TMI Tax Updates - e-Newsletter
May 8, 2020

Case Laws in this Newsletter:

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

TMI SMS

• The option to file statutory appeal was foreclosed by time limitation - HC ought not to have entertained the subject writ petition.

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Articles

• INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) ACT, 2020 – AN OVERVIEW
• Penalty u/s 270A of Income Tax Act, 1961
• CORONA: IMPACT AND LESSONS

Notifications

GST - States

• F-A-3-11-2020-1-V (24) - dated 4-5-2020 - Madhya Pradesh SGST
  Seeks to extend the time limit for furnishing of the annual return specified under section 44 of MPGST Act, 2017 for the financial year 2018-2019 till 30.06.2020.

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• F A 3-85/2017/1/V (26) - dated 4-5-2020 - Madhya Pradesh SGST
  Provide relief by conditional waiver of late fee for delay in furnishing returns in FORM GSTR-3B for tax periods of February, 2020 to April, 2020 under the MPGST Act, 2017

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• F A 3-51/2019/1/V(29) - dated 4-5-2020 - Madhya Pradesh SGST
  Supersession Notification No. F A-3-51-2019-1-V (13) dated the 20th March, 2020

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• F A 3-48/2019/1/V(31) - dated 4-5-2020 - Madhya Pradesh SGST
  Seeks to exempt certain class of registered persons capturing dynamic QR code and the date for implementation of QR Code to be extended to 01.10.2020

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• F A 3-32/2017/1/V (32) - dated 4-5-2020 - Madhya Pradesh SGST
  Amendment in Notification No. F-A-3-32-2017-1-V (41), dated the 29th June, 2017

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• F A 3-26/2019/1/V(30) - dated 4-5-2020 - Madhya Pradesh SGST
  Seeks to amend Notification No. F-A 3-26-2019-1-V (53) dated the 29th June, 2019

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• F A 3-26/2019/1/1V (23) - dated 4-5-2020 - Madhya Pradesh SGST
  Amendment in Notification No. F A-3-26-2019-1 -V (53) dated the 29th June, 2019

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• F A 3-14/2020/I/V (27) - dated 4-5-2020 - Madhya Pradesh SGST
  Seeks to prescribe the due date for furnishing FORM GSTR-1 for the quarters

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• F A 3-13/2020/1/V (33) - dated 4-5-2020 - Madhya Pradesh SGST
  Seeks to specify class of persons, other than individuals who shall undergo authentication, of Aadhaar number in order to be eligible for registration

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• F A 3-10/2020/1/IV (25) - dated 4-5-2020 - Madhya Pradesh SGST
  Seeks to specify the class of persons who shall be exempted from aadhar authentication

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• CT/LEG/GST-NT/12/17-06/2020 - dated 3-4-2020 - Nagaland SGST
  Seeks to extend due date for furnishing FORM GSTR-3B for supply made in the month of May, 2020.

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• CT/LEG/GST-NT/12/17-05/2020 - dated 23-3-2020 - Nagaland SGST
  Seeks to prescribe return in FORM GSTR-3B of SGST Rules, 2017 with due dates form for April, 2020 to September, 2020

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• FIN/REV-3/GST/1/08 (Pt- 1) (Vol.1)/41 - dated 24-2-2020 - Nagaland SGST
  Corrigendum to Notification NO.FIN/REV-3/GST/I/08 (Pt-I) (Vol 1) /26 , dated 21st Feb, 2020

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• FN/REV-3/GST/1/08 (Pt-1)(Vol.1)/26 - dated 21-2-2020 - Nagaland SGST
  Seeks to amend notification No. F.No.FIN/Rev-3/GST/1/08 (Pt-1) "D" dated 30.06.2017 so as to notify rate of GST on supply of lottery

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Income Tax

• 23/2020 - dated 6-5-2020 - IT
  Income-tax (8th Amendment) Rules, 2020.

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Highlights / Catch Notes

GST

• Transitional Input tax credit - availment of accumulated CENVAT by filing declaration Form TRAN-1 beyond the period provided under CGST Rules - Rule 117 is directory in nature, insofar as it prescribes the time-limit for transitioning of credit and therefore, the same would not result in the forfeiture of the rights, in case the credit is not availed within the period prescribed - the period of three years should be the guiding principle and thus a period of three years from the appointed date would be the maximum period for availing of such credit.
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• Grant of Bail - illegal availment of input tax credit - fictitious firms - It may be true that as on date the person conniving with the petitioner might not have been arraigned as accused or arrested; but then it would be pre-mature to make any further comment on the said aspect as investigation is under way and it is at crucial stage.
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• Restriction on Rectification of GSTR-3B return - The rectification/ adjustment mechanism for the months subsequent to when the errors are noticed is contrary to the scheme of the Act. The Respondents cannot defeat this statutory right of the Petitioner by putting in a fetter by way of the impugned circular. Since the Respondents could not operationalize the statutory forms envisaged under the Act, resulting in depriving the Petitioner to accurately reconcile its input tax credit, the Respondents cannot today deprive the Petitioner of the benefits that would have accrued in favour of the Petitioner, if , such forms would have been enforced. The Petitioner, therefore, cannot be denied the benefit due to the fault of the Respondents.
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Corporate Law

• Oppression and mismanagement - siphoning off of funds - Non payment of taxes - The petitioner admittedly is not a member - The question is whether the business of the respondent-company is being conducted in any fraudulent manner. - The petitioner has not established any fraud in the course of business carried out by the respondent-company.
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Indian Laws

• The co-operative banks under the State legislation and multi-State co-operative banks are ‘banks’ under section 2(1)(c) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The recovery is an essential part of banking; as such, the recovery procedure prescribed under section 13 of the SARFAESI Act, a legislation relatable to Entry 45 List I of the Seventh Schedule to the Constitution of India, is applicable. - The Parliament has legislative competence under Entry 45 of List I of the Seventh Schedule of the Constitution of India to provide additional procedures for recovery.
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Central Excise

• CENVAT Credit - input services - exempt services or not - Even if the process carried out by the appellant does not amount to ‘manufacture’, when N/N. 214/86 comes into application it has to be understood that the job worker is undertaking part of the manufacturing activity on behalf of the principal manufacturer - credit allowed.
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VAT

• Power of High Court to entertain writ petition - The option to file statutory appeal was foreclosed by time limitation including extended period of limitation - it is incomprehensible as to how it would become a case of violation of fundamental right, much less statutory or legal right as such - The High Court ought not to have entertained the subject writ petition filed by the respondent herein.
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Case Laws:

