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TMI Tax Updates - e-Newsletter January 10, 2022 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 GST: Classification of supply - Works contract - divisible supply or not - The instant contract shall be treated as an indivisible single contract thereby the O&M contract cannot be held to be independent of DB supply. Moreover, though the term ‘pure services’ has not been defined under the Act, a bare reading of the description of services as specified in the aforesaid entry denotes that supply of services which does not involve any supply of goods can be regarded as pure services - the O&M contract, if it were treated to be an independent supply, wouldn’t qualify as pure services rather the same shall be held as works contract as defined in clause (119) of section 2 of the GST Act. - AAR Visit to Get Source GST: Eligibility of exemption under GST - composite supply - service by way of milling of food grains into flour - distribution of such flour under Public Distribution System - If the value of goods involved in such composite supply exceeds 25% of the value of supply, the supply shall attract tax @ 5% (CGST @ 2.5% + WBGST @ 2.5%) - AAR Visit to Get Source GST: Benefit of Exemption from GST - affordable housing - The project referred to in the instant application which is currently under construction by the applicant is a Residential Real Estate Project (RREP) - The apartments in the said project qualify as affordable residential apartment as defined under the aforesaid notification - GST rate to be charged from customers for sale of flats in the said project, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier, shall be 1.5% (0.75% CGST and 0.75% SGST), as further reduced by 1/3rd to factor in the value of land. - AAR Visit to Get Source Income Tax: Rejection of books of accounts - valuation of the closing stock - gross profit margin - Assessment was complete u/s 143(3) - After that, during survey u/s 133A, assessee could not produce stock register - with the assessment having been completed under Section 143 (3) of the IT Act, and after the Assessee had produced its books of account, the question of invoking Section 145 of the IT Act did not arise - ITAT committed a serious error. It proceeded on that basis to re-work the gross profit margin. - HC Visit to Get Source Income Tax: TDS u/s 194H - bank guarantee commission - whether the bank guarantee commission is not in the nature of commission paid to an agent but it is in the nature of bank charges for providing one of the banking services and, if it so, whether the requirement for deduction at source under Section 194H would stand attracted? - Tribunal rightly dismissed the revenue appeal - HC Visit to Get Source Income Tax: Punitive charges paid to the Railways - Allowable Revenue expenditure u/s 37 - whether the punitive charges paid to the Railways for alleged violation of the provision of Indian Railway Act could be allowable as expenditure? - whether deduction can be claimed by the assessee in respect of such expenditure? -when the respondent/assessee loads the goods for dispatch through railway wagons actual measurement of weight cannot be done due to absence of weighing bridge at the originating station. Thus, we find that the Tribunal rightly decided the issue in favour of the respondent/assessee. - HC Visit to Get Source Income Tax: Determining the short term capital gains - adopting different value from market value of the property - sale of the property lower than the value adopted by the Stamp Valuation Authorities - Only when the matter carried to first appellate stage, the assessee objected to the value adopted by the AO without referring the matter to the DVO by giving the detailed reasons as to why the sale consideration was lesser amount. Hence, the decision relied by ld DR is distinguishable on facts. - Additions confirmed - AT Visit to Get Source Income Tax: Disallowance u/s 14A r.w.r. 8D - though not the dominant purpose of acquiring the shares is a relevant for the purpose of invoking the provisions under section 14 A of the Act, the shares held as stock in trade stand on a different pedestal in relation to the shares that were acquired with an intention to acquire and retain the controlling interest in the investee company - no illegality or irregularity in the Ld. CIT(A) deleting the addition made by the Ld. AO under rule 8D (2) (ii) - AT Visit to Get Source Income Tax: Condonation of delay in filing appeal before CIT(A) - sufficient cause of such delay - even the order of the learned CIT (A) in not admitting the appeal of the assessee is an order passed in contravention of Section 14 of the Insolvency and Bankruptcy Code 2016. This is for the reason that the section 14 prohibits even continuation of proceedings during moratorium against the corporate debtor. In view of this, the order of the learned CIT(A) in not admitting the appeal of the assessee is in contravention of Section 14 of the IBC and therefore not sustainable. - CIT(A) directed to decide the issue afresh - AT Visit to Get Source Income Tax: Disallowance of Interest on Borrowed Fund - Assessee company is one of the group companies of M/s SCSL and the assessee had advanced to the tune of ₹ 80.78 crores to M/s SCSL. We find that M/s SCSL was involved in a big financial scandal by way of inflating the figures in the balance sheet due to which M/s SCSL involved in various court cases, which are pending. - Genuineness of the amounts advanced to such group company by the assessee is doubtful. - Additions towards interest confirmed - AT Visit to Get Source Income Tax: Nature of expenditure - expenditure towards purchase of software - We hold that advantage of an enduring benefit, need not be on capital account. If the advantage consists merely in facilitating the assessee's trading operations or enabling him to manage and conduct his business more efficiently or more profitably while leaving the fixed capital untouched, the same cannot be regarded as on capital account. In order to treat any expenditure as capital expenditure, the same should result in accrual of advantage of enduring benefit and such benefit should accrue to the assesses in the capital field. - the expenditure in question has to be regarded as revenue expenditure. - AT Visit to Get Source Income Tax: Accrual of income in India - Royalty / FTS - the software maintenance fees, consulting charges and training fees which are incidental to software license fee, assumes same character as that of software license fee - Even the software maintenance, consulting charges and training fees which are incidental to software maintenance fee cannot come within the purview of FTS within clause 5 of Article 12 of the treaty - AT Visit to Get Source Income Tax: Disallowance of “Scholarship Expenses” - Expenses claimed under the head ‘Assistance to Law Students’ - The expenditure incurred by the assessee is the routine day-to-day expenditure incurred by the assessee for promoting his professional profile. These expenditure cannot be held to be capital expenditure in nature as no fresh new fixed assets is created by paying the scholarship sum - Allowed as business / revenue expenditure - AT Visit to Get Source Customs: Refund of terminal excise duty - supplies made against ICB - The second respondent is directed to consider the facts and circumstances with reference to the applications and documents filed by the petitioner and accordingly, take a decision and pass orders as expeditiously as possible preferably within a period of eight weeks from the date of receipt of a copy of this order. I - HC Visit to Get Source Corporate Law: Scope of 'deposits" - advances received towards sale consideration of immovable property - To unlock the funds invested in development of the lay outs etc., the 1st petitioner company had offered to sell the land in its possession and for this purpose entered into written agreement/arrangement. By virtue of proviso to Rule 2 (1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014, the advances received by the 1st petitioner for sale of immovable property are exempted from the purview of the deposits. - HC Visit to Get Source Indian Laws: Dishonor of cheque - Proceedings against the Joint Account Holder who is not the signatory of the cheque - Section 138 of the NI Act does not speak about the joint liability. Even in case of a joint liability, in case of individual persons, a person other than a person who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offence Under Section 138 of the NI Act. A person might have been jointly liable to pay the debt, but if such a person who might have been liable to pay the debt jointly, cannot be prosecuted unless the bank account is jointly maintained and that he was a signatory to the cheque. - HC Visit to Get Source IBC: Determination of insolvency resolution costs - payments of costs and expenses incurred by the Resolution Professional (RP) - Neither the basis of the claim nor its reasonableness has been considered by the adjudicating authority. The appellate authority has merely proceeded in an ad hoc manner on the ground that the amount of ₹ 5,00,000 as fee, in addition to the expenses, appears to be reasonable. - In the absence of any reasons either in the order of the NCLT or the appellate authority, it is impossible for the Court to deduce the basis on which the payment of an amount of ₹ 5,00,000 together with expenses has been found to be reasonable. Consequently, an order of remand becomes necessary. - SC Visit to Get Source IBC: Right of bank to claim priority on redemption of FD - CIRP proceedings under process - Fixed Deposits were never charged to the Appellant neither originally as “Charged Assets” nor subsequently as “Additional Security”, hence the Bank has no right over these Fixed Deposits even when loan is recalled by the Bank. No such charge was registered by the Corporate Debtor or even by the Appellant in terms of Section 77 of the Companies Act, 2013. - AT Visit to Get Source IBC: Withdrawal of CIRP Application filed u/s 12 A of IBC - settlement between the Appellants and the Corporate Debtor - On the day when the Application was filed, there was no requirement of approval of ninety percent of voting share of Committee of Creditors - entire dues of the Appellant were paid by the Corporate Debtor under Memorandum of Settlement dated 25.08.2021. An Application was also filed on 25.08.2021 i.e. before the constitution of the Committee of Creditors. - The Adjudicating Authority without considering the facts and sequence of the events had refused to entertain the Application - Appeal allowed - AT Visit to Get Source Service Tax: 100% EOU - Levy of service tax - export of services - Scientific and Technical Consultancy Service - Delivery of report to its client is an essential part of the service, report was delivered outside India and same was used outside India. This is not the disputed fact. We hold that the respondent satisfied the conditions of rule 3(2) and accordingly, the respondents are eligible for the exemption - AT Visit to Get Source Central Excise: Lapse of CENVAT Credit - When the notification which prescribed the nil rate of duty but bearing condition that no Cenvat credit should be availed whether Cenvat credit lying in balance after reversal on inputs, WIP and inputs contained finished goods, shall lapse in terms of Rule 11(3)? - There is a clear distinction between an absolute exemption and conditional exemption. Therefore, the contention of the adjudicating authority that since the exemption notification was issued under section 5A the appellant is otherwise required to pay balance credit is of no substance and has no basis - AT Visit to Get Source Articles Highlights of Key Changes in GST w.e.f January 01, 2022 VAULT MANAGERS – PART I Notifications GST - States 38/1/2017-Fin(R&C)(222)/3210 - dated 31-12-2021 - Goa SGST Goa Goods and Services Tax (Tenth Amendment) Rules, 2021. 38/1/2017-Fin(R&C)(22/2021-Rate)/8216 - dated 31-12-2021 - Goa SGST Seeks to supersede Notification No. 38/1/2017-Fin(R&C)(15/2021-Rate)2084, dated the 30th November, 2021 and amend Notification No 38/1/2017-Fin(R&C)(11/2017- Rate), dated the 30th June, 2017 38/1/2017-Fin(R&C)(21/2021-Rate)/8215 - dated 31-12-2021 - Goa SGST Seeks to supersede Notification No.38/1/2017-Fin(R&C)(14/2021- Rate)2084, dated the 30th November, 2021 and amend Notification No 38/1/2017-Fin(R&C)(1/2017-Rate), dated the 30th June, 2017 38/1/2017-Fin(R&C)(19/2021-Rate)/3212 - dated 31-12-2021 - Goa SGST Amendment in Notification No. 38/1/2017-Fin(R&C) (2/2017- Rate), dated the 30th June, 2017 38/1/2017-Fin(R&C)(18/2021-Rate)/3213 - dated 31-12-2021 - Goa SGST Amendment in Notification No. 38/1/2017-Fin(R&C)(1/2017- Rate), dated the 30th June, 2017 38/1/2017-Fin(R&C)(14/2021-Rate)(Corri.)/3208 - dated 30-12-2021 - Goa SGST Corrigendum - Notification No. 38/1/2017-Fin(R&C)(14/2021-Rate) 2084, dated the 30th November, 2021 Income Tax 02/2022 - dated 7-1-2022 - IT Corrigendum - Notification No. 139/2021 dated 28th December, 2021 Circulars / Instructions / Orders GST - Instruction No. 01/2022 - dated 7-1-2022 Guidelines for recovery proceedings under the provisions of section 79 of the CGST Act, 2017 in cases covered under explanation to sub-section (12) of section 75 of the CGST Act, 2017 News Sovereign Gold Bond Scheme 2021-22 (Series IX) – Issue Price Case Laws: GST 2022 (1) TMI 305 Exemption form GST or not - composite supply of service - milling of food grains into flour to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System - exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 or not - HELD THAT:- The activities undertaken by the applicant for milling of wheat into wheat flour, along with fortification and supplied upon packing of the same qualify the definition of composite supply under clause (30) of section 2 of the GST Act where the supply of services by way of milling is the principal supply. Whether this composite supply is made in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution? - HELD THAT:- Where the non-cash consideration involved in the instant supply is found to the extent of such an amount that the value of supply of goods does not exceed 25% of the total value of supply, the supply shall qualify for exemption vide entry serial 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 [corresponding State Tax Notification No. 1136-FT dated 28.06.2017]. Otherwise, the supply shall attract tax @ 5% vide entry serial No. 26 of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 [corresponding State Tax Notification No. 1135-FT dated 28.06.2017]. 