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2017 (8) TMI 1647 - NATIONAL COMPANY, LAW APPELLATE TRIBUNAL, NEW DELHI
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - arrears of salaries due have not been paid - Operational Creditors - service of demand notice - existence of debt and dispute or not - HELD THAT:- Admittedly, no demand notice under Section 8 was given by any of the individual respondent-'Operational Creditor', either in Form-3 or Form-4 of the Adjudicating Authority Rules. All the notices, which are same and similar and all dated 27th February, 2017, were issued by the same advocate, on behalf each of the respondents. Only the amount of default shown therein are varying. Learned counsel for the respondents accepts that apart from advocate notice, no separate notice under Section 8 were individually given by any of the respondents.
Service of demand notice - HELD THAT:- It is true that no authorisation on behalf of any Company, or firm is required to be given, but the individual(s) are also required to give notice under Section 8 in Form-3 or Form-4 under their signatures with clear understanding and request to repay the unpaid 'Operational Debt' (in default) unconditionally, in full, within ten days from the receipt of the letter, with further intimation that on failure, the said employee(s)/ workmen shall initiate a Corporate Insolvency Process in respect of the 'Corporate Debtor'. If such notice in Form-3 or Form-4 with the aforesaid stipulation is served on the 'Corporate Debtor', the 'Corporate Debtor' will understand the serious consequences of non-payment of 'Operational Debt', otherwise like any normal pleader notice/advocate notice or like notice under Section 80 of the Code of Civil Procedure, 1908 or notice for initiation of proceeding under the Industrial Disputes Act, 1947, the 'Corporate Debtor' may not take it seriously and may decide to contest the suit/case, if filed, before the appropriate forum - where the claim is made under Section 8 of I&B Code, in such case, the 'Corporate Debtor' will understand the seriousness that it cannot contest the claim, except in a case where a dispute has already been raised, prior to the issuance of notice under Section 8.
Application admitted - moratorium declared.
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2017 (8) TMI 1646 - NATIONAL COMPANY LAW TRIBUNAL HYDERABAD BENCH
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Inter-corporate loan falls under Section 5(8) (f) of the IBC or not - Section 7 of Insolvency and Bankruptcy Code 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT:- With regard to the contention/submission of the Respondent, the amount disbursed to Corporate Debtor is not part of the balance sheet of Financial Creditor, while perusing the records submitted by the Corporate Debtor itself, we have observed / found the Audited Reports for year ending 31-12-2009 of Quinn Logistics India Pvt. Ltd (Financial Creditor) under the heading current assets / loans and advances, an amount of ₹ 63,15,88,023/- was shown as loans and advances and also previous year ending 31-12-2008, an amount of ₹ 74,80,26,336/- was also shown as loans and advances. While further analyzing the schedules of balance sheet, the same was discussed in Schedule-8 and said amount was against the name of Mack Soft Tech Pvt. Ltd. i.e. the Corporate Debtor, therefore, even in this count also the Corporate Debtor have failed and in addition to the balance sheet, the Financial Creditor have also submitted the bank statement, establishing the proof of loans disbursement to Corporate Debtor.
The Corporate Debtor was enjoying Inter Corporate Loan granted by the Financial Creditor as interest free loan for quite a number of years and they should be happy with the same. It is also unique to observe that the borrower after enjoying the interest free loan for so many years instead of repaying the debt - The Financial Creditor was a holding company of the Corporate Debtor in the beginning and during the course of period the loans were disbursed free of interest. Section 5(8) of IBC Code also states that the Financial debt means a debt along with interest if any.
The Accounting Standard relied upon by Corporate Debtor is not related to the current facts & circumstances of the case since the accounting standard states that "when the obligation specified in the contract is discharged or cancelled or expires - Apparently, in the instant case there are no obligations specified, more over the petitioner itself accepted that there is no written agreement between the petitioner and Corporate Debtor. Further, the term "Expires" stated in the aforesaid accounting standard, there is no corresponding provision stating that the same is governed by Limitation Act, 1963. Therefore, even this contention of the respondent does not help them.
The Bench is of the prima facie view that to avoid disputes like in this case it would be advisable/beneficial/for audit trials for all to enter into an agreement with detailed terms & conditions including the schedule of the repayments, interest charged etc. However, in the present case, the Financial Creditor and Corporate Debtor had Holding/Subsidiary Company relationship and the Financial Creditor also submitted the bank statements towards disbursement of loan/money to Corporate Debtor and in balance sheet for the year ending 31.12.2009.
The Corporate Debtor owes ₹ 62,90,45,905/- therefore, debt and default has been established by the Financial Creditor - Financial Creditor has to receive ₹ 62,90,45,905/- which is the debt &default amount. Therefore, there is a default by the Corporate Debtor and thus the Financial Creditor is entitled to claim relief under section 7 of the IBC, 2016.
