Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 31, 2022
Case Laws in this Newsletter:
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI Short Notes
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Reopening of assessment u/s 147 - valid approval u/s 151 - The approving authority-the PCIT, has stated that he agrees with the comments of the A.O., which were annexed with the order, and has recorded his satisfaction that it was a fit case for issuance of the notice under Section 148 of the Act. The aforesaid order does not indicate non-application of mind by the PCIT to the proposal made by the A.O. and we are not able to accept the submission that the PCIT has granted approval without application of mind to the proposal put up by the A.O. - HC
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Addition u/s 68 - Unexplained cash deposit - sale of land being agricultural receipt - the purchase and sale has been done in a short period of time. In this view of the matter, the location of the land cannot come to the rescue of the assessee de hors any evidence of agricultural activity - Additions confirmed - AT
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LTCG - Period of holding of asset - deduction u/s 54 - So far as the residential building/house constructed on the said land is concerned, it was constructed in ay: 2014-15 on the aforesaid land, and the residential house was sold in ay: 2014-15 itself, the residential house was held for less than thirty six months, it is to be classified as short term capital asset and the gains arising therefrom shall be short term capital gains. The plain language of Section 54 clearly stipulate that deduction u/s 54 shall be allowed only on long term capital gains arising from sale of residential property, and the said deduction can no stretch of imagination be allowed on the short term capital gains - AT
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Addition u/s 68 - unexplained credit - Onus to prove - share capital introduced - the assessee failed to explain the sources of investment of cash of Rs. 10 lacs each by the 2 persons, in the share capital of the assessee company during the year under consideration, as credit worthiness of these persons could not be proved keeping in view the material on record including income declared in the return of income filed by these persons - Additions confirmed - AT
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Disallowance u/s 36(1)(iii) - commercial expediency to give no interest loans - the assessee’s arguments that there was a running account with the sister concern (viz. another company having common director), which was not demonstrated any business expediency between the assessee company with that of its subsidiary company. - additions confirmed - AT
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Excess stock found during the course of survey - It goes without saying that the onus to prove that the earlier admission at the time of survey was wrongly made, was on the assessee because it was he who was retracting. If this contention, not backed by any evidence, is removed from reckoning, there is nothing to justify the retraction. - Additions confirmed - AT
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Disallowance of brokerage paid to various persons by considering them to be ingenuine - When the Department has accepted the Income Tax Returns of the brokers and did not find any infirmity then it is not imperative by the AO to compel the lady brokers for verification whose details have already been provided by the ld. AR of the assessee as per the format of the AO. - Additions deleted - AT
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Long Term Capital Gain from sale of land - valid transfer of a capital asset or not? - Possession given or not? - The assessee placed reliance on the “Affidavit” of Buyer dated 3/11/2016. This document is titled as “affidavit” on Rs.100/- stamp paper and it is notarised. This notarised document does not have more evidentiary value than the two registered Sale deeds. It was executed three years after the Sale deeds. It is a settled legal proposition that an affidavit is not evidence within the meaning of Section 3 of the Indian Evidence Act,1872 .Affidavits are therefore, not included within the purview of the definition of "evidence" as has been given in Section 3 of the Indian Evidence Act. Therefore, the said document is mere self-serving statement. - AT
Customs
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Issuance of summons directly to the Managing Director of the company without calling for or summoning the other authorised representatives. - Notes
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Smuggling - recovery of foreign goods from the appellant by way of town seizure - Gold Coins - The whole burden or onus to establish the smuggled nature of goods/gold is on the revenue which have not been discharged. Admittedly, in the facts of the present case, it is a case of town seizure. - AT
Indian Laws
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Cognisable and non bailable offence or not - An insight into the understanding of section 63 of the Copyright Act, 1957. - Notes
IBC
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CIRP - dues of EPF - The law as it exists today does not oblige the IRP/RP to send any information to any creditor or statutory authority even if the records of the Corporate Debtor reflect any liabilities of the Corporate Debtor towards them. It is his sweet will to give information or not to any such entities. There has to be an obligation of the IRP/RP to inform the creditors whose liabilities are on the record of the Corporate Debtor since the object of insolvency resolution is to take into account all liabilities of Corporate Debtor and thereafter resolve it. - AT
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Family dispute over management of a Company - It cannot be disputed that the Company’s Article of Associations (AoA) is more powerful than the MOU and that too not signed MOU by all members of the Company/ family partition shareholding right. - If, there is overlapping provision between the Companies Act will prevail over the AOA. Accordingly, AoA will prevail over MOU, unless the MOU is legally binding and are appropriately incorporated in the AoA through the Amendment as prescribed under the Companies Act for the amendment of AoA. - AT
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Claim of electricity dues - Approval of Resolution Plan - In the present case, the Operational Creditors have been given only miniscule of their admitted claim to the extent of only 0.19%. As the law stand today, no exception can be taken to such Plans, which provide payment to Operational Creditor in accordance with Section 30(2)(b) of the Code. However, the time has come when it should be examined by the Government and the Board to find out as to whether there are any grounds for considering change in the legislative scheme towards the payment to the Operational Creditors, which also consist of Government dues and other statutory dues. - AT
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Service of limited notice - the Appellant has been served copy of the Application under Section 95(1) as per the requirements of the statute and since the Appellant was well aware of the date and appeared on the date before the Adjudicating Authority, we see no reason to direct for issue of any limited notice to the Appellant, he being aware of the proceedings. The stage of admission or rejection of the Application has not yet arrived and at the stage of admission or rejection of the Application, the Appellant can raise all the objections before the Adjudicating Authority opposing the admission of the Application. - AT
Central Excise
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Recovery of refund already granted - Refund of Education Cess and Secondary & Higher Education Cess - since the assessee has been held entitled to the refund of the Educational cess and Secondary & Higher Educational cess on the basis of a judgment and order of the Supreme Court in case SRD Nutrients which was in vogue at the relevant time, the appellants are not entitled to make recovery of the said refunded amount on the basis of the subsequent decision of the Supreme Court rendered in the case of Unicorn Industries. If such an action is permitted, it will open a Pandora box and the lis between the parties which had attained finality will never come to an end. This would be against the public policy which envisages providing quietus to litigation at some stage. - HC
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Monetary limit for filing appeal by Revenue - The department may not file appeal in isolation on the subject with lower valuation and wait for other similar to come and as and when sufficient number of appeals arises having a collective valuation of over ₹ One Crore, may proceed to file all of them in order to defeat the purpose of the circular. The cause of action in each appeal is separate. Therefore the monetary limit below which appeal shall not be filed referred to in the circular, is in context to a single appeal rather than the group of appeals. The amount involved in a group of appeals cannot be taken together for the purposes of the above Circular. - HC
VAT
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Priority of charge over assets - Secured creditors versus Crown Debts (State tax dues) - Attachment of property - default in repayment of loan amount - the State cannot claim any first charge over the subject property on the strength of Section-48 of the GVAT Act, 2003. - HC
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Constitutional validity of amendment - discrimination within the works contractors - discrimination between the dealers who purchase goods within the State and outside the State/country - There is a rationale behind such classification for the purpose of Section 6. In fiscal or taxing enactments, it is not necessary that every enactment should be backed by objects and reasons. What is relevant is the competence of the State and whether such enactment offends any constitutional rights, which in the instant cases, are held to be negative. - HC
Case Laws:
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Income Tax
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2022 (5) TMI 1389
Exemption of property and income of a State from Union taxation - Mussoorie Dehradun Development Authority - scope of separate entity / legal identity - collection of levies in the nature of fees, charges, tax etc. imposed by the State through an enactment, namely U.P. Urban Planning and Development Act, 1973 - HELD THAT:- As apparent from the record that Mussoorie Dehradun Development Authority, constituted under the U.P. Urban, Planning Development Act, 1973, is a separate entity and distinct from the State, having its own legal identity. It is a corporate body. It can sue or be sued in its own name. It has its own assets, liabilities. But only when the State Government decides that the purpose of the Development Authority has been achieved, and there is no need for continuance of such Authority, then it may pass the order of dissolution of the same. In that event, the income, assets, liabilities of the Authority will vest with the State Government, and not otherwise. Thus, it is apparent from the record that the Hon ble Supreme Court has already dealt with this matter, and we, are in deference to the observations made by the Hon ble Supreme Court in the case of Adityapur Industrial Area Development Authority [ 2006 (5) TMI 61 - SUPREME COURT ] come to the conclusion that substantial Question Nos. a and b are already covered, and there is no need to further agitate with the issue. Amount that has been collected for infrastructure development is being spent on infrastructure development, and it should also be excluded from the income o the basis of doctrine of diversion of income by overriding title - We make it clear that the earlier observations regarding substantial Question Nos. a and b also cover this issue. Any fees collected for infrastructure development by the Development Authority will be treated as income and the expenses incurred by the Authority for the purposes of infrastructure development would be deducted from the income, and the rest is taxable, and that has been done, and in fact, this issue was not at all raised before the first and second appellate authorities. We find it appropriate to mention herein that before the ITAT, the only ground that has been taken by the assessee is as under:- That on the facts and in the circumstances of the case and in law, the authorities below erred in holding that the claim of the appellant that there was diversion by overriding title in respect of infrastructure contribution is untenable. However, by filing these appeals before this Court, the assessee has developed its case, and included the substantial Question No. C , and that is also a good ground to dismiss the appeals. Thus, in the conspectus of the facts of the case, and the law applicable to this case, along with the ratio decided by the Hon ble Supreme Court in the case of Adityapur Industrial Area Development Authority (supra), we are of the opinion that there is no merit in these appeals, and the same are, hereby, dismissed.
