to the applicant, which are as under: (i) The applicant need to maintain separate accounts for the individual premises or (ii) The applicant need to reverse the input tax credit in terms of Rule 42 43 of CGST Rules 2017, in case they maintain common account for both the premises and avail the input tax credit. Even in both the above cases, the applicant has to pay GST @ 5%, on the supplies made at the impugned premises at Zoological garden, Mysuru.

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• 2021 (3) TMI 142
  Permission for withdrawal of petition - levy of GST - Collection of amount as re-imbursement of cost of blade, soap etc.,-collected for removing Mudi of the Devotees in a public place of worship - supply of Goods or Supply of Service - rate of tax - HELD THAT:- The applicant has filed application through online ARA-01 Portal on 21-02-2020. However, the applicant has filed physical copy of the application along with a letter dated 29.01.2021, requesting this authority to permit them to withdraw their application for advance ruling due to the current pandemic situation created by COVID19. The application filed by the Applicant for advance ruling is disposed off as withdrawn.

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• 2021 (3) TMI 141
  Classification of goods - rate of GST - Hand Sanitizer - HELD THAT:- The hand sanitizers are used to disinfect the skin surfaces from microbes and viruses. All disinfectants have a property of killing disease causing agents and can claim to be prophylactic in nature. But the main activity of the disinfectant is to disinfect the surfaces - Disinfectants are chemical agents designed to inactivate or destroy microorganisms on inert surfaces. Disinfectants kill more germs than sanitizers. Disinfectants are frequently used in hospitals, dental surgeries, kitchens, and bathrooms to kill infectious organisms. For any goods to be covered under HSN 3004, the said goods should be for therapeutic use or for prophylactic use . It is seen that the agent would be called a therapeutic agent only if it has a curative effect against a disease. Since the product in question is not used for treatment of an already prevalent disease in a patient, the same cannot be said to have a therapeutic use - The product in question, no doubt is used as an alternative to soap, it can't be said to have a prophylactic use in COVID Infection as the impugned produce is not specific to COVID-19 infection. The same cannot be compared with Polio drops or covaxin, wherein the Polio drops have a prophylactic use in preventing Polio myelitis disease or covaxin helps in preventing COVID -19 infection. In the instant case, the impugned product is not specific to any disease. Hence the goods in question cannot be covered under HSN 3004. The impugned goods are covered under heading 3808, which in turn is covered under entry no. 87 of Schedule III of Notification No.01/2017 - Central Tax (Rate) dated 28.06.2017 and hence are taxable at the rate of 9% under the CGST Act. Similarly, the goods are taxable at the rate of 9% under the KGST Act.

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• 2021 (3) TMI 140
  Classification of goods - hand sanitizers - Isopropyl rubbing alcohol IP - Chlorhexidine Gluconate - Isopropyl Alcohol solution - to be classified under Chapter Heading 3004 attracting 12 % GST or otherwise? - HELD THAT:- The drugs not only include medicines but also substances. So, obtaining a license for manufacturing of hand sanitizers, which is a disinfectant is actually a compliance of Drugs and Cosmetic Act, 1940. However, to decide the issue whether the disinfectant/ hand sanitizer should fall under HSN 3004 or 3808, we need to revert to HSN explanatory notes, case laws and common understanding of the product in the market. The HSN Code 3808 94 00 clearly covers all disinfectants. When there is a specific entry covering disinfectants, the same needs to be classified under the same head. But the Chapter Note 1 to the Chapter 38 clearly states that this Chapter does not cover medicaments (Heading 3003 or 3004) - for a goods to be covered under HSN 3004, the goods so supplied should be for therapeutic use or for prophylactic use . It is seen that the agent would be called a therapeutic agent only if it has a curative effect against a disease. Since the product in question is not used for treatment of an already prevalent disease in a patient, the same cannot be said to have a therapeutic use. Meaning of Disinfectants - HELD THAT:- Disinfectants are those goods used for disinfection. The disinfect has the meaning to get rid of infection or cleanse by destroying infecting micro-organisms especially by chemical means. Disinfectant is any substances that is used to kill germs, such as viruses, bacteria, and other microorganisms that can cause infection and disease. Further as per the common parlance also, the Alcohol based hand sanitizers are never classified as Medicaments. People buy hand sanitizers as an alternative to soap and for disinfecting purpose. In the present case, it is seen that the alcohol-based hand sanitizers, as the name itself suggests is to sanitize the hands and disinfect them and hence cannot be covered under Medicaments - The goods covered under heading 3808 are covered entry no. 87 of Schedule III of Notification No.01/2017 - Central Tax (Rate) dated 28.06.2017 and are taxable at the rate of 9% under the CGST Act. Similarly, the goods are taxable at the rate of 9% under the KGST Act.

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• 2021 (3) TMI 134
  Provisional attachment of Bank Accounts of petitioner - section 79(1)(c) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Issue notice. Stand over to 20.04.2021.

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• 2021 (3) TMI 128
  Violation of principles of natural justice - petitioner submits that the first respondent without considering the material placed by the petitioner has issued the impugned endorsement and further the first respondent has not considered the appeal on merits and rejected on unwarranted grounds - HELD THAT:- It is not in dispute that the petitioner aggrieved by the order passed by the second respondent, filed an appeal before the first respondent. The first respondent without assigning any reasons has rejected the appeal by issuing the impugned endorsement. Thus, the impugned endorsement issued by the first respondent is not a speaking order. Though the petitioner placed material before the first respondent, without considering the same, merely on the ground that the writ petition filed by the consigner, which is pending, rejected the appeal. The first respondent without application of mind has proceeded to reject the appeal which is arbitrary and in contravention of principles of natural justice. The said endorsement is liable to be set aside. The matter is remitted to first respondent to reconsider the appeal and pass appropriate order in accordance with law within a period of three months from the date of receipt of a certified copy of this order - Petition allowed by way of remand.

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• 2021 (3) TMI 97
  Seeking Grant of bail - case of accused/applicant is that accused has been falsely implicated in this case and he do not have any concern with the alleged firms - availment of fraudulent ITC - connection of accused with the offence - It is alleged that for the purpose of commission of offence, bogus firms were created in even in the name of the employees of the accused and these firms were used for the purpose of availament of fraudulent ineligible tax credit - HELD THAT:- The offence alleged against the accused is grave in nature in which a huge amount of ITC claim is involved. In commission of offence there is no actual purchase or sale of goods or hiring or rendering of services by projecting a huge turnover that remained only on papers. In such cases, the Government is not only deprived of what is due to them. But in fraudulent ITC claims, of the nature allegedly made against the accused, a huge liability is created for the Government. Conduct of accused is also shown non-cooperative during investigation. Role of accused being the main person in the commission offence has been shown. Such acts of creating fictitious firm and bogus bill for the purpose of availing benefit from the government causes heavy losses to the exchequer. Considering the facts and circumstances of the case, gravity of offence, role of accused and evidence surfaced against the accused till date, I do not find that this is a fit case to grant bail to the accused/applicant at this stage - Application dismissed.

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• Income Tax

• 2021 (3) TMI 138
  TDS u/s 195 - Royalty - amounts paid by the concerned persons resident in India to non-resident, foreign software suppliers - Whether constitutes as taxable income deemed to accrue in India u/s 9(1)(vi) - income deemed to accrue or arise in India - computer software is purchased directly by an end-user, resident in India, from a foreign, non-resident supplier or manufacturer, resident Indian companies that act as distributors or resellers, by purchasing computer software from foreign, non-resident suppliers or manufacturers and then reselling the same to resident Indian end-user, distributor happens to be a foreign, non-resident vendor, who, after purchasing software from a foreign, non-resident seller, resells the same to resident Indian distributors or end-users and computer software is affixed onto hardware and is sold as an integrated unit/equipment by foreign, non-resident suppliers to resident Indian distributors or end-users - whether assessee had purchased only a right to use the copyright i.e. the software and not the entire copyright itself, the payment cannot be treated as Royalty as per the Double Taxation Avoidance Agreement and Treaties? HELD THAT:- By virtue of Article 12(3) of the DTAA, royalties are payments of any kind received as consideration for the use of, or the right to use, any copyright of a literary work, which includes a computer programme or software.There can be no doubt as to the real nature of the transactions in the appeals before us. What is licensed by the foreign, non-resident supplier to the distributor and resold to the resident end-user, or directly supplied to the resident end-user, is in fact the sale of a physical object which contains an embedded computer programme, and is therefore, a sale of goods, which, as has been correctly pointed out by the learned counsel for the assessee. The logic behind Article 30 of the India-USA DTAA is for reasons connected with USA s municipal taxation laws, and has nothing to do with Indian municipal law governing the liability of persons to deduct tax at source under section 195 of the Income Tax Act. This is reinforced by the fact that the OECD Commentary on Articles 30 and 31 acknowledges the fact that the entry into force provisions, unlike the rest of the provisions in the OECD Model Tax Convention on Income and on Capital, depend on the domestic laws of Contracting States. The person mentioned in section 195 of the Income Tax Act cannot be expected to do the impossible, namely, to apply the expanded definition of royalty inserted by explanation 4 to section 9(1)(vi) of the Income Tax Act, for the assessment years in question, at a time when such explanation was not actually and factually in the statute. We cannot accede to the argument made by the learned Additional Solicitor General that the distribution of copyrighted computer software, on the facts of the appeals before us, would constitute the grant of an interest in copyright under section 14(b)(ii) of the Copyright Act, thus necessitating the deduction of tax at source under section 195. Given the definition of royalties contained in Article 12 of the DTAAs it is clear that there is no obligation on the persons mentioned in section 195 of the Income Tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income Tax Act (section 9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases. Doctrine of first sale/principle of exhaustion - the doctrine of first sale/principle of exhaustion is dependent, in the first place, upon legislation which either recognises or refuses to recognise the doctrine (thereby continuing to vest distribution rights in the copyright owner, even beyond the first sale of the copyrighted work). Thus, for example, prior to the amendment of section 14(d)(ii) in 2012, dealing with a cinematograph film, the distribution right to sell or give on hire or offer for sale or hire, any copy of the film, would continue to vest in the copyright owner, regardless of whether such copy ha[d] been sold or given on hire on earlier occasion , which manifested the legislative intent against the application of the doctrine of first sale/principle of exhaustion. Post 2012, however, the balance between the copyright owner s distribution right and the right of the purchaser to further resale, was tilted in favour of the latter, the words regardless of whether such copy has been sold or given on hire on earlier occasion being deleted by the amendment. Likewise, when it comes to section 14(a)(ii) of the Copyright Act, the distribution right subsists with the owner of copyright to issue copies of the work to the public, to the extent such copies are not copies already in circulation, thereby manifesting a legislative intent to apply the doctrine of first sale/principle of exhaustion. The language of section 14(b)(ii) of the Copyright Act makes it clear that it is the exclusive right of the owner to sell or to give on commercial rental or offer for sale or for commercial rental any copy of the computer programme . Thus, a distributor who purchases computer software in material form and resells it to an end-user cannot be said to be within the scope of the aforesaid provision. The sale or commercial rental spoken of in section 14(b)(ii) of the Copyright Act is of any copy of a computer programme , making it clear that the section would only apply to the making of copies of the computer programme and then selling them, i.e., reproduction of the same for sale or commercial rental. The object of section 14(b)(ii) of the Copyright Act, in the context of a computer program, is to interdict reproduction of the said computer programme and consequent transfer of the reproduced computer programme to subsequent acquirers/end-users. By way of contrast, once a book is sold, on further resale of the same book, the purchaser loses the material book altogether, as such purchaser has, for consideration, parted with the book once and for all. It is significant to note that after India took such positions qua the OECD Commentary, no bilateral amendment was made by India and the other Contracting States to change the definition of royalties contained in any of the DTAAs that we are concerned with in these appeals, in accordance with its position. As a matter of fact, DTAAs that were amended subsequently, such as the Convention between the Republic of India and the Kingdom of Morocco for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes On Income, Notification : No. GSR 245(E), dated 15-3-2000 [ India-Morocco DTAA ], which was amended on 22.10.2019, Amended by Notification No. S.O. 3789(E) [No.84/2019/F.No.503/09/2009-FTD-II], Dated 22-10-2019 incorporated a definition of royalties, not very different from the definition contained in the OECD Model Tax Convention. We cannot accede to the argument made by the learned Additional Solicitor General that the distribution of copyrighted computer software, on the facts of the appeals before us, would constitute the grant of an interest in copyright under section 14(b)(ii) of the Copyright Act, thus necessitating the deduction of tax at source under section 195 of the Income Tax Act. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS under section 195 of the Income Tax Act. The answer to this question will apply to all four categories of cases enumerated by us in paragraph 4 of this judgment. The appeals from the impugned judgments of the High Court of Karnataka are allowed, and the aforesaid judgments are set aside. The ruling of the AAR in Citrix Systems (AAR) [ 2012 (2) TMI 258 - AUTHORITY FOR ADVANCE RULINGS ] is set aside. The appeals from the impugned judgments of the High Court of Delhi are dismissed.

