TMI Tax Updates - e-Newsletter
August 26, 2020

Case Laws in this Newsletter:

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

Articles

1. Rate of depreciation – litigation by revenue is not desirable.

   By: DEVKUMAR KOTHARI

2. ALL ABOUT AADHAR AUTHENTICATION IN GST

   By: Ramandeep Bhatia

News

1. Structural Reforms are a Key Priority of the Government: Finance Minister

2. ₹ 2,000 notes were not printed in 2019-20: RBI annual report

3. APEDA signs MoUs with AFC India Limited and National Cooperative Union of India to synergize the activities in the interest of agriculture and allied sectors

Notifications

Companies Law

1. G.S.R. 526 (E) - dated 24-8-2020 - Co. Law

Companies (Corporate Social Responsibility Policy) Amendment Rules, 2020

2. G.S.R. 525 (E) - dated 24-8-2020 - Co. Law

Amendment in Schedule VII in Companies Act, 2013

GST - States

3. S.O. 159 - dated 24-8-2020 - Bihar SGST

Amendment in Notification S.O. No. 177, dated the 21st September, 2017

4. S.O. 158 - dated 24-8-2020 - Bihar SGST

Amendment in Notification S.O. No. 173, dated the 21st September, 2017

5. 23839 - FIN-CT1 -TAX- 0036/2020 - dated 25-8-2020 - Orissa SGST

Appointment of Revisional Authority under Odisha Goods and Services Tax Act, 2017

Circulars / Instructions / Orders

Customs

1. PUBLIC NOTICE No. 63/2020 - dated 21-8-2020

Disaster Recovery (DR) Drill planned from 21st -23rd August, 2020

2. PUBLIC NOTICE NO. 13/2020 - dated 19-8-2020

Streamlining of UQCs in Bills of Entry and Shipping Bills

3. PUBLIC NOTICE No. 62/2020 - dated 17-8-2020

Streamlining of UQCs in Bills of Entry

4. PUBLIC NOTICE No. 59/2020 - dated 5-8-2020

2ndphase of All India roll-out of Faceless Assessment

5. PUBLIC NOTICE NO. 105 /2020 - dated 5-8-2020

Instructions for uploading documents in E-Sanchit for approval of AD Code/IFSC with Bank Account in ICES

6. PUBLIC NOTICE No. 57/2020 - dated 29-7-2020

Prohibition of selling of Health Supplement containing PABA (Para Amino Benzoic Acid) a banned ingredient

7. PUBLIC NOTICE No. 56/2020 - dated 29-7-2020

Mandatory Testing and Certification of Telecommunications Equipment (MTCTE)

8. PUBLIC NOTICE No. 54/2020 - dated 17-7-2020

Requirement of Veterinary Certificate for import of Milk, Milk Products and Edible Lactose into India- Amendment to Public Notice No. 43/2020 dated 22.05.2020

9. PUBLIC NOTICE No. 22/2020 - dated 14-7-2020

Advisory for roll-out of IGST refund module for exports in ECCS application

10. PUBLIC NOTICE No. 43/2020 - dated 14-7-2020

Operationalization of Certain Functionalities in ICEGATE and Streamlining of processes in System related to Bonds and First Check BEs

11. PUBLIC NOTICE NO. 34 /2020 - dated 10-7-2020

ICES Advisory 25/2020 — Measures for Contactless Customs in EDI System

12. Public Notice No. 35/2020 - dated 10-7-2020

Turant Customs — Turant Suvidha Kendra and Other Initiatives for Contactless Customs

13. PUBLIC NOTICE NO. 12/2020 - dated 8-7-2020

Turant Customs — Turant Suvi4ha Kendra and Other Initiatives for Contactless Customs

Highlights / Catch Notes

GST

• Court Orders Respondents to Share Seized Documents with Petitioners; Unused Documents Must Be Returned Post-Investigation.

  Case-Laws - HC : Direction to the respondents to issue copies of the seized documents - the respondents shall permit the petitioners to take copies of those documents relied upon in the said notice/proceedings, before proceeding further in the matter. After the stage of investigation, the respondents shall return to the petitioners, all such seized documents as are not relied upon by them for proceeding further against the petitioners. - HC
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• Profiteering Allegations on Luggage Bags Not Subject to Penalties u/ss 171(1) & 122(1)(i) of CGST Act 2017.

  Case-Laws - NAPA : Profiteering - supplies of “luggage trolley bag/suitcases”, namely “Tropic 45 Weekender Black” and “Neolite Strolly 53 360 (VIP) FIR - the violation of the provisions of Section 171 (1) is not covered u/s 122(1)(i) of the CGST Act, 2017 as it does not provide penalty for not passing on the benefits of tax reduction and ITC and hence the penalty prescribed u/s 122 cannot be imposed - NAPA
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• Restaurant Overcharges Customers by 11.16% After GST Rate Cut, Ordered to Refund Excess to Consumer Welfare Funds.

  Case-Laws - NAPA : Profiteering - restaurant service - the Respondent had increased the base prices of different items by more than 11.16% i.e. by more than what was required to offset the impact of denial of ITC, supplied as a part of restaurant service, to make up for the denial of ITC post-GST rate reduction - The amount as determined is directed to be deposited in two equal parts, in the Central Consumer Welfare Fund and the Maharashtra State Consumer Welfare Fund - NAPA
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Income Tax

• Higher Depreciation Claim Denied for Assets Partly Used Personally Under Income Tax Act; Applies Only to Hire Vehicles.

  Case-Laws - AT : Additional depreciation on certain assets/machineries - If the assessee uses partly for own use and for hire charges he is not entitled to claim excess depreciation as per the provisions of the Income Tax Act. The rule for charging higher depreciation has been prescribed only for the vehicles which are running on hire. - AT
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• Income Tax Act: Section 56(2)(vii)(b) Inapplicable as Sub Clause (ii) Absent During Property Agreement.

  Case-Laws - AT : Addition u/s 56(2)(vii)(b) - purchase of immovable property - difference amount between the consideration paid by the assessee and the Sub Registrar Office (SRO in short) value - The AO is not permitted to invoke the provisions of section 56(2)(vii)(b)(ii) in the absence of sub clause (ii) in the Act as on the date of agreement. - AT
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• Reopening of Assessment u/s 147 Challenged; Court Finds It a Change of Opinion, Not Permissible by Law.

  Case-Laws - AT : Reopening of assessment u/s 147 - deduction u/s 57 disallowed - AO has applied his mind and formed an opinion for allowance of this interest expenses while framing original assessment. Now, reopening on the very same issue tantamount to change of opinion which is not permissible in law. - AT
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• Goodwill from Amalgamation with Liabilities Over Assets Depreciable as Intangible Asset under IT Act Section 32.

  Case-Laws - AT : Depreciation on goodwill arising out of amalgamation - The excess of liabilities over net assets was treated as goodwill - goodwill arising on account of amalgamation would constitute intangible asset eligible for depreciation u/s.32. - AT
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• Court Rules Against Additional Disallowances to Prevent Double Taxation of Cash Expenses Already Disallowed by Assessee.

  Case-Laws - AT : Disallowances of expenditure - Assessee itself has disallowed major part of cash expenses as unaccounted. There would be no justification for making further addition, which evidently would lead to double taxation. - AT
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• Unexplained Bank Deposits Taxed u/s 69, Not Section 68, Per Income Tax Act: Key Tax Treatment Distinction.

  Case-Laws - AT : Addition u/s 68 v/s 69 - unexplained deposit in the bank account - sum was not credited in the books of accounts, but the amount was found credited in the bank account of the assessee - The correct course of action for taxing the sums paid into the bank account is to tax u/s 69 and not u/s 68 - AT
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• Entity Challenges 40% Disallowance of Building Maintenance Expenses; Seeks Reduction to 10% for Sub-Leasing Operations.

  Case-Laws - AT : Addition of Building maintenance expenses - assessee is carrying on sub-letting activity on the buildings taken on rent. Hence the expenses incurred on building should be mainly on maintenance activities only - the disallowance of 40% of expenses on the higher side. - the disallowance may be restricted to 10% of the expense claimed - AT
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• Unsigned Notice u/s 148 Invalidates Assessment Reopening; Reassessment Proceedings Nullified Due to Legal Flaws.

  Case-Laws - AT : Reopening of assessment u/s 147 - invalid notice - Copy of the notice u/s 148 is unsigned as well as did not mention any assessment year - Since the notice itself was illegal and bad in Law, therefore, entire re-assessment proceedings have been vitiated - AT
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Corporate Law

• NCLT Can Order Forensic Audit u/r 11 to Address Alleged Oppression and Mismanagement in Company Disputes.

  Case-Laws - AT : Oppression and Mismanagement - Direction for Forensic Audit before deciding the issue of maintainability - Status Quo Ante - Thus the NCLT under Rule 11 of National Company Law Tribunal Rules, 2016 has the inherent powers to pass such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal. - AT
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• NCLT Failed to Address Key Legal and Factual Issues in Oppression and Mismanagement Case, Order Deemed Nonspeaking.

  Case-Laws - AT : Oppression and Mismanagement - the impugned order is a nonspeaking order. The question of Oppression, and Mismanagement, Maintainability and Limitation in the present case are mixed question of law and fact. Therefore, the NCLT was required to decide these questions at the time of final hearing of the Petition. - AT
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IBC

• Interest on Delayed Payments Not Considered "Operational Debt" in CIRP Due to Pre-Existing Dispute.

  Case-Laws - AT : Initiation of CIRP - the outstanding amount is towards interest on the delayed payments, for which there was a pre-existing dispute, before issuance of demand notice. The alleged claim amount, towards interest on loan alone, cannot be termed as an “Operational Debt‟ - AT
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• Force majeure event impacts project completion, CIRP initiated. RERA relief sought, Section 7 application filed for refund, later rejected.