• GST

• 2020 (5) TMI 171
  Transitional Input tax credit - availment of accumulated CENVAT credit as of 30th June, 2017 by filing declaration Form TRAN-1 beyond the period provided under CGST Rules - validity of Rule 117 of the CGST Rules - challenge on the ground that it is arbitrary, unconstitutional and violative of Article 14 to the extent it imposes a time limit for carrying forward the CENVAT credit to the GST regime - cause for not filing the TRAN-1 Form within time is sufficiently explained - section 140 of CGST Act. HELD THAT:- On 1st July, 2017, the new indirect tax regime was introduced in the country by way of enactments, including the Central Goods and Services Tax Act, 2017 (CGST Act). The CGST Act introduced transitionary provisions to enable the taxpayers to migrate from the erstwhile indirect tax regime to the new GST regime. Section 140 of the CGST Act deals with the transitionary provisions - In pursuance of the above noted provision, respondent No.1 framed the CGST Rules - Rule 117 of the said rules imposed a time limit of 90 days for availing benefit of the accumulated CENVAT credit as provided under Section 140 (1) in its input tax credit register under the CGST Act. The transition from the erstwhile regime to GST for the availment of the CENVAT credit was to be by way of a declaration to be submitted electronically in Form GST TRAN-1. The date prescribed for filing of the said Form was extended several times by way of orders issued from time to time, finally till 27th December, 2019. Several taxpayers however could not meet the deadline. This was on account of several factors - predominantly being inadequacies in the network of the respondents, which failed to meet the expectations and serve the needs of taxpayers. Thousands of taxpayers complained that there was low bandwidth and despite several attempts being made on the GST Network, they were unsuccessful in filing the statutory GST TRAN-1 Form online - The recommendations of the Grievance Redressal Committee were also brought to the notice of the GST Council and the matter was deliberated upon. Several cases got settled at the government level, however some cases were contested on the ground that taxpayers did not put forward any evidence to suggest that they faced any technical glitch on the portal that prevented them to submit the GST TRAN-1 Form within the prescribed time limit. Many such matters travelled to courts. Majority of them were allowed in favour of the taxpayers, and directions were issued to the respondents to permit the filing of TRAN-1 Form beyond the extended date. The insertion of Sub-rule 1(A) and, thereafter, extensions being granted for filing of GST TRAN-1, notwithstanding the period envisaged under sub rule (1) of Rule 117, demonstrates that the respondents recognize the fact that the registered persons were not able to upload GST TRAN-1 due to technical difficulties on the common portal. This also substantiates that the period for filing the TRAN-1 is not considered either by the legislature, or the executive as sacrosanct or mandatory. In the present case, Are the facts before us such, as to deny the petitioners the relief extended to taxpayers covered by the category of technical glitches or technical difficulties ? - HELD THAT:- The facts of each case enumerated above indicate that the petitioners have, either, not been vigilant of the timelines, or have been victims of the chaos and confusion that was prevailing at the time when the GST regime was introduced. As a result, Petitioners may not have concrete evidence in their hand to convincingly exhibit that they faced a technical issue on the GSTN portal while uploading the declaration in GST TRAN-1 - We were faced with a similar situation in the case of AB Pal Electricals Pvt. Ltd. vs. Union of India [ 2019 (12) TMI 1002 - DELHI HIGH COURT ] decided vide judgmentdated 17th December, 2019. In the said case, the assessee could not file the form within prescribed time for the reason that the Managing Director of the company was not keeping well, and as a result was unable to attend to the business affairs of the company for a long time - When the Managing Director recovered from his illness, he followed up with the authorities by submitting a representation seeking benefit of the CBIC s orders issued from time to time-extending the last date for submission of the TRAN-1 Form. The case was considered by the GST Council, but it failed to redress his grievance and the matter reached before us. We considered the situation and accepted respondents contention that the case of the petitioner could not be strictly considered as one covered by the situation of technical glitches - The above decision would also cover the case of the Petitioners, and there can be no two views about this proposition and we would like to extend similar benefit to them. Whether the Government could curtail the accrued and vested right, and restrict it to 90 days by a subordinate legislation? - HELD THAT:- There is nothing sacrosanct about the time limit so provided. It is not as if the Act completely restricts the transition of CENVAT credit in the GST regime by a particular date, and there is no rationale for curtailing the said period, except under the law of limitations. The period of 90 days has no rationale and as noted above, extensions have been granted by the Government from time to time, largely on account of its inefficient network. In order to avail the benefit, no restriction has been put under any provisions of the Act in terms of the time period for transition. The time limit prescribed for availing the input tax credit with respect to the purchase of goods and services made in the pre-GST regime, cannot be discriminatory and unreasonable. There has to be a rationale forthcoming and, in absence thereof, it would be violative of Article 14 of the Constitution - further, the CENVAT credit which stood accrued and vested is the property of the assessee, and is a constitutional right under Article 300A of the Constitution. The same cannot be taken away merely by way of delegated legislation by framing rules, without there being any overarching provision in the GST Act. The appellant-company was a registered dealer under the Tamil Nadu Value Added Tax Act, 2006 (Tamil Nadu VAT Act)who was engaged in the business of leasing management of the motor vehicles and resale of used motor vehicles. It claimed entitlement to input tax credit of the amount paid on the purchases made from the registered dealer of motor vehicle as per Section 19(2) of the Tamil Nadu VAT Act.As per Section 19(11), if a dealer had not claimed input tax credit for a particular month, the dealer could claim the input tax credit before the end of the financial year or before 90 days from the date purchase, whichever was later. When the petitioner filed its return for the assessment year 2007-08 - for want of tax invoices, the said input tax credit could not be claimed - in the instant cases, the input tax credit had been claimed in the erstwhile regime and was being reflected in the CENVAT credit ledger. This credit, under the Section 140(1), has to be carried forward and in that sense, the vested right of the property of the petitioner stood accrued and the same cannot be taken away by the respondents by way of Rules. Lastly, there are also merit in the submissions of the petitioners that Rule 117, whereby the mechanism for availing the credits has been prescribed, is procedural and directory, and cannot affect the substantive right of the registered taxpayer to avail of the existing / accrued and vested CENVAT credit. The procedure could not run contrary to the substantive right vested under sub Section (1) of Section 140 - Under the garb of framing Rules which are subordinate legislation, the width of those limitations could not have been expanded as is sought to be done by introduction of Rule (1A). In absence of any consequence being provided under Section 140, to the delayed filing of TRAN-1 Form, Rule 117 has to be read and understood as directory and not mandatory - Therefore, in the present cases, the purport of the transitory provisions is to allow a smooth migration from the erstwhile service tax regime to the new GST regime and the interpretation must be in consonance with the said purpose. Thus there are no hesitation in reading down the said provision [ Rule 117] as being directory in nature, insofar as it prescribes the time-limit for transitioning of credit and therefore, the same would not result in the forfeiture of the rights, in case the credit is not availed within the period prescribed. This however, does not mean that the availing of CENVAT credit can be in perpetuity. Transitory provisions, as the word indicates, have to be given its due meaning. Transition from pre-GST Regime to GST Regime has not been smooth and therefore, what was reasonable in ideal circumstances is not in the current situation. In absence of any specific provisions under the Act, we would have to hold that in terms of the residuary provisions of the Limitation Act, the period of three years should be the guiding principle and thus a period of three years from the appointed date would be the maximum period for availing of such credit - since all the Petitioners have filed or attempted to file Form TRAN-1 within the aforesaid period of three years they shall be entitled to avail the Input Tax Credit accruing to them. They are thus, permitted to file relevant TRAN-1 Form on or before 30.06.2020. Respondents are directed to either open the online portal so as to enable the Petitioners to file declaration TRAN-1 electronically, or to accept the same manually. Respondents shall thereafterprocess the claims in accordance with law. We are also of the opinion that other taxpayers who are similarly situated should also be entitled to avail the benefit of this judgment - Respondents are directed to publicise this judgment widely including by way of publishing the same on their website so that others who may not have been able to file TRAN-1 till date are permitted to do so on or before 30.06.2020. Petition allowed.

