TMI Tax Updates - e-Newsletter
July 6, 2022

Case Laws in this Newsletter:

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

Articles

1. Burning Issue Under ITC by GST Law

   By: Sanjay Loharkar

2. Broad aspect: while referring and applying any order of Superior Court, subsequent developments must also be considered by counsels, Courts and Tribunals. Tribunal wrongly applied Supreme Court Order directing Tribunal to refer question of law to High Court. Tribunal did not consider consequent and subsequent development in case of BIJU PATNAIK

   By: DEVKUMAR KOTHARI

3. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

4. CONCILIATION PROCEEDINGS UNER SECTION 22C OF LEGAL SERVICES AUTHORITIES ACT, 1987 ARE MANDATORY IN NATURE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. CCI Approves Acquisition of Citrix Systems, Inc.

2. Integration of ECCS with IDPMS / EDPMS of RBI.

Notifications

Central Excise

1. 12/2022 - dated 4-7-2022 - CE

Ethanol blended petrol - High speed diesel oil blended with bio -diesel - Effective Rate of Duty of excise - Seeks to amend Notification No. 11/2017-Central Excise, dated the 30th June, 2017

Customs

2. 38/2022 - dated 4-7-2022 - Cus

BCD and AIDC on Raw Cotton - Seeks to amend Notification No. 21/2022 dated 13 April 2022

Income Tax

3. 78/2022 - dated 4-7-2022 - IT

Corrigendum - Notification No. 60/2022 dated 10 June 2022

Highlights / Catch Notes

GST

• Authorities Must Verify Dealer Transactions for ITC Claims; Section 42(3) Ensures Cross-Verification for Accuracy and Compliance.

  Case-Laws - HC : Reversal of Input Tax Credit - proper verification of the transactions of selling/purchasing dealers to ensure that there is a match of the details of the transaction or not - what is required is that in matters involving claim of ITC, it is incumbent upon the authority to conduct a proper verification of the transactions of selling/purchasing dealers to ensure that there is a match of the details of the transaction, at both ends. This is why Section 42(3) requires the officer to supply the details of the transaction to 'both such persons' to enable such cross-verification - HC
  Visit to Get Source

  ---

• Court Confirms Rule 117 CGST: Time Limit for Transitioning Credit is Directory, Not Mandatory; Rights Not Forfeited for Delays.

  Case-Laws - HC : Benefits of transitional credit - delay in filing Form TRAN-1 - There are no hesitation in reiterating that Rule 117 of the CGST Rule being directory in nature, the prescribed time limit for transitioning of credit would in no manner result in forfeiture of the rights of the writ applicants even though, when the credit is not availed within the period prescribed - application allowed. - HC
  Visit to Get Source

  ---

• Car Dealers Can Use Input Tax Credit for Demo Vehicles Purchase Under GST, Per Section 17(5)(a)(A) Guidelines.

  Case-Laws - AAR : Availment and setting off of Input tax credit (ITC) - purchases of demo vehicles - car dealer - The demo vehicles are purchased all along for further supply with the condition that they will be kept for a specific period of time - the purchase of demo vehicles and further supply of the same satisfies the condition laid down in section 17(5)(a)(A) of the GST Act. - The applicant is eligible to avail input tax credit on purchases of demo vehicles which can be set off against output tax payable under GST. - AAR
  Visit to Get Source

  ---

• E-rickshaw Without Battery Still Classified as Electrically Operated Vehicle, Not 'Chassis' Under Tariff Item 8703.

  Case-Laws - AAR : Classification of goods - In the present case, the power of a battery operated vehicle is solely generated from the rechargeable battery since it doesn’t have any other source of propulsion. - There is not an iota of doubt that unless the battery is fitted to an e-rickshaw, it will not be capable to run. But the question arises that when an e-rickshaw, having a motor fitted on it, is supplied without battery, does it lose its original character and can be termed as ‘chassis’. - when a vehicle which is solely operational on battery power is supplied without battery, the same will qualify as a supply of electrically operated vehicle and therefore shall be classifiable under tariff item 8703. - AAR
  Visit to Get Source

  ---

• Investigation into Alleged GST Evasion Must Conclude Promptly; Adjudicating Authority to Decide on Evidence Next.

  Case-Laws - HC : Validity of simultaneous raids and search - apprehension of arrest - While the respondents are empowered to investigate alleged GST evasion, however such investigation cannot be for an indefinite period. At one point of time it has to come to an end, whereafter if the materials/evidence demands, appropriate order is required to be passed by the adjudicating authority. That stage is yet to be reached. - HC
  Visit to Get Source

  ---

Income Tax

• Faceless Tax Assessment Order Violates Natural Justice by Denying Personal Hearing, Breaching Section 144B Protocols.

  Case-Laws - HC : Faceless assessment u/s 144B - It can be safely be said that the impugned order was passed by the respondent in violation of principles of natural justice without affording an opportunity of personal hearing by not following the prescribed procedure laid down as per the provisions of section 144B of the Act, 1961 for Faceless assessment. - HC
  Visit to Get Source

  ---

• University's Exemption Eligibility u/s 11 Challenged Over Non-UGC Coaching Classes; Assessing Officer to Verify Evidence.

  Case-Laws - AT : Exemption u/s 11 - charitable activity - We fail to understand as to how any university, which has been set up under the UGC Act could grant affiliation for coaching classes which are nowhere part of commission’s standards. Faced with this situation, we are of the opinion that the learned Assessing Officer needs to factually verify all the assessee’s evidence(s) afresh and treat it as eligible for Section 11 exemption only for those courses which are run by the university strictly in tune with the UGC’s guidelines and if it is found that the coaching classes herein violate the same, the latter’s would be held as not entitled for the impugned exemption in light of the cited case laws. - AT
  Visit to Get Source

  ---

• Assessee Withdraws LTCG Exemption Claim; Income Reclassified as "Income from Other Sources" u/s 10(38).

  Case-Laws - AT : Bogus LTCG - exemption u/s.10(38) denied - the assessee submitted a letter withdrawing the LTCG claim u/s 10(38) and offered the same as income. Therefore, once the assessee had withdrawn her claim, now the assessee cannot claim the same as long term capital gain and the income in my opinion has to be treated as “income from other sources”. If the contention of the learned Counsel for the assessee that the same is to be allowed as LTCG is accepted, then the natural corollary will be to allow the same as exempt u/s 10(38) of the I.T. Act and the very nature of the declaration will be defeated. - AT
  Visit to Get Source

  ---

• CIT's Revision Order Quashed: AO Properly Verified Deductions u/ss 54B & 54F, Conducted Adequate Inquiries.

  Case-Laws - AT : Revision u/s 263 - AO though made inquiry about the claim made by the assessee, however, not discussed the same while passing assessment order. - It can be seen from the show cause notice issued under section 263 of the Act, wherein the ld.CIT has categorically mentioned that the AO did not verify the facts and allowed the deduction under section 54B & 54F of the Act. This observation by the ld.CIT is not correct, for the reason that the ld.AO has called for the details from the Sub-Registrar and received reply from Sub-Registrar on 24.1.2011 and 7.9.2011 respectively - Revision order quashed - AT
  Visit to Get Source

  ---

• Reopening Tax Assessments: Section 147 Requires Full Disclosure Failure for Beyond Four-Year Reassessment.

  Case-Laws - AT : Reopening of assessment u/s 147 - Reasons for belief that income has escaped assessment - Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period, as explained above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. - AT
  Visit to Get Source

  ---

• PCIT's Challenge on Goodwill Depreciation u/s 263 Overruled; 5th Proviso to Section 32(1) Found Inapplicable.

  Case-Laws - AT : Revision u/s 263 - depreciation claimed on goodwill arose out of amalgamation - PCIT has assumed jurisdiction u/s. 263 of the Act on the sole basis of application of 5th proviso to section 32(1) of the Act, towards depreciation on goodwill. In view of the factual matrix as stated in preceding paragraphs and non-applicability of 5th proviso to section 32(1) of the Income Tax Act, 1961, there cannot be error in relation to the view taken by the Assessing Officer while framing the original assessment. - AT
  Visit to Get Source

  ---

• Capital Gains from Relinquishing Asset Rights: AS-26 Not Applicable to Specific Intangibles like Internally Generated Goodwill.

  Case-Laws - AT : Capital gain on relinquishment of rights in the assets of the firm - ascertained goodwill for the purposes of accounting and settlement - When an Accounting Standard deals with a specific intangible asset, then AS-26 does not apply e.g., Valuation of Inventories. Also the internally generated goodwill arises when an enterprise incurs expenditure for future benefits e.g., Scientific Research, development of prototypes, etc., then the enterprise should not recognize any goodwill that may arise out of incurring of such expenditure at a future period as it is beyond the control of the enterprise. - AT
  Visit to Get Source

  ---

• PCIT Questions Unexplained Bank Deposits and Fund Transfers u/s 68 of Income Tax Act.

  Case-Laws - AT : Revision u/s 263 by CIT - the observations of PCIT are factually correct as there were deposit/fund transfers (including fund transfers from Anika Universal Pvt. Ltd.) credited to the bank account of the Appellant. In our view, in absence of an explanation, merely by going through the narration given in the bank statement one cannot form an opinion about the nature or source of funds received in terms of the proviso to Section 68 of the Act - AT
  Visit to Get Source

  ---

Customs

• Valuation of Azimut 68 Yacht Upheld; Lack of Purchase Evidence Justifies Duty and Interest u/r 9, Confiscation u/s 111(l.

  Case-Laws - AT : Valuation of imported goods - Brand New Azimut 68 Motor Yacht with Accessories - the appellant had not submitted any documentary evidences with regard to the purchase of the said goods and accordingly, the determination of the value of such goods under Rule 9 ibid is justified and thus, cannot be interfered with at this juncture. Therefore, the differential duty along with interest in the impugned order on the said goods is proper and justified and are liable for confiscation under Section 111 (l) ibid. - AT
  Visit to Get Source

  ---

Corporate Law

• NCLT Rules: Minutes of Discussion Recognized as Formal Settlement Record for Gujarat Family in Oppression Case.

  Case-Laws - HC : Oppression and Mismanagement - disputes between three families - the Minutes of Discussion cannot be contemplated merely as a compromise of the NCLT proceedings and in fact, categorically records a settlement amount payable to the Gujarat family. The disputes in the Minutes of Discussion which have been settled are the only disputes among the three families. - HC
  Visit to Get Source

  ---

IBC

• NCLT Rejects CIRP Application Due to Applicant's Non-Appearance; Stresses Merit-Based Decisions for Restoration Applications.

  Case-Laws - AT : Maintainability of application - initiation of CIRP - NCLT rejected the application for non-appearance - If there is inaction, want of Bonafide, which is imputable to the Applicant/Appellant, then the Restoration Application is not to be allowed by a Tribunal or by a Court of Law. Of course, the Tribunal is to decide the Restoration Application on merits. It must be remembered that time is precious and a wasted time will never come back again or revisit in the considered opinion of this Tribunal. - AT
  Visit to Get Source

  ---

Central Excise

• Legal Dispute Over National Calamity Contingent Duty Exemption Under Central Excise Law; Limitation Period in Question.

  Case-Laws - AT : Extended period of Limitation - emand on the ground that Notification does not exempt from payment of NCCD - The issue involved is a neat question of law which involved interpretation of exemption provided in respect of NCCD. It is also a fact on record that appellant have declared their manufacturing process to the department and they were filing ER-1 returns regularly. - it cannot be said that there is any suppression of fact on the part of the appellant. - AT
  Visit to Get Source

  ---

Case Laws:

• GST

• 2022 (7) TMI 187
  Seeking grant of Bail - evasion of GST - compounding of offences - whether the petitioner is falsely implicated in the case? - HELD THAT:- Taking into account the facts and circumstances of the case and without expressing any opinion on the merits of the case, this court deems it just and proper to enlarge the petitioner on bail. It is ordered that the accused-petitioner Kamal Chand Bothra S/o Shri Bhikam Chand Bothra shall be enlarged on bail provided he furnishes a personal bond in the sum of Rs.50,000/- with two sureties of Rs.25,000/- each to the satisfaction of the learned trial Judge for his appearance before the court concerned on all the dates of hearing as and when called upon to do so - Bail application allowed.

  ---

• 2022 (7) TMI 186
  Maintainability of appeal - appeal filed by the petitioner dismissed on the ground that the appeal was filed beyond the extended period of limitation under Section 107(1) of the Central Goods and Services Tax Act, 2017 - Cancellation of registration of petitioner - non-filing of returns for six months - HELD THAT:- The issue raised in this writ petition is covered by a decision of this Court in M/S. CHENNA KRISHNAMA CHARYULU KARAMPUDI VERSUS THE ADDITIONAL COMMISSIONER APPEALS1 AND ANOTHER [ 2022 (7) TMI 82 - TELANGANA HIGH COURT] where it was held that Though the lower appellate authority may be right in holding that while it may allow filing of an appeal beyond the limitation of three months for a further period of one month, therefore, by extension of limitation beyond the extended period of one month delay beyond the extended period of one month cannot be condoned, we are of the view that such a stand taken by respondent No.1 may adversely affect the petitioner - It was also held that It is further found that the issue pertains to cancellation of GST registration of the petitioner. In the facts and circumstances of the case, it would be just and proper if the entire matter is remanded back to respondent No.2 to reconsider the case of the petitioner and thereafter to pass appropriate order in accordance with law. Matter remanded back to respondent No.3 to consider the grievance expressed by the petitioner against cancellation of GST registration and thereafter pass an appropriate order in accordance with law - petition allowed by way of remand.