2022 (1) TMI 304 Classification of supply - Works contract - divisible supply or not - agreement entered between the applicant and KMC, Establishment of District Meter Areas, Construction Works and Operation Maintenance - agreement entered between the applicant and KMC be treated as single contract for composite supply of DB and O M or not - taxability under GST regime - input tax credit - HELD THAT:- It appears that the scope of work includes inter alia supply, laying, installation and commissioning of distribution network with HDPE pipe (noted in para 2.6) along with operation and maintenance. The contract has been divided into two phases i.e., (i) Design Construction Phase and (ii) O M Phase. However, completion of first phase of the contract i.e., Design Construction Phase shall entitle the contractor to apply for certificate of sectional completion only as referred to in clause 32.1 of the GCC - the instant contract is to be treated as a single contract for composite supply of DB and O M which qualifies as works contract as defined in clause (119) of section 2 of the GST Act. Further, as per Para 6 (a) of Schedule II to the GST Act, works contracts as defined in clause (119) of section 2 shall be treated as a supply of services. So, the instant supply shall be treated as supply of services. Taxability of supply - HELD THAT:- The applicant has made the instant composite supply of works contract to Kolkata Municipal Corporation which is a local authority in terms of definition under clause (69) of section 2 of the GST Act. Further, the works contract, as it appears from the scope of work, involves installation and maintenance of pipeline for water supply. We therefore find that the instant composite supply of works contract gets covered under entry serial number 3(iii) of the Notification No. 20/2017- Central Tax (Rate) dated 22.08.2017 and therefore shall attract tax @ 12%. The instant contract shall be treated as an indivisible single contract thereby the O M contract cannot be held to be independent of DB supply. Moreover, though the term pure services has not been defined under the Act, a bare reading of the description of services as specified in the aforesaid entry denotes that supply of services which does not involve any supply of goods can be regarded as pure services - the O M contract, if it were treated to be an independent supply, wouldn t qualify as pure services rather the same shall be held as works contract as defined in clause (119) of section 2 of the GST Act. 2022 (1) TMI 303 Eligibility of exemption under GST - composite supply - service by way of milling of food grains into flour to Food Supplies Department, Govt. of West Bengal for distribution of such flour under Public Distribution System - exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - rate of GST on such milling, if it does not fall under entry No. 3A - HELD THAT:- The applicant, according to the agreement as produced, has been selected for empanelment for crushing of wheat into wholemeal atta and fortify it by premixing of micro-nutrients containing Iron, Folic acid and Vitamin to a specific percentage. The agreement further requires the applicant to pack the crushed stock of wholemeal atta after fortification into properly levelled poly-packs having thickness of 40 microns or above. It, therefore, appears that the activities undertaken by the applicant for milling of wheat into wheat flour, along with fortification and supplied upon packing of the same qualify the definition of composite supply under clause (30) of section 2 of the GST Act where the supply of services by way of milling is the principal supply. Whether this composite supply is made in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution? - HELD THAT:- The agreement between the applicant and the State Government for supply of fortified Wholemeal Atta/Atta is found to be executed in terms of G.O. No. 2834-F.S. dated 6th September, 2017. The said Notification provides guidelines for the procedure of empanelment of flour mills/ attachakki to convert wheat into fortified atta/wholemeal atta in pursuance of clauses 36 and 37 of the West Bengal Public Distribution System (Maintenance Control) Order, 2013 and clauses 33 and 34 of the West Bengal Urban Public Distribution System (Maintenance Control) Order, 2013 - the instant composite supply made by the applicant is found to be in relation to any function entrusted to a Panchayat under article 243G of the Constitution. Whether the value of supply of goods in this case exceeds 25 percent of the total value of the supply or not? - HELD THAT:- In the instant case, the supply undisputedly fulfils the criteria as referred to in (i) and (ii) above. The applicant receives ₹ 10/- and ₹ 50/- i.e., ₹ 60/- in total against fortification cost and packing charges for crushing of 100 kgs of wheat which involves supply of goods. However, the applicant has not furnished before us any document in support of receipts towards non-cash consideration upon sale of bran, refractory and gunny bags which are claimed to have been sold in the open market by the applicant. In absence of such document, we are unable to ascertain whether the value of supply of goods in the composite supply exceeds 25% of the value of supply or not. Where the non-cash consideration involved in the instant supply is found to the extent of such an amount that the value of supply of goods does not exceed 25% of the total value of supply, the supply shall qualify for exemption vide entry serial 3A of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 [corresponding State Tax Notification No. 1136-FT dated 28.06.2017]. Otherwise, the supply shall attract tax @ 5% vide entry serial No. 26 of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. 2022 (1) TMI 302 Maintainability of Advance Ruling application - Levy of GST - Insurance premium paid towards launch services - MoF Notification No.09/ 2017-Integrated Tax (Rate) dated 28-06-2017 - HELD THAT:- Section 95 (c) of the CGST Act 2017 defines Applicant as any person registered or desirous of obtaining registration under the said Act. In the instant case, it is observed that M/s. U.R. Rao Satellite Centre, who have filed the application, is not a supplier of either goods or services or both but is a recipient of services. Thus the instant application is not admissible and liable for rejection in terms of Section 98(2) of the CGST Act 2017. 2022 (1) TMI 301 Maintainability of Advance Ruling application - Levy of GST - interest free Security Deposit - in case service is Exempt from GST, how would be accountable under GST? - HELD THAT:- The issue raised in the instant application and the audit objection raised in the audit report are one and the same i.e., applicability of GST on security deposit. Thus first proviso to Section 98(2) of the CGST Act 2017 is squarely applicable to the instant case, as all the conditions therein are fulfilled. 2022 (1) TMI 300 Benefit of Exemption from GST - property currently under construction is a Residential Real Estate Project (RREP) - property under construction is an affordable residential apartment or not - GST rate to be charged from customers for sale of flats in the said property should be 1.5% (0.75% CGST and 0.75% SGST), as further reduced by 1/3 rd to factor in the value of land or it should be 7.5% (3.75% CGST and 3.75% SGST), as further reduced by 1/3 rd to factor in the value of land - HELD THAT:- The activities undertaken by the applicant, as it appears from the available records, is development of a building consisting of apartments for the purpose of selling all or some of the said apartments. The instant project, therefore, can be termed as a real estate project . Further, a REP shall be treated as RREP if the carpet area of the commercial apartments is not more than 15 per cent. of the total carpet area of all the apartments in the REP. Here, from the submitted documents, it is found that the instant project doesn t have any commercial apartment. As a result, the instant project falls under the category of RREP. According to clause (9) of section 2 of the Kolkata Municipal Corporation Act, 1980, Kolkata means the area described in Schedule I. The instant project, being located in the district of Purba Bardhaman, is undisputedly in the towns other than Kolkata metropolitan cities. It therefore qualifies for carpet area not exceeding 90 square meter for the purpose of affordable residential apartment. Applicable rate of tax to be charged from customers for sale of flats in the said property - HELD THAT:- The applicant has also raised his doubt towards applicability of new tax rate of 1% effective from 01.04.2019 on the ground that the said property or the firm is not registered under any affordable housing scheme of the Central or State Government. In this context, it is found that the schemes which are notified as affordable residential apartment are applicable only for an ongoing project in respect of which the promoter has not exercised option to pay tax on construction of apartment at the rates specified for items (ie) or (if) against Sl No, 3 of the relevant Notification. As the instant project has commenced after 01.04.2019, it cannot be termed as ongoing project. Hence, affordable housing scheme of the Central or State Government, as pointed out by the applicant is not applicable for the instant project. GST rate to be charged from customers for sale of flats in the said project, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier, shall be 1.5% (0.75% CGST and 0.75% SGST), as further reduced by 1/3rd to factor in the value of land. Income Tax 2022 (1) TMI 299 Rejection of books of accounts - valuation of the closing stock - gross profit margin - Assessment was complete u/s 143(3) - After that, during survey u/s 133A, assessee could not produce stock register - HELD THAT:- How much of it weighed with the AO is anybody s guess. The fact remains that it continued to be referred to in the order of the CIT (A) and, as noted hereinbefore, the ITAT as well. The survey operation took place at a time when the previous year corresponding to AY in question had already ended. Therefore, what transpired during the survey operation could not have been taken into account. Re-working of the Assessee s gross profit rate for the AY in question appears to be based on surmises and conjectures, triggered as it were by the ITAT s rejection of the Assessee s books of account under Section 145 of the Act. Mr. Ray for the Assessee is right in contending that with the assessment having been completed under Section 143 (3) of the IT Act, and after the Assessee had produced its books of account, the question of invoking Section 145 of the IT Act did not arise. Court is satisfied that in rejecting the Assessee s book of account u/s 145 of the IT Act, the ITAT committed a serious error. It proceeded on that basis to re-work the gross profit margin. Question of law framed by this Court by order dated 10th July, 2017 is answered in the affirmative, i.e., in favour of the Assessee against the Revenue by holding that the ITAT erred in affirming the conclusions of the AO and CIT(A) based on materials collected during the period subsequent to the assessment period since each assessment year is separate. The corresponding orders of the AO and the CIT (A) to the above extent, are also set aside. 2022 (1) TMI 298 Stay of demand - Alternate remedy of an appeal u/s 246A - HELD THAT:- A careful perusal of the narrative thus far will make it clear that the writ petitioner has been given adequate and ample opportunities but the writ petitioner has not availed the same. The argument that the notice dated 10.08.2018 itself makes it clear that it is a e-process also weighs in the mind of this Court. In the light of the alternate remedy being not only efficacious and effective but also a highly tenable option in the case on hand owing to 25% of demand having been already deposited by the writ petitioner, we deem it appropriate to relegate the writ petitioner to the alternate remedy of an appeal under Section 246A of IT Act. No reason to interfere qua impugned orders i.e., impugned assessment order dated 09.12.2019 and impugned demand notice dated 09.12.2019, but it is made clear that if the writ petitioner chooses to approach the appellate authority u/s 246A of IT Act, it is well open to the appellate authority to consider the appeal on its own merits and in accordance with law uninfluenced by any observation made in this order which may come across as an observation on merits or which may come across as an observation having the trappings of an expression of opinion on merits of the matter. 2022 (1) TMI 297 TDS u/s 194H - bank guarantee commission - whether the bank guarantee commission is not in the nature of commission paid to an agent but it is in the nature of bank charges for providing one of the banking services and, if it so, whether the requirement for deduction at source under Section 194H would stand attracted? - HELD THAT:- This issue is no longer res integra and has been decided in the case of Commissioner of Income Tax-II Vs. JDS Apparels (P.) Ltd. [ 2014 (11) TMI 732 - DELHI HIGH COURT] . The Court after taking into consideration various decisions on the point held that the amount retained by the bank is a fee charged by them for having rendered the banking services and cannot be treated as a commission or brokerage paid in course of use of any services by a person acting on behalf of another for buying or selling of goods. Similar view has been taken in the case of Commissioner of Income tax (TDS)-1 Vs. Larsen Toubro Ltd. [ 2018 (12) TMI 991 - BOMBAY HIGH COURT] . We are in respectful agreement with the aforementioned decisions and, consequently, held that the Tribunal rightly dismissed the appeal - Decided against revenue. 2022 (1) TMI 296 Punitive charges paid to the Railways - Allowable Revenue expenditure u/s 37 - whether the punitive charges paid to the Railways for alleged violation of the provision of Indian Railway Act could be allowable as expenditure? - whether deduction can be claimed by the assessee in respect of such expenditure? - HELD THAT:- This issue has been decided in favour of the respondent/assessee by following the decision of the Hon ble Supreme Court in Prakash Cotton Mills Pvt. Ltd.[ 1993 (4) TMI 3 - SUPREME COURT] wherein it was held that the payment made to the Railway for overloading of wagons is compensatory in nature and can be allowed under explanation to Section 37(1) of the Act. Furthermore, on facts the Tribunal noted that when the respondent/assessee loads the goods for dispatch through railway wagons actual measurement of weight cannot be done due to absence of weighing bridge at the originating station. Thus, we find that the Tribunal rightly decided the issue in favour of the respondent/assessee. 