TMI Tax Updates - e-Newsletter
August 21, 2020

Case Laws in this Newsletter:

GST Income Tax Corporate Laws Securities / SEBI Insolvency & Bankruptcy Indian Laws

Articles

1. 194O: TDS on Payments by e-commerce operators to e-commerce participants

   By: Parag Agarwal

2. ADVANCE RULING MECHANISM UNDER GST LAWS

   By: DR.MARIAPPAN GOVINDARAJAN

3. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

News

1. Exchange Rates Notification No.80/2020-Customs (NT)

2. Guidance Note on Report Under Section 92E of The Income-Tax Act, 1961 (Transfer Pricing) (Revised 2020)

3. Minutes of the Monetary Policy Committee Meeting August 4 to 6, 2020

4. Our medical fraternity made the nation proud and shown to the world that India can be a trusted partner: Shri Piyush Goyal;

5. 1.22 crore Kisan Credit Cards sanctioned with credit limit of ₹ 1,02,065 crore under the special saturation drive

6. SEBI proposes to relax minimum public shareholding norms for firms under insolvency

7. Loans worth more than ₹ 1 Lakh crore disbursed under ECLGS

Notifications

Customs

1. 80/2020 - dated 20-8-2020 - Cus (NT)

Exchange Rates Notification No.80/2020-Custom (NT) dated 20.08.2020

GST - States

2. 51/2020 - State Tax - dated 6-7-2020 - Chhattisgarh SGST

Seeks to provide relief by lowering of interest rate for a prescribed time for tax periods from February, 2020 to July, 2020

3. 50/2020 - State Tax - dated 6-7-2020 - Chhattisgarh SGST

Chhattisgarh Goods and Services Tax (Seventh Amendment) Rules, 2020

4. 48/2020-State Tax - dated 6-7-2020 - Chhattisgarh SGST

Chhattisgarh Goods and Services Tax (Sixth Amendment) Rules, 2020

5. F3(23)/Fin(Rev-I)/2020-21/DS-IV/48 - dated 18-8-2020 - Delhi SGST

Seeks to prescribe the due date for furnishing FORM GSTR-1 for the quarters April, 2020 to June, 2020 and July, 2020 to September, 2020 for registered persons having aggregate turnover of up to 1.5 crore rupees in the preceding financial year or the current financial year

6. 842/XI-2-20-9(47)/17- U.P. Act-1-2017-Order-(137)-2020 - dated 7-8-2020 - Uttar Pradesh SGST

Amendment in Notification No. 662/XI-2-20-9(47)/17-U.P.Act-1-2017-Order-(126)-2020 Dated 01-07-2020.

Circulars / Instructions / Orders

Customs

1. 37/2020 - dated 19-8-2020

Extension of Deferred payment of Customs duty benefits to `Authorised Public Undertakings’

Highlights / Catch Notes

GST

• Court Grants Bail to Former Directors in GST Evasion Case Due to Lack of Substantial Evidence.

  Case-Laws - HC : Grant of Bail - evasion of GST - erstwhile directors of the company - They had already resigned legally from the Directorship of the Company. Merely on a bald statement of an employee of the Company, it cannot be held that the present applicants were in charge and responsible for the functions of the Company. - HC
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• SGST Act Section 161: Service of Assessment Order via Web Portal is Valid; Petitioner Must Adhere to Filing Deadlines.

  Case-Laws - HC : Non-service/delayed service of assessment order - The service of an order through the web portal is one of the methods of service statutorily prescribed under Section 161(1)(c) and (d) of the SGST Act. If that be so, then the petitioner cannot deny the fact of receipt of the order on 28.9.2019 for the purposes of filing the returns as contemplated under Section 62 of the SGST Act with a view to getting the assessment order withdrawn. - HC
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• Company Not Penalized for Failing to Pass GST Rate Cut to Customers Due to Lack of Penalty Rules at the Time.

  Case-Laws - NAPA : Profiteering - Nestle Munch Nuts 32 Gm. Chocolate and the Cadbury Dairy Milk Chocolate - allegation that the benefit of GST rate reduction to his customers not passed on - no penalty provisions were in existence between the period w.e.f. 16.11.2017 to 31.03.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively - NAPA
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Income Tax

• High Court Rules No Penalty u/s 271(1)(c) for Fully Disclosed, Yet Inadmissible, Tax Claim.

  Case-Laws - HC : Levy of penalty u/s 271(1)(c) - Assessee had declared the full facts and the sale agreement at the first instance; the full factual matrix or facts were before the AO while passing the asessment order - it is another matter that the claim based on such facts was found to be inadmissible. This is not the same thing as furnishing inaccurate particulars of income as contemplated under Section 271(1) (c) - HC
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• TPO's Failure to Use Prescribed Method u/s 92C(1) Leads to Deletion of Transfer Pricing Adjustments.

  Case-Laws - AT : TP Adjustment - ALP is determined by TPO by not applying any method at all or by choosing a method which is not prescribed u/s.92C(1) of the Act, then such a determination of ALP frustrates the transfer pricing addition and deleted the transfer pricing addition made thereon by holding the methods prescribed for determining the ALP are statutory prescription, it is absolutely essential for the TPO to compute the ALP by adhering strictly to one of such methods. Thus, adjustment made in Research and Development fees and Management fees without following prescribed method under law is deleted. - AT
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• Interest Deduction Allowed: Loans Against FDRs Result in Net Savings u/s 57(iii).

  Case-Laws - AT : Disallowance of deduction u/s 57(iii) - the interest paid on the loans raised against the FDR was having the direct nexus with the interest received from the FDRs and the assessee choose to save the penalty of 1.5% by raising the loans at 1% higher rate of interest than the interest rate on FDR thus there were saving of 0.5%. - set off allowed - AT
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Indian Laws

• Court Denies Bail to Accountant and Manager Accused of Service Tax Misappropriation and Forgery Due to Serious Offenses.

  Case-Laws - HC : Grant of Bail - Misappropriation / forgery of receipt of depositing the amount as service tax by the Accountant and Manager of the firm - Looking to the gravity of offence, this Court is not inclined to grant bail to the applicant at this stage - HC
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IBC

• Corporate Insolvency Process Begins Over Unpaid Dues; Dispute Must Exist Before Demand Notice Receipt.

  Case-Laws - AT : Initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of dispute - The existence of dispute must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice. - AT
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• Corporate Debtor's Insolvency Process Initiated; No Pre-Existing Dispute Found in Sky Forest Project Case.

  Case-Laws - AT : Initiation of CIRP - Corporate Debtor failed to make repayment of its debt - pre-existing dispute or not - each P.O./W.O. Constitutes separate contract having separate terms and conditions and independent dispute resolution clause, therefore for the alleged deficiency of service relating to the Sky Forest Project, the outstanding payment relating to other invoices could not be stopped and the finding of the Adjudicating Authority that there was pre-existing dispute is erroneous - AT
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• COC Can Replace Interim Resolution Professional in Later Meetings Without Giving Reasons, Per IBC Section 22(2).

  Case-Laws - AT : Replacement of IRP - Appointment of Resolution Professional - the COC has the requisite powers to propose change of the Interim Resolution Professional even in meeting/s subsequent to the first meeting mentioned in Section 22(2) of IBC. There is no requirement that they should give particular reasons for the change. - AT
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SEBI

• Court Affirms Credit Ratings as Expert Opinions; Will Not Interfere Unless Found Unreasonable or Made in Bad Faith.

