TMI Tax Updates - e-Newsletter
February 5, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax CST, VAT & Sales Tax Indian Laws

Articles

1. BUDGETARY AMENDMENTS TO THE PROVISIONS RELATING TO RE-ASSESSMENT UNDER INCOME TAX ACT

   By: DR.MARIAPPAN GOVINDARAJAN

2. GST Law: Bird's Eye View of Amendments Proposed through Finance Bill 2021

   By: Pawan Arora and ARCHANA JAIN

3. Finance Bill’2021- Paradigm shift in the provisions relating to  Income Tax Search and Seizure Assessments and Income Tax Settlement Commission CA.Mohit Gupta

   By: MOHIT GUPTA

News

1. DGGI Gurugram arrests one for collecting GST of ₹ 12.67 crore and withholding from onward deposit to Government

2. Payment of Tax by Fixed Sum Method under QRMP Scheme

3. CGST Meerut unearths fake GST invoicing of ₹ 200 crores

4. Budget 2021 clearly marks directional change for Indian economy: Finance Minister Smt. Nirmala Sitharaman

5. Andhra Pradesh becomes the 2nd State to undertake Power Sector reforms

6. Income Tax Department conducts searches in Assam

Notifications

Customs

1. 14/2021 - dated 4-2-2021 - Cus (NT)

Exchange rate Notification No.14/2021-Cus (NT) dated 4.2.2021

2. 14/2021-Customs (N.T./CAA/EXTENSION/DRI) - dated 2-2-2021 - Cus (NT)

Appointment of CAA by DGRI

GST - States

3. 05/GST-2 - dated 3-2-2021 - Haryana SGST

Amendment of notification No. 112/ST-2, dated 18.10.2017 to appoint Ms. Rachna Singh, Joint Commissioner of CGST, Panchkula as member of HAAR under HGST Act, 2017

4. 04/GST-2 - dated 22-1-2021 - Haryana SGST

Haryana Goods and Services Tax (Second Amendment) Rules, 2021

5. 03/GST-2 - dated 22-1-2021 - Haryana SGST

Haryana Goods and Services Tax (Amendment) Rules, 2021

SEZ

6. S.O. 520 (E) - dated 28-1-2021 - SEZ

Central Government de-notifies an area of 00.4788 hectares, thereby making resultant area as 10.1368 hectares at No. 16, G.S.T. Road, Perungalathur Village, Chennai in the State of Tamil Nadu

Circulars / Instructions / Orders

DGFT

1. Trade Notice No. 40/2020-21 - dated 4-2-2021

Introduction of online e-Tariff Rate Quota System for Imports

Highlights / Catch Notes

GST

• Petitioner Allowed to Contest Bank Account Freeze Due to Alleged ITC Fraud u/r 159(5) Before CGST Authority.

  Case-Laws - HC : De-freezing the bank account of petitioner - fraudulent availment of the ITC - Petition disposed off while granting them liberty to file their objections, under Rule 159(5) of the Rules, before the Deputy Commissioner, Anti-Evasion, CGST East, against the impugned provisional attachment/freezing of bank accounts - Petitioners directed to appear before the abovementioned authority - HC
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• Court Orders Refund for IGST Converted to CGST and SGST Due to Amendment; Applicants' Nil IGST Balance Addressed.

  Case-Laws - HC : Refund of amount towards IGST - as on date on account of such amendment in operation, the writ applicants have Nil balance of IGST in its electronic credit ledger and the IGST balance is converted into CGST and SGST. In other words, the balance of CGST and SGST got artificially inflated as a result of the appropriation of IGST credit - The respondents are directed to sanction and pay the refund - HC
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• Court Allows Refund of Unutilised Input Tax Credit for Transactions from July to October 2017; No Legal Basis for Denial.

  Case-Laws - HC : Refund of unutilised input tax credit - interest for delayed payment of refund - In view of the categorical assertion made by the learned counsel representing the Revenue that the aforesaid circular and notification would have no application to transactions entered into prior to the aforesaid circular and since admittedly the transactions for refund of unutilised input tax credit claimed pertains to the period July to October, 2017, consequently, there is no lawful impediment in justifying denial of refund of unutilised input tax credit to the petitioner. - HC
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Income Tax

• Interpreting Sub-Sections (1) & (2) of Section 92A: Ensuring Cohesive Application in Transfer Pricing Adjustments and Associated Enterprises.

  Case-Laws - HC : TP Adjustment - associated enterprise or not - it is evident that sub-Sections (1) and (2) of Section 92A of the Act are interlinked and have to be read together. In case the provisions of sub-Sections (1) and (2) are read independently, we are afraid that one of the provisions would be rendered otiose which is impermissible in law in view of the well settled rule of statutory limitation. Therefore, the requirement contained in sub-Sections (1) and (2) of Section 92A of the Act has to be complied with. - HC
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• Amendment to Section 194A exempts co-op banks from TDS only after 2015; 2012-2013 remains unaffected.

  Case-Laws - HC : TDS u/s 194A - interest paid to various members of the Society - No doubt, by the Finance Act, 2015 which entered into force with effect from 01.06.2015, clause (v) of Section 194A(3) came to be amended and the exemption from application of provisions of subsection (1) of Section 194A was restricted to co-operative society other than a co-operative bank. - This subsequent amendment, will however not apply for the Assessment Year 2012-2013 - HC
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• Case Remanded: Section 40A(2) Review of MD's Remuneration, 90% of Income, Lacks Evidence of Business Securing Role.

  Case-Laws - HC : Addition u/s 40A(2) - remuneration paid to the Managing Director nearly 90% of the returned income of the assessee company - Commissioner of Income Tax (Appeals) as well as the tribunal have completely failed to establish that no material was produced by the assessee to demonstrate that the Managing Director had secured the business of the company from Italy and other European countries. - Matter remanded back - HC
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• Assessing Officer Conducted Adequate Inquiries on Construction Costs; Further Investigation Deemed Unnecessary by Court.

  Case-Laws - AT : Revision u/s 263 - As seen from the assessment order that the AO had made enquiries in respect of the cost of construction and it cannot be said that no query was raised by the AO in respect of the cost of construction. In our considered opinion it is not open to enquire in case of inadequate enquiry. Infact in the case in hand the facts clearly show that adequate enquiries were made by the AO which were duly replied by the assessee. - AT
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• Reopening Tax Assessment After 4 Years Invalid if Full Disclosure Made: Section 147 Income Tax Act Violation.

  Case-Laws - AT : Reopening of assessment u/s 147 - reopening after expiry of four years - Original assessment have been passed under section 143(3) on Dated 14.12.2011 and A.O. recorded the reasons for reopening of the assessment in March, 2016. Since, there is no failure on the part of assessee to disclose fully and truly all material facts necessary for assessment, therefore, action under section 147 initiated after expiry of 04 years from the end of the relevant assessment year, the re-assessment would be bad in Law and is clearly hit by First Proviso to Section 147 . - AT
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• Supreme Court Allows Compensatory Payments for Mining as Deductible Expenses u/s 37(1) of Income Tax Act.

  Case-Laws - AT : Disallowance of payments as penal in nature - compensatory payment made by assessee/retained from the sale proceeds by monitoring committee on the directions of Supreme Court for mining and dumping outside lease area) - payment made as compensation is not hit by Explanation 1 to Section 37(1) and is an allowable expenditure - AT
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• Assessee Can Deduct Mistakenly Reported CENVAT Credit as Income in Later Year, Per Real Income Theory.

  Case-Laws - AT : Prior Period Expenditure - The amount representing CENVAT credit on PSF / UDF and advertisement expenses were wrongly offered as income in assessment years 2010-11 and 2011-12. When an item of income is not received by the assessee and was wrongly offered in the preceding assessment years, the assessee is entitled to claim deduction of such amount in the subsequent assessment year by way of reversal of entries. This is simply on the basis of real income theory and on the principle that if there is no income, there cannot be any tax. - AT
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• PCIT wrongly invoked Section 263 against AO for not inquiring into long-term borrowings; decision contradicts legal principles.

  Case-Laws - AT : Revision u/s 263 - the ld. PCIT had alleged that the ld. AO had not made any enquiry at all on the issue of long term borrowings and other current liabilities. It is not the case of the PCIT that the ld. AO had indeed made enquiries but he had not made requisite entries thereon - Hence, in our considered opinion, the ld. PCIT grossly erred in invoking revisionary jurisdiction which is against the settled legal principles and more so in the facts and circumstances of the instant case. - AT
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Customs

• Court Rules Smuggling Gold Can Be Terrorism If Threatening Economic Stability; Petitioner's Actions Under Scrutiny in FIR.

  Case-Laws - HC : Smuggling - Gold - distinct offences or not - It is true that every act of smuggling may not be covered under the definition of Terrorist act and only such smuggling of any material can be termed as Terrorist act which is done with intent to threaten or likely to threaten the economic security and to cause damage to the monetary stability of the country. In this case, the petitioner has been found to be smuggler of huge quantity of gold as well as facilitator to other fellow smugglers. Therefore, it cannot be said that this FIR is a discriminatory act towards him. - HC
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Indian Laws

• Court Examines Vicarious Liability of Non-Working Partner in Cheque Dishonor Case; Partnership Deed Not Indisputable Evidence.

