TMI Tax Updates - e-Newsletter
January 7, 2022

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. APPEAL ORDER NOT UPLOADED ON PORTAL PHYSICAL APPEAL WITH COD ALLOWED

   By: DEVKUMAR KOTHARI

2. 2021- MAJOR EVENTS IN GST

   By: Dr. Sanjiv Agarwal

News

1. Module wise new functionalities deployed on the GST Portal for taxpayers

2. Cabinet approves Agreement between India and Spain on Cooperation and Mutual Assistance in Customs Matters

3. Revenue Deficit Grant of ₹ 9,871 crore released to 17 States

4. Shri Piyush Goyal calls for a Single window portal for doing robust common KYC system for Stock Brokers, Mutual Fund and depositories etc

5. APEDA working in collaboration with state governments, farmers and others to boost honey exports

6. Searches conducted by Income Tax Department largely in Uttar Pradesh and Maharashtra

Notifications

Customs

1. 1/2022 - dated 6-1-2022 - ADD

Seeks to rescind notification No. 30/2016 dated 11.07.2016 which seeks to impose Anti-dumping Duty on Imports of 1,1,1,2-Tetrafluoroethane or R-134a from China PR

GST - States

2. 22/2021– State Tax (Rate) - dated 31-12-2021 - Bihar SGST

Seeks to supersede Notification No. 15/2021-State Tax (Rate), dated the 6th December, 2021 and amend Notification No. 11/2017- State Tax (Rate), dated the 29th June, 2017

3. 21/2021– State Tax (Rate) - dated 31-12-2021 - Bihar SGST

Seeks to supersede Notification No. 14/2021-State Tax (Rate), dated the 6th December, 2021 and amend Notification No 01/2017- State Tax (Rate), dated the 29th June, 2017

4. 20/2021– State Tax (Rate) - dated 30-12-2021 - Bihar SGST

Amendment in Notification No. 21/2018-State Tax (Rate), dated the 26th July, 2018

5. 19/2021– State Tax (Rate) - dated 30-12-2021 - Bihar SGST

Amendment in Notification No. 02/2017-State Tax (Rate), dated the 29th June, 2017

6. 18/2021– State Tax (Rate) - dated 30-12-2021 - Bihar SGST

Amendment in Notification No. 01/2017-State Tax (Rate), dated the 29th June, 2017

7. 25/2021 – State Tax - dated 24-12-2021 - Jharkhand SGST

Amendment in Notification No. 21/2019- State Tax, dated the 28th June, 2019

8. 24/2021 – State Tax - dated 24-12-2021 - Jharkhand SGST

Seeks to amend Notification No. 14/2021-State Tax, dated the 23rd June, 2021

9. 23/2021 – State Tax - dated 24-12-2021 - Jharkhand SGST

Amendment in Notification No. 13/2020 – State Tax, dated the 25th June, 2020

10. (22/2021) FD 55 CSL 2021 - dated 1-1-2022 - Karnataka SGST

Seeks to supersede Notification (15/2021) No. FD 55 CSL 2021, dated the 18th November, 2021 and amend Notification (11/2017) No. FD 48 CSL 2017, dated the 29th June, 2017

11. (21/2021) FD 55 CSL 2021 - dated 1-1-2022 - Karnataka SGST

Seeks to supersede Notification (14/2021) No. FD 55 CSL 2021, dated the 18th November, 2021 and amend Notification (01/2017) No. FD 48 CSL 2017, dated the 29th June, 2017

Circulars / Instructions / Orders

DGFT

1. Trade Notice No. 29/2021-2022 - dated 6-1-2022

Continuation of operations of the DGFT ‘COVID-19 Helpdesk' for International Trade related Issues’

Customs

2. Instruction No. 01/2022 - dated 5-1-2022

Implication of the judgement of the Hon’ble Apex Court in the case of M/s Westinghouse Saxby Farmer Ltd. Vs. Commissioner of Central Excise, Kolkata

Highlights / Catch Notes

GST

• No GST on Employee Recoveries for Canteen and Bus Services Under Subsidized Rates.

  Case-Laws - AAR : Levy of GST - recoveries made from the employees towards providing canteen facility and towards providing bus transportation facility - the applicant is not liable to pay GST on the recoveries made from the employees towards providing canteen facility at subsidized rates. - GST would not be payable on the recoveries made from the employees towards providing bus transportation facility. - AAR
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Income Tax

• High Court Rules Surcharge on Sales and Turnover Tax Not Disallowable u/s 40(a)(iib) of Income-tax Act.

  Case-Laws - SC : Revision u/s 263 by CIT - additions u/s 40(a)(iib) - The gallonage fee, licence fee and shop rental (kist) with respect to FL­9 and FL­1 licences granted to the appellant will, squarely fall within the purview of Section 40(a)(iib) of the Income-­tax Act, 1961. The surcharge on sales tax and turnover tax, is not a fee or charge coming within the scope of Section 40(a)(iib)(A) or 40(a)(iib)(B), as such same is not an amount which can be disallowed under the said provision and disallowance made in this regard is rightly set aside by the High Court. - SC
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• Court Invalidates Reassessment u/s 147: Lack of Crucial Documents and Independent Analysis by Assessing Officer.

  Case-Laws - HC : Reopening of assessment u/s 147 - Non dealing with objections - In the present case, apart from the fact that the reopening of the assessment being bad in law for non-supplying of the vital documents on the basis of which the reasons to believe were formed, the Court finds that the reasons for reopening merely reproduces the language of the report of the DDIT (Inv.) without the AO independently applying his mind to the material on record. - the impugned re-assessment order to be unsustainable in law - HC
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• Form 26AS TDS Credit Valid Without Extra Justification; A.O.'s Inaction Shouldn't Harm Assessee's Claim u/s 154(7).

  Case-Laws - AT : Non-grant of TDS credit - When the TDS credit available to the assessee is reflected in Form 26AS then the assessee is even not required to assist the tax authorities to justify the claim once it is declared and claimed in the return of income. Further, the letter dated 13/03/2013 is well within the period of limitation as prescribed U/s 154(7) of the Act then non-performance of duties by the A.O. to take a decision on the said letter cannot be taken to prejudicial to the assessee when the second letter is filed by the assessee on 03/08/2017 for reminding the A.O. for the said claim. - AT
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• Late Filing Fees u/s 234E Unsustainable if Invoked Before June 1, 2015, Per Section 200A Provisions.

  Case-Laws - AT : Late filing fee u/s 234E of the Act by passing the order u/s 200A - No doubt, provisions contained u/s 234E were inserted by the Finance Act, 2012 imposing a liability upon deductor where TDS statement/returns were filed belatedly to pay fee as per the said section, Assessing Officer is to collect said fee chargeable u/s 234E of the Act for which machinery provisions have been provided u/s 200A of the Act to be effective from 01.06.2015. When undisputedly A.O has not invoked the provisions contained u/s 234E prior to 1st June, 2015 as required u/s 200A the levy is not sustainable - AT
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• Deemed Dividends u/s 2(22) of Income Tax Act: Capital Nature Questioned; Section 46(2) Inapplicable.

  Case-Laws - AT : Addition u/s 2(22) - Deemed dividend - the amount in the nature of capital or not - dividend was declared before liquidation and dividend distribution tax was paid u/s. 115-O of the Act by the company (dividend was declared on 05.07.1999 and dividend distribution tax was paid on 31.01.2001). Therefore, the provisions of section 46(2) of the Act do not have application to the facts of the present case. - AT
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• Taxpayer Loses Capital Gains Benefit as Property Valuation Exceeds 10% Tolerance u/s 50C(1) of Income Tax Act.

  Case-Laws - AT : Capital gain - value determined by the DVO - entitled for the benefit of proviso to section 50C(1) - Regarding two properties, there is a difference of 14.77% and 14.58% between the value declared by assessee and the fair market value determined by DVO which is beyond the maximum tolerance band of 10% as per the proviso to section 50C(1) of the Act. Therefore, the benefit of said proviso cannot be extended to the assessee- AT
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• Trader Not Liable for TCS on Scrap Sales: Scrap Not Defined by Manufacturing or Mechanical Processes u/s 206C(1.

  Case-Laws - AT : Failure to collect TCS u/s 206C(1) - trading of scrap - sale of scrap to manufacturer - Period of limitation - assessee being trader, not covered in definition of "scrap", since scrap is not generated from manufacturing or mechanical working of material, therefore the assessee is not covered in definition of ‘scrap’. Hence, in our considered opinion, the assessee cannot be treated as an assessee in default - AT
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Customs

• Allegations of Mis-declaration in Import Case Lacks Expert Confirmation; Appellants Denied Cross-examination Rights.

  Case-Laws - AT : Mis-declaration and mis-classification of goods - It is unfair to allege that the appellants have mis-declared the goods without any categorical finding of an expert that the imported goods were NOT machinery oil and then allowing cross examination of such expert(s) by the appellant to prove its case and contest the expert opinion. In this case, while the test reports that have been relied upon as recorded in the impugned order only suggested that the goods “may be base oil” and NOT that “they are base oil”. Further, the reports also do not say that the goods are “not machinery oil” as described by the importer. - AT
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• Court Upholds No Interest on Refund Claim; Section 27 Requires Delay Over Three Months for Interest Eligibility.

  Case-Laws - AT : Denial of interest on refund claim - There is no infirmity in the Order under challenge where interest has not been awarded while sanctioning refund - Bare perusal of section 27 makes it clear that interest has to be given by the department while sanctioning the refund only when the sanction order has been passed after period beyond three months of seeking refund. - AT
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Corporate Law

• RBI's Authority: 1997 Notification Freezes CRB Capital Assets, Making Payment Withholding Legally Required for SIDBI.

  Case-Laws - SC : Claim of interest for delayed payment - The RBI has wide supervisory powers over financial institutions like SIDBI, in furtherance of which, any direction issued by the RBI, deriving power from the RBI Act or the Banking Regulation Act is statutorily binding on the defendant. Admittedly, the RBI issued Notification dated 10.04.1997, deriving power from S. 45-MB(2) of the RBI Act. Thereby, the RBI froze the assets of CRB Capital on the grounds of public policy, for the purpose of protecting interests of creditors and depositors of CRB Capital - in absence of the Official Liquidator’s consent and guidance, the defendant could not have made the payment without inviting onerous consequences for itself. Hence, it can be said that the defendant acted prudently, being conscious of the legal obligation, to withhold such payment to the plaintiff. - SC
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Indian Laws

• High Court Upholds Ruling: Respondents Forfeit Right to Appoint Arbitrator Post-Application u/s 11(6.

  Case-Laws - SC : Appointment of an arbitrator - Declination to appoint an Arbitrator in exercise of its power under Section 11(6) of the Arbitration and Conciliation Act, 1996 - So far as the question of law is concerned, certainly being settled that after the application has been filed for appointment of an Arbitrator under Section 11(6) of the Act, before the High Court the respondents forfeited their right to appoint an Arbitrator under the clause of arbitration thereafter but from the narration of facts which has been noticed by us, we are of the view that no error was committed by the High Court in dismissing the petition filed under Section 11(6) of the Act for appointment of an Arbitrator. - SC
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• Courts Balance Arbitration Award Clarification with Legal Soundness Under Arbitration and Conciliation Act, 1996.

  Case-Laws - SC : Validity of Arbitration Award - amicable settlement between the parties - A harmonious reading of Section 31, 34(1), 34(2A) and 34(4) of the Arbitration and Conciliation Act, 1996, make it clear that in appropriate cases, on the request made by a party, Court can give an opportunity to the arbitrator to resume the arbitral proceedings for giving reasons or to fill up the gaps in the reasoning in support of a finding, which is already rendered in the award. But at the same time, when it prima facie appears that there is a patent illegality in the award itself, by not recording a finding on a contentious issue, in such cases, Court may not accede to the request of a party for giving an opportunity to the Arbitral Tribunal to resume the arbitral proceedings - SC
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IBC

• Sub-lease from 2016 upheld in CIRP; no fraud found, transaction not challenged as it predates proceedings by two years.

