Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 7, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
GST
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Detention of goods alongwith vehicle - Having regard to the fact that goods and vehicle are lying stationed/detained with the respondent No.2 since 11.03.2021; inspection and physical verification of the goods including its weight has already been done. Hence, goods and vehicle are not required, at least for the purpose of inquiry. If they are detained for indefinite period, the condition of stationary truck with weight of 38.120 MT on its tyres, and loss of business of hopeless driver will be irreversible. - HC
Income Tax
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Reopening of assessment u/s 147 - reopening beyond the period of 4 years - bogus purchases transactions of diamonds - assessee was aware that, it was only an accommodation entries - It cannot be said that there was no tangible material before the Assessing Officer and that he proceeded mechanically based on the sole information and the impugned notice is without jurisdiction and contrary to Section 147 - HC
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Addition u/s 68 - If the assessee could not produce the Directors during the assessment proceedings in response to the summons issued by the Assessing Officer due to lack of time, then what prevented the Assessing Officer to ask the assessee to produce the Directors during the course of remand report when ample opportunity was given by the CIT (A) to him. - Thus onus cast upon the assessee was duly discharged - AT
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Addition on account of suppressed production on the basis of electricity consumption - the AO failed to appreciate the facts and did not attempt to establish a direct nexus between the production and electricity consumed for the manufacturing and arrived at a conclusion that there was an excess consumption of electricity resulting in suppressed production - AT
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Reopening of assessment u/s 147 - undisclosed capital gain - a right person is liable to pay tax on his income and no option is available to tax income in the hands of person other than one in whose hands it is taxable. - Income Tax is leviable only on the real income which the assessee has proved beyond doubt that assessee has received only 25% of the sale consideration - AT
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TP Adjustment - Arm's length price of the corporate guarantee fee - Lower authorities have also included a letter of comfort as part of corporate guarantee - We reject the submissions of the ld. AR of the assessee that the issue of corporate guarantee by the assessee to its AEs is not an international transaction and direct the AO/TPO to decide the issue - AT
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Deemed dividend addition u/s 2(22)(e) - it is only where a loan advanced by a company to registered shareholder and other conditions set out in section 2(22)(e) are satisfied, such amount of loan would be liable to regarded as deemed dividend within the meaning of the said section - AT
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Deduction u/s 80IA - More than ordinary profit shown by the assessee under section 80IA(10) - Admittedly, in the case on hand the assessee is showing higher amount of profit but question arises whether it is the result of arrangement of the assessee with the party based outside India. If yes, then such an arrangement has to be proved by the AO but the same has not been done so. - AT
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Ex-parte order passed by CIT(A) - Non-appearance before CIT(A) since the affairs of the assessee company not having been properly looked into by the person incharge at the relevant point of time - Matter remanded back to CIT(A) for fresh consideration - AT
Customs
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Release of seized goods - Drones - the Commissioner (Appeals) has taken a correct view after applying his mind so as to release the goods for immediate use so that the pandemic can be contained and lives of many can be saved - It requires application of mind taking into consideration the facts and circumstances of each case. - Revenue appeal dismissed - AT
Central Excise
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Judicial Review of Show Cause Notice (SCN) - whether refunds granted earlier pursuant to the Judgment of the Apex Court can be considered to be refunds erroneously granted in view of the subsequent Judgment of the Apex Court - As such, the contention of the Department that the refunds granted earlier were erroneous and could be recovered under Section 11A cannot be accepted. - HC
VAT
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Levy of tax on turnover - Bill of Lading - title to the goods or not - In the instant case, the Revenue did not dispute the fact that the duty was paid by the ultimate buyer and except for the alleged interpolation in the Bill of Entry, there was no other adverse finding rendered either by the Assessing Officer or by the Tribunal against the dealer. - HC
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Levy of sales tax on turnover - High seas sale - Admittedly, the Bill of Entry is not the document of title and even assuming that there are certain interpolations or corrections in the Bill of Entry, the question would be as to what is the effect of such corrections. - The Tribunal committed a serious error in reversing the well considered order passed by the First Appellate Authority by touching upon the factual findings, which were recorded by the First Appellate Authority - HC
Case Laws:
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GST
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2021 (4) TMI 234
Detention of goods alongwith vehicle - wrongful availment of input tax credit - It is the argument of the petitioners that such fishing and rowing inquiry in relation to availment of input tax credit and suspicion about the purchase transaction is not within the domain of respondent No.2, while exercising powers under Section 68 of the CGST Act, 2017 while goods are in movement - HELD THAT:- This Court is of prima facie view that the provisions of Sections 67, 68 and 129 of the Act of 2017 are required to be interpreted. The circular dated 13.04.2018, issued by the Central Board of Indirect Taxes and Customs though addresses the hardship being faced by the trade/industry on account of incorrect interpretation, if not misuse/abuse of the provisions of Sections 67/68 129 of the Act of 2017 and lays down guidelines for inspection and release of the goods in transit, but the same has not been adhered to by the respondent No.2. As is evident in the present case, if a Check Post Officer or Anti Evasion Officer intercepting the goods and vehicle while in transit, is permitted to carry on such fishing and rowing inquiry, it would impede, rather retard free flow of trade resulting in unnecessary and unwarranted harassment to the carrier of goods, so also to the consignor/consignee - Upon perusal of detention memo (Annex.8), so also Physical Verification Report (Annex.R/4), this Court finds that it is an admitted case of the respondent No.2 that all the documents prescribed under law were available and goods, including its weight, was found in order. Even, genuineness of the goods in transit per se is not in dispute inasmuch as, documents and e-way bill/other documents in relation to transit depicting the goods to be 34.120 tons of MS Scrap in quantity and the nature of goods on physical examination was found to be in accord. Having regard to the fact that goods and vehicle are lying stationed/detained with the respondent No.2 since 11.03.2021; inspection and physical verification of the goods including its weight has already been done. Hence, goods and vehicle are not required, at least for the purpose of inquiry. If they are detained for indefinite period, the condition of stationary truck with weight of 38.120 MT on its tyres, and loss of business of hopeless driver will be irreversible. Besides this, the kind of interim order, which this Court proposes to pass, would not amount to final relief - in the interest of justice it is deemed expedient and hence, respondent No.2 is directed to release the goods and vehicle in question forthwith, in case petitioner No.1 furnishes two solvent sureties to the tune of ₹ 15 lakhs executed by dealers registered in the State of Rajasthan. He shall not insist upon furnishing of bank guarantee or cash security. The case be listed on 19.04.2021.
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2021 (4) TMI 233
Profiteering - deposit of 50% of the purported anti-profiteering amount - HELD THAT:- In line with the statement made by learned counsel for the petitioner, 50% of the aforementioned amount, after excluding the GST component, will be deposited by the petitioner with the Central Consumer Welfare Fund before the next date of hearing. The proof of deposit will be placed on record. Subject to the aforesaid, there shall be a stay on the operation of the impugned order - List the matter on 29.04.2021.
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Income Tax
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2021 (4) TMI 232
Rectification of mistake u/s 254 - Whether ITAT has exceeded its power of rectification under Section 254(2) of the Act by means of the impugned order, when the issue had been remanded to the file of the AO by the Hon ble ITAT vide its order dated 03.09.2019 - Whether ITAT was legally justified in holding the interest income added by the AO as notional whereas the outstanding balance in HSBC account was interest bearing and there was no materials before Ld. ITAT to hold such interest as notional? - HELD THAT:- Tribunal exercised its powers, correctly, under Section 254(2) of the Act. Since the issue regarding notional interest is not adverted to in the order dated 03.09.2019, they were entitled to recall the order qua the said issue. Therefore, in our view, the first question of law does not arise for our consideration. The prayer made, in that behalf, is declined. Whether ITAT was legally justified in holding the interest income added by the AO as notional whereas the outstanding balance in HSBC account was interest bearing and there was no materials before Ld. ITAT to hold such interest as notional? - HELD THAT:- We will consider the same along with assessee s appeal i.e. ITA No.612/2017 whereby the direction of remand qua the existence of the bank deposits has been assailed.
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2021 (4) TMI 231
Estimation of income - bogus purchases - denial of natural justice - addition was made to the assessee s taxable income by adopting the measure that 5% gross profit - as per assessee issuance of summons to the parties who had provided so-called bogus purchase bills and the receipt of information from one such party, was not put to the assessee - HELD THAT:- The assessee was not confronted with the material and, therefore, in our view, the assessment order was clearly in jeopardy. What the CIT(A) did, [which, in the given circumstances, insofar as the revenue is concerned, was the best way forward] is to sustain a part of the addition by taking recourse to the methodology adopted in the assessee s case in an earlier AY i.e. 2006-2007. In that AY, concededly, addition had been made to the assessee s gross income by applying a GP rate of 5%. It is the same methodology that the CIT(A) has adopted and, accordingly, sustained the addition. Therefore, in our view, given the findings of fact returned by the CIT(A), which have been sustained by the Tribunal, no interference is called for. No substantial question of law.
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2021 (4) TMI 225
Reopening of assessment u/s 147 - reopening beyond 4 years - addition u/s 68 as assessee failed to disclose the true facts with regard to alleged cash transactions, which found to be an accommodation entries and the assessee being the beneficiaries, the amount has escaped assessment - as argued by assessee all the material facts including the bank statements, books of accounts, credit transactions were furnished and same was thoroughly examined by the Assessing Officer and in this circumstances, when there was no concealment or suppression of any facts, the reopening beyond 4 years in the absence of any nondisclosure of material facts cannot be permitted - HELD THAT:- We are not agree with the above contention as the true facts with regard to cash transaction made by the assessee was discovered by the Assessing Officer on the basis of the specific and relevant information received from the concerned department, which prima facie prove that the transaction shown in the books of accounts itself on the basis of subsequent information is found to be a bogus transaction and mere a disclosure of the cash entries reflected in the bank account, cannot be said to be disclosure of the full and true facts. Assessee was aware that the transaction was not business transaction and it was only an accommodation entries and the company was one of the beneficiaries of the transactions, despite of this, the assessee failed to disclose true and correct facts at the relevant time and therefore, the Assessing Officer is entitled to initiate reassessment proceedings on the basis of tangible material came in his hand, which tends to expose the untruthfulness of the entry of purchase made in the books of accounts. In this context, we may refer the observation of the Apex Court in the case of Honda Siel Power Products Vs. Dy. CIT, [ 2011 (7) TMI 275 - SC ORDER ] wherein, it is held that assessee having not pointed out during assessment proceedings about expenses incurred relatable to tax free income u/s. 14A, there was an omission and failure on its part to disclose fully and truly material facts, hence, reopening was justified. Reassessment proceedings could be said to have been initiated mechanically on the basis of third party information - Assessing Officer has verified the information and after application of mind and upon due satisfaction, he formed an opinion that income has escaped assessment. Learned Single Judge of Madras High Court in case of Sterlite Industries (India) Ltd. v. Assistant Commissioner of Income Tax [ 2008 (3) TMI 133 - MADRAS HIGH COURT ] upheld the notice for reopening which was based on information from enforcement directorate showing possible inflation of purchases made by the assessee. While according the sanction under Section 151 authority concerned has not applied his mind properly and mechanically accorded the sanction - We have perused the papers of the approval, which shows that the competent authority has given the satisfaction in hand writing and has expressed his satisfaction with regard to reasons recorded and accorded the sanction to issue impugned notice. Therefore, the approval for reassessment was granted on the date on which the impugned notice was issued. In this circumstances, the contention raised by the learned advocate for the writ applicant that sanction was not obtained before issuance of the notice cannot be accepted. Thus it cannot be said that there was no tangible material before the Assessing Officer and that he proceeded mechanically based on the sole information and the impugned notice is without jurisdiction and contrary to Section 147 of the Act. - Decided against assessee.
