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2020 (8) TMI 924
Assessment u/s 144C - APA between the assessee and the CBDT with reference to the TP issues - HELD THAT:- As in view of the Unilateral Advanced Pricing Arrangement [APA] between the assessee and the CBDT with reference to the TP issues for AY 2011-12, the assessee withdrew its appeal with reference to the grounds challenging the Transfer Pricing [TP] addition. The Tribunal dismissed the appeal of assessee by its order [2020 (2) TMI 1688 - ITAT BANGALORE]. A copy of the APA has also been filed before us. In this appeal by the revenue, the grounds are with reference to TP issues which have been settled in the APA.
We are of the view that the appeal of the revenue has become infructuous and accordingly the same is dismissed as infructuous.
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2020 (8) TMI 923
TP Adjustment - comparable selection - turnover filter - assessee alleged exclusion RS software India Pvt. Ltd.on turnover filter, as this company has huge turnover of 2472.08% - HELD THAT:- We note that international transaction for year under consideration and asst. year 2010-11 [2015 (7) TMI 212 - ITAT BANGALORE] are similar. There is nothing on record placed by revenue that brings out any factual differences.
Respectfully following above view, we direct Ld.AO/TPO to exclude all these comparables, for having excessive turnover.
Genesis International Corp Ltd - This company renders mapping and Geo spatial services in the process of which it develops software. Genesys International Corporation Ltd., cannot be considered as a comparable company and the said company should be excluded from the final list of comparable companies.
Comparables in respect of software R & D segment - As entire issue should be restored to the file of Ld. AO/TPO for undertaking exercise afresh by selecting fresh set of comparable companies in respect of software R & D segment. Accordingly, we set aside the order passed by Ld. AO on this issue and restore the same to his file for examining the issue afresh in the light of discussions made supra.
We direct learnt Ld.TPO to undertake fresh search analysis having regards the above observations and the view taken by this (Tribunal) in assessee’s own case for immediately preceding and succeeding assessment years. Assessee is directed to file all relevant information/details to assist Ld. AO/TPO for determining arms length price of the transaction in accordance with law.
Appeal filed by assessee stands allowed for statistical purposes.
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2020 (8) TMI 922
Violation of principles of natural justice - issuance of personal hearing notice even prior to the receipt of the explanation - non-application of mind - HELD THAT:- A reading of the provisions of Section 75(4) of the Tamil Nadu Goods and Service Tax Act 2017 shows that after the explanation is received from the writ petitioners, the authority must apply their mind and if they contemplate an adverse decision, then they must provide an opportunity of hearing. Therefore, issuing a personal hearing notice even prior to the receipt of the explanation cannot be said to be compliance of the aforesaid statutory requirements. That stage would arise only after the authority prima facie considers the explanation and contemplates an adverse decision.
Since there is a clear violation of the aforesaid requirement, the orders impugned in the writ petitions stand quashed and the writ petitions are allowed - The matters are remitted to the file of the respondents to pass orders afresh in accordance with law.
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2020 (8) TMI 921
Recovery of dues - priority of settlement of dues - Reluctance to transfer property - execution proceedings initiated by Recovery Officer (RO) pursuant to Decree/Recovery Certificate (RC) obtained by Punjab National Bank (PNB or Secured Creditor), inter alia on the ground that the erstwhile owner/borrower has to pay certain dues to the Central Excise Department.
Whether the dues of the secured creditor are to be paid in priority, by sale of secured assets specifically charged to it, vis-à-vis the arrears of outstanding dues under the Central Excise Act, 1944? - HELD THAT:- The undisputed legal position which emerges is that a conjoint reading of the relevant provisions of all the three enactments, i.e. Recovery Act, 1993, Securitisation Act, 2002 and Central Excise, 1944 would show that the secured creditor shall have a prior right of recovery from the sale of the secured assets, over and above the right of Central Excise.
Further, in UNITED BANK OF INDIA VERSUS ABHIJIT TEA CO. (P.) LTD. [2000 (9) TMI 928 - SUPREME COURT] and NAHAR INDUSTRIAL ENTERPRISES LTD. AND OTHERS VERSUS HONG KONG & SHANGHAI BANKING CORPORATION AND OTHERS [2009 (7) TMI 1193 - SUPREME COURT], Recovery Act, 1993 has been noticed to be a procedural Act, since, it precisely lays down, the manner and procedure of recovery of debts due to Banks and Financial Institutions. Since both Recovery Act, 1993 and Securitisation Act, 1993 are procedural in nature and complimentary to each other, therefore, the ratio of law, with regard to the applicability of principle of retroactive operation of the provisions of the Securitisation Act, 2002 would apply with equal force to the amendment under the Recovery Act, 1993 as well, and the above judgments would apply with equal force, to the amendment brought under the Recovery Act, 1993 as well.
There are no hesitation in concluding that the argument of the Central Excise, that the demands of Central Excise having been made/confirmed earlier than the aforesaid amendments under the aforesaid enactments which would have prospective operation in nature, and thus the demands under the Central Excise Act, 1944 would have precedence, is misplaced and hence is rejected.
It is well settled that, it is only when a charge is created by act of parties or exists by operation of law, upon the property, that question of priority arises to be determined. In the present case, the property in question had never been attached nor a charge was created by the Central Excise. Further, there is no provision which provides for creation of charge upon immovable property of assessee by operation of law. Therefore, Central Excise had no charge upon the property in question. Consequently, it had no locus to thwart/negate the entitlement of the secured creditor to sell the secured asset or deny the auction purchaser to enjoy natural fruits of the sale, upon which mortgage has been created in favour of secured creditor by creation of mortgage in terms of section 58 of the Transfer of Property Act, 1882, which mortgage has been upheld by DRT on issuance of Recovery Certificate - on account to conspicuous absence of charge or attachment upon the secured asset in favour of Central Excise in the manner so provided under the Act, 1944, it could not even have claimed priority of charge vis-à-vis the claim of the secured creditor.
