TMI Tax Updates - e-Newsletter
April 9, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise

Articles

1. NEW CBIC GUIDELINES FOR GST INVESTIGATIONS

   By: Dr. Sanjiv Agarwal

2. Audit wing of SGST Authority shall keep all proceedings in abeyance if the subject matter is pending before the CGST Authority

   By: Bimal jain

3. RE-ASSESSMENT ON THE BASIS OF AUDITOR’S REPORT

   By: DR.MARIAPPAN GOVINDARAJAN

4. Tax Liability cannot be imposed merely because the financial statement did not provide State-wise turnover

   By: Bimal jain

News

1. Auction for Sale (issue/ re-issue) of (i) ‘7.32% GS 2030’, (ii) ‘New GS 2039’ and (iii) ‘7.30% GS 2053’

2. IICA concludes VIII batch of ‘IICA Certified CSR Professional Programme” in Goa

Circulars / Instructions / Orders

Customs

1. Instruction No. 08/2024-Customs - dated 5-4-2024

Exemption for import of High End and High Value used Medical Equipment other than critical care medical equipment Hazardous and Other under Wastes (Management and Transboundary Movement) Second Amendment Rules, 2022 dated 23rd December, 2022.

Highlights / Catch Notes

GST

• Court Annuls GST Registration Cancellation Due to Procedural Errors and Lack of Clarity; Orders Restoration.

  Case-Laws - HC : Cancellation of GST registration - documents are vitiated by lack of clarity and non-application of mind - violation of principles of natural justice - The High Court observed that the order of cancellation was based on contradictory statements, as it referred to the petitioner's reply while also stating that no reply was submitted. Additionally, the order did not provide any reasons for the cancellation other than citing the absence of a response. - The High Court quashed the order of cancellation and directed the restoration of the petitioner's GST registration. However, it clarified that the authorities could initiate proceedings for cancellation of registration if there were genuine instances of non-compliance.
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Income Tax

• Court Upholds Assessee's Right to Choose Share Valuation Method; Orders New Valuation Using DCF Method with Independent Valuer.

  Case-Laws - HC : Valuation of the shares offered for subscription - Determination of fair market value - Applicability of u/s 56(2)(viib) read along with Rule 11UA - Adoption of the Net Asset Value (NAV) method over the Discounted Cash Flow (DCF) method - The court underscored that the option of selecting a valuation method for shares is unequivocally vested with the assessee. It was highlighted that the AO, while possessing the authority to question the veracity of a valuation report, is not empowered to independently adopt a different valuation methodology from that chosen by the assessee. - Conclusively, the High Court allowed the appeal, setting aside the ITAT's order and remitting the matter back to the AO for a fresh valuation exercise strictly adhering to the DCF method, albeit with liberty to appoint an independent valuer.
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• Court Affirms Forex Loss as Expenditure, Upholds ITAT Decision on EEFC Account, Following Precedent in Tax Law.

  Case-Laws - HC : Disallowance of foreign exchange fluctuation loss on sale proceeds held in the EEFC account - ITAT deleted addition - The High Court, after considering the arguments presented by both parties and referring to the Woodward Governor India case, concluded that the treatment of forex losses should adhere to the principles laid down in income tax law and accounting standards. It emphasized that such losses are considered as an item of expenditure under Section 37(1) of the Income Tax Act. As the issues raised had already been settled by precedent decisions, the Court declined to admit the appeal, affirming the decisions of the ITAT and the coordinate Bench of the Court.
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• Taxpayer Wins Appeal on Cash Payment Limits Under Income Tax Act; Payments Via Supervisors Validated by Court.

  Case-Laws - HC : Addition u/s 40A - Cash expenditure exceeding the threshold of Rs. 20,000/- - The appellant/assessee argued that the payments made through supervisors, who were employees of the assessee, to individual workers did not exceed Rs. 20,000/- each. Therefore, Section 40A(3) of the Act, which disallows certain expenditures not made by crossed cheque or bank draft, should not apply. - The High Court found that the supervisors were indeed employees of the appellant, as evidenced by the assessing officer's lack of dispute on this matter. Therefore, the payments made through supervisors were considered payments by the appellant. As these payments did not exceed Rs. 20,000/- to any individual worker and were made through agents of the appellant, the second proviso to Section 40A(3) applied, and the disallowance was not justified.
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• Tribunal Overturns Tax Reassessment; Upholds Dividend Income Exemption and Short-Term Capital Loss Claim.

  Case-Laws - AT : Reopening of assessment u/s 147 - Exemption of dividend income and the allowability of short-term capital loss - The Tribunal ruled in favor of the appellant, quashing the reassessment proceedings on the grounds of improper approval and lapse of the prescribed time period. - Regarding the exemption of dividend income and the allowability of short-term capital loss, the Tribunal found the appellant's transactions to be genuine and based on publicly available information. It concluded that the appellant fulfilled the conditions specified in the Income Tax Act, making them eligible for the claimed exemptions. Therefore, the disallowance of exemption for dividend income and the denial of the short-term capital loss claimed were overturned.
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• Tribunal Rules Loan Additions Unwarranted, No Withdrawals Occurred, Assessee Favored Over AO's Deemed Dividend Claim.

  Case-Laws - AT : Deemed dividend u/s 2(22)(e) - The AO held that loans received by the assessee from the Company constituted deemed dividends. However, the Appellate Tribunal found that there were no withdrawals of loans during the relevant year, leading to the conclusion that the additions proposed by the Assessing Officer were unwarranted. Consequently, the Tribunal ruled in favor of the assessee and deleted the proposed additions.
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• Tribunal Upholds Assessee's Appeal on Club House Income Taxability and Section 80P(2)(d) Deductions for Cooperative Interest.

  Case-Laws - AT : Deduction u/s. 80P(2)(d) - interest income earned from other cooperative banks/societies - Principle of mutuality - Taxability of Club House income - The Tribunal analyzed each issue raised by the assessee and provided detailed findings and decisions. It upheld the assessee's contentions regarding the assessment of total income, taxability of club house income, and disallowance of deduction under Section 80P(2)(d), thereby allowing the appeal on these grounds.
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• Tribunal Upholds Deletion of Additions, Citing Clear Fund Chain and Prohibition on Double Taxation.

  Case-Laws - AT : Addition u/s 68 - assessee received unsecured loans from various parties - The AO had held that the unsecured loans received by the assessee were a sham transaction to introduce its own unexplained money into the account. - The Tribunal reviewed the findings of the lower authorities and the submissions of both parties. They noted that the assessee had established a clear chain of funds and provided necessary details, including income offered before the settlement commission. The Tribunal upheld the CIT(A)'s decision, emphasizing that once an amount is taxed, it cannot be taxed again. Therefore, they confirmed the deletion of the additions.
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• Tribunal Confirms Validity of Proceedings but Rejects Income Additions Due to Lack of Corroborative Evidence.

  Case-Laws - AT : Validity of proceedings u/s 153C - The Tribunal upheld the proceedings u/s 153C, agreeing with the CIT(A)'s decision that the material seized during the search had a bearing on the determination of the assessee's total income, thereby justifying the assumption of jurisdiction u/s 153C. - The Tribunal concurred with the CIT(A) that the seized documents and the statements, especially when retracted, could not be solely relied upon to make additions to the assessee's income. It was emphasized that corroborative evidence was necessary to attribute the entries in the seized materials to the assessee. - The Tribunal agreed with the CIT(A)'s deletion of these additions, finding no direct reference to the assessee in the seized materials and considering the statements unreliable without independent corroborative evidence.
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• Income from Software Sublicensing to Indian Affiliates Ruled as Business Income, Not Taxable Without Permanent Establishment.

  Case-Laws - AT : Accrual of income in India - taxability of the “software” supplied to Indian affiliates - The Tribunal's decision effectively overturns the AO's and DRP's stance, particularly concerning the taxability of income from the sublicensing of software. By classifying this income as business income and acknowledging the lack of a PE in India, the Tribunal aligns its decision with the Supreme Court's interpretation, thereby granting relief to the assessee. This judgment underscores the nuanced understanding required in the taxation of international transactions, especially in the rapidly evolving tech sector.
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Customs

• Court Limits Role in Bank Guarantee Dispute; Focus on Contractual Resolution for Business Demerger Issues.

