Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 28, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Grant of Bail - power to re-arrest if the amount of tax evaded goes up during the investigation - Even if any new case is made out after release of the accused on bail ipsofacto, the Court or the police/department will not get a right to take the accused to the custody unless the bail originally granted is cancelled for any substantial reasons. There must overwhelming circumstances are necessary for cancellation of bail. Therefore it is clear that the right of a person once he has been granted by the competent authority shall be safeguarded with utmost respect to the said order passed by the competent court. - DSC
Income Tax
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Income from other sources u/s 56(2)(viib) - determining the share value of the premium - Method of valuation of shares - AO did not point out any flaw in the method of calculation of the value of shares by adopting the DCF method but, out rightly rejected the same, which should not have been done. - A direction issued based on the concession extended by the assessee cannot be relied upon by the Revenue as a precedent. - HC
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Reopening of assessment u/s 147 - As used the expression 'seems' by stating that though the assessee seems to be qualified under clause (a) to Section 43(5), since they had not complied with condition ('d') they are not entitled to any relief. As pointed out earlier reopening, based upon a change of opinion or a review of decision taken by the Assessing officer, is impermissible. - HC
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Exemption u/s 54F - Denial of exemption as appellant received multiple number of flats - Amendment to section 54 & 54F, restricting the claim of deduction to one residential unit was introduced by Finance (No.2) Act, 2014 w.e.f. 1.4.2015 (i.e. from AY 2015-16). Since we are concerned with assessment year 2009-10, the amendment brought out by Finance (No.2) Act, 2014 does not have application for the instant case. - AT
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Revision u/s 263 - the assessee made no specific claim u/s. 80P2(d) of the Act before the AO nor in the return of income as rightly pointed by the ld. DR. - Further, AO on incorrect assumptions of facts without applying correct application of law allowed deduction u/s. 80P2(d) of the Act which clearly reflects non application of mind. - Revision order sustained - AT
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Addition u/s 43CA - differential amount over and above the declared sale consideration - we are unable to accede to the contention so advanced on behalf of the assessee that the AO is not always obligated to follow the report of DVO and has to apply his own independent mind to the facts and circumstances persistent to the sale transaction. - AT
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Addition on the basis of Central Bureau of Investigation (CBI) report - criminal conspiracy - Assessee being govt officer (treasury officer) - allegation of dishonestly caused withdrawal from the public exchequer against a Letter of Credit (LOC) - Now since the foundation of the addition has gone, the addition cannot be sustained. - AT
Customs
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Interpretation of the Exemption Circular - the emphasis on the comma punctuation mark (,) used in Clause 5.5 of the Circular dated 23.03.2009 to be misdirected. The stress given to this separator is entirely out of context. The surrounding words both preceding and succeeding the comma have to be read together to give a complete meaning. - HC
IBC
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Direction for payment of outstanding amount of CIRP expenses and the contribution towards the liquidation cost - being satisfied that IFCI's inclusion as a member in the CoC is disputed by the remaining financial creditors, it appears to me that IFCI cannot be compelled to contribute its part of share towards the CIRP and Liquidation cost. Part payment voluntarily made by the IFCI does not bar it from disputing its liability to pay the amount as demanded by the liquidator. - Tri
Service Tax
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Prayer for revival of appeal accepting 7.5% pre-deposit and dispose of the appeal on merits - the appeal was rejected for non compliance of pre-deposit requirements, the petitioner has lost opportunity to urge the aforesaid legal contention. In the circumstances, this Court is of the opinion that the petitioner shall be permitted to argue the appeal on merits. - HC
Case Laws:
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GST
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2020 (9) TMI 1027
Input Tax Credit - mismatch in the Input Tax Credit claimed in GSTR-3B and that appearing in GSTR-2A during the period April, 2018 - March, 2019 - It is the petitioner s case that the conditions mentioned in Rule 86A of the CGST Rules, 2017 are not satisfied in the present case - HELD THAT:- The present writ petition is directed to be treated as a representation to respondent no.1, who is directed to decide the same by way of a reasoned order within four weeks, in accordance with law, after giving an opportunity of hearing to the petitioner and/or its authorized representative. The present writ petition and application stand disposed of.
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2020 (9) TMI 1026
Maintainability of appeal - requirement of pre-deposit - he petitioner is ready and willing to deposit an additional 20% of the remaining amount of tax in dispute in compliance of the requirements under Section 112 (8) of the Act - HELD THAT:- The petitioner shall deposit 20% of the remaining amount of tax in dispute in accordance with Section 112 (8) of the Act within three weeks from today and in which event, the recovery proceedings for the balance amount shall remain stayed till disposal of the instant petition. List for hearing in the second week of February, 2020 before the appropriate Court.
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2020 (9) TMI 1025
Grant of Bail - power to re-arrest if the amount of tax evaded goes up during the investigation - Accused is already on bail in the same case - availment of ineligible ITC to the tune of ₹ 24 Crore - pre-trial detention - custodial interrogation - HELD THAT:- It is now well settled by a catena of decisions of the Supreme Court that the power to grant bail is not to be exercised as if the punishment before trial is being imposed. The only material considerations in such a situation are whether the accused would be readily available for his trial and whether he is likely to abuse the discretion granted in his favour by tampering with evidences. If there is no prima facie case there s no question of considering other circumstances. But even where a prima facie case is established, the approach of the court in the matter of bail is not that the accused should be detained by way of punishment but whether the presence of the accused would be readily available for trial or that he is likely to abuse the discretion granted in his favour by tampering with evident. The above decision makes it abundantly clear that even if any new case is made out after release of the accused on bail ipsofacto, the Court or the police/department will not get a right to take the accused to the custody unless the bail originally granted is cancelled for any substantial reasons. There must overwhelming circumstances are necessary for cancellation of bail. Therefore it is clear that the right of a person once he has been granted by the competent authority shall be safeguarded with utmost respect to the said order passed by the competent court. In the criminal jurisprudence prevailing in all common law countries, every person is presumed to be innocent until proved to the contrary. The consequence that logically follows is that an accused ought not to be detained or imprisoned, that the personal liberty even of an accused should not be interfered with, until he is convicted by due process of law. Several offences are notified as being bailable and even in the remainder, that is non-bailable offences, the accused can be enlarged on bail by orders of the Court. Bail is the rule; Jail is the exception - The presumption of the innocence of an accused can easily be defeated if the investigation is not constrained by time, is open-ended and protracted. It is for this reason that the legislature has wisely provided that the investigation of an accused should reach its culmination by the filing of a Chargesheet within sixty days, or ninety days where the investigation relates to an offence punishable with death, imprisonment for life or imprisonment for a term of not less than ten years. No doubt the department has moved an application for examination of accused in terms of section 70 of CGST Act which was allowed. However, the said examination cannot be termed as custodial interrogation as claimed in the rep to the bail application. Section 70 CGST Act empowers the proper officer to sum any personwhose attendance he considers necessary either to give evidence or to produce document or any other thing in any inquiry in the same mariner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, 1908 and such inquiry shall be deemed to be a judicial proceedings within the meaning of section 193 and section 228 of the Indian Penal Code. The said examination is never meant to be a custodial interrogation and therefore such averments are rejected. Accused Parag Garg is entitled to bail as not only he was arrested in pursuance to a ongoing further investigation conducted by DGGI but also the fact that accused has prima facie shown that he has secured around 40% of the alleged tax evasion amount. The adjudication proceedings are yet to commence by the department as their investigation is not concluded and the complaint is not likely to be filed very soon. Bail application allowed subject to certain conditions.
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2020 (9) TMI 985
Search and Seizure - the petitioner is aggrieved by the action of the respondent which is without any legal basis - HELD THAT:- This order is in continuation of order dated 14.08.2020. No coercive steps be taken against the petitioners till the next date of hearing, i.e., 30.09.2020. The learned senior counsel for the petitioners ensure the compliance of order dated 14.08.2020 shall be done within the time frame fixed.
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Income Tax
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2020 (9) TMI 1024
Reopening of assessment u/s 147 - No notice issued u/s 148 - alternate remedy - as per revenue that the notice was dispatched to the appellant writ petitioner from Teynampet Post Office through speed post and also produced the proof before the learned Single Judge - HELD THAT:- Learned Single Judge was fully justified in dismissing the said writ petition, as the appellant has got an effective alternate remedy by way of an appeal before the Commissioner of Income Tax (Appeals) concerned. The Income Tax Act, 1961, being a physical Statute, has provided for hierarchy of remedies under that and there is no justification for the assessee to bypass such an appellate remedy. The point canvassed before us as well as before the learned Single Judge is not a pure question of law, but a pure question of fact with the limits of law involved in it. Therefore, if the facts are in dispute, it is but appropriate for the appellant assessee to avail the alternate remedy provided under the Act, as the Appellate Authority is entitled to re-appreciate the facts, call for records and then take a decision. Writ appeal is dismissed, the order dated 07.11.2019 passed in the said writ petition is confirmed and the appellant is directed to file the appeal before the concerned Commissioner of Income Tax (Appeals) within a period of 30 days from the date of receipt of a copy of this judgment.
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2020 (9) TMI 1023
Withholding of the refund u/s 241A - HELD THAT:- Having heard learned counsel appearing on behalf of the parties and in view of the guidelines in Mapel Logistics [ 2019 (11) TMI 340 - DELHI HIGH COURT] as well as, the directions contained in the said order dated 03.03.2020 rendered by the Coordinate Bench [ 2020 (3) TMI 1243 - DELHI HIGH COURT] we allow the present petition and remit the matter back to the Assessing Officer to pass a fresh speaking order, after affording an opportunity of being heard to the petitioner and further permitting them to place on record the additional affidavit dated 01.06.2020, filed before this Court, in accordance with law, within a period of six weeks from today.
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2020 (9) TMI 1022
Disallowance u/s 14A r.w.r. 8D - Whether no exempt income received by assessee? - non recording of satisfaction - HELD THAT:- To apply the provisions of Section 14A AO should have recorded a finding as to how Sub-Section (1) of Section 14A would stand attracted. In the absence of any such finding, the disallowance made was not justifiable. AO straightaway proceeded to the second limb of Section 14(2) which is impermissible. The Tribunal rightly took note of the decision in the case of Redington India Ltd. [ 2017 (1) TMI 318 - MADRAS HIGH COURT] wherein it was held that the provisions of Section 14A r.w.r 8D cannot be made applicable in vacuum i.e in the absence of exempt income. Therefore, we find that the Tribunal was right in deciding the issue against the Revenue and in favour of the assessee. Disallowance of foreign exchange fluctuation loss - HELD THAT:- As considered the reasons assigned by the Tribunal in the assessee's own case for the earlier assessment year wherein the Tribunal rightly took note of the earliest decision on the said point in the case of Soorajmull Nagarmull [ 1980 (9) TMI 69 - CALCUTTA HIGH COURT] and pointed out that under Section 43(5) of the Act, 'speculative transaction' has been defined to mean a transaction, in which, a contract for the purchase or sale of commodity is settled otherwise than by the actual delivery or transfer of such commodity. Assessee herein was not a dealer in foreign exchange, but was an exporter of cotton. Therefore, the Tribunal rightly took note of the transaction done by the assessee though, in order to hedge against the losses, the assessee booked foreign exchange in the forward market with the bank. Export contracts entered into by the assessee for the export of cotton in some cases failed and therefore, the assessee was held to be entitled to claim deduction in respect of the said amount as business loss. - Decided in favour of assessee.
