TMI Tax Updates - e-Newsletter
December 22, 2020

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

Articles

1. TWO TIER ARBITRATION

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. 8th Instalment of ₹ 6,000 crore released to the States as back to back loan to meet the GST compensation shortfall

2. Ignore prompt on liability for inward supplies attracting reverse charge in Table-3.1 (d)

3. Reform linked borrowing permissions are facilitating Ease of Doing Business reforms

Notifications

GST - States

1. S.O. 198 - dated 17-12-2020 - Bihar SGST

Amendment in Notification No. S.O. 111, dated the 29th June, 2017

2. S.O. 197 - dated 17-12-2020 - Bihar SGST

Seeks to waive penalty payable for noncompliance of the provisions of notification No. S.O. 111, dated the 06th May, 2020

3. 84/2020-State Tax - dated 14-12-2020 - Himachal Pradesh SGST

Seeks to notify class of persons under proviso to section 39(1)

4. 83/2020-State Tax - dated 14-12-2020 - Himachal Pradesh SGST

Seeks to extend the due date for FORM GSTR-1

5. F.12(46)FD/Tax/2017-III- 262 - dated 21-12-2020 - Rajasthan SGST

Seeking to extend the due dates for compliances and action in respect of anti-profiteering measures under GST till 31.03.2021

6. 966-F.T. - dated 15-12-2020 - West Bengal SGST

Seeks to notify that for specified chemicals eight-digit HSN Code is required to be reported on tax invoice by amending notification No. 1152-F.T. dated 29.06.2017

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CDMRD/DRMP/CIR/P/2020/244 - dated 21-12-2020

Review of inclusion of Historical Scenarios in Stress Testing in Commodity Derivatives Segment

2. SEBI/HO/MRD2/DCAP/CIR/P/2020/245 - dated 21-12-2020

Core Settlement Guarantee Fund, Default Waterfall and Stress Test for Limited Purpose Clearing Corporation (LPCC)

Highlights / Catch Notes

GST

• Bharathiar University's service sales to colleges are taxable composite supplies, not exempt under Notification No. 12/2017-C.T.(Rate).

  Case-Laws - AAR : Taxability - sale of application, registration of course, inspection, etc with the Principal Supply' of “affiliation” provided by the Bharathiar University to its constituent colleges (viz) Self-financing and management colleges - the composite supply of sale of application, registration, inspection, etc with 'affiliation' of the said institution/course as the 'Principal supply' are not exempted under the entry SI.No.66 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017.- AAR
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• Court Rules Limitation Act Doesn't Apply to Delay in Tax Invoice Rectification Under TSGST Act.

  Case-Laws - HC : Condonation of delay in rectification of the tax invoice, mentioned in the name of petitioner - the Limitation Act will not apply automatically unless it is extended to the special statute such as TSGST Act inasmuch as law in this regard is absolutely unambiguous that except in the case of the suit, appeal or application in the court, the limitation of Act will not apply/extend for the local or special statute. Thus, the petitioner‟s contention in respect of the extension of the Limitation Act stands dismissed. - HC
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• Goods Seizure u/s 130 Deemed Illegal; No Intent to Evade Tax Found, Confiscation Conditions Not Met.

  Case-Laws - HC : Seizure and detention of goods - Confiscation of goods - Section 130 of the Act - It has not been established that there was any contravention of any provision or any Rules with an "intent to evade payment of tax" - none of the ingredients which are required for confiscation existed in the present case and thus, the confiscation itself was wholly arbitrary and illegal. - HC
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• Transporting Exempted Goods Illegally: Penalty of 5% Value or Rs. 25,000 Under CGST, No SGST Penalty Applicable.

  Case-Laws - HC : Detention of a consignment of goods - the liability of a person, who is not the owner of the goods, and who has transported exempted goods in contravention of the IGST Act, can only be in an amount equal to 5% of the value of the goods or 25000 rupees whichever is less, as specified under the CGST Act. He cannot be further mulcted with a similar amount under the SGST Act since the provisions of tax and penalty under the SGST Act are not attracted to the inter-state transaction of exempted goods covered by the IGST Act - HC
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• GST Applies to E-Goods Delivered via Cloud from Outside India; 18% IGST u/ss 5(3) & 5(4) Required.

  Case-Laws - AAR : Goods or not - e-goods - sale/ supply within state - classification of services - rate of GST - goods delivered through CLOUD located outside India - In the absence of complete details and information as available, it is deemed that, the customer is in India which is a taxable territory and since the applicant is also located in India, GST is leviable on such supply of services. - The applicant is required to obtain registration and pay GST under reverse charge mechanism. We reiterate that IGST is applicable under section 5(3) & 5(4) of the IGST Act at the rate mentioned in para 5.4.1 above i.e @18%. - AAR
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• Court Rules No Price Reduction Required for Flat Purchase; Respondent Not Benefitting from Input Tax Credit (ITC.

  Case-Laws - NAPA : Profiteering - supply of purchase of Flat - it is established that there had been no additional benefit of ITC to the Respondent and hence he was not required to pass on its benefit to the above Applicant No.1 by reducing the price of the flat. - Since there is no basis for comparison of ITC available before and after 01.07.2017, the Respondent was not required to recalibrate the price of the flat due to additional benefit of ITC. Hence, the allegations of the Applicant No.1 made in this behalf are incorrect and therefore, the same cannot be accepted. - NAPA
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• Waste Management Services Under Concession Agreements Subject to GST, No Exemption Available.

  Case-Laws - AAR : Classification for supply of services - waste collection, segregation, treatment, transportation and disposal services under the service agreements entered with both concessionaries - The activity undertaken by the applicant under the Service Agreements entered with both concessionaries are not exempted from GST - AAR
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Income Tax

• High Court: Tribunal's Ex-Parte Order Exceeds Rule 25 Scope, Despite Merit-Based Decision on Revenue's Appeal.

  Case-Laws - HC : Rectification u/s 254 - Tribunal decided the appeal of the Revenue on merits and ex-parte - The proviso to Rule 25 deals with the situation where the Tribunal has passed an ex-parte order, due to non-appearance of the Respondent, even though the order was passed on merits. Thus, we are of the opinion that the reasoning given in para 6 of the Impugned Order is beyond the scope and ambit of Rules 25 of the ITAT Rules. - HC
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• Authorities Challenge Deemed Capital Gains u/s 50D Without Inquiry into Agreed Consideration for Flat Transfer.

  Case-Laws - AT : Deemed capital gains by invoking the provisions of section 50D - there was no justification on the part of the authorities below to doubt or dispute the said consideration as claimed to be mutually agreed by the assessee-company to arrive at the conclusion that the consideration received or accruing as a result of the transfer of the two flats was not ascertainable or could not be determined without even making any inquiry whatsoever with the concerned transferees. - AT
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• India-Japan Tax Agreement: Legal Fees to Law Partnerships Taxable Under Article 12, Article 12(4) Exclusion Not Applicable.

  Case-Laws - AT : Tax credit under article 23(2) of India Japan Double Taxation Avoidance Agreement ['Indo Japanese tax treaty'] - on the peculiarities of Indo Japanese tax treaty provisions, the legal fees paid to a partnership firm of lawyers can indeed be subjected to levy of tax under article 12 as the exclusion clause under article 12(4) does not get triggered for payments to persons other than individuals, and the provisions of article 14 are required to be read in harmony with the provisions of article 12(4). - AT
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• Section 40(a)(ia) of Income Tax Act doesn't apply to short TDS deduction cases, as seen with Section 194C vs. 194J.

  Case-Laws - AT : TDS u/s 194J or 194C - disallowance u/s. 40(a)(ia) - Short deduction of TDS - Carriage Fees/Channel Placement fees - the provisions of section u/s.40(a)(ia) of the Act have no application where there is short deduction of TDS as the Assessee in this case deducted TDS @2% under the provisions of section 194C - AT
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Service Tax

• Business Auxiliary Services Promoting Foreign Companies in India Qualify as Export; Commissions in Foreign Exchange Allowed.

  Case-Laws - AT : Export of Business auxiliary service - The appellant promoted the business of such foreign companies in India and as a consideration for this service, the appellant received commission from the foreign companies in convertible foreign exchange. The appellant has also described the manner in which it had promoted the business of such foreign companies from which it is clear that the appellant supports such foreign companies to procure orders in India. Such service is provided from India and used outside India. - Benefit of export allowed - AT
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Central Excise

• Appellant Entitled to Refund of Unutilized CENVAT Credit u/r 5; Interest Claim to be Considered After 3 Months.

  Case-Laws - AT : Refund of unutilized CENVAT Credit - surrender of registration - the appellant is entitled for refund claim of unutilized cenvat credit lying in their cenvat credit account at the time of surrender of the registration under Rule 5 of Cenvat Credit Rules, 2004. - The issue of claim of interest is a legal issue and can be raised at this stage, as the appellant has succeed on merits that they are entitled for refund claim, therefore, the adjudicating authority shall entertain the claim of interest of the appellant after three months from the date of filing refund claim - AT
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Case Laws:

• GST

• 2020 (12) TMI 797
  Service of providing providing labour to the Municipal Corporation, Government Offices, Government Ashrams, and Government Medical Collage and hospitals - applicant is mainly supplying manpower and only in the case of Government Ashram school, applicant is providing goods in the form of vegetable and mutton as per the contract executed - Whether the supply of impugned services like; supply of staff for cleaning the District Collector s office premises; providing manpower in the form of skilled assistants and technicians, to Hospitals and Dispensaries run by Government medical college, are covered under clause 1 2 of Twelfth Schedule of Article 243W? - HELD THAT:- Applicant, is running a society of labour belonging to the economically weaker sections of society, having certain objectives as cited supra in applicant s submission. As per the submissions, applicant is mainly engaged in providing labour to the Municipal Corporation, Government Offices, Government Ashrams, and Government Medical Collage and hospitals and all the activities carried out by them directly or indirectly, helps the Municipal Corporation to achieve its objective listed in Maharashtra Municipal Corporation Act, 1966 - On the perusal of the work orders, it is seen that applicant is mainly supplying manpower and only in the case of Government Ashram school, applicant is providing goods in the form of vegetable and mutton as per the contract executed. Clause No. 1 and 2 are related to Urban planning including town planning and Planning of land - use and construction of buildings, which are totally different from the applicant s supply of services. The applicant is supplying manpower for specific purposes like computer work, cleaning of office premises, security, skilled and unskilled labour, etc. - such supply of services and goods cannot be said to be related to functions specified under Clause land 2 of the 12th Schedule. Applicant has not provided manpower in relation to any urban planning or planning of land-use and construction of building. Further, the applicant has not brought on record as to how their supply is in furtherance of functions specified in the above mentioned Clause 1 and 2. Hence it is felt that, such subject supply is out of purview of the scope of Clause 1 and 2 of 12th Schedule of Article 243 W of the Constitution, as functions entrusted to Municipality. Whether the meals provided to Government Ashrams for economically weaker class of students fall within Clause 1 2 of the Twelfth Schedule of Article 243W? - HELD THAT:- It is seen that Clause 1 2 of the 12th Schedule enumerates certain functions to be undertaken by a Municipality in relation to and including Urban planning including town planning and Planning of land - use and construction of buildings. First of all the applicant is not supplying any meals, in fact their submissions reveal that they are only supplying vegetables and mutton which cannot be considered as meals. Further such supply can in no way be correlated with the functions mentioned under Clause 1 2 of the 12th Schedule and therefore we hold that supply of vegetables and mutton are not covered under the said Clauses 1 2. Whether the services provided by them fall under the Entry No. 3 of Exemption Notification No. 12/2017 dated 28th June, 2017, as amended, since the said services are in the nature of pure labour services? - HELD THAT:- To the Residential Deputy Collector and Collector office, Amravati, applicant is providing labour for cleaning of office premises. Applicant is also providing security guard for security purposes. While the services of manpower supply as submitted by the applicant, can be considered as pure services and the Collector office can be considered as State Government office, the applicant has not made submissions to show that the functions being undertaken are activities carried out in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution - Similarly in the case of supply of security guards to the Department of District Mahila and child development, Amravati (State Govt.); supply skilled and unskilled staff to the Divisional Commissioner, for Divisional Krida Sankul Samiti, Amravati (state level) for the samiti office; the applicant has not made submissions to show that the functions being undertaken by them are activities in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution. The applicant also provides manpower for computer working to the Amravati Municipal Corporation (AMC). The AMC is a Municipality and certain functions are entrusted to it under Article 243W of the Constitution. Municipal Corporations undertake a lot of work pertaining to their jurisdiction and are liable to pay GST wherever functions are undertaken which does not find mention under 11th Schedule. Hence in absence of such information we find that the applicant will not be eligible for exemption under Entry No. 3 of Exemption Notification No. 12/2017 dated 28th June, 2017. All the issues are answered in negative.

