TMI Tax Updates - e-Newsletter
March 9, 2021

Case Laws in this Newsletter:

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

Articles

1. INNOVATION IS THE KEY TO SUCCESS; LAWYERING IS NO EXCEPTION

   By: Jayaprakash Gopinathan

2. APPEAL BEFORE SECURITIES APPELLATE TRIBUNAL

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Sub-Committee of Insolvency Law Committee recommended IBC pre-pack framework

2. MCA strikes off 10,113 companies between April 2020 and February 2021

3. Details of Central Taxes collected by the Union Government

4. Disputes amounting to ₹ 98,328 crore are resolved under Vivad se Vishwas Scheme till 1st March 2021

5. NITI Aayog to release the SDG India Index & Dashboard, 2020-21 on 10th March 2021

6. More than 81% account holders are Women under Stand Up India Scheme

7. Income Tax Department conducts searches in Tamil Nadu

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CDMRD/DNP/CIR/P/2021/30 - dated 8-3-2021

Amendments to provisions in SEBI Circular dated September 16, 2016 on Unique Client Code (UCC) and mandatory requirement of Permanent Account Number (PAN).

Highlights / Catch Notes

GST

• Appeal Delay Condonation Denied: Appellate Authority Lacks Jurisdiction Beyond One-Month Extension u/s 129(1)(b) Penalty.

  Case-Laws - HC : Condonation of delay in filing appeal before the Appellate Authority - Levy of penalty u/s 129(1)(b) - The fact that there is an upper limit of only one month provided in the statutes itself for preferring an appeal beyond the prescribed period of three months itself establishes the fact that beyond that extended period of one month after the expiry of period of limitation, the Appellate Authority becomes functus officio and would not be in a position to entertain the appeal nor does he have the power to condone the delay. - HC
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Income Tax

• Assessee Seeks 84-Day Delay Condonation for Appeal Due to Legal Counsel Change, Citing Income Tax Act Purpose.

  Case-Laws - AT : Condonation of delay of 84 days in filing an appeal before CIT(A) - explanation offered by the assessee for condoning the delay of 84 days in filing of the appeal before the ld. CIT(A) is that the delay had occurred on account of the change of counsel - By mere non-condonation of delay of 84 days, the very object of the Act would be defeated. - AT
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• Refundable Security Deposit Not Subject to TDS u/s 194IA; No Default for Non-Deduction of TDS.

  Case-Laws - AT : TDS u/s 194IA - refundable security deposit paid to the land owners - non deduction of TDS - even if it is advance payment, it is not linked to the transfer of immovable property as enumerated in Section 194-IA of the Act, since the condition laid down in Section 2(47)(v) of the Act was not complied with within the meaning of Section 53A of the T.P. Act, so as to deduct TDS by the assessee on the said refundable security deposit. The assessee cannot be hold as the assessee in default u/s. 201(1) and 201(1A) of the Act. - AT
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• Income from Non-Nursery Activities Not Exempt as Agricultural Income u/s 10(1), Appeal Dismissed.

  Case-Laws - AT : Exemption u/s 10(1) - Agricultural Income or not - A.O. held that the portion relating to other than supply of plants and saplings cannot be characterized as agricultural income and such portion of income cannot be entitled to exemption u/s 10(1) - only growing of saplings and seedlings is undertaken in assessee’s nursery and the other activities such as preparation of land, supply of soil, supply of fertilizer, engaging Horticulturists, insuring etc. even assuming it as secondary operation to the primary operation was never carried out in assessee’s nursery but in client’s site - Appeal of the assessee dismissed - AT
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• Income Tax Deduction u/s 80IC Upheld for Transport, Power, and Interest Subsidies Linked to Business Profits.

  Case-Laws - AT : Disallowance of deduction u/s 80IC - Subsidy - nexus between the profits and gains of the industrial undertaking or business - The assessee succeeds and claim of the assessee in respect of deduction u/s 80IC of the Act in respect of subsidy (transport subsidy, power subsidy and interest subsidy) should be granted and the AO is directed to do so - AT
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• Assessment Order Invalidated: Jurisdictional Error Due to Wrong ITO Issuing Notice u/s 143(2.

  Case-Laws - AT : Validity of assessment order - Transfer of case from jurisdiction - Notice u/s 143(2) was issued by the ITO Ward-2, Malegaon, Nasik, Maharashtra whereas Assessment order passed by the ITO Ward-2 (2), Meerut, U.P. - the entire assessment order is null and void in the absence of issue and service of jurisdictional notice u/s 143(2) by the ITO at Meerut having jurisdiction over the case of the assessee. - AT
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• Unexplained Investments and Income Surrender u/ss 69, 115BBE: Loss Set-Off Allowed Until 2016-17. Case Reconsidered.

  Case-Laws - AT : Unexplained investment u/s 69 - surrender of income - provisions u/s 115BBE - no set off of loss u/s 69 - CBDT has clarified that, the Board is of the view that since the term 'or set off of any loss' was specifically inserted only vide the Finance Act 2016, w.e.f. 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under Section 115BBE of the Act till the assessment year 2016-17. - Since, CBDT Circular was issued after the order of the CIT(A), the CIT(A) did not have the benefit of the circular - Matter remanded back - AT
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• Sub-brokerage payments qualify as allowable business expenditures u/s 37; A.O.'s dismissal based on invalid evidence.

  Case-Laws - AT : Deduction on account of sub-brokerage paid u/s 37 - Allowable business expenditure or not? - A.O. did not bring any evidence on record to dispute the correctness of the documentary evidences filed by the assessee on record. The A.O. merely following the information received from the search of another person, disbelieved the explanation of assessee, but, such fact cannot be read in evidence against the assessee. - AT
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• Transfer pricing adjustments should target only international transactions with associated enterprises, not entire entities, per ESAS - ALP guidelines.

  Case-Laws - AT : TP adjustment in Distribution activity, described as ESAS - ALP and the consequential transfer pricing adjustment are contemplated only in respect of the international transactions and not the entity level transactions. The TPO, in the instant case computed transfer pricing adjustment in respect of entity level transactions. We direct to restrict it to the AE transactions under consideration and not the entity level transactions. - AT
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• Appeal Dismissed by ITAT Due to Unexplained 1924-Day Delay in Filing; Restoration Motion Denied.

  Case-Laws - HC : Condoning the inordinate delay of '1924 days' for filing appeal before ITAT - Absolutely no tenable reason or explanation has been offered by the Appellant/Assessee for condoning the inordinate delay of '1924 days'; much less any satisfactory explanation. The finding was rendered by the Tribunal that the inordinate delay cannot be condoned, led to dismissal of the MA for restoration of the appeal. - HC
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Indian Laws

• Disciplinary committee finds accountant guilty of misconduct on probability, questions raised on continuing without complainant's insistence.

  Case-Laws - HC : Professional Misconduct - Disciplinary against the CA - In the present case the disciplinary committee has passed the order only on the basis of preponderance of probability and the petitioner was held guilty, despite of the fact that the charges levelled against the petitioner are required to be proved beyond reasonable doubt. - Once the complainant has itself submitted an affidavit for withdrawal of his complaint there was no occasion for the disciplinary committee to continue the proceedings as the proceedings is not in the nature of suo motu proceedings. - HC
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IBC

• Corporate debtor's resolution plan approved; addresses farmers' FRP dues. No new obligations for applicant post-resolution.

  Case-Laws - Tri : Approval of Resolution plan - fresh claim of outstanding FRP dues of farmers who has supplied sugarcane to the corporate debtor - Once that process is over, the resolution applicant cannot be saddled with any kind of new liability apart from the agreed payment to the stakeholders in the Resolution Plan. - Tri
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• Court Stresses Piercing Corporate Veil to Hold Directors Accountable in Wilful Defaulter Cases; Section 14 IBC Not a Shield.

  Case-Laws - HC : Doctrine of piercing the corporate veil - In proceedings for declaration of Wilful Defaulter, the corporate veil has to be lifted in order to examine the role of the Directors in the alleged actions of the corporate debtor-company which lead to the proposed declaration of Wilful Defaulter - the petitioners cannot take advantage of Section 14 of the IBC merely on the ground of being at par with the corporate debtor, which itself is covered by the said section. - HC
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• Supreme Court dismisses appeal as appellant fails to implement Resolution Plan, unable to raise funds without mortgaging assets.

  Case-Laws - SC : Failure to implement Resolution Plan - The appellant has been unable to raise the funds - Ultimately, what the request of the appellant reduces itself to, is that it would raise funds on a mortgage of the assets of the Company and unless the Company is brought out of liquidation, it would not be in a position to raise the funds. This is unacceptable. - The appellant has failed to abide by its obligations. In that view of the matter, there are no reason or justification to entertain the Civil Appeal any further.- SC
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• NCLT admits Section 9 application: Ex-employees' salary arrears claim valid within limitation period due to MD's acknowledgment.