Application admitted - moratorium declared.
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2017 (8) TMI 1645 - SUPREME COURT
Nature of conditions which may be imposed Under Section 438 of Code of Criminal Procedure, 1973, while granting anticipatory bail - HELD THAT:- It is well settled legal proposition that in interpreting a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) should be preferred to an interpretation that would not promote the object - There is no dispute that Sub-clause (c) of Section 437(3) allows Courts to impose such conditions in the interest of justice. We are aware that palpably such wordings are capable of accepting broader meaning. But such conditions cannot be arbitrary, fanciful or extend beyond the ends of the provision. The phrase 'interest of justice' as used under the Sub-clause (c) of Section 437(3) means "good administration of justice" or "advancing the trial process" and inclusion of broader meaning should be shunned because of purposive interpretation.
Coming back to the case at hand, from the perusal of the impugned order it is clear that the court exceeded its jurisdiction in imposing such arbitrary conditions. Some of the conditions imposed are highly onerous and are absurd. Such onerous anticipatory bail conditions are alien and cannot be sustained in the eyes of law. The conditions imposed appear to have no nexus with the good administration of justice or advancing the trial process, rather it is an over-zealous exercise in utter disregard to the very purpose of the criminal justice system.
The impugned order passed by the High Court is set aside and the interim protection granted to the Petitioner by this Court on 07.02.2017 is made absolute - Appeal disposed off.
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2017 (8) TMI 1644 - ITAT MUMBAI
Claim of deduction on account of negative reserve - AO held that the negative reserve was taxable as business income of the assessee and added the same to the total income - HELD THAT:- As in case HDFC STANDARD LIFE INSURANCE COMPANY LTD. AND OTHER VERSUS DCIT (OSD) -1 (1) MUMBAI AND OTHERS [2013 (10) TMI 1072 - ITAT MUMBAI] allowed the claim of the assessee - examining the method of accounting and the mandate given by regulations to appoint Actuarial on the concept of mathematical reserves we do not see any reason to interfere with the order of the CIT(A).The mathematical reserve is a part of Actuarial valuation and the surplus as discussed in Form-I under Regulation 4 takes in to consideration this mathematical reserve also. Therefore the order of the order of the CIT(A) is approved.Moreover the Assessing Officer has no power to modify the amount after actuarial valuation was done, which was the basis for assessment under Rule 2 of 1st Schedule r.w.s.44 of the I.T. Act.The principle laid down by the Hon'ble Supreme Court in LIC vs.CIT [1963 (12) TMI 5 - SUPREME COURT] about the power of the Assessing Officer also restricted the scope and adjustment by the AO.
Revised computation of income excluding pension business deficit - assessee had reduced an amount on account of deficit from linked pension scheme in view of the exemption provided in section 10(23AAB) - HELD THAT:- As in case HDFC STANDARD LIFE INSURANCE COMPANY LTD. AND OTHER VERSUS DCIT (OSD) -1 (1) MUMBAI AND OTHERS [2013 (10) TMI 1072 - ITAT MUMBAI] the object of inserting section 10(23AAB) as per the Board Circular No. 762, dated February 18, 1998 was to enable the assessee to offer attractive terms to the contributors. Thus, the object of inserting section 10 (23 AAB) was not with a view to treat the pension fund like the Jeevan Suraksha Fund outside the purview of insurance business but to promote the insurance business by exempting the income from such fund. Therefore in the facts of the present case, the decision of the Income-tax Appellate Tribunal in holding that even after insertion of section 10(23AAB), the loss incurred from the pension fund like the Jeevan Suraksha Fund had to be excluded while determining the actuarial valuation surplus from the insurance business under section 44 of the Income-tax Act, 1961, cannot be faulted. Accordingly, questions (c) and (d) are answered in the affirmative, that is, in favour of the assessee.
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2017 (8) TMI 1643 - ITAT CHENNAI
Deduction u/s.10B on the deemed export - assessee, a company in the business of software development at Chennai - claim denied by the Revenue on the ground that the work for the same was carried out in India and the sale proceeds were received in Indian rupees i.e., as against in convertible foreign exchange, as required by sec. 10B - HELD THAT:- Even assuming that the export proceeds are received in foreign exchange, a matter which, in view of the contrary contentions, would require being finally determined on the basis of some material as, say, a certificate/s from the assessee’s banker/s, the question becomes of no consequence. The assessee has therefore been rightly disallowed its claim for deduction u/s. 10B on the deemed export, i.e., even assuming MGSC to be a STP Unit, and the export proceeds in respect of the development of computer software therefor, and which is further for its’ foreign client, being received by the assessee in foreign exchange, i.e., either by its purchase from an authorized dealer or through direct remittance from abroad.