  Case-Laws - HC : Dishonor of Cheque - Partnership firm - vicarious liability - Non working Partner was in charge of the affairs of the firm or not - a private document like the partnership deed, which is not in public domain, which is not on the record of any statutory authority, and which is specifically disputed, cannot be an indubitable or incontrovertible material. - HC
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IBC

• Security Interest Holder Not a Financial Creditor u/s 5(7) and (8) Despite Collateral Security in Corporate Debtor's Shares.

  Case-Laws - SC : Financial Creditors or not - a person having only security interest over the assets of corporate debtor, even if falling within the description of 'secured creditor' by virtue of collateral security extended by the corporate debtor, would not be covered by the financial creditors as per definitions contained in sub-section (7) and (8) of Section 5. What has been held by this Court as noted above is fully attracted in the present case where corporate debtor has only extended a security by pledging 40,160 shares of GEL. The appellant at best will be secured debtor qua above security but shall not be a financial creditor within the meaning of Section 5 sub-sections (7) and (8). - SC
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• Tribunal Review Power Limited: Only Allowed for Patent Errors, Not Re-Appraisal of Evidence u/r 11.

  Case-Laws - AT : Jurisdiction - power of Tribunal to review its own order - Power of Review has to be granted by statute and the ‘power of Review’ is not an inherent power and therefore cannot be exercised unless conferred specifically or by necessary implications - The error must be a ‘patent error’ which is ‘manifest’ and ‘self-evident’. The submissions of the Review Applicant in this case would amount to re-appraisal of evidence and findings of fact cannot be revisited within the limited scope of exercise of powers under Rule 11. - AT
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VAT

• Court Upholds Denial of Tax Refund on Inputs; Additional Commissioner Misinterpreted Law and Misused Section 64(1) Powers.

  Case-Laws - HC : Refund of tax paid on purchase of inputs - inputs disallowed - The order passed by the Joint Commissioner of Commercial Taxes cannot be said to be erroneous. The Additional Commissioner of Commercial Taxes has proceeded on the assumption that the benefit of refund of tax paid on purchase of inputs can be granted only in respect of manufacture and processing of goods which is not prescribed under the law. - there was no justification on the part of the Additional Commissioner of Commercial Taxes in invoking the power under Section 64(1) of the Act - HC
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Case Laws:

• GST

• 2021 (2) TMI 144
  De-freezing the bank account of petitioner - fraudulent availment of the ITC - search action carried out under Section 67 of the CGST Act, 2017 - HELD THAT:- In somewhat similar circumstances this Court in RAMAKRISHNA ELECTRO COMPONENTS PVT. LTD. VERSUS UNION OF INDIA ANR. [ 2021 (1) TMI 847 - DELHI HIGH COURT] has relegated the Petitioner in that case to avail of the statutory remedy under Rule 159(5) by preferring objections before the concerned authority. Accordingly, we dispose of the present petition, without prejudice to the rights and contentions of the Petitioners, granting them liberty to file their objections, under Rule 159(5) of the Rules, before the Deputy Commissioner, Anti-Evasion, CGST East, against the impugned provisional attachment/freezing of bank accounts. For this purpose, the Petitioners shall at the first instance appear before the abovementioned authority on Friday i.e., 5th February, 2021 at 11:30 AM along with their respective objections, and requisite documents. Thereafter, they shall continue to appear, if and when required and furnish all the information sought for by the Commissioner under Rule 159(5). The authority shall, within a period of two weeks of receipt of the objections, dispose of the same by way of necessary orders, after due intimation to the Petitioners. In case the Petitioners are aggrieved by the same, they shall be at liberty to pursue their remedies against the same, in accordance with law. Petition disposed off.

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• 2021 (2) TMI 143
  Release of documents as mentioned in Form GST INS- 02 dated 06.02.2020 (Annexure-C), after retaining photocopies of the same within a time frame to be fixed by the Hon ble Court - alternatively seeking to provide photocopies of all the documents as mentioned in Form GST INS-02 dated 05.02.2020 (Annexure-C) within a time frame to be fixed by this Hon ble Court - HELD THAT:- Once the show-cause notice is issued to the party concerned, the documents/records, which have not been relied upon, should be returned to the party. This is what even is suggested in the master circular dated 19.01.2017 which has been referred to in the representation - In the master circular, in clear terns, it has been stated that a show-cause notice and the documents relied upon in the show- cause notice, should be served on the assessee for initiation of the adjudication proceedings. However, the documents/records which are not relied upon in the show-cause notice, are required to be returned under proper receipt to the person from whom those are seized. This writ application is disposed off with a direction to the respondent No.2 to immediately look into the representation at Page-114, Annexure-P to this writ application and take an appropriate decision in accordance with law within a period of one week from the date of the communication of this order.

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• 2021 (2) TMI 142
  Prayer for a direction to the respondents to consider and decide its representation dated 02.01.2021 (Annexure-P/6) within a period of two months - HELD THAT:- Considering that the petitioner-Association has already approached the respondents by making a comprehensive representation alongwith certain documents, we deem it proper to direct the Chief Secretary, Government of Madhya Pradesh, Bhopal to decide the representation filed by the petitioner- Association by a speaking order after providing opportunity of hearing to the representative of the petitioner-Association within a period of three months from the date copy of this order is produced before him. Petition disposed off.

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• 2021 (2) TMI 141
  Refund of amount towards IGST - Seeking to extend amending Notification no.16/2015Customs, dated 01.04.2015 - seeking to set aside Trade Notice 11/2018, dated 30.06.2017 - HELD THAT:- It is held that the amendment of Notification No.16/2015 Cus. Vide Serial No.1 of Notification No.79/2017 dated 13th October, 2017, would also apply to imports made during the period 1.7.2017 to 13.10.2017. Trade Notice 11/2018 dated 30.6.2017 to the extent it is stated therein that under Chapter 5 importers would need to pay IGST is hereby quashed and set aside. The impugned order-in-original dated 29.9.2018 is hereby quashed and set aside and it is held that the petitioner is entitled to refund of the amount of Rs. 2,38,83,203/paid by it towards IGST with interest at the statutory rate - the controversy does not come to an end over here. After the present writ application was filed on 18th December 2020, Section 49 of the CGST came to be amended w.e.f. 01/02/2019 and new Section 49A and Section 49B were inserted in the said Act. By virtue of power under Section 49B, Rule 88A was inserted w.e.f. 29/03/2019 in the CGST Rules vide Notification No.16/2019CT, dated 29/03/2019. In such circumstances, w.e.f. 01/02/2019, the ITC available on account of IGST has to be first utilized for the payment of GST or CGST or SGST. This provision was amended w.e.f. 01/02/2019, but the GST portal started functioning as per the amended provisions w.e.f. 01/06/2019. Therefore, w.e.f. 01/06/2019, the accumulated ITC of IGST of Rs. 3,37,79,196/- (Additional Customs duty paid by the writ applicants, EPCG holder) started getting utilized automatically during the pendency of the petition. The ITC of CGST and SGST started accumulating correspondingly. In such circumstances, as on date on account of such amendment in operation, the writ applicants have Nil balance of IGST in its electronic credit ledger and the IGST balance is converted into CGST and SGST. In other words, the balance of CGST and SGST got artificially inflated as a result of the appropriation of IGST credit - The respondents are directed to sanction and pay the refund of Rs. 3,37,79,196/- after first reversing the entries of utilization of the subject credit and debiting the said amount from the credit ledger consequently available to the writ applicant - Application allowed.

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• 2021 (2) TMI 140
  Refund of unutilised input tax credit - interest for delayed payment of refund - Circular No.14/14/2017-GST, dated 6.11.2017 or notification No. 48/2017-Central Tax, dated 18.10.2017 - HELD THAT:- We are in complete agreement with the views expressed by the Department in Para 5 of the affidavit inasmuch as the circular is absolutely clear and the Department cannot insist upon an assessee to retrospectively comply with the circular. Consequently, the said circular operates prospectively from the date of the notification and not retrospectively since the circular came into effect from 06.11.2017. The said notification would have no application for the transactions entered into prior thereto - It is also clarified by the learned counsel for the Revenue that in the circumstances of the present case, there is no chance for supplier seeking refund thereof and consequently, there is no opportunity of double claim for unutilised input tax credit. To govern the procedure for claiming refund on such supplies, circular No.14/14/2017-GST, dated 06.11.2017 was issued, which also provided certain safeguards to prevent any dual claims of refunds. In view of the categorical assertion made by the learned counsel representing the Revenue that the aforesaid circular and notification would have no application to transactions entered into prior to the aforesaid circular and since admittedly the transactions for refund of unutilised input tax credit claimed pertains to the period July to October, 2017, consequently, there is no lawful impediment in justifying denial of refund of unutilised input tax credit to the petitioner. The impugned order dated 03.01.2020 is set aside and directions are issued to respondent No.2 to effect refund of unutilised input tax credit along with statutory interest that may be payable thereof within a period of two weeks from the date of the service of the certified copy of this order on the respondents - Application allowed.

