Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 23, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
DGFT
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20/2015-2020 - dated
21-7-2020
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FTP
Amendment in Export Policy of Personal Protection Equipment/Masks
GST - States
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61/GST-2 - dated
21-7-2020
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Haryana SGST
Notification to amend notification no.51/GST-2, dated 30.06.2020 in order to further extend period to pass order under Section 54(7) of HGST Act till 31.08.2020 or in some cases upto fifteen days thereafter under the HGST Act, 2017
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60/GST-2 - dated
21-7-2020
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Haryana SGST
Notification to amend notification no.43/GST-2, dated 07.05.2020 in order to extend due date of compliance which falls during the period from "20.03.2020 to 30.08.2020" till 31.08.2020 under the HGST Act, 2017
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59/GST-2 - dated
21-7-2020
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Haryana SGST
Notification to provide relief by waiver of late fee for delay in furnishing outward statement in FORM GSTR-1 for tax periods for months from March, 2020 to June, 2020 for monthly filers and for quarters from January, 2020 to June, 2020 for quarterly filers under the HGST Act, 2017
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58/GST-2 - dated
21-7-2020
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Haryana SGST
Notification to provide one time amnesty by lowering/waiving of late fees for non furnishing of FORM GSTR-3B from July, 2017 to January, 2020 and also seeks to provide relief by conditional waiver of late fee for delay in furnishing returns in FORM GSTR-3B for tax periods of February, 2020 to July, 2020 under the HGST Act, 2017
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57/GST-2 - dated
21-7-2020
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Haryana SGST
Notification to provide relief by lowering of interest rate for a prescribed time for tax periods from February, 2020 to July, 2020 under the HGST Act, 2017.
Income Tax
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50/2020 - dated
21-7-2020
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IT
U/s 10(46) of IT Act 1961 - Central Government notifies "Tamil Nadu e-Governance Agency" an agency formed by the State Government of Tamil Nadu in respect of the specified income arising to that Authority
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Maintainability of application- Scope of Advance Ruling - This authority has no jurisdiction to pass ruing on such matters pertaining to supply of goods or services or both which are being undertaken outside Maharashtra State by a different and distinct entity. We find no reason to entertain this application.
Income Tax
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Deduction u/s.80IA(4) - The assessee while determining the eligible profit, is not required to notionally reduce losses arising from eligible business in the earlier years already set off against other business of assessee in terms of Sections 70, 71 & 72 of the Act prior to exercise of option of ‘initial assessment year’.
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Revision u/s 263 - Income recognition method - PCIT cannot direct the AO for denovo assessment without assigning any defects or deficiencies in the method of accounting of revenue recognition on account of sale of flats/residential units/land and regarding non-applicability of AS-7 as contended by ld counsel for the assessee during the proceedings u/s 263.
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Computation of amount of diminution value on securities - the amount of premium on investment has not been taken into consideration at the time of computing diminution of the value of the securities. AO has not made any separate disallowance towards write off of premium on these securities. - Additions made deleted.
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Revision u/s 263 - The methodology adopted by the assessee for revenue recognition was being consistently followed by the assessee during previous and subsequent assessment years and same cannot be tinkered or disturbed by placing new method of revenue recognition wherein work in progress shown by the assessee has not been taken into consideration. In such type of case, inquiry should have been conducted by the revisional authority himself to record the finding that the assessment order was erroneous.
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Exemption u/s 10(34) - dividend income received by SARA fund - When the company with which SARA Fund has been invested, had already paid additional income tax on the earned dividend as required u/s 115-O of the Act, SARA fund was not required to pay additional income tax second time on the same income
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Addition u/s 69C OR 68 - Addition of share application money - Wrong mention of section - opening balance was carried forward - it is outside the ambit of section 68 - No addition.
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Nature of expenditure - Payment of ‘Franchisee fee’ - whether capital or revenue in nature? - ‘Franchisee Fee’ paid by the assessee is revenue in nature since it was only for limited period.
Customs
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Re-export of confiscated goods - if the appellant does not choose to redeem the goods then the goods shall remain in India and cannot be re-exported - confiscation of goods is set aside so as to facilitate re-export of impugned goods - Once the confiscation is set aside, the question of imposition of redemption fine does not arise - Further, on setting aside confiscation, imposition of penalty also does not arise.
Corporate Law
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Maintainability of application for winding up - Striking of name of the company - even after removal of the name of the company from the register of companies the NCLT can proceed with the petition for winding up under Section 271 of the Companies Act, 2013.
Central Excise
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Method of Valuation - inter unit transfer of goods - captive consumption - Appellant was justified in reducing the assessable value to the actual cost of production (i.e. 100% of cost excluding the notional loading of 15% or 10% of the goods manufactured by the Taloja Unit) as the cost of raw material for the Belur Unit for the purpose of determining the assessable value under rule 8 of the 2000 Valuation Rules.
VAT
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Doctrine of Contemporanea Expositio - Availment of Capital Investment Subsidy -when the Appellant company had obtained undue advantage in monetary terms by availing 25% extra subsidy; and had given undertaking to refund any excessive benefit with interest at the rate of 12% per annum, in our view, the Appellant company remains liable to refund the excess amount together with interest at the rate agreed upon, i.e., 12% per annum.
Case Laws:
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GST
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2020 (7) TMI 527
Maintainability of application- Scope of Advance Ruling - Tax liability of supply - Marine / Pressure Tight Cables/ Non Pressure Tight Cables - goods manufactured designed especially for use for Defence Ministry in their Warship as Parts of Warship - rate of GST - applicability of Sr. No: 252 of Schedule-I of the Notification No.1/2017 Integrated Tax (Rate) dated 28.06.2017 - Jurisdiction - HELD THAT:- The situs of supply of goods is originating from Gujarat and all other legal provisions of GST Acts are also to be fulfilled in Gujarat. The Gujarat GST authorities have the jurisdiction to collect GST on this transaction. Applicant is not carrying out any supply from the State of Maharashtra. Hence, the jurisdiction of this transaction is covered under Gujarat and Maharashtra has no scope to levy GST thereon. Maintainability of application - HELD THAT:- Considering the provisions of the Chapter XVII of the GST Act, this authority can only pass rulings on supplies being undertaken or proposed to be undertaken from Maharashtra State only. Therefore, this authority has no jurisdiction to entertain the subject application and to interfere in such activity of supply of goods , being carried out from another state. This authority has no jurisdiction to pass ruing on such matters pertaining to supply of goods or services or both which are being undertaken outside Maharashtra State by a different and distinct entity. We find no reason to entertain this application. Hence, without going into the merits of the case, the present application of the applicant seeking ruling on questions stated hereinabove is not maintainable and liable for rejection. Application dismissed as not maintainable.