  Case-Laws - AT : CIRP proceedings - Validity of Sub-lease - Admittedly, the transfer of portion of plot by sub-lease was effected on 27.09.2016 whereas CIRP initiated after more than two years i.e. on 26.11.2018. The RP has no ground to doubt the transaction which is more than two years prior to commencement of CIRP. The association has not raised any plea of fraud in transferring the plot by sub-lease to R-1 and the RP has failed to make out a case that the sub-lease was executed for depriving the rights of homebuyers - there are no substance in the argument of Ld. Counsel for the Appellant that the sub-lease is actuated by fraud, therefore, no limitation has applicable to such transaction. - AT
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• Court Allows 1392-Day Delay in Insolvency Filing, Citing Discretion u/s 5 of Limitation Act.

  Case-Laws - AT : Initiation of CIRP - validity of condonation of delay of 1392 days in filing Section 7 Application - In the facts and circumstances of the present case, the delay of less than two years’ period has been condoned by the Adjudicating Authority, exercising its discretion under Section 5 of the Limitation Act. It cannot be said that discretion exercised by Adjudicating Authority in condoning the delay is perverse or against any provisions of law or violates any principle of law for determining the ‘sufficient cause’ under Section 5 of the Limitation Act. - AT
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• Time-Barred Debts u/s 7 of Insolvency Code Cannot Be Entertained; Appellant Challenges Dismissal Without Merit Evaluation.

  Case-Laws - AT : Rejection of claims which are delayed - When an Application under Section 7 cannot be entertained for a debt, which is barred by time and is liable to be rejected, any addition in the claim, which may fall into the category of time barred debt, also cannot be entertained. The Appellant having objected to the addition of claim consequent to assignment by United Bank of India, it had every right to agitate the issue and pray for adjudicatory orders from the Adjudicating Authority, which he did by filing an Application. The Adjudicating Authority by misplaced observation rejected the Application without considering the merits of the claim- AT
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• NCLT to Reassess CIRP Application: Loan Misclassified as Non-Financial Debt Under Insolvency and Bankruptcy Code 2016.

  Case-Laws - AT : Initiation of CIRP - Financial Debt or Operational Debt - existence of ‘Default’ or not - The contra views arrived at by the ‘Adjudicating Authority’ that the ‘Loan’ was not a ‘Financial Debt’, as the amounts were not ‘money borrowed’ by the ‘Corporate Debtor’ and that the borrowing may not constitute a ‘Financial Debt’ that could be enforced as per the I & B Code, 2016 though the ‘Borrowing’ may be reflected in the ‘Balance Sheet’ as pointed out by the ‘Petitioner (Appellant)’ etc; are legally ‘invalid’ and ‘untenable’ - NCLT directed to re-adjudicate the application - AT
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Service Tax

• Reconsideration Required for Service Tax on "Pay and Park," "Bazar Fees," and "ROW"; Other Categories Upheld with Redetermination.

  Case-Laws - AT : Levy of service tax - Matter needs to be reconsidered by the adjudicating authority in respect of the demands made under the head “Pay and Park”, Bazar auction/ Bazar Fees” and Rasta Nuksan Bharpai/ ROW - In respect demands made under categories, Ground/ market Rent. Marriage Hall, Bhade Patti (BOT), Stall Ground Rent, Hospital and Blood bank rent, while the leviability of the service tax has been upheld as per our observations in para 4.8 and 4.9, but the quantum of the value of taxable service and service tax leviable needs to be redetermined - Extended period of limitation as held by the Commissioner is invokable - AT
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Central Excise

• Reversal of Cenvat Credit on Coal Inputs Deemed Incorrect; No Penalty Imposed According to Commissioner (Appeals) Decision.

  Case-Laws - AT : Reversal of Cenvat Credit - When the calculation arrived at by the Department and confirmed vide the order under challenge is perused (in para 18.3 of show cause notice), it is observed that the value of coal (inputs ) used in power plant and value of Coal handling service (input service) in terms of Rule 6(3A)(c ) (i) and 6 (3A(iii) has to be the value as shown in Column 4 of such table in para 18.3 of the show cause notice. However, the value of total inputs / input service as mentioned in para 1 of the said table has been taken by the Investigating Authority and has been confirmed by the Commissioner (Appeals). - The calculation based upon total value of input / input service is held to be wrong - no penalty - AT
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Case Laws:

• GST

• 2022 (1) TMI 190
  Revocation of cancellation of registration of petitioner - non-payment of GST dues - HELD THAT:- It is made clear that upon the deposit of the said amount of Rs. 90,09,874/-, the registration of the petitioner under CGST Act read with MGST Act, which is withdrawn shall stand restored without prejudice to the rights and contentions of the revenue. The revenue would be at liberty to decide the application for restoration of the registration of the petitioner upon deposit of the said amount of Rs. 90,09,874/- and shall pass an order within three months from the date of such deposit of the amount. The order that would be passed, shall be communicated to the petitioner within one week from the date of passing of such order. Insofar as the communication dated 22nd December, 2021 from the Superintendent, Central GST, Range-V, Div-IV, Sangli to the petitioner stating that the total GST outstanding liability of the petitioner is in the sum of Rs. 3,65,14,056/- is concerned, it is not in dispute that the investigation against the petitioner is still pending - no views provided on the merits of the said communication dated 22nd December, 2021 at this stage. Petition disposed off.

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• 2022 (1) TMI 189
  Unblocking of Input Tax Credit - HELD THAT:- Post earlier listing on 20.12.2021, Ms. S. Ragaventhre, learned Junior Standing Counsel for Central Excise and Customs, who accepted notice on behalf of both the respondents very fairly submits on instructions that the electronic credit ledger of the writ petitioner will be unblocked today or latest by close of working hours tomorrow. Petition disposed off.

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• 2022 (1) TMI 188
  Utilization of accumulated Input Tax Credit - request to furnish a copy of the revised form TRAN-1 that was filed by the petitioner - HELD THAT:- Since the petitioner s representation to the jurisdictional respondent namely, first respondent herein has remained unaddressed so far, this Writ Petition is disposed by directing the first respondent to respond to the representation dated 25.06.2020 within a period of 30 days from the date of receipt of a copy of this order. Petition disposed off.

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• 2022 (1) TMI 187
  Classification of goods - Non-Dairy Cream - to be covered under CH 1517 90 90 or under CH 2106 90 99 of the GST Tariff? - HELD THAT:- The subject classification matter is pending as a dispute in proceedings initiated by the Directorate General GST Intelligence, Pune Regional Unit and therefore in view of the first provisio to Section 98 of the CGST Act, the question raised by the applicant is not answered. Application rejected being not maintainable.

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• 2022 (1) TMI 186
  Levy of GST - recoveries made from the employees towards providing canteen facility at subsidized rates in the factory and office - recoveries made from the employees towards providing bus transportation facility - Exemption under N/N. 12/2017 Central Tax (Rate) - recoveries made from the employees on account of not serving the full notice period. Whether the GST would be payable on recoveries made from the employees towards providing canteen facility at subsidized rates in the factory and office? - HELD THAT:- The applicant is not supplying any canteen service to its employees in the instant case. Further, the said canteen facility services are also not the output service of the applicant since it is not in the business of providing canteen service. Rather, we find that, this canteen facility is provided to employees by the third party vendors and not by the applicant. Therefore, in the subject case, the applicant is not providing any canteen facility to its employees, in fact the applicant is a receiver of such services - Since the provision of canteen facility by the applicant to its employees is not a transaction made in the course or furtherance of business, and since in terms of Section 7 of the CGST Act, 2017, for a transaction to qualify as supply, it should essentially be made in the course or furtherance of business, it is found that the canteen services provided by the applicant to its employees cannot be considered as a supply under the relevant provisions of the CGST Act, 2017 and therefore the applicant is not liable to pay GST on the recoveries made from the employees towards providing canteen facility at subsidized rates. Whether the GST would be payable on the recoveries made from the employees towards providing bus transportation facility? If yes, whether the Applicant is exempted under Notification No. 12/2017 Central Tax (Rate)? - HELD THAT:- The applicant, arranging bus transportation facility for their employees is definitely not an activity which is incidental or ancillary to the activity of developing, manufacturing and marketing of pharmaceutical products, nor can it be called an activity done in the course of or in furtherance of developing, manufacturing and marketing of pharmaceutical products as it is not integrally connected to the business in such a way that without this, the business will not function. Hence, it is held that, GST would not be payable on the recoveries made from the employees towards providing bus transportation facility. Whether the GST would be payable on the notice pay recoveries made from the employees on account of not serving the full notice period? - HELD THAT:- The recovery of notice pay from dues of employee / payment of notice pay by the employee who could not serve the notice for the period as per contractual agreement / appointment letter does not amount to supply and therefore as per Section 7 (1A) of the CGST Act, 2017, the provisions of Schedule II does not come into play - the notice pay recovered by the applicant from its employees is not liable to GST.

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• 2022 (1) TMI 185
  Maintainability of appeal - time limitation - appeal has been filed within the prescribed time-limit - whether the appeal filed against the order of rejection of refund claim has to be decided or not? - HELD THAT:- The appellant has filed the refund claim RFD-01 vide ARN No. AA080720016486A, dated 7-7-2020 for refund of IGST Rs. 85,787/- and penalty of equivalent amount i.e. Rs. 85,787/- in pursuance to appeal allowed by Additional Commissioner Grade-II, (Appeal)-II, State Tax (SGST), Ghaziabad. Further, it is also found that in the instant matter there is no doubt about the fact that at the time of filing of refund claim, the appellant neither submitted copy of DRC-03 nor made any debit entry from Electronic Cash Ledger, resulting into rejection of refund claim by the adjudicating authority. Further, the appellant replied vide (RFD-09), dated 27-7-2020 in response to show cause notice (RFD-08), dated 17-7-2020, wherein, they submitted that they have debited Rs. 85,787/- IGST and Rs. 85,787/- in Penalty from their Electronic Cash Ledger and also submitted the copy of Debit Entry No. DC0807200250413, dated 25-7-2020 but the same has not been considered by the adjudicating authority. While filing of refund application, the appellant had not generated the DRC-03 due to not aware of refund process and however, now he has generated the DRC-03 vide Entry No. DC0807200250413, dated 25-7-2020 by debiting the amount of IGST Rs. 85,787/- and Penalty Rs. 85,787/- in Govt. account from their Electronic Cash Ledger. The appeal is disposed off with the direction to verify the same and process the refund claim as per provisions of Section 54 of the CGST Act, 2017 and rules made thereunder.