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• 2021 (2) TMI 139
  Seeking grant of Bail - allegation is that the permanent place of business, declared by the aforesaid entity, is found to be incorrect - offence punishable under Section 132(1)(i) of the Central Goods and Services Tax Act, 2017 - learned counsel for the respondent, as to on what basis the applicant came to be arrested, he submits that the address, which the applicant had declared, found to be non-functional, and he had wrongfully availed input tax credit. However, learned counsel does not argue with regard to apprehension that the applicant may tamper with the evidence or may not be available for trial. HELD THAT:- Considering the punishment provided for the alleged offence, so also considering the fact that the offence is triable by the Court of Magistrate, and that the applicant is in jail since more than one month, this Court is of the opinion that by imposing suitable conditions, he can be released on bail. The Criminal Application is allowed - applicant Gaurav s/o Ranjit Gupta, be released on bail on his furnishing PR bond in the sum of Rs. 1,00,000/- with one local surety in the like amount - applicant to deposit bank guarantee of Rs. 50,00,000/- with the authority concerned within a period of four weeks from today.

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• Income Tax

• 2021 (2) TMI 145
  Disallowance u/s 14A - whether assessee has not determined the expenditure incurred in relation to exempt income and Assessing Authority has rightly held that even though there is no dividend income from the investment? - HELD THAT:- This Court in BIOCON LIMITED [ 2021 (2) TMI 112 - KARNATAKA HIGH COURT] has held that if no exempt income has accrued to the assessee the provisions of Section 14A do not apply.Since no exempt income has accrued to the assessee, therefore we hold that the provisions of Section 14A of the Act do not apply to the fact situation of the case. In the result, the second substantial question of law is answered against the revenue and in favour of the assessee. TP Adjustment - Disallowance of depreciation claimed on Software Expenses - direction issued by the Tribunal to the Transfer Pricing Officer to exclude depreciation from the cost of tax payer as well as comparables and directing the Assessing Officer / Transfer Pricing Officer to re-work the depreciation - Rule 10B of the Rules Applicability - method in which comparability analysis is to be conducted under the transactional net margin method - HELD THAT:- There is a need for making an adjustment to eliminate the differences in the accounting policies of the appellant and the comparable companies, in terms of the above Rules, especially given that in the bench marked international transaction is the sales by a captive service provider to its associated enterprises, on which depreciation would have no bearing and thus can be excluded altogether. The Tribunal, by placing reliance on the Hyderabad Bench of the Tribunal in the case of MARKET RESEARCH TOOLS PVT. LTD. [ 2014 (2) TMI 312 - ITAT HYDERABAD] held that the Dispute Resolution Panel erred in directing to exclude depreciation from the cost of tax payer as well as comparables. The aforesaid finding cannot be said to be perverse warranting interference of the Court in this appeal.

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• 2021 (2) TMI 138
  TP Adjustment - Comparable selection - Whether tribunal is right in law in excluding certain comparable-companies on the ground of functional dissimilarity even when the comparable-companies satisfied all the qualitative and quantitative tests applied by Transfer Pricing Officer? - HELD THAT:- We find sufficient force in the submission made by the assessee that the first substantial question of law framed is vague inasmuch as particulars of the companies whose exclusion was being challenged has not been mentioned in the aforesaid substantial question of law. From perusal of the order passed by the tribunal, it is evident that the tribunal has placed reliance on in the case of Thirdware Solutions Ltd., which pertain to the same Assessment Year and thus, the tribunal has followed its own order in the same Assessment Year. From perusal of the order passed by the tribunal and in particular from para 11.1 to 11.8, it is evident that the tribunal has recorded the findings for exclusion of the companies pertaining to ITE services segment by assigning cogent reasons. Similarly, in paragraphs 12 and 13 of the order passed by the tribunal, the tribunal has excluded the companies of SWD services segment by assigning valid and cogent reasons. The revenue has not assailed the reasons assigned by the tribunal to be perverse no any material has been brought on record to indicate the perversity recorded by the tribunal. The aforesaid question is a question of fact and this court cannot interfere with the same in the absence of perversity. Therefore, the first substantial question of law is answered against the revenue and in favour of the assessee. Excluding certain comparable companies on the ground of RPT filter - Tribunal did not apply the Related Party Transaction filter and in fact, has rejected the same - Therefore, the second and third substantial questions of law in fact, do not arise for consideration in the fact situation of the case. Therefore, it is not necessary for us to answer the same.

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• 2021 (2) TMI 137
  Non filling of appeal electronically within the period of limitation - prayer made by the assessee to reckoned the date of filing as on date on which the appeal was actually filed - Whether Tribunal was right in holding that there is no delay in filing of e-appeal since the date of filing of belated e-appeal relates back to the date of filing of manual appeal? - HELD THAT:- Issue held in favour of the assessee and against the Revenue in the decision in the case of CIT Vs. A.A.Antony others [ 2021 (1) TMI 170 - MADRAS HIGH COURT] taking into consideration the Circular issued by CBDT, which in our opinion, appears to be a one time measure, the substantive right of appeal should not be denied to the assessee on hand on a technical ground. We make it clear that this observation cannot be taken advantage by the assessee as of now, when the procedure has been in vogue ever since the year 2016 and stood the test of time and in all probabilities, as of now, all teaching problems would have been solved. Bearing in mind the fact situation in the year 2016, we are of the view that the appeals need not have been rejected by the CIT-A on the ground that they were not e-filed within the period of limitation.

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• 2021 (2) TMI 136
  Pre- deposit of 20% - HELD THAT:- We are not inclined to exercise our writ jurisdiction under Article 226 of the Constitution as the petitioner has already availed the remedy of appeal. The petitioner may prosecute its appeal before the appellate authority in accordance with law. As far as the order of pre-deposit is concerned, the petitioner tried to contend and demonstrate that the petitioner was not given proper opportunity in as much as sufficient time was not given to the petitioner to place on record its say and the documents to be relied upon and the assessment order was passed in haste. Of course, it is the contention of the petitioner which the appellate authority will have to consider as per the record and the material placed before it. It appears that the notice was issued to the petitioner on 15.12.2019. It is case of the petitioner that the same was received on 16.12.2019 and the information was to be furnished on 17.12.2019. The assessment order was passed on 22.12.2019. Considering the aforesaid factual matrix of the case, we pass the following order:- The order of the appellate authority directing the petitioner to deposit 20% amount as pre-deposit is modified. The petitioner shall deposit 10% of its liability amount pursuant to the assessment as pre-deposit.

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• 2021 (2) TMI 135
  TP Adjustment - associated enterprise or not - participation of one or more persons in the management or control or capital - TPO treated the expenditure incurred on the advertisement and marketing and product promotion as an international transaction and determined the arms length price by applying bright line method - HELD THAT:- From perusal of the Memorandum of Finance Bill, 2002, it is evident that sub Section (2) of Section 92A was amended with effect from 01.04.2002 to clarify that mere fact of participation by one enterprise in the management or control or capital of the other enterprise, or the participation of one or more persons in the management or control or capital of both the enterprises shall not make them associated enterprises, unless the criteria specified in sub-Section (2) are fulfilled. From perusal of the aforesaid provisions, it is evident that sub-Sections (1) and (2) of Section 92A of the Act are interlinked and have to be read together. In case the provisions of sub-Sections (1) and (2) are read independently, we are afraid that one of the provisions would be rendered otiose which is impermissible in law in view of the well settled rule of statutory limitation. Therefore, the requirement contained in sub-Sections (1) and (2) of Section 92A of the Act has to be complied with. It is also pertinent to mention here that the finding recorded by the Tribunal that the assessee has not complied with the provisions of sub Section (1) of Section 92A of the Act, has not been assailed by the revenue. - Decided in favour of assessee.

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• 2021 (2) TMI 134
  TDS u/s 194A - interest paid to various members of the Society ( where individual interest amount exceeded Rs.10,000/-) in terms of Section 40(a)(ia) - ITAT deleted the addition - Whether the ld. ITAT has erred in not appreciating that there is nothing in 194A(3)(i)(b) or 194A(3)(viia)(b) to restrict their application to only non members particular when the legislature has not so intended and the explanatory memorandum to these clauses also does not bring out any such restricted interpretation? - HELD THAT:- Liability to deduct tax at source arises from the provisions of Section 194A(1) - Section 194A(3) provides that the provisions of sub-section (1) of Section 194A will not apply in certain contingencies. One of the contingencies is provided in sub clause (v). This contingency relates to income credited or paid by a cooperative society to a member thereof. There is no dispute that this was the position for the Assessment Year 2012-2013 and therefore, we feel that the CIT (Appeals) as well as the ITAT were quite right in reversing the Assessing Officer s order and holding that there was no liability for deducting tax at source in respect of amount of interest paid by the cooperative society to its members, even though such amount may have exceeded Rs.10,000/-. No doubt, by the Finance Act, 2015 which entered into force with effect from 01.06.2015, clause (v) of Section 194A(3) came to be amended and the exemption from application of provisions of subsection (1) of Section 194A was restricted to co-operative society other than a co-operative bank. This subsequent amendment, will however not apply for the Assessment Year 2012-2013 with which we are concerned in the present case. Further, the very fact that the Legislature had to step in and specifically exclude the co-operative banks with effect from 01.06.2015, indicates that prior to the said date the benefits of exemption were very much available to the co-operative banks like the Assessee as well - Decided in favour of assessee.