The definition of deemed export under the foreign trade policy, which includes the supply of ‘manufactured goods’ – so that its applicability to computer software is suspect, to a STP Unit, would be of little assistance in view of the specific provisions of the Act, a self contained code in itself, and the provisions of which are in fact applicable under the SEZ Act itself. Further still, we may also here clarify that the Circular (No.1001/8/2015-CX.8, dated 28-04-2014) by CBEC, stating that the supply of goods from DTA to a SEZ Act would constitute an export, would again be of little relevance. This is as the same is in respect of rebate on duty on goods cleared from DTA to SEZ as well as cenvat credit in respect thereof. The same, accordingly, has no bearing on the deduction under the provision of the Act.
Chapter VI of the SEZ Act, titled ‘Special fiscal provisions of Special Economic Zones’, under which Chapter section 27 falls, contains several provisions (viz. ss. 26 to 30) with regard to the exemption of duties under the Customs Act and the Central Excise Act, making the said Circular consistent with the provisions of the SEZ Act. We have already clarified that such a mechanism only would ensure extension of the benefit of the provisions of the Act, i.e., by reference or by incorporation under the relevant statues.
We draw support for our decision from the judgment in the case of CIT v. Electronic Controls and Discharge Systems Pvt. Ltd. [2011 (7) TMI 541 - KERALA HIGH COURT] relied upon by the ld. CIT(A), which, with respect, we consider as laying down the correct position in law, making it explicitly clear that inter unit sales in the Export Processing Zone cannot be treated an export for the purpose of s. 10A, an analogous provision - Decided against assessee.
Deduction of interest on Bandwidth and Telephone expenses in computing the assessee’s export turnover - assessee contends, being not incurred in foreign exchange, cannot be deducted - HELD THAT:- We find that assessee’s contention is valid in-as-much as export turnover, as defined in Explanation 2 to s. 10B, itself provides for the exclusion of telecommunication charges where incurred in foreign exchange. There is, however, no finding in this respect by any authority. Rather, it is not clear if this issue was raised before the ld. CIT(A), which is claimed to be vide Gd. 3 before him, widely worded, as is Gd. 3 before us, alleging the AO have to erred in computing the deduction u/s. 10A. The ld. CIT(A) having not disposed the assessee’s Gd.3 before him, the matter is to be restored back to this file for the same. So however, in-as-much as the AO has effected the adjustment without show causing the assessee in its respect, the matter is set aside to the file of the AO. Assessee’s appeal is partly allowed.
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2017 (8) TMI 1642 - APPELLATE TRIBUNAL, PREVENTION OF MONEY LAUNDERING ACT AT NEW DELHI
Money Laundering - section 26 of Prevention of Money Laundering Act, 2002 - HELD THAT:- Issue notice to the respondent.
List this appeal on 2nd February, 2018.
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2017 (8) TMI 1641 - ALLAHABAD HIGH COURT
Seeking grant of Anticipatory Bail - cognizable offence or not? - HELD THAT:- The learned counsel for the petitioners has not brought forth anything cogent or convincing to manifest that no cognizable offence is disclosed prima facie on the allegations contained in the F.I.R. or that there was any statutory restriction operating on the police to investigate the case.
Having scanned the allegations contained in the F.I.R. the Court is of the view that the allegations in the F.I.R. do disclose commission of cognizable offence and, therefore, no ground is made out warranting interference by this Court. The prayer for quashing the same is refused.
Petition dismissed.
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2017 (8) TMI 1640 - ITAT CHENNAI
Exemption u/s 11 - Revenue had withdrawn the benefit of Section 11 & 12 of the Act to the assessee only for the reason that the assessee’s activity is micro-financing by obtaining loan from bank and lending them to SHGs at a higher interest - HELD THAT:- When the assessee has utilized its entire funds for micro-financing in order to uplift the poor then the benefit of Section 11 & 12 cannot be denied to the assessee just because the assessee has charged some markup in its lending rates of interest. It is pertinent to mention that some markup in the lending rates is essential to cover up the administration cost and bad debts arising out of the advances. As also a well-known fact that to obtain loan from Banks is a cumbersome process which any ordinary persons cannot succeed. Entities such as the assessee Trust only has a potential to reach out to such persons and effectively avoid loss of capital and yet lift the poor and the downtrodden.
The assessee Trust has rendered service in the nature of ‘providing relief to the poor’ as envisaged in the Act and therefore the benefit of Section 11 & 12 of the Act cannot be denied - we hereby set aside the Order of the Ld.A.O and the Ld. CIT(A) and further direct the Ld.AO to grant the benefit of Section 11 & 12 of the Act, to the assessee.
