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Showing 481 to 500 of 14509 Records
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2020 (12) TMI 933
Deduction u/s. 10A - Whether the Tribunal was correct in holding that, the assessee's activity of human resources services are IT enabled services, when the assessee was only making available the data base of qualified IT personnel and entitled to deduction u/s. 10A of the Act and recorded a perverse findings? - Whether assessee's activity of human resources services are IT enabled services, when the assessee was only making available the data base of qualified IT personnel and entitled to deduction u/s. 10A of the Act and recorded a perverse findings? - HELD THAT:- Substantial questions of law framed in this appeal have already been answered against the revenue by judgment [2020 (11) TMI 653 - KARNATAKA HIGH COURT]. The aforesaid submission could not be disputed by the learned counsel for the revenue.
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2020 (12) TMI 932
Addition accepting change in the method of accounting adopted by the assessee - assessee was initially following the Percentage completion method by showing income on the basis of percentage of work done - in revised return filed assessee withdrew the claim of deduction u/s 80IB(10) of the Act and changed the method of accounting from the Percentage completion to the Project completion - HELD THAT:- We find that the assessee was regularly following the Percentage completion method by valuing the closing work-in-progress at estimated realizable price. Certain unforeseen circumstances developed. The assessee switched over from the Percentage completion method to the Project completion method by filing a revised return. It is not the case of the Revenue that the revised return was otherwise, not valid. Similarly, the Revenue has also not made out a case that the assessee did not consistently follow the Project completion method in the following years.
AR vehemently submitted that the assessee continued to follow the Project completion method and offered income under this method in the later years. Once it is seen that the assessee switched over from the Percentage completion method to the Project completion method in a bona fide manner and continued with the changed method in the years to come, in our considered opinion, no fault can be found with the ld. CIT(A) deleting the addition made by the AO sticking to the Percentage completion method, which was abandoned by the assessee. We therefore, accord our imprimatur to the view canvassed by the ld. CIT(A).
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2020 (12) TMI 931
Reopening of assessment u/s 147 - Notice issued by eligible jurisdictional officer - assessee had challenged the notice u/s 148 issued by the ITO, Ward 2(3), Jaipur while the case of the assessee falls under ITO Ward 2(2), Jaipur - HELD THAT:- After going through the records, we are in concurrence with the findings recorded by the ld. CIT(A) as we also noticed that the assessee himself had filed original return of income under ITO Ward-2(3), Jaipur which is apparent from the acknowledgement of return of income filed by the assessee. Therefore, the assessee himself submitted their jurisdiction to ITO Ward-2(3), Jaipur by admitting that ITO Ward-2(3), Jaipur was having jurisdiction over the assessee. As noticed that ITO Ward- 2(3), Jaipur had subsequently transferred the case to ITO Ward-2(2), Jaipur who completed the scrutiny assessment U/s 147/143(3) of the Act and even during the assessment proceedings, the assessee had never challenged the jurisdiction of the A.O. and rather participated in the proceedings.
As per the provisions of Section 124(3) of the Act, it has categorically been mentioned that no person shall be entitled to call in question the jurisdiction of an A.O., where he had made a return under Sub-Section (1) of Section 139, after expiry of one month from the date on which he was served with a notice under sub-Section (2) of Section 142 or after completion of assessment whichever is earlier. See BRITISH INDIA CORPORATION LTD. [2001 (1) TMI 914 - ALLAHABAD HIGH COURT]
Even as per the provisions of Section 124(3) of the Act, the issue of jurisdiction cannot be challenged after completion of assessment and as per the facts of the present case, the assessee himself had filed return of income with ITO Ward -2(3), Jaipur who had recorded the reasons for reopening, therefore, it cannot be held that reasons were recorded by wrong jurisdictional officer. - Decided against assessee.
Reasons recorded in the present case was by non-jurisdictional A.O., therefore, the said A.O. had no jurisdiction upon the assessee - We found that the assessee had declared capital gain income in return which clearly shows that there is non-application of mind on the part of the A.O. while recording the reasons as he did not consider the return furnished by the assessee wherein capital gain income has been shown. Thus, non-existing facts/basis does not lead to formation of belief u/s 147 which is a condition precedent U/s 147 of the Act as there is no rational nexus of material/information available with formation of belief. Thus, according to us, no valid belief can be formed on the basis of incorrect/non-existing facts U/s 147 of the Act otherwise it would be then difficult to interpret what weighed with the mind of the A.O. while recording reasons as the reasons recorded cannot be modified or supplemented by further explanation.
