TMI Tax Updates - e-Newsletter
January 10, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Reopening of assessment u/s 147 - Validity of reasons to believe - there was sufficient material available before the authority concerned for initiating a proceeding under Section 147 of the I.T. Act and the same cannot be held to be bad in law
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Income Tax:
Assessment u/s 153A - this Court does not find any illegality or infirmity in the entire process based on which the warrant under Section 132 and the notice under Section 153A of the IT Act was issued against the petitioner.
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Income Tax:
TDS u/s 195 - Disallowance u/s. 40(a)(i) in respect of payment of 'Software Maintenance charges' - Going by the beneficial provision in the DTAA vis-à-vis the Act, it is held that there was no requirement on the part of the assessee to deduct tax at source which should have called for any disallowance u/s.40(a)(i)
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Income Tax:
Penalty u/s 271AAB - the case of the assessee does not fall under the provisions of section 271AAB(3) of the Act but under the provisions of section 271AAB(1) of the Act and minimum penalty@ 10% of the undisclosed income is leviable.
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Income Tax:
Addition towards set off of fictitious losses through Client Code Modification - AO neither proved nor led any evidence in case of any single transaction, while making addition to the income of the assessee. Addition made by the AO is based on general propositions, which cannot be sustained
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Customs:
Adjudication of show cause notice - SCN was issued in 2002 and was pending - Validity of notice of hearing issued 2017 - this delay in adjudication would cause prejudice to the noticee as the men in the knowledge of the facts may not be available or even if available, memories fail - SCN quashed and set aside.
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Customs:
Amendment in the bill of entry - the mis-declaration of the goods covered by only one of the invoices is inadvertent and not deliberate. It would have been appropriate for the competent authority to dispose off the application for amendment of the bill of entry - there are no reason to sustain the confiscation of goods and imposition of penalty
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Customs:
Valuation of imported goods - It is not understood if Custom Officers were suspicious of misdeclaration of weight what prevented them from actually weighing the consignment as a whole and determining the actual weight of consignment - Entire case of undervaluation has been made against the appellant, by not amending the declared value, but by enhancing the same to take into account the estimated undeclared weight - enhancement of value cannot be accepted.
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Indian Laws:
Dishonor of Cheque - insufficiency of funds - non-compliance of the condition of suspension of sentence is sufficient to declare suspension of sentence as having been vacated.
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IBC:
Secured Creditor - As in the present case, all the ‘Secured Creditors’ have claimed right over the same secured asset, which is 91% of the total secured asset and particularly when a suit is pending for declaration, as to which ‘Secured Creditors’ has the first charge, in such a case, it was not open to the Adjudicating Authority to allow the application filed by the 1st Respondent to realise the ‘security interest’ u/s 52
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Service Tax:
Franchise Service - principal-agent relationship - collection of payment on behalf of the Appellant - Mere use of word ‘principle to principle’ basis cannot be read for the impugned arrangement between appellant and his agents to be called as franchise service - The term of agreement is absolutely against the intent of what can be called as franchise service.
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Service Tax:
CENVAT Credit - duty paying invoices - the debit notes contains all the details which are required under Rule 9 and therefore they are valid documents for claiming CENVAT credit.
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Central Excise:
Extended period of limitation - CENVAT Credit - Department itself has recorded that they had previously conducted audit of the records of the appellant during December 2008 audited up to March 2008 no objection on the issue was raised in the previous audit conducted by the Department - the question of suppression of facts with intent to evade payment of duty does not arise and cannot be alleged against the appellant.
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Central Excise:
Clandestine removal - In terms of Section 9D referred above, cross examination is necessary to establish the relevance of statements recorded during the investigation proceedings - only after cross examination the statement can be admitted as an evidence in the proceedings
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VAT:
Amnesty Scheme under GVAT - prima facie it appears that the case of the petitioners is not a search case. In any event, even otherwise, while making a best judgment assessment under the GVAT Act, it was not permissible for the second respondent to comment on the eligibility or otherwise of the petitioners under the amnesty scheme.
Articles
Notifications
Customs-
1/2020-Customs (CVD) - dated
8-1-2020
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CVD
Seeks to impose definitive countervailing duty on imports of Continuous Cast Copper Wire Rods originating in, or exported from Indonesia, Malaysia, Thailand and Vietnam.
GST - States-
KA.NI-2-1763/XI-2-9(42)/17 - dated
31-12-2019
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Uttar Pradesh SGST
Uttar Pradesh Goods and Services Tax (Thirty Third Amendment) Rules, 2019
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KA.NI-2-1745/XI-2-9(42)/17-2019 - dated
23-12-2019
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Uttar Pradesh SGST
Uttar Pradesh Goods and Services Tax (Eighth Removal of Difficulties) Order, 2019
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KA.NI-2-1523/XI-2-9(47)/17-U.P. Act-1-2017-Order-(81)-2019 - dated
19-12-2019
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Uttar Pradesh SGST
Amendment in Notification No. KA.NI.-2-391/XI-9(47)/17-U.P. Act-I -2017-Order-(112)-2018 Dated 07 March, 2018
Indian Laws-
S.O. 115(E) - dated
8-1-2020
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Indian Law
Seeks to amend Notification No. S.O. 4419 (E), dated the 10th December, 2019
SEBI-
SEBI/LAD-NRO/GN/2020/1 - dated
1-1-2020
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SEBI
Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Seventh Amendment) Regulations, 2019.
SEZ-
G.S.R. 12(E) - dated
31-12-2019
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SEZ
Special Economic Zones (4th Amendment) Rules, 2019
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (1) TMI 302
Profiteering - purchase of Flats in Respondent's project - allegation is that the Respondent had not passed on the benefit of Input Tax Credit availed by him by way of commensurate reduction in the price of the flats - contravention of section 171 of CGST Act - penalty - HELD THAT:- The Respondent has benefited from the additional ITC to the extent of 4.52% of the turnover during the period from July, 2017 to December, 2018 and hence the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has not passed on the above benefit to his customers and has profiteered an amount of ₹ 51,12,928/- inclusive of GST @ 12% on the base profiteered amount of ₹ 45,65,114/-. Further, the Respondent has realized an additional amount of ₹ 1,33,503/- from the Applicant No. 1 which includes both the profiteered amount @ 4.52% of the taxable amount (base price) and 12% GST on the said profiteered amount. He has further realized an additional amount of ₹ 49,79,425/- which includes both the profiteered amount @ 4.52% of the taxable amount (base price) and 12% GST on the said profiteered amount from the 99 other flat buyers other than the Applicant No. 1 as mentioned in Annexure14 of the Report dated 28.06.2019.
his Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 31.12.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent - As the Respondent has claimed that the OC has been received by him in June, 2019 therefore, the DGAP is directed to carry out further investigation as per the provisions of Rule 133 (4) of the above Rules and compute the final amount of benefit of ITC which is required to be passed on and submit his Report within a period of 3 months of this Order.
Since, the DGAP has carried out the present investigation till 31 .12.2018 only, any further benefit of additional ITC which might accrue to the Respondent, shall also be passed on by him to the eligible buyers. The concerned Commissioner CGST/SGST shall ensure that the above benefit is passed on by the Respondent to his recipients as per the provisions of Section 171 of the CGST Act, 2017.
Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats and the shops being constructed by him in his Project 'Pyramid City 5' in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section - Accordingly, a SCN be issued to him directing him to explain as to why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.
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Income Tax
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2020 (1) TMI 301
Rejection of books of accounts u/s 145 - Addition made, on account of suppressed sale, by using the material collected by the Excise Department; including the statements of relevant witnesses recorded during the search - HELD THAT:- Special Leave Petition is dismissed on the ground of low tax effect. However, the question of law is left open.
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2020 (1) TMI 296
Transfer pricing adjustments - Determination of ALP - Disallowance of loss - Bogus loss - HELD THAT:- There is an unequivocal finding in detail that the transactions claimed by the assessee are bogus. AO, the Transfer Pricing Officer as well as the Dispute Resolution Panel have dealt with the issue in detail and thereafter, they have given a clear cut finding that the transactions are bogus. Upon carefully considering the orders of authorities below, we find that all the issues raised by the assessee have been answered elaborately and these orders do not need any interference on our part.
Assessee has not given the explanation for the unusual loss despite inquiry. It has also not given details of sister concern. This is vital in view of the dubious nature of layered transaction. - Decided against assessee.
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2020 (1) TMI 294
Deduction u/s 80P(2) on interest income - CIT(A) had initially allowed the appeal of the assessee and granted deduction u/s 80P(2) - CIT(A) passed order u/s 154 wherein the claim of deduction u/s 80P was denied, by relying on the judgment of Mavilayi Service Co-operative Bank Ltd. v. CIT [2019 (9) TMI 782 - SC ORDER] .
HELD THAT:- The Full Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P of the I.T.Act. In view of the dictum laid down by the Full Bench of the Hon’ble jurisdictional High Court (supra), we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer. The Assessing Officer shall examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act.
