TMI Tax Updates - e-Newsletter
January 10, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
GST
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Input Tax Credit - the non-payment of the GST amount charged by the supplier - aggrieved person - The appellants cannot be nonsuited by virtue of an order, which was passed by the authority without hearing them. Therefore, we are of the view that the appellants should not be left remediless. - The matter has to be re-examined by the authority themselves instead of directing the appellants to approach the appellate authority - HC
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Service of SCN - discrepancies pertaining to difference in turn over between GSTR 1 and GSTR 3B, difference between GSTR 3B Vs GSTR 2A - input mismatch - This Court to the inevitable sequitur that the captioned main writ petition fails. However, before dismissing the captioned writ petition, it is made clear that all the rights and contentions of the writ petitioner are preserved, if the writ petitioner chooses to prefer a statutory appeal under Section 107 of TN-G&ST Act. - HC
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Classification of supply - composite supply or not - manufacture, sale and installation of electrical equipments, ranging from LED lightings, industrial and domestic switchgears, metering solutions, wires and cables, etc. - The aforementioned supply to be made by the application AIIL merits classification as “Installation services”, being electrical installation services of illumination for roads. - AAR
Income Tax
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Transfer u/s 127 - The petitioner is a highly influential person with significant presence in Delhi including an official residence and bank accounts. While his inconvenience would have anyway been overshadowed by the revenue interest in the facts of this case, it would be pertinent to mention the lack of any inconvenience whatsoever. - though the assessments of some of the involved persons are complete, that cannot itself be a bar for a transfer order under Section 127 of the petitioner’s assessment. - HC
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Income deemed to accrue or arise in India - Fees for Technical Services (FTS)/Fees for Included Services (FIS) - Assessee is not the ultimate beneficiary of the sum in question nor did it render any service to TIL. Further, there was no evidence which was brought on record to show that the technical skill, knowledge etc. were made available to TIL by the assessee. - HC
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Rejection of books u/s 145 - NP estimation - NP ratio of 7% being impractical and completely unacceptable and as most of the trading concerns have been operating at the GP ratio of 0.5% to 1%, when both the authorities have deemed it appropriate to apply 0.5% ratio, no indulgence is necessary. - HC
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Stay of demand - recovery proceedings - petitioner has not paid the prescribed 20% of the disputed amount - The impugned order is arbitrary and perverse inasmuch as it has been made in gross disregard to the directions of this Court [supra] inasmuch as the trinity principles has been ignored. - HC
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Reopening of assessment u/s 147 - in the original regular assessment proceedings for the subject assessment year 2014-15, the Assessing Officer had sought for and examined the petitioner’ share demat account which was provided by the petitioner to the Assessing Officer furnishing all particulars regarding the Wipro shares; this circumstance is also a pointer to the fact that the Assessing Officer had complete and full knowledge of the subject shares and their value at the time of original assessment proceedings and on this score also, it cannot be said that the income of the petitioner had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and consequently, the impugned order deserves to be quashed on this ground also. - HC
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Gain on sale of land - Short Term Capital Gain OR business income - the assessee converted the agricultural land into non-agricultural purpose - The above transaction is to be treated as an adventure in the nature of trade, as the assessee converted the above land as non-agricultural and for the purpose of industrial use and sold - AT
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Disallowance of interest on account of excess payment to the partners on the capital account - the approach of the AO in calculating the interest by considering only the closing balance as on the end of the financial year is not proper and justified. Accordingly, so far as the interest calculated by the assessee firm on daily product basis is concerned, the same is proper and justified. - AT
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Credit of TDS - The major defect on the part of the assessee for not approaching the appropriate authorities cannot cure the lapse on the part of assessee and therefore, the CIT(A) was right in dismissing the appeal of the assessee. - AT
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TP adjustment - benchmarking of international transaction of import of raw materials - the TP adjustments in respect of this transaction should be restricted in terms of the corresponding sales made from the imports made from Kimberly group of companies and third party vendors which are held to be not at arm’s length price as per working given by the assessee before the TPO which is extracted by the DRP in para 5.1 at page no.53 as the PLI adopted was profit earned by sales. - AT
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Set-off of brought forward business losses against current year business income - due date of filing of ITR u/s 139(1) - It is audit case or not - Before us also the assessee failed to bring to our notice any specific provision under any law which mandates that the assessee’s books of account need to be audited. Therefore, we agree with the view taken by Ld CIT(A) that the assessee has to file its ROI on or before 31st July as per the clause (c) of Explanation 2 of section 139(1) of the Act. We note that the assessee is not required to audit its books as per the Income Tax Act or under any other law and therefore clause (a)(ii) of section 139(1) of the Act is not attracted to the assessee’s case. Therefore, the action of the Ld.CIT(A) in confirming the action of CPC/AO cannot be faulted. - AT
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Revision u/s 263 by CIT - Addition u/s 68 - AO has not conducted any enquiry about the said transaction even when the report of the Investigation Wing containing the list of 84 companies found to be penny stock companies was available in the Income Tax Portal, which the AO needs to refer while framing the assessment. - Revision proceedings sustained - AT
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Surplus earned on the sale of plot - ‘capital gain‘ OR ‘business income’ - There is no clause in the partnership deed about making investment in the land and to earn capital gain only. When the expenses were incurred, it was shown at WIP, however, when the asset is sold, the partners claimed that it was as investment only and not business asset, which cannot be allowed. Thus, in our view the ld CIT(A) erred in treating / directing the assessing officer to treat the gain on sale of asset of firm as capital gain in place of business income. - AT
Customs
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Seeking release of the consignment - sale of goods after import - seeking cancellation of the previous bill of entry filed with the customs, and permit the Petitioner to file a new bill of entry as per new consignee - levy of demurrage charges - Petitioner is entitled to present the original bill of entry to the customs authority, upon which the goods have to be cleared. - The Petitioner shall pay the customs duty and interest - However, demurrage charges reduced to 50% - HC
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Smuggling - Gold Bars - it is evident that even on 17.04.2021, for not taking steps by the complainant to file the complaint, the complaint itself was closed. Therefore, nothing survives for adjudication by this Court. When the complaint itself is not pending, the challenge made by the Petitioner to the remand report had to be allowed. - the Criminal Original Petition is allowed. - HC
Indian Laws
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Dishonor of Cheque - Directors of the company have been made parties in the said case - Merely because the petitioner No.1 is the signatory of the cheque in question, is not at all sufficient to arraign him as an accused. Moreover, the respondent has never made any averment in the complaint against the petitioner No.2 as to how he is responsible for the conduct of the business of the company, though he appears to be the director of the company. - HC
IBC
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Initiation of CIRP - Financial Creditors - There is no denial of transfer of the amount by Bank transfer in the account of the Corporate Debtor. When disbursement of the loan is not even denied, the cry of the Appellant that loan Agreement was forged, has no weight. Further, the Adjudicating Authority has also relied on record of Financial Information in Form C in support of establishing default. - There were sufficient materials before the Adjudicating Authority to accept the debt and default and no error has been committed in admitting Section 7 Application - AT
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Jurisdiction to entertain and dispose of the Interim Application - Section 231 creates a bar on the jurisdiction of a civil court only where the Adjudicating Authority (i.e., NCLT in this case) has the jurisdiction over a given issue. Since, as held above, the NCLT does not have jurisdiction to adjudicate upon the First Appeal or the Interim Application, Section 231 cannot bar the jurisdiction of this Court. - HC
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Initiation of CIRP - shadow period - NCLT admitted the application u/s 7 - The Appellant cannot fall back upon the ingredients of Section 10A of the I & B Code, 2016, because of the fact that the Date of Default (Non Performing Asset), in the instant case on hand, was on 31.03.2017. In this connection, it is not out of place to this Tribunal, to make a pertinent mention that the 1st Respondent / Bank (Financial Creditor), filed under Section 7 Application, under the I & B Code, 2016, before the Adjudicating Authority, on 03.10.2018. As such, the contra plea, taken on behalf of the Appellant, is unworthy of acceptance. - AT
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Initiation of CIRP - Financial Creditors - When the cancellation of negotiated settlement was only on the ground that Respondent failed to allot 10 lakhs equity shares with face value of Rs. 10 each and failed to buy back the shares at price giving minimum yield of 13%p.a. the claim at best could have been confined to the above amount. Application having been filed for claiming amount of Rs. 265.02 Crores is clearly exorbitant and unconscionable and not genuine. - AT
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Initiation of CIRP - Extended period of limitation - Present is not a case where winding up petition filed in the Kolkata High Court was suffering from any defect of jurisdiction or other cause of a like nature. The foundational fact for taking benefit of Section 14 of the Limitation Act being not laid down by the Financial Creditor, no benefit under Section 14 can be claimed by the Appellant - the Adjudicating Authority did not commit any error in rejecting section 7 application filed by the Appellant. - AT
Service Tax
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Levy of Service Tax - Advertising Agency Service or not - It is seen that no evidence has been placed from record to establish that the appellant were providing “Advertising Agency Services.” The role of appellant was limited to being an intermediary in the sale of space/ time for media agency on commission basis. - AT
Central Excise
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Classification of goods - Silo - It is silo system which is capable of performing the assigned function is being manufactured and cleared by the appellant along with the associated accessories. It is settled position in law as per the Rule 2 (a) of the General Rules of Interpretation and clearly specified as per Section Note 3, 4 & 5 to Section XVI of the First Schedule to the Central excise Tariff Act, 1985 that essential character determines or the prime function of the machines, equipment interconnected or working in tandem will determine the classification of the said group of machines and equipment - AT
VAT
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Doctrine of mutuality - club and association service - Sale - foods and drinks provided to the members of the club - As the matter is no more res integra and the Apex Court has clarified that Sub-clause (f) of Article 366 (29-A) does not apply to the member's club and it is not disputed that the revisionist is a club incorporated and is serving foods and drinks to its members, it is not covered under the definition of Section 2 (h) of the Act of 1948, as held by the Tribunal - Demand set aside - HC
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Refund of the amount of tax deposited by the petitioner - the State has no authority to retain the amount after the demand raised was set aside by the Tribunal and the revision against the same was dismissed by this Court - Let the amount of refund due to the petitioner be now paid within a period of four weeks - HC
Articles
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2023 (1) TMI 334
Inter-state transaction or intra-state transaction or not - whether the transaction of supply of manpower by the petitioner to a company in Rajasthan is an inter-state transaction taxable as CGST+RGST, or it is an intra-state transaction liable to be taxed as IGST? - HELD THAT:- The petitioner admittedly has deposited 18% of IGST and that 35% of the CGST+RGST has been recovered by the respondents by attaching the accounts of the petitioner - the issue of inter-state transaction/intra-state transaction is a legal issue, though depending upon the facts of the case and as such, requires deeper consideration. For the reasons that validity of certain provisions is also under challenge, we consider it appropriate to entertain the writ petition and call upon the State of Rajasthan and the Union of India to submit their response to the writ petition within a period of one month, so that the matter may be heard finally immediately thereafter. Grant of interim protection - HELD THAT:- The petitioner cannot be compelled to pay tax on the services rendered by it twice, therefore, in the interest of justice, it is provided that the petitioner may apply for the refund of the IGST in the prescribed form as per the Act and the Rules within a period of two weeks from today and in the event such application is moved and is found to be in order, the respondents shall get it processed within a period of two months from the receipt of the said application, as has been provided under the Rules, and the petitioner is directed to deposit the balance 65% of CGST+RGST within a period of three months from today. List this petition for admission/final disposal after six weeks.
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2023 (1) TMI 333
Input Tax Credit - the non-payment of the GST amount charged by the supplier - appellants filed the writ petition contending that the non-payment of the GST amount charged by the 4th respondent to the appellants is violative of Article 19(1)(g) and 300A of the Constitution of India and against the provisions of the CGST and WBGST Act, 2017 - HELD THAT:- Undoubtedly, the appellants are aggrieved persons against the advance ruling. The 4th respondent having not preferred an appeal, such conduct of the 4th respondent cannot prejudice the rights of the appellants. Admittedly, the invoices, which were subject matter of consideration by the authority were the invoices raised by the appellants. Therefore, the appellants should have been put on notice by the authority or in other words, the 4th respondent ought to have impleaded the appellants in the proceedings before the authority. The appellants cannot be nonsuited by virtue of an order, which was passed by the authority without hearing them. Therefore, we are of the view that the appellants should not be left remediless. Though it is submitted by the learned Government Advocate appearing for the State that appeal has been provided to the appellate authority and if the appellants qualify the definition of an aggrieved person, they could very well approach the appellate authority - since the appellants have contended that sufficient factual details were not placed before the authority, directing the appellants to prefer an appeal to the appellate authority may not be effective since the facts, which the appellants seek to bring on record were not part of the records before the original authority. The matter has to be re-examined by the authority themselves instead of directing the appellants to approach the appellate authority - the matter is remanded back to the 5th respondent for fresh consideration - Appeal allowed by way of remand.