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2020 (7) TMI 526
Constitutionality and legality of National Anti Profiteering Authority - Section 171 of the Central Goods and Services Tax Act and Rule 126 of the Central Goods and Services Tax Rules - HELD THAT:- List the matter on 24th August, 2020 along with other connected matters.
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Income Tax
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2020 (7) TMI 525
Deduction u/s.80IA(4) - losses arising in eligible business, if any, prior to exercise of option towards initial assessment year to be artificially carried forward and notionally adjusted from the profits arising from eligible business in the initial assessment year - whether the assessee is entitled in law for claim of deduction of income arising from eligible business during the year under s. 80IA(1) r.w.s. 80IA(4) without making adjustments towards losses arising in the earlier assessment years prior to exercise of option of initial assessment year with reference to the eligible business? - HELD THAT:- The manner of determination of quantum of deduction as provided under s.80IA(5) has since been clarified by the CBDT Circular No.1 of 2016 dated 15.02.2016 and is devoid of controversy any more. Having regard to the wide ranging controversies, the CBDT circular has given categorical interpretation on exercise of option of choosing initial assessment year referred to sub-section (5) of Section 80IA of the Act in favour of the assessee. CBDT has also clarified that embargo placed under s.80IA(5) of the Act for quantification of deduction of profits and gains of an eligible business would apply from the assessment years immediately succeeding initial assessment years only. Having regard to express elucidation by CBDT, the CIT(A), in our view, has rightly decided the issue of manner of computation of quantum of deduction under s.80IA(5) in favour of the assessee. The assessee while determining the eligible profit, is not required to notionally reduce losses arising from eligible business in the earlier years already set off against other business of assessee in terms of Sections 70, 71 72 of the Act prior to exercise of option of initial assessment year . The losses arising in eligible business , if any, subsequent to earmarking of initial assessment year shall however continue to be governed by embargo placed in Section 80IA(5) of the Act. - Decided in favour of assessee.
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2020 (7) TMI 524
Revision u/s 263 - Income recognition method - method accounting regularly employed by the appellant in recognizing the revenue from sale of residential flats which was submitted and considered during the assessment proceedings u/s.143(3) - whether assessee was duty bound to follow AS-7 for revenue recognition? - HELD THAT:- Assessee is a construction company engaged in the construction of flats/residential units on the land owned by it without any contract with the customers for construction of flats/residential units. It is ample clear that the assessee company is consistently following revenue recognition method by adopting completed project method, wherein, the revenue is recognised at the time of sale of flats/residential units by way of registered sale deed in favour of the customers and advance from customer and work in progress is recognised at cost in the balance sheet. Assessee has recognised revenue on two broad heads viz; sale of flats and sale of plots/land and amount of advance is transferred to the sales account when the registered sale deed is executed in favour of the customers adding the amount of advance pertaining to flats/residential units/plots sold during the relevant financial year and further adding the amount of advance received during the year. PCIT could not point out any defect in the revenue recognition method i.e. completed project method/percentage completion method adopted by the assessee and we are satisfied that the method consistently followed by the assessee and accepted by the department for recognition of revenue by following AS-2 alongwith AS-9 is a reasonable and right method for recognition of revenue on sale of flats/residential units/land. As per section 43CB the profits and gains of a construction company arising from construction contract or a contract for providing services shall be determined on the basis of percentage completion method and the same is mandatory for revenue recognition w.e.f. 1.4.2017 i.e. assessment year 2017-18 and this method of revenue recognition was not mandatory and compulsory to be followed for assessment year 2013-14. PCIT cannot revise or revisit the assessment order(s) by pressing into service the provisions of section 43CB of the Act in the present case. Findings arrived at by PCIT in the impugned order without any deliberation of explanation of the assessee explaining the method of accounting of revenue on account of sales and regarding non-applicability of AS-7 cannot be held as valid and sustainable without any further examination and exercise. PCIT cannot direct the AO for denovo assessment without assigning any defects or deficiencies in the method of accounting of revenue recognition on account of sale of flats/residential units/land and regarding non-applicability of AS-7 as contended by ld counsel for the assessee during the proceedings u/s 263. We are of the considered view that the revisionary order passed by the Ld. Pr. CIT is without jurisdiction - Decided in favour of assessee.
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2020 (7) TMI 523
Disallowance of deduction claimed on account of diminution in the market value of Government securities classified under the category Held to Maturity - HELD THAT:- The essence of the matter is to examine as to whether a particular expenditure/loss is deductible and not whether the same is recorded in the books of account. If a particular amount is deductible as per law, the same has to be allowed as deduction irrespective of the fact that it was not recorded in the books of account. It is further noticed that the assessee did not record such diminution of value of securities to the extent of ₹ 2.65 crores in its books of account so as to satisfy the RBI norms, which provide for valuing the securities as such without any diminution in their value at the year end. RBI guidelines mandate reflection of certain transactions in a certain way and do not supersede the taxing principles. Treatment of the securities as investment or stock-in-trade - AR has relied on the judgment in Pr.CIT Vs. Bank of Maharashtra [ 2018 (3) TMI 316 - BOMBAY HIGH COURT] in which, in identical circumstances held that the securities held by the assessee bank as `Held till Maturity will not be treated as investment. No contrary point of view has been brought to our notice by the ld. DR. Respectfully following the precedent, we overturn the impugned order on this score and hold that such securities should be taken as stock-in-trade and not investments. Computation of amount of diminution value on securities - as premium on year to year basis and secondly, difference between the market value and the face value of the securities - We find that the amount of premium on investment has been separately claimed as deduction by the assessee. Such premium has been offloaded from the purchase cost to bring such securities at face value and all the subsequent calculations for valuing at the market price at the end of the year and calculation of profit at the time of sale of in a later year, have been done with reference to the face value without premium. Thus, it is clear that the amount of premium on investment has not been taken into consideration at the time of computing diminution of the value of the securities. AO has not made any separate disallowance towards write off of premium on these securities. We, therefore, order to delete the addition of ₹ 2.65 crores and odd. Thus, these three grounds are allowed. Disallowance u/s 36(1)(viia) - Amount of provision which was not made in the books of account - HELD THAT:- As decided in BANK OF MAHARASHTRA [ 2014 (10) TMI 210 - ITAT PUNE] Tribunal did not allow deduction u/s 36(1)(viia) of the Act in respect of the amount of provision which was not made in the books of account. Also see STATE BANK OF PATIALA VERSUS COMMISSIONER OF INCOME-TAX AND ANOTHER. [ 2004 (5) TMI 12 - PUNJAB AND HARYANA HIGH COURT] - Decided against assessee.