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• 2021 (3) TMI 127
  Waiver of Interest - Whether an Assessee defaulter of payment of demand raised as per the assessment order can claim waiver u/s 220(2A) - Assessment u/s 153A / 153C - HELD THAT:- Section 234A to C deals with charging of interest for default of furnishing return of income, payment of advance tax and interest on the deferment of the advance tax. The aforementioned proceedings have not been disputed by the petitioner except the modification in the appeal, preferred, against the assessment order. The demand of interest raised by the revenue was in accordance with the statutory provisions of the Act, which the petitioner failed to countenance with any direct and cogent evidence, except bald and vague plea of hardships.From the cumulative reading of the contents of the applications it is revealed that the applications were filed at the drop of the hat just to avail the remedy as provided under the Act, whereas the conditions enumerated therein are mutually to be complied with and not exclusive u/s 220(2A) of Act, 1967. None of the conditions as enumerated in Section 220 (2A) have been complied with the petitioner enabling to seek waiver of interest in accordance with law. The orders under challenge are not vitiated or there is a gross error apparent on the face, much less, erroneous or without application of mind. I may put caveat to the observations reflected in the impugned order that no materials has been placed on record regarding the income from other sources. The writ petition is accordingly dismissed.

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• 2021 (3) TMI 125
  Unexplained investment u/s 69 - HELD THAT:- From the plain reading of section 69 it is clear that investments which are made in the financial year immediately preceding the assessment year can only be subjected to addition under the said section. In other words, the investments made in any other assessment year cannot be brought to tax in the relevant assessment year. From the assessment order and on material record, it is clear that the investments / advances of ₹ 17,10,000 was made by the assessee in the financial year 2005-2006, i.e., assessment year 2006-2007. Therefore, investments made in assessment year 2006-2007 cannot be brought tax u/s 69 in the relevant assessment year, namely, A.Y. 2008-2009. For this reason alone, the A.O. was not justified in law in making an addition by invoking the provisions of section 69 of the I.T.Act. The advance paid by the assessee to Shri Narayana Reddy during the assessment year 2006-2007 is stated to be out of sale proceeds of 1 Acre 30 guntas of land belonging to the assessee and her son. Since it is clear that the amount has been advanced for purchase of land in assessment year 2006- 2007, addition u/s 69 of the I.T.Act amounting to ₹ 17,10,000 cannot be made for the relevant assessment year, viz., 2008- 2009. It is ordered accordingly. Unexplained investment u/s 69 - HELD THAT:- As assessee had received back a sum of ₹ 4 lakh being part of advance amount paid to Shri Narayana Reddy. This amount of ₹ 4 lakh received from Shri Narayana Reddy was invested in mutual funds. With regard to the bank deposit of ₹ 1 lakh, AO has erroneously came to the conclusion that the assessee has made bank deposit of ₹ 1 lakh. A.O. himself in paragraph 5 of the impugned assessment order had found that on verification of assessee s bank account, there was no such bank deposit on 12.11.2007 of ₹ 1 lakh. Therefore, only the investment made during relevant assessment year is with reference to mutual funds amounting to ₹ 4 lakh. The investment in mutual funds was explained by the amount of ₹ 4 lakh received by the assessee from Shri Narayana Reddy during the relevant assessment year. Therefore, the addition of ₹ 5 lakh is unwarranted u/s 69. Addition u/s 68 - HELD THAT:- Addition of ₹ 50,000 as unexplained cash credits in the bank account of the assessee. The said amount has been deposited in Karnataka Bank saving bank account on 07.04.2007 (cash deposit). Before the Assessing Officer, the assessee had stated that the assessee was unable to recollect the source of cash deposit. This was due to old age and the recent surgery she had undertaken, which had resulted into loss of memory. As stated that the cash deposit of ₹ 50,000 made by the assessee may be explained as part of past savings and other receipts. Since the assessee has not given any details with regard to the cash deposits of ₹ 50,000 on 07.04.2007, as confirm this addition.

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• 2021 (3) TMI 120
  Condonation of delay - delay of 206 days in filing the appeal - sufficient cause for delay - HELD THAT:- Managing Director of the assessee company has filed affidavit and medical certificates showing a sufficient cause that due to replacement of kidney, he fell ill and Dr. advised complete rest and isolation for proper cure and care. After recovering from the said illness, MD took all endeavor to file appeals before the Tribunal but the same was delayed by 206 days. There is no affidavit or documentary evidence from the Department controverting the said affidavit and medical evidence in support of application. Thus, in our humble understanding, this is a sufficient cause based on medical ground. Respectfully following the ratio of the decision in the case of Collector, Land Acquisition vs Mst. Katiji [ 1987 (2) TMI 61 - SUPREME COURT] and satisfying with the sufficient cause based on medical ground supported by an unrebutted affidavit of medical certificates, shown by the assessee in filing the appeals for condonation of 206 days, we have no hesitation to hold that the assessee has shown and established a sufficient cause for condoning the delay of 206 days in filing the appeals. Hence, we condone the delay of 206 days and admit the appeal for adjudication. Rejection of books of accounts - rejection of books of account by invoking the provisions of section 145(3) - HELD THAT:- On careful and vigilant reading of the orders of lower authorities, we find that the AO before resorting to take any action under section 145(3) of the Act has properly analysed the facts and circumstances of the case and found 11 defects and deficiencies citing the correct and completeness of books of account and ld counsel of assessee could not controvert these defects barring a few. Therefore, same were not reliable and the AO was right in rejecting the same by following the decision of Hon ble Supreme Court in the case of CIT vs. British Paints India Ltd. [ 1990 (12) TMI 2 - SUPREME COURT ] We are satisfied that the AO has given sufficient reasons regarding defects deficiencies of completeness and correctness of books of account, which could not reflect and disclose the true state of affairs and correct income of assessee for the period under consideration. The assessee failed to do and thus, in our considered opinion, the AO was right in rejecting the books of account of the assessee. We are also in agreement with the conclusion drawn and recorded by ld CIT(A) that since neither before the AO nor before the CIT(A), the assessee has not filed complete books of account and, therefore, the AO was right in rejecting books of account u/s.145(3) of the Act and to proceed to estimate profit on the basis of best judgment principles. In the present case also, the AO has categorically noted in the assessment order found many glaring discrepancies and defects in the books of account of the assessee as well as conduct of the assessee during assessment proceedings, thus the assessee s purchase and expenditures shown were not verifiable from books of account and same should be rejected and income has to be estimated. Estimating the income of the assessee @ 11% on gross turnover - HELD THAT:- As taking into consideration of the relevant evidence and facts and circumstances of the case, especially the net profit declared by the assessee and accepted by the department during immediately preceding assessment and succeeding assessment year, we are of the view that the average of three years is 1.98% as against the net profit declared by the assessee for present assessment year @ 1.66%. Therefore, in our considered opinion, to meet the ends of justice and to cover all possible leakage of revenue, we find it proper to estimate the net profit making the profit double of 1.98% (APPROX) which comes to 4% of contract receipts. The assessee get partial relief and the AO is directed to compute the net profit @ 4% of the gross contract receipts. Addition of other revenue viz; income from NSC and insurance claim and other receipts - HELD THAT:- Since the AO after rejection of books of account u/s.145(3) of the Act, has estimated the business income of the assessee accrued to it from the business activities of works contract, therefore, it is not permissible to make another addition pertaining to the entries in the profit and loss account without specifying the same in the assessment order and without bringing out any adverse materials on record that the assessee has earned some other income which was not related to its business activities of works contract. We are in agreement with the contention of the assessee that the AO has committed an error while adding the amount of other revenue viz; income from NSC and insurance claim and other receipts despite the fact that in assessee s own case, ITAT has allowed miscellaneous income as business income by holding that they cannot be excluded from the normal profit and in furtherance to that dismissing the departmental appeal against such deletion. Accordingly, we hold that the AO was not correct in making addition pertaining to other income shown in the P L account when he has estimated business income after taking action of rejection of books of account. Thus, the AO is directed to delete the same. Unexplained liability claimed by the assessee towards sundry creditors - Whether CIT(A) was not justified in holding that since book result of the assessee was rejected by the AO, further addition on account of bogus liability was not permissible? - HELD THAT:- The impugned amount as on 31.3.2009 also includes closing balance brought forward from preceding financial period and it becomes opening balance as on 1.4.2009 from present financial year 2009-10 and in our humble understanding, this amount cannot be taken into consideration for making addition in present assessment year 2009-10 on account of sundry creditors. From the copy of the scrutiny assessment order for A.Y. 2009-10, we also observe that the AO has accepted the closing balance of impugned amount of sundry creditors as on 31.3.2009, which has brought forward from present assessment year to succeeding assessment year 2010-2011 as opening balance has been accepted by the AO without any dispute. These glaring facts have not been controverted by ld CIT DR in any manner. Therefore, action of the AO in making addition of impugned amount of sundry creditors was not correct and valid. Thus, it cannot be held as sustainable. Therefore, the ld CIT(A) was quite correct and justified in deleting the addition by observing that after rejection of books of account and estimation of income, there is no valid reason to disallow the sundry creditors. - Decided against revenue.