As examined the various extensive activities conducted by the assessee Trust and the considerable time spent by the trustees as well as their relatives and is of the considered view that the consultation fee ranging from ₹ 4 lakhs to ₹ 12 lakhs paid to the Trustees is quite reasonable. Therefore, we do not find the assessee’s trust to have violated any of the provisions of the Act. - Appeals filed by the assessee for both the assessment years are allowed.
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2017 (8) TMI 1639 - CESTAT NEW DELHI
Jurisdiction - proper officer to issue SCN - power of D.R.I. Officers to act as ‘proper officer’ for demand proceedings under the Customs Act, 1962 - HELD THAT:- It has been ruled by Hon’ble Delhi High Court in the case of Mangali Impex Ltd. Vs. Union of India [2016 (5) TMI 225 - DELHI HIGH COURT] that the D.R.I. Officers are not competent to issue the show cause notice for the period prior to 08.04.2011. In similar such cases, various Benches of the Tribunal such as, Delhi, Chennai & Calcutta have set aside the impugned orders and remanded the matter to the original authority for deciding the issue of jurisdiction and thereafter to decide on the merits of the case, upon pronouncement of the judgment by the Hon’ble Supreme Court in the case of Mangali Impex.
Matters are remanded to the Original Authority for deciding the issues involved in the present appeals - appeal allowed by way of remand.
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2017 (8) TMI 1638 - DELHI HIGH COURT
Permanent Establishment (‘PE’) in India - income be attributed to such PE on account of offshore supplies - If the answer to the question (i) above is in the affirmative what should be the rate of attribution? - Is the Assessee entitled to adjustment of the expenses already incurred by it by way of payment to the Indian entity for marketing services? - Was the AO justified in adopting a different rate of attribution contrary to Article 7 of the Indo-China DTAA? - HELD THAT:- The learned counsel for the parties are permitted to file additional documents/papers which are part of the assessment record or were filed before the ITAT within eight weeks.
List in due course.
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2017 (8) TMI 1637 - ITAT MUMBAI
Deduction u/s 80P (2)(a)(i) - AO denied the deduction to the assessee holding it to be co-operative bank and accordingly not eligible for the said deduction as per section 80(4) - HELD THAT:- As this issue now is squarely covered in favour of the assessee in the case of the Citizen cooperative society Ltd [2017 (8) TMI 536 - SUPREME COURT] wherein as expounded that if one has to go by the definition of cooperative bank the assessee does not get covered thereby. That it is also a matter of common knowledge that in order to do the business of a cooperative bank, it is imperative to have a licence from the reserve bank of India which the assessee does not possess.
In the present case before me also the assessee cooperative society is not licensed from the reserve bank of India to act as co-operative bank. Hence as per the ratio emanating from the aforesaid honourable apex court judgement the assessee is not affected by the provisions of section 80P(4).Thus we hold that assessee is entitled to deduction under section 80P(2)(a)(i).
Assessee not entitled to treat interest income received from investment as business income by referring to honourable apex court decision in the case of Totgars’ cooperative society Ltd. [2010 (2) TMI 3 - SUPREME COURT] - This reasoning of the assessing officer confirmed by the learned CIT-A is also flawed. The decision of honourable apex court in the decision referred by the Assessing Officer is not at all applicable on the facts of the case. The Totgars’ society was not engaged into the business of accepting deposit and granting credit. Rather it was engaged in the activity for marketing of agricultural produce of its members. Hence this case laws is not at all applicable on the facts of the present case
In the present case assessee is engaging in to the business of accepting deposits and granting credit to its members. The assessee was utilising surplus fund in investments to earn income. This activity has direct & proximate connection or nexus to the earning of the assessee society. On this reasoning this activity of the assessee has been held to be business activity and the resultant income is treated as business income. There are several decisions in support of this proposition including that from ACIT vs. Buldhana Urban Cooperative Credit society Ltd [2013 (12) TMI 237 - ITAT NAGPUR]. Accordingly in the background of aforesaid discussion and precedent I hold that the interest income in this case is to be treated as business income. Other issues raised by the assessee in this appeal are now of academic interest. Hence not engaging into the same.
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2017 (8) TMI 1636 - KERALA HIGH COURT
Principles of natural justice - non-compliance with the procedure under Section 340 Cr.P.C as well the mandatory provisions of Section 195 Cr.P.C. - whether the impugned order is vitiated in the eyes of law as the learned Chief Judicial Magistrate has not followed the procedure under Section 340 Cr.P.C as well the mandatory provisions of Section 195 Cr.P.C.? - HELD THAT:- In the instant case, the records reveal that offences under Sections 193, 196, 205 and 120B read with 149 of IPC are alleged to have been committed in a proceedings in a Court of law affecting the administration of justice. Section 340 of the Code provides the procedure for offences enumerated in Section 195(1)(b)(i) of the Code. According to the learned counsel for the petitioner, a complaint which is filed under Section 340 alleging commission of offences under Section 193, 196, 205 of the IPC can be proceeded only as per the procedure laid down in Section 340 of the Code and non-compliance would vitiate the prosecution. Of-course the provisions under Section 195 and Section 340 of the Code are to protect persons from needlessly harassed by vexatious prosecution due to personal vendetta or retaliation against any person.
