Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 22, 2020
Case Laws in this Newsletter:
GST
Income Tax
Corporate Laws
Insolvency & Bankruptcy
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Customs
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26/2020 - dated
21-8-2020
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ADD
Seeks to impose anti-dumping duty on the imports of Phosphoric Acid of all grades and concentrations (excluding Agriculture or Fertilizer grade), originating in or exported from Korea RP for a period of five years.
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82/2020 - dated
21-8-2020
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Cus (NT)
Seeks to amend Notification No. 27/2018-Customs (N.T.), dated, the 28th March, 2018
GST
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62/2020 - dated
20-8-2020
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CGST
Central Goods and Services Tax (Tenth Amendment) Rules, 2020.
GST - States
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69/2019-State Tax - dated
20-8-2020
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Delhi SGST
Seeks to notify the common portal for the purpose of e-invoice
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22/2019-State Tax - dated
20-8-2020
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Delhi SGST
Seeks to notify the provisions of rule 138E of the DGST Rules w.e.f 21st June, 2019
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ERTS(T)2/2020/264 - dated
24-6-2020
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Meghalaya SGST
Seeks to provide relief by lowering of interest rate for a prescribed time for tax periods from February, 2020 to July, 2020.
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ERTS(T)2/2020/263 - dated
24-6-2020
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Meghalaya SGST
Meghalaya Goods and Services Tax (Seventh Amendment) Rules, 2020
Money Laundering
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G.S.R. 516 (E) - dated
20-8-2020
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PMLA
Notifies Aadhaar authentication service of the Unique Identification Authority of India under section 11A of the Prevention of Money-laundering Act, 2002
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Classification of goods - Cast Protector - It can only be considered as a covering made of plastic, which can be used by persons wearing casts, bandages, dressings etc or with burns, wounds, ulcers, abrasions etc to keep the portion dry during bathing. - The product merits classification under HSN 3926 90 99 - AAR
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Exemption from GST - lease rent charged by the municipality for land i.e., water channel used for fish farming falls within the meaning of “services relating to rearing of all life forms of animals – by way of renting or leasing of vacant land” - Benefit of exemption available - AAR
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Detention of goods - discrepancy in the e-way bill - tax was not mentioned separately in the e-way bill - it is not in dispute that the transpiration was covered by a valid tax invoice, which clearly showed the tax collected in respect of the goods and an e-way bill in the prescribed format in FORM GST EWB-01. Since there was no contravention by the petitioner of any provision of the Act or Rule for the purposes of Section 129, the detention in the instant case cannot be said to be justified. - HC
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Detention of goods alongwith vehicle - Section 129 of the GST Act - The detention of the vehicle and the goods was on the finding that the goods on inspection were found to be different from those that were covered by the invoice and transportation documents - the detention cannot be said to be unjustified. - HC
Income Tax
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The Tribunal thereafter could not have proceeded to examine the matter on merits after setting aside the order under Section 263 of the Act with reference to Section 13(8) of the Act as the merits of the matter was not the subject matter of the appeal before the Tribunal. - HC
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Valuation of stock - inclusion of duty of excise in the value - Accrual of liability - whether liability to pay excise duty is incurred immediately on manufacture of liquor or it arises only when the same is sought to be removed from the premises of the manufacturer, either for the purposes of sale or otherwise? - Held No - HC
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Unexplained investment in stock and spares - Addition u/s 69A - assessee has capitalised stock of stores and spares to the plant and machinery - there is no evidence brought on record to suggest that the assessee has made investment in its stocks outside the books of account - provisions of section 69A of the Act do not have any application on the facts of the case in hand. - AT
Corporate Law
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Reduction of Share Capital - Allegation on unfair valuation Minority shareholders opposed the scheme - Power to modify the resolution / scheme approved in the EOGM - it can not be said the NCLT has no power. If we assume that the NCLT has no power then it means that the scheme approved by the shareholders, whether wrong or right, the NCLT has to approve. We are not satisfied with the argument of the appellants that the NCLT has no power - AT
IBC
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Initiation of CIRP process - application was rejected on the ground that the claim of the Appellant falls within the ambit of disputed claim - Merely disputing a claim cannot be a ground to reject the claim - claim means a right to payment even it is disputed - AT
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Replacemnet of Resolution Professional - Collusion between Creditor and Debtor to initiate CIRP - Related Party - the pivotal issue remains to be determined while the ‘Corporate Debtor’ may go into liquidation leaving the Appellant remediless, which would result in great miscarriage of justice. It is for this Appellate Tribunal to step in and ensure that such miscarriage of justice is prevented. - AT
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Liquidation Order - period for completing ‘CIRP’ had come to an end and no Resolution Plan had been received - When admittedly, the necessary procedure was not followed during the course of ‘CIRP’ as required by the Provisions of IBC and the Regulations, such belated offer can not be said to be bona fide. Merely expressing that I am ready to file Resolution Plan is not sufficient for taking cognizance of such offer - AT
Central Excise
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Valuation of excisable goods - Amendment to Section 4 - change from Normal value to Transaction value - The Adjudicating Authorities as well as CESTAT are also guilty of failure to do something in these batches of cases - Since the Adjudicating Authorities as well as the CESTAT failed to make various determination, the orders of remand passed by the Tribunal, though for completely different reasons, were justified - Adjudicating authority to keep in mind the principles enumerated in the order for different period. - SC
Case Laws:
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GST
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2020 (8) TMI 489
Permission for withdrawal of Advance Ruling application - levy of GST - rate of GST - Land owners share of constructed residential flats, since joint development agreement entered between Land owner and Builder entered before the commencement of construction of the building and constructed residential fiats handed over before Completion - Land owner's share of constructed residential flats, since Joint development agreement entered between Land owner and Building and Constructed residential flats hand over after completion. HELD THAT:- The Application filed by the Applicant for advance ruling is disposed off as withdrawn.
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2020 (8) TMI 488
Classification of goods - Cast Protector - whether falls under HSN tariff item 9021.10.00 as a fracture appliance? - HELD THAT:- Cast Protector is not a pharmaceutical product. It is a reusable waterproof plastic covering with synthetic rubber diaphragm. It Can be used to keep casts, bandages, burns, wounds, abrasions, dressings, ulcers etc dry during bathing and showering. The rubber diaphragm protects the casts against water penetration while taking shower. It is also used for people who are wearing dressings for diabetic foot ulcers or after foot surgery - The product cannot be classified under the category of fracture appliances falling under HSN 9021 solely for the reason that it is used by persons to keep the casts dry while bathing. It can only be considered as a covering made of plastic, which can be used by persons wearing casts, bandages, dressings etc or with burns, wounds, ulcers, abrasions etc to keep the portion dry during bathing. The product merits classification under HSN 3926 90 99 'Other articles of plastics and articles of other materials of headings 3901 to 3914 -Other'.
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2020 (8) TMI 487
Exemption from GST - lease rent charged by the municipality for land i.e., water channel used for fish farming falls within the meaning of services relating to rearing of all life forms of animals by way of renting or leasing of vacant land - Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 and corresponding notification under Kerala GST - HELD THAT:- On reading of entry at Sl No. 54 of the \ said notification, it is clear that the services relating to cultivation of plants and rearing of all life forms of animals by way of renting or leasing of vacant land with or without structures is exempted under the entry. In the instant case, there is no doubt that the fish and crabs being reared by the applicant in the water channel taken on rent / lease are animals and the service of renting / leasing of the water channel has been availed by the applicant for the rearing of the animals. Thus, the activity of renting leasing the water channel by the Grama Panchayat to the applicant for fish farming for a consideration determined through auction is squarely covered under the exemption entry at Sl No. 54 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 as services relating to rearing of all life forms of animals by way of renting or leasing of vacant land. Exemption allowed.