Issue is answered in affirmative, and it is held, that the dues of the secured creditor are to be paid in priority by sale of secured assets specifically charged to it vis-à-vis the arrears of outstanding dues under the Central Excise Act, 1944.
Charges being claimed by various third parties, including Government and Semi-Government entities upon the property (secured asset) by enforcing their claim/s, of the dues recoverable from the erstwhile owner/borrower of the property - HELD THAT:- These are claimed by way of act of attachment being effected upon the secured asset, either pursuant-to dues being claimed under various enactments, or through the process of recovery where attachment orders are passed by the courts/authorities, on the application of 'the claimants or by operation of law. These encumbrances shall include, dues which are claimed, by third party entities like Central Excise, Government dues, Semi Government, dues of private individuals seeking attachment on the property of the defaulter/borrower etc. It would thus be fruitful to discuss these claims broadly by their respective classification.
It is to be noticed that the rights of the auction purchaser, on purchasing the secured asset, are virtually derivative rights from the secured creditor. Thus, if the auction purchaser has purchased the property from the secured creditor, it is the secured creditor which has exercised its right of priority to sell the secured asset to recover and appropriate its dues and hence the auction purchaser cannot be called upon to pay the dues of the previous owner/borrower.
While the banks proceed to sell the mortgaged property to recover the secured debts, it is noticed that due to attachments orders obtained by the agencies upon the secured asset/s, it does not get adequate buyers because of the encumbrance of attachment. If at all, it is able to sell it, the auction purchaser faces difficulty in getting the property transferred in its favour. Such attachments upon the property, which are obtained by the agencies or such other similarly placed entities, from the courts or arbitral tribunals are all unsecured attachments. Such unsecured debts/claims cannot have precedence over the secured debts by virtue of prior mortgage rights of having been created in favour of the secured creditor by the owner/mortgagor and consequently cannot be treated as an encumbrance either for the secured creditor or for the auction purchaser. The auction purchaser who has purchased such property from the secured creditor cannot be put to any disadvantageous position because of the such third party attachments.
Section 48 of the Act, 1882 would protect the right of the secured creditor and the also the subsequent rights created in favour of the auction purchaser purchasing the property from such secured creditor - an auction purchaser purchasing such property from the secured creditor would not be liable for the dues being claimed by such plaintiff nor can he interject right of enjoyment of the property purchased by the auction purchaser, merely on the basis of an attachment order for an unsecured debt. Even section 48 of the TP Act, 1882 would also protect the right of the secured creditor in whose favour prior mortgage rights exist and the consequent right of the auction purchaser from such attachments upon the secured asset.
Dues which emanate but of utilization of the property (secured asset) itself by the erstwhile occupier/owner/borrower, that are sought to be recovered from the auction purchaser - HELD THAT:- The most common claim is that of the Electricity Department against the auction purchaser towards unpaid bills of supply/use of electricity by the previous occupier/owner of the secured asset. Hence,' it requires to be dealt with specifically. It is to be noticed that it is consequent upon purchase of property in a public auction conducted by or on behalf of a secured creditor, that the auction purchaser realizes that previous electricity dues, consumed by the erstwhile owner has not been cleared due to which, re-connection or fresh electricity connection is denied. The Electricity Department, raises a demand and a condition, of clearance of previous dues, before the subsequent purchaser could claim a connection or a restoration thereof, which leads to an issue as to whether the auction -purchaser would be liable to clear the dues of the electricity consumed by the previous owner/occupier of the property.
As regards, other dues are concerned including transferable and recoverable statutory dues, pending installments due and payable to the allotting agency, Internal and External Development Charges payable to Development Authority, Extension fee/non-construction charges. Water and Sewerage dues etc., which are directly emanating out of the usage of the -property in question, would also be payable by the auction purchaser, where the properties are being sold on "as is where is basis".
The issue is answered in negative and it is held petitioner being successful auction purchaser, pursuant to an auction conducted by DRT under Recovery Act, 1993 would not be liable to pay the dues being claimed by Central Excise originally payable by the erstwhile owner/assessee/borrower.
Whether respondent No. 3 could have refused the transfer of the property in question in the name of the petitioner? - HELD THAT:- A perusal of the writ petition would reveal that petitioner submitted request letter dated 04.10.2019, vide diary No. 3921 to Respondent No. 3, pursuant to which, it issued the impugned letter dated 15.10.2019 (P-3), vide which transfer of property is sought to be resisted by Respondent No. 3 predominantly on five grounds. The first one being, that Urban Ceiling Officer Ludhiana vide letter dated 1275 dated 28.09.1987, has restricted the transfer of the property in question, and the decision in that regard is sought to be intimated to it. Petitioner has replied to the same, vide letter dated 16.10.2019 (P-4), stating that Urban Ceiling Law, is not applicable to the property in question. Since, Urban Land (Ceiling and Regulation) Act, 1976, was repealed by the Parliament by passing Urban Land (Ceiling and Regulation) Repeal Act, 1999 (Act No. 15 of 1999), therefore, the same cannot be an objection to resist the transfer of the property in favour of petitioner.
The respondent No. 3-GLADA is directed, that in case if it insists on compulsory registration in-spite of the aforesaid statutory provision, to decide the issue, after giving an opportunity of hearing to the petitioner and passing a speaking and reasoned order within four (04) weeks from the receipt of certified copy of the order, failing which the competent authority, shall be liable for proceedings for contempt under the Contempt of Courts Act, 1971.
Petition allowed.
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2020 (8) TMI 920
Admission of additional ground of appeal - Violation of provision of section 144C - whether Assessing Officer erred on facts and in law in directly passing final assessment order in the garb of issuing draft assessment order and raising a demand vide notice issued u/s 156 and initiating penalty proceedings vide notice issued u/s 274 r.w.s 271 - HELD THAT:- It would be pertinent to mention here that on identical set of facts the Tribunal in the case of Perfetti Van Melle (India) (P) Ltd. [2020 (8) TMI 273 - ITAT DELHI] has decided the issue in favour of the assessee and against the Revenue.