As regards the interest on the investments with Co-operative Banks and other Banks, the co-ordinate Bench order of the Tribunal in the case of Kizhathadiyoor Service Co-operative Bank Limited [2016 (7) TMI 1405 - ITAT COCHIN] had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business’ instead of `income from other sources’. However, as regards the grant of deduction u/s 80P of the I.T.Act on such interest income, the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT [2019 (9) TMI 782 - SC ORDER] and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income.
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2020 (1) TMI 295
Deduction u/s 80P(2) - CIT(A) passed order u/s 154 wherein the claim of deduction u/s 80P was denied - HELD THAT:- In the case of Chirakkal Service Co-operative Co-operative Bank Ltd. v. CIT [2016 (4) TMI 826 - KERALA HIGH COURT] had held that when a certificate has been issued to an assessee by the Registrar of Co-operative Societies characterizing it as primary agricultural credit society, necessarily, the deduction u/s 80P(2) has to be granted to the assessee.
Full Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT [2016 (4) TMI 826 - KERALA HIGH COURT] had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P. In view of the dictum laid down by the Full Bench of the Hon’ble jurisdictional High Court (supra), we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer. AO shall examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act.
Interest on the investments with Cooperative Banks and other Banks, the co-ordinate Bench order of the Tribunal in the case of Kizhathadiyoor Service Cooperative Bank Limited [2016 (7) TMI 1405 - ITAT COCHIN] had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business’ instead of `income from other sources’. However, as regards the grant of deduction u/s 80P on such interest income, the Assessing Officer shall follow the law laid down in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. It is ordered accordingly.
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2020 (1) TMI 293
Bogus LTCG - unexplained cash credit u/s. 68 - HELD THAT:- Identical issue was considered by this Tribunal in the case of Shri Ramesh Kumar Shah [2018 (12) TMI 1761 - ITAT BANGALORE] and the Tribunal remanded the issue to the AO for fresh consideration with a direction that the assessee should be provided with all the relevant evidence relied upon by the AO for making the addition and also allow opportunity of cross-examination of statements of persons which has been relied upon by the Investigation Agency.
We also find that the Hon’ble High Court of Karnataka has given similar directions in the case of Mrs. Chandra Devi Kothari [2015 (2) TMI 1313 - KARNATAKA HIGH COURT] wherein also the issue was with regard to long term capital gain on sale of shares being treated as unexplained cash credit u/s. 68 of the Act by the revenue. In the light of the aforesaid directions, we set aside the order of the CIT(Appeals) and remand the question of treating the long term capital gain as unexplained cash credit to the AO for fresh consideration as directed by the Tribunal in the case of Shri Ramesh Kumar Shah (supra). We make it clear that all issues raised by the assessee in this appeal are also left open for consideration.
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2020 (1) TMI 292
TDS u/s 195 - Disallowance u/s. 40(a)(i) in respect of payment of 'Software Maintenance charges' - HELD THAT:- Assessee was allowed the use of the software for its own business purpose and there was no permission to sub-licence the same. There is a specific bar on the assessee in not sub-licensing the software, which were to be used for its sole business needs. The consideration was for the use of software for its own business purpose and not for the use of, or the right to use, any copyright of software. As the consideration payable by the assessee for use of LARA, DIVA and Ocean was only for the use of the software for its own business purpose and not having right to copyright, the same will not constitute 'Royalties' within Article 13(3) of the DTAA.
Even if for a moment, we presume that the amount is chargeable to tax in the hands of the CMA CGM, France as royalty u/s 9(1)(vi) of the Act with the assistance of Explanation 4, as urged by the ld. DR, the same would escape taxation in terms of the DTAA because the parallel of Explanation 4 to section 9(1)(vi) is not a part of the DTAA. We have noted above that on the plain language of section 9(1)(vi) de hors the effect of Explanation 4, the consideration does not fall in the realm of 'royalty'.
Now we turn to the 'Maintenance charges' of the software paid by the assessee, which have been impliedly treated by the authorities below as 'fees for technical services' u/s 9(1)(vii) as well as the DTAA. Though there is no separate quantification of such an amount, but the same is a part of the overall consideration as per the Agreements.
Section 9(1)(vii) deals with income by way of 'fees for technical services'. Explanation 2 gives definition of 'fees for technical services' to mean any consideration for the rendering of any managerial, technical or consultancy services. As the maintenance of software is in the nature of a technical service, it is held that the same is covered u/s. 9(1)(vii) of the Act.
Reverting to the DTAA, it is seen that para 4 of the Article 13 deals with 'fees for technical services'. In the present context, it provides that the term "fees for technical services" means consideration for services of a managerial, technical or consultancy nature. Thus, the definition of 'fees for technical services' in the present context given in the DTAA is almost similar to that used in Explanation 2 to section 9(1)(vii) of the Act, going by which the software maintenance charges fall within the ambit of 'fees for technical services'.
Payment for use of software made by the assessee to CMA CGM, France does not satisfy the requirement of 'use of, or the right to use, any copyright of software'. Once it is held that para 3 of Article 12 is not attracted, as a sequitur, the application of clause (a) of para 4 of Article 12 of the DTAA with Portuguese would automatically be ousted, thereby making the amount of ₹ 6.85 crore paid by the assessee to CMA CGM, France for use of LARA, DIVA and Ocean software as immune from taxation in India. Going by the beneficial provision in the DTAA vis-à-vis the Act, it is held that there was no requirement on the part of the assessee to deduct tax at source which should have called for any disallowance u/s.40(a)(i) of the Act. We, therefore, order to delete the addition.
Granting of correct amount of credit of TDS - HELD THAT:- AO is directed to verify the amount of TDS and allow appropriate credit as per law.
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2020 (1) TMI 300
Reopening of assessment u/s 147 - Validity of reasons to believe - HELD THAT:- The phrase “Reasons to Believe” does not mean that the AO should have ascertained the facts by legal evidence. All that is required is that, the AO should prima facie have some material on the basis of which there should be reasons to believe of certain incomes chargeable to tax escaping assessment. There need not be any concrete evidence or proof available for coming to a final conclusion. It is only an initiation of proceedings of reassessment where the assessee gets a chance to put forth their defence, explanation and justification which would further be scrutinized by the AO while reaching to the final conclusion. One should not loose sight of the fact that the final assessment on the conclusion of a proceedings under Section 147 is also an appealable order wherein also the assessee has a right to agitate or challenge the order passed by the AO on a proceeding under Section 147 of the Act.
If we look into the proceedings under challenge, it would clearly reveal that there are sufficient reasons given by the Assessing Officer, which according to him is “Reasons to believe” of an income of more than ₹ 87 Lakhs, which are chargeable to tax has escaped assessment and which has come to the notice of Department at a later stage in the course of scrutiny.
Given the said facts and circumstances of the case, this Court has no hesitation to reach to the conclusion that there was sufficient material available before the authority concerned for initiating a proceeding under Section 147 of the I.T. Act and the same cannot be held to be bad in law as the proceedings drawn by the Assessing Officer seems to be with sufficient material in record showing income, which otherwise is chargeable to tax having escaped assessment.
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2020 (1) TMI 291
Revision u/s 263 - deduction u/s 10A - view of the PCIT that deduction u/s 10A should have been allowed by the AO after considering the business loss and carry forward the business loss of the assessee and since AO had accepted the return of income without giving effect to carry forward losses, excess deduction u/s 10A of the Act was erroneously allowed by the AO - HELD THAT:- We find that Hon’ble Apex Court in the case of CIT Vs. Yokogawa India Ltd. [2016 (12) TMI 881 - SUPREME COURT] held that the deduction u/s 10A of the Act would be prior to the commencement of the exercise to be taken under Chapter IV for arriving at the total income of the assessee from the gross total income. It further held that though Section 10A of the Act as amended provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV and not at the stage of computation of the total income under Chapter VI. In view of the aforesaid decision of Hon’ble Apex Court, we are of the view that Ld. PCIT was not justified in invoking the provisions of Sec.263 of the Act so as to term the order of AO to be erroneous and prejudicial to the interest of Revenue. We therefore set aside the order of Ld. PCIT. Thus, the grounds of the assessee are allowed.
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2020 (1) TMI 290
Disallowance u/s 14A - HELD THAT:- Provisions of Rule 8D were not applicable to the year under consideration. Therefore, the disallowance was to be computed on some reasonable estimated basis keeping in view the assessee’s financials. The estimation of 10% as made by learned first appellate authority could not be said to be unfair or unreasonable, in any manner. From perusal of financial statements, it is observed that the assessee has debited administration and other charges for ₹ 7.93 Lacs which would include routine expenditure viz. salary, telephone, conveyance, directors’ remuneration, demat charges, service tax etc. Most of the expenditure would be statutory in nature and would be necessary to maintain corporate personality of the assessee. Therefore, the estimation as made by Ld. CIT(A), in our considered opinion, was quite fair and the same would not require any interference on our part.