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• 2021 (2) TMI 132
  Revision u/s 263 - Non verification of reason for filing the second valuation report by assessee - AO did not apply his mind so as to properly verify and examine the two valuation reports submitted by the assessee during the course of assessment proceedings and passed the assessment order relying upon the valuation report in which the fair market value of the building cost of the property is shown at Rs. 1,02,61,710/- - HELD THAT:- We have carefully perused the valuation report placed on record in the form of paper book. Undoubtedly the valuation report dated 15.12.2012 has valued the property as on 15.12.2012 whereas the assessment year under consideration is A.Y.2010-11 relevant to F.Y.2009-10. As the construction had completed on 31.03.2010 the assessee correctly got the second valuation report dated 15.12.2012 valuing the property as on 31.03.2010. These facts were very much available during the course of the scrutiny assessment proceedings itself and also before the Pr. CIT for proceedings u/s.263 of the Act. We find that the AO has correctly accepted the correct valuation report and completed the assessment. As seen from the assessment order that the AO had made enquiries in respect of the cost of construction and it cannot be said that no query was raised by the AO in respect of the cost of construction. In our considered opinion it is not open to enquire in case of inadequate enquiry. Infact in the case in hand the facts clearly show that adequate enquiries were made by the AO which were duly replied by the assessee. We find that the AO has taken one of the plausible view and the Pr. CIT cannot substitute his view with that of the AO - Decided in favour of assessee.

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• 2021 (2) TMI 131
  Reopening of assessment u/s 147 - reopening after expiry of four years - unexplained share capital under section 68 and addition on account of Commission paid under section 69C - HELD THAT:- As in the case of ACIT vs., Marico Ltd. [ 2020 (6) TMI 436 - SC ORDER ] we are of the view that assessee disclosed complete details of receipt of share application money in assessment year under appeal to the A.O. at the original assessment stage along with documentary evidences, which have been accepted by the A.O. Thus, on mere change of opinion, the A.O. cannot reopen the assessment - no failure on the part of assessee to disclose fully and truly all material facts necessary for assessment. The reopening on mere change of opinion is bad in Law and void abinitio and is liable to be quashed. Original assessment have been passed under section 143(3) on Dated 14.12.2011 and A.O. recorded the reasons for reopening of the assessment in March, 2016. Since, there is no failure on the part of assessee to disclose fully and truly all material facts necessary for assessment, therefore, action under section 147 initiated after expiry of 04 years from the end of the relevant assessment year, the re-assessment would be bad in Law and is clearly hit by First Proviso to Section 147 . A.O. did not apply his mind to the reasons recorded for reopening of the assessment and without verifying the record of the Investor Companies also which have been accepted in the assessments under section 153C/153A prior to recording of the reasons clearly show that A.O. has not applied his mind to the facts already available on record. Reopening of the assessment is clearly bad in Law and liable to be quashed. In view of the above discussion, we set aside the Orders of the authorities below and quash the reopening of the assessment in the matter - Decided in favour of assessee.

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• 2021 (2) TMI 130
  Disallowance of SPV (Special Purpose Vehicle) Charges - Allowability of SPV Expenses - AR submitted that SPV expenses are for socio economic development of the mining area - AO invoked Explanation to section 37 (1) - HELD THAT:- We note that this issue stands squarely covered by decisions of coordinate bench of this Tribunal in case of M/s.Ramgad Minerals Mining Ltd [ 2012 (1) TMI 313 - KARNATAKA HIGH COURT] and M/S VEERABHADRAPPA SANGAPPA CO. [ 2020 (12) TMI 1145 - ITAT BANGALORE] - Thus we are of opinion that contribution to SPV being 15% of sale proceeds, under category B, is to be allowable expenditure for year under consideration. Disallowance of payments as penal in nature - AR emphasised that, lower authorities erred in treating said compensation as penalty and submitted that the said amount ought to have been allowed as expenditure in the hands of assessee incurred for the purpose of business - HELD THAT:- Respectfully following Hyderabad bench of Tribunal in case of NMDC Ltd [ 2018 (10) TMI 1120 - ITAT AHMEDABAD] the payment is compensatory in nature only as these funds are meant to be used for public purposes and the assessee could not have commenced its operations without paying the same, the same is allowable as revenue expenditure. We are therefore of the view that payment made as compensation is not hit by Explanation 1 to Section 37(1) and is an allowable expenditure. - we are of opinion that payment made as compensation is allowable expenditure for year under consideration. - Assessee appeal allowed.

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• 2021 (2) TMI 129
  Rectification of mistake - Jurisdiction over the matter of assessee lies with Income Tax Settlement Commission [ITSC] by virtue of section 245F(2) OR Tribunal - CIT(A) has dismissed the appeal only for statistical purpose and it is not on appealable order - HELD THAT:- We have noted that in the entire MA, there is no such averments that while deciding the appeal, the submissions raised by the ld. DR for the revenue was not correctly recorded or such submissions was left from consideration by Tribunal while adjudicating the appeal. We have noted that no such arguments was raised by revenue that the jurisdiction over the matter of assessee lies with ITSC by virtue of section 245F(2) of the Act and the Tribunal has no jurisdiction to adjudicate the appeal and that the Ld. CIT(A) has dismissed the appeal only for statistical purpose or that order is not on appealable order. All these pleas are raised for the first time before the Tribunal. Therefore, the pleas (objections) raised in the present MA is misplaced and cannot be admitted at this stage. Even otherwise it is settled law that mistake which is required to be rectified must be obvious and patent and not something which can be established by a long drown process or reasoning. If the issue is debatable and not patent and clear, then the provision of section 254(2) cannot be invoked and the remedy lies under section 260A of the Income tax Act. Therefore, we reject the submissions of Ld. DR for the revenue on first two objections Condonation of delay - We find merit in the submissions of ld.AR for the assessee that reliance on the order [ 2017 (7) TMI 360 - ITAT AHMEDABAD] was only for condoning the delay. We noted that the revenue has not raised grievances about the condonation of delay in admitting the appeal. Cases of assessee are similar on facts as in case of other group case which were also restored by the Tribunal to the file of LD. CIT(A), hence, the Tribunal in the present case has made no mistake, much less apparent mistake while following the order of the Tribunal in group cases. The revenue has not filed application to recall the order in Kirit M. Patel - Thus, the grievance of the revenue as raised in objection no. (iii) is also misplaced. Revenue made reliance on the decision of Cochin Tribunal in JC Augustine [ 2009 (3) TMI 218 - ITAT COCHIN] , wherein it was held that if the matter abates before ITSC, the erstwhile jurisdiction of the CIT(A) gets revived, thus, the assessee has to move a restoration petition before ld. CIT(A). We have seen that the Tribunal while restoring the appeals of the assessee to the file of ld. CIT(A) has not adjudicated the issues raised in the appeals on merit. So there is no harm to the interest of revenue as there is no adjudication on merit by Tribunal. In the result the application filed by the revenue is dismissed.

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• 2021 (2) TMI 128
  Levy of penalty u/s 271(1)(c) - denying the claim of deduction u/s 80IB(10) of Act on the ground that the area of the plot on which the housing project was taken up is less than one acre - HELD THAT:- It appears that the AO had concluded that the size of the land is less than one acre based on the entries in 7/12 extract. It is also a matter of fact that the actual area is more than one acre i.e., 4722 sq.mtrs, which is more than the area mentioned in 7/12 extract. Considering these facts, the Tribunal had allowed the appeal [ 2021 (2) TMI 80 - ITAT PUNE] and had clearly held the entries made in 7/12 extract are not conclusive and what is to be considered is the actual area of the plot and accordingly, allowed the appeal of the assessee in the quantum appeal. Thus, since the addition made in the assessment was deleted in the quantum appeal, no penalty can be levied. It i s a case of mere disallowance of claim made which does not tantamount to furnishing of inaccurate particulars of income nor is it false claim, as the assessee had made a bonafide claim and contended vehemently the findings of the AO that the size of the land is less than one acre. Therefore, the ratio of the decision of Hon ble Apex Court in the case of Reliance Petroproducts Ltd.[ 2010 (3) TMI 80 - SUPREME COURT] is squarely applicable to the facts in the present case. It is not a fit case for levy of penalty u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income - it is not a fit case for levy of penalty u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income. - Decided in favour of assessee.

