TMI Tax Updates - e-Newsletter
January 15, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Imposition of penalty u/s 122(xiv) of the CGST Act - detention of goods and vehicle on the ground that vehicle was not carrying the valid e-way bill - whether the Superintendent of State Tax has exceeded his jurisdiction in imposing the penalty? - - HC For the breach which falls under Section 122(xiv), the penalty is fixed @₹ 10,000/-. So far the penalty for an amount equivalent to tax is concerned those are for the incidents when the tax is sought to be evaded or not deducted under Section 51 etc. The other incidences as cataloged in Section 122 of the CGST Act are not relevant to the present case and as such we are of the firm view that the Superintendent of State Tax has exceeded his jurisdiction while imposing the penalty.
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GST:
Exemption from GST - service of transportation of goods from Magdalla Port, Surat to its General Lighterage Area of Magdalla Port - The length of the waterway, between which the service of transport is performed by the applicant, is the part of the “Arabian Sea” and not a part of any canal, river, lake or other navigable water within a State. Thus, their contention, that the transportation is being done on the inland waterway falling within the state, appears to be incorrect. - AAR
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GST:
Classification of goods - rate of tax - HSN Code - Agro Waste Thermic Fluid Heater or Boiler and parts thereof - The Agro Waste Thermic Fluid Heaters or Boilers are classifiable under heading 8402 19 19 of the First Schedule to the Customs Tariff Act, 1975 and attract 9% CGST + 9% SGST - AAR
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GST:
Input tax credit (ITC) on the inward supply of works contract service - outward supply is also works contract service - applicant is supplying works contract service to the Kolkata Municipal Corporation. He is, therefore, making an outward supply of works contract service and is not prohibited from claiming input tax credit either under clause (c) or clause (d) of section 17(5) of the GST Act. - AAR
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Income Tax:
Deemed dividend u/s 2(22)(e) - shares held in the name of minor children - no such benefit accrued, and hence the assessee could not be said to be the beneficial owner of the shares standing in the name of his minor sons. Commissioner (Appeals) was, thus, right in holding that the amounts withdrawn from the company could not be deemed to be dividend under section 2(22)(e) - AT
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Income Tax:
Assessment u/s 153A - Unaccounted income on account of under invoicing of sales - Admissions made under such circumstances without the corroborative evidence cannot be made basis for making the additions. Neither evidence was found nor the AO made out a case with the date wise, party wise cash of receipt from each distributor which was said to be unaccounted. - AT
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Income Tax:
TP Adjustment - royalty paid by the assessee to its AE - the TPO is not vested with any jurisdiction to question the commercial expediency of the transaction carried out by the assessee with its AE, and his jurisdiction is restricted to determining of the arm’s length price of the transaction - AT
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Income Tax:
Non setting off the short term capital gain against long term capital loss brought forward - There is merit in the contentions of the appellant that prior to amendment to section 70 & 74 by the Finance Act, 2002, the carry forward capital loss was not bifurcated between short term capital loss and long term capital loss. - AT
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Income Tax:
TDS u/s 195 - non deduction of TDS on software embedded in mobile phones imported by the assessee during the previous year - Finished mobile phones were imported by the assessee from Nokia Corp for the purposes of sale against a lump-sum consideration and there was no separate payment made by the assessee towards the purchase of any software. - No TDS liability - AT
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Income Tax:
TDS u/s 194J - Since the leased line charges got the final dressing up as `Royalty’ u/s 9(1)(vi) of the Act after the close of the relevant Financial year, we have no hesitation in holding that - even though the amount became chargeable to tax as royalty in the hands of the recipient under the Act for the year under consideration - but the same did not fasten an obligation to deduct tax at source as the assessee could not have activated its sixth sense to ascertain beforehand that an obligation to deduct tax at source was in offing. - AT
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Income Tax:
Enhanced rate of tax @60% u/s 158BBE on Unexplained / Undisclosed income - prospective or retrospective - Section 115 BBE was inserted by Finance Act 2012 w.e.f 01.04.2013. As on 01.04.2016 the financial year in which the subject seizures occurred Section 155BBE provided for 30% tax on income refereed to in Sections 68, 69, 69A, 69B, 69C and 69D. The same was amended by the 2nd Amendment Act; w.e.f. 01.04.2017, enhancing the rate to 60%. Hence there was no new liability created and the rate of tax merely stood enhanced which is applicable to the assessments carried on in that year. The enhanced rate applies from the commencement of the assessment year, which relates to the previous financial year. - HC
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Income Tax:
Prosecution proceedings for offence u/s 276C and 277 of IT Act - Mere showing ignorance by one of the assessees by maintaining that only her husband is aware of the return such conduct cannot be construed as abetment to atrract the offence under Section 278 of the Incomt Tax Act. To attract the offence of abetment there must be materials to show that she has instigated or invites her husband to commit offence. Therefore, this court is of the view that the offence under Section 278 not at all attracted against accused. - HC
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Income Tax:
Deduction u/s 80P(2)(a) (i) - the credits given to such members being for purposes other than agricultural credit - once section 80P(4) is out of harm’s way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted. - SC
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Customs:
Requirement of filing of Bill of Coastal Goods (BCG) - Order-Instruction
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IBC:
Initiation of CIRP - in the instant case Section 8 notice under ‘I&B’ Code was not served upon the Second Respondent / Corporate Debtor and admittedly the same got returned as mentioned Supra, this Tribunal comes to a consequent conclusion that the impugned order dated 01.01.2020 passed by the Adjudicating Authority in admitting the petition is not legally tenable and the same is accordingly set aside by this Tribunal to secure the ends of justice. - AT
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SEBI:
Repealing the Securities and Exchange Board of India (Central Database of Market Participants) Regulations, 2003 - Notification
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2021 (1) TMI 499
Input tax credit (ITC) on the inward supply of works contract service - outward supply is also works contract service - Interpretation of section 17(5) (c) & (d) of the GST Act - applicant submits that the said sub-section prohibits the recipient from claiming input tax credit on the inward supplies of the goods and services listed in the clauses - HELD THAT:- The term ‘supply’ includes both ‘inward’ and ‘outward’ supplies. If a person makes a supply, it refers to an outward supply. If the taxable person claims or is prohibited from claiming the input tax credit in respect of a supply, it refers to an inward supply. Each of the clauses of section 17(5) of the GST Act describes the supply of a class of goods or services. The input tax credit shall not be available in respect of any of the supplies listed under the clauses (a) to (i). In other words, a taxable person cannot claim the input tax credit in respect of these supplies. A taxable person can claim the input tax credit in respect of a supply only if he is a recipient of the said supply. The clauses (a) to (i) of section 17(5) of the GST Act, therefore, in the context of the sentence that constitutes the said sub-section, and in relation to the taxable person claiming an input tax credit, can only refer to inward supplies of the goods and services. Each of these clauses begins with a statement of the goods or services in respect of the inward supply of which the taxable person is prohibited from claiming the input tax credit. The rest of the clause describes the context and the conditions under which the prohibition applies and also mentions the exceptions if any.
Clause (c) of section 17(5) of the GST Act should be interpreted as a prohibition on a taxable person from claiming input tax credit on the inward supply of works contract service unless it is an input service for further supply of works contract service. The prohibition applies only if the works contract service is used for the construction of immovable property other than plant and machinery. The clause (d) of section 17(5) of the GST Act extends the prohibition to cover other inputs and input services when the recipient is constructing the immovable property on his own account - applicant is supplying works contract service to the Kolkata Municipal Corporation. He is, therefore, making an outward supply of works contract service and is not prohibited from claiming input tax credit either under clause (c) or clause (d) of section 17(5) of the GST Act.
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2021 (1) TMI 491
Legality and validity of the best judgment assessment orders - Cancellation of registration of petitioner - Cancellation of registration has been challenged on the ground that it does not indicate or acknowledge payment of GST to the tune of ₹ 10,25,800.00 by the petitioner - section 62(1) of the Maharashtra Goods and Services Tax Act, 2017 covering the period from March, 2020 upto October, 2020 - HELD THAT:- Impugned cancellation of registration dated 24.12.2020 is hereby stayed. Further, no coercive steps further to the best judgment assessments shall be taken against the petitioner in the meanwhile.
Stand over to 16.03.2021.
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2021 (1) TMI 490
Confiscation - appeal under Section 107 of the GST Act has been filed by the writ-applicant against the final order of confiscation or not - status of such appeal - any application under Section 67(6) of the Act is filed or not, for the provisional release of the goods, pending the appeal - deposit of 10% amount made or not - HELD THAT:- Mr. Dave, shall seek the necessary information as regards the above and assist this Court on the next date of hearing.
Post it on 13.1.2021 on top of the Board.
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2021 (1) TMI 489
Imposition of penalty under Section 122(xiv) of the CGST Act - detention of goods and vehicle on the ground that vehicle was not carrying the valid e-way bill - whether the Superintendent of State Tax has exceeded his jurisdiction in imposing the penalty? - HELD THAT:- For the breach which falls under Section 122(xiv), the penalty is fixed @₹ 10,000/-. So far the penalty for an amount equivalent to tax is concerned those are for the incidents when the tax is sought to be evaded or not deducted under Section 51 etc. The other incidences as cataloged in Section 122 of the CGST Act are not relevant to the present case and as such we are of the firm view that the Superintendent of State Tax has exceeded his jurisdiction while imposing the penalty. The penalty would have been ₹ 10,000/-. As there is no dispute about the tax, we will not lay our hands on that aspect. Mr. Majumder has categorically stated that the petitioner has paid the said tax. We are also not accepting that statement on the face of it. The revenue authority shall be at liberty to verify that fact to ascertain whether tax has been paid or not. In the event of non- payment of tax the appropriate action be taken for realizing the said tax from the petitioner. But in the circumstances, we set aside the order of penalty and direct the petitioner to pay the sum of ₹ 10,000/- as penalty for the breach which is covered under Section 122(xiv) of the CGST Act within a period of 1 month from today. If not paid, the action as prescribed by the statue be followed for realizing the same.
Petition stands partly allowed.
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2021 (1) TMI 498
Classification of goods - rate of tax - HSN Code - Agro Waste Thermic Fluid Heater or Boiler and parts thereof - applicability of Sl. No.234 of Schedule I to Notification No.1/2017-Central Tax (Rate), dated 28.06.2017 and corresponding notifications issued under State GST law and IGST Act - HELD THAT:- As per the functioning/working of the impugned product, it is an energy generation device, which merits classification in Chapter heading 8402 of the First Schedule to the Customs Act, 1975 - the impugned product is classifiable under heading 8402 19 19 of the First Schedule to the Customs Tariff Act, 1975, being a Thermic Fluid Heater or Boiler.
The Notification No.1/2017-Central Tax (Rate) dated 28.06.2017, as amended is relevant to the matter. This Notification has six Schedules wherein the listed goods attract the rate of CGST applicable to the respective Schedules. Schedule I comprises of goods which are chargeable to CGST @ 2.5%. Serial No. 234 covers the listed renewable energy devices and parts for their manufacture and these items attract 2.5% CGST - The vital condition for applicability of Sr. No. 234 of Notification No. 1/2017- Central Tax (Rate) is that the devices or parts thereof should be those listed in column 3 thereto. The applicant has claimed their device as ‘Waste to Energy Plant/ Device’. The inescapable inference that can be drawn from the entry is that the energy should be inevitably created from waste. In other words the fuel used for obtaining energy should inevitably be ‘waste’. The product has been presented by the applicant as ‘Thermic Fluid Heater’ in their written submission and during the course of personal hearing a brochure was submitted wherein the product has been categorised as ‘Biomass Fired Boiler’. The applicant has not clearly specified the functionality of the product and it becomes very difficult to classify the product merely going by the generic interpretation of the name allotted to the product. The product Thermic Fluid Heater/ Boiler gets classified under Chapter 8402 19 90 in terms of the description of the goods as listed under the respective head of the First Schedule to the Customs Tariff. However, the applicability of Sr. No. 234 of Notification No. 1/2017- Central Tax (Rate) essentially depends on the nature of fuel used for such energy device.
The products matching the description of the product under consideration use fuel such as Imported coal, rice husk, lignite, Coal, wood and briquette. None of these are non-conventional but are purely conventional fuels used for generation of heat or steam. As discussed above, the crucial factor is that the heat or steam should have been generated by use of a waste/ non-conventional element so as to qualify under the head ‘Waste to energy plants /devices’. However, the technical specifications available on the website of the applicant do not indicate that their product is generating energy from waste. Rather the literature indicates that the energy is generated by use of conventional elements.
In the instant case, it is found that the applicant has presented partial facts and deliberately chosen to remain silent on the vital aspect regarding the fuel used in their energy devices/ plants. This situation is akin to naming one’s pet cat as ‘Tiger’ and asking someone the classification of the pet by referring to its name rather than the technical characteristics. Such analysis by merely referring to a name would lead to wrong conclusions. To avoid such erroneous conclusions, there is no option but to refer to the technical specifications of the products of the applicant as available on their official website. Reference to such technical specifications leads to the inescapable inference that the fuel used for generation of energy is not ‘waste’ but conventional energy generating elements. Resultantly, we find that the rates as specified at Sr. No. 234 of Notification No. 1/2017-Central Tax (Rate) will not be applicable to the product under consideration.
Applicable rate of tax - HELD THAT:- It is to mention that the said product attracts rate of tax of 9% CGST + 9% SGST as applicable under Sr. No. 310 under Schedule III of Notification No. 1/2017-Central Tax (Rate) read with the corresponding notification under the Gujarat GST Act in case of Intra-State supply. Likewise, the applicable rate of tax will be 18% IGST under Sr. No. 310 under Schedule III of Notification No.1/2017- Integrated Tax (Rate) in case of Inter-State supply.
Though, the applicant has claimed the benefit of Sr. No.234 of Notification No.1/2017-Central Tax (Rate), they have not produced any documentary evidence such as supply contracts/order for WTEP from the concerned authorities to show that said Agro Waste Thermic Fluid Heater or Boiler is supplied for use in the initial setting up of renewable energy plants and devices including “waste to energy plants/devices”. Thus, it is seen that the applicant has chosen to omit the vital facts regarding the nature of fuel used for generation of energy and whether the said device is used for initial set-up of renewable energy plants. By providing such partial information, they have sought to claim a decision in their favour.
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2021 (1) TMI 497
Exemption from GST - service of transportation of goods from Magdalla Port, Surat to its General Lighterage Area of Magdalla Port (where the Mother Vessels are anchored) or vice versa - transportation of goods on other waterway of any inland water defined in clause(b) of Section 2 of the Inland Vessels Act, 1917 - Clause (b) of Entry No.18 of the Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017 - Whether the service of above transportation fall within area as defined in ‘Inland waterways’?
HELD THAT:- The 1st category of the term “inland water” comprises of “any canal, river, lake or other navigable water within a state”, as mentioned herein above. According to this, waterways on any canal, river, lake or other navigable water within a state, will be a part of “Other waterway on any inland water” - the applicant is providing service relating to transportation of goods in the water way, i.e. from Magdalla Port to its General Lighterage Area (Anchoring Point of Mother Vessel) or vice versa. This waterway is a part of the Arabian Sea. Whereas, the term “Other waterway on any inland water” covers any canal, river, lake or other navigable water within a State only. The length of the waterway, between which the service of transport is performed by the applicant, is the part of the “Arabian Sea” and not a part of any canal, river, lake or other navigable water within a State. Thus, their contention, that the transportation is being done on the inland waterway falling within the state, appears to be incorrect.
The service of transportation of goods in barrages from mother vessel to daughter vessel from Magdalla Port, Surat to its General Lighterage Area of Magdalla Port does not get covered in the definition of ‘other waterway on any inland water’, as defined under Clause (b) of Section 2 of the Inland Vessels Act, 1917.
It is that the service of transportation of goods in barrages from mother vessel to daughter vessel from Magdalla Port, Surat to its General Lighterage Area of Magdalla Port is neither covered in the definition of ‘national waterways’, as defined in Clause (h) of section 2 of the Inland Water Ways Authority of India Act, 1985 nor covered in the definition of ‘other waterway on any inland water’, as defined under Clause (b) of Section 2 of the Inland Vessels Act, 1917. Consequently, the same does not qualify for exemption contained at Sr. No.18 of the Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017.
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2021 (1) TMI 496
Plant and machinery or not - LNG Jetties proposed to be built by the applicant - input tax credit - Section 16 read with Section 17 of Section 16 of the Central Goods and Services Tax Act, 2017 read with the Gujarat Goods and Services Tax Act, 2017.