  Case-Laws - SC : CIRP - Former Employees claiming arrears of salary - Period of limitation - at least to the extent of an acknowledgement made by the then Managing Director of the Corporate Debtor, the arrears of salary due for a period of at least 3 years prior to 30.09.2014 would certainly be within limitation, and therefore payable to the Appellant. This being the case, it is clear that the NCLT judgment is correct in admitting the Section 9 application by the Appellant. Mr. Rai correctly points out that the Employees Provident Fund letter dated 13.04.2016 was only a red-herring, and has nothing to do with the arrears of salary which had to be paid. - SC
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Service Tax

• Court Rejects Service Charge Claim on Non-Refundable Contribution for 'Renting of Immovable Property Service' Due to Lack of Evidence.

  Case-Laws - AT : Renting of immovable property service - receipt of onetime non-refundable contribution - The entire case of the department is that one time refundable amount collected by the appellant from its member units is the service charge against the provision of ‘Renting of Immovable Property Service’ but the department has not adduced a single evidence in support of its allegation. Hence, the contribution of the department in this regard has no legs to stand - AT
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Central Excise

• Court Questions Penalty on Assessee Due to Insufficient Evidence of Material Diversion; Show Cause Notice Not Justified.

  Case-Laws - HC : Levy of Penalty - Jurisdiction - diversion of imported material or not - the assessee has not made any unconditional acceptance of any diversion - the so called letter issued by the assessee cannot be taken to be a case where the assessee accepted the fact that they have not utilized the raw materials for the purpose for which it was imported - the materials which were available cannot be a reason for issuance of the Show Cause Notice - HC
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VAT

• Court Rules Tax Refund Justified for Company on Excess Tax Paid for Diesel in Inter-State Trade for Mining Activities.

  Case-Laws - HC : Refund of excess tax paid - it can be safely concluded that the HSD has been purchased by the Petitioner/ Company from Indian Oil Corporation in the course of inter-State trade for use in mining activities and therefore, the question of passing of the tax burden to anyone would not arise and the respondent authorities are not justified in not processing the refund claims of the Petitioner / Company. - HC
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• Petitioner's Claims Dismissed for Not Meeting Pre-Deposit Requirement u/s 62(5) of Punjab VAT Act.

  Case-Laws - HC : Non-compliance with the pre-deposit - Section 62 (5) of the Punjab VAT Act - The petitioner having not complied with the mandatory requirement of the statute, cannot assert and challenge the order passed by the First Appellate Authority and the order passed by the Punjab VAT Tribunal as not sustainable - HC
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Case Laws:

• GST

• 2021 (3) TMI 273
  Condonation of delay in filing appeal before the Appellate Authority - petition preferred under Section 107 of the GST Act, 2017 has been dismissed on the ground of barred by limitation - Detention, seizure and release of goods and conveyances in transit - HELD THAT:- The Appellate Authority has been given the power to condone the delay of only one month i.e. 30 days and not beyond that. Thus, from the plain reading of the provisions it clearly establishes the fact that the provisions of Section 5 of the Limitation Act would not be governing the field in view of the specific period of limitation and the period for condonation of delay being provided. The original order was dated 15.10.2018. The appeal had to be filed within three months i.e. by 15.01.2019. If for some reason the appeal would not be filed under any circumstances, it ought to have been filed within a further period of 30 days. Having not done so within the said stipulated 30 days period, any subsequent filing of the appeal beyond the extended 30 days period the Appellate Authority would not have the power to condone the delay. The fact that there is an upper limit of only one month provided in the statutes itself for preferring an appeal beyond the prescribed period of three months itself establishes the fact that beyond that extended period of one month after the expiry of period of limitation, the Appellate Authority becomes functus officio and would not be in a position to entertain the appeal nor does he have the power to condone the delay. This Court does not find a strong case made out by the counsel for the petitioner in the instant case calling for an interference to the order passed by the Respondent - Petition dismissed.

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• 2021 (3) TMI 272
  Transitional credit / CENVAT Credit - transfer of credit - GST Tran-1 form - petitioner sought for CENVAT credit in the State of C.G. but because of technical glitches the GST portal could not be opened and accordingly the submission of form could not be made - HELD THAT:- Considering the documents which is filed, it appears that because of technical glitches the CENVAT credit form could not be filled and it could not be submitted to the GST Portal - It is directed that respondents shall reopen the portal within 2 weeks from the date of receipt of a copy of this order. In the event, if it do not open, they will entertain the application of the petitioner manually and pass the order on it after due verification of the credit as claimed by the petitioner. Petition disposed off.

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• Income Tax

• 2021 (3) TMI 271
  Condoning the inordinate delay of 1924 days for filing appeal before ITAT - Public sector undertaking (PSU) - Dismissal of MA for restoration of appeal since the COD clearance is no more required - reasons stated for the inordinate delay as applicant could not file said Miscellaneous Application due to bona fide reasons of transfer/retirement of concerned officers-in-charge and change in its Tax Consultants resulting in loss of track of proceedings as there were more than 50 appeals pending before this Hon ble Tribunal - HELD THAT:- On allowing the MA filed by the Revenue as per Annexure A/7 order dated 21.10.2011, the Appellant/Assessee could have filed a similar MA to get their appeal as well to be restored, which course was not pursed by them. It was after waiting for nearly 7-8 years, that they had some second thought and have come up on some revelation, that similar MA could be filed with a petition to condone the inordinate delay of 1924 days as discernible from Annexure A/1. It is in the said circumstance that, the merit of the so-called explanation to condone the delay was considered, leading to an adverse finding. Absolutely no tenable reason or explanation has been offered by the Appellant/Assessee for condoning the inordinate delay of 1924 days ; much less any satisfactory explanation. The finding was rendered by the Tribunal that the inordinate delay cannot be condoned, led to dismissal of the MA for restoration of the appeal. It is quite relevant to note that the merit of the case was not considered by the Tribunal, as the MA for restoration of the appeal came to be dismissed for want of any satisfactory explanation of delay. The finding rendered by the Tribunal is well supported by the reasons; which is more evident from the course and conduct pursued by the Assessee by approbating and reprobating simultaneously; initially by contending before the Tribunal (when MA preferred by the Revenue was allowed years ago in 2011) that the Apex Court ruling in Electronics Corporation of India Limited [ 2011 (2) TMI 3 - SUPREME COURT ] was not applicable to their case and now seeking to place reliance on the same.

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• 2021 (3) TMI 270
  TP adjustment in Distribution activity, described as ESAS (Engine sale, Spares sale and After-sale service) - ALP determination - International transaction - commission income earned by the assessee on transactions of rendering marketing services for which the credit notes were issued by the AEs during the year under consideration, but invoices were raised in earlier year(s) - HELD THAT:- The scope of the international transaction of rendering marketing services broadly commences with the doing of background work for sale as a step one, followed by actual sale as a step two and ending with the realization of the invoice value by the AE from the Indian customers as a step three. It is only on the completion of the step three that the international transaction of rendering marketing support services comes to an end resulting into accrual of income therefrom and the consequential ALP determination. Thus all the operating costs/revenue pertaining to the above broad activities running into three steps leading to the international transaction of rendering marketing support services are to be considered for determining its ALP under rule 10B(1)(e). To put it differently, only the costs/revenue which are either anterior to the step one or exterior to the step three need to be ignored. As clear from the details of Rs. 5.65 crore given by the assessee that it carried out the above referred first two steps of rendering marketing support services in the earlier years, which is evidenced from the fact that the invoices were raised by the AEs in preceding years. A fortiori, all the operating costs incurred by the assessee in earlier years on such rendition of services are also required to be included in the operating cost base while determining the ALP of the transaction on its completion in the year under consideration. Necessary details in respect of the commission income of Rs. 3.02 crore as discussed in the earlier para and the amount of operating expenses incurred in preceding years towards the international transaction under consideration are wanting. We, therefore, set-aside the impugned order and direct the AO/TPO to decide the issue accordingly. Comparability - Cuprum Bagrodia Ltd., whose OP/OR was taken by the TPO at 18.33%. The assessee contended before the DRP that the calculation of the PLI was not correct inasmuch as this company was into two business segments, namely, Trading segment and Mining segment and only the Trading segment was to be considered as comparable. As against that, the TPO had computed the PLI by taking entity level figures. The DRP on page 13, directed the AO to consider the segmental data. While giving effect to the direction of the DRP, the TPO in his letter to the AO, took adjusted PLI of this company at 6.12%. The case of the assessee is that the PLI of this company is 0.50%. Under these circumstances, we direct the AO/TPO to verify the contention of the assessee and adopt the correct PLI of Cuprum Bagrodia Ltd. George Oakes Limited - TPO adopted the PLI of this company at 5.45%. The DRP observed that the TPO computed operating profit by also considering nonoperating revenue and costs. While giving effect to the direction of the DRP, the TPO determined PLI of this company at 4.77%. The case of the assessee is that the PLI of this company should be (-) 0.22%. The AO/TPO is directed to verify the assessee s contention and adopt correct PLI while determining the ALP. Correct turnover filter - As seen that the TPO applied a particular turnover filter, which was modified by the DRP in para 11.2.3 of its direction. The AO, while giving effect to the direction of the DRP, inadvertently overlooked the same. The AO is directed to comply with the direction given by the DRP. TP adjustment should be restricted to the international transaction alone - ALP and the consequential transfer pricing adjustment are contemplated only in respect of the international transactions and not the entity level transactions. The TPO, in the instant case computed transfer pricing adjustment in respect of entity level transactions. We direct to restrict it to the AE transactions under consideration and not the entity level transactions. To sum up, we set aside the impugned order on ALP determination of the international transactions of the `Distribution activity and restore the matter to the file of the AO/TPO for a fresh determination of the ALP in accordance with our above observations/directions. Needless to say, the assessee will be allowed a reasonable opportunity of hearing. Addition u/s 40(a)(ii) - Education cess on income tax and secondary and higher education cess on income tax - HELD THAT:- We find that this issue is no more res integra in view of the judgment of Sesa Goa Lt. Vs. JCIT [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] in which it has been held that Education Cess is not disallowable expenditure u/s.40(a)(ii) of the Act. Similar view has earlier been taken in Chambal Fertilisers and Chemicals Ltd. and Another [ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT] . We direct to allow deduction for such an amount after verification.

