TMI Tax Updates - e-Newsletter
February 1, 2019

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy FEMA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Highlights / Catch Notes

Income Tax

• Enhancement of the income of the partners - partners did not file any return pursuant to the order passed by the Settlement Commission - reopening of assessment - Petition dismissed.
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• Determination of the full value of consideration in computation of long term capital gain - occupancy rights settled by allotting new flat in new building - the value of flat of 405 sq.ft. to be allotted in the new building should be accordingly reduced from the full value of consideration u/s 48(i).
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• Charitable activity - The objects of these cricket associations clearly demonstrate that these cricket associations exist and operate purely for the purpose of promoting cricket - the proviso to Section 2(15) has been wrongly invoked in these cases.
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• Penalty u/s 271(1)(c) - Merely because assessee claimed depreciation at 25% treating items to be plant, which claim was not acceptable to revenue, would not by itself attract penalty.
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• When the percentage of discounts to sales is consistent over the years then the ad-hoc disallowance is bad in law. Just because there are certain difficulty in verification of bills, the discounts cannot be restricted to the absolute figure of what amount was allowed in the immediately previous year.
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• Non deduction of TDS on account of Contractual Payments to the Gunman paid - there would be no requirement for tax deduction at source from payment made to corporations enjoying exemption under section 10(26BBB).
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Customs

• Anti-dumping duty - expired notification - the respondents cannot insist upon the petitioner to protect the interest of the Revenue towards the anti-dumping duty in the absence of any statutory right available as on today for levying & collecting such duty
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• Valuation of imported goods - Processed Betel Nuts - as the goods were cleared after collecting duty on the basis of tariff rate, it cannot be held that the goods are prohibited
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Corporate Law

• Repayment of deposits accepted before commencement of Section 74 of the Companies Act, 2013 - By virtue of the subsequent order of the appellate tribunal, bottom had gone out of the case of the respondent in the aforementioned criminal complaint case, continuation whereof would undoubtedly be an abuse of the process of the court.
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Indian Laws

• Dishonor of Cheque - insufficiency of funds - There was no reason for the applicant/accused to issue a cheque of his personal liability in the capacity as a Proprietor of Hindustan Traders. The complainant has not bothered to explain the same. Thus, the applicant/accused is entitled for the benefit of doubt.
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IBC

• Initiation of Corporate Insolvency Resolution Process - financial creditor - home buyers - failure to pay assured return /monthly rent - The applicants fall within the definition of 'Financial Creditors' - Application admitted.
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• If the two ‘Corporate Debtors’ collaborate and form an independent corporate unit entity for developing the land and allotting the premises to its allottee, the application under Section 7 will be maintainable against both of them jointly and not individually against one or other.
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Central Excise

• CENVAT Credit - various input services - services related to fitting of Bolt on the different equipments which are finished goods - maintenance of computer - upgrade in software - various other services - credit allowed on all the services.
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• CENVAT Credit - input services/capital goods - rent-a- cab service - in the present case the motor vehicle taken on rent are capital goods, hence does not fall under the exclusion category - credit allowed.
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Articles

• Carry forward of loss should be allowed liberally.
• INTERPRETATION OF THE TERM ‘DEBT’ UNDER INSOLVENCY AND BANKRUPTCY CODE, 2016

Notifications

• Companies Law

• File No. 1/1/2019-CL.I - dated 30-1-2019 - Co. Law
  Central Government appoints the 30th January 2019 as the date on which the provisions of section 465 of the Companies Act, 2013 in so far as they relate to the repeal of the Companies Act, 1956 (1 of 1956) [that in except in so far as they relate to the repeal of the Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961)] shall come into force

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• Customs

• 07/2019 - dated 31-1-2019 - Cus (NT)
  Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver

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• Income Tax

• 07/2019 - dated 30-1-2019 - IT
  Supersession Notification No. S.O. 5368(E) dated 22.10.2018

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• 06/2019 - dated 30-1-2019 - IT
  U/s 10(46) of the Income-tax Act, 1961 Central Government notifies ‘Joint Electricity Regulatory Commission (for the State of Goa and Union Territories except Delhi)’ a commission constituted by the Government of India, in respect of the specified income arising to that Commission

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• 05/2019 - dated 30-1-2019 - IT
  Centralised Verification Scheme, 2019

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• 04/2019 - dated 30-1-2019 - IT
  Income–tax (1st Amendment) Rules, 2019

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• 03/2019 - dated 25-1-2019 - IT
  Central Government rescinds Notification No. 15/2008 dated 01.02.2008

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• 02/2019 - dated 24-1-2019 - IT
  Corrigendum - Notification No. 68/2009 in F. No. 203/6/2009/ITA.II dated 15th of September, 2009

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• 01/2019 - dated 24-1-2019 - IT
  U/s 35(1) (ii) of IT Act 1961 Central Government approved ‘Jubilee Mission Hospital Trust’

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Circulars / Instructions / Orders

• DGFT - TRADE NOTICE No. 44/2018-19 - dated 31-1-2019
  Export Policy of Bio-fuels — Export of bio fuels from EOU/ SEZ / DTA
• DGFT - 70/2015-2020 - dated 30-1-2019
  Amendments in Hand Book of Procedures of FTP 2015-2020, related to Facility of Clubbing of Authorisations
• Customs - PUBLIC NOTICE NO. 01/2019 - dated 16-1-2019
  Invitation of applications for empanelment of Chartered Engineers for examination/valuation of Second / Old & Used machinery/ goods etc. in the jurisdiction of Pune Customs Commissionerate
• Customs - CORRIGENDUM TO TRADE NOTICE NO. 01/2018 - dated 20-11-2018
  Transition of Customs functions hitherto performed by the Central Excise/ GST officers, including the export procedure and sealing of Containerized export cargo, to the Customs formations, under the Commissioner of Customs, Pune

News

• First Revised Estimates of National Income, Consumption Expenditure, Saving and Capital Formation, 2017-18

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• 15th Finance Commission Meets Representative of Trade and Industry Bodies of Punjab

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• Address by the President of India Shri Ram Nath Kovind to the joint sitting of two Houses of Parliament

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• Text of PM’s statement to Media ahead of the Budget Session of Parliament on 31st January 2019

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Case Laws:

• GST

• 2019 (1) TMI 1515
  CENVAT Credit - Form-GST TRAN-1 - grievance of the technical glitches to GSTN - Held that:- Issue Notice to the newly added respondent Nos. 6 and 7 returnable on 30.1.2019.

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• Income Tax

• 2019 (1) TMI 1538
  Reopening of assessment - obligation on the part of the assessee to disclose fully and truly all primary material facts - Held that:- In the case of Calcutta Discount Co. Ltd Vs. I.T.O. [1960 (11) TMI 8 - SUPREME COURT] it has been held that the obligation on the part of the assessee is to disclose fully and truly all primary material facts which are necessary for assessment. Undisputedly, the fact that the the petitioner had received income on surrender of shares under buy back scheme of the subsidiary company was the material primary facts which was disclosed before the Assessing Officer during the course of regular assessment proceedings. Thus, there was complete disclosure of all primary material facts during the regular assessment proceedings, reopening is not justified. It cannot be said that there was any failure on the part of the petitioner to disclose fully and truly all material facts necessary for reassessment. Thus, the impugned notice is hit by first proviso of Section 147 and is without jurisdiction. Accordingly, impugned notice is quashed and set aside. - Decided in favour of assessee.

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• 2019 (1) TMI 1537
  Reopening of assessment - assessment done beyond the period of 4 years from the end of relevant assessment year - disallowance of write off entire expenditure as project was abandoned - Held that:- Reasons recorded by the AO for issuing the impugned notice neither record nor point out that there was any failure on part of the assessee to disclose truly and fully all material facts necessary for assessment. Infact, the reasons proceed on the perusal of the case recorded by the Assessing Officer. Thus, clearly the mandatory requirement for reopening of assessment beyond 4 years flowing from the first proviso to Section 147 of the Act in the present case is not satisfied. During the year under consideration, as per assessee's submission, project was abandoned and no income on this account has been generated, despite the fact that construction of such assets was carried out by the assessee. It cannot be accepted that no income even on account of scrap sale or debris has been generated. Once the construction work was started, then it must have been sold to other persons. It is a fact that entire expenditure was incurred on capital account. Now assessee's claim as revenue expenditure treating it as a write off when entire expenditure were in the nature of capital, cannot be accepted and treated as revenue expenditure. Further, genuineness of the expenses is also not proved because assessee has paid huge amount on account of rent, which is almost 50% of the total expenses. The genuineness was not brought into question in earlier years as the assessee was capitalizing all project expenses. Now the assessee is claiming to write off entire expenditure. The assessee failed to justify rent payment which was paid arbitrarily without any comparative rate with market. A vacant piece of land cannot be charged so much high rent. Assessee's claim that project was abandoned due to recession is also contrary to the facts because when assessee has started the project, condition of air catering market were more or less same from start to end of the assessee's project. This fact can be verified from the receipt of the assessee because revenue receipt is almost remains the same between F.Y. 2008-09 to 2010-11. As against this order of assessment, the petitioner filed appeal. It can thus be seen that the Assessing Officer had occasion to examine the claim and infact in the order of assessment, he had disallowed the same. In the context of such sum, therefore, it cannot be stated the income chargeable to tax has escaped assessment. - Decided in favour of assessee.

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• 2019 (1) TMI 1536
  Disallowance of brokerage payable - assessee follows the percentage method mandated [under Accounting Standards 7 -“AS-7”], and recognised under Section 145 - Held that:- It is not disputed that for past years as well, the treatment given by the assessee was accepted by the Revenue. Furthermore, the project completion method which this Court alluded to in DLF Universal Ltd. [2015 (4) TMI 981 - DELHI HIGH COURT] finds reflection as an approved method in the decision of the Supreme Court. Furthermore, this Court notices that as to what appropriate methods of treatment of expenditure in the hands of a particular business per se have to be adopted, is the subject matter of Accounting Standards. In the present case, after 2007, every builder must necessarily follow the percentage of completion method by following the AS-7. If the Revenue’s arguments were to be accepted too, the expenditure which is clearly discernable and which may accrue in a particular year and even be paid has to necessarily be disallowed in substantial part and never proportionality granted. In such event, the likely result would be that for next succeeding year, the AO must find himself bound by previous determination and depend upon the balance amount paid. Given the statement in CIT v. Bilahari Investment Pvt. Ltd. [2008 (2) TMI 23 - SUPREME COURT] that adoption of one or more methods and the implementation of it, is largely revenue neutral. This Court is of the opinion that no question of law arises on this aspect. Disallowance under Section 14A - Held that:- Revenue appellate authorities noticed that for the concerned AY, the assessee did not indicate "tax exempt" income to attract the provision. Therefore, the decision in Cheminvest Ltd. v. CIT [2015 (9) TMI 238 - DELHI HIGH COURT] clearly applied which the ITAT followed. No question of law, therefore, arises. Treatment of software expenditure claims - Held that:- The Court is of the opinion that the findings of the CIT(A) and ITAT are pure findings of fact. Moreover, as held by the CIT(A), the AO did not even care to examine the terms of agreement which the assessee entered into with the service provider. As far as the software expenditure goes, the Court is of the opinion that the findings of fact rendered by the CIT(A) and ITAT cannot be faulted.