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2020 (9) TMI 1021
Income from other sources u/s 56(2)(viib) - determining the share value of the premium - Method of valuation of shares - variation in value of shares to the extent of ten times between value adopted by the assessee company as against its actual value of underlying assets - assessee has adopted a method prescribed by the Income Tax Act, without considering the fact that the value of shares adopted by the assessee (under discounted case flow method) does not reflect the true market value of the shares on that date - assessee adopted the DCF method as available under Rule 11UA of the Rules for arriving at the value of the shares allotted and the share premium received - ao adopted the NAV method and re-valued the land owned by the assessee company for the purpose of determining the share value of the premium thereof - HELD THAT:- Noting that the AO had discarded the DCF method adopted by the assessee on the ground that the actual revenue varied from the projected revenue for four years, the Tribunal rightly noted that the projected value is an estimate and the variation in the estimate is marginal. Tribunal came to the conclusion that there was no material to hold that the assessee's projected sales revenues are fabricated or manipulated. As pointed out that the Assessing Officer did not point out any flaw in the method of calculation of the value of shares by adopting the DCF method but, out rightly rejected the same, which should not have been done. Revenue by relying upon the decision of CIT vs. M/s.Vaani Estates Pvt. Ltd. [ 2019 (5) TMI 952 - MADRAS HIGH COURT] submitted that the matter may be remanded to the Assessing Officer for fresh consideration to determine the fair market value of the shares in question as required in Explanation to Section 5 but said judgment, the matter was remanded to the AO for fresh consideration on a concession extended by the assessee by submitting that they will seek necessary clarification from the Central Board of Direct Taxes and they may be permitted to do so while the matter could be remanded back to the assessing authority. Therefore, a direction issued based on the concession extended by the assessee cannot be relied upon by the Revenue as a precedent. - Decided in favour of assessee.
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2020 (9) TMI 1020
Maintainability of appeal - low tax effect - whether case is covered by exceptions provided under clause (10)(c) of Circular No.3 of 2018 wherein it has been clearly stated that the cases involving revenue audit objection which had been accepted by the department are to be disposed off on merits? - deduction u/s 10A - HELD THAT:- The reason being that the assessee had omitted to adjust the business loss and unobserved depreciation of the assessment years 2007-08 2008-09 and he had failed to comply with the provisions of Section 10A(2)(ii) and (iii) - assessee vide letter dated 04.11.2015 stated that the return originally filed under Section 139 of the Act may be treated as a return filed pursuant to the notice issued under Section 148. The assessee after obtaining reasons for reopening had objected to the same, which was rejected by the Assessing Officer by an order dated 07.03.2016. Consequently the reassessment was completed vide order dated 30.03.2016. Challenging the said order, the assessee filed an appeal before the CIT (Appeals)-4, Chennai, [CIT(A)]. By order dated 30.03.2016, the CIT(A) allowed the assessee's appeal on the ground that reopening was not justified as well as on merits. Questioning such an order, the Revenue preferred an appeal before the Tribunal and the same was dismissed by the impugned order, on the ground of Low Tax Effect, which we have held to be not sustainable. Is not the finding of the Tribunal bad, especially the last fact finding authority should have disposed off the matter on merits especially in cases where the Revenue audit objections had been accepted by the department? - Second Substantial Question of Law raised by the Revenue in this appeal has been decided earlier by the Division Bench of this Court and the legal issue is no longer res integra . At this stage, it would be beneficial to refer to the decision of the Hon'ble Division Bench of this Court in the case of Commissioner of Income Tax Vs. Comstar Automative Technologies Pvt Ltd. [ 2020 (7) TMI 730 - MADRAS HIGH COURT] . The Substantial Question of Law framed for consideration in that appeal was identical to that of the case on hand except for the fact in the said case, the provision which was pressed into the service is Section 10B of the Act. The appeal filed by the Revenue was dismissed by judgment dated 06.07.2020 following the decision in the said assessee's case in M/s.Comstar Automative Vs. The Deputy Commissioner of Income Tax [ 2020 (3) TMI 814 - MADRAS HIGH COURT].
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2020 (9) TMI 1019
Entitlement for deduction u/s.10A - when the new STP unit was not in existence and no activities are carried out from the STP unit - assessee is a Design Engineering Company - question of law involving in the case - HELD THAT:- Newly established undertaking is an undertaking of the assessee independent of all the undertakings that he is already possessing. In the instant case, the assessee was engaged on site development of software program. The programs were delivered at the premises of the client at the work site in South Korea. The activities of the assessee finally culminated at the work site of the clients at South Korea and there was no need for full fledged infrastructure facilities in India. Thus, the industrial undertaking of the assessee was independent of all the undertakings which it was already possessing. Therefore, the assessee has rightly been held entitled to deduction under Section 10A of the Act by the Commissioner of Income Tax (Appeals) as well as the Tribunal. The aforesaid concurrent findings of fact by no stretch of imagination can be said to be perverse. It is the cardinal principle of law that tribunal is fact finding authority and a decision on facts on the tribunal can be gone into by the High Court only if a question has been referred to it, which says the finding of the tribunal is perverse. See SUDARSHAN SILKS SAREES VS. CIT [ 2008 (4) TMI 5 - SUPREME COURT] and and 'MANGALORE GANESH BEEDI WORKS VS. CIT [ 2015 (10) TMI 1283 - SUPREME COURT] . We find that matter stands concluded by findings of fact and the revenue has not been able to either plead or place on record material to show that findings of fact recorded by the Tribunal are perverse. Thus, we hold that non substantial questions of law. arise for consideration in this appeal.
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2020 (9) TMI 1018
Allowing set off of losses of amalgamating company against the profits of assessee amalgamated company - HELD THAT:- In order to claim benefit of set off, of accumulated loss, the amalgamated company has to satisfy the conditions laid down in 72A(2)(a)(b) and (c). It is pertinent to note that Sub-Section (2) starts with a non obstante clause. In other words, it shall have effect notwithstanding other provisions of the Act. Thus, the compliance with the conditions prescribed in Section 72A(2) of the Act is mandatory. Tribunal has not adverted to the aforesaid aspect of the issue and has not satisfied itself whether the assessee has complied with the conditions laid down in Section 72A(2) of the Act is sine qua non, to enable the assessee to claim the benefit of the set off under Section 72A of the Act. Since, the aforesaid aspect requires factual adjudication, therefore, we deem it appropriate to remit the matter to the Tribunal afresh for adjudication. In view of preceding analysis, it is not necessary to answer the substantial questions of law framed by this court.
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2020 (9) TMI 1017
Reopening of assessment u/s 147 - reopening beyond the period of four years - differences between charges received as per TDS Certificate and charges offered in the P L A/c - whether mere production of records and account books before the Assessing Officer would not necessarily amount to disclosure within the meaning of 'Disclosure' as mentioned under 1st proviso to Section 147 ? - HELD THAT:- We find none to be available on record as is evident from the AO dated 30.11.2016, wherein the AO himself states that after the assessment was completed u/s 143(3) on perusal of the records, it was seen from the P L A/c that there is differences between charges received as per TDS Certificate and charges offered in the P L A/c. When the assessment was completed under Section 143(3) of the Act, this aspect, was noted by the Assessing Officer, namely the differences between the charges received as per TDS Certificate and charges offered in P L A/c and that perhaps was the reason for the Assessing Officer to record the TDS credit is as per NSDL. Tribunal was fully justified in holding that reopening the assessment beyond four years was a clear change of opinion and did not satisfy the requirements to be fulfilled in terms of 1st proviso to Section 147 of the Act. Thus, the Revenue has not made out any ground to interfere with the order passed by the Tribunal.
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2020 (9) TMI 1016
Reopening of assessment u/s 147 - notice beyond the period of four years from the end of the relevant assessment year - whether the business loss claimed by the assessee can be treated as a Speculative Loss - HELD THAT:- The decision in the case of Kelvinator of India Private Limited [ 2010 (1) TMI 11 - SUPREME COURT] fully supports the case of the assessee, wherein the Hon'ble Supreme Court held that after 01.04.1989, the Assessing Officer has power to reopen, provided there is tangible material to come to a conclusion that there is escapement of income from assessment, reasons must have a live link with formation of belief. As already pointed out the finding rendered by the AO stating that the expression 'or' occurring in between Clause (a) to (d) of Section 43(5) should be read as 'and' as no such interpretation could have been made to the statutory provision as explained by us in the presiding paragraphs. On facts, the Assessment Officer was in favour of the assessee. As used the expression 'seems' by stating that though the assessee seems to be qualified under clause (a) to Section 43(5), since they had not complied with condition ('d') they are not entitled to any relief. As pointed out earlier reopening, based upon a change of opinion or a review of decision taken by the Assessing officer, is impermissible. Further the interpretation given by the Assessing Officer to Section 43(5) of the Act is wholly untenable.- Decided against the Revenue
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2020 (9) TMI 1015
Penalty levied u/s. 271(1) ( c) r.w.s. 274 - non-validity of penalty notice - Defective notice - HELD THAT:- Reading of the penalty notice, we note that the AO has not stricken out the irrelevant portion of the fault/charge which would have spelt out the specific fault/charge against the assessee as per section 271(1) (c) of the Act. Since the proposed notice itself is defective, all subsequent proceedings are bad in law and the penalty imposed by the AO u/s. 271(1)(c) of the Act and confirmed by the Ld. CIT(A) should be cancelled. SEE M/S SSA S EMERALD MEADOWS [ 2015 (11) TMI 1620 - KARNATAKA HIGH COURT] AND M/S MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] - Decided in favour of assessee.
