Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 10, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Correction of amount shown in GST TRAN-1 - Transitional credit - Period of limitation - It does not stand to reason that the date of filing of Form-1 and date for revision of the same be one and the same and in order to be viable, there must be a sufficient gap of time in between the two - Section 120A grants only one opportunity to the petitioner to rectify the Form TRAN-1 and there is, in my view, no basis for such restriction. In this case, the last dates for filing of TRAN-1, and seeking revision of the same are both 27.12.2017. The petitioner has uploaded the TRAN 1 on 27.12.2017 and there was thus, no time available for the petitioner to have sought revision of the error that was occasioned in the Form. - Directions issued - HC
Income Tax
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Reopening of assessment u/s 147 - material which was examined and qua which opinion was rendered by the AO while passing the draft assessment orders - The failure to arrive at a logical conclusion in a Section 144C proceeding cannot become the ruse for initiating the proceedings under Section 147/148 of the Act in the absence of new material emerging before the AO which gives the AO reason to believe that assessee's income chargeable to tax had escaped assessment - HC
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Deduction of lease rent - lumpsum amount paid by the appellant/assessee for the entire tenure of the lease i.e. 99 years - matching principle - Given the facts obtaining in this case, the matching principle would have no applicability. The appellant/assessee chose to incur the liability of a crystallised amount in the period relevant to the AY in issue i.e. AY 2007-2008, and therefore, it was entitled to seek deduction of the amount which fulfilled the attributes - The expenditure was not in the nature of capital expenditure or a personal expense, It was expended fully and exclusively for the purposes of the business and; It did not fall within the realm of any provision of the Act which prohibited the appellant/assessee from claiming this deduction - HC
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Deduction of TDS on the amount paid and payable to the workmen - Though it is referred as Voluntary Retirement Scheme, one has to see the object and intent behind it. When once a factual finding is given that it is a special package, a different view is not possible. We may note that the case on hand involves a chequered history with respect to the running of Industry qua rights of the workmen. - Therefore, this is not a case of voluntary retirement by the workmen, but, on the other hand, brought forth by contingency - No TDS liability - HC
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DTVSV Act - in a case where the Appeal is filed by the Income Tax authority, the amount payable shall be one-half of the amount calculated - whether Petitioner is eligible for payment of 50% of disputed tax or 100%? - Having observed that the pending Appeal is a Revenue Appeal, the first proviso of Section 3 of the DTVSV Act would become applicable and, accordingly, the amount payable by the Petitioner would be 50% of the amount, viz., 50% of the disputed tax. - HC
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Refund the monies lying in the Capital Gains Account Scheme (CGAS) with the bank along with interest at prevailing rates - The operation of the account in question is a matter of contract qua the petitioners and R2 and the petitioners are at liberty to give such instructions to R2 as they may wish to, in this regard. Form-G which is to be approved by the assessing authority will have no application in this case since the transaction giving rise to capital gains has not been captured by the Department. In any event, today, R1 does not have any claim towards the amounts in the bank accounts. - HC
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Addition under the head “Capital Gains” - Fair Market Value of the salable area - The method adopted by the Assessing Officer to compute Fair Market Value of salable constructed are is flawed - invoking the provisions of Sec.45(5A) of the Act which is inserted by the Finance Act, 2017 w.e.f. A.Y. 2018-19 is bad-in-law in as much as that the Assessing Officer should have applied the provisions of Sec.45(5A) in its entirety not in part i.e., only by adopting the value for stamp duty purpose of the saleable area, (2) not applying other limb of provisions, which determines the tax of chargeability of “Capital Gains” to tax. It is suffice to say that the action of the Assessing Officer is bad-in-law without delving into issue whether the said provisions have retrospective effect or not - AT
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Black Money Undisclosed Foreign Income And Assets And Imposition Of Tax Act, 2015 - Sole beneficiary of the Foreign Account - Merely mentioning the name of the assessee in the account opening form which is rebutted by the assessee by filing an affidavit and complete details of the ownership of the bank account, the assessee cannot be held the beneficial owner of such sum. Therefore, such solitary fact cannot lead to addition in the hence of the assessee where there is no other evidence available with respect to the ownership or beneficial ownership over such bank account. - AT
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Revision u/s 263 by CIT - assessee’ s claim of 100 % exemption of profits u/s 80 IC - Manufactured items - serial no. 5 of the negative list - on account of the clear cut ambiguity in the item mentioned/described against S.No.5, relating both to organic and inorganic chemicals, the assessee is entitled to the benefit of doubt regarding the items sought to be covered under it. - The findings of the Ld. Pr.CIT therefore to the effect that the AO’ s order was erroneous on account of inadequate enquiry having been conducted on the issue of grant of exemption u/s 80 IC of the Act to unit- II of the assessee are accordingly set aside. - AT
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Addition by treating the interest received on STDR made in the pre-commencement period as being income from other sources - the interest income has to be brought to tax without allowing any deduction u/s 57(iii) towards interest on borrowed capital. - AT
Customs
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Reopening of assessment - Recovery of Refund of Extra Duty Deposit (EDD) - this Court is of the opinion that the impugned order issued on 08.01.2013 ought not to have issued by the respondents and they should have waited till the disposal of the CESTAT Appeal filed by the petitioner, which is pending. - HC
Service Tax
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Refund of service tax - Transition of credit to GST - The words “notwithstanding anything contrary contain in said law” means that the provisions of this Section will prevail over provisions of existing law except provision of Section 11B(2) of Central Excise Act, 1944. The Section 11B(2) of Central Excise Act, 1944 contains provisions relating to granting of refund in case of unjust enrichment. Thus, as far as conditions of Section 142(9)(b) of CGST Act, 2017 is concerned, the appellant has fulfilled the said conditions and hence is entitled for refund - AT
VAT
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Input Tax Credit - denial of credit capital goods of the unit -2 on the ground that credit cannot be availed before the commencement of commercial production as per Section 12(2) of the KVAT Act - the deduction of input tax has to be allowed on fulfillment of one of the conditions namely (1) after commencement of commercial production, (2) sale of taxable goods and (3) sale of any goods in the course of export out of the territory of India by the registered dealer. Rule 133 of the Rules provides for deduction of input tax subject to the conditions mentioned therein. It is pertinent to note that none of the conditions prescribed in Rule 133 provide that each unit of the petitioner has to be an independent unit to avail of the benefit of input tax. - Credit allowed - HC
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Exercise of erroneous Jurisdiction by the AO - The growing practice in the High Court is to file writ petitions under Article 226 of the Constitution of India without exhausting the statutory remedies provided under the Act. The points raised in this regard are statutory violations. However, even such statutory violations can be dealt with by the Appellate authorities or the Appellate Tribunals. This apart, in a writ petition, if such orders are passed with jurisdictional errors and quashed without any remand, then an injustice would be caused to the very spirit of the statute enacted for the benefit of the public at large. - Writ petition dismissed - HC
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Validity of assessment order - reversal of Input Tax Credit - inputs damaged in transit or destroyed at some intermediary stage of manufacture - the reversal of ITC involving Section 17(5)(h) by the revenue, in cases of loss by consumption of input which is inherent to manufacturing loss is misconceived, as such loss is not contemplated or covered by the situations adumbrated - HC
Case Laws:
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GST
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2021 (7) TMI 351
Maintainability of appeal - non-constitution of Benches of Appellate Tribunal by the GST Council - HELD THAT:- Matter requires consideration. Learned Standing Counsel prays for and is granted four weeks time to file counter affidavit. Rejoinder affidavit, if any, may be filed within one week thereafter. List thereafter.
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2021 (7) TMI 350
Maintainability of petition - Court had directed that after hearing the Petitioner an order should be passed on the SCN not later than 15th March, 2021 but Principal Commissioner, GST and Central Excise, Bhubaneswar has passed a detailed order on 17th March 2021 - HELD THAT:- The impugned order is appealable under the statute in question, the Court while leaving it open to the Petitioner to urge all the grounds raised in the present writ petition before the appellate forum declines to interfere in the impugned order, without expressing any view whatsoever on the merits of the contentions of the Petitioner. Petitioner states that the Petitioner would be filing applications before the Tribunal both for condonation of delay and seeking waiver of pre-deposit. If such applications are filed, they will be considered on their merits and in accordance with law by the appellate forum - petition disposed off.
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2021 (7) TMI 337
Validity of assessment order - clients were not provided adequate opportunity to submit the documents - violation of principles of natural justice - HELD THAT:- No doubt, the country was reeling under the COVID-19 pandemic, which may have caused inconvenience to petitioner in participating in the hearing. However, nothing prevented him from communicating this fact to the assessing authority and seek adjournment in the matter - the petitioner has annexed documents to show that bills were submitted prior to the introduction of GST Act, 2017 and it is claimed in view of taxes being deducted at source by the Government department the petitioner cannot be saddled with liability under GST Act. As such materials had not been placed before the assessing authority, the said authority had no occasion to consider tax liability from such angle. To strike a balance between the indolence of petitioner in not responding to the notice and participating in the hearing culminated in passing the impugned orders on one hand and the necessity of fair adjudication based on all relevant materials, the matter is remanded for fresh hearing subject to conditions. Petition allowed by way of remand.
