TMI Tax Updates - e-Newsletter
September 8, 2021

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Corporate Laws Securities / SEBI Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

Articles

1. AUDIT COMMITTEE

   By: DR.MARIAPPAN GOVINDARAJAN

2. KYC, Re-KYC, misconceptions around KYC and Inoperative Accounts: Customers harassment by Banks and Financial Institutions (FIs),MFs, Brokers over CKYC

   By: shivaprasad chhatre

News

1. CBDT amends Income-tax Rules, 1962 to ease authentication of electronic records submitted in faceless assessment proceedings

2. IEPFA and ICSI hold seminar on empowering investors to celebrate Azadi ka Amrit Mahotsav

Notifications

GST - States

1. 05/2021- State Tax (Rate) - dated 3-8-2021 - Telangana SGST

Provide the concessional rate of CGST on Covid-19 relief supplies, up to and inclusive of 30th September 2021

2. 04/2021- State Tax (Rate) - dated 3-8-2021 - Telangana SGST

Amendment in Notification No. 11/2017 – State Tax (Rate), Dated. 29.06.2017

Income Tax

3. 101/2021 - dated 6-9-2021 - IT

Income-tax (27th Amendment) Rules, 2021. - Prescribed manner of authentication of an electronic record under electronic verification code under sub-clause (b) of clause (i) of sub-section (7) of section 144B

Law of Competition

4. L-3(2)/Regln-Gen. (Amdt.)/2021/CCI - dated 6-9-2021 - Competition Law

Competition Commission of India (General) Amendment Regulations, 2021

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/MRD2_DCAP/P/CIR/2021/626 - dated 7-9-2021

Position Limits for Currency Derivatives Contracts

GST

2. 158/14/2021 - dated 6-9-2021

Clarification regarding extension of time limit to apply for revocation of cancellation of registration in view of Notification No. 34/2021-Central Tax dated 29th August, 2021

DGFT

3. 22/2015-20 - dated 6-9-2021

Implementation of MoU between Government of Republic of India and the Government of the Republic of the Union of Myanmar for import of Urad and tur from Myanmar

4. 21/ 2015-20 - dated 6-9-2021

Implementation of MoU between Government of Republic of India and Government of Republic of Malawi for import of pigeon peas from Malawi

Highlights / Catch Notes

GST

• GST Liability for Works Contract: Construction Completion Date Crucial, Per Notification No. 06/2019 & 03/2019-Central Tax.

  Case-Laws - AAR : When the GST liability would arise - Valuation - business of providing works contract and construction services - development of land - the levy is imposable on the date of completion of the construction as per Notification No. 06/2019 -Central Tax (Rate) - Notification no.3/2019-Central Tax (Rate) is applicable to this transaction even if the actual cost of construction is available. - AAR
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• Vocational training courses approved by NCVT or SCVT are tax-exempt under Serial Number 66 of Notification 12/2017.

  Case-Laws - AAR : The services provided by the applicant under vocational training courses recognized by National Council for Vocational Training (NCVT) or State Council of Vocational Training (SCVT) are exempt under Serial Number 66 Notification 12/2017 Central Tax (Rate) as education as part of an approved vocational education course. - AAR
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• Senior Intelligence Officer Arrests Assessee Against Court Orders; High Court Disposes Contempt Cases, Seeks Specific Findings.

  Case-Laws - HC : Contempt of court - Right of Senior Intelligence Officer to arrest the assessee as against the directions of the Court - The Directorate has misread and misconstrued the observations in paragraph nos. 8 and 9 of the order dated 21.02.2019. It is well-settled in law that any one intentionally avoiding the mandate in law is not entitled for any protection in law – but, there should be a finding on the issue - contempt cases stand disposed of - HC
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Income Tax

• High Court Upholds Section 11 Exemption; Criticizes AO for Ignoring Appellate Orders in Charitable Objects Case.

  Case-Laws - HC : Exemption u/s 11 - Proof of charitable object u/s 2(15) - Rule of Consistency - AO ignored the cardinal principle of judicial discipline in not adhering to the orders passed by the Appellate Authority. Thus, for all the above reasons we find that the Tribunal ought not to have reversed the order passed by the CIT(A). - HC
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• Depreciation on Goodwill in Amalgamation Rejected: Deferred Sales Tax Liability Not Intangible Asset, Lacks Valuation Details.

  Case-Laws - AT : Depreciation on goodwill - amalgamation - acquisition of the deferred sales tax liabilities - MOU agreed to purchase the Assets consisting the Immovable properties - On the date of execution of MoUs, the liability was a known liability, therefore, it cannot be treated that it is a intangible asset and cannot be treated as a goodwill. Before us the assessee has not produced any details in regard to how he has arrived the value of assets and entry in the books of accounts. Therefore the contention of the assessee is rejected - AT
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• Assessee Not Liable for Interest as Bank Delays Cheque Clearing; Advance Tax Deemed Paid on Time u/ss 234B, 234C.

  Case-Laws - AT : Interest u/s 234B and 234C charged for default in payment of advance tax - assessee has submitted certificate from the Punjab National Bank that the cheques issued by the assessee have been deposited and sent for clearing on the same date (i.e. before 15th) but were cleared after the due date (17 th and 18th) thus not liable to pay interest for default of payment of advance tax - The assessee is deemed to have paid the advance tax within the due date of payment. Hence, not liable to be charged any interest u/s 234B and 234C - AT
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• Tax Deduction Approved: Assessee Successfully Proves Section 80-IC Claim Despite Initial Denial Due to Inconclusive Evidence.

  Case-Laws - AT : Exemption u/s 80-IC - Claim denied as no work was carried at the Baddi Unit - There is no concrete material on record which would suggest that the assessee’s claim was not genuine and no work was carried at the Baddi Unit. The fact that the assessee had one internet connection / AC or inadequate computer facilities or the fact the bank accounts were not maintained at Baddi location is only a matter of perception and nothing conclusive could be borne out of those observations. Assessee had well substantiated its claim of deduction u/s 80-I - AT
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• High Court Upholds Revenue's Case, Invalidates Tribunal's Order on Section 10(38) Exemption for Penny Stock Transactions.

  Case-Laws - HC : Exemption u/s 10(38) - no material on record to establish the genuineness of the purchase of shares - penny stock purchases - Role of the assessee in promoting a company, the relation of the assessee with that of the promoter and the role of inflating of prices, etc. - - The issue has already been decided in favor of revenue by this HC. - Order of ITAT set aside and order of CIT(A) restored - HC
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• Court Rules Reopening u/s 147 Not Justified; No Omission by Assessee, Just a Change of Opinion.

  Case-Laws - HC : Reopening of assessment u/s 147 - Case of the petitioner is not falling within the proviso Clause (c) of explanation 2 to Section 147 of the Income Tax Act and the respondents could not able to establish that there was a failure on the part of the Assessee to disclose fully and truly all material facts and further, this Court could able to arrive a conclusion that the factual inference drawn is also change of opinion, the petitioner is entitled to succeed in the present case. - HC
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• High Court Sets Aside Assessment Under Sec 144B for Violating Natural Justice; Orders New Assessment Process.

  Case-Laws - HC : Faceless assessment u/s 144B - Natural Justice Principles' [NJP] - SCN issued calling upon writ petitioner-assessee's response by 59 minutes post 23.00 hours on 26.07.2021 - The Impugned Assessment order is set aside solely on the ground of non adherence to statutorily ingrained NJP principle; - Assessing Authority directed to do de novo exercise. - HC
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• Supreme Court Interim Order Blocks Appeal on Reopening Tax Assessment u/s 147 Due to Limitation Period Issues.

  Case-Laws - HC : Reopening of assessment u/s 147 - period of limitation - The appellant having enjoyed the benefit of the interim order passed by the Hon'ble Supreme Court on 08.12.2016, restoring the position, which stood as on 08.06.2014, are not entitled to maintain a challenge to the reopening/reassessment on the ground of limitation. - HC
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• Objective Satisfaction Needed for Reopening Tax Assessment u/s 147; Participation Required if Initiated After Four Years.

  Case-Laws - HC : Reopening of assessment u/s 147 - Reason to believe - The objective satisfaction would be sufficient for the purpose of allowing the Assessing authority to proceed with the reopening proceedings. - The reasons furnished in the case of the petitioner would be sufficient for the purpose of reopening of assessment as the case of the petitioner is initiated beyond a period of four years, but within a period of six years and therefore, the petitioner is bound to participate in the reopening proceedings for the purpose of defending their case - HC
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Customs

• Swivel chair components in disassembled form classified under heading 9401, sub-heading 94013000 for imports.

  Case-Laws - AAR : Classification of imported goods - chairs in disassembled form - There appears to be no doubt that the components of swivel seats/chairs proposed to imported are specifically designed for manufacture/assembly of goods described under the sub- heading 94013000 - it is concluded that heading 9401 is the appropriate classification for the components of swivel seats in disassembled state, the only possible entry at eight-digit level is 94019000. - AAR
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• Appeals on undervalued aluminum scrap imports dismissed; notices issued by unauthorized officer under Customs Act, Section 28(4).

  Case-Laws - SC : Undervaluation of goods - various types of Aluminium scrap imported - Jurisdiction - proper officer to issue SCN - these appeals must fail as the show cause notice(s) in the present cases was also issued by Additional Director General (ADG), Directorate of Revenue Intelligence (DRI), who is not a proper officer within the meaning of Section 28(4) read with Section 2(34) of the Customs Act, 1962. - SC
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• Customs Valuation Ruling: Importer's Acceptance of Higher Value Insufficient for Mis-declaration Without Additional Evidence.

  Case-Laws - AT : Valuation of imported goods - Light Melting Scrap (LMS) - High Sea Sales - just acceptance by the importer of the enhanced value in import of some consignment, solely cannot be ground for establishing the charge of mis-declaration against him - AT
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Direct Taxes

• Provisional Property Attachment Challenged Under Benami Transactions Act; Validity of Show Cause Notice in Question.

  Case-Laws - HC : Benami Transactions - provisional attachment of property - validity of show cause notice - for all purposes, it is only the commencement of proceedings under the Act and the petitioner has to respond to the show cause notice by submitting their explanations/objections along with the documents and evidences and thereafter, the authorities are bound to adjudicate the matter in the manner provided and take appropriate decision. - HC
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Indian Laws

• Supreme Court Reviews Constitutional Validity of 97th Amendment on Multi-State Co-operative Societies and Legislative Power Division.

  Case-Laws - SC : Legislative Power to make laws with respect to Multi-State Co-operative Societies - Power of Center versus Power of State - Application of the Doctrine of Severability - Vires of the Constitution (Ninety Seventh Amendment) Act, 2011 which inter alia introduced Part IXB under the chapter heading ‘The Co-operative Societies’ - Dissenting orders passed in regard to the application of the Doctrine of Severability. - SC
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Service Tax

• Appellant Wins Refund Claim After Double Payment of Tax Liability; Burden of Proof on Department per Verification Report.

  Case-Laws - AT : Refund claim - tax liability discharged by the appellant twice - The verification report of the department itself is supporting the appellant’s contention that the same liability has been discharged twice by the appellant once inadvertently in the inactive account, subsequently, in the active account - no other evidence was required to be produced by the appellant. Otherwise also it is a settled law that onus always rests upon the department to prove the allegations raised in the show cause notice - Refund allowed - AT
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Central Excise

• Interest Due on Wrongly Availed Cenvat Credit From Date Taken Until Reversal, Even If Unused.

  Case-Laws - AT : Levy of interest - Cenvat credit availed wrongly - In the Rule it is clearly provided that whether the credit is taken or utilized the interest will be chargeable. In the present case even if the credit was not utilized but taken wrongly therefore, the interest is chargeable from the date of taking credit till the date of reversal, if any made - the appellant is liable to pay interest. - AT
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• Appellant's Refund Claim Denied for Exceeding One-Year Deadline Under Explanation (B) to Section 11B, Central Excise Act 1944.

  Case-Laws - AT : Refund of amount appropriated during the pendency of appeal before the CESTAT - any claims made as a consequence of Appellate Order/(s) will have to pass through the rigours of (ec) ibid. - The application for refund here is filed on 14.08.2020, which is clearly after the prescribed period of one year from the relevant date as prescribed under (ec) of Explanation (B) to Section 11B of the Central Excise Act, 1944 and hence, the appellant does not pass through the rigours of the specific provision under (ec) ibid - AT
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VAT

• Claim for Damages Dismissed Due to Missed Six-Month Limitation Period, Resulting in Loss of Right to Sue.