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• 2020 (12) TMI 796
  Classification of goods - rate of GST - Tyre Pyrolysis Oil - Applicant has submitted that pyrolysis oil should be qualified as either a Biodiesel (HSN 3826) as it is derived from rubber part of the Tyre which is renewable in nature just like Palm Oil made from Palm fruit used to make biodiesel or as a Marine Fuel (HSN 2710) as its specifications meet that of Marine fuels - HELD THAT:- The Applicant is engaged in recycling of the waste tyres used by vehicles and pyrolysis oil is recovered during the said process of recycle, along with other products like Iron and Steel and carbon black. It is only the rubber component of the tyre which is converted into Pyrolysis Oil, which can be used for heating purposes and as a liquid fuel. Applicant has submitted that Pyrolysis oil can also be sold as a liquid fuel - Since there is no specific and separate schedule entry prescribed for Tyre pyrolysis oil , we are required to classify the said product. The Applicant vide email dated 20.11.2020, has made submissions which appear to have been sourced from the internet. However they have not made any submissions in respect of the chemical composition of their product nor have submitted any test report which shows the composition of their product - In view of non-submission of details, this Authority cannot pass a Ruling on the questions raised by the Applicant. The said question cannot be answered in view of non-submission of full details by the Applicant as mentioned under the Observations and Findings section of the order.

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• 2020 (12) TMI 795
  Rectification of mistake - an error has been noticed under the observation part in para No.5.2.6 at two places wherein the date of amendment of Section 17(5) of the CGST Act. 2017 is mentioned as 01.12.2016 instead of 01.02.2019 - HELD THAT:- It is noticed that such typographical error has indeed occurred in para 5.2.6 and needs correction. Therefore, this corrigendum order is issued, to correct the error. Application allowed.

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• 2020 (12) TMI 794
  Rectification of mistake - typographical error has indeed occurred in the said para 2.7 and needs correction - HELD THAT:- This corrigendum order is issued to correct the above mentioned error. Application allowed.

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• 2020 (12) TMI 793
  Taxability - sale of application, registration of course, inspection, etc with the Principal Supply of affiliation provided by the Bharathiar University to its constituent colleges (viz) Self-financing and management colleges - composite supply of services or not - Whether the services provided by the University to its constituent colleges are exempted vide sl.no 66 of Notification no.12/2017 CT(Rate) dated 28.06.2017? - HELD THAT:- The sale of application, registration, inspection are all supplies which are naturally bundled and supplied in conjunction in the course of the activity of extending affiliation. Thus, all the fees in question collected by them and the supplies thereto results in the activity of affiliation of the institution, upgradation, increase in the capacity/course, etc and are governed by the UGC regulation. The amendment by Notification No. 2/2018-C.T.(Rate) dated 25.01.2018 was proposed to exempt services relating to admission to, or conduct of examination for admission to all educational institutions,. as defined in the notification(definition 2(y) of Notification No. 12/2017-CT(R)). Thus the entry at 66(b)(iv) seeks to exempt only those services provided to such institution in relation to admission of students or conduct of examination for such admission to all the educational Institutions, including the higher educational institutions, which were not exempted up to this amendment - As per the definition of affiliation under regulation 2.1 above, affiliation in relation to a college is an activity to recognize such college to the privileges of the university to which the institution is affiliated. In other words, the activity of affiliation is to monitor whether the institution possess the required infrastructure in terms of Space, Technical prowess, financial liquidity, faculty strength, etc and thereby eligible for the privileges to conduct the course/programme of study for the degree/title extended by the University to the students enrolled in such institutions. In the case at hand, it is evident that the affiliation services provided by the applicant enables the said institution to conduct the course/programme and do not relate to admission of students to such course/programme in the said institutions or conduct of examination for such admission in the said institution. Also, the exempted services on the conduct of examination is that related to the admission to such institution and not related to the examination based on which degree/title, etc are conferred to the students, as is being claimed by the applicant, though we do not part any opinion on the claim of the applicant that they extend such services to the institutions by extending the affiliation - thus, the composite supply of sale of application, registration, inspection, etc with affiliation of the said institution/course as the Principal supply are not exempted under the entry SI.No.66 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017.

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• 2020 (12) TMI 792
  Restriction on Rectification of GSTR-3B return - Refund of excess tax paid - Constitutional validity of Rule 61 (5) of the GST Rules, Form GSTR- 3B and Circular No. 26/26/2017-GST dated 29.12.2017 - vires of CGST Act and contrary to Articles 14, 19 and 265 of the Constitution of India - challenge is principally for the reason that Petitioner is being prevented from correcting its monthly GST returns, and consequently seeking refund of the excess taxes paid. HELD THAT:- Issue Notice. List the matter in the first week of March, 2021 for final disposal.

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• 2020 (12) TMI 791
  Condonation of delay in rectification of the tax invoice, mentioned in the name of petitioner - whether the Superintendent of State Tax being the authority which passed the order dated 15.11.2018 had the authority to condone the delay on the face of the petition filed under Section 161 of the TSGST Act for rectifying the defects or errors in the impugned notice dated 10.10.2018 and the order dated 15.11.2018? - applicability of Section 29(2) of the Limitation Act vis a vis Section 69 of Tamil Nadu Hindu Religious and Charitable Endowments Act, 1959 - HELD THAT:- Section 161 of the TSGST Act provides that for purpose of any error which is apparent on the face of the record in the decision or the order or the notice or the certificate or any other documents issued by any authority, the said authority can exercise the said power to rectify either on own motion of the said authority or by the officers appointed under TSGST Act or CGST Act or by the affected person, if such action is taken within a period of three months from the date of such decision, or order or notice or certificate or any other documents as the case may be. The first proviso stipulates that no such rectification shall be done after a period of six months from the date of issue of such decision or order or notice or certificate or any other documents. The second proviso provides that the said period of six months shall not apply in such cases where the rectification is purely in the nature of correction of clerical or arithmetical error, arising from any accidental slip or omission. It is apparent on the face of the said provision of Section 161 of the TSGST Act that this is a complete code within itself and it has impliedly excluded the Limitation Act. Thus, what has been observed by the Superintendent of Taxes in the decision communicated by the reply dated 17.12.2019 does not suffer from any infirmity. Moreover, the Limitation Act will not apply automatically unless it is extended to the special statute such as TSGST Act inasmuch as law in this regard is absolutely unambiguous that except in the case of the suit, appeal or application in the court, the limitation of Act will not apply/extend for the local or special statute. Thus, the petitioner s contention in respect of the extension of the Limitation Act stands dismissed. That apart, in the considered view of this court, the rectification as sought is not covered by Section 161 of the TSGST Act. It is needless to say that when a legal action is barred by limitation unless that bar is overcome, no decision can be rendered on merit. Petition dismissed.

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• 2020 (12) TMI 790
  Seizure and detention of goods - failure to maintain the records as required to be maintained under Section 35 (1) of the CGST Act read with Rules 56 and 57 of the CGST Rules - Confiscation - penalty - HELD THAT:- Section 9 of the CGST is the charging section which provides for levy of tax on supplies of goods or services. Section 12 of the CGST Act provides for time on which the tax are to be paid and elaborates the time of supply of goods and Section 12 (2) clearly provides that the time of supply of goods is the date of issue of invoices or the date of receiving of the payment in respect to such supplies - Section 35 (1) clearly provides that all the registered person are required to keep and maintain at the principal place of business a true and correct account of things specified in Clause (a) to (f). The Second proviso to Section 35 (1),Rule 56 and Rule 57 make it further necessary to keep the said documents as specified in Clause (a) to (f) in the electronic form. In the present case, the proper officer was empowered to determine the liability of payment of tax in terms of the powers conferred under Section 35 (6) after resorting to the procedure as established under Section 74 of the Act - Although in terms of the provisions of Section 35 (6), the unaccounted goods are deemed to be supplied however, determination and quantification of the tax on the said deemed supply has to be done in accordance with Section 73 or Section 74of the Act - A perusal of Section 73 and 74 makes it clear that a show cause notice is bound to be served prior to determination of the tax leviable on the deemed supply whereas in the present case no such notice is available on record and it is common ground that apart from the said proceedings, no other proceedings have been initiated and concluded under Section 73 or 74 of the Act. Confiscation of goods - Section 130 of the Act - HELD THAT:- In the present case, even if it is admitted, for the sake of arguments, that the documents were not maintained at the registered office or the other place of business, there is no finding to the effect that any supply was made with an intent to evade payment of tax as is required under Section(i) of Section 130 (1) - there is nothing on record to establish that the petitioner did not account for any goods on which he is liable to pay tax under the Act (as required to attract Section 130 (1)(ii). It has not been established that there was any contravention of any provision or any Rules with an intent to evade payment of tax - none of the ingredients which are required for confiscation existed in the present case and thus, the confiscation itself was wholly arbitrary and illegal. Search and Seizure - Section 67 of the CGST Act, 2017 - HELD THAT:- A perusal of the said section makes it clear that proper officer should have reasons to believe that there is any suppression of any transaction relating to supply of goods by the taxable person or as claimed or has claimed input tax credit in respect of entitlement or has indulged in contravention of the provisions of this Act or the Rules made there under to evade tax under this Act, or such person is keeping his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act - In the present case, as the petitioner has not challenged the seizure order, I am not going to the said question in the absence of any pleadings or the arguments advanced or document produced in respect of the same. Levy of Penalty under Section 122 - HELD THAT:- The facts of the present case makes it clear that even if the allegations of the department, as adjudicated and confirmed in an appeal are accepted to be true, the offence committed by the petitioner would fall under the offence specified in Column B above for following reasons; firstly, the only allegations are that the petitioner has not maintained the Book of Accounts as are required under the Act and the Rules and secondly the penalty has been imposed holding the Petioners conduct in violation of Section 122 (1) (xvi) and (xvii) of CGST Act read with Section 122(1) (xvi) (xvii) of UP GST Act and thirdly, no exercise for quantification of the tax evaded has been done in pursuance to the powers conferred under Section 35 (6) read with Section 73 or 74 of the Act, as such, I have no hesitation in holding that in the given facts and circumstances of the case for the violations alleged and established against the Petitioner, the maximum penalty that could be imposed upon the petitioner is Rs. 10,000/-. The impugned orders dated 15.1.2020 and 27.1.2020 (Annexure No. 5) is set aside insofar as it relates to confiscation of goods and imposition of penalty in excess of Rs. 10,000/-, as the confiscation has been set aside, there is no question of payment of redemption fine - the total penalty imposed upon the petitioner is quantified at Rs. 10,000/- - Appeal allowed in part.