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• 2021 (3) TMI 269
  Deduction on account of sub-brokerage paid u/s 37 - Allowable business expenditure or not? - HELD THAT:- A.O. in the entire assessment order did not mention any details of the search conducted in the case of Shri Praveen Agarwal. The A.O. did not mention anything in the assessment order as to how the statement of Shri Praveen Agarwal was incriminating in nature against the assessee. Whatever documentary evidence was produced by the assessee before A.O. have not been doubted by the A.O. and no enquiry on the same have conducted by the A.O. Thus, its stand established that assessee being engaged in business of real estate has engaged M/s. Taral Vincom Pvt. Ltd., as sub-broker. The assessee paid the impugned amount to the sub-broker against Bill and copy of the ledger account of the sub-broker is filed before A.O. The impugned amount is paid through banking channel on which TDS has also been deducted. The assessee filed details to show that for how much deals, sub-broker has worked for the business of assessee which were noted in the assessment order. All these documentary evidences have not been doubted by the A.O, therefore, assessee has been able to prove that the impugned amount have been incurred wholly and exclusively for the purpose of business of assessee. A.O. did not bring any evidence on record to dispute the correctness of the documentary evidences filed by the assessee on record. The A.O. merely following the information received from the search of Shri Praveen Agarwal, disbelieved the explanation of assessee, but, such fact cannot be read in evidence against the assessee. The details of ledger account show that assessee has regular business with M/s. Taral Vincom Pvt. Ltd., which is supported by the activities conducted by them. The bills issued by assessee and copy of bills issued by M/s. Taral Vincom Pvt. Ltd., show complete details as to for which property the transactions have been conducted by the sub-brokerage, for which commission have been paid to M/s. Taral Vincom Pvt. Ltd. The documentary evidences on record clearly suggest that assessee entered into the genuine business activities with the sub-broker and sub-broker rendered services for the business activity of the assessee. In the Group Case the Ld. CIT(A) has already deleted the similar addition finding the commission payment made to the same sub-broker as genuine - Decided against revenue.

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• 2021 (3) TMI 267
  Unexplained investment u/s 69 - surrender of income - provisions u/s 115BBE w.e.f. 01.04.2013 in the provision of Income Tax statute and by virtue of sub-section (2) of section 115BBE, no set off of loss u/s 69 can be allowed - disallowance of set off of brought forward losses against the income assessed u/s 68 - HELD THAT:- From perusal of Section 115BBE, it is very clear that any expense or allowance shall not be allowed from the income assessed u/s 69 but, this Section does not indicate that set off of brought forward business losses shall not be allowed from income assessed u/s 69 for the purpose of calculating tax u/s 115BBE. This is further confirmed by the amendment made under the Finance Act, 2016, which is applicable from AY 2017-18. Pre-amended provision of Section 115BBE of the Act did not convey the intention that losses shall not be allowed to be set-off against income referred to in Section 115BBE of the Act and hence, the amendment was made vide the Finance Act, 2016. Thus keeping the legislative intent behind amendment in Section 115BBE(2) vide the Finance Act, 2016 to remove any ambiguity of interpretation, the Board is of the view that since the term or set off of any loss was specifically inserted only vide the Finance Act 2016, w.e.f. 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under Section 115BBE of the Act till the assessment year 2016-17. Since, CBDT Circular No. 11/2019 dated 19.06.2019 was issued after the order of the CIT(A), the CIT(A) did not have the benefit of the circular. Therefore, we are of the view that the Circular applies in the present assessee s case as the Assessment Year before us is that of A.Y. 2015-16 and till A.Y. 2016-17, the assessee is entitled to claim se-off of loss against income determined under Section 115BBE of the Act. The appeal of the assessee is allowed.

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• 2021 (3) TMI 266
  Validity of assessment order - Transfer of case from jurisdiction - Notice u/s 143(2) was issued by the ITO Ward-2, Malegaon, Nasik, Maharashtra whereas Assessment order passed by the ITO Ward-2 (2), Meerut, U.P. - HELD THAT:- Material on record clearly prove that ITO at Meerut having jurisdiction over the case of the assessee did not issue notice under section 143(2) upon the assessee within the period of limitation provided under the Act. Therefore, the notice issued under section 143(2) by ITO, Malegaon have no jurisdiction over the case of the assessee was not valid and would not confer any jurisdiction over the case of the assessee. The entire assessment proceedings are, therefore, vitiated because of non-service of jurisdiction notice under section 143(2) within the period of limitation by ITO at Meerut having jurisdiction over the case of the assessee. The assessment order is, therefore, null and void. Since the entire assessment order is null and void and as such the same is liable to be quashed. The Ld. D.R. filed copy of jurisdiction history in the case of the assessee, but, it did not provide how the case of assessee was transferred from Meerut to Malegaon for the assessment year under appeal. It would, therefore, would not support the case of the Revenue. Considering the totality of the facts and circumstances of the case in the light of above decisions relied upon by Learned Counsel for the Assessee, we hold that the entire assessment order is null and void in the absence of issue and service of jurisdictional notice under section 143(2) by the ITO at Meerut having jurisdiction over the case of the assessee. In view of the above, we set aside the Orders of the authorities below and quash the assessment order. Accordingly, appeal of the assessee allowed.

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• 2021 (3) TMI 265
  Disallowance of deduction u/s 80IC - Transport Subsidy, Power Subsidy and Interest Subsidy - nexus between the profits and gains of the industrial undertaking or business - HELD THAT:- We note that the Hon ble jurisdictional High Court (Guwahati High Court) while dealing with the nature of the above referred subsidy (transport subsidy, power subsidy and interest subsidy) [ 2013 (7) TMI 175 - GAUHATI HIGH COURT ] Aforesaid decision of the Hon ble Guwahati High Court was confirmed in CIT vs. Meghalaya Steel Ltd. [ 2013 (7) TMI 175 - GAUHATI HIGH COURT ] in favour of the assessee by holding as Transport subsidy, interest subsidy, power subsidy and insurance subsidy are revenue receipts which are reimbursed to the assessee for elements of cost relating to manufacture and sale of its products; there is certainly a direct nexus between the profits and gains of the industrial undertaking or business and such subsidies and therefore, the amount received by the assessee as subsidies qualify for deduction under Section 80IB and 80IC. The assessee succeeds and claim of the assessee in respect of deduction u/s 80IC of the Act in respect of subsidy (transport subsidy, power subsidy and interest subsidy) should be granted and the AO is directed to do so. - Decided in favour of assessee.