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2020 (8) TMI 486
Principles of Natural Justice - Cancellation of petitioner's registration - Section 329(2) of the West Bengal Goods Service Tax Act, 2017 - HELD THAT:- Admittedly, the petitioner was granted ample opportunity of hearing before passing of the impugned order. The impugned order cannot be held to be without jurisdiction or violative of the principles of natural justice. The remedy of the petitioner to challenge the impugned order lying under Sections 30 and 107 of the aforementioned Act. In other words, the petitioner has an effective alternative remedy to prefer an appeal against the impugned order - Petition dismissed.
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2020 (8) TMI 485
Freezing of petitioner's bank account - section 74 of GST Act - HELD THAT:- Issue notice. List on 21st September, 2020.
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2020 (8) TMI 484
Direction to Kerala Lok Ayukta to consider Exhibit P1 complaint - declaration that Exhibit P1 complaint as not maintainable under Section 157 (2) of the Kerala Goods and Services Act, 2017 - HELD THAT:- Perusal of the statement of facts filed in support of the writ petition shows that after taking cognizance of the complaint, there was 20 postings and that adjudication of the complaint remains at the evidence stage. Complaint has been enquired and it is at the evidence stage - Though reliance has been made on Section 157(2) of the Kerala Goods and Services Act, 2017 for a declaration that Ext.P1 complaint is not maintainable. We are not inclined to grant the third relief as Lok Ayukta has already taken cognizance of the complaint and it is at the evidence stage. For the above said reasons, complaint also cannot be quashed. Writ of certiorari also cannot be granted as prayed for. The only relief that remains to be considered is whether direction can be issued to Kerala Lok Ayukta, Thiruvananthapuram/respondent No.1 to dispose of Ext.P1 complaint expeditiously - Judicial notice can be taken that there are several complaints pending before the Kerala Lok Ayukta, Thiruvananthapuram. The present complaint filed in January, 2018 and numbered as 440 of 2018. Petition dismissed.
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2020 (8) TMI 483
Cancellation of petitioner's registration - CGST Act, 2017 - Order No.1 of 2020 Central Board of Indirect Taxes and Customs in S.O. 2064 (E). dated 25.06.2020 - HELD THAT:- The Commercial Taxes and Registration Department of the Government of Tamil Nadu has passed G.O.Ms.No.102 dated 26.06.2020 consequent upon the above CBIT Notification. The petitioner has filed memo dated 12.08.2020 requesting that it may be permitted to withdraw the writ petition and seeking liberty to approach the Assessing Authority by the cut-off date provided in the Notification seeking restoration of registration - Petition dismissed as withdrawn.
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2020 (8) TMI 482
Cancellation of petitioner's registration - CGST Act, 2017 - Order No.1 of 2020 Central Board of Indirect Taxes and Customs in S.O. 2064 (E). dated 25.06.2020 - HELD THAT:- The Commercial Taxes and Registration Department of the Government of Tamil Nadu has passed G.O.Ms.No.102 dated 26.06.2020 consequent upon the above CBIT Notification. The petitioner has sent an e-mail dated 30.07.2020 requesting that it may be permitted to withdraw the writ petition and seeking liberty to approach the Assessing Authority by the cut-off date provided in the Notification seeking restoration of registration. - Petition dismissed as withdrawn.
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2020 (8) TMI 481
Detention of goods - tax was not mentioned separately in the e-way bill - detention on the allegation that there was a discrepancy in the e-way bill that accompanied the transportation of the goods - Section 129 of GST Act - HELD THAT:- The power of detention under Section 129 is to be exercised only in cases where a transportation of goods is seen to be in contravention of the provisions of the Act and Rules and not simply because a document relevant for assessment does not contain details of tax payment - As per the statutory provisions applicable to the instant case, a person transporting goods is obliged to carry only the documents enumerated in Rule 138(A) of GST Rules, during the course of transportation. The said documents are (i) the invoice or bill of supply or delivery challan, as the case may be and (ii) the copy of e-way bill in physical form or e-way bill Number in electronic form etc. A reading of the said Rule clearly indicates that the e-way bill has to be in FORM GST EWB-01, and in that format, there is no field wherein the transporter is required to indicate the tax amount payable in respect of the goods transported. In the instant case, it is not in dispute that the transpiration was covered by a valid tax invoice, which clearly showed the tax collected in respect of the goods and an e-way bill in the prescribed format in FORM GST EWB-01. Since there was no contravention by the petitioner of any provision of the Act or Rule for the purposes of Section 129, the detention in the instant case cannot be said to be justified. The respondents are directed to release the goods forthwith to the petitioner on the petitioner furnishing a copy of this judgment before the respondents - petition allowed.
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2020 (8) TMI 480
Detention of goods alongwith vehicle - Section 129 of the GST Act - petitioner seeks permission to clear the goods on furnishing a bank guarantee to cover the amounts demanded in Ext.P4 - HELD THAT:- The detention of the vehicle and the goods was on the finding that the goods on inspection were found to be different from those that were covered by the invoice and transportation documents - the detention cannot be said to be unjustified. The writ petition is disposed off by directing the 1st respondent to permit the petitioner to clear the goods and the vehicle on furnishing a bank guarantee for the amount demanded in Ext.P4.
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Income Tax
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2020 (8) TMI 479
Income Tax Settlement Commission order u/s 245D(4) - undisclosed foreign income and assets - whether the Settlement Commission lacked the jurisdiction to decide the applications under section 245C? - HELD THAT:- The counter affidavit be filed within a period of four weeks from today. Rejoinder affidavit be filed within a period of four weeks from the date of service of the counter affidavit on the petitioners. Counsel for the parties have agreed that the petition can be disposed of at this stage. In order to facilitate the Court in doing so, counsel shall file notes of their written submissions at least two weeks before the next date of listing. List the Special Leave Petition after eight weeks.