  ---

• 2022 (7) TMI 185
  Rate of GST - execution of certain works contract in favour of one Nirmithi Kendra, Bengaluru Rural District, for which it has received consideration - case of the petitioner is that the Nirmithi Kendra is a Government concern and hence petitioner is liable to pay GST at the rate of 12% on the consideration received - taxable at 12% or 18%? - HELD THAT:- Admittedly, Annexure C is an audit report issued under Section 65 (6) of the CGST Act. Section 65 of the CGST Act, 2017 deals with Audit by tax authorities - no recovery is contemplated by the authorities. Upon issuance of an audit report under Section 65 (6) of the CGST Act, it requires further adjudication before holding the petitioner liable for the same, which will be done only after hearing the petitioner. Similarly, Annexure G is an intimation to tax assessee as payable under Section 73 of the CGST Act and the said intimation itself permits the petitioner to show cause its case before the authority and further action will be initiated only after considering the reply of the petitioner if any. Hence, the writ petition filed by the petitioner has to be considered premature. However, taking into consideration that the petitioner was required to submit its reply to Annexure G by 23.05.2022, the same is hereby extended to 8.07.2022. Petition dismissed.

  ---

• 2022 (7) TMI 184
  Reversal of Input Tax Credit - proper verification of the transactions of selling/purchasing dealers to ensure that there is a match of the details of the transaction or not - HELD THAT:- Section 42(5) of the CGST Act, in terms of which, a reversal of ITC should be a natural consequence in the event of any discrepancy in the claim. Evidently so. However, what is required is that in matters involving claim of ITC, it is incumbent upon the authority to conduct a proper verification of the transactions of selling/purchasing dealers to ensure that there is a match of the details of the transaction, at both ends. This is why Section 42(3) requires the officer to supply the details of the transaction to both such persons to enable such cross-verification - reference may also be made to Circular No.5 of 2021 dated 24.02.2021 issued by the Principal Secretary/Commissioner of Commercial Taxes under the Value Added Tax regime, providing for the procedure to be followed in the case of verification of claims of ITC involving selling/purchasing dealers. The challenge to the notice fails and the petitioner is directed to file its reply to the show cause notice before the Assessing Authority, who, in turn, shall complete the proceedings - Petition disposed off.

  ---

• 2022 (7) TMI 183
  Levy of IGST on Ocean Freight - reverse charge mechanism - petitioner had already paid the customs duties on the goods purchased - applicability of Entry No.10 of the notification dated 28.06.2017 - HELD THAT:- On perusal of the impugned notice/communication dated 29.08.2019 issued by the respondent, judgement in MOHIT MINERALS PVT LTD VERSUS UNION OF INDIA 1 OTHER [ 2020 (1) TMI 974 - GUJARAT HIGH COURT] by which Entry No. 10 of the notification dated 28.06.2017 is held utra vires the Integrated Goods and Services Tax Act,2017 which is upheld by the Hon ble Supreme Court in UNION OF INDIA ANR. VERSUS M/S MOHIT MINERALS PVT. LTD. THROUGH DIRECTOR [ 2022 (5) TMI 968 - SUPREME COURT] and in view of the above position, the proceedings initiated by the respondents as well as notice/communication dated 29.08.2019 are required to be quashed and set aside. Petition allowed.

  ---

• 2022 (7) TMI 182
  Benefits of transitional credit - delay in filing Form TRAN-1 - HELD THAT:- In the case of the High Court of Delhi in Brand Equity Treaties Ltd. Ors. vs. Union of India [ 2020 (5) TMI 171 - DELHI HIGH COURT ] ultimately held that Rule 117 of the CGST Rules is directory in nature in so far as it prescribes the time limit for transitioning of credit is concerned and at the same time the Court has held that the same would not result in the forfeiture of the rights, in case the credit is not availed within the period prescribed. Ultimately, the Court after considering the terms of residuary provisions of the Limitation Act held that the period of three years should be the guiding principle and thus, a period of three years from the appointed date would be the maximum period for availing of such credit. Even this Court had an occasion to deal with similar issue in the case of M/s Siddharth Enterprises through partner Mahesh Liladhar Tibdewal vs. The Nodal Officer, [ 2019 (9) TMI 319 - GUJARAT HIGH COURT ]. This Court vide order dated 06.09.2019 has allowed the aforesaid batch of writ applications with a direction to the respondent authorities to permit the writ applicants filing of declaration Form GST TRAN-1 and GST TRAN 2 to enable them to claim transitional credit of the eligible duties in respect of the inputs held in the stock as on the appointed date in terms of Section 140(3) of the Act. At the same time, this Court further held that the due date as contemplated under Rule 117 of the CGST Rules for the purposes of claiming transitional credit are held to be procedural in nature and should not be construed mandatory. Indisputably, the writ applicant company at relevant stage though, belatedly had applied for filing of Form TRAN 1 to avail the Input Tax Credit of the accumulated CENVAT credit as of 30.06.2017 as reflected in their letter dated 05.04.2018. The reason explained by the writ applicant for the delayed uploading of the Form appears to be genuine as the bank account of the writ applicant company was declared Non Performing Account - It is not in dispute that substantial amount to the tune of Rs.2,41,33,827/- were lying in the account of erstwhile regime and pursuant to the Notification dated 10.09.2018, the writ applicant had immediately approached to the respondent authority namely the Commissioner of GST vide letter dated 12.09.2018 to give him an opportunity to upload Form TRAN-1 by reopening the portal. There are no hesitation in reiterating that Rule 117 of the CGST Rule being directory in nature, the prescribed time limit for transitioning of credit would in no manner result in forfeiture of the rights of the writ applicants even though, when the credit is not availed within the period prescribed - application allowed.

  ---

• 2022 (7) TMI 181
  Availment and setting off of Input tax credit - purchases of demo vehicles - whether GST liability on sale of vehicle, spares, labour can be done by utilizing the input tax credit on purchase of demo vehicle, other expenses like repairs maintenance, insurance etc.? - HELD THAT:- In the instant case, the demo vehicles are not used for transportation of passengers by the applicant. Merely providing test drive facility or to demonstrate the features of a vehicle to prospective buyers cannot be regarded as imparting training on driving the vehicle. It therefore appears that the applicant shall be entitled to take input tax credit on demo vehicles only when the condition laid down in section 17(5)(a)(A) gets satisfied i.e., if it is established that the purchases of such demo vehicles are made for further supply of such vehicle. The business model of the applicant delineates that the demo vehicles are initially kept by the applicant for a certain period of time as mandated by the car manufacturing company for providing test drive facility to the prospective buyers. The applicant, after receipt of the demo vehicles, capitalizes the same in his books of accounts in lieu of booking the same as stock-in-trade. Capital goods in terms of clause (19) of section 2 of the GST Act means goods, the value of which is capitalised in the books of accounts of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business . It would not be out of place to mention here that the provisions of the GST Act doesn t restrict to avail input tax credit to the extent of capitalization sans clauses (c) and (d) of sub-section (5) of section 17 of the Act ibid - the input tax credit on purchase of demo vehicles cannot be denied merely on the ground of capitalization of the vehicles in the books of accounts. It needs to be reiterated that section 17(5)(a)(A) restricts input tax credit in respect of motor vehicle for transportation of persons except when they are used for further supply of such motor vehicles. The intention of the law, as it appears from the expression for further supply of such vehicles is to allow input tax credit in respect of taxpayers dealing with motor vehicles as they are engaged in further supply of such motor vehicles - the expression such bears a wide connotation which does not put any restriction in respect of supply of demo vehicles. When the applicant makes purchases of the demo vehicles, such purchases are also meant for further supply. However, as per Dealership Agreement and Test Drive Car Policy, the applicant requires capitalizing the demo vehicles and has to keep such vehicle for a specific period of time. Such activities, in any manner, do not change the purpose of further supply. The standard business practice of a car dealer is to purchase vehicles including one or more demo vehicles for further supply of such vehicles. While non-demo vehicles are made available for sale immediately after the purchase, the demo vehicles are put up for sale after the demonstration/test drive period. The demo vehicles are purchased all along for further supply with the condition that they will be kept for a specific period of time - the purchase of demo vehicles and further supply of the same satisfies the condition laid down in section 17(5)(a)(A) of the GST Act. The applicant is eligible to avail input tax credit on purchases of demo vehicles which can be set off against output tax payable under GST.

  ---

• 2022 (7) TMI 180
  Classification of goods - three-wheeled electrically operated vehicle, commonly known as e-rickshaw, when sold without battery - classifiable as an electrically operated motor vehicle under HSN 8703 or not - rate of tax - HELD THAT:- Chapter 87 of the First Schedule to the Customs Tariff Act,1975 classifies Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof - Furthermore, Other vehicles, with only electric motor for propulsion under Tariff item 8703 80 covers Three-wheeled vehicles having HSN Code 8703 80 40. It appears that e-rickshaw being a three-wheeled electrically operated vehicle would be classifiable under tariff item 8703 80 40. But the issue in hand is not to decide the HSN code of e-rickshaw rather the issue, as it is found, is confined to decide whether fitting of battery is a pre-condition or not so as to qualify an e-rickshaw as an electrically operated vehicle. In the present case, the power of a battery operated vehicle is solely generated from the rechargeable battery since it doesn t have any other source of propulsion. Electrically operated vehicles as it has been explained in serial number 242A of the Notification No. 12/2019-Central Tax (Rate) dated 31.07.2019 requires a single factum that the vehicles will run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicles. There is not an iota of doubt that unless the battery is fitted to an e-rickshaw, it will not be capable to run. But the question arises that when an e-rickshaw, having a motor fitted on it, is supplied without battery, does it lose its original character and can be termed as chassis . Thus, when a vehicle which is solely operational on battery power is supplied without battery, the same will qualify as a supply of electrically operated vehicle and therefore shall be classifiable under tariff item 8703.

  ---

• 2022 (7) TMI 179
  Classification of goods - three-wheeled electrically operated vehicle, commonly known as e-rickshaw, when sold without battery - classifiable as an electrically operated motor vehicle under HSN 8703 or not - rate of tax - HELD THAT:- Chapter 87 of the First Schedule to the Customs Tariff Act,1975 classifies Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof - Furthermore, Other vehicles, with only electric motor for propulsion under Tariff item 8703 80 covers Three-wheeled vehicles having HSN Code 8703 80 40. It appears that e-rickshaw being a three-wheeled electrically operated vehicle would be classifiable under tariff item 8703 80 40. But the issue in hand is not to decide the HSN code of e-rickshaw rather the issue, as it is found, is confined to decide whether fitting of battery is a pre-condition or not so as to qualify an e-rickshaw as an electrically operated vehicle. In the present case, the power of a battery operated vehicle is solely generated from the rechargeable battery since it doesn t have any other source of propulsion. Electrically operated vehicles as it has been explained in serial number 242A of the Notification No. 12/2019-Central Tax (Rate) dated 31.07.2019 requires a single factum that the vehicles will run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicles. There is not an iota of doubt that unless the battery is fitted to an e-rickshaw, it will not be capable to run. But the question arises that when an e-rickshaw, having a motor fitted on it, is supplied without battery, does it lose its original character and can be termed as chassis . Thus, when a vehicle which is solely operational on battery power is supplied without battery, the same will qualify as a supply of electrically operated vehicle and therefore shall be classifiable under tariff item 8703.

  ---

• 2022 (7) TMI 135
  Validity of simultaneous raids and search - action of respondent Nos.2 to 9 in harassing, manhandling and assaulting petitioner Nos.2 to 4 purportedly conducted in furtherance of inquiry proceedings - seeking direction to transfer of conduct of enquiry F.No.574/CE/198/2019/INV initiated against 1st petitioner to 10th respondent or any other unit/wing established under the CGST Act - compliance with the principles of natural justice - HELD THAT:- Regarding manhandling and assaulting the directions issued in the earlier order [ 2020 (11) TMI 269 - TELANGANA HIGH COURT ] observed. In the context of extreme bitterness between the parties as recorded by this Court in its order dated 06.11.2020, the apprehension of arrest expressed by the petitioners cannot be brushed aside. However respondents in their counter affidavit has made a categorical statement that there is no question of causing arrest of the petitioners since respondents are primarily concerned with recovery of revenue. That apart, it is the clear stand of the respondents that as on today, alleged GST evasion of the petitioners would be to the tune of approximately Rs.9.00 crores. From the affidavits filed by the respondents it is evident that investigation is on. Petitioners being taxable persons under GST are required to cooperate with the investigation which the petitioners state they are cooperating, though disputed by the respondents. While the respondents are empowered to investigate alleged GST evasion, however such investigation cannot be for an indefinite period. At one point of time it has to come to an end, whereafter if the materials/evidence demands, appropriate order is required to be passed by the adjudicating authority. That stage is yet to be reached. Even assuming that Rs.9.00 crores may be adjudicated as the GST not paid or evaded by petitioners, petitioners have the right to file appeal under Section 107(1) of the CGST Act and under Section 107(6) of the CGST Act if the petitioners deposit 10 per cent of the disputed tax, its appeal would be admitted for adjudication. This is a right provided by the statute. As against the alleged GST evasion of Rs.9.00 crores, petitioners have paid till date Rs.4.10 crores which is much higher than the statutory requirement of depositing 10 per cent in the event of filing of appeal. In view of the above admitted facts, while petitioners shall cooperate with the investigation and shall respond to any summons that may be issued by the respondents, the interim order passed by this Court on 04.03.2022 that no coercive steps should be taken by the respondents in the course of investigation shall continue till conclusion of the investigation - Petition disposed off.