  Case-Laws - HC : Invoking and encashing a bank guarantee - Demerger of business - bank guarantee for fulfillment of the duty amount - The High Court acknowledged the limited jurisdiction under Article 226 of the Constitution of India. It stated that it cannot adjudicate on the terms of the demerger or the inter se liability between the petitioner and respondent no. 2. Furthermore, the court recognized the principle that a bank guarantee constitutes an independent contract between the bank and the party in whose favor it is issued. Consequently, the court determined that issues concerning the invocation of the bank guarantee should be addressed in appropriate proceedings dealing with contractual matters.
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Corporate Law

• Stamp Duty on Increased Share Capital Limited to Articles of Association, Not Procedural Forms, with Cap on Cumulative Duty.

  Case-Laws - SC : Liability of stamp duty on increase in share capital - How stamp duty is to be applied to Articles of Association in cases of increased share capital? - The Supreme Court clarified that Form No. 5, merely serving as a notice to the Registrar, does not fall within the ambit of "instrument" as defined under the Stamp Act. It underscored that only the Articles of Association, which embody the company's regulations, can be stamped, and not the procedural forms associated with it. - The Court decisively interpreted the amendment introducing a maximum stamp duty cap as a one-time measure applicable to the Articles of Association, including any subsequent increases in share capital, provided the cumulative stamp duty did not exceed the prescribed cap.
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• Court Confirms Shares Are "Movable Properties" Under Will; Cancels Unauthorized Allotment for Equal Distribution.

  Case-Laws - HC : Division of shares among the deceased's children - Interpretation of will - To be treated as part of her "movable properties" or not - The High Court upheld the CLB's interpretation that the shares in question fell within the purview of "movable properties" bequeathed by the will. The court observed that despite the absence of explicit mention of the shares, the will's intention to equally distribute all movable and immovable properties among the deceased's children was clear. - The court found the allotment of additional shares in the appellant companies to one of the children (represented by the appellants) to be done without proper authority, violating the provisions of the Companies Act. It deemed the CLB's decision to cancel this allotment as justified.
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• Secured Creditors Can Enforce Rights Under SARFAESI Act Without Court During Liquidation, Says High Court.

  Case-Laws - HC : CIRP - Recovery of outstanding dues - Legitimacy and consequences of a Sale Deed executed by the company in liquidation. - Priority of charges - The High court recognized the secured creditor's (Andhra Bank) rights under the SARFAESI Act to enforce their security interest without judicial intervention. It affirmed that the Sale Deed, although executed during the winding-up proceedings, was a valid exercise of the bank’s rights to recover its dues and was not aimed at defrauding other stakeholders. - The court dismissed allegations of the property being undervalued or sold in bad faith. - The court clarified the Official Liquidator's powers, emphasizing that while the Liquidator plays a crucial role in protecting the company's assets, the SARFAESI Act empowers secured creditors to realize their security interests independently.
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IBC

• Resolution Plan Approval Upheld: Tribunal Validates CoC's Commercial Judgment and Fair Fund Allocation Among Creditors.

  Case-Laws - AT : Approval of Resolution Plan - The Appellate Tribunal upheld the approval of the Resolution Plan, stating that there was no violation of statutory provisions. It emphasized the commercial wisdom of the CoC and noted that the plan fairly allocated funds to different classes of creditors. - The Tribunal clarified that the Adjudicating Authority's order did not require the entire amount of the appellant's claim to be kept in escrow. It interpreted the order as intending to hold only the amount provided in the plan against the admitted claim in escrow, subject to the outcome of an execution petition. - The NCLAT dismissed the appellant's appeal against the approval of the plan.
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• Tribunal Upholds Asset Sale Strategy in Liquidation, Criticizes Non-Cooperative Shareholders for Hindering Process.

  Case-Laws - AT : CIR - Order of Liquidation - Concern regarding auction at a price significantly lower than their fair value - The NCLAT found that the appellant's challenges were not maintainable, noting that there is no provision in the Insolvency and Bankruptcy Code (IBC) that allows a shareholder to sell assets after the initiation of liquidation proceedings. - The Appellate Tribunal clarified that reductions in the reserve price followed the guidelines set forth in the regulations, and the decision to sell the corporate debtor's assets through a slump sale after several unsuccessful auctions was a reasonable approach to maximize value. - The Tribunal criticized the appellant for their non-cooperation during the Corporate Insolvency Resolution Process (CIRP) and the liquidation process. It highlighted that such behavior contributed to the challenges faced in asset realization.
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Service Tax

• High Court Quashes Form SVLDRS-3 and Show Cause Notice Over Procedural Irregularities and Lack of Hearing.

  Case-Laws - HC : Benefit of SVLDRS - Discrepancies in the petitioner's declaration under the scheme, alleging incorrect categorization and pending litigation. - The High Court found that the Designated Committee violated principles of natural justice by directly issuing Form SVLDRS-3 without providing the petitioner an opportunity for a personal hearing, as mandated by the Sabka Vishwas Scheme and its rules. - Given the procedural irregularities and the failure to adhere to the prescribed process, the High Court quashed both the Form SVLDRS-3 and the Show Cause Notice.
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• Service Tax Not Applicable to Healthcare Facilities for Visiting Doctors, Tribunal Rules in Favor of Appellant.

  Case-Laws - AT : Levy of Service tax - providing infrastructure and administrative facilities to the visiting doctors - The appellant argued that the primary purpose of these arrangements was to provide healthcare services, not business support. They emphasized contractual control, patient privity, and past tribunal decisions supporting their position. The Tribunal concurred, finding no evidence to suggest business support services. It also rejected the invocation of the extended period, ruling in favor of the appellant.
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• Tribunal Confirms Eligibility for Service Tax Refund on Export Input Services, Clarifies Timeliness Based on Payment Date.

  Case-Laws - AT : Refund of service tax paid on input services used for export of goods - The Tribunal, in its final analysis, sided with the appellant, confirming their eligibility for the refund. It distinguished this case from previous judgments by focusing on the nature of input services for exported goods and the payment mechanism of service tax under reverse charge basis. - On the limitation period, the Tribunal noted that the crucial date for determining timeliness was the date of service tax payment, not the export date. Since the service tax was paid after July 1, 2007, and the claim was filed within a year from this payment, the Tribunal found the claim timely and thus, eligible for a refund.
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Central Excise

• Electronic Evidence Admissible; Demand Confirmed, Penalties on Directors Set Aside Due to Lack of Involvement.

  Case-Laws - AT : Demand of duty and Levy of penalty - Levy of penalty on Director - Clandestine removal - The demand was based on data printouts retrieved from a third party's computer, which the Appellant contested, citing procedural irregularities. However, the Tribunal found the electronic evidence admissible as it was certified by the Forensic Department. Additionally, the Appellant failed to provide evidence to counter the allegations, leading to the confirmation of the demand. Regarding the imposition of penalties on the directors, the Tribunal noted the lack of personal involvement and shifted the burden of proof to the Appellant. As there was no evidence implicating the directors, the penalties were set aside.
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Case Laws:

• GST

• 2024 (4) TMI 319
  Cancellation of GST registration - documents are vitiated by lack of clarity and non-application of mind - violation of principles of natural justice - HELD THAT:- The show cause notice does not indicate as to which provisions of the applicable GST statutes were not complied with by the petitioner. In those circumstances, as correctly pointed out by the petitioner in reply dated 09.02.2023, it was not possible for the petitioner to show cause in response. The order of cancellation also contains no reasons except for the contradictory statements referring to the reply dated 09.02.2023 and thereafter stating that no reply was submitted. Therefore, the impugned order of cancellation is unsustainable. The impugned order of cancellation is quashed and, as a corollary, the first respondent is directed to restore the registration of the petitioner forthwith. It is made clear that it is open to the respondents to initiate proceedings, including for cancellation of registration, in case of non-compliance, in accordance with law. Petition allowed.

