Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 24, 2019
Case Laws in this Newsletter:
GST
Income Tax
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Highlights / Catch Notes
GST
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Leasing of Satellite Transponder - the transponders are goods and any transfer of right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration is liable to GST @5%.
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Levy of GST - services or assistance rendered by the Court Receiver appointed by this Court - In the absence of reciprocal enforceable obligations, it would not be correct to characterise the Defendant's occupation of the Suit Premises against payment of royalty as a 'supply' for 'consideration' on which GST is payable by the Court Receiver.
Income Tax
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Stock difference - when there is a difference in the value of stock shown in the statement given to the bank and the books of account of the assessee, the assessee is bound to explain the differences. In the absence of any explanation furnished by the assessee, additions confirmed.
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Deduction as loss on Chit - Even if the assessee is not able to establish that the money raised through chit was used for business purpose then also, disallowance should be of net amount of chit discount (-) chit dividend and not of gross amount of chit discount.
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Collection of tax at source (TCS) U/s 206C - unless the members of the petitioner-association get themselves registered as the manufacturers of bidi u/s 11 of the Regulation of Trade Act, it cannot be said that they are utilizing the processed Tendu leaves for the purposes of manufacture of bidi. - not entitled to claim exemption from TCS
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LTCG - Deduction u/s 54F - Merely because the sale deed had not been executed or that construction is not complete and it is not in a fit condition to be occupied does not disentitle the assessee to claim section 54F relief
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Condonation of delay - delay of 1038 days - This Tribunal is bound to remove the injustice by condoning the delay on technicalities. If the delay is not condoned, it would amount to legalising an illegal order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto.
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TDS u/s 194J - The fee is paid to arbitrators who perform the legal functions. Hence, it cannot be said that the company is not getting the services of the arbitrators and dealing with their disputes regarding the contracts etc. - the amount is liable to TDS
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Reopening of assessment u/s 147 or 153C - assessment proceedings were initiated mainly on the information found during the search proceedings - jurisdiction lies to initiate proceedings u/s.153C and not u/s.148 - assessment made by the AO u/s 143(3) r.w.s. 147 quashed
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Penalty u/s 271(1)(c) - voluntary surrender on account of long term capital gain on sale of shares during assessment proceedings - the surrender made by the assessee is voluntary, for which only addition can be made and penalty u/s 271(1)(c) cannot be initiated.
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Provision against SABAH forward contract as the order was cancelled beyond the year ending - Incurring of loss in a succeeding year is something quite different from marking transaction to market rate as at the close of the year. - Since the instant loss actually fell upon the assessee in the succeeding year, the same cannot be allowed as deduction in the year under consideration.
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Disallowance on account of Foreign Fluctuation Exchange loss - such loss/profit to be of revenue character. - the CBDT Instruction cannot override the judicially settled position - claim allowed.
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Nature of expenditure - There is no provision in the Act to disallow revenue expenditure under Section 37 of the Act in its entirety, in the year in which the expenditure is incurred, on the basis that it has to be allowed only to the extent benefit is received.
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Exemption u/s 11 - charitable activity u/s 2(15) - providing healthcare facilities and imparting medical education and training - with a view to corporatize the hospital the management of the charitable activity was handed over to SCPL - some erroneous presentation of Form No. 10B report does not disentitle the trust for claiming exemption u/s. 11.
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Addition u/s 69C on the basis of valuation report - unexplained expenditure - assessee has not maintained books of account and fail to furnish bills and vouchers in support of material purchased to substantiate the cost of construction of the house - additions confirmed.
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Disallowance u/s 40A(3) - cash payments of expenditures - poor creditability in the market - genuineness of such expenditure is not in dispute - AO directed to sustain disallowance u/s 40A(3) to the extent of 5% of the alleged amount.AO to sustain disallowance u/s 40A(3) to the extent of 5% of the alleged amount.
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Claim of refund of interest - excess interest collected u/s.220 along with statutory interest U/s.244A - Revenue directed to refund the said sum along with appropriate interest within a period of four weeks.
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Exemption u/s 10(26) - denial of exemption relief to the two partnership firms that was formed by two tribal individuals - sec. 10(26) pre-possess “any person” who is also a member of a Scheduled Tribe as against sec. 10(26A) and 10(26AAA) applicable in case of specified categories of person respectively - Benefit of exemption not allowed.
IBC
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CIRP - discrimination against secured creditor - The Appellant a ‘Secured Financial Creditor’ has been discriminated with other ‘Secured Financial Creditors’, we hold that the ‘Resolution Plan’ is violative of Section 30(2) (e) of the ‘I&B Code’. However, we are not inclined to set aside the approved plan on such ground. The ‘Successful Resolution Applicant’ is given opportunity to remove the discrimination.
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The Tribunal is empowered to restore the name of the Company and all other persons in their respective position for the purpose of initiation of CIRP u/s 7 and 9 of the I&B Code based on the application, if filed by the ‘Creditor’ or workman within twenty years from the date the name of the Company is struck off under sub-section (5) of Section 248.
Service Tax
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CENVAT Credit - input services - services which are used for the personal use of their employees - Merely because a person happens to be their employee he does not cease to be a service recipient. If the employees were not a service recipient, no amounts would have been recovered from them and no service tax would have been paid on the same. - Credit allowed.
Central Excise
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Interest on unutilized reversed credit entry - The erstwhile Rule 14 of the Cenvat Credit Rules read as “taken or utilised”, which had been amended and substituted by the words “taken and utilised” - substantive benefit cannot be denied to the appellant - Demand of interest waived.
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CENVAT Credit - use of capital goods - the capital goods were not used continuously for two years for manufacture of exclusively exempted goods. Since the amendment is by way of substitution, it will be applicable from the retrospective effect.
Case Laws:
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GST
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2019 (9) TMI 930
Classification of services - rate of tax - Leasing of Satellite Transponder - Whether Leasing of Satellite Transponder which is covered under SAC Code 997319 be charged at 5% GST as per HSN Code 8803 Parts Goods of Heading 8802 (Satellites)? - Notification No.8/2017 - Integrated Tax (Rate) dated 28.06.2017. HELD THAT:- In the instant case satellite transponders had been leased out. Therefore the rate of tax applicable on the service of leasing of the satellite transponders shall be the same as the rate of tax as applicable on the supply of the satellite transponders. This brings us to the question of determination of the rate of tax on supply of satellite transponders which in turn requires us to determine the classification of the said goods. The transponder essentially is a repeater which receives the signal transmitted from earth station on the uplink, amplifies the signal, converts to a dissimilar frequency and retransmits the same on the downlink. Therefore the essential / significant features of amplification and frequency conversion are done by the key payload of the communication satellite i.e. the transponder. Therefore the transponder becomes an integral part of the communication satellite, without which the communication satellite becomes defunct. The Communication Satellite Transponders are appropriately classifiable under Tariff Heading 8803, more specifically under 8803 90 00. Transponders, being parts of communication satellites, are covered under 8803 90 00 and any leasing of such transponders would be covered under the Entry No. 17 of Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017 at the rate applicable as on the supply of like goods involving the transfer of title in goods - Admittedly the transponders are goods and any transfer of right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration is covered under the clause (viii) of Entry No. 17 of the said Notification.
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2019 (9) TMI 929
Jurisdiction - Levy of GST - services or assistance rendered by the Court Receiver appointed by this Court under Order XL of the CPC - HELD THAT:- The services of the Court Receiver are activities or transactions which shall be treated neither as a supply of goods nor a supply of services. Accordingly, the fees or charges paid to the Court Receiver are not liable to GST. The answer to Issue i.e. Whether GST is liable to be paid on services rendered by the Court Receiver appointed by this Court under Order XL of the CPC is answered in the negative. It is clarified that this Court has not considered this issue in the context of a private receiver who may be appointed by the Court under Order XL of the CPC - GST cannot be levied or recovered on services provided by the Court Receiver. Rule 591 of the Bombay High Court (Original Side) Rules prescribes the fees of the Court Receiver. Therefore, GST should not be levied on amounts directed to be paid by litigants to the office of the Court Receiver. Levy of GST - Estates under the control of the Court Receiver - royalty or payments under a different head paid by a defendant (or in a given case by the plaintiff or third party) to the Court Receiver in respect of properties over which a Court Receiver has been appointed - scope of 'supply of services' - payment of royalty for remaining in possession of the Suit Premises, either during the pendency of the Suit, or at the time of passing of the decree - whether payment made to the Receiver to be held in custody by it in relation to the underlying dispute between the parties attract GST? - HELD THAT:- The Learned Amicus Curiae is correct in submitting that the legislature has, in Section 92 of the CGST Act, provided that a receiver would be a convenient point for the revenue to determine and collect GST. If Section 92 of the CGST Act is applicable in a given case, GST may be determined and recovered from the Court Receiver by reason of the Court Receiver being akin to a 'representative assessee'. However, whether or not GST is applicable depends on the nature of the cause of action pleaded by the Plaintiff or the order of the Court directing payment and which sets out the terms of receivership. This is because the cause of action and finding thereon will determine the character of the payments made. All or some of these would have to be considered to determine if a 'taxable event' within the four corners of the CGST Act have taken place to attract liability for GST. The requirement of a 'supply' is essential. It is the taxable event under the CGST Act. If there is no supply, there can be no liability for payment of tax (or any interest or penalty thereon). This is clear from Article 246A of the Constitution of India which deals with the legislative competence of the Union and the States to make laws with respect to goods and services tax imposed by the Union or such State and Article 366(12A) of the Constitution of India which defines 'goods and services tax' as 'any tax on Supply of Goods or Services or both except taxes on the supply of the alcoholic liquor for human consumption'. This is also evident from the charging provision i.e. Section 9 of the CGST Act - If these requirements are met with, Section 92 of the CGST Act provides that GST may be determined and recovered from the receiver in the like manner and to the same extent as it would be determined and be recoverable from a taxable person as if the receiver were conducting the business himself. The effect of payment of royalty by the Defendant to the Court Receiver as a condition for remaining in possession of the Suit Premises - HELD THAT:- In the present case, royalty is paid towards damages or compensation or securing any future determination of compensation or damages for a prima facie violation of the Plaintiff's legal right in the Suit Premises. The prima facie finding is that the Defendant has no semblance of right to be in occupation of the Suit Premises. The permission granted to the Defendant to remain in possession subject to payment of royalty is an order to balance the equities of the case. The basis of this payment is the alleged illegal occupation or trespass by the Defendant. Such payment lacks the necessary quality of reciprocity to make it a 'supply'. Hence no GST is payable. Although the quantification of royalty towards a claim of damages involves ascertaining the market rent payable with respect to the property alleged to be illegally occupied, the compensation liable to be paid does not acquire the character of consideration so as to make the transaction a supply. Therefore, in the present case, where the Plaintiff has made out a strong prima facie case and the Defendant has not been able to demonstrate any semblance of right to occupy the Suit Premises, it cannot be said that the Defendant's occupation pursuant to an Order of the Court is a contract involving a 'supply' for consideration. In the absence of reciprocal enforceable obligations, it would not be correct to characterise the Defendant's occupation of the Suit Premises against payment of royalty as a 'supply' for 'consideration' on which GST is payable by the Court Receiver.
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Income Tax
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2019 (9) TMI 928
Appeals to High Court u/s 260A - Words the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner in Section 260A (2) (a) interpretation - whether mean only the 'jurisdictional' Principal or Chief Commissioner of Income-tax (CIT) or could it include any CIT including the CIT (Judicial)? - period of limitation - HELD THAT:- SLP dismissed on the ground of low tax effect. Rest of the matters - Delay condoned. Applications seeking exemption from filing certified copy of the impugned order are allowed.
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2019 (9) TMI 927
Assessment u/s 153A - allegation of generation of unaccounted money and also transfer of such money in exchange of share capital - proving any accommodation entry - reliance on third party statement - CIT(A), ITAT and HC deleted the additions - HELD THAT:- Delay condoned. The special leave petitions are dismissed.