2022 (1) TMI 295 Unexplained share capital / share application money received from Kolkata based companies - HELD THAT:- AO had categorically held that the all the companies are bogus - on perusing the balance sheet and P L Account of M/s. Tirumala Dealers Private Limited it is apparent that the company is making loss. We further observed from the balance sheet of M/s. Tirumala Dealers Private Limited that the investment of ₹ 7,05,00,000/- was made from the earlier reserves and surplus - Therefore, the exact source of the reserves and surplus of the earlier years resulting in liquidity to the company for making investment in the assessee company is not coming out clearly. It is also not in dispute that all the five company s address are in the same building and the building is deserted. In this situation, we are of the view that the Ld. CIT (A) s finding is erroneous. Hence, we hereby set aside the order of the Ld. CIT(A) on this issue and uphold the order of the Ld. AO. Therefore, the issue is decided in favour of the Revenue. Addition towards notional interest charged on interest free advances extended to Directors of the assessee company - HELD THAT:- Before us, the assessee has filed the income tax returns and statement of affairs of M/s. Jagadamba Cotton Industries Pvt Ltd for the relevant assessment year to establish the genuineness of the transaction. However, we find that there is no discussion about these documents in the order of the Ld. Revenue Authorities. Therefore, to verify the veracity of these documents, we remit back the issue of share application money received from M/s. Jagadamba Cotton Industries Pvt Ltd to the file of the Ld. AO for de novo verification. As regards the amount received from share application money received from Smt. Susheelabai Rungta even before us at this stage nothing is produced to establish the genuineness of the transaction. Therefore, we do not find it necessary to interfere with the orders of the Ld. Revenue Authorities. Accordingly ground raised in para 2(ii) is disposed off. 2022 (1) TMI 294 Reopening of assessment u/s 147 - determining the short term capital gains - adopting different value from market value of the property - contention of the assessee that due to dispute in the property, she was compelled to dispose the property lower than the value adopted by the Stamp Valuation Authorities - Non reference of matter to DVO - HELD THAT:- If the AO finds that the value adopted by the assessee is lesser than the Stamp Valuation Authority due to the specific reasons, the AO was required to refer the matter to the DVO to ascertain the market value of the property. But the AO did not adopt the said procedure as mandated under section 50C(2) of the Act. The assessee, all along, has objected to the valuation and submitted the required documents to prove that the market value of the property is lesser than the Stamp Valuation Authority. On being asked by the bench, ld DR could not controvert the above position as to why the matter was not referred to the DVO for ascertaining the market value of the property at the relevant time. In the case of Smt. Chitti Parvatha Vardhanamma (supra), the assessee did not ask the AO to referred the matter to the DVO, hence, the AO was compelled to complete the assessment by adopting the guidelines value considered by the SRO. But in the present case, the assessment was completed u/s.144/147 of the Act in the absence of the assessee. Only when the matter carried to first appellate stage, the assessee objected to the value adopted by the AO without referring the matter to the DVO by giving the detailed reasons as to why the sale consideration was lesser amount. Hence, the decision relied by ld DR is distinguishable on facts. In view of above, we do not find any infirmity in the findings of the ld CIT(A) to interfere and, accordingly, dismiss the grounds of the revenue. Unexplained investment in purchase of property - CIT- A restricted he addition - HELD THAT:- During the assessment proceedings, as the assessee has not filed details, the addition was made by the AO. The assessee filed some evidences during the appeal/remand proceedings which are examined by the AO. The position emerging from examination of the evidences and details filed by the assessee is that the payments are made over a period of time from 26.5.2007 to 16.5.2008 and demand draft for ₹ 15,00,000/- was dated 2.6.2007 mentioned by the AO in remand report (para 6.2(a)(b), the question arises as to assessability of the amount for the assessment year under consideration. It is seen from the details that payments of ₹ 9,00,000/- on 15.5.2008 and ₹ 8,00,000/- on 16.5.2008 are only transactions during the relevant period. The investment or payments made during the relevant period are ₹ 17,00,000/-. In view of the factual position as above, the addition is restricted correctly. - Decided against assessee. 2022 (1) TMI 293 Reopening of assessment u/s 147 - non issue of notice u/s 143 - validity of the reassessment for want of notice u/s 143(2) - currable defect u/s 292BB - HELD THAT:- As decided in M/S. HOTEL BLUE MOON [ 2010 (2) TMI 1 - SUPREME COURT] Section 292BB of the Act does not save complete absence of notice and it covers only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. The reassessment completed without issuing a notice U/s 143(2) of the Act is not sustainable in law and the same is invalid. - Decided in favour of assessee. 2022 (1) TMI 292 Deduction u/s 80P - claim for deduction on interest income - AO denied the deduction u/s.80P(2)(a)(i) for the reason that as per the decision rendered in the case of Totagars Co-operative Sale Society [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] Interest income is taxable under the head income from other sources and will not be entitled to deduction under section 80P(2)(a)(i) - HELD THAT:- Supreme Court in Totgars Co-operative Sale Society [ 2010 (2) TMI 3 - SUPREME COURT] held that interest on such investments, cannot fall within the meaning of the expression profits and gains of business and that such interest income cannot be said to be attributable to the activities of the society, namely, carrying on the business of providing credit facilities to its members or marketing of agricultural produce of its members. The court has held that when the assessee society provides credit facilities to its members, it earns interest income. The interest which accrues on funds not immediately required by the assessee for its business purposes and which has been invested in specified securities as investment are ineligible for deduction under section 80P(2)(a)(i) It can thus be seen that the ratio laid down by the Hon ble Karnataka High Court in the case of Totalgars Cooperative Sales Society [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] is that in the light of the principles enunciated by the Supreme Court in Totgars Co-operative Sale Society (supra), in case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall within any of the categories mentioned in section 80P(2)(a) of the Act. However, section 80P(2)(d) of the Act specifically exempts interest earned from funds invested in co-operative societies. Therefore, to the extent of the interest earned from investments made by it with any co-operative society, a co-operative society is entitled to deduction of the whole of such income under section 80P(2)(d) of the Act. However, interest earned from investments made in any bank, not being a co-operative society, is not deductible under section 80P(2)(d). Allowance of corresponding expenditures proportionately on income earned by the appellant from investments which was claimed as deduction, alternatively under section 80 P [2][d] - HELD THAT:- Hon ble ITAT, Bengaluru Bench in the case of Puttur Primary Co-operative Agriculture and Rural Development Bank Ltd.,[ 2021 (6) TMI 460 - ITAT BANGALORE] for Assessment Year 2016-17, held that the Assessee should be allowed expenses and the entire gross interest cannot be taxed. We remit the question of quantum of disallowance of interest income to be decided by the AO afresh in the light of the directions by the Tribunal in the decision referred to above. The AO will afford opportunity of being heard to the Assessee and filing appropriate evidence, if desired, by the Assessee to substantiate its case, before deciding the issue in the set aside proceedings. 2022 (1) TMI 291 Assessment u/s 153A - Scope of unabated assessment proceedings - HELD THAT:- Scope of making assessment of total income u/s.153A in an unabated assessment proceedings is limited and can be only of assessing income that is not disclosed which is detected or which emanates from material found in the course of search of some other person and which relate to the Assessee, as has been held in the case of M/S.Delhi Interntional Airport Ltd.[ 2021 (11) TMI 928 - KARNATAKA HIGH COURT] . Since the impugned addition treating the Agricultural income as income from other sources is not based on any incriminating material found during the course of search, the additions are liable to be deleted. Addition of agricultural income - HELD THAT:- As far as the addition made in these two Assessment years are concerned, the Agricultural income declared was a sum of ₹ 1,26,500 and ₹ 1,65,800/- respectively. Assessee is aged 80 years and is residing with his daughter. The declaration of Agricultural income is not with a view to explain any source. Moreover the Agricultural holdings are not disputed. Absence of details of crops grown and evidence of sale of Agricultural produce in the form of bills can be a basis to doubt the quantum of Agricultural income but cannot be the basis the treat the entire Agricultural income as income from other sources, in the peculiar facts and circumstances of the case.We therefore accept the plea of the Assessee in this regard and delete the addition made by the AO in both the AYs. Unexplained expenditure u/s. 69C being the LIC Premium paid by the appellant's daughter - reliance on documents found during the course of search u/s 132 - HELD THAT:- Under section 292C of the Act, there is a presumption that the contents of the documents found during the course of search u/s 132 of the Act are true. In the light of the aforesaid provisions, the revenue authorities have presumed that the premium on LIC policy, which is admittedly in the name of Dr. M. K. Girija has been paid by the Assessee. There can be no presumption that because this receipt was found in the course of search of the assessee that it is only the assessee who has paid premium. In fact, the presumption is that it is only Dr.M.K.Girija, who has paid the premium on LIC policies as the policy as well as the receipts are in her name. - the very basis of this addition is unsustainable and the same is directed to be deleted. Assessee appeal allowed. 2022 (1) TMI 290 Reopening of assessment u/s 147 - Eligibility of reasons to believe - reopening on the basis of the audit objection - escapement of rental income received - HELD THAT:- In the impugned assessment year is Assessment Year 2009-10, which was originally assessed u/s 143(3) on 12.12.2011 and reopening was initiated by issuing of notice on 18.03.2014 without having any tangible material in possession of the AO - Therefore, as the case of the assessee is reopened on reappraisal of the same material available before the AO during original assessment proceedings, we do not have any hesitation in holding that the assumption of jurisdiction by the AO u/s 148 of the Act is not in proper. Accordingly, we quash the reassessment proceedings. On the merits, it is apparent that assessee has received rent only for 11 months and for one month, property of assessee was vacant. There is no under assessment in case of rental income offered by the assessee. Claim of deduction of the property tax it is apparent that assessee has claimed the 50% of property tax pertaining to property No.101B and 101C after credit for excess property tax of ₹ 20,40,956/-. AO got confused for the reason that three properties were given on rent to one tenant out of which 1 property is owned by a Private Limited Company and two properties are owned by the assessee jointly along with his brother. The assessee has claimed only 50% share of property tax which pertains to properties owned by assessee and his brother. The Assessing Officer has incorrectly computed that assessee should be entitled to deduction only of ₹ 15,16,568/-. In facts assessee is correctly eligible to claim deduction of house tax of ₹ 20,40,956/- . In view of this there is no excess deduction claimed and allowed to assessee. AO has wrongly construed Rent agreement and confused him as rent agreement was with one common tenant for three premises owned by two different owners, one of the property is jointly owned by the assessee with 50 % share. CIT (A) also confirmed the action of the ld AO without giving any reason but merely upholding views of ld AO confirmed the order of assessment. 