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2020 (7) TMI 522
Revision u/s 263 - revenue recognition method - assessee company is following percentage completion method of accounting for revenue recognition but while considering the revenue recognition of the Surekha Vatika Project, proper method was not applied by the assessee leading to incorrect revenue recognition instead of the proper method which recognizes the revenue - HELD THAT:- It is well settled principle that the AO is required to make reasonable, sufficient and adequate enquiry of impugned issues during assessment proceedings and in case of no enquiry or insufficient or inadequate enquiry, Pr.CIT is empowered to revise the order holding the same as erroneous and prejudicial to the interest of the revenue. But if this proposition is evaluated in the facts and circumstances of the present case then, it is clearly discernible that the AO by way of notice u/s.142(1) dated 26.10.2015 and 30.7.2015 called the documents/information from the assessee which includes copy of the audited balance sheet, profit and loss account, Annual report alongwith details of bank accounts maintained including bank name, branch details and a/c no. supported with bank statements for the financial year 2012-13 relevant to assessment year 2013-14. As observed that the Assessing Officer also called the details of party-wise purchase and sales of land/flat, details of project-wise percentage of construction as on 31.3.2013, estimate cost of each projects and estimate sales price thereof and closing stock details with detail valuation and method of valuation, which were submitted by the assessee and this fact has not been negated or disputed by Pr. CIT in the impugned order as well as during the arguments before us by Ld. CIT DR. In view of copies of notices and replies of the assessee available at APB page 43 to 51, we are satisfied that during assessment proceedings, the AO made proper, sufficient and adequate enquiry on the issues including issue of revenue recognition of the assessee by following percentage completion method, project-wise revenue recognition. It is not a case of no enquiry, inadequate enquiry or insufficient enquiry. Therefore, without holding so, the impugned assessment order cannot be tagged or alleged as erroneous and prejudicial to the interest of revenue. The methodology adopted by the assessee for revenue recognition was being consistently followed by the assessee during previous and subsequent assessment years and same cannot be tinkered or disturbed by placing new method of revenue recognition wherein work in progress shown by the assessee has not been taken into consideration. In such type of case, inquiry should have been conducted by the revisional authority himself to record the finding that the assessment order was erroneous. In the present case, the Pr. CIT has not made inquiry himself on the submission/reply of the assessee to before exercising his power u/s.263 of the Act vide dated 23.3.2018 (APB pages 59 to 68) and relevant part as reproduced by the ld Pr. CIT in para 4 of the impugned order. He merely set aside the assessment order and directed the AO to redo the assessment denovo on the issue, which is not permissible as per principle laid down by Hon ble Delhi High Court in the cases of Jyoti Foundation [ 2013 (7) TMI 483 - DELHI HIGH COURT] and DG Housing [ 2012 (3) TMI 227 - DELHI HIGH COURT] . We reach to a logical conclusion that the issuance of notice u/s.263(1) of the Act and impugned revisional order u/s.263 of the Act is not sustainable and revisionary authority had no valid jurisdiction to revise the assessment order. Consequently, the impugned notice as well as revisional order u/s.263 of the Act are hereby dismissed. - Decided in favour of assessee.
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2020 (7) TMI 521
Exemption u/s 10(34) - dividend income received by SARA fund - exemption claimed by the appellant on its share of dividend income of dividend income received by SARA Fund (venture capital Fund - (VCF) - HELD THAT:- CIT(A) have taken a wrong view by holding that the assessee cannot grow tax-free income u/ss 10(34) and 10(35) of the Acts unless additional tax has been paid as per the provisions of Sections 115-0 and 115-R of the Act and as such the exemption claimed u/ss 10(34) and 10(35) is to be allowed only if the dividend income distributed as per the provisions of Sections 115-O and 115-R whereas, the conditions laid down u/s 115-O to avail the exemption u/s 10(34), is to be complied with at the level of venture capital undertaking and not at the stage when the investor, the assessee in this case, received the dividend income from VCF. So, the assessee is entitled for exemption u/s 10(34) of the Act and its share of dividend income is out of dividend income received by SARA fund. When the company with which SARA Fund has been invested, had already paid additional income tax on the earned dividend as required u/s 115-0 of the Act, SARA fund was not required to pay additional income tax second time on the same income. - Decided in favour of the assessee. Disallowing expenses by taxing the share of the appellant in interest income from VCF under the head Other Sources on gross basis and not on net basis in disregard of the fact that income of a VCF - HELD THAT:- A person who makes investment in the venture capital company or venture capital fund, the assessee in this case, earned the income out of such investment which income shall be treated firstly as investment directly in the venture capital undertaking and venture capital fund or venture capital company is only a pass through vehicle. So, in these circumstances, the assessee-company is entitled to book expenditure incurred by SARA fund as if the same has been incurred by the assessee directly in the venture capital fund. So, we are of the view that the expenses disallowed by Ld. CIT(A) by taking the shares of the assessee in interest income from VCF under the head other sources on gross basis and not the net basis, which requires to be determined by treating the same nature of income like long term capital gain, short term capital gain, dividend and other income such as interest etc. Grounds determined in favour of the assessee. Income from other sources - HELD THAT:- In the balance sheet / revenue account of SARA fund and the assessee has rightly disclosed the income by subtracting the amount which is the amount of capital nature and as such not taxable in the hands of investor by treating the same nature of income like LTCG, STCG, Dividend and other income such as interest etc. and as such to be taxed as per the provisions as applicable under different heads of income meaning thereby a person who makes investment in the VCC and VCF - the assessee in this case, earned the income out of such investment, which income shall be treated as if the investment was directly in the VCU and VCF and VCC is only a pass through vehicle. Assessee has rightly taken the net income for tax at ₹ 11,97.38,454/- by subtracting the amount of ₹ 5,62,61,546/- and the assessee is liable to be taxed accordingly. So, Ld. CIT(A) has erred in holding that the appellant's share in the payment of ₹ 5.62,61,546/- (17,60,00,000 - 11,97,38,454) @ 22.73% i.e. ₹ 1,27,88,250/- as income from other sources in the hands of assessee, which is required to be assessed in view of the provisions contained u/s 115U of the Act. - Decided in favour of the assessee.