Therefore, the findings recorded by the ld. CIT(A) supporting the reasons on the ground of sufficiency of reasons, according to us, are misconceived and cannot be sustained. Assumption of jurisdiction U/s 147 of the Act by the A.O. is not tenable.
Capital gain computation - Additions u/s 50C - CIT-A taking cognizance of the report of the DVO in considering the valuation made by the DVO in its report - HELD THAT:- A.O. passed provisional order of assessment after making reference to the DVO which according to us is not allowed as per the scheme of the Act as there is no provision in the law to pass provisional assessment order subject to receipt of DVO report.
Although, the ld DR has submitted that by making reference U/s 50C(2)(b) of the Act while passing the order of assessment, the limitation U/s 153 of the Act has been extended by the A.O. but, we are not inclined to accept the argument of ld. DR as Section 153 specifically does not exclude period of reference u/s 50C of the Act. Thus, we are of the view that what cannot be done directly cannot be done indirectly. Ld DR could not bring on record any contrary decision or position of law to our notice to counter the judgment relied upon by the ld. AR of Hon’ble Gujrat High Court in the case of Darshan Buildcon vs ITO [2019 (1) TMI 956 - GUJARAT HIGH COURT] therefore we hold that the assessment order passed by the A.O. and upheld by the ld. CIT(A) is liable to be set aside as there cannot be any provisional assessment order under the income tax law.
Upholding of addition u/s 50C - DVO had made no attempt except to adopt the stamp valuation as on the date of sale deed. The said DVO report does not determine fair value U/s 50C of the Act. The DVO has merely accepted the stamp value given by the sub-registrar as on the date of sale deed, without considering and disposing the objections of the assessee that properties were disputed and prior agreement of sales were executed by the assessee. No fair value has been determined in DVO report, no comparable sale instances relied upon, no correct method applied to determine fair value, no adequate opportunity of being heard given. The information/documents relied upon by the ld. DVO have not been confronted and/or provided to the assessee. Further the very purpose of reference is defeated if stamp valuation is mechanically applied in valuation proceedings. CIT(A) was not justified by simply resorting to DVO report which does not determine fair value as envisaged under the law.
Doubting on existence of agreement to sell is also not justified as no addition can be sustained merely on suspicion. The fact that the assessee received advance payment of ₹ 11.00 lacs in F.Y. 2004-05 and 2005-06 is undisputed. However, merely receipt of advance payment in cash and doubt on reliability of agreement to sell without any valid basis does not justify addition.
Receipt of consideration in cash mode and not through cheque - Requirement of receipt of consideration in cheque only was made effective later on by inserting proviso to Section 50C - However, at the time of execution of agreement to sell, there was no such restriction of receiving cash consideration against agreement to sell, thus, having regard to the decision of the Coordinate Bench in the case of Indexone Tradecone (P.) Ltd [2018 (9) TMI 1231 - ITAT JAIPUR] the said basis is not a valid basis to deny benefit of taking stamp duty valuation considering DLC rates of FY 2004-05 for the purpose of section 50C of the Act. Therefore, the findings of ld. CIT(A) are set aside
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2020 (12) TMI 930
Reopening of assessment u/s 147 - no notice u/s 143(2) issued - HELD THAT:- AO has not stated either in the assessment order or in the order-sheets of the assessment proceedings that any notice u/s 143(2) was issued to the assessee. It is clear that there is no notice u/s 143(2) and reassessment proceedings in the case of assessee were completed without issuance of a notice U/s 143(2) - Hon’ble Supreme Court in the case of ACIT Vs Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] has held that failure on the part of the assessing authority to issue notice U/s 143(2) of the Act cannot be a mere procedural irregularity and the same is not curable.
It is not a mere formality but it given the jurisdiction to the A.O. to complete the assessment U/s 143(3) of the Act, therefore, non-issuance of notice U/s 143(2) of the Act vitiates the assessment proceedings. In view of decision of Hon’ble Supreme Court in the case of ACIT Vs Hotel Blue Moon (supra) as well as other decisions in this regard cited above, the assessment proceedings completed without issuance of notice u/s 143(2) of the act and void ab-initio and liable to be quashed. The judicial pronouncements referred and relied upon by the ld. DR are not applicable in the facts of the present case. In view of the above facts and circumstances, we quash the proceedings U/s 147/148 of the Act as invalid. Appeal of the assessee is allowed.
