TMI Tax Updates - e-Newsletter
December 5, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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GST:
Validity of assessment order u/s 73 of GST Act - Prescribe procedure under Rule 142 - proper officer to assess the case of petitioner - When the same Officer is authorized to assess the case of the dealer under IGST and SGST, we feel that there is nothing wrong in single assessment being made unless grave prejudice is show, which is not, in the case on hand. In-fact, the prejudice does not even appear to be inherent also in passing the single assessment order. - HC
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GST:
Recovery of dues - Attachment of property - The impugned notice was issued on 06.01.2022. There is no gainsaying that no proceedings were pending. The summons under section 70(1) of the CGST Act and GGST Act came to be issued only on 21.01.2022. The very invocation of powers and issuance of order dated 06.01.2022 was therefore in absence of any proceedings initiated. - The attachment orders issued by the respondent is set aside. - HC
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GST:
Rate of GST - sale of rejected paddy seed - “Rejected paddy / Damaged paddy” per se supplied by the applicant, procured by them although merits classification under chapter 100610 subject to adherence of the conditions as stipulated under chapter note and section note discussed supra, would be leviable to tax @2.5% CGST + 2.5% CGGST. - AAR
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GST:
Exemption from GST - Flavoured Milk for Tea Preparation - pasteurized milk - Since, the product of the applicant, classifiable under Chapter Sub-Heading No. 0401 20 00, is pasteurized milk which is neither concentrated nor contains added sugar or other sweetening material and it is not Ultra High Temperature Milk, as declared by the applicant, it is eligible for the benefit of exemption - AAR
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GST:
Government Entity or not - Damodar Valley Corporation fulfils the criterion laid down for "Government entity" as per Notification No. 31/2017 -Central Tax (Rate)/32/2017- Central Tax (Rate) both dated 13.10.2017 since it has been set up by an Act of Parliament with 100% control to carry out the function entrusted by the Government. - AAR
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Income Tax:
Waiver of interest u/s 220(2A) - Levy of interest is mandatory - Merely raising the dispute before any authority cannot be a ground not to levy the interest and/or waiver of interest u/s 220(2A). Otherwise each and every assessee may raise a dispute and thereafter may contend that as the assessee was bona fidely litigating and therefore no interest shall be leviable. - SC
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Income Tax:
Denying exemption u/s. 54B - Assessee being ignorant of the same as entitled to claim compensation derived from the Government of Maharashtra of compulsory acquisition as non-taxable, offered the capital gains to tax by claiming deduction u/s. 54B of the Act. - the authorities under the Act are required to assist the assessee in the assessment proceedings by giving effect on the correct position of law, even if the assessee makes wrong claim. - AT
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Income Tax:
Shipping income for voyages performed by the vessels u/s 172 - DTAA between India and Singapore - shipping income sourced in Singapore and assessable to tax at Singapore on accruing and not on remittances basis, for the Year of Assessment 2016 and 2017. It is further clarified that a physical flow of funds is therefore not relevant and the chartered income is subject to tax in Singapore on remittances basis. - AT
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Income Tax:
Addition u/s 68 - Consistently escaping from appearing/producing the documents and alleged parties before the ld. AO and the appellate authority(ld.CIT-A) indicates that the assessee has no plausible explanation to explain the source of alleged sum of share capital and security premium - Additions confirmed - AT
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Income Tax:
Revision u/s 263 - Income from other sources - AO failed to examine the applicability of s. 56(2)(vii)(b) - Fair Market Value (FMV) (guideline value under Stamp Act) of the property - . It is open for the revisionary authority to examine the same himself proceedings or direct the assessing authority to do so. However, once he adopts the latter course, it is not for us to interfere with the exercise of his discretionary power. - AT
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Income Tax:
Addition u/s 56(2)(vii b) - value the equity shares using DCF Method - the Lower Authorities ought to have considered the valuation report of the Chartered Accountant submitted by the assessee and should have verified as to whether the said valuation report is inconformity with Section 56(2) (viib) of the Act read with Rule 11UA (2) of the Income Tax Rules or not and accordingly shoud have decided the matter by following the principal of consistency. - AT
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Income Tax:
Depreciation on foreign exchange fluctuation loss - foreign currency term loan availed for purchase of windmill - since the assessee has capitalized and claimed depreciation in spread over years and assessments have become final and in this year, the assessee has made claim of depreciation @ 80% on the loan on account of foreign exchange fluctuation loss relating to foreign currency term loan, which was availed for the purchase of this windmill and capitalized, hence we are of the view that the assessee is entitled for claim of depreciation and we allow the same. - AT
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Income Tax:
Revision u/s 263 - where there is no addition on account of unaccounted sales and the resultant additional net profit, then the question of alleged capital employed to carry out such alleged unaccounted sales and turnover as per the order of the Ld. Pr. CIT doesn’t have any legal basis and the same deserve to be set-aside. - AT
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Customs:
Classification of imported goods - Oil contained in the Bunker tanks in Engine Room of Vessel imported for breaking up, are associated and connected with the machinery and engine of the Ship and are regarded as forming integral part of the Vessel and therefore classifiable along with the Vessel under CTH 8900 and cannot be assessed to duty independently of the vessel under CTH 27.10. - AT
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Indian Laws:
Dishonor of cheque - rebuttal of presumption - Only lodging such a complaint of taking such cheque by force or threat is not sufficient enough to rebut presumption under Section 139 of N.I. Act specifically when the accused admits her signature on the cheque.- HC
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IBC:
Cost of CIRP / Liquidation - Liability of operational creditors - Appellants are small suppliers and they don’t want to be burdened with additional liability as their business is in a very bad shape and they have lost already a crore plus. - Prayer accepted - Let Liquidation be continued and let amount be realized during Liquidation and be distributed in accordance with section 53 of the Code. - AT
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Central Excise:
Interest on delayed refund - seizure of cash / currency during search - The Commissioner (Appeals) has committed an error while holding that since there is no provision to grant interest on the seized currency notes while refunding the said currency, the interest from the date of seizure cannot be granted - appellant is held entitled for refund of interest on the principle amount at the rate of 12% from the date of its seizure. - AT
Articles
News
Case Laws:
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GST
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2022 (12) TMI 125
Validity of assessment order u/s 73 of GST Act - Prescribe procedure under Rule 142 - proper officer to assess the case of petitioner - tax periods June, 2017 to September, 2019 - supply liable to tax under the state GST or IGST - HELD THAT:- A perusal of Form GST INS-01 coupled with Rule 139 (1) would show that, the Officer to whom the authorization is given in Form GST-1S can only inspect and search the business records and also seize the same in terms of Rule 139. But, here is a case where the Officer to whom the authorization was given, is also the Officer, who has been declared as a “Proper Officer” in terms of Section 73 of the CGST Act, for proceeding under the provisions of Sections 73 and 74 of the Act. Further, the Act does not anywhere contemplate an authorization from higher authority for assessing the case of a dealer, falling within the territorial jurisdiction of the Officer. In view of the Notification issued by the Chief Commissioner and as held earlier, the first Respondent is the Proper Officer to proceed against the dealer under Sections 73 and 74 of the Act, more so, when the dealer falls within his territorial jurisdiction - the argument that the first Respondent could not have passed the Assessment Order basing on the said authorization, though appeared to be correct at the first blush, but on a close perusal of the record, coupled with the Notification given, we hold that there is no illegality in first Respondent assessing the case of the Petitioner.
Whether the procedure followed by the authorities with regard to passing of the Order under Section 73 of the CGST Act read with Section 20 of the IGST Act is correct? - HELD THAT:- Under Rule 142, the Proper Officer shall serve along with the notice issued under section 52 or section 73 or section 74 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130, a summary thereof electronically in FORM GST DRC-01. 30) Rule 142 (1A), as it stands today, state that the Proper Officer “may”, [which came into effect from 15.10.2020], before service of notice to the person chargeable with tax, interest and penalty, under sub-section (1) of Section 73 or sub-section (1) of Section 74, as the case may be, communicate the details of any tax, interest and penalty as ascertained by the said officer, in Part A of FORM GST DRC- 01A.
Whether intimation under Sub-section (5) of Section 73 and sub-section (5) of Section 74, by issuing notice in FORM GST DRC-01A should be followed? - HELD THAT:- In the instant case, as seen from the record, authorization to inspect and search in Form GST INS01 is dated 20.11.2019, and the business premises was searched on 27.11.2019 by the first Respondent. Notice for production of records was issued on 27.11.2019 and the same were submitted by the Petitioner on 21.01.2020 - the entire process of issuing authorization, submission of documents and books of accounts etc., were prior to the amendment of Rule 1A i.e., 15.10.2020, meaning thereby, that the Proper Officer “shall”, before service of notice under Sub-section 1 of Section 73 or 74, indicate the details of tax, interest and penalty in Form GST DRC-01A.
Whether such Forms were issued? - HELD THAT:- After following the other mandatory requirements, the impugned Order came to be passed on 05.05.2022. Ergo, it is very much clear that, the procedure, as required under the Act, namely, issuance of Form GST DRC-01A, followed by a reply in Form GST DRC- 06, as contemplated under the Act, have been followed.
