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TMI Blog2016 (5) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... sed no further proceedings of any nature are to be entertained by the Board including the application for modification filed by the Company and pending before the Board. The Income Tax Department shall be entitled to take steps for attachment of the properties of the Company, including Ville Parle land as per the provisions of the Income Tax Act and shall be entitled to sell the same. If there are any secured creditors in respect of these properties, such attachment and sale shall be subject to the rights of those creditors. Out of the proceeds, the Principal amount of tax due to the Income Tax Department and even the admitted excise dues shall be paid to the Revenue. Insofar as payment of interest and penalty is concerned, that would be dependent upon the decision which the Board would give. Before parting with, we may point out that M/s. Sheth Developers Private Limited and Suraksha Realty Limited have filed applications to intervene in the matter as they submit that in respect of Ville Parle Land, MOU was entered into by the Company with them. However, once it is found that such an agreement was in violation of the Scheme, the arrangement with the aforesaid interveners ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emand raised by Department but are in dispute before various appellate authorities/Courts. (d) To waive interest and penalty, if any, imposed and not to levy such interest and penalties during the rehabilitation period. (e) To exempt GTC from Capital Gain on sale of surplus land and/or sale of industrial sheds proposed for development on surplus land at Marol. (f) To exempt from TDS against payments to be received by the company. Objection was filed by the appellant against the DRS on 23.03.2001. During hearing dated 29.03.2001, the representative of the appellant stated that the appellant had no objection if the reliefs and concessions sought were not directed to be given but kept for the consideration of the Income Tax Department. 3) The Scheme of reconstruction/rehabilitation which was submitted by the OA, after consultation with all the stakeholders and creditors as per the requirement of law, was approved and sanctioned by the Board (hereinafter referred to as the 'SS-02') vide order dated 16.02.2002. It may be mentioned here that after the DRS was circulated and before it could be sanctioned, the income tax demand of ₹ 366 crores was intimated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rojected fund flow statement, there was to be no decrease in the fixed assets. It was further laid down in para 10(f) under the head 'General Terms and Conditions' that the company would not undertake any major modernization/diversification program/ capital expenditure except normal capital expenditure during the period of implementation of the rehabilitation scheme without specific prior permission of the MA/BIFR. Besides this, Board further directed the Promoters in para 9 (S)(b) of the Sanctioned Rehabilitation Scheme to meet any shortfall in the cash flow projections or any contingency not conceived in the Scheme. In this regard, promoters may raise moneys by way of development of industrial estate and sale thereof of surplus land available at Marol, Mumbai or sale/development of any other surplus assets. 5) Having regard to the aforesaid provisions in the Scheme with its imprimatur by the Board, the Revenue could not and did not resort to any action by way of attachment of movable or immovable assets of the company. 6) The cut-off date in the Scheme was 31.12.1998 and the rehabilitation period of eight years was prescribed therein. However, later on the cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany's Board of Directors (BOD), if any, would stand discharged with immediate effect. (iv) The company would complete necessary formalities with the 'Registrar of Companies' (ROC), as may be required. 9) As per the Revenue, as on 20.01.2010, there were outstanding dues and income tax amounting to ₹ 761.35 crores and the demand thereof was sent to the Company for payment and it was also mentioned that coercive action may be taken to recover the said amount. Such a demand was made on the premise that the net-worth of the company had turned positive and it has ceased to be a sick company. Therefore, having lost the status of a sick company, it was not entitled to the protection under provisions of SICA. 10) Within few days of this demand, the Revenue found from the reports in print media that the company had sold its Vile Parle Property in Mumbai for a sum of ₹ 591 crores. In order to verify this sale transaction, a specific survey under Section 133(A) of the Income Tax Act was conducted from which it was gathered that the Company had entered into a Memorandum of Understanding (MOU) with M/s. Sheth Developers Pvt. Ltd. and Suraksha Reality Ltd. for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication, the Appellate Authority passed the order suspending the proposed online e-auction. The appeal was ultimately decided by the Appellate Authority on 31.01.2011. With other connected appeals, inter alia, ordering that Income Tax Department could not have initiated any coercive action for recovery of its dues against the Company since the unimplemented provisions of the sanctioned rehabilitation scheme for the unexpired period of the scheme are still under implementation. 