  Case-Laws - AT : Initiation of CIRP - Apart from the fact that there are ‘force majeure’ due to which the ‘Corporate Debtor’ could not complete the project, it is found that the 1st Respondent knocked the doors of the RERA and instead of waiting there, moved application under Section 7 not for Insolvency Resolution to get the Flat/ Apartment or liquidation, but for refund of the amount already paid. - Further after reaching upon the settlement, application rejected - AT
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• Corporate Applicant's Fraudulent Intent in Insolvency Filing u/s 10; No Penal Order Issued Yet u/s 65.

  Case-Laws - AT : The stand as taken by the parties, suggest that the application under Section 10 of the I&B Code was filed by the ‘Corporate Applicant’ fraudulently with malicious intent and not for ‘Resolution’ or ‘Liquidation’ and may attract Section 65 of the I&B Code for penal action. However, as no such order has been passed by the Adjudicating Authority (NCLT), we are not passing any penal order u/s 65 - AT
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Case Laws:

• GST

• 2020 (8) TMI 604
  Direction to the respondents to issue copies of the seized documents - territorial Jurisdiction - transfer of the investigation to Kollam - HELD THAT:- The petitioners will no doubt be entitled to seek copies of the documents seized from their premises, if and when they are confronted by the respondents with any notice or other proceeding, wherein reliance is placed on the said seized documents. I, therefore, make it clear that in the event of any notice or other proceedings being issued to the petitioners in connection with the investigation that is currently ongoing, wherein reference is made to any document seized from the petitioners, the respondents shall permit the petitioners to take copies of those documents relied upon in the said notice/proceedings, before proceeding further in the matter. After the stage of investigation, the respondents shall return to the petitioners, all such seized documents as are not relied upon by them for proceeding further against the petitioners. Transfer of the files to Kollam and to base the investigation in Kollam - HELD THAT:- The said prayer of the petitioners cannot be acceded to. In matters of investigation the respondents are to be given a certain degree of leeway while deciding such administrative matters such as the place at which an investigation is to be based and the manner in which it is to proceed. With such administrative decisions of the investigating authority this Court would be loath to interfere, in proceedings under Article 226 of the Constitution of India. Petition allowed in part.

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• 2020 (8) TMI 603
  Attachment of property - issuance of summons for the presence of applicant - applicant expressed inability to be present as he was medically advised not to step out - HELD THAT:- No sooner the writ applicant failed to respond to the summons issued to him by the respondent No.4 under Section 70 of the Act, the respondent No.4 proceeded to pass an order in Form GST DRC-01A fixing the liability of Rs. 1,07,05,725/- to be paid to the department - It is not in dispute that the writ applicant had no opportunity to make good his case that all his transactions are legal and free from any doubt. Besides the same, the writ applicant had informed the respondent No.4 that he has been medically advised not to get out of his house. During that particular period, the writ applicant had also undergone cataract surgery. Having regard to the fact that a huge liability has been determined to be discharged by the writ applicant, one opportunity of hearing should be given to the writ applicant - matter remitted to the respondent No.4 for fresh consideration of the matter after giving an opportunity of hearing to the writ applicant - application allowed by way of remand.

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• 2020 (8) TMI 602
  Profiteering - supplies of luggage trolley bag/suitcases , namely Tropic 45 Weekender Black and Neolite Strolly 53 360 (VIP) FIR - allegation that Respondent had denied the benefit of GST rate reduction - violation of the provisions of Section 171 (1) of CGST Act - 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 to 31.08.2018 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 invoices while charging excess consideration and GST from the buyers. However. from the perusal of Section 122 (1) (i) of the CGST Act, 2017, it is clear that the violation of the provisions of Section 171 (1) is not covered under Section 122 (1) (i) of the CGST Act, 2017 as it does not provide penalty for not passing on the benefits of tax reduction and ITC and hence the penalty prescribed under Section 122 cannot be imposed for violation of the anti-profiteering provisions made under Section 171 of the above Act - It is further revealed that vide Section 112 of the Finance Act; 2019 specific penalty provisions have been added for violation of the provisions of Section 171 (1) which have come in to force w.e.f. 01 01.2020. by inserting Section 171 (3A). Since, no penalty provisions were in existence between the period w.e.f. 15.11.2017 to 31.08,2018 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) can not be imposed on the Respondent retrospectively. Accordingly, the notice dated 13.06.2019 issued to the Respondent for imposition of penalty under Section 122 (1) (i) is hereby withdrawn and the present penalty proceedings launched against him are accordingly dropped.

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• 2020 (8) TMI 601
  Profiteering - restaurant service - allegation that Respondent had not passed on the commensurate benefit, despite the reduction in the rate of GST - contravention of section 171 of CGST Act - penalty - HELD THAT:- It is clear from the plain reading of Section 171(1), that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second about the passing on the benefit of the ITC - On the issue of reduction in the tax rate, it is apparent from the DGAPs Report that there has been a reduction in the rate of tax from 18% to 5% w.e.f. 15.11.2017, vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 in the post GST period. It has been revealed from the DGAP s Report that the ITC which was available to the Respondent during the period July 2017 to October 2017 was 11.16% of the net taxable turnover of restaurant service supplied during the same period. With effect from 15.11.2017, when the GST rate on restaurant service was reduced from 18% to 5%, the ITC was not available to the Respondent. The DGAP in his Report has stated that the Respondent had increased the base prices of different items by more than 11.16% i.e. by more than what was required to offset the impact of denial of ITC, supplied as a part of restaurant service, to make up for the denial of ITC post-GST rate reduction. The profiteered amount is determined as Rs. 61,67,097/- as has been computed in Annexure-15 of the DGAP s Report dated 25, 10.2019. Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the Rules. Further, since the recipients of the benefit, as determined, are not identifiable, the Respondent is directed to deposit an amount of Rs. 61,67.097/- in two equal parts, in the Central Consumer Welfare Fund and the Maharashtra State Consumer Welfare Fund as per the provisions of Rule 133 (3) (c) of the CGST Rules 2017, along with interest payable @ 18% to be calculated standing from the dates on which the above amount was realized by the Respondent from his recipients till the date of its deposit. The aggregate amount shall be deposited, as specified above, within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned SGST Commissioner. Penalty - HELD THAT:- It is evident that the Respondent has denied the benefit of tax reduction to the customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence under section 171 (3A) of the CGST Act, 2017, and therefore, he is liable to penal action under the provisions of the above Section. Accordingly, a notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.

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• Income Tax

• 2020 (8) TMI 600
  Disallowance u/s 36(1) (vii) - contribution to the pension Fund - AO observed that the assesse had not furnished the working of its claim as per the conditions laid down thus 25% of the amount claimed was allowed and 75% of the claim was disallowed - CIT(A) considering that the Gujarat Maritime Board Employees Pension Trust Fund was duly approved by the CIT, Gandhinagar with effect from 28.03.2003 and the contribution was paid in compliance of the terms of the appointment on the respective erstwhile state government employees in the earlier year, which was constantly allowed by the department - Tribunal affirmed the view of the CIT (A) - HELD THAT:- The issue relating to the contribution to pension fund under Section 36(1)(iv) of the Income Tax Act read with Rule 87 and 88 of the Income Tax Rules would not constitute a question of law and would be in the realm of factual issue. The ITAT has observed in its order that no evidence was led by the Revenue-Appellant to dispute the correctness of the findings recorded by the CIT (Appeals). Depreciation of assets which were allowed as application of income - HELD THAT:- It is pertinent to note that the aforesaid issue is covered against the Revenue in terms of the judgment of the Apex Court RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA[ 2017 (12) TMI 1067 - SUPREME COURT ]- The order of the ITAT discusses, after relying on the Judgment of the Apex Court in the Rajasthani and Gujarati Charitable Foundation (supra) that the income of the trust is required to be computed u/s. 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from the gross income of the trust. Exemption u/s 11 - denying the benefits of Sections 11 and 12 by invoking proviso to Section 2(15) r.w. Section 13(8) - Claim of benefit u/s 2(15) - HELD THAT:- ITAT has clearly observed that the activities carried out by the Assessee are for the advancement of any other object of general public utility without any intention of making profit after considering the provisions of the Gujarat Maritime Board Act, 1981 and the facts of the case. Therefore, it cannot be said that the activities carried out by the Assessee are in the nature of trade, commerce or business. Decisions of this court in the case of CIT v. Gujarat Industrial Development Corporation (GIDC) [ 2017 (7) TMI 811 - GUJARAT HIGH COURT ] and Ahmedabad Urban Development Authority (AUDA) [ 2017 (5) TMI 1468 - GUJARAT HIGH COURT ] squarely cover the present issue in favour of the Assessee since the fees collected by the Assessee is incidental to the object and purpose of attainment of the main object for the development of minor ports in the State of Gujarat. This Court has held in the case of AUDA [ 2017 (5) TMI 1468 - GUJARAT HIGH COURT ] that merely because the AUDA is charging fees and/or cess, the activities cannot be said to be in the nature of trade, commerce or business. In the case of GIDC (supra), this Court has clearly held that the charitable activities also require operational / running expenses as well as capital expenses to be able to sustain and continue in the long run. Therefore, the ITAT has rightly found that the activity of the assesse is for the advancement of any other object of general public utility and is not hit by the provisio to section 2(15) of the Act, and therefore, the Assessee is entitled to exemption u/s. 11 of the Act. - Decided in favour of assessee.

