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TMI Tax Updates - e-Newsletter
September 3, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Grant of Bail - condition to deposit entire demand of GST with interest for Bail - the condition is onerous and is liable to be set aside - This Court is of the opinion that since the maximum punishment which can be awarded is upto 5 years and the petitioner has almost undergone a period of one year having been arrested on 06.09.2019. The onerous conditions would thus violate Article 21 of the Constitution of India as the liberty of the petitioner is being deprived - Bail conditions modified - HC
Income Tax
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Exemption u/s.54B and 54F - new piece of land was purchased by the assessee in the names of his two sons - Once the assessee was not the owner of the property, there could obviously have been no question of allowing exemption u/ss.54B or 54F- AT
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Assessment is in the name of the deceased person - when the factum of death was brought to the notice of the authorities below, instead of substituting the legal heirs of the assessee in the file of the Revenue both the authorities below proceeded with and finalized the assessment against the assessee, since deceased which is unlawful, arbitrary, erroneous and bad in law. - AT
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Income received from sale of software licenses - Royalty - the amended definition of Royalty under the domestic law even if amended with retrospective effect cannot be extended to the definition of “Royalty” under the DTAA since the term “Royalty” under the DTAA has not been amended. As the provision of DTAA over-ride the provision of Income Tax Act, 1961 and being more beneficial shall apply - AT
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Accrual of expenditure liability - correct year of assessment - On perusal of the order of AO who has given the detailed finding that why the above liability did not accrue in assessment year 13-14 but in assessment year 12-13, based on the appreciation of the agreement shown by the assessee cannot be found fault with - Additions confirmed - AT
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Disallowance of expenses incurred on corporate social responsibility (“CSR”) - expenditure incurred towards display of name/logo of the assessee on various items is undoubtedly for the promotion of the business of the assessee as it promotes goodwill. Hence, the expenditure is to be allowed as revenue expenditure. - AT
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Penalty u/s 271(1)(c) - defective notice - Even where it is held that the charge is uncertain at the initiation stage, the same has been made definite while passing the penalty order, therefore, it is not a case of lack of opportunity to the assessee as well as lack of application of mind on the part of the Assessing officer. - AT
Customs
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Refund of ADD - Period of limitation - Unable to comprehend as to how the Assistant Commissioner of Customs could resort to any reasoning for rejecting the petitioner's claim for refund, when the Deputy Commissioner of Customs had held that the duty itself was not leviable and that the petitioner would be entitled for consequential relief, which order has become final - HC
IBC
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Secured financial creditor or not - The creation of pledge of shares by the Corporate Debtor is said to be in regard to the money lent to WLD and BRASSCO. The Appellants not having advanced any money to the Corporate Debtor as a financial debt would not be coming within the purview of financial creditor of the Corporate Debtor. - AT
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Implementation of approved Resolution Plan - successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted. All claims must be submitted to and decided by the resolution professional, so that a prospective Resolution Applicant knows exactly, what has to be paid, in order that it may then take over and run the business of the Corporate Debtor - AT
Central Excise
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100% EOU - Extended Period of Limitation - Use of imported inputs in manufacture of non-excisable goods - The burden of proving to the contrary rested upon the appellant, which the appellant failed to discharge by failing to establish that the imported inputs were not used in the production of the cut flowers sold in DTA - In view thereof, the authorities below have rightly invoked Section 28 of the 1962 Act and allied provisions. - SC
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100% EOU - Whether customs duty can be charged on the non-excisable goods produced in India and sold in DTA by an EOU? - the appellant, having availed exemption under the notification, cannot evade customs duty on the imported inputs at the rate prescribed by the notification. - since the cut flowers are non-excisable goods, the demand for payment of customs duty had rightly been made - SC
VAT
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Nature of transaction - Sales or works contract - The only point repeatedly canvassed both before the Authorities as well as before this Court is that the judgment of the Hon’ble Supreme Court (majority view) must be applied to the transaction in issue. This cannot be accepted for the mere asking. It is for the petitioner to establish its case and produce enough factual particulars to support the conclusion that the nature of the transaction is a works contract and not a sale. - HC
Case Laws:
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GST
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2020 (9) TMI 76
Grant of Bail - condition to deposit entire demand of GST with interest for Bail - creation of fictitious firms and tax invoice - GST evasion - petitioner unable to pay outstanding amount for fulfilling conditions envisaged under Section 438 Cr.P.C. - presumption of innocence or not - HELD THAT:- This Court is of the opinion that the condition is onerous and is liable to be set aside. This Court is of the opinion that since the maximum punishment which can be awarded is upto 5 years and the petitioner has almost undergone a period of one year having been arrested on 06.09.2019. The onerous conditions would thus violate Article 21 of the Constitution of India as the liberty of the petitioner is being deprived - The factum of the investigation being complete and enquiry having been completed and the relevant documents being in possession of the prosecution, the petitioner thus cannot be detained during the trial only on account of the fact that a bail order in the form of a recovery proceedings has been passed against him to pay the outstanding worth almost ₹ 2 crores along with interest. The condition of payment of ₹ 1,94,78,017/- along with interest is set aside. The bail bonds of ₹ 50 lakhs with one surety are reduced to ₹ 25 lakhs which shall be in the form of immoveable property, to the satisfaction of the Ilaqa/Duty Magistrate, Panipat. The order of the Addl. Sessions Judge dated 08.04.2020 (Annexure P-2) is, accordingly, modified, whereas the other conditions shall remain intact. Petition allowed.
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Income Tax
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2020 (9) TMI 75
Addition u/s 40(a)(ia) - disallowance made towards transportation charges - Tribunal held that the assessee has produced the evidence in case of payment made to one T.Shivakumar and the matter was therefore, remitted for re-examination - HELD THAT:- Admittedly, the assessee had produced a copy of the agreement entered between it and T.Shivakumar as well as affidavit of T.Shivakumar stating that he acted only as a commission agent. CIT (Appeals) refused to accept the evidence adduced by the assessee. Tribunal directed the remand of the matter to the CIT (Appeals). In view of submissions made and in the facts of the case, the remand of the case is imperative. Accordingly, it is directed that the assessee shall be at liberty to adduce the evidence with regard to the payments made to Abdul Rahim and Srinivas before the CIT (Appeals). The aforesaid evidence shall be considered by the CIT (Appeals) and in case, CIT (Appeals) deems it appropriate, he shall be at liberty to seek the remand report from the Assessing Officer and thereafter to decide the matter afresh in accordance with law. To the aforesaid extent, the order passed by the Tribunal is modified. No substantial questions of law
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2020 (9) TMI 74
Bench at Allahabad is not functioning properly due to non posting of permanent members - HELD THAT:- As during last one year, the Income Tax Appellate Tribunal, Allahabad has functioned only for eleven days. It shall not be out of place to mention here that the Principal Seat of the High Court is at Allahabad. According to Sri Ashish Bansal, the Income Tax Appellate Tribunal, Allahabad has jurisdiction of all the districts of Eastern U.P., but due to non posting of permanent members at Income Tax Appellate Tribunal, Allahabad, it is not functioning properly from last several years. Prima-facie, the contention of Sri Ashish Bansal appears to be correct, particularly, in the light of the instructions of the respondent nos.1 to 4 dated 14.8.2020. Despite our order dated 7.8.2020, the respondents have not clearly stated in the instructions as to why the Income Tax Appellate Tribunal at Allahabad is not functioning. This lead us to prima-facie belief that there is failure of duty on the part of the respondent nos. 1 and 5, which amounts to denial of justice to the assessee appellants resulting in their harassment. We direct the respondent nos.1 and 5 to show cause by means of an affidavit as to why permanent members at Allahabad Income Tax Appellate Tribunal, have not been posted and why exemplary cost may not be imposed upon them for obstructing the normal functioning of the Income Tax Appellate Tribunal at Allahabad.