2022 (1) TMI 289 Entitlement of TDS Credit - CIT(A) directed the AO to allow credit as per the form No. 26AS for the year under consideration and withdraw the excess credit which had already been claimed by the assessee and allowed by AO in preceding years - HELD THAT:- Credit for TDS has to be allowed in the assessment year, in which the corresponding income is assessable. It is not relevant in which financial year, the tax has been deposited in Govt. account or in which year TDS certificate has been issued. The relevant thing which has to be verified is for which year the deductor has credited the income to the assessee in the TDS certificate issued and if the income is credited for relevant assessment year then TDS credit has to be allowed even if said TDS credit is appearing in Form No. 26AS in next assessment year. In instant case we find that the TDS certificates under reference filed by the assessee before the AO can be divided in three categories. First category, where the TDS has been deducted by the deductor for assessment year 2010- 11. One TDS certificate, available falls in this category. In this TDS certificate, date of credit or payment is not mentioned and only date of deposit of TDS in Government Account is mentioned as on 05/03/2010 and 05/04/2010 respectively. In the circumstances, it needs verification as to in which year the corresponding income was assessable in the hands of the assessee. Second category of TDS certificates are concerned, we find that in those certificates income has been credited or paid to the assessee in the assessment year under consideration and tax has also been deducted in assessment year under consideration i.e. AY 2011-12 , however same has been deposited in subsequent assessment year i.e. AY 2012-13. If the income corresponding to the TDS is assessable in the year under consideration, then the assessee is eligible for credit of TDS in the year under consideration, irrespective of the year in which TDS was deposited by the deductor - section 205 of the Act also support this view. According to the section 205 of the Act, where tax is deductible at the source under the provisions of the act, the assessee shall not be called upon to pay tax himself to the extent to which tax has been deducted from that income. Thus, in order to call bar of section 205 into operation, it is necessary to establish the tax has in fact deducted at source and credit of the tax deducted at source must be granted to the payee, even if the payer or deductor has not deposited the tax into Government Account. The third category of TDS certificates, where income has been credited or paid by the deductor in financial year corresponding to assessment year 2012- 13 and tax has also been deducted in the financial year corresponding to assessment year 2012-13. In those cases, the deductor has credited the income to the assessee for assessment year 2012-13, whereas assessee has claiming the credit of said TDS in assessment year 2011-12. We do not understand as how and on what basis the assessee has credited the income corresponding to those TDS certificate in the year under consideration. No documentary evidence in this regard as the corresponding income is assessable or capable of being assessed in the year under consideration, have been filed before lower authorities or before us and therefore onus is on the assessee to establish that said income corresponding to those TDS certificate was assessable in the year under consideration. We set aside the finding of the Ld. CIT(A) on the issue in dispute and restore the issue of verification of TDS certificates as to in which assessment year income corresponding to the TDS is assessable and allow credit accordingly. For verification of the assessment year in which income is assessable‟, the Assessing Officer may carry out the inquiries which he deems fit in the circumstances - It is the responsibility of the assessee also not to claim the same TDS twice. The ground No. 1 of the appeal of the assessee, is accordingly allowed for statistical purposes. Withdrawal of credit of TDS amount as already been availed by the assessee - When, the assessee has already claimed TDS credit corresponding the income offered in preceding years, though same is appearing in form No. 26AS of the year under consideration, the assessee is not entitled for credit of TDS to that extent. We accordingly, uphold the finding of the Ld. CIT(A) of withdrawing the credit of the TDS amount, credit of which has already been availed by the assessee in preceding assessment years - Decided against assessee. 2022 (1) TMI 288 Disallowance of depreciation of block of computer equipment - AO disallowed depreciation as invoices were not reconciled with the tax audit report - HELD THAT:- CIT(A) called for a remand report from the A.O. and the A.O. in the remand report stated that the invoices for an amount of ₹ 6,18,80,241 were not produced and conveyed his objections for allowing the claim of depreciation. A.O., however, in the remand report stated that there is no objection for allowing depreciation on actual amount of invoices furnished and the CIT(A) may decide the issue based on the records available. CIT(A) rejected the appeal of the assessee for the reason that the invoices produced are not legible. The legible copies of all the invoices in relation to the additions made to the computer equipments are placed on record (refer pages 185 to 195 of the paper book). Therefore, in the interest of justice and equity, we are of the view that the matter needs to be verified by the A.O. afresh. Hence, the issue raised as regards to the disallowance of depreciation on addition made on block of computer equipments is restored to the files of the A.O. The A.O. is directed to examine the invoices in respect of ₹ 6,18,80,241 and if found in order, the A.O. is directed to grant depreciation on the same. It is ordered accordingly. Nature of expenditure - software development expenses - revenue or capital expenditure - CIT(A) held that the expenditure incurred on the software development is capital expenditure - HELD THAT:- CIT(A) failed to appreciate that the assessee does not test on a single software during the entire year. Further, a software is not customized and deployed on the electronic products and a new product is launched every year and the same is a continuous activity. Since the CIT(A) has not understood the business model of the assessee, it is necessary that the matter needs to be examined afresh by the A.O. Accordingly, the issue raised in ground 2 is restored to the files of the A.O. The A.O. is directed to examine the expenditure incurred and come to a conclusion whether it is a capital or revenue expenditure. The A.O. shall afford a reasonable opportunity of hearing to the assessee before a decision is taken in this matter. It is ordered accordingly. Deduction of education cess on Income Tax and Secondary and Higher education cess on Income Tax - admission of Additional ground - HELD THAT:- The Mumbai Bench of the Tribunal in the case of Voltas Limited [ 2020 (7) TMI 125 - ITAT MUMBAI] had admitted additional ground of appeal with regard to the claim of education cess and adjudicated the matter in favour of the assessee, by following the judgment of the Hon ble Bombay High Court in the case of Sesa Goa Limited [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] . In the light of the aforesaid judicial pronouncements, we hold that education cess is to be allowed as deduction. It is ordered accordingly. 2022 (1) TMI 287 Disallowance of depreciation on securities - HELD THAT:- We find that identical issue arose before the Co-ordinate Bench of Tribunal in assessee s own case for A.Y. 2013-14 [ 2021 (7) TMI 622 - ITAT DELHI] and the Coordinate Bench of Tribunal, by following the order in assessee s own case for A.Y. 2011-12 2012-13 [ 2019 (1) TMI 1654 - ITAT DELHI] , deleted the addition. Disallowance of contribution to Punjab Sind Bank Employees Pension Fund Trust under Section 36(1)(iv) - HELD THAT:- We find that identical issue arose before the Co-ordinate Bench of Tribunal in assessee s own case for A.Y. 2013-14 [ 2021 (7) TMI 622 - ITAT DELHI] and the Coordinate Bench of Tribunal, by following the order in assessee s own case for A.Y. 2011-12 2012-13 [ 2019 (1) TMI 1654 - ITAT DELHI] , deleted the addition. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- We find that identical issue arose before the Co-ordinate Bench of Tribunal in assessee s own case for A.Y. 2013-14 [ 2021 (7) TMI 622 - ITAT DELHI] and the Coordinate Bench of Tribunal, by following the order in assessee s own case for A.Y. 2011-12 2012-13 [ 2019 (1) TMI 1654 - ITAT DELHI] , deleted the addition. as held ejecting the theory of dominant purpose in making investment in shares whether it was to acquire and retain controlling interest in the other company or to make profits out of the trading activity in such shares - clearly made a clear distinction between the dividend earned in respect of the shares which were acquired by the assessee in their exercise to acquire and retain the controlling interest in the investee company, and the shares that were purchased for the purpose of liquidating those shares whenever the share price goes up, in order to earn profits. It is, therefore, clear that though not the dominant purpose of acquiring the shares is a relevant for the purpose of invoking the provisions under section 14 A of the Act, the shares held as stock in trade stand on a different pedestal in relation to the shares that were acquired with an intention to acquire and retain the controlling interest in the investee company - no illegality or irregularity in the Ld. CIT(A) deleting the addition made by the Ld. AO under rule 8D (2) (ii) - Revenue appeal dismissed. 2022 (1) TMI 286 Condonation of delay in filing appeal before CIT(A) - sufficient cause of such delay - assessee has gone into corporate insolvency resolution process and interim resolution professional has been appointed by NCLT - HELD THAT:- Delay of 23 months in filing of the appeal before the learned CIT(A), the assessee did not file appeal in order to buy peace of mind and to avoid penalty - when the assessment orders in case of other assessment years were also framed on the similar line and when the penalty was levied by the AO, the assessee preferred the appeal. It caused delay of almost 23 months and therefore, the assessee preferred the application for condonation of delay, which was rejected by the learned CIT(Appeals). We find that even the order of the learned CIT (A) in not admitting the appeal of the assessee is an order passed in contravention of Section 14 of the Insolvency and Bankruptcy Code 2016. This is for the reason that the section 14 prohibits even continuation of proceedings during moratorium against the corporate debtor. In view of this, the order of the learned CIT(A) in not admitting the appeal of the assessee is in contravention of Section 14 of the IBC and therefore not sustainable. We allow the appeal of the assessee with respect to the ground No.1 of the appeal and restore these appeals back to the file of the learned CIT (A) to decide the issue afresh. He also directed now that as an official liquidator has been appointed, the respective notice for the hearing etc are also requiring to be addressed to the official liquidator. The assessee is also directed to place before the CIT (A) the revised form No.35 duly signed by the official liquidator. This may be taken on record by the CIT(A) and then decide the issue of condonation of delay in filing of these appeals of 23 months after granting proper opportunity of hearing - If the appeals are admitted, then to decide the issue on the merits of the case, after granting opportunity of hearing in accordance with the law. 2022 (1) TMI 285 Penalty levied u/s 271(1)(c) - Defective notice u/s 274 - addition of deemed dividend U/s 2(22)(e) - HELD THAT:- On perusal of the aforesaid notice it is clear that AO has not specified whether the penalty is being levied on account of concealment of particulars of income or furnishing of inaccurate particulars of income. In this regard, we have gone through the case of Jurisdictional High court referred by learned counsel in the case of Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] . There is nothing before us on hand to differs from the issue raised in the cases cited so as to take a different view on this issue. Therefore, since the issue on hand being squarely covered following the principle of consistency, we find merit in the submission of the assessee and direct the Assessing Officer to delete the penalty since, the notice issued under section 274 read with section 271(1)(c) dated 18th March 2015 was bad in law. Since, we have deleted the penalty on account of invalid notice issued under section under section 274 read with section 271(1)(c) - Decided in favour of assessee. 2022 (1) TMI 284 Penalty u/s 271AAB - Defective notice u/s 274 - whether the impugned penalty proceedings could be held as rightly initiated since not specifying the corresponding statutory limb? - HELD THAT:- As decided in SHRI ASHOK BHATIA [ 2020 (2) TMI 261 - ITAT INDORE] the matter written in the body of the notice issued u/s 274 of the Act does not refer to the charges of provision of Section 271AAB of the Act makes the alleged notice defective and invalid and thus deserves to be quashed. Since the penalty proceedings itself has been quashed the impugned penalty stands deleted. - Decided in favour of assessee. 2022 (1) TMI 283 Reopening of assessment u/s 147 - Disallowance of Interest on Borrowed Fund - As submitted that the assessee had taken loan on which interest has been claimed as business expenditure, but the borrowed funds were advanced to others on interest free, which shows that the assessee had not utilized the borrowed funds for the purpose of its business - HELD THAT:- During the impugned AY, the assessee has also given loans and advances to other companies which is outstanding as on 31/03/2008 including advances given to M/s SCSL. During the impugned AY, the assessee has received interest - It clearly shows that interest bearing funds had been given to the others/group companies/M/s SCSL on interest free. Therefore, the AO has rightly disallowed interest paid on borrowed funds to the above noted companies u/s 36(1)(iii). Section 36(1)(iii) is clear that if the interest paid by the assessee is to be allowed only in respect of capital borrowed for the purpose of business or profession only, whereas, in the case on hand, the assessee has utilized the above interest bearing loans for other purposes by giving loans on interest free. The facts in the cases relied on by the assessee are that notional interest which was not charged by the assessee, but, the issue in the case under consideration is different that the AO has disallowed interest paid on borrowed funds but not on the notional interest income, which was to be received by the assessee. Assessee company is one of the group companies of M/s SCSL and the assessee had advanced to the tune of ₹ 80.78 crores to M/s SCSL. We find that M/s SCSL was involved in a big financial scandal by way of inflating the figures in the balance sheet due to which M/s SCSL involved in various court cases, which are pending. Genuineness of the amounts advanced to such group company by the assessee is doubtful. Therefore, the arguments advanced by the ld. AR of the assessee are not tenable or acceptable and, therefore, we set aside the order of the CIT(A) and restore that of the AO. Accordingly, the addition made by the AO is restricted to ₹ 11,03,57,441/- towards interest only as against the addition of ₹ 11,11,15,463/- made by the AO u/s 36(1)(iii) of the Act and other addition made by the AO towards bank charges and Demat charges are not covered u/s 36(1)(iii). Thus, the ground raised by the revenue are partly allowed. 