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2019 (9) TMI 926
Depreciation on UPS @60% - MAT/115JB applicability On Insurance Companies - MAT computation on Solatium Fund - Commission for receipt of reinsurance - TDS on Survey Fees u/s 195 - fee has been paid for utilizing the expertise of the surveor and therefore, tax has to be deducted at source - HELD THAT:- Applications seeking exemption from filing certified copy of the impugned judgment are allowed. Leave granted. Hearing expedited.
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2019 (9) TMI 925
Accrual of income - accounting treatment in respect of prepaid cards - Rendering of Services - Income recognition - Accounting standards - amount received on sale of prepaid cards to the extent of unutilized talk time - assessee was engaged in the business of providing basic telecom services in the State of Rajasthan and had both prepaid and postpaid subscribers - HELD THAT:- SLP dismissed.
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2019 (9) TMI 924
Collection of tax at source (TCS) - Exemption under sub-section (1A) of Section 206C - Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc. - whether the members of the petitioner-association, who are the contractors of Tendu leaves (a forest produce), are entitled to claim exemption under sub-section (1A) of Section 206C from the collection of tax at source from them by the seller, namely, the Forest Department of the State of Maharashtra? - HELD THAT:- It is an integrated process of manufacture or producing bidi in this case, from the processed Tendu leaves, which qualifies for exemption. The placement of the word processing in between manufacturing and or producing articles or things under sub-section (1A) is also significantly indicate such intention of the Legislature. The processing of Tendu leaves in this case may qualify for the purposes of trading or sale, but not for the utilization for the purposes of manufacture of bidis. Section 11 of the Regulation of Trade Act deals with the registration of the manufacturer of finished goods using the forest produce, who has to get himself registered with the concerned Department of the State Government in a manner provided under Rule 9 of the Rules framed under the Regulation of Trade Act. It is not the claim of the petitioner-association that they are also the manufacturers of bidi and the Tendu leaves purchased by them from the Forest Department of the State Government are processed for utilization in the process of manufacture of bidi. It is not an integral part of the process of manufacture of bidi. It is thus clear that unless the members of the petitioner-association get themselves registered as the manufacturers of bidi under Section 11 of the Regulation of Trade Act, it cannot be said that they are utilizing the processed Tendu leaves for the purposes of manufacture of bidi. The expression processing under sub-section (1A) will have, therefore, to be necessarily understood as an intermediary process in the manufacture of bidi. No substance in the challenge raised in this petition, which is dismissed.
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2019 (9) TMI 923
Claim of refund of interest - excess interest collected u/s.220 along with statutory interest U/s.244A of the Income Tax Act, 1961 - further, seeking compensation for the inordinate delay in granting the refund . - HELD THAT:- The above claim made by the petitioner for refund of the sum is not disputed by the respondents and on the other hand, the respondents seek four weeks time to refund the same, this Writ Petition is disposed of, by recording the above stand taken by the respondents, also with further direction to the respondents to refund the said sum along with appropriate interest within a period of four weeks from the date of receipt of a copy of this order.
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2019 (9) TMI 922
TP Adjustment - rate of interest on loans given to Associated Enterprises -Tribunal restricting the rate @ LIBOR + 2% instead of 17.22% proposed by the Transfer Pricing Officer - HELD THAT:- It is an agreed position between the parties that the issue raised herein stand concluded against the Revenue and in favour of the Respondent Assessee. This by the decision of this Court in the case of the same Respondent viz. Principal Commissioner of Income Tax v/s. Manugraph [ 2018 (11) TMI 1693 - BOMBAY HIGH COURT] as following M/S. EVEREST KENTO CYLINDERS LTD. [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] Nature of expenditure - expenses incurred for DRUPA Exhibition Germany - revenue or capital expenditure - HELD THAT:- Apex Court in Taparia Tools vs. JCTI [ 2015 (3) TMI 853 - SUPREME COURT] has held that there is no concept of deferred expenditure unless it falls in specified Sections. It held that ordinarily, if the Assessee claims the expenditure in a particular year, it has to be allowed. We note that the expenditure incurred on DRUPA Exhibition is in the nature of marketing and selling expenses. This expense is incurred with the hope of resultant increased sales. In fact this Court has in CIT V/s. Asian Paints (India) Ltd. [ 2016 (11) TMI 258 - BOMBAY HIGH COURT] while following its earlier decision in CIT v/s. Geoffrey Manners Co. Ltd. [ 2009 (2) TMI 13 - BOMBAY HIGH COURT] held that expenditure incurred in making advertisement films resulting in building the firm s brand image, is an expenditure in respect of an ongoing business and would be in the revenue field. There is no provision in the Act to disallow revenue expenditure under Section 37 of the Act in its entirety, in the year in which the expenditure is incurred, on the basis that it has to be allowed only to the extent benefit is received. No substantial question of law. TDS u/s 195 - Disallowance of reimbursement of expenses incurred by subsidiary of the Appellant - HELD THAT:- Tribunal found that there was no income embedded in the reimbursement of expenses made, therefore following the decision of the Apex Court in the case of GE India Technology Cen. (P) Ltd. v/s. Commissioner of Income-tax [ 2010 (9) TMI 7 - SUPREME COURT] it allowed the Respondent s appeal as held that requirement of deducting tax at source under Section 195 of the Act would only arise, if the payment is shown to have embedded income, taxable in India. In this case it is found that the payment which has been made is in the nature of reimbursement and therefore no obligation to deduct tax at source arises. Consequently, no occasion to disallow expenditure under section 40(a)(i) of the Act can arise. Appeal admitted on the substantial question of law at (b) and (c).
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2019 (9) TMI 921
TP Adjustment - adjustment in respect of the international transaction only and not on the entire sales - Whether the assessee had failed to prove that the margin of profit of the AE transaction is the same as the margin of profit of the non-AE transaction? - HELD THAT:- Transfer Pricing adjustment has to be done only in respect of related party transactions and not on all transactions. See SANDVIK ASIA PVT. LTD., [ 2018 (5) TMI 262 - BOMBAY HIGH COURT] Exclude Genesys International Corporation Ltd. And Cosmic Global Ltd. from the set of comparables - HELD THAT:- Functionally M/s. Genesys And Cosmic Global Ltd. was different from the Respondent. Therefore, would not be an appropriate comparable. Risk adjustment - HELD THAT:- Tribunal allows the Respondent s appeal by way of remand to the Assessing Officer to examine the issue of risk adjustment while arriving at the ALP. In fact, it follows its earlier order [ 2016 (7) TMI 238 - ITAT PUNE] in respect of Assessment Year 2008-09 in respect of the same Respondent. From The order of tribunal, no substantial question of law arises - appeal of the revenue dismissed.
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2019 (9) TMI 920
TP Adjustment - average rate of interest of 11.30% during the year - series of debentures issued in different years was a separate international transaction and each transaction was required to be benchmarked separately - HELD THAT:- Tribunal in the impugned judgment has made certain observations suggesting that the identification of the tested party is imperative while applying other methods from comparison for transfer pricing and not while applying CUP method. Our non-consideration of the revenue s Appeal in the present case, should not be seen as putting our seal on such observations of the tribunal. We keep such question open to be examined in an appropriate case. In the present case, independent of such observations of the tribunal, we find that the conclusions arrive at, are based on evidence on record which conclusions call for no interference. Disallowance u/s 14A computed as per Rule 8D - HELD THAT:- The issue is no longer resintigra. The facts are that the assessee had not earned any exempt, income during the year under consideration. As held earlier Delhi High Court which judgment is also followed repeatedly by our Court, in case of Chemvinvest Ltd. Vs. Commissioner of Income Tax [ 2015 (9) TMI 238 - DELHI HIGH COURT] in such a case disallowance of expenditure under section 14A of the Act would not be permissible. The decision of Delhi High Court was carried in the appeal by the revenue. The SLP has been dismissed by the Supreme Court. Addition on account of interest accrued from three parties had become NPA - HELD THAT:- As decided in BAJAJ FINANCE LIMITED [ 2019 (4) TMI 378 - BOMBAY HIGH COURT] interest on NPAs cannot be taxed on accrual basis. It was noted that NBFC would be governed by the directions issued by the Reserve Bank of India and RBI directives provided that under certain circumstances, a loan or advance would be treated as NPA. The Court on the real income theory held that such interest would not be taxable.
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2019 (9) TMI 919
Rectification of mistake u/s 254 - ALP adjustment on interest on receivables - HELD THAT:- Tribunal has considered and held that it is an international transaction which needs TP adjustment. Thereafter, the Tribunal has set aside the issue to the file of the TPO to calculate the average collection period of the industry and also to charge interest only on the period beyond the industrial average. We find that the assessee had raised additional grounds of appeal vide letter dated 6.9.2018 and is part of the record in which the assessee is raising a ground that it is a debt free company and that no borrowed funds were utilized to pass on the facility to its AE. Tribunal, inadvertently missed to consider and decide on the admissibility of the additional grounds and if they were to be admitted, to consider the merits of the additional grounds of appeal filed by the assessee. If these grounds are admitted and allowed, then the consequences/result of such decision would have an impact on the decision already taken by the Tribunal. Therefore, these grounds may need adjudication by the Tribunal. Therefore, we are of the opinion that there is a mistake apparent from the record which needs rectification. ALP adjustment towards interest on outstanding receivables - HELD THAT:- On going through the order of the Tribunal, we find that for the A.Y 2014-15, we have followed the decision of the ITAT in the assessee s own case for the A.Y 2013-14 and have remanded the matter to the file of the AO for calculating the industrial average period of collection and directed the AO not to charge interest if the receivables were collected within the industrial average period. We find that we have not adjudicated the specific ground raised by the assessee in Ground No.2.1 which are similar to the additional grounds 5 and 6 raised by the assessee for the A.Y 2013-14. Therefore, we deem it fit and proper to recall the order of the Tribunal dated 12-06-2019 only for adjudication of Ground No.2.1 raised by the assessee in the appeal. M.A. is accordingly allowed.
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2019 (9) TMI 918
Deduction as loss on Chit - Whether the Chit discount is capital in nature OR revenue expenditure? - Whether disallowance of Chit loss is sustained, then the income from Chit dividend be also reduced from the income? - Chit income be reduced from the income - net amount v/s gross amount - HELD THAT:- In CIT Vs. Kottayam Cooperative Bank Ltd. [ 1974 (4) TMI 2 - KERALA HIGH COURT] and also CIT Vs. Merchant Navy Club [ 1971 (9) TMI 59 - ANDHRA PRADESH HIGH COURT] and ITO Vs. Singh Radio Co. (India) (P.) Ltd. [ 1991 (7) TMI 144 - ITAT DELHI-D] it was held that the loss incurred in subscribing to chit fund is allowable if funds raised from such chit is utilized for the purpose of business. On this aspect, there is no finding of authorities below. Before us, the assessee has brought certain additional evidences on record in the form of ledger account of various chits as well as copy of bank statements and it is being claimed before us that the money raised through chit was used for the business purpose. Under these facts, we feel it proper to restore back the matter to the file of ld. CIT(A) for fresh decision after examining these additional evidences and if the assessee is able to establish that the money raised through chit was utilized for the purpose of business, then the loss incurred in the chits being net of chit discount (-) chit dividend should be allowed as revenue expenditure. Even if the assessee is not able to establish that the money raised through chit was used for business purpose then also, disallowance should be of net amount of chit discount (-) chit dividend and not of gross amount of chit discount. - Appeals filed by the assessee are allowed for statistical purposes.
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2019 (9) TMI 917
Condonation of delay for filing Rectification u/s 254 - HELD THAT:- We find that u/s 254(2) of the Act, the M.A has to be filed within six months from the end of the month in which the Tribunal has passed the order. The Revenue has filed this M.A almost after 12 months from the date of passing of the order. This Tribunal, in the case of ACIT vs. Gayathri Infra Ventures Ltd [ 2018 (7) TMI 1917 - ITAT HYDERABAD] has held that the Tribunal does not have the power to condone the delay in filing of the M.A and that the M.A filed beyond the period of six months cannot be entertained The Hon'ble Karnataka High Court in the case of Shri Muni Naga Reddy Vs. ACIT [ 2018 (8) TMI 1261 - KARNATAKA HIGH COURT] also has held that the Tribunal cannot condone the delay in filing of the Miscellaneous Application u/s 254(2) of the Act. Respectfully following the same, the Miscellaneous Application filed by the Revenue is dismissed.