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• 2024 (4) TMI 297
  Maintainability of petition - non-constitution of Tribunal - HELD THAT:- The respondents has submitted that at present the Tribunal has not been constituted and the process towards constitution of the Tribunal is going on, therefore, in these circumstances, this petition may not be kept pending but with appropriate protection available under Section 112(8) of the Rajasthan Goods and Services Tax, 2017, this petition may be disposed off with liberty to the petitioner to file appeal within stipulated period from the date the Tribunal is constituted. Learned counsel for the petitioner agrees to the disposal of the petition on the aforesaid condition. This petition, at this stage, is disposed off with a direction that in case petitioner makes payment as per provisions contained in Sub-section(8) of Section 112 of the Act, further proceedings shall not be drawn for recovery of the balance amount, provided that the petitioner avails statutory remedy of appeal within a period of three months from the date of the constitution of the Tribunal.

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• Income Tax

• 2024 (4) TMI 320
  Deemed dividend u/s. 2(22)(e) - sum/loan received by the assessee from another group company - HELD THAT:- From the understanding of the provisions of the Companies Act, 2013 and the legislative intent of bringing amendment to section 2(22)(e) by the Finance Act, 1987, the beneficial ownership is with KSWPL under whose substantial control, loan from APL is granted to the concern i.e. ASMSPL, assessee. ASMSPL i.e. the assessee cannot influence the decision making of company KSWPL. Similarly, APL cannot influence the decision making process of KSWPL. In both the companies, the controlling interest (substantial interest) is held by KSWPL. It is in fact KSWPL who is in a position to influence the decision making process of the two companies. Therefore, the deeming fiction of section 2(22)(e) can be applied only in the hands of KSWPL who is the beneficial owner of shares in both, the lender and the receiving companies. A loan or advance received by assessee (a concern) is not per se in the nature of income. It is in fact deemed accrual of income u/s. 5(1)(b) of the Act in the hands of the beneficial shareholder and not in the hands of the receiver (concern) who is a non-shareholder. Also, the definition of dividend under the Act is an inclusive definition which was expanded to include even a loan or advance though in the natural and ordinary course, it is not an income. The basic character of dividend is a share in profits of the company, given to its shareholder. Assessee and APL are in no way in a position to compel KSWPL in any way for exercising its voting rights in a particular manner. In fact, in the present case, it is the other way that KSWPL, because of its shareholding, is in a position to compel, both the assessee and APL, by exercising its voting power, to conduct in a particular way. Thus, even by going with the observations and findings in the case of National Travel Services [ 2018 (1) TMI 1159 - SUPREME COURT] the beneficial shareholder in the present case is KSWPL under whose controlling interest and influence, APL has given loan/advance to the assessee. Accordingly, the deeming provisions of section 2(22)(e) under the second limb are attracted on KSWPL. Also, taking into consideration the provisions contained in section 5(1)(b), the income accrues or arises or is deemed to accrue or arise in the hands of KSWPL and not in the hands of the assessee, in the present case. This leads us to bringing legal fiction to a logical conclusion that by invoking second limb of section 2(22)(e) accrual of income and its taxability cannot be held to be in the hands of the assessee i.e. ASMSPL (the concern) before us. We thus, set aside the findings of CIT(A) and delete the addition made by treating the amount of loan and advance as deemed dividend u/s. 2(22)(e) of the Act. Accordingly, ground taken by the assessee is allowed.

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• 2024 (4) TMI 318
  Valuation of the shares offered for subscription - Determination of fair market value - rejection of the Fair Market Value [FMV] evaluation as submitted by the appellant as contemplated u/s 56(2)(viib) read along with Rule 11UA of the Income Tax Rules - Consequent to the rejection of that Report, the AO independently determined the value of each share to be INR 40.40/- and thus quantified the disallowance under Section 56(2)(viib) - principal grievance of the appellant is that even if the AO had deemed it fit to reject the Valuation Report drawn on the basis of Discounted Cash Flow Method [DCF Method], it could not have substituted the means and the method of valuation of its own volition AO has chosen to depart from the DCF Method which was adopted by the assessee and has independently ascertained the face value of the shares by adopting the Net Asset Value Method [NAV Method]. HELD THAT:- The explanation placed in clause (viib) postulates that the FMV of shares shall be the value determined in accordance with the methods as may be prescribed or as may be substantiated by the company to the satisfaction of the AO, whichever be higher. A perusal of Rule 11UA(2) would indicate that the assessee is enabled to determine the FMV of the unquoted equity shares either in accordance with the formula prescribed in clause (a) or on the basis of a report drawn by a merchant banker who may have determined the FMV as per the DCF Method. In our considered opinion, the language of Rule 11UA(2) indubitably places a choice upon the assessee to either follow the route as prescribed in clause (a) or in the alternative to place for the consideration of the AO a Valuation Report drawn by a merchant banker as per the DCF method. However, and as is manifest from a conjoint reading of Section 56(2)(viib) read along with Rule 11UA(2), the option and the choice stands vested solely in the hands of the assessee. While it would be open for the AO, for reasons so recorded, to doubt or reject a valuation that may be submitted for its consideration, the statute clearly does not appear to empower it to independently evaluate the face value of the unquoted equity shares by adopting a valuation method other than the one chosen by the assessee. It is this aspect which was duly acknowledged by the Bombay High Court in Vodafone M-Pesa [ 2018 (3) TMI 530 - BOMBAY HIGH COURT] As decided in Sodexo Facilities Management Services [ 2023 (5) TMI 1317 - ITAT MUMBAI] wherein held AO has not carried out valuation by an independent valuer and merely chosen a part of the valuation report submitted by the assessee. Therefore, we restore back the issue to the AO for referring the matter to a valuation expert by way of the issue of commission and thereafter, determining the FMV of the undertaking of the food division of the assessee. Also decided in Taaq Music Pvt. Ltd . [ 2020 (10) TMI 28 - ITAT BANGALORE] the primary onus to prove the correctness of the valuation Report is on the assessee as he has special knowledge and he is privy to the facts of the company and only he has opted for this method. Hence, he has to satisfy about the correctness of the projections, Discounting factor and Terminal value etc. with the help of Empirical data or industry norm if any and/or Scientific Data, Scientific Method, scientific study and applicable Guidelines regarding DCF Method of Valuation. The order of ld. CIT(A) is accordingly set aside and this issue is remanded to the AO for decision afresh, after due opportunity of hearing to the Assessee Question A and C are answered in the negative and in favor of the appellant assessee. In light of the answers rendered in respect of the aforenoted two questions, the additional questions which are framed would not merit an independent examination. The matter shall in consequence stand remitted to the AO which shall undertake an exercise of valuation afresh in accordance with the DCF method.

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• 2024 (4) TMI 317
  Disallowance of foreign exchange fluctuation loss on sale proceeds held in the EEFC account - ITAT deleted addition as the sale proceeds which were already received by the assessee and the assessee was not under obligation to keep sale proceeds under EEFC account - Revenue submits that the reasoning of the I TAT is improper and that foreign exchange fluctuation should have been ignored when considering profit and loss - HELD THAT:- The issue raised in this appeal stands answered against the Revenue by the decisions of the Hon ble Supreme Court in the case of Commissioner of Income Tax, Delhi Vs Woodward Governor India (P) Ltd [ 2009 (4) TMI 4 - SUPREME COURT] wherein as clearly held that whether the loss suffered by the assessee due to fluctuation of foreign exchange as on the date of the balance sheet is in respect of the purchase and sale of goods (payments have to be made/received) is an item of expenditure u/s 37(1) of the Income Tax Act. Thus no substantial question of law arises in this appeal.

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• 2024 (4) TMI 316
  Addition u/s 40A - Cash expenditure exceeding the threshold of Rs. 20,000/- - Lump sum amount paid to the leader of each group of workers for the purpose of disbursement to the individual workers - Assessee draw a lump sum amount from bank by cheque through his employees i.e., supervisors for payment to be made to labours and supervisors used to make payment to labours and give an account to the assessee in the form of a list containing payments made to each individual labour - HELD THAT:- The payment so made by the supervisors had not exceeded Rs. 20,000/- to any individual labour. As per provision of Section 211 of the Indian Contract Act, agent is bound to conduct the business of his principal according to the direction given by the principal or in the absence of such direction according to the customs which prevail in doing business of the same kind at the place where the agent conducts such business. In the present set of facts the supervisors acted as agent of the assessee in conducting the assessee s business. There is no material or evidence of record to indicate or establish that the supervisors were sub-contractors. The finding recorded by the ITAT that the supervisors were sub-contractors is perverse and contrary to law. Consequently, the said finding is hereby set aside. As found that the supervisors acted as agent of the assessee to disburse the amount to individual labours which in no case exceeded Rs. 20,000/- to any individual labour. Therefore, in view of the circumstances prescribed in the second proviso to Section 40A(3) read with Rule 6DD(l) of the Income Tax Rules, 1962 and the above-referred provisions of the Indian Contract Act, the aforesaid payment cannot fall within the scope of Section 40A(3). Disallowance to the extent of 20% made by the ITAT and to add it in the income of the assessee cannot be sustained and is hereby set aside. Decided in favour of assessee.