Whether in terms of Section 17 of the CGST Act, 2017 read with GGST Act, 2017, the LNG jetties proposed to be built by the applicant can be said to be covered within expression ‘plant and machinery’ as foundation to equipment, apparatus, machinery to be installed on it?
Whether as per Section 16 read with Section 17 of the said Acts, the applicant can accordingly avail ‘input tax credit’ of GST paid in inputs, input services as well as capital goods procured for the purpose of building the LNG jetties?
HELD THAT:- Applicant have entered into a Concession Agreement with the Gujarat Maritime Board (‘GMB’) to, inter-alia, implement the development, construction, operation and maintenance of Liquified Natural Gas (‘LNG’) Port with a Floating Storage and Regasification Unit (‘FSRU’) facility in Jafrabad, Gujarat under the Build, own, Operate and transfer (‘BOOT’) basis and the purpose of the construction of the 2 jetties is for the installation of plant and machinery on it.
As per data available online, a jetty, in brief, is a structure generally constructed on plinths or pillars that projects from land out into water. It can also be described as a narrow structure projecting from the shore into the deep water as a landing place for ships i.e. the place where ships or boats stop to let people get on or off, or to load or unload goods. Jetty structure is used to berth the vessels alongside and affords them a working platform and can also be called a landing stage at which boats can dock or be moored. However, as discussed in the para above, in the instant case, the 2 jetties proposed to be constructed by the applicant as per the agreement with GMB is not for the aforementioned purpose but solely for installation of plant and machinery on it for the purpose of regasification of LNG. In short, the construction of the above jetties is nothing but a civil structure or an immoveable property constructed on pillars or plinths extending from the sea shore to the deep sea.
On going through the definitions of ‘foundation’, the one thing that we find strikingly common in all of them is that foundations are structures which are located below the ground and support the structures/buildings built above it. Thus, the primary condition for a structure to be a ‘foundation’ is that it is required to be a concrete structure made of stones, bricks, cements etc., which should be located below the ground and give support to the structure/building constructed above it. However, on going through the definitions as well as the details of jetties proposed to be built by the applicant as per their agreement with GMB and comparing the same, we find that the jetties are just civil structures or immoveable property, which are akin to a building wherein the only difference being that buildings are located on foundations below the surface of the ground whereas a jetty is a civil structure which is constructed high above the sea shore and extending into the deep sea, stationed on pillars or plinths - Thus, the jetties, in itself, being civil structures and immovable property constructed above the sea shore and extended into the sea, stationed on pillars and plinths above the earth, cannot be considered or covered under the definition of ‘foundation’. Hence, on this ground itself, we conclude that the said jetties proposed to be built by the applicant cannot, by any stretch of imagination, be called or defined as a ‘foundation’.
Whether the ‘plant and machinery’ proposed to be installed by the applicant on the aforementioned jetties would be covered under the definition of ‘plant and machinery’ as defined in Explanation to Section 17 of the CGST Act, 2017? - HELD THAT:- Since the apparatus, equipment and machinery proposed to be installed by the applicant do not satisfy the conditions required to be defined as ‘plant and machinery’, we conclude that the same are not covered under the definition of ‘plant and machinery’ in terms of the Explanation to Section 17 of the CGST Act, 2017.
Whether as per Section 16 read with Section 17 of the said Acts, the applicant can avail ‘input tax credit’ of GST paid in inputs, input services as well as capital goods procured for the purpose of building the LNG jetties? - HELD THAT:- Jetties proposed to be constructed by the applicant are civil structures (immoveable property’) which are to be constructed as per their agreement with Gujarat Maritime Board(GMB) - The applicant cannot avail ‘input tax credit’ of GST paid on inputs, input services as well as capital goods procured for the purpose of building the LNG jetties in terms of Section 16 read with Section 17 of the CGST Act, 2017 read with GGST Act, 2017.
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2021 (1) TMI 495
Classification of supply - rate of GST - HSN Code - supply to be made by the applicant of Wear Plates and Tamping Tools as manufactured specifically as per RDSO Drawing directly to the Railway Authorities as per the Order received from M/s Trio Enterprise - fall under HSN 86040000 & classified under Chapter 86 and should be taxed GST @ 5% or otherwise? - HELD THAT:- The applicant is having factory at Survey No. 428/1, Village-Nana Fofalia, Dabhol, Vadodara, Gujarat-391210, engaged in the manufacture of Wear plats & Tampering tools.
The ‘Wear Plates’ and the ‘Tamping Tools' are used in the Ballast Cleaning Machine and the Tie Tamping Machine, respectively. These machines are used for the servicing and maintenance of the railway track lines - Further, we have also perused the photographs of both the products, viz. ‘Wear Plates’ & ‘Tamping Tools' along with the photographs of Railway Track Maintenance Machines viz. Ballast Cleaning Machinery & Tie Tamping Machinery, the place where both the products are fixed in the abovementioned machineries and working of the same and it is found that the Ballast Cleaning Machine and the Tie Temping Machine are self-propelled Track Maintenance Vehicles of the Railway. The Ballast Cleaning Machine is used to clean ballast (Grit/Kapachi) and without ‘Wear Plates’ it cannot run. Whereas, the Tie Tamping Machine is used for ballast (Grit/Kapachi) tamping work. Tamping Tools is the key component of the Tie Tamping Machine, which get wear out after few days of working due to friction between ballast and tools. These tools required being replaced time to time to keep the machine and in turn the railway track working. Thus, ‘Wear plates’ and ‘Tamping tools’ supplied by the applicant are having specific use and are essential parts of the Ballast Cleaning Machine and the Tie Tamping Machine of railways, respectively.
Thus, the applicant has specifically manufactured the products, viz. ‘Tamping Tool’ and ‘Wear Plates’ as per RDSO drawings of the Railway and supplied the same to M/s Trio Enterprise, which ultimately supplied as a back to back supply to the Railways by M/s Trio Enterprise. Said ‘Wear plates’ and ‘Tamping tools’ are having specific use and are essential parts of the Railway Track Maintenance Vehicles viz. the Ballast Cleaning Machine and the Tie Tamping Machine.
As per Explanatory Notes to HSN code 86.04, “the vehicles covered by this heading, whether or not self-propelled, are specially designed for use e.g. in the installation, servicing and maintenance of the permanent way and structures alongside tracks.” It further states that the heading includes “Self-propelled Vehicles for track maintenance (in particular, railway track lines) equipped with one or more engines which not only power the working machines mounted thereon (i.e. track-setters, ballast tampers etc.) and propel the vehicle while work in progress but also enable it to travel rapidly along the track, as a Self-propelled Unit, when the working machines are not in operation -Thus, the Chapter sub-heading No.8604 00 00 covers only the ‘Railway or Tramway Maintenance or Service Vehicles whether or not Self Propelled’. However, this sub-heading is totally silent about the parts of the said vehicles.
The classification of the “Wear plates” and “Tamping Tool” manufactured specifically as per RDSO Drawing and supplied to the Railways through M/s Trio Enterprise, being a parts of a self-propelled track maintenance vehicles (viz. the Ballast Cleaning Machine & the Tie Tamping Machine), under chapter sub-heading 860799 (Other Parts of railway or tramway locomotives or rolling stock), and, hence, same will attract GST @ 5% under S. No. 241 of the Schedule I till 30.09.2019 and w. e. f. 01.10.2019, @12% under S. No.205G of the Schedule-II to the Notification No.01/2017- Central Tax (Rate) dated 28.06.2017, as amended.
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2021 (1) TMI 494
Levy of GST - Service of catalyst to facilitate development of scientific temper among students - requirement of GST registration - Educational institute or not - applicant, therefore, requested to consider science education imparted by Community Science Centres as an integral and important support to formal education system in raising the quality of science education and include it in the definition of ‘education institute’ - HELD THAT:- Vikram A Sarabhai Community Science Centre was established by India’s renowned Scientist, Dr. Vikram Sarabhai in 1966 to take students, from both school and college, out of the rigid framework of textbook and encourage them to think, explore and crate. It is a pioneering community science centre, conducting innovative programmes for improving quality of science education, its popularization and building scientific temper.
It is found that the none of the activities carried out by the applicant as mentioned, is covered under the scope of “Educational Institution” is defined in para 2(y) of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017, and, hence, the admittedly, the applicant does not fall under the definition of “educational institution” - It is further worthwhile to mention here that the advance ruling authority is not the Legislature to amend the GST law, but it concise with law. Hence, it is not the authority to consider science education imparted by Community Science Centres as an integral and important support to formal education system in raising the quality of science education and include it in the definition of ‘educational institution’ - thus it can be safely concluded that the applicant is not at all entitled for exemption in respect of any activity undertaken by them under Entry at Sr. No. 66 of the exemption Notification No.12/2017-Central Tax (Rate) dated 28.06.2017, as amended.
Requirement of Registration Certificate u/s 23(2) of the Goods and Service Tax Act - applicability of exemption Notification No.12/2017-State Tax dated the 30th June, 2017 - HELD THAT:- This notification makes the exemption to charitable trusts available only in respect of charitable activities. While the income from only those activities listed above is exempt from GST, income from the activities other than those mentioned above is taxable. Thus, there could be many services provided by charitable and religious trust, which are not considered as charitable activities and hence, such services come under the purview of GST - Further, if trusts are running schools, colleges or any other educational institutions specifically for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over age of 65 years or above residing in a rural area, such activities will only be considered as charitable activities and income from such supplies will be wholly exempted from GST -
Thus, services provided by way of training or coaching in recreational activities relating to arts or culture or sports by a charitable entity will be exempt from GST.
The applicant is not entitled for exemption in respect of any activity undertaken by them, under the said Entry Nos. 1, 13 & 80 of the of the exemption Notification No.12/2017-Central Tax (Rate) dated 28.06.2017, as amended, granting exemption to an entity registered under Section 12AA of the Income Tax Act, 1961.
Thus, the applicant is liable to pay GST on all the activities carried out by the applicant as mentioned in foregoing para and, consequently, required to obtain GST registration for said taxable services provided by them.
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2021 (1) TMI 493
Classification of supply - composite supply or mixed supply? - trading activity of Grated Supari, Lime and Tobacco by putting them together in a transparent plastic pouch for the sake of easy carry by the customer - whether the delivery of the 3 items Grated Supari, Lime and Tobacco put together in a transparent plastic pouch by the applicant for the sake of easy carry by the customer will be treated as mixed supply or otherwise? - HELD THAT:- Gutkha, which in itself is a combination of grated supari, slaked lime, chewing tobacco and some other flavouring ingredients is similar in nature to the combination mentioned hereinabove. Gutkha is an item which is easily available in the open market, is widely popular across the country and consumed by crores of people across the length and breadth of India. Thus, it can be said that the combination formed by mixing required proportions of grated supari and slaked lime with chewing tobacco results in a product similar in nature to gutkha (without the sweet or savoury flavourings). Further, even when an individual goes to a pan shop and asks for the above combination known popularly as ‘mawa’ in Gujarat, the pan shop owner will give the 3 items i.e. grated supari, slaked lime and chewing tobacco separately so as to enable the person to mix them as per his requirement before consuming it. We also find that the precise reason why the applicant wants to supply the above 3 items in a single transparent plastic pouch, although packed separately and charged itemwise, to the customers, is to enable them to mix these items as per the required proportion before consuming it.
Thus, it can be concluded that the 3 items mentioned above are naturally bundled and supplied in conjunction with each other in the ordinary course of business and this combination is nothing but a composite supply of goods, wherein chewing tobacco is the principal supply.
“Mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. However, as discussed earlier and admitted by the applicant himself, the aforementioned combination of 3 items is not sold for a single price i.e. each of these items are shown separately in the invoice and separate prices are charged for each item. Also as discussed earlier in para 10.3, since the aforementioned combination constitutes a composite supply of goods, wherein chewing tobacco is the principal supply, it can be safely concluded that the aforementioned combination is not a ‘mixed supply’ of goods.
Also, in view of Section 8(a) of CGST Act, it can be seen that a composite supply comprising of two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply. Therefore, in the instant case, since chewing tobacco is the principal supply in the composite supply of goods, the said composite supply of goods would be treated as a supply of chewing tobacco falling under Tariff Item 24039910 of the First Schedule to the Customs Tariff Act, 1975 (1 of 1975). The same appears at Sr.No.15 of Schedule-IV of the Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 [on which GST liability is 28% - The said product also appears at Sr.No.26 of Notification No.01/2017- Compensation Cess (Rate) dated 28.06.2017 issued under the CGST Act, 2017 under which a Compensation Cess of 160% is leviable on it. Also, as per Section 136 of the Finance Act, 2001, a National Calamity Contingent Duty (NCCD) of 10% is leviable on chewing tobacco as per the Seventh Schedule to the Finance Act, 2001.
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2021 (1) TMI 492
Classification of goods - seat adjuster - Whether the product merits classification under Serial No.170 as per Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 or under Serial No.435A of Notification No.1/2017-Central Tax(Rate) dated 28.06.2017 as amended by Notification No.41/2017-Central Tax(Rate) dated 14.11.2017?
HELD THAT:- On going through the definitions of ‘parts’ and ‘accessories’, it ca be said that ‘parts’ are an amount or section which when combined with others, makes up the whole of something. In other words, a 'part' is an essential component of the whole without which the whole cannot be complete or cannot function. Further, as per definition, ‘accessories’ are different from parts, as it is not an essential component of the whole without which the whole cannot be complete or function, but it is a thing which can be added to something else in order to make it more useful, versatile, or attractive. Based on the submission of the applicant as well as the image of the ‘seat adjuster’ submitted by the applicant, we find that it is essentially in the nature of rails made out of iron and steel which are affixed/welded/bolted into the lower cushion of the ‘seat’ which helps the driver or passenger to slide the seat back and forth, as per his convenience/requirement and comfort, with the operation of a lever forming part of the rail assembly. However, it cannot be considered a ‘part’ of the seat as stated by the applicant as it is not an essential component of the seat i.e. the seat is complete and fully functional even without it. We find that the ‘seat adjuster’ merely helps in the adjustment of the seat i.e. moving it back and forth as per requirement/convenience and merely improves the efficiency and convenience of the seat but does not form a part of the seat. Thus it can be concluded that the ‘seat adjuster’ is just an ‘accessory’ which improves the efficiency and convenience of the seat. Since the ‘seat adjuster’ is an accessory of the seat which is an essential part of the motor vehicle, it would be aptly covered under the Sub-heading 87089900 as ‘accessory’ of the motor vehicle under the head “Parts and accessories of the motor vehicles”.
From a bare reading of the Chapter Heading 8708.00, it can be derived that it covers parts and accessories of motor vehicles and this chapter heading is wide enough in its scope so as to cover all accessories of motor vehicles which would also cover accessories to seats. We are therefore of the opinion that the parts and accessories of motor vehicles, subject to relevant conditions, which are not covered under any of the Sub-headings starting from 87081010 to 87089500 under the Heading 8708 would be invariably covered under the Sub-heading 87089900. In the instant case, heading 8708 covers “parts and accessories of the motor vehicles of headings 87.01 to 87.05 (other than specified parts of tractors). Further, as discussed earlier, ‘seat adjuster’ does not form a part of the seat of a motor vehicle but is just an ‘accessory’ of the seat and since the seat is an essential part of the motor vehicle, the said accessory automatically becomes an accessory of the motor vehicle.
We also find that as per the explanatory notes to the heading 8708, this heading covers those parts and accessories of the motor vehicles of heading 87.01 to 87.05, which fulfil the two conditions mentioned - In this regard, it is to mention that on the basis of the submission given by the applicant with regard to the ‘seat adjuster’ along with its picture, specific functions and uses, it can be derived that the ‘seat adjustor’ is an accessory, which can be used solely and principally in the seats of the motor vehicles only. Motor vehicles are covered under headings 87.01 to 87.05 of Chapter 87 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as listed in para 15.1 above. Thus the first condition is satisfied - We have also gone through the list of ‘parts and accessories’ excluded as per the provisions of the Explanatory Notes to Section XVII to the ‘Harmonized Commodity Description and Coding System’ and found that ‘seat adjuster’ does not find mention in the same. Therefore the second condition is also satisfied - Therefore, since both the conditions have been satisfied, it can be safely concluded that the ‘seat adjustor’ is covered under the heading 8708 only.
It is thus concluded that the product ‘seat adjuster’ manufactured and supplied by the applicant is correctly classifiable under Heading No.8708 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and is covered under Entry No.170 of Schedule-IV of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017.
