Corporate insolvency procedure - petition u/s 7 of The Insolvency and Bankruptcy Code 2016 - Held that:- The corporate debtor has been reminded of the fact of occurrence of default, the Petitioner has also filed the correspondence dated July 09,2015, August 19, 2015, September 11,2015, August 18,2016 and final notice dated February 06,2017 demanding payment of dues, failing which, the company would take recourse for remedial measures. To which, the Corporate Debtor, on August 20,2016 and on November 22,2016, responded to the notices given before November 22,2016 confirming the correctness of their indebtedness seeking extension of time for taking legal action for recovery. Thereafter, for the petitioner stated that the Corporate Debtor failed to discharge the liability till the date of filing this petition, this Bench believes that the corporate debtor committed default and it has remained in existence till date.
The petitioner filed proof of service showing that notice has been served upon the corporate debtor before filing this petition i.e., on 08.02.2017.
Looking at the Petition filed by the Financial Creditor u/s 7 of I&B Code, for this Bench being satisfied that the Corporate Debtor failed to discharge the liability mentioned in this Company Petition resulting occurrence of default for an amount of around ₹ 27.77crores, this Bench admits this petition u/s 7 of the Code declaring moratorium for the purposes referred to in section 14 of the Code
CENVAT credit - input services - service of laying of pipelines to transport/supply water from dams/storage tanks to their captive mines - Held that: - The matter is covered in appellant’s own case M/s Hindustan Zinc Ltd. Versus CCE & ST, Udaipur [2016 (7) TMI 1064 - CESTAT NEW DELHI], where CESTAT allowed the benefit of Cenvat credit for the subject service i.e. laying of pipelines to supply water from dams/storage tanks to Dariba mines (captive mines) of the appellant - appeal allowed - decided in favor of appellant.
Constitution of arbitral tribunal - procedure contained in the arbitration agreement for constituting the arbitral tribunal - whether panel of arbitrators prepared by the Respondent violates the amended provisions of Section 12 of Arbitration and Conciliation Act, 1996 - person ineligible to act as an arbitrator - as argued by the the Petitioner was that the panel of arbitrators drawn by the Respondent consists of those persons who are government employees or ex-government employees
Held that:- If this contention of the Petitioner above is accepted, then no person who had earlier worked in any capacity with the Central Government or other autonomous or public sector undertakings, would be eligible to act as an arbitrator even when he is not even remotely connected with the party in question, like DMRC in this case. The amended provision puts an embargo on a person to act as an arbitrator, who is the employee of the party to the dispute. It also deprives a person to act as an arbitrator if he had been the consultant or the advisor or had any past or present business relationship with DMRC. No such case is made out by the Petitioner.
It cannot be said that simply because the person is retired officer who retired from the government or other statutory corporation or public sector undertaking and had no connection with DMRC (party in dispute), he would be treated as ineligible to act as an arbitrator. Had this been the intention of the legislature, the Seventh Schedule would have covered such persons as well. Bias or even real likelihood of bias cannot be attributed to such highly qualified and experienced persons, simply on the ground that they served the Central Government or PSUs, even when they had no connection with DMRC. The very reason for empanelling these persons is to ensure that technical aspects of the dispute are suitably resolved by utilising their expertise when they act as arbitrators. It may also be mentioned herein that the Law Commission had proposed the incorporation of the Schedule which was drawn from the red and orange list of IBA guidelines on conflict of interest in international arbitration with the observation that the same would be treated as the guide 'to determine whether circumstances exist which give rise to such justifiable doubts'. Such persons do not get covered by red or orange list of IBA guidelines either.
As already noted above, DMRC has now forwarded the list of all 31 persons on its panel thereby giving a very wide choice to the Petitioner to nominate its arbitrator. They are not the employees or ex-employees or in any way related to the DMRC. In any case, the persons who are ultimately picked up as arbitrators will have to disclose their interest in terms of amended provisions of Section 12 of the Act. We, therefore, do not find it to be a fit case for exercising our jurisdiction to appoint and constitute the arbitral tribunal. Petition dismissed.
