TMI Tax Updates - e-Newsletter
October 20, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Classification of supply - activity of building and mounting of the body on the chassis made available by the customers - The activity of body building undertaken on a truck chassis made available by a customer to the applicant amounts to supply of services as per Schedule II clause 3 of CGST Act 2017. - AAR
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GST:
Classification of services - Levy of GST - leasing of pathway to a person to her/his dwelling unit - The applicant has agreed through a MOU to tolerate her use of this pathway for a period of time for consideration. Hence, this service of agreeing to grant easement rights is a service of agreeing to tolerate an act and is classifiable under SAC 999794 under ‘other miscellaneous services’/ ‘Agreeing to tolerate an act’. - AAR
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GST:
Classification of supply - “inspection and testing services” on fresh table grapes - The Services provided by the applicant related to testing of chemicals in fresh table grapes are not classifiable under SAC 9986 and is not exempt - AAR
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GST:
Classification of supply - supply of goods or not - what is principal supply - transaction of printing of content provided by the customer, on poly vinyl chloride banners and supply of such printed trade advertisement material - trade advertisement material - the supply of printing services on plastic in this case PVC materials are classifiable under SAC 998912. The principal supply being the ‘Supply of service’, the composite supply is also classifiable under SAC 998912 and the applicable rate on such supply is that applicable for such SAC. - AAR
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GST:
Supply or not - Levy of GST - reimbursement of expenses from the Subsidiary Company to its Ultimate Holding company located in a foreign territory outside India - this transaction falls within the definition of services and is for a consideration as defined in Section 2(7) and Section 2(31) of the Act. - the applicable rate of IGST is 18% - AAR
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GST:
Gambling/Betting on the Cricket Team or not - prohibited act or not - violation of Rule 31(A) (3) of the CGST Rules, 2018 or not? - the format of online fantasy game offered by respondent No.5 is a game of mere skill and their business has protection under Article 19(1)(g) of the Constitution of India. - HC
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GST:
Provisional attachment of the immovable property - residential premises - In the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of passing an order of provisional attachment under Section 83 of the Act, then such action amounts to malice in law. - Any use of discretionary power exercised for an unauthorized purpose amounts to malice in law. It is immaterial whether the authority acted in good faith or bad faith. - the relief with regard to the order in Form GST DRC-01A is not granted, whereas the order of provisional attachment of immovable property under Section 83 of the Act is quashed and set aside. - HC
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Income Tax:
TDS u/s 194J - deduct tax at source on payments made to hospitals - With reference to Section 35AD(8)(C), 44AA and 80-IB, it cannot be inferred that the hospitals carry on business and not profession. The submission of TPAs that when they make payments to the hospitals, they are not liable to deduct tax at source as hospitals carry on a business activity under Section 194J, is not worthy of acceptance. - HC
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Income Tax:
Deduction u/s 44C - interest on external commercial borrowing loans - No infirmity in the order of AO in not granting deduction u/s 44C of the act from the above income which is taxed under article 11 (2) of the DTAA on gross basis at the rate of 10%. As we hold that there is no need to go to Section 44C of the act in this case, reliance placed by the assessee on the several judicial precedents with respect to the definition of meaning of total income/ adjusted income is not relevant. - AT
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Income Tax:
Block assessment - It is duty of the authorities to guide the assessee, if there is some excess offering of income on a misconception and then correct it. Attempt should be to determine correct income and not to take undue advantage of the assessee’s ignorance. Since the suo motu offering of income by the assessee on this count is much more than the income that ought to have been offered, if properly instructed, further addition deleted - AT
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Income Tax:
Income accrued in India - section 9(1)(i) - Explanation 5 has been given retrospective effect and Explanations 6 and 7 have been inserted in furtherance of the object of insertion of Explanation 5, these two explanations cannot be read in isolation, but have to be tagged alongwith Explanation 5 so that both the Explanations have to be given a retrospective effect - AT
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Income Tax:
Income accrued in India - dividend income - DDT is levy on the dividend distributed by the payer company, being an additional tax is covered by the definition of ‘Tax’ as defined u/s 2(43) of the Act which is covered by the charging section 4 of the Act and charging section itself is subject to the provisions of the Act which would include section 90 of the Act. - DDT levied by the appellant should not exceed the rate specified in Article 10 in India Germany DTAA - AT
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Income Tax:
Nature of the receipt - premium or transfer charge on the transfer of tenancy by one tenant (of the assessee) to another - The gain arising is to be categorized on the basis of the holding period of the capital asset by the transferor – and not another, prior to its transfer. Then there is the aspect of the head of income under which it is taxable, i.e., where the same is held as not assessable as capital gains.- AT
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Income Tax:
Assessment concluded based on a news article - Concealment of material facts - the assessment in the instant case has been concluded based on a news article which does not in any case constitute adequate material on record. Accordingly, addition made by the A.O., has been rightly deleted by the CIT(A). - AT
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Service Tax:
Classification of services - Business Auxiliary Services or not - Sales Promotion Agency - Although there is only one wholesale buyer, APBCL, their orders depend on the orders which the retailers place on the depots of APBCL. The appellant was specifically required to ensure that the retailers place maximum quantities of the client’s products on APBCL depots. Thus, the services rendered by the appellant are in the nature of promotion and marketing of the clients’ products - AT
Articles
Notifications
Customs-
32/2020 - dated
19-10-2020
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ADD
Seeks to amend notification No. 51/2015-Customs (ADD) dated 21st October, 2015 to extend the levy of ADD on All Fully Drawn or Fully Oriented Yarn/Spin Draw Yarn/Flat Yarn of Polyester imported from China and Thailand till 30th November, 2020.
GST - States-
05/2020-State Tax (Rate) - dated
17-10-2020
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Gujarat SGST
Exemption to satellite launch services provided by ISRO Antrix Co Ltd and NSIL
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71/2020-State Tax - dated
16-10-2020
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Himachal Pradesh SGST
Seeks to amend Notification No. 14/2020-State Tax, dated the 23rd June, 2020
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70/2020-State Tax - dated
16-10-2020
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Himachal Pradesh SGST
Seeks to amend Notification No. 13/2020-State Tax, dated the 23rd June, 2020
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69/2020-State Tax - dated
16-10-2020
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Himachal Pradesh SGST
Seeks to amend Notification No. 41/2020-State Tax, dated the 14th July, 2020
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4/2020-State Tax (Rate) - dated
16-10-2020
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Himachal Pradesh SGST
Amendment in Notification No. 12/2017-State Tax (Rate), dated the 30th June, 2017
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F. 12(46)FD/Tax/2017-III-248 - dated
19-10-2020
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Rajasthan SGST
Notification to exempt Satellite launch services provided by ISRO by Antrise Co. Ltd and NSIL as recommended by GST Counsil in its 42nd meeting held on 05.10.22020
Income Tax-
83/2020 - dated
19-10-2020
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IT
U/s 92C(2) of IT Act 1961- Computation of arm's length price
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (10) TMI 768
Classification of supply - supply of goods or supply of services - activity of building and mounting of the body on the chassis made available by the customers - HELD THAT:- In the instant case the applicant is entrusted with the work of building the load body using own material for fabricating the bus body besides fabrication services - Once the bus body is built and mounted on the chassis, the vehicle is sent back to the Customers after raising tax invoice towards body building charges on which GST is charged separately. At no stage the ownership of the chassis is transferred to the applicant. The consideration received by the applicant is towards the manufacturing of the bus body on the chassis supplied by the principal. Thus, it is evident that the activity undertaken by the applicant for body building on the chassis provided by customer is to be classified as Job work under CGST/TNGST Act 2017 and as per Schedule II of CGST Act 2017, the said activity of building body on the chassis of the customer by the applicant is supply of services. The activity of body building undertaken on a truck chassis made available by a customer to the applicant amounts to supply of services as per Schedule II clause 3 of CGST Act 2017.
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2020 (10) TMI 767
Classification of services - Levy of GST - leasing of pathway to a person to her/his dwelling unit by CMRL - exemption granted under Notification 12/2017-CT(R) - HELD THAT:- In this case, the pathway is owned by the applicant and both the applicant and the individual have the right to use pathway. In the case of renting or leasing of the property, the owner(applicant in this case) will not have the right to use the the land/pathway involved as leasing involves transfer of the right to enjoy the property to the lessee and the lessor does not retain right to enjoy the property during the lease period. In the instant case, it is not a lease of the pathway but only Easement rights are granted to the individual by the applicant. Therefore the classification of the service supplied is not covered under SAC 9972 which covers renting or leasing of property. In the case at hand, the applicant owns the pathway but has agreed through an MOU with the individual to permit her to use the pathway to access the main road from her residential property which is adjacent to the pathway. This is an easement right given by the applicant to the individual to enjoy her residential property for a period of time for a consideration. The applicant has agreed through a MOU to tolerate her use of this pathway for a period of time for consideration. Hence, this service of agreeing to grant easement rights is a service of agreeing to tolerate an act and is classifiable under SAC 999794 under other miscellaneous services / Agreeing to tolerate an act . Thus, the act of agreeing to grant easement rights of the pathway by the applicant to Dr.K.Prema by way of shared access is classifiable under SAC 999794 and taxable under @18%.
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2020 (10) TMI 766
Classification of supply - inspection and testing services on fresh table grapes - classifiable under entry 9986 of Notification no. 11/2017-Central Tax Rate) dated June 28 2017- Support services to agriculture, forestry, fishing, animal husbandry chargeable to NIL rate of tax or otherwise? - Entry 54 (a) of exemption notification no.12/2017-Central Tax (rate) dated June 28,2017. HELD THAT:- The applicant has stated to be primarily engaged in the business of providing various support services including sampling, inspection, verification, testing and certification services on fresh table grapes and other agricultural produce - The applicant has stated that the scope of service in relation to agricultural produce has been widened under the CGST Act and is unsure to continue the above tax position and has classified its services under the Heading 9983 - Other professional, technical and business services and discharged GST at the rate of 18%. As a result of such change in tax position, the exporter-customers of the Applicant have expressed protest that the services provided by the Applicant continue to remain exempt in view of its coverage under Entry 54(a) of Exemption Notification No. 12/2017- Central Tax (Rate) dated June 28, 2017. When NRL has authorized certain laboratories to undertake testing of soil, water, from the plot/farm along with the grown grapes in such plot, DMI has authorized laboratories for the Grading and marking of fruits. APEDA ensures registration of all the stake holders and traces the events in the Grape Net . In the case at hand, the applicant Laboratory is an approved laboratory by the Directorate of Marketing Inspection (DMI) and undertakes testing for Agmark Grading and Final Inspection . The applicant is not authorized to undertake testing of soil, water, farm/plot where the cultivation is undertaken but is authorized to sample and grade the cultivated grapes based on physical attributes for issuance of Certificate of Agmark grading . It is seen from the test reports submitted by the applicant, they conduct test to detect residue of various chemicals, pesticides etc. The recommended chemicals for which testing is to be done is specified in Annexure -9 of APEDA trade Notice. Thus the testing undertaken by the applicant is to detect residue of various chemicals in the cultivated grapes and can also be to grade the cultivated grapes as per the Criteria for Grade designation given in Schedule-II of Fruits and Vegetables Grading and Marking Rules, 2004 . It is clear that, grading of fresh table grapes undertaken by the applicant is in accordance with the guidelines/provisions stipulated in the mentioned Trade notice of APEDA and the Fruits and Vegetables Grading and Marketing Rules and testing for residue of various chemicals/pesticides is as per Procedures for Export of Fresh Table Grapes to the European Union of APEDA. 998611 covers support services to crop production which includes grading of seeds to be marketed, Post-harvest crop services limited to preparation for primary markets, other support services like tilling of fields preparatory to planting, planting, cultivation and fertilization of crops, spraying, including from the air, pest control for agriculture, etc. In short, 99861 i covers support services necessary for Crop Production and includes activities of Post-harvest services of crop for preparation for Primary markets. Preparation of crops for primary market in, jives activities which are essential for selling the produce. Without these activities by the farmers, the produce would not be sold in primary market - this SAC covers only services necessary for agricultural production. i.e. without these services the production of the crop would not be complete - SAC 998619 includes other support services related to agriculture, not elsewhere classified. To be classified under this sub-group, the activity is to be a support service related to agriculture and not classified elsewhere. The activity undertaken by the applicant is testing for chemical residue/grading/ certification of the Fresh Table grapes for Marketing/ Export as per the procedure of APEDA, the Export Development Authority for Agricultural and Processed food products and the applicant lab is an authorized lab of Directorate of Marketing 86 Inspection which establishes that the activity of the applicant is a support service to the exporter-client of the applicant for marketing/export and is not a support service related to agriculture but is related ensure the agriculture produce has access to certain markets to earn a higher price. Even without these activities of the applicant, the crop is produced. Hence, the supply by the applicant is not classifiable under SAC 998619 also. The testing for chemical residue, grading based on physical attributes of table grapes is classifiable under SAC 998346 - it is seen that supply of services classifiable under SAC 9986 and which are agricultural operations directly related to production of any agricultural produce are eligible for this exemption. For the case in hand, the activities of testing for chemical residue, grading based on physical attributes of table grapes are not classifiable under SAC 9986 as they are not meant for preparation of crops for primary market and not necessary for production of the grapes. Hence, they are not directly related to the production of the table grapes - the activities of the applicant are not eligible for the exemption under therefore the applicant is not eligible for exemption at Entry No. 54 (a) of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 as amended and Notification No.II(2)/CTR/532(d-15)/2017 vide G.O. (Ms) 73 dated 28.06.2017.