Whether the product ‘seat adjuster’ finds mention under the Heading 9401, for which we would be required to go through the said heading as appearing in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975)? - HELD THAT:- A ‘seat adjuster’ cannot, by any stretch of imagination, be defined as a part of a ‘seat’ as it is not an essential component of the ‘seat’ i.e. the ‘seat’ is complete and fully functional without it. Further, as per definition, ‘accessories’ are different from parts as it is not an essential component of the whole without which the whole cannot be complete or function, but it is a thing which can be added to something else in order to make it more useful, versatile, or attractive. We find that ‘seat adjuster’ fits the definition of ‘accessory’ perfectly - the ‘seat adjuster’ is essentially in the nature of rails made out of iron and steel, which are affixed/welded/bolted into the lower cushion of the ‘seat’, which helps the driver or passenger to slide the seat back and forth, as per his convenience/requirement and comfort, with the operation of a lever forming part of the rail assembly. We find that the ‘seat adjuster’ merely helps in the adjustment of the seat i.e. moving it back and forth as per requirement/convenience and merely improves the efficiency and convenience of the seat but does not form a part of the seat. Even while looking at the function of the ‘seat adjustor’ as well as its use, it can be derived that it can be termed only as an ‘accessory’ and not a part of the ‘seat’. Even in common parlance, the ‘seat adjustor’ is not considered as a part but only as an ‘accessory’ of the seat of a motor vehicle. Thus it can be concluded that the ‘seat adjuster’ is just an ‘accessory’, which improves the efficiency and convenience of the seat. Now, since Sub-heading No.94019000 only covers parts of a seat, the ‘seat adjuster’, which is not a ‘part’ but only an ‘accessory’ of the seat, would not be covered under the said sub-heading.
Thus, the ‘seat adjuster’, being an ‘accessory’ of the seat, does not fall under the heading 9401 but would be rightly classified under the Heading 8708 (Parts and accessories of the motor vehicles).
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Income Tax
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2021 (1) TMI 488
Deduction u/s 80P(2)(a) (i) - the credits given to such members being for purposes other than agricultural credit - eligibility after introduction of section 80P(4) - Assessee stated to be providing credit facilities to their members for agricultural and allied purposes, have been classified as primary agricultural credit societies by the Registrar of Cooperative Societies under the Kerala Co-operative Societies Act, 1969 - HELD THAT:- The ratio decidendi of Citizen Cooperative Society Ltd. [2017 (8) TMI 536 - SUPREME COURT], must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee.
A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the word “agriculture” into Section 80P(2)(a)(i) when it is not there.
Section 80P(4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are cooperative societies engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Cooperative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm’s way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted.
Thus, the giving of loans by a primary agricultural credit society to nonmembers is not illegal, unlike the facts in Citizen Cooperative Society Ltd. (supra).
Resultantly, the impugned Full Bench judgment is set aside. The appeals and all pending applications are disposed of accordingly.
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2021 (1) TMI 480
Capital gain computation - Determination of Fair Market Value by the Ld. CIT(A) with regard to sale of land - AO invoked the provisions of section 50C and directed the assessee as to explain as to why the value of Sub Registrar Office should not be considered for computing the capital gains, against the sale consideration admitted by the assessee - CIT(A) held that the AO is not permitted to adopt the value determined by the DVO for the A.Y.2009-10 for the earlier year i.e 2008-09 and determined the fair market value by allowing reduction of 15% for the annual increase in rates and accordingly partly allowed the appeal of the assessee.
HELD THAT:- In the circumstances AO ought to have referred the valuation to the Departmental Valuation Officer as provided in sub section 2 of section 50C or made the enquiries with the APIIC. In the instant case, the AO has not done the above exercise, instead blindly adopted the value decided by the DVO for the A.Y.2009-10 for the impugned assessment year.
The short question whether the value decided by the DVO for the A.Y.2009-10 can be applied for the A.Y.2008-09 or not? is to be answered as ‘No’ since, the values keep changing and for income tax, each assessment year is independent.
AO ought to have referred the valuation of property to the DVO for the A.Y.2008-09 also separately and taken the value so decided by the DVO for the purpose of capital gains. In the instant case, the Ld.CIT(A) has determined the fair market value of ₹ 6800/- after giving some reduction for annual increase and the department did not bring any material to show that the market value of the land in the impugned A.Y. is more than the value determined by the Ld.CIT(A). Therefore, we find no reason to interfere with the order of the Ld.CIT(A) and the same is upheld. - Decided against revenue.
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2021 (1) TMI 479
Deduction of education cess paid u/s 40(a)(ii) - HELD THAT:- This issue is covered in favour of the assessee by the decision of Chambal Fertilizers Ltd. [2018 (10) TMI 589 - RAJASTHAN HIGH COURT]wherein it was held that education cess is not a part of tax.
Accordingly, the same was held as allowable as a deduction and that disallowance u/s 40(a)(ii) of the Act cannot be made.
Hon’ble High Court of Bombay in the case of Sesa Goa Ltd. vs. JCIT. [2020 (3) TMI 347 - BOMBAY HIGH COURT] held that “education cess is allowable expenditure as the word ‘cess’ is conspicuously absent under the provision of Section 40(a)(ii) of the Act”. This Bench of the Tribunal has applied and followed these decisions in the case of ITC Limited [2018 (11) TMI 1611 - ITAT KOLKATA] and other cases. Respectfully following the same we allow this claim of the assessee.
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2021 (1) TMI 478
TDS u/s 194J - disallowance of leased line charges (link service cost) on account of non-deduction of tax at source - leased line charges got the final dressing up as `Royalty’ u/s 9(1)(vi) - HELD THAT:- Once there is no liability to deduct tax at source at the material time, the fortiori is that there can be no question of disallowance u/s 40(a)(ia) of the Act. When the payment of leased line charges was made, no existing provision at that time made the assessee clearly liable to deduct tax at source.
Since the leased line charges got the final dressing up as `Royalty’ u/s 9(1)(vi) of the Act after the close of the relevant Financial year, we have no hesitation in holding that - even though the amount became chargeable to tax as royalty in the hands of the recipient under the Act for the year under consideration - but the same did not fasten an obligation to deduct tax at source as the assessee could not have activated its sixth sense to ascertain beforehand that an obligation to deduct tax at source was in offing. As the scope of “Royalty” came to be expanded after the close of the financial year when the assessee had already paid lease line charges, we hold that the same could not have triggered deduction of tax at source so as to warrant any disallowance u/s.40(a)(ia) of the Act. Thus, ground No.1 by the assessee is allowed.
Deduction u/s 10AA unit - Having held that the payment of leased line charges not as royalty oo question of making any separate disallowance in respect of 10AA unit. The finding rendered by the ld. CIT(A) in sustaining the disallowance and simultaneously allowing deduction u/s 10AA at the resultant enhanced income has, thus, become academic.
Disallowance of expenditure on purchase of RSA tokens - AO did not allow the deduction despite the assessee’s contention that the RSA tokens were used in rendering services to its Associated Enterprise and were charged at a mark up at 15% along with other costs incurred by it in rendering services - HELD THAT:- As assessee was getting remunerated by its AE at cost plus 15%. The assessee specifically stated before the AO that the cost of RSA tokens was repaid by its AE with 15% mark up and such amount was considered as part of income of the year under consideration.
Once the amount of expenditure, debited to the Profit and loss account, gets specifically credited to the Profit and loss account with a certain mark-up, there can be no question of disallowing the expenditure so charged while continuing to treat the amount credited as income. Thus RSA tokens are in the nature of revenue expenditure and hence deductible.
Comparable selection - inclusion of Infosys Technologies Ltd. in the determination of the Arm’s Length Price of the international transaction - HELD THAT:- As seen that the international transaction is that of `Provision of software services’ for which the assessee was compensated at cost plus 15%. The assessee is acting as a captive unit to its AE for rendering software services.
In contrast, the Infosys Technologies Ltd. is a giant company rendering on-shore and off-shore services at a very high scale. Thus we are satisfied that the ld. CIT(A) was justified in excluding this company from the list of comparables.
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2021 (1) TMI 477
Addition u/s 68 - whether the enhancement made by the ld. CIT(A) is in accordance with law? - HELD THAT:- AO made no addition in respect of these items of cash credit, though in the course of hearing before him he holds the discussion of such items of income. As per the propositions of law, on such facts only the Pr. CIT or the CIT(A) is empowered to take appropriate action u/s 263 of the Act.
Coming to the addition of ₹2,10,00,000/-, the assessee stated that the old address of the company has changed. Notices were sent to the old addresses. As D/R submitted that the addition may be restored to the file of the AO for fresh adjudication after giving the assessee adequate opportunity of being heard, provided the assessee in the case, cooperate and furnish all the necessary details required for the assessment including the present addresses of the companies - we set aside this matter to the file of the AO for fresh adjudication - assessee is directed to produce the principal officers of the share applicant companies before the AO and also furnish the present addresses of those companies. In the result, ground allowed for statistical purposes.
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2021 (1) TMI 476
Assessment of trust - denial of carry forward of deficit - carrying forward of the losses for being set off against the income of the charitable trust - CIT-A allowed claim - as per revenue there is no express provision in the income tax act allowing such claim and Ld. CIT (A) granted double benefit to assessee 1st as accumulation of income or corpus donation in previous year/current year and exemption under section 10 (34) and then as application of income under section 11 (1) (a) - HELD THAT:- The issue stands covered by order of CIT vs Ohio University Christ College [2018 (11) TMI 1055 - KARNATAKA HIGH COURT] and decision CIT vs Institute of Banking [2003 (7) TMI 52 - BOMBAY HIGH COURT] .These decision upholds the carry forward of losses for being set off against income of charitable trust for subsequent assessment years.
We note that an identical issue has been decided by coordinate bench of this Tribunal in case of ITO vs Shraddha trust [2017 (4) TMI 1289 - ITAT BANGALORE ] wherein, it was held that set-off of excess of expenditure incurred over the income of earlier years can be adjusted against income of subsequent years and such adjustment would not be application of income in subsequent years. - Decided against revenue.
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2021 (1) TMI 475
Allowable business expense u/s 37(1) - disallowance of free of cost (CFOC’) phones issued to employees, dealers and Care centers - These handsets were issued to care centers as "Swap hand-sets" in the event the handset sold to the customer were found to be defective and could not be repaired during the warranty period - HELD THAT:- From the perusal of the submissions of the assessee before the Assessing Officer and the CIT(A), it can be seen that only sample copies were given and extensive details of each party was not given before the Revenue authorities. Therefore, we direct the assessee to produce the details in consonance to the claim of the assessee before the Assessing Officer. Thus, we remand back this issue to the file of the Assessing Officer for taking into account the evidences for consideration of assessee’s claim and thereafter passing the order as per the decision of the Tribunal in case of Nokia India Pvt. Ltd. same entity referred to by the Assessing Officer [2018 (9) TMI 877 - DELHI HIGH COURT]
TDS u/s 195 - non deduction of TDS on software embedded in mobile phones imported by the assessee during the previous year - Taxability of software embedded in mobile phones - AO based on the assessment of NIPL for preceding years, proceeded with artificial splitting of the price of imported mobile phones into the price of embedded software and price of component in the ratio of 40:60 - as alleging that the artificial cost of embedded software such arrived is taxable as ‘royalty’ in India (both under the provisions of the Act and as well as India-Finland Tax Treaty), AO proceeded with making disallowance u/s 40(a)(i) - HELD THAT:- Finished mobile phones were imported by the assessee from Nokia Corp for the purposes of sale against a lump-sum consideration and there was no separate payment made by the assessee towards the purchase of any software. The Revenue could not point out the distinguishing fact that there was a separate payment made for purchase of software embedded in mobile phones. The decision relied by the Ld. AR are apt for the present assessee’s case and the CIT(A) has rightly deleted this addition.There is no need to interfere with the findings of the CIT(A). Hence, Ground No. 1 of the Revenue’s appeal is dismissed.
TDS u/s 194H or 194J - Disallowances u/s 40(a)(ia) - Trade discounts/trade offers to HCL and other distributors - primary allegation of AO is that such trade offers and discounts provided by the assessee to HCL and other distributors are in the nature of income by way of commission’ and hence, liable for TDS under Section 194H of the Act and the Assessing Officer has alternatively alleged that such trade offers and discounts fall under the definition of fee for technical services liable for deduction at source under section 194J - HELD THAT:- In the present assessment year, the CIT(A) has observed that one of the scheme documents shows that HCL is eligible for raising a credit note if it achieves prescribed sales target during a given month. The other scheme was in relation to rebate towards specific model of phone issued to select set of stores. These schemes are given to promote the sales and in effect given as reduction in the purchase consideration paid by the distributor. The assessee has also submitted the third party confirmations which was received by them from various distributors to demonstrate that the relationship between the assessee and its distributors is on principal-to-principal basis, and that trade offers/discounts have been extended by the assessee to them. Thus, the facts are identical in the present case as well to that of NIPL [2020 (2) TMI 1038 - ITAT DELHI]. Therefore, there is no need to interfere with the finding of the CIT(A) and in light of the decision of the Tribunal in NIPL, Ground Nos. 2 and 3 in revenues’ appeal are dismissed .
Disallowance of Trade Price protection expenses - HELD THAT:- From the perusal of the records it can been seen that the Assessee filed Party wise details of Trade Price Protection expenses, along with independent confirmations obtained from distributors, during the course of the assessment proceedings before the learned assessing officer. The additional evidence was also filed before the CIT(A) and despite the opportunity given to the Assessing Officer, the Assessing Officer choose not to file remand report on this issue.
Thus, the contention of the Ld. DR that no evidence was filed by the assessee appears to be incorrect. The Tribunal has adjudicated this issue in favour of the assessee’s predecessor entity NIPL [2020 (2) TMI 1038 - ITAT DELHI]. CIT(A) has also rightly held that based on the confirmations available from the distributors, the nature of Trade Price Protection cannot be said to be a bogus expense nor protection against a probable loss.
Ad-hoc disallowance of 25% of the amount of ‘provision for obsolescence’ - DR submitted that no documentary evidence of such obsolescence of inventory was furnished - HELD THAT:- CIT(A) while deciding the issue clearly held that the assessee has mentioned these products in its books of accounts. But the fact remains whether the sale was not actually made in the present assessment year which is not emerging from the order of the CIT(A) and also that the Assessing Officer has also not given as to what is the reason for disallowance of 25% of the amount of provision for obsolescence on ad-hoc basis. Thus, it will be appropriate to remand back this issue to the file of the Assessing Officer with direction to determine and decide the same afresh in respect of the cost of obsolete items with reference to net realizable value.
Ad-hoc disallowance of 25% of advertisement expenditure alleging same to be capital in nature - HELD THAT:- CIT(A) has observed that the assessee is engaged in trading of mobile handsets and its accessories and had claimed certain expenditure on advertisement as revenue expenditure. But the Assessing Officer treated the said expenditure as deferred revenue expenditure and allowed a proportion of advertising expenses. The CIT(A) relied upon the decision of the Hon’ble Delhi High Court in case of Spice Distribution Ltd. [2014 (9) TMI 732 - DELHI HIGH COURT] wherein the Hon’ble High Court held that the said expenditure is revenue in nature. It is pertinent to note that the assessee incurred these expenses on conducting road shows, participation in industry events, product advertising in all forums of media for attracting customers which eventually leads to enhancement of sales of the assessee company in India. Thus, these expenses are incurred in relation to the business only and therefore, are revenue in nature. Hence, there is no need to interfere with the findings of the CIT(A).
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2021 (1) TMI 487
Grant of refund due to the petitioner alongwith interest u/s 244A - petitioner seeks a direction to the respondents, to process the return of income of the petitioner for the assessment year 2019-20 under section 143(1) - HELD THAT:- As grievance of the petitioner is now within a narrow compass matter is with respondent No.5 which will intimate the petitioner regarding processing and release of refund since processing of the income tax return for the assessment year 2019-20 has been completed. It is also seen that the said respondents have admitted that certain amount of refund is due to the petitioner processing of which at the level of respondent No.2 is complete after resolution of all technical issues.
Having heard learned counsel for the parties and having considered the provisions of section 143(1) of the Act, we direct respondent No.5 to complete the processing of the refund claim of the petitioner and thereafter, release the due refund amount to the petitioner alongwith applicable interest in accordance with law within a period of two weeks from the date of receipt of a copy of this order.Writ petition is accordingly allowed to the above extent.