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• 2020 (8) TMI 599
  Notice u/s 143(2) to the amalgamating company i.e a non-existent entity - Validity of assessment - HELD THAT:- Hon ble Supreme Court in the case of Pr. CIT Vs. Maruti Suzuki India Ltd. [ 2019 (7) TMI 1449 - SUPREME COURT] had observed, that where the A.O despite being informed of the fact that the amalgamating company had ceased to exist as a result of the approved scheme of amalgamation, had issued the notice u/s 143(2) in the name of the amalgamating company, the very basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceased to exist upon the approved scheme of amalgamation. Participation in the proceedings by the assessee cannot operate as an estoppel against law. On the basis of our aforesaid observations, we are of the considered view that neither the issuance of the notice u/s 143(2) to the amalgamating company i.e a non-existent entity be construed as a notice issued to the amalgamated company, nor the same be validated by bringing it within the realm of a procedural irregularity within the meaning of Sec. 292B. A strong conviction that non-issuance of a notice u/s 143(2) to the amalgamated company, which forms the very foundation for framing of a valid assessment would divest the A.O of his very jurisdiction to frame such assessment. We would mince no words in concluding that the non-issuance of a notice u/s 143(2) to the amalgamated company viz. M/s Siemens Limited, PAN No. AAACS0764L, would therein render the impugned assessment framed by the A.O u/s 143(3) r.w.s 144C(13), dated 30.01.2017 as invalid and void ab initio. Accordingly, the impugned assessment framed by the A.O de hors issuance of any notice u/s 143(2) to the amalgamated company cannot be sustained, and is thus quashed for want of jurisdiction. The additional ground of appeal raised by the assessee is allowed.

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• 2020 (8) TMI 598
  Additional depreciation on certain assets/machineries - whether the assets are registered as a commercial vehicle or private vehicles/assets? - HELD THAT:- Assessee was required to obtain registration from some assets as is clear from the picture of the assets showing in the assessment order but the assessee also did not produce any registration certificate before us as to whether the assets are registered as a commercial vehicle or private vehicles/assets. It is also clear from the Appendix Part-A(III) regarding depreciation the assessee is eligible for additional depreciation on the motor cars, motor lorries but the AO has disallowed higher depreciation claimed by the assessee on other assets which are not covered under the motor car, motor vehicles as defined above as per the Motor Vehicles Act as amended. He is entitled for additional depreciation only on those vehicles which were used for running them on hire but the assessee also unable to demonstrate that the which assets were used in the hire completely. The assessee is engaged in the civil construction business and he has achieved huge turnover but without using of these heavy/light machineries/vehicles huge turnover cannot be achieved. If the assessee uses partly for own use and for hire charges he is not entitled to claim excess depreciation as per the provisions of the Income Tax Act. The rule for charging higher depreciation has been prescribed only for the vehicles which are running on hire. Respectfully following the above judgment of ANUPCHAND AND CO. [ 1999 (6) TMI 25 - MADHYA PRADESH HIGH COURT] the assessee is not eligible/entitled for the claim of excess depreciation on impugned 14 items as mentioned by the AO in his order. In the peculiar facts and circumstances of the case, the case laws and circular relied on assessee are not applicable in the present case in hand but the case laws cited by the ld. CIT-DR support the case to the extent of their applicability in the present case. - Decided against assessee.

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• 2020 (8) TMI 597
  Addition u/s 56(2)(vii)(b) - purchase of immovable property - difference amount between the consideration paid by the assessee and the Sub Registrar Office (SRO in short) value - Section 50C applicability - HELD THAT:- The property was in dispute due to bank loan and the original title deeds were not available for complying with the sale formalities. Therefore, there was a delay in obtaining the title deeds for completing the registration. Thus, we find that there is genuine cause for delay in getting the property registered. CIT(A) relied on the decision of M.Siva Parvathi and Ors [ 2009 (10) TMI 618 - ITAT VISAKHAPATNAM] which is rendered in the context of application of section 50C of the Act. In the decision cited, this Tribunal has considered the decision of K.P.Varghese [ 1981 (9) TMI 1 - SUPREME COURT] and held that the provisions of section 50C which were not available in the statute cannot be applied during the interim period. Where any individual or Hindu Undivided Family receives any immovable property without consideration, the stamp duty value of such property required to be considered as the consideration paid and the said amount to be taxed u/s 56(2)(vii)(b) of the Act. In the instant case, as discussed earlier the assessee has paid the consideration and there was no evidence from the department to show that the assessee has paid the excess consideration over and above the sale deed. With effect from 01.04.2014, the Act has been amended and the new sub clause(ii) has been introduced to section 56(2)(vii)(b)in the statute. As per the provisions the Act from the A.Y.2014-15 sub clause (ii) has been introduced so as to enable the AO to tax the difference consideration if the consideration paid is less than the stamp duty value. The AO is not permitted to invoke the provisions of section 56(2)(vii)(b)(ii) in the absence of sub clause (ii) in the Act as on the date of agreement. The department has not brought any evidence to show that there was extra consideration paid by the assessee over and above the sale agreement or sale deed. No other case law of any high court supporting the contention of the department was brought to our notice by the Ld.DR. Therefore, we hold that the Ld.CIT(A) has rightly applied the decision of this Tribunal in the assessee s case and deleted the addition. Hence, we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld.- Decided in favour of assesssee.

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• 2020 (8) TMI 596
  Disallowance u/s 40(a)(ia) - non-deduction of tax at source on the remuneration paid to artists - assessee had contended that the language Sec.40(a) (ia) refers to TDS on amounts payable and amounts paid - main reason for confirming the disallowance is this that the assessee has not produced a CA certificate in which it is certified by the CA that the deductee has filed the return of income, after including the amount received from the assessee and paid taxes - HELD THAT:- Referring to main argument of assessee that the assessee was earlier not properly guided by the earlier counsel and after the assessee approached the present counsel, proper advise was given by the present counsel but because of ongoing Covid pandemic, the required documents, CA certificates etc. could not be brought on record and therefore, this is the request of the learned AR of the assessee that under these facts and in the interest of justice, the assessee should be provided one more opportunitywe set aside the order of CIT(A) and restore the matter back to the file of AO in both years with the direction that the assessee should bring on record the required evidences including the CA certificate for both years and the AO should consider those documents - Appeals of the assessee are allowed for statistical purposes.

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• 2020 (8) TMI 595
  Reopening of assessment u/s 147 - deduction u/s 57 disallowed - HELD THAT:- AO had passed the original assessment order under section 143(3) of the Act in which he allowed the deduction under section 57 - all the facts pertaining to the transaction of Idea Shares were available before the AO when he passed the original assessment Order u/s 143(3). After the original assessment, the AO did not find any fresh information/material in respect of the transaction of purchase/ sale of the Idea Shares. This is evident from the reasons recorded by the AO. Yet, the AO re-opened the assessment under section 147 and disallowed the said interest expense claimed under section 57. In the original assessment proceedings AO has considered the aspect interest expenses and considered in the body of assessment order as well as in the computation of income specifically and after considering the same, the AO allowed the interest expenses. AO has applied his mind and formed an opinion for allowance of this interest expenses while framing original assessment. Now, reopening on the very same issue tantamount to change of opinion which is not permissible in law. Asian Paints Ltd. vs. DCIT [ 2008 (7) TMI 237 - BOMBAY HIGH COURT] has been held that the initiation of reassessment proceedings would amount to change of opinion of the AO as it was merely a fresh application of mind by the AO to the same set of facts and that since the AO had failed to apply his mind to the relevant material while framing the assessment order under section 143(3), he could not take advantage of his own wrong and reopen the assessment under section 147 - This was the case where the AO had reopened the assessment within four years from the end of the Assessment Year under appeal. Even in the case of in the case of Legato Systems (India) Pvt. Ltd. [2009 (9) TMI 943 - DELHI HIGH COURT ] has held that proceedings under section 147/148 of the Act vis- -vis completed assessments cannot be reopened, on a mere change of opinion i.e. on the basis of the same set of facts and material which were in the knowledge of the AO, and that the proceedings for reopening of assessment on the ground of income escaping assessment is an exception to the finality of the proceedings arrived at under Section 143(3) of the Act during the regular assessment proceedings of the assessment years. Notice u/s. 148 of the Act was issued on the ground that there was reason to believe that income had escaped assessment, there was neither any change of law nor had any new material been brought on record between the date of the assessment order and the date of formation of opinion by the AO. It was merely a fresh application of mind by the officer to the same set of facts and the reassessment proceedings initiated based on the change of the opinion of the officer is bad in law. This was the case where the AO had reopened the assessment within four years from the end of the Assessment year. Hence, the reasons recorded for reopening reflect a mere change in the opinion by the AO. Accordingly, we quash the reopening and allow the jurisdictional issue in favour of the assessee.

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• 2020 (8) TMI 594
  Depreciation on goodwill arising out of amalgamation - assessee is engaged in the business of manufacturing and sale of printed self-adhesive stripes, labels, glow signs and all kind of trade and advertising material, trading of car accessories - Addition in the case of the assessee by observing that the goodwill arose on account of market value of immovable assets which were higher than their book value - HELD THAT:- The excess of liabilities over net assets was treated as goodwill and the depreciation for the same was claimed by the assessee treating the said goodwill as an intangible asset. AO had observed that there is no question of any goodwill prevailing in the books of FSPL in view of the fact that, it had incurred losses. This observation of the AO is not tenable in view of the fact that whether the unit is incurring losses or not, has got nothing to do with the existence of goodwill prevailing in the said unit. Goodwill would arise on account of various factors such as continuing clients, continuing business relationship, established set up for smooth conduct of business, continuing business, commercial and industrial rights and licenses to the successor company / merged entity. These commercial, business and industrial rights were duly acquired by the assessee company through a scheme of merger and due consideration passed on for the same by way of allotment of shares. Same would factually tantamount to acquisition of goodwill. Since, the goodwill is an intangible asset, within the meaning of Section 32 in the form of industrial, business and commercial rights, the assessee would be eligible for depreciation u/s.32 of the Act. We find that the ld. CIT(A) had observed that goodwill in the instant case had arose on revaluation of properties which is factually incorrect as observed hereinabove by us i.e the value of assets and liabilities were recorded at book values only pursuant to merger. We find that lower authorities had placed reliance on the decision in the case of Jaypore Sugar Co.Ltd., [ 2010 (12) TMI 258 - ITAT, VISAKHAPATNAM] to support their proposition. We find that subsequent to this decision, the Hon ble Supreme Court in the case of CIT vs. Smifs Securities Ltd.. [ 2012 (8) TMI 713 - SUPREME COURT] had specifically held that goodwill arising on account of amalgamation would constitute intangible asset eligible for depreciation u/s.32. We hold that assessee is entitled for depreciation claimed @25% on goodwill valued. Disallowing depreciation on capital assets purchased - HELD THAT:- We find that the aluminium frames that were purchased were duly utilized in the business of the assessee and finished product generated thereon, had been sold and hence, duly reported by the assessee. Hence, there cannot be any dispute on the same. However, the assessee was not able to prove beyond doubt, the suspicion that arose in the minds of the revenue in respect of these parties appearing to be in the negative list of sales tax department of Government of Maharashtra. In these circumstances, it could be safely concluded that assessee could have purchased these capital goods from the grey market in order to save the liability of VAT. Since the items purchased were capital goods, which is not in dispute, hence, we hold that the depreciation attributable to that VAT portion alone should be disallowed in the hands of the assessee. Needless to mention that assessee could be entitled for depreciation on these capital assets on recurring basis year on year on the basis of return down value of each year. Accordingly, grounds raised by the assessee in this regard are partly allowed.

