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Showing 401 to 420 of 1740 Records
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2024 (9) TMI 1342
Denial of benefit of Input Tax Credit - denial on the ground that no such payment was made against the Permanent Registration Number of the petitioner - HELD THAT:- The matter requires reconsideration at the hands of the 1st respondent. A reading of Ext.P4 order does not show that the 1st respondent had considered the contention of the petitioner that the payments in respect of which he was seeking the benefit of Input Tax Credit were actually payments which were reflected against the Provisional Registration granted to the petitioner under Registration Number 32AACFK4681K1Z9 and before the petitioner was granted the Permanent Registration Number - 32AACFK4681K2Z8.
There are no reason as to why such credit should be unavailable to the petitioner - petition disposed off.
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2024 (9) TMI 1341
Allowability u/s 37(1) - whether Tribunal was erroneous in not properly appreciating the decision of Ramaraju Surgical Cotton Mills a later decision of the Hon’ble Supreme Court and specifically referred to in the petitioner’s submission before the Tribunal?” - HC 2024 (2) TMI 1434 - CALCUTTA HIGH COURT] decided issue in the favour of revenue - HELD THAT:- SLP dismissed.
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2024 (9) TMI 1340
Accrual of income in India - sale of software product - royalty receipts - India USA DTAA - delay filling SLP - as decided by HC [2023 (2) TMI 1251 - DELHI HIGH COURT] amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS under section 195.
HELD THAT:-There is a gross delay of 384 days in filing and 66 days in refiling this special leave petition.
Delay in refiling is condoned. However, the explanation offered for seeking condonation of delay of 384 days in filing is neither satisfactory nor sufficient in law so as to condone the same. Hence, the application seeking condonation is dismissed.
Even otherwise, the special leave petition is covered on merits by virtue of the judgment of this Court in the case of Engineering Analysis Centre of Excellence Private Limited [2021 (3) TMI 138 - SUPREME COURT] which judgment has also been sustained in the review petition filed by the petitioner by a three-Judge Bench of this Court. SLP dismissed both on the ground of delay as well as on merits.
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2024 (9) TMI 1339
Disallowance made u/s 40A(2) - Slump Sale Transfer of hospital as a going concern - amount spent on projects for establishing and operating hospitals - Nature of expenditure on hospital projects as revenue or capital expenditure - Disallowance of service charges paid to a company - Disallowance of expenditure for inflow of equity - disallowance towards non-recoverable projects cost by holding that the expenditure is in the nature of revenue expenditure - disallowance of legal and professional charges by holding that the same is in the nature of capital expenditure -
HELD THAT:- On a query made by this Court, the learned counsel appearing for the petitioners, on instructions, states that the judgments referred to in paragraph 3 of the impugned judgment have not been challenged by the petitioners. Hence, no case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India.
The Special Leave Petition is, accordingly, dismissed.
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2024 (9) TMI 1338
Faceless assessment of income escaping assessment - validity of notice issued by the JAO as not in accordance w/sec 151A - not permissible for the Jurisdictional Assessing Officer to issue a notice under Section 148, as the same would amount to breach of the provisions of section 151A - HELD THAT:- As decided in recent decision of this Court in Hexaware Technology Ltd. [2024 (5) TMI 302 - BOMBAY HIGH COURT] provisions of Section 151A of the IT Act had clearly brought a regime of faceless assessment. The Court held that it was not permissible for the Jurisdictional Assessing Officer to issue a notice under Section 148, as the same would amount to breach of the provisions of section 151A of the IT Act.
There is no question of concurrent jurisdiction of the JAO and the FAO for issuance of notice under Section 148 of the Act or even for passing assessment or reassessment order. When specific jurisdiction has been assigned to either the JAO or the FAO in the Scheme dated 29th March, 2022, then it is to the exclusion of the other.
We find substance in contentions as urged on behalf of the petitioner considering that the impugned notice has been issued by the Jurisdictional Assessing officer, which is outside the faceless mechanism as provided under the provisions of Section 144(B) read with Section 151A and the “Scheme” notified by the Central Government dated 29 March 2022 under Section 151A. It is also correct that in several proceedings which had come up before this Court, the Court had taken into consideration the said decision and had granted reliefs, finally disposing of the petitions.