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2020 (9) TMI 73
Characterization of income - agricultural income or business income - HELD THAT:- Tribunal has considered the nature of activity carried out by the assessee and after taking into account Explanation 3 to section 2 (1A), inserted by the Finance Act, 2009, has held that the income derived by the assessee from such activity as agriculture inasmuch as the Explanation 3 states that income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income . Tribunal further relied on CBDT Circular No.01/2009 dated 27-03-2009 explaining the rationale of Explanation 3. It is seen that similar issue once again came up for consideration before the Tribunal in assessee s own case for A.Y. 2013-14. A copy of such order has also been placed on record in which the earlier view has been reiterated. The ld. DR fairly conceded that the facts and circumstances of the instant case are mutatis mutandis similar to those of the earlier years. Since the issue under consideration is fully covered by the orders passed by the Tribunal for the preceding years, respectfully following the precedent, we countenance the view taken by the ld. CIT(A). This issue is, therefore, decided in favour of the assessee. Disallowance of depreciation - AO treated the so-claimed agricultural income as business income, he, therefore, disallowed differential depreciation - HELD THAT:- Since we have approved the opinion of the ld. CIT(A), reversing the view of the AO on this issue, the reason for disallowance of depreciation to the above extent, ceases to exist. Since the entire income from operations has been held by us as agricultural income, the fortiori is that the full amount of depreciation at ₹ 1.64 crore should get reduced from the computation of agricultural income and consequently value of assets for carrying forward written down value to the subsequent years. Be that as it may, there can be no addition on account of disallowance of depreciation for the year under consideration. Claim of Foreign Exchange Gain held to be taxable - HELD THAT:- Tribunal made the bifurcation of Foreign Exchange Fluctuation Gain into four parts, namely, relating to Capital Expenditure; Revenue Creditors, Revenue Debtors; and Revaluation at the year-end (unrealised gain). It held that the Foreign Exchange Fluctuation Gain in relation to the Capital expenditure; Revenue creditors; and Revaluation at the year-end was chargeable to tax. Only Foreign Exchange Fluctuation Gain from Revenue debtors was held to be in the nature of agricultural income and hence, not taxable. The ld. AR has placed on record similar details for the year under consideration. Since such classification of the Foreign Exchange Fluctuation Gain under four categories by the assessee, as placed on record at page 160 of the paper book, have been examined neither by the AO nor by the CIT(A), we set-aside the impugned order and direct the AO to consider taxability of Foreign Exchange Fluctuation Gain from these four items in accordance with the view canvassed by the Tribunal in assessee s own for the A.Y. 2011-12 as discussed above.
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2020 (9) TMI 72
Short deduction of TDS - TDS u/s 194C or 194J - Payment for collection and disposal of waste - whether lifting material and disposal of hospital waste would fall within the definition of technical services? - HELD THAT:- It is noteworthy that the deductee company has rendered services of lifting material and disposal of hospital waste from the premises of the assessee. As relying on case GUJARAT FLUOROCHEMICALS LIMITED VERSUS VS ACIT (TDS) CIRCLE, BARODA AND ITO (TDS) VERSUS VS GUJARAT FLUOROCHEMICALS LIMITED [ 2013 (11) TMI 371 - ITAT AHMEDABAD] we hold that the services provided by the deductor would not fall in the category of technical services, therefore, the assessee has rightly deducted tax u/s 194C - Decided in favour of assessee.
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2020 (9) TMI 71
Rectification u/s 154 - excess MAT credit has been given to the assessee u/s. 115JAA - HELD THAT:- In the present case, the CIT(A) observed that the AO mentioned that there is no MAT credit for A.Ys. 2006-07 and 2007-08 and further, he opined that the assessee could not demonstrate what is the actual MAT credit available for the aforesaid two assessment years. Assessee even before CIT(A) pleaded that there may be direction to the AO to give appeal effect to order of Tribunal and CIT(A). Admittedly, this was not considered by the CIT(A) and there was no reference in the order passed u/s. 154 of the Act regarding availability of MAT credit for A.Ys. 2006-07 and 2007-08. Therefore, in our opinion unless the appeal effect is given, then only whether the MAT credit is available or not will be known, if the AO finds MAT credit on such examination, which can be carried forward to give credit in the year under consideration - we find force in the arguments of ld. AR and taking into consideration the discussion made above we remand the matter to the file of AO for its fresh consideration with the direction to compute the MAT credit available to the assessee in earlier years by giving effect to the orders of ITAT and CIT(A). Thus, the only ground raised by the assessee is allowed for statistical purpose.
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2020 (9) TMI 70
Exemption u/s.54B and 54F - new piece of land was purchased by the assessee in the names of his two sons - assessee contended that at the time of transfer of property, he had no right over the same except the amount received in the capacity of Approver - Family partition took place before effecting the transfer of property and the land in question was partitioned in favour of his sons - HELD THAT:- From the findings recorded by the ld. CIT(A), it becomes apparent that he accepted the assessee s claim that he was not owner of the property at the time of sale inasmuch as the Partition deed, transferring interest in the property to his sons, was executed prior to the date of sale. Once the assessee was not the owner of the property, there could obviously have been no question of allowing exemption u/ss.54B or 54F - To that extent, the view taken by the ld. CIT(A) is correct. Once the assessee is not entitled to exemption because he was not the owner of the property transferred, there can be no question of computing any capital gain in his hands from the transfer of the same property. Assessee did compute capital gain in his return of income and thereafter claimed exemptions u/ss.54B and 54F of the Act. Simply because such a computation of capital gain was made on an ill-advice, cannot bind the assessee for the times to come, if, in fact, he was not liable for such capital gain. As the proceedings in the first appeal are continuation of the assessment proceedings, there can be no impediment on the assessee in making a lawful claim before the CIT(A) for the first time and the CIT(A) accepting the same, if it is otherwise sustainable. There can be no estoppel against the provisions of the Act. If an assessee is not legally chargeable to tax, he can validly make such a claim before the CIT(A) notwithstanding the fact that the amount was wrongly included in the return of income. The contention of the ld. DR objecting to raising a fresh claim before the ld. CIT(A) for the first time is, ergo, jettisoned. We thus hold that not only the assessee was justified in making a claim of Partition Deed in the first appeal, the ld. CIT(A) was also fully within his jurisdiction in entertaining such a claim. In the absence of the Revenue having filed any cross appeal assailing the acceptance of the genuineness of such a Partition Deed by the ld. CIT(A), such a finding attained finality and the same cannot be challenged before the Tribunal when the appeal of the assessee is under consideration. Direct the AO to consider the income chargeable under the head Capital gain in the hands of the assessee by taking full value of consideration towards extinguishment of his right in the property - Appeal is partly allowed.
