TMI Tax Updates - e-Newsletter
October 9, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Profiteering - writ of prohibition restraining the respondents from taking any coercive actions - period 01st January, 2019 to 31st March, 2019 - principal profiteered amount directed to be deposited in 6 installments - The interest amount directed to be paid by the respondents is stayed till further orders. - HC
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Income Tax:
Penalty u/s 271(1)(c) - bogus purchases - No clinching material had been brought on record by the revenue which could disprove the authenticity of the purchases claimed by the assessee to have been made from the aforementioned parties, no penalty u/s 271(1)(c) could have thus validly been imposed upon him - AT
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Income Tax:
TP Adjustment - Working capital adjustment was denied to the assessee in absence of any reliable data provided by the assessee. - outstanding debtors beyond an agreed period is a separate international transaction of providing funds to its associated enterprise for which the assessee must have been compensated in the form of interest at LIBOR + 300 BPS as held by CIT (A) . - AT
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Income Tax:
Penalty u/s 27(1)(c) - bogus LTCG claim of the assessee on transaction in penny stocks of Mukesh Choksi Group of accommodation entry providers - ITAT deleted the penalty - The assessee has supported the face value of transactions with bills and payments - Order of ITAT confirmed - HC
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Income Tax:
Levy of tax on the royalties or fees for technical services - rate of tax under the DTAA - 12% or 10% - the substitution has the effect of deleting the old rule and making the new rule operative. Therefore, the Tribunal has rightly determined the rate of tax as substituted in Clause 2 of Article 12 of DTAA between India and Singapore applicable for the entire fiscal year as defined in DTAA and is liable to be taxed at 10%. - HC
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Income Tax:
Exemption u/s 11 - Determination of application of income and accumulation of income - claim of deduction of the claim of assessee for an amount u/s 24(a) from rental income - the word ‘income’ in Section 11(1a) of the Act must be understood in commercial sense and the entire income of the trust in the commercial sense has been spent for the purpose of charity. - HC
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Income Tax:
Addition u/s 68 - whether Tribunal is right in law in accepting the contentions of the Assessee without giving an opportunity to the AO by way of a remand - the explanations in the context of Section 68 of the Income Tax Act have to be considered in the light of human probabilities and the explanations cannot be unreasonably rejected. - no substantial question of law arises. - HC
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Income Tax:
Deduction u/s 80IC - AO has held that the profits are not matching with the consumption of the electricity at the said Unit - comparison of consumption of electricity in various Units of the Assessee - the AC has not rejected the books of account. We find that there are many reasons for higher electricity consumption, therefore, on this simple disparity the AO cannot disallow the deduction U/s 80IC - HC
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Customs:
Valuation of imported goods - Cut Orchid Flowers (Dendrobium Hybrid) of various varieties and colour - undervaluation of goods - Section 17(5) of the Customs Act, 1962, specifically provides that in case where the Customs Officer amends any assessment made by the importer, then Custom Officer will issue a speaking order giving the reasons for making the amendments in the assessment as made by the importer - In absence of any order under Section 17(5) of the Customs Act, 1962, Commissioner (Appeal) was justified in remanding the matter to the original authority for passing the order under Section 17(5). - AT
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Customs:
Levy of ADD - imported stainless steel CR Coils having width less than 1280 mm - The act of re-export of the goods subsequent to import by mis-declaring/non-declaring the width cannot obliterate the said act or omission - Demand of duty confirmed - Commissioner (Appeals), however, without issuing any notice or providing any opportunity to the appellant directed confiscation under Section 111(m) of the Customs Act, 1962. - Consequently, the confiscation under Section 111(o) cannot be sustained. - AT
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Customs:
Classification of imported goods - Sucrose (pharmaceutical grade) - The products enumerated in the said Explanatory Notes clearly indicates that confectionary are mostly for immediate consumption and sometimes added with therapeutic value classified under Chapter 30 as pharmaceutical products. Also, applying the common parlance test, it cannot be claimed that the imported sugar spheres/neutral pellets are used by a common man like the use of a confectionary even if the same manufacturer manufactures both these items. - AT
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Corporate Law:
Restoration of name of the Company in the Register of Companies - The Registrar of Companies, the respondent herein, is ordered to restore the original status of the Appellant Company as if the name of the company has not been struck off - However, it will not entitle the Directors of the Company whose name in case have been disqualified by virtue of provisions of section 164 of the Companies Act, 2013 by the Respondent/RoC automatically to be restored to directorship except in accordance with law. - Tri
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Service Tax:
Export of services or not - intermediary, commission and marketing service fee received - the activity of the assessee-appellant rendered is ‘intermediary service’ taxable in the hands of the provider. Assessee-appellant is provider of the service and, hence, liability devolves on them in terms of rule 9 of Place of Provision of Service Rules, 2012. - AT
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Service Tax:
Classification of service - Appellant has appointed for collating and uploading the details/ information, like name, educational qualification, designation, contact number etc, of the employees in the database - the services availed by the appellants cannot be categorised under “Business Support Service” before 01.05.2011. - the same are not for provision of online information. - AT
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VAT:
Condonation of delay in filing second appeal - no sufficient cause shown for delay - the file went missing - there are no reason to disbelieve the affidavit filed. The assessee is a joint stock company and is involved in various activities. Therefore, it cannot be said that the reason assigned by them does not constitute sufficient cause. On considering the reasons, the explanation offered by the assessee-company constitutes sufficient cause. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (10) TMI 307
Profiteering - writ of prohibition restraining the respondents from taking any coercive actions - period 01st January, 2019 to 31st March, 2019 - HELD THAT:- Keeping in view the orders passed by this Court in PHILLIPS INDIA LIMITED VERSUS UNION OF INDIA & ORS. [2020 (6) TMI 626 - DELHI HIGH COURT], M/S. SAMSONITE SOUTH ASIA PVT. LTD. VERSUS UNION OF INDIA & ORS. [2020 (7) TMI 526 - DELHI HIGH COURT] and M/S. PATANJALI AYURVED LTD. VERSUS UNION OF INDIA & ORS. [2020 (7) TMI 614 - DELHI HIGH COURT] this Court directs the petitioner to deposit the principal profiteered amount of ₹ 37,85,342/- in six equated installments commencing 15th October, 2020. The interest amount directed to be paid by the respondents is stayed till further orders.
List on 03rd November, 2020 along with the connected batch of matters.
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Income Tax
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2020 (10) TMI 309
Rectification application - Request for online approval of refund - prayer for up-to-date interest has also been made - as assured and undertaken to this Court that the petitioner’s rectification application shall be decided within two weeks and up-to-date interest, in accordance with law, shall be paid to the petitioner.
HELD THAT:- The statement/undertaking given by learned counsel for the respondents, on instructions of the AO, is accepted by this Court and the respondents are held bound by the same.
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2020 (10) TMI 295
Deduction u/s 80P(2)(a)(i) - assessee were essentially doing the business of banking, and therefore, in view of insertion of section 80P(4) with effect from 01.04.2007, the assessee will not be entitled to deduction u/s 80P - HELD THAT:- Judgment of the Hon’ble jurisdictional High Court in the case of Chirakkal Service Cooperative Bank Ltd. [2016 (4) TMI 826 - KERALA HIGH COURT] was ruling the roost and the certificate issued by the Registrar of Co-operative Society terming the assessees as a primary agricultural credit society would be sufficient for grant of deduction u/s 80P of the I.T.Act. I
We are of the view that there should be fresh examination by the Assessing Officer as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not.
A.O. shall list out the instances where loans have disbursed for non-agricultural purposes etc. and accordingly conclude that the assessees’ activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act, 1969, before denying the claim of deduction u/s 80P(2) - AO shall examine the activities of the assessees-society by following the dictum laid down in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT [2019 (3) TMI 1580 - KERALA HIGH COURT]and shall take a decision in accordance with law. Appeals filed by the assessees are allowed for statistical purposes
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2020 (10) TMI 294
TP Adjustment - ‘international transactions’ on account of notional interest on outstanding balance of receivables from Associated Enterprises (‘AE’) - characterizing of outstanding account receivables as loan - CIT-A benchmark notional interest on account receivables at the rate of LIBOR plus 300 basis points - whether outstanding balance of receivables from the AE is not an international transaction as it does not impact the profits, incomes, losses or assets of the appellant? - HELD THAT:- Services charge and payments as well as the method of providing invoices in making payment. It provides that the company shall raise invoices on the recipient on the first day of every subsequent month for the services fee, and the recipient shall pay the services for within 15 days of receipt of the invoice by the company.
Service costs shall constitute full consideration for the company for the providing of services to the recipient. This agreement clause clearly shows that if the payment is beyond 15 days, it does not include the cost of service for withholding the payment beyond 15 days by the associated enterprises. This shows that in the service cost, the cost of outstanding which remains overdue is not factored. Hence, We do not find any infirmity in the order of the ld CIT A.
Working capital adjustment was denied to the assessee in absence of any reliable data provided by the assessee. Even before us same is not provided. Therefore it is apparent that in the present case working capital adjustment was not factored into by determining the arm’s-length price of the international transaction of provision of the services. Therefore, outstanding debtors beyond an agreed period is a separate international transaction of providing funds to its associated enterprise for which the assessee must have been compensated in the form of interest at LIBOR + 300 BPS as held by CIT (A) .
In the result order of the learned CIT – A confirmed and all the grounds of appeal of assessee are dismissed.
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2020 (10) TMI 293
Penalty u/s 271(1)(c) - bogus purchases - HELD THAT:- A.O had declined to accept the authenticity of the purchase transactions under consideration, for the reason that the documentary evidence produced by the assessee did not substantiate the authenticity of the same to the hilt. We have deliberated at length on the issue under consideration, and find, that the addition made by the A.O is merely backed by an unproved claim of the assessee, and not a claim which was disproved to the hilt on the basis of irrefutable documentary evidence by the revenue - unproved purchases would justify an addition in the hands of the assessee, however, merely on the said standalone basis no penalty u/s 271(1)(c) could have been validly imposed.
In the case before us, as the revenue had failed to disprove to the hilt on the basis of clinching documentary evidence, the authenticity of the claim of the assessee of having made purchases from the aforementioned parties, therefore, merely on the basis of the unproved claim of purchases no penalty under Sec. 271(1)(C) could have been validly imposed on the assessee.