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• 2020 (5) TMI 170
  Grant of Bail - illegal availment of input tax credit - fictitious firms - HELD THAT:- In the instant case, it appears that the case would require thorough investigation with the possibility of addition of more accused to the array; inasmuch as, as many as 406 summonses have been issued and 92 beneficiary firms are under scrutiny - Complaint might have been filed against the petitioner in compliance with Section 167 of Cr.P.C, that would however not preclude the investigating agency to investigate into what could be the huge racket and under such circumstances placing the petitioner out of jail would be potential threat to the investigation; inasmuch as, the manipulation of the evidence at the hands of the petitioner cannot be ruled out. The loss of ₹ 60 Crores to the public exchequer so far cannot be considered as a small amount. It may be true that as on date the person conniving with the petitioner might not have been arraigned as accused or arrested; but then it would be pre-mature to make any further comment on the said aspect as investigation is under way and it is at crucial stage. Bail cannot be granted - application dismissed.

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• 2020 (5) TMI 169
  Restriction on Rectification of GSTR-3B return - Refund of excess tax paid - Constitutional validity of Rule 61 (5) of the GST Rules, Form GSTR- 3B and Circular No. 26/26/2017-GST dated 29.12.2017 - vires of CGST Act and contrary to Articles 14, 19 and 265 of the Constitution of India - challenge is principally for the reason that Petitioner is being prevented from correcting its monthly GST returns, and consequently seeking refund of the excess taxes paid. Rectification of Form GSTR 3B - period from July to September, 2017 - HELD THAT:- The statutory scheme, as envisaged under the Act provided a facility for validation of monthly data through the IT System of the Government wherein the output of one dealer (Form GSTR-1), becomes the input of another dealer and gets auto-populated in Form GSTR-2 (Inward Supplies) - The statutory provisions provided not just for a procedure but a right and a facility to a registered person by which it can be ensured that the ITC availed and returns can be corrected in the very month to which they relate, and the registered person is not visited with any adverse consequences for uploading incorrect data. Rectification scheme under the Act - HELD THAT:- The statute provides for a 2-stage rectification procedure by which the errors or omissions can be rectified by a registered person - While the GST regime envisaged the filing process and recording of ITC and payment of taxes as above, admittedly, due to system issues and under preparedness with regard to the extent of data to be processed, Form GSTR-2, and 3 were not made operational; and have been now completely done away with. Form GSTR-2A was made operational only in September 2018 by the Government. This Form is also valid in respect of the past periods commencing July 2017. Since Forms GSTR-2 and 3 could not be operationalized by the Government, the Government introduced Rule 61(5) (which was amended vide Notification No. 17/2017-Central Tax, dated 27.07.2017) and the Rule 61(6) in the CGST Rules, and provided for filing of monthly return in Form GSTR-3B which is only a summary return. Mr. Singh appearing for the Revenue does not controvert the submission of Mr. Gulati that Form GSTR3B is filled in manually by each registered person and has no inbuilt checks and balances by which it can be ensured that the data uploaded by each registered person is accurate, verified and validated. Therefore, the design and scheme of the Act as envisioned has not been entirely put into operation as yet - In these circumstances, there are merit in the submission of Mr. Gulati that if the statutorily prescribed form i.e. GSTR-2 3 had been operationalized by the Government, as was envisaged under the scheme of the Act, the Petitioner with reasonable certainty would have known the correct ITC available to it in the relevant period, and could have discharged its liability through ITC, instead of cash. Now that the correct figures are known to the Petitioner, and limited rectification of returns is permissible, why is Petitioner s grievance not redressed? - The answer lies in the refund provisions that we shall now allude to briefly. These provisions are the stumbling block for the petitioner to remedy the situation. ITC is taken on the basis of the invoices issued to a registered person providing input/output services. This ITC is credited to the electronic credit ledger [Section 2 (46) of the CGST Act] under section 49(2) of the CGST Act. The rectification/ adjustment mechanism for the months subsequent to when the errors are noticed is contrary to the scheme of the Act. The Respondents cannot defeat this statutory right of the Petitioner by putting in a fetter by way of the impugned circular. Since the Respondents could not operationalize the statutory forms envisaged under the Act, resulting in depriving the Petitioner to accurately reconcile its input tax credit, the Respondents cannot today deprive the Petitioner of the benefits that would have accrued in favour of the Petitioner, if , such forms would have been enforced. The Petitioner, therefore, cannot be denied the benefit due to the fault of the Respondents. The rectification of the return for that very month to which it relates is imperative and, accordingly, we read down para 4 of the impugned Circular No. 26/26/2017-GST dated 29.12.2017 to the extent that it restricts the rectification of Form GSTR-3B in respect of the period in which the error has occurred - the Petitioner is permitted to rectify Form GSTR-3B for the period to which the error relates, i.e. the relevant period from July, 2017 to September, 2017 - petition allowed.

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• Income Tax

• 2020 (5) TMI 167
  Validity of block assessment - income reported by the assessee is on presumptive basis u/s 44AE - as argued since the search warrant is in joint names, the assessment should have been made as an AOP and therefore, the present assessment in individual capacity of the assessee is bad in law - HELD THAT:- This ground has no merit because of this reason that as per section 292CC recently inserted in the Income Tax Act, 1961 w.e.f. 01.04.1976, even in case of joint warrant, assessment has to be separate in individual names. Second technical objection is that search itself is illegal and therefore, the consequent block assessment is bad in law - Regarding this technical objection, we find that an Explanation had been inserted in section 132 by the Finance Act, 2017 w.r.e.f. 01.04.1962 to the effect that the reasons to believe recorded by the income tax authorities under this section shall not be disclosed to any person or any authority or the Appellate Tribunal. The assessee also has not produced any material in support of this ground and therefore, we do not find any reason to interfere in the order of CIT (A) on this issue. Income reported on presumptive basis u/s 44AE by assessee - compute cash available with the assessee towards explanation of source of various investment - whether depreciation should be added because the income declared by the assessee is after depreciation and hence, cash available is such declared income plus depreciation? - CIT (A) rejected this claim by saying that as per the assessee himself, depreciation is only a notional charge on profit and does not involve actual cash outgo and hence, depreciation being a notional charge cannot become source of real asset like cash and gold - HELD THAT:-. In our considered opinion, this logic of CIT (A) is not proper. If the income declared by the assessee u/s 44AE only is considered as source of cash and gold found then the amount of depreciation allowable should be added to such accepted source because such income declared u/s 44AE is after reducing allowable depreciation from real cash income and therefore to work out the cash available with the assessee on account of such income should be such income and the amount of allowable depreciation. But there is no finding of AO or CIT (A) about the amount of depreciation allowable on these four trucks during the block period and therefore, we remit this matter back to AO to decide this issue after allowing reasonable opportunity of being heard to the assessee. These grounds are allowed for statistical purposes. Business advance made by the assessee in Anubhav Plantations and VGP Plantations as undisclosed income of block period - main argument is this that these are business advances and since these are not recoverable, it is allowable as business loss against this very addition made by the AO - CIT (A) has rejected this argument by holding that addition has to be made because source of such advances could not be explained by the assessee and regarding claim of it as business loss, no specific finding is given and this claim was rejected by saying that bad debts are allowable u/s 36 (1) (vii) on actual write off - HELD THAT:- We feel that these findings of Chandrahas learned CIT (A) are also not sustainable because if the advances are given by the present assessee, its non recovery can be claimed as business loss by the present assessee only and it should be allowed if other pre requirements for claiming such loss is satisfied by the assessee. Actual write off in books is required to claim bad debts but the assessee is claiming it as business loss and not as bad debt u/s 36 (1) (vii). Such claim as bad debt is neither claimable nor allowable for this reason alone that the requirements of section 36 (2) cannot be satisfied for nonrecovery of trade advances. Hence, we will it proper to remand this matter also to the AO for a fresh decision about the claim of the assessee as business loss. We order accordingly and direct the AO to decide this issue by a speaking and reasoned order after affording adequate opportunity of being heard to the assessee. Ground is also allowed for statistical purposes. Interest charged u/s 158 BFA (1) should be deleted - HELD THAT:- It is a settled position of law that chargeability of interest is consequential and therefore, this ground is rejected. Levy of surcharge - HELD THAT:- In the case of CIT Vs Vatika Township [ 2014 (9) TMI 576 - SUPREME COURT] it was held that levy of Surcharge by insertion of proviso to section 113 of Income Tax Act by Finance Act 2003 is prospective. In the present case, the block period ends on 06.09.2000 and therefore, surcharge cannot be levied in the present case. This ground is allowed.