  Case-Laws - HC : Claim of damage (compensation) from the department for putting plaintiff (Assessee) into unnecessary litigation - Period of limitation - The appellant did have a case for damages against the respondents but on account of his not filing the suit within six months from the cause of action arose, his right to suit was lost. - HC
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Case Laws:

• GST

• 2021 (9) TMI 320
  Agreements entered on or before 29th September 2019 with unregistered persons - Applicability of paragraph 2A of Notification No. 03/2019-Central Tax (Rate) dated 29th March, 2019 - actual cost of construction of services are known - valuation rule applicable for identifying the value of supply for construction services rendered - Rule 30 of CGST Rule, 2017 - time of supply - adoption of Rule 31, instead of Rule 30 of CGST Rule, 2017 in terms of proviso to Rule 31 of CGST Rules - Section 15 (5) read with Section 2(87) of CGST Act, 2017 - HELD THAT:- Para 2A of the Notification provides the value to be taxed where a person transfers development rights or FSI to a promoter against consideration and does not limit itself to the transfer of development rights alone to be the taxable event as stated by the applicant. Here in the instant case, the owners have vested the rights to develop the immovable property owned by them, into a residential apartment, with the applicant. So the contention of the applicant that this para would not be applicable to this transaction as it does not involve transfer of development rights is not sustainable - Section 148 allows the Government, on the recommendations of the GST Council, to notify a certain class of registered persons and to prescribe special procedures with regard to payment of tax and administration of such persons. Payment of Tax encompasses value to be adopted for payment of such tax (measure) and time of payment of such tax (point of taxation). Vide Para 2A, the value to be adopted for construction service in respect of apartment handed over to the landowners against the development right received from such land owners are prescribed and the Time of Supply is notified vide Notification No. 06/2019-Central Tax (Rate) - the class of persons i.e., the promoters who receive development rights for construction against consideration payable in the form of construction of commercial or residential apartments or in any other form including cash and the value to be adopted for such construction services and the time of Supply for payment of tax on such construction services rendered. In the case at hand, from the submissions of the applicant, it is evident that the applicant though had entered into the JDA with the landowners, who are unregistered before September 2019, when the clause 2A of the Notification No. 11/2017-C.T (Rate) dated 28.06.2017 as amended, was amended to person instead of registered person , the time of supply in the case at hand falls after such amendment only. Here the date of completion is yet to arrive and so the developer being the taxable person would be liable to pay the tax on such date of completion - In the instant case, the Time of Supply falls after the amendment in the Para 2A making the method of valuation to be adopted for the construction service extended to the land owners both registered or unregistered against the development rights and therefore, the applicant has to adopt the value as per Para 2A to the Notification and the liability to tax arises on the date of issuance of completion certificate for this project or the date of first occupation. Thus, the Value of construction services provided by a promoter to land owner being a non-registered person shall be determined based on the total amount charged by the promoter for similar apartments in the project from independent buyers, other than the land owner, nearest to the date on which such development right etc. is transferred to the promoter, less the value of transfer of land, if any, as prescribed in paragraph 2 of Notification No. 11/2017-CT(R) dated 28.06.2017. Whether the N/N. 03/2019 is applicable, when the actual cost of construction of services is known? - HELD THAT:- In the instant case, the date of levy being the date of issuance of completion certificate, Para 2A becomes applicable to them and so the value should be calculated only. The said para prescribes that the value of construction in respect of such apartments shall be deemed to be equal to the Total amount charged for similar apartments in the project from the independent buyers, other than the person transferring the development rights/FSI - As the law has provided for such valuation, the contention that para 2A is not applicable when the actual cost of construction is available does not hold water as we cannot go beyond the law pronounced. Hence the valuation as prescribed in the said para 2A becomes squarely applicable in the present case. Paragraph 2A the Notification no.3/2019-Central Tax (Rate) dt. 29.03.2019 is applicable to the agreement entered into between the applicant and the owners of the land in as much as the levy is imposable on the date of completion of the construction as per Notification No. 06/2019 -Central Tax (Rate) dated 29.03.2019 - Notification no.3/2019-Central Tax (Rate) dt. 29.03.2019 is applicable to this transaction even if the actual cost of construction is available.

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• 2021 (9) TMI 319
  Classification of supply - principal supply of fishing boats and vessels - classifiable under HSN Code 8407 taxable at 5% GST rate or not - Goods of supply under HSN code 8409, 8483, 8902, 8487, 8501, 8502, 8415, 8418, 8413 which is also supplied to fishing boats and vessels mainly - applicability of circular No.52/26/2018-GST - HELD THAT:- The applicant has stated that they are providing complete sales Service Support to all their customers and have multiple Service Centers/trained manpower across the Coastline for the same, whereas during hearing it was informed that they have not carried on this activity Pre-GST regime and also they don t have any purchase orders at present. In the case at hand, the applicant has stated that they have been established in March 2020 for the proposed supplies but had not furnished any documentary evidence to substantiate their proposed supply in the form of any Purchase Order from any class of recipient, List of goods to be supplied or any documentary evidence to prove the proposed business of the applicant, i.e., any correspondences with the proposed principal suppliers with whom they intend to enter into transactions or agreements/Purchase orders for further supply. In this situation, without the specifics of the proposed supply, substantiated with the material facts, this authority is constrained to rule on the applicability of the said entry to the proposed transactions, based on the clarification in the Circulars and the rulings extended by the Advance Ruling authorities of Kerala, Maharashtra, etc. Therefore, without material evidence for the proposed supply, no ruling is extended on the clarifications sought by the applicant.

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• 2021 (9) TMI 318
  Exemption under GST - services provided under vocational training courses recognized by National Council for Vocational Training (NCVT) or State Council of Vocational Training (SCVT) - exempt either under Entry No. 64 of exemption list of Goods and Service Tax Act 2017 or under Educational Institution defined under Notification 12/2017 Central Tax (Rate)? - HELD THAT:- The applicant Society, a Non-Governmental Organization was established in the year 1973. The Leprosy Mission Regional Vocational Training Centre at Vadathorasalur, Tamil Nadu was started in the year 1996. It trains and supports employment of young adolescents coming from families affected with leprosy and individuals with disabilities. Their project benefits Children self affected with leprosy, Children of leprosy affected persons, differently abled, Parentless Children. Applicant is conducting courses under formal Trades and informal trades. Course falling under formal trades are courses affiliated with the National Council for Vocational Training (NCVT) and State Council of Vocational Training (SCVT) - In the instant case, the applicant s activity falls under Education as part of an approved vocational education course in respect of the courses listed as Formal Trades for which they possess affiliation under NCVT/SCVT. Hence in respect of these courses, they fit under the definition of educational Institution under Clause 2(y) of the Notification No.12/2017 dated 28.06.2017. Whether the courses conducted by the applicant are approved vocational education courses? - HELD THAT:- In the instant case, the courses offered by the applicant namely Mechanic (Motor Vehicle), Electrician, Sewing Technology are courses approved by National Council for Vocational Training (NCVT/Central) which has been evidenced by the certificates issued to candidates on completion of courses as produced by the applicant. These certificates are issued by NCVT wherein the name of the applicant is mentioned as the name of the institute. In respect of Mechanic Refrigeration Air Condition and Central Plant, Electrical Technician and Automobile Mechanic are approved by State Council of Vocational Training (SCVT), it is seen that the certificates are issued by the Department of Employment and Training of Government of Tamil Nadu wherein the name of the applicant figures as the institute imparting the training - from the certificates issued to the candidates completing the above said vocational courses, it is clear that the courses are affiliated to the NCVT/SCVT which falls under SI. No. 66 Notification 12/2017 Central Tax (Rate) as education as part of an approved vocational education course. The services provided by the applicant under vocational training courses recognized by National Council for Vocational Training (NCVT) or State Council of Vocational Training (SCVT) are exempt under Serial Number 66 Notification 12/2017 Central Tax (Rate) as education as part of an approved vocational education course. In the instant case, courses affiliated to SCVT are exempt subje.ct to re-affiliation by the Department of Employment and Training of Government of Tamil Nadu.

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• 2021 (9) TMI 299
  Payment/reimbursement of the applicable GST - Works Contract executed prior to GST implementation i.e. 01.07.2017 and work of which were continued post 01.07.2017 - HELD THAT:- It is deemed proper to direct the respondent No.3- Principal Secretary, Public Works Department, Government of M.P., Bhopal to decide the said representation which will be filed by the petitioner by a speaking order after providing opportunity of hearing to the representative of the petitioner within a period of three months from the date copy of this order is produced before him. Petition disposed off.

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• 2021 (9) TMI 298
  Contempt of court - Right of Senior Intelligence Officer to arrest the assessee as against the directions of the Court - petitioners did not appear before the Senior Intelligence Officer and have failed to submit necessary documents and tender other evidences - HELD THAT:- The writ Court formed an opinion on a conjoint reading of sections 69 and 70 of the Central Goods and Services Tax Act, 2017 that the Senior Intelligence Officer is not authorized to arrest an individual to whom he had issued summons on the first date of his appearance. It is certainly not the import of section 69 read with section 70 of 2017 Act that an individual who is avoiding appearance before the authority without any just excuse can claim that even if he appears after a dozen summons the authority cannot take coercive action against him, including his arrest. The Directorate has misread and misconstrued the observations in paragraph nos. 8 and 9 of the order dated 21.02.2019. It is well-settled in law that any one intentionally avoiding the mandate in law is not entitled for any protection in law but, there should be a finding on the issue - contempt cases stand disposed off.

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• 2021 (9) TMI 272
  Maintainability of appeal - appeal filed within the prescribed time limit or not - due to COVID-19 pandemic situation, appeal could not be filed within stipulated time - appeal filed against the order of cancellation need to be decided or not - HELD THAT:- Hon ble Supreme Court of India while disposing off IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [ 2021 (3) TMI 497 - SC ORDER] has held that In computing the period of limitation for any suit, appeal, application or proceeding, the period from 15.03.2020 till 14.03.2021 shall stand excluded - the delay stands condoned. Whether appeal filed against the order of cancellation need to be decided or not? - HELD THAT:- The appellant has filed returns upto date of cancellation of registration hence, the appellant has substantially complied with the provisions of the CGST Act/Rules, 2017 in the instant case. Therefore, the registration of appellant may be considered for revocation by the proper officer. Accordingly, the appeal of the appellant is allowed. Further, the proper officer is allowed to consider the revocation application of the appellant after due verification of payment particulars of tax, late fee, interest and status of returns. Appeal disposed off.

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• Income Tax

• 2021 (9) TMI 326
  Reopening of assessment u/s 147 - Reason to believe - Assessment is reopened beyond a period of four years, but within a period of six years - HELD THAT:- As based on the return of income filed by the petitioner / assessee, the assessment order has been passed and subsequently certain new tangible materials were traced out for the purpose of reopening as the AO has reason to believe that income chargeable to tax has escaped assessment - the assessee cannot say that he has produced all the material facts and books of accounts etc., Even if such materials are produced, if the authorities formed an opinion that the tax escaped assessment, then they are empowered to initiate reopening proceedings. Assessment is reopened beyond a period of four years, but within a period of six years and therefore, mere availability of tangible material would be sufficient for the purpose of invoking the powers under Section 147 of the Act. This failure on the part of the petitioner was considered for reopening of assessment and the finding is given that the assessee company has misleading the assessing authorities by furnishing incorrect particulars - this Court cannot arrive a finding in this regard. It is for the assessee to establish his case during the course of reassessment proceedings. The writ petition is filed, challenging the reopening proceedings. Thus, objective satisfaction would be sufficient for the purpose of allowing the Assessing authority to proceed with the reopening proceedings. Objective satisfaction would be sufficient for the purpose of allowing the Assessing authority to proceed with the reopening proceedings. Once, the materials are available and such materials were not taken into consideration by the original assessing authority, or any findings are given in the assessment order, which would be sufficient for the purpose of reopening of assessment and once such reopening is made based on tangible materials, then the assessee has to defend his case by furnishing further particulars or explanations or documents during the course of reopening proceedings. High Court cannot form any opinion in respect of such findings to be made. Only endeavour of the High Court is to ensure that, whether the conditions stipulated and the process adopted for the purpose of reopening of assessment in consonance with the provisions of the Act and in accordance with the Directives of the Hon ble Supreme Court of India in the case of GKN Driveshafts [ 2002 (11) TMI 7 - SUPREME COURT] are not. If the conditions are fulfilled, then it is for the assessee to defend their case in the manner known to law. The reasons furnished in the case of the petitioner would be sufficient for the purpose of reopening of assessment as the case of the petitioner is initiated beyond a period of four years, but within a period of six years and therefore, the petitioner is bound to participate in the reopening proceedings for the purpose of defending their case. - Decided against assessee.