What now bothers us and more so judicially, is that neither for the assessee nor for the revenue, the ball would stop rolling. This, in as much as, the decision of this Court in Hexaware, being already assailed by the Revenue before the Supreme Court, it is stated by Mr. Sharma, that all our judgments which follow the decision in Hexaware and the other connected decisions, are now being assailed by the Revenue before the Supreme Court, in the proceedings of a Special Leave Petition being filed under Article 136 of the Constitution of India. This has entailed a peculiar situation, namely that the Revenue is now required to initiate proceedings before the Supreme Court and the assessee would be required to face such proceedings. Thus, the proceedings which stood disposed of by this Court, by such method, in fact, would get transferred to the Supreme Court, in view of the pendency of the Revenue’s challenge to the decision of this Court in Hexaware.
In such circumstances, in our opinion, it is in the interest of the parties, that henceforth we need to have a different approach considering that in disposing of such petitions following Hexaware, it would involve both the Revenue as also the assessee to face further proceedings, for the reason that our orders in such manner create further litigation between the Revenue and the assessees. We may observe that the endeavor of the Court would always be, that at least, the orders passed by the Court ought not to generate any litigation between the parties much less a further litigation with which we are concerned.
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2024 (9) TMI 1337
Maintainability of appeal before High court - substantial question of law or fact - Tribunal setting aside the disallowance of short term loss claimed by assessee in P & L A/c by holding that the shares have acquired by assessee under normal business transaction and can be taken as stock-in-trade - Whether the impugned order of the Tribunal requires interference at the hands of this Court? -
HELD THAT:- It is settled position of law that under Section 260-A of the Act, the High Court could entertain the appeal or appeals only if it involves substantial question/s of law. In the instant case, we are of the view that in the peculiar facts of the case, the question raised by the Revenue is not a substantial question of law and it is a question of fact. Moreover, the Revenue had not filed appeal before the Tribunal with regard to colorable device or the genuineness of transaction or on allowance of loss in a sum of Rs. 11,27,00,000/-. But, the Revenue’s appeal was in respect of other disallowances allowed by the Assessing Authority.
The substantial question of law raised by the Revenue would not emanate from the order of the Tribunal, but from the order of the Commissioner of Income Tax (Appeals). The Revenue had not raised the genuineness of transaction or colorable device before the Tribunal. Hence, in the peculiar facts and circumstances of the case, we are not inclined to interfere with the order of the Tribunal. Accordingly, the substantial question of law raised by the Revenue is answered against them and in favour of the assessee.
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2024 (9) TMI 1336
Reopening of assessment u/s 147 - Issuance of three successive notices - there was no return to cross-check - HELD THAT:- Company brought to the notice of the officer concerned about the filing of the returns in the year 2010 i.e., on 08.10.2010 and about the One Time Settlement. However, the officer concerned without application of mind, disposed of the objections concluding that there are reasons to believe that income has escaped assessment and the same was established on the intimation received from the Investigation wing, Mumbai and there was no return in hand for the relevant assessment year to cross-check the facts. This is untenable. The reason is apparent. It is relevant to note that the company had already filed its returns in the year 2010 and it was also brought to the notice of the department about the one-time settlement.
However, the same was not noticed and the officer concerned concluded that there was no return to cross-check. Absolutely, there is no application of mind by the officer concerned in dealing with the objections and reopening the assessment. The reasons recorded for reopening of assessment are without application of mind and cannot be said to be reasons to believe which is a mandatory condition to invoke the provisions of Section 147 R/w Section 148 of the Act.
The reasons recorded for reopening of assessment are based on a borrowed satisfaction which is impermissible in law. Hence, the reasons for reopening of assessment are untenable.
Furthermore, the issuance of successive notices under Section 148 of the Act is also unsustainable in law. Therefore, the Communication dated 27.11.2017 and the notices are liable to be quashed. Accordingly, they are quashed. WP allowed.