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• 2021 (2) TMI 127
  Prior Period Expenditure - Deduction claimed on account of CENVAT credit pertaining to PSF / UDF and advertisement expenses - departmental authorities have rejected them on the ground that they are prior period expenditure - HELD THAT:- On the basis of legal opinion, the assessee has reversed the entries in the prior period income account by debiting the prior period expenditure account in the impugned assessment year. Thus, as could be seen from the facts on record, the CENVAT credit on PSF / UDF and advertisement fee was not actually received by the assessee but anticipating that it is entitled to such credit, assessee had offered them as income in assessment years 2010-11 and 2011-12. The amount representing CENVAT credit on PSF / UDF and advertisement expenses were wrongly offered as income in assessment years 2010-11 and 2011-12. When an item of income is not received by the assessee and was wrongly offered in the preceding assessment years, the assessee is entitled to claim deduction of such amount in the subsequent assessment year by way of reversal of entries. This is simply on the basis of real income theory and on the principle that if there is no income, there cannot be any tax. When the assessee has not earned the income, liability in respect of such nonexistent income cannot be fastened with the assessee. We direct the Assessing Officer to delete the addition subject to verification that the assessee has actually forgone its claim of CENVAT credit before the concerned authority. Disallowance of service tax paid on chartered flight and service tax computed on discount received on PSF / UDF - it is the contention of the assessee that while offering income on accrual basis in the preceding assessment years, the assessee had also included the service tax paid on chartered flight and discount received on PSF / UDF and submitted, since the assessee had voluntarily offered such income in the preceding assessment years and since the amount has been actually paid in the impugned assessment year, they have to be allowed as deduction in view of section 43B - HELD THAT:- We find substantial merit in the aforesaid submission of the assessee. Accordingly, we direct the Assessing Officer to verify whether the service tax on chartered flight amounting to Rs. 18,72,540 and discount received on PSF / UDF of Rs. 36,28,401 was paid to the government account in the impugned assessment year and if on verification assessee s claim is found to be correct, the same has to be allowed. Interest on delayed payment of service tax - HELD THAT:- Commissioner (Appeals) has accepted assessee s claim that such interest is not penal, but compensatory in nature. The doubt raised by him is only with regard to the fact whether the liability relating to such interest payment has arisen during the year. In view of the aforesaid, we direct the Assessing Officer to verify the date of actual payment of interest on delayed payment of service tax. If on verification it is found that the assessee has actually paid the interest in the impugned assessment year, the same should be allowed as deduction to the assessee. This ground is allowed subject to verification. Disallowance being the expenditure incurred for increase in share capital - HELD THAT:- On a perusal of the balance-sheet of the assessee as at 31-03-2012, we do not find any asset of enduring nature created on account of issuance of IPO. Thus, in our view, this expenditure is akin to expenditure incurred towards aborted project, hence, qualify as revenue expenditure. In the case of CIT vs General Insurance Corporation [ 2006 (9) TMI 116 - SUPREME COURT ] the Hon ble Apex Court has allowed assessee s claim of expenditure in connection with issuance of bonus shares as revenue expenditure. Similar view has been expressed in the other decisions cited before us. Short grant of TDS credit - HELD THAT:- Having heard the parties, we direct the Assessing Officer to verify assessee s claim and allow due credit of TDS in accordance with law after proper verification of facts and materials on record. This ground is allowed, for statistical purpose.

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• 2021 (2) TMI 126
  Penalty levied u/s 271(1)(c) - disallowance being 12.5% of the Bogus purchases - HELD THAT:- In the instant case, in response to the show cause notice during the course of penalty proceedings, the assessee filed a reply stating that they had submitted copy of the ledger account, bills of the concerned parties along with delivery challans, bank statements where payments had been reflected to prove the genuineness of the purchases. It was stated before the AO that raw materials were purchased from the concerned parties who were having TIN number and were registered dealers. It was stated that during the year under consideration, the assessee had no transaction with the said parties and therefore, it was not able to produce them before the AO. In view of the facts and circumstances of the case, we are persuaded by the judgment of the Hon ble Punjab Haryana High Court in Harigopal Singh [ 2002 (8) TMI 65 - PUNJAB AND HARYANA HIGH COURT] instead of the order of the Tribunal in the case of Bhansali Trading Corporation [ 2015 (9) TMI 997 - ITAT JAIPUR] We are of the considered view that the Ld. CIT(A) has rightly followed the judgment of the Hon ble Punjab Haryana High Court in Harigopal Singh (supra) and deleted the penalty - Decided against revenue.

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• 2021 (2) TMI 125
  Revision u/s 263 - long term borrowings and other current liabilities which were not verified by the ld.AO while completing the assessment proceedings - Non-verification of the said details and non-enquiry thereon had caused prejudice to the interests of the revenue and also making the order of the ld. AO erroneous in the mind of the ld. PCIT - HELD THAT:- Assessee had filed three undated replies before the ld.AO, wherein in one of the replies, the assessee had specifically furnished the entire details of long term borrowings along with confirmation of accounts, ITR acknowledgement and balance sheet of loan creditors and in yet another reply it had also furnished the details of other current liabilities together with confirmation from parties, ITR acknowledgements and balance sheet of the creditors. Assessee had furnished yet another reply before the ld.AO wherein specifically it had furnished the details of other current liabilities, details of long term borrowings, details of non-current investments, details of loans and advances and details of other current assets. We are unable to persuade ourselves to accept to the finding recorded by the ld. PCIT that no enquiries per se were carried out by the ld. AO with regard to long term borrowings and other current liabilities in the scrutiny assessment proceedings - aforesaid details of long term borrowings and other current liabilities were admittedly filed before the ld. AO during the course of assessment proceedings and the ld. AO on examination of the same had arrived at the right conclusion that those liabilities are indeed genuine and had accordingly resorted not to make any addition thereon. Merely because there is no discussion in the assessment order regarding a particular item enquired by the ld. AO, it does not make the order of the ld. AO erroneous. AO could be expected to address only those issues on which he is not in agreement with the submissions / claims made by the assessee in the return of income. Hence, only disputed issue is the subject matter of discussions in the assessment order. We hold that the ld. AO is not required to write a thesis and record his finding in the assessment order on the aspects which he is accepting. What is required for the purpose of initiation of Section 263 proceedings is that whether due enquiries were indeed carried out by the ld. AO on a particular issue. The law is very well settled that the revisionary jurisdiction u/s.263 of the Act could be initiated by the PCIT only for lack of enquiry on the part of the ld. AO and not for inadequate enquiry. We find from the perusal of the entire order of the ld. PCIT that the ld. PCIT had alleged that the ld. AO had not made any enquiry at all on the issue of long term borrowings and other current liabilities. It is not the case of the PCIT that the ld. AO had indeed made enquiries but he had not made requisite entries thereon. Hence, in our considered opinion, the ld. PCIT grossly erred in invoking revisionary jurisdiction which is against the settled legal principles and more so in the facts and circumstances of the instant case. CIT had recorded finding that assessee had furnished all those details pertaining to long term borrowings and other current liabilities on 19/04/2018 which we find is factually incorrect. On one hand in para 3 the ld. PCIT says that assessee has furnished three undated letters before the ld. AO which admittedly contained the details of long term borrowings and other current liabilities as stated supra. But in para 4, the same PCIT says that the same details were furnished before the ld. AO only on 19/04/2018. From the perusal of the paper book we find that the letter dated 19/04/2018 filed before the ld. AO was only in respect of penalty proceedings initiated by the ld. AO u/s.271(1)(c) of the Act giving reply to show-cause notice u/s. 274 r.w.s. 271(1)(c) of the Act and also requesting the ld. AO to adjust the refund available in assessee s case towards demand arising for A.Y.2015-16. Hence, it could be safely concluded that the ld. PCIT had invoked revisionary jurisdiction in the instant case by incorrect assumption of fact, which is not permissible in law. - Decided in favour of assessee.

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• Customs

• 2021 (2) TMI 124
  Smuggling - Gold - distinct offences or not - impugned FIR has been registered only on the basis of suspicion whereas such FIR can only be registered for prima facie involvement of any person in terrorist activities as defined under Section 15 of the Act of 1967 - HELD THAT:- The present FIR has been registered on sufficient material came to the notice of the NIA under the prosecution of the present petitioner and others under the Customs act and otherwise. As per statement of the petitioner recorded under Section 108 of Customs act and the statements of other co-accused persons and on the basis of other material, the present petitioner has been prima facie found to be smuggler of gold as well as the facilitator of the alleged smuggling. Therefore, it cannot be said that the present FIR has been registered without any basis or the contents of FIR prima facie do not constitute the impugned offences which may warrant quashing of the present FIR. Further, the NIA shall, after due investigation, present its report (Negative FR/Challan) before the Trial Court and in case of filing of Challan, the petitioner shall be at liberty to take legal recourse available to him as per law. It is true that every act of smuggling may not be covered under the definition of Terrorist act and only such smuggling of any material can be termed as Terrorist act which is done with intent to threaten or likely to threaten the economic security and to cause damage to the monetary stability of the country. In this case, the petitioner has been found to be smuggler of huge quantity of gold as well as facilitator to other fellow smugglers. Therefore, it cannot be said that this FIR is a discriminatory act towards him. Petition dismissed.

