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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter March 10, 2021 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Highlights / Catch Notes GST Refund of unutilized input tax credit - When the law requires that no application for refund shall be rejected without giving an applicant an opportunity of being heard, the same cannot be substituted by telephonic conversations and exchange of e-mails. This is more so in the case of a claim for refund where no timelimit is fixed vis-a-vis rejection of claim. Under sub-section (7) of section 54, a time-limit of 60 days is prescribed for making of an order allowing claim of refund; but that period of 60 days would commence from the date of receipt of the application complete in all respects (emphasis is ours) without there being a corresponding provision for rejection of application not complete in all respects - HC Visit to Get Source Summons issued u/s 70 of the CGST Act, 2017 - The department would like to now proceed further in accordance with law - Even as on date, if the writ applicants have an apprehension that they would be arrested any time, it is open for them to take recourse available to them in accordance with law to take care of such a situation. - HC Visit to Get Source Recovery of amounts of tax / GST collected by its vendors (members of the petitioner association), but not deposited - The members of the petitoner association are at liberty to approach NLC seeking its indulgence for additional time to remit tax, not/short deducted and it is for NLC to consider the same. - HC Visit to Get Source Income Tax Claim for deduction in respect of taxes paid abroad - AO directed to allow the deductions in respect of taxes paid by the assessee abroad, in respect of which no foreign tax credit is granted to the assessee, in the light of the decision of Hon’ble jurisdictional High Court in the case of Reliance Infrastructure decision (supra), and examine the matter be afresh in this light. - AT Visit to Get Source Claim for refund of the taxes paid abroad, by the Indian tax authorities - No part of the income earned abroad had actually suffered tax in India, relief under section 91 is not admissible in respect of the same. We, therefore, reject the foreign tax credit claim in respect of taxes paid in non-tax treaty partner jurisdictions as well. - AT Visit to Get Source Deemed dividend u/s.2(22)(e) - The provisions of section 2(22)(e) of the Act, is a deeming provision and should be construed strictly. It is an established fact that the said transaction took place during the course of business and there being no personal/individual benefit accrued to the assessee and hence section 2(22)(e) of the Act cannot be invoked. Had it been the case of the AO that the assessee had directly borrowed loans and advances from the company to his proprietorship concern, then the AO could have invoked the provisions of section 2(22)(e) of the Act. - AT Visit to Get Source Disallowance of the claim of depreciation on intangible asset - amalgamation scheme initiated - when there is no transfer of the asset as well as there is no valuation of the asset, there cannot be any claim of ownership or claim of depreciation. With regard to non-compete agreement, there is no such agreement on record and even if it exists, the amount paid for non-compete agreement is capital payment and not eligible for depreciation. - AT Visit to Get Source Advance ruling application u/s 245R - We do not find any design to avoid tax by any illegal or improper means. The submission of the Revenue is mostly on the merits of the case which has to be considered in the course of merit hearing. Merely because the applicant has taken over the responsibility of risk of loss or damage till the equipments were delivered in Delhi and also that of insurance etc; it does not establish that the transaction was designed prima-facie for avoidance of tax. - AAR Visit to Get Source Reopening of assessment u/s 147 - It is a settled principle of law that the AO cannot justify by taking recourse to some material and information beyond the scope of the reasons recorded by the Assessing Officer prior to reopening. In the instant case, the respondent has traveled beyond the scope of reasons recorded in order to justify the action of reopening. - the formation of belief entertained by the Assessing Officer seems to be vague and based on irrelevant material. - HC Visit to Get Source Revision u/s 263 - Addition u/s 68 - Assessee has discharged the onus on it; and twice the AO enquired about it and in the reassessment this issue has been thoroughly enquired as discussed supra and the view taken by AO is a plausible view in line with the judicial precedence supra and so it cannot be called erroneous. So the Ld PCIT erred in holding the AO’s re-assessment order as erroneous. - AT Visit to Get Source TDS u/s 194C - TDS liability of aggregator of CABs / Taxis - one wing of the legislature has recognized Uber B.V. as an aggregator and not a service provider which again brings us to the same point that the transportation service is provided by Driver-Partner to Users directly for which User is making the payment and it is the User who is the person responsible for making payment. And, Uber B.V. and UISPL are not a party to the contract of transportation entered into between a User and a Driver-Partner. - AT Visit to Get Source Allocating expenses to agricultural income and non-agricultural income - AO having accepted fact that Head Office expenses needs to be apportioned between agricultural income and non-agricultural income, has erred in disallowing total expenses for impugned assessment year without there being any change in facts. - AT Visit