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2020 (7) TMI 520
Addition u/s 69C OR 68 - Addition of share application money - Wrong mention of section - assessee contends that such unexplained credits are outside the ambit of section 69C - HELD THAT:- Wrong mention of section would not vitiate the entire assessment. Moreover, the first appellate authority, at para 4.3 of his order, has also acknowledged this inadvertent error. No merit in this application moved by the assessee. Accordingly, the same stands rejected It is true that the Assessing Officer did not proceed further after serving the summons u/s 131 of the Act. In our considered opinion, if the summons were served and share applicants being family members, the Assessing Officer had all powers to enforce their attendance. Before the first appellate authority, the assessee furnished complete bank statements alongwith source of availability of funds with share applicants, but the same has been discussed summarily by the ld. CIT(A) and also by the Assessing Officer in his remand report. When the income of the share applicants does not justify the share application money, then the burden is heavier on the assessee to prove the credit worthiness of the share applicants. Though the assessee did file documentary evidences, it appears that the same have not been thoroughly examined by the authorities below. Therefore, in the interest of justice and fair play, we deem it fit to restore the entire assessment to the file of the Assessing Officer. The assessee is directed to furnish documentary evidences to show the availability of funds with share applicants and the Assessing Officer is directed to examine thoroughly and decide the issue afresh after giving reasonable and sufficient opportunity of being heard to the assessee. In so far as the addition on account of share application money from Pawan Goyal Sons, HUF is concerned, there is no dispute that this was opening balance brought forward from the preceding Assessment Years and, therefore, it is outside the ambit of section 68. To this extent, we do not find any error or infirmity in the findings of the ld. CIT(A). Addition of ₹ 6,50,000/- stands deleted. - Appeal of the revenue allowed in part for statistical purposes.
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2020 (7) TMI 519
Disallowance u/s 43B the entire amount of VAT and Tax payable - closing balance as brought forward to the year under considerationrought - HELD THAT:- As is discernible from Schedule 3 i.e. details of disallowance of unpaid expenditure u/s 43B for the year under consideration, therein forming part of the revised statement of income , the current year expenditure towards VAT and Excise duty was not paid by the assessee up to the due date of filing of its return of income under sub-section (1) of Sec. 139 for the year under consideration. Amount of VAT Excise duty formed part of the suo motto disallowance made by the assessee u/s 43B of the Act. We are in agreement with the claim of the ld. A.R that as the balance amount was the closing balance of the earlier years that was brought forward to the year under consideration, the same could not have been disallowed u/s 43B. Accordingly, we set aside the order of the CIT(A) in context of the issue under consideration and vacate the disallowance made by the A.O u/s 43B - Decided in favour of assessee. Disallowance of foreign exchange loss - addition as assessee failed to place requisite documents in support of its claim - HELD THAT:- On a perusal of the orders of the lower authorities, we find that the assessee despite specific directions had failed to place on record the requisite documents in support of its claim of having suffered the foreign exchange fluctuation loss viz. copies of bank statements, ledger accounts and the rate of foreign exchange payments made or received.Though there is no infirmity in the declining of the unsubstantiated claim of the assessee by the lower authorities, but then, a perusal of the Foreign exchange fluctuation gain/loss ledger accounts filed by the assessee does inspire some confidence as regards the veracity of such claim. Restore the matter to the file of the A.O for fresh adjudication. In case the assessee is able to substantiate its claim for foreign exchange fluctuation loss to the satisfaction of the A.O, then the latter shall allow the deduction of the same. Assessee's Ground is allowed for statistical purposes. Disallowance of bad debts/advances w/off and sundry balances w/off - HELD THAT:- Additional evidence filed by the assessee was forwarded by the CIT(A) to the A.O for his comments. In reply, it was submitted by the A.O, that in the course of the remand proceedings the assessee on being called upon to justify its claim for deduction of bad debts/write off of the aforesaid amounts, had only submitted the list of the parties and claimed that the copies of bills, invoices and other documents were not available with it, as the same had been destroyed pursuant to closure of the factory in July, 2012. As such, the A.O reverted back to the CIT(A), therein stating that the aforesaid claim of deduction raised by the assessee was not verifiable for want of documentary evidence. As per the CBDT Circular No. 12/2016, dated 30.05.2016, claim for deduction of any debt or part thereof in any previous year shall be admissible u/s 36(1)(vii) if inter alia it fulfilled the conditions stipulated in sub-section (2) of Sec. 36 CIT(A) called upon the assessee to demonstrate satisfaction of the said mandatory condition. Assessee in the absence of the requisite documents stated that it was not possible for it demonstrate the fulfilment of the conditions stipulated in sub-section (2) of Sec. 36. CIT(A) not finding any infirmity in the declining of the assessee s claim for deduction u/s 36(1)(vii) by the A.O, therein upheld his order to the said extent. Disallowance u/s 36(1)(vii) - Addition of bad debts - HELD THAT:- A.O observing that neither the advances written off by the assessee during the year were ever taken into account by the assessee in computing of its income, nor the same represented money lent by the assessee in the ordinary course of business of banking or money lending, thus, it did not satisfy either of the conditions contemplated in Sec. 36(2) of the Act. Although, we concur with the view taken by the lower authorities that the advances written off by the assessee would not qualify for deduction u/s 36(1)(vii) r.w Sec. 36(2), but then, the same on the said standalone basis cannot jeopardise its entitlement towards claim for deduction of the same as a business loss u/s 37. Hon ble High Court of Bombay in the case of Harshad J. Choksi Vs. CIT [ 2012 (8) TMI 710 - BOMBAY HIGH COURT] had an occasion to deal with the issue, that where an amount is held to be not deductible as a bad debt in view of noncompliance of the conditions precedent as provided u/s 36(2), then could the same be considered as an allowable business loss. High Court while answering the said issue, had observed that non-satisfaction of the conditions for claim of bad debts, would not prevent the assessee from claiming deduction of the same as a business loss incurred in the course of carrying on of