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2020 (8) TMI 478
TP Adjustment - comparable selection - Whether the Tribunal was right in holding that inclusion of companies with different financial years ending as comparables though Rule 10 B (4) of the Income Tax Rules refers only to data relating to the financial year of the assessee in which the international transaction has been entered into? - HELD THAT:- We confirm the finding of the Tribunal directing the exclusion of Infosys BPO Limited from the list of comparables. The conclusion arrived at by us is duly supported by the decision of the Hon'ble Division Bench of the Karnataka High Court in PCIT Vs. Swiss Re Global Business Solutions India [ 2018 (7) TMI 52 - KARNATAKA HIGH COURT] - As excluded from the list of comparables for the reason that it was a giant Company in the area of development of software Rejection of comparable selected by the assessee having different financial year - Tribunal followed the decision in R R Donnelley India Outsource Private Limited [ 2016 (8) TMI 1165 - ITAT CHENNAI] and remanded the matter back to the Assessing Officer by issuing similar direction as issued in the said order - HELD THAT:- The argument of the Revenue is that the direction is devoid of reasons. We do not agree with the said submission because the Tribunal had referred to the decision of R R Donnelley India Outsource Private Limited Vs. DCIT (supra). All the directions contained thereunder were issued and the position of law as applied by the Tribunal merits acceptance. Our views/conclusion is strengthened by the decision of the High Court of Delhi in PCIT Vs. Baxter India Pvt. Ltd [ 2018 (9) TMI 1894 - DELHI HIGH COURT ] . It is also a case arising out of an assessment for the year 2012-13, wherein the Court took note of the decision in the case of CIT-II Vs. Mckinsey Knowledge Centre Pvt. Ltd. [ 2015 (3) TMI 1226 - DELHI HIGH COURT] wherein it was held that if from the available data, the results for financial year can reasonably be extrapolated then the comparable cannot be excluded. No error in the order passed by the Tribunal on this issue Remove the Cosmic Global Limited from the list of comparables - Tribunal followed the assessee's own case in [ 2017 (2) TMI 1208 - ITAT CHENNAI] arising for the assessment year 2008-09 - therefore we find that the Tribunal was right in directing the Assessing Officer to exclude Cosmic Global Limited from the list of comparables. Suitable adjustment to account for differences in working capital position - Tribunal remanded the matter to the Assessing officer to rework the working capital adjustment - HELD THAT:- We find that the issue to be fully factual and no substantial question of law flows from it. While on this issue, we refer to the decision of the Division Bench of this Court in the case of Commissioner of Income Tax Vs. Same Deutz-Fahr India (P) Ltd. [ 2017 (12) TMI 631 - MADRAS HIGH COURT] wherein it was held that the right of appeal under Section 260A of the Act is not automatic and it is limited right of appeal restricted only to cases which involve substantial questions of law and it is not open to the High Court to sit in appeal over the factual findings arrived at by the Tribunal. Order of the Tribunal remitting the matter to the Assessing Officer to rework the working capital adjustment is affirmed and is not interfered as no substantial question of law arises for consideration on the said issue. Order granting risk adjustment at 2% - TPO had denied adjustments on the ground that the information is not readily available in the public domain to fine tune the margins of the comparables on the basis of standard benchmarks to adjust for the differential functional profile of the entities - HELD THAT:- Tribunal took note of the arguments of the assessee that they function under limited risk because they are a wholly owned subsidiary of their AE and they are a captive service provider and whereas the comparable Companies has independent entities, the assessee being a captive service provider is a very relevant factor. After noting the factual position, the Tribunal referred to the decision in M/s.KOB Medical Textiles Pvt. Ltd [ 2017 (5) TMI 1166 - ITAT CHENNAI] wherein the Tribunal held that the risk adjustment could be given only to Company to Company basis, considering the level of risk involved between the assessee and the comparable Companies adopting the percentage of risk adjustment granted thereunder. The Tribunal directed the Assessing Officer to grant 2% towards risk adjustment on adhoc basis. We find that no substantial question of law flows from this issue as it is entirely factual. Accordingly, the finding of the Tribunal on this issue does not call for any interference. Disallowance u/s 14A read with Rule 8D - HELD THAT:- This Court in the case of Commissioner of Income Tax, Central Board, Chennai Vs. Chettinad Logistics Private Limited [ 2017 (4) TMI 298 - MADRAS HIGH COURT] wherein it was held that Section 14A cannot be invoked. We note that the exempt income was earned by the assessee in the relevant assessment year. The Special Leave Petition filed by the Revenue as against this decision was dismissed by the Hon'ble Supreme Court on the ground of delay as well as on merits in the judgment reported in CIT, Chennai Vs. Chettinad Logistics Pvt. Ltd. [ 2018 (7) TMI 567 - SC ORDER] . Therefore the Substantial question of law has to be answered against the Revenue.
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2020 (8) TMI 477
Revision u/s 263 - eligibility of the assessee to claim deduction u/s 80IB(10) - Whether the Tribunal was correct in holding that the order under Section 263 of the Act is not sustainable in view of insertion of Section 13(8) of the Act? - HELD THAT:- Order passed by the AO is erroneous and is prejudicial to the interest of the revenue. The Tribunal by placing reliance on the decision in the case of HERO AUTO LIMITED [ 2012 (3) TMI 332 - DELHI HIGH COURT] has held that lack of enquiry regarding eligibility of assessee for deduction under Section 80IB(10) cannot be upheld. It is pertinent to mention here that in the aforesaid decision, from perusal of paragraph 3, it is evident that there was not discussion in the order of CIT (Appeals) as to how and in what manner the enquiry was lacking and what was the fault and default committed by the Assessing Officer. The distinction between lack of enquiry and inadequate enquiry was also noted. Therefore, the Tribunal grossly erred in law in applying the aforesaid decision to the fact situation of the case and ought to have appreciated that the instant case was a case of lack of enquiry and not inadequate enquiry with regard to claim of the assessee with regard to deduction under Section 80IB(10) of the Act. Tribunal has recorded the finding that the Assessing Officer should have examined the claim for deduction of the assessee in the light of Section 11 - Tribunal thereafter could not have proceeded to examine the matter on merits after setting aside the order under Section 263 of the Act with reference to Section 13(8) of the Act as the merits of the matter was not the subject matter of the appeal before the Tribunal. Substantial questions of law framed by a bench of this court are answered in favour of the revenue and against the assessee.
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2020 (8) TMI 476
Double Taxation - Payment of Normal Tax (advance Tax / TDS) considering the assessee has Multiple permanent establishments in India - Seeking stay of payment of equalization levy /s 165A read with Section 166A of the Finance Act, 2016 as amended by Finance Act, 2020 during the pendency of the present writ petition - applicant s case before this Court is that it is not liable to tax in India as its core business is carried outside India and none of the activities which are carried out in India result in the existence of either a permanent establishment ( PE ) or the payment received by it can be characterized as Royalty. HELD THAT:- Levy has been introduced w.e.f. 01st April, 2020 by amendment of the Finance Act, 2016 vide the Finance Act, 2020 and is being levied on the entities that do not have a PE in India. Since it is the applicant s case that it does not have a PE in India, it would be liable to pay tax under the new levy. However, according to the applicant, any further payment would result in double taxation. Revenue submitted that, it has no desire or authority of collecting the EL from the Applicant in respect of the income on which income tax has been paid by the Applicant either as advance tax or as TDS made by its customer banks in India during the pendency of this writ petition. - This Court is of the view that the respondent no.3 can have no objection to being held bound by its own averments in the reply/counter affidavit.
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2020 (8) TMI 475
Income accrued in India - amount received by the assessee on account of the provision of seismic survey services Fee for Technical Services (FTS as defined u/s 9(1) (vii) - taxable under the provisions of Sec. 44DA r.w. Section 115A of the Act - HELD THAT:- The said questions of law have already been answered by the order in ONGC vs. CIT. [2015 (7) TMI 91 - SUPREME COURT] . In terms whereof, the substantial questions of law were answered in favour of the assessee and against the revenue. The said position is not disputed by both the learned counsels. Decided in favour of assessee
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2020 (8) TMI 474
Valuation of stock - inclusion of duty of excise in the value - Accrual of liability - whether liability to pay excise duty is incurred immediately on manufacture of liquor or it arises only when the same is sought to be removed from the premises of the manufacturer, either for the purposes of sale or otherwise? - HELD THAT:- Assessee's liability to pay duty on the goods manufactured arises only at the time of removal of the same from its premises, be it distillery, or a warehouse or any other place of storage established or licensed under the Karnataka State Excise Act and not at any time earlier. The aforesaid issue is no longer res integra in view of decisions of Supreme Court in Polyset Corporation [ 1999 (10) TMI 66 - SUPREME COURT ] wherein held that till date of clearance of goods, excise duty payable on such goods does not get crystallized and assessee cannot be said to have incurred the excise duty liability. Thus, it was held that in respect of the excise goods not being removed, no liability is accrued and there is no question of payment of excise duty. The same view has been reiterated in 'MARUTI SUZUKI (INDIA) LIMITED VS. COMMISSIONER OF INCOME TAX, DELHI' [ 2020 (2) TMI 376 - SUPREME COURT ] - Decided against revenue.