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2021 (1) TMI 474
Non setting off the short term capital gain against long term capital loss brought forward - HELD THAT:- Since the law regarding losses under the head “Capital gains” has undergone changes from time to time, a question often arises whether the law that should prevail is the law pertaining to the year in which loss was suffered or the year in which set off is claimed. The answer is where a right for more liberal treatment is already earned cannot be lost because of subsequent restriction, since vested right cannot be divested, unless specifically withdrawn either explicitly or by implication. In other words, existing rights of set off cannot be treated as withdrawn.
In the instant case, the appellant acquired depreciation plant in AY 1996-97, being electric meters which were disposed off during the year giving rise to capital gain taxable u/s 50.
There is merit in the contentions of the appellant that prior to amendment to section 70 & 74 by the Finance Act, 2002, the carry forward capital loss was not bifurcated between short term capital loss and long term capital loss.
As mentioned earlier, in Kotak Mahindra Capital Co. Ltd. [2012 (8) TMI 339 - ITAT MUMBAI] held inter alia (i) that provisions of section 74(1) as amended w.e.f. 01.04.2003, would apply only to long term capital loss relating to assessment year 2003-04 and onwards and (ii) that restriction imposed therein in terms of setting off long term capital loss only against long term capital gains and not against short term capital gain is applicable only in relation to long term capital loss incurred by assessee in assessment year 2003-04 and subsequent years and same is not applicable to long term capital loss relating to and brought forward from period prior to assessment year 2003-04 which shall be governed by provisions of section 74(1) - prior to amendment made w.e.f. 01.04.2003.
We direct the AO to allow set off of capital loss carried forward from AY 2001-02 against capital gains earned by the appellant during the year under consideration.
In the submissions filed before the Tribunal dated 30.11.2020, the appellant claims carry forward capital loss of AY 2001-02 at ₹ 90,12,331, whereas in the written submission filed before the Ld. CIT(A) dated 03.09.2016, it claims ₹ 88,61,301/- as balance of AY 2001-02 available for set off against the capital gains of the year under consideration. The AO is directed to verify the above. Appeal of the assessee is allowed.
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2021 (1) TMI 473
Reopening the assessment u/s 147 - As argued reopening an assessment is without jurisdiction and is merely based on a change of opinion as the appellant had disclosed fully and truly all the material facts at the time of original assessment made - AO has reopened the case on the basis of audit objection - disallowance of deduction u/s 54F - HELD THAT:- We find that the assessee had filed before the AO a written submission dated 29.11.2010 containing inter alia a detailed note on exemption claimed u/s 54F and 54EC along with supporting documents. The said written submission was filed in the office of the AO on 29.11.2010 as evident from the stamp mark. It is not disputed by the Ld. DR. Also as per the purchase agreement of the residential property and Index No. II, which were filed before the AO during the course of original assessment proceedings, the agreement is for the purchase of residential property comprising of 6700 sq. ft. and 400 sq. ft.
Thus it is evident that the appellant had purchased a residential property i.e. House No. 1057 of 6700 sq. ft. and House No. 1059 of 400 sq. ft. along with the land appurtenant thereto and claimed deduction u/s 54F against the sale of long term shares.
The consistent view is that even after amendment of section 147 (w.e.f. 01.04.1989) mere change of opinion does not confer jurisdiction on the Assessing Officer to initiate proceedings for re-assessment merely by resorting to Explanation 1 to that section on the basis of change of opinion. Where, on the same material, the succeeding officer wants to take a different view than taken by the predecessor Assessing Officer and wants to take action u/s 147, such action cannot be sustained because the view taken by the subsequent officer is nothing but a change of opinion.
Thus mere change of opinion by Assessing Officer cannot be a ground for reassessment and that amendment of section 147 w.e.f. 01.04.1989 has not altered the position- the Assessing Officer must have reason to believe that income has escaped assessment
As the assessee in the instant case disclosed all the primary facts necessary for assessment of its case to the Assessing Officer a mere change of opinion by the AO in the instant case cannot be a ground for reassessment. - Decided in favour of assessee.
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2021 (1) TMI 472
TP Adjustment - royalty paid by the assessee to its AE - determining of the ALP of royalty at nil by the TPO - benchmarking of the transaction of payment of royalty by the assessee to its AE - HELD THAT:- It is a matter of fact borne from the records that the TPO in the course of the remand proceedings had vide his report dated 14th November, 2014 accepted that the assessee had received technical assistance from its AE. On a perusal of the order passed by the TPO, we find that he had without following any of the methods prescribed in Sec. 92C determined the arm’s length price of the royalty paid by the assessee to its AE at Nil, for the reason, that as per him the assessee was not required to pay any royalty without receiving any new technology from the AE. - TPO had clearly traversed beyond scope of his jurisdiction which is restricted to determination of the arm’s length price of the transaction by following any of the method provided in Sec. 92C - Also, the TPO is not vested with any jurisdiction to question the commercial expediency of the transaction carried out by the assessee with its AE, and his jurisdiction is restricted to determining of the arm’s length price of the transaction
Now when the TPO without following any of the methods prescribed under Sec. 92C of the Act had determined the ALP of the royalty paid by the assessee to its AE at Nil, the same, on the said count also is liable to be struck down.
Alternate transfer pricing adjustment made by the TPO by selecting CUP method and considering an “agreement” entered into between two group companies of the assessee i.e Dow UK King Lynn Plant (Dow, UK) with Dow BV (Dow Netherland), whereby Dow, UK had paid royalty @ 3% of its domestic sales and @ 5% of its export sales for manufacture and sale of “Chlorpyrifos” - We are unable to persuade ourselves to accept the determining of the alternate transfer pricing adjustment of 5% of the export sales made by the TPO. Admittedly, the aforesaid transaction acted upon by the TPO for benchmarking the royalty paid by the assessee to its AE is a transaction between two AE’s and hence, the same by no means could have been regarded as a valid comparable.
As per Sec. 92F(ii) of the Act, the Arm’s Length Price means a price which is applied or proposed to be applied in a transaction between persons other than associated enterprises in uncontrolled conditions. Also, Rule 10B(1)(a) provides that for the purpose of applying CUP method the price paid by the assessee to its AE is to be compared with an uncontrolled transaction. Insofar the definition of “Uncontrolled transaction” is concerned, the same is provided in Rule 10A(ab), as per which, the same means a transaction between enterprises other than associated enterprises, whether resident or non-resident. As the aforesaid transaction considered by the TPO is between two AE’s, the same, thus, being in blatant violation of the mandate of Sec.92F(ii) r.w. Rule 10B(i)(a) could not have been considered for the purpose of determining the arm’s length price of the royalty paid by the assessee to its AE. Our aforesaid view is supported by the decision of a ‘third member’ of the ITAT, Mumbai in the case of Tecnimont ICB P. Ltd. [2013 (9) TMI 595 - ITAT MUMBAI] wherein held by the Tribunal that a controlled transaction or a transaction with an AE cannot be taken as a comparable for the purpose of determining the arm’s length price of an international transaction of the assessee with its AE. Accordingly, in the backdrop of our aforesaid deliberations, we herein vacate the alternate transfer pricing adjustment.
Sustainability of the arm’s length price determined by the TPO in the course of the remand proceedings by benchmarking the royalty transaction on the basis of an “agreement” between AARC Corporation and CCT Corporation found in the Royaltstat database - We concur with the ld. A.R that what has been relied and acted upon by the TPO is only an “amendment agreement” and as the full “agreement” is neither available in the Royaltstat database nor in the public domain, therefore, in the absence of the terms and conditions being available the same could not have been adopted for benchmarking the payment of royalty by the assessee to its AE.
Since the “agreement” selected by the TPO was not in force during the year, therefore, we agree with the ld. A.R that the same could not have been considered for the purpose of benchmarking the payment of royalty by the assessee to its AE. As the aforesaid “agreement” had been entered into between the parties based in USA, therefore, on account of geographical difference between the aforesaid agreements the same could not have been feasibly adopted for the purpose of comparability .Also as the products licensed under the aforesaid “amendment agreement” are biological granular matrix pest control as opposed to “Chlorpyrifos” in the case of the assessee, therefore, on account of the variance in the products also the aforesaid “agreement” could not have been selected for the purpose of comparability.
Benchmarking the royalty paid by the assessee to its AE using CUP method - On a perusal of the orders of the lower authorities, we find that they had accepted the benchmarking analysis applying the TNM method for all other transactions. We find that the CUP method cannot be applied as the TPO has not been able to find a similar transaction which could be compared with the transaction of the assessee company. As regards the remaining methods, viz. Resale Price Method (RPM), Cost Plus Method (CPM) and Profit Split Method (PSM), the same are not applicable to the aforesaid transaction under consideration i.e payment of royalty by the assessee to its AE. As such, we are of the considered view that since comparable transactions cannot be found under the CUP method AND RPM, CPM & PSM are not applicable on the prevalent facts, therefore, the transaction of payment of royalty by the assessee to its AE had rightly been benchmarked by the assessee by applying the TNM method - as the net margin of the assessee company is shown to be higher than the margin of the comparables, therefore, the adjustment made by TPO/DRP on the said count also could not have been sustained.
We herein conclude that the transfer pricing adjustment made by the AO/TPO as regards the royalty paid by the assessee company to its AE viz. Dow AgroSciences BV cannot be sustained and is liable to be vacated. Accordingly, we herein direct the A.O to delete the transfer pricing adjustment.
Transfer pricing adjustment as regards the Intra-Group services received by the assessee from its AEs - HELD THAT:- Lower authorities had erred in rejecting the benchmarking analysis of the assessee on the ground that the cost and benefit analysis was not done by the assessee, and it had not shown as to what benefit was derived by it from rendition of the aforesaid services by its AEs. We are afraid that the aforesaid observations of the lower authorities cannot be sustained. It is not obligatory for the assessee to demonstrate as to whether or not the international transaction had resulted into an economic benefit or not, for the reason, that the same would depend on various factors and would be beyond the control of the assessee. Apart from that, whether a benefit is obtained is a matter of perception for a businessman, and it is not open for the revenue to sit in judgment over this exercise.
Accordingly, we are unable to subscribe to the rejection of the benchmarking analysis by the TPO/DRP, for the reason, that the assessee had failed to demonstrate the benefits which were derived by it from rendition of the services by its AEs - Also, we are unable to persuade ourselves to subscribe to the determination of the ALP of the Intra-Group Services received by the assessee from its AEs at Nil by the TPO without following any of the method provided in Sec. 92C.
TPO is obligated to benchmark the arm’s length price of an international transaction by adopting any of the prescribed method contemplated in Sec. 92C of the Act, failing which the adjustments made by him cannot be sustained in the eyes of law. Accordingly, in the backdrop of our aforesaid deliberations, the transfer pricing adjustment carried out by the TPO as regards the intra-group services received by the assessee from its AEs cannot be sustained and is liable to be struck down.
Benchmarking of the intra-group services received by the assessee from its AEs by applying TNM method could not have been faulted with by the lower authorities.
D.R had stated that majority of the payments were made by the assessee to a Chinese AE, which primarily comprised of a payment stated to have been made in respect of services of a person, viz. Mr. Jeorge La Roza who is stated to be responsible for overall commercial performance of the region - The details as regards the services rendered by Mr. Jeorge La Roza to the assessee, as well as the basis of the charge so raised formed part of the “additional evidence” that was filed by the assessee with the DRP. In fact, no adverse inference as regards the aforesaid payment made by the assessee company finds any mention in the order of the DRP. In our considered view, as there is no justifiable reason for drawing of any adverse inferences as regards the payments that were made by the assessee to the aforesaid person, we, thus, not being able to persuade ourselves to subscribe to the claim of the ld. D.R that there was no material available on record which would justify the basis of the costs to the AE, reject the same.
We herein vacate the transfer pricing adjustment made by the AO/TPO as regards the intra-group services received by the assessee from its aforesaid AEs.
Error computing its tax liability and also allowed short credit of advance tax deposited - HELD THAT:- As stated by the assessee that a rectification application dated 01.03.2016 had thereafter been filed with the A.O seeking rectification of the aforesaid mistakes, which, however, is pending as on date. It is stated by the assessee that the A.O may be directed to rectify the errors in light of the rectification application filed by the assessee. We have given a thoughtful consideration and in the backdrop of the aforesaid claim of the assessee, we direct the A.O to consider its aforesaid grievances while giving appellate effect to our order.
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2021 (1) TMI 471
Revision u/s 263 - Reopening of assessment u/s 147 - HELD THAT:- When re-opening of the assessment proceedings started, it was on the basis that some income had escaped assessment on the amount of remuneration to the directors since the assessee did not comply with Section 297 and 314(1B) of the Company Act, 1956 - Assessee gave detailed reply to the AO satisfying him that these provisions are not applicable in his case. AO therefore, stopped the re-opening proceedings and accepted the original assessment passed u/s.143(3) with the total loss shown of (-) ₹ 6,25,277/- dated 29.12.2016 vide order u/s.143(3) r.w.s 147. Therefore, it cannot be said that the AO has not applied his mind and has not made any enquiry.
Whether the Ld. Pr. Commissioner of Income Tax in exercising of his power vested u/s. 263 can revise that reassessment order with the intention of bringing into tax some other items which do not form part of the reasons recorded at the time of issuing notice u/s.148? - In answer to this, we find the Hon‟ble Jurisdictional High Court in the case of CIT Vs. Jet Airways (I) Ltd. [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] and in the case of CIT Vs. Shri Ram Singh [2008 (5) TMI 200 - RAJASTHAN HIGH COURT] has held that when no addition was made regarding the item in respect of which reasons were recorded for reopening of the assessment, the Commissioner could not exercise his jurisdiction u/s.263 of the Act in order to bring to tax other items of additions.
Proceedings undertaken u/s.147/148 was prima facie on the issue of remuneration of ₹ 2,00,19,537/- paid to the directors of the assessee. Pr. Commissioner of Income Tax in his order surpassed his jurisdiction asking the AO to examine the issue of sale of immovable property by the assessee and issue of undisclosed TDS to be verified by the AO which were not at all the items forming part of the reasons recorded at the time of issuance of notice u/s.148.
Taking we are of the considered view that the Commissioner of Income Tax was not correct in law while resorting to passing order u/s.263 and in view thereof, we quash the order passed u/s.263. Appeal of the assessee is allowed.
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2021 (1) TMI 470
Exemption u/s. 80IC - assessee has not filed return of income u/s.139(1) - HELD THAT:- As per the provisions of section 80 AC it is mandatory for the assessee to file return of income u/s.139 (1) to be eligible to claim deduction u/s. 80-IA or 80-IB, or 80-IAB or 80-IC or 80-ID or 81-E. It is undisputed that assessee has not filed return of income under section 139 (1). Hence, as per the provisions of the act, the assessee is not entitled to claim the deduction. The assessee is also aware of this provision. Hence, the assessee has filed condonation application before the CBDT. There is no information about the CBDT condoning the same.
We affirm the order of authorities below that since the assessee has not followed the mandate of the act to be eligible to the above said deduction, the assessee’s appeal is to be dismissed.
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2021 (1) TMI 469
Rectification u/s 154 - deduction u/s 80IA has been allowed before computing gross total income - assessee filed objection to the notice issued u/s 154 stating that rectification proceedings initiated is time barred - As argued the issue sought to be rectified is a debatable issue and not amenable to proceedings u/s 154 - HELD THAT:- We hold that since computation of deduction u/s 80IA of the I.T.Act was never the subject matter of issue / dispute in any proceeding u/s 263 of the I.T.Act, u/s 254 of the I.T.Act or in A.O.’s order u/s 143(3) r.w.s. 254 of the I.T.Act, limitation u/s 154(7) of the I.T.Act, would have to be reckoned from the date of original assessment order dated 10.02.2005 passed u/s 143(3) of the I.T.Act.
Therefore, rectification order dated 28.03.2012 would be barred by limitation u/s 154(7) of the I.T.Act. It is ordered accordingly.
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2021 (1) TMI 468
Disallowance u/s.14A - AO noticed that the assessee has earned dividend income but assessee has not disallowed any expenses for earning the exempt income u/s. 14A - HELD THAT:- Since the assessee had sufficient own interest free funds no disallowance should have been made considering the interest. In so far as the disallowance of administrative expenses is concerned we find that the CIT(A) has restricted disallowance to the extent of the exempt income relying upon the decision of JOINT INVESTMENTS PVT LTD [2015 (3) TMI 155 - DELHI HIGH COURT]. We are of the opinion that such disallowance is reasonable and need no interference. Ground No.1 is accordingly dismissed.