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• 2021 (3) TMI 119
  Disallowance of interest - AO had proceeded to work out the disallowance by concluding that the terms loans received by the assessee was used to advance the amounts and thereby assessee has utilized interest bearing fund for the purpose of advance - HELD THAT:- The summarized amount advanced to Vijuk Equipments Inc. as recorded in the assessment order and also reproduced in the order of CIT(A) reveal that assessee has made aggregating payment on various dates prior to 7.1.2011, being the date of disbursement of term loan of ₹ 329 lakhs. We thus find force in the contention of the Ld AR that the term loan of ₹ 329 lakhs could not have been utilized for making the advance to Vijuk Equipment Inc. In such a situation, we are of the view that no disallowance of interest could be made for the amounts advanced out of term loan of ₹ 329 lakhs. We therefore direct the AO to delete the addition on interest to that extent. As far as payment of ₹ 90.30 lakhs made to Vijuk Equipments Inc. on 09.03.2011 is concerned, before us Ld AR has fairly admitted that the term loan of ₹ 90.30 lakhs could have been said to be utilized for advancing the amount of ₹ 90.30 lacs to Vijuk Equipments Inc. In such a situation, we are of the view that to the extent of disallowance of interest on ₹ 90.30 lacs advanced calls for no interference. We therefore direct the disallowance of interest be restricted out of amount of ₹ 90.30 lakhs paid on 09.03.2011 from the term loan received by the assessee. Thus this ground of assessee is partly allowed.

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• 2021 (3) TMI 116
  Disallowance u/s 36(1)(iii) on account of interest expense on borrowings - HELD THAT:- As decided in assessee's own case [ 2019 (2) TMI 1912 - ITAT DELHI] investments in mutual funds had not started till the time, the assessee started earning operating income from transmission of electricity. It is also not in dispute that the borrowed funds were entirely used by the assessee for investment in fixed assets for the purposes of business - assessee had adequate interest free funds of its own for making investments in mutual funds. It is, furthermore, not in dispute that there were contractual restrictions imposed on assessee in respect of utilization of borrowed funds; and also, the assessee was liable for payment of substantial amounts of liquidation damages/pre-payment charges in case the assessee made pre-payment of loan repayments - due to contractual restrictions and liquidation damages/pre-payment charges, as aforesaid; it was neither prudent for the assessee to divert any part of borrowed funds for nonbusiness purposes; nor was it prudent to make pre-payment of loan repayments even if the assessee had its own interest free funds. In these specific and peculiar facts and circumstances, there is no case for any disallowance of interest U/s 36(1)(iii) of I.T. Act. - Decided in favour of assessee.

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• 2021 (3) TMI 115
  Exemption u/s 11 - Registration u/s 12AA and 80G(5)(vi) denied - Charitable activity u/s 2(15) - HELD THAT:- Under the amended law as are applicable in the instant case, once the ld. CIT(E) is satisfied about the objects and the genuineness of the activities of the trust and the sufficient compliance of other law for time being in force as are material for the purpose of achieving its objects, the provisions of sections 11 and 12 shall apply from the assessment year following the financial year in which such application is made. In the instant case, the assessee has made an application on 04.02.2020 and in light of the aforesaid provisions, we find that where the registration has been granted by the ld CIT(E) after satisfying himself about the objects and genuineness of its activities, the provisions of sections 11 and 12 shall apply in the case of the assessee from 01.04.2020 i.e. from A.Y 2020-21 onwards. It is a case where the ld. CIT(E) has sought certain explanation/clarification from the assessee trust regarding its objects vide show cause dated 11.09.2020 which has been suitably explained by the assessee by way of its affidavit dated 22nd September, 2020 and basis such clarification, ld. CIT(E) was satisfied about the charitable nature of the objects of the assessee foundation and therefore, once, the objects have been found to be charitable in nature, there is no discretion left with the ld CIT(E) to restrict the applicability of provisions of section 11 and 12 from date of furnishing of such affidavit and rather, as per the provisions of sub-section 2 to section 12A, the provisions of section 11 and 12 shall apply from 01.04.2020 i.e. from A.Y 2020-21 onwards and the assessee shall be entitled to claim exemption under section 11 and 12 from A.Y 2020-21. In any case, the requirements of proviso to Section 2(15) remain mandatory in nature and the compliance thereof has to be examined by the AO on a yearly basis including that for A.Y 2020-21 while framing the assessment as per law. In the result, the ld. CIT(E) is directed to grant registration u/s 12AA effective from A.Y 2020-21 instead of A.Y 2021-22. Following the aforesaid discussions, the ld. CIT(E) is also directed to grant registration u/s 80G(5)(vi) effective from A.Y 2020-21 instead of A.Y 2021-22 - Appeal of assessee allowed.

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• 2021 (3) TMI 114
  Rejection of books of accounts - Trading addition - GP estimation - AO estimated G.P. rate of 0.69% on declared turnover as against G.P rate of 0.38% declared by the assessee and made a trading addition in the hands of the assessee - HELD THAT:- Once the books of accounts are rejected, the AO has to estimate the profits based on his best judgment and either the past year results or comparative profits declared in similar line of trade in commodities could be a guiding factor. Regarding past year results, it is an admitted position of Revenue that past year results cannot be made a guiding factor and the assessee has also contended that given the exceptional circumstances where the turnover has increased by almost 130 times, the past year results are not reflective of state of affairs of current year. There is nothing on record in terms of comparative profits declared in similar line of trade in commodities. As assessee has explained the substantial fall in G.P rate due to fall in prices of cardamom where the prices have reduced by almost half the rate at the end of the year as compared to beginning of the year. Therefore, we find that there is no rational basis for estimating the gross profit rate by the AO even where the books of accounts are rejected. In fact, in the remand report submitted to the ld CIT(A), the AO has admitted that there is no specific reason mentioned in the assessment order to estimate the gross profit rate of 0.69% as against declared gross profit rate of 0.38%. Further, the AO has acknowledged the fact that turnover has increased substantially during the year and the trading results are duly supported with documentary evidences. Regarding commodity and cardamom trading losses CIT(A) has also recorded a finding that these are speculative losses and are not part of trading account of the assessee and thus, doesn t effect the trading results so declared by the assessee. In the results, the trading additions so made by the AO and confirmed by the ld CIT(A) is hereby directed to be deleted.

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• 2021 (3) TMI 113
  Non-granting of deduction u/s.37 - contribution to SPV being 15% of sale proceeds - sale proceeds retained by the monetary committee on the direction of Hon ble Supreme Court by holding that same is in penal nature - Whether it is compensatory in nature incurred wholly and exclusively for the purpose of business and hence allowable u/s.37? - HELD THAT:- As relying on ASHWATHNARAYANA SINGH AND CO. [ 2021 (2) TMI 130 - ITAT BANGALORE] we direct the Assessing Officer, the contribution to SPV being 15% of sale proceeds under the Category B is to be allowed as expenditure in the Assessment Years under consideration. Asseessee s appeals are allowed.

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• 2021 (3) TMI 106
  Assessment u/s 153A - Assessee is providing accommodation entries, for which assessee might have earned commission as per the prevailing market rate of 2% to 2.25% on the total credits on the bank account of the assessee - basis of the additions which has been made in the impugned appeals are that the assessee was found to be non-existing company at the time of search and assessee-company has indulged in taking accommodation entry in lieu of cash from various paper/ shell company - HELD THAT:- Assessee-company is very old company incorporated way back on 4th April, 1991 and has been duly registered as NBFC with RBI. Since then Assessee Company has been regularly filing its return with Income Tax Department, under the Income Tax Act, Returns with ROC under the Companies Act and also before RBI, being NBFC. It has been regularly filing its return of income along with audited accounts. The balance-sheet as on 31st March, 2011 reflects share capital reserve and surplus of more than ₹ 20.65 crores. It has investments of more than ₹ 18.27 crores and loans and advances given for the business purpose was at ₹ 2.43 crore and cash and bank balance of approximately ₹ 10 lakhs. The interest income has been shown at ₹ 19.65 lakhs. Same is the position in all the subsequent years balance-sheets. Thus, it cannot be held that it is non-existing company having no real business. Admittedly, during the course of search nothing incriminating or any iota of document has been found or seized from the possession of the assessee company - as per the assessment order itself nothing was found from the possession of assessee as no one was present at the premises. The entire premise has been drawn on the basis of certain information in possession with the Department from the search and seizure of group companies of Shri Sanjay Bhandari and from there it has been gathered that the assessee-company was engaged in some accommodation entry. If that is the case, then what information or material pertaining to the Assessee Company was found or unearthed which was handed over the Assessing Officer. Assessee has clarified that neither Shri Deepak Agarwal nor Shri Vishnu Agrawal are related to the assessee-company nor they were directors. Further, the document which has been referred in the assessment order has neither been found from the possession of the assessee nor it has been confronted to assessee nor any person was examined wherein the name of the assesseecompany has been implicated. This material itself cannot be held to be found from the search conducted in the case of the assessee. In case, if such a material found from the search of a different person, then the same should have been considered there in that case or satisfaction should have been recorded in terms of 153C against the assessee. In so far as this matter is concerned it cannot be reckoned as an incriminating material to make assessment under section 153A. Moreover, this paper has been recovered from a third party and is purely a blank paper without any mention of year or any amount so this cannot be basis for any inference or addition. The assessment for the Assessment Year 2011 12 to 2015 16 had attained finality. The period for the assessment year 2015-16 and 2016-17 nothing has been found from any enquiry or carried out in the case of the assessee that assessee was providing any accommodation entry and the business carry on by the assessee is sham or paper transaction, hence the addition cannot be made on the basis of any hypothesis presumption albeit it has to be based on evidences or material or enquiry conducted. The addition here in this case has purely been made on surmises and presumption that assessee might have earned 2% commission on accommodation entry. This approach is unsustainable in law and on facts. At least, there has to be a concrete finding with material that assessee was found to be carrying out shady accommodation entry transaction. Accordingly, we do not find any reason to uphold the alleged commission income in all the years. It cannot be held that assessee is paper company or was earning income was on the basis of alleged commission on accommodation entry. - Decided in favour of assessee.

