TMI Tax Updates - e-Newsletter
December 2, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Highlights / Catch Notes
GST
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Levy of GST - sale of developed plot of land for which consideration is received before the issuance of completion certificate - The sale of developed land, by the applicant as per the facts provided by him where the development work is limited to providing common amenities (common drainage, water line, electricity line, land levelling, road and street light) and no development work will be done by the applicant after the sale of the developed land and if no advance from the customer for undertaking development activities is taken then it does not constitute a supply within the meaning of Section 7 of the GST Laws and therefore GST is not applicable on such sale - AAR
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Classification of goods - HSN Code - baby wipes - the impugned article-‘baby wipes' are neither designed to absorb and store fluids nor are shaped to fit human body and hence cannot be classified under tariff heading 9619 - the product “baby wipes” merits classification under tariff heading 3307 and attract 18% GST, in terms of Circular dated 09.08.2018. - AAR
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Classification of services - rate of GST - composite supply or not - - manufacturers of electronics equipments for locomotives and coaches - The supply made by the applicant against the letter of acceptance (LOA) of the South Central Railway is a composite supply and the rate of tax applicable is the rate at which the principal supply has to be taxed i.e., Electrical signalling equipment with HSN code ‘8530’ - This commodity was made taxable at the rate of 9% under CGST & SGST respectively - AAR
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Input tax credit - GST paid on the services provided by GACL in the form of agreeing to surrender/ relinquish its rights in the leasehold property in favour of GNAL - GST amount borne by GNAL on subject service received is blocked credit vide Section 17(5)(d) CGST Act and thereby ineligible for availment of credit. - AAR
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Classification of supply - composite supply of services or not - health care services - if composite amount is not charged from the patient. and if the cost of medicines and other goods and services supplied in the course of treatment of a patient admitted in the hospital for treatment, surgery or diagnosis, is segregable from the amount charged for healthcare services, then it is not a Composite supply in terms of the Section 2(30) of CGST Act, 2017 and in that case the supply of medicines and other goods and services will not be exempt from tax - AAR
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Requirement of obtaining HSN Codes at the time of obtaining registration - Pan Masala and Tobacco products Trading - the benefit of the Composition Scheme u/s 10 of the GST Act. 2017 shall not be available to the applicant. - The case of the applicant is fully and squarely covered under the restrictive condition of Section 10(2)(b) and 10(2)(e) - AAR
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Classification of goods - sprinkler system, drip irrigation system including laterals, P.V.C. Pipes, other components and accessories - The goods falling under Chapter heading /tariff item No. 8424 shall attract GST rate 12% (6% CGST and 6% SGST). Further, laterals/parts used solely or principally with sprinklers or drip Irrigation system, which are classifiable under heading 8424, would attract a GST of 12%, - AAR
Income Tax
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Addition u/s 69A - survey action under Section 133A - Addition based on loose paper in search - There is no concrete evidence which has been brought on record by the Assessing Officer to establish that the entry 'Parvez Sir' in the impounded paper establishes the fact that it refers to Respondent. The Assessing Officer has made the addition only on the surmise that the impounded papers were containing entries which are dated 15/11/2006 whereas Respondent retired from the firm on 14/11/2006. - HC
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Addition u/s 40A(2) - disallowance of interest claim of 9% - ITAT has rightly concluded that the provisions like Section 40A are meant to check evasion of tax through excessive or unreasonable payment to relatives and associate concerns and should not be applied in a manner which will cause hardship in bonafide cases relying on Section 40A(2) - it is not a case of tax evasion in as much as it is not the Revenue’s case if the rate would have been less the assessee’s profit would have been more. - HC
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Deduction u/s 80IA - the scope of deduction under Section 80IA of the Act is limited to determination of quantum of deduction by treating eligible business as the only source of income. Therefore, the deduction cannot be denied because the deduction under Section 80IA has to be computed unit wise and not for the business as a whole. - HC
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Provision for Bad debts - Rural branch - section 36(1) (viia) - No doubt, “place” as such is not defined in the definition clauses and so much so, we have to find out the scope and meaning of “place” referred to in the section. Standing counsel for the Department produced before us last published Census Report of 2001. Even though the previous Census Report may be the relevant one, we feel the scope of “place” as referred to in the Census Report produced could be adopted for the purpose of this case - Thus the question is answered in favour of revenue and against the assessee - HC
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Validity of order passed u/s 144C - non passing a draft assessment order - not passing a draft assessment order in accordance with the provisions contained u/s 144C(1) is a non-curable defect - AT
Customs
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Entitlement for concessional rate of duty - coated paper - The descriptions in the relevant tariff items are emphatically unambiguous, the rules of classification clearly delineate the distinction and the onus for disturbing classification is unequivocally enunciated as the law of the land. The classification can be revised only by determination of the process by which the pulp was extracted - The ‘coated paper’, as certified by the competent authority designated under the Comprehensive Economic Partnership Agreement (CEPA), does not conform to the description corresponding to sub-heading 8410.13 of First Schedule to Customs Tariff Act, 1975. - Benefit of concessional rate of duty allowed - AT
IBC
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Initiation of CIRP - It is to be remembered that IBC, 2016 is not a ‘Debt Enforcement Procedure’ - the ‘proceedings’ under IBC are summary in nature and not an adversary one. Suffice it for this ‘Tribunal’ to relevantly point out that the ‘proceedings’ under IBC are not like that of a regular ‘Civil Suit’. As such, the aspects of the exorbitant interest, penal interest, purportedly imposed on the ‘Corporate Debtor’ by the Respondent No. 1/Bank are not gone into by this ‘Tribunal’ in ‘Appeal’. - AT
Service Tax
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Nature of activity - manufacture or service - job of manufacturing Plastic Jars and Containers in the factory of the service recipient by the help of their own manpower - the services cannot be classified under the head of manpower recruitment service - AT
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Levy of service tax - Renting of Immovable Property Services - vacant land solely used for mining purposes - support services or not - Pertinently after the deletion of the words “support services” in Section 66D (a). The demand of service tax is made under reverse charge mechanism for the period after 01.04.2016 after the substitution of the word “any service” in clause (iv) of Section 66D (a) whereas the demand in these appeals is on the allegation that ‘renting of immovable property’ is a ‘support service’ The words ‘support services’ having been omitted w.e.f. 01.04.2016, the circular is not applicable for the period after 01.04.2016 - AT
Notifications
Customs-
95/2021 - dated
30-11-2021
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Cus (NT)
Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver
GST - States-
31110 -FIN-CTI -TAX-0002/2020 - dated
10-11-2021
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Orissa SGST
Corrigendum - Notification No. 28646-FIN-CT1-TAX-0002-2020/FIN, dated the 11th October, 2021
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31106 -FIN-CTI -TAX-0002/2020 - dated
10-11-2021
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Orissa SGST
Corrigendum - Notification No. 28636-FIN-CTI -TAX-0002- 2020/FIN, dated the 11th October, 2021
SEZ-
S.O. 4904 (E) - dated
29-11-2021
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SEZ
Central Government partial de-notifies an area of 151.8220 hectares at Mundra Taluka, District Kutch, in the State of Gujarat, thereby making resultant area as 8282.7670 hectares
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2021 (12) TMI 39
Levy of GST - sale of developed plot of land for which consideration is received before the issuance of completion certificate - Classification of supply - supply of goods or supply of services or both - applicable rate of GST - HSN or SAC of GST - Entry No of the Notification on the supply or activities or transactions? - actual value of Land as per Government Guidelines can be excluded from the Total Consideration (or Gross amount charged) or not - benefit of Para-Z of Notification No 11/2017 dated 28-06-2017 regarding l/3rd abatement/exclusion on account of the value of transfer of land or undivided share of land from the total amount charged. HELD THAT:- The intention of the legislature is thus clear regarding exclusion of land from the purview of GST and accordingly, it is beyond doubt that there is no GST on the sale of land per se by excluding sale of land from the definition of supply - Once it is established that GST is not leviable on sale of land on account of sale of land not being supply, we need to examine what constitutes land and whether in the given facts of the case, the supply is of something other than land. It is pertinent to note that the moot question here is whether there is sale of anything other than land since the query stales that the plot has been sold after carrying out the development activities or providing amenities such as Drainage line, water line, electricity line, land levelling, and common facilities viz road and street light etc. The development work done on the land is for the whole parcel of land and not for a given plot, which is sold to the customers. The title in the common area and amenities does not belong to the owners of the plot but rests with the Urban Local Body as per the applicable laws. Further, there are easement rights and right of way to be granted, which further show that there is no collective ownership of the common amenities with the plot owners or any association of such plot owners - the provision of common amenities such as Drainage line, water line, electricity line, land levelling, and common facilities viz road and street light etc to the buyers of the plot of land does not have any bearing on the taxability or otherwise of the sale of plot after carrying on the development work for providing amenities. The question raised by the applicant is qualified by the phrase issuance of completion certificate . In this regard, we have to say that from the discussion above, it is clear that development of land is not akin to construction of a complex or building. The concept of obtaining a completion certificate is applicable to the construction of a complex or building and not to development of land, so far as GST is concerned. Therefore, it is immaterial whether any money is received by the applicant from prospective buyers before development of plots is completed and a completion certificate is received by the applicant from the appropriate authority - Principles of interpretation of Statutes, Deeds and Documents refer to an Absurdity Limit, which states that a statute cannot be interpreted literally if it would lead to an absurd result. There is no concept of obtaining completion certificate in case of development of land since development of land is not akin to construction of a building or a complex. Therefore, if development and sale of such developed land by a person is treated to be a taxable supply distinct from sale of land, then each subsequent sale of such parcel / plot of land would also become a taxable supply which makes the interpretation give an absurd result. The sale of developed land, by the applicant as per the facts provided by him where the development work is limited to providing common amenities (common drainage, water line, electricity line, land levelling, road and street light) and no development work will be done by the applicant after the sale of the developed land and if no advance from the customer for undertaking development activities is taken then it does not constitute a supply within the meaning of Section 7 of the GST Laws and therefore GST is not applicable on such sale - other questions need not be answered as has become absurd.