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2020 (12) TMI 929
Disallowance u/s.14A - assessee had earned dividend income and claimed the same as exempt in the return of income - HELD THAT:- Even if the expenses are to be disallowed as attributable to the said investment activity, it could be disallowed on a proportionate basis only for 9 days and not for the whole year. Hence, in this regard, the computation mechanism provided in Rule 8D(2)(iii) of the Rules would only result in absurdity if it is followed.
We find that the ld. AR at the time of hearing had placed reliance on the decision in the case of Lee and Muirhead Pvt. Ltd. [2019 (4) TMI 1871 - BOMBAY HIGH COURT] and the same, in our considered opinion, would come to rescue of the assessee wherein it had been held that Rule 8D cannot be applied blindly when the assessee had hardly incurred any expenses in relation to dividend earned and substantial investments were made temporarily in order to park idle funds. At the same time, some disallowance of expenses need to be made u/s.14A even though the investment was held for 9 days. In these peculiar facts and circumstances, we direct the ld. AO to adopt the disallowance workings given by the assessee during the course of assessment proceedings computing disallowance u/s.14A of the Act at ₹ 99,600/-. The disallowance of ₹ 99,600 could be treated as expenses incurred for 9 days attributable to investment activity and that would meet the ends of justice in the peculiar facts and circumstances of the instant case.
Disallowance u/s.14A while computing book profit u/s.115JB of the Act - HELD THAT:- We find that the Special Bench of Delhi Tribunal in the case of Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI] had already held that the computation mechanism provided in Rule 8D(2) of the Rules cannot be applied for the purpose of disallowance of expenses under Clause ‘f’ of Explanation to Section 115JB (2) of the Act. However, certain expenses need to be disallowed as per Clause ‘f’ of Explanation to Section 115JB (2) of the Act. Hence, we hold that the disallowance computed by the assessee on rationale basis at ₹ 99,600/- be disallowed under Clause ‘f’ of Explanation to Section 115JB(2) of the Act. The ld. AO is directed accordingly.
Depreciation of revised written Down Value (WDV) of the assets acquired by the assessee from its holding company - whether the transaction would be covered by the provisions of Section 47(iv) and the actual cost as per Explanation 6 to Section 43(1) r.w.Explanation 2 to Section 43(6) ? - HELD THAT:- As decided in own case for A.Y.2007-08 in the case of the transferor company, the income is to be treated as income of the year in which the transfer has taken place. This shows that the subsequent event has the effect of withdrawing the exemption granted under section 47 and the income goes back to the date of transfer. Thus, provisions of section 47 are withdrawn on occurrence of the events mentioned under section 47A and the transaction has to be treated as a transfer under section 47(v) or (vi) of the Act as the case may be and the transferor company is liable to pay the capital gains tax. In the present case due to seizure of the assessee-company being a subsidiary of the transferor company, the provisions of section 47(iv) have ceased to apply, and the transaction has to be considered as a transfer. Section 47A provides for withdrawal of exemption and the resultant treatment to be given to income in the hands of the transferor company. Thus issue decided in favour of assessee.
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2020 (12) TMI 928
TP Adjustment - Comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee's Software Development Services Business need to be deselected from final list.
TDS u/s 194J - Disallowance u/s 40(a)(ia) - Leased line / date link charges - HELD THAT:- As relying on case of Channel Guide India Limited Vs. ACIT [2012 (9) TMI 95 - ITAT MUMBAI] and also the decision in the case of Gupshup Technology India (P) Ltd. [2017 (2) TMI 587 - ITAT MUMBAI] these payments made for lease line charges were neither comes under professional services nor under technical services u/s 194J of the Act. - Decided in favour of assessee.
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2020 (12) TMI 927
Reopening of assessment u/s 147 - as argued in this case Joint Commissioner did not approve the reasons for reopening, the notice u/s. 148 of the Act is bad in law - HELD THAT:- We do not agree with the said contention of the Ld. AR because as per clause 28(C) of section 2 of the Act which defines the Joint Commissioner means also the person appointed as Additional Commissioner for the purpose of this Act. Since the AO has issued the notice u/s. 148 of the Act after getting approval of the Additional Commissioner which the statute recognizes as also the Joint Commissioner by virtue of section 2(28C) of the Act, the issuance of notice by AO cannot be held as bad. So, the legal issue raised by the assessee is dismissed.