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• 2020 (8) TMI 593
  Addition u/s 68 - unexplained Share Capital/Share Application money - assessee failed to prove creditworthiness of the shareholders / share applicants and the genuineness of the transactions - HELD THAT:- In this case, on perusal of facts available on record, including the finding of the CIT(A), it is abundantly clear that there is no reference to any incriminating material found as a result of search to additions made towards share capital. In fact, the assessee has proved that share capital raised during block period was accounted in regular books of accounts and same has been scrutinized by the AO in the scrutiny assessment proceedings passed u/s 143(3) - Therefore there is no error in the findings recorded by the CIT(A), while deleting additions made towards share capital u/s 68 - even otherwise the assessee has filed various evidences to prove identity, genuineness of transactions and creditworthiness of the shareholders. Therefore, on this count also, the additions made by the Ld. AO cannot survive. Hence, we are of the considered view that the Ld.CIT(A) was right in deleting the additions made towards share capital and hence, we are inclined to uphold the finding of Ld.CIT(A) and reject ground taken by the revenue. Disallowances of bogus depreciation and bogus expenses - HELD THAT:- As regards, claim of depreciation, CIT(A) had recorded categorical finding that claim of depreciation was made on office equipments, furniture and fixtures etc., which were evidently put to use, but not on plant and machinery as claimed by the AO. Accordingly, he has directed the Ld. AO to verify the claim of the assessee, in light of various evidences and allow the depreciation, if the claim of the assessee is correct. Therefore when the issue has been set aside to the Ld. AO for verification of facts, there is no grievance for revenue to agitate such findings and hence, we are inclined to uphold the findings of the Ld.CIT(A) and reject arguments of the revenue. Disallowances of expenditure - CIT(A) has recorded categorical finding to the effect that major part of expenses for different assessment years were incurred through cheque and no adverse findings is borne from the records that the expenses were otherwise bogus, non genuine or inflated. Primary details having been furnished and no discrepancy was noticed or pointed out by the ld. AO. Noted that all expenses were recorded in regular books of accounts and were subject to verification from the Ld. AO during regular assessment proceedings. Assessee itself has disallowed major part of cash expenses as unaccounted. There would be no justification for making further addition, which evidently would lead to double taxation. Revenue has failed to controvert the findings recorded by the CIT(A) with any evidences. We, therefore are of the considered opinion that there is no error in the findings recorded by the CIT(A) to interfere by us at this stage. Hence, we are inclined to uphold the findings of Ld.CIT(A) and reject ground taken by the revenue.

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• 2020 (8) TMI 592
  Addition u/s 68 v/s 69 - unexplained deposit in the bank account - sum was not credited in the books of accounts, but the amount was found credited in the bank account of the assessee - HELD THAT:- In the instant case, the deposit was made in the bank account, but not in the regular books of accounts maintained by the assessee. As per the provisions of section 68, the amount found credited in the books of accounts for which the assessee failed to offer explanation to the satisfaction of the AO required to be brought to tax u/s 68, whereas in the instant case, the said sum was not credited in the books of accounts, but the amount was found credited in the bank account of the assessee. The correct course of action for taxing the sums paid into the bank account is to tax u/s 69 of the Act. Neither the AO nor the Ld.CIT(A) has made addition u/s 69. On identical facts in the case of Smt.Asha Sanghavi [ 2019 (11) TMI 868 - ITAT VISAKHAPATNAM] this Tribunal held that the cash deposits or deposits made in bank account required to be brought to tax u/s 69 and not u/s 68 AO is not permitted to make the addition u/s 68 of the Act in respect of the deposits made in the bank account. Accordingly, we set aside the order of the Ld.CIT(A) and delete the addition made by the AO. - Decided in favour of assessee.

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• 2020 (8) TMI 591
  Disallowance of Administrative expenses - non-furnishing of details - denial of principle of natural justice - HELD THAT:- Assessee should be given proper opportunity by the assessing officer to explain its case before the AO takes any action adverse to the assessee. Assessee should be given proper opportunity by AO to explain its case before the AO takes any action adverse to the assessee. In the instant case, we notice that the assessing officer neither called for explanations from the assessee nor did he explain as to why he is restricting the claim of administrative expenses to Rs. 4.77 crores as against the claim of Rs. 5.77 crores. Accordingly, we are of the view that the there is no reason to reduce the claim of administrative expenses by Rs. 1.00 crore. Accordingly, we direct the AO to allow the administrative expenses fully as claimed by the assessee at Rs. 5.77 crores. Addition of pantry and stationery purchases - denial of principle of natural justice - HELD THAT:- Reasons discussed in the preceding paragraphs on the principle of natural justice, the action of the assessing officer cannot be upheld. Accordingly, we direct the AO to allow deduction relating to pantry and stationery purchase. Addition of Building maintenance expenses - said expense was grouped under the head Administrative expenses - according to AO, the assessee did not produce proper break-up of the asset owned by it and expenses related to building hence the AO disallowed 40% of the above said claim - HELD THAT:- It is not clear whether the AO did call for any detail or not. We have noticed that the assessee is carrying on sub-letting activity on the buildings taken on rent. Hence the expenses incurred on building should be mainly on maintenance activities only. We notice that the AO has disallowed 40% of expenses on adhoc basis, i.e., he did not bring any material on record to support the estimate of 40%. Accordingly, in the absence of any supporting evidences, we are of the view that the disallowance of 40% of expenses on the higher side. Since the assessee has not furnished any break-up details, we are of the view that some disallowance out of the above said expenses is called for. In our view the disallowance may be restricted to 10% of the expense claimed under the head building maintenance services, i.e., 10% of Rs. 45,57,237/- and the same would take care of deficiencies, if any in the claim. We order accordingly. The order passed by Ld CIT(A) on this issue stands modified accordingly. Disallowance of miscellaneous expenses - HELD THAT:- AO has made this disallowance without properly analysing the financial statements furnished by the assessee. We notice from the financial statements furnished by the assessee that the details of administrative expenses are given in Schedule 24. Further the miscellaneous expenses included in the break-up details of administrative expenses was Rs. 4,09,950/- only. Hence we are unable to understand as to how that the AO could disallow a sum of Rs. 7.00 lakhs out of miscellaneous expenses. Accordingly, we are of the view that there is no basis for making disallowance - Decided in favour of assessee.

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• 2020 (8) TMI 590
  Deduction u/s 54F - denial of claim as assessee has already purchased the residential flat at Rajendra Nagar out of the sale proceeds - HELD THAT:- We hold that the revenue authorities have mislead themselves on holding that the purchase of the Rajendra Nagar flat out of the sale proceeds of the original asset was on the basis of wrong facts. Hence, keeping in view the facts of the case that the capital gains have been utilized for construction of house at D-279, Defence Colony, New Delhi and as per the provisions of the Act, the assessee doesn t have more than one house which is chargeable to tax under the head income from house property other than the one residential house owned on the date of sale of original asset, we hereby hold that the addition made by the revenue authorities is unwarranted. - Decided in favour of assessee.

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• 2020 (8) TMI 589
  Validity of reopening of the assessment - as per AIR data information received from the Office of the DIT CIB Rajasthan, Jaipur showing that the assessee has paid credit card bills in the financial year 2008-09 - AO received the information about the credit card bills payment - HELD THAT:- AO has not made any addition but accepted the return of income declared by the assessee in the original return of income while passing the order on 08.08.2017. AO has reopened the assessment only on suspicion of escapement of income on account of credit card payment without considering the fact that the assessee already filed his return of income declaring total income as income under the head Salary . The AO during the course of assessment proceedings verified the income of the assessee from M/s. Genpact India as well as the details of the credit card payment from Citibank and the AO has received the requisite details from the said company. In the case in hand, the assessee has duly brought to the notice of the ld. CIT (A) that the return of income was filed on 9th July, 2010. However, without considering the same, the ld. CIT (A) upheld the reopening of the assessment by recording the reasons on incorrect facts. Hence in the facts and circumstances of the case, we find that the reopening of the assessment by the AO is without application of mind and simply going by the information received as per AIR Data. Hence the reopening of the assessment is quashed being invalid. - Decided in favour of assessee.