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2020 (9) TMI 1014
Exemption u/s 54F - Denial of exemption as appellant received multiple number of flats - transfer of 60% of land for builders against cost of construction of flats for 40% share - assessee and co-owners of the property had entered into a joint development agreement - Assessee submitted capital gains is not assessable in the year of entering into joint development agreement but only when the flats are received by the assessee as per the joint development agreement - HELD THAT:- All the flats were situated in a residential building and the four residential flats constitute a residential house . Accordingly, view confirmed by the Hon ble High Court in SMT. KG. RUKMINIAMMA [ 2010 (8) TMI 482 - KARNATAKA HIGH COURT]. As decided in SHRI. B.J. BADRINATH [ 2018 (11) TMI 1168 - ITAT BANGALORE] ratio of the judgement of the Hon ble jurisdictional High Court in the case of CIT Vs. K.G. Rukminiyamma (supra) applies to also 54F of the Act since both section i.e. 54 54F of the Act are pari materia. Moreover, in the case of other co-owners, it has been submitted by the Ld. A.R. that claim of deduction u/s 54F of the Act was allowed by the A.O. This assertion made by the Ld. A.R. was not controverted by the Ld. D.R. Amendment to section 54 54F, restricting the claim of deduction to one residential unit was introduced by Finance (No.2) Act, 2014 w.e.f. 1.4.2015 (i.e. from AY 2015-16). Since we are concerned with assessment year 2009-10, the amendment brought out by Finance (No.2) Act, 2014 does not have application for the instant case.
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2020 (9) TMI 1013
Revision u/s 263 - treating the original assessment made u/s. 143(3) as erroneous and prejudicial to the interest of revenue - assessee not eligible for deduction u/s. 80P2(d) - assessee has made certain investment in various banks and earned interest income on fixed deposit and dividend income and has not offered the said amount for taxation under the head Income from other sources and he held interest and dividend income earned is other income not eligible for deduction u/s. 80P2(d) - As per assessee every detail regarding the claim under Chapter VI has been provided to the AO and after examination of which the AO allowed the claim of assessee - HELD THAT:- Record furnished before us regarding the assessment proceedings clearly shows the assessee made no specific claim u/s. 80P2(d) of the Act before the AO nor in the return of income as rightly pointed by the ld. DR. Whether the interest and dividend earned by the assessee from Co-operative Bank is eligible for claim u/s. 80P2(d) ? - In the present case, the assessee is a Co-operative Society engaged in the business of manufacturing of sugar and by-products. As rightly argued by Shri Deepak Garg that the assessee is not under the activities of specified under Clause (d) or (b) of section 80P, but under Clause (c), as discussed above the assessee earned interest and dividend income from Latur District Central Co-operative Bank and Vikas Sahakari Bank Ltd. clearly shows the interest and dividend earned by the assessee are not from Co-operative Society. Therefore, in our opinion the AO on incorrect assumptions of facts without applying correct application of law allowed deduction u/s. 80P2(d) of the Act which clearly reflects non application of mind. Coming to the assessment order passed 143(3) of the Act, we note that there was no discussion nor reference made by the AO to the claim of assessee made u/s. 80P2(d) - AO has not made proper enquiry of the claim made by the assessee in terms of provisions contemplated u/s. 80P - Pr. CIT directed the AO to decide this issue afresh after bringing entire facts on record after affording opportunities to the assessee, in our opinion, the order of Pr. CIT-2 is valid in treating the assessment order completed u/s. 143(3) of the Act dated 08-03-2016 as erroneous and prejudicial to the interest of revenue. - Decided against assessee.
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2020 (9) TMI 1012
Losses eligible to be carried forwarded and consequently for set off in subsequent years - Business or speculation loss - claimed on commodity and derivatives and share derivatives as speculation loss - HELD THAT:- Assessee s activity/loss is covered in currency and futures and options, which have been carried out/claimed as per proviso/clause (d) to section 43(5) of the Act read with Explanation 1 thereto and the said Notification No. 2/2006 [ so 89( E ), dated 25-1-2006. AO erred in assessing/adding all the losses, which the assessee claimed on commodity and derivatives and share derivatives as speculation loss. Since the assessee s case is covered in Explanation 1 to section 43(5)(d) of the Act and assessee s transaction was an eligible transaction, it cannot be termed as speculative transaction . Since the Revenue has not challenged the finding of fact on this issue by the Ld. CIT(A) that the commodity have taken place through registered broker on the portal of the NSE through screen based trading system, the finding of fact crystalizes and therefore, as per law the action of Ld. CIT(A) is correct and we find no infirmity in the impugned order of the Ld. CIT(A) in allowing the same as business loss. Assessee has filed his return of income u/s. 139(4) belatedly because the assessee was an individual and his accounts need not be audited u/s. 44AB - AO misdirected himself and fell in error as rightly noted by the Ld. CIT(A). According to the threshold limit as per section 44AB of the Act in this assessment year was of ₹ 60 lakhs and as per section 44AB of the Act the law enforced for the AY 2012-13 the limit was of ₹ 60 lakhs and it was enhanced to ₹ 1 crore only for the AY 2013-14. After going through the details of derivatives chart, which is evident from P L account, which show the total of favourable and unfavourable differences exceed ₹ 60 lakhs and therefore, the assessee was required to get his accounts audited u/s 44AB of the Act. Since the return of income was filed on 26-09-2016 claiming losses incurred during the year (AY under consideration), the assessee was eligible to carry forward his losses as business loss. We find no infirmity in the impugned order of the Ld. CIT(A) in adjudicating this issue. Therefore, this ground (no.1) of revenue s appeal is dismissed. Unexplained cash credit u/s. 68 - unapproved creditworthiness of the loan creditor - CIT-A deleted addition - HELD THAT:- Assessee received ₹ 60 lakhs from Sh. G.R Poddar and the AO in the scrutiny proceedings u/s 143(3) of the Act has accepted the identity, creditworthiness and genuineness of the loan transaction with Shri G.R.Poddar. Since the AO himself has accepted the identity, creditworthiness and genuineness of the lender, who is the elder brother of the assessee, who has given loan in the AY 2013-14, it does not stand to logic why the loan for this AY should be disallowed when the very same elder brother/lender of the assessee has given the loan to the assessee. Therefore, the said loan cannot be suspected / doubted. We find no infirmity in the impugned order of the Ld. CIT(A) and therefore, we dismiss this ground no.2 of the revenue s appeal. Short term capital loss - disallowance as assessee did not produce any details or contract regarding this issue and has failed to prove the nature of transaction - HELD THAT:- CIT(A) has found that all the transactions were carried out through the registered broker electronically on the portal of the NSE through Screen Based Trading System and supported by time stamped contract notes. As brought to the notice of CIT(A) that the deliveries have been effected through depository accounts and the payment was through banking channels and, therefore, CIT(A) found that AO has simply disbelieved the claim even though the assessee had filed the complete details of Short term capital loss along with ledger of assessee in the books of broker. Taking note of the contract notes, the Ld. CIT(A) found that assessee carried out short-term transaction therefore, he directed to allow the claim of the assessee on this ground. We find no infirmity in the action of Ld CIT(A) on this issue. - Decided against revenue.
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2020 (9) TMI 1011
Addition u/s 43CA - differential amount over and above the declared sale consideration - determination of Fair market value of commercial plot - determination of Fair market value of commercial plot - HELD THAT:- Assessee didn t raise any objections before the DVO where he shared the preliminary estimate with the assessee for reasons best known to it and has raised its objections for the first time before the AO on receipt of the DVO report and the secondly, the AO has proceeded to follow the report the DVO. We therefore donot find any infirmity in the action of the DVO as the assessee failed to raise any objections before him. We also donot find any infirmity in the action of the AO in following the report of the DVO. Once the AO has referred the matter to the DVO for his expert opinion and the latter has submitted his report, the AO is duty bound to follow the said report and doesn t have any discretion in that regard. AO cannot entertain any objections so raised by the assessee against the valuation so determined by the DVO. Therefore, we are unable to accede to the contention so advanced on behalf of the assessee that the AO is not always obligated to follow the report of DVO and has to apply his own independent mind to the facts and circumstances persistent to the sale transaction. We have also gone through the decisions relied upon by the ld A/R at the Bar and find that none of the decisions support the contention so advanced on behalf of the assessee. In the result, the ground of appeal is dismissed. Addition u/s 14A - HELD THAT:- Disallowance u/s 14A r/w Rule 8D is restricted to the extent of dividend income claimed exempt by the assessee and the remaining addition is hereby directed to be deleted. The ground is thus partly allowed.
