TMI Tax Updates - e-Newsletter
October 28, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
GST Fraud - Misuse of Aadhar and PAN cards of writ petitioner - offence of issuing invoice without supply of goods in violation of TN-GST, C-GST Acts and rules thereunder - levy of penalty u/s 122(1)(ii) of TNGST and CGST Acts - a criminal complaint has been lodged by the writ petitioner and investigation is under-way - it would only be appropriate to set aside the impugned order without expressing any view or opinion on the merits of the matter, leaving it open to respondents to proceed afresh either against writ petitioner or any other entity or person depending on the outcome of investigation that is under-way qua alleged misuse of writ petitioner's Aadhar and PAN cards to obtain a fake registration. - HC
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GST:
Input Tax Credit - option to pay GST at concessional rate availed - other indirect expenses incurred for the purpose of business such as rent, commission, professional fees, telephone etc. - since the applicant has been availing the benefit of the said notification and paying GST at a concessional rate, they shall not avail Input Tax Credit. - AAR
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GST:
Taxable services or exempt services - mixed supply of services to MCGM by the applicant - Vehicle with All India Tourist Permit provided for Carrying Covid 19 Patients for Medical Treatment - The applicant has not submitted that they have provided ambulance service for the covid patients. Neither have they submitted anything on record to show that the Innova vehicles supplied by them have been converted into ambulances or registered as such, nor have they submitted proof of having transported only covid 19 patients for medical treatment. Further, the vehicles are not registered with RTO for the use as the Ambulance and they are registered as tourist vehicles. - AAR
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GST:
Input Tax Credit - inputs/input services procured by the applicant to implement the promotional scheme under the name 'Buy n Fly' - The input goods/services in the form of Trip to Dubai, Gold voucher, Televisions, Air coolers procured by the applicant for the intended use in furtherance of their business and distributed to the retailers under the 'Buy N Fly' scheme, are goods/services which are in the nature of gifts for personal consumption of the receiver specifically restricted under Section 17(5)(g) of the GST Act - ITC is not available - AAR
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GST:
Classification of goods - four toys in which physical force is the primary action and have electronic circuits/parts for providing light, music, horn etc arc ‘electronic toys’ - The products Children Scooter, Activity Ride-on, Smart Tri-cycle and Kick Scooter, in which physical force is the primary action and contains an in built electronic circuit, are ‘Electronic Toys’ and the applicable GST Rate is CGST @ 9% and SGST @ 9% - AAR
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Income Tax:
Addition u/s 2(22)(e) - deemed dividend - What is required to be seen is whether CAPL has advanced moneys as pure loan amounts or for business purposes. The agreements produced by the assessee before Ld CIT(A), which were also confronted with the AO, would prove that the transactions entered between the parties are business transactions. The Ld A.R also submitted that both the companies are maintaining accounts as running accounts only and real estate investment activity was agreed to be a continuous activity. Hence the question of making one to one reconciliation, as contended by Ld DR. would not arise in these types of transactions. - additions made u/s 2(22)(e) deleted - AT
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Income Tax:
Validity of selection of case for scrutiny under compulsory scrutiny criteria - the assessee has challenged the scrutiny assessment as the Assessing Officer has not obtained necessary sanction from the competent authority as per the instruction of CBDT - when the fact of the conducting the survey as well as the post survey enquiry is not in dispute then the case of the assessee would certainly fall under the category of selection under compulsory scrutiny. No substance or merit in the additional ground raised by the assessee - AT
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Income Tax:
Assessment u/s 153A - Addition u/s 68 - incriminating documents - Demat statements and real time transactions through screen based trading on recognized stock exchanges. Simply because certain persons have admitted to have provided these entries as accommodation entries, cannot make these entries incriminating unless such persons are subjected to cross examination by the assessee. - AT
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Income Tax:
Disallowance of proportionate interest u/s 36 (1) (iii) - when assessee had sufficient funds, why should it depend on borrowed funds. In any case, if at a given point of time assessee has own funds and they have advanced it as interest-free loans to sister concerns for meeting their business needs, in which assessee also has an interest, then such advances should not lead to disallowance of interest paid on borrowings. In other words, unless the assesses establishes with cash flow statements about availability of its own funds at the time of making the interest-free advances. - Matter restored back for verification - AT
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Income Tax:
Loss incidental to business - non-recovery of certain business advances - Once assessee had any business transaction with any party during the course of which if assessee had incurred any loss and for which detailed justification and explanation has been given with documentary evidences, we failed to understand as to why such a loss can be disallowed once there is no controversial material or inquiry denied by the said party. Simply rejecting the explanation on flimsy grounds without any inquiry cannot be sustained. - AT
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Income Tax:
Undisclosed capital gain - The approach of the revenue authorities in treating the oral statement of the searched person as sacrosanct in total disregard to the registered documentary evidence available, is not in accordance with law and the addition made, therefore, by holding that the surplus consideration was received in the impugned transaction in the hands of the assessee is, therefore, directed to be deleted - AT
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Customs:
Entitlement to O&M benefits (fiscal benefits covered under Section 26 of the SEZ Act in respect of maintenance and duty free import to raw materials and consumables for generation of power) - whether the condition that no duty free benefits for transfers to EOU is contrary to the SEZ Act and the Rules made thereunder? - The dispute in the present case relates to the direction to re-demarcate the petitioner’s power plant as a non-processing unit for the purposes of the 2009 Guidelines. The direction to re-demarcate is clearly not traceable to Section 26(2) of the SEZ Act. - The present petition is allowed to the limited extent that the condition imposed by Unit Approval Committee of refunding the O&M benefits obtained by the petitioner during the period 01.04.2015 to 15.02.2016 by its letter dated 18.04.2016, is set aside - HC
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Corporate Law:
Effective date of Resignation from the post of Managing Director - Compiling Proceedings against the Director / Petitioner for Non-appointment of Woman Director in the company - Even assuming that the petitioner had submitted his resignation to the Registrar of Companies on 05.09.2013, however, the petitioner had filed FORM DIR-11 only belatedly after initiation of the present proceedings and Form DIR-12 has not been filed subsequently by the company. - This Court is of the view that the grounds and the submissions raised by the petitioner are purely a matter of evidence and the same cannot be gone into by this Court in the quash petition - HC
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Indian Laws:
Difference between Fee and Tax - water and sewerage taxes levied and collected - legislative competence of State Legislature to levy the tax under the provisions of Section 52(1)(a) - There can be no manner of doubt that the levy which is imposed under Section 52 is a tax on lands and buildings situated within the area of the Jal Sansthan for the purpose of imposing the tax. The tax is imposed on premises which fall within the territorial area of the Jal Sansthan. The expression ‘premises’ is defined to mean land and building. The tax is on lands and buildings. - The levy under Section 52 falls squarely under the ambit of Entry 49 of List II as it is in the nature of a tax and not a fee. Thus, the applicability of Entry 17, which is a non-taxing entry, does not arise in this case. - SC
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Indian Laws:
Seeking grant of Bail - Breach of Trust - trading in crypto currency - collection of huge amounts from gullible investors - Coupled with the factum that after allegedly inducing the complainants to give their hard earned money for investment in the firm Pluto Exchange, the assured returns were not given to the investors with the applicant having closed his office of the Pluto Exchange firm at Connaught Place and having gone away to Dubai apparently admittedly even as per averments made in his application though he has submitted that he was running a gold business, the factum that despite running a gold business, the applicant did not return the amounts due to the complainants, cannot be overlooked - Bail rejected - HC
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IBC:
Initiation of CIRP - It is clear that Respondent ‘Eastern Embroidery Collections Private Limited’ was the Corporate Guarantor of the Principal Borrower ‘Eastern Overseas’, and not a Personal Guarantor. Therefore, in terms of Sub-section (7) and (8) of Sec 3 of I&B Code, 2016 is a Corporate Debtor. Further, the applicable Rules would be ‘Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016’. - The Adjudicating Authority committed an error in holding that action should have been initiated against the Personal Guarantor of the Corporate Debtor under Section 95 of the Code instead of proceeding against the Corporate Debtor - AT
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VAT:
Rejection of input tax credit - Fictitious dealers - Bogus supplier - protective assessment under Section 38[5] of the Act - levy of penalty - since it is established that supplier was not existing, credit cannot be allowed - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2021 (10) TMI 1124
Seeking a direction to upload the Form GST TRAN-1 within extended timeline - HELD THAT:- Identical issue decided in the case of M/S RATEK PHEON FRICTION TECHNOLOGIES PRIVATE LIMITED VERSUS PRINCIPAL COMMISSIONER AND 2 OTHERS AND M/S MODERN PLYWOOD CENTRE, M/S ALLIED AGENCIES VERSUS UNION OF INDIA AND 5 OTHERS [ 2021 (9) TMI 1042 - ALLAHABAD HIGH COURT ] where it was held that if the respondents had offered a functional system, the State could not have deprived the petitioners of transition credit of CENVAT and ITC (under the repealed laws) - thus, there is no hesitation in observing that a reasonable opportunity ought to have been granted to all registered persons /taxpayers to submit/revise/re-revise electronically their Form GST TRAN-1/TRAN-2. Petition is allowed.
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2021 (10) TMI 1123
Seeking a direction to upload the Form GST TRAN-1 within extended timeline - HELD THAT:- Identical issue decided in the case of M/S RATEK PHEON FRICTION TECHNOLOGIES PRIVATE LIMITED VERSUS PRINCIPAL COMMISSIONER AND 2 OTHERS AND M/S MODERN PLYWOOD CENTRE, M/S ALLIED AGENCIES VERSUS UNION OF INDIA AND 5 OTHERS [ 2021 (9) TMI 1042 - ALLAHABAD HIGH COURT] where it was held that if the respondents had offered a functional system, the State could not have deprived the petitioners of transition credit of CENVAT and ITC (under the repealed laws) - thus, there is no hesitation in observing that a reasonable opportunity ought to have been granted to all registered persons /taxpayers to submit/revise/re-revise electronically their Form GST TRAN-1/TRAN-2. Petition is allowed.
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2021 (10) TMI 1122
GST Fraud - Misuse of Aadhar and PAN cards of writ petitioner - offence of issuing invoice without supply of goods in violation of TN-GST, C-GST Acts and rules thereunder - levy of penalty u/s 122(1)(ii) of TNGST and CGST Acts - HELD THAT:- This Court is of the view that owing to the nature of the stand taken by the writ petitioner and owing to this Court noticing that a criminal complaint has been lodged by the writ petitioner and investigation is under-way, it would only be appropriate to set aside the impugned order without expressing any view or opinion on the merits of the matter, leaving it open to respondents to proceed afresh either against writ petitioner or any other entity or person depending on the outcome of investigation that is under-way qua alleged misuse of writ petitioner's Aadhar and PAN cards to obtain a fake registration. In the light of writ petitioner having demonstrated her bona fides by lodging an FIR, it is only appropriate that an order as on the lines alluded to supra is made. Impugned order being made by first respondent and consequential order being order dated 23.07.2021 made by second respondent are set aside solely on the ground that alleged misuse of writ petitioner's Aadhar and PAN Cards and obtaining of fraudulent registration is under investigation - it is made clear that no opinion or view on the merits of the matter has been expressed in this order. Petition disposed off.
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2021 (10) TMI 1121
Permission to carry forward unutilised CENVAT credit of duty paid under Central Excise Act, 1944 as well as the Input Tax Credit under VAT Act of the respective States - HELD THAT:- The issue decided in the case of UNION OF INDIA MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, THROUGH ITS SECRETARY (REVENUE) VERSUS M/S ASAID PAINTS LIMITED [ 2021 (3) TMI 953 - KARNATAKA HIGH COURT] where it was held that the respondents-assessees are permitted to file/revise TRAN-1 either electronically or manually on or before 31.03.2021. Appeal dismissed.
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2021 (10) TMI 1120
Input Tax Credit - option to pay GST at concessional rate availed - other indirect expenses incurred for the purpose of business such as rent, commission, professional fees, telephone etc. - N/N. 8/2018- Central Tax (Rate) dated 25/01/2018 - HELD THAT:- From a reading of the said notification it is seen that the concessional rate under the notification shall not apply, if the supplier of such goods has availed input tax credit as defined in clause (63) of section 2 of the Central Goods and Services Tax Act, 2017, CENVAT as defined in CENVAT Credit Rules, 2004 or the input tax credit of Value Added Tax or any other taxes paid, on such goods. In other words, since the applicant has been availing the benefit of the said notification and paying GST at a concessional rate, they shall not avail Input Tax Credit. Other issues are withdrawn by the applicant - application disposed off.
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2021 (10) TMI 1119
Scope of Advance Ruling application - Classification of services - Works contract services - Krishna Bhima stabilization project - recipient of services - to be classified under sub-clause (vii) of serial no 3 of Heading 9954 (construction of service) substituted by way of Notification No 31/2017-Central tax (Rate) dated 13th Oct 2017 as amended to original notification 11/2017 - Central Tax (Rate)? - HELD THAT:- This authority is governed by the provisions of Chapter XVII of CGST ACT and the relevant Sections are 95 to 98, 102, 103, 104 and 105. As per Section 95, the term 'advance ruling' means a decision provided by this authority to an applicant on matters or questions specified in sub-section 2 of Section 97, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Section 95 of the CGST Act, 2017 allows this authority to decide the matter in respect of supply of goods or services or both, undertaken or proposed to be undertaken by the applicant. The applicant has not undertaken the supply in the subject case. Rather, the applicant is a recipient of impugned services in the subject case. The impugned transactions are not in relation to the supply of goods or services or both undertaken or proposed to be undertaken by the applicant and therefore, the subject application cannot be admitted as per the provisions of Section 95 of the GST Act. Hence without discussing the merits of the case, the subject application is rejected as not being maintainable.
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2021 (10) TMI 1118
Taxable services or exempt services - mixed supply of services to MCGM by the applicant - Toyota Innova or Equivalent Vehicles (6 Seater) registered in Tourist Category with All India Tourist Permit provided for Carrying Covid 19 Patients for Medical Treatment - HELD THAT:- Even though the applicant has submitted that the subject supplies would fall under no. 6 of twelfth schedule article 243W of the constitution i.e. Public health, no evidence or documents have been submitted to substantiate their claims for exemption. Further, the only SERVICE PURCHASE ORDER', submitted by the applicant mentions the description of service as Adv for ambulance like Innova covid 19 . The applicant has not submitted that they have provided ambulance service for the covid patients. Neither have they submitted anything on record to show that the Innova vehicles supplied by them have been converted into ambulances or registered as such, nor have they submitted proof of having transported only covid 19 patients for medical treatment. Further, the vehicles are not registered with RTO for the use as the Ambulance and they are registered as tourist vehicles. It is also observed that, in its Circular No. 51/25/2018-GST dated 31/07/2018 the Central Government clarified that the service tax exemption at Sr. No. 25 (a) of Notification No. 25/2012 dated 20/06/2012 (ST Notification) has been substantially, continued under GST vide Sr No. 3 and 3A of the Exemption Notification. Sr. No. 25(a) of the ST notification under the erstwhile service tax laws, exempted services provided to the Government, a local authority or a governmental authority by way of water supply, public health, sanitation, conservancy, solid waste management or slum improvement and up-gradation. The said supply does not satisfy the provisions of Entry No 3 of Notification no. 12/2017-C.T. (Rate) dated 28th June, 2017 as amended and therefore cannot be treated as exempted. Therefore the same is liable to tax under the Notification No. 11/2017-C.T. (Rate) dated 28th June 2017, as amended.