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• 2020 (8) TMI 588
  Condonation of delay - delay of 245 days - order of the Pr. CIT passed u/s. 263 - HELD THAT:- As submitted AO passed an order giving effect to the said order of the Pr. Commissioner of income Tax, on 08-04-2019 and the said consequential order was received by the assessee on 11-04 -2019 - as the ITP of the assessee was not in a condition to take necessary action in the matter, he approached another ITP, on whose advice he filed the appeal in time before the CIT(A) on 25-04-2019 against the order dated 08-04-2019 passed by the AO. This appeal and stay petition were last posted on 31-10-2019. Only then, the assessee came to know that the correct remedy for him was to challenge the order of the Pr. CIT passed u/sec.263 of the IT Act dt. 10-01- 2019. Then, he approached his Authorised Representative - there was no willful negligence or laches on the part of the assessee and in case if this delay of 245 days is not condoned, it would cause irreparable harm and injustice to the assessee. We find that there is good and sufficient reasons for filing the appeal belatedly. Accordingly, we condone the delay of 245 days in filing the appeal and admit the appeal for adjudication. Revision u/s 263 - excess cash deposits - AO declared it his deemed turnover and 2.5% of such deemed turnover, being rate of Gross Profit declared, was brought to tax - CIT observed that AO should have treated this as unexplained cash credits u/s 68 and charged to tax at a special rate of 30% as per Section 115BEE - HELD THAT:- The additions made u/s. 68, 68, 69B, 69C and 69D of the I.T. Act cannot be set off with loss with effect from 01/04/2017. The direction of the Pr. CIT that addition u./s. 68 of the Act is to be made at special rate of 30% is proper if the addition made u/s. 68 of the Act is sustained by the Assessing Officer. Further, in this case, as rightly pointed out by the Ld. AR, the Pr. CIT had exercised his power u/s. 263 and he himself decided about the applicability of section 68 of the Act. Thereafter, he gave direction to the Assessing Officer to give opportunity of hearing to the assessee which is inappropriate. Pr. CIT pre-decided the issue and thereafter, directed the Assessing Officer to give opportunity of hearing to the assessee. We vacate this finding of the Pr. CIT and remit the issue in dispute to the file of the Assessing Officer to examine how the provisions of section 68 is not applicable to the assessee s case. The Assessing Officer has to examine whether the provisions of section 68 is applicable to the assessee s case or not. If the assessee is able to prove the identity and capacity of the parties concerned and the genuineness of the transactions to the satisfaction of the AO, he shall not make addition u/s. 68 of the Act. With this observation, we remit this issue to the file of the AO for fresh consideration - Appeal of the assessee is partly allowed for statistical purposes.

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• 2020 (8) TMI 587
  Unexplained investments u/s.69B - HELD THAT:- Assessee miserably failed to explain the impugned assessment before Assessing Officer as well CIT(A). Therefore, the Assessing Officer as well as CIT(A) decided the orders against the assessee while making additions. Even before us, no new facts or circumstances have been placed on record and the orders passed by the revenue authorities have also gone unrebutted, therefore, we find no reason to interfere into or to deviate from such findings of the authorities below and we uphold the findings of the Ld.CIT(A) and reject the ground raised by the Assessee.

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• 2020 (8) TMI 586
  Reopening of assessment u/s 147 - invalid notice - unsigned notice - HELD THAT:- Copy of the notice u/s 148 is unsigned as well as did not mention any assessment year. Since unsigned notice have been sent to the assessee, therefore, it vitiate the entire re-assessment proceedings because it was the jurisdictional notice to initiate proceedings u/s 147 . Since the notice itself was illegal and bad in Law, therefore, entire re-assessment proceedings have been vitiated and as such A.O. could not have assume the jurisdiction under section 148 to frame the assessment against the assessee. The Ld. CIT(A) was justified in holding the assessment order to be null and void. The Departmental Appeal has no merit and the same is accordingly dismissed. - Decided in favour of assessee.

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• Customs

• 2020 (8) TMI 585
  Validity of provisional assessment - dry dates - HELD THAT:- The writ petitions are disposed off with a direction to the respondents to decide the appeals to be preferred by these writ petitioners within two weeks from the date of receipt thereof. This is the outer limit and the Commissioner (Appeals) can also decide the appeals earlier. Petition disposed off.

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• Corporate Laws

• 2020 (8) TMI 584
  Transfer of immovable property - payment of standard transfer charges - direction to extend the time for building completion by two years from the date of transfer of the said plot in the name of the applicant. Whether this Court is empowered to grant reliefs as prayed by the applicant under Section 446(2) of the Companies Act, 1956 or not? - HELD THAT:- A perusal of the record indicates that on 28th January 1978 Transpower Corporation, a Partnership Firm was constituted. On 7th March, 1980 a plot bearing No.B-16 was allotted by MIDC vide agreement executed between MIDC and said Transpower Corporation. On 7th March, 1982 MIDC handed over possession of the said plot to the said Transpower Corporation. On 04th May, 1980, Transpower Corporation was converted into Private Limited Company under the name of Transpower Engineering Pvt. Ltd. On 27th November, 1991, the said Transpower Engineering was converted into a Limited Company which company came to be wound up subsequently (hereinafter referred to as the Company in Liquidation). The Form No.23 was filed with the Registrar of Companies in that regard. After construing Section 456(1) of the Companies Act, 1956, this Court held that power of Company Court is vast. The leasehold rights of the company are an asset of the company which is capable of sale through the process of liquidation. The Official Liquidator has power to take possession even MIDC property given on lease and to sell the subsisting leasehold rights during the the Court of winding up. Under Section 457(1)(c) of the Companies Act, 1956, the Official Liquidator in winding up by the Court shall have power with the sanction of Court to sell the immovable property by public auction or private contract with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels. This Court is of the view that the issue as to whether MIDC is entitled to recover any premium on the transfer of the property sold by sanction of the Company Court in respect of assets of the company in liquidation is an issue incidental and arise in the course of the winding up of the company and thus, can be tried by the Company Court under Section 446(2) of the Companies Act, 1956. Whether any of the transfer of the said property of the said plot was a formal transfer or non-formal transfer or whether such transfer was voluntarily or involuntarily? - HELD THAT:- A perusal of the record indicates that the said partnership Transpower Corporation was converted into Transpower Engineering Pvt. Ltd. On 4th May, 1980 and the said Private Limited Company was subsequently converted into a Limited Company on 27th September, 1991 which is now in liquidation. A copy of the Form No.8 was also filed with the Registrar of Companies, Maharashtra, Mumbai which is also placed on record. There is thus no substance in this submission made by the learned Counsel for MIDC - There is no substance in the submission of learned Counsel for the MIDC that MIDC was not aware of conversion of said Transpower Corporation in Transpower Engineering Pvt. Ltd. and thereafter by the Transpower Engineering Pvt. Ltd. to Transpower Engineering Limited. On perusal of the letter dated 29th January, 1992 annexed at page 151 of the pleadings, it is clear that on the basis of fresh incorporation certificate, the MIDC had noted the change in its records, in name of Transpower Engineering Ltd. MIDC informed that further correspondence would be in the name of Transpower Engineering Limited. - the factum of change in the name of M/s. Transpower Engineering Pvt. Ltd. to M/s. Transpower Engineering Limited on the basis of fresh Certificate of incorporation is not disputed by the MIDC. The amalgamation of Plot No.B-16 had taken place with the Plot Nos.B-25, B-26 and B-27 in the year 1981. Since this Court is of the view that the demand made by the MIDC in this proceeding towards differential premium for the first transfer between Transpower Corporation and Transpower Engineering Pvt. Ltd. itself barred by law of limitation, the MIDC would not be thus entitled to recover even standard transfer charges in respect of transfer of plot in favour of Transpower Engineering Pvt. Ltd. Whether MIDC is entitled to recover differential premium on the transfer of the said land by Transpower Engineering Pvt. Ltd. to Transpower Engineering Ltd. or not or can recover only standard transfer charges? - HELD THAT:- This court is of the view that such transfer of the leasehold rights of the company in liquidation in favour of the successful bidder pursuant to an order passed by the Company Court would not be a voluntary transfer but would be an involuntary transfer and would attract the payment of standard transfer charges only. It is not in dispute that this Court has already permitted the execution of the deed of assignment in favour of the Applicant in respect of said leasehold right as a nominee of the successful bidder. The Applicant has already paid the entire consideration amount to the Official Liquidator and is already put in physical possession thereof. The Official Liquidator has also settled the claims of various creditors or has distributed dividend out of the said sale proceeds. Whether MIDC can raise demand for payment of extension charges for allegedly not carrying out development of the said plot by Transpower Corporation or thereafter by Transpower Engineering Pvt. Ltd. within the time prescribed or not? - HELD THAT:- The Applicant itself seeks direction against Respondent No.2 to extend the time for completing a building by two years from the date of transfer in the plot No.B-16 in the name of Applicant. The Applicant is thus liable to pay such extension charges as contemplated in various circulars issued by MIDC. It is not the case of the Applicant that the Applicant is not liable to pay any extension charges to the Respondent No.2. This Court accordingly directed the Official Liquidator to consider the payment of extension charges while adjudicating the affidavit of proof of debt and decide the quantum of extension charges, if any, payable and for that period whether up to the date of winding up or any earlier period or it is continuing. - MIDC is therefore at liberty to file its affidavit of proof of debt for claiming quantum of extension charges as well as for payment of standard transfer charges for transfer of leasehold rights by the company in liquidation in favour of the successful bidder/its nominee as it deems fit with the Official Liquidator within four weeks from today. Payment of differential premium now demanded by MIDC on the transfer of the leasehold right from the company in liquidation to the successful bidder or its nominee - HELD THAT:- This Court is already of the view that the MIDC would be entitled to demand only standard transfer charges and not differential premium @ 30%. Such quantification in respect of standard transfer charges to be decided by the Official Liquidator subject to the issue of limitation. The Official Liquidator is directed to decide both these claims i.e. for payment of extension charges and standard transfer charges within a period of 12 weeks from the date of Respondent No.2 filing an affidavit of proof of debt if found within the period of limitation or if there is any delay in filing, within 3 months from the date of condonation of delay, if any, by this Court. Application disposed off.