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2020 (9) TMI 69
Deduction u/s 54F - Capital Gains arose on transfer of assets - Year of assessment - A.Y. 2012-13 or in A.Y. 2013-14 - whether assessee has within a period of one year or after the date on which the transfer took place purchased or within a period of 3 years after the date constructed one residential house? - HELD THAT:- In the present case, admittedly, the assessee neither purchase one residential house within the period of one year before the date of transfer or after two years of date of transfer nor constructed house within a period of three years. The only contention that the assessee was that the assessee made investments under the Capital Gain Scheme almost entire consideration under fixed deposits with the Syndicate Bank. Assessee transferred original asset on 26-08-2011 therefore in our opinion, the Capital Gain has to be assessed in the year under consideration i.e. A.Y. 2012-13. In order to get exemption u/s. 54F of the Act, the assessee must have purchased new asset one year before (26-08-2010) or two years after (26-08-2013) or constructed one residential house within a period of three years (26-08-2014). As rightly pointed by Shri Alok Malviya, ld. DR that the assessee did not utilize the sale consideration for purchase of flat or construction of one residential house. Therefore, the exemption as claimed by the assessee u/s. 54F of the Act is liable to be denied. Thus, in our opinion the order of CIT(A) is justified that the Capital Gains is to be assessed under the year under consideration, consequently, the assessee is not entitled to claim exemption u/s. 54F - Decided against assessee.
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2020 (9) TMI 68
Computation of deduction u/s 10AA - computation mechanism provided under the APA agreement - ALP adjustment made by the assessee pursuant to APA as a Voluntary Transfer Pricing adjustment - HELD THAT:- The ALP adjustment made by the assessee pursuant to APA is a Voluntary Transfer Pricing adjustment and is therefore eligible for deduction under section 10AA of the Act, as section 10AA(1) read with 10AA(7) of the Act uses the expression Profits and gains derived from the export of the unit which is wide in nature and covers the increased profits of the Company after making the ALP adjustment pursuant to APA. Whether ALP adjustment pursuant to APA falls within the ambit of proviso to Section 92C(4) of the Act ? - HELD THAT:- ITAT Bangalore in case of IBM India Pvt Ltd [ 2020 (8) TMI 196 - ITAT BANGALORE] , following the decision of Pune Tribunal in case of DAR AL Handasah Consultants (Shair partners) India Pvt Ltd [ 2019 (12) TMI 153 - ITAT PUNE] has held that deduction under section 10AA of the Act has to be allowed on incremental income arisen pursuant to APA as per modified return filed under section 92CD of the Act as same is not hit by proviso to section 92C(4) We hold that the ALP adjustment made pursuant to APA by the assessee in respect of Gurqaon SEZ unit results in increase in profits of the business of the undertaking/unit, the increased profits of the assessee being eligible for deduction under section 10AA of the Act given the wide nature of the expression used in section 10AA i.e. 'Profits of the business of the undertaking/unit' and that the proviso to section 92C(4) is not a bar to allowing such a claim. - Decided against revenue.
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2020 (9) TMI 67
Deduction u/s. 80P(2)(a)(i) or 2(d) - interest earned by the assessee on surplus funds - HELD THAT:- Following the decision of the ITAT Bangalore Bench in the case of The Jayangar Co-operative Society Ltd. [ 2020 (2) TMI 1324 - ITAT BANGALORE] remand the question of allowing deduction u/s. 80P(2)(a)(i) as well as 80P(2)(d) of the Act to the AO for fresh consideration as per directions contained in the order of Tribunal in the case of The Jayangar Co-operative Society Ltd. (supra). - Appeal by the assessee is treated as allowed for statistical purposes
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2020 (9) TMI 66
Assessment is in the name of the deceased person - HELD THAT:- A proceeding could be continued against the legal representative of the deceased assessee only if it had been initiated when the assessee was alive. Thus, it has been decided that the assessment made on dead person, on the face of it, be a nullity in law. In the case in hand, we find that when the factum of death was brought to the notice of the authorities below, instead of substituting the legal heirs of the assessee in the file of the Revenue both the authorities below proceeded with and finalized the assessment against the assessee, Late Ghanshyam H Parsana, since deceased which is unlawful, arbitrary, erroneous and bad in law. No merit in the proceeding itself having been continued and finalized against the dead person which is void ab initio and the same is liable to be quashed. - Decided in favour of assessee.
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2020 (9) TMI 65
TP Adjustment - determining the Arm s length price of the international transaction of reimbursement of expenses paid to the associated enterprises determined by the ld TPO at Rs. Nil - HELD THAT:- As decided in own case [2020 (4) TMI 749 - ITAT DELHI] in the instant case, the assessee has incurred expenditure and not making payment of mark-up is not adverse to the entity in Indian Jurisdiction. The assessee has claimed the expenditure paid by the AE on its behalf. The contention of the TPO is that the assessee was not required to incur the said expenses. But it was under jurisdiction of the AO whether particular expenditure was incurred wholly and exclusively for the purpose of business and not in the domain of the TPO to hold that in view of the warranty etc., the assessee was not required to incur expenditure on firewall charges. Contention of the assessee seems plausible that motors were required to checked for content of moisture acquired in transport from India to the USA, i.e., the destination point and it was the responsibility of the assessee to provide defect free motors to the end customers. Thus, respectfully following the finding of the Hon'ble Delhi High Court [2012 (4) TMI 346 - DELHI HIGH COURT ] we delete the transfer pricing adjustment. We direct the ld AO/ TPO to delete the adjustment arising on account of determination of ALP of the international transaction of reimbursement of expenses paid by the assessee to its associated enterprises on account of testing charges.
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2020 (9) TMI 64
Income received from sale of software licenses - Royalty under Article 12 of India Singapore Agreement - whether the receipts on sale of licensed software to the end user customers in India, which was an application software, can be covered under the term Royalty income arising on sale of such software as provided in Section 9(1)(vi) of the Act and/ or under Article 12(3) of the India Singapore Treaty? - Whether provision of DTAA over-ride the provision of Income Tax Act, 1961? - HELD THAT:- Hon ble High Court of Delhi in DIT vs Nokia Networks OY [ 2012 (9) TMI 409 - DELHI HIGH COURT] had held that Explanation 4 was added to section 9(1)(vi) of the Act by the Finance Act, 2012 with retrospective effect from 01.06.1976 to provide that all consideration for use of software shall be assessable as Royalty . However, the definition in the DTAA has been left unchanged It is an admitted fact that though Explanation 5 has been inserted in section 9(1)(vi) of the Act but no amendment has been made to the definition under the DTAA and since the provisions of the DTAA are beneficial to the assessee, then the said provisions would be applied. Thus, we hold that the amended definition of Royalty under the domestic law even if amended with retrospective effect cannot be extended to the definition of Royalty under the DTAA since the term Royalty under the DTAA has not been amended. As the provision of DTAA over-ride the provision of Income Tax Act, 1961 and being more beneficial shall apply and since the definition of Royalty has not been amended in the DTAA, receipts by the assessee on sale of copyright Article was not taxable in the hands of the assessee. Before parting, we may also point out that there is no merit in the plea of the Ld. DR for the Revenue that whether the copyrighted Article was processed or not. We reiterate that as per the provisions of DTAA has not been amended and the same being more beneficial, the same are to be applied and the consideration received by the assessee on sale of copyrighted license is not taxable in the hands of the assessee. Ground of appeal No.1 raised by the assessee is thus allowed.