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2021 (12) TMI 38
Classification of goods - HSN Code - baby wipes - rate of tax to be levied on baby wipes - If Circular No.52/ 26/ 2018 GST-dated 9th August 2018, is not applicable to the applicant, whether the applicant can go back and charge GST @ 12% since there exists ambiguity in this regard? - HELD THAT:- Circular No.52/26/2018-GST dated 09.08.2018 clarifies that the classification of baby wipes depends on their constituents; they are classifiable under tariff heading 3307 if they are impregnated with perfumes or cosmetics and if they are coated with soap or detergent they would fall under tariff heading 3401; they would attract 18% GST in both cases. The Tariff heading 9619 covers articles having multiple layers designed to absorb and store fluid. Generally, these articles are shaped so as to fit snugly to human body. In the instant case, the impugned article- baby wipes' are neither designed to absorb and store fluids nor are shaped to fit human body and hence cannot be classified under tariff heading 9619 - the product baby wipes merits classification under tariff heading 3307 and attract 18% GST, in terms of Circular dated 09.08.2018. The Circular No.52/ 26/2018 GST-dated 9th August 2018, is applicable to the applicant.
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2021 (12) TMI 37
Classification of services - rate of GST - composite supply or not - manufacturers of electronics equipments for locomotives and coaches for Indian Railways and Metro Railways - naturally bundled supply of services or not - HELD THAT:- As seen from the definition a composite supply is essentially a naturally bundled supply where two or more different supplies invariably exist along with each other. As against this a mixed supply is a bundled supply is not a bundled supply where the goods / services though supplied together are distinct and separately identifiable. However a supply can be a mixed supply only if it is a single price. The Hon ble High Court of Kerala in the case of ABBOTT HEALTHCARE PRIVATE LIMITED VERSUS THE COMMISSIONER OF STATE TAX KERALA, THE COMMISSIONER, CGST, KERALA, UNION OF INDIA, STATE OF KERALA, THE KERALA AUTHORITY FOR ADVANCE RULING, THE KERALA APPELLATE AUTHORITY FOR ADVANCE RULING [ 2020 (1) TMI 338 - KERALA HIGH COURT] held that a composite supply must take into account supplies as affected at a given point in time on as is where is basis. The supply made by the applicant against the letter of acceptance (LOA) of the South Central Railway is a composite supply and the rate of tax applicable is the rate at which the principal supply has to be taxed i.e., Electrical signalling equipment with HSN code 8530 - This commodity was made taxable at the rate of 9% under CGST SGST respectively vide Notification No. 41/2017 dated: 14.11.2017. Therefore the supply of Train Collision Avoidance System (TCAS) is taxable at the rate of 9% under CGST SGST respectively.
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2021 (12) TMI 36
Input tax credit - GST paid on the services provided by GACL in the form of agreeing to surrender/ relinquish its rights in the leasehold property in favour of GNAL - HELD THAT:- The subject GST borne by GNAL is blocked credit under Section 17(5)(d) CGST Act for the land leased to it will be for the construction of civil structures, administrative block/ factory et al. Thus the plain meaning of the words of Section 17(5)(d) blocks the subject amount from credit admissibility. The treatment of capitalising an expenditure under Plant and Machinery in the Balance Sheet does not have a bearing on the blocking of GST portion borne by GNAL for the subject leasing activity, as the subject leasing service received by a GNAL for the new construction of immovable property such as factory building/ shed/ administrative block, et al by GNAL. Also, GNAL have given a faint impression that certain of their pipes fitted on supporting structures may be installed in the open, i.e, outside a shed but on a supporting structure - the proportion of plot area used for the construction of civil structures/ administrative block/ factory/ building sheds (having plant and machinery inside it )vis- -vis the proportion of plot area used for installation of pipes fitted on supporting structures in the open on the land, if that be the case, cannot be taken as a basis for awarding a proportionate credit, for the CGST Act and Rules have not envisaged such a mechanism to award proportionate credit for GST in such cases. GST amount borne by GNAL on subject service received is blocked credit vide Section 17(5)(d) CGST Act and thereby ineligible for availment of credit.
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2021 (12) TMI 35
Classification of supply - composite supply of services or not - health care services - Supply of medicines, consumables etc. to patients admitted in hospitals, exempt under notification No.12/2017 read with Section 8(a) of CGST or not - HELD THAT:- If a composite amount is charged from the patient admitted in the hospital for treatment, surgery or diagnosis including for medicines and other goods and services supplied in the course of treatment of the patient, and if the amount of such medicines and other goods and services is not segregable from the composite amount charged from the patient, then it is a Composite supply in terms of the Section 2(30) of CGST Act. 2017 in which healthcare service will be principal supply. and such Composite supply of healthcare services will be exempt from tax as per Sl. No. 74 of Notification No. 12/2017-CT (Rate), dt. 28.6.2017. But, if composite amount is not charged from the patient. and if the cost of medicines and other goods and services supplied in the course of treatment of a patient admitted in the hospital for treatment, surgery or diagnosis, is segregable from the amount charged for healthcare services, then it is not a Composite supply in terms of the Section 2(30) of CGST Act, 2017 and in that case the supply of medicines and other goods and services will not be exempt from tax as per SI. No. 74 of Notification No. 12/2017-CT (Rate), dt. 28.6.2017, but will be taxable at the rate applicable to the respective goods and services.
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2021 (12) TMI 34
Seeking rectification in original ruling - error apparent on the face of record or not - Whether Epoxidised Soyabean Oil can be classified under tariff item 1518 of Schedule-I (taxable at 5 %) or Schedule-II(taxable at 12 %) of Notification No. 1/2017-Central Tax (Rate) dated June 28, 2017, as amended from time to time? - HELD THAT:- After the perusal of the original order the mistake pointed out by the applicant if found correct. As the mistake is typological error and apparent on the record the mistake is hence by being rectified and the correct GST No. 23AAACD5735C1Z7 is being mentioned in first page of the order. It was also seen that while mentioning the Order No. instead or the order No. as 04/2021 by mistake it was mentioned 04/2020. Hence. this typological error is being rectified and thus in place of order no. 04/2020 the order No. is now being mentioned 04/2021 - The original ruling is rectified.