Disallowance of interest u/s. 36 (1) (iii) - AO noticed that the assessee has given interest free advances to its sister concern and interest incurred by the assessee on the loans borrowed by it need to be proportionately disallowed - HELD THAT:- On the first day of the accounting year the loans and advances were ₹ 15.70 crores and in the last day of the accounting year loans and advances have been reduced to ₹ 9.55 crores. This means that no fresh loans / advances were given during the year under consideration. Further the interest free funds available with the assessee is around ₹ 38 crores, therefore, it can be safely concluded that the loans and advances given to the sister concern have been given out of own interest free funds. On these facts no disallowance need to be made, we accordingly direct the AO to delete the addition.
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2021 (1) TMI 486
Reopening of assessment u/s 147 - proceedings beyond the period of four years - interest on capital and remuneration from the partnership firm and the said amount had not been offered or disclosed for the purpose of taxation - HELD THAT:- It is the settled position of law that the condition precedent for the purpose of resorting to re-opening of the assessment is that the Assessing Officer should be satisfied based on some cogent or tangible material, that the case is one of escapement of income chargeable to tax. In the absence of escapement of any income chargeable to tax, it is not open for the department to re-open the case of the assessee.
Assessee is right in his submission that mere incorporation of interest on partners capital and remuneration does not necessarily mean or should be construed as mandatory.
There has to be some material on record to indicate that the writ-applicant had actually received any 'interest on capital' or 'remuneration' from the partnership firm. Where no such income has been earned by the writ-applicant, the question of taxing the same does not arise at all.
As relying on ALIDHRA TAXSPIN ENGINEERS & 1 [2017 (5) TMI 1684 - GUJARAT HIGH COURT] no hesitation in arriving at the conclusion that the re-opening of the assessment is not justified. - Decided in favour of assessee.
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2021 (1) TMI 467
Exemption u/s 11 - Denying the grant of registration u/s 12AA - appellant society was formed with the mixed objects like religious and non-religious activity and the appellant society was registered u/s 12A since 1977-78 - As stated that the original certificate of the registration u/s 12A was misplaced and on the legal advice filed fresh application in Form 10A for grant of registration u/s 12AA of the Act on 04.03.2020 - HELD THAT:- It cannot be said that merely because some of the objects of the appellant society are religious in nature it cannot be said that the objects are not charitable in nature. Thus, the order of the ld. Commissioner of Income Tax (Exemption) on this score cannot be upheld.
Merely because the appellant society is in receipt of income from letting out Event Hall and Bhaktniwas it cannot be said that the activities of the appellant society are not genuine. Because, there is no bar under the law to earn income for the purpose of attaining the main objects of the trust.
As regards to the reasoning of the ld. Commissioner of Income Tax (Exemption) that the appellant society had invested surplus funds of the trust in the form of FDs and applicability of the proviso to section 2(15) of the Act, it is settled proposition that the issue of grant of registration u/s 12AA of the Act and the examination of exemption u/s 11 of the Act are two different and distinct procedures prescribed under the Act. The issues of exemption u/s 11 of the Act cannot be examined at the stage of grant of registration u/s 12AA of the Act because the stage of examination of issues u/s 11 of the Act would arise only after grant of registration u/s 12AA of the Act.
In Goa Industrial Development Corp. vs. CIT [2020 (2) TMI 366 - BOMBAY HIGH COURT] wherein the Hon’ble Jurisdictional High Court held that the mere introduction proviso to section 2(15) of the Act by itself would not render the activities of the assessee trust as non-genuine activities, so as to, entitle Commissioner of Income Tax (Exemption) to cancel and deny the registration u/s 12AA.
We find from the impugned order except for stating that the activities are not genuine because of the applicability of the proviso to section 2(15) of the Act and the investments in the FDs out of the income there is no other allegation against the appellant society. In the circumstances, we set-aside the impugned order and direct the ld. Commissioner of Income Tax (Exemption) to grant the registration u/s 12AA - Decided in favour of assessee.
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2021 (1) TMI 466
Registration u/s 12AA rejected - assessee/applicant trust was registered under Bombay Public Trust Act, 1950 - assessee/applicant being engaged in education activities, verification of admissions given to the students from financially weaker sections of the society/RTE category students is most relevant but in absence of relevant details, the satisfaction about the compliance of the requirements of section 12AA(1)(a)(ii) by the assessee/applicant could not be arrived at by the Ld. CIT (Exemption) and the application for grant of registration was rejected by CIT (Exemption) - assessee submitted that when the application for registration was made by the assessee/applicant by that time some admissions of students have already been made corresponding fees collected - HELD THAT:- We are of the considered view that one final opportunity should be given to the assessee/applicant in the interest of justice. In view thereof, we set aside the order of the Ld. CIT (Exemption) dated 29.09.2020 and restore the matter back to his file for re-adjudication while complying with the principles of natural justice.
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2021 (1) TMI 485
Receipt in the form of non-compete fees - Revenue or capital receipt - HELD THAT:- As decided in ANJUM G BALAKHIA [2016 (7) TMI 575 - GUJARAT HIGH COURT] it is well settled that a liability cannot be created retrospectively. In the present case, compensation received under Non-Competition Agreement became taxable as a capital receipt and not as a revenue receipt by specific legislative mandate vide Section 28(va) and that too with effect from 1.4.2003. Hence, the said section 28(va) is amendatory and not clarificatory - Appellate Tribunal right in holding that provisions of section 28(iv) are not applicable in the case of assessee - Decided in favour of assessee
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2021 (1) TMI 465
Capital gain computation - request for admission of additional evidence - HELD THAT:- We deem it fit and proper to admit the additional evidence submitted by the assessee and allow the cost of acquisition while computing the capital gain. The issue is set aside to the file of the AO for denovo re-consideration. Needless to mention that the Assessee shall be given a fair opportunity of hearing. Assessee's appeal is treated as allowed for statistical purposes.
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2021 (1) TMI 464
Estimation of profit - Assessee submitted he is not maintaining the books of accounts and that the AO should have estimated the income at reasonable percentage which is about 6% - HELD THAT:- CIT(A) without examining the profit percentage in the years before the A.Y. 2012-13 and without giving any reasons has estimated the profit percentage at 7% of gross receipts. In view of the same, we deem it fit and proper to remand the issue to the file of AO with a direction to re-consider the issue and accordingly estimate the income de-novo.
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2021 (1) TMI 463
Forex Loss on Derivatives - CIT(A) upholding the disallowance made by the AO by holding the same as hypothetical and contingent in nature - as argued these expenses are recognized in accordance with the accounting treatment provided in the Accounting Standard -11 and 30, issued by the Institute of Chartered Accountants of India - HELD THAT:- Forward contracts entered into for the purpose of protecting against loss and which has a nexus to the business of the assessee and which are on revenue account have to be allowed as a deduction. The decision cited on behalf of ld. counsel for the assessee supports the claim made in this regard. We, however, find that the details of forward contracts and nexus with the business of the assessee have not been submitted by assessee before the AO - As upholding the principle that losses on account of exchange fluctuation on forward covered contracts are allowable as a deduction, we hold that the factual details in this regard should be examined by the AO and for the purpose we set aside the order of CIT(Appeals) and remand the issue to the AO for fresh consideration.
Addition u/s 40(a)(ia) - Payment for software license fees - AO was of the view that payment in question was in the nature of royalty or fees for technical services and therefore taxable in India - whether payment for software license fee made by the Appellant is the consideration not for Copyright but for Copyrighted Article and hence, would not fall under the definition of the Royalty both under the Act and the respective DTAA between India and USA? - HELD THAT:- As relying on S. ALLEGIS SERVICES INDIA PVT. LTD. [2017 (9) TMI 1799 - ITAT BANGALORE] we hold that disallowance u/s. 40(a)(i) of the Act in the present case cannot be sustained as the obligation to deduct tax at source was in respect of the date and period prior to the decision rendered by the Hon’ble Karnataka High Court in the case of Samsung Electronics Co. Ltd [2011 (10) TMI 195 - KARNATAKA HIGH COURT].
Deduction u/s. 10A computation - communication charges inclusion - HELD THAT:- Taking into consideration the decision rendered by the Hon’ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] we are of the view that communication charges should be excluded both from export turnover and total turnover.
Disallowance of contribution to Super Annuation Fund - AO disallowed the said contribution u/s 40A(7) - HELD THAT:- We are of the view that the stand taken by the revenue cannot be sustained. The recognition of superannuation fund granted by the CIT, LTU is a department’s own document and they cannot be allowed to dispute the same.
The only ground on which disallowance was made by the AO was that superannuation fund was not approved. Now that the approval is granted by the CIT, LTU, we are of the view that there is no merit in ground raised by the revenue
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2021 (1) TMI 462
Estimation of income - suppression of income or the inflation of purchase or inflation of expenditure - search u/sec. 132 was conducted - assessee filed return of income disclosing loss u/s 139(1) and subsequently revised the loss duly decreasing the loss which was admitted as undisclosed income during the course of search - HELD THAT:- In the instant case, it is clear from the discussion that there was no material and no defects were pointed out by the AO. Even though search was conducted no evidence was found by the AO evidencing the suppression of income or the inflation of purchase or inflation of expenditure. The assessee has maintained regular books of account which are duly audited. A search u/sec. 132 was conducted but no evidence was found indicating concealment of income.
In the case of Pr.CIT Vs. Marg Ltd. [2017 (7) TMI 823 - MADRAS HIGH COURT] held that profits of the assessee cannot be estimated without rejection of books of account. In the case of Dhakeswari Cotton Mills Ltd. Vs. CIT [1954 (10) TMI 12 - SUPREME COURT] held that AO is not entitled to make a pure guess work or suspicion without any reference or without any material at all. Taking into consideration of all the above aspects, in the instant case, there is no basis for estimation of income, therefore, estimation of income without having any seized material or any material is bad in law, Hence, we uphold the order of the ld. CIT(A) and dismiss the appeal of the Revenue.
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2021 (1) TMI 461
Assessment u/s 153A - Unaccounted income on account of under invoicing of sales - HELD THAT:- No evidence is found with regard to under invoicing of sales or unaccounted purchases either in the premises of the residence or the business premises of the assessee. From the assessment order, it is also seen that no excess stock was found and there was no stock difference. AO verified the books of accounts, no defects were found during the course of assessment. As stated earlier, search was continuously conducted in the business premises of the assessee and recorded the statements u/s 132(4) in multiple premises regularly without giving sufficient intervals to the assessee to apply the mind on the issues raised by the department. Thus there is a possibility of building up pressure on the assessee which resulted in confusion in his mind.
The entire addition was made on the statement recorded from the assessee on 02.09.2016 on the basis of invoice No.2135 dated 30.07.2016 related to the sale invoice of Lakshmi Agencies which was billed for ₹ 361.53 per case which was accounted in the books of the assessee. The year wise unaccounted income was computed on sales declared by assessee on the presumption of cash received back @8% of actual sales which is incorrect since the distributors told that they paid the cash ranging from ₹ 50,000/- to ₹ 60,000/- per load.
Admissions made under such circumstances without the corroborative evidence cannot be made basis for making the additions. Neither evidence was found nor the AO made out a case with the date wise, party wise cash of receipt from each distributor which was said to be unaccounted.
In the instant case there was no evidence found in the premises of the assessee to show that the assessee is under invoicing the sales. No other material was found and seized from the premises of the assessee with regard to receipt of cash from the distributors. No evidence was found in the premises of the distributors also to establish that that the assessee was paid unaccounted cash by the distributors. The AO could not rebut the submissions of the assessee with regard to sale price and under invoicing with relevant facts and evidences. Therefore we, hold that the additions made solely on the basis of statement u/s 132(4) without having corroborating evidence is unsustainable and accordingly we uphold the order of the Ld.CIT(A) and dismiss the appeals of the revenue for the A.Ys 2013-14 to 2016-17 on this issue.
Validity of making additions u/sec. 153A without having seized material - CIT(A) deleted the addition holding that the AO is not permitted to make the addition without having seized material. - HELD THAT:- There is no dispute that the entire addition was made on the statement recorded u/s 132(4) without having any incriminating material. The Ld.CIT(A) followed the order of this Tribunal and the decision A.P. High court in the case of A.M.R. India Pvt. Ltd. [2014 (6) TMI 964 - ANDHRA PRADESH HIGH COURT]
Therefore respectfully following it we hold that in completed assessments the AO is not permitted to make additions without having the seized material / incriminating material. Accordingly, we uphold the orders of the Ld.CIT(A) and dismiss the appeals of the revenue on this issue.
Cash deposit made during demonetization period - HELD THAT:- In the instant case, the assessee had explained the source and furnished the confirmation letter and also explained the source of source.
The creditor of Arunachalam Manickavel is having credit worthiness and there is no dispute. The department also conducted the search against the creditors, thus there is no dispute with regard to identification and credit worthiness of the creditor. Therefore, there is no case for making addition in the hands of the assessee. If at all the AO disbelieved the source of source, the same required to be made addition in the hands of the creditor, but not in the hands of the assessee. Therefore, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue.
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2021 (1) TMI 484
Disallowance u/s 40(a) (ia) - Tribunal held that the disallowance ought to be restricted to the amounts remaining outstanding, on which TDS was not made during the relevant previous year and not on the amounts which were actually paid during the previous year - HELD THAT:- From a perusal of the order passed by the Tribunal, it is evident that the issues which arose for consideration before the Tribunal have not been dealt with on merits and the Tribunal has dealt with the appeal on a technical issue. Therefore, in the peculiar fact situation of the case, we deem it appropriate to quash the order passed by the Tribunal. Therefore, the order dated 04.12.2015 passed by the Tribunal is set aside and the Tribunal is directed to adjudicate the appeal on the aforesaid three issues. Therefore, it is not necessary for us to answer the substantial questions of law framed in this appeal.
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2021 (1) TMI 460
Deemed dividend u/s 2(22)(e) - shares held in the name of minor children - whether the minor legally cannot enter into contract with the companies for purchase of shares and hence shares held by minor, who is not having voting rights cannot be treated as beneficial owner of shares? - Commissioner (Appeals) deleted the additions by holding that the shareholding of assessee, as father and his minor cannot be added for the purpose of section 2(22(e) read with section 2(32) - HELD THAT:- As none of the shareholders was holding more than 10% of voting power in Vapi Care Pharma and had more than 20% shares in Varieties Pharma and /or in Veritas Biovention - source of shareholding of Master Yes Shah is independent and he is entitled to the benefit of ownership. Assessee does not have any beneficial interest in the Shares held by Minor son Master Yes Shah. Commissioner (Appeals) also held that the issue for consideration was whether the share held on behalf of Minor child, who could not exercise voting power, should be excluded from the total share holding for ascertaining whether assessee is a substantial shareholder. If shares were excluded from the total shares issued by the company, the assessee’s interest would exceed 20%, but if such shares are included, his interest would fall below 20%.
In CIT Vs C.P. Sarathy Mudaliar [1971 (10) TMI 8 - SUPREME COURT] while considering the (corresponding section 2(6A)(e) of Indian Income tax Act 1922) held that the section speaks of "shareholder", it refers to the registered shareholder and not to the beneficial owner.
Also in Minnie Cama Vs ITO [1984 (11) TMI 77 - ITAT AHMEDABAD] held that it is well settled that a deeming provision like section 2(22)(e) must be strictly construed. For determination of question as to whether the assessee had substantial interest in company, shares held by trust in which assessee was trustee, or held in joint names or held in name of minor children of the assessee could not be considered as shares held by the assessee. If so considered, it could be seen from the list of shareholders, that the assessee was not holding shares ‘carrying not less than twenty per cent of the voting power’ and, therefore, she could not be treated to be a ‘person who has substantial interest in the company’ within the meaning of the provisions of section 2(22).
Hon’ble Bombay High Court in ITO Vs S.S. Barodawala [1983 (1) TMI 110 - ITAT BOMBAY-B] held that when a father as a guardian may manage the affairs with regard to the shares standing in the name of his minor sons, but this will not make him the beneficial owner of the shares. To make him a beneficial owner the benefit or advantage arising out of the shares must accrue to him. In the present case, no such benefit accrued, and hence the assessee could not be said to be the beneficial owner of the shares standing in the name of his minor sons. Commissioner (Appeals) was, thus, right in holding that the amounts withdrawn from the company could not be deemed to be dividend under section 2(22)(e). Thus in view of the above said factual and legal discussion, we affirm the order of learned Commissioner (Appeals). - Decided against revenue.