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• 2021 (9) TMI 325
  Reopening of assessment u/s 147 - assessee argued notice is beyond the period of limitation as prescribed - whether the assessee can assail the order of the AO rejecting the objections by filing writ petition under Article 226 of the Constitution of India? - correctness of the interim orders granted in the writ petitions - how the time limit prescribed under proviso to Section 153(2) read with Explanation 1(ii) is to be computed? - HELD THAT:- The writ appeals were intra-court appeals before the Hon ble Division Bench against the interim order granted in the writ petitions. On a perusal of the judgment/order passed by the Hon ble Division Bench [ 2014 (7) TMI 605 - MADRAS HIGH COURT] , it is not clear as to whether there was any interim order granted by the Hon ble Division Bench staying the order of interim stay granted in those writ petitions - the assessee as well as the Revenue reconciled with the fact that the entire batch was clubbed together and heard. Therefore, we are convinced to state that the stand taken by the assessee before us as well as before the learned Single Bench is unacceptable. Hon ble Supreme Court had observed that during the pendency of the appeal before it, stay of reassessment was granted, which was directed to be continued till the disposal of the writ petitions before the High Court. Assuming the learned Senior Counsel for the appellant is correct, after the order was passed by the Hon ble Supreme Court, the order of stay stood revived, which would mean that even after, the order of stay was not extended beyond 08.06.2014, which is deemed to have been extended from 09.06.2014 pursuant to the judgment/order of the Hon ble Supreme court dated 08.12.2016. In fact, the assessee was basking under the said interim order and therefore, it would not lie in the mouth of the assessee to now contend that the proceedings are barred by limitation The argument on behalf of the appellant wants us to adopt a laser edge approach and if such proposition is to be accepted, it would result in great prejudice to the litigant, who approaches the Court. There are several decisions which hold that even if the interim orders are not extended, as long as the matters are pending before the Court, the authorities, who are bound by the interim orders, though initially granted for a limited period, would always be guided by the fact that the main case is still pending and would await the decision of the Court. The Assessing Officer while completing the reassessment proceedings, has rightly made an observation that had he proceeded further without knowing as to what was the nature of the order passed by the Court, there is every likelihood that he would be hauled up for contempt. Thus, we find that the argument as projected by the appellant is wholly unacceptable and in the facts and circumstances of the case as we have elaborated above, such an argument can never be advanced by the appellant. The appellant having enjoyed the benefit of the interim order passed by the Hon ble Supreme Court on 08.12.2016, restoring the position, which stood as on 08.06.2014, are not entitled to maintain a challenge to the reopening/reassessment on the ground of limitation. As pointed out by the Assessing Officer, the assessee in their letters dated 22.09.2014 and 23.10.2014, did not raise any objection regarding limitation, their prayer was to keep the proceedings in abeyance as they have filed Special Leave Petition before the Hon ble Supreme Court. It is only on 24.10.2014, the date on which the reassessment order was passed, the assessee raised a plea regarding limitation. Simultaneously they were pursuing the matter before the Hon ble Supreme Court and as could be seen from the judgment/order of the Hon ble Supreme Court [ 2016 (12) TMI 878 - SUPREME COURT] the appellant-assessee had the benefit of an order of stay of reassessment proceedings. Therefore, the assessee s plea that the proceedings are barred by limitation is absolutely frivolous and cannot be entertained and rightly rejected by the Assessing Officer as well as by the learned Single Bench. Therefore, the assessee has to necessarily avail the appellate remedy as against the order of reassessment dated 24.10.2014 and agitate all issues on merits except the contentions with regard to the limitation, which we have rejected in this appeal.

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• 2021 (9) TMI 324
  Faceless assessment u/s 144B - Natural Justice Principles [NJP] - SCN issued calling upon writ petitioner-assessee s response by 59 minutes post 23.00 hours on 26.07.2021 - HELD THAT:- A clear and indisputable violation of NJP is a certain exception to the Rule and the case on hand directly and squarely fits into this exception owing to the narrative set out thus far. In this regard, as already alluded to, Tin Box Company [ 2001 (2) TMI 13 - SUPREME COURT] Case law becomes relevant it comes to the aid of the writ petitioner in the case on hand owing to the factual matrix and the most relevant paragraph in Tin Box case law The above buttresses the principle that in a given case of indisputable NJP violation i.e., aforementioned facet of NJP, availability of statutory appeal argument pales into insignificance. With regard to the third point which turns on Section 144B(7)(viii), this Court refrains itself from expressing any opinion on the same at this point of time as I only propose to relegate the matter for assessment afresh after considering the writ petitioner-assessee s response, which has not been done qua the impugned order. Therefore, when the response of writ petitioner-assessee is considered, it will include considering the writ petitioner-assessee s request for a personal hearing. This much clarity will suffice and any further elaboration would be unnecessary as that would only burden this order with particulars that are not imperative for appreciating this order. The Impugned Assessment order is set aside solely on the ground of non adherence to statutorily ingrained NJP principle; - Assessing Authority directed to do de novo exercise.

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• 2021 (9) TMI 323
  Reopening of assessment u/s 147 - tangible material for reopening - Reopening beyond periods of four years - unabsorbed depreciation of the Amalgamating Company was excess adjusted - HELD THAT:- Reopening of the assessment, in the case of the Writ Petitioner is falling beyond the period of four years. Thus the conditions stipulated under proviso Clause (c) of explanation 2 to Section 147 of the Act is to be complied. Mere reason to believe is insufficient for the purpose of assessment beyond the period of four years. Change of opinion - Assessing Authority, while passing the original Assessment Order considering the very same materials as well as the informations provided and the Court Orders formed an opinion that it is a case of amalgamation. Thereafter, they are again forming an opinion that the transaction does not come under purview of Section 2(1B) of the Income Tax Act and it is an ordinary takeover of business by acquiring shares. Where two opinions are possible in respect of a particular transaction and the Assessing Authority formed a particular opinion and passed an Assessment Order and the other opinion later on formed for the purpose of reopening of assessment beyond four years from and out of the same materials without any alteration or change, then such opinion formed at later point of time, undoubtedly to be construed as change of opinion . Failure on the part of the Assessee to disclose fully and truly all material facts - TDS credit pertaining to GTPL was allowed in the hands of Roca India. Therefore, the prerequisite condition as to existence of reason to believe that income has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment has not been satisfied. As in the Original Assessment Order itself, the Assessment Authority made a finding regarding unabsorbed depreciation of amalgamating company. The details are furnished and the Assessing Authority has taken into consideration of all these facts. The rejection order which is impugned is passed only based on the factual inferences drawn from and out of the very same materials produced by the petitioner at the time of original assessment and has elaborately considered in the aforementioned paragraphs. The inferences drawn at later point of time in the present case, is nothing but a change of opinion and therefore, the subsequent finding on the point that there was a failure on the part of Assessee cannot be relied upon. Case of the petitioner is not falling within the proviso Clause (c) of explanation 2 to Section 147 of the Income Tax Act and the respondents could not able to establish that there was a failure on the part of the Assessee to disclose fully and truly all material facts and further, this Court could able to arrive a conclusion that the factual inference drawn is also change of opinion, the petitioner is entitled to succeed in the present case. - Decided in favour of assessee.

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• 2021 (9) TMI 322
  Exemption u/s 10(38) - no material on record to establish the genuineness of the purchase of shares - penny stock purchases - Role of the assessee in promoting a company, the relation of the assessee with that of the promoter and the role of inflating of prices, etc. - Tribunal remitting the issue back to the file of the Assessing Officer by quoting the decision in the case of Kanhaiyal Sons (HUF) [ 2019 (2) TMI 1640 - ITAT CHENNAI ] wherein the onus has been shifted to the Revenue with a direction that the Assessing Officer is to bring on record the role of the assessee in promoting the company and the relation of the assessee if any with that of the promoters and role of inflating of prices etc., which exercise had already been done by the Assessing Officer and the SEBI HELD THAT:- Identical issue was considered by this Court in several other matters where the Tribunal followed the said decision and the Court allowed the appeal filed by the Revenue, which judgment had become final. One such decision is in the case of CIT Vs. Manish D.Jain (HUF) [ 2020 (12) TMI 740 - MADRAS HIGH COURT ] to which, one of us (TSSJ) was a party. The above substantial question of law raised in this appeal is identical to that of the question raised in the said case. - The issue has already been decided in favor of revenue by this HC. Since the above legal position fully covers the issue in the case on hand, no useful purpose will be served in ordering notice to the respondent and more particularly when the above legal position attained finality and the assessee therein or any other assessee, whose case was dealt with in similar matter had filed any appeal. - Order of ITAT set aside and order of CIT(A) restored - Decided in favour of revenue.

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• 2021 (9) TMI 314
  Recovery of the outstanding tax demand from the amounts lying deposited in foreign banks - Whether bank account can be held to be property - Corruption activity by some of NTPC officials - petitioners were maintaining accounts with National West Minister Bank, London which has been frozen by the order of the Special Court - whether the entire amount frozen in London and transferred to India is the case property or alleged proceeds of the crime and may be liable for confiscation in case the petitioner s are convicted and thus cannot be utilized for fulfilling the tax demands due against the petitioners? - petitioners contends that despite the investigation pending since 2006, no cognizance of the offence has been taken, much less, framing of any charge against the petitioner even for the offences punishable under Section 420/120-B IPC HELD THAT:- Bank account of the accused or any of his relations is property within the meaning of Section 102 of the Criminal Procedure Code and a police officer in course of investigation can seize or prohibit the operation of the said account if such assets have direct links with the commission of the offence for which the police officer is investigating into. The contrary view expressed by the Karnataka, Gauhati and Allahabad High Courts, does not represent the correct law. It may also be seen that under the Prevention of Corruption Act, 1988, in the matter of imposition of fine under sub-section (2) of Section 13, the legislatures have provided that the courts in fixing the amount of fine shall take into consideration the amount or the value of the property which the accused person has obtained by committing the offence or where the conviction is for an offence referred to in clause (e) of subsection (1) of Section 13, the pecuniary resources or property for which the accused person is unable to account satisfactorily. The interpretation given by us in respect of the power of seizure under Section 102 of the Criminal Procedure Code is in accordance with the intention of the legislature engrafted in Section 16 of the Prevention of Corruption Act As per the status report filed by the CBI, the amounts transferred by TPE to RAPL in the NatWest Bank, London account, in relation to the impugned transaction are mentioned in entries 2 and 3 above, totalling to a sum of USD 2,15,71,843.90. However, the amount which was frozen and received in India is beyond the amount in relation to impugned transaction with TPE. The amount received in excess of the amount received from TPE by RAPL qua the impugned transaction cannot be prima facie termed as case property or the proceeds of the crime liable to be confiscated or for compensation in case the petitioners are charged and convicted. Consequently the learned Special Judge is directed to retain the amount received in lieu of the frozen amount of USD 2,15,71,843.90 alongwith the interest accrued thereon from the date of receipt till date and transfer the balance amount alongwith the interest accrued thereon received in the account at SBI, Tees Hazari, to the income-tax department.

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• 2021 (9) TMI 312
  Reopening of assessment u/s 147 - reason to believe - payment effected in foreign currency towards loan guarantee fee/ interest, no tax was deducted by the assessee at source - HELD THAT:- This Court is of the considered opinion that based on the return of income filed by the petitioner / assessee, the assessment order has been passed and subsequently certain new tangible materials were traced out for the purpose of reopening as the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. Under these circumstances, the assessee cannot say that he has produced all the material facts and books of accounts etc., Even if such materials are produced, if the authorities found that the tax escaped assessment, then they are empowered to initiate reopening proceedings. assessment is reopened within a period of four years and therefore, mere availability of tangible material would be sufficient for the purpose of invoking the powers under Section 147 of the Act. As pointed out in the reasons, the petitioner has represented that there is no item of expenditure falling under Section 40A of the Income Tax Act. However, the respondent subsequently found that the payment effected in Foreign Currency / interest, no tax was deducted by the assessee at source. This failure on the part of the petitioner was considered for reopening of assessment and the finding is given that the assessee company has misleading the assessing authorities by furnishing incorrect particulars. However, this Court cannot arrive a finding in this regard. Once, the materials are available and such materials were not taken into consideration by the original assessing authority, or any findings are given in the assessment order, which would be sufficient for the purpose of reopening of assessment and once such reopening is made based on tangible materials, then the assessee has to defend his case by furnishing further particulars or explanations or documents during the course of reopening proceedings. High Court cannot form any opinion in respect of such findings to be made. Only endeavour of the High Court is to ensure that, whether the conditions stipulated and the process adopted for the purpose of reopening of assessment in consonance with the provisions of the Act and in accordance with the Directives of the Hon ble Supreme Court of India in the case of GKN Driveshafts [ 2002 (11) TMI 7 - SUPREME COURT ] are not. If the conditions are fulfilled, then it is for the assessee to defend their case in the manner known to law. - Thus the reasons furnished in the case of the petitioner would be sufficient for the purpose of reopening of assessment as the case of the petitioner is initiated within a period of four years and therefore, the petitioner is bound to participate in the reopening proceedings - Decided against assessee.

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• 2021 (9) TMI 307
  Unabsorbed depreciation set off against capital gains in any Assessment Year prior to 2001-2002 - Period of limitation for carrying forward of Unabsorbed depreciation loss prior to assessment year - beyond the eight year period mandated under the provisions of Section 32 - HELD THAT:- It is not in dispute that the substantial question of law framed for consideration has been answered against the Revenue in the case of CIT Vs. Best Crompton Engineering Ltd. [ 2021 (8) TMI 515 - MADRAS HIGH COURT ] once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. - Decided against the Revenue.