Thus we have no hesitation to hold that the proceedings culminated on 07.12.2018 when the demand notice was issued and served upon the assessee along with the penalty notice u/s 274 of the Act and therefore all the subsequent proceedings and orders become non est. The additional ground is accordingly allowed.
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2020 (8) TMI 919
TP Adjustment - interest on outstanding receivables to be computed by applying LIBOR plus 0.5% - HELD THAT:- Exactly similar issue has been dealt with by the Tribunal in assessee’s own case for the A.Y. 2013-14 [2019 (4) TMI 2094 - ITAT MUMBAI] wherein the Tribunal has held that interest on outstanding receivables has to be computed by applying LIBOR plus 0.5%.
Tribunal in assessee’s own case for the A.Y. 2013-14, we direct the A.O. to make adjustment by applying LIBOR plus 0.5%. We direct accordingly.
Treatment of interest income received on margin money and on bank deposit and ICD - ‘income from other sources’ OR ‘business income’ - HELD THAT:- As respectfully following the order of the Tribunal in assessee’s own case in [2019 (4) TMI 2094 - ITAT MUMBAI] we direct the A.O. to treat interest on margin money as income from business whereas interest on bank deposit and ICD as income from other sources. We direct accordingly.
Disallowance u/s 14A r.w.r. 8D under normal provisions as well as while computing book profit U/s 115JB - HELD THAT:- In the instant case before us, there is no dispute to the fact that the assessee was not in receipt of any exempt income, therefore, no disallowance is warranted U/s 14A of the Act r.w.r. 8D of the Rules under normal provisions as well as while computing income u/s 115JB of the Act, since assessee was not in receipt of any exempt income during the year under consideration.
Addition on account of provision of income tax recoverable from GUVNL and Essar Steel Ltd. while computing income under the normal provisions and for the purpose of book profit U/s 115JB - HELD THAT:- Respectfully following the orders of the Tribunal in assessee’s own case [2019 (4) TMI 2094 - ITAT MUMBAI] we confirm the addition made by the AO/TPO under normal provisions of the Act.
Addition made while computing book profit U/s 115JB - As relying on [2019 (4) TMI 2094 - ITAT MUMBAI] confirm the action of the A.O. on account of provisions of income tax recoverable while computing income under normal provisions of the Act and also direct the A.O. to delete the addition made while computing book profit U/s 115JB of the Act.
TP adjustment on account of interest on money advanced as share application money - adjustment by charging interest @ 4.19% on outstanding share application money paid by the assessee to its AE - HELD THAT:- No merit in the adjustment made by the TPO on account of interest for the money paid for allotment of shares which was allotted within the period of 6 months.
Similar view has been taken by the Coordinate Bench in the case of group concern Essar Steel Orissa Ltd. [2016 (8) TMI 415 - ITAT MUMBAI] wherein it was held that recharacterization of the transaction is not permissible without any material or evidence suggesting that such advance is only a loan - Thus we do not find any merit in the adjustment made by the A.O. by charging interest on the advances made for allotment of shares. We direct accordingly.
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2020 (8) TMI 918
TP Adjustment - comparable selection - HELD THAT:- E-infochips Bangalore Ltd be excluded on grounds of functional dissimilarity and non-availability of its segmental financial.
E-Zest Solutions Ltd. having diversified activities without having any segmental information on record. In view of the matter, we order to exclude E-zest Solutions Ltd. from the final set of comparables.
Infinite Data System Private Limited (Infinite) be exluded as functional dissimilarity and on ground of super normal profit to the tune of 1496%.
Infosys Limited (Infosys) - Keeping in view the functionality and huge brand value and significant expenditure on R & D we find Infosys not a suitable comparable vis-à-vis taxpayer, hence, order to be excluded.
Sonata Software Ltd. - Since the RPT/sales of Sonnata is 59.35%, thus apparently fails TPOs filter of 25%, this comparable is remitted back to the Ld. TPO to decide afresh after providing opportunity of being heard to the taxpayer.
Sasken Communication Technologies Ltd is not a suitable comparable on ground of functional dissimilarity and business restructuring.
Zylog is not a valid comparable on ground of extra ordinary event vis-à-vis taxpayer hence, order to be excluded.
Grant of working capital adjustment - TPO / DRP have denied the benefit of working capital adjustment while computing the ALP on the ground that the assessee has not demonstrated that there is a difference in levels of working capital employed by the taxpayers vis-à-vis comparables - HELD THAT:- TP study referred to by the taxpayer for benchmarking its International Transaction shows that the complete detail has been provided to grant working capital adjustment. So, in view of the matter, we are of the considered view that the matter is required to be reconsidered by the TPO by providing opportunity of being heard to the assessee. Moreover working capital adjustment has been granted to the taxpayer in the earlier years and since then there is no change in the business model of the assessee. So, this issue is remitted back to the Ld. TPO.
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2020 (8) TMI 917
TP Adjustment - selection of MAM - HELD THAT:- As decided in own case [2019 (12) TMI 1630 - PUNJAB AND HARYANA HIGH COURT] conclusion of the ITAT could not be faulted as the same was inconsonance with the provisions of the Act and the Rules. The contention of the Counsel for the revenue cannot be accepted as the Tribunal while upholding the TNMM Method has observed that the other methods prescribed under the Act namely the CUP or Cost Plus Method being not applicable in the facts and circumstances of the case, the Respondent Assessee could only resort to TNMM as the most appropriate method to show that its profit margin from international transactions was at arm’s length.