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• 2020 (12) TMI 789
  Detention of a consignment of goods - allegation that the consignment was not covered by a valid delivery chalan that was one of the prescribed documents for transportation of exempted goods - HELD THAT:- The impugned judgment does not call for any review. It has to be borne in mind that when goods are detained in the course of interstate transportation, the power to detain stems from Section 20 of the IGST Act which makes the provisions of the CGST Act, in relation to offences and penalties, inspection, search, seizure, arrest etc., applicable mutatis mutandis in relation to integrated tax, as if they were enacted under the IGST Act. The 4th proviso to Section 20 of the IGST Act provides that where penalty is leviable under the CGST Act and the SGST Act, the penalty leviable under the IGST Act shall be the sum total of the said penalties. Whether the 4th proviso would be attracted to the detention that was the subject matter of the Writ Petition more so when the transportation involved was of exempted goods? - HELD THAT:- It is clear from a reading of provision of Section 129 (1)(b) of the CGST, that when exempted goods are transported inter-state, in contravention of the provisions of the CGST Act, the goods and the conveyance used for transportation are liable to detention and can be released on payment of an amount equal to 5% of the value of the goods or 25,000 rupees whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty - In the instant case, it is not in dispute that it was not the owner of the goods, who came forward for the payment of tax and penalty. It is also not in dispute that there was no occasion for payment of any tax and penalty as the goods under transportation were exempted from tax under the IGST Act. The only amount to which the writ petitioner was liable was the amount equal to 5% of the value of the goods or 25000 rupees whichever was less as mandated under Section 129(1)(b) of the CGST Act. It has to be borne in mind that in the case of an interstate transaction the applicable statute is the IGST Act and the power of detention is exercised by virtue of the provisions of Section 20 of the IGST Act read with Section 129 of the CGST Act. There is no reference to the provisions of the SGST Act in Section 20 of the IGST Act, save for the mention in the 4th proviso to Section 20. In my view, the 4th proviso would be attracted only in a situation where, in respect of an interstate transaction, there is a liability to pay tax under the IGST Act that includes components of tax under the CGST and SGST Acts or where a penalty based on tax liability is attracted under both of the said enactments - the inference is inescapable that the amount to be collected from a person who is found to have transported exempted goods contrary to the provisions of the IGST Act, can only be such amount as is found payable under the CGST Act since it is the provisions of that Act that are to be deemed as enacted under the IGST Act. In other words, there is no provision that requires one to treat the provisions of the SGST Act as forming part of the IGST Act. Thus, the liability of a person, who is not the owner of the goods, and who has transported exempted goods in contravention of the IGST Act, can only be in an amount equal to 5% of the value of the goods or 25000 rupees whichever is less, as specified under the CGST Act. He cannot be further mulcted with a similar amount under the SGST Act since the provisions of tax and penalty under the SGST Act are not attracted to the inter-state transaction of exempted goods covered by the IGST Act - review petition dismissed.

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• 2020 (12) TMI 788
  Grant of Anticipatory Bail - offence under Sections 67(2) of CGST Act, 2017 and GGST Act, 2017 - HELD THAT:- Considering the facts and circumstances of the case, and since the present application has been preferred against the summons issued by the authority under the Act, it is expected that the authority concerned shall comply with the principle laid down by this Court in the decision rendered in Special Civil Application No.13679 of 2019 and allied matters dated 20.10.2020 [ 2020 (11) TMI 40 - GUJARAT HIGH COURT ] in its true spirit. Application disposed off.

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• 2020 (12) TMI 787
  Principles of Natural Justice - Refund of CGST - petitioner would point out that, without affording sufficient opportunity of hearing to the petitioner, the said order has been passed rejecting the petitioner s application for refund - HELD THAT:- Admittedly, no hearing was afforded to the petitioner by the second respondent before passing of the impugned order dated 27.03.2019 rejecting the petitioner s application for refund. As seen from Rule 92(3) of the Central Goods and Services Tax Rules, 2017e, it is clear that any application for refund can be rejected only after affording sufficient opportunity of hearing to the party, who seeks for refund. The first respondent in the impugned order dated 20.08.2020 has also confirmed that no hearing was afforded to the petitioner by the second respondent and despite the same, has dismissed the appeal erroneously. When Rule 92(3) of the CGST Rules, 2017, makes it clear that hearing is mandatory before rejecting any application for refund, the second respondent as well as the first respondent in their respective impugned orders have arbitrarily and by total non application of mind to the said Rule has rejected the petitioner s application for refund. The matters are remanded back to the second respondent for fresh consideration and the second respondent shall pass final orders on the refund application dated 27.03.2019 submitted by the petitioner on merits - Petition allowed by way of remand.

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• 2020 (12) TMI 786
  Goods or not - e-goods - sale/ supply within state - classification of services - rate of GST - exemption from GST or not - reverse charge mechanism - procurement from foreign supplier and supply from out of India - customer is from India and paying the consideration in dollar - exports or not - rate of SGST CGST or IGST - customer pays for the e goods in Indian rupees and goods delivered through CLOUD located outside India - customer / buyer is from out of India and payment is done in dollar - goods/ services are stored in CLOUD which are the servers outside India - not imported into India and the services are stored on CLOUD and therefore it cannot be said to be imports or not - rate of GST if RCM applicable. Whether e-goods , as commercially known in the market, are goods as defined in the GST Acts or are they services as per GST Act? - HELD THAT:- In the subject case the e-goods, referred to by the applicant are online gaming , as stated by him during the course of Final Hearing. Section 2(17) of the IGST Act, 2017, defines online information and database access or retrieval services (OIDAR) as services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services..(vii) Online Gaming - This definition will answer the first question posed by the applicant i.e. e-goods (in this case online gaming) will be considered as services under the GST Laws. If they are goods, what is the HSN classification and if services, what is the service classification and rate of GST on its sale/ supply within state? - Whether they are exempted from GST? - If Not exempted, what is the rate of GST on supply? - HELD THAT:- The Code wise List of services finds mention in Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. In the subject case we find that the applicant is supplying online content services - the subject services i.e. online gaming falls under SAC 998439. All services covered under the Heading 9984 attract a GST rate of 18%. In what circumstances will IGST, under reverse charge, be applicable or whether it is applicable in the situation of procurement from foreign supplier and supply from out of India? - HELD THAT:- There is a supply of OIDAR services to the applicant from suppliers based abroad. The nature of OIDAR services are such that it can be provided online from a remote location outside the taxable territory. A similar service provided by an Indian Service Provider, from within the taxable territory, to recipients in India would be taxable. In cases where the supplier of such service is located outside India and the recipient is a business entity (registered person) located in India, the reverse charge mechanism would get triggered and the recipient in India who is a registered entity under GST will be liable to pay GST under reverse charge and undertake necessary compliances. If the supplier is located outside India and the recipient in India is an individual consumer not registered under GST Laws, in such cases also the place of supply would be India and the transaction is amenable to levy of GST. In such case the individual should obtain registration and pay GST under reverse charge. If the customer is from India and paying the consideration in dollar, whether it will be allowed as exports or if not allowed as exports then whether GST is leviable? What is rate of SGST CGST or IGST? Under which HSN Code or SAC? - HELD THAT:- In case applicant s customer is from India i.e. taxable territory. Hence, GST would be liable on such transactions. In the case of supply of taxable service the word consideration is the key. As per Section 2 ((31) of the CGST Act, 2017, Consideration, includes any payment to be made, whether in money or otherwise. If customer pays for the e goods in Indian rupees and goods delivered through CLOUD located outside India whether SGST CGST or IGST leviable on such transactions? - H ELD THAT:- The applicant has not mentioned whether the said customer is located in India or abroad but since the applicant has mentioned that the payment is in Indian Rupees we assume that the customer is in India which is a taxable territory and since the applicant is also located in India, GST is leviable on such supply of services. Place of supply - In case where customer / buyer is from out of India and payment is done in dollar, according to us it is export of goods / services and therefore neither SGST CGST is leviable? Please clarify the same - HELD THAT:- The clause (e) of Section 97 (2) of the CGST Act, 2017 has got a very wide connotation and would cover all sorts of transactions, where the Advance Ruling on the questions related to the determination of the liability to pay tax can be sought by the Applicant - the applicant is supplying OIDAR services in the subject case and as per the provisions of Section 13 (12) of the IGST Act, in such cases, the place of supply of online information and database access or retrieval services shall be the location of the recipient of services, in this case the customer who is located abroad. In the subject case, the applicant has not provided details mentioned in the aforesaid seven non-contradictory conditions and therefore we are not able to come to any conclusion with respect to place of supply i.e whether the recipient in the subject case is in non-taxable territory or is deemed to be located in taxable territory. Also, the applicant did not attend online hearings scheduled on 10.11.2020 and 01.12.2020 and requested for adjournment. The first request for adjournment in respect of online hearing dated 10.11.2020 was received from the applicant vide email dated 05.11.2020 and adjournment was granted. The second request for adjournment in respect of online hearing dated 01.12.2020 was not granted as already sufficient opportunities had been given to the applicant for presenting his case on the said issue - in view of details having not been submitted by the applicant, we are unable to answer this question. In case buyer is from India, the goods/ services are stored in CLOUD which are the servers outside India, therefore even though payment is received in rupees, it is again export of services being services are received from distantly installed servers. Hence No CGST and or SGST is leviable? - HELD THAT:- In respect of this question, it is seen that the service is supplied by the applicant from taxable territory to recipients who are also located in taxable territory. The taxable event under GST Laws is supply of goods or services or both and the supplier of such goods or services or both, is liable to pay GST. In this situation since both, the supplier and recipient of services are located in taxable territory, the subject services will not be considered as exported and the applicant will have to discharge his GST liability on the amounts received for supplying such services. Whether IGST is applicable under section 5(3) 5(4) of the IGST Act, according to us it is not of because it is not imported into India and the services are stored on CLOUD and therefore it cannot be said to be imports and thus not liable for RCM? - If suppose RCM is applicable then its rate? - HELD THAT:- The applicant is required to obtain registration and pay GST under reverse charge mechanism. We reiterate that IGST is applicable under section 5(3) 5(4) of the IGST Act at the rate mentioned in para 5.4.1 above i.e @18%.