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2019 (9) TMI 916
Bogus purchase of timber - As argued that the sellers did not issue any sale bill - HELD THAT:- In our opinion, it is the duty of the assessee to produce all the bills and vouchers in support of purchase entries found in the books of account. In the absence of the details, the Assessing Officer considered it as bogus purchase. Even before us, the assessee was not able to lead any evidence regarding the genuineness of the purchasers, though the burden is on the assessee to prove the genuineness of the transactions. In view of these, we are inclined to confirm the addition made towards bogus purchases. Accordingly, this ground raised by the assessee is dismissed. Addition u/s 40A(3) - cash purchase in excess of ₹ 20,000/- - HELD THAT:- Before us, the assessee filed receipts from parties confirming the receipt of cash payments and also confirming that they do not have bank accounts. DR objected to this contention of the assessee and contended that the receipts filed by the assessee are stereotype and also they do not have dates. DR further submitted that these receipts were not produced before the AO for verification. In our opinion, these receipts need to be verified at the ends of the AO. Hence, in the interest of justice and equity, we remit this issue to the A.O. to examine it afresh and if the assessee is able to prove the reasonable cause for making such cash payments, the same may be deleted. Further the amount paid towards bogus purchases by way of cash cannot be once again considered u/s 40A(3) of the I.T.Act, which amounts to double addition. To that extent the assessee gets relief. With these observations, the issue is remitted to the A.O. for fresh consideration. Stock difference - difference between value of the stock hypothecated to the bank to avail loan and the value of the stock found reflected in the trading account - HELD THAT:- In the present case, the stock is hypothecated to the bank and the bank official physically verified the stock on 20.03.2013 and thus there was a difference between the stock value shown in the stock statement furnished to the bank and the value of stock shown by the assessee in his books of account as on 31.03.2013 at ₹ 94,77,500. Even after giving opportunity to the assessee, the assessee was not able to reconcile the stock difference. In our opinion, when there is a difference in the value of stock shown in the statement given to the bank and the books of account of the assessee, the assessee is bound to explain the differences. In the absence of any explanation furnished by the assessee, the CIT(A) is justified in confirming the addition made by the Assessing Officer. Case followed COIMBATORE SPINNING AND WEAVING CO. LIMITED VERSUS COMMISSIONER OF INCOME-TAX. [ 1973 (3) TMI 27 - MADRAS HIGH COURT] - Decided against assessee.
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2019 (9) TMI 915
Benefits of exemption u/s 11 - excessive payment to Doctors by way of salary and professional fees - assessee is a charitable trust registered since 21.11.1977 and is running medical institution (hospital) and also in the imparting of education - assesses trust besides have registered u/s 12AA was also approved u/s 10(23C)(via) is running the hospital in the name of BIMR Hospital and BIMR Heart Centre - HELD THAT:- In the present case, the AO has brought on record the comparable instances of the Gajraja Chikitsa Mahavidhyalay and Chirayu Medical College on record but failed to bring on record expertise , qualification any other factors like seniority competence ,experience, qualification etc. AO has further failed to bring on record the revenue collected by these hospital or a period of three years and what was a salary paid to these doctors. AO failed to bring on record whether salary paid to these doctors as mentioned in order were in which proportion to revenue collected by the hospital or not. The Government medical college or salary paid to the government hospital cannot be compared with the salary paid by the private hospital to the private doctors. In the absence of necessary information with respect to that establishment of the hospital, the revenue collected by the hospital, the competence, experience and their ability to give result, it would not be safe use these as comparable instances with that of the assessee. Doctors who had passed out with the same degree in cardiology DM cannot be compared with experience doctor working in the field for the last ten years. No such fact and figure were brought on record by the AO in his order with respect to Dr. Viaks Goyal, Dr. R.K. Singh and Dr. Puneet Rastogi and Dr. Ram Kumar. In our view , intervention in heart by way angiography and surgical bypass and valve replacement needs different skills and expertise in the medical field. To day we are having specialists, super specialist and organ specialist in India and outside India with the same educational qualification. Dr. Ravi Shankar Dalmia having sufficient expertise in the field it is clear from the fact that from 2007 he was working with escort hospital Delhi and thereafter working with the assessee hospital with effect from F.Y. 2009-10. The contribution of doctor is clear from the fact that revenue collected from the A.Y. 2009-10 was 183.26 lakh whereas the revenue collected from the F.Y. 2011-12 was 337.14. The revenue has increased two times in from 2009-10 to 2011-12 and same with the same ration it increased for Dr. Ravi Shankar Dalmia. The finding recorded by the AO based on the comparable instances is wholly incorrect. In our view, the comparable instances brought on by the AO are not at all comparable as the services rendered by the professional like Dr. Ravi Shankar Dalmia cannot be compared with the other DM (Cardiologists) or assistant professional or professor in some medical college or working in other hospital. It is expected from the AO to bring on record the comparable only after bringing on record the comparison between two doctors not only on the basis of the medical degree but also on the basis of expertise etc as mentioned hereinabove. No such fact and figure were brought on record by the AO in his order with respect to Dr. Viaks Goyal, Dr. R.K. Singh and Dr. Puneet Rastogi and Dr. Ram Kumar. In our view , intervention in heart by way angiography and surgical bypass and valve replacement needs different skills and expertise in the medical field. To day we are having specialists, super specialist and organ specialist in India and outside India with the same educational qualification. Dr. Ravi Shankar Dalmia having sufficient expertise in the field it is clear from the fact that from 2007 he was working with escort hospital Delhi and thereafter working with the assessee hospital with effect from F.Y. 2009-10. The contribution of doctor is clear from the fact that revenue collected from the A.Y. 2009-10 was 183.26 lakh whereas the revenue collected from the F.Y. 2011-12 was 337.14. The revenue has increased two times in from 2009-10 to 2011-12 and same with the same ration it increased for Dr. Ravi Shankar Dalmia. Finding recorded by the AO based on the comparable instances is wholly incorrect. In our view, the comparable instances brought on by the AO are not at all comparable as the services rendered by the professional like Dr. Ravi Shankar Dalmia cannot be compared with the other DM (Cardiologists) or assistant professional or professor in some medical college or working in other hospital. It is expected from the AO to bring on record the comparable only after bringing on record the comparison between two doctors not only on the basis of the medical degree but also on the basis of expertise etc as mentioned hereinabove. - Decided against revenue
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2019 (9) TMI 914
Condonation of delay - delay of 1038 days in filing the appeal before the Tribunal - whether the assessee s failure is sufficient cause for condoning the delay? - Whether 1038 days was excessive or inordinate? - HELD THAT:- When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of non deliberate delay. No counter-affidavit was filed by the Revenue denying the submission made by the assessee. It is not the case of the Revenue that the appeal was not filed deliberately. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue. As observed in MST. KATIJI AND OTHERS [ 1987 (2) TMI 61 - SUPREME COURT] if the application of the assessee for condoning the delay is rejected, it would amount to legalise injustice on technical ground when the Tribunal is capable of removing injustice and to do justice. This Tribunal is bound to remove the injustice by condoning the delay on technicalities. If the delay is not condoned, it would amount to legalising an illegal order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto. Under the scheme of Constitution, the Government cannot retain even a single pie of the individual citizen as tax, when it is not authorised by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalise an illegal and unconstitutional order passed by the lower authority. Therefore, in our opinion, by preferring the substantial justice, the delay of 1038 days has to be condoned. There is no question of any excessive or inordinate when the reason stated by the assessee was a reasonable cause for not filing the appeal. We have to see the cause for the delay. When there was a reasonable cause, the period of delay may not be relevant factor. In case the delay was not condoned, it would amount to legalise an illegal and unconstitutional order. The power given to the Tribunal is not to legalise an injustice on technical ground but to do substantial justice by removing the injustice. The Parliament conferred power on this Tribunal with the intention that this Tribunal would deliver justice rather than legalise injustice on technicalities. Therefore, when this Tribunal was empowered and capable of removing injustice, in our opinion, the delay of 1038 days has to be condoned and the appeal of the assessee has to be admitted and disposed of on merit. We condone the delay of 1038 days in filing the appeal and admit the appeal for adjudication. Estimation of income of the assessee on the basis of the seized records - Estimation of G.P. - There is no error in the estimation of income of the assessee on the basis of the seized records. The estimation of income by the AO is based on the documents found during the search and statement recorded during the course of search. Being so, the AO is completely justified in adopting those figures for the whole year and for the next year. For this proposition, reliance is placed on the judgment of the Jurisdictional High Court in the case of Travancore Diagnostics P. Ltd. vs. ACIT [ 2016 (11) TMI 76 - KERALA HIGH COURT] wherein it was held that when suppression had been found from the documents and the statement on record, the AO was completely justified in adopting those figures for the whole year and for the next year which was based on sound rationale, since from the statement on behalf of the assessee, the suppression was found to be continued. In view of the uncontroverted and admitted statement given on behalf of the assessee u/s. 133A and the documents impounded during the survey, which were also virtually admitted by the assessee, there was no error in the order of the Tribunal in accepting the materials on record in order to arrive at an assessment.
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2019 (9) TMI 913
Revision u/s 263 - deposits made into the Bank account - HELD THAT:- Since the AO while framing the original assessment, had considered the entire material, was satisfied with the above factual aspect and thereafter, estimated the income of the assessee at 10% and made an addition of ₹ 9,50,000/-. AO had taken one possible view where two views are possible. When the PCIT does not agree, the assessment cannot be treated as erroneous in so far as it is prejudicial to the interests of the Revenue, since the view taken by the AO is not unsustainable in law. When an Assessing Officer adopts one of the courses permissible in law which results in loss of revenue or where two views are possible and the Assessing Officer has taken one view with which the PCIT/Commissioner does not agree, the assessment order cannot be treated as erroneous order in so far as it is prejudicial to the interests of the Revenue, unless the view taken by the AO is unsustainable in law. Any and every erroneous order cannot be the subject matter for revision u/s. 263 unless the second requirement of section 263 of the Act being prejudicial to the interests of the Revenue prevails. In this case, there was no material to show as to how the order of the Assessing Officer was erroneous in so far as it would become prejudicial to the interests of the Revenue to invoke the jurisdiction u/s. 263 - Decided in favour of assessee.