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• Income Tax

• 2022 (1) TMI 184
  Revision u/s 263 by CIT - additions u/s 40(a)(iib) - CIT observed that, AO failed to disallow the debits made in the Profit Loss Account of the assessee, with respect to the amount of surcharge on sales tax and turnover tax paid to the State Government, which ought to have been disallowed under Section 40(a)(iib) - HELD THAT:- As by virtue of licence which is granted in favour of State owned Undertaking, the statutory fees etc., viz., gallonage fees, licence fee and shop rental (kist) are payable by the appellant Undertaking, i.e., KSBC. Once the State Government Undertaking takes licence, the statutory levies referred above are on the Government Undertaking because it is granted licences. Therefore, we are of the view that the finding of the High Court that gallonage fee, licence fee and shop rental (kist) so far as FL 1 licences are concerned, is not attracted by Section 40(a)(iib), cannot be accepted and such finding of the High Court runs contrary to object and intention behind the legislation. Because another State Government Undertaking, i.e., Kerala State Co operatives Consumers Federation Ltd. was also granted licences during the relevant years, as such exclusivity mentioned in Section 40(a)(iib) is lost, also cannot be accepted, for the reason that exclusivity is to be considered with reference to nature of licence and not on number of State owned Undertakings. If the interpretation, as held by the High Court, is accepted, the legislative intent can be defeated by issuing licences in FL 1 to several State Government Undertakings and then make a contention that exclusivity is lost. Said interpretation runs contrary to the intent of the amendment. Surcharge which is sought to be levied is nothing but the enhancement of sales tax, which is levied under Section 5(1) of the KGST Act. When the basic sales tax paid by KSBC under Section 5(1)(b) of the KGST Act, deduction was allowed, there is no reason not to allow deduction of surcharge on sales tax. If the revenue does not consider Section 40(a)(iib) is applicable to the basic sales tax paid by KSBC under Section 5(1)(b) of the KGST Act, it is not known how the surcharge on sales tax, which is nothing but the sales tax, can be brought in the net of Section 40(a)(iib)(A) or 40(a) (iib)(B) of the Act. Further a clear distinction between fee and tax is carefully maintained throughout the scheme under Section 40(a) of the Act itself. Wherever the Parliament intended to cover the tax it specifically mentioned as a tax. Section 40(a)(i) and 40(a)(ia) specifically relate to tax related items. Section 40(a)(ic) refers to a sum paid on account of fringe benefit tax. At the same time, Section 40(a)(iib) refers to royalty, licence fee, service fee, privilege fee or any other fee or charge. If these words are considered to include a tax or surcharge like sales tax, the distinction so carefully spelt out in Section 40 between a tax and a fee will be obliterated and rendered meaningless. It is settled principle of interpretation that where the same Statute, uses different terms and expressions, then it is clear that Legislature is referring to distinct and different things. Even the other alternative submission of the learned counsel that it may attract Section 40(a)(iib)(B) also cannot be accepted for the reason that wherever the Parliament intended to include tax, referred clearly to taxes clearly in the very Section 40. That itself indicates that the surcharge or tax were never intended to be included in the net of amended Section 40(a)(iib)(A) or 40(a)(iib)(B) of the Income- tax Act, 1961. So far as turnover tax is concerned it is submitted by the learned ASG appearing for the revenue that such tax was imposed not only on KSBC in terms of Section 5(1)(b) of KGST Act, but it is imposed on various other retail dealers specified under Section 5(2) of the said Act. Further turnover tax is also a tax. The very same reason which we have assigned above for surcharge, equally apply to the turnover tax also. As such turnover tax is also outside the purview of Section 40(a) (iib)(A) and 40(a)(iib)(B). Thus we hold that the gallonage fee, licence fee and shop rental (kist) with respect to FL 9 and FL 1 licences granted to the appellant will, squarely fall within the purview of Section 40(a)(iib) of the Income- tax Act, 1961. The surcharge on sales tax and turnover tax, is not a fee or charge coming within the scope of Section 40(a)(iib)(A) or 40(a)(iib)(B), as such same is not an amount which can be disallowed under the said provision and disallowance made in this regard is rightly set aside by the High Court. In result, the assessments completed against the assessee with respect to assessment years 2014 -2015 and 2015-2016 stand set aside. The assessing officer to pass revised orders after computing the liability in accordance with the directions as indicated above. As the dispute relates to assessment years 2014 -2015 and 2015 -2016, the assessing officer shall pass appropriate orders, within a period of two months from the date of receipt of this judgment.

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• 2022 (1) TMI 183
  Reopening of assessment u/s 147 - Non dealing with objections - HELD THAT:- Admittedly, the objections were not separately dealt with by the AO as mandatorily required by the judgment of Supreme Court in GKN Driveshafts (India) Ltd. [ 2002 (11) TMI 7 - SUPREME COURT ] On that short ground, the reopening of the assessment is rendered bad in law and the impugned reassessment order deserves to be set aside. As seen that the reasons for reopening of the assessment merely repeats the language of the report of the DDIT (Inv.) without any independent application of mind by the AO. In Sabh Infrastructure Ltd. [ 2017 (9) TMI 1589 - DELHI HIGH COURT ] in similar circumstances set aside the re-assessment order. In paragraph-15 of the said decision, it has been observed that assessment proceedings, especially those under Section 143 (3) of the Act have to be accorded sanctity and any reopening of the same has to be on a strong and sound legal basis. It was further emphasized that there have to be reasons to believe and not merely reasons to suspect that income has escaped assessment. In the present case, apart from the fact that the reopening of the assessment being bad in law for non-supplying of the vital documents on the basis of which the reasons to believe were formed, the Court finds that the reasons for reopening merely reproduces the language of the report of the DDIT (Inv.) without the AO independently applying his mind to the material on record. For all of the aforementioned reasons, the Court finds the impugned re-assessment order to be unsustainable in law and the same as well as the consequential demand notices are hereby set aside.

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• 2022 (1) TMI 182
  Addition u/s 69C - unexplained expenditure - HELD THAT:- As perused the Balance Sheet along withits relevant annexures for the immediately preceding assessment year, wherein, it has been suitably demonstrated by the Ld. AR that the impugned amount represented capital work in progress as on 31.3.2011 and during the year under consideration, it has only been transferred from capital work in progress to fixed assets account - no fresh expenditure has been incurred during the year under consideration and the addition to fixed assets is merely a transfer entry. Also gone through the copy of the ledger account for the capital work in progress for the year ended 31.3.2011 and we note that most of the work pertains to labour charges paid for cleaning and leveling of land. It is also a case in point that neither in the immediately preceding assessment year nor in the assessment year under consideration, the assessee has claimed the impugned amount as expenditure but has capitalized the same. A plain reading of section 69C would show that a rigours of this provision are attracted in the financial year in which the assessee has incurred an expenditure and where he offers no explanation about the source of such expenditure. However, in the present case, neither has the impugned expenditure been incurred in the assessment year under consideration nor is it the Department s case that the assessee could not explain the source of such expenditure, as admittedly, and undisputedly, this expenditure has been routed throughthe books of account which are duly audited and have been accepted by the AO - In such a situation, we are unable to uphold the order of the Ld. CIT(A). We set aside the same and direct the Assessing officer to delete the addition. - Decided in favour of assessee.

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• 2022 (1) TMI 181
  Non-grant of TDS credit - salary income received from HDFC Bank as well as Centurion Bank of Punjab to tax - Claim of TDS credit deducted by Centurion Bank of Punjab from the salary of the assessee duly offered to tax - HELD THAT:- AO has denied the claim of credit of TDS on technical ground of limitation, however, when nothing was to be performed on the part of the assessee to claim such credit of TDS and refund except claiming the same in the return of income then the A.O. cannot be absolved from performing his duties as mandated under the provisions of this Act. When the TDS credit available to the assessee is reflected in Form 26AS then the assessee is even not required to assist the tax authorities to justify the claim once it is declared and claimed in the return of income. Further, the letter dated 13/03/2013 is well within the period of limitation as prescribed U/s 154(7) of the Act then non-performance of duties by the A.O. to take a decision on the said letter cannot be taken to prejudicial to the assessee when the second letter is filed by the assessee on 03/08/2017 for reminding the A.O. for the said claim. The whole conduct on the part of the authorities below for non-granting of due credit of TDS as well as refund is nothing but amounts to undue enrichment of the department by failure to perform its duties. When it was the duty on the taxing authority to grant undisputed due TDS credit and consequential refund and non non-perfoming of its duties on technical ground certainly results injustice to the assessee. Accordingly, in the facts and circumstances of the case, the impugned orders of the authorities below are set aside and the claim of TDS credit deducted by Centurion Bank of Punjab from the salary of the assessee duly offered to tax is allowed and the A.O. is directed to grant consequential refund to the assessee. - Decided in favour of assessee.

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• 2022 (1) TMI 180
  Assessment u/s 153A - Proof of incriminating material as recovered during the course of search - addition on account of long-term capital gain - HELD THAT:- As it is clear that the original assessment stood completed on the date of the search and no assessment proceedings were pending as regards the assessment order under appeal i.e., 2007-08. It is an undisputed fact that no incriminating material was recovered during the course of search concerning the addition made on account of long-term capital gain. It is well settled law that seized material must have some nexus or relevance to the additions sought to be made and must be relevant for the belief formed regarding income having escaped assessment. We are of the view that completed assessment can be interfered with by the AO while making assessment under section 153A of the Act only on the basis of some incriminating material unearthed during the course of search which was not produced or not already disclosed or made known in the course of original assessment. We, therefore, are of the view that invocation of section 153A of the Act by the Revenue for assessment year 2007-08 was without any legal basis as there was no incriminating material qua the assessment order under appeal. Assessing Officer was not justified in making the addition on account of long-term capital gains. - Decided in favour of assessee.

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• 2022 (1) TMI 179
  Penalty u/s 271 (1)(c) - TDS liability u/s 194C/ 195 - Whether reimbursement of expenses is not hit by the Section 40(ba)? - HELD THAT:- The case before the authorities below was that the assessee was not required to deduct tax. However, no material is placed on record in support of the contention of the assessee that no tax is deductable. In the absence of the material evidence, we do not find any infirmity into the order of the authorities below. The grounds raised in this appeal are rejected. Appeal of the assessee is dismissed.

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• 2022 (1) TMI 178
  Disallowing interest paid to NBFC and other Financial Institutions merely because of Non-Deduction of TDS despite of providing interest certificates, confirmations and certificates in form 26A - HELD THAT:- This ground relating to interest paid to NBFC and others, find that Ld.CIT(A) has passed reasonable order and he has directed the AO to verify and grant proportionate relief - we do not find any infirmity in the same. Hence, we uphold the same. Addition u/s 40A - cash payments - HELD THAT:- We find that why this payment cannot be consider under exemption in Rule 6DD u/s. 40A(3) has not been explained. Nor the Ld. DR could point out the same. In considered opinion, the facts and circumstances narrated above fully support the assessee plea that the impugned payment falls under the ken of exemption to section 40A(3) contained under Rule 6DD. Hence, disallowance made in this regard is not legally sustainable. Hence, we set aside the order of Ld.CIT(A) and decide the issue in favour of the assessee.

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• 2022 (1) TMI 177
  Late filing fee u/s 234E of the Act by passing the order u/s 200A - Application to processing of TDS return/statement prior to 01.06.2015 - HELD THAT:- When undisputedly levy has been made by the A.O in all appeals under consideration prior to 1st June, 2015 by invoking the provisions contained u/s 234E the same is not sustainable in the eyes of law. No doubt Hon ble High Court of Bombay in case of Rashmikant Kundalia [ 2015 (2) TMI 412 - BOMBAY HIGH COURT] the constitutional validity of Sec. 234E of the Act has been, upheld, the same is not applicable to the facts of the cases at hand by virtue of the amendment to Sec. 200A by way of Finance Act, 2015 effective from 1st June, 2015 because A.O had issued intimation u/s 200A of the Act prior to 01.06.2015. No doubt, provisions contained u/s 234E were inserted by the Finance Act, 2012 imposing a liability upon deductor where TDS statement/returns were filed belatedly to pay fee as per the said section, Assessing Officer is to collect said fee chargeable u/s 234E of the Act for which machinery provisions have been provided u/s 200A of the Act to be effective from 01.06.2015. When undisputedly A.O has not invoked the provisions contained u/s 234E prior to 1st June, 2015 as required u/s 200A the levy is not sustainable, the said amendment being prospective in nature and cannot be applied in processing of TDS return/statement prior to 01.06.2015 - See SIBIA HEALTHCARE PRIVATE LIMITED VERSUS DY. COMMISSIONER OF INCOME-TAX (TDS) , CENTRALIZED PROCESSING CELL, GHAZIABAD [ 2015 (6) TMI 437 - ITAT AMRITSAR] Thus CIT(A) have erred in levying /confirming the late filing fee u/s 234E of the Act by passing the order u/s 200A of the Act. - Decided in favour of assessee.

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• 2022 (1) TMI 176
  Addition u/s 2(22) - Deemed dividend - receipt is in the nature of capital or not - whether the said amount was part of interim dividend declared the company on which dividend distribution tax was already paid - Whether assessee is not entitled to any exemption, in the absence of section 10(33)? - whether CIT(A) has erred in ignoring the provision of section 115-O of the Act as per which, payment of dividend distribution tax is considered as final payment of tax and thus, taxing the same under section 2(22) ? - HELD THAT:- Admittedly, the dividend income was received in the previous year relevant to assessment year 2003-2004. For the assessment year 2003-2004, the assessee was not entitled to exemption of dividend income in absence of section 10(33) of the Act (section 10(33) of the Act was omitted by the Finance Act, 2002). Moreover, the contention of the assessee that the impugned payment of Rs. 25 lakh is in the nature of capital in view of the fact that the company was under liquidation proceedings, and accordingly, such distribution will have to be taxable in accordance with section 46(2) of the Act is also devoid of any merits, because dividend was declared before liquidation and dividend distribution tax was paid u/s. 115-O of the Act by the company (dividend was declared on 05.07.1999 and dividend distribution tax was paid on 31.01.2001). Therefore, the provisions of section 46(2) of the Act do not have application to the facts of the present case. In the light of the aforesaid reasoning, we see no reason to interfere with the order of the CIT(A) and we uphold the same as correct and in accordance with law. Assessee appeal dismissed.

