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TMI Tax Updates - e-Newsletter October 16, 2020 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax CST, VAT & Sales Tax Indian Laws Highlights / Catch Notes GST Classification of goods - ready to consume pouch milk fortified with vitamins A and D and small quantities of turmeric (Haldi) and black pepper extracts - The applicant’s product remains classifiable under HSN 0401 even after a small quantity of curcuminoids, having ant-oxidant properties, are added, provided the Analysis Report referred to in para 2.1 is accurate. It follows that the product is exempt under Entry No. 25 of the Exemption Notification. - AAR Visit to Get Source Construction of the pipeline in Bangladesh - Works contract service or not - export of service or not - place of supply of service - The provisions for deemed export under section 147 of the GST Act is available for supply of goods only. The applicant’s supply of service cannot, therefore, be considered “deemed export’ under the GST Act - AAR Visit to Get Source Detention of consignment of goods - mis-classification of the goods - case of petitioner is that the alleged mis-classification of the goods cannot be a reason for detaining the consignment under Section 129 of the GST Act - the respondents are directed to forthwith release the goods and the vehicle to the petitioner - HC Visit to Get Source Income Tax Discrepancy of stock - The conclusion reached by the Tribunal is coloured by the irrelevant consideration ignoring the relevant documents produced by the appellant assessee, resulting into the findings based on such conjecture and surmises without reference to the material and relevant evidence and therefore, such findings of the Tribunal even though on question of fact are liable to be set aside by this Court. - HC Visit to Get Source Assessment u/s 153A - sham loss on sale of shares - Assessee himself has discredited the entries pertaining the purchase and sale transactions of shares in its books. The submissions remains un-repudiated to our understanding. It is thus observed that the assessee has come forward to make an inexplicable and strange admission that certain profits arising on sale of shares have been introduced in the books unilaterally as book / paper entries without any supporting material. - AT Visit to Get Source Penalty u/s 271E - breach of provisions of Sec. 269T - Cash payment to creditors - Mere nomenclature in a particular manner in a balance sheet will not be conclusive for determination of nature of transaction. The stand of the assessee towards purchase of tobacco is consistent and emanating from the orders of the lower authorities. Are inclined to appreciate the stand of the assessee in affirmative on merits. - AT Visit to Get Source Penalty u/s 271(1)(c) & 271AA - It is mandatory requirement to obtain an independent accountant’s report/documents in respect of specified domestic transactions with Associated Enterprises as per Section 92D of the Act and this mandate cannot be diluted by the so called reasonable cause given under Section 273B - AO was right in imposing the penalty - AT Visit to Get Source Taxation in the hands of the trust/AOP - Revenue recognition - Redemption of the relevant SRs had not taken place till 31.03.2012, therefore, the CIT(A) had rightly concluded that no upside income/surplus could have been recognized in the hands of the assessee for the year under consideration. - AT Visit to Get Source Revision u/s 263 - assessee has made payment to persons specified u/s 40A(2)(b) - No enquiry has been done by the Ld. AO and if any enquiry has been claimed to have been done the same was acted on the basis of the wrong 3CB-3CD report which vitiates the entire proceeding - AT Visit to Get Source Revision u/s 263 - depreciation on the residential properties - Where the factual scenario of a case prima facie shows the description of property as residential and cry for looking deep into it in terms of actual usage for the purposes of business, then a mere collection of registry document and keeping that on record cannot be held as conducting an enquiry. It is a clear case of lack of enquiry on part of the AO - AT Visit to Get Source Income accrued in India - providing bandwidth services outside India - The assessee company is a tax resident of Singapore, which is providing band width services to the various Indian Telecom Operators like Bharti Airtel in India and the services are being provided outside India and the consideration received by the assessee company is not taxable as ‘Royalty’ in view of the beneficial provisions of DTAA between India and Singapore under which the definition of ‘Royalty’ has not been amended. - AT Visit to Get Source Depreciation on license fee paid for 20 years - intangible asset - deferred revenue expenditure - benefit of depreciation on the registration fee of paid to Indian Railways directed to be allowed - AT Visit to Get Source Addition invoking the provisions of Section 56(2)(ix) - advances received - AO observed that, the assessee had no intention to repay the creditors - The present case, the specific provision is sec. 56(2)(ix) which is in relation to capital asset. There is no forfeiture of the amount so received by the assessee and it is outstanding in the books of account of the assessee and also confirmed by the lenders. There is also no negotiation for transfer of capital asset by the assessee with these two parties. - Additions deleted - AT Visit to Get Source Customs Whether the Appellant was entitled to import ammonium nitrate? - Keeping in mind the fact that ammonium nitrate is an explosive in any combination containing more than 45% of ammonium nitrate by weight and the admitted fact that the application for import licence was rejected, we conclude that the Appellant was not entitled to import 740 MT of Ammonium Nitrate on 24.09.2015 and, consequently, the detention and subsequent auction of the consignment of ammonium nitrate by the Customs authorities cannot be faulted. - HC Visit to Get Source Corporate Law Ownership of shares - time limitation to claim ownership - The applicant, it appears, discovered, in and about April-June 1997 (after a gaop of about 4 years), that its name, as the shareholder of the Company, does not find mention in the annual return filed by the Company with the ROC. - The suit is prima facie within limitation. The plaint cannot be rejected on the ground of limitation without testing the averments made in the plaint and the documents appended thereto at the trial. - HC Visit to Get Source Disqualifications for appointment of a Directors - if the default is committed by company A by not filing financial statements or annual returns, the said director of company A would incur disqualification and would vacate office as director of companies B to E. However, the said person would not vacate office as director of company A. If such person does not vacate office and continues to be a director of company A, it is necessary that such person continues to retain the DIN. - HC Visit to Get Source Indian Laws Dishonor of Cheque - In the context of an offence under section 138 of the Act, by virtue of Explanation (b) to section 141 of the Act, only a partner of a 'firm' has been artificially equated to a 'director' of a 'company'. Its a legal fiction created in a penal statute. It must be confined to the limited to the purpose for which it has been created. Thus a partner of a 'firm' entails the same vicarious liability towards his 'firm' as 'director' does towards his 'company', though a partnership is not an artificial person. - However, there is no indication in the statute to stretch that legal fiction to a sole proprietary concern - Besides, in the case of a sole proprietary concern, there are no two persons in existence. - HC Visit to Get Source IBC Liquidation Proceedings - Invocation of Bank Guarantee - there is no material to show that any fraud was played by the Corporate Debtor in obtaining Bank Guarantee from the applicant - the relief prayed for by the applicant to restrain the Corporate Debtor from invoking Bank Guarantee or to give a direction to the Liquidator to return the Bank Guarantee or to direct the Liquidator to Inform Bank of America that there are no claims against Bank Guarantee, cannot be granted. - Tri Visit to Get Source Release of attachment on the plant and machinery, factory building, movable assets and bank accounts - Section 60(5) of I&B Code - since the Hon'ble High Court of Bombay has ruled that NSEL is not a Financial Establishment, the impugned notification of the Deputy Secretary to the Government of Maharashtra with regard to attachment over the properties of Corporate Debtor owing to its alleged dues to NSEL cannot survive. - Tri Visit to Get Source Initiation of CIRP - a perusal of the present Application would go on to show that it has been filed by the Applicant with an ulterior motive to usurp the provisions of Section 10 of the I&B Code, 2016 for the purpose of protection of the asset which has been given for the benefit of a group company, in order to secure the loan availed from the Financial Creditor. The reason stated by the Corporate Applicant for filing its Application under Section 10 of the I&B Code/2016, is viewed by this Authority as a process of subverting the primary object of the I&B Code, 2016 - Application rejected - Tri Visit to Get Source Service Tax CENVAT Credit - non-reversal of proportionate credit - From application of the definition of ‘exempted services’ in rule 2 (e) of CENVAT Credit Rules, 2004, to the facts leading to the impugned order, there are no doubt that the amendments in section 65 (105) of Finance Act, 1994 in relation to ‘endowment policies’ and ‘unit linked insurance plan (ULIP) policies’ cannot be held to have established ‘exempted services’ warranting any restriction on availment of CENVAT credit of ‘input services’ as provided for in the rule 6 of CENVAT Credit Rules, 2004. - AT Visit to Get Source Activity under the Joint Venture Agreement (JDA) - the activity undertaken by the appellant with its cost equivalence recorded in the books is nothing but capital contribution. The adjudicating authority has erred in concluding that the mechanism of ‘cash call’ prescribed in the ‘joint operations agreement’ is consideration for services; it is intended as the vehicle for contribution by the participating interests to the capital requirements of the venture. As such capital contributions are obligated for the establishment and operation of a business venture, it is not ‘consideration’ for rendering of any taxable service. - AT Visit to Get Source CENVAT Credit - exempt service or not - portion of payments (premium) received by the assessee that remains untaxed at the appropriate rate - The legislative intent of the inclusive aspect of ‘exempted service’ did not contemplate subsequent incorporation as the test of exemption. - The inclusive portion of the definition of ‘exempted service’ is restricted to certain services - AT Visit to Get Source Classification of services - Export of service or not - Management, Business Consultancy Services or Real Estate Agent service - appellant is engaged in providing non-binding investment advisory service to SITQ Mauritius Advisory Services and other such entities - The services provided by the appellant is classifiable under ‘Management, Business Consultancy Services’ - AT Visit to Get Source Articles TCS ON SALE OF MOTOR VEHICLES – GST ANGLE (Under Income Tax Act, 1961) Provisions like those of sections 43CA, 50C, .50CA,S.56 S.68 etc. - ADDITION SHOULD NOT BE MADE WITHOUT EVIDENCE OF UNDISCLOSED OR EXTRA CONSIDERATION - a point of view. Notifications Customs 100/2020 - dated 15-10-2020 - Cus (NT) Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Silver 099/2020 - dated 15-10-2020 - Cus (NT) Exchange rate Notification No.99/2020-Cus (NT) dated 15.10.2020 98/2020 - dated 14-10-2020 - Cus (NT) Amendment in Notification No. 31/86-Cus, dated the 5th February,1986 DGFT 40/2015-2020 - dated 15-10-2020 - FTP Amendment in Export Policy of Alcohol based Hand Sanitizers GST - States 73/2020-State Tax - dated 14-10-2020 - Maharashtra SGST Seeks to notify a special procedure for taxpayers for issuance of e-Invoices in the period 01.10.2020 - 31.10.2020. 72/2020 State Tax - dated 14-10-2020 - Maharashtra SGST Seeks to make the Eleventh amendment (2020) to the MGST Rules 4/2020-State Tax (Rate) - dated 14-10-2020 - Maharashtra SGST Extension of MGST exemption on services by way of transportation of goods by air or by sea from customs station of clearance in India to a place outside India, by one year i.e. upto 30.09.2021 G.O. (Ms) No. 148 - dated 3-10-2020 - Tamil Nadu SGST Special procedure for taxpayers for issuance of e-invoices during the period from 01.10.2020 to 31.10.2020 G.O. (Ms) No. 147 - dated 1-10-2020 - Tamil Nadu SGST Amendment in Notification No. II(2)/CTR/532(d-15)/2017, dated the 29th June, 2017 G.O. (Ms) No. 146 - dated 1-10-2020 - Tamil Nadu SGST Tamil Nadu Goods and Services Tax (Eleventh Amendment) Rules, 2020 G.O. (Ms) No. 145 - dated 1-10-2020 - Tamil Nadu SGST Extension of the date of implementation of the Dynamic QR Code for B2C invoices G.O. (Ms) No. 144 - dated 1-10-2020 - Tamil Nadu SGST E-invoices to be issued by certain class of registered persons - Amendments to Notification 07/2020 - dated 24-9-2020 - Telangana SGST Extending the time limit for furnishing the of the annual return in FORM GSTR-9 Circulars / Instructions / Orders Customs - PUBLIC NOTICE NO. 114/2020 - dated 25-8-2020 Mandatory drawl and processing of samples in CRCL test Module in ICES 1.5 by Customs & CRCL officers News Special Window to States for meeting the GST Compensation Cess shortfall INDIA’S FOREIGN TRADE: September 2020 Caution to Investors against unsolicited investment tips Ministry of Finance clarification on Vodafone arbitration appeal Finance Minister Smt. Nirmala Sitharaman attends the G20 Finance Ministers and Central Bank Governors Meeting through video conferencing Market Access through Authorised Persons Case Laws: GST 2020 (10) TMI 630 Classification of goods - ready to consume pouch milk fortified with vitamins A and D and small quantities of turmeric (Haldi) and black pepper extracts - classified under HSN 0401 and exempt under Serial No. 25 of Notification No. 2/2017- Central Tax (Rate) dated 28/06/2017 or otherwise? - whether the product gets removed from HSN 0401 for the use of the additives like the vitamins and turmeric extracts? - HELD THAT:- Explanatory Note concerning HSN 0401 says, products of this heading may be frozen and may contain the additives referred to in the General Explanatory Note to this Chapter. The said General Explanatory Note states that Chapter 4 covers milk (full cream milk and wholly or partially skimmed milk), cream, buttermilk, curdled milk and cream, yoghurt, kephir and other fermented or acidified milk and cream, whey, the products consisting of natural milk constituents, not elsewhere specified or included, butter and other fats and oils derived from milk, dairy spreads, cheese and curd - The products mentioned above, the Note continues, may contain, in addition to natural milk constituents (i.e., milk enriched in vitamins or mineral salts), small quantities of stabilising agents which serve to maintain the natural consistency of the product during transport in a liquid state, as well as very small quantities of anti-oxidants or of vitamins not normally found in the product. Circular No. 52/26/2018-GST dated 09/08/2018 of TRU, Department of Revenue, Government of India (Trade Circular No. 11/2018 dated 13/08/2018 of the State Government) already clarifies that milk fortified with vitamins A and D is classifiable under HSN 0401. The above Explanatory Note further explains that such milk remains classified under HSN 0401 even if a small quantity of items containing anti-oxidant properties are added - The applicant s product, therefore, remains classifiable under HSN 0401 even after a small quantity of curcuminoids, having ant-oxidant properties, are added, provided the Analysis Report referred to in para 2.1 is accurate. It follows that the product is exempt under Entry No. 25 of the Exemption Notification. 2020 (10) TMI 629 Construction of the pipeline in Bangladesh - Works contract service or not - export of service or not - place of supply of service - input tax credit on its inward supplies for the service rendered in the construction of Bangladesh portion of the pipeline - levy of tax on goods or services procured locally within Bangladesh for the purpose of construction of Bangladesh portion of the pipeline on behalf of NRL - input tax credit on procurement of such goods or services in Bangladesh used in the construction of Bangladesh portion of the pipeline on behalf of NRL. HELD THAT:- A strip of land extending over more than a hundred kilometre is not a fixed establishment in terms of section 2(7) of the IGST Act. Location of the recipient in the present context cannot, therefore, be determined by applying the provisions under section 2(14) (b) or (c) of the IGST Act. NRL being registered and resident of India, the location of the recipient of the service shall be in India in terms of section 2(14)(d) of the IGST Act - The place of supply of the service should, therefore, be determined in terms of proviso to section 12(3)(a) of the IGST Act for carrying out the construction work of immovable property. It shall be in India, being the location of the recipient - The applicant s service will not, therefore, be the export of service within the meaning of section 2(6) of the IGST Act. The provisions for deemed export under section 147 of the GST Act is available for supply of goods only. The applicant s supply of service cannot, therefore, be considered deemed export under the GST Act - Although a public sector undertaking NRL is not a Govt Entity as defined in clause 4(x) of the Rate Notification (direct Govt participation in equity is less than 90% in NRL). The concessional rate in terms of Entry No. 3(iii)(c) of the Rate Notification is, therefore, unavailable. It will, therefore, be taxable @ 18% under Entry No. 3(xii) of the Rate Notification. GST shall be payable on the consideration receivable for the applicant s service. 