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2023 (1) TMI 332
Service of SCN - discrepancies pertaining to difference in turn over between GSTR 1 and GSTR 3B, difference between GSTR 3B Vs GSTR 2A - input mismatch - it is alleged that the impugned order was not preceded by Forms GST DRC-01 and GST DRC-01A - show cause notice [SCN] was issued by the respondent before making the impugned order, or not - rectification petition under Section 161 of TN-G ST Act. Whether the impugned order not being preceded by Forms GST DRC-01 and GST DRC-01A? - HELD THAT:- As the issue is now not statutorily imperative and as it is optional at the instance of the respondent (Revenue), the first point of campaign stands doused. This takes this Court to the second point namely, SCN prior to issue of the impugned order. Dealing with erstwhile 'the Tamil Nadu Value Added Tax Act, 2006 (Tamil Nadu Act No.32 of 2006)' [hereinafter 'TNVAT Act' for the sake of convenience and clarity] which stood subsumed by Goods and Services Tax regime which kicked in on and from 01.07.2017, this Court held that it is not imperative to issue a SCN for a revision under Section 22(4) of erstwhile TNVAT Act, 2006 unlike best judgment method revision under Section 27 of TNVAT Act wherein it is statutorily imperative to issue SCN before resorting to Section 27 of TNVAT Act - the expression 'errors apparent on the face of record' has been repeatedly explained by this Court to be errors which are so obvious and so palpable (tangible if one may say so) that no inferential process is required or no inferential process need to be applied to detect the error. A careful perusal of these issues set out herein will make it clear that they may not qualify as errors apparent on the face of record but this Court refrains itself from expressing any view or opinion on the same as this Court intends to preserve the rights of the writ petitioner to prefer a statutory appeal under Section 107 of TN-G ST Act, if the writ petitioner is so advised and if the writ petitioner is desires to do so. This Court to the inevitable sequitur that the captioned main writ petition fails. However, before dismissing the captioned writ petition, it is made clear that all the rights and contentions of the writ petitioner are preserved, if the writ petitioner chooses to prefer a statutory appeal under Section 107 of TN-G ST Act. The Writ Petition is dismissed.
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2023 (1) TMI 331
100% EOU - rejection of refund claim - appeal filed within the time limitation - Section 107 of TNGST Act - HELD THAT:- This Court considering the bonafides on the part of the writ petitioner and also taking into account the facts and circumstances of the case including the obtaining factual position that the refund amount claimed in barely Rs.9.42 lakhs, treats this case as a one off matter, making it clear that it will not serve as precedent in all and every such case is inclined to treat 12.07.2022 as the date of appeal. It is to be noted that the case of the writ petitioner qua refund of a little over 9.42 lakhs is they have made deemed export as supply has been made to a 100% EOU but the refund order dated 06.04.2022 made by the [first respondent now] proceeds on the basis that it is a wrong ITC claim. This Court refrains itself from expressing any opinion or view on this aspect of the matter as it would now be in the hands of the second respondent/Appellate Authority to decide the matter on its own merits and in accordance with law. The writ petitioner shall refile the second refund application (already filed) as appeal (in appeal format) before second respondent - Writ Petition disposed off.
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2023 (1) TMI 330
Classification of supply - composite supply or not - manufacture, sale and installation of electrical equipments, ranging from LED lightings, industrial and domestic switchgears, metering solutions, wires and cables, etc. - applicability of Entry 3(iv)(a) of Notification no. 11/2017-C.T. (Rate) dated 28.06.2017 - benefit of concessional rate of duty - whether the contract undertaken by the Applicant for design, supply, installation and commissioning, etc. of Highway lighting system for the project of development, maintenance and management of National Highway-111 qualifies as Works contract under the GST regime? - HELD THAT:- In the instant case under consideration, as is forthcoming from the documents furnished before us by the applicant, M/s Bilaspur Pathrapali Road Private Limited, Ahmedabad (Concessionaire) was awarded a contract dated 14.05.2018 by National Highways Authority of India (NHAI), Ministry of Road Transport and Highway (MoRTH), Government of India (GoI) relating to development, maintenance and management of 4 laning of Bilaspur to Pathrapali section of NH-111 (NH-130) from 0.000 km to 53.300 km in the State of Chhattisgarh under Bharatmala on Hybrid Annuity Mode. Subsequently, Concessionaire entered into an agreement with AIIL for Engineering, Procurement and Construction (EPC) works of development, maintenance and management of 4 laning of Bilaspur to Pathrapali Section of NH-111 (NH-130) from 0.000 km to 53.300 km in the State of Chhattisgarh. ln background of the aforesaid facts i.e. award of contract for development, maintenance and management of NH-111 by NHAI to Concessionaire and award of contract for EPC works relating to said project by Concessionaire to AIIL. The scope of work awarded to the applicant covers only the activities involved in the Lighting works at various locations including highway and flyover/VUPS/bridges area across the length of the project as indicated in TCS Schedule and as per approved design basis by IE/NHAI. In addition to the above work of electrification or lighting works the applicant is responsible for Supply, installation testing of electrical materials as per BOQ with the pre-condition that all the fixtures, panels, wires/ cables, lights, earthing materials, and other items complete in all respect, shall confirm to established specifications - In the instant case in hand, it is only that the civil works involved for completion of such electrical installation services have been included in the scope of work entrusted upon the applicant. The instant supply of the applicant of the work of Highway Lighting System / Lighting works at various locations including highway and flyover/VUPS/bridges gets aptly covered under Installation services , being special trade installation services involving the installation of basic electrical wiring circuits or fittings in buildings and other construction projects, as also being electrical installation services of illumination and signalling systems for roads - The work undertaken by the applicant in entirety, as elaborately discussed herein is nothing but electrical Installation services of illumination for roads and by no stretch of imagination can be termed as civil engineering works. The benefit of aforesaid Notification as provided under S.no. 3(iv)(a) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended is available only to Construction services of Heading no. 9954, supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a road, bridge, tunnel, or terminal for road transportation for use by general public and not to the instant work of Highway Lighting System which is nothing but electrical installation services of illumination for roads - in the instant case the basic requirement, for eligibility to the said exemption as provided under S.no. 3(iv)(a) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended, of getting covered under Heading 9954 under Construction service supplied by way of construction of a road stares unfulfilled, as the instant supply pertains to electrical Installation services of illumination for roads. Whether the instant supply of installation of highway lighting system undertaken by the applicant is a Composite supply? - HELD THAT:- From the perusal of the service order read with Bill of Quantities (BOQ), it is clear that the Applicant is supplying all the goods required for highway lighting system as well is responsible for installation of such goods, such as lighting pole, lights, earthing work, etc. On the basis of evidences furnished by the applicant there exist all reasonable grounds to hold that natural bundle of supply of goods and services is prevalent in the instant supply of installation services of highway lighting system and these are supplied in conjunction with each other in the ordinary course of business by the applicant. Besides this, the impugned supply of installation services in entirety thereof can only be construed to be made, once whole of the supplies are made by the applicant. Thus, we come to the considered conclusion that the second criterion of composite supply stands fulfilled in the instant supply of installation services of highway lighting system made by the applicant. Whether the work of installation of highway lighting system, rendered by the applicant qualifies being Works Contract, much essential for availing the claimed exemption as provided under S.no. 3(v)(a) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended, vide Notification 01/2018 Central Tax (Rate) doted 25.01.2018? - HELD THAT:- There exists a clear demarcation of a works contract as a supply of service under GST. Besides this, as per section 17(5) (c) of the CGST Act, 2017, input tax credit shall not be available in respect of the works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service. Thus, ITC for works contract also stands restricted and can be availed only by one who is in the same line of business and is using such services received for further supply of works contract service. From the definition, a work shall be treated as Works Contract if that work is done for land or earth or for immovable property and there is transfer of property in goods involved in the execution of such contract. Immovable property, by its very definition means that it cannot be moved and cannot be detached or dismantled from the land or earth and further that dismantling of the same would render it defunct / redundant. Immovable property would include in its ambit land and the things which are attached to or embedded in the lard such as buildings, bridges etc. However not everything that is attached to the land would automatically constitute an immovable property - In the case present case under consideration, as is forthcoming from the various clauses of the service order issued by M/s AIIL in favor of the applicant, the work of installation services of highway lighting system to be installed by the applicant on the National Highway comes into existence in an immovable condition and there appears no intention to move the same in future to any other place. The benefit of the entry at Sl.no. 3(iv)(a) is not eligible to M/s HPL Electric and Power Limited, behind Mata Garage, Jai Bhole Complex, Pandri, Raipur,Chhattisgarh, 492001 GSTIN-22AAACH0165J1ZO, as the basic requirement for eligibility to the said exemption as provided under S.no. 3(iv)(a) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended, of getting covered under Construction service under Heading 9954 stands unfulfilled, whereas the instant supply pertains to electrical Installation services . The work undertaken by the applicant is electrical installation services of illumination for roads - As regards the issue of applicability of Entry 3(iv) (a) of Not. No. 11/2017-CT (Rate) as applicable in case of sees provided by the sub-contractor raised by the applicant, hem sae has no relevance as the applicant eligible to be benefit of the claimed exemption.
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Income Tax
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2023 (1) TMI 329
Reopening of assessment u/s 147 - Reopening beyond a period of four years - deduction granted for Keyman policy and disallowance u/s 14A - HELD THAT:- As it appears from the record that claim of Keyman insurance premium appeared in computation of income and also in audited annual accounts under the head Long term loans and advances and details of Keyman insurance policy along with receipts for payments made during the year under consideration were also furnished before the AO. Disallowance u/s 14A - case of the respondent is that there was an error in computation of the average value of investments, as adopted at the original assessment stage, whereby certain investments yielding exempt income were not considered. From the record, it appears that investments and assets were shown in the balance sheet and specific notice was issued with respect to disallowance under section 14A - assessee vide letter gave complete details and explanation as to why disallowance under section 14A is unwarranted and in fact, the AO made addition u/s 14A of the Act while framing the assessment under section 143(3) of the Act. AO after threadbare examining the various issues including issues as to Keyman insurance premium and disallowance u/s 14A of the Act, took a view not to make any disallowance in respect of Keyman insurance premium while framing assessment under section 143(3) of the Act and made disallowance under section 14A of the Act. There is change of opinion by the AO to reopen the assessment for the AY 2013-2014, more particularly, when the issues raised in the reopening assessment were already considered during the assessment proceedings under section 143(3) - AO cannot have any jurisdiction to issue the notice u/s 148 for reopening the assessment for the year under consideration more particularly, when the assessment is sought to be reopened beyond a period of four years as held by the Supreme Court in case of Commissioner of Income tax v. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] - Decided in favour of assessee.
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2023 (1) TMI 328
Transfer u/s 127 - whether proper opportunity has been granted to the petitioner to represent their case? - case of petitioner s income tax assessment was transferred from Kolkata to New Delhi - stating and communicating the reasons for transfer - HELD THAT:- Upon perusal of the records we find that the respondent no.1 has clearly delineated the reasons of the transfer under Section 127 in the Impugned Order for a detailed and coordinated investigation of the petitioner. It is to be noted that the files of several other persons have also been transferred u/s 127 - The petitioner is the only one whose file is still not being transferred because of the writ petition filed before the Calcutta High Court. The various reasons provided are based on concrete material that have been mentioned in the Impugned Order in paragraph 7. One cannot say that the present transfer is based only on surmises and conjectures as it is evident that the name of the petitioner has been taken by some of the persons on whom investigation, search and survey was carried out. The statement of certain persons also indicates that there was transfer of cash to the tune of almost Rs. 20 crores from the residence of the petitioner at Delhi. This money trail raises suspicion. Even though the said cash has been shown in the books of the All India Congress Committee, the source of the funds from the Madhya Pradesh Congress Committee is required to be looked into by the tax authorities. The recording in the books of the All India Congress committee was done subsequent to the raids conducted by the tax authorities. Unaccounted cash transactions have been clearly found in the Whatsapp chats and accompanying documents obtained from several persons wherein the term KN has been referred to. These persons were either known to the petitioner or were associates of persons who seem to be extremely close to the petitioner. It is clear that the present transfer is based on cogent material that requires further investigation by the tax authorities. The argument of the petitioner that they are willing to cooperate in the investigation, thereby negating the requirement of the transfer, is of no relevance as the officer conducting the coordinated search in my opinion, is best suited to investigate and carry out the assessment of the petitioner. It is to be noted that at the stage of passing an order u/s 127, after considering objections of the petitioner, the authorities are not required to give out the entire case of the tax authorities. Even if the additional information shared vide the affidavit-in-opposition and compilations are not considered, this Court finds the Impugned Order to satisfy the threshold of an administrative/quasi-administrative order. Thus, i t would be incontestable and sufficient to conclude that as long as cogent materials are present, the transfer that has been sought for cannot be held to be mala fide or based on extraneous circumstances . The administrative/quasi-administrative order passed under Section 127 of the Act does not need to give a detailed explanation and a concrete financial nexus, but is required to bring out certain facts that could indicate that the case warrants further investigation to be carried out by the tax authorities. The petitioner is a highly influential person with significant presence in Delhi including an official residence and bank accounts. While his inconvenience would have anyway been overshadowed by the revenue interest in the facts of this case, it would be pertinent to mention the lack of any inconvenience whatsoever. Though the assessments of some of the involved persons are complete, that cannot itself be a bar for a transfer order under Section 127 of the petitioner s assessment. Nor can the fact that he has not been subjected to any search or seizure be a bar to transfer. There is enough material garnered from other persons to establish a nexus, concrete enough to seize the judicial hands of this court from entering into the realm of reasonable executive discretion. The Impugned Order is unimpeachable and has been done so after following the principles established in law. In light of the same, we find no reason to interfere with the Impugned Order, and accordingly, the present writ petition is dismissed. All interim orders stand vacated. The tax authorities are directed to complete the assessment of the petitioner within the time frame allowed in accordance with law.