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• 2024 (4) TMI 315
  Reopening of assessment u/s 147 - Valid approval/sanction for the order under section 148A (d) granted or not? - information is received that assessee has indulged in the sham scheme just to avail fictitious loss which has resulted in escapement of taxable income of the assessee for the assessment year under consideration as to it was found that assessee had invested in the scheme of mutual fund - The claim of the assessee is that the principal chief Commissioner of income tax should have granted such approval as more than three years have elapsed - HELD THAT:- As submitted that for the identical as the year in case of Siemens financial services private limited [ 2023 (9) TMI 552 - BOMBAY HIGH COURT ] as per order dated 25 August 2023 has held that under section 151 specified authority for the purposes of section 148 and section 148A Shall be , if three years or less than three years have elapsed from the end of the relevant assessment year, principal Commissioner or principal director of Commissioner or director. If more than three years have elapsed from the end of the relevant assessment year, then principal chief Commissioner or the principal director general of chief Commissioner or director general. Admittedly in this case also the approval/sanction for the order under section 148A (d) was obtained from principal Commissioner of income tax (C) 1, Mumbai and not principal chief Commissioner of income tax despite more than three years have left from the end of the relevant assessment year. Accordingly, respectfully following the decision of the honourable Bombay High Court we allow ground number 1 and 2 of the appeal quashing reassessment proceedings. Dividend income and allowability of capital loss - The assessee purchased mutual fund of Rs. 300 lakhs (11,36,316.29 units). The assessee earned dividend on 18/6/2015 of Rs. 5,397,502/ . Further on December 21, 2015, and notice was issued by the mutual fund for declaration of dividend of Rs. 4 per unit. The record date was fixed on 26 December 2015. In both the notices issued by mutual fund clearly state that after payment of dividend, the power unit NAV of the dividend options of the scheme will fall to the extent of the payout and statutory levies (if applicable). Therefore, naturally if anybody is selling after the dividend earned by the unitholder the redemption value will fall. Assessee sold all those mutual funds at redemption amount which resulted into a short-term capital loss. Thus, the assessee acted on a publicly available notice issued by the mutual fund, both the notices are placed before us, it cannot be said that transaction entered into by the assessee is fictitious or sham. With respect to the applicability of provisions of section 94 (7) of the act, the lower authorities have also accepted that the assessee fulfils the condition by which the transaction insecurities cannot be considered for avoidance of tax. Assessee purchased such securities and 17/6/2015 when the record date was 18 June 2015 and securities were sold on 28/3/2016. The lower authorities have denied the exemption of dividend income and allowability of capital loss despite transaction is not falling u/s 94 (7) of the act holding it to be sham and fictitious transaction is devoid of any merit. Accordingly on the merits also, orders of the lower authorities are reversed and ground number 4 7 of the appeal are allowed.

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• 2024 (4) TMI 314
  Deemed dividend u/s 2(22)(e) - As alleged assessee has received a loan from company wherein he is holding 32.83% equity shares - HELD THAT:- Assessee has not withdrawn any loan during the year under consideration and the outstanding balance on each closing day is credit balance during the year. Since there is no debit balance in any closing day of the year under consideration, we deem it fit and proper to delete the additions proposed by the Assessing Officer under Section 2(22)(e) of the Act. Payment to RHPL and SSPDPL, there is no doubt that the assessee hold substantial interest in RHPL and SSPDPL and also hold a substantial shares in MMLPL and also MMLPL has accumulated profits during the close of the assessment year - The provisions of Section 2(22)(e) of the Act is attracted if any advances or loan given directly to the shareholder or to a concern in which the shareholder is having a substantial interest or any payment by such company in which assessee is having a substantial interest on behalf of or for the individual benefit of any such shareholder. From the above definition we infer that the payment made to the concern in which the assessee is having a substantial interest and in turn above such concerns makes a payment to the assessee direct / indirect benefit of the assessee the provisions of Section 2(22)(e) of the Act are attracted. In the given case, the assessee has demonstrated that no doubt the concern in which assessee is having substantial interest has received certain funds from the company and it was utilized by them for their own business purposes and none of the funds received by those companies in which the assessee is having substantial interest has made any payments directly or indirectly to the benefit of the assessee. Therefore, the payment received by RHPL and SSPDPL are utilized by them for the purpose of their own business. Therefore, provisions of Section 2(22)(e) of the Act cannot be invoked in this case. Accordingly, Ground No.2 raised by the assessee is allowed.

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• 2024 (4) TMI 313
  Deduction u/s. 80P(2)(d) - interest income earned from other cooperative banks/societies - HELD THAT:- As relying on KSHATRIY GADKARI MARATHA COOPERATIVE CREDIT SOCIETY LTD [ 2019 (4) TMI 1932 - ITAT MUMBAI ] and KALIANDAS UDYOG BHAVAN PREMISES CO-OP SOCIETY LTD. [ 2018 (4) TMI 1678 - ITAT MUMBAI ] we hold that the assessee a cooperative society is eligible for deduction u/s. 80P(2)(d) of the Act in respect of the interest income earned by the assessee from either any other cooperative society or from a cooperative bank. Principle of mutuality - Club House income and expenditure - We need to recognize that the society is housing society and the club house services are offered only to the members of the society and we observe that AO has recognized only the receipt from the members as income and not allowed any related expenses. We are aware that housing co-op societies are running under mutuality concept. Therefore, the stand of the authorities are not proper. We direct the Assessing Officer to allow the expenses against the income under the mutuality concept. Accordingly, Grounds raised by the assessee are allowed.

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• 2024 (4) TMI 312
  Unexplained cash credit - Addition u/s 68 - assessee received unsecured loans from various parties - CIT(A) deleted addition - HELD THAT:- Assessee established complete chain of flow of funds by way of elaborate written submissions during the course of appellate proceedings. The relevant ledgers were also furnished. Assessee has received unsecured loans from 3 entities. The source of the same was commission received from Kawarlal sons and M/s D.K. Enterprises which are group concerns of the assessee. These two concerns have surrendered income before Hon ble ITSC and therefore, the impugned additions have been taxed at source itself. The assessee has established clear chain of funds to substantiate this fact. The assessee has also filed necessary details including income offered before settlement commission in the name of group companies and further clarified that group Companies had paid commission to above entities of Umed Mehta. Considering all these facts, CIT(A) held that impugned credits stood subjected to tax and covered by Settlement application. Except for mere allegations, the remand report is unable to controvert all these findings. In such a situation, we see no reason to interfere in the impugned order. Decided against revenue.