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2021 (10) TMI 1117
Input Tax Credit - inputs/input services procured by the applicant to implement the promotional scheme under the name 'Buy n Fly' - Section 16 read with Section 17 of the CGST Act, 2017 and TNGST Act, 2017 - HELD THAT:- The promotional scheme, 'Buy n Fly' is a scheme launched in the furtherance of business and the goods/services procured as a reward to the scheme are those procured in furtherance of business. The applicant has furnished the Tax Invoice for such purchases and it is seen that, the Invoice is raised on them only. The Prima facie conditions under Section 16 stands fulfilled. Section 17(5) of the GST Act, gives the situations wherein, even when such goods/services are procured for furtherance of business, the tax paid thereon are not available as Input Tax Credit. The said section starts with 'Non obstante clause', 'Notwithstanding anything contained in sub section (1) of section 16', which indicates that the provisions under Section 17(5) prevails over section 16(1) of the Act. Section 17(5)(g) above, restricts the ITC on the goods/services procured for personal consumption, even if those goods/services are procured in the furtherance of business. 'Personal Consumption' is not defined in the GST Law - the claim that the cost of these goods/services are accounted under sales promotion account, the expenses under which are considered to arrive at the cost of the product is immaterial and the argument does not hold, in as much as the credit of taxes paid on the goods/services for personal consumption is explicitly restricted. The fact of who pays for the goods and services here is irrelevant to the usage of the said goods and services. The goods and services are used by the retailers and hence are for personal consumption and the applicant is ineligible to take input tax credit on the inward supply of these goods/services. The input goods/services in the form of Trip to Dubai, Gold voucher, Televisions, Air coolers procured by the applicant for the intended use in furtherance of their business and distributed to the retailers under the 'Buy N Fly' scheme, are goods/services which are in the nature of gifts for personal consumption of the receiver specifically restricted under Section 17(5)(g) of the GST Act - further, the promotional rewards in goods being consumables in nature are gifts extended to the retailers for promoting their products, voluntarily distributed by the applicant without any consideration/ Tax invoice and are in the nature of gifts meant for personal consumption. Hence the input tax credit of the taxes paid on the goods/services procured to be distributed as rewards is not available to them under Section 17(5)(g) read with Section 17(5)(h) of the CGST Act 2017.
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2021 (10) TMI 1116
Classification of goods - four toys in which physical force is the primary action and have electronic circuits/parts for providing light, music, horn etc arc electronic toys - whether these toys will be taxable at 18% GST as per Sl.No. 440 of Schedule-III of the rate Notification or Other than electronic toys attracting 12% GST as per Sl.No. 228 of Schedule --II of the rate Notification - HELD THAT:- The applicant arc trading the toys , viz., Children s Scooter, Smart Tri-cycle, Activity Ride-on and Kick Scooter, which they have been considering as Toys - Other than Electronic and has applied the rate as specified under Sl.No. 228 of Schedule-II of the Rate Notification. These toys are advertised to help the Kids to develop the motor skills. It is evident that the Tricycles, Scooters, pedal cars, like the products in hand are to be classified under CTH 9503 only and the 8 digit classification in the Tariff is based on the material it is made of and classification is not provided based on whether it is operated manually or otherwise. The description of goods in entry Sl.No. 228 says Toys like tricycles, Scooters, pedal cars, etc and at Sl.No. 440 above, states as Electronic Toys like tricycles, scooters, pedal cars, etc . Thus, we see that both the entries speaks of Tricycles, Scooters, Pedal Cars, while one gives the rate for Toys , the other gives the rate for Electronic Toys . Electronic Toys are not defined in the said Notification and also in the Customs Tariff made applicable to GST - In the case at hand, Electronic Toys are not defined in the Notification and the applicable Tariff. In such a situation, there is no merit in importing the observation/decision based on a definition specific to a Notification. In the case at hand, it is seen that the Children Scooter, Activity Ride-on, Smart Tri- cycle and Kick Scooter, have an electronic circuit for flashing lights, playing music/sound and horn, which is either powered by the Battery housed in the toy or powered by the Induction force applied while playing with the toy. Thus all the four products consists of an electronic circuit as a part of the said Toy - it is not that the Scooters, Tri-cycle and Ride-on necessarily should have flashing lights, music/sound supplied by an exclusive electronic circuit. In the kick scooters meant for children upto the age of 14, the electronic circuit available in the product is powered by the Induction force, i.e., when physical force is applied and the kick scooter is moved, the physical force induces electrical energy which powers the electronic circuit and the LED starts flashing, thus encouraging the children while help improving the gross motor skills. The products are designed to develop gross motor skills in as much as they are designed to use the physical force and can be enjoyed by either pedaling, or by pushing with the leg and also fine motor skills like blinking, discrete tasks of switching on/off the music:/light etc provided through the inbuilt electronic circuit, powered with the electrical energy (battery)/ induction force. Both the functions of the toys are targeted to develop a certain skill while amusing the child playing with it. Therefore, the products in hand are Electronic Toys and the applicable GST Rate is as per Sl.No. 440 of Schedule-III of the Rate Notification. The products Children Scooter, Activity Ride-on, Smart Tri-cycle and Kick Scooter, in which physical force is the primary action and contains an in built electronic circuit, are Electronic Toys and the applicable GST Rate is CGST @ 18% as per S1.No. 440 of Schedule III to Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017.
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2021 (10) TMI 1115
Principles of natural justice - request of the appellant to conclude the case without issuance of SCN - HELD THAT:- Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed. Whereas, on going through the content of the letter against which the appellant has filed the appeal, it is found that it is not a Decision or Order as there is no findings or observation are given in the said letter or no provisions of law/Act has been discussed in the letter accordingly, the said letter does not come under the purview of definition of order/decision. Though, the definition of order/decision has not been given in GST law/Act however, it has been defined in various legal dictionary/form. It is apparent that order or decision is pronounced after an evaluation of facts and law with proper reasoning and discussion and findings whereas, on going through the content of the letter, that it is found that in the instant case, there is no findings or discussion or provisions of law are discussed therefore, appeal against the said letter is not maintainable/acceptable under Section 107(1) of CGST Act, 2017. This appeal is not maintainable and liable to be rejected.
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2021 (10) TMI 1065
Seizure of goods - absence of E-way bill - Section 129(3) of UPGST Rules, 2017 - HELD THAT:- For the period 1.2.2018 to 31.3.2018, the condition of E-way bill has been held to be not applicable. The order dated 28.2.2018 passed under Section 129(3) of UPGST Rules, 2017 is quashed and all consequential proceedings stands dropped - petition allowed.
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Income Tax
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2021 (10) TMI 1114
TDS u/s 194H - discounts given to collection centres - Whether ITAT was justified in holding that the relationship between the assessee and collection centres is in the nature of Principal to Principal and not that of Principal to Agent? - HELD THAT:- In this case, admittedly, respondent has not been paying any money to the collection centres. Respondent was only receiving payment from the collection centres. As noted earlier, the collection centres collect money from the patient and pays a reduced amount to respondent and keeps the difference for itself as its margin. As the section is applicable only to a person who is responsible for paying to deduct tax at the time of credit to the account of the payee or at the time of payment and as respondent does not perform any act of paying, there is no obligation on the company to deduct tax at source. We fail to understand appellant s arguments as to how respondent was to deduct TDS when it was not making any payment. Mr. Suresh Kumar was unable to explain how respondent should have deducted TDS and paid with the treasury when respondent was not making any payment. Even the Assessing Officer, who the appellant wishes to support, does not say anything on this - AO s order is contrary to sense. In our view, ITAT (though has applied slightly different preposition while allowing the appeal) has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.
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2021 (10) TMI 1113
Offences u/s 276CC, 276C(1) and 276C(2) of the Income Tax Act, 1961 - search conducted in the partner's premises and that the transactions were admittedly recorded in the books of accounts of the firm, the Income Tax Appellate Tribunal's view that there was concealment of income for invoking Section 271(1)(C) - as urged by the learned Counsel that putting the petitioners through the ordeal of trial would be a futile exercise - HELD THAT:- Income Tax Department, very fairly affirmed that the Dvision Bench of this Court had set aside the order of the Income Tax Tribunal and stated that no further proceedings are pending against the parties and that order of the Division Bench had not been taken up further in appeal by the department/revenue. Also affirmed by the learned Counsel that the complaint had been preferred only consequent to the order of the Appellate Tribunal. But, as it turned out, that particular order of the Tribunal had been set aside by the Divison Bench of this Court. Find every reason to interfere with further progress of E.O.C.C now pending of the file the learned Additional Chief Metropolitan Magistrate/E.O - I, Egmore, insofar as the petitioners/A1 to A3 are concerned and direct the same to be quashed - present Criminal Original Petition is allowed and E.O.C.C.on the file of the Additional Chief Metropolitan Magistrate, Economic Offences Court - I, Egmore is quashed.
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2021 (10) TMI 1112
Initiating the proceedings u/s 153C - grievance made on the part of the petitioner that the respondent has not disposed of the objections raised by the petitioner against the reopening - HELD THAT:- Noticing the requirement of the law, where the respondents have chosen not to dispose of objections raised to the satisfaction notes, without expressing any opinion on the correctness of initiation of the proceedings, the request is being granted to the assessee of availing opportunity of hearing. The objections raised by the assessee shall be considered by the respondent authority concerned which shall decide the same within the period of four weeks of the date of receipt of copy of this order. The order of disposing of the objection, if goes against the petitioner, the petitioner shall be availed the time of four weeks to avail the legal recourse in accordance with law. Present petition stands disposed of. Notice is discharged. Ad-interim relief, granted earlier stands vacated.
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2021 (10) TMI 1111
Deduction claimed u/s 80P(2)(d) - as argued reply filed by the petitioner was not even referred to, while passing the order of assessment - Petitioner contends that though an appeal is available u/s 246A of the Act, failure to consider the reply submitted by the petitioner amounts to violation of the principles of natural justice - HELD THAT:- As rightly argued by the respondent, this Court will not interfere normally under Article 226 of the Constitution of India on orders of assessment issued by the assessing authorities. It is equally settled that when there is a violation of the principles of natural justice, this Court can step in, even against assessment orders, to avoid the unnecessary travails of an assessee, in pursuing the statutory remedies. In the instant case, Ext.P9 show cause notice was issued on 22.03.2021 directing the petitioner to show cause as to why the assessment should not be completed as per the draft assessment order. The response of the petitioner was also sought for in the said show-cause notice. Petitioner s response to Ext.P9 is produced as Ext.P10, wherein it has raised an objection of some substance, however brief it may be. Certain documents were also produced along with Ext.P10. However, while issuing the order of assessment, it is seen that there is no reference at all to the response submitted by the petitioner nor is there any consideration of the document produced along with Ext.P10. Whether the contentions raised by the petitioner in Ext.P10 or whether the document produced along with Ext.P10 may have a bearing upon the case is not a matter which this Court can go into at this stage. An order of assessment is the foundation on which the rights of the assessee depend upon. It is necessary that the assessing authority considers the objections filed by the petitioner especially when a show-cause notice in the form of Ext.P9 had been issued, eliciting the response of the petitioner. Failure to consider the said response offered by the petitioner in the facts of the case is a negation of the rights of natural justice. In the said view of the matter, I find that the order of assessment suffers from the infirmity of violation of the principles of natural justice and is liable to be set aside. Accordingly, set aside Ext.P11 assessment order dated 19-04-2021 issued by the respondent and direct the respondent to consider and pass fresh orders for the assessment year 2018-19, relating to the petitioner, after affording an opportunity of hearing to the petitioner, as expeditiously as possible.
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2021 (10) TMI 1110
Stay of demand - deposit of 20% of the total demand - HELD THAT:- Exts.P2 and P8 directing deposit of 20% of the total demand are both made by the Income Tax Officer and not by the Appellate authority. Petitioner has not yet moved any application for stay of the assessment order in the pending appeal, before the 2nd respondent. As rightly pointed out by the learned Standing counsel, the Appellate Authorities are not bound by any office memorandum issued by the department, since they are exercising adjudicatory powers and possess discretionary powers. In considering the grant of stay pending appeal, the High Court of Delhi had clearly observed in Turner General Entertainment Networks case [ 2019 (1) TMI 1365 - DELHI HIGH COURT] that while, the authorities concerned have to apply their mind to decide such applications and pass appropriate orders independent of the office memorandum. The judgment of the High Court of Kerala, produced as Ext.P9, stands on a different footing since, in that case, this Court had directed the consideration of the appeal without insisting on any deposit due to the peculiar nature of the facts involved in that case. Petitioner, if he is so advised, ought to move an appropriate application for stay before the Appellate Authority. If such an application is preferred, needless to say, the appellate authority shall pass appropriate orders within a period of two months from the date of receipt of such an application. Further, if the Appellate Authority feels it desirable to consider and pass orders on the appeal itself, liberty is granted to the Appellate Authority to do so.
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2021 (10) TMI 1109
Validity of reopening of assessment - absence of a valid Section 143(2) notice issued by the Assessing Officer - HELD THAT:- AO has himself filed a remand report dt.13-07-2021 inter alia making it clear that he had issued 148 notice on 21-03-2014 followed by the assessee s latter submissions dt.07-01-2015 seeking to treat the original return filed on 31-07-2008 as the one in response to re-opening only. Learned assessing authority further states that it had issued only Section 142(1) notice(s) dt.21-01-2014 and 30-12-2014 thus, a Section 143(2) notice in the entire re-assessment process. We thus quote hon ble apex court s landmark decision in ACIT Vs. Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT] holding that Section 143(2) notice has to be mandatorily issued before framing an assessment. An assessee s letter seeking to treat the original return as that filed in furtherance to Section 148 notice requires issuance of a valid Section 143(2) notice. Thus the impugned re-assessment frame herein on 31-03-2015 is non est in law. The same stands quashed therefore. All other pleadings on merits are rendered infructuous. - Decided in favour of assessee.