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2020 (9) TMI 1010
Validity of the assessment order itself - Order barred by limitation and liable to be quashed - HELD THAT:- We find that an identical challenge was dismissed by the co-ordinate bench in the case of Religare Capital Markets Ltd [ 2019 (10) TMI 992 - ITAT DELHI] wherein it has been held that final assessment order passed u/s 143(3) r.w.s. 144C(13) of the Act would not be covered under the provisions of section 153 of the Act. Respectfully following the findings of the coordinate bench, this ground is dismissed. TP Adjustments - international transactions relating to receipt of Management and consultancy services received towards Recovery of costs for SAP maintenance - HELD THAT:- Revenue authorities cannot judge the rendition of services by applying benefit test as laid down in the case of EKL Appliances [ 2012 (4) TMI 346 - DELHI HIGH COURT] . In our considered opinion, the only consideration in such transaction is rendition of services. All that the revenue authorities have to see is as to whether there is rendition of services by the AE to the assessee. This definitely puts the burden on the assessee to demonstrate that there was rendition of services by the AE to the assessee. Assessee cannot furnish evidences for day to day rendition of services, but definitely can demonstrate rendition at crucial points. Merely filing sample emails would not suffice. The assessee has to come with more strong evidences which may be in any form, including electronic forms to demonstrate that the AE has actually rendered services which are mentioned in the agreement. In the interest of justice and fair play, we restore this issue to the file of the Assessing Officer/TPO. The assessee is directed to come with strong evidences to demonstrate that the services were actually rendered by the AE. The Assessing Officer/TPO is directed to examine the issue afresh in the light of evidences that would be furnished by the assessee. This ground is, accordingly, treated as allowed for statistical purposes. Reimbursement of SAP and other expenses - assessee had incurred certain expenses in the nature of SAP maintenance charges, vehicle, telephone and food expenses, etc. on behalf of its AEs, on a cost-to-cost basis, without charging any mark-up - HELD THAT:- , no mark up is warranted on pass through costs as these are reimbursement of primary third party expenses initially incurred by the assessee for which no value addition is done by the assessee and are subsequently reimbursed by the AEs on cost to cost basis. Moreover, in our considered view, such transactions are undertaken for commercial expediency and are not intended to be undertaken with expectation of return. Considering the nature of expenses in totality, in light of OECD guidelines, we do not find any merit in this adjustment made by the TPO. The same is directed to be deleted. Disallowance u/s 14A r.w.r. 8D - appellant received dividend which were claimed as exempt u/s 10(34) - Assessee made suo moto disallowance - HELD THAT:- Assessee has made investments out of his own funds. Even assuming that the investments have come out of pool of funds, that is own funds and borrowed funds, then, the ratio laid down by Reliance Utilities and Power Ltd [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] squarely apply on the facts of the case, as in that case, the Hon'ble Bombay High Court has held that if the investments are made from pool of funds, then presumption would be that investments have come out of own funds if own funds are in excess of investment. Tribunal in assessee s own case in earlier assessment years have deleted the disallowance and this fact has also been accepted by the DRP. Merely because the Revenue has preferred an appeal before the higher forum would not justify any upholding of the disallowance. Disallowance u/s 14A on dividend income - HELD THAT:- Respectively following the decision of the jurisdictional High Court in the case of Godrej Boyce Mfg. co. Ltd. Vs. DCIT another [ 2010 (8) TMI 77 - BOMBAY HIGH COURT] we delete the disallowance made u/s 14A r.w. Rule 8D and accordingly, the ground taken by the assessee in this regard is allowed. Claim of additional depreciation - after the implementation of Scheme of amalgamation and arrangements passed by the Hon'ble High Court of Bombay at Goa and Hon'ble Madras High Court, the copper division, power division and aluminium division merged with the appellant - AO was of the opinion that the assessee is not entitled for additional depreciation as the word manufacture as defined in section 2(29BA) of the Act with effect from 1.4.1999 do not take in its purview the claim of the assessee - HELD THAT:- The term production has been interpreted to be one having much wider connotation in as much as every manufacture can be characterised as production while every production might not amount to manufacture as held by the Hon'ble Apex court in the case of NC Budharaja Co. [ 1993 (9) TMI 6 - SUPREME COURT]. Hon'ble Supreme Court in the case of Sesa Goa Ltd . [ 2004 (11) TMI 14 - SUPREME COURT] [earlier name of the assessee] has held that extraction and processing of iron ore amounts to production. Thus we direct the Assessing Officer to allow claim of additional depreciation. Claim of balance 50% additional depreciation disallowed - assessee had acquired and installed some of the new plant and machinery eligible for additional depreciation under section 32(1)(iia) of the Act and was put to use for a period less than 180 days during FY 2012-13 - Scope of amendment - HELD THAT:- Amendment takes effect from 1.4.2016. As this amendment is effective from 01.04.2016, therefore, it is clearly not applicable to the year under consideration. As far as the applicability of this amendment having retrospective effect, we are of the view that the Tribunal being last fact finding authority, should refrain from adjudication of retrospective or otherwise of the applicability in the amendment. In our considered view, this should be in the domain of superior courts. Therefore, considering the plain language of the section, we do not find the amendment applicable to the year under consideration. We are of the considered view that the assessee is not entitled for claim of 50% of the depreciation brought forward from earlier assessment years. Deduction u/s 32AC disallowance - claim of the assessee was denied by AO solely on the ground that exploration of mines and generation of power were not manufacturing activities as envisaged u/s 32AC - HELD THAT:- In light of the decision in the case of Sesa Goa. [ 2004 (11) TMI 14 - SUPREME COURT] and NTPC Sail Power Co. Pvt Ltd [ 2019 (3) TMI 207 - DELHI HIGH COURT] we direct the Assessing Officer to allow the claim of deduction u/s 32AC of the Act. Addition on account of out of books receivables - as during the course of survey conducted u/s 133A at the business premises of the appellant, certain documents were impounded, which contained email exchanges made by the senior executives of the appellant company where from formed a belief that receivables of ₹ 1095.93 crores have not been disclosed by the assessee in its books of account - HELD THAT:- Neither the Assessing Officer has done any verification nor the assessee has brought any evidence on record. Entire addition has been made only on the basis of emails without proper verification. On such half-baked facts, it is not possible for us to decide the quarrel. Therefore, we deem it fit to restore the entire quarrel to the file of the Assessing Officer. The Assessing Officer s directed to make verification of the claim from the respective bodies as mentioned here in above, and the assessee is directed to furnish necessary evidences in respect of such claims. Claim of the assessee that certain amounts pertained to other group entities, which are distinct entities, cannot be brushed aside lightly - HELD THAT:- We direct the AO to consider only those receivables which pertain to the appellant company. With these directions, this ground is treated as allowed for statistical purposes. Disallowance of Corporate Social Responsibility expenditure - HELD THAT:- These expenses are either in the nature of charity or donation. In our considered view, these expenses are not in the nature of CSR. Payments made to church, police station, summits, schools, etc cannot be considered to have been spent on CSR. Though the amendment to Section 37 of the act may be prospective, but at the same time, assessee had to justify the claim of expenditure being spent on CSR. Details mentioned hereinabove do not justify the claim of expenditure on account of commercial expediency. Considering the claim from all possible angles, we do not find any merit in such claim of expenditure - Decided against assessee. Addition of liquidated damages - HELD THAT:- When the entire basis of making a decision is that agreements were not for supply of any machinery, but of design, transfer of technology knowhow, patent etc, which are in the nature of intangible assets, but the lower authorities have completely ignored the fact that even intangible assets are capital goods and a specific rate of depreciation is provided in the Income Tax Act. In our considered opinion, and as admitted by the revenue authorities, damages were for intangible assets and intangible assets are also capital goods. Therefore, any liquidated damages received are capital receipts. We, accordingly, direct the Assessing Officer to delete the addition. Denial of brought forward losses and unabsorbed depreciation - claim was denied by AO on the ground that in earlier assessment years, additions/disallowances have been made which have been confirmed by the DRP - DRP confirmed the findings of the Assessing Officer holding that the claim could only be admissible once assessment of earlier A.Y is finalised - HELD THAT:- Even if the earlier assessment orders are in appeal, the assessee is still entitled for claim of set off as per assessed figures of previous A.Ys. We, accordingly, direct the Assessing Officer to allow set off as per assessed figures of the previous A.Ys. This ground is allowed for statistical purposes. Applicability of provisions of Minimum Alternate Tax [MAT] - HELD THAT:- Disallowance made as per provisions of I.T. Act, would not justify in exporting the disallowance for the computation of book profit u/s 115JB of the Act Debit under the head Provision for Doubtful Trade Receivables/Advances and had also added back the same in the computation of total income under the normal provisions of the Act - HELD THAT:- We are of the opinion that no adjustment need to be made on this count and the Assessing Officer is directed to delete the same. Reduction claim of provision for taxes - HELD THAT:- Figure of ₹ 1782.09 crores pertain to reversal of unutilised provision for taxes in the current year. In our considered view, these factual figures need verification. We, therefore, deem it fit to restore this issue to the file of the Assessing Officer. The Assessing Officer is directed to verify the correctness of figures mentioned in charts hereinabove and decide the issue afresh. Reduction claim on account of Debentures Redemption reserve and surplus - Transfer to Reserve and Surplus Account - HELD THAT:- Once reserve is created, it reduces divisible profit. This is the amount of profit which is retained for use in business when difficulty arises. Reserves can be invested. The said investments can be even outside the business and in such cases the reserve is called the reserve fund. Reserves are shown on the liability side of the balance sheet and are generally treated as belonging to the proprietor just as capital. It is a sum owned by the business to the proprietor. Reserves themselves are not assets but represent a portion of the assets which the proprietor is free to utilize for business as one likes, i.e. the assets equalling the reserves that are not required to pay liabilities. Generally reserves are created at the discretion of the management as a matter of prudence, but in certain cases a statute can direct creation of special reserves. For the purpose of Section 115JB of the Act, statutory reserves are treated alike and in a similar manner as other reserves. See SREI INFRASTRUCTURE FINANCE LTD VERSUS ADDITIONAL COMMISSIONER OF INCOME TAX [ 2015 (2) TMI 545 - DELHI HIGH COURT]. Claim u/s 80 GGB denied - HELD THAT:- Claim was made before the Assessing Officer but was denied. In our considered opinion, if the assessee is eligible for claim of deduction u/s 80 GGB of the Act the same deserves to be allowed. We direct the Assessing Officer to allow the same as per provisions of the law after making necessary verification.
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2020 (9) TMI 1009
Addition on the basis of Central Bureau of Investigation (CBI) report - criminal conspiracy - Assessee being govt officer (treasury officer) - allegation of dishonestly caused withdrawal from the public exchequer against a Letter of Credit (LOC) - AO considering the charge sheet filed by CBI, was of the opinion that assessee was involved in the LOC scam and the assessee might have received pecuniary benefit i.e. a share of the scam - HELD THAT:- Assessee was not even made an accused by the CBI while submitting the offence/charge under sec. 173 of the Cr. P. C. and was not convicted also by the Special Judge, CBI and also taking note of the corroborative evidence which is the certificate issued by the Special Judge, CBI (supra) dated 07.07.2015 showing the assessee was not proceeded against by CBI or Special Court in the case, therefore, there was no basis for the addition. We note that the AO has made the addition only on the basis of the allegation on the part of the Investigative Agency i.e. CBI investigating the LOC scam at the F.I.R. stage where assessee s name also figured and that event made the AO saddle the assessee with the addition. Now since the foundation of the addition has gone, the addition cannot be sustained. We note that the AO in the second and third round has simply reiterated the addition and there was no other material other than his reiteration of the original assessment. Therefore, taking note that the foundation of the addition since has been removed, the super structure cannot survive and it falls, therefore, the addition made by the AO and confirmed by the Ld. CIT(A) is directed to be deleted. Assessee appeal allowed.
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2020 (9) TMI 1008
Best judgment u/s 144 - withdrawal of additional grounds of appeal - proof of service of notice issued u/s 143(2) - non-production of assessment records - HELD THAT:- There is no doubt that the AO has passed the assessment order u/s. 144 and the Ld. CIT(A) has also passed the impugned order exparte. As per record, the present appeal came up for hearing before the Bench on 07.12.2018 and adjourned many-times. On 27.11.2019 the Bench has directed the Departmental Representative to produce the records of assessment, but the Department did not produce the same. On 15.06.2020, Ld. DR also sought time to file the proof of service of notice issued u/s. 143(2) of the Act and case was adjourned for 30.07.2020. But again on 30.07.2020 DR did not produce the assessment records to prove the service of notice issued u/s. 143(2) of the Act and the case was adjourned for today i.e. 16.09.2020. Today also the record is not available. DR made a statement that, if the Counsel for the assessee withdraw the additional grounds of appeal filed vide letter dated 20.02.2020, then the issues involved in the present appeal may be set aside to the AO to decide the same afresh, as per law, after giving opportunity to the assessee. Assessee agreed to the same and filed a letter requesting for withdrawal of the additional grounds of appeal raised vide its letter dated 20.02.2020. Keeping in view the statement made by the Ld. Sr. DR for setting aside the issues in dispute to the AO and in view of the letter dated 16.09.2020 filed for the assessee for withdrawal of additional grounds of appeal and in view of the non-production of assessment records especially proof of service of notice issued u/s 143(2) of the Act by the Department, in our considered opinion, this matter requires thorough investigation at the level of the Assessing Officer. We set aside this matter to the AO with the directions to make the assessment , as per law.Assessee s Appeal is allowed for statistical purposes.