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2019 (9) TMI 912
Computation of deduction u/s 10A - STP Unit and not a SEZ unit - AO has reduced the amount from the export turnover but it has not been reduced from the total turnover - HELD THAT:- As per the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Tata Elxsi Ltd. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] it was held that total turnover is sum total of export turnover and domestic turnover and if an amount is reduced from export turnover then the total turnover also goes down by the same amount automatically. Since the direction of CIT(A) on this issue is in line with this judgment of Hon'ble Karnataka High Court, we decline to interfere in the order of ld. CIT(A) on this issue. Accordingly ground nos. 5 and 6 of the revenue s appeal are rejected. Eligible deduction computed u/s 10A - Whether Foreign Inward Remittances which are received within a period of one year from the date of export will stand qualified for the purpose of eligible remittances ? - Export Turnover for computation of deduction u/s 10A - HELD THAT:- As per the RBI Master Circular No. 10/2011-12 available filed by the revenue, it is seen that for STP units, time allowed for collection of export proceeds in India is 12 months from the date of export and hence, it has to be seen as to whether the amount of export in question was received in India in foreign currency within the period of 12 months from the date of export. There is no finding available in the order of ld. CIT(A) on this aspect. The working of this amount of ₹ 4,23,73,388/- is also not available before us in the paper book and hence, we feel it proper to restore this aspect of the matter back to the file of ld. CIT(A) for fresh decision with the direction that he should determine the actual amount of export proceeds not received within 12 months from the date of export. Regarding the extension granted by RBI also, he should examine the copy of request made by the assessee for obtaining such extension of time and the actual permission granted by the RBI because we find that the permission of RBI brought on record by the assessee available on page 26 to 27 of the paper book is regarding USD 4,590,641.00 and it includes invoices for both years i.e. Assessment Years 2011-12 and 2012-13. On page no. 4 of the paper book is the detail regarding outstanding amount as on 31.03.2012 of ₹ 4,23,73,388/- but there is no invoice date available in this statement and date of realization during Financial Year 2011-12 is also not available to conclude that such realization made in Financial Year 2011-12 is within 12 months from the date of export or not. The ld. CIT(A) should examine and decide all these aspects by way of a speaking and reasoned order after providing adequate opportunity of being heard to both sides Disallowance u/s. 14A and foreign exchange gain / loss - HELD THAT:- CIT(A) has restored back both the matters to the file of AO for decision but now this is settled position of law that ld. CIT(A) cannot restore the matter back to the AO for fresh decision. The ld. CIT(A) should decide the issue himself and since, he has not done so, we set aside the order of ld. CIT(A) on both these issues and restore back these issues to his file for decision with the direction that he should decide the issue himself by way of a speaking and reasoned order after providing adequate opportunity of being heard to both sides. Accordingly ground nos. 2 to 4 of the revenue s appeal are allowed for statistical purposes. Impairment of assets - HELD THAT:- Order of ld. CIT(A) is very cryptic and there is no finding that assets in question were sold or discarded or demolished and hence, in our considered opinion, the order of CIT (A) on this issue is not sustainable. It may be that the claim of the assessee is not allowable but even in that case also, the assessee should be allowed depreciation. Hence we set aside the order of ld. CIT(A) on this issue also and restore back the matter to his file for fresh decision with the direction that he should decide the issue afresh by way of a speaking and reasoned order in the light of above discussion after providing adequate opportunity of being heard to both sides. Ground no. 5 is also allowed for statistical purposes.
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2019 (9) TMI 911
Levy of penalty u/s 271B - Books of accounts not audited - bonafide belief - addition the turnover of the assessee has increased the prescribed limit of ₹ 1.00 Crore applicable for the assessment year 2014-15 - HELD THAT:- Assessee was under the bonafide belief that the Books of accounts need not be audited and filed the Return of income. We find the explanations of the Ld.AR are realistic and duly supported with the financial statements which cannot be over looked. Further, the assessee is Regular in filing the Return of income and has been paying the taxes. The Reasonable cause explained by the assessee u/s 273B of the IT Act, that the assessee has maintained Books of accounts and based on Books of accounts, income and expenditure has been prepared and filed the return of income. In the Assessment proceedings, the AO found the credits in other Bank accounts which were not disclosed and the assessee has accepted the addition. Assessee has a Reasonable cause and the action of the assessee is not wanton. Considering the facts, circumstances and the legal provisions that the penalty provisions are not automatic and the AO has to weigh the circumstances further on the turnover and demonstrated with financial statements. Accordingly, we set aside the order of CIT(A) and direct the AO to delete the penalty and allow the grounds of appeal of the assessee. Levying penalty u/s 271(1)(C) - assessee has challenged the issue of notice u/s 274 - defective notice - HELD THAT:- It was imperative for the AO to strike off irrelevant limb so as to make the assessee aware as to what is the charge made against him and so that he can respond accordingly. Further, the Hon ble High Court of Karnataka in the case of CIT vs. Manjunatha Cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed that the levy of penalty has to be clear as to the limb under which it is being levied - where the AO proposes to invoke the first limb being the concealment then, notice has to be appropriately marked. Further, the Hon ble High Court has held that the standard proforma of notice u/s 274 of the Act, without striking of the relevant clauses would lead to inference of non-application of mind by the AO. In the present case, the AO is not sure whether he was to proceed on the basis that the assessee has concealed the particulars of his income or furnished inaccurate particulars of income. Also see M/S SSA'S EMERALD MEADOWS [ 2016 (8) TMI 1145 - SC ORDER] - Decided in favour of assessee
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2019 (9) TMI 910
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Identical issue has been dealt with GUJARAT POWER CORPORAT ION LTD. AND (VICE-VERSA) [ 2019 (7) TMI 700 - ITAT AHMEDABAD] as relying on SHRENO LTD [ 2018 (12) TMI 1145 - GUJARAT HIGH COURT] hence the assessee is entitled to relief as claimed for which was rightly allowed by the CIT(A) by deleting the addition made by the Learned AO without any infirmity so as to warrant interference. The question is accordingly answered in the affirmative, i.e. in favour of the assessee and against the revenue. Disallowance applying provision of Section 115JB while completing disallowances under section 14A r.w.r. 8D - HELD THAT:- As decided in own case [ 2019 (7) TMI 700 - ITAT AHMEDABAD] we find from the issue citation that in the same set of facts the computation under clause (f) of explanation 1 to section 115JB as has been done by the authorities below u/s 14A r.w.r. 8D of the Income Tax Act, 1962 is not permissible and hence such disallowance is quashed the addition is therefore deleted. This ground of appeal preferred by the assessee is thus allowed
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2019 (9) TMI 909
Exemption u/s 11 - charitable activity u/s 2(15) - providing healthcare facilities and imparting medical education and training - with a view to corporatize the hospital the management of the charitable activity was handed over to SCPL - HELD THAT:- CIT(A) has correctly held that the activity of the trust to carried on in accordance with its objects and in the best interest of charity, therefore, the exemption u/s. 11(1)(a) has rightly allowed by the CIT(A). Similarly, the CIT(A) has clearly held that the Sec. 13((1)(c)(ii) can apply only if any part of the charitable income of the trust has been used or applied for the benefits of the said persons during the previous year. But, since no portion of the income of the assessee has been applied for said person, therefore, the case of the assessee falls outside the scope of this section. The trust is in receipt of income by way of management charges from SCPL and also all of its liabilities have been taken over by the same therefore there is a fact that there is no undue benefits of the use of trust property have been taken by any other persons. Similarly, there is no diversion of income of the trust as per Explanation of Sec. 13(2)(d) and 13(2)(g) of the Act as the trust has been benefitted greatly and its deficit of trust duly reduced to a great extent. We also observed that some erroneous presentation of Form No. 10B report does not disentitle the trust for claiming exemption u/s. 11 of the Act. Similarly, the amount of advance of ₹ 54,35,71,980/- in favour of SCPL appearing in the balance sheet was not advance but the reimbursement of the expenses. In the light of the aforesaid facts and circumstances, we are of the considered opinion that the CIT(A) has analyzed the facts correctly and given a judicious finding which does not call for any interference from outside. Allowance of set off brought forward losses of the trust against the current year surplus - HELD THAT:- We find that the Ld. CIT(A) has given detailed reason for allowing a set off losses and carry forward of losses on the basis of rulings of Hon ble Jurisdictional High Court of Gujarat, Bombay and Rajasthan. In view of these facts, we are of the considering opinion that the issue is covered in favour assesse. Ld. Counsel further submitted that the issue is settled by the Hon ble Supreme Court in the case CIT(E) New Delhi vs. Subros Educational Society in Miscellaneous Application [ 2018 (4) TMI 1622 - SC ORDER] . Accordingly, the findings of the CIT(A) does not call any interference from our side and accordingly the same is upheld. Therefore, this ground of appeal is dismissed. Disallowance of depreciation - HELD THAT:- We find that the issue is covered against the Revenue.
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2019 (9) TMI 908
Disallowance u/s 40A(3) - cash payments of expenditures - poor creditability in the market - whether the alleged payments are in consideration of the business expediency needs to be examined in the given facts of the case? - The assessee is into transport business and owns many trucks and also do the job work of truck repairing - HELD THAT:- Assessee should not be subject to the rigorous provision of u/s 40A(3) of the Act if he has incurred the expenditure for business expediency and if genuineness of such expenditure is not in dispute. In the instant case if alleged disallowance is added to the profits of the assessee resultant figure will be very abnormal and the net profit rate of the assessee will surge to around 27% which cannot be practically possible in this type of business. Also looking to the consistency of net profit earned by the assessee in the preceding years which is 1.85% in the year under appeal as against 1.33% in the preceding year, the object of the assessing officer should be to tax the income of the assessee earned during the year. Certainly this will not apply to the unexplained capital/revenue receipts or unexplained investments but so far as the year to year business transactions is concerned the principal of res judicata should be applied to estimate the profits of the assessee. AO has not rejected the books of account u/s 145(3) of the Act which shows that he was satisfied with the book results and gross revenue is not in dispute. Expenditure incurred by the assessee which is purely for the business expediency not raising any doubt of genuineness but certainly the assessee could have avoided to make cash payment at certain point of time. But still to meet the end of justice and being fair to both the parties and without setting a precedent, we direct the AO to sustain disallowance u/s 40A(3) to the extent of 5% of the alleged amount. So the disallowance u/s 40A(3) TDS u/s 194A - disallowance u/s 40(a)(ia) - HELD THAT:- No information is provided by the assessee for the amount paid at ₹ 37,148/-. So the disallowance u/s 40(a)(ia) of the Act for the amount of ₹ 37,148/- stands confirmed. As regards the remaining amounts which are paid to Non- Banking Finance Company, we observe that when a person taken loans from these companies post dated cheques are issued for the installment which comprises of the principle as well as the interest component. Many times the installment are paid as cheques already stands issued but the credit of TDS is not passed on to the assessee for being deposited in the bank account as tax deducted at source. In the instant case, since the assessee was in default on multiple occasions, the amounts were paid lump sum to prevent the vehicle from being detained. Though the provisions are very clear with regard to u/s 40(a)(ia) of the Act that if assessee has not deducted tax at source but he is able to provide the certificate from the Chartered Accountant, specifying that the payee have offered the amount received as revenue in the regular return of income and paid taxes thereon, then, the assessee should not be deemed to be a person in default for non-deduction of tax at source. Though the assessee has not placed any such certificate on record but still on the request of the assessee and in the interest of justice we set aside this issue to the file of AO for deciding it afresh for the amounts paid to six finance companies of which the details shall be provided by the assessee along with address. AO should call for information from these companies with reference to the details to be provided by the assessee that whether they have received alleged amount and have shown it as the revenue. AO if satisfied, may decide in accordance with law and give relief to the assessee, if eligible Addition u/s 68 - addition for unexplained cash - HELD THAT:- loan has been shown as Hand loan Irshabhai, assessee failed to provide any detail at any stage so the addition u/s 68 is confirmed. As regard the remaining amounts the assessee s contention is that the name, address, PAN No. of the cash creditors were provided, most of these loans were repaid during the year through account payee cheque which proves the genuineness of the transactions. However, for providing further information to prove creditworthiness and genuineness of the other loans request was made for one more opportunity to appear before Ld. AO who would be free to issue summons to these parties if necessary. We in the interest of justice accept the request and direct the AO to examine that whether the alleged amount of loan has been repaid back during the year and if satisfied with the identity, genuineness and creditworthiness should decide in accordance with law, after providing reasonable opportunity of being heard to the assessee Disallowance u/s 40(a)(ia) for freight payment - HELD THAT:- We direct the Ld. AO to verify the PAN No. and if contention of the assessee is found to be correct then should decide in accordance with law. This ground of the assessee is partly allowed for statistical purposes. Disallowance of freight expense - assessee submitted that the payment was made through banking channel. PAN No. of the one of the payee Mr. Ranchhodbhai was provided - HELD THAT:- Since some of the issues relating to freight payment has been set aside to the file of Ld. AO for afresh examination, we deem it fit appropriate to give one more opportunity to the assessee to satisfy the Ld. AO for the claim of freight expenses after being provided necessary evidences.