The Assessment Order makes it very much clear that, the Petitioner was given an opportunity to file documentary evidence i.e., work orders, Form VAT 250 [Option to pay at composition under AP VAT 205), VAT-200 returns, filed along with RA bills VAT-501 and 501A certificates filed with A.P. and Telangana. Also GSTR-3B and GSTR-1 reports and details of invoice number, date and period of month which was reported to the respective States to be made available, on or before 15.11.2011, failing which the turnovers, sales/service relating to GST period, attracts levy of tax under GST Act, 2017.
Whether a single Assessment Order can be passed for IGST, SGST and CGST? - HELD THAT:- It is to be noted that, except stating that single Assessment Order could not have been passed, no provision under law debarring the Authority from following such procedure has been placed on record. Further, the prejudice that is caused in passing single Assessment Order is also not shown. Apart from that, neither IGST nor CGST Act, anywhere prohibit making a single assessment under both the enactments. When the same Officer is authorized to assess the case of the dealer under IGST and SGST, we feel that there is nothing wrong in single assessment being made unless grave prejudice is show, which is not, in the case on hand. In-fact, the prejudice does not even appear to be inherent also in passing the single assessment order.
This issue namely as to whether the turnovers falls outside the purview of Section 7 of the IGST and, as such, no tax under Section 5 of IGST can be levied by the first Respondent herein is a factual aspect, for which, this Court under Article 226 of the Constitution of India, cannot embark on investigating the same, more so, when a remedy of Appeal is available to the Petitioner. Hence, the argument that the Assessment Order is hit by Article 286 of the Constitution of India, cannot be gone into and answered in this Writ Petition.
There are no merit in the Writ Petition. Accordingly, the Writ Petition is dismissed.
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2022 (12) TMI 124
Seeking grant of bail - illegal gratification - recovery from possession of accused or not - non-service of any Notice under section 41A Cr.P.C. - HELD THAT:- Having regards to the nature of accusation and the punishment prescribed for the same, as well as the submission of learned Advocates of both sides, more specially the period of detention, and further keeping in mind the dictum of Hon’ble Supreme Court in Satender Kumar Antil [2022 (8) TMI 152 - SUPREME COURT], I am of the considered opinion that further custodial detention of the accused seems to be unwarranted herein this case, and it is a fit case where the privilege of bail can be extended to the accused.
Thus, it is provided that on furnishing a bond of Rs. 1,00,000/ (Rupees one lac) with two sureties of like amount, to the satisfaction of learned Special Judge, CBI, Assam, Chandmari, the accused be enlarged on bail - application disposed off.
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2022 (12) TMI 122
Classification of goods - rate of GST - sale of rejected paddy seed - fit for human consumption or could be used for Industrial usage, Cattle feed production, Manure production etc. - HELD THAT:- The goods under question would merit classification under a heading only if the conditions as stipulated are adhered to. The rules of interpretation for classification, section notes and chapter notes as specified under Customs Tariff Act 1975 are applicable for classification of the impugned goods. Any additional usage / functionality would disentitle the impugned goods from getting classified under any heading. Needless to mention here that, besides this the technical information and parameters of the impugned goods intended to be traded by the applicant consequent upon its receipt from the supplier, its intended use downstream is also of much relevance for arriving at the appropriate classification of the same.
Purely based on the description of the goods mentioned in the tender / agreement document with Chhattisgarh State Cooperative Marketing Federation i.e., rejected paddy / damaged paddy (not fit for human consumption) would merit classification under chapter heading 1006 10, subject to stipulations and conditions as mentioned in the Section note and chapter note. Any further classification i.e., whether the rejected paddy/damaged paddy is of seed quality or other is not possible in absence of further description or technical information or parameters of the impugned goods.
Applicable tax rate on such goods - HELD THAT:- There is no doubt that the same depends upon the classification of the goods in question as discussed above and the effective rates of such goods are specified in schedules appended to Notification no. 01/2017-CT(Rate) dated 28.6.2017 as amended and subject to the adherence of stipulations mentioned therein - the applicable rate of tax on all goods classifiable under chapter 10 i.e., cereals is 2.5% CGST 2.5%SGST, in terms of entry no. 45 to 59 (except sr. no. 57) to Schedule-I to Notification no. 01/2017-CT(Rate) dated 28.6.2017 as amended vide Notification No. 6/2022-Central Tax (Rate)New Delhi, the 13th July 2022, effective from 18.7.2022.
In view of the section 103 of CGST Act, 2017, the ruling given IN RE: M/S. SAM OVERSEAS [2019 (3) TMI 1954 - APPELLATE AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND] would be binding only on the relevant applicant and on the concerned officer or the jurisdictional officer.
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2022 (12) TMI 123
Recovery of dues - Attachment of property - Section 83 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- The pendency of the proceedings is sine qua non for exercise of powers of provisional attachment. While earlier section 83 could be invoked only during pendency of certain proceedings, now it can be invoked "after initiating proceedings under the Chapters mentioned therein". The fundamental requirement remains valid that there must be proceeding pending before the section could be invoked and provisional attachment could be acted upon.
The impugned notice was issued on 06.01.2022. There is no gainsaying that no proceedings were pending. The summons under section 70(1) of the CGST Act and GGST Act came to be issued only on 21.01.2022. The very invocation of powers and issuance of order dated 06.01.2022 was therefore in absence of any proceedings initiated. The powers under section 83 could not have been exercised. The impugned order stands illegal when it seeks to provisionally attach the bank account of the petitioner. It is only on this ground that the impugned Order is liable to be set aside.
The attachment order dated 6.1.2022 issued by the respondent no.3 is set aside. The respondent authorities may continue to proceed further pursuant to the summons dated 21.01.2022 and are at liberty to consider imposing the provisional attachment under section 83 of the CGST Act in accordance with law - Petition allowed in part.
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2022 (12) TMI 121
Classification of goods - rate of tax - Exemption from GST - Flavoured Milk for Tea Preparation - pasteurized milk - whether flavoured milk for Tea preparation can be considered a beverage containing milk? - HELD THAT:- In common parlance, a beverage is (chiefly in commercial use) a drink other than water, It is a liquid for drinking especially such liquid other than water (as tea, milk, fruit juice beer) usually prepared (as by flavouring, heating, admixing) before being consumed. The Instant Product, “flavoured milk for Tea Preparation” can't be consumed instantly and it does not contains any additives like sugar or sweeteners for direct consumption.
It is moreover, a 'preparation' made as per the description given by the applicant in the flow chart submitted by them. The applicant's product was found to be “Tea Milk” rather than 'Flavoured Milk for Tea Preparation' from which Tea shall be prepared. The final product Tea can be said to be a beverage but not the raw material i.e. “Tea Milk”.
The product of the applicant is appropriately classifiable under Chapter 04 under heading 0401 20 00.
Rate of GST - HELD THAT:- Since, the product of the applicant, classifiable under Chapter Sub-Heading No. 0401 20 00, is pasteurized milk which is neither concentrated nor contains added sugar or other sweetening material and it is not Ultra High Temperature Milk, as declared by the applicant, it is eligible for the benefits under Notification No. 2/2017-Central Tax (Rate) dated 28-06-2017.
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2022 (12) TMI 120
Government Entity or not - Damodar Valley Corporation - applicability of Notification No. 11/2017- Central Tax (Rate), dated the 28th June, 2017 [as amended by Notification No. 31/2017-Central Tax (Rate) dated 13.10.2017] and Notification No. 12/2017-Central Tax (Rate), dated the 28th June, 2017 [as amended by Notification No. 32/2017-Central Tax (Rate) dated 13.10.2017 - HELD THAT:- The applicant is registered under Goods and Services Pax ('GST') Act, 2017. As per their submission they are engaged in 3 major activities namely generation, transmission and distribution of electricity/ flood control and irrigation, and some connected activities like soil conservation, afforestation etc.
The term Government entity as it has been defined in the aforesaid notifications evidently denotes that in order to qualify for a Government Entity, the applicant must have been set up by an Act of Parliament or by an Act of State Legislature or it must have been established by any of the Governments i.e. either by the Union Government or by the State Government with 90 percent or more participation by way of equity or control. Further, the applicant is to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority.
Damodar Valley Corporation fulfils the criterion laid down for "Government entity" as per Notification No. 31/2017 -Central Tax (Rate)/32/2017- Central Tax (Rate) both dated 13.10.2017 since it has been set up by an Act of Parliament with 100% control to carry out the function entrusted by the Government.
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Income Tax
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2022 (12) TMI 114
Denying exemption u/s. 54B - compensation derived from the Government of Maharashtra of compulsory acquisition as non-taxable, offered the capital gains - AO opined that land belong to the assessee is barren land as per 7/12 extract and the finding of CIT(A) that the said land is within 8 K.M. from the Municipal area of Jalna falling u/s. 2(14)(iii)(b) of the Act - HELD THAT:- In the present case, the assessee shown capital gain and claimed deduction u/s. 54B of the Act, in my opinion, is a wrong claim, denial of the same for violation of provisions u/s. 54B of the Act is misconceived. As noted earlier, the assessee fulfilled all the conditions contemplated in clause (i) to (iv) of sub-section (37) of section 10 of the Act, but however, ignorant of the same as entitled to claim compensation derived from the Government of Maharashtra of compulsory acquisition as non-taxable, offered the capital gains to tax by claiming deduction u/s. 54B of the Act.