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2020 (9) TMI 1007
Assessment u/s 153A - addition of cash found during the course of search - unexplained advances - as contented Addition was made simply on the basis of disclosure of such income before the settlement commission which was done to meet the compliance of the provisions of Section 245C(1) - HELD THAT:- From the record we found that during the course of search, the assessee has surrendered ₹ 15,89,65,200/-. Yearwise breakup of the income surrendered as given at para 3 of this order hereinabove, we found that in the A.Y. 2008-09 and 2009-10, the A.O. had made addition of ₹ 1.50 lacs and ₹ 2.00 lacs respectively on account of advances surrendered by the assessee. We also found that the detailed finding has been given by the A.O. and the ld. CIT(A) with regard to amount found to have been advanced by the assessee, accordingly, we confirm the addition of ₹ 1.50 lacs in the A.Y. 2008-09 and ₹ 2.00 lacs in the A.Y. 2009-10. Income surrendered by the assessee before the Settlement Commission on account of scrap business - HELD THAT:- CIT(A) in the impugned order given a categorical finding that no evidence was found during the course of search to justify the disclosure of income from scrap business. The A.O. also has not quoted or referred to any document found during search with respect to income from scrap business. No addition could have been made u/s 153A unless the same is linked with the material found during search. In view of these facts, the ld. CIT(A) concluded that the addition made by the A.O. is uncalled and deserves to be deleted. The detailed finding given by the ld. CIT(A) has not been controverted by the ld DR, accordingly, we do not find any reason to interfere in the finding so recorded by the ld. CIT(A) for deleting the addition of ₹ 15.00 lacs made by the A.O. on account of scrap trading. Interest earned on undisclosed advance - HELD THAT:- There is no material on record so as to establish that assessee received interest on the alleged advances. It is the working of the mind of the A.O. that has resulted in addition on account of interest. The interest has been calculated notionally and addition has been made accordingly. Decision of the Ld. CIT(A) is based on many judicial pronouncement and sound law. Therefore, the decision of the Ld. CIT(A) in deleting the addition deserves to be confirmed. Addition on account of interest earned on undisclosed advance was deleted by the ld. CIT(A) by having the same observation to the effect that addition was made by the A.O. by presuming that the assessee had earned interest on advances although no evidence was found during the course of search. After giving detailed finding, the ld. CIT(A) has concluded that no addition could be made simply on the basis of presumption as the presumption, however, strong cannot take the place of evidence. We found that while deleting the impugned addition of notional interest, the ld. CIT(A) has deliberated on various judicial pronouncements as referred to in his order and after applying the proposition of law laid down therein to the facts of instant case and concluded that the addition so made on account of notional interest is not warranted. Addition of unexplained transaction - HELD THAT:- Since the assessment u/s 143 is to be made after hearing such evidences as the assessee may produce and such other evidence as the assessment officer may require is specified points, and after taking into account all relevant material which he has gathered, the A.O. shall make an assessment of the total income. Since the primary onus to tax any income is upon the revenue and since the A.O. failed to bring out any such material for taxing the income of ₹ 4.00 crores, in our considered opinion the same is not sustainable on the facts of the case as also in law. Having examined the seized material, it is not discernible as to how such material demonstrates that the assessee has earned the income of ₹ 4.00 crores. Detailed finding so given by the ld. CIT(A) while deleting addition above has not been controverted by the ld DR by bringing any positive material on record, accordingly, we do not find any reason to interfere in the findings so recorded by the ld. CIT(A) which are as per material on record. Unexplained investment in jewellery - unexplained gold jewellery, diamond and silver items - HELD THAT:- CIT(A) considering the status of the family and traditions has allowed 200 grams for children and thus benefit has been given of 200 grams of gold and remaining 300 grams has been treated as unexplained of the value of ₹ 8,85,000/-. Assessee has disclosed 189.620 carats of gold in wealth tax and IT returns as against 373.620 grams found during search. Thus 184 grams remained to be explained. The assessee had pleaded that considering the status of family, number of family members, traditions in the traditional marwadi family more credit required to be given of the diamond found during search. CIT(A) has given credit of 25% of 184 carats of diamond which remained unexplained. Thus 46 carat of diamond has further been treated as explained and balance 138 carats of diamond of the value of ₹ 37,13,994/- was treated as unexplained. The silver weighing 39 kg has been treated as explained by the Ld. CIT(A) with respect to the status of the family and traditions. CIT(A) has sustained addition of ₹ 97,65,444/- (885000+3713994+5166450 [surrendered by the assessee]) totaling to ₹ 97,65,444/-. A detailed finding has been recorded by the ld. CIT(A) for upholding the addition of ₹ 97,65,444/-. -The detailed findings so recorded by the ld. CIT(A) has not been controverted by the ld AR and the DR by bringing any positive material on record, accordingly, we confirm the order of the ld. CIT(A) for upholding the addition on account of jewellery. Addition of cash found during the course of search - not giving credit to the balances available in the books of accounts of the group - HELD THAT:- The cash available in books are more as against cash found physically. This was so because certain payments were still to be accounted for in the books of accounts. Considering the submission of the assessee the Ld. CIT(A) deleted the addition. The Ld. CIT(A) has held that for small discrepancies in the books of accounts and overwriting the books cannot be rejected unless it is established that discrepancies in overwritings established manipulation and fraud. The Ld. CIT(A) has also correctly that as the cash stood accounted for in the books of accounts, section 69A could not be invoked. A.O. has not made effort to find out the book position of any concern. The same has not been discussed. The A.O. has also referred to report submitted under rule 9 to ITSC and has made the addition on the basis of such report. We observe that the A.O. was precluded in utilizing the report in making addition without furnishing a copy of the same to the assessee for defense and rebuttal. The action of the A.O. is contrary to the established principles of equity and justice - A.O. could not have utilized the report submitted under rule 9 without first furnishing a copy of report to the assessee. This was not done. The assessee does not know the contents of the report submitted under Rule 9 by the CIT to ITSC - No reason to interfere in the order for deleting the addition made by the A.O. u/s 69A of the Act. Undisclosed advances made by the assessee on the basis of seized documents - HELD THAT:- We found that the amount of disclosure made by the assessee on account of income on sale of Arpit Nagar land amount of ₹ 2.43 crores was available with the assessee which was given as advance in the immediate succeeding year i.e. 2012-13. Thus, out of total addition of ₹ 5,68,50,000/- on account of addition for the advances in the A.Y. 2012-13, a set off of ₹ 2.43 crores are required to be allowed. Thus, we confirm the addition on account of loans and advances in the A.Y. 2012-13 to the extent of ₹ 3,25,50,000/- i.e. (5,68,50,000 - 2,43,00,000). We direct accordingly. Addition was made on the basis of other seized documents - HELD THAT:- Income surrendered on the basis of above documents i.e. ₹ 49,24,000/- and ₹ 4,50,000/- in the A.Y. 2012-13 and ₹ 25.00 lacs in the A.Y. 2013-14 which works out to be ₹ 78,74,000/-, deserves to be set off out of addition of ₹ 2.55 crores made in the A.Y. 2013-14 on account of surrender for advances. In nutshell, the addition of ₹ 2.55 crores made in the A.Y. 2013-14 on account of surrender for advances is restricted to ₹ 1,76,26,000/- (2,55,00,000 - 78,74,000). We direct accordingly. Deleting the addition made on account of interest alleged to be earned which was found to be not actually earned by the assessee confirmed.
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Customs
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2020 (9) TMI 1006
Interpretation of the Exemption Circular - Circular No.128/95-Cus dated 14.12.1995 - Demand for Cost Recovery Charges [CRC] towards cost of the Customs staff posted at the station - respondents contend that the petitioner has not met the performance benchmark stipulated in the exemption Circular - whether Petitioner fulfils the eligibility criteria for availing the benefit of exemption or waiver of CRC in terms of the Circulars issued by the Revenue? HELD THAT:- The evaluation of the performance of the Petitioner is based primarily upon two criteria: firstly, on the number of containers/TEUs handled by CFS as given in Clause 1 (ii), and secondly, on the number of BoE/SB processed by CFS as given in Clause 1 (iii).The simple question that hinges before us is whether these criteria at Clauses 1 (ii) and 1 (iii) were to be satisfied simultaneously, or whether the satisfaction of any one of the Clauses would suffice, in order to make the Petitioner eligible for waiver of CRC. The data presented reflects that, for instance, in the year 2014-15, while the petitioner had processed 5218 TEUs, in contrast, it had only processed 602 BoE/SBs. Upon analysis of the data given, the petitioner has computed that for one BoE/SB, there were 9 TEUs i.e. to say, a ratio of 1:9. On this basis, it is implied by the petitioner that one BoE/SB pertains to more than one TEU. To buttress this contention, the petitioner also relied upon data from Kolkata Port Trust which indicates a ratio of 1:4 i.e. for one BoE/SB there are minimum of 4 TEUs. On the strength of the aforesaid workload data, it was argued before us that, even if the lower ratio of 1:4 was applied to the present factual matrix, a minimum requirement of 1200 BoE/SB would translate into 4800 TEUs. By this analysis, it was argued by the petitioner that if the requirement of 1200 BoE/SB is fulfilled by a custodian, then requirement of 1200 TEUs as prescribed in Clause 1(ii) would be rendered meaningless as it would automatically stand fulfilled - This, in our view, is an incorrect and distorted way to look at and interpret the exemption criteria laid down in the said Circular. The purpose behind the exemption clauses is that those ICD/CFS which achieve the necessary performance benchmark are not burdened with CRC. In the absence of the conjunction or between the conditions, it cannot be suggested that the aforesaid criteria have to be applied in the alternative, as sought to be presented by the petitioner. Further, the benchmark at Clause 1 (iv) makes it clear without any ambiguity that the benchmark at Clauses 1(ii) and (iii) have to be taken into consideration cumulatively in order to be eligible to claim exemption or waiver of CRC. The benchmarking is evaluated both on the basis of number of containers handled by ICD/CFS, as well as the number of BoE/SB processed, and both these conditions need to be satisfied simultaneously and not just one of them in order to be eligible to claim waiver from the payment of CRC. Both criteria envisage different parameters of performance by an ICD/CFS operator. Clause 1 (ii) envisaged number of and volume of goods handled (container/TEUs), whereas, Clause 1 (iii) envisaged the number of documents and volume of business handled. As pointed out by Mr. Bansal, there can be a situation where a document (BoE/SB) may contain goods that require more than one container, but conversely, there can also be an eventuality where a container may contain goods that are subject matter of more than one document. This would largely depend on the nature of goods. Thus, there can be a situation when there would be no correlation between the two. Mr. Bansal has further explained that a container is provided by the shipping line and it is for them to determine how to extract them. He submits that for less bulky goods, there might be more than one BoE/SB container. This situation, as portrayed by Mr. Bansal, cannot be ignored. There can be circumstances where there may be more than one BoE/SB per container. It is for this reason that the benchmarking criteria has been prescribed in such a manner that the performance can be evaluated on dual parameters for deciding the eligibility for exemption from CRC. The same is also evident on the basis of the file noting which have been placed on record by the respondent, a perusal of which throws light upon the rationale behind the issuance of the Exemption Circular. According to the petitioner s written rejoinder submissions, the rationale behind such incentivization was to promote the import/export of goods, to encourage business efficacy by targeting increase in actual business of importing/exporting of TEUs, and not the quantum of paper-work required for the same. Firstly, we must point out that this is an inference of the Petitioner which lacks material foundation. Secondly, this argument is wholly misconceived and