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• 2021 (3) TMI 105
  Penalty u/s 271(1)(c) - disallowance of depreciation on computers and the disallowance of expenses - CIT-A deleted the addition - HELD THAT:- Disallowance of expenses cannot attract penal provisions due to the reason that assessee has claimed the expenses for maintaining the status and structure of the assessee company during the BIFR proceedings and part of which has been disallowed by the AO on only estimate basis. Similarly, depreciation claimed on computers, and other assets cannot be disallowed on proportionate basis, when the AO has admitted part of the depreciation as allowed. CIT(A) has relied on the decision of in the case of Reliance Petro Product Ltd. [ 2010 (3) TMI 19 - SUPREME COURT] wherein it is held that merely rejection of the claim of the assessee cannot invite penalty under section 271(1)(c) - AO has failed to substantiate any failure on the part of the assessee in disclosing all material facts fully and truly. AO has also failed to substantiate, as how the contention of the assessee was not bona fide. As noticed that in the grounds raised, the Revenue has only contested penalty in respect of depreciation on computers, whereas there is no separate computation of the depreciation on computers, either in the assessment order or in the penalty order. The finding of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any infirmity in the same - Appeal of the Revenue is dismissed.

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• 2021 (3) TMI 104
  Reopening of assessment u/s 147 - whether the AO is in possession of the material/information basis which he has formed the reasonable belief that the income of the assessee has escaped assessment for the impugned assessment year? - HELD THAT:- For assumption of jurisdiction u/s 147 AO must form a prima facie view on the basis of tangible material in his possession that there is an escapement of income, the opinion so formed may be subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion, the reasons recorded and/or the documents available on record must show a link/nexus and relevancy to the opinion formed by the AO regarding escapement of income and the reasons are required to be read as they were recorded by the AO. For the AO to disclose and open his mind through the reasons recorded by him and he has to speak through the reasons that the income chargeable to tax has escaped assessment. On the date of recording of reasons by the AO, only piece of information in possession of the AO was the CIB report that the assessee has sold certain immoveable property and the AO was not even having a copy of the sale deed or the specifics of the immoveable property, which to our mind, raises a question mark on the tangible nature of such information in terms of whether it is real or actual rather than imaginary and whether it actually relates to the assessee or not. Where the AO still wishes to rely on the report of CIB, given that such report is more of a generic report and not containing exact specifics of of immoveable property and other particulars of the transaction, it is expected that the AO on receipt of such report should carry out further examination before arriving at the prima facie view that income has escaped assessment and the matter is fit for issuance of notice u/s 148 - Such examination is required to be carried out before issuance of notice u/s 148 as the same is required for the Assessing officer to form his own independent opinion that the income has escaped assessment. In the instant case, there is no such examination and investigation carried out by the AO and infact, only after recording of the reasons, he has sought copy of the sale deed from the Sub-Registrar where the assessee has been shown as power of attorney holder of the owner of the immoveable property which again raises a question mark on the tangible nature of the CIB report. We therefore find that the AO has merely gone by the CIB report and was not even in possession of the sale deed and the exact specifics of the transaction at the time of recording of reasons and therefore, it is a case where the proceedings are vitiated for want of tangible material in possession of the AO and lack of reason to believe which is more in the realm of suspicion rather than formation of opinion that income has escaped assessment. The reasons thus recorded and/or the documents available on record, therefore, don t show a link/nexus and relevancy to the opinion formed by the Assessing Officer regarding escapement of income. Even though the reopening in the present case was after the expiry of four years from the end of the relevant A.Y 2008-09, given that there was no original return of income filed by the assessee and consequent assessment, it was not necessary for the AO to show that there was any failure to disclose fully or truly all material facts necessary for the assessment in terms of proviso to section 147 which is not applicable in the instant case. The assumption of jurisdiction and initiation of the proceedings u/s 147 of the Act to reopen the assessment proceedings are vitiated and does not satisfy the requirement of law and such action on the part of the Assessing Officer cannot be accepted and the notice under section 148 and consequent proceedings are thus set-aside. In the result, ground no. 1 of the assessee s appeal is allowed.

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• 2021 (3) TMI 99
  Penalty u/s 271(1)(c) - Defective notice - Non specification of charge - disallowance on account of non compete fee, expenditure incurred for increase in authorized capital and wrong deduction claimed u/s 80HHC on account of interest earned - HELD THAT:- Penalty notice does not specify whether the penalty was proposed for concealment of particulars of income or for furnishing inaccurate particulars of such income in terms of provisions of Section 271(1)(c). The Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT ] held that notice under section 274 should specifically state the grounds mentioned in section 271(1)(c) of the Act, i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy requirement of law. In notice dated 29.12.2006 and on 23.12.2011 issued under section 274 read with section 271 of the Act, initiated penalty against the appellant for alleged concealment of income or furnishing of inaccurate particulars of such income , that is to say, the specific default was not specified by the assessing officer in the notice issued. Hence since the notice u/s 274 has not been specified as to whether penalty is proposed for alleged concealment of income OR furnishing of inaccurate particulars of such income , the penalty levied is hereby obliterated. - Decided in favour of assessee.

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• Customs

• 2021 (3) TMI 136
  Rejection of declaration under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - voluntary disclosure - reason for rejection was mentioned as being ineligible under section 125(1)(f)(i) read with section 121(m) of the Finance (No. 2) Act , 2019 - violation of principles of natural justice - HELD THAT:- For determining eligibility under the category of 'voluntary disclosure', a great deal of discretion is vested on the designated committee, who has to decide eligibility on a case to case basis. Needless to say, when a discretion is conferred upon an authority to decide an issue which has civil consequences upon the party concerned, such discretion has to be exercised in a just, fair and reasonable manner complying with the principles of natural justice. Thus, while deciding eligibility, the designated committee is required to consider all relevant materials and also hear the concerned declarant. Having held so, let us deal with the contention of the petitioner that before a declaration is rejected, an opportunity of hearing should be granted to the declarant. Though we do not find any such express provision in the scheme laying down requirement of hearing before rejection of the declaration, we find from section 127 more particularly under sub-sections (3) and (4) thereof that if the designated committee upon verification, determines the amount payable by the declarant to be higher than what is declared by the declarant, then an opportunity of hearing should be granted to a declarant. This coupled with what we have discussed in paragraph 19 above, makes hearing before rejection obligatory. This aspect of the matter was gone into by this Court in Thought Blurb Vs. Union of India [ 2020 (10) TMI 1135 - BOMBAY HIGH COURT ] . It has been held that in a situation where the amount estimated by the designated committee is in excess of the amount declared by the declarant, an opportunity of hearing is required to be given by the designated committee to the declarant, then it would be in complete defiance of logic and contrary to the very object of the scheme to outrightly reject a declaration on the ground of being ineligible. Summary rejection of a declaration without affording any opportunity of hearing to the declarant would be in violation of the principles of natural justice impeaching the decision making process thus rendering the decision invalid in law. Since it is found that impugned rejection of the declaration of the petitioner is in violation of the principles of natural justice which has impacted the decision making process thus rendering the decision invalid, it may not be necessary for us to enter into the merits of the challenge as to whether the declaration of the petitioner was in fact valid or not under the category of 'voluntary disclosure'. This is a matter which should be best left to the designated committee to decide after granting opportunity of hearing to the petitioner. Petition disposed off.

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• 2021 (3) TMI 129
  Maintainability of petition - seeking certain clarifications on whether the drones in question would require clearance - HELD THAT:- The Director General of Civil Aviation has, by order dated 21.01.2021, rejected the request of the petitioner. With the passing of this order, the mandamus sought for by the petitioner is not liable to be granted and this writ petition is thus dismissed as infructuous. Liberty is however available with the petitioner to challenge order dated 21.01.2021, in accordance with law.

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• 2021 (3) TMI 122
  Levy of Redemption fine and penalty - import of superior kerosene oil - authorization to import kerosene - HELD THAT:- From the judgment of the Hon'ble jurisdictional High Court in Sankar Pandi [ 2001 (12) TMI 83 - MADRAS HIGH COURT ], it is seen that when the goods are re-exported no redemption fine can be imposed. The said decision was affirmed by the Hon'ble Supreme Court in UNION OF INDIA VERSUS SANKAR PANDI [ 2010 (3) TMI 1247 - SC ORDER ]. The Tribunal in the decisions relied by the ld. Counsel for appellant has followed the said decisions to hold that redemption fine cannot be imposed when the goods are released only for the purpose of re-export. Penalty u/s 112(a) of the Customs Act - HELD THAT:- The Commissioner (Appeals) has already taken a lenient view by reducing the penalty from ₹ 4 lakhs to ₹ 2 lakhs. However, it is noted that the appellant has suffered huge charges towards demurrage and detention besides having to incur freight charges on the re-export. Taking this into consideration and also the fact that the appellant has not profited from the import as the goods were re-exported, the penalty can be reduced from ₹ 2 lakhs to ₹ 1,00,000/-. The impugned order is modified to the extent of setting aside the redemption fine totally and reducing the penalty from ₹ 2 lakhs to ₹ 1,00,000/- - Appeal allowed in part.

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• 2021 (3) TMI 103
  Maintainability of appeal - compliance with the requirement of pre-deposit - Revenue submits that she has sent reminders but failed to receive any report on the issue - HELD THAT:- This Tribunal in similar circumstances, vide Interim Order No.I/127-131/2019 dated 30th July 2019 in appeal Diary No. 870602019 held that Since the order has been set aside by the learned Commissioner (Appeals) for fresh adjudication by the lower authority, therefore, no duty nor any penalty as on date is crystallised against the appellants. Therefore, the pre-deposit, cannot be insisted in accordance with Section 129E of the Customs Act, 1962. Consequently, the defect memo is discharged and the appeals are maintainable, which will be heard in due course. No contrary judgment nor any contrary practice of any other Commissionerates was placed, inspite of sufficient time being allowed to the department - appeal maintainable.

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• 2021 (3) TMI 102
  Seeking stay of the order of the adjudicating authority - communication of appeal - Rule 41 of CESTAT (Procedure) Rules, 1982 - HELD THAT:- The appellant had complied with the provisions of Section 129E of Customs Act, 1962 while filing the appeal before this forum challenging the impugned order dated 8th September 2020. Learned Advocate is fair enough to submit that no communication, after filing this appeal before this forum, has been received from the department. Since the law on the subject is very clear, which is also evident from the circular issued by the Board, we find no reason to intervene at this stage as prayed by the appellant. The appellant is free to approach this Tribunal as and when any cause of action arise. Application dismissed.

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• 2021 (3) TMI 101
  Maintainability of appeal - non-compliance with the requirement of pre-deposit of the amount - Section 129E of the Customs Act, 1962 - HELD THAT:- On a plain reading of Section 129E of the Customs Act, 1962, it is clear that an appeal cannot be entertained unless the provisions of Section 129E of Customs Act, 1962 has been complied with. The appeal being not maintainable, accordingly, not entertained.