Long-Term capital gains to be exempt u/s 10(38) - HELD THAT:- Undisputed position that emerges is the fact that the stated investments were held by assessee since past many years. The investments were long term investments and reflected as such in the financial statements which is further evident from the fact that the assessee never made provision for diminution in value thereof on the Balance Sheet date. In fact, similar gains were accepted by department as Long-Term Capital gains in AYs 2005-06 & 2008-09 in scrutiny assessments u/s 143(3). Therefore, rule of consistency favored assessee’s stand. It is also the factual findings of Ld. CIT(A) that the stated investments were not out of borrowed funds, which fact remain undisputed before us also.
The factual findings of Ld. CIT(A) at para 10.24 lead us to inevitable conclusion that the stated gains were rightly held to be assessable as Long-Term Capital gains rather than as business income. Therefore, we concur with the stand of learned first appellate authority, in this respect. Resultantly, the grounds raised by revenue stand dismissed. The revenue’s appeal stands dismissed.
Short-term capital gains OR business income - HELD THAT:- CIT(A) has clinched this issue also in the right perspective. The average holding period of most of the scrips was found to be below 45 days. The assessee carried out multiple transactions with short selling which would be the attributes of a trader and not of an investor.
AR, in the course of hearing, has relied upon the decision of Hon’ble Bombay High Court rendered in Jaya Chheda V/s ACIT [2017 (12) TMI 1357 - BOMBAY HIGH COURT] to submit that the formula of holding period as adopted by Ld. first appellate authority would not be conclusive. However, we find that learned first appellate authority, in the present case, has elaborately examined the nature of the stated transactions and on the basis of assessee’s conduct, formed an opinion that the assessee acted as trader and not as an investor. We also find that Ld. AR is unable to controvert the factual findings of Ld. CIT(A). Therefore, we see no reason to interfere with the impugned order, in this regard. Hence, concurring with the same, we dismiss the ground raised by the assessee. Ground No. 3 of assessee’s appeal is related with interest u/s 234, which would not require our indulgence.
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2020 (1) TMI 289
Addition on account of cash deposits - HELD THAT:- Income is being considered the cash deposits in the hand of the assessee which would not be influenced to the findings in the complaint filed by the assessee against Shri Kalpesh P. Prajapati. We find that the AO has made addition of total cash deposits, however in such cases of cash deposits, only peak balance is being considered. The perusal of statement shows that there is a peak credit balance of ₹ 2,13,747/- as on 24-07-2007.
Accordingly, addition to this peak balance is confirmed. We find that there is opening cash deposit of ₹ 2,13,747/- on 04-04-2007, hence the initial cash deposit is also not unexplained. Therefore, the addition of said amount is also confirmed. In view of this, the addition of ₹ 4,13,747/-(4,00,000 + 2,13,747) is confirmed and the balance is deleted.
This addition is being confirmed on technical ground as there is a dispute between the assessee and Kalpesh P. Prajapati that the bank account was opened by Shri Kalpesh P. Prajapati and not by the assessee. Further, since the Kalpesh Prajapati has agreed to pay the Income Tax liability before the Hon’ble High Court, therefore as per our considered opinion that the assessee will recover the income tax liability of this income from Shri Kalpesh Prajapati and pay to the Income Tax Department. In view of this fact, the ground of appeal is partly allowed in favour of the assessee.
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2020 (1) TMI 288
Revision u/s 263 - disallowances made towards expenditure related to issue of NCD, disallowances of foreign exchange loss, while computing book profit u/s 115JB deduction for provision for leave encashment and disallowances of expenditure related to foreign currency convertible notes - HELD THAT:- CIT(LTU) has adopted another view and review the assessment order passed by the Ld. AO by holding that any expenditure for raising the loan to finance the expansion of the business and such expenditure is allowable only by way of amortization in terms of section 35D. Similarly, in respect of disallowances of foreign exchange loss, while computing book profit u/s 115JB, although, the Ld. AO has accepted explanation furnished by the assessee but, the Ld. CIT(LTU) has adopted different view by holding that the exchange loss is to be treated as diminish in the value of investments attributable to foreign exchange and that the foreign exchange is contingent in the nature .
Fact remains that the issue of foreign exchange loss has been elaborately discussed by the Hon’ble Supreme Court, in the case of Woodward Governor vs. CIT [2009 (4) TMI 4 - SUPREME COURT] , where it was held that loss suffered by the assessee, in respect of revenue liability on account of exchange difference as on the date of the balance sheet is an item of expenditure allowable u/s 37(1) of the Act, in the year of accrual. The assessee has explained the above facts and also support its arguments with the help of the decisions of Hon’ble Supreme Court in the above case.
AO after considering relevant facts has accepted the claim of the assessee. But, the Ld. CIT(LTU) was of the view that the Ld. AO has not carried out required enquiries to be carried out in accordance with law, without bringing on record how enquiries carried out by the Ld.AO is insufficient or inadequate.
Deduction for provision for leave encashment - assessee has claimed deduction for said provision on the basis of decision of Hon’ble Kolkata High Court, in the case of Exide Industries Limited Vs CIT [2007 (6) TMI 175 - CALCUTTA HIGH COURT] and this fact has been brought to the notice of the Ld.AO. Pursuant to the above, Ld. AO has allowed the deduction for the same, after considering one of the possible views. Subsequently, the Ld.CIT(LTU) adopted another view in 263 proceedings on the basis of Hon’ble Supreme court decision in its first interim order, dated 08/09/2008, in case of Exide Industries Limited. However, it is pertinent to note that the stay given by the Hon’ble Supreme Court was interim stay till further order and thereafter, the Hon’ble Supreme court has passed a subsequent interim order, dated 08/09/2008, wherein it has laid down condition for claiming deduction for provision for leave encashment and thereby stay initial granted by Hon’ble Supreme Court, vide first interim order get vacated. The Hon’ble Supreme Court, further held that the assesee can claim deduction by paying tax as if, section 43B(f) is on statue book. But, at the same time, it would not be entitled to make a claim in its return of income. The assesee on the basis of said findings of the courts has made a claim and same has been accepted by the Ld. AO. Therefore, we are of the considered view that the ld.CIT(LTU) was incorrect in coming to the conclusion that the Ld. AO has erroneously allowed deduction for provision for leave encashment.
Disallowances of expenditure related to foreign currency convertible notes, the assessee has made all the disclosure in the statutory documents, including in the return of income and notes thereto given in statement of total income. Further, the assesee has specifically drawn attention of the Ld.AO to the aforesaid claim of the expenditure by way of notes to computation of income, wherein it has been explained that said expenditure was incurred on discharge of loan liability and it was written off against securities premium account in the books of accounts in accordance with the provision of section 78 and 79 of the Companies Act, 1956 and for the purpose of income tax, these expenses incurred in connection with discharge of loan liability have been claimed as deduction. All these facts were brought to the notice of the Ld.AO. Pursuant to, the Ld. AO has allowed deduction for the same by accepting the claim of the assesee. CIT(LTU) has made the disallowances by holding that said expenses is incurred to discharge loan liability and accordingly, capital in nature, but, the Ld. AO was not examined these aspects before allowing the claim, without bring on record, how the view taken by the Ld. AO is incorrect. Therefore, we are of the considered view that on this count also, the assumption of jurisdiction by the Ld.CIT(LTU) is incorrect.
Assessment order passed by the Ld. AO is neither erroneous, nor prejudicial to the interest of the revenue. Therefore, we set aside order passed by the Ld. CIT(LTU) u/s 263 of the I.T.Act, 1961 and restored assessment order passed by the Ld. AO u/s 143(3) r.w.s. 144C(13) - Decided in favour of assessee.
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2020 (1) TMI 287
Penalty u/s 271AAB - search and survey operation under section 132(1) was conducted - assessee at the time of search admitted an undisclosed income of ₹ 1.90 Crores under section 132(4) - HELD THAT:- In this case there was an existing tax liability on the assessee to pay the taxes and, therefore, the Assessing officer should have adjusted the tax from the seized assets , hence, it cannot be said that the assessee has not complied the aforesaid requirement of provisions of section 271AAAB of the Act . Even otherwise, the assessee has also explained that it was not possessed of sufficient funds and the moment it got possessed of funds, it filed the revised return on 12.2.2014 and paid due taxes.
So far as the contention of the Ld. Counsel for the assessee that the aforesaid surrender can not / does not fall within the definition of the undisclosed income, as defined under the provisions of section 271AAB is concerned, we do not agree with the above submissions. The assessee has duly made a statement that the aforesaid disclosure was on account of unrecorded transactions / discrepancies in the accounts and on account of certain loose papers found during the search action.
In view of this, the aforesaid disclosure, in our view, falls within the scope of undisclosed income as provided under Explanation (C) to section 271AAB - We hold that the case of the assessee does not fall under the provisions of section 271AAB(3) of the Act but under the provisions of section 271AAB(1) of the Act and minimum penalty@ 10% of the undisclosed income is leviable. - Appeal of the assessee is partly allowed.