  Case-Laws - HC : Credit Rating Rationales - factors required to be considered by ICRA while deciding the rating - As opinion of ICRA is rendered after taking into account all positive or negative factors and that it is an opinion rendered by experts in the field, this Court will not, unless the said opinion is perverse, arbitrary and mala fide, interfere in the same as a mathematical calculation of a credit rating is not possible - if the opinion is intelligible, convincing, and based on reasoning, no decree declaring the said opinion as null and void, unenforceable and ineffective cannot be passed as is prayed by the plaintiff - HC
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Case Laws:

• GST

• 2020 (8) TMI 449
  Classification of goods - portions of cooked chicken, mutton, fish, eggs etc - whether classifiable under HSN 1601 as they contain more than 20% by weight of meat? - challenge to AAR decision - HELD THAT:- The moot question is thus whether the products for which classification has been sought contain more than 20% by weight of chicken meat or fish or eggs are claimed by the appellant, and if so whether they fall under chapter 16 - The WBAAR ought to have considered this point when admitting the products for classification. Food preparations containing more than 20% by weight of sausage meat, meat offal, fish etc. are included in chapter 16 (Chapter Note 2 to Chapter 16). According to chapter Note 2 to Chapter 16 and Explanatory Note to Chapter 16 the weight of meat ought to be considered at the stage when it is presented to the customer as foodstuff and not at the ingredients level before preparation of the food. It is clear from the test reports submitted during the course of hearing that the tests were conducted on the final marketable products and in each of the twenty eight products the quantity of chicken meat or fish or eggs is found to be more than 20% be weight. No arguments were put forward by the Respondents in contrary to the test reports - Further food preparation containing more than 20 % by weight of sausage meat, meat offal, fish etc. are included in Chapter 16 and the weight of meat ought to be considered at the stage when it is presented to the customer as foodstuff and not at the ingredient level before preparation of the food. The test reports clearly certifies that the final products except products of Sl.No. 7 and 26 to 28 contain more than 20% by weight of chicken and they are marketed as non-vegetarian confectionary or chicken based confectionary. Chicken cutlet cease to be a cutlet if chicken is removed and thus is clearly a meat based products. Thus it can be included that the chicken based products are classifiable under HSN 1601 and not under the residual entry of 2106. The products with main components of filling of chicken except products of Sl.No. 7 and 26 to 28 are classifiable under HSN 1601 - the decision of AAR modified.

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• 2020 (8) TMI 448
  Grant of Bail - evasion of GST - erstwhile directors of the company - evasion of on account of production and sale of sanitizers - It is argued that the instant arrest proceedings are completely premature, as till date the assessment proceedings have not commenced and, therefore, there is no concretized liability that the GST Department can fasten on the SDPL - Sub-section (7) of Section 107 of the CGST Act - HELD THAT:- We have gone through the record in order to ascertain the existence of reasons to believe for the proceedings being initiated against the applicants. We do not perceive any material, except the statement of the employee. There is no documentary material produced on record to show that the present applicants were legally in charge and responsible for the day-to-day working of the Company. They had already resigned legally from the Directorship of the Company. Merely on a bald statement of an employee of the Company, it cannot be held that the present applicants were in charge and responsible for the functions of the Company. It is directed that the applicants be released from custody on their furnishing a personal bond in the sum of Rs.5,00,000/- each, with separate sureties of the like sum to the satisfaction of the trial Court, for their appearance before it, as and when required, further subject to the conditions imposed.

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• 2020 (8) TMI 447
  Non-service/delayed service of assessment order - While the assessment orders are dated 20.8.2019, it is the case of the petitioner that these orders were not served on him till much later and within 30 days after the from the date of receipt of the orders, he filed the returns as permitted under Section 62 of the SGST Act - HELD THAT:- The service of an order through the web portal is one of the methods of service statutorily prescribed under Section 161(1)(c) and (d) of the SGST Act. If that be so, then the petitioner cannot deny the fact of receipt of the order on 28.9.2019 for the purposes of filing the returns as contemplated under Section 62 of the SGST Act with a view to getting the assessment order withdrawn. In as much as the return filed by the petitioner for the period April and May 2019 was only on 30.10.2019,ie., 71 days after the date of service of the assessment order through the web portal (20.8.2019), the petitioner cannot aspire to get the benefit of withdrawal o f the assessment orders contemplated under Section 62 of the SGST Act. The assessment orders would therefore have to be held valid and the remedy of the petitioner against the said assessment order can only be through an appeal before the appellate authority under the Act. It is directed that the recovery steps for recovery of amounts confirmed against the petitioner by Exts.P1 and P2 assessment orders and Exts. P8 and P9 demand notices shall be kept in abeyance for a period of one month so as to enable the petitioner to move the appellate authority in the meanwhile and obtain orders of stay in the stay application filed along with the appeal - petition disposed off.

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• 2020 (8) TMI 446
  Profiteering - Nestle Munch Nuts 32 Gm. Chocolate and the Cadbury Dairy Milk Chocolate - allegation that the benefit of GST rate reduction to his customers not passed on by way of commensurate reduction in price - contravention of provisions of Section 171 (1) of the CGST Act, 2017 - penalty - HELD THAT:- It has been revealed that the Respondent has not passed on the benefit of reduction in GST rate from 28% to 18% on the above products w.e.f 15.11.2017 and hence, the Respondent has violated the provisions of Section 171 (1) of the CGST Act, 2017. Penalty - HELD THAT:- It is also revealed from the perusal of the CGST Act and the Rules framed under it that no penalty had been prescribed for violation of the provisions of Section 171 (1) of the above Act, therefore, the Respondent was issued show cause notice to state why penalty should not be imposed on him for violation of the above provisions as per Section 122 (1) (i) of the above Act as he had apparently issued incorrect or false invoice while charging excess consideration and GST from the buyers - from the perusal of Section 122 (1) (i) it is clear that the violation of the provisions of Section 171 (1) is not covered under it as it does not provide penalty for not passing on the benefits of tax reduction and ITC and hence the above penalty cannot be imposed for violation of the anti-profiteering provisions made under Section 171 of the above Act. Since, no penalty provisions were in existence between the period w.e.f. 16.11.2017 to 31.03.2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively - the notice dated 01.01.2019 issued to the Respondent for imposition of penalty under Section 122 (1) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.

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• Income Tax

• 2020 (8) TMI 445
  Levy of penalty u/s 271(1)(c) - Defective notice - Addition of capital capital - concealment of particulars of his income and furnishing inaccurate particulars of such income - HELD THAT:- Two limbs of Section 271(1)(c) of the Act and also the fact that the two limbs i.e. concealment of particulars of income and furnishing inaccurate particulars of income carry different connotations. We have also noticed that the Assessing Officer has to indicate in the statutory notice for which of the two limbs he proposes to impose the penalty and for this the notice has to be appropriately marked. If in the printed format of the notice the inapplicable portion is not struck off thus not indicating for which limb the penalty is proposed to be imposed, it would lead to an inference as to nonapplication of mind, thus vitiating imposition of penalty. The word particulars used in Section 271(1)(c) of the Act would embrace the meaning of the details of the claim made. Referring to Webster s Dictionary where the word inaccurate has been defined as not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript , Supreme Court held that the two words i.e., inaccurate and particulars read in conjunction must mean that the details supplied in the return are not accurate, not exact or correct, not according to truth or erroneous. It was held that mere making of a claim which is not sustainable in law by itself would not amount to furnishing inaccurate particulars regarding the income of the assessee. In the present case, concealment of particulars of income was not the charge against the appellant, the charge being furnishing of inaccurate particulars of income. As discussed above, it is trite that penalty cannot be imposed for alleged breach of one limb of Section 271(1)(c) of the Act while penalty proceedings were initiated for breach of the other limb of Section 271(1)(c). This has certainly vitiated the order of penalty. Assessee had declared the full facts and the sale agreement at the first instance; the full factual matrix or facts were before the AO while passing the asessment order. It is clear from the facts that the appellant had never suppressed any material fact from the respondent. Hence we are inclined to accept the submissions of the appellant. It is another matter that the claim based on such facts was found to be inadmissible. This is not the same thing as furnishing inaccurate particulars of income as contemplated under Section 271(1) (c) - Decided in favour of assessee.