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• 2022 (1) TMI 175
  Capital gain - value determined by the DVO - entitled for the benefit of proviso to section 50C(1) - Addition on account of difference between the sales consideration and the valuation done by the DVO - HELD THAT:- Assessee furnished a chart showing the details of difference in % of value declared by the assessee and value accepted. With regard to properties shown at Sl.No.1 and 2 there is no difference of 5.7% between the value declared by assessee and the value determined by the DVO. Therefore, we find convincing force in the submission of ld.AR of the assessee that the assessee is eligible of benefit of amendment made in section 50C(1) by inserting 3rd Proviso for enhancing tolerance bend for variation between declared value vis- -vis stamp valuation from 5% to 10% was held to be retrospective from the date when section 50C was inserted w.e.f 01.04.2003. See Maria Fernandes Cheryl [ 2021 (1) TMI 620 - ITAT MUMBAI] . Similar view was reiterated by Delhi Tribunal in Amrapali Cinema [ 2021 (4) TMI 1160 - ITAT DELHI] therefore, respectfully following the decision of Co-ordinate Benches as referred above and considering the fact that the difference between the declared value and the value determined by the DVO is only 5.77%. Thus, we direct the AO to delete the addition qua property mentioned at Sl.No.1 and 2. So far as the Property mentioned Sl.No.3 and 4 are concerned, we find that there is a difference of 14.77% and 14.58% between the value declared by assessee and the fair market value determined by DVO which is beyond the maximum tolerance band of 10% as per the proviso to section 50C(1) of the Act. Therefore, the benefit of said proviso cannot be extended to the assessee - we find that these case laws are not applicable on the facts of the present case as all those case laws relates to addition in different chapter of Income Tax Act and facts of all those cases are altogether different and the ratio of all those cases are not applicable on the facts of the present case - assessee is not entitled for the benefit of proviso to section 50C(1) qua property shown at S No 3 4 and accordingly, the addition with regard to property mentioned at Sl.No.3 and 4 are upheld. Appeal of the assessee is partly allowed

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• 2022 (1) TMI 174
  Allowable revenue expenses - Claim for deduction for the full amount of initial payments for the leaseholds - 2nd round of litigation - Whether the impugned order is void and deserves to be cancelled, inter alia, for the reason that it contains conclusions contrary to the decision of the jurisdictional High Court in DCIT v. Sun Pharmaceutical Industries Ltd. [ 2009 (3) TMI 587 - GUJARAT HIGH COURT] / - HELD THAT:- As in the case on hand we find that the assessee has taken the land for setting up power receipt station in order to further distribution of power to customers and not for the purpose of extraction of the minerals. The issue whether the lease premium is capital in nature depends upon the facts and circumstances of each case. Accordingly, in our humble understanding, the principles laid down by the Hon ble SC PINGLE INDUSTRIES LIMITED [ 1960 (4) TMI 5 - SUPREME COURT] cannot applied in each and every case without examining the necessary and relevant facts. Also in the case of CIT vs. H.M.T. Ltd.[ 1992 (11) TMI 37 - KARNATAKA HIGH COURT] has allowed such lease premium as revenue expenses. In that case the land was acquired on lease for 95 years and the assessee paid upfront lease premium of Rs. 12,09,200/-. Thereafter, the assessee was liable pay lease rent at Rs.1 per annum. The Hon ble Karnataka High Court was pleased to delete the addition made by the AO.As the assessee will not be penalized even in the case no tax deducted at source on the amount paid or credited to resident payees if following conditions fulfilled: (A) Payee has included the impugned amount on which tax was not deducted/short deducted by the payer in his return of income filed under section 139 and pays the taxes due on returned income and (B) Payer produces a certificate in prescribed form i.e. form 26A from a CA to the effect that the payee has included the income in return and paid taxes thereof. We note that the disallowance cannot be made without referring the provisions as discussed above - we hold that the impugned amount of lease premium expenses are allowable deduction as revenue expenses while computing the business income of the assessee. Hence, we reverse the order of the authorities below and direct the AO to delete the addition made by him. Thus the ground of appeal of the assessee is allowed. Disallowance u/s 14A r.w.s. 8D - HELD THAT:- We hold that no disallowance of interest expense claimed by the assessee can be made on account of investments made in the securities as discussed above. Hence we direct the AO to delete the addition made to the extent of interest expenses. Administrative expenses - We are of the view that some element of the administrative expenses should be considered/ allocated against the exempted income. But the assessee has not done so. Accordingly, the AO has made the disallowance qua the administrative expenses under rule 8D of Income Tax Rules which was subsequently confirmed by the ld. CIT-A. As assessee has not made any disallowance qua the administrative expenses and also failed to justify based on the documentary evidence that it has not incurred any expense, we don t find any reason to interfere in the finding of the ld. CIT-A. Hence, we confirm the disallowance made by the authorities below towards the administrative expenses subject to the limit of the exempted income. Thus the ground of appeal of the assessee is partly allowed. Depreciation on the intangible assets being leasehold right - HELD THAT:- As the amount of lease premium was allowed as revenue expenditure. Once the deduction has been allowed to the assessee, the question of allowing either the depreciation or revenue expense does not arise. As such, the issue raised by the assessee becomes infructuous. Accordingly, the ground of appeal raised by the assessee is dismissed as infructuous. Deduction under section 80IA - Insurance receipts - Once the loss has been allowed as deduction in the earlier year, then the receipt against such loss by way of insurance claim should also be treated as income of the assessee. There cannot be different treatment for the loss claimed by the assessee and the income shown by the assessee qua such loss. In addition to the above, we also note that the finding of the learned CIT(A) is not complete. If the learned CIT(A) had a doubt about the character of insurance receipt whether it is on revenue account or capital account, then it was his duty to find out the truth by carrying out the necessary verification. But we find that the CIT (A) without necessary verification had doubted on the impugned insurance receipt. In our considered view, this approach of the CIT(A) seems to be improper. Be that as may be, in the interest of justice and fair play, we are inclined to restore the issue to the file of the AO for limited purpose to verify whether the impugned receipt represents the capital receipt or revenue receipt. If it is of capital in nature, then the assessee should not be allowed as deduction under section 80 IA of the Act and vice-versa as per the provisions of law. Hence the issue raised by the assessee is allowed for the statistical purposes. Streetlight maintenance - As safely concluded that the expression Profit and gain derived from an Industrial undertaking used in sections 80-IA of the Act, will include all the profits and gains earned by the Industrial undertaking by the actual conduct of its business. It would mean that all the income which has a direct nexus with the business of the Industrial Undertaking, will be includible in such profits and gains. Thus, we are of the view that profit and gain earned by the assessee from the services of maintenance of street light are not the profit and gain from the activity or undertaking of generation and distribution of power. As there is no nexus between the business of power distribution and maintenance /service of street light. Thus, we hold that profit and gains derived from street light maintenance services should not be included in amount of deduction under section 80IA of the Act. Hence we do not find any infirmity in the finding of the authority below. Accordingly the assessee s ground of appeal is dismissed. Bad debts recovery - There remains no ambiguity to the fact that the assessee is eligible for deduction under section 80 IA of the Act with respect to the impugned bad debt recovery shown as income in the year under consideration. Thus the ground of appeal of the assessee is allowed. Interest income - As transpired that the assessee has not made fixed deposits under any obligation in the course of carrying on the business of distribution of power. However, it is also a fact on record the impugned interest income was offered by the assessee as business income which was also accepted by the revenue in the assessment proceedings. The provisions of Section 80-IA of the Act provides for deduction of the profits derived from the business by an undertaking or enterprise, engaged inter alia, in generation or generation and distribution of power. But the interest income was not arising to the assessee from the activity of distribution of power. Thus, on the same reasoning given in the relation to streetlight maintenance activity in para no. 38 of this order, the impugned income is not eligible for deduction under section 80-IA of the Act. Therefore the authority below rightly excluded the same from the computation of deduction under section 80IA of the Act. Hence the assessee ground of appeal is dismissed. Delayed payment interest - Once a bill is raised to the customer, it is expected from the customer to make the payment within the time provided therein. In case of any delay, the interest charged by the assessee from the customers represents the compensation for the delay payment. In other words, it is an opportunity loss to the assessee for the delay in the payment, had the money been realized by the assessee in the time, the same would have been exploited in some remunerative activity but the assessee was deprived. Thus the interest was charged which partakes the character of the sale proceeds. Thus to our understanding such amount of interest is very much eligible for deduction under section 80-IA. As relying on NIRMA INDUSTRIES LIMITED [ 2006 (2) TMI 92 - GUJARAT HIGH COURT] the judgment was rendered in connection with the provisions of section 80I of the Act but the principles laid down therein can also be adopted to the provisions of section 80-IA of the Act. In view of the above, we do not find any infirmity in the order of learned CIT (A). Hence the issue raised by the Revenue is dismissed. Unfulfilled guarantee revenue - The fees charged by the assessee from the customers on account of not using the committed units has direct nexuses with the activity of the assessee i.e. distribution of electricity. Had the customer utilized the guaranteed units, there would have been the flow of income from the distribution of power activity which was very much eligible for deduction under section 80-IA of the Act. On the same analogy, the amount paid by the customer on account of the failure on its part for not utilizing the committed units, would partake the character of sale proceeds of power distribution activity. Thus to our understanding such amount of un-fulfilment commitment charges is very much eligible for deduction under section 80-IA. Interest income on late payment which is eligible for deduction under section 80-I of the Act but the principles laid down therein can also be adopted to the provisions of section 80-IA of the Act in the given facts and circumstances. In view of the above we do not find any infirmity in the order of learned CIT (A). Hence the issue raised by the Revenue is dismissed. Rent income - The provisions of Section 80-IA of the Act provides for deduction of the profits derived from the business by an undertaking or enterprise, engaged inter alia, in generation or generation and distribution of power. But the rental income was not arising to the assessee from the activity of distribution of power. Thus, on the same reasoning given in the relation to streetlight maintenance activity in para no. 38 of this order, the impugned income is not eligible for deduction under section 80-IA of the Act. Thus in view of the above discussion we are of the opinion that the rental income received from employee should not be included in the computation of deduction under section 80IA of the Act as the same is not the profit or gain derived from the eligible business activity. Before parting a question arises what about the depreciation claimed by the assessee with respect to such building being the staff quarters. If the income is not eligible for deduction under section 80-IA then in our considered view the corresponding depreciation should also be excluded from the profit of the eligible undertaking. Likewise, the expenses incurred in connection with the maintenance of such staff quarters should also be excluded. Accordingly, we direct the AO to exclude the rental income from the amount of eligible profit net of the expenses qua to such rental income. Hence the ground of appeal of the assessee is partly allowed. Delayed payment charges - The late fees charged by the assessee from the customers on account of delayed payment within the time has direct nexuses with the activity of the business of the assessee i.e. distribution of electricity. Thus to our understanding such amount of delayed payment charges is very much eligible for deduction under section 80-IA of the Act. In holding so we draw support and guidance from the judgment of Hon ble Gujarat High Court in the case of Nirma Industries Ltd. Vs. DCIT [ 2006 (2) TMI 92 - GUJARAT HIGH COURT] - with the interest income which is eligible for deduction under section 80- I of the Act but the principles laid down therein can also be adopted to the provisions of section 80-IA of the Act in the given facts and circumstances. In view of the above we do not find any infirmity in the order of learned CIT (A). Hence the issue raised by the revenue is dismissed. Miscellaneous receipts - whether the amount of scrap sale shown by the assessee is eligible for deduction under section 80-IA? - Admittedly the amount of scrap sale is not arising from the power distribution activity of the assessee. The amount of deduction under section 80-IA of the Act is limited to the extent of the profit derived from the distribution of power in the given facts and circumstances. Accordingly, we are not in agreement with the contention of the assessee. We find lot of force in the arguments of the assessee. The amount of sale of scrap of Rs. 10,04,30,079/- represents the sale of the items which have been classified as fixed assets in the books of accounts. In other words these items pertaining to the relevant block of assets on which the assessee is entitled to claim the depreciation. Accordingly, on sale of these items, the sale proceeds should be adjusted against the relevant of assets and therefore the same should not be treated as income of the assessee. To avoid any ambiguity, the amount of Rs. 1,53,39,539/-being the difference of Rs. 11,57,69,618/- minus Rs. 10,04,30,079/- shall be treated as scrap sale which is not eligible for deduction under section 80-IA of the Act. In view of the above and after considering the facts in totality, the ground of appeal of the assessee and the ground of appeal of the revenue are dismissed. Eligibility to claim of deduction of the items raised in the ground of appeal de novo afresh - Deduction of the education cess paid on income tax u/s 37(1) - Since the claim of the assessee is purely legal claim and entire facts are available on record. Thus it is not justified in not admitting the purely legal ground raised by the assessee for the first time. As the assessee has not claimed this expenditure before the lower authorities, they have not got opportunity to examine the same as per the provisions of Act, thus In the interest of justice, the ground is restored back to the file of the Assessing Officer with a direction to examine assessee s eligibility to claim of deduction of the items raised in the ground of appeal de novo afresh after providing an opportunity of being heard to the assessee and as per the provisions of law. Thus the additional ground of appeal raised by the assessee is allowed for statistical purposes Disallowance on account of fees for the study relating to new project - HELD THAT:- From the preceding discussion, we note that the expenditure on the feasibility report was incurred by the assessee for the expansion of the existing business. This finding of the learned CIT-(A) has not been controverted by the learned DR appearing on behalf of the revenue. Therefore, such expenses cannot be treated as capital in nature as these expenses do not fall under the mischief of the provisions of section 35D - See KESORAM INDUSTRIES AND COTTON MILLS LIMITED VERSUS COMMISSIONER OF INCOME-TAX [ 1991 (3) TMI 28 - CALCUTTA HIGH COURT] - thus we hold that the expenditure incurred by the assessee on the study and preparation of the feasibility are allowable expenses under the provisions of section 37(1) of the Act. Thus we do not find any infirmity in the order of the learned CIT-(A). Hence the ground of appeal of the revenue is dismissed. Deduction u/s 80IA - initial assessment year for claiming the deduction with respect to all its units was the year under consideration - HELD THAT:- Deduction is available to the assessee at its option for 10 consecutive assessment years out of a block of 15 years effective from the year in which the undertaking begins the activity of renovation and modernization of the existing transmission/distribution lines. It was the 1st time i.e. the year under consideration when the assessee exercised its option for claiming the deduction under section 80IA of the Act. Thus, the period of 10 years shall begin from the year under consideration for which the assessee is entitled for deduction. As per circular CBDT circular No. 1 of 2016 dated 15th February 2016 Assessee has option to choose initial year or first year out of the block of 15 or 20 years as case may be to claim deduction for 10 consecutive years but not the year in which the assessee becomes first time eligible to claim deduction. After considering the facts in totality, we are of the view that there is no infirmity in the order of the learned CIT(A). Accordingly we decline to interfere in his order. Hence, the ground of appeal of the revenue is dismissed. Deduction u/s 80G/80GGB - donation shown in the profit and loss account of the eligible undertaking cannot be claimed as deduction under the provisions of section 80G /80GGB - AO disregarded the contention of the assessee by observing that there remained no taxable profit after claiming the deduction under section 80- IA of the Act in the specified undertaking - whether the assessee can claim the deduction under section 80G and 80GGB of the Act for the donations made by the undertaking eligible for deduction under section 80-IA ? - HELD THAT:- There is no dispute to the fact that the amount of donation was claimed by the assessee in the profit and loss account of the eligible undertaking which has been disallowed while computing the eligible profit. Certainly, the profit of the eligible undertaking will increase by the amount of disallowance made by the assessee on account of the donations paid to the institutions which is entitled for deduction under section 80G/80GGB of the Act. It has to be disallowed/added back while computing the eligible profit of the business referred therein under section 80-IA of the Act. It is for the reason that this donation does not relate to the business referred under section 80-IA of the Act which is eligible for deduction. But the same can be claimed as deduction by virtue of the provisions of section 80G/80GGB of the Act separately subject to the conditions specified therein. Hence, we do not find any infirmity in the order of learned CIT (A). Thus, the ground of appeal of the Revenue is dismissed. Computation of deduction u/s 80-IA - As regards the issue of preceding year loss which was not set off by the assessee against the eligible undertaking located at Bhiwandi, we note that the issue is no longer rest integra and settled in favour of the assessee by the judgment in the case of Velayudhaswamy Spinning Mills [ 2010 (3) TMI 860 - MADRAS HIGH COURT] . Hence, the ground of appeal of the revenue is dismissed. MAT computation u/s 115JB on addition u/s 14A - HELD THAT:- Disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of the Hon ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. [ 2014 (11) TMI 1169 - CALCUTTA HIGH COURT] Determine the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently - There is no mechanism/ manner given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income. Therefore in the given facts circumstances, we feel that adhoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB of the Act. Thus the ground of appeal of the Revenue is partly allowed. Enhanced profit which is deductible under the provisions of section 80 IA of the Act on account of the disallowance of the expenses under the provisions of section 14A - claim of the assessee was rejected by the learned CIT (A) by holding that there is no dispute that the disallowances under section 14A will increase the business profit - HELD THAT:- The 1st question that arises for our consideration whether the expenses disallowed under section 14A of the Act were attributable to the eligible undertaking or not. But the assessee before us has not brought anything on record suggesting that such expenses which was disallowed under the provisions of section 14 A of the Act were pertaining to the eligible undertaking. Accordingly, we are of the view that no benefit can be extended to the assessee on account of the enhanced profit which is deductible under the provisions of section 80 IA of the Act on account of the disallowance of the expenses under the provisions of section 14A. Addition of provision for doubtful debts to the net profit for the purpose of computation under section 115JB - HELD THAT:- The assessee could not have added back the provision for doubtful debts to the net profit for the purpose of computation under section 115JB of the Act in the years prior to insertion of clause (i) as those years had already elapsed and the assessee could not have given effect to the provision, which was inserted at a later point of time. The assessee therefore, could not have added back the provision for bad and doubtful debts to the net profit due to reasons beyond its control. Therefore, no adverse inference could have been drawn against the assessee. In view of preceding analysis, the assessee cannot be penalized for not adding the provisions for bad debts on account of retrospective amendment as discussed above. Hence, the ground of appeal of the assessee is allowed whereas ground of the revenue is dismissed. Addition of amount of contribution made u/s 35(1)(ii) towards the research activity apportioned to Ahmadabad generation unit and Ahmedabad distribution unit in equal proportion - CIT-A deleted the addition - HELD THAT:- If the eligible undertaking derives any incomefrom the activity other than those business referred therein, then, the same cannot be allowed as deduction under section 80-IA of the Act. On the same reasoning, if there is any expense/payment made by the non-eligible undertaking which is not in connection with the business referred under the provisions of section 80-IA of the Act, the same expenses/payment has to be excluded for determining the eligible profit. Thus, the amount eligible for deduction under section 80-IA of the Act is determined from the business referred therein only. Coming to the case on hand the contribution under section 35 (1)(ii) of the Act was paid by the assessee against the against the non-eligible undertaking which is not qualified for deduction under section 80-IA of the Act, the same cannot be considered as an expense/payment against the specific business/undertaking eligible for deduction under section 80 IA of the Act. It is for the reason that the contribution under section 35(1)(ii) of the Act does not relate to the eligible undertaking. In other words, the payment under section 35(1)(ii) of the Act is eligible for deduction on account of the payment made to the specific institution irrespective of the business whether it is eligible or non-eligible carried on by the assessee. In holding so we draw support and guidance from the judgment of Zandu Pharmaceuticals Works Ltd. [ 2012 (9) TMI 620 - BOMBAY HIGH COURT] - As the amount of contribution was claimed by the assessee in the profit and loss account of the non-eligible undertaking. Hence, we do not find any infirmity in the order of learned CIT (A). Hence the ground of appeal of the Revenue is dismissed.