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2020 (1) TMI 299
Reopening of assessment u/s 147 - Determining the capital gains tax - Determination of the value of immovable property - handing over possession of the property - market value of the property or actual sale consideration whichever is higher was required to be adopted - HELD THAT:- Information which necessitated the AO to reopen the assessment had been found namely the communication received from the office of Inspector General of Stamps and Registration, Bangalore addressed to Commissioner of Income Tax, Bangalore which was forwarded to the jurisdictional Assessing Officer by communication dated 09.02.2012 as well as to the Directorate of Income Tax (Intelligence) vide letter dated 01.02.2012. This material which was available before the Assessing Officer had persuaded him to form an opinion that income chargeable to tax had escaped from assessment. This finding would not give rise for us to formulate substantial question of law as sought for in the appeal memorandum.
Clause 6 of the said agreement would clearly indicate that possession of the property which has been delivered is symbolic possession and not physical possession.
By applying Section 53A of Transfer of Property Act and Section 2(47) (v) it has been rightly held that physical possession of the property was not transferred to the purchaser under the agreement of sale. In other words, it has been held by Tribunal that in the absence of any finding about handing over of possession in any earlier year, it cannot be said that property was transferred in any earlier year and for ascertaining same, matter has been remanded back to CIT (Appeals) with regard to issue of possession and said finding recorded by the Tribunal cannot be found fault with. That apart, issue relating to valuation, Tribunal has noticed that AO had not referred the matter to the valuation officer as required under Section 50C(2). Said valuation would be the basis for determining the amount of capital gains tax which would be taxable for the relevant year. The finding recorded by the Tribunal is purely question of facts not giving rise to substantial question of law being formulated. As such, we do not find any other ground to entertain this appeal. Accordingly, it stands dismissed.
We do not express any opinion with regard to valuation and contention of both parties in this regard is kept open to be urged before the Commissioner of Income Tax (Appeals) insofar as Section 50C of the Act is concerned.
By applying Section 53A of Transfer of Property Act and Section 2(47) (v) of I.T. Act, it has been rightly held that physical possession of the property was not transferred to the purchaser under the agreement of sale.
It has been held by Tribunal that in the absence of any finding about handing over of possession in any earlier year, it cannot be said that property was transferred in any earlier year and for ascertaining same, matter has been remanded back to CIT (Appeals) with regard to issue of possession and said finding recorded by the Tribunal cannot be found fault with. That apart, issue relating to valuation, Tribunal has noticed that Assessing Officer had not referred the matter to the valuation officer as required under Section 50C(2). Said valuation would be the basis for determining the amount of capital gains tax which would be taxable for the relevant year. The finding recorded by the Tribunal is purely question of facts not giving rise to substantial question of law being formulated. As such, we do not find any other ground to entertain this appeal. Accordingly, it stands dismissed.
We do not express any opinion with regard to valuation and contention of both parties in this regard is kept open to be urged before the Commissioner of Income Tax (Appeals) insofar as Section 50C of the Act is concerned.
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2020 (1) TMI 286
Reopening of assessment u/s 147 - Addition towards set off of fictitious losses through Client Code Modification - HELD THAT:- DIT that the assessee had taken loss adjustment entries worth of ₹ 1,55,31,999/- in F&O and Cash Segment by way of CCM, re-opened the assessment by issuing notice u/s. 148 of the Act. The assessee vide letter dated 15.10.2015 filed objection against the said notice u/s.148. The AO rejected the objection by an order dated 05.02.2016.
The Hon’ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007 (5) TMI 197 - SUPREME COURT] analyzed the distinction between the acceptance of a return u/s 143(1) and an assessment which is framed u/s 143(3) of the Act. In the former case, the AO would have much wider latitude to reopen the assessment.
Thus in the instant case, the AO has rightly issued notice u/s 148 for reopening the return of income processed u/s 143(1) of the Act. Accordingly we dismiss the grounds raised by the assessee against the re-opening done by the AO.
On merit we find that the assessee is not a registered broker on the Stock Exchange and only registered brokers can modify Client Code of their own clients. Hence, the observations by the AO that the assessee having done or resorted to CCM is incorrect. It is seen that nothing has been brought on record by the AO to show that instruction for CCM was given by the assessee. In fact, the assessee cannot be held responsible for CCM done at the end of the broker.
In the instant case, there is no incriminating statement from the brokers of the assessee i.e. Mansi Share & Stock Advisors Pvt. Ltd, Bonanza Portfolio Ltd and KM Jain Share Brokers Pvt. Ltd.
Further, no evidence is brought on record by the AO of any action by SEBI on assessee or its brokers for CCM. The data provided by NSE nowhere states that loss suffered by assessee is non-genuine.
In the assessment order dated 31.03.2016, the AO has stated the modus operandi of creation of fictitious profits and /or losses with a malafide intention of escaping taxes, but he has neither proved nor led any evidence in case of any single transaction, while making addition to the income of the assessee. Addition made by the AO is based on general propositions, which cannot be sustained. - Decided in favour of assessee.
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2020 (1) TMI 298
Disallowance of deduction u/s 54B - ITAT confirming the deletion by the CIT(A) of the addition by the AO on account disallowances of deduction u/s 54B - HELD THAT:- Appellant did not make any specific reference (in the manner in which the appeal has now been moulded before this Court) to be considered by the Commissioner of Income Tax (Appeals) or by the Tribunal. The submission before the Commissioner as well as the Tribunal was all with reference to the factual aspect as to the necessity to have the agricultural operation in the property concerned which was subjected to sale within the span of two years in conformity with the mandate of Section 54B of the Income Tax Act.
This was considered by the Commissioner as well as the Tribunal on the basis of the materials on record and a finding was rendered accordingly. This being the position, the finding rendered by the Commissioner, which was subjected to scrutiny and the finding given by the Tribunal is purely on a question of facts and no question of law is involved in this appeal; much less any substantial question of law.
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2020 (1) TMI 297
Assessment u/s 153A - sufficient information available in the record of the department forming basis of reason to believe - HELD THAT:- Shri Muneesh Kumar, DDIT (Inv) II, Raipur, has mentioned that ‘Shri Subhash Sharma of Raipur is known to be a close associate of Amolak Singh Bhatia group and therefore, he is proposed to be included in the search.” Similar observation in respect of other liquor contractors of the State is also mentioned in the note sheet concluding that in the light of above, on the basis of information gathered during discrete enquiries, it is apparent that the Shri Amolak Singh group and his associates and Shri Manjeet Singh Bhatia and associates are concealing their true income and are in possession of substantial amount of money, bullion, jewellery and other valuable assets representing income which has not been and shall not be disclosed for the purposes of taxation.
The officer thereafter proposed issuance of warrant of authorisation u/s 132 in respect of premises of Shri Amolak Singh Bhatia and family, Shri Surjeet Singh Bhatia and family, Shri Manjeet Singh, Shri Subhash Sharma, Shri Santosh Kumar, Shri Gurmeet Singh Bhatia and family and Shri Manjeet Singh at different locations.
This Court is satisfied that the authority was possessed of information on the basis of which a reasonable belief was founded that the petitioner has omitted or failed to produce books of accounts or other documents and that such person is in possession of any money, bullion, jewellery or other valuable article which represents either wholly or partly income or property which has not been or would not be disclosed. This Court is further satisfied that before issuance of warrant and the notice under Section 153A of the IT Act the authority applied its mind to the material and the formation of opinion is honest and bona fide and further that it is not based on any extraneous or irrelevant material.
Having examined the papers, this Court is also satisfied that the reasons for formation of belief are relevant to the subject matter at hand and since this Court is not required to go into the sufficiency or adequacy of the information nor can the Court sit in appeal over the satisfaction of the authority, this Court does not find any illegality or infirmity in the entire process based on which the warrant under Section 132 and the notice under Section 153A of the IT Act was issued against the petitioner.
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Customs
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2020 (1) TMI 285
Revocation of CHA License - time limitation for issuance of Offence Report - It is the contention of the petitioner that the show cause notice was issued beyond the period of 90 days of the offence report and thus contrary to the Regulation 20 (1) of Custom House Agent Licensing Regulations, 2004 and was therefore time barred - Regulation No. 20 (1) of the Customs Brokers Licensing Regulations, 2013 - HELD THAT:- The petitioner had challenged another show cause notice dated 6.9.2017 issued to the petitioner. The said writ petition was withdrawn as was recorded in the order - dismissal of the writ petition after recording the willingness of the petitioner to participate in the said show cause proceeding dated 6.9.2017 is of no relevance.
As per Regulation 20 (1) the show cause notice has to be issued within a period of 90 days “ receipt of the offence report.” Respondent has not stated as to when the report was received - In the facts of the present case, it is evident that the offence report was dated 6.9.2016 and therefore the last date for issuing the aforesaid show cause notice would have been 04.12.2016.