It is discernible from the records that the learned Sessions Judge keeping the settled principle of law in mind instructed the Chief Judicial Magistrate in the Revision Petition, to direct the investigating officer to have a full-fledged investigation by the police as persons who are not parties to the proceedings are also suspected to be involved in the alleged impersonation and fraud practiced upon the Court and that the report of the police can be made use of, as a material for considering whether a complaint has to be filed and what all are the offences committed - It is well settled that the inherent jurisdiction under Section 482 Cr.P.C has to be exercised sparingly and carefully with caution to avoid abuse of the process of the Court and prevent miscarriage of justice and to secure the ends of justice. Here, the alleged offences are of exceptional nature and gravity. Who all are the culprits involved in the alleged crime and their participation in committing the alleged offences have to be unearthed and booked for the same.
The learned Chief Judicial Magistrate has to deal with the matter in accordance with the established proposition of law and record a finding on the basis of the report that will be submitted by the Investigating Officer after a full fledged investigation and the investigation is permitted to proceed with - It is well settled that the inherent jurisdiction under Section 482 Cr.P.C has to be exercised sparingly and carefully with caution to avoid abuse of the process of the Court and prevent miscarriage of justice and to secure the ends of justice. Here, the alleged offences are of exceptional nature and gravity. Who all are the culprits involved in the alleged crime and their participation in committing the alleged offences have to be unearthed and booked for the same. The argument advanced by the learned counsel for the petitioner that the order is vitiated in the eyes of law inasmuch as the mandatory provisions as envisaged under Section 340 of the Code have not complied with and the procedure adopted for registration of Annexure A1 FIR, suffers from grave error and calls for rectification, is devoid of merits.
Application dismissed.
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2017 (8) TMI 1635 - ITAT HYDERABAD
Unaccounted the receipts shown in the TDS certificate - revised statement of income - gross income declared by the assessee is more than the receipts shown in TDS certificates - primary objection of the assessee is that assessee filed the revised computation of income before the AO showing the additional income against which, expenditure was claimed - HELD THAT:- In our opinion, the argument of Counsel for assessee is not verified by the lower authorities and the turnover and expenditure shown by the assessee through the revised statement of account before AO was unvouched and it is required to be examined by the lower authorities with reference to books of account maintained by assessee, then only it is possible to say whether assessee has unaccounted the receipts shown in the TDS certificate produced by it.
Accordingly, in the interest of justice, we remit the entire issue in- dispute to the file of AO with a direction to assessee to explain the additional receipts shown by the assessee and additional expenditure claimed by assessee with reference to the books of account maintained by the assessee. Accordingly, the issue in dispute is remitted to the file of AO for fresh consideration to decide the same after giving opportunity of hearing to assessee. Appeal of assessee is partly allowed for statistical purposes.
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2017 (8) TMI 1634 - KERALA HIGH COURT
Maintainability of suit - Period of limitation for filing a suit - whether Ext. A1 balance sheet and the profit and loss account is an acknowledgment of liability for the period ending 31.3.1995 to which it relates or on 26.3.1997 when it was signed? - Section 18 of the Limitation Act, 1963 - HELD THAT:- Mere entries in books of account shall not alone be sufficient evidence to charge any person with liability. There has to be further evidence to prove payment of the money which may appear in the books of account either by production of receipts and vouchers or other clinching evidence.
The Commercial Documents Evidence Act, 1939 has not been extended to Part B States and therefore no presumption as to genuineness of documents or accuracy therein arises. The plaintiff contended that Ext. B11 balance sheet and the profit and loss account was filed two years after its due date and hence not kept in the regular course of business. The defendant contended that it could ill-afford to employ a Manager or Secretary and that the accounts were finalized by its directors themselves during the relevant time. But no explanation is forthcoming as to why the directors who made the entries were not examined or any voucher or receipt produced to prove discharge. The onus of proof is heavy on the defendant and we notice that neither parties have adduced any oral evidence in the case except marking the documents on consent. The defendant sought one more opportunity to adduce oral and documentary evidence to substantiate its contentions which we are inclined to grant in the peculiar circumstances of the case.
The suit remanded to consider only the plea of discharge of liability put forth by the defendant and all other findings by the court below are confirmed - Appeal suit is allowed.