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• 2022 (1) TMI 173
  Failure to collect TCS u/s 206C(1) - trading of scrap - sale of scrap to manufacturer - Period of limitation - Assessee failed to submit the Form No.27BA and failed to furnish the declarations in Form 27C as required under the explanation (1A) and (1B) to section 206C(1) in the office of the Competent Authority - assessee submits that assessment order passed by u/s 206C(6)/(6A) r.w.s 206C(7) as barred by limitation and therefore deserves to be quashed - HELD THAT:- Section 206C prescribes two window wherein, assessee seller does not require to collect TCS. First is obtain declaration (in Form 27C) from the counter party-purchaser, that goods so purchased are to be utilized for the purposes of manufacturing, processing or producing articles or things or for the purposes of generation of power and not for trading purposes and in those cases assessee seller is not required to collect TCS on such transactions. The same is envisaged in Section 206C(1A) of the Act. The second window is to obtain certificate, to the effect that buyer has furnished his return of income u/s 139 of the Act and has taken into account such amount for computing income in such return of income; and has paid the tax due on the income declared by him in such return of income. Such certificate should be obtained from a Chartered Accountant as per proviso to section 206C(6A) of the Act, in Form 27BA, as prescribed by CBDT. Respectfully following the Judgment of Bharat Hotels Ltd, [ 2015 (12) TMI 1469 - KARNATAKA HIGH COURT] we note that in assessee`s case under consideration, order passed by the assessing officer under section 206C(6)/(6A) r.w.s 206C(7) for AY.2012-13 and A.Y. 2013-14 are barred by limitation and therefore we quash both the orders of the assessing officer and hence we allow the appeal of the assessee. Interpreting the term Scrap as defined in clause (b) to Explanation to section 206C - For AY 2014-15 to AY 2016-17 as noted that assessee under consideration is a trader in scrap. His products are not a result of manufacturing process carried out by him. Thus, assessee being trader, not covered in definition of scrap , since scrap is not generated from manufacturing or mechanical working of material, therefore the assessee is not covered in definition of scrap . Hence, in our considered opinion, the assessee cannot be treated as an assessee in default, therefore we allow appeals of the assessee.

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• 2022 (1) TMI 153
  Revision u/s 263 by CIT - AO allowed the deduction u/s 80P(2)(a)(i) in respect of interest income from the Co-operative Bank and as such, the order was not `erroneous for the purpose of section 263 - HELD THAT:- On perusal of the assessment order passed u/s 143(3) of the I.T.Act dated 30.11.2016, it is clear that there is no discussion by the A.O. and deduction u/s 80P of the I.T.Act has been granted without much inquiry. The assessment order completed without making necessary inquiry rendered the assessment erroneous and prejudicial to the interest of revenue. Therefore, the CIT has correctly invoked the provisions of section 263 of the I.T.Act and we uphold the same. As regards whether the assessee is entitled to deduction u/s 80P(2)(a)(i) and 80P(2)(d) of the I.T.Act, the recent order of the Tribunal in the case of M/s.Vasavamba Co-operative Society Ltd [ 2021 (8) TMI 706 - ITAT BANGALORE] after considering the judicial pronouncements on the issue held that interest income earned out of investments made from surplus funds would be taxable under the head `income from other sources and would not be eligible for deduction u/s 80P(2)(a)(i) of the I.T.Act. It was further held by the Tribunal insofar as deduction u/s 80P(2)(d) of the I.T.Act is concerned, only those interest received from investments with co-operative societies alone would be entitled to deduction. As contended that majority of the interest income is earned out of investments made with Central Co-operative Banks and is in compliance with the requirement under the Karnataka Co-operative Societies Act and Rules. If the amounts are invested in compliance with the Karnataka Co-operative Societies Act, necessarily, the same is to be assessed as income from business, which entails the benefit of deduction u/s 80P(2)(a)(i) of the I.T.Act. Insofar as deduction u/s 80P(2)(d) of the I.T.Act is concerned, we make it clear that interest income received out of investments with cooperative societies is to be allowed as deduction. Hon ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. Ors. [ 2021 (1) TMI 488 - SUPREME COURT] had settled various issues for claiming deduction u/s 80P(2)(a)(i) Thus the matter needs to be examined afresh by the A.O. de hors the observations of the CIT. The A.O. is directed to follow the dictum laid down by the Hon ble Apex Court in framing the fresh assessment. It is ordered accordingly.