As mentioned elsewhere, the facts of the years under consideration are identical to the facts considered by the co-ordinate bench and Hon'ble High Court in earlier A.Ys. Therefore, respectfully following the decision of the Hon'ble Punjab and Haryana High Court [2019 (12) TMI 1630 - PUNJAB AND HARYANA HIGH COURT] we decline to interfere with the findings of the ld. CIT(A). Accordingly, the grounds raised by the Revenue in both the A.Ys stand dismissed.
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2020 (8) TMI 916
Utilization of Input GST - Whether Payment of GST Liability on sale of vehicle, spares, labour can be done by utilising the Input GST on purchase of Demo Vehicle, other expenses like Repairs & Maintenance, Insurance etc., relating to Demo Vehicle used for Demonstration and or Trial run purpose? - HELD THAT:- The demo cars purchased from supplier are being capitalised. The capital goods which are used in the course or furtherance of business, is entitled for input tax credit. Sub-section (19) of Section 2 of the CGST Act states Capital Goods as "the value of which is capitalised in the books of accounts of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business." - In this case, demo vehicles is used for furtherance of supply of such vehicles (such as demo car) as the prospective buyer is subjected to training about the features of the car and how to use them and is also used for driving including the test drives.
Application allowed.
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2020 (8) TMI 915
Auction sale - Appellant's claim of having statutory lien and charge on the plant and machinery supplied by the Appellant rejected - valuation challenged - rejection on the ground that no security interest has been created, as such - undue unexplained urgency in auction sale - inconsistencies and contradictions in valuation reports procured/relied upon by the Liquidator - case of improper valuation - Plant & machinery sold to the auction purchaser is different from what was valued for auction - Assets advertised under the head "land and building" were sold as part of "plant and machinery" - Items sold to the auction purchaser are undervalued - shell company.
Publication of sale notice - HELD THAT:- It is not the case that Stakeholders agreed to shifting of items from Category of "Building" to "Plant and Machinery" after issue of Sale Notice (Annexure - 9). The Liquidator has not argued nor explained before us as to why there is such major difference between Annexure - V of Sale Notice compared with Annexure - V of the information document. Clearly what was sold as "Plant and Machinery" was different and much more than what was advertised in the Sale Notice. How can Reserve Price for "Plant and Machinery" remain same even after embedded huge "structures" were shifted from Block 'A' to Block 'B' in that category? They could not have and should not have been shifted. What was later taken away by the Respondent No. 2 was shocking and still worst. We will discuss that after sometime. Here, we record that there is material difference between what was advertised in Public Notice and what was put in the information document and actually passed on by way of Sale Certificate. The above factors are themselves sufficient to set aside such auction which must be said to be vitiated as there is fundamental defect in putting up the articles for auction.
Liquidator failed to prescribe pre-bid Qualifications - Defective Auction process - HELD THAT:- The Regulations required the Liquidator to prescribe pre-bid qualifications. This does not appear to have been done in spite of value and volume of material and thus, with practically one bidder, the auction appears to have been completed of plant and machinery which was in Block 'B'. When the credentials of second bidder did not support it to even deposit 10% EMD (which is returnable), even if it somehow on its own or on behest of someone deposits the EMD, it does not make it genuine bidder. Liquidator failed to prescribe pre-bid qualifications as per Regulations to secure real competition and failed in his duty. This is yet another factor hitting at the auction process which has been conducted. It was defective Auction process with no genuine bidding.
Improper Valuations relied on - HELD THAT:- Going through the Valuation Reports, although these are documents by experts, it appears that the Valuers treated different items differently. Someone picked/left some items in building category and someone picked/left the same in plant and machinery category and vice versa. No clear instructions appear to have been given to Valuers by Liquidator (who was earlier RP even in CIRP) with regard to particulars and categories of the assets. The Liquidator appointed Valuers during liquidation but gave up on them midway after taking tentative valuation and jumped to the valuation got done in CIRP - What was the basis for such figure is also not clear. Section 18(1)(a) requires IRP to collect all information relating to the assets of Corporate Debtor. Section 18(1)(f) requires IRP to take control and custody of any asset over which Corporate Debtor has ownership rights. Section 36 of IBC shows how Liquidation Estate is formed. There could not be confusion relating to particulars of the assets. It does appear that there was confusion in Valuation Reports even for categorisation of items of assets in different Blocks and thus, the Reports were improper and not comparable to arrive at liquidation value or to fix average for "Reserve Price".
Conduct of Liquidator - HELD THAT:- It is immaterial here as to what were/are the merits of lien/charge or being Secured Creditor claimed by the Appellant. Material is that the Liquidator - a semi-judicial statutory authority behaved in a manner one would not expect such authority to behave.
Incidents post issue of Sale Certificate - HELD THAT:- On record, we have Notice dated 28th May, 2019 (Annexure - 14 - Page 429 @ 430) issued by the Appellant to both the Respondents sent by e-mail and courier reminding of its pending claims and details of the developments in litigation and how unknown persons claiming to be representatives of Respondent No. 2 had come to take away plant and machinery from project site claiming that there was Sale Certificate, Schedule of which shows it included Plant and Machinery over which lien/charge is claimed; and that large quantity of Plant and Machinery is removed by them. Appellant claims to have then filed CA 684 of 2019 (Annexure - 15) against the auction on 3rd June, 2019.
No proper system put in place by Liquidator - HELD THAT:- On 7th August, 2019, this Tribunal had in Company Appeal (AT) (Ins) No. 802 of 2019 (Annexure - 22) directed the Adjudicating Authority to decide the Appeal of Appellant on an early date and in the meantime, Liquidator was directed not to allow any person to remove the assets in question even if it is sold but if not yet removed. On that date of 07.08.2019, Counsel for Respondent No. 1 kept opposing the Appellant, not telling us that on 05.08.2019, his representative "visited the project site and found" Respondent No. 2 had already removed items worth Rs. 20 Crores illegally and Respondent No. 1 had filed Police Complaint dated 06.08.2019 (see Annexure - 7 - Diary No. 17759). So, after leaving the project site open for Respondent No. 2 (since Sale Certificate dated 20.05.2019), the Representative visits on 05.08.2019 which means none responsible was posted. Else before wrong/illegal lifting of such magnitude, Respondent No. 1 would have known.