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2017 (8) TMI 1633 - ITAT MUMBAI
Validity of reopening of assessment u/s 147 - Estimation of income on bogus purchases - CIT(A) sustained the estimate of 10% made by the AO - as assessee submitted that there is a mistake in the quantum of alleged bogus purchases in both the years, the Ld CIT(A) directed the AO to verify the same and allow relief accordingly - HELD THAT:- Even though the quantum of purchases made from M/s Manish Enterprises and M/s J P Enterprises matched with the quantum of purchases made from M/s Crescent Chemical Trading Co and M/s Pharma Trading House respectively, yet the fact remains that they are altogether different parties. It is a settled proposition of law that the provisions of income tax should be construed strictly. In the case of reopening of already completed assessment, the relevant provisions shall be subjected to more strict interpretation. Accordingly we are of the view that there is merit in the contentions of the assessee that the AO did not make any addition in respect of the alleged escaped income for which the assessment was reopened.
Whether the AO is entitled to make addition in respect of any other escaped income, if he did not make any addition in respect of items for which the assessment was reopened? - This question came to the consideration of Hon’ble jurisdictional Bombay High Court in the case of Jet Airways Ltd [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] and it was held that the assessing officer is not entitled to make addition of any other escaped income, if he does not make addition of any income for which the assessment was reopened. Since the facts available in the instant case are identical in nature, by following the decision of Jurisdictional High Court, we hold that the AO is not entitled to make the impugned additions when he did not make any addition in respect of items for which the assessment was reopened. Accordingly we set aside the order passed by Ld CIT(A) and quash the assessment order passed by the AO in the reassessment proceedings.
AY 2010-11 - AO has made the impugned addition only on the basis of information received from Sales tax authorities. We also notice that the AO did not make any independent enquiry to disprove the factum of purchases. At the same time, we notice that the assessee has also failed to furnish evidences to prove the transportation of materials.
We notice that the assessee has reconciled the purchases with sales. There should not be any doubt that the sales could not be made without making corresponding purchases. The AO has also accepted the purchases as well as sales. However, since the assessee did not furnish evidences for transportation of goods, the AO presumed that the assessee would have made extra profit and accordingly estimated the same at 10% of the value of purchases. We have noticed that the AO has made the addition without making any independent enquiries.
Assessee has also failed to prove the transportation of goods. During the course of arguments, the Ld A.R submitted that the materials might have been directly transported from the suppliers place to the customers place, but no evidence in that regard was furnished. Under these set of facts, we are of the view that the AO was justified in estimating extra profit, if any, made in the purchases. However, we are of the view that the estimation @ 10% appears to be on the higher side. The assessee also contends that it has already declared 4.16% on the above said transactions. We also notice that the co-ordinate bench has estimated the profit in the range of 3.50% to 4% in the case of Kamal P Agarwal & others [2017 (7) TMI 1083 - ITAT MUMBAI]
Thus disallowance of purchases may be made @ 4% to meet the anomalies, if any, and in our view, the same would meet the ends of justice. We order accordingly. The order of Ld CIT(A) stands modified accordingly and the AO is directed to restricted the addition to 4% of the value of alleged bogus purchases.
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2017 (8) TMI 1632 - BOMBAY HIGH COURT
Seeking interim protection staying proceedings - alleged evasion of service tax on account of non-payment of service tax on royalty - HELD THAT:- The stay will continue.
In addition there will be a stay imposing service tax on royalty required to be paid or deposited under Section 9 of the Mines and Minerals(Development and Regulation) Act 1957. This order will not come in the way of the Revenue from conducting and completing its assessment and enquiry. Liberty to the Revenue to apply once the assessment is over.
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2017 (8) TMI 1631 - ITAT MUMBAI
Denial of exemption under section 11 - charitable activity u/s 2(15) - assessee was registered under section 12A - HELD THAT:- As decided in assessee's own case [2015 (1) TMI 696 - ITAT MUMBAI] all the activities are carried out in accordance with the objects and none of its activities have been found to be non genuine. The assessee's explanation before the DIT regarding nature of receipts clearly shows that they have been received from the members while pursuing objects of the society, specifically mentioned in the "objects" for which it was granted registration u/s 12A.
Otherwise also, if any transaction of the trust which are incidental or ancillary towards fulfillment of the objects of other general public utility, will not normally amount to business trade or commerce, unless there is some intention to carry out business, trade or commerce on a permanent basis or for a reasonable continuity. The LD. DIT has not brought any evidence or material on record to show that the assessee was carrying out the activities on business or commercial principle or outside its objects. Thus on the facts of the present case it cannot be held that assessee's case is hit by proviso to section 2(15) or the registration granted earlier can be canceled within the ambit of section 12AA(3).
We find that the assessee’s appeal is for A.Y. 2010- 11 but the assessee was granted the registration in A.Y. 2009-10 itself by the Tribunal. Therefore, assessee’s appeal is allowed. In A.Y. 2011-12, the Ld. CIT(A) has followed the order of 2009-10. Therefore, Revenue’s appeal is dismissed.