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• 2020 (5) TMI 166
  Exemption u/s 11 - grant of registration u/s. 12AA - Charitable activity u/s 2(15) - HELD THAT:- The assessee has applied on 20.07.2017 for registration of AOP under the W. B. Societies Registration Act, 1961, the outcome of it must be in the knowledge of assessee, which may be shared with the CIT(E) and the Ld. CIT(E) to consider the application of assessee for exemption u/s.12A afresh as per the ratio laid down in LAXMINARAYAN MAHARAJ AND ANOTHER [ 1983 (9) TMI 50 - MADHYA PRADESH HIGH COURT] and M/S AMBALA PUBLIC EDUCATIONAL SOCIETY, AMBALA [ 2018 (11) TMI 1178 - PUNJAB AND HARYANA HIGH COURT] on the issue. Before we part, we would like to remind the Ld. CIT(E) that the Ld. CIT(E) s jurisdiction is to verify the objects of the assessee and the genuineness of the activities meaning thereby that he had to satisfy himself that the objectives of the Trust are charitable in nature and activities have been carried on or to be carried on are genuine, meaning thereby that they are in consonance for achieving of charitable objects and nothing else. We set aside the impugned order of Ld. CIT(E) and remand the application of the assessee back to the file of the Ld. CIT(E) for de novo consideration in the light of the aforesaid discussion. Appeal of assessee is allowed for statistical purposes.

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• 2020 (5) TMI 165
  Addition u/s 41 - unsecured loan taken from Standard Chartered Bank by treating the same as the liability, which was ceased to exist - HELD THAT:- On a query raised by the assessee, he, however, failed to explain as to how the said liability of ₹ 74,668/- as on 01.09.2009 was increased to ₹ 2,29,065/- as on 31.03.2015 as shown by the assessee in its balance-sheet. He has also failed to point out any communication received from M/s. Saha Finlease Pvt. Limited during the period of last more than 10 years to show that the loan liability in question sold by Standard Chartered Bank was ever claimed by M/s. Saha Finlease Pvt. Limited from the assessee. The assessee thus has failed to establish the existence of the said liability and having regard to all the facts of the case said liability can be treated as ceased to have existed. Therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) on this issue confirming the addition made by the AO. Un-reconciled difference in the account of certain sundry creditors and debtors - HELD THAT:- Difference in the closing balance of M/s. Life Drug House Pvt. Limited and M/s. Indchemie Health Specialities Pvt. Limited was satisfactorily explained by the assessee and the said explanation was duly accepted by the AO after verification of the relevant record. Regarding the difference in closing balance of other two parties namely M/s. Goutam and M/s. Maa Padma Medical, the assessee, however, could not offer any satisfactory explanation as clearly stated by the AO in his remand report. Categorical findings recorded by the AO in his remand report, difference in the closing balance of the concerned parties was satisfactorily explained by the assessee and the CIT(Appeals) was not justified in confirming the addition made by the AO on this issue to that extent. Modify the impugned order of the CIT(Appeals) on this issue and restrict the addition made by the AO. Ground No. 2 of the assessee s appeal is thus partly allowed.

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• 2020 (5) TMI 164
  Disallowance of expenditure u/s 57(iii) - assessee failed to provide any proof to A.O. to prove that the expenses claimed were incurred for earning interest on fixed deposits under the head Income from other sources - CIT-A allowed the disallowance - Additional disallowance as made u/s 14A - HELD THAT:- The investment managers were appointed by the trustee to manage the asset of the trust. The investment manager raises funds from contributors at beginning of fund life, parks the same for time being in FDR with Bank, invest the same in investee company, realizes income from investment, make exit at appropriate time, park surplus money in bank FDR and distributes fund amongst contributors. Assessee had earned exempt income against which it has offered disallowance u/s 14A in terms of Rule 8D. However, by implication, it could not be said that rest of the expenditure was incurred to earn the interest income. It is quite evident form assessee s own submissions before Ld. CIT(A) that the prime objective of the assessee was to make investment as venture capital fund. The income earned therefrom was assessed as capital gains. Only the surplus money held by the assessee was kept as fixed deposits in the bank. The management / trusteeship fees other expenditure was primarily directed towards venture capital investments. No borrowing costs have been incurred by the assessee - claim of the assessee was to be adjudged at the threshold of Sec. 57(iii) which mandate that any expenditure laid out or expended wholly or exclusively for the purposes of earning such income, would be allowable. However, in the present case, the management / trusteeship fees and other expenses which mainly consist of audit fees, professional fees etc. were directed towards the prime activity i.e. venture capital investment, the income from which has been assessed under the head Capital Gains. Therefore, we find that there was no direct nexus of these expenditure vis- -vis interest income earned by the assessee. The rule of consistency would not be applicable since matter of disallowance u/s 57(iii) arose in AY 2010-11 also. The decision of Tribunal for AY 2009-10 was concerned with disallowance u/s 14A only and therefore, the same would also not be applicable. Upon perusal of grounds raised by revenue, it is evident that revenue was under appeal on the ground that Ld. CIT(A) allowed the expenditure though the assessee did not fulfill the Venture Capital Fund regulations. The deduction u/s 57(iii) was not the issue under consideration. In the decision of CIT V/s Richardson Cruddas Ltd. [ 1989 (12) TMI 3 - CALCUTTA HIGH COURT] there was nexus of custodian expenditure vis- -vis interest income and therefore, the same is factually distinguishable. Since there was no material on record which would suggest any nexus of expenditure vis- -vis interest income, the expenditure thus claim would not be allowable to the assessee - we set aside the impugned order and restore the computations made by Ld. AO. - Decided in favour of revenue.

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• 2020 (5) TMI 163
  Deduction u/s 80P(2) - assessee is a co-operative society registered under Karnataka Co-operative Societies Act, 1959 - denial of deduction u/s 80P(2) as the assessee is in the Banking business accepts the deposits from the general public being C Class nominal members and also lend the funds - whether nominal members are the contributors for earning surplus and does not participate share the sulplus of the society, hence the concept of mutuality cease to exists? - HELD THAT:- As decided in M/S. KODAVOOR VYAVASAYA SEVA SAHAKARI SANGHA NIYAMITHA [ 2019 (8) TMI 1269 - ITAT BANGALORE] referring decision rendered by the co-ordinate Bench and the jurisdictional High Court in respect of Members definition and chargeability of interest income under 'income from other sources' . We follow the judicial precedence and restore the entire disputed issue to the file of Assessing Officer to adjudicate afresh in the light of the decision of chargeability of interest income under the head 'income from other sources' and the observations in the case of Totgar's Co-operative Sales Society Ltd. vs. ITO [ 2010 (2) TMI 3 - SUPREME COURT] and Tumkur Merchants Souharda Credit Co-operative Ltd. [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT]. Whereas in respect of the claim of Nominal Members included in the definition of Member we find support on our view rely on the decision of Trapaj Vibhageeya Khet Udyog Mal Rupantar Food Processing Sahakari Mandali Ltd. vs. DCIT [ 2018 (8) TMI 273 - ITAT AHMEDABAD] and Prin. CIT vs. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd. [ 2019 (1) TMI 116 - MADRAS HIGH COURT] which is covered in favour of the assessee. Accordingly, we are of the substantive opinion that the nominal members are also eligible for the Benefits of credit society. Accordingly we restore entire disputed issue to the file of Assessing Officer to grant the benefit to the nominal members - Assessee's appeal is allowed for statistical purposes.