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2020 (10) TMI 765
Classification of supply - supply of goods or not - what is principal supply - transaction of printing of content provided by the customer, on poly vinyl chloride banners and supply of such printed trade advertisement material - trade advertisement material - classification and rate of CGST if the transaction is that of supply of services? Whether the Principal Supply in the said transaction is Supply of trade advertisement- goods or Supply of Printing Service on the desired materials? - HELD THAT:- The predominant element in a composite supply would be the one for which the recipient is under taking the transaction with the supplier. It would also be the one which changes the nature of the inputs involved sufficiently enough to justify such a transaction. The other supply would only be ancillary to the main supply and even without that ancillary supply, the nature of the inputs involved would change significantly enough for the recipient to undertake the transaction. In the instant case, the Purchase Order is raised for Prints and the media/material in which the output is required are spelt in. The value of the PO is arrived at based on the number of such advertisings required and the value of the unit number is calculated per dimensions - The recipient has undertaken this transaction with applicant mainly to get the printing services of the applicant. Without the printing activities, the blank PVC flex cannot be used as advertisement materials by the recipients. Even if the blank PVC material is made into banners/ hoardings/ billboard/ standees etc. by adding eyelets, metal rods etc., the transaction would not be complete as per the purchase order placed on the applicant by the recipient. Only if the digital content provided by the recipient is digitally printed onto the PVC material would the transaction be complete. Further, in this case, the nature of the inputs, rolls of PVC Flex materials, is changed in the final supply by the process of cutting to required dimensions, digital printing on that and making that printed sheet into banners/hoardings/billboard/standees etc. by adding eyelets, metal rods etc. Therefore, the predominant supply i.e. the principal supply in the composite supply is the services of printing. As per CBIC vide Circular No.11/ 11/2017-GST dated 20.10.2017, it is evident that Supply of service is the Principal Supply , when the content is supplied by the owner of the intangible input for printing and the physical inputs used are that of the printer and Supply of goods is the Principal Supply in cases where the printing of such content is ancillary to supply of goods. The customer transfers the right to use the intangible inputs (digital images, text etc.) temporarily so that they can be used solely for printing. The applicant does not have the right of usage of such intangible inputs for any purpose nor do they own such inputs. Further, the nature of the physical inputs is not changed with the process of printing as in Para 5 and in that case printing is ancillary supply. In the considered transaction, the supply undertaken by the applicant involves printing of the content which is Art work or in other words, intangible inputs, whose rights are with customer and which are shared with the applicant for printing in the required material/media and supply as advertisement of the customer in the required format. The nature of the physical inputs is transformed with the printing activities and without the printing, the final product cannot be used as a trade material as required by the recipient. Thus the predominant activity is printing the intangible inputs of the customer in the required tangible inputs sourced by the applicant as per Para 4 and going by the clarification above, the principal supply is Supply of Service . Therefore, the supply of printing services on plastic in this case PVC materials are classifiable under SAC 998912. The principal supply being the Supply of service , the composite supply is also classifiable under SAC 998912 and the applicable rate on such supply is that applicable for such SAC. For the period upto 13.10.2017, the applicable rate is 9% CGST as per the entry Sl.No. 27/27(ii). With effect from 13.10.2017, while entry at 27 (ii) is retained as such, entry at 27 (i) is amended. Therefore for the period from 13.10.2017, the applicable rate is 6% CGST, in cases of supply of services of printing of goods falling under Chapter 48 or 49 which attracts CGST@6% or 2.5% or Nil when only content is supplied and physical inputs are of the printer and other Printing services attracts CGST 9% as per entry 27(ii) - In the case at hand, only content is supplied to the applicant and the physical inputs are that of the applicant, hence it is required to correctly classify the printed materials as the GST rate notifications seek to tax differently the printing services based on the classification and applicable rate of such goods on which the printing is done - in the case at hand, the goods on which the applicant provides the printing activities Trade advertisings are classifiable under Chapter 49 attracting CGST @ 6%. In the case at hand, the supply of printing services on PVC materials (goods classifiable under CTH 4911) are classifiable under SAC 998912. Therefore the applicable rate of CGST for the period effective from 13.10.2017 on the supply of services of Printing is covered under entry No. 27(i) of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 as amended. Thus, the supply of printing services by the applicant are classifiable under SAC 998912 . The applicable rates are CGST @ 9% and SGST C9% from 01.07.2017 to 22.08.2017 and 22.08.2017 to 13.10.2017 vide entry at Sl.No. 27 27(ii) respectively and effective from 13.10.2017, the applicable tax rate is CGST cu 6% and SGST 4 6% as per the substituted entry at Sl.No. 27 (i).
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2020 (10) TMI 764
Supply or not - Levy of GST - reimbursement of expenses from the Subsidiary Company to its Ultimate Holding company located in a foreign territory outside India - rate of GST applicable to the said reimbursement of expenses - Intermediary or not - HELD THAT:- In the instant case, ICU Medical Inc. has entered into an agreement with Wells Fargo for using credit card facilities by the employees of the group companies, affiliates etc. for business related expenses such as travel, accommodation etc. The billing of these transactions are made by Wells Fargo to ICU Medical Inc. However, there is another separate transaction here. This transaction involves ICU Medical Inc. and the applicant. ICU Medical Inc. sends the details of the business related expenses made by the employees of the applicant, as received from Wells Fargo. The employees are issued the credit cards under the logo of ICU Medicals and Wells Fargo. For the privilege of using these cards, the applicant has to pay ICU Medical Inc. all the relevant expenses and charges made by its employees - It is evident that this is a separate transaction between the applicant and ICU Medical Inc. for the services of providing the credit cards to the employees of the applicant which are to be used only for business related activities. For this, a payment is made by the applicant to ICU Medical Inc. in response to the services of providing the cards. Therefore, this transaction falls within the definition of services and is for a consideration as defined in Section 2(7) and Section 2(31) of the Act. This transaction is also in the course or furtherance of business as is seen in the Travel 86 Expense Policy- Non-U.S. Based employees issued by ICU Medicals Inc. that the card should be used only for business related expenses and not personal expenses of the card holders - Further, as per Section 2 (84) (h) a person includes any body corporate incorporated by or under the laws of a country outside India, which is ICU Medical Inc. in this case. Therefore, the transaction in question is a Supply as per Section 7 of the Act. ICU Medical Inc., Intermediary or not - HELD THAT:- As per the definition, an Intermediary does not include anyone supplying goods or services on his own account. In the instant case, ICU Medical Inc. has an agreement with Wells Fargo, billing by Wells Fargo is done to ICU Medical Inc., payment to Wells Fargo is also done by ICU Medical Inc. The applicant does not come into the picture for any transactions with Wells Fargo - ICU Medical Inc. has a Travel Expense Policy- Non-U.S. Based employees to be followed for the usage of the applicant s employees. As per this, the cards are the property of ICU Medical Inc. and can be revoked at any time. From this it is evident that ICU Medical Inc. is making the supply of the credit cards to the applicant, for use of its employees, on its own account and not as an Intermediary . Thus, it is evident that ICU Medicals Inc., is supplying credit services to the applicant for specific use of its cardholders/employees for travel, accommodation, meals etc. while on travel for business use alone. which fall under the definition of Supply under GST - In the case at hand, the service imported by the applicant is one of extension of credit for furtherance of business. On perusal of the Classification of Service, it is seen that the said service is appropriately classifiable under SAC 997113 - Having decided that there is Supply and the applicant is liable to pay IGST under Reverse Charge, the applicable rate of IGST is 18% as per Sl.No.15 of Notification 08/2017- Integrated Tax Rate dated 28.06.2017.
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2020 (10) TMI 763
Gambling/Betting on the Cricket Team or not - respondent No.5- Dream 11 Fantasy Private Limited provides a platform to its users for playing sports and games on a virtual platform, such as fantasy cricket, football, kabaddi, basketball and hockey - prohibited act or not - violation of Rule 31(A) (3) of the CGST Rules, 2018 or not? - HELD THAT:- The result of the fantasy games offered by respondent No.5 is not determined merely by chance or accident, but the skill of the participant determine the result of the game having predominant influence on the outcome of the fantasy game. Whether any particular team in the real world match wins or loses, is also immaterial as the selection of virtual team by the participant involves choosing players from both the teams playing in the real world. It is also clear that offering the fantasy games of Dream-11 involving substantial skills is a business activity and not wagering having protection granted by Article 19(1)(g) of the Constitution. The SLP filed by said Varun Gumber against the above judgment was dismissed by the Hon'ble Supreme Court vide its order dated 15.09.2017. The Union of India has neither filed SLP against the said judgment dated 18.04.2017 of the Punjab Haryana High Court nor filed any review of the order dated 15.09.2017 and have thus, accepted the findings contained therein - the issue whether the fantasy games played on the platform of respondent No.5 are or are not gambling/betting activities was thus closed and decided in favour of respondent No.5. We have also considered the submission of the respondent No.5 that the online fantasy games of respondent No.5 are not operating in total regulatory vacuum and on affidavit it has been submitted that they are subject to self-regulation by the industry body known as Federation of Indian Fantasy Sports (FIFS) founded in 2017, of which respondent No.5 is a member. The FIFS is a Section 8 Company incorporated under the Companies Act, 2013 for the purpose of self-regulation and promotion of best practices in online fantasy sports services and contests offered in India, which has issued a Charter for Online Fantasy Sports Platforms - The rules and regulations contained in the said Charter are to ensure that the games run by its members are 'games of skill' and are not in the form of any gambling/betting. The FIFS has also framed Ombudsman Rules, which mandate the Ombudsman to be a retired Judge of the Hon'ble Supreme Court or of a State High Court, to ensure that any disputes or grievances of the members of public who participate in the online fantasy games are redressed promptly and in a fair and transparent manner. The fantasy sports industry is regarded as the next sunshine industry of India which is growing exponentially and already contributing thousands of crores to the Government exchequer. They also contain safeguards to ensure that persons below 18 years of age are not allowed to participate and that the public is not being misled or cheated and that there is transparency in financial matters, prizes etc. The FIFS has also issued Self-Regulation Guidelines on Advertising Online Gaming by adopting IAMAI Guidelines to ensure that the advertisements are fair, transparent and not misleading. The guidelines prohibit advertisements by members suggesting any gambling/betting activities and there is a penalty clause as well for violation. We also agree with the submission of respondent No.5 that the fantasy sports formats like that of Dream-11 are globally recognized as a great tool for fan engagement, as they provide a platform to sports lovers to engage with their favorite sports along with their friends and family. This legitimate business activity having protection under Article 19(1)(g) of the Constitution contributes to Government Revenue not only vide GST and income tax payments, but also by contributing in increased viewership and higher sports fan engagement, thereby simultaneously promoting even the real world games. Whether the online fantasy sports games offered on Dream-11 platform are gambling/betting ? - HELD THAT:- The issue is decided against the PIL petitioner - Since the result of fantasy game depends on skill of participant and not sheer chance, and winning or losing of virtual team created by the participant is also independent of outcome of the game or event in the real world, we hold that the format of online fantasy game offered by respondent No.5 is a game of mere skill and their business has protection under Article 19(1)(g) of the Constitution of India. Whether Dream-11 is wrongly classifying its virtual online games under wrong entry for GST and is also violating Rule 31A (3) of CGST Rules, 2018 to evade GST is concerned? - HELD THAT:- It is deemed appropriate to leave the said second issue for the GST authorities to consider in accordance with law. Thus, the PIL has been filed without any real public interest, without disclosing the relevant facts and without proper research - the PIL is misconceived - PIL petition dismissed.