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• 2021 (9) TMI 306
  Exemption u/s 11 - Proof of charitable object u/s 2(15) - Rule of Consistency - denial of exemption on the ground that conducting lectures, workshops, seminars and earning rental income from multi-storeyed building and running of hostel are commercial in nature - whether Tribunal was right in holding that the appellant society is not entitled to exemption under Section 11 in the light of the amendment made to Section 2(15) with effect from 01.04.2009? - HELD THAT:- On account of the fact that the assessee had succeeded before the CIT (Appeals) for assessment year 2010-11 and the said order having become final, applying the Rule of Consistency the revenue cannot take a different stand for the assessment year under consideration, AY 2011-12. Nevertheless there are decisions wherein it has been held that though the cardinal principle is that each assessment year is a distinct and separate unit, nevertheless if the facts and the nature of activities done by the assessee and the nature of claim made by the assessee are identical for the earlier assessment years. Unless there are strong and compelling reasons to take a different view, the revenue should be bound by the decisions in the earlier as well as the subsequent assessment years so far as the said assessee is concerned. This in other words terms as the Rule of Consistency. In the instant case, for the assessment year 2010-2011, the Assessing Officer took a similar view as that of the view taken by the Assessing Officer for the assessment year under consideration AY 2011-2012. Against such decision, the assessee filed appeal before the CIT(A)-VII, Chennai. The CIT(A) after elaborately considering the factual matrix allowed the appeal filed by the assessee. In the said decision, the CIT(A) has examined the very same rental receipts received by the appellant/assessee and granted relief to the appellant/assessee. Aggrieved by the same, the revenue preferred an appeal before the Tribunal and the appeal was withdrawn by the revenue Tribunal has recorded the application filed by the revenue seeking leave to withdraw the appeal and nowhere in the said application it has been mentioned that the appeal has not been pursued on the ground of low tax effect. Rather the application states that no appeal to the Appellate Tribunal is necessary against the order of the CIT(A) dated 19.02.2014. If such was the factual position, the Assessing Officer on the date when he completed the assessment on 31.03.2014 the order passed by the CITA() in the assessee s own case for the earlier assessment year dated 19.02.2014 was available and on record. Assessing Officer was bound by the said order because the said order has not been reversed or modified on the date when the assessment order for the current assessment year 2011-2012 was passed i.e. on 31.03.2014. Therefore, the Assessing Officer ignored the cardinal principle of judicial discipline in not adhering to the orders passed by the Appellate Authority. Thus, for all the above reasons we find that the Tribunal ought not to have reversed the order passed by the CIT(A). Tax case appeal is allowed, the order passed by the Tribunal is set aside and the order passed by the CIT(A) restored. - Decided in favour of assessee.

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• 2021 (9) TMI 305
  Depreciation on non compete fee at 25% - Depreciation on intangible assets - Disallowance of claim by revenue as non compete fee paid does not confer upon the assessee any right which could be used in the business - it only restrains the other person from carrying on his business in competition with the assessee s business - Tribunal allowed depreciation - HELD THAT:- It is not in dispute that the substantial questions of law which have been framed for considered have been answered against the revenue and in favour of the assessee in the case of Commissioner of Income Tax, LTU, Chennai vs. Areva T D India Ltd. [ 2021 (4) TMI 32 - MADRAS HIGH COURT] - Decided against revenue.

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• 2021 (9) TMI 304
  Deduction u/s 80HHC - deduction in the case of MAT assessment is to be worked out on the basis of profit computed under regular provisions of law applicable to computation of profit and gains of business or profession - whether Tribunal is right in law in holding that in computing book profit under Section 115JB of the Act, the deduction under Section 80HHC should be limited to 30% of profit from export business, as provided under Section 80HHC(1B)? - HELD THAT:- The substantial questions of law, which have been framed for consideration, have been answered against the Revenue by the Hon ble Supreme Court in the case of Ajanta Pharma Ltd. vs. Commissioner of Income-Tax [ 2010 (9) TMI 8 - SUPREME COURT]. The said decision was followed by a Division Bench of this Court in the case of CIT vs. M/s. Bannari Amman Sugars Ltd. [ 2018 (7) TMI 1845 - MADRAS HIGH COURT] to which one of us (TSSJ) was a party as held as held that computation has to be done under the book profits and not under the normal computation.

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• 2021 (9) TMI 302
  TDS u/s 195 - Disallowance u/s 40(a)(i) - payments of export sales commission and service charges made to non-resident without deduction of tax at source - Indo South Korean DTAA - ITAT deleted the addition as affirming the order passed by the Commissioner of Income CIT(A) - whether in the instant case, the CIT(A) has recorded a finding as to the nature of services availed by the assessee from the non-resident.? - HELD THAT:- CIT(A) perused the copies of the agreement and on facts, found that the amounts paid by the assessee were sales commission and marketing services to non-resident agents outside India for their services rendered outside India by way of canvassing sales order and none of the entities to whom payments were made by the assessee have a Permanent Establishment [PE] in India. Further, taking note of the relevant Articles in the respective DTAA agreements entered into between India and the respective Country, it was held that the income earned is taxable in those Countries. First Appellate Authority and the Tribunal have held that what was paid by the assessee to the non-resident was sales commission and cannot be regarded as if for technical services - no question of law or substantial question of law arises for consideration. - Decided against revenue.

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• 2021 (9) TMI 301
  Reopening of assessment u/s 147 - addition of deemed income u/s.69 - unexplained investment of the amount spent out on the purchase of shares - eligible reason to believe the escapement of real income - Tribunal upholding the reopening by issue of notice u/s.148 - HELD THAT:- Tribunal had considered the factual matrix and taken note of all the grounds urged by the assessee and concurred with the factual findings recorded by the Assessing Officer as well as the CIT(A) that the assessee could not furnish any details regarding the payments received from the Sundry Debtors and that even their names could not be furnished, and that apart, the Tribunal has recorded that the assessee had admitted that income details are available with the assessee and in the absence of any details, the Tribunal rightly held that it is impossible to believe the theory that the assessee had received the payments from its old Sundry Debtors after a gap of two to three years, and accordingly, the appeal was dismissed - No substantial question of law.

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• 2021 (9) TMI 300
  Valuation of Gift - Whether the guideline value for the purpose of the valuation of stamp duty and registration can be taken the basis for the purpose of determining the value of gift as against the value as per Schedule II of Gift Tax Act? - Penalty - HELD THAT:- The valuation of the property was done in terms of the provisions of the Gift Tax Act and in the process of doing such evaluation, the Assessing Officer relied upon the registered sale deeds and the stamp duty which was paid on such instruments though the apparent sale consideration reflected in those documents were less. In any event, this being a question of fact, the burden was on the assessee to prove that what he receive was only Rs. 3 lakhs from the purchaser/partnership firm and not Rs. 15,34,500/-. This aspect of the matter having not been established by the assessee, we find that the Tribunal rightly affirmed the orders passed by the authorities below. Thus, adequate relief has been granted to the assessee by the Tribunal and there is nothing to interfere with such order - the substantial question of law is answered against the assessee - appeal dismissed.

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• 2021 (9) TMI 296
  Levy of penalty u/s 271(1)(b) for non-compliance to the notice issued u/s 142(1) - HELD THAT:- It is an undisputed fact that the assessment order for A.Y. 2015-16 has been passed u/s 143(3) - We find in the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust [ 2007 (8) TMI 386 - ITAT DELHI-G] has held that when the order is passed u/s 143(3) of the Act and not under section 144 of the Act, it would mean that subsequent compliance in assessment proceedings are considered to be a good compliance and defaults committed earlier are ignored by Assessing Officer and in such circumstances, there could be no reason to come to the conclusion that the default was willful. We find that the facts in the case under consideration to be identical to that of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust (supra) and in such a situation, we relying on the aforesaid decision held that penalty imposed u/s 271(1)(b) of the Act was not warranted more so, when the assessment order has been passed u/s 143(3) - Decided in favour of assessee.

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• 2021 (9) TMI 290
  Deduction u/s 80IC - interest received by the assessee from the FD - whether interest received should have been netted off with interest paid since it is inextricably linked with the business of the eligible unit and as such only the net interest ought to have been considered for the purpose of deduction u/s. 80IC - HELD THAT:- As relying in assesse s own case [ 2021 (3) TMI 1248 - ITAT KOLKATA] we restore this issue raised in the additional ground of appeal of the assessee to the file of Ld. CIT(A) to pass appropriate order in terms of the Tribunal s order in assessee s own case supra for AY 2014-15. Therefore, this appeal of assessee is allowed for statistical purposes.

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• 2021 (9) TMI 289
  Assessment u/s 153A - Addition u/s 68 - assessee has received gift during the year in cash - assessee could not explain the various credits appearing in the bank accounts of the assessee and could not establish the genuineness of the said transactions - HELD THAT:- As noted that during the course of assessment proceedings assessee had not filed the requisite details to the satisfaction of the Assessing Officer for which huge additions have been made - As seen that various additions have been made by the AO which amounts to double addition of the same amount i.e. in the hands of the assessee as well as in the hands of two companies and other relatives. The submission of the assessee during the course of search in his statement recorded u/s 132(4) of the Act that he was a moderator or facilitator of accommodation entries and that only commission income should be considered as his income also has not been considered by the lower authorities. Considering all we deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one more opportunity to the assessee to substantiate his case and decide the issue as per facts and law. AO while deciding the issue shall also keep in mind the decision of the Hon ble Delhi High Court in the case of CIT vs Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] - Appeal of assessee allowed for statistical purposes.

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• 2021 (9) TMI 288
  Deduction u/s 35(1)(ii) - weighted deduction to donation to School of Human Genetics and Pollution Health ( SHG PH) - proof of valid approval granted under the Act by the CBDT - Whether cancellation of registration to SHG PH, vide CBDT order dated 15.09.2016 with retrospective effect can invalidate the assesse s claim of deduction under Sec. 35(1)(ii)? - HELD THAT:- If the assessee acting upon a valid registration/approval granted to an institution had donated the amount for which deduction is claimed, such deduction cannot be disallowed if at a later point of time the same is cancelled with retrospective effect. We have perused the aforesaid judicial pronouncements relied upon by the ld. A.R and are persuaded to accept his claim that the issue involved in the present appeal is squarely covered by the view taken by the co-ordinate benches of the Tribunal. Recently, a co-ordinate bench of Tribunal i.e ITAT Mumbai Bench C , Mumbai in the case of M/s Pooja Hardware Pvt. Ltd. [ 2019 (10) TMI 1281 - ITAT MUMBAI] had after relying on the earlier orders of the co-ordinate benches of the Tribunal on the issue pertaining to the allowability of deduction under Sec. 35(1)(ii) of the Act in respect of a donation given to SHG PH by the assessee before them had vacated the disallowance of the assessee s claim for deduction under Sec.35(1)(ii) Accordingly, we set-aside the order of the CIT(A) and vacate the disallowance of the assessee s claim for deduction under Sec.35(1)(ii) . Ad hoc disallowance of 20% of the expenses - expenditure been disallowed by the A.O on the basis of his conviction that the personal element in incurring of the said expenditure could not be ruled out - HELD THAT:- Admittedly, it is a matter of fact borne from the records that neither of the lower authorities had pointed out as to what all expenses claimed by the assessee were not supported by documentary evidences, nor earmarked those which as per them did not inspire much of confidence. Also, nothing is discernible from the records which would reveal as to what all expenses the A.O was of the view had not been incurred by the assessee wholly and exclusively for the purpose of his profession. In the backdrop of the aforesaid facts, we find substantial force in the claim of the ld. A.R that devoid of any such specific finding by the lower authorities, the disallowance of the aforesaid expenses in a most arbitrary manner on an ad hoc basis could by no means be held to be justified - Decided in favour of assessee. Addition u/s 68 - unexplained cash credit - assessee received the gift from his father - discharge the primary onus as cast upon to prove the nature and source of the cash credit - HELD THAT:- As both the financial statement of Shri. Virendra Tandon (father) for the year under consideration i.e A.Y 2014-15, as well as his admission in the gift deed , dated 21.06.2013 a/w a mention of the source of the gift transaction in question i.e accumulated savings of the past, as were filed by the assessee with the A.O in the course of the assessment proceedings, therein, clearly sufficed to discharge the primary onus that was cast upon him to prove the nature and source of the cash credit in his books of accounts. A.O on the basis of half-baked facts and premature observations, and all the more without considering the material that was filed by the assessee in the course of the assessment proceedings before him, had rejected the assessee s claim of having received the gift from his father; and treated the same as an unexplained cash credit within the meaning of Sec. 68 of the Act. We cannot remain oblivious of the fact that Shri Virendra Tandon had duly disclosed the gift transaction in his financial statement for the year under consideration i.e A.Y 2014-15, and also categorically admitted in the gift deed , dated 21.06.2013 of having gifted the amount in question to his son. As the assessee s father i.e Shri Virendra Tandon had gifted the amount in question to his son i.e the assessee by way of financial assistance at a time when the assessee is stated to be struggling for his survival in the industry. In our considered view, utilisation of accumulated savings by a father for the purpose of financially assisting his son is not something unheard of in our society. - Decided in favour of assessee. Charging of interest u/s 234A, 234B, 234C and 234D - HELD THAT:- As the charging of interest under the said respective sections is mandatory as per the judgment of the Hon ble Supreme Court in the case of CIT vs. Anjum M. H. Ghaswala Ors. [ 2001 (10) TMI 4 - SUPREME COURT] therefore, the A.O is directed to recompute the same while giving effect to our aforesaid order. The Ground of appeal no. 5 is allowed in terms of our aforesaid observations.

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• 2021 (9) TMI 287
  Additions u/s. 41(1) - Liability as extinguished and assumed the character of income as envisaged in section 41(1) - CIT(A) allowed the issue of the assessee and deleted the additions - HELD THAT:- Admittedly, these amounts were received prior to 2003 and was outstanding due to closure of assessee-company. The advances so received were adjusted to the receivables and reconciliation was filed. As on 31.03.2016, the advances received against sales amount is `Nil as per the Balance Sheet. Therefore, the liability cannot be construed to have been extinguished and assumed the character of income as envisaged in section 41(1) of the I.T. Act. In this context, we rely on the judgment in the case of CIT v. Shri Vardhman Overseas Ltd. [ 2011 (12) TMI 77 - DELHI HIGH COURT] wherein it was held that the liability appearing in the Balance Sheet tantamount to acknowledgement of debt. Therefore, it was held by the Hon ble High Court that the liability has neither ceased to exist nor there is a remission of liability in terms of section 41(1) of the I.T. Act. In view of the judgment of the Hon ble High Court of Delhi (supra) and aforesaid reasoning, we uphold the order of the CIT(A). - Decided against revenue.