2020 (10) TMI 628 Grant of Pre-arrest Bail - non-bailable offence in terms of Section 132(1)(b) and (c) read with Section 132(5) of the Central Goods and Services Tax Act, 2017 - main allegation of the respondents is that, applicants are guilty of circular trading by claiming Input Tax Credit on the materials never purchased and passing on such Input Tax Credit to companies to whom they never sold any goods - it was held by the High Court that though the officers under the CGST Act, cannot seek custody of the arrested persons for completing the investigation, respondent s contention that applicant s detention in custody is necessary to prevent him from causing the evidence of the offence to disappear or tampering such evidence is well founded. HELD THAT:- SLP Dismissed. 2020 (10) TMI 627 Detention of consignment of goods - mis-classification of the goods - case of petitioner is that the alleged mis-classification of the goods cannot be a reason for detaining the consignment under Section 129 of the GST Act - HELD THAT:- There are force in the contention of the learned counsel for the petitioner that the allegation of mis-classification of goods cannot warrant a detention of the goods under Section 129 of the GST Act. If the respondents feel that there has been a mis-classification of the goods, then it is for them to prepare a report based on the physical verification done by them, get the petitioner to sign on the same after recording his objections, if any, to the findings recorded therein, and thereafter forward a copy of the said report to the Assessing Officer of the petitioner, who can consider the said report and objections at the time of finalising the assessment in relation to the petitioner. The detention of the goods in transit cannot be justified for the said reasons - the respondents are directed to forthwith release the goods and the vehicle to the petitioner, after getting the petitioner's signature/ objections recorded on the report prepared by the respondents pursuant to the physical verification of the goods in question - petition allowed. Income Tax 2020 (10) TMI 626 Deduction u/s 80IA - only the profit making power generating unit of the assessee should be taken into account and not the loss making units in computing the total income of the assessee for its eligible business - HELD THAT:- Issue decided against the revenue by placing reliance on decision of this court in SWARNAGIRI WIRE INSULATIONS (P.) LTD. [ 2013 (2) TMI 202 - KARNATAKA HIGH COURT]. The aforesaid position was not disputed by learned counsel for the revenue. Disallowance u/s 14A - HELD THAT:- Assessee has invested a sum of ₹ 26,61,011/- from its own capital and the claim of the assessee for an amount of ₹ 14,40,471/- under Section 14A of the Act has been remitted to the Assessing Officer to decide the claim in accordance with law. The aforesaid concurrent findings of fact recorded by the Tribunal by no stretch of imagination can be said to be either perverse or based on no evidence. No element of perversity has been brought to our notice, therefore, it is not necessary for us to answer the aforesaid substantial question of law. 2020 (10) TMI 625 Exemption u/s 10 (23C) (vi) - application has been filed for exemption for the assessment year 2018-2019 and Form 56D specifically mentions that it was made for the assessment year 2018-2019. The petitioner also filed a letter, dated 13.02.2020, requesting the 2nd respondent to consider the application filed by him on 26.03.2019 in Form 56D for the assessment year 2019-2020 and in the absence of any specific provision under the Act, with reference to the same, the 2nd respondent has rightly rejected the request of the petitioner - HELD THAT:- Mere wrong quotation of law or non-mentioning of the relevant provision of law or a typographical mistake does not disentitle a person/individual/ an institution from any relief, if otherwise he or she/individual/institution is entitled to. 2nd respondent cannot desist from exercising his power by mis-reading on the face of it without going into the merits of the application of the petitioner and the documents furnished along with it in spite of giving personal hearing opportunity for the petitioner s representative to represent his case, it is nothing but 1 Sixteenth proviso omi.by the Act No.12 of 2020, w.e.f 01.06.2020 non-application of mind and refusal to exercise his discretion, though obligated under law to pass an appropriate order on merits. Instead of suggesting to file a fresh application, the 2nd respondent ought to have considered the above said application of the petitioner, dated 26.03.2019 on merits by treating it for the financial year 2018-2019 and the assessment year 2019-2020 only instead of rejecting it as barred by time. Impugned proceedings of the 2nd respondent, dated 23.03.2020 cannot be sustained on any ground and as such, it is set aside. The application of the petitioner, dated 26.03.2019 and Form 56D submitted by the petitioner shall be treated for the financial year 2018-2019 in the assessment year 2019-2020 and the exemption sought for by the petitioner shall be considered afresh on merits. 2020 (10) TMI 624 Penalty u/s 271(1)(c) - set off the losses incurred in the share trading business from that of the professional income disallowed - whether making of a claim of set off losses suffers in share trading would amount to furnishing inaccurate particulars of income? - Tribunal found in the assessee's case that the assessee has furnished entire transaction details before the AO - HELD THAT:- Tribunal has recorded a finding of fact that it was never the case of revenue that the assessee has concealed any part of his income and also noted the argument of the Department before the Tribunal that claiming a set off in respect of losses would amount to furnishing of inaccurate particulars of income. This argument was considered for its correctness and the Tribunal followed the decision of Reliance Petroproducts Pvt., Ltd. [ 2010 (3) TMI 80 - SUPREME COURT ] and held that after furnishing the details and making a claim in the return of income, does not amount to furnishing inaccurate particulars or concealed any part of income. Tribunal, held that the assessee had made a claim after furnishing entire details and it is his personal opinion with regard to the computation of income tax and there may be difference of opinion with regard to nature of transaction by the assessee on the one end and the opinion of the department on the other end and such difference of opinion, cannot be construed as furnishing inaccurate particulars of income. It is not clear as to when the assessments were taken up for consideration and whether they were simultaneously taken up; and in any event, as always argued by the revenue before us, each assessment year is distinct and different and we find that this cannot be a ground to upset the factual finding recorded by the Tribunal. - Decided against revenue. 2020 (10) TMI 623 Exemption u/s 11 - Charitable activity u/s 2(15) - assessee was engaged in the Area Development and Town Planning and carrying out the activity of general public utility - According to the AO, the respondent -assessee was not carrying out any charitable activities and was squarely covered by proviso 1 2 to Section 2(15) r/w Section 13(8) - HELD THAT:- Functions of the respondent assessee are for charitable purposes and for general public utility and therefore, the respondent assessee is entitled to exemption under Section 11 of the Act. Following the judgment of this Court in the case of Ahmedabad Urban Development Authority [ 2017 (5) TMI 1468 - GUJARAT HIGH COURT] present appeal fails and is hereby dismissed. Substantial questions of law as framed are answered in favour of the assessee 2020 (10) TMI 622 Discrepancy of stock - excess stock of 22115 kg - discrepancy in the stock of scrap found during the course of survey - survey proceedings - as per CIT- A no reason for the Assessing Officer to treat the said discrepancy as unexplained and to make addition thereof - ITAT set aside the order passed by the CIT(A) - HELD THAT:- By way of job work charges, the proof of goods lying at godown delivered after the job work was over were also produced in the form of bills for job work. M/s. Shubham Enterprise also issued confirmation with regard to return of the goods after the job work was over. The Assessing Officer has also recorded in the assessment order that the bill nos.5 and 6 were found at the time of survey pertaining to the goods of M/s. Shubham Enterprise received by the assessee for job work. With regard to the transportation charges, the assessee explained and submitted that it was the responsibility of the Pankajbhai to deliver the goods for job work at the door step of the appellant assessee and the bills of M/s. Shubham Enterprise also show the truck number in which the goods were received by the appellant assessee. CIT(A) after considering such facts, came to the conclusion that the goods in question belonged to M/s. Shubham Enterprise, which is also confirmed by both the parties and considering submissions as well as the documentary evidence produced by the appellant assessee, the CIT(A) has come to a clear finding of fact that the goods in question did not belong to appellant but belonged to M/s. Shubham Enterprise. Tribunal, however, has failed to consider the relevant documents on record and has taken into consideration the irrelevant facts with regard to the onus of the assessee to actual transportation of the goods in question, payment of octroi etc., and thereby discarded findings of facts arrived at by the CIT(A) based upon the material on record resulting into a perverse order. Tribunal has committed an error in reversing the order passed by the CIT(A) without giving any cogent reasons for the same in the impugned order. The conclusion reached by the Tribunal is coloured by the irrelevant consideration ignoring the relevant documents produced by the appellant assessee, resulting into the findings based on such conjecture and surmises without reference to the material and relevant evidence and therefore, such findings of the Tribunal even though on question of fact are liable to be set aside by this Court. We are of the opinion that the impugned order passed by the Tribunal being perverse is liable to be quashed - Decided in favour of assessee. 2020 (10) TMI 621 Assessment u/s 153A - sham loss on sale of shares - whether impugned additions/ disallowances made dehors the incriminating material is permissible as per the scheme of assessment embodied in S. 153A? - CIT(A) quashed the additions made towards disallowance of loss on sale of shares alleged to sham by AO on the ground that such additions are not sustainable in the absence of any incriminating material found in the course of search - HELD THAT:- Assessment order is silent towards presence or otherwise of incriminating material for indulging in impugned additions as sham loss on sale of shares. The extract of the remand report from the AO also does not answer the presence or otherwise of such incriminating materials in connection with the impugned additions/disallowance. No averment in the assessment order either on the point whether the assessment stood concluded on the date of search or not. In the absence of discussion on these aspects, it is a difficult proposition to determine the issue either way which is dependent on the facts in question. CIT(A) has mechanically applied the law evolved by judicial precedents on contours of S. 153A in an abstract and generic manner. CIT(A) was under bounden duty to make suitable inquiry to find the presence or otherwise of the incriminating material and should simply ought not to have brushed aside the additions and determine the viability of additions/ disallowance upon a vague and non-descript remand report where pertinent points raised by the CIT(A) remains unanswered. The findings of CIT(A), in our view, lacks comprehension. CIT(A) ought to have repeated the inquiry on incriminating material from the AO where the remand report allegedly did not cogently address the pertaining issue raised by the CIT(A) himself at the first instance. No such inquiry has been made as enjoined in law towards corroboration of assertions made by AO in support of its challenge to jurisdiction for additions. Assessee himself has discredited the entries pertaining the purchase and sale transactions of shares in its books. The submissions remains un-repudiated to our understanding. It is thus observed that the assessee has come forward to make an inexplicable and strange admission that certain profits arising on sale of shares have been introduced in the books unilaterally as book / paper entries without any supporting material. This assertion has a direct impact to the impugned loss in controversy. Ostensibly, the presence of incriminating material can not be ordinarily seen in isolation but has to be appreciated in conjunction with books maintained by the Assessee Co. Loss claimed ₹ 5 Crores on sale of ACFSL shares in controversy is stated to be wrongly claimed in books as derivative transaction by the assessee and consequently characterized as business loss as per the scheme of the Act. On the contrary, the loss arising on ordinary share transaction, needs to be tested on the touchstone of deeming fiction embedded in Explanation to Section 73 of the Act to determine whether the impugned loss is speculative in nature and thus to be treated on a different tangent. As per the averments of the Assessee by way of it submissions, the share trading transactions have the attributes of ordinary transactions in contrast to derivative transactions enjoying a different legal status in view of exceptions carved out in S. 43(5) of the Act. Hence, the issue needs to be examined by the CIT(A) from this perspective as well which may call for some factual verifications.CIT(A) ought to have examined these crucial aspects with a degree of objectivity by making inquiries and verification in this regard in accordance with law. We thus see obscure merits in the first appellate order in challenge. Appeal of the Revenue is allowed for statistical purposes. 2020 (10) TMI 620 Disallowance u/s 54F - appellant has not invested the sale proceeds in the capital gains account scheme as required u/s 54F - A.O. had held that assessee had purchased an apartment and not constructed the apartment - assessee did not deposit capital gains amount in the capital gains account scheme before the date of furnishing of return of income u/s 139 - HELD THAT:- In the instant case, assessee had expended in July, 2017 i.e. well within period of 3 years from the date of sale of original asset. Therefore, going by the dictum laid down in the case of K. Ramachandra Rao[ 2015 (4) TMI 620 - KARNATAKA HIGH COURT] though the assessee has not deposited capital gains amount in the capital gains account scheme within the prescribed time, since the impugned expenditure was incurred within a period of 3 years from the date of sale of original asset, the assessee was entitled to proportionate deduction u/s 54F of the Act. Assessee has produced proof of payment to M/s. Mas Furniture who also had acknowledged the receipt of the amount and has stated that amount received from assessee was towards furnishing of apartment of the assessee in Sankalap Central Park. The stamp duty is part of the cost of the apartment and expenditure incurred for furnishing the apartment is a cost of improvement. We hold that assessee is entitled to proportionate deduction u/s 54F - Decided in favour of assessee. 2020 (10) TMI 619 Penalty u/s 271E - breach of provisions of Sec. 269T - HELD THAT:- The assessee has narrated the circumstances in relation to the cash payments to four parties. Assessee has attempted to demonstrate from the ledger account that the outstanding has been carried forward from the earlier years and a part payment was also made in the preceding years as a measure of discharge of liability arising from purchase of tobacco products. Similar payment in cash has been made in the earlier year which has not been disputed by the Revenue. The presumption of bona fide good faith would, thus, arise in favour of the assessee. Mere nomenclature in a particular manner in a balance sheet will not be conclusive for determination of nature of transaction. The stand of the assessee towards purchase of tobacco is consistent and emanating from the orders of the lower authorities. Are inclined to appreciate the stand of the assessee in affirmative on merits. On merits, the case of the assessee deserves to be accepted. Hence, the penalty imposed u/s 271E by the competent authority (JCIT) is set-aside and quashed. - Decided in favour of assessee. 2020 (10) TMI 618 Levying the late fees u/s 234E - statement processed u/s 200A - delay in filing the TDS quarterly returns - HELD THAT:- As relying on M/S EXECUTIVE ENGINEER CO [ 2019 (7) TMI 1678 - ITAT INDORE] assessee is eligible for relief for deletion of fee levied u/s 234E of the Act as the returns are processed before 1.6.2015. - Decided in favour of assessee. 