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2021 (10) TMI 1108
Addition of deferred revenue income - HELD THAT:- We notice that the coordinate bench has upheld the view taken by Ld. CIT(A) on an identical issue in assessment year 2007-08 [ 2020 (1) TMI 1011 - ITAT BANGALORE] including the view taken by CIT(A) on alternative contention of the assessee. Following the same, we uphold the view taken by the Ld. CIT(A) on this issue in this year also. The alternative direction given by Ld. CIT(A) to A.O. is also upheld. Disallowance u/s 14A - HELD THAT:- We notice that the A.O. has made disallowance out of administrative expenses under Rule 8D(2)(iii). As per the decision rendered in the case of Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] only those investments which have yielded exempt income should be considered for computing average value of investments for the purpose of Rule 8D of I.T. Rules. Accordingly, we modify the direction given by Ld. CIT(A) and direct the A.O. to exclude all investments which did not yield any exempt income while computing average value of investments for the purpose of Rule 8D of I.T. Rules and compute the disallowance accordingly. Disallowance of software expenses - AO took the view that software purchases are in the nature of capital expenditure - AO disallowed the claim of the assessee and allowed depreciation @ 60%/30% depending upon the date of purchase of software - HELD THAT:- We direct the A.O. to examine the issue afresh as per the directions given by the Tribunal in assessment year 2011-12 [ 2020 (12) TMI 470 - ITAT BANGALORE] with regard to treating of software purchases as capital in nature. The AO should also examine the issue with regard to other directions issued by Ld CIT(A). Disallowance of brand building expenses - Revenue or capital expenditure - HELD THAT:- We hold that the brand building expenditure is allowable as revenue expenditure. We notice that the Ld. CIT(A) has observed that some of the invoices produced by the assessee do not relate to the year under consideration and further some of the expenditure is liable for tax deduction at source. Accordingly, we restore this issue to the file of the A.O. for examining the above said two observations made by CIT(A) and to take appropriate decision in accordance with law. Computation of deduction u/s 10A and 10AA - Reduction of expenses incurred in foreign currency from the export turnover while computing deduction u/s 10A - whether the expenditure incurred by the assessee in foreign currency is towards providing technical service outside India or not? - contention of Ld A.R is that assessee is providing BPO services and not any technical service as contemplated in the definition of export turnover given in sec.10A/10AA - HELD THAT:- As relying on M/S MPHASIS LTD [ 2014 (8) TMI 690 - KARNATAKA HIGH COURT] we direct the AO not exclude the expenditure incurred in foreign currency from export turnover.
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2021 (10) TMI 1107
Addition u/s 2(22)(e) - deemed dividend - Proof of substantial interest - assessee being a shareholder having substantial interest in the companies loans imparted by assessee - HELD THAT:- The agreement dated 14.11.2005 entered between both the companies makes it clear that BBPL has made investments in various projects of The Embassy Group and CAPL is involved in these ventures. It is further mentioned that CAPL shall pay money to BBPL as and when required to support the real estate investment activities. It has also been mentioned that the amount invested by CAPL shall be adjusted against the properties. It is an undisputed fact that the amounts invested by CAPL has been adjusted against the properties assigned to CAPL by BBPL, vide assignment agreements dated 28.03.2015. Thus the original agreement dated 14.11.2005 stands corroborated by the assignment agreements dated 28-03-2015. These uncontroverted documents supports the submissions of the assessee that the amounts given by CAPL to BBPL are not loans or advances contemplated in sec.2(22)(e) . What is required to be seen is whether CAPL has advanced moneys as pure loan amounts or for business purposes. The agreements produced by the assessee before Ld CIT(A), which were also confronted with the AO, would prove that the transactions entered between the parties are business transactions. The Ld A.R also submitted that both the companies are maintaining accounts as running accounts only and real estate investment activity was agreed to be a continuous activity. Hence the question of making one to one reconciliation, as contended by Ld DR. would not arise in these types of transactions. Accordingly, we confirm the order of Ld CIT(A) in deleting the additions made u/s 2(22)(e) of the Act in all the three years under consideration. Protective addition of undisclosed income in the hands of the assessee - When the sources stood explained, the question of making any addition on substantive basis or protective basis does not arise. Accordingly, we do not find any infirmity in the order of Ld CIT(A) in deleting the additions made on protective basis in all the three years. - Assessee appeal allowed.
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2021 (10) TMI 1106
Revision u/s 263 by CIT - Case was selected for scrutiny - assessee had claimed rental income and claimed deduction u/s 24B as interest paid for home loan against the property bearing No.C-207, Sarvodaya Enclave, New Delhi-110017 - on the basis of audit objection, the Assessing Officer initiated rectification proceedings u/s 154 however, same was dropped instead the Assessing Officer ( AO ) made proposal for revising the assessment u/s 263 of the Act made to the Ld.Pr.CIT - Whether objections of the assessee were not duly considered by the Ld. Pr. CIT before passing the impugned order? - HELD THAT:- From the order of the Ld. Pr. CIT, it is clear that he set-aside the assessment order and directed the Assessing Officer to investigate the issue and pass a speaking order. In our considered view, this approach of the Ld. Pr. CIT is erroneous as the law is clear that the Ld. Pr. CIT either he can make enquiry himself or cause such enquiry to be made but such exercise is to be made before passing the order u/s 263 of the Act. It is not disputed by the Revenue that proceedings u/s 154 of the Act were dropped by the same Assessing Officer who had requested for exercising powers u/s 263 of the Act by the Ld. Pr. CIT. It is also not disputed that the revision by the Ld. Pr. CIT is based upon the audit objections. Pr. CIT did not dispose of the objections of the assessee that assessment order passed by the Assessing Officer was without jurisdiction. Under these undisputed facts, we are of the view that the exercise of power u/s 263 of the Act by the Ld. Pr. CIT is not accordance with law. Therefore, the same deserves to be quashed. We, therefore, hereby quash the impugned order being unjust and contrary to the settled law. The grounds raised in this appeal by the assessee are allowed. Appeal of the assessee is allowed
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2021 (10) TMI 1105
Deduction u/s 80IB(11A) - AO disallowing the deduction claimed as the predominant activity of the assessee is milling/de-husking of paddy, which does not constitutes a manufacturing activity , and is beyond the scope of Section 80IB(11A) and that the activity of storage and transportation undertaken by the assessee are only incidental to the main manufacturing activity off the assessee - HELD THAT:- The aforesaid issue is squarely covered in favour of the assessee by the order of the Co-ordinate Bench of Tribunal in assesse s own case for the A.Y. 2009-10 [ 2021 (6) TMI 258 - ITAT DELHI ] Following the order of the co-ordinate Bench in the case of a group company, LT Foods Ltd. [ 2020 (10) TMI 88 - ITAT DELHI ] allowed deduction claimed u/s 80 IB(11 A) - activities involving cleaning, steaming, soaking, drying, polishing, grinding etc. clearly fall within the expression handling as contemplated under section 80 IB(11 A) - de- husking of the paddy to convert it into rice is an integral part of reducing the post- harvest food grain loss as it enhances life of food grain and reduces the loss of food grain and contributes to the preservation of food grains - CIT(A) has righty allowed the claim of deduction under section 80IB(11A) of the Act and we decline to interfere with the order of the ld. CIT(A). Disallowance u/s 14A - HELD THAT:- The assessee is not liable for any disallowance on interest as no interest bearing funds have been utilized for the purpose of making investment. Since, the share of profit from the partnership is mere distribution of income which is already been taxed, hence the provisions u/s 14A are not attracted in such case. Further, we also affirm the principle of no disallowance is called for where there is no exempt income earned. The AO is directed to re- compute the disallowance, keeping in view the guidelines mentioned above. Prior period Expenses - amount comprised of excess input tax receivable and bank processing charges - AO disallowed prior period expenses on the grounds that they do not relate to the relevant previous year - HELD THAT:- The relevant facts are that the aforesaid expenditure was duly claimed as deduction in the computation of income as the same were business expenditure incurred in the ordinary course of running the business and allowable revenue deduction u/s 37(1) of the Act. Further, in so far as bank processing chargesis concerned, the processing charges was accounted and charged by the bank during the relevant assessment year only, but the assessee inadvertently debited the same into prior period expenses. In view of the above, the disallowance of prior period expenses is being deleted in toto.
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2021 (10) TMI 1104
Validity of selection of case for scrutiny under compulsory scrutiny criteria - the assessee has challenged the scrutiny assessment as the Assessing Officer has not obtained necessary sanction from the competent authority as per the instruction of CBDT - Whether there was no information nor satisfaction of the department for conducting survey and thus the entire survey proceedings is nothing but a biased action on the part of the department which is illegal and unjustified? - HELD THAT:- There is no much gap between the survey and the post survey enquiry conducted by the AO therefore the post survey enquiry are part and partial of the survey proceedings and would deem to be concluded on the conclusion of the post survey enquiry on 27.01.2012. Thus, when the fact of the conducting the survey as well as the post survey enquiry is not in dispute then the case of the assessee would certainly fall under the category of selection under compulsory scrutiny. No substance or merit in the additional ground raised by the assessee. The same is dismissed. Ground no. 1 of the original grounds is general in nature and does not require any specific adjudication. Addition u/s 68 - unexplained cash credit - HELD THAT:- The assessee has shown the unsecured loan of ₹ 2,60,000/- which means the remaining unsecured loans was repaid by the assessee. Assessee has failed to explain the source of cash credit of ₹ 8,50,000/- and repayment of the unsecured loan of ₹ 8,30,000/-. The consolidated balance-sheet as referred by the learned AR has been re-casted and filed at this stage but was not produced before the authorities below. Even the capital account balance of the assessee shown in the consolidated balance-sheet as on 31st March, 2011 is contrary to the balance-sheet of M/s Rastogi Mobile Zone wherein there is a negative capital balance. AR has submitted that the loan amount is mistakenly shown as capital balance in the consolidated balance-sheet but the same is the unsecured loan amount of ₹ 10,29,797/-. This figure alongwith the current liabilities of M/s OM Jewellers is again not matching with the unsecured loan shown by the assessee in the return of income for the assessment year 2012-13 -Therefore, the assessee has grossly failed to explained the source of the cash credits - Decided against assessee.
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2021 (10) TMI 1103
Penalty levied u/s 221 r.w.s. 140A(3) - Claim of the assessee that post amendment of Sec. 140A(3) w.e.f 01.04.1989 without there being any amendment in Sec. 221(1) of the Act no penalty could be levied for non-payment of self-assessment tax - Whether no penalty under sub-section (3) to Sec. 140A could have validly been imposed on the assessee for its failure to discharge its admitted self-assessment tax liability? - HELD THAT:- Admittedly, it is a matter of fact borne from the record that the assessee company except for the aforesaid interest income on the ICD s with NBFC s had no other source of income. Insofar the availability of the aforesaid funds invested with the NBFC s are concerned, we find that as the same were sourced from the parent company, viz. Mercantile Ports and Logistics Ltd. [formerly known as SKIL Ports Logistics ltd) Guernesey (SPLL-G)] for a specific purpose i.e for Karanja port development project, and were invested by it with the NBFC s, therefore, the same were not freely available to the assessee for discharging its admitted tax liability. We are in agreement with the view taken by the CIT(A) that as the assessee was in no financial position to pay the self-assessment tax at the time of filing of return of income, therefore, no penalty u/s 221(1) r.w.s 140A(3) could have been imposed on it. We, thus, in terms of our aforesaid observations concur with the view taken by the CIT(A) that considering the serious financial constraints of the assessee due to which it had failed to discharge its admitted self-assessment tax liability at the time of filing its return of income, and for a period thereafter, no penalty under Sec. 221(1) r.w.s 140A(3) could have even otherwise be imposed on it. Finding no infirmity in the view taken by the CIT(A) we uphold his order. Accordingly, the appeal filed by the revenue being devoid and bereft of any merit is dismissed.
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2021 (10) TMI 1102
Income accrued in India - Fixed place PE - business connection in India - Attribution of profits - Whether the appellant has a permanent establishment (PE) under Article 5(2) 5(4)/5(5) of the India-Mauritius DTAA? - AO Proceeded by attribution of profit to PE and attributed 30% of the gross advertising revenue and made attribution - HELD THAT:- Considering the past history of the assessee in light of the decision of this Tribunal [ 2020 (10) TMI 1019 - ITAT DELHI] read with the decision of the Hon'ble Supreme Court in the case of E-funds IT Solutions Inc. [ 2017 (10) TMI 1011 - SUPREME COURT]. we hold that the assessee has no business connection in India in terms of section 9(1) of the Act and has no PE under Article 5(2), 5(4) and 5(5) of India Mauritius DTAA. Since we have held that there is no PE, we are of the considered view that there cannot be any attribution of profit as held by this Tribunal in assessee's own case in A.Ys. 2009-10 and 2011-12. TPO has accepted the international transactions at Arm's length and no adverse inference was drawn. We have also gone through the TP assessment order and find no adjustment.
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2021 (10) TMI 1101
Assessment of trust - special fund received through donation treated as revenue receipt - Rectification of mistake u/s 154 - to consider expenditure for running of the trust but the Assessing Officer has left out the same and proceeded to consider the donations partly for specific purpose and others not for the specific purpose - HELD THAT:- As the amount of donation has been given for the specific purpose. Assessing Officer has bifurcated three donations as specific purpose and left out other donations not being specific purpose without giving any reason. The donations are being specific purpose and being capital receipts are not coming within the ambit of definition of income as defined under section 2(24)(ii). It being a capital receipts, there is no necessity of routing through income and expenditure account, as claimed by the AO - some donations have been received for the special project undertaken by the trust and, therefore, same cannot be treated as revenue receipt. It is not the case that the assessee trust has not disclosed the donation and have not accounted for. The amount received clearly demonstrates for the purpose of various project development and building construction. In view of above, I am of the considered view that the amount received by the assessee trust for specific direction to use the same for different project undertaken by the assessee and is entitled for deduction u/s. 11 - decisions relied by assessee, support the case of the assessee, wherein, the corpus funds received by the trust are considered as capital receipts, not includible in income of the trust. - Decided in favour of the assessee.
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2021 (10) TMI 1100
Assessment u/s 153A - Addition u/s 68 - whether unsupported entries appearing in the books of account can also fall under the term incriminating documents ? - HELD THAT:- In completed assessments, the additions u/s 153A can only be made on the basis of some incriminating material. The argument of learned CIT, D.R. that unsupported entries, recorded in the books of account, also comes under the definition of incriminating material, is of no force as these entries cannot be called incriminating as the assessee had recorded such transactions in the books of account. They are also not unsupported , but are duly and properly supported by documentary evidences, such as bank statements, Demat statements and real time transactions through screen based trading on recognized stock exchanges. Simply because certain persons have admitted to have provided these entries as accommodation entries, cannot make these entries incriminating unless such persons are subjected to cross examination by the assessee. As in case of completed assessments, the additions can only be made on the basis of incriminating material respectfully following the judgment of Hon'ble Supreme Court in the case of Meeta Gutgutia [ 2018 (7) TMI 569 - SC ORDER] and Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] we do not find any infirmity in the order of learned CIT(A). Therefore, the appeals filed by the Revenue are dismissed.