Unexplained investment in flat in the name of the assessee - HELD THAT:- AO has noted that the assessee had purchased a flat for ₹ 3,98,945/- which included a deposit of ₹ 1,50,000/- made by draft by the mother of the assessee to the builder. As noted that the assessee's consistent stand was that ₹ 1,50,000/- has been given by her mother Smt. Asha Sharma directly to the builder in the form of draft. In such a scenario, the assessee has discharged her burden to show the source of ₹ 1,50,000/-. Thereafter, if the AO had any doubt about the source of this amount, then the AO was at liberty to proceed against Smt. Asha Sharma which the AO has not done. Therefore, since the assessee has discharged her onus to show the source of ₹ 1,50,000/- no addition could have been legally made against the assessee as per the law in force in AY 1998-99, therefore, the Ld. CIT(A) erred in confirming the addition, therefore, I direct the deletion of addition of ₹ 1,50,000/-. This ground of appeal of assessee is allowed.
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2020 (12) TMI 926
Deduction u/s 80P - interest derived from investments with the cooperative banks - HELD THAT:- The Hon'ble Karnataka High court in the case of PCIT vs. Totagars Cooperative Sale Society [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] has held that for the purpose of section 80P(2)(d) Co-operative Bank should be considered as cooperative society. Similar view has been taken by the Hon'ble Gujarat High court in the case of Surat Vankar Sahakari Sangh Ltd. vs. ACIT [2016 (7) TMI 1217 - GUJARAT HIGH COURT]
On the same issue in the case of PCIT vs. Totagars Co-operative Sale Society [2017 (7) TMI 1049 - KARNATAKA HIGH COURT] has taken a contrary view holding that interest income earned from deposit with the cooperative bank does not qualify for deduction under section 80P(2)(d) of the Act. It would be relevant to mention here that the Hon'ble High Court while rendering the later judgement has not considered the earlier decision rendered in the case of Totagars Co-operative Sale Society (supra).
No judgement from Hon'ble Jurisdictional High court on the issue of eligibility of deduction under section 80P(2)(d) of the Act on interest income derived by a Cooperative Society from a Cooperative Bank has been brought to our notice. The Hon'ble Bombay High Court in the case of K. Subramanian Vs. Siemens India Ltd. [1983 (4) TMI 3 - BOMBAY HIGH COURT] has held that when two conflicting decisions of non-jurisdictional High Courts are available, the view that favours the assessee is to be preferred.
Accordingly, following the decision of Hon'ble Karnataka High Court in the case of Totagars Cooperative Sale Society (supra) and the decision in the case of Hon'ble Gujarat High Court in the case of Vankar Sahakari Sangh (supra) the deduction claimed by the assessee under section 80P(2)(d) of the Act in respect interest derived from investments with the cooperative banks is allowed. I find merit in the grounds of appeal raised by the assessee. The impugned order is set aside and the appeal of assessee is allowed.
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2020 (12) TMI 925
Addition u/s.68 - unexplained cash credits and consequential disallowance of interest expenses on unsecured loans - Admission of additional evidence - HELD THAT:- As perusing the additional evidences furnished by the assessee, we are of the view that all these additional evidences furnished by the assessee in respect of the 16 creditors would go to the root of the matter of the addition made in respect of these unsecured loan creditors. Thus, in the interest of justice we admit these additional evidences and restore them to the file of the Assessing Officer for denovo adjudication of the addition made in respect of these creditors as these evidences were not produced before the AO. Thus, this issue of addition towards unsecured loans and the disallowance of consequential interest thereon is restored to the file of the Assessing Officer for deciding afresh.
Correct head of income - interest received from partners - treated as “income from other sources” or income earned in the course of the “business” of the assessee - HELD THAT:- Department having accepted the treatment of the assessee in reducing interest from partners from work-in-progress in the immediately preceding assessment year and also in the immediately succeeding assessment year, we see no reason to reject the very same treatment given by the assessee for the interest received from the partners for the current Assessment Year i.e. A.Y. 2010-11. Therefore, applying principle of consistency we direct the Assessing Officer to delete the addition made under the head “income from other sources”. Ground of appeal is allowed.