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• 2019 (1) TMI 1535
  Disallowance on account of proportionate interest u/s 14A r.w.r. 8d(2)(ii) - sufficiency of own funds - Tribunal deleted the addition - Held that:- Investment made in shares which gave rise to exempt income was made out of its own funds and not out of borrowed funds i.e. interest bearing funds. In such a case this Court in CIT Vs. HDFC bank Vol. [2014 (8) TMI 119 - BOMBAY HIGH COURT] has in identical circumstances held that the principle laid down in Reliance Utilities and Power Ltd.[2009 (1) TMI 4 - BOMBAY HIGH COURT] would equally apply while computing the disallowance under Section 14A of the Act. - Decided against revenue

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• 2019 (1) TMI 1534
  Order passed by the Settlement Commission - Enhancement of the income of the partners - partners did not file any return pursuant to the order passed by the Settlement Commission - reopening of assessment - ground so raised was that the Assessing Officer ought to have proceeded under Section 155(1)(C) of the Act and not under Section 148 - Held that:- The Tribunal found that the subject matter in Dalmia Manganese Corporation [1997 (3) TMI 13 - SUPREME COURT] was relating to the withdrawal of development rebate allowed by the Assessing Officer in the regular assessment order. Subsequently, proceedings were taken under Section 154 of the Act for rectification of the assessment. The Hon'ble Supreme Court found that when there is a specific provision in so far as re-opening of assessment, there could be no resort made to a general provision for rectification. The Tribunal found that the dictum does not apply in the present case, when there was no regular assessment made. Resort could only be had to Section 148, since Section 155 applies only in the case of a completed assessment of a partner and the share of the income of the firm as found in an order passed under Section 245D(4)[clause (c) of Section 155(1)] is not included in the partners completed assessment. We do not think any interference can be made to the order of the Tribunal, since the question has been answered perfectly in tune with the law. We hence answer the questions of law raised here against the assessee and in favour of the Revenue

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• 2019 (1) TMI 1533
  Revision u/s 263 - claim under Section 80IB allowability - period of limitation under Section 263(2) - return filed under Section 153A - Held that:- We find that the reasons stated for revising the order under Section 263 which go to the root of the claim made under Section 80IB of the Act, which would apply to the entire amounts claimed; that in the revised return originally filed and in the return filed under Section 153A of the Act. Without revising the earlier order at Annexure-I, it would not be possible to disallow the claim further made under the return filed pursuant to notice issued under Section 153A of the Act by revising Annexure-C order. The grounds as stated in Section 263 order was available to the Revenue even as against the original order passed at Annexure-I. No interference of the allowance granted by the Assessing Officer having been attempted under Section 263 of the Act; the issue stands settled for that assessment year. As for the enhanced claim made under Section 80IB not being sustainable in a return filed pursuant to a notice issued under Section 153A; it was never raised by the CIT in the order under Section 263. In such circumstances, we are of the opinion that the limitation in so far as interfering with the claim under Section 80IB of the Act has to commence from the first order at Annexure-I, which is dated 31.08.2005. The order under Section 263 of the Act had been passed long after the limitation expired and hence we are unable to sustain the same. We answer the question of law in favour of the assessee and against the Revenue, in so far as the limitation aspect is considered. - Decided in favour of the assessee

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• 2019 (1) TMI 1532
  Disallowance u/s 40(a)(ia) - scope of amendment - whether the second proviso to Section 40(a)(ia) would have retrospective effect? - Held that:- The said proviso was inserted w.e.f 1.4.2013 and in essence, it provides that where an assessee fails to deduct whole or any part of the tax at source but is not deemed to be an assessee in default under the first proviso to Section 201(1), then for the purpose of clause 40(a)(ia), it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the payee. The Revenue would content that the benefit of this proviso would be available to the assessee only prospectively w.e.f. 1.4.2013. Various Courts, however, have seen this proviso as beneficial to the assessee and curative in nature. The leading judgment on this point is in the case of CIT Vs. Ansal Land Mark Township P Ltd [2015 (9) TMI 79 - DELHI HIGH COURT] as held that Section 40(a)(ia) is not a penalty and insertion of second proviso is declaratory and curative in nature and would have retrospective effect form 1.4.2005 i.e the date from the main proviso 40(a)(ia) itself was inserted. Several High Courts have adopted the same lines. We may also note that the Supreme Court in the case of Hindustan Coca Cola Beverages P Ltd Vs. CIT [2007 (8) TMI 12 - SUPREME COURT OF INDIA] even in absence of second proviso to Section 40(a)(ia) had noticed that the payee had already paid the tax. Under such circumstances, the Court held that the payer / deductor can at best be asked to pay the interest on delay in depositing tax. - No question of law.

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• 2019 (1) TMI 1531
  Deduction u/s 80M - revision u/s 263 - Deduction in respect of certain inter-corporate dividends - case of the Revenue is that the benefit of the dividend declared in respect of Assessment Year 2002 to 2003 cannot be taken by the Assessee particularly seeing as the provisions of Section 80M were themselves introduced only with effect from 01.04.2003 - whether “dividend distributed” would include dividends declared in the earlier year but paid out in the current year? Held that:- No fetter set out in the provision in this regard. Though the declaration of dividend by the appellant had been occasioned in the financial years 2001-02 as well as 2002-03, there is no dispute on the position that the dividend had in fact, been paid out by the assessee only during the relevant financial year and that too prior to the due date for filing the return. Accepting the submission of the Revenue, would, in our view tantamount to inserting a new condition in the statutory provision which is impermissible in law. We are thus in agreement with the Tribunal in their conclusion that the assessee is entitled to the deduction sought. We draw support in this regard from the decisions of the Division Bench of the Delhi High Court in the case of Commissioner of Income Tax V. Delhi Tourism & Transportation Development Corporation Ltd.(2013 (7) TMI 625 - DELHI HIGH COURT) and Commissioner of Income Tax V. Saumya Finance and Leasing Co. P. Ltd. (2008 (1) TMI 13 - BOMBAY HIGH COURT), which have taken views similar to the one expressed by us above. - decided in favour of assessee.

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• 2019 (1) TMI 1530
  Levy of penalty u/s. 271(1)(c) - assessee had furnished inaccurate particulars of income - disallowance of consultancy fees paid to NNE Pharma Plan India Ltd. - Held that:- We find that the assessee had furnished entire details indicating nature of services rendered by NNE Pharma Plan India Ltd. together with copy of GMP audit report thereon during the course of penalty proceedings. We hold that these details were not appreciated by the authorities below during the penalty proceedings. We further hold that levy of penalty is not automatic. The assessee had duly furnished all relevant details during the course of penalty proceedings. Moreover, mere disallowance of expenditure for non appreciation of relevant facts would not result in levy of penalty. Reliance in this regard is placed on the decision of Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT). - Decided in favour of assessee.

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• 2019 (1) TMI 1529
  Penalty u/s 271(1)(c) - Held that:- In view of the fact that the quantum additions/disallowances itself has been set aside having regard to the appellate order of the ITAT in quantum proceedings, the very basis for imposition of penalty under s. 271(1)(c) does not survive at present. Therefore, the action of the CIT(A) towards sustaining penalty is set aside and restored back to the file of CIT(A) for fresh adjudication in the light of quantum appeal. - Appeal of the Assessee is allowed for statistical purposes.

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• 2019 (1) TMI 1528
  Addition on account of suppressed debtors - no independent verifiable evidences - Held that:- It is seen that the assessee is not able to reconcile with corroborative evidences i. e. copy of ledger accounts etc. , to prove that the figures in the audited financials are corroborated by ledger accounts in bank accounts with independent verifiable evidences. Therefore, in view of these circumstances, we do not find any infirmity in the order of CIT(A), accordingly same is upheld. - Decided against assessee. Addition on account of suppressed yarn - Held that:- The books of accounts of the assessee are audited u/s. 44AB of the Act and no adverse comments has been made by auditor in his report. Moreover, the AO has also not pointed out any defects in the maintenance of books of accounts of the assessee nor has pointed out any irregularities in the books of accounts, further, the books of accounts duly reflected purchase and sales and month wise quantity details purchases of raw-material, nor the books of accounts have been rejected by the AO. It is also seen that the bank statement was submitted by the assessee showing estimated stock only. The stock was not pledged before the bank but hypothecated to avail the large margin of Drawing Power. The AO has not made any independent enquiry to establish his case that he was also in a position of any such evidence of negate that the purchase and sales made by the AO were not correct. Hon'ble Gujarat High Court in the case of CIT vs. Arrow Exim Pvt. Ltd. [2010 (1) TMI 769 - GUJARAT HIGH COURT] wherein it was held that where there was discrepancy between stock as per books of accounts and that shown in the statement given to bank allegedly to obtain higher credit facilities, Tribunal had accepted explanation given by assessee and in that context had stated that when books of accounts or accounting system had been found to be genuine supported by vouchers, etc. , addition was not justified. - Decided in favour of assessee.

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• 2019 (1) TMI 1527
  Disallowing of provision debited to the Profit and Loss Account - CIT-A deleted part addition on the ground that this provision is unascertained expenditure but it was the liability that was existing at the end of the financial year but the payments made subsequent to the end of the financial year but before the finalization of the accounts - Held that:- AS-4 says that the conditions for an event prevail on the balance and crystallized between the close of the financial year and approval of accounts, such events shall be known as adjusting events and have to be recorded in the previous year. The provision made by the assessee for meeting the liability incurred by it before the date of closure of accounts is an allowable deduction out of gross receipts of the accounting year during which the provision for meeting such expenditure was made and such a liability is not a contingent liability. Rule of consistency demand that unless and until something illegal is shown, AO has to follow the course of action taken for the earlier years. We found that the liability said to have been discharged in this matter by way of provision was in respect of the expenses already incurred during the financial year 2011-12 and payments made subsequent to the closure of the books of accounts but before the approval of the same. While respectfully following the decision of the Hon’ble Apex Courtin the case of Bharat Earth Movers [2000 (8) TMI 4 - SUPREME COURT] and also Radhaswami Satsang vs CIT [1991 (11) TMI 2 - SUPREME COURT], we are of the considered opinion that the amount under the provision is an allowable deduction.Further, in these peculiar circumstances, no revenue implications are there. While accepting the contention of the assessee, we find that the appeal is devoid of merit and is liable to dismissed - Decide against revenue

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• 2019 (1) TMI 1526
  Charitable activity - registration u/s 12AA denied - necessity of qualifying the trust as a “general public utility trust” - Held that:- Section 12AA(1)(b) provides that if the Principal Commissioner or Commissioner is satisfied about the object of the trust and the genuineness of its activities, he shall pass an order in writing registering the trust and if not so satisfied, pass an order refusing to register the trust. Thus, the power of the CIT is to register or to refuse the registration of the trust. He is not supposed to qualify the trust as “general public utility trust”. It is for the Assessing Officer to examine every year after considering the activities of the trust whether they fall within any of the above clauses of charitable activities. The CIT is not supposed to specify while registering the trust the activities which can or would be performed by the trust. In view of the above, we direct that the trust would be granted registration under Section 12AA of the Act without any qualification. - Decided in favour of assessee.