to Get Source Addition u/s 68 - Unexplained share capital - both the nature & source of the share application and premium received by it was fully explained by the assessee. - assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified - AT Visit to Get Source Disallowance of non-compliance charges amounting paid to National Stock Exchange - in the tax audit report, the auditor, in his own wisdom, has stated that this amount was liable to be disallowed and added back to the income of the assessee. In our considered opinion, interest of substantive justice would be met if the assessee is allowed an opportunity to explain and establish before the AO as to how these amounts do not fall within the mischief of section 37(1) - AT Visit to Get Source Loss on sale of depreciable assets - CIT(A) rejected the claim - non-filing of the return of income by due date can be basis for denial of claim for carry forward of losses as per section 139(3) of the Act, therefore, in the instant case, where admittedly and undisputedly there is no such claim by the assessee in terms of carry forward of such losses on account of sale of plant and machinery and furniture, the reasoning adopted by the ld CIT(A) is not sustainable as the same is not in accordance with law. - AT Visit to Get Source Deduction u/s 80IAB - development of SEZ - BOA has granted approval to the assessee. This approval has not been cancelled or suspended. It was valid. The assessee has offered a piece of land at lease rent for a period of 99 years with development charges - The receipt has been shown as income - Sister concern has already applied to the BOA Before the 31st March for approval. - It could not be doubted by referring an aspect that capital expenditure shown and capitalized under the head work-in-progress was bogus. On the basis of such an observation, deduction otherwise admissible to the assessee cannot be denied. - AT Visit to Get Source Unexplained deposits - the CIT (A) has neither verified the evidence by herself nor has called for any remand report from the AO, but has summarily accepted the evidence filed by the assessee. The additional evidence filed by the assessee before the CIT (A) ought to have been verified by the AO. - Matter remanded back - AT Visit to Get Source Revision u/s 263 - TP Adjustment - Where the direction of the DRP have been held to be part of the assessment order, then, there can be no doubt that TP order is also part of assessment order and is thus amenable to jurisdiction of the CIT u/s.263 of the Act and particularly on the issues which were not considered by the TPO and DRP. - AT Visit to Get Source Corporate Law Maintainability of suit before Civil Court - Relegating the parties to continue with the civil suit would thus not be appropriate remedy, considering the manner in which Section 430 of the Act is couched and the appropriate course for the Appellant would be to avail its remedy before the NCLT. Further even if one were to examine the issue is the context of Companies Act, 1956, there is sufficient case law that holds that the jurisdiction of the Civil Court in matters relating purely to issues pertaining the management of the company can not be gone into any civil suit. - HC Visit to Get Source Indian Laws Dishonor of Cheque - Prosecution must prove the guilt of an accused beyond all reasonable doubt. The standard of proof so as to prove a defence on the part of an accused is “preponderance of probabilities”. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which he relies - Thus, as an undated cheque having been given only as a security, the provision of Section 138 of the Negotiable Instruments Act are not at all attracted - HC Visit to Get Source IBC The NCLT/NCLAT could have exercised jurisdiction under section 60(5)(c) of the IBC to stay the termination of the PPA by the appellant, since the appellant sought to terminate the PPA under Article 9.2.1(e) only on account of the CIRP being initiated against the Corporate Debtor - The NCLT/NCLAT correctly stayed the termination of the PPA by the appellant, since allowing it to terminate the PPA would certainly result in the corporate death of the Corporate Debtor due to the PPA being its sole contract - SC Visit to Get Source Revision of claim towards salary after the approval of resolution plan - The Applicant had very conveniently decided to sleep over his right from the order dated 14.12.2020. It is only at this ripe stage when the CoC has already approved the Resolution Plan that the Applicant suddenly decided to make his claim again. Hence there is no error in not considering the claim of applicant submitted after the time allowed, that too after the CoC meeting. - Tri Visit to Get Source Rejection of fresh claim after the approval of Resolution Plan - The claims are to be filed in response to public notice which RP/IRP issued. In such contingency, after the resolution plan has already been approved in March, 2020, fresh claim cannot be entertained in June, 2020. - AT Visit to Get Source Service Tax Rejection of application under SVLDRS - Effect of remanding back the order by the Tribunal for De-Novo adjudication - though the appeal of petitioner No.1 was heard by CESTAT on 10.05.2019 (which was certainly prior to 30.06.2019), it was finally disposed of subsequently on 08.11.2019 - the decision of the designated committee i.e., respondent No.2 dated 13.01.2020 rejecting the declaration of petitioner No.1 under the litigation category on the ground of ineligibility was not correct and is liable to be interfered with. - HC Visit to Get Source Amnesty scheme - SVLDRS - Petitioner’s case falls within the ambit of ‘enquiry or investigation’, as the Petitioner was issued summons dated 10.05.2019 by the Anti-Evasion Group 