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• 2021 (9) TMI 285
  Long term capital gain addition - valid transfer u/s.2(47)(v) - As argued transfer of the relevant capital asset by way of sale deed dt.20-04-2009 in issue was indeed a sham one in light of the alleged Memorandum of Understanding (MoU) dt.20-04-2009 and re-conveyance deed dt.18-05-2009; respectively - HELD THAT:- We find no reason to express our concurrence with this taxpayer s stand. This is for the reason that he has already executed the impugned registered sale deed; treated as a valid transfer u/s.2(47)(v) of the Act which is deemed to have superseded all the oral as well as un-registered documents between the vendor and the vendee; as the case may be. And also that whatever are the documents sought to be filed by way of additional evidence, the same only contain pleadings before the respective civil and criminal courts (supra) which are yet to attain finality. We are unable to treat the assessee or his family members pleadings or evidence therein as forming the sole basis so afar as assessment of his impugned capital gains is concerned. We wish to refer to hon ble apex court s decision in CIT Vs. Balbir Singh Maini [ 2017 (10) TMI 323 - SUPREME COURT ] rejecting the department s pela seeking to invoke a transfer in absence of registered document, thereby squarely covering the issue so far as the facts herein are involved as this assessee had not only appeared before the registration authority claiming therein that he had indeed transferred peaceful and vacant possession of the relevant capital asset but also received the entire corresponding sale consideration. Any prior or subsequent document therein to, oral as well as an unregistered one ought to be taken as superseded by the foregoing registered transfer document in issue. We therefore quote hon ble apex court s yet another decision CIT Vs. K.Y. Pilliah [ 1966 (10) TMI 35 - SUPREME COURT ] to express our concurrence with the CIT(A) s detailed discussion under challenge. The assessee s strong endeavour to rely on the foregoing litigation (supra) as well as evidence deserves to be declined in light of his registered sale deed dt.20-04-2009. We accordingly uphold the impugned long term capital gain addition in assessee s hands. All the assessee s applications/petitions seeking to admit additional grounds and evidence shall be deemed to have been disposed-of in light of our foregoing detailed discussion.

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• 2021 (9) TMI 284
  Depreciation on goodwill - amalgamation - acquisition of the deferred sales tax liabilities - MOU agreed to purchase the Assets consisting the Immovable properties - As per revenue deferred sales tax liability claimed by the assessee under the head of goodwill sought to be depreciated by the assessee is not proper and not in accordance with law and this is the liability which was existed on the date purchase and it was known liability ,therefore, it cannot be treated as goodwill - HELD THAT:- On the one hand the assessee submits that it is a part of fixed assets included in the cost of the fixed assets and on the other hand, he submits that it is a goodwill which has been arisen towards excess consideration paid for the discharging of liabilities in future date, therefore, it is goodwill and to be named as intangible assets, which are contrary in nature. On the date of execution of MoUs, the liability was a known liability, therefore, it cannot be treated that it is a intangible asset and cannot be treated as a goodwill. Before us the assessee has not produced any details in regard to how he has arrived the value of assets and entry in the books of accounts. Therefore the contention of the assessee is rejected. Entire assets and liabilities were not taken over by the assessee as per MOUs therefore, the assets and deferred sales tax liabilities which are not in the nature of amalgamation. In the impugned case, it appears that the assessee has tried to pass entry in its books of account only giving corresponding effect in the assets side in the balance sheet of the said liability as goodwill, which is a self-creating in nature. The liability will always remain the liability and the liability cannot change in the form of assets. Therefore, the creation of goodwill in the books of account is completely wrong and charging depreciation on the goodwill is also wrong, hence, the depreciation claim of the assessee on the goodwill is not allowable as per the IT Act - assessee is not eligible for claiming depreciation on goodwill since its inception i.e. first year of claiming of depreciation and accordingly, the grounds raised by the assessee on this issue are dismissed. Alternatively, that the assessee may claim the deduction when it is actually paid to the concerned department subject to the First party had claimed it as expenditure and suo motto disallowed under section 43 B(a) of the Income Tax Act. 1961, if it satisfies the conditions stipulated in section 43B(a) of the income tax act. The AO is directed to ensure to avoid double deduction on this count.

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• 2021 (9) TMI 283
  Disallowance of assessee s claim for deduction of Corporate Social Responsibility (CSR) - CIT(A) observed that the expenditure that was incurred by the assessee insofar the same was in the nature of donations, was to be disallowed, for the reason, that the same was not incurred for the purpose of its business u/s 37(1) but that the deductions against the aforesaid donations would be permissible to the assessee in terms of the provisions of Sec.80G - HELD THAT:- No infirmity emerges from the order of the CIT(A), who had rightly held that the expenses and contributions that were made by the assessee towards village development expenses as per the directions of the Government Authorities, whether State or Central, for which the approval of the Competent Authority was received during the year under consideration were to be allowed as a deduction while computing its income. Accordingly, concurring with the view taken by the CIT(A), we are not persuaded to accept the claim of the revenue that the CIT(A) had erred in allowing the assessee s claim for deduction with respect to CSR contributions. The Ground of appeal No. (i) is accordingly dismissed. Disallowance of Land Acquisition Expenses - revenue or capital expenditure - HELD THAT:- As the facts and the issue involved qua the disallowance of land acquisition expenses during the year under consideration, remains the same, as were there before the Tribunal in the assessee s own for A.Y. 2012-13 [ 2019 (1) TMI 1918 - ITAT MUMBAI] , therefore, we respectfully follow the same, and therein, uphold the order of the CIT(A) who had rightly vacated the disallowance of the land acquisition expenses. Disallowance of the provision for enhanced compensation on land acquisition - HELD THAT:- As decided in own case [ 2019 (1) TMI 1918 - ITAT MUMBAI] , the expenditure incurred by the assessee was in the nature of a revenue expenditure that was allowable as a deduction while computing its income, the Tribunal had upheld the view taken by the CIT(A) and had vacated the said disallowance - thus uphold the order of the CIT(A) who had rightly vacated the disallowance made by the A.O as regards the provision for enhanced compensation on land acquisition for the year under consideration. Disallowance of School Expenses - assessee had incurred expenses pertaining to running of Atomic Energy Central School, Oscom (Orissa Sand Complex) as the claim of the assessee before the lower authorities that they were providing funds for running of the school in an area where they were carrying out their mining operations - HELD THAT:- As the facts and the issue qua the assessee s claim for deduction of the expenditure incurred on running the Atomic Energy Central School, Oscom (Orissa Sand Complex), during the year under consideration, remains the same, as were there in its case for the immediately preceding year i.e A.Y. 2012-13 [ 2019 (1) TMI 1918 - ITAT MUMBAI] , therefore, we respectfully follow the view taken by the Tribunal and uphold the order passed by the CIT(A).

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• 2021 (9) TMI 282
  Interest disallowance u/s 36(1)(iii) - nexus between the borrowed funds and advances granted by the assessee - proof of commercial expediency - advances were made at lower rate of interest and in the absence of any commercial / business expediency, the interest disallowance as made by Ld.AO - assessee submitted that there was sufficient interest free own funds with the assessee and the advances were out of commercial expediency - CIT - A deleted the addition - HELD THAT:- As could be seen that there was commercial expediency for the assessee to grant the loan to M/s RHSL since the success of RHSL would impact the business interest as well as profitability of the group as a whole. The main objective was not to earn the interest but to further the business interest of the group as a whole. Hence, no infirmity could be found in the conclusion of Ld. CIT(A) that the funds were advanced out of commercial expediency / business exigencies. The case law of CIT V/s United Breweries [ 1972 (1) TMI 6 - MYSORE HIGH COURT] as referred to by Ld. CIT(A), duly support the said proposition. The same is also supported by case of S.A. Builders V/s CIT [ 2006 (12) TMI 82 - SUPREME COURT] wherein it was held that it was enough to show that the money was expanded not out of necessity and with a view to direct and immediate benefit but voluntarily and on grounds of commercial expediency and in order to indirectly facilitate the carrying on the business. The expression commercial expediency was of wide import and would include such expenditure as a prudent businessman would incur for the purpose of business. The expenditure may not have been incurred under any legal obligation but yet is allowable as business expenditure if it was incurred on grounds of commercial expediency. Therefore, we concur with the conclusions drawn by Ld. CIT(A), in this regard. Only requirement to claim interest expenditure u/s 36(1)(iii) is that the borrowed funds should have been expanded wholly and exclusively for business purposes - As undisputed fact that there is one-to-one correlation between the borrowed funds and the advances granted by the assessee. The funds have been lent for business purposes since the main objective was to develop the SEZ. Therefore, in our considered opinion, the primary requirement to claim deduction u/s 36(1)(iii) was duly fulfilled by the assessee. CIT(A) has computed average borrowing rate @2.99% which would further support the case of the assessee only. - Decided against revenue. Disallowance u/s 14A - suo-moto disallowance made by assessee - CIT-A deleted the addition - HELD THAT:- It is undisputed fact that the assessee has claimed expenditure of Rs. 11 Lacs only out of which it has already offered suo-moto disallowance of Rs. 2.13 Lacs u/s 14A and another disallowance of Rs. 5.77 Lacs as Balances written off . It could be seen that the assessee is a corporate entity and it would necessarily be required to incur routine expenditure to maintain its corporate personality. Therefore, no further disallowance would be warranted on the given facts. By confirming the stand of Ld. CIT(A) on this issue, Dismiss ground of Reveue.

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• 2021 (9) TMI 281
  Revision u/s 263 by CIT - period of limitation - CIT setting aside order passed u/s 143(3) r.w.s. 147 on the ground that the same is erroneous and prejudicial to the interest of the revenue as the issue of share capital and share premium were not verified by the AO - Assessee argued revisionary proceedings as barred by limitation in terms of section 263(2) - HELD THAT:- We are quite convinced with the submissions of the assessee that period of limitation has to be taken from the original assessment order dated 11.03.2013 and not from re-assessment order dated 29.12.2017. It is also true that the issue which was subject matter of revisionary proceedings u/s 263 of the Act was not at all subject matter of re-assessment proceedings u/s 147 of the Act nor addition was made on the items of escapement of income as recorded u/s 148(2). The revisionary order is barred by limitation and accordingly the entire proceedings are invalid and nullity. The case of the assessee is squarely covered by the decision of the Apex court in the case of CIT Vs. Alagendran Finance Ltd. [ 2007 (7) TMI 304 - SUPREME COURT] wherein the very same issue of limitation has been decided in favour of the assessee under similar facts. - Decided in favour of assessee.

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• 2021 (9) TMI 280
  Assessment on a non-existent entity - assessment in the name of the amalgamating company - Whether a curable defect as per Section 292B? - demand u/s 115QA - HELD THAT:- As decided in GENPACT INDIA PVT. LTD. VERSUS DCIT CIRCLE-10 (1) NEW DELHI [ 2020 (7) TMI 712 - ITAT DELHI] once it is found that assessment is framed in the name of non-existing entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of Section 292B of the Act. Hence, the Assessment proceedings as well as the Assessment order itself are void ab initio. Therefore, assessment order is set aside. - Decided in favour of assessee.

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• 2021 (9) TMI 279
  Interest u/s 234B and 234C charged for default in payment of advance tax - assessee has submitted certificate from the Punjab National Bank that the cheques issued by the assessee have been deposited and sent for clearing on the same date (i.e. before 15th) but were cleared after the due date (17 th and 18th) thus not liable to pay interest for default of payment of advance tax - HELD THAT:- A collecting banker acts as an agent of the customer if he credits the latter s account with the amount of the cheque after the amount is actually realized from the drawee banker - As an agent of his customer, the collecting banker does not possess title to the cheque better than that of the customer. If the customer has no title thereto, or his title is defective, the collecting banker cannot have good title to the cheque. In case the cheque collected by him did not belong to his customer, he will be held liable for conversion of money, i.e., illegally interfering with the rights of true owner of the cheque. From the concurrent reading of the above, it can be said that the assessee is deemed to have paid the advance tax within the due date of payment. Hence, not liable to be charged any interest u/s 234B and 234C AO denied grant of interest u/s 244A on the grounds that the refund determined doesn t exceed 10% of the total tax payable - A.Y. 2007-08 - HELD THAT:- Since, the issue of interest u/ s 234B and 234C has been adjudicated in favour of the assessee, there would be upward revision of the interest receivable. The Assessing Officer is hereby directed to re- compute the interest payable and issue the same at the earliest as per Section 244A(1 )(a). AO has added back difference in income reported in AIR - AY 2009-10 - While checking the total interest during the period from AYs 2008-09 and 2009 -10, interest shown as income by the bank as a whole is much higher than the interest shown in the 26 AS and interest certificates. So the data provided in AIR is variable, hence the additions deserves to be deleted. The mismatch arose due to difference in the TDS deducted, the receipt of TDS certificate and the interest earned. The assessee has been continuously following the same system of accounting and found to be accounting for the interest rightly more than which has been reflected in the 26AS - the similar rate of tax for all the years, it is a revenue neutral exercise and no disallowance on account of mismatch is called for. Appeal of assessee allowed.