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• Corporate Laws

• 2021 (2) TMI 123
  Seeking to refrain the act of the Respondent Company to initiate the corporate restructuring by way of incorporating a Holding Company - seeking to bring three of the group companies under it thereby establishing a holding-subsidiary relationship and to require the maintenance of status quo as regards to shareholding pattern of the Company - seeking not to resort to alienation, transfer, lien, lease etc of the movable/immovable properties of the R-1 Company - Power to punish for contempt - Section 425 of the Companies Act - HELD THAT:- As rightly pointed out by the learned counsel for the respondents 1, 4, 15, 24, 25, if the respondents have violated the interim orders passed by this Tribunal on 4.11.2019 and 6.1.2020, the only remedy available to the applicants is to initiate contempt proceedings against the erring respondents. The application is not maintainable.

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• 2021 (2) TMI 122
  Rectification of error - error apparent on the face of record or not - seeking to rectify the error in the cause title to the Impugned order dated 29th November, 2019 herein Tap World Anr. has shown as the Applicant - HELD THAT:- On verification of the records and the order, it is noticed that there is a typographical error while preparing the order dated 29.11.2019. IA 66/KOB/2019 has been filed by Mr.Shibu Prabhakaran who is the Respondent No.13 in the TCP/22/KOB/2019. However, while preparing the order, it is stated that the applicant is M/s Tap World. Hence, the first prayer may be allowed and the cause title of the order dated 29.11.2019 to be corrected as Mr.Shibu Prabhakaran-Applicant/Respondent No.13 Vs M/s Tap World and others Respondents/Petitioner Respondents in place of M/s Tap World as applicant. Seeking to rectify the error that in Paragraph 2 of the impugned order wherein it has been mentioned that the IA No.66/KOB/2019 was filed in pale of IA No.6/KOB/2019 - HELD THAT:- On a verification of the daily order dated 25.11.2019, it is seen stated that the Respondent/Petitioner in IA submitted that IA/6/KOB/2019 is not maintainable under Section 97(1) as the IA was filed by R1. Counsel for Respondent/Petitioner in IA has not pressed for this IA and informed that for this purpose another IA is being filed with the same contents by a Member. Hence IA 6/KOB/2019 stands dismissed. The applicant in that IA was Kerala Chamber of Commerce Industry. Thereafter, the applicant herein (Kerala Chamber of Commerce Industry) filed IA/66/KOB/2019 taking the contentions raised in IA 6/KOB/2019. Hence the words used in place of IA/6/KOB/2019 is correctly used based upon the records. Hence no rectification is necessary in Para 2 of the order in IA/66/KOB/2019. Seeking to recall the appointment of Justice K.Narayana Kurup as the Chairman to the AGM of the Applicant Chamber - HELD THAT:- Since there was no consensus among the petitioners and respondents with regard to the name of the Chairman to be appointed, for conducting the AGM, a request has been made by both the parties before this Tribunal to decide the name of an independent person by this Tribunal, for appointment as Chairman, and taking into consideration the orders of the Hon ble High Court of Kerala dated 2.9.2018 as also there is an urgency to conduct the AGM under the supervision of an impartial competent person, and after hearing the learned counsel for the applicant herein also, this Tribunal decided to appoint Mr. Justice K. Narayana Kurup, former Acting Chief Justice of the Madras High Court as the Chairman of the respondent company- M/s Kerala Chamber of Commerce and Industry for conducting the AGMs - It is also brought to my notice that the son-in-law of Mr.Justice Narayana Kurup has already sent his resignation letter resigning in the year 2011. The learned counsel for applicant stated that this letter will be placed before the next meeting of the Board of Directors. It is also seen that due to non-cooperation and violation of the directions of the NCLT by the Respondent No.1 Company with the appointed Chairman Shri P.S.Antony, Retd.District Judge, he expressed his inability to continue as Chairman. This fact was also taken into consideration while appointing Mr.Justice K. Narayana Kurup as the Chairman. Seeking to rectify the error in Para 11 of the Impugned Order wherein Mr.A.J.Rajan has been erroneously referred to as the Secretary and has been asked to assist the NCLT appointed Chairman - HELD THAT:- On perusal of the minutes of the urgent meeting of the Director Board of M/s Kerala Chamber of Commerce vide No.18/2017-18 held on 20.9.2018, as Item No.5 it is stated that as a follow up of the suggestions made in the previous meeting regarding the appointment of Mr.A.J.Rajan, IAS (Retd) as Secretary, the Chairman informed the Board that considering all the aspects of the matter, he has taken the decision to re-appoint Mr.A.J.Rajan, IAS (Retd) as Secretary. In view of the above, there is nothing wrong in Para 11 of the impugned order wherein it was stated that the Chairman will be at liberty to utilize the facilities of Respondent No.1 Company including the services of the Secretary Mr.A.J. Rajan and other staff for conducting the AGMs smoothly. Seeking to direct that the Applicant Chamber may be permitted to hold its AGM following the order of the Hon ble High Court of Kerala dated 2 September, 2019 as may be conducted following its by-laws - HELD THAT:- There is nothing wrong in the appointment of Mr. Justice K.Narayana Kurup as NCLT appointed Chairman to conduct the AGMs of M/s Kerala Chamber of Commerce and Industry, and that he has taken charge as the Chairman, there is no question of permitting the applicant Chamber of Commerce Industry to hold its AGMs following the judgment of the Hon ble High Court of Kerala dated 2.9.2019 that the AGM shall be convened and conducted in accordance with Rules and Ext.B2 by-laws, with an outer limit of three months agreed to by both sides. This fact was taken into consideration while passing the orders in IA.66/KOB/2019. In para 16 of the order, it is stated that the NCLT appointed Chairman may approach the Hon ble High Court of Kerala for extension of time limit, if it is necessary, to enable him to complete the task entrusted to him. Hence a direction to the Chamber of Commerce to hold the AGM cannot be allowed. All the parties are directed to co-operate with the Chairman for conducting the meeting of the AGMs. Application allowed in part.

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• Insolvency & Bankruptcy

• 2021 (2) TMI 147
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - petitioner seeks to enforce the sale agreement as an operational debt - existence of debt and dispute or not - present petition has been filed by a power of attorney holder on behalf of the petitioner - HELD THAT:- In Palogix Infrastructure Private Limited v ICICI Bank Limited, [ 2017 (10) TMI 913 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] the Hon ble NCLAT, after noting the judgment of the Hon ble Supreme Court in Innoventive Industries Limited v ICICI Bank, [ 2017 (9) TMI 58 - SUPREME COURT ] that the IBC was an Act to consolidate and amend the laws relating to reorganisation and insolvency resolution, and that it is settled law that a consolidating and amending act like the present Central enactment forms a code complete in itself, exhaustive of the matters dealt with therein, went on to hold that a power of attorney holder is not competent to file an application on behalf of a financial creditor or operational creditor or corporate applicant - Therefore, the present petition filed by a power of attorney holder on behalf of the petitioner is not maintainable. We have considered the underlying nature of the transaction between the parties. The petitioner had offered her flat, which she was entitled to in the premises in question on account of redevelopment of the existing building, to the respondent. The respondent had paid what has been called earnest money to the petitioner. The present petition is for the remainder of the purchase price of the flat, apparently on the strength of an MoU dated March 2017 (we are unable to ascertain the exact date of the MoU from the petition). Prima facie, an MoU is a sort of agreement which will lead up to a formal agreement in due course. It is generally considered to be non-binding and legally non-enforceable, though exceptions would exist particularly in cases where a binding understanding can be inferred from its various clauses. Section 5(21) of the IBC defines an operational debt as a claim in respect of the provision of goods or services, or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority. In the present case, the underlying nature of the transaction is akin to that of a sale agreement. The present petition seeks to enforce the sale agreement as an operational debt. There is no supply of goods or service from the respondent to the petitioner, as a result of which a debt could be said to have arisen. Rather, it is the petitioner who is required to supply the good in the form of the new flat, to the respondent. Therefore, such a transaction is not covered within the meaning of section 5(21) of the IBC. This is more in the nature of specific performance of the transaction, which can, if necessary, be enforced in a civil court. This Adjudicating Authority cannot take upon itself the role of a civil court in enforcing specific performance of such contracts. Petition dismissed.