As held by the Hon’ble High Court of Bombay [2008 (12) TMI 88 - BOMBAY HIGH COURT]that the authorities under the Act are required to assist the assessee in the assessment proceedings by giving effect on the correct position of law, even if the assessee makes wrong claim. Therefore, the compensation derived from the Government of Maharashtra on the compulsory acquisition of assessee’s land, the assessee is entitled to claim the same as exempted u/s. 10(37) of the Act. Thus, the order of CIT(A) in confirming the view of AO in denying the deduction u/s. 54B of the Act is not justified and the addition made thereon is deleted. Thus, the grounds raised by the assessee are allowed.
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2022 (12) TMI 113
Correct head of income - gain on sale of shares - short term capital gain or business income of the assessee - frequency of transactions and the period of holding - HELD THAT:- The only basis on which the ld. CIT(A) has confirmed the action of the Assessing Officer in treating the STCG as business income is the frequency of transactions and the period of holding which in our opinion is not the determinating factor to decide such issue. We have also examined the balance sheet filed by the assessee for the year and observe that the two portfolios maintained by the assessee were clearly mentioned separately, one under the head stock-in-trade and the other under the head “current investments”. As examined the details of the shares held by the assessee as investment and stock-in-trade. During the year, we do not find any change of facts and circumstances over the preceding or succeeding financial years and, therefore, in our considered opinion/view, the revenue cannot be allowed to disturb the position which has been accepted by the revenue in the case of the assessee in the earlier and subsequent years.
Thus respectfully following the decision of Radhasoami Satsang [1991 (11) TMI 2 - SUPREME COURT] we set aside the order of the ld. CIT(A) and direct the Assessing Officer to treat the sum as Short Term Capital Gain - Appeal of the assessee is allowed.
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2022 (12) TMI 112
Income deemed to accrue or arise in India - Shipping income for voyages performed by the vessels u/s 172 - DTAA between India and Singapore - freight income earned from the voyage performed - qualify for tax exemption in India - As submitted freight income was not directly remitted to Singapore and the freight income was never subjected to tax in Singapore - HELD THAT:- IRAS Authority have stated that the assessee company derives shipping income (charter income) from third party from export voyages from Indian ports. The assessee company would report the chartered income in its Singapore Tax Return for the years of Assessment 2017 and 2018. It is clarified that Article 24(1) of India-Singapore DTAA is not applicable to the charter income derived by the assessee on the voyages from Indian ports. For the reason that the income, if accruing in or derived from a business carried on in Singapore. The chartered income is, therefore, shipping income sourced in Singapore and assessable to tax at Singapore on accruing and not on remittances basis, for the Year of Assessment 2016 and 2017. It is further clarified that a physical flow of funds is therefore not relevant and the chartered income is subject to tax in Singapore on remittances basis.
As clarified that Article 24(1) does not apply to the shipping income received by a Singapore Shipping Enterprises from Indian customers and the shipping income is taxable in Singapore, on an arising basis when the income is earned by the shipping enterprise regardless of whether the shipping income is received in or remitted to Singapore. Since Article 24(1) is not applicable, the provisions of Article 8(1) should apply without any limitation. As such the shipping profits derived by a Singapore resident shipping enterprise from the operation of ships in international traffic shall be taxable only in Singapore in accordance with Article 8(1) and the same does not confer the Indian Authorities to the right to tax such profits.
We find this view has been followed by the Chennai Benches of the Tribunal in M/s. Bengal Tiger Line Pte. Ltd. [2020 (11) TMI 567 - ITAT CHENNAI]
We held that the Assessing Officer and Ld. DRP was not justified in denying the benefit of Article 8 by invoking the limitation of Article 24 between India and Singapore DTAA following Jurisdictional High Court judgment in M.T. Maersk Mikage v. DIT (International Taxation) ([2016 (9) TMI 19 - GUJARAT HIGH COURT] We are therefore of the considered opinion that the exercise under taken by the Assessing Officer and the Ld. DRP in co-relating the remittances and denying the certificate issued by the Singapore Tax Authorities is not proper and both the Assessing Officer and the Ld. DRP has not considered the Singapore Income Tax Returns filed by the assessee. In view of the above the order of the lower authorities namely final Assessment Order passed by the Assessing Officer and directions issued by Ld. DRP are hereby set-aside and they are directed to allow the benefit of Article 8 to all the voyages carried out by the assessee in this appeal. Appeals filed by the assessee are allowed.
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2022 (12) TMI 111
Revision u/s 263 - Addition u/s 68 - unexplained cash credits of share capital and share premium received - HELD THAT:- Statutory notice u/s. 143(2) of the Act duly served upon the assessee and when the case of the assessee was selected for scrutiny, there was no proper compliance. The assessee failed to produce the alleged parties who had subscribed to the equity shares of the assessee company and did not file any documentary evidence to explain the alleged credit.
Assessee was asked to explain the cash credits received by it during the year. Assessee failed to file necessary details to explain the source of alleged cash credit u/s. 68 and also unable to prove identity, creditworthiness of the cash creditors as well as genuineness of the transaction. The assessee company has miserably failed to explain the source of alleged cash credits. If the assessee had sufficient details to explain the alleged sum, it could have certainly filed those details at any stage.
Consistently escaping from appearing/producing the documents and alleged parties before the ld. AO and the appellate authority(ld.CIT-A) indicates that the assessee has no plausible explanation to explain the source of alleged sum of share capital and security premium and, therefore, the provisions of section 68 have rightly been invoked by ld. AO treating the alleged sum as the unaccounted income of assessee, which seems to be routed in the books through bogus/accommodation entry in the form of share capital and security premium. Therefore, we find no infirmity in the finding of the ld. CIT(A) confirming the addition made u/s. 68 of the Act. This ground of assessee’s appeal is dismissed.
Disallowance made u/s. 14A - On perusal of order passed u/s.144 of the Act, we find that this addition/disallowance was correctly made as there was no submission/satisfactory explanation. We thus fail to find any infirmity in the findings of the ld. CIT(A). Therefore, we dismiss ground no. 3 raised by the assessee
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2022 (12) TMI 110
Revision u/s 263 - Income from other sources - AO failed to examine the applicability of s. 56(2)(vii)(b) - Fair Market Value (FMV) (guideline value under Stamp Act) of the property - absence of any verification qua the applicability of s. 56(2)(vii)(b) and, consequently, non-recording of satisfaction in its respect - HELD THAT:- We are in agreement with the ld. Pr. CIT that the agreement referred to in s. 56(2)(vii)(b) is to be a valid agreement in law (for which reference is made to the decisions in ITO v. Vinod Kumar Chate [2022 (4) TMI 614 - ITAT JABALPUR] rendered in the context of the analogous provision of s.50C, and Naina Saraf (supra), to cite two. We, as afore-stated, agree that the only question that survives is the applicability of the section 56(2)(vii)(b), in view of the provisos thereto, in the instant case. It is open for the revisionary authority to examine the same himself proceedings or direct the assessing authority to do so. However, once he adopts the latter course, it is not for us to interfere with the exercise of his discretionary power. We have clarified that the only aspect open for adjudication is if the agreement dtd.29/3/2011 qualifies to be an agreement referred to in the proviso to section 56(2)(vii)(b).
Though no issue in its respect stands raised before us, inasmuch as the assessee’s return was selected for limited scrutiny, clarify that it is in our view within the competence of the ld. Pr. CIT to, as the revisionary authority, extend the scope of enquiry, requiring the assessing authority to enquire into areas impinging on matters at hand, or which comes to the notice of the AO in the course of his examination, and warrant further verification, as in the instant case. Reference for the purpose may be made to the decisions by the Jabalpur Bench of the Appellate Tribunal in Alankar & Anr. [2022 (8) TMI 1312 - ITAT JABALPUR] and Nitin Sharma [2020 (10) TMI 75 - ITAT JABALPUR] - Assessee appeal dismissed.
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2022 (12) TMI 119
Reopening of assessment u/s 147 - Validity of order passed u/s 148A (d) - HELD THAT:- UPON hearing the counsel the Court made the following - Issue notice to the respondents.
In the meantime, there shall be interim stay of further proceedings pursuant to the impugned notice dated 29.03.2022.
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2022 (12) TMI 117
Reopening of assessment u./s 147 - Necessity of disposing of the objections - bogus LTCG on penny stock transaction - HELD THAT:- We noticed that in today’s date, this Court has disposed of two of the matters being Special Civil Application [2022 (11) TMI 1269 - GUJARAT HIGH COURT] and [2022 (11) TMI 1268 - GUJARAT HIGH COURT] wherein the assessment made is nil and they were the part of the very group, therefore, nothing can be presumed in advance and the stage of disposing of the objections will need to be made available to the respondent authority.
Petition being prematured, this Court chooses not to entertain it at this stage. Let the disposal on the strength of the objections raised by the petitioner be made by the authority concerned within two weeks from the date of receipt of copy of this order, on availing opportunity in accordance with law.
If any adverse order is passed, no effect be given to the same by the Revenue for two weeks. The petitioner will be at liberty to take legal course within this period of two weeks, if it so chooses.