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2021 (4) TMI 224
Reopening of assessment u/s 147 - reopening beyond the period of 4 years - bogus purchases transactions of diamonds - accommodation entry receipts - hawala racket busted during the search operation at the several places and found that Mr. Afroze Mohd. Hasanfatta and their group, instead of importing diamonds, they made bogus import bills, claiming that they have purchased the diamonds from foreign traders and by using this bogus bills, money was routed through 12 entities, without any single diamond being imported in India - HELD THAT:- As during the course of previous assessment proceedings, the assessee failed to disclose material particulars with regard to alleged transactions and the true facts of the transactions having been discovered by the Assessing Officer on the basis of the information received from the concerned department. Law in this regard has been settled by various decisions of this Court as well as the Apex Court that burden is on the assessee to make true and full disclosure. Where the transaction itself on the basis of the subsequent information is found to be a bogus transactions, mere a disclosure of said transaction at the time of original proceedings, cannot be said to be a disclosure of true and full facts in the case. Assessee was aware that the transaction with M/s. Agni Pvt Ltd was not business transaction but in the form of bogus purchase, it was only an accommodation entries and the company was one of the beneficiaries of the transactions, despite of this, the assessee failed to disclose true and correct facts at the relevant time and therefore, the Assessing Officer is entitled to initiate reassessment proceedings on the basis of tangible material came in his hand, which tends to expose the untruthfulness of the entry of purchase made in the books of accounts. In this context, we may refer the observation of the Apex Court in the case of Honda Siel Power Products Vs. Dy. CIT, [ 2011 (7) TMI 275 - SC ORDER ] wherein, it is held that assessee having not pointed out during assessment proceedings about expenses incurred relatable to tax free income u/s. 14A, there was an omission and failure on its part to disclose fully and truly material facts, hence, reopening was justified. Reassessment proceedings said to have been initiated mechanically on the basis of third party information - AO has verified the information and after application of mind and upon due satisfaction, he formed an opinion that income has escaped assessment. See Principal Commissioner of Income Tax, Rajkot Vs. Gokul Ceramics [ 2016 (7) TMI 214 - GUJARAT HIGH COURT ] Whether according the sanction under Section 151 of the Act, the authority concerned has not applied his mind properly and mechanically accorded the sanction? - As perused the papers of the approval, which shows that the competent authority has given the satisfaction in hand writing and has expressed his satisfaction with regard to reasons recorded and accorded the sanction to issue impugned notice. Therefore, the approval for reassessment was granted on the date on which the impugned notice was issued. In this circumstances, the contention raised by the learned advocate for the writ applicant that sanction was not obtained before issuance of the notice cannot be accepted. It cannot be said that there was no tangible material before the Assessing Officer and that he proceeded mechanically based on the sole information and the impugned notice is without jurisdiction and contrary to Section 147.
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2021 (4) TMI 220
Addition u/s 68 - assessee having received 0% OFCDs from various parties - onus cast upon the assessee to prove - unexplained cash credit holding that the investment made by different corporate concerns in OFCDs (Optionally Fully Convertible Debentures) issued by the assessee company have not been satisfactorily explained - addition based on non production of Directors - HELD THAT:- The assessee company was in existence for about only one and a half months during the relevant period and not much business was conducted, however, as per the memorandum of association the assessee company was formed to carry on the business as service provider/operators, agents, lenders, hirer and distributors of cable television network in the line of telecom and communication and also to act as business consultant. Admittedly the company had meager receipts from advisory services and some interest income. On the issue of receiving of OFCDs from various the Assessing Officer has required the assessee to furnish the relevant evidences and documents to establish the identity and creditworthiness of the investor companies and also the genuineness of the transaction. Nowhere these evidences or documents have been rebutted by Assessing Officer or any specific material has been brought on record to allay the veracity of these documents. In so far as the Assessing Officer s allegation that the assessee was non cooperative, already it has been explained by the assessee before the ld. CIT (A) as well as before us that, in the first notice u/s. 142(1) issued on 15.10.2013 seeking preliminary details, the assessee had filed their requisite details, which were, income tax return, balance-sheet, computation and details of Directors of shareholders. Thereafter, 2nd notice was issued almost after 15 months from the date of first notice, wherein 63 points were listed, which too was complied with by the assessee on 16.02.2015. It was for the first time that at the fag end of the limitation of passing of the order that the Assessing Officer issued summons u/s.131 on 20.03.2015 to produce the Directors of the subscriber companies on 24.3.2015 and said summons was served on the late evening of 21st March, 2015 which was a Saturday and in response assessee has replied on 24.03.2015 that time allowed was too short. The Assessing Officer immediately thereafter issued a final show cause notice on 25.03.2015 which again was responded on 27.03.2015. Under these admitted facts, which have been duly noted by the ld. CIT (A) which is also evident from the records, there cannot be any allegation of non cooperation by the assessee or failure to produce the Directors. If the Assessing Officer was really desired to examine the Directors, then he would have given sufficient time to the assessee specifically when most of the Directors are based out station. Now in so far as Income Tax Inspector s report that address of KOA Investment was a small Halwai shop, it has already been clarified that the Income Tax Inspector has gone on the wrong address, and therefore, this report of the Income Tax Inspector cannot be taken into cognizance. Another point raised by the ld. counsel is that the Income Tax Inspector s report was never confronted to the assessee and if there was any such adverse report regarding wrong address or parties not available, at least assessee should have been confronted to clarify or to provide the correct address. When ld. CIT (A) in the remand proceedings asked the Assessing Officer to carry out necessary inquiry, then also, Assessing Officer did not ask the assessee to produce the Directors, albeit has sent notices u/s. 133(6) to these companies who had duly responded to and had given all the necessary details and confirmation along with documentary evidences substantiating the case of the assessee. In such remand report also no adverse inference has been drawn which fact has already been noted by the ld. CIT (A) and has dealt with same while deleting the addition in the case of each and every subscriber/investor company. Hence, non production of Directors on the facts and circumstances of the case cannot be adversely viewed and cannot be the sole reason for sustaining the addition. Coming to the Assessing Officer s observation regarding statement of Shri Tarun Goyal and the investigation carried out in his case in the year 2008 factum of investigation report in the case of Shri Tarun Goyal which relates for much earlier years cannot be conclusive material to hold that either Shri Tarun Goyal was still continuing with his nefarious business of accommodation entry or assessee was beneficiary of any accommodation entry in this year. Statement of Shri Jagdish Prasad Purohit dated 21.01.2015, wherein he has admitted that he is controlling few companies which were engaged in providing accommodation entry - The reliance placed by the Assessing Officer in his statement to draw the adverse inference is not correct, because Assessing Officer has just jumped to the conclusion that, since these companies are controlled by Shri Jagidsh Prasad Purohit, therefore, it has to be sham transaction or bogus. At least there should have been some reference that the assessee company was one of the beneficiaries of the accommodation transaction or was figuring in the list of the companies through which he has been provided accommodation entries. Without any such material information from his statement or investigation report qua the assessee, all the reference made by the Assessing Officer has no legs to stand so as to warrant any adverse inference while examining the credit entries in the case of the assessee company. Assessing Officer has also referred the investigation of bank transaction with various parties at the time of repayment of OFCD holders and came to the conclusion that the amount of repayment finally vested with the subscribers. If the fund obtained through OFCD have been refunded back which is an admitted fact and did not remain in the possession of the assessee company and then how the refunded amount has been utilised by the subscriber companies is none of burden of the assessee, unless these parties have confirmed otherwise and from where the funds have originated. How the assessee can be held to beneficiary of accommodation entry until and unless there is some information or statement or material that for the period the assessee had taken OFCDs was through unaccounted money which was introduced in the books and later on it has repaid back which is also duly reflected in the books of account and has received a cash back from these entities. If the assessee could not produce the Directors during the assessment proceedings in response to the summons issued by the Assessing Officer due to lack of time, then what prevented the Assessing Officer to ask the assessee to produce the Directors during the course of remand report when ample opportunity was given by the CIT (A) to him. - Thus onus cast upon the assessee was duly discharged - Decided in favour of assessee.
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2021 (4) TMI 218
Revision u/s 263 - denying deduction under sections 11 and 12 - Second round of assessment - HELD THAT:- The impugned assessment order dated 27.3.2017 has been passed on the basis of 263 order of the CIT. That order no more available, hence there are no leg to stand i.e. for second assessment order dated 27.3.2017. If that be so, the subsequent proceedings become redundant. It is also pertinent to note that while deciding the appeal against the regular assessment order dated 16.3.2015, the Tribunal has already observed that this assessment order was passed by denying deduction under sections 11 and 2 of the Act, because, the AO has held that second proviso to section 2(15) is applicable in the case of the assessee and its activities are not of charitable nature. This reasoning did not meet the approval of the ITAT [ 2016 (5) TMI 1026 - ITAT AHMEDABAD] on the ground that Hon'ble Gujarat High Court has reversed earlier view of the Tribunal and held that the assessee is entitled for the benefit under section 11 and 12 of the Act. The decision of Hon'ble Gujarat High Court is reported [ 2017 (5) TMI 1468 - GUJARAT HIGH COURT] . The Tribunal has already given direction for passing a fresh assessment order treating the assessee as a charitable institution. Thus, the original assessment order was set aside by the Tribunal, and therefore, no 263 proceedings could be sustained. Appeals of the Revenue are dismissed.
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2021 (4) TMI 216
Addition on account of suppressed production on the basis of electricity consumption - huge deviation in the electricity consumption and presumed that the production disclosed in the books was substantially suppressed - HELD THAT:- One of the reasons for rejecting the books of account by the AO was inconsistent electricity consumption and proceeded to compute the net profit of suppressed production. The AO did not give the cogent reasons for method of computing suppressed production and he went by supposition but not by actual detention which is not justified as rightly held by the CIT(A). The factors responsible for variation in electricity consumption has been explained by the assessee in his detailed written submissions before the AO - As pointed by the CIT(A) that this Tribunal held the consumption of the electricity for the manufacturing of mild steel ingots/billets depend on various factors like quality of raw material which was the major input, voltage of the supply, power interruptions, mechanical and electrical breakdowns and the chemical composition of the liquid metal. In the present case having explained all the above in assessment proceedings, the AO failed to appreciate these facts and did not attempt to establish a direct nexus between the production and electricity consumed for the manufacturing and arrived at a conclusion that there was an excess consumption of electricity resulting in suppressed production, in our opinion, has no basis for computing alleged suppressed production on estimation. Addition made on account of suppressed production on the basis of electricity consumption is liable to be deleted. We find no infirmity in the order of CIT(A) and it is justified. Accordingly, the only ground raised by the Revenue is dismissed.
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2021 (4) TMI 214
Exemption u/s 11 denied - cancel the registration u/s 2AA(3)/(4) - cancellation of registration under section 12AA(3)/(4) - effective date of cancellation of registration - Authority to cancel the registration under section 12AA(3)/(4) - Principal Commissioner of Income-Tax-17 cancelling the registration of the Appellant - HELD THAT:- We see no reasons to take any other view of the matter than the view so taken by the coordinate bench in the case of Navajbai Ratan Tata Trust vs PCIT [ 2021 (3) TMI 1146 - ITAT MUMBAI] . These observations will apply mutatis mutandis in the present case as well. Respectfully following the same, we hold that the impugned order cancelling registration granted to the assessee trust will have effect from the date on which hearing, on the first show cause notice requiring the assessee to show cause as to why registration under section 12A not be cancelled, and the assessee formally acquiesced to the said notice 10.03.2015, i.e on 20th March 2015.