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• 2021 (2) TMI 146
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt or not - debt due and payable or not - time limitation - pre-existing dispute between the parties or not. Time Limitation - HELD THAT:- This Adjudicating Authority observes that the instant Application under Section 9 of IB Code, 2016 was filed on 18.11.2019, whereas the last date of invoice is 09.02.2015 and the date of default as mentioned in Part-IV of the Form - 5 in the instant Application is also 09.02.2015, which is much beyond the period of Limitation of three years - Further Hon ble Supreme Court in Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd. [ 2019 (9) TMI 1019 - SUPREME COURT ] have categorically held that the proceedings under section 7 of the IBC are an application and not suits ; thus they would fall within the residuary article 137 of the Limitation Act and the right to apply will arise from the date of default. It is not disputed that the instant application has been filed much after the completion of the limitation period of three years reckoned from the date of default as stated in the application itself. Further the Applicant herein has also failed to place on record any other document which either reflects existence of circumstances covered under Section 5 of the Limitation Act for condonation of delay or circumstances covered in Section 18 of the Limitation Act allowing extension of limitation period. Thus the applicant has not been able to prove that the instant Application is within time and not barred by limitation - this Adjudicating Authority is of the view that the Application is liable to be dismissed on the sole ground of limitation as all the invoices which are subject matter of the instant Application are beyond the time period of three years. Pre-existing dispute or not - HELD THAT:- There exists a pre-existing dispute between the parties, which was raised much prior to the issuance of demand notice u/s 8 and the same is evident from the email dated 28.04.2015 - it is evident that there exists a pre-existing dispute between the parties which was actually raised much prior to the issuance of demand notice. The instant Application U/s 9 of IB Code, 2016 is liable to be rejected on the ground of limitation and also in view of the pre-existing dispute between the parties - Petition rejected.

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• 2021 (2) TMI 121
  Financial Creditors or not - Secured creditor - pledge of the shares - whether the appellant is a financial creditor within the meaning of Section 5(8) of the Code on the strength of pledge agreement dated 10.01.2012 and Deed of Undertaking dated 10.01.2012 entered into with L T Infrastructure? - HELD THAT:- As clear from the definition a contract of guarantee is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The present is not a case where the corporate debtor has entered into a contract to perform the promise, or discharge the liability of borrower in case of his default. The Pledge Agreement is limited to pledge 40,160 shares as security. The corporate debtor has never promised to discharge the liability of borrower. The Facility Agreement under which the borrower was bound by the terms and conditions and containing his obligation to repay the loan security for performance are all contained in the Facility Agreement. A contract of guarantee contains a guarantee to perform the promise or discharge the liability of third person in case of his default . Thus, key words in Section 126 are contract to perform the promise , or discharge the liability , of a third person. Both the expressions perform the promise or discharge the liability relate to a third person . The Pledge Agreement dated 10.01.2012 does not contain any contract that the promise which was made by the borrower in the Facility Agreement dated 12.05.2011 to discharge the liability of debt of Rs. 40 crores is undertaken by the corporate debtor. It was the borrower who had promised to repay the loan of Rs. 40 crores in Facility Agreement dated 12.05.2011 and it was borrower who had undertaken to discharge the liability towards lender. This Court held that a person having only security interest over the assets of corporate debtor, even if falling within the description of secured creditor by virtue of collateral security extended by the corporate debtor, would not be covered by the financial creditors as per definitions contained in sub-section (7) and (8) of Section 5. What has been held by this Court as noted above is fully attracted in the present case where corporate debtor has only extended a security by pledging 40,160 shares of GEL. The appellant at best will be secured debtor qua above security but shall not be a financial creditor within the meaning of Section 5 sub-sections (7) and (8). The Appellate Tribunal has dealt with Section 5(8)(f) while rejecting the claim of the appellant as to be the financial creditor. It appears that the submission based on Section 5(8) (i) was not addressed before the Appellate Tribunal which has now been pressed before us. We, thus, uphold the decision of the Resolution Professional as approved by the NCLAT as correct. The appellant is not financial creditor of the corporate debtor. Hence, Miscellaneous Application was rightly rejected by the Adjudicating Authority. Appeal dismissed.

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• 2021 (2) TMI 120
  Jurisdiction - power of Tribunal to review its own order - mistake apparent on the face of record or not - It is the case of the Review Applicant that the accounts were reconciled with the sister concerns and therefore no amount was due and payable and hence there is an error apparent on the face of record and sought for remanding the matter to the Learned Adjudicating Authority for a de novo consideration - whether it is otherwise permissible in law for this Tribunal to Review its Judgement passed in Appeal? - HELD THAT:- This Appellate Tribunal while dealing with the scope of power conferred under Rule 11 in Action Barter Private Limited V/s. SREI Equipment Finance Limited Anr. [ 2020 (9) TMI 843 - NATIONAL COM PANY LAW APPELLATE TRIBUNAL, NEW DELHI ] and it was held that Rule cannot be invoked to revisit the findings returned as regards the assertion of facts and pleas raised in the appeal and it is not open to re-examine the findings on questions of fact, how-so-ever erroneous they may be. The mistake/error must be apparent on the face of the record and must have occurred due to oversight, inadvertence or human error. Of course it would be open to correct the conclusion if the same is not compatible with the finding recorded on the issues raised. We accordingly decline to entertain any plea in regard to the merits of the matter involved at the bottom of the appeal and confine ourselves to the interpretation of the findings recorded and the conclusions derived therefrom as regards fate of the application under Section 7 of I B Code filed by the Financial Creditor and the disposal of appeal. It is significant to mention that in the NCLAT Rules, 2016 there is no express provision for Review and the contention of the Review Applicant that Rule 11 of the NCLAT Rules, 2016 is applicable and therefore this Application is maintainable, is untenable as the power vested in this Tribunal under Rule 11 can only be exercised to enhance cause of justice or prevent abuse of process. To reiterate, Power of Review has to be granted by statute and the power of Review is not an inherent power and therefore cannot be exercised unless conferred specifically or by necessary implications - The error must be a patent error which is manifest and self-evident . The submissions of the Review Applicant in this case would amount to re-appraisal of evidence and findings of fact cannot be revisited within the limited scope of exercise of powers under Rule 11. It appears that the Appellant is trying to have a re-hearing which is not permissible - There is no mistake apparent from the record and the Applicant cannot be permitted to seek re-hearing of the Appeal in regard to any finding which would amount to sitting in an Appeal in disguise. In the garb of this Review Application, the Applicant seeks to re-argue the matter. This Review Application is dismissed as impermissible in Law and as no mistake apparent from the record is made out.

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• 2021 (2) TMI 119
  Seeking to implead M/s Inkel Limited as Additional Corporate Debtor - Section 9 of IBC - HELD THAT:- The proposed additional Corporate Debtor is in charge of the day to day affairs of the Company and is, therefore, responsible and liable for all the debts and liabilities that are incurred on behalf of the Corporate Debtor. It is further clear that the Corporate debtor has been acquired exclusively for the purpose of entering into agreements and to limit the liability on the proposed additional Corporate Debtor which is in contravention to the provisions of I B Code. The Directors Report to shareholders forming part of the Annual Returns filed by the proposed Respondent in the year 2018-2019 reveals that the Corporate Debtor is a subsidiary of M/s. Inkel Ltd. The Holding Company (M/s. Inkel Limited) have 65% of the shares in the subsidiary company managed by a Managing Director who is a part of the minority shareholder group and promoter - It is seen from the records that the operational affairs of the Corporate Debtor are now being managed by INKEL executives and that the Companies are hopeful of achieving a turnaround in the fortunes of the Corporate Debtor and ensure that the investments stay protected. Thus, it is clear that the Corporate Debtor company have been acquired by M/s Inkel Ltd. and is having a control stake of over 65% of the shares of the Corporate Debtor with effect from 01.12.2017. The operations of Corporate Debtor were managed, controlled and operated by the proposed Corporate Debtor - thus, it is clear that the proposed additional Corporate Debtor is the holding company of the M/s. Seguro Foundations and Structures Pvt Ltd. Therefore, the Application under Section 9 would be maintainable against both of them jointly. Hence, this Tribunal is of the view that M/s. Inkel Limited, should be impleaded as additional Corporate Debtor. Application is disposed of and M/s. Inkel Limited is impleaded as additional Corporate Debtor in the IBA.

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• 2021 (2) TMI 118
  Dissolution of the Corporate Person through voluntary liquidation - Section 59(7) of the Code, 2016 read with Rules and Regulations therein - HELD THAT:- The final report showing the realisation and payment to the creditors and Members of the Company, containing the details as required under Regulation 38 of IBBI Regulations has been annexed with the application. The Liquidator filed this application along with final report forwarding a copy of the final report to the Registrar of Companies, Kerala and IBBI in Compliance of Section 59(6) of the Code, read with Regulations 32 and 34 of IBBI Regulations. The liquidator has produced the email sent to the Registrar of Companies and the Insolvency Bankruptcy Board of India intimating the voluntary liquidation of the Corporate Debtor. He has also produced the screenshot of approval by IBBI on the aforesaid intimation along with a copy of IP-1 filed by him to the IBBI. In the application filed by the Liquidator under Section 59 of the Code for dissolution of this Corporate Person, this Tribunal noticed that the affairs of the Corporate Person have been completely wound up and its assets were liquidated. Hence, this Tribunal is of the considered view that the Corporate Person, through its Liquidator, voluntarily liquidated itself so as to get dissolved. This Tribunal approves the dissolution of the Corporate Person. The Liquidator is directed to file a copy of this order with the Registrar of Companies, Kerala and also the Insolvency and Bankruptcy Board of India within fourteen days from today in compliance of Section 59 (7 to 9) of the I B Code - Application allowed.