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• Insolvency & Bankruptcy

• 2021 (3) TMI 139
  Oppression and mismanagement - Ex-parte order passed - Instead of moving the NCLT for vacating the ad-interim order, the respondents moved the National Company Law Appellate Tribunal in appeal - violation of principles of natural justice - HELD THAT:- The NCLAT has remanded the proceedings back to the NCLT for fresh consideration on merits. The grievance of the appellants is that this would preclude them from applying for the grant of ad-interim relief during the pendency of the proceedings before the NCLT and the final hearing of the petition may take several years. The appellants should, in our view, be granted liberty to apply afresh before the NCLT for interim relief on the basis of the same application on which the NCLT passed its order. In order to enable the respondents to have an opportunity to controvert the application for interim relief, we direct that they may file their reply, if any, within a period of two weeks from today. The NCLT shall reconsider the application for interim relief in terms of the above directions after hearing the parties. The order of the NCLAT shall accordingly stand set aside and be substituted by the directions which have been issued - Appeal disposed off.

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• 2021 (3) TMI 126
  Initiation of CIRP - Period of limitation - NPA - Jurisdiction of Tribunal to admit application - HELD THAT:- That article 137 in the Limitation Act, 1963 would apply for the purpose of the bank's application made before the Tribunal, is undisputed. On perusal of the impugned order, it appears that the bank had asserted, the bar of limitation did not apply as the corporate debtor had made acknowledgments in its balance-sheets, acknowledgments as in section 18 of the Limitation Act, for the period of limitation being extended - The court is convinced that the mandate of the Limitation Act is for dismissal of, inter alia, an application such as the bank's, on having been brought more than three years after right to sue accrued. The Tribunal, on the facts, lacked jurisdiction to admit it. The impugned order dated August 19, 2020 is set aside and quashed.

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• 2021 (3) TMI 124
  Seeking stay of further proceedings in the Company Petition by projecting its inability in servicing the debts in respect whereof default was alleged by the Financial Creditor - disputes between the Corporate Debtor and the recipient of energy as well as change in supply chain management of the recipient of energy hindering it from carrying on its business - HELD THAT:- Admittedly, Petition under Section 7 of I B Code filed by the Respondent Bank is still at the pre-admission stage and the Appellant- Corporate Debtor has, by raising the issue of problems confronted by the Power Sector resulting in inflicting of heavy financial loss to the power generating Companies like the Appellant, been able to stall the CIRP proceedings initiated by the Respondent (Financial Creditor) against it by filing Application under Section 7 of I B Code. It is flabbergasting to find that by raising the liquidity issue and pending litigation proceedings the Corporate Debtor put a spoke in the wheel of Corporate Insolvency Resolution Process stalling its commencement at the hands of Adjudicating Authority who was required, in terms of mandate of Section 7(4) (5) of I B Code to pass an order of admission or rejection of such Application within fourteen days of the receipt of the Application. The commencement of CIRP takes effect from the date of admission of Application as specifically laid down under sub-section (6) of Section 7 of the I B Code. All that the Adjudicating Authority is required to do is to ascertain the existence of default and on being satisfied that a default has occurred and the Application is complete, the Adjudicating Authority is required to admit the Application. The existence of default in respect of financial debt would be ascertainable from the records of an Information Utility or on the basis of other evidence furnished by the Financial Creditor. Where the Adjudicating Authority is satisfied that there is no financial debt payable in law or infact or that default has not occurred, it may reject such Application but if the Application is incomplete, the Financial Creditor has to be provided an opportunity of rectifying the defect in the Application within seven days of notice received from the Adjudicating Authority. All that should be present to the mind of Adjudicating Authority is that there is an obligation on the part of Corporate Debtor to pay the financial debt and that the Corporate Debtor has failed in such obligation - The fortunes of Corporate Debtor may wax or wane depending upon the outcome of litigation but same cannot be permitted to impede the course of insolvency resolution proceedings contemplated under the I B Code, object whereof, inter alia, is maximisation of value of assets of corporate person by reorganization and insolvency resolution in a time bound manner. It is significant to notice that the Application filed by the Corporate Debtor seeking stay of proceedings before the Adjudicating Authority did neither dispute the existence of debt owed to the Respondent Bank nor did it raise any issue in regard to the event of default as alleged by the Respondent Bank. Its therefore, clear that debt and default are not disputed. The financial woes of the Appellant and the liquidity problems faced by it, whether forced upon it or of its own making, have no bearing on commencement of insolvency resolution and cannot be permitted to be a stumbling block in triggering of CIRP at the instance of Financial Creditor. The commencement of CIRP proceedings has already been delayed by one year much to the chagrin of Respondent (Financial Creditor) who has been virtually compelled to be a spectator helplessly watching the assets of Corporate Debtor getting depleted in value. The Appellant has no justification in stalling the process and seeking stay of CIRP, which in essence has manifested in blocking the passing of order of admission of Application of Respondent under Section 7 of I B Code - Appeal dismissed.

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• 2021 (3) TMI 118
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make the repayment of its dues - Petition was filed in the year 2019 after a lapse of six years - time limitation - HELD THAT:- The Contention of the Learned Counsel that the Directors were not served a copy and therefore sufficient opportunity was not given to them to present their case is untenable, in the light of the admitted position of fact that the Notice was admittedly hand delivered to the Official Liquidator who was appointed by the Hon ble High Court of Bombay on 25.01.2018; but the Corporate Debtor did not enter any appearance nor has chosen to file any Reply despite the Adjudicating Authority having given sufficient opportunities to do so. Whether the Section 7 Application is barred by limitation? - HELD THAT:- In the instant case the date of default (NPA) is 31.03.2013 and the Application under Section 7 was filed on 10.10.2019. The contention of the Learned Counsel appearing for the Bank that there was another Balance and Security Confirmation Letter dated 03.07.2014, page 84 of the Reply, which is vehemently opposed by the Appellant Counsel on the ground that it has not been filed before the Adjudicating Authority, which would give a fresh lease of life to the debt, is unsustainable as three years has lapsed for computing the limitation as the date of filing of the Application is 10.10.2019. The other Balance and Security Confirmation Letter relied upon by the Respondent Counsel is dated 17.06.2017 which is also beyond three years of the date of NPA. The letter dated 11.06.2017 written by the Corporate Debtor seeking for request for restructuring of the existing loan has not been accepted by the Bank - this communication relied upon by the Respondent Bank is beyond the period of three years from the date of NPA and also does not fall within the provisions of Section 18 of the Limitation Act, 1963 - Further, there is nothing on record to suggest that the Appellant has acknowledged the debt within three years and has agreed to pay the debt. The matter is remitted to the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench) to be listed on 5th April, 2021 for quantifying the fees of the RP to be borne by Applicant/Financial Creditor - petition dismissed.

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• 2021 (3) TMI 117
  Corporate Debtor, going concern or not - Validity of directions issued by the NCLT - Respondents sought direction to Committee of Creditors of the Corporate Debtor Company, namely EMCO Limited, to provide interim funds to the Resolution Professional to run during the CIRP period - seeking to provide funds to meet the expenditure already incurred - seeking further direction to CoC to submit the compliance report at the time of next hearing - HELD THAT:- It is an admitted fact that the CIRP proceedings began on 16.08.2019 and the Resolution Professional was confirmed on 14.10.2019. In the Reply filed by the RP to the MA all facts with respect to the salaries of 51 employees were placed on record till 31.08.2019. It is stated in the Reply that any salary dues prior to the commencement of CIRP process will be considered by the Resolution Applicant, whose Resolution Plan, if any, shall be approved by the CoC Members. It is also an admitted fact that the said employees have also filed a Claim with the RP. Keeping in view that the Application under Section 7 or Section 9 is not a Suit or a Money Claim and having regard to the fact that the Resolution Professional has filed a detailed Affidavit that the Corporate Debtor is not a going concern and is non-operational , this Tribunal is of the considered opinion that the Learned Adjudicating Authority ought to have taken this aspect into consideration and heard the CoC before issuing the directions. On going through Section 28(1)(a), Section 28(3) and Section 28(4), it is clear that the Resolution Professional can raise Interim Finance only subject to approval of the Committee of Creditors by a vote of 66 % under Section 28. In the instant case it is an admitted fact that the CoC have not approved the raising of any interim funds. The contention of the Learned Counsel appearing for the first Respondent that Section 20(2)(c) is to be relied upon which refers to Management of Operation of Corporate Debtor as a going concern is untenable as the said Section refers to duties of Interim Resolution Professional. Section 25(2)(c) is relevant to the instant case as it deals with Duties of Resolution Professional with respect to raising Interim Finance subject to the approval of Committee of Creditors under Section 28. Section 28 refers to whether the approval of Committee of Creditors is required for raising Interim Finance . It is reiterated by the Resolution Professional that the Corporate Debtor is not a going concern - Further Section 30(2)(a) of the Code specifies that if a Resolution Plan is approved then the same would provide for the payment of Insolvency Resolution Professional Process cost in a manner specified by the Board in priority by the repayment of other debts of the Corporate Debtor and if such a Plan is not approved and if companies go into liquidation under Section 33(1) of the Code, then the distribution of assets under Section 53(1) would arise. The direction given by the Adjudicating Authority in MA 4002/2019 are contrary to the provisions of IBC and are hereby set aside. Appeal allowed.