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• 2020 (5) TMI 162
  Addition made towards the difference in the value of services rendered as reflected in Form No.26AS vis- -vis books of account of assessee - HELD THAT:- The law is very well settled that the claim of TDS credit should be granted vis- -vis corresponding income getting taxed in the relevant assessment year. Considering the fact that the assessee had furnished a detailed reconciliation statement party wise mentioning the total receipts vis- -vis the corresponding TDS thereon and as per the reconciliation statement. There are some parties with whom no receipts have been shown by the assessee in her income tax return, but reflected in Form 26As of the assessee together with TDS thereon, we deem it fit and appropriate, in the interest of justice and fair play, to remit the issue to the file of Ld. A.O. for denovo adjudication in accordance with law by making corresponding cross-verification with the concerned parties to ascertain the fact whether at all any services were indeed rendered and completed during the year under consideration by the assessee so as to bring to tax the corresponding service charge income thereon together with its TDS. Grounds raised by the assessee are allowed for statistical purposes.

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• 2020 (5) TMI 161
  Addition u/s. 69B - unexplained source of deposit - HELD THAT:- It is not known how one could establish the agricultural income. In this country agriculture is an unorganized sector. Expecting evidence from the agriculturist for their agriculture income is something impossible one. So long as the agriculture activity in this country is un-organized and it is sold in the un-regulated market, no one could establish the agriculture income. Moreover, the investment is only 22.50 lakhs. In the present economic scenario, which prevails in our country even a small agricultural labour would earn ₹ 500 to ₹ 1,000/- in day. A person employed in hair cutting shop or in road side restaurant also earn ₹ 1,000/- to 2,000/- per day. This economic factor cannot be doubted by anyone in this country. Taking into consideration of the economic situation prevails in the country, this Tribunal is of the considered opinion that there is no justification for making addition of ₹ 22.50 lakhs. Accordingly, the orders of both the lower authorities are set aside and the addition of ₹ 22.50 lakhs is deleted - Appeal filed by the assessee stands allowed

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• 2020 (5) TMI 160
  Disallowance of depreciation on the WDV of imported software - assessee had claimed depreciationon the WDV of imported software - assessee did not deduct tax at source on the payment made for purchase of software, the AO took the view that depreciation claimed by the assessee is not allowable as deduction u/s 40(a)(ia) - HELD THAT:- We are concerned here with AY 2012-13 and during the year under consideration, the assessee has claimed only depreciation thereon. In the earlier years, the AO had only disallowed the depreciation claimed by the assessee by invoking the provisions of sec.40(a)(ia) i.e., the AO has not disturbed the action of the assessee in capitalizing the payment of ₹ 5.00 crores. Hence the issue of capitalizing the payment has attained finality. Hence we are not able to understand as to how the CIT(A) can direct the AO to treat the amount of depreciation as royalty payment. The foregoing discussions would show that the CIT(A) has rendered his decision without properly appreciating the facts surrounding the issue. In any case, the facts presented by Ld A.R also, in our view, requires verification. Hence, we are of the view that this issue requires fresh examination at the end of the ld CIT(A). Accordingly we set aside the order passed by CIT(A) on this issue and restore the same to his file for examining it afresh, after affording adequate opportunity of being heard to the assessee. Disallowance for non deduction of tax at source u/s 195 - payment was made outside India for services rendered outside India i.e in Uganda - payment to a person for the purpose of handling of all operations including coordinating with Indian teams for maintaining, rectifying problems, testing, upgrading /supporting customers, contentproviders etc. in Uganda - HELD THAT:- Since the facts relating to this issue is identical in nature of assessee own case for asst. year 2011-12, we hold that disallowance made u/s 40(a)(i) is not justified and accordingly direct the AO to delete the same. Disallowance of write off of miscellaneous expenses - deduction being the rental/telephone deposits written off - HELD THAT:- Though the assessee claims that these payments were made in the normal course of business, we noticed that the rent deposits have been made to 5 persons and advance rent has been paid to one person. The payments made to 3 persons have been described as advance for services . Though there is no dispute with regard to the principle that the payment made in the normal course of conducting business, if not recoverable is allowed as deduction, yet we noticed that the AO did not examine the nature of payment and the fact whether these payments were made in the course of conduction of business. We have noticed earlier that the AO has disallowed the claim by holding that all the payments have been made on capital account. Accordingly we are of the view that this issue requires fresh examination at the end of the AO. Accordingly we set aside the order passed by the ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine the nature of payment and decide the same afresh in the light of the discussions made supra.

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• 2020 (5) TMI 159
  Non-refundable security deposit - Addition as undisclosed receipts - assessee submitted that necessary approvals took lot of time and no activity was carried out on the project and no revenue has been generated from the said project - also that dispute was going between the assessee and the said party in respect of the same land and development, etc., which is pending before the Hon ble Delhi High Court - HELD THAT:- As brought on record that a settlement agreement has been entered between the parties on 11.07.2017 and the Hon ble Delhi High Court vide judgment and order [ 2017 (1) TMI 1715 - DELHI HIGH COURT] has taken the settlement agreement on record and has disposed of the said petition to be decided in terms of settlement agreement. Since the issue has attained finality in terms of settlement agreement duly approved by the Hon ble High Court, the matter is restored back to the file of the Assessing Officer to implement the said settlement agreement and decide the issue. Accordingly, the Revenue s appeal is partly allowed for statistical purposes.

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• 2020 (5) TMI 158
  Addition u/s 68 - bogus Long Term Capital Gain - HELD THAT:- No confusion to the extent that the income declared in earlier assessment year can be taken into account to explain the transactions of subsequent year provided there is a nexus between the income declared and the transaction of the subsequent assessment year. In the case of assessee for A.Y. 2013-14 cash income is offered as undisclosed income. The revenue authorities were unable to find any other source of undisclosed income for A.Y. 2013-14. Therefore, the assessee had undisclosed cash income at the end of A.Y. 2013-14 i.e. at the opening of A.Y. 2014-15. For A.Y. 2014-15 there is no other undisclosed income found except the bogus claim of Long Term Capital Gain. Income offered by the assessee under IDS 2016 for A.Y. 2013-14 has been rightly claimed as the source of the bogus Long Term Capital Gain managed by the assessee in A.Y. 2014-15 and thus, the bogus claim of Long Term Capital Gain for A.Y. 2014-15 has been rightly explained by the assessee byway of offering undisclosed income in A.Y. 2013-14 under the Income Declaration Scheme 2016. We, thus, set aside the orders of the both lower authorities delete the addition and allow the sole ground raised by the assessee. Appeal of the assessee is allowed.