Restriction of the disallowance of entire purchases made by the A.O to 30% of the aggregate value of such purchases by the CIT(A), which thereafter was substituted by 10% by the Tribunal, speaks for itself that the disallowance sustained in the hands of the assessee is merely backed by a process of estimation and not based on any concrete evidence.
No clinching material had been brought on record by the revenue which could disprove the authenticity of the purchases claimed by the assessee to have been made from the aforementioned parties, no penalty u/s 271(1)(c) could have thus validly been imposed upon him. We thus not being able to persuade ourselves to subscribe to the observations of the lower authorities therein vacate the penalty imposed by the A.O u/s 271(1)(c). - Decided in favour of assessee.
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2020 (10) TMI 305
Reopening of assessment u/s 147 - notice u/s 148 is barred by limitation - petitioner had under quoted the sale amount in the returns - HELD THAT:- Under the proviso to Section 147 department was entitled to issue the notice on or before 31.03.2014, on which date, the four year period prescribed under this Section, expires. Apparently, the notice under Section 148 dated 30.03.2016 is beyond the period of six years and as such, the notice itself is bad in law, since barred by limitation. As such, the consequential impugned assessment order dated 30.12.2016, cannot be sustained.
Department submission that the petitioner had disclosed the full value in Annexure 1-A of the sale deed and that he had shown a lesser amount in the returns, cannot be sustained for two reasons. Firstly, such a reasoning was not assigned while the petitioner's objections were considered at the time of passing the assessment order. This ground of objection has been brought in the first time by way of a counter affidavit, which is impermissible.
Secondly, Annexure 1-A is a statement made along with sale deed presented for registration and the value of ₹ 1,94,95,000/- is only a guideline, whereas the recitals in the sale deed evidences that the property was purchased at ₹ 1,50,00,000/-. Therefore the guideline value shown in the Annexure 1-A of the sale deed, cannot be construed to be an actual sale value and therefore the consequential decision that the petitioner had under quoted the sale amount in the returns, cannot be accepted. Nevertheless, it is made clear that this Court is not expressing its views that the sale price shown in the Sale Deed would be conclusive evidence for determination.
Impugned assessment order cannot be sustained since it is barred by limitation and accordingly, the same stands quashed - Decided in favour of assessee.
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2020 (10) TMI 304
Deduction u/s 80IB - Assessee in Form No.10CCB failed to provide the details of number of workmen working in each of the Units of the Assessee - HELD THAT:- There was this omission on the part of the Assessee whilst filling in the Form 10CCB, it is not as if this omission was not rectifiable. In fact, the AO should have granted the Assessee an opportunity for rectifying this omission.
Assessee even prior to the assessment, produced material before the AO, which evidences that each of the Units of the Assessee employed more than 10 workers. This means that there was material before the AO to conclude that the Assessee fulfilled the conditions required for claiming deduction under Section 80IB. In these circumstances, both, the Commissioner (Appeals), as well as the ITAT, were quite justified in directing grant of deduction u/s 80IB to the Assessee.
In the case of Hindustan Steel Limited vs. State of Orissa [1969 (8) TMI 31 - SUPREME COURT] the Hon'ble Supreme Court has held that mere furnishing of deduction form 10CCB could, at the most, be a default of technical and venial nature. Such omission cannot be held to be so fatal as to merit the penalty of disallowance of deduction under consideration. The view taken by the Commissioner (Appeals) and the ITAT is in consonance with the law laid down by the Hon'ble Apex Court in Hindustan Steel Limited (supra). Accordingly, the substantial question of law 'A' is required to be decided against the Revenue and in favour of the Assessee.
Deduction under Section 80IC - AO has held that the profits are not matching with the consumption of the electricity at the said Unit - AO has compared the consumption of electricity in various Units of the Assessee and on such basis, concluded that the profits in respect of the newly established Unit at Nalagarh appeared to be unreasonably high - HELD THAT:- The requirements of customers at Goa Unit are different from those of Daman Unit. The quality of printing, sale value and contribution of Nalagarh Unit is much higher as compared to other units. The products manufactured at Goa & Daman are excisable products whereas Nalagarh Unit is excise exempt for 10 years.
Moreover the electricity power rate at Goa, Daman are different from the power rates at Himachal Pradesh. We find that the Commissioner of Income Tax was of the view that the AO should bring out the reason of more sales at Nalagarh Unit. We find that AO has not carried out any excise. We find that in the instant case, the AC has not rejected the books of account. We find that there are many reasons for higher electricity consumption, therefore, on this simple disparity the AO cannot disallow the deduction U/s 80IC. - Decided in favour of assessee.
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2020 (10) TMI 303
Addition u/s 68 - whether Tribunal is right in law in accepting the contentions of the Assessee without giving an opportunity to the AO by way of a remand, particularly, when the Assessee has withdrawn the statement unsuccessfully without legal basis ? - HELD THAT:- Explanation offered by the Assessee was more than probabilized. These are concurrent findings of fact. Besides, as held by the Hon'ble Supreme Court in Sumati Dayal [1995 (3) TMI 3 - SUPREME COURT] the explanations in the context of Section 68 of the Income Tax Act have to be considered in the light of human probabilities and the explanations cannot be unreasonably rejected. Thus, the decision in Sumati Dayal (supra), to a certain extent, supports the case of the Assessee rather than the Revenue.
The decision in Killick Nixon Ltd. [2012 (3) TMI 175 - BOMBAY HIGH COURT] turns on its peculiar facts where there were concurrent finding of fact that the transaction in question was a sham and not genuine transaction. In these circumstances, it was held that there was no question of law to be considered. In the present case, there are concurrent findings of fact. Since no case of perversity has been made out, no substantial question of law arises.
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2020 (10) TMI 302
Exemption u/s 11 - Determination of application of income and accumulation of income - claim of deduction of the claim of assessee for an amount u/s 24(a) on the ground that the income of the trust has to be computed in a commercial manner and not as per the Act - HELD THAT:- The object of Section 11 of the Act is to grant immunity to the income of a charitable trust from income tax. The immunity however, is confined to the extent to which such income is applied to such purposes in India. The exemption will be denied if the income is not actually applied for charitable purposes.
This exclusion from immunity, which has been granted by Section 11 has to be confined to the real income of the trust. The application or accumulation can only be of real income which has actually been received by an assessee. It is pertinent to note that Central Board of Direct Taxes has issued a Circular No.5-P dated 19.05.1968, which provides that the word ‘income’ in Section 11(1a) of the Act must be understood in commercial sense and the entire income of the trust in the commercial sense has been spent for the purpose of charity.
The real income of the trust is exempt to the extent to which some income is applied to such purposes in India. The aforesaid view has been taken by in JAYASHREE CHARITY TRUST [1984 (12) TMI 30 - CALCUTTA HIGH COURT]as well as GANGA CHARITY TRUST [1985 (10) TMI 67 - GUJARAT HIGH COURT] with which we respectively agree.
From perusal of the order passed by the CIT(Appeals) as well as the Tribunal, we find that neither the CIT (Appeals) nor the Tribunal has examined the case of the assessee on the touchstone of aforesaid well settled legal principles. In the facts of the case left with no option but to quash the order of the Tribunal and remit the matter to the Tribunal afresh for consideration in the light of observations made supra. Since, the matter is being remitted to the Tribunal, therefore, it is not necessary for us to answer the substantial questions of law. Appeal is disposed of.
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2020 (10) TMI 260
Revised return filed beyond the prescribed period of limitation - matter not remanded to the AO to assess the original return of the assessee - disallowances deleted by ITAT - HELD THAT:- ITAT was not justified in going into the issue of disallowances before the AO had an opportunity of assessing the original return and determined the amount which was liable to be brought to tax. This later exercise involved examination of factual matrix which, in the facts and circumstances of the present case, the ITAT should not have undertaken as if it were the authority of the first instance.
ITAT, in this case, after holding that the revised return was filed beyond the prescribed period of limitation, should have restored the original return before the AO and, thereafter, directed the AO to assess the original return in accordance with law. This would have afforded both, the Revenue as well as the Assessee, effective opportunity to putforth their respective versions on the issue of disallowances which, normally arise in the course of such assessment proceedings.
Impugned order made by the ITAT, to the extent it purports to delete various disallowances or to finalise the assessment, must be interfered with. This later portion of the impugned order is, therefore, set aside. - Decided in favour of the Revenue and against the Assessee.
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2020 (10) TMI 301
Deduction u/s 10B - HELD THAT:- Section 10A and 10B of the Act are pari materia provisions. However, difference is with regard to nature of the unit. Section 10A deals with Free Trade Zone (FTZ) unit whereas, Section 10B deals with 100% export oriented unit. Section 10A of the Act covers newly established undertaking in Free Trade Zones whereas, Section 10B deals with newly established 100% export oriented undertakings. Section 10A of the Act was introduced to give effect to EXIM policy of the Central Government. Policy deals with exchange through others and provides that EOU/EHTP/STP/BTP unit may export goods manufactured / software developed by it through another exporter or any other EOU/EHTP/STP/SEZ unit subject to the conditions mentioned.
In the instant case, admittedly, the assessee is a manufacturing unit and is 100% export oriented unit as has been found by the Tribunal in para 3 of the order. The assessee has manufactured precision components and has exported the same through Toyota Tsusho P. Ltd., which had received the export proceeds in convertible foreign currency. Therefore, the assessee was entitled to the benefit of deduction under Section 10B of the Act.
Substantial questions of law framed by this court are answered in favour of the assessee and against the revenue. The orders passed by the AO, CIT (Appeals) and the order of the Tribunal insoafar it deprives the assessee of the benefit u/s 10B of the Act are hereby quashed and the assessee is entitled to the benefit of deduction under Section 10B of the Act.
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2020 (10) TMI 299
Bogus LTCG - addition on account of LTCG claimed as exempt u/s. 10(38) - transaction was pre-arranged as well as sham and was carried out through penny scripts companies / paper companies - whether the assessee earned long term capital gain through transactions with bogus companies? - ITAT deleted the addition - HELD THAT:- Tribunal has recorded the finding of fact that the assessee discharged his onus of establishing that the transactions were fair and transparent and further, all the relevant details with regard to such transactions were furnished before the Income Tax authorities and the Tribunal also took notice of the fact that some of the shares also remained in the account of the appellant.
Assessee has a Demat Account maintained with the ICICI Securities Ltd. and has also furnished the details of such bank transactions with regard to the purchase of the shares. Tribunal took notice of the fact that the statements recorded by the investigation wing of the Revenue with regard to the Tax entry provided were informed to the assessee despite giving him opportunity to meet such an allegation. No substantial question of law.