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2022 (5) TMI 1388
Revision u/s 263 - petitioners had opted to settle the dispute under the Direct Tax Vivad Se Vishwas Act, 2020 - HELD THAT:- Section 6 of the Direct Tax Vivad Se Vishwas Act, 2020, makes it very clear that once there is a compliance with the timeliness specified under Section (5), the designated authority shall not institute any proceedings in respect of an offence or aims or levy any penalty or charge any interest under the Income Tax in respect of the tax arrears. Section 5 of the Direct Tax Vivad Se Vishwas Act, 2020, also makes it clear that save as otherwise expressly provided in sub-section(3) of Section 5 or Section 6, noting contained in this Act shall be construed as conferring any benefit, concession or immunity on the declarant in any proceedings other than those in relation to which the declaration has been made. The intention of the parliament enacting the of the Direct Tax Vivad Se Vishwas Act, 2020, is to bring a closure of disputes in respect of tax arrears. Whether the petitioner had correctly or wrongly availed the benefit of Section 57(F) of the Income Tax Act or not cannot be re-opened once again under Section 263 of the Income Tax Act, 1961. Once the petitioners had opted to settle the dispute under the Direct Tax Vivad Se Vishwas Act, 2020, the proceedings initiated under Section 263 have to go. If on the other hand the respective petitioners had not filed Form 1 and 2 or not accepted with the issue of Form 3, the Impugned Notice seeking to re-open the assessment under Section 263 of the Income Tax Act, 1961 could be justified. The Finance Minister in her speech on 01.02.2020 announced the the Direct Tax Vivad Se Vishwas Scheme to bring down the litigation. The Government intended to reduce the litigation, so that the taxpayers can buy peace with the department. The aforesaid scheme was to be implemented on 30.06.2020. The taxpayers whose appeals were pending at any level were entitled to avail benefit of the scheme. Therefore, there is no justification in proceeding further with the impugned proceedings initiated by the first respondent under Section 263 of the Income Tax Act, 1961.
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2022 (5) TMI 1387
Reopening of assessment u/s 147 - deduction of TDS on expenses on behalf of the Principal Companies - valid approval u/s 151 - TDS @ 2% u/s 194C or @ 10% u/s 194H - petitioner had received payments under Section 194 J also, but it had not shown the said receipts in his P L account and had not given any explanation for the same - HELD THAT:- In the present case, at the time of making the assessment originally, the Assessing Officer had not formed any opinion regarding the reasons on which the notice under Section 148 of the Act has been issued. To say it more particularly, the A.O. had not formed any opinion regarding receipt of payments by the petitioner under Section 194 J, which had not been shown in its P L account, non-disclosure of the amount of reimbursement of expenses claimed by it, non-submission of the details of expenses incurred by it for verification during the assessment proceedings and non-production of any ledgers, bills and vouchers of expenses incurred on behalf of the Principal Companies etc. Therefore, it is not a case of change of opinion and challenge to the notice under Section 148 of the Act on the ground that it seeks to initiate reassessment on the ground of change of opinion, cannot be accepted. The approving authority the PCIT, has stated that he agrees with the comments of the A.O., which were annexed with the order, and has recorded his satisfaction that it was a fit case for issuance of the notice under Section 148 of the Act. The aforesaid order does not indicate non-application of mind by the PCIT to the proposal made by the A.O. and we are not able to accept the submission that the PCIT has granted approval without application of mind to the proposal put up by the A.O. Keeping in view the scope of power of judicial review while scrutinizing a notice issued under Section 148 of the Act as explained in Raymond woolen Mills Ltd. [ 1997 (12) TMI 12 - SUPREME COURT] and Phool Chand Bajarang Lal [ 1993 (7) TMI 1 - SUPREME COURT] and Srikrishna [ 1996 (7) TMI 2 - SUPREME COURT] , we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not as the sufficiency or correctness of the material cannot a thing to be considered at this stage. In the instant case, the notice under Section 148 of the Act has been issued by the assessing officer after conducting an investigation and going through the income tax return and other related documents of the petitioner and after forming reason to believe that the petitioner did not truly and fully disclose all the material facts, because of which income has escaped assessment. We are satisfied that there was prima facie material available on record before the assessing officer for issuing a notice for reassessment and the notice under Section 148. WP dismissed.
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2022 (5) TMI 1386
Addition u/s 68 - Unexplained cash deposit - HELD THAT:- Explanation of receipt of gift and past savings has rightly been rejected by the authorities below for cryptic evidence. As regards the claim of sale of land being agricultural receipt, we note that in the statement of facts before us, assessee himself has admitted that there is no evidence whatsoever of agricultural activity having been done in the said land by assessee itself. Assessee has submitted that land was purchased from persons who were doing agricultural activity. If the land was purchased from persons who were doing agricultural activities and assessee has not been performing any agricultural activities in the said land, then said land cannot be said to be agricultural land in the hands of the assessee. Also, as noted by the authorities below, the purchase and sale has been done in a short period of time. In this view of the matter, the location of the land cannot come to the rescue of the assessee de hors any evidence of agricultural activity. Accordingly, we do not find any infirmity in the order of the ld. CIT (A) in this regard. Hence, we uphold the order of the ld. CIT (A) and the appeal of the assessee is dismissed. Penalty levied u/s 271(1)(c) - HELD THAT:- We note that the AO has passed the penalty order before the CIT (A) passed the order in the quantum proceedings. The addition in this case related to rejection of claim of agricultural income and rejection of sources of deposits. In our considered opinion, assessee has made a claim and the same has been rejected by the Revenue authorities. Mere rejection of a claim cannot ipso facto fasten rigours of penalty upon the assessee. This has been so held by Hon ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd . [ 2010 (3) TMI 80 - SUPREME COURT] . We are conscious that we have upheld the addition on agricultural income on the grounds of absence of cogent evidence of agricultural activities done on the said land. In this view of the matter, the said addition does not fasten upon the assessee liability for penalty. Other addition has also been sustained by us for not having any cogent evidence. We are of the opinion that penalty u/s 271(1)(c) is not exigible on these additions also. Hence, we set aside the orders of the authorities below and delete the penalty levied in this regard. Therefore, the appeal of the assessee is allowed.
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2022 (5) TMI 1385
Addition u/s 68 - Assessee company was struck of - recovery of tax due from the struck off Company - DR submitted since the Assessee Company has been struck off, the Counsel appearing on behalf of the Assessee struck off Assessee Company has no locus standi to represent before the Tribunal - Whether Appeal cannot be dismissed as not maintainable merely on the ground of striking off the Assessee Company by the ROC and insisted to hear and decide the present Appeal on merit? - HELD THAT:- Though the Assessee company has been struck off under Section 248 of the Companies Act 2013, in view of sub-sections (6) and (7) of Section 248 and Section 250 of companies Act 2013, the Certificate of Incorporation issued to the Assessee company cannot be treated as cancelled for the purpose of realizing the amount due to the company and for payment or discharge of the liability or obligations of the company, we are of the opinion that the Appeal filed by the struck off Assessee Company or Appeal filed by the Revenue against the struck off Company are maintainable. Therefore by rejecting the contention of the Ld. DR, we hold that the present Appeal filed by the Assessee (struck-off company) is maintainable and the same has to be decided on merit. Since, we held that, the present Appeal is maintainable, the Counsel appearing on behalf of the Assessee Company has every locus to represent the Assessee in the present Appeal. Office is directed to list the appeal before the regular Bench for hearing on 07/09/2022.
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2022 (5) TMI 1384
Exemption u/s 11 - grant of registration u/s 12A - CIT(E) has rejected the application of assessee for grant of registration u/s 12A on four grounds, firstly that the assessee s constitution(MOA) does not have irrevocability clause, secondly that the constitution of the assessee also does not provide that in case of winding up/dissolution of the assessee, its funds /property will be transferred to another charitable entity, thirdly that the constitution of the assessee does not have a clause that the beneficiaries are a section of public and not specific individuals, and fourthly that the assessee will use its funds/property for its objects - HELD THAT:- CIT(E) asked assessee to incorporate these clauses in its constitution/MOA, but the assessee did not produce amended constitution(MOA), neither before the ld. CIT(E) and nor even before us. The primary condition for grant of registration u/s 12A is that the assessee is a public charitable trust and is required to fulfill the conditions as are mandated under the 1961 Act for grant of exemption from tax. In the instant case, the assessee constitution/MOA clearly provides that in case of winding up/dissolution of the assessee, the proceeds of assets /property shall be distributed amongst the members, which clearly militate against the charitable nature of the trust - there is no irrevocability clause, that the creation of the charitable entity is irrevocable and all the funds/ property which become part of the assessee shall not revert back to the contributories/members. The constitution/MOA of the assessee does not have a clause that property/funds of the assessee shall be used solely for the charitable objects of the assessee. Further the constitution/MOA does not have a clause that the beneficiaries of the assessee shall be public atlarge, and not specific individuals. The assessee has not produced amended constitution/MOA even before tribunal, and since the assessee is claiming itself to be charitable entity seeking exemption of its income u/s 11 and 12, the onus is on the assessee to prove that it is a charitable entity fulfilling all the statutory requirements. Under these circumstances, we do not find any merit in the appeal filed by the assessee, which stood dismissed.