self-contradictory. We cannot interpret business efficacy in the manner that the Petitioner contends. We also cannot agree with the Petitioner s rationale that actual business is only TEUs, and not the documents i.e. BoE/SB, or that efficacy will always be achieved when more TEUs are imported/exported in one BoE/SB, and not when the same TEU is imported/exported through multiple BoEs/SBs. If we accept this contention, it would mean that those CFS which have higher volume of paper-work should be deemed as inefficient and be denied the exemption, which cannot be correct. Clause 1 (iii) of the Exemption Circularis not to be rendered dead letter or meaningless. In our opinion, the quantum of documentation vis-avis TEUs would be driven by the requirements of each business, and it is not for the court to construe a provision merely on the perceived understanding of some data analysis. Both conditions foresee different parameters of evaluating the performance of CFS. The statistical ratio cannot be used to interpret the provision. The petitioner has contended that the plain and ordinary meaning of the benchmark shows that each benchmark is a separate criterion and there is nothing in the Exemption Circular to indicate that the petitioner was required to simultaneously satisfy more than one benchmark prescribed. On the basis of the above discussion, we are unable to agree with this interpretation of the petitioner. Furthermore, in our opinion, this viewpoint is flawed because we cannot read something that does not emerge from a plain reading of the exemption circular. The bare reading of the provision leads to a conclusion that the conditions or the performance benchmarks are required to be fulfilled simultaneously. We cannot read any requirement to the contrary. We also find the emphasis on the comma punctuation mark (,) used in Clause 5.5 of the Circular dated 23.03.2009 to be misdirected. The stress given to this separator is entirely out of context. The surrounding words both preceding and succeeding the comma have to be read together to give a complete meaning. The complete sentence reads as- These norms include parameters such as the total number of import or export containers handled, the customs declarations filed for import or export, etc The sentence expressly uses the expression such as , and then mentions some of the parameters by way of illustration or example, separated with the use of a comma, and followed by the word etc . This makes it clear that the comma has been merely used to separate the descriptive parameters, which are being mentioned inclusively. It is also obvious that these are a few of the parameters, which have been illustrated, and there may be more. All of the above makes it abundantly clear that the sentence cannot be construed to mean that the parameters, as separated by the comma, are to be read disjunctively to imply satisfaction of individual parameter separate from the rest. Lastly, we also do not find any merit in the contention of the Petitioner that file noting dated 04.08.2006, cannot be used to explain the rationale behind the language used in the Exemption Circular, on account of the noting being made after the date of issue of the Exemption Circular. The file noting was prepared pursuant to certain queries raised by the Finance Minister, minuted in the noting as (1) Will the cost recovery be prospective, i.e. after date of issue or orders? (ii) Is it ensured that no claim for past period (i.e. from date of establishment of ICD/CFS) will be made or entertained? (iii) Is It correct to infer that the benchmark will apply to actuals and not on the basis of projections made at the time of establishment of ICD/CFS? . The noting reiterates the rationale behind the concept of exemption. Therefore, in our opinion, the noting, though subsequent to the Exemption Circular, is still relevant in order to gauge the intent of the Exemption Circular. The petitioner had failed to satisfy all the conditions for becoming eligible for the exemptions - Petition dismissed.
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Corporate Laws
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2020 (9) TMI 1005
Auction Sale - Disbursement of the amount lying with the Official Liquidator pursuant to the auction sale - HELD THAT:- This Court has perused the report submitted by the Talati Talati, Chartered Accountant dated 24th January 2020 together with Re-verification report dated 18th February 2020 for the claim of IDBI and State Bank of India - In view of the above fact situation, the Official Liquidator is directed to disburse the following amount from the balance lying in the account of the company in liquidation. The official liquidator is directed to verify the details of each of the worker and shall deposit the claim amount of each of the workers in their respective bank accounts directly by IMPS/RTGS/NEFT - The Official Liquidator is further directed that the amount payable to the secured creditors and unsecured creditors shall be deposited within the period of two weeks from the date of receipt this order directly in the bank account of the respective claimants by IMPS/RTGS/NEFT for which the respective advocates are directed to provide details of the bank account to the official liquidator at the earliest. Application disposed off.
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2020 (9) TMI 1004
Sanction of Amalgamation Scheme - Sections 230 to 232 of the Companies Act, 2013 - HELD THAT:- Upon perusal of the petitioner companies reply, we feel that the ends of justice will be met if we direct that the provisions of section 232(6) of the Companies Act, 2013, shall be applicable to the Scheme. In other words, the Scheme shall be effective from the Appointed Date indicated in the Scheme - The RD, after perusing the reply of the petitioner companies, has submitted a satisfactory report in so far as his observations at paragraph IV(a), and IV(c) to IV(g) are concerned. The clarifications given by the Petitioner Companies are hereby accepted by the Tribunal. The Petitioner Companies undertake to comply with all statutory requirements, if any, as required under the Companies Act, 2013 and the Rules made thereunder whichever is applicable. The undertakings given by the Petitioner Companies are accepted by this Tribunal. From the material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy - Since all the requisite statutory compliances have been fulfilled, petition is made absolute in terms of the prayers therein. The Scheme is sanctioned hereby, and the Appointed Date of the Scheme is fixed as 1st April 2019 - application allowed.
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2020 (9) TMI 1003
Approval of scheme of compromise or arrangement - section 230(2)(a) and (c) of Companies Act - the proposed Scheme has not been consented to by 75% of the Secured Creditors - Creditors Responsibility Statement is not attached to the CA - no statement made in the CA with regard to safeguards for protection of other secured and unsecured creditors - report by the auditor of Liquidity test not attached - Valuation report in respect of the shares and the property by a registered valuer is not attached - terms of the Scheme contemplate a debt restructuring of the financial creditors in addition to Operational Creditors. HELD THAT:- This Bench has considered the affidavit filed by the Respondent Company as well as its authorised representative. Suffice it to say that we do not find the explanations altogether convincing. This is especially due to the fact that Mr Vijay Tiwari had seen and replied to the email dated 12.05.2020 much before the hearing on that very day started. Therefore, there is no way we can accept the submission that he simply forgot to inform the Bench regarding IA No.904/MB.IV/2020, even after being informed of it on the morning of the hearing. He has also sought to pin the blame on the Respondent Company and his arguing counsel for the error on his part. The actions on the part of Mr Vijay Tiwari amount to obtaining orders of the Bench behind the back of the Applicant Bank. This cannot be encouraged. Further, as a professional, it does not behove Mr Vijay Tiwari to blame others for his mistake, when he is the professional on record representing the Respondent Company. However, considering that the authorised representative is young and that he has a long way to go in his career, we restrain ourselves from imposing any costs.We, however, advise him to be more careful in future. Considering all factors, the following further directions are hereby given: (a) The meetings referred to in this Tribunal s order dated 12.06.2020 shall be confined to that of Operational Creditors alone, and shall not include the Financial Creditors, who are outside the purview of the proposed Scheme. (b) The sixty-day time limit to conduct the meetings shall now be counted from 27.07.2020 instead of 12.06.2020. (c) In case physical meeting of the Operational Creditors is feasible, the same shall be held within the local limits of Mumbai City. In case the meetings of the Operational Creditors are convened through any audio-visual means capable of being recorded, then the unedited raw footage of the meeting to be conducted by videoconferencing shall be preserved for record and also submitted to this Tribunal along with an affidavit to this effect. (d) It shall be the duty of the Respondent Company to ensure that the unedited raw footage of the meeting shall be preserved in good condition and that the same is not corrupted due to any reason whatsoever, whether technical or human. Any failure in this regard shall be viewed seriously. Application disposed off.
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2020 (9) TMI 1002
Approval of Composite Scheme of Amalgamation and Plan of Merger - sections 230 to 232 read with section 234 and other applicable provisions of Companies Act, 2013 - HELD THAT:- The observations of the Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai, mentioned in para 10 above, have been clarified by the Petitioner Companies in para 11 above. The clarifications are accepted. Moreover, the Petitioner Companies, through their Counsel, undertake to comply with all statutory requirementsrequired under the Companies Act, 2013 and the rules made thereunder, whichever is applicable. The undertakings given by the Petitioner Companies are accepted - The Official Liquidator, High Court, Bombay, has filed his report dated 14th July 2020 with the Tribunal, inter alia submitting that the affairs of the First Petitioner Company have been conducted in a proper manner. No objections have been raised with respect to the Scheme. From the material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy - Since all the requisite statutory compliances have been fulfilled, the Scheme is sanctioned. The Scheme is sanctioned, and the Appointed Date of the Scheme is fixed as opening hours of 1stMarch 2020 - application allowed.
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2020 (9) TMI 1001
Sanction of Scheme of Merger by Absorption - sections 230 to 232 and other applicable provisions of the Companies Act, 2013 - HELD THAT:- From the material on record, the Scheme appears to be fair and reasonable and is not in violation with any provision of law and is not contrary to public policy - Since all requisite statutory compliances have been fulfilled, petition is made absolute in terms of prayer clause (a) to (c) thereof. The Scheme of Merger by Absorption is sanctioned hereby, and the Appointed Date of the Scheme of Merger by Absorption is 1stApril 2019. The Transferor Companies be dissolved without winding up - application allowed.
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2020 (9) TMI 1000
Sanction of Amalgamation Scheme - dispensation of meeting of equity shareholders and creditors - sections 230 to 232 and other applicable provisions of the Companies Act, 2013 - HELD THAT:- This Bench hereby dispenses with the meetings of the Unsecured Creditors of each of the Applicant Companies. However, this Bench hereby directs that notices be issued to each Unsecured Creditor of each of the Applicant Companies with a direction that they may submit their objection, if any, to the Tribunal within thirty days of receipt of notice. Copies of such objections shall simultaneously be served upon the respective Applicant Company at its Registered Office. It shall be the duty of the Applicant Company concerned to ensure that every creditor of such company is put on notice as regards the Scheme. Further, any objection raised by any person shall be considered at the time of final disposal of the Company Petition. The Applicant Companies to serve the notice upon (1) the Central Government through the office of the Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai; (2) Registrar of Companies, Maharashtra, Mumbai; and (3) the Income Tax Authority within whose jurisdiction the Applicant Companies are assessed to tax, clearly indicating PAN of the company concerned; pursuant to section 230(5) of the Companies Act, 2013 and as perrule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. If no response is received by the Tribunal from such authorities within thirty days of the date of the receipt of the notice, it will be presumed that they have no objection to the proposed Scheme. The Applicant Companies shall file compliance report with the registry in regard to the directions given in this Order in lieu of customary affidavit of service, due to lockdown situation prevailing now proving service of notices to the regulatory authorities as stated above and do report to this Tribunal that the directions regarding the issue of notices have been duly complied with.