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• 2019 (1) TMI 1525
  Addition on Foreign Remitance from LTC College London (U.K.) terming as loan remitted though banking channel - "commission" or as "against invoice" which is reflected in the account statements of the banks - Held that:- CIT(A) has based his order on two remand reports. In the remand reports, the AO has admitted that “LTCC” is remitting the money through banking channel and the college has given confirmation. Doubts have not been raised. When we have confronted this aspect to the ld.DR, then he was unable to rebut the finding of the ld.CIT(A), rather conceded that this finding has been recorded on the basis of remand report given by the AO under the tutelage of additional CIT. CIT(A) has deleted this addition after reproducing reconciliation of cash entry with cashbook. The assessee has demonstrated as to how it has deposited the cash in the bank account, and how this cash was available with the assessee in the cash book. This was also not rebutted in the remand report by the AO. The ld.CIT(A) in the finding extracted on both the issues has based its finding on remand reports. Revenue has not raised any plea that any additional evidence was entertained by the ld.CIT(A) in violation of Rule 46 of the Income Tax Rules. We have duly extracted grounds of appeal taken by the Revenue. Taking into consideration, the detailed order of the ld.CIT(A) on both the issues, we do not find any reasons to interfere in it. Hence, appeal of the Revenue is dismissed.

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• 2019 (1) TMI 1524
  Penalty u/s 271(1)(c) - TPA adjustment - assessee has used multiple year data in computing the ALP - Held that:- TPO/Assessing Officer has held that such action by the assessee is contrary to the provisions of the Act and would tantamount to furnishing of inaccurate particulars of income. In our understanding of the law, prior to 2007, there was a legal debate as to whether multiple year data can be used or current year data has to be used. In our considered opinion, this being a debatable issue at that point when the assessee filed its return of income, adoption of multiple year data for arriving at ALP is a bonafide exercise. Therefore, it cannot be said that the assessee has not done TP exercise in good faith and with due diligence. Another reason for making the adjustments was that the assessee had claimed capacity utilisation which was denied by the TPO/CIT(A)/ITAT. The difference in level of capacity utilisation is an accepted principle though denied in the case of the assessee but then the same cannot tantamount to filing TP report without good faith and due diligence. Considering the TP documentation of the assessee in totality, we are of the considered opinion that neither Explanation 1 as applied by the Assessing Officer nor Explanation 7 as applied by the CIT(A) to section 271(1)(c) of the Act apply. No merit in the penalty so levied and we, accordingly, direct the Assessing Officer to delete the same. - decided in favour of assessee

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• 2019 (1) TMI 1523
  Determination of the full value of consideration in computation of long term capital gain - sale consideration adoption - transfer of flat - occupancy rights settled by allotting new flat in new building - litigation between the assessee and Sh, Shinde - Section 50C applicability - Held that:- Assessee received a sum of ₹ 11,000/- through cheque no. 99308 on 09-04-2001, which is prior to the date of agreement to sell, that is, 31.5.2002. This evidences that the assessee genuinely entered into an agreement to sell with the Developer on 31-05-2002 and received a sum of ₹ 11,000/-, which constitutes receipt of a ‘part’ of consideration before the date of agreement. Not only that, the assessee received further sums of ₹ 2 lakh on 23-10-2002; ₹ 5 lakh on 16-04-2003 and ₹ 7 lakh before 11-01-2007. All these receipts were through banking channel. A factual finding recorded by the ld. CIT(A) in the impugned order to this extent has not been controverted on behalf of the Revenue. When we conjointly read the two provisos to section 50C(1), it emerges that the assessee entered into an agreement to sell on 31-05-2002; received part payments; and finally executed registered conveyance deed on 28-07-2010. Having satisfied the mandate of second proviso and further going by the first proviso to section 50C(1), the stamp value for the purpose of computation of capital gain at the time of sale in the year 2010 should be considered with reference to the date of agreement, namely, 31- 05-2002 The sale consideration is one 495 sq.ft. flat in the new building plus monetary consideration of ₹ 51 lakh, the Revenue has considered the value of two flats of 405 sq. ft. and 495 sq ft. plus ₹ 51.00 lac as the full value of consideration. We have seen the entire gamut of the factual panorama above, from which it transpired that Shri Shinde was having some occupancy rights in flat no. 5A of ‘Sai Chhaya’ and eventually his claim was settled by allotting him a 405 sq. ft. flat in the new building. It is in this light of the facts that we need to decide whether the assessee transferred flat no. 5 and 5A in ‘Sai Chhaya’ or only flat no. 5. Whereas the assessee is contending that he transferred only one flat, the Department has opined that he transferred both the flats. We find from the nature of litigation between the assessee and Sh, Shinde that the latter was having only occupancy right in respect of flat no. 5A. The ownership right in it vested only in the assessee. No material has been brought on record to establish the ownership right of Sh, Shinde in flat no.5A. As such, it is held that as the assessee was legal owner of both the flats, 5 and 5A, in ‘Sai Chhaya’, it was he alone who transferred both the flats admeasuring 898.48 sq.ft. area to the Developer. Thus the stamp value as well as the actual sale consideration has to be worked out accordingly. Allowing deduction to the assessee on account of the value of one flat of 405 sq.ft. to be allotted to Sh. Shinde in the new developed building - Held that:- When we conjointly read the two provisos to section 50C(1), it emerges that the assessee entered into an agreement to sell on 31-05-2002; received part payments; and finally executed registered conveyance deed on 28-07-2010. Having satisfied the mandate of second proviso and further going by the first proviso to section 50C(1), the stamp value for the purpose of computation of capital gain at the time of sale in the year 2010 should be considered with reference to the date of agreement, namely, 31- 05-2002. We order accordingly. The Hon’ble Bombay High Court in CIT Vs. Abrar Alvi [2000 (3) TMI 20 - BOMBAY HIGH COURT] has held that a payment for removal of encumbrances is deductible u/s.48(1) as expenses incurred wholly and exclusively in connection with transfer. Where this is not possible, without discharge of liability, payment towards such liability should be considered as ‘in connection with transfer’, which expression is wide than that of the ‘transfer’. Also in CIT Vs. M/s. Bradford Trading Company (P) Ltd. [2002 (9) TMI 33 - MADRAS HIGH COURT] holding that the amount paid for removing encumbrances and settlement of claim is expenditure incurred in connection with transfer of a capital asset deductible u/s.48(1) of the Act. In the light of the above, it is held that the value of flat of 405 sq.ft. to be allotted in the new building should be accordingly reduced from the full value of consideration u/s 48(i).

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• 2019 (1) TMI 1522
  Entitlement to exemption under section 11 to cricket associations - whether it is hit by the proviso to Section 2(15)? - charitable activity - Held that:- So far as the cricket associations are concerned, the allegations of the revenue authorities have no bearing on the denial of the status of ‘charitable activities’ in the hands of the cricket associations before us- particularly as learned Commissioner has not been able to point out a single object of the assessee cricket associations which is in the nature of trade, commerce or business, and, as it is not even in dispute that the objects being pursued by the assessee cricket associations are “objects of general public utility” under section 2(15). All the objects of the assessee cricket associations, as reproduced earlier in this order, unambiguously seek to promote the cricket, and this object, as has been all along accepted by the CBDT itself, an object of general public utility. Cricket is indeed an immensely popular game in this part of the world, and anything to do with cricket results in mass involvement of public at large. The sheer strength of these numbers results in higher visibility of cricketing activities and the scale of operations on which the work for development of cricket is to be carried out. These facts, by itself, and without the assessee before us deviating from their objects or venturing into trade, commerce or business, cannot require the activities to be treated as commercial activities. When a cricket stadium is to be built, it has to accommodate a very large number of persons but the size of the stadium would not mean that the activity is for anything other than promotion of cricket.. When the numbers are large, the scale of operations is large, and when scale of operations are larger, even the surplus or deficit could be large, but then the scale of operations may be a scale on which commercial activities could be carried out but that fact cannot convert an object of general public utility into a commercial activity. As analysed the annual reports and the annual financial statements of the assessee, and we do not find any objects, other than objects of the cricket associations, being pursed by these cricket associations. The objects of these cricket associations clearly demonstrate that these cricket associations exist and operate purely for the purpose of promoting cricket. We are, therefore, of the considered view that the proviso to Section 2(15) has been wrongly invoked in these cases. In the cases of various other cricket associations- details of which are set out earlier in this order, holding that the proviso to Section 2(15) cannot be invoked in the cases of such similarly placed cricket associations. Respectfully following the same, and also for the detailed reasons set out above, we uphold the plea of the assessee. We are not reproducing extracts from these decisions, for the sake of brevity, but we adopt, and concur with, the reasoning of these decisions. When proviso to Section 2(15) cannot be invoked on the facts of these cases, the benefits of Section 11 and 12, which were declined only by invoking the proviso to Section 2 (15), could not have been declined on the facts of these cases. We have noted that all the learned representatives have advanced detailed arguments on the proposition that since the assessee cricket associations are engaged in educational activities, it is not really material whether or not the assessee has engaged itself in the activities in the nature of trade, commerce or business. However, in the light of our categorical finding that the assessee cricket associations were not really engaged in the activities in the nature of trade, commerce or business, it is not really necessary to adjudicate on this plea. We leave the question open for adjudication in a fit case. The assessee is thus held to be carrying out ‘charitable activity’ within the meanings of that expression under section 2(15) and, accordingly, the assessee is entitled to relief under section 11. As to whether the assessee is carrying out educational activities or not, given our above finding, that aspect of the matter is wholly academic as on now and we decline to address that issue. Corpus donation - Held that:- We uphold the plea of the assessee and direct the Assessing Officer to treat the TV subsidy received from the BCCI as a corpus donation. The assessee gets the relief accordingly. As we have decided the main grievance of the assessee, as set out in ground no. 3 (a), we see no need to adjudicate on the alternative plea set out in ground 3 (b). That aspect of the matter is rendered academic and does not call for any adjudication as on now. Infrastructure subsidy received - capital or revenue receipt - Held that:- As long as the subsidy is relatable to a capital asset created by the assessee on his own or by an eligible district cricket association, as the present subsidy undisputedly is, it is outside the ambit of revenue receipt and taxable income. The very foundation of the stand of the Assessing Officer is thus devoid of legally sustainable merits. As such, there can hardly be an occasion, in principle, to hold such a subsidy as a revenue receipt or taxable income. There is not even a whisper of a discussion by the Assessing Officer to the effect that infrastructure subsidy is revenue in nature. As a matter of fact, the claim is made for the subsidy only after the expenditure having been incurred. The authorities below have simply brushed aside the case and the submissions of the assessee and proceeded to hold it as an income. Looking to the nature of the subsidy, which is clearly relatable to the capital assets generated, we are unable to hold this receipt in the revenue field. Deprecation not to be allowed on assets purchased in prior years - Held that:- This issue now stands concluded by Hon’ble Supreme Court’s judgment in the case of CIT Vs Rajasthani & Gujarati Charitable Foundation [2017 (12) TMI 1067 - SUPREME COURT] wherein Grant of depreciation even upon full cost of the asset being allowed. The assessee gets the relief accordingly.