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• 2024 (4) TMI 311
  Validity of proceedings u/s 153C - statement recorded u/s 132(4) and the material seized at third party premises - Addition of undisclosed amount - CIT(A) deleted addition - HELD THAT:- The seized material was in the nature of dumb document which did not contain complete and unambiguous information to arrive at a conclusion that the assessee was in receipt of the payments found noted therein against the name HM . There was no corroborative evidence to support and supplement the details in the seized material to conclusively establish that the name HM found in the seized material refers to the assessee only. There was no corroborative evidence to prove that the payments noted in the seized material have actually materialized and transfer of money had actually taken place between the concerned parties. In view of all these reasons, the addition of alleged receipts by the assessee from M/s SRS Mining has rightly been deleted by Ld. CIT(A). We endorse the view of Ld. CIT(A), in this regard. Addition of alleged receipts from assessee to SRS Mining and distribution thereof to various constituencies - As observed that the impugned addition has been made based on the entries found in the loose sheets seized from the office premises of M/s SRS Mining coupled with statement of Shri K. Srinivasulu u/s 132(4) (from whose possession the material was seized) with regard to the contents of the said seized material, entries found in the loose sheets seized from the residential premises of accountant of M/s. SRS Mining and the statement of Shri. T. Shanmugasundaram u/s 132(4) dated 09.12.2016 with regard to the contents of the said seized material. Name of the assessee did not appear in any of the relevant loose sheets taken into consideration by the AO while drawing such an inference. It was also noted that the acronym HM appears as scribbling at the top of the loose sheets only whereas the said acronym HM was not found noted in any of the remaining loose sheets as referred to by Ld. AO. Though the name of the assessee was not found noted in any of the relevant seized loose sheets and the acronym HM was found noted only on top of two sheets, Ld. AO held that entire entries in the said seized loose sheets reflected the transactions of the assessee merely by relying on the statement of Shri K. Srinivasulu. Statement of Shri. K. Srinivasulu (from whose possession the material was seized) recorded u/s 132(4) is concerned, he merely stated that HM found in the seized notebook denotes Housing Minister . However, Shri K. Srinivasulu did not explain or elaborate in the said statement regarding what the acronym HM stands for. Further, this statement was a retracted statement. Considering the observation of Shri P. Rama Mohan Rao [ 2018 (12) TMI 1990 - MADRAS HIGH COURT] his statement, on standalone basis, would have no evidentiary value. The Hon ble Court held that if Ld. AO was to rely on this statement, he was to let in other reliable evidence to corroborate the same. Similar were the directions of Hon ble Court in the case of M/s SRS mining [ 2022 (8) TMI 968 - MADRAS HIGH COURT] Therefore, the statement of Shri K. Srinivasulu could not be used against the assessee unless some other evidence to corroborate the same was made available on record. Another fact is that the material has been seized from a third-party and the presumption of Sec.132(4A) r.w.s. 292C would arise qua the searched person or qua the person who was found in the possession or control of such documents. Such a presumption was not applicable to a person other than the searched persons as held in the case of MISS LATA MANGESHKAR. [ 1973 (6) TMI 13 - BOMBAY HIGH COURT] and various other decisions including the decision of Gaurangbhai Pramodchandra Upadhyay [ 2020 (3) TMI 882 - GUJARAT HIGH COURT] as well as the decision of Vinit Ranawat [ 2015 (6) TMI 608 - ITAT PUNE] In a recent decision titled as CIT vs. Sunil Kumar Sharma [ 2024 (2) TMI 116 - KARNATAKA HIGH COURT] held that a sheet of paper containing typed entries and in loose form, not shown to form part of the books of accounts regularly maintained by the assessee or his business entities, do not constitute material evidence. Supreme Court in the case of CBI vs. V.C. Shukla [ 1998 (3) TMI 675 - SUPREME COURT] held that it is that independent corroborative evidence is required in respect of entries in regular books of accounts and the same would apply in the present case. The adjudication of Ld. CIT(A), on legal grounds as well as on merits, would not require any interference on our part. Appeals of the revenue as well as the cross-objections of the assessee, for all the three years, stands dismissed.

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• 2024 (4) TMI 310
  Accrual of income in India - taxability of the software supplied to Indian affiliates - AO treated the amount as taxable u/s 56(1) of the Income Tax Act 1961 r.w.Article 23(3) of the India-USA DTAA - HELD THAT:- Having gone through the material on record, directions of the two members of the ld. DRP affirming the action of the Assessing Officer in the draft Assessment Order, the directions of the other member of the ld. DRP directing that no taxability arises, keeping in view the order of the coordinate bench of the an Tribunal in the assessee s own case [ 2023 (8) TMI 875 - ITAT DELHI] and keeping in view the judgment of Hon ble Apex Court in in the case of M/s Engineering Analysis Centre of Excellence (p) Ltd [ 2021 (3) TMI 138 - SUPREME COURT] we hold that the amount received on account of sublicensing of standardized software is not liable to tax. Appeal of the assessee is allowed.

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• Customs

• 2024 (4) TMI 309
  Writ Petition - Invoking and encashing a bank guarantee - Demerger of business - bank guarantee for fulfillment of the duty amount - whether there is any obligation/liability of the petitioner to extend the Bank Guarantee which was furnished by the petitioner in regard to the imports - HELD THAT:- In our opinion, the jurisdiction of this Court under Article 226 of the Constitution is limited. We cannot delve on any issue in regard to the terms and conditions of the demerger and the inter se liability between the petitioner and respondent no. 2-KLL on the demerged business, including on the issues of the inter se liability on the imports in question, for which the bank guarantee was furnished. Equally there cannot be an exercise of jurisdiction to injunct the invocation of the bank guarantee, as it is a settled principle of law that the bank guarantee constitutes an independent contract between the bank and the party in whose favour the bank guarantee is furnished. An injunction restraining the invocation of the bank guarantee can be granted in appropriate proceedings dealing with such contractual issues. Such reliefs can be granted applying the well-settled principles which need to weigh with the Court in injuncting the invocation of a bank guarantee. Certainly in the present facts, it is difficult for a writ court to consider the issues on invocation of bank guarantee and to record a finding of fact in that regard inter se between the petitioner and KLL. Be that as it may, insofar the present proceedings are concerned, it appears that the adjudication proceedings now stands remanded to the Original Authority/ Assistant Commissioner, who is seized of the matter in pursuance of the order passed by the Appellate Authority, and who is now called upon to decide on the remanded issues including on the issue of the party required to furnish the bank guarantee. In such circumstances, in our opinion, it would be appropriate that in this regard we keep open all contentions of the parties, to be urged before the Assistant Commissioner/Original Authority, before whom the proceedings are pending including on the issue of extension of bank guarantee either by the petitioner or respondent no. 2-KLL. We may also observe that unless the Assistant Commissioner so decides, the bank guarantee needs to be renewed for a reasonable time. Thus, we dispose of this petition by the following order: Let the bank guarantee in question be extended by the petitioner for a period of one month from today. Petition stands disposed of in the aforesaid terms.

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• Corporate Laws

• 2024 (4) TMI 308
  Liability of stamp duty on increase in share capital - How stamp duty is to be applied to Articles of Association in cases of increased share capital? - HELD THAT:- Filing of Form No. 5 is only a method prescribed, whereby notice of increase in share capital or of members of a company has to be sent to the Registrar, within 30 days of passing of such resolution. The Registrar then has to record such increase in share capital or members, and carry out the necessary alterations in the articles. Stamp Duty is affixed on Form No. 5 as a matter of practical convenience because a company itself cannot carry out the alterations and record the increase in share capital in its Articles of Association. It is only the articles which are an instrument within the meaning of Section 2(l) of the Stamp Act and accordingly have been mentioned in Article 10 of Schedule-I of the Stamp Act. It is a settled position of law that in case of conflict between two laws, the general law must give way to the special law. A conjoined reading of the Stamp Act and the Companies Act would show that while the former governs the payment of stamp duty for all manner of instruments, the latter deals with all aspects relating to companies and other similar associations - In the case at hand, we are concerned with an instrument which is chargeable to Stamp Duty and finds its origin in the Companies Act. The various provisions of the Companies Act provide the purpose and scope of the instrument. Thus, it has to be said that the Companies Act is the special law and the Stamp Act is the general law with regards to Articles of Association, and the special will override the general. Whether the maximum cap on stamp duty is applicable every time there is an increase in the share capital or it is a one-time measure? - HELD THAT:- It is an admitted fact that when the respondent increased its share capital from Rs. 36 crores to Rs. 600 crores it paid a stamp duty of Rs. 1,12,80,000/- and at that time there was no provision for a maximum cap or upper ceiling on the amount payable - The fact that the maximum cap of Rs. 25 lakhs would be applicable as a one-time measure and not on each subsequent increase in the share capital of a company is fortified directly by the Maharashtra Stamp (Amendment) Act, 2015 which amended the charging section for Articles of Association i.e., Article 10 of the Stamp Act. It is true that the amendment does not have retrospective effect, however since the instrument Articles of Association remains the same and the increase was initiated by the respondent after the cap was introduced, the duty already paid on the same very instrument will have to be considered. It is not a fresh instrument which has been brought to be stamped, but only the increase in share capital in the original document, which has been specifically made chargeable by the Legislation. The appellants are directed to refund Rs. 25 lakhs paid by the respondent along with interest @ 6% per annum. Let the needful be done within 6 weeks from today - order of the High Court of Bombay upheld - civil appeal dismissed.