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2024 (9) TMI 1335
Validity of order passed u/s 264 - written submissions filed by the petitioner not considered before passing order - denial of principle of natural justice - HELD THAT:- A perusal of the postal cover produced at Annexure-E would indicate that though the impugned order is purported to have been passed on 20.11.2023, but the impugned order is seen to have been dispatched only on 29.11.2023, subsequent to the written submissions filed by the petitioner.
In view of this ambiguity and discrepancy that is apparent on the face of the record, as regards the purported date of the impugned order and date of dispatch by the respondent No.1, matter is required to be reconsidered afresh by considering written submissions filed by the petitioner on 23.11.2023.
A perusal of the written submissions filed by the petitioner would also indicate that the same are relevant and necessary for the purpose of adjudication of the issues involved in the petition and since the same would have bearing/impact on the claim of the petitioner, the impugned order deserves to be set-aside.
Also the material on record demonstrates that the petitioner had made investment and availed the benefit of Income Declaration Scheme under Section 183 of the Finance Act, 2016, which would have an impact on the claim of the petitioner and the said aspect having not been considered by the respondent, is yet another circumstance that would vitiate the impugned order, which deserves to be set-aside and the matter remitted back for reconsideration afresh in accordance with law. So also, the additional written submissions filed on 14.11.2023 having not been considered fully and in the proper perspective. Impugned orders in so far as it relates rejecting the claim of the petitioner are hereby set-aside.
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2024 (9) TMI 1334
Ex-parte order passed by CIT(A) - assessee could not represent his case before Ld. CIT(A) and the order being an ex parte order, stood vitiated on account of violation of principle of natural justice - HELD THAT:- As seen that during the appellate proceedings, the assessee did not submit details and documents before the Ld. CIT(A), therefore, the Ld. CIT(A) passed an ex parte order.
We note that assessee could not plead his case successfully before the Ld. CIT(A) and also note that Ld. CIT(A) has not passed the order as per the mandate of provisions of section 250(6) of the Act. That is, Ld. CIT(A) did not pass order on merit based on the entire material available on record.
One more opportunity should be granted to the assessee to plead his case before the Ld. CIT(A). We note that it is settled law that principles of natural justice and fair play require that the affected party is granted sufficient opportunity of being heard to contest his case. Therefore, without delving much deeper into the merits of the case, in the interest of justice, we restore the matter back to the file of Ld. CIT(A) for de novo adjudication and pass a speaking order after affording sufficient opportunity of being heard to the assessee.
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2024 (9) TMI 1333
Addition u/s 56(2)(x) - difference in Fair Market Value of the property as per Stamp Duty Valuation Authority - HELD THAT:- When on the date of agreement amount of consideration is fixed for the transfer of immovable property and the date of registration is not the same, then the Stamp duty Value on the date of agreement is to be taken. The section further provides that the value as on date of agreement can be taken only when the amount of consideration in the agreement has been paid by way of account payee cheque or by the electronic clearing system through a bank account on or before the date of agreement transfer of such immovable property. Thus, the aforesaid provisos carve out exception by taking the stamp duty value as on the date of agreement when the payments have been made through banking channels.
AO has stated that allotment letter is not a registered agreement, therefore, the value of the property has to be taken as on the date of sale registration. First of all, when builder gives an allotment letter with terms and conditions and all the rights and the value of purchase is agreed upon and assessee has acted upon by accepting the terms and conditions and starts making the agreed payment, then it is clearly covered under aforesaid proviso to section 56(2)(x).
The assessee has agreed to purchase in the year 2012 in terms of allotment letter and also made the payments before the sale was registered. Therefore, the value as on date of allotment has to be treated as stamp duty value for the purpose of aforesaid provision of section 56(2)(x) of the Act and since at that time payment made was more than the stamp duty value therefore, no addition can be made. Appeal of the Revenue is dismissed.
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2024 (9) TMI 1332
Disallowance of the exemption u/s 10(23C)(ad) and/or 10(23C)(vi) - disallowing the expenditure Incurred for running the education institute / schools, affiliated with State Govt. Education board against the fee income, received from the students - Addition on the ground that the gross receipt of the assessee exceeds Rs.1 crore as prescribed monetary limit u/s 10(23C)(iiiad) of the Act - HELD THAT:- Before CIT(A) assessee has specifically pointed out that it operates two educational institutions namely Rose Mary High Convent Higher Secondary School and Rose Mary High School and contended that the monetary limit of Rs.1 crore as prescribed u/s 10(23C)(iiiad) read with Rule 2BC of the Act should be applied in respect of the gross receipts of each of the educational institutions and not on the aggregate receipts of both the educational institutions.