Even though the petitioner had an alternate remedy, there is no point in relegating the petitioner to the alternate remedy at the stage - Since, the SCN is to be construed beyond the period of limitation, the impugned order is also liable to be held without jurisdiction and is therefore liable to be quashed.
Petition allowed.
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2020 (1) TMI 282
Amendment in the bill of entry - Advance Authorization Scheme - CHA omitted to declare 3.75 MTs of ‘Kolophonium C’ and subsequently, sought amendment of the bill of entry as provided for in section 149 of Customs Act, 1962 - It is seen that, instead of considering the request for amendment to include the goods covered by the second invoice for the consignment, proceedings were initiated and, that too, in the absence of SCN.
HELD THAT:- The application for amendment of bill of entry has not been acted upon and is, as yet, pending before the competent authority. In those circumstances, there is no justification for initiation of proceedings against the importer.
From the records, we are unable to ascertain if any further investigation to establish intent to mis-declaration the goods was evidenced. Had the incompleteness of the declaration been complemented by a similar mis-declaration in the bill of lading, there could have been some support to a premise of commission of an offence. We do not find any evidence to that effect. In the circumstance of a mis-match between the bill of lading and the actual clearance of the goods, proceedings under section 116 of Customs Act, 1962 would have arisen. It is, therefore, obvious, that any intended mis-declaration of quantity would have succeeded only with a corresponding mis-declaration in the bill of lading. Such is not on record herein.
It would appear that the mis-declaration of the goods covered by only one of the invoices is inadvertent and not deliberate. It would have been appropriate for the competent authority to dispose off the application for amendment of the bill of entry - there are no reason to sustain the confiscation of goods and imposition of penalty - the impugned order is modified to the extent of setting these aside and relieving the importer of the burden of redemption fine and penalty under Customs Act, 1962.
Appeal allowed in part.
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2020 (1) TMI 281
Valuation of imported goods - 130 rolls of 50 Micron Spangle Film - misdeclaration of description/weight of goods - determination of excess goods on estimation basis - rejection of declared value - Rule 12 of Customs Valuation Rules, 2007 - HELD THAT:- As per the facts recorded in the order in original the excess weight found in the consignment over the declared weight as per the Bill of Entry was not determined on the basis of actual weighment, but on the basis of estimation - for making the charge of misdeclaration of weight, revenue has adopted a novel, self contradictory method of estimation. When they themselves agree that the length of the rolls was not identical, then what was basis for determining the total length of the 130 rolls to multiply the same by weight per unit length. Further in the entire exercise we are unable to determine what was the weight per unit length taken for estimation, and how the figure of 2.270 MT, arrived as short declared. It is not understood if Custom Officers were suspicious of misdeclaration of weight what prevented them from actually weighing the consignment as a whole and determining the actual weight of consignment.
From perusal of the two Bill of entries it is quite evident that in the Bill of Entry Filed by the Appellants they have declared the gross weight of the consignment as 14950 kgs and Net weight of 14560 Kgs as per the packing list issued by the foreign supplier. In the amended Bill of Entry, as per the order of the Additional Commissioner, the Net Weight was amended to 16771 Kgs without changing the gross weight. This has created the situation wherein the Net Weight as per the assessed Bill of Entry is more than the Gross Weight of consignment.
We are not in position to agree that there was any misdeclaration of the weight of the imported goods. Entire case of undervaluation has been made against the appellant, by not amending the declared value, but by enhancing the same to take into account the estimated undeclared weight - enhancement of value cannot be accepted.
Appeal allowed - decided in favor of appellant.
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2020 (1) TMI 284
Principles of natural justice - non-speaking order - Direction to petitioners to remit the duty along with the interest - no prior opportunity was given to the writ petitioners for put forth their objections - HELD THAT:- This Court is of the view that if the respondents are of the opinion that the petitioners are duty bound to remit the duty, such decision can be made only after giving due consideration to the objections raised by the petitioners and that non-consideration of any such objections will amount to violation of the principles of natural justice, apart from being termed as a non-speaking order.
Impugned orders are set aside with liberty to the respondents to issue a fresh SCN - Petition disposed off.
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2020 (1) TMI 283
Adjudication of show cause notice - SCN was issued in 2002 and was pending - Validity of notice of hearing issued 2017 - basis of the challenge to the notice of hearing, is the long delay in taking up adjudication proceedings - HELD THAT:- The long delay in taking up the adjudication of a show cause notice (without sufficient cause), would be indicative of the Revenue having abandoned the show cause notice - this delay in adjudication would cause prejudice to the noticee as the men in the knowledge of the facts may not be available or even if available, memories fail. Besides, papers and records which may be an answer to the challenges in the notice may not be traceable. Thus, making it impossible to respond to the notice appropriately.
Petition allowed.
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Corporate Laws
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2020 (1) TMI 280
Winding up petition - compensation paid by the National Highways Authority of India (NHAI) towards acquisition of the lands of the Company - whether the workers' union of the Company could maintain an application under Section 529A of the erstwhile Companies Act, 1956?
HELD THAT:- This Court directs as follows:-
I) That the Court continues to be in the position of custodia legis of the Company/BJF.
II) That ipso facto there is no permanent stay of winding up.
III) That as the custodia legis, this Court appoints a three member Committee of Management (for CoM).
IV) The CoM will be constituted of the following members: 1) Mr. Mukul Lahiri, Learned Senior Advocate; 2) Mr. Snehatosh Mazumder, Learned Counsel; and 3) Mr. Sondwip Mukherjee, Learned Counsel (and erstwhile Joint Special Officer).
V) The CoM will be entitled to appoint an Auditor of quality to carry out a complete audit, including a forensic audit, of the Company.
VI) The CoM shall be also entitled to consult professionals of standing/experts on an advisory basis for arriving at a just conclusion with regard to the professional and financial health of the Company.
VII) All creditors, workers etc. claiming their dues from the Company shall submit their respective claims with the CoM. The CoM shall quantify and prioritise the respective claims and submit a schedule of payments in consultation with the Auditors and experts appointed by the CoM.
VIII) The cut-off period for filing claims with the CoM shall be the period when the Company was referred to BIFR for a rehabilitation scheme.
IX) The initial remuneration of the members of the CoM shall be ₹ 1.5 lacs (Rupees One Lakh Fifty Thousand only) each. The CoM shall be entitled to secretarial and other expenses of ₹ 50,000/- (Rupees Fifty Thousand only) at the initial stage.
X) Out of the total sum of money presently lying in the custody of the Learned Registrar (Original Side), High Court at Calcutta, a sum of ₹ 25 lacs (Rupees Twenty Five Lacs only) be initially placed at the disposal of the CoM, which shall keep the said money in a separate account in a Nationalised Bank, to be operated on the basis of joint signatures of two members of the CoM.
XI) The expenses of the Auditor and the advisory opinion of the experts shall initially be met by the CoM from out of the balance of ₹ 25 lacs after deducting the sum of 5 lacs towards their individual remuneration and secretarial costs.
XII) All parties present before this Court and otherwise claiming to be associated with the Company, subject to the satisfaction of the CoM, as well as all officers at the Government/Administrative level shall render assistance to the CoM, as and when called for.
XIII) The CoM shall be entitled to place its recommendations before the Court. The CoM shall keep in mind that the template of Company Law Jurisdiction has been transformed over the years, making it necessary for this Court to observe that the present litigation associated with CP 2/1987 alongwith its connected CAs is almost antique, thus requiring any surviving rights of parties to be tested under current laws.
Reference answered.
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2020 (1) TMI 279
Restoration of name of respondent on the register of companies maintained by the office of the ROC - allegation that the appellant has failed to prove that he is a creditor of the company - Section 421 of the Companies Act, 2013 - HELD THAT:- The Respondent No.3 and 4 has given an affidavit and indemnity in the year 2005, while applying for striking off the name of the company, that the Respondent No.2 company has no assets and liabilities and also undertook to pay any liability arising later on - We cannot say that it is outstanding as on 2005 or it has been paid to somebody who was not entitled to it because there are no records since 1998.
Since the company has no assets and the company has not filed any return from 1998 onwards, therefore, it would be futile to restore the name of the company.
Appeal disposed off.
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2020 (1) TMI 278
Oppression and mismanagement - Prohibitory injunction against Respondents from effecting transfer of shares of the Appellants - application for release of interim payment of amount deposited by the Respondents - share price conversion in separate escrow account with HDFC Bank, Bhavnagar Branch - HELD THAT:- The Consent Terms recorded by the Tribunal amount to a Consent Decree notwithstanding the fact that the Company Petition was kept pending for formal disposal after admitting the Valuation Report and follow up action. Since, part consideration admittedly stands deposited by the Respondents in an Escrow Account, there was no justification in withholding its release in favour of the Appellants. Of course, the Tribunal could have insisted upon simultaneous delivery of share certificates by the Appellants while releasing such part payment and made provision for the balance payment either by furnishing of Bank Guarantees or any other appropriate mode.