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2021 (12) TMI 33
Requirement of obtaining HSN Codes at the time of obtaining registration - composition levy under sub-sections (1) and (2) of section 10 - person engaged in Pan Masala and Tobacco products Trading - applicable tax rate on the supply of such Pan Masala or Tobacco products - applicability of tax rate prescribed under Notification No. 50/2020 - HELD THAT:- The provisions relating to Composition. as contained in Section 10 of the GST Act, 2017 contains certain conditions, the presence of which excludes a person from taking the benefit of this scheme of Composition. One such conditions is given in Section 10(2)(b) which states that the benefit of this scheme shall not be available to a person who is engaged in the supply of goods that are not leviable to tax under this Act - As per explanation (ii) to Notification No. 14/2019 - CT. the rules for the interpretation of the First Schedule to the said Customs Tariff Act. 1975 (51 of 19751. including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. The list of goods to he sold from the Pan shop include all kinds of goods that are normally bought from a Pan Shop. Accordingly, one of the goods that shall be sold from the applicant's Pan Shop is Gutka, containing Tobacco or otherwise. The Gukta is a preparation of betel nuts and any one or more of lime, katha (catechu) and tobacco whether or not containing any other ingredient, such as cardamom. copra or menthol, which is same as Pan Masala discussed supra. In a Pan shop the seller also generally makes a product akin to Gutka themselves by mixing of betel nuts, lime, kattha and tobacco containing or not containing other ingredients are sold which amounts to manufacture of Gutka. Preparation of Gutka in the Pan Shop is akin to manufacture on account of the process of preparation being that of mixing of different bought out ingredients 4nd the resultant product having a distinct name and use - the preparation of Gutka at the Pan Shop for sale is covered in the Second Proviso of Notification No. 14/2019-CT. In the Table given in Notification No. 14/2019-CT both Pan Masala and goods covered under Chapter 24 are listed as goods for which composition cannot be obtained. The case of the applicant is fully and squarely covered under the restrictive condition of Section 10(2)(b) and 10(2)(e) of the GST Act, 2017.
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2021 (12) TMI 32
Seeking rectification of mistake in the original ruling - error apparent on the face of record or not - Classification of goods - sprinkler system. drip irrigation system including laterals. P.V.C. Pipes. other components and accessories - to be classified under HSN 8424 or not - rate of tax - N/N. 1/2017-Central Tax (Rate). dated 28-6-2017 - HELD THAT:- In respect of the question asked as per the clarification circular No.155/11/2021-GST dated 17.06.2021 issued by The CBIC. New Delhi we hold that the Sprinklers: drip irrigation system including laterals (pipes to he used solely with sprinklers/drip irrigation system)/parts to he used solely or principally with sprinklers or irrigation system:- as classifiable under chapter heading /tariff item No. 8424 and under entry No.195B of Schedule II of Notification No. 01/2017 Central Tax(Rate) dated 28.06.2017 and corresponding notification under SGST as amended, shall attract GST rate 12% (6% CGST and 6% SGST), evan if supplied separately. However. any part of general use, which gets classified in a heading other than 8424. in terms of Section Note and Chapter Notes to HSN. shall attract GST as applicable to the respective heading. The original ruling is rectified.
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2021 (12) TMI 31
Seeking withdrawal of application - no application in prescribed format and no proof of fee paid for the application was uploaded - HELD THAT:- In light of the fact that no application was filed in prescribed form. no proof of the payment of fee was given and also on request of the applicant for the withdrawal of the contention/application for advance ruling the Authority hereby agrees to the withdrawal of the application for the advance ruling without going into the merit of the case and passing any ruling on the argument given by the applicant for which advance ruling was sought for. Application dismissed.
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2021 (12) TMI 30
Classification of goods - sprinkler system, drip irrigation system including laterals, P.V.C. Pipes, other components and accessories - to be classified under HSN 8424 or not - applicable tax rate is 12% or not - applicability of notification No. 1/2017-Central Tax (Rate), dated 28-6-2017 - HELD THAT:- In the circular dated 31.12.2018, It has been discussed there under how the said entry 195 B was inserted in the Notification No. 01/2017 from 25.01.2018 and it is specifically mentioned therein that the issue of GST rate on micro irrigation including drip irrigation system, including laterals the GST Council recommended 12% GST rate on micro irrigation system, namely, sprinklers, drip irrigation system, including laterals. Accordingly, the said entry 195B was inserted in the notification No. 1/2017-Central Tax (Rate). Hence, as per the CBIC vide the said circular dated 31.12.2018 has clearly clarified the matter that the term sprinklers , in the said entry 195B, covers sprinkler irrigation system. Sprinklers; drip irrigation system Including laterals; which covers sprinkler irrigation system, falling under Chapter heading /tariff item No. 8424 shall attract GST rate 12% (6% CGST and 6% SGST). Further, laterals/parts used solely or principally with sprinklers or drip Irrigation system, which are classifiable under heading 8424, would attract a GST of 12%, even if supplied separately.
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2021 (12) TMI 29
Refund of excess GST paid wrongly - Refund claim is time barred under Section 54(1) or not - HELD THAT:- The fresh refund application has been filed by the appellant vide ARN No. AA0809200447634 dated 21.09.2020 as per sub rule (3) of Rule 90 of. CGST Rules, 2017. Therefore, the jurisdictional officer is agreed upon that the refund claim has been filed beyond the period of two years from the relevant date as mentioned in clause (h) of explanation (2) sub section (14) of Section 54 of the CGST Act, 2017. In the instant case, the refund should have been filed for the Tax period 2017-2018 on or before 31.08.2020 as it was extended vide Notification No. 35/2020 dated 03.04.2020 read with 55/2020 dated 27th June-2020 whereas the appellant has filed the fresh refund claim on 21.09.2020. There are no infirmity in the rejection of refund claim on the ground of time bar issue - appeal dismissed.
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Income Tax
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2021 (12) TMI 28
Revision u/s 263 by CIT - excess carry forwarded of unabsorbed depreciation and set off after a period of eight years - whether the exercise of power by the Commissioner of Income Tax under Section 263 was valid and proper? - whether in allowing excess carry forwarded of unabsorbed depreciation and set off after a period of eight years in view of the amended Section 32 (2) of the Act is justified? - HELD THAT:- Tribunal considered the said issue and, in our opinion, rightly held that for invocation of the power under Section 263 of the Act two conditions have to be specified simultaneously, namely, the order sought to be revised should be shown to be erroneous and it should be prejudicial to the interest of the revenue. In this regard the Tribunal followed the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. Commissioner of Income-tax[ 2000 (2) TMI 10 - SUPREME COURT] . We find that there is no error in the manner the Tribunal has decided this issue and we affirm the view taken by the Tribunal. On the merits of the matter it appears to us that as to whether in allowing excess carry forwarded of unabsorbed depreciation and set off after a period of eight years in view of the amended Section 32 (2) of the Act is justified, the said issue is no longer res integra. We find that there is no error in the order passed by the Tribunal. Accordingly, the appeal fails and the same stands dismissed. The substantial questions of law are answered against the revenue.
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2021 (12) TMI 27
Addition u/s 69A - survey action under Section 133A - Addition based on loose paper in search - AO came to a conclusion that 'Parvez Sir' mentioned in the loose paper found in the premises of Alliance Hotel was the Respondent and added the amount to the income of Respondent under Section 69A - HELD THAT:- The paper showing the name of 'Parvez Sir' was found in the premises of Alliance Hotel during the course of survey / search action of one Alliance Hotel and not from Respondent. The contents of the papers found were also not in the handwriting of Respondent. Mr. Kashan Ghaswala, partner of Alliance Hotel, has stated that 'Parvez Sir' mentioned in the paper found was not the Respondent. Even Respondent has categorically stated that he is not the 'Parvez Sir' mentioned in the papers found from the premises of Alliance Hotel. Therefore, the Assessing Officer was not justified in invoking the provisions of Section 69A of the Act because addition upon conjectures and surmises without any evidence to dispute the explanation offered by the Assessee cannot be made. There should have been some money found with the Assessee. There is no concrete evidence which has been brought on record by the Assessing Officer to establish that the entry 'Parvez Sir' in the impounded paper establishes the fact that it refers to Respondent. The Assessing Officer has made the addition only on the surmise that the impounded papers were containing entries which are dated 15/11/2006 whereas Respondent retired from the firm on 14/11/2006. In our view, the CIT(A) as well as ITAT were justified in coming to a conclusion that the Revenue could not establish the nexus between these documents with Respondent and that the Assessing Officer also has not made any efforts whatsoever to indicate that 'Parvez Sir' noted in the documents are really referring to Respondent. ITAT has not committed any perversity or applied incorrect principles to the given facts - No substantial question of law.
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2021 (12) TMI 26
Deduction u/s 80IB(10) - Commencement certificate of the local authority for the housing project was obtained on 28th November 1992, i.e., much before 1st October 1998, the date on or after which the development and construction of the housing project should have commenced to be eligible for deduction u/s 80IB(10) - HELD THAT:- On the plan approved by local authority on 28th November 1992 it has been concluded and held on facts that the plan based on which the assessee commenced development and construction, was totally different from the plan which was approved on 28th November 1992 and the revised plan based on which the assessee commenced the development and construction, was entirely different from the original plan and that plan has been approved by the local authority only in 2003. It has been factually held that as per the original plan approved on 28th November 1992, two buildings were to be constructed on the aforesaid plot of land. As per the revised building plan approved by the local authority in 2003, seven buildings were to be constructed on the said plot of land. It is also not disputed that assessee is a different entity from Bombay Gas Co. Ltd. which had got original plan approved in 1992 and the assessee had taken possession of the plot of land only in the year 2003 and thereafter got the revised plan approved. ITAT has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.