Respondent No. 1 lacked information and control - HELD THAT:- We do not find that the reasons recorded by the Adjudicating Authority in Paragraphs 91 to 101 of the Impugned Order can be maintained. When there were Orders dated 12th June, 2019 (Annexure - 17) "that movement of goods would be subject to outcome of proceedings", the outcome cannot change only because there was movement of goods. Even if the plant and machinery had been dismantled, that could not have been reason to deny the relief of return of material. The other reason that the Applicant/Appellant was only an Unsecured Creditor and higher proceeds would not go to the Applicant - Appellant was no reason not to cancel the auction. Appellant is admittedly Operational Creditor. Illegality in the process and illegal loss to Corporate Debtor is bound to affect the beneficiaries down the line of Section 53 of IBC. If the auction is illegal, without proper valuation and there was also confusion with regard to what is lifted, declining to take action would amount to rewarding the wrong done. The Appellant had not pursued the provision of Letter of Credit, was also no reason to refuse to cancel the auction - There was no material before the Adjudicating Authority to refer to the Respondent No. 2 as "bona fide purchaser". The reference was made in the passing. When Adjudicating Authority held that it was wrong on the part of Liquidator, to first not decide question of lien/charge and Secured Creditor and could not have issued Sale Certificate clearly dispute was pending litigation. Respondent No. 2 who did not check up, cannot claim to be bona fide purchaser. Similarly, the Adjudicating Authority erred in not giving any restitution. It expressed helplessness claiming that disciplinary proceedings against a Resolution Professional can be taken only by IBBI and that if somebody has unlawfully gained and restitution is to be provided to the person who has suffered loss, the same also can be done only by IBBI.
Appellant cannot be treated as Secured Creditor under IBC - HELD THAT:- Considering the provisions (as discussed in detail by the Adjudicating Authority) as found in Section 3(30) which defines "Secured Creditor" and Sections 3(31), 3(33) read with Section 238 of IBC, if benefit is to be taken under the provisions of IBC, it can be done if there was a contractual arrangement/transaction creating security interest in favour of the Creditor. It has to be a security interest which is "created" as such. IBC is complete Code in itself. The Appellant is claiming to be Secured Creditor on statutory basis. Admittedly, the Appellant is not relying on any contractual provision, or transaction creating security interest to claim benefits of lien/charge - the Appellant cannot be treated as Secured Creditor.
Appeal allowed.
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2020 (8) TMI 914
Appointment of Provisional Liquidator - Section 271 (a) and 272 (1) (a) of the Companies Act, 2013 - HELD THAT:- The name of Mr. Suresh Chandra Pattanayak having IP Registration No. IBBI/IPA-002/IP-N00759/2018- 2019/12384 was proposed. The Tribunal hereby appoints Mr. Suresh Chandra Pattanayak, Insolvency Professional as Provisional Liquidator in the matter under this order and the relevant law. The Provisional Liquidator shall be paid Rs.100,000/- lump sum for his services.
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2020 (8) TMI 913
Addition u/s 68 - Protective additions - substantive addition made in the hands of lender - CIT(A) deleting the addition in the hands of the assessee, which was made on the protective basis - Whether CIT-A erred ignoring the fact that the issue of substantial addition in the case of Shri Global Tradefin Ltd., has not reached the finality and is pending in the Bombay High Court - HELD THAT:- AO as well as CIT(A) recorded a findings that 25 companies who invested in the assessee company are included in the list of said 53 investor companies which have advanced money to 14 companies including the assessee and same amount has been transferred by all 14 companies including the assessee to one company namely M/S Shree Global Tradefin Ltd. Thus, the amounts have been transferred by 14 companies including assessee to M/S Shree Global Tradefin Ltd., and the flow of funds are clearly evident and discernible. As such, there is no doubt as to the source of money.
AO added u/s 68 of the Act on protective basis in the hands of the assessee and simultaneously similar addition was made to the income of Shree Global Tradefin Ltd. on substantive basis on the ground that source of money was not proved.
Pertinent to note that in the appellate proceeding, the Tribunal deleted the addition in the case of Shree Global Tradefin Ltd.[2018 (10) TMI 1974 - ITAT MUMBAI] and there is no finding by the Coordinate Bench that the said amount of Rs. 43.50 Cr belongs to the present assessee. We note from the perusal of the order of coordinate bench that the addition in the case of M/S Shree Global Tradefin Ltd. has been deleted on merit. Thus, the coordinate bench has not given any finding that the money belongs to the assessee.
The protective addition is always made whenever there is a doubt about the correct entity or correct assessment year. Thus , where there is a doubt as to whom the income belongs to, the addition is made in the hands of two persons, i.e. on substantive basis in the hands of one person and on protective basis in the hands of the other person. The protective addition would become substantive, only and only if substantive addition is deleted by the appellate authority on the ground that the income belonged to the person in whose hands protective addition has been made. The protective addition does not survive if the substantive addition has been confirmed or substantive addition has been deleted on merits.
Thus protective addition has to go as the substantive addition was deleted on merits. We do not find nay force in the arguments/written submissions of the ld. DR that where substantive addition is deleted the protective has to restored to the AO as in the case of M/S Shree Global TradefinLtd , assessment has not attained finality. We are therefore inclined to dismiss the appeal of the revenue by upholding the order of CIT(A) - Decided against revenue.
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2020 (8) TMI 912
Exemption u/s. 11 - income from the trust was drawn by the trustee and evidences for the applications were not produced, the AO treated them as violation u/s. 13(1)(c) and hence denied the exemption - assessee incurred capital expenditure, in view of denial of exemption u/s. 11, the A O treated it as non-application of income, however, allowed the depreciation and thus assessed the entire income in the status of AOP at maximum marginal rate - HELD THAT:- The assessee is registered u/s. 12(A)(a) as a charitable trust and is running an educational institution. It is not clear from the orders of the lower authorities whether the assessee has submitted all the evidences in support of its claim of exemption and such material were properly appreciated or not.