13) This order was challenged by the Revenue by filing the Writ Petition (C) No. 1875/2011 in the High Court of Delhi. While the aforesaid writ petition was pending certain other developments took place. Some dues of Central Excise Authority were also payable by the company. The Company had written few letters to the Central Excise Authorities, in the year 2010, stating that their manufacturing operation has become unviable because of fixed overheads and consequently a decision was taken to restructure business by entering into reality business. The company also had filed Misc. Application No. 114/2011 with a prayer to extend the duration of rehabilitation period (originally fixed for eight years) by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Appellate Authority had gone against it, the Company challenged the order of the Appellate Authority by filing Writ Petition No. 4614 of 2011. This writ petition was, however, dismissed as 'withdrawn' on 05.07.2011 and the High Court gave two months' time for the clearance of the manufactured stock of goods and payment of excise duty on those goods. The order was silent about income tax dues. The reason for which withdrawal was sought is contained in the following portion of the said order of the High Court. We have heard learned counsel for the parties. Learned senior counsel for the petitioner, on instructions, states that he would like to withdraw the writ petition and the application to pursue the course suggested by the majority view of the AAIFR vide order dated 29.06.2001 for seeking modification of the Scheme by approaching the BIFR. With the withdrawal of the writ petition, order of the Board, as affirmed by the Appellate Authority, attained finality. 17) As noticed above, at that time, Writ Petition No. 1875 of 2011 filed by the Revenue was pending in the High Court. This petition was filed against the order of the Appellate Authority r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctioned scheme. 19) What follows from the above is that the High Court was convinced by the reason that the question as to whether the Company had indulged in sale of assets unauthorisedly and in violation of para 9(5)(b) which is yet to be taken by the Board. The High Court also proceeded on a palpably wrong presumption that the sanctioned Scheme was still under operation and, therefore, bar under Section 22 of the SICA applied. For this reason, it directed that the only remedy left for the Revenue was to approach the Board for lifting of the bar under Section 22 of the SICA. From the facts and events noted above, this premise and assumptions are clearly erroneous and contrary to record. 20) In the first instance, it is to be seen that the Scheme had already expired on 31.03.2011. Application for extension of the Scheme was filed before the Board which was dismissed. The reason given by the Company seeking extension was that the implementation of the Scheme was delayed because of the coercive tactics which the Revenue had adopted against the Company. This claim was found to be hollow and incorrect. The Appellate Authority had upheld this order of the Board, albeit by a majo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties, as required. By these remarks the Appellate Authority only pointed out the breach committed by the company in not taking prior permission and nowhere permitted the company to resort to the same even now as that opportunity was already lost. 23) It is the aforesaid remarks, advantage whereof was taken by the Company when orders dated 5th July, 2011 were passed in Writ Petition No. 4614 of 2011. Though, the petition was withdrawn, the counsel for the Company made the statement that the Company would like to pursue the course 'suggested' by the majority view of the Appellate Authority in its order dated 29th June, 2001 for seeking modification of the Scheme by approaching the Board. No such suggestion or permission at all was given. It is stated at the cost of repetition that the aforesaid observations were made while dealing with the particular argument of the Company. That did not mean that the aforesaid observations gave the Company any liberty to approach the Board even at this juncture. The filing of such application by the Company before the Board seeking modification is, therefore, totally untenable move on the part of the Company. Such an application is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of ₹ 635.96 crores (principal amount of tax and penalty ₹ 164.96 crores + interest upto June, 2015 @ 471.01 crores). Referring to the details in the said chart, as per which the demand was calculated by the Revenue in respect of different Assessment Years, an endeavour was made by the learned senior counsel for the Company to show that even those demands were included where the Company had succeeded and the appeals filed by the Department were pending before the Income Tax Appellate Tribunal. It was, however, clarified by Mr. Maninder Singh, learned ASG appearing for the Revenue that no doubt appeals have been filed by the Revenue which are pending before the ITAT, but the disputed amount has not been included and only that amount which was payable as per the order of CIT (Appeal), is included. 30) Another important submission, which needs consideration, advanced by Mr. Sundaram, learned senior counsel appearing for the Company was that in the Scheme which was approved by the Board, Income Tax Department had agreed to waive interest and penalty and, therefore, it was not permissible for the Department to include the interest and penalty. The particular clause in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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