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• 2021 (3) TMI 112
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Debt - minimum amount of default - existence of debt and dispute or not - whether Notification under Section 4 of the Code raising the minimum default limit be applicable to the applications initiated after the Notification date? - HELD THAT:- In the absence of clear indication of a contrary intention in the notification issued on 24.03.2020 by the Ministry of Corporate Affairs, Government of India, then the substantive rights of individuals to an action is to be decided by the Law that existed when the action was initiated as the case may be. In the present case, notwithstanding the fact, the Central Government is delegated with a power to quantify the amount of default at any time after the enactment of the I B Code, this power will not deny the right which had already accrued to an Operational Creditor at the time of default of the debt. Occurrence of Default - HELD THAT:- The Operational Creditor gets the right to trigger the CIR Process . Section 9(1) of the Code confers a substantive right to file and to initiate CIRP against the Corporate Debtor. It is needless for this Tribunal to point out that upon an application being filed by the concerned person in terms of the ingredients of Section 9(1) of the Code and the default sum is quite in tune with Section 4 of the Code, the application is to be admitted by the Adjudicating Authority , of course subject to the ingredients of Sections 9(2) 9(5) of the Code. The Notification dated 24.03.2020 does not save the Applicant from the initiation of insolvency especially in cases where defaults towards creditors have taken place before the pandemic and the resultant financial crisis. Such an interpretation would be contrary to the intention of the executive in exercise of its power of delegated legislation. Thus, if the intention was to provide for a blanket protection to Corporate Debtors from being dragged to the NCLT irrespective of when or what extent a default has taken place, it would necessarily require a legislative amendment, and that a mere issuance of the notification would not suffice. This Tribunal vide order dated 16.10.2020 had already observed that since the cause of action arose (on 03.01.2020) before 25.03.2020, this application is maintainable and therefore, this point of non-maintainability has no legs to stand. Whether the provisions of Section 10A stand attracted to an application under Section 9 which was filed after 5th June 2020 (the date on which the provision came into force) in respect of a default which has occurred after 25 March 2020? - HELD THAT:- In the present case, it was asserted that the onset of Covid-19, which was the reason for the insertion of Section 10A, has nothing to do with the default as the part of the respondent in paying the outstanding operational debt of the applicant, which owes its existence even before the onset of the pandemic. The proviso to Section 10A stipulates that no application shall ever be filed for the initiation of the CIRP of a corporate debtor for the said default occurring during the said period . The explanation which has been inserted for the removal of doubts clarifies that Section 10A shall not apply to any default which has been committed under Sections 7, 9 and 10 before 25 March 2020. In this application, the Corporate Debtor on 31.12.2019 assured the Operational Creditor that the shipment of goods would be made within one week, but the same was not shipped on 14.01.2020. The date of refusal to deliver the goods and return the money is not to be treated as the date of default, as the date of default occurred on the date of shipment which was not fulfilled and complied by the Corporate Debtor and the acknowledgement made thereafter. The date of deafault is the date on which the Corporate Debtor failed to fulfil the obligation. Therefore, it seems that the Corporate Debtor is trying to take undue benefits of the lockdown and Section 10A inserted into the IBC. Pre-existing dispute - HELD THAT:- This Tribunal finds that the application made by the Operational Creditor is complete in all respects as required by law and that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount of One Lakh rupees stipulated under Section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Application. Hence, the Adjudicating Authority decided to admit this application and orders initiation of CIRP against the Corporate Debtor. Application admitted - moratorium declared.

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• 2021 (3) TMI 111
  Seeking direction to Respondent to conduct the revaluation of the Corporate Debtor taking into account the current functioning of the Hospital - seeking to send back the current resolution plan to CoC of the Resolution applicant for enhancement of plan consideration or for consideration - seeking to allow the applicant to submit a settlement plan to the CoC and initiate withdrawal of the CIRP - Section 12A of the Insolvency and Bankruptcy Code. HELD THAT:- The Resolution Professional took all steps as per the provisions of IBBI Regulations, before submitting the Resolution Plan to the CoC for its approval. Thereafter, only after the approval of CoC, the Resolution Professional filed the Resolution Plan for approval of this Adjudicating Authority. It is seen that wide publicity has been made inviting expression of Interest for getting a prospective Resolution Applicant, so that the maximum value be received for the assets and properties of the Corporate Debtor - The value assessed by both the valuers are more or less same, except few difference in the value. The resolution professional has not accepted the value given by Mr. Patel only. He has computed the value in accordance with the internationally accepted valuation standards, after physical verification of the fixed assets of the Corporate Debtor. The fair value and the value arrived at by both groups of the registered valuers were not significantly different. Hence, he has not appointed a fresh valuer. This Tribunal finds that the Resolution Professional had complied with the provisions of Regulation 27 and 35 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, before arriving at a decision to place the Resolution Plan before the CoC. The CoC approved the Resolution Plan with 100% voting right for approval by the Adjudicating Authority. Under Section 31(1) of the Code, for final approval of a Resolution Plan, the adjudicating authority has to be satisfied that the requirement of Sub Section (2) of Section 30 of the code has been complied with - the applicant has approached with this IA only on 15.2.2021 ie., at the eleventh hour, when the Plan is to be approved. It seems, this is only for delaying the approval of the Resolution Plan by the Adjudicating Authority, which cannot be accepted. As rightly stated by the Resolution Professional, if the applicant is aggrieved by the Resolution Plan, under Section 61(3), she can very well approach the appellate authority for redressal of her grievances. In view of the pronouncements of the Hon ble Supreme Court and the Hon ble NCLAT, as stated earlier in this order, this Tribunal cannot entertain the claim put forward by the applicant herein for rejection of the Resolution Plan at this stage. Submission of Settlement Plan to the CoC - HELD THAT:- It is too late to grant such a prayer because the events narrated by the Resolution Professional in his reply regarding non-cooperation of the Suspended MD/Directors of the Corporate Debtor during the CIR Process makes it very clear that there is no attempt on the part of the Corporate Debtor to produce a better settlement plan. The Resolution Professional has produced various emails sent by him to the suspended Directors since they sent a mail to him to submit a better Resolution Plan, requesting them to give such a settlement plan immediately, so that he can place it before the CoC. But they did not care to do so. Even in the CoC meeting held on 26th December, 2020 the email received from Mrs.PV Mini, applicant herein, which was a mail stating that possibility to bringing a fresh resolution plan by a prospective resolution applicant has been placed. Since the email does not contain any specific details about prospective applicant, plan consideration, timelines to be followed etc. and that the mail is completely silent about the submission of the Expression of Interest, after detailed deliberations, the CoC unanimously decided to reject the proposal submitted by the applicant herein in view of insufficiency of information and due to the limited time period available to complete the CIR Process. In the same CoC the final Resolution Plan was discussed and approved by the COC - the applicant/Suspended MD of the Corporate Debtor is not diligent in bringing in another Resolution Applicant, who can offer better amount, but it seems that the applicant s only intention is to delay the proceedings - the Corporate Debtor cannot file a Section 12A application as per the Insolvency and Bankruptcy Code. This Tribunal do not find any cogent reason to entertain this application and grant any relief sought for in this application - Application dismissed.

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• 2021 (3) TMI 110
  Seeking rejection of Resolution Plan - non-compliance with Regulation 35(a), 35(b) and 35(c) of CIRP regulations and Section 30(2)9f) of IBC 2016 and infringement of fundamental rights enshrined under the Constitution of India thereby not complying with Section 30(2)() of the IBC 2016 - seeking rejection of Valuation report issued by Shri R,K. Patel as it is prepared negligently without any care and caution - seeking to appoint another valuer for land and building for complying with Regulation 35(a), 35(b) and 35(c) of CIRP Regulations - seeking directions to RP and CoC to reconvene the meeting to comply with the provisions of IBC 2016 and CIRP regulations upholding the fundamental rights enshrined under the Constitution of India and arrive at a value of Resolution Plan which balances the interest of all stakeholders. Whether the applicant is eligible to get the reliefs to reject the Resolution Plan submitted by the Resolution Applicant M/s Lissie Medical Institutions and also to reject the valuation report filed by Mr.R.K. Patel and to appoint another valuer convening another CoC? HELD THAT:- This Tribunal finds that the Resolution Professional had complied with the provisions of Regulation 27 and 35 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, before arriving at a decision to place the Resolution Plan before the CoC. The CoC approved the Resolution Plan with 100% voting right for approval by the Adjudicating Authority. Under Section 31(1) of the Code, for final approval of a Resolution Plan, the adjudicating authority has to be satisfied that the requirement of Sub Section (2) of Section 30 of the code has been complied with. On a verification of the Resolution Plan submitted by M/s Lissie Medical Institutions it is seen that requirement of Sub- Section (2) of Section 30 has been followed before submitting the Resolution Plan for the approval of the Adjudicating Authority. Section 31(1) of the Code lays down in clear terms that for final approval of a Resolution Plan, the Adjudicating Authority has to be satisfied that the requirement of Sub-Section (2) of Section 30 of the Code has been complied with. It is worthwhile to note that when the Resolution Professional has filed the Resolution Plan before this Tribunal, on a Caveat Petition, this applicant was also heard on 28.1.2021 and he has been given time to make his objection, if any, and the pronouncement of the approval of the Resolution Plan was fixed on 22.2.2021. However, the applicant approached with this IA only on 12.2.2021 (after curing the defects), ie., the last moment when the Plan is to be approved. It seems, this is only a delaying tactics putting hurdle in the process of approval of Resolution Plan by this Adjudicating Authority, which cannot be accepted. This Tribunal do not find any convincing reason to interfere with the request of the respondent Resolution Professional for approving the Resolution Plan - Application dismissed.

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• 2021 (3) TMI 109
  Seeking appropriate directions for dealing with the claim of EPFO department - discharging duties of Liquidator - Section 35 (1) (n) and 60 (5) of I B Code, 2016 - HELD THAT:- From the reading of provisions under Section 7A, 7Q and 14 B of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, it is clear that the contribution, interest and damages payable are statutory dues and not claims which can be submitted to the Liquidator in Form G. Hence the EPFO need not file Form G before the Liquidator. It is also seen that the EPFO has got first charge over the Assets of the defaulter and its priority of payment over other debts is as per Section 11 of the EPF MP Act 1952. The Liquidator is directed to consider the Claims of EPFO made by them vide Annexure A III dated 6th May 2020 and Annexure V dated 12th June 2020 in which the amount due from M/s. Achariya Techno Solutions Private Limited for the period up to June 2018 has been indicated, while determining the amount payable to the stakeholders in this matter. Application disposed off.

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• 2021 (3) TMI 108
  Seeking revival of application filed by the applicant under Section 9 of the Insolvency and Bankruptcy Code, 2016 - parties have amicably settled their disputes as the Corporate Debtor has agreed to pay the amount due and payable to Operational Creditor and has given a time schedule for making such payment - HELD THAT:- In view of the settlement arrived between the parties, this Tribunal need not revive the petition and pass any orders. However, both parties are directed to strictly follow the agreement between them made in the Settlement Agreement. Liberty is granted to the applicant to approach the appropriate forum, in case of failure in implementing the Settlement Agreement by the Corporate Debtor. Application disposed off.

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• 2021 (3) TMI 100
  Seeking approval of Resolution Plan - section 30(6) of the Insolvency Bankruptcy Code, 2016 - HELD THAT:- A Resolution Plan is required to contain a statement that how it will deal with the interest of the all stakeholders including Financial Creditor and the Operational Creditors and if these are sufficiently provided in the Resolution Plan then the AA may approve the Resolution Plan, if the AA is satisfied that the Resolution Plan has provisions for effective implementation - In respect of compliance of Section 30(2) (a) of the Code, it is seen that there is a provision in the resolution plan in clause 6.1 (page 222) that the payment of CIRP cost shall be in priority of all the claims. As regards compliance of clause (b) of Section 30 (2) of the Code, the RP has certified in Form H that clause 6.3.2 of the Resolution Plan (page 223) provides for the payment of the debts of operational creditors which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the CD under section 53. All the requirements of Section 30 (2) are fulfilled and no provision of the law for the time being in force appears to have been contravened. In respect of compliances regarding CIRP Regulations especially Regulations 38 and 39, it is seen that RP in its Form-H has certified and explained in details, from pages 374 to 381 of the application, that the Resolution Plan has complied with the all the required Regulations - the Resolution Plan fulfilled the requirement as referred in section 30 (2) and there are sufficient provisions in the plan for its effective implementation as required under the proviso of section 31 of the Code. There is no impediment in giving approval to the Resolution Plan - Resolution Plan approved - application allowed.