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2021 (1) TMI 483
Prosecution launched for the alleged offence under Section 276C and 277 of IT Act - Whether no materials unearthed by the searching officer or the Deputy Director? - search said to have taken place in third party premises and statements recorded from 3rd parties the prosecution - HELD THAT:- Admittedly, Returns have been filed before the Assessing Officer. Merely because search has been conducted and some third parties statements were recorded and further they have also not been examined, this Court is of the view that unless a finding recorded by the Assessing Officer as to wilful attempt to evade tax or filing false verification, the complaint filed by the Deputy Director is not maintainable. Only the Assessment Officer shall reassess the total income of six Assessment year, then Assessing Authority take note of the income disclosed in the earlier report any undisclosed income found during the search and find out what is the total income each year and pass an Assessment Order.
The very object of the statute as could be discernible under Section 276 is that to maintain such complaint by the Deputy Director of Income Tax Act, the materials seized or collected during search should unerringly pointing towards the accused, not mere statemenst of some third parties and some entries made by them.
To attract the offence the assessee did not do any of the act required to constitute the offence of 277 of Income Tax Act before the Deputy Director of the Income Tax Department . Whereas it is admitted that the Returns were filed before the Assessing Officer by the Assessee and the verification is also done by them while fling the return. Whether such verification are false or not has to be decided by the Assessing Officer before whom such verification has filed.
Mere showing ignorance by one of the assessees by maintaining that only her husband is aware of the return such conduct cannot be construed as abetment to atrract the offence under Section 278 of the Incomt Tax Act. To attract the offence of abetment there must be materials to show that she has instigated or invites her husband to commit offence. Therefore, this court is of the view that the offence under Section 278 not at all attracted against accused.
Prosecution contention is that merely because the accused signed the statement while recording statement under Section 131 of the Income Tax Act, such statement can be construed as verification. No false statement whatsoever given before the Deputy Director to contend that he is competent to launch the complaint. Mere keeping silent does not amount to giving a false evidence, merely the accused or assessees did not accept every accusation made against them such conduct cannot be taken by the Department to contend that they committed an offence.
If the contention of the prosecution that when the accused confronted with the statement of third parties they did not explain properly such conduct amounts to false statement before the Deputy Director, therefore the complaint is maintainable is accepted the same will lead to serious consequences. If such contention is accepted by the Court of Law, it is easy for the authorities to summon any assessee under section 131 of the Income Tax Act and make accusations against them when accused or assessee denies, then it is easy for the authorities for launching prosecution against anybody as per their like and dislike. Therefore, such contention by the prosecution that false statement made while recording statement under Section 131 of the Income Tax Act also amounts to false evidence, therefore, complaint is maintainable, at no stretch of imagination can be countenanced.
Merely because the power vested to lodge a complaint by the Deputy Director every case the prospection cannot be launched merely on the conferment of such power without any material. Only in the cases where incriminating materials seized from the possession of the assessee and any statements which incriminate themselves recorded under 132 (4) of the Income tax Act or any incriminating evidence collected clinchingly establishes complicity of the accused with the crime, prosecution can be initiated without waiting for the assessment or reassessment proceedings. Otherwise when materials collected are weak and prosecution itself rely them only as corroborative evidence then Department has to wait till the finding recorded by Assessing Officer. When the very complaint itself launched on the basis of the opinion formed by the Deputy Director of Income Tax Department based on some materials according to them it is only helpful for corroboration, prosecution has to fail and the court has to conclude that such prosecution is without any materials. In such view of the matter this Court is of the view that the complaint filed by the Deputy Director of Income Tax is premature at this stage. Accordingly this submission is answered against the Respondent.
Admissibility of Electronic Evidence - This Court is of the view that such contention become insignificance since this court has already concluded the very launching of the prosecution is not proper and the Deputy Director of prosecution is incompetent to file the complaint in a given set of facts. Though the certificate can be produced at appropriate stage as per the dictum laid down by the Apex Court in Arjun Panditrao Khotkar vs. Kailash Kushanrao Gorantyal and others [2020 (7) TMI 740 - SUPREME COURT] this court is of the view that since this Court has already held that the very complaint is not maintainable restrain itself to further discussion with regard to the validity and admissibility of those documents, if any finding is recorded by this Court as to the admissibility of Electronic Evidence, same will have impact on the prosecution if any lodged at later stage by the Assessing Officer as indicated.
In fine the Revision Petitions allowed. The prosecution launched by the Deputy Director is not maintainable and as discussed above the present complaint lodged by the prosecution is premature one. If the Assessing Officer comes to the conclusion in a proceedings under Section 153 of the Income Tax Act, it is open to the Department to initiate penal action as per law.
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2021 (1) TMI 459
CIT-A dismissed the appeal on the ground of non-prosecution of appeal - Disallowance of various expenses As argued CIT-A not appreciating the correct facts of the case and without giving proper opportunity of being hear confirmed addition - HELD THAT:- From the perusal of the order of the CIT(A), it can be seen that the CIT(A) has not given any categorical finding on merit of the case. Therefore, it will be appropriate to give the opportunity of hearing to the assessee before the CIT(A). Hence, we are remanding back the entire issue to the file of the CIT(A) to be decided on merit.
Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Appeal filed by the assessee is partly allowed for statistical purpose.
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2021 (1) TMI 437
TP Adjustment - Payment made to AE in view of intragroup services received by assessee - TPO determined ALP at NIL by applying CUP, vis-à-vis, ALP determined by assessee at aggregate level by using TNMM - HELD THAT:- TPO held that, as there is no benefit from services for which payments has been made, he determined ALP of international transaction at Nil, without carrying out any FAR analysis of intra-group services. This approach of Ld.TPO is not acceptable, as once a transaction has been categorised as independent international transaction, it is necessary to determined ALP of such transaction. Ld.TPO cannot consider ALP at ‘NIL’ and value of transaction has to be computed as per law.
We direct Ld.TPO to judge the requirement of services from viewpoint of assessee as a businessman. Therefore in this regard we are of view that assessee has to substantiate that these services are required by it. We note that assessee has entered into Intra Group Service agreement with AE. This goes to prove that services were required by assessee.
Assessee has to demonstrate and satisfy Evidence Test or rendition test and benefit test, as envisaged u/s 92(2) of the Act, and that, services provided by AE are neither duplicative nor shareholder’s activity. Ld.AO/TPO is then directed to determine Arm’s length price of these services based on documents submitted by assessee by determining “most appropriate method‟ and Comparability analysis.
Disallowance u/s 40(a)(ia) - HELD THAT:- No details have been furnished in support of the claim of assessee. Accordingly we are of considered opinion that the issue needs to be re-verified by Ld.AO. Assessee is directed to file all relevant details in support of its contention. Ld.AO shall then consider all these doc evidences filed by assessee in accordance with law.
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2021 (1) TMI 458
Long term capital loss - capital loss restricted as property transfered was jointly owned by the assessee and her daughter - HELD THAT:- Payment at the time of purchase of property came from a bank account which was jointly operated by the assessee and her daughter. Similarly, at the time of sale of the property, the sale consideration went back into a bank account jointly operated by the assessee and her daughter.
These facts evidently demonstrate that Tricia Batliwala was joint owner along with the assessee at the time of purchase as well as the sale. The contention put forth on behalf of the assessee that she included the name of her daughter in the purchase as well as sale deeds only for ensuring that the property gets easily transferred to Tricia Batliwala after her death, does not and cannot change the legal position. If title of an immovable property stands in the name of two persons, it evidences both as co-owners. One of such persons cannot claim himself as sole owner nor can he unilaterally transfer the said property by claiming that he was indeed the sole owner and the name of the other person was included just as a nominee and not as a co-owner. It is title of the immovable property which is decisive of ownership and not the understanding outside the records which both the parties may have entered into.
In fact, registration of an immovable property is a proof of ownership, which, in turn, gets reflected from the legal documents. Since the flat in question was purchased as joint owners and also transferred by the two persons as joint owners, there is absolutely no doubt that the profit or loss in the transaction will also have to be shared by both of them as joint owners and not in the hands of one person to the exclusion of the other. Such a contention, if accepted, would open floodgates of disputes with no end in sight.
The contention of the assessee that she offered full rental income from the flat as her own does not change the ownership of property. If such rental income has been wrongly assessed fully in the hands of the assessee, the remedy lies in correcting such assessment of income and not making a further wrong assessment by taxing the entire capital gain/loss in the hands of the assessee. Assessee appeal dismissed.
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2021 (1) TMI 482
Deemed registration u/s 12AA - HELD THAT:- It is a matter of record that vide order dated 08.07.2008, learned Income Tax Appellate Tribunal set aside the order of the Commissioner resulting into revival of the application for seeking exemption under Section 12A of the Income Tax Act dated 28.03.2007 submitted on 29.03.2007 and almost twelve years have passed, it is deemed to have been granted registration after the expiry of six months, in view of the ratio culled out in the judgments referred to above. Accordingly, the application of the petitioner for registration of the Society under Section 12A of the Income Tax Act is allowed.
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2021 (1) TMI 481
Enhanced rate of tax @60% u/s 158BBE on Unexplained / Undisclosed income - Effect of Amendment enhancing the rate of tax incorporated in the I T Act and that of surcharge in the Finance Act - prospectively or retrospectively - petitioner sought for a declaration that the amendments made by the Taxation Laws (Second Amendment) Act, 2016, to Section 115BBE of the Income Tax Act, 1961 enhancing the rate of income tax, for specified incomes which are unexplained, to 60% and the surcharge provided in the Finance Act, 2016 to 25% for income covered under Section 69A, to be prospective - consequential relief is sought against Ext.P2 assessment order levying tax at the enhanced rate of 60% and surcharge @25% on the 'advance tax'.
HELD THAT:- The subject amendments which are relevant for our consideration have no direct link with the demonetization introduced or the taxation and investment regime of Pradhaan Mantri Garib Kalyan Yojana 2016 brought in under Chapter IX A of the 2nd amendment Act. The 2nd amendment Act as is clear from the Statements of Objects and Reasons, was to curb, evasion of tax and black money as also plug loopholes in the IT Act and to ensure that defaulting assessees are subjected to higher tax and stringent penalty provision. Both the measures spoken of herein were to further the said objects and there cannot be any nexus assumed nor is it discernible.
Section 115 BBE was inserted by Finance Act 2012 w.e.f 01.04.2013. As on 01.04.2016 the financial year in which the subject seizures occurred Section 155BBE provided for 30% tax on income refereed to in Sections 68, 69, 69A, 69B, 69C and 69D. The same was amended by the 2nd Amendment Act; w.e.f. 01.04.2017, enhancing the rate to 60%. Hence there was no new liability created and the rate of tax merely stood enhanced which is applicable to the assessments carried on in that year. The enhanced rate applies from the commencement of the assessment year, which relates to the previous financial year.
Likewise it was by Chapter II with heading 'Rates of Income Tax', as provided in the Finance Act 2016, that a surcharge was introduced by way of the 3rd proviso of Section 2(9) of that Finance Act. This comes into effect from the Financial Year 2016-2017; which is the year in which the subject seizures were occasioned - By the 2nd Amendment Act Section 2 of the Finance Act, 2016 stood amended by which 115BBE was omitted from the 3rd proviso. After the 6th proviso yet another proviso was inserted which provided for the 'advance tax' computed under the first proviso, in respect of any income chargeable to tax under Section 115BBE(1)(i), to be increased by a surcharge for the purposes of the Union, calculated @25%. Hence there is no new liability of surcharge created and it is a mere enhancement of the rate of surcharge.
Income Tax at the rate or rates specified, as prescribed in any Central Act to be charged for any assessment year, shall be so charged in respect of the total income of the previous year as per Section 4 Of the IT Act - There is no such provision to enable a surcharge to be so taxed, on the Finance Act prescribing an enhanced rate at the commencement of an year. The said contention however, cannot be sustained especially looking at the decision \ in CIT Kerala v. K Srinivas. [1971 (11) TMI 2 - SUPREME COURT]. The facts are not relevant to the issue raised here and we need only look at the declaration as to the nature of a surcharge imposed in the Finance Act. The legislative history with respect to the concept of surcharge was traced by the Court, which, for the first time was found to have been recommended, in the report of the Committee on Indian Constitutional Reforms Volume I Part I.
In the instant case surcharge was imposed by Finance Act, 2016 and the rate stood enhanced by Finance Act, 2017. The Income Tax even as per the Finance Act was to be at the rate specified in Part I of the 1st Schedule which shall be increased by surcharge for purposes of the Union. Surcharge hence partakes the character of Income-tax and Article 271 itself empowers the Parliament, at any time to increase any of the duties or taxes by a surcharge for the purpose of the Union and it forms part of the Consolidated fund. So when a surcharge is imposed it is in effect an enhancement of the tax or duty. The provision in the Finance Act also employs the words 'the income tax computed shall be increased by a surcharge'. Section 4 of the IT Act squarely applies to the surcharge imposed.
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2021 (1) TMI 457
Unexplained cash deposits in Standard Chartered Bank - unexplained investment and income from undisclosed source - HELD THAT:- Assessee had duly substantiated on the basis of supporting documentary evidence that was filed with the lower authorities the availability of cash with him on 28.03.2007 i.e. on refund of earnest money pursuant to cancellation of the 'agreement', dated 09.01.2005. Although, the CIT(A) in the course of the appellate proceedings had forwarded the additional documentary evidence that was filed by the assessee in order to support his claim as regards the source of the cash deposits of ₹ 18 lac in his bank account with Standard Chartered Bank, Jalandhar, however, we find that there is no whisper of any rebuttal of the said claim of the assessee in the 'remand report' dated 02/03.12.2016 filed by the A.O.
If the A.O. in the course of the remand proceedings would had any doubts as regards the veracity of the aforesaid claim of cancellation of the 'agreement, dated 09.01.2005, then he would have cross-verified the same and/or called for further details from the assessee. In the backdrop of our aforesaid observations, we are unable to persuade ourselves to subscribe to the view taken by the CIT(A) that the assessee had failed to substantiate the availability of funds with him pursuant to the cancellation of the aforesaid 'agreement', dated 09.01.2005.
Assessee had sufficient amount available with him on 28.03.2007 for making of cash deposits of ₹ 9 lacs each in his bank account with Standard Chartered Bank, Jalandhar on 04.04.2007 and 05.04.2007, therefore, the same could not have been added as an unexplained investment in his hands - Decided in favour of assessee.
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Customs
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2021 (1) TMI 454
Rejection of request of provisional release of imported goods - doubt in Country of origin - Section 110 (A) of the Customs Act, 1962 - HELD THAT:- Admittedly, the goods in question were cleared for home consumption, therefore, at the time of importation the assessment has been made after investigate the goods, in that circumstances, on mere presumption or on the basis of third party evidence, it creates doubts that the country of origin is not Kingdom of Saudi Arabia. Therefore, in that circumstances, the goods are required to be provisionally released under Section 110 (A) of the Customs Act, 1962 by putting reasonable condition for release of the goods in terms of precedent decision. Therefore, the matter is remanded back to the adjudicating authority to re-consider the request of provisional release of impugned goods in judicious manner as the goods are in perishable nature within seven days from the date of receipt of this order.
Appeal allowed by way of remand.
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2021 (1) TMI 453
Absolute Confiscation - penalty u/s 112(a) of Customs Act - goods are LED chains or LED Modules? - rejection of BIS certification - primary ground for rejection of the BIS officials test report submitted by the importer appellant before the adjudication authority was that the sample forwarded by the dock officer to the concerned group was different from the photographs annexed to the test report - HELD THAT:- Photographs being secondary piece of evidence which appearances can vary with the angle of photography, it should not form the basis of his decision that the goods are ‘LED chains’’ and not ‘LED modules’ as opined by the BIS Authorities. In such an event also if discrepancy is noticed Circular No. 30/2017-Cus. dated 18.07.2017 at clause (f) of para 2 that permits redrawal of sample even for a second test could have been resorted to and the second Test report could have been accepted.
This was not invoked by the adjudicating authority namely, Additional Commissioner of Customs, Gr.-VI, NS-V, JNCH nor by the Commissioner (Appeals) before passing his subsequent order for which, on the request of the appellant, a direction was given by this Bench to redraw sample from the seized imported goods and get the same tested at the Bureau of Indian Standards. In obedience to such order dated 06.10.2020 test was carried out and BIS authorities have submitted their report reconfirming that the imported goods are LED Modules standard IS 16103 and the Port Duty Officer, Mumbai forwarded the same report received through e-mail to the respondent department with a cover note that for such item compulsory BIS registration mark is not required. These two e-mail printouts are accepted as additional evidence as per Rule 23 clause (3) of the CESTAT Procedure Rule, 1992 to arriving at a conclusion that the order passed by the Commissioner (Appeals) for absolute confiscation of imported goods does not stand the test of law and the same is required to be set aside.