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2020 (10) TMI 297
Levy of tax on the royalties or fees for technical services - rate of tax under the Double Taxation Avoidance Agreement (DTAA) - assessee submitted that from perusal of Article 4 of the Notification dated 18.07.2015, it is evident that paragraph 12 of Article 12 of DTAA has been deleted and has been substituted by the paragraph which provides for levy of tax on the royalties or fees for technical services at the rate not exceeding 10% - DTAA between India and Singapore - HELD THAT:- Instant case is a case of substitution by repeal and therefore, the Tribunal has rightly held that new provision which is in existence shall apply for the entire fiscal year as defined in DTAA.
The singular issue which arises for consideration in this appeal is with regard to the rate of tax under the DTAA for Assessment Year 2006-07. Before proceeding further, we may advert to well settled rules of Interpretation with regard to taxing statutes. The substitution of a provision results in repeal of earlier provision and its replacement by new provision. When a new rule in place of an old rule is substituted, the old one is never intended to keep alive and the substitution has the effect of deleting the old rule and making the new rule operative.
Thus, it is evident that paragraph 2 of Article 12, which provided for levy of tax on royalties or fees for technical services at the rate not exceeding 12% has been deleted and in its place, the provision which provides for levy of tax on the royalties or fees for technical services at the rate not exceeding 10% has been substituted. Thus, the substitution has the effect of deleting the old rule and making the new rule operative. Therefore, the Tribunal has rightly determined the rate of tax as substituted in Clause 2 of Article 12 of DTAA between India and Singapore applicable for the entire fiscal year as defined in DTAA and is liable to be taxed at 10%. For the aforementioned reasons, the substantial questions of law framed by this court are answered in affirmative and against the revenue.
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2020 (10) TMI 296
Penalty u/s 27(1)(c) - bogus LTCG claim of the assessee on transaction in penny stocks of Mukesh Choksi Group of accommodation entry providers - ITAT deleted the penalty - HELD THAT:- Incidence of penalty u/s 271(1)(c) of the Act is not automatic and should not be imposed merely because it is lawful to do. Considering the smallness of the amount involved, we consider it expedient to give benefit of doubt to the assessee owing to mitigating circumstances viz; the absence of copy of statement of Mr. Mukesh Chokshi or any other substantive material. The assessee has supported the face value of transactions with bills and payments. In the backdrop of ambiguity in circumstances, it is difficult to hold that the explanation offered by the assessee is blatantly false. We are thus inclined to exonerate the assessee from the incidence of penalty. However, in peculiar circumstances, this view shall not operate as precedent in any manner. - No substantial question of law.
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2020 (10) TMI 284
Prior period expenses - allowable u/s. 37(1) - HELD THAT:- AO wrongly added especially when it has been duly accepted by department in almost all years and solely additions made during AY 2009-10 were duly struck down by CIT(A)-XVI and later on CIT(A) order was accepted by the ITAT also. Nature of these expenses clearly shows that these might pertain to earlier years but crystallized only in current AY 2006- 07. Respectfully following the ITAT order on the same issue alongwith adjudication that these aren’t expenses pertaining to earlier year’s fully allowable u/s. 37(1) addition made by AO is deleted.
CIT(A) has deleted the addition by respectfully following the order of the ITAT in assessee’s own case. No contrary decision has been brought to our notice by the Ld. DR. Therefore, the issue involved in ground no. 1 is decided in favour of the assessee and against the revenue by dismissing the ground no. 1 raised by the Revenue.
Bond Issue Expenses - HELD THAT:- This issue is also covered in favour of the assessee by the order of the Ld. CIT(A)-XVI, New Delhi in which Ld. CIT(A) has deleted the similar addition for assessment year 2007-08. The order is placed on record. No contrary decision has been brought to our notice by the Ld. DR. The nature of these expenses are that these are expenses incurred every year to meet the statutory requirements of issue of bonds and are Trustee Annual Fees, Rating Agencies Annual Fees, NSDL/CDSL Annual Fees, C/o stamp papers, Registrar and Transfer agents fees etc. Exactly similar expenses has been allowed by the Department in the Assessment year 2007-08. - Decided against revenue.
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2020 (10) TMI 283
Assessment u/s 153A - Whether evidence found during the course of search? - HELD THAT:- The impugned orders do not refer to these statements. No doubt, the statement recorded u/s 132 (4) of the Act on its own, withot any corroboruating evidence does not constitute incriminating material. In this case, however, the statement is coupled with bank statement and such bank statements are for the relevant assessment years.
In CIT vs. Chethan das Lachman das [2012 (8) TMI 367 - DELHI HIGH COURT] and in Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] made a reference not only to the evidence found during the course of search, but also to the other post search material or information available with the Ld. AO to make an addition under this section. This aspect missed the attention of the CIT(A).
Since such statements are produced before us in the paper book vide Annexure A-5, we are of the considered opinion that it requires consideration before reaching a conclusion as to whether or not there is any incriminating material in this case. Since the Ld. CIT(A) did not advert to this aspect at all in the impugned orders and no finding is returned as to the impact of these bank statements on the fact in issue, we are of the considered opinion that an error had crept in, in the order of the learned Ld. CIT(A).
We set aside the impugned orders and remand issue to the file of the Ld. CIT(A) to consider the bank statements that were handed over by the assessee at the time of the search and recording of the statements u/s 132 (4) to reach a conclusion according to law. CIT(A) will afford an opportunity to the assessee while considering this issue and consider the submissions, if any, made by the assessee on this aspect - Appeals of the Revenue are allowed for statistical purpose.
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2020 (10) TMI 282
Estimation of income - NP determination - assessee has declared the Net Profit on presumptive basis u/s 44AD of the IT Act @ 8% - HELD THAT:- We find that since the assessee has already explained the source of amount of turnover declared by the assessee, salary income and loans from the relatives, then the action of the AO by taking the entire bank amount as turnover of the assessee is contrary to the facts.
When the assessee has discharged his onus of explaining the source of deposit in the bank account and the AO has failed to conduct any further enquiry or bring any contrary material on record to disprove the explanation and evidence produced by the assessee, the addition made by the AO is not sustainable. Accordingly, the said addition made by the AO on account of turnover of the assessee is deleted.
Net profit rate applied by the AO at 8%, since the main issue of enhancing the turnover of the assessee is decided in favour of the assessee, therefore, this issue becomes infructuous. We may clarify that the AO has not enhanced the NP rate but applied the same NP rate which was declared by the assessee in the return of income. Therefore, the assessee has no merit on this issue. Appeal of the assessee is allowed.
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2020 (10) TMI 280
Addition u/s. 68 - Submission of additional evidences filed by the assessee before the Ld. CIT (A) - HELD THAT:- CIT(A) had decided the matter based on the additional evidence filed by assessee without obtaining remand report from Ld.AO which is not in accordance with rule 47A of the Rules. Therefore, in the interest of justice, we hereby remit the matter back to the file of the AO with directions to admit and examine any evidence filed by the assessee in support of her claim even if it is for the first time and thereafter decide the matter in accordance with law and merits after affording proper opportunity to the assessee of being heard.
Also hereby direct the Ld. AO to examine the actual transactions made by the assessee with an open mind ignoring the silly mistakes committed in the books of accounts of the assessee, as it appears from the facts of the case that the additions made by the Ld. AO for ₹ 1,09,19,900/- u/s. 68 of the Act may not be warranted because the cash brought into the books of the assessee appears to be the amount paid to Mr. Sabzan who is the construction mistry for constructing the Hospital of the assessee, sourced from the bank loan obtained by the assessee. As far as the addition u/s. 68 for ₹ 61,42,389/- is concerned, the issue requires proper verification. - Decided in favour of revenue for statistical purposes.
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2020 (10) TMI 279
FAA admitting fresh claim of the assessee - Depreciation on goodwill - CIT- A directed AO to allow depreciation on the same @12.5% - main contention of the revenue is that Ld. CIT(A) could not admit the claim and further, if the claim was to be admitted, the matter should have been remanded back to the file of Ld. AO for verification of valuation of goodwill and computations thereof - HELD THAT:- Assessee had made this claim during the course of assessment proceedings itself before Ld. AO by way of letter dated 11/09/2012 along with supporting documents but the same were not admitted by Ld. AO since the assessee did not revise its return of income. CIT(A), being an appellate authority, was empowered to do so. Furthermore, this claim of the assessee has been accepted by the Tribunal in AY 2011-12 [2018 (9) TMI 615 - ITAT MUMBAI] which has been followed by Ld. CIT(A). Therefore, this plea of the revenue was to be rejected and we find no infirmity in the action of Ld. CIT(A) in admitting assessee’s claim by relying upon the cited decision of the Tribunal in assessee’s own case for AY 2011-12.
Assessee’s new claim arises out of business transfer agreement dated 17/11/2009 and this was the first year of claim which would have consequential impact on subsequent years. AO had no occasion to consider the assessee’s claim since the claim was not admitted and no verification as to quantification / computations / valuation of goodwill has been done at the level of AO.
To dispel the concerns raised by revenue and keeping in view the fact that this was first year of claim, while in principal holding that the assessee was entitled to claim the depreciation on goodwill in terms of the decision of Hon’ble Supreme Court in the case of Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] as well as in terms of decision of Tribunal for AY 2011-12 in assessee’s own case, the limited matter of verification of valuation of goodwill stand remitted back to the file of Ld. AO. The Ld. AO is directed to allow the depreciation after due verification of quantification of amount of goodwill after appreciating the relevant documents. For the said limited purpose, the matter stand restored back to the file of Ld. AO. Appeal stands partly allowed for statistical purposes
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2020 (10) TMI 274
Levy of penalty u/s 271(1)(c) - Defective notice - whether for concealment of particulars of income or furnishing inaccurate particulars of income? - HELD THAT:- The language used in the notice therefore clearly show that notice issued by the A.O. for levy of the penalty proceedings under section 271(1)(c) to be bad in Law as it did not specify in which limb of Section 271(1)(c) penalty proceedings have been initiated i.e., whether for concealment of particulars of income or furnishing inaccurate particulars of income. The entire penalty proceedings are, therefore, vitiated and no penalty is leviable. We are fortified in our view by the Judgment in the case of Commissioner of Income Tax vs., SSA’s Emerald Meadows [2015 (11) TMI 1620 - KARNATAKA HIGH COURT] which is confirmed by the Hon’ble Supreme Court [2016 (8) TMI 1145 - SC ORDER]. - Decided in favour of assessee.