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2021 (12) TMI 25
Reopening of assessment u/s 147 - Eligible reason to believe - change of opinion - Denial of deduction under Section 80P (2) - HELD THAT:- As in the present case, the Assessing Officer raised a specific query in the original assessment proceedings, to which Petitioner replied. Therefore it is clear that Assessing Officer in the original assessment proceedings was conscious of the issue involved of the eligibility of Petitioner to claim deduction under Section 80P (2) of the Act. The co-ordinate Bench of this Court has succinctly laid down the criteria for reopening of assessment within a period of 4 years in Jainam Investments [ 2021 (9) TMI 517 - BOMBAY HIGH COURT] by holding that the Assessing Officer cannot reopen the assessment even within four years merely on the basis of change of opinion. The Assessing Officer had no power to review the assessment, which has been concluded unless he has tangible material to come to the conclusion that there is escapement of income from assessment. For all these reasons, we are of the view that the exercise of jurisdiction under Section 148 of the Act in the present case is without any tangible material. - Decided in favour of assessee.
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2021 (12) TMI 24
Revision u/s 271(1)(c) - Defective notice u/s 274 - HELD THAT:- Tribunal is in full consonance with the law laid down by the various High Court as well as Hon ble Supreme Court on the subject issue. The learned Senior Counsel appearing for the respondent has placed before us the decision of this case in the case of Principal Commissioner of Income Tax 19 Kolkata Vs.Dr. Murari Mohan Koley [ 2018 (9) TMI 1 - CALCUTTA HIGH COURT] taking note of the various decisions including the decision in the case of Manjunatha Cotton [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] which was affirmed by the Hon ble Supreme Court as the appeal filed by the revenue was dismissed by the Hon ble Supreme Court. The Supreme Court has also taken note of the decision of AMSON PERINCHERY [ 2017 (1) TMI 1292 - BOMBAY HIGH COURT] and ultimately held that the show cause notice issued under Section 274 of the Act does not specify the charge against the assessee as to whether it is concealing particulars of income or furnishing inaccurate particulars of income and, therefore, the show cause notice was defective. The decision of this Court in the case of Dr. Murari Mohan Koley (supra) will apply with full force. Thus we are of the considered view that the order passed by the Tribunal does not call for any interference. Accordingly, appeal fails and the substantial questions are answered against the revenue.
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2021 (12) TMI 23
Revision u/s 263 - Addition u/s 68 - persons failed to prove their identity, genuinity and credit worthiness - provisions of Section 68 as amended given retrospective operation - HELD THAT:- We find that the questions raised before us is squarely covered by the decision of M/s. Pragati Financial Management Pvt. Ltd[ 2017 (3) TMI 1242 - CALCUTTA HIGH COURT] Thus, following the above decision of the Hon ble Division Bench, this appeal is dismissed and we hold there is no substantial questions of law arising for consideration.
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2021 (12) TMI 22
Depreciation on intangible assets - denial of depreciation as hotel operation of the appellant was suspended during the year under consideration as per the Auditors Report - HELD THAT:- This issue squarely covered by an order passed by this Court TULIP HOSPITALITY SERVICE LTD. [ 2018 (12) TMI 1338 - BOMBAY HIGH COURT] as held both the CIT (A) as well as the Tribunal found on facts that the hotel business cannot be carried out without necessary licenses, permits and approvals. Thus, the proposition canvassed by by the Revenue that intangible assets in the nature of permits, licenses approvals are not required for carrying on the business of hotel not found to be correct by both the CIT(A) and the Tribunal. It is not disputed that the intangible assets viz. permits, licenses and approvals fall within the meaning of intangible assets under Section 32. Addition u/s 40A(2) - disallowance of interest claim of 9% in respect of the fully convertible debentures - AO's opinion is based on the noting made by the auditors in the annual report of respondent that payment of interest at 24% on Fully Convertible Debentures (FCD s) was prejudicial to the interest of the company - ITAT deleted the addition - HELD THAT:- As provided under Section 40A (2) (a), the Assessing Officer was duty bound to form a personal opinion, after having regard to the fair market value of the goods, services or facilities for which payment is made, that such expenditure is excessive or unreasonable. As stated earlier, there is no material placed to indicate what would have been the fair market value of interest that would have been payable on the debentures and why such payment was excessive or unreasonable. Simply relying on the auditors finding is not enough. ITAT has rightly concluded that the provisions like Section 40A are meant to check evasion of tax through excessive or unreasonable payment to relatives and associate concerns and should not be applied in a manner which will cause hardship in bonafide cases relying on Section 40A(2) - it is not a case of tax evasion in as much as it is not the Revenue s case if the rate would have been less the assessee s profit would have been more. As could be seen from the assessment order itself respondent had filed return of income for Assessment Year 2010-2011, which is the year in question, declaring loss and the return of income had been processed under Section 143 (1) of the Act. We find support for this view from the judgment Dempo and Co. P. Ltd. [ 2010 (10) TMI 711 - BOMBAY HIGH COURT] - Decided against revenue.
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2021 (12) TMI 21
Bogus purchases - in making the addition AO has primarily relied upon some information received from the office of the Director General of Income Tax (Investigation), Mumbai regarding bogus purchases - notice issued to these three parties under Section 133 (6) of the Act remained unserved because they are not available/traceable - ITAT deleted the addition - HELD THAT:- ITAT has on facts came to a conclusion that respondent has filed before the Assessing Officer complete books of accounts, items wise stock register evidencing the receipts of gift materials and issue thereof. ITAT has also accepted the photographs of the functions and promotional activities and confirmations from the shop keepers. What really tilted the opinion of ITAT in favour of respondent is that respondent had produced copies of bank statements of Punjab National Bank and Axis Bank evidencing the payments through banking channels by account payee cheques to the suppliers. Nothing in the order of the AO that the Assessing Officer has looked into or considered this fact dispassionately. The ITAT, therefore, came to a conclusion that respondent has discharged its onus by producing the books of accounts, stock register, stock tally and also filed various documentary evidences such as statements of banks. According to ITAT, once respondent has discharged this burden, the onus shifts to the Revenue and the AO has not conducted any independent inquiry or further verification of the records produced before him. We have to note that this view of ITAT has not even been challenged and no substantial question of law has been proposed. Admittedly the three parties are private limited companies. Assessing Officer does not mention anywhere to which address the notice under Section 133 (6) of the Act was sent because being a company, certainly the records in the office of the Ministry of Corporate Affairs or the Registrar of Companies will indicate the address of the registered office of these three entities. AO only says the notices remained unserved because companies are not available/traceable. That is neither here nor there because the Assessing Officer should have stated why the notices were not served - Was it because of any endorsement by the postal authorities that there was no such company in existence at the address mentioned or intimation posted but not collected or refused. Another point we have to note is that the Director of these three companies, on whose notarised affidavit cum declaration the Assessing Officer was relying upon, was not even made available for cross examination. - Decided against revenue.