Assessee also pointed out that the entire gross receipt cannot be assessed to tax without allowing eligible deduction against said income.
We find that the above stated facts have not been properly considered by CIT(A) while passing the impugned order as the claim of the assessee was disallowed on the ground that the assessee is neither registered u/s 12A/12AA nor approved/notified under the provisions of Section 10(23C)(iiiad) of the Act and therefore, the claim of the assessee was denied as the total receipts are more than Rs.1 crore as prescribed under the said provisions of Section 10(23C)(iiiad) read with Rule 2BC
CIT(A) has not disputed the fact that the assessee is running two separate educational institutions and therefore, in our considered view the gross receipts of each of the educational institutions has to be separately considered for the purpose of allowing the claim of exemption u/s 10(23C)(iiiad) of the Act. In any case the total income of the assessee ought to have been assessed as per commercial principles and the eligible expenditure against the gross receipts should have been allowed while computing the total income. Accordingly, in the facts and circumstances of the case we set aside the impugned order of CIT(A) and the matter is remanded to the record of the jurisdictional A.O for fresh adjudication - Appeal of the assessee is allowed for statistical purposes.
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2024 (9) TMI 1331
Delay in filing the appeal - assessee has filed the appeal after a delayed of 506 days - Registration of Trust u/s 12AB(1)(b)(ii)/ 12A denied - HELD THAT:- The reason given is that while checking status of the assessment order, the CA also checked the status of application for registration and found that the application has been rejected. It means that the assessee was primarily concerned about the fate of assessment order. The CA also checked the status of the application filed for registration while checking the assessment order. It is thus crystal clear that after filing the application, it has remained inactive and was negligent.
There was no due diligence on the part of the assessee. This fact shows the lackadaisical attitude of the assessee towards the registration of the trust and subsequent follow up action indulging filing of appeal. Such casual and lackadaisical approach towards the order of rejection of registration cannot constitute “sufficient cause” within the meaning of section 253(5) of the Act. In view of the above facts and respectfully following the authoritative precedents cited supra, we refuse to condone the delay, requested by the assessee.
Since, delay has not been condoned it becomes academic in nature to discuss the merit of the case. Assessee appeal dismissed.
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2024 (9) TMI 1330
Reopening of assessment u/s 147 - capital gain on sale of land or profit on sale of land - as argued no addition made on account of income escaped as per reasons recorded - reopening of assessment based on different grounds than those included in the reason for reopening - HELD THAT:- On perusal of Section 147 of the Act would show that, if, the Revenue makes an attempt to reopen the assessment, all that the AO has to show is that, AO has reason to believe that any income chargeable to tax has escaped assessment for the concerned assessment year and while doing so, AO is also empowered to assess any other income, which has escaped assessment and, which comes to AO's notice, subsequently, albeit, during course of the assessment proceedings.
Careful reading of Section 147 of the Act would show that it empowers an Assessing Officer to reopen the assessment, if, AO has reason to believe, that any income chargeable to tax has escaped assessment for the relevant year, "'and also bring to tax'", any other income, which may attract assessment, though, it is brought to AO's notice, subsequently, albeit, in the course of the reassessment proceedings. To put it plainly, the purported income discovered subsequently during the course of reassessment proceedings, can be brought to tax, only, if the escaped income, which caused, in the first instance, the issuance of notice under Section 148 of the Act, is assessed to tax.
In the present case before us admittedly the AO has reopened the assessment for assessing capital gain on sale of land or profit on sale of land, as noted in the reasons recorded above and while framing reassessment u/s. 143(3) r.w.s.147 of the Act, he has not touched upon this issue and added TP adjustments made for determination of ALP of the assessee. We quash the reassessment order and allow this appeal on jurisdictional issue. Appeal filed by the assessee is allowed.