2022 (1) TMI 282 Nature of expenditure - Allowable revenue expenditure u/s 37 - expenditure towards purchase of software - assessee submitted that the expenditure incurred by the assessee is towards purchase of Core Banking Solutions (CBS) software which is an application software - whether expenditure incurred on Vysyamulya Project which is a project by which the assessee wanted to link its 125 branches networked with a Centralized Processing Solution? - HELD THAT:- With passage of time, a perpetual license purchased 10 years ago may not be compatible on that brand new computer that a person may buy. So, every few years, one has to purchase new software to ensure that one remains up-to-date, compatible with new hardware and with other people s operating systems. In fact, there was a time in which perpetual license agreements were the only ones that existed regarding software. That has since changed, and now many software companies provide subscription services or annual licenses. Therefore the business model adopted by the licensor to grant licenses only on the basis of perpetual license cannot be the basis to hold that the expenditure incurred by the assessee is capital expenditure. Notwithstanding the use of the term perpetual, the license agreement between the assessee and Sanchez provides for annual maintenance and upgrade fee also. Therefore it is not possible to look into the clause in the license agreement in isolation to come to a conclusion that because the license is in perpetuity, the expenditure incurred is capital expenditure. We hold that advantage of an enduring benefit, need not be on capital account. If the advantage consists merely in facilitating the assessee's trading operations or enabling him to manage and conduct his business more efficiently or more profitably while leaving the fixed capital untouched, the same cannot be regarded as on capital account. In order to treat any expenditure as capital expenditure, the same should result in accrual of advantage of enduring benefit and such benefit should accrue to the assesses in the capital field. Such accrual of benefit in the capital field would mean that the said benefit should form part of the profit-making apparatus of the assessee s business. The expenditure in question only facilitates carrying on the business of the assessee more profitably without touching the profit making apparatus of the bank which is receiving deposits and lending/investing them for profit. Therefore the expenditure in question has to be regarded as revenue expenditure. Thus the relevant grounds of appeal are allowed. 2022 (1) TMI 281 Accrual of income in India - Royalty / FTS - tax receipt towards software license fees as 'Royalty' within the meaning of Article 12 of the India- Netherlands Double Taxation Avoidance Agreement - distinction between royalty paid on transfer of copyright rights and consideration for transfer of copyrighted articles - Right to use a copyrighted article or product with the owner retaining his copyright - HELD THAT:- The appellant company granted the software license fee on non-exclusive non-transferable basis during the license term. The subject software is standard software not customised software. The title, the ownership and all rights in patents, copyrights and trade secrets and other software contained does not get transferred to the customer. The Courts as well as OECD commentary on Article 12 of the DTAA recognized the distinction between copyrighted article and copyright right in the programme and software which incorporates a copy of the copyrighted programme. Any payment made for acquisition of copy of the software is held not to be Royalty. Thus as relying on ENGINEERING ANALYSIS CENTRE OF EXCELLENCE PRIVATE LIMITED [ 2021 (3) TMI 138 - SUPREME COURT] we hold that fee for grant of software license cannot be taxed in India. Since we have held that the subject transaction of receipt of consideration for grant of software license held not to be Royalty under the provisions of Income Tax Act, 1961, the question of considering under the provisions as per DTAA between India and Netherland does not arise. Thus, ground of appeal No.1 filed by the assessee stands allowed. Bring to tax software maintenance fee and consulting service fee and training fees as Fees for Technical services within the meaning of Article 12(5)(a) of the India and Netherland treaty - DRP held that the receipts of assessee from the software maintenance, consulting services and training fees are chargeable to tax as Fees for Technical services as per Article 12 (5)(a) of India and Netherland treaty - HELD THAT:- Clause 5 of Article 12 defines fees for technical services to mean the payment of any kind to any person in consideration of rendering any technical or consultancy services that are ancillary and subsidiary to application of enjoyment of the right, any copyright information described in clause 4 which deals with the payment made towards Royalties. DRP gave a finding that the software maintenance, consultation charges and training fees are in connection with the receipt of consultation towards software license fee. This finding of the DRP is not under challenge before us. Therefore, the software maintenance fees, consulting charges and training fees which are incidental to software license fee, assumes same character as that of software license fee. Even the software maintenance, consulting charges and training fees which are incidental to software maintenance fee cannot come within the purview of FTS within clause 5 of Article 12 of the treaty. Our view is fortified by the judgment of Hon ble Delhi High Court in the case of Datamine International Ltd . [ 2016 (3) TMI 540 - ITAT DELHI] . We, therefore, we hold that software maintenance fees, consultancy services fees and training services fees cannot be held to be Fees for Technical services . Thus, grounds of appeal no. 2 to 4 stands allowed Short credit of deduction of tax at source - HELD THAT:- This ground of appeal is restored to the file of AO with a direction to allow tax as per the information contained in Form No.26AS. Thus, grounds of appeal is allowed for statistical purposes. 2022 (1) TMI 280 Late payment of Provident Fund and ESIC u/s 43B - HELD THAT:- As relying on PRO INTERACTIVE SERVICE (INDIA) PVT. LTD.[ 2018 (9) TMI 2009 - DELHI HIGH COURT ] and Aimil Limited, [ 2009 (12) TMI 38 - DELHI HIGH COURT ] the amount paid is allowed as an expenditure only when payment is actually made. We do not think that the legislative intent and objective is to treat belated payment of Employee s Provident Fund (EPD) and Employee s State Insurance Scheme (ESI) as deemed income of the employer under section 2(23)(x) of the Act. - the issue is covered against the Revenue - Assessing Officer directed to delete the disallowance 2022 (1) TMI 279 Validity of assessment u/s 153A r.w.s.153C - assessment within the-period of preceding six years - Whether search year in the case of the assessee is A.Y. 2018-19 and not impugned A.Y. 2016-17 ? - HELD THAT:- In the present case, it is undisputed fact that the document has been handed over to the Assessing Officer of assessee on 01.12.2017 which falls in the A.Y. 2018-19, therefore the search year will be 2018-19 and the year under consideration will be part of preceding six assessment years for which Assessing Officer was required to issue notice u/s. 153C of the Act and which he has not done and assessment order passed by Assessing Officer u/s. 143(3) is not in accordance with law and therefore is null and void and all additions made are liable to be deleted and are ordered to be deleted. - Decided in favour of assessee. 2022 (1) TMI 278 Addition u/s. 41(1) - sundry creditors balance of parties from whom no reply was received are bogus and non-existent - Admission of additional evidences as assessee furnished confirmation letters obtained from the above said creditors as additional evidences - HELD THAT:- Since those letters were not available with the assessee during the course of assessment proceedings. Further, they have to be collected from the creditors, over whom the assessee may not be having effective control. It is the case of the assessee that the confirmation letters were obtained subsequent to the completion of the assessment and hence they were produced before Ld. CIT(A) as additional evidences. Thus, we are of the view that there was reasonable cause for the assessee in not producing those letters before the A.O. Accordingly, in the interest of natural justice, we admit the additional evidences. Since these evidences require examination at the end of the A.O., we set aside the order passed by ld. CIT(A) on this issue and restore the same to the file of the A.O. for examining it afresh. Disallowance u/s. 40A(3) - HELD THAT:- We notice that the assessee has agreed for this disallowance before the AO - Accordingly, the Ld. CIT(A) also confirmed the disallowance. Before us, the assessee could not furnish any material to controvert the addition made by the A.O. It was also not shown to us that the addition was agreed under wrong impression. Accordingly, we also confirm the disallowance made u/s. 40A(3) of the Act. Addition being the difference in sales reported in the books of accounts and VAT returns - HELD THAT:- Before the A.O., the assessee could not reconcile the difference and hence agreed for the addition. Before Ld. CIT(A) also the assessee could not reconcile the difference and hence the Ld. CIT(A) also confirmed the same. Before us also, the assessee could not reconcile the difference. Hence, we have no other option but to confirm the addition made by the A.O. on this issue. 2022 (1) TMI 277 TP adjustment made in respect of payment of Corporate management services - Admission of additional evidence - HELD THAT:- We are of the view that, in the interest of natural justice, the additional evidences furnished by the assessee requires to be admitted. Accordingly, we admit them. We also notice that the details of various facilities availed by the assessee from its AE as well as the nature of services provided by the AE to the assessee have not been correctly appreciated by the AO/TPO. Accordingly, we are of the view that this issue requires fresh examination at the end of the AO/TPO. Accordingly, we set aside the order passed by the AO on this issue and restore the same to the file of AO/TPO for examining it afresh duly considering the additional evidences furnished and also the information and explanations that may be furnished by the assessee. Computation of deduction u/s. 10AA by not including items that were excluded from export turnover from the total turnover - HELD THAT:- AO held that these expenses would fall under the category of delivery of articles or tools or computer software outside India or expenses incurred in providing the technical services outside India as per explanation 1(i) to Section 10AA. Accordingly he took the view that these expenses have to be reduced from export turnover while computing deduction u/s. 10AA of the Act. However, he held that these expenses are not required to be deducted from total turnover'. Accordingly, the AO recomputed the deduction u/s. 10AA. DRP, in principle, agreed with the view taken by AO.DRP noted that the decision rendered by the jurisdictional Karnataka High Court in the case of CIT vs. Tata Elxsi Ltd. others [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] is in favour of the assessee and SLP is pending before Hon'ble Supreme Court. Accordingly, the Ld. DRP directed the AO to keep the disallowance made u/s. 10AA of the Act as protective addition till the final outcome of the SLP filed in Hon'ble Supreme Court. We heard the parties and perused the record. This controversy has since been settled by Hon'ble Supreme Court in the case of HCL Technologies Ltd. [ 2018 (5) TMI 357 - SUPREME COURT] . Accordingly, we restore this issue to the file of AO with the direction to follow the decision rendered by Hon'ble Supreme Court in the above said case - Appeal filed by the assessee is treated as allowed for statistical purposes. 2022 (1) TMI 276 Disallowance of Scholarship Expenses - Expenses claimed under the head Assistance to Law Students - allowable business expenses or not? - HELD THAT:- As decided in own case [ 2021 (2) TMI 1239 - ITAT DELHI] in the case of the professionals, the way they promote themselves, is changing very fast and the benefits of such expenditure are huge and wide. Therefore according to us the impugned expenditure incurred by the assessee is a revenue expenditure allowable u/s. 37 (1) of the income tax act. We do not subscribe to the view of the learned CIT - A these expenditure is capital in nature. The expenditure incurred by the assessee is the routine day-to-day expenditure incurred by the assessee for promoting his professional profile. These expenditure cannot be held to be capital expenditure in nature as no fresh new fixed assets is created by paying the scholarship sum. - Decided in favour of assessee. Credit for the TDS denied - HELD THAT:- We find that issue was raised by the assessee before CIT(A) and CIT(A) did not adjudicate the issue for the reason that assessee had filed a rectification application before the AO. Before us, it is the submission of the assessee that matter may be remitted to AO with necessary directions for the necessary verification and thereafter giving the credit of the TDS. Considering the submissions of the AR, we direct the AO to grant the credit for the TDS after necessary verification and in accordance with law. Thus ground of assessee is allowed for statistical purposes. Relief u/s 90 for the taxes paid in the United Kingdom (UK) - claim of proportionate tax credit u/s 90 - HELD THAT:- As the overseas income earned by the assessee in UK has been offered to tax by the assessee in India and out of the total tax paid by assessee in UK, assessee is claiming credit u/s 90 of the Act since the corresponding amount of income has already been offered to tax in India and has also been accepted by Revenue. We are of the view that the credit of the taxes paid on such income deserves to be allowed. We therefore restore the issue back to the file of AO and direct him to allow the credit of the foreign taxes paid as claimed by the assessee u/s 90 of the Act as per the provision of Act and in accordance with law. Needless to state that AO shall grant adequate opportunity of hearing to the assessee. Assessee is also directed to promptly furnish all the details called for by the AO. We thus direct accordingly. Thus the ground of assessee is allowed. 