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2020 (10) TMI 270
Disallowance of expenditure u/s. 36(1)(iii) - Disallowance of expenditure u/s. 37(1) r.w.s. 57(iii) - CIT-A deleted disallowance - As per CIT-A assessee business was of provision of financial services and hence held that the pre-commencement expenses were allowable - Whether CIT(A) ought not to have allowed entire business expenditure against interest income without examining the nature of expenses ? - HELD THAT:- We find that the Ld. CIT(A) has also taken cognizance of the fact that during the assessment year 2016-17, the assessee has changed the main object as business and removed the object of hotel business from the Memorandum of Association
Since the business of the assessee company during the relevant assessment year was only financial services, the income earned during the relevant assessment year ought to be assessed as business income and the entire expenditure incurred by the assessee for earning such income has to be allowed as deduction. Needles to mention, nothing on record is before us to suggest that the assessee company was indulging in any other business activity during the relevant assessment year. Therefore we are of the considered view that the expenditure incurred by the assessee towards salary has also to be allowed as deduction while computing the business income of the assessee for the relevant assessment year. Accordingly we hereby direct the Ld.AO to delete the addition - Decided in favour of assessee.
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2020 (10) TMI 269
Difference between form 26AS and the amount shown in the profit and loss account - leakage of revenue during the period of joint development - HELD THAT:- It is the case of the assessee that an agreement was entered with an intention of developing the above property jointly as business venture and the income from the said activity was offered to tax by the following the percentage of completion method.
AO was of the view that the assessee cannot adopt percentage of completion method as it is not in the business of developing the property but only was the land owner of the property. Difference amount contained in form 26AS and shown in the profit and loss account was brought to tax. This is an issue which requires to be decided having regard to the terms of the joint development agreement and the intention of the parties to the agreement.
Intention of the parties can be gauged from the entries made in the books of account. Entries in the books of account clearly goes to show that the assessee is only a partner in the development of scheduled property of the agreement. No addition can be made based on a mere difference between form 26AS and the amount shown in the profit and loss account and in the absence of any reconciliation and corroborative evidence. It is not the case of the Revenue that there is leakage of revenue during the period of joint development, it is a case of tax neutral. No addition is warranted and the Assessing Officer is directed to delete the addition. - Decided in favour of assessee.
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Customs
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2020 (10) TMI 289
Classification of imported goods - Sucrose (pharmaceutical grade) - classified under CTH 17029090 of Customs Tariff Act, 1975 or under CTH 17019990? - contention of the Revenue is that the imported sugar spheres or Non-pareil seeds 40-60 Mesh Sugar sphere (pharmaceutical grade) are classifiable under CTH 17019990 whereas the appellant while filing the Bill of Entry declared classification under CTH 17029090, but later during the appellate/adjudication proceedings claimed its classification alternatively under 17049090 of Customs Tariff Act, 1975.
HELD THAT:- In confirming the classification under Chapter heading 1701, the learned Commissioner (Appeals) in the impugned order held that chemically pure sucrose as mentioned under the Tariff Heading cannot be construed that it should consist of chemically pure sucrose only; but the chemically pure sucrose could also be in mixture with other materials like starch and water as in the present case. It is his reasoning that what is to be seen in classifying the mixture is the essential character of the product i.e. among all the elements the one that provides the essential character to the said product. He has observed that in the present case, it is sucrose, which is present in the range of 80 to 90% provides the essential character to the imported product Non-pareil seeds 40-60 Mesh Sugar sphere (pharmaceutical grade). In arriving at the said conclusion the Ld. Commissioner (Appeals) referred to rule 3(b) of General Rules of Interpretation, applicable to classification of products in mixture.
There are merit in the observation of the learned Commissioner (Appeals). The argument of the appellant that the product chemically pure sucrose specified under chapter heading 1701 if mixed with any other ingredients except with flavouring or colouring agent, it would fall outside the scope of the said heading - The contention of the appellant that chemically pure sucrose mixed with other items would fall outside the scope of the said heading as it is not designed to bring within its scope other than pure sugar except when added with colouring or flavouring agent therefore devoid of merit.
The Ld. Commissioner (Appeals) in determining the classification of the chemically pure sucrose mixed with starch and water, correctly applied Rule 3(b) of General Rules of Interpretation. He has observed that the classification of principal constituent in the mixture which provides essential character to the product be adopted for the mixture - In the present case chemically pure sucrose is the main constituent and provides the essential character to the mixture as neither the starch which acts as binder nor water which is used in the process can be called as the essential item to be used in the pharmaceutical industry, the purpose for which the mixture is manufactured.
The products enumerated in the said Explanatory Notes clearly indicates that confectionary are mostly for immediate consumption and sometimes added with therapeutic value classified under Chapter 30 as pharmaceutical products. Also, applying the common parlance test, it cannot be claimed that the imported sugar spheres/neutral pellets are used by a common man like the use of a confectionary even if the same manufacturer manufactures both these items. The use of the imported pellets is in pharmaceutical industry not as confectionary by the common man - it can safely be concluded applying the aforesaid tests that the imported product in question common in both the Appeals fall under CTH 17019990 - the demand of duty and interest confirmed for the normal period is upheld.
Penalty - HELD THAT:- Since the issue relates to classification of goods between two competing Headings being a question of interpretation of law, hence, imposition of penalty is uncalled for and unwarranted, accordingly set aside.
Time Limitation - HELD THAT:- On a change of view by the department, allegation of mis-declaration or suppression of facts in classifying the product at the times of its import under CTH 17029090 is incorrect and cannot be sustained. The Revenue, on the other hand, argued that in the era of self-assessment, it is burden of the assessee to classify and discharge duty properly, hence, failure of classifying the product under correct sub-heading amounts to mis-declaration. Hence, invoking the extended period of limitation is justified.
The appellant have been continuously declaring classification of the product under Heading 1702 after providing full and description of the goods in their Bills of Entry; duly filed all literatures on process of manufacture, its usage etc. as and when called for by the department during assessment proceedings. In such circumstance, allegation of suppression of facts or mis-declaration solely on the basis that the correct classification which according to the Department would fall under different Tariff Heading i.e. 1701 attracting higher rate of duty during the period under dispute cannot be sustained - the demand confirmed in the impugned Order invoking extended period is set aside on the ground of limitation.
Appeal disposed off.
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2020 (10) TMI 288
Misdeclaration of export goods - mis- declaration of attempt to export 22 “carat gold jewellery” - Outright Scheme for manufacture of Gold Jewellery with an obligation to export the same with certain quantity of gold within stipulated period of ninety days with required value addition - allegation is that in order to show that the export of gold in the form of Gold Jewellery was in compliance with the said scheme, the appellant SGPL mis-declared the actual quantity of gold containing in the said jewellery - Confiscation - Redemption Fine - penalty.
HELD THAT:- From the statement of Roshan Vernekar and that of the other persons recorded in the impugned Order, one thing is very clear that the export quantity of gold declared in the Shipping Bill is incorrect and the same was detected by the Customs authority on a thorough re-examination of the declared gold jewellery meant for export. It is not disputed by SGPL at any stage of the proceeding that the content of the gold in the jewellery meant for export was found to be 3540 gms. instead of the declared quantity of 13,633.730 gms - Ld. Commissioner was justified in directing confiscation of the goods and imposition penalty on SGPL under the respective provisions of the Customs Act, 1962. However, the quantum of fine directed and penalty imposed appears to be on higher side in the circumstances of the case and the evidence brought on record. Hence, to meet the ends of justice the redemption fine is reduced to 20.00 lakhs and penalty to ₹ 5.00 lakhs on SGPL.
While imposing penalty on Shri Roshan Vernkear, learned Commissioner analyzing the evidences observed that Shri Roshan Vernekar did not take any steps to examine the content of the gold in the gold studded jewellery before export and declaration made on behalf of the appellant company M/s SGPL. The learned Commissioner also did not accept the submission of Shri Roshan Vernekar that the making of jewellery was entrusted to one Shri Hitesh Desai, who met him only once and also without visiting the premises of Bengali Babu, who carried out the making of jewellery for export, and the said gold jewellery was accepted as genuine and declaration with Customs for export was filed accordingly. Thus, he found him guilty and imposed penalty both under section 114(iii) & 114AA of Customs Act, 1962.
There are no justification to interfere with the said finding of the Ld. Commissioner which points out to omission of necessary steps required to be taken by Shri Roshan Vernekar in the verification of the jewellery and preparation of export documents on behalf of SGPL. Also, it cannot be ignored that as a remedial action, necessary criminal case was initiated against the karigar - the penalty imposed on him seems to be disproportionate and consequently deserves to be reduced. Consequently, penalty on Shri Roshan Vernkear under Section 114AA is reduced to ₹ 2.00 lakhs and penalty under Sec. 114(iii) is set aside as imposition of penalty under Sec. 114AA would meet the ends of justice.
In imposing penalty on Directors Mrs. Deepa Vernekar and Mrs. Shilpa Vernekar, the learned Commissioner observed that even though they have not signed any export documents, they are liable for penalty for the mis-declaration and misdeeds of Shri Roshan Vernekar. I do not find merit in the observation of the learned Commissioner imposing penalty on Directors Mrs. Deepa Vernekar and Mrs. Shilpa Vernekar, as neither of them was examined nor in any of the statements of other witnesses, anyone implicated them stating that they had knowledge about handing over the gold to Hitesh Desai for making the jewellery and/or they had the knowledge of the content of the gold in the jewellery declared for export was less than the declared quantity in the export documents. Therefore, imposition of penalty on them cannot be sustained.
Penalty on CHA - HELD THAT:- There are force in the contention of the CHA inasmuch as the Department could not produce any cogent evidence to establish the fact that either Shri Vinay Shah or CHA was aware of the fact that the gold jewellery meant for export did not contain the quantity of gold as declared along with other imitation stone, assuming for a while that Shri Vinay Shah was the employee of the CHA. He has prepared the document as declared to him on behalf of the exporter - the imposition of penalty on Shri Vinay Shah and the CHA cannot be sustained.
Application allowed in part.