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2021 (12) TMI 20
Deduction u/s 80IA - Proof of industrial undertaking that manufactured a product - assessee used to procure unprocessed or raw seeds and the final product which comes out is different commodity - HELD THAT:- The various stages indicate that the raw seeds which could be the subject matter of human consumption, after undergoing the various process stages, ceased to be edible and the said seeds could only be used for cultivation. Even applying the commercial test, the ITAT, on the facts, found that even in the market, the said final output was known to be used only for cultivation. In the circumstances, in the present case, on the facts the ITAT was right in coming to the conclusion that a different commodity emerged after the raw seeds underwent the above different stages. We concur with the opinion of ITAT that there is no merit in the stand taken by the Revenue that the activity carried by respondent in its industrial undertakings does not amount to manufacture or production of articles or things. Whether the ITAT was justified in allowing the deduction under Section 80IA when the assessee had declared loss under the head profits and gain of business? - An industry entitled to the benefit of s. 80E could have its profits wholly wiped out on adjustment against a heavy loss suffered by another industry, and thus be totally denied the relief which should have been its due by virtue of its profits. In our opinion, each industry must be considered on its own working only when adjudging its title to the deduction under s. 80E. It cannot be allowed to suffer because it keeps company with some other industry in the hands of the assessee. To determine the benefit under s. 80E on the basis of the net result of all the industries owned by the assessee would be, moreover, to shift the focus from the industry to the assessee. We hold that in the application of s. 80E the profits and gains earned by an industry mentioned in that section cannot be reduced by the loss suffered by any other industry or industries owned by the assessee. In the circumstances, we hold that the scope of deduction under Section 80IA of the Act is limited to determination of quantum of deduction by treating eligible business as the only source of income. Therefore, the deduction cannot be denied because the deduction under Section 80IA has to be computed unit wise and not for the business as a whole. Deduction for interest u/s 36(1)(iii) as allowable only if the assets acquired out of the borrowed capital has been put to use - HELD THAT:- The judgment of the Apex Court in Deputy Commissioner of Income Tax V/s. Core Health Care Ltd. [ 2008 (2) TMI 8 - SUPREME COURT] squarely covers this question and the Apex Court has held that such interest is allowable under Section 36(1)(iii). The Apex Court has held that interest on moneys borrowed for the purposes of business is a necessary item of expenditure in a business. For allowance of a claim for deduction of interest under the said section, all that is necessary is that firstly, the money, i.e., capital, must have been borrowed by the assessee; secondly, it must have been borrowed for the purpose of business; and, thirdly, the assessee must have paid interest on the borrowed amount. The Apex Court has also held that all that is germane is : whether the borrowing was, or was not, for the purpose of business
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2021 (12) TMI 19
Deduction u/s 80HH and 80I - Tribunal justification in holding that in view of the provisions of Section 80AB the loss sustained by the Generic Division was to be deducted from the profits of Bulk Drugs Division for the purposes of computing deduction - HELD THAT:- If one considers Section 80I of the Act it provides for deduction in respect of profits and gains from Industrial undertaking after a certain date etc. It applies to industrial undertaking or a ship or the business of a hotel or business of repairs to ocean going vessels or other powered craft. Section 80IA of the Act provides for deductions in respect of profits and gains from industrial undertaking or enterprises engaged in infrastructure development etc. Section 80HH of the Act provides for deduction in respect of profits and gains from a newly established industrial undertaking or a hotel business in backward area. If we consider the language applied in these three sections, they are identical except that the industry to which it becomes applicable differs. Therefore, even if the judgment of the Apex Court in Reliance Energy Limited [ 2021 (4) TMI 1237 - SUPREME COURT] was in regard to Section 80-IA of the Act, in our view it covers even Sections 80I and 80HH of the Act. In Reliance Energy (supra) the Apex Court had categorically stated that Section 80AB of the Act cannot be read to be curtailing the width of Section 80-IA of the Act. Mr. Pinto submitted that this observation of the Apex Court was in the nature of obiter. It is settled law that even if the observation of the Apex Court is in the nature of obiter, the same will be binding on the High Courts. In view of what is said in Reliance Energy Limited (supra) by the Apex Court we will have to answer the question noted above in negative.
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2021 (12) TMI 18
TDS u/s 194D - Default u/s 201(1) - payment of insurance commission to its agents - assessee deducted TDS on the net amount of insurance commission after excluding the service tax component - AO opined that TDS was required to be deducted on the gross insurance commission including the service tax component as required u/s 194D - HELD THAT:- The obligation to deduct is on the person who is paying and the deduction to be made at the time of making such payment. Factually and admittedly no amount has been paid to the agents by respondent as a reimbursement of expenses incurred by agent in the foreign travel. Respondent had made arrangement for foreign travel for all the agents and paid expenses directly to those service providers. Therefore as no amount was paid to the agents by respondent, obligation to deduct income tax thereon at source also would not arise. We disagree with the view expressed by the Assessing Officer and concur with the view expressed by the CIT(A) as well as ITAT (though its reasons are different from our reasons).
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2021 (12) TMI 17
Allowability of bad debts and bad and doubtful debts u/s 36(1)(vii) - Determination of Rural Branch - Place - claim of the assessee for bad debts u/s 36(1)(vii), and the claim in the credit balance in the provision for bad and doubtful debts u/s. 36(1)(viia) be disallowed? - HELD THAT:- The question concerning bad debts falling under Section 36(1)(vii) is covered in favour of the assessee in reported judgment of the Supreme Court in Catholic Syrian Bank v. Commissioner of Income Tax [ 2012 (2) TMI 262 - SUPREME COURT] and had answered the point in favour of assessee and against the Revenue. Valuation of unquoted securities - HELD THAT:- The question is no more res integra and is answered by following the precedents in Commissioner of Income Tax v. Nedungadi Bank Ltd [ 2002 (11) TMI 29 - KERALA HIGH COURT] and Commissioner of Income Tax v. Lord Krishna Bank Ltd (2011) [ 2010 (10) TMI 860 - KERALA HIGH COURT] , and this Court had answered in favour of the assessee Provision for Bad debts - Rural branch - HELD THAT:- Classification between rural and other branches of a bank is made based on the population in the place where the concerned branch is located. While the assessee's case that found acceptance with the Tribunal is that place referred to in the above definition clause is the ward of a panchayat or municipality, the Assessing Officer took the view that place contained in the definition clause should mean a revenue village. No doubt, place as such is not defined in the definition clauses and so much so, we have to find out the scope and meaning of place referred to in the section. Standing counsel for the Department produced before us last published Census Report of 2001. Even though the previous Census Report may be the relevant one, we feel the scope of place as referred to in the Census Report produced could be adopted for the purpose of this case - Thus the question is answered in favour of revenue and against the assessee
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2021 (12) TMI 16
Validity of order passed u/s 144C - non passing a draft assessment order - HELD THAT:- When case was remanded to the assessee to decide afresh on all the issues except one issue already decided in favour of the assessee, the AO was mandatorily required to pass a draft assessment order as per provisions contained u/s 144C(1) of the Act, but AO has straightaway passed final assessment order which is not sustainable in the eyes of law. Identical questions having already been decided by the Hon ble Delhi High Court in assessee s own case for AY 2008-09 [ 2017 (9) TMI 1838 - DELHI HIGH COURT ] as to not passing a draft assessment order in accordance with the provisions contained u/s 144C(1) is a non-curable defect, we find no illegality or perversity in the impugned findings returned by the ld. CIT(A), hence the appeal filed by the Revenue is hereby dismissed.
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2021 (12) TMI 15
Revision u/s 263 by CIT - assessee had earned long term capital gain which was offered under Income Disclosure Scheme 2016 (IDS) and tax due was paid - only reason for which learned PCIT has invoked his power under section 263 of the Act is, AO should have added back the purchase cost of the shares with alleged commission paid by the assessee for obtaining the entries relating to long term capital gain - HELD THAT:- The assessee had paid the purchase cost of shares through account payee cheque and the transaction was carried out through SEBI registered broker and on stock exchange platform. The assessee has furnished the contract note relating to purchase of shares as well as the bank statement showing the transaction made through banking channel. There is no material on record to suggest that the payment made of ₹ 2,00,000 through cheque towards purchase cost has been routed back to the assessee. There is nothing on record to suggest that the assessee has paid commission for obtaining accommodation entry. A reading of the impugned order passed under section 263 of the Act reveals that merely on presumption and surmises learned PCIT has assumed jurisdiction under section 263 of the Act. It is also evident, before the revisionary authority assessee has specifically stated that all relevant materials including evidence for payment made towards purchase cost were furnished before the AO. It cannot be said that the AO has not enquired into the issue. It could be a fact that after considering the materials available on record the AO was satisfied that the assessee had incurred the expenditure towards cost of the shares. That being a plausible view, cannot be termed as erroneous. Further, we find that the issue is squarely covered by the decision in case of Mrs. Manisha Ajay Shah [ 2020 (10) TMI 660 - ITAT MUMBAI] . As the assessment order cannot be held as erroneous and prejudicial to the interest of the revenue. Accordingly, we set aside the impugned order passed under section 263 - Decided in favour of assessee.
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2021 (12) TMI 14
Best judgment assessment u/s. 144 - Non appearance by assessee - HELD THAT:- On perusal of the order sheet of the appeal, we find that on various other occasions also no one appeared on behalf of the assessee before the Tribunal and the case was adjourned on that sole reason. Even today, on the date of hearing, no one appeared before me on behalf of the assessee. Only an adjournment letter is filed citing vague reasons. Assessee is not interested to pursue his appeal - having regard to the facts and circumstances of the case and on examining the orders of the Ld. Revenue Authorities it is evident that the AO as well as the Ld. CIT(A) had made the addition and sustained the same in the absence of cogent material/documentary evidence in support of the assessee's claim. Even now before the Tribunal, neither the assessee/assessee's counsel was present to argue the appeal nor filed any documentary evidence to support the claim against the additions made by the Ld. A.O. In this situation, we do not find it necessary to interfere in the order passed by the Ld. CIT(A) - Appeal filed by the assessee is dismissed.