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2019 (9) TMI 907
Disallowance of commission expenses - bogus expenses - HELD THAT:- Commission paid to Shri Deepak Kumar Tripathi, Vikash Pandey and Md. Danish Hussain were in respect of sales of the assessee s product in the State of Uttar Pradesh. Though, there was no agreement or any other supporting evidence except their statement/confirmations. Once the A.O. has examined these parties and confirmed having rendered services then the claim in respect of these three parties cannot be denied. As the business of the assessee for selling of its products in the State of Uttar Pradesh is not in dispute and it is also not in dispute that the assessee has not claimed any other expenditure regarding travelling in respect of sale in the State of Uttar Pradesh, therefore, commission paid to three parties namely Shri Deepak Kumar Tripathi, Shri Vikash Pandey and Mohd. Danish Hussain are allowable deduction being incurred for the purpose of business. As regards the commission paid to Ms. Preeti Tripathi, Ms. Pushpa Tripathi and Deepak Kumar Tripathi (HUF), it is apparent that these are only the name facilitated by Shri Deepak Kumar Tripathi and Shri Vikash Pandey for inflating the expenditure by the assessee. Therefore, in absence of any material to show that these other persons even are competent to render the service, the claim of commission paid to the related parties Shri Deepak Kumar Tripathi and Vikash Pandey is not found to be genuine. Hence, in the facts and circumstances of the case, the claim of the assessee is allowed in respect of Shri Vikash Pandey and Mohd. Danish Hussain and the balance amount of disallowance is sustained. Appeal of the assessee is allowed in part.
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2019 (9) TMI 906
Capital gain computation - accepting the valuer of land as per report of DVO which pertains to area far away from the land sold by the appellant - HELD THAT:- This issue has duly been covered in favour of the assessee by the decision of Hon ble ITAT in the case of co-sharer of the same land, therefore, the claim of the assessee is liable to be allowed in the interest of justice. However, on the other hand, the Ld. Representative of the Department has refuted the said contention. Deduction u/s 54F - HELD THAT:- Claim u/s 54F of the Act is beneficial provisions and is applicable to the assessee when old capital assets is replaced by new capital assets in form-a residential house. Once an Assessee falls within ambit of beneficial provision, then said provision should be liberally interpreted. The Hon ble High Court of Karnataka in the case of CIT Vs. Sambandam Udaykumar [ 2012 (3) TMI 80 - KARNATAKA HIGH COURT] has held that the Section 54F is a beneficial provision for promoting the construction of residential house requires to be construed liberally for achieving that purpose. The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement of law. The words used in the section are purchased or constructed. The condition precedent for claiming benefit u/s 54F is that the capital gain should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. Merely because the sale deed had not been executed or that construction is not complete and it is not in a fit condition to be occupied does not disentitle the assessee to claim section 54F relief If the construction was not completed within the prescribed period and the assesssee has invested the amount, therefore, the claim of the assessee is not liable to be declined u/s 54F of the Act. We are of the view that the claim of the assessee has wrongly been denied by CIT(A), therefore, we set aside the finding of the CIT(A) on this issue and allowed the claim of the assessee u/s 54F of the Act. Accordingly, this issue is decided in favour of the assessee against the revenue.
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2019 (9) TMI 905
Addition on account of revenue recognition in respect of Freight and contract activity - addition on account of liquidated damages and addition on account of claim of depreciation at 80% on certain plant and machinery - Decided in favour of assessee. Disallowance u/s 14A r.w.r. 8D on account of interest - HELD THAT:- The issue of disallowance of interest under rule 8D(2)(ii) is now no more res integra in view of the judgment delivered by the Hon'ble Supreme Court in Godrej Boyce Manufacturing Company Ltd. vs. DCIT [ 2017 (5) TMI 403 - SUPREME COURT] upholding the view of the lower authorities that when interest free funds in the form of share capital and reserves etc. are more than the amount of investment, then no disallowance of interest can be made u/s 14A. The Hon'ble Karnataka High Court in CIT Anr vs. Microlabs [ 2016 (4) TMI 219 - KARNATAKA HIGH COURT] has also held that when investments are made from a common pool and non-interest bearing funds are more than the investment in tax free securities, no disallowance of interest expenditure u/s 14A can be made. Respectfully following the precedents, we order to delete the disallowance under Rule 8D(2)(ii). Disallowance under Rule 8D(2)(iii) is concerned, it is seen that ordinarily the disallowance is made at 0.5% of the average value of investments, as has been done by the AO. AR contended that the assessee did not earn exempt income from certain investments and hence they should be excluded. Since the relevant facts for determining such an issue are not available on record, we set-aside the impugned order and remit the matter to the file of AO with a direction to decide it accordingly. Disallowance on account of Foreign Fluctuation Exchange loss and loss suffered in a separate contract in the next year - HELD THAT:- Neither the AO nor the ld. first appellate authority has disputed the fact that the first item of loss of ₹ 2.18 crore is on account of a transactions otherwise of revenue nature and this transaction resulted due to marking the liability to market rate as at the end of the year. The Special Bench of the Tribunal in DCIT Vs. Bank of Bahrain and Kuwait [ 2010 (8) TMI 578 - ITAT, MUMBAI] has held that such loss or profit is of revenue character. After considering the adverse Instruction No.03/2010, the Hon ble Delhi High Court in Munjal Showa Vs. DCIT [ 2016 (2) TMI 1061 - DELHI HIGH COURT] has held that such loss/profit to be of revenue character. It further held that the CBDT Instruction cannot override the judicially settled position. In view of the foregoing, we overturn the impugned order and direct to delete the addition of ₹ 2.18 crore. As regards the loss authorities below have correctly viewed this transaction as not affecting the profit for the year under consideration. The contract, resulting into loss of ₹ 8.88 crore, was actually cancelled in April/May of 2009, which falls in the succeeding year. Even though it is an event occurring after the balance sheet date, but it falls in the category of `Non-Adjusting Events , for which the accounts closing before that date are not to be adjusted. Incurring of loss in a succeeding year is something quite different from marking transaction to market rate as at the close of the year. Since the instant loss of ₹ 8.88 crores actually fell upon the assessee in the succeeding year, the same cannot be allowed as deduction in the year under consideration.
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2019 (9) TMI 904
Maintainability of appeal - low tax effect - monetary limit - HELD THAT:- In the light of the CBDT Circular dated 8.8.2019, all these appeals of the Revenue have to be dismissed, as the tax effect involved in the quantum in dispute in all these appeals are less than ₹ 50 lacs. We dismiss all the appeals of the revenue in limine as withdrawn. As observed earlier, liberty is given to the revenue to move application for recall of the order, if the tax effect is more than ₹ 50.00 lakhs or if the issues contested therein fall in the category of exceptions prescribed by the CBDT in the Circular or subsequently.
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2019 (9) TMI 903
Addition u/s 69C on the basis of valuation report - search u/s 132(1) - HELD THAT:- It is undisputed fact that appellant assessee has made investment in construction of said property No. 5/157. CIT(A) has dealt with the issue at length after considering detailed submissions filed by the assessee, valuation report, remand report of the AO and rejoinder of the assessee on the remand report as well as the objections raised by the assessee to the valuation report. CIT(A) has accommodated the assessee by and large allowing that considering contingency and miscellaneous items @2% and the method of valuation on the basis of detailed item wise as per second valuation report wherein more scientific method was followed in arriving correct investment as even admitted by valuation officer. CIT(A) are appears very reasonable and logistic on the premises of scientific approach duly supported with judicial pronouncement. Therefore, the assessee should not have any grievance from the impugned order. In the case of Shri Sanjeev [ 2017 (12) TMI 792 - ITAT AGRA] the facts were that the assessee has maintained books of account, balance sheet and profit and loss account for the three years and filed the material documentary evidence with year wise break up of investment made by the assessee in the construction whereas in the present case, assessee has not maintained books of account and fail to furnish bills and vouchers in support of material purchased to substantiate the cost of construction of the house. Since the assessee did not maintain regular books of account to record all the expenditure of the property so the present case is distinguishable on facts and would be no help to the assessee. Appeal of the assessee is dismissed.
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2019 (9) TMI 902
Exemption u/s 10(26) - denial of exemption relief to the two partnership firms that was formed by two tribal individuals - Benefit of doubt in relation to an exemption provision - diversified views - HELD THAT:- Benefit of doubt in relation to an exemption provision in a tax law goes in favour the Revenue / State and not to the taxpayer anymore. We follow the same to hold that the assessee s arguments that a partnership firm is a member of a scheduled tribe is not liable to be accepted. We also make it clear that this is going by their lordships foregoing landmark decision(s), there is no scope left for us hold that there is any scope of intendment in the impugned statutory provision stretching the impugned exemption to a partnership firm as a member of Scheduled Tribe under Article 366 Constitution of India. The assessee s next argument that sec. 13 of the General Clauses Act, 1897 (supra) treats masculine and singular expression in central regulations to be inter-changeable famine gender plural expression; also carries no substance since the legislature expression herein is very much clear that the impugned exemption benefit is available to a member a of Scheduled Tribe only takes to a partnership firm consisting of partners who are member of such a Scheduled Tribe. We reiterate that the said provision General Clause Act itself contains a stipulation that unless there is anything repugnant in the subject or context . We therefore decline the assessee s instant argument as well. We make it clear whilst holding so the Income Tax Act is complete code in itself in the nature of specific law which applies at the cost of all the general laws going by the legal maxim generalia specialibes non derogant as per hon'ble apex court s decision in Union of India and Another vs. Indian Fisheries (P) Ltd. [ 1965 (4) TMI 52 - SUPREME COURT] We also wish to quote hon'ble apex court s foregoing decision in M/s Jullunder Vegetables [ 1965 (11) TMI 101 - SUPREME COURT] holding that though under the Partnership Law a firm is not a legal entity but only consists of individual partners for the time being, for tax law, income-tax as well as sales-tax, it is a legal entity. We hold that mere fact that the assessee s two partners are already enjoying sec. 10(26) exemption does not amount to overstretching the very relief to their partnership firm as well. We notice that sec. 10(26) comes into play in case of a member of a Scheduled Tribe notified in Article 366 of the Constitution of India. Similar exemption clauses sec. 26A is applicable to any income accruing or arising to any source in the district of Ladakh are admittedly applicable in cases of individual; HUF, firms, association of person and company u/s 6 (1) to (4) and sec. 10(26AAA) deals with an individual only; respectively. The necessary inference that flows from a comparative analysis of all these exemption provisions is that sec. 10(26) pre-possess any person who is also a member of a Scheduled Tribe as against sec. 10(26A) and 10(26AAA) applicable in case of specified categories of person respectively. We also involve the doctrine of necessary implication in this backdrop that what is implied in the statute is as much a part thereof as that what is expressed. We thus find no infirmity in the CIT(A) s lower appellate order upholding the Assessing Officer s action that the assessee is not entitled for the exemption benefit u/s. 10(26) - Decided against assessee.