Penalty u/s.271(1)(c) - inaccurate particulars of income by claiming higher depreciation i.e. 80% on the windmill than the allowable depreciation i.e. 40% - Held that:- The purchase of windmill in question and depreciation claimed thereon is very much part of financial statements and return of income furnished by the appellant where date of installation is stated to be 30.9.2004 which is supported by the evidences mentioned herein above. Contention of Assessing officer that the claim was not bonafide and assessee could have claimed the depreciation in the subsequent years. This itself proves that in fact windmill is installed which is used for the purposes of the business depreciation is allowable on it. Reliance of Assessing Officer on statement prepared by officials of the Suzlon was not examined by department nor was any opportunity granted to appellant for cross examination. Even for making an addition based on statement of third parties, AO is duty bound to give cross examination of that party otherwise the addition is also not sustainable. Therefore the penalty u/s 271(1) (c) is definitely cannot be sustained in absence of cross examination.
The assessee has sought to explain by way of evidences as noted in aforesaid paras that actual generation of electricity of 402 units has been shown for the month of September-2004. The invoices of the supplier of the machinery is also prior to the purported date of installation on 30/09/2004. The assessee has offered some explanation on deficit noted by the ITAT towards transportation and insurance. The explanation offered by the assessee is somewhat plausible particularly in the context of penal provisions of section 271(1)(c) of the Act. Needless to say, penalty proceedings are independent of assessment proceedings and it is well settled that concealment of income cannot be automatically inferred on the basis of additions/disallowance in the quantum assessment without being proved otherwise. In other words, imposition of penalty is not an automatic consequence of the assessment proceedings. The penalty cannot be levied as a matter of course on the ground that quantum additions have been confirmed by the superior authority. The assessee in the instant case has provided plausible evidence which are not totally bereft of merits. - Decided against revenue.
Transfer pricing adjustment - manner of apportionment of unallocable costs and not allowing deduction on account of pass through costs - Held that:- AR could not adduce the details of `Unallocable costs’ of ₹ 9.79 crore, which is not even available in the TPO’s order. In the absence of such details, it cannot be precisely ascertained as to how much is really the amount of unallocable costs. Under these circumstances, we set aside the impugned order and remit the matter to the file of AO/TPO for considering the details of ₹ 9.79 crore. If some cost included in this amount is directly identifiable with one of the three segments, then, it should be excluded from the common pool to be considered separately under the respective segment. The remaining amount should be apportioned amongst the three segments in the ratio of the amount of respective gross margins. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in this regard.
Computation of the assessee’s PLI - Held that:- We find that the so-called pass through cost amounting to ₹ 17.13 lac was incurred qua third parties. The otherwise nature of such costs, being, operating, has not been disputed. The third party outsourced services cost has ultimately gone into the rendering of services by the assessee which fetched the contracted revenue. On a specifc question about the nature of such costs, it was stated that the assessee did not recover it from its AE and there was no profit element involved in it. This contention automatically shows that the third party outsourced services cost cannot be assigned the character of pass through cost as admittedly it has not been recovered as such from the AE. If the contention of the ld. AR that since there is no profit element in the incurring of such a cost and hence the same be excluded by treating it as a pass through cost, is taken to a logical conclusion, then, all the costs incurred by the assessee to third parties in rendering the services to its AE will find their way out of the ambit of ‘Operating costs’, thereby rendering the concept of `Operating costs’ itself meaningless. This is patently erroneous and unacceptable. Ex consequenti, we hold that the third party outsourced service cost amounting to ₹ 17,13,222/- is rightly includible in the total operating costs incurred by the assessee. The argument of the ld. AR fails on this score.