4, Central Excise & Service Tax. - However, unilateral quantification by the Petitioner by writing the letter/communication dated 18.06.2019 cannot render him eligible. - In the present case, since amount could not be said to have been ‘quantified’, the petitioner was not eligible, and therefore, the reasoning given by the respondent in rejecting the application does not call for any interference - HC Visit to Get Source Validity of Show Cause Notice - SCN issued by the department without providing audit report to the petitioner - since, the matter is at the stage of show cause notice and opportunity of filing reply and personal hearing is still available with the petitioner, petition dismissed - HC Visit to Get Source Central Excise Classification of goods - In any case all the show cause notices were issued only on and after 30.08.1995, raising a classification dispute, after having approved the classification list submitted on 27.08.1993. The dispute in the case on hand was one of classification alone, applicable to the product manufactured during the entire period after 27.08.1993. The dispute was not invoice-centric. Therefore, what was sought to be done by the Original Authority was actually to review the approval of the classification list submitted on 27.08.1993 by cleverly issuing separate notices covering certain specific periods. - Entire SCN is invalid irrespective of the fact that part is within normal period of limitation - SC Visit to Get Source Notifications GST 05/2021 - dated 8-3-2021 - CGST Seeks to implement e-invoicing for the taxpayers having aggregate turnover exceeding ₹ 50 Cr from 01st April 2021. News Massive fake invoice racket busted by DGGI, Nagpur Zonal Unit in the first week of March 2021 – Fraudulent transactions of app. ₹ 500 Crores by 18 non-existent firms based in Jalgaon, Mumbai and Pune detected – Main Mastermind located and arrested DGGI Gurugram officials arrest 2 men for defrauding exchequer of more than ₹ 690 crore Financial aid to states to meet GST compensation GST compensation shortfall released to States reaches ₹ 1.06 lakh crore Tariff Notification No. 28/2021-Customs (N.T.) in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver NITI Aayog and RMI India release a new report ‘Mobilising Electric Vehicle Financing in India' 3,82,875 number of Companies struck off in three years up to financial year 2020 Action initiated to control fraudulent companies Over 1,10,019 loans extended since launch of ‘Stand up India’ scheme since its inception Bangladesh- India hold Commerce Secretary level meeting at Dhaka Auction for Sale (Re-issue) of ‘4.48% GS 2023’, ‘GoI Floating Rate Bond 2033’, ‘6.22% GS 2035’, and ‘6.67% GS 2050’ Case Laws: GST 2021 (3) TMI 339 Refund of unutilized input tax credit - export of service - zero-rated supply - section 16(3) of the IGST Act read with section 54 of the CGST Act and Rule 89 of the Central Goods and Services Tax Rules, 2017 - no hearing granted to petitioner - violation of principles of natural justice - HELD THAT:- Section 54 of the CGST Act deals with refund of tax. Sub-section (1) says that any person claiming refund of any tax and interest may make an application before the expiry of two years from the relevant date in the prescribed form and manner. As per sub-section (5), if on receipt of any such application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order accordingly. In terms of sub-section (7), the proper officer shall issue the order under sub-section (5) within 60 days from the date of receipt of the application, complete in all respects. In a case where the proper officer is satisfied for reasons to be recorded in writing that the whole or any part of the amount claimed as refund is not admissible or is not payable, he shall issue notice to the applicant requiring filing of reply within 15 days of receipt of notice and after considering the reply make an order sanctioning the amount of refund in whole or in part or rejecting the refund claim which order shall be made available to the applicant. As per the proviso, an application for refund shall not be rejected without giving the applicant an opportunity of being heard. Therefore, there is a clear legal mandate that if an application for refund is to be rejected, the same can only be done after giving the applicant an opportunity of being heard. When the law requires that no application for refund shall be rejected without giving an applicant an opportunity of being heard, the same cannot be substituted by telephonic conversations and exchange of e-mails. This is more so in the case of a claim for refund where no timelimit is fixed vis-a-vis rejection of claim. Under sub-section (7) of section 54, a time-limit of 60 days is prescribed for making of an order allowing claim of refund; but that period of 60 days would commence from the date of receipt of the application complete in all respects (emphasis is ours) without there being a corresponding provision for rejection of application not complete in all respects - Admittedly in this case, no hearing was granted to the petitioner. Impugned orders, therefore, would be in violation of the proviso to subrule (3) of rule 92 of the CGST Rules and also in violation of the principles of natural justice. The matter should be remanded back to the original authority for a fresh decision in accordance with law after giving an opportunity of being heard to the petitioner - Petition allowed by way of remand. 