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• 2020 (5) TMI 157
  TP Adjustment - comparable selection - non-consideration of capacity utilization adjustment by the A.O./TPO while comparing the comparable companies - HELD THAT:- We find merit in the arguments advanced by the ld. counsel for the assessee that when it is operating at 51.29% of its installed capacity as against 7% in the preceding assessment year and, as such, it could not achieve economics in utilizing fixed costs, therefore, the assessee should be granted capacity utilization adjustment. However, the same needs verification at the level of A.O./TPO - we deem it proper to restore the issue to the file of A.O./TPO with a direction to give an opportunity to the assessee to substantiate with evidence to his satisfaction regarding the capacity utilization adjustment that is necessary for the assessee for this particular assessment year. A.O./TPO shall decide the issue as per fact and law, after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee on account of transfer pricing adjustment are accordingly allowed for statistical purposes. Nature of expenditure - Disallowance of moulds as revenue expenditure - revenue or capital expenditure - HELD THAT:- We find although the assessee filed a certificate from the Chartered Engineer to the effect that the life of moulds of cylinder liners does not exceed more than one year, the ld.CIT(A) rejected the same and upheld the action of the AO the reasons for which have already been reproduced in the preceding paragraphs. It is the submission that the assessee being the manufacturer of moulded automobile products, therefore, mould is a basic material. Such mould has been purchased and utilised in the process of production which has a very short life and needs to be replaced from time to time and, therefore, should be treated as revenue in nature. It is also his submission that the expenditure on mould is of recurring nature and, therefore, merely because it has some enduring benefit to the assessee, the same cannot be considered as capital in nature especially when the life of mould is less than one year and has to be replaced frequently. The various decisions relied on by the Ld. Counsel for the assessee also support his case to the proposition that expenditure incurred on moulds is revenue in nature. We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to treat the expenditure on moulds as revenue expenditure. The grounds raised by the assessee on this issue are accordingly allowed.

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• Customs

• 2020 (5) TMI 156
  Release of Bank Guarantees - import of Gold Granules - exemption from payment of Customs duty in terms of Sl.No.966 of the table to Notification No.82 of 2018- Cus dt.31-12-2018 amending Notification No. 46/2011 dt. 01-06-2011 - retroactive check of the certificate of origin - HELD THAT:- It is the duty of the respondents to complete the provisional assessment and also return the Bank Guarantees given by the petitioner towards the exports made by it under the Bills of Entry referred to above since there is no dispute now about the Country of origin of the goods in question - respondents are directed to (i) release six Bank Guarantees furnished by the petitioner on or before 4.5.2020 since the petitioners have given Bonds for the goods covered by the 6 Bills of Entry, and (ii) also complete the provisional assessments in respect of the said Bills of Entry within a period of three (03) months from the date of receipt of a copy of this order and communicate their deposition to the petitioner. Petition allowed.

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• 2020 (5) TMI 155
  Quantum of redemption fine and penalty - enhancement of value of imported goods - old and used worn clothing - HELD THAT:- On perusal of the impugned order, we note that the ld.Commissioner (Appeals) has ordered reduction of redemption fine and personal penalty on the basis of ratio laid down by the Three Member Bench of CESTAT, Delhi in the case of M/S. OMEX INTERNATIONAL VERSUS COMMISSIONER OF CUSTOMS, NEW DELHI [ 2015 (4) TMI 112 - CESTAT NEW DELHI (LB)] - The Three Member Bench has taken the view that redemption fine of 10% and penalty of 5% of the value of the imported goods, would be appropriate in case of import violating Exim Policy Provisions - there are no reason to interfere with the findings of the ld.Commissioner (Appeals) on the basis of such decision. The impugned order is upheld and the appeals filed by the Revenue are rejected - Decided against Revenue.

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• 2020 (5) TMI 154
  Valuation of imported goods - Aluminium scrap - rejection of declared value of the goods under import, without rejecting the transaction value/declared price - Section 14 of the Customs Act - HELD THAT:- There are no cogent reasons have been given by the Court below for rejection of transaction value. The declared transactions value can only be rejected with cogent reasons by undertaking the exercise as to on what basis the paid price was not the sole consideration, or the transactions value. Since, no such exercise is done by the Court below to reject the price declared or the transaction value in the bills of entry, the orders of Court below are erroneous and fit to be set aside. The Adjudicating Authority was bound to accept the transaction value declared by the appellant - importer, and erred in rejecting the declared price without recording any finding for rejecting the same, as required under Section 14 of the Customs Act. Appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2020 (5) TMI 153
  Adjournment of conducing Annual General Meeting (AGM) - stay on result of election and/or voting - Ex parte ad interim or interim order - scope of an appeal - three appeals are against ad interim orders when only the parties to the testamentary suit were present before the Court - Order 41 Rule 22 of the Code of Civil Procedure, 1908 - HELD THAT:- The impugned order dated 2nd August, 2019, as clarified by the order dated 5th August, 2019, is, therefore, not sustainable in view of the fact that orders and/or directions were passed interfering with the holding of AGM by Companies which are separate juristic entities without first deciding the issue of jurisdiction. Even if the deceased held shares in such Companies, which are subject matter of the bequest under the Will in question, the jurisdiction to pass orders in respect thereof had to be decided first when specifically raised. The order dated 9th August, 2019, which is a subsequent order wherein the learned Single Judge has exercised probate jurisdiction when the issue of inherent lack of jurisdiction was kept pending for decision, is also not sustainable on the same ground. The order dated 2nd August, 2019 as clarified by the order dated 5th August, 2019 is set aside on the ground that the jurisdiction as to the authority of the probate Court to pass orders against Companies which are third parties to the testamentary suit should have been decided first before passing any other order as the issue relates to inherent lack of jurisdiction and goes to the root of the matter, particularly in view of the fact that a probate Court only in an extreme case can pass an order of injunction. So far as the order dated 9th August, 2019 is concerned, the same also is set aside on two grounds. It is a subsequent order again passed without first deciding the issue of jurisdiction prior to interfering with the AGM of a third party Company as also for being devoid of reasons. The ad interim orders/ ex-parte ad interim orders continued for around eight (8) months but when it involves an inherent lack of jurisdiction the said orders have to be set aside. The same is our conclusion even if the order is treated as an ad interim order. Appeals allowed.