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2021 (10) TMI 1099
Correct head of income - assessment of income earned from investment made in mutual funds under the head business income or Short Term Capital Gain - second round of litigation - whether the assessee acted as an investor or a trader while dealing with sale and purchase of shares and mutual funds? - HELD THAT:- In the second round of litigation, we found that the basic issue i.e. the business income or investment income was confined to the gain from the mutual funds only whereas on the contrary, the entire matter was restored back for a fresh decision which comprises of the income from sale of shares and also redemption of mutual funds. The lower authorities completely ignored the specific ground taken by the assessee before the ITAT and had confined its findings only to the redemption of mutual funds and that too was decided against the assessee on the ground that no evidence of investment in the mutual fund was furnished by the assessee. Whereas on the contrary, the ld. AR strongly relied upon his submissions made before the lower authorities and drawn our attention to the fact that the assessee had already placed on record the various evidences which were sufficient to reach to a conclusion by the revenue authorities but as per the ld. AR, all the evidences filed by the assessee were ignored by the lower authorities by giving a finding that no evidence to corroborate the investment in mutual funds was furnished by the assessee. We restore the matter back to the file of the A.O. with direction to decide the same afresh by taking into consideration the transactions in the mutual funds as well as shares carried out by the assessee. Appeal of the assessee is allowed for statistical purposes only.
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2021 (10) TMI 1098
TP Adjustment - comparable selection - turnover of the companies sought for exclusion is more than 200 crores - HELD THAT:- As considering 10 times to 1/10 of the turnover the alleged comparable is much more than the turnover of assessee. We note that, assessee in Acusis Software India Pvt.Ltd [ 2018 (8) TMI 1885 - KARNATAKA HIGH COURT ] AND Autodesk India Pvt.Ltd [ 2018 (7) TMI 1862 - ITAT BANGALORE] were captive service provider like assessee before us. Respectfully following the same we direct the Ld.TPO to exclude the comparable s alleged hereinabove for exclusion. Computing deduction under section 10AA - As reduced communication expenses and travelling and conveyance expenses incurred from the export turnover - HELD THAT: - We respectfully following the view taken by Hon ble Supreme Court direct the Ld.AO to recompute deduction under section 10AA of the Act in accordance with the principles laid down in case of CIT vs HCL Technologies [ 2018 (5) TMI 357 - SUPREME COURT ]
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2021 (10) TMI 1097
Disallowance u/s 14A read with Rule 8D - As submitted assessee had sufficient money of its own for making all the investments - HELD THAT:- We are in agitation with the contention of the ld. AR. However, assessee should prove the availability of interest free funds to make such investments by filing necessary cash flow statements on the date of investment in view of decision by the Hon ble Supreme Court in the case of Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] - Respectfully following the same, we direct the Ld.AO to carry out necessary verification based on the documents filed by assessee in accordance with law. For disallowance under section Rule 8D(iii) needs to be computed as assessee has not even disallowed suo moto expenditure that could be attributable to earning of such income. In our view it would be fair enough to restrict the disallowance at 0.5% of investment that yielded dividend income. Ld.AO is directed to compute the disallowance under Rule 8D (iii) as directed here in above. Disallowance of proportionate interest u/s 36 (1) (iii) - AO disallowed interest expenditure incurred on bank overdraft and interest payable to financial institutions - as submitted advances were given to the sister concern due to commercial expediency who also engaged in the same business as that of assessee - HELD THAT:- The audited accounts filed by assessee revealed that there were sufficient funds with assessee as on 31/03/2013. The argument that assessee had sufficient own funds cannot be the only reason to allow the claim of assessee. And we also note that, when assessee had sufficient funds, why should it depend on borrowed funds. In any case, if at a given point of time assessee has own funds and they have advanced it as interest-free loans to sister concerns for meeting their business needs, in which assessee also has an interest, then such advances should not lead to disallowance of interest paid on borrowings. In other words, unless the assesses establishes with cash flow statements about availability of its own funds at the time of making the interest-free advances. For this reason a cash flow statement needs to be verified for the period under consideration. We therefore remit this issue back to Ld.AO for due verification. Assessee is directed to file the cash flow statement during the period under consideration which shall be verified by the Ld.AO in accordance with law. Disallowance u/s 35D - expenses claimed by assessee is 1/5 of total expenses which has been amortised over a period of time -HELD THAT:- These expenses were incurred by assessee during financial year 2008-09 towards converting Brigade Enterprises Pvt.Ltd., to Brigade Enterprises Ltd., that is conversion of private limited company into public limited company. Authorities below have rejected the claim of assessee by following the decision of Hon ble Supreme Court in case of Brooke Bond India Ltd. [ 1997 (2) TMI 11 - SUPREME COURT ] We note that in the said case it was also held that the expenditure incurred on public issue for the purpose of expansion of the companies are to be treated as capital expenditure. However by virtue of the provision of section 35D of the Act, amortisation of such capital expenditure is allowable. As in the preceding four assessment years, the Ld.AO did not disallow the expenses under section 35D. As the nature of expenditure is not disputed by the Ld.AO, and that the section allows amortisation of such expenses that have been incurred towards expansion/extension of the undertaking, it could not be denied in the subsequent period also. Disallowance of deduction claimed u/s 80 IB - Whether loss of one eligible undertaking is to be set off against the profits of another eligible undertaking? - Whether when the gross total income is positive, the deduction u/s. 80IA can be worked out independently without setting off of losses of other eligible units? - HELD THAT:- This question stands already answered by the Hon ble Madras High Court in the case of Chamundi Textiles (Silk Mills) Ltd. [ 2012 (6) TMI 317 - MADRAS HIGH COURT] held that only an assessee having positive profits from eligible undertaking could claim such deduction. Their Lordships also held that, for arriving at such profit, income from various units had to be calculated, and if one of the unit was running at loss, gross total income had to be arrived at considering such loss also. In the present case, the table extracted at page 14 of this order shows that there were loss in certain eligible units. However, the gross total income computed after setting off losses from eligible units was positive - In our view, the computation of gross total income in respect of the eligible units u/s. 80IB in the present facts of the case is to be consonance with the above principles approved by the Hon ble Supreme Court in the case of IPCA Laboratories Ltd. [ 2004 (3) TMI 9 - SUPREME COURT] We direct the Ld.AO to compute the profits under the head business income from eligible undertaking by netting of the losses earned by assessee from other eligible undertaking for determining the deduction to be computed under section 80IB(10) of the act. Whether the deduction claimed can be only against the business profits or can it be against the other heads of income? - If the gross total income was loss, deduction u/s. 80IA/IB was to be rejected. Section 80IA/IB for that matter, are controlled by 80AB of the Act. Gross total income means gross total income computed as per the provisions of the Act. This was clearly interpreted by the Hon ble Supreme Court in the case of Synco Industries Ltd [ 2008 (3) TMI 13 - SUPREME COURT] and it was held that gross total income had to be arrived at after making deduction as per appropriate computation provisions including income u/s. 60 to 64, adjustment of interest losses and after setting off of brought forward losses and unabsorbed depreciation. Only if resultant gross total income is positive the assessee was entitled for deduction under chapter VIA of the Act. Same proposition is upheld by the Hon ble Supreme Court in the case of Reliance Energy Ltd. [ 2021 (4) TMI 1237 - SUPREME COURT] Respectfully following the ratio laid down by Hon ble Supreme Court , we remand this issue back to the Ld.AO to recompute the deduction under section 80IB(10) of the Act, on the principles laid down in case of Reliance Energy Ltd. (supra), as explained hereinabove. Appeal of assessee stands partly allowed.
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2021 (10) TMI 1096
Disallowance u/s 14A - Sufficiency of own funds - validity of the jurisdiction assumed by the A.O as regards the satisfaction recorded by him - simpliciter rejection by the AO - as submitted by the assessee that as it had sufficient non-interest bearing funds available with it throughout the year which were far much higher than the investments made in the exempt income yielding securities, therefore, no part of the interest expenditure claimed as deduction was liable to be disallowed - HELD THAT:- A.O on the basis of his general observations had dislodged the claim of the assessee that no expenditure was incurred for earning of the exempt dividend income and had worked out the disallowance u/s 14A r.w. Rule 8D. As per observation made in case GODREJ BOYCE MANUFACTURING COMPANY LIMITED VERSUS DY. COMMISSIONER OF INCOME-TAX ANR. [ 2017 (5) TMI 403 - SUPREME COURT] we are of the considered view, that the issue that an A.O before taking recourse to the provisions of Sec. 14A(2) and (3) r.w Rule 8D of the Income Tax Rules 1963, is statutorily obligated to give a clear finding with reference to the assessee s accounts as to how the expenditure claimed by the assessee in respect of its non-exempt income were related to the exempt income; is no more res-integra pursuant to the aforesaid judgments of the Hon ble Apex Court. The failure on the part of the A.O to strictly comply with the aforesaid statutory obligation that was cast upon him, can safely be gathered from the fact that there is no clear finding by him with reference to the assessee s accounts, as to how to the other expenditure claimed by the assessee in respect of its non-exempt income were related to the exempt income - a simpliciter rejection by the A.O of the aforesaid claim of the assessee which is only backed by his general observations, surmises and conjectures can by no means justify the validity of the jurisdiction assumed by him for computing the disallowance u/s 14A r.w. Rule 8D(2)(iii) in the hands of the assessee. We, thus, not finding favor with the view taken by the CIT(A) who had upheld the validity of the jurisdiction assumed by the A.O for computing the disallowance u/s 14A r.w Rule 8D(2)(iii) set-aside the same - Decided in favour of assessee.
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2021 (10) TMI 1095
Capital gain computation - AO in adopting stamp duty value as per Section 50C of the Act as full value of consideration - Scope of amendment to Section 50C - HELD THAT:- Difference in consideration adopted by the stamp valuation authority and the assessee is less than 5% and we find that there is an amendment which has been brought in Section 50C of the Act by way of third proviso w.e.f. 01/04/2019 wherein tolerance band of 10% has been specified. This amendment in third proviso has been held to be retrospective in operation by the Co-ordinate Bench of this Tribunal in the case of Maria Fernandes Cheryl [ 2021 (1) TMI 620 - ITAT MUMBAI] stating that the said proviso even though not stated to be prospective must be construed as curative in nature and hence to be given retrospective aspect - Thus we direct the ld. AO to consider only ₹ 58,50,000/- as sale consideration while computing the capital gains as against ₹ 61,16,000/-. Exemption u/s 54EC - investment made by her in NHAI capital gain bonds within a period of six months - The primary fact of date of handing over of cheque together with the application form is duly supported by an affidavit filed by the sub-broker Shri Gobind M Vaswani who had categorically affirmed that he has collected the application form together with the cheque from the assessee on 24/10/2013 and had indeed handed over the same to authorised agent i.e. M/s. Karvy Stock Broking Ltd., on 24/10/2013 itself. The contents of this affidavit has not been controverted by the revenue by bringing in contrary evidences thereon. The law is very well settled that in the event of an affidavit not tested by the department in the manner known to law, then the contents of the said affidavit is to be construed as true and correct. Reliance in this regard is placed on the celebrated decision of the Hon ble Supreme Court in the case of Mehta Parikh Co. vs CIT[ 1956 (5) TMI 4 - SUPREME COURT] We have no hesitation in holding that assessee is entitled for claim of exemption u/s.54EC of the Act in respect of investment made by her in NHAI capital gain bonds within a period of six months from the date of transfer. Accordingly, the grounds raised by the assessee are allowed.