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2020 (12) TMI 924
Eligibility for deduction u/s 10A - HELD THAT:- In principle, the deduction u/s 10A is allowable because this is offered by the assessee itself as Voluntary T P Adjustment and therefore, this issue in principle is covered in favour of the assessee by the tribunal order cited by the learned AR of the assessee as noted above.
But on this factual aspect about Prior Period Expenses for F. Y. 2008 – 09 reported by the assessee in Schedule 8 of the Audited Accounts for F. Y. 2009 – 10 this is not clear as to whether these expenses or any part of these expenses is related to Prior Period income of ₹ 5,42,11,607/- reported in same Schedule 8 of the Audited Accounts for F. Y. 2009 – 10 because if the same is related then the actual income on this account will be less and then only actual such income can be considered for deduction u/s 10A. On this aspect, neither any detail is made available before us nor there is any finding of AO or CIT (A). Hence, we restore this matter to AO for fresh decision.
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2020 (12) TMI 923
Mandatory injunction seeking release of bills of lading illegally withheld by the defendants - Section 13(1-A) of the Commercial Courts Act, 2015 read with Order 43 Rule 1 (2) of the Code of Civil Procedure, 1908 - Right to retain shipment - Defendant are freight services agents - HELD THAT:- Upon reading the text messages of 1st, 2nd and 3rd June together, it is to be observed that after receiving ₹ 4,35,000/-, defendants made, the release of consignment, conditional and exercised “right to retain goods” under Section 171 of the Indian Contract Act, 1872. However, messages of 3rd June, 2020 show that the defendants had not exercised a ‘particular liens but ‘general liens. If read carefully, 3rd June message, does not suggest, goods were retained for not making payment of sea freight for second consignment. In fact, evidence and the circumstances emerging and flowing were indicative of the fact that ₹ 4,35,000/- were paid towards freight charges of second consignment and not against dues, however, in breach of assurance/promise, defendants, adjusted it against dues and declined to release bills. The question nos.15 (i., (ii. and (iii. are answered accordingly, in negative.
Whether defendants were entitled to exercise lien under Section 171 of the Indian Contract Act, 1872? - HELD THAT:- It may be stated that defendants were not entitled to exercise general lien being not banker, factors, wharfingers, attorneys and also broker - In the case in hand, pleadings of either party do not suggest that bailee was empowered to exercise the general lien envisaged under Section 171 of the Indian Contract Act, 1872 - Goods cargo in the second shipment is a paper, a perishable product, which may loose its utility if kept for long period. Even otherwise, plaintiffs have paid sea freight for second consignment. Therefore, it is just and proper to direct defendants to release bills of lading immediately. In fact, it appears, that since second consignment has not been released within reasonable time, plaintiffs vendees have cancelled the orders. Therefore, the balance of convenience also tilts in favour of the plaintiffs.
Appeal allowed - decided in favor of appellant.
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2020 (12) TMI 922
Provisional release of seized goods - enhancement of Bank Guarantee required to be furnished by the Petitioner - HELD THAT:- The Petitioner is required to furnish a Bank Guarantee in the sum of ₹ 15 Crores, pursuant to which the Respondents are required to release the seized goods in terms of the order of CESTAT dated 13.11.2019 as modified by the Supreme Court - It is thus open to the Petitioner to furnish a Bank Guarantee in the sum of ₹ 15 Crores to the satisfaction of the Competent Authority. The Competent Authority shall thereafter forthwith release the seized goods to the Petitioner, provisionally, on furnishing the requisite Bond as directed by CESTAT.
Contempt petition disposed off.
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2020 (12) TMI 921
Condonation of delay in filing appeal - application of the appellant rejected on the ground that the same is barred by limitation and no sufficient cause for condonation of delay of 455 days in filling the appeal - HELD THAT:- It is well settled in law that the expression 'sufficient cause' should receive liberal consideration so as to advance the cause of justice and the same should not be used as a penal statute to punish the erring parties.
Reference can be made to the case of PERUMON BHAGVATHY DEVASWOM, PERINADU VILLAGE VERSUS BHARGAVI AMMA (DEAD) BY LRS & ORS. [2008 (7) TMI 836 - SUPREME COURT].