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• 2019 (1) TMI 1521
  Penalty u/s 271(1)(c) - deliberate concealment of income OR bonafide contesting claim of exemption - assessee was not entitled to claim u/s 54F and 54B for the specific reason that the land so sold was not agricultural one, the same was converted into a non-agricultural land before transferring it on 30.11.2010 by the assessee - Held that:- It is evident from the records that in this particular case, the assessee has disclosed all particulars with bonafide belief, no such disclosure was found to be incorrect. Neither the assessee concealed the income by not showing such income in its return or in its books of accounts. The assessee did not hide any income so mentioned in his return, the documents relating to the agricultural land sold by the assessee was produced before the AO, claimed u/s 54F regarding investment for purchase of land for construction of house, investment for purchase of flat or cost of construction of the residential house was duly disclosed by the assessee in his return and the corroborating evidences were also placed before the Assessing Officer. Therefore, there is no conclusive evidence of concealment of income ever found by the authorities below. The primary fact was duly disclosed by the assessee relating to his claim. Merely because the claim was made on bonafide belief of the appellant, the same cannot be held that the income was concealed or inaccurate particulars were furnished. Since, the claim was rejected as not tenable does not empower the revenue authorities to levy the penalty. We repeat that the appellant had furnished all the details, information and explanation regarding his claim of exemption during assessment. No information or details were withheld from the acknowledgement of the Assessing officer. It can be a wrong claim, but according to us, cannot be said to be false. Merely because the claim was made on bonafide interpretation and belief of the appellant it cannot be held that income was concealed or inaccurate particulars furnished. Case of COMMISSIONER OF INCOME-TAX VERSUS RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] to be followed - decided in favour of assessee

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• 2019 (1) TMI 1520
  Penalty u/s 271(1)(c) - disallowance of depreciation on electric fittings - rate of depeciation - Held that:- It is observed from orders of authorities below that assessee claimed depreciation at 25% on ground that these were electrical installations which are not in the nature of Electrical fittings and capital expenditure made for DG set, Transformers, switch panels and other accessories required to run a particular machinery. It is also observed that assessee was of the view that these installations comes within definition of plant under section 43 (3) of the Act. Further Ld.CIT (A) himself records that there has been differences of opinion with regard to applicability of rate of depreciation on items of Electrical installation. Merely because assessee claimed depreciation at 25% treating items to be plant, which claim was not acceptable to revenue, would not by itself attract penalty under section 271 (1) (c) of the Act. The disallowance can at best be a wrong claim but not a false claim. See COMMISSIONER OF INCOME-TAX VERSUS BACARDI MARTINI INDIA LTD. [2006 (9) TMI 104 - DELHI HIGH COURT] - Decided in favour of assessee Penalty levied on account of technical assistance/know-how expenses - Nature of expenses - Held that:- It is observed that assessee offered explanation which has not been found false by Ld.AO or by Ld.CIT(A). Further in our considered opinion claim of capital versus revenue expenditure itself is debatable and therefore cannot be subject matter of penalty by way of concealment or filing of inaccurate particulars.- Decided in favour of assessee

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• 2019 (1) TMI 1519
  Adhoc disallowance of direct expenses - discounts to sales - basis for disallowing the claim of the assessee - Held that:- CIT(A) has agreed that in the earlier years, discount on sales was reduced from the sale figure and only net sale was shown in the P&L A/c and whereas in the impugned assessment year, gross sales figure has been shown in the receipts side of P&L A/c and the discounts were shown as direct expenses in the payment side of the P&L A/c. When the CIT(A) has accepted this explanation, there is no basis for disallowing the claim of the assessee. There is not finding that the discounts given were more than the previous year as a percentage of sales. When the percentage of discounts to sales is consistent over the years then the ad-hoc disallowance is bad in law. Just because there are certain difficulty in verification of bills, the discounts cannot be restricted to the absolute figure of what amount was allowed in the immediately previous year. The discount in question is linked to the sales and is business expenditure. We see no reason why the discount should be restricted by the CIT(A) while agreeing with the contention of the assessee. The adhoc disallowance made by the AO, in our view is factually and legally not sustainable. We allow Ground of the assessee and direct the AO to grant deduction of the balance amount of discount claimed by the assessee. Disallowance of collection charges - Held that:- The grant of disallowance cannot be sustained. No disallowance can be made on the ground that verification of documents/evidences is time consuming. Admittedly the assessee has produced bills and vouchers as desired by the AO in the remand proceedings, when this fact is not denied, the disallowance cannot be sustained, thus, Ground of assessee is allowed.

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• 2019 (1) TMI 1518
  Deduction u/s. 36(1)(viia) - repetitive appeals - Held that:- In view of the fact that similar issue has been decided earlier against the assessee by the Tribunal, respectfully following the precedent, we uphold the impugned orders in restricting the claim of deduction u/s.36(1)(viia) to the extent of provision in the books of account. Chapter XIV-A of the Income-tax Act deals with the provision for avoiding repetitive appeals. It has only one section 158A which contains a procedure when assessee claims that identical question of law is pending before High Court or Supreme Court. In the instant case the assessee wants to keep the matter alive till the decision of the Hon'ble High Court on the said issue. We, therefore, admit, in terms of sec. 158A(3), that the question of law arising in the instant appeal, is identical with the question of law stated to be pending before the Hon'ble High Court. Resultantly the appeals of the assessee are dismissed as per sec. 158A(4). It is, however, made clear that when this issue is decided by the Hon'ble High Court, amendment, if necessary, shall be made as per the mandate of sec. 158A(5). - Decided against assessee.

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• 2019 (1) TMI 1517
  Non deduction of TDS on account of Contractual Payments to the Gunman - Additions u/s 40(a) (ia) - income of a statutory corporation established by Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen (being citizen of India) - Exemption U/S 10(26BBB] - Held that:- Section 10 (26BBB) came into existence after the issue of the said Circular dated 16-7-2002. The said section was inserted in the Income - tax Act vide Finance Act, 2003 (w.e.f. 1-4-2004) unconditionally exempting any income of a corporation established by a Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen being the citizens of India. The corporations covered under section 10(26BBB) are also statutorily not required to file return of income as per section 139 of the Act. References were received in the Board requesting for extension of the aforesaid exemption from TDS granted vide Circular No.4/2002 to the corporations covered under section 10(26BBB) as well. The CBDT has now clarified that there would be no requirement for tax deduction at source from payment made to corporations enjoying exemption under section 10(26BBB). The Central Board of Direct Taxes, issued Circular No. 07/2015 no. F. No. 275/50/2006 IT(B) Dated April 23, 2015 on serial no 65 Any Income of a corporation for ex-servicemen [Section 10(26BBB)]. From assessment year 2004-05, any income of a statutory corporation established by Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen (being citizen of India) is exempt from tax under section 10 (26BBB). Keeping in view the Circular issued by the CBDT the disallowance made by the Assessing Officer which was not based on the said Circular is hereby deleted. Disallowance under section 43B - interest expenses payable to SADB as on 31st March 2013 - Held that:- We have gone through the provisions of the Income Tax Act,1961 which specifically excludes the Co-operative Development Banks from the purview of the provisions of Section 43B. Hence, the addition made by the Assessing Officer without any legal basis is hereby directed to be deleted.

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• 2019 (1) TMI 1493
  Penalty u/s. 271(1)(c) - assessment u/s.153C - unexplained income - loan taken from firm stood dissolved - delay in recording satisfaction from the completion of the assessment of the person searched - income assessable in hands of firm after dissolution - Held that:- The fact that the firm M/s. K. R. Boob & Sons got dissolved on 28-12-2003 and the assessee took over the dissolved firm as an individual, cannot alter the legal position which requires the assessment of the dissolved firm, if any, in the hands of the firm itself Once it is found as an admitted position that the entity taking loan from Shri Shriram H. Soni was M/s. K.R. Boob & Sons, a partnership firm, we fail to comprehend as to how the addition on account of interest and brokerage thereon could be made in the hands of the assessee in his individual capacity. We are satisfied that the addition in respect of any undisclosed income from the transaction of payment of interest and brokerage from undisclosed sources, if any, should have been considered only in the hands of M/s. K.R. Boob & Sons, a partnership firm and not the assessee. Since the instant additions have been made in the hands of the assessee, an individual, a hitherto partner of the firm M/s. K.R. Boob & Sons, we set-aside the same and order to delete them in the hands of the assessee. The AO is at liberty to take any other suitable remedial action as per the provisions of the Act, if any. We hold that the delay of 6-7 months in recording satisfaction from the completion of the assessment of the person searched cannot be held as vitiating the assessment on this count, but the delay beyond this period would call for quashing of assessment of the person other than the person searched on account of delay in recording satisfaction. CBDT Circular No.24/2015 dated 31-12-2015 has recognized that the judgment of Hon’ble Supreme Court in CIT Vs. Calcutta Knitwears [2014 (4) TMI 33 - SUPREME COURT] in the context of section 158BD applies to the assessment u/s.153C as well. As advert to the facts of the instant case, it is found that the assessment of Shri Shriram H. Soni, the person searched was completed on 27-03-2006. The AO of Shri Shriram H. Soni recorded satisfaction on 20-02-2007 and remitted the incriminating material etc. to the AO of the assessee. This shows that there was a delay of about 11 months from the completion of assessment of Shri Shriram H. Soni. Delay of around 11 monthly is clearly hit by the threshold period of 6-7 months, as held supra by us to be reasonable. Additions have been wrongly made and sustained. We, therefore, order to delete these additions. In view of our decision on the deletion of additions on merits, there remains nothing requiring imposition or confirmation of penalty u/s.271(1)(c) of the Act in respect of three assessment years under consideration. We, therefore, order to delete the penalty in all the three years under appeal. - Decided in favour of assessee.