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2023 (1) TMI 327
Income deemed to accrue or arise in India - Fees for Technical Services (FTS)/Fees for Included Services (FIS) under Article 12 of the Indo-USA Treaty (Convention between the Government of United States of America and Government of Republic of India for the Avoidance of Double Taxation - services provided by the assessee to Timken India Limited (TIL) - fee received is for included services as provided in Article 12 of the Indo-US Treaty and, therefore, liable to tax in India - Effect of the ruling rendered by the Authority of Advance Ruling (AAR) - HELD THAT:- It is important to note that in terms of paragraph 4(b) of Article 12 of the Indo-US Treaty, the scope of Article 12 was explained by pointing out that generally speaking technology will be considered made available when the person acquiring the services is unable to apply the technology. The fact that the provision of service may require technical input by the person providing the service does not par se mean that technical knowledge, skill etc. are made available to the person purchasing the service, within the meaning of paragraph 4(b). Similarly, the use of a product which embodies technology shall not par se be considered to make the technology available. This aspect was considered by CIT(A) and it was found that by virtue of the said agreement there is no transfer of a technical plan or technical design and what was transferred through the agreement was commercial information. Upon analysis of the agreement it was found that the agreement is purely advisory services and such advisory services cannot be treated as fees for included services under Article 12(4)(b) of the Indo-US Treaty since there is no technology which is made available. Tribunal upon reconsideration of the factual position found that the clauses in the agreement would clearly show that the nature of services is advisory in nature and nothing has been made available to TIL by the assessee. As not in dispute that the assessee does not have any permanent establishment in India and, income so arising to them in India cannot be taxed under Article 7 as business profits either. The assessee and the TIL had filed a writ petition before this Court challenging the vires of Section 44D(b) of the Act. The Hon ble Court while framing the issue for consideration by its judgment reported [ 2016 (4) TMI 592 - CALCUTTA HIGH COURT ] held that the issue pertains to machinery of presumptive tax provided for in the provision and the contention of the petitioners that apparent shutting out of an assessee s option to claim deduction from the gross income in respect of matters covered by the provisions is unreasonable and as such, falls foul of Article 14 of the Constitution. The above decision has attained finality as the revenue had not carried the matter in appeal. This aspect was also noted by the learned Tribunal but in its view, as having come to a factual conclusion that the assessee is rendering only advisory service and it cannot be treated as included services under Article 12(4)(b) and held that the contention of the assessee with regard to the binding nature of the ruling of the AAR has become academic. The agreement between the parties had been properly interpreted by the CIT(A) and on re-examination, the Tribunal also concurred with the CIT(A). Thus, we find no different view is possible than the interpretation given by the CIT(A) as approved by the Tribunal. Therefore, the order passed by the learned Tribunal is affirmed on this aspect and, accordingly, substantial questions of law nos.(a) and (b)are answered against the revenue. Services rendered by the assessee and the other is service rendered by third party - Once again going back to the agreement between the parties in Section 1.2 (quoted above), it has been clearly mentioned that each invoice shall be submitted no later than 15th day following the end of each calendar month; each invoice shall identify the compensation that is due to provider to compensate it for all costs for providing such services; only costs without any mark-up shall be invoiced. This aspect was rightly taken note of by the CIT(A) as well as the Tribunal and the issue was decided in favour of the assessee. So far as the services rendered by the third parties, on facts, the CIT(A) and the Tribunal had found that the actuals billed by the third parties were paid by the assessee in USA and were later on reimbursed by TIL to the assessee in India and, therefore, there was no basis for the assessing officer to conclude that the payments of reimbursement were in the nature of fees for technical services. Assessee is not the ultimate beneficiary of the sum in question nor did it render any service to TIL. Further, there was no evidence which was brought on record to show that the technical skill, knowledge etc. were made available to TIL by the assessee. Transfer Pricing Officer (TPO) scrutinised the details of reimbursements while examining the international transaction of reimbursement by TIL to the assessee under Section 92 of the Act and found that the assessee made no profit on such reimbursements and that the reimbursements were at Arm s Length. Thus, the finding having been rendered after thorough examination of the factual position as well as the terms and conditions of the agreement qua Article 12(4)(b) of the Indo-US Treaty, we find no ground to take a different view. Consequently, the substantial question of law nos.(c) and (d) are also answered against the revenue.
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2023 (1) TMI 326
Rejection of books u/s 145 - NP estimation - AO held estimating the net profit at 0.05 % of the assessee company - HELD THAT: - There has been equitable balance struck by the authorities when it found that the Assessing Officer had not given any internal or external comparitive figures of sector of the assessee’s business while arriving at the GP/NP ratio of 7%. The business is of trading of steel items. The manufacturing activities had almost stopped. NP ratio of 7% being impractical and completely unacceptable and as most of the trading concerns have been operating at the GP ratio of 0.5% to 1%, when both the authorities have deemed it appropriate to apply 0.5% ratio, no indulgence is necessary. These are all essentially and predominantly the factual aspects analysed based on the material adduced before these authorities and that also by giving cogent and sound reasons, in absence of any question of law, much less any substantial questions of law for the court to admit this matter, this appeal is dismissed.
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2023 (1) TMI 325
Revision petition u/s 264 - appropriate writ, direction or order quashing the order passed by Assistant Commissioner of Income Tax u/s 179 of IT Act - HELD THAT:- We are informed that apart from the petitioner/assessee, other directors of the aforementioned company had also approached this Court and that those writ petitions were withdrawn, with liberty to the said petitioners to file revision petitions under Section 264 of the Income Tax Act, 1961. Petitioner has placed before us an order passed in the writ petitions in case titled Kishan Kumar Munjal vs. Assistant Commissioner of Income Tax [ 2022 (2) TMI 1332 - DELHI HIGH COURT] Accordingly, as was direction issued in the aforementioned writ petition and other connected writ petitions, this writ petition is disposed of with liberty to the writ petitioner/assessee to file a revision petition under Section 264 of the Act. In case a revision petition is preferred within three weeks of the receipt of a copy of the order passed today, the concerned authority will rule on the petition and not reject the same on the ground of limitation, as was the observation made by the coordinate bench in the aforementioned writ petitions.
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2023 (1) TMI 324
Stay of demand - recovery proceedings - petitioner has not paid the prescribed 20% of the disputed amount till the date of passing of the impugned order - HELD THAT:- This Court finds that the impugned order cannot be sustained inasmuch despite the specific directions of this Court [ 2022 (2) TMI 1334 - MADRAS HIGH COURT] to take into account the trinity test, the impugned order has been made overlooking the same in gross disregard to the above directions. Though, normally discretionary orders are not interfered with under Article 226 of the Constitution of India, however, discretionary orders are amenable to Writ jurisdiction, and would warrant interference, if it suffers from the vice of being perverse or arbitrary. The impugned order is arbitrary and perverse inasmuch as it has been made in gross disregard to the directions of this Court [supra] inasmuch as the trinity principles has been ignored. Hence, the impugned order is set aside, the respondents are directed to pass fresh orders in the stay application filed, keeping in mind the trinity principles laid down by this Court in the case of Queen Enterprises 2021 (4) TMI 609 - MADRAS HIGH COURT and the case of Kannammal 2019 (3) TMI 1 - MADRAS HIGH COURT The stay application should be disposed of within a period of six weeks from the date of receipt of a copy of this order, until the stay application is disposed of, no further proceedings shall be taken against the petitioner.
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2023 (1) TMI 323
Reopening of assessment u/s 147 - Time limit for notice - period of limitation u/s 149 - failure on the part of the assessee to disclose fully and truly all material facts - HELD THAT:- Section 149(1)(a) contemplates that if Section 149(1)(b) does not apply, then the period of limitation is 3 years from the end of the relevant assessment year; in the instant case, the subject assessment year came to an end on 31.03.2015 and the applicable period of limitation is 3 years which expired on 31.03.2018 and consequently, the impugned proceedings initiated pursuant to the Notice dated 30.06.2021 issued under Section 148 is clearly barred by limitation. A perusal of Section 149(1)(b) will indicate that the period of limitation is extendable from 3 years up to 10 years from the end of the relevant assessment year, if the AO has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to Rs.50 lakhs more for that year. In the instant case, a perusal of the notices, show cause notice and the impugned order clearly establish that Section 149(1)(b) does not apply, because the allegation of escapement of income is not based on books of account or other documents or evidence in the possession of the A.O; on the contrary, the allegation of escapement of income is based only on the disclosure expressly made by the petitioner - assessee itself of the gift of Wipro shares received by it and the very same information was readily available with the A.O. when the original assessment order dated 28.06.2016 was passed by him. It is significant to note that at the time of passing the said order dated 28.06.2016, the A.O. came to the definite conclusion that Section 56(2)(vii)(c) did not apply insofar as the petitioner was concerned despite having all details, information and material in this regard that was required at that time and based on the very same material, it was impermissible for the A.O. to simply / merely change his mind and initiate reassessment proceedings by issuing a notice dated 30.06.2021; it is therefore clear that in the facts of the instant case, Section 149(1)(b) was not applicable and it was only Section 149(1)(a) that was applicable and consequently, the impugned proceedings pursuant to the Notice dated 30.06.2021 issued beyond he period of limitation, which expired on 31.03.2018 are hopelessly barred by limitation and the impugned proceedings and order deserve to be quashed. While Section 149(1)(a) prior to amendment prescribed period of 4 years, Section 149(1)(b) prior to amendment prescribed a further period of 4 years subject to the conditions stipulated in Section 147 prior to amendment. However, after amendment, while Section 149(1)(a) prescribes a period of three years, Section 149 (1)(b) prescribes a further period beyond 3 years up to 10 years. The proviso to Section 149(1)(b) is a safeguard in favour of the assessee which prevents / prohibits the respondents revenue from invoking the larger / longer period of 10 years in cases of time barred notices which had lapsed on account of the expiry of the period of limitation under Section 149 (1)(b) prior to amendment. It is therefore clear that if the further period of 4 years contemplated in Section 149(1)(b) had expired prior to 01.04.2021, the larger / longer period of 7 years contemplated in Section 149(1)(b) after amendment will not enure to the benefit of the revenue which is barred / prohibited from issuing such notices which are barred by limitation. The mandatory requirements / conditions / ingredients contained in Section 147 have to be complied with by the respondents revenue to issue a notice by placing reliance upon the pre-amended provisions. Coming to the facts of the case on hand, which is in relation to the assessment year 2014-15, the material on record discloses that the aforesaid judgment was also rendered in relation to the same petitioner company under identical and similar circumstances, albeit for the previous assessment year 2013-14 and the same is directly and squarely applicable to the facts of the present case also and consequently, no reliance can be placed upon the proviso to Section 149(1)(b) [after amendment] by the respondents in order to contend that the notice dated 30.06.2021 was within the prescribed period of limitation. For previous assessment year 2013-14, in the present case, there was a sale of Wipro shares during the assessment year 2014-15 itself and the same was assessed to capital gains tax by the Assessing Officer which clearly indicated that he was fully aware of the market price of the Wipro shares much prior to issuance of the notice dated 30.06.2021 and consequently, it cannot be said that the income of the petitioner had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. So also, in the original regular assessment proceedings for the subject assessment year 2014-15, the Assessing Officer had sought for and examined the petitioner share demat account which was provided by the petitioner to the Assessing Officer furnishing all particulars regarding the Wipro shares; this circumstance is also a pointer to the fact that the Assessing Officer had complete and full knowledge of the subject shares and their value at the time of original assessment proceedings and on this score also, it cannot be said that the income of the petitioner had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and consequently, the impugned order deserves to be quashed on this ground also.
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2023 (1) TMI 322
Gain on sale of land - Short Term Capital Gain OR business income - CIT(A) treated the sale transaction as an adventure in the nature of trade - HELD THAT:- The assessee purchased the piece of land on 06.02.2014 for a consideration of Rs. 1.53 crores and within a period of six days thereafter, the assessee entered into a sale agreement dated 12.02.2014 with Agarwalla Teak International Pvt. Ltd. for a consideration of Rs. 1.86 crores. This clearly proves that the assessee has no intention of carrying out any agricultural activity in the land. It clearly proves that the assessee converted the agricultural land into non-agricultural purpose and sold it to M/s. ATIL. As further seen from the registered sale deed that the entire sale consideration was funded by M/s. ATIL to the assessee to buy the above piece of land. Further it is seen from the ld. CIT(A) s order, CIT(A) directed the AO to delete the claim of Long Term Capital Gain offered by the assessee in the Return of Income filed for the subsequent Assessment Year 2016-17. Thus there is no question of double taxation of the very same sale transaction. The above transaction is to be treated as an adventure in the nature of trade, as the assessee converted the above land as non-agricultural and for the purpose of industrial use and sold it to M/s. Agarwalla Teak International Pvt. Ltd. for a consideration of Rs. 1.86 crores. We do not find any infirmity in the orders passed by the Lower Authorities and therefore does not require any interference. Thus the grounds raised by the assessee is devoid of merits and the same is liable to be rejected. Appeal filed by the Assessee is hereby dismissed.