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2021 (10) TMI 1094
Loss incidental to business - non-recovery of certain business advances made to certain parties in the normal course of its business - Whether such loss incidental to business, upon being written off in the Books of the Appellant is a claimable deduction allowable u/s 28 r.w.s. 37 of the Income Tax Act, 1961? - AO and the CIT(A) held that the deduction claimed on account of advances written off was a claimable deduction only u/s 36(l)(vii) r.w.s.36(2) - HELD THAT:- Even though assessee might have claimed as a bad debt in the profit and loss, but before the AO as well as ld. CIT(A) the assessee claimed that it was actually a business loss in the normal course of carrying on business, as the advances were given to aforementioned parties during the course of business in the earlier years for the reasons mentioned above as business advance and then it was duly explained the circumstances in which these advances could not be recovered either due to dispute or for different various reasons as discussed above, and therefore, it was claimed as business loss while computing the profit and loss account for the year under consideration. Firstly in the case of Govinda Infraproperty Pvt. Ltd. (Govinda) in whose account the assessee has written off the advance of ₹ 3,92,00,000/-, there was an agreement between the assessee and the said party for the purpose of developing the assessee s security business across the India wherein the assessee was required to pay service fee of 10% of the business value that service provider would generate for the assessee - it cannot be held that there was no business advance or there can be any iota of doubt that such advance had become irrecoverable which assessee has written off. Once, during the course of carrying out business any advance has been given for the business purpose and the same was not being recovered or it had become irrecoverable due to dispute, then if it has been written off by the assessee, then such a loss has to be allowed in the computation of profit and loss account. It is a decision of the company or the businessman to write off such an advance. There are cogent reasons for non recovery and consequently any loss arising from such writing off cannot be questioned nor the prudence of the businessman and can be questioned - All the submission and explanation by the ld. counsel incorporated above are not only plausible explanation but also fully supported by documentary evidences filed before the authorities below. We are thus in tandem with the submission of the Ld. Counsel and accordingly, the loss claimed on such an advance given to Govinda Infraproperty is accepted and same is directed to be allowed. Advance written off in the case of Linton Distributors Pvt. Ltd.loss claimed in this year cannot be held to be non genuine. Even the inquiry and observations made by the AO u/s.133(6) had already been explained by the assessee in detail as incorporated above and also each and every observation of the AO in the remand report which has no adverse inference. Neither the AO nor ld. CIT (A) can question the credibility of assessee whether the said party was capable of complying with the said order or did not had any experience or there is any inquiry leading to any finding that said party was itself bogus. Again the wisdom and the business prudence of the assessee cannot be questioned to test the said transaction on preponderance of probability when there is no adverse material against the assessee with regard to business dealing of the assessee with the said party. The reasoning given by the ld. CIT(A) for disallowing the said claim of loss cannot be accepted and the explanation and the submission given by the assessee with the documentary evidence as discussed above are accepted and hence the loss claimed with regard to advance paid to this party is allowed as business loss. In the case of Om Sai Assotech Pvt. Ltd., again it was on account of works contract awarded by the appellant executed by M/s. Environ Energy Pvt. Ltd. for comprehensive operations and maintenance of sites in Rest of West Bengal (ROWB) circle maintained by VIOM Networks discovered that due to certain defaults and short comings of Om Sai in the execution of the work Environ Energy had made certain deduction for which the assessee after making repeated request and series of discussion managed to get the said deduction/penalty reduced. The assessee also realized that certain excess payments were made by the appellant on behalf of Om Sai as discussed above. The assessee requested and duly informed Om Sai about the proposed deduction and liability towards the sub-contractor which were discharged by the assessee on its behalf, however, Om Sai failed to settled the accounts and there arose a dispute between the assessee and Om Sai. There is a letter written by the assessee raising a final demand notice on 01.04.2014 calling upon it to make a payment of ₹ 1,56,64,000/- towards the excess amount towards deductions proposed by Environ Energy - said party did not make the payment. The assessee has also filed the suit against the High Court claiming the amount along with interest and OM Sai has filed a counter claim before the High Court against the assessee for recovery of sum of ₹ 9.30 crores against the appellant. Thereafter, the assessee finally considered that there is no point going through for protracted litigation and took a business decision to write off the amount in its books. Such write off of loss is incidental to the business operation; therefore, we do not find any reason as to why such loss can be disallowed. With regard to Metro Railways Kolkata entire detail and discussion about the manner in which the dispute had arisen and why the assessee was forced to write off the said deposit paid to the KMR has been discussed in detail in the foregoing paragraphs. The matter had also reached to stage of an arbitration as per the Hon ble Kolkata High Court order and the consequence of written off had already been stated above. In a nutshell, there is no dispute that either the assessee s explanation is not correct or the transaction entered with KMR was not genuine. Once assessee had any business transaction with any party during the course of which if assessee had incurred any loss and for which detailed justification and explanation has been given with documentary evidences, we failed to understand as to why such a loss can be disallowed once there is no controversial material or inquiry denied by the said party. Simply rejecting the explanation on flimsy grounds without any inquiry cannot be sustained. Accordingly, we do not find any reason to uphold such findings. Accordingly, the entire claim of advance written off is allowed. Disallowance u/s 14A - HELD THAT:- It is an undisputed fact that assessee has earned exempt income against which assessee had made suo moto disallowance of ₹ 1,418 u/s.14A whereas the Assessing Officer has proceeded to make disallowance of ₹ 1,87,024/- once since exempt income itself is ₹ 6,525/-, the disallowance u/s.14A cannot exceed more than exempt income as held in the case of Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] which has also been followed in the case of GVK Project Ltd. [ 2018 (5) TMI 1786 - DELHI HIGH COURT] . Thus, the disallowance made by the Assessing Officer is restricted to ₹ 6,525/- and balance is deleted.
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2021 (10) TMI 1093
Disallowance of certain expenses specifically incurred for the project and also interest disallowance - assessee submitted as alleged disallowance of interest and administration expenditure pertains to projects under construction and the disallowance is rightly made and also made a request that suitable direction should be given to the AO that the year in which these projects can be completed, the assessee should be entitled to claim the alleged disallowance of expenses - HELD THAT:- Since the assessee is following percentage completion method, the alleged expenses and interest expenditure which were having direct nexus with the projects undergoing during the year cannot be claimed as revenue expenditure for the year under appeal and, therefore, should form part of the work-in-progress and the assessee shall be eligible to claim the amount as an expenditure when the projects with which they are connected are completed and assessee starts selling the units of the project.- Decided against assessee. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- It is a settled judicial precedence that disallowance of interest expenditure u/s 14A of the Act is not called for if the assessee has sufficient capital and reserve and surplus that interest free funds available are in excess of the investments held during the year. Since the interest free funds available with the assessee are in excess of the investment in equity shares at the close of the year and there being no specific finding by the AO about the nexus of the interest bearing funds having been applied for investment in equity shares, we find no justification in the finding of the ld. CIT(A) confirming the interest disallowance u/s 14A of the Act made by the AO. We accordingly set aside the finding of the ld. CIT(A) and allow the ground no. 3 raised by the assessee.
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2021 (10) TMI 1092
Undisclosed capital gain - during the course of search and seizure operation u/s 132 carried out on the residential premises of assessee s brother, certain documents relating to the assessee were found - Capital gain returned by the assessee on sale of property jointly owned with his brother - HELD THAT:- Only documentary evidence available in the present case is the registered sale deed which records and confirms the sale consideration declared by the assessee of ₹ 68 lacs. No other evidence whatsoever contradicting the sale consideration mentioned in the registered sale deed has been found. Also not denied that no investigation, with regard to the difference in the sale consideration as stated by Shri Surinder Singh Bindra and as recorded in the registered sale deed, was done by the AO. On the contrary, we find, he merely jumped on the oral statement of Shri Surinder Singh Bindra taking it to be a solemn truth merely because it was a statement recorded on oath, totally disregarding the registered documentary evidence being the sale deed. A registered sale deed cannot be summarily dismissed as evidence when juxtaposed with the oral statement alone that too only of one of the parties to the transaction even when made on oath. The statement, to carry weight as evidence needs to be supported with other evidences. The statement at best raises a suspicion about the consideration exchanged in the transaction which should prompt further inquiries, but oral statement even if recorded on oath alone is not sufficient to contradict/displace a duly registered documentary evidence. We agree with the Ld.Counsel for the assessee that the conclusion of the AO that the excess consideration was received, was based on mere surmises and lacked being backed by any evidence documentary or otherwise of any sort. Thus approach of the revenue authorities in treating the oral statement of the searched person as sacrosanct in total disregard to the registered documentary evidence available, is not in accordance with law and the addition made, therefore, by holding that the surplus consideration was received in the impugned transaction in the hands of the assessee is, therefore, directed to be deleted. Ground of appeal raised by the assessee allowed. Addition applying GP rate to contract receipts of the assessee - HELD THAT:- In the present case it is not denied that the husband of the assessee, who was the person searched wherein documents relating to his wife, the assessee before us, were found, had himself stated to the authorities of having earned 8% to 9% profits on the receipts. Moreover, as rightly pointed out by the Ld.CIT(A), even Legislature has considered a net profit rate of 8% to be appropriate for contract receipts in the presumptive scheme of taxation. Therefore, we see no reason to interfere in the order of the Ld.CIT(A) restricting the net profit rate of 8% of the contract receipts.
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2021 (10) TMI 1091
Revision u/s 263 by CIT - AO did not properly examine the bills/vouchers/receipts relating to the investments made by the assessee in a new flat to claim deduction u/s 54F - HELD THAT:- As perusal of the impugned order of the CIT reveals that after thoroughly examining the details and evidences furnished by the assessee during the revision proceedings u/s 263 CIT could not point out much discrepancy except about some small payments on account of small improvements such as bath room door, balcony grill, geysers, painter etc. as against the total allowance claimed - in respect of the items mentioned by the CIT, the assessee himself had mentioned before the Assessing Officer that the receipts about the said items were not available. The nature of the items and the small investments made in that respect, in our view, cannot be doubted as the assessee has duly furnished the details and evidences relating to the investments made and the same were duly examined by the Ld. CIT himself, however, the Ld. CIT could not point out any major discrepancy. In our view, CIT has wrongly exercised this revision jurisdiction u/s 263 in this case. In our view, no useful purposes will be served for re-assessment on this issue when the details etc. have already been examined by the the Ld. CIT and no error has been found in the order of the Assessing Officer. In view of this, the impugned order of the Ld. CIT is set aside and the order of the Assessing Officer is restored. The appeal of the assessee stands allowed.
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2021 (10) TMI 1064
Assessment u/s 153A - addition u/s 68 - onus to prove - addition was confirmed based on the report of the DDIT (Inv.) Kolkata - incriminating material found in search or not? - summons u/s 131 to lenders issued - as argued by assessee AO made no sufficient efforts to produce its witnesses before the assessee for cross examination - Whether reliance on 'reports of investigation wing' etc. did not constitute 'material' relevant for the purpose of assessment in this case? - HELD THAT:- In the present cases also the opportunity to cross examination has not been given to the assessee - AO at the fag end of time barring dates, had issued the alleged notices u/s 131 of the Act, the fact of which is also not coming out from the records as in the order sheets, the AO has not mentioned about the fact of having issued notices u/s 131 - AO straight forward shifted the onus of producing witnesses to the assessee by observing that assessee were also responsible for producing the witnesses but it is not a valid argument for not giving opportunity to the assessee for cross examination as the Department is all powerful to make sure that these witnesses are present for the cross examination by the assessee. Under similar circumstances, the Hon'ble Delhi High Court in the case of Pr. CIT vs. Best Infrastructure (India) (P.) Ltd. [ 2017 (8) TMI 250 - DELHI HIGH COURT ] has held that Revenue cannot shift the onus of producing its witnesses to the assessee. AO did not make sufficient efforts to produce its witnesses before the assessee for cross examination therefore, such statements taken behind the back of the assessee and not confronted to the assessee do not have any evidentiary value and therefore, if we ignore such statements, taken behind the back of the assessee and not confronted to the assessee and take into account all other evidences filed by the assessee which are in favour of the assessee and wherein the Assessing Officer has also not found any discrepancy, the additions sustained by learned CIT(A) are liable to be deleted. Additions have been made on the basis of statements of witness and the witnesses have not been cross examined by assessee. AO though in the assessment order has noted that summons u/s 131 of the Act were issued to the witnesses but no steps, as required by law, have been taken by the AO as the witnesses did not appear and the AO did not enforce their presence by taking further steps. Merely writing in the assessment order that notices u/s 131 has been issued, without recording any order in the order sheet regarding this fact nor having any evidence of service of such notices, does not serve the purpose of giving opportunity to the assessee of cross examination. On merits also, we find that assessee had fulfilled its part of onus which is required to be fulfilled by the assessee as the identity of the lender companies is not in doubt, creditworthiness of the companies is not in doubt as these companies had sufficient funds to advance the loans which is apparent from the amount of share capital and the reserves they are carrying in their balance sheets. The year-wise amount of share capital, reserves and loans out of which these creditors had advanced loans to the assessee, has been tabulated in a chart, which, for the sake of completeness, has been made part of this order. Creditworthiness of the lender companies is not in doubt. As regards the genuineness of the transactions, we find that loans were taken through banking channels and interest was also paid after deducting TDS and a part of loans were also returned back with interest even before the date of search and this proves that the transactions were genuine. The authorities, during the search on the assessees, did not find any incriminating material and any money trail to establish that cash had exchanged in lieu of transactions of loans received and repayments thereof. The assessments of these companies, wherein the interest paid by the assessee, has been accepted to be their income, also proves that the transactions were genuine. Therefore, all the three ingredients of section 68 are fulfilled and therefore, also the additions confirmed by learned CIT(A) cannot be sustained.n the present cases, other than the statements recorded by another officer (which we have already held to be of no evidentiary value) there is no material before the Assessing Officer to disapprove the evidences filed by assessee. - Decided in favour of assessee.
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Customs
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2021 (10) TMI 1090
Entitlement to O M benefits (fiscal benefits covered under Section 26 of the SEZ Act in respect of maintenance and duty free import to raw materials and consumables for generation of power) - period 01.04.2015 to 15.02.2016 - whether the condition that no duty free benefits for transfers to EOU is contrary to the SEZ Act and the Rules made thereunder? - HELD THAT:- It is apparent from Sub-section (8) of Section 15 of the SEZ Act that the Central Government has ample powers to impose certain terms and conditions subject to which a unit can carry out its operations - it is clear that the Central Government can introduce terms and conditions by notifying Rules or issuing guidelines in terms of which an approval may be granted. The letter of approval as contemplated under Section 15(9) of the SEZ Act is required to be issued by the Development Commissioner pursuant to the proposal submitted under Section 15(1) of the SEZ Act. The person who is granted the letter of approval falls within the definition of an entrepreneur within the meaning of Section 2(j) of the SEZ Act. Section 15(9) of the SEZ Act makes it specifically clear that the letter of approval shall mention the operations that the concerned person is authorised to undertake. Thus, the scope of the expression authorised operations is well defined and the same has to be stated in the letter of approval - In the present case, the letter of approval dated 08.10.2009 expressly indicates the operations/activities that the petitioner is authorised to undertake. In the aforesaid circumstances, the contention that the operations of generating electricity were rendered unauthorised by the Central Government by the letter dated 06.04.2015 whereby the 2009 Guidelines were reinstated, is unpersuasive. There is nothing to indicate either in the three Guidelines (2009 Guidelines, 2012 Guidelines and the 2016 Guidelines) that the effect and the import of the said guidelines was to render the operations being carried out by the concerned unit as unauthorised operations. This Court is of the view that this is an apparent error as the Second Letter was addressed to all Development Commissioners forwarding the First Letter. As noticed above, the opening words of the second paragraph of the Second Letter indicates that it is in pursuance to the decision to withdraw the 2012 Guidelines and restore the 2009 Guidelines as contained in the communication enclosed the First Letter dated 06.04.2015. The First Letter does not contain any decision that the processing areas of the SEZ would be re-demarcated to place those units which are operating in the processing area of the SEZ to be placed in a non-processing area - the exercise of demarcation is required to precede the issuance of the letter of approval. It is essential to note that one of the principal difference between the 2009 Guidelines and the 2012 Guidelines is that, whereas under the 2009 Guidelines, a power plant set up by a developer/co-developer as a part of infrastructure facility was required to be placed only in a non-processing Area of the SEZ and would not be entitled to any O M benefits - the direction in the second paragraph of the Second Letter must be read as applicable only to those power plants which are set up by developers/co-developers as a part of the facility or utility for the SEZ and, not as a separate unit set up within the SEZ to generate power as a product or as a captive power plant in terms of Clause (ii) of the 2009 Guidelines. Even assuming that the Central Government had the power to re-demarcate areas post-issuance of the letter of approvals, the Second Letter on the basis of which the petitioner has been denied the O M benefits with effect from 01.04.2015 to 16.02.2016, cannot be construed in the manner so as to be applicable to the petitioner s unit which was granted the LoA under the 2009 Guidelines. The dispute in the present case relates to the direction to re-demarcate the petitioner s power plant as a non-processing unit for the purposes of the 2009 Guidelines. The direction to re-demarcate is clearly not traceable to Section 26(2) of the SEZ Act. The present petition is allowed to the limited extent that the condition imposed by Unit Approval Committee of refunding the O M benefits obtained by the petitioner during the period 01.04.2015 to 15.02.2016 by its letter dated 18.04.2016, is set aside - Petition disposed off.