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2022 (5) TMI 1383
LTCG - Period of holding of asset - deduction u/s 54 - HELD THAT:- Assessing Officer has rightly brought to tax gains on the sale of land as long term capital gain as the land was purchased in financial year 2006-07(ay: 2007-08) which was sold in financial year 2013-14(ay:2014-15) on which the Assessing Officer has rightly allowed the deduction u/s. 54 - So far as the residential building/house constructed on the said land is concerned, it was constructed in ay: 2014-15 on the aforesaid land, and the residential house was sold in ay: 2014-15 itself, the residential house was held for less than thirty six months, it is to be classified as short term capital asset and the gains arising therefrom shall be short term capital gains. The plain language of Section 54 clearly stipulate that deduction u/s 54 shall be allowed only on long term capital gains arising from sale of residential property, and the said deduction can no stretch of imagination be allowed on the short term capital gains - CIT(A) has rightly affirmed the assessment order passed by the AO, by relying upon the decisions of Hon ble High Court, as are mentioned in its appellate order. It is also undisputed that the property which was sold was an residential house property. The apportionment to be done between land and building was required to be done, as land is long term capital asset in the instant case, while constructed residential house was held for not more than thirty six months. Further, the asset sold is composite being land and residential house constructed by the assessee, and hence for granting deduction u/s 54 of the 1961 Act, it is to be considered that the property sold was residential, and hence benefit u/s 54 will be available while reckoning the entitlement of the assessee for benefit u/s 54, while it is different matter, the same shall be restricted to long term capital gains arising on sale of land being long term capital asset for computing eligibility of deduction u/s 54 and its computation thereof, as the residential building/house constructed on the said land cannot be considered for grant of deduction u/s 54, being a short term. capital asset. Thus, this appeal filed by the assessee lacks merit. - Decided against assessee.
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2022 (5) TMI 1382
Disallowances of employment contribution towards EPF/ESIC - Scope of amendment - HELD THAT:- As employees s contribution to ESI and PF which have been collected by the assessee from its employees have thus been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Till this provision is enacted in as the due amounts on one pretext or the other were not being deposited by the assessee though substantial benefits had been obtained by them in the shape of the amount having been claimed as a deduction but the said amounts were not deposited. It is pertinent to note that the respective Act such as PF / ESIC etc. also provides that the amounts can be paid later on subject to payment of interest and other consequences and to get benefit under the Income Tax Act, an assessee ought to have actually deposited the entire amount as also to adduce evidence regarding such deposit on or before the return of income under sub-section (1) of Section 139 - where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1)(va) of the IT Act. This view is rendered in CIT vs. Jaipur Vidyut Vitran Nigam Ltd.[ 2014 (1) TMI 1085 - RAJASTHAN HIGH COURT] , CIT vs. Udaipur Dugdh Utpadak Sahakari Sangh Ltd.[ 2014 (8) TMI 677 - RAJASTHAN HIGH COURT] , and CIT vs Rajasthan State Beverages Corportation Limited.[ 2016 (8) TMI 1317 - RAJASTHAN HIGH COURT] - In all these decisions, it has been consistently held that where the PF and ESI dues are paid after the due date under the respective statues but before filing of the return of income under section 139(1), the same cannot be disallowed under section 43B read with section 36(1)(va) of the Act. We further note that though the ld. CIT(A) has not disputed the facts of the case that the amount has been deposited by the assessee before the due date of filling return of income but has followed the decision of Hon ble Gujarat HC in the case of CIT-II Vs. Gujarat State Road Transport where in the HC held that amendment in section 43B vide Finance Act 2003 will apply only for employer s contribution. So far as employee s contribution is concerned it is not governed by section 43B but by section 2(24)(x) and 36(1)(va). Based on the above discussion and findings that the amendment is prospective and not retrospective and when there are two views on the issue one which is favourable to the assessee holds better footing. Therefore, based on the above findings we allow the claim of the assessee.
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2022 (5) TMI 1381
Exemption u/s 11 - self style jurisdiction in enquiring into the applicability of section 11(4A), in respect of the present year - Whether Forum below, have again erred, as to applicability of section 11 (4A), which he has simply concurred with the findings of the Assessing Officers. And it was never being a fact that the appellant assessee did not want to avail the exemption U/s 11(4A)? - HELD THAT:- issue raised by the assessee in ground Nos.2 3 has already been decided by the Hon ble Jurisdictional High Court in assessee s own case r [ 2003 (1) TMI 27 - ORISSA HIGH COURT] in favour of the assessee. Therefore, this ground may be allowed as per the decision of the Hon ble Jurisdictional High Court (supra). Notional income computed on mercantile system - AR drew our attention assessee s paper book wherein the interim order has been passed by the Tribunal directing both the parties i.e. assessee as well as the department to bring on record as to whether the accrued income for these particulars years have subsequently been accounted by the assessee in other assessment years on cash basis or not. Our attention was also drawn regarding reply filed by the department in compliance of the direction issued by the Tribunal on 05.05.2008, wherein the department has expressed its inability to verify the voluminous documents; more specifically the verifications of the documents to be made are not in possession of the department. It was also stated by the department in the said letter that verification by the AO regarding the incomes accrued to the assessee cannot be possible to be done by the AO alone. Without going much into the merits of the case and delving into the assessment year under consideration along with the year of appeal, we are of the substantive opinion that when the department itself has expressed its inability to verify the documents as had been directed by the Tribunal vide its order dated 05.05.2008, either on account of voluminous documents or for any other reason whatsoever, hence the contentions of the assessee cannot be rebutted or curtailed by the revenue, therefore, the assessee cannot be kept in abeyance from getting justice which he deserves. Accordingly, we allow the ground No.4 of appeal of the assessee.
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2022 (5) TMI 1380
Penalty 271(1)(c) - defect in notice u/s 274 - As argued A.O. has not applied his mind and non striking of charge in the penalty notice i.e. whether the charge is for concealment of income or furnishing of in accurate particulars of income - HELD THAT:- We find the Jurisdictional Honble High Court of Bombay in Mohd Farhan A Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT ] as dealt on this disputed issue of not striking off charge in the penalty notice would vitiate the penalty proceedings. CIT(A) has deleted the penalty as the A.O has not strike off the charge for levy of penalty for concealment of income or for furnishing of inaccurate particulars of income. DR could not controvert the findings of the CIT(A) with any new cogent material evidence or information to take a different view. Accordingly we do not find any infirmity in the order of the CIT(A), who has considered the facts, provisions of law and passed a reasoned and speaking order and uphold the same and dismiss the grounds of appeal of the Revenue.
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2022 (5) TMI 1379
Addition u/s 68 - unexplained credit - Onus to prove - share capital introduced during the year under consideration as the assessee company failed to prove the creditworthiness of the persons who have contributed the fresh share capital allotted by the company during the year under consideration - HELD THAT:- Section 68 of the Act cast obligation on the assessee where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source of credit thereof or the explanation offered by the assessee is found not satisfactory in the opinion of the AO, the sum so credited may be treated as income and charged to income-tax as income of the assessee of that previous year. The burden/onus is cast on the assessee and the assessee is required to explain to the satisfaction of the AO cumulatively about the identity and capacity/creditworthiness of the creditors along with the genuineness of the transaction to the satisfaction of the AO. All the constituents are required to be cumulatively satisfied. If one or more of them is absent, then the AO can make the additions u/s. 68 of the Act as an income. In the closely held companies the share capital are mostly raised from family, close relatives and friends and the assessee is expected to know the share subscribers and the burden is very heavy on the assessee to satisfy cumulatively the ingredients of Section 68 of the Act as to identity and establish the credit worthiness of the creditors and genuineness of the transaction to the satisfaction of the AO, otherwise the AO shall be free to proceed against the assessee company and make additions u/s. 68 of the Act as unexplained cash credit. The use of the word any sum found credited in the books in Section 68 indicates that it is widely worded and the AO can make enquiries as to the nature and source thereof. AO can go to enquire/investigate into truthfulness of the assertion of the assessee regarding the nature and the source of the credit in its books of accounts and in case the AO is not satisfied with the explanation of the assessee with respect to establishing identity and credit worthiness of the creditor and the genuineness of the transactions, the AO is empowered to make additions to the income of the assessee u/s. 68 of the Act as an unexplained credit in the hands of the assessee company raising the share capital because the AO is both an investigator and adjudicator. After perusing the entire record before us including taxable income declared by these two subscribers, we are of the considered view that the assessee failed to explain the sources of investment of cash of Rs. 10 lacs each by Mr. Sanjeev Kumar and Mr. Vinod Kumar Sharma, in the share capital of the assessee company during the year under consideration, as credit worthiness of these persons could not be proved keeping in view the material on record including income declared in the return of income filed by these persons, thus impeaching Section 68 of the 1961 Act, which requires assessee to cumulatively prove to the satisfaction of the AO as to identity, creditworthiness of the creditors and genuineness of the transaction. Thus, we dismiss this appeal filed by the assessee, as it lacks merit.