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2020 (8) TMI 473
Stay petition - Recovery proceedings - HELD THAT:- Keeping in mind the fact that only 20% of the tax demanded was asked to be paid by 1st respondent as a condition for not enforcing the entire demanded amount as mentioned in the assessment order, we do not wish to interfere with the quantum of tax to be deposited i.e., 20% disputed tax as fixed by 1st respondent in the assessment order. We are inclined to grant to petitioner four (04) more weeks time to comply with the payment of 20% of the tax demanded as per the order of the 1st respondent. Writ Petition is disposed of directing petitioner shall pay to respondents on or before 31.03.2020 a sum of ₹ 60 lakhs; and the balance shall be paid in three (03) equal monthly installments on or before 30.06.2020 and in default of payment of any of these amounts, this order shall stand vacated.
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2020 (8) TMI 472
Unexplained investment in stock and spares - Addition u/s 69A - HELD THAT:- It is the not the case of the Revenue that the assessee has not accounted for certain purchases and is having excess stock than what is shown in its books of account. Moreover, the AO has not denied that the assessee has capitalised stock of stores and spares to the plant and machinery. The value of stock and spares is found to be capitalised in the plant and machinery and, therefore, the same could not have been found in the closing stock shown in the books of account. Stock of stores and spares which have been shown to the bank are reflected in the books of account under the head Plant and Machinery as the same were capitalised. Except for this, there is no evidence brought on record to suggest that the assessee has made investment in its stocks outside the books of account. Considering the totality of the facts, we are of the considered view that the provisions of section 69A of the Act do not have any application on the facts of the case in hand. We, accordingly, direct the Assessing Officer to delete the addition - Decided in favour of assessee.
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2020 (8) TMI 471
Revision u/s 263 - payment made to gratuity fund u/s 40A(7) disallowed - HELD THAT:- Payment made to LIC of India is not a provision but it is actual expenditure claimed under the gratuity contribution, which needs to be allowed as deduction. Therefore, the order passed by the AO u/s.143(3) was not erroneous and prejudicial to the interest of Revenue. In our opinion, the Pr.CIT is not justified in directing the AO to disallow the payment made to gratuity fund u/s.40A(7) of the Act, hence, the order passed by the Pr.CIT u/s.263 of the Act is hereby quashed. - Appeal of the assessee is allowed.
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2020 (8) TMI 470
Estimation of profit from bogus purchases - unexplained expenditure - HELD THAT:- In this case, considering the nature of business of the assessee the AO has estimated 40.50% gross profit, which has been upheld by the ld. Ld.CIT(A). Although, both authorities have taken uniform rate of profit for estimation of income from alleged bogus purchase, but no one could support said rate of gross profit with necessary evidences or any comparable cases. Therefore, rate of profit adopted by the AO as well as the ld. CIT(A) seems to be on higher side when compared to nature of business of the assessee and hence, to settle dispute between the parties, we direct the ld. AO to estimate 12.50% gross profit on alleged bogus purchases. Appeal filed by the assessee is partly allowed.
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2020 (8) TMI 469
Condonation of delay - delay in filing of appeal - HELD THAT:- As per the interpretation of the various courts, certain reasons would come under the definition of reasonable cause like illhealth of the concerned persons, who is aggrieved or his counsel is one of the reasons for condone, the delay in filing appeal. Further, the legislature has conferred power to condone delay by enacting section 5 of the Limitation Act, 1963, in order to enable the courts to do substantial justice to parties by disposing off matters on merits. At the same time, the courts has also held that every days of delays must be explained by the person. In this legal back ground, if you examine the facts of the present case, we find that the assessee has given reasons for not filing appeal within the time allowed under the Act, as per which the father of the assessee, Shri Mohanlal M.Shah, aged 65 years, who look after the tax matters of the assessee was admitted to hospital from 26/12/2018 to 29/12/2018 for spinal problem due to which, he could not attend the case for filing appeal before the Tribunal. However, immediately after recovery from his illness, he has filed appeal, which resulted in delay of 68 days in filing appeal before the Tribunal. If you go through, the reasons given by the assessee along with necessary supporting evidences filed to justify the reasons given for such delay, we find that the reasons given by the assessee for not filing appeal within the time allowed under the Act comes under the ambit of reasonable cause, as provided under the Act and as interpreted by the various courts. There is a reasonable cause for not filing appeal within the time allowed under the Act, which is sufficient to condone the delay in filing of appeal. We, further noted case of Collector of land acquisition vs Mst.Katiji [1987 (2) TMI 61 - SUPREME COURT] has very categorically held that when, substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other aside cannot claim to have a vested right injustice being done, because of a non-deliberate delay. We are of the considered view that this is a fit case for condonation of delay in filing of appeal and hence, we condone the delay in filing of appeal and admit the appeal for hearing.
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2020 (8) TMI 468
Deemed Dividend u/s 2(22)(e) - CIT- A ultimately concluded that it would be personal expenses for assessee which is met by M/s PHL and therefore, the addition would have to be confirmed - HELD THAT:- As rightly held by Ld. CIT(A), the provisions of Sec.2(22)(e) were not applicable since the payment was mere reimbursement of expenditure by M/s PHL. CIT(A) proceeded on wrong footing that the same would be personal expenditure and hence, disallowable completely overlooking the fact that the said expenditure has never been claimed by the assessee anywhere while computing his income. The said expenditure was booked as business expenditure by M/s PHL. Therefore, the impugned additions could not be sustained. By deleting the same, we allow the appeal.
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2020 (8) TMI 467
Deemed dividend u/s.2(22)(e) - Assessee has placed reliance on the decision in the case of Commissioner of Income Tax Vs. P. K. Badiani [ 1970 (2) TMI 3 - BOMBAY HIGH COURT] wherein held section 2(6A)(e) must be so interpreted that once an amount goes out of the accumulated profits as a loan and the loan is to be deemed to be dividend, the same amount when repaid cannot again be capable of attracting the fiction and be deemed to be dividend and avoid the happening of any such eventuality, the accumulated profits must be notionally reduced by the amount of all loans, etc., which are to be deemed to be dividends under the fiction under section 2(6A)(e) - HELD THAT:- This issue needs factual verification vis-a-vis the applicability of law as pronounced by the Hon ble Jurisdictional High Court (supra.). Double taxation, in any case, is not warranted within the spirit and soul of the Income Tax Statute. Therefore, we set aside the order of the Ld. CIT(Appeals) and restore the matter back to the file of Assessing Officer directing him to consider the judgment of the Hon ble Jurisdictional High Court (supra.) and analyze the same with the facts of the assessee s case and adjudicate the issue in compliance with the principles of natural justice. Appeal of the assessee is allowed for statistical purposes.
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2020 (8) TMI 466
Penalty u/s. 271(1)(c) - assessee voluntarily admitted income out of his agricultural income - AO rejected the assessee s agricultural income claim to the extent of ₹ 10 lakhs for want of details/evidences and completed the assessment, which the assessee itself accepted by its letter - HELD THAT:- Assessee has furnished confirmation letters from the purchasers of Casurina and necessary certificates from the Village Administrative Officer to prove that the assessee is owner of the land and he has grown a Casurina Plant etc. The assessee has also explained that the transactions were undertaken through his bank accounts and receipts are through banking channels. Thus, the assessee has clearly explained that he was in receipt of the impugned sum from the sale of Casurina plant. It is also seen from the orders of the lower authorities that the AO issued summons to the purchaser, Shri. Chandrakesavan and levied penalty for non-compliance of the purchaser and compelled the assessee to appear u/s. 131. The assessee agreed to admit additional income on a condition that penalty proceedings should not be initiated. However, when the AO has initiated penalty proceedings and sought for explanation, the assessee explained his transactions and brought to the notice of the AO that the impugned transactions were undertaken through banking channel. Therefore, the assessee prima facie, placed relevant materials and explained the transaction. Penalty proceedings being a separate proceeding, if at all, the AO intends to levy penalty, then the AO is bound to record the satisfaction that the explanation offered by the assessee is false. In this case, since the AO has not recorded such findings, we are of the opinion that the penalty levied is un-sustainable and hence it is deleted. The corresponding grounds of the assessee are allowed.