2020 (10) TMI 617 Revision u/s 263 - genuineness of the transaction on account of sundry creditors - as per AO Assessee has incurred higher expenditure during the year thus disallowed 20% of the expenses u/s 37 - HELD THAT:- In the original assessment proceedings, AO was not precluded to make addition of the whole of the creditors or disallow the whole of the expenditure , if the details were not forthcoming from the assessee. But when the details are filed by assessee, because of the Lake of time available with the assessing officer, provisions of Section 263 cannot be invoked. For this reasons the order of CIT cannot be sustained. In the order passed by the CIT there is no inclination or finding that how the creditors are unsubstantiated. Even one creditor allegedly held to be bogus by the learned CIT, we do not find any mention in the order of the assessing officer or in the order of the CIT. There is no basis for such a finding. When the complete expenditure has been allowed by AO to the extent of 80% of those expenditure as expenditure incurred wholly and exclusively for the purposes of the business there is no question to further examine the genuineness and creditworthiness of such creditors when such creditors emerge from these expenditure only. The creditors were not the loans received by the assessee but are part of unpaid expenditure. Thus the reason given for resuming jurisdiction u/s 263 of the act to verify the genuineness and creditworthiness of the sundry creditors is also not correct. There is no provision in the act that unpaid expenditure is also to be tested on the parameter of creditworthiness. Therefore even in the assessment order the ld AO did not commit any error of law. - Decided in favour of assessee. 2020 (10) TMI 616 Rectification u/s 154 - disallowance of interest on account of purchase of land - assessee has contended before the ld. CIT (A) that the said land was acquired by the assessee out of its own funds and not borrowed funds - HELD THAT:- CIT (A) considered the fact that the assessee has availed cash credit limit on which the interest was paid during the year under consideration but no loan was taken by the assessee for purchase of land in question. Therefore, when the total borrowed funds is less than the total expenditure on the current assets then it becomes a matter of scrutiny to find out whether the borrowed fund has been utilized by the assessee for purchase of land in question. Prima facie, it appears that the assessee has made investment during the year in the current assets which is more than the borrowed funds, therefore, the borrowed funds was utilized by the assessee for the current assets and not for the acquisition of the land in question. While passing the order under section 154 AO has not issued any notice to the assessee and without giving an opportunity of hearing to the assessee the disallowance is made. Disallowance made by the AO on account of proportionate interest expenditure is highly arbitrary and not justified. The same is deleted. - Decided in favour of assessee. 2020 (10) TMI 615 Penalty u/s 271(1)(c) 271AA - No independent accountant's report in respect of all international transactions between associated enterprises or specified domestic transactions - contention of the assessee is that there is no international transaction, therefore, there was no need to maintain the TP documents - HELD THAT: - Assessee mandatorily has to maintain documents of its own. Non-maintaining documents on account that there is no international transaction and merely relying on the supporting documents of Associated enterprise, cannot be termed as reasonable cause for not maintaining the documents on its own under Section 273B in respect to the international transactions as well as the specified domestic transactions as well. It is mandatory requirement to obtain an independent accountant s report/documents in respect of specified domestic transactions with Associated Enterprises as per Section 92D of the Act and this mandate cannot be diluted by the so called reasonable cause given under Section 273B - AO was right in imposing the penalty under Section 271AA of the Income Tax Act and the CIT(A) was not right in deleting the penalty. - Decided in favour of revenue. 2020 (10) TMI 614 Addition u/s 68 towards unexplained share application / share premium - sworn statement accepted the factum of giving accommodation entries and creditworthiness of the lender as well as genuineness of transaction was not proved - CIT-A deleted addition - HELD THAT:- The assessee prima-facie has complied with the ingredients required u/s 68 of the Act of genuinity, identity and creditworthiness. The CIT(A) relied on the Catena of judicial decisions in his order and has test checked the creditworthiness and identity of shareholders and came to a reasonable conclusion that the assessee has discharged its burden on submitting the information. A.O has failed to make further enquiries and relied only on statement of the key person, which was retracted subsequently. We found the order of the CIT(A) is a reasoned and logical order, where the CIT(A) has dealt on the facts, provisions of law and Judicial decisions and applied the Ratio of decisions to the present case and deleted the addition. DR could not controvert the findings of the CIT(A) with any new cogent evidence. - Decided against revenue. 2020 (10) TMI 613 Taxation in the hands of the trust/AOP - Revenue recognition - quantification of the income of the assessee - section 167B applicable on the assessee or section 164 (1) - in this case investors/ contributors are also the beneficiaries and at the date of creation of trust, beneficiaries were not identifiable - assessee was created under the guidelines of the Reserve Bank of India for fast recovery of Non-Performing Assets of the Banks/FIs and principally derived income from Asset Reconstruction Activity and handling of Non-Performing Assets of Banks/financial institutions. As the assessee had receipts on account of sales made during the year on which no tax was paid - HELD THAT:- A.O ought to have been guided by the RBI Circular No. RBI/2013-14/571 DNBS (PD) CC No. 38/SERC/26.03.002/2013-14, dated 23.04.2014, which though was issued after the relevant financial year, but could be referred for understanding the guiding principles laid down for recognition of revenue by ARCs. As observed by the CIT(A), and rightly so, the ARCs are supposed to recognize upside income only after full redemption of Security Receipts (SRs), except for the Management fees which is to be recognized on accrual basis. Redemption of the relevant SRs had not taken place till 31.03.2012, therefore, the CIT(A) had rightly concluded that no upside income/surplus could have been recognized in the hands of the assessee for the year under consideration. As for the management fees, we find, that no income on the said count had accrued to the assessee during the captioned year. We thus in the backdrop of our aforesaid observations concur with the view taken by the CIT(A), that as neither any upside income nor any management fess had accrued to the assessee during the year in question, therefore, its income was to be assessed at Rs. Nil. We uphold the view taken by the CIT(A), to the extent he had concluded that as there was a shortfall of recovery over purchase consideration till 31.03.2013 of ₹ 24.26 crores, and there was also no receipt of management fees as per the profit and loss account, hence no upside income could have been recognized in the hands of the assessee in terms of the guidelines laid down in the Circular No. RBI/2013-14/571 DNBS (PD) CC No.38/SERC/26.03.002/2013-14,dated 23.04.2014, issued by the RBI, therin providing the Uniform Accounting Standard for revenue recognition for ARCs, and also in the backdrop of the view taken by his predecessor while disposing off the appeal in the case of the ISARC SIDBI-2, a sister concern, for A.Y.2012-13, vide his order dated 08.02.2017 passed in Appeal No. CIT(A)-32/IT-211/23(1)(2)/15- 16. Accordingly, finding no infirmity in the view taken by the CIT(A), we uphold his order. 2020 (10) TMI 612 Revision u/s 263 - assessee has made payment to persons specified u/s 40A(2)(b) for purchase of Grey Cloth, which falls under the definition of specified domestic transactions - Whether matter could not be referred to the Ld. TPO? - HELD THAT:- Admittedly for some reason or the other the actual Audit Report of the assessee in Form 3CB-3CD was not made available before the Ld. AO and, thus, the fact of making payment to the persons specified under Section 40A(2)(b) for purchase of gray as mentioned in the said Audit Report could not be considered. Consequentially the matter could not be referred to the Ld. TPO in terms of the CBDT instruction. Needless to mention that the AO has not considered the reason for scrutiny selection as per CASS and failed to conduct necessary enquiry for the reason as narrated hereinbefore. We, therefore, find substance in the argument advanced by the Ld. DR. Mr. Sharma. Also we do not appreciate the submission made by the Ld. AR in support of his case. Though the said 3CB-3CD report was submitted through electronic media on 30.09.2014 we have to consider that during that relevant point of time when filing of documents through electronic media was introduced it is quite natural that without having expertise knowledge every person in the department is expected to Act accordingly. When the Ld. AO has requisitioned the said Audit Report of the assessee, we failed to understand as to how Audit Report of other persons can be made available to the AO instead of the assessee s. No enquiry has been done by the Ld. AO and if any enquiry has been claimed to have been done the same was acted on the basis of the wrong 3CB-3CD report which vitiates the entire proceeding. We, therefore, find no infirmity in the observation made by the Ld. PCIT in setting aside the assessment order considering it erroneous and prejudicial to the interest of Revenue and in passing direction upon the concerned AO to complete proper enquiries and verification de-novo so as to warrant interference. - Decided against assessee. 2020 (10) TMI 611 Deduction u/s 43B - Provision for diminution in the value of Investments - year of creation of provision - Claim rejected by the A.O on the ground that he had no authority to allow any relief or deduction which had not been claimed in the return - HELD THAT:- CIT(A) was not justified in declining to consider the assessee s claim that as the Provision for diminution in the value of Investments was disallowed/added back by the assessee while computing its income for the year in which it was created i.e A.Y 2013-14, the same thus could not have been included in its income for the year in question i.e A.Y 2017-18 in which it was reversed. As observed we are of a strong conviction that as no deduction for the aforesaid provision was claimed by the assessee while computing its income for the year in which it was created i.e A.Y 2013-14, the inclusion of the same on its reversal in the books of account during the year in question i.e A.Y 2017-18 would undoubtedly lead to a double taxation in its hands. Such extraction of tax from an assessee without the authority of law is prohibited as per Article 265 of the Constitution of India. See M/S. DILIP KUMAR AND COMPANY ORS. [ 2018 (7) TMI 1826 - SUPREME COURT] We find ourselves to be in agreement with the claim of the assessee that as the Provision for diminution in the value of Investments was disallowed/added back by the assessee while computing its income for the year in which it was created i.e A.Y 2013-14, the same thus could not have been included in its income for the year under consideration i.e A.Y 2017-18 in which it was reversed. We thus in terms of our aforesaid observations set aside the order of the CIT(A) who as observed by us hereinabove had declined to deal with the aforesaid claim of the assessee, and direct the A.O to vacate the impugned addition - Decided in favour of assessee. 2020 (10) TMI 610 Transfer of property u/s 2(47) - capital gain - As submitted by assessee he only entered into an agreement of sale but had not become the owner of the property nor has any right accrued to him thereon and therefore, there was no capital asset owned by the assessee which has been transferred - HELD THAT:- As assessee had entered into an agreement of sale and also had received the possession of the property. In the suit before the City Civil Court, for cancellation of the agreement of sale, the assessee had pleaded that there was transfer of property. The assessee had claimed to have a right in the property by virtue of the agreement of sale with possession. Whether such a right can be considered as a capital asset under the Income Tax Act is the question before us. Meaning of the property of any kind - the AO has brought out the assessment order, the decision of the Hon'ble Court wherein even the right in the property has been held to be a capital asset u/s 2(14) - AO treating the sum of ₹ 60.00 lakhs as received for transfer of right in the capital asset cannot be faulted. Computation of capital gains - AO has allowed indexation of only cost of acquisition which is the sum incurred by the assessee for excavation work - litigation between the assessee and the vendors before the City Civil Court, Secunderabad is not in dispute. Assessee s claim of legal expenses ought to have been allowed - Assessee s claim of expenditure towards watch and ward of the property over a period of 10 yrs also cannot be brushed aside. The assessee had been protecting the property from encroachers for a period of 10 years and therefore, it cannot be ruled that the assessee has not incurred any expenditure towards such work. Therefore, we are of the view that a sum of ₹ 10.00 lakhs would be reasonable expenditure towards legal expenses and also towards watch and ward expenses which is to be allowed from the amount received by the assessee for computing the taxable capital gain. We deem it fit and proper to direct the AO to recompute the capital gain after allowing a sum of ₹ 10.00 lakhs towards the above discussed expenses and the assessee s appeal is therefore, treated as partly allowed. 2020 (10) TMI 609 Revision u/s 263 - depreciation on the residential properties - HELD THAT:- In the instant case, where the matter was selected for complete scrutiny and there are addition to the fixed assets during the year, it is ordinarily expected that the AO examines these transactions thoroughly from the perspective of satisfying the twin test of ownership and usage for purposes of business rather than merely relying on the information submitted by the assessee company. It is not a question of kind and extent of enquiry and hence, a difference of approach and methodology of examination of a particular transaction as done by the AO and as suggested by the ld Pr CIT. No doubt every AO has his unique style of functioning and no hard and fast rule can be laid down as to how he should conduct the enquiry in discharge of his statutory functions. Where the factual scenario of a case prima facie shows the description of property as residential and cry for looking deep into it in terms of actual usage for the purposes of business, then a mere collection of registry document and keeping that on record cannot be held as conducting an enquiry. It is a clear case of lack of enquiry on part of the AO and the order thus passed is clearly erroneous and prejudicial to the interest of the Revenue. Finding of the ld Pr CIT that the order so passed by the AO is erroneous in so far as prejudicial to the interest of Revenue is upheld. Claim of depreciation on scooter - AO has to satisfy himself about the ownership and usage of the property. In the instant case, the scooter is registered in the name of one of the partners of the firm and therefore, it was incumbent on part of the AO to examine the reason as to how the same was reflected in the balance sheet of the firm and whether any payments were made by the firm or not and whether the assessee firm can still claim depreciation on such scooter even though the scooter was not registered in the name of the firm. However, no such enquiry was conducted and matter was thus not examined at all. Similarly, no enquiry was conducted regarding usage of scooter for business purposes - lack of enquiry on part of the Assessing officer and the finding of the ld Pr CIT that the order so passed by the AO is erroneous in so far as prejudicial to the interest of Revenue is upheld. Interest on FDRs - There is no enquiry and investigation carried out by the AO regarding the purpose for which the FDRs were created and placed as guarantee as so claimed by the assessee for business purposes. Consequently, there is no examination and finding as to how the interest on such FDRs can be included for the purposes of computing the partner s remuneration u/s 40(b) - It is again a case of lack of enquiry on part of the AO and the finding of the ld Pr CIT to this extent that the order so passed by the AO is erroneous in so far as prejudicial to the interest of Revenue is upheld. Inadmissible expenses - All the ld Pr CIT has stated is that these expenses so claimed by the assessee include inadmissible expenses and the AO failed to make the enquiry and identify such expenses and therefore, the order so passed by the AO is erroneous in absence of making enquiry/investigation and we therefore, don t see any infirmity in the said findings of the ld Pr CIT. We are of the considered view that there is no infirmity or illegality in action of the ld Pr CIT in exercising his revisionary jurisdiction u/s 263 - Decided against assessee. 