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2021 (7) TMI 334
Correction of amount shown in GST TRAN-1 - Transitional credit - Period of limitation - Constitutional validity of Section 140 of the CGST Act - carry forward of Input Tax Credit - revenue neutrality - HELD THAT:- The writ petition is liable to be allowed - Admittedly, there have been multiple difficulties, both technical and otherwise, that have been faced by assesses and the Department post introduction of GST with effect from 01.07.2017. In such a situation a bonafide human error as in the present case should be permitted to be rectified. There is no dispute expressed by the respondents in its counters on the position that the error committed is inadvertent - the exercise of transitioning ITC is revenue neutral at this juncture, since what is enabled by permitting such transition is only the carryforward of the ITC and the utilization of the same will be subject to proper verification by the Assessing Officer at the time of assessment. It does not stand to reason that the date of filing of Form-1 and date for revision of the same be one and the same and in order to be viable, there must be a sufficient gap of time in between the two - Section 120A grants only one opportunity to the petitioner to rectify the Form TRAN-1 and there is, in my view, no basis for such restriction. In this case, the last dates for filing of TRAN-1, and seeking revision of the same are both 27.12.2017. The petitioner has uploaded the TRAN 1 on 27.12.2017 and there was thus, no time available for the petitioner to have sought revision of the error that was occasioned in the Form. The respondent will enable the filing of revised Form TRAN-1 by opening of the portal and this exercise will be completed within a period of eight weeks from today - Petition closed.
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Income Tax
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2021 (7) TMI 354
Disallowance of expenditure on commission payment to the whole-time Managing Director - Tribunal deleted the addition receiving fixed salary and other related benefits and also holding 95% of total shares of the assessee company entitled for receipt of dividend declared by the assessee company u/s 36(1)(ii) - whole time Managing Director of the assessee company who is in receipt of the fixed salary and other salary benefits like other employees of the assessee company is not an employee of the assessee company - HELD THAT:- Issue decided in favour of assessee as relying on M/S. TRUE VALUE HOMES (INDIA) PVT. LTD. [ 2021 (3) TMI 1221 - MADRAS HIGH COURT]
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2021 (7) TMI 353
Substantial question of law - Scope of Section 260A - Excess consumption of raw material - CIT (Appeals) and the ITAT have recorded the concurrent findings by observing that AO had wrongly added on account of excess consumption of raw material and there was no justification given by the AO for rejecting the Books of Accounts of the respondent Assessee - HELD THAT:- As there are concurrent findings recorded by both the authorities, the Court is not inclined to interfere with the same, more particularly when the learned Sr. Standing Counsel Mr.Patel for the appellant has failed to point out any question of law, much less substantial question of law being involved in the present appeal. See M. Janardhana Rao [ 2005 (1) TMI 14 - SUPREME COURT ]
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2021 (7) TMI 352
Exemption u/s 11 - entitled for registration u/s.12AA - Whether Tribunal was right in holding that the assessee trust is entitled for registration u/s.12AA as public charitable trust? - HELD THAT:- The Tribunal has rightly observed that there is no trust called Public Religious Trust and there can only be a Public Charitable Trust , therefore, the order passed by the DITE on 06.09.2012 granting registration to the Trust as Public Religious Trust is erroneous and the same should be modified as Public Charitable Trust . The reasoning given by the Income Tax Appellate Tribunal is just and proper. We do not find any ground much less any substantial question of law to interfere with the order passed by the Income Tax Appellate Tribunal. - Decided against revenue.
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2021 (7) TMI 349
Reopening of assessment u/s 147 - violation of the principle of natural justice - HELD THAT:- Non-supply of the copy of Mr. Banka s statement (which incidentally has been extracted in full in the reasons for reopening), or not providing an opportunity to cross-examine Mr. Banka at the stage of objections vitiates the reopening of the assessment. Such opportunity would be provided, if sought by the Petitioner, and if so permitted in law, in the reassessment proceedings. This Court is not satisfied that the Petitioner has made out any case for interference by the Court at the present stage, i.e. the stage of issuance of the notice for reopening of the assessment under Section 147 of the Act. While reserving the right of the Petitioner to raise all the defences available to it in accordance with law in the reassessment proceedings, including the right to cross-examine the deponents of the statements relied upon by the Department in the reassessment proceedings, the Court declines to interfere in the matter.
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2021 (7) TMI 348
Reopening of assessment u/s 147 - whether the respondent can continue with the impugned proceedings based on the same material which was examined and qua which opinion was rendered by the AO while passing the draft assessment orders? - Is the respondent be permitted to assess the petitioners income chargeable to tax, which, according to the respondent, had escaped assessment in the facts and circumstances obtaining in the instant cases? - HELD THAT:- AO has no power to carry out an assessment based on a mere change of opinion on the same set of facts and materials which was available on record. The AO s power under Section 147 of the Act does not extend to carry out the review of the material that was always available on record, and by this route conclude that the assessee s income chargeable to tax has escaped assessment. [See Commissioner of Income-tax, Delhi vs. Kelvinator of India Ltd. , [ 2010 (1) TMI 11 - SUPREME COURT] Grant of approval under Section 151 for issuance of notice under Section 148 - Given this backdrop, the ACIT while giving approval under Section 148 of the Act, ought to have applied his mind, to the crucial question as to whether any new or fresh facts had come to the notice of the AO for triggering the provisions of Section 147/148 of the Act. The ACIT, on the other hand, mechanically replicated the language of the provision [i.e., Section 151 of the Act] by making the aforesaid endorsement in both cases - Given this backdrop, the ACIT while giving approval under Section 148 of the Act, ought to have applied his mind, to the crucial question as to whether any new or fresh facts had come to the notice of the AO for triggering the provisions of Section 147/148 of the Act. The ACIT, on the other hand, mechanically replicated the language of the provision [i.e., Section 151 of the Act] by making the aforesaid endorsement in both cases - See SYNFONIA TRADELINKS PVT. LTD. VERSUS INCOME TAX OFFICER, WARD-22 (4) [ 2021 (3) TMI 1177 - DELHI HIGH COURT] The argument advanced on behalf of the respondent, that the petitioners should be relegated to an alternate remedy cannot be sustained as the errors committed in the instant cases go to the root of the respondent's jurisdiction. As noticed above, the stand taken that Explanation 2(b) appended to Section 147 of the Act would come to the aid of the respondent is completely misconceived given the fact that, in instant cases, the proceedings under the said provision have been undertaken based on a review of the material which was already available on record. Undoubtedly, the respondent was attempting to regurgitate old facts by taking recourse to the provisions of Section 147/148 of the Act, which, according to us, is not permissible. The failure to arrive at a logical conclusion in a Section 144C proceeding cannot become the ruse for initiating the proceedings under Section 147/148 of the Act in the absence of new material emerging before the AO which gives the AO reason to believe that assessee's income chargeable to tax had escaped assessment. - Decided in favour of assessee.
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2021 (7) TMI 347
Revision u/s 263 - whether the interest earned by the assessee against fixed deposits had any nexus with the real estate project undertaken by it? - ITAT set aside revision orders of CIT - HELD THAT:- Having regard to the submitted documents, it cannot be said that the enquiry or verification was not carried out by the AO. A perusal of paragraphs of the impugned orders passed by the Tribunal would show that findings of fact concerning the enquiry made by the AO have been recorded. We find it difficult to agree with the ld. DR that there was no enquiry conducted by the Ld. Assessing Officer by putting any specific question to the assessee as to the treatment given to the interest. As a matter of fact, the reason for the difference in the amount as per Form 26AS and ITR was due to the interest received from the banks that was duly accounted and considered in the financial statements of the company and was adjusted against the project expenditure. The very fact that pursuant to the scrutiny when the Ld. Assessing Officer proposed charging the interest amount received to tax, the very same explanation was offered by the assessee and was accepted by the Assessing Officer. We are, therefore, of the considered opinion that it is not a case of no enquiry and as a matter of fact, it was specifically brought to the notice of the Ld. 7 Assessing Officer that the interest earned was adjusted against the project expenditure. Whether or not an AO has carried out an enquiry or verification, all that the Court is required to ascertain is as to whether the AO applied his mind? - The fact that the AO has not given reasons in the assessment order is not indicative, always, of whether or not he has applied his mind. Therefore, scrutiny of the record, is necessary and while scrutinising the record the Court has to keep in mind the difference between lack of enquiry and perceived inadequacy in enquiry. Inadequacy in conduct of enquiry cannot be the reason based on which powers under Section 263 of the Act can be invoked to interdict an assessment order. Even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of 'lack of inquiry'. See ANIL KUMAR SHARMA [ 2010 (2) TMI 75 - DELHI HIGH COURT] Order as erroneous and is prejudicial to the interests of the revenue - The error should be one that is not debatable or a plausible view. Section 263 of the Act invests a power of revision in a superior officer and therefore, by the very nature of the power, does not allow for supplanting or substituting the view of the AO. The appreciation of material placed before the AO is, exclusively within his domain which cannot be interdicted by a superior officer while exercising powers under Section 263 of the Act only on the ground that if he had appraised the said material, he would have come to a different conclusion. [See Parashuram Pottery Works Co. Ltd. v. ITO,[ 1976 (11) TMI 1 - SUPREME COURT] ] Whether AO received a response to his query about the adjustment of interest, in the concerned AYs, against inventory? - We are of the opinion that, since the Tribunal has returned a finding of fact that there was indeed an enquiry carried out by the AO as to the nexus between the funds invested in fixed deposits (on which interest was earned) and the real estate project undertaken by the assessee, no interference is called for by the Court. In the instant cases, it was not as if the funds were surplus and therefore invested in a fixed deposit. The funds were received for the real estate project and while awaiting their deployment, they were invested in a fixed deposit which generated interest. This fits in with the dicta of the Supreme Court in Bokaro Steels Case [ 1998 (12) TMI 4 - SUPREME COURT] and Indian Oil Panipat Power [ 2009 (2) TMI 32 - DELHI HIGH COURT] , NTPC Sail Power [ 2012 (10) TMI 524 - DELHI HIGH COURT] , and Jaypee DSC Ventures [ 2011 (3) TMI 309 - DELHI HIGH COURT] In our view, we need not detain ourselves and examine as to whether Clause (a) and (b) of Explanation 2 appended to Section 263 of the Act could have been applied to the AYs in issue, since on facts, it has been found by the Tribunal that an enquiry was, indeed, conducted by the AO. - Decided in favour of assessee.