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2017 (8) TMI 1630 - DELHI HIGH COURT
Seeking direction to petitioner being directors to disclose their personal movable and immovable assets - direction for issuance of bailable warrants was ordered to be kept in abeyance - HELD THAT:- Once the decree against the respondent No.2 cannot be executed against the petitioners as its directors, the next question is whether under Order XXI Rule 41 of the CPC, a direction to the directors to disclose their personal movable and immovable assets can be issued.
The direction impugned is evidently under sub-Rule (2) of Order XXI Rule 41. However what the said rule permits is a direction for disclosure of the particulars of the assets of the judgment-debtor and not assets of any other person. Though Order XXI Rule 41(1) also permits the Court to examine “any other person” but the words “any other person” are absent from sub-Rule (2) of Rule 41 which permits a direction only against the judgment-debtor where the judgment-debtor is a corporation, against any officer thereof and disclosure as aforesaid, of assets of the judgment debtor only and not of personal assets of such officer - Once the directors of a company are not judgment-debtor in a decree against a company, there can be no direction to them to disclose their assets.
The direction contained in the impugned order dated 23rd February, 2017 directing the petitioners to on affidavit disclose their personal movable and immovable assets as distinct from the assets of the respondent no.2/judgment-debtor thus cannot be sustained and is set aside. Axiomatically, the impugned order dated 17th March, 2017 of issuance of bailable warrants against the petitioners for non-compliance with the directions dated 23rd February, 2017 also has to go - Petition allowed.
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2017 (8) TMI 1629 - BOMBAY HIGH COURT
Revival of Winding up proceedings - Failure in payment of instalments - HELD THAT:- The winding up proceedings revive. This is not a case of a simple default. The company has avoided compliance with the undertaking given to the Supreme Court by filing the consent terms. This is evident from the fact that after paying the first instalment the company committed default. This was not remedied immediately but they have been in default since April. Though the Order of this court required the petition to be be advertised the Petitioners have played along and appear to have now arrived at fresh and modified terms. The process is being misused. Given past conduct this renewed attempt at settlement does not appear bonafide. The petition already stands admitted. Accordingly, the provisions of clauses 6 and 7 are now required to be performed in accordance with the order dated 22nd March, 2017.
Stand over as per CMIS for final hearing.
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2017 (8) TMI 1628 - ITAT CHENNAI
Deduction u/s 80IA - disallowance of other income from the computation of profits and gains for the purpose of deduction - HELD THAT:- Disallowance of other income from the computation of profits and gains for the purpose of deduction - HELD THAT:- As relying on assessee’s own case for the AYs 2007-08, 2008-09, 2009-10 & 2010-11 [2017 (4) TMI 1530 - ITAT CHENNAI] disallowance as made by the AO and as confirmed by the Ld.CIT(A) stands sustained. However, considering the alternate prayer of the assessee and also following decision of the Co-ordinate Bench of this Tribunal, the expenses in relation to the earning of the other income is estimated at 10% and the AO is directed to exclude 10% of the other income as expenses while computing the deduction u/s.80IA of the Act. In the result, Ground Nos.1 & 2 are partly allowed.
Disallowance u/s 14A - HELD THAT:- As decided in assessee’s own case for the AYs 2007-08, 2008-09, 2009-10 & 2010-11 [2017 (4) TMI 1530 - ITAT CHENNAI] Rule 8D which came with effect from 24 th March, 2008, will be applicable only after the period 2008-09. Nevertheless, their Lordship has clearly noted that even prior to that year, A.O. was duty bound to compute disallowance under Section 14A by applying a reasonable method having regard to the facts and circumstances of the case. Therefore, despite the argument of learned A.R. that electricity bonds were taken under compulsion and there was no expenses incurred for earning the interest income, we are inclined to remit the issue back to the file of A.O. for consideration afresh. We, therefore, set aside the orders of the authorities below and remit on this aspect back to A.O. for consideration afresh in accordance with law.
Additional depreciation in respect of the plant & machinery - HELD THAT:- On perusal of the decision of the Hon’ble Supreme Court in the case of MP State Electricity Board [1968 (11) TMI 85 - SUPREME COURT] and also the subsequent decision in the case of NTPC. [2002 (4) TMI 694 - SUPREME COURT], it has been held that electricity is goods. The Hon’ble Orissa High Court in the case of Orissa power generation Corporation Ltd. [2015 (5) TMI 62 - ORISSA HIGH COURT] has also held that generation of electricity is manufacture. This being so, as the assessee is in the business of manufacture of electricity and electricity are goods, we are of the view that the assessee is entitled to the claim of additional depreciation in respect of the plant & machinery. In these circumstances, we find no reason to interfere in the findings of the Ld.CIT(A) on this issue. In these circumstances, Ground Nos.2.1 to 2.3 of the Revenue’s appeal stands dismissed.