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2022 (5) TMI 1378
Disallowance u/s 36(1)(iii) - commercial expediency to give no interest loans - assessee has extended substantial amount as loan to one of its director during the financial year, and not charged interest on the loan amount - HELD THAT:- Though the assessee s claim that payment made to the Director, Shri Kamal Deshraj Dogra was for business expediency, but the assessee could not prove before us the nexus between the assessee-company with its subsidiary company in the nature of trade and business. Furthermore, Shri Kamal Deshraj Dogra being director of both the companies, payments made directly to the common director of the company is not established with proper material on hand for the socalled business exigency. Thus, the assessee s arguments that there was a running account with the sister concern viz. Kamal Freight Pvt.Ltd., which was not demonstrated any business expediency between the assessee company with that of its subsidiary company. In the above circumstances, we do not find any infirmity in the order passed by the lower authorities, more particularly, the ld.CIT(A) has clearly held that judgement of S.A. Builders facts [ 2006 (12) TMI 82 - SUPREME COURT] is not applicable to the assessee s case. Punjab Haryana High Court in the case of C.R. Auluck Sans P.Ltd., [ 2014 (2) TMI 73 - PUNJAB AND HARYANA HIGH COURT] has also upheld disallowance made under section 36(1)(iii) of the Act on the ground that the assessee has failed to establish commercial expediency in doing the financial transactions. Thus, we have no hesitation in upholding the order of the CIT(A), and this ground raised by the assessee are hereby rejected, accordingly, appeal filed by the assessee is dismissed.
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2022 (5) TMI 1377
Revision u/s 263 - Unexplained cash deposits - as argued during the course of the assessment proceedings completed the assessment after conducting an enquiry into the source of cash deposits as now the revision is not possible on the same set of facts because the AO has formed an opinion which is a possible view as per law - HELD THAT:- AO while framing the assessment has gone into the details of the cash deposits and the other two more amounts - She stated before the AO that the cash deposits is out of the gift received from her husband and the AO has verified the return of income of the Assessee's husband and the bank accounts. We noted that the Assessee's husband sold one immovable property located at Uthandi, Chennai to one Smt. Mangaiyarkarasi who has paid a sum to the Assessee by way of demand draft on 28.02.2014. As claimed that the husband has gifted a sum of Rs. 30.00 lakhs and Rs. 10.00 lakhs to the Assessee and the same was deposited in the above said bank accounts, i.e. Axis Bank account maintained in the name of the Assessee. The date of the sale of this property, the date of depositing the demand draft and the date of the gift is the same, i.e. 28.02.2014. We find that the Assessing Officer has examined the same facts and reached to a conclusion that the transactions of gift are genuine and explained. Hence, we find no merit in the revision order passed by the PCIT and hence the same is quashed as the Assessing Officer had a reasonable view while framing the assessment. Thus, the revision order is thereby quashed and the appeal of the Assessee is allowed.
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2022 (5) TMI 1376
Undisclosed investment in stock - certain loose documents found during the course of search which indicated that there were undisclosed sales - HELD THAT:- CIT(A) has given a categorical finding that the assessee was able to locate and reconcile all these entries with the regular books of account and there were only some minor differences to be found in the quantitative details of stock as per the books of account and the physical verification of stock as on the date of search. It has been mentioned by the Ld. CIT(A) that the difference was only to the tune of 0.35% of the turn over. The above finding by the Ld. CIT(A) has been recorded after a detailed verification and even during the course of arguments before us, the Ld. CIT DR could not point out any perversity in the findings of the Ld. CIT(A). Thus, the Ld. CIT(A) has returned a categorical finding that there were no undisclosed sales. In such a situation, any addition on account of undisclosed investment in stock, which is relatable to undisclosed sales, cannot be sustained. Finding no perversity in the order of the Ld. CIT(A) on this issue, we uphold his findings and dismiss the ground raised by the Department. Addition on account of difference in cost of construction as per the books of account and as per the report of the DVO - As it is an undisputed fact on record that no incriminating material or evidence was found during the course of search which could indicate that the assessee had made investment towards cost of construction outside the regular books of account. We also note that the Ld. CIT(A) had deleted the addition in this year by following the order of the Ld. CIT(A) for the immediately preceding assessment year. Since no material was found in the search and seizure operations which could justify the Assessing Officer's action in referring the matter to the DVO for his opinion on valuation of the said properties, then the valuation arrived at by the DVO would be of no consequence. Accordingly, in view of the above cited judicial precedents as well as the factual finding recorded by the Ld. CIT(A) in assessment year 2016-17, which, in our opinion, is both sound as well as logical, we have no hesitation in upholding the same. Accordingly, the ground raised by the Department on this issue also stands dismissed.
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2022 (5) TMI 1375
Short credit of Tax Deducted at Source [TDS] - turnover reported in Form No. 26AS is less than the turnover as per the return of income filed by the Assessee - Assessee before the Assessing Officer explained that the amounts credited represented the income receipts for multiple years and therefore only the income attributable to this assessment year is offered to tax and in support of the same filed copies of the invoices before the Assessing Officer - HELD THAT:- The provisions of the Rules cannot overrule the provisions of the Act and where the Act is omitted, the requirement of the income being offered to the assessment, as a condition to obtain credit for TDS, a rule cannot be quoted to deny the TDS credit to the Assessee, what the Act has given to him. Meaning thereby, as per the amended provisions, once the TDS was deducted, a credit of the same has to be given to the Assessee, irrespective of the year to which it relates. In terms of the provisions of Section 199(1) of the Act, once the TDS was deducted, credit of the same is to be given to the Assessee, irrespective of the year to which it relates. Hence, we direct the Assessing Officer to allow the TDS credit as per the Form No. 26AS after verification of the TDS Certificates. As regards to the CIT(A) restricting the credit of TDS to the extent claimed in the return of income, we noted that the Assessee claimed TDS on the interest at Rs. 2,90,623/- as against the TDS deducted on account of interest amounting to Rs. 4,20,856/- as per Form No. 26AS. We direct the Assessing Officer to allow the entire interest, as the Assessee has disclosed the income, i.e. interest income amounting to Rs. 42,44,457/-. We direct the Assessing Officer accordingly.
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2022 (5) TMI 1374
Disallowance(s) of administrative service charges 40A(2)(a) (b) r.w.s. 37(1) - AO invoking the impugned disallowed for want of a valid service agreement dated 02.02.2005 which was only applicable for a period of seven years - Revenue's case before us is that the assessee had not filed the recipient's computation as well as return(s) coupled with the alleged addendum to the foregoing services agreement and therefore, the impugned disallowance is liable to be upheld - HELD THAT:- We make it clear that the assessee had indeed filed its recipient's tax returns in support of its argument that the impugned Section 40A(2)(a) (b) disallowance does not survive any more once both these parties stood assessed at the maximum marginal rate in light of the CBDT's age old circular No. 6/P dated 06.07.1968 to this effect. This is in addition to the fact that it has also sought to prove its addendum to the impugned agreement (supra) extending the period of operation thereof covering all the instant three assessment years for the first time only. Faced with this situation, we deem it appropriate to restore the assessee's instant identical first and foremost grievance back to the Assessing Officer for his afresh adjudication as well as necessary factual verification as per law within three effective opportunities of hearing. Ordered accordingly. The assessee's corresponding grounds are treated as allowed for statistical purposes.
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2022 (5) TMI 1373
Excess stock found during the course of survey - Retraction of statement - HELD THAT:- AR failed to lead any evidence to the effect that the goods against such invoices were received before the date of survey but the invoices were not entered as these were received later on. Given the fact that the actual stock was counted at the time of survey, and the tentative Trading, Profit and loss account was drawn which indicated excess stock of Rs. 8.46 lakh; the assessee admitted such excess stock without raising any issue at that time; later on issued a retraction letter after more than two months but still without furnishing any detail of the alleged late receipt of invoices; taking a contention after two years that 23 invoices were received later on and still failing to lead any evidence to demonstrate that such invoices were received after the date of survey but the goods were received before the date of survey, entire case made by the assessee for the relief gets demolished. The contention seeking relief is based solely on the premise that certain goods were received in stock but the corresponding invoices were received after the date of survey. However, no evidence to corroborate such a version has been provided. It goes without saying that the onus to prove that the earlier admission at the time of survey was wrongly made, was on the assessee because it was he who was retracting. If this contention, not backed by any evidence, is removed from reckoning, there is nothing to justify the retraction.Therefore, satisfied that the authorities below were justified in making and sustaining the addition of excess stock found at the time of survey. - Decided against assessee.