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2020 (8) TMI 465
Validity of reopening of assessment u/s 147 - reopening after four years - validity of reason to believe - Accrual of income - Whether lapsed freezer deposits cannot be treated as income in the hands of assessee? - HELD THAT:- Admittedly reopening of assessment was initiated after four years and the original assessment order was completed u/s 143(3) of the I.T.Act. Necessary precondition in such situation for reopening the assessment, is that the income has escaped assessment by reason of the failure on the part of assessee to disclose fully and truly all material facts. AO in the reasons recorded for issuance of notice u/s 148 had not mentioned that income has escaped assessment, on account of non-disclosure on the part of the assessee of full and true material facts necessary for completion of assessment. The taxability of lapsed freezer deposit on proportionate was basis of original assessment, whereas in the reassessment, the lapsed freezer deposit as on 31.03.2006 was sought to be taxed as income for assessment year 2009-2010. Therefore, the reassessment was initiated on mere change of opinion. Hence, going by the judicial pronouncements cited supra, we hold that reassessment order for assessment year 2009-2010 is bad in law. Accrual of income - Taxability of freezer deposits received by these assessee from their customers - Issues on merits we notice that the ITAT Cochin bench in its own case [2014 (4) TMI 1227 - ITAT COCHIN] had dismissed the department appeal against the original assessment following its own orders for the earlier years on the ground that the said amount is taxable only in the year of termination and the assessee had already offered such amount to tax in the return of income filed by it. - Decided in favour of assessee.
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Corporate Laws
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2020 (8) TMI 464
Reduction of Share Capital - Allegation on unfair valuation Minority shareholders opposed the scheme - Power of NCLT to approve the reduction in share capital - Power of NCLT or Board of Directors to modify/amend the resolution - The appellant had mentioned that the price offered per share is on the lower side and also station that it is against the spirit of Section 66 of the Companies Act. HELD THAT:- We note that to ensure fairness a fair play of the share purchase is necessary. The company appointed M/s BSR Associates LLP to do the valuation of share of the company. The company also added valuation taking into consideration the past performance as well as future projection by expert. - We find no irregularity in the valuation done by the valuer. We also note that the appellant in Company Appeal (AT) No.366/2019 has voted against the resolution and as per the affidavit of Respondent the appellant can hold the shares of Respondent company. If the appellant, Mr. Janak Mathuradas feels that the offer price is less and the valuation got done by him is the best, then we allow him to purchase/acquire the shares of other minority shareholders at a price of ₹ 2100/- and can hold it as per his wish. Power to modify the resolution / scheme approved in the EOGM - Held that:- The undertaking affidavit was filed as per the direction of the NCLT Mumbai, when the Respondent company stated that the shareholders who have voted against the resolution can continue to hold the shares of Respondent company. We also note that the special resolution specifically provides that the said reduction is being approved by the shareholders subject to any terms, modifications or conditions that the NCLT Mumbai may impose and the Board of Directors of the Respondent may agree. We note from the record that the NCLT has given directions and the same has been approved by the Board of Directors of the company. The NCLT has the powers, therefore, the Company has approached for approval of the same and the objectors have objected to the Scheme and the modification has been done. The same modification has been ratified by the Board of Directors. Therefore, it can not be said the NCLT has no power. If we assume that the NCLT has no power then it means that the scheme approved by the shareholders, whether wrong or right, the NCLT has to approve. We are not satisfied with the argument of the appellants that the NCLT has no power - the directions issued by the NCLT and modification proposed by the Board of Directors are the practical method to ensure that the shareholders who want to retain his shares are able to do so which does prejudice them. Appeal dismissed.
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2020 (8) TMI 463
Reduction of Share Capital - the equity shares of the petitioner-company were delisted from stock exchange - the company petition was filed for providing the non-promoter public shareholders an opportunity to liquidate their shareholding at a fair and equitable price. - HELD THAT:- In the present case, we have found no patent unfairness in the valuation report obtained by the petitioner-company. The proposed capital reduction has in fact also been approved by a majority of the non-promoter public shareholders. The petitioner-company to publish the notices about registration of order and minutes of reduction by the concerned Registrar of Companies Mumbai, Maharashtra in two newspapers namely i. e., Financial Express Mumbai edition in English language and translation thereof in Loksatta in Marathi language both having circulation in Mumbai within 30 days of registration. The petitioner-company undertakes to file certified/authenticated copy of the order and form of minutes duly certified by the Deputy Director or Assistant Registrar, National Company Law Tribunal, Mumbai Bench with the Registrar of Companies within 30 days of receipt of this order - Application for the reduction of share capital allowed subject to the directions given. Application for the reduction of share capital allowed.
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Insolvency & Bankruptcy
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2020 (8) TMI 462
CIRP process - Condition precedent for filing new application - submission of certain financial information as a record of default before the Information Utility - Section 7 of the IBC, 2016 - pre-existing dispute or not. What is the scope of the powers of the NCLT and whether the exercise of the same in the impugned order May 12, 2020 is de hors the IBC, 2016 and the rules and regulations framed thereunder? - HELD THAT:- While both the NCLT and NCLAT have been conferred with powers to regulate their own procedure, such use of its power is circumscribed and subject to inter alia, the principles of natural justice as well as the provisions of CA, 2013 or the IBC, 2016, inclusive of any rules/ regulations made under the IBC, 2016 by the regulatory body, IBBI. Therefore, the powers of the NCLT and NCLAT is limited both by principles of natural justice as well as statutory provisions and regulations framed under such legislations. Clause (a) of sub-section 3 of Section 7 clearly states that the financial creditor shall furnish along with the application record of the default recorded with the information utility or such other record or evidence of default as may be specified. As is evident, the clause is disjunctive in nature and when the word or is used in drafting of positive conditions, the positive conditions separated by or are read in the alternative. On a close due diligence of the various provisions above, including section 7 of the IBC, 2016 read with Rule 4 of the AA Rules, 2016 and Form-1 therein, and regulation 8 of the CIRP Regulations, 2016, observations of the Supreme Court in paragraph 32 (provided above), it becomes crystal clear that apart from the financial information of the IU, eight classes of documents can be considered to be sources that evidence a financial debt . Interpretation of section 215 of the IBC, 2016 - HELD THAT:- On a bare perusal of the section it appears that subsection (b) having used the word shall makes it mandatory for an operational creditor to file all information including information with regard to assets in relation to which any security interest has been created. This is because in subsection (c) of the above section the words may has been used in contradistinction for operational creditors. One would have to however note that subsection (1) of the above section refers to any person who intends to submit financial information . The use of the said term by the Legislature in subsection (1) leads me to an inference that submitting data to the information utility is not mandatory for all classes of people - Furthermore, one may read the heading of section 215 that reads as follows: Procedure for submission, etc., of financial information. It is trite law that the Heading of a section does not necessarily limit the section. However, all factors being taken in consonance and on a harmonious reading of section 215 of the IBC, 2016 with section 7 of the IBC, 2016 alongwith the Rules and Regulation discussed above, I come to the conclusion that the legislature did not intend to make it mandatory for financial creditors to submit financial information to the IU. The financial creditors can rely on either of the modes of evidences at hand to showcase a financial debt, that is, either a record of default from the IU OR any other document as specified which proves the existence of a financial debt. Analysis on Inherent powers of the NCLT - HELD THAT:- This brings