Computation of mean OP/TC of comparables - Held that:- There can be no quarrel on the fact that if figures of Inventory, Receivables and Payables warrant a working capital adjustment in a negative manner to the profit margin of the comparables, the same has to be necessarily carried out in the same manner as it is done if the adjustment leads to reduction of the profit margin of comparables. However, it is essential that any adverse calculation should be confronted to the assessee, so that his objection, if any, could be addressed. As the needful has not been done in this case, we set aside the impugned order on this score and remit the matter to the file of TPO/AO for confronting the assessee with the manner in which the adjusted OP/TC of comparables has been computed, so that the assessee may raise objection, if any, to the computation of working capital adjustment.
Selection of comparables - comparability analysis - Yassessee is engaged in market research activities/business development and helps its associated enterprises in identifying new projects and business opportunities in India’. The assessee: `also acts as an intermediary between its AEs and clients’. Further, it: `provides technical support/coordination services to its AEs, thus companies functionally dissimilar with that of assessee need to deselected from final list of comparability.
The Karnataka High Court judgment in 2017 (2) TMI 1236 was disposed of as withdrawn based on a memo filed by the petitioner's counsel R. B. Aneppanavar. Respondents were represented by B. P. Puttasiddaiah from M/s. Mahesh & Co.
Penalty under section 271(1)(c) - treating the share trading loss as speculation loss as per Explanation to Section 73 and consequently not entitled for set off against other income - proof of inaccurate particulars or concealed particulars of his income - Held that:- As decided in CIT -vs.- Auric Investment & Securities Limited [2007 (7) TMI 276 - DELHI HIGH COURT ] the penalty imposed by the Assessing Officer under section 271(1)(c) was not sustainable as mere treatment of business loss as speculation loss by the Assessing Officer did not automatically warrant inference of concealment of income and there was nothing on record to show that in furnishing its return of income, the assessee had either concealed its income or had furnished any inaccurate particulars of income. No infirmity in the impugned order of the ld. CIT(Appeals) cancelling the penalty imposed by the Assessing Officer under section 271(1)(c) - Decided in favour of assessee.
PMLA Complaint - prima facie ground and any material evidence qua any of the petitioners to satisfy the necessary pre-requisites for invoking Section 3 of PMLA against them and essential for taking cognizance and proceeding against each of the petitioners - 'mens rea' or culpable 'knowledge' of the 'Scheduled Offence' and 'Proceeds of Crime' - Held that:- By the impugned order dated 18.7.2014, the Special Court for PMLA mechanically took 'cognizance' of the alleged offence punishable under Section 4 of PMLA qua each of the accused petitioner, without even prima facie material showing existence of any 'mens rea' or culpable 'knowledge' with all or any of them, of the subject Scheduled Offence investigated separately by Crime Branch, Surat in FIR Nos. I-16/2014 dated 11.04.2014 and I-17/2014 dated 13.4.2014, or of any 'proceeds of crime' emanating from the said scheduled offences.
Neither there is any tangible evidence, nor even any circumstantial material to impute culpable knowledge on the petitioners and to even prima facie conclude that they were either aware of the commission of the Schedule Offence or the generation of the alleged proceeds of crime by or out of such Schedule Offence. As per the material adduced, it cannot be even prima facie held that the petitioners had any reason to even have any reasonable doubt regarding commission of alleged schedule offence and generation of any proceeds of crime in relation thereto. The same is also fortified by the fact that none of the petitioners were made an accused in the scheduled offence. Even though the accused petitioners received in their bank accounts certain amounts at the instance of or from their close relative Shri Afroz Hasanfatta, the statements if taken on their face value, do not satisfy even on prima facie basis the pre-requisite for trying any person on allegation of money laundering i.e. 'mens rea' or culpable 'knowledge' of the 'Scheduled Offence' and 'Proceeds of Crime' derived therefrom, and projection of such proceeds of crime as untainted. Even on prima facie basis no offence is made out against any of the accused petitioners. Therefore, find merit in the submissions made on behalf of the accused Petitioners and have no hesitation in holding that the impugned Order was passed mechanically and deserves to be set aside.