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• 2020 (8) TMI 583
  Maintainability of petition - Oppression and Mismanagement - failure to make a declaration under section 89 (1) and (2) of the Companies Act, 2013 read with Rule 9 of Companies (Management and Administration) Rules, 2014 - HELD THAT:- The section mandates that a declaration is to be filed by the registered owner and by the beneficial owner with the company in Form MGT 4 and MGT 5 respectively and the Company in turn will have to file MGT 6 with ROC along with the prescribed fees. Further under Section 89(8) of the Act, the beneficial owner and any person claiming through him cannot exercise any rights in respect of the shares held. We are not satisfied with the allegations of the Appellant as the Shareholder Agreement was entered between the Appellant, R-1 and R-2 Company. The shares were held by R-1 in its own name, even if R-1 is a nominee of Kohli ventures as per the Shareholding Agreement, but having a separate legal entity R-1 can hold shares in its own name. There is nothing on record that any action was initiated or any competent authority have decided the question of beneficial interest in the company. Thus no such rights could be taken away from R-1 in respect of such shares - As R-1 is registered as a shareholder as on the date of petition and no competent court has passed any order affecting its rights as on the date of petition eligibility of R-1 to file a petition is to be reckoned on the date of the petition. Therefore, the petition is maintainable per se on the date of petition. Direction for Forensic Audit before deciding the issue of maintainability - Status Quo Ante - HELD THAT:- The question of maintainability need not to be decided as preliminary issue which can be decided along with main petition. Thus the NCLT under Rule 11 of National Company Law Tribunal Rules, 2016 has the inherent powers to pass such orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal. Therefore, the orders passed by NCLT are not questionable on the grounds contended by the Appellant - maintainability is a mixed question of facts and law and conducting a forensic audit could produce the important facts that may be required by the NCLT in order to decide the preliminary issue. Whether the impugned interim order dated 14th June 2017 passed by the Tribunal is in consonance with sub-section (4) of Section 242 of the Companies Act, 2013? - HELD THAT:- The imposition of forensic audit and calling for the report of Forensic Audit before the Tribunal is a measure to help the Tribunal to appreciate the issue on the basis of an independent report so as to ensure that the case is processed with due regard to rights and obligations of contesting parties would be in the interest of justice. Similarly the status quo as made is only with a view to regulate the conduct of the company s affairs during the pendency of the case so that no contesting party takes an advantage during the period detrimental to the other party. The status quo restored as on 27.4.2017 (date of petition) as directed by the NCLT Chennai till the matter is under consideration cannot be found faulted with. Impugned order upheld - appeal disposed off.

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• 2020 (8) TMI 582
  Oppression and mismanagement - doctrine of indoor management - maintainability of proceedings under Section 241/242 of the Companies Act, 2013 - Section 8 company - HELD THAT:- Various irregularities have been committed by the appellant in a charitable company. The appellant is expected to maintain a higher standard of fair play and probity while managing the affairs of a charitable company and any irregularity committed by him shall be taken to be far seriously than if it is committed in a non-charitable company. It would be highly inappropriate for the appellant to raise the issue that it is a charitable company and the petition cannot be filed under Section 241/242 of the Act. Seeing the various irregularities committed by the appellants, this Tribunal cannot shut their eyes to let appellant go scot free undermining the spirit of charity - there are no force in the arguments of the appellants and the same are rejected. Administrator on behalf of 7th respondent submitted his report vide Diary No.21484 dated 10.5.2019. Learned Administrator submitted that this Tribunal vide order dated 9.4.2019 directed the appellants to hand over all documents of the company to Administrator but in wilful and rank disobedience to the orders of this Tribunal the appellants did not either product the documents before the Administrator or communicated the reasons, if any for not producing the same. Administrator submitted that he has filed a contempt application against the appellants with a prayer to direct the City Police Commission to apprehend the appellants and seize the records of the company from him. Administrator also submitted that the appellant is not handing over the documents as requires and the only presumption can be drawn is that he is purposefully withholding the documents, since if produced it would be unfavourable to him - despite specific direction the relevant documents were not provided by the appellants to Administrator, therefore, this Tribunal directed appellant No.1 to remain present in person on 8th August, 2019. The appellant did not appear on 8th August, 2019 and the hearing was deferred to 6th September, 2019 for personal appearance of appellant No.1. The appellant did not appear on 6.9.2019 also and the Tribunal has to stated that the appellant is playing hide and seek and not cooperating. The conduct of the appellant is not upto the mark. Appeal dismissed.

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• 2020 (8) TMI 581
  Compounding of offence - Section 441(1) of Companies Act - Whether Tribunal can impose the compounding fees under Section 441 (1) of the Act, less than minimum prescribed for the offence under Section 165 (1) read with Section 165(6) ? Time limitation for filing appeal - HELD THAT:- In this case, the Respondent was conscious that after coming into force the provisions under Section 165(1) of the Act, he cannot hold Directorship in more than 20 companies and Directorship in more than 10 Public Companies, at the same time. As per the Section 165 (3) of the Act, till 31.03.2015 Respondent was required to resign from the Directorship of the Companies more than the limits specified in sub- Section 1 of Section 165 of the Act, within the specified period. The Respondent has resigned from the Directorship of M/s Fabius Properties Pvt. Ltd. and resignation was accepted by the Company on 29.12.2015 and there is nothing on record to presume that the Respondent violated the provisions on a bonafide belief. The conduct of Respondent shows that he acted in conscious disregard of its obligation. The Tribunal failed to notice the minimum fine prescribed under Sub-Section 6 of Section 165 of the Act, which was applicable at relevant time i.e. before the amendment - In view of the error apparent in the impugned order dated 03.04.2018 passed by the Tribunal, thus, the order cannot be upheld. The Respondent has contravened the provisions of 165(1) of the Act, which is punishable under Sub-Section 6 of Section 165 of the Act. Taking into consideration, the facts and circumstances of the case, we imposed minimum fine at the rate of five thousand rupees for every day for the period 01.04.2015 to 21.02.2016 i.e. 272 days. We quantified penalty to Rs. 13,60,000/-. The Respondent has already paid Rs. 50,000/- after adjustment, now he is liable to pay Rs. 13,10,000/-. Therefore, The Respondent is directed to pay such amount within a period of 60 days in National Company Law Tribunal, Kolkata. Appeal allowed.

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• 2020 (8) TMI 580
  Oppression and Mismanagement - reduction of share capital - the shareholding of the Appellants was diluted and reduced from 50% to 1% and subsequently, shareholding is brought down to 0.12% and 0.1% of the total paid up capital - time limitation - what is the crucial date when the Applicant is required to satisfy the requirements under Section 399 of the Companies Act, 1956, so as to make the requirement of having an aggregate of 1/10th of shares out of total shareholding of the Company, if the Applicant alleges oppression in bringing down his shareholding? HELD THAT:- It is well settled that the question of oppression and mismanagement and maintainability is a mixed question of fact and law and when the Petition is filed alleging that the shareholding of the Applicant has been brought down below 1/10th of the total shareholding of a Company by oppression and mismanagement the Tribunal was required to decide the question of Maintainability at the time of final hearing of the Petition and the crucial date of cause of action is when the alleged shareholding of the Applicant has been brought down below 1/10th of the total shareholding of the Company. In this case the Appellants have alleged that on 11.12.2002 without any notice or board meeting. The Respondent No. 2 allotted shares to Respondent No. 3 and 4 and thereby shareholding of Late Mr. Bipin Chandra brought down from 50% to 1% and subsequently, by increasing paid up capital from time to time the shareholding of Mr. Bipin Chandra brought down 50% to 1% of the total paid up capital and 1/50th of the total membership. In the impugned order Learned Tribunal has considered the question of maintainability on the date of filing of the Petition which is not correct and question of maintainability in the case is a mixed question of fact and law. Therefore, it should have been decided at the time of final hearing of the Petition. It is interesting fact the Respondents have restricted its arguments on the question of limitation only. It means that the Respondents are not convinced or not in a position to justify the findings of the Tribunal in regard to maintainability of the Petition in view of Section 399 of the Companies Act, 1956. Time Limitation - HELD THAT:- The Tribunal has not given any findings that the Petition is time barred. But dismissed the Petition on the ground of delay and laches. As the Tribunal has not embarked the issue of limitation, therefore, we restrained ourselves to express any opinion in regard to the arguments advanced by Learned Counsel for the Respondents on the question of limitation. However, we are of the view that as per the allegations in the Petition, it is apparent that in this Petition issue of limitation is a mixed question of fact and law. Therefore, it should have been decided at the time of final hearing i.e. when the Petition is decided on merit. Learned Tribunal without discussing evidence gave a finding that the Tribunal do not find any deficiency in allotting the shares to Respondent No. 8 to 50 - the impugned order is a nonspeaking order. The question of Oppression, and Mismanagement, Maintainability and Limitation in the present case are mixed question of law and fact. Therefore, the Tribunal was required to decide these questions at the time of final hearing of the Petition. The matter is remanded to Tribunal that after hearing both the parties, Petition be decided afresh on merit.

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• 2020 (8) TMI 579
  Levy of penalty - failure to hold Annual General Meeting of the Company for the years 2012, 2013, 2014 and 2015 - violation of provisions under Section 166 of Companies Act - HELD THAT:- Admittedly, the Appellant Nos. 2 to 4 did not hold Annual General Meeting of the Company for the years 2012, 2013, 2014 and 2015 and thus violated the Provisions under Section 166 of Companies Act which is punishable under Section 168 of the Companies Act, 1956 till 31.03.2014. Thereafter, violated the Provisions under sub-section (1) of Section 96 of Companies Act, 2013 which is punishable under Section 99 of Companies Act, 2013. The Act came into force on 01.04.2014. Hence, the period of violation is 01.04.2014 to 09.07.2017. RoC in his Report has mentioned the total amount of Penalty to be imposed on each Appellant which is 2,35,90,000/- however, the Ld. Tribunal has imposed Penalty on each Appellant 27,09,000/- Ld. Tribunal to maintain the consistency has to impose Penalty which is as per calculation maximum fine Rs. 2,35,90,000/-. 1/5th of the maximum amount is Rs. 47, 18,000/-. However, Ld. Tribunal has imposed Penalty Rs. 27, 09,000/- which is less than 1/5th of the Maximum amount - thus, Ld. Tribunal has undertaken a lenient view in imposing Penalty. Appeal dismissed.