2020 (10) TMI 608 Reopening of assessment u/s 147 - TDS u/s 194C - Disallowance u/s 40 (a)(ia) on labour charges - Notice beyond 4 years - HELD THAT:- In the case of Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT] held that after substitution of section 147 by the Direct Tax Laws (Amendment) Act, 1987, concept of change of opinion must be treated as an in-built test to check abuse of power by Assessing Officer and therefore, after 01.04.1989, AO has power to reopen, provided there is tangible material to come to conclusion that there is escapement of income from assessment ; reasons must have a live link with formation of belief. In Foramer France [2003 (1) TMI 101 - SC ORDER] observing that the law prevailing on date of issue of impugned notice would apply to instant case, and since new section 147 had come into force w.e.f. 01.04.1989, provisions of that section were applicable, held that since admittedly there was no failure on the part of the petitioner to make return or to disclose fully and truly all material facts necessary for assessment, proviso to section, which bars issue of notice u/s 148 after expiry of 4 years from end of relevant assessment year, squarely applied to facts of instant case and therefore, impugned notice was barred by limitation. In the instant case, the AO has issued the notice u/s 148 beyond 4 years from the relevant assessment year. We are of the considered view that the AO has reopened the assessment on the basis of a mere change of opinion and therefore, the same cannot be sustained. Therefore, we uphold the order of the Ld. CIT(A) - Appeal filed by the Revenue is dismissed. 2020 (10) TMI 607 Disallowance u/s 14A r.w. Rule 8D - Addition with regard to the normal computation of income as well as the computation of book profit u/s 115JB - HELD THAT:- There is no dispute in these appeals that the assessee did not earn any exempt income. Also there is no dispute that the assessee did not make any claim for exemption. That when there is no exempt income earned by the assessee, no disallowance u/s 14A of the Act can be made is no longer res integra. There is no exempt income earned by the assessee, no disallowance under Section 14A of the Act can be made. Similar is the decision in Pr. CIT v. M/s Ballarpur Industries Ltd. [ 2016 (10) TMI 1039 - BOMBAY HIGH COURT] and Winsome Textiles Industries Ltd. [ 2009 (8) TMI 220 - PUNJAB AND HARYANA HIGH COURT] Also in the case of ACIT v. Vireet Investment (P.) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] has held that computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to computation as contemplated u/s 14A r.w. Rule 8D. - Decided against revenue. 2020 (10) TMI 606 Depreciation on asset which have been leased to other parties - HELD THAT:- Assessee had produced such certificates from the lessees before the Tribunal, whereas in the present case the certificates have been produced by the assessee before the CIT(A). CIT(A) has not observed anything wrong in those certificates. If he was having any doubt regarding those certificates and if same were produced for the first time before him, he should have admitted the same as additional evidence under Rule 46A of the Income-tax Rules and either he himself should have verified or should have referred the same to the Assessing Officer for verification. The impugned order of the Learned CIT(A) was passed in the year 2015, however nothing has been brought on record before us that anything wrong has been observed by the Departmental Authorities in those certificates. DR has also not pointed out anything wrong with those certificates submitted before the Ld. CIT(A). No justification or cause for issuing direction by the CIT(A) to the AO for verification of the depreciation claimed by the lessees, before allowing depreciation to the assessee on such leased asset. Accordingly, this ground of the appeal of the assessee is allowed. Disallowance made u/s 14A read with rule 8D of Income-tax Rules, 1962 - HELD THAT:- No expenses have been incurred for earning the dividend income, whereas the assessee has made suo motu disallowance of ₹ 10 lakh. AO has not pointed out how the said claim of ₹ 10 lakh, is not correct. The AO has jumped to the conclusion without examining the claim of the assessee. In our opinion, the facts and circumstances of the year under consideration being identical to the facts and circumstances of assessment year 2008-09, respectfully following the finding of the Tribunal [ 2020 (10) TMI 529 - ITAT DELHI] we hold that no disallowance u/s 14A can be made without recording proper satisfaction as required under the law. Accordingly, the disallowance in dispute is deleted. The ground of appeal is allowed. Disallowance u/s 14A while computing book profit under section 115JB - HELD THAT:- As decided in own case [ 2017 (6) TMI 1124 - ITAT DELHI] Computation under clause (f) of Explanation 1 to section 115JB(2). is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income-tax Rules, 1962.. Accordingly we restore this ground of appeal back to the file of the learned Assessing Officer to decide the issue without resorting to the rule 8D of the income tax rules for disallowing expenditure in relation to the exempt income by working out the book profit 2020 (10) TMI 605 Setting off of LOSS OF STPI/SEZ UNITS against business income from non-STPI/non-SEZ units - STPI refers to Software Technology Park and SEZ refers to Special Economic Zone - HELD THAT:- As decided in own case [ 2015 (10) TMI 826 - KARNATAKA HIGH COURT] Loss arising in eligible SEZ/STPI undertakings are not required to be adjusted against the profits arising from other SEZ/STPI undertakings and the said loss can be adjusted against profits arising from non-SEZ/non-STPI units. Accordingly, this issue is decided in favour of the assessee. Exclusion of Miscellaneous income while computing deduction u/s 10A/10AA/10B - HELD THAT:- The decision rendered in own case [ 2015 (10) TMI 826 - KARNATAKA HIGH COURT] would cover the income booked under the head Sale of Scrap/Newspaper, Rental income and interest income. Accordingly, we direct the AO to allow deduction u/s 10A/10AA/10B of the Act in respect of income earned on sale of scrap/newspaper and Rental income. The remaining item is Other income - In AY 2007-08 and 2008-09, this item of miscellaneous income was restored to the file of the AO for examining the nature of receipt and decide the same accordingly - Following the same, we restore the issue relating to Other income to the file of the AO with similar directions. Exclusion of Net interest income for deduction u/s 10A/10AA/10B - HELD THAT:- It is required to be examined first as to whether the AO has assessed interest income under the head Income from business or under the head Income from other sources . If the AO has assessed interest income as business income, then the assessee is eligible for deduction u/s 10A/10AA/10B on interest income also. However, if the AO has assessed interest income under the head income from other sources , then it is required to be examined as to whether there is direct nexus between interest income and income of business undertaking. With regard to Category (a) above, if the nexus is shown between the loan funds and the deposits, the assessee is eligible for deduction in respect of interest income, following the decision rendered by the Hon'ble Karnataka High Court in the assessee s own case . With regard to Category (b) above, it is imperative on the part of the assessee to show that there is nexus between interest income and income of business undertaking. We have noticed earlier that the AO has taken the view that the surplus funds of undertaking located in SEZ are put into common bank account. Accordingly, the AO has observed that the surplus funds relating to SEZ division could not be separately identified, if all the surpluses of all divisions are put together, meaning thereby, it is the case of the AO that there is no nexus between interest income and income of business undertaking. In our view, the assessee may be given an opportunity to show that the nexus between SEZ/STPI divisions and the fixed deposits from which interest income was earned. If the assessee is able to show the nexus to the satisfaction of the AO, then the interest income to that extent should be eligible for deduction u/s 10A/10AA/10B - restore this issue to the file of the AO for examining it afresh in the light of discussions made supra. Whether Deemed exports are eligible for deduction section 10A/10AA/10B - HELD THAT:- Identical issue has been decided in favour of the assessee in TATA ELXSI LTD. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] - we direct the A.O. to include deemed exports as part of turnover while computing deduction u/s 10A/10AA/10B of the Act. Eligibility of the assessee to claim deduction u/s 10A of the Act in case of Delayed collections of export proceeds - HELD THAT:- As relying on own case we direct the AO to include sale amount in the export turnover, while computing deduction u/s 10A of the Act, where the applications have been filed by the assessee to RBI seeking permission to receive the export proceeds beyond the prescribed period. Set off of foreign tax credit/deduction relating to income generated abroad - HELD THAT:- The expressions used in sec. 90(1)(a)(i) and (ii) and in sec.91 would also merit attention in this regard. Section 90(1)(a)(i) uses the expression income on which have been paid both income tax . Section 91(1) uses the expression If any person who is resident in India in any previous year proves that in respect of his income which accrued or arose during the previous year outside India (and which is not deemed to accrue or arise in India), he has paid in any Country with which there is no agreement under section 90 for the relief or avoidance of double taxation, income tax, by deduction or otherwise - It can be noticed that, payment of tax is mentioned both in sec.90(1)(a)(i) and sec. 91. Section 90(1)(a)(ii) uses the expression income tax chargeable under this Act and under the Corresponding law in force in that Country .. Thus, it can be noticed that the provisions of sec.90(1)(a)(i) and sec.91(1) refers to actual payment made in the foreign Country and the provisions of sec.90(1)(a)(ii) refers to income tax chargeable under this Act and under the corresponding law in force in that Country , i.e., there is no reference to actual payment of tax. Accordingly, following the binding decision of High Court in A.Y. 2001-02 to 2004-05 we set aside the order passed by A.O. on this issue and direct him to allow foreign taxes credit claimed by the assessee. Claim of Depreciation on Software - amount of software capitalized by it, by invoking provisions of section 40(a)(ia) of the Act for non-deduction of tax at source from the payments made for purchase of software - HELD THAT:- Following the decision rendered by the coordinate bench in the Tally Solution [ 2017 (7) TMI 606 - ITAT BANGALORE] we direct the A.O. to delete the disallowance on depreciation made u/s 40(a)(ia) of the Act. Since we have held that depreciation is not liable to be disallowed u/s 40(a)(ia) of the Act, the alternative claim of the assessee for enhanced deduction shall become infructuous, even though the claim of the assessee is supported by the circular no.37/2016 dated 2.11.2016 issued by CBDT. Allocation of Corporate overheads to units claiming deduction u/s 10A/10AA/10B - HELD THAT:- The head office does not exist for its own sake. Its existence is relevant for all the activities undertaken by various divisions, units and profit centres. The very existence of the divisions, units and profit centres is dependent upon the policy decisions taken in head-office. We the view that head office expenses which are in the nature of common expenses are required to be allocated to different units or undertakings and more particularly to the undertakings claiming beneficial deductions under the Act. Since deduction is allowed u/s 10A/10AA/10B on the profits derived from the undertakings, all direct or indirect expenses, must be adjusted in order to arrive at the profits derived from the undertaking. In that process, the component of head office expenses also requires allocation. It appears that the same principle has been upheld by Hon ble Karnataka High Court. However, there appears to be some direction on the manner of allocation of Head office expenses. The AO should have implemented the direction given by Hon ble High Court in the earlier years. Accordingly, we restore this issue to the file of the assessing officer. Rejection of claim for deduction u/s 10A of the Act in respect of STPI units located at Bangalore - HELD THAT:- Following the decision rendered by Hon ble jurisdictional High Court in the assessee s own case and in the case of Wipro GE Medical Systems Ltd. [ 2015 (8) TMI 548 - KARNATAKA HIGH COURT] we hold that the new STPI undertakings located in Bangalore, against which deduction has been claimed by the assessee are eligible for said deduction. Accordingly, we direct the A.O. to allow the claim of the assessee. Whether applicable foreign VAT/GST shall form part of export turnover or not while computing deduction u/s 10A/10AA/10B - HELD THAT:- We direct the A.O. to include foreign VAT/GST in the export turnover, since export profits realized by the assessee is said to include the above said VAT/GST. Taxability of interest granted to the assessee u/s 244A - HELD THAT:- Restore this issue to the file of the A.O. with the direction to ascertain the interest, if any, withdrawn out of the interest given to the assessee u/s 244A of the Act in the respective years and reduce the same from the interest income and tax the balance amount. We order accordingly. Deduction claimed by the assessee u/s 80IB - HELD THAT:- As considered an identical issue in this order in the context of allocation of corporate expenses to undertakings claiming deduction u/s 10A/10AA/10B of the Act (Issue no.8). We have restored this issue to the file of the AO for the reasons discussed in issue no.8. Though the issue herein is contested in the context of deduction u/s 80IB of the Act, yet the underlying facts are identical with issue no.8, discussed supra. Accordingly, in order to maintain uniformity, we feel it proper to restore this issue to the file of AO with similar directions. Eligibility of the assessee to claim deduction u/s 80IB of the Act on the profit derived on sale of monitors - HELD THAT:- Assessee did not claim benefit u/s 80IB of the Act in respect of profit derived from trading activity of monitors, i.e., monitors, which were sold separately and not along with computer hardware. In respect of monitors sold along with the computer hardware, the Hon ble High Court has expressed the view that those monitors which are used in the computers are in the nature of spare parts in the manufacture of computers. Accordingly, the Hon ble High Court has expressed the view that when the computer is sold along with monitor, then the monitor forms part of the said computer, and hence the same falls within the first degree and is eligible for deduction u/s 80IB of the Act. Accordingly, following the decision rendered by Hon ble High Court, we direct the A.O. to allow deduction u/s 80IB of the Act in respect of sale of monitors made along with the computer hardware, as part of computers. Eligibility of the assessee to claim deduction u/s 80IB of the Act in respect of other incomes received by it - HELD THAT:- Coordinate bench has decided this issue against the assessee in assessment year 2008-09. We also notice that the decision rendered by Hon ble High Court of Karnataka was in the context of section 80HHC of the Act, meaning thereby, the High Court has not decided an identical issue in the context of 80IB of the Act. Under these set of facts, we prefer to follow the decision rendered by the coordinate bench in assessment year 2008-09. Exclusion of other income while computing deduction u/s 80IC - HELD THAT:- Before us the assessee did not demonstrate that the miscellaneous income would fall under the category of income derived from industrial undertaking. Accordingly, we hold that the miscellaneous income is not eligible for deduction u/s 80IC - The direction of Ld DRP in AY 2011-12 is reversed. The A.O. is directed to compute the deduction u/s 80IC of the Act. Whether the expenditure incurred in foreign currency is required to be deducted from the export turnover while computing deduction u/s 10A/10AA/10B? - HELD THAT:- What is required to be excluded is the expenses specifically mentioned in the definition of export turnover , viz., the expenditure incurred on freight, telecommunication charges or insurance attributable to the delivery of the computer software outside India or expenses, if any incurred in foreign exchange in providing technical services outside India alone are required to be excluded from the export turnover. If any amount is excluded from export turnover , the same is required to be excluded from total turnover also, as held by Hon'ble Karnataka High Court in the case of Tata Elixi Ltd [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] and CIT vs. HCL Technologies Ltd [ 2018 (5) TMI 357 - SUPREME COURT] We set aside the order passed by the A.O. on this issue and direct him to compute the deduction u/s 10A/10AA/10B of the Act by following the discussions made supra. Whether reimbursements received by the assessee are required to be excluded from the export turnover for the purpose of computing deduction u/s 10A/10AA/10B ? - The assessee has debited the profit loss account with the cost of purchase of assets and credited the profit loss account with the amounts reimbursed by the customers - cost so incurred cannot be categorised as direct cost related to the development of software. Since it is an expenditure incurred at the request of customer for which reimbursement was also received, there is no revenue element involved in it. Accordingly, we are of the view that this amount should not be considered as either expenditure or part of export turnover, i.e., the receipt should be netted off against the expenditure. Nature of payment received by way of incentive awards - this amount has been received as incentive from the customers, meaning thereby, it is in the nature of additional payments received towards export of software. Hence,we are of the view that it shall form part of sales turnover. Since it is only a revenue item, it cannot be categorized as expenditure as contemplated under the definition of the export turnover.Hence the same is not required to be excluded from the export turnover. Exclusion of profits attributable to overseas development centre for computing deduction u/s 10A/10AA/10B - HELD THAT:- We respectfully following this decision, are of the opinion that for this year also the issue requires to be remitted back to the Assessing Officer and accordingly do so with a direction to the Assessing Officer to follow the decision of Tribunal. Rejection of claim for deduction of educational cess - HELD THAT:- We notice that the Hon'ble Bombay High Court has also held in the case of Sesa Goa Ltd vs. JCIT [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] that the education cess is allowable as deduction. Deduction of employees contribution made to ESIC - HELD THAT:- Even though assessee has not put up the claim in the return of income, a fresh claim can be admitted by the Tribunal as per the decision rendered by Hon ble Supreme Court in the case of Goetz India Pvt. Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] when all facts are available on record. Accordingly, we restore this issue to the file of the A.O. with the direction to examine the claim of the assessee and decide the same in accordance with the decision rendered by Hon ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd. [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT]. Disallowance of loss claimed towards provision of marked to market valuation of outstanding forward contracts - HELD THAT:- We notice that the details of underlying assets in respect of outstanding forward contracts are not available on record. There should not be any doubt that the value of underlying assets (in the form of debtors, creditors and other monetary assets) as on the balance sheet date, against which the outstanding forward contracts have been taken, should be more than the value of outstanding forward contracts. In that case, the loss arising on restatement of forward contract is fully allowable as deduction. Since the AO has not examined this aspect, we are of the view that this issue needs to be restored to the file of the AO for the limited purpose of examining as to whether the value of underlying assets is more than the value of the forward contracts. Since the AO has disallowed the loss in AY 2009-10, 2011-12 and 2012-13, this issue is restored to the file of AO in the above said three years alone. The assessee is directed to furnish relevant details to prove that the value of underlying assets is more than the value of outstanding forward contracts as on the balance sheet date. Disallowance u/s 14A of the Act made to the net profit while computing book profit u/s 115JB of the Act - HELD THAT:- In the case of Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] has expressed the view that the amount disallowed u/s 14A of the Act cannot be adopted for the purpose of computation of book profit u/s 115JB and the disallowance to be made u/s clause (f) to explanation 1 has to be computed independently without having regard to the provisions of section 14A - We are unable to sustain the addition made by the A.O. Since the addition required to be made under clause (f) to explanation 1 is required to be computed independently, we restore this issue to the file of the A.O. for examining it afresh. Disallowance of expenditure by invoking provisions of sec. 115 BBD - HELD THAT:- A.O. was not justified in invoking the provisions of sec.115BBD of the Act for making the impugned disallowance. Since the AO has not disallowed the interest expenditure on the reasoning given by Ld DRP, we do not find it necessary to address the same. Disallowance of part of advertisement, publicity and sales promotion expenditure treating the same as brand building expenses - HELD THAT:- AO has not demonstrated with cogent evidence, any special circumstances or reasons to hold that the impugned expenditure was capital in nature. It is also note-worthy that no specific instances have been pointed out by the AO in this regard. The assessing officer has also not mentioned the basis for arriving at the conclusion that 25% of expenditure would be for promotion of brand value. Hence, we are of the view that the AO has made the ad-hoc disallowance only on surmises and conjectures. AO was not justified in disallowing part of advertisement expenses and accordingly direct him to allow the entire advertisement expenses claimed by the assessee. Disallowance of fees paid to Registrar of companies for increasing the Authorized capital of the assessee company - HELD THAT:- Hon ble `Supreme Court in the case of Punjab State Industrial Corporation Ltd. [ 1996 (12) TMI 6 - SUPREME COURT] and Brooke Bond Ltd. [ 1997 (2) TMI 11 - SUPREME COURT] has expressed the view that the fees paid to Registrar of Companies for increasing the authorized capital is capital in nature. Hence, we do not find any infirmity in the decision of A.O. in disallowing the claim of assessee by holding that the same as capital in nature. The contention of the assessee that the expenditure should be allowed by amortised over a reasonable period of time. However, we notice that there is no provision under the Act to accept the claim of the assessee. Accordingly, we confirm the disallowance made by the A.O. TDS u/s 195 - HELD THAT:- A.O. was justified in holding that the payment made to M/s. Gartner Group is in the nature of royalty within the meaning of section 9(1)(vi) of the Act and hence the assessee is liable to deduct tax at source from the said payment u/s 195 of the Act. In view of the default on the part of the assessee in not deducting the tax at source, the A.O. was justified in making the disallowance of payment made to M/s. Gartner Group by invoking provisions of section 40(a)(i). Non-granting of TDS credit - HELD THAT:- This issue requires fresh examination at the end of the A.O. by duly considering the TDS certificates furnished by the assessee and also making due enquiries, if required. Transfer pricing adjustment on the short term advances given to foreign subsidiaries - HELD THAT:- As assessee did not establish that there is parity of facts. We notice that the coordinate bench of ITAT has determined the ALP rate of interest at Libor + 150 basis point. It is also noticed that the revenue has accepted the decision rendered by ITAT and the TPO has also adopted the same in A.Y. 2015-16. Accordingly, it is noticed that a consistent view is being taken on this issue. Accordingly, we direct the A.O./TPO to adopt the ALP rate of interest at Libor + 150 basis point. Guarantee commission in respect of corporate guarantee provided by the assessee to its Associated Enterprises (AEs) - HELD THAT:- TPO did not examine internal CUP study of the assessee and has proceeded to determine the ALP of international transaction under TNMM method. Since we have held that the internal CUP is the most appropriate method. We have noticed that the assessee has furnished details of fees collected from AEs and Non-AEs, the nature of services provided to both the parties, copies of sample invoices. We have also noticed that the TPO has not examined them at all. Accordingly, we restore this issue to the file of AO/TPO for examining the issue under internal CUP method by considering all the details and information furnished by the assessee. Transfer pricing adjustment made for Specified Domestic Transaction - transfer pricing adjustment made for Specified Domestic Transactions - HELD THAT:- transactions are entered between two units belonging to the same assessee. Hence both the units are two arms of the same tax entity. We have earlier expressed the view that the ALP value of inter-unit transactions has to be applied in both the transacting units for the purposes of sec. 92 of the Act. Hence the substitution of ALP value (market value) in respect of interunit transactions u/s 92 of the Act is tax neutral exercise. However, the effect will be seen in this regard while computing deduction u/s 10A/10AA/10B of the Act. Accordingly, the reduction , if any, in the quantum of deduction under above sections after application of the ALP, in our view, is the Transfer pricing adjustment contemplated in sec.92 - issue requires fresh examination at the end of TPO/AO by duly considering various other contentions of the assessee and also by considering the discussions made supra. Accordingly, we set aside the order passed by A.O. on this issue and restore the same to the file of the AO/TPO Adjustment in respect of liquidated damages - HELD THAT:- TPO has feel into error in not recognizing the Mutual subcontracting agreement dated 01st April, 2005 entered between the assessee and M/s Wipro Inc., USA, since it is the claim of the assessee that the said agreement has not been terminated. Without examining the said claim of the assessee, it may not be correct on the part of the TPO to observe that the said agreement was not valid in the year relevant to AY 2010-11. We also notice that the TPO has not brought any material on record in support of his observations that, in an uncontrolled transaction, no third party would have paid such kind of liquidated damages in respect of dispute between its subsidiary and a third party. We are of the view that, without examining the Mutual subcontracting agreement, the TPO could not have come to such kind of conclusion. Accordingly, we are of the view that this issue has not been properly examined by TPO - this issue requires fresh examination at the end of AO/TPO. 2020 (10) TMI 604 Income accrued in India - amount received from Indian customers for the provisions of bandwidth services outside India - whether equipment/process royalty under section 9(1)(vi) of the Act read with Article 12(3) of the India Singapore Tax Treaty - As per assessee mere receipt of service using equipment under the control, possession and operation of service provider would only be transaction of a service and not to use or right to use an equipment, and would not attract Royalty under the Act or the Tax Treaty - HELD THAT:- Where the Tax Treaty between India Singapore specifically does not include transmission by satellite, cable, optic fiber or similar technology in the definition of Royalty under the Tax Treaty and also where the Tax Treaty had not undergone any amendment, the provisions of DTAA being more beneficial to the assessee are attracted and the assessee is not liable to be taxed on the amount received from Indian customers for the provision of bandwidth services outside India. There is no merit in the orders passed by the authorities below and the same are reversed. The assessee company is a tax resident of Singapore, which is providing band width services to the various Indian Telecom Operators like Bharti Airtel in India and the services are being provided outside India and the consideration received by the assessee company is not taxable as Royalty in view of the beneficial provisions of DTAA between India and Singapore under which the definition of Royalty has not been amended. Thus, Ground of appeal Nos. 1 2 raised by the assessee are allowed. 2020 (10) TMI 603 Depreciation on license fee paid for 20 years - intangible asset - treating the license fee paid to Indian Railways as deferred revenue expenditure eligible for amortization over a period of 20 years but not being eligible for depreciation - HELD THAT:- Following the judgment of the Hon ble Delhi High Court, in the case of Container Corporation of India Ltd. [ 2017 (1) TMI 1586 - ITAT DELHI] this Tribunal noted that in this case, the assessee had earned a benefit of enduring nature of plying on Indian Railways Tracks for a period of 20 years which was a valuable commercial right available to the assessee for a considerable period of time and, therefore, the same was eligible for depreciation u/s 32(1) (ii) of the Act. During the course of proceedings before us in the present appeal, the Department could not bring to our notice any judgment contrary to the above said adjudication and in favour of the Revenue on the issue. Therefore, respectfully following the judgment of Areva T D vs. DCIT [ 2012 (4) TMI 79 - DELHI HIGH COURT] and also the order of the Tribunal in the case of Container Corporation of India (supra), we allow Ground of the assessee s and direct that benefit of depreciation on the registration fee of ₹ 50 Crores paid to Indian Railways be allowed the benefit of depreciation. Disallowance on account of claim against Contractors/Third Parties - CIT-A allowed relief to assessee - HELD THAT:- CIT (A) has noted that the assessee s submission is tenable in as much as it has not accounted for the claim against Contractors/Third Parties pending its realization due to inherent uncertainty in the ultimate realization of the said amount.CIT (A) has also noted that the assessee has been consistently following Accounting Standard-9 dealing with Revenue Recognition issued by the Institute of Chartered Accountant of India. In the proceedings before us, the Ld. SR. DR could not bring to our notice any perversity in the said order of the CIT (A). We also note that a similar issue had been decided in favour of the assessee by the CIT (A) in Assessment Years 2003-04 and 2004-05 which have been accepted by the Department. Therefore, in such a situation, following the principle of consistency, we find no reason to deviate from the findings of the Ld. CIT(A) 2020 (10) TMI 602 Revision u/s 263 - Assessee company claimed exemption u/s.10(20A) of the Act till A.Y. 2002-03 and Section 10(20A) was omitted by the Finance Act w.e.f. 01.04.2003 therefore, under income Tax Act, 1961, no exemption is available to the company - assessee declared income earned from the Govt. of Maharashtra as an agent - HELD THAT:- As decided in own case when the AO accepted the assessee is an agent and completed the assessment u/s 143(3) over the years, it means that the AO completed the assessment with one particular view, whereas Pr. CIT intends to correct the above view and presumed that the case of assessee falls under Article 289(1) and come to a conclusion that assessee is not comes under Article 289 and subjected to tax under Income Tax Act, therefore, in our view, this is another view in the case of assessee.- Pr. CIT cannot invoke the provision of section 263 of the Act when two views are possible as held in the case of CIT vrs. Max India [2007 (11) TMI 12 - SUPREME COURT] . - Decided in favour of assessee. 2020 (10) TMI 601 Addition invoking the provisions of Section 56(2)(ix) - advances received - AO observed that, the assessee had no intention to repay the creditors, the assessee diverted the funds to acquire fixed assets and investments - bulk of amount received from Metro Corporation was invested in individual name of assessee and unless the assessee has changed the categorization of receipt to be his own and not longer to be creditors, the assessee would not have used it for acquisition of assets/investments in his own name - HELD THAT:- The assessee wrote back the amount to the P L account because the various trade parties did not claim these amounts for a long time. The unclaimed surplus balances retained by the assessee itself was treated as trade receipt by bringing it to the P L account and the claim of the customers have become barred by limitation - As treated as trade receipt of the assessee. In the present case, the amount was received by the assessee in the course of his business operations and it was shown as liability in his Balance Sheet till the F.Y. ending 31/03/2015 relevant to the A.Y. 2015-16. There was no write off by the assessee by crediting it to the P L account. By showing the balance as outstanding in the Balance Sheet, the debit is acknowledged by the assessee and the lender also confirmed the same. It cannot be said that the claim of the parties has been barred by time. The present case, the specific provision is sec. 56(2)(ix) which is in relation to capital asset. There is no forfeiture of the amount so received by the assessee and it is outstanding in the books of account of the assessee and also confirmed by the lenders. There is also no negotiation for transfer of capital asset by the assessee with these two parties. Thus, the assessee s case is not hit by the provisions of section 56(2)(ix) of the I.T. Act. - Decided in favour of assessee. Customs 2020 (10) TMI 600 Grant of Bail - offence punishable under Section 27(b)/27(d)/28 of the Drugs and Cosmetic Act, 1940 - Section 7/11/46/47 of the Customs Act - Section 21/22(c) of the NDPS (Amendment) Act - HELD THAT:- Medicines have been recovered from the house of the petitioner in an alleged search. Without disclosing the source from where he had obtained the medicines, the petitioner was selling the same illegally. Let the petitioner, above named, be released on bail on furnishing bail bond of ₹ 10,000/- (Ten thousand) with two sureties of the like amount each to the satisfaction of the learned District Sessions Judge, Madhubani, in connection with Laukaha P.S. Case No.162 of 2020 (G.R. No.12 of 2020), subject to the conditions imposed - bail application allowed. 