Appointment of Court Commissioner - bearing of fee of the Court Commissioner - Held that:- Once the plaintiff is willing to bear the costs of the Commission subject to final order as to costs in the suit, the objection of the defendant no.1 does not come in the way, especially when the Joint Registrars are burdened with recording of evidence.
Accordingly, Mr. Dinesh Dayal, Additional District Judge (Retd.) (Ph. No.9810100200) is appointed as the Court Commissioner to record evidence in the suit.
The fee of the Court Commissioner, besides out of pocket expenses is tentatively fixed at ₹ 1,00,000/- to be initially borne by the plaintiff subject to final orders as to costs in the suit.
The Court Commissioner is requested to record the evidence within the Court Complex and to complete the same within one year of the date of first appearance of the parties before him. He is granted liberty to have the matter placed before the Court, if any of the parties are found delaying recording of the evidence.The Registry is directed to send the file of the suit at the place and time fixed by the Court Commissioner for recording of evidence.
Notional loss - Loss arising on revaluation of foreign exchange forward contract - account of Accounting Standard 11 issued by ICAI - Held that:- In the assessment relating to A.Y. 2010-11, the assessee claimed that the loss brought forward from A.Y. 2009-10 should be set off against income relating to A.Y. 2010-11. The Assessing Officer noticed that the loss claimed by the assessee on account of revaluation of forward contracts and other assets have been disallowed. Hence the Assessing Officer rejected the claim of the assessee for set off brought forward loss.
In the appellate proceedings, the learned CIT(A) noticed that the claim of the assessee was allowed in A.Y. 2009-10 by him and hence the assessee would be eligible for set off brought forward loss. Accordingly, he directed the Assessing Officer to grant consequential relief to the assessee. The Revenue is aggrieved by the said decision the learned CIT(A).
We have heard the parties and perused the record. In the preceding paragraph, we have upheld the decision rendered by the learned CIT(A) in A.Y. 2009-10 and hence direction given by the learned CIT(A) in A.Y. 2010-11 to the Assessing Officer to grant consequential relief to the assessee does not call for any interference.
Cargo Handling Services - the assessee-Appellants had been mainly providing services of packing of GSSP power manufactured in the factory as per the work order given to them by M/s Bohra Industries Ltd. - The contracts clearly indicate that this was executed for packing of GSSP. Filling, weighing and stitching are part of the packing activity for stacking and shifting of the bags adjunct to loading point - Held that: - an identical issue was decided by the Hon’ble Allahabad High Court in the case of Commissioner of Central Excise vs Manoj Kumar, [2012 (9) TMI 941 - ALLAHABAD HIGH COURT] where it was held that The sugar bags were not to be loaded or unloaded for any movement outside the factory on public roads, on any ships, airplane or trucks for onward movement to any destination. The activities will fall within the meaning of transportation of goods, and would certainly not be included in the definition of 'Cargo Handling Service', which is the service exigible to service tax - appeal allowed - decided in favor of appellant-assessee.
Make over of the excess collections qua movie tickets - penalty - The inspection, apparently, revealed that the petitioner was collecting the component of entertainment tax as well from the viewers, although, the subject movie had been exempted from tax - Held that: - A perusal of the contents of the said reply would show that the petitioner has not denied the fact that cash, amounting to ₹ 8,92,862/-, purporting to be proceeds of sale of tickets, was found in his premises - A perusal of the reply would show that the petitioner was not able to explain the difference in the two products arrived at by the first respondent. The first product was arrived at by multiplying the number of tickets sold with the rates stipulated qua tickets, albeit, net of taxes, while the second product involved the multiplication of tickets sold by rates, which included the component of tax. The variation in the two products, according to the first respondent, was equivalent to the cash found, on inspection in the premises of the petitioner. This variation, the petitioner was not able to address in the reply.