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2024 (9) TMI 1329
Disallowance made of expenses incurred in relation to earning exempt income u/s 14A - expense suo moto disallowed by the assessee u/s 14A pertaining to the earning of exempt income was “Nil” - persistent plea of the assessee against any disallowance of expenses to be made u/s 14A of the Act was that it had sufficient interest free own funds for the purposes of making this investment - HELD THAT:- No change in facts and circumstances from the preceding year having been pointed out to warrant NIL disallowance of expenses in the impugned year, except for stating that it had sufficient own funds for making the investments. But this fact was present in the preceding year also when also there were sufficient own funds available with the assessee for making investments yet it had suo moto made a disallowance of Rs. 31 lacs u/s 14A of the Act. Further, we agree with the AO that the possibility of incurrence of NIL administrative expenses was not feasible considering the huge quantum of investments made by the assessee earning exempt income to the tune of approx. 25.65 Crs nor do we find it was explained by the assessee with cogent reasons.
AO, we hold, was correct in being not satisfied with the claim of the assessee of NIL expense being incurred for earning exempt income. The invocation of Rule 8D of the Rules, as a consequence, we hold, has been rightly held by the Ld. CIT(A) to be in accordance with law as per section 14A(2)/(3) of the Act.
The order of the Ld. CIT(A) confirming the disallowance made u/s 14A is accordingly upheld. - Decided against assessee.
Disallowance of deduction claimed u/s 80IA - reduction of profits of the eligible unit by allocating certain Head Office/Common expenses to the eligible unit - HELD THAT:- No merit in the disallowance made by allocating the common expenses to the eligible unit and thus reducing the deduction claimed u/s 80IA of the Act to Rs. 1,07,897/-. Firstly, it is a fact on record that the quantum of operation of the eligible unit was miniscule as compared to the ineligible unit, with the ineligible unit accounting for almost the entire turnover of the assessee to the tune of 99.733% and the eligible unit’s turnover being only 0.2676%. The entire exercise of allocation of expenses, therefore, is a waste exercise by which only 0.26% of the alleged common expenses have been allocated to the eligible unit amounting to Rs. 1,07,897/- , out of total of such expenses to the tune of Rs. 4 crores approximately. On the principle of materiality itself, this entire exercise of allocating expenses to the eligible unit, therefore, fails.
Even otherwise, we have noted that the ITAT in the case of the assessee in AY 2008-09 found identical allocation of expenses to the eligible unit of the assessee claiming exemption of its income u/s 10B of the Act on account of audit fees, managerial remuneration etc. to be inappropriate finding these expenses to have no bearing on the earning of income. Therefore, considering the materiality of the entire exercise and taking note of the decision of the ITAT in the case of assessee in AY 2008-09, we hold that the disallowance made by allocating commission expenses to the eligible unit of the assessee claiming deduction u/s 80IA is not sustainable. The disallowance so made is, therefore, directed to be deleted. Decided in favour of assessee.
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2024 (9) TMI 1328
Levy of penalty u/s 114(i) of the Customs Act, 1962 - smuggling - export of Red Sanders - Failure to comply with KYC requirements - HELD THAT:- The role played by Shri Arup Mukherjee and M/s. Bose Enterprises was shorn of adhering to prescribed procedures and formalities as enshrined in law. Both the appellants herein completely failed in ascertaining the whereabouts by way of KYC of the persons associated from whom they had sourced the business nor were they in possession of any letters of authorization or profile assessment and verification report etc. of their ultimate client M/s. Bhadrakali Export Pvt.Ltd., Nepal for whom they undertook the said transit clearance of Nepal based cargo meant for export to Korea. The appellant’s plea that as the show cause notice makes out no allegation of abetment against the appellants, no penalty can be imposed on them under section 114(i) of the Customs Act, 1962, cannot be agreed upon.