Any infirmity in the Valuation Report, more so, when it was restricted to alleged fraud only in the context of non-application of proper methodology would not warrant withholding of the part consideration as any variation in the value of shares would not affect the Appellants right to claim/ recover the same.
Respondents to release the amount of ₹ 5,95,00,000/- to the Appellants immediately against the share price - Appellants are directed to handover the shares alongwith duly singed Transfer Forms to the Registry of the Tribunal (National Company Law Tribunal, Ahmedabad Bench) - Appeal allowed.
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Insolvency & Bankruptcy
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2020 (1) TMI 277
Approval of Resolution Plan - requirement on the part of ‘Resolution Applicants’ to obtain approval of the Competition Commission of India prior to approval by the ‘Committee of Creditors’ - compliance with the mandatory requirement under the proviso to Section 31(4) of the Insolvency and Bankruptcy Code, 2016.
HELD THAT:- The proviso to sub-section (4) of Section 31 of the ‘I&B Code’ which relates to obtaining the approval from the ‘Competition Commission of India’ under the Competition Act, 2002 prior to the approval of such ‘Resolution Plan’ by the ‘Committee of Creditors’, is directory and not mandatory. It is always open to the ‘Committee of Creditors’, which looks into viability, feasibility and commercial aspect of a ‘Resolution Plan’ to approve the ‘Resolution Plan’ subject to such approval by Commission, which may be obtained prior to approval of the plan by the Adjudicating Authority under Section 31 of the ‘I&B Code’.
In present matter already approval of the Competition Commission of India has been taken to the ‘Resolution Plan’.
The Appellant has no vested fundamental right to challenge the plan approved by the ‘Committee of Creditors’ - appeal dismissed being not maintainable.
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2020 (1) TMI 276
Status of the appellant - Auction - Lien/ charge of the appellant on the goods sold and services rendered for the corporate debtor - security interest - whether appellant is a secured creditor or unsecured Operational Creditor? - cancellation of auction or not.
Whether liquidator has complied with the order of the Tribunal? - HELD THAT:- It is to be noted that in Form C both monetary claim and claim of security interest were made. Further, appeal filed by the appellant was allowed and in para I & Il of the order, wherein it has been specifically directed that the liquidator was to pass an appropriate reasoned order "by reiecting or allowing/ partly allowing the claim of the appellant as per Rules" and to decide the claim within 30 days from the date of this order. The approach of liquidator in deciding the claim was also not approved. The directions given by the Tribunal clearly state that liquidator could reject or allow or partly allow the claim as per rules. Had the decision of liquidator been upheld then Tribunal would have not so directed and instead the appeal would have been dismissed. Thus, there is no iota of doubt that the appellant's monetary claim and claim of lien were to be decided afresh by the liquidator.
The approach of the liquidator in forming such belief/ opinion is contrary to the factual position as evident from the grounds of appeal and findings of the Tribunal. It is a settled position that findings and prayers are intertwined and ultimate decisions is relevant. Hence, in the facts of the case as discussed above such presumption is not justified. Further the liquidator is obliged to work subject to the directions of the Adjudicating Authority as provided in Section 35(1) of IBC, 2016.
It is further noteworthy that liquidator is a quasi judicial authority as against RP who is merely the administrative authority. As per section 40 of the IBC, 2016 the Liquidator can adjudicate upon claims made by the creditors whereas in case of CIRP this power exists only with the COC.
It is also noteworthy that as far as secured creditor is concerned, the moratorium ends immediately after completion of CIRP so that such secured creditor if wishes so, then it can realise its security interest on its own and and not putting his secured as security into liquidation estate. The moratorium for other parties may continue as per the provisions of section 33 (5) of IBC, 2016. Thus, security interest becomes a central point in the liquidation proceedings - From the perusal of various discussion, it would be evident that CIRP is driven by Committee of Creditors, whereas liquidation is driven by liquidator. The liquidator has got immense powers. Although, he is subject to the direction by the Adjudicating Authority but normally no intervention/ monitoring of day to day functioning of liquidator is envisaged in the IBC,2016 or Regulations made thereunder. The liquidator is suppose to function as trustee of the creditors. He works as a fiduciary for the benefit of all the creditors. This is statutorily recognised in section 36(2) of the IBC, 2016.
Having regard to the sequence of events, the claim of lien/charge had to be decided prior to issue of sale certificate. On this basis, it can safely be concluded that the action of the liquidator in issuing sale certificate before deciding the claim of security interest of appellant is not correct because on that date there was a possibility that there could be a security interest of the applicant and, if that would have become a reality, unless security interest was relinquished under section 52, such asset could not have formed part of liquidation estate at the very outset.
Cancellation of auction and restitution - the applicant is aggrieved by the functioning and approach of the liquidator during the liquidation process - Whether there exists a case for cancellation of auction? - Whether restitution as claimed by the applicant can be made and any mechanism is prescribed for enforcement of such claim in IBC, 2016? - HELD THAT:- The valuation has been challenged on all parameters. It has been pleaded both by the liquidator and auction purchaser that the role of judicial authorities was very limited since the valuation was an exercise which was to be taken by an experts and this could not be disturbed unless there were apparent mistakes. There cannot be any dispute with this proposition but on the face of it, we find that there exist inconsistencies and contradictions in various documents produced before us,hence, a case of improper valuation is made out.
In the present case, as stated by the liquidator, the only criteria which has been fixed was that deposit of 10% of amount as earnest money deposit (EMD). In our view, when sale of such a huge plant at very large site is involved, the background of the bidder is very important and their past experience of participation in such kind of auction and completing the auction transaction in a smooth manner is of utmost importance. However, in the present case, this criteria has not been appeared to have been followed. The financials of the second bidder do not support the credential even for depositing of 10% EMD.
The IBC,2016 has prescribed roles of it's different constituents. The roles of COC, RP and liquidator have already been discussed herein before, hence, not repeated. The jurisdiction of Adjudicating Authority has been prescribed in various specific sections. For example under section 19(2) of the IBC,2016, the Adjudicating Authority can direct the suspended Board of Directors to provide necessary cooperation to IRP/RP. Another example is approval of resolution plan under section 31 of the IBC,2016 which is circumscribed by the provisions of section 30(2) of the IBC, 2016 and it has been repeatedly held that commercial wisdom of COC is supreme and Adjudicating Authority cannot prevail over that - The Adjudicating Authority can decide the matters relating to preferential transactions, under-valued transaction, frauds etc. In addition to this under section 42, the Adjudicating Authority can decide an appeal filed by the aggrieved party by the decision of the liquidator as regard to its claim. The jurisdiction under section 60(5) of the IBC,2016 also exists which is undisputedly a residual jurisdiction.
The residuary jurisdiction vested in Tribunal through clause(c) above is to be applied in the present case. This clause provides for decision by Tribunal on various matters relating to Insolvency resolution or liquidation proceedings and has got overriding effect over any contrary provisions contained in any other law for the time being in force, hence, this jurisdiction is subject to specific provisions of the IBC,2016. Thus, if any specific provisions/ mechanism exist in IBC,2016 and/or Regulations made thereunder for redressal of any grievance or any issue involving question of law or facts in relation to liquidation proceeding, then, such mechanism would have to be applied.
The IBBI is empowered to impose penalty on Insolvency professional as per Section 220(3) of the IBC,2016. Section 2206), 220(5) and 220(6) of the IBC,2016 provide for determination of unlawful gain earned by a person, to order disgorgement of an amount equivalent to such unlawful gain and to provide restitution to the person who suffered the loss from the amount so disgorged. Once these specific provisions exist, in our considered view the proper forum to decide the question of restitution is IBBI and not this Adjudicating Authority. Thus, this contention of the applicant is rejected.
Application disposed off.
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2020 (1) TMI 275
CIRP Proceedings - ‘Secured Creditor’ has relinquished ‘security interest’ or not - Jurisdiction - power of Adjudicating Authority u/s 52 r/w Regulation 37 of the IBBI (Liquidation Process) Regulations, 2016 to decide disputed question of fact with regard to realization of ‘security interest’ by a ‘Secured Creditor’ - HELD THAT:- After enforcement of right under Section 52 by one of the ‘Secured Creditor’, no other ‘Secured Creditor’ can enforce his right subsequently for realization of the amount for the same secured assets, as the excess amount by way of proceeds pursuant to the first enforcement is deposited in the account of the Liquidator.
Only one ‘Secured Creditor can enforce his right for realization of its debt out of the secured assets as per Section 52 - There is nothing on record to suggest that 1st Respondent has moved before the Liquidator in terms of sub-section (2) of Section 52 for realizing the ‘security interest’. It is also not clear whether the records of such ‘security interest’ has been maintained by an information or utility or in the manner as specified by the Board or verified by the Liquidator.
In absence of any allegation that there is resistance in recovering the secured assets, the question of entertaining the application by the Adjudicating Authority under sub-section (6) of Section 52 does not arise. Therefore, except the manner as prescribed under sub-section (2), (3) and (4) of Section 52, if a ‘Secured Creditor’ directly applies before the Adjudicating Authority for allowing it to recover the secured assets under sub-section (6) of Section 52, such application is not maintainable.