  ---

• Income Tax

• 2022 (7) TMI 178
  Faceless assessment u/s 144B - Non adherence to procedure to be adopted by the National Faceless Assessment Centre - denial of natural justice - as per assessee no draft assessment along with show cause notice as required under section 144B(1) and section 144B(7) is given to the petitioner - HELD THAT:- It is not in dispute that in facts of the case no draft assessment along with show cause notice as required under section 144B(1) and section 144B(7) is given to the petitioner so as to enable the petitioner to give explanation for proposed addition during the hearing before the National Faceless Assessment Centre. Section 144B(1)(xii) provides that on receipt of show cause notice, assessee may furnish his response to the National Faceless Assessment Centre and as per clause (xiv), assessment unit shall make a revised draft assessment order after considering the response of the assessee and send it to the National Faceless Assessment Centre. As per the provisions of section 144B(7) in case of variation prejudicial to the assessee as proposed in the draft assessment order, the assessee is entitled to request for personal hearing and upon such request, the personal hearing may be provided by the authority, if the case of the assessee is covered by circumstances provided therein in exercise of powers under sub-clause (h) of clause (xii) of section 144B(7) of the Act, 1961. It can be safely be said that the impugned order was passed by the respondent in violation of principles of natural justice without affording an opportunity of personal hearing by not following the prescribed procedure laid down as per the provisions of section 144B of the Act, 1961 for Faceless assessment. Petition allowed. The impugned order of assessment passed by the respondent under section 143(3) read with section 144B dated 08.06.2021 at Annexure-N and demand notice under section 156 of the even date at Annexure-O are quashed and set aside.

  ---

• 2022 (7) TMI 177
  Exemption u/s 11 - Claim denied as coaching classes do not serve the purpose of education as a charitable activity within the meaning of Section 2(15) - scope of charitable activity - assessee is running various study centres as per its agreement with Yashwantrao Chavhan Maharashtra Open University, Nashik as per the duly approved programmes - HELD THAT:- We note first of all from a perusal of the assessee s detailed paper book that it has been running various study centres as per its agreement with Yashwantrao Chavhan Maharashtra Open University, Nashik as per the duly approved programmes. The said agreement suggests that the assessee is supposed to offer and carry out various study programmes for the university s registered students by way of correspondence classes, evaluation and as evolving course material as well other allied activities. That being the case, we are of the opinion that the CIT(A) has rightly held the assessee is eligible for the impugned exemption since it is carrying out education activities only. We draw support from Lok Shikshan Trust [ 1975 (8) TMI 1 - SUPREME COURT] , Saurashtra Education Foundation decisions [ 2004 (2) TMI 11 - GUJARAT HIGH COURT] that such educational activities resulting in university degrees in various courses indeed make it eligible for Section 11 exemption. Section 11 exemption proceedings very much empower the Assessing Officer to verify the nature of the assessee s activity(ies) as to whether they are in line with its objects or not. Learned counsel lastly sought to pin-point the fact that all its foregoing classes are very much in tune with the university s approval only. He could hardly rebut the fact that a university is set up after its approval from the University Grants Commission UGC , a statutory body set up under the University Grants Commission Act, 1956 which makes provision for coordination of and determination of standards in universities. We fail to understand as to how any university, which has been set up under the UGC Act could grant affiliation for coaching classes which are nowhere part of commission s standards. Faced with this situation, we are of the opinion that the learned Assessing Officer needs to factually verify all the assessee s evidence(s) afresh and treat it as eligible for Section 11 exemption only for those courses which are run by the university strictly in tune with the UGC s guidelines and if it is found that the coaching classes herein violate the same, the latter s would be held as not entitled for the impugned exemption in light of the cited case laws. The assessee is directed to file all the relevant details within three effective opportunities failing which the learned Assessing Officer shall be at liberty to proceed as per law.

  ---

• 2022 (7) TMI 176
  TDS u/s 194C OR 194I - Short deduction of TDS - Default u/s 201(1) and 201(1A) - common maintenance charges (CAM) Paid - HELD THAT:- As clearly gathered that CAM charges have been paid to different parties by executing agreements which do not form part of rent payment. It has not been disputed by the authorities below, nor by the learned Sr. DR before us, that the assessee has deducted TDS u/s 194C of the Act on the payment of CAM charges to the respective third parties who provided services to maintain common area. As payment towards CAM charges are in the nature of contractual payment which are made for availing services/ facilities and not for the use of any premises/ equipment, therefore, same would be subject to deduction of tax at source u/s 194C of the Act and not u/s 194I of the Act. This view has also been taken by the Tribunal in the case of Kapoor Watch Company Pvt. Ltd. ( 2021 (1) TMI 209 - ITAT DELHI] . As the facts involved in the present case of assessee before us are quite identical and similar to the facts of the case involved in the cases of Connaught Plaza Restaurants P. Ltd. ( 2022 (1) TMI 409 - ITAT DELHI] and Kapoor Watch Company Pvt. Ltd. (supra), therefore conclude that as claimed by the assessee the TDS on CAM charges paid by it is liable for deduction of tax at source @ 2% u/s 194C - we set aside the order of the AO as well as that of learned CIT(A) treating the assessee company as an assessee in default u/s 201(1) of the Act. - Decided in favour of assessee.

  ---

• 2022 (7) TMI 175
  Addition u/s 68 - large increase of sundry creditors during the year - AO doubted the genuineness of the trade creditors shown by the assessee in the balance sheet on account of the purchases made by the assessee - HELD THAT:- Entire business affairs reported by the assessee is in accordance with the normal practice followed and therefore, it appears that the assessee is engaged in showing these transactions which the AO considered as only as paper entries with alleged sundry creditors without any real purchase and sales. Therefore, the book results shown by the assessee do not reveal the correct state of affairs and business results. When the AO has clearly made out a case of non genuine purchase made by the assessee then instead of making the addition U/s 68 of the Act the income of the assessee ought to have been estimated after rejecting the books of accounts and applying appropriate and reasonable rate of GP/NP. It is a regular practice of the assessee to show that the purchases on credit and then settlement of account by showing the sales to the same trade creditors who have supplied the goods to the assessee. Therefore, in the facts and circumstances of the case we are of the view that when the assessee s books of account are not reflecting the correct affairs and book results are not rejected at most the income of the assessee is required to be estimated after rejecting the books of accounts. This is view taken by us is based on the decision of Hon ble Bombay High Court in the case of PCIT Vs. Mohmmad Haji Adam Co. [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT ] As the assessee has not placed the details of the profit of its regular business turnover via a vis the turnover of these bogus entry provider purchase and sales. The said details may be verified by the assessing officer and the AO is directed to add appropriate rate of profit in these transactions. Accordingly, we set aside this matter to the record of the AO to estimate the income of the assessee on the basis of the turnover shown by applying a proper and reasonable basis being GP/NP rate. Accordingly Ground No. 1 is partly allowed.

  ---

• 2022 (7) TMI 174
  Bogus LTCG - exemption u/s.10(38) denied - as per AO assessee failed to prove the genuineness of the transactions except for the document produced - CIT (A) upholding the action of the AO in treating the long term capital gain as income from other sources and applying the provisions of section 115BBE - HELD THAT:- It is an admitted fact that the assessee in the original return of income had claimed the exemption u/s 10(38) on account of sale of 70000 shares of Jackson Investment Ltd. As find during the course of search when it was noticed that the assessee had used the stock exchange mechanism for routing unaccounted money by using scrips of the company, which is a penny stock company, the assessee submitted a letter withdrawing the LTCG claim u/s 10(38) and offered the same as income. Therefore, once the assessee had withdrawn her claim, now the assessee cannot claim the same as long term capital gain and the income in my opinion has to be treated as income from other sources . If the contention of the learned Counsel for the assessee that the same is to be allowed as LTCG is accepted, then the natural corollary will be to allow the same as exempt u/s 10(38) of the I.T. Act and the very nature of the declaration will be defeated. Arguments of assessee that the AO cannot change the head of income is concerned, the same also is without any force especially when the assessee withdrew her claim of exemption u/s 10(38) and offered the same as income of the assessee. So far as the various decisions relied upon by the learned Counsel for the assessee are concerned, the same in my opinion are distinguishable and not applicable to the facts of the present case especially when the assessee in the instant case has herself withdrew the claim and accepted the income from sale of shares of the penny stock company as her income. Alternate argument of the assessee that the same should be added u/s 68 of the Act and the provisions of section 115BBE should not be attracted the same in my opinion, is without any force. The Assessing Officer as well as the learned CIT (A) in this case has correctly applied the provisions of section 115BBE of the I.T. Act. Therefore, the alternate contention of the learned Counsel for the assessee does not have any force and accordingly, the same is dismissed. - Decided against assessee.

  ---

• 2022 (7) TMI 173
  Levy of penalty u/s 271C - reasonable cause within the meaning of section 273B for non deduction of TDS on EDC charges towards Town and Country Planning, Government of Haryana - As submitted by assessee the payments made to HUDA were only for the purpose of facilitating the payments due on account of EDC charges towards Town and Country Planning, Government of Haryana and when the payments are made to the Government or local authority, no tax is required to be deducted - HELD THAT:- As receipts on account of EDC are being deposited in the Consolidated Fund of the State, accordingly directions were issued to colonizer like present assessee, to not deduct TDS. The Co-ordinate Benches in M/s. Perfect Constech P. Ltd. case [ 2020 (12) TMI 1158 - ITAT DELHI] and RPS Infrastructure Ltd. [ 2019 (9) TMI 39 - ITAT DELHI] have held that assessee was not required to deduct tax at source at the time of payment of EDC. Thus levy of penalty u/s 271C of the Act cannot be sustained. The grounds raised in the appeals are allowed.

  ---

• 2022 (7) TMI 172
  Exemption u/s 11 Denied - Default filling Form No. 10 electronically - HELD THAT:- It is not in controversy that an amendment in section 11 and 13 of the Act was made vide Finance Act, 2015 applicable from 01.04.2016 (A.Y. 2016-17 onwards), whereby filing of Form No. 10 electronically to the Assessing Officer within the due date specified u/s. 139(1) of the Act, has been made as a condition for accumulation of income u/s. 11 and 13 of the Act. The CBDT while considering the representations received by the Board/Field Authorities qua delay in filing of Form No. 9A and Form No. 10 for A.Y. 2016-17, issued a Circular No. 7/2018 dated 20.12.2018 and empowered the Commissioners of Income Tax to admit belated applications in Form No. 9A and Form No. 10 qua A.Y. 2016-17 where the same are filed after the expiry of time allowed under the relevant provisions of the Act. It was further instructed to the Commissioners of Income Tax, to satisfy themselves that the Assessee was prevented by reasonable cause from filing an application in Form No. 9A and Form No. 10 within the stipulated time. I n the case of CIT vs. Nagpur Hotel Owners Association ( 2000 (12) TMI 99 - SUPREME COURT] allowed the filing of Form No. 10 upto the stage of completion of assessment u/s. 143(3) of the Act and the Hon ble Allahabad High Court in the case of CIT vs. Panama Chemical Works ( 1999 (6) TMI 3 - MADHYA PRADESH HIGH COURT] also held that filing of the audit report during the assessment proceedings by the Assessee amounts to substantial compliance with the statutory requirement. No doubt, lack of knowledge of law is not an excuse, however,considering the peculiar facts that the provision for filing of the Form No. 10 was inserted newly and made applicable from A.Y. 2016-17 onwards, which in the instant case is under consideration and therefore the Assessee committed error which prima facie seems to be bonafide and unintentional. Even otherwise the Assessee rectified its mistake by filing form No. 10 electronically along with revised return of income u/s. 139(4) of the Act, which goes to show that the Assessee has used its due Diligence and made available the form No. 10 to the Assessing Officer during the assessment proceedings itself and therefore the Assessee can not be penalized. On the aforesaid analyzations, we are of the view that the Assessing Officer should have taken into consideration the form No. 10 filed on dated 24.03.2018. Consequently, the assessment order along with impugned order is set aside and the case is remanded to the file of the Assessing officer for decision afresh by taking into consideration the FORM 10 filed along with the revised return of income, suffice to say while affording proper and reasonable opportunity of being heard to the Assessee. Assessee appeal stands allowed for statistical purposes.

  ---

• 2022 (7) TMI 171
  Disallowance on account of written off relating to embezzlement - amount embezzled from account by way of forged cheques by employee of the assessee company - HELD THAT:- As decided in Associated Banking Corporation of India [ 1964 (10) TMI 7 - SUPREME COURT] held that loss must be deemed to have arisen only when the employer comes to know about it and realized that the amount embezzled cannot be recovered, no doubt, it came to its knowledge prior. We noted that in the present case also, the assessee came to know of embezzlement in 2001-02 but he tried his level best for recovery of embezzled amount by filing police complaints and even the matter was referred to CBI by filing FIR against the accused persons as noted above. The assessee also pursued the matter with the Banking Ombudsman and the bank officials, when finally everybody refused and there was no chance of recovery, the assessee reversed this amount in the accounts of the assessee for assessment year 2008-09, when finally discovered that this amount is not recoverable. Hence, in such circumstances, we are of the view that the loss on account of embezzlement claimed by assessee is allowable in this year - Appeal of assessee allowed.

  ---

• 2022 (7) TMI 170
  Revision u/s 263 - eligibility of Deduction u/s 54F - construction of a new residential property from the sale of the land - CIT found that the AO has not made proper inquiry before allowing deduction under section 54F viz. whether the assessee has deposited capital gain amount in the specified capital gain tax account, whether the assessee spent the money for construction of a residential house; whether the assessee is entitled to claim deduction under section 54F for more than one residential house; AO failed to verify whether the land sold was an agriculture land two years before the date of transfer of the said land not verified that no agriculture income has been shown by the assessee from the above agriculture land - HELD THAT:- From scrutiny sheet of the Income Tax Department relating to the assessee wherein the reason on which cases selected for scrutiny is given as AO should examine the sources of investment in property as appearing in AIR . However, it is seen from the assessment order dated passed by the AO that it is very cryptic order confined to two paragraphs only without making any discussions and justification for the relief granted to the assessee either under section 54B or under section 54F of the Act. In the assessment order passed by the AO, there is no whisper on the inquiries made by him, before passing regular assessment order. Probably for this reason, the ld.CIT has reopened the assessment under section 263 We find that the ld.CIT also has not verified assessment record properly and simply carried out the objections made by the Internal Audit Party of the department, and thereby initiated the Revision proceedings. It can be seen from the show cause notice issued under section 263 of the Act, wherein the ld.CIT has categorically mentioned that the AO did not verify the facts and allowed the deduction under section 54B 54F of the Act. This observation by the ld.CIT is not correct, for the reason that the ld.AO has called for the details from the Sub-Registrar and received reply from Sub-Registrar on 24.1.2011 and 7.9.2011 respectively. AO though made inquiry about the claim made by the assessee, however, not discussed the same while passing assessment order. Thus, we find that the ld.CIT has initiated Revision proceeding based on the Internal Audit Party report only, which is not maintainable in law following jurisdictional High Court in the case of N.K. Roadways P.Ltd. ( 2014 (6) TMI 188 - GUJARAT HIGH COURT ] - Hon ble Supreme Court [ 1970 (4) TMI 4 - SUPREME COURT] also held that revision made by the Commissioner simply following direction of the Board, which may control exercise of power of officers of department in administrative matters but not quasi-judicial matters. In case of judicial matters, the Commissioner should apply his mind and initiate proceedings in accordance with law and not merely carry out directions of the Board. Thus, any order passed pursuant to the directions of the Board is liable to be set aside as Commissioner has not applied his independent judgments in invoking revision proceedings. We hold that revision order passed by the ld.CIT is not in accordance with law and the same is hereby quashed. Appeal of assessee allowed.