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• Customs

• 2019 (1) TMI 1514
  100% EOU - Exemption under N/N. 13/81 Custom dated 9.2.1981 - raw materials, including those rendered as wastage during manufacture of exported goods - imported raw materials contained in wastage in excess of input-output norms - demand of duty with penalty on wastage of imported fabrics - Whether based on the standard input output norms (SION) fixed under the Exim Policy, the appellant can be called upon to pay customs duty in respect of the excess fabric consumed by it? Held that:- The Duty Exemption Scheme is contained in Chapter VII of the Import Export Policy and Procedures, 1992-1997. Paragraph 113 thereof relates to Special Schemes. Sub-clause (ii) thereof, which is relevant for the present purpose, provides that for readymade garments (other than the leather garments) the special scheme for value based licence provides for the import of fabrics and trimming/embellishments with Actual User condition. The details of the scheme are given in the Handbook of Procedure, 1992-97 (Vol.II) - Vide Notification No.13-Cus dated 9.2.1981, the Central Government, in exercise of powers under section 25 of the Customs Act, has exempted goods specified in the table therein below when imported into India for the purpose of manufacture of articles for export out of India by 100% export oriented undertakings approved by the Board of Approval for 100% Export Oriented Undertakings from the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 and the additional duty, if any, leviable thereon under section 3 of that Act, subject to the conditions stipulated thereunder. In this case, there is no dispute that the duty free imported goods were used in the manufacture of final products for export and the waste was generated during the course of the manufacturing process. The export obligation against the goods imported as per the letter of intent has been fulfilled - It is also not in dispute that the waste was disposed of after due permission being obtained from the Deputy Commissioner, Central Excise - The department has nowhere alleged that the duty free imported goods were not consumed in the manufacturing of the finished goods or that such goods have been cleared in the guise of removal of waste. There is no allegation relating to removal of goods with intent to evade payment of duties - In the opinion of this court, once it is not disputed that the goods were used in the manufacturing of finished goods and the export obligation has been duly fulfilled, the benefit of exemption provided under the notification in question cannot be denied to the appellant. N/N. 13-Cus dated 9.2.1981 - Held that:- Notification No.13-Cus is primarily concerned with fulfillment of export obligation from the goods imported into India and the satisfaction required to be recorded by the Assistant Collector as contemplated by Condition (6) is not in the context of wastage generated, but in the context of manufacture of articles for export from the imported goods. Therefore, such satisfaction would be relatable to actual use of the goods for the purpose of manufacture to ensure that there is no diversion of goods or that imported raw material is not clandestinely removed - In the present case, as noticed earlier, it is not the case of the respondent that any part of the imported fabric has been diverted or clandestinely removed. The only allegation is that the waste generated is more than the standard input output norm, which has nothing to do with the fulfillment of export obligation or compliance with the conditions of the exemption notification. Under the circumstances, the raw material being exempted under N/N. 13/81-Customs dated 09.02.1981, the demand of customs duty on imported raw materials contained in wastage in excess of input-output norms is not justified. Despite the fact that excess consumption has been found as compared to the standard input output norms, such excess waste has been permitted to be destroyed by the Deputy Commissioner, Central Excise & Customs, and hence, the respondent is not justified in demanding customs duty forgone on the excess waste material worked out on the basis of the input-output norms - This court is of the view that the mere fact that the wastage is in excess of the input output norms, without anything more, would not be sufficient for the Assistant Collector to arrive at the satisfaction that the imported fabric has not been used for the manufacture of the articles for export. Condition No.6 of the Notification No.13-Customs dated 9.2.1981, cannot be read in a manner whereby despite the fact that the assessee is in a position to show that the entire material has been used for the purpose of manufacture of goods and there is no allegation with regard to diversion of goods, merely because the wastage norms are not satisfied, the Assistant Collector of Customs can record satisfaction to the effect that the goods have not been used for the manufacture of articles for export. The Appellate Tribunal was, therefore, not justified in confirming the customs duty on imported raw materials contained in wastage in excess of input output norms under the Export Import policy - appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1513
  100% EOU - Vires of CBEC Circular No.62/2001-Cus dated 12.11.2001 - meaning of Manufacture held by judiciary - input output ratio - relevancy of CBEC Circular No.1029/17/2016-CX dated 10.05.2016 issued in respect to Cenvat Credit Rules, 2004 - clearance of foundry scrap beyond the ratio/norms of scrap laid down by the Norms Committee - N/N. 52/2003-Cus dated 31.03.2003. Whether clearance of imported scrap after segregation can be said to be clearance as such ? - Held that:- While the Circular 1029/2016-/CX dated 10th May, 2016 clarifies whether segregated foreign materials from imported honey grade brass scrap can be treated as inputs as such as contemplated in rule 3(5) of the CENVAT Credit Rules, 2004, the principle involved is the same. In this case also, the segregated material has an altogether different character and use vis- -vis the brass scrap. The value per unit and classification of the segregated foreign materials is also different from that of the imported brass scrap. As a necessary corollary therefore, the segregated foreign material cannot be treated as input as such for the purpose of levy of customs duty. The Tribunal, therefore, did not commit any error in placing reliance upon Circular No.1029/2016-/CX dated 10th May, 2016. Whether clearance of such scrap upon payment of excise duty would fall within the ambit of paragraph 3 of Notification No.52/2003-Cus dated 31.03.2003? - Held that:- Waste and scrap arising in the course of production or manufacture of finished goods are also exempt from the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 and the additional duty, if any, leviable thereon under section 3 of the said Customs Tariff Act - Reverting to the facts of the present case, the segregated waste has arisen in the course of production/manufacture of the finished goods viz. brass articles; the Commissioner of Customs has recorded that the segregated waste had in fact been cleared on payment of duty after being duly permitted by the Development Commissioner in accordance with the provisions of the EXIM Policy. The requirements of clause (3) of Notification: 52/2003-Cus dated 31st March, 2003 are therefore, wholly satisfied. Under the circumstances, there does not appear to be any legal infirmity in the view adopted by the Tribunal. It is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to any question of law, much less, a substantial question of law, warranting interference - appeal dismissed.

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• 2019 (1) TMI 1512
  Anti-dumping duty - Expired notification - N/N. 50/2017-Customs (ADD) dated 18.10.2017 - imports made by the petitioner firm from the countries specified in N/N. 34/2012-Customs (ADD) dated 03.07.2012 - import of Soda Ash - revocation of N/N. 34/2012 by the Central Government - Whether the respondents are entitled to collect anti-dumping duty from the petitioner in respect of import of Soda Ash from the countries referred, in the absence of any statutory right conferred on them, especially, when such right conferred through the Notification got expired already on 02.07.2018? Held that:- There is no dispute to the fact that the anti-dumping duty was imposed in pursuant to the Notification issued as stated. It is also not in dispute that the right to collect such anti-dumping duty got expired on 02.07.2018. Even otherwise, as it is admitted by the respondents in the counter affidavit that the DGAD has already passed an order on 14.12.2018 holding that the continuation of anti-dumping duty is not warranted and thus, he is not recommending for the extension of the anti-dumping duty on import of subject matter from the subject countries. It is an admitted case of the respondents that as on date, no notification is in force empowering the collection of ADD - On the other hand, it is a matter of fact such power conferred on the authorities through issuance of relevant notification ceased to exist after 02.07.2018. There is no justification on the part of the respondents in seeking for any interim protection for releasing the goods without collecting the anti-dumping duty on the reason that the order passed by DGAD dated 14.12.2018 is an appellable order - the respondents cannot insist upon the petitioner to protect the interest of the Revenue towards the anti-dumping duty in the absence of any statutory right available as on today for levying collecting such duty - petition allowed - decided in favor of petitioner.

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• 2019 (1) TMI 1511
  Valuation of imported goods - rejection of declared value - Section 12(1) of Customs Valuation (determination of value of imported goods) Rules, 2007 read with Section 14 of the Customs Act, 1962 - Appellants drew our attention to the amendment dated 14.10.2010 made in sales contract dated 29.07.2010 by which the quantity has been reduced to 12000 kgs and final destination of import has also been changed to Nhava Sheva Port - Revenue submitted that the amendment dated 14.10.2010 was not brought to the notice of the learned Commissioner - Held that:- The amendment dated 14.10.2010 has a bearing on the issue involved and therefore without going into the merits of the matter, the matter is remanded back to the learned Commissioner to decide it afresh, after looking into all the documents produced by the Appellants and in particular the amendment dated 14.10.2010 and also after hearing the Appellants on all the issues/points. Appeal allowed by way of remand.

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• 2019 (1) TMI 1510
  Valuation of imported goods - Processed Betel Nuts - N/N. 12(RE-2013)/2009-14 dated 13.05.2013 - whether the betel nuts are liable for confiscation by declaring value which were lesser than the price fixed by the DGFT in the Notification - Held that:- The issue is no more res-integra in view of the decision of the Hyderabad Bench of this Tribunal in the case of International Seaport Dredging Ltd. vs. C.C. & S.T., Visakhapatnam [2016 (11) TMI 176 - CESTAT HYDERABAD]. The Tribunal has taken the view that as the goods were cleared after collecting duty on the basis of tariff rate, it cannot be held that the goods are prohibited - In the present case also, it is the Revenue’s contention that the goods being of lesser value, required a licence and thus has to be considered as prohibited. However, the decision of the Tribunal in the case of International Seaport Dredging Ltd. vs. C.C. & S.T., Visakhapatnam is squarely applicable to the facts of the present case. There are no justifiable reasons to confiscate the betel nuts in question. Penalty u/s 112(a) of FA - Held that:- Penalty in terms of Section 112(a) of the Customs Act is imposable where a person does anything or omits to do anything rendering the goods liable to confiscation - The imposition of penalty upon the appellant is also not justifiable and the same is accordingly set aside. Redemption fine imposed under Section 125 of the Customs Act, 1962 is set aside. Appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2019 (1) TMI 1516
  Rejection of application for discharge filed by the applicant - It is the contention of the applicant that, he has nowhere connected for the alleged offences registered against him - sufficient ground for framing the charges existed - Held that:- From the perusal of the statements of the Chetna Naresh Chandan, Dimple Kamlesh Kanungo and Dheeraj B. Shah clearly show that the applicant himself played a leading role to invest the amounts of Wasankar (WWML Company). Therefore, at this stage, it cannot be said that there is no sufficient material to frame the charge. Learned ASJ-3 (Special Judge) rightly rejected the application for discharge. Therefore, there is no merit in this application - the present revision application is rejected.

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• 2019 (1) TMI 1509
  Repayment of deposits accepted before commencement of Section 74 of the Companies Act, 2013 - time limit to repay in terms of Section 74(1) - Held that:- By virtue of the order dated 03.11.2016, the period of compliance with the requirement of Section 74(1) of the Companies Act, 2013, as extended earlier by the tribunal in the company petition in terms of order dated 11.03.2016 stood further extended upto 31.12.2016 pursuant to directions of the appellate tribunal in appeal - This remains the factual position as shown by careful reading of the final order in appeal passed on 31.01.2017, wherein the appellate tribunal expressly said that it had found no grounds to extend the period beyond 31st December, 2016 . It is clear that the gravamen of the charge on which the prosecution under the penal clause contained in Section 74(3) is to be founded has to be to the effect that the company to be prosecuted had failed to abide by its liability under Section 74(1) or within the extended period granted by the tribunal on a petition to that effect. Since the order of the tribunal does not attain finality inasmuch as there is a remedy of appeal available there against, the provision contained in Section 74(2), in so far as it refers to the time allowed by the tribunal will have to be construed as the time allowed by the tribunal alongwith modification in such regard if ordered in appeal by the appellate tribunal. The criminal complaint on which the cognizance was taken on 20.09.2016 was rendered premature or infructuous upon the appellate tribunal entertaining the appeal under Section 421 and granting an interim protection extending the period of compliance upto 31.12.2016. By virtue of the subsequent order of the appellate tribunal, bottom had gone out of the case of the respondent in the aforementioned criminal complaint case, continuation whereof would undoubtedly be an abuse of the process of the court. Petition allowed.