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2021 (4) TMI 213
Income deemed to accrue or arse in India - treating the receipts from TCL as royalty and taxed under India-UK Tax Treaty - whether Liaison Office (LO) constitutes a permanent establishment in India?- Whether Land Earth Station ('LES') constitutes a permanent establishment of the Appellant in India? - AR submitted that the lower forums and the DRP has treated the receipts from TCL as royalty and made taxable at 10% under India-UK Tax Treaty. Therefore the action of the A.O and lower forums are not in accordance with law and the Hon'ble Tribunal in assessee's own case in earlier years has granted relief to the assessee - HELD THAT:- We find the submissions of the Ld. AR are realistic and the Ld. AR also referred to the DTTA between India-UK Tax Treaty and decision of the Hon'ble Tribunal for the A.Y 2015-16, wherein this disputed issues have been dealt. The Hon'ble Tribunal in assessee's own case [ 2020 (10) TMI 1188 - ITAT MUMBAI] conclude, that the amounts received by the assessee from TCL for providing Satellite Telecommunication Services is not to be held as royalty in its hands. PE in India - whether Liaison Office (LO) of the assessee constituted its PE in India and that the Land Earth Stations (LES) constituted a PE of the assessee in India - HELD THAT:- As decided in own case [ 2020 (10) TMI 1188 - ITAT MUMBAI] A.O/DRP had in the aforesaid preceding years concluded that the LO and LES were to be treated as the PE on the assessee in India, remains the same, as are involved in the appeal of the assessee for the year under consideration, we therefore respectfully follow the aforesaid order of the Tribunal. Accordingly, in the backdrop of our aforesaid observations, we herein conclude that the assessee did not have any PE in India during the year under consideration. Considering the profitability on ad hoc basis of 30% on gross receipts from TCL by applying the Rule 10 of Income Tax Rules, 1962 - HELD THAT:- Theaforesaid issue pertains to the computing the income of the assessee attributable to its PE in India. Since we have upheld the primary stand of the assessee that there does not exist any PE of the assessee in India, thus, the dispute in ground of appeal No. 8 having been rendered as merely academic as dismissed as infructuous. Levying surcharge, secondary education cess and higher secondary education cess over and above the tax computed - HELD TAT:- Tax computed at the rate prescribed under the India-U.K. tax treaty is not be subjected to any additional taxes in the form of surcharge or education cess. We thus set aside the view taken by the lower authorities and direct the A.O to recompute the tax liability of the assessee in terms of our aforesaid observations. Denial of TDS credit - HELD THAT:- Since the matter requires examination and verification of the facts in respect of Tax credits. We restore this disputed issue to the file of A.O to grant credit after verification and allow the ground of appeal for the statistical purposes.
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2021 (4) TMI 212
Application for registration filed u/s 12AA rejcted ex-parte - notices as mentioned in the appellate order were never served on the assessee in physical form but only on the portal which is not accessed by the society members - notices as mentioned in the appellate order were never served on the assessee in physical form but only on the portal which is not accessed by the society members - HELD THAT:- As pointed out by appellant, the Trust could not respond to the queries raised by the ld. CIT(E) for the reason that it did not access the portal. Sh. Ram Gopal Bansal, President of the Trust has stated in his affidavit that no adjournment was sought by the applicant/Trust. The copy of e-proceedings on record corroborates the version of the applicant/appellant. There is no material on record to infer that the assessee has deliberately omitted to access on line portal of the department. Hence, we are of the considered view that the assessee should get an opportunity to present its case before the ld. CIT(E) in the interest of justice. We therefore, set aside the ex-prate order passed by the ld. CIT(E) and send back the same to the ld. CIT(E) for deciding the application of the applicant Trust afresh on merits, after affording a reasonable opportunity of being heard to the appellant. Further, we direct the appellant/applicant to cooperate with the ld. CIT(E) and not to seek adjournments on frivolous grounds. Appeal filed by the appellant/applicant is allowed for statistical purposes.
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2021 (4) TMI 211
Disallowance of contribution made to the unapproved gratuity fund - Whether assessee had applied for approval of gratuity fund as held by CIT-A? - as per revenue no supporting evidence for grant of approval was furnished by the assessee as per the requirement of section 36(1)(v) of the Act during the assessment proceedings and during appellate proceedings as well - HELD THAT:- As pointed out by the Ld. counsel Under section 36(1)(v) of the Act, any provision or contribution made to an approved gratuity fund is allowable provided that it should be approved by the Chief Commissioner of the of the Income Tax. The copy of corrigendum dated 3.7.2020 issued by the CIT-1, Chandigarh establishes the fact that the assessee had applied for approval of the said scheme, which was granted by the authority concerned on 28.2.2012. The Revenue did not dispute the contents of the said corrigendum. Hence, in our considered view, the Ld. CIT(A) has rightly deleted the addition made by the AO, wrongly holding that the scheme was not approved by the concerned authority. Therefore, we do not find any infirmity in the order passed by the Ld. CIT(A). Disallowance of premium paid towards leave encashment scheme - assessee made payment by creating LIC based fund - AO made addition of the said amount on the ground that no actual payment was made to any employee - HELD THAT:- The assessee has made the said payment in order to secure the plan for payment of leave encashment at the time of retirement of its employees on attaining the age of superannuation as per the terms and conditions of the plan. We further notice that the Ld. CIT(A) has already decided the identical issue in favour of the assessee in assessee's appeal for the assessment year 2013-14 and the department did not challenge the findings of the Ld. CIT(A). We further notice that the Ld. CIT(A) has decided the identical issue in favour of the assessee in assessee's appeal for the assessment year 2014-15. We further notice that this issue is covered in favour of the assessee by the order of the co-ordinate Bench of the Tribunal in the cases of the H.P. State Industrial Corporation Ltd. [ 2015 (8) TMI 123 - ITAT CHANDIGARH ] Since, the findings of the Ld. CIT(A) are in accordance with the decision of the coordinate Bench discussed above, we do not find any reason to interfere with the findings of the Ld. CIT(A), Hence, we uphold the decision of the Ld. CIT(A) and dismiss this ground of appeal of the Revenue.
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2021 (4) TMI 210
Correct head of income - income from sale of impugned properties - business income OR long term capital gain - whether sale of 39 plots/land parcels and transaction of capital contribution of 3 plots to partnership firm out of 215 bigha agricultural land cannot be regarded as 'business activity' in the given set of factual matrix? - HELD THAT:- The provisions of Section 2(14) of the Act defines a 'capital asset' whereby property of any kind held by the assessee, whether or not connected with his business or profession would fall within the sweep of expression 'capital asset'. Thus, the law does not expect complete absence of business connection of an asset for the ascertainment of the character of asset. Property of 'any kind' is somewhat sweeping in nature which stipulates that property could be capital asset, even if, connected with business of the assessee. In the instant case, the Revenue could not demonstrate any real substantive and systematic course of activity or conduct on the part of the assessee to characterize the income to be sourced from a business activity induced by commercial spirit. The assessee is entitled in law to hold certain class of asset as 'capital asset' even while he is dealing with the assets of similar nature in business with commercial objectives. In the instant case, the AO has inter alia alleged that the assessee is engaged in a systematic commercial exploitation of land in the capacity as a partner with other co-owners. In our view, cannot be seen as an handicap in the hands of HUF assessee and would not deprive the HUF assessee of treating the assets as capital assets. Thus, in the totality of extenuating circumstances existing in the present case, we find that plea of the assessee has merits and deserves acceptance. We accordingly hold that claim of assessee to characterize the gain arising on sale of land parcels in question to be chargeable under the head 'capital gain' cannot be dislodged and replaced by 'business income'. Hence, we set aside the order of the Revenue authorities and restore the action of the assessee in this regard.- Decided in favour of assessee.
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2021 (4) TMI 209
Reopening of assessment u/s 147 - undisclosed capital gain - AIR information that assessee has sold a piece of land and the income is chargeable to the extent of capital gain has escaped from assessment - sale of said land assessee along with other co-owners received consideration - as per purchase deed, share of both the co-owners was 50% but in the transfer deed/sale deed assessee has shown consideration of 25% along with other co-owner - The assessee calculated capital gain on 1/4th of consideration - HELD THAT:- CIT(A) confirmed the action of AO by taking view that when no specific share was mentioned in the purchase deed, the share of co-owners are equal. On the death of one of the co-owners, three legal heirs became owners of the property along with surviving co-owner with their cumulative share which cannot be more than 50%. CIT(A) further held that the total income as defined in section 2(45) of the Act is to be computed as per provision of the Act. The income is taxable in the hand of the person to whom it belongs. A literal interpretation of the provisions leads to the conclusion that a right person is liable to pay tax on his income and no option is available to tax income in the hands of person other than one in whose hands it is taxable. There is no ambiguity in sect ion 2(45) of the Act that only a right person is liable to pay tax on his income and no option is available to tax income in the hand of person other than whose hands it is taxable. The Income Tax is leviable only on the real income and not on any hypothetical or on presuming income. The appellant before the Lower Authorities has clearly by placing documentary evidence in the form of sale deed, copy of sale consideration and by confirmation by co-owner has proved that assessee has received only 25% of the sale consideration. In our view, the AO as well as the ld. CIT(A) wrongly presumed that in absence of the specific share in the purchase deed the assessee was having 50% share. Income Tax is leviable only on the real income which the assessee has proved beyond doubt that assessee has received only 25% of the sale consideration, thus, the grounds of appeal raised by assessee are allowed.
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2021 (4) TMI 208
TP Adjustment - comparable selection - Non considering provision of bad and doubtful debts as operating in nature while computing operating margin of assessee and the comparable companies - HELD THAT:- In light of the decision of coordinate bench of this Tribunal in case of Brocade Communications Systems Pvt. Ltd. [ 2020 (4) TMI 776 - ITAT BANGALORE] and Rolls-Royce India (P.) Ltd. [ 2016 (4) TMI 1178 - ITAT DELHI] the margin is to be reworked by considering the provision for doubtful debts as operating expenditure. The Ld. AO is directed to recompute the margin of assessee as well as comparables based upon the observations of this Tribunal in case of Brocade Communications Systems Pvt. Ltd. (supra) and decision of Hon'ble Delhi Tribunal in the case of Rolls-Royce India (P.) Ltd. (supra). In terms of risk, we note that assessee is a no risk company and therefore risk adjustment should be provided to comparables is any. We direct the assessee to file all necessary details in respect of the same. In respect of the companies for which details could not be filed, the Ld. AO/TPO shall call for necessary information under section 133(6) in order to compute necessary adjustment. Not applying the upper limit of turnover on sales filter and for in appropriate inclusion/exclusion of comparables by Ld. AO/TPO in the final list - HELD THAT:- This Tribunal in case of Genesis Integrating Systems India Pvt. Ltd. vs [ 2011 (8) TMI 952 - ITAT BANGALORE] and various other decisions have held that, companies having turnover in excess of ₹ 200 crores cannot be compared with companies having turnover less than ₹ 200 crore. This preposition has been accepted by Hon'ble Bombay High Court in case of CIT vs Pentair Water Pvt. Ltd.,[ 2016 (5) TMI 137 - BOMBAY HIGH COURT] - Hon'ble Court upheld rejection of companies having turnover holding that turnover is a relevant factor in considering comparability of companies. Accordingly we direct Ld. AO/TPO to exclude Tata Elxi Ltd. (Seg.), Mindtree Ltd., Larsen and Toubro Infotech Ltd., RS Software (India) Ltd., Persistent Systems Ltd., Nihilent Technologies Ltd., Infosys Ltd., Cybage software Pvt. Ltd. for having high turnover as compared to a captive service provider like assessee. Infobeans Technologies Ltd. - It is observed that the annual report of this company categorises the diversify services provided by this company under software development segment. We also note that this company is basically into application development for web and mobile and provides customised services to its offshore clients comprising. Entire revenue received by this comparable case under one single segment of sale of software. This company also owns software licenses. In our considered opinion this comparable cannot be considered to be functioning in 100% risk mitigated environment and is a full-fledged enterprise. Such a comparable cannot be compared with a captive service provider like assessee.Accordingly we direct this comparable to be excluded from finalist. Evoke Technologies Ltd., I2T2 India Ltd., Indiagames Ltd., FCS Software Solutions Ltd., DCIS DOT COM Pvt. Ltd. - As submitted that assessee had filed all relevant details in regards to the same in order to verify the filters considered by the Ld. TPO however the authorities below have summarily rejected these comparables. Based upon the above submissions by both sides, we set aside this issue back to Ld. AO/TPO for reconsideration of Evoke Technologies Ltd., I2T2 India Ltd., Indiagames Ltd., FCS Software Solutions Ltd., DCIS DOT COM Pvt. Ltd. Accordingly ground 1.14 stands allowed for statistical purposes. Proposed adjustment of notional interest on outstanding debtors - action of the Ld. AO to treat credit period to be 30 days - We direct Ld. AO/TPO to verify the invoices against which payments have been received by assessee within the credit period agreed between assessee and the AE. In the event, any trade receivable falls beyond the agreed period of 90 days, the Ld. AO/TPO shall verify, if the same is subsumed in the working capital adjustments. On verification, if found to be subsumed, then no adjustment deserves to be made. On the contrary if any trade payables falls outside the agreed credit period that is not subsumed, adjustment on such trade receivables would be restricted to LIBOR + 300 basis points.