As in the present case, all the ‘Secured Creditors’ have claimed right over the same secured asset, which is 91% of the total secured asset and particularly when a suit is pending for declaration, as to which ‘Secured Creditors’ has the first charge, in such a case, it was not open to the Adjudicating Authority to allow the application filed by the 1st Respondent to realise the ‘security interest’ under Section 52 - as the Liquidator has abdicated its power and the Adjudicating Authority without any jurisdiction by the impugned order directed the Liquidator to handover the symbolic possession of the fixed assets of the ‘Corporate Debtor’ to Finquest Financial Solutions Pvt. Ltd. with a finding that the said Applicant is entitled to realise the ‘security interest’ without noticing the relevant provisions, the impugned order passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai cannot be upheld.
The matter is remitted to the Liquidator to proceed in accordance with law, following Section 53 r/w Section 52 of the I&B Code - appeal allowed by way of remand.
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Service Tax
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2020 (1) TMI 274
Franchise Service - principal-agent relationship - relationship between the Appellant and the agents who are collecting money as against a bill of Bill issuer (public utility services) from the customers on behalf of Appellants, who is actually engaged in providing such Bill collection services to such customers - taxability of Franchisee fees - onetime fee/security deposit collected by the Appellant from the said agents.
HELD THAT:- Perusal of the agreement shows that the agreement is titled as " Retail Agent Agreement" which has been executed by the Appellant with an intention to provide an efficient and easily assessable payment collection services for the bill issuers (as defined in the agreement itself) for the collection of the payments from the customers ( who are also defined in the agreement itself), who wish to settle their Bills from the Bill issuer over the country. All such persons who wish to become the part of the company's network of retail agents through which the company shall provide such payment collection services may be appointed as the agent of the company. This objective in itself is sufficient for us, when looked into in relation to the definition of franchise service and the meaning of representational right as discussed above, to hold that the agreement is to appoint someone who may undertake to collect the impugned bills payment not absolutely on his own but who undertake to collect the same on behalf of the Appellant.
Mere use of word ‘principle to principle’ basis cannot be read for the impugned arrangement between appellant and his agents to be called as franchise service - Perusal of the terms of the agreement give us a clarity to hold that the payment of ₹ 15000/- is not at all the consideration towards the purchase of Representational Rights by the agent from the Appellant. Contrary thereto the arrangement herein is that payment to be made by the Appellant to the agent per Bill basis. This particular term of agreement is absolutely against the intent of what can be called as franchise service.
The adjudicating authority below have committed an error while giving interpretation to the word 'franchise service'. The authorities have failed to observe the actual intent of the agreement involved - appeal allowed - decided in favor of appellant.
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2020 (1) TMI 273
Refund of CENVAT Credit remaining unutilized - refund rejected on the ground that the appellant failed to show the nexus with the services utilized with that of services exported - HELD THAT:- It is a fact on record that, at the time of availing of CENVAT credit, it was shown by the appellant that, at any time no question was raised for inadmissibility of the CENVAT credit. In these circumstances, at the time of filing of refund claim, it cannot be questioned that the appellant is not entitled to CENVAT credit.
The appellant is entitled to refund of the CENVAT credit lying unutilized in their CENVAT account - Appeal allowed - decided in favor of appellant.
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2020 (1) TMI 272
CENVAT Credit - input services - keyman mediclaim/insurance policy - case of the Department is that the life insurance policy of the keyman person, Shri Anil Singhal (Managing Director), is primarily for his personal use and not for any business purposes, and credit cannot be allowed - HELD THAT:- The issue has been decided by this Tribunal in favour of the appellant in their own case M/S. OM LOGISTICS LTD. VERSUS COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, [2019 (8) TMI 1451 - CESTAT, PRINCIPAL BENCH, NEW DELHI] where it was held that appellant is entitled to benefit of cenvat credit under Rule 2 (l) of Cenvat Credit Rules on the Keyman Insurance.
Credit allowed - appeal allowed - decided in favor of appellant.
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2020 (1) TMI 271
CENVAT Credit - duty paying invoices - allegation that credit availed without input service invoice and also on the basis of 69 debit notes issued by M/s. Banketch India (P) Ltd., Bangalore - Rule 9 of the CCR - HELD THAT:- It has been consistently held by the Tribunal and the High Court in various decisions cited that CENVAT credit can be availed on the basis of debit notes if it contains all the details as specified under Rule 9 of the CCR and in the present case, the debit notes produced before me contains all the details which are required under Rule 9 and therefore they are valid documents for claiming CENVAT credit.
Appeal allowed - decided in favor of appellant.
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Central Excise
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2020 (1) TMI 268
CENVAT Credit - common inputs/input services used in the manufacture of the exempted final product as well as the other excisable product - non-maintenance of separate records - Rule 6 of CCR - period from 07/2005 to 03/2010 - HELD THAT:- In the present case two periods are involved for the period 2008-2009 and 2009-2010, the appellant has already reversed the proportionate credit attributable to input services used for the exempted goods and the same has been accepted in the SCN and has also been appropriated and is not in dispute - Further, it is found that once the appellant has reversed the proportionate credit for the period April 2008 to March 2010 as provided under Rules then the question of demand of amount of 10% on the value of exempted goods as per Rule 6(3)(i) does not arise - it is the option of the assessee to choose either of the three options given under Rule 6 and the Department cannot substitute its own option and this has been settled by the Tribunal in the case of M/S. MERCEDES BENZ INDIA (P) LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I [2015 (8) TMI 24 - CESTAT MUMBAI] and also by the recent decision of the Telangana High Court in the case of M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT].
Demand of ₹ 10,03,983/- pertaining to the period July 2005 to March 2008 - Time limitation - HELD THAT:- The entire demand is barred by limitation for the reason that during the disputed period, there was a dispute regarding statutory interpretation of Rule 6 of the CCR and subsequently there was a retrospective amendment vide Finance Act, 2010 also - also, the present proceedings were initiated on the basis of audit objections and it is well settled that no suppression can be alleged on the basis of audit objection in view of the various decisions relied upon by the appellants - further, in the present case, the appellant has placed on record Audit Note dated 08.02.2010 wherein Department itself has recorded that they had previously conducted audit of the records of the appellant during December 2008 audited up to March 2008 no objection on the issue was raised in the previous audit conducted by the Department. Therefore, the CENVAT credit availed by the appellant was in the knowledge of the Department and therefore, the question of suppression of facts with intent to evade payment of duty does not arise and cannot be alleged against the appellant.
Appeal allowed - decided in favor of appellant.
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2020 (1) TMI 267
Clandestine removal - grey fabric - reliability on statements - cross-examination of persons - Section 9D of the Central Excise Act, 1944 - HELD THAT:- The adjudicating authority was required to record a finding on the request of cross examination as per the provisions of Section 9D, and then could have proceeded to rely or discard the statements relied upon by the revenue in the adjudication proceedings - It is not the case the adjudicating authority had not found the request for cross examination irrelevant in the adjudication proceedings, he himself had allowed.
It appears that adjudicating authority has in the first instance allowed the request of cross examination and fixed the date for cross examination on 22.4.2008. However since the cross examination did not happen on the appointed day he held the same to be irrelevant.
In terms of Section 9D referred above, cross examination is necessary to establish the relevance of statements recorded during the investigation proceedings. Once it is found that cross examination is required for establishing the truth and relevance of the statement recorded it should be allowed, and only after cross examination the statement can be admitted as an evidence in the proceedings - Once adjudicating authority/Commissioner (Appeals) find that cross examination was required, then before admitting any statement in evidence, they should allow/ extend opportunity for cross examination.
There are no merits in the findings recorded by the adjudicating authority/ Commissioner (Appeal) that the opportunity was extended and since cross examination was not done on the appointed date, the bar of Section 9D has been successfully crossed. While making this observation, we are not observing that appellant could prolong the adjudication proceedings indefinitely by making the request for cross examination a then choosing not to appear on the day appointed for cross examination.
In the present case after allowing the request for cross examination, adjudicating authority has proceeded to adjudicate the case without putting the appellant on notice just for the reason that hearing fixed for cross examination, did not happen on the appointed day - the matter needs to be remanded back to adjudicating authority for considering the request for cross examination made by the appellants, and only after recording reason for permitting or disallowing cross examination proceed with the adjudication proceedings - appeal allowed by way of remand.
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2020 (1) TMI 270
Contempt petition - alleged violation/non-compliance of the interim order - Petitioner submits that the Assistant Commissioner is writing letters saying that in view of the judgment rendered by the Supreme Court in the case of ASIAN RESURFACING OF ROAD AGENCY PVT. LTD. AND ANR. VERSUS CENTRAL BURUEAU OF INVESTIVATION [2018 (4) TMI 3 - SUPREME COURT], the interim order has lapsed and the petitioner should deposit the penalty, but penalty has not yet been realised.