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2023 (1) TMI 321
Disallowance of interest on account of excess payment to the partners on the capital account - AO has calculated the interest @ 12% on the closing balance in the partner s capital account as on 31st March, 2011 - HELD THAT:- The partnership deed provides payment of interest @ 12% per annum or any rate applicable as per the provisions of section 40(b)(iv) of the Income Tax Act. It further provides that such interests shall be calculated and credited to the account of the each partner at the close of the accounting year which means that the interest will be credited only at the end of the accounting year / financial year and does not mean that the interest will be calculated on the credit balance in the capital account at the end of the accounting year. Even otherwise the interests on the credit balance in the capital account has to be calculated on the actual duration of the credit remains in the capital account and not on opening or closing day of financial year. In such a case, if a partner keeps a credit balance on the opening day but subsequently withdraws the amount then payment of interest on the opening balance will not be proper and justified. Similarly, if the partner withdraws the amount at the fag end of the financial year then the payment of interest only on the closing balance would also be not proper and justified when a credit balance remained for the whole financial year except on the last date of financial year. Therefore, the approach of the AO in calculating the interest by considering only the closing balance as on the end of the financial year is not proper and justified. Accordingly, so far as the interest calculated by the assessee firm on daily product basis is concerned, the same is proper and justified. Since the method of calculating the interest by the assessee is a proper and consistently followed year after year therefore, the same cannot be disturbed for the year under consideration. Accordingly, the disallowance made by the AO on account of excess payment of interest to the partners is deleted. The ground no. 1 to 7 of the assessee s appeal are allowed. TDS u/s 194A - Disallowance of interest paid to the legal heirs of the deceased partners - AO disallowed the claim of interest payment to the legal heirs of the deceased partners considering the entries made on 31st March, 2011 - HELD THAT:- CIT(A) observed in the impugned order that this payment of interest to the legal heirs does not fall under section 40(b)(iv) and it can be considered under section 36(1)(iii) or section 37 of the Income Tax Act. Since the CIT(A) has no jurisdiction to remand the matter therefore, the impugned order of the CIT(A) qua this issue is not inconformity with provisions of section 250 and 251 of the Income Tax Act. AO has made the disallowance by considering the entries made on 31st March, 2011 without considering the fact that after the death of the partner of the firm this amount ceases to be the credit in the capital account of the partner and consequently takes the character of loan from the deceased partner / legal heirs of the deceased partner. The capital introduced by a partner of the partnership firm is always for business purposes and it is not an amount which is kept with the partnership firm only for earning the interest because it was also the need of the partnership firm for doing the business by utilizing the said amount. Accordingly, the claim of interest paid to the legal heirs on this amount which is in the nature of loan and the interest was already subjected to TDS u/s 194A the same cannot be disallowed merely on the ground of passing an entry on 31st March, 2011 or on the ground that it is not an loan amount. Accordingly, the impugned order of the CIT(A) is modified and the matter is remanded to the record of the Assessing Officer for readjudication of this issue as per law.
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2023 (1) TMI 320
Denial of claim for exemption u/s 54B - sale consideration received on sale of agricultural land was invested in purchase of agricultural lands in the name of son and daughter-in-law - HELD THAT:- Appellant is not entitled for deduction in respect of section 54B - Following the above decisions, this Tribunal in the case of Vandana Maruti Pathare [ 2022 (3) TMI 775 - ITAT PUNE] held that the deduction u/s 54B cannot be allowed in case where there was no purchase of the land/property in the name of the assessee. The submissions made by Counsel that since income arisen out of the agricultural lands were assessable in the hands of the appellant by virtue of clubbing provisions, therefore, the exemption should be allowed u/s 54B, cannot be accepted for the reason that deeming provisions cannot be extended beyond the purpose for which they have been enacted. Provision under the provisions of Benami Act, such transactions are permissible as no relevance in deciding the issue of allowability of deduction u/s 54B, as it is settled position of law that the exemption provisions should the construed strictly. Thus, we do not find any merit in the submissions made by the appellant for claiming deduction u/s 54B. Deduction u/s 54F - appellant had not adduced any evidence in support of the construction of residential property except making a bald submission - HELD THAT:- Further from the submission made by the appellant, it is clear that entire money was spent on the construction subsequent to the date of filing of the return of income and the assessee had not deposited unutilized portion of the consideration in capital gain scheme as provided under the provisions of section 54F - Thus, the submissions made by the assessee are not supported by any evidence and devoid of any merits. In the circumstances, we do not find any merit in the ground of appeal no.2 filed by the assessee. Hence, ground of appeal no.2 stands dismissed. Addition of cash deposits in bank account - HELD THAT:- In the present case, on mere perusal of the assessment order, it would suggest that the appellant had failed to offer any explanation whatsoever before the AO. It was only during the course of proceedings before the CIT(A), the appellant took a plea that the cash deposits was made on past savings without leading necessary evidence on record in support of such contention. The same came to be rejected by the CIT(A). Even during the course of hearing of appeal before us, AR took a plea for the first time that the said cash deposits were made out of sale consideration received on sale of land over and above the apparent consideration mentioned in the sale deed. However, the ld. AR had not adduced any evidence in support of this submission except making ipse dixit submissions. It must be mentioned that it is settled position of law that the consideration stated in the sale deed executed and registered is conclusive, unless and otherwise there is a material on record showing consideration was paid over and above stated consideration, as held in the case of K.P. Varghese [ 1981 (9) TMI 1 - SUPREME COURT] and Shivakami Co. (P.) Ltd[ 1986 (3) TMI 2 - SUPREME COURT] and also in view of the provisions of Registration Act. Thus, the explanation offered before us during the course of hearing of appeal is not tenable in the eyes of law as it is a mere bald submission without bringing any material on record in support of submission. As regards to the other contentions of the appellant that the AO without discharging the onus of proving the source from which the investments and cash deposits were made, had chosen to make addition. This submission is contrary to the well settled position of law that no burden lies on the Revenue to show the income is received from any particulars source before invoking the provisions of section 68/69 as held in the case of Roshan Di Hatti [ 1977 (3) TMI 3 - SUPREME COURT] , M. Ganapathi Mudaliar [ 1964 (4) TMI 22 - SUPREME COURT] and A. Govindarajulu Mudaliar [ 1958 (9) TMI 3 - SUPREME COURT] . In view of the well settled position of law, the contentions urged by the ld. AR is devoid of any merit and the ground of appeal no.3 is highly misconceived.
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2023 (1) TMI 319
Credit of TDS - D.R. submitted that Principal Commissioner of Income Tax or Commissioner of Income Tax has the power to decide this matter and the assessee has not filed the proper application before both the authorities - HELD THAT:- As in the present case the assessee never approach the appropriate authorities instead filed the application before the Assessing Officer and filed the appeal thereafter before the CIT(A). The major defect on the part of the assessee for not approaching the appropriate authorities cannot cure the lapse on the part of assessee and therefore, the CIT(A) was right in dismissing the appeal of the assessee. There is no need to interfere with the findings of the CIT(A). The contention of the assessee that the refund should have been given to the assessee does not sustain when the assessee has not availed the appropriate authority which grants the condonation of delay of applying for refund and directing the same. Thus, appeal filed by the assessee is dismissed.
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2023 (1) TMI 318
Estimation of turnover - CIT(A) estimated the profit @5% of the turnover - HELD THAT:- When the learned CIT(A) estimated the profit @5% of the turnover, the same in our opinion is justified and the assessee now cannot plead to restrict the profit @ 3% of the turnover. So far as the decision in the case of Karla Srinivasa Rao [ 2022 (4) TMI 588 - ITAT VISAKHAPATNAM] is concerned, we find the Assessing Officer in the said case estimated the income @ 5% by rejecting the books of account, since the assessee failed to furnish the details of expenses claimed in the P L account as well as the stock register. However, in the instant case, as mentioned by the AO, neither the assessee has maintained any books of accounts nor any books of accounts were produced for verification either at the time of search proceedings or during the post search proceedings or assessment proceedings. Therefore, the same decision, in our opinion, is not applicable to the facts of the present case. Even otherwise also, the assessee during the Course of assessment proceedings as well as appeal proceedings before the learned CIT(A) had requested to adopt the net profit rate of 5%. Under these circumstances, we do not find any infirmity in the order of the learned CIT(A) restricting the profit rate at 5% of the turnover. The ground raised by the assessee on this issue is accordingly dismissed. Addition being interest from sundry debtors - HELD THAT:- Admittedly, the addition was made on the basis of statement recorded u/s 131 dated 15.3.2017 from Shri P. Hema Kumar Reddy who in his answer to question No.12 had stated that the assessee group charges interest @ 18% per annum uniformly. Statement was not recorded from the assessee and the statement was recorded only on 15.3.2017. There is no iota of any evidence found during the course of search that the assessee has received any interest during the impugned A.Y nor the Assessing Officer questioned Shri P. Hema Kumar Reddy for the impugned A.Y. Nothing has been brought on record by the Assessing Officer that the debtors were questioned/confronted and that they have admitted to have given any interest to the assessee. Under these circumstances we are of the considered opinion that the addition being interest @ 18% from sundry debtors as on 31.3.2011 is not justified being added on surmises and presumptions. We, therefore, set aside the order of the CIT (A) on this issue and the grounds raised by the assessee on this issue are allowed.
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2023 (1) TMI 317
Penalty passed u/s 271(1)(c) - unexplained cash credit addition u/s 68 - HELD THAT:- Admittedly, the assessee has shown receipt of unsecured loan which was treated as unexplained cash credit u/s 68 of the Act and same was also confirmed by the learned CIT (A). The AO also initiated the penalty proceeding under section 271(1)(c) of the Act and levied penalty for furnishing inaccurate particular of income. Penalty proceedings are different from assessment proceeding. Any addition made under the assessment proceeding will not automatically lead to concealment of income or furnishing inaccurate particular of income. As such, the AO has to reach at independent finding that the assessee has concealed income or furnished inaccurate particular of income. In holding so we find support and guidance from the judgment of Hon ble supreme court in case of T Ashok Pai [ 2007 (5) TMI 199 - SUPREME COURT ] Assessee during the penalty proceedings furnished documentary evidences in support of identity, genuineness and credit worthiness of parties by stating that same were not furnished earlier due non-cooperation from the parties. The above explanation of the assessee was not found to be incorrect by the AO. The AO neither made any independent inquiry with regard to fact whether the loan credit indeed represent income of the assessee and the consciously furnished inaccurate particulars of income. As such, the entire basis of the AO treating such credit as unexplained was based on the doubt and human probabilities. There was no cogent material brought on record by the AO that assessee furnished inaccurate particular of income and the explanation furnished by the assessee is not true. Therefore, merely an addition made during the quantum proceeding will not attract penalty under section 271(1)(c) - Appeal of the assessee is hereby allowed.
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2023 (1) TMI 316
Revision u/s 263 - subsidy received - Reduction of amount from cost of asset as per provisions of explanation 10 to sub section of section 43 - HELD THAT:- In the present case, the ld. AR had demonstrated before us the issue sought to be revised by the ld. PCIT in exercise the power vested with him u/s 263, was examined by the AO and took a plausible view during the course of assessment proceedings. No doubt the assessment order is silent on this point. But, generally, the issues which are acceptable to the AO do not find mention in the assessment order and it cannot be said that the AO had not applied his mind as observed in the case of Hari Iron Trading Co. [ 2003 (5) TMI 48 - PUNJAB AND HARYANA HIGH COURT] and Eicher Ltd [ 2007 (5) TMI 107 - HIGH COURT , DELHI] - Therefore, it cannot be said that the AO had failed to make an enquiry, no further enquiry is necessary and all the facts were before the AO. Consequently, we are of the considered opinion that the proposition that the assessment order is erroneous for want of an enquiry or proper enquiry would have no application to the facts of the present appeal. PCIT cannot invoke the jurisdiction u/s 263 of the Act in respect of this issue. Accordingly, we set-aside the order of revision u/s 263 on this point.