2022 (1) TMI 275 Unexplained jewellery - Diamond studded in the jewellery were out of the undisclosed income of the assessee - HELD THAT:- As AO himself mentioned that the gold worth ₹ 10,14,418/-is attributable to Smt. Kanta Bansal, wife of the assessee. According to the CBDT instructions in case of a married woman 500 g is the threshold limit and Hon ble Gujarat High Court said that to such an extent of jewellery, the source shall be presumed to have been explained. In view of this position of law laid down in the case of Ratan Lal [ 2010 (7) TMI 769 - GUJARAT HIGH COURT] and also the view taken by the Tribunal in the case of Smt. Satya Bhalla [ 2016 (5) TMI 1571 - ITAT DELHI] we are of the considered opinion that pursuant to the CBDT instructions, the wife of the assessee is entitled to keep 500 g of jewellery the source of which is a demoted have been explained and, therefore, no addition could be made are sustained. We accordingly allow ground No. 1 and 2 of assessee s appeal. Cash found during the search operations - As per AO that no proper explanation supported by documents was given by the assessee regarding this amount - CIT(A) observed that even during the appellate proceedings, though it was submitted on behalf of the assessee that the amount of ₹ 50,000/- was available due to the withdrawal from the bank from different members of the family, no evidence to show the withdrawals from the bank or the cashbook or through any other documentary evidence was produced and thereby confirmed the addition. Before us also no new facts are forthcoming nor any bank withdrawals are proved by any evidence. We therefore, do not consider it necessary to interfere with the findings of the Ld. CIT(A) on this issue and accordingly uphold the same. 2022 (1) TMI 250 Additions in respect of employees contribution towards ESI/PF - Deposits before the due date of filing of return of income u/s 139(1) - HELD THAT:- In the instant case, admittedly and undisputedly, the employees contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) - D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years . In the instant case, the impugned assessment year is assessment year 2018-19 and therefore, the said amended provisions cannot be applied in the instant case. The addition by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the deposit of the employees s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted - Appeal of the assessee is allowed. Customs 2022 (1) TMI 274 Classification of goods - Cutter Suction Dredger - whether classified under CTH 8905 1000of CTA or under chapter heading 90.31? - it was held by Tribunal that The first appellate authority was correct in holding that production measuring equipment is part and parcel of the dredger and cannot be classified separately under chapter heading 90.31. HELD THAT:- In view of the finding of fact recorded by the Customs, Excise and Service Tax Appellate Tribunal, no interference is warranted. The conclusion reached, therefore, is unassailable. Civil appeal dismissed. 2022 (1) TMI 273 Valuation of imported goods - import of Li Ning brand goods from Singapore for the period February, 2012 to March, 2015 - inclusion of marketing, advertising, sponsorship and promotional expenses/ payments made by the appellant to promote the Li Ning brand was a condition of sale - HELD THAT:- There are no merits in this appeal - appeal dismissed. 2022 (1) TMI 272 Refund of terminal excise duty - supplies made against ICB - reliance placed on amended paragraph 8.3(c) of the Foreign Trade Policy, 2009-2014 - petitioner reiterated that all the transactions made by the petitioner fall before the date of amendment and therefore, the pre-amended paragraph 8.3(c) is to be applied for the purpose of considering the case of the writ petitioner - HELD THAT:- The petitioner is of an opinion that their case is to be considered by applying the pre-amended paragraph 8.3(3) and accordingly, appropriate orders are to be passed. This being the factum established, the impugned orders passed by the second respondent in proceedings dated 17-7-2013, 31-10-2013 and 26-9-2013, which was reaffirmed on 25-11-2013 are set aside and the matter is remanded back to the second respondent for fresh consideration. The second respondent is directed to consider the facts and circumstances with reference to the applications and documents filed by the petitioner and accordingly, take a decision and pass orders as expeditiously as possible preferably within a period of eight weeks from the date of receipt of a copy of this order. I Petition allowed. 2022 (1) TMI 271 Seizure of export goods - Coal - prohibited goods or not - subject consignment of Coal had been procured through E-auction, which as per the Coal distribution policy could only be consumed within India and could not be exported - HELD THAT:- It is apparent from the records that the goods had been seized under Section 110 of the Customs Act, 1962 under the reasonable belief that the export consignments were not eligible to be exported due to certain regulation of Coal India Limited which prohibited export of coal purchased in public auction making the coal liable for confiscation under Section 113 of the Customs Act, 1962. The subject coal along with vehicles was seized after 6 days of filing the Shipping Bill. There is no allegation of mis-declaration of goods. The exporter filed the Shipping Bill under the bona fide belief that the goods are eligible to export freely - The department seems to have gone overboard in seizing the goods merely on account of the fact that the coal procured in public auction could not be exported, in clear disregard to the fact that the exporter himself did not procure the coal in public auction and the call of the department to straightway seize the coal presented by the third party for export does not seem to be in line with the instructions of the Coal India on export of coal. The very seizure of coal along with vehicles on 6-3-2021 and issue of letter of provisional release on 16-3-2021 are prejudicial to the interests of the appellant but since these are not speaking and reasoned orders, the case should be remanded back to the respondent department to consider the entire facts of the case in the light of existing legal position and pass a well-reasoned and speaking order in this case within 15 days of the receipt of this order - appeal allowed by way of remand. Corporate Laws 2022 (1) TMI 270 Seeking revival of the Rajasthan State Agro Industries Corporation Limited. - Sections 391 443 of the Companies Act, 1956 read with Sections 230 and 273 of the Companies Act, 2013 - voluntary winding up was sought earlier - HELD THAT:- This Court finds that though Sub-clause (c) of Section 434 of the Act, 2013, speaks of transfer of certain proceedings to the National Company Law Tribunal including the proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of the Companies pending before the High Court, however, in the present case, since the order of winding up has already been passed of a Government Company and the State files an application for recalling the order passed by this Court of winding up, the same can be done by the High Court. The application filed by the State of Rajasthan deserves to be allowed and winding up order dated 03.09.1997 is recalled and the Company-Rajasthan State Agro Industries Corporation Limited, is revived - Application allowed. 2022 (1) TMI 269 Scope of 'deposits - advances received towards sale consideration of immovable property - alleged violation of Section 73 of the Act read with Companies (Acceptance of Deposits) Rules, 2014 - HELD THAT:- Basing on the complaints lodged by one Guruzala Venkateswara Rao on various dates alleging that the 1st petitioner company has been collecting deposits through various schemes and has defaulted in refund of matured amounts to the depositors, the 1st respondent ordered inspection of the 1st petitioner Company - there are considerable force in the contention of the petitioners that the said Guruzala Venkateswara Rao foisted many false complaints against the 1st petitioner company in order to settle his personal scores with the 1st petitioner and the other group of companies. Further, the said Guruzala Venkateswara Rao is neither allottee nor he is in any way directly involved or linked with the business transactions of the petitioners. Whether the amounts collected by the petitioners for sale of immovable property as advance would come under the purview of deposits or would exempt from the purview of deposits by virtue of Rule 2(1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014? - HELD THAT:- Admittedly, the 1st petitioner company had purchased the agricultural land and after obtaining the permission from the competent authorities for conversion of agricultural land into non-agricultural land, the 1st petitioner also obtained permission for development of the land into layout of plots for residential/commercial housing. To unlock the funds invested in development of the lay outs etc., the 1st petitioner company had offered to sell the land in its possession and for this purpose entered into written agreement/arrangement. By virtue of proviso to Rule 2 (1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014, the advances received by the 1st petitioner for sale of immovable property are exempted from the purview of the deposits. In view of the proviso to Rule 2 (1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014, continuation of proceedings against the petitioners/A-1 to A-4 would amount to abuse of process of the Court - Criminal Petition is allowed. 2022 (1) TMI 268 Seeking to register the transfer of shares - seeking rectification in the register of members to include the applicants herein - payment of dividends as applicable on the transferred shares to the applicants from the year 2012 till date - HELD THAT:- Section 58 of the Companies Act, 2013 deals with the Refusal of Registration and appeal against the Refusal, whereas Section 59 of the Companies Act, 2013 deals with Rectification in the Register of Member. It is evident from the records that the alleged shares were purchased by the petitioner in the year 2012 itself. As per section 58(4), the application has been filed within limitation period i.e. within 60 days from the intimation from the 2nd Respondent as RTA agent of the 1st Respondent is dated 18.01.2020 and was received by the applicants on 28.01.2020, The applicants filed an appeal before the Tribunal on 12.03.2020. The applicants by the SEBI Circular bearing no. SEBI/HO/MIRSD/DOS3/CIR/P/2018/139 dated 06.11.2018 which specifically deals with transfer deeds executed prior to notification SEBI (LODR) Regulations, 2015, as per this the applicants executed the indemnity bond which is also placed on record it shows that the applicants complied with the said regulations and handed over to the 2nd respondent on 27.03.2019 in their Chennai office. However the 2nd Respondent vide letter dated 02.04.2019 intimated to the 3rd and 4th Respondents for raising any objections relating to transfer within 14 days. It does not reflect any objections in the application - it is noted that the 2nd Respondent demanded share transfer stamp worth ₹ 12,375/- for effecting the transfer which is promptly sent on 04.09.2019 by hand delivery and further informed that there is no objection. Mail communication copy has been placed on record. It is further seen from the record that the 2nd respondent vide letter dated 18.01.2020 once again rejected the share transfer stating the same reason of non-submission of PAN card copy and Signature mismatch. Considering the fact that as per the applicants, records submitted it clearly shows that they have complied with all the procedures pertaining to the share transfer and also complied with sec. 58(4) of the Companies Act 2013. Henceforth, it is evident that the 2nd Respondent is making unnecessary delays making the share transfer in spite of adequate submissions made by the applicants - application allowed. 2022 (1) TMI 267 Approval for the Scheme of Amalgamation - Sections 230-232 of the Companies Act, 2013 - HELD THAT:- After analysing the Scheme in detail, this Tribunal is of the considered view that the scheme as contemplated amongst the petitioner companies seems to be prima facie beneficial to the Company and will not be in any way detrimental to the interest of the shareholders of the Company. In view of the absence of any other objections having been placed on record before this Tribunal and since all the requisite statutory compliances having been fulfilled, this Tribunal sanctions the Scheme of Arrangement commonly appended as Annexure 5 with the Company Petitions as well as the prayers made therein. The scheme is approved - application allowed. Insolvency & Bankruptcy 2022 (1) TMI 266 Determination of insolvency resolution costs - payments of costs and expenses incurred by the Resolution Professional (RP) - HELD THAT:- In the present case, after the NCLAT set aside the order of the NCLT initiating the CIRP, the proceedings were remitted back for determining the insolvency resolution costs. It is material to note that the appellant had addressed a letter to the respondent on 13 December 2019 prior to the filing of the application to which the respondent responded on 24 January 2020 stating that, upon verification, the costs and fees were found in conformity with both the technical and financial bid, based on which the assignment was awarded - The adjudicating authority merely directed the respondent to pay the expenses incurred and an amount of ₹ 5,00,000 plus GST towards the fee of the RP. Neither the basis of the claim nor its reasonableness has been considered by the adjudicating authority. The appellate authority has merely proceeded in an ad hoc manner on the ground that the amount of ₹ 5,00,000 as fee, in addition to the expenses, appears to be reasonable. Both the orders suffer from an abdication in the exercise of jurisdiction. In the absence of any reasons either in the order of the NCLT or the appellate authority, it is impossible for the Court to deduce the basis on which the payment of an amount of ₹ 5,00,000 together with expenses has been found to be reasonable. Consequently, an order of remand becomes necessary. The impugned judgment and order of the NCLAT dated 30 July 2020 is set aside - the NCLT, upon remand, is requested to expedite the disposal of the MA and to complete the process within a period of one month from the date of receipt of a certified copy of this order on its record - appeal disposed off. 2022 (1) TMI 265 Approval of Resolution Plan - seeking modification in the Resolution Plan - time limit of 330 days provided in Section 12 of IBC is mandatory or not? - Whether the subject matter of present Application IA No.479/KB/2021 is different to the prayer in IA No.426/KB/2021? - HELD THAT:- In the present case, the Adjudicating Authority