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• Customs

• 2022 (1) TMI 172
  Mis-declaration and mis-classification of goods - machinery oil - machinery lubricating oil - to be classified under CTH 27101950 and CTH 27101980 respectively or not - intelligence indicated that the average price of base oil is about US $ 900-1100 per MT whereas the importer in this case has declared a price of US $ 490-500 per MT - appellant sought cross-examination of the chemical examiners which was denied - violation of principles of natural justice - HELD THAT:- It is found from the impugned order that there is no recording of any cross-examination of the chemical examiners for the test reports. The allegation in the show cause notice as confirmed in the impugned order is that the appellant has misdeclared the nature of goods. The appellant imported base oil and declared it as machinery oil and also claimed wrong classification in this bill of entry.Since the description of the goods was held to be not correct, the declared assessable value was rejected under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Goods, 2007 and redetermined under Rule 5. Accordingly, the assessment of the bills of entry which were provisionally assessed was ordered to be finalized and the differential duty was ordered to be recovered. It is unfair to allege that the appellants have mis-declared the goods without any categorical finding of an expert that the imported goods were NOT machinery oil and then allowing cross examination of such expert(s) by the appellant to prove its case and contest the expert opinion. In this case, while the test reports that have been relied upon as recorded in the impugned order only suggested that the goods may be base oil and NOT that they are base oil . Further, the reports also do not say that the goods are not machinery oil as described by the importer. Thus, there is an ambiguity in the test reports - there is a need to allow the appellant to cross-examine all the chemical examiners whose test reports were relied upon in the impugned order so that a categorical, authentic finding may be recorded as to whether the imported goods were base oil or machinery oil or whether they can be described as both. Matter remanded back to the Commissioner of Customs with a direction to allow cross-examination of all the experts whose reports were relied upon and after giving the reasonable opportunity of being heard, pass an order - appeal allowed by way of remand.

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• 2022 (1) TMI 171
  Denial of interest on refund claim - duty which was prayed to be refunded was paid prior to show cause notice of 2011 was issued (within three months of the relevant refund application) - Section 27(1) of Customs Act, 1962 - HELD THAT:- When the provisions of Section 27 of Customs Act are applied to the facts of present case it is clear that the duty which was prayed to be refunded was paid prior to show cause notice of 2011 was issued. The order of Original Adjudicating Authority which dropped the impugned demand was passed on 31.08.2018 and application praying for refund was filed on 1.10.2018. The refund in this case was admittedly sanctioned on 22.10.2018. Thus it is clear that refund of Customs duty paid was sanctioned within one month of the application seeking that refund. There is no infirmity in the Order under challenge where interest has not been awarded while sanctioning refund - Bare perusal of section 27 makes it clear that interest has to be given by the department while sanctioning the refund only when the sanction order has been passed after period beyond three months of seeking refund. There is no infirmity in the order under challenge - appeal dismissed.

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• Corporate Laws

• 2022 (1) TMI 170
  Seeking interest on the alleged belated payment of principal sum and accrued interest to the plaintiff for the Bonds issued by SIDBI - Bond Holder undergone liquidation - central case projected by the plaintiff was that the amount, both principal and interest, were paid beyond the maturity period and, therefore, the defendant is liable to pay the interest for delayed payment - HELD THAT:- A conjoint reading of the statutory provisions, makes it abundantly clear that for public interest the RBI is empowered to issue any directive to any banking institution, and to prohibit alienation of an NBFC s property. The term Public interest has no rigid definition. It has to be understood and interpreted in reference to the context in which it is used. The concept derives its meaning from the statute where it occurs, the transaction involved, the state of society and its needs - it is not necessary for RBI to mention a specific provision before issuing directions, for it to have statutory consequences. All that is required is the authority under the law, to issue such direction. The RBI under Section 45-MB of the RBI Act, 1934 and 35-A of the Banking Regulation Act, 1949 has the requisite authority to issue the communication dated 09th June, 1997. The omission by the RBI to mention any enabling provision, doesn t change the nature and status of the direction. The statutory arrangement and interpretation persuades to hold that actions in furtherance of grounds of public policy by the RBI was justified, for issuing the Notification dated 10.04.1997. The notification itself clearly mentioned that it is issued for the benefit of depositors and creditors of CRB Capital. The actual status of the RBI Notification would have a bearing on the claim against the defendant in the suit and the later proceeding. The plaintiff, as can be noted, always had the option of challenging its legality but they have never specifically challenged those in the Suit. Therefore, when the legality of the RBI Notification is not under challenge, relief can t be granted in the Suit without determining its legality. This in our perception can by itself, put a quietus on the issue at hand - the plaintiff cannot be granted parity with its predecessor-in-interest, Shankar Lal Saraf, who was paid interest which accrued in July, 1997 despite the RBI directive of 09.06.1997. The defendant has explained this aberration by clarifying that the payment to Shankar Lal Saraf was made before the defendant was in receipt of the RBI directive. Hence, the plaintiff cannot claim any advantage for themselves or parity with its predecessor-in-interest, on this cause. Shadow over Shankar Lal Saraf s transaction - HELD THAT:- Section 441(2) of the Companies Act, 1956 reveals that winding-up proceedings other than voluntary winding-up, are said to have commenced from the date of presentation of petition - A conjoint reading of Section 531 and 441(2) of the Companies Act, 1956 prima facie reveals that any transfer of property by or against a company in involuntary winding up, the suspect spell for deemed fraudulent transaction is six months before presentation of the winding up petition. In the present case, the petition for winding-up was submitted by RBI on 22.05.1997 and admittedly, the transfer in Shankar Lal Saraf s favor was executed in February, 1997. Hence, the defendant s prima facie suspicion that the transfer during the suspect spell, may be deemed fraudulent, is not misplaced. Thus, the defendant s impression that the transfer in favour of Shankar Lal Saraf was not legitimate, was a reasonable opinion, shared by many, including the RBI and the Official Liquidator. The defendant was in receipt of the RBI s directions, not to part with payment as the Official Liquidator had treated the transaction as fraudulent. This had clearly placed a shadow over the plaintiff s title to the Bonds and consequences must flow therefrom. Whether withholding payment bonafide? - HELD THAT?:- The Learned Counsel for the plaintiff has failed to show how the defendant derived any undue benefit by withholding the payment accrued on the Bonds. The amount due on the Bonds was immediately transferred to the Accrued Interest head and was not used by the defendant for their business. Hence, the plaintiff s contention that the defendant s actions of withholding payment were mala fide, is not acceptable - the defendant is barred by res judicata from raising the issue of fraudulent preference. The issue of fraudulent preference is no longer res integra and none sought to challenge the Company Court s judgment and re-agitate the issue. Hence, this contention will be of no advantage for the plaintiff. Bond status and obligation: Holder in due course - HELD THAT:- An obligation has been imposed on the transferee of the promissory notes, to be deemed to be a Holder in due course , that the notes should have been acquired in good faith; after exercising reasonable care and caution about the holder s title. In the present case, while the Shankar Lal Saraf s (holder) title over the Bonds/Promissory Notes is not in dispute but as discussed earlier, Shankar Lal Saraf s holding stood cleared by the Company Court only on 17.12.2004 but before the said judgment, there was a cloud over his title. Consequently, the plaintiff s status as holder in due course was suspect at the relevant point of time - defendant bank was therefore justified in withholding payment till conclusion of dispute in Company Court, even though the relief claimed was in respect of an unconditional undertaking , as there were reasonable legal concerns for the transaction during the suspect spell, for making such payments. Entitlement for Interest on delayed payment - pendente lite interest - HELD THAT:- The defendant acted bona fide and there was no undue delay on their part, to remit the dues. - The plaintiff did pray for pendente lite interest in the Trial Court but neither did the trial court frame any issue in this regard, nor were any arguments recorded. This shows that such claim was not pressed by the plaintiff. Further, no ground is urged in the appeal memo, that such an issue ought to have been framed. Hence, it is clear that the plaintiff is not serious on its claim for pendente lite interest. Was plaintiff s demand barred by waiver/ acquiescence? - HELD THAT:- It is clear that the plaintiff accepted the payment from the defendant as due settlement of its claims. SIBCO s failure to raise protest and demand for interest at the earliest possible stage, amounted to sub-silencio acceptance. Accordingly, the plaintiff is barred from raising this demand after several months applying the principle of waiver/acquiescence. Whether present suit barred by Constructive res judicata? - HELD THAT:- The cause of action for the plaintiff accrued the first time, when the defendant allegedly failed to pay timely interest. Since such a claim was not raised in the writ court, the subsequent Suit of SIBCO is barred by the principle of Constructive Res Judicata. The RBI has wide supervisory powers over financial institutions like SIDBI, in furtherance of which, any direction issued by the RBI, deriving power from the RBI Act or the Banking Regulation Act is statutorily binding on the defendant. Admittedly, the RBI issued Notification dated 10.04.1997, deriving power from S. 45-MB(2) of the RBI Act. Thereby, the RBI froze the assets of CRB Capital on the grounds of public policy, for the purpose of protecting interests of creditors and depositors of CRB Capital - in absence of the Official Liquidator s consent and guidance, the defendant could not have made the payment without inviting onerous consequences for itself. Hence, it can be said that the defendant acted prudently, being conscious of the legal obligation, to withhold such payment to the plaintiff. The defendant s appeal against the impugned judgment is allowed by restoring the judgment of the Trial Court. The plaintiff s cross-appeal is however rejected.

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• 2022 (1) TMI 169
  Sanction of Scheme of Amalgamation - Section 230(1) read with Section 232(1) of the Companies Act, 2013 - HELD THAT:- Various directions with regard to holding convening and dispensing with various meetings issued - the scheme is approved - application allowed.

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• 2022 (1) TMI 168
  Seeking to restore the name of the Company in the ROC - Section 252 of the Companies Act, 2013 - HELD THAT:- A perusal of the various documents more particularly, the Income Tax Acknowledgment for the Assessment Year 2014-2015 to 2019 - 2020 would show that the Company has paid tax and further a perusal of the bank statements for the period from 01.09.2014 would show that the Company has done various transactions which manifest the fact that the Company was active and running preceding two years from the date of strike off. Taking into consideration the provisions of Section 252 of the Companies Act, 2013 which vests this Tribunal with a discretion where the Company whose name has been struck off and such Company is able to demonstrate that there is a running business as on the date when the name of the Company was struck off and also keeping in consideration that it is just to do so can restore the name of the Company in the register and in the interest of all the stakeholders including members of the Company, its employees as well as the revenue and the Applicant itself who seeks restoration of the name of the Company in the register being maintained by RoC. The Application is allowed subject to the directions imposed.

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• Insolvency & Bankruptcy

• 2022 (1) TMI 167
  CIRP proceedings - Validity of Sub-lease - tri-partite agreement - sub-lease of portion of the plot to R-1 by Corporate Debtor - intent to defraud the allottees of Towers No. 5, 6, 7, and 7A or not - whether the allottees are aggrieved with the transaction of sub-lease in favour of R-1? - HELD THAT:- The parties have come to a settlement on 21.05.2018 before the mediation centre in terms of minutes of meeting dated 30.12.2017. On the basis of the settlement the court has disposed of the Civil Suit. The R-1 has filed the copy of Civil Suit, Judgment and Settlement deed, list of allottees (homebuyers of Shubhkamna City) provided to Association by the Corporate Debtor on 20.02.2017 - The Association in the suit has not claimed any relief for cancellation of sub-lease deed dated 27.09.2016. The Association has pursued its claim only against the Corporate Debtor and not against the R-1. It means the Association is not aggrieved with the transaction of sub-lease in favour of R-1. Whether the RP has any locus to file Application before Adjudicating Authority? - HELD THAT:- The R-1 in the said letter has not disclosed the name and number of allottees who are demanding R-1 to allot flats on the basis of agreements executed by the Corporate Debtor. The RP has not stated in the Application that after receiving the letter he has verified the contents of the letter. The RP has not filed any claim form and list of such allottees, therefore, the statement of the RP that he has received the claim of 161 allottees, is not correct - RP has no locus to file the Application. Admittedly, the transfer of portion of plot by sub-lease was effected on 27.09.2016 whereas CIRP initiated after more than two years i.e. on 26.11.2018. The RP has no ground to doubt the transaction which is more than two years prior to commencement of CIRP. The association has not raised any plea of fraud in transferring the plot by sub-lease to R-1 and the RP has failed to make out a case that the sub-lease was executed for depriving the rights of homebuyers - there are no substance in the argument of Ld. Counsel for the Appellant that the sub-lease is actuated by fraud, therefore, no limitation has applicable to such transaction. The RP has no locus standi to file the Application before the Adjudicating Authority claiming the relief as shown in Para 7. There are no ground to interfere in the impugned order. Thus, the Appeal is dismissed.