business as that of a share broker. assessee s claim that the amount of advances written off during the year was in the nature of a business loss requires to be adjudicated upon by the A.O. On a similar footing, the claim of the assessee that the sundry balances written off during the year were also a loss incidental to its business, on the same terms requires to be visited by the A.O. As principally in agreement with the contention of the ld. A.R, that the assessee s claim for deduction of the advances paid to customers, which were written off by it during the year under consideration were supposed to be looked into u/s 37 Accordingly, we herein direct the A.O to adjudicate upon the claim of the assessee as regards allowability of its claim for deduction of, viz. (i) the amounts advanced to suppliers written off during the year AND the sundry balances written off as a business loss within the meaning of Sec. 37 of the Act. Addition of Unsecured loans as an unexplained cash credit u/s 68 - HELD THAT:- On a perusal of the respective returns of income, we find that during the year under consideration viz. A.Y 2013-14, the directors viz. S/sh. Shyam Ghia and Mukund Dalal had returned an income respectively. As regards the source of advancing of the respective loans, both of them had deposed in their respective affidavits that the same was out of their past savings. To sum up, the aforesaid directors viz. S/sh. Shyam Ghia and Mukund Dalal, after providing their respective income-tax credentials, had admitted of having advanced loans to the assessee company during the year under consideration. However, as the aforesaid documents viz. copies of the returns of income, and also their respective affidavits had been filed before us as additional evidence, and the same were not there before the lower authorities, therefore, in all fairness we restore the matter to the file of the A.O for readjudication. LTCG on transfer of the land - powers of the Tribunal to entertain an additional ground - HELD THAT:- Assessee had assailed the assessing of the LTCG on the impugned transfer of land and subjecting of the same to tax, as the MOU, dated 19.12.2012 i.e the agreement to sell , was thereafter cancelled vide a deed of cancellation, dated 28.09.2017. As such, the said ground raised by the assessee was not available at the time of filing of the return of income, and in fact had became available on account of change of circumstances in the course of hearing of the appeal before the CIT(A). Accordingly, in our considered view, the assessee remaining well within its right had validly assailed the assessing of the LTCG on the impugned transfer of land before the CIT(A). Maintainability of the claim of the assessee that in the absence of transfer of the land under consideration - As decided BALBIR SINGH MAINI, CS ATWAL [ 2017 (10) TMI 323 - SUPREME COURT] in order to qualify as a transfer of a capital asset under Section 2(47)(v) of the Act, there must be a contract which can be enforced in law under Section 53A of the Transfer of Property Act - in terms of Sec. 2(47)(v) of the Act, transfer of any immovable property in part performance of a contract of the nature referred in Sec. 53A of the Transfer of Property Act, 1882, will be completed only when the agreement under Sec. 53A of the Transfer of Property Act is registered under the Indian Registration Act. In the case before us, as the assessee by way of an unregistered MOU, dated 19.12.2012 had though sought to transfer the land under consideration to the purported buyer viz. M/s Golden Star Promoters Pvt. Ltd., but then, the very fact that the possession of the land was never parted with/delivered to by the assessee to the other party, on the said count itself would render the provisions of Sec. 2(47)(v) of the Act r.w.s 53A of the Transfer of Property Act, 1882, as inapplicable. As the instrument of transfer was an unregistered MOU, dated 19.12.2012, the same in the backdrop of the aforesaid judicial pronouncements would exclude the applicability of Sec. 2(47)(v) of the Act r.w Sec. 53A of the Transfer of Property Act. In so far the provisions of sec. 2(47)(vi) are concerned, we find that the assessee who had not even parted with the possession of the land in favour of the purported buyer, had not entered into any arrangement or acted in any other manner, which had the effect of transferring, or enabling the enjoyment of the property under consideration to the purported buyer. Rather, the fact that the MOU, dated 19.12.2012 was subsequently cancelled vide a deed of cancellation, dated 28.09.2017, therein proves to the hilt that the impugned sale transaction had never crystallized. As a matter of fact, the lower authorities had failed to place on record any material which would rebut the aforesaid claim of the assessee. In fact, it is not even the case of the revenue that the deed of cancellation, dated 28.09.2017 is a sham or a fabricated document. In fact, the subsequent sale of part of the land by the assessee in the period relevant to A.Y 2018-19 and A.Y 2019-20, further fortifies the veracity of the aforesaid claim of the assessee. As decided in MR. FARDEEN KHAN [ 2018 (8) TMI 134 - BOMBAY HIGH COURT] where the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account . On the basis of our aforesaid observations, we are unable to persuade ourselves to concur with the view taken by the lower authorities, and therein vacate the addition towards LTCG made by them, on the basis of the MOU. - Decided in favour of assessee. Capital loss for the purpose of set off against the income of the assessee/carry forward to the subsequent years - HELD THAT:- As the assessee had failed to substantiate the basis for allocation of the sale consideration to the individual assets, and also its inventory, the A.O had for the said reason disallowed its claim for Short Term Capital Loss. In our considered view, the matter in all fairness requires to be revisited by the A.O, for allowing an opportunity to the assessee to substantiate its claim of Short Term Capital Loss so raised in its return of income. Accordingly, we herein restore the matter to the file of the A.O with a direction to re-adjudicate the same. At the same time, the assessee is directed to substantiate its claim of Short Term Capital Loss, as raised in its return of income, by justifying the basis for allocation of sale consideration qua the depreciable assets and its inventory. Ground allowed for statistical purposes. Rectification of mistake u/s 154 - CIT-A erred in confirming the action of A.O in not setting off Unabsorbed Depreciation brought forward from earlier years, disallowance of Bad Debts/Advances written off and Sundry Balances written off AND disallowance of Short Term Capital Loss on sale of depreciable assets. - HELD THAT:- Application for rectification under Sec. 154 are not free from doubts and debate, and would involve a long drawn process of reasoning, the same would thus not fall within the realm of rectification within the meaning of Sec. 154 of the Act. As such, finding no infirmity in the view taken by the lower authorities, who in our considered view had rightly rejected the application filed by the assessee under Sec. 154, we uphold the same.