In the application for condonation of delay, the appellant had stated that on account of the financial difficulty, he could not arrange the amount and the delay had caused - Taking into consideration that expression 'sufficient cause' should receive liberal consideration so as to advance the cause of justice, the substantial question of law framed in this appeal is answered in favour of the assessee and against the revenue.
The matter is remitted to the Tribunal for decision on merit after affording an opportunity to the parties.
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2020 (12) TMI 920
Import of Multi Function Devices (MFDs) for use within the country - contravention of the provisions of the Foreign Trade (Development & Regulations) Act, 1992 read with the Foreign Trade Policy, Hazardous and Other Waste (Management and Transboundary Movement) Rules, 2016, e-Waste (Management and Handling) Rules, 2011 and Environment (Protection) Act, 1986 - HELD THAT:- The goods were released based on Annexure-3. However, in Annexure-3, there was a specific direction to intimate the DGFT about the import not being supported by an import licence from the DGFT, which could lead to confiscation proceedings being initiated under the Foreign Trade Act. It was also directed that a surety bond be executed for the market value of the goods, minus that imposed on the importer as redemption fee by the Commissioner of Customs and modified by the Tribunal.
We direct the respondents who have already cleared the goods on the basis of the interim orders to execute such surety bonds within a period of two months from the date of receipt of a certified copy of this judgment failing which the Customs authorities could initiate proceedings for return of goods, the location of which should be in the knowledge of the respondent/importer as per the Extended Producer Responsibility Authorization.
Petition disposed off.
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2020 (12) TMI 919
Levy of penalty under Section 112 of the Customs Act, 1962 - proceeding of adjudication without supplying the relied upon documents - Alleged recovery and seizure was initially made by the BSF and subsequently was handed over to the Customs authority - burden of proof in terms of Section 123 of the Customs Act, 1962 - HELD THAT:- The learned Commissioner (Appeals) should have verified the facts prior to dismissal of the appeal of the appellant. It is not in dispute that the Show Cause Notice dated 14.8.2018 was issued without appending any relied upon documents though it had placed reliance upon several documents such as BSF seizure, Customs inventory, statements of different persons, Assay report etc. The imposition of penalty upon the present appellant by the Adjudicating authority is based upon such documents - It is a settled position of law that a Show Cause issuing authority is required to provide copies of all relied upon documents along with the Show Cause Notice. When the authority wants to rely upon such documents, it is incumbent upon them to provide copy of such documents to the noticee and non-supply of such copies of relied upon documents to the noticee renders the process of adjudication void ab-initio.
In the present case also, order passed by the Lower adjudicating authority without supplying such relied upon documents along with the Show Cause Notice and finalizing adjudication of the matter w.r.t. the present appellant was bad in law. However, the Adjudication Order has already merged in two separate Orders-in-Appeal with respect to different noticee as recorded hereinbefore. Pertinent to observe that there is no appeal against Order-in-Appeal No. KOL /CUS (CCP) /AA /293 /2019 dated 01.05.2019 w.r.t. noticee no. 2 of the Show Cause Notice dated 14.08.2018. Since such Order-in-Appeal setting aside penalty upon the said noticee has reached its finality, no fresh proceeding against such noticee can be drawn at this stage.
The matter remanded to the original Adjudicating Authority i.e. the Assistant Commissioner of Customs, Maldah Customs Division, Maldah for adjudication of the case afresh w.r.t. the present appellant being noticee no. 1 in the Show Cause Notice dated 14.8.2018 after providing authenticated copies of all relied upon documents to the present appellant - appeal allowed by way of remand.
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2020 (12) TMI 918
Maintainability of petition - conversion of PIL to company petition - HELD THAT:- Sri W.H. Khan, learned Senior Advocate, appearing for the applicants prays for a little time to address on the phrase “pending immediately before such date” used in Section 434(1)(c) of the Act 2013 as well as on the point of whether a PIL on conversion into a company petition under the facts and circumstances of the present case, can be proceeded with by the High Court?
As prayed by learned counsel for the applicants/respondent no.12, put up in the additional cause list on 07.12.2020 at 3.00 P.M.