me to the scope of the power of the tribunals under the CA, 2013 to invoke their inherent powers. The Central Government by virtue of its rulemaking powers under Section 469 of the CA, 2013 formulated both the NCLT Rules, 2016 as well as NCLAT Rules, 2016 which have been in operation with effect from July 21, 2016. Both Rules have a similar Rule 11 which revolves around the inherent powers of these Tribunals - Since the impugned order is silent as to the enabling provision, for the sake of hypothesis and the convenience of assumption, let me assume that that the impugned order was issued by the NCLT by exercising its inherent powers under Rule 11 of the NCLT Rules, 2016. The inherent powers of the NCLT under Rule 11 of the NCLT Rules, 2016 do not permit the NCLT to pass the impugned order. Analysis on Substantive and Procedural laws - HELD THAT:- The very nature of the impugned order would create barriers for financial creditors and would leave them on the high seas as regards the corporate insolvency resolution process. Under the above circumstances it is apparent that the NCLT has acted without jurisdiction and exceeded its jurisdiction that is limited within the four corners of Section 424 of the CA, 2013 and Section 7(3)(a) of the IBC, 2016. Furthermore, the impugned order is clearly striking a discord with Rule 4 of AA Rules, 2016 and Regulation 8 of the CIRP Regulations, 2016. Hence, the impugned order is so patently without jurisdiction that it cannot be allowed to stand - The impugned order dated May 12, 2020 issued by the Principal Bench of the NCLT, is de hors the CA, 2013, the IBC, 2016 and the rules and regulations framed thereunder. The question answered in affirmitive. In the event the answer to the above is in the negative, whether the NCLT could enforce the same retrospectively thereby adversely affecting the rights of the petitioner No. 1 as a financial creditor under the extant provisions of the IBC, 2016? - HELD THAT:- Section 240 of the IBC, 2016 which empowers the IBBI to make regulations (which are essentially to be characterized as delegated legislations ) stipulates that such regulations must be consistent with the IBC, 2016 to carry out the provisions of the IBC, 2016 and upon such perusal comes across as silent when it comes to empowering the IBBI to make regulations which are retrospective in nature - the retrospective nature of the impugned order promulgated by the NCLT is bad in law and does in fact, create new disabilities for financial creditors, as is the case with the writ petitioner No. 1 - the question is answered in the negative. IU is only one of the designated methods of furnishing proof to the AA or NCLT, to prove the existence of a financial debt that has accrued to a financial creditor. Coupled with Regulation 8 of CIRP Regulations, 2016 it becomes very apparent that the debt that is due to a financial creditor may be proved before the NCLT by any of the four classes of documents stated in subregulation 2(b) of Regulation 8 of the CIRP, 2016. The impugned order dated May 12, 2020 issued by the Principal Bench of the NCLT, New Delhi is held to be ultra vires the IBC, 2016 and the Regulations thereunder, and is accordingly struck down.
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2020 (8) TMI 461
Maintainability of application - initiation of CIRP - Financial Creditors - It is claimed that the Appellant deserve similar treatment as the Secured Financial Creditors - whether the Appellant required separate treatment at par with Secured Financial Creditors on the basis of the claim that it was Secured Operational Creditor? HELD THAT:- What appears is that the COC has consciously taken decision so as to persuade the SRA to increase the worth of the Resolution Plan to the extent of ₹ 235.86 Crores but in the process, accepted portions payable to the Operational Creditors to be reduced. As regards the contention of the Appellant in Appeal No.688 of 2019 that its claim was accepted by RP to the extent of ₹ 73,07,76,273/-, the RP has in Reply (Diary No.14497 of Appeal No.688 of 2019), accepted that in this regard, there was clerical/typographical error which can be rectified. What is apparent from the Appeal No.688 of 2019 itself is that the RP had initially accepted the claim of the Appellant IOC (Indian Oil Corporation Limited) only of ₹ 39,09,99,828/- which after correspondence was accepted to the extent of ₹ 73,07,76,273/-. It seems that subsequently, the earlier RP Mohan Lal Jain was replaced. In the process, the error may have occurred but now the RP has fairly accepted that this was an error which needs to be rectified. There are no substance in the Company Appeal (AT) (Ins) No.680 of 2019 to interfere with the Impugned Order or the Resolution Plan which has been approved - appeal disposed off.
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2020 (8) TMI 460
Maintainability of application - initiation of CIRP process - application was rejected on the ground that the claim of the Appellant falls within the ambit of disputed claim - the Respondent has filed Civil Suit after receipt of the demand notice - HELD THAT:- Appellant had regularly supplied goods to the Respondent i.e. earlier to the 5 invoices. The Respondent has denied that the Appellant has never delivered 5 invoices referred in the application but subsequently he admits that the Appellant has supplied goods as per invoice dated 26.11.2016 and 20.12.2016. In the C-Forms delivered by the Respondent to the Appellant there is reference to all the 5 invoices, the Respondent has no courage to say that the C-Forms are forged. From the ledger of Respondent maintained by the Appellant it is apparent that there was a long business relationship between the parties. Ledger and bank account enteries corroborate with 5 invoices. If really the Appellant was unable to supply raw material due to shortage then Respondent could have filed the correspondence with the Appellant in this regard. The Respondent has not placed on record any of the invoice to show that he had to purchase material from Appellant s competitors. In this case in reply to the notice the Respondent has raised a vague and baseless allegations against the Appellant which are not supported by any documentary evidence. Therefore, the dispute is spurious or hypothetical, hence the Adjudicatory Authority has to reject such defence. The Adjudicating Authority wrongly rejected the claim on the ground that the claim raised by the Appellant falls within the ambit of disputed claim. Merely disputing a claim cannot be a ground, as held by the Hon ble Supreme Court in Innovative Industries Ltd Vs ICICI Bank and Anr. [ 2017 (9) TMI 58 - SUPREME COURT] wherein it is observed that claim means a right to payment even it is disputed. The Code gets triggered the moment the default of ₹ 1 Lakh or more . The Respondent has defaulted to pay more than ₹ 1 Lakh and in absence of any pre-existing dispute and the record being complete, the application u/s 9 preferred by the Appellant was fit to be admitted - Appeal allowed.
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2020 (8) TMI 459
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - It is the stand of the 2nd Respondent/ Bank that it had only put part of the Secured Asset to an auction, which was let out by the Appellant to the Charak Hospital Research Centre and the remaining was not put to Auction - Time Limitation - HELD THAT:- The provisions of I B Code override other Laws. At the same time, the IBC proceedings cannot be initiated based on time barred claims. Regardless of when IBC came into force, if more than three years had elapsed from the date of default, a creditor is not entitled to maintain an Application under the Code. IBC is not a litigation and that an Adjudicating Authority is not deciding a money claim or suit. In short, an Adjudicating Authority is not a Court of Law. Time Limitation - HELD THAT:- The 1st Respondent/ Company Corporate Debtor s loan account was declared NPA by the 2nd Respondent on 31.03.2004. A Recall Notice dated 11.07.2007 was issued by the 2nd Respondent/ Bank to the Corporate Debtor for recalling the facility and demanding a sum of ₹ 17,94,54,108.73/-. The Application before the Tribunal was filed on 11.12.2018. The Application was served on the Corporate Debtor vide letter dated 11.03.2019. The Section 7 Application filed by the 2nd Respondent/ Bank in the year 2018 is a belated one because of the simple reason that in the present case the declaration of NPA or default on 31.03.2004 had occurred over three years prior to the date of filing of the Application and hence, this Tribunal comes to an inescapable conclusion that the Application filed by the 2nd Respondent/ Bank (under Section 7 of the Code) before the Adjudicating Authority is hit by Limitation, as per Article 137 of the Limitation Act, 1963. This Tribunal comes to an inevitable conclusion that Application filed under Section 7 of the Code by the 2nd Respondent/ Bank before the Adjudicating Authority (NCLAT), Mumbai-II is barred by Limitation and that the Adjudicating Authority had erred in admitting the Application, which needs to be set aside by this Tribunal and accordingly this Tribunal set-aside the impugned order dated 16.12.2019, in the interest of justice. Application dismissed - The matter is remitted to the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench-II for determining the fee and costs of the Corporate Insolvency Resolution Process as incurred by him, which is to be borne and paid by the 2nd Respondent/ Bank (Financial Creditor).