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2020 (7) TMI 518
Nature of expenditure - Payment of Franchisee fee - whether capital or revenue in nature? - HELD THAT:- The Tribunal vide order [ 2018 (12) TMI 1820 - ITAT MUMBAI ] by placing reliance on the earlier order of the Tribunal for AY 2009-10 [ 2018 (1) TMI 786 - ITAT MUMBAI ] decided the issue in favour of the assessee holding Franchisee Fee as revenue expenditure. The facts in the assessment year under appeal are identical. The Franchisee Fee has been paid in pursuance to agreement dated 04/04/2008, which has been examined by the Tribunal in the very first year of assessment. No contrary material has been placed on record by the revenue. Thus, respectfully following the decision of Co-ordinate Bench, we hold Franchisee Fee paid by the assessee is revenue in nature. Adhoc disallowance of air fare and travelling expenditure - AO held that the expenditure includes travelling expenditure incurred for VIPs and Celebrities and, hence, not allowable u/s 37(1) - contention of the assessee is that the expenditure is necessary for the business, as VIPs and Celebrities are invited to attract more crowd and add glamour to the sporting event - HELD THAT:- As decided in own case [ 2018 (1) TMI 786 - ITAT MUMBAI ] keeping in view the fact that as observed by the CIT(A) that the assessee had failed to place before him any evidence e.g air tickets, details of vehicles, name of service providers, details of persons utilizing these services and their nexus with business etc, therefore, as per him the possibility of the expenditure partly having been incurred for non business purposes could not be ruled out, and the fact that the assessee too had submitted before us that sufficient opportunity was not allowed to it at the time when such adhoc disallowance of expenses was made, therefore, in all fairness restore the matter to the file of the A.O for making necessary verifications on the basis of documentary evidence as regards the entitlement of the assessee towards the claim of the aforesaid expenses. A.O shall in the backdrop of our aforesaid observations make necessary verifications as regards the aforesaid claim of expense of the assessee booked under the said respective heads, viz. airfare expenses, travelling expenses and vehicle hiring charges. Adhoc disallowance of expenditure relating to Boarding and Lodging and Food and Nutrition - HELD THAT:- The Tribunal relying on the decision for 2009-10 in assessee s own case [ 2018 (1) TMI 786 - ITAT MUMBAI ] restored the issue to AO for fresh adjudication. Since the facts in the impugned assessment year are identical, we deem it appropriate to restore this issue back to the file of Assessing Officer with similar directions. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ]
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Customs
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2020 (7) TMI 517
Re-export of confiscated goods - import of old and used ventilators with all standard accessories - prohibited goods or not - eligible for home consumption or not - applicability of sub-rule (6) of Rule 12 of Hazardous and Other Wastes (Management, Handling and Transboundry Movement) Rules 2016 - HELD THAT:- On perusal of said Schedule VI of the said Rules, it is seen that at Basel No.B1110 used critical care medical equipment for reuse are included. The goods imported by the appellant and which are impugned goods are ventilators which through common knowledge, we note that the same are critical care medical equipments. The appellant has declared them as used ventilators. Further reuse includes original use. Therefore, the imported goods which are subject matter of this appeal are covered by Basel No.B1110 and are covered by said Schedule VI - the learned counsel for appellant cannot be agreed upon, that the impugned goods are covered by Schedule III to the said Rules 2016 - thus, the impugned goods are covered by Schedule VI of the said rules and as per Rule (6) of Rule 12 of the said rules, import of the same is not permitted. On confiscation the goods becomes property of Government. The original authority has also given option to redeem the goods for exportation. Under the provisions of Section 125 of Customs Act, 1962 the option to redeem the same is provided. However, the said option cannot be compelled. Therefore, if the appellant does not choose to redeem the goods then the goods shall remain in India and cannot be re-exported - confiscation of goods is set aside so as to facilitate re-export of impugned goods - Once the confiscation is set aside, the question of imposition of redemption fine does not arise - Further, on setting aside confiscation, imposition of penalty also does not arise. Appeal allowed in part.
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Corporate Laws
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2020 (7) TMI 516
Maintainability of application for winding up - Striking of name of the company - Section 248 of the Companies Act 2013 - whether the NCLT can proceed with winding up petition or not? - HELD THAT:- From sub-section (8) of Section 248, it is clear that Section 248 in no manner will affect the powers of the Tribunal to wind up the company, the name of which has been struck off from the register of companies. Therefore, even after removal of the name of the company from the register of companies the NCLT can proceed with the petition for winding up under Section 271 of the Companies Act, 2013. Similar view taken in the case of MR. HEMANG PHOPHALIA VERSUS THE GREATER BOMBAY CO-OPERATIVE BANK LIMITED AND M/S. PENGUIN UMBRELLA WORKS PRIVATE LIMITED [ 2019 (9) TMI 893 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI] where it was held that the name of the Company having been struck-off, the Corporate Person cannot file an application under Section 59 for Voluntary Liquidation. The matter is remitted to NCLT, New Delhi for deciding the winding up petition on merit as per law - Appeal allowed by way of remand.