  ---

• 2022 (7) TMI 169
  Revision u/s 263 - Deduction u/s 80P - As per CIT interest income was not arising from the activity of financing from the members, therefore, the assessee is not eligible for deduction for such interest income under the provisions of section 80P of the Act but the AO has allowed the same without the necessary verification and application of mind - HELD THAT:- At the outset we note that this tribunal in the case of Shree Keshav Co-operative Credit Society Limited [ 2022 (7) TMI 79 - ITAT RAJKOT] involving identical facts and circumstances has decided the issue in favour of the assessee as held that AO has taken one of the possible view for allowing the deduction to the assessee under the provisions of section 80P(2)(d)/80P(2)(a)(i)(a) of the Act. Where two view are possible on the issue and the AO has taken one of the possible view, but the PCIT do not agree with the view adopted by the AO, in such scenario, the order of the AO cannot be held erroneous. Before us, no material has been placed on record by the ld. DR to demonstrate that the decision of Tribunal as cited above has been set aside / stayed or overruled by the higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of the case referred above nor has placed any contrary binding decision in its support. - Decided in favour of assessee.

  ---

• 2022 (7) TMI 168
  Reopening of assessment u/s 147 - eligible Reasons for belief that income has escaped assessment - As alleged assessee had not furnished relevant documents and evidences during the assessment proceedings, therefore disallowed undisclosed work in progress and added to the total income of the assessee - Also addition on account of short accounted of contract income and interest income - HELD THAT:- The settled position of law is that if an assessment for any year has been completed u/s 143(3) or u/s 147, then no action shall be taken u/s 147 after the expiry of four years from the end of relevant assessment year unless income chargeable tax has escaped assessment by reason of the failure on the part of the assessee. We have examined the original assessment order framed by assessing officer under section 143(3) of the Act and note that there is no allegation that the assessee has failed to disclose fully and truly, all material facts necessary for assessment. We note that there is change in opinion as the assessee has disclosed all the material facts in its return of income, and submitted WIP details, Interest details, TDS details, contract income, interest income, Balance Sheet along with annexures, and other evidences as required by the assessing officer and the Assessing Officer had considered the same while completing the original assessment u/s 143(3) of the Act dated 07.12.2011. We note that in the assessee`s case in the reasons supplied to the assessee, there is no whisper, what to speak of any allegation, that the assessee had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. See KANTIBHAI DHARAMSHIBHAI NAROLA VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX, WARD 3 (2) (4) [ 2021 (2) TMI 102 - GUJARAT HIGH COURT] as held held that there cannot be any action under Section 147 of the Act after the expiry of a period of four years from the end of the relevant assessment year until and unless the income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make disclosure of all the material facts truly and fully necessary for assessment. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period, as explained above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. Therefore, based on these facts and circumstances, we do not find any infirmity in the order of ld CIT(A), hence we confirm and approve the findings of ld CIT(A) and dismiss the grounds raised by the Revenue.

  ---

• 2022 (7) TMI 167
  Additional depreciation u/s 32(1)(iia) - depreciation for wind mills - HELD THAT:- We make it clear that the assessee has already been granted normal depreciation on the corresponding fixed asset i.e. windmill(s) since the instant appeal is only concerned with additional depreciation issue. A perusal of Assessing Officer s assessment order reveals that the assessee is in windmill s power generation business at least since A.Y. 2008-09. We therefore reject the Revenue s argument that it is not entitled for the impugned additional depreciation claim pertaining to installation of air-conditioning unit since going against the facts on record. Most significant aspect of entitlement of assessee s additional depreciation claim which has been rejected by the lower authorities on the ground that the same is applicable only with effect from 1.4.2013 whereas we are in A.Y. 2012-13 only. This tribunal s co-ordinate bench order for A.Y. 2011-12 in ACIT vs. Shri Atul Shivdas Ganatra (HUF) [ 2018 (11) TMI 1907 - ITAT MUMBAI] allowed assessee claim - Decided against revenue.

  ---

• 2022 (7) TMI 166
  Addition being business loss claimed by the assessee on purchase and sale of skimmed milk powder and channa - assessee failed to give any evidences to prove the transaction of sale and purchase and the loss thereof incurred by the assessee on such transaction - HELD THAT:- During the assessment proceedings, the assessee was asked by the Assessing Officer to furnish necessary evidences to prove the transaction of sale and purchase and the loss thereof incurred by the assessee on such transaction. However, the assessee failed to furnish any reliable evidence to prove the transaction. Even the notices by the Assessing Officer u/s 133(6) of the Act issued to the concerned parties with whom the assessee made transaction remained unanswered Even in first appeal, the assessee could not furnish any evidence to prove the aforesaid business transaction and loss thereof. The ld. CIT(A), therefore, dismissed the appeal of the assessee. Thus after hearing the ld. DR, we do not find any reason to interfere with the above order of the ld. CIT(A). The order of the CIT(A) is accordingly upheld. - Decided against assessee.

  ---

• 2022 (7) TMI 165
  Addition on gross profit - Reduction in gross profit - Rejection of books of accounts - CIT- deleted the addition - HELD THAT:- With regard to allegation of the AO that the assessee was repeatedly asked to produce the bill and the internal audit report, but assessee failed to produce Internal Audit Report and proof of payment for internal audit,we find that same has been replied Vide letter dated 29.12.2016, details of provision made for internal audit fees were submitted to the AO. The entire details of complimentary expenses have been mentioned in the order of the ld. CIT(A) giving the complete details of the particulars, designation, cost price of the complimentary and also the various divisions. With regard to service charges, the entire details and the method of accounting charges, and the amount of the services charges paid of Rs.1.23 Cr. have been duly mentioned at para 31 32 of the order of the ld. CIT(A). With regard to the internal audit fees, the details have been filed by letter dated 29.05.2016. Copy of the ledger has been submitted before the AO as verified by the ld. CIT(A). The reasons for declining the gross profit along with rooms available, rooms occupied, percentage of room rate, room revenue and F B revenue [page 25 26 of the order of the ld. CIT(A)] has been duly furnished substantiating the decline in receipts, incurring expenses of direct receipts such as electricity, water, staff, music and entertainment which have been and to be provided irrespective of the percentage of occupancy. Thus, having gone through the entire facts, we hereby decline to interfere with the reasoned order of the ld. CIT(A). Addition on account of Deemed Dividend - CIT- deleted the addition - HELD THAT:- The provisions of section 2(22)(e) of the Act are not applicable in the present case as the assessee is not a shareholder in the companies from which advance has been received during the year. As evident from the aforesaid table showing shareholding pattern, the assessee is not a shareholder in M/s AIPL M/s GSL. In case of GSL, viz., GSHPL do not hold shares in assessee company, clearly bringing it outside the scope of Section 2(22) (e) of the Act. - both the advances could not have been added in the hands of assessee company, being not the registered shareholder of AIPL or GSL.- Decided in favour of assessee.

  ---

• 2022 (7) TMI 164
  Addition of capital WIP written off - AO not found claim acceptable on the ground that the said expenses were clearly capital in nature, as the Assessee company has itself admitted the fact that due to certain unavoidable reasons - HELD THAT:- We do not find any reason and/or material to controvert the findings of the ld. Commissioner in affirming the addition under challenge. Hence, the ground No. 1 raised by the Assessee which relates to the affirmation of the disallowance of expenses qua Capital WIP written off , is dismissed. Addition of expenditure on account of legal and professional charges under the head other expenses - Commissioner observed that by its own admission, the Assessee has stated that the expenditure has been for services of various legal and technical professionals to augment its scale of operations significantly , thus the expenditure is adjudged as capital expenses - HELD THAT:- We have given our thoughtful consideration to the conclusions drawn by the authorities below to the issue in hand and do not find any reason or material to controvert the findings of the authorities below, specifically, the ld. Commissioner in affirming the addition under challenge and therefore, in our considered view, the conclusion drawn by the ld. Commissioner does not require any interference, as the same does not suffer from any perversity, impropriety and /or illegally. Consequently, ground No. 2 also stands dismissed. Appeal of assessee dismissed.

  ---

• 2022 (7) TMI 163
  Penalty u/s. 271(1)(c) - allegation of defective notice issued u/s 274 - non specification of clear charge - assessee challenged that AO initiated penalty under section 271(1)(c) for concealing/ furnishing of particulars of Income and thereafter issued the notice u/s 274 read with 271(1)(c) without specifying the limb of the penalty and finally imposed the penalty for concealment by filling of inaccurate particulars of income - HELD THAT:- The Hon ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon ble High Court also held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clause would lead to an inference of non-application of mind by the Assessing Officer and levy of penalty would suffers from non-application of mind. Also see M/S. SAHARA INDIA LIFE INSURANCE COMPANY, LTD. [ 2019 (8) TMI 409 - DELHI HIGH COURT] The penalty provisions of section 271(1)(c) of the Act are attracted, where the Assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings. Therefore, it is imperative for the Assessing Officer to specify the relevant limb so as to make the Assessee aware as to what is the charge made against him so that he can respond accordingly. Having regard to the manner in which the Assessing Officer has issued the notice under section 274 r.w.s. 271(1)(c) of the Act without specifying the limb under which the penalty proceedings have been initiated and proceeded with, apparently goes to prove that notice in this case has been issued in a stereotyped manner without applying mind which is bad in law, hence can not be considered a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act and therefore we are of the considered view that under these circumstances, the penalty is not leviable - Decided in favour of assessee.

  ---

• 2022 (7) TMI 162
  Deduction u/s 80IB - Disallowance of deduction on the ground that completion certificates were not produced during the assessment proceedings as well as during the appellate proceedings in the office of ld. CIT(A)-I, hence, no relief in this regard is being allowed - HELD THAT:- We find that while allowing the claim u/s. 80IB of the Act to the Assessee, the ld. Commissioner sought the remand report from the Assessing Officer, who in the remand proceedings verified the completion certificates on test check basis and found the completion certificates in order and accordingly, the ld. Commissioner while relying upon the remand report, allowed the claim of the Assessee qua deduction u/s. 80IB(10) of the Act. Therefore, we are of the considered view that the contention with regard to the non-fulfilling of twin conditions for the eligibility of deduction u/s. 80IB(10) of the Act and not making any enquiries regarding correctness and genuineness of the completion certificates submitted by the Assessee, is not tenable and hence, the same is dismissed. On the aforesaid analyzations and considerations, the appeal of the Revenue is liable to be dismissed, as the order under challenge does not suffer from any perversity, impropriety and/or illegality. Appeal filed by the revenue department stands dismissed Validity of Completion certificates of the projects, on which the Assessee has claimed deduction u/s. 80IB(10) - Once, the completion certificates on test check basis found to be in order in the remand proceedings conducted by the Assessing Officer on the direction of the ld. Commissioner, and the same has been accepted by the ld. Commissioner as it reflects in the impugned order, nothing survives against the claim of deduction of the Assessee. As the facts and circumstances of the instant case are exactly similar as involved in Assessee s case for A.Y. 2004-05 and even 2005-06 as well, therefore, we are inclined to allow the appeal of the Assessee.

  ---

• 2022 (7) TMI 161
  Exemption u/s 54F - Proof of acquiring single unit - determination of separate independent unit - HELD THAT:- Admittedly, the physical verification report, remand report clearly show that the assessee has acquired Flat Nos.201 202 as a single unit and Flat No.301 on the upper stair is not connected to Flat No.201 202 owned by the assessee. Consequently, as the assessee has constructed one residential house being the combination of both Flat Nos.201 202, the assessee is entitled to the benefit of exemption u/s.54F of the Act in respect of Flat Nos.201 202 to be considered as one. The assessee is not entitled to the benefit of exemption u/s. 54F of the Act in respect of Flat No.301. Appeal of the assessee is partly allowed for statistical purposes.