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2022 (12) TMI 109
Disallowing the employees contribution of Provident Fund which the assessee has remitted the same beyond the date specified in the respective Act after two days delay u/s.36 - case was selected for scrutiny under CASS and notices u/s. 143(2) and 142(1) - HELD THAT:- We observe from the record that the assessee claimed the expenditure which assessee has debited to the income and expenditure as provision for special memento to the members. However, it is brought to our notice that this is a regular expenditure claimed by the assessee in every Financial Year. In this regard assessee has filed copy of the expenditure for three years i.e. for the F.Y. 2016-17, 2017-18 and 2018-19. Therefore, it clearly indicates that this expenditure is a recurring expenditure incurred by the assessee in this assessment year also. Therefore, merely observing that assessee has declared as a provision it cannot be disallowed. However, what is relevant is the nature of expenditure which assessee claims every year and AO has not expressed his view on the nature of expenditure which can be disallowed or which assessee is not allowed to claim. Therefore, the expenditure claimed by the assessee is an expenditure for the operation of the society allowable under the Act. Therefore, we direct the Assessing Officer to allow this expenditure as a regular expenditure allowable for this assessment year.
With regard to provision for encashment of staff leave which assessee has claimed as the expenditure, we observe that the assessee claims certain expenditure as a period expenditure relevant for the current assessment year and whenever the employee claims the same in the subsequent month or subsequent year it is adjusted against the above said provision. The expenditure claimed by the assessee is an ascertainable liability. Therefore, this expenditure also has to be allowed as the period cost. Accordingly, the Ground No. 1 raised by the assessee is allowed.
Alternatively disallowance of any expenditure would increase the total income which is eligible for deduction u/s. 80P(2) - We are in agreement with submissions of the assessee that the deduction claimed u/s. 80P of the Act is after determining the net taxable income and if any disallowance made in determining the above said net taxable income will increase the above said net taxable income which is clearly allowable as the deduction under Chapter VIA. Therefore, there is a merit in claim of the assessee. Since we have already allowed Ground No. 1 of the assessee it leads to only discussion on academic purpose. Therefore, we are inclined to keep the Ground No. 2 as open.
CPC has disallowed the Employee Contribution claimed by the assessee as a deduction - Any delay in depositing the contribution received by them is chargeable to tax u/s.28 of the Act. Therefore, the collections/recoveries from the employees are first treated as income of the assessee u/s. 28 of the Act and any payment within the due date of the respective Act is treated as application and however, when the assessee fails to deposits within due dates, the same is not allowable deduction u/s.36 of the Act. Therefore, the recovery from the employees are remain as income of the assessee. Therefore, we are not inclined to allow the ground raised by the assessee in this regard. Moreover, this ground raised by the assessee is not borne out of the order passed u/s.143(3) of the Act.
Appeal filed by the assessee is partly allowed.
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2022 (12) TMI 108
Disallowing electricity expenses - AO has disallowed the business expenses on the ground that the assessee is using the premises/security services/ electricity along with other 17 companies and the same was borne by the assessee for its group companies and therefore the said expenses are held to be not incurred for the business of the assessee - Assessee submitted that the 17 Companies are having registered address at the premises of the assessee company which were not doing any business/activities in the said premises, those companies were merely having the registered address of the premises of the assessee and the entire expenditure have been incurred by the assessee for its business purpose - HELD THAT:- It is the specific case of the assessee before us that, the Ld.CIT(A) has not considered the paper book produced by the Assessee which comprising of all the explanation and details to prove the case of the assessee.
We found that the Lower Authorities have not given any finding on the documents produced by the assessee in the paper book. Therefore, in our considered opinion, the issue requires to be remanded to the file of the A.O. for de-novo consideration and to pass appropriate order after considering the documents produced by the assessee. Accordingly, we partly allow Assessee’s Ground No. 1 for statistical purpose by remanding the issue to the file of A.O. for de-novo consideration.
Gift and presentation expenses - Disallowance on various expenses made by the A.O. which have been remanded by CIT(A) to the file of A.O. with a direction to consider the same in view of the claim of the Assessee that the same have already been disallowed in computation of assemble income for the year under consideration - HELD THAT:- Assessee has not proved before the lower authorities that the said expenses are related to the business, therefore the Ld.CIT(A) has rightly upheld the view of the A.O that gift and presentation expenses for crockery expenses and unrelated to the business of the assessee and disallowed the same. CIT(A) has directed the A.O. to verify the contention of the assessee and further also directed to delete the addition if the same has already been disallowed in computation of assemble income for the year under consideration so as to avoid the double addition. Very same direction has also been given by the CIT (A) in respect of disallowanc claimed by the assessee under the head ‘fine and penalties’. The said action of the Ld.CIT(A) found to be legal and reasonable which cannot be found fault with.
Allowable expenses u/s 37(1) - allowability of Business promotion expenses, Sales promotion expenses, Diwali expenses, Entertainment expenses and Membership fee expenses - Personal expenses HELD THAT:- It is for the Assessee to prove that the expenses so incurred are for the purpose of the Business in the true word and spirit of Section 37 of the Act. Ergo, we deem it fit to remand the above issue also to the file of the Ld. A.O. for de-novo consideration with a direction to assessee to justify his contention before the Ld. A.O. and the A.O. shall decide the same in accordance with law. Accordingly, the Ground No.3 of the Assessee is partly allowed for statistical purpose.
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2022 (12) TMI 118
Waiver of interest u/s 220(2A) - appropriate competent Authority rejected the application of the petitioner for waiver of interest while exercising the powers - HELD THAT:- It is the case on behalf of the petitioner that as the dispute was pending for Mutual Agreement Procedure [MAP] resolution which subsequently came to be culminated in the year 2012 and the liability to pay the tax thereafter arose and therefore the petitioner shall be entitled to the waiver of interest u/s 220(2)(A)(ii) of the Act. The aforesaid has no substance.
Merely raising the dispute before any authority cannot be a ground not to levy the interest and/or waiver of interest u/s 220(2A). Otherwise each and every assessee may raise a dispute and thereafter may contend that as the assessee was bona fidely litigating and therefore no interest shall be leviable. It is required to be noted that under Section 220(2) of the Act, the levy of simple interest on non-payment of the tax @ 1% p.a. is, as such, mandatory. We are in complete agreement with the view taken by the High Court.
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2022 (12) TMI 107
Addition u/s 56(2)(vii b) - value the equity shares using DCF Method - A.O was of the opinion that the assessee cannot be considered as start up, the share valuation report relied upon by the assessee is not acceptable since the projections and actual are not in conformity and the valuation report does not meant requirements of Indian Evidence Act, does not pertain to the date of issue of the shares - HELD THAT:- For the year under consideration i.e. A.Y. 2016-17 unlike previous years the Ld. A.O. has not even gone through the valuation report and opined that the report falls foul of Section 45 of the Indian evidence Act. In our considered view the Ld. AO and the CIT (A) have committed an error in not following the principal of consistency.
The Coordinate Bench of the Tribunal in[2018 (10) TMI 1400 - ITAT DELHI] held that the evaluation report which is prepared by the professional such as chartered accounts or mercantile banks for which their respective professional bodies have laid down specific disclosure requirements those disclosure requirements are binding on them. Merely because the valuation report contains certain caveats and disclosures those factors are not sway the mind of the A.O or commissioner of Appeal and therefore remitted the matter to the file of the Assessing Officer for objectively evaluation of the valuation report submitted by the assessee.
As per the Assessee, the Valuation report is be inconformity with the provisions of Section 56(2)(viib) read with Rule 11UA (2) of the Income Tax Rules. In our opinion, in view of the facts and the circumstances of the case, the Lower Authorities ought to have considered the valuation report of the Chartered Accountant submitted by the assessee and should have verified as to whether the said valuation report is inconformity with Section 56(2) (viib) of the Act read with Rule 11UA (2) of the Income Tax Rules or not and accordingly shoud have decided the matter by following the principal of consistency.
In view of the above discussions, to render substantial justice, we remand the matter to the file of Ld. A.O. for the purpose of verifying as to whether the valuation report of the Chartered Accountant submitted by the Assessee is inconformity with the Section 56(2) (viib) of the Act read with Rule 11UA(2) of the IT Rules or not and decide the matter in accordance with law by keeping the principal of consistency in mind. Appeal filed by the assessee is partly allowed for statistical purpose.
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2022 (12) TMI 106
Allowable revenue/business expenditure - expenditure debited to profit and loss account - assessee contends that the DRP/ACIT has erred in disallowing the impugned amount by treating the same as capital expenditure by not considering the assessee’s submission that the said expenses were incurred wholly and exclusively for the purpose of business - HELD THAT:- It is evident that the impugned expenditure claimed by the assessee company are mostly recurring in nature which has existed even in the earlier years wherein the co-ordinate bench has decided the said expenditure to be capital in nature and shall form part of cost of investment in which the assessee was at liberty to claim the same at the time of sale of investment. It is pertinent to point out that the impugned expenditure are found to be part of cost of investment through various subsidiaries, viz. Zippaero Pty Ltd, Aero Star, Australia Pty Ltd, Bak systems Plc. Etc. In respect of other expenditure, in view of the earlier Tribunal order in assesse’s own case on the impugned issue of treatment of capital expenditure and revenue expenditure of the assessee, the Ld.AO is hereby directed to decide this issue in the light of decision given by this Tribunal for A.Ys 2011-12 to 2013-14 [2020 (6) TMI 564 - ITAT MUMBAI] - Ground 1 raised by the assessee is partly allowed for statistical purpose.