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• 2020 (12) TMI 785
  Profiteering - supply of purchase of Flat - allegation that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in the price of his residential unit and that GST had been charged on the amounts due to him against payments to be made by him to the Respondent - violation of the provisions of Section 171 (1) of the CGST Act, 2017 or not - HELD THAT:- The Respondent had got Affordable Housing The Millenia 37D project approved under the Haryana Affordable Housing Policy and allotted flats to the successful buyers on 27.10.2017 through draw of lots He invited applications for allotment of houses via advertisement in newspapers. The Applicant No. 1 had applied for allotment of a flat and the draw of lots for allotment of houses was conducted on 27.10.2017 in the presence of the committee constituted under the above Policy. It is also revealed that first builder buyer agreement was executed on 08.11.2017 vide which the terms and conditions for allotment of Flat were settled. It is also apparent from the record that the Respondent had received the Environment Clearance from the State Environment Impact Assessment Authority Haryana on 21.08.2017, also the work order for construction to contractor was given on 22.09.2017 before which he could not have started the execution of the project. On the basis of the sequence of the above events it could be safely concluded that the above project had been started after coming in to force of the GST w.e.f. 01.07.2017. It is also clear that the draw of lots for allotment was held on 27.10.2017. The first agreement between the buyer and the Respondent was executed on 08.11.2017. Therefore, it was apparent that the Applicant No. 1 had applied for allotment and was allotted the above flat after coming in to force of the GST w.e.f. 01.07.2017. Since the above project was not under execution in the pre-GST period i.e. before 01.07.2017 therefore, no comparison could be made between the ITC which was unavailable to the Respondent before 01.07.2017 and after 01.07.2017 to determine whether the Respondent had benefitted from additional availability of ITC or not. Thus, it is established that there had been no additional benefit of ITC to the Respondent and hence he was not required to pass on its benefit to the above Applicant No.1 by reducing the price of the flat. The Applicant No. 1 could have availed the above benefit only if the above project was under execution before coming in to force of the GST as the Respondent would have been eligible to avail ITC on the purchase of goods and services after 01.07.2017 on which he was not entitled to do so before the above date. Since there is no basis for comparison of ITC available before and after 01.07.2017, the Respondent was not required to recalibrate the price of the flat due to additional benefit of ITC. Hence, the allegations of the Applicant No.1 made in this behalf are incorrect and therefore, the same cannot be accepted. It is clear from the Section 171 (1) of the CGST Act, 2017, that there should either be reduction in the rate of tax or the benefit of ITC which are required to be passed on to the recipients by commensurate reduction in the price. Since there had been no reduction in the rate of tax or benefit of additional ITC to the Respondent the provisions of the above Section are not attracted in the present case and the allegation of profiteering are not established against the Respondent. The Respondent had not contravened the provisions of Section 171 (1) of the CGST Act, 2017 - Application dismissed.

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• 2020 (12) TMI 748
  Classification for supply of services - waste collection, segregation, treatment, transportation and disposal services under the service agreements entered with both concessionaries - Exemption under N/N. 11/2017- C.T.(Rate) dated 28th June 2017 or under entry no.3 of the Notification 12/2017-Central Tax (rate) dated 28.06.2017? - HELD THAT:- The words of the entry at S.No.3 of the Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 are very clear in that the class of service providers is clearly mentioned. If the intention of the legislature is to exempt Pure Services by way of any activity entrusted to Panchayat/ Municipality under the Article 243 G /243 W of the Constitution , then the class of recipients will not be mentioned in the description as is available in certain entries of the said Notification(entry No. 23/3 (v), for example). Again if the intention of the legislature is to tax/exempt a supply when made by a Sub-Contractor, such intention is explicitly stated as available in entry 3(ix) of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 as amended. Thus, it is a well settled position that the exemption notification must be interpreted on their own wordings In the case at hand, the entry at Sl.No. 3 is explicit in its application in as much as the class of recipient and the type of activities are mentioned. On plain reading of the said entry, it is specified that only services provided to Central Government, State Government or union territory or local authority or a Governmental authority will be exempted, which is not the case in hand. Therefore the supply made by the applicant under the Service Agreement is not eligible for exemption in terms of entry No.3 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017. The supply of services by the applicant relating to waste collection, segregation, treatment, transportation and disposal services under the Service Agreements entered with both concessionaries are classified under SAC 9994 in terms of Notification No. 11/2017 C.T.-(Rate) dated 28.06.2017 - The activity undertaken by the applicant under the Service Agreements entered with both concessionaries are not exempted from Goods and Services Tax in terms of entry no.3 of the Notification 12/2017- Central Tax (Rate) dated 28.06.2017.

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• Income Tax

• 2020 (12) TMI 783
  Rectification u/s 254 - respondent states that this Court in the present appeal cannot direct the Tribunal to expedite the disposal of the application filed by the appellant under Section 254(2) - HELD THAT:- We are of the view that if the respondent s submission is accepted, it would defeat the cause of justice as this Court would not hear the appeal till appellant s application under Section 254(2) is decided and at the same time, it could issue no direction to the Tribunal to expedite the disposal of the said application. If the facts stated in the present petition are correct, then the appeal is liable to be allowed on the first question of law framed by the appellant in the present appeal. Consequently, as of now, admit the appeal on the following question:- Whether the Tribunal erred in law in failing to adjudicate upon the admissibility and consider the additional evidence furnished by the appellant under Rule 29 of the ITAT Rules? At this stage, learned counsel for the respondent submits that this Court cannot decide the issue No. 1 without seeing the record of the Tribunal. Since it is the case of the appellant that he wishes to avail the benefit of amnesty scheme i.e. Vivad Se Vishwas , which closes on 31st December, 2020, we direct the Registry of this Court to summon the record for assessment year 2011-12 by a special messenger today itself.

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• 2020 (12) TMI 782
  Exemption u/s 10(1) - profit arising on sale for a land on the ground that the land, which was sold was agricultural land - Tribunal reversed the order passed by the CIT-A, who confirmed the order of assessment only on the ground that the lands were shown as agricultural lands in the revenue record during the relevant period and therefore, would not fall within the purview of the definition of capital asset under the Act - HELD THAT:- In the instant case, nothing was brought on record by the assessee to establish that the agricultural operations were carried on prior to his purchase and after purchase. Conduct of the assessee in selling the property within a short period of one year and the property being used to develop the SEZ ought to have taken note of by the Tribunal while deciding the character of the land, as mere classification of the land in the revenue record, as agricultural land, does not conclusively prove that the nature of the land is an agricultural land. Lands were transferred to non-agriculturists for non-agricultural purpose and this would also be one of the relevant factors to test the case of the assessee. The Tribunal relied on the decision in the case of M.S.Srinivasa Naicker [2007 (1) TMI 149 - MADRAS HIGH COURT ] the said Judgment could not have been applied to the case on hand because in the said decision on examining the facts and as admitted by the revenue, on the date of sale, agricultural operations were carried on in the lands, which is not so in the case of the assessee. Thus, for all the above reasons, we find that the Tribunal erred in interfering the order passed by the CIT[A] affirming the order of assessment dated 14.03.2014. - Decided in favour of the revenue

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• 2020 (12) TMI 781
  Rectification u/s 254 - Tribunal decided the appeal of the Revenue on merits and ex-parte, as there was no presence on behalf of the Petitioner - Petitioner filed the Miscellaneous Application u/s 254(2) read with Rule 25 of the ITAT Rules, wherein explanations were provided for such non-appearance - affidavit of the Director of the Petitioner-company stating that the non-appearance was on account of the illness of the counsel - HELD THAT:-The presumption of disinterest against the Petitioner is speculative. The other factor that prevailed upon the Tribunal was the lapse of time since the first date of hearing. Tribunal ignored the fact that Petitioner had approached the Tribunal in December 2018, and thus, the time gap of 2 years between the first date of hearing and the date of decision cannot be a compelling measure. In our view, these factors ought not to be viewed in isolation, without taking into consideration the sufficiency of reasons for non-appearance. Petitioner had given a sufficient and cogent explanation for non-appearance of its Representative, which, however, the Tribunal has failed to take into account. Besides, in para 6 of the Impugned Order, the Tribunal also went into the question of merits of the ex-parte decision, by delving into the correctness of order. This also was an erroneous yardstick for deciding the Miscellaneous Application. Tribunal has failed to appreciate that the Petitioner was seeking the recall of the order dated 24th July, 2018 and restoration of the appeal, and not the rectification of any mistake apparent on record. The merits of the case could not have been gone into at the stage of deciding an application under Rule 25 of the ITAT Rules. Rules 24 and 25 of the ITAT Rules enable the Tribunal to restore the appeal, if a party appears afterwards and satisfies the Tribunal that there was a sufficient cause for its non-appearance when the appeal was taken-up for hearing. The proviso to Rule 25 deals with the situation where the Tribunal has passed an ex-parte order, due to non-appearance of the Respondent, even though the order was passed on merits. Thus, we are of the opinion that the reasoning given in para 6 of the Impugned Order is beyond the scope and ambit of Rules 25 of the ITAT Rules. Assessee was prevented by sufficient cause from appearing before the ITAT when the appeal was taken up for hearing. Further, the Tribunal has taken into consideration such reasons which were not germane for deciding the Miscellaneous Application. The sufficiency of the cause, which was the only factor to be examined, has been ignored by the Tribunal. If sufficient cause is shown, the Tribunal is obligated to consider the same and make an order setting aside the ex-parte order, irrespective of the fact that the final order decided the appeal on merits. We are also persuaded to allow the petition, in view of the undertaking given by the Petitioner that it would apply under the Vivad Se Vishwas Scheme in the event the appeal is restored to its original number. The Petitioner s undertaking is taken on record and it shall be held bound by the same.

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• 2020 (12) TMI 780
  Deemed capital gains by invoking the provisions of section 50D - capital gain arising from the said transfer of flats - Whether only document evidencing the transfer in the form of self-made affidavit did not indicate any consideration for transfer, the consideration received or accruing as a result of transfer of the rights of the two flats was not ascertainable and could not be determined? - HELD THAT:- As observed that even though the consideration for transfer of two flats received or accruing to the assessee was not mentioned in the affidavit filed by the assessee evidencing the said transfer, copies of accounts of the concerned transferees were produced by the assessee to show the consideration for transfer of the two flats as agreed between the parties. We, therefore, do not agree with the contention of the revenue that there was no evidence produced by the assessee-company to show the consideration received or accruing as a result of the transfer of the two flats. As matter of fact, the said consideration so agreed was taken into consideration by the assessee-company for computing the capital gain arising from the transfer which was duly declared in its return of income and as rightly contended by assessee, there was no justification on the part of the authorities below to doubt or dispute the said consideration as claimed to be mutually agreed by the assessee-company to arrive at the conclusion that the consideration received or accruing as a result of the transfer of the two flats was not ascertainable or could not be determined without even making any inquiry whatsoever with the concerned transferees. Provisions of section 50D are not applicable in this case and the impugned addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) by invoking the said provision is not sustainable. We accordingly delete the same and allow Ground No. 1 of the appeal. Disallowance u/s 14A - disallowance so made cannot be added while computing the book profit of the assessee-company under section 115JB - HELD THAT:- Since this issue is squarely covered by the various judicial pronouncements including the decision of Special Bench of this Tribunal in the case of ACIT vs.- Vireet Investment (P) Limited [ 2017 (6) TMI 1124 - ITAT DELHI ] we direct the Assessing Officer to delete the addition made on account of disallowance under section 14A while computing the book profit of the assessee-company under section 115JB - Ground No. 2 of the assessee is accordingly allowed.

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• 2020 (12) TMI 779
  Treatment of optionally and Compulsory Convertible Debentures issued by the assessee company as Equity Share Capital - HELD THAT:- The parties herein have agreed that the issue stands covered in favour of the assessee and after analyzing this issue and perusing the findings of the Pune Bench of the Tribunal. [ 2020 (12) TMI 747 - ITAT PUNE] we allow these grounds of appeal of the assessee. Thus, grounds pertaining to treatment of optionally and Compulsory Convertible Debentures issued by the assessee company as Equity Share Capital are allowed. Determination of ALP of the assessee company - HELD THAT:- As after analyzing the relevant documents on record, going through the orders of the sub-ordinate Authorities that the ALP of the assessee has to be freshly determined and in view thereof, we set aside the order of the Ld. CIT(Appeals) on this matter and restore the issue to the file of TPO/AO for fresh determination of ALP of the assessee after complying with the principles of natural justice. Thus, the ground of appeal raised by the assessee is allowed for statistical purposes.

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• 2020 (12) TMI 778
  TP Adjustment - adjustment made to international transaction of Engineering Design and related Services - Comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee need to be deselected from final list. Transfer pricing adjustment for interest on receivables - HELD THAT:- In the instant case, the Learned DRP has noted the decisions of the Tribunal and High Court in the earlier years. In assessment year 2010-11 the Tribunal in the case of Kusum Healthcare Private Limited [ 2015 (4) TMI 180 - ITAT DELHI] and held that impact of credit period was duly factored in working capital adjustment allowed while determining the arm s-length price and, therefore, no separate adjustment for interest on receivables was warranted in the hands of the tested party.