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• 2021 (9) TMI 278
  Revision u/s 263 by CIT - entitled to deduction under section 32AC - allowance of depreciation on assets acquired earlier, but were installed during the present assessment year - scope of amendment - as argued installation and capitalization was not evident - HELD THAT:- The first proviso to the section inserted Finance Act, 2001 w.e.f. 01/04/2016 mentions that provided that where the installation of the new assets are in a year other than the year of acquisition, the deduction under this sub-section shall be allowed in the year in which the new assets are installed.10. Notes to clauses in the introduction clarifies that it is meant to remove hardships. In our considered opinion, since amendment is meant to remove a hardship, the same needs to be given retrospective effect. This proposition is based upon the Haydens rules or mischief rules. According to this rule, while interpreting statutes, first the problem or mischief that the statute was designed to remedy should be identified and then a construction that suppresses the problem and advances the remedy should be adopted. This proposition is also duly supported by Hon ble Supreme Court decision in the case of Alom Extrusions[ 2009 (11) TMI 27 - SUPREME COURT] and Calcutta Exports Company [ 2018 (5) TMI 356 - SUPREME COURT] that when an amendment is made to clarify or remove the hardship, the same is to be treated as clarificatory amendment and it applies retrospectively. There certainly can be view on this issue that the assessee is eligible for allowance for depreciation on assets which have been acquired earlier, but were installed during the present assessment year. Assessee has provided the details of computation of depreciation including that u.s 32AC to the AO. The grievance of the Ld.CIT, which is echoed by CIT-DR before us is that the AO has not obtained the details of assets acquired earlier, which has been installed during the year. As in the Ld.CIT s view the assets acquired prior to the financial year are not eligible for depreciation u.s 32AC. There certainly can be a legally sustainable view that assessee is eligible for allowance of depreciation on assets, which have been acquired earlier, but were installed during the present assessment year. CIT is not correct in observing that the installation and capitalization is not evident. We find that the installation and capitalization was clearly evident from the financials of the assessee company - AO took the view that the assessee is eligible for the depreciation on all these assets, which have been duly capitalized during the financial ear. It can be said that AO has taken a possible view and if the Ld.CIT is not in agreement there with and takes a contrary view, the same would not give raise to the section 263 jurisdiction with the Ld.CIT. Assessee has filed an additional evidences regarding installation of the machinery. Though, we have already pointed out hereinabove, that once the assets is capitalized in the financials of the company, the same can be said to have taken place only after installation of the company of the assessee. In any case, since assessee s counsel has given the additional evidences before us, we direct the same should be examined by the AO. AO should grant depreciation to the assessee after examination thereof. We set aside the direction of the Ld.CIT that assessee is eligible to claim deduction only where invoice date falls after 01/04/2013.appeal by the assessee stands allowed for statistical purpose.

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• 2021 (9) TMI 277
  Exemption u/s 80-IC - Claim denied as no work was carried at the Baddi Unit - non fulfilling prescribed conditions of claiming deduction u/s 80-IC - HELD THAT:- Assessee is engaged the services of software professionals from sister concern as well as from outside agencies at different rates. The manpower is hired at Rs. 7000/- per day including travelling from sister concerns. This rate is Rs. 9500/- per day for outside agencies. The amount paid to independent professional was Rs. 22.91 Lacs whereas amount paid for manpower hired from sister concern was Rs. 50.10 Lacs - manpower was sourced from various streams viz. independent consultants directly hired by the assessee himself and the manpower hired from sister concerns and outside agencies. This fact has not been fully appreciated by Ld. CIT(A) and hence, the observations that the assessee supplied different names at different point of time and there were inconsistencies in the information supplied by the assessee. These employees were contractual employees whereas the details submitted before Ld. AO was with respect to employees directly hired by the assessee. In the above table, the assessee has specified the nature of work done, details of manpower as well as work sheets showing utilization of the professionals to carry out the work of software development. The sample copies of timesheets have also been placed. Upon perusal of the same, it could be seen that elaborate timesheets have been maintained for time spent by software professionals on various projects. The invoices raised by various agencies for supply of manpower to the assessee has also been placed. It could be seen that these agencies have supplied technical manpower to the assessee to carry out software development work at Baddi. There is no concrete material on record which would suggest that the assessee s claim was not genuine and no work was carried at the Baddi Unit. The fact that the assessee had one internet connection / AC or inadequate computer facilities or the fact the bank accounts were not maintained at Baddi location is only a matter of perception and nothing conclusive could be borne out of those observations. Assessee had well substantiated its claim of deduction u/s 80-IC - Decided in favour of assessee.

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• Benami Property

• 2021 (9) TMI 317
  Benami transaction - benami ownership of the plaintiff over the suit property taken by the defendant in his written statement - right of coparcener in the Hindu Undivided Family - claiming a decree for mandatory and permanent injunction for directing the defendant, the present appellant to hand over vacant possession of the property in question and mesne profits - The plaintiff had pleaded that she became the owner of property by virtue of gift deed executed on 03.09.1984 by her father- Late Sh. K.B. Midha - HELD THAT:- The husband of the plaintiff and the defendant are real brothers being sons of Late Sh. Krishna Lal Gulati. The property in question was gifted by the father of the plaintiff to her daughter i.e. the plaintiff. The defendant in the written statement pleaded many other facts relating to joint business of the family and the partition of the assets of family of Late Sh. Krishan Lal Gulati. The assertion made by the defendant in the written statement was denied by filing a rejoinder. The plea raised by the appellant is that the plaintiff was a Benami holder of the property. Such plea is barred in terms of Section 4(2) of the Act. Since such plea was not available in law, the High Court was justified in passing a decree on the basis of the written statement filed. The arguments that the plaintiff was holding the property in fiduciary capacity is not tenable in as much as the averment made by the defendant is of passing the consideration in favour of father of the plaintiff. The father of the plaintiff was not holding the property in a fiduciary capacity for the defendant. Still further, the defendant has not pleaded that the Plaintiff or her father had any fiduciary capacity as against the defendant is concerned. In the present case, the father of the plaintiff had no fiduciary relationship with the defendant falling in Section 4(3)(b) of the Act. The finding recorded by the Division Bench of the High Court in respect of blending of the property by the plaintiff in the Joint Hindu Family will arise only if it is a case falling under Clause (a) of sub-Section (3) of Section 4 of the Act, 1988. Such was not the case set up by the defendant. In view thereof, we do not find any merit in the present appeal. The appeal is dismissed. As the plaintiff is giving up her claim of mesne profits. The amount of Rs. 12,00,000/- (Rupees Twelve Lakhs) deposited in terms order dated 06.11.2015 of this Court be refunded to the defendant subject to the condition that the defendant hands over vacant physical possession of the property in question to the plaintiff within two months from today.

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• 2021 (9) TMI 311
  Benami Transactions - provisional attachment of property - beneficial owner of the property - Scope of amendment Act - HELD THAT:- In the present case, investigations and search were conducted prior to the amendment Act. The alleged benami transactions were also occurred prior to the amendment. But, the provisional attachment under Section 24 was made after the amendment, which is certainly permissible under Section 1 Sub- Section (3) of the Act. Thus, the reference made by the learned counsel for the petitioner regarding Sub-Section (3) to Section 3 cannot have any application in respect of the facts and circumstances of the case on hand. In the present case, it is not in dispute that the impugned order dated 12.05.2017, is an order of provisional attachment passed under Section 24(4)(a)(i) of the Benami Transactions (Prohibition) Amendment Act, 2016 and the second amendment order dated 26.05.2016 is the notice to show-cause under Section 26(1) of the Act. Thus, for all purposes, it is only the commencement of proceedings under the Act and the petitioner has to respond to the show cause notice by submitting their explanations/objections along with the documents and evidences and thereafter, the authorities are bound to adjudicate the matter in the manner provided and take appropriate decision. This being the scope of the Act, the petitioner has misconstrued the provisions based on certain incorrect interpretations, filed the present Writ Petition. Now, the impugned show cause notice dated 26.05.2017 is to be responded by the petitioner by submitting their explanations/objections, if any and thereafter, the authorities are bound to take a decision, considering the documents and the objections, if any filed by the petitioner. Thus, the petitioner has approached this Court at the initial stage and the adjudication is yet to be completed. Petitioner is at liberty to submit his objections/defence statements, evidences and documents, if any, within a period of three weeks from the date of receipt of copy of this order and on receipt of such objections etc., the respondents are bound to continue the proceedings and complete the same by following the procedures as contemplated as expeditiously as possible, since the matter is pending for a long time and the petitioner is directed to co-operate for the completion of proceedings instead of making an attempt to prolong and protract the issues on flimsy grounds.

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• Customs

• 2021 (9) TMI 321
  Classification of imported goods - chairs in disassembled form - whether the chairs proposed to be imported would merit classification under sub-heading 94013000 of the first schedule to the Customs Tariff Act, 1975 as swivel seat with variable height adjustment? - HELD THAT:- Going by the description of the sub-heading, i.e., swivel seats and variable height adjustment, it is clear that without the seat, which is going to be procured domestically and used in the assembly process post import, it has to be concluded that applying the principle that classification of goods need to be done in the state in which the goods are imported, the essential character of a swivel seat is not achieved. There appears to be no doubt that the components of swivel seats/chairs proposed to imported are specifically designed for manufacture/assembly of goods described under the sub- heading 94013000 - it is concluded that heading 9401 is the appropriate classification for the components of swivel seats in disassembled state, the only possible entry at eight-digit level is 94019000. The components of swivel seats/chairs, proposed to be imported by the applicant in dis-assembled form, merit classification under sub-heading 94019000 of the first schedule to the Customs Tariff Act 1975.

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• 2021 (9) TMI 316
  Undervaluation of goods - Jurisdiction - proper officer to issue SCN - Additional Director General (ADG), Directorate of Revenue Intelligence (DRI) issued the notice - HELD THAT:- In view of decision in CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS [ 2021 (3) TMI 384 - SUPREME COURT] these appeals must fail as the show cause notice(s) in the present cases was also issued by Additional Director General (ADG), Directorate of Revenue Intelligence (DRI), who is not a proper officer within the meaning of Section 28(4) read with Section 2(34) of the Customs Act, 1962. Appeal dismissed.

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• 2021 (9) TMI 297
  Request for release and re-export of goods - sugar - It is the petitioner s case that, being the owner of the goods, it is entitled to re-export, though on payment of necessary re-export charges - Revenue contended that, the Advance Authorisation Licence pertaining to the sugar in question has been issued in the name of R3 and thus the conditions that attach to that licence will have to be satisfied by the petitioner in order to entitle it to re-export. - HELD THAT:- Statutory provisions and regulations cannot, the Bench holds, be interpreted in a manner so as to deprive the exporter of his title to the goods imported. On the question of confiscation of the goods, such a question did not arise in that case, in the light of a factual finding rendered to the effect that the licences issued were current and valid. The counter filed by the Customs Department in this case does not deal specifically with the validity of the licence. It only states that the licence stands in the name of the importer and thus the conditions that attach to the licence would have to be satisfied by any party wishing to deal with the goods. This is a matter to be examined by the authorities, bearing in mind the position that, all that is sought to be done by the foreign exporter/petitioner, is re-export of the goods. Conditions as may be specific to the importer, such as domestic manufacture, would, evidently, not be applicable to the petitioner. Re-export, once permitted, will be upon payment of applicable charges and duties, and in accordance with law - Petition disposed off.

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• 2021 (9) TMI 295
  Valuation of imported goods - Light Melting Scrap (LMS) - High Sea Sales - rejection of declared value - redetermination of the value under Rule 9 of CVR, 2007 - HELD THAT:- The demand made as per the show cause notice has been mechanically confirmed by the adjudicating authority and upheld by the Commissioner (Appeal), without taking into account the fact that the total duty paid by the appellant on two consignments cleared by them was Rs. 2,65,198/- for which the Tr-6 Challans, No 10247825 dated 10.11.2009 and No 10247102 dated 10.11.2009 have been produced by the appellants. If the total duty determined on the four consignments is on enhanced value of Rs. 41,73,804/- is less than the total duty already paid by the appellants, then what the case of revenue is. There appears to be gross misapplication of mind by the authorities concerned. This issue needs to be reconsidered by the authorities below and proper speaking order needs to be passed. While reconsidering the issue on the above aspect, the authorities need to establish the charge of mis-declaration by referring to various evidence produced by the appellant to establish that prevailing international price of the LMS at the relevant time was as per their declared value. In any case appellants were always entitled to ask for a speaking order, for enhancement of the value of the consignments imported in November 2009, in terms of Section 17 (5) of the Customs Act, 1962. The entire issue of mis-declaration of value needs to be reconsidered by the authorities below and proper speaking order giving proper reasoning for the enhancement of value needs to given, just acceptance by the importer of the enhanced value in import of some consignment, solely cannot be ground for establishing the charge of mis-declaration against him - the matter remanded back to the original authority for reconsideration of matter against the two appellants - Appeal allowed by way of remand.

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• Corporate Laws

• 2021 (9) TMI 274
  Sanction of Scheme of Arrangement - Section 230(1) read with Section 232(1) of the Companies Act, 2013 - HELD THAT:- Various directions with regard to holding, convening and dispensing of various meetings issued - directions with regard to issuance of notices also issued. The scheme is approved - application allowed.