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• Insolvency & Bankruptcy

• 2019 (1) TMI 1508
  Constitutional validity of various provisions of the Insolvency and Bankruptcy Code, 2016 - corporate debtor - Code for reorganization and insolvency resolution of corporate debtors - Regulations 16A and 16B of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Held that:- Since the financial creditors are in the business of money lending, banks and financial institutions are best equipped to assess viability and feasibility of the business of the corporate debtor. Even at the time of granting loans, these banks and financial institutions undertake a detailed market study which includes a techno-economic valuation report, evaluation of business, financial projection, etc. Since this detailed study has already been undertaken before sanctioning a loan, and since financial creditors have trained employees to assess viability and feasibility, they are in a good position to evaluate the contents of a resolution plan. On the other hand, operational creditors, who provide goods and services, are involved only in recovering amounts that are paid for such goods and services, and are typically unable to assess viability and feasibility of business. The BLRC Report, already quoted above, makes this abundantly clear. The operational creditors are not discriminated against or that Article 14 has been infracted either on the ground of equals being treated unequally or on the ground of manifest arbitrariness. The main thrust against the provision of Section 12A is the fact that ninety per cent of the committee of creditors has to allow withdrawal. This high threshold has been explained in the ILC Report as all financial creditors have to put their heads together to allow such withdrawal as, ordinarily, an omnibus settlement involving all creditors ought, ideally, to be entered into. This explains why ninety per cent, which is substantially all the financial creditors, have to grant their approval to an individual withdrawal or settlement. In any case, the figure of ninety per cent, in the absence of anything further to show that it is arbitrary, must pertain to the domain of legislative policy, which has been explained by the Report. Also, it is clear, that under Section 60 of the Code, the committee of creditors do not have the last word on the subject. If the committee of creditors arbitrarily rejects a just settlement and/or withdrawal claim, the NCLT, and thereafter, the NCLAT can always set aside such decision under Section 60 of the Code. For all these reasons, we are of the view that Section 12A also passes constitutional muster. Resolution professional has no adjudicatory powers - Held that:- When the liquidator determines the value of claims admitted under Section 40, such determination is a decision , which is quasi-judicial in nature, and which can be appealed against to the Adjudicating Authority under Section 42 of the Code - Unlike the liquidator, the resolution professional cannot act in a number of matters without the approval of the committee of creditors under Section 28 of the Code, which can, by a two-thirds majority, replace one resolution professional with another, in case they are unhappy with his performance. Thus, the resolution professional is really a facilitator of the resolution process, whose administrative functions are overseen by the committee of creditors and by the Adjudicating Authority. Constitutional Validity of Section 29A - retrospective application - Held that:- It is settled law that a statute is not retrospective merely because it affects existing rights; nor is it retrospective merely because a part of the requisites for its action is drawn from a time antecedent to its passing - it is clear that no vested right is taken away by application of Section 29A. Section 29A(C) not restricted to malfeasance - Held that:- The legislative purpose which permeates Section 29A continues to permeate the Section when it applies not merely to resolution applicants, but to liquidation also. Consequently, this plea is also rejected. The One-year period in section 29A(C) and NPAs - Held that:- As a matter of legislative policy therefore, quite apart from malfeasance, if a person is unable to repay a loan taken, in whole or in part, within this period of one year and three months (which, in any case, is after an earlier period where the corporate debtor and its financial creditors sit together to resolve defaults that continue), it is stated to be ineligible to become a resolution applicant. The reason is not far to see. A person who cannot service a debt for the aforesaid period is obviously a person who is ailing itself. The saying of Jesus comes to mind if the blind lead the blind, both shall fall into the ditch. The legislative policy, therefore, is that a person who is unable to service its own debt beyond the grace period referred to above, is unfit to be eligible to become a resolution applicant. This policy cannot be found fault with - Neither can the period of one year be found fault with, as this is a policy matter decided by the RBI and which emerges from its Master Circular, as during this period, an NPA is classified as a substandard asset. The ineligibility attaches only after this one year period is over as the NPA now gets classified as a doubtful asset. Related party - Held that:- The persons who act jointly or in concert with others are connected with the business activity of the resolution applicant. Similarly, all the categories of persons mentioned in Section 5(24A) show that such persons must be connected with the resolution applicant within the meaning of Section 29A(j). This being the case, the said categories of persons who are collectively mentioned under the caption relative obviously need to have a connection with the business activity of the resolution applicant. In the absence of showing that such person is connected with the business of the activity of the resolution applicant, such person cannot possibly be disqualified under Section 29A(j). All the categories in Section 29A(j) deal with persons, natural as well as artificial, who are connected with the business activity of the resolution applicant. The expression related party , therefore, and relative contained in the definition Sections must be read noscitur a sociis with the categories of persons mentioned in Explanation I, and so read, would include only persons who are connected with the business activity of the resolution applicant - Therefore, any such person is not indeterminate at all, but is a person who is in the saddle of the business of the corporate debtor either at an anterior point of time or even during implementation of the resolution plan. This disposes of all the contentions raising questions as to the constitutional validity of Section 29A(j). Exemption of micro, small and medium enterprises from section 29A - Held that:- When the Code has worked hardship to a class of enterprises, the Committee constituted by the Government, in overseeing the working of the Code, has been alive to such problems, and the Government in turn has followed the recommendations of the Committee in enacting Section 240A. This is an important instance of how the executive continues to monitor the application of the Code, and exempts a class of enterprises from the application of some of its provisions in deserving cases. This and other amendments that are repeatedly being made to the Code, and to subordinate legislation made thereunder, based upon Committee Reports which are looking into the working of the Code, would also show that the legislature is alive to serious anomalies that arise in the working of the Code and steps in to rectify them. Section 53 of the code does not violate article 14 - Held that:- The unsecured debts are of various kinds, and so long as there is some legitimate interest sought to be protected, having relation to the object sought to be achieved by the statute in question, Article 14 does not get infracted. For these reasons, the challenge to Section 53 of the Code must also fail. The Insolvency Code is a legislation which deals with economic matters and, in the larger sense, deals with the economy of the country as a whole. Earlier experiments, as we have seen, in terms of legislations having failed, trial having led to repeated errors , ultimately led to the enactment of the Code. The experiment contained in the Code, judged by the generality of its provisions and not by so called crudities and inequities that have been pointed out by the petitioners, passes constitutional muster - the credit that has been given by banks and financial institutions to the commercial sector (other than food) has jumped up from INR 4952.24 crores in 2016-2017, to INR 9161.09 crores in 2017 2018, and to INR 13195.20 crores for the first six months of 2018 2019. Equally, credit flow from non-banks has gone up from INR 6819.93 crores in 2016-2017, to INR 4718 crores for the first six months of 2018-2019. Ultimately, the total flow of resources to the commercial sector in India, both bank and non-bank, and domestic and foreign (relatable to the non-food sector) has gone up from a total of INR 14530.47 crores in 2016-2017, to INR 18469.25 crores in 2017 2018, and to INR 18798.20 crores in the first six months of 2018-2019. These figures show that the experiment conducted in enacting the Code is proving to be largely successful. The defaulter s paradise is lost. In its place, the economy s rightful position has been regained. Petition disposed off.

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• 2019 (1) TMI 1507
  Initiation of Corporate Insolvency Resolution Process - sub-section (5)(c) of section 60 of the Insolvency and Bankruptcy Code, 2016 - Financial Creditors - Resolution Plan - application was filed on the ground that ‘Interim Resolution Professional’ has failed to consider that the assignment agreements which were entered into as late as 24th November, 2016, by which the existing debt of the ‘Corporate Debtor’ was suspiciously changed hands from a related party of the ‘Corporate Debtor’ being ‘Synergies Castings Limited’ to a third-party Non-Banking Financial Company being ‘Millennium Finance Limited’. Whether the assignment(s) made by ‘Synergies Castings Limited’ on 24th November, 2016 in favour of ‘Millennium Finance Limited’ is legal? Whether the order dated 2nd August, 2017 passed by the Adjudicating Authority approving the ‘Resolution Plan’ submitted by ‘Synergies Castings Limited’ is legal? Held that:- It is evident that on the date of acquisition of the debt in the instant case, the Appellant was not only aware about the factum of pendency of reference of the ‘Corporate Debtor’ with the ‘BIFR’ indicating its financial stressed position but also aware about its limited rights and exposure in the total secured debts of the ‘Corporate Debtor’ in terms of the order dated 29th May, 2012 passed by the ‘BIFR’ and the orders dated 1st February, 2013 & 20th June, 2013 passed by the ‘DRT’, Visakhapatnam. However, despite the same, the Applicant acquired the debts of the ‘Corporate Debtor’ and thereafter in the proceedings not only before the ‘BIFR’ but before the Tribunal making systemized efforts to derail and delay the revival prospects of the ‘Corporate Debtor’ - the Appellant in the present case is a minority creditor of the ‘Corporate Debtor’ and thus single handedly not entitled under law to interject and interfere in an appropriate ‘Resolution Plan’ having the consent of the majority ‘Financial Creditors’ of the ‘Corporate Debtor’. On perusal of the three assignment agreements, it is clear those documents are duly executed with the concerned authorities, and they are not questioned by any party to those proceedings. Appellant herein, being similarly situated like that of ‘Synergies Castings Limited’ and ‘Millennium Finance Limited’, do not have any locus standi to question the veracity of those documents on mere apprehensions or allegation of mala-fides or fraudulent etc. Admittedly, the Appellant is not a party to those Assignment agreements. It is not tenable to raise apprehensions before the Adjudicating Authority to adjudicate. The courts usually adjudicate issues basing on cause of action arisen in a particular case. The Adjudicating Authority cannot enter into roving enquiry on mere apprehensions, baseless allegations. It is hereby declare that both ‘Synergies Castings Limited’ and ‘Millennium Finance Limited’ were eligible to execute the assignment agreements in question and all rights flow those agreements to ‘Millennium Finance Limited’. After getting assignment of rights, the ‘Millennium Finance Limited’ is fully competent to participate in ‘Committee of Creditors’ in question and it cannot be called a related party as explained. Whether the above documents were executed without making reference to ‘BIFR’ is valid or not? - Held that:- Admittedly, the Appellant herein and the ‘Millennium Finance Limited’ are assignees of original lenders to ‘Synergies-Dooray Automotive Limited’. It is not the case of the Appellant that Assignors have no right to question the rights/interest to the assignee. It is the case of the Applicant that the Respondent No. 3 was assigned the rights/interest in question in order to deprive/reduce the interest of the Appellant herein in the ‘Committee of Creditors’. As long as the assignment agreement deeds are valid and legally enforceable, the Appellant has no locus standi to question its object, modus operandi behind its execution. The contentions of the Appellant that the ‘Millennium Finance Limited’ would become a related party by virtue of section 5(24) is not at all tenable. The Assignment deeds of various Banks/Financial Institutions/ARCs in favour of ‘Synergies Castings Limited’ happened way back in the years 2008-2011 and that too from ‘SBI’, ‘IDBI’, ‘ICICI’ (ARCIL). Therefore, the Adjudicating Authority has not find any fault with these assignment deeds. With respect to the allegation of ‘Synergies Castings Limited’ assigning its debt to ‘Millennium Finance Limited’ on 24th November, 2016, the Adjudicating Authority rightly held that there is no merit in this argument - The ‘I&B Code’ is a code by itself and section 238 provides over riding effect of it over the provisions of the other Acts, if any of the provisions of an Act is in conflict with the provisions of the ‘I&B Code’. Therefore, the arguments of the Appellant that merger and amalgamation of the companies cannot be proposed in the ‘Resolution Plan’ or such proposal is violative of clause(e) of sub-section (2) of section 30 is fit to be rejected. Appeal dismissed.

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• 2019 (1) TMI 1506
  Procedure for determining voting share for passing Resolutions in the CoC that comprise multiple class of Financial Creditor during the CIRP - whether the various threshold voting share fixed for the decision of the COC under various sections of the I & B Code needs to be followed literally or whether they are only directory, and if so, what procedure has to be followed in determining the voting percentage among the COC to pass a particular resolution? - Difference of opinion. Held that:- The case shall be referred by the President for hearing by one or more of the other Members of the Tribunal u/s 419(5) of the Companies Act, 2013 read with rule 60 of NCLT Rules.