The respondent department is directed to treat the imported goods as LED Modules for the purpose of clearance in favour of the appellant and complete the process within a month of communication of this order - Appeal allowed.
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2021 (1) TMI 456
Provisional release of seized goods - electric motorcycle in complete knock down condition - benefit of N/N. 50/2017 - Customs dated 30.06.2017 - It is contended that once order of assessment has been passed, the same being an appealable one, petitioner can avail his remedy by filing appeal before the Commissioner of Customs (Appeals) - HELD THAT:- It is directed that the goods imported by the petitioner vide bill of entry No.6874524 dated 13.02.2020 be released for home consumption on payment of 25% of the basic customs duty and on furnishing bank guarantee of a nationalized bank for the remaining amount before respondent No.3 as per assessment made.
On complying with the aforesaid requirements, respondents shall release the goods of the petitioner forthwith - Stand over to 16.03.2021.
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2021 (1) TMI 455
Grant of Bail - bail applications were dismissed for the reason that he had violated the bail condition and there is a possibility that he may again abscond and secondly for the reason that he was undergoing COFEPOSA detention - HELD THAT:- Considering the present pandemic situation, it is not likely that the trial would get over immediately. The applicant's justification for the violation of the condition is that he had gone to Bangalore to meet his son and subsequently, he overstayed and could not return on time to report before the investigating officer as directed by this Court. His leaving jurisdiction and not reporting before the investigating officer initially was with permission. But subsequently, he overstayed and also defaulted the conditions and could ultimately be apprehended only on 12.12.2019 for undergoing detention of COFEPOSA. Hence there is a reasonable doubt expressed by the prosecution that the applicant may again default bail condition.
The stringent conditions can be made for granting bail since he has antecedents of violating the bail condition and granting bail - the bail application is allowed and the applicant is directed to be released on bail on the execution of a bond for ₹ 1,00,000/- with two solvent sureties for the like amount each to the satisfaction of the jurisdictional court and on the conditions imposed.
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Corporate Laws
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2021 (1) TMI 451
Seeking modifications of the order passed in the captioned Company Scheme Applications - holding of meeting of its members by way of video-conferencing and/ or other audio-visual means - HELD THAT:- That in view of the current extra-ordinary circumstances due to the COVID-19 pandemic prevailing in the country, the meeting of the equity shareholders of Applicant Company 1 be convened on 24.02.2021 or 26.02.2021 or 01.03.2021 at 3 PM or any adjourned dates thereof, for the purpose of considering, and, if thought fit, approving, the proposed Scheme of Arrangement (Scheme), through video conferencing and/ or other audio visual means, without holding a general meeting requiring the physical presence of shareholders at a common venue, as the same in the current COVID-19 environment mandating social distancing norms shall not be feasible.
That in view of the current extra-ordinary circumstances due to the COVID-19 pandemic prevailing in the country, the meeting of the equity shareholders of Applicant Company 3 be convened on 24.02.2021 or 26.02.2021 or 01.03.2021 at 11AM or any adjourned dates thereof, for the purpose of considering, and, if thought fit, approving, the proposed Scheme of Arrangement (Scheme), through video conferencing and/ or other audio visual means, without holding a general meeting requiring the physical presence of shareholders at a common venue, as the same in the current COVID-19 environment mandating social distancing norms shall not be feasible.
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2021 (1) TMI 450
Restoration of name of the Company in the Register of Companies, maintained by the Registrar of Companies, Kochi - Section 252 of the Companies Act, 2013 - HELD THAT:- Even though sufficient opportunities were given to the appellant to produce the latest Balance Sheets and Financial Statements of the Company for the year ending 31st March 2019 and also the Income Tax Return Acknowledgment for the Assessment Year 2019-20, they have not produced the same.
Having satisfied with the reasons as mentioned in the appeal and in the light of the provisions of Companies Act, 2013, and considering the report of the RoC, this Tribunal is of the opinion that it would be just and equitable to order restoration of the name of the Company in the Register of Companies - The Registrar of Companies, the respondent herein, is ordered to restore the original status of the Appellant Company as if the name of the company has not been struck off from the Register of Companies and take all consequential actions like change of company’s status from ‘Strike off’ to ‘Active’ (for e-filing) and to intimate the bankers about restoration of the name of the company so as to defreeze its accounts. The Registrar of Companies, Kochi is also directed to allow for filing of the Annual Returns and Financial Statements by the company to restore the name of the Company.
It may be noted that since the Appellant has not produced the latest Balance Sheets and Financial Statements of the Company for the year ending 31st March 2019 and also the Income Tax Return Acknowledgment for the Assessment Year 2019-20, any action for restoration of the company by the RoC shall be taken only after producing the same before him - The Appellant Company is directed to file all the statutory document(s) along with prescribed fees/additional fee/fine as decided by Registrar of Companies within 30 days from the date on which its name is restored on the Register of Companies by the Registrar of Companies.
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2021 (1) TMI 452
Restoration of name of petitioners in the Register of Companies - non-filing of financial statements and annual returns for three consecutive financial years - section 252 of Companies Act - Disqualification of petitioners form acting as petitioners - deactivation of DIN - Section 164 and 167 of the Companies Act, 2013 - HELD THAT:- In furtherance of the purpose of this scheme, directors of struck off companies who seek to be appointed as directors of other/new companies, ought to be provided an opportunity to avail of this scheme, provided that they have undergone a substantial period of their disqualification. The scheme clearly seeks to provide a fresh start for directors of defaulting companies who seek appointment in other companies or wish to start new businesses. Therefore, if a substantial period has passed since the disqualification of such directors, they ought to be given an opportunity to avail of the scheme.
The CFSS-2020 was last extended till 31st December 2020. If the scheme is extended beyond 30th December, 2020, directors who fall in any of the categories mentioned above ought to be given an opportunity to avail of the same.
Let the DIN/DSC numbers of the Petitioners be reactivated so as to enable them continue to act as directors in M/s. Golden Saphire Shipping and Logistics (India) Pvt. Ltd., and also to enable the Petitioners set up any new company in accordance with law. The reactivation be done within one week - petition disposed off.
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2021 (1) TMI 449
Approval of Composite scheme of amalgamation - seeking to dispense the meetings of the Shareholders and Secured Creditors of the Applicant Companies - seeking direction to convene the meeting of the Unsecured Creditors of the Applicant Company No. 1 ,2 & 3 for considering the composite scheme of Amalgamation - Sections 230 to 232 of the Companies Act, 2013 and other applicable provisions of the Companies Act, 2013 R/w Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- The Companies have followed extant provisions of Companies Act in framing the Scheme in question, which are duly approved by the Board of Directors of the Companies involved. The Statutory Auditor/Chartered Accountants of the Applicant Companies have issued Certificate dated 09th June, 2020 by inter-alia certifying that accounting treatment as prescribed U/s 133 of the Companies Act, 2013 with reference to the Scheme in question is complied with. The Applicant Companies have disclosed all material facts relating to the Scheme in question and filed necessary documents along with the Application. Therefore, we are convinced with the case as made out by the Applicants so as to grant relief as sought for, by dispensing the meeting of the Shareholders and Secured Creditors of the Applicant Companies and to order to convene the meeting of the Unsecured Creditors of the Applicant Companies by appointing the Chairperson and Scrutinizer for convening the meeting by fixing venue, time, quorum etc.
Various directions regarding holding and dispensation of various meetings, issued - application allowed.
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2021 (1) TMI 448
Seeking an order, declaring the resolution dated 21.11.2015 passed in the EGM of the First Respondent Company removing the Petitioner from being a Director of the 1st Respondent Company as null and void and not binding on the Petitioner - Seeking to declare that the actions of the Respondent Nos.2 to 4, which are detrimental to the interest of the First Respondent Company are not binding on the Petitioner and the First Respondent Company - seeking to re-induct the Petitioner as the Director of the 1st Respondent Company - seeking a Permanent Injunction restraining the Respondent Nos.2 to 4 from interfering with the day to day management and administration of the first Respondent Company etc.
Whether the Petitioner has come to the Tribunal with clean hands by disclosing complete material facts of the issue in question so as to seek equitable relief(s) provided under sections 241, 242, and 244 of the Companies Act, 2013? - HELD THAT:- The Petitioner has not brought forth all material facts before this Tribunal, like the pendency of criminal cases filed by the Respondents against the Petitioner. The Petitioner, admittedly, has filed several civil and Criminal cases against the Company and its Directors. In fact, as per Law, the Petitioner, being Shareholder holding substantial shares in the Company and also being a Permanent Director, has fiduciary duties towards the Company and its stakeholders, and he cannot, himself be a litigant, unless, he was arbitrarly not permitted to get involved in the affairs of Company by removing him even from the position of Director by the use of brute majority by other Directors and Shareholders. So far as various allegtions of fraud, misrepresentation on the part of Respondents in taking his signature, taking loan, mismanaging the affairs of Company etc are concerned, these are totally unsubstantiated. Similarly several charges of financial irregularities have been levelled against him. Though the Petitioner is well aware that Civil Court/Criminal Courts, do not have juridisdiciton over Company matters, he has approached those courts. Having not succeeded there, he is now before this Tribunal. Cases with regard to his dealings with the company's assets have been filed against him as well. Therefore, he has not come to the Tribunal with clean hands to seek equitable relief(s) from the Tribunal.
Whether due procedure was followed by the Company in removing the Petitioner from position of Director of the Company? - HELD THAT:- It is settled law that such a Director can be removed, duly following the extant provisions of the Articles of Associaiton and the Company Law - It is observed that section 9 of the Companies Act, 1956 provides that the provisions of the Act would have effect, notwithstanding anything to the contrary contained in the Articles of the Company, and that in the instant case the Permanent Director could be removed if the requirements of Section 284 and of a valid meeting had been satisfied.
Further, in the light of the conduct of the Petitioner, breach of fiduciary duties towards the 1st Respondent and the stakeholders involved, the 1st Respondent has found that the Petitioner is not a "fit and proper" person to be a Director of the 1st Respondent, and that the 1st Respondent has followed the due procedure established to remove him. The Petitioner cannot claim Directorship as a matter of right.
In determining whether the Petitioner's removal from the Board of the 1st Respondent company, the most relevant factor is whether the removal was in accordance with the relevant provisions. On perusal of the documents produced before us, it is seen that on 16.10.2015, the 4th Respondent Company, being the 50% shareholder in the 1st Respondent Company duly served on the 1st Respondent Company notice seeking removal of the Petitioner as required under section 169 read with section 115 of the Act, 2013 and a requisition for convening an EGM under section 100 of the Act for such removal, hence the process of removal of the Petitioner from the board of the 1st Respondent was duly initiated as per section 169 of the Companies Act, 2013. Section 169(2) of the Act, 2013 requires special notice of the resolution to remove a Director from the Company.
As per the requirements of section 169(3) of the Act, the 1st Respondent Company dispatched to the Petitioner's addresses, as contained in the register of Directors of the 1st Respondent, the notice dated 16.10.2015 issued by the 4th Respondent to the Petitioner along with a notice convening Board meeting to be held on 28.10.2015 to consider such removal. Further, the said Notice was also sent to the e-mail address of the Petitioner on 20.10.2015. The draft resolution on the subject of removal of the Petitioner was also communicated. It is however noticed that the Petitioner remained absent at the Board meeting held on 28.10.2015. It is also seen from the minutes of the meeting dated 28.10.2015, that it was resolved to convene an EGM on 21.11.2015 to consider the Petitioner's removal from Directorship. For this also the 1st Respondent served a notice dated 28.10.2015 convening an EGM on 21.11.2015 on the Petitioner - However, the Petitioner did not issue any confirmation of attendance till the date of the EGM. Further, the Petitioner failed to issue a written representation providing the reason as to why he should not be removed from the Directorship as provided under section 169(4) of the Act, 2013. It is further seen that the Petitioner through his advocate submitted a letter requesting for adjournment of the EGM only at the commencement of the EGM on 21.11.2015, on health grounds but without substantiating the same. He could have sent a proxy, but could not have prevented a meeting. On a perusal of the records, it is seen that the 3 members representing 79.50% of the paid up capital of the 1st Respondent were present at the meeting and that after considering the letter dated 21.11.2015 of the Petitioner, seeking adjournment of the meeting, the members unanimously voted for removal of the Petitioner from Directorship. The meeting was conducted as per law, and the relevant Form DIR-12 was filed with the Ministry of Corporate Affairs.
The 1st Respondent has acted in accordance with the provisions of the Companies Act, 2013. Infact it is the Petitioner who has time and again lost the opportunity provided to him under the Act to safeguard his interests. By not attending the board meeting dated 28.10.2015 and not making any written representation before the commencement of EGM dated 21.11.2015 and then by remaining absent at the EGM, the Petitioner has foregone his right. It is clear, therefore, that the Petitioner was afforded reasonable opportunity before being removed as a Director, which he failed to avail. Thus the procedure followed by the Respondent Company cannot be found fault with, and hence no case is made for any intereference by this Tribunal. The allegations that the impugned procedure was concocted is not borne out by facts brought out.
The Petitioner has failed to make out a case for any intervention by this Tribunal - Petition dismissed.
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Insolvency & Bankruptcy
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2021 (1) TMI 447
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt ad dispute or not - service of demand notice - Appellant submits that in the instant case no Demand Notice was ever served on the ‘Corporate Debtor’ / Second Respondent as per section 8 of the ‘I&B’ Code - allegation that the said Demand Notice was knowingly addressed to the wrong address of the ‘Corporate Debtor’ by the First Respondent - HELD THAT:- An ‘Operational Creditor’ shall deliver to the ‘Corporate Debtor’ a Demand Notice in Form-3 or a copy of an invoice attached with a notice in Form-4 as per Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Demand Notice or the copy of the invoice demanding payment referred to in sub-section 2 of section 8 of the code may be delivered to the ‘Corporate Debtor’ at the registered office by hand, registered post or speed post with acknowledgement due or by electronic mail service to a whole time Director or designated partner or key managerial personnel, if any, of the ‘Corporate Debtor’. Besides these, a copy of Demand Notice of invoice demanding payment shall also be filed with an information utility.
Be it noted, that only if a ‘Demand Notice’ / Invoice demanding payment under the code is issued, the ‘Corporate Debtor’ will appreciate in right earnest the consequences flowing on account of failure to pay the ‘operational debt’. Also, that, after transfer of the case from Hon’ble High Court to the Tribunal (in respect of the winding up petition) an ‘Operational Creditor’ is required to submit all information including the details of the proposed Insolvency professional - An application filed u/s 9 of the ‘I&B’ Code, 2016 without serving notice u/s 8 of the code is not maintainable. Indeed, a mere failure to serve the ‘Demand Notice’ is not a curable defect. A ‘Bankruptcy’ notice sets in motion the entire process leading to ‘Bankruptcy’ and it is to be rigidly and narrowly construed.
Thus, serving of ‘Demand Notice’ together with the ‘Rejoinder’ filed by the First Respondent/’Operational Creditor’ before the ‘Adjudicating Authority’ is not the requirement of ‘Law’ - It cannot be lost sight off that the amount shown in ‘Bank Certificate’ is proof of the ‘Dues’.
Waiver / Approbation and Reprobation - HELD THAT:- In the instant case the Adjudicating Authority while passing the impugned order had admitted the application without there being service of demand notice to the Second Respondent / ‘Corporate Debtor’ which is admitted by the First Respondent/Operational Creditor in its ‘Reply’ filed before this Tribunal and a plea of the registered address of the Second Respondent / Corporate Debtor being changed by the debtor Company will not hold water for the failure of the First Respondent / Operational Creditor to send a notice u/s 8 of the Code. In this regard, even the Adjudicating Authority in the impugned order at paragraph 5(i) had mentioned that the ‘Operational Creditor’ had stated in para 8 of its ‘Rejoinder’ that the ‘Demand Notice’ was returned unserved and that the said Authority had not adverted to about the aspect of sufficiency of service of ‘Demand Notice’ to the Second Respondent / Corporate Debtor which is mandatory as per Section 8 of the code and as such it is held by this Tribunal that the impugned order is not a valid one in the eye of Law -
It cannot be forgotten that the proceedings under section 138 of NI Act, 1881 pertain to criminal liability for dishonour of cheques issued and do not bar an application u/s 9 of the code as opined by this Tribunal. Likewise, the pendency of proceedings under Or.37 of the Civil Procedure Code will not prohibit an application under Section 9 of the Code.