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2022 (5) TMI 1372
Disallowance of brokerage paid to various persons by considering them to be ingenuine - HELD THAT:- As noted that the assessee has provided all the details of the brokers like Income Tax Returns, Copy of Bank Statements, Pan Card Details, Addresses of the brokers and nothing has been found wrong except the lady brokers did not appear before the AO for verification. When the Department has accepted the Income Tax Returns of the brokers and did not find any infirmity then it is not imperative by the AO to compel the lady brokers for verification whose details have already been provided by the ld. AR of the assessee as per the format of the AO. Hence, in this view of the matter, we do not concur with the orders of the lower authorities and the disallowance sustained by the ld. CIT(A) is deleted. Thus the appeal of the assessee is allowed.
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2022 (5) TMI 1371
Long Term Capital Gain from sale of land - valid transfer of a capital asset or not? - Possession given or not? - assessee company submitted before the A.O. that in this case, there is no transfer of the land as per the provisions of Section 54 and 55 of the Transfer of Property Act - HELD THAT:- The assessee has not denied the fact that the it had entered into a registered sale deed dated 01/11/2013. Assessee has not denied receipt of the entire sale consideration - assessee claims that no possession was given. This submission of the assessee regarding possession of the land is not being given is against the recital of the registered sale deed. The registered sale deed categorically mentions that peaceful and vacant possession has been handed over to the purchaser. Recitals of the registered sale deed that the vacant and peaceful possession has been handed over to the purchaser have to be taken as the true fact. It is not a claim of the assessee that it had not disclosed all the facts about the impugned land to the buyer Mr. Mustak Saheblal Shaikh. Therefore, it is not the claim of the assessee that it was a fraudulent transaction. It is also not the claim of the appellant assessee that he had no intention to enter in the transaction. From the Clauses of the Sale deed, it can be inferred that both the vendors and Vendee have full knowledge of all the clauses mentioned in the Sale deed. There is no evidence filed by the AR to prove that the contents of the said registered sale deed are not true or are false. Therefore, it means the possession was handed over to the Purchaser, purchaser had paid entire consideration to the seller and the purchaser became the legal owner of the impugned land on 1/11/2013. Neither the purchaser nor the seller has filed any FIR against the so called villagers who opposed the buyer. The assessee is a legal owner of the property, if there were any encroachments, appellant assessee had not filed any evidence to prove the so-called encroachments, therefore, the said claim of the assessee is unsubstantiated. The purchaser Mustak Saheblal Shaikh had paid the stamp duty and registration charges. Secondly the Appellant after 15 days have purchased the impugned land from Mr. Mustak Saheblal Shaikh by entering into a registered Sale Deed, the said sale deed does not mention anything about the encroachments. There is no cancellation deed. This sale deed is an independent transaction. The second registered sale deed dated 16/11/2013 mentions Mr.Mustak Saheblal Shaikh as owner of the said impugned land. Thus, both the appellant and Mr. Mustak Saheblal Shaikh had admitted before the registrar while registering the sale deed that Mustak Saheblal Shaikh is the owner of the impugned land on16/11/2013. Thus in the second recital also facts have been admitted both by the assessee and Mr.Shaikh. Thus on 16/11/2013, Mustak Saheblal Shaikh was the legal owner of the impugned land as per the registered sale deed dated 16/11/2013. The assessee placed reliance on the Affidavit of Mr. Mustak Saheblal Shaikh dated 3/11/2016. This document is titled as affidavit on Rs.100/- stamp paper and it is notarised. This notarised document does not have more evidentiary value than the two registered Sale deeds. It was executed three years after the Sale deeds. It is a settled legal proposition that an affidavit is not evidence within the meaning of Section 3 of the Indian Evidence Act,1872 .Affidavits are therefore, not included within the purview of the definition of evidence as has been given in Section 3 of the Indian Evidence Act. Therefore, the said document is mere self-serving statement. In the present case, assessee has not claimed that the transaction is sham. In the present case, we have considered all the evidences put forth by the assessee. All these things establish that there was a valid legal registered sale deed dated 01/11/2013 by which vacant and peaceful possession of the impugned land was given to the purchaser and the purchaser had paid entire consideration to the seller. Therefore, it is a transfer of capital asset and hence attract capital gain tax. Therefore, the Assessment Order is upheld. Thus, the grounds of appeal raised by the assessee are dismissed.
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Customs
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2022 (5) TMI 1370
Smuggling - recovery of foreign goods from the appellant by way of town seizure - Gold Coins - 5 Apple I-phones - filter Cigarettes - Drum Bright Blue premium quality tobacco - Cosmetic items - Food Supplements - baggage rules - HELD THAT:- The whole case of the revenue is made out on the allegation that the appellant had arrived from Dubai at the Ahmadabad Airport, which is the Customs Station. Thus, for the allegations contained in the show cause notice, particularly, there being violation of the baggage Rules, the jurisdiction in the matter was with the Customs Commissionerate at Ahmadabad. In the circumstances, it is found that whole proceedings by the Customs (Preventive) at Jaipur is wholly without jurisdiction. Further the appellant was intercepted by the Police at Ajmer who are not the customs officers. The whole burden or onus to establish the smuggled nature of goods/gold is on the revenue which have not been discharged. Admittedly, in the facts of the present case, it is a case of town seizure. The proceedings are ab initio void, wholly holding without jurisdiction. Accordingly, the impugned order is set aside and the appeal is allowed. The respondents Customs Authority is directed to return the seized/confiscated goods to the appellant forthwith, within a period of 30 days from the date of receipt of a copy of this order to the appellant or his authorised representative - Appeal allowed - decided in favor of appellant.
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2022 (5) TMI 1369
Confiscation - purity of the imported goods was less than the required parameter - power of Commissioner to order re-export of goods as per Circular No. 100/2003-Cus. dated 28.11.2003 - HELD THAT:- Instead of delving much into the legality and admissibility of additional evidence etc. what is required to be observed here is that the basis of the order passed by the learned Commissioner (Appeals) is in sharp contrast to the evidence in which he had placed his reliance. To start with, he observed that in the Order-in-Original the adjudicating authority had noted that purity percentage was not available in the purchased order and for that reason he disbelieved the copy of purchased order submitted by the Appellant. However, any prudent man, apart from being a judge, would have got the temptation to call for the lower Court s record and examine the purchase order himself that was being submitted to the adjudicating authority before giving a finding so as to make it rational and believable. The order passed by the Commissioner (Appeals) is illogical, inconsistent and not supported by any reason and therefore contrary to the dictates of Section 129(2), 129(3) after making such further enquiry and 129(4) and in view of plethora decisions, discretionary powers of the Court can be interfered with when the order is arbitrary or perverse. Appeal allowed.
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Insolvency & Bankruptcy
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2022 (5) TMI 1368
Validity of Resolution plan - No allocation has been made towards dues of Employees Provident Fund Organisation as mentioned under Section 7A of the Employees Provident Fund Miscellaneous Provisions Act, 1952 - Applicant submits that no claim has been filed by the Appellant, therefore, there was no occasions for inclusion of their claim in the Resolution Plan - HELD THAT:- It is clear that no claim was submitted by the Appellant in the CIRP process but there is no denying to the fact that in CIRP process notice of proceedings under Section 7A were issued to the Resolution Professionals as well as to the Corporate Debtor. Director of the Corporate Debtor who is now the Resolution Applicant also participated in the proceedings under Section 7A but the proceeding under Section 7A does not find any mention in the Resolution Plan, supposedly due to non-filing of any claim. The present case is a case of that nature where inspite of Director of the Corporate Debtor and the Resolution Professional being aware of the inquiry under 7A did not take steps to inform the Department concerned to file its claim in the CIRP process and both Resolution Professional and Respondent No.2 Resolution Applicant now contend that no claim has been filed by the Appellant. There is no error in the Resolution Plan not noticing and reflecting their claim. Although Section 18 of the Code uses the expression collate all the claims but the said expressions being followed by the words submitted by creditors , the Resolution Professional is entitled to contend that unless the claim is received by him, he has no obligation to include it in the list of claims or even the Information Memorandum. The law as it exists today does not oblige the IRP/RP to send any information to any creditor or statutory authority even if the records of the Corporate Debtor reflect any liabilities of the Corporate Debtor towards them. It is his sweet will to give information or not to any such entities. There has to be an obligation of the IRP/RP to inform the creditors whose liabilities are on the record of the Corporate Debtor since the object of insolvency resolution is to take into account all liabilities of Corporate Debtor and thereafter resolve it. It is the matter on which attention of regulation making authority and Government has to be drawn by this Tribunal so as to take remedial measures, if any. In the present case, the claim which is now crystalized under Section 7A was not there at the time of currency of the Corporate Insolvency Resolution Process, hence, it is not necessary to express any concluding opinion as to what steps to be taken by the Appellant for a claim which has been crystalized after close of CIRP process. Appellant are at liberty to take such appropriate remedy for recovery of the amount under Section 7 as may be advised - Appeal disposed off.