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• 2020 (8) TMI 444
  Unexplained cash - seized cash from one Selvaraj - Excise officials have seized cash from Selvaraj on the basis of which a crime has been registered - Whether department has no right to hold the seized cash, the same will be returned to the court? - Magistrate has declined the application of the petitioner for interim custody of the money due to the pendency of proceedings in the Income Tax Department - HELD THAT:- Income Tax Department has not initiated any proceedings against the petitioner. Though Mr. Selvaraj has not responded to the summons issued, he has filed a statement to the effect that he has no objection in releasing money to the petitioner. The said Selvaraj is illiterate and a resident of Tamil Nadu. If the money does not belong to him, naturally he may not respond to the summons. In the circumstances, to meet the ends of justice, it is necessary that this Court pass appropriate orders on interim custody of the amount. Accordingly, the writ petition is disposed of directing the petitioner to file an undertaking before the Judicial First Class Magistrate s Court-I, Palakkad to the effect that if the amount of Rs. 10,00,000/- is released by the Income Tax Department, the petitioner shall produce the said amount before the Judicial First Class Magistrate s Court-I, Palakkad as and when required by the court. If the petitioner approaches the additional 4th respondent-Deputy Commissioner of Income Tax, Central Circle, Thrissur, along with a copy of the said affidavit and executes a bond with the Deputy Commissioner to the effect that the petitioner shall make available the said amount of Rs. 10,00,000/- as and when the Department of Income Tax initiates any proceedings on the issue and requires the petitioner to deposit the said amount.

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• 2020 (8) TMI 443
  Deduction u/s 80 IA - Exclusion of profits/income derived from wind energy generated and distributed through TNEB in the computation of taxable total income - HELD THAT:- Tribunal in the impugned order discussed the assessee s appeal following the decision of the Special Bench of the Tribunal in the case of ACIT vs. Goldmine Shares and Finance Pvt. Ltd. [ 2008 (4) TMI 405 - ITAT AHMEDABAD] . It cannot be disputed that the decision in the case of Goldmine Shares and Finance Pvt. Ltd. is no longer good law in the light of the decision of the Division Bench of this Court in the case of Velayudhaswamy Spinning Mills (P) LTD. vs. Assistant Commissioner of Income Tax [2010 (3) TMI 860 - MADRAS HIGH COURT] which has been confirmed by the Hon ble Supreme Court [ 2016 (11) TMI 373 - SC ORDER] . Therefore, the Substantial Questions of law have to be answered in favour of the assessee. We do not think that a remand is required in the matter, more particularly, when the assessment is of the year 2006. However, when the Assessing Officer gives effect to the decision of this Court answering the Substantial Questions of law in favour of the assessee, it will be well open to him to proceed in accordance with law. - Decided in favour of assessee.

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• 2020 (8) TMI 442
  TP Adjustment - action of AO in determining the ALP of international transactions involving Research and Development fees and Management fees at Nil without applying most appropriate method - HELD THAT:- Hon ble High Court of Bombay in the case of Johnson Johnson Ltd. [ 2017 (4) TMI 1281 - BOMBAY HIGH COURT ] we find that the TPO had made transfer pricing adjustment on account of sales promotion and publicity expenses being payable by the assessee to its parent company M/s. Johnson Johnson, USA. TPO did not follow any method prescribed u/s. 92C(1) of the Act r.w.s. 10B made adjustment. The Hon ble High Court of Bombay was pleased to hold that the TPO is obliged under the law to determine the ALP by following any one of the prescribed methods of determining the ALP as detailed in section 92C(1) of the Act and upheld the order of Tribunal in allowing assessee s appeal by deleting the addition made on account of sales promotion and publicity expenses. Hon ble High Court of Bombay in the case of Merck Ltd. [ 2016 (8) TMI 561 - BOMBAY HIGH COURT ] pleased to hold the entire transfer pricing agreement becomes unsustainable in law in not adopting one of the mandatorily prescribed methods to determine the ALP in respect of fees of technical services payable by the assessee therein to its AE. The Hon ble High Court of Bombay held the view taken by the Tribunal in deleting the adjustment made by the TPO without applying any of the method prescribed u/s. 92C to determine ALP is a possible view. TPO has to confine himself to one of the prescribed methods for determination of the ALP of international transaction, for which mechanism has been prescribed in Rule 10B of the Income-tax Rules, 1962. Further, it held the ALP of an international transaction can be determined only by applying one of the prescribed methods given under section 92C(1) of the Act and the ALP is determined by TPO by not applying any method at all or by choosing a method which is not prescribed u/s.92C(1) of the Act, then such a determination of ALP frustrates the transfer pricing addition and deleted the transfer pricing addition made thereon by holding the methods prescribed for determining the ALP are statutory prescription, it is absolutely essential for the TPO to compute the ALP by adhering strictly to one of such methods. Thus, adjustment made in Research and Development fees and Management fees without following prescribed method under law is deleted. Granting weighted deduction u/s. 35(2AB) - HELD THAT:- Tribunal in the case of M/s. East West Seeds Ltd. [ 2019 (8) TMI 1524 - ITAT PUNE ] wherein this Tribunal while placing reliance on the decision of Torrent Pharmaceuticals Ltd [ 2009 (11) TMI 819 - ITAT AHMEDABAD ] allowed the claim of weighted deduction u/s. 35(2AB).

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• 2020 (8) TMI 441
  TP Adjustment - Comparable selection - Dispute Resolution Panel (DRP) for inclusion of Coral Hub Limited as comparable in design engineering service segments of assessee - HELD THAT:- The company is primarily engaged in providing IT enabled services and the production and sale of such services cannot be expressed in any generic units. Further, he submitted that the TPO accepted Coral Hub Limited as comparable to the assessee for A.Y. 2010-11. We note that the DRP reproduced the comparable companies for A.Y. 2010-11 in its order which clearly shows the Coral Hub Limited was taken as comparable. We find in the annual report the entire income of Coral Hub Limited has been shown as income from IT enabled services. No infirmity in the order of AO/DRP in accepting the Coral Hub Limited as comparable to the activities of assessee in the final list of comparables. Thus, ground Nos. 1 and 2 raised by the Revenue are dismissed. Inclusion of Cosmic Global Limited as comparable in design engineering service segments of assessee - We find the DRP reproduced the Circular issued by the CBDT which clearly shows that the CBDT explained 15 categories which fall under the IT enabled services products or services amongst which medical transcription is treated as IT enabled services. Therefore, we find no infirmity in the order of AO/DRP in inclusion of Cosmic Global Limited in the final set of comparables. Thus, ground raised by the Revenue are dismissed. Include Microgentics Systems Limited in the final set of comparables - For medical transcription, training will be given by the Doctors and they are not at all engaged in medical transcription activity and the services of assessee are requires highly skilled personnel because it is engaged in designing. We note that the DRP having found the medical transcription services which represents IT enabled services treated the activities of Microgentics Systems Limited is functionally similar to the assessee and directed the TPO to include Microgentics Systems Limited as comparable in the final list of comparables. Thus, we find no infirmity in the order of DRP/AO. Accordingly, ground raised by the Revenue are dismissed. Rejection of Eclerx Services Limited - Eclerx Services Limited is not comparable and the Assessing Officer/TPO is directed to exclude for the purpose of benchmarking of the international transactions. Rejecting the R Systems International Limited in the comparable set on account of persistent loss making company - DR submits that the R Systems Limited should not be accepted as a comparable because of different year ending - there is no dispute that foreign exchange gain is treated as non operating revenue. The assessee is persistent loss making company. Therefore, we find no infirmity in the order of AO in excluding R Systems International Limited on account of persistent loss making company as comparable to the assessee and thus, ground raised by the assessee is dismissed.