Provision for warranties - provision in respect of warranty pertaining to certain products - contingent liability OR ascertained liability - disallowance of provision for warranties treating the same as a contingent liability and not an ascertained liability - HELD THAT:- It is observed that the co-ordinate bench in assessee’s case for AYs 2011-12 to 2013-14 has allowed the expenditure towards provision for warranty [2020 (6) TMI 564 - ITAT MUMBAI]. Assessee ground 2 is allowed.
Disallowance u/s 40A(9) - actual expense incurred and contribution to Mahindra Academy - addition of expenditure on employee welfare fund and Rs.18 lakhs paid to Mahindra Academy under section 40A(9) on the ground that the same was not for business purpose - HELD THAT:- We are of the view that as this issue has already been covered by the decision of the co-ordinate bench in the earlier years, as the same is squarely covered in assessee’s favour, we allow this ground of appeal filed by the assessee.
Disallowance of deduction in respect of stock option granted to employees under the ESOP scheme - As observed that the amount is the difference between the fair market value of shares offered to employees on the date of grant of option and price at which they were offered to employee - HELD THAT:- As decided in own case for A.Y. 2013- 14 [2020 (6) TMI 564 - ITAT MUMBAI] AR fairly submitted that in principle, this issue is decided in favour of the assessee by the Special Bench in the case of Biocon Ltd [2013 (8) TMI 629 - ITAT BANGALORE] but still in the interest of justice, a specific direction need to be given to the ld. AO to allow deduction in respect of all options exercised during the year equal to the difference between the exercise price and the market price at the time of exercise of the option, as held in the case of Biocon Ltd, instead of the market price at the time of grant of option - Decide in favour of assessee.
Disallowance u/s 14A r.w.r.8D - HELD THAT:- As relying on assessee own case [2020 (6) TMI 564 - ITAT MUMBAI] assessment year 2013-14 we direct the ld. AO to consider only those investments which had actually yielded exempt income during the year while working out the disallowance under third limb of Rule 8D(2) of the Rules. With regard to interest disallowance under rule 8D(2)(ii), we find that assessee is having sufficient interest free funds to make investments which had yielded exempt income. Hence interest disallowance is hereby deleted. This ground is allowed for statistical purpose.
TP Adjustment - adjustment for corporate guarantee - HELD THAT:- As observed for A.Y. 2009-10 [2019 (4) TMI 1867 - ITAT MUMBAI] that the co-ordinate bench in earlier years has upheld the rate of 3% to be the fee charged on corporate guarantee and we find no infirmity in the arm’s length guarantee fees on the guarantee provided to AEs. We hereby confirm the addition made as arm’s length price of the international transaction being adjustment for corporate guarantee provided by the assessee company to its AEs. In the result, we dismiss this ground of appeal filed by the assessee.
Disallowance u/s 40(a)(ia) in respect of year-end provisions - assessee company has not deducted TDS on year-end provisions on the pretext that the liability for deduction of TDS arises in subsequent year as and when the bill of the party is booked, as per Form 3CD - HELD THAT:- Having considered the rival submissions and perused the materials on record and also the order of the Tribunal for A.Y. 2012-13 [2020 (6) TMI 564 - ITAT MUMBAI], we respectfully following the above cited order of the Tribunal, allow this ground of appeal filed by the assessee and delete the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act.
Weighted deduction u/s 35(2AB) on scientific expenditure - non-receipt of form 3CL from DSIR - Claim restriction as allowed by DSIR in Form 3CL instead of granting deduction under section 35(2AB) of the Act based on the claim made by the assessee in its return of income - HELD THAT:- Issue decided in favour of assessee as relying on the case of Glennmark Pharmaceuticals Ltd. [2019 (8) TMI 1649 - ITAT MUMBAI] and the Pune Bench of the Tribunal in the case of Cummins India Ltd [2018 (5) TMI 1314 - ITAT PUNE] as directed to allow the claim for deduction u/s.35(2AB) as non-receipt of form 3CL from DSIR is not determinative of the issue. - Decided in favour of assessee.
TDS u/s 194C - disallowance u/s 40(a)ia) - service coupon to dealers - non deduction of TDS - HELD THAT:-It is observed that in a similar disallowance in assessee’s case for A.Y. 2007-08 [2020 (1) TMI 1612 - ITAT MUMBAI]the co-ordinate bench restored the matter to the Assessing Officer directing to consider the issue that no disallowance under section 40(a)(ia) could be made after the expiry of the time for passing of the order under section 201 of the Act and that in case the disallowance is sustained, the same is liable to be restricted to the extent of 30% of the amount of service coupons.
Thus we respectfully follow the said decision and hereby restore this issue to the file of the Assessing Officer by directing him that no disallowance under section 40(a)(ia) shall be made after the expiry of the time for passing of the order under section 201 of the Act and that in case the disallowance is confirmed, 100% of the said amount should be disallowed in view of the Apex Court decision in Shree Choudhary Transport Co [2020 (8) TMI 23 - SUPREME COURT] - Decide partly in favour of assessee.
Nature of receipt - octroi incentive - Revenue or capital receipt - AR contended that the impugned octroi incentive received under the “package scheme of incentives 1993”announced by the Government of Maharashtra for moving industries to certain backward areas of Maharashtra in order to develop the under developed and developing areas of the state - HELD THAT:- As relying on assessee own case A.Y. 1996-97 in Tribunal, we hold that the said subsidy is to be treated as capital receipt. We thereby allow this ground of appeal filed by the assessee.
Rental income on property let out - business income or house property - assessee contended that the co-ordinate bench has deleted the disallowance for the reason that the property in question being stock in trade, provisions of section 28 will apply and not the provisions of section 24 - HELD THAT:- As decided in own case [2019 (4) TMI 1867 - ITAT MUMBAI] it is not in dispute that the income from letting out the property to Ridge Business Centre has been assessed as business income right from the earlier years and the same position has been accepted by the Department. Once the income -which has been derived from stock-in-trade and has been accepted as business income, then the - computation has to be made under section 28 and not under section 23. The assessee has duly shown the income received / accrued from Ridge Business Centre as business income, then any further rent realized by Ridge Business Centre form the third party cannot be said to have been earned / received or accrued to the assessee company. Thus, we are inclined to agree with the contention of the learned Counsel for the assessee that no further income can be attributed to the assessee once the rental income has been assessed as business income and not from the income from house property.
Claim for deduction of gain on difference in exchange - gain on difference in exchange arising out of the repayment of foreign currency loans / revaluation of foreign currency loans as on 31/03/2010 - HELD THAT:- As in assessee’s case for A.Y. 2013-14 [2020 (6) TMI 564 - ITAT MUMBAI] where the Assessing Officer is directed to allow depreciation on exchange difference.
Disallowance of deduction u/s 80IC - assessee had made detailed submission with regard to the methodology adopted for calculation of deduction under section 80IC and that the assessee has provided the basis of allocation of overheads - HELD THAT:- AO is directed to recompute deduction under section 80IC in view of the of the order of Tribunal for A.Y. 2009-10 [2019 (4) TMI 1867 - ITAT MUMBAI]. In the result, this ground of appeal raised by the assessee is allowed for statistical purpose.
Disallowance of credit for TDS - HELD THAT:- We hereby direct the Assessing Officer to verify the claim of TDS raised by the assessee and allow credit of the same after due verification for the impugned year. This ground of appeal is allowed for statistical purpose.
Interest on tax free bonds - assessee submitted that the assessee company has inadvertently included the impugned interest income in its return of income under the head “Income from other sources”- HELD THAT:- As decided in own case A.Ys 2011-12 and 2013-14 the said interest income included interest earned on tax free bonds in the sum which is not liable for taxation at all both under normal provisions of the Act as well as in the computation of book profits u/s.115JB - Merely because, the assessee had erroneously offered the same in the return of income, the same cannot be brought to tax by the revenue. The law is now well settled that only just and right tax should be collected from the right person by the revenue. Hence, we deem it fit and admit the additional ground and direct the ld. AO to reduce the sum towards interest income on tax free bonds both under normal provisions of the Act as well as in the computation of book profits u/s.115JB.
Disallowance of pro-rata premium payable on redemption of FCCB - HELD THAT:- Evident that the claim of priority deduction of premium on convertible debentures was allowable in terms of the propositions laid down in the above cited decisions. It is also undisputable fact that the Tribunal has allowed the assessee’s claim by treating the same as revenue expenditure on identical facts. We hold that the DRPs decision in allowing the impugned expenditure as revenue expenditure is justifiable. In this regard, we dismiss this ground of appeal filed by the revenue.
Bond yield approach followed by the TPO to arrive at the ALP rate of interest of Rs.14.73% per annum - HELD THAT:- DR submitted that let the Id. TPO be directed to adopt LIBOR + 300 basis points for benchmarking international transaction in respect of loan given to AE. But we find that this Tribunal in assessee's own case for the A.Y.2009-10 in para 21 had specifically directed to consider only LIBOR rate at the relevant time and determined the ALP of the said transaction accordingly. Respectfully following the said judicial precedent, we direct the Id. AO accordingly.