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Corporate Laws
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2021 (10) TMI 1089
Effective date of Resignation from the post of Managing Director - Compiling Proceedings against the Director / Petitioner for Non-appointment of Woman Director in the company - case of petitioner is that he had resigned from the Directorship in the company with effect from 05.09.2013 and he had no control over the affairs relating to the company thereafter - Section 149 of the Companies Act, 2013 - HELD THAT:- The Assistant Director, Government of India, Ministry of Corporate Affairs, Chennai had issued summons to the petitioner and others to attend the said office to give evidence and to produce the books of accounts or any other paper in pursuant to the notice dated 17.03.2015. However, the petitioner failed to comply with the same. Thereafter, the respondent, filed a complaint under Section 207(4) of the Companies Act, 2013 against the petitioner and others before the learned Additional Chief Metropolitan Magistrate, chennai to summon and punish them according to law for the default. Two directors in the case of a private company and one director in case of one person company (b) a maximum of fifteen directors, provided that a company may appoint more than 15 directors after passing a sepcial resolution, further as per Sub-Section (2) of the above said section, every company existing on or before the date of commencement of the act shall within one year from such commencement shall comply with the requirement of Sub Section (1), that as per Rule 3 of the companies (Appointment and qualification of Directors) Rule, 2014, every unlisted public company having (a) paid up share capital of one hundred crore rupees or more or(b) turnover of three hundred crore rupees or more, shall appoint atleast one woman director within one year from the commencement of companies Act, 2013 (i.e.) 01.04.2014. As per provisions of Section 172 of the Companies Act, 2013 If a company contravene any of the provisions in this Chapter and for which no specific punishment is provided therein, the company and every officer of the company, who is in default shall be punishable with fine, which shall not be less than fifty thousand but may extend to five lakh rupees. Further, a letter dated 06.04.2016 was addressed by the petitioner to the Registrar of Companies seeking apologize for the delay in response and stated that he was ceased to be a Director of the Company on 05.09.2013 and that he was not in touch with the said company - an examination of the record would show that there is a receipt of G.A.R.7 from the Ministry of Corporate Affairs from one Tanmoy Dey, for a sum of ₹ 7,800/- towards fee for Form DIR-11 and the same would show that the petitioner had resigned from the company on 05.09.2013 and the same was declared by the petitioner by signing the same digitally only on 05.03.2016, which is only after initiation of the present proceedings, however, Form No.DIR-12 is not found in the material produced and that Form 32 has not been filed by the company. In the present case on hand, the petitioner, who had worked as Director in the company had submitted his resignation to the Company on 20.12.2012 and thereafter, the petitioner had submitted his resignation to the Board of Directors of the company on 05.09.2013 with a copy marked to the Regional Office of the Registrar of Companies, Chennai - Even assuming that the petitioner had submitted his resignation to the Registrar of Companies on 05.09.2013, however, the petitioner had filed FORM DIR-11 only belatedly after initiation of the present proceedings and Form DIR-12 has not been filed subsequently by the company. This Court is of the view that the grounds and the submissions raised by the petitioner are purely a matter of evidence and the same cannot be gone into by this Court in the quash petition. It is well settled legal position that only when the allegation made in the complaint do not constitute an offence, for which, the accused is subjected to trial, the complaint could be quashed. In the instant case, the petitioner has not made out any case within the purview of Section 482 Cr.P.C., warranting to quash E.O.C.C.No.299 of 2015 pending on the file of learned Additional Chief Metropolitan Magistrate E.O.-I, Allikulam Moore Market, Chennai - the present Criminal Original petition is hereby dismissed.
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2021 (10) TMI 1088
Transfer of shares - Oppression and mismanagement - restraint on Respondents from transfering /investment/assets - creation of further third-party rights on the shares held by the Petitioner in R11 and R12 - HELD THAT:- In view of the narration of facts by the Petitioner and grounds of oppression and mismanagement namely systematic assets stripping of Respondent No.1, Petitioners being kept away affairs of Respondent No.1, affairs of Respondent No.1 being conducted as sole proprietorship, unjustified transfer of Respondent No.12 to Respondent No.2 and breach of doctrine of legitimate expectation, it can be said that no prima facie case has been made out by the Petitioner to grant any interim directions to restrain the transfer of assets already made or creating any third party rights. The proposed EGM which is being challenged was held on 15.01.2020, the entire issue of dispute between the parties is founded in the Share Purchase Agreement and are purely contractual nature. Upon perusal of the clauses of shareholder agreement it is clear that Anand Rathi Shareholders shall be in sole control of the company and committee formed thereunder shall be responsible for management, supervision, direction and control of the company including day to day management of the company - The Petitioner is a party to the said Agreement and has acquiesced to the rights conferred to both the parties under the SHA and now is estopped from claiming that the Anand Rathi group are conducting the affairs of Respondent No.1 which are oppressive and amounts to mismanagement of Respondent No. Company. This Bench therefore is of the considered opinion that no prejudice is caused to the rights of the Petitioner under said alleged transfer of shares of Respondent No.1 to Respondent No.11 or transfer of assets to Respondent No.2 from Respondent No.1, and is governed by the interse agreement namely the shareholder agreement/share purchase agreement both dated 10.08.2016. The rights of the shareholders qua the company in the Petition alleging the Oppression and mismanagement are squarely covered under the SHA/SPA dated 10.08.2016 and hence are bound by the terms and conditions thereof. The Anand Rathi Group being the majority shareholders and in control of the management of the company have acted in the best interest of the Company due to the notification of MCA and the Petitioners have waived their rights to object to the transfers being made by acquiescence - the prayer for interim relief is rejected. The prayer is rejected.
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2021 (10) TMI 1087
Approval of scheme of amalgamation and arrangement - sections 230-232 of the Companies Act, 2013, and other applicable provisions of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- Various directions with regard to holding, convening and dispensing with various meetings issued - directions with regard to issuance of notices also issued. The scheme is approved - application allowed.
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Insolvency & Bankruptcy
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2021 (10) TMI 1086
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Personal Guarantor of the Principal Borrower - existence of debt and dispute or not - service of demand notice - Whether the EECPL is the Corporate Guarantor and therefore Corporate Debtor of the Eastern Overseas, in terms of Sub-section (7) and (8) of Sec 3 of I B Code and the applicable Rules will be Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 ? HELD THAT:- The Adjudicating Authority has held that the Insolvency and Bankruptcy (Application to Adjudicating Authorities for Bankruptcy Process for Personal Guarantors to Corporate Debtors Rules, 2019 will be applicable instead of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016. Under both the Rules, the conditions for the applicability of the Rules are provided. The learned Adjudicating Authority had failed to notice that the Financial Creditor had taken Personal Guarantee of Mr Mahendra Singh Narang and Mrs Manjit Kaur in addition to the Corporate Guarantee given by the Corporate Debtor - on the occurrence of default, it was the sole prerogative of the Financial Creditor to initiate action against the Principal Borrower or the Personal Guarantor of the Corporate Guarantor. Since the Appellant Financial Creditor had initiated action under the Insolvency and Bankruptcy Code against the Corporate Guarantor, the Application could not have been dismissed on the erroneous assumption that the Application should have been filed against the Personal Guarantor under Section 95 of the Code. It is clear that Respondent Eastern Embroidery Collections Private Limited was the Corporate Guarantor of the Principal Borrower Eastern Overseas , and not a Personal Guarantor. Therefore, in terms of Sub-section (7) and (8) of Sec 3 of I B Code, 2016 is a Corporate Debtor. Further, the applicable Rules would be Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 . The Adjudicating Authority committed an error in holding that action should have been initiated against the Personal Guarantor of the Corporate Debtor under Section 95 of the Code instead of proceeding against the Corporate Debtor - Appeal allowed.
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2021 (10) TMI 1085
Validity of Order directing Status Quo on the shares and assets of the Appellant Company - entire share transactions was a subject matter of challenge before the Hon ble High Court of Delhi in various connected matters - HELD THAT:- It is seen from the record that the Respondent M/s. Creative Souls Technology India Ltd. has been restrained by the Hon ble High Court of Delhi in exercising any rights Qua such shares vide Order dated 19.07.2021 passed in OMP/1/COMM/213 of 2021. Learned Counsel for the Appellant has also filed an Additional Affidavit with respect to the first Respondent conducting Extraordinary General Meeting removing the existing Directors and appointing its own Directors at the Board of the Appellant and submitted that Contempt Proceedings were also being initiated before the Hon ble High Court of Delhi. We refrain from passing any observations regarding the subsequent developments as it is not a subject matter before us. Keeping in view, the factual matrix of the instant case and the fact that Orders of the Hon ble High Court of Delhi have not been placed before NCLT, we are of the considered view that the Order be set aside and the matter be remanded to NCLT and the same shall be decided by the Tribunal taking into consideration all the Orders of the Hon ble High Court of Delhi and shall dispose of the Company Petition as expeditiously as practicable. Application disposed off.
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2021 (10) TMI 1084
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Pre-Existing Dispute or not - time limitation. Whether this Application filed under Section 9 of the Code is barred by Limitation? - HELD THAT:- The date on which the default occurred has been clearly specified in column 2(a) as December 19th, 2014. The only suggestion with respect to any acknowledgement is in para V in residuary point no. 8 in which the particulars of Financial Debt with documents and evidence on record is required to be mentioned. In this column the disputed email dated 05.08.2015 is mentioned. Limitation is a mixed question of law and facts and no case has been made for extension of period of Limitation as the actual date of default is mentioned in the Section 9 Application as 19.12.2014. The last goods were supplied on 18.11.2014, admittedly the last payment was made on 25.11.2014 and the Application under Section 9 was filed on 09.05.2018. The record does not show any communication between 2015 and 2018. For all these reasons, the Application is barred by Limitation. Whether there is any Pre-Existing Dispute existing between the parties prior to the issuance of the Notice mandated under Section 8 of the Code? - HELD THAT:- A perusal of the Debit Note dated 24.03.2017 read together with the Goods Received Notes and the Laboratory Test Report of the goods supplied show that there is a Pre-Existing Dispute , prior to the issuance of the Notice under Section 8. The defence raised by the Corporate Debtor is not a sham defence and not a feeble or unsupported assertion. The record shows that there is documentary evidence filed in support of the defence. Appeal dismissed.
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2021 (10) TMI 1083
Condonation of delay of 52 days in filing the Appeal - Approval of Resolution Plan - Section 31 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Admittedly this Appeal has been filed against the impugned order dated 22 October 2019, and the Appeal was filed on 29 January 2020 with an Application for condonation of delay of 52 days. The present Appeal has been filed 98 days after passing the impugned order, i.e., a delay of 68 days, beyond 30 days, prescribed under Section 61 (2) of the IBC - that in fact, it is an admitted case of the Appellant that the present Appeal has been filed with the delay of 52 days and thus, the Appellant itself has duly admitted that the Appeal is beyond the condonable period of Limitation under Section 61 (2) of the I B Code. Admittedly the present Appeal has been filed against the impugned order dated 22 October 2019. Thus, the preposterous averments of the Appellant seeking to justify the delay in filing the Appeal do not render the present Appeal to be within Limitation. Accordingly, the present Appeals suffers from delay beyond the condonable period of 15 days under the proviso of Section 61 (2) of the IB code, hence liable to be dismissed at the threshold. The instant Appeal has been filed against the impugned order dated 22 October 2019, presented on 29 January 2020. Therefore, at the least, this Appeal is filed 98 days after passing of the impugned order, i.e. with a delay of 68 is beyond 30 days prescribed under Section 61 (2) of the IBC Code. Considering the statutory provision of Section 61 (2) of the IBC, this Appellate Tribunal has no power to condone the delay beyond 15 days after the prescribed 30 days provided for filing an Appeal. Therefore, the contention of the Appellant that the period from passing of the impugned order dated 22 October 2019 to the order dated 19 December 2019 should be considered a continuous cause of action is without any basis and not sustainable. Application rejected.
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2021 (10) TMI 1082
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors or not - creation of equitable mortgage over the Apartment proposed to be developed - physical possession of property taken over by first respondent or not - proceedings under SARFAESI Act is pending - HELD THAT:- There is no impediment for an Applicant to prefer an Application under section 7 of the I B Code, 2016 when already the proceedings under SARFAESI Act, 2002 are pending. For maintaining an application u/s 7 of the Code, an applicant is to establish the existence of a debt, which is due from the Corporate Debtor. In fact, the issue of whether there is debt and default can be looked into only if the Corporate Debtor disputes the debt or takes a plea that there is no default though there is debt. Ordinarily, the Corporate Debtor is empowered to point out that a Default had not occurred. It cannot be forgotten that a debt may not be due, if it is not payable either in law or in fact. In the instant case, just because a Guarantee Deed is furnished by a different entity, the same would not in any way relieve the obligation of the Corporate Debtor to pay the First Respondent / Financial Creditor as Principal Borrower. On behalf of the First Respondent / Financial Creditor/Applicant it is brought to the notice of this Tribunal that the Corporate Debtor had availed the financial debt / loan by executing a Loan Agreement and Promissory Note to and in favour of the First Respondent / Financial Creditor. Undoubtedly, under the I B Code, CIRP is not an adversarial litigation, like the Court of Law . An Adjudicating Authority is not deciding a money claim in a civil suit. An Adjudicating Authority s part is confined to the act of deciding whether the application is complete, and whether there is any debt or default - in view of the fact that in the present case the existence of debt of the Corporate Debtor and default , committed thereto, this Tribunal is of the considered view that the Section 7 application is complete and viewed in that perspective, the impugned order dated 13.11.2020 passed by the Adjudicating Authority in admitting the application and appointing the Interim Resolution Professional Mr. A. Mohan Kumar and declaring Moratorium etc. are free from any legal infirmities. Application dismissed.
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2021 (10) TMI 1081
Maintainability of appeal - appeal filed within time limitation or not - power to review is an inherent power of the Tribunal or not - HELD THAT:- The Appellant came to know of order of approval of Resolution Plan on 17.10.2019, the maximum period of 45 days will expire on 1.12.2019. Even if an exemption for period of 11 days spent in getting certified copy of order is given, the period of limitation will expire on 14.12.2019. Thus appeal filed on 27.12.2019 is clearly time barred - Even if starting date of limitation is taken from 18.10.2019, when Respondent No. 1 filed reply to the notice dated 23.9.2019 on the online portal of Income Tax Department informing Appellant of the approval of the Resolution Plan, the maximum prescribed 45 days period of limitation would expire on 2.12.2019. After excluding 11 days period that was spent in obtaining certified copy of the order, the limitation would expire on 13.12.2019. Even then the limitation appeal filed on 27.12.2019 is time barred. The Appellant was adequately informed and well aware of the initiation of CIRP and approval of the Resolution Plan and yet he did not file any claim with the Resolution Professional. The Learned Counsel for Applicant of IA No. 909 of 2020) has, therefore, emphatically stated that since the Appellant was well aware of the initiation of CIRP much before 9.12.2019, when he applied for obtaining certified copy of the Impugned Order, therefore, the appeal is barred by limitation of time. Appeal dismissed as being time barred.