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2020 (9) TMI 63
Accrual of expenditure liability - correct year of assessment - Disallowance of expenses claimed through computation of total income though not accounted in this year but in preceding previous year - Whether expenditure incurred by the assessee has accrued as a liability in financial year 2011 12 or 2012 13? - HELD THAT:- In the present case on reading of the agreement executed by the assessee, disclosure of notes as discussed above in the financial statements, clearly shows that provision of expenses made by the assessee for assessment year 2012 13 is in conformity with proper accounting principles, where according to the assessee itself, the above liability arose in that year, correctly shows that expenditure was incurred by the assessee is accrued liability for assessment year 2012 13 and not assessment year 13 14. On perusal of the order of AO who has given the detailed finding that why the above liability did not accrue in assessment year 13 14 but in assessment year 12 13, based on the appreciation of the agreement shown by the assessee cannot be found fault with. In view of this, we confirm the actions of the lower authorities in disallowing the expenditure of ₹ 33.92 crore is claimed by the assessee in this assessment year i.e. assessment year 2013 14 as it does not pertaining to this year. Accordingly, ground of the appeal is dismissed. Disallowance of utilization of the provisions for obsolescence - assessee has reduced in the computation of total income sum from its income on account of users of provision for obsolescence claimed to have been offered to tax in the prior years - HELD THAT:- As before the AO the assessee has not furnished the details of treatment given to it to the provision of obsolescence created by the assessee and utilized by the assessee. Assessee also did not substantiate with adequate evidence about the disallowance of the provision made in the earlier years. Also not established that how the utilization of provision of the inventory is allowable as deduction in this year - provision has been made by the assessee for obsolescence of inventory applying the provisions of the accounting standard 29 related to the provisions, contingent liabilities and assets. It is also required to be appreciated that the order passed by the learned CIT A on the merits of the issue where the assessee could not represent its case before her. Whole issue has not been examined by any of the lower authorities in the right perspective. Even the assessing officer has stated that in note number 11 inventory being note to account for assessment year 2013 14 the assessee has used the entire provision in assessment year 2012 13 and nothing was left to be carried forward is completely erroneous. Differential interest income as per profit and loss account and amount as per Form No 26 AS for the subject year - HELD THAT:- Interest income is chargeable to tax in the year in which it accrues. It cannot be an excuse that assessee has offered the income in subsequent assessment year. Therefore, as there is no clarity that what is the amount of interest income booked by the assessee with respect to all the parties from womb interest has been earned and which has disclosed in form number 26AS before the subject assessment year, we set aside the whole issue to the file of the learned assessing officer with a direction to the assessee to show with proper evidence that what is the amount of income that has been credited in the books of account for the subject assessment year and what is the amount of interest shown in form number 26AS for the subject AY. AO is directed to examine the same, after giving the proper opportunity of hearing to the assessee, decide the issue on the merits afresh. Accordingly, ground number three of the appeal is allowed with above direction.
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2020 (9) TMI 62
Disallowance of foreign exchange fluctuation loss - assessee stressed that in view of the provision of section 43A realized loss and realized gain was on account of capital assets, the same were not allowable as revenue expenditure but were liable to be added to/reduced from cost of relevant assets in the year in which the liability in foreign currency is discharged - HELD THAT:- The assessee had disclosed foreign exchange loss on acquisition of fixed assets at ₹ 2.16 crores (approx.) against which the foreign exchange gain of ₹ 53,05,919/- against CWIP was adjusted and the balance of ₹ 1.63 crores (approx.) was added back in the computation of income. Admittedly the foreign exchange loss on acquisition of fixed assets totaling to ₹ 1.63 crores (approx.) is not allowable as an expenditure in view of the section 43A of the Act. Further, foreign exchange gain of ₹ 53,05,919/- is to be adjusted against the aforesaid loan and net amount of ₹ 1.63 crores (approx.) having been offered to tax, warrants no further disallowance in the hands of the assessee. - Decided in favour of assessee. Disallowance of corporate social responsibility ( CSR ) in books of accounts - expenses not incurred for the purpose of business - assessee claimed that the expenditure has been incurred towards maintenance charges of GSS, Gurgaon for the benefit of the children of the employees of the assessee company - HELD THAT:- The assessee has placed on record the list of the expenditure before us. The perusal of the same reflects the expenditure on certain renovation work at Mohindergarh including providing chairs and tables by the assessee. Expenses are debited on account of Tools for Honda Training Center Lab- Mohindergarh. All the said expenses are incurred for efficiently carrying out the business of the assessee and thus fulfill the condition of wholly and exclusively for the purpose of business - donation to Brahma Kumaris merits to be disallowed in the hands of the assessee, as it is case of charity. The same may be looked into as per the provision of section 80G of the Act. Further, expenditure incurred towards display of name/logo of the assessee on various items is undoubtedly for the promotion of the business of the assessee as it promotes goodwill. Hence, the expenditure is to be allowed as revenue expenditure. Alternate observations of AO that the Explanation (2) to section 37(1) which has been introduced w.e.f. 01.04.2015 is to be applied retrospectively - We find that the Raipur Bench of Tribunal in Jindal Power Ltd. [2016 (7) TMI 203 - ITAT RAIPUR] and National Small Industries Corpn. Ltd. vs DCIT [ 2019 (2) TMI 1538 - ITAT DELHI] have held that the said explanation is prospective in nature. Consequently, we find no merit in the stand of the Assessing Officer in this regard except expenditure of ₹ 50,000/-, the balance expenditure is allowed in the hands of the assessee. Disallowance of composition fee - expenditure has been incurred by the assessee towards composition fee for regularizing the Naurangpur Building and issuance of Occupancy certificate - HELD THAT:- Hon ble Delhi High Court in CIT vs Lokenath Co. [ 1984 (1) TMI 53 - DELHI HIGH COURT ] on similar facts held that on similar facts wherein the assessee has constructed a multi-storeyed building and in view of excess construction on one of the floor, it submitted a fresh plan and where the revised plan was approved, subject to payment on adhoc composition fee, held that the mandate of the Legislature is that on the acceptance of the compensation, there is condonation of the disobedience of a procedural requirement. This compensation was not a penalty payment, to save the assessee from criminal liability or criminal prosecution or to compound any offence committed by the assessee. Thus, the Tribunal was justified and the impugned sum was admissible as business expenditure under section 37(1) of the Act. Following the said dictate of the Hon ble High Court, we hold that the composition fee paid by the assessee merits to be allowed as business expenditure. Nature of expenses - expenditure incurred on repair and maintenance/replacement of existing assets - as per AO such expenditure incurred by the assessee booked under the head repair and maintenance is capital in nature and hence, disallowed - HELD THAT:- The Hon ble Supreme Court in CIT vs Saravana Spinning Mills (P.) Ltd. [ 2007 (8) TMI 16 - SUPREME COURT] has laid down that in case the expenditure is incurred for current repairs, then it replaces part of the existing plant machinery and the same is to be allowed as business expenditure in the hands of the assessee u/s 31(1) of the Act. Expenditure in respect of repair and maintenance of existing structure and is to be allowed as an expenditure in the hands of the assessee - expenditure incurred on acquisition of chairs, which are detailed in Paperbook is capital in nature and amount needs to be capitalized in the hands of the assessee. The said expenditure is booked under the head furnishing furniture. Accordingly, we uphold the order of the Assessing Officer in this regard but direct the Assessing Officer to allow the expenditure incurred on repairs of plant machinery in entirety. Ground of assessee is partly allowed. Expenditure incurred on signages installed at the premises of dealers/sub dealers - HELD THAT:- The expenditure was incurred on signage for display of the name of the assessee at the dealer s premises. However, once the same is fixed at dealers site then the Courts have held that it does not satisfy the test of ownership with the assessee and the expenditure is to be allowed as revenue expenditure. We find support from the ratio laid down by the Hon ble Delhi High Court in CIT vs Honda Siel Power Products Ltd [ 2017 (6) TMI 524 - SUPREME COURT] - Thus, we are of the view that the expenditure to the extent claimed by the assessee is to be allowed in the hands of the assessee and not the entire expenditure.Ground of assessee is partly allowed.Ground of assessee is partly allowed. Disallowance of sales tools expenses - expenditure incurred by the assessee on sales tools/fixtures which are placed at dealer s outlets are specifically manufactured by third party manufacturers in accordance with the specifications provided by the assessee - whether the assessee is incurring expenditure to maintain standard format of displaying its products all over India in order to induce prospective customers to clearly identify the exclusive dealers of assessee s products in India and expenditure incurred was wholly and exclusively for the purpose of his business? - HELD THAT:- We are of the view that the expenditure incurred on Signages expenses was in the nature of advertisement expenditure, which are recurring in nature, incurred for the purpose of business and in the absence of any capital asset being acquired/owned by the assessee, the same was allowable as business deduction under section 37(1) of the Act. Disallowing 25% of Royalty expenses - HELD THAT:- The assessee had entered into a technical know-how agreement with Honda Motors Company, Japan under which it was paying lumpsum fee which was the amount in connection with the new models introduced in a year. The total amount paid during the year was capitalized by the assessee in its books of accounts and also in the P L A/c. The assessee also paid running Royalty which was paid for grant of the right to license and manufacturing of two-wheelers in India. The total running Royalty paid was ₹ 378.20 crores (approx.). The said Royalty which is the recurring Royalty paid by the assessee from year to year had been allowed as revenue expenditure in the hands of the assessee in the preceding years. We find no merit in the said exercise carried out by the Assessing Officer and accordingly we direct the Assessing Officer to allow the running Royalty as business expenditure in entirety. Admission of additional ground - Stand of the Revenue that where the assessee itself had not claimed as deductible in its hands, then the same cannot be allowed by the additional ground of appeal - HELD THAT:- We find no merit in the stand of the Ld.DR for the Revenue as there is no estoppel in law; especially where the issue has been decided by the Jurisdictional High Court on similar facts. Accordingly, we allow the additional ground of appeal raised by the assessee.