Adjustment made by the TPO in respect of receipt of technical services - HELD THAT:- We are of the view that the assessee has furnished the complete details of foreign AE as tested party as being less complex entity. The assessee further to this, has given a plausible explanation as to why the assessee requires the technical service in order to develop its export market with the support of its AE to design the vehicles for markets outside the country. We are convinced with the submission of the assessee that the AE is a high end service provider for manufacture, designing, style, prototyping and other technical service and it also was assisting the assessee in launching successful modes like Xylo Refresh, Bolero Refresh, Quanto and Genio. The allegation that since assessee has its own R & D centre at Nasik and hence it will not be in need of third party service is not acceptable, in our view. From the above observation, we are of the considered opinion that the Ld.DRP has rightly deleted the impugned adjustment made by the AO / TPO. These grounds of appeal filed by the revenue are dismissed.
TDS u/s 194H - dealers’ incentive for which tax was deductible - HELD THAT:- DRP relying on the decision of this Tribunal in assessee’s case for A.Y. 2007- 08 has allowed the said expenses to be claimed. We would like to place our reliance on the decision of the co-ordinate bench [2020 (6) TMI 564 - ITAT MUMBAI] since the dealer is merely an intermediary between the assessee and final customer, the provisions of Section 194H of the Act are applicable and since the assessee had failed to deduct the tax at source, disallowance u/s.40(a)(ia) of the Act need to be made in respect of dealer incentive. The said action of the Id. AO was upheld by the Id. DRP. We find that this issue has been consistently decided in favour of the assessee by this Tribunal in its own case in various assessment years.
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2022 (12) TMI 105
Deduction u/s. 54F - assessee required to construct a building as per the date of sale of asset i.e. within three years - HELD THAT:- In the present case, admittedly, the assessee purchased a residential property on 23-12-2010 and the assessee sold immovable properties located at Mouje Korche by various sale deeds i.e. 22-02-2011, 17-03-2011 etc. as shown in para 8 of the assessment order. In pursuance of the decision of Hon’ble High Court of Allahabad [2009 (7) TMI 118 - ALLAHABAD HIGH COURT] the assessee required to construct a building as per the date of sale of asset i.e. 17-03-2011 within three years.
Admittedly, the AO deployed Inspector to verify whether there is any construction/residential house constructed by the assessee. The Inspector submitted report on 19-12-2016 stating that no construction or residential house is existing at House No. 4, Ward No. 12, Ichalkaranji which clearly establishes the assessee could not construct a house within three years from the date of sale of its assets on 17-03-2011 till 19-12-2016. Therefore, the assessee made construction within three years and in my opinion, the AO rightly denied deduction u/s. 54F - Appeal of assessee is dismissed.
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2022 (12) TMI 104
Reopening of assessment u/s 147 - Reasons to believe - tangible material showing the escapement of income - assessee made payments in cash excess of Rs.20,000/- to a person in a day - HELD THAT:- AO did not mention any tangible material came to its knowledge for reopening and also the failure of the assessee in disclosing fully and truly all the relevant particulars. In similar circumstances the Hon’ble Supreme Court in the case of Kelvinator of India Ltd.[2010 (1) TMI 11 - SUPREME COURT] that reopening could be done on fulfillment of two conditions.
The Hon’ble Supreme Court held that after 01-04-1989 the AO has to power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from other assessment. Further, there must be reasons recorded showing live link with the formation of the belief that there is escapement of income from assessment.
In the present case, find no such tangible material came to the knowledge of AO which resulted in a conclusion that there is a escapement of income from original assessment. Further no live link with the formation of such belief that there is a escapement of income from assessment except stating that an examination of ledgers of purchasers. AO has no jurisdiction to reopen the assessment in the absence of any tangible material showing the escapement of income. Thus, the reassessment framed by the AO fails and as confirmed by the CIT(A) is not justified. Ground raised by the assessee is allowed.
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2022 (12) TMI 103
Depreciation on foreign exchange fluctuation loss relating to foreign currency term loan availed for purchase of windmill - applicability of provisions of section 43A - Disallowance of claim of depreciation on foreign exchange loss - HELD THAT:- We noted that the assessee has purchased windmill and capitalized the same in its books of accounts. The assessee purchased this machinery indigenously and hence, provisions of section 43A will not apply. But, since the assessee has capitalized and claimed depreciation in spread over years and assessments have become final and in this year, the assessee has made claim of depreciation @ 80% on the loan on account of foreign exchange fluctuation loss relating to foreign currency term loan, which was availed for the purchase of this windmill and capitalized, hence we are of the view that the assessee is entitled for claim of depreciation and we allow the same.
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2022 (12) TMI 102
Revision u/s 263 - unaccounted turnover - additions towards additional capital employed/invested for maintaining the minimum additional stock - information received from Directorate General of GST Intelligence - addition on account of additional net profit by applying the net profit rate of 4.42% on the alleged undisclosed sales - HELD THAT:- Firstly, we don’t agree with the contention of the ld CIT DR that the whole of the assessment order has been set-aside to the file of the AO - assessment order has been set-aside for the limited purposes of examining the matter relating to additional capital employed/invested for maintaining the minimum additional stock to carry out unaccounted turnover, thus where the assessee has challenged the matter relating to estimation of net profit on the unaccounted turnover before the Coordinate Bench, the assessee is very much within its rights to rely on the findings of the Coordinate Bench.
Also gone through the order of the Coordinate Bench [2022 (9) TMI 922 - ITAT CHANDIGARH] in assessee’s case and the findings contained therein as recorded a finding that very foundation for making the additions on account of unrecorded sales stands demolished and has no sound basis and the additions on account of additional net profit earned on alleged unrecorded sales were directed to be deleted. It is a settled position that for achieving certain turnover, the assessee has to deploy and invest certain funds/capital.
Where a finding has already been recorded as in the instant case that there is no basis for determining unrecorded sales and the whole of the additions have been deleted, the question of capital employed for achieving such unrecorded sales/turnover doesn’t arise for consideration. In view of the same, where there is no addition on account of unaccounted sales and the resultant additional net profit, then the question of alleged capital employed to carry out such alleged unaccounted sales and turnover as per the order of the Ld. Pr. CIT doesn’t have any legal basis and the same deserve to be set-aside. In the result, the order of the ld PCIT passed u/s 263 of the Act is hereby set-aside. - Decide against revenue.
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2022 (12) TMI 116
National Faceless assessment - opportunity of hearing to the petitioner - appeals have been disposed of without affording an opportunity of hearing to the petitioner, as hearing was not mandatory under the scheme National Faceless Appeal Scheme, 2020 - HELD THAT:- Denial of opportunity to the petitioner for a hearing at the stage of appeal is a violation of principles of natural justice and even if the provisions of the scheme did not provide for such an opportunity, the rules of natural justice have to be read into the scheme and the petitioner was definitely entitled to an opportunity to present its case before the appeals were decided. It must also be noticed that the scheme itself has been later amended making it mandatory to grant an opportunity of hearing if the same is sought.
Therefore, we are of the view that orders in appeal for assessment years 2013-2014, 2014-2015 & 2015-2016 are liable to be set aside. Consequently, the appeals filed by the petitioner in respect of the aforesaid assessment years will stand restored to file and they shall be disposed of in accordance with law after affording an opportunity of hearing to the petitioner.
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2022 (12) TMI 115
Reopening of assessment u/s 147 - notices u/s 148A - period of limitation - minimum 7 days time has to be granted to the assessees to reply to the show cause notices - HELD THAT:- This is not a case were the proceedings are bared by limitation even if the date of receipt of notice is determined to be any other date other than 25-03-2022. The petitioners have a statutory right to reply to the notices within 7 days of its receipt. Though there is substantial merit in the contention taken by the learned counsel for the department that the notices having been sent to the registered Email Ids of the assessees on 25-03-2022 that, must be taken as a relevant date, opinion that no prejudice will be caused to the department by affording an opportunity to the petitioners to reply to the show cause notice within a period of 7 days.
In the result Ext.P3 order in both cases will stand set aside and the officer concerned shall take a fresh decision in the matter after giving 7 days time to the petitioners to reply to the show cause notice. The petitioners shall submit their replies on or before07-06-2022 and a fresh decision shall be taken thereafter in accordance with law.
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Customs
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2022 (12) TMI 101
Rejection of application for grant of transferability in respect of Duty Free Import Authorisations (DFIA) - only pesticides that are physically incorporated in the export product can be imported - non-mentioning of supporting manufacturer - not providing technical characteristics, quality and specification of pesticides/insecticides in the shipping bills - HELD THAT:- Taking into consideration the contents of the impugned orders in all these writ petitions rejecting the petitioners’ applications for grant of transferability in respect of Duty Free Import Authorisation (DFIA) in question which according to me are lacking sufficient reason and not dealt with and discussed the relevant legal contentions raised by the petitioners in these writ petitions and accordingly the impugned orders of rejection of the petitioners’ aforesaid applications for grant of DFIA in question are set aside.
The matters are remanded back to the respondents/authority concerned to reconsider the aforesaid applications and pass reasoned and speaking orders in all the aforesaid applications after giving opportunity of hearing to the petitioners or their authorised representatives and petitioners will be entitled to urge before the respondents/authority concerned all the points raised in these writ petitions, within eight weeks from the date of communication of this order without granting any unnecessary adjournment to the parties.