2020 (10) TMI 599 Grant of Bail - Sections 135 of Custom Act, 1962 - Smuggling - Gold biscuits - valuation of the gold biscuits is below one crore - section 102 of and 104 of Custom Act - HELD THAT:- Having considered the material on record, larger mandate of the Article 21 of the Constitution of India and the dictum of Apex Court in the case of DATARAM SINGH VERSUS STATE OF UTTAR PRADESH AND ANR. [ 2018 (2) TMI 410 - SUPREME COURT] and without expressing any opinion on the merits of the case, let the applicant involved in the aforesaid crime be released on bail on his furnishing a personal bond and two sureties each in the like amount to the satisfaction of the court concerned with certain conditions imposed. Bail application allowed. 2020 (10) TMI 598 Refusal of grant a P5 licence to the Appellant - Section 6 F of the Explosives Act, 1884 (the Explosives Act) read with Rule 121 of the Explosives Rules, 2008 (the Explosives Rules) - whether the Appellant was entitled to import ammonium nitrate? - HELD THAT:- It is clear that an existing importer is entitled to apply for a licence within six months from the date of entry into force of the Ammonium Nitrate Rules and to comply with the provisions of the Rules within one year from the date of publication thereof. In the case on hand, the Appellant applied for a P5 licence on 05.08.2015, and the said application was rejected on 19.08.2015. Once the application for a licence was rejected, in our view, the Appellant is not entitled to rely upon the proviso to Rule 5, which provides for additional time during the transitional period to enable persons dealing with ammonium nitrate, as of the date of entry into force of the Ammonium Nitrate Rules, to apply for a licence and to comply with the Rules. In fact, the proviso to Rule 5 was deleted by a subsequent amendment with effect from 27.09.2018. Even otherwise, on facts, the time limits in the proviso do not apply - the undisputed position is that the Appellant imported 740 MT of ammonium nitrate under bill of entry No.2704255 dated 24.09.2015 from Korea. Thus, it is clear that the import of ammonium nitrate was subsequent to the rejection of the application for a licence. Consequently, there is no doubt that the Appellant violated Rule 6(4)(a) of the Ammonium Nitrate Rules which prohibits a person from importing ammonium nitrate without a valid licence and without complying with the conditions of such licence. The ammonium nitrate having the chemical formula NH4NO3 or any combination containing more than 45% of ammonium nitrate by weight shall be deemed to be an explosive as per the Explosives Act. This position emerges from the notification dated 21.07.2011 of the Ministry of Commerce and Industry which was issued under Section 17 of the Explosives Act. Keeping in mind the fact that ammonium nitrate is an explosive in any combination containing more than 45% of ammonium nitrate by weight and the admitted fact that the application for import licence was rejected, we conclude that the Appellant was not entitled to import 740 MT of Ammonium Nitrate on 24.09.2015 and, consequently, the detention and subsequent auction of the consignment of ammonium nitrate by the Customs authorities cannot be faulted. Whether the application for an import licence can be rejected on the ground that the Appellant is a trader? - HELD THAT:- Upon perusal of the Ammonium Nitrate Rules, we do not find any provision that prohibits the grant of licence to a trader. However, it needs to be borne in mind that ammonium nitrate is an explosive. The learned counsel for the first and second Respondents pointed out that the import licence has not been granted to any trader so far on the ground of national security. She explained that ammonium nitrate is used in the manufacture of explosives and, therefore, it would be difficult to track the end use and end users of ammonium nitrate if traders are permitted to import ammonium nitrate for sale to their customers. Upon perusal of Rules 34 and 35 of the Ammonium Nitrate Rules, we find that Rule 34 provides that the District Authority shall verify the antecedents of the applicant including the genuineness of the purpose before granting a no objection certificate. Appeal dismissed. 2020 (10) TMI 597 Misdeclaration of imported goods - import of huge tonnes of Used Rubber Tyre Cut into Two Pieces (used Rubber Tyre with one cut in bead wire) in containers - restricted goods or not - It is the specific case of the respondent/writ petitioner that the said goods are freely importable under policy conditions and also under CTH 40040000 and they had satisfied the conditions of the Exim Policy and they are one of the actual user of the said goods imported - HELD THAT:- In the considered opinion of this Court, in the light of the non taking of stand by the appellants/responds as to the applicability of Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 and in the light of the stand taken in the Writ Petitions, it cannot be concluded as a restricted item, for which, provisional release is not prohibited. It is also to be pointed out at this juncture that the third appellant/third respondent in compliance of the order passed in the Writ Petitions has also ordered the provisional release, subject to various conditions. There is no error apparent in the impugned orders passed and it also protected the interests of both parties. It is also made clear that the claim or otherwise of the Writ Petitioner/Importer is also subject to the out come of the adjudication proceedings, which came to be initiated subsequent to the filing of the Writ Petitions - Appeal dismissed. Corporate Laws 2020 (10) TMI 596 Ownership of shares - time limitation to claim ownership - The applicant, it appears, discovered, in and about April-June 1997 (after a gaop of about 4 years), that its name, as the shareholder of the Company, does not find mention in the annual return filed by the Company with the ROC . - whether the plaintiff could have filed a suit for declaration claiming a right in the subject 500 shares, based on the allegation that it was defrauded, given the aforementioned events? HELD THAT:- The period of limitation provided in Article 59 of the 1963 Limitation Act [which is 3 years] can commence only when the fraud was discovered in line with the provisions of Section 17 of the said Act. The expression first become known to him appearing in Article 59 in the context of an action filed based on a fraud employed by the defendant could only mean when the fraud was first discovered or could have been discovered by the plaintiff by employing reasonable diligence. It is important to bear in mind as to whether fraud in actuality has been committed or not can only be known after a pleading, in that behalf, is made which is tested, based on evidence led by parties - it is only when the fraud got unravelled in August-September 2010 could the material particulars as to how the fraud was employed have been pleaded as is the requirement under Order VI Rule 4 of the CPC. The date concerning the discovery of fraud is crucial as the limitation under Article 59 in line with Section 17 of the 1963 Limitation Act would commence only from that date. The argument that fraud with reasonable diligence could have been discovered earlier is untenable in the instant case as there nothing on record to demonstrate that the plaintiffs were aware of the fact that the stamps affixed on the transfer deeds produced in Court were not printed around the same time when the transfer deeds were purportedly executed. The suit is prima facie within limitation. The plaint cannot be rejected on the ground of limitation without testing the averments made in the plaint and the documents appended thereto at the trial. Whether or not the transfer deeds concerning 260 shares are genuine documents? - HELD THAT:- Section 17 of the 1963 Limitation Act [which is pari materia to Section 18 of the 1908 Limitation Act], embody the fundamental principles of justice and equity, whereby, a party should not be prevented, from taking recourse to legal proceedings, when certain facts and materials are deliberately concealed from it. The opposite party, which has acted fraudulently, should not be allowed to use the statute of limitation as a shield where fraud is employed. Therefore, to close the instant suit, at this juncture, by allowing the captioned application, would cause, to my mind, serious impediment in the examination that the Court would be called upon to conduct about the genuineness of the documents-in-issue i.e. the transfer deeds. The prayer made in the captioned application lacks merit and hence deserves to be dismissed - application dismissed. 2020 (10) TMI 595 Disqualifications for appointment of a Directors - Deactivation of DIN - whether a prior notice is required before disqualifying a director under Section 164(2) of CA 2013? - HELD THAT:- When Section 164(2) of CA 2013 is read with Rule 14 of the AQD Rules, it appears that, if Form DIR-9 is filed, the Registrar of Companies could rely on the names and addresses of directors that were provided by the Defaulting Company. Such reliance may not, however, be bereft of controversy especially when neither statute nor rule sets out the criteria for the preparation of such list. In any event, in all the cases at hand, such a list was not provided because the Defaulting Company did not file DIR-9. In such case, Rule 14(3) provides for resort to Section 2(60) of CA 2013 - it is evident that the statutory prescription is generic except with regard to the managing director and whole-time director and, consequently, insufficient to fix responsibility and attribute the default to a specific set of directors. As a corollary, an enquiry would be necessary. However, the scope of enquiry under Section 164(2) would vary from that under Section 164(1). In specific, the first question under Section 164(2) would be whether the company concerned has defaulted in fulfilling the obligations specified in Clauses (a) or (b). As regards Section 164(2)(a), the learned ASGI contended that this determination would be fairly straight forward. While this contention has some basis, such determination may not necessarily be devoid of challenge as would be evident from the following. As per the proviso to Section 96 (1) of CA 2013, the first annual general meeting (AGM) may be held by a company within nine months from the last date of the preceding financial year and the subsequent AGM's within six months from the last date of the preceding financial year. The time limit for filing the financial statements runs from the date of AGM and Section 137(1) of CA 2013 provides that the same should be filed within 30 days from the date of the AGM. Consequently, the prescribed time limit for filing the financial statements would vary depending on the date of AGM and, as a corollary, the date of default in filing the financial statements would also vary, including with reference to whether it is the first AGM or a subsequent AGM. It could become even more complicated if the AGM is not held as the time limits would run from the last date prescribed for holding the AGM in such situation. As regards the annual return, as per Section 92(4) of CA 2013, it is required to be filed within sixty days of the AGM. Once again, the date of default would vary depending on the date of AGM as also if the AGM is not held. Rules 9 and 10 deals with the application for allotment of DIN. Rule 10 (6) specifies that the DIN is valid for the life time of the applicant and shall not be allotted to any other person. Rule 11 provides for the cancellation or surrender or deactivation of the DIN. It is very clear upon examining Rule 11 that neither cancellation nor deactivation is provided for upon disqualification under Section 164(2) of CA 2013. In this connection, it is also pertinent to refer to Section 167(1) of CA 2013 which provides for vacating the office of director by a director of a Defaulting Company - it follows that if a person is a director of five companies, which may be referred to as companies A to E, if the default is committed by company A by not filing financial statements or annual returns, the said director of company A would incur disqualification and would vacate office as director of companies B to E. However, the said person would not vacate office as director of company A. If such person does not vacate office and continues to be a director of company A, it is necessary that such person continues to retain the DIN. The publication of the list of disqualified directors by the ROC and the deactivation of the DIN of the Appellants is hereby quashed - Appeal allowed. 2020 (10) TMI 594 Demand of amendment in the company petition - Applicant wants 11 types or categories of amendments/enlargements, of which the number of instances, where these amendments/enlargements occur, runs into 108 such instances of amendments being proposed - HELD THAT:- As admitted by the Applicant, who presently controls the management of Respondent No.1 Company, the Respondent No. 1 Company M/s. Montreaux Resorts Pvt. Ltd. through present Applicant has filed another petition against the same Respondents in 2016 U/S. 241-242 of the Companies Act, 2013 for acts of oppression and mismanagement, wherein an application seeking interim relief is pending consideration before this Bench, admittedly with parallel/similar prayers against the same Respondents. On overall view of the entire scenario amongst the parties, litigations pending, issues involved, and also long pendency of present main petition, wherein Hon'ble Supreme Court and Hon'ble NCLAT have categorically directed NCLT to ensure an early disposal of the present main petition No. 114/2007, in our view a practical approach to minimize the entire process of litigation needs to be adopted. If the amendments are to be allowed at this stage, these will no doubt change the entire original petition - Application allwoed. Insolvency & Bankruptcy 2020 (10) TMI 593 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The mention of incorrect address in the Form, payment of fees by Oriental Bank of Commerce instead of Dena Bank does not have any bearing on the merits of the Petition. Any how the Corporate Debtor is before us now through a counsel and mention of old address in the Form 1 is a rectifiable defect. Since the Petition is signed by the Petitioner Bank s officer, the contention that the person who signed the Petition does not have sufficient authority does not hold water. The statement of account produced by the Petitioner clearly shows that the interest due as on 31/01/2016 was paid only on 16/07/2016. The principal due of 31/03/2016 was paid on 23/08/2016. Even assuming, without accepting the contention of the Corporate Debtor, that the date of default of interest was on 03/03/2016, the payment having been made much later i.e. on 16/07/2016, the commission of default is clear - it cannot be accepted that the Corporate Debtor that there was no default. The default committed by the Corporate Debtor thus squarely falls within the definition of default as provided under Section 3(12) of the Code. There is debt as claimed in the Petition and the Corporate Debtor defaulted in making the payment. Hence petition deserves admission - Petition admitted - moratorium declared. 2020 (10) TMI 592 CIRP Proceedings - invocation of Bank Guarantee - HELD THAT:- The bank guarantees furnished for availing certain services are performance guarantees which could be invoked on the failure of the corporate debtor to perform certain acts. Thus, would fall squarely under the above definition and would be beyond the purview of section 14 of the Code - It is thus clear from the finding that bank guarantees would not come within the restrictions imposed upon by section 14 of the Code. Besides bank guarantees represents an independent contract between the Bank and the beneficiary, both the parties would be bound by the terms thereof. This Authority need not however concern itself with the propriety of the bank guarantees. Nor can the matter of fraud or irretrievable injury can be gone into. The same is not canvassed either. What needs consideration is if a restraint order can be passed within the parameters of the Code, now that the CIRP has commenced. As already indicated and authoritatively decided, bank guarantees would not come within the scope of section 14 of the Code. No order of restraint is thus contemplated. Therefore, the prayer made in the Application does not merit consideration - Application cannot be allowed. 2020 (10) TMI 591 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Debt - existence of debt and dispute or not - time limitation. On the matter of 'default' not being a continuing wrong - HELD THAT:- This exposition of law in regard to section 23 of the Limitation Act, 1963, has no applicability in so far as the case of the Corporate Debtor is concerned, inter alia for the reason that there is acknowledgement of liability. On the matter of Balance confirmation and acknowledgement of liability in the Balance Sheet - HELD THAT:- An acknowledgement of liability in the balance sheet of the company constitutes an acknowledgment of liability within the meaning of section 18 of the Limitation Act, 1963, with attendant consequences. In the present case, there is acknowledgement in the balance sheet of the corporate debtor as at 31.03.2015 and 31.03.2016, and therefore, a fresh period of limitation began to run from that date - the date of signatures of the directors be construed as the date of effective acknowledgement of the state of indebtedness of the company. On the matter of Settlement Offers made - HELD THAT:- In view of the fact that the Corporate Debtor in its financial statements for the F.Y. 2014-15 and F.Y. 2015-16 filed with the Ministry of Corporate Affairs acknowledges the liability towards the Financial Creditor; and also in its letter dated 23.02.2017 submitted a proposal for one time settlement of dues of the Financial Creditor, IDBI Bank Limited and Bank of India, which was also revised on 15.09.2018 - the petition filed by the Financial Creditor is within limitation. This Petition reveals that there is a debt as defined in section 3(11) of IBC; there is a default within the meaning of section 3(12) of IBC. Therefore, the Petition made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is more than minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Petition. Petition admitted - moratorium declared. 