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• 2021 (3) TMI 263
  Disallowance u/s 80P(2)(a)(i) - sole reason for the A.O. and the first appellate authority to decide the appeal against the assessee was that the assessee was registered under the Karnataka Souharda Sahakari Act, 1997, and therefore, was not a cooperative society within the purview of section 2(19) - HELD THAT:- Hon ble Karnataka High Court in the case of M/s.Swabhimani Souharda Credit Co-operative Ltd.[ 2020 (1) TMI 831 - KARNATAKA HIGH COURT] had decided an identical issue and held that the entities registered under the Karnataka Souharda Sahakari Act, 1997, fit into the definite term Co-operative Society . AO in the impugned assessment order had clearly held that the assessee is providing credit facilities to its members and interest paid to members on their deposits. As further stated by the A.O. that the entire interest income received is out of operational income of the assessee. As mentioned earlier, the solitary reason for denying the claim of deduction u/s 80P(2) was that the assessee cannot be termed as a cooperative society coming within the definition of section 2(19) since it is registered under the Karnataka Souharda Sahakari Act, 1997. Since have held in view of the above judicial pronouncement that the assessee is a cooperative society though it is registered under the Karnataka Souharda Sahakari Act, 1997, allow the appeal of the assessee.

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• 2021 (3) TMI 262
  Exemption u/s 10(1) - Agricultural Income or not - income derived from sale of saplings and seedling grown in a nursery shall deemed to be agricultural income - A.O. held that the portion relating to other than supply of plants and saplings cannot be characterized as agricultural income and such portion of income cannot be entitled to exemption u/s 10(1) - HELD THAT:- In the instant case, the primary operation is done in assessee s nursery will confine only with regard to growing of plants and saplings. The subsequent operation, i.e., supply of fertilizer, supply of soil, engaging Horticulturists, insuring the plant, making pits and other related activities even assuming it is secondary operation is never carried out in assessee s nursery but in client s site. Plants and saplings are planted in the client s site and became the property of the client. Thereafter the assessee s role is only to tend these plants and saplings. The services so performed are in the nature of maintenance and cannot be termed as secondary operation in the strict sense of the term. Therefore, hold that the income derived by the assessee by activities other than sale of plants raised in its own nursery is not in the nature of agricultural income falling within the definition of section 2(1A) of the I.T.Act. The judicial pronouncement relied on by the assessee is distinguishable on facts for the reason that in those case, both primary and secondary agricultural operations as enumerated by the Hon ble Apex Court in the case of CIT v. Raja Benoy Kumar Sahas Roy[ 1957 (5) TMI 6 - SUPREME COURT] was carried out in assessee s land, whereas, in the instant case, only growing of saplings and seedlings is undertaken in assessee s nursery and the other activities such as preparation of land, supply of soil, supply of fertilizer, engaging Horticulturists, insuring etc. even assuming it as secondary operation to the primary operation was never carried out in assessee s nursery but in client s site. - Decided against assessee.

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• 2021 (3) TMI 261
  Penalty proceedings u/s 271(1)(c) - disallowance in deduction claimed u/s 35(2AB) - HELD THAT:- Since the quantum addition is also deleted by the Tribunal [ 2019 (1) TMI 20 - ITAT BANGALORE] there is no question of levying of any penalty and the CIT(A) has rightly deleted the penalty on the basis of the order of the Tribunal of quantum additions. Accordingly, we confirm the finding of Ld. CIT(A) in deleting the penalty. Appeal filed by the revenue is dismissed.

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• 2021 (3) TMI 260
  Penalty u/s 271(1)(c) - excess depreciation claim on plant and machinery u/s.32(1)(iia) - disallowance of claim as appellant has started production only in the current year and therefore the assessee cannot be said to have been already engaged in the business of manufacturing - HELD THAT:- While deciding the matter in favour of the assessee the Ld. Tribunal in M/S CERA SANITARYWARE LTD. VERSUS ACIT (OSD) , RANGE-1, AHMEDABAD [ 2017 (1) TMI 390 - ITAT AHMEDABAD] limited company declaring total income of Rs. 11.43 Crores approx. and having no mens rea of claiming excess depreciation of just Rs. 7,80,826/-, rather it was claimed in regular course with the firm belief that it is legally allowable which was further supported by statutory Audit Report and therefore, imposition of penalty is unjustified. The A.O. decided the matter against the assessee on the contention that depreciation can be allowed on the show room building as it could not be deemed to be put to use on 05.03.2007 as claimed by the assessee but was put to use on 31.05.2007 after the completion of Bath Studio. On that premises the penalty imposed u/s.271(1)(c) of the Act was declared to be unjustified as the assessee has only committed an undoubtful bona fide error without having any intention of concealment of income or furnishing inaccurate particulars of income. Thus relying on the same ratio when there was full disclosure of the claim made by the assessee in the case in hand certified by the Chartered Accountant penalty is not justified merely on the ground of rejection of claim on merit and, thus, quashing of penalty by the Ld.CIT (A), in our considered opinion, is just and proper so as to warrant inference. Decided against revenue.

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• 2021 (3) TMI 259
  Penalty u/s 271(1)(c) - notice in the name of the non-existent company being amalgamated - HELD THAT:- Order of penalty passed by the revenue on a non-existing company is not sustainable in the eyes of law. The same is void ab initio and liable to be quashed. Hence, we quash the entire proceeding. See MARUTI SUZUKI INDIA LIMITED [ 2019 (7) TMI 1449 - SUPREME COURT] and DIMENSION APPARELS PVT. LTD. [ 2014 (11) TMI 181 - DELHI HIGH COURT] . The penalty is, therefore, is hereby deleted. - Decided in favour of assessee.

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• 2021 (3) TMI 258
  TDS u/s 194IA - refundable security deposit paid to the land owners - non deduction of TDS - proceedings under section 201(1) and 201(1A) - Transfer u/s 2(47) - Contention of the learned Authorised Representative is that there is no applicability of Section 194-IA of the Act since there was no transfer in terms of Section 2(47)(v) of the Act in relation to the JDA cum General Power of Attorney dt.3.6.2013 - HELD THAT:- As carefully gone through the various clauses of JDA cum General Power of Attorney to see whether the consideration received by the assessee is in terms of transfer of immovable property in terms of Section 2(47)(v) of the Act. In the present case, an amount of Rs. 21.85 Crores has been paid to 54 land owners which was shown as interest free Refundable Security Deposit in the JDA cum General Power of Attorney and this security deposit paid by the assessee is recoverable through sale of constructed area of the land owners share which is specified in Clause 15 of the JDA cum General Power of Attorney. After obtaining the consent from the land owners, the assessee shall take appropriate steps to obtain No Objection Certificate, other permissions required for undertaking the Project within 12 months from the date of the JDA. As seen from the above, it is actually mentioned that the assessee is only permitted by the land owners to develop the scheduled property as residential apartment buildings and also mentioned that it cannot be construed as delivery or possession in terms of Section 53 of the T.P. Act r.w.s. 2(47)(v) of the Act. Legal possession of scheduled property are continue to remain with the possession of the land owner. There is a time limit to get the permission from the competent authority which is 12 months from the date of Agreement, thereafter 60 months time to complete the construction of residential apartment buildings form the receipt of the sanction plan, thereafter grace period has been given which show that the time is the essence of the contract. In the Assessment Year under consideration, nothing is brought on record to show that the assessee got approval of the sanctioned plan vis- -vis any construction is started. Being so, the argument of the ld. DR is that there was a transfer of immovable property in the assessment year under consideration is not tenable. This is so, because the transferee is not able to complete any act as mentioned in JDA cum General Power of Attorney. The transferee only made payment of interest free refundable security deposit of Rs. 21.85 Crores to the land owners as per clause No. 15. There was a condition in Clause No. 15 that the security deposit paid by the present assessee to the land owner shall be recovered through sale of the part of the owners constructed area. Thus even if it is advance payment, it is not linked to the transfer of immovable property as enumerated in Section 194-IA of the Act, since the condition laid down in Section 2(47)(v) of the Act was not complied with within the meaning of Section 53A of the T.P. Act, so as to deduct TDS by the assessee on the said refundable security deposit. The assessee cannot be hold as the assessee in default u/s. 201(1) and 201(1A) of the Act. Decided in favour of assessee.