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2022 (5) TMI 1367
Distribution of sale proceeds from liquidation estate - priority of charges over the assets - relinquishment of security interest - seeking direction to liquidator to distribute the entire sale proceeds of the liquidation estate to Punjab National Bank since the same has exclusive charge over the property of the corporate debtor which has been sold by the Liquidator - condonation of delay in filing application - HELD THAT:- The Appellant had opted to relinquish its security exercising its right under Section 52 of the Code. After it relinquished the security, the secured creditors are entitled for receiving payment as per Section 53. The issue is no more res integra in view of the judgment of the Hon ble Supreme Court in India Resurgence ARC Private Limited vs. Amit Metaliks Limited and Anr.[ 2021 (6) TMI 684 - SUPREME COURT ]. In the case before Hon ble Supreme Court, Appellant was Dissenting Financial Creditor and it challenged the distribution of the assets under the Resolution Plan. The argument was raised that the Dissenting Financial Creditor was entitled to receive the payment as per their secured interest - It was held in the case that It has not been the intent of the legislature that a security interest available to a dissenting financial creditor over the assets of the corporate debtor gives him some right over and above other financial creditors so as to enforce the entire of the security interest and thereby bring about an inequitable scenario, by receiving excess amount, beyond the receivable liquidation value proposed for the same class of creditors. The issue is no more res integra and no error is committed by the Adjudicating Authority in rejecting the Application filed by the Appellant - appeal dismissed.
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2022 (5) TMI 1366
Seeking to pass an order of Interim Stay of the impugned order - all the members are from Hindu Undivided Family - family management company dispute where certain Members / Shareholders are not seeing eye to eye - Company s Article of Associations (AoA) is more powerful than the MOU - overlapping provision between the Companies Act will prevail over the AOA - HELD THAT:- This is a case of family management company dispute where certain Members / Shareholders are not seeing eye to eye and the Tribunal has observed certain irregularity in its functioning - It cannot be disputed that the Company s Article of Associations (AoA) is more powerful than the MOU and that too not signed MOU by all members of the Company/ family partition shareholding right. If, there is overlapping provision between the Companies Act will prevail over the AOA. Accordingly, AoA will prevail over MOU, unless the MOU is legally binding and are appropriately incorporated in the AoA through the Amendment as prescribed under the Companies Act for the amendment of AoA - Notification No. 464(E) of MCA dated 05.06.2016 provides for subject to certain exceptions, modifications and adaptation which are enumerated therein limited to non-application of second proviso to sub-section(1) of Section 188 which is a matter of examining a full case and thereafter, to consider whether the interest of the shareholders are protected or not. This is not a fit case to consider interim relief for grant of stay when the matter even travelled to the Hon ble High Court of Kerala upto its Division Bench and effect of stay of the impugned order dated 31.12.2021 will cause irreparable harm to the Company and accordingly the case is not a fit case for granting interim relief and accordingly we are not inclined to grant any interim relief and hence appeal is dismissed.
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2022 (5) TMI 1365
Claim of electricity dues - Approval of Resolution Plan - whether consideration of Resolution Plan of Respondent No.3 by the CoC after expiry of 330 days, vitiate the approval of the Resolution Plan? - entitlement to claim its unpaid CIRP dues as per West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 even after approval of the Plan by order dated 08.10.2021 - violation of Section 30, sub-section (2), sub-clause (e) in view of West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 - Resolution Plan is in accordance with Section 30, sub-section (2), sub-clause (b) and the distribution to the Appellant Operational Creditor is fair and equitable or not? Whether the consideration of Resolution Plan of Respondent No.3 by the CoC after expiry of 330 days, vitiate the approval of the Resolution Plan? - HELD THAT:- This Tribunal in the same very judgment while relying on judgment of the 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 ] held that time-line provided in Section 12 is not mandatory and in certain cases, time-line can be extended. The Appeal filed by WBFC on the aforesaid ground was dismissed. The same very ground, which were raised by WBFC unsuccessfully before the Adjudicating Authority as well as before this Tribunal, are being pressed by the learned Senior Counsel for the Appellant - there are no error in extension of 330 days time by the Adjudicating Authority, the consideration of the Resolution Plan was also approved by this Tribunal and cannot be permitted to be reagitated in the instant Appeal. Whether the Appellant is entitled to claim its unpaid CIRP dues as per West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 even after approval of the Plan by order dated 08.10.2021? - Whether Resolution Plan violates Section 30, sub-section (2), sub-clause (e) in view of West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 since it contravenes Regulation 4.6.4 as well as Regulation 4.6.1 of the Statutory Regulations? - HELD THAT:- Hon ble Supreme Court in LALIT KUMAR JAIN VERSUS UNION OF INDIA AND ORS. [ 2021 (5) TMI 743 - SUPREME COURT ] had reiterated the principals laid down in STATE BANK OF INDIA VERSUS V. RAMAKRISHNAN AND ANR. [ 2018 (8) TMI 837 - SUPREME COURT ] where it was held that The object of the Code is not to allow such guarantors to escape from an independent and coextensive liability to pay off the entire outstanding debt, which is why Section 14 is not applied to them. However, insofar as firms and individuals are concerned, guarantees are given in respect of individual debts by persons who have unlimited liability to pay them. And such guarantors may be complete strangers to the debtor often it could be a personal friend. It is for this reason that the moratorium mentioned in Section 101 would cover such persons, as such moratorium is in relation to the debt and not the debtor. Above pronouncement by Hon ble Supreme Court makes it clear that under Section 133 of the Contract Act, guarantor/ surety/ liability is not discharged even on variance of terms of contract by Resolution Plan. Thus, the submission of learned Senior Counsel for the Appellant that if any variance in Resolution Plan is not in conformity of Section 30, sub-section (2) (e), it would be in contravention of West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 cannot be accepted. The Statutory Regulations shall stand overridden by virtue of approval of Resolution Plan. Under the Plan, the Appellant electricity supply provider is obliged to reconnect the electricity, which is provision of the Resolution Plan and Appellant cannot be heard in saying that since the Statutory Regulation 4.6.1 and 4.6.4 are not complied, the Appellant is not obliged to reconnect the electricity without payment of outstanding electricity dues. Whether the Resolution Plan is in accordance with Section 30, sub-section (2), sub-clause (b) and the distribution to the Appellant Operational Creditor is fair and equitable? - HELD THAT:- The present is not a case where the Appellant is contending that payment of debt to the Appellant/ Operational Creditor is not as per provisions of Section 30, sub-section (2), sub-clause (b), (i) and (ii). It is not a case that Appellant could not have been entitled to receive any higher amount in event of liquidation of the Corporate Debtor under Section 53, in event amount to be distributed under the Plan is distributed in accordance with priority of sub-section (1) of Section 53 - Law being now settled that mere fact that Operational Creditors and Financial Creditors are not paid same amount and same percentage, cannot be said to be inequitable. It is settled that the Code and the Regulations does not contemplates that there could be equal treatment to all creditors. The Insolvency Law Committee Report 2018 deliberated upon the objection to Section 30, sub-section (2), sub-clause (b), insofar as it provides for minimum payment of liquidation value. It was also noticed that public comments were received by the Committee stating that the liquidation value, which is guaranteed to the Operational Creditors may be negligible as they fall under the residual category of creditors under Section 53 of the Code - The Committee in the 2018 Report, ultimately decided against any amendment to be made in the existing scheme of the Code and the minimum value to be paid to the Operational Creditors was retained. More than three years have elapsed from the said report. The question that Operational Creditors are getting negligible value have been raised before the Committee and other Forms from time to time. The Operational Creditors normally had claims pertaining to supply made to the Corporate Debtor, which amounts normally as compared to the Financial Creditors claim are less. Operational Creditors consist of various type of industries including MSMEs, public sector organization and small entities. Altogether denying their claim or receiving ineligible amount in the Resolution Plan causes hardship and misery to the Operational Creditors. Even the statutory dues, which by virtue of law as it exists today are dealt in the same manner, resulting in no payment or negligible payment and some time even less than 1% of the claim. The Operational Creditors are not part of CoC like Financial Creditors and they have no control over the CIRP - In the present case, the Operational Creditors have been given only miniscule of their admitted claim to the extent of only 0.19%. As the law stand today, no exception can be taken to such Plans, which provide payment to Operational Creditor in accordance with Section 30(2)(b) of the Code. However, the time has come when it should be examined by the Government and the Board to find out as to whether there are any grounds for considering change in the legislative scheme towards the payment to the Operational Creditors, which also consist of Government dues and other statutory dues. There are no good ground to interfere with the impugned order approving the Resolution Plan - there is no merit in the Appeal, the Appeal is dismissed.
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2022 (5) TMI 1364
Service of limited notice - copy of the Application under Section 95(1) was duly served or not - HELD THAT:- In the present case, the Appellant has been served copy of the Application under Section 95(1) as per the requirements of the statute and since the Appellant was well aware of the date and appeared on the date before the Adjudicating Authority, we see no reason to direct for issue of any limited notice to the Appellant, he being aware of the proceedings. The stage of admission or rejection of the Application has not yet arrived and at the stage of admission or rejection of the Application, the Appellant can raise all the objections before the Adjudicating Authority opposing the admission of the Application. It is for the Adjudicating Authority to consider the pleas of both the parties and pass appropriate order as contemplated under Section 100 of the Code. Learned Counsel for the Appellant seeks liberty to submit representation before the Resolution Professional with regard to the facts of the Appellant s case. It is open for the Appellant to give Application/ Representation to the Resolution Professional within one week from today. Appeal disposed off.