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2020 (8) TMI 458
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - pre-existing dispute or not - HELD THAT:- The supply of materials by Operational Creditor to the Corporate Debtor under the purchase order and LoA is not in controversy. It is also not in controversy that some of the goods lying unutilised in Gaya DF Area, exposed to vagaries of Nature or pilferage, were lifted back by the Operational Creditor at the specific request of the Corporate Debtor . The conclusion drawn by the Adjudicating Authority on the basis of material brought on record by the parties that dispute in regard to quality of goods not matching the specification of franchiser was for the first time raised by the Corporate Debtor in its reply to the demand notice, justifies the conclusion that the defence raised was an afterthought and spurious. Factum and validity of the letter produced, goes un-assailed and uncontroverted on the part of Corporate Debtor as also the Appellant. The amount acknowledged to be in default far exceeds the prescribed limit of ₹ 1 lakh warranting triggering of Corporate Insolvency Resolution Process . In this view of the matter, the issue raised in this appeal no more survives for consideration as the operational debt being due and payable stands admitted and acknowledged. Appeal dismissed.
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2020 (8) TMI 457
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - default has been committed by dishonour of cheques - privity of contract - HELD THAT:- tHE father and son have been working in tandem to defraud the Creditors and raising the false plea of there being no privity of contract between the Corporate Debtor and the Financial Creditors while being fully conscious of the fact that the financial assistance was obtained for promoting the business of the Corporate Debtor . While Mr. P.C. Pantulu acted as authorised representative of the borrower- Cybermate Infotek Limited , son Mr. P. Chandra Shekhar (Appellant), Director of the Corporate Debtor , acted as Guarantor. The Settlement deed dated 7th September, 2016 executed between the lenders including the Financial Creditors and the aforestated father and son duo is in furtherance of loan extended by the Financial Creditors to the Corporate Debtor towards discharge of liability of the Corporate Debtor . The Letter dated 1st February, 2017 issued by the Corporate Debtor to Respondent No.2 is also to the same effect. The Settlement Agreement dated 7th September, 2016 and the letter dated 1st February, 2017 admitting the debt on behalf of the Corporate Debtor confirm these conclusions. It is, therefore, of no avail for the Appellant to contend on behalf of the Corporate Debtor that the debt, liability in respect whereof has been admitted and acknowledged and default has been committed by dishonour of cheques, was not payable in law or in fact. The issue raised and the arguments advanced on behalf of the Appellant being devoid of merit are repelled - Appeal dismissed.
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2020 (8) TMI 456
Replacemnet of Resolution Professional - Collusion between Creditor and Debtor to initiate CIRP - Related Party - Recall of order - levy of penalty - Jurisdiction of Adjudicating Authority - It is the case of the Appellant that the Appellant- Bank of India is a secured creditor which did not trigger any Corporate Insolvency Resolution Process against the Corporate Debtor but Laxmi Kantha Rao Thota (Respondent No.3), who is a related party of the Corporate Debtor , filed an application under Section 7 of the I B Code in connivance with the Corporate Debtor . HELD THAT:- The Adjudicating Authority has failed to exercise jurisdiction vested in it. The material irregularity brought to our notice in the resolution proceeding goes to the root of the matter and the impugned order cannot be sustained. This is notwithstanding the fact that the order of admission of application under Section 7 has not been assailed in appeal. Once it was brought to the notice of the Adjudicating Authority that the initiation of the Corporate Insolvency Resolution Process was at the instance of Respondent No.3, who was allegedly a related party on the date of filing of application as also on the date of admission of such application, fraudulently i.e. with intent to defraud the Appellant being the Sole Secured Financial Creditor of the Corporate Debtor , the Adjudicating Authority should not have abdicated its duty by deferring the decision on application under Section 65 of the I B Code preferred by the Appellant until final hearing despite recording findings and making observations that the provisions of the I B Code had been blatantly infracted by the Interim Resolution Professional by excluding Appellant from the purview of the Committee of Creditors . Admittedly, the Resolution Process has failed to fructify and the Adjudicating Authority is considering the recommendation for liquidation of the Corporate Debtor . It is queer that the pivotal issue remains to be determined while the Corporate Debtor may go into liquidation leaving the Appellant remediless, which would result in great miscarriage of justice. It is for this Appellate Tribunal to step in and ensure that such miscarriage of justice is prevented. The impugned order cannot be sustained - Matter restored before the Adjudicating Authority - Certain period to be excluded. - Appeal allowed.
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2020 (8) TMI 455
Liquidation Order - appellant submits that without deciding the applications of the Appellants, the Adjudicating Authority proceeded to pass orders of Liquidation as period for completing CIRP had come to an end and no Resolution Plan had been received - HELD THAT:- We do not find that only because Mr. Uttam Chand Chauodhary was CA of the Corporate Debtor and happens to be CA also of the Original Financial Creditor who filed Application under Section 7 of the IBC, one can jump to a conclusion of collusion especially, when nothing is shown that the said Uttam Chand Choudhary has any shares or is Director of the Original Financial Creditor. Still, further material would be required to be shown to claim collusion between the Said Financial Creditor and the Directors of the Corporate Debtor. Merely on assumption, fraud can not be said to have been prima facie indicated for the Adjudicating Authority to further take cognizance of the averment made. The Learned Counsel states that the Appellant had filed Application before the Adjudicating Authority to consider Appellants as Resolution Applicants. It is stated that the Adjudicating Authority did not pass orders even on that application. It appears to us that the Provisions of IBC require that a prospective Resolution Applicant must approach the Resolution Professional by filing expression of interest and then following the procedures of IBC and the Regulations and complete compliances regarding the tendering of the Resolution Plan. Nothing of this sought has admittedly been done. Without moving Resolution Professional CoC filing of application to Adjudicating Authority is not the solution - When admittedly, the necessary procedure was not followed during the course of CIRP as required by the Provisions of IBC and the Regulations, such belated offer can not be said to be bona fide. Merely expressing that I am ready to file Resolution Plan is not sufficient for taking cognizance of such offer. There are no reason to interfere in the Impugned Order by which the Liquidation Orders have been passed - appeal dismissed.
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2020 (8) TMI 454
CIRP process - it is alleged that Appellant did not file any claim as operational creditor or financial creditor and appellant does not come within the meaning of creditor - HELD THAT:- The Appellant is neither operational creditor nor financial creditor or secured creditor or unsecured creditor or a decree-holder . Therefore, in the present case, the Appellant s claim is not a security interest or any other right as operational creditor or financial creditor and the appeal can be filed against approval of a plan by any aggrieved person o any ground, mentioned in subsection (3) of Section 61 of the I B Code. There is nothing on record to show that the approved resolution plan is in contravention of the provisions of any law for the time being in force or there has been any material irregularity in exercise of the powers by Resolution Professional (i) during the corporate insolvency resolution period; it is not the case of the Appellant that (ii) the debt owed to the operational creditors of the corporate debtor have not been provided in the resolution plan in the manner specified by the Board; or (iii) the insolvency resolution process costs have not been provided for repayment in priority to all other debts; or (iv) resolution plan does not comply with the criteria specified by the Board - As none of the criteria fulfils in this appeal, Section 61(3) of the I B Code is not attracted. Appeal dismissed.