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• 2021 (3) TMI 257
  Disallowance of CSR SD expenses u/s 37 - Expenses not been incurred for the purpose of business of the appellant - as per assessee appellant being a government of India undertaking and CSR and SD expenses having been incurred as per mandatory guidelines issued by Department of Public Enterprises, Ministry of heavy industry, the expenses are exclusively for the purpose of business and in accordance with provisions of section 37 - HELD THAT:- A similar issue was considered by the Tribunal in A.Ys 2013-14 and 2014-15 [ 2021 (1) TMI 530 - ITAT DELHI ] Just because the expenditure was voluntary in nature and was not forced on the assessee by a statutory obligation, it could not cease to be a business expenditure. Therefore, the authorities below indeed erred in law in declining deduction of the expenditure incurred which was, beyond dispute or controversy, at the instance of the Government, and was to discharge the assessee s obligations towards society as a responsible corporate citizen - no illegality or perversity in the findings returned by the ld. CIT (A) in deleting the addition made by the AO on account of disallowance of CSR expenditure. Revenue recognition - Interest on mobilisation advance - interest on the mobilization amount claimed by the assessee - hybrid method of accounting adopted over the years, the interest amount had to be treated as income HELD THAT:- An identical issue was considered by the Hon ble Delhi High Court in assessee s own case [ 2016 (12) TMI 1842 - DELHI HIGH COURT] the entire matter is contentious in the sense that the third party - RPCL - which was awarded the contract claimed that it had performed it in accordance with the agreement with the parties. The assessee, however, felt otherwise and terminated the contract. There could be several likely outcomes in these proceedings many of them possibility impinging upon the rights of the assessee to receive advance amount itself along with interest either in whole or in part. In these circumstances, the ITAT s conclusions that there was no crystallized right to receive any particular amount or amounts, cannot be faulted. No question of law arises. Disallowance made u/s 14A - Non recording of satisfaction - HELD THAT:- As decided in own case 2021 (1) TMI 530 - ITAT DELHI according to the provisions of section 14A(2), the Ld. assessing officer before invoking the applicability of Rule 8D should have explained as to why the voluntary disallowances or no disallowances made by the assessee was unreasonable and unsatisfactory. We failed to find any such satisfaction recorded by the Ld. assessing officer. The satisfaction is mandatory therefore we direct the Ld. assessing officer to delete the disallowance under section 14A of the income tax act applying the provisions of Rule 8D. Assessee appeal allowed.

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• 2021 (3) TMI 256
  Revision u/s 263 - claim of deduction u/s 80(P)(2)(d) - HELD THAT:- The matter is covered in favour of the assessee in its own case for AY 2014-15 by the decision of the Coordinate Bench [ 2019 (11) TMI 690 - ITAT JAIPUR] wherein the Tribunal has allowed the appeal of the assessee on the issue of claim u/s 80P(2)(d) of the Act. The fact that the decision of the Tribunal has not been accepted by the Revenue and further appeal has been preferred before the Hon ble Rajasthan High Court cannot be a basis to hold that the order so passed by the AO allowing such deduction is erroneous in so far as prejudicial to the interest of Revenue and therefore, the findings of the ld Pr.CIT to this extent are set-aside. Claim of various provisions , the assessee has submitted that these relates to liabilities which have crystallized during the year though the payment have been made in the subsequent financial year and thus are allowable business expense. The assessee has also furnished a chart with remarks showing analysis of specific provisions for outstanding liability as on 31.03.2012 and date of subsequent payment. The reason why the same was not found acceptable to ld Pr CIT was that due to non-availability of proper ledgers and other requisite details on assessment record, the same cannot be verified and even the AO has not verified the issue whether the business liabilities regarding these provisions were actually raised and ascertained during the year under consideration or not. There is nothing on record that these details have been called for and examined by the AO during the assessment proceedings and are available on record as so contended by the ld AR and in absence of such examination and relevant material on record, the assessment order passed by the AO is rightly considered as erroneous in so far as it is prejudicial to the interest of the Revenue and the findings of the ld PCIT are upheld in this regard. Provision of bonus - Assessee has submitted that the same has already been considered disallowed in its computation of income in terms of section 43B of the Act and which has been accepted by the AO while completing the assessment proceedings. We have gone through the computation of income available and find the contention so advanced by the assessee as correct as an amount of Rs. 13,00,000/- towards bonus has been suo-moto disallowed by the assessee while computing its income under the head business income . Therefore, the order so passed by the AO accepting the suo-moto disallowance of such provision for bonus cannot by any stretch of imagination be held to be erroneous and prejudicial in nature and hence, the findings of the ld CIT to this extent are set-aside. The order so passed by the ld Pr.CIT is hereby modified to exclude the examination of matter relating to claim of deduction u/s 80(P)(2)(d) and provision of bonus and is sustained to the extent of examination of allowability of various provisions as per law after providing reasonable opportunity to the assessee. Appeal of the assessee is partly allowed.

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• 2021 (3) TMI 255
  Condonation of delay of 84 days - explanation offered by the assessee for condoning the delay of 84 days in filing of the appeal before the ld. CIT(A) is that the delay had occurred on account of the change of counsel - HELD THAT:- No doubt the appellant had not furnished the details as to, who was the original counsel etc. But, it is also clear that the ld. CIT(A) had not doubted the veracity of the explanation offered by the appellant in support of condoning the delay of 84 days in filing the appeal before him. If the ld. CIT(A) wanted more details, he should have asked the appellant to furnish the same. Obviously, the ld. CIT(A) had chosen not to seek any further details. Furthermore, though the ld. CIT(A) had referred to certain judicial precedents and culled out the ratio laid down therein, we, without going into the applicability of the ratio laid down therein to the facts of the present case, it would suffice to say that the CIT(A) had ignored the fundamental principle governing the condonation of delay under the income-tax proceedings i.e. the income-tax proceedings are only civil proceedings and the main object of the Income Tax Act is only to determine the correct tax liability in the hands of the assessee. By mere non-condonation of delay of 84 days, the very object of the Act would be defeated. The ratio laid down by the Hon ble Telangana High Court in the case of Thunuguntla Jagan Mohan Rao [ 2020 (8) TMI 368 - TELANGANA HIGH COURT ] is squarely applicable to the facts of the present case. Accordingly, we direct the ld. CIT(A) to condone the delay of 84 days and adjudicate the issue in appeal on merits in accordance with law.

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• 2021 (3) TMI 254
  Rectification of mistake u/s 154 - case was selected for limited scrutiny vide notice u/s. 143(2) - addition as incurred by the assessee towards CSR - Addition on the ground that there is nothing on record to demonstrate that the said expense is laid out wholly and exclusively for the purpose of business and, therefore, the same is not allowed as per the provisions of section 37(1) - HELD THAT:- We find substance in the submissions of Ld. AR that once the case was selected for limited scrutiny in which the returned income was accepted by the AO, passing an order under section 154 by making an addition on the ground that the same is a mistake apparent on record, is illegal and void beyond his jurisdiction. We set aside the order of CIT(A) and quash the order passed by the AO u/s. 154 of the Act. Accordingly, the grounds raised by the assessee are allowed.

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• 2021 (3) TMI 253
  MAT computation u/s 115JB - Addition of provision for gratuity treated as unascertained liability for calculation of Book profits u/s 115JB - HELD THAT:- Assessee company has for the first time has filed actuarial valuation report of Gratuity liability as on 31.03.2016 - As revenue submitted that an opportunity be provided to verify the facts on liability of gratuity. We find that the CIT(A) has made an observation of the order that the assessee neither in the assessment proceedings nor in the appellate proceedings has submitted working or demonstrated the amount of 43,30,736/- has been determined on the basis of actuarial valuation. Considering the principles of natural justice and the fact that the A.O should not be deprived to verify and examine the claims. We set-aside the order of the Ld.CIT(A) and restore the disputed issue to the file of the A.O for limited purpose to verify and examine the evidences and allow the claim of the assessee. The grounds of appeal of the assessee are allowed for statistical purposes.

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• 2021 (3) TMI 252
  Nature of receipt - Compensation received by the assessee towards displacement in terms of Development Agreement - revenue receipt OR capital receipt as the property has gone into re-development - HELD THAT:- We find that compensation received by the assessee towards displacement in terms of Development Agreement is not a revenue receipt and constitute capital receipt as the property has gone into re-development. In such scenario, the compensation is normally paid by the builder on account of hardship faced by owner of the flat due to displacement of the occupants of the flat. The said payment is in the nature of hardship allowance / rehabilitation allowance and is not liable to tax. We set aside the findings of the ld. CIT(A) on this issue and direct the AO to delete the addition made.

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• 2021 (3) TMI 251
  Maintainability of appeal - low tax effect - HELD THAT:- There is no appearance from the side of assessee despite service of notice. The CBDT has issued circular No.17/2019 dated 08-08-2019 revising upward the monetary limits for filing of appeals by the Department in Income-tax Cases before various appellate forums. The earlier circular No.03/2018 dated 11-07-2018 fixed monetary limit for filing of appeals by the Revenue before the Tribunal at Rs. 20.00 lakh. Such limit has now been enhanced in the Circular dated 08-08-2019 to Rs. 50.00 lakh. Since tax effect in the instant appeals is less than the revised monetary limit of Rs. 50.00 lakh, we are not inclined to entertain the appeals of the Revenue. Hawala transaction - contention of the ld. DR that the appeals should not be dismissed because the additions in these cases were made on the basis of information received from the Sales tax department about the assessee indulging in hawala transactions - HELD THAT:- Such a contention has not been countenanced by the Pune Benches of the Tribunal in several cases including ITO VS. M/s Param Marketing [ 2020 (1) TMI 1415 - ITAT PUNE] and ITO VS. Yusuf Gulmmohmmed Patel [ 2020 (1) TMI 1416 - ITAT PUNE] .Not only that, even the Miscellaneous application filed u/s 254(2) on this issue has also been dismissed in DCIT VS. M/s Rang Rasayan [ 2020 (1) TMI 1414 - ITAT PUNE] . No contrary view has been brought to my notice on behalf of the Revenue. Respectfully following the above precedent, dismiss the appeals filed by the Revenue.