2020 (10) TMI 590 CIRP / Liquidation Proceedings - applicant has contended that the Liquidator committed serious error in not admitting the claim filed by the applicant and further the Liquidator committed error in not returning the Advance Bank Guarantees - HELD THAT:- It is true the applicant to produce necessary documents in support of the claim filed before the Liquidator. The liability of the Corporate Debtor will be decided only when supporting documents or invoices are filed. It is the case of the Liquidator that proforma invoices are not in the records of the Corporate Debtor. Then how the Liquidator can admit the claim of the applicant when there are no documents with the Corporate Debtor with reference to the alleged proforma invoice. There must be some proof before the Liquidator that such invoices were raised and filed with the Corporate Debtor. It is an admitted case of the applicant that goods were not dispatched to the Corporate Debtor. The goods were allegedly made ready and were lying with the units of the applicant. The specific case of the applicant is that the Corporate Debtor failed to lift the goods prepared according to the specification which was also inspected by the Inspecting Agency. There must be some evidence before the Liquidator. All necessary documents are to be filed with the Liquidator by the applicant by which the Liquidator would be able to decide the liability of the Corporate Debtor towards the applicant. The Liquidator cannot decide a dispute which is within the jurisdiction of a competent authority. The Liquidator is not an adjudicating authority on any dispute between the applicant and the Corporate Debtor. The Liquidator cannot assess the damages which are within the realm of a civil court against breach of contract. The applicant has not approached any civil court as of now for assessment of damages. When the Liquidator is expressing difficulty to admit the claim of the applicant on the ground of non-production of documents, etc. then the Tribunal cannot direct the Liquidator to admit the claim. The claim of the applicant is in the nature of damages for breach of contract. Therefore, we feel that the Liquidator has not committed any error in not admitting the claim. Invocation of Bank Guarantee - HELD THAT:- There is no fraud alleged in obtaining Bank Guarantee. An injunction cannot be given against invoking Bank Guarantee unless it is shown that a fraud of egregious nature is involved. In the present case there is no material to show that any fraud was played by the Corporate Debtor in obtaining Bank Guarantee from the applicant - the relief prayed for by the applicant to restrain the Corporate Debtor from invoking Bank Guarantee or to give a direction to the Liquidator to return the Bank Guarantee or to direct the Liquidator to Inform Bank of America that there are no claims against Bank Guarantee, cannot be granted. Application dismissed. 2020 (10) TMI 589 Release of attachment on the plant and machinery, factory building, movable assets and bank accounts - Section 60(5) of I B Code - HELD THAT:- A bare reading of the MPID Act, 1999, would show that with regard to the attachment that are effected by the competent authority under the MPID Act, 1999, the designated court would further enquire into claims/objections on such attachments and for that purpose, Section 7 of the MPID Act, 1999 provides the designated court all the powers as contained in Civil Procedure Code - It is pertinent to note that the properties of the Corporate Debtor are attached under the provisions of the MPID Act for the alleged dues of ₹ 98.8 Crores, payable by the Corporate Debtor to NSEL on the premise that NSEL is Financial Establishment. However, Hon'ble High Court of Bombay in the matter of 63 Moons Technologies Limited vs. State of Maharashtra [ 2019 (8) TMI 1038 - BOMBAY HIGH COURT ] has categorically held that NSEL is not a Financial Establishment and that all the attachments made under the MPID Act, 1999 on the premise that NSEL is a Financial Establishment would not subsist. Section 238 of the IB Code, 2016 provides for non-obstante clause to the effect that the Code shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of such law - The Hon'ble Supreme Court in the case of Solidaire India Ltd. Vs. Fairgrowth Financial Services Pvt. Ltd. [ 2001 (2) TMI 968 - SUPREME COURT ] has held that where two statutes contain non-obstante clause, latest statute would prevail. Thus IB Code, 2016 being the later statute of the two, provisions of Section 238 of IB Code, 2016 would prevail over the provisions of MPID Act, 1999, insofar as it relates to enquiry on attachments which are civil in nature as per Section 7 of MPID Act, 1999 - Further, since the Hon'ble High Court of Bombay has ruled that NSEL is not a Financial Establishment, the impugned notification of the Deputy Secretary to the Government of Maharashtra with regard to attachment over the properties of Corporate Debtor owing to its alleged dues to NSEL cannot survive. This Adjudicating Authority holds the attachment made by the Competent Authority under MPID Act, 1999, as invalid in the eyes of law - Application disposed off. 2020 (10) TMI 588 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - debt and due payable or not - HELD THAT:- A creditor of the debtor company can raise a defence that there is no default or debt is not due or payable in fact or law as is the case in applications under section 7 - The main objector in the instant case is NAFED, who have not denied the existence of debt or default but have only raised objection as to the quantum of debt as accepted by the Corporate Applicant in its application. The argument advanced by NAFED is that the Corporate Applicant has shown only ₹ 57.50 Cr, as debt in default but in fact the said amount was the OTS amount agreed between parties with the agreement that if instalments as agreed were not paid by the Corporate Applicant, the OTS will be cancelled and entire dues will get revived. According to NAFED, their total debt and default is to the tune of ₹ 132.21 Cr. It is contended on behalf of the objector/NAFED that since the application under section 10 does not reflect the correct figure of debt owed to the Objector, the same cannot be termed as complete and therefore the same should be rejected. It is clear the NAFED has not raised any defence to say that there is no debt or no default, rather they have contended that the amount of debt and default is much higher than reported by the Corporate Applicant. The Corporate Applicant does not fall within the prohibitions stipulated in Section 11 of the Code - this Adjudicating Authority is inclined to admit the instant application filed under section 10 of the Code - Application admitted - moratorium declared. 2020 (10) TMI 587 Maintainability of application- initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - concealment of substantial facts - HELD THAT:- It is clear that the petitioner with malafide intention along with suppression of material facts has not come with clean hands and concealed substantial material facts. Hence this petition deserves to be dismissed. Petition dismissed. 2020 (10) TMI 586 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- Rule 7 of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules, 2016, empowers this Adjudicating Authority to look into the documents which are being filed by the Corporate Applicant and to ascertain whether the said documents are in order. It must be noted here that this Adjudicating Authority is not a mere stamping authority and is required to apply its mind in relation to the veracity of the documents filed correlating with Annexures required to be enclosed under the prescribed form, namely Form 6 under the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules, 2016. It is evident from the record or proceedings that the matters were initially reserved for orders on 08.11.2019 and thereafter, it was posted for clarifications on 18.11.2019 and an opportunity to rectify the defects in the Application as per proviso the sub - section (4) of Section 10 of IBC, 2016. In spite of the same the discrepancies in the documents in relation to the Audited Balance Sheet as on 31.03.2018 31.03.2019 and for the period ending 15.09.2019 still persists and as such the present Application filed by the Corporate Applicant is being surrounded with doubts. Hon'ble Supreme Court in a catena of decisions has held that the purpose and object of the I B Code, 2016 is only for Resolution and not otherwise. However, a perusal of the present Application would go on to show that it has been filed by the Applicant with an ulterior motive to usurp the provisions of Section 10 of the I B Code, 2016 for the purpose of protection of the asset which has been given for the benefit of a group company, in order to secure the loan availed from the Financial Creditor. The reason stated by the Corporate Applicant for filing its Application under Section 10 of the I B Code/2016, is viewed by this Authority as a process of subverting the primary object of the I B Code, 2016. This Authority does not deem fit and appropriate for considering this Application under Section 10 of I B Code, 2016 - Application dismissed. 2020 (10) TMI 585 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - whether there is a pre-existing dispute between the Operational Creditor and the Corporate Debtor as alleged? - HELD THAT:- Here in this case the operational creditor had issued demand notice on 4th June, 2019. To the said notice the corporate debtor had given notice of dispute by reply dated 20th June, 2019 as per section 9(5)(ii)(d) of the Code and proved existence of dispute prior to the date of issuance of the demand notice - In the view of the matter, we are unable to hold that Annexure V to XIX copies of e-mails given to the operational creditor by the corporate debtor relied upon by the Ld. Sr. Counsel for the operational creditor evidencing admission of liability by the corporate debtor. As per the terms of the contract, the delay on the side of the operational creditor give rise to a cause of action to the corporate debtor to claim liquidated damage. The Corporate Debtor in the case in hand succeeded in proving existence of disputes. Moreover, the Corporate Debtor also has succeeded in proving that the claim of the Operational Creditor is much prior to the expiry of the warranty period mentioned in the terms and conditions in Annexure-IV. Keeping in view of the matters, facts and circumstances and position of law, it is held that the application is liable to be rejected under section 9(5)(ii)(d) of the Code. Application dismissed. 2020 (10) TMI 584 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - Time Limitation - principles of res-judicata - quantum of ineterest. Time Limitation - HELD THAT:- The date of default is taken to be 07.02.2013, since in terms of the conditions mentioned in the invoice, interest would be charged if payment is not made within 30 days - This claim pertains to transactions in the financial year 2012-2013, therefore, the question of limitation must be considered - Time which needs to be excluded from calculation of Limitation period in accordance with section 14 of the Limitation Act, 1963:- (a). Time spent in proceedings before the Hon'ble Bombay High Court (Date on which Winding up petition was filed, i.e., 15.12.2014 to Date on which Company Petition was transferred to this adjudicating authority, i.e., 1.04.2017): 779 days (b). Time spent between the transfer of file and the date on which Form 5 was filed with this authority, in terms of the notification number GSR (E) dated 29.06.2017 ibid (1.02.2017 - 21.06.2017): 140 days (c). Time spent in proceedings before this Adjudicating Authority (Date on which Form 5 was filed 21.06.2017 to Date on which Abatement order was passed 03.10.2018): 469 days. Thus, after exclusion of time of 1,388 days (time spent in proceedings before the Hon'ble Bombay High Court and before this Adjudicating Authority), a period of 228 days prevails before limitation period of 3 years come to an end as per the provisions of Art. 137 of the Limitations Act - the petition filed by the Operational Creditor is within limitation. Principle of res judicata - HELD THAT:- It is observed that the order dated 03.10.2018 by the Adjudicating Authority, by which the previous proceeding abated, grants the Operational Creditor liberty to initiate a fresh proceeding as per the provisions of IBC. Therefore, that order which noted the abatement in terms of the notification number GSR (E) dated 29.06.2017 ibid, did not decide on the merits of the case. Therefore, the principles of res judicata are not satisfied and hence, this limb of the arguments advanced on the part of the Corporate Debtor deserves to be rejected. Pre-existing dispute - HELD THAT:- The Corporate Debtor claims that there existed a dispute relating to the quality of goods supplied and hence no payment for the same had been made. No correspondence has been placed before this Adjudicating Authority regarding the dispute about quality and quantity of supplies - this defence on the part of the Corporate Debtor also deserves to be rejected. Arbitrary and excessive interest at 24% per annum - HELD THAT:- Claim about excessive interest cannot be countenanced at this stage long after the invoices were received and acknowledged by the Corporate Debtor. The Petition made by the Operational Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is more than minimum amount of one lakh rupees stipulated under section 4(1) of the IBC. Therefore, the default stands established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor - Petition admitted - moratorium declared. 2020 (10) TMI 583 Approval of Resolution Plan - Implementation of various actions proposed to be taken pursuant to this Resolution Plan - direction that this Resolution Plan shall be binding on the Company together with its employees, members, Creditors (including any assignees and successors), guarantors and all other stakeholders affected by the Resolution Plan and that accordingly, the approval of such employees, members, Creditors, guarantors and other stakeholders (including any Governmental Authorities) shall not be separately required to be undertaken, whether before or after the Vesting Date. HELD THAT:- Section 30(6) of the Code enjoins the resolution professional to submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority. Section 31 of the Code deals with the approval of the resolution plan by the Adjudicating Authority, if it is satisfied that the resolution plan as approved by the committee of creditors under section 30(4) meets the requirements as referred to in section 30(2) - Thus, before approving the Resolution plan, it is the duty of the Adjudicating Authority that it should satisfy itself that the Resolution plan as approved by the COC meets the requirements as referred to in subsection (2) of Section 30. The RP has complied with the code in terms of Section 30(2)(a) to 30(2)(f) and Regulations 38(1), 38(l)(a), 38(2)(a), 38(2)(b), 38(2)(c) 38(3) of CIRP regulations - The identity of the Resolution Applicants have been duly verified by the RP and affidavit as per section 30(1) of the Code has been obtained from the Resolution Applicants stating that they are not ineligible U/s 29A of the IB Code, 2016. The Plan also provides for keeping the Company as a going concern and operate in its normal course of business upon implementation of Resolution Plan. There is no objection filed by any other person in this regard. The Resolution Plan includes a statement under regulation 38(1A) of the CIRP Regulations as to how it has dealt with the interest of the stake -holders in compliance with the Code and Regulations thereunder - It is also evident that the Resolution Plan placed before this Adjudicating Authority, was approved by the Committee of Creditors in the CoC meeting held on 31.08.2019 with 100% votes cast in favour of Approval of Resolution Plan. Resolution plan approved. PMLA 2020 (10) TMI 582 Disposal of representations dated 21.08.2018 by passing a reasonable and speaking order, within a reasonable time period that may be fixed by this Court - HELD THAT:- The interest of the petitioner is only private and if the same is a public interest, the locus will be tested in a different way. The term dual test is whether the petitioner is a person aggrieved, as admittedly, he is an advocate and had never traded with the NSE nor had suffered any loss on account of the alleged co-location service. The petitioner being a complete stranger, there is no cause of action for him to maintain a writ petition, much less, any cause of action that arose within the jurisdiction of this court to maintain a writ petition here. Therefore, on the ground of maintainability itself the petitioner has to be nonsuited. Admittedly, there were issues when co-locations were introduced on 22.05.2017. The first show cause notice was issued by SEBI to NSE, to conduct an extraordinary investigation. Deloitte, a private independent professional agency was appointed and a report was filed and other private investigators were also engaged to find out whether any profits were made by the brokers. On 3.7.2018, a second show cause notice was issued and a full-fledged encquiry by SEBI was conducted. The enquiry was held from February 2019 to April 2019. On 30.04.2019, SEBI passed an order of imposing a disgorgement penalty of ₹ 624.00 Crores for certain failures for not having safeguards. However, no case was made out against NSE for fraud - NSE had preferred an appeal before the Securities Appellate Tribunal (SAT). Before the Securities Appellate Tribunal, the appeal was also heard in length and reserved for orders on 05.03.2020. The petitioner also has impleaded himself in the appeal, besides filing an independent appeal. From the above, it is evident that the representation of the petitioner has already been disposed of. Section 6(3) of the Securities Contracts (Regulation) Act, 1956, mentions about the power of the Central Government to call for periodical reports or direct enquiries to be made. Already show cause notice was issued under Section 11 of the Securities Contracts (Regulation) Act. When the prayer in both the writ petitions, is to consider the representation of the petitioner dated 21.08.2018, and action has already been taken and that the SAT is seized of the matter and having reserved orders in the appeal, issuance of mandamus, is not warranted. Petition dismissed. Service Tax 2020 (10) TMI 581 CENVAT Credit - input service - Deposit Insurance Service provided by DICGC - denial on the ground that such services have no nexus or connectivity with the actual performance of the banking service provided by the assessee-appellant - HELD THAT:- The issue with regard to availment of cenvat credit on the disputed service was highly debatable and there were conflicting views by different benches of the Tribunal. For resolving the dispute, the Larger Bench was constituted. In the case of South Indian Bank Vs. Commissioner of Customs, Central Excise Service Tax, Calicut, the Larger Bench of the Tribunal vide order dated 20.03.2020, reported in 2020-TIOL-861-CESTAT-BANG-LB has answered the reference in the following terms: The insurance service provided by the Deposit Insurance Corporation to the banks is an input service and CENVAT credit of service tax paid for this service received by the banks from the Deposit Insurance Corporation can be availed by the banks for rendering output services . Thus, the issue arising out of the present dispute regarding availment of the Cenvat credit on Deposit Insurance Service provided by DICGC is no more res integra - appeal allowed - decided in favor of appellant. 