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2019 (9) TMI 901
Exemption u/s 11 - charitable activity u/s 2(15) - HELD THAT:- The activities of the Assessee are covered by last limb of Section 2(15) and are akin to the activities to Samudra Institute of Maritime Studies Trust [ 2014 (9) TMI 575 - BOMBAY HIGH COURT] . Not only that the notice for Cancellation u/s 12AA was dropped by the DIT(E) himself. We are therefore, of the opinion that the Ld. CIT(A) has correctly appreciated the facts and allowed this ground of appeal. We therefore, accordingly, uphold that activities undertaken by the Assessee satisfy the requirements of the term education . Advance fee received from the students - HELD THAT:- On an overall consideration of this decision coupled with the contentions of consistency and tax neutrality, we find that the ld. CITA) rightly accepted the accounting method followed by the Assessee. However, due to revised calculation there was unspent amount. There was no requirement of filing the prescribed form as per the computation and consistent method. Therefore, we find that this observation of the ld. CIT(A) at para no 5.4.9 of the impugned Appellate Order is erroneous and deserved to be deleted. As regards ground no 4 we have separately decided the issue in the subsequent paragraphs. Accordingly, ground no 2 is allowed in favour of the Assessee and the Assessing Officer is directed to accept the method of accounting regularly adopted by the Assessee. Denial of exemption under section 11 by holding that advance given to the director for petty cash expenses was hit by the restrictions u/s 13(3) - HELD THAT:- Findings of the Assessing Officer and the ld. CIT(A) are not correct because the break up of the alleged amount of ₹ 11,57,000/- is as given above and does not partake the character of loans and advances to related parties. The first two amounts (₹ 20,000 + ₹ 10,22,000) pertained to another trust which is also registered with the DG Shipping and is a section 25 company and therefore, charitable and not hit by section 13(3) of the Act. The last amount of ₹ 1,15,000/- represented reimbursement to be recovered from the students towards counseling fees. None of the students are related to the Assessee under appeal. We therefore, find merits in the argument of the ld AR that the consequential exemption u/s 11 and 12 is erroneously rejected by the Assessing Officer and wrongly confirmed by the ld. CIT(A). We therefore, direct the Assessing Officer to allow exemption u/s 11 and 12 of the Act. Denial of exemption u/s 11 - donation and contribution - not deciding deduction u/s 80G - HELD THAT:- As carefully considered the rival submissions and perused the materials on records and find that since ground no 4 is already allowed with ground nos 1, 2 and 3, this ground of appeal is only consequential and therefore, allowed in the favour of Assessee. The Assessing Officer is directed to allow the exemption u/s 11 instead of deduction u/s 80G in respect of contribution Allow the cost of acquisition towards fixed assets u/s 11 as per law instead of only depreciation
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2019 (9) TMI 900
Penalty u/s 271(1)(c) - voluntary surrender on account of long term capital gain on sale of shares - HELD THAT:- It is evident from the records that all the purchases and sales of share have been clearly shown in the income and expenditure account and also there is no inaccurate particulars furnished by assessee. The assessee, while filing the return of her income, had disclosed all the material and details in respect of long term capital gain, therefore, the AO was not justified in levying the penalty u/s 271(1)(c). In the proceedings under section 271(1)(c) of the Act, the onus is on the AO to prove as to which facts and/or records submitted by assessee are false or incorrect and that the assessee has furnished inaccurate particulars or concealed its income. Assessee, during assessment proceedings, had agreed to the disallowance and made a voluntary surrender on account of long term capital gain on sale of shares, to buy peace and to avoid litigation, which does not prove that it is a case of concealment of income or furnishing of inaccurate particulars of income as contemplated in the provisions of section 271(1)(c). Therefore, the surrender made by the assessee is voluntary, for which only addition can be made and penalty under section 271(1)(c) of the Act cannot be initiated. Coming to the reliance placed by the ld. D.R. on the decision of the Hon'ble Madras High Court in the case of Sundaram Finance Ltd. vs. ACIT [ 2018 (5) TMI 259 - MADRAS HIGH COURT] we find that defect in the notice issued under section 274 read with section 271 of the Act, but in the present case the penalty levied under section 271(1)(c) of the Act has been deleted by the CIT(A), dealing with the issue on merit and not on the basis of defect in the notice issued under section 274 read with section 271 of the Act. No infirmity in the order of the ld. CIT(A), deleting the penalty levied under section 271(1)(c) of the Act. - Decided in favour of assessee.
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2019 (9) TMI 899
Reopening of assessment u/s 147 - jurisdiction of AO - As alleged notice has been issued by some other Assessing Officer and the assessment has been framed by a different Assessing Officer whereas the jurisdiction of the assessee lies with another Assessing Officer - HELD THAT:- Reasons recorded for reopening the assessment were recorded by the Income-tax Officer, Ward 29(3), New Delhi whereas the return was filed with the Income-tax Officer, Ward 39(4), New Delhi with whom the jurisdiction lies. Once again, disregarding the contents of the letter, objections were disposed of by the Income-tax Officer, Ward 29(3), New Delhi vide order dated March 29, 2015. This order is placed at pages 10 to 12 of the paper book. Without affording any opportunity of being heard to the assessee to contemplate any further legal proceedings, assessment order was framed under section 144 of the Act vide order dated March 30, 2015 and assessment has been framed by the Income-tax Officer, Ward 63(4), New Delhi. These undisputed facts clearly reveal that the notice has been issued by some other Assessing Officer and the assessment has been framed by a different Assessing Officer whereas the jurisdiction of the assessee lies with another Assessing Officer. Thus we hold that the assessment order dated March 30, 2015 framed under section 144 read with section 147 of the Act is bad in law and deserves to be quashed. See SMT. KAMLESH GOEL VERSUS THE I.T.O, WARD 59 (3) , NEW DELHI [ 2018 (9) TMI 102 - ITAT DELHI] - Decided in favour of assessee.
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2019 (9) TMI 898
Reopening of assessment u/s 147 or 153C - assessment proceedings were initiated mainly on the information found during the search proceedings - HELD THAT:- AO has issued notice u/s.148 of the Act and initiated proceedings with the information or incriminating material found during the search in the case of M/s. Sri Sai Kamal Construction Group. As per the material found during the search, assessee has purchased 10 acres of land at Dargah Inmulnarva Village, Kothur Mandal, Mahaboobnagar and paid an amount of ₹ 1,19,00,000/-. Since the assessment proceedings were initiated mainly on the information found during the search proceedings and it was found that assessee is a party to the transactions and the same material was brought on record to complete the assessment u/s.147 of the Act, however, jurisdiction lies to initiate proceedings u/s.153C of the Act and not u/s.148 of the Act. Even it is not brought on record whether there is proper satisfaction recorded by the AO of the search party as well as AO of the assessee. We set aside the order of CIT(A) and quash the assessment made by the AO u/s 143(3) r.w.s. 147 of the Act. Since the very assessment is quashed, the additions made in such assessment automatically get cancelled. Hence, this appeal of assessee is allowed.
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2019 (9) TMI 897
Grant of registration as charitable society u/s 12AA - denial of registration as applicant society was primarily indulging in commercial activity of selling milk and on noting that there was substantial deposit of cash in its bank account during demonetization period showing that the activities of the applicant society were not transparent and further for the reason that the change in the constitution of the governing body of the society had not been shown to be accepted by the Registrar of Societies HELD THAT:- As regard the commercial activity carried out by the applicant society, the contention that it had owned primarily non-milching cows while the milching cows were very few is a vital fact pointed out by the the assessee, which, if found correct may have impact on the conclusion drawn vis a vis the activity carried out by the applicant society being primarily commercial or not. The applicant society has submitted detail of the nature of cows owned by it, but the same, we find, needs to be verified and investigated further before arriving at any finding on the issue. Further the issue of change in constitution of the governing body not being accepted by the Registrar of Society, the contention of the society that there was no such requirement in the Act also, needs to be looked into. Regarding the finding of excess currency/cash being deposited in bank during demonetization period, the assessee has contended that the same has nothing to do with its own income and could in fact be attributed to people who were disposing off their demonetized currency to charitable societies during this period. We find that all the issues raised by the Ld.CIT(E) need to be examined and investigated further before arriving at the conclusion vis a vis the eligibility of the applicant society to grant of registration u/s 12AA of the Act, in view of the above contentions raised by the Ld.Counsel for the society. We, therefore, consider it fit to restore the issue back to the Ld.CIT(E) to consider the grant of registration afresh after giving due opportunity of hearing to the applicant society. Appeal of the applicant society is allowed for statistical purposes.
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2019 (9) TMI 896
Addition u/s 41(1) - AO noted that there are static creditors which have neither been written off nor the amount have been paid in the subsequent period - HELD THAT:- As during the assessment proceedings, the assessee has submitted a list of sundry creditors more than three years consisting of 15 parties, out of which 11 parties have been paid in the financial year 2013-14 and amount pertaining to one party namely, ICRA has been written off as not payable. Regarding the four parties disputed before us, the assessee has transferred these amounts to OSV claim payable as on 31.03.2014 which means that the company has filed its claim statement for the OSV Contract which is reflected in claim receivable. The matter is still under settlement by the OEC appointed by Company and ONGCL. The creditors represent amount payable to be paid only against the amount recoverable from ONGCL on settlement. These creditors are for various material/services rendered by them during the contract which is also a matter of dispute raised by ONGCL, and hence the company will pay them only once its claims are settled with ONGCL. The record also shows that the confirmations have not been filed before the Revenue authorities whereas it was vehemently argued by the ld. AR that the confirmations were made available before the Revenue authorities. Hence the matter is remanded back to the file of the Assessing Officer for the limited purpose of examining the settlement by the OEC and ONGCL by taking the confirmations filed on record and take a view in accordance with the provisions of law. Disallowance on account of Festival expenditure - HELD THAT:- Revenue authorities disallowed is the increase in expenses without any iota of evidence or cogent reason. Keeping in view, the judgments of Hon ble Apex Court in the case of Dhakeswari Cotton Mills Ltd. Vs CIT [ 1954 (10) TMI 12 - SUPREME COURT] , Sayaji Iron Engg. Co. Vs CIT [ 2001 (7) TMI 70 - GUJARAT HIGH COURT] and DCIT Vs Haryana Oxygen Ltd. [ 2001 (7) TMI 70 - GUJARAT HIGH COURT] , we hereby hold that the disallowance made by the Assessing Officer cannot be legally sustained. TDS u/s 194J - Disallowance on account of legal and professional expenses - HELD THAT:- The dispute will be decided by one or more persons the arbitrators , arbiters or arbitral tribunal , which renders the arbitration award . The arbitral Tribunal is not a court in the traditional sense but provides services to resolve disputes that arise out of agreements between members, organizations or private parties. The arbitrators are empanelled and are choosen by the mutual consent of the parties. The arbitration fee is also determined by and paid by both the parties were availing the arbitration award. The fee is paid to arbitrators who perform the legal functions. Hence, it cannot be said that the company is not getting the services of the arbitrators and dealing with their disputes regarding the contracts etc. Since, the amount is in the nature of professional services sought by the legal professionals involved in the profession/occupation/vocation of arbitration, the amount is liable to TDS as per the provisions of Section 194J Disallowance on account of vessel repair maintenance u/s 40(a)(ia) - HELD THAT:- A concurrent reading of Section 195, 44BB, 40(a)(ia) of the Act and the Circular 3/2015 of CBDT pertaining to other some chargeable under this Act give rise to the sum chargeable of ₹ 295,287/-. Hence, the disallowance is limited to the extent of ₹ 295,287/- being the 10% of the deemed profits of the recipient company. Difference between depreciation as per Companies Act and Income Tax Act while calculating total income as per section 115JB on the ground that assessee had adopted the rate of depreciation as per Income Tax Act instead of Companies Act in Profit Loss Account - HELD THAT:- According to the first proviso to section 115JB(2), the accounting policies, the accounting standards adopted for preparing such accounts, the method and rates of depreciation which have been adopted for preparation of the profit and loss account laid before the annual general meeting, should be followed while preparing profit and loss account for the purpose of computing book profit under section 115JB. Based on the direct provisions of the Income Tax Act and judgments in the case of Malayala Manorama Co. Ltd. vs. CIT [ 2008 (4) TMI 20 - SUPREME COURT] and CIT vs. Prakash Industries Ltd. [ 2010 (4) TMI 238 - PUNJAB HARYANA HIGH COURT] the addition made by the Assessing Officer on account of adjustment in computation u/s 115JB is hereby deleted.