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• Insolvency & Bankruptcy

• 2021 (3) TMI 282
  CIRP - Former Employees claiming arrears of salary - Period of limitation - Seeking declaration that the notice/letters alleged to have been issued by 1st defendant as null and void and will not bind the plaintiff - seeking to grant permanent injunction restraining the 2nd defendant from relying on or claiming against the plaintiff based on the alleged letters/notices - HELD THAT:- What becomes clear is the fact that from the date of the last acknowledgement i.e. 30.09.2014 till the date on which the petition before the NCLT was filed i.e. 27.07.2017, three years have not elapsed. Therefore, at least to the extent of an acknowledgement made by the then Managing Director of the Corporate Debtor, the arrears of salary due for a period of at least 3 years prior to 30.09.2014 would certainly be within limitation, and therefore payable to the Appellant. This being the case, it is clear that the NCLT judgment is correct in admitting the Section 9 application by the Appellant. Mr. Rai correctly points out that the Employees Provident Fund letter dated 13.04.2016 was only a red-herring, and has nothing to do with the arrears of salary which had to be paid. It is clear that there is an acknowledgement of liability, which therefore shows that there is no dispute as to amounts owed to the Appellant. The impugned NCLAT judgment is accordingly set aside. Consequently, the NCLT judgment is restored to the file. Appeal allowed.

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• 2021 (3) TMI 281
  Failure to implement Resolution Plan - NCLAT noted that the appellant had failed to implement the Resolution Plan for a period of over eight months and, hence, declined to exercise its jurisdiction pursuant to its inherent power under Rule 11 of the NCLAT Rules, 2016 - HELD THAT:- By the order of the court dated 9 October 2020, which was passed on the statement which was made by Senior Counsel, an amount of Rs. 50 crores was required to be deposited before 10 January 2021. On 25 November 2020, while clarifying the earlier order by which the order of NCLAT was stayed, time for the deposit of Rs. 50 crores was extended until 25 February 2021. The appellant was clearly put on notice that the amount of Rs. 20 crores already deposited would stand forfeited in the event the appellant fails to comply with the terms of the order. The appellant has been unable to raise the funds. The fact of the matter, as it emerges from Mr Vishwanathan s submissions, is that the appellant will be unable to raise funds from the Term Lenders who are insisting that the status of the Company should change from a company under liquidation to an active status. The order of liquidation has not been set aside. Ultimately, what the request of the appellant reduces itself to, is that it would raise funds on a mortgage of the assets of the Company and unless the Company is brought out of liquidation, it would not be in a position to raise the funds. This is unacceptable. The appellant has failed to abide by its obligations. In that view of the matter, there are no reason or justification to entertain the Civil Appeal any further. The consequence envisaged under the order of this Court shall accordingly ensue in terms of the forfeiture of the amount of Rs. 20 crores. As a consequence of this order, the management shall revert to the liquidator for taking steps in accordance with law. Application disposed off.

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• 2021 (3) TMI 279
  Doctrine of piercing the corporate veil - Issuance of notice during moratorium period - proceeding for declaration of Wilful Defaulter - petitioners argues that in view of the prior commencement of CIRP under the Insolvency and Bankruptcy Code, 2016 (IBC), the Identification Committee had no authority to issue the show-cause notice dated November 4, 2019 and the subsequent notices for personal hearing pursuant thereto - Whether Directors are at par with their company as far as the moratorium under Section 14 of the IBC is concerned? - HELD THAT:- The moratorium stipulated in Section 14 of the IBC has to be read in the context of the scope of operation of the resolution professional. Read in conjunction, the provisions of the IBC indicate that Section 14(1), Clauses (a) and (c) contemplate an arrest of all proceedings not only before courts of law and tribunals but before other authorities as well. Although, strictly speaking, the declaration of Wilful Defaulter dealt with in the RBI guidelines is not an action to foreclose, recover or enforce any security interest created by the corporate debtor, the effect of such a declaration is to interdict and conflict with the functioning of the resolution professional within the scope of the IBC. Thus, the continuance of proceedings for declaration of Wilful Defaulter in respect of the borrowing company must be construed to fall within the purview of the moratorium provided in Section 14 of the IBC. The Directors of the company, however, stand on a different footing - Section 17(1) clearly provides that the management of the affairs of the corporate debtor shall vest in the interim resolution professional and the powers of the Board of Directors of the said debtor shall stand suspended and be exercised by the interim resolution professional. The scope of functioning of the interim resolution professionals are clearly laid down in Sections 17, 18 and 20 of the IBC. The Directors are shut out from having any role in the functioning of the corporate debtor-company from the inception of the CIRP. As such, the present petitioners, in the capacity of Directors of the borrower company, cannot interfere in the functioning of the company at all. On the other hand, the steps taken against the Directors, even in their capacity as Directors, such as publication of their names in the list of Wilful Defaulters and the like, do not affect the CIRP at all, since the Directors have no truck with the company from the moment of inception of the CIRP. Section 14 of the IBC contemplates a moratorium in respect of all proceedings against the corporate debtor, for the obvious reason that the continuance of other proceedings may lead to conflicting decisions vis- vis the management of the corporate debtor by the resolution professional. However, such immunity cannot be extended to Directors in view of their interference with the affairs of the company being negated by the provisions of the IBC itself during CIRP - Hence, whatever may be the consequence of declaration of the Directors, even in the capacity of Directors of the company, as Wilful Defaulters, the same does not interfere with the CIRP in any manner in view of the prior dissociation of the Directors from the affairs of the company at the commencement of the CIRP. In proceedings for declaration of Wilful Defaulter, the corporate veil has to be lifted in order to examine the role of the Directors in the alleged actions of the corporate debtor-company which lead to the proposed declaration of Wilful Defaulter - the petitioners cannot take advantage of Section 14 of the IBC merely on the ground of being at par with the corporate debtor, which itself is covered by the said section. Adopting the doctrine of piercing the corporate veil, particularly in view of the contemplation of the RBI guidelines being to promote public policy and advance public interest, the Directors cannot claim to be at par with their company as far as the moratorium under Section 14 of the IBC is concerned. Petition dismissed.

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• 2021 (3) TMI 264
  Reduction of share capital - minority shareholders adequately compensated to their legitimate expectation with regard to valuation of shares - method of valuation and assumptions carried out by the Valuers - HELD THAT:- From the NAV method it is amply clear that the Company is going concern with positive networth. Learned NCLT has taken into consideration the valuation report which was made in the year 2017 which was submitted on 25.10.2017 by PWC and on 26.10.2017 by Haribhakti. Learned NCLT, Mumbai passed its order on 27.10.2020, almost three years after the submission of valuation report. In our view the valuation reports as made in 2017 are not as on date, when the learned NCLT passed its order on 27.10.2020 - We have not gone into the veracity of the methodology adopted by the Valuers. Even though the learned NCLT framed an issue with regard to whether the public shareholders constituting 3.59 % adequately compensated or not. However, the learned NCLT, Mumbai failed to consider the vital point that the valuation was done in the year 2017 and by the time learned NCLT, Mumbai passed the order, three years have passed. It is an admitted fact that the Company is a going concern and the learned NCLT, Mumbai ought to have considered the value of the shares for the current year. Method of valuation and assumptions carried out by the Valuers - HELD THAT:- It is made clear that we have not gone into the merits/demerits of methodology adopted by the Auditors. We are concerned only the economic interest of the public shareholders who by virtue of cancellation and extinguishing the shares whether they get their legitimate expectation of the fair value and whether they have been paid the fair value considering the performance of the Company - The objection of the Appellants that the Company adopted a selective method for the reduction of the share capital is concerned, we are not in the agreement with the submission of the Appellants. There is no discrimination adopted by the Company in the present case. It is also an admitted fact that the shares of the Company were de-listed from the BSE and the shares of the public shareholders cannot be tradable. It is crystal clear that the Profit After Tax (PAT) for the Financial Year 2016-17 has been shown as Rs. 288.33 lakhs whereas for the Financial Year 2018-19 it shows Rs. 503.52 lakhs. The earning per shares (EPS) for the Financial Year 2016-17 has been shown as 87.52 lakhs whereas for the Financial year 2018-19 it shows as Rs. 158.24 lakhs. The net worth of the Company for the Financial Year 2016-17 is shown as Rs. 2,52,307 lakhs whereas for the Financial Year 2018-19 it is shown Rs. 3,26,645 lakhs. In a broad look at the figures, it is amply clear that the Company had made its growth substantially and also made good profits - the public shareholders/non-promotors shareholders have not been adequately compensated for the reason that the valuation done in the year 2017 had been taken into consideration even after three years it was passed. We are of the view that there is a drastic change in the growth of the Company. The shareholders in a Company has every right to sell their shares as and when they get good price meaning thereby the shareholders have every right to trade shares as and when they get good price. However, in the present case the Company passed its resolution for reduction of the share capital to an extent of 11,81,036 equity shares constituting 3.59 %. Since in the EGM, the majority shareholders approved the reduction of share capital, public shareholders/non-promotor shareholders have no option except to surrender their shares to the Company by extinguishing their shares and exit from the Company whatever price is fixed by the Company. Therefore, the shareholders in the present case expects justification from the Courts/Tribunals. Even though the public shareholders/non promotor shareholders had objected to the reduction of share capital in the EGH but the majority shareholders i.e. promotor group having majority, passed the resolution in favour of reduction of share capital. The Company is hereby directed to revalue the shares by a registered/independent valuers to value the shares of the Company and the Company shall pay the fair price arrived at by the valuer based on the latest audited accounts of the Company - The Company is directed to place all the audited accounts of the Company as required by the valuer to value the shares. The reduction of share capital as allowed is upheld - appeal allowed.