  ---

• 2022 (7) TMI 160
  Revision u/s 263 - depreciation claimed on goodwill arose out of amalgamation - applicability of 5th proviso to section 32(1) of the Act and restriction of depreciation in a scheme of amalgamation - As per CIT AO wrongly depreciation on goodwill, even though 5th proviso to section 32(1) of the Act, very clearly restricts claim of depreciation to successor company on amalgamation, as if such succession has not taken place - distinction between the purchase of goodwill under amalgamation as against the goodwill created - HELD THAT:- There is no dispute with regard to the fact that goodwill is not existing in the books of account of the amalgamating company. Further, depreciation on goodwill claimed by the assessee was first time recognized in the books of account of amalgamated company in a scheme of amalgamation approved by the Hon ble High Court of Madras. As per said scheme of amalgamation, accounting treatment in the books of transferee company has been specified as per which transferee company shall account for merger in its books of account as per purchase method of accounting prescribed under Accounting Standard-14 issued by Institute of Chartered Accountants of India. In this case, there was no goodwill in the books of account of the amalgamating company and further, goodwill has been acquired by amalgamated company by paying consideration over and above net value of assets at amalgamating company. Therefore, in our considered view, case of the assessee squarely comes under ratio laid down by the Hon ble Supreme Court in the case of M/s. Smifs Securities Ltd.[ 2012 (8) TMI 713 - SUPREME COURT] It is well settled principle of law by decisions of various Courts, including decision in the case of Malabar Industrial Co. [ 2000 (2) TMI 10 - SUPREME COURT] where it has been clearly held that the PCIT cannot assume jurisdiction to revise assessment order, unless the PCIT satisfies that assessment order passed by the Assessing Officer is erroneous, insofar as it is prejudicial to the interests of the Revenue. In this case, on the issue of depreciation on goodwill, the Assessing Officer has taken one possible view with which the PCIT does not agree, however, it cannot be treated as erroneous prejudicial to the interests of the Revenue, unless view taken by the Assessing Officer is erroneous and unsustainable in law. This legal principle is also laid down in the case of CIT Vs. Max India Ltd. [ 2007 (11) TMI 12 - SUPREME COURT] - In our considered view, view taken by the Assessing Officer on the issue of depreciation on goodwill is a possible view, because when 5th proviso to section 32(1) of the Act, has no application to the given facts and circumstances of the case, the Assessing Officer cannot take any view, which is contrary to provisions of section 32(1) of the Act. Since, the Assessing Officer has taken one of the possible view for which the PCIT may not agree, however, this may not be a reason for the PCIT to assume jurisdiction to revise assessment order passed by the Assessing Officer. We are of the considered view that the assessment order passed by the Assessing Officer u/s. 143(3) of the Act dated 29.12.2017, is neither erroneous nor prejudicial to the interest of the Revenue. PCIT has assumed jurisdiction u/s. 263 of the Act on the sole basis of application of 5th proviso to section 32(1) of the Act, towards depreciation on goodwill. In view of the factual matrix as stated in preceding paragraphs and non-applicability of 5th proviso to section 32(1) of the Income Tax Act, 1961, there cannot be error in relation to the view taken by the Assessing Officer while framing the original assessment. Appeal of assessee allowed.

  ---

• 2022 (7) TMI 159
  Addition u/s 68 - unexplained share capital - as per AO no documentary evidences to prove the genuineness of the transactions as well as the identity and creditworthiness of the investors given - HELD THAT:- AO took no steps to verify the creditworthiness of the creditors or identity of the subscribers to ascertain that the transactions were genuine or whether these were bogus entries of money lenders and, therefore, we are of the considered view that the judgement of the Hon ble Apex Court in the case of NRA Iron Steel Pvt. Ltd. [ 2019 (3) TMI 323 - SUPREME COURT] does not help the case of the Department. Hon ble Delhi High Court in the case of M/s Nova Promoters and Finlease (P) Ltd [ 2012 (2) TMI 194 - DELHI HIGH COURT] wherein the Hon ble High Court has pointed out that the evidence or the material adduced by the assessee cannot be thrown out without any inquiry. In the present case, there exists no material to implicate the assessee for the failure to produce the common director or the failure to explain the source of source when the AO himself has not conducted any inquiry which could indicate that the impugned transactions were not genuine. In our considered view, the suspicion however strong cannot substitute the documentary evidence, until proved to be false. Therefore, in our considered opinion, the impugned addition on the facts of the case is not sustainable. Also we would like to make a reference to the judgement of the Hon ble Apex Court in the case of CIT vs Lovely Exports [ 2008 (1) TMI 575 - SC ORDER] held that if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO, then the Department is free to proceed to reopen their individual assessment in accordance with law but it cannot be regarded as undisclosed income of the assessee company. Therefore, for the reasons given in the preceding paragraphs, we hold that the impugned addition u/s 68 of the Act is not sustainable in the eyes of law and while setting aside the order of the Ld. CIT(A), we direct the AO to delete the impugned addition. - Decided in favour of assessee.

  ---

• 2022 (7) TMI 158
  Capital gain on relinquishment of rights in the assets of the firm - assessee paid amounts over and above the sum, standing to the credit of the capital account - amounts due to the assessee upon retirement from partnership - ascertained goodwill for the purposes of accounting and settlement - whether the amount received by the assessee in excess of the amount standing to the credit of the partnership firm which is paid towards the notional gain on revaluation of land held as stock in trade is goodwill as the and therefore not liable to tax? - contention of AR that difference between the total amount standing to the credit of the capital account, in the form of capital contribution, interest and accumulated profits and the final amount paid to the assessee at the time of retirement is goodwill - HELD THAT:- We notice that, the revaluation of the inventory carried out by the firm was not accounted in the books by the firm, nor the same is reflected in the capital accounts of the partners. The computation of the gain is not disputed by the lower authorities, though the assessee has not produced any supporting document to show how the original cost of the land was arrived at. The important fact to be noted here is that, neither the stock in trade (land) is reflecting the revalued amount nor the capital account of the partners is credited with the gain on revaluation. When an Accounting Standard deals with a specific intangible asset, then AS-26 does not apply e.g., Valuation of Inventories. Also the internally generated goodwill arises when an enterprise incurs expenditure for future benefits e.g., Scientific Research, development of prototypes, etc., then the enterprise should not recognize any goodwill that may arise out of incurring of such expenditure at a future period as it is beyond the control of the enterprise. We are, therefore, of the view that the claim of the assessee for not routing the revaluation through the capital account of the partners stating it to be a practice as per AS-26 is not tenable. The Tribunal in the case of Savitri Kadur [ 2019 (7) TMI 593 - ITAT BANGALORE] clearly stated that the goodwill to the extent of the amount recorded in the books is not taxable and the goodwill that is not substantiated by entries in the books of accounts of the assessee would become taxable. In assessee s case though the assessee claims that the difference in the amount as per capital account in the books and the amount settled to the assessee is goodwill, however, the same is not recorded in the books. Hence, respectfully following the above decision of the coordinate bench of the Tribunal, we hold that the amount being the amount paid in excess of what is standing to the credit of the partner s capital account is taxable in the hands of the assessee. Thus, the appeal of the assessee is dismissed.

  ---

• 2022 (7) TMI 157
  Bonus ex-gratia payment - bonus/ex-gratia @ 8.33% to its employees which was payable on Dussehra i.e., October/November 2012 - HELD THAT:- The issue-in-dispute in the year under consideration being similar to what has been decided by the Tribunal for assessment year 2011-12 ( 2018 (3) TMI 1970 - ITAT MUMBAI] respectfully following the finding of the Tribunal, the claim of the assessee is held to be crystallized in the year under consideration and accordingly allowed. The ground No. 1 of the appeal of the assessee is allowed. Disallowance of professional charges as paid to consultant - HELD THAT:- We are of the opinion that evidently when bills were not received by the assessee, though the work was completed in the financial year corresponding to assessment year 2012-13, the liability was crystallized only after the receipt of the bills and therefore, the assessee is justified in claiming the same in the assessment year 2013-14 i.e. current assessment year. The Ground of appeal of the assessee is accordingly allowed. Disallowance of commission on sale - HELD THAT:- As the sale proceeds was received on 04.08.2011, therefore, the commission on sales was accordingly crystallized in the year under consideration and not in the year of the sale. We find that the Ld. CIT(A) has also held the claim of the assessee as justifiable, however, directed the AO to verify the fact and ascertain the amount as otherwise payable. We are of the view that if the Assessing Officer has not already verified then we direct him to verify the payment and allow in view of finding of the Ld. CIT(A). This ground is allowed for statistical purposes Liability of transport charges disallowed - HELD THAT:- As the expenses have been crystallized only after receipt of the report from the customer as stipulated in the contract for transport charges with the transporter. Accordingly, the claim of the assessee of transport charges in the year under consideration is allowed. Further, we are of the view that in the earlier assessment year as well in current assessment year, the assessee has reported taxable income and rate of tax being unaltered, therefore, the entire exercise of assessing in the year under consideration for AY 2012-13 or in AY 2013-14 is Revenue neutral. The Ground No. 4 of the appeal of the assessee is accordingly allowed.

  ---

• 2022 (7) TMI 156
  Revision u/s 263 by CIT - deduction for interest expenditure made by the Appellant and allowed by the AO under Section 57 - HELD THAT:- The conclusion drawn by the PCIT that the claim of deduction has been allowed without investigating the matter or verifying the allowability of such claim is contrary to material on record. Further, in letter dated 28.02.2016, the Appellant had submitted that the borrowed funds were kept in fixed deposits and the interest income earned was used for paying interest cost on borrowed funds, thus, explaining the nexus. The submission of the Appellant have been reproduced by the PCIT s order under heading Written Submission However, the PCIT failed to consider the same and returned incorrect finding that no submission were made by the Appellant. In view of the aforesaid, we set aside the order of PCIT on issue no.1. Share application money received form AMR - Perusal of record shows that the Appellant had, during the assessment proceedings, as well as before PCIT, provided explanation about the source of funds being his capital of INR 3,02,33,407/- and secured loans from bank as reflected in Balance Sheet of Lakshmi Business Centre, proprietorship firm of AMR - Further, as per the computation of income for the Assessment Year 2013-14, AMR had net taxable income - The aforesaid information and supporting documents were filed during the assessment proceedings. The PCIT had, relying upon incorrect facts, proceeded to conclude that the AO had failed to carry out necessary reconciliation of bank loan with its utilization. Accordingly, in view of the aforesaid, we set aside the decision of the PCIT on this issue. Share application money received by the Appellant from WEPL - We find that on the examining of the bank statements submitted by the Appellant, the PCIT had pointed out that there were deposits/fund transfers immediately prior to transfer of funds to the Appellant as share application money and referred to one such instance of fund transfer from of INR 36,00,000/- credited to the account of the Appellant on 27.07.2012 in paragraph 3.3 of the impugned order. Perusal of the bank statements shows that the observations of PCIT are factually correct as there were deposit/fund transfers (including fund transfers from Anika Universal Pvt. Ltd.) credited to the bank account of the Appellant. In our view, in absence of an explanation, merely by going through the narration given in the bank statement one cannot form an opinion about the nature or source of funds received in terms of the proviso to Section 68 of the Act inserted by the Finance Act, 2012, with effect from 1.04.2013, AO was duty bound to carry out necessary verification in terms of proviso to Section 68 of the Act and more so, for the reason that the case was selected for scrutiny under CASS, inter alia, for large share application money received against un-allotted shares as noted by the AO in paragraph 1 of the Assessment Order. Further, at the relevant time AMR held 46% shareholding of the Appellant, whereas balance 54% shareholding was held by WEPL. As per annual accounts of WEPL filed by the Appellant, AMR was also one of the directors of WEPL. Therefore, the Appellant was in a position to gather information and provide explanation about the nature and source of funds used by WEPL for making payment towards share application money. We are of the view that neither the assessment order nor the material on record supports the contentions of the Appellant the AO had carried out necessary inquiries and verification during the assessment proceedings, and therefore, the provisions of Explanation 2(a) to Section 263 are attracted. Accordingly, in view of the above, we confirm the order of PCIT passed under Section 263 of the Act to the extent it sets aside the Assessment Order, dated 29.03.2013, holding the same to be erroneous and prejudicial to the interest of Revenue on account of failure of the AO to carry out necessary verification in relation to share application money of INR 2,56,64,000/- received by the Appellant from WEPL in terms of Section 68 - Revenue appeal is partly allowed.

  ---

• 2022 (7) TMI 155
  Deduction u/s 80IC - allocation of R D expenditure - R D expenditure nexus to the Baddi units - As per CIT-A no apportionment of R D expenses to Baddi unit is required for computing deduction u/s 80IC - HELD THAT:- Assessee is having six units and deduction under section 80IC of the Act is being claimed qua one unit only namely Baddi unit No.1 and the assessee company is having two approved R D facilities one at Mahape and another one at Sinnar. At the same time, it is also undisputed fact on record that the assessee does not have any R D centers at Baddi. CIT(A) has returned factual finding that no R D activities have been carried out by the assessee company in its Mahape and Sinnar R D facilities qua the products/drugs manufactured by the assessee company on its Baddi units during the year under assessment. In the subsequent assessment years 2010-11 to 2013-14 identical issue has been decided by the Revenue in favour of the assessee by holding that R D expenses incurred by the assessee company at Mahape and Sinnar units are not allocable to Baddi unit as there is no direct nexus between the R D activities carried out and product manufactured by the assessee company at Baddi unit 1. Even the AO in his remand report discussed by the Ld. CIT(A) in para 5.1 of the impugned order categorically mentioned that the assessee s list of products manufactured at Baddi plant during the year under assessment show that the R D expenses incurred at approved R D centers situated at Mahape and Sinnar pertain to different products and not to the ones being manufactured at Baddi unit . This contention of the assessee has not been controverted by bringing on record any fact or evidence by the AO by filing any counter reply. Rather the AO has mentioned in its remand report that he has perused all the documents submitted by the assessee carefully. Also brought on record by the assessee company that there is a gestation period of 10/14 years before any commercialization of product is achieved or even after lapse of such period there can still be no commercial production. But at the same time it is admitted fact that none of the products being manufactured by the assessee company at Baddi units has any nexus with the R D activities being carried out at Mahape and Sinnar units. So we are of the considered view that when there is no direct nexus between the expenditure incurred on R D activities by the assessee company at its Mahape and Sinnar units and manufacturing activity at the Baddi Units are not sustainable in the eyes of law. We are of the considered view that the Ld. CIT(A) has returned the findings on facts in the light of the decisions rendered by Hon ble Bombay High Court in case of Zandu Pharmaceutical Works ( 2012 (9) TMI 620 - BOMBAY HIGH COURT ) and Bush Boake Allen (India) Ltd. [ 2003 (12) TMI 10 - MADRAS HIGH COURT] . So we find no ground to interfere into the impugned order passed by the Ld. CIT(A). Resultantly, appeal filed by the Revenue is dismissed.