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Corporate Laws
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2019 (9) TMI 895
Oppression and mismanagement - misutilization of funds - main controversy involved in the Petition is that the Respondents have not utilised the proceeds of the IPO as per the terms and conditions of the IPO mentioned in the Prospectus and Respondent No. 2 along with other Respondents has diverted the proceeds of the IPO to other entities which are under his control to defraud the members/investors of the 1st Respondent Company, which is a public listed Company - pre-requisites provided under Section 237(b) of the Companies Act, 1956. HELD THAT:- The powers conferred under Section 237(b) of the Companies Act, 1956 [Section 213(b) of the Companies Act, 2013] on the Tribunal are administrative in nature and can be exercised on the basis of the existence of circumstances as specified in the clause. The existence of the circumstances is a condition precedent as stipulated under Section 213(b), on the basis of which a prime facie honest opinion could be formed for ordering an investigation into the affairs of the company. In other words the order for investigation into the affairs of the company can only be made on the satisfactory grounds, which are available on the record of the case file. In the case on hand the 1st Respondent Company during the year 2010-2011, had availed secured loans of ₹ 37.81 Crores as per the cash flow statement from banks in addition to public issue proceeds of ₹ 73.60 Crores. The fact that the 1st Respondent Company has negative cash flow of ₹ 40.87 Crores under cash flow from operations clearly proves that the 1st Respondent Company has not utilized these IPO proceeds and loans from banks for the 1st Respondent Company but only diverted the same to its group companies - there are financial mis-management of funds of the 1st Respondent Company covertly disbursed to group entities for their own use and benefit through one of its group entity, RPPL, since the same could not have been done directly through the 1st Respondent Company. Thus, the 1st Petitioner and the respondents have allegedly diverted the funds of the 1st Respondent Company to their associates and companies and matters are pending before the different judicial forums. Thus, there exist the circumstances which prima facie suggest that the business of the company is being conducted with intent to defraud its members and the amount collected through IPO has been diverted to the associates and companies by the 1st Petitioner and the Respondents, which amounts to fraud played on the investors, which points out that the management of 1st Respondent company along with 1st Petitioner is guilty of fraud, misfeasance or other misconduct towards the company and its members - In the light of the circumstances stated, this tribunal is satisfied that it necessary to order the investigation into the affairs of the 1st Respondent Company under the provisions of Section 213(b) of the Companies Act 2013. The Central Government is hereby directed to appoint one or more competent persons as Inspectors to conduct investigation into the affairs of the 1st Respondent Company, as expeditiously as possible for filing report and on receiving the report, to follow the course of action as provided in law.
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Insolvency & Bankruptcy
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2019 (9) TMI 932
Maintainability of application - Initiation of CIRP - Corporate Debtor defaulted in repayment of sum - existence of debt or not - HELD THAT:- It is apparent on record that debt is in existence, thereafter the Corporate Debtor failed to repay the loan amount by which the account has become NPA. There is no merit in the arguments of this Corporate Debtor counsel saying that Corporate Debtor made efforts to repay the OTS amount within the time limit as mentioned in the OTS sanction letter, whereby we hereby hold that the Creditor Bank established existence of debt and default by filing various documents executed by the Corporate Debtor - Petition admitted - moratorium declared.
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2019 (9) TMI 931
Maintainability of petition - initiation of CIRP - it was alleged that the corporate debtor has committed default in repayment of sum - HELD THAT:- It is established that there is default of debts which comes to ₹ 5,66,946/- including ₹ 3,50,000/- Principal amount and ₹ 2,16,946/- interest amount and which is in excess of ₹ 1,00,000/-. Hence, the present application is found complete as per the provisions of the I B Code. The present IB Petition is found complete and deserves admission - petition admitted - moratorium declared.
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2019 (9) TMI 894
CIRP - discrimination against secured creditor - separate treatment to dissenting Secured Financial Creditors - Liability of successful resolution applicant to remove the discrimination - HELD THAT:- (Un-amended/ old) Regulation 38 having held to be discriminatory was substituted on 5th October, 2018 by new Regulation 38. Sub-clause (c) of clause (1) of Regulation 38 shows that the liquidation value payable to dissenting financial Creditors has been deleted. In Swiss Ribbons Pvt. Ltd. Anr. vs. Union of India Ors. [ 2019 (1) TMI 1508 - SUPREME COURT ] , the Hon ble Supreme Court observed that the NCLAT while looking into viability and feasibility of resolution plans as approved by the committee of creditors, always gone into whether the operational creditors are given roughly the same treatment as financial creditors, and if they are not, such plans are either rejected or modified so that the operational creditors' rights are safeguarded . In the present case, the Resolution Plan approved by the Committee of Creditors do not confirm the test of Section 30(2) (e), being discriminatory, as having discriminated the similarly situated Secured Creditors . The Insolvency and Bankruptcy Board of India has not provided for separate treatment to dissenting Secured Financial Creditors who do not vote in favour of the Resolution Plan . No such amendment has been made in Regulation 38 since amended Section 30(2) (b) came into force i.e. 16th August, 2019. The Appellant a Secured Financial Creditor has been discriminated with other Secured Financial Creditors , we hold that the Resolution Plan is violative of Section 30(2) (e) of the I B Code . However, we are not inclined to set aside the approved plan on such ground. The Successful Resolution Applicant is given opportunity to remove the discrimination of Appellant by providing similar treatment as provided to other similarly situated Financial Creditors . Appeal allowed.
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2019 (9) TMI 893
Initiation of Corporate Insolvency Resolution process - Restoration of non-existent Company ( Corporate Debtor ) - Power of Tribunal - The Company was struck-off from the Register of the Companies u/s 248 of the Companies Act, 2013 - default in repayment of amount alongwith interest and other charges - Section 7 of the Insolvency and Bankruptcy Code, 2016. Whether an application under Section 7 or 9 for initiating Corporate Insolvency Resolution Process is maintainable against a Company/ Corporate Debtor , if the name of the Company/ Corporate Debtor is struck-off from the Register of the Companies? HELD THAT:- As per sub-section (6) of Section 248, before passing an order under sub-section (5) (removing the name from the Register of Companies), the Registrar is to satisfy himself that sufficient provision has been made for realization of all amount due to the company and for the payment or discharge of its liabilities and obligations within a reasonable time and, if necessary, obtain necessary undertakings from the Managing Director, Director or other persons in charge of the management of the Company - As per proviso thereof, notwithstanding the undertakings referred to in sub-section (6), the assets of the Company are to be made available for payment or discharge of its liabilities and obligations even after the date of the order removing the name of the Company from the Register of Companies. From sub-section (7) of Section 248, it is also clear that the liability, if any, of every director, manager or other officer who was exercising any power of management, and of every member of the company dissolved under sub-section (5) of Section 248, shall continue and may be enforced as if the company had not been dissolved - From sub-section (8) of Section 248, it is clear that Section 248 in no manner will affect the power of the Tribunal to wind up a company, the name of which has been struck off from the Register of Companies. Therefore, it is clear that after removal of the name of the Company from the Register of the Company for the purpose of right of realization of all amount due to the Company and for the purpose of payment or discharge of its liabilities or obligations of Company continues. In terms of Part II of I B Code, for the purpose of liquidation, except Voluntary Liquidation of Corporate Persons under Section 59 of the I B Code, procedure of Corporate Insolvency Resolution Process is to be followed, if a proceeding is initiated under Sections 7 or 9 of the I B code. Instead of liquidation, the first step to be taken is to ensure that in a time bound manner the value of assets of Corporate Debtor/ Company is maximized and to promote entrepreneurship, availability of credit by balancing the interest of all the stakeholders; within an active legal framework for timely resolution of insolvency and bankruptcy. Liquidation of assets of the Corporate Debtor / Company is not the object, but object is revival and rehabilitation of the Corporate Debtor / Company by way of Resolution and maximization of the value of assets of the Corporate Debtor and balancing the interest of all the stakeholders. The name of the Corporate Debtor (Company) may be struck-off, but the assets may continue. Whether in the present case, there are assets of the Corporate Debtor or not can be looked into only by the Interim Resolution Professional / Resolution Professional - The name of the Company having been struck-off, the Corporate Person cannot file an application under Section 59 for Voluntary Liquidation. In such a case and in view of the provisions of Section 250 (3) read with Section 248 (7) and (8), we hold that the application under Sections 7 and 9 will be maintainable against the Corporate Debtor , even if the name of a Corporate Debtor has been struck-off.' Liability of the Ex-Directors or Shareholders or Officers - HELD THAT:- Section 248 (7) of the Companies Act being clear, we are not expressing specific opinion, till any order is passed by the Adjudicating Authority or demand is made by the Interim Resolution Professional . The Adjudicating Authority who is also the Tribunal is empowered to restore the name of the Company and all other persons in their respective position for the purpose of initiation of Corporate Insolvency Resolution Process under Sections 7 and 9 of the I B Code based on the application, if filed by the Creditor ( Financial Creditor or Operational Creditor ) or workman within twenty years from the date the name of the Company is struck off under sub-section (5) of Section 248 - In the present case, application under Section 7 having admitted, the Corporate Debtor and its Directors, Officers, etc. deemed to have been restored in terms of Section 252(3) of the Companies Act. Appeal dismissed.
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2019 (9) TMI 892
Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in repayment of amount - pre-existing dispute or not - HELD THAT:- The main contention of the Corporate Debtor that Operational Creditor was liable to pay an amount of ₹ 7.5 lakhs in addition to the amount already paid. The main case of Corporate Debtor that Operational Creditor agreed to pay the sum but however it did not pay. This dispute existed prior to the demand notice issued on behalf of Operational Creditor. The Operational Creditor was to further release ₹ 7.5 lakhs. He failed to pay and Corporate Debtor therefore demanded this money which arises in connection with MSA and both parties admitted having entered into MSA. The Corporate Debtor also issued reply to the demand notice raising dispute. The Corporate Debtor filed certain documents which are e-mails issued from time to time but the fact remains the agreed amount of ₹ 7.5 lakhs was not paid by the Operational Creditor to the Corporate Debtor. This is a pre-existing dispute between the parties. If ₹ 7.5 lakhs was paid to the Corporate Debtor, then Corporate Debtor would have completed the task orders under MSA. Long back dispute was raised before filing the petition. Though email correspondence was filed by the Operational Creditor, yet there was dispute between the parties over payment of balance. Therefore, Petition is liable to be rejected on these grounds. The Petition is liable to be rejected as there was pre-existing dispute between the parties - petition dismissed.
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2019 (9) TMI 891
Permission for withdrawal of company petition - Application is filed under Section 12 A of the Code - HELD THAT:- It is clear from section 12A of the Code that the Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section 9 or section 10 on an application filed by the applicant with the approval of 90% voting share of the Committee of Creditors. Thus it is clear if 90% voting share of Committee of Creditors approves application for withdrawal then Adjudicating Authority to allow for withdrawing the application filed under section 7 or section 9 or section 10 of the Code. The application for withdrawal under section 12A of the code shall be submitted to the IRP or RP as the case maybe in Form FA of the schedule before issue of invitation for expression of interest and further to be accompanied by a bank guarantee towards estimated cost. In this case EOI was issued on 03.05.2019 and the same was published. However on 04.05.2019 Financial Creditor filed withdrawal application in Form FA. The COC discussed the same. However, they approved the withdrawal by giving relaxation. Then Committee of Creditors to approve with 90% of voting share. If approved the IRP shall submit the application to the Adjudicating Authority on behalf of applicant and Adjudicating Authority may approve the same by order. We allow the settlement that has been entered into and annul the proceedings . Hon'ble Apex Court held Sec. prevails over regulation Sec 12A of I B Code provides for withdrawal. The COC with 100% voting share have approved the application for withdrawal. Therefore permission can be granted under Section 12A of the I B Code to the Application for withdrawal of Company petition. Application withdrawn.
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2019 (9) TMI 890
Dissolution of company - section 59 of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It appears that the affairs of the company have been completely wound up, and its assets have been completely liquidated. The Company deserves to be dissolved. Accordingly, at this moment direct that the company shall be dissolved from the date of this order.
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Service Tax
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2019 (9) TMI 889
Liability of service tax - amount received from the prospective buyers where such amount includes consideration towards undivided share of land within the period 2010-11 to 2014-15 - services availed from two sub-contractors in undertaking construction activity when these sub-contractors have discharged the service tax liability - construction activity undertaken for educational institutions and on the deposits collected from all the buyers of residential apartment towards resident/owner welfare association to be used for future payments. Demand of service tax - amount received from the prospective buyers where such amount includes consideration towards undivided share of land within the period 2010-11 to 2014-15 - HELD THAT:- The learned Commissioner held that the appellant has collected sums from the buyers before the receipt of the occupancy certificate/completion certificate and therefore provided taxable service as per Section 65(105) (zzzh) of the Finance Act 1994. He also relied upon the Board Circular 151/2/2012-ST dated 10.02.2012 - reliance placed in the case of GS. PROMOTERS VERSUS UOI [ 2010 (12) TMI 34 - PUNJAB AND HARYANA HIGH COURT] where it was held that the levy of tax is on service and not on service provider and construction services are certainly provided even when a constructed flat is sold. Taxing of such transaction is not outside the purview of the Union Legislature as the same does not fall in any of the taxing entries of State list - service tax cannot be levied. Demand of service tax - reverse charge mechanism on the services availed by them from two sub-contractors - HELD THAT:- Karnataka High Court in the case of COMMISSIONER OF CENTRAL EXCISE SERVICE TAX CUSTOMS, BANGALORE-II VERSUS NITHESH ESTATES LTD., [ 2018 (7) TMI 1135 - KARNATAKA HIGH COURT] where it was held that the appellants are not liable to pay any service tax as the building constructed by them is not for the use of Commerce or Industry - no service tax is liable to be paid by the appellants in this regard. CENVAT Credit - the service provider has not furnished Cenvat credit documents to the Department for verification and thus failed to comply with the provisions of Rule 6 of the Cenvat Credit Rules - HELD THAT:- In terms of N/N. 21/2014-CE (NT) of Cenvat Credit Rules, 2004 the service provider shall not take credit after 6 months of date of issue of any documents specified in sub-rule (1) of Rule 9. However, learned counsel for the appellants submits that the credit was due to them prior to 11.07.2014 i.e the date of amendment of Rule and therefore, they are not barred from taking credit. However, it is held that no service tax is payable by the appellants on the issues raised in the impugned order we are not going into the issue of credit. Appeal allowed - decided in favor of appellant.