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• 2021 (3) TMI 250
  Approval of Resolution plan - fresh claim of outstanding FRP dues of farmers who has supplied sugarcane to the corporate debtor - whether the outstanding dues of the factory be returned/refunded and/or adjusted towards the future bill cycles of the Applicant? - HELD THAT:- The attached plots are the property of the Corporate Debtor and were mentioned in the valuation report - It is to be noted that when the resolution plan is approved the resolution applicant takes over all the assets of the Corporate Debtor and is liable to make payment to the Financial Creditors, Operational Creditors etc. as agreed in the resolution plan which has been approved by the CoC and subsequently final seal of approval is given by this Tribunal as provided under Section 31 of the Code. Once that process is over, the resolution applicant cannot be saddled with any kind of new liability apart from the agreed payment to the stakeholders in the Resolution Plan. The resolution applicant is deemed to have taken over all the assets of the Corporate Debtor including the above said plots of land on which the R1 created a charge for non-payment of FRP. In the resolution plan, approved by this Bench the Resolution Applicant has agreed to pay sum of Rs. 2 Crores to the farmers over a period of time. Hence, charge created by the R1 on the initiation of Revenue Recovery Proceedings has to be set aside - Application disposed off.

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• 2021 (3) TMI 249
  Extenstion of tenure of contract for transportation by the RP during CIRP - Seeking to declare that the steps taken by the Resolution Professional for inviting fresh tenders with dubious nature without following due process of law is arbitrary, illegal and the same is not in accordance of law - seeking to declare that all the steps taken by the Resolution Professional in inviting fresh tenders is vitiated by law and the same is liable to be set aside in the interest of justice - HELD THAT:- It is a fact on record that the Applicant herein was awarded a contract/work order for transportation of coal to the Corporate Debtor vide work orders for unit-I II linkage coal vide order No. 4100124570, 4100124571 dated 18.02.2019 and e-auction coal work order for Unit-I and II vide order No. 4100124663, 4100124666 dated 07.03.2019 respectively. Now that the Applicant herein has filed the instant Application seeking relief against the action of Resolution Professional for calling of bids and seeking quotation for award of contract of supply for the year 2020-21. From a bare reading of the above clause relating to contract validity, it is clear that the contract is not automatically determinable by passing of time of one year. A plain reading given to the clause i.e., extendable to another year i.e., from 01.04.2020 to 31.03.2021 based on your performance, unless terminated earlier in accordance with clause 6 of general terms and conditions indicates that the contract is extended by default for one more year i.e., from 01.04.2020 to 31.03.2021 subject to fulfillment of two essential conditions (1) Performance of the Applicant (2) earlier termination in accordance with clause 6 of general terms and conditions. Thus the contract shall be extended, if it is not terminated earlier and if the performance of the contractee is satisfactory. Thus satisfactory performance and non-termination leads to automatic extension of the contract - In the instant case, the Resolution Professional has extended the tenure of the Applicant by a period of 3 months, in my opinion, obviously the Resolution Professional would not have done so, if the performance of the Applicant was not satisfactory. Therefore, it is clearly indicates that the performance of the Applicant is satisfactory. Thus both the ingredients i.e., satisfactory performance and non-termination which are essential pre-conditions for an automatic extension of the contract for a period of another one year are present here. The steps proposed to be taken by the Resolution Professional such as inviting fresh tenders etc., are not warranted - Application disposed off.

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• 2021 (3) TMI 248
  Validity of accepting the assignment as a liquidator in voluntary liquidation process of Buffalogrid Project (P.) Ltd. without holding a valid Authorization for Assignment (AFA) issued to him by his IPA - contraventions 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 contained in the First Schedule of the IP Regulations - HELD THAT:- It is clear from Regulation 7A 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. 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 the cut-off date, i.e., 31st December, 2019. Adequate time was given to the professionals to obtain AFA from respective IPAs. The Bye-Laws of ICSI Institute of Insolvency Professionals defines in para 4(1)(aa) the expression Authorization for Assignment as an authorization 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 - Further, Section 208 of the Code also casts an obligation to abide by the code of conduct and comply with all requirements and terms and conditions specified in the bye-laws of the insolvency professional agency of which he is a member. The credibility of the processes under the Code hinges upon the conduct and competence of the IP. Section 208(2) of the Code provides that every IP shall take reasonable care and diligence while performing his duties and to perform his functions in such manner and subject to such conditions as may be specified. Further, the Code of Conduct specified in the First Schedule of the IP regulations enumerates a list of code of conduct for insolvency professionals including maintaining of integrity and professional competence for rendering professional service, representation of correct facts and correcting misapprehension, not to conceal material information and not to act with mala fide or with negligence. The DC finds that an order has been passed by the Disciplinary Committee of IPA against Mr. Kapur on 7th September, 2020 wherein it has been mentioned that the Mr. Kapur accepted the assignment on 4th September, 2019. However, on examination of the documents placed on record, the DC finds that the date of acceptance is 28th August, 2019 while the order of Disciplinary Committee of IPA mentions the date of acceptance as 4th September, 2019, which appears to be incorrect - The Disciplinary Committee of IPA vide aforementioned order issued warning to Mr. Kapur to be extremely careful and diligent and that he should act strictly as per law and similar action should not be repeated. IPA further directed that Mr. Kapur shall not accept any new assignment without obtaining Authorisation for Assignment. SCN disposed off.

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• Service Tax

• 2021 (3) TMI 268
  Renting of immovable property service - onetime non-refundable contribution made by the member units towards the expenditure of the park for developing and constructing the infrastructure - case of the department is that rental amount is collected in guise of non-refundable contribution which is nothing but service charge against renting of immovable property service hence, liable to service tax - HELD THAT:- The Tribunal in the appellant s own case in the identical facts and circumstances and law point in M/S GUJARAT ECO TEXTILE PARK LTD. VERSUS C.C.E. S.T. SURAT-I [ 2019 (9) TMI 581 - CESTAT AHMEDABAD] has held that the demand of service tax under the head of renting of immovable property service on the onetime contribution paid to the appellant by its members is not taxable. The entire case of the department is that one time refundable amount collected by the appellant from its member units is the service charge against the provision of Renting of Immovable Property Service but the department has not adduced a single evidence in support of its allegation. Hence, the contribution of the department in this regard has no legs to stand. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2021 (3) TMI 280
  Process amounting to manufacture or not - maintainability of petition - failure of the petitioner to make the pre-deposit - HELD THAT:- The petitioners have highlighted the financial stringency being suffered by the petitioners and the fact that they are unable to make payment of any deposit. The impugned orders dated September 24, 2001, January 15, 2002 and 1st April, 2002 is set aside and the matter remanded to the Tribunal to hear out the appeal without requiring the petitioner to deposit any amount - petition allowed by way of remand.