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• 2020 (8) TMI 440
  Deemed dividend u/s 2(22)(e) - amount of loan given by the company to the assessee - HELD THAT:- Assessee is a director of Sankalp Seeds Private Limited. He was summoned by ADIT (Investigation), Aurangabad for verification of cash deposits in his bank account. During the course of his statement on oath before the ADIT (Inv.), the assessee admitted to have borrowed a sum of Rs. 10,00,000 as loan from Sankalp Seeds Private Limited, which was subsequently repaid. AO found accumulated profits of the company to be much in excess of Rs. 10,00,000, being the amount of loan given by the company to the assessee. The provisions of section 2(22)(e) in such circumstances, are obviously attracted. The assessee had tried to make out a case before the authorities that the said amount of Rs. 10,00,000 was received as advance or an imprest. CIT(A) has elaborately dealt with such contentions by giving dates on which small amounts of imprest were received by the assessee. Salary received by the assessee from the company is different from such amount of Rs. 10,00,000 received by the assessee. In fact, the assessee categorically admitted before the ADIT (Inv.) that the amount of Rs. 10,00,000 received by him was subsequently repaid. If, that be the situation, we fail to appreciate as to how the rigour of section 2(22)(e) of the Act can be avoided. Case of P.Sarada Vs. CIT [ 1997 (12) TMI 1 - SUPREME COURT] has held that section 2(22)(e) of the Act is magnetized on a shareholder receiving loan or advance from a company even though ultimately the amount stands adjusted at the end of the year. In view of the above factual scenario, we are satisfied that the provisions of section 2(22)(e) of the Act are attracted in the instant case. Thus, the addition sustained in the first appeal is hereby affirmed. Reopening of assessment u/s 147 - no return in response to notice u/s 148 was filed, the AO did not furnish any such reasons - HELD THAT:- There is no legal bar on the assessee taking up such a legal ground before the Tribunal despite having desisted in the first appeal, there should be some material to fortify the stand. From the material available on record, it is observed that the assessee did not file any return in response to notice u/s 148 of the Act. Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO [ 2002 (11) TMI 7 - SUPREME COURT ] has laid down the procedure for supplying the reasons recorded by the AO to the assessee only after the assessee has filed return in response to notice u/s 148 of the Act. If the assessee fails to furnish such return, obviously, there is no obligation on the part of AO to furnish a copy of reasons to assessee. In the extant case, the assessee did not furnish return in response to notice u/s 148 of the Act. That being the position, we hold that the AO was justified in not supplying the reasons before taking up the assessment u/s 147 of the Act. This ground, ergo, fails.

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• 2020 (8) TMI 439
  Addition u/s 68 - Unexplained cash credit - identity and credit worthiness of the loan creditor and genuineness of the transactions - HELD THAT:- Onus is always on the assessee to substantiate with evidence to the satisfaction of the AO regarding the identity and credit worthiness of the loan creditor and genuineness of the transaction. In the instant case, no doubt, the assessee has filed some papers/documents before the AO. Assessee company failed to produce the directors of M/s Baldev Promoters Pvt. Ltd., and Shri Raju Khan. The source of Shri Raju Khan to extend such huge amount was also not substantiated. We deem it proper to restore the issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the identity and credit worthiness of the loan creditors and the genuineness of the transaction. The assessee is hereby directed to produce the Managing Director/Director of M/s Baldev Promoters Pvt. Ltd. and Shri Raju Khan before the AO for his examination. The AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

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• 2020 (8) TMI 438
  Commencement of business operation or not - whether set up of business is only set up or is also commencement of business? - Interest expenditure allowance - HELD THAT:- The present assessment was made in the hands of the assessee, following the same reasoning as in Assessment Year 2006-07 [ 2020 (6) TMI 569 - ITAT DELHI] both by the Assessing Officer and the CIT(A), since the issues have already been decided by the Tribunal in earlier year in assessee s own case, we hold that as the business of the assessee had already commenced in Assessment Year 2006-07, then the interest expenditure and all other expenses both administrative and other expenses are to be allowed as business expenditure. The interest income is to be taxed as business income and the interest expenditure is to be set off against the said business income. During the year under consideration, the assessee had capitalized interest expenditure of Rs. 40.78 Corers, hence, there is no issue of its allowability. Coming to the submissions of the Ld. DR for the Revenue, we find that the interest expenditure of Rs. 18.64 Crores is business expenditure and the same needs to be allowed as expenditure in the hands of the assessee, hence, we hold so. The grounds of appeal raised by the assessee in this year are thus allowed. Facts and issues raised in appeal of the assessee relating to Assessment Year 2008-09 are similar to the facts and issues in Assessment Year 2007-08 and our decision in Assessment Year 2007-08 shall apply mutatis mutandis. The interest expenditure in the respective year which has been capitalized by the assessee and not claimed as business expenditure, hence, the only portion claimed in the hands of the assessee is to be allowed as business expenditure. Accordingly, grounds of appeal raised by the assessee stands allowed.

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• 2020 (8) TMI 437
  Estimation of income - trading addition - books of accounts rejected u/s 145(3) - net profit has been estimated @ 15% as against 14.23% declared by the assessee - HELD THAT:- The books of accounts have rightly been rejected u/s 145(3) and thereafter, net profit has been estimated @ 15% as against 14.23% declared by the assessee. Nothing has been brought to our notice in terms of prior settled history of the assessee or comparative third party data. In the facts and circumstances of the case, we therefore upheld the order of the ld CIT(A) and the ground of appeal is hereby dismissed. Cash deposited in the bank account maintained with SBI, Tonk Road, Jaipur - whether the assessee has satisfactorily explained the nature and source of cash deposit of Rs. 25 lacs in his bank account maintained with SBI? - HELD THAT:- Claim of the assessee of returning of the amount originally received from the buyers presupposes the previous understanding between the parties at the time of entering into the agreement and the terms of such understanding which therefore cannot be ignored. The claim of the assessee of returning the amount through cheque can be easily verified from the assessee s bank statement and the same cannot be manipulated, however, the same has not been verified either during the assessment or during the appellate stage. The affidavit of the buyer even though executed subsequent to the close of the assessment proceedings, however, where the transactions are reflected in the assessee s bank account, the same cannot be manipulated subsequently and can be easily verifiable directly from the Bank. During the course of hearing, the ld AR has also submitted that the assessee has been able to obtain the original sale agreement which could not be produced earlier as the same was with the buyers and has also submitted the source of repayments which also require proper verification. We therefore believe that the matter requires fresh examination taking into consideration the aforesaid aspects and the matter is accordingly set-aside to the file of the AO to examine the same a fresh after providing reasonable opportunity to the assessee. In the result, the ground is allowed for statistical purposes.