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2022 (5) TMI 1363
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The debt of the Financial Creditor falls well within the definition of Financial debt in terms of section 5(8) and as such is entitled to file present application. It is very clear that the last payments having been made by the Corporate Debtor on 14th June, 2018 and 19th September, 2019, in Working Capital Demand Loan-II and Working Capital Demand Loan-I respectively, and the petition having been filed on 11/02/2020, the petition is very much within the period of limitation. It is also clear that in spite of the demand notice having been sent by the Operational Creditor on 1st October, 2018, in accordance with the terms and conditions of the Facility Agreements, and since the Corporate Debtor has committed default and has failed to clear its liability of financial debt towards the Financial Creditor, it is liable to be proceeded against accordingly. Petition admitted - moratorium declared.
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PMLA
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2022 (5) TMI 1362
Condonation of delay of 204 days in filing appeal - sufficient reasons for condonation provided or not - HELD THAT:- There is sufficient explanation for not filing the appeal within the prescribed period. It is also informed by learned counsel for the Appellant that RC in the CBI Court and proceedings before the Enforcement Directorate involving the same transactions are pending. In Tata Yodogawa Ltd. [ 1988 (9) TMI 53 - SUPREME COURT ], the Supreme Court had considered the application seeking condonation of delay wherein it was contended by the Appellants therein that the legal problem in filing the special leave petitions arose and the Supreme Court despite opportunities being given found that the Appellant had failed to explain as to what was the legal problem which had caused the delay. In view of the facts of the case, as also the explanation rendered for the delay, it is opined that Appellant has sufficiently explained the delay for not filing the appeal within the prescribed period - Application seeking condonation of delay in filing the appeal before the Tribunal is allowed.
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Central Excise
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2022 (5) TMI 1361
Maintainability of appeal - Monetary limit for filing appeal by Revenue - proper jurisdiction - Recovery of refund already granted - Whether the assessee is liable to return the Education Cess and Secondary Higher Education Cess on the changed view of law as subsequently laid down by the Full Bench of the Supreme Court in M/S. UNICORN INDUSTRIES VERSUS UNION OF INDIA OTHERS [ 2019 (12) TMI 286 - SUPREME COURT] , over ruling M/S. SRD NUTRIENTS PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE GUWAHATI [ 2017 (11) TMI 655 - SUPREME COURT] , on the basis of which the aforesaid Cess was refunded to the assessee? HELD THAT:- In an appeal filed by the Commissioner of Central Excise before the High Court of Sikkim u/s 35G of the Act in relation to refund of Education Cess and the Secondary Higher Education Cess the value involved was ₹ 63 lakhs only and an objection was raised that the appeal is not maintainable in view of the National Litigation Policy dated 22.08.2019 which provides for not filing of appeals to High Court where the valuation is below ₹One Crore. The Division Bench observed that the preliminary objection has much substance though the appeal was disposed of otherwise - The department may not file appeal in isolation on the subject with lower valuation and wait for other similar to come and as and when sufficient number of appeals arises having a collective valuation of over ₹ One Crore, may proceed to file all of them in order to defeat the purpose of the circular. The cause of action in each appeal is separate. Therefore the monetary limit below which appeal shall not be filed referred to in the circular, is in context to a single appeal rather than the group of appeals. The amount involved in a group of appeals cannot be taken together for the purposes of the above Circular. The appellants have not brought on record any material to show that any special permission was granted by the Government of India or the Ministry of Finance to file appeal ignoring the above Circular - It is also important to note that these appeals do not involve any substantial question of law. The question of law proposed to be raised stands settled by catena of decisions as would be clear by the subsequent discussion and, as such, cannot be regarded as substantial question of law. Thus, appellants were not justified in filing these appeals contrary to the mandate of the above circular which is binding upon them. Accordingly, these appeals are not maintainable. Whether the appeals are maintainable before the High Court or are required to be filed directly before the Supreme Court u/s 35 L of the Act? - HELD THAT:- If the appeal involves any question in relation to rate of excise duty or the value of the goods in context with the assessment, the appeal would not lie before the High Court but would lie to the Supreme Court u/s 35L of the Act which enables filing of the appeal in the Supreme Court if the order passed by the authority below relates to the determination of any question in relation to the rate of duty of excise or to the value of goods for the purposes of the assessment - Since the appeals are directed against the order passed by CESTAT directing refund of cess and does not involve determination of any question in relation to rate of excise duty or value of goods for the assessment purposes, the appeals would lie to the High Court and have rightly been preferred. The appeals as such are maintainable. The preliminary objections to the above extent stand over ruled. Condonation of delay in filing the appeals - HELD THAT:- Admittedly, 7 % so charged by the government was illegal and was realised under a mistake and without authority of law. Therefore, a suit was brought for refund of the amount so charged - It was in view of the facts in a suit for refund of the amount excessively charged in a suit based upon Section 72 of the Indian Contract Act, which provides that where money is paid by mistake to a person, he is liable to repay or return it, the court applied Section 17(1)(c) of The Limitation Act, 1963, and held that the limitation would run from the date of the knowledge of such mistake. The appellant is calculating the limitation for filing of the appeals from the date of subsequent decision of the Supreme Court in the case of Unicorn Industries. This is simply misconceived for the reason that the statute does not provide for taking limitation for filing appeal from any other date except from the date of service/receipt of the copy of the impugned order - Sub-Section (2A) of Section 35 G contemplates for recording satisfaction regarding sufficient cause for not filing the appeal within the period of 180 days as prescribed. Therefore, primarily explanation has to be furnished for not filing the appeal within said 180 days from the receipt of the copy of the impugned order. The said period had expired in each case much before the decision was rendered in Unicorn Industries. There is no explanation on record why the appellant could not file the appeal within the said 180 days. Therefore, in view of the language used in Section 35G (2)(a) in the absence of any sufficient cause for not filing the appeal within that period, it would not be prudent and justifiable to condone the delay by this Court. Any explanation for the period subsequent to it is of no consequence. There are no merit in the submission that the appellants are entitled to get the delay in filing the appeals condoned. There is no sufficient ground to condone the delay and, accordingly, delay condonation applications in all the appeals stand rejected. Whether the subsequent change in opinion by the Supreme Court on the interpretation of a particular provision of law, the appellants are entitled to reopen all the past cases which have been decided on the basis of the opinion of the Supreme Court that was prevailing as binding on the date of their decisions? - HELD THAT:- It may be profitable to refer to the case of STATE OF GUJARAT OTHERS VERSUS ESSAR OIL LIMITED AND ANOTHER [ 2012 (1) TMI 47 - SUPREME COURT] , which holds that no refund can be ordered against a party, if that party has not been unjustly enriched or when it has acquired the benefit lawfully. Since the assessee have got the benefit of refund lawfully under the prevailing law, they cannot be directed to refund the same merely on the basis of change of opinion. Therefore, the appeals for the sole purpose to seek return of the amounts refunded in view of the decision of SRD Nutrients on the change of opinion subsequently are meaningless. In the cases at hand, since the assessee has been held entitled to the refund of the Educational cess and Secondary Higher Educational cess on the basis of a judgment and order of the Supreme Court in case M/S. SRD NUTRIENTS PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE GUWAHATI [ 2017 (11) TMI 655 - SUPREME COURT] which was in vogue at the relevant time, the appellants are not entitled to make recovery of the said refunded amount on the basis of the subsequent decision of the Supreme Court rendered in the case of Unicorn Industries - If such an action is permitted, it will open a Pandora box and the lis between the parties which had attained finality will never come to an end. This would be against the public policy which envisages providing quietus to litigation at some stage. There are no merit in these appeals and the same are dismissed, first for the reason, they are barred by limitation, secondly, they are not maintainable and, lastly, the change of opinion of the court in a subsequent matter of another party would not give any leverage to the appellants to reopen the decisions which have attained finality - appeal dismissed.
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CST, VAT & Sales Tax
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2022 (5) TMI 1360
Attachment of property - default in repayment of loan amount - case of bank is that State has got its charge mutated in the revenue records with respect to the dues to be recovered from the original borrowers towards VAT - HELD THAT:- It is the case of the bank that in accordance with the provisions of the SARFAESI Act, more particularly, Section-26E and also, in view of the two pronouncements of this High Court one in the case of BANK OF INDIA VERSUS STATE OF GUJARAT 3 OTHER (S) [ 2020 (1) TMI 1197 - GUJARAT HIGH COURT] ; and another in the case of KALUPUR COMMERCIAL CO-OPERATIVE BANK LTD. VERSUS STATE OF GUJARAT [ 2019 (9) TMI 1018 - GUJARAT HIGH COURT] , the bank will have the first precedence and the department cannot put forward its claim for the purpose of recovering the dues towards VAT. What came to be purchased by the writ-applicant in the auction proceedings conducted by the Bank of Baroda was a secured asset under the provisions of the SARFAESI Act. In such circumstances, the State cannot claim preference over the subject property for the purpose of recovery of the dues towards tax. It is not in dispute that the first charge was created in favour of the bank and the bank in exercise of its powers under the SARFAESI Act, put the subject property to auction. It is hereby declared that the State cannot claim any first charge over the subject property on the strength of Section-48 of the GVAT Act, 2003. The respondent no.6 is directed to post and certify a mutation entry to record the certificate of sale by the writ-applicant bank in favour of the respondent no.5 with respect to the subject property - Application allowed.