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2020 (9) TMI 61
Penalty u/s 271(1)(c) - Defective notice - non specification of charge - assessee was non-cooperative before the revenue authorities especially before the Ld. First Appellate Authority - HELD THAT:- No doubt that the assessee remained non-cooperative before the revenue authorities especially before the Ld. First Appellate Authority. But in our view the grounds raised by the Assessee in the present Appeal are very much important to decide the issues in dispute which have not been decided by the Ld. CIT(A). As gone through the various grounds raised by the Assessee before the Ld. CIT(A) especially the initiation of penalty is fatally defective so much so, no specific charge has been mentioned which makes the whole proceedings unsustainable in law, which has not been decided by the Ld. CIT(A). We are of the view that the issues in dispute require thorough consideration at the level of the Ld. CIT(A), which have not been decided by the Ld. CIT(A). We are setting aside the issues in dispute to the Ld. CIT(A) to decided the same, afresh, as per law, after giving full opportunity to the assessee as required under the law. - Decided in favour of assessee for statistical purposes.
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2020 (9) TMI 60
Disallowance u/s 14A - As per CIT-A investments that has yielded the exempted income alone is to be considered for the purpose of calculating the disallowance under Rule 8D(iii) - contention of the assessee even before authorities below that the interest bearing borrowings were utilized for business purposes and not for making investments - HELD THAT:- The authorities below have not given any finding to contradict/rebut this plea of the assessee. In any case, the assessee s own interest free funds which were deployed by the assessee in business ( share capital-losses) are much higher than average investment held by assessee during the year under consideration. Thus, additions as were made by AO which was later sustained by learned CIT(A) by disallowing interest expenditure invoking provisions of Section 14A read with Rule 8D(2)(ii) of the 1962 Rules is not sustainable in the eyes of law which we order deletion. Our decision is supported by decision of Reliance Utilities and Power Limited . [ 2009 (1) TMI 4 - BOMBAY HIGH COURT], M/S RELIANCE INDUSTRIES LTD [ 2019 (1) TMI 757 - SUPREME COURT] HDFC BANK LTD. [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2020 (9) TMI 59
Nature of expenses - expenses on repairs - revenue or capital expenditure - assessee did not wish to agitate the disallowance upheld by CIT(A) partly - HELD THAT:- Bills for the expenses indicate it to be for the repairs, supply of consumables, recalibration of the machinery. It is not the case of the Revenue that by incurring of the impugned expenditure any new asset has come into existence. Repairs was for preserving and maintaining an already existing asset. We therefore set aside the addition confirmed by CIT(A) and hold the expense to be of revenue in nature. Thus the ground of the assessee is partly allowed TDS u/s 194C - disallowance of expenses for Non-Deduction of the TDS on payment of share of income of joint venture partner alleging it to be in the nature of procurement commission - HELD THAT:- Assessee had entered into a JV with HCIL for the construction of road in Bihar - From the MOU, Learned AR has also demonstrated that the respective parties were not entitled to the profit or loss arising from the services performed by the other party. To the understanding of the sharing of the revenue on receipt from the clients. Considering the totality of the aforesaid facts, we find force in the argument of Ld AR that the amount paid to HCIL represented the diversion of income by overriding title. We also find support from the decision rendered in the case of Soma TRG Joint Venture [ 2017 (9) TMI 1239 - JAMMU KASHMIR HIGH COURT ] wherein on identical facts the issue was decided in Assessee s favour. Before us, Revenue has not pointed to any factual error in the submissions of Learned AR nor has pointed to any contrary binding decision. AO was not justified in disallowing the expenses by invoking the provisions of s. 40(a)(ia) of the Act. We therefore, set aside the order of AO. Thus the ground of assessee is allowed.
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2020 (9) TMI 58
Penalty u/s 271(1)(c) - concealment of particulars of income or furnishing inaccurate particulars of income - assessee is defaulter for concealing particulars of his income - HELD THAT:- AO in the show-cause notice has initiated the penalty proceedings for concealing the particulars of income or furnished inaccurate particulars of such income and subsequently, while passing the penalty order, the AO has levied penalty for concealing the particulars of income. AO has initiated the penalty proceedings on both the charges, while levying the penalty, the AO has levied the penalty on a specific and clear-cut charge for concealing the particulars of income. Therefore, it is not a case where the penalty has been initiated for a particular charge and thereafter, penalty has been finally levied on a different charge. The assessee was made aware of both the charges at the time of initiation of penalty proceedings and while finally levying the penalty, the AO has given a specific finding that it is a case of concealment of particulars of income. Even where it is held that the charge is uncertain at the initiation stage, the same has been made definite while passing the penalty order, therefore, it is not a case of lack of opportunity to the assessee as well as lack of application of mind on the part of the Assessing officer. It is not a case of the assessee that the charge of concealment of particulars of income is not attracted in the facts of the present case. AO has invoked the provisions of explanation 5A to section 271(1)(c) which has been confirmed by the ld CIT(A). The ld. CIT(A) has dismissed the contention of the assessee of suo motu filing the revised return of income for the reason that such return has been filed, even though the disclosing unexplained investment in jewellery found during the course of search, subsequent to the date of search. - Decided against assessee.