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2019 (9) TMI 888
CENVAT Credit - input services - services which are used for the personal use of their employees - HELD THAT:- As far as these services are concerned, the employees are their service recipients and they are the service providers. They are not in an employer-employee relationship as far as these services are concerned. For the services which they have rendered to their employees, they have collected amounts along with service tax and paid the same to the exchequer and reflected these amounts in their ST-3 returns - Merely because a person happens to be their employee he does not cease to be a service recipient. If the employees were not a service recipient, no amounts would have been recovered from them and no service tax would have been paid on the same. Conversely, the appellant cannot get any exemption from payment of service tax if he has rendered services, even if such services are rendered to their own employees for a consideration - CENVAT Credit allowed. CENVAT Credit - credit available on the basis of debit notes which are not eligible documents - Rule 9 of CCR, 2004 - HELD THAT:- The learned counsel has taken me through samples of the documents to demonstrate that credit was not taken on debit notes by them. Debit notes were only raised by them on their employees to recover amounts. They have not availed any Cenvat credit on the basis of such debit notes - demand not sustainable. Appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (9) TMI 887
Classification of goods - motor vehicles as well as chassis fitted with engine which is also cleared at times by the appellant - motor vehicles have been described as tipper which have been claimed to be meant for off-road use and hence classifiable under 8704 2390 - HELD THAT:- We are not inclined to interfere with the order passed by the Customs, Excise and Service Tax Appellate Tribunal at New Delhi. Appeal dismissed.
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2019 (9) TMI 886
Interest on unutilized reversed credit entry - HELD THAT:- The erstwhile Rule 14 of the Cenvat Credit Rules read as taken or utilised , which had been amended and substituted by the words taken and utilised - Such an amendment conveys the intent of the legislature and hence, substantive benefit cannot be denied to the appellant. Further, if credit has been taken but not utilised and is subsequently reversed, it leads to no consequence and results in a revenue neutral situation. The recovery of interest is untenable - appeal allowed - decided in favor of appellant.
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2019 (9) TMI 885
CENVAT Credit - use of capital goods in the manufacturing of exempted goods - benefit of N/N. 30/2004-CE. availed - contention of the department is that since at the time of receipt of capital goods, the appellant was manufacturing exclusively exempted goods with the help of the said warping machine, they are barred from availing the Cenvat Credit on such capital goods - HELD THAT:- As per the facts of the present case, though the appellant received and installed the capital good in their running unit in August, 2015 but before completion of two years, in August, 2017 the capital good was used for manufacture of goods which were cleared on payment of duty, availing the exemption notification 29/2004-CE. Therefore, the capital goods were not used continuously for two years for manufacture of exclusively exempted goods. Since the amendment is by way of substitution, it will be applicable from the retrospective effect. Tribunal in various judgments, under the same set of facts and dispute related to N/N. 29/2004-CE and 30/2004-CE, held that even though initially Nil rate of duty exemption under N/N. 30/2004-CE has been availed and subsequently, Notification No. 29/2004-CE availed and paid the duty, the Cenvat Credit on capital goods is admissible. Cenvat Credit on the capital goods is admissible - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (9) TMI 884
Rebate claim - rectification of mistake - error apparent on the face of record - legality of order passed under section 22 of the U.P. Trade Tax Act - HELD THAT:- Under the rebate N/N. 3913 dated 23.11.2000, rebate was made available to such unit with respect to such goods as had been manufactured under an eligibility certificate whose validity commenced prior to 09.11.2000. The original eligibility certificate issued to M/s. R.L. Steels Private Limited with respect to the new unit where the goods (forming subject matter of the rebate claimed) were manufactured, clearly provided the date of beginning of the exemption as 15.05.1997, i.e. the date of first sale. The order dated 31.12.2000 passed by the Divisional Level Committee, Garhwal in favour of the applicant clearly brings out that, that order was passed only with reference to the original eligibility certificate dated 15.12.2001, issued to M/s. R.L. Steels Private Limited. - The order dated 31.12.2002 passed by the Divisional Level Committee, Garhwal is not an independent order and does not seek to grant exemption on fresh appraisal of eligibility. It only provides for continuation of the facility of exemption already granted in accordance with Section 4-A(2)(B) of the Act. Since the assessee succeeded to the new unit w.e.f. 14.11.2002, that date was specified in the order dated 31.12.2002 for the purposes of computing the surviving period of exemption for which eligibility certificate was issued. In no sense or eventuality, it could be read as an independent eligibility certificate or an eligibility certificate whose validity commenced after 09.11.2000. A view having been taken that the assessee was entitled to the benefit of rebate as commenced prior to 09.11.2000, it fell outside the scope of proceedings of rectification of mistake to take another view. The reason for the assessing officer to have made the rebate conditional, did not survive after the decision of the Division Bench of the Uttrakhand High Court. Therefore, the benefit of rebate granted under the assessment order became absolute and final. The order dated 02.12.2008 passed by the Commercial Tax Tribunal is set aside. The questions of law are answered in affirmative, i.e. in favour of the assessee and against the revenue - revision allowed.
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Indian Laws
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2019 (9) TMI 883
Dishonor of Cheque - discharge of a legally enforceable debt - offence punishable under Section 138 of the Negotiable Instruments Act, 1881 - rebuttal of presumption - HELD THAT:- The circumstances enabled the accused to persuade the court to believe that he had not incurred any debt or liability to the complainant and that he had not issued the cheque to the complainant in discharge of any debt or liability. Thus, even if it is found that the specific plea set up by the accused as to the possession of his cheque by the complainant is not proved by him, he could succeed in rebutting the presumption under Section 139 of the Act by relying upon the facts and circumstances of the case set up by the complainant against him and also the facts and circumstances brought out in the evidence of the complainant. Then, in the absence of any reliable evidence adduced by the complainant to prove the transaction alleged by him, he has failed to prove that the accused committed an offence punishable under Section 138 of the Act. The judgment of the trial court acquitting the accused, does not warrant any interference by this Court in appeal - appeal dismissed.
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2019 (9) TMI 882
Dishonor of Cheque - acquittal of accused - section 138 of NI Act - existence of debt or not - HELD THAT:- The circumstances enable the accused to persuade the court to believe that he had not incurred any debt or liability to the complainant and that he had not issued the cheque to the complainant in discharge of any debt or liability. Thus, even if it is found that the specific plea set up by the accused as to the possession of his cheque by the complainant is not proved by him, he could succeed in rebutting the presumption under Section 139 of the Act by relying upon the facts and circumstances of the case set up by the complainant against him and also the facts and circumstances brought out in the evidence of the complainant. Then, in the absence of any reliable evidence adduced by the complainant to prove the transaction alleged by him, he has failed to prove that the accused committed an offence punishable under Section 138 of the Act. The judgment of the trial court acquitting the accused, does not warrant any interference by this Court in appeal - Appeal dismissed.
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2019 (9) TMI 881
Protection of world's wild fauna mainly exotic animals/birds and to protect and improve the natural environment including the wildlife - case of the petitioner is that the exotic animals/birds are not covered under the Schedules of the Wildlife (Protection) Act, 1972 - HELD THAT:- The live animals and birds cannot be imported into India, save and except under a valid Import License issued by the DGFT. Further, as per Policy Condition No. 6, the import of species listed in CITES are subject to the provisions of CITES. Thus, import into India of the exotic animals and birds specified in CITES is restricted. The import of only wild animals defined in the Wildlife (Protection) Act, 1972 is prohibited. At the point of Import/Export, a Customs/DRI officer is obliged and has jurisdiction, to detect and prevent smuggling of live animals and birds into or out of India, so that the smugglers of exotic birds and animals can be penalized for violation of the provisions of Customs Act, 1962, read with the CITES and Foreign Trade Policy - Thus, any live animals and birds, while being smuggled through the Indian Customs Frontiers, can be seized at the point of Import/Export and the concerned persons can be subjected to penal and confiscatory provisions in accordance with the provisions of the Customs Act, 1962. Regional Deputy Directors, Wildlife Crime Control Bureau is obliged to assist in the same. The exotic birds/animals do not come under the purview of Wild Life Protection Act, 1972. There is no provision under the Wildlife (Protection) Act, 1972 to issue licence or permission for dealing in exotic birds.There are no Rules and Regulations and procedures for keeping, breeding, buying, selling and exhibiting such animals (exotic animals) within country which have been bred in India. No documents are specified and no permission are required as per Customs Act for keepin g, breeding buying, selling and exhibiting such animals (exotic animals) within country which have been bred in India. Animals have been bred in captivity in India, Customs Act does not have role in it - From plethora of material adduced by the petitioner, it is very clear that trade, possession, transportation and breeding of exotic animals/exotic birds within India is not governed and restricted by Wildlife (Protection) Act, 1972. The exotic animals/birds are not notified under Section 123 of the Customs Act, 1962. Thus, there is no burden on the person who is in possession of exotic animals/birds, to prove his lawful acquisition or lawful importation into India under the provisions of Customs Act, 1962 - The 'exotic animals/birds' do not attract provisions of Chapter IVA- Detection of illegally imported goods and prevention of disposal thereof, containing Sections 11A to 11G, as they are not notified under Section 11B. Thus, the person in possession of 'exotic animals/Birds is not bound to comply with requirements of Section 11C to 11F of the Customs Act, 1962 regarding intimation of place of storage, precautions to be taken in acquiring, maintaining accounts or sale thereof. It is well settled that the Court must be extremely careful to see that under the guise of redressing public grievance it does not encroach upon the sphere reserved by the Constitution to the Executive and the Legislature. Thus, it cannot direct the government to initiate legislation or interfere in the matters of governmental policy, except in cases of violation of fundamental rights. The Central Government has consciously kept the exotic animals/ exotic birds out of the purview of Wildlife (Protection) Act, 1972 by not including them in its Schedules, and has thus permitted their domestic trading, possession and captive breeding in India. Such legislative intent and decision of the Government can neither be interfered with in writ jurisdiction, nor can any direction be given to the Government in this regard to amend Wildlife (Protection) Act, 1972 or Customs Act, 1962. At the point of Import/Export, a Customs/DRI officer has jurisdiction to detect and prevent International Trade, i.e., import/ export of live animals and birds into or out of India, if found in violation of the provisions of Customs Act, 1962 read with the 'CITES' and Foreign Trade Policy. Thus, any live animals and birds, while being smuggled through the Indian Customs Frontiers, can be seized at the point of Import/Export by DRI/Customs and the concerned persons can be subjected to penal and confiscatory provisions in accordance with the provisions of the Customs Act, 1962. There is no restriction on domestic trade, keeping, captive, breeding, buying, selling and exhibiting 'exotic animals/exotic birds' within India, either under the Wildlife (Protection) Act, 1972 or under the Customs Act, 1962 or under the Foreign Trade (Development Regulation) Act, 1962 or CITES. The present Public Interest Litigation petition is hereby dismissed without costs.
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