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2021 (7) TMI 346
Deduction u/s 35DD - being l/5th of expenses incurred on demerger of certain units of NIIT - HELD THAT:- One of the undertakings of the demerged company i.e. NIIT Ltd. was transferred to another existing company i.e. NIIT Technologies Ltd./appellant/assessee. Thus, the resulting company, i.e. NIIT Technologies Ltd. was already in existence, and therefore, the argument that the deduction can be claimed only by the demerged company, which was in existence, and that the word assessee has been carefully used by the legislature, only to include the demerged company, is, misconceived. The legislature has used the word assessee having regard to the various ways in which the schemes are structured. Illustratively, two very broad mechanisms often used have been adverted to hereinabove. Secondly, having regard to the fact that the deduction claimed by the appellant/assessee under the provisions of Section 35DD of the Act was allowed in the earlier AYs i.e. AY 2004-2005 to 2006-2007, the same should not have been disallowed in the AYs in issue i.e. 2007-2008 and 2008-2009 based on reasoning which does not comport with a plain reading of the provisions of Section 35DD of the Act, and the understanding of how a demerger scheme operates. The interpretation of such provisions should align, wherever possible, with how ordinary men of commerce construe such business structuring operations. - Decided against revenue. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- We are of the view that the Tribunal in calculating the disallowance as per the provisions of Rule 8D(2)(iii) of the Rules was not in order - Failure of the AO to record satisfaction - no reasons have been provided but only a conclusion has been reached that the AO was satisfied that the Assessee had incurred expenses to manage its investments which may yield exempt income, and Assessee grossly failed to calculate such expenses in a reasonable manner to ascertain the true and correct picture of its income and expenses. Consequently on the aspect of administrative expenses being disallowed, since there was a failure by the AO to comply with the mandatory requirement of Section 14 A (2) of the Act read with Rule 8D (1) (a) of the Rules and record his satisfaction as required thereunder, the question of applying Rule 8D (2) (iii) of the Rules did not arise. Deduction of lease rent - lumpsum amount paid by the appellant/assessee for the entire tenure of the lease i.e. 99 years - HELD THAT:- Tribunal was wrong in applying the matching principle and directing that one-time lease rent should be spread equally over the tenure of the lease - The annual lease rent that the appellant/assessee was required to pay if it had chosen the said route, was ₹ 7,08,913/-. The commuted and discounted value of the one-time lease rent was eleven (11) times the annual rent; which in absolute terms was much lower than the amount that would have accrued as rent over the entire tenure of the lease i.e. 99 years. This was the option exercised by the appellant/assessee. As is evident, taking the present value or time value of the money into account, a lumpsum figure was proposed to the appellant/assessee for securing leasehold rights for 90 years. The lumpsum amount paid by the appellant/assessee, as adverted to above, was far less than the amount that it would have to pay if it were to choose the other option i.e. pay the lease rent on an annual basis for 90 years at the rate of ₹ 7,08,913/-. The matching principle, which is an accounting concept, requires entities to report expenses, at the same time, as the revenue. In other words, the revenue is matched with the expense, in the income and expenditure statement, for a particular period. Given the facts obtaining in this case, the matching principle would have no applicability. The appellant/assessee chose to incur the liability of a crystallised amount in the period relevant to the AY in issue i.e. AY 20072008, and therefore, it was entitled to seek deduction of the amount which fulfilled the following attributes - The expenditure was not in the nature of capital expenditure or a personal expense, It was expended fully and exclusively for the purposes of the business and; It did not fall within the realm of any provision of the Act which prohibited the appellant/assessee from claiming this deduction. - Decided against revenue.
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2021 (7) TMI 344
Deduction of TDS on the amount paid and payable to the workmen being the members of the first respondent - The workmen were made entitled for certain payment consequent upon the closure of the Industry - Single Judge took up the issue of due payment is to be construed as a special package coming under the second proviso to Section 10(10B) of the Income Tax Act as against the case sought to be projected by the appellant that it would come under Section 10(10C) being the Voluntary Retirement Scheme - HELD THAT:- Though the learned counsel appearing for the appellant seek to contend that the case on hand would come under Section 10(10C) of the Income Tax Act, in which case, the amount quantified is only the Voluntary Retirement payment, we do not subscribe to the said view expressed. Incidentally, the learned counsel appearing for the appellant submitted that if it is a case under first proviso to Section 10(10B) of the Income Tax Act, there is a cap with respect to the amount quantified - ₹ 50,000/-. This will only militate against the members of the first respondent. The said contention also, in our considered view, cannot be countenanced. As rightly submitted by the learned Senior Counsel appearing for the first respondent, it is a case of the first respondent/writ petitioner that the case would fall under the second proviso. We do not find any perversity in such a finding rendered by the learned Single Judge.Therefore, the interpretation given has to be accepted with respect to the nomenclature of the Scheme. Though it is referred as Voluntary Retirement Scheme, one has to see the object and intent behind it. When once a factual finding is given that it is a special package, a different view is not possible. We may note that the case on hand involves a chequered history with respect to the running of Industry qua rights of the workmen. Therefore, this is not a case of voluntary retirement by the workmen, but, on the other hand, brought forth by contingency. Therefore, the reason of the learned Single Judge bringing the case under the second proviso is perfectly in order. We have no hesitation in confirming the order of the learned Single Judge.
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2021 (7) TMI 339
Deemed dividend u/s 2(22)(e) - Tribunal by placing reliance on PRADIP KUMAR MALHOTRA [ 2011 (8) TMI 16 - CALCUTTA HIGH COURT ] has held that the advance of loan granted by the Company to the assessee cannot be treated as deemed dividend Section 2(22)(e) - HELD THAT:- The aforesaid finding is based on meticulous appreciation of evidence on record. The assessee had produced the documents before the Commissioner of Income Tax (Appeals) and the Commissioner of Income Tax (Appeals) had asked for the remand report from the Assessing Officer. The Commissioner of Income Tax (Appeals), after consideration of the remand report, recorded a finding in this regard, which has been affirmed by the Tribunal. Thus, it cannot be said that the assessee had not adduced any material either before the Commissioner of Income Tax (Appeals) or before the Tribunal. - Decided in favour of the assessee
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2021 (7) TMI 338
TP Adjustment - TPO treating Arms length Price for royalty payment as 'NIL' even though the TPO had clearly established that assessee had not derived any benefit out of royalty payment - HELD THAT:- The issue whether the Transfer Pricing Officer, while exercising the jurisdiction under Section 92KA(3) of the Act, can only determine the Arms Length Price of an international transaction, is no longer res integra and the same has already been adjudicated by the decisions of Delhi and Bombay High Courts respectively in 'CIT Vs. EKL APPLIANCES LTD.' [ 2012 (4) TMI 346 - DELHI HIGH COURT] and 'CIT Vs. LEVER INDIA EXPORTS LTD', [ 2017 (2) TMI 120 - BOMBAY HIGH COURT]. The Transfer Pricing Officer cannot derive any benefit from the transaction. Besides that, the finding recorded by the Tribunal that the international transaction of payment of royalty ought to be bench marked in an aggregated manner at entity level on application of transactional net margin method has not been challenged by the revenue before this Court. Therefore, the issue involved in this appeal is covered by the decisions of Bombay as well as Delhi High Court. - Decided in favour of assessee.