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2023 (1) TMI 315
TP adjustment - benchmarking of international transaction of import of raw materials - deemed international transaction i.e. third party vendors - objection raised before the DRP is that the TPO was not justified in using TNMM as most appropriate method for the purpose of benchmarking the transaction of import of raw materials as against CUP method used by the assessee - HELD THAT:- We find that the contention of assessee that the third party vendors are not the AEs of the appellant remained un-adverted. Therefore, the certificate issued by third party vendors, whereby, they confirmed that the discount of 10% to 20% had been given to the appellant on the raw materials supplied during the year and further confirmed that the price they have charged to the appellant company is lower than the price, it would have charged if the appellant had not purchased under global sourcing arrangement cannot be ignored by holding that these certificates were issued by AEs. Similarly, as regards to the import of raw materials from AEs, the contention of appellant company that the price charged by the AEs is lower than the prevailing market price remains uncontroverted. The lower authorities have failed to advert to this submission made by the appellant and therefore, we are of the considered opinion that the matter requires remission to the AO / TPO to examine the above benchmarking analysis furnished by the appellant and then proceed with the benchmarking of the transaction of import of raw materials in accordance with law. Alternate claim that for the purpose of benchmarking the transaction of import of raw materials, the gross margins of appellant company should be compared with the gross margins of comparable companies, as the competition faced by the appellant company effected the net margins of appellant company on account of lower volume - We are of the considered opinion that, in case the AO / TPO on examination of benchmarking analysis made by the appellant company is found to be not acceptable, the AO / TPO shall examine the relevance of comparison of gross profits of appellant company with the comparable companies and proceed to benchmark the international transaction of import of raw materials. Thus, this ground of appeal stands partly allowed for statistical purposes. In the event as result of above exercise done by the TPO results in TP adjustment in respect of transaction in respect of import of raw material, we find merit in the submissions made by the ld. Sr. Counsel the TP adjustments in respect of this transaction should be restricted in terms of the corresponding sales made from the imports made from Kimberly group of companies and third party vendors which are held to be not at arm s length price as per working given by the assessee before the TPO which is extracted by the DRP in para 5.1 at page no.53 as the PLI adopted was profit earned by sales. Adjustment in respect of A M expenses incurred by the appellant - TPO and DRP inferred the existence of international transactions on noticing that the appellant had incurred excess expenditure on A M expenses as compared to the expenses incurred by the comparables chosen by the TPO and then proceeded to make adjustments of difference in order to determine the value of such A M expenses incurred by the AE - HELD THAT:- The issue in these grounds of appeal is no more res integra as decided by the Tribunal in assessee s own case for earlier assessment years 2008-09 [ 2021 (3) TMI 71 - ITAT PUNE] , 2009-10 [ 2021 (11) TMI 1124 - ITAT PUNE] , 2010-11 [ 2022 (7) TMI 1366 - ITAT PUNE] and 2011-12 [ 2023 (1) TMI 262 - ITAT PUNE] The Hon ble Delhi High Court had been consistently reiterated the law laid down by it in its earlier decisions in the case of Sony Ericsson Mobile Communications India P. Ltd. [ 2015 (3) TMI 580 - DELHI HIGH COURT] and Maruti Suzuki India Ltd. [ 2015 (12) TMI 634 - DELHI HIGH COURT] Thus we allow grounds of appeal No.2 filed by the assessee. However, we make it clear that we are conscious of the fact that in the final assessment order passed by the AO, no addition on account of A M expenditure was made, as this addition was subsumed in the addition made on account of international transaction of import of raw materials. Therefore, the findings on A M expenditure shall become academic, in view of the addition made by TPO / AO on account of TP adjustment in respect of international transaction of import of raw materials is sustained. Direction of the Hon ble DRP to make addition alternatively by disallowing the A M expenditure u/s 37(1) - We vacate the direction of the Hon ble DRP to AO consider the addition u/s 37(1) alternatively.
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2023 (1) TMI 314
Unexplained credit u/s 68 - Bogus LTCG - long term capital gain on sale of shares sold on recognized stock exchange - HELD THAT:- We are in absolute agreement with the submission of Ld. DR that the issue of exempted capital gain arising from Turbotech Engineering Ltd. stands duly examined and concluded by ITAT, Indore Bench in the case of Shri Abhishek Gupta [ 2022 (8) TMI 1333 - ITAT INDORE] . We note that the although the present appeal concerns the shares of Lifeline Drugs and Pharma Ltd., but the position is pari materia similar to the share of Turbotech Engineering Ltd. Further, we do not find any material change which could suggest non-applicability of the decision of Shri Abhishek Gupta (supra) in present appeal. Hence, we find no valid reason to deviate. Accordingly, we uphold the additions made by revenue-authorities and dismiss the Grounds raised by assessee.
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2023 (1) TMI 313
Set-off of brought forward business losses against current year business income - due date of filing of ITR u/s 139(1) - It is audit case or not - action of the AO/CPC not allowing set-off - main contention of assessee is that the due date for it should be taken as 30th September, since its accounts are required to be audited as per trust deed - HELD THAT:- The requirement of getting accounts audited should be under the Income tax Act or under any other law . Hence it is required to be examined as to whether the accounts of the assessee are required to be audited under the Income tax Act or under any other law. We notice that the ld CIT(A) has given clear finding that the accounts of the assessee are not required to be audited under the Income tax Act or under any other law. Before us also the assessee failed to bring to our notice any specific provision under any law which mandates that the assessee s books of account need to be audited. Therefore, we agree with the view taken by Ld CIT(A) that the assessee has to file its ROI on or before 31st July as per the clause (c) of Explanation 2 of section 139(1) of the Act. We note that the assessee is not required to audit its books as per the Income Tax Act or under any other law and therefore clause (a)(ii) of section 139(1) of the Act is not attracted to the assessee s case. Therefore, the action of the Ld.CIT(A) in confirming the action of CPC/AO cannot be faulted. So we confirm the action of the Ld.CIT(A) on this issue. Alternative contention is whether the principal portion of loan waived by the lender would be liable to be taxed u/s 41(1) of the Act or not ? - A perusal of Profit and Loss account would show that the assessee has credited the P L account with the waiver of interest portion and waiver of principle portion of loan. A perusal of the computation of total income would show that the assessee has not excluded principal portion of loan waived from the Net profit shown in the Profit and Loss account. Hence all facts relating to this issue is available on record. Thus the principal portion of amount waived by the lender credited to the Profit and Loss account is not liable to taxation under the Income tax Act. Accordingly, we direct the assessing officer to exclude this amount while computing total income of the assessee.
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2023 (1) TMI 312
Revision u/s 263 by CIT - Addition u/s 68 - bogus long-term capital gain from sale of equity shares - HELD THAT:- As considering the judgment of the Hon ble Jurisdictional High Court in the case of Swati Bajaj Others [ 2022 (6) TMI 670 - CALCUTTA HIGH COURT ] we find that such kind of transactions of earning long-term capital gain from penny stock companies have been held to be bogus. It is also not in dispute that AO has not conducted any enquiry about the said transaction even when the report of the Investigation Wing containing the list of 84 companies found to be penny stock companies was available in the Income Tax Portal, which the AO needs to refer while framing the assessment. Under these given facts and circumstances, we are of the considered view that ld. PCIT was justified in invoking the revisionary proceedings holding the assessment order as erroneous as well as prejudicial to the interest of revenue and also directing the AO to frame the assessment afresh considering the observation in the impugned order. Therefore, the grounds raised by the assessee are dismissed.
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2023 (1) TMI 311
Surplus earned on the sale of plot - capital gain OR business income - HELD THAT:- The assess-firm has incurred expenses for boundary wall, paid incremental and FSI charges in the office of Surat Municipal Corporation, such expenses were incurred for the purpose of business. Such expenses were debited in the profit and loss account of the assessee-firm and not in the individual hand of the partners of assessee-firm. Surprisingly, the sale deed of the land was executed by partners of the assessee-firm. Again, no capital gain is shown in the hand of the partners for the reasons best known to them. Despite the fact the sale deed was executed by the partners, the capital gain is shown in the hand of assess-firm. The partners of the assessee-firm are acting in accordance with their whims and choice. Once, the land/ plot was introduced as a capital contribution, it loses its control from the hand of the partners of the assessee, as it became the asset of the assess-firm. Now, the partners are raising plea that the accountant of the firm has made wrong entry. No corrective step is shown to have been taken by the partners in showing such expenses in their personal account, as no such evidence is placed on record. Thus, the stand of partners is contrary. The formation of partnership was with the objects of doing business in real estate and such conduct is reflected as asset as business WIP are major factors which cannot be ignored. There is no clause in the partnership deed about making investment in the land and to earn capital gain only. When the expenses were incurred, it was shown at WIP, however, when the asset is sold, the partners claimed that it was as investment only and not business asset, which cannot be allowed. Thus, in our view the ld CIT(A) erred in treating / directing the assessing officer to treat the gain on sale of asset of firm as capital gain in place of business income. Thus, we reverse the order of ld CIT(A) and fully concur with the finding of assessing officer, with our aforesaid observation. Similarly, in none of the case, as relied by assessee, there was no dispute on the nature of asset. The facts in the present case is unique as initially it was introduced as capital contribution, development charges of FSI was paid in Surat Municipal Corporation, it was sold in individual capacity but capital gain was again shown in the hand of assess-firm, when such glaring fact was detected by assessing officer, the partner took the plea that accountant committed mistake, which was never corrected. In the result, the grounds of appeal raised by the revenue are allowed.
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2023 (1) TMI 291
Unrealized gains on revaluation of forward contracts as the bank accounts - whether Tribunal is right in law in setting aside claim of assessee relating to unrealized gains on revaluation of forward contracts as the bank accounts were admittedly prepared on accrual basis and revenue was recognized following mercantile method except for certain items which were accounted on cash basis? - depreciation in value of investment in HTM Securities - disallowances made u/s 36(1) (viia) - disallowance made u/s 14A - disallowances on account of AFS and HFT category of investments by relying upon the decisions which has not reached finality and even when the assessing authority rightly disallowed the depreciation on investment of Available for Sale (AFS) and held for trading (HFT) category investment and added to the taxable income - HELD THAT:- As submitted that in view of the disposal of [ 2023 (1) TMI 243 - KARNATAKA HIGH COURT] these two appeals do not survive for consideration. He further submitted that the Revenue has filed these two appeals challenging the findings recorded by the ITAT, Income Tax Appellate Tribunal in Revenue's appeals and those issues were not under consideration before the ITAT. Therefore, these appeals are superfluous and unnecessary. The said submission is not opposed by Shri K.V.Aravind, learned Senior Standing Counsel.
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Customs
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2023 (1) TMI 310
Seeking release of the consignment - sale of goods after import - seeking cancellation of the previous bill of entry filed with the customs, and permit the Petitioner to file a new bill of entry as per new consignee - levy of demurrage charges - HELD THAT:- The situation in the present case is that though the out-of-charge process was undertaken by the importer way back in August, 2022, the said importer has not paid the customs duty and taken clearance of the goods. In effect therefore he has abandoned the goods. The importer has also not paid the detention/demurrage charges and till date the goods are lying with the customs authority. The Petitioner has already received the original bill of entry and other documents from the Bank, which would therefore show that the title of the goods has, in fact, passed to the Petitioner. A perusal of the judgment in Agrim Sampada [ 2004 (1) TMI 86 - HIGH COURT OF DELHI] clearly shows that the original importer in the said case, who had to make payment on cash against delivery basis, had abandoned the same and under such circumstances, the Court had held that the party similarly situated as the Petitioner is entitled to present the original bill of entry to the customs authority, upon which the goods have to be cleared. The issue of payment of demurrage has been considered by several decisions of the Supreme Court and of this Court. On the question of demurrage, the Supreme Court in INTERNATIONAL AIRPORTS AUTHORITY VERSUS GRAND SLAM INTERNATIONAL OF INDIA [ 1995 (2) TMI 70 - SUPREME COURT ] , held that the demurrage would be liable to be charged even if there was fault on the part of the customs authority. Whether the demurrage would be liable to be paid by the Petitioner insofar as the customs duty and the interest? - HELD THAT:- These circumstances would clearly show that until December, 2022, the abandonment could not have been concluded by the Customs authorities, at the importer's instance as the out-of-process charge had already been done. Therefore, the customs authorities could not have presumed change in ownership till December 2022. If the goods are not released to the Petitioner, the authorities would follow the procedure prescribed in law and recover the demurrage which they are obviously entitled to recover. However, the Petitioner herein is seeking release of goods due to change in ownership of goods on the strength of the original documents having been released in its favour and the Importer having not cleared the goods. The short question that arises is whether, the Petitioner can claim that it is not liable to pay any demurrage. The Petitioner shall pay the customs duty and interest - Insofar as the detention/demurrage charges are concerned, since there is no explanation for the delay between September 2022 to December, 2022 and the first representation itself was made on 3rd December, 2022, the Petitioner would be liable to pay 50% of the detention/demurrage charges payable till 3rd December, 2022 as also demurrage charges for the period from 3rd December, 2022 till date - petition disposed off.
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2023 (1) TMI 309
Smuggling - Gold Bars - proceedings initiated against the Petitioner under Section 135 of the Customs Act - HELD THAT:- When the case was taken up for hearing, the learned Counsel for the Petitioner seeks indulgence of this Court to call for remarks from the learned Judicial Magistrate No.I, Alandur regarding the pendency of the case in R.R.No.27 of 2014 where the criminal case is said to be pending against the Petitioner. Therefore, the Registry was directed to call for remarks from the learned Judicial Magistrate No.I Alandur regarding the pendency of the case in R.R.No.27 of 2014 in respect of the Petitioner herein/A2. Accordingly, remarks were received from the learned Judicial Magistrate No.1, Alandur stating that since in the year 2019, Special Court for Exclusive Trial of Customs Act was constituted, the case in R.R.No.27/2014 was transferred to the file of the learned Judicial Magistrate, Special Court for Exclusive Trial of Customs Act, Alandur. In pursuance of the same, by order dated 06.10.2022, the Registry was directed to call for remarks from the learned Judicial Magistrate, Special Court for Exclusive Trial of Customs Act Cases, Alandur regarding the stage of the case relating to R.R.No.27/2014 in respect of the Petitioner herein/A2 in F.No.DRI/CZU/VIII/48/ENQ-1/INT44/2014 on the file of the Respondent, by e-mail on or before 13.10.2022. Thus, it is evident that even on 17.04.2021, for not taking steps by the complainant to file the complaint, the complaint itself was closed. Therefore, nothing survives for adjudication by this Court. When the complaint itself is not pending, the challenge made by the Petitioner to the remand report had to be allowed. The Criminal Original Petition is allowed.