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2021 (4) TMI 206
Revision u/s 263 - Disallowance u/s 14A - HELD THAT: - As per the provision of section 263(2) of the Act, no order shall be made under sub-section (1) after expiry of two (02) years from the end of financial year in his order said to be revised was passed. As noted above, the assessment order was passed on 30.01.2015. Admittedly, the assessment was reopened under section 147 on the issue of deduction under section 80IA of the Act. In the re-assessment order the A.O. has not examined the issue of section 14A. Thus, from the facts it is clear that the Ld. PCIT, while revising the assessment order in fact revised the assessment order date 30.01.2015 passed under section 143(3). The ld. PCIT passed order under section 263(1) of the Act on 07.12.2018, which is beyond the two (02) years period of limitation, therefore, the order passed by the ld. PCIT is barred by limitation, which we hold so. Even on merit, we find that the assessee in reply to show cause notice under section 263 of the Act has specifically stated that the assessee has earned total exempt income of ₹ 2,02,337/- and the maximum disallowance should not exceed to the exempt income. The ld. PCIT instead of accepting the contention of assessee proceeded to direct the AO to frame the de-novo assessment. Considering the fact that it is settled law that disallowance under section 14A of the Act should not exceed the exempt income, thus, we are of the view that the assessment order dated 30.01.2015 was otherwise not erroneous. Thus, the assessee is also succeeded on merit.
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2021 (4) TMI 205
Accrual of income - addition on a/c of space rent income on the basis of disclosure in Notes to Accounts of the assessee - HELD THAT:- As decided in INDIA TRADE PROMOTION ORGANISATION [ 2019 (9) TMI 661 - ITAT DELHI] we are of the considered view that when income on account of space rent has not been accrued, as in the instant case due to dispute, there cannot be any rent even though entry in the books of account have been made on account of notional income. So, when the income would be received its taxability can be examined by the Revenue. Revenue has not brought on record any document if the dispute between the parties qua the space rent has been resolved. So, in these circumstances, we are of the considered view that there is no illegality or perversity in the findings returned by the ld. CIT (A) - Decided against revenue
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2021 (4) TMI 204
Addition u/s 68 - treating the unsecured loan as unexplained cash credit - CIT(A) has allowed the assessee to submit the additional evidences under rule 46A of the Act - HELD THAT:- The comments of the Assessing Officer at the remand proceeding reported that assessee has furnished details and documents which prima-facie show the source of funds in the hands of the lender Sh. Romi Patel who is also the director of the assessee company. AO has only expressed his observation to the source of funds to the amount of only ₹ 49,000/- claimed out of cash withdrawn almost two and a half months prior to the deposit and also stated that lender (director of the assessee company) has failed to make compliance with the summon issued under section 131 of the Act. It was also reported loan transactions were reflected in the copy of bank statement of the lender as well as the receiver. Without specifically considering the aforesaid facts and material, the ld. CIT(A) has held in a general manner that the assessee has failed to establish the genuineness and creditworthiness of the loan creditors. As elaborated above in this order, the assessee has furnished additional evidences duly admitted under 46A by the Ld. CIT(A) demonstrating that the depositor Shri Romi P. Patel has received an amount of ₹ 5 lacs from A.M. Enterprises and on 12th May, 2011, the depositor had also received ₹ 5 lacs from M/s. Manilal Prabhudas Sons a partnership firm and balance of ₹ 49,000/- was out of cash withdrawal of ₹ 1 lacs from his bank account maintained with HDFC Bank. It is noticed that these additional evidences has not been disproved by the Assessing Officer by making further investigation and verification. In the light of the above facts and circumstances, we consider that ld. CIT(A) is not justified in sustaining the addition, therefore, the appeal of the assessee is allowed.
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2021 (4) TMI 203
TP Adjustment - Arm's length price of the corporate guarantee fee - international transaction u/s 92B or not? - HELD THAT:- A corporate guarantee indeed forms an international transaction u/s. 92B of the Act. And that Explanation to section 92B; inserted by the Finance Act 2012 w.e.f. 01/04/2002 is applicable with retrospective effect. As assessee's reliance on Bharthi Airtel [ 2014 (3) TMI 496 - ITAT DELHI ] and other catena of case law (supra) in this regard stand overruled. We thus decline the assessee's argument against the corporate guarantee as an international transaction in principle. Lower authorities have also included a letter of comfort as part of corporate guarantee which goes against the case law PCIT Vs. Redington (India) Ltd., Chennai [ 2020 (12) TMI 516 - MADRAS HIGH COURT ] Therefore, we find prima-facie merit in assessee's instant latter argument. The fact also remains that the learned TPO is yet to examine the corporate guarantee fee amount as segregated by the so called letter of comfort amount. We thus affirm the impugned corporate guarantee adjustment addition in principle and leave it to open for the TPO to finalize consequential computation in above terms. We are also of the considered opinion that the issue should be examined by the TPO calling for information from the Bank that what is the impact of the counter bank guarantee given by the assessee whether is there any liability fasten on the company in case of counter bank guarantee. If found yes, then the DRP's decision is correct. If there is no liability as submitted by the ld. AR or the assessee, then, it is a mere letter of comfort and no addition is called for. The case law relied upon by the ld. AR of the assessee is distinguishable on fact to the case of the assessee and the same are not of any help to the assessee' case. We reject the submissions of the ld. AR of the assessee that the issue of corporate guarantee by the assessee to its AEs is not an international transaction and direct the AO/TPO to decide the issue - Appeal of the assessee is treated as allowed for statistical purposes.
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2021 (4) TMI 202
TP Adjustment - adjustment in respect of Advertising, Marketing and Promotion (AMP) expenditure - HELD THAT:- As decided in own case [ 2018 (11) TMI 1106 - ITAT MUMBAI] AMP expenditure incurred by the assessee not being an international transaction as defined under section 92B of the Act, no transfer pricing adjustment could have been made by the Transfer Pricing Officer. More so, when the method adopted by the Transfer Pricing Officer for making such adjustment is not provided under the statute. Before parting, we must observe that all other international transactions entered into between the assessee and its AE were found to be at arm s length. It is also not disputed, if the international transactions are considered as a whole, the margin shown by the assessee is more than the margin shown by the comparables selected by the Transfer Pricing Officer. Assessee Grounds raised are allowed. Adjustment in respect of technical support services, other support services and pass through cost - HELD THAT:- We notice from the records that TPO Ld. DRP has not examined the voluminous data submitted by assessee. Ld. DRP merely observed that the clinical trials are not conducted on its own, the assessee neither has personnel nor infrastructure to conduct such trials, therefore, it cannot be termed as technical service. Hence, he rejected the submissions of the assessee without actually verifying the data before them. Therefore, it is fit case for restoring the matter to the AO/TPO for fresh adjudication of the matter on merits. Accordingly, these grounds raised by the assessee are allowed for statistical purposes. Disallowance u/s. 36(1)(iii) - sufficiency of own funds - HELD THAT:- Since, assessee has sufficient funds and by following the above decision, no disallowance of interest u/s. 36(1)(iii) of the Act is warranted. Accordingly these grounds raised by the assessee are allowed. Education Cess allowability - Addition u/s 40(a)(ii) - d eductible expenses u/s. 37 - whether the expression any rate or tax levied as it appears in Section 40(a)(ii) includes cess ? - HELD THAT:- As decided in SESA GOA LIMITED [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] The CBDT Circular, is binding upon the authorities under the IT Act like Assessing Officer and the Appellate Authority. The CBDT Circular is quite consistent with the principles of interpretation of taxing statute. This, according to us, is an additional reason as to why the expression cess ought not to be read or included in the expression any rate or tax levied as appearing in Section 40(a)(ii) of the IT Act. In the Income Tax Act, 1922, Section 10(4) had banned allowance of any sum paid on account of 'any cess, rate or tax levied on the profits or gains of any business or profession'. In the corresponding Section 40(a)(ii) of the IT Act, 1961 the expression cess is quite conspicuous by its absence. In fact, legislative history bears out that this expression was in fact to be found in the Income Tax Bill, 1961 which was introduced in the Parliament. However, the Select Committee recommended the omission of expression cess and consequently, this expression finds no place in the final text of the provision in Section 40(a)(ii) of the IT Act, 1961. The effect of such omission is that the provision in Section 40(a)(ii) does not include, cess and consequently, cess whenever paid in relation to business, is allowable as deductable expenditure. Disallowance of tax deduction on brand usage royalty - HELD THAT:- As relying on own case[ 2019 (1) TMI 1870 - ITAT MUMBAI] the application made by the assessee to RBI for brand usage agreement specifically mentions that the royalty to be remitted is net of taxes. Further, the approval was received from the RBI to remit the royalty on brand usage by the assessee @ 1 % net of taxes. Considering the brand usage agreement vis- -vis. the approval granted by RBI, it can be safely inferred that taxes were liability of J J India under the terms of agreement. The assessee has entered into a commercial arrangement with J J US and it has been so arranged that the payment of taxes have to be borne by the assessee being a commercial arrangement, the same should not be questioned while calculating arms length price. AO is directed to delete the addition Service Tax paid on brand usage royalty paid and on know how royalty paid - HELD THAT:- In assessee's own case for the assessment year 2002-03 [ 2014 (2) TMI 978 - ITAT MUMBAI] and the Tribunal has held after considering the agreements entered into between the assessee and J J US and also the decision in the case of Dresser Rand India P. Ltd.[ 2012 (10) TMI 127 - ITAT MUMBAI] that the taxes were liability of the assessee company under the terms of agreements and accordingly disallowance made by AO were deleted. Further, we also observe that liability of payment of service tax is of recipient of services and since assessee is the receiver of services, it is the liability of the assessee company to bear service tax. Hence we hold that TPO was not justified to state that liability of bearing service tax was of assessee-company. In view of above, we hold that disallowances made by TPO on account of taxes, services tax is not justified and we direct to delete the same. Disallowance of entire technical know how royalty payment on traded goods - HELD THAT:- As decided in own case. [ 2019 (1) TMI 1870 - ITAT MUMBAI] as already held that the agreements between J J India and J J USA for payment of royalty has to be considered in the light of the approval of the RBI. We do not find any substance in the findings of the TPO that there is no need for paying royalty for technical/marketing know-how. We also do not find any force in the findings of the TPO that this royalty is deemed to be included in Brand royalty. The Ld. CTT(A) has rightly considered the relevant clauses of the agreement between J J India and J J USA. We, therefore, do not find any reason to interfere with the findings of the Ld. CIT(A). Disallowance of Tax and R D Cess paid on technical know-how royalty - HELD THAT:- As already held elsewhere that royalty payments has been approved by RBI and therefore deserves to be allowed. Accordingly as the payments have been made in the light of the agreement with J J US and as per the approval/guidelines of the RBI, we do not find any reason to disallow the tax and R D Cess paid on technical royalty. We accordingly direct the AO to delete the addition made on this account. Depreciation on testing equipments - HELD THAT:- As relying on own case [ 2014 (3) TMI 254 - ITAT MUMBAI] we direct the AO to allow the claim of depreciation on testing equipments
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2021 (4) TMI 201