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• 2020 (5) TMI 152
  Oppression and mismanagement - siphoning off of funds - the promoters of the respondent-company obtain loan from that company, invest the loan proceeds in other entities of the group promoted by them and the same money comes back to the respondent as loans and advances - allegation that transactions carried out without approval of the shareholders - bar created by section 185 of the Companies Act, 2013 - invocation of section 213 of the Companies Act, 2013. Whether the petitioner is entitled to the main reliefs as prayed for since the matter is listed for final disposal and therefore, there is no question of granting any interim relief in favour of the petitioner? HELD THAT:- It is an undisputed fact that the petitioner has not initiated any action against the respondent for recovery of the security deposit. The petitioner has directly filed this petition nearly four years after the expiry of the MoU. It is also very clear that the petitioner has neither questioned whatever transactions done by the respondent in all these years nor the petitioner challenged the details given in the Balance Sheet filed by the respondent-company from time to time. The question arises why the petitioner remained silent without taking appropriate steps for recovery of security deposit within the period of limitation. The Memorandum of Understanding came to an end by 25-9-2015. The petitioner ought to have initiated action against the respondent-company on or before 25-9-2018. Whereas the present petition is filed by the petitioner on 18-2-2018. By the date when the petitioner moved the present petition, the claim of the petitioner against the respondent-company became time-barred. The petitioner cannot claim that it is the creditor of the respondent-company as on the date when it filed the present petition. The reason is the debt, if any, stands barred by limitation. The petitioner, therefore, lost the character of a creditor by the date when it filed the present petition against the respondent-company. The petitioner in order to prove its case has mainly relied on Memorandum of Understanding, Deed of Pledge, Original Share Certificate and Share Transfer forms. Actually, there is no dispute about the entering into the Memorandum of Understanding and also security taken by the petitioner for security deposit. The petitioner has obtained Personal Guarantee as well as Promissory Note. The petitioner has taken sufficient security. However, the petitioner did not initiate any action either against the company or against the Personal Guarantee when security amount became due. On the other hand the petitioner is now seeking investigation on the ground that there was a default by the respondent in returning the security deposit. This cannot be a ground for ordering investigation - the documents are not sufficient to come to any conclusion that the company is indulging in fraudulent activities and as such investigation is required to be ordered under section 213 of the Companies Act, 2013. Therefore, it is not at all a fit case to order investigation basing on the financial statements. If any irregularity is found in the financial statements it is for the authority concerned to initiate action under the provisions of the Companies Act, 2013. However, the concerned authorities have not initiated any action. Therefore, the financial statements cannot be taken as ground for ordering investigation into the affairs of the respondent-company as if the company is indulging in fraudulent activities. When an investigation can be ordered under section 213(b) of the Companies Act, 2013? The applicant must place the circumstances suggesting that the business of the respondent-company is being conducted with intent to defraud the creditors. Except the petitioner, no other creditor had initiated any action against the respondent-company. Even no Member of the respondent-company has alleged that the business of the respondent-company is being done in a fraudulent manner or for unlawful purpose. The members have not complained that the affairs of the respondent-company are being conducted in an oppressive manner. The petitioner admittedly is not a member - The question is whether the business of the respondent-company is being conducted in any fraudulent manner. The petitioner has simply alleged that taxes were not paid to the Government authorities and there is violation of certain provisions of the Companies Act. The authorities concerned can initiate appropriate action against the respondent, if really the respondent-company committed any violation of the provisions of the Companies Act. There is no need to order an investigation on these grounds. The petitioner has not established any fraud in the course of business carried out by the respondent-company. Therefore, the petitioner has utterly failed to establish the prima facie case that the affairs of the respondent-company is being held in a fraudulent manner. There is absolutely no ground to order investigation into the affairs of the respondent-company - Petition dismissed.

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• Insolvency & Bankruptcy

• 2020 (5) TMI 151
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- There is clear cut admission on the part of the Corporate Debtor about its inability to clear the Operational debt, in terms of the letter dated 18-11-2016. Further, in the reply dated 16-9-2019 also, the Corporate Debtor has stated categorically in para 4 at p.2 thereof, that the Respondent is in grave financial crisis and is not in a position to repay the amount to the Petitioner - the application made by the Operational Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Petition - In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor. Application admitted - moratorium declared.

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• Central Excise

• 2020 (5) TMI 150
  CENVAT Credit - input services - exempt services or not - denial for the reason that the activity of machining operations is an exempted service as per Notification No.25/2012-ST dt. 20.06.2012 (Sl.No.30) - HELD THAT:- When the semi finished gods are received by the job worker under challans as per Rule 4 (5) (a), it can be understood that the activity undertaken by the appellant is also part of the manufacturing activity. In other words, the job worker manufactures on behalf of the principal manufacturer. The notification No.214/86 helps to decide as to who has to pay Central Excise duty on the finished goods when manufacturing activity is carried out using job work facility. Since the appellants are doing part of the manufacturing activity, it cannot be said that the activity undertaken by them is service which is exempted under Notification No.25/2012-ST. Even if the process carried out by the appellant does not amount to manufacture , when N/N. 214/86 comes into application it has to be understood that the job worker is undertaking part of the manufacturing activity on behalf of the principal manufacturer. The Tribunal in the case of M/S. SHREE ORGANO CHEMICALS AHMEDABAD P. LTD VERSUS COMMISSIONER OF CENTRAL EXCISE ST, AHMEDABAD [ 2019 (2) TMI 852 - CESTAT AHMEDABAD] had occasion to consider a similar situation and has held that the credit availed in respect of job work activities would be eligible to the assessee. Credit allowed - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2020 (5) TMI 168
  Levy of turnover tax - foreign liquor - compounding scheme - Section 7 of the KGST Act - legality to adopt assessed tax of the previous year as the basis for fixing the compounded liability - HELD THAT:- The decision in M/s.Hotel Breezeland Ltd [ 2019 (2) TMI 1086 - KERALA HIGH COURT ] was rendered by the Division Bench after considering a batch of writ appeals and a writ petition where it was held that dealer who opts for payment of tax under Section 7 cannot be said to have been absolved of the liability for all the consequences arising from such an assessment made for the previous three years which is the reference point for determining the tax payable in the relevant year under clause (b) of Section 7. It was well within the authority of the 1st respondent to have revised the assessment for the years 2008-09, 2009-10 and 2010-11, based on the revision of the assessment and tax component for the year 2007-08, resulting in a cascading effect on the assessment for the following three years. The fact that compounded tax was paid for those three years did not fetter the right to revise the assessment. Petition dismissed.

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• 2020 (5) TMI 149
  Power of High Court to entertain writ petition - The option to file statutory appeal was foreclosed by time limitation including extended period of limitation - whether the High Court in exercise of its writ jurisdiction under Article 226 of the Constitution of India ought to entertain a challenge to the assessment order on the sole ground that the statutory remedy of appeal against that order stood foreclosed by the law of limitation? HELD THAT:- The assessment order dated 21.6.2017 was challenged by the respondent by way of statutory appeal before the Appellate Deputy Commissioner only on 24.9.2018. Section 31 of the 2005 Act provides for the statutory remedy against an assessment order. The same, as applicable at the relevant time - Section 31 states that the statutory appeal is required to be filed within 30 days from the date on which the order or proceeding was served on the assessee. If the appeal is filed after expiry of prescribed period, the appellate authority is empowered to condone the delay in filing the appeal, only if it is filed within a further period of not exceeding 30 days and sufficient cause for not preferring the appeal within prescribed time is made out. The appellate authority is not empowered to condone delay beyond the aggregate period of 60 days from the date of order or service of proceeding on the assessee, as the case may be. In the present case, admittedly, the appeal was filed way beyond the total 60 days period specified in terms of Section 31 of the 2005 Act. In that, the respondent had filed the appeal accompanied by an application for condonation of delay setting out reasons - The High Court finally allowed the writ petition vide the impugned judgment and order on the ground that the statutory remedy had become ineffective for the respondent (writ petitioner) due to expiry of 60 days from the date of service of the assessment order. Inasmuch as, the appellate authority had no jurisdiction to condone the delay after expiry of 60 days, despite the reason mentioned by the respondent of an extraordinary situation due to the act of commission and omission of its employee who was in charge of the tax matters, forcing the management to suspend him and initiate disciplinary proceedings against him. Soon after becoming aware about the assessment order, the respondent had filed the appeal, but that was after expiry of 60 days period. Whether the High Court ought to have entertained the writ petition filed by the respondent? - HELD THAT:- As regards the power of the High Court to issue directions, orders or writs in exercise of its jurisdiction under Article 226 of the Constitution of India, the same is no more res integra. Even though the High Court can entertain a writ petition against any order or direction passed/action taken by the State under Article 226 of the Constitution, it ought not to do so as a matter of course when the aggrieved person could have availed of an effective alternative remedy in the manner prescribed by law. The principle underlying the dictum in this decision would apply proprio vigore to Section 31 of the 2005 Act including to the powers of the High Court under Article 226 of the Constitution. Notably, in this decision, a submission was canvassed by the assessee that in the peculiar facts of that case (as urged in the present case), the Court may exercise its jurisdiction under Article 142 of the Constitution, so that complete justice can be done - Thus, what this Court cannot do in exercise of its plenary powers under Article 142 of the Constitution, it is unfathomable as to how the High Court can take a different approach in the matter in reference to Article 226 of the Constitution. The principle underlying the rejection of such argument by this Court would apply on all fours to the exercise of power by the High Court under Article 226 of the Constitution. The remedy of appeal is creature of statute. If the appeal is presented by the assessee beyond the extended statutory limitation period of 60 days in terms of Section 31 of the 2005 Act and is, therefore, not entertained, it is incomprehensible as to how it would become a case of violation of fundamental right, much less statutory or legal right as such - Pertinently, no finding has been recorded by the High Court that it was a case of violation of principles of natural justice or non compliance of statutory requirements in any manner. Be that as it may, since the statutory period specified for filing of appeal had expired long back in August, 2017 itself and the appeal came to be filed by the respondent only on 24.9.2018, without substantiating the plea about inability to file appeal within the prescribed time, no indulgence could be shown to the respondent at all. The High Court ought not to have entertained the subject writ petition filed by the respondent herein. The same deserved to be rejected at the threshold - Appeal allowed.