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2021 (10) TMI 1080
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- Mere plain reading of the provisions under section 7 of IBC and Judicial Pronouncements thereon shows that in order to initiate CIRP Under Section 7 the applicant is required to establish that there is a financial debt and that a default has been committed in respect of that financial debt. That while dealing with the said matter, the financial creditor has clearly established that a financial debt in form of Short-Term Loan has been advanced to the Corporate Debtor which can be clearly substantiated by the copies of the Bank statement showing disbursal of Loan amount by the financial Creditor (Annexure-8) and the letter dated 23.04.2021 wherein, the Corporate Debtor expresses its inability to clear dues. It is found that the documents submitted by the Financial Creditor and the Corporate Debtor clearly substantiate the Financial Creditor's claim that the Corporate Debtor has defaulted on repayment of the debt amount, also as the Corporate Debtor himself submitted that due to financial strain they are unable to pay the amount - upon appreciation of the documents placed on record to substantiate the claim, this Adjudicating Authority admits this petition and initiates CIRP on the Corporate Debtor with immediate effect. Application admitted - moratorium declared.
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2021 (10) TMI 1079
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- The Bench notes that the ample opportunity was given to the Corporate Debtor to file its reply. However, the Corporate Debtor failed to file reply before this Bench - The Bench further notes that till the date of the final hearing the Corporate Debtor did not choose to file any reply contesting above Company Petition and also did not comply the order dated 01.03.2021 wherein he was directed to file reply. Therefore, the Corporate Debtor's right to file reply was forfeited. The counsel appearing for the Financial Creditor invited the attention of this Tribunal to the relevant documents filed in proof of debt and default in support of company petition. Since the Respondent/Corporate Debtor did not file any reply, the claim of the Financial Creditor remains unchallenged. There are no valid grounds warranting the rejection of the above Company Petition as the debt and default are clearly established and the debt is also within limitation. Thus, the present Company Petition satisfies all the necessary requirements for admission. Petition admitted - moratorium declared.
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2021 (10) TMI 1078
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- It is apparent from the records that a loan of ₹ 1,70,00,000/- was sanctioned by the Financial Creditor to the Corporate Debtor the repayment of which has been defaulted - Corporate Debtor first defaulted in payment of interest in January 2018. After this, the Financial Creditor requested payment on 15.04.2018. Upon request from the Corporate Debtor, on 03.05.2018 the Financial Creditor extended the period of repayment till the first week of July 2018. Having not received any amount, the Financial Creditor finally recalled its loan on 10.07.2018. As per Part IV of Form I, the date of default is 01.04.2018. The present Petition was filed on 30.01.2021, it is therefore within the limitation period - The Corporate Debtor has also admitted the existence of debt time and again. The only defence taken by the Corporate Debtor is its inability to pay due to the continuous losses incurred by it. The Petition made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is more than the minimum amount as stipulated under section 4(1) of the Code at the relevant time. Therefore, the default stands established and there is no reason to deny the admission of the Petition. Given this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor. Petition admitted - moratorium declared.
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2021 (10) TMI 1077
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Pre-existing dispute between the parties or not - HELD THAT:- The burden of proof lies on the Corporate Debtor to establish the pre-existence of dispute before this tribunal. As rightly pointed out by the counsel appearing for the Operational Creditor, in the minutes of the meeting dated 16.08.2016 which was annexed at page No. 117 it was clearly mentioned that the Corporate Debtor has assured to clear the outstanding amount of ₹ 46.5 Lacs as full and final settlement in three equal instalments that too by end of September 2016 - The subsequent email also clearly proves that the Corporate Debtor has assured clearance of the pending dues of the Operational Creditor which was withheld by the Corporate Debtor due to some technical quarries raised by their Higher Officers. This bench has no hesitation in holding that the Corporate Debtor has miserably failed to prove and demonstrate the existence of any pre-existing disputes between the parties and no presumption of pre-existence of disputes can be inferred from the reply filed by the Corporate Debtor in the present company petition. Unless this tribunal after applying its mind comes to the conclusion that the plea of pre-existence of disputes raised by the Corporate Debtor is not a palpable defence and requires some investigation, the plea of pre-existence cannot be accepted. The contention of the respondent that the emails relied upon by the Operational Creditor strengthens the existence of disputes is not legally sustainable as no such presumption of disputes can be inferred from the emails. This bench is of the considered opinion that there is an Operational Debt due and payable, by Corporate Debtor and the Corporate Debtor has committed default in paying the same. When once these two legal requirements are established, this bench has no option except to admit the above petition filed U/sec. 9 of the Insolvency and Bankruptcy Code, 2016. Petition admitted - moratorium declared.
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2021 (10) TMI 1076
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - High Seas Sale Agreement - existence of debt and dispute or not - HELD THAT:- It is not in dispute that only based upon high sea sale agreements that the corporate debtor has engaged the services of the operational creditor to deliver certain goods from Indonesia to Cochin. However it is seen that after the goods have arrived at Cochin, the corporate debtor was not in a position to take delivery of those goods since the corporate debtor's client, namely, M/s. Mahe Convention and Events Centre, Kannur was constrained to stop the entire projects. However, it is a fact borne on record that based upon the amendment letter which has been issued during the month of October, 2016 the goods which were at the customs house, were ultimately cleared in the name of the new consignee, viz., M/s. Mahe Convention and Events Centre, Kannur and not by the corporate debtor. The operational creditor in their rejoinder has not disputed the said fact that the consignment has been cleared by, viz., M/s. Mahe Convention and Events Centre, Kannur. Hence, this Tribunal is of the view that there is no due which is liable to be paid by the corporate debtor to the operational creditor in the present application and consequently there is no default being committed on the part of the corporate debtor. Application dismissed.
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Service Tax
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2021 (10) TMI 1075
Levy of service tax - security services or not - collection of charges providing armed security guards to public sector banks / undertakings and government departments - HELD THAT:- The appellant is performing statutory duties and the amount so collected is being deposited in the government treasury. CBEC has issued a Circular No.89/7/2006-ST dated 18.12.2006 clarifying that wherever the charges collected by any sovereign public authority for carrying out any statutory function, the same is not liable to levy of service tax if following three conditions are satisfied: (a) Sovereign/public authorities perform duties which are in the nature of statutory and mandatory obligation to be fulfilled in accordance with the law. (b) The fee collected should be levied as per the provision of relevant law. (c) The amount collected is to be deposited into government treasury. Further, there is a CESTAT decision in THE DEPUTY COMMISSIONER OF POLICE JODHPUR, SUPERINTENDENT OF POLICE VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, JAIPUR- [ 2016 (12) TMI 289 - CESTAT NEW DELHI] , where it was concluded that the police department which is in the agency of State Government cannot be considered to be a person engaged in the business of running security services. The CESTAT in the said decision has held that the activity undertaken by the police is not covered by the definition of security agency under Section 64(94) of the Finance Act, 1994. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2021 (10) TMI 1074
Assessment of escaped turnover - wrong availment of Input Tax Credit (ITC) - Section 27 of TNVAT Act - HELD THAT:- There is a statutory appeal provided under TNVAT Act as against the impugned order and this statutory appeal is available to writ petitioner under Section 51 of TNVAT Act. Therefore, there is an alternate remedy. There is nothing to demonstrate that alternate remedy is not efficacious. The second respondent has applied his mind and made the impugned order (on a demurer, erroneous may be as contended by writ petitioner) and therefore, it does not warrant interference in exercise of powers under Article 226 of Constitution of India on this facet also. As I am taking the view that this case does not warrant interference under Article 226 of Constitution of India, in the light of alternate remedy, I refrain from expressing any opinion or view on merits of the matter and traces or trappings of observations on merits which may appear to have been made in this order are for the limited purpose of disposal of captioned writ petition and therefore, the same should not come in the way of a Statutory appeal i.e., this order should not in any way either impede or serve as a impetus if the writ petitioner chooses to avail alternate remedy and statutory appeal under Section 51 of TNVAT Act. Petition dismissed.
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2021 (10) TMI 1073
Valuation - permissible deduction for the purpose of computing the respondent s taxable turnover or not - bank charges, guesthouse charges, fuel charges, computer expenses, and entertainment charges incurred by the respondent - expenses relatable to labour and other like charges or not - Rule 3 (2) (l) of the KVAT Rules? - HELD THAT:- Insofar as deductions in the nature of interest charged by the client towards postage, telephone expenses, etc. incurred by the dealer and also vehicles used exclusively used by the contractor in the execution of the works contract are concerned, a co-ordinate Bench of this Court in the case of Larsen Toubro v. State of Karnataka [ 2009 (9) TMI 933 - KARNATAKA HIGH COURT ] while considering the provisions under the Karnataka Sales Tax Act, 1957 has held that the said charges undoubtedly come within the scope of the cost of the establishment of the contractor to the extent it is relatable to supply of labour and services. The issue was also examined with reference to the principles laid down in Gannon and Dunkerley [ 1992 (11) TMI 254 - SUPREME COURT ] wherein the Hon ble Apex Court has held that the value of goods involved in the execution of works contract has to be determined after taking into consideration the value of the entire works contract after deducting the charges toward labour and services. All the deductions claimed by the assessee are relatable towards establishment charges as aforesaid which deserves to be allowed as deductible expenditure for arriving at the value of the goods. Otherwise, there will be a possibility of levying tax on an amount over and above the actual value of the goods, which is impermissible under law - the Tribunal has rightly allowed the appeal setting aside the finding of the authorities. The revision petition stands dismissed.
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2021 (10) TMI 1072
Rejection of input tax credit - Fictitious dealers - Bogus supplier - protective assessment under Section 38[5] of the Act - levy of penalty - HELD THAT:- The Enforcement Officer has submitted a report to the Assessing Authority that M/s. Master Trading Company did not exist in the registered address. On further enquiry from the owner/landlord of the building, it was found that the said place was not rented to M/s. Masters Trading Company. Further, the Enforcement Officer has visited the business premises as well as the residential address declared and found that no such dealer existed in the registered place of business and in the residential address shown in the VAT-1 application for registration, for the last two years. In Salem Steel Trading Company supra, the Co-ordinate Bench of this Court has held that the claim of input tax credit cannot be withheld for the reason that the selling dealers have not paid tax to the Department when all other documentary evidence are in favour of the dealer and when goods have even moved against e -sugams. The case on hand does not satisfy the conditions of documentary evidence proved in favour of the dealer and goods having been moved against e -sugams. The judgment cited by the learned counsel for the assessee in the case of THE STATE OF KARNATAKA REPRESENTED BY THE PRINCIPAL SECRETARY TO GOVT FINANCE DEPARTMENT BANGALORE VERSUS SRI RAJESH JAIN PARTNER M/S SALEM STEEL TRADING COM [ 2016 (12) TMI 1869 - KARNATAKA HIGH COURT] as well as BHARAT SANCHAR NIGAM LTD. (BSNL) VERSUS UNION OF INDIA [ 2006 (3) TMI 1 - SUPREME COURT] were considered by the Tribunal along with the judgments of M/s. Pack Well Industries supra and M/s. Microqual Techno Private Limited, Bangalore supra, having analyzed the material facts vis- -vis the Rulings of the Hon'ble Apex Court and this Court the judgments, the Tribunal has rightly rejected the appeals filed by the assessee allowing the Cross Appeals filed by the Revenue. The revision petition stands dismissed.
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Indian Laws
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2021 (10) TMI 1071
Difference between Fee and Tax - Refund of water and sewerage taxes levied and collected under the provisions of the Uttar Pradesh Water Supply and Sewerage Act 1975 (UP Water Supply and Sewerage Act) - legislative competence of State Legislature to levy the tax under the provisions of Section 52(1)(a) - Applicability of judgement in the two judge Bench of this Court in Union of India v. State of U.P. [ 2007 (11) TMI 701 - SUPREME COURT] - HELD THAT:- A basic principle of tax jurisprudence is that the levy of a tax cannot be conflated with its measure. In the context of Section 52, the levy by the Jal Sansthan is on premises situated within its area meaning the area within which the Jal Sansthan exercises its jurisdiction and powers. The levy is on premises. The expression premises is defined in Section 2(18) to mean any land or building . Hence, read together with the definition of the expression premises , the levy is squarely on lands and buildings situated within the area of the Jal Sansthan. While imposing the levy under clause (a) of Section 52(1) the legislature has provided that the levy will be on premises situated within the area of the Jal Sansthan, where the area is covered by the water supply services of the Jal Sansthan. This stipulation in clause (a) does not render the levy a fee instead of a tax. The levy is on premises situated within the area of the Jal Sansthan. The measure of the tax is the assessed annual value of the premises, annual value being assessed in the manner indicated in Section 53. The rate of tax in the case of a local area, other than a city, has to be not less than 6 per cent and not more than 14 per cent. In the case of the water tax in a city the rate is to be not less than 7.5 per cent and not more than 12.5 per cent. A similar provision has been incorporated in regard to the levy of a sewerage tax in Section 52(1)(b) and sub-Sections (2) and (3) provide for the measure and the rate of tax - The restrictions which are imposed by Section 55 do not render the tax a fee, nor are they indicative of the tax being charged for the actual use of water. While imposing the levy in Section 52(1)(a), the legislature has considered it appropriate to restrict the levy within the parameters which are specified in Section 55. That does not alter the fundamental nature of the levy, which is constituted as one on premises (defined to mean land and building) situated within the area of Jal Sansthan. Chapter VI makes a clear distinction between a tax, a charge and a fee. We have already noticed the provisions of Chapter VI governing the levy and imposition of taxes. Section 59 provides for the fixation of the cost of water to be supplied by the Jal Sansthan according to its volume as well as the minimum cost to be charged in respect of each connection. The Jal Sansthan may, in lieu of charging for the cost of water according to volume, charge a fixed sum on the basis of expected consumption - The legislature may choose a label for the tax based on the nature of the levy. On the other hand, the legislature may choose a label having a relationship with the function of the authority which imposes the tax as in the present case. The tax has been labelled as the water tax or a sewerage tax simply because it is imposed by the Jal Sansthan constituted under the UP Water Supply and Sewerage Act. That does not alter the nature of the levy which in substance is a tax on lands and buildings within the meaning of Entry 49 of List II of the Seventh Schedule. There can be no manner of doubt that the levy which is imposed under Section 52 is a tax on lands and buildings situated within the area of the Jal Sansthan for the purpose of imposing the tax. The tax is imposed on premises which fall within the territorial area of the Jal Sansthan. The expression premises is defined to mean land and building. The tax is on lands and buildings. The levy under Section 52 falls squarely under the ambit of Entry 49 of List II as it is in the nature of a tax and not a fee. Thus, the applicability of Entry 17, which is a non-taxing entry, does not arise in this case. Tax and fee - HELD THAT:- The water tax is levied so long as the Jal Sansthan has provided a stand post or waterworks within a stipulated radius of the premises through which water has been made available to the public by the Jal Sansthan. The levy of the tax does not depend upon the actual consumption of water by the owner or occupier upon whom the tax is levied. Unlike the charge under Section 59 which is towards the cost of water to be supplied by the Jal Sansthan according to its volume or, in lieu thereof on a fixed sum, the tax under Section 52 is a compulsory exaction. Where the premises are connected with water supply, the tax is levied on the occupier of the premises. On the other hand, where the premises are not so connected, it is the owner of the premises who bears the tax. The levy under Section 52 (1) is hence a tax and not a fee. It is a tax on lands and buildings within the meaning of Entry 49 of List II. Applicability of judgement in the two judge Bench of this Court in Union of India v. State of U.P. [ 2007 (11) TMI 701 - SUPREME COURT] - HELD THAT:- The Jal Sansthan was catering to the need of maintaining the sewerage system not only at the railway stations but in the adjoining areas as well as the residential quarters, offices, gardens, and sheds maintained by the Union of India through the railways. The Division Bench of the High Court dismissed the writ petition challenging the levy. The two judge Bench held that Section 52 states that the Jal Sansthan can levy tax, fee and charge for water supply and for sewerage services and though the charge was termed as a tax, in substance it is a fee for the supply of water. There is an evident error in the above observations. Section 52 is contained in Chapter VI which is titled taxes, fees and charges . The observations in paragraph 23 quoted above indicate that the title of Chapter VI was conflated with the nature of the provision which is contained in Section 52. Section 52 provides for the levy of taxes and not for fees or charges for which there are distinct provisions in Chapter VI. The observations of the Court that though the charges are loosely termed as tax, it is in substance a fee, is per incuriam and in any event not reflective of a correct reading of the provisions of the statute. The levy under Section 52 is a tax simplicitor and cannot be regarded either as a charge or a fee for a service rendered. To that extent, the observations in paragraph 23 of the decision in Union of India v. State of U.P. would have to be and are accordingly overruled. There is no merit in the challenge raised in the writ proceedings before the High Court of Judicature at Allahabad - the constitutional challenge to the validity of Sections 52 (1)(a), Section 55(b)(1) and Section 56 of the UP Water Supply and Sewerage Act, is rejected - appeal allowed.