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• 2020 (8) TMI 436
  Addition u/s 23(4) - Income from House Property - Property are stock in trade of the appellant firm - deemed rental income of the two unsold flats - HELD THAT:- It is an undisputed fact that assessee firm is in construction business and the two flats which are unsold were lying as its stock and were vacant and no rental income has been derived by the assessee firm. We find that identical issue arose in the case of Gajendra Pawar [ 2019 (2) TMI 1867 - ITAT PUNE] wherein the Co-ordinate Bench of the Tribunal decided the issue in favour of the assessee - no addition on account of deemed rent of two unsold flats can be made in the hands of assessee. Disallowance u/s 40A(3) - exception for incurring cash expenditure of Rs. 20,000/- as given in Rule 6DD - HELD THAT:- It is an undisputed fact that the amount which has been disallowed by the AO has been made by the assessee through bearer cheque. Before us, assessee has not pointed out the provisions of Rule 6DD under which the payment can be allowed. He has also not pointed out any fallacy in the findings of Ld.CIT(A). We therefore find no reason to interfere with the order of Ld.CIT(A)

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• 2020 (8) TMI 435
  Disallowance of deduction u/s 57(iii) - Interest on Loan - income under the head income from other sources which was on account of interest from saving bank account and FDR - HELD THAT:- In the present case, the interest paid on the loans raised against the FDR was having the direct nexus with the interest received from the FDRs and the assessee choose to save the penalty of 1.5% by raising the loans at 1% higher rate of interest than the interest rate on FDR thus there were saving of 0.5%. As regards to the decisions relied by the A.O. and considered by the Ld. CIT(A) i.e; CIT Vs. Dr. V.P. Gopinathan [ 2001 (2) TMI 10 - SUPREME COURT] it is noticed that the same is distinguishable from the facts of the assessee s case, since the issue in the said case was not relating to the applicability of section 57(iii) of the Act rather in the said case the loan was raised from different bank on which interest was paid while the interest was earned on the FDR with the different bank, so there was no nexus. We therefore by considering the facts of the present case as discussed herein above, are of the view that the disallowance sustained by the Ld. CIT(A) was not justified, accordingly, the same is deleted. Appeal of the Assessee is allowed.

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• 2020 (8) TMI 434
  Revision u/s 263 - Business loss on currency swap allowed by CIT - HELD THAT:- DR has fairly agreed that the appeal filed by the revenue is not maintainable, because the Ld.CIT(A) has deleted additions made by the Ld. AO, on the basis of 263 order passed by the Ld.PCIT, but the u/s 263 order passed by the Ld.PCIT has been set aside by the ITAT. Once, revisional order passed by the Ld.PCIT has been set aside by the ITAT, then any consequential order passed by the Ld. AO u/s 143(3) r.w.s. 263 of the I.T.Act, 1961, no longer survives. We find that in M/S JBF INDUSTRIES LTD. VERSUS PCIT-4, MUMBAI [ 2018 (11) TMI 866 - ITAT MUMBAI] as set aside order passed by the Ld.PCIT u/s 263 of the I.T.Act, 1961. Further, once order passed by the Ld.PCIT u/s 263 of the Act, has been set aside, then the assessment order passed by the Ld. AO pursuant to directions of the Ld.PCIT, u/s 143(3) r.w.s. 263 of the I.T.Act, 1961, no longer survives. The Ld.CIT(A) after considering relevant facts has rightly deleted additions made by the Ld. AO. Hence, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss appeal filed by the revenue.

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• Corporate Laws

• 2020 (8) TMI 432
  Disqualification of Director - newly appointed Director was not allowed to operate the bank account since she was declared disqualified along with other Directors due to non-filing of audited financials of the company with the Register of Companies - Section 164(2) of the Companies Act - HELD THAT:- Section 167(1)(a) of Companies Act makes it clear that if a director of a company who has failed to file financial statements incurs disqualification for appointment of a director in another company or re-appointment as a director as the case may be would immediately forfeit his right to continue as director in all the companies which may have filed the financial statements of annual returns as required under the Companies Act. The inclusion of the said proviso has an object as it is found that directors in several companies act in a perfunctory manner and with a view to evade the provisions of the Companies Act remain as director of different companies and continue to remain in the Board of such companies by virtue of the fact that no default had occurred in the other company. It is significant to mention here that director of Regatta Techno-Com System Private Limited and S H Manufacturing and Trading Private Limited are common and keeping in view the object of the said amendment which fastens the liability on the directors and in clear terms specify the disqualification that a director would earn irrespective of the fact that he may not be the director of the company which has not committed any default, there are no reason in the communication made by the State Bank of India. Petition dismissed.

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• 2020 (8) TMI 431
  Maintainability of suit - Jurisdiction of Civil Court to try the suit in view of specific bar under Section 430 of the Companies Act, 2013 - grant of ad-interim injunction in favour of the petitioner - whether Title Suit No.781 of 2019 is maintainable under the facts and circumstances of this case or that under various provisions of the Companies Act 2013 Civil Court s jurisdiction is barred to entertain such suit? HELD THAT:- Section 9 CPC gives jurisdiction to try all suits of civil nature excepting those which are expressly or impliedly barred by any other law. A bar to file a civil suit may be expressed or implied. An express bar is whether statue it is contain a provision that the jurisdiction of a civil court is barred, as for example Section 430 of the Companies Act. An implied power may rise when a statue provides a special remedy to an aggrieve party like a right of appeal - Exclusion of civil court jurisdiction cannot be readily inferred on the ground of availability of remedy and forum under Special Act when the action in question was taken without complying with the provisions of the Act. The civil court s jurisdiction cannot be said to be barred under the Law. Before I conclude, let me state few words about the nature of the dispute between the parties. Allegation against the petitioner is that the petitioner allowed an outstation cricketer to play second division cab league for defendant No.1 club though according to the rules of CAB no outstation player is permitted to take part in cricket during tournament on behalf of any club registered under CAB. It is also alleged that by engaging the said outstation cricketer the petitioner compelled the club to spent huge sum of money towards conveyance charges and stay of the said outstation cricketer - Importantly enough, till date CAB did not raise any allegation against defendant No.1 club. On the contrary, the petitioner also did not make his grievance challenging the memorandum of article or any resolution taken by the Board of Directors virtually altering the memorandum of articles or any other action of the defendant No.1 club or its Board of Directors which is prejudicial to him or any class of member or members at large. On the contrary, the allegation of the defendant is that the rules of natural justice procedure audi altarem partem were not given to him before passing an order of suspension. The learned District Judge, South 24 Parganas sitting in appellate jurisdiction failed to exercise her jurisdiction and the order passed by her to the extent regarding maintainability of the suit is liable to be set aside - revision allowed.

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• 2020 (8) TMI 430
  Application for withdrawal of all the civil and criminal and company cases - Loss of faith between the promotors - sections 241 and 242 of the Companies Act, 2013 - HELD THAT:- In view of the mediation agreement between the petitioner and the respondents, this Tribunal is of the view that no further issues survive to be adjudicated in the company petitions pending before this Bench. Taking note of the mediation agreement and withdrawal application filed by the petitioners and considering the facts stated above, both the parties are directed to comply with the mediation agreement made between them. Petition withdrawn.