vide Order dated 16.03.2021 condoned the delay of 43 days in submitting the Resolution Plan by the CP Ispat Pvt. Ltd. (R2) and RP was directed that the Resolution Plan be placed before the COC for consideration on or before 22.03.2021 and the COC shall be deliberate on the Resolution Plan in its feasibility and viability and take a decision on or before 25th March, 2021. This Order was not challenged by the Appellant - In the earlier Application (I.A. No. 426/KB/2021), it was prayed that the COC be restrained from considering the Resolution Plan because at that time the Resolution Plan was pending before the COC for consideration. However, the Adjudicating Authority vide Order dated 30.04.2021 has dismissed the Application holding that voting has already been taken place on resolution plan and against that order when the Appeal came for hearing before this Appellate Tribunal at that time the resolution plan has already been approved by the CoC and the Application was pending before the Adjudicating Authority for approval of Resolution Plan. Therefore, this Appellate Tribunal declined to interfere in the order passed by the Adjudicating Authority. When this Appellate Tribunal has already overruled all the objections of the Appellant and directed the Adjudicating Authority to consider the Application for approval of Resolution Plan then there is no occasion for the Appellant to file the Application praying that the Application filed by the RP for approval of plan be dismissed and liquidation order be passed. We are in agreement with the finding of Ld. Adjudicating Authority that the subject matter of this Application is similar to the prayer in earlier Application I.A. No. 426/KB/2021 and the issue was settled on 30.04.2021 which is upheld by this Appellate Tribunal on 02.08.2021. Whether the time limit of 330 days provided in Section 12 of IBC is mandatory? - HELD THAT:- The object of the IBC is the resolution of the insolvency of a Corporate Debtor. Efforts of all stakeholders has to be towards resolution of insolvency - There can be no dispute that the law mandates that CIRP proceedings have to be concluded within 330 days. Hon ble Supreme Court, after noticing the above requirement of 330 days in Section 12, laid down in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT ] that normally as per law, insolvency resolution process has to be completed within 330 days maximum, but in exceptional cases, the period can be extended by Adjudicating Authority/ Appellate Tribunal. The Hon ble Supreme Court has held that in exceptional cases, time can be extended. The general rule being that 330 days is the outer limit within which resolution of the stressed assets of the Corporate Debtor must take place beyond which the Corporate Debtor is to be driven into liquidation and also held that in 2nd proviso to sub-section (3) of Section 12 the word mandatorily as being manifestly arbitrary under Article 14 of Constitutional of India and as being an excessive and unreasonable restriction on the litigant s right to carry on business under Article 19 (1)(g) of the Constitution. Therefore, strike down the word mandatorily Thus, it is settled law that the time limit for completion of Insolvency Resolution Process provided in Section 12 of IBC is not mandatory. Therefore, we are unable to be convinced with the argument of learned Counsel for the Appellant that in time limit of 330 days provided in Section 12(3) if the resolution is not completed, the Adjudicating Authority is bound to order for liquidation. Appeal dismissed. 2022 (1) TMI 264 Seeking permission to first Appellant to file a claim in respect of the unpaid rent as Operational Creditor - seeking direction to the Resolution Professional to collate the claim and classify in terms of the Liquidation Mechanism under Section 33 of the Insolvency and Bankruptcy Code - HELD THAT:- The RP enjoys the right to take control and custody of all the assets and records of the Corporate Debtor for the purpose of preserving and protecting the assets. The material on record shows that the RP responded to the claim forms submitted by the Appellants. Vide two letters dated 05.06.2020 and 30.08.2020 admitting part of their claims and informing that in the event, the verification of claims was not agreeable to them, they may take appropriate recourse under the provisions of the Code. In the claim forms, dated 04.11.2019, filed by the Appellants, no reference has been made regarding the deductions made from the Security Deposit or Maintenance Advance towards the outstanding dues. In the absence of any communication or initiation by the Appellants to the Respondents regarding adjustments made against the Security Deposit or the Maintenance Advance, it is evident that no such adjustments have been made by the Appellant. A perusal of the Maintenance Agreement shows that in the event of non-payment of Maintenance Charges by the Respondent, the only right that accrues upon the two Appellants is to disconnect/discontinue the electric supply to the premises. Further, the Respondent looses their right to use the common facility and services specified in the Maintenance Agreement. The Agreement does not empower the two Appellants with any right to deduct the Maintenance Advance on account of non-payment of Maintenance Charges. It is seen from the record that the RP prepared and submitted a comparative table of amounts and placed before the CoC, dues payable upto 15.09.2020. Having regard to the provisions of Section 14 of the Code, Regulations 13 and 14 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and Section 25(2) which relates to duty of the RP regarding custody of the asset of the Corporate Debtor , the Adjudicating Authority has rightly examined the provisions of the Agreement between the parties in detail. However, in para 21 of the Impugned Order, the Learned Adjudicating Authority has observed, Therefore, the Respondents are directed to file their claim before the RP for the unpaid rent from 25.03.2020 to 28.07.2020 and not beyond that . Appeal allowed in part. 2022 (1) TMI 263 Right of bank to claim priority on redemption of FD - Seeking transfer of amount payable (including interest accrued thereon) on closure of Fixed Deposits to the account held by the Corporate Debtor with IDBI Bank - CIRP proceedings under process - HELD THAT:- From the perusal of Clause 10(c) of the Facility Agreements (at page 86 of the Appeal Paper Book), the Appellant Bank is required to first ask from the Corporate Debtor to furnish additional security - It is an admitted fact that the Appellant has failed to place on record any document to establish that a request was ever made for creating additional security in terms of Clause 10(c). From the perusal of the Clause 14 of the Facility Agreements which states that in the event of default in repayment of the financial facilities, the Appellant has the right to take possession of Charged Assets - Fixed Deposits were never charged to the Appellant neither originally as Charged Assets nor subsequently as Additional Security , hence the Bank has no right over these Fixed Deposits even when loan is recalled by the Bank. No such charge was registered by the Corporate Debtor or even by the Appellant in terms of Section 77 of the Companies Act, 2013. Appeal dismissed. 2022 (1) TMI 262 Withdrawal of CIRP Application filed u/s 12 A of IBC - settlement between the Appellants and the Corporate Debtor - two Financial Creditors out of which one having 17% of voting shares has dissented to allow withdrawal - requirement of consent/approval form CoC for withdrawal of Application - HELD THAT:- The Hon ble Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 1508 - SUPREME COURT ] has held that at any stage, before a Committee of Creditors is constituted, a party can approach National Company Law Tribunal (NCLT) directly and that the Tribunal may, in exercise of its inherent powers under Rule 11 of NCLT Rules, allow or disallow an application for withdrawal or settlement - The Hon ble Supreme Court held that Approval of ninety percent voting share is mandated when Committee of Creditors is already constituted and is in existence. In the present case, the Application under Section 12A was filed on 25.08.2021 on which date settlement between the Appellants and the Corporate Debtor had already been entered. On the day when the Application was filed, there was no requirement of approval of ninety percent of voting share of Committee of Creditors - entire dues of the Appellant were paid by the Corporate Debtor under Memorandum of Settlement dated 25.08.2021. An Application was also filed on 25.08.2021 i.e. before the constitution of the Committee of Creditors. There was no requirement of directing for obtaining approval of ninety percent vote of Committee of Creditors for considering the Application. There was no fresh Application before the Adjudicating Authority apart from Application dated 25.08.2021 which was filed prior to the constitution of Committee of Creditors. The Adjudicating Authority without considering the facts and sequence of the events had refused to entertain the Application on the ground that it is not supported by ninety percent vote of Committee of Creditors - present is a case where the Application for withdrawal ought to be allowed permitting withdrawal of Corporate Insolvency Resolution Process. Appeal allowed. 2022 (1) TMI 261 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- It is seen from the submissions that, the Principal amount claimed by the Applicant is ₹ 1.25 Crore, which is deposited with the Corporate Debtor for the supply of goods to the Applicant. While this being the fact, it is pertinent to decide under the provisions of IBC, 2016, on the issue, as to whether the Petitioner qualifies to be an Operational Creditor in relation to the: Corporate Debtor. For a person to qualify as an Operational Creditor he must have supplied the goods or rendered service to the Corporate Debtor, which is not the proposition in the present case and on the other, as per the agreement dated 01.12.2016 filed by the Applicant, it is the Corporate Debtor who is required to supply the goods to the Applicant, claiming to be Operational Creditor. Further, the default in the present case has arisen since the Corporate Debtor had failed to repay the deposit which is made by the Applicant - Thus, the failure to repay the deposit amount would not fall within the meaning of operational debt as stipulated under Section 5(21) of IBC, 2016 and as a consequent thereto, the Petitioner does not qualify to be an Operational Creditor as defined under Section 5(20) of IBC, 2016 in respect of the Corporate Debtor. The instant Application filed by the Applicant under Section 9 of IBC, 2016 is not maintainable - Application dismissed. 2022 (1) TMI 260 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - dispute on the short supply of goods delivered by the Operational Creditor - HELD THAT:- It is seen from the e-mail communication dated 17.10.2020 filed in the typed set of documents filed by the Corporate Debtor, regarding the dispute of short supply was sent only after filing of this application - It is clear from the e-mail communication dated 04.09.2020 that the Corporate Debtor has acknowledged his default and there is no pre-existing dispute regarding short supply until 04.09.2020. Further, it is also pertinent to note that the default arising in the present Application is much prior to the advent of the Covid-19 pandemic and hence the Corporate Debtor also cannot seek shelter under Section 10A of IBC, 2016. Under the said circumstances, this Tribunal is left with no other option than to proceed with the present case and initiate the Corporate Insolvency Resolution Process in relation to the Corporate Debtor. The Petition as filed by the Operational Creditor, is required to be admitted under Section 9(5) of the IBC, 2016 - Petition admitted - moratorium declared. Service Tax 2022 (1) TMI 256 100% EOU - Levy of service tax - export of services - Scientific and Technical Consultancy Service - Technical Testing and Analysis Service - bundled pre-production services - Rule 3 of Place of Provision of Service Rules, 2012 (POP) - HELD THAT:- Reliance placed in the case of COMMISSIONER OF SERVICE TAX VERSUS BA RESEARCH INDIA LTD. [ 2009 (11) TMI 213 - CESTAT, AHMEDABAD] where it was held that the said services came under rule 3(1)(2) of the Rules. It is very much clear that the performance of the service is not complete until the testing and analysis report is delivered to its client. In the present case, when such reports were delivered to the clients outside India it amounts to taxable service partly performed outside India. The performance of testing and analyzing has no value unless and until it is delivered to its client and the service is to be completed when such report is delivered to its client. Thus, delivery of report to its client is an essential part of the service, report was delivered outside India and same was used outside India. This is not the disputed fact. We hold that the respondent satisfied the conditions of rule 3(2) and accordingly, the respondents are eligible for the exemption under Notification No. 11 /2007-ST, dated 1-3-2007. Appeal allowed - decided in favor of appellant. Central Excise 2022 (1) TMI 259 Lapse of CENVAT Credit - balance credit after reversing the Cenvat credit lying in balance on inputs, WIP and contained in the final product - benefit of N/N. 30/2004-CE as amended availed - When the notification which prescribed the nil rate of duty but bearing condition that no Cenvat credit should be availed whether Cenvat credit lying in balance after reversal on inputs, WIP and inputs contained finished goods, shall lapse in terms of Rule 11(3)? - HELD THAT:- Since the Notification No. 30/2004-CE dated 09.04.2007 contains the above condition the notification is not absolutely therefore, the situation of the appellant is covered under Rule 11(3)(i) according to which the appellant is required to pay an amount equivalent to Cenvat Credit, if any taken by him in respect of inputs received for used in the manufacture of said final product and is lying in stock or in process or is contained in the final product or lying in stock but if the Notification is absolutely having no condition in terms of Rule 11(3)(ii) the remaining credit shall lapse and shall not be allowed to be utilized - The case of the appellant is covered by rule 11(3) (i) therefore, the remaining credit shall not lapse. One of the contention by the adjudicating authority is that even though the argument of the appellant that the Cenvat credit balance will lapse as per Rule 11(3) only, the product is exempted absolutely is accepted there is no dispute that Notification No. 30/2004-CE has been issued under section 5A of the Central Excise Act, 1944 and the appellants having opted for the same, cannot escape from the obligation relating reversal of balance Cenvat Credit. There is a clear distinction between an absolute exemption and conditional exemption. Therefore, the contention of the adjudicating authority that since the exemption notification was issued under section 5A the appellant is otherwise required to pay balance credit is of no substance and has no basis. The issue has been considered by the tribunal time and again and after interpreting Rule 11(3) (i) and (ii) came to conclusion that in case of conditional notification the assessee is not required to lapse the remaining credit after reversal on input as such, input in process and input contained in finished goods - On the absolute identical issue involving the exemption notification 30/2004-CE the tribunal in THE COMMISSIONER, CENTRAL EXCISE CGST, ALWAR VERSUS M/S. ORIENT SYNTEX (PROP. APM INDUSTRIES LTD.) [ 2020 (6) TMI 59 - CESTAT NEW DELHI] held that balance credit shall not lapse in terms of Rule 11(3) of Cenvat Credit Rules, 2004 therefore the issue is no longer res-integra. Appeal allowed - decided in favor of appellant. 