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2020 (10) TMI 762
Levy of GST on Works Contract awarded under the VAT regime - Petitioner has preferred a representation being aggrieved vide the representation dated 31.08.2018 before the respondent No. 4 i.e. the Chief Engineer PWD(Roads). However the same has remained un-attended to. HELD THAT:- Issue Notice returnable by 3(three) weeks - the petitioner is permitted to serve extra copies on the counsel for the respondents within 1(one) week from today. It is submitted by Mr. Choudhury, learned standing counsel that similar matters are fixed after 3(three) weeks and this matter may also be directed to be listed along with these matters. List this matter along with WP(C)8628/2019, WP(C)7169/2018, WP(C)3694/2019, WP(C)7571/2019 and WP(C)9052/2019 for further order.
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2020 (10) TMI 761
Permission to pay the arrears of tax in instalments along with interest thereon - HELD THAT:- This Court in PAZHAYIDOM FOOD VENTURES (P) LTD. VERSUS SUPERINTENDENT COMMERCIAL TAXES (CGST) I CIRCLE, PALA [ 2020 (7) TMI 737 - KERALA HIGH COURT] , in similar circumstances, directed the respondent tax authority to accept the belated returns and permitted the petitioner therein to discharge the balance tax liability in equal monthly instalments. Since the petitioner is not disputing its liability, and wishes to put a quietus to the matter, it is deemed appropriate to direct the respondent to accept the belated return filed by the petitioner for the period from February, 2020 to April, 2020, without insisting on payment of the admitted tax declared therein - petition disposed off.
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2020 (10) TMI 760
Provisional attachment of the immovable property - residential premises - Direction to respondent to transfer the proceedings to the CGST department - Section 83 of GST Act - HELD THAT:- Section 83 talks about the opinion which is necessary to be formed for the purpose of protecting the interest of the government revenue. Any opinion of the authority to be formed is not subject to objective test. The language leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act in forming its opinion - But, at the same time, there must be material based on which alone the authority could form its opinion that it has become necessary to order provisional attachment of the goods or the bank account to protect the interest of the government revenue. The existence of relevant material is a precondition to the formation of opinion. The use of the word may indicates not only the discretion, but an obligation to consider that a necessity has arisen to pass an order of provisional attachment with a view to protect the interest of the government revenue. Therefore, the opinion to be formed by the Commissioner or take a case by the delegated authority cannot be on imaginary ground, wishful thinking, howsoever laudable that may be. Such a course is impermissible in law. At the cost of repetition, the formation of the opinion, though subjective, must be based on some credible material disclosing that is necessary to provisionally attach the goods or the bank account for the purpose of protecting the interest of the government revenue. The statutory requirement of reasonable belief is to safeguard the citizen from vexatious proceedings. Belief is a mental operation of accepting a fact as true, so, without any fact, no belief can be formed. It is equally true that it is not necessary for the authority under the Act to state reasons for its belief. But if it is challenged that he had no reasons to believe, in that case, he must disclose the materials upon which his belief was formed. In the case at hand, Ms. Mehta, the learned A.G.P. appearing for the respondents very fairly submitted that not only the impugned order of provisional attachment is bereft of any reason, but there is nothing on the original file on the basis of which this Court may be in a position to ascertain the genuineness of the belief formed by the authority. The word necessary means indispensable, requisite; indispensably requisite, useful, incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. The word necessary must be construed in the connection in which it is used. The formation of the opinion by the authority should reflect intense application of mind with reference to the material available on record that it had become necessary to order provisional attachment of the goods or the bank account or other articles which may be useful or relevant to any proceedings under the Act. In the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of passing an order of provisional attachment under Section 83 of the Act, then such action amounts to malice in law. Malice in its legal sense means such malice as may be assumed from the doing of a wrongful act intentionally but also without just cause or excuse or for want of reasonable or probably cause. Any use of discretionary power exercised for an unauthorized purpose amounts to malice in law. It is immaterial whether the authority acted in good faith or bad faith. This writ application stands partly allowed - the relief with regard to the order in Form GST DRC-01A is not granted, whereas the order of provisional attachment of immovable property under Section 83 of the Act is quashed and set aside.
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2020 (10) TMI 759
Provisional attachment of the immovable property - residential premises - Direction to respondent to transfer the proceedings to the CGST department - Section 83 of GST Act - HELD THAT:- Section 83 talks about the opinion which is necessary to be formed for the purpose of protecting the interest of the government revenue. Any opinion of the authority to be formed is not subject to objective test. The language leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act in forming its opinion - But, at the same time, there must be material based on which alone the authority could form its opinion that it has become necessary to order provisional attachment of the goods or the bank account to protect the interest of the government revenue. The existence of relevant material is a precondition to the formation of opinion. The use of the word may indicates not only the discretion, but an obligation to consider that a necessity has arisen to pass an order of provisional attachment with a view to protect the interest of the government revenue. Therefore, the opinion to be formed by the Commissioner or take a case by the delegated authority cannot be on imaginary ground, wishful thinking, howsoever laudable that may be. Such a course is impermissible in law. At the cost of repetition, the formation of the opinion, though subjective, must be based on some credible material disclosing that is necessary to provisionally attach the goods or the bank account for the purpose of protecting the interest of the government revenue. The statutory requirement of reasonable belief is to safeguard the citizen from vexatious proceedings. Belief is a mental operation of accepting a fact as true, so, without any fact, no belief can be formed. It is equally true that it is not necessary for the authority under the Act to state reasons for its belief. But if it is challenged that he had no reasons to believe, in that case, he must disclose the materials upon which his belief was formed. In the case at hand, Ms. Mehta, the learned A.G.P. appearing for the respondents very fairly submitted that not only the impugned order of provisional attachment is bereft of any reason, but there is nothing on the original file on the basis of which this Court may be in a position to ascertain the genuineness of the belief formed by the authority. The word necessary means indispensable, requisite; indispensably requisite, useful, incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. The word necessary must be construed in the connection in which it is used. The formation of the opinion by the authority should reflect intense application of mind with reference to the material available on record that it had become necessary to order provisional attachment of the goods or the bank account or other articles which may be useful or relevant to any proceedings under the Act. In the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of passing an order of provisional attachment under Section 83 of the Act, then such action amounts to malice in law. Malice in its legal sense means such malice as may be assumed from the doing of a wrongful act intentionally but also without just cause or excuse or for want of reasonable or probably cause. Any use of discretionary power exercised for an unauthorized purpose amounts to malice in law. It is immaterial whether the authority acted in good faith or bad faith. This writ application stands partly allowed - the relief with regard to the order in Form GST DRC-01A is not granted, whereas the order of provisional attachment of immovable property under Section 83 of the Act is quashed and set aside.
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2020 (10) TMI 758
Provisional attachment of the immovable property - residential premises - Direction to respondent to transfer the proceedings to the CGST department - Section 83 of GST Act - HELD THAT:- Section 83 talks about the opinion which is necessary to be formed for the purpose of protecting the interest of the government revenue. Any opinion of the authority to be formed is not subject to objective test. The language leaves no room for the relevance of an official examination as to the sufficiency of the ground on which the authority may act in forming its opinion - But, at the same time, there must be material based on which alone the authority could form its opinion that it has become necessary to order provisional attachment of the goods or the bank account to protect the interest of the government revenue. The existence of relevant material is a precondition to the formation of opinion. The use of the word may indicates not only the discretion, but an obligation to consider that a necessity has arisen to pass an order of provisional attachment with a view to protect the interest of the government revenue. Therefore, the opinion to be formed by the Commissioner or take a case by the delegated authority cannot be on imaginary ground, wishful thinking, howsoever laudable that may be. Such a course is impermissible in law. At the cost of repetition, the formation of the opinion, though subjective, must be based on some credible material disclosing that is necessary to provisionally attach the goods or the bank account for the purpose of protecting the interest of the government revenue. The statutory requirement of reasonable belief is to safeguard the citizen from vexatious proceedings. Belief is a mental operation of accepting a fact as true, so, without any fact, no belief can be formed. It is equally true that it is not necessary for the authority under the Act to state reasons for its belief. But if it is challenged that he had no reasons to believe, in that case, he must disclose the materials upon which his belief was formed. In the case at hand, Ms. Mehta, the learned A.G.P. appearing for the respondents very fairly submitted that not only the impugned order of provisional attachment is bereft of any reason, but there is nothing on the original file on the basis of which this Court may be in a position to ascertain the genuineness of the belief formed by the authority. The word necessary means indispensable, requisite; indispensably requisite, useful, incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. The word necessary must be construed in the connection in which it is used. The formation of the opinion by the authority should reflect intense application of mind with reference to the material available on record that it had become necessary to order provisional attachment of the goods or the bank account or other articles which may be useful or relevant to any proceedings under the Act. In the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of passing an order of provisional attachment under Section 83 of the Act, then such action amounts to malice in law. Malice in its legal sense means such malice as may be assumed from the doing of a wrongful act intentionally but also without just cause or excuse or for want of reasonable or probably cause. Any use of discretionary power exercised for an unauthorized purpose amounts to malice in law. It is immaterial whether the authority acted in good faith or bad faith. This writ application stands partly allowed - the relief with regard to the order in Form GST DRC-01A is not granted, whereas the order of provisional attachment of immovable property under Section 83 of the Act is quashed and set aside.
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Income Tax
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2020 (10) TMI 755
TDS u/s 194J - deduct tax at source on payments made to hospitals - HELD THAT:- Sweep and scope of Explanation (a) to Section 194J is not restricted only to payments made to medical or other professionals but services rendered in the course of carrying on the stipulated profession. It is pertinent to note that payments are made to the hospitals and not personally by the payer to the individual doctors or professionals. The medical services are rendered in the course of carrying on the medical profession. Undoubtedly, the nature of payment in the hands of the recipient, is determinative of deductibility of tax at source, however, the payments in the hands of hospital cannot be treated to be business income as the payments are received in the course of carrying on the medical profession. It is well settled rule of statutory interpretation that meaning and purport of one section cannot be understood with reference to other sections of the Act. With reference to Section 35AD(8)(C), 44AA and 80-IB, it cannot be inferred that the hospitals carry on business and not profession. The submission of TPAs that when they make payments to the hospitals, they are not liable to deduct tax at source as hospitals carry on a business activity under Section 194J, is not worthy of acceptance. We are not inclined to agree to the submission made on behalf of the assessee that while interpreting Section 194J, the High Court of Bombay and Delhi High Court have enlarged the scope of the Act. In fact, the language employed in Section 194J is plain and unambiguous, which does not admit of any two interpretations. It is also the submission that the courts have rewritten or recast Section 194J while interpreting the same is also untenable. Since, Section 194J neither suffers from any ambiguity nor admits of two interpretations. The question of taking a view which is favorable to the assessee does not arise. In view of preceding analysis, as well for the reasons assigned by High Court of Bombay and Delhi High Court in Dedicated Healthcare Services [ 2010 (5) TMI 98 - BOMBAY HIGH COURT] and Vipul Medcorp [ 2011 (9) TMI 85 - DELHI HIGH COURT] we respectfully concur with the view taken by Bombay and Delhi High Court. Circular No.8/2009 dated 24.11.2009 issued by Central Board Of Direct Taxes taken the view that payments which are made by TPAs to hospitals fall within the purview of Section 194J. No exception can be taken to the circular to that extent, consistent with the interpretation placed on the provisions of Section 194J - But vice in the circular that has been issued by the Central Board of Direct Taxes lies in the determination which has been made by the Board that a failure to deduct tax on payments made by TPAs to hospitals under Section 194J will necessarily attract a penalty u/s 271C. Besides interfering with the quasi judicial discretion of the Assessing Officer or, as the case may be, the appellate authority the direction which has been issued by the Board would foreclose the defence which is open to the assessee under Section 273B. By foreclosing a recourse to the defence statutorily available to the assessee under Section 273B, the Board has by issuing such a direction acted in violation of the restraints imposed upon it by the provisions of Sub-section (1) of Section 119. To that extent, therefore the circular that was issued by the Board would have to be set aside and is accordingly set aside. - Decided against assessee.
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2020 (10) TMI 754
Deposits in bank account under the wrong PAN that showed the petitioner as a company - Petitioner firm issued with the PAN showing its status as a company - Department refuses to accept an appeal which is filed in the PAN of the petitioner which shows its status as a firm, whereas the PAN recorded in the system of the Department, based on the orders of the assessing authority, shows the petitioner as a company - HELD THAT:- This is a case where the basic issue that comes up for consideration is as to whether the petitioner firm had correctly accounted for the deposits made in its account. AO in Ext.P6 order states that the claims made by the petitioner could not be accepted in view of the same not being substantiated with proper evidence and due to paucity of time. While it may be a fact that the assessing authority was limited by time constraints, in view of the statutory provisions mandating the completion of assessments within a particular time, the same cannot be cited as a reason for abdicating his role as an adjudicating authority in tax assessment. Assessee cannot be prejudiced on account of the delay occasioned by the department in passing assessment orders, and the hasty manner in which an assessment order is passed without considering the material produced by an assessee, cannot be justified on the ground that the time limit for finalising assessment was nearing expiry. As a proper consideration of the materials produced by the petitioner assessee in Ext.P6 order, I quash Ext.P6 order and direct the respondent to redo the assessment in relation to the petitioner by considering the materials produced by the petitioner to justify his contentions on merit, and referring to the said material while passing final orders of assessment for the assessment year in question.