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2020 (10) TMI 287
Levy of ADD - imported stainless steel CR Coils having width less than 1280 mm - It is alleged that the goods were stuffed in seven containers, and in three containers weighing around 54.294 MTs Stainless Steel CR Coils having width less than 1280 mm , hence liable to Anti Dumping duty amounting to ₹ 49,14,756/- - N/N. 14 of 2010 dated 20.02.2010 read with N/N. 86/2011 dated 6.9.2011 - Confiscation - Penalty - HELD THAT:- The issue is no more res integra and settled by the judgment of Hon'ble Supreme Court in favor of Revenue in the case of COMMISSIONER OF CUSTOMS (EXPORT) VERSUS M/S. MASCOT INTERNATIONAL [2017 (7) TMI 276 - SUPREME COURT] setting aside the judgment of the Tribunal in this regard. Thus, the Stainless Steel CR Coils of 54.298 MT having width less than 1280 mm are liable to Anti Dumping duty of ₹ 49,14,756/- and the confirmation of the duty by the authorities below does not suffer from any infirmity. This is also not disputed by the Appellant during the course of hearing.
Confiscation - Redemption fine - HELD THAT:- The adjudicating authority while confirming the demand of Anti Dumping duty directed confiscation of the goods observing that the goods are liable to anti dumping duty and there has been mis-declaration/non-declaration of goods in the respective Bills of Entry. The confiscation of the goods was directed under Section 111(d) and 111(o) of the Customs Act, 1962 and allowed redemption of the same on payment of fine of ₹ 4.00 lakhs.
There is merit in the contention of the learned AR for the Revenue inasmuch as when the goods were imported, the appellant did not appropriately declare the width of the stainless steel CR coils in the Bills of Entry only in respect of 54.294MTs when the width of other coils having width more than 1280mm declared, resulting into nonpayment of Anti Dumping duty. After initiation of investigation, the Anti Dumping duty of ₹ 49,14,756/- has been deposited by them. Subsequently, the goods were provisionally released on execution bond and cash security. On their application, the Commissioner of Customs allowed re-export of the goods in May, 2014 and the goods were subsequently re-exported in September, 2014.
Penalty on Shri Ketan R Jain - HELD THAT:- The Department could not bring out any evidence against personal involvement of Shri Ketan R Jain indicating that he has involved actively in non-payment of anti dumping duty by mis-declaring the width of the coil. On the contrary, he has signed the relevant import documents filed with Department in normal course. Accordingly, imposition of penalty on him is unwarranted and the same is accordingly set aside.
There are no merit in the contention of the appellant in as much as the amount of Anti Dumping duty was paid during the course of investigation in February, 2014, which later resulted into issuance of show-cause notice in August, 2014 after completion of the investigation. The said show-cause notice was adjudicated by the Assistant Commissioner in 2017 and the appeal against the said order was finally decided by the learned Commissioner (Appeals) by order dated 19.09.2018.Consequent to the said Order the refund of anti dumping paid during investigation became due to them. Consequently, on their filing of refund claim on 26.11.2018, the Assistant Commissioner after scrutinizing the refund claim from all aspects including unjust enrichment etc., sanctioned the refund to the Appellant.
Appeal allowed in part.
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2020 (10) TMI 285
Valuation of imported goods - Cut Orchid Flowers (Dendrobium Hybrid) of various varieties and colour - undervaluation of goods - demand of duty on the enhanced value on the basis of the certain market enquiries - principles of natural justice - HELD THAT:- From Public Notice No 48/2003 dated 08.12.2003, issued by the Commissioner of Customs (Import), Air Cargo Complex, Mumbai it is quite evident that the procedure of Kaccha Bill of Entry is a special procedure for facilitating the immediate clearance of consignments of certain categories of goods. Public notice makes it clear that Kaccha Bill of Entry shall be filed as a prior bill of entry and processed accordingly. It also prescribes that these Bill of Entries shall be system appraised on the basis of the declarations made by the importer and the duty payment challan shall be system generated. In case the department finds that any duty has been short levied or short paid against a Kacha Bill of Entry, then it will communicate to the importer about short payment of duty, and also initiate the legal action as per law. Importer has to pay the duty immediately or this facility of allowing clearance on the basis of Kaccha Bill of Entry shall be withdrawn.
In their submission and arguments appellants submit that they have no grievance with the order of the Commissioner (Appeal) as he has remanded the matter back to the original authority to pass a fresh order (refer para 11), following the principles of natural justice. Their grievance is against the observations made by the Commissioner (Appeal) in para 7, 8 & 10 (reproduced above in para 3 of this order). The learned counsel submits that as per the observations made in para 10, Commissioner (Appeal) has decided the issue himself upholding the assessment orders enhancing the duty. By doing so he has seriously constrained the original authority from examining the issue afresh and passing the speaking order following the principles of natural justice.
In terms of the public notice referred above, it is quite evident that allowing clearance against Kacha Bill of Entry, is a special dispensation made by the revenue for allowing speedy clearance of consignments of certain category of goods. Hence by availing this special dispensation, appellants are bound by the requirements laid down by that public notice, specifically in respect of the payment of duty as per the assessment made. Hence we do not find any merits in the submissions of the appellants that they were coerced and forced to pay the enhanced duty.
Section 17(5) of the Customs Act, 1962, specifically provides that in case where the Customs Officer amends any assessment made by the importer, then Custom Officer will issue a speaking order giving the reasons for making the amendments in the assessment as made by the importer - In the present case Customs has not issued any such order under Section 17(5). In absence of any order under Section 17(5) of the Customs Act, 1962, Commissioner (Appeal) was justified in remanding the matter to the original authority for passing the order under Section 17(5).
Appeal disposed off.
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Corporate Laws
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2020 (10) TMI 306
Summon of accused to face trial for the offences punishable u/s 129 of Companies Act - HELD THAT:- From the very perusal of impugned summoning order it is apparent that the summoning has been made u/s 129 of Companies Act but neither the name of the accused has been given nor their parentage has been given nor the specific offence in which they been summoned is given. The complaint was with prayer for summoning accused persons for offences punishable u/s 129 of the Companies Act for making defiance of provisions of Section 129 of Companies Act and penal clause is there in Companies Act u/s 129(7) for making defiance against the provisions of section 129 of the Companies Act regarding financial statement. Hence request was made for making summoning of accused for offences punishable u/s 129(7) of the Act and it was with penal liability u/s 129(7) of the Act, but the Magistrate has summoned u/s 129 of the Companies Act without specifying penal provision u/s 129(7) of the Act. Hence it is prima-facie apparent that the Special C.J.M., Agra, was not careful to go through the complaint and relevant penal provision under which punishment was sought. Even names of accused persons with their parentage, who have been summoned, were not given nor contention of complaint is there nor any application of judicial mind is apparent from the impugned order.
Hence apparently there is non application of judicial mind by concerned Special C.J.M., Agra, in passing the impugned summoning order.
The impugned summoning order dated 27.2.2019 is being quashed with a direction to the court of Special C.J.M., Agra, to pass a judicial order in the matter - application allowed.
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2020 (10) TMI 290
Restoration of name of the Company in the Register of Companies, maintained by the Registrar of Companies - Section 252(3) of the Companies Act, 2013 - HELD THAT:- The ROC submitted that the action of striking off of the name of the Company was triggered due to negligence and lack of due diligence on the part of the directors of the Company for not discharging their statutory duties in filing the statutory returns within the due date stipulated under the Companies Act and also for not responding to the several periodical notices within the notice periods. Therefore, the action of strike off of the name of company is fully substantiated within the authority under the provisions of Section 248 of the Act and deserves the protection of this Tribunal.
The Registrar of Companies, the respondent herein, is ordered to restore the original status of the Appellant Company as if the name of the company has not been struck off from the Register of Companies and take all consequential actions like change of company’s status from ‘Strike off’ to Active (for e-filing) and to intimate the bankers about restoration of the name of the company so as to defreeze its accounts/
It is further observed that by virtue of this order of restoration of name of Company in the register it will not entitle the Directors of the Company whose name in case have been disqualified by virtue of provisions of section 164 of the Companies Act, 2013 by the Respondent/RoC automatically to be restored to directorship except in accordance with law.
Application allowed.
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2020 (10) TMI 278
Approval of the Scheme of Amalgamation - Section 230 to 232 and other applicable provisions of the Companies Act, 2013 read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- The Official Liquidator sought to take on record and consider the report of the Chartered Accountant and has also sought to fix the remuneration payable to the Auditor who has Investigated into the affairs of the Transferor Company. In this regard, this Tribunal hereby directs the Transferor Company - 5 and Transferor Company - 6, jointly to pay a sum of ₹ 50,000/-to the Official Liquidator for the payment of fees payable towards the Auditor who has investigated into the affairs of the Transferor Companies.
Upon a query raised by this Tribunal in relation to the filing of this Petition by the Petitioner Companies under Section 230 - 232 of the Companies Act, 2013, since the Transferor Companies are wholly owned subsidiaries of the Transferee Company and as such why they have not filed the present Scheme under Section 233 of the Companies Act, 2013, the Learned AR for the Petitioner Companies submitted that the wholly owned subsidiary Companies i.e. the Transferor Companies are not solvent and as such they cannot comply with Section 233(1)(c) of Companies Act, 2013 and in the said circumstances, have filed the current petition for the approval of the Scheme under Section 230 - 232 of the Companies Act, 2013.
In view of absence of any other objections having been placed on record before this Tribunal and since all the requisite statutory compliances having been fulfilled, this Tribunal, sanctions the Composite Scheme of Arrangement, annexed as Annexure "E" with the Company Petitions as well as the prayer made therein - While approving the Scheme as above, it is clarified that this order should not be construed as an order in any way granting exemption from payment of stamp duty, taxes or any other charges, if any payment is due or required in accordance with law or in respect to any permission/compliance with any other requirement which may be specifically required under any law.
Petition allowed.
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2020 (10) TMI 272
Appointment of independent forensic auditor - HELD THAT:- After perusing the case records including the Order passed earlier on 17.01.2020 and 17.02.2020, the interim counter filed by the respondents, particularly the report of the Advocate Commissioner and the counter filed by the respondent Company against the Report, this Bench is of the view that the petition was filed under Section 241 and 242 of Companies Act and the reliefs sought for can only be available under the same sections of the Companies Act and cannot be granted under Arbitration and Conciliation Act.
This Tribunal pass the following order:
I. While considering the present situation to meet the ends of justice, this Tribunal allows the appointment of an Independent Forensic Auditor to complete the auditing work within 60 days from the date of appointment of the auditor by this Bench.