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• 2022 (1) TMI 166
  Seeking extension of Corporate Insolvency Resolution Process (CIRP) - HELD THAT:- The object of the IB Code is the resolution of the insolvency of a Corporate Debtor. Efforts of all stakeholders has to be towards resolution of insolvency. There can be no dispute that the law mandates that CIRP proceedings have to be concluded within 330 days. Hon ble Supreme Court, after noticing the above requirement of 330 days in Section 12, laid down in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT ] that normally as per law, insolvency resolution process has to be completed within 330 days maximum, but in exceptional cases, the period can be extended by Adjudicating Authority/ Appellate Tribunal. From the materials on the record, it is clear that CIRP period along with extensions granted from time to time was to come to an end on 15th September, 2021/ 30th September, 2021 and in the Application filed by Resolution Professional, further extension was sought. There is no doubt that maximum period of 330 days has already come to an end in the month of September 2021. The Adjudicating Authority made observation that even after 730 days, there is no sight of completion of CIRP and RP and COC merely want to explore the possibility of Resolution. Adjudicating Authority lost sight that after extension given from time to time the period expired only in the month of September 2021 - Adjudicating Authority ought to have given reasonable extension of period for proceeding further with Resolution Project Wise for which 25 Expression of Interests have already been received with the Resolution Professional. Appeal allowed.

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• 2022 (1) TMI 165
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial creditors - mortgage on leave and license basis - validity of condonation of delay of 1392 days in filing Section 7 Application - principles of limitation for filing applications under Section 7 of IBC - HELD THAT:- After the account of the Corporate Debtor was declared NPA on 28th June, 2013, immediately i.e. in the next month itself i.e. 22nd July, 2013 notice under Section 13 sub-section (2) of SARFAESI Act, 2002 was given by the State Bank of India to the Corporate Debtor and thereafter under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 being O.A. No.726 of 2014 was filed. An order dated 09.03.2017 was passed by the District Magistrate allowing Application under Section 14 of the SARFAESI Act to take physical possession of assets of the Corporate Debtor. The State Bank of India cannot be held to be negligent in prosecuting its remedies for recovery of its debt. To find out sufficient cause for condonation of delay, all facts, circumstances and sequence of events have to be taken into consideration. In the present case, it cannot be held that Financial Creditor i.e. State Bank of India was negligent in prosecuting the proceedings for recovery of its debt. It did initiate the proceedings under SARFAESI Act and also filed an Application for recovery of debt under Section 19 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 in the year 2014. The Corporate Debtor having acknowledged the liability in its balance sheet as on 31st March, 2015, the Financial Creditor shall have a fresh period of limitation, which came to an end only on 31st March, 2018 - In the facts and circumstances of the present case, the delay of less than two years period has been condoned by the Adjudicating Authority, exercising its discretion under Section 5 of the Limitation Act. It cannot be said that discretion exercised by Adjudicating Authority in condoning the delay is perverse or against any provisions of law or violates any principle of law for determining the sufficient cause under Section 5 of the Limitation Act. There are no error in the order of the Adjudicating Authority condoning the delay in filing the Application under Section 7 of the IB Code by the State Bank of India - appeal dismissed.

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• 2022 (1) TMI 164
  Rejection of claims which are delayed - assignment of debt by United Bank of India in favour of ARCIL - objection to acceptance of ARCIL claim on account of assignment from United Bank of India on grounds of limitation - HELD THAT:- The present is a case where Appellant was complaining about the addition of certain claims of the Financial Creditor Respondent No.2, consequent upon assignment by United Bank of India had become barred by time. Section 7 Application was filed by Respondent No.2 on the ground of default as mentioned in the Application. The Respondent No.2 has filed the Application on the basis of inclusion of assignment by ICICI Bank. The objection raised by the Appellant is with regard to assignment by United Bank of India, which objection has been specifically taken in email dated 14th June, 2020 as well as in the Application being I.A. No.415 of 2020 filed by the Appellant. The Appellant s grievance was that there has been increase in the voting shares of Respondent No.2 consequent to admitting assignment of United Bank of India by which voting shares increased by more than 8.4%. The case of the Appellant was that the United Bank of India placed the account of Corporate Debtor as NPA in the year 2015 and the limitation of three years came to an end in the year 2018, hence, the said claim stood barred by time. When an Application under Section 7 cannot be entertained for a debt, which is barred by time and is liable to be rejected, any addition in the claim, which may fall into the category of time barred debt, also cannot be entertained. The Appellant having objected to the addition of claim consequent to assignment by United Bank of India, it had every right to agitate the issue and pray for adjudicatory orders from the Adjudicating Authority, which he did by filing an Application being I.A. No.415 of 2020. The Adjudicating Authority by misplaced observation rejected the Application without considering the merits of the claim. The Adjudicating Authority having not considered the claim on merits, ends of justice would be met in directing for fresh consideration by the Adjudicating Authority - Fresh consideration of Application being I.A. No.415 of 2020 should be done by the Adjudicating Authority, only when Resolution Plan has not yet been approved. In event, the Resolution Plan has already been approved by the Adjudicating Authority, the Application I.A. No.415 of 2020, needs no further consideration and be treated to be as closed. Appeal disposed off.

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• 2022 (1) TMI 163
  Jurisdiction - power of Adjudicating Authority to pass the interim order in the Application filed by the Appellant, the effect of which was to stop the implementation of the order dated 22nd August, 2020 passed by the District Magistrate - HELD THAT:- In the CIRP proceedings in the present case, order for liquidation was passed on 31st May, 2021 by the Adjudicating Authority. By consequent order dated 16th November, 2021, the Adjudicating Authority has confirmed the auction sale of the Corporate Debtor held on 16th August, 2021. The act of providing internet services to the residents by other internet providers apart from the Appellant, emanated from the order of District Magistrate dated 22nd August, 2020 passed in exercise of jurisdiction under National Disaster Management Act, 2005, which action was sought to be indirectly challenged before the Adjudicating Authority. The act of permitting the residents to avail the internet service of other service providers, did not emanate from any proceedings under the Insolvency Resolution Process and was outside the Insolvency Resolution Process. Although, the order of the District Magistrate dated 22nd August, 2020 is said to have been challenged by the Appellant before the Allahabad High Court by filing a Writ petition, but there is no material to indicate that operation of order dated 22nd August, 2020 of the District Magistrate has been stayed. The Adjudicating Authority by issuing the interim order dated 27.10.2020 had virtually stopped the implementation of order of the District Magistrate dated 22nd August, 2020, which was outside the jurisdiction of the Adjudicating Authority. Impugned order is set aside - Appeal is dismissed.

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• 2022 (1) TMI 162
  Acceptance or rejection of Application within the stipulated time as envisaged under Section 99 of IBC - confirmation of the Resolution Professional from the Board as required by Section 97 - occasion to record any finding regarding default or not - HELD THAT:- There cannot be any dispute with the statutory scheme as contained in Section 97 that when Application is filed by the Resolution Professional under Section 95, the Adjudicating Authority shall direct the Board within seven days of the date of the Application to confirm that disciplinary proceedings pending against the Resolution Professional or not and the Board was required within seven days to communicate in writing either confirming the appointment of the Resolution Professional or rejecting the appointment of the Resolution Professional and nominating another Resolution Professional - looking into the facts of the present case where it is not a case of the Appellants before us that any disciplinary proceedings are pending against the Resolution Professional who has filed the Application, we see no useful purpose in again directing the Adjudicating Authority to send the recommendation to the Board for confirmation. The order having been passed more than three months prior to the passing of the order, hence we are of the view that due to this reason the order of the Adjudicating Authority does not need to be interfered with. Second submission of the Learned Counsel for the Appellants is that Adjudicating Authority was not required at the stage when report was still to be filed by the Resolution Professional to record a finding regarding default - HELD THAT:- It was an error on the part of Adjudicating Authority to observe in Para 10 as reproduced and hold that there is a default when matter was at the stage of acting on the application under Section 95 read with Section 96 - At the stage of Section 95 Adjudicating Authority is to act upon the application to take further steps. The stage for allowing Application to admit or reject the application would be under Section 100. At the stage of appointment of Resolution Professional, such allowing is not contemplated. In Section 97 no adjudication as such is involved. The observations as quoted regarding default deserves to be deleted from the judgment and are hereby deleted - Appeal allowed in part.

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• 2022 (1) TMI 161
  Maintainability of application - initiation of CIRP - Financial Debt or Operational Debt - existence of Default or not - HELD THAT:- In the present case, it is brought to the forefront that the Appellant had issued the declaration under the proviso to, Rule 2(c) of the Rules. There is no gainsaying of the fact that the ingredients of Sections 73 76 are not meant to protect the Company to whom the sum is given - In the present case, it is to be pointed out that at no point of time the Respondent/Company sought to avoid the Loan Transaction with the Appellant . As a matter of fact, the Respondent and its Officers had confirmed their obligations to repay the Loan to the Appellant . As such, the plea of Voidability of the Loan Transaction is not available to the Respondent/ Company, in the considered opinion of this Tribunal . In the present case, the Second transfer Rs. 1.60 crores was made to the Respondent/Company on 18.01.2017 and the said transfer was effected from the Appellant s personal Bank Account to the Current Account of the Respondent/Company. In fact, the first Transfer of Rs. 2.50 Crores, was made on 01.12.2016 to the Respondent/Company and these were recorded in the Minutes of the Board of Director s on 22.03.2017 and 06.04.2017 respectively. The contra views arrived at by the Adjudicating Authority that the Loan was not a Financial Debt , as the amounts were not money borrowed by the Corporate Debtor and that the borrowing may not constitute a Financial Debt that could be enforced as per the I B Code, 2016 though the Borrowing may be reflected in the Balance Sheet as pointed out by the Petitioner (Appellant) etc; are legally invalid and untenable - Application allowed.

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• 2022 (1) TMI 160
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - petition is within the limitation or not - HELD THAT:- It is very clear from the perusal of the relevant dates of invoices that none of the invoices are within 3 years prior to the date of filing the above Company Petition on 24.10.2019 and are all barred by limitation - Upon thorough verification from Tribunal records and inward stamp appearing on Company Petition it reveals that the petition was filed on 24.10.2019 and the two invoices admitted to have been within limitation by the Corporate Debtor were also barred by limitation. This Bench has no hesitation in holding that the Company Petition is hopelessly barred by the limitation - Since the Company Petition is dismissed on the ground of limitation, this Bench feels that there is no necessity to make any observations or give findings on the other pleas raised by the Corporate Debtor in their reply. Company Petition is dismissed.

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• PMLA

• 2022 (1) TMI 159
  Money Laundering - proceeds of crime - Seeking default or Statutory bail - fraud and misappropriation of money - filing of the complaint by ED and also reserving the right to carry on further investigation and to file subsequent complaint as empowered u/s 44 Explanation (ii) of PML Act - incomplete investigation or filing of the complaint would be considered to be complete investigation for offence of money laundering - HELD THAT:- No doubt the investigation in the offence of money laundering involves tracing of different evidence of layering, padding, fabrication of documents etc. and this process requires unearthing of evidence and documents, analyzing the same and to ascertain the laundering of the proceeds of crime but once the accused has been arrested the onus lies on the Directorate to complete the investigation within the time frame. If no time frame is fixed and Explanation (ii) added to Section 44 is taken on the face of it, the primary question would arise that even if Directorate can file supplement complaint but what would be the maximum time line within which investigation should be completed if accused is judicial custody and ED takes a plea of non-application of section 167(2) of Cr.P.C. - the provision of section 167(2) of Cr.P.C. probably has been meant for a situation like this. Therefore Explanation (ii) attached to section 44 of PMLA cannot be taken to defeat the very purpose of section 167(2) Cr.P.C. In the facts of the present case it is mentioned that further investigation in the matter is still in progress and remaining proceeds of crime amount is being traced. Para 9.2 of the complaint also mentions that complainant craves leave of the court to file further complaints to initiate necessary action as contemplated under PMLA with regard to other accused persons and also against accused Satender Singh Madhok and others, on the outcome of the investigation which is still in progress. No specific provision of PMLA has been pointed out to show non-application of section 167(2) Cr.P.C. laying down limits of 60/90 days as per the punishment prescribed for offences, for completing the investigation. Even if the investigation of money laundering involves tedious process of collecting evidence and analyzing the same but if the accused has been kept in judicial custody he to my mind has a right that either investigation qua should complete or be released on bail. In this case ED is not denying that its investigation qua accused/ applicants is also going on. Though ED is empowered to carry further investigation but accused persons to my mind are certainly entitled for bail in this case u/s 167(2) Cr.P.C. as by own assertion of ED, investigation has not been completed despite filing of the complaint on 30.10.2021. Therefore, accused persons/applicants Sandeep Singh Madhok and Satender Singh Madhok are ordered to be admitted on bail upon furnishing of bail bond for sum of Rs. 1,00,000/- with one surety of equal amount to the satisfaction of ld. CMM/ACMM on duty as well as subject to conditions imposed. Bail application allowed.