  ---

• 2022 (7) TMI 154
  Disallowance of depreciation u/s 32 of block of computer equipment - HELD THAT:- CIT(A) called for a remand report from the A.O. and the A.O. in the remand report stated that the invoices were not produced and conveyed his objections for allowing the claim of depreciation. The A.O., however, in the remand report stated that there is no objection for allowing depreciation on actual amount of invoices furnished and the CIT(A) may decide the issue based on the records available. The CIT(A) rejected the appeal of the assessee for the reason that the invoices produced are not legible. The legible copies of all the invoices in relation to the additions made to the computer equipments are placed on record - Therefore, in the interest of justice and equity, we are of the view that the matter needs to be verified by the A.O. afresh. Hence, the issue raised as regards to the disallowance of depreciation on addition made on block of computer equipments is restored to the files of the A.O. The A.O. is directed to examine the invoices in respect of Rs.6,18,80,241 and if found in order, the A.O. is directed to grant depreciation on the same. It is ordered accordingly. Disallowance of software development expenses - Allowable business expenditure or not? - HELD THAT:- CIT-A without appreciating the business model of the assessee, held that the same software and same testing may not be done every year. It was further held by the CIT(A) that the assessee may test different software in different years and once developed, tested and customized according to a country specification will give an enduring benefit to the assessee. Accordingly, the CIT(A) held that the expenditure incurred on the software development is capital expenditure - CIT(A) failed to appreciate that the assessee does not test on a single software during the entire year. Further, a software is not customized and deployed on the electronic products and a new product is launched every year and the same is a continuous activity. Since the CIT(A) has not understood the business model of the assessee, it is necessary that the matter needs to be examined afresh by the A.O. Accordingly, the issue raised in ground 2 is restored to the files of the A.O. The A.O. is directed to examine the expenditure incurred and come to a conclusion whether it is a capital or revenue expenditure. The A.O. shall afford a reasonable opportunity of hearing to the assessee before a decision is taken in this matter. It is ordered accordingly. Deduction of education cess on Income Tax and Secondary and Higher education cess on Income Tax - HELD THAT:-The Mumbai Bench of the Tribunal in the case of Voltas Limited [ 2020 (7) TMI 125 - ITAT MUMBAI] had admitted additional ground of appeal with regard to the claim of education cess and adjudicated the matter in favour of the assessee, by following the judgment of the Hon ble Bombay High Court in the case of Sesa Goa Limited [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] v - In the light of the aforesaid judicial pronouncements, we hold that education cess is to be allowed as deduction. It is ordered accordingly.

  ---

• Customs

• 2022 (7) TMI 153
  Classification of imported goods - Betel Nut Products (known as (Supari Unflavoured) - prohibited goods or not - classifiable under CTH 21069030 or not - seeking issuance of waiver certificate for detention and demurrage charges under Regulations of Handling of Cargo in Customs Areas Regulations 2009 - HELD THAT:- The issue that arises in these matters has been considered by this Court in M/S. BLUE VISTA INTERNATIONAL LTD. VERSUS THE COMMISSIONER OF CUSTOMS, THE ADDITIONAL COMMISSIONER OF CUSTOMS (IMPORTS) , THE ADDITIONAL COMMISSIONER OF CUSTOMS (SIIB) , THE ASSISTANT / DEPUTY COMMISSIONER OF CUSTOMS, CHENNAI [ 2022 (7) TMI 80 - MADRAS HIGH COURT] where it was held that all petitioners are permitted to make applications for provisional release under Section 110A and such applications as/if and when received shall be disposed by the adjudicating authority after hearing the petitioners and simultaneous with a prima facie determination of the classification of the commodity in each case, within a period of two (2) weeks from date of receipt of the applications. The direction given in the aforesaid case is extended to the present matters as well. The petitioner has made representations before the respondents, both dated 09.05.2022 that shall be disposed by R4 within a period of two (2) weeks from date of receipt of a copy of this order after hearing the petitioner - petition disposed off.

  ---

• 2022 (7) TMI 152
  Valuation of imported goods - Brand New Azimut 68 Motor Yacht with Accessories - alleged mis-declaration of description and value of the imported goods - evasion of legitimate customs duty payable on higher import price for the actually imported goods i.e. yacht of model Azimut 68 Evolution , instead of model Azimut68 , as declared in the subject Bill of Entry - validity of declared price - rejection of the declared assessable value and re-determination of the same - HELD THAT:- It is clear that all material facts have been declared to the department. Particularly, the capacity 2xMAN 1360mHP applicable for evolution type, was specifically indicated in the bill of entry. Mere non-mentioning of the words/Phrase E or Evolution would in no way constitute the suppression of a material fact more so, the details are available in the documents submitted along with the Bill of Entry. Thus, under the circumstances of the case and more particularly, the documentary evidences submitted by the appellant, there are no hesitation in holding that non-mentioning the code or word E or Evolution in the above documents is inconsequential and had no effect on the aspect of valuation of imported goods for the purpose of assessment of the correct duty liability. Thus, there is no question of any mis-declaration on the part of the appellants and that they have not connived with the overseas manufacturer in defrauding the legitimate dues of the government, as alleged by the learned adjudicating authority. Rejection the declared value and redetermination of the same - HELD THAT:- The learned adjudicating authority has observed that when the purchase order is of Azimut 68, then it has to be inferred that whatever price paid is not of higher version of Azimut 68 Evolution and that the same is for the lower version - These findings in the impugned order are factually incorrect inasmuch as the purchase order had described the specification of the engine of imported yacht as 2xMAN 1360mHP , which admittedly relates to the higher version, imported by the appellant on payment of the actual price, attributable to such category of goods. The provisions for valuation of import of goods are contained in sub-section (1) of Section 14 of the Customs Act, 1962. The said statutory provisions mandate that the price actually paid or payable for the goods, when sold for export to India for delivery at the time and place of importation, should be considered as transaction value for the purpose of levy of duties of Customs - The explanation clause (1) appended to Rule 12 ibid suggests that this rule by itself does not provide a method for determination of value, it provides a mechanism and procedure for rejection of declared value in cases where there is reasonable doubt that the declared value does not represent the transaction value; and that where the declared value is rejected, then the value shall be determined by proceeding subsequently in accordance with rules 4 to 9 ibid. On scrutiny of the impugned order, it is found that the learned adjudicating authority has rejected the declared value solely based upon the singular fact that the negotiations with the overseas manufacturer with regard to the final price of goods were verbal. It is opined that such facts can never be a reason for rejection of the declared value under Rule 12 ibid inasmuch as the appellant had given the name and details of the officer of the supplier, with whom the price negotiation took place. It is found from the case file that the appellant had submitted and relied upon various documents and statement recorded under summon to demonstrate that there is no under valuation of goods and the circumstances under which the negotiation took place, resulting in reduction of price of goods/ offer of discount etc. The issue of rejection of transaction value and re-determination of the same was the subject matter of litigation in many cases. The common ratio of various judgments has been that the transaction value cannot be rejected on the basis of assumption and unless there is enough evidence to prove that any consideration over and above the invoice price has been paid by the importer, the declared value has to be accepted for the purpose of Section 14 of the Customs Act, 1962 - Thus, in so far as the valuation of the yacht is concerned, Revenue has not made out any case of mis-declaration and consequential undervaluation of the same. Therefore, there are no merit in the re-determination of the value of the yacht and confirmation of differential duty thereon. To this extent, we find that the impugned order is not maintainable. As the charge of mis-declaration and undervaluation of the yacht falls flat, confiscation and penalties imposed also do not survive. Accordingly, the same are set aside. Importation of goods i.e. V-SAT connection with dish antenna - HELD THAT:- It is observed from the findings recorded in the impugned order that the appellant had not submitted any documentary evidences with regard to the purchase of the said goods and accordingly, the determination of the value of such goods under Rule 9 ibid is justified and thus, cannot be interfered with at this juncture. Therefore, the differential duty along with interest in the impugned order on the said goods is proper and justified and are liable for confiscation under Section 111 (l) ibid. It is also noticed that though the impugned order has imposed redemption fine on both the category of improperly imported goods, but imposed the fine combined, without bifurcating the same product-wise. Since, the assessable value determined in the impugned order was to the tune of Rs.14,78,128/-, the imposition of redemption fine on such value should be confined to 10% of such value. Accordingly, it is ordered that the appellant is liable to pay redemption fine of Rs.1,47,812/- in respect of V-SAT connection with dish antenna imported by them. However, the appellant is not exposed to the penal consequences provided under Section 114A ibid, especially for the reason that non-levy or short-levy of duty was not due to the reason of willful mis-statement or suppression of facts etc. Personal penalty imposed on the other appellants in respect of the goods V-SAT connection with dish antenna - HELD THAT:- This penalty cannot also be sustained inasmuch as the impugned order has not specifically dealt with the issue regarding involvement of those persons (the other appellants herein) in importation of such goods. The impugned order is upheld to the extent of demand of duty on the V-sat antenna and redemption fine - all other demands confirmed and penalties imposed are however, set aside, along with consequential relief - Appeal allowed in part.

  ---

• Corporate Laws

• 2022 (7) TMI 151
  Oppression and Mismanagement - Seeking temporary injunction restraining the Defendant Nos. 1 and 2, their servants/agents or any other person directly or indirectly acting for or on behalf of Defendant Nos. 1 and 2 from taking any steps which would defeat the Applicants rights under the agreement - whether the Minutes of Discussion is in fact a family settlement agreement which is valid and subsisting? - HELD THAT:- The present Suit seeking specific performance of the Minutes of Discussion was filed subsequent to the Company Petition having been filed by the Defendants before the NCLT under Section 241, 242 and 244 of the Companies Act, 2013 which sought to restrain the alleged oppressive acts of the Plaintiffs against Defendant Nos. 1 and 2. The said Company Petition is at the stage of hearing and final disposal subsequent to the orders passed by the NCLT as well as by the NCLAT and the Supreme Court. However, a determination of the issue as to the Minutes of Discussion being a family settlement is an issue which arises before this Court having jurisdiction and for considering whether interim relief is to be granted in the Interim Application such a prima facie determination would be necessary. It is to be noted that the Minutes of Discussion has admittedly been executed by the Plaintiffs and the Defendant Nos. 1 and 2. It had been executed after rounds of negotiations spanning a few years and the Minutes of Discussion was arrived at in order to settle the disputes between what is described in the Minutes of Discussion as disputes between three families, namely the Gujarat family, Maharashtra family and Andhra Pradesh/Telangana family - It would be necessary to advert to the concluding paragraph in the Minutes of Discussion which comes after Clauses 1 to 9 thereof have been executed by the Plaintiffs and Defendant Nos. 1 and 2. The concluding paragraph which has been further executed by these parties has been differently interpreted by Mr. Virag Tulzapurkar and Mr. Ravi Kadam in their oral arguments on behalf of the Plaintiffs and Defendant Nos. 1 and 2 respectively. The Minutes of Discussion cannot be contemplated to be a mere compromise of the proceedings before the NCLAT. The Minutes of Discussion is a contract in the nature of a family settlement and it is clear from the Minutes of Discussion that the Defendant No. 3 Company is considered to be a family run company, as the three divisions described as families, namely Gujarat Division, the Maharashtra Division, Andhra Pradesh/Telangana Division had run the Defendant No. 3 Company, as a family venture. It is clear from the Minutes of Discussion that the settlement arrived was among these three families/divisions. The Minutes of Discussion also records that the mechanics of the family settlement agreed to between the participants are provided for in the Minutes of Discussion. Thus, the Minutes of Discussion cannot be contemplated merely as a compromise of the NCLT proceedings and in fact, categorically records a settlement amount payable to the Gujarat family. The disputes in the Minutes of Discussion which have been settled are the only disputes among the three families. The submission of Mr. Ravi Kadam that this is not in the nature of family settlement deciding all disputes between the family, cannot be accepted. The Minutes of Discussion inspite of its nomenclature, is a full and final family settlement among the three families of the pending issues. Delay in filing of the Suit and seeking interim relief - HELD THAT:- The delay by itself is no ground to deny the relief. In the facts of the present case, no prejudice has been caused to Defendant Nos. 1 and 2 by such alleged delay. There has been no attempt made by the Defendants to show any prejudice caused to them on account of the delay in filing of the present Suit and seeking interim relief - there has been no right which has accrued to the Defendants by reason of alleged delay in filing the captioned Suit and seeking interim relief. Considering that the Minutes of Discussion which amounts to a family settlement was being implemented in its true spirit and intent as well as the fact that it was in September 2020 that the Defendant Nos. 1 and 2 in correspondence chose not to execute the formal family settlement agreement and scheme of arrangement (demerger) as borne out from the correspondence, the Plaintiffs had no choice but to take steps in filing the present Suit on 25th January 2021 seeking specific performance of the Minutes of Discussion - no case has been made out on behalf of the Defendants that the alleged delay in filing the present Suit and seeking interim relief would disentitle the Plaintiffs from being granted the interim relief sought. The Minutes of Discussion is a family settlement and requires to be specifically performed, the relief sought for by the Applicants/Plaintiffs to restrain the Defendant Nos. 1 and 2 from taking any steps which would defeat the Applicants rights under the Minutes of Discussion and/or relief prayed for in the captioned Suit are required to be granted. This, particularly considering the fact that the Defendants are acting contrary to the Minutes of Discussion by seeking relief of buyout and sellout on fresh valuation of shares and other assets before the NCLT. Defendant Nos. 1 and 2, their servants/agents or any other person directly or indirectly acting for or on behalf of Defendant Nos. 1 and 2 are restrained by temporary injunction from acting in any manner contrary to the Minutes of Discussion and/or defeating the Applicants rights under the Minutes of Discussion and/or the reliefs prayed for in the captioned Suit - Application disposed off.