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Customs
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2020 (9) TMI 57
Release of consignment - refund of ADD - L-ASCORBATE 2 - PHOSPATE -35 PCT, attracting Anti Dumping Duty - petitioner's claim for refund of ADD was rejected on two grounds, namely, that the petitioner had not filed the refund claim of ADD within one year from the levy of ADD and that the ADD was not paid under protest , which are against the requirements under Section 27 of the Customs Act. HELD THAT:- The petitioner's claim for refund has been rejected stating that the claim is made after a period of one year from the date of payment and that the petitioner had not produced evidence to the effect that the duty was paid under protest . When this Court in its earlier order dated 18.08.2015 had observed that the authority concerned should pass a speaking order after adjudication, the Deputy Commissioner of Customs had held that ADD was not leviable on the subject goods and that the importer is entitled for consequential relief, I am unable to comprehend as to how the Assistant Commissioner of Customs could resort to any reasoning for rejecting the petitioner's claim for refund, when the Deputy Commissioner of Customs had held that the duty itself was not leviable and that the petitioner would be entitled for consequential relief, which order has become final - As a matter of fact, the second respondent had no other opinion, but to comply with the request of the petitioner for refund, in view of the Order-in-Original dated 19.10.2015 passed by the Deputy Commissioner of Customs. As such, both the reasonings that the application for refund is time barred and that the payment was not made under protest , cannot be sustained. The learned Senior Standing Counsel for the respondents would rely on certain reasonings given in the counter affidavit filed by them with regard to the procedure for paying duty under protest and the statement of the audited Balance Sheet and certificates from the Statutory Auditor. Curiously, these submissions made based on the counter averments, are not the reasonings given by the second respondent in the impugned order for rejecting the petitioner's claim - It is a well settled proposition that the reasoning adduced in the impugned order cannot be improved or substituted by way of a counter affidavit filed in a Writ Petition. As such, in view of the observations made by this Court with regard to the illegality of the reasons cited in the impugned order, the petitioner would be entitled to succeed. Petition allowed.
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2020 (9) TMI 56
Grant of Bail - Smuggling - Sections 135 of Custom Act - HELD THAT:- Without expressing any opinion on the merits of the case and considering the nature of accusation and the severity of punishment in case of conviction and the nature of supporting evidence, reasonable apprehension of tempering of the witnesses and prima facie satisfaction of the Court in support of the charge, the applicants are entitled to be released on bail in this case. Let the applicants Pintu Verma @ Mukesh Verma and Deepu Verma, under Sections 135 Custom Act, Police Station Custom be released on bail on their furnishing personal bonds with two sureties each in the like amount to the satisfaction of the court concerned with the following conditions imposed.
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Corporate Laws
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2020 (9) TMI 55
Approval of Consolidation of shares - Consolidation of equity shares by increasing the face value of the equity shares from the existing ₹ 10 per equity share of the petitioner to ₹ 5,000 per equity share and resultant increase in the paid-up equity share capital of the company - HELD THAT:- The petitioner-company has duly followed the process of law and passed the resolution of the consolidation of shares. Section 61(1)(b) further enables consolidation of company to alter its share capital by consolidation and divide all or any of its share capital into shares of larger amounts than its existing shares. Thus, consolidation can be approved in terms of section 61(1)(b) of the Companies Act, 2013. The objections raised by two shareholders who have failed to attend the extraordinary general meeting despite receipt of notice have not been able to make tenable grounds to oppose such consolidation, which is proposed and resolved by the members in the extraordinary general meeting dated July 18, 2017 in the best interest of the shareholders and in view of the valuation of the shares carried out by the valuer appointed by the petitioner-company. The objector has questioned the valuation report with reference to the fair market value and the offer of ₹ 3,400 to the non-promoter share value being offered by the petitioner-company. Such objections cannot be considered as the petitioner-company is not a listed company and as such the shares are not marketable and that the shareholders themselves registered the grievance that they are not able to find buyers and hence the petitioner-company would justify such shareholders who are unable to find buyers by consolidation of share. In the light of the corporate structure of the petitioner-company wherein the promoters hold 90 per cent. of the equity shares, some shareholders are not able to find buyers for their shares and hence, consolidation will be the best exit option available to the shareholders more particularly to the small shareholders. Each consolidated share will rank pari passu in all respect of each other, with no impact on effective dividend yield of the company shares and therefore, it can be said that the shareholders will have the more liquidity in their hands and reasonable return on their investment - the prayer of the petitioner-company to consolidate equity shares by increasing the face value of the equity shares from the existing ₹ 10 per equity share of the petitioner-company to ₹ 5,000 per equity share is approved as provided under section 61(1)(b) of the Companies Act, 2013. Resultantly, the paid-up share capital of the company will be increased from ₹ 44,29,480 to ₹ 44,30,000 and consequential changes in the equity share capital in the records of the company and that of the Ministry of Corporate Affairs can be made. Petition disposed off.
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Insolvency & Bankruptcy
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2020 (9) TMI 54
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - time limitation - whether the Application under Section 7 of the I B Code, 2016 filed by the Respondent Bank was within the period of limitation? - HELD THAT:- The determining factor is the three years period from date of default/NPA. This Appellate Tribunal has also observed in RAJENDRA KUMAR TEKRIWAL (EX- DIRECTOR: PITHAMPUR POLY PRODUCTS LIMITED) VERSUS BANK OF BARODA (BEFORE MERGER WITH RESPONDENT BANK WAS KNOWN AS DENA BANK ) [ 2020 (8) TMI 498 - NATIONAL COMPANY LAW APPEALLATE TRIBUNAL, NEW DELHI ] that the period of three years from the date of the Account of Corporate Debtor is classified as NPA then it becomes impermissible to proceed with Section 7 Application as observed in the para 11 of the Judgment - All these leads to reiterate that the provisions of The Limitation Act, 1963 vide Section 238A of the I B Code, 2016 will be applicable to all NPA cases provided they meet the criteria of Article 137 of the Schedule to The Limitation Act, 1963. The extension for the period of Limitation can only be done by way of application of Section 5 of The Limitation Act, 1963, if any case for the condonation of delay is made out. The impugned order dated 27.08.2019 passed by the Adjudicating Authority (NCLT, Hyderabad Bench, Hyderabad) is set aside - appeal allowed.
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2020 (9) TMI 53
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of dispute or not - Adjudicating Authority has rejected the Application on the ground that the Corporate Debtor has raised a dispute regarding demurrage payment, much before the issuance of demand notice - HELD THAT:- It is clear that the dispute was raised by email dated 09th March 2018 regarding the alleged claim of demurrage and detention charges. The demand notice regarding the alleged claim has been issued on 05th September, 2018. The issue regarding payment against the detention charges requires extensive evidence because the parties are at variance interalia in respect of the period for which such charges are to be levied. The alleged claim is not crystallised and the Adjudicating Authority while exercising summary power cannot investigate into the matter regarding the liabilities of the Corporate Debtor to pay the demurrage and detention charges. The dispute raised by the Corporate Debtor cannot be said to be spurious, hypothetical or illusory. The Adjudicating Authority has rightly rejected the Application filed under Section 9 of the Code based on the ground of the pre-existing dispute - Appeal dismissed.
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2020 (9) TMI 52
Prayer for a direction in the name of Resolution Professional to include the Appellant No. 1 in the Committee of Creditors as a secured financial creditor - extension of all benefits of a secured financial creditor - HELD THAT:- Appellant No. 1 s claim in purported capacity of Secured Financial Creditor has been rejected way back in the year 2017 and decision in this regard has not been called in question. It is not open to Appellants to raise the same issue in 2020 by filing I.A. No. 62 of 2020. The queer explanation emanating from the Appellants that rejection of its claim as Financial Creditor went un-assailed under the bona fide belief that the interest of Appellant s would be taken care of under the Liberty House Group Resolution Plan is repugnant to reason and cannot provide a lawful excuse for filing of I.A. No. 62 of 2020 under Section 60(5) of the I B Code after a lapse of about three years. Such explanation deserves to be noticed only for being rejecting. This is apart from the fact that the Appellants have not lent any money directly to the Corporate Debtor and the Corporate Debtor did not owe any financial debt to the Appellants except that the pledge of shares was to be executed. There can be no dispute with the preposition of law that creation of pledge of shares by the Corporate Debtor does not tantamount to a guarantee or indemnity. The creation of pledge of shares by the Corporate Debtor is said to be in regard to the money lent to WLD and BRASSCO. The Appellants not having advanced any money to the Corporate Debtor as a financial debt would not be coming within the purview of financial creditor of the Corporate Debtor. Appeal dismissed.