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• 2019 (1) TMI 1505
  Initiation of Corporate Insolvency Resolution Process against Corporate Debtor - time limitation - filing of the application within the period of CIRP - disbursement of payments to financial creditors approved and passed by Committee of Creditors (CoC) - validity of Resolution Plan. Whether C.A. (IB) No. 1092/KB/2O18 is maintainable? - Held that:- Methodology approved is the distribution of upfront payment not based on voting share but based on the security interest held by each creditors and on the basis of voting shares of the respective financial creditors. It is not exclusively based on security interest as alleged. It appears to me that the law, settled subsequent to the voting that assenting and dissenting creditors to be treated equally, doesn’t affect the methodology for distribution passed by the CoC since it was passed by majority vote share considering security interest as well as voting shares. The Judgment in Binani Industries Limited [2018 (11) TMI 803 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] was passed on 14th November, 2018 and Sirpur Paper Mills Ltd. was disposed of on 19/09/2018. So they are aware that upon dissent, they would not lose their share prior to their date of voting against the Resolution Plan. They had enough time to challenge the methodology, decided on 21/04/2018. However, they have not opted to challenge the methodology in time. They have not opted to file the objection even at the time of filing application for approval of the first approved Plan. IFCI rushed to the AA after two days of filing the application for approval of the restated resolution plan - the objection of the objectors in that regard is found not at all sustainable - thus, the CA (IB) No. 1092/KB/2018 challenging the distribution methodology is not maintainable. Whether the distribution methodology for disbursing payments to financial creditors approved and passed by Committee of Creditors (CoC) in the meeting held on 21/4/2018 is unjust, and creates unreasonable distinction among the financial creditors as alleged? If so whether the distribution is to be made in accordance with the voting share of the financial creditors as alleged? - Held that:- Creation of class amongst the financial creditors is known to law and being applied in cases in which successful resolution plan was approved. Ld. Senior Counsel for IFCI was unable to bring to my notice any of the provision of the Code or Regulation so as to enable me to hold that distribution methodology contained in the re-stated final resolution plan dated 22/11/2018 under consideration for approval is contrary to the provisions of the Code or Regulation - the secured creditors’ claims are distinct with that of the claim of unsecured creditors. The submissions that the secured and unsecured creditors are to be classified as one group of financial creditors is found devoid of any merit. Whether the resolution plan was approved by the CoC in violation of any of the provisions of the Code as alleged? - Reliefs and costs - Held that:- It has meted out all the requirements to be meted out as per Section 30(2) of the I&B Code. So also the requirements to be meted out as per Regulation 39(4) of IBBI (IRP For Corporate Persons) Regulations, 2016 are also meted out by the RP. A certificate in Form H as provided, is enclosed with the Plan. So also an affidavit of resolution applicant u/s. 29A is also submitted along with the original plan. Therefore, the plan has been prepared in accordance with the provisions of the Code, Regulations and as per the directions and the advice from the financial creditors - The plan approved by the CoC is fair, equitable and does not discriminate against the objectors i.e. IFCI and SREI. Under these circumstances, I do not find any justifiable reason to disturb the distribution methodology, the very basis used by the resolution applicant for payment of upfront amount. The appeal filed by SREI and the Clarification application filed by the RP before the NCLAT was between 28th April, 2018 to 13th November, 2018. The total days truly come to 199 days as submitted on behalf of the RP. Therefore, for the purpose of counting period of expiry of CIRP period, the above mentioned days are hereby excluded. The extended period of CIRP is therefore, expired on 4th December, 2018. The resolution plan of BPSL is therefore, filed within time. The Resolution Plan of Bhagwati Power and Steel Limited, which is approved by the CoC with 77.20% voting percentage, is hereby approved under provisions of Section 31(1) of the Insolvency and Bankruptcy Code, 2016, which will be binding on the Corporate Debtor, its employees, members, creditors, guarantors and other stakeholders involved in the Resolution Plan - The revival plan of the company in accordance with the approved Resolution Plan shall come into force with immediate effect - The moratorium order passed under Section 14 shall cease to have effect.

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• 2019 (1) TMI 1504
  Initiation of Corporate Insolvency Resolution Process - financial creditor - home buyers - failure to pay assured return /monthly rent - Section 7 of the Insolvency and Bankruptcy Code, 2016 read with rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - territorial jurisdiction in respect of respondent corporate debtor as per the provisions of sub-section (1) of Section 60 of the Code - Held that:- It is evident from the record that the application has been filed on the proforma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of the Code. We are satisfied that a default amounting to lacs of rupees has occurred. As per requirement of Section 4 of the Code if default amount is one lac or more then the CIR Process would be issued. The application under sub-section 2 of Section 7 is complete; and no disciplinary proceedings are pending against the proposed Interim Resolution Professional. The petitioners being financial creditors can invoke Corporate Insolvency Resolution Process under Section 7 of the code against the respondent corporate debtor in case of default in repayment of financial debt. Admissibility of the application - Held that:- The applicants being home buyers would fall within the definition of 'Financial Creditors'. The material placed on record further confirms that applicant financial creditor had disbursed the money to the respondent corporate debtor as consideration for purchase of a residential unit. Though a considerable long period has lapsed even the principal amount disbursed has not been repaid by the respondent corporate debtor. It is accordingly held that respondent corporate debtor has committed default in repayment of the outstanding financial debt which exceeds the statutory limit of rupees one Lakh. Thus, the application warrant admission as it is complete in all respects. The Interim Insolvency Resolution Professional is directed to make public announcement immediately with regard to admission of this application under Section 7 of the Code. The expression 'immediately' means within three days as clarified by Explanation to Regulation 6 (1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - the moratorium in terms of Section 14 of the Code is declared.

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• 2019 (1) TMI 1503
  Maintainability of application - Section 7 of the ‘I&B Code’ - Collaboration Agreement - application filed jointly against the two ‘Corporate Debtors’ - whether the application under Section 9 is jointly maintainable against 1st and 2nd Respondents (‘Corporate Debtors’) or not? Held that:- The ‘Collaboration Agreement’ dated 3rd May, 2013 reached between the ‘Owner of the Land’- ‘AMB Infrabuild Pvt. Ltd.’ and the ‘Developer’- ‘Earth Galleria Pvt. Ltd.’ shows that the ‘Developer’ will sell the flats to the extent of its own shares and the ‘Land Owner’ will sell the developed portion of its own shares. The ‘Land Owner’ have agreed to make it as a ‘Joint Venture Project’ and treated the ‘Joint Venture Project’ for all purpose as evident from Clause 55 of the ‘Collaboration Agreement’ dated 3rd May, 2013 read with Memorandum of Understanding reached between three allottees, the Appellant and the 1st and 2nd Respondents dated 6th February, 2016 - The ‘Developer’- ‘M/s. Earth Galleria Pvt. Ltd.’ having been empowered by ‘M/s. AMB Infrabuild Pvt. Ltd.’- (Land Owner) to advertise the project and for marketing the developed property as a ‘Joint Venture Project’, in terms with the said ‘Collaboration Agreement’ on behalf of the joint venture, if the Memorandum of Understanding dated 20th June, 2014 has been reached between the ‘Earth Infrastructure Ltd.’ and the Appellant- Mrs. Mamtha, the 2nd Respondent cannot take a plea that it is not a signatory to the Memorandum of Understanding dated 20th June, 2014, the 2nd Respondent being represented by ‘Earth Infrastructure Ltd.’ pursuant to the ‘Collaboration Agreement’. The Adjudicating Authority has failed to take into consideration the aforesaid facts and wrongly held that the ‘Corporate Insolvency Resolution Process’ cannot be initiated against the two ‘Corporate Debtors’. If the two ‘Corporate Debtors’ collaborate and form an independent corporate unit entity for developing the land and allotting the premises to its allottee, the application under Section 7 will be maintainable against both of them jointly and not individually against one or other - In such case, both the ‘Developer’ and the ‘Land Owner’, if they are corporate should be jointly treated to be one for the purpose of initiation of ‘Corporate Insolvency Resolution Process’ against them. The Adjudicating Authority having failed to notice the same, the impugned order dated 12th March, 2018 is set aside and matter remitted to the Adjudicating Authority, New Delhi Bench, for admission of the case if record is complete, after notice to the parties - appeal allowed.

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• FEMA

• 2019 (1) TMI 1502
  Maintainability of appeal before Special Director (Appeals) - proper appellate authority for deciding the appeals filed after repeal of FERA on 01.06.2000 against the order passed under Section 51 of FERA - contravention of Sections 9 (1) (a), 9(1)(c) and Section 16(1) of the Foreign Exchange Regulation Act, 1973 - imports and exports of certain commodities made with two foreign parties, viz., M/s Fingrain, S.A., Geneva and M/s Continental Grain Export Corporation, New York - whether appeal against the order passed by the Deputy Director of Enforcement (Adjudicating Officer) under Section 51 of FERA read with FEMA would lie only to the Appellate Tribunal under Section 19 of FEMA but not before the Special Director (Appeals) under Section 17 of FERA? Held that:- Any appeal filed after 01.06.2000 against the order of the Adjudicating Officer passed under Section 51 of FERA in the proceedings initiated under FERA would lie before the Appellate Tribunal under Section 19 of FEMA. The legislature did not intend to make a distinction between the two appeals for their disposal by two different appellate authorities under FEMA only because one appeal was filed prior to 01.06.2000, therefore, it will lie before the Appellate Tribunal whereas the other appeal which was filed after 01.06.2000 though against the similar order, it will lie before the Special Director (Appeals). In our view, there does not appear to be any justifiable reason to make such distinction for filing of appeals filed against the similar order passed under FERA before two different appellate authorities under FEMA - this intention of the legislature is strengthened when we read Section 49 (5)(b) of FEMA and Section 81(c) of FERA. So far as Section 49(5)(b) of FEMA is concerned, it specifically provides that the appeals filed under Section 52 (2) of FERA against the order passed under Section 51 of FERA will be decided by the Appellate Tribunal under FEMA - So far as Section 81(c) of FERA, 1973 is concerned, it deals with Repeal and Saving of FERA, 1947. Clause (c) of Section 81 specifically provides that all the appeals filed under Section 23 of FERA, 1947, whether pending on the date of Repeal or/and those filed after the repeal of FERA, 1947, shall be disposed of by the Appellate Board constituted under FERA, 1973. Since Section 49(5)(b) of FEMA is not identically worded on the pattern of Section 81(c) of FERA, that itself would justify that the legislature intended to provide two appellate authorities in FEMA for filing two types of appeals arising out of a similar order - it is not possible to accept the submission of learned counsel for the respondents(assessees) that by interpretative process this Court can uphold creation of another appellate authority for the disposal of the appeals filed against the order passed under Section 51 of FERA after 01.06.2000 which do not fall under Section 49 (5)(2) of FEMA. There is no reason as to why the same legislative intent while interpreting the provisions of FERA, 1973 and FEMA, 1999 is applied for deciding the identical question now arising in the case. The appellate forum for deciding the appeals arising out of the order passed under Section 51 of FERA whether filed prior to 01.06.2000 or filed after 01.06.2000 must be the same, i.e., Appellate Tribunal under FEMA - the appeal filed by respondent Nos. 2 to 4 against the order dated 05.12.2003 passed by Deputy Director of enforcement under Section 51 of FERA will lie and was, therefore, maintainable only before the Appellate Tribunal under Section 19 of FEMA - appeal allowed.