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2023 (1) TMI 308
Maintainability of appeal - Absolute confiscation - kadiwali gold chain - passenger baggage rules - whether the appeal is not maintainable before this Tribunal on the ground of jurisdiction? - HELD THAT:- The appeal can be disposed of only on the issue of jurisdiction without going into the merit of the case. Both the sides have relied upon contrary judgments. However, as per the Hon ble Madras High Court judgments in the case of SHRI PAYANGADI MOIDU MOHAMMED ALI VERSUS THE COMMISSIONER OF APPEALS, THE ADDITIONAL COMMISSIONER OF CUSTOMS (AIR) [ 2017 (2) TMI 84 - MADRAS HIGH COURT ], in the identical issue appeal does not lie before the Tribunal whereas the competent authority is revisionary authority (Government of India). In the present case, the appeal before this Tribunal is without jurisdiction. Therefore, the appeals are dismissed as infructuous.
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Corporate Laws
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2023 (1) TMI 307
Seeking restoration of the name of the Company in the Register maintained by the Registrar of Companies (RoC) - it is alleged that the Appellant company has not filed its return of income since inception, thereby violating the mandatory provisions under Section 139 of the Income Tax, 1961 - HELD THAT:- There is no illegality committed by the Ld. Adjudicating Authority while passing the impugned order and also there is no cogent reason to interfere. Therefore, we do not need to interfere in the impugned order. The impugned order passed by the National Company Law Tribunal (Court-V, New Delhi) is hereby affirmed. There is no merit in the Appeal. The Appeal is hereby dismissed.
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Insolvency & Bankruptcy
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2023 (1) TMI 306
Jurisdiction to entertain and dispose of the Interim Application - Seeking withdrawal of money deposited - whether respondent can be allowed to withdraw the monies deposited by appellant pursuant to this Court s order dated 10th December 2012 towards stay of execution of the impugned judgment given that appellant is undergoing CIRP? - effect of moratorium under Section 14 of the IBC. Whether this Court does not have the jurisdiction to entertain and dispose the Interim Application? - HELD THAT:- The NCLT can exercise jurisdiction and adjudicate upon the First Appeal or the Interim Application only if it is statutorily empowered to do so. The IBC does not confer any such statutory power upon the NCLT to sit in appeal over a judgment and decree of a Civil Court, nor decide an interim application arising out of such civil appeal. This is a power that is solely vested in a civil court under Section 96 of CPC - In Gujarat Urja [ 2021 (3) TMI 340 - SUPREME COURT ] the Hon ble Supreme Court laid down the test to ascertain the matters which can be adjudicated upon by the NCLT under Section 60(5)(c) and held that only those disputes which arise solely from the insolvency of the corporate debtor can be entertained by the NCLT under this provision. It is therefore clear that in order for appellant to establish that this Court is divested of its jurisdiction to entertain the First Appeal or the Interim Application, it would have to be established that the First Appeal and the Interim Application arise solely from the insolvency of the corporate debtor. Such is clearly not the case here, since the First Appeal arises out of a challenge against the Impugned Judgment passed by the Trial Court on the issue of termination of respondent s employment. It has nothing to do with the insolvency of the corporate debtor. The NCLT could never sit in appeal over the judgment/decree of a Civil Court. Such a judgment/decree can only be corrected in appeal and, therefore, the NCLT would not have jurisdiction to hear and decide the First Appeal. It is this Court which is the only appropriate forum to exercise jurisdiction over the First Appeal and the Interim Application, and not the NCLT - Appellant has also sought to rely upon Section 231 of the IBC to contend that the jurisdiction of this Hon ble Court is barred. Section 231 creates a bar on the jurisdiction of a civil court only where the Adjudicating Authority (i.e., NCLT in this case) has the jurisdiction over a given issue. Since, as held above, the NCLT does not have jurisdiction to adjudicate upon the First Appeal or the Interim Application, Section 231 cannot bar the jurisdiction of this Court. Whether the amount deposited by appellant in the Trial Court pursuant to the order dated 10th December 2012 is affected by the moratorium under Section 14 of the IBC? - HELD THAT:- Once the monies have been deposited, they cease to remain the asset of the judgment debtor. The monies are custodia legis. They are placed beyond the reach of the parties. They are held in trust by the Court. The monies are secured for the benefit of the judgment creditor and there is only a postpone of the right of the plaintiff to receive the said amount which is necessitated because of the pendency of the First Appeal - once appellant had deposited the sum of Rs.32,16,909/- in the Trial Court pursuant to this Court s order dated 10th December 2012 as a condition for stay of execution of the Impugned Judgment, the said amount ceased to belong to/be in the control of appellant. Appellant was not entitled to/the owner of the said amount as on the date of commencement of CIRP (i.e., 15th May 2018). Once appellant ceased to be the entitled to/owner of the said amount, the said amount is unaffected by the moratorium which comes into effect under Section 14 of the IBC upon the commencement of CIRP. Resultantly, there is no bar on this Court from allowing the withdrawal of the amount by respondent if this Court so deems fit. Application disposed off.
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2023 (1) TMI 305
Seeking initiation of the liquidation of the Corporate Debtor - Section 33, sub-section (2) read with Section 34 of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The Explanation to Section 33, sub-section (2) contains a legislative declaration empowering the CoC to take a decision to liquidate the Corporate Debtor any time after its constitution as per sub-section (1) of Section 31 and before the confirmation of the Resolution Plan, including at any time before the preparation of the Information Memorandum. The Explanation, thus, clarifies that CoC is fully empowered to take a decision to liquidate any time after the constitution under sub-section (1) of Section 21, but before (i) the confirmation of the Resolution Plan; and (ii) at any time before the preparation of Information Memorandum - There is no material to indicate that CoC has taken into consideration the Explanation to Section 33, sub-section (2) before taking a decision to liquidate the Corporate Debtor. Explanation to Section 33, sub-section (2) has to be given some meaning. There is no doubt that in Section 33, sub-sections (1) and (2) legislature has used the expression shall . However, the obligation of the Adjudicating Authority to direct for liquidation shall rise only when decision of the CoC is in accordance with the Code. Judicial review of the decision of the CoC in a particular case is not precluded. In Sreedhar Tripathy, it has been clearly held that judicial review of the decision of the CoC is not precluded and it depends on facts of each case. Coming to the facts of the present case, Form-G having been issued after preparation of the Information Memorandum and the last date fixed by the CoC being 24.10.2022 for receiving Expression of Interest, we are satisfied that Adjudicating Authority did not commit any error in rejecting for liquidation and asking the CoC to reconsider its decision. The order of Adjudicating Authority clearly empowers the CoC to reconsider its decision and take an appropriate decision taking into consideration further facts and events - Appeal dismissed.
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2023 (1) TMI 304
Initiation of CIRP - Financial Creditors - whether notices sent in Section 7 Application to the Corporate Debtor were duly served or not? - HELD THAT:- In Section 7 Application, which has been filed by the Financial Creditor, the notices which were sent to the Corporate Debtor were at the email address registered as shown in Company Master Data obtained on 26.10.2021. The fact that subsequently the Corporate Debtor got its email address changed in the Company Master Data is reflected in Company Master Data obtained on 09.03.2022, cannot be a ground to be pressed by the Corporate Debtor that notices were not sent at the registered email address of the Corporate Debtor - The Financial Creditor has also filed an affidavit of service dated 15.12.2021 before the Adjudicating Authority where details of service of notices were mentioned. The Adjudicating Authority being fully satisfied by the affidavit of service and materials brought on record has held that notices were served. The letter produced itself clearly indicates that Rajendra Kumar was a staff of 3 C Company and he requested that he should be removed from the post of Director from all the Companies of 3 C Group. The letter sent by Rajendra Kumar has been brought on record by the Appellant himself, which indicates that Rajendra Kumar was Director in All Companies of 3 C Group, hence, the signature of Rajendra Kumar on the loan Agreement is clearly explained as he was made Director in all Companies of 3 C by the Appellant and other Promoters. Coming to the RTI reply, which has been filed by the Appellant, suffice it to say that RTI reply cannot be a basis for disregarding the loan Agreement dated 31.05.2018. Admittedly, the RTI reply was obtained at the instance of the Appellant on 03.09.2022, which was a document procured by the Appellant for the purposes of the case. More so, the amount transferred in the Bank account of the Appellant was in pursuance to the loan Agreement. There is no denial of transfer of the amount by Bank transfer in the account of the Corporate Debtor. When disbursement of the loan is not even denied, the cry of the Appellant that loan Agreement was forged, has no weight. Further, the Adjudicating Authority has also relied on record of Financial Information in Form C in support of establishing default. There were sufficient materials before the Adjudicating Authority to accept the debt and default and no error hasbeen committed in admitting Section 7 Application - Appeal dismissed.
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2023 (1) TMI 303
Rejection of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors or not - real nature of the transactions between the parties is of loan transaction or not - HELD THAT:- The submission of learned counsel for the Appellant that the mention of Capital Advance was only an inadvertent error which was corrected in 2019-20 and 2020-21, cannot be accepted. The Section 7 application itself was filed by the Appellant in the year 2019 and Appellant has contemporaneous records which have their own relevance and value. The Appellant who was Assignee of IFIN when itself described the amount of Rs.210 Crores as Capital Advance, it is clear that it was understood even by the Assignee that the amounts were in the nature of Capital Advance for the purposes of supply and services. The Balance Confirmation which was issued by the Borrower in the year 2017, which is part of the Reply filed by the Corporate Debtor, also mentions the amount as project advance. When the Corporate Debtor has challenged the very nature of the financial debt, the Adjudicating Authority was required to look into the nature of transactions to decide as to whether the transactions falls within the meaning of Section 5 Sub-section (8) of the I B Code. Hon ble Supreme Court in ES KRISHNAMURTHY ORS. VERSUS M/S BHARATH HI TECH BUILDERS PVT. LTD. [ 2021 (12) TMI 683 - SUPREME COURT ] has held that if the Adjudicating Authority is satisfied that default is occurred it has to admit the application. There can be no dispute to the proposition as laid down by the Hon ble Supreme Court in the above case. The present is not a case where default in payment of debt is an issue. The principal issue which was raised by the Corporate Debtor in its Reply was that the transaction itself is not a financial debt. Further, there can be no dispute that in law a Guarantor is a Corporate Person and if the Corporate Debtor committed default in payment of debt, application under Section 7 can very well be filed against the Corporate Guarantor but the question in the Section 7 application before the Adjudicating Authority was very nature of the transaction. The Corporate Debtor has questioned the very nature of the transaction pleading that it was not a financial debt not disbursed for time value of the money and it was for the purposes of only arranging the advance payment which was to be made by the IL FS entities in favour of WWIL and its subsidiaries. The Adjudicating Authority has also noticed that the Appellant who had filed Section 7 application has not filed in rejoinder refuting the various pleadings and materials brought on record by the Corporate Debtor in its detailed reply alongwith Annexures. The Adjudicating Authority after considering all the relevant facts and circumstances has rightly come to the conclusion that application under Section 7 did not deserve admission - Appeal dismissed.