I find no error in the order - the theatre owner cannot illegally collect tax and, then, keep the proceeds with himself.
Penalty - Held that: - the provision invoked does not apply, to the instant circumstances - penalty is set aside.
Petition allowed - decided partly in favor of petitioner.
Claim of refund of excess CVD paid on import of mobile handsets including cellular phones - mobile handsets including cellular phones - the decision in the case of YU Televentures Pvt. Ltd. Versus Union Of India & Ors [2016 (8) TMI 184 - DELHI HIGH COURT] contested - Held that: - the decision in the above case upheld - we do not see any reason to grant any interim relief in favour of the petitioner - petition dismissed.
Legality of promotion to the cadre of ACIT on the basis of All India level seniority list pertaining to the cadre of Income Tax Officers (ITO) - Held that:- There exists no All India seniority list pertaining to the cadre of ITOs based on the principles/ directions of the Hon’ble Supreme Court in N.R.Parmar (2012 (12) TMI 872 - SUPREME COURT ). The fact that the cadre of ITO is a feeder cadre for promotion to the cadre of ACIT cannot be disputed. We find some considerable force in the argument of Shri M.S.Trivedi that if the respondents were to effect promotion to the cadre of ACIT on the basis of the existing All India level seniority list of ITOs as on 01.01.2012 (pre-Parmar) circulated through the letter dated 01.09.2015 vide Annexure A/1, there is likelihood of some of the ITOs who were given deemed date of eligibility based on the decision of N.R.Parmar (supra) may be out of the zone of consideration for promotion to the cadre of ACIT, but the fact remains that All India level seniority list is yet to be finalised and published.
As the matter is sub judice before the Hon’ble High Court of Gujarat wherein order says " Hence, the status quo as on date be continued qua promotions from the cadre of Income Tax Officers to Assistant Commissioner of Income Tax". As such we are not supposed to deal with the prayer of the applicant in this O.A. subject to the order that may be passed by the Hon’ble High Court in the matters pending before it pertaining to publication of All India Level seniority list of ITOs and promotion to the cadre of ACITs. However, we may observe that the applicant is at liberty to approach the Tribunal as and when circumstances warrant. In terms of the above observations, the O.A. stands disposed of.
Penalty u/s. 271B - non-uploading of audit report electronically - assessee’s explanation for non uploading of audit report because of problem faced in the system and the contention that second circular issued by the CBDT extending the due date of filing of return of income from 30th Sep, 2013 to 14th Oct, 2013 implicit the difficulty in uploading the audit report - Held that:- the online filing of audit report u/s. 44AB was newly introduced during the year under consideration because of which the assessee had faced difficulty in uploading the audit report electronically in the system. The issuing of the two circulars by the CBDT implicit constraint and elucidate the hiccup in uploading the prescribed reports of audit in the system electronically. We also noticed that the assessee had submitted the audit report on 30/09/2013 manually within the due date which could not be uploaded electronically because of the reasons stated supra in this order. The above stated facts and findings indeed indicate that there was a bonafide reasonable cause for not uploading the audit report electronically by the assessee, therefore, as per our considered opinion the ld. CIT(A) is not justified in sustaining the penalty levied by the assessing officer. - Decided in favour of assessee.
Change in method of valuation - acceptance of 5% as the basis for valuing the Slow Moving Stock - Held that:- Revenue’s contention that the acceptance of 5% as the basis for valuing the Slow Moving Stock being unscientific, is baseless in our opinion. Once the engineering expert examined all the heads of stock and valued them, to the best of his judgment, and in the absence of any finding that the 5% was not relatable to such valuation without an alternative valuation or that it is a flawed method of valuation, the AO could not have rejected what was offered as the reduced value of the Slow- Moving Stock. There is nothing on the record to doubt the bonafides of the valuation. In the event of likelihood of the stocks realising a higher amount than the value shown, the same would be reflected in the subsequent year in the income or profit of the assessee, the Revenue’s contention is without any merit.