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2020 (10) TMI 753
Disallowance of salary paid overseas to expatriates of the Appellant working in India by the Head Office ( HO ) and the Indian taxes paid thereon by the HO - head office of the assessee is situated in Japan and has deputed certain employees to work in its branches situated in India whose sole responsibility is to exclusively manage the business operation of the branches of the assessee in India. - HELD THAT:- Expatriate employees deputed by the HO are working exclusively for the Indian branches. Therefore, the salary paid to expatriates is incurred wholly and exclusively for the purpose of carrying on the business of branches in India and thus, the salary paid to expatriate is deductible as an expense under section 37(1) of the Act and not covered within the scope of head office expenditure under section 44C of the Act. It is submitted that this issue is now covered by the order of the High Court in [2016 (4) TMI 817 - DELHI HIGH COURT] wherein the High Court dismissed the appeal of the Department - we direct the learned assessing officer to delete the disallowance of salary paid overseas to the expatriates of the appellant working in India by the head office and the Indian taxes paid thereon by that office. Addition on account of the interest received by Indian branches from head office and other overseas branches - HELD THAT:- Income earned from head office and overseas branches is not taxable in the hands of the PE in India since they are not separate legal entities and are part of the same foreign company therefore no income can arise when the transactions are carried out by different parts of the same legal entity. It is a settled principle of law that no man can make profit out of himself. Therefore, the interest income earned from head office and overseas branches is not chargeable to tax. Disallowance u/s 14 A on account of the exempt interest income earned on pass-through certificates claimed as exempt u/ 10 [35A] - HELD THAT:- Difference if the income is received as a dividend u/s 10 (34) or is distributed by a securitisation trust which is also exempt u/s 10 (35A) - we are of the view that if these passthrough certificates are held as stock in trade by the assessee and distribution of income is also exempt in the hands of the assessee, it is also on the same footing as in case of other banks which are receiving the dividend from securities held as stock in trade. Therefore, we hold that in this case, provisions of Section 14 A does not apply. Hence no disallowance is called for under that Section. Accordingly, made by the learned assessing officer u/s 14A of the income tax act of ₹ 22,521,366/ is unwarranted. Further, as the assessee is granted relief on the first argument that Section 14 A is not applicable in case of bank when the investments are held as stock in trade, other arguments raised are merely academic. Taxability of interest earned on external commercial borrowing to Indian customers - HELD THAT:- Assessee has received interest from external commercial borrowing loan given by the head office/overseas branches to various customers in India. AO has taxed this income at the rate of 10% applying the article 11 (2) of double Taxation Avoidance Agreement. In view of this we dismiss ground number [4] of the appeal to that extent. Deduction u/s 44C - AO has held that since the interest on external commercial borrowing loans are taxed on gross basis, therefore there is no question of allowing any deduction from such income and accordingly did not consider the interest on external commercial borrowing loans for the purpose of computing deduction under that Section - HELD THAT:- It is the option of the assessee to govern by the provision of the Domestic tax Laws or DTAA, whichever is more beneficial to assessee. But there is no mandate that assessee can opt for lower taxes as per DTAA and claim expenses as per Domestic tax laws. Therefore there cannot be any further expenditure claimed as deduction from that income. That will dilute the amount of tax payable on interest income in the source country as payable according to the Double Taxation Avoidance Agreement - no mandate in the DTAA to grant any such deduction from income taxed u/s 11 (2) - No infirmity in the order of AO in not granting deduction u/s 44C of the act from the above income which is taxed under article 11 (2) of the DTAA on gross basis at the rate of 10%. As we hold that there is no need to go to Section 44C of the act in this case, reliance placed by the assessee on the several judicial precedents with respect to the definition of meaning of total income/ adjusted income is not relevant. Taxation of interest received by the assessee u/s 244A of the income tax act on income taxes refund received during the year - in the return of income the interest was offered to tax at the rate of 10% under article 11 (2) of the DTAA - HELD THAT:- This issue squarely covered in favour of the assessee by the decision of the Honourable Bombay High Court in CREDIT AGRICOLE INDOSUEZ [ 2015 (6) TMI 974 - BOMBAY HIGH COURT] wherein the issue has been set aside to the file of the learned assessing officer to determine/adopt the rate of tax on refund in the light of relevant clauses of the DTAA . Therefore, we also set aside this issue to the file of the learned assessing officer to decide on the rate of tax on interest on income tax refund received by the assessee. TP Adjustment - segregating the international transaction of the receipt of the guarantee commission and benchmarking the same separately - HELD THAT:- We allow this ground of appeal of the assessee holding that as the banking business of the assessee and the transactions related to the issue of guarantee commission on by the assessee are interlinked and closely connected, they should have been benchmarked in a bundled manner. Accordingly ground number 9 of the appeal of the assessee is allowed. Liability for education cess on income-tax levied for AY 2015-16 ought to be allowed as a deduction under the head income from business and profession. - HELD THAT:- Whether education cess is allowable as a deduction to the assessee u/s 37 (1) of the income tax act the issue has been decided in Sesa Goa Ltd. [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] - we set aside the issue back to the file of the learned assessing officer directing him to allow the education cess as deduction u/s 37 (1) of the act after verifying the computation of the same. Accordingly additional ground raised by the assessee is allowed with above direction.
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2020 (10) TMI 752
Block assessment order on the issue of limitation - Time limit for completion of block assessment - special audit u/s.142(2A) - time limit available for completing assessment in terms of proviso to Explanation 1 to section 158BE - AR contended that the Hon ble Bombay High Court did not render any specific adjudication on the validity of second order u/s.142(2A) in its interim order dated 3.6.2008 and hence the period of limitation should not considered with reference to such date - HELD THAT:- There remains no iota of doubt on this position, when we observe that the writ petition filed against the second order u/s 142(2A) was eventually withdrawn by the assessee. We hold that the block assessment order passed by the AO on 26.6.2008 is within the limitation period seen in the light of clause (ii) of Explanation 1 to section 158BE read with the proviso. Ex consequenti, these grounds are dismissed. Unexplained investment in Sai Farm House and Cattle Shed - HELD THAT:- Despite the fact that the amount of investment in Cattle Shed as per the seized material was ₹ 2,77,727/-, the AO preferred to go with the higher value, on the basis of Registered valuer s report, at the time of determining total undisclosed income towards the investment in Cattle Shed. While considering undisclosed investment in Sai Farm House, the AO adopted the value as per the seized material, which was more than the amount determined by the Registered Valuer at ₹ 37,05,500/- and the DVO at ₹ 49,76,921/-. However, while finding out unexplained investment in Cattle Shed, the AO chose to go with the higher value given by the Registered Valuer in preference to the amount as appearing in the seized material. Such approach, in our considered opinion, is not correct. The AO was supposed to determine the extent of undisclosed income towards undisclosed investment in Sai Farm House and Cattle shed on the basis of seized material. The total amount which called for the addition comes to ₹ 57,66,245/- (₹ 54,88,518 + ₹ 2,77,727). As against this, the assessee voluntarily declared undisclosed income of ₹ 53,91,887/-. This shows that further addition on this score is called for at ₹ 3,74,358/-. We, therefore, restrict the addition made and sustained in the first appeal at ₹ 13,34,231/- to ₹ 3,74,358/-. This sub-ground is partly allowed. Disallowance of Bad Debts in relation to Vaishnavi Petrol Pump - HELD THAT:- We are concerned with the sale of petrol and diesel etc. outside the books of account, which runs on thin margin. Once there is a cycle of making purchase of petrol and diesel etc. outside and books of account and its later sale, the AO should have considered the profit element from such sale and the initial investment. As against the total sale outside the books of account at ₹ 1.59 crore, the assessee itself offered undisclosed income of ₹ 68.69 lakh. It is duty of the authorities to guide the assessee, if there is some excess offering of income on a misconception and then correct it. Attempt should be to determine correct income and not to take undue advantage of the assessee s ignorance. Since the suo motu offering of income by the assessee on this count is much more than the income that ought to have been offered, if properly instructed, we order to delete the addition of ₹ 90.51 lakh. Disallowance of Bad Debts relating to M. S. Swami Petrol Pump - HELD THAT:- The combined position of both the petrol pumps on this score is that there were gross sales outside the books of account at ₹ 2.28 crore (₹ 1.59 crore plus ₹ 68.57 lakh). Combined amount of bad debts is ₹ 1.01 crore (₹ 80.51 lakh plus ₹ 20.86 lakh). Combined net good sales made outside the books of account come to ₹ 1.27 crore (₹ 2.28 crore minus ₹ 1.01 crore). As against this, the combined amount offered by the assessee is ₹ 73.73 lakh (₹ 68.69 lakh plus ₹ 5.04 lakh). This gives income at the rate of 58% of the net sales made outside the books of account. When we consider the lower level of profit on the sale of petrol and diesel etc., this amount turns out to be much more than the normal initial investment in such type of business and the profit thereon. Addition u/s 40A(3) could not be made in the computation of undisclosed income u/s.158BC - See DHANVARSHA BUILDERS AND DEVELOPERS (P.) LIMITED. [ 2005 (10) TMI 276 - ITAT PUNE-A]
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2020 (10) TMI 751
Income accrued in India - transaction involving sale of shares of foreign company held investment - AO asked the assessee to explain as to why capital gains arising from sale of shares from Accelyst to Jasper Infotech Private Limited should not be brought to tax in India u/s 9(1)(i)? - Scope of amendment to section 9(1)(i) - HELD THAT:- Explanations 6 and 7 have to be read with Explanation 5 to understand the provisions of Section 9(1)(i) of the Act. Since Explanation 5 has been given retrospective effect and Explanations 6 and 7 have been inserted in furtherance of the object of insertion of Explanation 5, these two explanations cannot be read in isolation, but have to be tagged alongwith Explanation 5 so that both the Explanations have to be given a retrospective effect, keeping in mind the decision of the Hon'ble High Court of Delhi in the case of Copal [ 2014 (8) TMI 606 - DELHI HIGH COURT ] Direct the Assessing Officer to read Explanation 7 as applicable for the year under consideration and delete the impugned addition.
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2020 (10) TMI 750
TP Adjustment - comparable selection - HELD THAT:- Appellant has provided software development support services to its AEs with respect to smartcards business thus companies functionally dissimilar with that of assessee and comparing with risk profile need to be deselected from final list. Also exclusion on major unallocable expenses criteria. Addition u/s 40(a)(i) on account of non-deduction of tax at source on reimbursement - some additional evidences were furnished before the DRP - HELD THAT:- As assessee has claimed that pertains to pension of the Managing Director, this needs to be re-verified by the Assessing Officer. We, accordingly, direct the assessee to furnish necessary evidence relating to pension and the Assessing Officer is directed to examine the same and decide the issue in the light of the findings given by the Tribunal in assessee s own case in A.Y 2011 12. Disallowance of advance written off - assessee entered into a lease deed with E-Lights Techno Park Pvt Ltd for office premises in Chennai but f or some reason, the assessee could not take possession of the office premises and the lessor did not repay the said security deposits - HELD THAT:- We find that the assessee has furnished additional evidences before the DRP. We are of the considered view that such additional evidences should have been examined thoroughly. We, accordingly, restore this issue to the file of the Assessing Officer. The assessee is directed to furnish all the additional evidences in support of the claim of write off and the Assessing Officer is directed to examine the same and decide the issue afresh after giving reasonable opportunity of being heard to the assessee. Income accrued in India - dividend income - benefit of applicable Double Taxation Avoidance Agreement between India and Germany ( DTAA ) qua the rate of tax on payment of dividend to the shareholder (Giesecke Devrient GmbH) - interplay between Section 115-0 of the Act on one hand, and Article 10 of DTAA governing taxation of dividend on the other - whether the Dividend Distribution Tax [DDT] is tax on the company or the shareholder since the admissible surplus stands reduced to the extent of DDT? - HELD THAT:- As in GODREJ AND BOYCE MFG. CO. LTD [ 2010 (8) TMI 77 - BOMBAY HIGH COURT] has unequivocally held that DDT is tax on the company and not on the shareholder . DDT is levy on the dividend distributed by the payer company, being an additional tax is covered by the definition of Tax as defined u/s 2(43) of the Act which is covered by the charging section 4 of the Act and charging section itself is subject to the provisions of the Act which would include section 90 of the Act. Liability to DDT under the Act which falls on the company may not be relevant when considering applicability of rates of dividend tax set out in the tax treaties. The generally accepted principles relating to interpretation of treaties in the light of object of eliminating double taxation, in our view does not bar the application of tax treaties to DDT. Tax rates specified in DTAA in respect of dividend must prevail over DDT. Article 10.4 above specifies that clause 1 and 2 will not be applicable if beneficial owner of dividend carries on business in other contracting state of which the company paying dividend is a resident through PE situated therein. Though supporting documents have been filed before us, but these documents need verification from primary officer, that is, the Assessing Officer. We, therefore, deem it fit to restore this issue for limited purpose of verification in the light of the aforesaid Articles of DTAA. DDT levied by the appellant should not exceed the rate specified in Article 10 in India Germany DTAA. Assessee's additional ground is allowed in part for statistical purposes.