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2021 (7) TMI 336
Direct Tax Vivad Se Vishwas Scheme, 2020 - DTVSV Act - in a case where the Appeal is filed by the Income Tax authority, the amount payable shall be one-half of the amount calculated - whether Petitioner is eligible for payment of 50% of disputed tax or 100%? - HELD THAT:- In this case, assessing officer had made addition with respect to permanent establishment in the case of Petitioner and consequently denied it benefits of the double taxation avoidance agreement. The entire income was taxed at 40% instead of 10% as declared by Petitioner. Then the matter was appealed to CIT(A). The additions were deleted. Against the said deletions, the Department filed an Appeal before the ITAT [ 2015 (5) TMI 760 - ITAT MUMBAI] against the order of CIT(A). The Tribunal restored the matter back to the assessing officer for fresh examination. It is stated that the Department had accepted this order of the ITAT. However, Petitioner challenged this order before this Court by way of an Appeal Having observed that the pending Appeal is a Revenue Appeal, the first proviso of Section 3 of the DTVSV Act would become applicable and, accordingly, the amount payable by the Petitioner would be 50% of the amount, viz., 50% of the disputed tax.
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2021 (7) TMI 333
Reopening of assessment u/s 147 - whether the authority competent has reason to belief for reopening of Assessment in respect of the income chargeable to Tax as escaped assessment? - HELD THAT:- In the present case, the petitioner made an attempt to adjudicate the issues on facts by holding that mere purchase of property is not a ground to invoke u/s 147 - Beyond the facts, the transactions made, the sources on hand and other details are to be scrutinized by the AO for the purpose of forming an opinion. Admittedly the petitioner has not filed Returns of income for the Assessment Year 2011-2012. Assessment or Re-Assessment is to be made with reference to the reasons furnished. This being the factum established, the petitioner has to proceed with the process by producing all the documents and evidences to defend their case. This Court that pursuing of the interim order, the Assessment Officer was permitted to complete the adjudication and pass a final order of Assessment. Thus, the respondent is permitted to communicate the Assessment Order, if any already passed to the Writ Petitioner, enabling the petitioner to redress her grievances by preferring an appeal under the provisions of the Income Tax Act, if advised.
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2021 (7) TMI 332
Claim of deduction u/s 36(1)(viia) - Whether Tribunal was right in holding that the amount deductible u/s 36(1)(viia) would have to be limited to the amount actually provided for in the books? - Tribunal not adjudicating on the Appellant s alternate contention that the shortfall in the present years between the upper limit allowable under Section 36(1)(viia) and the actual amount created as a provision in its books in the present years ought to nevertheless be allowed as a deduction in the present years on account of the provision created in the subsequent years that was in excess of such alleged shortfall and as such deemed to have been made good HELD THAT:- The condition precedent for claiming deduction under Section 36(1)(viia) of the Act is that a provision for bad and doubtful debt should be made in the accounts of the assessee. The aforesaid Section mentions the maximum amount for which such a provision should be made. If a provision is made in excess of the limits prescribed under the Section, the assessee would not be entitled to deduction of the excess amount. Once a provision is made and the amount of deduction is within the limit prescribed under the Act, the assessee would be entitled to deduction of the amount for which provision is made in the books of accounts. The assessee is therefore entitled to deduction subject to the limit mentioned in Section 36(1)(viia) of the Act. The substantial Questions of law Nos.1 and 3 framed by this Court, are substantially answered by this Court in I.T.A. [ 2020 (2) TMI 1020 - KARNATAKA HIGH COURT] and therefore, the said questions are answered in favour of the revenue and against the assessee. The Tribunal was right in holding that the deduction computed at the rate of 7.5% of the total income ought to be computed after setting off of brought forwards losses. Decided in favour of the revenue Deduction computed at the rate of 7.5% of the total income ought to be computed after setting off of brought forwards losses - a plain reading of section 36(1)(viia) of the Act, it is clear that the amount of deduction at the rate of 7.5% is to be calculated with reference to total income computed under the head profits and gains of business or profession . The provisions governing the brought forward and set of business loss are not part of the provisions governing the computation of profits under the heads profits and gains of business under Section 28. Hence, we hold that the deduction at the rate of 7.5% of the total income should be computed before setting off the loss brought forward. Hence the reasoning adopted in this regard by the assessing officer and the Commissioner of Income Tax (Appeals) is not in accordance with the provisions of the Act - Decided against the revenue and in favour of the assessee.
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2021 (7) TMI 330
Refund the monies lying in the Capital Gains Account Scheme (CGAS) with the bank along with interest at prevailing rates - scheme of investment of capital gain in terms of Section 54/54F - HELD THAT:- As regards the taxability of the transaction of sale, there is nothing to be said in so far as, admittedly, the time lines for bringing capital gains, if any, to tax, have long elapsed. The allegation of the revenue to the effect that the petitioners have timed the request for closure well after the expiry of the statutory timelines may well be correct, but the Department has missed the bus in this regard. What remains is the closure of the account and refund of the amounts to the petitioners. The operation of the account in question is a matter of contract qua the petitioners and R2 and the petitioners are at liberty to give such instructions to R2 as they may wish to, in this regard. Form-G which is to be approved by the assessing authority will have no application in this case since the transaction giving rise to capital gains has not been captured by the Department. In any event, today, R1 does not have any claim towards the amounts in the bank accounts. Thus, the petitioners are at liberty to issue suitable instructions to R2 in regard to their bank accounts and such request, including request for closure of and refund of balances, shall be honoured by R2 in accordance with the terms of the contract governing the parties and without insistence upon Form-G of the CGAS Scheme.
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2021 (7) TMI 328
Addition under the head Capital Gains - Fair Market Value of the salable area - Joint Development Agreement (JDA) of land by adopting a higher value of consideration by the AO - HELD THAT:- AO is not empowered to substitute the agreed consideration by Fair Market Value except in situations envisaged u/s 50C of the Act. Whenever the Parliament intended to substitute the actual sale consideration by the Fair Market Value, it has done so, by enacting specific provisions for example the provisions of Sec.45(4) etc. The method adopted by the Assessing Officer to compute Fair Market Value of salable constructed are is flawed for the following reasons viz (1) invoking the provisions of Sec.45(5A) of the Act which is inserted by the Finance Act, 2017 w.e.f. A.Y. 2018-19 is bad-in-law in as much as that the Assessing Officer should have applied the provisions of Sec.45(5A) in its entirety not in part i.e., only by adopting the value for stamp duty purpose of the saleable area, (2) not applying other limb of provisions, which determines the tax of chargeability of Capital Gains to tax. It is suffice to say that the action of the Assessing Officer is bad-in-law without delving into issue whether the said provisions have retrospective effect or not. Secondly, the Assessing Officer should not have adopted ready reckoner value for the purpose of determining fair market value of the saleable constructed area, in as much as, it does not reflect the Fair Market Value as held by the jurisdictional High Court in the case of CIT Vs. Nirman Laxmanarayan Grovver [ 1994 (12) TMI 3 - BOMBAY HIGH COURT ] Thirdly, the Assessing Officer can adopt only discounted value of the ready reckoner value even if ready reckoner value is held to be Fair Market Value. Arguments advanced by the ld.CIT D.R. are only on the aspect of computation of the fair market value, since we held that in the absence of any enabling provision under the Income Tax Act, 1961 the Assessing Officer is not empowered to substitute the agreed consideration by fair market value except in the situations envisaged under the provisions of Sec.50C of the Act. we need not deal with arguments of the ld.CIT D.R. Therefore, what follows from the above discussion is that first of all the Assessing Officer ought not have embarked upon exercise of substituting the agreed consideration by Fair Market Value of the salable area in the facts of the present case nor the values adopted can be approved in the light of the discussions cited above. Thus, according to us, the orders of the lower authorities are contrary to the law. Therefore, we hereby set aside the orders of ld.CIT(A) and the Assessing Officer and allow the grounds of appeal filed by the assessee.