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2022 (5) TMI 1359
Constitutional validity of amendment - discrimination within the works contractors - discrimination between the dealers who purchase goods within the State and outside the State/country - Constitutional Validity of amendment introduced by Act 21 of 2007 retrospectively with effect from 01.01.2007 to Section 6 of the Tamil Nadu Value Added Tax Act, 2006 (Act 32 of 2006) - ultravires Articles 14, 19 (1) (g), 20, 301 and 304 (a) of the Constitution of India or not - constitutional validity of Section 3 of the Tamil Nadu Value Added Tax (Amendment) Act, 2007 - ultravires the Constitution of India and violative of Articles 14, 301, 303 and 304 of Part XIII of the Constitution of India or not. HELD THAT:- The issue is answered accordingly, partly in favour of the Revenue and partly in favour of the assessees - Following conclusions reached:- a. Section 6 of the TNVAT Act, 2006 is not a charging Section. It only provides for an alternate mode of discharging taxes to the dealers, who voluntarily opt for the compounding scheme to pay taxes at a compounded rate. It is always open to the dealers to fall back under Section 5 from the next year, if their tax planning permits them. No tax under the TNVAT Act, can be levied at the point of interstate purchase. However, when such goods are brought in and used in the execution of the works contract, they are liable to pay tax on the deemed sale in accordance with Sections 5 and 10 of the TNVAT Act. b. While granting the concession at the point of payment of output tax, it is open to the State to impose any restriction or conditions for availing such concession. The concession at the point of interstate purchase from a registered dealer is already available under Section 8 of the CST Act and there is no tax on imported goods and such goods are taxed only at the first point of sale within the State. c. The composition scheme under Section 6 cannot be treated as provision for levy of tax on purchases or imposing any restriction on purchases from other State or import. The conditions do not alter the rate of tax of goods imported from outside the State. The concession is granted at the point of output tax payable on the transfer of property in goods. d. Works contract in general denotes the genus with different species. The dealers purchasing goods from local dealers form a distinct category/species from dealers who purchase goods from local as well as other state dealers or dealers who import goods to be used in the works contract. There is a rationale behind such classification for the purpose of Section 6. In fiscal or taxing enactments, it is not necessary that every enactment should be backed by objects and reasons. What is relevant is the competence of the State and whether such enactment offends any constitutional rights, which in the instant cases, are held to be negative. The object and the reason adduced in the counter, which in the opinion of this court, can be discerned even without such counter as because, whenever, a purchase takes place in the course of intertrade or commerce falling under Section 8(1) of the CST Act, the rate of tax payable is at a concessional rate upon satisfaction of the requirement under Section 8(4), which is much lower than the rate of tax prescribed for the purchase of goods from a local dealer. The State obviously is at loss of revenue at the point of purchase, added together the option to pay tax at compounded rate on the value of the Contract, the State is at a loss. Such classification or distinction is not unknown in taxing law. Even Sections 5 and 6 of TNVAT Act classify works contractors into different categories. Similarly, Section 8 of the CST Act treats the dealers of the same goods differently, depending upon whether they fall under Section 8(1) or 8(2) of the CST Act. The object that is sought to be achieved is two folds viz., (i) to curb the loss of revenue accrued due to interstate purchase of goods or import; and (ii) to create a level playing field for the local dealers. Therefore, the condition is well found on intelligible differentia and has a nexus to the object that is sought to be achieved. Hence, the challenge to the provision as being arbitrary and in violation of Article 14 is rejected. e. The challenge to a provision as being ultra vires to the constitution is available only on limited circumstances, (i) when it is beyond the legislative competence of the State and (ii) when it offends or violates the constitutional guarantees and safeguards. In the present case, the authority of the State to levy tax on sale of goods is traceable to Entry 54 of List II of Seventh Schedule as it stood then. The authority to impose tax carries with it all the incidental authority to lay down the procedure, to grant exemption or concession and to impose conditions or restrictions for availment of such exemptions and conditions. Therefore, the amendment challenged is well within the legislative competence of the State. f. As regards the provision offending Article 14, 19(1) (g), 301, 303 and 304 of the Constitution, we have already held that the impugned amendment is based on intelligible differentia, does not affect the right of the dealers to carry on any trade of business or impedes the free movement of goods. The compounding Scheme under Section 6 is only an option to be exercised voluntarily. There is no compulsion to opt under section 6 and it is open to a works contractor to pay taxes under section 5. The condition contained in section 6 cannot be regarded as giving any preference to one State over another or as discriminatory by levying more tax on the goods brought in from outside the State as because the State by such amendment has not imposed any tax. Therefore, the Amendment does not infringe any of the guarantees or safeguards provided under the Constitution. Accordingly, all the writ petitions challenging the vires of Section 6 of TNVAT Act, 2006, fail and are hence, dismissed. g. Insofar as the challenge to the retrospective effect given to the amendment as being violative of Article 19 (1) (g) of the Constitution, the same is rejected as because it is within the authority of the State to bring in such amendments in fiscal statutes by clearly prescribing the date from which it must be given effect. The hardship that is caused to individuals seldom matters as validity of any fiscal enactment ought to be tested on the basis of generality of its operation and not on the basis of few individual cases. However, by the time amendment was introduced, the assessment year 200607 was over. Hence, it will not apply to the assessment year 2006-07. With respect to the assessment year 2007-08, the retrospective operation will not affect the dealers, who had already exercised the option prior to the date of amendment for that year and would be applicable only to those dealers who had not exercised the option by that date. h. Insofar as reading down the provision to permit the assessees to exclude the turnover relating to interstate purchase or import and pay tax for that separately under Section 5 and for the balance turnover under Section 6, the said request is rejected as the same is not possible, once the provisions are upheld. The same would amount to re-writing the law and defeat the very purpose of the amendment. i. Regarding the co-developers of SEZ are concerned, the provision cannot be read down to exclude the co-developers of SEZ, when the validity has been upheld. Such an exercise would amount to dichotomy in law. The facts, as to whether the activity against which an exemption is claimed, is an authorized activity of the Developer to extend the benefit to the co-developer, as to whether the ownership is transferred to third parties and the interpretation of contracts cannot be adjudicated in this writ petition. It is open to the concerned petitioner to challenge the order of assessment, if any, passed against him in the manner known to law. j. With regard to the writ petitions challenging the notices are concerned, the petitioners are directed to submit their reply within a period of four weeks from the date of receipt of a copy of this order and the concerned assessing officers shall fix a date for personal hearing within two weeks thereafter and pass orders within a further period of four weeks. In case, the assessees fail to submit their reply, it is open to the assessing officers to fix a date for hearing and thereafter, pass orders in accordance with law. k. Insofar as the challenge to the assessment orders is concerned, this court has already upheld the vires of Section 6. In some cases, this court finds that there are other issues which are dealt with in the assessment orders. It is only appropriate that the factual aspects are raised before the appellate authority. Therefore, this court relegates the petitioners to avail the alternative remedy of appeal under Section 51 of the TNVAT Act, 2006 within a period of four weeks from the date of receipt of a copy of this order. The Registry is directed to return the original impugned orders to the respective counsel. The writ petitions challenging the vires of Section 6 of TNVAT, 2006 are dismissed and the writ petitions challenging the notices and assessment orders are disposed of with the above directions.
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Indian Laws
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2022 (5) TMI 1358
Dishonor of Cheque - compounding of offences - parties settled the matter - amount deposited by the petitioner with the respondent-complainant - Section 147 of the Negotiable Instruments Act, 1881 - HELD THAT:- The issue regarding compounding under the Negotiable Instruments Act at the stage of appeal as well as revision has come before this Court as well as before the Hon'ble Supreme Court and they have upheld that the powers under Section 147 of the Negotiable Instruments Act can be invoked at any stage of the proceedings i.e. at the stage of trial, appeal or at the revisional jurisdiction and that the courts should be liberal in exercising such powers. Reference can also be made to the judgment in the matter of COCHIN HOTELS CO. (P) LTD. AND ORS. VERSUS KAIRALI GRANITES AND ORS. [ 2005 (2) TMI 904 - SUPREME COURT] , and K. SUBRAMANIAN VERSUS R. RAJATHI REP. BY P.O.A.P. KALIAPPAN [ 2009 (11) TMI 1013 - SUPREME COURT ], which held that the petitioner can resort to a compounding mechanism in terms of Section 147 of the Negotiable Instruments Act as offence related to dishonour of cheque has a compensatory profile and it should be given precedence to cumulative mechanism. The offence is almost a civil wrong which has been clothed in criminal overtones, therefore, priority should be given to compensatory mechanism. In view of the parties having settled the matter and the amount having been deposited by the petitioner with the respondent-complainant and in the light of consent of the parties, it is deemed appropriate to invoke the power vested by virtue of Section 147 of the Negotiable Instruments Act and allow the compounding of the offence under Section 138 of the Negotiable Instruments Act - petition allowed.
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