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• 2021 (9) TMI 273
  Restoration of name of respondent company in the register of companies - section 252 of the Companies Act, 2013 - HELD THAT:- It is evident from the plea of the Appellant that it admits the default and questions the due process undertaken by the RoC in striking off the name of the Appellant Company as envisaged under Section 248 of the Companies Act, 2013. However, the Appellant is seeking restoration of its name in the register as maintained by RoC, relying on the ground that the Appellant as of date is in active business and has been preparing all its financial statements and in the circumstances, it is just that the name of the Company should be restored on the register of RoC as maintained by the Respondent. A perusal of the documents referred, reflects that the appellant has business operations which necessitate restoration of its name in the Register of Companies. The assumption of RoC that the company was not in operation was merely on grounds of non-filing of the Statutory Returns by the appellant company. The Act itself provides for redressal of these defaults - Merely to disallow restoration on grounds of its failure to file annual returns would neither be just nor equitable. As per several decisions of various Courts it should only be in exceptional circumstances that Courts should refuse restoration where the company has been struck off for its failure to file annual return as that would be excessive or inappropriate penalty for that oversight. The restoration of the Appellant Company s name in the Register will be subject to their filing all outstanding documents for the defaulting years as required by law and completion of all formalities, including payment of any late fee or other charges which are leviable by the Respondent for the late filing of statutory returns - the appeal is allowed subject to payment of costs of Rs. 20,000/- to the Registrar of Companies.

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• Securities / SEBI

• 2021 (9) TMI 310
  Validity of appointment of Grant Thornton Bharat LLP (GTB) as a Forensic Auditor in respect of the financial statements of the respondent No.2/company - conflict of interest - violation of the principles of natural justice - absence of cause of action within the jurisdiction of this Court for maintaining the present petition - HELD THAT:- The cause of action is a bundle of facts which when taken together, with the law applicable to the said facts, gives a right to the plaintiff to seek relief against the defendant. In other words, cause of action is premised on the existence of a group of facts put together that would entitle a plaintiff to approach the court for a remedy against the defendant. In UNION OF INDIA VERSUS ADANI EXPORTS LTD. [ 2001 (10) TMI 321 - SUPREME COURT] , it was held by the Supreme Court that in order to confer jurisdiction on a High Court to entertain a writ petition, the averments in the writ petition must disclose that such integral facts have been pleaded in support of the cause of action that would empower a court to decide the dispute and it is not as if each and every fact pleaded in the petition would automatically lead to a conclusion that there would arise a cause of action within the territorial jurisdiction of a particular High Court, unless the facts are of such a nature that they would have a nexus or relevance with the lis involved in the case. It is also not in dispute that the sale proceeds of the shares of SAIPL to TMPPL, i.e., a sum of Rs. 1000-1200 crores had been placed in an escrow account held in trust for the shareholders and the very same Transaction Committee was required to deliberate upon and evaluate the various options available for distribution of the monies to the shareholders - It has not been denied by the respondent No.2/company that during this entire period when a decision was taken to delist the company and give an exit option to the public shareholders by offering them a floor price of Rs. 63.77 ps per share, Mr. Anoop Krishna was closely connected not only to the management, but also to the aforesaid promoters of the respondent No.2/company. We are unable to sustain the order dated 20.10.2020 passed by the respondent No.1/SEBI insofar as it has upheld the decision taken on 07.10.2020, of appointing GTB as a forensic auditor in respect of the financial affairs of the respondent No.2/company which is accordingly quashed and set aside - Petition allowed.

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• Insolvency & Bankruptcy

• 2021 (9) TMI 275
  Refund of amount illegally retained - amounts were given during moratorium period for supply of goods/components - siphoning off proceeds of Corporate Debtor in contravention of Moratorium - contravention of Section 14, 31 and Section 74 of IBC - section 60(5) of the Insolvency Bankruptcy Code, 2016 - Maintainability of application under Rule 11 of the NCLT Rules, 2016 or under Section 60(5) of IBC, 2016 - HELD THAT:- The provisions of Section 60(5) (a) (b) of IBC, 2016 are not applicable. Section 60(5)(c) of IBC, 2016 states that any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code shall be considered by the Adjudicating Authority - Admittedly, in the present matter, the Resolution Plan has already been approved. This period of 180 days may be extended under Section 12 of IBC, 2016 and in terms of the amended provision of Section 12 of IBC, 2016, the total period of insolvency resolution process is 330 days, which means that the period so referred to in Section 5(14) of IBC, 2016 is subject to the extension made under Section 12 of IBC, 2016 or when the Resolution Plan is approved by the Adjudicating Authority - in the case in hand, the Resolution Plan has already been approved by the Adjudicating Authority on 02.04.2019. Therefore, no insolvency proceeding is pending before the Adjudicating Authority. Maintainability of application under Rule 11 of NCLT Rules, 2016 - HELD THAT:- During the pendency of any matter before the Tribunal, when there is no specific provision under the Act/Code is given only then the Tribunal may pass order by exercise of its power under Rule 11 of the National Company Law Tribunal Rules to deal with such situation. But herein the case in hand, no such matter is pending after the approval of Resolution Plan by the Adjudicating Authority, therefore, a separate application to deal with a new issue cannot be entertained under Rule 11 of the NCLT Rules, 2016. As per Section 25(1) of IBC, it is the first and foremost duty of the IRP/RP to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. And in order to protect and preserve the assets of the corporate debtor, a separate provision has been made under Section 14(2) of IBC and Sub Section 2A of Section 14 is added w.e.f. 28.12.2019, as per which the supply of essential goods or services of the Corporate Debtor shall not be terminated, suspended or interrupted during the period of moratorium. Even before the insertion of Sub Section 14(2A) there was a provision under Section 14(2) of IBC, which authorised the RP to permit anyone to continue the supply of essential goods or services which is necessary to keep the Corporate Debtor as a going concern. The goods/components were supplied by the respondents on the request of the RP during the moratorium period and the RP has acted as per the provision contained under Section 14(2) of the IBC 2016 - there is no contravention of provisions contained under Section 14 of IBC. Application dismissed.

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• Service Tax

• 2021 (9) TMI 293
  Refund claim - tax liability discharged by the appellant twice - unjust enrichment - recoverable arrears pending in respect of the appellant or not - HELD THAT:- It is observed that there is no dispute about the fact that account No. D001 was never a registered account allotted to the appellant for discharging his service tax liability as the registration process for the said account, admittedly could not get completed. There is also no dispute for account No.D002 to have been the active and valid account in the name of appellant facilitating him to discharge his liability towards the taxable services being rendered by him. It is also observed from the record that the impugned refund claim was forwarded to the jurisdictional range officer calling for a verification report. The verification report of the department itself, is falsifying the said case and is supporting the appellant s contention that the same liability has been discharged twice by the appellant once inadvertently in the inactive account, subsequently, in the active account - no other evidence was required to be produced by the appellant. Otherwise also it is a settled law that onus always rests upon the department to prove the allegations raised in the show cause notice. The appellant at the time of arguments has laid emphasis on CA certificate corroborating the appellant s contention. No doubt the said certificate was not produced before the adjudicating authorities below but as already observed above, there were two verification reports by the range officers including that of the jurisdictional range officer supporting the fact that there is no possibility of any invoice or any return pertaining to the account No.D001, the account being inactive for being never registered in the name of the appellant - It is apparent that learned Commissioner (Appeals) has ignored the verification done by the department itself which proves that there is no such liability towards the appellant for the impugned period which require deposit of Rs. 9,16,735/- twice - thus, refund was rightly been filed. Appeal allowed - decided in favor of appellant.

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• 2021 (9) TMI 286
  Non-payment of service tax - Event Management Service - necessary documents to claim input tax credit not produced, is available now - registration for the service taken or not - demand of tax with interest and penalty of 25% if dues paid within 30 days - HELD THAT:- It is noted that from verification of invoices, bank statements, it is revealed that the appellant has not included all the considerations collected from the client in the taxable value for the purposes of payment of service tax. On such score, there are no grounds to interfere with the liability to discharge service for the impugned period. The appellant has put forward the contention that they were not able to produce necessary documents at the time of adjudication so as to claim the input tax credit. It is submitted by her that they now have the documents for the year 2010-11 - the matter can be remanded for the limited purpose of looking into the claim of the appellant with regard to input tax credit for the period 2010-2011 The demand for the period upto 2009-2010 is upheld - the demand confirmed for the period after 1.4.2010 till 20.08.2011 is remanded to the adjudicating authority who shall re-determine the liability after taking into consideration the claim of the appellant with regard to input tax credit. So also, the benefit of imposing lesser penalty as per proviso to Section 28 (1) of Finance Act, 1994 can be extended to the appellant, if eligible - Appeal disposed off in part and part appeal remanded.

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• Central Excise

• 2021 (9) TMI 294
  Levy of interest - Cenvat credit availed on the contribution of service charges collected from employees, which is not Cenvatable - Outdoor Catering Services - levy of penalty - Rule 14 of Cenvat Credit Rules, 2004 - HELD THAT:- The issue of availment of Cenvat credit on employees contribution in respect of Outdoor Catering Services was debatable and the issue has been finally settled in the case of CCE, NAGPUR VERSUS ULTRATECH CEMENT LTD., [ 2010 (10) TMI 13 - BOMBAY HIGH COURT] by the Hon ble Bombay High Court. Therefore, in this backdrop of the issue the malafide intention cannot be attributed to the appellant. Therefore, the penalty imposed by the Lower Authority is not sustainable hence, penalty is set aside. Interest on availment of Cenvat credit - HELD THAT:- It has been settled that the credit on Outdoor Catering Service to the extent of contribution of services charges borne by the employee is not Cenvatable. Therefore, the credit taken by the appellant is wrongly taken credit. Therefore, in terms of Rule 14 of CCR, 2004 interest is chargeable. In the Rule it is clearly provided that whether the credit is taken or utilized the interest will be chargeable. In the present case even if the credit was not utilized but taken wrongly therefore, the interest is chargeable from the date of taking credit till the date of reversal, if any made - the appellant is liable to pay interest. The penalties imposed upon the appellants are set aside and demand of interest is maintained - Appeal allowed in part.

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• 2021 (9) TMI 292
  Refund of accumulated CENVAT Credit lying unutilized in their CENVAT account - closure of manufacturing operations - Section 11B of the Central Excise Act, 1944 - HELD THAT:- There is no dispute that nothing has to be read into the provisions which the legislature in its wisdom has consciously drafted. No disputes also that Rule 5 of the CCR does not speak of refund in a situation where the manufacturing unit is closed down. There is also no doubt that Rule 5 does not specifically prohibit refund when a unit closes down; so, what is not there can never be read into a provision while strictly adhering to the legislative intention as to not read something into a provision. Rule 5, admittedly, does not specifically prohibit refund in a situation where a manufacturing unit closes down and the credit available could not get utilized. Hence, the legislative intention cannot be applied to the advantage of the Revenue especially when the tax suffered amount in the form of CENVAT Credit is lying with the Revenue. The Hon ble High Court of Rajasthan in the case of M/S. WELCURE DRUGS AND PHARMACEUTICALS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR [ 2018 (8) TMI 1169 - RAJASTHAN HIGH COURT] where it was held that Tribunal is fully justified in ordering refund particularly in the light of the closure of the factory and in the light or the assessee coming out of the Modvat Scheme. The lis in the case on hand has already been settled by the Hon ble High Courts and hence, the denial of refund being incorrect, cannot be sustained - Appeal allowed - decided in favor of appellant.

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• 2021 (9) TMI 291
  Refund of amount appropriated during the pendency of appeal before the CESTAT - Applicability of 11B of the Central Excise Act, 1944 - HELD THAT:- The undisputed fact is that the refund was claimed consequent to the Final Order of the CESTAT in M/S. SANMAR FOUNDRIES LTD. VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE, TIRUCHIRAPALLI COMMISSIONERATE [ 2019 (3) TMI 1363 - CESTAT CHENNAI] and hence, the claim is not a normal refund claim. The legislature in its wisdom has inserted (ec) under Explanation (B) to Section 11B with effect from 11.05.2007 with a purpose, thereby carving out an exception from a normal refund claim. This is in the nature of a special provision and hence, any claims made as a consequence of Appellate Order/(s) will have to pass through the rigours of (ec) ibid. The application for refund here is filed on 14.08.2020, which is clearly after the prescribed period of one year from the relevant date as prescribed under (ec) of Explanation (B) to Section 11B of the Central Excise Act, 1944 and hence, the appellant does not pass through the rigours of the specific provision under (ec) ibid - appeal dismissed - decided against appellant.

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• CST, VAT & Sales Tax

• 2021 (9) TMI 308
  Rejection of request for refund of difference of entry tax - Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 - HELD THAT:- Section 11 of the Entry Tax Act cannot be pressed in to service for granting refund. However, this issue has answered against the respondent by the Hon ble Division Bench of this Court in the case of State of Tamil Nadu Vs Ganesh Automobiles, [ 2001 (9) TMI 1117 - MADRAS HIGH COURT ] and the Commercial Tax Officer Vs M/s.Coimabatore Auto Carriage (P) Ltd., [ 2010 (1) TMI 1148 - MADRAS HIGH COURT] . These writ petitions are allowed with a direction to the respondent to refund the excess amount within a period of 3 months from the date of receipt of a copy of this order.