Nor do we find any reason to subscribe and uphold the AO’s adverse observations that the change in method of valuation was without basis. In fact the observations of the CAG in this case led to the change and adoption of AS-2, which was not previously resorted to. - Decided against revenue
Denial of deduction u/s 80IB - conditions for availing the benefit - deductions are claimed are subject matter of an earlier assessment year and allowed - Held that:- The qualification as to whether any industrial undertaking fulfills the condition as specified under Section 80-I of the Act has to be determined in the year in which the new industrial undertaking is established. Although the deduction under Section 80-I of the Act is available for the assessment years succeeding the initial assessment year, the conditions for availing the benefit are inextricably linked with the previous year relevant to the assessment year in which the new undertaking was formed. In such circumstances, it would not be possible for an Assessing Officer to reject the claim of an assessee for deduction under Section 80-I of the Act on the ground that the industrial undertaking in respect of which deduction is claimed did not fulfill the conditions as specified in Section 80-I(2) of the Act, without undermining the basis on which the deduction was granted to the assessee in the initial assessment year. This in our view would not be permissible unless the past assessments are also disturbed.
Assessing Officers over a period of three years being assessment years 1988-89, 1989-1990 and 1990-1991 have consistently accepted the claim of the assessee for deduction under 80-I of the Act and it would not be open for the Assessing Officer to deny the deduction under Section 80-I of the Act on the ground of non fulfilment of the conditions under 80-I(2) of the Act without disturbing the assessment for the assessment years relevant to the previous year in which the Unit Nos.2 & 3 were established. - AO is directed to allow the claim of the assessee for deduction u/s 80IB - Decided in favour of assessee.
Invocation of extended period of limitation - Demand of duty alongwith interest and penalty - appellant procured certain inputs from 100% EOU - credit of duty availed in excess of additional duty leviable under Section 3 of the Customs Tariff Act equivalent to duty of excise specified in Clauses (i) (ii) (iii) (iv) (v) (vi) (via) of Rule 3(1) of CCR, 2004 is irregular - the decision in the case of M/s. Molex (India) Private Ltd. Versus Commissioner of Central Excise [2016 (9) TMI 39 - CESTAT BANGALORE] contested, where it was held that Though the method used for calculating the measure of such excise duty was also to include element of customs duties but the entire duty paid on the invoices will have to be considered as Central Excise duty paid under Section 3(1) of Central Excise Act - Held that: - the decision in the above case upheld - appeal dismissed.
Insolvency and Bankruptcy Code 2016 - eligibility of petitioner - Held that:- The expression Debt' means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. However Part Il specifically deals with "Insolvency resolution and Liquidation" and it has its own definition enumerated in Section 5 of IBC as is discussed in the preceding para. Therefore the definition as enumerated in section 5 of IBC are to apply the expressions used in sections 7 and 9 of IBC and therefore, the expression used in section 3 of IBC cannot be exclusively read to interpret various words used in section 5 of IBC. Therefore we find no merit in the aforesaid submission.
Therefore the argument of the petitioner to treat this petition as the one under section 9 of IBC is also without substance and we reject the same. This petition fails and the same is dismissed. Keeping in view the tenderness of the provisions of IBC we refrain from burdening the petitioner with cost.
Before parting we make it clear that any observations made in this order shall not be construed as an expression of opinion on the merit of the controversy as we have refrained from entertaining the application at the initial stage itself when the Respondents have not entered appearance and are not present before us. Therefore the right of the Applicants before any other forum shall not be prejudiced on account of dismissal of instant application.
The following questions of law arise for determination:
(i) Did the ITAT fall into error in holding that invocation of Section 145 of the Income Tax Act, 1961 (‘the Act’) in the facts of this case was not justified?
(ii) Is the impugned order erroneous inasmuch as it interprets Section 80IA (8) and (10) of the Act?
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