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2020 (10) TMI 749
Assessment u/s 153A - Assessee argued absence of any incriminating material found during the course of search - Addition u/s 68 - credit worthiness of the loan creditors/share applicants and genuineness of the transaction - HELD THAT:- The requirement that the incriminating material to have the co-relation to the particular addition sought to be made is a logic that will hold good not only for Section 153 C of the Act but in relation to Section 153A of the Act as well. Consequently no error having been committed by the ITAT in accepting the plea of the Assessee that there is no incriminating document which was seized in the course of search relating to the addition sought to be made on account of the share capital. Therefore, the jurisdictional requirement of Section 153 A of the Act was not satisfied. Additions made under section 153A in the orders passed under section 153/143(3) of the Act are not in accordance with the law - Decided in favour of assessee.
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2020 (10) TMI 748
Set off of unabsorbed business loss - Addition on the ground that carry forward of losses was denied by the AO in A.Y.2006-07 invoking the provisions of section 79 - whether the provisions of section 79 of the Act can be invoked and examined in the assessment year in which the assessee claimed for carry forward of losses or in the assessment year in which the assessee actually claimed set off of carry forward losses against the profits of that year? - Assessee contended since the assessee claimed set off of loss only during the A.Y.2012-13 and subsequent years the applicability of provisions of section 79 is to be examined only during the A.Y. 2012-13 - HELD THAT:- Respectfully following the decision of the Hon'ble Supreme Court in the case of CIT v. Manmohan Das [ 1965 (11) TMI 33 - SUPREME COURT] we hold that the claim for set off of carry forward of losses prior to assessment years 2006-07 against the profits of the current assessment year i.e. A.Y.2012-13 vis- -vis the provisions of section 79 of the Act has to be examined by the Assessing Officer only in the assessment year in which the assessee claimed such set off of losses in the return of income. In the present case since the assessee has claimed set off of carry forward of losses against the income of the current assessment year i.e. A.Y. 2012-13 and also in the subsequent assessment years this claim of the assessee has to be examined only during the assessment year 2012-13 and subsequent assessment years. Thus, the grounds raised in this regard are restored to the file of the Assessing Officer who shall decide the implication of section 79 of the Act in the light of our above said findings and observations. The grounds raised are disposed off accordingly. Addition on account of discrepancies in stocks - discrepancies found during the course of search - HELD THAT:- Considering the volume of gold jewellery and diamonds handled by the assessee in the instant case during the year under consideration, the unreconciled stock contributed a very meagre percentage of the total material handled by the assessee, we hold that assessee had given plausible explanation in the facts of the instant case on which no addition is required to be made. We also find that the explanation given by the assessee was not found to be false or in-genuine before the revenue authorities. Hence we have no hesitation in directing AO to delete the addition made on account of discrepancies in stocks - grounds raised in this regard are allowed.
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2020 (10) TMI 747
Maintainability of the allowance of watchman salary claimed from the rental income assessed u/s. 22, i.e., prior to the claim of standard deduction u/s. 24(a) at the rate of 30% thereof - HELD THAT:- The matter would require a factual examination and finding. Two, the volume of the expenditure incurred, with the watchman salary alone accounting for nearly 90% of the gross revenue, pegged at, as stated, ₹ 500 p.m. per shop, even as the scope of the services gets continually enhanced, resulting in continued losses, even ignoring watchman salary (and which though cannot be), which therefore need to be explained from a business man s point of view, issuing clear finding/s of fact. This is as the same, inferably on account of commonality of interest, assumes thus the nature of a self-inflicted loss, which cannot be regarded as genuine? Business decisions are, after all, grounded in market realities and economic rationale, and must therefore be explainable in terms thereof. Rather, a non-explanation and, consequently, absence of any finding on this aspect, has led it to be a subsisting issue between the assessee and the Revenue. The law in the matter being clear, the matter stands accordingly set aside, for a decision as per law, delineating the onus cast on either side by law. Our order is, besides the orders by the Revenue authorities, also based on the arguments advanced during hearing. Further, though this may not appear to be the controversy arising, going by the Revenues Gd. 2 before us, our adjudication is with reference to the issue discerned as arising; the AO at para 6.3 of his order clearly stating that the assessee is supposed to recover at least the cost of its activities (the various services being provided), and the loss sustained cannot, thus, be accepted as a genuine business loss. Nature of the receipt - premium or transfer charge on the transfer of tenancy by one tenant (of the assessee) to another - Capital gain or income from other sources - HELD THAT:- We set aside the matter for fresh adjudication in accordance with law to the file of the ld. CIT(A), after affording the parties before him a reasonable opportunity of hearing, within the time frame, if any, stipulated by law. Inasmuch as we are setting aside the matter, the first appellate authority shall not be bound by our observations, except have regard to them to the extent they are consistent with or otherwise explain the order by the Tribunal in Vinod V. Chhapia [ 2013 (2) TMI 556 - ITAT MUMBAI ] a valid judicial precedent, and relied upon in the assessee s own case. And decide the matter per a speaking order, issuing definite findings of fact and of law, answering the various aspects of the issue as delineated by us. The twin elements of capital gain are capital asset and transfer ; the transfer making the capital asset the property of the transferee. The capital asset acquired by the incoming tenant from the assessee is to be specified. The gain arising is to be categorized on the basis of the holding period of the capital asset by the transferor and not another, prior to its transfer. Then there is the aspect of the head of income under which it is taxable, i.e., where the same is held as not assessable as capital gains. We decide accordingly. We wish to make it clear, that we have, in rendering our decision, kept uppermost the need to eschew any prejudice being caused to either side, while at the same time discharging the duty cast on the Tribunal as the final fact finding body, i.e., to deal with and determine questions which arise out of the subject-matter of the appeal in the light of the evidence, and consistently with the justice of the case, as explained by the Apex Court in many a case ( CIT v. Walchand Co. (P.) Ltd . [ 1967 (3) TMI 2 - SUPREME COURT ]
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2020 (10) TMI 745
Condonation of delay - delay of 404 days in filing the appeal - HELD THAT:- While considering the condonation of delay, what is to be seen is whether the interest of the Revenue will stand protected even while recognizing the right of the Assessee to exercise the statutory remedies available to the Assessee and that the statutory right of an appeal cannot be made redundant by dismissing the application for condonation of delay and rejecting the appeal on technical grounds. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be referred. In view of the above, the delay of filing this appeal is condoned. Grant of recognition u/s.10(23C)(vi) - Claim denied as Assessee has not furnished relevant materials before the authorities below. We find that there is a lapse on the part of the Assessee - HELD THAT:- Keeping in view the Assessee status for which it was established mainly to discharge various important aspects on medical education, we are of the opinion that one more opportunity should be given to the Assessee to substantiate his case before the CIT (Exemptions). - we set aside the order passed by the CIT (Exemptions) and we remit the issue back to CIT (Exemptions) to examine the entire issue afresh and decide in accordance with law. Appeal filed by the Assessee is allowed for statistical purpose.
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2020 (10) TMI 744
Assessment concluded based on a news article - Concealment of material facts relevant for both disclosure as per Income-tax Act and the Accounting Standards as well as during the course of assessment proceedings - A.O. had alleged that the assessee has received an amount of USD 30 million as proceeds for sale of urbantouch.com The shareholders of the assessee had sold their shares in the Company in the month of August 2012 and the domain name was sold by the assessee in March 2013 - HELD THAT:- In the instant case as well, the article printed may have been to provide information with respect to the fact that the shareholders of the assessee are selling the shares held by them. However, the same has been misunderstood by the A.O. and an adjustment to that effect has been made in the subject assessment order. It would also be pertinent to note that the copy of the article which was relied upon by the A.O. was not provided to the assessee during the course of assessment proceedings. Accordingly, the information contained in the news article was not ratified by the assessee. Additionally a letter was written by assessee company objecting to the material published in the article which was the basis, on which the A.O. has passed the assessment order. In this letter to the Editor of Economic Times, the assessee states that the article per se did not speak about any amount being received by the assessee and only speaks of consideration received by the shareholders. Given the same, no specific action was taken by the assessee or any of its Directors at the time the news article was published. Transaction of sale of shares by the investors is distinct and separate from the sale of shares undertaken in August, 2012. Neither the assessee nor the investors have received the said amount of USD 30 million. The amount has been reported in the news articles relied upon by the A.O. without carrying out adequate due diligence and without being ratified by the assessee or the investors. We are of the view that the assessment in the instant case has been concluded based on a news article which does not in any case constitute adequate material on record. Accordingly, addition made by the A.O., has been rightly deleted by the CIT(A). - Decided in favour of assessee.
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2020 (10) TMI 743
Disallowance u/s 14A r.w.Rule 8D - Mandation of Recording of satisfaction as required u/s 14A(2) - AO has disallowed interest expenditure under Rule 8D(2)(ii) and other expenses @0.5% of average value of investments under Rule 8D(2)(iii) - HELD THAT:- It is very clear from the assessment order that there are no suo- moto disallowances from the assesee and when, this was brought to the notice of the ld. AR for the assessee, the assessee stated that there is no application of section 14A or interest income earned from head office, but not explained how provisions of Rule 8D are not applicable - AO, on the basis of information furnished by the assesse has noted that the explanation furnished by the assessee is not acceptable - findings recorded by the Ld. AO is sufficient and a clear indication of his compliance of the procedure prescribed u/s 14A(2) and hence, we are of the considered view that there is no merit in argument taken by the Ld. AR for the assessee regarding satisfaction as required u/s 14A(2 - Hence, an argument of assessee is rejected. Interest disallowances - It is a settled position of law that only net interest expenditure needs to be considered for computing disallowances u/s 14A. This principle is supported by the decision of CIT vs Jubiliant Enterprises Pvt.Ltd [ 2017 (2) TMI 1219 - BOMBAY HIGH COURT ] . We direct the Ld. AO to consider net interest expenditure for the purpose of working out disallowances of interest under Rule 8D(2)(ii) of I.T.Rules, 1962. Addition of other expenditure - Although the assessee has requested for disallowances of 1% to 2% of exempt income, but from AY 2008-09 onwards disallowances contemplated u/s 14A shall be computed in accordance with Rule 8D, where the procedure has been laid down for determination of disallowances of expenditure and this principle is supported by the decision of CIT vs Godrej and Boyce Manufacturing Co.Ltd. [ 2010 (8) TMI 77 - BOMBAY HIGH COURT ] . Therefore, we are of the considered view that there is no merit in arguments taken by the assesee and hence, we are inclined to uphold the computation of other expenses as per Rule 8D(2)(iii) AO has determined the disallowances of ₹ 88,551/-, which is more than amount of exempt income, which cannot be the case. It is a settled principle of law that disallowances of expenditure u/s 14A shall not shallow entire exempt income of the assessee - we direct the Ld. AO to restrict disallowances of expenditure computed u/s 14A to the extent of exempt income of the assessee for the year under consideration. - Decided partly in favour of assessee.
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2020 (10) TMI 742
Capital gain computation - Disallowance of interest expenses while computing income from Long Term Capital Gain - HELD THAT:- As decided in own case we are satisfied that the ld. Revenue authorities have failed to appreciate the facts and circumstances in right perspective while holding that nexus has not been proved. The assessee has demonstrated that interest free funds were used for acquiring assets and interest expenditures were capitalized. Unsecured loans were remained outstanding at the end of every accounting year. It cannot be construed that nexus has not been demonstrated. We have noticed the order of the AO, which is absolutely silent on any of the aspects though the ld.CIT(A) has made reference to the details in order to demonstrate that the assessee failed to prove the nexus, but on re-appreciation of these very details we are of the view that the ld.CIT(A) has not appreciated the facts in right perspective, and considered them half-heartedly. We find that there is no disparity on facts between AYs 2010-11 [ 2019 (4) TMI 1912 - ITAT AHMEDABAD] to this assessment year. The assessee has demonstrated that the borrowed funds have been used by him in making investments. Therefore, he is entitled for the claim of interest expenditure while computing the Long Term Capital Gains/Short Term Capital Gains on sale of investments - Appeal of the assessee is partly allowed.