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• 2021 (3) TMI 276
  Levy of Penalty - Jurisdiction - failure of the Tribunal, to arrive at definitive findings of fact, despite being a final fact finding authority - diversion of imported material or not - demand of duty under the proviso to Section 28(1) of the Customs Act, 1962 - whether it is correct that duty if at all recoverable could only be in terms of Rule 8 of the Customs (Import of Goods at Concessional Rate of Duty for Manufacturer of Excisable Goods) Rules, 1996? - penalty. HELD THAT:- The reason for issuance of the Show Cause Notice is by reference to the standard input-output norms fixed in respect of the concerned industrial activity - the standard input-output norms can be treated as an indicator and that may not be a sole reason for initiation of proceedings. This aspect was considered by the High Court of Gujarat in the case of Goodluck Garments Pvt. Ltd. Vs. Commissioner of Central Excise Customs, Surat-II [ 2019 (1) TMI 1514 - GUJARAT HIGH COURT] . The argument of the assessee therein was that the input-output norms were in the nature of guidelines and not a fixed formula. This aspect was considered and the Court held that the mere fact that the wastage was in excess of the input output norms, without anything more, would not be sufficient for the Assistant Collector to arrive at the satisfaction that the imported fabric had not been used for the manufacture of the articles for export. On a perusal of the reply given by the assessee dated 15.10.2009 to the Show Cause Notice dated 16.09.2009, the assessee has not made any unconditional acceptance of any diversion. All that they have stated is that the practice is common in the industry and they were not aware that a letter has to be obtained from the proper officer and they made it clear that they have not hidden any facts and have not caused any reason for the Adjudicating Authority to believe that the facts were suppressed. Therefore, the so called letter issued by the assessee cannot be taken to be a case where the assessee accepted the fact that they have not utilized the raw materials for the purpose for which it was imported - the materials which were available cannot be a reason for issuance of the Show Cause Notice dated 16.09.2009. The appeal filed by the assessee is allowed on a different ground than what was raised by the assessee, namely that standard input-input norms cannot be a sole basis for giving a cause of action for issuing the Show Cause Notice for determination of the wastage, when there is no allegation of diversion made against the appellant - order passed by the Tribunal vacating the penalty is sustained - Appeal disposed off.

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• CST, VAT & Sales Tax

• 2021 (3) TMI 278
  Recovery of arrears of tax due from M/s.Kairali Steels Traders for the period between 2009-10 to 2012- 13 - TNGST Act - It is submitted that the petitioner was unaware of the fact that the property purchased from the second respondent s father was offered as a security to the Commercial Tax Officer when second respondent obtained registration for M/s. Kairali Steels Traders under the provisions of the Tamil Nadu General Sales Tax Act, 1959 and thus, the arrears of tax of the said concern cannot be fastened on the petitioner. HELD THAT:- The second respondent, the proprietor of M/s.Kairali Steels Traders was an assessee in default. While obtaining registration under the provisions of the Commercial Tax Department, the father of the second respondent Mr.K.P. Kesavan, the vendor who sold the property to the petitioner had offered the said property as a security for a sum of Rs. 50,000/- as is evident from a reading of Form XIX-B - Copy of Form XIX-B executed by the second respondent s father along with the second respondent on 23.02.2000 clearly states that the mortgage/charge for the specified schedule property was to secure the interest of the Commercial Tax Department for a sum of Rs. 50,000/- only under Section 21 of the aforesaid Act. The petitioner has not bought a property of the second respondent. Therefore, defence under Section 24-A of the Tamil Nadu General Sales Tax Act, 1959 that the purchase was for adequate consideration and without notice of arrears of tax is available to the petitioner. This writ petition is partly allowed by quashing the impugned order by directing the petitioner to pay a sum of Rs. 50,000/- to the first respondent being the value of the security offered by the petitioner s vendor/ second respondent s father in Form XIX-B. No cost.

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• 2021 (3) TMI 277
  Maintainability of petition - non-compliance with the pre-deposit - Section 62 (5) of the Punjab VAT Act - it is prayed that the mandamus be issued directing the First Appellate Authority to consider the appeal of the petitioner and decide the same on merits without insisting for pre-deposit of 25% of the additional demand - HELD THAT:- It is not found that the present case to be of such extreme hardship, where this Court should exercise its extraordinary writ jurisdiction to interfere and waive the mandatory requirement of Section 62 (5) of the Punjab VAT Act. The mandatory provisions under Section 62 (5) of the Punjab VAT Act need to be complied with, especially in the light of the fact that the vires of the said provisions have been upheld by the Supreme Court in M/S TECNIMONT PVT. LTD. (FORMERLY KNOWN AS TECNIMONT ICB PRIVATE LIMITED) VERSUS STATE OF PUNJAB OTHERS [ 2019 (9) TMI 788 - SUPREME COURT] where it was held that High Court rightly held Section 62(5) of the PVAT Act to be legal and valid and the condition of 25% of pre-deposit not to be onerous, harsh, unreasonable and violative of Article 14 of the Constitution of India. The petitioner having not complied with the mandatory requirement of the statute, cannot assert and challenge the order dated 24.11.2015 (Annexure P-4) passed by the First Appellate Authority and the order passed by the Punjab VAT Tribunal as not sustainable - Petition dismissed.

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• 2021 (3) TMI 275
  Refund of excess tax paid - refusal to issue C-Form declarations - purchase of HSD at concessional rate - stand taken by the respondent authorities while rejecting the representation of the Petitioner/ Company is that the excess tax can be refunded only to those from whom it was charged as per as per the Section 20 (1) and (7) of HVAT Act - period October 2017 to March 2018 - HELD THAT:- A similar controversy came up for consideration before this Court in the case of Carpo Power Limited (supra) as also before Gujarat High Court in J.K. CEMENT LTD. VERSUS STATE OF GUJARAT [ 2020 (3) TMI 140 - GUJARAT HIGH COURT] , wherein a number of judgments of the Hon ble Supreme Court have been discussed and it has been held that The respondents are directed to forthwith process the refund claims of the respective petitioners and grant refund of the tax amount collected from the petitioners and deposited by the seller in accordance with law within a period of twelve weeks of the receipt of a copy of this judgment. Thus, it can be safely concluded that the HSD has been purchased by the Petitioner/ Company from Indian Oil Corporation in the course of inter-State trade for use in mining activities and therefore, the question of passing of the tax burden to anyone would not arise and the respondent authorities are not justified in not processing the refund claims of the Petitioner / Company. The respondents are directed to process the refund claim of the petitioner and grant refund of the tax amount collected from the petitioner and deposited by the seller, in accordance with law within a period of four (04) weeks from the date of receipt of certified copy of this judgment - petition allowed.

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• Indian Laws

• 2021 (3) TMI 274
  Professional Misconduct - Disciplinary Committee of ICAI has observed that the petitioner is guilty of professional gross negligence and held him guilty for expressing opinion on financial status of company in which he was having substantial interest - complaint was made against the petitioner to the effect that complainant wife is Director, therefore, she cannot sign balance-sheet - principles of natural justice - HELD THAT:- From perusal of the record it is seen that some undisputed facts are that initially the complaint made against the petitioner was on the basis of which the cognizance was taken by the disciplinary authority was prayed to be withdrawn by filing the affidavit by the complainant itself. Even after filling of withdrawal application the Committee has continued the proceedings. The order impugned reflects that same is being based on mere considering the possibility of collusion of the respondent with the Director of the Company. There is no substantial material available on record which have been considered by the disciplinary committee who arrived at conclusion that the wife of the respondent was having substantial interest in the company. In para 7 of the impugned order it is held by the disciplinary committee that Although, the Respondent wife s holding does not fall within the clear cut definition of substantial interest, yet looking into the supporting documents which shows that she has been authenticating the Financial Statements of the Company for the Financial Year 2009-2010, signing annual return, holding more than 20% shares in the Company seem to suggest that she had substantial interest in the Company. In para 8 the disciplinary committee has arrived at the conclusion that there is some possible collusion of the Respondent with the Director of the Company. He is being guilty by the disciplinary committee on the basis of material available on record. Further in para 11 of the impugned order shows that despite an application for withdrawal of the complaint which was received on 31.10.2014 the disciplinary committee has continued with the proceedings. This clearly goes to show that the impugned order has been passed merely on the basis of possibilities. In the present case the disciplinary committee has passed the order only on the basis of preponderance of probability and the petitioner was held guilty, despite of the fact that the charges levelled against the petitioner are required to be proved beyond reasonable doubt. Once the complainant has itself submitted an affidavit for withdrawal of his complaint there was no occasion for the disciplinary committee to continue the proceedings as the proceedings is not in the nature of suo motu proceedings. The arguments advanced by the respondents that the authorities are having powers to take up the matter on its suo motu, but these proceedings are taken up by the authorties on the basis of complaint made against the petitioner and not under the suo motu proceedings. Thus, the aforesaid arguments has no limbs to stand. The order impugned is unsustainable as the same is violative of principle of natural justice and fair play and has been passed without following the procedure as contemplated under the Act of 1949 - Petition allowed - decided in favor of petitioner.

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