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Insolvency & Bankruptcy
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2020 (9) TMI 999
Direction for payment of outstanding amount of CIRP expenses and the contribution towards the liquidation cost - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- According to the Ld. Counsel for R4 it is the CoC members objected to the inclusion of R4 in the CoC even if it is an unsecured creditor. However, dispute as to whether the R4 is a financial creditor or not has not been settled by the CoC and the said dispute is now referred to the AA and two IAs in that regard are pending. According to her without settling the said dispute, R4 may not be compelled to pay its part of share towards the Cost of CIRP and liquidation. I found some merit in her submission upon a reference to the copy of minutes she brought to my notice. IFCI has already been included as one of the Financial Creditors at the instances of IRP after verifying its claim. According to the liquidator IFCI is a financial creditor since the debenture holder is a creditor or a lender of the CD company. Though it is certain that convertible debentures are long term debt instruments issued by a company that can be converted into equity shares of the company on a future date, since the dispute as to whether it is a debt instrument or not is pending for consideration before the AA, I am not deciding the said dispute here in this application. However being satisfied that IFCI's inclusion as a member in the CoC is disputed by the remaining financial creditors, it appears to me that IFCI cannot be compelled to contribute its part of share towards the CIRP and Liquidation cost. Part payment voluntarily made by the IFCI does not bar it from disputing its liability to pay the amount as demanded by the liquidator. However, to have a fare and just consideration of the objections now raised by the IFCI it appears to me that, that part of the amount to be contributed by the IFCI in accordance of the voting share already determined, by the RP is to be deposited in an interest bearing account of the CD in the name of the liquidator so as to realise the amount by him in case the inclusion of the R4 is found legal and proper. If found it is to be excluded, the amount in deposit is to be refunded to it. Application disposed off.
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2020 (9) TMI 998
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Debt or not - existence of debt and dispute or not - HELD THAT:- This Bench noted a very queer aspect in the demand notice in respect of the outstanding loan which was served on 21.08.2017 by the Petitioner to Mr. Sunil Kewalramani (son and POA holder of the Petitioner) among themselves. The Petitioner sends the Demand Notice which is replied by Mr. Sunil Kewalramani (son and POA holder of the Petitioner) on behalf of the Corporate Debtor Company. Here, the Bench notes that both of them are Directors on the board of the Corporate Debtor Company - this bench clearly finds unlawful collusion and misuse of the position by the Petitioner. This also brings out the fact that there is no difference between the Petitioners and the Corporate Debtor as the Petitioner is Promoter and in control of the day to day affairs of the Corporate Debtor Company. This Bench notes that even in the submissions, the Petitioner have not denied the fact that the demand notice have been issued, received and replied amongst him and his son only. This Bench also has come to a conclusion that the effective control of the Corporate Debtor Company has remained with the Petitioner only. This Bench also fairly concludes that the whole process of issuing, receiving and replying of the demand notice by the Petitioner and Mr. Sunil Kewalramani (son and POA holder of the Petitioner) has been without any knowledge of the other Directors and therefore clearly shows malicious intention of the Petitioners. Therefore, the Bench concludes that there is not been any Effective service of Demand notice . Whether the amount being mentioned by the Petitioner in claim of ₹ 47,16,667/- can qualify as a financial debt or not? - HELD THAT:- In this case, the Bench takes note of the fact that there is no written terms and conditions for repayment of interest. Even the Petitioner in his submissions has mentioned that there was no interest chargeable on this account, nor there was any due date of payment. A perusal of the records also shows that no interest has been created in the Books of Accounts of the company. Therefore, there is no time value of money in terms of Section 5(8) of the Code. Neither there is time value of money nor there is due date of repayment - This Bench therefore has no hesitation in concluding that it does not fall under Section 5(8) of the Code and cannot be termed as financial debt. Petition dismissed.
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2020 (9) TMI 997
Maintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of its debt - Financial Debt or not - existence of debt and dispute or not - HELD THAT:- It is evident that Petitioner had granted Financial assistance to the Corporate Debtor, the same was disbursed to the Corporate Debtor and there was a default in repayment of the said dues - The nature of debt is a Financial Debt as defined under section 5 (8) of the Code. It has also been established that admittedly there is a Default as defined under section 3 (12) of the Code on the part of the Corporate Debtor. This Bench having been satisfied with the petition filed by the Petitioner which is in compliance of provisions of Section 7 of the Code, admits this Petition declaring moratorium - petition admitted.
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2020 (9) TMI 996
Maintainability of application - initiation of CIRP - alleged default on the part of the corporate debtor in settling an amount towards the assured returns as promised by the corporate debtor - existence of debt becoming due or not - major point raised by the corporate debtor is that the debt has not yet become due as per the conditions of MOU executed between the parties - HELD THAT:- A perusal of the clause of MOU signed between the parties on 1st February, 2014 reveals that the assured return shall be payable only upon execution of the Unit Buyer's Agreement on the Company's standard format. The financial creditors have not shown any proof to establish the fact that they have got the Unit Buyer's Agreement duly executed by both the parties. As a result of failure to produce the duly signed Unit Buyer's Agreement, it is considered that the debt has not yet become due. Petition dismissed.
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2020 (9) TMI 995
Liquidation of the Corporate Debtor - Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In the factual background and in the absence of any approved resolution plan and for want of time beyond statutory CIRP period; there is no other alternative left but to order in conformity with the decision of the Committee of Creditors, for liquidation of the corporate debtor under Section 33 of the Code. The application is allowed by ordering liquidation of the corporate debtor, namely M/s. Beta Infratech Private Limited in the manner laid down in the Chapter III of Part II of the Insolvency and Bankruptcy Code, 2016.
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2020 (9) TMI 994
Approval of resolution passed by the Committee of Creditors for initiation of Liquidation process - appointment of Liquidator for initiation of liquidation process for the Corporate Debtor - section 33(2) of the IBC, 2016 - HELD THAT:- This Tribunal is of the view that, since the Corporate Debtor is an MSME, even if the promoters- directors have been declared as 'wilful defaulters', they can apply under the provisions of Section 230 of the Companies Act, 2013 as they are exempted from Section 29A of IBC, 2016. Even after the declaration of initiation of liquidation proceedings, the promoters- directors still have a chance to tender definite plan for taking over the company as a going concern or under the provisions of Section 230 of the Companies Act, 2013. The Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 contemplates that a period of 90 days has to be provided for completion of a Scheme of compromise or arrangement from the date of the order of liquidation, during which period the prospective Resolution Applicant can very well submit his Scheme under Section 230 of the Companies Act, 2013 - In terms of Section 240-A(l) notwithstanding anything to the contrary contained in this Code, the provisions of Clause (c) and (h) of Section 240-A shall not apply to the Resolution Applicant in respect of CIRP of any Micro, Small and Medium Enterprises (MSME) . It is seen that in the Review Committee for wilful defaulters held on 12.03.2018, the sole member of CoC (Financial Creditor - Indian Overseas Bank) has declared the promoter-director as 'wilful defaulter'. This Tribunal is of the opinion that there is no need to interfere with the decision of the CoC as communicated by the Resolution Professional and hence proceeds to consider the application made under Section 33 for liquidation of the Corporate Debtor. Therefore, application filed by the Promoter-Director is liable to be dismissed . Application filed by the Promoter Director stands dismissed - application filed for initiation of Liquidation process of the Corporate Debtor is hereby allowed.
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2020 (9) TMI 993
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Time Limitation - also allegation that application filed without proper authorization - debt as well as quality of service under dispute. Time Limitation - HELD THAT:- It is observed that the Operational Creditor has approached this Adjudicating Authority pursuant to orders of the then Hon'ble High Court of Andhra Pradesh wherein it was directed to transfer the winding up proceedings vide I.A. No. 5/2018 in C.P. No. 34/2011 dated 18.07.2018 to the NCLT Hyderabad Bench and that pursuant to the said order, the Operational Creditor has approached this Adjudicating Authority by issuing Demand Notice U/s. 8 of IBC. The series of events being continuous in nature and approach of the Applicant before this Adjudicating Authority by virtue of the order of Hon'ble High Court of Andhra Pradesh covers the plea of Limitation and therefore the Application is within Limitation. Pre-existing dispute or not - HELD THAT:- The Applicant had preferred a Civil Suit bearing O.S. No. 778 of 2013 before the City Civil Court, Hyderabad against the Corporate Debtor wherein the Corporate Debtor herein has raised certain disputes by way of filing a counter-affidavit. However, the said matter was dismissed for default due to non-prosecution by the applicant herein - It is observed that though the Civil Suit bearing O.S. No. 778 of 2013 before the City Civil Court, Hyderabad was dismissed for default but there were many disputes raised by the Corporate Debtor therein and a counter claim of ' 41,00,000/- was also made. Further the Corporate Debtor duly replied to the Demand Notice issued U/s. 8 of IBC by the operational creditor which reflects and highlights that there is existence of dispute between the parties. On consideration of the above said email correspondence as well as disputes raised by the Corporate Debtor by way of Counter affidavit filed in the Civil Suit referred to hereinbefore, this Adjudicating Authority observes that there is evidence on record which indicates that there was pre-existence of dispute between the Applicant and Respondent in respect of the claims made by the Applicants - Since there exists a real dispute between the Applicant and Respondents in respect of claims made vide invoices raised in the month of May, 2010, we are not inclined to admit this Application. Application dismissed.
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2020 (9) TMI 992
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Debt or not - Existence of debt and dispute or not - HELD THAT:- Debt means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt which means debt includes the financial debt and operational debt and definition of financial debt shows that a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes either of clause (a) to (i) and if the amount paid comes under the definition of Section 5(8) of the IBC only in that case a person who gave the money comes under the definition of Financial Creditor. In the case in hand, there is no dispute that certain amount has been advanced by the Petitioner to the Corporate Debtor through RTGS payments on different dates but the question is that can the amount be treated as a financial debt or not? We find that the Petitioner in his application, everywhere referred the word 'loan amount' and not the debt and against that loan amount, he was getting the interest from the Corporate Debtor, therefore, we are unable to accept the contention of the Petitioner that he is the Financial Creditor under Section 5(7) and the amount which he has advanced as a loan comes under the definition of Section 5(8) - Further, the issuance of TDS certificates does not amount to an admission of liability and the TDS certificate is primarily to acknowledge the deduction of tax at source. There are no documents of loan agreement, which would show, what was the agreed rate of interest and as we have already referred the definition of financial debt and on the basis of the same we are of the considered view that the claim of the petitioner do not come under any of the clause (a) to (i) of Section 5(8) of IBC. The Petitioner has neither enclosed the resolution passed by the Board of Director of the Corporate Debtor Company nor enclosed the resolution passed by the Board of Director of his company by which the company was authorized to disburse the loan. We have already held that there is no written agreement - the Petitioner has failed to convince us that the amount which he has paid comes under the definition of Financial Debt and the applicant is the Financial Creditor therefore, the present application is not maintainable. Application dismissed.