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Customs
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2020 (10) TMI 757
Smuggling - Gold Biscuits - offence punishable under Section 135 (i) (i) of the Customs Act - acquittal of the accused - whether the acquittal order passed by the trial court is correct or not? - HELD THAT:- The trial court considered the oral and documentary evidence in detail and acquitted the accused. This is an appeal against acquittal. The Apex Court observed that the presumption of innocence attached to every accused persons got strengthen on acquittal of an accused by a trial court - This principle was laid down by Hon'ble Supreme Court in SAMPAT BABSO KALE AND ORS. VERSUS THE STATE OF MAHARASHTRA [ 2019 (4) TMI 1911 - SUPREME COURT] and CHANDRAPPA AND ORS. VERSUS STATE OF KARNATAKA [ 2007 (2) TMI 704 - SUPREME COURT] . The trial court considered all the oral and documentary evidence in detail and came to a definite conclusion that the accused is not guilty. In such circumstances, this Court cannot interfere with the well considered judgment of the trial court in an appeal against acquittal. Appeal dismissed.
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2020 (10) TMI 741
Imposition of penalty - designation of appellant on the company - non-executive Chairman of the Company or not - existence of mens rea - reliability of statements recorded - rectification of mistake - HELD THAT:- In view of the dictum of law with regard to the statement recorded under section 108 of the Act coupled with concurrent findings of fact arrived at by the adjudicating authority and the CESTAT, we are not inclined to interfere as no perversity is pointed out in such factual findings arrived at by the both the authorities. For the foregoing reasons and considering section 112(a) of the Customs Act which provides that penalty against person who in relation to any goods does or omits to do any act which act or omission would render such goods liable to confiscation under section 111 or abets the doing or omission of such an act, penalty can be imposed not exceeding the value of the goods or five thousand rupees whichever is greater. Therefore, invoking such provision would require mens rea on part of the appellant which is duly established on record. Rectification of mistake - HELD THAT:- The CESTAT was justified in rejecting the rectification application as any interference in the impugned order passed by the CESTAT would have resulted in review of its own order which is not permissible under the provisions of the Customs Act. Appeal dismissed.
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Corporate Laws
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2020 (10) TMI 740
Oppression and Mismanagement - appointment of Managing Director - continuation of lease - appointment of Board of Directors of the Company - It is alleged by the Petitioners that on 19-09-2017, these added Directors without any authority and without serving notice to the Petitioners held Extra Ordinary General meeting of shareholders for enhancing shareholding by allotting those shares to the Respondent Nos. 5 to 37, illegally reducing the Petitioners as minority shareholders. Whether the Respondent Nos. 2 to 4 were appointed as the additional Directors and their appointments as Directors have been confirmed? - Whether the Petitioners were illegally removed from the posts of Directors/Managing Director by the Respondents? - HELD THAT:- The law prescribes that if Article of Association of the Company allows the Board of Director to appoint any person as the Director, such appointment shall be as additional Directors and he shall be Director up to date of next AGM. In this case, the appointment letters produced at Annexure R-4, discloses that Respondent Nos. 2 to 4 were appointed as the Directors by the Board of Directors in meeting dated 27-03-2015. However, the official record reflects their appointment as the independent Directors and not as the additional Directors. Article of Association of Respondent No. 1 Company is on record at Annexure P-1(Page 101 of the Petition). It confers right of Board of Directors to appoint fit and proper person as the Director. Section 161 of the Companies Act, 2013 says that if a person appointed as the Director by the Board of Directors, his appointment shall be presumed to be appointment as the additional Directors till next AGM. In next AGM, his appointment as the additional Directors can be ratified. In this case, the appointment letters of Respondent Nos. 2 to 4 show that they were appointed as Directors. The public record show that they were appointed as the independent Directors and not additional Directors. On the basis of evidence in form of public record, the inference has to be drawn that appointment of Respondent Nos. 2 to 4 was made as the Directors - It is not in dispute that on 27-03-2015, the Petitioners were only shareholders as well as Directors of Respondent No. 1, Company. On 27-03-2015, the Petitioners as the Directors appears to have been issued appointment letters to Respondent Nos. 2 to 4 appointing them as the Directors. It can safely be inferred that on 27-03-2015, the Petitioners being only shareholders might have held AGM and appointed Respondent Nos. 2 to 4 as the Directors and issued the appointment letters in the capacity as the Directors. It is settled law that service of notices to all the Directors of the Board of Directors is essential for any resolution passed at the meeting and where admittedly no notice was given even to one of the Directors, the resolution passed at the meeting of the Board of Directors is invalid - In this case, the Respondents did not state anywhere as to when notice for EOGM dated 19-09-2017 was dispatched or sent to the Petitioners. They did not produce copies of such notices on record at all. There is absolutely no evidence on record to prove service of notices. It is for them to prove the fact by producing material evidence thereto. In our considered opinion, the Respondents failed to establish that before holding the meeting of Board of Directors and the EOGM dated 19-09-2017, the notices of those meetings were served on the Petitioners. Since the Petitioners were not served with the notices of those meetings, all resolutions passed or decisions taken by the other Directors (Respondent Nos. 2 to 4 herein) in such meetings, became void and are not binding the Petitioners at all. The Respondents state that they have allotted shares of the Company to Respondent Nos. 5 to 37. However, they did not produce any evidence to prove this point. The Respondent Nos. 5 to 37 did not appear in this case stating that they are shareholders of the Company. There is no record in evidence to show that the Respondent Nos. 5 to 37 had paid any amount towards purchase of the shares. Article 15 of the Articles of Association of the Respondent No. 1 Company, states the procedure in detail as to how the shares of the Company are to be allotted or to be transferred. That procedure has not been followed - Respondent Nos. 5 to 37 are not the shareholders of the Respondent No. 1, Company. Thus, the Petitioners are still the Directors of the Respondent No. 1, Company even today. What should be final order so that the affairs of the Respondent No. 1 Company can run smoothly? - HELD THAT:- There is material on record indicating that the loan account of Respondent No. 1, Company was declared NPA by Punjab National Bank in the year 2017. It is seen from the evidence on record that during that time, only Respondent Nos. 2 to 4 were controlling the affairs of the Company. If it is so, it has to be held that they mismanaged the affairs of the Company. Be that as it may, while considering the Petition under Section 241 and 242 of the Companies Act, 2013, it has to be endeavor of this Tribunal to see that the affairs of the Company are being conducted smoothly, in future at least - It is brought to our notice that Respondent No. 4, Mr. Shanker Ghosh has resigned as the Director on the ground of ill health. He has already been relieved from his post. Now, the Petitioner No. 1 and 2 and the Respondent No. 2 and 3 are the Directors of the Company. Accordingly, we decided that the Petitioners and the Respondent No. 2 and Respondent No. 3 are the Directors of Respondent No. 1, Company. In short, two persons from Petitioners group and two persons from the Respondents group are the Directors. We also hold that Respondent Nos. 5 to 37 are not shareholders of the Respondent No. 1, Company. To avoid future embezzlement of the Company's account, we direct that the account shall be operated under joint signature of the Petitioner No. 1, Mr. Ajay Sinha and Respondent No. 2, Mr. Jogendra Tiwari. This will avoid complications in future. It is declared that the Petitioners are the Directors of the Respondent No. 1, Company, M/s. Spencer Distilleries Private Limited and Petitioner No. 1 is the Managing Director of the Respondent No. 1, Company - It is declared that Respondent Nos. 2 and 3 are also the Directors for Respondent No. 1, Company, M/s. Spencer Distilleries Private Limited - Petitioner No. 1, Mr. Ajay Sinha and Respondent No. 2, Mr. Jogendra Tiwari, Director, are the authorized signatory of the Company who shall have power to operate the Bank account of the Respondent No. 1, Company, M/s. Spencer Distilleries Private Limited, under their joint signatures - Respondent Nos. 5 to 37 are not the shareholders of the Respondent No. 1, Company - petition allowed in part.
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Insolvency & Bankruptcy
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2020 (10) TMI 739
Direction to Resolution Professional to call for a meeting of the COC and to further direct the COC to invite the Applicant to the said meeting - discussing, negotiating and finalising last revised bid submitted by the Applicant for the purpose of deciding the successful resolution applicant - stay on approval of Resolution Plan. The main prayer of the applicant herein, who is the unsuccessful Resolution Applicant, is that this Adjudicating Authority should direct the RP to conduct another CoC meeting to consider its revised Resolution Plan for the purpose of deciding the successful Resolution Applicant, keeping in view, the objects of the Code. HELD THAT:- Various allegations have been levelled by the Applicant alleging bias in favor of the successful Resolution Applicant on the part of the CoC. It is also alleged that CoC accepted the bid of the successful RA, by ignoring the higher bid submitted by the Applicant herein in the evening of 21.02.2019, which was brought before CoC by the RP on 22.02.2019, and that it was done intentionally to keep the applicant out of race. However, no concrete evidence to prove these allegations have been placed on record, particularly in view of the admitted fact that a revised Resolution Plan was submitted suo motu by the applicant herein to RP, after the RP had already submitted IA No. 173/2019, inter-alia, seeking approval of this Adjudicating Authority to the Resolution Plan approved by the CoC in terms of section 30(4) of the Code. As per the provisions of IBC, 2016 once a CIRP application is admitted, it is the duty of RP to constitute CoC and thereafter publish EoI, Information Memorandum and Evaluation Matrix on the basis of decisions taken in CoC meetings. Thereafter, upon receipt of EoI by potential Resolution Applicants, various Resolution plans are examined by the RP and all the compliant Resolution Plans are put up before the CoC for deliberations about each of those plans for considering their feasibility and viability. In this regard, it is pertinent to note here that under the provisions of the Code, the commercial wisdom of the CoC has been given paramount status without any judicial intervention. In the instant case, the present application has been filed before this Adjudicating Authority after placing of Resolution plan approved by CoC for a determination by this Adjudicating Authority under section 31 of the Code - such application is not maintainable as there is no vested right or fundamental right with any Resolution Applicant to have its Resolution Plan considered or approved. Further, as no adjudication has been done on the Resolution Plan so submitted by the RP by this Adjudicating Authority, no such IAs can be adjudicated upon at his stage. Application dismissed as not maintainable.
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2020 (10) TMI 738
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Whether this application is filed by the proprietary firm or proprietor of the firm? - HELD THAT:- In this proceeding, we noted that the application is filed by one Mr. Sanjay Kumar, the proprietor of M/s. Sri Ram Constructions (in Form-5). Notice under section 8 of IBC was also sent by Mr. Sanjay Kumar, proprietor on behalf of the firm. So, on facts the order relied on by the Ld. Sr. Counsel for the corporate debtor is not applicable. Moreover, we have elaborately discussed the provisions of section 5(20) read with section 3(23) of IBC and held that even application filed by the proprietary firm through its proprietor is maintainable - On the basis of facts in this case and evidence on record, we hold that this application is filed by the proprietor of the firm, Mr. Sanjay Kumar and not by proprietary firm, Sri Ram Constructions. Whether the application is defective as has been filed clubbing different causes of action? - HELD THAT:- The letter of award is only one and it is dated 12.01.2016. Under that letter of award, three work orders were issued. However, date of completion of work/delivery as mentioned as one and same, i.e. 31.08.2016. So, for operational creditor, the cause of action to initiate this proceeding against the corporate debtor had arisen on 31.08.2016 and it was one and the same. In view of this, we hold that the ruling of the Hon'ble NCLAT is not applicable on facts - this application is not defective because of different causes of action are clubbed together - answered in negative. Whether there exists pre-existing dispute about the work carried by the operational creditor and hence, application is not maintainable? - HELD THAT:- The operational creditor did not disclose all above correspondences while filing application under section 9 of IBC against the corporate debtor. Be that as it may, there is sufficient evidence on record to show that there exists dispute in between the operational creditor and the corporate debtor pending even prior to the demand notice under section 8 of IBC sent by the operational creditor to the corporate debtor. That dispute appears to be relating to both, services rendered by the operational creditor and the amount claimed towards operational debt. To resolve that dispute in between the parties full-fledged trial in the form Civil Suit is required. We, in our limited jurisdiction, cannot resolve such dispute - there is a pre-existing dispute pending in between the operational creditor and the corporate debtor about the work carried by the operational creditor and the amount claimed towards operational debt - Answered in affirmative. Application disposed off.