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2021 (10) TMI 1070
Seeking grant of Bail - trading in crypto currency - collection of huge amounts from gullible investors - assured returns were not given to the investors - Breach of Trust - HELD THAT:- Without any observations on the merits or demerits of the trial that would take place, in as much as, the charge sheet has already been filed, the factum that the applicant indulged in the trade of crypto currency despite public notices dated 24.12.2013, 01.02.2017, 05.12.2017 issued by the RBI as also issued on 06.04.2018 cautioning users/holders and traders of virtual currency including bit coins regarding various risks associated in dealing with such virtual currencies with regulated entities already providing such services having been called upon to exit the relationship within three months from the date of the circular dated 06.04.2018 bearing DBR.No.BP.BC.104/08.13.102/2017-18, copy of which is annexed as Annexure-F to the present application, coupled also with the aspect that in view of the associated risks, it was decided by the RBI with immediate effect vide circular dated 06.04.2018 that the entities regulated by the RBI would not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs and that such services included maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transferring/receipt of money in accounts relating to purchase/ sale of VCs with the transactions entered into by the applicant, coupled with the aspect that apart from the investments received by the applicant prior to the circular dated 06.04.2018, the applicant continued to take investments even after the RBI s circular dated 06.04.2018 as per the statement of amount invested by complainants along with receipts as submitted by the applicant. Coupled with the factum that after allegedly inducing the complainants to give their hard earned money for investment in the firm Pluto Exchange, the assured returns were not given to the investors with the applicant having closed his office of the Pluto Exchange firm at Connaught Place and having gone away to Dubai apparently admittedly even as per averments made in his application though he has submitted that he was running a gold business, the factum that despite running a gold business, the applicant did not return the amounts due to the complainants, cannot be overlooked and thus, taking into account the allegations levelled against the applicant of he with his associates having duped the complainants allegedly to the tune of ₹ 2.5 Crores in the instant case which relates to an alleged commission of an economic offence, which offences corrode the fabric of democracy and are committed with total disregard to the rights and interest of the nation and are committed by breach of trust and faith and are against the national economy and national interest, whereby a large number of innocent investors have been duped of their hard-earned money, it is not considered appropriate to release the applicant on bail. Application dismissed.
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2021 (10) TMI 1069
Seeking grant of Bail - contention is that the mutual fund units in question were voluntarily transferred by OCL and DCEL to three companies of the petitioner to utilize the dead assets of the company and offer the same as collateral, with a view to avail margin for trading - whether the petitioner, who is alleged of committing an offence involving about ₹ 344 Crores, is entitled to bail or not? - HELD THAT:- A perusal of the judgment in SANJAY CHANDRA VERSUS CBI [ 2011 (11) TMI 537 - SUPREME COURT ] indicates that the magnitude of the offence cannot be the only criterion for denying bail. The object of bail is to secure the presence of the accused at the Trial. The object of bail is neither punitive nor preventative and the person who has not been convicted should be held in custody pending Trial only to ensure his attendance at Trial; and to ensure that the evidence is not tampered with and the witnesses are not threatened. If there is no apprehension of interference in administration of justice in a criminal trial by an accused then a person should not be deprived of his liberty. Only a vague belief that he will tamper with evidence cannot be a ground to deprive a person of his liberty. Gravity of the offence cannot be the sole ground to deny bail to the accused. The investigation against the accused has been completed and the charge sheet has been filed as on 11.11.2019. The further investigation that is being carried out is with respect to other authorities and the accused has no role to play therein. The evidences are documentary in nature and all the relevant documents are within the custody of the prosecution. Therefore, there is no likelihood of tampering of evidence. This court is inclined to grant bail, subject to the conditions imposed - application allowed.
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2021 (10) TMI 1068
Rejection of representation re-fixing/revisiting the seniority list by placing Direct recruit Assistant Commissioners en-block over and above the promotees Assistant Commissioners - whether inter-se seniority of the petitioners and private respondents is to be determined from the date of their substantive appointment in accordance with Rule 8 (1) or it is to be determined in accordance with Sub-Rule 3 of Rule 8 of the Seniority Rules 1991? HELD THAT:- The issue regarding what is the import and purport of phrase one selection occurring in sub-rule (3) has to be dealt with first before proceeding further in the matter. Ordinarily, appointments through direct recruit and promotion to a post are not made by one selection inasmuch as direct recruitment to the post of Assistant Commissioner in the present case is made by the Uttar Pradesh Public Service Commission through competitive examination whereas promotion is made by the Departmental Promotion Committee constituted for the said purpose - one selection occurring in Rule 8(3) of Rules,1991 means in the same year. If appointments are made to a post by direct recruitment and by promotion as per their quota in the same recruitment year , then their inter se seniority is to be determined applying the provisions of Rule 8(3) of Rules, 1991. This Court in the case of RAVINDRA NATH PANDEY S/O B.N. LAL PANDEY VERSUS STATE OF U.P. THRU PRINCIPAL SECRETARY [ 2014 (9) TMI 1245 - ALLAHABAD HIGH COURT] has held that Sub-rule 3 of Rule 8 of Rules, 1991, should be construed in such a manner so that rule does not become inoperative. It has been held that phrase one selection occurring in Rule 8(3) should be construed to mean the selection made in the same year of recruitment and seniority of all persons who are appointed by direct recruitment or promotion in the same recruitment year, should be determined as per Rule 8(3) of Rules, 1991. In the present case, final selection and appointments to the post of Assistant Commissioner, Commercial Tax through direct recruitment (petitioners) and promotion (private respondents) was concluded in the year of recruitment 2008-09 i.e. 01.07.2008 to 30.06.2009. The petitioners were issued appointment letters on 19.12.2008 in pursuance thereof, they joined between 24.12.2008 to 16.06.2009 whereas the promotion order in respect of private respondents was issued on 27.02.2009 and all the promotees submitted their joining on the same day i.e. 27.02.2009. Whether the petitioners who had no grievance against the impugned seniority list dated 09.08.2012 till the year 2020, get cause of action in the year 2020 to challenge the said seniority list as representation filed by one of the petitioners got rejected vide impugned order dated 20.03.2020? - HELD THAT:- It is well settled law that a party does not get cause of action to get a dispute reopened, which is finally settled between the parties because of change of law or decision of the Court. - In the present case, impugned seniority list dated 09.08.2012 remained unchallenged for 9 long years. Promotions were made in the year 2014 based on this seniority list to the post of Dy Commissioner, Commercial Tax without any demur by the petitioners, therefore, the petitioners do not get a cause of action to raise the dispute against the seniority list dated 09.08.2012 in the year 2020 because of the judgment in the case of Shanti Shekhar Singh [ 2017 (5) TMI 491 - ALLAHABAD HIGH COURT] - In number of decisions, it has been held that delay and latches have to be seen from the original cause of action and not from the date of representation or from the decision on the representation, if any. If the petitioners were aggrieved by the seniority list dated 09.08.2012, they could have come to this Court before promotion to the post of Dy Commissioner, Commercial Tax was held from the said seniority list. They have approached this Court in the year 2020 and, therefore, these writ petitions are barred by gross delay and latches, which are liable to be dismissed on this ground alone - It is also well settled that settled seniority of persons in a service should not be disturbed after much delay as seniority in service should not be a variable factor. If the appointment to the post of Assistant Commissioner Commercial Tax is made through direct recruitment and promotion in the same year of recruitment, their seniority must be determined applying the provisions of Rule 8(3) of the Rules, 1991 - In the present case, since the appointment on the post of Assistant Commissioner was made through direct recruitment and by promotion in the recruitment year 2008-09, their seniority was rightly determined applying the principle of Rule 8(3) while publishing the seniority list dated 09.08.2012. Rule 8(1) cannot be applied for determining inter se seniority of direct recruits and promotees, if the selection and appointments are made in the same recruitment year through direct recruitment and promotion. Thus, it is held that the impugned seniority list is correctly prepared and settled seniority position should not and cannot be reopened after 8- 9 years. Petition dismissed.
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2021 (10) TMI 1067
Non-grant of sanctioned CC Facility - Breach of trust - Commitment of fraud - prosecution under vicarious liability - commission of offences punishable under Section 409, 420 RPC - whether a Chairman/Director of a company, or say a bank, can be vicariously liable for a criminal offence attributed to the company/bank? - HELD THAT:- The issue whether a Chairman/Director of a company, or say a bank, can be vicariously liable for a criminal offence attributed to the company/bank, came up for consideration before the Supreme Court in Sunil Bharti Mittal vs. CBI [ 2015 (9) TMI 1339 - SUPREME COURT] , where it was held that The Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused. The Magistrate has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. The Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused. In the present case, the Trial Court has failed to pose to himself the correct question viz. as to whether the complaint, even if given face value and taken to be correct in its entirety, would lead to the conclusion that the respondents herein were personally liable for any offence. The Bank is a body corporate. Vicarious liability of the Chairman/Managing Director and Branch Manager would arise provided any provision exists in that behalf in the statute. The Statutes indisputably must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability. In the present case, the important aspects have not been followed by the Trial Court while entertaining the complaint and issuing summons to petitioners. The complaint filed by respondents does not withstand the touchstone of law laid down by the Supreme Court as discussed above and is, at the most, a civil dispute. Thus, in order to secure the ends of justice, instant petition requires to be allowed - petition allowed.
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2021 (10) TMI 1066
Dishonor of Cheque - insufficiency of funds - legally enforceabe debt or not - acquittal of respondent/accused of the charge under Section 138 of the Negotiable Instruments Act, 1881 - rebuttal of presumption - HELD THAT:- It is quite clear that presumption under Section 139 of the Act, 1881 covers legally enforceable debt or liability, in other words the law of aforesaid presumption as it stands now after the judgment of Supreme Court in the matter of Rangappa [ 2010 (5) TMI 391 - SUPREME COURT] is that once the issuance of the cheque is admitted or proved, the trial Court is duty bound to raise presumption that the dishonoured cheque placed before it was indeed issued in discharge of legally enforceable debt or liability of the amount mentioned therein, although the presumption in this regard is a rebuttable one. Looking to the provisions contained in Section 139 of the Act, 1881 the learned trial Magistrate ought to have presumed that cheque (Ex.P-2) was issued by respondent/accused for the discharge of loan amount/legally enforceable debt as has been stated by Mahendra Kumar Sahu (PW-1) because the accused has not examined himself or adduce any evidence to rebut the aforesaid presumption. Although, in the statement recorded under Section 313 of the CrPC, respondent/accused has stated that he has not given any cheque to the complainant but the statement of the accused recorded under Section 313 of the CrPC is not a substantive evidence of defence, but only an opportunity to the accused to explain the incriminating circumstances appearing in the prosecution case of the accused. Mahendra Kumar Sahu (PW-1) has proved in this case that cheque (Ex.P-2) amounting of ₹ 4,72,366/- had been issued by the respondent/accused in favour of appellant/complainant, which was dishonoured and after receiving intimation (Ex.P-3) in this regard, notice (Ex.P-4) was sent to the accused for payment of cheque amount but despite service of notice, respondent/accused did not pay the cheque amount to the complainant and thereby complainant has complied with the necessary provisions of Section 138 of the Act, 1881, which is well supported by aforesaid documents also, therefore, on the basis of legal presumption under Sections 139 and 118 of the Act, 1881, it is proved that the cheque was issued by the respondent/accused to discharge loan amount/legally enforceable debt. The finding arrived at by the trial Magistrate is unsustainable in law. The appellant/complainant is entitled to get the cheque amount of ₹ 4,72,366/- and in addition to that since the transaction is of the year, 2012, he is entitled to get ₹ 2 lakhs more on account of expenses and interest. The respondent/accused is convicted for offence under Section 138 of the Negotiable Instruments Act, 1881 and awarded sentence of fine to the tune of ₹ 6,72,366/-, in default thereof, to undergo simple imprisonment of four months - the appeal is allowed reversing the acquittal.
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