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• Service Tax

• 2022 (1) TMI 158
  Levy of service tax - Ground/Market Rent - Marriage Hall Rent - Stall/Ground Rent - Built Own Transfer charges (BOT) e) Hospital - Blood Bank Rent - Pay and Park Fees - Bazar auction/Bazar fees - Rusta Nuksan Bharpai (ROW) - applicability of time limitation - penalties - HELD THAT:- The observations made by the Commissioner, are agreed upon, to the effect that just because the services under consideration have been provided Municipal Authority, the same cannot be said to be a service covered under Article 243 read with Schedule 12 of Constitution of India. Hence the arguments advanced by the appellant counsel to that effect cannot be sustained, more so over when they themselves have admitted there liability to pay service tax in respect of services under category of BOT, Mandap Renting of Space to Blood Bank - the submissions of the appellant to effect that the value of tax able services under these category needs to be redetermined after taking into account the relevant and admissible deductions are agreed upon. Renting of Stall - HELD THAT:- To the extent the space is provided to the poor for the purpose of street vending and street hawking, the submission made by the appellant is agreed upon, but the same cannot be true in case of the shops and stalls rented out. Extended period of limitation - Section 73 of the Finance Act, 1994 - HELD THAT:- Commissioner has found the justification that being statutory authority cannot be subjected to penalty. Without stating Section 80 of Finance Act, 1994 he for these reasons has refrained from imposing penalties on the appellant - it is clear that extending benefit under Section 80 cannot be cited as reason for not invoking extended period of limitation under Section 73 - the invocation of extended period is justified. Matter needs to be reconsidered by the adjudicating authority in respect of the demands made under the head Pay and Park , Bazar auction/ Bazar Fees and Rasta Nuksan Bharpai/ ROW - In respect demands made under categories, Ground/ market Rent. Marriage Hall, Bhade Patti (BOT), Stall Ground Rent, Hospital and Blood bank rent, while the leviability of the service tax has been upheld as per our observations in para 4.8 and 4.9, but the quantum of the value of taxable service and service tax leviable needs to be redetermined - Extended period of limitation as held by the Commissioner is invokable - Penalties imposed should be waived off by invoking section 80 of the Finance Act, 1994. Appeal allowed in part and part matter on remand.

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• Central Excise

• 2022 (1) TMI 157
  Reversal of CENVAT Credit - common inputs/ common input services used by the appellant in production of sponge iron and in production /generation of electricity as sold - dutiable as well as exempted goods - non-maintenance of separate records - HELD THAT:- Admittedly the electricity so generated by the appellant has being used captively as well as sold to other buyers and on such sales no duty was paid by the noticee because of the exemption for generation of electricity. The availment of CENVAT Credit on the inputs / input services used by the appellant definitely shall be governed by Rule 6 of CENVAT Credit Rules, 2004. Since the separate account was not maintained by the appellant under Rule 6(3) of CENVAT Credit Rules, 2004 will be applicable in terms whereof either 5% of the value of exempted goods and exempted service was to be paid or such an amount as is calculated in terms of Rule 6(3A)( c) (i) with respect to calculating amount of CENVAT Credit on imports used in or in relation to manufacture of exempted goods and Rule 6(3)(A)(C)(iii) for an amount attributable to input service used in or in relation to manufacture of exempted goods - only such common inputs were used, the value of such common inputs was to be used in said computation as were used for generation of such amount of electricity which was sold outside. Further a clarification in Chapter 5 of CBEC Board Circular No. 754/70/2003 CX dated 9.10.2003 says that CENVAT Credit is also admissible in respect of amount of inputs contained in waste/ refuse of by product. Similarly, the CENVAT Credit is not to be denied if the inputs are used in intermediate of the final product even if such intermediate is exempted from payment of duty. The basic idea is that CENVAT Credit is admissible so long as the input are used in or in relation to manufacture of final product whether directly or indirectly and such final products have been cleared. When the calculation arrived at by the Department and confirmed vide the order under challenge is perused (in para 18.3 of show cause notice), it is observed that the value of coal (inputs ) used in power plant and value of Coal handling service (input service) in terms of Rule 6(3A)(c ) (i) and 6 (3A(iii) has to be the value as shown in Column 4 of such table in para 18.3 of the show cause notice. However, the value of total inputs / input service as mentioned in para 1 of the said table has been taken by the Investigating Authority and has been confirmed by the Commissioner (Appeals). The calculation based upon total value of input / input service is held to be wrong - no penalty can be imposed under Section 11AC of Central Excise Act, 1944 in respect of alleged non payment of the amount due 6(3) CENVAT Credit Rules, 2004 - Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2022 (1) TMI 156
  Levy of penalty U/s 15 A (1) (o) of UP Trade Tax Act - intent to evade payment of tax or not - Form -31 has been produced before the seizure order and the transaction is recorded in the books of account of both consignee and consignor - penalty at an excessive rate or not - HELD THAT:- If the goods are purchased against Form 3-A, the same are required to be sold in the same form and condition. If the goods, so purchased against Form 3-A, were even altered in the existing product, it will take into sweep of a new product. The case in hand, admittedly, the body was mounted on the chassis and thereafter, final bill was issued, which itself is a violation of the Form 3-A. The benefit of Form 3-A can be availed from the payment of purchase documents only in the event the terms conditions thereon are satisfied. Necessary condition is required to be satisfied - In the case in hand, it is admitted by the revisionist that final bill was issued after the body was mounted on the chassis, which were purchased against Form 3-A. Therefore, there is no doubt that the sale of chassis with mounted body made by the revisionist would be selling a product, which is in different condition from the chassis or the body and thus, the same would be liable to be purchase tax under section 3AAA of the Act. Other submission cannot be permitted to be raised in the revisioinal jurisdiction, for the first time. Revision dismissed.

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• Indian Laws

• 2022 (1) TMI 155
  Appointment of an arbitrator - Declination to appoint an Arbitrator in exercise of its power under Section 11(6) of the Arbitration and Conciliation Act, 1996 - settlement of disputes through the process of arbitration in terms of the clause of arbitration under general conditions of agreement - appellant failed to participate despite the opportunity being afforded, exparte award came to be passed - HELD THAT:- The exposition of legal principles is indeed well settled by this Court in DATAR SWITCHGEARS LTD. VERSUS TATA FINANCE LTD. [ 2000 (10) TMI 873 - SUPREME COURT] followed in PUNJ LLOYD LTD. VERSUS PETRONET MHB LTD. [ 2005 (4) TMI 612 - SUPREME COURT] that once an application under Section 11(6) of the Act has been filed for appointment of an Arbitrator before the High Court, the respondents forfeited their right to appoint an Arbitrator and the High Court alone holds jurisdiction to appoint an Arbitrator in exercise of power under Section 11(6) of the Act. Indisputedly, the appointment of an Arbitrator was made by the respondents after arbitration petition was filed by the appellant under Section 11(6) of the Act in the Registry of the High Court on 23rd October, 2009. This Court cannot be oblivious of the peculiar facts and circumstances brought to our notice that after filing of an arbitration petition on 23rd October 2009 in the Registry of the High Court, the appellant completely slept over the matter and the respondents were never served of any notice of the Arbitration Petition filed before the High Court of Orissa - the fact still remains that except the letter being once sent by the appellant on 27th December, 2011 informing of the arbitration petition being filed under Section 11(6) of the Act before the High Court, no steps were taken thereafter to pursue his arbitration application and since the appellant had not participated before the Arbitral Tribunal after filing of the statement of claim, exparte award came to be passed by the Arbitral Tribunal on 21st June, 2013. It may be noticed that notices were issued for the first time by the High Court of the arbitration petition filed by the appellant in the year 2016 almost 3 years after passing of the exparte award dated 21st June, 2013. The High Court was not inclined to exercise its jurisdiction under Section 11(6) of the Act for appointment of an Arbitrator and dismissed the petition by an Order dated 26th July, 2019 with liberty to the appellant to submit objections against the exparte award dated 21st June, 2013 under Section 34 or 37 of the Act, if so advised - so far as the question of law is concerned, certainly being settled that after the application has been filed for appointment of an Arbitrator under Section 11(6) of the Act, before the High Court the respondents forfeited their right to appoint an Arbitrator under the clause of arbitration thereafter but from the narration of facts which has been noticed by us, we are of the view that no error was committed by the High Court in dismissing the petition filed under Section 11(6) of the Act for appointment of an Arbitrator. Appeal dismissed.

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• 2022 (1) TMI 154
  Validity of Arbitration Award - amicable settlement between the parties - It is the case of the appellant that though the Arbitrator has awarded compensation/damages in view of the case of the appellant that the contract between the parties was illegally and abruptly terminated by the respondent - detailed reasons for settlement also not provided - HELD THAT:- Section 31 of the Act deals with form and contents of arbitral award . As per the same, an arbitral award shall be made in writing and shall be signed by the members of the Arbitral Tribunal. The arbitral award shall state the reasons, upon which it is based, unless parties agree that no reasons are to be given, or the award is an arbitral award on agreed terms under Section 30 of the Act. Chapter VII of the Act provides recourse against arbitral award. The recourse to a Court against an arbitral award is to be in terms of Section 34(1) of the Act. As per Section 34(2A) of the Act, if the arbitral award arising out of arbitrations other than international commercial arbitrations, is vitiated by patent illegality, same is a ground for setting aside the award - From a reading of Section 34(4) of the Act, it is clear that on receipt of an application under subsection (1), in appropriate cases on a request by a party, Court may adjourn the proceedings for a period determined by it in the order to give the Arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of Arbitral Tribunal, will eliminate the grounds for setting aside the arbitral award. Reliance is placed on the documentary evidence i.e. letters dated 01.06.2010, 17.06.2010, email dated 02.08.2010 and letters dated 08.11.2010 20.01.2011. It is the specific case of the respondent that learned Arbitrator failed to appreciate such evidence, which would establish their case that there was accord and satisfaction between the parties and there was no abrupt termination or any breach on their part. It is their case that in view of such omission to consider vital evidence on record, findings recorded by the Arbitrator are perverse and constitute patent illegality within the meaning of Section 34(2A) of the Act. The Notice of Motion filed under Section 34(4) of the Act by the appellant, clearly states that the said Motion was moved as an abundant precaution and they are seeking remission to the Arbitrator to provide detail and express reasons in addition to reasons already stated in the arbitral award dated 13.11.2017. A harmonious reading of Section 31, 34(1), 34(2A) and 34(4) of the Arbitration and Conciliation Act, 1996, make it clear that in appropriate cases, on the request made by a party, Court can give an opportunity to the arbitrator to resume the arbitral proceedings for giving reasons or to fill up the gaps in the reasoning in support of a finding, which is already rendered in the award. But at the same time, when it prima facie appears that there is a patent illegality in the award itself, by not recording a finding on a contentious issue, in such cases, Court may not accede to the request of a party for giving an opportunity to the Arbitral Tribunal to resume the arbitral proceedings - as rightly contended by the learned counsel appearing for the respondent, that on the plea of accord and satisfaction on further consideration of evidence, which is ignored earlier, even if the arbitral tribunal wants to consciously hold that there was accord and satisfaction between the parties, it cannot do so by altering the award itself, which he has already passed. Civil appeal dismissed.

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