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2023 (1) TMI 302
Initiation of CIRP - reinstatement of dismissed petition - shadow period - NCLT admitted the application u/s 7 - Appellant submits that the Adjudicating Authority, having given Liberty, to file a Petition, for re-instatement, it should be treated, to be Liberty, to file a fresh Application / Petition, as per Section 7 of the I B Code, 2016, for same cause of action - HELD THAT:- In view of the crystalline fact that a Liberty, was granted by the Adjudicating Authority (Tribunal) as mentioned in its Order dated 05.11.2020, obviously based on the Memo, filed by the 1st Respondent / Bank to resurrect / revive the IBA/757/2019, to its file, in the event of failure of OTS Proposal, the Appellant at this distant point of time, cannot have a grievance to say that the Order, passed on 05.11.2020, was an Ex-parte one, because of the latent and patent fact that as per Rule 11 of the NCLT Rules, 2016, under the caption Inherent Powers, the Adjudicating Authority (Tribunal), has an inbuilt power, is empowered, to pass necessary orders or issue such directions, to meet the ends of Justice or to prevent, an abuse of process, as the case may be. Viewed in that perspective and also keeping in mind the primordial fact that because of the Default, in payment of the amount, under the One Time Settlement, the act of the 1st Respondent / Bank, in filing application and the Logical Corollary Order, passed by the Adjudicating Authority (Tribunal) in allowing the said Application, and the Order of Restoration, by no stretch of imagination, cannot be found fault with, in the considered opinion of this Tribunal, and hence, the Plea of the Appellant, that there is / was a negation of Rules of Natural Justice, has no legs to stand and the same is not acceded to, by this Tribunal. Dealing with the Plea of the Appellant that the initiation of Corporate Insolvency Resolution Process, by the 1st Respondent / Bank, in regard to the shadow period, i.e., 25.03.2020 to 25.03.2021, when the restrictions imposed, by the ingredients of Section 10A of the I B Code, 2016, were in force, is bad in Law, this Tribunal, relevantly points out that the Parliament, had intended to impose a prohibition, as regards the projecting of the Applications/ Petitions, for the start of Corporate Insolvency Resolution Process, in respect of a Corporate Debtor, for a Default, taking place on or after 25.03.2020 and the embargo was for a period of six months, extendable for a year. As a matter of fact, the words, shall ever be filed, is a clear pointer that the Statutory Provision, ought not to be applicable, in respect of any Default, prior to 25.03.2020, as opined by this Tribunal. The Appellant cannot fall back upon the ingredients of Section 10A of the I B Code, 2016, because of the fact that the Date of Default (Non Performing Asset), in the instant case on hand, was on 31.03.2017. In this connection, it is not out of place to this Tribunal, to make a pertinent mention that the 1st Respondent / Bank (Financial Creditor), filed under Section 7 Application, under the I B Code, 2016, before the Adjudicating Authority, on 03.10.2018. As such, the contra plea, taken on behalf of the Appellant, is unworthy of acceptance. The principle of Waiver or Approbation and Reprobation, lies at the root of conduct, productive of change of activation, and this principle, is akin to the Rule of Constructive Res judicata, as per Explanation IV of Section 11 of the Civil Procedure Code. It is to be remembered that an Application, under Section 7 of the I B Code, 2016, can be preferred by a Financial Creditor, on the basis of Debt and Default. Even the non-payment of Debt, even in entirety or in part or instalment of the Sum of Debt, by a Debtor / Person, will clothe a Right, on a Financial Creditor, to prefer an Application, when the Debt, become due and payable, either in Law or in Fact. No wonder, the Plea of the Appellant that only a portion / part payment only, remains to be paid, by the 2nd Respondent / Corporate Debtor, is a candid tacit admission of Default, and this is a clear adverse circumstance in favour of the Appellant. OTS An Acknowledgement of Debt - HELD THAT:- In the present case, this Tribunal, points out that the OTS is a clear cut admission of the Corporate Debtor (between the Parties ), and it is an Acknowledgement of Debt, in terms of the ingredients of Section 18 of the Limitation Act, 1963. Appellant s Locus Standi - HELD THAT:- The Appellant who has preferred the instant Comp. App (AT) (CH) (INS.) No. 89 of 2022, is the Promoter of the 2nd Respondent / Corporate Debtor, and in as much as he is an Investor, is not an Aggrieved Person, to prefer the instant Appeal, before this Tribunal, notwithstanding the fact that Section 61 (1) of the I B Code, 2016, employs the words, any person aggrieved by the order of the Adjudicating Authority, under this Part (Chapter VI) of the I B Code, 2016, may prefer an Appeal, in respect of the Order, passed by the Adjudicating Authority, as opined by this Tribunal. Hence, the instant Appeal, filed by the Appellant, before this Tribunal, is not per se maintainable, and answered accordingly. In regard to an Existence of Debt, due and payable in Fact and in Law, and Default was committed by the 2nd Respondent / Corporate Debtor, and the Default took place, well before the Covid-19 Pandemic, and that the Application, filed by the 1st Respondent / Bank / Financial Creditor, is complete in all respects. Looking at from any point of view, the impugned order dated 04.02.2022 in IBA/757/2019, passed by the Adjudicating Authority (National Company Law Tribunal, Division Bench I, Chennai), exercising its subjective judicial discretion, in admitting the Application (Filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, read with Rule 4 of the I B (Application to Adjudicating Authority) Rules, 2016), by the 1st Respondent / Bank / Financial Creditor with Moratorium, is free from any Legal Infirmities. Resultantly, the instant Appeal, sans merits. Appeal dismissed.
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2023 (1) TMI 301
Seeking direction to the Appellant to vacate the premises belonging to the Corporate Debtor in his possession - remedy of Resolution Professional for taking possession from the Appellant, whose lease had come to an end on 31st December, 2021 was only taking proceeding for eviction under MP Accommodation Control Act, 1961 - Whether the Committee of Creditors who have decided to renew the lease in favour of the Appellant till 31st December, 2021 had jurisdiction to issue legal notice for eviction of the Appellant from the premises in question? HELD THAT:- The provisions of Section 18 of IBC empowers the IRP to take control and custody of any asset over which the corporate debtor has ownership rights. When we look into the Section 18(1)(f)(ii), the duty is also to take control and custody of assets that may or may not be in possession of the corporate debtor. For carrying out the duties entrusted to the IRP under Section 18 of the Code and those entrusted on RP under Section 25, the IRP/RP can very well take recourse to Section 60. For effectuating the duties entrusted on the IRP under Section 18 recourse to adjudicating Authority by filing an Application under Section 60(5) is fully permissible. In the present case, we are considering the case where there is no dispute that assets in question is owned by the Corporate Debtor hence by virtue of Section 18(1)(f), Resolution Professional can take steps for taking possession of the assets. To resist the case taken by the RP, Appellant contends that under Section 60(5), no Application can be entertained for eviction of the Appellant and the only remedy available to the RP is to take proceedings under MP Accommodation Control Act, 1961. It is further relevant to notice that present is a case where renewal lease dated 17.09.2021 was executed by the RP himself for a period of 5 months till 31st December, 2021. The present is not a case where lease in favour of the Appellant is subsisting. The lease has come to an end on 31st December, 2021. Further the lease renewal in favour of the Appellant was by RP himself on 17.09.2021 (Fresh Lease) which lease contained specific clause for eviction by 15 days notice - When the Corporate Debtor has the ownership rights over the premises which premises can be taken in control by IRP/RP, we are of the view that for eviction of the Appellant especially in event when lease in favour of the Appellant has come to an end, filing a suit is not contemplated in the statutory scheme contained in IBC. The contention of the Appellant that RP has to file a suit for eviction of the Appellant under the MP Accommodation Control Act, 1961 can not be accepted - the Adjudicating Authority has rightly allowed the Application filed by the RP directing the Appellant to vacate from the premises so that Resolution Plan which has been approved can be implemented. The Appeal is dismissed.
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2023 (1) TMI 300
Initiation of CIRP - Financial Creditors - time limitation - date of default - acknowledgement of debt in writing in the balance sheets - HELD THAT:- Section 7 Application was filed by the Appellant on 05th April, 2019. There was negotiated settlement between the parties dated 04.12.2008. It can safely be accepted that the period of limitation did not expire till the parties entered into negotiated settlement. Under the negotiated settlement, payments were made by the Respondent from time to time. Last payment was made on 30th April, 2014, the negotiated Settlement was cancelled by the Appellant by Letter dated 11th July, 2014. There can be no doubt that when the settlement was cancelled on 11th July, 2014, the amount became due with effect from 11th July, 2014. The Application under Section 7 has been filed on 05th April, 2019. We need to first examine as to whether there is any acknowledgement by the Corporate Debtor during the said period for the extension of limitation since without extension of limitation during the period, the Application was obviously filed beyond three years from the date when amount became due. The letter written by Corporate Debtor indicates that letter mentions about the default in compliance of allotment of 10 lac equity shares of 10 each. Letter never acknowledged any default of the original amount or the amount which became due in loan recall notice issued by the Appellant on 04.03.2004. As noted above by cancelling the negotiated settlement vide letter dated 11th July, 2014 original liability of the Respondent under the loan agreement was sought to be restored. When we look into the loan recall notice dated 04.03.2004, the amount which was claimed in the loan recall notice, was Rs. 24,69,59,120/- with further interest with effect from 01st January, 2004. The letter dated 2nd July 2015 is neither any acknowledgement of amount referred to in recall notice nor can be treated to be acknowledgement of the amount as claimed by the Appellant in the Section 7 Application. The next letter which has been relied on by the Appellant is letter dated 03.10.2017. Letter dated 03.10.2017 was written by the Corporate Debtor to the Appellant with regard to buy back shares of Rs. 1 Crore which according to the Respondent was only default of the negotiated settlement - the above letter also cannot be treated to be acknowledgement of liability and amount claimed by the Appellant in the loan recall notice dated 04.03.2004 or the amount which became due as per Appellant after the revocation of negotiated settlement on 11th July, 2014. The letter dated 03.10.2017 cannot be read to be any acknowledgement or dues as is now claimed by the Appellant in their application. In Section 7 Application, date of default was mentioned as 04.03.2004 and the letter cannot be read to be acknowledgment of the dues which are now sought to be claimed in Section 7 Application nor can be said to be any acknowledgment of the amount as referred to in the Loan Recall Notice dated 04.03.2004 or the amount which according to the Appellant became due after cancellation of the negotiated settlement dated 11th July, 2014. It is clear that Adjudicating Authority was convinced that there is no genuine claim by the Financial Creditor. We fully endorse the view taken by the Adjudicating Authority that after negotiated settlement between the parties on 04.12.2008, cash component of Rs. 7.5 Crores was paid admittedly within time allowed and default was only of nonallotment of 10 lakhs equity shares of Rs. 10 each. The cancellation of negotiated settlement was only on the ground that Respondent failed to comply the allotment of equity shares and execution of buy back agreement. We have already extracted the letter dated 11th July, 2014 by which negotiated settlement was cancelled by the Appellant. When the cancellation of negotiated settlement was only on the ground that Respondent failed to allot 10 lakhs equity shares with face value of Rs. 10 each and failed to buy back the shares at price giving minimum yield of 13%p.a. the claim at best could have been confined to the above amount. Application having been filed for claiming amount of Rs. 265.02 Crores is clearly exorbitant and unconscionable and not genuine. One of the object of the Trust is to arrive at One Time Settlement and taking measures to enforce the available securities for effective and efficacious recovery under the SARFAESI Act, 2002 restructuring or reconstruction of assets was to act as trustee, managers and administrators. The object of trust is not to completely annihilate the Corporate Debtor. The action of the Appellant in completely ignoring the negotiated settlement and after realizing the entire cash component again embarking on recovery of entire amount, is not in accordance with the object and purpose for which trust has been created. Appeal dismissed.
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2023 (1) TMI 299
Initiation of CIRP - Extended period of limitation - It is submitted that in view of the filing of the winding up petition which was pending in the Kolkata High Court, Appellant was entitled to take benefit of Section 14 of the Limitation Act, 1963 - HELD THAT:- Part-V of the Section 7 Application pertaining to Particulars of Financial Debt (Documents, Records and Evidence of Default), there are no mention of any material or any document on basis of which benefit of Section 14 of the limitation can be claimed. In Section 7 Application, the filing of winding up petition was in fact concealed. Law is well settled that for taking benefit of extension of limitation under the limitation act, 1963 there has to be relevant materials brought on record to extend the benefit of Section 14 of the limitation Act, 1963. The Hon ble Supreme Court in the matter of BABULAL VARDHARJI GURJAR VERSUS VEER GURJAR ALUMINIUM INDUSTRIES PVT. LTD. ANR. [ 2020 (8) TMI 345 - SUPREME COURT ] laid down that question of limitation is essentially a mixed question of law and facts and when a party seeks application of any particular provision for extension or enlargement of the period of limitation, the relevant facts are required to be pleaded and requisite evidence is required to be adduced. The benefit of Section 14 was extended because prima facie it was proved that proceedings under SARFAESI Act were without jurisdiction. Present is not a case where it is even contended that winding up petition filed by the Appellant before the Kolkata High Court were without jurisdiction proceeding or were terminated by the defect of a like nature. The proceedings benefit of which is sought to be claimed, it has to be proved that proceedings are prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature is unable to entertain it. Present is not a case where winding up petition filed in the Kolkata High Court was suffering from any defect of jurisdiction or other cause of a like nature. The foundational fact for taking benefit of Section 14 of the Limitation Act being not laid down by the Financial Creditor, no benefit under Section 14 can be claimed by the Appellant - the Adjudicating Authority did not commit any error in rejecting section 7 application filed by the Appellant. Appeal dismissed.
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2023 (1) TMI 290
Recovery of Electricity dues - jurisdiction of Adjudicating Authority to waive the electricity dues recoverable from the premises - whether the electricity dues can be waived in the Resolution Plan? - HELD THAT:- The issues which have been raised by the Appellant in this Appeal are fully covered by the judgment of this Tribunal in DAMODAR VALLEY CORPORATION VERSUS DIMENSION STEEL AND ALLOYS PRIVATE LIMITED, BIJOY MURMURIA, RESOLUTION PROFESSIONAL OF THE CORPORATE DEBTOR, C/O SUMEDHA MANAGEMENT SOLUTION PRIVATE LIMITED, C.P. ISPAT PRIVATE LIMITED [ 2022 (5) TMI 1365 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ]. In the above case the approval of plan was challenged on various grounds. One of the ground raised was that Appellant was entitled to claim unpaid dues as per West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 - it was held in the case that When any statutory provision including the provisions of West Bengal Electricity Regulatory Commission (Electricity Supply Code) Regulations, 2013 are overridden, the question of contravention of such provision does not arise. There are no good ground to interfere with the order passed by the Adjudicating Authority approving the Resolution Plan. There is no merit in the Appeal. The Appeal is dismissed.