  ---

• 2022 (7) TMI 150
  Territorial Jurisdiction - Members of tribunal recused themselves to take up the matter - it was held by Acting president and Technical member that these matters have to be posted before any other Bench at Delhi but most of the Judicial Members at Delhi are not inclined to take up these matters. For want of time, we have no other option but to post the same before Chandigarh Bench, which is relatively nearer to the petitioner in the matter - HELD THAT:- When both the Members have recused to take up these matters, both the Company Petitions ought to have been placed before the Hon ble Acting President/ President on administrative side for posting the CPs before the appropriate Bench. When members have recused themselves from dealing with the matters, they ought to have directed only for placing the matter before the Acting President or President for passing appropriate order for assignment or transfer. After recusing themselves from the matter, the order for transferring the matters to the Chandigarh Bench ought not to have been passed - A question may be asked as to when Acting President who was Member of the Bench has recused himself in the above two Company Petitions, whether on the administrative side the Acting President can pass an order exercising its jurisdiction under Rule 16(d). The power given to the President under Rule 16 is statutory power which as rule of necessity has to be exercised by the President, even though on judicial side the President/ Acting President has recused himself. Further the Acting President who has recused in order dated 02.09.2021 is not the President as on date. The matter remitted to the Hon ble President of the NCLT to pass appropriate orders in exercise of its jurisdiction under Rule 16(d) of the NCLT Rules, 2016 for hearing - appeal allowed in part.

  ---

• Insolvency & Bankruptcy

• 2022 (7) TMI 149
  Financial Creditors seeking to realise an amount more than offered by the Appellant either in the insolvency resolution process by Resolution Plan or a liquidation process - Section 12A of IBC - HELD THAT:- The primary object of the IBC is to revive the Corporate Debtor and to ensure that it starts running. The Hon ble Supreme Court has observed that the settlements have to be encouraged because the ultimate purpose of the IBC is to facilitate the continuance and rehabilitation of a Corporate Debtor - The law has been clearly laid down by the Hon ble Supreme Court that although settlement has to be encouraged in the IBC but no direction can be issued to the Financial Creditor to positively grant the benefit of OTS to a borrower. The debt and default having been found by the Adjudicating Authority by admitting Application which debt and default having not been questioned before us, there are no error in the order of the Adjudicating Authority admitting Section 7 Application. The statutory scheme under the IBC delineated under Section 12A of the Code as well as Regulation 30 A of the CIRP Regulations, 2016 which has been brought in the statute w.e.f. 06.06.2018 is a clear recognition of provisions and procedures for settlement in the IBC proceedings. In the facts of the present case and sequence of the events which is noticed above, thus one more opportunity be given to the Appellant to submit an Application under Section 12A to the IRP/ RP for being placed before the CoC which is in place in view of our order dated 15.03.2022 vacating the interim order on constitution of the CoC. Since the offer of Rs. 81 Crores of the Appellant is not accepted by the Bank, the Application may be filed by the Appellant only if it makes an offer under Section 12A Application for an amount of more than Rs.81 Crores. The CoC under the IBC has been given full freedom to grant an approval of 90% voting share to a proposal under Section 12A only thereafter Application can be filed before the Adjudicating Authority. The freedom of decision of the CoC is unfettered. However, in the facts of the present case, the CoC while taking a decision for accepting or rejecting of proposal under Section 12A may also take following factors into consideration:- (i) The Bank had issued a proposal for sale of NPA of the Corporate Debtor to the Asset Reconstruction Companies (ARC s)/ Non-Banking Financial Companies (NBFC s)/ Financial Institution (FI s) for an amount of Rs.81 Crores. (ii) Whether the Financial Creditor looking to the assets of the Corporate Debtor shall be able to realise an amount more than offered by the Appellant either in the insolvency resolution process by Resolution Plan or a liquidation process. (iii) The maximisation of the assets of the Corporate Debtor is one of the objectives, equally important is the recovery of the financial dues of the Bank and we have no doubt that CoC while taking a decision shall take decision under which it shall be able to realise its dues to the maximum. (iv) The CoC having been constituted after our order dated 15.03.2022 may also proceed to issue Form-G and receive the Resolution Plans. However, till the decision on proposal under Section 12A is not taken, CoC shall not proceed to take a vote on any of the Resolution Plans. Appeal disposed off.

  ---

• 2022 (7) TMI 148
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - share application money - nature of transaction - Financial Debt or advance amount - contingent contract or not - enforceable by law or not - amount paid to Financial Creditor was towards Deal Fee payable to Appellant as per Agreement or not. Whether amount of Rs.3.5 crore disbursed by the Financial Creditor to the Corporate Debtor between 02.12.2016 to 15.12.2016 is a financial debt within the meaning of Section 5(8) of the I B Code or the amount was advanced towards 50% equity share in M/s SPT the US Company? - HELD THAT:- Section 5(8) Sub-clause (f) covers any amount raised under any other transaction having the commercial effect of a borrowing. There cannot be any denial to the commercial effect of the transaction since it is on the record that the amount which was given by the Financial Creditor was credited in the IDBI Bank account of the Corporate Debtor from which the EMD for participation in the auction of M/s Sona BLW Precision Forge. Inc was paid. The case of the Appellant that the said amount of Rs.3.5 crore given by the Financial Creditor was purchase price of the 50% equity share in M/s SPT is not supported by the materials on the record. The amount of USD 1.5 Million was sent by the Financial Creditor to the M/s SPT directly on 23.12.2018 as share application money which amount can be said to be amount sent for equity shares which equity shares was never given to the Financial Creditor. Thus, the case of the Appellant that amount of Rs.3.5 crore be treated as investment only towards purchase of equity share is not supported from the record rather materials including acknowledgement of the Corporate Debtor clearly prove that the aforesaid amount comes within the definition of financial debt under Section 5(8)(f) of the I B Code - thus, the amount of Rs.3.5 crore is a financial debt and application filed under Section 7 was fully maintainable by the Financial Creditor. Whether the liability of the Corporate Debtor to return Rs.3.5 crore received from the Financial Creditor could have arisen only when the Corporate Debtor received the amount of USD 0.80 Million from the Investor Ajay Kumar Jain and the Agreement dated 14.07.2018 being a contingent contract in so far as payment of Rs.3.5 crores of Financial Creditor is not enforceable by virtue of Section 33 of the Contract Act? - HELD THAT:- The Financial Creditor being not part of the Agreement dated 14.07.2018, the submission that payment to the Financial Creditor was contingent contract is without any foundation. Agreement dated 14.07.2018 was agreement between third parties of which Financial Creditor was not part therefore the question of non-payment by Corporate Debtor to the Financial Creditor on the basis of such agreement does not arise, nor by Agreement dated 14.07.2018 the liability to pay debt of the Financial Creditor can be diluted. Any Agreement by the Corporate Debtor with third parties cannot dilute the debt due to Financial Creditor - there are no substance in this submission of the Appellant. Whether the amount of Rs.3.5 crore paid by the Financial Creditor to the Corporate Debtor was towards Deal Fee payable to Appellant as per Agreement dated 04.12.2016? - HELD THAT:- The Appellant referred to agreement dated 04.12.2016 to submit that said agreement refers to Deal Fee of USD 1 Million. In the Agreement dated 04.12.2016, Deal Fee was referred to fee of USD 1 Million which was included in the total project cost which was the total project cost for acquiring M/s Sona BLW Precision Forge. Inc. M/s Sona BLW Precision Forge. Inc. was under Bankruptcy Laws of USA. The said company was to be acquired by bidding. There is no indication in the Agreement that any Deal Fee is to be paid to the Appellant who claims to be technocrat by the Financial Creditor. Learned counsel for the Respondent, Mr. Ravi Chirania has rightly in his submission stated that this argument has been raised in this Appeal only and before the Adjudicating Authority never such plea was raised nor any submission made regarding this. The Reply filed by the Corporate Debtor before the Adjudicating Authority clearly indicates that the submission regarding Deal Fee payable to the Appellant was never taken. In the entire detailed Reply filed by the Corporate Debtor which runs into 41 pages at no place even indication have been given that any Deal Fee was to be paid to the Appellant by the Financial Creditor. The Adjudicating Authority did not commit any error in admitting the Application under Section 7 - Appeal dismissed.

  ---

• 2022 (7) TMI 147
  Maintainability of application - initiation of CIRP - NCLT rejected the application for non-appearance - Corporate Debtor failed to make repayment of its dues - Operational Creditors - service of valid demand notice - stand of the Appellant is that the Adjudicating Authority had failed to consider that the Appellant was prevented by sufficient cause namely Technical Issue / Connectivity Issue at the time of calling the matter in virtual hearing - violation of principles of natural justice - scope of the term sufficient cause - HELD THAT:- It comes to be known that on 18.02.2021, the Applicant/Appellant because of his failure to appear before the Adjudicating Authority, the case was dismissed for Non-Prosecution. On 07.04.2021, the Restoration Application was filed and that the case was posted for hearing on 21.04.2021, where a Counsel of the Applicant/Appellant appeared and failed to address any argument. But the Respondent made the argument that the Application filed was defective on various grounds and time was granted to the Respondent to file counter. It is significant for this Appellate Tribunal to point out that the Restoration Application is completely mentioned the reason as to why the adjournment was requested on 24.09.2021 and what for, the proceedings before the Adjudicating Authority were not conducted by the Appellant/Applicant on earlier hearings. The Respondent projects a plea that the total claim of the Appellant/Applicant is less than Rs.1 Crore, threshold limit and the I B Code, 2016, is utilised as a Money Recovery Fora, by the Applicant/Appellant which is impermissible in law - It is to be pointed out that the plea of Restoration/Condonation of Delay is not a matter of right. The term Sufficient Cause is a circumstance to be taken into account in exercising discretion by a Tribunal/Court of Law. No wonder, the Tribunal cannot determine the aspect of Sufficiency of Cause dehors the facts pleaded and made out by a Party. Where Bonafides are absent, there can be no Sufficient Cause for allowing the Restoration Application by the Tribunal. In Law, Sufficient Cause is not different from Good Cause. A Party who is not vigilant may not get a second opportunity. Mere absence of the Learned Counsel or a Pleader or that he is engaged elsewhere or he was engaged or in another Court is not a good reason for Restoration. Indeed, acceptability of an Explanation is the criteria for allowing a Restoration Application projected by a Party. If there is inaction, want of Bonafide, which is imputable to the Applicant/Appellant, then the Restoration Application is not to be allowed by a Tribunal or by a Court of Law. Of course, the Tribunal is to decide the Restoration Application on merits. It must be remembered that time is precious and a wasted time will never come back again or revisit in the considered opinion of this Tribunal. - In the instant case, on behalf of the Applicant/Appellant, a Demand Notice dated 02.04.2019 was addressed to the Respondent demanding a sum of Rs.13,49,016/-, being the sum which was the defaulted one. Furthermore, the Debt was stated to be pending from the Financial Year 2011-2012 and it is continuing one, according to the Applicant/Appellant. This Tribunal, on the basis of the facts and circumstances of the present case is not inclined to take a liberal approach in allowing the application on the file of the Adjudicating Authority (National Company Law Tribunal, Chennai Bench) by extending its Judicial Arm of Generosity, when Bonafides are very much conspicuously absent. Appeal dismissed.

  ---

• 2022 (7) TMI 146
  Maintainability of application - initiation of CIRP - time limitation - recovery of dues from the Corporate Debtor - Central Government has taken over the management or the control of the Demdima Tea Estates and six other tea gardens - separate juristic entity of Corporate Debtor - seeking exclusion of the period of 536 days in computation of the period of limitation under the Limitation Act, 1963, for the purpose of filing of the petition - whether taking over management of the said Tea Gardens has created an embargo in filing of appropriate insolvency proceeding under the Insolvency and Bankruptcy Code, 2016? HELD THAT:- The Operational Creditor has based the instant interlocutory application on the Notification dated 28 January 2016 vide S.O.No.260(E) issued by Additional Secretary, Ministry of Commerce and Industries, Department of Commerce, New Delhi, whereby the Central Government has taken over the management or the control of the Demdima Tea Estates and six other tea gardens, in exercise of their powers conferred by sub-section (1) of the Section 16(E) of the Tea Act 1953 (29 of 1953) and under provisions of the Chapter-IIIA of the Tea Act 1953 (29 of 1953) - The Operational Creditor has claimed that pursuant to the provisions of Chapter IIIA of the Tea Act 1953, no proceedings for winding up or for the appointment of receiver is maintainable. As such the Operational Creditor could not take any steps or file any suit or application for winding up or under Section 9 of the Insolvency and Bankruptcy Code, 2016 before the appropriate forum and the recovery of the said outstanding dues was stalled. Section 16M of the Tea Act, 1953 which provides that no suit or other legal proceedings shall be instituted or continued against a tea undertaking or tea unit in respect of which an order has been made under Sections 16D or 16E, except with the previous permission of the Central Government or of any officer authorised by the Government in this purpose - under section 16G of the Tea Act, 1953, where management or a tea undertaking or tea unit owned by a company is taken over by any person or body of persons authorised by the Central Government under the said Act, then, notwithstanding anything contained in the said Act or in the memorandum or articles of such company, no proceedings for winding up of such company or for the appointment of Receiver in respect thereof shall lie in any Court except with the consent of the Central Government. The Operational Creditor could have filed a suit against the Corporate Debtor upon taking prior consent of the Central Government. While the notification dated 28th January 2016 places the tea estate owned by the Corporate Debtor under the control and management of the Tea Board authorized by the Central Government, the same cannot be said about the Corporate Debtor itself. The Corporate Debtor was very much under the control of its directors. As such, the Operational Creditor had ample opportunity to proceed against the Corporate Debtor for recovery of its dues or under section 9 of the Insolvency and Bankruptcy Code, 2016. This Adjudicating Authority is not satisfied that the Operational Creditor had sufficient cause for not preferring CP(IB) No. 2185/KB/2019 within the prescribed limitation period - Petition dismissed.