Allowability of Corporate Social Responsibility - CIT-A allowed claim - HELD THAT:- On perusal of the provisions of Explanation-2 to Sec.37(i) clearly shows that the said Explanation has been introduced by the Finance Act, 2014 w.e.f. 01.04.2015 and consequently would be applicable from AY 2015-16 onwards. In these circumstances, we find no error in the findings of the Ld.CIT(A) on this issue, consequently finding of the Ld.CIT(A) on this issue stands confirmed. Ground of the Revenue’s appeal stands dismissed.
Depreciation on UPS - at 60% OR 15% allowed by the AO - HELD THAT: - UPS being the integral part of the computer system, admittedly, is eligible for higher rate of depreciation at 60%. It is noticed that the Ld.CIT(A) had decided the issue by following the decision of the Hon’ble Supreme Court in the case of CIT vs. BSES Rajdhani Power Ltd. referred to supra. This being so, we find no reason to interfere in the findings of the Ld.CIT(A) on this issue.
Depreciation at 15% in respect of the civil structures - HELD THAT:- As fairly agreed by both the sides that this issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal in the assessee’s own case for the AYs 2007-08, 2008-09, 2009-10 & 2010-11 [2017 (4) TMI 1530 - ITAT CHENNAI]as held that the civil structures made for drainage and water supply in the mines are to be treated as plant and entitled for higher rate of depreciation.
Depreciation at 15% on building and electrical installations instead of 10% as applicable to buildings - HELD THAT:- As this issue has been restored to the file of the AO for the earlier Assessment Years for readjudication on identical findings, the issue in this appeal also restored to the file of the AO for re-adjudication.
Nature of expenditure - Treating the spares valued at more than ₹ 50.00 lakhs as Revenue expenditure instead of a capital.
Surcharge recoverable from the State Electricity Board - assessee had not offered the surcharge recoverable by the assessee from the Electricity Board during the relevant AY on the belated settlement of power bill as such income - CIT(A) had allowed the same by following his predecessors orders - HELD THAT:- As it is noticed that this issue was squarely covered by the decision of the Co-ordinate Bench of this Tribunal, respectfully following the decision of the Co-ordinate Bench of this Tribunal in the assessee’s own case, the findings of the Ld.CIT(A) on this issue stands reversed.
However, as it has been submitted by the Ld.AR that the assessee has offered the said surcharge during the subsequent period to tax, the AO shall examine the assessee’s claim as to whether the said surcharge has been offered to tax for the subsequent years and if it is found to have been offered to tax, the same is to be excluded from the income declared for these relevant Assessment Years. Revenue’s appeal stands partly allowed for statistical purposes.
Reopening of assessment - advance over burden removal expenditure and deduction u/s.80IA of the Act on the other incomes - HELD THAT:- AR has not been able to show as to how both the issues had been examined by the AO in the course of the original Assessment Order. In any case, the denial of the deduction u/s.80IA of the Act in respect of the other incomes is the consequence of the decision of the Hon’ble Supreme Court in the case of Liberty India Ltd. [2009 (8) TMI 63 - SUPREME COURT]and consequently, we find no error in the re-opening. Consequently, Ground No.1(a & b) stands dismissed.
Deduction u/s.80IA of the Act in respect of the other incomes - Following the decision of the Co-ordinate Bench of this Tribunal in the assessee’s own case, we have already held that the assessee is entitled for deduction u/s.80IA of the Act of 10% as the estimated expenditure in respect of the other incomes. On identical findings, Ground Nos.2 & 3 of the assessee’s appeal stands disposed of.
Expenses on removal of the advanced over burden expenses - submission that the advanced over burden was an expenditure and the provisions of Sec.35E applied - HELD THAT:- As relying on assessee's own case “Expenditure on removing overburden in the continuous process of mining lignite from an old open cast mine is not expenditure for prospecting, etc. of minerals within the meaning of s.35E and also not capital expenditure but same is allowable revenue expenditure under s.37(1).
Addition of financial assurance - HELD THAT:- On perusal of the guidelines more specifically in Para No.7 which has been extracted above clearly shows that for financial assurance, the mining company is to open an Escrow with schedule bank with the Coal Controller Organization as the exclusive beneficiaries. This has not been examined by the AO. This being so, we are of the view that this issue to be restored to the file of the AO for re-adjudication and we do so. The AO shall examine and verify as to whether the said amount has been deposited in such Escrow account as has been prescribed in the guidelines. If there is such deposit in the Escrow account, then admittedly, the same is liable to be allowed. Further, also considering the submission of the Ld.AR that the assessee has offered this amount subsequently as its income in the subsequent Assessment Years, the AO is to verify as to whether any part of the balance expenditure claimed has been offered to tax in the subsequent years.
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