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• 2024 (4) TMI 307
  Division of shares among the deceased s children - Interpretation of will - To be treated as part of her movable properties or not - equal division of the 100 shares of the appellant company-Vantage Construction (P) Limited, between the three children of the testator - cancellation of allotment of 9800 shares - HELD THAT:- What is apparent is that the issue with regard to the shareholding of the deceased was very much alive and in the knowledge of the parties. The whole tone and tenor of the correspondence between the parties referred hereinabove would show that HPSC was always ready and willing to transfer 1/3rd shareholding in the two companies, provided both NPSC and NCD were to agree to compensate him for so called cumulative losses, which incidentally were never spelled out. Therefore, there is merit in the submission by the learned counsel for the respondents that after the death of HPSC on 03.04.2014, the legal heirs/successors of deceased HSPC are attempting to set up a new case, which was never espoused by the deceased - late HPSC. HPSC never challenged the entitlement of the respondents as regards 1/3rd shareholding in the company with regard to the shares left behind by the deceased Smt. Ram Piari Chawla - the finding given by the CLB that the shareholding to the extent of 100 shares in Vantage Construction Private Limited and 5 shares in Earl Chawla Company Private Limited were in the nature of movable properties encompassed in the Will dated 04.07.1986, appears to be without any blemish and the same cannot be faulted on any ground whatsoever. It is a finding based purely on the prevailing facts and on a fair and reasonable interpretation of the Will. Decision of the CLB to cancel the allotment of 9800 shares in the appellant No. 1 company in favour of appellant No. 2/HPSC represented through legal heirs - HELD THAT:- It is pertinent to mention that the aspect of allotment of 9800 shares in the name of HSPC from 10.10.2002 was not indicated in the letter dated 22.11.2008 and it only came to be revealed in the subsequent letter dated 01.12.2008. There was a clear attempt on the part of late HPSC in dragging his feet on the matter by calling upon the respondents to submit certain documents vide letter dated 15.12.2009, despite being the real brother of the respondents and having common knowledge of the entire factual background. It is also borne out from the record that the register of shareholding was fabricated so as to show 100 shares of his deceased mother in the name of his own daughter and as his mother had died on 27.10.1990. There is brought not an iota of evidence that any other person was brought in as the second director for mandatory compliance with the provisions of the Act and in the said circumstances the decision by the CLB thereby raising an inference that HPSC allotted 9800 shares to himself without holding any valid meeting as required by law and thereby making such increase behind the back of NPSC and NCD, required to be invalidated. This Court finds that the impugned judgment dated 24.06.2013 passed by the CLB does not suffer from any patent illegality, perversity or incorrect approach in law. Accordingly, the present appeal is dismissed.

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• 2024 (4) TMI 306
  Recovery of outstanding dues - priority of charges - whether Andhra Bank, which had the first charge over the property in question and is evidently a secured creditor, could have effected a sale of the property in question by way of a private treaty? - Legitimacy and consequences of a Sale Deed executed by the company in liquidation. - HELD THAT:- This Court has gone through the relevant provisions of the SARFAESI Act, 2002 as also the Companies Act of 1956. There is no gain saying that the company (in liquidation) was a borrower in terms of Section 2(f) of the SARFAESI Act and the debt was taken and in existence against the property in question, which was recoverable by the Bank. Further, the property in question was a financial asset of the Bank in terms of Section 2(l) and there also arose a default in so far that there was apparently non-payment of the debt taken by the borrower in terms of Section 2(j) of the SARFAESI Act. Where a secured asset is an immovable property, sale by any method other than public auction or public tender may be effected on such terms as may be settled between the secured creditor and the proposed purchaser in writing. Although, in terms of sub-Section (2) to Section 13 of the SARFAESI Act, there was no specific declaration as to the account of the company in liquidation having become a Non-Performing Asset, such recourse was definitely on the cards. This court finds substance in the plea advanced by the learned counsel for Andhra Bank, that by virtue of the order dated 03.12.2012 passed by the CLB, whereby liberty was granted to the Bank to take action against the mortgaged property as per law, the sale of the property in question by way of a private treaty with the borrower and the purchaser was squarely included and envisaged. Whether the sale of the property in question on 30.01.2013 should be validated by this Court? - HELD THAT:- Unhesitatingly from the trail of correspondence viz., the letters/emails dated 20.12.2012, 22.12.2012, 27.12.2012, 28.12.20212 that preceded between the principal borrower i.e. the company (in liquidation) through Ms. Manju Kanwar and Andhra Bank before the sale was effected, does go to show that all efforts were being made to set the company (in liquidation) on course to recovery and revive it, and further to ensure that its account with the Bank does not become an NPA. If the said letters dated 20.12.2012, 22.12.2012, 27.12.2012 and 28.12.20212, emanating from the company (in liquidation) are to be believed, the company was going through a poor commercial phase due to a world-wide recession which greatly impacted Europe and United Kingdom in particular. This Court finds that the reliefs claimed in Company Application No. 340/2016 moved on behalf of the Official Liquidator are not sustainable. There are no justifiable reasons to invalidate the sale deed, for the simple reason that the sale had been effected by Andhra Bank under its aegis through the principal borrower/debtor, under its overall supervision and control and the entire sale consideration was duly received and accounted for. There is not an iota of material placed on the record to suggest that any part of the sale consideration was siphoned off or misappropriated by anyone connected with the company (in liquidation). Application dismissed.

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• Insolvency & Bankruptcy

• 2024 (4) TMI 321
  Approval of the Resolution Plan - HELD THAT:- The Resolution Plan submitted by Respondent No.3, has been approved by the CoC with 100% vote share. The Hon ble Supreme Court in K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK OTHERS [ 2019 (2) TMI 1043 - SUPREME COURT ] and COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT ] has held that the Adjudicating Authority and the Appellate Tribunal are not to sit in appeal over the commercial wisdom of the CoC, which is paramount and non-justiciable and under the scheme of the Code, every dissatisfaction does not partake the character of a legal grievance. It is settled proposition that approval of the Resolution Plan can be interfered with, only when the Resolution Plan violates any of the provisions of Section 30, sub-section (2) of the Code. It is relevant to notice that at the time when this utilities/ equipment/ installations were made the Corporate Debtor was subsidiary of the Appellant, the holding Company. Shared utilities and equipment installed outside the lease land area were permitted to be utilized and used both by the Corporate Debtor for running the Hotel as well as by the Appellant for the purpose of its residential block and commercial establishment. The Corporate Debtor being no longer subsidiary of the Appellant, which has now been taken over by the SRA, there has to be an arrangement between land owner, i.e., the Appellant and SRA for continuing use and access to the shared utilities and equipment. It is also relevant to notice that the SRA has taken the Hotel of Corporate Debtor as a running concern and for the purposes of running the Hotel, it requires use of shared utilities and services as it was being done prior to initiation of CIRP - there are no error in granting of reliefs and concessions. The Resolution Plan having been approved by 100% vote share of the CoC and no grounds having been made out to interfere with the approval of the Resolution Plan within the meaning of Section 30, sub-section (2) to establish that Resolution Plan violates any provision of Section 30 subsection (20 of the Code, there are no reason to interfere with the impugned order approving the Resolution Plan - However, approval of Resolution Plan and grant of reliefs and concessions under paragraph-9 (7) as extracted above, does not fetter the right of the parties to enter into an arrangement with regard to shared utilities and equipment, which are located outside the lease hold land of the Corporate Debtor and further, the approval of Resolution Plan and grant of above reliefs and concessions does not fetter the rights of the parties to establish their rights and obligations in a competent Court. The impugned order dated 04.01.2024 passed by the Adjudicating Authority upheld - appeal disposed off.