In the facts and circumstances and in the interests of justice, we deem it fit to remit the entire issues back to the AO for a fresh examination. Since, the right to exemption must be established by those who seek it, the onus therefore, lies on the assessee. In order to claim the exemption from payment of income tax, the assessee had to put before the income tax authorities proper materials which would enable them to come to conclusion - Therefore, the assessee shall place all contemporaneous primary as well as secondary evidences in support of its claim before the AO. The AO shall after due verification and after appropriate enquiry, as deemed fit, and after affording adequate opportunity to the assessee, shall pass a speaking order - Assessee’s appeal is treated as partly allowed for statistical purposes.
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2020 (8) TMI 911
Dishonor of Cheque - existence of debt or liability or not - rebuttal of presumptions - complaint was filed after the period of 15 days - Condonation of delay in filing complaint - HELD THAT:- The notice herein has not been issued to the drawer of these two cheques within the mandatory period of fifteen days of the receipt of information on 07.03.1997 by the complainant from the bank regarding the return of the cheque as unpaid and as such the notice is defective in respect of the said two cheques as it is not in accordance with the provision of Section 138(b) of the N.I. Act.
Reliance placed upon the photo copy of the reply given by the Advocate of the accused in response to his letter dated 15.04.1997 which proved the service of the said notice - admissibility of evidences - HELD THAT:- It is this document which has been filed and relied upon by the complainant in support of his due service of notice. It is seen from the said copy of the letter that the alleged notice dated 15.04.1997 gave a notice to pay the cheque amount within seven days from the receipt of letter dated 15.04.1997. And the said statement has not been denied by the complainant. From the copy of the letter that has been relied upon, this court finds that the demand to pay the said amount within seven days is in clear violation of the provision of Section 138(c) of the N.I. Act 1881.
The power of the court to condone the delay, on a prayer under Section 142 (1) (b) is in respect of filing of a complaint under Section 138 of the N.I. Act and not in respect of issuance of notice under Section 138 of the N.I. Act. The present case has been filed on 14.05.1997 and thus with in the period of limitation. The complainant has also admitted that the mother of the accused has filed a suit against the complaint’s elder brother Nirmal Guchait and the said suit is still pending. This shows that there is on going dispute between the parties.
The present case is under Section 138 of the N.I. Act, wherein the mandatory requirement in a case under this provision, is the notice, which initiates the total process and is the base/foundation of such a case. The notice in this case has to be complete in all respect as required under the said Section. Any defect in the said notice including its service and contents and requirements is vital in a case of this nature. In the present case, the findings of the Trial Court that the notice in this case is insufficient, vague and illegal is found to be correct and this Court also finds that the notice in this case is not in accordance with law being in violation of the provisions under Section 138(b) and (c) of the N.I. Act and hence the judgment under appeal needs no interference.
The appeal against acquittal stands dismissed.
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2020 (8) TMI 910
Maintainability of application - initiation of CIRP - Stamping of documents - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Whether the Debenture Subscription Agreement and Debenture Trust deed executed and registered in Delhi are insufficiently stamped in the State of Maharashtra in accordance with Maharashtra Stamp Act 1958, where they are sought to be enforced? - impounding of documents under Sec 33 & 34 of Maharashtra Stamp act 1958, in a summary proceedings under IBC - novation of contract - recovery of outstanding sums due to be redeemed under the Debenture Subscription Agreement and Debenture Trust Deed - HELD THAT:- The court, while admitting a petition under sec. 7 of I & B code has the power to examine the contracts between the parties, rights accrued to the parties and has to look into the enforceability of the document in the light of objection raised that these documents are insufficiently stamped. The basic rights of recovery of monies under 4330 Debentures will have to be considered harmonizing the charging section envisaged under Sec 33 & 34 of Maharashtra Stamp Act, which will have to be addressed to ensure revenue recoveries - This section cast an obligation on the Court, Adjudicating Authority, Judicial officer, Quasi judicial officer not to admit any document which is not duly stamped. In view of Sec 19 of Maharashtra Stamp Act 1958, the documents executed in Delhi and sought to be enforced in Mumbai are subject to pay the difference of duty.
The Hon'ble Mumbai High Court in Antifriction Bearing Corporation Ltd. Vs, State Of Maharashtra [1998 (9) TMI 472 - HIGH COURT OF BOMBAY], dealt with the similar question of law wherein the petitioner company held in properties in Gujarat and registered in the state of Gujarat, constituency issued debenture trust deed and these documents were also registered in the state of Gujarat - The court held that the petitioners are liable to pay stamp duty as directed by Superintendent of Stamp, Maharashtra. The above dictum would categorically demonstrate that documents received in the State of Maharashtra, if insufficiently stamped would be subject to levy of specific stamp duty under sec. 19 of Maharashtra Stamp Act and impounding of the documents under Sec 33 & 34 Maharashtra Stamp act 1958 is a consequential order.
There are no hesitation to take the view that there is no Novation of contract as the larger understanding was revoked by the petitioner vide letter dated 1/11/2018 and thus it clearly demonstrates that the so called larger understanding was not acted upon, and therefore the earlier liability of payment of the outstanding dues were never subsumed in the overall settlement as claimed by the Corporate Debtor/Respondent, hence the liability of the Corporate Debtor is not discharged - thus, there was no consensus arrived between the parties and the settlement was revoked by the petitioners. Therefore, it can be said that all the rights accrued to the Petitioners No. 2 & 3 under the Debenture Trust Deed and Agreements are enforceable subject to the payment of difference of stamp duty.