Even though on behalf of the First Respondent it is contended that the Second Respondent/Corporate Debtor had mentioned that they will be making payment all outstanding amount of ₹ 79,76,937/- as per letter of the Second Respondent dated 08.07.2014 against the purchase and the same being an admission of the debt, this Tribunal is of the considered view that since the ‘Service of notice’ at the registered address of the ‘Corporate Debtor’ was not established to the subjective satisfaction of this Tribunal and the admitted fact being that the notice sent to the Second Respondent at its registered office got returned, the said admission of debt and the reference made to the NI Act, 1881 in regard to the presumption that a ‘Holder of Cheque’ received the cheque for the discharge either in whole or in part of any debt or other liability will not in any way heighten or improve the case of Appellant any further.
Thus in the instant case Section 8 notice under ‘I&B’ Code was not served upon the Second Respondent / Corporate Debtor and admittedly the same got returned as mentioned Supra, this Tribunal comes to a consequent conclusion that the impugned order dated 01.01.2020 passed by the Adjudicating Authority in admitting the petition is not legally tenable and the same is accordingly set aside by this Tribunal to secure the ends of justice. As a logical corollary, this Tribunal declares illegal the order passed by the ‘Adjudicating Authority’ in appointing the ‘Interim Resolution Professional’, declaring moratorium and all other orders passed by the ‘Adjudicating Authority’ pursuant to the impugned order and action, if any, taken by the ‘’Interim Resolution Professional’ (including the advertisement, if any, published in the newspaper calling for applications and all such orders) and that the petition/application filed by the First Respondent is dismissed as abated. The Adjudicating Authority is required to close the CIRP proceeding.
Appeal allowed.
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2021 (1) TMI 446
Liquidation of Corporate Debtor - section 61 of the Insolvency and Bankruptcy Code - HELD THAT:- Section 29A (b) of I&B Code shall be applicable in the instant case. According to this provision of the code, a person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person is a willful defaulter in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949. The Appellant had been declared as a willful defaulter in terms of Reserve Bank of India both by Respondent No. 1 bank i.e. OBC and Respondent No. 3 viz. SBI. Therefore, the Appellant has no locus standi to challenge the impugned order dated 8th November, 2019. The Appellant submitted a resolution plan pursuant to the order of Hon’ble High Court of Karnataka, which was placed before the COC which was rejected by the COC on the ground that it did not conform to the requirement of the code being Section 29A (b). The order of the Karnataka High Court only permitted the Appellant to submit its resolution plan to the RP. However, it did not in any way takes away the right of COC to reject the resolution plan on the ground that it is in contravention of the various provisions of law.
It can be concluded that a limited judicial review is available in respect of an approved resolution plan. The grounds under Section 30(2) or 61(3) of the IBC are regarding testing the validity of the approved resolution plan by COC and not for approving the resolution plan which has been disapproved by the COC in exercise of its business decision.
The Appellant cannot take plea that he was not given the statutory time period of 30 days to place his resolution plan as he had submitted his resolution plan well within time as agreed in the COC meeting i.e. on or before 16th September, 2019. The contention of the Appellant that COC abruptly decided not to seek extension of time for CIRP process from the Adjudicating Authority is invalid as it is the commercial wisdom of the COC whether they want to seek extension of time or not after considering the feasibility and viability of the submitted resolution plan.
Appeal dismissed.
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2021 (1) TMI 445
Seeking permission to appellant to work out his remedies through the process of Labour Court and to get an award from the Labour Court in terms of the provisions contained in the Industrial Disputes Act and other parental enactments and to keep the appeal filed under Section 42 of IBC - Section 60(5) of the IBC - HELD THAT:- The claims of about 65 workmen are pending before this Tribunal for consideration. The appellant along with others already approached before the Labour Court when the Corporate Debtor declared a lock out of its factory and the Labour Court, Ernakulam passed an award of December, 21, 2015 in tune with the settlement agreement dated December, 02, 2015 made between the Union and the Management of the Corporate Debtor. Now the claim put forward by the appellant is barred by Limitation as the appellant sought to have raised an industrial dispute and raised his claims before 2.12.2018. Now the appellant’s approaching the Labour Court is nothing but a futile exercise, with an intention to delay and stop the entire process of recovering pending dues from the Corporate Debtor. Since the appellant has not produced any order of the Labour Court or such authorities, it is true that the Liquidator on his own cannot decide on disputed liabilities in the absence of a Civil Court decree or award.
It is not for this Tribunal to give permission to a party to approach any statutory authority or any other forum. If the appellant is aggrieved by any order passed by the Liquidator, he is at liberty to approach this Tribunal under Section 42 of the IBC - After exhausting the remedy by filing appeal under Section 42 of the IBC, and this Tribunal is seized of the matter, the present IA is filed by the appellant with the stipulation that “in the event this Tribunal is not inclined/proposed to decide the lis disputes arising in the appeal, the appellant may be permitted to approach the Labour Court under the Industrial Disputes Act”, is only a delaying tactics in disposing of the Appeals pending before this Tribunal and also to delay the CIR Process. If the appellant is aggrieved by the order of this Tribunal, he is at liberty to approach the appropriate forum for redressal.
Application dismissed - Dated the 8th day of January, 2021.
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2021 (1) TMI 444
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - service of notice - HELD THAT:- Though the case was filed on 12th December, 2019, the Petitioner could not attend office objection in time. Therefore, the case was listed on 12.03.2019 for compliance of office objections. It was subsequently listed for hearing on 18.03.20, 15.06.20 and 18.06.20 but none appears for the Petitioners on these dates. So the Tribunal ordered notice to the Respondent on 22.06.20. However, service of notice could not be effected on the Respondents till date and resultantly none appears for the Respondents. And the notices sent through Registry of the Tribunal returned un-served. The Petitioner also failed to serve notices on the Respondent till date.
The Respondent has broadly admitted the debt in question, though they have raised dispute by way of its Reply. In order to consider for admission of a case filed under the provisions of Code, it is necessary to establish not only debt and default in question but also Corporate Debtor has become insolvent by virtue of its financial position. However, the Petitioner, even not pleaded that the Corporate Debtor has become insolvent except pleading that the Respondent failed to pay their outstanding dues. However, the Petitioner plead with the Respondent to clear their outstanding amount as they are small entrepreneurs and fulfilled their commitment to their staff. The Petitioner could not service notice on the Respondent even though sufficient time was granted to it - Therefore, instead of keeping it pending on the file of this Tribunal for service of notice and to furnish financial status of Corporate Debtor, it would be just and proper to dispose of the instant Company Petition with a direction to the Respondent to settle the issue, instead of prosecuting the litigation, in their own interest.
It is directed that the Respondent/Corporate Debtor to settle the issue in question by taking into consideration of the status of Operational Creditor, being a small entrepreneur - In case, the Respondent/Corporate Debtor failed to settle the issue in question, within a period two months from the date of receipt of a copy of this order, the Petitioner is at liberty to file fresh case in accordance with law for the same cause of action - petition disposed off.
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2021 (1) TMI 443
Seeking to order for distribution of the unsold Intangible Assets- Intellectual Property available with the Corporate Debtor - Section 35(1)(n) of Code R/w Regulation 38(1) of IBBI( Liquidation Process) Regulations, 2016 - HELD THAT:- The assets of the Corporate Debtor have been completely liquidated and only intellectual Property in question, on which TDB has charge, remains with Corporate Debtor. The Applicant has also explored the possibility of selling it but in vain. And the amount realised out of liquidation of assets was only ₹ 2,26,000/- which was utilised for CIRP costs, and no further funds will be available even for CIRP costs, if it is further permitted to continue. Therefore, instead of permitting the Applicant to file another Application U/s 54 of the Code, and the extant Regulations of IBBI (Liquidation Process) Regulations, 2016, to seek dissolution of the Company, it would be just and proper for the Adjudicating Authority to exercise its discretionary powers to dissolve the Company, in the interest of justice.
The Applicant is permitted to assign absolute rights over Unsold Intangible Assets- Intellectual Property available with the Corporate Debtor, Virtual Logic Systems Private Limited, to Technology Development Board, Secured Financial Creditor, towards their liability, immediately after receipt of a copy of this order and complete the remaining liquidation process - Subject to above distribution to TDB, the Corporate Debtor, namely M/s. Virtual Logic Systems Private Limited is hereby dissolved with immediate effect - petition disposed off.
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2021 (1) TMI 442
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Petitioner is stated to have continued the services inspite of failure to pay outstanding amount - Agreement has clearly provided terms of payment and service to be utilised and also alternative mechanism for any dispute arise out of implementation of terms and conditions of it - existence of debt and dispute or not - HELD THAT:- The Agreement has clearly provided terms of payment and service to be utilised and also alternative mechanism for any dispute arise out of implementation of terms and conditions of it. If the dues are not paid, the Petitioner has the right to suspend services until all undisputed invoices are paid. However, for the reasons best known to the Petitioner is stated to have continued the services inspite of failure to pay outstanding amount. The Petitioner failed to take any of the actions as mentioned in the Licence Agreement.
The claim made in the instant Company Petition is for the period from 20.08.2016 to 19.02.2018, however the Petitioner has not initiated any legal course of action to recover the alleged outstanding amount till impugned the legal notice dated 06.06.2019 issued under the provisions of the Code. Except showing some uncorroborated e-mails made with the Respondent, the Petitioner failed to substantiate its claim even prima facie. In the Licence Agreement, there is a clause by name Force Majeure, which exempts the parties for delays, failure or omissions due to any cause beyond its reasonable control, due to labour disturbances, riots, fires, earthquake, floods, EPIDEMIC etc. For the cause of action arise in the year 2016, the Petitioner got issued demand notice only on 6.6.2019, however, the instant Petition was filed before the Tribunal only on 29th January 2020. Therefore, invoking the provisions of Code for the nature of causes of action arise in the instant is nothing but abuse the provisions of the Code.
It is also relevant to point out here that Section 4 of Code underwent amendment, wherein minimum amount of default is enhanced to Rupees One Crore from existing amount of Rupees One Lakhs (Amended as per the Gazette of India notification issued by the Ministry of Corporate Affairs dated 24.03.2020). Every Act or it amendment, will normally have prospective effect unless it is made retrospective. However, Courts/Tribunal, will have to examine the issue with reference to cause of act in arise in particular cases, and to decide the case by applying Law as available at the time of admission of a particular case - the Petitioner failed to make out even prima facie case with regard to claim made in the instant Company Petition, which is misconceived. Therefore, instant Company Petition is liable to be rejected.
Petition dismissed.
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Service Tax
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2021 (1) TMI 441
Selling of surplus power in Domestic Tariff Area and installing dedicated transmission lines into Domestic Tariff Area - surplus electricity supplied in the Domestic Tariff Area as per rule 47 of the Special Economic Zone Rules - to be treated as other business or not - reliance on permission dated 19.12.2006 and the Notifications dated 10.5.2007 and 19.6.2007 along with the provisions of the SEZ Act, 2005 - supply of the electricity to Domestic Tariff Area is beyond the Authorized Operations approved under the Act or not? - services received by the assessee was not shared between authorised operation in Special Economic Zone Unit and Domestic Tariff Area - whether expression “wholly consumed” referred to in Explanation (iii) of the proviso to para 2(a) of the Notification No. 17/2011-ST would be applicable to sharing business between authorised operation in Special Economic Zone Unit and Domestic Tariff Area Unit - Explanation to para 2(a) of the Notification No. 17/2011-ST - Notification No. 9/2009-ST, and 17/2011-ST.
HELD THAT:- The Tax Appeal is under Section 35(G) passed by the Customs, Excise and Service Tax Appellate Tribunal, Ahmedabad, is admitted on the substantial questions of law - To be heard along with the the Tax Appeal No. 399/20.
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CST, VAT & Sales Tax
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2021 (1) TMI 440
Imposition of penalty under Income Tax Act - KVAT Act, 2003 - HELD THAT:- The appeals, delay condonation petitions and the stay petitions preferred by the petitioner is liable to be considered and disposed of on merits before proceeding with the recovery of amounts in terms of the orders passed by the assessment authority.
There will be a direction to the 2nd respondent appellate authority to take up consider and pass appropriate orders on Exhibits P2, P2(a) and P2(b) appeals, Exts.P3, P3(a) and P3(b) delay condonation petitions and Exts.P4, P4(a) and P4(b) stay petitions preferred by the petitioner and to dispose of the same in accordance with law at the earliest, at any rate, within six weeks from the date of receipt of a copy of this judgment. Till orders are passed, coercive proceedings on the basis of the original order shall be kept in abeyance.
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Indian Laws
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2021 (1) TMI 439
Dishonor of cheque - acquittal of accused - only defence taken is that the accused has given the said cheque in favour of one Krishnappa while availing loan of ₹ 30,000/- for him and the same has been misused - HELD THAT:-It is the specific case of the complainant that notice was sent through UCP was served and through out the cross- examination of PW.1, nothing is elicited with regard to non-service of notice sent through UCP. Though he denies the address, claiming that till 2004, he was residing in the address mentioned in the complaint but in the cross-examination, he categorically admits that his wife residing in the said address and any notice sent to that address his wife would intimate the same. The first contention that no notice was served on him cannot be accepted for the answer elicited from the mouth of DW.1 and notice sent to him was returned with an endorsement the notice is not claimed.
With regard to the other defence is concerned, he has not handed over the cheque to the complainant. First of all nothing has been elicited in the cross-examination of PW.1 and also it is important to note that it is not his case that he has not filed the insolvency case marked at Ex.P.8 and also it is the contention that except the amount of ₹ 30,000/- borrowed from Krishnegowda, he has not received any amount. On perusal of Ex.P.8 in his own insolvency petition, he has listed out in the schedule including the name of this complainant. There is no any explanation with regard to the schedule where he mentioned the list of the creditors in his insolvency petition. It is specifically mentioned that the liability of ₹ 3,00,000/- in respect of this petitioner, it is also important to note that in the cross-examination, the accused was gone to the extent of denying his own signature and also same is not specific denial but he is having doubt about his signature. When all these materials are elicited from the mouth of this accused, the Trial Judge ought not to have come to the conclusion that he was not having the financial capacity to pay the amount.
If the accused was not having any acquaintance with the complainant what made him to make him as party in the insolvency case and also what made him to list out the due payable to the complainant. The very documentary proof placed before the Trial Court is ignored by the Trial Court. It is nothing but perverse judgment and not considered the material on record and also the admissions elicited from the mouth of DW.1. When the cheque has been issued, when the notice has been issued and though the accused admits the signature and not disputed the same, the Trial Judge ought to have invoked the Section 139 of Negotiable Instrument Act, 1881 ('the N.I. Act' for short) to draw the presumption. No discussion in the judgment even for drawing the presumption under Section 139 of the N.I. Act. The findings given by the Trial Court is erroneous and the same is against the material available on record and hence, the judgment of the trial Court requires interference of this Court.
Appeal allowed.
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2021 (1) TMI 438
Dishonor of Cheque - funds insufficient - post dated cheque - legally enforceable debt or not - acquittal of the accused - the accused in this case has contended that cheque in question was a post dated cheque issued for security purposes only - Whether the complainant has made out all the ingredients of Sec.138 of N.I.Act to prove the guilt of the accused person? - HELD THAT:- accused admitted his signature on cheque and its issuance to complainant. Consequently presumption under Section 118 and 139 of N.I. Act would be available to complainant - In this case, accused has not led his evidence.
The reasons assigned by the trial Court that complainant failed to prove the particulars of seizure of vehicle of accused, its sale to third party, the amount received from such sale coupled with the contention that cheque issued was a post dated cheque given for security purpose only cast a serious doubt about the complainant's case, would be contrary to the law under Negotiable Instruments Act regarding presumptions available to the complainant. The trial Court taking judicial notice of the fact that farmers borrowing loan from financials would put their signatures wherever indicated by the financiers is also perverse and not based on any evidence - liability of accused continues even after repossession and sale of vehicle to third parties, for any balance due after adjusting amount recovered from sale.
The complainant has established all the ingredients of offence under Section 138 and as the reason assigned by the trial Court for acquittal is held to be perverse, the appeal is allowed, the impugned order of acquittal is set aside. The accused is held guilty of offence punishable under Section 138 of the N.I. Act.
It is felt just and proper to impose a sentence of fine instead of imprisonment as the offence is in the nature of a civil wrong and the purpose of Section 138 is compensatory and not punitive. The accused is hereby sentenced to pay a fine of ₹ 13,74,000/- i.e. twice the amount of the cheque and in default of payment of fine, to undergo simple imprisonment for a period of fourteen months.
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