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2021 (7) TMI 325
Black Money Undisclosed Foreign Income And Assets And Imposition Of Tax Act, 2015 - Assessee as Sole beneficiary of the Foreign Account - non disclosing such foreign asset in his Income Tax Return - ultimate beneficial owner - CIT- A deleted the addition holding that the assessee is not the beneficial owner of the bank account and further the source of the fund in that bank account is emanating from Rajvin Limited trust in which the business receipts are credited belonging to the business dealings of son of the assessee - Under what circumstances the undisclosed asset located outside India can be taxed in the hands of the assessee ? - HELD THAT:- Testing the case before us on the parameters laid down by The Companies Act it is apparent that there is no any arrangement, contract et cetera between Watergate advisors private limited or Mr. Rajneesh Mehra with the assessee. There is no demonstration by the revenue that assessee exercises any control as a shareholder of Watergate advisors limited over that company. There is no evidence that assessee has received any interest. It is not also demonstrated that assessee exercises any control to appoint directors or control the management or policy decision of that company. This is also adequately narrated by the learned CIT A. Thus, the test of beneficial ownership as per the criteria laid down Under The Companies Act 2013 does not satisfy that assessee is a beneficial owner of the bank account owned by Watergate advisors Limited. Another law, which deals with the beneficial ownership, is The Benami Property (Prohibition) Act 1988. Section 2(12) The Benami Property (Prohibition) Act, 1988 defines beneficial owner to mean a person, whether his identity is known or not, for whose benefit the benami property is held by a benamidar. Benami property has been defined to mean any property, which is the subject matter of a benami transaction and also includes the proceeds from such property. 'Beneficial owner' has been defined as an individual who ultimately owns or controls a client of a reporting entity or the person on whose behalf a transaction is being conducted and includes a person who exercises ultimate effective control over a juridical person . Testing the above facts with respect to this law, here there is no evidence that the consideration has been provided by the assessee of the sum deposited in the bank account of Watergate advisors Limited. Contrary to that assessee has shown that above funds have been transferred from Rajvin Limited, which is owned and controlled by the son of the assessee. Similar to the provisions of the Companies act here also it is not demonstrated that assessee enjoys and exercises any control the Watergate advisors Limited or the owner of the Watergate advisors Limited. It is also required to be tested the test of beneficial ownership in the context of Prevention Of Money Laundering Act where reference is made to the ultimate ownership or control of the entity. Provisions of Rule 9(3) of The Prevention of Money Laundering (Maintenance of Records) Rules, 2005 provides that : In the case of a company, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical persons, has/have a controlling ownership interest or who exercise control through other means Testing the transactions before us it is apparent that assessee does not own any share capital in case of Watergate advisors Limited as well as it also does not controls the above company as he does not have any shareholding or management rights in that company. With respect to the mention of the name of the assessee in the account opening form as beneficial owner, assessee has relied upon the decision of the coordinate bench in case of Mr. Kamal Galani[ 2020 (10) TMI 1077 - ITAT MUMBAI] Merely mentioning the name of the assessee in the account opening form which is rebutted by the assessee by filing an affidavit and complete details of the ownership of the bank account, the assessee cannot be held the beneficial owner of such sum. Therefore, such solitary fact cannot lead to addition in the hence of the assessee where there is no other evidence available with respect to the ownership or beneficial ownership over such bank account. In view of this it is apparent that the mere account opening form where the assessee is mentioned as the beneficial owner of the account mentioning is details of his passport as an identification document, does not necessarily, in absence of any other corroborative evidence of the beneficial ownership of the assessee over that for an asset cannot lead to taxability in the hands of the assessee Under the Black Money Act. We hold that assessee does not have beneficial ownership of the amount deposited in Watergate advisors Limited, assessee also do not held that asset. The learned CIT A has also held so giving the detailed reasons as reproduced above. The learned departmental representative could not show us any evidence that assessee is the owner or beneficial owner of the sum lying in the bank account of Watergate advisors Limited. The assessee has given an overwhelming evidence of the fact that money belong to the son of the assessee which were not at all controverted by the learned assessing officer. CIT A was correct in deleting the addition of ₹ 56,647,000/ in the hands of the assessee.
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2021 (7) TMI 324
Existence of an Assessee s PE in India - Double Taxation Avoidance Agreement between India and the UAE - CIT(A) held that activities of the Project Office of the assessee were 'preparatory and auxiliary' in nature in terms of the Article 5(3)(e) of the Double Avoidance Agreement between India and the UAE - HELD THAT:- As decided in own case [ 2016 (2) TMI 47 - DELHI HIGH COURT] the consideration of various activities has been specified in the contracts in question. Annexure C (Contract Price Schedule and Rental Rates Schedule) specifically assigns value to various activities. It is also not disputed that the invoices raised by the Assessee specifically mentioned the work done outside India as well as in India. Thus, even though the contracts in question may be turnkey contracts, the value of the work done outside India is ascertainable. There is no dispute that the values ascribed to the activities under the contracts are not at Arm's Length. There is also no material to indicate that the work done outside India included any input from the Assessee's PE in India. The ITAT had considered the contract and in view of the fact that the consideration for various activities such as design and engineering, material procurement, fabrication, transportation, installation and commissioning had been separately specified, the Tribunal rightly held that the consideration for the activities carried on overseas could not be attributed to the Assessee's PE in India In view of the conclusion that the Assessee did not have a PE in India during the AYs 2007-08 and 2008-09, no income of the Assessee from the projects in question can be attributed to the Assessee s PE.- Decided in favour of assessee.
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2021 (7) TMI 323
Revision u/s 263 by CIT - assessee s claim of 100 % exemption of profits u/s 80 IC in respect of its Unit- II - HELD THAT:- As the letter of the GOI to the DIC, Himachal, which as per the Ld. Pr.CIT the AO failed to consider, stated the item manufactured by the assessee as covered under serial no. 5 of the negative list, but the item manufactured by the assessee does not have the NIC CODE mentioned against the said serial NO. of the negative list and also that the description of items in the said serial no. is ambiguous mentioning organic chemicals under some descriptions and inorganic chemicals against other description. There is no dispute vis a vis the aforestated facts. Perusing the manner of description of items falling in the negative list, i.e. Schedule XIII of the Income tax, there is no doubt that to qualify as an item covered therein, all the manners of describing the items has to be satisfied. It has to fit into the description, belong to the specified chapter of Excise classification and also qualify as item of the specified NIC CODE. In the present case the uncontroverted fact is that the NIC CODE of the item manufactured by the assessee is not that mentioned in S.No.5 of Schedule XIII, though it may meet the other descriptions. It cannot therefore be categorically said that the item manufactured by the assessee qualified in S. No.5 of the negative list. Moreover on account of the clear cut ambiguity in the item mentioned/described against S.No.5, relating both to organic and inorganic chemicals, the assessee is entitled to the benefit of doubt regarding the items sought to be covered under it. We do not find any error in the view taken by the AO, in the light of the above facts which were before him also, that the item manufactured by the assessee does not qualify in S. No. 5 of the negative list and the assessee therefore is entitled to claim exemption u/s 80 IC The argument of the Ld.DR that the statement of the Department of Industrial Policy Promotion is a technically backed one, we find is very impressive and pertinent and there may be no doubt about it also, but all the same it only mentions the item as falling in S. No.5, which at the cost of repetition, we state, has been clearly demonstrated as being unclear of the items sought to be covered and the assessee not qualifying therein on account of its NIC CODE being not covered in it. There was no error in the order of the AO, taking the view that the item manufactured by the assessee did not meet the description of S.No. 5 of the negative list and accordingly allow assesses claim of exemption u/s 80 IC of the Act. The findings of the Ld. Pr.CIT therefore to the effect that the AO s order was erroneous on account of inadequate enquiry having been conducted on the issue of grant of exemption u/s 80 IC of the Act to unit- II of the assessee are accordingly set aside. Claim of deduction u/s 80 IC on rental income in Unit- I (IU-II) and on interest on securities deposited with Sales Tax Department and H. P. S.E. B. - HELD THAT:- Since it is a fact on record that the AO had not allowed the assessee s claim on deduction of profits earned in Unit- I (IU-II) as per the provisions of section 80 IC of the Act, it is but obvious that the entire income earned therein had been subjected to tax and, therefore, the findings of the Ld.Pr.CIT that the assessee had been wrongly allowed deduction u/s 80 IC of the Act on rental income and interest on securities earned in the said unit by the AO is incorrect. There is clearly no error in the order of the AO since both the rental income and interest on securities has been subjected to tax and the findings of the Ld.Pr. CIT in this regard are therefore set aside. Bifurcation of expenses between Unit- I (IU-II) and Unit- II of the assessee - With respect to the apportionment of expenses relating to the electricity charges and salary to employees between Unit- I (IU- II) and Unit- II, we find that the assessee had explained that the two units were separate manufacturing different items, having their own infrastructure for electricity and had different employees on their rolls and expenses had accordingly been accounted for in the said two units. The Ld. Pr. CIT while f inding error in the order of the AO has not dealt with this contention of the assessee. The Ld. Pr. CIT could have found an error in the order of the AO only after pointing out any infirmity in the reply filed by the assessee, which he has failed to do so. In effect, the entire order of the Ld. Pr.CIT passed u/s 263 of the Act is set aside. - Decided in favour of assessee.