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• Insolvency & Bankruptcy

• 2020 (8) TMI 578
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - realization of interest on delayed payments - HELD THAT:- Admittedly, the outstanding amount against the Corporate Debtor is towards interest amount of Rs. 22,64,054/-, for delayed payment against the goods sold and delivered. It is evident from the particulars of claims annexed with the Appeal as Annexure A2. In case of SBF PHARMA VERSUS GUJARAT LIQUI PHARMACAPS PVT. LTD. [ 2019 (11) TMI 1431 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] , this Appellate Tribunal rejected the Petition for the realization of only interest amount, on the ground that the Petition is filed for other than for the Resolution of Insolvency or liquidation. The respondent further contends that, the claim of interest alone on loan, does not clarify as an Operational Debt under the I B Code . It is settled that the charging of interest, ought to be an actionable claim, enforceable under law, provided it was properly agreed upon between the parties. In this case, Learned Counsel for the Appellant submits that the email dated 05th September 2015, relates to the quotation only. It is pertinent to mention that Operational Creditor issued first demand notice on 28th December 2018. Based on this first demand notice. The Corporate Debtor made the payment of the principal amount, and only an interest amount of Rs. 22,64,054/- remained outstanding towards interest, for which the Corporate Debtor raised the dispute. After that, the Operational Creditor issued the demand notice on 15th January 2019 Application for initiation of corporate insolvency resolution process under Section 9 of the I B Code was filed before the Adjudicating Authority. Before the issuance of the second demand notice, the dispute relating to the payment of interest was existing. Therefore, the Adjudicating Authority rejected the Application by the Impugned Order. It is also pertinent to allege that the outstanding amount is towards interest on the delayed payments, for which there was a pre-existing dispute, before issuance of demand notice. The alleged claim amount, towards interest on loan alone, cannot be termed as an Operational Debt - Appeal dismissed.

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• 2020 (8) TMI 577
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of dues - existence of debt and default or not - HELD THAT:- Admittedly, the 1st Respondent defaulted to pay amount. The project was affected by force majeure due to imposition of ban by the National Green Tribunal by order dated 17th September, 2013 restraining the different projects which are within 10 Km from the Okhla Bird Sanctuary including NCR areas. The Flat Owners Agreement relates to development of the project in Eco City in Sector-75, Noida. Apart from the fact that there are force majeure due to which the Corporate Debtor could not complete the project, it is found that the 1st Respondent knocked the doors of the RERA and instead of waiting there, moved application under Section 7 not for Insolvency Resolution to get the Flat/ Apartment or liquidation, but for refund of the amount already paid. Also, the Settlement Agreement has been reached by the 1st Respondent on 24th October, 2019. The application under Section 7 was fit to be rejected - Appellant is directed to adhere to the Terms of Settlement . The Interim Resolution Professional is entitled for fees and costs, as it is not determined in the Agreement - the Corporate Debtor (company) is released from all the rigours of Moratorium and is allowed to function through its Board of Directors from immediate effect - Appeal allowed.

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• 2020 (8) TMI 576
  Cross security deposit - failure of compliance of the execution of the construction contract - HELD THAT:- It is apparent from the wordings of this MoU dated 13.09.2017 that the return of the amount was being assured with an allotment of plots and issuance of cheques. The amount was referred as loan at more than one place. As regards allotment, paragraph-11 of the Notice dated 27.11.2018 (Annexure-A9) appears to be more in the context of wording of the MoU where it is stated that First Party allots certain plots. There is nothing that actual allotment letters were issued, or possession handed over. The intent of the parties in all the MoUs appear to be of extending Financial Debt. There are no reason to interfere with the Impugned Order of the Adjudicating Authority. The Adjudicating Authority has found it to be Financial debt outstanding and admitted the Section 7 Application - appeal dismissed.

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• 2020 (8) TMI 575
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - case of appellant is that it could not conduct the business due to RBI Circular dated 13th March, 2018 - HELD THAT:- As per Section 12(3) of the Companies Act, 2013, it is a necessary for a Company to write name of the Company along with its former name, so changed during the last two years. But in the present case, the Appellant purposely suppressed the former name in Form-6 as well as in the affidavit verifying the petition filed under Section 10 of the I B Code. Centrum Financial Services Limited Respondent No.15 brought on record a Tabular Chart and audited statement to show that the Corporate Applicant was solvent and self-sustained Company and immediately before the petition was filed, the Appellant serially siphoned off money. In support of it a Tabular Chart has been enclosed - However, we are not inclined to give any finding on the question of fact as to whether the Appellant is a solvent Company and any amount is siphoned or not. If that be so, it will be open to the parties to move on the aforesaid facts before the Registrar of Companies and Regional Director of the Companies, Eastern Region with such allegations. The stand as taken by the parties, suggest that the application under Section 10 of the I B Code was filed by the Corporate Applicant fraudulently with malicious intent and not for Resolution or Liquidation and may attract Section 65 of the I B Code for penal action. However, as no such order has been passed by the Adjudicating Authority (National Company Law Tribunal) under Section 65 imposing penalty, we are not passing any penal order under Section 65 - the application under Section 10 was not maintainable. Appeal dismissed.

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• 2020 (8) TMI 574
  Release of amount deposited with the Registrar General of the Hon ble High Court of Delhi upon invocation of the Bank Guarantee - asset of the Corporate Debtor given as security interest , or not - CIRP process - HELD THAT:- The amount of Rs. 20 Crores deposited by way of Bank Guarantee was against the sum of Rs. 76.45 Crores awarded, therefore, said amount of Rs. 20 Crores, if payable to the Financial Creditor will be out of Rs. 76.45 Crores as awarded in its favour. Even if, it is accepted that said amount of Rs. 20 Crores, as deposited with the Registrar General of Delhi High Court, is meant for payment to the Appellant - Morgan Securities Credits Pvt. Ltd. against the awarded amount of Rs. 76.45 Crores - the Bank Guarantee of Rs. 20 Crores given by the Bank on behalf of the Corporate Debtor, relates to the claim of the Appellant - Morgan Securities Credits Pvt. Ltd. which has been taken care by the Resolution Professional against the claim preferred in the Corporate Insolvency Resolution Process. Such being the position, during the Corporate Insolvency Resolution Process, the amount will be deposited with the Resolution Professional and the Appellant s claim can be taken care by the Successful Resolution Applicant, if a resolution plan is approved. During the liquidation stage the amount of Rs. 20 Crores cannot be treated as Security Interest , merely because it was deposited against award amount of Rs. 76.45 Crores. The finding given by the Adjudicating Authority that the amount of Rs. 20 Crore is an asset of the Corporate Debtor is upheld - the observation that the amount was a security interest in Morgan s favour being against the facts and law is set aside - appeal dismissed.

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• PMLA

• 2020 (8) TMI 573
  Money Laundering - Release of petitioner from Jail - allegation of extortion - keeping in jail custody beyond the period the maximum sentence which could be awarded pertaining to alleged offence though he has been remanded in judicial custody by a judicial order passed by the Court of competent jurisdiction - judicial order of remand - valid order of remand beyond the period of maximum sentence could have been awarded to the accused (the petitioner) in view of the protection provided under Article 20 and 21 of the Constitution of India or not - period of custody in jail. Maintainability of application - availability of alternative remedy - HELD THAT:- There is no absolute bar to entertain the writ application in the event of availability of alternative remedy subject to the condition mentioned herein above. If the issue falls under the aforesaid heading then the alternative remedy cannot be invoked as a bar for entertainment of the writ application and the court would adjudicate the dispute raised by the parties. Issuance of writ of mandamus in the shape of habeaus corpus giving direction to the court below to release from the judicial custody - HELD THAT:- The habeas corpus is a latin word which means to provide the body . A writ of habeas corpus is used to bring a prisoner or other detainee (e.g. institutionalized mental patient) before the court to determine, if the person s imprisonment or detention is lawful. A habeas corpus petition proceeds as a civil action against the State agent who holds the defendant in custody. It can be exercised pertaining extradition processes used - the extension of benefit would be granted to the accused during the period of investigation, enquiry and trial with respect to other cases but, in the event, the accused has been found guilty and has been awarded sentence, till the expiry of the period of sentence, he will not be granted relief of set off with respect to other criminal cases. Admittedly, the petitioner is not only in custody with respect to present case rather with respect to other cases also and with respect to two cases, still he has not been granted bail and, as such, he is in jail custody in respect of aforesaid two cases also. This Court only places reliance on the declaration made by the petitioner as well as to the extent the Union of India has brought the fact to the notice of this Court - Though the petitioner has already suffered maximum punishment of seven years, so in the present case lodged under the PML Act, he cannot be kept in judicial custody but, because in two cases in which he is still in jail with respect to valid order of remand, in such circumstances, he cannot be released from jail custody exercising the power of habeas corpus but, this Court observes that after calculating the period of sentence in terms of Section 31 and 428 of the Cr.P.C., if the petitioner has completed seven years of jail custody, which is the maximum period he can be sentenced in this case, in such situation, he cannot be kept in jail custody with respect to the present case but, he cannot be set free from the jail on account of valid judicial order of remand with respect to two other cases. It will not be appropriate for this Court to straightway give direction for release of the petitioner from the jail custody rather he should take proper steps in accordance with law - Application disposed off.

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• CST, VAT & Sales Tax

• 2020 (8) TMI 572
  Principles of Natural Justice - case of petitioner is that the assessing officer, without properly applying his mind on the documentary evidence filed by the petitioner, simply recorded the statement made by the enforcement wing officials and passed the impugned orders relating to the assessment years in question - HELD THAT:- The issue decided in the case of AMUTHA METALS VERSUS COMMERCIAL TAX OFFICER, MANNADY (EAST) ASSESSMENT CIRCLE, CHENNAI [ 2007 (3) TMI 677 - MADRAS HIGH COURT] where it was held that Under the statutory provisions, it is expected from the assessing officer to consider the objections and either accept or reject the same by giving valid reasons by applying his mind. The matters are remitted back to the first respondent for passing orders afresh - petition allowed by way of remand.