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2020 (12) TMI 917
Approval of Amalgamation Scheme - Section 230-232 of Companies Act, 2013 - seeking the dispensation of the meeting of shareholders of the Transferor Company, M/s. Trion Chemicals Private Limited and Transferee Company M/s. Bodal Chemicals Limited - seeking the dispensation for the meeting of Secured Creditor of Applicant Transferor Company no. 1 - seeking the direction for convening the meetings of Secured Creditor of Applicant Transferee Company no. 2 and Secured and Unsecured Applicant Transferor Company No. 1.
HELD THAT:- Various directions regarding dispensation and holding of various meetings issued - directions regarding issuance of notices also issued.
Application disposed off.
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2020 (12) TMI 916
Approval of Scheme of Amalgamation - Section 230-232 of Companies Act - HELD THAT:- Various directions regarding holding and convening of various meetings, issued - various directions regarding issuance of notices for the meetings to be held, is also issued.
Application admitted - the scheme is approved.
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2020 (12) TMI 915
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- It is pertinent to note that the Applicant has placed on record all the invoices, stating that the Respondent itself had acknowledged the said invoices and copies of ledger account. Once the debt is shown as due, it is for Respondent to prove that there are no outstanding dues to be paid to the Applicant. There has been much cloud in the submission of the Respondent. Therefore, without any specific details of material particulars or evidence the fact of existence of a dispute cannot be sustained.
In MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [2017 (9) TMI 1270 - SUPREME COURT], Apex Court held that the Court does not need to be satisfied that the defense is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application.
The applicant has attached an affidavit in compliance of section 9(3)(b), also, it has attached the copy of Bank statements in compliance of the requirement of Section 9(3)(c) of the IBC 2016 - The registered office of respondent is situated in New Delhi and therefore this Tribunal has jurisdiction to entertain and try this application - The present application is within the prescribed limitation period.
Thus, the present application is complete and the Operational Creditor is entitled to claim its dues, establishing the default in payment of the operational debt beyond doubt, and fulfillment of requirements under section 9(5) of the Code. Hence, the present application is admitted.
Petition admitted - moratorium declared.
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2020 (12) TMI 914
Determination of service tax liability on the approval of resolution plant under IBC - Seeking declaration that total liability of the petitioner to the respondent does not exceed ₹ 35,54,682.55 in accordance with the order dated 30.08.2019 passed by the National Company Law Tribunal, Mumbai Bench sanctioning the resolution plan of the petitioner under section 31 of the Insolvency and Bankruptcy Code, 2016 - direction to the respondent not to appropriate an amount of ₹ 6,23,82,214.00 already recovered following the order in original dated 22.07.2020 - seeking direction to the respondent to refund an amount of ₹ 5,88,27,531.45 to the petitioner.
HELD THAT:- As per the statement of objects and reasons which preceded the bill while being introduced in the parliament, there was no single law in India dealing with insolvency and bankruptcy. There were several laws dealing with different aspects and providing for creation of multiple fora. Existing framework for insolvency and bankruptcy was found to be inadequate and ineffective resulting in undue delays in resolution. Therefore, the said legislation was proposed. Objective of the Code is to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the priority of payment of government dues and to establish an Insolvency and Bankruptcy Fund and matters connected therewith or incidental thereto - The Code seeks to provide the National Company Law Tribunal and Debts Recovery Tribunal as the adjudicating authorities for resolution of insolvency, liquidation and bankruptcy. The Code separates commercial aspects of insolvency and bankruptcy proceedings from judicial aspects besides providing for an Insolvency and Bankruptcy Board of India for regulation of insolvency professionals etc.. Insolvency professionals will assist in completion of insolvency resolution, liquidation and bankruptcy proceedings envisaged in the Code.
It is evident that focus of the Code is resolution of insolvency and bankruptcy. In other words the thrust is for revival of such corporate persons, partnership firms and individuals facing insolvency and bankruptcy rather than liquidation.
The preamble of the Code was examined by the Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [2019 (1) TMI 1508 - SUPREME COURT]. It was held that the preamble gives an insight into what is sought to be achieved by the Code. The Code is first and foremost, a Code for reorganization and insolvency resolution of corporate debtors. Unless such reorganization is effected in a time bound manner, the value of the assets of such persons will deplete. Therefore, the maximization of the value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions.