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• 2020 (12) TMI 777
  Revision u/s 254 - HELD THAT:- It is a case, where the Tribunal has disposed of the grounds in a particular manner. We are of the view they cannot be interfered with u/s 254(2). In clause (vi) of the miscellaneous application, it is stated that Tribunal has not decided about one comparable company named M/s South India Surgical Limited. Assessee has not raised any ground before the Tribunal with regard to comparable company. It is only stated that the assessee has argued before the Tribunal on the above said comparable. Since the above facts are not apparent from record, we are not able to appreciate this contention of the assessee and accordingly reject the same. It is the submission of the assessee that the Tribunal has committed an error in not admitting the additional grounds. However, we notice that the Tribunal has taken a particular view on the above matter. Hence, the same cannot be interfered with u/s 254(2) of the Act.

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• 2020 (12) TMI 776
  Tax credit under article 23(2) of India Japan Double Taxation Avoidance Agreement [ Indo Japanese tax treaty ] - withheld Tax by its clients fiscally domiciled in Japan - HELD THAT:- A position well visualized by the multilateral bodies, developing the treaty provision in question, that in all the cases in which the interpretation of the residence country about the applicability of a treaty provision is not the same as that of the source jurisdiction about that provision, and yet the source country has levied taxes - whether directly or by way of tax withholding, the tax credit cannot be declined. To put a question to ourselves, what could possibly be the situations in which views of the source and residence jurisdictions may differ about the applicability of a treaty taxation provision, and yet the residence country could still provide the related tax credits. In our humble understanding, for the detailed reasons set out above, these are the cases in which the treaty partner source jurisdiction has taken a reasonable bonafide view which is not manifestly erroneous- even though it is not the same as is the view taken by the residence jurisdiction. That aspect alone, however, is not the sole determinative factor in the present context since we have already held that, on the peculiarities of Indo Japanese tax treaty provisions, the legal fees paid to a partnership firm of lawyers can indeed be subjected to levy of tax under article 12 as the exclusion clause under article 12(4) does not get triggered for payments to persons other than individuals, and the provisions of article 14 are required to be read in harmony with the provisions of article 12(4).

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• 2020 (12) TMI 775
  Reopening of assessment u/s 148 - non disposal of objections - accommodation entry receipts - HELD THAT:- As perused the assessment order and we find that the AO has disposed off the objections in the assessment order without passing a separate order which is the contrary to law an deserve to be cancelled on this count, in view of the decision of the Hon ble Apex Court in the case of GKN Driveshaft [ 2002 (11) TMI 7 - SUPREME COURT ] Also in the reasons, the AO has recorded that assessee has obtained the accommodation entry of Rs. 60 lacs in the name of 6 dummy / paper companies during the year under consideration, but finally made the addition of Rs. 50 lacs in the assessment order which also shows that AO has not applied his mind before recording the reasons in issuing the notice u/s. 148 of the Act. Therefore, the addition in dispute deserve to be cancelled. - Decided in favour of assessee.

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• 2020 (12) TMI 774
  Disallowance u/s 14A - Apportionment of the expenditure qua strategic and non-strategic investment in shares - As no dividend income was earned on shares held as investment, the action of the Ld. CIT (A) in upholding the disallowance u/s 14A is squarely against the order of Jurisdictional HC in Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] - HELD THAT:- As relying on MAXOPP INVESTMENT LTD. [ 2018 (3) TMI 805 - SUPREME COURT] when assessee company has admittedly earned the dividend income of Rs. 1,79,87,005/- and has incurred administrative and operative expenses and share trading expenses to the tune of Rs. 3,14,48,275/- as against the total trading of shares carried out during the year from which profits have been earned to the tune of Rs. 2,39,19,454/-, apportionment of the expenditure qua strategic and non-strategic investment in shares has to be made and disallowance by way of applying Rule 8D (2)(iii) on the average value of stock-in-trade is not applicable. So, appeal filed by the assessee is partly allowed and AO is directed to compute the disallowance by way of apportionment of expenditure incurred by the assessee in relation to exempt income by segregating the expenditure qua strategic and non-strategic investment in shares.

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• 2020 (12) TMI 773
  Addition u/s 40(a)(ia) - disallowance of interest - Scope of second proviso to Section 40(a)(ia) - HELD THAT:- We find that while allowing the claim of the assessee, CIT(A) has given a finding that payee has included the interest income in its total income and has also filed the return of income and therefore no disallowance can be made in the hands of the assessee in view of the fact that the 2nd proviso to said section has been held to be clarificatory in nature. CIT(A) relied on the decision in the case of Rajeev Agarwal [ 2014 (6) TMI 79 - ITAT AGRA] while deciding the issue - In the case of CIT vs. Ansal Land Mark Township Pvt. Ltd. [ 2015 (9) TMI 79 - DELHI HIGH COURT] has also held that second proviso to Section 40(a)(ia) to be declaratory and curative and it has retrospective effect from 01.04.2005. Before us, Revenue has not pointed any fallacy in the findings of the CIT(A) nor has placed any contrary binding decision in its support. In view of these fact, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed. Disallowance of short-term capital gain/loss - AO noted that it had demolished the existing building and since the building was demolished and it was the only asset in the block of asset , the written down value as appearing in the fixed scheduled for Income Tax working was claimed as Short Term Capital loss u/s 50(2) - HELD THAT:- CIT(A) while deciding the issue in favour of the assessee has given a finding that assessee had followed the right method of calculating the short term capital loss on the building which was demolished during the year and since there was no other asset in the said block, assessee had claimed the WDV of the said asset as short term capital loss as per the provision of Section 50(2) - Before us, no fallacy in the findings of the CIT(A) has been pointed out by Revenue nor Revenue has placed any contrary binding decision in its support - Appeal of the Revenue is dismissed.

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• 2020 (12) TMI 772
  Grant of registration u/s. 80G denied - assessee was enjoying the registration u/s.12A - objection that the assessee was granted registration u/s. 12A for religious or general public utility purposes and the registration was not granted for chairtiable purposes i.e. relief of poor and medical relief and whereas the assessee had spent amount on healthcare education and relief to poor - HELD THAT:- From the perusal of main objects of the assessee as contained in memorandum of association at Sr. Nos. 2 and 3 we find that these are for establishment and promotion of hospitals medical and healthcare institutions and to establish maintain and run colleges and schools for primary and technical scientific institutions. CIT(E) while rejecting the application u/s. 80G of the Act ignored the objects as contained in the object clause of memorandum of association whereas he himself has noted that the assessee had spent an amount of Rs. 1,44,000/- towards health and further an amount of Rs. 22,300/- was spent on education and Rs. 58,540/- as help to poor. These all expenditure represents expenditure for charitable purposes which is mentioned in the object clause of the assessee. Though the registration granted u/s. 12A mentions the purpose of registration as religious or general public utility but the object clauses of the assessee clearly shows that main object of the assessee were promotion of health and imparting of education. We do not agree with the findings of ld. CIT(E) in dismissing the application of the assessee. Moreover, we find that once registration u/s. 12A is given the registration u/s. 80G can be denied if the activities are not genuine. The ld. CIT(E) nowhere has doubted the genuineness of activities of assessee. - Decided in favour of assessee.

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• 2020 (12) TMI 771
  Disallowance of stamp duty and registration fee paid at the time of registration of tenancy agreement - HELD THAT:- On a reading of the tenancy agreement as a whole it does not appear that there is transfer of property by the landlord to the assessee as concluded by Commissioner (Appeals). Though, it may be a fact that the tenancy agreement is silent on the duration of the terms of the tenancy, however, there are various terms and conditions in the tenancy agreement which make it clear that the right, title and interest over the tenanted property still remains with the landlord and have not been transferred to the assessee. It is a fact on record that the tenancy agreement has been executed and registered under the Maharashtra Rent Control Act,1999. Also a fact on record that the monthly rent paid by the assessee and the landlord has been allowed as expenditure. That being the case, there is no reasonable basis for disallowing the stamp duty and registration charges by holding it as capital expenditure. Though Commissioner (Appeals) has referred to a Board resolution to conclude that the assessee has acquired enduring right over the property, however, the terms of the tenancy agreement speak differently. If one goes by the tenancy agreement, there cannot be any doubt that there is no perpetual right granted to the assessee. In view of the aforesaid, we hold that the expenditure incurred by the assessee towards stamp duty and registration charges for registering the tenancy agreement is revenue in nature and allowable. Accordingly, we direct the Assessing Officer to delete the addition. Ground no.1, raised by the assessee is allowed. Disallowance of expenditure - AO found that the chemical business earlier carried on by the assessee is no longer in existence therefore, he was of the view that various expenses claimed by the assessee which do not have any nexus with the interest income earned cannot be allowed - HELD THAT:- Undisputedly, the expenditure claimed by the assessee was disallowed solely for the reason that the chemical business of the assessee is no longer in existence. It is the claim of the assessee that the business has not been closed permanently. In our view, if the assessee can bring on record sufficient evidence to prove that the business is continuing and has not been permanently closed, the expenditure relating to such business has to be allowed. However, since the assessee requires to establish its claim through proper evidence, we are inclined to restore the issue to the Assessing Officer for fresh adjudication after providing reasonable opportunity of hearing to the assessee. The ground raised by the assessee is allowed for statistical purposes.

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• 2020 (12) TMI 770
  TDS u/s 194J or 194C - disallowance u/s. 40(a)(ia) - Short deduction of TDS - Carriage Fees/Channel Placement fees - Whether payments made for use/ right to use of process are royalty as per Explanation 6 to section 9(1)(vi) hence such payments are covered u/s. 194J ? - HELD THAT:- No infirmity in the order of the Ld.CIT(A) in deleting the disallowance as the Ld.CIT(A) followed the order of the Tribunal and deleted the disallowance made u/s.40(a)(ia) of the Act. Even otherwise, the provisions of section u/s.40(a)(ia) of the Act have no application where there is short deduction of TDS as the Assessee in this case deducted TDS @2% under the provisions of section 194C of the Act as held by the Coordinate Bench of this Tribunal in the case of M/s. Sapiens Technologies (1982) India Pvt. Ltd. [ 2020 (9) TMI 1151 - ITAT MUMBAI] TDS u/s. 194C OR u/s. 194J - disallowance made u/s. 40(a)(ia) in respect of editing expenses - HELD THAT:- Since in the case on hand also there is short deduction of TDS as the assessee had deducted TDS @2% as against 10%, it is a case of short deduction of TDS and not non-deduction of TDS. In the circumstances no disallowance is attracted u/s. 40(a)(ia) of the Act. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the revenue on this issue. Disallowance made towards commission expenses - CIT-A deleted the addition - HELD THAT:- Assessing Officer has disallowed the expenditure without any contrary evidences in possession. It is very evident from the assessment order itself that by letter dated 07.03.2014, the Assessee has submitted detailed break-up of the expenses. The Assessing Officer has not demonstrated as to why this commission expenditure is ingenuine and is not allowable. Since the Assessing Officer has not substantiated his reasoning and has not pointed out any defect in the claim of the Appellant, such disallowance of commission expenditure cannot be sustained. The Assessing Officer is therefore, directed to delete the disallowance of commission expenditure correctly - Decided against revenue.