II. It is also directed to constitute an audit committee consisting of two directors from the Petitioner's side and two from the Respondent's side other than Respondent No. 2 for helping and co-operating in completing the independent audit.
III. The costs of the forensic auditor should be borne by both the parties equally. It is also directed both the parties to suggest the list of persons to perform as an Independent Forensic Auditor before 19.06.2020.
List the Company Petition on 22.06.2020, for suggesting list of auditors by both the parties.
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Insolvency & Bankruptcy
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2020 (10) TMI 308
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- Chief Legal Head of the Bank of India, is directed to remain present today at 03.00 p.m. after consulting the concerned ofcers of Bank of India, who according to the Interim Resolution Professional have condoned the aforesaid conduct of the suspended Directors and have not taken any action in the matter.
The Prothonotary and Senior Master shall forthwith email a copy of this Order to the Chief Legal Head of the Bank of India, Main Branch, Fort, Mumbai and also inform him telephonically that he should remain present through video conferencing before this Court today at 03.00 p.m. - This order will be digitally signed by the Personal Assistant of this Court.
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2020 (10) TMI 277
Validity of Board Meeting - issuance of SCN - Removal of Director of Company - whether the petitioner is a shareholder or not? - HELD THAT:- A decision as regards the shareholding of the petitioner needs an elaborate hearing. When a meeting was held invalid, the Resolution passed therein has to go but since the issue has been raised by the petitioner that it was set aside as regards respondent No. 4 but not as regards the petitioner, it requires further hearing supported by records and evidence available, which probably would be available with the petitioner. It can certainly not be completed in a hearing through Video Conferencing. Both the parties are interpreting the judgment as regards shareholding of the petitioner in their own way. In these circumstance, we leave this issue open, for being decided after hearing the matter further at length.
The maintainability of the application cannot be heard unless and until a clarification of the operative part of the judgment under challenge is obtained. The clarification would certainly go to the root of the right of Smt. Usharani in holding the disputed shareholding. Since such a dispute has already been entertained in the said CP, prima facie, the very same question cannot be entertained as it would attract constructive res-judicata. However, till the clarification is obtained, it is fair and just to safeguard the only one property held by R-1. Accordingly we are of the opinion that a status quo in regard to the landed property is to be passed till the petition is finally heard.
An order of status quo pending final hearing of the maintainability of the petition is passed.
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2020 (10) TMI 276
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Debt - Operational Debt - existence of debt and dispute or not - HELD THAT:- It is admitted fact that the Corporate Debtor has not filed the reply to the application filed by the Operational Creditor but Corporate Debtor sent the reply to the demand notice, which Operational Creditor has enclosed at page 74 of the paper book and we have gone through the reply to the demand notice and we find that it is specifically mentioned in para 6 of the reply to the demand notice that quality control department has detected that the supplied paper quality is less than 130 to 140 GSM and rejected on the ground that the said materials does not qualify the standard of paper quality of 180 GSM.
It is found that nowhere, the petitioner has explained or revert to the submissions made in para 6 of the reply to the demand notice rather petitioner is silent on this point and we find that this matter has discussed with the Operational Creditor by the Company Director of Corporate Debtor in the month of June. 2018 and it was decided that demurrage of 30% of the total invoice amount i.e. ₹ 2,48.952/- from the principal amount but Operational Creditor no-where in the main application mentioned about this fact that when the dispute regarding the quality of goods raised by the Corporate Debtor then it was agreed to deduct 30 per cent of the total invoice amount i.e. ₹ 2,48,952/-, therefore, we are of the considered view that although no reply has been filed by the Corporate Debtor but in reply to the demand notice. Corporate Debtor has raised the issue of quality of goods.
There is difference between the Financial Debt and Operational Debt. Operational Debt means a claim in respect of the provisions of goods or services including employment or a debt in respect of the dues arising under any law for the time being in force comes under the definition of operational debt whereas the Financial debt means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes and the other conditions mentioned at Section 5(8)(a to i) - Now it is the settled principle of law that National Company Law Tribunal is not recovery court rather when a default occurred financial creditor or operational creditor may file an application for initiating corporate insolvency resolution process and word default is defined U/S 3(12) of the IBC.
In view of Section 3(12)IBC so far operational debt as defined in Section 5(21) IBC is concerned default means a debt which is defined in Section 3(11) IBC and not the interest like financial debt.
There is no drafting error in section 5(21). while defining the Operational debt rather the legislature clearly omit the word interest in the definition of operational debt for the purpose of default in order to trigger Section 9 IBC. If it had been the intention of legislature to add interest in the debt, then like definition of financial debt, it must be described in the definition of operational debt but it is omitted, therefore, it had never been the intention of legislature to include interest in the definition of operational debt. Hence, in view of aforesaid discussions, we are of the considered view that we can always presume that the legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should have effect - like definition of financial debt given in Section 5(8) of the IBC, word interest is not included in Section 5(21) of IBC i.e. in the definition of operational debt therefore, while calculating the default for the non-payment of debt in case of operational debt only the principal amount can be treated as a defaulted amount and not the interest amount.
Since Corporate Debtor has already deposited the principal amount of ₹ 8,04,540/- before Registrar, NCLT, therefore, in view of Section 3(12) of the IBC. there is no default of debt and if there is no default of operational debt then Section 9 of the IBC cannot be triggered - Application dismissed.
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2020 (10) TMI 275
Maintainability of application - Section 60(5) of the Insolvency and Bankruptcy Code, 2016, read with Rule 11 of the N.C.L.T. Rules, 2016 - Whether a successful Resolution Applicant can file an application under the provisions of Section 60(5) of the Code, for extending the time stipulated for complying with the terms and conditions mentioned in the Resolution Plan?
HELD THAT:- Nobody has questioned and nobody probably can question the Resolution Applicant after its Plan has already been approved by the COC and then by the Adjudicating Authority. It has already entered the shoes of the Corporate Debtor, and started doing all that was required to be done by the erstwhile Corporate Debtor, including the change of its directors for which necessary correspondence is stated to have been made by the Resolution Applicant. However, since the applicant has referred to and relied upon certain decisions, we may notice the view taken therein.
On going through various decisions from the Hon'ble Supreme Court, Hon'ble Appellate Tribunal and our coordinate Bench of NCLT Chandigarh, whereby the period of lock-down has been ordered NOT to be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown in relation to a corporate insolvency resolution process, let us now revert back to the only question involved in the present set of facts and circumstances - Here in this case, the CIRP came to an end once the Resolution Plan had already been approved by the CoC, and thereafter by this Adjudicating Authority. The only issues that the Resolution Applicant has is, the litigation with other local authorities, which led him to file some litigation and the said litigation has delayed the execution of the Resolution Plan. For the delay in fighting litigation with other local authorities, no provision of the IBC could be invoked. That is a matter between the Resolution Applicant and the other third parties, for which no such permission or extension of time was required from this Adjudicating Authority. But since the Applicant has filed an application under Section 60(5), of the Code, even though these provisions could not have been invoked, but looking at the special circumstances due to the spread of Covid-19, this may also be considered to be the genuine contributory cause of delay in execution of the Resolution Plan.
The implementation schedule of the Resolution Plan be extended for another period of 6 months from 24.05.2020 to 24.11.2020 - application allowed.
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2020 (10) TMI 273
Appointment/Replacement of RP - whether the decision of the CoC to appoint Mr. Sumit Binani as RP is valid in the eye of law or whether Mr. Mukesh Khandelwal, IRP should continue as RP?
HELD THAT:- This Adjudicating Authority is of the view that a mere technical objection regarding the authorization on behalf of CoC to one of its members cannot construe a valid ground for rejection of Application under Section 22 of IB Code, 2016, as the same act conducted by PFC is basing upon the Resolution for Change of IRP to RP by CoC with 89.6% votes in favour and that such act would not cause any hardship to any of the members of the CoC - It is a fact not in dispute that the IRP herein has carried out various complicated CIRP's such as of BSPL in a fair manner, and the same is evident from the order of NCLT Principal Bench, Delhi in the matter of BSPL. It is also observed that the CoC in the instant manner has also not levelled any allegations against the conduct of the IRP herein. Further, this Adjudicating Authority observes that pursuant to stay on IBBI Order by Hon'ble High Court of Delhi, there is no bar on the CoC to continue IRP herein as the RP and the IRP herein cannot be excluded from the zone of consideration on the same ground.
In relation to the recording of reasons by CoC in its meeting for removal of the IRP as RP, this Adjudicating Authority observes that the Hon'ble Supreme Court and Hon'ble NCLAT in plethora of Judgments has held that the CoC is not bound to record any reasons under Section 22 of IB Code, for change of IRP with another Insolvency professional as RP - On a plain reading of Section 22 of the Code, 2016, it is clear that the CoC is conferred with the power of replacing the IRP by another Resolution Professional and no reasons need to be recorded by the CoC for affecting such replacement. It is the prerogative of the CoC whether to continue the IRP as the RP or to replace the IRP with by another RP.
It is pertinent to note that the CoC has decided to appoint Mr. Sumit Binani as RP in the 4th CoC meeting with 89.6% votes and that the written consent by way of Form-AA is also placed along with the instant Application. Further, the CoC has also filed an Application vide IA No. 234/2020 before this Adjudicating Authority for appointment of the proposed RP. Therefore, this Adjudicating Authority observes that the first three of the above conditions have been fulfilled and, therefore, what remains is only appointment by this Adjudicating Authority after confirmation by the IBBI.
This Adjudicating Authority does not find any infirmity with the decision of CoC to replace Mr. Mukesh Khandelwal with Mr. Sumit Binani as RP to conduct the CIRP of M/s. KSK Mahanadi Power Company Ltd. Accordingly, IA No. 235/2020, filed by Mr. Mukesh Khandelwal, IRP is rejected - this Adjudicating Authority directs the Registry to forward the name of the proposed RP in IA No. 234/2020 to the IBBI for its confirmation, as contemplated under Section 22(4) of IBC, 2016.
For confirmation from IBBI, put up the matter on 16.06.2020.
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2020 (10) TMI 271
CIRP Process - priority of payment of dues - Whether it is permissible under the provisions of IBC for the Corporate Debtor to repay the debts of one of the many financial creditors in preference to other financial creditors after initiation of CIRP and invocation of moratorium u/s 14 of the Code?