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• 2021 (3) TMI 98
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditor - existence of debt and dispute or not - HELD THAT:- As regards the amount involved in the Default and the Date of default, it is mentioned by the Financial Creditor in the Part IV of their Petition that the total claim amount is ₹ 7,77,60,913 only. It is further added by the Financial Creditor that the account of the Corporate Debtor was classified as NPA on 28-9-2016 - That during the course of the hearings on 27-8-2019 as well as 9-10-2020, the Corporate Debtor had unequivocally admitted its liability. The Financial Creditor has been successful in establishing the 'default' of the amount above ₹ 1,00,00,000 in respect of the Corporate Debtor. This Bench is, therefore, inclined to initiate CIR process against the Corporate Debtor - the present Petition being complete and having established the default in payment of the Financial Debt for the default amount being above ₹ 1,00,00,000, the Petition is admitted in terms of section 7(5) of the IBC and accordingly, moratorium is declared in terms of Section 14 of the Code. Petition admitted.

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• 2021 (3) TMI 96
  Disciplinary proceedings - Validity of accepting the assignment as Interim Resolution Professional (IRP) in corporate insolvency resolution process (CIRP) of Ajanta Offset and Packaging Limited (CD) after 31st December, 2019 without holding a valid Authorisation for Assignment (AFA) issued to him by his IPA - contravention of sections 208(2)(a) and 208(2)(e) of the Insolvency and Bankruptcy Code, 2016 (Code), regulations 7(2)(a), 7(2)(h) and 7A of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) read with clauses 1, 2, 11, 12 and 14 of the Code of Conduct for Insolvency Professionals contained in the First Schedule of the IP Regulations for accepting the assignment of IRP in CIRP of CD after 31st December, 2019 - HELD THAT:- It is clear from the said Regulation that one of the essential conditions for undertaking any assignment by an IP is that he should have a valid AFA which is issued by the IPA with which he is enrolled as a professional member. In other words, without AFA, an IP is not eligible to undertake assignments or conduct various processes thereof. Regulation 7A was inserted in the IP Regulations vide notification dated 23rd July, 2019, much before 31st December, 2019. Adequate time was given to the professionals to obtain AFA from respective IPAs. The bye-laws of Indian Institute of Insolvency Professional of ICAI defines in para 4(1)(aa) the expression Authorisation for Assignment as an authorisation to undertake an assignment, issued by an insolvency professional agency to an insolvency professional, who is its professional member, in accordance with its bye-laws regulation. An application for grant of AFA can be made to the IPA under para 12A of said bye laws. The DC finds that an order by the Disciplinary Committee of the IPA dated 1st December 2020 has been passed disposing the SCN issued by IPA dated 31st August 2020 to Mr. Guddeti, on the issue of accepting assignment as IRP after 31-12-2019 without holding a valid AFA in the CIRP of Ajanta Offset and Packaging Limited, wherein Mr. Guddeti was not held guilty of Professional Misconduct as Mr. Guddeti had given his consent on 6th June, 2019 and appointment of IRP was confirmed by the AA based on his written consent - In view of the fact that the Disciplinary Committee of the Indian Institute of Insolvency Professional of ICAI has already passed order in this matter, the DC, in exercise of the powers conferred under Regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, disposes of the SCN without any direction. SCN disposed off.

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• 2021 (3) TMI 95
  Seeking grant of Bail - Functions and obligations of insolvency professionals - Demand of bribe from the complainant in connection with the claim submitted in the matter of CIRP of CD - SCN alleged contraventions of provisions of section 208(2)(a) of the Insolvency and Bankruptcy Code, 2016 (Code), Regulation 7(2)(a), (b), (f), (h) and (i) of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) and clauses 1,2,3,5,9,12,14,17,24 and 28 of the Code of Conduct under regulation 7(2) thereof - HELD THAT:- Under the Code, the RP plays a key role in resolution process of the CD. IP is appointed by the Adjudicating Authority as an officer of the Court to oversee the resolution process and it is the duty of the RP to conduct CIRP with integrity, transparency and accountability in the process ensuring that all the stakeholders are kept informed, thereby ensuring an effective insolvency regime, which would in turn foster public confidence. Therefore, it becomes imperative for an IP to perform his duties with utmost care and diligence. Section 208(2) of the Code provides that every IP shall abide by the Code of conduct. It is the duty of the IP to ensure that his conduct would not undermine the credibility of the process. Therefore, while granting certificate of registration to an IP they are subjected to follow the Code of Conduct specified in the First Schedule to the IP Regulations to ascertain that the IP is a fit and proper individual. The FIR against Mr. Mohan is yet to culminate into a chargesheet, however, the submission of Mr. Mohan that before issuing of the SCN, statutory requirements of sections 217, 218, 219 and 220 of the Code were not complied with by the IBBI since no independent investigation was conducted and thus, the SCN is illegal, unlawful and void ab initio is untenable. Regulation 11 of the IP Regulations gives power to IBBI to issue SCN based on findings of an inspection, investigation or on material otherwise available on record, if the facts prima facie disclose any contravention of the Code, Rules or the Regulations thereof - The DC also notes that a criminal writ petition has also been filed by Mr. Mohan before Hon'ble High Court of Delhi against CBI praying that the Petitioner is not a public servant and, for quashing the FIR and any other proceeding emanating therefrom which was admitted vide order dated 24-2-2020. The Hon'ble High Court of Delhi, vide Order dated 3-11-2020, adjourned the matter at the request of the counsel appearing for CBI on the ground of medical emergency. Thus, the matter is next posted on 15-12-2020 and the Hon'ble Court also clarified that no further adjournments would be granted. The DC, in exercise of the powers conferred under section 220(2) of the Code read with sub-regulations (7), (8) and (10) of Regulation 11 of IBBI (Insolvency Professional) Regulations, 2016, issues the following directions: (i) Mr. Arun Mohan shall not seek or accept any process or assignment in any capacity under the Code, till he is exonerated of the charges. (ii) A copy of this order shall be forwarded to the ICSI Institute of Insolvency Professionals where Mr. Arun Mohan is enrolled as a member. (iii) A copy of this Order shall also be forwarded to the Registrar of the Principal Bench of the National Company Law Tribunal, for information.

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• Service Tax

• 2021 (3) TMI 133
  Rejection of declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - eligibility of petitioner No.1 or maintainability of its declaration to avail the benefits of the scheme under the category of investigation, enquiry or audit on the ground that service tax dues of petitioner No.1 for the related period was not quantified on or before 30.06.2019 - HELD THAT:- The issue decided in the case of THOUGHT BLURB VERSUS UNION OF INDIA AND ORS. [ 2020 (10) TMI 1135 - BOMBAY HIGH COURT] where it was held that petitioner was eligible to file the application (declaration) as per the scheme under the category of enquiry or investigation or audit whose tax dues stood quantified on or before 30th June, 2019. Thus, it is evident that all that would be required for being eligible under the above category is a written communication which will mean a written communication of the amount of duty payable including a letter intimating duty demand or duty liability admitted by the person concerned during inquiry, investigation or audit. For eligibility under the scheme, the quantification need not be on completion of investigation by issuing show-cause notice or the amount that may be determined upon adjudication. Further, under the scheme what is relevant is quantification of duty demand or duty liability in the manner indicated above on or before 30.06.2019 and not communication before that date. The scheme does not speak of communication; it is quantification which is relevant. Thus, what is of essence under the scheme is an admission of tax dues or duty liability by the declarant before the cut-off date which need not be of the exact figure upon determination by the authorities post 30.06.2019 - In the instant case, petitioner No.2 in his statement before the Senior Intelligence Officer on 12.06.2019 had admitted gross service tax liability of ₹ 1,73,12,978.00. While admitting the said figure, petitioner No.2 did not include service tax on Ocean Freight on which petitioners claimed exemptions. However, in the show cause-cum-demand notice issued subsequently by the office of respondent No.2 on 13.11.2019 this claim was brushed aside and upon addition of service tax on Ocean Freight the total service tax liability got enhanced to ₹ 1,96,02,184.00. It is a settled proposition of law that when an authority relies upon a document, copy of the same should be made available to the aggrieved party so that the aggrieved party can respond to such document and effectively make its defence. Therefore, non-furnishing of report dated 20.02.2020 to the petitioners was in violation of the principles of natural justice which, therefore, vitiated the impugned decision taken. Matter remanded back to the designated committee to consider the declaration of petitioner No.1 dated 26.12.2019 afresh as a valid declaration in terms of the scheme under the category of investigation, enquiry and audit and thereafter grant the consequential relief(s) to the petitioner - petition allowed by way of remand.

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• 2021 (3) TMI 130
  CENVAT Credit - service tax paid by them prior to registration with the Department - Whether the Tribunal is right in holding that the respondent was entitled for CENVAT credit prior to rendering any service nor getting registered with the Service Tax Department when the decisions relied upon are sub-judice in the Apex Court? - services received from outside India, on which, service tax is to be paid - output service or not - HELD THAT:- Karnataka High Court in the case of Commissioner of Service Tax, Bangalore Vs. Aravind Fashions Ltd. [ 2011 (9) TMI 852 - KARNATAKA HIGH COURT ] wherein it was held that though the assessee therein was a recipient of service, the service provider being outside India, the assessee therein was to be treated as a service provider and that therefore, the assessee therein was entitled to use CENVAT credit available with it to discharge service tax on the service rendered. CENVAT Credit - service tax paid by them prior to registration with the Department - Whether the Tribunal is right in holding that the respondent was entitled for CENVAT credit prior to rendering any service nor getting registered with the Service Tax Department when the decisions relied upon are sub-judice in the Apex Court? - HELD THAT:- High Court of Karnataka in the case of mPortal India Wireless Solutions (P) Ltd. Vs. Commissioner of Service Tax [ 2011 (9) TMI 450 - KARNATAKA HIGH COURT ] has held that the service tax registration was not mandatory for refund of accumulated CENVAT credit of service tax paid on input service used for export of service. Application dismissed - decided against Revenue.

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• 2021 (3) TMI 107
  Calculation of Service Tax - appellant claimed that they had paid much more Service Tax than required to be paid by them and such excess payment of Service Tax is actually refundable on final adjudication - HELD THAT:- The appeal is allowed by way of remand to the original adjudicating authority, who shall look into the evidence and after hearing the appellant, pass a reasoned order. The appellant is also directed to appear with their representation and all evidences they wish to rely which they have filed earlier or they want to produce now before the authority. The appellant is directed to appear before the adjudicating authority in the third week of March 2021 and seek opportunity of hearing accordingly.