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2021 (12) TMI 1
Revision u/s 263 - reopening of the assessment of the assessee in view of the provision u/s.263 - long term capital gain on account of sale of penny stock - As argued by assessee that once the issue has already been raised by the Assessing Officer and thereafter, the claim of the assessee was denied then, in the said circumstances, the assessment could not be revised in view of provision u/s.263 - HELD THAT:- As decided in MRS. MANISHA AJAY SHAH VERSUS PRINCIPAL CIT-30, MUMBAI [ 2020 (10) TMI 660 - ITAT MUMBAI] AO has issued a questionnaire wherein specific information was sought on transaction of equity shares and working of short term capital gain/long term capital gain. The assessee furnished a detailed reply to the notice issued under section 142(1) of the Act, wherein the assessee while replying to the query on transaction of shares, informed that a declaration under IDS 2016 has been made in respect of long term capital gain arising on sale of shares to GCM Securities Ltd. Ostensibly, the Assessing Officer after examining the documents accepted the same and made no addition. Merely for the reason that the Assessing Officer has taken a plausible view after examining the records that is not acceptable to the PCIT, would not make the assessment order erroneous. In the present case twin conditions set out in section 263 are not satisfied and hence, the PCIT wrongly assumed revisional jurisdiction. Thus it is quite clear that the fact of the present case is quite similar to the fact of the case under consideration. Taking into all these facts, we are of the view that the revision of assessment u/s.263 is not liable to be sustainable in the eyes of law. Therefore, we set aside the same and allowed the appeal of the assessee.
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Customs
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2021 (12) TMI 13
Entitlement for concessional rate of duty - coated paper - classified under tariff item 4810 29 00 of the First Schedule to Customs Tariff Act, 1975 or not - legality and propriety of the approach adopted by the first appellate authority in the impugned order for upholding the classification redetermined by the assessing authority to deny eligibility to concessional rate of duty - HELD THAT:- The decisions in HPL CHEMICALS LTD. VERSUS CCE, CHANDIGARH [ 2006 (4) TMI 1 - SUPREME COURT] and in HINDUSTAN FERODO LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, BOMBAY [ 1996 (12) TMI 49 - SUPREME COURT] mandate that it is for Revenue to discharge the burden of justifying the appropriateness of the proposed alternative classification in conformity with the General Rules for Interpretation of the Harmonized System and it does not secure acceptance merely by discrediting the classification claimed by the assessee. In the present dispute, that onus can be discharged only by establishing that at least 90% of the fibre content of the pulp used for manufacture of the impugned goods has been derived from chemical processing of wood. The certification evincing the origin of the goods, and based on production process intimated by the manufacturer, is the threshold qualification for preferential rate of duty. The rules of origin stipulate ascertainment of the source, and extent, of content in a manufactured. The partial acceptance of origin in the certificate while casting aspersions on the classification therein is not consistent with treaty mandate of presumption of authenticity unless expressly established otherwise - The first appellate authority did not consider it necessary to ascertain the methodology of that determination even though the report was bereft of any explanation. Nor is there any submission that standard tests for determination of the pulp as having been extracted by chemical process was available in the laboratory. Such unqualified reliance on a single sentence in the test report which abdicates the statutorily empowered determination in favour of the laboratory certification is not dissimilar to the abdication of empowerment to assess in favour of the investigation agency as both remain in the lee of statutory accountability. Evolving technology in the paper industry, and particularly in qualitative improvement for catering to existing uses as well as new applications, has had to focus attention on the yellowing and brittleness associated with passage of time that affect paper made from pulp obtained by mechanical processing of wood - The mechanical processing of wood does little to the lignin content in pulp and, while chemi-mechanical processing has some impact, only chemical processing can render lignin free fibre. It is, therefore, the presence of lignin in paper that is the distinction for differentiating between that manufactured from pulp obtained by mechanical process or chemi-mechanical process and from chemical processing of wood. The descriptions in the relevant tariff items are emphatically unambiguous, the rules of classification clearly delineate the distinction and the onus for disturbing classification is unequivocally enunciated as the law of the land. The classification can be revised only by determination of the process by which the pulp was extracted - The coated paper , as certified by the competent authority designated under the Comprehensive Economic Partnership Agreement (CEPA), does not conform to the description corresponding to sub-heading 8410.13 of First Schedule to Customs Tariff Act, 1975. The denial of the benefit of the concessional rate of duty being improper, the impugned order is set aside - Appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2021 (12) TMI 12
Seeking withdrawal of application - grievance of the Appellant is that the 1st Respondent had assumed the role of an Adjudicating Authority applied his judicial mind and dismissed it prayer to place the information available with him before the Adjudicating Authority , as regards the withdrawal - Regulation 30A and 12A of the IBC, 2016 - HELD THAT:- The reality of the matter is that the Appellant, the Assignee of JSB , standing in the shoes of JSBL , will become an Applicant in so far as the withdrawal is concerned as per Regulation 30A and 12A of the IBC, 2016. If the Regulation 30A(1)(a) is pressed into service then it is incumbent on the part of the Interim Resolution Professional/Resolution Professional to constitute the Committee of Creditors . Furthermore, in the instant case it can safely and securely be said that 1st Respondent/Resolution Professional by constituting Committee of Creditors on 27.08.2020 as thwarted an endeavour of the Appellant in seeking a pre Committee of Creditors constitution withdrawal as per Regulation 30A(1)(a). Suffice it for this Tribunal to make a pertinent mention as the 1st Respondent/Resolution Professional, by constituting the Committee of Creditors after the submission of Form A, the 1st Respondent had acted not in tune with the intention of the Amendment dated 25.07.2019 brought in the CIRP Regulations, 2016. This Tribunal keeping in mind a pivotal fact that the Appellant/Assignee of JSBL , is an Applicant for the purpose of CIRP Regulations and also considering the fact that the person to whom debt has been legally assigned or transferred is also a Financial Creditor as per Section 5(7) of the I B Code, 2016, there is no impediment in Law for it to reap the benefit of amendment to Regulation 30A(1) of CIRP Regulations - this Tribunal interferes with the impugned order passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Mumbai) and set aside the same. Appeal allowed - decided in favor of appellant.
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2021 (12) TMI 11
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - privity of contract between the Appellant and Respondent or not - relationship as Operational Creditor and Corporate Debtor is not established as is required under Section 9 of IBC - HELD THAT:- The Appellant has produced no document in the form of a contract to establish such a relationship. An e-mail dated 21.4.2018 is the first such communication sent by the Appellant to the Respondent, which the Appellant has used to show such a relationship with the Corporate Debtor. This e-mail contains the claim of Appellant that he was engaged to provide services by the Statutory Auditor of Corporate Debtor Mr. Arun Kishore, and on such a request he agreed to provide requisite services to the Corporate Debtor. He has further explained in this email the work carried out by him for the Corporate Debtor and also mentioned raising of four invoices amounting to ₹ 1,81,000/- to the Corporate Debtor on account of services rendered by him. On juxtaposing the definition of Operational Creditor and Operational Debt as included in IBC with the work relationship as is evidenced in the e-mail dated 21.4.2018 sent by the Appellant to the Respondent and the affidavit of Arun Kishore (supra), we find that the Applicant was employed by Mr. Arun Kishore, Statutory Auditor of Corporate Debtor to provide certain services. Therefore, the Appellant did not have the relationship of Operational Creditor with the Corporate Debtor for provision of any services. The Adjudicating Authority has thus found absence of privity of contract between the Applicant and the Respondent in the Impugned Order. The Appellant has not been able to establish or show evidence of his engagement or employment by the Corporate Debtor - Appeal dismissed.