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2021 (7) TMI 322
Disallowance u/s.14A - HELD THAT:- It is undisputed fact that during the year under consideration the assessee company has earned exempt income in the form of dividend only. However, the ld. CIT(A) has sustained the addition to the extent of ₹ 2,58,487/-. After considering the decision of Jivraj Tea Ltd. vs. DCIT [ 2014 (9) TMI 131 - ITAT AHMEDABAD ] wherein it is held that disallowance u/s. 14A cannot be exceeded the exempt income we restrict the disallowance to the extent of the exempt income in the form of dividend earned by the assessee during the year under consideration to the amount . Accordingly, this ground of appeal of the revenue is dismissed. Computing book profit u/s. 115JB - HELD THAT:- No addition of disallowance made u/s. 14A can be made while computing book profit u/s. 115JB of the Act as held by Special Bench decision of Delhi ITAT in the case of ACIT vs. Vineet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI ] The ld. counsel is fair enough not to controvert this undisputed fact that this issue is covered in favour of the assessee by the decision of Special Bench of the ITAT Delhi as referred above. Therefore, we do not find any merit in the appeal of the revenue, therefore, the same stands dismissed. Disallowance u/s. 40(a)(ia) on account of non-deduction of tax - HELD THAT:- After verifying that assessee has not filed supporting details and invoices of reimbursement of expenditure. In this regard, it is observed that ld. CIT(A) has not demonstrated the specific deficiencies in the details filed by the other parties in respect of payment made therefore, we restore this issue to the file of Assessing Officer for adjudicating afresh after verification of specific detail and the claim of payment of taxes by payee. Accordingly, the appeal of the revenue is dismissed and cross objection filed by the assessee is allowed for statistical purposes. Disallowance u/s. 36(i)(iii) - AO observed that assessee has given interest free loan to M/s. Lalbhai Realty Finance Ltd. an associated concern of the assessee company - CIT(A) has deleted the disallowance after verification of undisputed fact that assessee was having sufficient interest free funds to the amount in the form of share capital and reserves and surplus - HELD THAT:- The revenue had not disproved these undisputed fact that assessee was having sufficient interest free fund out of which the impugned loan was advanced to its sister concern. In the light of the above facts and findings, we do not find any infirmity in the decision of ld. CIT(A), therefore, the appeal of the revenue stands dismissed. Carry forward LTC loss as assessee had not filed revised return of income revising claim - HELD THAT:- In view of the direction of the ld. CIT(A) to the Assessing Officer to allow the claim of the assessee after verifying the revised working, we do not find any reason to interfere in the finding of ld. CIT(A). Therefore, this ground of appeal of revenue is dismissed. Addition u/s. 41(1) - HELD THAT:- Considering the fact that auditor has remarked in the Audit report in form NO. 3CD that the said liability was still existed subject to confirmation we restore this issue to the file of Assessing Officer to adjudicate afresh after giving opportunity to the assessee to make compliance as recommended in the Audit report. Therefore, this ground of appeal is allowed for statistical purposes. Non granting credit for TDS - HELD THAT:- As perused the material on record connected with the issue filed by the assessee during the course of assessment proceedings and appellate proceedings. Since this issue of granting credit for TDS has not been specifically adjudicated by the lower authority, therefore, we restore this issue to the file of the Assessing Officer for deciding afresh after verification of the supporting material after providing due opportunity to the assessee. Accordingly, this ground of the cross objection is allowed for statistical purposes. Computation of book profit u/s 115JB - CIT(A) has directed the Assessing Officer to verify the contention of the assessee that the provision was made in assessment year 2010-11 and same was added while computing book profit u/s. 115JB of the Act and the same was reversed in the year under consideration, if it is found correct, the Assessing Officer is directed to reduce book profit - HELD THAT:- After hearing both the sides and taking into consideration the detailed finding of the ld. CIT(A), we do not find any infirmity in the decision of ld. CIT(A) in directing the Assessing Officer to consider the claim of the assessee after verification of the facts available on the record. Accordingly, this ground of appeal of Revenue stands dismissed.
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2021 (7) TMI 321
Addition by treating the interest received on STDR made in the pre-commencement period as being income from other sources - whether the interest income received by the assessee on temporary deposit of funds with banks was assessable as income of the assessee or it would go to reduce the cost of borrowings? - HELD THAT:- In the instant case, the assessee company has invested borrowed funds, available during the period starting disbursement and availability of funds, and actual utilization for the purposes the funds were borrowed, and therefore surplus in the intervening period, in short term interest bearing deposits with the bank. There is nothing on record to suggest that the assessee company was bound to utilize the interest so earned on such short term deposits to adjust against the interest paid on borrowed capital and there were any end-use restrictions and it was therefore free to use the interest income in any manner it liked and therefore interest earned by investing borrowed capital in short term deposit is an independent source of income not in any manner connected with construction activities which rightly been brought to tax as income under the head income from other sources . Even the ground relating to setting off of interest expenses on borrowed funds U/s 57(iii) against the interest income has been discussed in case of Seshasayee Paper Boards Ltd. [ 1984 (4) TMI 17 - MADRAS HIGH COURT] has decided the same against the assessee. Therefore, respectfully following the same, the interest income has to be brought to tax without allowing any deduction u/s 57(iii) towards interest on borrowed capital. - Decided in favour of revenue.
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2021 (7) TMI 320
Assessment u/s 153A - addition on account of disallowance u/s 10(38) - HELD THAT:- The impugned disallowance is not based on any incriminating material found as a result of search. CIT (A) has confirmed the addition on the ground that there is no explanation as to the contradictory stand in as much as surrender was made in Assessment years 2014-15 and 2015-16 but not in the instant year. AR has explained that the scrips in Assessment year 2014-15 and 2015-16 were M/s Kappac Pharma Ltd. and M/s Swift IT Infrastructures Services Ltd., which is different from the scrip in the instant year, namely M/s KGN Industries Ltd. DR has not been able to rebut the above factual submission and also not highlighted any incriminating material found as a result of search despite copies of panchnamas having been again placed on record by the Ld. AR. We hold that the Ld. CIT (A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A of the I.T. Act. Accordingly, the disallowance made by the Assessing Officer and as upheld by the Ld. CIT (A) in the 153A assessment proceedings being void ab initio is deleted. - Decided in favour of assessee.
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2021 (7) TMI 319
TP Adjustment - Comparable selection - exclusion of Thirdware from the final set of comparables for the purpose of benchmarking Software Development segment - HELD THAT:- A close examination of decision in the said case reveals that the said company was accepted as comparable to a Software Development service provider on the basis of geographical segment reporting, i.e. domestic vis- -vis overseas. The issue was not examined with regard to segment reporting of the services and functional analysis - Hon'ble Jurisdictional High Court in the case of PTC Software (I) Pvt. Ltd. [ 2016 (9) TMI 1282 - BOMBAY HIGH COURT] has held that Software Product and Software Development services are functionally different. The company engaged in selling of software product is incomparable to company rendering Software Development services. Thus, in view of the above, we hold that the decision rendered in the case of Steria (India) Ltd [ 2018 (4) TMI 578 - DELHI HIGH COURT] is distinguishable, hence, the same does not support the case of Revenue. We hold that Thirdware being a product company is not a good comparable to a company engaged in software development services, therefore, the Assessing Officer is directed to exclude Thirdware from the final set of comparables. Working capital adjustment - HELD THAT:- We find that in assessment year 2010-11 the CIT(A) had allowed working capital adjustment on final set of comparables. The Revenue challenged the same before the Tribunal [ 2019 (10) TMI 1241 - ITAT MUMBAI] . The Coordinate Bench upheld the finding of CIT(A) in allowing working capital adjustment and rejected the ground raised by the Revenue. Similarly, in assessment year 2011-12 and 2013-14 the Tribunal allowed the benefit of working capital adjustment to the assessee following the order in assessment year 2010-11. No contrary material has been placed before us by the Revenue. Respectfully following the decision of Coordinate Bench in assessee's own case in the preceding assessment years and immediately succeeding assessment year, we direct the Assessing Officer to allow the benefit of working capital adjustment to the assessee. Consequently, ground No. 1.2.10 is allowed. Transfer Pricing (TP) adjustment made on account of provision of IT support and related services - Excel was excluded from list of comparables on account of abnormally fluctuating revenue. Similar view has been taken by the Tribunal in the case of M. Model Global Services [ 2019 (10) TMI 1439 - ITAT MUMBAI] for exclusion of Excel from the final set of comparables. Respectfully following the decision of Co-ordinate Bench in the case of Banc Tec TPS India Pvt. Ltd. [ 2020 (7) TMI 367 - ITAT MUMBAI] AO is directed to exclude Excel from the list of comparables for parity of reasons.
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2021 (7) TMI 316
Deemed dividend u/ s 2(22)(e) - HELD THAT:- A perusal of the shareholding pattern placed before us shows that none of the shareholders of the lender company holding 10% or more of the voting power holds substantial interest in the assessee company. This being so, the basic condition s.2(22)(e) of the Act is not fulfilled in the present case. We, thus, totally fail to understand the approach of the AO in applying the law for additions of this magnitude. Secondly, we also affirmatively take note of the plea raised on behalf of the assessee that the lender company has given interest bearing loan to assessee and the loan is not interest free. The said loan cannot be said to be for the individual benefit of any such shareholder . In the similar circumstances, the Hon ble Calcutta High Court in the case of Pradip Kumar Malhotra [ 2011 (8) TMI 16 - CALCUTTA HIGH COURT] has observed that advances given by the lender was not for the individual benefit of the shareholder but for business purposes and therefore such transactions would not fall within the sweep of deeming fiction created under s.2(22)(e) - This reason also on a standalone basis is sufficient to exclude the applicability of Section 2(22)(e) of the Act on the money received by the assessee. As seen from any angle, additions are totally unjustified made by way of deemed dividend in the case of the assessee as rightly held by the CIT(A) on the factual backdrop. We thus see no error in the conclusion drawn in the first appellate order albeit for the reasons noted above. Disallowance towards the excess interest paid to the persons covered u/ s 40A(2)(b) - HELD THAT:- Identical issue has come up before the co-ordinate bench in the earlier year relevant to AY 2011-12 wherein the co-ordinate bench has approved the reversal of disallowance made by the CIT(A) in these similar facts - AO has not discharged the onus which lay upon it to show that the interest paid is excessive or unreasonable having regard to fair market value of facility so provided. We thus see no reason to interfere with the order of the CIT(A). Accordingly, Ground no.2 of the Revenue s appeal is dismissed.