HELD THAT:- The main reason for prohibition of various actions is to provide for a calm period to the Corporate Debtor during which a resolution can be arrived at. Such calm period ensures keeping the corporate debtor's assets together during the insolvency resolution process so that the corporate debtor may continue as a going concern while the creditors take a view on the resolution of default and cannot resort to individual enforcement action which may frustrate the objectives of the CIRP and the Code - It is pertinent to emphasize here that Clause (b) of Section 14(1) clearly and categorically prohibits any transfer or alienation of assets, legal rights or beneficial interest therein by the Corporate Debtor to any person. Cash in hand and in bank accounts are liquid assets of the Corporate Debtor. Therefore any preferential payment to any creditor during the period of CIRP will squarely fall within this prohibition.
It is not permissible under the provisions of IBC for the Corporate Debtor to repay the debts of one of the many financial creditors in preference to other financial creditors after initiation of CIRP and invocation of moratorium u/s 14 of the Code - the question answered in negative - application dismissed.
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2020 (10) TMI 268
Exclusion of period of 103 days from CIRP period - exclusion sought on the ground that an application against RP, challenging the admission of claims of SASF and for revision in the voting rights among the members of CoC was filed and was first listed for hearing on 01.11.2019 and the same was reserved for orders on 11.02.2020.
HELD THAT:- As the process of CIRP was restrained on account of disputes regarding voting share amongst the members of CoC which required adjudication by this Adjudicating Authority, the instant case will squarely fall within the category of "unforeseen circumstances" which have adversely impacted the CIRP process. As submitted by RP a Resolution Plan is ready to be voted upon by the members of CoC, and if the exclusion for the period as prayed for is not allowed, the Corporate Debtor will be driven to liquidation.
Considering the exceptional circumstances of this case, this Adjudicating Authority is satisfied with the reason as mentioned and therefore deems it proper to grant an exclusion of 102 days from the CIRP period, as this will be in the interest of all the stakeholders of the Corporate Debtor - Application allowed.
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2020 (10) TMI 267
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:-Section 236 of the Code provides that all offences under the Code shall be tried by a Special Court constituted as aforesaid under the Companies Act. Section 236(2) provides that no Court shall cognizance of the offence punishable under the Code save on a complaint made by the Board (IBBI) or the Central Government or any person authorised by the Central Government in this behalf. Similar provision is also enshrined under Section 439 of the Companies Act. The allegations made when proved may entail punishment and/or fine. Therefore, this Authority would not be in a position to make any comment or give any finding on the allegations made in the Application.
Application rejected.
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2020 (10) TMI 266
Liquidation of Corporate Debtor - Section 33(1) and 33(2) of the IB Code - HELD THAT:- There are no reason to adjourn the matter on the request of the Suspended Management, who has no role as of now. More so, if at all, Suspended Management wishes to file any objection or any representation, they could have done it just after passing of the resolution by the Committee of Creditors for liquidation of Corporate Debtor - Under such circumstances, the matter cannot be adjourned.
Liquidation ordered - moratorium declared under Section 14 of the IB Code shall cease to have effect from the date of the order of liquidation.
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2020 (10) TMI 265
Direction against the RP to pass a reasoned order regarding verification of outstanding claims - HELD THAT:- It is the bounden duty of the RP to give reasons when claim has been rejected, for there being no proof reflecting the RP has given reasons for rejection of the part of the claim of the Applicant herein, the RP is hereby directed either to admit the claim or to give reasons as to why the balance part of the claim of the Applicant is not admissible within three days hereof - Application allowed.
Approval of Resolution Plan - HELD THAT:- It is not the case of this Applicant that its Resolution Plan has been rejected by the RP in violation of the procedure laid down under the Code. Interestingly, the plan has been approved unanimously with 100 % voting share of CoC which is much above the statutory requirement of 66 % in terms of Section 30(4) of the Code. The right of approval of a plan lies within the domain of CoC. Now some of the homebuyers filed an application supporting this Resolution Plan. Apart from this, Applicant has also filed a comparative chart showing that if its Resolution Plan has been considered, it will maximize the value of the Corporate Debtor. It cannot become a sole criteria to consider of the Resolution Plan. It is one of the component to be considered provided more than one claim has been placed before the CoC then the CoC will consider the Resolution Plan that maximize the value of the Corporate Debtor. It is not that the Plan that comes after four months with added value is to be treated as a plan for maximization the value of the Corporate Debtor, because if this Bench considers such plan after four months, tomorrow if somebody else comes with more value than instead of considering this plan that plan has to be considered. This Bench is bound by the procedure as set out under the Code, once it is in compliance of the procedure this Bench has jurisdiction to see as to whether the plan placed before this Bench is in confirmation with Section 30(2) of the IBC or not - there are no merit in this application - application dismissed.
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2020 (10) TMI 264
Liquidation of the Corporate Debtor - section 33(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It is found that five claims have been received and admitted, and there are neither any fixed assets nor any business with the Corporate Debtor. Therefore, the CoC has resolved for liquidation of the Corporate Debtor vide its 4th meeting dated 07.12.2019. It is also to be noted that this Adjudicating Authority has no jurisdiction to interfere in the commercial wisdom of the CoC.
The Adjudicating Authority passes an order for initiation of liquidation of the Corporate Debtor viz., Special Prints Limited. - Application admitted - moratorium declared.
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2020 (10) TMI 263
Exclusion of 60 days from CIRP period - section 12(2) of Insolvency & Bankruptcy Code, 2016 - HELD THAT:- The Adjudicating Authority can exclude a certain period for the purpose of counting total period of CIRP, if circumstances justify such exclusion.
Here is the case, where considerable time i.e. 79 days has been lost in the CIRP period. Necessarily some period is to be excluded from the CIRP, otherwise CoC cannot go ahead with the CIRP. Out of 79 days period lost in the CIRP, the Resolution Professional has requested only 60 days' time for evaluation of EoI as date of receipt of EoI was extended by CoC up to 13.01.2020. Further as stated by the Resolution Professional, the Special Audit period was also extended up to 28.02.2020. So these are justifiable grounds for excluding some period from the CIRP, since CoC could not complete the above tasks well within time. Thus, there are grounds to exclude 60 days from CIRP in the interest of justice.
Application is allowed by excluding 60 days for the purpose of counting period of CIRP and thereby allowing Resolution Professional/CoC a further 60 days with effect from 02.02.2020 to complete the CIRP within the period allowed.
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2020 (10) TMI 262
Validity of provisional attachment order - Liquidation Process - Section 60(5) of the Insolvency and Bankruptcy Code, 2016, read with Rule 11 of the National Company Law Tribunal Rules, 2016 - HELD THAT:- The applicant-corporate debtor is a going concern and undergoing the process of CIRP and at present is at the stage of liquidation. The question of effect of the latest amendment by way of insertion of Section 32A to the Code on the corporate debtor's CIRP and the question of jurisdiction of the Directorate of Enforcement to attach the properties of the corporate debtor or part thereof, which is undergoing CIRP is pending consideration before the Hon'ble NCLAT and of the Hon'ble Supreme Court.
It is seen that if the corporate debtor is not permitted to operate the bank accounts, at least to the extent of maintaining the same as a going concern, it will result in closing down the corporate debtor, which is against the object of the Code itself - at this stage, we are not inclined to interfere with the impugned provisional attachment order. However, we permit the applicant-Liquidator of SRS Limited to open a new account in State Bank of India and to operate the same for the purpose of maintaining the corporate debtor company as a going concern, until further orders. However, the applicant has to justify the various transactions in the said new account by filing monthly reports before this Tribunal.
List the CA No. 60/2020 on 05.02.2020 along with CA No. 22/2020.
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2020 (10) TMI 261
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The application claims himself to be the Financial Creditor on the basis financial debt under Section 5(8)(f) explanation, but now he has changed his stand and claims himself to be financial creditor, but not under Section 5(8)(f) explanation rather under Section 5(8) of the IBC.
We would like to refer the decision of the co-ordinate bench of NCLT, Allahabad in the case M/S DASAPRAKASH HOTELS AND RESORTS PVT LTD VERSUS M/S KUMAR ASHIYANA PVT LTD [2018 (11) TMI 1800 - NATIONAL COMPANY LAW TRIBUNAL, ALLAHABAD] held that "Applicant has filed present application for the alleged breach of compromise agreement dated 19.07.2017 arising out of Company Petition No. 43 of 2012 which got dismissed as infructuous vide order dated 07.08.2017 and it will be treated as decree of the Court" and upon which Ld. Counsel for applicant placed reliance is concerned, in course of arguments we have notice in that decision definition of decree was not discussed by them. Therefore, we are unable to accept the view taken by the co-ordinate bench of NCLT Allahabad that the compromise arrived between the parties treated as decree likewise the letter dated 25.01.2019 will also be treated as decree.
Thus, the applicant is an allottee under Section 5(8)(f) of the IBC and same is challenged before the Hon'ble Apex Court in WP (Civil)-26/2020 in which Hon'ble Apex Court held that "the status quo, as of today, with respect to the pending applications, shall be maintained in the meanwhile".
List the case on 04.03.2020, awaiting order in case of Hon'ble Apex Court in WP (Civil)-26/2020.
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Service Tax
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2020 (10) TMI 292
Classification of service - Appellant has appointed M/s. Hewitt Associates for collating and uploading the details/ information, like name, educational qualification, designation, contact number etc, of the employees in the database - Appellant also claims that they are further using the global telecommunication channel set-up by its overseas group entities for making long distance international calls - whether service fall under Business Support Service, Online Information & Database Service (referred as Computer Network Service) and Manpower Recruitment & Supply Agency Services? - time limitation - penalty.
Whether the services received by the Appellant from M/s. Hewitt Associates and M/s. Communication Services can be qualified as “Business Support Services”? - HELD THAT:- In view of the insertion w.e.f. 01.05.2011, of words “operational or administrative assistance in any manner”, it goes without saying that the operation is prospective only. It is not disputed that the services are in the nature of helping the routine administration as averred in the SCN - the services availed by the appellants from M/s Hewitt Associates and M/s Communication Services cannot be categorised under “Business Support Service” before 01.05.2011.