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2021 (12) TMI 10
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- There is no denial of the fact that because of the default committed by the Corporate Debtor in regard to the repayment of Credit Facility in violation of the sanctioned terms, loan documents, the Respondent No. 1/Bank had classified the accounts of the Corporate Debtor on NPA on 30.05.2016. It cannot be ignored that the Respondent No. 1/Bank, after issuing Demand Notice and also issued Notice under Section 13(2) of the SARFAESI Act to the Corporate Debtor and Guarantors requiring them to repay the dues before 22.09.2016. A mere running of the eye of the OTS proposal dated 06.12.2018, 12.12.2018, 11.01.2019 addressed to the Chief Manager of the Respondent No. 1/Bank, Trivandrum International Health Services Ltd unerringly pointed out that the Corporate Debtor had admitted its liability and had prayed for the OTS of Credit Facility and mooted an abnormal offer of ₹ 8.15 Crores on 11.01.2019 towards the Full and Final Settlement of all the outstanding liabilities with the Bank , which was approved by the Bank as per its Sanction Letter dated 22.01.2019 which was accepted by the Corporate Debtor on 24.01.2019. But the fact of the matter is that the Corporate Debtor had prayed for time till 20.02.2019 for payment of 5% advance sum under the OTS scheme and indeed, the Corporate Debtor in accordance with the OTS was to repay the liabilities of the Respondent No. 1/Bank by 30.06.2019. Therefore, in the instant case, the default is on 30.06.2019. It is well settled that it is not for the Adjudicating Authority to arrive at the quantum of the outstanding amount due to be paid by the Corporate Debtor to the Financial Creditor . It is to be remembered that IBC, 2016 is not a Debt Enforcement Procedure - the proceedings under IBC are summary in nature and not an adversary one. Suffice it for this Tribunal to relevantly point out that the proceedings under IBC are not like that of a regular Civil Suit . As such, the aspects of the exorbitant interest, penal interest, purportedly imposed on the Corporate Debtor by the Respondent No. 1/Bank are not gone into by this Tribunal in Appeal . This Tribunal taking note of the facts and circumstances of the present case, in accumulative manner, comes to a resultant conclusion that the Debt of the Corporate Debtor and Default committed by it were proved and that the Adjudicating Authority on being satisfied with the disbursement of various loans to the Corporate Debtor by the Bank came to the right conclusion of admitting the Application - Application admitted - moratorium declared.
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2021 (12) TMI 9
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - debt payable or not - Applicability of bar created by the provisions of Section 10A - pendency of restructuring proposal - maintainability of Appeal under Section 61(1) of the IBC - Whether there is misjoinder of cause of actions? - HELD THAT:- It is apparent that more than one Financial Creditor can file joint Application and the dates of default may be different. There is no such provision in Section 9 of the IBC. Therefore, the ratio of the Judgment in the case of International Road Dynamics South Asia [ 2017 (8) TMI 1369 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] is not applicable to the facts of present case - Hon ble Supreme Court in the Case of Gaurav Hargovind Bhai Dave Vs. Asset Reconstruction Company (India) Limited Anr. [ 2019 (9) TMI 1019 - SUPREME COURT ] held that the date on which the bank declared the account of Corporate Debtor NPA is the date of default. In the present case, the account of the Corporate Debtor was classified as NPA on 31.03.2019. The cause of action accrued on 31.03.2019, the date of NPA. In such circumstances, we are unable to convince with the argument of Ld. Sr. Counsel for the Appellant that there is misjoinder of cause of action in the Application under Section 7 of the IBC. Whether the debt is not payable in fact? - HELD THAT:- Section 3(12) of the IBC defines default means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the Corporate Debtor as the case may be . With the definition, it is clear that the two instalments i.e. dated 17.06.2020 and 17.12.2020 were not due and payable even though the earlier instalments were become due and payable and the Corporate Debtor had committed default. Therefore, it cannot be said that the Corporate Debtor has not committed any default in respect of the aforesaid loans and the debt is not payable in fact. Whether the debt is barred by limitation? - HELD THAT:- The Corporate Debtor has specifically acknowledged the debt. The Application under Section 7 of the IBC is filed on 09.01.2020. The Application is filed within three years from the date of acknowledgement - there are no force in the argument of Ld. Sr. Counsel for the Appellant that the debt is barred by limitation. Whether, the Application under Section 7 of the IBC is not maintainable as a bar has been created by the provisions of Section 10A? - HELD THAT:- In the present case, the Corporate Debtor has committed default for Rupee Term Loan I, Rupee Term Loan II and cash credit on 31.01.2019, 31.01.2019 and 28.01.2019 respectively and the account of the Corporate Debtor was classified as NPA on 31.03.2019 i.e. prior to insertion of Section 10A. Therefore, provision of Section 10A is not attracted to the present Application under Section 7 of the IBC. Whether filing of an Application under Section 7 of the IBC despite opposition by all other creditors and during pendency of restructuring proposal is unsustainable in law? - HELD THAT:- It is not convincing that during the pendency of restructuring proposal outside the purview of IBC, the Application under Section 7 of IBC is unsustainable in law. On the other hand, The Appellant has candidly admitted in Para 10 of Written Submission that none of the judgments passed by the Hon ble Judicial Forums have dealt with a situation like the present one, wherein the financial interest of other Financial Creditors have been damaged due to the isolated and unilateral action of one the Financial Creditor. Whether impugned order is against the very spirit of IBC as the Adjudicating Authority fails to consider that restructuring outside the purview of IBC would be beneficial to the Financial Creditors? - HELD THAT:- There is no duty cast on the Adjudicating Authority that no sooner Adjudicating Authority gets information that outside the purview of IBC any restructuring proposal is under consideration before the consortium of lenders then he should defer the proceedings for initiation of CIRP. On the other hand, Section 7(4) of the IBC provides that the Adjudicating Authority shall within 14 days of receipt of the Application ascertain the existence of default from the records of an information utility or on the basis of other evidence furnished by the Financial Creditor passed an order under Section 7(5) - In the present case, the Corporate Debtor committed default and the Application is complete and there is no disciplinary proceedings pending against the Resolution Professional. Therefore, the AdjudicatingAuthority has no option except to admit the Application under Section 7 and to initiate the CIRP. The Adjudicating Authority was not obliged to consider that restructuring outside the purview of IBC would be beneficial to the Financial Creditors. Whether Kotak Mahindra Bank can maintain the Appeal under Section 61(1) of the IBC? - HELD THAT:- The Appellant Kotak Mahindra Bank has no valid ground to challenge the impugned order and failed to point out any legal or factual flaw in the impugned order. The Appellant has no locus standi to file this Appeal. Thus, the Appellant is not come within the purview of aggrieved person . Hence, the Appellant Kotak Mahindra Bank cannot maintain the Appeal. It is also pointed out that the Appellantwas well aware of the proceedings under Section 7 before the Adjudicating Authority, however, the Appellant chose not to participate in the proceedings. Therefore, the Appeal at the instance of Kotak Mahindra Bank is not maintainable. Appeal dismissed.
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2021 (12) TMI 8
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- It is seen from the petition that the Corporate Debtor has admitted its liability towards Financial Creditor in its Ledger account annexed as Annexure-5 and further in declaration Annexed as Annexure-3 with Supplementary Affidavit, the corporate debtor has given declaration regarding the loan from Mr. Vikash Kumar, Director (Financial Creditor). It is, also important to take note that the notification regarding the enhancement of minimum amount of default to Rs. One crore for the purpose of section 4 was issued by the Ministry of Corporate Affairs on 24th March, 2020 and the amount defaulted by the corporate debtor as well as filing of captioned petition is much before the coming into effect of notification dated 24th March, 2020. Since any notification issued by the Government is generally prospective in nature unless specifically expressed, hence, the said notification is not applicable to the present matter. The evidence placed by the financial creditor is sufficient to establish the existence of debt as well as default in payment on the part of the Corporate Debtor. The Hon'ble Apex Court has clearly stated in case of Innoventive Industries M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. [ 2017 (9) TMI 58 - SUPREME COURT] that the moment it is established that there is a default in payment of financial debt by the corporate debtor, which is due and payable and the application is complete and no disciplinary proceedings is pending against the proposed RP then the adjudicating authority has no option but to admit the application. The Financial Creditor has fulfilled all the requirements of law. Accordingly, this Adjudicating Authority admits this application and initiate the process of CIRP of the Corporate Debtor. Application admitted - moratorium declared.
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2021 (12) TMI 7
Cancellation of allotment of plot - liquidator was made aware by RIICO for the first time about cancellation of allotment only on 8.10.2020 - application was within limitation or not - HELD THAT:- As per Rule 24(1) of RIICO disposal of Land Rules, 1979, the allotment of plot can be cancelled only by the unit head of RIICO which was not done and therefore cancellation is not good in the eyes of law - RIICO repeatedly sent notices to pay the dues and get the restoration done on 06.10.2017. As per Section 238, IBC overrides any other laws in India. Section 32A (2) clearly speaks that no action on the property of CD can be taken for any old dues after liquidation order had been passed. Evidently, in the present case Respondent has proceeded against the CD when either it was undergoing CIRP and moratorium u/s. 14 of the Code was in force or the said proceedings were barred in terms of Section 32A (2) of the Code - Tribunal is of the view that the liquidator should pay all the dues to RIICO which are pending from CD. This order does not exempt the liquidator from following any rules of RIICO and they have to abide by it and accordingly use the plot which is in question. RIICO being directed to restore the allotment of the said property in favour of the CD once all the pending dues are submitted. Further RIICO is also directed to facilitate the transfer property to the successful bidder within reasonable time after payment had been done - Application disposed off.