Thus, it can be said that the Corporate Debtor has defaulted in paying the outstanding sum due under the Secured Redeemable Non-Convertible Debenture Subscription Agreement dated 1st March 2014 and Debenture Trust Deed dated 1st March 2014 and that there is no novation of contract as claimed by the Corporate Debtor/Respondent - the corporate debtor is liable to pay the sums outstanding amounting to ₹ 65,24,33,104/- (principal amount of Rs. 43,33,00,000/- plus interest @ 9 % p.a. from the respective date of subscription to till 21st April, 2019 amounting to Rs. 21,74,10,733/- and penal interest @ 6% p.a. amounting to Rs. 20,22,371/-) to the petitioner No. 2 & 3. The petition is complete and deserves admission.
The petition is admitted and the documents namely Debenture Trust Deed dated 1st March, 2014 and Redeemable Non-convertible Debenture Subscription Agreement dated 1 March, 2014, are impounded for adequate stamping are being sent to the Sub Registrar of Assurance, Mumbai. The Interim Resolution Professional shall consider the above documents upon payment of requisite stamp duty.
As per V. Nallasenapathy, Member (T) - Both the members have admitted the company petition and initiated CIRP against the Corporate Debtor.
The members are divided on the issue - whether the Debenture Subscription Agreement and Debenture Trust Deed are required to be impounded and sent for payment of requisite stamp duty.
The question of law is framed as whether the Debenture Trust Deed dated 1st March, 2014 and Redeemable Non-convertible Debenture Subscription Agreement dated 1st March, 2014, shall be impounded and be sent for payment of requisite stamp duty in accordance with the Maharashtra Stamp Act - The Registry is directed to immediately place the record before the Hon'ble President for constituting appropriate bench/3rd Member for his opinion, so that the order in MA is rendered in accordance with the opinion of majority.
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2020 (8) TMI 909
Robery and attempt to murder - Recovery of prohibited buttondar knife from the appellant and his co-accused - conviction under Section 394 of IPC - HELD THAT:- Mere production of photocopy of an OPD card and statement of mother on affidavit have little, if any, evidentiary value. In order to successfully claim defence of mental unsoundness under Section 84 of IPC, the accused must show by preponderance of probabilities that he/she suffered from a serious-enough mental disease or infirmity which would affect the individual’s ability to distinguish right from wrong - Further, it must be established that the accused was afflicted by such disability particularly at the time of the crime and that but for such impairment, the crime would not have been committed. The reasons given by the High Court for disbelieving these defences are thus well reasoned and unimpeachable.
Regardless thereto and given the ingrained principles of our criminal law jurisprudence which mandates that substantive justice triumph limitations of procedure, this Court on 22.07.2020 tried to enquire into the mental health of the appellant, by requesting the learned Additional Solicitor General to get the appellant mentally examined. However, notwithstanding such efforts, the appellant who had been granted bail by this Court earlier, is untraceable.
Given such inability of the appellant to establish juvenility or insanity, raise any doubt regarding guilt; and considering the detailed reasons accorded by the High Court, the reliable testimony of twelve witnesses as well as the leniency shown in sentencing, there are no reasons to interfere with the impugned order(s) - appeal dismissed.
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2020 (8) TMI 908
Classification of services - royalty paid in respect of Mining Lease - to be classified under Licensing services for the right to use minerals including its exploration and evaluation, or not - applicability of heading 9973 attracting GST at the same rate of tax as applicable on supply of like goods involving transfer of title in goods - liability to pay tax on contributions made to District Mineral foundation (DMF) and National mineral Exploration trust (NMET) as per MMDR Act, 1957 - HELD THAT:- A mining lease holder or prospecting license cum mining lease is required to pay royalty, dead rent (when it is more than royalty), money to DMF and NMET under the MMDR Act. These leases are granted to the person under the Act and he has to make payment of all the requisite amounts. lie has no choice to make payment of one or more but has to pay all the dues as per Act. The Act has bifurcated the heads for its own convenience, but the person is discharge all the liabilities.
AAR in its order has already held that as per sub-clause (i) of clause (17) of section 2 of CGST Act the activity is supply and as per paragraph 5 (e) of schedule II it is a supply of services. Appellant has not contested it - these all payments are made in order to secure a mining or prospecting licence cum mining lease under the Act which are charged by Government.
AAR has in its order also held that being a business entity the appellant is liable to pay tax on this supply of services under reverse charge mechanism as per notification 13/2017 central tax (rate) dated 28.06.2017. Hence, the order of AAR is confirmed.
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2020 (8) TMI 907
Classification of goods - HSN code - Papad and papad pipes of different shapes, sizes and varieties (commonly known as Fryums) - - classifiable under Tariff Item 2106 90 99 of the First Schedule to the Customs Tariff Act, 1975 or not - applicable rate of GST - Applicability of Sl. No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended - HELD THAT:- It is now well settled principle of interpretation of statue that the word not defined in the statute must be construed in its popular sense, meaning, that sense which people conversant with the subject matter with which the statue is dealing would attribute to it. It is to be construed as understood in common language. This view has been upheld by the Supreme Court in INDO-INTERNATIONAL INDUSTRIES VERSUS COMMISSIONER OF SALES TAX, UP. [1981 (3) TMI 77 - SUPREME COURT].
The issue of proper classification of the product “Fry Snack Foods called Fryums “and admissibility of exemption notification under Central Excise regime was examined by the Hon'ble Customs, Excise and Gold Appellate Tribunal (CEGAT, as it was known then) in the case of TTK. PHARMA LTD. VERSUS COLLECTOR OF CENTRAL EXCISE [1992 (8) TMI 183 - CEGAT, NEW DELHI] where it was held that the product “Fry Snack Foods called Fryums” have been considered as “Namkeen” and not as “Papad”.
It is observed that Fried Fryums are eatable and used as food articles or eatables and such fried, salted Fryums are found to be commonly known and used as “Namkeen”. Further it can be seen that “Papad” even after roasting or frying are known and used as “Papad” only. Whereas, in commercial or trade parlance also, the “Fried Fryums” cannot be said to be known as “Papad”.