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• Central Excise

• 2021 (3) TMI 123
  Interest on delayed refund - claim of interest on delayed refund, from the date of deposit till the refund of the pre-deposit of principal amount - Amount deposited under protest - HELD THAT:- Admittedly, the amount under dispute was reversed on 31.03.2006 under protest and the same became pre-deposit within the meaning of Section 35 F ipso facto, by operation of law. On-going through the provisions of both Income Tax Act, 1961 and Central Excise Act, 1944, the interest on delayed refund is payable after expiry of 3 months from the date of granting refund or from the date of communication of order of the appellate authority, which are pari-materia - As the Hon ble Apex Court in the case of SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [ 2006 (1) TMI 55 - SUPREME COURT] has answered the issue holding that the assessee is entitled to claim interest from the date of payment of initial amount till the date of its refund - Therefore, the appellants are entitled to claim the interest on delayed refund from the date of deposit till its realization @ 12% per annum. Appeal allowed - decided in favor of appellant.

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• 2021 (3) TMI 121
  Scope of the adjudication proceeding where the case has been remanded back by the tribunal - Interpretation of a document recovered by revenue during investigation - demand based on sales register retrieved from the computer which does not stands reflected in the statutory records of the sales for the year 1999-2000 - HELD THAT:- After the first remand order, the matter was again adjudicated by commissioner vide order no 40/COMMR./2009 dated 31.08.2009. In the said order the commissioner citing largely from the OIO 13/COMMR/2003 dated 11.07.2003 (which was earlier set aside by tribunal order dated 26.11.2007 cited above) came to the conclusion that the demand was correctly made and reconfirmed the same. The matter was again agitated by the appellant before tribunal. After examining the observations made in the earlier order of tribunal dated 26.11.2007, the order of the commissioner was set aside and matter was remanded again. Thereafter, the matter was taken up for the adjudication by Commissioner once more and vide the order dated 16.04.2020 impugned in this proceedings the demand was once again confirmed ignoring the observation made by the tribunal twice over - Thereafter the impugned order has once again confirmed the entire demand without following the direction in the first tribunal order dated 26.11.2007 and also the second tribunal order dated 24.01.2019. The fact of duplication of demand has been specifically examined in both the tribunal s order and the finding of both the orders are very clear and precise leaving no scope for interpretation. Even if the Adjudicating Authority had any doubts regarding what was stated in the first tribunal order dated 26.11.2007 the same was clarified in the second tribunal order dated 24.01.2019. In case the commissioner was aggrieved by the observation of the second tribunal order dated 24.01.2019 the right course of action was to take the matter to the higher forum and not to ignore the same. The impugned order passed directly in violation of two tribunal s orders is bad in law and is therefore set aside. The matter once again remanded to the Adjudicating Authority for fresh adjudication following the directions made in earlier order of tribunal dated 26.11.2007 and repeated in its order dated 24.01.2019 - Appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2021 (3) TMI 135
  Levy of Interest for delayed remittance of Additional Sales Tax (AST) - section 24(3) of TNGST Act - period 2006-07 - HELD THAT:- The petitioner has filed returns in Form A-1, under a self-assessment scheme. It was thus incumbent upon the petitioner to have included (i) the correct undisputed turnover, as well as (ii) the correct liability in respect of that turnover. There is no dispute with respect to the turnover itself and there is also no dispute with respect to the liability under TNGST. However, the petitioner failed to remit the AST in regard to the turnover returned which is a lapse in self-assessment. The distinction noted by the Bench is very relevant in this case. The Bench states that the default arising on non-payment of tax on an admitted liability in the case of a self-assessment will attract an automatic levy of interest, whereas, default in filing an incomplete or incorrect return would attract interest only based on the adjudication by the Assessing Officer. The present assessment is based on a self-assessment and liability to AST is thus automatic. The question of determination is not relevant in the present case. It is relevant that the petitioner does not dispute either the turnover or the liability to AST. Immediately on being put to notice, at the first instance (on 10.11.2009) the petitioner made the entire payment of AST by 30.11.2009. Liability to AST is thus not in dispute - in the light of judgment in EID. PARRY (INDIA) LTD. VERSUS ASSISTANT COMMISSIONER (CT), CAC, CHENNAI (AND OTHER CASES) [ 1998 (12) TMI 589 - TAMIL NADU TAXATION SPECIAL TRIBUNAL] this case attracts interest under Section 24(3) automatically and there is no infirmity in the order challenged. Petition dismissed - decided against petitioner.

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• 2021 (3) TMI 132
  Levy of penal interest under Section 24(3) of the Tamil Nadu Value Added Tax Act, 2006 - belated payment of sales tax by the appellant - Principles of natural justice - HELD THAT:- Tax or penalty levied/leviable on taxable turnover suppression are not eligible for loan scheme. Turnover suppression has been defined to mean taxable turnover not shown or not declared as such in the monthly returns filed by the appellant. It is not in dispute that the appellant has filed their monthly returns which has reflected all the transactions. In respect of certain transactions the appellant has declared in the monthly returns as 'Sale against Form C', 'Sale against Form H' and in respect of certain transactions, incorrect rate of tax was adopted. The demand of penal interest flows from the demand dated 29.08.2013. The appellant had been diligently prosecuting the matter, in the sense promptly submitting their objections as and when notices were issued by the respondent. Though the appellant had been doing so by sending reply dated 24.06.2013, 03.09.2013, 14.02.2014 and 11.03.2014, they have not been favoured with a speaking order, nor provided an opportunity of personal hearing, though sought for. Whether clause 12 of the agreement could have been invoked by the respondent to make a demand and consequently, demand penal interest? - HELD THAT:- If there is a turnover suppression, the appellant would not be eligible for the loan scheme. Turnover suppression has been defined to mean taxable turnover not shown or not declared as such in the monthly returns filed by the appellant. It is not in dispute that the appellant has filed the monthly returns and has shown the taxable turnover - Prima facie, in our view it cannot amount to suppression as such transactions are permissible under the Act. Eligibility or ineligibility would have to be decided by interpreting all the conditions in the agreement as well as in the eligibility certificate. Therefore, the respondent has proceeded on a wrong footing. If the respondent has to make out a case of turnover suppression for invoking clause 12, then the respondent should establish that the turnover has not been shown in the monthly returns filed by the dealer. The argument of the respondent is that the liability to pay interest is automatic in terms of section 24(3) of the TNGST Act. Therefore, no notice is necessary for levying penal interest. A distinction has to be drawn in the appellant's case owing to the fact that the appellant disputes the allegation of the Department that they are a defaulter, i.e. there has been a turnover suppression. Unless the said issue is decided, the aspect of delay in payment of taxes cannot be decided. Only after deciding the delay which is alleged to have occurred, interest can be levied. Therefore, in the factual circumstances of the case, issuance of notice on the appellant was absolutely necessary. This Court is convinced to hold that the respondent has failed to address the crucial issues in spite of the appellant raising objections and mechanically proceeded to issue the notice demanding penal interest. Hence, this Court is inclined to interfere with the notice issued by the respondent which was impugned in the writ petition dated 16.04.2014 and remand the matter back to the Assessing Officer to take a fresh decision in the matter after affording an opportunity to the appellant to submit detailed objections and after giving an opportunity of personal hearing to the authorized representative of the appellant - Appeal allowed by way of remand.

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• 2021 (3) TMI 131
  Maintainability of petition - availability of alternate remedy of appeal - allegation is that the writ petition was filed beyond the maximum time limit stipulated under the VAT Act for filing the appeal - HELD THAT:- An identical issue was considered in MAHINDRA MAHINDRA LTD. VERSUS THE JOINT COMMISSIONER (CT) APPEALS, THE DEPUTY COMMISSIONER (CT) - II, LARGE TAX PAYERS UNIT, CHENNAI-8 [ 2021 (3) TMI 82 - MADRAS HIGH COURT ] wherein we dealt with the issue as to whether the decision of the Hon'ble Supreme Court in the case of ASSISTANT COMMISSIONER (CT) LTU, KAKINADA ORS. VERSUS M/S. GLAXO SMITH KLINE CONSUMER HEALTH CARE LIMITED [ 2020 (5) TMI 149 - SUPREME COURT ], which was relied upon by the learned Single Judge, laid down the proposition that there has been absolute bar for entertaining a writ petition, which had been filed beyond the statutory period of limitation prescribed under the Act for preferring a statutory appeal before the Appellate Authority. In the light of the above decision wherein it is held that there is no absolute bar for entertaining a writ petition, the decision of the learned Single Judge in holding as if there is a blanket ban for entertaining a writ petition cannot be countenanced. Hence, the impugned order is interfered with. Revision of assessment, which was initially completed by issuance of a notice under Section 27 of the VAT Act - HELD THAT:- Our attention is drawn to a certificate issued by the Chartered Accountant dated 16.2.2017 - No doubt, the said certificate dated 16.2.2017 is much after the assessment order dated 15.9.2016. Nevertheless, had an opportunity been granted to the appellant to produce the books of accounts and other records, in all probabilities, the dispute would have been resolved. Thus, considering the peculiar facts and circumstances of the case, we are of the considered view that one more opportunity can be granted to the appellant to go before the Assessing Officer and place all records so as to enable the Assessing Officer to complete the assessment in accordance with law after taking note of the relevant factors. The matter is remanded to the Assessing Officer for a fresh consideration - Appeal allowed by way of remand.

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• Indian Laws

• 2021 (3) TMI 137
  Arbitral Award - Time Limitation for filing petition - whether the period of limitation for filing the Petition under Section 34 would commence from the date on which the draft award dated 27.04.2018 was circulated to the parties, or the date on which the signed copy of the award was provided? HELD THAT:- In an arbitral tribunal comprising of a panel of three members, if one of the members gives a dissenting opinion, it must be delivered contemporaneously on the same date as the final award, and not on a subsequent date, as the tribunal becomes functus officio upon the passing of the final award. The period for rendering the award and dissenting opinion must be within the period prescribed by Section 29A of the Act. There is only one date recognised by law i.e. the date on which a signed copy of the final award is received by the parties, from which the period of limitation for filing objections would start ticking. There can be no finality in the award, except after it is signed, because signing of the award gives legal effect and finality to the award - The date on which the signed award is provided to the parties is a crucial date in arbitration proceedings under the Indian Arbitration and Conciliation Act, 1996. It is from this date that: (a) the period of 30 days for filing an application under Section 33 for correction and interpretation of the award, or additional award may be filed; (b) the arbitral proceedings would terminate as provided by Section 32(1) of the Act; (c) the period of limitation for filing objections to the award under Section 34 commences. The period of limitation for filing objections would have to be reckoned from the date on which the signed copy of the award was made available to the parties i.e. on 19.05.2018 in the instant case - It is the admitted position that the objections were filed within the period of limitation prescribed by Section 34(3) of the Act, if reckoned from 19.05.2018. Undisputedly, in the instant case, the objections have been filed within the period of limitation prescribed under Section 34(3) from the date of receipt of the signed award. Appeal allowed.

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