Whether the networking (telecommunication related) services received by the Appellant from overseas group entities can be classified as Online Information & Database Service (referred as “Computer Network Service”)? - HELD THAT:- The global entity has created a network of computers and provided connectivity between different group entities so that information and data can be exchanged. We find that the learned AR argues that provision of information is also categorised under OIADR. In such a scenario, information flows both ways from the appellants to other global entities and vice-versa. In such a case, the appellants at times become service providers and at times service receivers. It is not coming forth either in the SCN or in the OIO that the amount paid by the appellants to the overseas entity is for the information they received, even if assuming that data retrieval is not mandatory. In view of the submission of the appellants and on perusal of the invoices for the so-called network services, we find that the same are not for provision of online information. Therefore, we are not inclined to accept the contention of the learned AR - the appellants are not exigible to Service Tax on OIADR (Computer Network Service).
Whether the Appellant can be said to have received manpower recruitment and supply agency service from overseas group entities? - HELD THAT:- In terms of the employment contract, the appellant is under obligation to pay salary (including other entitlements) to the Seconded Personnel during the period of secondment in foreign exchange in his home country; for administrative convenience, the Appellant remits the salary payable to the Seconded Personnel in his home country in Foreign Exchange through the Seconder Company; the Seconded Personnel, as required under the Income Tax Act, 1961.
Extended period of limitation - penalties - revenue neutrality - HELD THAT:- The appellants submit that the issue is revenue neutral as being an STPI unit, the appellants would have been eligible to claim refund of Service Tax paid on input services in terms of Rule 5 of CCR, 2004. The contention has force - As the issue decided on merits, we are not going into further arguments on this point - Having decided the issue in favour of the appellants on merits, we don’t find any reason to discuss the merits or otherwise of imposition of penalties.
Appeal allowed - decided in favor of appellant.
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2020 (10) TMI 291
Non-levy of penalty - Levy of service tax on ‘renting of immovable property’ service - retrospective amendment - non-payment of service tax - non-filing of half yearly returns - demand alongwith the penalties - extended period of limitation - HELD THAT:- The ld. Commissioner has given cogent reasons and has recorded the findings that there is no deliberate default on the part of the assessee, in not depositing the service tax. In this view of the matter, we uphold the non-levy of penalty under Section 78 and also dropping of the demand of service tax amounting to ₹ 58,85,465/- , in view of the stay granted by the Hon’ble Supreme Court, being Interim Order dated 14.10.2011 in Civil Appeal No.8390 of 2011 and other appeals, in the case of Retailers Association of India Vs. Union of India & Another [2011 (10) TMI 12 - SUPREME COURT].
Penalties - HELD THAT:- In view of the provisions of Section 76, which provides for levy of penalty, where a person is liable to pay service tax, fails to pay such tax and further, Section 80 provides that where such failure is for reasonable cause, no penalty shall be imposed under Section 76, 77 and 78 of the Finance Act - there being reasonable cause for late payment of service tax, we set aside the penalty under Section 76 also.
Appeal dismissed - decided against Revenue.
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2020 (10) TMI 286
Export of services or not - intermediary, commission and marketing service fee received - period from 1st July 2012 to 31st March 2016 - time limitation - HELD THAT:- The activity of an ‘intermediary’ is not envisaged as any less of ‘service’ than contemplated by section 65B(44) of Finance Act, 1994 and this is evident from its definition in rule 2(f) of Place of Provision of Service Rules, 2012. While ‘main service’ on own account, implying adequate autonomy to negotiate ‘consideration’ to be passed on in the value chain to the next ‘provider’ and onwards until the sum of consideration is recovered in entirety from the ultimate consumer, is also no more and no less than ‘service’, the antithesis thereof, characterized by divesting of such autonomy and to be inferred from the nature of the ‘consideration’, will relegate the corresponding activity to that of ‘intermediary’ which is subordinate to a ‘main service’ on own account within which it is rendered. By designating of the activity of ‘intermediary’ as ‘service’ but not on its own account to be distinguished by provision of ‘main service’ on own account, it would appear that while being ‘provider’ – one of the two essential determinants of ‘service’ – the ‘consideration’ received, as it must for coverage under Finance Act, 1994, by the ‘intermediary’ is lesser than, or subordinate to, the consideration that corresponds to performance of the ‘main service’ on own account. Here, irrespective of the delivery of the ‘main service’ in the ‘taxable territory’ or otherwise, the ‘consideration’ received by the ‘provider’ in India is deemed to have been for service rendered in India. From this would emerge a pattern in which ‘services’ coalesce within a ‘main service’ detracting from independent existence of each of them except for the description corresponding to ‘consideration’ of the coalesced ‘main service’ rendered on own account which is characterized by the recipient of service acknowledging only one provider for contractual consideration but yet carrying on business with other entities with whom the recipient of consideration has entered into separate contracts.
There is no broader span of activity than the ticketing/booking for access to service that is offered by the airline operator/hospitality provider to the traveler. It is common ground that the assessee was contracted by the overseas entity to promote and market the Abacus ‘computer reservation system’ (CRS) software among travel agents for enabling access to the offerings of airline operators and hospitality providers who had separately contracted with the overseas entity for access to the system at the other end. The assessee undertook the responsibility of identifying travel agents who were designated as subscribers of Abacus ‘computer reservation system’ upon successful concluding of agreements with them. Thus are the subscriber and the airline operator/hospitality provider facilitated for providing travel solutions to the public. Upon the successful closure of booking, the overseas entity was recompensed with commission per transaction. Travel agents were, in turn, compensated by the overseas entity on per transaction basis to incentivize usage of the Abacus system. The consideration received by the assessee from the overseas entity for the contracted undertaking is also computed on per transaction basis. It is this networking of activities – the channel that links the airline operator/hospitality provider and the traveler - that pushes forward the business of travel, and hospitality, industry - The airlines/hotels and the travel agents are not bound to each other and nor do either contract for exclusive use of the Abacus system. It is upon the volumes generated by the subscriber on Abacus that the licencee of the software is paid and it is from this payment that the assessee, as well as subscribing travel agent, are compensated by the licencee which flows from the agreement of the licencee with the assessee and of the assessee with the travel agent. In all of these multiple transactions that enable a traveler to fly or occupy accommodation, the fare and tariff is in the public domain and the airline/hotel offers commission on that to the parent company of the appellant; ‘consideration’ for all other transactions pertaining to the ticketing/booking are constrained within this consideration to derogate from autonomy of negotiation and progressive summation of consideration to paid by the ultimate consumer thus derogating from the hallmark of ‘main service’ on own account. Consequently, the activity of the assessee-appellant rendered is ‘intermediary service’ taxable in the hands of the provider. Assessee-appellant is provider of the service and, hence, liability devolves on them in terms of rule 9 of Place of Provision of Service Rules, 2012.
The impugned order has taxed two streams of consideration: ‘commission’ based on passenger bookings and fixed ‘marketing service fee’ and, while the former is consideration for ‘intermediary service’ as set out above, the nature of the latter is not clear. Though the adjudicating authority has not given much thought to its computation, it would appear from the invoices, that these have been billed as a standard amount. Nevertheless, in the narration of facts, the adjudicating authority has recorded that the dues under this head are netted; as netting out involves adjustment of flows in both directions and there is no ostensible reason for the assessee to pay the overseas entity, we are unable to decide the legality of subjecting the ‘marketing service fee’ to tax - Furthermore, in the context of our finding on the taxability of ‘commission fee’, with consequent denial of refund of accumulated credit, the assessee may be entitled to utilise such CENVAT credit in the discharge of tax liability.
While upholding the finding in the adjudication order, arising from the proposal to recover tax, to the extent of the confirmation that ‘commission fee’ is consideration for service rendered in India, we remand all other issues back to the respective original authorities for disposal in accordance with the law as set out by us and the directions recorded. The assessee is at liberty to raise their contentions pertaining to bar of limitation, invoking of section 80 of Finance Act, 1994 and entitlement to CENVAT credit before the adjudicating authorities concerned - Appeal disposed off.
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Central Excise
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2020 (10) TMI 300
CENVAT Credit - Deposit Insurance and Credit Guarantee Corporation for insuring the deposits of the customers - period after 01.04.2012 - HELD THAT:- The service provided by the Deposit Insurance and Credit Guarantee Corporation to the banks for insuring the deposits of the public with the banks has been considered by the banks to be an input service and CENVAT credit for service tax paid by the banks for this service has been availed of by the banks for rendering output service. The issue involved is whether the banks can avail credit of this service tax paid by the banks for the service provided by the Deposit Insurance Corporation.
The impugned order cannot be sustained and the same is accordingly set aside and quashed - Appeal allowed.
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2020 (10) TMI 281
CENVAT Credit - input services - outdoor catering service - period from February 2014 to March 2015 - HELD THAT:- The period involved in the present case is from February 2014 to March 2015 and therefore, the amended definition of input service (w.e.f. 01.04.2011) is applicable.
The “Outdoor Catering service” being availed by the Appellant has a direct impact on the manufacturing process and the cost of the final product manufactured by the Appellant. In the event, the Appellant does not avail the said service, the employees in the Appellant-company would be compelled to step out of the factory premises for refreshments, which would lead to loss of manhours for the Appellant-company. This may prima facie seem menial, however, when considered at a larger scale, this translates into an additional cost for the Appellant. Therefore, by availing the said service, the Appellant company attempts to ensure proper working conditions for its employees and reduce loss of manhours.
Hon’ble Rajasthan High Court in COMMISSIONER, CENTRAL EXCISE VERSUS M/S MANGLAM CEMENT LTD. [2017 (11) TMI 483 - RAJASTHAN HIGH COURT], considered the very same issue, as in the present case, for a period post the amendment of the definition of input service (w.e.f. 01.04.2011) and has held that ‘Outdoor catering’ services are required to be carried out for the process of manufacture and delivery.
Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (10) TMI 298
Condonation of delay in filing second appeal - no sufficient cause shown for delay - HELD THAT:- The delay is to an extent of 329 days. The reason assigned is that the copy of the impugned order was served to the junior staff of the senior advocate for further course of action by the authorized representative of the assessee. Thereafter, the file went missing. Later on, when the representative of the company intended to know what has happened to the matter, then they searched the file and it was found - there are no reason to disbelieve the affidavit filed. The assessee is a joint stock company and is involved in various activities. Therefore, it cannot be said that the reason assigned by them does not constitute sufficient cause. On considering the reasons, the explanation offered by the assessee-company constitutes sufficient cause.
Hon’ble Supreme Court have held in a catena of judgments that the delay should not come in the way of doing substantial justice between the parties.
Revision disposed off.
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