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• 2020 (8) TMI 429
  Holding of AGM - Club Membership - members not paid membership fees - It was stated by the appellant that Madras Race Club ( for short MRC ) has two set of members Club Members and Stand Members. Only Club Members have the right to vote at AGM and the present appeal relates to rights of the Club Members - HELD THAT:- It is pertinent to mention that Madras Race Club was incorporated as a not for profit company under Section 26 of the Companies Act, 2013 and as per its objects contained in its Memorandum and Article of Associations, Madras Race Club (MRC) has to utilitise its profit and other incomes for promoting its objects. The affairs of MRC is managed by Management committee comprising of 12 members and they are liable to retire by rotation. However, to serve the public interest the Govt. of Tamil Nadu had appointed 4 Management Committee Members who shall not retire by rotation. The MRC had commissioned a special investigation audit by an Independent Auditor viz. Brahmayya Company Chartered Accountant in the year 2016; this was done in order to recover the dues and large number of irregularities observed in MRC. Thereafter, the NCLT Chennai directed that notices issued to the person who were identified as being in default in Chartered Accountant report and also appointed Hon ble Justice K.P.Siva Subramaniyan a retired Judge of the Hon ble Madras High Court to conduct a further independent enquiry to determine the genuineness of the members of the MRC - It is also observed that out of total membership of 1245, 924 members were allegedly admitted during this period from the audit report and from the enquiry conducted by Hon ble Justice K.P.Siva Subramaniyan a retired Judge of the Hon ble Madras High Court. It is very clear that these 635 have not paid the entrance fee . On the intervention of NCLAT, MRC was agreeable to offer the appellants in both the Company Appeals as Stand Member but they refused. The order of NCLT Chennai with an amendment that let the AGM 2018-19 to additionally consider also inter alia the issue of paying entrance fees along with interest at State Bank of India fixed deposit rate for the years of delay in payment, is upheld.

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• 2020 (8) TMI 428
  Reduction of share capital - section 66 of the Companies Act, 2013 - reduction on the ground that petitioner-company is not carrying on any business activities and has no immediate plans to revive the same - HELD THAT:- There is no objection from any quarter regarding the reduction of share capital as contemplated by the petitioner-company. The present petition seeking approval for reduction of capital is allowed as follows: (a) The special resolution approving the capital reduction as approved by the shareholders in the general meeting held on February 26, 2018 is hereby confirmed. The petitioner-company shall comply with all applicable laws and procedures in this regard. (b) The petitioner-company shall comply with all the applicable pro visions of the Income-tax Act, 1961 and all tax issues arising out of the application will be met and answered in accordance with law. (c) The petitioner-company shall submit an affidavit before the Registrar of Companies, Maharashtra, Mumbai, that the interests of the creditors and all other stakeholders are protected under the scheme. (d) The minute set forth in the schedule hereto is hereby approved. (e) The certified copy of this order including the minute as approved be delivered to the Registrar of Companies, Maharashtra, Mumbai, within thirty days of receipt of this order. (f) Paper publication confirming the reduction of share capital by this Tribunal be issued in the same newspapers in which publications were carried out earlier, within a period of thirty days from the date of this order.

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• Securities / SEBI

• 2020 (8) TMI 427
  Credit Rating Rationales - factors required to be considered by ICRA while deciding the rating - praying for a decree of declaration, declaring the Credit Rating Rationales dated 24th April, 2020 and 30th April, 2020 passed by the defendant or any other similar credit rating rationale downgrading the plaintiff s credit rating from BBB+ (stable outlook) to BBB (negative outlook) as null, void, unenforceable and ineffective - also seeks decree of mandatory injunction directing the defendant to withdraw the said credit rating rationales from the physical as well as electronic records of the defendant including on the world wide web - charge of Violation of rating methodologies or the CRA Regulations or the Master Circular - Whether the defendant-ICRA has a right to publish the rating despite being objected to by the plaintiff/JPL? HELD THAT:- Combined reading of SEBI CRA Regulations and RBI Master Circular clearly depict that as far as the initial rating is concerned, if the same is not accepted, then the same will not be published by the Credit Rating Agency however, once an initial credit rating is accepted and published based whereon a party seeks financial facility, during the pendency of the said financial facility, the Credit Rating Agency is mandated to conduct periodic surveillance and even if subsequent rating opined by the Credit Rating Agency during the period of surveillance is not accepted by the party, the same will still be disseminated by press release on the website of the Credit Rating Agency as also intimated to the Stock Exchange/Debenture Trustees. Clause (B) of the agreement between JPL and ICRA clearly defines the scope of work and that once the initial credit rating is assigned and accepted, ICRA shall subject to clause (F) keep the rating under surveillance during the lifetime of the bank facility, that is, such time that any amount is outstanding against it or the sanction remains valid whichever is earlier. Once based on the credit rating a party seeks a bank facility it cannot thereafter want the Credit Rating Agency to not conduct periodic surveillance thereof and in case of a change therein not intimate the same to the concerned agency and the parties duly affected by the said Credit Rating. The interpretation as sought to be given by JPL would be contrary to the public policy and hence cannot be accepted. As per the terms of the agreement between JPL and ICRA as also the CRA Regulations, Master Circular of RBI, the Credit Rating Agency, that is, ICRA was entitled to publish the initial rating once accepted, based whereon JPL took credit facility and thereafter ICRA is mandated to conduct periodic reviews/surveillance of the credit rating and publish the same in the best interest of the provider of the financial facility and the other parties. What are the factors required to be considered by ICRA while deciding the rating and whether those factors have been considered by ICRA or the finding of ICRA is based on erroneous considerations? - Credit rating of the company is based on the futuristic position of the company to clear its debt liability and the same is not dependent merely on the fact that in the preceding year, debts had been cleared. The opinion of ICRA as primarily based on the fact that though in the previous year there were increased repayments of debt, however, the debt liability was still high coupled with the fact that JPL could not procure contract to optimally utilize its power generation and was utilizing power generation only to the extent of 1/3rd and that the primary client of JPL being TANGENDCO, the time for recovery of its dues was increasing as in the past thereby making the liquidity and debt paying capacity of JPL stretched. As opinion of ICRA is rendered after taking into account all positive or negative factors and that it is an opinion rendered by experts in the field, this Court will not, unless the said opinion is perverse, arbitrary and mala fide, interfere in the same as a mathematical calculation of a credit rating is not possible. Therefore, as regards issue No.(ii) is concerned, this Court finds that the rating rationales depend from industry to industry and that ICRA has taken into account the relevant rating rationales, both positive and negative and based thereon rendered the opinion which is plausible on the facts and the said opinion being neither perverse nor arbitrary nor mala fide, this Court will not interfere therein by passing a decree declaring the same to be null and void. Whether this Court can grant a mandatory injunction against ICRA directing it to review its ratings? - ICRA had downgraded the credit rating of JPL in the previous year also from AAA to BBB+ when neither JPL filed no suit raising objection to the downgrading or to the publishing of the credit rating. Credit rating having been utilized by JPL for receiving the financial facility, till the subsistence of the financial facility, JPL can neither seek setting aside of the said rating unless the same is irrational, arbitrary or mala fide and also cannot seek a decree that the said rating be not disclosed/published - Evidentiary value of opinion of an expert has to be decided on the basis of the credibility of the expert and the relevant facts supporting the opinion. Therefore, the emphasis has to be on the data on the basis of which opinion is formed. Further, if the opinion is intelligible, convincing, and based on reasoning, no decree declaring the said opinion as null and void, unenforceable and ineffective cannot be passed as is prayed by the plaintiff in prayer (a) of para 66 of the suit in respect of the Credit Rating Rationales dated 24th April, 2020 and 30th April, 2020 passed by the defendant. As the impugned Credit Ratings are surveillance ratings even if JPL objects to the same, no mandatory injunction can be granted to the defendant to remove the Grade Rating Rationales from the physical as well as electronic record of the defendant on the worldwide web, much less permanent injunction.