Revision u/s 263 - revised return was filed by the assessee declaring the same total income but claiming higher amount of Long-Term Capital Loss on transfer of Government Securities - Set off of Long-Term Capital Gain from sale of Bonds and right to property against Long Term Capital Loss on sale of Government Securities - HELD THAT:- The assessee that it was the duty of the ld. Pr. CIT to ascertain the actual position of the appeal stated to be filed by the assessee against the order passed by the Assessing Officer under section 143(3) on this issue and had he done that, he would have found that the order passed by the AO under section 143(3) on this issue was already merged in the appellate order of the ld. CIT(A) and the claim of the assessee for Long-Term Capital Loss arising from the sale of Government Securities after applying the Cost Inflation Index having been already allowed by the ld. CIT(A), there was no error in the order of the Assessing Officer in allowing the set off of such loss against the Long-Term Capital Gain arising from the Bonds and Right to Property. Claim of the assessee for Long-Term Capital Loss arising from the sale of Government Securities after applying the Cost Inflation Index was disallowed by the Assessing Officer in the order passed under section 143(3) for the year under consideration by relying on the order passed in assessee s own case on the similar issue for A.Y. 2010-11 under section 143(3) read with section 263 - As pointed out by assessee, the said order passed by the Assessing Officer for A.Y. 2010-11 was a subject matter of appeal and the claim of the assessee for Long-Term Capital Loss arising from the sale of Government Securities after applying the Cost Inflation Index was allowed by the Tribunal and following this conclusion drawn in A.Y. 2010-11, the Tribunal has already upheld the appellate order of the ld. CIT(A) dated 28. 02.2019 for the year under consideration allowing the similar claim of the assessee. This issue thus stands decided by the Tribunal on merit in assessee s own case for A.Y. 2010-11 as well as for the year under consideration and we, therefore, do not consider it necessary or expedient to deal with the argument sought to be raised by the ld. CIT, D.R. on merit of this issue. Ground No. 3 of the assessee s appeal is accordingly allowed. Short-term capital gain arising from the sale of flats without taking into consideration the stamp duty valuation - As is evident from the submission made by the assessee before the Assessing Officer during the course of assessment proceedings, the actual sale consideration adopted by the assessee for computation of capital gain arising from the sale of concerned flats which was lower than the stamp duty valuation was duly explained by the assessee and the same was also supported by a valuation report of the registered valuer, which had valued the market value of the flats at ₹ 5. 84 crores just before its sale by the assessee. It is also relevant to note here that a specific request was also made by the assessee to the Assessing Officer to refer the matter relating to the valuation of the property to DVO in terms of section 50C(2) of the Act if the lower sale consideration actually received by the assessee than the stamp duty value as justified by it was not acceptable. No such reference, however, was made by the Assessing Officer and keeping in view the same as well as all the facts of record, we find merit in the contention of the ld. Counsel for the assessee that the explanation/justification offered by the assessee in the matter was found acceptable by the Assessing Officer and on appreciation thereof a well considered view was taken by the Assessing Officer. This issue thus was examined by the Assessing Officer during the course of assessment proceedings and after having satisfied himself with the explanation/justification offered by the assessee, which was duly supported by the valuation report of the Registered Valuer, a possible view was taken by the Assessing Officer accepting the stand of the assessee. In the case of R.K. Construction Co [ 2008 (7) TMI 354 - GUJARAT HIGH COURT] cited by the ld. Counsel for the assessee, it was held by the Hon ble Gujarat High Court that when the necessary details and documents were furnished by the assessee to the Assessing Officer and a particular view was taken by the Assessing Officer on the basis of the same, it was not open for the Commissioner to take a different view in the revision proceedings under section 263 of the Act. If the facts of the present case as discussed above are considered in the light of the decision of the Hon ble Gujarat High Court in the case of R.K. Construction Co. (supra), we find that there was no error in the order of the Assessing Officer on this issue as alleged by the ld. Pr. CIT and the impugned order passed by the ld. Pr. CIT revising the order of the Assessing Officer on this issue is not sustainable. Income and year of taxability of the profit arising to the assessee from sale of right in 37 flats - HELD THAT:- The entire income arising from the sale of right in 37 flats was offered by the assessee in A. Y. 2015-16 under the had long-term capital gain and when the Assessing Officer assessed the same as business income of the assessee, an appeal was filed by the assessee before the ld. CIT(A), who allowed the appeal of the assessee on this issue and directed the Assessing Officer to assess the income arising to the assessee from the sale of flats under the head long-term capital gain . This decision rendered by the ld. CIT(A) has already been upheld by the ITAT [ 2019 (12) TMI 1281 - ITAT KOLKATA] . Keeping in view the same, we find merit in the contention of the ld. Counsel for the assessee that both these issues relating to head of income under which the income in question is chargeable to tax as well as the year of taxability of the same have already been decided by the Tribunal in assessee s own case for A.Y. 2015-16 and consequently the order of the Assessing Officer passed for the year under consideration under section 143(3), which is in consonance with the view taken by the Tribunal, cannot be said to be erroneous as alleged by the ld. Pr. CIT. We, therefore, set aside the impugned order passed by the ld. Pr. CIT under section 263 on this issue and restore that of the Assessing Officer. Assessee appeal allowed.
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2021 (4) TMI 200
Deemed dividend addition u/s 2(22)(e) - HELD THAT:- There is merit in the argument of the assessee's counsel that assessee has established that it is a business transaction for purchase of property belonging to FDITPL in favour of the assessee and such business transactions outside the purview of section 2(22)(e) of the Act. The alternative argument of the assessee is that Costal Construction Company is not a shareholder in FDITPL. As such, section 2(22)(e) of the Act cannot be applied. For this purpose, he relied on the judgment of the Hon'ble High Court of Karnataka in the case of CCIT-III v. Sarva Equity P. Ltd. [ 2014 (4) TMI 788 - KARNATAKA HIGH COURT] wherein it was held that it is only where a loan advanced by a company to registered shareholder and other conditions set out in section 2(22)(e) are satisfied, such amount of loan would be liable to regarded as deemed dividend within the meaning of the said section - Being so, in our opinion, the case is squarely covered by the judgment of Hon'ble High Court of Karnataka (supra). Accordingly, we are inclined to delete the addition made by the AO. Initiation of proceedings u/s. 153C of the Act on the reason that initiation of search in the case of searched person is illegal and ultra vires the provisions of section 132(1)(a),(b) (c) of the Act and framing assessment is also bad in law in view of the judgment of the Supreme Court in the case of Ajit Jain [ 2003 (1) TMI 97 - SC ORDER] - As before us, the assessee raised a specific ground that framing assessment u/s. 143(3) r.w.s. 153A r.w.s. 153C is bad in law. Being so, it is appropriate to remit this issue to the file of CIT (Appeals) for fresh adjudication after examining the seized material, if any, and to decide in accordance with law, after providing assessee opportunity of being heard.
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2021 (4) TMI 199
Disallowance of deduction u/s.10B - Revenue allegation that the assessee in not eligible for claiming deduction under section 10B of the Act by virtue of CBDT instruction No- 02/2009 dated 09-03-2009 which mandate assessee to file ratification of LOP by the Board of approval but the assessee in case on hand has not done so - HELD THAT:- The issue on hand is covered in favour of assessee by the decision of Hon ble Jurisdictional High Court in case of CIT vs. ECI Technologies [ 2015 (5) TMI 230 - GUJARAT HIGH COURT] . Thus we hold that the assessee on hand is an eligible assessee to claim the deduction under section 10B of the Act as in its case approval granted by the Development commissioner of STPI as 100% EOU later on ratified by the Board of Approval. Deduction u/s 80IA - More than ordinary profit shown by the assessee under section 80IA(10) - whether the provisions of section 80IA(10) of the Act is applicable to the transactions carried out by the assessee with the non-resident, AE of the assessee? - HELD THAT:- The constraint of sub section 10 of section 80IA of the Act is that the profit should not be shifted from one taxable entity in India to another taxable entity based in India. Similarly, there is no such stipulation under the provisions of the Act that the increase in the profit of the assessee having eligible business must correspond with the reduction in the taxable profit in India of the person carrying on non-eligible business. Accordingly we hold that the provisions of sub-section 10 of section 80 IA of the Act are applicable to an assessee carrying on eligible business and declaring unreasonable profit than the ordinary profit by carrying out transactions with the party based in/outside India which is closely connected with the assessee. Admittedly the provisions of subsection 10 of section 80 IA of the Act are the deeming provisions for determining the reasonable amount of profit of the eligible business of the assessee for claiming the deduction under section 80-IA, 10A/10B of the Act. The deeming provisions mandate to treat certain transactions in a specific manner ignoring the realty of the transactions as reflected in the documents. It is the settled law that the scope of the deeming provision should be restricted to what is provided in such a provision. There cannot be any inference or intendment with respect to such provisions. The assessee by way of many methods may manipulate the transactions with the closely connected parties in order to show higher amount of profit. For example, the assessee is buying goods from the closely connected party say at ₹ 100.00 though the same party selling to others at ₹150.00 only. Thus this manipulation can be referred as an arrangement between the assessee and the other party who is closely connected with the assessee for the purpose of showing higher amount of profit in the books of the assessee. Thus the provisions of section 80 IA (10) of the Act mandates that there should be an arrangement between the parties closely connected with each other and this arrangement has to be proved by the AO. Admittedly, in the case on hand the assessee is showing higher amount of profit but question arises whether it is the result of arrangement of the assessee with the party based outside India. If yes, then such an arrangement has to be proved by the AO but the same has not been done so. The operating margin to the cost certainly appears to be unreasonably high but at the same time if we compare the gross amount of the service charged with the comparable cases, it is found that it is at the fair value. In other words the gross margin to the cost is very high but sale value of the services is at the ALP. This fact can be verified from the details available on pages 53 to 55 of the PB for the AY 2007-08 of the paper book. According to these details the medical billing can be charged at rate of 4% to almost 16% whereas the assessee was charging @ of 4%. Thus there remains no ambiguity to the fact that the assessee was able to generate more profit to the cost for the reason that expenses were of negligible value. Thus the assessee was able to generate more revenue by controlling expenses. Addition u/s 14A r.w.r.8D - assessee alternatively submitted that if addition is confirmed then direction should be given that exemption under section 10B should be increased with the amount of addition/ disallowance under the provisions of section 14A read with rule 8D - HELD THAT:- Admittedly, the assessee is eligible for deduction under section 10B of the Act. Therefore we are of the view that even if the addition/disallowance is made under the provisions of section 14A read with rule 8D of Income Tax Rule, then the assessee shall be eligible for deduction under section 10B of the Act on the enhanced amount of profit on account of such disallowance. From the CBDT circular bearing number No.37 of 2016 issued by CBDT dated 02.11.2016though the section 10B of the Act is not mentioned but disallowance has been made with reference to the provisions of section 80- IA(10) of the Act, there remains no ambiguity to the fact that the assessee shall be eligible on the higher amount of profit increased on account of disallowance made by the authorities below under the provisions of section 14A read with rule 8D of Income Tax Rule. As such there will not be any impact on the tax liability of the assessee. Accordingly, we confirm the disallowance made by the authorities below with the direction to the AO to allow the deduction under section 10B/10A of the Act on the higher amount of profit on account of such disallowance. Thus the ground of appeal of the assessee is allowed in terms of the above. Treatment to interest income - CIT (A) confirming the action of AO by not treating the interest income as part of business income - HELD THAT:- The provisions of subsection (4) to section 10B of the Act refers to the profits of the business of the undertaking which implies that the entire profit of the undertaking is to be considered whether it was from the export activities or not. For example the income of the eligible undertaking such as rental, commission, interest, duty drawback shall also be considered for working out the exemption provided these income are part and parcel of business of the assessee. In holding so we draw support and guidance from the order of special bench of ITAT Indore in the case of Maral Oversea Ltd.[ 2012 (4) TMI 345 - ITAT INDORE] . Correct head of income - whether the interest income shown by the assessee is a business income or the income from other sources? - HELD THAT:- Admittedly, the assessee is 100% EOU and it is not carrying out any other activity. The funds which were invested by the assessee in the FDs, available in spare, were having the close nexus with the export activities of the assessee. It is because, the assessee was engaged only in one activity i.e. export of services as 100% EOU and thus the fund used for the investment in the FD was pertaining to such export activity. Thus, in our considered view such interest income is derived by the assessee from the business activities. In holding so we draw support and guidance from the judgment of the Hon ble Gujarat High Court in the case of PCIT vs. Dishman Pharmaceutical Ltd [ 2019 (10) TMI 1195 - GUJARAT HIGH COURT] . Thus we hold that the interest income derived by the assessee is from the business activities of the undertaking. Therefore, the same is eligible for exemption under section 10B of the Act. As we have held that the interest income of the assessee is eligible for exemption under 10B .