Thus, it is evident that if the adjudicating authority is satisfied that the resolution plan as approved by the committee of creditors under sub section (4) of section 30 meets the requirements of sub section (2) of section 30, it shall by order approve the resolution plan. Once such approval is granted by the adjudicating authority, it shall be binding on the corporate debtor and its employees, members, creditors (including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed), guarantors and other stakeholders involved in the resolution plan. As per the proviso, before passing an order under section 31 the adjudicating authority has to satisfy itself that the resolution plan has provisions for its effective implementation - From a conjoint reading of section 31(1) and section 238 of the Code, it is quite evident that the provisions of the Code shall have overriding effect. The non obstante clause in section 238 and the use of the expression “shall” in sub section (1) of section 31 makes it abundantly clear that a resolution plan approved by the committee of creditors and further approved (or sanctioned) by the adjudicating authority would be binding on all creditors including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed.
Thus, the resolution plan mentions that the claim of service tax dues falls under the definition of operational creditors. Such dues should be settled at par with other operational creditors under the resolution plan which provides for settlement of dues of operational creditors at the rate of 5% of the principal amount with waiver of interest, penal interest and penalties. The claim amounting to ₹ 1929.85 lakhs was being contested by the corporate debtor before the concerned authority and the amount of admitted claim could not be determined until the outcome of the said proceeding. Therefore, the said amount of ₹ 1929.85 lakhs was kept in abeyance. However, the amount that would come to be determined upon adjudication would be settled at the appropriate time.
In the present case, what we have noticed is that section 87(b) (i) was invoked as early as on 18.04.2013 whereas the first show-cause cum demand notice was issued to the petitioner only on 18.04.2015. While invocation of section 87(b)(i) and recoveries made thereunder are highly questionable, it may not be necessary for us to delve into the legality or illegality of the same in the present proceeding because of the binding nature of the resolution plan as approved by the committee of creditors and sanctioned by the Tribunal. However, attempt by the respondent for appropriation of the amount recovered through such questionable means in the face of the resolution place so approved and sanctioned is a live issue and hence needs to be adverted to.
Once a resolution plan is approved by the committee of creditors by the requisite percentage of voting and the same is thereafter sanctioned by the adjudicating authority (Tribunal in this case), the same is binding on all the stakeholders including the operational creditors. As a matter of fact, respondent herein as an operational creditor had lodged its claim before the resolution professional. The resolution plan provides for settlement of service tax dues at 5% of the amount of principal dues that would be crystallized upon adjudication, further providing for waiver of interest, penal interest and penalty that may be charged. As we have held above, respondent may be justified in proceeding with the show-cause cum demand notices because that has resulted in crystallization of the total amount of service tax dues i.e., the principal amount payable by the petitioner which is ₹ 7,02,20,725.00. The amount of service tax dues having thus crystallized as above, the resolution plan says that the same would be settled at 5% of the principal dues adjudicated. The word used is “adjudicated” and not “adjusted” as sought to be read and applied by the respondent. Therefore, the amount that the petitioner would be required to pay is 5% of ₹ 7,02,20,725.00. In so far the recovered amount i.e. ₹ 6,23,82,214.00 is concerned, the same is part of the total demand determined i.e. ₹ 7,02,20,725.00. After retaining 5% of ₹ 7,02,20,725.00, respondent would be duty bound to refund the balance amount to the petitioner which will not only be in terms of the resolution plan and thus in accordance with law but will also be a step in the right direction for revival of the petitioner which is the key objective of the Code. There is no question of retaining the said amount. Submissions made by Mr. Jetly that the amount already recovered should be allowed to be appropriated by the respondent and that petitioner should pay 5% of the balance of the principal dues i.e. 5% of ₹ 7,02,20,725.00 less ₹ 6,23,82,214.00 is without any substance and liable to be rejected.
There should be no hesitation to hold that principal service tax dues quantified by the respondent vide order in original dated 22.07.2020 has to be settled at the rate of 5%, in other words 5% of ₹ 7,02,20,725.00. The directions of the respondent for appropriation of the amount of ₹ 6,23,82,214.00 already recovered cannot be sustained. Respondent shall retain 5% of ₹ 7,02,20,725.00 from the above amount recovered and thereafter refund the balance amount to the petitioner. To that extent, impugned order in original dated 22.07.2020 is interfered with. Refund shall be made within a period of three months from the date of receipt of a copy of this judgment and order.
Petition allowed.
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