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Customs
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2021 (7) TMI 343
Reopening of assessment - Recovery of Refund of Extra Duty Deposit (EDD) - HELD THAT:- The issues relating to the import period from 1997- 2002 and the EDD deposit made were refunded pursuant to the orders passed by the CESTAT. When such a refund is made and the petitioner also received the refund amount, thereafter, the Show Cause Notice was issued for the imported period from 2006-2010. Based on the same principles, the petitioner filed the appeal before the CESTAT and the said appeal is pending, and the petitioner made a pre-deposit, as required under the statute. The Board also issued a Circular dated 16.09.2014 that if an opinion is formed that the EDD was erroneously refunded as the matter is pending before the CESTAT, the demand cannot be made till the issues are settled by passing a final order - In the present case, admittedly, the CESTAT Appeal is pending. This being the factum, this Court is of the opinion that the impugned order issued on 08.01.2013 ought not to have issued by the respondents and they should have waited till the disposal of the CESTAT Appeal filed by the petitioner, which is pending. The impugned demand notice issued by the 4th respondent is kept in abeyance till the disposal of the CESTAT Appeal filed by the petitioner - Petition disposed off.
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Corporate Laws
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2021 (7) TMI 318
Approval of scheme of Amalgamation - seeking directions for convening and holding of various meetings - Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 - HELD THAT:- The meetings of the Secured Creditors of Applicant Company 1 is hereby dispensed with. Since there are NIL Secured Creditor in Applicant Company 2, question for convening of meeting of Secured Creditor in Applicant Company 2 does not arise. Application allowed.
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Insolvency & Bankruptcy
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2021 (7) TMI 317
Seeking direction to complete the leasing process of auditorium - respondent No.2-Haryana Shahri Vikas Pradhikaran (HSVP) makes a statement that in a meeting, which was held yesterday i.e. 14.06.2021, the tender process, which was initiated, stands cancelled, rendering the writ petition infructuous - HELD THAT:- The present writ petition is disposed of as infructuous.
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Service Tax
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2021 (7) TMI 326
Refund of service tax - Transition of credit to GST - rejection of refund claim on the ground of non-submission of document - also refund claim was filed after the expiry of relevant date - Section 11B of the Central Excise Act - HELD THAT:- Initially the appellant filed the ST-3 returns on 31/08/2017 for the period from April 2017 to June 2017 and utilized the entire cenvat credit and the closing balance was nil and in the transitional return in form GST Tran-1, he filed the nil value and did not carry forward any unutilized balance of cenvat credit. Subsequently, he realized that he did not avail the cenvat credit and KKC totally amounting to ₹ 16,50,384/- and filed a revised return in view of Section 142(9)(b) of CGST Act, 2017 but the original authority issued to the appellant, a show-cause notice proposing to deny the refund for non submission of documents and on the ground of limitation under Section 11B of the Central Excise Act. It is found that after the reply to the show-cause notice, appellant reduced the claim of cenvat credit for refund to the tune of ₹ 15,74,893/- by surrendering some amount of cenvat credit and KKC and restricted the refund to ₹ 15,74,893/-. Further both the authorities have not considered the submissions of the appellant that primarily the appellant is claiming the refund of cenvat credit in terms of Section 142(9) (b) of the CGST Act, 2017. Both the authorities have held that refund is time-barred in view of Section 11B of the Central Excise Act, 1944. The words notwithstanding anything contrary contain in said law means that the provisions of this Section will prevail over provisions of existing law except provision of Section 11B(2) of Central Excise Act, 1944. The Section 11B(2) of Central Excise Act, 1944 contains provisions relating to granting of refund in case of unjust enrichment. Thus, as far as conditions of Section 142(9)(b) of CGST Act, 2017 is concerned, the appellant has fulfilled the said conditions and hence is entitled for refund - it is a settled law that whenever two options are available, the assessee may choose the option which is more beneficial for them and in the present case the assessee/appellant has chosen to file the refund claim under Section 142(9)(b) of CGST Act, 2017 which has a overriding effect over Section 11B of Central Excise Act, 1994. The appellant did not choose to carry forward the credit in Tran-1 and preferred to claim cash refund as provided under Section 142(9) (b) of CGST Act, 2017. The impugned order holding that appellant is entitled for cash refund in view of Section 142(9) (b) of the CGST Act is set aside - case remanded back to the original authority for the limited purpose of verification of the invoices/documents - appeal allowed by way of remand.
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Central Excise
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2021 (7) TMI 327
Clandestine Removal - M.S. Billets - pig iron - difference in the declared stock and physical stock beyond tolerance limit - corroborative evidence to allege that the apparent shortage is due to clandestine removal, present or not - HELD THAT:- The method of stock verification adopted by the Revenue in this case (during inspection) is not correct and free from error. Further, such stock taking is not provided under the scheme of the Central Excise Act read with the Rules. Further, it is found that the appellant has given cogent explanation for the apparent shortage, which has not been found wrong by the court below. Further, such apparent shortage is less than 1% in case of M.S. Billets and about 3% in case of Pig Iron, which is within the tolerance limit in this type of industry - Save and Except the bald allegation made by the Revenue of clandestine removal, there is no other allegation in the show cause notice as regards the quantitative mismatch of input output ratio, etc. Hon ble High Courts and this Tribunal have repeatedly held that insignificant shortage in the stock of raw materials and finished goods does not lead inevitable evidence of clandestine removal, in absence of corroborative material on record. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2021 (7) TMI 345
Input Tax Credit - denial of credit capital goods of the unit -2 on the ground that credit cannot be availed before the commencement of commercial production as per Section 12(2) of the KVAT Act - sale of taxable goods or commencement of commercial production - HELD THAT:- It is well settled rule of statutory interpretation in relation to the taxing statute that the subject is not to be taxed unless the words of the taxing statute unambiguously impose tax on him. The proper course in construing revenue Acts is to give a fair and reasonable construction to their language without leaning to one side or the other but keeping in mind that no tax can be imposed without words clearly showing an intention to lay the burden and that equitable construction of the words is not permissible. It is equally well settled legal proposition that the word 'or' is normally disjunctive and the word 'and' is normally conjunctive. It is well settled rule of statutory interpretation that where the provision is clear unambiguous, the word 'or' cannot be read as 'and' and the expression 'or' is disjunctive. The deduction of input tax has to be allowed on fulfillment of one of the conditions namely (1) after commencement of commercial production, (2) sale of taxable goods and (3) sale of any goods in the course of export out of the territory of India by the registered dealer. Rule 133 of the Rules provides for deduction of input tax subject to the conditions mentioned therein. It is pertinent to note that none of the conditions prescribed in Rule 133 provide that each unit of the petitioner has to be an independent unit to avail of the benefit of input tax. There is no element of any mens rea that the petitioner had the intention to evade tax. The petitioner had paid taxes according to the information furnished in the return and therefore, it should not have been penalized subsequently after the assessment proceedings are finalized and the amount of tax is determined. It is well settled in law that penalty cannot be imposed merely because it is lawful to do so. The substantial questions of law are answered in favour of the petitioner and against the respondent.
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2021 (7) TMI 342
Seeking Exemption from VAT - petitioner- Institution is falling under the definition of dealer or not - Explanation (iii) to Section 2(15) of the TNVAT Act - HELD THAT:- This Court is of the considered opinion that the contention of the petitioner for grant of consumption is also well defended by the respondents. However, certain facts if at all the petitioner is of the opinion were not considered by the respondents in the impugned order, the said order is to be taken by way of an appeal before the appellate authority. The act provides an appeal to the Appellate Deputy Commissioner under Section 51 of the TNVAT Act. Section 58 provides appeal to the Appellate Tribunal and thereafter, the appeal or revision before the High Court under Sections 59 or 60 as the case may be. When the statutory remedies are available to the petitioner to redress the grievances with reference to certain facts as well as the legal grounds raised, it is not appropriate on the part of the High Court to adjudicate such issues in the absence of documents and material evidences. In the present case, the petitioner is claiming certain benefits by interpreting the provisions of the TNVAT Act and based on certain facts - However, the facts are distinguished by the respondents and they are not disputing the exemption granted with reference to the medical equipments. Petition disposed off.