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2020 (8) TMI 453
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - time limitation - HELD THAT:- It is evident from the records that both Appellant and Respondent No. 1 herein resorted to filing proceedings/claims/counter claims before other forums - Even if the learned Counsel for the Appellant intend to take a stand that the pending proceeding before the DRT and other Civil Courts get extends the limitation, we are of the firm opinion that the proceedings before the DRT and other forums, will not get the benefit of extending the limitation period merely on the basis of pending proceedings before the DRT. In this regard, it is unequivocal and settled law that the IBC is a complete Code and as per Section 238 of IBC it has overriding effect on other laws. Therefore, pending proceedings before other forums, the limitation will not get extended. There are no illegality in the order passed by Adjudicating Authority in rejecting the Application filed by the Appellant-Bank under Section 7 of IBC - appeal dismissed.
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2020 (8) TMI 452
Liquidation proceedings - case of appellant is that the Tribunal failed to appreciate the statutory provision as also the fact that the Liquidator had reduced the price below 75% of the reserved price bypassing the provisions of Regulation 33 (2) and without obtaining permission from the Tribunal - HELD THAT:- The liquidation estate comprising of Nicco House admittedly does not belong to the Appellant and in its capacity as tenant, the Appellant having no right, title or interest in Nicco House other than the right of occupation in accordance with the terms of Lease Agreement does not fall within the ambit of Operational Creditor under Section 5(20) of the I B Code . It is absurd to assert or even to suggest that by using the demised premises as a tenant, the Appellant was rendering any services so as to bring its claim within the fold of operational debt . The argument raised on this score being fallacious is rejected. Insofar as the liquidation proceedings are concerned, it is for the Liquidator to form the liquidation estate in relation to the Corporate Debtor as mandated under Section 36 of the I B Code which include assets over which the Corporate Debtor has the ownership rights. The Liquidator is required to access any information systems for the purpose of admission and proof of claims and identification of the liquidation assets relating to the Corporate Debtor , receive and collect the claims of the creditors within 30 days of commencement of the liquidation process, verify such claims and finally either admit or reject the claim either in whole or in part. The determination of valuation of claims, as mandated by Section 41 of the I B Code , falls within the domain of the Liquidator who is supposed to follow the Regulations framed by the Insolvency and Bankruptcy Board of India in this regard. It has rightly been held to have no locus standi under Section 47(1) of the I B Code to seek any direction against the Liquidator as regards alleged undervalued sale transaction. That apart, it appears that the Appellant has taken varying stands mutually exclusive and inconsistent. Claim of compensation in its capacity as tenant is incompatible with its lately projected claim of being an operational creditor qua the Corporate Debtor . Both stands can t co-exist. Without having a locus, the Appellant has been interfering with the process of liquidation and thwarting the liquidation process which ultimately will have deleterious effect on the rights of those who are found entitled to the benefit of the distribution of sale proceeds of liquidation proceedings. The role played by the Appellant, as the chequered history of the case unfurls, is unwarranted. Re-agitating the same matter time and again in different rounds and lately under self-assumed status of being an operational creditor clearly at variance with the Appellant s admitted status as tenant of Nicco House . The appeal is frivolous and devoid of any merit. The view taken by the Tribunal does not suffer from any legal infirmity or factual frailty - Appeal dismissed.
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Central Excise
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2020 (8) TMI 451
Valuation of excisable goods - Amendment to Section 4 - change from Normal value to Transaction value - allegations that assessees in these cases allegedly undervalued the goods, sold them for a much higher price than what was reflected in the invoices and thereby they evaded the excise duty actually payable. - period of assessment was both prior to and after 01.07.2000 and in other cases, the period was after 01.07.2000 HELD THAT:- The Adjudicating Authorities as well as CESTAT are also guilty of failure to do something in these batches of cases - Since the Adjudicating Authorities as well as the CESTAT failed to make various determination, the orders of remand passed by the Tribunal, though for completely different reasons, were justified - Hence the appeals are liable to be disposed of, confirming the orders of remand passed by CESTAT, with a clarification on the legal issues so that the Adjudicating Authorities know how to proceed. However, while carrying out the exercise of re adjudication, the Adjudicating Authorities should keep in mind the principles enumerated hereunder: Cases where the period of assessment is prior to 01.07.2000 First ascertain the price at which such goods are ordinarily sold by the assessee to a buyer who is not related to him, in the course of wholesale trade, at the time and place of removal and also find out whether the price is the sole consideration for the sale. If the Adjudicating Authority is able to find this out, he may take such price as the normal price and treat the case as covered by Section 4(1)(a), applying, wherever permissible, the prescriptions contained in the proviso to clause (a) of sub -section (1) of Section 4. If Value is not ascertainable, then follow the Rules. The phrase for any other reason appearing in Section 4(1) (b) would include cases where the price charged in the course of wholesale trade is not discernible or where the same, though discernible, cannot be linked to delivery at the time and place of removal or where the price is not the sole consideration for the sale, even though the price charged in the course of wholesale trade for delivery at the time and place of removal are available. Cases where the period of assessment is after 01.07.2000 First ascertain the transaction value , with particular reference to the definition of the said expression contained in Section 4(3)(d). Apply the transaction value so ascertained, to cases where three conditions, namely (i) the goods are sold for delivery at the time and place of removal, (ii) the assessee and buyer are not related and (iii) the price is the sole consideration, are satisfied. This is because such cases will fall under Section 4(1)(a). If Value is not ascertainable or all the 3 conditions are not satisfied, then follow the Rules. Principles applicable in common (both pre and post amendment) The Adjudicating Authority may treat any amount received either in cash or otherwise, over and above the invoice value, as the value of excisable goods even in cases falling under Section 4(1)(a) (after the amendment), as the definition of transaction value under Section 4(3)(d) means the price actually paid or payable. The Adjudicating Authority shall keep in mind the fact that while the expression normal price was not defined in Section 4(1) before amendment, the expression transaction value is defined very exhaustively in Section 4(3)(d) and this definition is both inclusive as well as exhaustive.
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CST, VAT & Sales Tax
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2020 (8) TMI 450
Levy of penalty u/s 31(8) of Haryana VAT Act - allegation that the driver was not carrying statutory documents though the goods in the present case have been imported from out of country and the Custom Duty has been paid on the same - appellant argued that the penalty imposed was illegal, there could have been no evasion of tax as the goods were imported from Germany and it was accompanied by challan VAT D-3 and bill of entry. HELD THAT:- The contentions raised lack merit. The documents produced showed import by NAW, the goods were moving from Tuglabad to Faridabad, as per the handwritten slip and the statements recorded, the goods were to be delivered to the appellant directly. There was no document accompanying the goods for the said transaction i.e. transfer to the appellant. It would be worth mentioning here that the employee of the appellant was accompanying the goods, yet he was not carrying any document for the transaction between NAW and the appellant - The fact that the goods originated from Germany will not be of any help in the present case as there would be no tax involved in the hands of the importer so far as import transaction is concerned but the subsequent transaction would be governed by the provisions of the Act. The stand taken by the appellant that the goods were being sent for job work was not substantiated, as no agreement to the said effect was produced. The challan for transfer of goods was produced after a delay of 14 days, there is no mention of time of removal of goods in the challan and the same has rightly been not found worth reliance. There is another aspect of the matter, inspite of the fact that the goods worth ₹ 30 lacs odd were detained by the authorities, yet the principal/real owner (as per the case of the appellant) neither came forward in the penalty proceedings nor produced evidence which was solely in its possession, to substantiate the stand taken and the averments made. Appeal dismissed.
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