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2021 (12) TMI 6
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - HELD THAT:- This bench notes that the Corporate has filed the reply claiming that the Petitioner has supplied excess quantities as against the purchase orders issued by the Corporate Debtor. The Corporate Debtor also pointed out that the Petitioner supplied defective and inferior quality of Pet Bottles and Hope Buckets which damaged the product and thus the Corporate Debtor suffered financial loss of more than ₹ 30 lakhs. The Corporate Debtor claimed the Petitioner have refused to take back the excess quantities of Pet Bottles and Hope Buckets. The Corporate Debtor pointed out that in the month of April 2019 at the request of the Petitioner, they supplied goods amounting to ₹ 8,85,295/- to an associate company of the Petitioner namely Max Indo Private Limited and claimed that an entry to that effect to the ledger account statement on 26.04.2019 which establishes that the amount were paid to Max Indo Private Limited and Grow Max India Private Limited. The Corporate Debtor has not filed any proof of objection raised with regard to excess supply of quantities of Pet Bottles and Hope Buckets prior to the initiation of section 8 Demand Notice - It is undisputed fact that the Pet Bottles and Hope Buckets were delivered to the Corporate Debtor and the invoices raised remain unpaid. The Corporate Debtor has not demonstrated that any dispute with regard to excess supply of goods/inferior quality was raised prior to the issuance of demand notice. Hence, there is a clear liability of payment of amount due under the invoices and default of non-payment of such dues by the Corporate Debtor, Petition is admitted. Petition admitted - moratorium declared.
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2021 (12) TMI 5
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- In the instant case there is a financial debt and there has been a default in repayment of the same and that this Adjudicating Authority is satisfied that the Financial Creditor has proved its case by placing evidence that default has occurred for which the Corporate Debtor was liable to pay. Even the Corporate Debtor acknowledges the debt and default, but seeks time for repayment of the said financial debt. The Financial Creditor has fulfilled all the stipulations as required under the provisions of the IB Code, 2016 for the purpose of initiating Corporate Insolvency Resolution Process. In these circumstances, having satisfied with the submissions made by the Petitioner/Financial Creditor, the contentions of the Corporate Debtor are overruled and this Adjudicating Authority is inclined to admit the instant Application - the instant application is hereby admitted and this Adjudicating Authority orders the commencement of the Corporate Insolvency Resolution Process (CIRP) which shall ordinarily be completed within the timelines stipulated in the IB Code, 2016 (as amended), reckoning from the day of this order is passed. Application admitted - moratorium declared.
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Service Tax
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2021 (12) TMI 4
Nature of activity - manufacture or service - job of manufacturing Plastic Jars and Containers in the factory of the service recipient by the help of their own manpower - such activity falls under supply of Manpower and Recruitment Service or Job work manufacturing? - HELD THAT:- There is no dispute in the fact that the appellants have entered into the contract for undertaking the manufacturing of Plastic Jars and containers in the factory of the Service recipient. The charges for the job is on per container basis, the appellants are not collecting the fixed wages or salary against providing the manpower. Therefore, the activity carried out by the appellant is of Job Work manufacturing and not of Manpower Recruitment Service. On the same set of facts in respect of other contractors providing services to the same service recipient, this tribunal has considered the matter in the case of RAMESHCHANDRA C. PATEL VERSUS COMMR. OF SERVICE TAX, AHMEDABAD [ 2011 (11) TMI 415 - CESTAT, AHMEDABAD] where it was held that the contractor has provided the same service to the service recipient i.e. M/s N K Proteins Ltd and this tribunal held that it does not fall under Manpower Recruitment service. Thus, in the present case, the services cannot be classified under the head of manpower recruitment service - appeal allowed - decided in favor of appellant.
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2021 (12) TMI 3
Levy of service tax - Renting of Immovable Property Services - support services or not - vacant land solely used for mining purposes - royalty and dead rent collected in terms of mining lease agreements for grant of mining rights - period from 01.07.2012 to 31.03.2016 - extended period of limitation - HELD THAT:- As per the law that existed prior to 01.07.2012, leasing of vacant land / immovable property for mining purposes was not taxable and was expressly excluded from the definition of renting of immovable property service . Prior to 01.07.2012, only those services which were specified by definition given in subsection (105) of Section 65 were taxable - A brief look into the history of service tax law would show that prior to 01.07.2012, Section 65 was the pivotal section of service tax law and it provided definition of all taxable services. The definition of renting of immovable property was provided in Section 65 90(a). The taxable service of renting of immovable property was provided in Section 65 (105) (zzzz). Similarly, what is event management is given in Section 65 (40) and the taxable service of event management is defined in Section 65 (zzzzr). An activity whether constitutes service was understood on the basis of the definition of classification and whether such service is taxable was to be understood on the basis of the definition of taxable service provided in Section 65 (105). From the definition, it can be seen that prior to 01.07.2012, definition of taxable service of renting of immovable property services did not include renting of vacant land solely used for mining purposes - A new service tax regime was introduced vide Finance Act, 2012 which gave up the system of identifying taxable services with reference to the definitions or classification of services. Section 65B thus practically replaced erstwhile elaborate definitions and classifications provided in Section 65. Section 66B was inserted as the new charging section. A negative list was introduced as Section 66D which comprises of the list of services which are not taxable under law. The Revenue alleges that royalty and dead rent is the consideration paid for providing renting of immovable property services. The act of entering into a lease agreement for grant of mining rights arises out of statue, namely, Mines and Minerals (Regulation and Development) Act, 1957 as well as the Rajasthan Minor Minerals Concession Rules, 1986. No amount other than the charges specified in the Acts/Rules can be collected. The conditions that can be incorporated in the agreement are also prescribed by giving a Modal Agreement. The assessee who is the service provider thus has no say in the terms and the conditions of the agreement or on the charges that may be collected from the lessee - The clarification issued by the Board under the new Tax regime w.e.f. 01.07.2012 explaining the application of definition of support services lays down that services provided by Government in the nature of grant of mining rights or licensing rights does not fall within the meaning of support services and is not taxable service. The circular / clarification / instructions issued by the Board are binding on the Revenue. True, it may be that renting of immovable property is mentioned in the includes part of the definition of support services . However, the said services of renting of immovable property has to be understood in the context of it being a support service provided by a Government to business entities. An activity of mere renting of immovable property by Government to business entities would fall within the definition of support service and would be taxable - The activity of lease of land solely for mining purposes is in the nature of exercise of sovereign right and is not a service that entities can carry out by themselves. The service of renting of immovable property would fall within the definition of support service only if such services fit into the middle part of the definition. Pertinently after the deletion of the words support services in Section 66D (a). The demand of service tax is made under reverse charge mechanism for the period after 01.04.2016 after the substitution of the word any service in clause (iv) of Section 66D (a) whereas the demand in these appeals is on the allegation that renting of immovable property is a support service The words support services having been omitted w.e.f. 01.04.2016, the circular is not applicable for the period after 01.04.2016 - the issue on merits is held in favour of assessee and against the Revenue. Extended period of limitation - HELD THAT:- The period involved is from 01.07.2012 to 31.03.2016. The show cause notices have been issued on dates thereafter invoking extended period. In para-16 of the SCN dt. 05.10.2017 it is stated that assessee has not paid service tax and has not obtained services tax registration. It is also alleged that if the Revenue had not requested to provide information, non-payment of service would have gone unnoticed. That therefore, assessee has wilfully and deliberately suppressed facts with intent to evade payment of service tax - No particular positive act of wilful and deliberate suppression has been unearthed by Revenue with cogent evidence. Further, in the present case, there is clarification issued by the Board that grant of mining rights is not support service. For these reasons, the demand raised invoking the extended period cannot sustain. The assessee succeeds on the issue of limitation also. The demand of service tax cannot sustain - appeal allowed - decided in favor of appellant.
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2021 (12) TMI 2
Refund claim - exclusion of export invoices worth ₹ 24,72,12,897/- from the turnover - rejection on account of necessary documents / certificates evidencing the foreign inward remittances - HELD THAT:- The impugned order is set aside and consequently, I deem it proper that the Adjudicating Authority shall look into these documents and then pass appropriate order on the exclusion of turnover pertaining to those export invoices and also pass appropriate order on the refund claim of the appellant after hearing and considering all such documents that may be furnished in support, by the appellant. Appeal allowed by way of remand.
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