2020 (10) TMI 580 CENVAT Credit - non-reversal of proportionate credit availed on input services that was attributable, mathematically, to rendering of services by the appellant on which tax liability was not required to be discharged - endowment policy and unit linked insurance plan (ULIP) policy - period between 2008-09 to 2010-11 - HELD THAT:- Considering that it has been held in INDIAN NATIONAL SHIPOWNERS' ASSOCIATION VERSUS UNION OF INDIA [ 2009 (3) TMI 29 - BOMBAY HIGH COURT] by the Hon ble High Court of Bombay, and duly affirmed by the Hon ble Supreme Court in UOI VERSUS INDIAN NATIONAL SHIPOWNERS ASS. ORS. [ 2010 (12) TMI 12 - SUPREME COURT] , that no taxable service can, by inference, be presumed to exist until specifically enumerated in section 65 (105) of Finance Act, 1994, this proposition advanced by, and on behalf of, the adjudicating authority fails the test of judicial confirmation. Consequently, the inference that the service described in section 65 (105) (zx) of Finance Act, 1994 is a bundle from which one has been isolated for tax till 1st May 2011 is also not tenable; this should have been amply evident from the absence of a new entry to describe such service identified for levy of tax. Neither does the tax on management of segregated fund in section 65 (105) (zzzzf) of Finance Act, 1994 with effect from 16th May 2008 obtain support for it as this freshly incorporated taxable service is a fiction designed by law through a deeming provision. Hence, it is abundantly clear that the expansion of the taxable value through the two amendments supra did not bring new services into existence. Even if it did, the subsequent existence of such service could not enable assumption that these were exempted till then. From application of the definition of exempted services in rule 2 (e) of CENVAT Credit Rules, 2004, to the facts leading to the impugned order, there are no doubt that the amendments in section 65 (105) of Finance Act, 1994 in relation to endowment policies and unit linked insurance plan (ULIP) policies cannot be held to have established exempted services warranting any restriction on availment of CENVAT credit of input services as provided for in the rule 6 of CENVAT Credit Rules, 2004. Appeal allowed - decided in favor of appellant. 2020 (10) TMI 579 Fastening of tax liability by combination of the legal fiction in Finance Act, 1994 for deeming provider and recipient - inclusion of a particular business model within the compasses of that very fiction by way of a clarificatory circular of the Central Board of Excise Customs that was deployed by the adjudicating authority - attribution of certain expenditure of the appellant to one of their business ventures sufficed for it to be consideration for service rendered - HELD THAT:- There are no doubt that agreement among entities for rendering of service to another entity is the essence of joint venture ; however, it is doubtful if joint operation agreement , mandated by the terms of the production sharing contract , can be deemed to be one such in the absence of an external beneficiary. In the impugned contract, the several participating interests are, collegially, designated as contractor in the singular and in furtherance of the policy of the Government of India to involve corporate participation for efficient harnessing of natural resources as codified in the production sharing contract agreed upon. This, then, would be the primary association as joint venture comprising of four entities, including Government of India, for viability in extraction of natural resource as the common goal. The manner in which the contract provides for distribution of profit petroleum and cost petroleum is a business model for ensconcing within itself the alienation of risk by the Government of India which necessarily mandates a working arrangement for the disaggregation of cost petroleum as compensation for the mutually exclusive risks undertaken by the contractor. The participating interests in the joint operations have not come together of their own accord for the common purpose of bearing the risk but from one stipulation in the contract setting forth the common purpose including the participation in the proceeds of profit petroleum that is extracted. Service is the satisfaction of one s need by another person with the existence of a provider as sine qua non in any service transaction and with accumulated capital affording the luxury of such satisfaction. Owing to increasing pressure on manufacturers to scale up size and to specialize in competencies for achieving cost optimality, that is no longer a luxury borne on affordability. With the maturing of this sector, the State inserted itself as a stakeholder and, as always, tax was, so to speak, the foot in the door. Taxpayer fatigue, engendered by prohibitively high rates, frenetic enforcement overreach and incessant adversarial litigation, was not conducive to direct implementation of the negative list ; more so, as definitional certitude was necessary to guide assesses and assessors through unfamiliar territory of intangibles. The addition of services to the enumeration, though slow in the early years, underwent a five-fold increase between 2000-01 and 2006-07 signposting the imminence of transition to negative list regime. No business venture can function without capital and the by-passing of transubstantiation of accumulated capital, in the form of cash and bank balances, into these rights and competencies does not derogate from that. Hence, the activity undertaken by the appellant with its cost equivalence recorded in the books is nothing but capital contribution. The adjudicating authority has erred in concluding that the mechanism of cash call prescribed in the joint operations agreement is consideration for services; it is intended as the vehicle for contribution by the participating interests to the capital requirements of the venture. As such capital contributions are obligated for the establishment and operation of a business venture, it is not consideration for rendering of any taxable service. It is found that it is parties to the production sharing contract who constitute a joint venture and that the Explanation below section 65B (44), intended to cover supply of services to a constituent of unincorporated associations or body of persons by the latter is not relevant to the present dispute. Further, the fulfilment of obligation to contribute to the capital of the joint venture is beyond the scope of taxation under Finance Act, 1994 as it does not amount to consideration. The performance of such obligations is intended to serve itself and, thereby, the joint-venture. As the demand confirmed in impugned order is not on the consideration for rendering of a service, we are not required to decide on the other issues. Appeal allowed - decided in favor of appellant. 2020 (10) TMI 578 CENVAT Credit - exempt service or not - portion of payments (premium) received by the assessee that remains untaxed at the appropriate rate - subsequent failure in neutralizing the credit to the extent of not being attributable to taxable output services - rule 6(3) of CENVAT Credit Rules, 2004 - HELD THAT:- The present dispute has its genesis in not subjecting the entirety of premium to tax from the time that service in relation to life insurance was incorporated in section 65(105) of Finance Act, 1994 but was, by a series of amendments, expanded within the premium payable by the policy holder. Even after the last of the changes before that tax regime ended on 30th June 2012, the entirety of premium was not subject to tax as a certain portion therein could not be attributed to service. Even the two inclusions, effected in 2008 and 2010, could not be said to have incorporated a new service for taxation as the former depended on deeming of service for coverage by a new enumeration without going beyond the premium and the latter, too, not only did not travel beyond the premium but also remained within life insurance as the activity under coverage. Hence, new identifiable taxable services were not the subject of the impugned levy. Even if these were to considered as new taxable services the question of harmonizing the proposition of Revenue with the scheme of tax arises. Finance Act, 1994 is concerned with taxable service and not service and it is only upon incorporation within section 65(105) that that a new taxable service can be acknowledged. Rule 6 of CENVAT Credit Rules, 2004 is concerned with exempted service to the extent that input services are deployed for rendering such exempted services and credit has been availed thereon. The legislative intent of the inclusive aspect of exempted service did not contemplate subsequent incorporation as the test of exemption. Nevertheless, we must travel on to ascertain the legislative intent. There are certain activities that may well be beyond the competence of the Union to tax and, thereby, beyond contemplation for inclusion in section 65(105) of Finance Act, 1994. Trading is one which comes to mind immediately and yet another is works contract with a catena of decisions based on exclusion of competence to tax by the Union - In the absence of a definition of service , this is the interpretation that is doctrinally satisfying and but for which the inclusive component is otiose. Likewise, in a scheme of levy that enumerates the taxable activities, it is only by statutory incorporation that a service is acknowledgeable in law and any service that may be legislated within Finance Act, 1994 can be considered as exempted only through notification under statutory authority. There is only one service and that is risk cover with attendant payouts contingent upon death or maturity; subsequent taxation by creating a service within, and assigning a value to it, was not intended to cover a new service. Both were extractions from the expenditures incurred by the insurer in relation to the policy. The inclusive portion of the definition of exempted service is restricted to certain services - Appeal allowed - decided in favor of appellant. 2020 (10) TMI 577 Classification of services - Export of service or not - Management, Business Consultancy Services or Real Estate Agent service - appellant is engaged in providing non-binding investment advisory service to SITQ Mauritius Advisory Services and other such entities - export of services in terms of Rule 3(1)(iii) of the Export of Service Rules, 2005 - period from 2007-08 to 2010-11 - HELD THAT:- the appellant renders investment advisory services in relation to investment and not to any particular real estate / project. It is advising in respect of investment in Companies in real estate sector in the form of equity / debt and not in real estate property per se. Further, the advisory services provided by the appellant are not restricted to advising in respect of investments. It is wider in scope and also includes general economic and market conditions, tax environment etc. The appellant also advises on various funding, investment structuring options. The matter is no longer res integra. This matter has already been decided by this Tribunal in party's own case M/S. SITQ INDIA PVT. LTD. VERSUS C.S.T., DELHI [ 2018 (3) TMI 770 - CESTAT NEW DELHI] where it was held that Tribunal in the case of AMP capital Advisors Indian Pvt. Ltd. Vs. CST, Mumbai [2015 (6) TMI 122 - CESTAT MUMBAI], observed that the appellant providing advisory services to AMP capital, Australia and the service recipient using said advice received for further advising for their customers in India, would qualify for export of service. The services provided by the appellant is classifiable under Management, Business Consultancy Services , and, therefore, the demand of service tax is not sustainable - Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2020 (10) TMI 576 Non-speaking order - allegation that the respondent No.2, without considering any of the points raised by the petitioner in its reply, proceeded to pass a non-speaking order - HELD THAT:- Learned Assistant Government Pleader Shri Chintan Dave could not justify in any manner that the impugned order is a reasoned order or that it was not a non-speaking order - Law is well settled that a non-speaking order suffers from arbitrariness which goes to the root of the matter and as such, alternative remedy may not come in the way of this Court in entertaining this petition. The impugned order dated 3rd June, 2020 passed by respondent No.2 is hereby quashed - Petition allowed. Indian Laws 2020 (10) TMI 575 Dishonor of Cheque - maintaining prosecution under section 141 of N.I. Act for arraining the company as an accused - main contention of the petitioner is that the prosecution could not launch unless and until the firm arraign as accused - whether in sole proprietorship firm indictment of firm arraign as parties is necessary or not? - HELD THAT:- The phrase association of individuals necessarily requires such entity to be constituted by two or more individuals i.e. natural persons. On the contrary a sole-proprietorship concern, by very description does not allow for ownership to be shared or be joint and it defines, restricts and dictates the ownership to remain with one person only. Thus, associations of individuals are absolutely opposed to sole-proprietorship concerns, in that sense and aspect - A 'partnership' on the other hand is a relationship formed between persons who willfully form such relationship with each other. In the context of an offence under section 138 of the Act, by virtue of Explanation (b) to section 141 of the Act, only a partner of a 'firm' has been artificially equated to a 'director' of a 'company'. Its a legal fiction created in a penal statute. It must be confined to the limited to the purpose for which it has been created. Thus a partner of a 'firm' entails the same vicarious liability towards his 'firm' as 'director' does towards his 'company', though a partnership is not an artificial person. So also, upon being thus equated, the partnership 'firm' and its partner/s has/have to be impleaded as an accused person in any criminal complaint, that may be filed alleging offence committed by the firm. However, there is no indication in the statute to stretch that legal fiction to a sole proprietary concern - Besides, in the case of a sole proprietary concern, there are no two persons in existence. Therefore, no vicarious liability may ever arise on any other person. The identity of the sole proprietor and that of his 'concern' remain one, even though the sole proprietor may adopt a trade name different from his own, for such 'concern'. The principle contained in section 141 of the Act is not applicable to a sole-proprietary concern. The petitioner taken the money in advance by way of loan and petitioner handed over the cheques bearing no. 850213 850214 amount of ₹ 50,000/- each only for the security for payment of money advance by way of loan. So the transaction of money and cheques not in the prosecution of business of firm but cheques handed over by petitioner to Nepal Singh in individual capacity. So due to aforesaid reason too no need to implead the sole proprietor firm by his firm name - there is no illegality or irregularity in the orders. Petition dismissed.
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