The fact that the present attempted export of Red Sanders was attempted through a chain of intermediaries with at no stage of any mention of KYC documents coming through is a pointer to the grave omissions at different stages facilitating the said export of banned goods. Shri Arup Mukherjee who used to make payments to the appellant M/s. Bose Enterprises with reference to services rendered by them thus cannot absolve himself of his role as an intermediary in the sordid saga of the said attempted export. The fact that he was an important link and sourcing the business for the customs broker without either knowing his clients nor having obtained necessary documents to ascertain and fulfill the KYC requirements is certainly an omission of serious proportions and having admittedly been in the trade sourcing business for several years it indeed is an omission of multitude ramifications and no less casual and deliberate in nature.
The appellants have not made out a convincing case for non-imposition of penalty on them. However, considering the facts and circumstances of the case and the totality of the action on part of the two appellants, a penalty of Rs.4,00,000/- each would meet the ends of justice - Appeal disposed off.
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2024 (9) TMI 1327
Requirement to issue fresh SCN - Misdeclaration of value of imported goods - mis- classification of goods - rejection of declared value - right to cross-examination - Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR, 2007) read with Section 14 of the Customs Act, 1962 -
Requiremnet of fresh SCN - assessment by itself being appealable even by the department whether the facts justified a fresh show cause notice? - HELD THAT:- The valuation has to be determined even if be on contemporaneous price by sequentially following Customs Valuation Rules by rejecting all those which are not legally accepted. Also the statement of the Director (Finance of M/s. Glanbia Performance Nutrition India Pvt. Ltd) which has been relied upon to indicate mis-description and valuation is required to be tested on cross-examination and all documents of contemporaneous price to be adopted by the department are required to be supplied to the appellants. The statement of Director (Finance) of another rival Company even if is to be relied upon same has to be backed with import data.
It is found that no such exercise has been carried out by the department in instant matter and in the absence of same, appellants cannot offer effective reply. Further, some of the products that do contain proteins do not prima facie merit consideration under T.H 21069099. Same needs detailed Consideration.
The matter deserves to be re-considered by the adjudicating authority by offering a proper opportunity, as well as relevant import data/ documents as may be relied upon by the department and required in defence by the party - Appeal is allowed by way of remand.
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2024 (9) TMI 1326
Levy of penalty u/s 114(iii) of the Customs Act, 1962 - Customs Broker - Mis-classification of goods with an aim to get higher MEIS benefit for the exporter - safety matches - to be classified under CTH 36050090 or under CTH 36050010? - HELD THAT:- The charge against the appellant is that even though they knew the classification of the goods they did not advice the exporter to classify the goods correctly, facilitating the exporter to get undue higher MEIS benefits.
Firstly, it is found that the matter pertains to the period 2018-19 to 2020-21, covering a large number of Shipping Bills as seen from the Annexure to the SCN dated 25/05/2022. It hence shows that there was a practice in the Custom House to classify safety matches under CTH 3605.0090. In such a situation it would have been highly unusual for a Customs Broker to seek to change a long-followed classification and advice the exporter to file a classification of the impugned goods under CTH 3605.0010.
Secondly as pointed out by the Apex Court in NORTHERN PLASTIC LTD. VERSUS COLLECTOR OF CUSTOMS & CENTRAL EXCISE [1998 (7) TMI 91 - SUPREME COURT] and also by a Co-ordinate Bench of this Tribunal in HIM LOGISTICS PVT. LTD. VERSUS CC, NEW DELHI [2016 (4) TMI 1153 - CESTAT, NEW DELHI], classification of goods being complex, it is declared as a matter of belief of an assessee and does not on its own amount to mis-declaration. Further it is not for CHA to have opinion on how the goods are to be classified. It was for Customs Authorities to correctly classify goods. Hence, there cannot be a dilution of the statutory responsibility of the Customs Officers in ensuring correctness classification / assessment and payment of duty by putting the responsibility of classification on the CHA, without proving any blame worthy action willfully done by him impacting the classification done.
Thirdly there is no iota of proof in the impugned order of the CHA colluding with the exporter or illegally benefiting from the export of goods. Assumptions and presumptions or bald statements do not make for proof. Hence as pointed out by the Hon’ble Madras High Court in M/S. NOVEL DIGITAL ELECTRONICS VERSUS THE COMMISSIONER CUSTOMS (IMPORTS) , CUSTOMS HOUSE [2015 (4) TMI 347 - MADRAS HIGH COURT] in such circumstances, it cannot be said that the act was wilful, deliberate and dishonest, in that he wanted to avoid payment of duty, thereby evading tax liability and is not a case where penalty could have been imposed.