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2020 (9) TMI 991
Direction to First and Second Respondents to supply the Electricity to the Corporate Debtor in the present circumstances without insisting on the payment of past dues or any other preconditions so as to make the company as going concern - HELD THAT:- The Respondent has filed the Counter wherein it is contended that since the electricity connection was disconnected on 23.10.2018 much prior to the commencement of the CIRP due to non-payment of the arrears and if aggrieved by the action of the Respondent a remedy is also open for the company namely, M/s. Supreme Coated Board Mills Private Limited to take recourse in approaching the concerned authority seeking for re-connection if aggrieved by the Applicant and not by approaching this Tribunal with the instant Application. It is to be noticed that the Hon'ble Supreme Court has repeatedly reiterated in relation to IBC, 2016 and proceedings thereunder that resolution of insolvency of the Corporate Debtor, if possible should be attempted at any cost instead of allowing the Company to go into liquidation - The Respondent was agreeable to such a course of action without prejudice to its contentions that this matter will not fall under the provisions of Section 14(2) of the Insolvency Bankruptcy Code, 2016. The request of the CoC expressed through the Applicants seems to be fair to the limited extent that since the machinery had been kept in idle condition for more than 8 to 9 months and which might be a detrimental factor to maximize the value of the assets appropriate directions given under the circumstances to the Respondents who are agreeable to such a course by directing them to give the re-connection of electricity for a limited period of three weeks with the date of commencement as to when the re-connection to be given to be intimated to the Respondent in advance by the Applicant at least a week prior in consultation with the CoC. Charges for re-connection as well as consumption charges for the three weeks period shall be duly remitted by the Applicant. Application disposed off.
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2020 (9) TMI 990
Validity of e-auction - submission of cunter-bid - declaration of earlier auction as illegal and bad - HELD THAT:- The liquidator under Regulation 33(3) can deal with the aspect of collusion between various parties which ultimately effects the maximization of value of all assets of the corporate debtor adversely. No doubt, the sanctity of auction process has to be maintained i.e., once it is closed, normally it should not be reopened as generally understood. As stated earlier, generally the same can be done only on two grounds i.e., fraud or material irregularity occurred in the process of auction. However, another ground is added by IBC, 2016 i.e., maximization of value of assets of corporate debtor. Thus, when a situation of challenge to auction process arises on the ground of assets are not being sold at the maximum possible value, then, also in our considered view, auction process can be enquired into and such process can be set aside on this ground also. Another aspect which needs to be considered is that a person who is ready to pay more cannot be debarred or legal technicalities cannot be allowed to come in its way. Further, when liquidator is having an opportunity to approach this Authority in case of collusion, but when the maximization of value of assets is apparently not happening, though may or may not exist, any other interested party can certainly approach this Authority under sections 60(5)(a) / 60(5)(c) of IBC, 2016. Such person, in our considered view, cannot be rendered remedyless. It is apparent that there is a departure from the earlier concept of supremacy of Committee of Creditors as the decisions of Committee of Creditors now can be looked upon in the light of preamble to IBC, 2016 and Committee of Creditors may be required to reconsider the resolution plan to achieve such objectives. In our considered view, this rationale also applies to the decisions of liquidator - the decisions of the liquidator can certainly be looked upon by this Authority when such decisions are not in consonance with the stated objectives of IBC, 2016. In the present case, as stated earlier, e-auction was taken only once. Only one bidder has participated and that too, bid at a reserve price. This bid has been accepted by the liquidator. No reason has been brought on record by the liquidator as to why multiple rounds of auctions were not required as mandated in clause 1 of part 1 of Schedule I. Further, this situation is also violative of Regulation 39 of Liquidation Process Regulation Rules, 2016 as the maximization was not endeavoured - Further, as per notice inviting for expression of interest, balance consideration was to be deposited within 7 days from the date when any bidder is declared successful. However, in the present case, such condition has also been relaxed by taking a bank guarantee for an amount of ₹ 10 Crores approx. Thus, there exists not only contravention of the preamble to the Code and Regulations made thereunder but also an irregularity/deviation. As evident from the various provisions of the Code as well as Liquidation Process Regulations discussed herein before, maximization of value of the assets of the corporate debtor is a key factor / prime consideration and in the present case this object has not been achieved by accepting the bid of the applicant at the reserve price which has been now outbid by a substantial higher amount. Much higher Earnest money has also been deposited - it is a simple case of sale of immovable property, hence, no complexities are involved and, therefore, the only criteria which needs to be applied here is higher bid in monetary terms as well as having regard to time value of money should exist and on this criteria new bid gets through. The old e-auction is cancelled and set aside. The proposal of applicant is accepted subject to the condition that the balance amount of total bid of ₹ 15.50 Crores for the impugned asset parcel shall be deposited within six weeks from the date of receipt of this order failing which the amount of ₹ 3.875 Crores so deposited shall stand forfeited - Application allowed.
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2020 (9) TMI 989
Liquidation of Corporate Debtor - Section 33(1) of the Insolvency Bankruptcy Code, 2016 - Resolution Professional has filed the present application for resolution as statutory period has elapsed from the date of initiation of CIRP and no Resolution Plan has been approved by the CoC - HELD THAT:- It is pertinent to refer Section 33(1)(a) of the IBC, which mandates that where the Adjudicating Authority before the expiry of maximum period permitted for completion of the corporate insolvency resolution process under Section 12 or the fast track corporate insolvency resolution process under Section 56, as the case may be, does not receive a resolution plan under sub-section (6) of Section 30, it shall pass an order requiring the Corporate Debtor to be liquidated in the manner as laid down in the manner. Therefore, the Tribunal observes that upon failure of the resolution process and no approved resolution plan and further on completion of statutory CIRP process, there is no alternative left but to order in conformity with the decision of the CoC liquidation has to follow under Section 33 of the Code. Adherence of the statutory requirement has to be done, as the language of the Code is clear that the adjudicating authority must give effect to it whatever may be consequences. Thus, the application is allowed by ordering liquidation of Corporate Debtor i.e. JVL Agro Industries Ltd. in the manner laid down in Chapter III Part II of IBC, 2016 and further appoint Supriyo Kumar Chaudhari as a liquidator in terms of Section 34(1) of the Code, and he is directed to issue public announcement stating that the Corporate Debtor is in liquidation, in terms of Regulation 12 of IBBI (Liquidation Process) Regulations, 2016 - Application allowed.
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Service Tax
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2020 (9) TMI 988
Maintainability of appeal - requirement of mandatory pre-deposit - prayer for revival of appeal accepting 7.5% pre-deposit and dispose of the appeal on merits - banking and other financial services - HELD THAT:- The petitioner is a Co-operative Society. The legal argument advanced by the petitioner is that their activities are arrangements between the members of the Society and it would not amount to 'banking and other financial services' as defined in the Finance Act, 1994. This is a question of law. By Ext.P4 order by which the appeal was rejected for non compliance of pre-deposit requirements, the petitioner has lost opportunity to urge the aforesaid legal contention. In the circumstances, this Court is of the opinion that the petitioner shall be permitted to argue the appeal on merits. The writ petition is disposed of permitting the petitioner to make the requisite pre-deposit on Ext.P3 appeal within a period of ten days from the date of receipt of a copy of this judgment. If the petitioner remits the pre-deposit, the third respondent shall consider Ext.P3 appeal on merits after giving further opportunity of hearing to the petitioner. The third respondent shall pass orders on Ext.P3 appeal on merits within a period of two months.
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Central Excise
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2020 (9) TMI 987
CENVAT Credit - Reverse charge Mechanism - service provider or not - manufacturer of goods having nil tariff rate of duty - HELD THAT:- The issues involved in the present appeal were considered by the Tribunal and the appeals filed by the appellant were allowed by way of remand to the Commissioner (Appeals). Pursuant to the remand direction of the Tribunal, the Commissioner (Appeals) took-up de novo proceedings and passed the order dated 17.10.2018 in favour of the appellant, by granting the refund benefit. Since, the appellant submits that the issue arising out of the present dispute is identical to the facts and the issues decided in the orders referred above, the present appeal should also be allowed by way of remand to the Commissioner (Appeals) for fresh decision on merits - Appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2020 (9) TMI 986
Benefit of concessional rate of tax - difficulty in obtaining 'C' forms - purchase of High Speed Diesel from suppliers in other States - HELD THAT:- The petitioner is entitled to the inclusion of High Speed Diesel Oil as a commodity in the registration certificate. The issue involved in the Writ Petition is squarely covered by a decision of this Court in M/S. DHANDAPANI CEMENT PRIVATE LTD., M/S. TERU MURUGAN BLUE METAL VERSUS THE STATE OF TAMIL NADU, THE PRINCIPAL COMMISSIONER COMMISSIONER OF COMMERCIAL TAXES, THE ASSISTANT COMMISSIONER (ST) , THE JOINT COMMISSIONER (ST) TERRITORIAL, THE DEPUTY COMMISSIONER (ST) [ 2019 (2) TMI 1850 - MADRAS HIGH COURT] , wherein it was held that The Petitioner in these Writ Petitions has stated on affidavit that it is unable to download the C forms from the websites as the same stand blocked from use. Upon enquiry with the Assessing Authorities, they have been informed that the benefit of the decision in M/S. THE RAMCO CEMENTS LTD. VERSUS THE COMMISSIONER OF COMMERCIAL TAXES, THE ADDITIONAL COMMISSIONER (CT) [ 2018 (10) TMI 1529 - MADRAS HIGH COURT] Ltd can be extended only to those dealers in that are party to the decision. This stand is unacceptable in so far as the decision of this Court as well as other High Courts, one of which has been confirmed by the Supreme Court, are decisions in rem, applicable to all dealers that seek benefit thereunder, of course, in accordance with law. The State has, after the date of the above order, filed a Writ Appeal in THE COMMISSIONER OF COMMERCIAL TAXES, CHEPAUK, CHENNAI, THE ADDITIONAL COMMISSIONER (CT) VERSUS THE RAMCO CEMENTS LTD. AND THE STATE TAX OFFICER, THE JOINT COMMISSIONER (CS) (SYSTEMS) VERSUS SUNDARAM FASTENERS LIMITED [ 2020 (3) TMI 450 - MADRAS HIGH COURT] challenging the decision in the case of Ramco Cements that has been considered and dismissed by a Division Bench of this Court. Mrs.G.Dhanamadhri, submits that the State intends to challenge the order in Writ Appeal by way of a Special Leave Petition. As on date, the order in Writ Appeal is final, and following the rationale thereof, the Writ Petition is allowed.
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