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2020 (9) TMI 51
Replacement of IRP with a new IRP - removal of IRP on the ground that the Appellant had been in gainful employment of the Financial Creditor / Union Bank of India for 34 years and had been dealing with the accounts of the Corporate Debtor which facts were unknown to the Corporate Debtor previously - impugned order is assailed on the ground that the removal of the Interim Resolution Professional who had been appointed and confirmed can be carried out only with concurrence of Committee of Creditors - HELD THAT:- Admittedly the Appellant had been in gainful employment of the Financial Creditor for 34 years and had been dealing with the accounts of the Corporate Debtor a fact which the Corporate Debtor claims not to be in know-of previously. The Appellant may not be currently in employment of the Financial Creditor or drawing salary under it but the fact remains that on account of services rendered in past an element of loyalty is there which cannot be ignored. In view of this fact appreciation on the part of the Corporate Debtor that the Appellant would not be fair in his working as Resolution Professional cannot be dismissed off-hand more so when an instance of deviation was pointed out which the Appellant, when confronted, admitted as a mistake. This factual position emanates from the impugned order. This is independent of any prejudice caused actually and factually as the bias has to be viewed from the perspective of the Corporate Debtor on the mere basis of apprehension on account of past services rendered by the Appellant with the Financial Creditor . In such circumstances, no exception can be taken to the powers of the Adjudicating Authority acting independent of the opinion of the Committee of Creditors in this regard. Appeal dismissed.
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2020 (9) TMI 50
Various illegal acts committed by Corporate Debtor in collective connivance to strip the SPV Company - HELD THAT:- It is clear that at present, the Corporate Debtor is in Liquidation and the Liquidation Proceedings which are time bound proceedings are pending. In Liquidation Proceedings of the Corporate Debtor investigations with regard to the transactions relating to some other entity referred as SPV cannot be said to be relevant. The Adjudicating Authority has already observed that the Applicant/Appellant can initiate appropriate criminal/civil proceedings, if any, before the Appropriate Authority and Forum. If the Appellant has any grievances against the acts committed by the Corporate Debtor with regard to the SPV Company, the appropriate legal recourse would always be open. In Liquidation proceedings of the Corporate Debtor it is not necessary to decide the issue as filed by the Appellant. Proceedings under Insolvency and Bankruptcy Code are basically summary in nature and it is not possible to decide what the Learned Sr. Counsel is claiming to be fraud. The proceedings of IBC cannot be so conducted, so as to make IBC unworkable. The Appeal is dismissed at the stage of Admission.
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2020 (9) TMI 44
Implementation of approved Resolution Plan - Section 31 of I B Code - Appellant contends that the Adjudicating Authority vide the impugned order has failed to grant certain reliefs and concessions as provided in the approved Resolution Plan which is permissible - HELD THAT:- The Resolution Plan can only be challenged before the Appellant Tribunal on very limited groundswhich is specified in sub Clause (3) of Section 61 of the I B Code. In this case, the Successful Resolution Applicant has challenged the approved Resolution Plan on the ground of the observations made in para 23, 24 and 25 of the impugned order, whereby the Adjudicating Authority hasdeclined to allow reliefs and concessions prayed by the Resolution Applicant. The said grounds of challenge of the approved Resolution Plan under this Appealare beyond the limited scope of Appealas prescribed under sub-Section (3) of Section 61 of the I B Code, 2016. It has been emphasised by the Adjudicating Authority that the Resolution Applicant has to ensure compliance under all applicable laws for the time being in force. This does not mean that the Adjudicating Authority has changed the terms of the Resolution Plan. It is pertinent to mention that after approval of the Resolution Plan, in every case, the Successful Resolution Applicant has to ensure compliance under applicable laws. Thus, it is clear that successful resolution applicant cannot suddenly be faced with undecided claims after the resolution plan submitted by him has been accepted. All claims must be submitted to and decided by the resolution professional, so that a prospective Resolution Applicant knows exactly, what has to be paid, in order that it may then take over and run the business of the Corporate Debtor - The Adjudicating Authority has neither varied the terms of the approved Resolution Plan, nor denied any concession. In fact, the Adjudicating Authority has not allowed general waiver from the statutory liabilities and has specified that the Resolution Applicant may apply for such reliefs and concessions to the relevant Authorities who may consider the same as per applicable laws. Instant Appeal against the Approved Resolution Plan is not maintainable under Sec 61(3) of the I B Code 2016 - Appeal dismissed.
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Central Excise
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2020 (9) TMI 49
100% EOU - Exemption from payment of Customs Duty and Excise Duty - sale to DTA - production and export of cut flowers and flower buds of all kinds, suitable for bouquets and for ornamental purposes - benefit of N/N. 126/94Cus dated 3.6.1994 - thrust of the argument of the appellant is that according to Paragraph 3 of the exemption notification, sales made in DTA would attract excise duty and since the cut flowers sold by the appellant are non-excisable goods, no excise duty can be levied upon it - it is also contended that since the cut flowers are home grown, customs duty cannot be levied upon them and therefore, the demand of customs duty cannot be sustained. Whether customs duty can be charged on the non-excisable goods produced in India and sold in DTA by an EOU? - HELD THAT:- In the present case, the notification provides for exemption on import of inputs and at the same time prescribes for adherence of certain conditions for availing the exemption. The notification further prescribes the rate at which the customs duty on the inputs used in the production of non-excisable goods sold in DTA is to be charged. Thus, the notification, having been issued in exercise of delegated legislation under Section 25 of the 1962 Act, has to be understood as any other law . Resultantly, the appellant, having availed exemption under the notification, cannot evade customs duty on the imported inputs at the rate prescribed by the notification. - The show cause notice points out that the appellant imported raw materials like Live Rose Plants and consumables like fertilizers and planting materials, however, the appellant advisedly chose to confine its argument to cut flowers , which, as contended, were grown on Indian soil and thus not amenable to customs duty. However, the demand made in the show cause notice treating cut flowers as deemed to have been imported was only for the purpose of quantification of the customs duty on the imported inputs and not imposition of the customs duty on the domestically grown cut flowers as such. In case of excisable goods, even the present notification takes resort to Section 3 of the 1944 Act, as can be seen from the Paragraph 3 of the notification extracted above. Whereas, the provisions of the 1962 Act are invoked only when the goods are non-excisable. In the present case, since the cut flowers are non-excisable goods, the demand for payment of customs duty had rightly been made vide show cause notice under the provisions of the 1962 Act. Whether the amendment in terms of Notification No. 56/01Cus dated 18.05.2001, purporting to amend the criteria for determination of duty on inputs, is prospective or retrospective in its application? - HELD THAT:- The notification posits of carrying out amendments and substituting the charging clause of the inputs used in case of non-excisable goods. The language employed in the notification does not offer any guidance on whether the amendments as made were to apply prospectively or retrospectively. It is a settled proposition of law that all laws are deemed to apply prospectively unless either expressly specified to apply retrospectively or intended to have been done so by the legislature. The latter would be a case of necessary implication and it cannot be inferred lightly. Upon a bare reading of the circular, it can be noted that it discusses the mechanism in force before the amendment, the reason for bringing in the change and the changes brought in. The circular does not mention that the earlier methodology in force was deficient or devoid of clarity in any manner. It rather says that the same was being disadvantageous to the EOU units as compared to the DTA units due to the difference in charging rates in the respective circulars. Upon considering that, the amendment