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2021 (7) TMI 341
Validity of assessment order - reversal of Input Tax Credit - inputs damaged in transit or destroyed at some intermediary stage of manufacture - Section 19(9) sub-clause (iii) of TNVAT Act - periods 2008-09 to 2012-13 and 2011-12 to 2016-17 - HELD THAT:- Issue decided in the case of M/S. ARS STEELS ALLOY INTERNATIONAL PVT. LTD. VERSUS THE STATE TAX OFFICER, GROUP I, INSPECTION, INTELLIGENCE I, CHENNAI [ 2021 (6) TMI 957 - MADRAS HIGH COURT] where it was held that the reversal of ITC involving Section 17(5)(h) by the revenue, in cases of loss by consumption of input which is inherent to manufacturing loss is misconceived, as such loss is not contemplated or covered by the situations adumbrated under Section 17(5)(h). The only difference between the matters covered by the above order and the present matters would be that the impugned orders in these matters are passed under the provisions of the TNVAT Act. The applicable provisions, Section 17(5)(h) of the TNGST Act and Section 19(9)(iii) of the TNVAT Act are in pari materia - petition allowed.
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2021 (7) TMI 331
Exercise of erroneous Jurisdiction - provisions of the Tamil Nadu Value Added Tax Act, 2006 erroneously applied by AO - Case of petitioners is that when the impugned orders are passed with jurisdictional error and based on erroneous application of law, then a writ petition is to be entertained without exhausting the statutory appellate remedy provided under the Act itself - HELD THAT:- Jurisdictional error should not result in exoneration of liability. Jurisdictional error, if any committed, is technical, and thus, rectifiable. In such circumstances, the Courts are expected to quash the order passed by an incompetent authority and remand the matter back for fresh adjudication - Contrarily, if an assessee is exonerated from liability, undoubtedly, the purpose and object of the Act is defeated. The growing practice in the High Court is to file writ petitions under Article 226 of the Constitution of India without exhausting the statutory remedies provided under the Act. The points raised in this regard are statutory violations. However, even such statutory violations can be dealt with by the Appellate authorities or the Appellate Tribunals. This apart, in a writ petition, if such orders are passed with jurisdictional errors and quashed without any remand, then an injustice would be caused to the very spirit of the statute enacted for the benefit of the public at large. Thus, Courts are expected to be cautious, while granting exoneration of liability merely on the ground of jurisdictional errors, if any committed by the authorities competent - Liability and jurisdictional errors are distinct factors, and therefore, Courts are expected to provide an opportunity to the Department to decide the liability on merits and in accordance with law with reference to the provisions of the Act and Rules and guidelines issued by the Department. This Court has no hesitation in arriving a conclusion that the petitioners are bound to exhaust the statutory appellate remedy as contemplated under the provisions of the TNVAT Act. Thus, the petitioners are at liberty to approach the appellate authority by filing appeal/revision and by following the procedures contemplated - Petition disposed off.
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2021 (7) TMI 329
Levy of Entry tax - unmanufactured tobacco in sealed container - covered under Entry-5[ii] of the Notification dated 30.03.2002 in No.FD.11.CET.2002[I] as amended by the subsequent Notification dated 01.10.2013 in No. FD.208.CSL.2013[III] or otherwise? - Whether the first respondent is justified in clarifying that the unmanufactured tobacco is brought into the local area in sealed container and is covered under Entry 5(ii) of the aforesaid notifications and therefore, is liable for tax under section 3(1) of the KTEG Act? - HELD THAT:- All the references are qua the registered dealer (or dealer liable to be registered or the dealer) and the point of entry into the local area, and there is no reference to point of sale in section 3 of the KTEG Act. The place of business is defined to be the place where dealer is doing business and the value of goods is the purchase price at which the dealer purchases the goods. There is no reference to retail price or retail place of business. Thus, it is obvious on a plain reading of these provisions that the legislature intended the point of entry into the local area as the taxable event for the purposes of levy of entry tax and not the point of sale. If the intendment of the legislature, as is obvious from the provisions of the KTEG Act, is to stipulate entry of goods into the local area as the taxable event, this Court cannot opine that the taxable event must be the point of consumption, use or sale because goods are packed differently for wholesale and retail purposes. The fact that the unmanufactured tobacco is sold in retail in paper pouches that are just folded and the folds are kept in place by a loosely glued label would be of no consequence. As already observed, at the point-of-entry into the local area, the unmanufactured tobacco was in a sealed container - the first respondent is justified in clarifying that the unmanufactured tobacco is brought into the local area in a sealed container and is covered under Entry 5 (ii) of the aforesaid notifications and therefore, is liable for tax under section 3 (1) of the KTEG Act. Whether, the second respondent, in exercise of the jurisdiction conferred under section 17(5) of the KTEG Act, by the impugned order/s dated 17.08.2020 could have rectified the assessment orders dated 12.04.2019 issued for the assessment years 2014-15, 2015-16 and 2016-17 and levied entry tax as per the demand? - HELD THAT?:- The treating of the unmanufactured tobacco brought into the concerned local area by the petitioner in the assessment orders dated 12.04.2019 as Non-assessable excluding the relevant turn over from the assessment, undeniably, would be prejudicial to public revenue in the light of the terms of the amendment Notification dated 01.10.2013 and the provisions of Section 3(1) of the KTEG Act. The unmanufactured tobacco brought into the local area by the petitioner is treated as Non-assessable only because of the interim orders of this Court in the aforementioned writ petitions filed by the petitioner impugning the amendment Notification dated 01.10.2013, and it is also subject to the condition that such assessment orders would be reopened after the final decision in the writ petitions. The petitioner s grievance is that the impugned rectification orders are consequent to the impugned Clarification order dated 29.6.2020, and if the rectification orders are consequent to a judgment or order by the Court, the petitioner cannot, and in fact, does not have a grievance - the second question is also answered against the petitioner concluding that in the facts and circumstances of this case, the second respondent, is justified in exercising the jurisdiction conferred under section 17(5) of the KTEG Act and rectifying the assessment orders dated 12.04.2019 issued for the assessment years 2014-15, 2015-16 and 2016-17. Petition dismissed.
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Indian Laws
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2021 (7) TMI 340
Dishonor of Cheque - insufficiency of funds - failure to repay the money despite receiving demand notice - mechanical statement without verification of documents - HELD THAT:- The impugned cheque for a sum of ₹ 2,00,000/- was issued by the accused in favour of the complainant which was presented by the complainant to his banker i.e. SBI for encashment and crediting the same in his account. The said cheque was sent to Tripura Gramin Bank from SBI for collection. But the cheque was bounced from the Tripura Gramin Bank on which it was drawn for insufficiency of fund in the account of the accused. It also stands proved that the complainant issued statutory demand notice to the accused which was received by him and despite receipt of the notice, the accused did not pay the loan of the said amount of ₹ 2,00,000/- to the complainant. Eventually the complainant lodged the complaint in the court of the CJM at Udaipur. It is true that the complainant could not produce the impugned cheque at the trial. But his failure in presenting the cheque before the court does not affect his case because the Branch Manager of SBI at Udaipur branch had categorically stated in his evidence that the said cheque was missing from the custody of the bank which was also reported to the jurisdictional police station and the information was recorded in the General Diary of the police station. The accused could not impeach the evidence of the PW in this regard and there is no reason to doubt the statement of the Branch Manager, SBI [PW-3]. The plea of the accused is not at all probable. The complainant on the other hand has been able to prove the essential facts by adducing consistent evidence. The complainant proved that accused borrowed a sum of ₹ 2 lakhs form him and to discharge his debts, he issued the impugned cheque to the complainant which was dishonoured by the bank - In the instant case, apparently the accused petitioner did not lead any evidence in rebuttal of such statutory presumptions. He has also failed to bring on record such facts and circumstances which would lead the courts below to believe that the liability, attributed to the accused petitioner was improbable or doubtful. The impugned judgment is set aside and judgment and order of the trial court convicting the accused petitioner for having committed offence punishable under Section 138 NI Act is restored - Sentence is reduced to fine of ₹ 2,25,000/- only and in default to SI for 2 months. The criminal revision petition stands disposed of.
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2021 (7) TMI 335
Entitlement of compensation under Section 124A of the Railways Act - untoward incident - officers accountable for the lapses in the handling of the Court cases - HELD THAT:- The aim of the National Litigation Policy is to transform the Government into an efficient and responsible litigant. The core issue involved in the Court cases need to be focused and the same have to be managed and conducted in a cohesive, coordinated and time bound manner with the aim to reduce government litigation in Courts. All substantial questions of law in relation to special Economic Laws in view of the changing scenario and economic activity so as to achieve the goal in the national Legal Mission. The National Litigation Policy should imbibe into it the compulsory mediation process by the Government. India has, as its dynamic doctrine, economic democracy sans which critical democracy is chimerical. As a matter of fact, the Supreme Court has observed that even constitutional problems cannot be studied in a socio-economic vacuum, since socio culture changes are the change of the new values and slogging of old legal thought will be part of the process of the new equity loaded legality. The Judge is a social scientist in the role as a constitutional invigilator. This Court is of the view that the directions with respect to the Accountability in Government litigation are in the nature of PIL and therefore, it would be appropriate to list this matter before the PIL Bench - Subject to the orders of Hon ble the Chief Justice, list this matter before Division Bench on 15th July, 2021.
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