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• Indian Laws

• 2020 (5) TMI 148
  Applicability of SARFAESI Act to the co-operative banks - Scope of the legislative field covered by Entry 45 of List I viz. Banking and Entry 32 of List II of the Seventh Schedule of the Constitution of India - power of the Parliament to legislate - competence to amend Section 2(c) of the SARFAESI Act by adding subclause '(iva) a multi-State co-operative bank' - co-operative banks at State and multi-State level are co-operative banks or not. Whether 'co-operative banks', which are co-operative societies also, are governed by Entry 45 of List I or by Entry 32 of List II of the Seventh Schedule of the Constitution of India, and to what extent? - HELD THAT:- Section 6 deals with the forms of business in which banking companies may engage. There cannot be any form of activity/business of banking without there being an entity. Section 6 is not a provision of the conferral of the status of the banking company. The definitions of 'banking' and 'banking company' are contained in Section 5(b) and 5(c) of the BR Act, 1949 respectively, and when reading with Section 56(a), it means co-operative banks also. The co-operative bank falls within the definition of Section 5(c), and its activity is of banking, and in addition to the business of banking, a co-operative bank may engage in any of the business as enumerated in Section 6 - the recovery of dues would be an essential function of any banking institution and the Parliament can enact a law under Entry 45 of List I as the activity of banking done by co-operative banks is within the purview of Entry 45 of List I. Obviously, it is open to the Parliament to provide the remedy for recovery under Section 13 of the SARFAESI Act. Co-operative bank's entire operation and activity of banking are governed by a law enacted under Entry 45 of List I, i.e., the BR Act, 1949, and the RBI Act under Entry 38 of List I - There can be various aspects of an activity. The co-operative societies may be formed under the provisions of the State Co-operative Acts. The State law provides for 'incorporation, regulation and winding up' under Entry 32 of List II, a membership registration, and other matters can be governed by Entry 32 of List II, and, at the same time, the aspects relating to the banking, licensing, accounts, etc. can be covered under Entry 45 List I. The legislation and entries are to be considered in pith and substance is the settled principles of law, and incidental trenching is permissible. Thus, section 2(c)(iv)(a) of the SARFAESI Act and the notification dated 28.2.2003 cannot be said to be ultra vires . They are within the ken of Entry 45 List I of the Seventh Schedule to the Constitution of India. The SARFAESI Act is relatable to Entry 6 of List III considering the provisions contained in Sections 69 and 69A of the Transfer of Property Act, 1882. It relates to Entry 45 of List I of the Seventh Schedule of the Constitution of India. The concept of regulating nonbanking affairs of society and regulating the banking business of society are two different aspects and are covered under different Entries, i.e., Entry 32 of List II and Entry 45 of List I, respectively. The law dealing with regulation of banking is traceable to Entry 45 of List I and only the Parliament is competent to legislate. The Parliament has enacted the SARFAESI Act. It does not intend to regulate the incorporation, regulation, or winding up of a corporation, company, or co-operative bank/co-operative society. It provides for recovery of dues to banks, including co-operative banks, which is an essential part of banking activity. The Act in no way trenches on the field reserved under Entry 32 of List II and is a piece of legislation traceable to Entry 45 of List I - the U.P. Co-operative Services Act was saved on the ground of incidental trenching on the subject of another list, i.e., Entry 45 List I, which is permissible. Whether banking company as defined in Section 5(c) of the BR Act, 1949 covers co-operative banks registered under the State Co-operative Laws and also multi-State co-operative societies? - HELD THAT:- The present one is a case of incorporation by reference in the same Act by a subsequent amendment in the application to co-operative banks. When we apply the provisions of Section 5(c) to the co-operative banks, we have to read the co-operative banks as part and parcel of said definition as mandated statutorily. In case a company is not taken as a reference to the co-operative societies/banks in Section 5(c), several problems as to the interpretation of Section 56 would arise. It would have become necessary to amend all the provisions wherever words 'banking company' occur in the BR Act, 1949 in the application to co-operative banks - the Parliament considered it appropriate to provide additional remedy for speedy recovery which is an alternative even if there is an incidental encroachment on the field reserved for the State under Entry 32 of List II, as in pith and substance, the 'banking' is part of Entry 45 of List I and recovery procedure is covered within the ken of Entry 45 of List I. Thus, considering the Doctrine of Pith and Substance and incorporation by amendment made, we are of the considered opinion that co-operative banks are included in the definition of 'bank' and 'banking company' under Section 2(1)(c) and 2(1)(d) of the SARFAESI Act. The co-operative banks, which are governed by the BR Act, 1949, are involved in banking activities within the meaning of Section 5(b) thereof. They accept money from the public, repayable on demand or otherwise and withdrawal by cheque, draft, order or otherwise. Merely by the fact that lending of money is limited to members, they cannot be said to be out of the purview of banking - They perform commercial functions. A society shall receive deposits and loans from members and other persons. They give loans also, and it is their primary function. Thus, they are covered under 'banking' in Entry 45 of List I. Whether co-operative banks both at the State level and multi-State level are 'banks' for applicability of the SARFAESI Act? - HELD THAT:- The co-operative banks under the State legislation and multi-State co-operative banks are banks under section 2(1)(c) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The recovery is an essential part of banking; as such, the recovery procedure prescribed under section 13 of the SARFAESI Act, a legislation relatable to Entry 45 List I of the Seventh Schedule to the Constitution of India, is applicable. Whether provisions of Section 2(c) (iva) of the SARFAESI Act on account of inclusion of multi-State co-operative banks and notification dated 28.1.2003 notifying co-operative banks in the State are ultra vires ? - HELD THAT:- The Parliament has legislative competence under Entry 45 of List I of the Seventh Schedule of the Constitution of India to provide additional procedures for recovery under section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 with respect to co-operative banks. The provisions of Section 2(1)(c)(iva), of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, adding ex abundanti cautela , a multi-State co-operative bank is not ultra vires as well as the notification dated 28.1.2003 issued with respect to the co-operative banks registered under the State legislation. Petition disposed off.

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