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• 2021 (9) TMI 303
  Claim of damage (compensation) from the department for putting plaintiff (Assessee) into unnecessary litigation - Period of limitation - It is contended that, the plaintiff was put to untold hardship only because the defendants took a false stand that the order reopening the assessments was served on the plaintiff. - violation principles of natural justice - HELD THAT:- No doubt, the appellant has been unnecessarily vexed by the action of the second defendant. The second defendant made a false representation before the tribunal which caused so much hardship to the plaintiff. Therefore, the plaintiff was definitely justified in claiming compensation from the defendants. But the plaintiff ought to have filed the suit for compensation within time - The cause of action for the plaintiff arose on 11.05.2004. The plaintiff instead of filing a suit for damages within six months from the said date chose to file writ petition followed by writ appeal and review petition. In the review petition, the plaintiff pleaded that since his writ appeal was dismissed by granting him liberty to work out his remedy before the civil Court, it should be clarified that the same would be a common law remedy dehors Section 49 and 50 of the TNGST Act. By invoking Section 14 of the Limitation Act, 1963, the bar of limitation could be overcome. In computing the period of limitation for any suit, the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a Court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a Court which is unable to entertain it - Whenever a person bonafide prosecutes with due diligence another proceeding which proves to be abortive and no decision could be rendered on merits, the time taken in such proceeding ought to be excluded as otherwise the person who has approached the Court in such proceeding would be penalized for no fault of his own. The Hon ble Supreme Court in MP. STEEL CORPORATION VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2015 (4) TMI 849 - SUPREME COURT ] however clarified that the period prior to the initiation of any abortive proceeding cannot be excluded for the simple reason that Section 14 of the Limitation Act, 1963, does not enable the litigant to get a benefit beyond what is contemplated by the section- that is to put the litigant in the same position as if the abortive proceeding had never taken place. In the case on hand, the limitation period was six months. The cause of action commenced on 11.05.2004 when the appellate authority allowed the plaintiff s statutory appeal. Limitation began to run from the said date - Writ proceedings under Article 226 of the Constitution of India would fall within the expression civil proceeding occurring in Section 14 of the Limitation Act. But the plaintiff herein filed W.P.(MD)No.1872 of 2005 only on 09.03.2005. By then, the limitation prescribed by Section 50 of the TNGST Act had already expired. Invocation of Section 14 of the Limitation Act would be of no avail. That is why, the plaintiff filed Review Application No.50 of 2007 and pleaded for grant of appropriate liberty which would help him to surmount the himalayan barrier erected by the said provision. Unfortunately, the Division Bench did not grant any such relief. The result of applying the limitation bar contained in Section 50 of TNGST Act has operated very harshly on the appellant - Appeal dismissed.

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• Wealth tax

• 2021 (9) TMI 309
  Violation of principles of natural justice - appeal was accepted ex-parte, without granting reasonable opportunity of hearing - exclusion of the value of the factory land and buildings within the scope of the exception carved out in the definition of net wealth in Section 2(ea) of the Act - said asset was a commercial asset occupied and used for commercial purposes - HELD THAT:- It is true that, unless and until the counsel or the authorized representative has been duly authorized to appear in the matter, the Courts and Tribunals will not entertain the said person to represent, as the assessee can always take a stand that the person who had appeared had not been authorized to appear. In the instant case, facts had to be adjudicated - if the assessee had an opportunity to place their submissions before the Tribunal, the order would have been more elaborate and a speaking order and it would satisfy the principles of natural justice and the principle of audi alteram partem . This opportunity could have been granted to the assessee when they filed the Miscellaneous Petition, which was filed within the reasonable time. The reason assigned by the assessee in the Miscellaneous Petition as to why they sought for adjournment, appears to be a reasonable explanation, more particularly, when the Revenue did not controvert the facts stated in the Miscellaneous Petition nor it was found to be a false statement. Therefore, an opportunity could have been granted to the assessee to place the factual position before the Tribunal for a more effective adjudication and decision on merits. Appeal allowed.

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• 2021 (9) TMI 276
  Properties considered for wealth tax purposes - four properties were treated as stock-in-trade and profits from sale of said properties has been offered to tax under the head income from business , thus not included under wealth tax - HELD THAT:- When the Assessing Officer has accepted profits earned from sale of said assets as income assessable under the head income from business or profession , then there is no reason for the Assessing Officer to treat said assets as investments only for the reason that those assets are not classified as stock-intrade in books of account of the assessee. It is well settled principles of law by the decision of various courts, as per which entries in the books of account is not relevant criteria to decide nature of asset or income or expenses, but what is relevant is nature of assets and intention of the assessee to hold such assets in the business of the assessee. From the intent and conduct of the assessee, it was very clear that those lands were held in the business of the assessee as stock-in-trade and further, profits derived from sale of said land was rightly assessed under the head income from business or profession. The Assessing Officer having accepted income declared from sale of land under the head profits gains from business, was erred in considering those lands as investments which falls under the definition of assets u/s.2(e)(a) of the Wealth Tax Act, 1957, and to charge for wealth tax. Therefore, the Assessing Officer as well as learned CWT(A) completely erred in considering assets held as stock-in-trade within definition of assets for the purpose of wealth tax. The Assessing Officer is directed to delete four assets as claimed by the assessee as stock-in-trade for the purpose of wealth tax - appeal filed by the assessee for both assessment years are allowed.

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• Indian Laws

• 2021 (9) TMI 315
  Legislative Power to make laws with respect to Multi-state Co-operative Societies - Power of Center versus Power of State - Application of the Doctrine of Severability - Vires of the Constitution (Ninety Seventh Amendment) Act, 2011 which inter alia introduced Part IXB under the chapter heading The Co-operative Societies - whether Part IXB is non est for want of ratification by half of the States under the proviso to Article 368(2)? As per R.F. Nariman, J. It is entirely a matter for the States to legislate upon, being the last subject matter mentioned in Entry 32 List II. At this stage, it is important to note that Entry 43 of List I, which deals with incorporation, regulation and winding up of trading corporations including banking, insurance and financial corporations expressly excludes co-operative societies from its ambit. Entry 44 List I, which is wider than Entry 43 in that it is not limited to trading corporations, speaks of corporations with objects not confined to one State. This Court has therefore held, on a reading of these entries, that when it comes to Multi State Co-operative Societies with objects not confined to one state, the legislative power would be that of the Union of India which is contained in Entry 44 List I. It may thus be seen that there is no overlap whatsoever so far as the subject co-operative societies is concerned. Co-operative societies as a subject matter belongs wholly and exclusively to the State legislatures to legislate upon, whereas multi-State cooperative societies i.e., co-operative societies having objects not confined to one state alone, is exclusively within the ken of Parliament. This being the case, it may safely be concluded, on the facts of this case, that there is no overlap and hence, no need to apply the federal supremacy principle as laid down by the judgments of this court - If the subject matter of an amendment falls within the proviso, then the additional procedural requirement is that such amendment shall also be required to be ratified by the legislatures of not less than one half of the States by resolution to that effect passed by those legislatures before the bill making provision for such amendment is presented to the President for assent. A challenge to a constitutional amendment may, therefore, be on procedural or substantive grounds. The present case concerns itself with the procedural ground contained inArticle 368(2) proviso. There can be no doubt that our Constitution has been described as quasi-federal in that, so far as legislative powers are concerned, though there is a tilt in favour of the Centre vis- -vis the States given the federal supremacy principle outlined hereinabove, yet within their own sphere, the States have exclusive power to legislate on topics reserved exclusively to them - there can be no doubt whatsoever that Article 246(3) read with List II of the 7th Schedule of the Constitution of India reflects an important constitutional principle that can be said to form part of the basic structure of the Constitution, namely, the fact that the Constitution is not unitary but quasi-federal in character. It is clear that the exclusive legislative power that is contained in Entry 32 List II has been significantly and substantially impacted in that such exclusive power is now subjected to a large number of curtailments. Indeed, Article 243ZI specifically mandates that the exclusive legislative power contained in Entry 32 List II of the State Legislature is now severely curtailed as it can only be exercised subject to the provisions of Part IXB; and further, Article 243ZT makes it clear that all State laws which do not conform to the restrictions mentioned in Part IXB automatically come to an end on the expiration of one year from the commencement of the Constitution 97th Amendment Act. It is clear, therefore, that the Scheme qua multi-State cooperative societies is separate from the Scheme dealing with other cooperative societies , Parliament being empowered, so far as multi-State cooperative societies are concerned, and the State legislatures having to make appropriate laws laying down certain matters so far as other cooperative societies are concerned. The effect of Article 246ZR is as if multi-State co-operative societies are separately dealt with in a separate sub-chapter contained within Part IXB, as is correctly contended by the learned Attorney General. Also, there is no doubt that after severance what survives can and does stand independently and is workable - the amendments made in Article 19 and the addition of Article 43B would also have to be struck down, which was not pleaded or argued before either the High Court or before us. This being the case, we declare that Part IXB of the Constitution of India is operative insofar as multi-State co-operative societies are concerned. The judgment of the High Court is upheld except to the extent that it strikes down the entirety of Part IXB of the Constitution of India - it is declared that Part IXB of the Constitution of India is operative only insofar as it concerns multi-State cooperative societies both within the various States and in the Union territories of India - Appeal disposed off. As per K.M. JOSEPH, J. I am in complete agreement with the reasoning and conclusion in regard to the provisions relating to Article 240ZI to Article 243ZQ and Article 243ZT, being unconstitutional for non-compliance, with the mandate of the proviso to Article 368(2) of the Constitution of India. However, I regret my inability to concur with the view taken that the Doctrine of Severability will apply to sustain Article 243ZR and Article 243ZS to the multistate cooperative societies operating in the Union Territories, and that, it would not apply to cooperative societies confined to the territories of the Union Territories. Article 243ZH is the definition clause. It is clear that the provisions contained in Articles 243ZI to 243ZQ and Article 243ZT are all meant to apply in regard to cooperative societies, which are born under laws made by the State Legislature. It is beyond the pale of doubt that the legislative powers of the State Legislature, in regard to cooperative societies , falling in Entry 32 of List II of the Seventh Schedule, has been conditioned, cribbed and confined, though no change, as such, is made in the Entry 32 - It is clear that what is relevant is, whether by direct or indirect means, there is a substantive impact on the provisions covered by the proviso to Article 368(2). There is also a clear impact on Article 246(3), which deals with the exclusive powers of the State Legislature and, therefore, there is a change brought about in regard to the provisions contained in Chapter I of Part XI of the Constitution, which is contained in clause (b) to the proviso of Article 368(2). The provisions of Article 243ZI to 243ZQ and Article 243ZT are undoubtedly afflicted with the vice of non-compliance with the procedure, which is mandatory. Resultantly, the said provisions must be treated as still born. These provisions are void in law. The definition clause Article 243ZH clearly would have no meaning and would cease to be workable - the intention discernible was that Parliament intended to provide a uniform set of legislative norms and create rights, liabilities and powers across the board through the length and breadth of the country. In fact, it was to inform all cooperative societies, whether they were governed by laws made by the State Legislatures, falling under Entry 32 of List II of Seventh Schedule, or the appropriate Entry under List I. Once the Court has painted the relevant provisions, which are the substantial provisions (Article 243ZI to 243ZQ), with the brush of unconstitutionality, rendering those provisions, still born, it would appear that the provisions contained in Article 243ZR and Article 243ZS would not have the crutches without which these provisions cease to be workable and are impossible to sustain. The unconstitutional part, which is to be an integral part of Article 243ZR and Article 243ZS, must continue to exist, if the provisions , in question, are to bear life. I respectfully disagree with the view taken by my learned and esteemed Brother in regard to the application of the Doctrine of Severability. - Appeal dismissed. Dissenting orders passed in regard to the application of the Doctrine of Severability.

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• 2021 (9) TMI 313
  Dishonor of Cheque - Suit for recovery of costs and future interest, on the foot of a promissory note - part payment endorsements on the back side of the suit promissory note are true or not - necessary ingredients of a promissory note as defined under Section 4 of the Negotiable Instruments Act, present or not - HELD THAT:- A careful examination of the provisions of the Negotiable Instruments Act in application to Ex.A1 promissory note, makes out that it stands to such description. The predominant consideration stated not only in Section 4 but also as to negotiability, being its one of principal features, described in Sections 13 and 14 of this Act, leaves no manner of doubt, of its nature. Thus, being a negotiable instrument with such characteristics it can be enforced as such. Even otherwise, if the contention of the appellant is accepted, it being an incomplete instrument, the Negotiable Instruments Act did not prohibit enforcing it in the manner stated in Section 20 therein relating to inchoate stamped instruments. The defence of the appellant is only with reference to want of contents in this promissory note describing the parties thereto and not with reference to other characteristics - the premise sought to be made out by the appellant is non existent having regard its nature, Ex.A1 is meeting the requirements being a legal and enforceable negotiable instrument. The peculiarity in this case is that Ex.A1 to Ex.A3 are attributed to the appellant, he being their author. In such circumstances, the burden is very heavy on the appellant being the defendant in the suit, to substantiate his defence as against the material placed by the respondent. Intrinsic worth of Ex.A1 to Ex.A3 should be considered in this context to aid the testimony placed by the respondent on record - the material on record in this case, particularly proof offered by the respondent basing on Ex.A1, her testimony as P.W.1, Ex.A2 and Ex.A3 and supporting testimony of P.W.2 and P.W.3, did establish such transactions. The legal burden in terms of Section 101 of the Evidence Act on the respondent stood discharged thus. Thus, rejecting the contention of appellant on consideration of material, since the entire case revolves around appreciation of evidence and fact based, as rightly pointed out for the respondent, there are no such questions of law much less substantial questions raised in this second appeal for consideration and determination. This case did not meet the requirement under Section 100 CPC for this Court to reconsider the matter - the second appeal is dismissed.

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