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• PMLA

• 2021 (2) TMI 117
  Freezing of Bank Accounts - appellant while assailing the order passed by the High Court, inter alia contended that the freezing of the bank accounts maintained by the appellant company has prejudiced the appellant, inasmuch as, the amount in the account which belongs to the appellant is made unavailable to them due to which statutory payments to be made to the Competent Authorities under various enactments is withheld and the payment of salary which is due to the employees is also prevented - HELD THAT:- If the salutary principle is kept in perspective, in the instant case, though the Authorised Officer is vested with sufficient power; such power is circumscribed by a procedure laid down under the statute. As such the power is to be exercised in that manner alone, failing which it would fall foul of the requirement of complying due process under law. We have found fault with the Authorised Officer and declared the action bad only in so far as not following the legal requirement before and after freezing the account. This shall not be construed as an opinion expressed on the merit of the allegation or any other aspect relating to the matter and the action initiated against the appellant and its Directors which is a matter to be taken note in appropriate proceedings if at all any issue is raised by the aggrieved party. What has also engaged the attention of this Court is with regard to the plea put forth on behalf of the appellant regarding the need to defreeze the account to enable the appellant to pay the statutory dues. The appellant in that regard has relied on the certificate issued by the Chartered Accountant, (AnnexureP/ 38 at page 231) which indicates the amount payable towards ITDS, PF, ESI, Professional Tax, Gratuity and LIC employees deductions, in all amounting to Rs. 79,93,124/. Since we have indicated that the freezing has been done without due compliance of law, it is necessary to direct the respondents No.1 to 3 to defreeze the respective accounts and clear the cheques issued by the appellant, drawn in favour of the Competent Authority towards the ITDS, PF, ESI, Professional Tax, Gratuity and LIC employees deductions, subject to availability of the funds in the account concerned. Needless to mention that if any further amount is available in the account after payment of the statutory dues and with regard to the same any action is to be taken by the respondent No.4 within a reasonable time, it would open to them to do so subject to compliance of the required procedure afresh, as contemplated in law. It is directed that the respondents shall defreeze the accounts and honour payments advised by the appellant towards statutory dues - appeal allowed - decided in favor of appellant.

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• Service Tax

• 2021 (2) TMI 116
  Works Contract - commercial or industrial construction service - Audit of the records of the appellant revealed that it had utilized CENVAT credit against payment of service tax on CICS even though benefit of abatement of 67% under the notification was admissible only when the service provider did not avail credit of input, input services or capital goods - HELD THAT:- It would be necessary to refer to the agreement executed between the appellant and Gautami, for that would determine whether it was a composite contract imposing goods and service - the provisions of the agreement clearly demonstrates that the contract was composite in nature involving both supply of goods/materials and provisions of services to Gautami. Such composite contracts are taxable under the category of works contract w.e.f June 1, 2007. The period of dispute in the present appeal is from April 1, 2006 to October 31, 2007. Thus, the appellant was not required to pay service tax for any period prior to June 1, 2007. Even for the period post June 1, 2007, service tax could not be demanded under CICS, as the service was classifiable under works contract . The confirmation of demand under the impugned order cannot be sustained - Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2021 (2) TMI 115
  Refund of tax paid on purchase of inputs - inputs disallowed included purchase of food and beverages, housekeeping and office maintenance, printing and stationery, maintenance of photocopying machine, sports goods and events, car lease etc. - tax periods May 2012 to December 2012 - HELD THAT:- The sine qua non for exercise of power under Section 64(1) of the Act is that the Commissioner has to form an opinion that the order passed by any officer subordinate to him is erroneous or is prejudicial to the interest of the revenue. Thus, before exercising the powers under Section 64 of the Act, the Commissioner has to form an opinion that the order passed by any subordinate officer is either erroneous or is prejudicial to the interest of the revenue. In the light of the aforesaid facts, the order passed by the Joint Commissioner of Commercial Taxes may be seen - The Joint Commissioner of Commercial Taxes, in its order dated 15.07.2014, has considered the question whether the disallowance of income tax on food items, housekeeping and office maintenance, printing and stationery, maintenance of photocopying machine, sports goods and events, car lease rentals is proper. The Joint Commissioner of Commercial Taxes has taken note of Section 20(2) of the Act and has held that SEZ developer is eligible for input tax paid and does not stipulate any condition. It has further been held that it is not necessary that SEZ unit should be engaged in the activity of involving goods as output. The Joint Commissioner of Commercial Taxes has also taken note of Rule 130(A) of the Rules and has held that the aforesaid provision makes a SEZ unit or SEZ developer entitled to claim refund of input tax under Section 20(2) of the Act on the purchases made. It has also been held that no condition has been specified under Section 20(2) of the Act to claim refund. The appellant has satisfied the conditions mentioned in Rule 130(a)(1)(b) of the Rules. The Joint Commissioner of Commercial Taxes has also taken note of the definition of input in Section 2(19) of the Act and it has been held that the input means any goods including capital goods purchased by a dealer in the course of his business for re-sale or for use in the manufacture or processing or packing or sorting of other goods or any other use in the business. It has also been held that use of expression any other use in business in the definition of input, has wider meaning and certainly includes any purchases made which are for any other uses in the business carried out by the appellant. Thus, the appellant has been held entitled to claim refund of input tax paid on purchase of Rs. 7,06,435/-. In the result, the appeal has been allowed. The order passed by the Joint Commissioner of Commercial Taxes cannot be said to be erroneous. The Additional Commissioner of Commercial Taxes has proceeded on the assumption that the benefit of refund of tax paid on purchase of inputs can be granted only in respect of manufacture and processing of goods which is not prescribed under the law. Therefore, in the fact situation of the case, there was no justification on the part of the Additional Commissioner of Commercial Taxes in invoking the power under Section 64(1) of the Act - Appeal allowed - decided in favor of appellant.

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• Indian Laws

• 2021 (2) TMI 114
  Dishonor of Cheque - Partnership firm - vicarious principle underlying the provisions of section 141 of the Act - Non working Partner was in charge of the affairs of the firm or not - whether the accused is justified in the contention that the partnership deed dated 9.1.2013 is an incontrovertible material as would render the proceedings an abuse of the process of law? - HELD THAT:- The answer must be an emphatic no. An incontrovertible material is, ordinarily, a public document in public domain or a private document which is not disputed or is irrefutable. It is not even argued, that the partnership deed is a public document. Be it noted, that according to the accused, the partnership firm is not registered. The partnership deed which is pressed in service to canvas the submission that the accused was not in charge of the affairs of the firm is not a document in public domain - The principle that indubitable material can be looked into in exercise of 482 jurisdiction is too well settled. The expressions used by the Apex Court are indubitable or incontrovertible or irrefutable and the semantic difference apart, the ratio is that the material which is brought to the Court s notice by the accused, must be incontrovertible as would persuade the Court to believe that continuation of the proceedings shall be an abuse of the process of the law. I have already held that a private document like the partnership deed, which is not in public domain, which is not on the record of any statutory authority, and which is specifically disputed, cannot be an indubitable or incontrovertible material. No case is made out for interfering in exercise of inherent powers or in extraordinary jurisdiction. Application dismissed.

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• 2021 (2) TMI 113
  Dishonor of Cheque - It is contended by petitioners counsel that the complainant had filed the private complaint against the accused after following the requisite conditions of the N.I.Act, but the same came to be dismissed for non-prosecution - HELD THAT:- The Negotiable Instruments Act is a special enactment which delivers social justice as well criminal justice. The cause of action arise only after return of the instrument from the Bank as where the cheque was presented. Even pre-cognizance has been taken on filing of the complaint by the complainant by following requisite condition under Section 138 of the N.I.Act and thereafter, if found that there is a prima-facie case to proceed, the Court has to apply it s mind as under Section 142 of N.I.Act for taking cognizance under the aforesaid provision. But the cognizance arise in a proceeding under Section 138 of the N.I.Act, it is pre-cognizance and post cognizance. But post cognizance it is only after initiation of criminal prosecution against the accused by perusal of the material facilitated by the complainant and thereafter to proceed in further to prove the guilt of the accused by producing worthwhile evidence which may end in conviction or acquittal. But it is the domain vested with the trial Court. The trial Court has to give credentiality to Section 138 of the N.I.Act which is a special enactment and so also, give credentiality to Section 3 of the Indian Evidence Act as wherein the Doctrine of Preponderance of Probability even in civil in nature under Section 138 of the N.I.Act. But after post-cognizance the complainant has to prove the guilt of the accused by facilitating worthwhile evidence, then there shall be Doctrine of beyond reasonable doubt if the case ends in conviction and if any doubt arise, then the case ends in acquittal, it is based upon the evidence facilitated by the complainant to establish his case and similarly the witnesses have to be subjected to cross-examination on the part of the defense. Even as under Section 139 of the N.I.Act, there is a presumptive value neither the evidence of the complainant or defense and the proceedings has to be taken in terms of the prosecution. In the instant case, the petitioner/complainant being a gravamen of the charge, has challenged the order of for dismissal of his complaint for non-prosecution by urging various grounds. Therefore, it is deemed proper for intervention of the impugned order, if not, certainly the complainant/petitioner would be the sufferer. Petition allowed.

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