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• Indian Laws

• 2020 (8) TMI 571
  Interpretation of Statute - Right of Daughter in the property of her parents etc. - Section 6 of the Hindu Succession Act, 1956 as amended by Hindu Succession (Amendment) Act, 2005 - right of a coparcener in the property - retrospective and retroactive statute - HELD THAT:- In view of the provisions contained in Section 6 when a coparcener is survived by a female heir of Class I or male relative of such female, it was necessary to ascertain the share of the deceased, as such, a legal fiction was created. The Explanation I provided legal fiction of partition as if it had taken place immediately before his death, notwithstanding whether he had the right to claim it or not. However, a separated Hindu could not claim an interest in the coparcenary based on intestacy in the interest left by the deceased - The amended provisions of Section 6(1) provide that on and from the commencement of the Amendment Act, the daughter is conferred the right. Section 6(1)(a) makes daughter by birth a coparcener in her own right and in the same manner as the son. Section 6(1)(a) contains the concept of the unobstructed heritage of Mitakshara coparcenary, which is by virtue of birth. Section 6(1)(b) confers the same rights in the coparcenary property as she would have had if she had been a son . The conferral of right is by birth, and the rights are given in the same manner with incidents of coparcenary as that of a son and she is treated as a coparcener in the same manner with the same rights as if she had been a son at the time of birth. Though the rights can be claimed, w.e.f. 9.9.2005, the provisions are of retroactive application; they confer benefits based on the antecedent event, and the Mitakshara coparcenary law shall be deemed to include a reference to a daughter as a coparcener. At the same time, the legislature has provided savings by adding a proviso that any disposition or alienation, if there be any testamentary disposition of the property or partition which has taken place before 20.12.2004, the date on which the Bill was presented in the Rajya Sabha, shall not be invalidated. The prospective statute operates from the date of its enactment conferring new rights. The retrospective statute operates backward and takes away or impairs vested rights acquired under existing laws. A retroactive statute is the one that does not operate retrospectively. It operates in futuro. However, its operation is based upon the character or status that arose earlier. Characteristic or event which happened in the past or requisites which had been drawn from antecedent events. Under the amended Section 6, since the right is given by birth, that is an antecedent event, and the provisions operate concerning claiming rights on and from the date of Amendment Act. The effect of the amendment is that a daughter is made coparcener, with effect from the date of amendment and she can claim partition also, which is a necessary concomitant of the coparcenary. Section 6(1) recognises a joint Hindu family governed by Mitakshara law. The coparcenary must exist on 9.9.2005 to enable the daughter of a coparcener to enjoy rights conferred on her. As the right is by birth and not by dint of inheritance, it is irrelevant that a coparcener whose daughter is conferred with the rights is alive or not. Conferral is not based on the death of a father or other coparcener. In case living coparcener dies after 9.9.2005, inheritance is not by survivorship but by intestate or testamentary succession as provided in substituted Section 6(3). Effect of enlargement of daughter s rights - HELD THAT:- As per the Mitakshara law, no coparcener has any fixed share. It keeps on fluctuating by birth or by death. It is the said principle of administration of Mitakshara coparcenary carried forward in statutory provisions of Section 6. Even if a coparcener had left behind female heir of Class I or a male claiming through such female Class I heir, there is no disruption of coparcenary by statutory fiction of partition. Fiction is only for ascertaining the share of a deceased coparcener, which would be allotted to him as and when actual partition takes place. The deemed fiction of partition is for that limited purpose. The classic Shastric Hindu law excluded the daughter from being coparcener, which injustice has now been done away with by amending the provisions in consonance with the spirit of the Constitution - There can be a sole surviving coparcener in a given case the property held by him is treated individual property till a son is born. In case there is a widow or daughter also, it would be treated as joint family property. If the son is adopted, he will become a coparcener. An adoption by a widow of a deceased coparcener related to the date of her husband s death, subject to saving the alienations made in the intermittent period. Acquisition of Rights in Coparcenary Property - HELD THAT:- As a matter of fact, in substance, there is a divergence of opinion in Prakash v. Phulavati and Danamma [ 2015 (10) TMI 2761 - SUPREME COURT ] with respect to the aspect of living daughter of a living coparcener. In the latter case, the proposition of the living daughter of a living coparcener was not dealt with specifically. However, the effect of reasons given in para 23 had been carried out to logical end by giving an equal share to the daughter. Partition and Effect of Statutory Fiction - HELD THAT:- Once the constitution of coparcenary changes by birth or death, shares have to be worked out at the time of actual partition. The shares will have to be determined in changed scenario. The severance of status cannot come in the way to give effect to statutory provision and change by subsequent event. The statutory fiction of partition is far short of actual partition, it does not bring about the disruption of the joint family or that of coparcenary is a settled proposition of law. For the reasons mentioned above, we are also of the opinion that mere severance of status by way of filing a suit does not bring about the partition and till the date of the final decree, change in law, and changes due to the subsequent event can be taken into consideration. When the proviso to unamended Section 6 of the Act of 1956 came into operation and the share of the deceased coparcener was required to be ascertained, a deemed partition was assumed in the lifetime of the deceased immediately before his death. Such a concept of notional partition was employed so as to give effect to Explanation to Section 6. The fiction of notional partition was meant for an aforesaid specific purpose. It was not to bring about the real partition. Neither did it affect the severance of interest nor demarcated the interest of surviving coparceners or of the other family members, if any, entitled to a share in the event of partition but could not have claimed it. The entire partition of the coparcenary is not provided by deemed fiction; otherwise, coparcenary could not have continued which is by birth, and the death of one coparcener would have brought an end to it. Legal fiction is only for a purpose it serves, and it cannot be extended beyond. It is apparent that the right of a widow to obtain an equal share in the event of partition with the son was not deprived under old Section 6. Unamended Section 6 provided that the interest of a coparcener could be disposed of by testamentary or intestate succession on happening of exigency under the proviso. Under the old law before 1956 devise by a coparcener of Hindu Mitakshara family property was wholly invalid. Section 3 What has been recognised as partition by the legislation Under Section 6, accordingly, rights are to be worked out. This Court consistently held in various decisions mentioned above that when the rights are subsequently conferred, the preliminary decree can be amended, and the benefit of law has to be conferred. Hence, we have no hesitation to reject the effect of statutory fiction of proviso to Section 6 - If a daughter is alive on the date of enforcement of the Amendment Act, she becomes a coparcener with effect from the date of the Amendment Act, irrespective of the date of birth earlier in point of time. Section 6(5) - HELD THAT:- The intendment of amended Section 6 is to ensure that daughters are not deprived of their rights of obtaining share on becoming coparcener and claiming a partition of the coparcenary property by setting up the frivolous defence of oral partition and/or recorded in the unregistered memorandum of partition. The Court has to keep in mind the possibility that a plea of oral partition may be set up, fraudulently or in collusion, or based on unregistered memorandum of partition which may also be created at any point of time. Such a partition is not recognized Under Section 6(5) - It is settled law that family arrangements can be entered into to keep harmony in the family. There is a general presumption that every Hindu family is presumed to be joint unless the contrary is proved. It is open even if one coparcener has separated, to the non-separating members to remain joint and to enjoy as members of a joint family. No express agreement is required to remain joint. It may be inferred from how their family business was carried on after one coparcener was separated from them. Whether there was a separation of one coparcener from all other members of a joint family by a decree of partition, the decree alone should be looked at to determine the question. The expression used in Explanation to Section 6(5) partition effected by a decree of a court would mean giving of final effect to actual partition by passing the final decree, only then it can be said that a decree of a court effects partition. A preliminary decree declares share but does not effect the actual partition, that is effected by passing of a final decree; thus, statutory provisions are to be given full effect, whether partition is actually carried out as per the intendment of the Act is to be found out by Court. Even if partition is supported by a registered document it is necessary to prove it had been given effect to and acted upon and is not otherwise sham or invalid or carried out by a final decree of a court. In case partition, in fact, had been worked out finally in toto as if it would have been carried out in the same manner as if affected by a decree of a court, it can be recognized, not otherwise - There is a clear legislative departure with respect to proof of partition which prevailed earlier; thus, the Court may recognise the other mode of partition in exceptional cases based upon continuous evidence for a long time in the shape of public document not mere stray entries then only it would not be in consonance with the spirit of the provisions of Section 6(5) and its Explanation. Thus, it is decided as under: (i) The provisions contained in substituted Section 6 of the Hindu Succession Act, 1956 confer status of coparcener on the daughter born before or after amendment in the same manner as son with same rights and liabilities. (ii) The rights can be claimed by the daughter born earlier with effect from 9.9.2005 with savings as provided in Section 6(1) as to the disposition or alienation, partition or testamentary disposition which had taken place before 20th day of December, 2004. (iii) Since the right in coparcenary is by birth, it is not necessary that father coparcener should be living as on 9.9.2005. (iv) The statutory fiction of partition created by proviso to Section 6 of the Hindu Succession Act, 1956 as originally enacted did not bring about the actual partition or disruption of coparcenary. The fiction was only for the purpose of ascertaining share of deceased coparcener when he was survived by a female heir, of Class-I as specified in the Schedule to the Act of 1956 or male relative of such female. The provisions of the substituted Section 6 are required to be given full effect. Notwithstanding that a preliminary decree has been passed the daughters are to be given share in coparcenary equal to that of a son in pending proceedings for final decree or in an appeal. (v) In view of the rigor of provisions of Explanation to Section 6(5) of the Act of 1956, a plea of oral partition cannot be accepted as the statutory recognised mode of partition effected by a deed of partition duly registered under the provisions of the Registration Act, 1908 or effected by a decree of a court. However, in exceptional cases where plea of oral partition is supported by public documents and partition is finally evinced in the same manner as if it had been affected by a decree of a court, it may be accepted. A plea of partition based on oral evidence alone cannot be accepted and to be rejected outrightly. The views to the contrary expressed in Prakash v. Phulavati and Mangammal v. T.B. Raju and Ors. [ 2018 (5) TMI 1368 - SUPREME COURT ] overruled - The opinion expressed in Danamma @ Suman Surpur and Anr. v. Amar [ 2018 (3) TMI 867 - SUPREME COURT ] is partly overruled. Let the matters be placed before appropriate Bench for decision on merits.

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