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2021 (4) TMI 198
Application for exemption under Section 12AA(1)(b)(ii) rejected - HELD THAT:- It appears that though all the documents as directed to be submitted by the appellant were not submitted before the Revenue but the Ld. CIT(E) has not even taken into consideration the documents already submitted before him while considering the matter for registration of the appellant trust under Section 12AA of the Act. Hence, in order to prevent the miscarriage of justice, in our considered opinion another opportunity be given to the appellant to present its case before the Revenue with all the evidences/documents. In that view of the matter we quash the order impugned and set-aside the issue to the file of the Ld. CIT(E) for his consideration afresh upon taking into account the evidences on record in support of the case of the assessee or any other evidence which the assessee may choose to file at the time of hearing of the matter. The Ld. CIT(E) is further directed to give an opportunity of being heard to the assessee for proper consideration of the matter. Appeal is allowed for statistical purposes.
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2021 (4) TMI 197
Ex-parte order passed by CIT(A) - Non-appearance before CIT(A) since the affairs of the assessee company not having been properly looked into by the person incharge at the relevant point of time - HELD THAT:- In the circumstances explained by the assessee regarding the affairs of the assessee company not having been properly looked into by the person incharge at the relevant point of time, the non-appearance of the assessee before the CIT(A) was owing to reasonable cause. In the given facts and circumstances of the case, we are of the view that the assessee should be afforded an opportunity of being heard before the CIT(A). We therefore set aside the order of the CIT(A) and remand the issues raised by the assessee in the appeal before CIT(A) for fresh consideration by the CIT(A) after affording assessee opportunity of being heard. The assessee is directed to co-operate in the set aside proceedings for expeditious disposal of the appeal by the CIT(A). The appeal of the assessee is accordingly treated as allowed for statistical purposes.
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2021 (4) TMI 196
Best judgment assessment - no reply of notice u/s. 143(2) - there was a proposal to estimate the income at 20% of the turnover - HELD THAT:- It is the claim of the assessee that there was change of address. Consequently, the notices issued by the A.O. and the CIT(A) were never received by him. The assessee has filed an Affidavit stating the reasons of non-appearance before the A.O. and the CIT(A). In the interest of justice and equity, one more opportunity should be granted to the assessee to represent the case before the A.O. Therefore, the entire issue raised in this appeal is restored to the files of the A.O. The assessee shall cooperate with the Department and shall not seek unnecessary adjournments. The A.O. shall afford a reasonable opportunity of hearing to the assessee and shall take a decision in accordance with law. It is ordered accordingly.
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2021 (4) TMI 195
Unexplained income - Addition on account of the amount credited in the capital account of partner of the firm - Credit worthiness of the person making payment - CIT-A deleted the addition - HELD THAT:- The assessee explained the source of the partner for depositing the amount in the capital account. The said amount was received by the partner from her son who is NRI, the transaction was through banking channel out of the NRE saving bank account of her son, therefore the addition made by the A.O. was not justified - the amount was received by the assessee firm from the partner who explained the source for the same and if at all any addition was called for that was required to be made in the hands of the partner and not in the hands of assessee firm. On an identical issue in the case of ITO Vs. Nahar Singh Sadhu Singh [ 2001 (7) TMI 62 - PUNJAB AND HARYANA HIGH COURT] held that the partner had the requisite amount to invest towards the capital account of the firm. Since no evidence had been pointed out against that finding the amount could not be assessed as income from undisclosed sources of the firm. also see METACHEM INDUSTRIES [ 1999 (9) TMI 21 - MADHYA PRADESH HIGH COURT] - Thus addition was rightly deleted by the Ld. CIT(A). Addition on account of amount received from Shri Ankush Gupta - explanation of source - HELD THAT:- It is not in dispute that the assessee received a sum from Shri Ankush Gupta through banking channel and the source of source was explained by the assessee by furnishing the documentary evidences to prove the credit worthiness of Shri Punit Gupta and Shri Akash Bansal from whom Shri Ankush Gupta received the amount. The said documents revealed that the amount of ₹ 32,00,000/- was received by Shri Ankush Gupta from his brother Shri Puneet Gupta who is the NRI and settled in UK. The said amount was transferred from the NRE account. The Assessee also explained the source of another amount of ₹ 9,50,000/- received by Shri Ankush Gupta from his cousin Shri Akash Bansal by furnishing the copy of bank account of Shri Akash Bansal, therefore the addition made by the A.O. was not justified and the Ld. CIT(A) rightly deleted the same particularly when the assessee proved the identity and creditworthiness of depositor as well as genuineness of transaction. Addition on account of the transaction with M/s. Shree Radha Commodity Services - CIT-A deleted the addition - HELD THAT:- Respectfully following the aforesaid referred to order in assessee's own case [ 2019 (10) TMI 1404 - ITAT CHANDIGARH] , we do not see any merit in this ground of the Departmental appeal particularly when the cash deposited in the bank account of M/s. Radha Commodity Services was accepted by the Department as genuine while framing the assessment under section 143(3) of the Act vide order dt. 23/03/2016, for the same A.Y. 2013-14; in the case of Shri Kushal Gupta proprietor of M/s. Radha Commodity Services from whom the assessee received the loan through banking channel. We therefore do no see any valid ground to interfere with the findings given by the Ld. CIT(A) on this issue. Appeal of revenue dismissed.
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2021 (4) TMI 194
Condonation of delay - delay of 1189 days in filing the appeal against quantum order passed by the ld. CIT(A) and there is a delay of 307 days in filing the appeal against the order confirming penalty imposed by the AO u/s 271(1)(c) - benefit of the provisions of Vivad Se Viswas Act - HELD THAT:- Since the assessee had closed its business operations the assessee could not receive the order passed by the Ld. CIT(A). The department has not rebutted these fats. Further, the assessee could not file the appeals within limitation period as the partner of the assessee had to undergo medical treatment due to his ill health. In the present cases, although the delay is inordinate, yet, in view of the fact that the assessee wants to avail the benefit of the provisions of Vivad Se Viswas Act, 2020 and the assessee has explained the cause of delay in filing the present appeals, we are of the considered view that no prejudice is going to be caused to the revenue in case the delay is condoned in both the cases. Accordingly, in view of the principles laid down by the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs Mst. Katiji Ors [ 1987 (2) TMI 61 - SUPREME COURT] we take a lenient view and allow the applications for condonation delay and dismiss both the cases of the assessee as withdrawn with the liberty to file M. As. for restoration of the appeals in case the issues involved are not settled under the provisions of Vivad Se Visvas Act, 2020.
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2021 (4) TMI 193
Reopening of assessment u/s 147 - addition u/s 68 - reasons recorded AO has mentioned that accommodation entry has been escaped and issued noticed u/s. 148 - HELD THAT:- In response to notice assessee filed the objection which was decided in a summary manner. We further find that after considering the reply filed by the assessee as well as documentary evidences, the AO has made the addition of ₹ 15 lacs u/s. 68 of the Act whereas AO has issued the notice u/s.148 of the Act for escapement of income of ₹ 75 lacs which is contrary in law and shows the non-application of mind on the part of the assessee. Hence, on this account, the assessment in dispute framed by the AO is bad in law and deserve to be quashed. Exactly under the similar facts and circumstances there are various cases, as relied by the ld. Counsel for the assessee, in which similar issue has been adjudicated and decided in favour of the assesee wherein the assessment has been quashed, especially in the recent decision passed in the case of Smt. Meena Gupta [ 2020 (9) TMI 533 - ITAT DELHI ] - Thus assessment framed in the present case is hereby quashed. - Decided in favour of assessee.
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Customs
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2021 (4) TMI 230
Interest for delayed remittance of refund on account of IGST - HELD THAT:- While granting refund to the petitioners, the petitioners will be granted interest at the rate of 7% simple, from the date, when the shipping bills were filed by them, till the date of actual refund, which, in this case, ought not to go beyond 26.04.2021. Petition disposed off.
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2021 (4) TMI 229
Principles of Natural Justice - opportunity of cross examination of a person upon whom reliance is placed by the Officer in finalising the impugned assessment - HELD THAT:- The appellate authority has passed an order on 10.03.2021 allowing the appeal of the petitioner to the effect that the principles of natural justice will have to be complied with and the Assessing Authority should grant an opportunity of cross examination to the petitioner prior to finalization of assessment. A copy of this order is placed on file. The impugned order has no legs to stand, since it has, admittedly, been passed without affording an opportunity of cross examination to the petitioner and the same is set aside - Let the petitioner be afforded an opportunity of cross examination, heard in full and an order of assessment be passed denovo within a period of six (6) weeks from today - Petition allowed.
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2021 (4) TMI 215
Release of seized goods - Drones - clearance of the goods was denied based upon DGFT Notification No.30/2015-2020 dated 8.11.1990 and WPC licence for the drones - Commissioner (Appeals) ordered for release of goods under bond directing to produce the necessary licence and permission from the appropriate authorities within a period of six months from the date of release of the goods. - HELD THAT:- It is noted that the goods were specifically imported for meeting the requirements during the pandemic. Drones were intended to be used for monitoring the public as to whether there is violation of the restrictions for travel and gathering of people. It is also seen from the documents that drones were intended for supply only for the police department and only for the purpose of use during the pandemic. The department has issued an end-user certificate dt. 22.05.2020 in which it is stated that such drones are intended to monitor the COVID-19 situation in Chennai city. Needless to say that from 22.03.2020 onwards the country was in lock down for a period upto May 2020. When the goods are imported / intended for use by the government for the public purpose and especially when there is worldwide pandemic of COVID-19, the departmental authorities ought to have viewed the same in the right perspective. So also, no purpose would serve by release of the goods after prolonged delay. In fact, the Commissioner (Appeals) has taken a correct view after applying his mind so as to release the goods for immediate use so that the pandemic can be contained and lives of many can be saved - It requires application of mind taking into consideration the facts and circumstances of each case. Commissioner (Appeals) has rightly ordered for release of the goods - appeal dismissed.