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• 2020 (12) TMI 769
  Disallowance in respect of ESOP expenses - Whether permissible expense u/s 37(1) ? - as per AO addition made stating that these expenses are only notional expenses and have been incurred in relation to issue of shares to employees resulting in increase in capital and is not an allowable expense - HELD THAT:- CIT(A) allowed claim of the assessee following the decision of the Bangalore Special Bench in the case of Biocon Limited [ 2013 (8) TMI 629 - ITAT BANGALORE ] and also the decision of the Mumbai benches in the case of DCIT v. Kotak Mahindra Bank Ltd [ 2018 (1) TMI 320 - ITAT MUMBAI ], Accenture Services Pvt. Ltd., [ 2010 (3) TMI 1107 - ITAT MUMBAI ] and the decision of the Hon ble Madras High Court in the case of CIT v PVP Ventures Limited [ 2012 (7) TMI 696 - MADRAS HIGH COURT ] and deleted the disallowance made by the Assessing Officer - On reading of the order of the Ld.CIT(A) we do not find any infirmity in the order passed by the Ld.CIT(A). Thus, the grounds raised by the revenue are dismissed. Disallowance of interest u/s.36(1)(iii) - nexus between borrowed funds and capital work in progress - HELD THAT:- On a perusal of the order of the Tribunal for the A.Y.2014-15 we notice that the Tribunal upheld the order of the Ld.CIT(A) in deleting the disallowance made u/s. 36(1)(iii) of the Act as the assessee had sufficient own funds in the form of share capital and reserves. For A.Y. 2010-11 the Ld.CIT(A) deleted the disallowance for the reason that the assessee has share capital and reserves much more than the capital work-in-progress and it is the finding of the Ld.CIT(A) that no nexus between borrowed funds and capital work-in-progress has been established by the Assessing Officer and therefore Ld.CIT(A) held that no part of interest can be disallowed. He also placed reliance on the decision of the Hon ble Bombay High Court in the case of CIT v. Reliance utilities Power Ltd., [ 2009 (1) TMI 4 - BOMBAY HIGH COURT ] and CIT v. HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT ] These findings of the Ld.CIT(A) could not be rebutted by the revenue with evidences. - Decided against revenue.

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• 2020 (12) TMI 768
  Unexplained cash credit u/s. 68 - addition in respect of the Share Capital and Share Premium - Identity of the Investor, Creditworthiness of the investor AND Genuineness of the transactions proved or not? - HELD THAT:- The assessee has furnished the address, PAN, Certificate of incorporation, MOA AOA of the subscribers who subscribe the shares. To prove the credit-worthiness the assessee has given the certificate source of fund, Balance sheet, Profit Loss Account and Return of income of share applicants. The investor companies have positive net worth and only invested 1.6% and 1.2% of their net worth. The assessee submitted Form of application of shares, Photocopy of the cheque receipt towards the share application, photo copy of the bank deposit slip reflecting the deposit of the above cheque, extract of Bank Statement of all subscribers duly highlighting the entries of share money and premium money given by them to the appellant company along with copy of board resolution, resolving the decision of investment into appellant company. To prove the genuineness of the transaction the assessee produced the confirmation, bank statement, financial of the lender. Nothing came into noticed that the transaction were found bogus. Retracted statement of Shri Rajesh Agarwal was not liable to be relied upon the unless corroborated by the sufficient evidence on record. Moreover no opportunity of being heard was given to the assessee - As relying on M/S. BINI BUILDERS PVT. LTD. VERSUS DCIT-CENTRAL RANGE-7 (3) , MUMBAI [ 2020 (3) TMI 595 - ITAT MUMBAI] issue decided in favour of assessee.

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• 2020 (12) TMI 767
  Bogus purchases - unverifiable purchases to the extent of 3% of value thereof as against 10% made by the ld. AO in the assessment - HELD THAT:- CIT(A) had considered the entire modus operandi of the assessee and had accepted the fact that the assessee had indeed made sales out of the disputed purchases and hence, it could be safely presumed that the assessee could have only made purchases from the grey market in order to have some saving in indirect taxes and incidental profits thereon. We find that the ld. CIT(A) had also placed reliance on Mercury International 2016 (8) TMI 1519 - ITAT MUMBAI] case wherein under identical facts and circumstances, this Tribunal had restricted the profit element embedded in the value of disputed purchases at 3%. We find that the ld. DR before us was not able to provide any other contrary decision before us. Hence, we do not find any infirmity in the order of the ld. CIT(A) and accordingly, the grounds raised by the revenue are dismissed.

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• 2020 (12) TMI 766
  TP Adjustment - comparable selection - exclusion of Excel Infoways Ltd. - HELD THAT:- As relying on M/S. ZENTA PVT. LTD., M/S. ACCENTURE SOLUTIONS PVT. LTD., (FORMERLY KNOWN AS ZENTA PVT. LTD.,) = TMI [ 2019 (9) TMI 1472 - ITAT MUMBAI] Excel Infoways Ltd., is to be excluded from the list of comparables and accordingly, no adjustment of arm s length price of the international transaction need to be made in the instant case as is evident from the chart submitted by the assessee hereinabove. Accordingly, part of the ground raised by the revenue with regard to exclusion of Excel Inforways Ltd., contested by the revenue is dismissed.

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• 2020 (12) TMI 765
  Delay in filing appeal - condonation delay filling against levying late filing fee under Section 234E demands were raised under Sections 200A and 154 - appeals have been filed belatedly before the learned CIT(A), and there is a substantial delay in filing of these appeals varying from 223 days to maximum of 927 days - HELD THAT:- It is very much known in law that when substantial justice is pitted against technicalities, then substantial justice must prevail. Similarly in the case of the company, M/s. Thirumurugan Plastics P. Ltd. [ 2019 (12) TMI 1424 - ITAT CHENNAI] in which the assessee was a Director, also there was delay in filing of these appeals on identical grounds, the Co-ordinate Bench of the Tribunal in that cases has held Revenue claimed to have served the impugned orders electronically, the assessee pleads that they were not brought to its notice and the Revenue has not sent any further communication till the date of recovery notice served on 04.03.2019, manually. Assessee was unaware of such orders. When there is a change from one system, say the manual system to the other system, say the electronic system, apart from relying the rules and regulations, the Revenue as an administrator of the Act must also guide the assessees, in enabling them to comply with the systemic changes in a reasonable manner. Atleast in those cases, like this case, where the demand made on the assessee is pending for long time and the assessee has not responded, the Revenue should also have used other mode of communication, mentioned in sub-section (1) to section 282. After condoning the delay, the issues had been restored to the file of learned CIT(A) for adjudication on merits.

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• Benami Property

• 2020 (12) TMI 764
  Benami transaction - Plaintiff entitled to get a declaration of right, title and interest of the suit land - Prohibition of the right to recover property held benami - suit barred by Benami Transaction (Prohibition) Act, 1988 - HELD THAT:- If the title is established in favour of the vendor and the vendor does not raise any objection as regards the execution of transfer, none can have the locu standi to challenge the validity of the deed of transfer [Exbt.3]. As such, the plaintiffs title cannot be questioned by the defendant and he is estopped from questioning the transfer in favour of the plaintiff. Moreover the pleadings relating to non-execution of the deed of transfer [Exbt.3] by the legal heirs of Hrisikesh Majumder have not been proved complying the requirement of Section 103 of the Evidence Act. Whether the finding of the appellate Court on the additional issues framed by the said Court suffers from perversity ? - From the discussion made above, it is evident that the finding of the first appellate court in respect of the additional issue as referred in the substantial No.1 is perverse. Having discussed as such, this court is of the view that the plaintiffs are entitled to get a declaration of right, title and interest of the suit land in his favour and he is also entitled to get a declaration in respect of possession of the suit land and accordingly, his possession over the suit land is confirmed. As consequence thereof, the plaintiff is entitled to a decree of perpetual injunction restraining the defendant or his man or agents from entering into the suit land and disturbing the peaceful possession of the plaintiff. As corollary, the impugned judgments and decrees are set aside. The judgment and decree of the trial court are restored. In the result, the appeals are allowed.

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• Customs

• 2020 (12) TMI 763
  Permission for withdrawal of petition - petitioner seeks permission to withdraw the writ petition, without prejudice to the right of the petitioner to avail statutory remedy against Ext.P2 order - compliance with the requirement of mandatory pre-deposit as envisaged under Section 129E of the Customs Act, 1962 - HELD THAT:- This writ petition is dismissed as withdrawn, without prejudice to the statutory remedy, if any, available to the petitioner to challenge Ext.P2 order.

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• Corporate Laws

• 2020 (12) TMI 762
  Direction to RoC to activate the DIN Numbers - filing of all the defaulted Annual Returns and Financial Statements of the Appellant Company before the RoC - Section 424 (3) of the Companies Act 2013 - HELD THAT:- It appears from the record that on 21.10.2020 notice was issued to the Registrar of Companies, Kerala for his report and the matter adjourned to 20.11.2020. It is reported that the notice to the Registrar of Companies was duly served. But ROC has neither filed report nor responded to the notice. Hence, this Tribunal proceeded to decide the matter, proving that the ROC has no objection in allowing the M.A. Activation of DIN of the Director - HELD THAT:- Having satisfied with the submissions made by the Appellant and following the decision in Mukut Pathak (supra), this Tribunal came to the conclusion that it would be just and proper to order reactivation of the Director Identification Number of the Directors, namely, Mr. Sidhik Ibrahimkunju and Mrs. Jiyasha Sidhik to enable the Applicant company with the provisions to file the Annual Returns and Financial Statements or other applications contemplated under the Companies Act, 2013. The RoC is directed to reactivate the DIN of Mr. Sidhik Ibrahimkunju and Mrs. Jiyasha Sidhik respectively, by collecting fine/ penalty, if any, for the lapse of the Directors - The Company is directed to file all its statutory document(s) along with prescribed fees/additional fee/fine as decided by Registrar of Companies within 30 days from the date on which the DIN of the Directors is reactivated - Application allowed.

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• 2020 (12) TMI 761
  Sanction of Scheme of Amalgamation - Sections 230 232 of the Companies Act, 2013 - HELD THAT:- There appears no impediment in sanctioning the present Scheme. Consequently, sanction is hereby granted to the Scheme under section 230 to 232 of the Companies Act, 2013. The Petitioners shall however remain bound to comply with the statutory requirements in accordance with law. If there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Tribunal to the scheme will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the Petitioners. The scheme is sanctioned - application allowed.

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• 2020 (12) TMI 760
  Seeking a stay of conduct of the Annual General Meetings of the R1 Company proposed to be held on 11.12.2020 - HELD THAT:- Upon hearing of the parties and on perusal of the materials on record, this Tribunal is of the opinion that the relief to stay the AGMs to be held on 11.12.2020 cannot be granted. However, the respondents are directed that the decisions/resolutions/business taken in the ensuing AGMs be kept in abeyance until further orders. It is made clear that respondents are at liberty to take recourse to avail the benefit of Companies Fresh Start Scheme 2020 if such a course is necessary. Application disposed off.