HELD THAT:- This contempt petition is disposed of with the observation that the judgment in the case of ASIAN RESURFACING OF ROAD AGENCY PVT. LTD. AND ANR. VERSUS CENTRAL BURUEAU OF INVESTIVATION [2018 (4) TMI 3 - SUPREME COURT] is in respect of the interim orders granted by the High Court in criminal and civil cases and not in tax matters.
Registry is directed to list the Appeal before the appropriate Court in the next week, which is taking up the jurisdiction of the central excise appeals, so that the matter is decided finally.
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2020 (1) TMI 269
Maintainability of appeal - pre-admission stage - Section 35G of the Central Excise Act, 1944 - Taxability - classification as agricultural machinery - HELD THAT:- While according to the assessee, being a manufacturer of small agricultural implements for classification as agricultural machinery, they were exigible to Nil rate of duty, the department had other views and it is this dispute which led to the proceeding which ultimately culminated in the order of ‘the Tribunal’ who have decided in favour of the assessee.
There are no reasons to interfere with the opinion of ‘the Tribunal’ - no substantial question arises in the present appeal for inviting admission - appeal dismissed.
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CST, VAT & Sales Tax
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2020 (1) TMI 266
Jurisdiction - authority to deduct the sales tax at source from their bills - tender conditions offered by Geeta Enterprises/Asansol- Respondent No.1 - HELD THAT:- The appellant could not have insisted for production of actual payment receipts of sales tax paid by third party - the seller of the goods, from where the same were procured by the respondent No.1 at first point of sale, after recovering the same from the respondent No.1. In that, the seller is responsible to pay the sales tax amount collected from the respondent No.1. The respondent No.1 had no responsibility in that regard.
There are no reason to interfere in this appeal - appeal dismissed.
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2020 (1) TMI 265
Amnesty Scheme - registration not obtained - It is the case of the petitioners that they bona fide believed that they were selling immovable property and therefore, neither obtained registration under the Gujarat Value Added Tax Act, 2003 nor paid any tax thereunder - HELD THAT:- The object of the amnesty scheme is to bring about expeditious and effective resolution of old disputes and recoveries of old outstanding dues of the Government and reduction of administrative costs. Since such scheme is applicable to all pending cases, the officers acting under the relevant statutes are expected to respect the object of the scheme and to ensure that the assessees get the benefit under the scheme. Therefore, when a bona fide request is made by an assessee to adjourn the hearing of a case with a view to enable him to avail the benefit of the scheme, the concerned officer is duty bound to respect such request - Therefore, when in the present case, where the matter had not been taken up for hearing for a considerable period of time, when the petitioners requested the second respondent to keep the assessment proceedings in abeyance as they wanted to avail the benefit of the amnesty scheme, the respondent ought to have respected such request and afforded the petitioners sufficient time to avail the benefit of the amnesty scheme, however, on the contrary, the second respondent, in undue haste, has proceeded to pass an ex parte high pitched best judgment assessment order under section 34(8) of the GVAT Act.
Section 17 of the GVAT Act provides for power to transfer proceedings and lays down that the Commissioner may, after due notice to the concerned parties and by an order in writing, transfer any proceedings or class of proceedings under any provision of that Act from himself to any other officer and he may likewise transfer any such proceedings from such officer to another or to himself - In the facts of the present case, on a perusal of the reply received by the petitioners in response to their application under the Right to Information Act, it is evident that the jurisdiction of the petitioners was not transferred to the second respondent - Consequently, the second respondent did not have any jurisdiction to make assessment in the case of the petitioners, which renders the impugned assessment orders null and void as they have been passed by an authority which lacked the jurisdiction to make such orders.
Perusal of the paragraph 5(2) of the Amnesty Scheme reveals that the scheme clearly provides for making applications thereunder even in cases where there have been enforcement proceedings. Moreover, the petitioners have asserted that in their case there was no search, which fact is clearly supported by the reply received by them in response to their applications under the Right to Information Act, wherein it has been stated that no search warrant has been issued to Sunflower Developers - the first petitioner in both the petitions. Under the circumstances, prima facie it appears that the case of the petitioners is not a search case. In any event, even otherwise, while making a best judgment assessment under the GVAT Act, it was not permissible for the second respondent to comment on the eligibility or otherwise of the petitioners under the amnesty scheme.
Apart from the fact that the second respondent lacked the jurisdiction to make the assessment orders, even otherwise, the second respondent ought to have respected the request of the petitioners to keep the proceedings in abeyance so as to enable the petitioners to avail of the benefit under the amnesty scheme. While it is true that even after the passing of the assessment orders, the petitioners would be entitled to avail of the amnesty scheme, the consequence of the passing of the impugned assessment orders would be that the petitioners would be required to accept the amount assessed under the impugned assessment orders and pay tax accordingly under the amnesty scheme - Thus, the second respondent, by not keeping the proceedings in abeyance, has tried to frustrate the petitioners’ chances of obtaining the benefit of the amnesty scheme and by making a high pitched best judgment assessment, has attempted to ensure that even if the petitioners decide to avail the benefit of the Amnesty Scheme, they are required to pay a huge amount of tax. This conduct of the second respondent cannot be countenanced.
The impugned assessment orders are set aside - petition allowed.
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Indian Laws
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2020 (1) TMI 264
Jurisdiction - powers to make interim orders - whether the Gujarat Public Works Contract Disputes Arbitration Tribunal constituted under Section 3 of the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992 has jurisdiction to make interim orders in terms of Section 17 of the Arbitration and Conciliation Act, 1996?
HELD THAT:- The appropriate remedy for the contractor was to approach the arbitral tribunal constituted under the Gujarat Act since that would have jurisdiction to decide whether the notice issued by the Government was a legal notice and whether the Government was, in fact, entitled to recover any amount from the contractor - It would also be within the jurisdiction of the Tribunal to decide whether the contractor has made out a prima facie case for grant of interim relief.
We are purposely not going into the merits of the case because once we hold that the Tribunal has the jurisdiction to entertain and adjudicate upon the dispute it would not be proper for us to make any comments on the merits.
Insofar as the powers vested in the Arbitral Tribunal in terms of the Section 17 of the A&C Act are concerned, such powers can be exercised by the Tribunal constituted under the Gujarat Act because there is no inconsistency in these two Acts as far as the grant of interim relief is concerned - This power is already vested in the tribunal under the Gujarat Act and Section 17 of the A&C Act compliments these powers and therefore it cannot be said that the provisions of Section 17 of the A&C Act are inconsistent with the Gujarat Act.
Appeal allowed.
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2020 (1) TMI 263
Dishonor of Cheque - insufficiency of funds - Appellate Court has suspended the substantive sentence of the appellants subject to deposit 25% of the compensation awarded by the trial court in favour of the complainant - HELD THAT:- This Court having already upheld the order of the Appellate Court dated 01.12.2018 suspending the sentence subject to deposit 25% of the amount of compensation any submission questioning the order of the Appellate Court directing the suspension of sentence subject to deposit of 25% of the compensation amount needs no further consideration. By dismissal of the criminal appeals of the appellants on 29.05.2019 by this Court the challenge stands repelled and cannot be allowed to be reopened.
The second round of litigation which was initiated by the appellant by filing application under Section 482 Cr.P.C. was against the order dated 20.07.2019 passed by the Additional Sessions Judge, Panchkula by which Additional Sessions Judge held that the appellant having not complied with the direction dated 01.12.2018 to deposit 25% of the amount of compensation, the order of suspension of sentence shall be deemed to have been vacated. The order dated 20.07.2019 was an order passed by the Additional Sessions Judge on account of failure of the appellant to deposit 25% of the amount of compensation. The suspension of sentence on 01.12.2018 was subject to the condition of deposit of 25% of the amount of compensation, when the condition for suspension of sentence was not complied with, learned Additional Sessions Judge was right in taking the view that order of suspension of sentence shall be deemed to have been vacated - Challenge to order dated 20.07.2019 has rightly been repelled by the High Court by its elaborate and well considered judgment.
When suspension of sentence by the trial court is granted on a condition, noncompliance of the condition has adverse effect on the continuance of suspension of sentence. The Court which has suspended the sentence on a condition, after noticing non-compliance of the condition can very well hold that the suspension of sentence stands vacated due to non-compliance. The order of the Additional Sessions Judge declaring that due to noncompliance of condition of deposit of 25% of the amount of compensation, suspension of sentence stands vacated is well within the jurisdiction of the Sessions Court and no error has been committed by the Additional Sessions Judge in passing the order dated 20.07.2019.
It is for the Appellate Court who has granted suspension of sentence to take call on non-compliance and take appropriate decision. What order is to be passed by the Appellate Court in such circumstances is for the Appellate Court to consider and decide. However, non-compliance of the condition of suspension of sentence is sufficient to declare suspension of sentence as having been vacated.
Appeal dismissed.
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