Petition allowed by way of remand.
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2022 (12) TMI 100
Classification of imported goods - Oil contained in the Bunker Tanks in the Engine Room/Outside Engine Room of Vessel imported for breaking up - to be assessed independently of the vessel under CTH 2710 or with the Vessel imported for breaking up under CTH 8908 00 00? - HELD THAT:- The issue as regards Bunker Tanks in the Engine Room stands decided in the decisions of the Hon’ble Gujarat High Court in PRIYA HOLDING (P) LTD VERSUS COMMISSIONER OF CUSTOMS, PREVENTIVE [2012 (11) TMI 532 - GUJARAT HIGH COURT] and COMMISSIONER OF CUSTOMS VERSUS JM. INDUSTRIES [2014 (10) TMI 227 - GUJARAT HIGH COURT], in which it is held that such oil cannot be classified under CTH 2710 and has to be classified along with the vessel imported for breaking up under CTH 8908 - The Hon’ble Gujarat High Court has in the said decisions held that Oil contained in the Bunker tanks in Engine Room of Vessel imported for breaking up, are associated and connected with the machinery and engine of the Ship and are regarded as forming integral part of the Vessel and therefore classifiable along with the Vessel under CTH 8900 and cannot be assessed to duty independently of the vessel under CTH 27.10.
Thus, the impugned Orders holding that Oil inside the Bunker Tanks in engine rooms are to be assessed to duty under CTH 27.10 are liable to be set aside and Oil contained in Bunker Tanks in Engine Room of Vessel imported for breaking up is classifiable under CTH 8908 along with such vessel.
As regards, the Oil contained in Bunker Tanks outside the engine room of vessel, despite duty was paid under protest, there is, however, no speaking order passed as regards the same. It can be seen that if the tanks containing Oils are connected with pipeline with the engine or machinery of the vessel, there may be no reason why the same cannot be treated as integral part of the engine or machinery of the vessel. However, since there is no speaking order on that part of issue, we direct the adjudicating authority to pass speaking order in respect of duty pertaining to Oil contained in Bunker Tanks outside the engine room of vessel.
Appeal allowed.
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2022 (12) TMI 99
Seeking remand of the case - cross-examination of witnesses - Mis-declaration of goods being imported - request of remand is for the purpose of seeking opportunity to cross-examine the witnesses based on whose statement the appellant has been penalized - Section 138B of Customs Act, 1962 - HELD THAT:- Apparently and admittedly, the adjudicating authority has placed considerable reliance on the statement of the Directors of CHA M/s. Him Logistics Ltd. namely Shri Prakash Chand Sharma and Shri Ashok Sharma and also on the statement of the proprietor for the importer company namely Shri Naresh Kumar Jha. In the given circumstances, specifically when there is no statement of the appellant which may from any stretch of imagination be considered as a confession of the appellant, the right to cross-examination was a basic right rather originating out of principles of natural justice. There is nothing on record to indicate that any prejudice would be caused to the department by providing appellant a right to cross-examination.
There is not retraction by any of the the three witnesses whose cross-examination has been prayed for. In the given circumstances and keeping in view the mandate of the statute as has been directed by the Hon’ble Apex Court to be strictly followed in all adjudications, where there appears the violation of the right to natural justice, it is deemed fit case to be remanded back again to the original adjudicating authority with the direction that three of the witnesses namely Shri Naresh Kumar Jha, Shri Prakash Chand Sharma and Shri Ashok Sharma be once again summoned and an opportunity be afforded to the appellant to cross-examine three of the said witnesses.
Appeal allowed by way of remand.
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Corporate Laws
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2022 (12) TMI 98
Termination of commercial sub-contracts - It has been alleged that the ‘Impugned Order’ was in violation of the principles of natural justice and was passed in the course of daily proceedings, without hearing the `State of Kerala’, who is the owner of the project - HELD THAT:- This Appellate Tribunal do hold that prima-facie the ‘Tribunal’ had sufficient powers to appoint the ‘Inspector’ and therefore we do not find any error on this aspect. Incidentally, it is noted that opportunity was given to both ‘Appellants’ and ‘Respondents’ to give the memo of names to appoint inspector. However, due to non-response from the ‘Appellants’, the ‘Tribunal’ appointed on request of the ‘Respondents’ herein ‘Shri Ravish Kumar’ as an ‘Inspector’.
As regard the contention of the ‘Appellants’ that no opportunity was given to them of being heard and they were denied two weeks period to file objection to report of Shri Ravish Kumar- Inspector appointed by the ‘Tribunal’, this Appellate Tribunal note form the ‘Impugned Order’ that the ‘Respondents’ therein/ ‘Appellants’ herein have availed many adjournments in the matter under one pretext or other - this Appellate Tribunal do not find any error in the Impugned Order with reference to this aspect especially keeping in view that this is only interim measure subject to final CP which is yet to be disposed by the ‘Tribunal’ along with I.A filed by the Appellant on maintainability issue.
As regards the plea that the existence of the Company will be at `Stake’ since the ‘Tribunal’ by the ‘Impugned Order’, has prohibited from withdrawal of any money from revenue collection. This `Appellate Tribunal’ will like to take this fact in to consideration that without regular cash flow available, it would be difficult for the concerned Company to pay Salary and other Operational Expenses. However, looking to various averments made and keeping in mind the ‘Report’ of independent Inspector appointed by the ‘Tribunal’ as per Companies Act, 2013 who has pointed out several irregularities by the ‘Appellants’, it may not be advisable to intervene at this stage.
Appeal disposed off.
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Insolvency & Bankruptcy
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2022 (12) TMI 97
Cost of CIRP / Liquidation - Liability of operational creditors - Distribution of proceeds from the sale of the liquidation assets - Direction to contribute proportionately in accordance with the voting share towards CIRP /Liquidation costs - section 53 of IBC - HELD THAT:- This is a clear case of misusing the provisions of the Code both by the Operational Creditor who has initiated the CIRP and the RP also - the Appellants are small suppliers and they don’t want to be burdened with additional liability as their business is in a very bad shape and they have lost already a crore plus.
We are unable to agree with the Adjudicating Authority that the Operational Creditors are to bear the cost of CIRP/Liquidation and hence, we set aside the impugned order to the extent para 9.IX as appearing supra and rest part of the impugned order we uphold. Let Liquidation be continued and let amount be realized during Liquidation and be distributed in accordance with section 53 of the Code.
Appeal disposed off.
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Service Tax
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2022 (12) TMI 95
Levy of service tax - renting of immovable property service or not - services by way of renting out its immovable property of shops and buildings to various persons/firms/organizations for use in the course of furtherance of business of commerce - HELD THAT:- The issue as to whether the appellant would be liable for service tax under the category of “renting of immovable property‟ for the period prior to 01.07.2012 and after 01.07.2012 has been settled by the Supreme Court in a recent decision rendered in the case of the appellant in KRISHI UPAJ MANDI SAMITI, NEW MANDI YARD, ALWAR VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, ALWAR [2022 (2) TMI 1113 - SUPREME COURT] and it has been held that it would be taxable prior to 01.07.2012 but would not be taxable w.e.f. 01.07.2012.
The dispute in the present case is from 01.04.2012 to 31.3.2013. In view of the aforesaid decision of the Supreme Court service tax under the category of renting of immovable property could have been confirmed only for the period from 01.04.2012 up to 30.06.2012. However, no service tax could have been confirmed for the period from 01.07.2012 to 31.03.2013. The order passed by the Commissioner is accordingly modified to the extent indicated above.
Appeal allowed in part.
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2022 (12) TMI 94
Classification of services - fees under the head Standard and Labelling (Registration and labelling Fees) and Processing Fee - whether the fees collected by the respondent was only for furtherance of the enforcement of the provisions of the Energy Conservation Act, 2001 and Bureau of Energy Efficiency (Particulars and Manners of their Display on Labels of Room Air Conditioners) Regulations, 2009? - HELD THAT:- It is not in dispute that the Tribunal in the case of the respondent itself, for the earlier period, allowed the appeal filed by the respondent in a matter where the same issue was involved - reliance placed in appellant own case BUREAU OF ENERGY EFFICIENCY VERSUS CST, DELHI [2018 (4) TMI 771 - CESTAT NEW DELHI] where it was held that The assessee- Appellants, acting in pursuance to the statutory regulations, collected statutorily fixed fee for such performance, cannot be subjected to Service Tax.
The period involved in the matter decided earlier by the Tribunal related to the period 2008-09 to 2012-13, also included the negative list. The period involved in the present case is covered by the decision of the Tribunal.
The Commissioner committed no illegality in dropping the proceedings - Appeal dismissed.
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2022 (12) TMI 96
Maintainability of petition - availability of alternative remedy of appeal - time limitation - HELD THAT:- The Petitioner has not placed on record any material as to the date of receipt of order dated 16th December, 2021. In view of aforesaid sub-section (3A) of Section 85, the Petitioner was required to file Appeal within two months i.e., on or before 15th February, 2021 and the condonable period was one month thereafter which lapsed on 15th March, 2021.