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• Insolvency & Bankruptcy

• 2020 (12) TMI 759
  Prayer to initiate criminal proceedings against Mr. Praful Prakash Bafna under Section 340 read with Section 195 of Cr. P.C. and Section 193 of the Penal Code - Forged and fabricated signature - Appellant submitted that the Interlocutory Applications were filed allegedly under the signature of Mr. Praful Kumar Bafna for the Financial Creditor and the Corporate Debtor found that the signatures were forged and fabricated - HELD THAT:- The Appellant/Corporate Debtor has not shown us that the Financial Creditor would have any advantage or benefit of putting false signatures. The prayer of I.A. No 51 of 2020 (The Appeal Page 118) claims that the I.A. Nos. 41 and 42 of 2020 are not signed by the authorized signatory Mr. Praful Prakash Bafna and prayer is to initiate criminal proceedings against Mr. Praful Prakash Bafna under Section 340 read with Section 195 of Cr. P.C. and Section 193 of the Penal Code. If Mr. Praful Prakash Bafna has not signed his prosecution is being sought. The Corporate Debtor appears to have bulldozed when without asking the Adjudicating Authority to pick and send the admitted and disputed signatures for report of Handwriting Expert, on its own it sent documents which were in its possession and then brandished the said Report filing I.A. No. 62 of 2020 asking the Adjudicating Authority to take it on record. What the conclusion of that Report can be seen from Paragraph 8 of I.A. No. 62 of 2020 (Annexure P8 Page 141 at 144). The Corporate Debtor claimed that the Report dated 2nd March, 2020 conclusively found that the signature of Mr. Praful Prakash Bafna in I.A. Nos. 41 and 42 of 2020 were not naturally executed but they must have traced/transplanted/copy-pasted . When the admitted and disputed signatures were not sent through the Adjudicating Authority, and Corporate Debtor sent copies of documents it had, such report could naturally be expected. Copy of the Report has not been placed before us. Even without going into the merit whether or not, the signatures are matching, the Appellant has not shown that the Financial Creditor or Mr. Praful Prakash Bafna the authorized Signatory had anything to gain by authorized signatory not signing. The contents of the I.As were false is also not the case. The Appellant/Corporate Debtor has not prima facie shown any intention or mensrea on the part of the Financial Creditor in this regard - No prima facie material is shown by Corporate Debtor that by Praful Bafna himself not signing, the Adjudicating Authority would entertain an erroneous opinion touching any point material to the result of the proceeding. (This is not to be taken as any finding whether or not he signed. We are only seeking material for opinion as required under Section 340 of Cr.P.C.) In the facts of the matter it does not appear to us that it is expedient in the Interest of Justice that an inquiry should be made under Section 340 of Cr. P.C. No such case was made out before the Adjudicating Authority and the Appellant has not convinced us that Interest of Justice required an inquiry to be held and so the order of Adjudicating Authority should be interfered with. The Appellant is right in claiming that the Adjudicating Authority could not have directed the Appellant to approach appropriate forum for redressal and that on this count it had jurisdiction under Section 340 of Cr. P.C. However Appellant fails to convince us that facts and circumstance of the matter required Adjudication Authority to form opinion that it is expedient in the interest of justice that an inquiry should be made into alleged offence. It appears to us that the observations made by the Adjudicating Authority regarding jurisdiction may have to be modified. The Order of the Adjudicating Authority, as not pressed, is maintained - Appeal disposed off.

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• 2020 (12) TMI 758
  Jurisdiction - power of Committee of Creditors to decided on Financial or Operational Creditor - Appellant has challenged the impugned Order on the ground that the Adjudicating Authority has erred in facts and law in holding that M/s BVN Traders is a Financial Creditor , which is mainly based on decision of the Committee of Creditors, though it was not empowered to decide that BVN Traders is a Financial or Operational Creditor. Whether the Committee of Creditors constituted under Section21 of the I B Code, 2016, could determine that M/s BVN Traders is a Financial or Operational Creditor? - Whether the Resolution Professional could reclassify the status of a creditor from Financial to Operational Creditor based on the expert opinion despite that the Adjudicating Authority had taken a contrary view? - HELD THAT:- The Order of the Adjudicating Authority that BVN Trader is a Financial Creditor is not totally based on the decision of the Committee of Creditors . The Adjudicating Authority has determined the status of BVN Traders as a Financial Creditor in view of provisions and the fact situation . It would have been ideal and rather expected that Adjudicating Authority should have recorded reasons also, instead of taking a short cut by taking the support of Resolution of CoC. This was perhaps the reason CoC appears to have got emboldened that it can take such decisions in favour or against its own constituents - It is essential to note that on the initiation of Appellant Mr Rajnish Rai the Resolution Professional and the Members of the Committee of Creditors , excluding Respondent No. 3 BVN Traders, made deliberate attempt to eliminate the name of BVN Traders from the Committee of Creditors. It also appears that the Claim of Respondent No. 3 BVN Trader was illegally rejected as Financial Creditor , so that they could pass the Resolution to withdraw the CIRP with the required percentage of voting share, i.e., 90%. Since Respondent No. 3, which had 30.9% voting share in the CoC, the Resolution for withdrawal u/s 12A could not have materialised, therefore in their effort to defeat the valuable rights of the Respondent No. 3 BVN Traders, the RP ignored the Order of the Adjudicating Authority dated 23rd January 2020 and was successful in his deliberate attempt to change the status of BVN Traders from Financial Creditor to the Operational Creditor and then eliminate its name from the Committee of Creditors . The IBBI Circular No. I.P./003/2018 dated 3rd January 2018 provides that an Insolvency Resolution Professional shall not outsource any of his duties and responsibilities under the Code - it appears that the Resolution Professional has failed to perform his obligation/duty to observe the Code, the Rules and Regulations as enumerated in the Code and CIRP Regulations while conducting CIRP for the reason of taking up such an Agenda of Meeting and leading to illegal Resolution of ousting the BVN Traders from the Committee of Creditors . The Committee of Creditors was not empowered to adjudicate the issue that has cropped up in the present case, i.e. M/s BVN Traders is a Financial or Operational Creditor. Such adjudication is beyond the scope of consideration of the Committee of Creditors. Further, the Resolution Professional erred to reclassifying the status of a creditor from Financial to Operational Creditor , based on the alleged expert opinion despite that the Adjudicating Authority took a contrary view. Whether the Order of the Adjudicating Authority in upholding that BVN Traders is a Financial Creditor based on the majority decision of Committee of Creditors is valid? - HELD THAT:- The Appellant has not disputed the amount due. In the instant Appeal, the Appellant is seeking a declaration that BVN Traders is not a Financial Creditors. As per Section 5(7) of the Code, only such Creditor could be the Financial Creditor of the Corporate Debtor to whom a financial debt is owed by the Corporate Debtor , and as per Section 5(8) of the Code, the critical requirement of the financial debt is disbursal against the Consideration for the time value of money, which included the events and modes of disbursement and enumerated in sub-clauses. In the present case, undisputedly Appellant s company has deposited its title deed of Plot No. Y of 7/130(1), Swaroop Nagar, Kanpur-208002 against the loan amount of Rs. 80,00,000/- @ 18% per annum. The record shows, the Appellant Company is a borrower, and the loan amount was directly disbursed to Appellant s Company for which the title deed was deposited with the Respondent No. 3. In the said transaction time value of money is unambiguously involved, and the Appellant Company s liability is regarding the debt owed by it - In the present case, Respondent No. 3 disbursed the debt against the Consideration for the time value of money. It is reiterated that the Appellant Company had raised the said amount from the Respondent No.3 to meet its working Capital Requirement. Hence the Respondent No. 3 is a Financial Creditor within the meaning of 5(7) and 5(8) of the Code. In the present context, it is clear that the expression disburse would refer to the fund transfer made by the Respondent No.3 to the Corporate Debtor for the particular purpose of funding, i.e. working capital. The expression disburse refers to money, which has been paid against consideration for the time value of money. In short, the disbursal must be money and must be against Consideration for the time value of money, meaning thereby, the fact that such money is now no longer with the lender, but is with the borrower, who then utilises the money for the working capital requirement or any other purpose of the company. Thus, it is clear that the Respondent No.3 disbursed money in the form of fund transfer made towards the purpose of working capital of funding. The term financial debt has been defined in section 5(8) of Code to mean a debt, along with interest, if any, which is disbursed against the consideration for the time value of money. An illustrative list of transactions that would fall under this definition has also been included - it can be safely concluded that to qualify as a Financial Creditor a basic element of disbursal to the Corporate Debtor, of amount against the Consideration of time value of money, needs to be found in the genesis of any debt being claimed as financial debt before it could be treated so, under Section 5(8) of the IBC . Similarly, the transaction involved in the present case meets the root ingredients/basic element of financial debt within the meaning of the Code. The Resolution taken in 8th CoC (Annexure A9), in Agenda Item 6, approving withdrawal under Section 12 A of IBC would also require to be ignored as it was taken after the illegal Resolution in Agenda Item 5 to eliminate BVN Traders and illegal reconstitution of CoC. During CIRP, the IRP is authorised to collate the claims, and based on that he is empowered to constitute the Committee of Creditors. We hold that the Resolution Professional may add to existing claims of claimants already received, or admit or reject further Claims and update list of Creditors. But after categorisation of a claim by the IRP/Resolution Professional we hold that they cannot change the status of a Creditor. For example, if the Resolution Professional has accepted a claim as a Financial Debt and Creditor as a Financial Creditor, then he cannot review or change that position in the name of updation of Claim. It is also to be clarified that while updating list of Claims the Resolution Professional, can accept or reject claims which are further received and update list - the decision of the Adjudicating Authority to treat BVN Traders as a Financial Creditor needs no interference. Appeal disposed off.

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• 2020 (12) TMI 757
  Exclusion of 68 days from initial period of 180 days of Corporate Insolvency Resolution Process - non-speaking order - HELD THAT:- The Adjudicating Authority has declined to exclude 167 days while reckoning the period of Corporate Insolvency Resolution Process by making an observation that the reasons stated are not plausible. The reasons assigned for seeking such exclusion and why the same did not prevail with the Adjudicating Authority have not been addressed. The impugned order to this extent can safely be termed to be a non-speaking order and cannot be supported. Judicial notice has been taken of the hardship caused, curbs on movement and normal business activities which is evident from order passed by the Hon ble Apex Court in suo moto proceedings. The prayer allowing exclusion of time w.e.f 20th March, 2020 to 2nd September, 2020 in reckoning of the ordinary Corporate Insolvency Resolution Process period viz. 180 days is directed - application allowed.

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• 2020 (12) TMI 756
  Permission to applicant to be impleaded as a party respondent in Applications - Section 60 (5) (a) (c) of the Insolvency Bankruptcy Code, 2016 - HELD THAT:- The applicant being an unsecured financial creditor, will be directly affected if any amount over and above what is actually payable is paid to the Workmen. They have further stated that the applicant has averred that the Respondent has admitted and entertained certain claims which were filed beyond the last date for submission of the claims. In this regard, the Respondent submitted that these amounts are admitted liability in the books of accounts maintained by the Corporate Debtor and hence the Liquidator is duty bound to accept the same in accordance with Regulation 19 (4) and Regulation 25. Despite the same, certain employees/workmen without knowing that their claims were already accepted as reflected in the books of accounts had also obtained orders of this Tribunal to submit the same before the Respondent - The Respondent liquidator stated that he has executed his duties as per provisions of law and the present application deserves to be adjudicated as per judicial discretion of this Tribunal. Maintainability of Intervention Application filed by Respondent 1 - Section 60 (5) (a) of the Insolvency Bankruptcy Code, 2016 read with Rule 11 and 32 of the NCLT Rules - HELD THAT:- It is seen that there is a collusion by the Liquidator with the applicant M/s Kopran Limited in filing the present M.A in order to defeat the rightful claims of the ex-workers of their legitimate dues. This will be clear from the counter filed by him in the present M.A. The Liquidator can make the legitimate payment of the applicant Kopran Limited but that should not be at the costs of the workmen of Excel Glasses Limited - The application is liable to be dismissed as not maintainable. Applications disposed off.