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2020 (10) TMI 737
CIRP process - Orders/directions to treat the applicants as 'Financial Creditor' - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 readwith Rule 11 of the NCLT Rules, 2016 - HELD THAT:- It is an admitted fact of the parties that the applicants had entered into an agreement with the Corporate Debtor on 17.05.2011 and on the basis of that agreement the developer will get 55 per cent whereas the owner's share was 45 per cent and as per the agreement, the land shall be under the possession and control of the applicants but thereafter a subsequent agreement was executed on 18.03.2013 and according to the supplementary agreement in terms of Clauses 8, 9 10, new terms and conditions were fixed and the terms and conditions - From the perusal, it appears that by subsequent agreement, both the Applicants are allotted 9 flats each and as per terms and conditions, a separate letter of allotment is issued and on the basis of that the applicants claimed themselves to be the Financial Creditors. Mere plain reading of the provisions shows that a Financial Creditor is a person to whom a financial debt is owned and includes a person to whom a debt is legally assigned or transferred. The applicants claimed themselves to be Financial Creditors because according to him a financial debt is owned by the Corporate Debtor. The plain reading of Section 5(8) shows that a financial debt means a debt along with interest which disbursed against the consideration of time value and money and includes any of the Clause (a to i) under Section 5(8) of IBC, 2016. Mere plain reading of the Clause 21 of the Supplementary Collaboration Agreement shows that both the applicants/owners and the developer/Corporate Debtor shall execute and register the sale deed and the other documents in respect of the flat, car parking etc. in favour of the intending purchaser therefore, when we shall read this Clause along with the definition of Promoter then we are of the considered view that the applicants are not the Financial Creditors rather they are the promoters along with developer hence, on the basis of allotment of flats in terms of the Supplementary Collaboration Agreement, in our view, the applicants cannot be treated as Financial Creditors and the allotment letter cannot come under the definition of financial debt - there are no force in the contention raised on behalf of the applicants that in view of the allotment letters issued in their favour regarding the allotment of 9 flats, they are entitled to claim before the RP as a Financial Creditor and they are also entitled to be included as a member of CoC as Financial Creditor. The applicants are not liable to be considered as a Financial Creditor - the prayer to declare them as Financial Creditors is hereby rejected. So far, the second contention of the applicants, that if they are not considered as Financial Creditor then the RP may be directed to handover the possession of the apartments of the land is concerned, in our opinion, since the applicants have entered into a Supplementary Collaboration Agreement with the developer who has developed the real estate project on the land of the applicants and against whom the CIRP has been initiated, therefore, they are also the promoter of the said project hence, they are not entitled to get the land back. Therefore, this prayer of the applicants is also rejected. Application dismissed.
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2020 (10) TMI 736
Liquidation process - Priority of settlement of dues - Payment of dues of Applicant as Secured Creditors as provided under the provisions of Part II Chapter II of the Insolvency Bankruptcy Code, 2016 - HELD THAT:- It is clear that the dues of the Government, Central Government and/or State Government or any legal authority fall under the category of Operational Debt . That apart, the Applicant is claiming that in view of the provision of section 48 of Gujarat Value Added Tax, 2003, he may be treated as Secured Creditor. This contention of the Applicant is/are also not maintainable in view of the definition stated hereinabove as also in view of section 238 of the IBC. While deciding the issue of 'Operational Creditor' and 'Financial Creditor', the Hon'ble Supreme Court observed in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 1508 - SUPREME COURT] wherein it is inter alia observed that an 'Operational Debt would include a claim in respect of the provision of goods or service, including employment, or a debt in respect of payment of goods or services, including employment, or a debt in respect of payment of dues arising under any law and payable to the Government or any local authority. Statutory dues such as income tax, value added tax and other statutory dues arising out of law will arise only if the company/corporate debtor is operational and, therefore, such dues have a direct nexus with the company - Thus, any dues and services of the Government Departments are considered as Operational Creditor . Under such circumstances, the very purpose for which the IA has been filed is not going to succeed as they fall under the category of Operational Creditor as per the provisions of IBC. Application dismissed.
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2020 (10) TMI 735
Liquidation process - Priority of settlement of dues - Payment of dues of Applicant as Secured Creditors as provided under the provisions of Part II Chapter II of the Insolvency Bankruptcy Code, 2016 - main contention in the application are that the Petitioner is claiming to be a secured statutory creditor in view of the provision of section 48 of the Gujarat Value Added Tax and accordingly they want to be considered as Secured Statutory Creditor in petition which is under CIRP - HELD THAT:- The dues of the Government, Central Government and/or State Government or any legal authority fall under the category of Operational Debt . That apart, the applicant is claiming that in view of the provision of section 48 of Gujarat Value Added Tax, 2003, he may be treated as secured statutory creditor. While deciding the issue of Operational Creditor and Financial Creditor , the Hon'ble Supreme Court observed in Swiss Ribbons Pvt. Ltd. Anr. vs. Union of India Ors. SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 1508 - SUPREME COURT] wherein it is, inter alia, observed that an 'Operational Debt would include a claim in respect of the provision of goods or service, including employment, or a debt in respect of payment of goods or services, including employment, or a debt in respect of payment of dues arising under any law and payable to the Government or any local authority. Statutory dues such as income tax, value added tax and other statutory dues arising out of law will arise only if the company/corporate debtor is operational and, therefore, such dues have a direct nexus with the company . Thus, any dues and services of the Government Departments are considered as Operational Creditor . Under such circumstances, even if, the Applications are restored by condoning the delay, the very purposes for which the IAs have been filed are not going to succeed, as they fall under the category of Operational Creditor as per the provision of IBC - However, the Applicant/State Tax Officer-2 have liberty to put their claim as Operational Creditor before the RP - Application dismissed.
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2020 (10) TMI 734
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - unattested Pledge Agreement - the same is being given a new nomenclature as agreement of pledge and guarantee - pre-existing dispute or not - HELD THAT:- Each and every clause points to the clear cut intention of the parties who had entered into a Pledge Agreement thereby pledging the shares of the Corporate Debtor and other Pledgers. None of the clauses of the agreement except clause 5.1(g) referred to above and clause 6.2 (b) referred to above have been referred to by the Financial Creditor. The agreement runs into 20 pages and under different heads it beautifully describes the intention of the parties, assigning the role of the Pledger and the pledged shares. For understanding and interpreting this agreement one would have to go into and understand the circumstances which led to the execution of this agreement. Since the loan agreement between the Borrower and the Financial Creditor had also been entered into on the same date i.e. 27.02.2015 which required security package for the said loan to be submitted by the Borrower to the Financial Creditor. This agreement can be referred to as a hybrid agreement. Though it is in fact an agreement of pledge but, for the convenience of the Financial Creditor the same is repeatedly being referred to by the Financial Creditor in its pleadings as Agreement of Pledge and Guarantee without there being any Guarantee explicitly or implicitly. This agreement cannot be interpreted as per the convenience of the Financial Creditor. The role of the Pledgers has been clearly specified from the very beginning and it was very much clear to all the parties including the Borrowers and the Financial Creditors. The Minutes of the Board Meeting submitted to the Financial Creditor by the Borrower specifically in clause 5 mentioned that the Corporate Debtor, and another Pledger shall pledge the number of shares mentioned against their respective names and that Mr. Manoj Kumar Agarwal shall execute Letter of Guarantee received from the Financial Creditor in this connection in favour of the Financial Creditor to secure the dues of the Company. If there had been any intention to include the Pledger Corporate Debtor herein as a Guarantor, a similar guarantee agreement would have been executed from the Corporate Debtor as well. The present application under Section 7 seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor, which is only a Pledger of shares, and has not availed any financial benefit from the Financial Creditor and has never signed any document intending to be a Guarantor, cannot be allowed to be proceeded against under Section 7 of the Code - Admission of this petition and initiation of CIRP against the Corporate Debtor shall be the harshest action if allowed to be taken in the foregoing facts and circumstances. The application of the Financial Creditor does not inspire confidence and has failed to convince us as regards fixing any liability on this Corporate Debtor as regards the outstanding dues of the Financial Creditor. Nothing is found due and payable by the corporate debtor to the financial creditor - Petition dismissed.
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2020 (10) TMI 733
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The Petition under Section 9 of Insolvency and Bankruptcy Code, 2016 is filed on 07.03.2013 for the default amount of INR18,48,234.54Ps, which was due on account of non-payment for security services provided by the Petitioner to the Respondent as per the work order dtd 14.01.2013 - The above work order dtd 14.01.2013 duly signed by the Petitioner and the Respondent, consists of terms and conditions, wherein at point no. 11, it is stated that - In case of any theft from our factory due to security lapses or inefficiency, the same will be recovered from NISA's A/c. - The work order of 14.01.2013 is effective from 20.01.2013 to 19.01.2014, but it has not been extended. Pre-existing disputes is established when the Respondent in its reply has raised the contentions that a statutory notice was sent on 24.08.2016 demanding an amount of INR75.00 Lakhs by the Respondent to the Petitioner and the same was also replied by the Petitioner. Thereafter, the Respondent had filed CP(L) 889 of 2016 under Section 433 and 434 of the Companies Act, before the Hon'ble High Court, Bombay - The dispute regarding the breach of terms and conditions of the work order was raised by the Corporate Debtor long back prior to the issue of demand notice. Hence this is a case of preexisting dispute between the Corporate Debtor and the Petitioner. The disputes raised by the Corporate Debtor falls within the ambit of Section 5(6) of the Code which provides as below: dispute includes a suit or arbitration proceedings relating to- (a) the existence of the amount of debt; (b) the quality of goods or service; or (c) the breach of a representation or warranty; There is a pre-existing dispute, in relation to the unpaid operational debt, between the parties which is supported by the evidence placed on record. This dispute existed prior to the serving of demand notice under section 8 and the Operational Creditor had such notice of existence of such dispute - application rejected.
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2020 (10) TMI 732
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The Principal amount had been paid by the Respondent and the interest thereupon had also been paid by issue of shares, and when the same had been accepted by the BIFR as the final settlement of its liability under the revised Scheme, further interest, i.e. interest on interest, being charged by the Petitioner would not constitute debt as per the Code, even if it is otherwise payable. As per Section 5(8) of the Code, financial debt means a debt along with interest, if any, which is disbursed against the consideration for the time value of money - The interest upon interest claimed after much time is not receivable against any disbursement against the consideration for the time value of money, or against any Agreement or Contract between the parties concerned, and does not give rise to a right to payment in the hands of the creditor. No claim or debt therefore arises. There could, therefore, also be no default under the Code. The Petition fails on this account. The entire exercise of repayment of debt in this Petition is an exercise in recovery. Once the matters have been brought under the IBC 2016, and all earlier matters have abated, they have to be considered under the provisions of the Code. It is a settled position of law that the provisions of the Code cannot be invoked for recovery of outstanding amount but can be invoked to initiate CIRP for justified reasons as per the Code - In the instant case there was no debt within the meaning of the Code, even if there may otherwise be amounts payable by the Respondent, and that too was disputed from the very beginning requiring the intervention of the BIFR with the Petitioner opposing various proposals, from time to time. There was. therefore, no clear debt. Proceedings under the Code are summary proceedings where the debt, if any, has to be undisputed and clear. This is not the case here. Petition dismissed.
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Service Tax
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2020 (10) TMI 731
Maintainability of appeal - appropriate forum - Classification of Services - Business Auxiliary Services or Erection, Commissioning or Installation? - sales commission received by the appellant from M/s. Electrosteel Castings Ltd., M/s. Lanco Industries Ltd., and M/s. Pacific Pipe Systems Pvt. Ltd. - HELD THAT:- Having regard to the subject-matter and the issue decided by the Tribunal, the appeal would lie to the Supreme Court in terms of Section 35L of the Act 1944. Without entering into the merits of the matter, this appeal is disposed off on the ground that the same is not maintainable before this Court. It would be open for the Revenue to avail appropriate legal remedy before appropriate forum in accordance with law.
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2020 (10) TMI 730
Classification of services - Business Auxiliary Services or not - Sales Promotion Agency - extended period of limitation - penalties - HELD THAT:- Business Auxiliary Service is defined during the relevant period included the services related to promotion or marketing or sales of goods produced or provided by or belonging to the client. The agreements which have been entered into clearly state that the appellant has been employed as a promoter of the products of their clients - It is true that there is only one customer viz; APBCL in the State of Andhra Pradesh who purchases IMFL from various distilleries and in turn would sell it in retail. Therefore, it is in the interest of every distillery to ensure that they sell more to the customer of APBCL. This is sought to be done, inter alia, by close coordination with the retailers, to ensure maximum quantities of their client s products are ordered by the retailer from the depots of APBCL. For this purpose, they need to promote and market their goods to the sole customer. The Promoter i.e. the appellant got paid at ₹ 8/- per case as service charges on the secondary sales of their brands during the period of agreement. All these factors make it abundantly clear that not only is the agreement titled as sales promotion agreement but the responsibilities of the appellant or that of sales promotion, there may be some other related incidental responsibilities and the payment to the appellant is based on the sales of the products. Although there is only one wholesale buyer, APBCL, their orders depend on the orders which the retailers place on the depots of APBCL. The appellant was specifically required to ensure that the retailers place maximum quantities of the client s products on APBCL depots. Thus, the services rendered by the appellant are in the nature of promotion and marketing of the clients products - the appellant is liable to pay service tax under Business Auxiliary Services for the services rendered by them. Extended period of Limitation - Penalty - HELD THAT:- The appellant has not taken the registration nor disclosed the nature of their activities to the Service Tax Department at any stage. It is only on the basis of specific intelligence and follow up of investigations that it has come to the light that the appellant was rendering Business Auxiliary Services and has neither obtained registration nor filed returns nor has paid any service tax whatsoever - the appellant has suppressed these facts and therefore the invocation of extended period of limitation under Section 73 is correct and proper. Consequently, the confirmation of interest is also liable to be upheld - penalties also upheld. Appeal dismissed - decided against appellant.