This Court is not inclined to exercise the extraordinary jurisdiction vested under Article 226 of the Constitution of India. Hence, the writ petition is liable to be dismissed.
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Central Excise
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2022 (12) TMI 93
Interest on delayed refund - seizure of cash / currency during search - calculation of relevant time - to be calculated from expiry of three months from the date of receipt of the impugned refund application till the date of refund of such duty or not - applicability of section 11B/11BB of Central Excise Act, 1944.
HELD THAT:- Hon’ble Apex Court in the case of COMMISSIONER OF CUSTOMS (IMPORT) , RAIGAD VERSUS M/S. FINACORD CHEMICALS (P) LTD & OTHERS [2015 (5) TMI 371 - SUPREME COURT] while discussing the liability of the department to pay the interest has referred to Departments’ own circular dated 2.1.2002 wherein the Board clarified that the matters of refund other than the amount of duty would not be covered under the provisions of section 11B of Customs Act or section 35FF of Central Excise Act. It was held by the Hon’ble Apex Court that in such cases of refund even the concept of unjust enrichment is not applicable.
Another circular of department bearing No. 802/35/2004 CX dated 8.12.2004 was also being considered by the Apex Court in its above mentioned judgement dated 8.4.2015. In that circular the Board emphasised that the amounts other than the amount of duty if deposited it should be refunded immediately as non-returning of deposits attract interest that has been granted by the Courts in number of cases.
Since the amount in question was not the amount of pre-deposit as required under section 35F of Central Excise Act, section 35FF has been wrongly invoked by Commissioner (Appeals). The Commissioner (Appeals) has committed an error while holding that since there is no provision to grant interest on the seized currency notes while refunding the said currency, the interest from the date of seizure cannot be granted. Commissioner (Appeals) is held to have ignored the judicial precedence as discussed above and thus is held to have committed violation of principles of judicial protocol - the order under challenge is hereby set aside and appellant is held entitled for refund of interest on the principle amount at the rate of 12% from the date of its seizure.
Appeal allowed.
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2022 (12) TMI 92
CENVAT Credit - requirement to reverse credit in respect of inputs and input service attributed to exempted goods - liability to pay 5% / 10% in terms of Rule 6(3) of Cenvat Credit Rules, 2004 - HELD THAT:- It is not disputed that appellant have been maintaining separate record for cenvatable and non-cenvatable inputs in RG-23 Part-I and Form-IV register respectively. The appellant made some transfer entry due to the reason that at times the input which was issued for exempted goods from their Form-IV register, subsequently because of the use in the dutiable goods, transfer to the accounts of dutiable goods i.e. Part-I and similarly, the transfer entry was made for vice-versa. Due to this transfer entry, the Adjudicating Authority cannot say that they are not maintaining separate accounts.
It is clear that the appellant have not taken or reversed the Cenvat credit in respect of input and input service. The Adjudicating Authority has confirmed the demand of Rs. 1,98,42,913/- in terms of Rule 6(3) of Cenvat Credit Rules, 2004. In case of demand under Rule 6(3) for the amount 5%/ 10%, is made the appellant became entitle to take credit in respect of all inputs and input service irrespective of the use of the same either in the dutiable or exempted goods. Therefore, if the appellant have already reversed/ not taken credit of Rs. 2,27,92,622/- then the demand of Rs. 1,98,42,913/- which is lesser than the foregone credit of the appellant , will not sustain. Even though the Adjudicating Authority has some doubt about manner of maintenance of separate accounts but the fact remains that the appellant have not taken/ reversed Cenvat credit in respect of input and input service of Rs. 2,27,92,622/-. On this basis itself, without going into correctness of the separate accounts, the demand is not sustainable.
The demand under Rule 6(3) of Cenvat Credit Rules, 2004 is not sustainable - the interest and penalty is also not maintainable. Personal penalty of Rs. 10,00,000/- imposed on Shri Rajesh Kumar Sinha, Manager (Administration) & Authorised signatory of M/s. Manglam Drugs & Organics Limited being consequential to demand which is sustainable, is also not maintainable - Appeal allowed.
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Indian Laws
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2022 (12) TMI 91
Dishonor of cheque - rebuttal of presumption - signatures in the cheque not disputed - acquittal of respondent on the ground that the appellant failed to prove that cheques were issued towards legally enforceable debt - Section 138 of the N.I. Act - HELD THAT:- It is now a well settled proposition of law that the Appellate Court should not replace its finding with that of the trial Court only when another view is possible. Interference is permitted only when findings of the trial Court are perverse or against a settled proposition of law. Keeping in mind the above settled proposition for the purpose of deciding present appeal. Re-appreciation of evidence so as to consider whether findings of the trial Court are in fact perverse and if so whether interference is warranted, needs to be looked into.
In the entire evidence brought on record, the accused did not dispute issuance of such cheques including her signature on it. However, only defence raised with regard to such cheques is that same were obtained by force and coercion as well as threats. Thus, when the signatures on the cheques are not disputed as that of the accused, the provisions of Section 139 of N.I. Act stands attracted immediately. Magistrate is duty bound to draw a presumption under Section 139 of N.I. Act in favour of the complainant and there is no other option available otherwise.
The entire material placed by the parties before the trial Court in connection with Exh.24 i.e. promissory note dated 18th April, 2012 nowhere remotely suggests that the accused succeeded in proving contrary thereby dislodging presumption under Section 118 of the N.I. Act.
The entire case of the complainant is based on a cheque dated 15th June 2012 for ₹3,00,000/- issued by the accused towards discharge of the amount mentioned in the promissory note at Exh-24. Therefore, apart from the presumption under Section 118 of the N.I. Act, the complainant is also having the support of presumption under Section 139 of the N.I. Act - only because the complaint is lodged with the police station on 2nd July 2012 i.e. on the date when such cheques were already dishonoured, no interference could have been drawn by the learned Court in favour of the accused so as to dislodge presumption under Section 139 of the N.I. Act. Only lodging such a complaint of taking such cheque by force or threat is not sufficient enough to rebut presumption under Section 139 of N.I. Act specifically when the accused admits her signature on the cheque.
Once it is considered that the accused failed to rebut presumption under Section 139 of the N.I. Act qua the cheque dated 15th June 2012 for ₹3,00,000/- vide Exh-21, the accused ought to have been considered as guilty for the offence punishable under Section 138 of N.I. Act. Thus such findings are clearly unacceptable and therefore so far as the first cheque of ₹3,00,000/- is concerned dated 15th June 2012, the accused is found guilty for the offence under Section 138 of the N.I. Act.
The impugned judgment needs to be quashed and set aside qua cheque dated 15th April 2012 for ₹3,00,000/- at Exh-21 (colly) - application disposed off.
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2022 (12) TMI 90
Dishonor of Cheque - it is alleged that the petitioner was looking after the day to day affairs of the company - vicarious liability can be fastened against the petitioner under section 141 of the Negotiable Instruments Act or not - HELD THAT:- The Court has gone through the materials on record and finds that admittedly, the petitioner was the Executive Director at the time of issuing of the cheque. In paragraph no.3 of the complaint, it has been clearly averred that the accused nos. 2, 3 and 6 are the Directors of the company and accused nos.4,5,7,8,9 and 10 are responsible for the day to d ay affairs of the company. Thus, in the complaint itself it has been disclosed that this petitioner was not concerned with the day to day affairs of the company. The cheque was issued on 30 .09.2014. This petitioner has resigned on 27.02.2014 which was accepted on 14.11.2014 as contained in annexure 5 series. The cheque was presented on 20.12.2014 which was returned on 22.12.2014 and legal notice was issued on 30.12.2014, the reply by the accused on 17. 01 .2014 and 23.01.2015, respectively and the complaint was filed on 04.02.2015, and the document on record clearly suggest that the petitioner has resigned on 14.11.2014 and the complaint was filed on 04.02.2015.
On perusal of the cheque, which has been brought on record in the petition, it is transpired that the cheque in question was issued by the authorized signatory and it has been signed by the accused nos.2 and 3. Admittedly, this petitioner is not the signatory of the cheque in question.
Thus, it is crystal clear that vicarious liability under sub section 1 or 2 of section 141 of the Negotiable Instruments Act can be fastened if the person is having the control over the day to day affairs of the company. Looking to the explanation of the said section, it is crystal clear that the firm or the company are required to be made an accused in the complaint and the company has already been made accused in the case in hand, however, such vicarious liability arises only when the company or the firm commits offence as primary offence. In the case in hand, in the complaint it has been stated that this petitioner was only Director and accused nos.4,5,7,8,9 and 10 are made to look after day to day affairs of the company and other accused persons against whom also cognizance has been taken.
In the case in hand, it is an admitted fact as averred in the paragraph no.3 of the complaint petition, that the accused nos.4,5,7,8,9 and 10 are looking after the day to day affairs of the company and the petitioner is not the drawer of the cheque and in the light of the judgment of the Hon’ble Supreme Court in the case of S.M.S. Pharmaceuticals v. Neeta Bhalla [2005 (9) TMI 304 - SUPREME COURT] it has been considered later on by the Hon’ble Supreme Court in the case of S.P.Mani [2022 (9) TMI 846 - SUPREME COURT] that the order taking cognizance was erroneous and would not sustain under the eye of law.
Application disposed off.
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