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• 2024 (4) TMI 305
  Approval of Resolution Plan - what is the import of order dated 30.11.2023, whether the entire amount of claim of Rs.132,89,52,568/- was to be kept in escrow account or only the amount provided in the plan against the admitted claim has to be kept in the escrow account? - HELD THAT:- On looking into Para 41 and 42 of the order, it is clear that what was intended by the Adjudicating Authority was that value provided against the claim in the plan should be held in escrow account subject to decision in the execution petition. Resolution Plan has provided amount of Rs.1 Lakh against the claim of the Appellant and the Successful Resolution Applicant proposed to pay said amount to the Appellant. The submission of the Appellant that order meant that entire amount of Rs.132 crores be kept in escrow account cannot be accepted. The order dated 30.11.2023 cannot be read to mean that amount of Rs.132,82,52,568/- has to be kept in escrow account. Hon ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT] has held that allocation of plan value to different category of creditors can be different. It was held that Operational Creditor has to be given priority of payment above all Financial Creditors. It is also relevant to notice that commercial wisdom of the CoC in approving Resolution Plan has to be given paramount importance and NCLT and this Appellate Tribunal can interfere in the order approving the Resolution Plan only when there is violation of statutory provisions of Section 30(2) of the Code. Present is not a case where violation of any statutory provision under Section 30(2) of the Code has been alleged by the Appellant. Appellant s claim was accepted as Other Creditor and in the allocation of amount of Rs.1 Lakh against the claim of the Appellant it is not shown that there is any violation of any statutory provision. There are no ground to interfere with the order passed by the Adjudicating Authority approving the Resolution Plan - there are no error in the order impugned - appeal dismissed.

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• 2024 (4) TMI 304
  CIR - Order of Liquidation - The appellant raised concerns about the liquidation process, arguing that prime assets of the corporate debtor were auctioned at a price significantly lower than their fair value - Whether there are any violations in the liquidation process as per Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 and consequently whether application filed by the Appellant are maintainable? - HELD THAT:- The Respondent / Liquidator obtained the approval of SCC meeting on 20.10.2022 for conducting E-auction on Slump Sale basis wherein certain assets like shares of Barnawa Agro Industries, vehicles, scrap etc. were excluded. The reserved price was fixed as per the valuation reports. It is on record that the Appellant was also present in the 6th SCC meeting as a special invitee. The changes in the prices over different auctions are noted in table in paragraph 28. Appellant has missed out on the provisions that Schedule I of Liquidation Regulations only lays down the manner of sale. If the mechanism of sale as specified in Regulation 32 is changed, the Schedule I will have to be followed afresh after every such change. Nowhere, therefore, it is found that the reductions are violative of the Liquidation Regulations. In the 10th e-auction dated 10.08.2023, the reserve price was Rs.16.41 crores and the realizable value was 29.41 crores, which was beyond the reserve price. It is also noted that Rs.29.41 crores was realized without the assets such as the shares in subsidiary of Barnawa Agro Industries Ltd., vehicles, scrap etc. which were not part of the sale. It is also noticed that Rs.29.41 crores will not only cover the claim of the Financial Creditors but substantial amounts will also accrue to the shareholders - The argument of the Appellant that presuming that the Respondent had continued with the same mode of sale and reduction of only 10% happened every time, even by that means, by the time of 9th auction the price would have been somewhere around 24 crores. And in the current auction done by the Liquidator realized value at Rs. 29.41 crores, without including some assets, is more than Rs.24 crores. Therefore, there are no merit in the allegations of the Appellant. There are no violation of the Regulations 32, 32-A, 33, 34 36 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. From the facts of the case, it can be noted that the Appellant / Exmanagement were not cooperating the Liquidator and providing full details of the assets of the Corporate Debtor. Liquidator has rightly proceeded ahead and no reasons found to question the liquidation proceedings in this ground - there are no justification in the argument of the Appellant that the Liquidator has not followed the Liquidation Regulations. The non-cooperation of the ex-management is clearly noted by the Adjudicating Authority in its order dated 28.02.2019. In the facts of the case, it is clearly made out that there appears to be no violation in the liquidation process as provided in various regulations of the Liquidation Process Regulations. In fact, the CIRP process could not proceed because of the non-cooperation of the ex-management. This ultimately led to the liquidation of the Corporate Debtor. Even during liquidation process, there was non-cooperation. Appeal dismissed.

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• Service Tax

• 2024 (4) TMI 303
  Sabka Vishwas Scheme (Legacy Dispute Resolution) Scheme 2019 - Discharge Certificate in form SVLDRS-4 was issued to the Petitioner - jurisdiction to issue the said SCN seeking payment of further duty - HELD THAT:- As per the provisions of Section 129 of the Sabka Vishwas Scheme, the Discharge Certificate issued to the Petitioner in Form SVLDRS-4 was conclusive in respect of the matter and time period contained therein i.e. from April, 2017 to June, 2017. Once the said Discharge Certificate in Form SVLDRS-4 was issued, the Petitioner was not liable to pay any further dues, interest or penalty with respect to the said period. Further, an assessment in respect of the matter and time period covered by the said Discharge Certificate could not be re-opened in any other proceedings under the Indirect Tax Enactment. In these circumstances, once the said Discharge Certificate in form SVLDRS-4 was issued to the Petitioner, Respondent No. 3 had no power or jurisdiction to issue the said Show Cause Notice dated 25th September, 2020, seeking payment of further duty or to pass the said Order-in-Original dated 30th November, 2021. The said Show Cause Notice has been issued, and the said Order has been passed, totally without jurisdiction. The said Show Cause Notice dated 25th September, 2020 and the said Order-in-Original dated 30th November, 2021 have been issued and passed totally contrary to the provisions of the Sabka Vishwas Scheme and totally without jurisdiction. For these reasons, they are required to be quashed and set aside. Petition allowed.

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• 2024 (4) TMI 302
  Benefit of SVLDRS - Discrepancies in the petitioner s declaration under the scheme, alleging incorrect categorization and pending litigation. - It is the case of the Petitioner that it had discharged the service tax liability much before the cut off date and that there was no investigation / audit / enquiry pending against the Petitioner before the Respondents - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - HELD THAT:- In the present case, it is obvious that there is a dispute between the Petitioner and the Respondents in respect of service tax amount payable by the Petitioner. According to the Petitioner, it has paid the said amount of Rs. 23,17,088/-. Whilst, according to the Respondents, the said amount had to be paid by the Petitioner as stated in Form SVLDRS-3 issued by the Respondents as well as in Show Cause Notice dated 30th December, 2020 issued by Respondent No. 3. As per the provisions of Section 127 of the Sabka Vishwas Scheme and Rule 6 of the Sabka Vishwas Rules, the Designated Committee was required to issue Form SVLDRS-2 indicating the amount which, according to the Designated Committee, was payable by the Petitioner, and give an opportunity of personal hearing to the Petitioner. If such a Form SVLDRS-2 had been issued by the Designated Committee, then the Petitioner would have got an opportunity of personal hearing and of making written submissions by filing Form SVLDRS-2A. However, in the present case, without issuing Form SVLDRS-2, the Designated Committee has straight away issued SVLDRS-3, thereby depriving the Petitioner of an opportunity of personal hearing. This action of the Designated Committee, of straight away issuing Form SVLDRS-3 without issuing Form SVLDRS-2, is not only in violation of Section 127 of the Sabka Vishwas Scheme and Rule 6 of the Sabka Vishwas Rules but is also in total violation of the principles of natural justice. Thus, before issuing Form SVLDRS-2, Respondent No. 3 could not have issued the said Show Cause Notice dated 30th December 2020. Form SVLDRS-3 and Show Cause Notice dated 30th December 2020 are required to be quashed and set aside and the matter is required to be remanded to the Designated Committee for taking a fresh decision in the matter after giving an opportunity of personal hearing to the Petitioner - Form SVLDRS-3 and SCN is hereby quashed and set aside - Matter is remanded back to the Designated Committee and it is directed to issue Form SVLDRS-2 to the Petitioner and, after giving an opportunity of personal hearing to the Petitioner, to pass a reasoned order within a period of six weeks from the date of intimation of this Order. Petition disposed off by way of remand.