has been brought in to establish parity with the excise notifications and to vindicate the disadvantage that earlier regime was causing to EOU units. Merely because an anomaly has been addressed, it cannot be passed off as an error having been rectified. Unless shown otherwise, it has to be seen as a conscious change in the dispensation, particularly concerning the fiscal subject matters. The word anomaly has been defined in Webster's New Twentieth Century Dictionary to mean abnormality; irregularity; deviation from the regular arrangement, general rule or the usual method . The proviso to the charging section of the 1944 Act provides that an EOU making DTA sales shall be charged duty as if the goods were imported into India and in value equal to the customs duty chargeable thereto. No doubt, the said provision applies only in cases of excisable goods, but the exemption notification providing for similar duty by terms thereunder for non-excisable goods, can be understood to have been made to equate the duty in case of excisable as well as non-excisable goods. Therefore, it must follow that the said provision was not an error that crept in but was intentionally introduced by the Government to determine the charging rate. That being the position prior to amendment, the amendment brought in cannot be said to be clarificatory in nature. The appellant was obliged to comply with the conditions prescribed by the EXIM Policy, to avail the exemption under the stated notification; and failure to do so, must denude them of the exemption so granted. Further, since the charging rate prescribed under the exemption notification is under question, any ambiguity in regard to the date of application of the amendment thereto would necessarily have to be construed in favour of the State, unless shown otherwise by judicially acceptable parameters. The next contention of the appellant is that Section 28 of the 1962 Act cannot be invoked to extend the limitation as there was no wilful misstatement or suppression of facts on behalf of the appellant - HELD THAT:- In the fact situation of the present case, the appellant was issued a show cause notice mentioning that it had suppressed the DTA sales of cut flowers to evade payment of duty. Had the appellant in good faith believed that no duty was payable upon the DTA sales of cut flowers, it would have sought prior approval of the Development Commissioner, which it failed to do. Even in the letter seeking expost facto approval, the appellant claimed that they had not used any imported input such as fertilizer, plant growth regulations, etc. in growing flowers sold in DTA, despite having imported green house equipment, raw materials like Live Rose Plants and consumables like planting materials and fertilizers - The burden of proving to the contrary rested upon the appellant, which the appellant failed to discharge by failing to establish that the imported inputs were not used in the production of the cut flowers sold in DTA - In view thereof, the authorities below have rightly invoked Section 28 of the 1962 Act and allied provisions. The CESTAT has rightly upheld the levy of customs duty - appeal dismissed.
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CST, VAT & Sales Tax
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2020 (9) TMI 48
Maintainability of petition - exemption from payment of Sales-tax on sale of Finished Products - Notification-S. O. No.478 S.O.No. 479 both dt. 22.12.1995 - HELD THAT:- This issue can be agitated by the petitioner first with the appropriate authority and thereafter before the appropriate forum in accordance with law. Petition disposed off.
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2020 (9) TMI 47
Validity of assessment proceedings - proceedings made on the basis of the Audit Reports/Inspection Proposals proceeded from the Enforcement Wing or from ISIC Authorities - applicability of Circular No.3 dated 18.01.2019 - HELD THAT:- The Commissioner of State Tax, Chennai had issued Circular No.3 dated 18.01.2019, empowering the Assessing Authority to deviate from the proposals, without seeking for approval from the Enforcement Wing/ISIC Authorities - the Circular has empowered the Assessing Officers to henceforth independently deal with the assessment without being influenced by the proposals of the higher officials. In view of Circular No.3 dated 18.01.2019 issued by the Commissioner of State Tax, Chennai, the impugned proceeding in this Writ Petition, which proceeds on the basis of the proposals/reports of the Enforcement Wing/ISIC, is set aside and consequently, the matter is remanded back to the Assessing Officer - Petition allowed by way of remand.
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2020 (9) TMI 46
Issuance of C forms - purchase of High Speed Diesel from the suppliers in other States - Central Sales Tax Act, 1956 r/w. The Central Sales Tax (Registration and Turnover) Rules, 1957 - HELD THAT:- The Hon'ble Division Bench in the case of 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] had clearly directed the State and the Revenue Authorities not to restrict the use of C Forms for their inter-State purchases of six commodities by the assessees and other registered dealers at concessional rate of tax and they are further directed to permit online downloading of such declaration in C Forms to such dealers. The circular letter of the Commissioner dated 31.05.2018 was quashed and the Hon'ble Division Bench also set aside the consequential notices and proceedings initiated against all the assessees throughout the State of Tamil Nadu. Petition allowed.
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2020 (9) TMI 45
Nature of transaction - Sales or works contract - Remittal of assessment order - Rectification of error - Section 84 of the Tamil Nadu Value Added Tax Act, 2006 - HELD THAT:- Clearly what has been done is a remittal of the assessment to the file of the Assessing Officer with a direction to redo the assessment in the light of the guidelines set out by the Supreme Court in M/S. KONE ELEVATOR INDIA PVT. LTD. VERSUS STATE OF TAMIL NADU AND OTHERS [ 2014 (5) TMI 265 - SUPREME COURT] , the contract and other documentation inter se the parties and the terms of the contracts that governed the transactions - In compliance thereof, a pre-assessment was issued to the petitioner wherein the Assessing Authority proposed to complete the assessment based on the findings of the minority judgment in M/S. KONE ELEVATOR INDIA PVT. LTD. VERSUS STATE OF TAMIL NADU AND OTHERS [ 2014 (5) TMI 265 - SUPREME COURT] . Since the Officer referred specifically to paragraph 140 of the judgment, the petitioner objected to the notice, pointing out that what had been referred to in the notice was the minority view and not the majority view. It is relevant to note that no evidence was produced, by way of contracts or other documentation to support the petitioners case that the transactions constituted works contract only. The issue canvassed before me relates to the interpretation of the contract as well as other documents entered into inter se the petitioner and its customers which do not appear to even be part of the record of the assessing officer. It is only upon such examination that one could conclude as to whether the transaction is question would constitute a works contract or a direct sale. The Assessing Authority, in the present case, has come to the conclusion that the transaction is a sale and the sole argument advanced by learned counsel for the petitioner is that, in coming to this conclusion, what has been applied is the minority view in the Kone Elevator (India) Pvt. Ltd and not the majority view. The only point repeatedly canvassed both before the Authorities as well as before this Court is that the judgment of the Hon ble Supreme Court (majority view) must be applied to the transaction in issue. This cannot be accepted for the mere asking. It is for the petitioner to establish its case and produce enough factual particulars to support the conclusion that the nature of the transaction is a works contract and not a sale. This exercise has not been undertaken. In the absence of any supporting material (contracts, invoices etc.), the conclusion of the authority was that the transactions in issue cannot simply be compared to, or equated with the transaction of supply of lifts by Kone Elevators. The petitioner may not agree with the conclusion that the Assessing Authority has arrived at. However, it is not for this Court sitting in writ jurisdiction to review the materials relating to the transactions engaged in by the petitioner and come to its own view and it is thus only appropriate that the petitioner approach the appellate authority by way of appeal. While expressing no view whatsoever on merits, that is, whether the transactions in issue are liable to be classified as works contract or sale , I am not of the view that this is a fit matter for interference under Article 226 of the Constitution of India and permit the petitioner to file a statutory appeal. An appeal, if filed within a period of four weeks from today, will be entertained by the first Appellate Authority without reference to any limitation, but subject to all other statutory conditions - Petition disposed off.
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