Fourthly when action is proposed to be initiated against Custom Brokers for lapses on their part for their duties to be performed as a Customs Broker and not for any other blame worthy act under the Customs Act 1962, then the matter should be examined under the Customs Brokers Licensing Regulations, 2018 (CBLR, 2018) which regulates the working of Customs Brokers and contains provisions for action to be initiated against them for lapses on their part.
There are no grounds for imposition of penalty has been made out and hence the impugned order is set aside - appeal allowed.
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2024 (9) TMI 1325
Imposition of moratorium u/s 14 of the IBC, 2016 during CIRP - stay of the moratorium imposed - HELD THAT:- There is a clear distinction between a direction not to take further steps pursuant to the order dated 16 October 2023 and stay of the moratorium imposed by the said order. Had the learned NCLAT decided to stay the moratorium, it could have done so. There is no stay of the moratorium imposed by the learned NCLT, in the order dated 9 November 2023 of the NCLAT.
Reliance on the judgment of a coordinate Bench of this Court in SSMP Industries Ltd v Perkan Food Processors Pvt Ltd [2019 (8) TMI 916 - DELHI HIGH COURT] where it was held that 'this court is of the opinion that the Plaintiff's and the defendant's claim ought to be adjudicated comprehensively by the same forum. At this point, till the defence is adjudicated, there is no threat to the assets of the corporate debtor and the continuation of the counter claim would not adversely impact the assets of the corporate debtor. Once the counter claims are adjudicated and the amount to be paid/recovered is determined, at that stage, or in execution proceedings, depending upon the situation prevalent, Section 14 could be triggered. At this stage, due to the reasons set out above, the counter claim does not deserve to be stayed under Section 14 of the Code. The suit and the counter claim would proceed to trial before this Court.'
This decision is of no avail to the petitioner. It holds that the counter claims by the company which is facing insolvency is maintainable even during the currency of the moratorium. This decision is clearly in terms of the moratorium imposed, as the moratorium restrains actions being instituted or taken against the corporate debtor, whereas a counter claim is a counter claim by the corporate debtor.
The moratorium imposed by the NCLT specifically restrains institution and continuation of any proceedings including arbitral proceedings against the respondent. The prayer in this petition is specifically for institution of arbitral proceedings against the respondent. It cannot, therefore, be granted while the moratorium is in place.
As such the petition is adjourned sine die, awaiting the proceedings before the NCLAT or any order modifying or lifting the moratorium issued by the NCLT.
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2024 (9) TMI 1324
Liability to pay electricity dues which had arisen during the CIRP period - Failure to take into account the current position of law with respect of Section 14 of the IBC - whether the Appellant was lawfully entitled to demand the payment of current electricity dues incurred by the Corporate Debtor during the period of moratorium and whether it was entitled to disconnect the electricity connection in the event the current dues are not met?
HELD THAT:- The Adjudicating Authority has failed to appreciate the amendments which were brought about in Section 14 of the IBC by Act 1 of 2020. The impugned order is clearly in conflict with the legislative scheme as contemplated in Explanation appended to Section 14(1) and the provisions contained in Section 14(2-A).
Section 14(1) Explanation and Section 14(2-A) was clearly introduced by way of an amendment to fill critical gaps in the Corporate Insolvency framework and that a substantive provision was introduced into IBC framework which clearly provided that the supply of goods or services, critical to protect and preserve the value of the Corporate Debtor, could always be terminated or suspended or interrupted during the period of moratorium when the dues arising from such supply during the moratorium period is not paid. Thus, the benefit of electricity supply which is enjoyed by any Corporate Debtor given by government or authority should be continued subject to the condition that there is no default of payment of current dues.