What will be the classification of “Fried Fryum”? - HELD THAT:- Heading 2106 is an omnibus heading covering all kind of edible preparations, not elsewhere specified or included. Chapter Note 5 provides an inclusive definition of this heading and covers preparations for use either directly or after processing, for human consumption. In 5 (b) above, preparation for use after processing has been included and mentioned therein such as cooking, dissolving or boiling in water, milk or other liquids. Obviously, the term “such as” is purely illustrative but not exhaustive and therefore processing includes frying also, hence fried goods are also covered under chapter head 2106 which is ready for human consumption. Further, Chapter Note 6 pertaining to Tariff item 2106 90 99 also provides inclusive definition and products mentioned therein are illustrative only - it is held that the product “Fried Fryum” is appropriately classifiable under Tariff item 2106 90 99.
SI. No. 23 of Schedule III of issued under the CGST Act, 2017 and corresponding Notification No. 1/2017-State Tax (Rate) dated 30.06.2017, as amended, issued under the SGST Act, 2017 covers “Food preparations not elsewhere specified or included (other than roasted gram, sweetmeats, batters including idli/dosa batter, namkeens, bhujia, mixture, chabena and similar edible preparations in ready for consumption form, khakhra, chutney powder, diabetic foods)” falling under Heading 2106. Therefore, Goods and Service Tax rate of 18 % is applicable to the product “Fried Fryums” as per SI. No. 23 of Schedule III of Notification No. 1/2017 Central Tax (Rate) dated 28.06.2017, as amended, issued under the CGST Act, 2017 and Notification No. 1/2017-State Tax (Rate) dated 30.06.2017, as amended, issued under the SGST Act. 2017 or 1GST Act, 2017.
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2020 (8) TMI 906
Input Tax Credit - inward supply of goods or work contracts services for construction & maintenance of warehouse / building - goods purchased for the purpose of construction & maintenance of Warehouse such as Vitrified Tiles, Marble, Granite, ACP Sheet, Steel Plates, TMT Tor(Saria), Bricks, Cement, Paint and other construction material - GST paid on Work contract service received from registered & unregistered Contractor for construction & maintenance contract of building - GST paid on goods purchased & works contract service received during the FY 2017-18 for the purpose of construction & maintenance of Warehouse - section 17(5) (d) of CGST Act, 2017 - HELD THAT:- As per the Section 17 (5) of CGST Act, the Input tax credit shall not be available on the goods and services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.
The definition of immovable property is not provided under GST Act. According to section 3(26) of the General Clauses Act, 1882, “Immovable property shall include land, benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth”. According to section 3 of the Transfer of Property Act, 1882, Immovable property means “Immovable property does not include standing timber, growing crops or grass” - It is undisputed as per the submissions of appellant as well as from the Order of AAR that appellant intends to construct building / warehouse which is immovable property.
Appellant never segregated construction from maintenance but rather has used only comprehensive phrase “Construction and Maintenance”. He has never spelt out accounting treatment of inward supply of goods or services or both received by him for construction of an immovable property. The explanation appended at the end of sub-section allows ITC to the extent it is not capitalised. Capitalisation or Non-capitalisation of these expenses is certainly not a permanent indelible mark in the account books. These accounting entries may be modified, altered or deleted as per prevailing/ changing contingencies. These entries are not static but dynamic. Since such a question has not been raised, we are not inclined to discuss it.
Input Tax Credit of GST paid on goods purchased for the purpose of construction & maintenance of Warehouse such as Vitrified Tiles, Marble, Granite, ACP Sheet, Steel Plates, TMT Tor(Saria), Bricks, Cement, Paint and other construction material cannot be claimed to the extent of capitalisation in terms of clause (d) of section 17(5) of GST ACT, 2017 - Input Tax Credit of GST paid on Works contract service received from registered & unregistered Contractors for construction & maintenance contract of building cannot be claimed to the extent of capitalisation in terms of clause (d) of section 17(5) of GST ACT, 2017 - Input Tax Credit of GST paid on goods purchased & works contract service received during the FY 2017-18 for the purpose of construction & maintenance of Warehouse cannot be claimed to the extent of capitalisation in terms of clause (d) of section 17(5) of GST ACT, 2017.
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2020 (8) TMI 905
Penalty u/s 271AAB - defective notice u/s 274 - non specification of charge - As per assessee penalty notice so issued is defective as it does not disclose specific charge and secondly there is no concealed income as search took place prior to due date of filing of income-tax return - HELD THAT:- Where a search has been initiated the AO may direct payment of penalty in addition to tax if any payable by him. However, provisions of section 274 and 275 shall so far as may apply in relation to the penalty refer to in section 271AAB of the Act.
As per section 274 of the Act no order imposing a penalty shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard.
In this case the assessing officer has given notices and in response thereto the representative of the assessee appeared before the assessing officer. Now coming to the question whether notice so issued mention any specific charge. A bare reading of notice demonstrates that notice relate to ingredients of penalty u/s 271(1)(c) of the Act, it does not contain the ingredients of section 271AAB of the Act. Under these facts the notice is improper and is not in accordance with requirement of law. The assessing officer is expected to make his direction clear as to which clause of section 271AAB of the Act, he wishes to invoke. There is clear absence of such direction. Ld. counsel for the assessee has relied upon various judicial pronouncements in support of his contention that where the notice is being defective, therefore, no penalty can be levied or sustained.
CIT(A) observed that the impugned amount would not have been offered for taxation had there been no search and seizure operation, this observation goes to demonstrate that convers of such observation gives benefit of doubt to the taxpayer. In our considered view that it is purely a guess work without being substantiated by any material evidence. The impugned penalty therefore, cannot be sustained. The Assessing Officer is directed to delete the penalty. Assessee appeal allowed.
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