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• Insolvency & Bankruptcy

• 2020 (8) TMI 426
  Maintainability of application - CIRP process initiated - moratorium declared - Appellant submitted that since the Application filed by 1st Respondent herein was admitted on 31.05.2019 against the same Corporate Debtor viz., M/s Cure Life Care Pvt. Ltd. their Application became infructuous - HELD THAT:- It is a fact that the Appellant filed Company Petition under Section 7 of IBC before the Adjudicating Authority in the year 2017 itself. Subsequently, 1st Respondent herein filed CP(IB) No. 388/NCLT/AHM/2018 against the same Corporate Debtor and the Company Petition came to be admitted on 31.05.2019 and Corporate Insolvency Process was initiated by imposing moratorium under Section 14(1) of IBC - In view of admission of Company Petition filed by1st Respondent and initiation of Corporate Insolvency Resolution Process against the same Corporate Debtor, there was no option except to dispose of the Petition. Accordingly, in presence of the representatives of the Appellant as well as Respondent, the C.P.(IB) No. 157/7/NCLT/AHM/2017 was disposed of as infructuous for the reason that CP(IB) No. 388/NCLT/AHM/2018 was admitted against the same Corporate Debtor. The said decision taken in the meeting of the Committee of Creditors on 05.07.2019 and filing of Application in pursuance thereof under Section 12 A of IBC seeking withdrawal of the Petition before the Adjudicating Authority is arbitrary and against conscience of legal jurisprudence - Petition restored to its original position - appeal allowed.

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• 2020 (8) TMI 425
  Stay of termination notice - Facilities agreement - conduct of examinations deploying National Technology Infrastructure for the Appellant s clients - It is submitted that the Corporate Debtor failed to remedy contractual breaches, thereby, a notice of termination dated 10th June, 2019 issued by the Appellant in terms of Clause 11(b) of the Facilities Agreement. Whether the order passed by the Adjudicating Authority staying the termination notice is legal or not? HELD THAT:- The Respondent herein was appointed as Interim Resolution Professional (in short IRP) to carry out the functions as per law. In view of Section 14 once a moratorium was imposed by the Adjudicating Authority and on appointment of Interim Resolution Professional the Interim Resolution Professional will be at the helm of affairs of the company in view of the suspension of the Board of Directors of the Corporate Debtor . As on the date of the imposition of moratorium the business and activities of the Corporate Debtor will have to be carried out for smooth functioning of the company and the company shall remain as a going concern. Apart from that the Resolution Professional shall ensure for smooth running of the company as a going concern and the Resolution Professional shall perform the duties as per Section 25 of the I B Code. Sub- Section (2)(a) of Section 25, the Resolution Professional take immediate custody and control of all the assets of the Corporate Debtor, including the business records of the Corporate Debtor - Further, the said provision sets out the duty of Resolution Professional to preserve and protect the assets of the Corporate Debtor and lays down the functions he may perform the same. In view of the duties cast upon the Resolution Professional, the Resolution Professional to keep the Corporate Debtor as a going concern and filed an application being C.A. (M.B.)- 2954 of 2019 before the Adjudicating Authority seeking stay of termination of notice and sought direction to the Appellant to continue the Facilities Agreement dated 01.12.2016 - The Adjudicating Authority after hearing the parties stayed the termination of notice and directed the Appellant herein to adhere to the terms of contract without fail. Appeal dismissed.

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• 2020 (8) TMI 424
  Maintainability of appeal - time limitation - pendency of petition - account of Corporate Debtor declared as NPA on account of default - Appellant contends that during the pendency of the Petition Respondent Bank entered into OTS. However, the Respondent Bank did not withdraw the Petition and suddenly on 29th July 2019 issued a letter asking them to deposit the balance amount as per terms of OTS - non-compliance of the provision of Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016. HELD THAT:- Admittedly, in this case, the account of corporate debtor was classified as NPA on account of default committed on 31st March 2016. As per Article 137 of the Limitation Act, the limitation period of three years was available to the applicant. But before the expiration of limitation period on 13rd March 2018, the Corporate Debtor submitted an acknowledgement of debt in writing and promised to clear the dues at the earliest possible. In addition to this, the Corporate Debtor had also submitted OTS proposal which was later on accepted on 27th December 2018 by the Bank. Thus, it is clear that a fresh period of limitation started after the acknowledgement of the debt by the Corporate Debtor and the Petition was filed within the limitation. Therefore, it is clear that the Petition is not time-barred. It is on record that on the day petition was admitted there was status quo order by the Hon ble High Court and which was in the knowledge of the Adjudicating Authority. But the Adjudicating Authority admitted the Petition by the impugned order dated 23rd August 2019. Learned Counsel for the Appellant placed reliance on the Respondent s letter dated 29th July 2019, which is at page 60 of the paper book. On perusal of the record, it is apparent that after acceptance of OTS for settling the dues of all the three companies in Rs. Sixty Crores, Bank has received a substantial amount from the Corporate Debtor. It is also clear that after making default in payment as per terms of OTS, the Corporate Debtor further paid rupees One Crore to the Bank for renewing the OTS. Bank even after accepting after rupees One Crore revoked the offer to renew the OTS. Considering the present/prevailing economic scenario of the country and downfall/slump in every business activity, we deem it fit and proper to provide one more opportunity to the parties for considering the OTS (One Time Proposal) in a fair, just, objective and dispassionate manner - there is no proper compliance under Section 7(5)(a) of the Insolvency and Bankruptcy Code, but this defect in the Application is a curable defect which can be rectified. The matter is remanded back to the Adjudicating Authority to pass an order afresh, after providing an opportunity to the opposite party - appeal allowed by way of remand.

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• 2020 (8) TMI 423
  Review or modification of Resolution Plan after its approval - Appeal has filed mainly on the ground by the Adjudicating Authority has no power to review its Order - HELD THAT:- It is clear that at the time of substitution of the names of the legal heirs of Late Mukanchand Bothra, counsel for the Resolution Professional has given his consent and has stated that RP has no objection to the same - It is also on record that the Resolution Plan was finally approved by the Adjudicating Authority vide its Order dated 27th August 2019. Thus, it is clear that out of the claim of Rs. 15 Crores submitted by Mukanchand Bothra, only claim of Rs. 4,12,95,002/- was allowed to his share. It is undisputed facts after the death of Mukhanchand Bothra his legal heirs, i.e. Appellants had been substituted in place of Late Mukhanchand Bothra. As per approved Resolution Plan Rs. 4,12,95,002/- comes to the shares of Late Mukhanchand Bothra. Therefore, all the appellants are entitled to one-third share, from the amount which was allotted in favour of Late Mukhanchand Bothra - the resolution professional has no right to again raise the issue of succession from the appellants at the time of distribution of amount. On perusal of entire record; it remains undisputed that the Resolution Plan was approved by the Adjudicating Authority and the names of legal heirs of late Mukanchand Bothra was already substituted by Order of the Adjudicating Authority, with the consent of the Resolution Professional. Therefore there was no occasion to demand succession certificate, Probate Order from the Appellants at the time of distribution of money as per approved Resolution Plan - It is thus clear that the Appellants are entitled to the share allotted to Late Mukanchand Bothra. No further proof of succession is needed by the Resolution Professional from the legal heirs, whose names had been substituted in place of Mukanchand Bothra. Appeal allowed.