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• 2024 (4) TMI 301
  Evasion of service tax - SCN issued only on the basis of Audit report - violation of principles of natural justice - difference between the value declared in ST-3 return and Income Tax Audit Report - HDLD THAT:- It is found that though the independent inquiry was conducted but ultimately the demand is based on Income Tax Documents. It is also found that no specific category of service was referred which is the primary aspects for confirmation the Service Tax demand. The appellant have submitted various documents but the Adjudicating authority despite that observed that no documents have been submitted. It is the appellant s submission that they have given the proper reconciliation and explanation regarding difference between ST-3 return and Income tax Audit report. The same has also not been considered properly by the Adjudicating Authority - there is a clear violation of principles of Natural justice on the part of the Adjudicating Authority. Therefore, the order cannot be sustained. The appeal is allowed by way of remand to the Adjudicating authority for passing a fresh order after considering all the submission, documents and explanation given by the appellant.

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• 2024 (4) TMI 300
  Levy of Service tax - Business Support Services - providing infrastructure and administrative facilities to the visiting doctors - Invocation of Extended period of Limitation - HELD THAT:- As per the terms and conditions stipulated in the agreements between the appellant and the visiting doctors, such visiting doctors are being paid in proportionate to the actual work done by them, subject to the minimum fee assurance provided by the appellant. Further, it is the appellant s hospital that allocates a specific visiting doctor to the patients and patient s medical records are maintained and retained by the appellant s hospital. Also, the bills for treatment are raised by the appellant s hospital and not by the visiting doctors and the payments thereof are also collected by the appellant s hospital. Further, the visiting doctors are not allowed to undertake their independent practice/profession by availing the appellant hospital s infrastructure. Even in the show cause notice, it is mentioned that consultants/doctors are required to work for the hospital which clearly indicates that the doctors are working with the appellant s hospital and it is the visiting doctors who, in fact, are service providers to the appellant s hospital as the appellant s hospital is availing the services of such visiting doctors, for which they are paid by the said hospital as per the agreement and not the vice versa. Further, the appellant s hospital, being a service recipient, is deducting TDS in terms of Section 194 of the Income Tax Act, 1961 from the remuneration paid to the visiting doctors. This issue is no more res integra and has been settled in favour of the assessee by various decisions. In the case of M/S SIR GANGA RAM HOSPITAL, BOMBAY HOSPITAL MEDICAL RESEARCH CENTRE, APPOLLO HOSPITALS, M/S MAX HEALTH CARE INSTITUTE LTD VERSUS CCE DELHI-I, CCE ST INDORE, CCE ST RAIPUR, CST NEW DELHI AND CST DELHI VERSUS M/S INDRAPRASTHA MEDICAL CORPORATION LTD [ 2017 (12) TMI 509 - CESTAT NEW DELHI] , it was observed by the Tribunal that Applying the above ratio and examining the scope of the tax entry for BSS, we are of the considered view that there is no taxable activity identifiable in the present arrangement for tax liability of the appellant hospitals. The decision of Sir Ganga Hospital s case was followed in the case of CCE ST, PANCHKULA, DELHI-IV VERSUS ALCHEMIST HOSPITAL LIMITED, ARTEMIS MEDICARE SERVICES LIMITED (VICE-VERSA) [ 2019 (3) TMI 1331 - CESTAT CHANDIGARH] and it was held by the Tribunal that respondent-assessee were not provided any Business Support Service to the consultants/doctors or patient, therefore, no service tax is payable by respondent-assessee under the category of Business Support Service and in the result, the appeal filed by the Revenue was dismissed and the appeal filed by the assessee was allowed. Extended period of Limitation - HELD THAT:- In the present case, there is no suppression on the part of the appellant to invoke the extended period of limitation and the Revenue has failed to establish ingredients of fraud, collusion, wilful mis-statement or suppression of facts or contravention of any of the provisions of the Act or Rules with an intent to evade the payment of tax as provided in Section 11A(4) of the Central Excise Act, 1944 as applicable to the service tax also. The impugned order is not sustainable in law and is set aside - appeal allowed.

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• 2024 (4) TMI 299
  Refund of service tax paid on input services used for export of goods - rejection of refund claim observing that the exports have happened prior to 06.10.2007 (the date of notification) and therefore the appellant is not eligible for refund - period from 01.10.2007 to 02.04.2008 - N/N. 41/2007 dated 06.10.2007 - HELD THAT:- When the Department has not filed any appeal, it is indeed acceptance of the order of the Tribunal. The Department then cannot deviate such acceptance on the basis of merits or monetary grounds. The refund has to be sanctioned to the appellant. The ligation policy put forward in every Budget is to reduce the litigation and to lessen the burden of public exchequer on litigations. This being the intention of the litigation policy, the department has readjudicated the matter and again put further rounds of litigations. These situations should not be allowed to recur or continue. It appears that the adjudicating authority has not understood para-2 of the CBEC instructions dt. 12.12.2013 issued in regard to litigation policy. It does not mean that the decision of the Tribunal can be flouted or refused to be given effect to. When not appealed by either side, the order passed by Tribunal is final. The department cannot sit in appeal on an order passed by the Tribunal. The Hon ble Apex Court in the case of UNION OF INDIA VERSUS KAMLAKSHI FINANCE CORPORATION LTD. [ 1991 (9) TMI 72 - SUPREME COURT] held that The position now, therefore, is that, if any order passed by an Assistant Collector or Collector is adverse to the interests of the Revenue, the immediately higher administrative authority has the power to have the matter satisfactorily resolved by taking up the issue to the Appellate Collector or the Appellate Tribunal as the case may be. In the light of these amended provisions, there can be no justification for any Assistant Collector or Collector refusing to follow the order of the Appellate Collector or the Appellate Tribunal, as the case may be, even where he may have some reservations on its correctness. The Hon ble Rajasthan High Court in the case of BHARAT SANCHAR NIGAM LTD. VERSUS HE PRINCIPAL COMMISSIONER, CENTRAL GOODS AND SERVICE TAX COMMISSIONERATE COMMISSIONERATE-JAIPUR, ASSISTANT COMMISSIONER, CENTRAL GOODS AND SERVICE TAX COMMISSIONERATE CENTRAL EXCISE BUILDING, SECRETARY, MINISTRY OF FINANCE-DEPARTMENT OF REVENUE-GOVERNMENT OF INDIA [ 2022 (3) TMI 330 - RAJASTHAN HIGH COURT] held that when the entire order in original is set aside by Tribunal, the department cannot give limited effect to Tribunal s order restricting it to one demand only. The impugned order is set aside - appeal allowed.

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• Central Excise

• 2024 (4) TMI 298
  Clandestine removal - admissibility of electronic evidence - burden/onus to prove - suppression of facts or not - Demand of duty and Levy of penalty u/r 26 of the Central Excise Rules, 2002 - Levy of penalty on Director - HELD THAT:- When Appellant is charged with production of specific quantity and payment of royalty against the said quantity, the burden of proof shifts to it under Section 106 of the Indian Evidence Act and in such circumstances of the case when Hon ble Supreme Court in the judgment noted in Order-in-Original in the case of COLLECTOR OF CUSTOMS, MADRAS AND OTHERS VERSUS D. BHOORMULL [ 1974 (4) TMI 33 - SUPREME COURT] has clearly stated that law does not requires the prosecution to proof the impossible but it is required to establish such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue and had hinted at Section 106 of the Indian Evidence Act in an indirect way, as could be noticed from the submissions of Learned Authorised Representative, the Revenue has clearly established a case of clandestine removal against the Appellant and following decision of this Tribunal at Allahabad passed in the same M/s. Kamdhenu Ispat Ltd. matter in respect of another Franchise named Advance Impex Pvt. Ltd., the liability in the nature of duty, interest and penalty on the Appellant Company, as being confirmed by the learned Commissioner, is confirmed. Having regard to the fact that personal involvement of the present as well as previous Director is not made out from the materials available on the record and the present Director is In-charge of the company, which is having another Excise registration number, against whom no proceeding for the shortage of raw material discovered in 2011 has been initiated and there is specific observation by the Commissioner that the previous Director was responsible only for day to day activity of the Appellant Company, the findings in confirming penalty on both Samir Bhagat and Raman Gupta not confirmed. The appeal of Appellant Company is dismissed.

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