Explanation to Section 14(1) and Section 14(2-A) of the IBC is clearly attracted in the facts of the present case. The protection granted by Section 14(1) is clearly subject to no default in the payment of current dues as clearly stipulated in the explanatory clause. Further, Section 14(2-A) only prohibits interruption, termination or suspension of any such supply of goods or services to the Corporate Debtor which the RP considers critical to protect and preserve the value of the Corporate Debtor and manage the operations of the Corporate Debtor as a going concern but with an exception carved out which provides that in case the Corporate Debtor has not paid dues arising from such supply during the period of moratorium.
The impigned order is held to be legally unsustainable and accordingly set it aside - appeal allowed.
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2024 (9) TMI 1323
Challenge to closure of factory - validity of closure notice - jurisdiction of Adjudicating Authority to adjudicate upon the closure - HELD THAT:- After the order dated 08.08.2019, matter was placed before the CoC in the meeting held on 02.09.2019 in which meeting the issue was left for the Resolution Applicant to take a call and thereafter the CoC to look into. However, no Resolution Plan having been approved, the liquidation was subsequently directed on 09.01.2020. There was no determination with regard to notice dated 31.07.2017 - the Adjudicating Authority has not taken any decision and has not expressed any view that the Adjudicating Authority has jurisdiction to adjudicate the notice dated 31.07.2017. What is recorded in the order is the statement made by the Resolution Professional. Hence, the order dated 08.08.2019 cannot be read to be determination by the Adjudicating Authority of its jurisdiction to pronounce on the closure notice.
It is well settled that after initiation of the CIRP all claims against the corporate debtor has to be filed and examined in the CIRP/ Liquidation Process. It has also come on the record that after liquidation proceedings, the claims were also filed by the Appellant before the liquidator and the liquidator has admitted their claims to the extent of Rs.1,09,70,698.27/-. The direction of the High Court dated 27.04.2019 cannot be read to mean that High Court adjudicated the issue as to whether NCLT can examine the challenge to the closure notice dated 31.07.2017. The order of the High Court, thus, has to be read to mean that Appellants were given liberty to raise their claims in the proceedings before the NCLT and raise all contentions. The mere fact that liberty was granted by the High Court to file claim and raised all contentions cannot be read to mean that High Court has adjudicated and directed that the closure notice dated 31.07.2017 be also adjudicated by the NCLT.
From liberty to raise all contentions and issues are not akin to any direction or adjudication that issue pertaining to challenge to the closure notice has to be undertaken by the NCLT. The above order of the Hon’ble Supreme Court does not in any manner support the submission of the Appellant that NCLT has to adjudicate on the closure notice dated 31.07.2017 - neither of the judgment of the High Court of Uttarakhand or the Judgment of the Hon’ble Supreme Court can be read to mean that after an adjudication, the High Court or the Supreme Court has held hat question of closure of notice dated 31.07.2017 has to be examined and adjudicated by the NCLT.
The judgment of the Hon’ble Supreme Court in Embassy Property Developments Pvt. Ltd. vs. State of Karnataka [2019 (12) TMI 188 - SUPREME COURT] also throws considerable light on the jurisdiction which can be exercised by the NCLAT under Section 60(5). In the aforesaid case, with regard to mining lease which was granted to the corporate debtor notice of premature termination was issued by Government of Karnataka. Government of Karnataka subsequently rejected the proposal for extension of the lease. The Resolution Professional filed an application before the NCLT, Chennai Bench praying for setting aside the order of the Government and seeking declaration that lease should be deemed to be valid after 31.03.2020. NCLT, Chennai had allowed the application setting aside the order of the Government of Karnataka.
It is clear that the closure/lockout notice which was issued on 31.07.2017 much prior to initiation of the CIRP and the closure and lockout notice was nothing to do with the CIRP process. Challenge to the closure and lockout notice cannot be raised before the Adjudicating Authority who is not competent to adjudicate the said issue which arises out of the provision of the Uttar Pradesh Industrial Disputes Act, 1947. Hence, the Adjudicating Authority did not commit any error in not entertaining the challenge to the closure notice dated 31.07.2017.
Thus, no error has been committed by the Adjudicating Authority in rejecting the application filed by the Appellant where Appellant has sought to challenge the closure dated 31.07.2017 and transfer order dated 20.06.2017 - there are no merit in the Appeal - appeal dismissed.
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