  ---

• 2022 (7) TMI 145
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditor - existence of debt and dispute or not - time limitation - HELD THAT:- On perusal of the documents of the Operational Creditor, it is clear from the electronic mails dated 2nd November, 2016 and 24th November, 2016 and from the minute of the meeting dated 16th November, 2016 held between the Operational Creditor and Corporate Debtor that the Corporate Debtor has admitted/acknowledged its liability and it is clear that there are unequivocal admissions of amounts due and payable by it to the Operational Creditor. Thus, by virtue of the unconditional withdrawal of the suit by the Corporate Debtor, there cannot be any justification to refuse to pay the admitted amount to the operational creditor. The Corporate Debtor has failed to make payment of the confirmed and undisputed outstanding dues/debt of Rs.35,74,679/- only to the Operational Creditor and as evident from the facts and circumstances, the Corporate Debtor is not in a position to clear its legal debt and committed default. The claim is not in any way barred by limitation as will appear, inter alia, from the invoices and repeated acknowledgements of liability by the Corporate Debtor, which is undisputed - the Operational Creditor has a valid claim against the Corporate Debtor, which the Corporate Debtor has failed to discharge, by committing default which is proved on record. The Corporate Debtor has failed to prove any pre-existing dispute or any payment having been made to the Operational Creditor, within 10 days of receipt of the Statutory Notice under Section 8 of the Code. The application filed by the Operational Creditor under Section 9 of the Insolvency Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, is hereby admitted - Moratorium declared.

  ---

• 2022 (7) TMI 144
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Personal Guarantors to Corporate Debtor - accounts classified as NPA - existence of debt and dispute or not - HELD THAT:- The personal guarantor, viz., Mr. Shankar Lall Ajitsaria, had executed personal guarantee in favour of the Applicant to secure the repayment of the principal amount of the Credit Facilities together with all interest, additional interest, liquidated damages, premium on repayments, reimbursement of all costs, charges and expenses and all other obligations payable by PFAPL in respect of the Facility Agreements. The Applicant has issued a Demand Notice in Form B on 19/10/2020 under Rule 7(1) of the IB Rules, 2019 demanding Rs.62,59,94,939.27 along with unapplied interest, other charges and costs till repayment in full. In this factual conspectus, the applicant prays for initiation of insolvency resolution process, against the respondent/personal guarantor - It is made known to everyone that on filing this Application by the Applicant/Creditor the interim-moratorium commences in terms of section 96(1)(a) of IBC, 2016. Petition admitted - moratorium declared.

  ---

• 2022 (7) TMI 143
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Personal Guarantors to Corporate Debtors - Jurisdiction to entertain insolvency matters of partnership firms and individuals - existence of debt and dispute or not - HELD THAT:- The provisions relating to the insolvency and bankruptcy process of personal guarantors to CDs came into force on 1st December 2019 vide a Central Government notification. Section 179, subject to provisions of section 60, vests the jurisdiction in Debt Recovery Tribunals (DRTs) to entertain insolvency matters of partnership firms and individuals. Section 60 of the Code clearly states that in relation to insolvency resolution and liquidation of corporate persons, including personal guarantors to CDs, NCLT shall be the Adjudicating Authority ( AA). Therefore, when provisions of Section 60 are attracted, section 179 is rendered inapplicable. From the report submitted by the Resolution Professional, there does not appear any request of the RP for issuance of the instructions for the purpose of conducting negotiations between the debtor and creditor for arriving at the repayment plan. Therefore, based on the reasons recorded in the report submitted by the Resolution Professional, the petitions, filed under the provisions of Section 95 of IBC, 2016 is hereby ADMITTED under Section 100 of the IBC, 2016. Petition admitted - moratorium declared.

  ---

• 2022 (7) TMI 142
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Personal Guarantors to Corporate Debtor - no counter claim filed by respondents despite opportunity provided - Section 94 of Insolvency of Bankruptcy Code, 2016 read with Rule 6(1) of the Insolvency Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtor) Rules, 2019 - HELD THAT:- The Resolution Professional recommended to accept the application filed under Section 94 of the IBC, 2016 for initiation of Insolvency Resolution Process in respect of Avasarala Venkateswara Rao, Personal Guarantor to the Corporate Debtor - Despite of opportunity counter not filed by the respondents. Thus the contentions as made in the application remain unrebutted. The report of the Resolution Professional also has been neither questioned nor complied with. In this backdrop, on careful perusal of record, it is found that the petition filed by the personal guarantor for initiation of Insolvency resolution process against her, prima facie, not collusive. There are no reasons to dismiss the Petition. The Petitioner/Debtor herein has proposed the name of Shri Ramachander Rao Bikumalla, Insolvency Professional to act as Resolution Professional, who has given his consent in Form-A - petition admitted - moratorium declared.

  ---

• PMLA

• 2022 (7) TMI 141
  Seeking a writ of mandamus directing the Directorate of Enforcement to withdraw the Look Out Circular (LOC) issued against the petitioner - case against against the petitioner s grandfather, late father and late uncle on the allegations of commission of offences under the IPC and Prevention of Corruption Act, 1988 - it is claimed that petitioner was a minor being 8 to 14 years old and was not involved in the family business - Petitioner s involvement in the offence or not - Doctrine of Colourable Legislation - HELD THAT:- From clause (h) of para 8 of the O.M. dated 27th October, 2010, it is evident that unless a citizen is suspected to be involved in the commission or facing investigation or trial on the accusation of offences which are cognizable under the Indian Penal Code or other Statutes, the citizen can neither be detained, arrested or prevented from leaving the country and the originating agency can only seek intimation of his arrival and/or departure. Further in LOC of intimation the authorities at the airport/ or any other port of departure or arrival cannot restrain or detain the person on the pretext that intimation of his arrival or departure is required to be given to the originating agency which would indirectly serve as a detentive/ preventive LOC. It is well settled that what cannot be done directly, cannot be done indirectly. In the present case the petitioner was not an accused either in the predicate offence nor the 2 ECIRs as he was admittedly a minor at the time of commission of the transactions purportedly resulting in the alleged offences under IPC, PC Act or even under PMLA. Thus, a preventive/ detentive LOC leading to the detention of the petitioner was clearly unwarranted. It is only when the petitioner filed the present writ petition that this preventive/ detentive LOC was converted into an intimative LOC. Since the respondent no.1 has already taken remedial action, no further directions are required to be passed in this petition. Needless to note that in the garb of LOC of intimation, the petitioner will not be detained or prevented at the airport or any other port on the pretext that first intimation has to be given to the originating agency. The writ petition and application are disposed off with the hope and expectations that respondents will abide by the terms as laid down in the O.M. dated 27th October, 2010 issued by the respondent No.2.

  ---

• Central Excise

• 2022 (7) TMI 140
  Maintainability of application of substitution of legal heirs - HELD THAT:- The prayer for substitution made by the revenue to substitute the legal heirs made by the revenue in GA/5/2022 to substitute the legal heirs of the deceased second respondent is not maintainable. The fact is clear that in the instant case the adjudication process was over and an order in original was passed by the Commissioner of Central Excise, CGST Central Excise, Howrah Commissionerate on 28th October, 2017. The assessee, namely, the company and the deceased second respondent filed an appeal before the Tribunal which was allowed by the impugned order. The revenue now seeks to challenge the order passed by the tribunal. Thus, the appeal being the continuation of the proceedings, the law as interpreted by the Hon ble Supreme Court in SHABINA ABRAHAM AND OTHERS VERSUS COLLECTOR OF CENTRAL EXCISE CUSTOMS [ 2015 (7) TMI 1036 - SUPREME COURT] would squarely apply to the instant case on hand - the decision of the Hon ble Supreme Court in the case of Shabina Abraham squarely applies to the facts of this case as observed hereinbefore and the same is binding upon this Court. Application disposed off.

  ---

• 2022 (7) TMI 139
  Extended period of Limitation - Levy of National Calamity Contingent Duty (NCCD) - POY falling under Chapter 5402 - demand on the ground that Notification No. 67/95-CE dated 16.03.1995 does not exempt from payment of NCCD - demand alongwith Interest and penalty - HELD THAT:- The case can be decided on the ground of limitation itself. The issue involved is of levy of NCCD in respect of Partially Oriented Yarn falling under Chapter 5402 consumed captively for the manufacture of Polyester Texturised Yarn. On the said issue, there are number of judgments as cited by the appellant and some of the judgments are in favour of the appellant. The issue involved is a neat question of law which involved interpretation of exemption provided in respect of NCCD. It is also a fact on record that appellant have declared their manufacturing process to the department and they were filing ER-1 returns regularly. Since the activity of entire manufacturing i.e. right from the polyester chips stage to the final stage i.e. Polyester Texturised Yarn including the manufacture of intermediate goods on job work basis were in the knowledge of the department, it cannot be said that there is any suppression of fact on the part of the appellant. In respect of the entire demand which is for the period from 01.07.2003 to 31.07.2004, the show cause notice was issued on 31.07.2008. The entire period is beyond one year, hence the demand under proviso to Section 11AC is not sustainable. The demand is hit by limitation hence the impugned order is set-aside - the appeal is allowed only on limitation without going into merits of the case.

  ---

• 2022 (7) TMI 138
  Valuation - Recovery of transportation/ freight from their buyers and mentioning the same separately on the correspondence invoices/ bills - requirement of inclusion of said freight collected from the buyer in the assessable value of the goods for the purpose of payment of duty, or not - Place of removal - sub section (1) of Section 4 of Central Excise Act, 1944 - demand of Interest and penalty - HELD THAT:- While the show cause notice alleged that the amount of freight recovered in the invoices is additional consideration, the Commissioner in the impugned order has held that when the freight is collected in invoices for delivery upto the buyer s premises, the buyer s premises become the place of removal . It is seen that the above decision of Hon ble Apex Court covers all the aspects of this issue, in the cases of COMMISSIONER, CUSTOMS AND CENTRAL EXCISE, AURANGABAD VERSUS M/S ROOFIT INDUSTRIES LTD. [ 2015 (4) TMI 857 - SUPREME COURT] and COMMISSIONER CENTRAL EXCISE, MUMBAI-III VERSUS M/S. EMCO LTD. [ 2015 (8) TMI 200 - SUPREME COURT] holds that the buyer s premises cannot, in law, be a place of removal under Section 4. In this matrix of facts, the decision of Commissioner holding buyer s premises as place of removal cannot be upheld. The impugned order upholding the demand of duty is therefore set aside. Demand of Interest and penalty - HELD THAT:- Since the demand of duty is set aside, the demand of interest as well as penalty cannot be sustained. Appeal allowed - decided in favor of appellant.

  ---

• CST, VAT & Sales Tax

• 2022 (7) TMI 137
  Validity of assessment order - Reversal of Input Tax Credit - Validity of Section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006 - HELD THAT:- The assessment proceeds to reverse the petitioner s claim for Input Tax Credit (ITC) in terms of Section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006 and has not taken note of the decision of the Division Bench of this Court in the case of THE STATE OF TAMIL NADU REPRESENTED BY ITS SECRETARY COMMERCIAL TAXES DEPARTMENT, THE DEPUTY COMMISSIONER (CT) (FAC) VERSUS M/S. EVEREST INDUSTRIES LIMITED [ 2022 (4) TMI 1204 - MADRAS HIGH COURT ] has held that The position as regards section19(2)(ii) and the proviso inserted vide Act 28 of 2013 and its subsequent omission vide Amendment Act 5 of 2015 and the claim of refund, shall be examined. In light of the categoric findings and conclusion of the Division Bench of this Court to the effect that the amendment to Section 19(2)(v) is curative and declaratory, the petitioner is entitled to the relief as sought and the impugned assessment order is set aside - petition allowed.

  ---

• Indian Laws

• 2022 (7) TMI 136
  Dishonor of Cheque - ageing and writing on the cheque - application of the petitioner wherein he had made a prayer for sending the cheque to F.S.L. for opinion of the Hand-writing Expert and forensic science opinion, rejected - grievance is that the disputed cheque was a blank cheque issued in 2011 and has been misused in 2018 - HELD THAT:- As per the accused, the complainant is not the holder in due course. The cheque was fabricated in the year 2018 and it was not against any legal debts or liabilities. It was also urged that the complainant had no source of income to lend Rs.10 Lacs and thus, there was no enforceable debt. The accused had also filed a complainant under sections 406, 420, 506(2) and 114 of IPC and thereafter, the Chapter Case under Section 107 of Cr.P.C. was filed against the complainant and witness Amratbhai Gopalbhai Patel. It is alleged by the petitioner accused that Amratbhai Gopalbhai Patel, who was his partner, has given the said cheque in the year 2011 for 2-3 days as the complainant insisted for a blank cheque. It was informed to the petitioner accused that the complainant had torn off the cheque and therefore, the petitioner, on assurance so given, had not proceeded further but thereafter, according to him, the complainant and Amratbhai Gopalbhai Patel in collusion have misused the cheque and filed false complaint under section 138 of the N.I. Act. In the present case, the facts in the complaint suggest that the signed cheque was handed over but the facts in the complaint also suggests that he was informed that the complainant would receive the amount so mentioned in the cheque. While it is the case of the complainant that it was a cheque that was signed in blank while the facts suggest that the cheque amount was also noted in the cheque, which the complainant has disputed. It is his specific case that the cheque was given in the year 2011 while it was misused in 2018 - Since there was no direction to pay the amount so stated to be mentioned in the cheque, the applicant has disputed the age of ink utilized for the signature of the applicant on the cheque and prayed for comparison of the ink used for text on the body of the cheque, alleging that the endorsement was not in full on the instrument. Considering the facts and circumstances of the case and the principle laid down by the Apex Court inT. NAGAPPA VERSUS Y.R. MURALIDHAR [ 2008 (4) TMI 789 - SUPREME COURT] , the petitioner is required to be granted opportunity for adducing evidence keeping in mind the larger object of fair trial. Appeal allowed.

  ---