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Insolvency & Bankruptcy
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2020 (7) TMI 515
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- Hon'ble Supreme Court in the matter of M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. [ 2017 (9) TMI 58 - SUPREME COURT ] has ruled such that if the Adjudicating Authority is satisfied that there is a debt and default has been occurred, then the Adjudicating Authority is bound to admit the application - By placing reliance on the said decision of the hon'ble Supreme Court, the debt is well established and the default has been occurred because the outstanding loan is still unpaid. This satisfies the requirement of section 3(11) and (12) of the Insolvency and Bankruptcy Code for triggering the corporate insolvency resolution process in respect of the corporate debtor-company. It is undisputedly established that the petitioner-financial creditor duly sanctioned and have disbursed various loan facilities to the corporate debtor and the same were availed of and utilized by it. The corporate debtor also confirmed its debts liability, through onetime settlement by offering ₹ 1,600 lakhs to the petitioner by its letter dated December 7, 2017 which could not be materialized. The corporate debtor was irregular in making repayment of its loan and the last payment was made by it on May 31, 2017. Hence, the present IB petition is found to be filed well within limitation and maintainable. Application admitted - moratorium declared.
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Central Excise
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2020 (7) TMI 514
Method of Valuation - inter unit transfer of goods from the Taloja Unit for captive consumption to the Belur Unit - entire value of cost of production or actual value of cost of production to be adopted? - adoption of rule 8 of the 2000 Valuation Rules, for ultimately transferring the goods to the supplier of goods - HELD THAT:- The fact of the present case are similar to the facts of the aforesaid decision of the Tribunal in M/S ITC LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI [ 2016 (4) TMI 280 - CESTAT CHENNAI] . The factual position was also explained in detail in the written submissions filed by the Appellant at the time of hearing before the Additional Commissioner. It was clearly pointed out that if both the units of the Appellant had been in one factory, there would not have been any scope for addition of profit margin @ 10% of the cost of production for each division. It was also stated that the Taloja Unit, while discharging the duty liability prior to the transfer of the partly processed material to the unit at Belur, followed the provision of rule 8 of the 2000 Valuation Rules by paying duty @110% at the cost of production. In view of the decision of the larger Bench of the Tribunal in I.T.C Ltd., it has to be held that the Appellant was justified in reducing the assessable value to the actual cost of production (i.e. 100% of cost excluding the notional loading of 15% or 10% of the goods manufactured by the Taloja Unit) as the cost of raw material for the Belur Unit for the purpose of determining the assessable value under rule 8 of the 2000 Valuation Rules. Department relied upon the larger Bench decision of the Tribunal in EICHER MOTORS LTD. VERSUS COMMISSONER OF C. EX., INDORE [ 2008 (6) TMI 19 - CESTAT NEW DELHI] . A perusal of the said decision indicates that Eicher Motors Ltd was engaged in the manufacture and sale of bus/truck. It supplied chassis on payment of excise duty under rule 8 of the 2000 Valuation Rules @110% of the cost of manufacture of the chassis to M/s. Bhagirath Coal and Metal Fabricators Pvt. Ltd. for building the bodies of buses/ trucks on job work basis. The Tribunal held that 110% of the cost of chassis should be considered to arrive at the assessable value at the end of Bhagirath and not 100% of the cost of chassis - It is clear that this decision in Eicher Motor Ltd. Did not deal with a case of inter-unit transfer of goods. This decision, therefore, would not come to the help of the Department - On the other hand, the larger bench decision of the Tribunal in I.T.C Ltd. squarely applies to the present case as the said decision is in relation to conversion and job work carried out at different divisions of the same company through inter-unit transfer of goods for captive consumption. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (7) TMI 513
Doctrine of Contemporanea Expositio - Availment of Capital Investment Subsidy - issuance of new Entitlement Certificate for subsidy - Capital Investment Subsidy to the Appellant to the extent of 75% of deposited VAT. - whether the company was entitled to the subsidy to the extent of 75% of tax payable and deposited or was entitled only to 50%? Entitlement of the Appellant to Capital Investment Subsidy - HELD THAT:- It appears that though at one stage (i.e., on 02.12.2005), the State Government thought it proper to announce an entirely different treatment to cement units by extending 75% subsidy to them with a different methodology and hence, inserted Sub-clauses (vi) and (vii) to Clause 7 of RIPS-2003 but, it did not continue with that policy and deleted the said sub-clauses on 28.04.2006. It remains trite that extending of any incentive in the form of exemption, rebate, concession or subsidy is a matter of the policy of the Government and for that matter, fiscal policy. Ordinarily, such framing of the policy remains within the domain of the Government; and the Government is entitled to frame a particular policy and to alter the same, as deemed fit and proper. As to whether the cement industry was to be granted 75% subsidy under RIPS-2003 or not was definitely a matter of the policy of the Government; and when such a policy was not in existence at the time of consideration of the application of the Appellant, no benefit could have been claimed under a non-existent policy. The Additional Chief Secretary has rightly held that SLSC's decision dated 17.03.2011 and its repeat decision dated 24.11.2011 had been erroneous on the very fundamentals where it was assumed as if BIDI had already sanctioned 75% subsidy to the company. The High Court has also independently examined the entire matter in requisite details and we are unable to find any infirmity when the High Court has held that the Appellant company was only entitled to subsidy to the extent of 50% of the tax payable and deposited and not to the extent of 75%. SLSC's decision of granting 75% subsidy to the Appellant - HELD THAT:- The possibility of so called other view (the wrong one) could arise only if SLSC is held entitled to simply turn itself away from the applicable provisions of the Scheme while ignoring the fact that Sub-clauses (vi) and (vii) of Clause 7 had already been deleted; and is simultaneously conferred with dubious discretion to interpret the decision of BIDI in whatever manner it would chose to. Obviously, such arbitrary authority or unfettered discretion is not available to any decision taking body; and could least be countenanced for a responsible body of the Government, like SLSC, who deals with public exchequer. Having examined the record in its totality, we have not an iota of doubt that the initial decision of SLSC had not only been erroneous but had been highly perverse, reaching the level of absurdity. The view of SLSC cannot be regarded as a possible view of the matter from any standpoint or any angle - the contention on the part of the Appellant about existence of any ambiguity