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Corporate Laws
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2021 (4) TMI 228
Auction - 5670 kilograms of copper ingots - appellant was the highest bidder - was not informed whether he is the successful bidder and demanded return of EMD - appellant thus not intending to proceed with the sale and requested for return of EMD - inconsistent stand of appellant - HELD THAT:- It can be seen that the appellant is not having a consistent stand before the Court. By Annexure-R3 he requested for return of EMD on the ground that he has not been intimated as to whether he is the successful bidder. After receiving Annexure-R2 communication from the Official Liquidator regarding confirmation of sale also the appellant by Annexure-R4 informed the Official Liquidator that he is not intending to proceed with the sale and requested for return of EMD. The appellant filed Company Application No.75/2020 to set aside Annexure- R6 letter of the Official Liquidator whereby the EMD was forfeited. The appellant then turned around and filed C.A. No.76/2020 for direction to allow the appellant to remit the balance sale consideration in two installments within 3 months from the date of order after deducting the amount deposited as EMD. Later, the appellant filed C.A. No.78/2020 for direction for refund of EMD.Still later, C.A. No. 01/2021 was filed for direction to confirm the sale in favour of the appellant as 'directed' by the Court on 09.12.2020. The appellant cannot take inconsistent positions before the Court. The contention of the appellant that the Court had orally directed the appellant to remit the amount is clearly an attempt to resuscitate the C.A.Nos. 75 and 76 of 2020, which were already dismissed. Copper does not rust; but the appellant has come to Court with rusted hands. The appellant cannot be permitted to take advantage of his own wrong. The Company Court would not confirm the sale on re-auction, if best prices are not secured. Therefore, the said contention of the appellant is only to be rejected - Appeal dismissed.
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Insolvency & Bankruptcy
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2021 (4) TMI 223
Sanction of scheme of Merger and amalgamation - Seeking direction of the Tribunal for convening and holding separate meetings of certain class of creditors of the Company - whether the Tribunal while exercising the jurisdiction under Section 230 of the Act, can pass directions against the RBI? - Applicability of 07th Jun, 2019 circular of RBI - HELD THAT:- At this stage, if we express any opinion in regard to the submissions of Ld. Counsels for the parties it will affect the merits of the Appeal. However, we are of the view that if the operation of the aforesaid direction is stayed it will not prejudice to the proceedings pending before the Tribunal. Therefore, we deem it appropriate to pass ad-interim order. In Para 34 of the impugned order following direction is stayed till pendency of this Appeal:- all governmental or regulatory authorities shall be estopped from taking any coercive steps including reporting in any form and/or changing the account status of the Company Application allowed.
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2021 (4) TMI 222
Maintainability of application - Initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditors - special power of attorney (page 66 - 73) is not signed by the power of attorney holder Mr. Bhagwandas Patel - HELD THAT:- Power of attorney is a legal instrument that empowering any specific person to act for and in the name of the person executing such instrument. Power of attorney is created for matters relating to property, tax payments, banking and legal proceedings etc. etc. The person who is executing such power of attorney or who grants such power is called as the donor and the person to whom such power is granted is called as attorney / agent / done. On perusal of the records it is found that the Special Power of Attorney executed on 27th June, 2019 is not signed by Mr. Bhagwandas Patel. Moreover, photograph of the Agent -Mr. Bhagwandas Patel is not affixed in the document, a such the power of attorney itself is bad in the eye of law and cannot be relied upon - Notwithstanding above, the applicant has not filed copy of the purchase order delivery challan to substantiate its claim. The applicant has also not put on record a copy of the partnership firm. The petition is not maintainable and deserves to be dismissed - Petition disposed off without costs.
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2021 (4) TMI 221
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - application is complete in all respects or not - HELD THAT:- The Corporate Debtor made a submission that there was no relationship between the Operational Creditor or the Corporate Debtor and other application filed against the Corporate Debtor under Section 7 was also pending and listed even today. We verified this fact from the cause list. Thus the factor of collusiveness gets adequately rebutted - The name of the Interim Resolution Professional (IRP) has been proposed, though, it is not mandatory in respect of application filed under Section 9 of the I.B. Code, 2016 - there is no material on record to show that any disciplinary proceedings are pending against such proposed IRP This application is complete in all respects and defect free. It also complies with the requirements of provision of relevant provisions of the Insolvency and Bankruptcy Code 2016 The amount of debt is more than the threshold limit prescribed for the initiation of the CIRP against the Corporate Debtor - Application is deserved to be admitted - application admitted - moratorium declared.
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2021 (4) TMI 219
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Financial Creditors - HELD THAT:- The Corporate Debtor admitted the fact that the Financial Debt of more than ₹ 1,00,000/ - (as per Sec.4 of IBC, 2016) is due and payable by them to the Financial Creditor and that they have committed default in paying the same. Application admitted - moratorium declared.
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2021 (4) TMI 217
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Financial Creditors or not - existence of debt and dispute or not - HELD THAT:- It is not in dispute that from 29.05.2017, the Corporate Debtor stopped paying the Petitioner sum of rupees eight lakhs per month towards remuneration and interest of loan amount. The Corporate Debtor committed default in paying the debt in form of un-secured loan by the Petitioner to the Corporate Debtor. That amount is more than rupees one lakh (i.e. the threshold limit of the debt amount stated under Section 4 of the Insolvency and Bankruptcy Code, 2016 to initiate the Corporate Insolvency Resolution Process) - From the above facts it can be held that the Corporate Debtor has committed a default in paying the debt - also, Financial Creditor suggested name of one Mr. Sunil Kumar Agarwal, having registration number for the appointment as the Interim Resolution Professional against whom, no disciplinary proceedings pending. The application is defect free - application admitted - moratorium declared.
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2021 (4) TMI 207
Validity of transactions held during Moratorium period - transaction with respect to the assets of the Corporate Debtor/Corporate Applicant - overriding effect of provisions of IBC over other laws - HELD THAT:- The Corporate Applicant i.e., M/s RCM Infrastructure Ltd filed an Application invoking Section 10 of IBC before the Adjudicating Authority. The Appellant is arrayed as a party to the said proceeding. From the records it is evident that the Appellant filed Counter Affidavit to the Application and it is also on record that the Corporate Debtor availed financial facility and also stated that they have initiated proceeding under SARFAESI Act, 2002 and issued Demand Notice dated 17.01.2017 and also issued possession notice dated 18.04.2018 for ₹ 74,72,73,108/- and took symbolic possession of all the secured assets - There is a prohibition with respect to the assets of Corporate Applicant including transfer, encumbered, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein. Further, the order prohibits in respect of the Corporate Applicant s property including any action under SARFAESI Act, 2002. Therefore, the Appellant is aware of the order and filed its claim in Form-C dated 21.01.2019 claiming an amount of ₹ 78,92,50,634/-. When the Appellant is having the knowledge of imposition of moratorium, the sale of assets of the Corporate Debtor cannot be proceeded and concluded and they strictly abide by Section 14 of IBC. There is a prohibition with respect to the assets of Corporate Applicant including transfer, encumbered, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein. Further, the order prohibits in respect of the Corporate Applicant s property including any action under SARFAESI Act, 2002. Therefore, the Appellant is aware of the order and filed its claim in Form-C dated 21.01.2019 claiming an amount of ₹ 78,92,50,634/- - When the Appellant is having the knowledge of imposition of moratorium, the sale of assets of the Corporate Debtor cannot be proceeded and concluded and they strictly abide by Section 14 of IBC. It is also on record that by filing revised claim in Form-C on 11.02.2019 before the RP by the Appellant, the Appellant clearly violates the order of moratorium. The Appellant Bank lost sight of the fact that IBC is a complete Code itself and Section 238 of IBC has overriding effect over all other laws including SARFAESI Act, 2002. The imposition of moratorium as per Section 14 of IBC is to protect the interest of the Corporate Debtor by protecting the assets of the Corporate Debtor for the sole objective to maximisation the value of assets. This Tribunal in the matter of Encore Asset Reconstruction Company Pvt. Ltd. Vs. Charu Sandeep Desai and Others [ 2019 (8) TMI 529 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] also held that Section 238 of IBC will prevail over any of the provisions of the SURFAESI Act, 2002 if it is inconsistent with any of the provisions of IBC. The Assets of the Corporate Debtor/Applicant forms part of valuation. Learned Adjudicating Authority has rightly set aside the sale of assets of the Corporate Applicant. The sale of assets of the Corporate Applicant during moratorium is against the spirit of Section 14 of IBC - there are no infirmity in the order passed by the learned Adjudicating Authority. Appeal dismissed.
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PMLA
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2021 (4) TMI 227
Provisional attachment with respect to the four sugar mills of the petitioner - Right to property - violation of the provisions of Section 5 of PML Act - HELD THAT:- In the instant case, assailing the provisional attachment order, no ground has been taken that the order has been passed by an incompetent authority or by an authority having no jurisdiction. In this view, it is not a case of lack of jurisdiction. Further, in this writ petition, the vires of the Act has not been challenged. In this case, Right to Property is involved. Right to property is a constitutional right, which is always subject to restriction imposed by law. Further, the Right to Property has not been included under Part-III of the Constitution of India, which deals with the Fundamental Rights. Article 300-A is under Chapter IV of Part-XII of Constitution of India and it provides Right to Property. Thus, this is also not a case of enforcement of Fundamental Right. On the other hand, this is a case of right over the property, which can efficaciously be adjudicated by Forums provided under the Act. It is trite law that the writ petition at the stage of show cause notice is not maintainable. - It is also found that in addition to remedy available under Section 8 of the Act, the party/person aggrieved by an order made by Adjudicating Authority can prefer an appeal under Section 26 of the Act before the Appellate Tribunal and thereafter any person aggrieved by any decision or order of Appellate Tribunal can file an appeal before the concerned High Court, as provided under Section 42 of the Act. The fact that the High Court has wide jurisdiction under Article 226 of the Constitution, does not mean that it can disregard the substantive provisions of a statute and pas orders which can be settled only through a mechanism prescribed by the Statute. Considering various aspects including the multilayered remedies are available to the petitioner under the statute in which the impugned order of provisional attachment has been passed, we are not inclined to entertain this writ petition challenging the provisional attachment orderunder Section 5 of the Prevention of Money Laundering Act, 2002 - petition dismissed.