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• 2020 (8) TMI 422
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of dispute - application rejected on the ground that the claim of the Appellant falls within the ambit of Existence of Dispute - HELD THAT:- The Adjudicating Authority have noticed that 75 MTs cargo is lost due to the moisture and remaining 30GMT cargo in rejected condition is still under the possession of appellant, which appears to be a disputed matter, came to the conclusion and hold that the claim amount raised by the appellant is a disputed claim - In an application under Section 9, it is always open to the Corporate Debtor to point out pre-existence of dispute. It is to be shown that the dispute was raised prior to the issuance of demand notice under Section 8(1). The existence of dispute must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice. If it comes to the notice of the Adjudicating Authority that the operational debt is exceeding Rs. 1 lakh and the application shows that the aforesaid debt is due and payable and has not been paid, in such case, in absence of any existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt the application under Section 9 cannot be rejected and is required to be admitted. From the record, it is found that the Respondent has defaulted to pay more than Rs. 1 lakh and in absence of any pre-existing dispute, and the record being complete, the application under section 9 preferred by the Appellant was fit to be admitted - application admitted - moratorium declared.

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• 2020 (8) TMI 421
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - pre-existing dispute or not - Whether pre-existing dispute exists before issuance of the demand notice? - HELD THAT:- The Ld. Adjudicating Authority has given a finding that there is a running composite account between the same parties, and there is no differentiation between the different work orders issued between the parties. It is also on record that the Operational Creditor had filed Section 9 application in respect of outstanding dues under the following Purchase Orders and two Work Orders amounting to Rs. 48,06,944/- with the interest of Rs. 14,69,242/- aggregating to Rs. 62,76,186/- for the projects at Hyderabad Centrum Project, Hyderabad and Greena Panvel Project, Maharashtra. The service was deficient in respect of Sky Forest Project, but there was no dispute concerning P.O. No. 3228108125. The Corporate Debtor himself alleged that the Operational Creditor is pressurizing the payment under P.O. No. 3228108125 under the fear that the same will not function similar to STP at Sky Forest Project. On perusal of the Reply dated 23.04.2018 (Annexure A-7), it is clear that no dispute was existing about the P.O. No. 3228108125. There is nothing on record to substantiate that there is running composite account between the same parties, and there is no differentiation between different work orders issued between the parties. The above observation of the Adjudicating Authority is without any basis. It is also necessary to mention that each P.O./W.O. Constitutes separate contract having separate terms and conditions and independent dispute resolution clause, therefore for the alleged deficiency of service relating to the Sky Forest Project, the outstanding payment relating to other invoices could not be stopped and the finding of the Adjudicating Authority that there was pre-existing dispute is also erroneous - thus, it is clear that the Adjudicating Authority erred in rejecting the application filed under Section 9 of the IBC based on the pre-existing dispute. Appeal allowed.

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• 2020 (8) TMI 420
  Replacement of IRP - Appointment of Resolution Professional - Power of CoC - Necessity to record reasons or issue notice for replacing the IRP/RP - HELD THAT:- What appears is that the Adjudicating Authority has proceeded on the basis that if in the first meeting of COC, the COC does not replace the IRP with another RP, the COC cannot do so subsequently. Like statement of question of law is stated by the Adjudicating Authority that The COC having not resolved to replace IRP in its first meeting could not be allowed to replace him by a resolution in any of its subsequent meetings . It appears to us that this is clearly a wrong legal proposition considering the provisions of IBC. There is not merely Section 22 Sub-Section (2) which is relevant but also Section 27 - In both the provisions, the law nowhere says that the COC is required to give reasons. This appears to be also right. The reason is that relationship between the IRP/RP and the COC is that of confidence. If there is loss of confidence and combination is continued, the Corporate Debtor would be put to loss because of the bad relationship between IRP/RP with COC. The learned Counsel for the Appellant is rightly pointing out that initially Section 16 of IBC which deals with appointment and tenure of Interim Resolution Professional had provision which stated that The term of Interim Resolution Professional shall not exceed 30 days from date of his appointment. This could have caused vacuum and confusion in case of default. This provision was substituted with effect from 6th June, 2018 and now the provision in Section 16(5) provides The term of the Interim Resolution Professional shall continue till the date of appointment of the Resolution Professional under Section 22. Thus, the COC has the requisite powers to propose change of the Interim Resolution Professional even in meeting/s subsequent to the first meeting mentioned in Section 22(2) of IBC. There is no requirement that they should give particular reasons for the change. The Respondents in the Appeals are only the Corporate Debtors who are represented through the same IRP Pavan Kankani. The Applications filed by the COC (Appellant) does not in any manner attribute any motives against the present IRP and this being so, there is no necessity for issuing Notices in these Appeals - the Committee of Creditors are allowed in each of these matters to engage Shri B. Naga Bhushan as Resolution Professional in each of the matters, if there is no proceeding pending against him. Appeal allowed.

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• Indian Laws

• 2020 (8) TMI 433
  Extension of period of suspension for further 180 days - alleged import of overvalued diamonds - approval under section 17(a) of the Prevention of Corruption Act - HELD THAT:- The order of extension of suspension of the petitioner as at (A) dated 19.07.2019 which was assailed in the Original Application before the Tribunal reveals that the same has been passed upon acceptance of the recommendation of the Suspension Review Committee by the with the Disciplinary Authority - That period having been expired in the meantime, the last order of extension has come on 15.01.2020. On that occasion, the Suspension Review Committee had again recommended for continuance of suspension which has been accepted. The opposite parties have been shifted from their place of posting, where the allegations were leveled. In the absence of any specific material, the likelihood on their part to influence the investigation and tamper with the evidence in the criminal trial is hardly inferable. There are no such indications that even in their present place of posting, the working atmosphere in case of their joining the work in the office is likely to be polluted when the fact remains that the petitioners are at liberty to post them in any such non-sensitive post as deemed proper. After that incident, no further allegation of their misconduct in any way has also been reported - other group B officers, who have also been arraigned in the criminal case arising out of the same incident wherein the opposite party as at (B) is an accused, are all on bail. The CBI has moved for cancellation of bail granted all accused persons. The investigation by CBI is complete in respect of both the set of accused. In case of those officers also, the Review Committee had submitted the recommendation. The case of the opposite party at B rather stands on a better footing than those two protection officers implicated in the case. In that view of the matter, the continuation of suspension of this opposite party as at (B) is apparently discriminatory and violative of Articles 14 and 16 of the Constitution because thereby equals have been treated unequally - there are no infirmity in the ultimate conclusion of the Tribunal that further continuance of suspension of the opposite parties would no more be useful. However as it is found that the challenges were to the order dated 19.07.2019 extending the suspension of the opposite party of (A) with effect from 22.07.2019 and order dated 22.07.2019 extending the suspension of the opposite party at (B) with effect from 24.07.2019; We, accordingly direct that they be not treated to have been under suspension with effect from above said dates and not as has been ordered by the Tribunal as effective from the expiry of the initial period of suspension for 90 days - application allowed in part.

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• 2020 (8) TMI 419
  Grant of Bail - Misappropriation of amount - forgery of receipt of depositing the amount as service tax before complainant - alleged incident was committed during the period from 05.04.2016 to 28.11.2016 while the complainant lodged the report on 19.09.2017 - HELD THAT:- The applicant who was working as Accountant in the complainant s firm Datt Enterprises, during the period from 05.04.2016 to 28.11.2016, in connivance with co-accused who was working as Manager withdraw the amount of Rs. 51,46,895/- from the account of firm Datt Enterprises by online transaction in the name of depositing service tax and also withdraw the amount of Rs. 18,09,303/- from the account of Datt Associates and out of that amount they deposited some amount in applicant accounts located at Axis Bank, Branch and some amount was invested in the movable and immovable properties. Thus applicant and co-accused misappropriated that amount. Looking to the gravity of offence, this Court is not inclined to grant bail to the applicant at this stage - Bail application dismissed.

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