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PMLA
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2023 (1) TMI 298
Provisional attachment order - seeking eviction of the present owner - the case is that since the Petitioner is 50% owner of all these properties, the occupants cannot be evicted in this manner - HELD THAT:- Admittedly, Sh. Pankaj Jain and Sh. Sanjay Jain are brothers. They own equal shares in the properties listed above. The ED is seeking eviction of the occupants from the properties, qua the share of Sh. Pankaj Jain, but the same are under occupation of the family of Sh. Sanjay Jain or tenants. The appeal filed by Sh. Pankaj Jain against whom the attachment order has been finally confirmed, is presently pending before the Appellate Tribunal constituted under Section 25 of PMLA. A perusal of Section 26 of the Prevention of Money Laundering Act, 2002 shows that orders of attachment passed by the Adjudicating Authority are appealable to the Appellate Tribunal at the instance of `any person aggrieved . In the opinion of this Court, Sh. Sanjay Jain who is the Petitioner before this Court would also be a `person aggrieved who would be entitled to approach the Appellate Tribunal and challenge the attachment order or object to the impugned notices issued pursuant to the attachment order - Admittedly, the family of the Petitioner is residing in two of the seven premises from where the occupants are sought to be evicted. Some of the premises are also tenanted premises. Thus, the effect of Rule 5(3) and Rule 5(5) would have to be considered by the Tribunal. Even the Petitioner s challenge to the provisional attachment order in respect of these very properties is stated to be pending before the Adjudicating Authority and the same is yet to be confirmed. The Petitioner is permitted to file an appeal, within a week challenging the final attachment order passed by the Adjudicating Authority dated 29th September, 2022 before the Appellate Tribunal - Petition disposed off.
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Service Tax
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2023 (1) TMI 297
Levy of Service Tax - Advertising Agency Service or not - remitting 85% of the total amount received from their customers on getting space/time from media agencies or news papers or various publications - It has been argued that it is only the sub agent M/s. Surya Publicity which provided the services to their client and since appellant has not provided service, there is no question on payment of any Service Tax - exemption under Notification No. 06/2005-ST dated 01.03.2005 with effect from 01.04.2005 - HELD THAT:- In the instant case M/s. Surya Publicity was providing Advertising Services to its client. M/s. Surya Publicity was not discharged any service tax liability as the same was liable for the levy of Service Tax. M/s. Surya Publicity was purchasing time and space in the newspaper / media companies through the appellant. The amount paid by M/s. Surya Publicity to the appellant for purchase of time M/s. Surya Publicity to the appellant for purchase of time and space was sought to be tax by revenue under the category of Advertising Service. It is seen that no evidence has been placed from record to establish that the appellant were providing Advertising Agency Services. The role of appellant was limited to being an intermediary in the sale of space/ time for media agency on commission basis. In this regard the decision of Tribunal in case of CCE, CHANDIGARH VERSUS M/S. HK. ASSOCIATES AND OTHERS, H. KASS.. VERSUS CCE [ 2008 (12) TMI 65 - CESTAT, NEW DELHI] is relevant - It was held in the case that amounts paid to M/s. H.K. Associates by KBPL have been accounted as advertisement and sales promotion expenses. A portion of the sum so received was spent on advertisement by H.K. Associates. These facts alone can not lead to an inference that M/s. H.K. Associates have rendered the services as advertising agency. The appeal is allowed.
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Central Excise
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2023 (1) TMI 296
Classification of goods - Silo - Rule 2 (a) of the General Rules of Interpretation - to be classified under Chapter Subheading 84379090 of the Central Excise Tariff Act, 1985 or under chapter sub-heading 94060099 of the Central Excise Tariff Act, 1985 - levy of penalty under Rule 26 of Central Excise Rules, 2002 on Senior Vice President (Finance) and Company Secretary and Chairman and Managing Director of Appellant - Demand of interest - extended period of limitation - HELD THAT:- From perusal of the entries it is quite evident that the terms of heading pre and post introduction of the 8 Digit Classification Code in Central Excise the Section Note and Chapter Note and the terms of Chapter Heading, at 6- digit level were not amended or changed in any manner. This implies that the classification of the goods both pre and post introduction of 8 digit classification code, in respect of these heading would not change till 6 digit - it is quite evident that the contracting parties to the HSN Convention could have in its statistical nomenclature, could have only specified the any sub division at a level beyond the six digit nomenclature set out in the code. The amendments made in the First Schedule to Central Excise Tariff Act, 1985 by the amending Act of 2004 were to expand the classification code from 6 digit to 8 digit and align the Central excise tariff with the Customs Tariff which was aligned to HSN. By adopting the Eight Digit classification code in Central Excise to align the Central Excise Tariff with the Custom Tariff, the classification of the goods at the six digit level could not have been amended. From the perusal of the purchase orders it is quite evident that the findings recorded in the impugned order that the appellant was supplying only silo per-se cannot be sustained. It is silo system which is capable of performing the assigned function is being manufactured and cleared by the appellant along with the associated accessories. It is settled position in law as per the Rule 2 (a) of the General Rules of Interpretation and clearly specified as per Section Note 3, 4 5 to Section XVI of the First Schedule to the Central excise Tariff Act, 1985 that essential character determines or the prime function of the machines, equipment interconnected or working in tandem will determine the classification of the said group of machines and equipment - the Office of Chief Commissioner has agreed with the view as canvassed by the appellant while classifying the said goods under Heading 8437. We also take the note of the fact that this view has been expressed by the Chief Commissioner, under the scheme of eight digit classification code introduced by the Central excise Tariff Amendment Act, 2004. We also take note of the Shipping Bills field by the appellant classifying the same goods under CTH 843709090 and assessed by the Custom Authorities at Nhava Sheva under the said heading. There are no merits in the impugned order classifying the impugned goods cleared by the appellant under CETH 94060099 and demanding the duty accordingly. Extended period of limitation - HELD THAT:- The amendment scheme of classification from 6 digit to 8 digit was introduced in 1995 and the Office of Chief Commissioner has rendered the opinion after examination of the issue on 9th January 2013, then it is not understood just for the change of opinion how can appellant be charged for suppression with intent to evade payment of duty subsequently for invoking extended period of limitation and for imposition of penalty under Section 11AC. Since the order of demand of duty is set aside, the order for demand of interest too can t be sustained - appeal allowed.
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CST, VAT & Sales Tax
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2023 (1) TMI 295
Doctrine of mutuality - club and association service - whether after the 46th Constitutional Amendment made in the Constitution which came into effect from 02.02.1983, the services in form of foods and drinks provided to the members of the club would be included under the term 'sale' and liable to be taxed? - HELD THAT:- Section 2(h) (v) of U.P. Trade Tax Act, 1948 provides that in case of supply of goods by any unincorporated association or body of persons to members shall be considered as 'sale'. Further Section 2(h)(vi) provides that any services in whatsoever manner such as foods and drinks provided for human consumption shall also be encompassed under the term 'sale'. The earlier Constitution Bench decision in THE JOINT COMMERCIAL TAX OFFICER, HARBOUR DIVISION II, MADRAS VERSUS YOUNG MEN S INDIAN ASSOCIATION, MADRAS AND OTHERS [ 1970 (2) TMI 87 - SUPREME COURT] had held that where supply of various preparations by clubs to members is involved, it shall not be sale, as there is no transfer of property from one to another. If the club even though a distinct legal entity is only acting as agent for its members in the matter of supply of various pre- parations to them and no sale would be involved as the element of transfer would be completely absent. The Apex Court further, while answering the question posed by the Division Bench, in STATE OF WEST BENGAL ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE ORS. VERSUS M/S. RANCHI CLUB LTD. [ 2019 (10) TMI 160 - SUPREME COURT] has held that the judgment rendered by the earlier Constitution Bench in the matter of Young Men's Indian Association continues to hold the field even after 46th amendment. According to Apex Court Sub-clause (f) of Article 366 (29-A) has no application in member's club. As the matter is no more res integra and the Apex Court has clarified that Sub-clause (f) of Article 366 (29-A) does not apply to the member's club and it is not disputed that the revisionist is a club incorporated and is serving foods and drinks to its members, it is not covered under the definition of Section 2 (h) of the Act of 1948, as held by the Tribunal - Revision allowed.
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2023 (1) TMI 294
Rectification of mistake - mistake apparent on the face of record - Interpretation of Statute - Section 19(5)(a) read with Section 17 and Section 2(20) as well as Section 30 of the Act - reversal of ITC - G.O.Ms.No.103 dated 01.08.2012 - G.O.Ms.No.155 dated 08.12.2012 - G.O.Ms.No.6 dated 06.02.2013 - HELD THAT:- Section 84 provides for the rectification of an error apparent on record and not one which involves discussion, debate or possible multiple opinions. This is a settled position as per several judgments of the Hon ble Supreme Court and High Courts - What has to be borne out by process of reasoning taking note of rival contentions and differing points of view is not liable to be addressed under Section 84, the purpose of which is only to correct an apparent and evident mistake. None of the Notifications in this case touch upon the aspect of Input Tax Credit in the hands of the selling dealers, and had they done so, the officer would perhaps have been right in stating that the grant of ITC even in the place of such express provision for reversal in the Notification, was an error apparent on record. Since the Notification did not mention anything about ITC or reversal, the impugned proceedings would also have to be tested in the context of whether at all Section 84 could be applied in this case, and thus fail. The impugned orders are quashed and these writ petitions are allowed.
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2023 (1) TMI 293
Maintainability of petitioner - availability of statutory remedy of appeal - Refund of the amount of tax deposited by the petitioner - grant of interest in terms of Section 29(2) of U.P. Trade Tax Act, 1948 - HELD THAT:- Certain amount of tax due from three companies namely, M/s Shristi Agencies (Pvt.) Limited, M/s Rudder Steels (Pvt.) Ltd. and M/s Shivalik Ispat and Fabricators Private Ltd., was sought to be recovered from M/s Usha India Ltd. and M/s Malvika Steel Pvt. Ltd. in which the petitioner along with his brothers Anil Rai were the shareholders and directors. M/s Usha India Ltd. and M/s Malvika Steel Pvt. Ltd. are said to be debtors of the companies, from whom amount of tax is due. The amount was sought to be recovered from them in their individual capacity. The order was challenged by them by filing writ petitions before this Court. They were relegated to avail of their remedy of appeal before the Tribunal, which was to be heard on merits, subject to deposit of ₹ one crore by both the brothers. Undisputedly, the petitioner deposited ₹ one crore. Both the appeals preferred by the petitioner and his brother were allowed by the Tribunal vide order dated June 9, 2016 and demand against them was quashed with liberty to the Department to deal with the recovery from the companies. An application for refund was filed by the petitioner on August 25, 2017, which remained pending. A reminder was sent on July 23, 2020 on which the order dated September 17, 2020 was passed, rejecting the claim for refund on the flimsy ground that the Tribunal while accepting the appeal had not directed for refund of the amount. We are not required to deal with that order on merits for the reason that learned counsel for the State has fairly submitted that after the order of demand was set aside by the Tribunal, the petitioner will be entitled to refund of the amount deposited as pre-condition for hearing of appeal on merits - Still further, what is required to be noticed is that the order of the Tribunal dated September 17, 2020 was not challenged by the Department immediately when the same was passed. But, when the petitioner filed the present writ petition in this Court, impugning the order rejecting his prayer for refund, Sales/Trade Tax Revision Defective No. 28 of 2021 was filed, after a delay of 1766 days. The same was dismissed on September 2, 2021 as the delay could not be satisfactorily explained. From the facts of the present case, what is established is that retention of the amount deposited by the petitioner as a precondition for hearing of appeal on merits would be a direct violation of Article 265 of the Constitution of India, as the State has no authority to retain the amount after the demand raised was set aside by the Tribunal and the revision against the same was dismissed by this Court - Let the amount of refund due to the petitioner be now paid within a period of four weeks along with interest due in terms of Section 29(2) of the Act of 1948. The interest shall be calculated from January, 2018 onwards at the rates specified in Section 29(2) of the Act of 1948. As apparently in the case in hand the delay in grant of refund to the petitioner is patently illegal in view of the order passed by respondent no. 3, the State shall be at liberty to recover the amount of interest to be paid to the petitioner from the officer(s) concerned, as public exchequer should not be burdened on account of illegal action by the officer(s) of the Department - The writ petition is allowed with costs of ₹ 10,000/- to be paid along with the amount of refund.
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Indian Laws
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2023 (1) TMI 292
Dishonor of Cheque - insufficiency of funds - legally enforceable debt - petitioners submits that the petitioner No.1 has issued signed blank cheque as security, but, the respondent has presented the same without the knowledge of the petitioners - it is submitted that admittedly the Company has not been arrayed as party in the N.I. Act case. But, the Directors of the company have been made parties in the said case. HELD THAT:- Since Durga Krishna Store Pvt. Ltd, the company has not been made an accused here in this case, and since no legal notice has also been issued to it, the complaint under Section 138 of the N.I. Act, to the considered opinion of this court, cannot be maintained against the present petitioners, without invoking the provision of Section 141 of the N.I. Act and as such the complaint lodged before the Court of learned CJM, Cachar, Silchar is nothing but an abuse of the process of Court and the impugned order of taking cognizance, dated 16.03.2020, suffers from manifest illegality and thus, failed to withstand the test of legality, propriety and correctness - Further, it appears that in the complainant petition, the respondent has not specifically stated as to how the petitioners are responsible for the conduct of the business of the company i.e. Durga Krishna Store Pvt. Ltd. Merely because the petitioner No.1 is the signatory of the cheque in question, is not at all sufficient to arraign him as an accused. Moreover, the respondent has never made any averment in the complaint against the petitioner No.2 as to how he is responsible for the conduct of the business of the company, though he appears to be the director of the company. There are sufficient merit in this petition, and accordingly, the same stands allowed.
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