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• 2020 (12) TMI 755
  Payment of licence fees to the Applicants for the CIRP period as CIRP costs - Individual claims of Applicant No.1 and Applicant No. 2 as financial creditors - whether the Applicants are entitled to payment of license fee, for the period between 15.01.2018 and 23.01.2019 and the quantum of the same on the basis of the IT returns filed before passing of the order? - HELD THAT:- The contention of the applicants that it was impossible for them, to file the ITR by anticipating the requirement stated in the Hon ble NCLAT order and that the findings of the Appellate Tribunal cannot be held against the applicants as they have filed the ITRs within the last dates - that part of the order of Hon ble NCLAT has to be implemented by the respondents. There is no averment in the reply of any of the Respondents that the Hon ble NCLAT rejected the claim of the applicants regarding the payment of Licence fee. The only contention is that the applicants have not furnished the Income Tax Returns, prior to the order of Hon ble NCLAT. Due to Covid-19 Pandemic, the time for submission of IT Return was extended and the applicants have filed the IT Returns and produced the proof of submission. The contention of the respondents on this core is to be rejected partly. It is found from the chart submitted by the Respondent No.2- Resolution Professional that no amount is payable to Applicant No.1/ MIPL in respect of the factory premises since it was not used for CIRP as a going concern . This statement has not been rebutted by the applicants in their rejoinder. Therefore, this Tribunal is of the view that the respondent- Resolution Applicant is bound only to pay the licence fee claimed by the Applicant No.2. Since the 2nd Applicant- M/s Grove Limited have not refunded the security deposit of Rs. 50 Lakhs, the 3rd respondent is bound to pay the licence fee deducting the amounts of Rs. 50 Lakhs with the interest, if any. Application allowed in part.

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• Service Tax

• 2020 (12) TMI 754
  Business auxiliary service - commission received by the appellant for the services rendered to foreign companies - period involved is 2007-08 to 2010-11 - HELD THAT:- The commission amount was received by the appellant from foreign principals in convertible foreign exchange for which debit notes and the corresponding certificates of foreign inward remittance issued by the banks were submitted by the appellant before the Adjudicating Authority. The debit note for commission and the corresponding FIRC have been enclosed from pages 108 to 144 of the paper-book. It is, therefore, apparent that the appellant had received commission in convertible foreign exchange for the service rendered outside India to foreign companies. The appellant promoted the business of such foreign companies in India and as a consideration for this service, the appellant received commission from the foreign companies in convertible foreign exchange. The appellant has also described the manner in which it had promoted the business of such foreign companies from which it is clear that the appellant supports such foreign companies to procure orders in India. Such service is provided from India and used outside India. The service rendered by the appellant would, therefore, satisfy the twin conditions set out in rule 3(2) of the 2005 Rules as has also been clarified by the Circular dated February 24, 2009. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2020 (12) TMI 753
  Refund of unutilized CENVAT Credit - surrender of registration under Rule 5 of the Cenvat Credit Rules, 2004 - rejection on the ground that neither the refund claim is covered under Section 11B of the Central Excise Act, 1944 nor under Rule 5 of the Cenvat Credit Rules, 2004 - interest on delayed refund - HELD THAT:- This Tribunal in the case of M/s Shree Krishna Paper Mills Ind. Ltd. [ 2018 (4) TMI 1155 - CESTAT CHANDIGARH ] has observed that although this Tribunal has denied refund claim in the case of Phoenix Inds Ltd [ 2014 (10) TMI 677 - CESTAT MUMBAI ] but the Regional Bench at Chandigarh is bound by the decision of Hon ble High Court of Punjab Haryana; therefore, relying on the decision of Rama Industries Ltd [ 2009 (2) TMI 136 - PUNJAB AND HARYANA HIGH COURT ] , it is held that the appellant is entitled for refund claim of unutilized cenvat credit lying in their cenvat credit account at the time of surrender of the registration under Rule 5 of Cenvat Credit Rules, 2004. Grant of interest on delayed refund after three months of filing of the refund claim - HELD THAT:- In the case in hand, the claim of interest by the appellant during the course of arguments is a consequential relief, as it has been held that the appellant is entitled for refund, then they are entitled for interest also after three months of filing of the refund claim. It is a fact on record that at the time of filing of refund claim before the adjudicating authority, the appellant was not aware that the adjudicating authority will not sanction their refund claim within three months of the filing of the same. Therefore, claim of interest on delayed refund could not be raised before the adjudicating authority - Admittedly, it has been held that it is a consequential relief, therefore, the appellant is entitled for interest after three months from the date of filing refund claim. The issue of claim of interest is a legal issue and can be raised at this stage, as the appellant has succeed on merits that they are entitled for refund claim, therefore, the adjudicating authority shall entertain the claim of interest of the appellant after three months from the date of filing refund claim - Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2020 (12) TMI 784
  Legality and validity of the impugned prohibitory order - validity of Attachment Order - petitioner is a non-executive director and M/s. Twilight Mercantiles Limited is a public limited company - petitioner contended that such prohibitory order, demand notice and attachment order cannot be issued against a non-executive director of a public limited company - Section 44(6) of the MVAT Act - HELD THAT:- The present case is squarely covered by our decision in Shri. Girdhari Lal Lath [ 2020 (10) TMI 202 - BOMBAY HIGH COURT ] where it was held that It is an admitted position, at least no dispute has been raised, that M/s. Birla Electricals Limited is a public company. If that be so, the fact that Petitioner was a director of the said company for the relevant period, though in a nonexecutive character and stated to have resigned, would have no bearing on fastening of liability on the Petitioner for the alleged default of M/s. Birla Electricals Limited. In such circumstances, attachment of the bank account of the Petitioner does not appear to be justified and is without any legal sanction. The impugned prohibitory order dated 12.02.2018, the demand notice dated 18.12.2018 as well as the attachment order dated 10.06.2019 cannot be sustained qua the petitioner - Petition allowed.

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• 2020 (12) TMI 752
  Violation of principles of natural justice - Petitioner contends that it had suffered serious prejudice on account of such violation of principles of natural justice and so the impugned assessment order by the 1st respondent and the consequential garnishee order issued by the 1st respondent to the 2nd respondent require to be set aside - HELD THAT:- It is obvious that there has been a violation of principles of natural justice and the petitioner had suffered grave prejudice on account of non-service of the pre-assessment show-cause notice on it by 1st respondent. The matter is remitted back to 1st respondent for fresh consideration - the 1st respondent shall serve a show-cause notice on the petitioner in accordance with rule 64 of the Telangana VAT Rules indicating the proposed tax and the turnover on which it is sought to be imposed - Petition allowed by way of remand.

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• 2020 (12) TMI 751
  Remission of amount of tax deducted at source from the bills of the petitioner under the repealed Bihar Value Added Tax Act, 2005 - refund of amount of tax deducted source from the bills of the petitioner after the coming into force of the Act with appropriate interest thereon - restoration of registration cancelled under the Act for failure to pay the amount of tax under the Act for the period 01.07.2017 to 31.03.2018 - HELD THAT:- The issue can best be resolved with the petitioner appearing before the respondent no. 2, who shall, after ascertaining the information from all departments/sources, ensure passing of appropriate directions for adjustment of the tax deducted under various Statutes and refund of the amount, due and admissible, in accordance with law. Such deduction, adjustment and refund has to be in terms of the Bihar Value Added Tax Act/Bihar Goods and Service Tax Act. The petitioner are directed to appear before the respondent no. 2, namely, Road Construction Department through its Secretary having its office at Vishweshwaraiya Bhawan, Bailey Road, Patna on 28th December, 2020 at 10:00 A.M. - Petition stands disposed of.

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• Wealth tax

• 2020 (12) TMI 750
  Wealth tax assessment - property which is subject to wealth tax by the AO is not residential or commercial property and it is an industrial property not liable for wealth tax - rental income from the said property was treated as income from house property. According to the assessee, it is not an asset liable for wealth tax - Assessing Officer treated it as an asset liable for wealth tax - HELD THAT:- The provisions of the Act are clear and categoric that all immovable assets falling within the definitions are to be included as the wealth of the assessee unless the same are excluded by the exclusion clause. On reconstruction of the definition clause, after amendment w.e.f 1st April, 1997, commercial properties are to be included in the net wealth of the assessee and exemption is being allowed to such house of the assessee which is occupied for carrying out his business or profession by assessee himself, as it is provided in the sub clause (3) to s. 2(ea)(i) of the Act, business or profession carried on by him. The portion rented out by the assessee against which compensation has been received and assessed as business income is the portion in which tenant of the assessee is carrying out his business or profession. Mere assessment of the rent or compensation under the head business income does not commensurate with the assessee carrying on his business or profession in the said property. In the facts of the present case, the assessee is not carrying on the business of letting out properties. Accordingly, the portion of property which is occupied by the tenant is to be included as an asset within the definition provided in section 2(ea)(i) of the Act at the relevant time. If an asset is used for the purpose of business or profession then it is not an asset for the purpose of taxability under WT Act. Hon ble Bombay High Court in the case of Parekh Traders [ 1983 (9) TMI 39 - BOMBAY HIGH COURT] wherein it was held that property owned by the assessee subject to letting year to year, income on which taxed as income from house property so as to take advantage of deduction u/s.24 of the Act and treating the same property as business asset to claim exemption u/s.2(ea) of W T Act. In the present case also the assessee s income from letting out the property is assessed as income from house property and the assessee has availed deduction u/s.24 of the Act and for the purpose of wealth tax it cannot be considered as business asset so as to exempt from wealth tax. In our opinion, it is rightly to be considered as an asset liable for wealth tax. Value of industrial land to be reduced from value of the factory building so as to ascertain the net asset value - The assessee in this case not demonstrated that industrial land is not part of the factory building let out to the tenant. Being so, it should be considered as part of the factory building and to be included in the asset liable for wealth tax. Notional interest computed by AO on the deposit received by the assessee to be excluded from net maintainable rent - It is appropriate to consider the annual value considered by the Assessing Officer as per Section 23 of the Income Tax Act for the purpose of income tax assessment so as to determine the net maintainable rent for the purpose of wealth tax. The Assessing Officer in the same assessment year cannot consider one rent for determining the annual value for the purpose of Income Tax and different rent for wealth tax purpose. Accordingly, we direct the Assessing Officer to adopt the same annual value as per Section 23 of IT Act for determining the net maintainable rent. Accordingly, he determined the gross maintainable rent and correspondingly he shall give deduction towards municipal tax and G.M.R. It is ordered accordingly.

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• Indian Laws

• 2020 (12) TMI 749
  Revocation of in-principle agreement for one-time settlement - whether the said RBI circulars and the RBI policy guidelines for COVID-19 would apply to the Petitioners and whether the Petitioner, can in law, pray that the revocation of the OTS proposal be quashed and IL FS be directed to abide by the OTS proposal? HELD THAT:- Despite the Petitioners having sought three months time in the writ petition for finalizing the OTS proposal and raising of Rs. 100 crores, even the grants of six months time has proved to be insufficient. The present case does not relate to postponement of payment of instalments of loans or where any accounts would be classified as NPAs, for defaults made during the COVID-19 pandemic. While there is no doubt that the pandemic did cause disruption to normal business operations and genuine borrowers ought to be given the benefit of the RBI circulars and policy guidelines, the Petitioners do not fall in that category. The defaults by the Petitioners date back to 2018. The defaults continued over a period of two years prior to the outbreak of the pandemic itself. Such cases cannot be those which would be entitled to benefits under the policies of the RBI which are meant to give some relief during the pandemic. Moreover, in the present case, despite repeated opportunities having been given by the Division Bench at the stage when the DRT proceedings were going on and even after the filing of the present writ petition, the same have been of no avail - Respondent is permitted to proceed against the Petitioners, in accordance with law - Petition dismissed.

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