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Central Excise
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2021 (4) TMI 226
Judicial Review of Show Cause Notice (SCN) - whether refunds granted earlier pursuant to the Judgment of the Apex Court can be considered to be refunds erroneously granted in view of the subsequent Judgment of the Apex Court - Recovery of refunded Education Cess and Secondary and Higher Education Cess - Section 11A(i) of the Central Excise Act, 1944 - Interest in terms of Section 11AA of the Act - Area based exemption ELD THAT:- The term erroneous any error deviating from law. A change of law subsequently would not make an action taken earlier by Quasi Judicial Authority in terms of law as it stood then, to be held to be erroneous so as to enable the Departmental Officer to invoke powers under Section 11A of the Central Excise Act. On perusal of Section 11A reveals that the power under Section 11A for recovery of duties not levied or not paid or short levied or short paid or erroneously refunded will be available to the departmental Officer only on the decisions mentioned in Sub-section (4) unless the concerned departmental Officer is satisfied that the refund granted earlier was because of any or all of the conditions mentioned under sub-Section (4), the refunds cannot be treated to be erroneous. The mandate of section requires the departmental Officer to apply its mind and only upon satisfaction of the conditions mentioned under sub-Section (4) of Section 11A can any refund granted earlier be treated to have been erroneously. It can be held that the concerned departmental Officer exercising power under Section 11A of the Central Excise Act must arrive at finding that the earlier order/refunds as have been granted in the present proceedings, were contrary to the law and therefore, erroneous and that the same are required to be reopened or recovered by invoking the powers under Section 11A. The refunds were granted by the Department in terms of the Judgment in M/S SRD Nutrients Private Limited [ 2017 (11) TMI 655 - SUPREME COURT ]. As discussed above, the Department accepted the Judgment of the Apex Court in M/S SRD Nutrients Private Limited (supra) and sanctioned the refunds. As such, the contention of the Department that the refunds granted earlier were erroneous and could be recovered under Section 11A cannot be accepted. Binding effect of a Judgment and Principle of Res Judicata It is also not disputed that in respect of the some of the petitioners since the refunds were not granted, writ petitions were filed before this Court and this Court by orders on different dates held that the petitioners were entitled to refunds claimed in terms of the judgment of the Apex Court in M/S SRD Nutrients Private Limited [ 2017 (11) TMI 655 - SUPREME COURT ]. There is no appeal or review filed in respect of these orders also which have been since attained finality. Accordingly, the refunds which were granted by the Department were pursuant to judicial proceedings before the Apex Court and/or the Gauhati High Court, the refunds sanctioned/released were on the basis of orders passed by the Apex Court and/or the Gauhati High Court. Consequently, once a judgment or judicial order is passed by a Court of law against the Department, the remedy available to the Department is by way of an appeal to a higher Court or review. This Court holds that the refund granted/sanctioned earlier in terms of the Judgment of the Apex Court rendered in M/S SRD Nutrients Private Limited [ 2017 (11) TMI 655 - SUPREME COURT ] as well as in terms of orders passed by this Court directing such refunds of Education Cess and Secondary and Higher Education Cess in terms of M/S SRD Nutrients Private Limited [ 2017 (11) TMI 655 - SUPREME COURT ], cannot be revoked co-laterally by a Quasi Judicial Authority of the Department without taking recourse to the statutory and/or judicial remedies available to the Department. In view of dismissal of the earlier review petition filed by the Department against the Judgment of the Apex Court in M/S SRD Nutrients Private Limited [ 2017 (11) TMI 655 - SUPREME COURT ] and also in view that no appeal or review having been preferred against orders of this Court directing entitlement of refund of Education Cess and Secondary and Higher Education Cess to the petitioners, the issue between the parties to the lis having attained finality, the later Judgment of the Apex Court in M/S Unicorn Industries [ 2019 (12) TMI 286 - SUPREME COURT ] holding M/S SRD Nutrients Private Limited [ 2017 (11) TMI 655 - SUPREME COURT ] to be per incuriam, will not permit the Department to unilaterally revoke or re-open the issue without taking recourse to the remedies available to them before a judicial forum. Judicial Review in Show Cause Notice There is another aspect that needs to be dealt with in the present proceedings. The petitioners before this Court in the present proceedings are questioning the show cause notices issued by the department. Although, the High Court in exercise of judicial review under Article 226 of the Constitution of India would not ordinarily interfere with the show cause notices issued, however, where a show cause notice has been issued by an authority wholly without jurisdiction or by way of wrongful usurpation of power, the person aggrieved need not be relegated to avail any statutory alternative remedy available - In the facts of the present case, there is no dispute that the refunds granted earlier to the petitioners were in pursuance to judicial orders passed by the Apex Court in M/S SRD Nutrients Private Limited [ 2017 (11) TMI 655 - SUPREME COURT ] and/or orders passed by this Court in writ applications filed by some of the petitioners. As held by the Apex Court, declaration of judgment to be rendered per incuriam by latter judgment will not upset the binding effect of the judgment between the litigating parties. As the department sanctioned the refunds in terms of such orders passed in judicial proceedings between the assessees and the department, the same having attained finality cannot be reopened except by way of the Department taking recourse to available judicial remedies. Unless, such remedies are availed of, attempting to re-open orders passed by Department officers by collaterally by taking recourse to Section 11A cannot be permitted. Thus, the show cause notices issued are required to be held to have been issued without any jurisdiction and by wrong interpretation of the powers under Section 11A read with Section 11AA and therefore, the same are required to be set aside. Petition allowed.
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CST, VAT & Sales Tax
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2021 (4) TMI 192
Levy of sales tax on turnover - High seas sale - exemption claimed by the dealer on high sea sales, disallowed on the ground that there was interpolation of the name of the customer in the copies of the Bills of Entry, which were filed before the Sales Tax Authorities - HELD THAT:- The fact remains that the Tribunal touched upon the finding rendered by the First Appellate Authority. Admittedly, the Bill of Entry is not the document of title and even assuming that there are certain interpolations or corrections in the Bill of Entry, the question would be as to what is the effect of such corrections. This issue was considered by the Hon'ble Division Bench of this Court in the case of STATE OF TAMIL NADU VERSUS KAWARLAL AND CO. [ 2011 (9) TMI 519 - MADRAS HIGH COURT] where it was held that Bill of Lading is the document of title and admittedly it carried the name of the ultimate buyer and that there was no denial of the fact that the Assessee had transferred the goods before it crossed the Customs Station, Tribunal was correct in granting relief. The Tribunal committed a serious error in reversing the well considered order passed by the First Appellate Authority by touching upon the factual findings, which were recorded by the First Appellate Authority - there are no hesitation to hold that the common impugned order passed by the Tribunal calls for interference. Petition allowed.
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2021 (4) TMI 191
Levy of tax on turnover - Bill of Lading - title to the goods or not - rate of tax - taxable at 8% or otherwise - High Seas Sale or not - claim of high sea sales denied on the ground that the document filed by the dealer did not conclusively prove the claim of high sea sales - levy of penalty u/s 16(2) of the Tamil Nadu General Sales Tax Act, 1959 - HELD THAT:- There can be no quarrel over the legal position that the Bill of Entry is never treated as a document of title under the Customs Act, 1962. Rather, the Bill of Lading is the document of title, which should contain the name of the ultimate buyer - In the instant case, the Revenue did not dispute the fact that the duty was paid by the ultimate buyer and except for the alleged interpolation in the Bill of Entry, there was no other adverse finding rendered either by the Assessing Officer or by the Tribunal against the dealer. In identical circumstances, the Hon'ble Division Bench of this Court in the case of STATE OF TAMIL NADU VERSUS KAWARLAL AND CO. [ 2011 (9) TMI 519 - MADRAS HIGH COURT] dismissed the tax case appeal filed by the Revenue and it was held that Bill of Lading is the document of title and admittedly it carried the name of the ultimate buyer and that there was no denial of the fact that the Assessee had transferred the goods before it crossed the Customs Station, Tribunal was correct in granting relief. Since the Tribunal has not rendered any finding to dislodge the factual finding arrived at by the First Appellate Authority, there is no justification for the Tribunal to reverse the order passed by the First Appellate Authority - petition allowed.
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2021 (4) TMI 190
Issuance of C forms - Concessional rate of tax - purchase of High Speed Diesel from suppliers in other States - HELD THAT:- The issue is covered by a decision of this Court in M/S. THE RAMCO CEMENTS LTD. VERSUS THE COMMISSIONER OF COMMERCIAL TAXES, THE ADDITIONAL COMMISSIONER (CT) [ 2018 (10) TMI 1529 - MADRAS HIGH COURT] where it was held that The respondents are directed to permit these petitioners to download 'C ' forms, as has been done in the past for the purpose of purchasing petroleum products against the issuance of 'C' declaration forms. Petition allowed.
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2021 (4) TMI 189
Issuance of C forms - Concessional rate of tax - purchase of High Speed Diesel from suppliers in other States - HELD THAT:- The issue is covered by a decision of this Court in M/S. THE RAMCO CEMENTS LTD. VERSUS THE COMMISSIONER OF COMMERCIAL TAXES, THE ADDITIONAL COMMISSIONER (CT) [ 2018 (10) TMI 1529 - MADRAS HIGH COURT] where it was held that The respondents are directed to permit these petitioners to download 'C ' forms, as has been done in the past for the purpose of purchasing petroleum products against the issuance of 'C' declaration forms. Petition allowed.
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2021 (4) TMI 188
Maintainability of review petition - Rectification of Mistake - error apparent on the face of record - entitlement to pensionary benefit - HELD THAT:- It is pertinent to mention here that the applicant/State permitted the petitioner/opposite party to serve on the post of Member of U.P. Trade Tax Tribunal, during period from 27.01.1994 upto 31.12.2011, i.e., qualifying service for ten years for entitlement for getting pension. The Government Order dated 05.05.2000 cannot override the provisions of Rule 56 of fundamental rules framed by the State of U.P. - The applicant/State on the basis of principles of estoppel and acquiescence, cannot raise objection on the basis of government order dated 05.05.2000 that now the petitioner/opposite party is not entitled for getting pension. The respondent/ opposite party joined on 27.01.1994, hence, government order cannot have retrospective effect, because, Rule 56 of Fundamental Rules has been made applicable by virtue of provisions of Section 10(1-B) of U.P. Trade Tax Act, to members of U.P. Trade Tax Tribunal, including members appointment in quota of Advocates also. There is no apparent error on the face of judgment and order dated 03.04.2017. The exposition of law of Hon ble Apex Court relied upon by the learned Advocate General does not extend any benefit to the applicant/State. When the review will not be maintainable:- (i) A repetition of old and overruled argument is not enough to reopen concluded adjudications. (ii) Minor mistakes of inconsequential import. (iii) Review proceedings cannot be equated with the original hearing of the case. (iv) Review is not maintainable unless the material error, manifest on the face of the order, undermines its soundness or results in miscarriage of justice. (v) A review is by no means an appeal in disguise whereby an erroneous decision is reheard and corrected but lies only for patent error. (vi) The mere possibility of two views on the subject cannot be a ground for review. (vii) The error apparent on the face of the record should not be an error which has to be fished out and searched. (viii) The appreciation of evidence on record is fully within the domain of the appellate court, it cannot be permitted to be advanced in the review petition. (ix) Review is not maintainable when the same relief sought at the time of arguing the main matter had been negatived. The present application for review of judgment and order dated 3.4.2017 is devoid of merits - Application for ROM dismissed.
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2021 (4) TMI 187
Maintainability of petition - whether there is an absolute bar to entertain the petition on the ground that alternative efficacious remedy is available and that be invoked by the writ petitioner - HELD THAT:- There is no absolute bar for entertaining a writ petition, we are of the view that the decision of the learned Single Judge 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] in holding as if there is a blanket ban for entertaining a writ petition cannot be countenanced. The matter is remanded to the Assessing Officer for a fresh consideration - Appeal allowed.
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2021 (4) TMI 185
Release of goods alongwith vehicle - respondents fairly submits that if the amount in question ₹ 70,92,629/- is secured, appropriate release may be considered - HELD THAT:- This Court, after hearing learned counsel for the parties, without entering into the merits of the case and while leaving the same to the appellate jurisdiction, directs the petitioner (Leeladhar Meghwal) to submit a bank guarantee of ₹ 70,92,629/- before the respondent authority within a period of 15 days from today, immediately whereafter, the respondent authority shall be required to release the vehicle. The respondent authority shall be free to impose any other condition strictly in accordance with law. The respondent authority shall release the vehicle as soon as the bank guarantee is furnished. Petition disposed off.
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Indian Laws
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2021 (4) TMI 186
Threat - Seeking issuance of directions to the official respondents for protection of life and liberty of the petitioners from the private respondents arrayed in the petition - HELD THAT:- Learned State counsel on instructions from ASI Amar Singh submits that the statements of the petitioners have been recorded by Deputy Superintendent of Police, Head Quarter, Ambala. It is stated therein that there is no threat perception. No cause of action survives for pursuing with the present petition - Disposed of as infructuous.
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