2022 (1) TMI 258 Clandestine removal - MS Ingots - demand confirmed merely on the basis of assumption and presumptions - no corroboration to the statement - demand has been confirmed based upon the documents/ ledger maintained by the third party - authenticated and reliable evidences or not - Application for settlement under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - discharge certificate has not been issued in their favour for want of requisite payments to be made prior to issue of discharge certificate - HELD THAT:- The Department conducted investigation in this case with the search in the premises of M/s. Monu Steels. The appellant, Shri S K Pansari, proprietor of said propriety concern who apparently and admittedly was working as commission agent between the sellers and buyers of iron and steel products and used to get commission from either the seller or buyer or from both of them depending upon the finalisation of the deal and the nature of goods - But it is observed that the documents and statement based where upon were the demands against others including other manufacturers or raw material providers were of M/s. Monu Steel and Shri S K Pansari, the present appellant. Those orders are passed based upon the fact that the demand cannot be confirmed based upon such a record which was not recovered from the concerned assessee but from the possession or premises of third party. The demand has been confirmed based upon certain entries in the private ledger book of M/s. Monu Steels itself where Shri S K Pansari, Appellant himself is the proprietor. The premises of M/s. Monu Steel and of Shri S K Pansari were searched. The incriminating documents were got recovered from the appellant s own premises. Physical inspection of furnance of 4000 MT installed in appellant s premises when got compared with the electricity consumption record and the production record of the appellant it correctly led the adjudicating authority to conclude the suppression of production of M S Ingots by the Appellant and clandestinely removing those ingots without proper assessment and payment of duty. Not only this statement of Shri S K Pansari has sufficient admission for the alleged clandestine removal of goods without payment of excise duty. The statement being given to Customs Officer is very much admissible in evidence. As per section 52 of Indian Evidence Act, Admissions need no further proof unless retracted. As already observed above, there is no retraction on part of the appellant. Documents recovered from the premises of appellant rather corroborate the said admission. I am therefore, of the opinion that demand has rightly been confirmed against the appellant - Appeal dismissed. 2022 (1) TMI 257 Clandestine removal - M. S. Ingots - excess consumption of electricity - corroborative evidence or not - retraction of statements - entire demand is based upon the records recovered from Sh. S.K. Pansari, Proprietor of M/s. Monu Steel - HELD THAT:- There is no evidence expect the said statement and private dairy entry of 3rd party i.e. of Sh. S.K. Pansari, which contains the name of the appellant. The law as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence is well settled. Only on the basis of statement of third party no demand could be made. The Hon ble High Court of Judicature at Allahabad in the matter of M/S. CONTINENTAL CEMENT COMPANY VERSUS UNION OF INDIA OTHERS [ 2014 (9) TMI 243 - ALLAHABAD HIGH COURT] and also this Tribunal in the cases of M/S. RAIPUR FORGING PVT. LTD., SHRI SUNIL KEDIA, KRISHNA IRON STRIPS TUBES PVT. LTD., SHRI SUNIL AGARWAL, SHRI RAM ROLLING MILL, SHRI SANDEEP GIDWANI VERSUS CCE, RAIPUR-I [ 2016 (2) TMI 763 - CESTAT NEW DELHI] , C.C.E. S.T. -RAIPUR VERSUS P.D. INDUSTRIES PVT. LTD. [ 2015 (11) TMI 455 - CESTAT NEW DELHI] and COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, LUDHIANA VERSUS M/S ANAND FOUNDERS AND ENGINEERS [ 2015 (11) TMI 1166 - PUNJAB HARYANA HIGH COURT] have categorically held that the findings of clandestine removal cannot be upheld based upon the third party documents unless there is clinching evidence of clandestine manufacture and removal of the goods. The penalty imposed on Shri Naren Kumar Mishra, Director of the appellant is also set aside. Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2022 (1) TMI 255 Validity of assessment orders issued under section 25 of the Kerala Value Added Tax Act, 2003 - rejection of claim of input tax credit for tax paid on capital goods in terms of Rule 13 of the Kerala Value Added Tax Rules, 2005 - assessment years involved in the former writ petition are 2015-16, 2016- 17 and 2017-18 - HELD THAT:- The question whether Ext.P1 agreement is a composite agreement for a works contract or whether it is purely an agreement without any transfer of property involved in it, is a mixed question of fact and law. Though the agreement is termed as an agreement for the supply of Hydrogen, Nitrogen and Steam, the assessing officer has relied on various circumstances to regard the agreement as a works contract. The correctness or otherwise of the circumstances relied upon by the assessing officer in the impugned assessment orders, certainly require a detailed appreciation of facts. Merely because the amount involved in the order of assessment is large or merely because the nomenclature used in the agreement is as an agreement for supply, those by themselves are not sufficient justification to invoke the jurisdiction under Article 226 of the Constitution of India. It is relevant to observe that the impugned assessment orders were issued on 15.07.2021 and W.P.(C) No.17451 of 2021 was filed on 13.08.2021 while W.P.(C) No.18783 of 2021 was filed on 03.09.2021. Both these writ petitions were pending consideration before this Court at the admission stage itself, from the aforesaid date till today. Since this Court has expressed its disinclination to entertain these two writ petitions, the period spent by the petitioner before this Court, in these two writ petitions, must be permitted to be excluded while calculating the limitation period for filing the appeals as directed. Hence, It is declared that petitioner will be entitled to seek exclusion of time for the period spent by the petitioner pursuing these two writ petitions while pursuing the statutory remedy of appeals. There are no reason to interfere with the impugned orders in the exercise of jurisdiction under Article 226 of the Constitution of India - petition dismissed. 2022 (1) TMI 254 Classification of goods - steel strip (shoe-shank) used in between the insole and sole of the shoe as iron and steel - covered under the Entry No. 40 of schedule -II, Part -A of the U.P. VAT Act, 2008 and taxable @ 4 % or to be included in the Lower of Shoes as mentioned in the Entry No. 150 of Schedule II, Part C of the U.P. VAT Act, 2008 taxable @ 4 % and treating it as an unclassified item taxable @ 12.5? - HELD THAT:- Entry No. 150 of Schedule II, Part C of the U.P. VAT Act, 2008 shows that various items of shoe i.e. upper and lower of shoes, sole, ilet, shoe laces are mentioned in the aforesaid entry. Had the intention of the legislature to exempt all component used in manufacture of lower of shoe, which consists the lower of shoes, shank and heel, there was no requirement for specifically mentioning the sole in the entry no. 150 - The item sold by the applicant is only one of the component of lower of shoe which cannot be covered in the nature of lower of shoe because lower of shoe consists of three items i.e. outsole, shank and heel. Admittedly, the applicant is selling only shank as such it is not covered under the said entry i.e. Entry no. 150 because the entry does not refer lower of shoe and all its component. So far as the contention of the learned counsel for the applicant to that extent is rejected. In the alternative, learned counsel for the applicant submitted that admittedly the goods sold by the applicant has been manufactured by the iron strip as defined under Section 14 of Central Sales Tax Act, 1956, where iron strips has specifically been mentioned - the said ground has not only been taken before the Tribunal but also before the first appellate authority and same has not been considered by the authorities below. The Tribunal being the last Court of fact, in para 4 of its order has referred the argument of the counsel for the applicant but has not whispered a word about the said contention in its finding. The matter is remanded to the Tribunal for fresh consideration as to whether the item sold by the applicant can fall under the iron and steel as defined under Section 14 of the Central Sales Tax Act,1956 of Serial no. 40 - revision disposed off. 2022 (1) TMI 253 Demand of certain sums of money towards revised tax and penalty - deemed assessment under Section 22(2) of TNVAT Act - writ petitioner not having responded to the pre-revision notice under Section 27 of TNVAT Act - HELD THAT:- Considering the facts and circumstances of the case, more particularly the fact that the quantum is not a huge amount and considering the nature of the business, the following order is passed making it clear that this will not serve as a precedent in days to come. In other words, this is clearly a one off case and the indulgence shown by this Court is solely owing to the peculiar facts and circumstances and therefore, it will not apply to all cases where a dealer receives a pre-revision notice does not respond to the same but comes up with a writ petition later saying that he approached the respondent in person, making this position clear. Impugned demand notice dated 06.12.2021 is set aside solely on the ground that a revisional order crystallising tax liability and penalty has not been made pursuant to pre-revision assessment notice dated 08.11.2019 - petition disposed off. Indian Laws 2022 (1) TMI 252 Entitlement to claim suit - suit promissory note is a forged and fabricated document or not - HELD THAT:- Admittedly, Ex.A1 was prepared through computer. If really the suit promissory note had been executed by the defendant, as claimed by the plaintiff, absolutely there is no possibility of material contradictions creeping into the evidence of P.W.1 and P.W.2 with regard to execution of the suit promissory note. Further, admittedly, there was a civil dispute between the defendants father and P.W.2, it is hard to comprehend that the defendant would have brought P.W.2 for the purpose of making attestation in the suit promissory note and therefore, this Court is of the view that P.W.2 is not a trustworthy witness. The trite law is that the plaintiff cannot be permitted to pick holes in the defendants case and claim to have proved his case. No doubt, the Judgments and Decrees of the Courts below are based on proper appreciation of evidence placed and proper understanding of the settled principles of law governing the provisions of Sections 20 and 118 of Negotiable Instruments Act. Admittedly, the defendant received a sum of ₹ 1,90,000/- from the plaintiff, which he is liable to pay the same to the plaintiff with reasonable interest. Accordingly, the defendant is directed to pay a sum of ₹ 1,90,000/-, as agreed, to the plaintiff with interest at the rate of 3% per annum. The Second Appeal is dismissed. 2022 (1) TMI 251 Dishonor of cheque - Proceedings against the Joint Account Holder who is not the signatory of the cheque - the petitioner/A.2 is not a signatory to the subject cheques but contended that the petitioner/A.2 is aware of the money transactions and handing over of the subject cheques - HELD THAT:- As per the mandate given under Section 138 of N.I Act, where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence. A person who is the signatory to the cheque and the cheque is drawn by that person on an account maintained by him and the cheque has been issued for the discharge, in whole or in part, of any debt or other liability and the said cheque has been returned by the bank unpaid, such person can be said to have committed an offence. Section 138 of the NI Act does not speak about the joint liability. Even in case of a joint liability, in case of individual persons, a person other than a person who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offence Under Section 138 of the NI Act. A person might have been jointly liable to pay the debt, but if such a person who might have been liable to pay the debt jointly, cannot be prosecuted unless the bank account is jointly maintained and that he was a signatory to the cheque. In the instant case, it is evident from the entire material placed on record, particularly, the complaints filed by the respondent No.2/complainant under Section 138 of N.I. Act r/w Sec.200 Cr.P.C, the petitioner/A.2 is merely a joint account holder and she is not the signatory to the subject cheques - The Courts below erred in taking cognizance against the petitioner/A.2, particularly, when she is not a signatory to the disputed cheques. So the contentions raised on behalf of the respondents do not merit consideration. In view of these circumstances, when no ingredients under Section 138 of N.I.Act are made out against the petitioner/A.2, continuation of the subject proceedings against the petitioner/A.2 is abuse of process of law - Petition allowed.
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