in the matter and extending the benefit of ambiguity to itself could only be, and is, rejected. Doctrine of Contemporanea Expositio - HELD THAT:- The doctrine of Contemporanea Expositio cannot be invoked in the case of present nature would also be clear by visualising the result, if at all this doctrine is applied. It is not far to seek that if at all this doctrine is applied, the consequence would be that howsoever erroneous a decision by the executive or administrative authority may be, once it emanates from the understanding of some of the officers or authorities, the same would acquire immunity from scrutiny for all time to come. Such has never been the intent of the doctrine of Contemporanea Expositio nor could such a result be countenanced. Whether principles of Promissory Estoppel apply? - HELD THAT:- When the decisions of SLSC dated 17.03.2011 and 24.04.2011 turn out to be unauthorised and not in accord with the applicable provisions of the Scheme, the principles of promissory estoppel cannot be invoked for their enforcement - Even otherwise, when the decision of SLSC, or any decision of any authority for that matter, was subject to revision by the Government in terms of Clause 13 of the Scheme, it cannot be suggested that the said power of revision cannot be invoked. In other words, the principles of promissory estoppel cannot operate against such revisional power of the Government. Hence, this part of the contentions also deserves to be, and is, rejected. Exercise of powers of revision by the State Government under Clause 13 - HELD THAT:- The initial decision of SLSC was entirely erroneous and cannot be said to be a possible view of the matter. Coupled with that, the said decision was directly prejudicial to the interest of revenue where the State exchequer was to part with extra 25% of the tax amount received or receivable from the Appellant. As noticed, the learned ACS, while passing the order dated 12.03.2008 in exercise of such power of revision under Clause 13 of the Scheme, has meticulously examined the entire material and has recorded each and every finding with due regard to the dealings of the parties and the provisions of Scheme as applicable. The exercise of power of revision as per Clause 13 of the Scheme remains unexceptionable in the present case. Effect of availing 75% subsidy for 7 years - HELD THAT:- The suggestion that already availed benefit cannot be withdrawn turn out to be hollow and baseless because whatever was obtained by the Appellant, beyond its entitlement, had only been based on an erroneous and unauthorised decision of SLSC. In any case, RIPS-2003 being a matter of concession in the form of subsidy, securing an advantage by the Appellant at the cost of public exchequer could not have been allowed and, for the Scheme itself having reserved the powers in the State Government to revise the erroneous and prejudicial order within a period of five years from the date of fully availing of the benefits, such powers have rightly been invoked and exercised by the State Government. Thus, BIDI, in its decision dated 01.04.2006 never directed for grant of 75% subsidy to the Appellant company in terms of proviso to Clauses 7(i)(a) and 7(i)(b) of RIPS-2003 nor allowed any customised package to the company. The position of record is crystal clear that BIDI's decision dated 01.04.2006 had only been for allowing 'recently announced cement package' to the company and that was also coupled with the requirement of applicability of RIPS-2003. The initial part of this decision of BIDI dated 01.04.2006 and the company's prayer dated 26.04.2006 for registration in terms of Sub-clause (vii) of Clause 7 of RIPS-2003 became redundant on 28.04.2006 with the amendment of Clause 7 of RIPS-2003 and deletion of Sub-clauses (vi) and (vii) thereof because no decision had been taken by SLSC to grant subsidy to the company in terms of the said Sub-clauses (vi) and (vii) of Clause 7 by that date i.e., 28.04.2006 - It is also clear that the doctrine of Contemporanea Expositio neither applies to this case nor inures to the benefit of Appellant. The principles of promissory estoppel are equally inapplicable and the State Government has rightly exercised the powers of revision under Clause 13 of RIPS-2003 to interfere with the erroneous decisions of SLSC whereby the Appellant was allowed 25% extra subsidy and which was, obviously, prejudicial to the interest of revenue; and mere availing of the benefits by the Appellant under the erroneous decisions of SLSC is of no effect, particularly when the State Government has exercised the powers of revision within the time stipulated in Clause 13 of RIPS-2003. Levy of Interest - HELD THAT:- When availing of subsidy to the tune of 75% (and thereby availing 25% in excess) is not referable to any misrepresentation by the Appellants and there is no allegation of breach of any of the conditions of RIPS-2003 by the Appellants while availing such benefit, the Respondent cannot be held entitled to demand interest at the rate stipulated in Clause 10 of RIPS-2003. However, and at the same time, when the Appellant company had obtained undue advantage in monetary terms by availing 25% extra subsidy; and had given undertaking to refund any excessive benefit with interest at the rate of 12% per annum, in our view, the Appellant company remains liable to refund the excess amount together with interest at the rate agreed upon, i.e., 12% per annum. The impugned order of the High Court dated 11.01.2019, upholding the order dated 12.03.2018 passed by the Additional Chief Secretary, Finance Department, Government of Rajasthan, Jaipur is affirmed but with the modification that the Respondents shall be entitled to recover interest at the rate of 12% per annum from the date of availing of excessive subsidy (25%) by the Appellants until payment/recovery - appeal allowed in part.
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Indian Laws
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2020 (7) TMI 512
Repayment of loan - Lease Rental Discounting Facility - mortgage of property - Non-performing asset - HELD THAT:- In view of the specific stand taken by the first respondent that each individual bank have their own guidelines with respect to the moratorium period and that the said term it is governed by a contract, it would highly be inappropriate on the part of this Court to examine the terms of the contract, its effect and such other details, which have to be established only after evidence is let in. The petitioners will have to examine the agreement under which they had availed the loans and had taken recourse under the said agreement - In a Writ Petition filed under Article 226 of the Constitution of India, this Court cannot examine these disputed facts. It is an admitted fact that the loan share become Non Performing Assets as on date. There has been default in the repayment of the loan. Naturally, the second respondent has a right to initiate necessary proceedings. The proceedings are pending. It is for the Debt Recovery Tribunal to decide the issues. It is for the petitioners to raise those issues before the Debt Recovery Tribunal - In view of the categorical stand taken by the first respondent that they cannot examine the complaints in view of the fact that the relief revolves around the interpretation of the agreement between the petitioners and the second respondent, I am afraid, I am not able to issue any Mandamus to the first respondent to compel them to examine the representation and pass orders. Petition dismissed.
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