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• Service Tax

• 2019 (1) TMI 1501
  Penalty u/s 76, 77 and 78 of FA - Simultaneous penalty u/s 76 and 78 of FA - Mis-declaration - service tax registration not obtained - Held that:- It is settled law that penalty under Section 78 as well as 76 cannot be imposed simultaneously. In the present case the penalty under Section 78 has been imposed by the adjudicating authority. In the case of Bajaj Travels Ltd Vs. CST, Delhi [2016 (2) TMI 172 - GUJARAT HIGH COURT] the Hon’ble High Court of Delhi has held that the amendment in Section 78 whereby it is provided that when penalty under Section 78 is imposed, no penalty under Section 76 should be imposed. This amendment is of clarificatory nature hence, it is effective retrospectively. The penalty under section 76 is set aside by the adjudicating authority is legal and proper - As regard penalty under Section 77 since the adjudicating authority despite giving clear finding in para 35, has not passed any order, matter is remanded to adjudicating authority for passing an order - appeal allowed in part and part matter on remand.

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• Central Excise

• 2019 (1) TMI 1500
  Attachment of immovable property - recovery of penalty imposed upon the Director from the petitioner company - It was submitted that in the facts of the present case, since no notice as contemplated under rule 4 of the Recovery Rules has been issued upon the petitioner, the question of resorting to the provisions of rule 5 does not arise - Held that:- Issue Notice returnable on 31st January, 2019. By way of ad-interim relief, the respondents are restrained from proceeding further pursuant to the attachment order dated 8.1.2019.

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• 2019 (1) TMI 1498
  CENVAT Credit - various input services - services related to fitting of Bolt on the different equipments which are finished goods - maintenance of computer - upgrade in software - Training on enhancement for the computer software - calibration services - testing of cable of power supply - maintenance of server services - testing Inspection and Analyses service - maintenance of the website charges - office maintenance - Disinfection treatment of wooden boxes - services of filing of bolts on equipment - Held that:- All the services on which the credit was disputed were used by the appellant in relation to the manufacture of final product. The service of maintenance of computer is essential for the overall operation of the factory activities which is in relation to the manufacture of the final product. Similarly the upgrade in software, Training on enhancement for the computer software and the calibration services all are related to the maintenance of computer and software, therefore, they are input service. The testing of cable of power supply is a regular affair while running the factory, therefore, it is related to the manufacture of final product, maintenance of server services also similar to the maintenance of computer software. The testing Inspection and Analyses service is a routine affaire in manufacturing unit which is essential for uninterrupted manufacturing activity. Similarly the maintenance of the website charges, office maintenance, Disinfection treatment of wooden boxes wherein the goods were packed, repairing of electricity motor used for production purpose, repair and maintenance of crane which is used for loading and unloading of the goods within the factory premises, maintenance of Air Conditioner installed in the plant. All the services are essential services for running manufacturing operations. As regard the services of filing of bolts on equipment is directly in relation to the manufacture of final product. Therefore credit is admissible. All the services which are the subject matter of this case are indeed inputs services and appellant are legally entitled for the Cenvat Credit - credit allowed - appeal allowed - decided in favor of appellant.

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• 2019 (1) TMI 1497
  CENVAT Credit - input services/capital goods - rent-a- cab service - Held that:- There is no dispute on the fact that both the vehicles taken on rent, as per the invoice are capital goods. In terms of definition of the capital goods provided under Rule 2(a) (B) the exclusion entry reads as the “rent a cab service provided by way of renting of motor vehicle and so far which is not a capital goods”. Since, in the present case the motor vehicle taken on rent are capital goods, hence does not fall under the exclusion category. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (1) TMI 1496
  Seizure of Vehicle - Non-production of transit declaration form (TDF) - Section 52 of the U.P. Value Added Tax Act, 2008 - circular dated 3 September 2013 - Incidence and levy of tax - Rebuttal of presumption. Which of the two cases i.e. M/s Prakash Transport Corporation vs. CCT [2013 (12) TMI 921 - ALLAHABAD HIGH COURT], or M/s S.B. International Gularbhoj vs. The Commissioner, Commercial Tax Lucknow [2013 (10) TMI 916 - ALLAHABAD HIGH COURT], lays down the correct proposition of law? Whether the Transit Declaration Form (TDF) is mandatory requirement in view to the circular issued by the Commissioner read with Section 52 of the Act and Rule 58 of the Rules or in the alternative upon non-production of the TDF on interception of the goods whether a presumption that the goods are meant for sale within the State can mandatorily be drawn in view of Section 52 read with Rule 58 and the circular dated 3 September 2013 issued by the Commissioner? Held that:- The officer inspecting the goods in transit is invested with the power to seize goods, if he finds that the documents in respect of the consignment is false, bogus, incorrect, incomplete or invalid. These powers are wide enough to empower the officer making search of goods in transit to seize the goods where TDF is not being carried by the driver or the owner of the vehicle. It would be a case where incomplete or invalid documents are carried during transit - Section 48 deals with power of an authorised officer to seize goods found in a dealer's place of business, vehicle, vessel or any other building or place or in other contingencies stipulated thereunder. Sub-section (5) of Section 50 makes applicable mutatis mutandis the provisions of subsections 3, 7, 8, 9 and 10 of Section 48 to goods seized under Section 50. Once the scheme of the Act reveals that the seizure is not automatic but a result of quasi judicial process where decision is taken consistent with the principles of natural justice after recording satisfaction regarding infraction of the provisions of the Act or an attempt to evade payment of tax, it follows as a necessary corollary that the presumption contained under Section 52 and Rule 58 would also be rebuttable at such stage, otherwise providing hearing would be an empty formality and eyewash. Scope of enquiry which has to be made at the stage of issuance of show cause notice before seizure is directed - Held that:- The irresistible conclusion is that under the scheme of the Act, the carrying of TDF is both for the benefit of the driver or person in charge of the vehicle as well as revenue as it prima facie establishes that the consignment is meant for transportation outside the State. It is mandatory in the sense that once it is duly carried during transit, the authorities would then not be in a position to draw presumption under Section 52/Rule 58. But, even if such case, it is not conclusive evidence of the fact that such goods are meant for transportation outside the State. If it is found as a matter of fact that the goods had not been so carried out of the State, the authorities would still have power to levy tax and impose penalty [Rule 6 (7)]. On the other hand, if the driver or the person in charge of the vehicle is intercepted without carrying TDF, a presumption would be raised that the goods carried thereby are meant for sale within the State inviting seizure and penalty. The Commissioner is authorised to waive the requirement of making deposit or direct deposit of such lesser amount or may require furnishing security in such form other than cash or indemnity bond, as he may deem fit. The driver or person in charge of such a vehicle would get another opportunity to rebut the presumption contained under Section 52 and Rule 58 during course of penalty proceedings. Here he would get a more elaborate hearing and opportunity to lead evidence followed by final order imposing penalty or dropping the proceedings. Based on ultimate outcome of the penalty proceedings, amount, if any, deposited as per provisions of sub-section (7) or sale proceeds under sub-section (9) would be adjusted and the excess amount refunded to him. The observations made in M/s Prakash Transport Corporation that good cannot be seized for non-production of TDF was confined to the facts of that case, but cannot be approved as laying down any general principle of law - Again, the observations made in M/s S.B. International were based more on concession of the parties than laying down any law of general application. Thus, none of the above judgments lay down any general proposition of law to be treated as a precedent and therefore, no question of conflict arises between the two judgments. The provision relating to carrying of TDF is a machinery provision. The production of TDF during transit is mandatory in the sense that it thereby denudes the authorities of their power to draw presumption under Section 52/Rule 58. Absence of the same does not mandatorily lead to the conclusion that goods are meant for sale within the State. It only gives rise to a rebuttable presumption - The presumption is rebuttable subject to limitations discussed above during course of seizure proceedings and without any limitation whatsoever at the stage of penalty proceedings. The reference is answered accordingly.

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• Indian Laws

• 2019 (1) TMI 1499
  Second Bail application - Hawala transactions - illegal gratifications and the bribe money given to the aforesaid public servants - ground of parity claimed by accused-applicant - Held that:- During recovery accused-applicant was found on his table where open packet containing bribe money was kept and was in open condition. The accused-applicant was fully aware about the bribe money which he was knowingly receiving, as is evident by the intercepted conversation of accused-applicant with co-accused- Aman Shah - The role of accused-applicant is distinguishable and grave, vis-a-vis other co-accused persons who have been granted bail, as the recovery of bribe money is recovered only from the possession of accused-applicant and no explanation of this possession has been given by accused-applicant - The ground of parity is not available to the accused-applicant. Apart from this the argument of the learned counsel for the accused-applicant that charge-sheet has also been filed in the matter, is also of no help to him as when the first application of bail was rejected by this Court as well as by the Hon ble Supreme Court, at that time also charge-sheet had been submitted. Considering all facts and circumstances of the case and rival contentions of the learned counsels and keeping in view the gravity of offence vis-a-vis material on record, without commenting upon the merits of the case, there are no good ground found to release the accused-applicant, Saurabh Pandey on bail - Bail application of the accused-applicant is accordingly rejected.

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• 2019 (1) TMI 1495
  Dishonor of Cheque - insufficiency of funds - Section 138 of Negotiable Instruments Act - discharge of a legally enforceable debt or liability - rebuttal of presumption - Held that:- It is clear that explanation to Section 138 leaves no manner of doubt that to attract an offence under section 138 of the NI Act, there should be legally enforceable debt or other liability subsisting on the date of drawal of the cheque. Thus, considering the admissions given by the complainant, it cannot be said positively that the said cheque has been issued by the applicant/accused for the discharge of any legally enforceable debt or liability as on the date of issuance of the cheque. It is well settled that presumption under section 118 read with section 139 of the N.I. Act is rebuttable presumption and the accused can do so on preponderance of probability and also on the basis of the cross­-examination of the complainant and his witnesses, if any - In the instant case, the applicant/accused has discharged the said burden and rebutted the presumption drawn under section 118 read with section 139 of the Act. Thus, the evidence is short of proving that there exists a legally enforceable debt or liability for which the applicant/accused has given the said cheque. There was no reason for the applicant/accused to issue a cheque of his personal liability in the capacity as a Proprietor of Hindustan Traders. The complainant has not bothered to explain the same. Thus, the applicant/accused is entitled for the benefit of doubt. Criminal Revision Application is allowed.

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• 2019 (1) TMI 1494
  Dishonor of Cheque - offence punishable under Section 138 of Negotiable Instruments Act - acquittal of accused - Held that:- It is apparent on the face of the record that the learned Judge has recorded findings in consonance with the facts on record and has appreciated the documents as well as the evidence in accordance with law. It is also apparent on the face of record that it is not the respondent no.1, but it is the applicant/complainant, who has cheated the present respondent no.1. The fact that the cheque issued towards the LIC and the cheque presented by the applicant for encashment are one and the same. The cheque number of both cheques is 169764. It was fortunate that the accused/respondent no.1 had drawn a photocopy of the cheque prior to submitting the same for the purpose of drawing the LIC policy. The evidence on record speaks for itself. In fact the accused­-respondent no. 1 had also warned the applicant/complainant that he would initiate prosecution against the complainant. However, since the applicant had initiated criminal proceedings against respondent no.1 under Section 138 of Negotiable Instruments Act, he had not taken any steps. The LIC of India or the accused­-respondent no.1 would reserve their rights to initiate the criminal proceedings against the applicant for forgery and fabrication of documents. Since the respondent no.1 had to go through the trauma/ordeal of the criminal prosecution for a period of ten years, the application seeking leave to appeal is dismissed with costs - application dismisssed with costs.

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