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Central Excise
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2020 (10) TMI 756
CENVAT Credit - inputs procured by themselves and used in the manufacture of job work goods and cleared under Notification No. 214/86-CE dated 25.03.1986 - credit denied on the ground that goods manufactured on job work basis, wherein the subject inputs were used, have been cleared under Notification No. 214/86-CE, without payment of excise duty - HELD THAT:- The issue is no longer res-integra as in various judgments including the judgments in the appellant s own case, BANCO ALUMINIUM LTD VERSUS C.C.E. S.T., VADODARA-I [ 2019 (7) TMI 1691 - CESTAT AHMEDABAD] this Tribunal has held that inputs used in the manufacture of job work goods, under Notification No. 214/86-CE dated 25.03.1986, particularly by virtue of specific provision under Rule 3(1), in the appellant s own case, the Tribunal held that even though the job work goods are exempted under notification 214/86-CE, the credit is allowed. CENVAT credit allowed - appeal allowed - decided in favor of appellant.
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2020 (10) TMI 729
Condonation of Delay in filing the miscellaneous application for restoration of appeal - rectification of mistake - HELD THAT:- There is no delay in filing the miscellaneous application for restoration of appeal inasmuch as upon receipt of the Final Order, the applicant /respondent had filed the appeal before the Hon ble Bombay High Court, which was withdrawn with liberty to file a rectification application before the Tribunal. Hence, the miscellaneous application is disposed of, holding that there is no delay in filing the said application before the Tribunal. Rectification of Mistake - error apparent on the face of record or not - HELD THAT:- The submissions made in the said miscellaneous application was considered by the Tribunal in specifically observing at paragraph 5 therein that during the disputed period 2005-06, the respondent did not refund the disputed duty amount to its buyers. Such findings were recorded by the Tribunal upon examination of the relevant documents including the invoices etc. available in the case file during the course of hearing of appeal. Thus, it cannot be said that there is apparent mistake in the said order passed by the Tribunal, which can be rectified as prayed for by the applicant/respondent - there is no merit in the miscellaneous application filed for rectification of mistake - application dismissed.
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CST, VAT & Sales Tax
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2020 (10) TMI 728
Violation of principles of natural justice - recovery of TDS - Service of notice - HELD THAT:- We are not inclined to interfere with the order passed by the learned Single Judge in any manner because the allegation of breach of principles of natural justice made by the Assessee has already been found in favour by the learned Single Judge in the impugned order passed by setting aside the order dated 9.2.2017 which was passed after the Show Cause Notice dated 1.9.2016 - When challenge was raised before the learned Single Judge, the Petitioner/Assessee was able to satisfy the learned Single Judge that the notice and the impugned order were never served on the Assessee and therefore, opportunity of hearing was not given to the Assessee. Since the matter has been remanded back to the Assessing Authority to give an opportunity of hearing to the Assessee on this ground, there is no reason to interfere with the said order, which is essentially in favour of the petitioner only. Apparently, the remand order is only for looking into the issue of TDS made by the Assessee and deposit or recovery thereof - the Assessee is directed to appear before the Assessing Authority in the first instance on 21.10.2020 at 11.00 am and further it is directed that the Assessing Authority to pass appropriate orders after hearing the Assessee as early as possible, preferably within one month thereof.
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2020 (10) TMI 727
Payment of tax at compounding rate - alleged suppressed sale - Section 3(4) of the TNVAT Act - HELD THAT:- Section 3(4)(b) of the Tamil Nadu Value Added Tax, (Fourth Amendment) Act 2011, enables the dealer to pay tax for a year on his turnover relating to taxable goods upto ₹ 50 lakhs at 1% and for the sales turnover over and above ₹ 50 lakhs, he is liable to pay tax under Section 3(2). The aforesaid amendment came into effect from 01.04.2012 and a bare reading of the provision explicitly permits the dealer to pay tax at the compounded rate of 1% under Section 3(4) for the sales turnover below ₹ 50 lakhs and for the turnover that exceeds ₹ 50 lakhs, they are liable to pay tax under Section 3(2) of the TNVAT Act. In view of the amendment, the respondent may not be justified in bringing the dealer out of the purview of Section 3(4) of the Act, as and when it is found that the sales turnover of the dealer exceeds ₹ 50 lakhs and thereby, subject them to the rate of tax under Section 3(2) for the entire sales turnover . The matter is remanded back to the respondent herein for reconsideration - Petition allowed by way of remand.
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Indian Laws
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2020 (10) TMI 746
Violation of Principles of Natural Justice - Cancellation of second tender - E-Tender notice for unloading/loading of foodgrains/fertilizer bags from/into railway wagons, trucks etc., stacking the foodgrains/fertilizers in bags, bagging, weighment, standardisation, cleaning of foodgrains/fertilizers etc. and transporting of foodgrains/fertilizers etc. from Railway Station to Corporation godowns or vice versa - Managing Director of the Corporation cancelled the aforesaid tender apparently on the ground that it was impractical to go ahead with such tender. HELD THAT:- Despite the fact that the prayer in the Writ Petition filed by Respondent No.1 was set out in the very beginning of the impugned judgment, confining itself to the cancellation of the second tender, the impugned judgment went ahead and not only set aside such cancellation vide the letter dated 26.07.2019, but also went ahead and set aside the Managing Director s report dated 14.06.2019, and the Special Secretary s order of 16.07.2019, which required the taking of disciplinary action and recovery of financial loss from those who are responsible. Shri Rakesh Dwivedi also fairly conceded that his client had not asked for any relief qua the delinquent officers. This being the case, we set aside the impugned judgment insofar as it has quashed the Managing Director s report dated 14.06.2019, and the order of the Special Secretary dated 16.07.2019. Any consequential action that is to be taken pursuant to these orders must follow in accordance with law. It may be added that every case in which a citizen/person knocks at the doors of the writ court for breach of his or its fundamental rights is a matter which contains a public law element , as opposed to a case which is concerned only with breach of contract and damages flowing therefrom. Whenever a plea of breach of natural justice is made against the State, the said plea, if found sustainable, sounds in constitutional law as arbitrary State action, which attracts the provisions of Article 14 of the Constitution of India - The present case is, therefore, a case which involves a public law element in that the petitioner (Respondent No.1 before us) who knocked at the doors of the writ court alleged breach of the audi alteram partem rule, as the entire proceedings leading to cancellation of the tender, together with the cancellation itself, were done on an ex parte appraisal of the facts behind his back. Judged by the touchstone of these tests, it is clear that Respondent No.1 has been completely in the dark so far as the cancellation of the award of tender in his favour is concerned, the audi alteram partem rule having been breached in its entirety. As has been correctly argued by Shri Rakesh Dwivedi, prejudice has indeed been caused to his client, not only from the fact that one year of the contract period has been taken away, but also that, if the impugned High Court judgment is to be set aside today, his client will be debarred from bidding for any of the Corporation s tenders for a period of three years. Undoubtedly, prima facie, the rates at which contracts have been awarded pursuant to the tender dated 01.06.2018 are way above the rates that were awarded of the same division, and for exactly the same amount of work awarded vide the earlier tender advertisement dated 01.04.2018. Shri Dwivedi s argument that in the neighbouring regions the rates tendered were also high, and nothing has yet been done to nullify these tenders and the financial loss caused, does carry some weight. That a huge financial loss to the Corporation has also taken place is something for the Corporation to probe, and take remedial action against the persons responsible. The impugned judgment of the High Court is upheld on the ground that natural justice has indeed been breached in the facts of the present case, not being a case of admitted facts leading to the grant of a futile writ, and that prejudice has indeed been caused to Respondent No.1. In view of this finding, there is no need to examine the other contentions raised by the parties before us - appeal disposed off.
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2020 (10) TMI 726
Dishonor of Cheque - insufficiency of funds - discharge of a legally enforceable debt or not - offence punishable under section 138 of NI Act or not - HELD THAT:- It is the duty of the accused before the court by adducing evidence to show that the cheque was not supported by consideration and that there was no debt or liability to be discharged as alleged. It is necessary on the part of the accused to set up a probable defence for getting the burden of proof shifted to the complainant. Once such rebuttable evidence is adduced and accepted by the court, the burden shifts back to the complainant. Having regard to the materials on record, this Court is of the view that the accused failed to adduce evidence to rebut the presumption or a probable case to shift the burden to the complainant. It is well settled law that in a revision against conviction and sentence rendered concurrently by the trial court as well as the appellate court, the High Court does not, in the absence of perversity, upset factual findings arrived at by the appellate court. It is not for the revisional court to re-analyse and re-interpret the evidence on record in a case where the appellate court has come to a probable conclusion. On going through the impugned judgment, this Court is of the view that the appellate court correctly applied the presumption under Section 139 of the Act. Unless the contrary is proved, it is presumed that the holder of a cheque received the cheque of the nature referred to in Section 138 of the Act for the discharge, in whole or in part, of any debt or other liability. On a perusal of the entire evidence, it is disclosed that Ext.P2 cheque was issued to the complainant. The cheque was presented in time. Notice was issued calling upon the accused to pay the amount covered under the cheque within 15 days from the date of receipt of the notice in accordance with law. The amount was not paid as demanded. Hence, all the legal formalities under Section 138 of the NI Act have been complied with - In the case at hand, the accused has no case that she has not signed the cheque or parted with under any threat or coercion. That apart, the accused has no case that unfilled cheque had been lost irrecoverably or stolen. The accused failed to prove in the trial by leading cogent evidence that there was no debt or liability. In view of the above, this Court is of the view that the trial court and the appellate court rightly entered a finding that Ext.P2 cheque was issued for a legally enforceable debt. Accordingly, the case of the complainant has been proved beyond reasonable doubt. The offence punishable under Section 138 of the NI Act is punishable with imprisonment or with fine or with both. Considering the fact that the accused is a lady aged 66 years, it is not necessary to impose compulsory imprisonment on her. Hence, the sentence imposed is liable to be modified - application allowed in part.
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2020 (10) TMI 725
Dishonor of Cheque - the accused was directed to pay a sum of ₹ 3,25,000/- as compensation. Default sentence was also imposed - HELD THAT:- The learned counsel appearing for the petitioner states that the petitioner is now aged about 60 years. He is said to be suffering from old age related ailments. Therefore, the learned counsel appearing for the petitioner wanted this Court to show some indulgence. The petitioner had remitted a sum of ₹ 50,000/- at the time of obtaining suspension of sentence. The petitioner has no objection for the legal heirs of the complainant to take the said amount. The petitioner is also willing to deposit a further sum of ₹ 50,000/- to the credit of S.T.C.No.449 of 2011 on the file of the Judicial Magistrate, Aundipatti, within a period of eight weeks from the date of receipt of a copy of this order. The legal heirs of Baskaran can withdraw the same. If the petitioner does not comply with the said undertaking to pay a sum of ₹ 50,000/- more within the period mentioned above, the petitioner will undergo the default sentence. Recording the said undertaking of the revision petitioner, the Judgment passed by the Courts below is modified as follows:- a) The conviction imposed on the petitioner finding him guilty of the offence under Section 138 of the Negotiable Instruments Act is confirmed. b) The sentence of imprisonment for a period of six months Simple Imprisonment is modified to five months Simple Imprisonment. c) The petitioner has already undergone the said five months Simple Imprisonment and that therefore, he need not undergo the modified sentence of imprisonment. d) The compensation directed to be paid by the petitioner is reduced to ₹ 50,000/-. The petitioner is given eight weeks from the date of receipt of a copy of this order to deposit the said amount. The legal heirs of the complainant can withdraw the amount of ₹ 50,000/- already deposited by the accused and the amount of ₹ 50,000/- to be deposited by the petitioner. e) If the petitioner fails to pay the compensation amount of ₹ 50,000/-, the petitioner will undergo the default sentence for a period of three months Simple Imprisonment. Criminal revision petition stands partly allowed.
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