2021 (3) TMI 338 Seeking directions for lifting the provisional attachment - petitioner-company is not able to pay the salaries and other statutory dues concerning its employees as well as the amounts claimed by the respondents - HELD THAT:- Petitioner says that Mr. Navneet Singh, director of the petitioner-company will join the proceedings as soon as he is served with the summons. It is also made clear that ₹ 2.00 crores which the petitioner-company, for the moment, has been permitted to collect from the 11 bank accounts will be only used to pay the salaries of the employees whose details have been given in the affidavit of director of the petitioner-company. List the matter on 05.04.2021. 2021 (3) TMI 337 Summons issued under Section 70 of the CGST Act, 2017 - Apprehension of arrest - writ applicant failed to produce the requisite documents relevant for the purpose of investigation on his second appearance before authority - HELD THAT:- It appears on the basis of the materials on record that the only idea of preferring the two writ applications at the relevant point of time was to evade arrest. The apprehension on the part of the writ applicants at the relevant point of time was that if they would appear before the authority pursuant to the summons, then they would be arrested. As such, there is no good ground much less any legal ground to question the legality and validity of a summons issued under Section 70 of the Act, 2017. As such, as on date, both the writ applications could be said to have become infructuous. However, both the learned counsel vociferously submitted that the writ applicants have deposited a huge amount with the department and the adjudication with regard to their liability is yet to take place, and therefore, the interim protection earlier granted by this Court should continue till everything is finalized. We are not inclined to extend the protection any further. Mr. Divyeshvar would submit that the department does not require the presence of the writ applicants any further. The department would like to now proceed further in accordance with law - In view of such statement being made by Mr. Divyeshvar, nothing more is required to be adjudicated. Even as on date, if the writ applicants have an apprehension that they would be arrested any time, it is open for them to take recourse available to them in accordance with law to take care of such a situation. Application disposed off. 2021 (3) TMI 336 Recovery of amounts of tax / GST collected by its vendors (members of the petitioner association), but not deposited - HELD THAT:- This is not a matter which warrants interference or attention of this Court as the liability of the deductors to remit the tax deducted by it to the coffers of the Department, is absolute. In fact, failure to do so would render them liable to interest and penal action. The members of the petitoner association are at liberty to approach NLC seeking its indulgence for additional time to remit tax, not/short deducted and it is for NLC to consider the same. Petition dismissed. 2021 (3) TMI 335 Profiteering - allegation against the petitioner appears to be that it has not passed on the benefit of GST rate reduction, which slid from 28% to 18% - HELD THAT:- Having regard to the fact that the investigation is complete and the report will engage the attention of the National Anti-Profiteering Authority (NAPA), as envisaged under the Goods and Services Tax Rules, 2017, the petitioner should have an opportunity to raise the issues on merits, including the aspect of jurisdiction, before the aforementioned authority. Petition disposed off. Income Tax 2021 (3) TMI 345 Reopening of assessment u/s 147 - assessee had claimed excessive deductions u/s 80 IB(10) without providing interest on capital and remunerations to the partners for the respective years under consideration, which had escaped assessment - case of the assessee is that, both the interest and remuneration stipulations were incorporated earlier which contained clause as to payment of interest and remuneration, which was not at all paid to the partners - revenue has considered the partnership deed 23.01.2008 and concluded that, interest and remuneration were payable to the partners - HELD THAT:- Clauses of the partnership deed provided for interest on partner's capital and remuneration, the same is subject to their mutual agreement - clauses contained are only enabling provision not mandatory in nature so as to lead to an inference that, the assessee had to pay interest on capital and remuneration to its partners. Even after 01.04.2009, interest on capital as well as the remuneration were not to be paid to the partners. No material on record to indicate that, the writ applicant has actually received any interest on capital and remuneration from the partnership firm. Record further indicates that, for the assessment year 2010-11[ 2015 (8) TMI 1160 - ITAT AHMEDABAD ] deduction u/s 80 IB(10) was claimed without paying any interest on capital and remuneration to partners and such claim was not disturbed by the assessing officer. In this view of the matter, the conclusion arrived at by the assessing officer that, the assessee has claimed deduction without providing interest on capital and remuneration to partners as per the clause 6 and 7 of the deed, has escaped assessment on account of failure on the part of the assessee in filing of the return of income disclosing fully and truly all material facts are contrary to law and without jurisdiction. We hold that, the contention raised by learned Sr. counsel Mr. Hemani merits consideration that mere incorporation of clauses in the partnership deed for interest on the partner s capital and remuneration, does not signify that, interest and remuneration is to be paid to the partners mandatorily. The issue involved in the present case is squarely covered by the case of Alidhara Taxspin (P) Ltd. [ 2017 (5) TMI 1684 - GUJARAT HIGH COURT ] and applying the principles of law as propounded by this Court, we hold that, re-opening of the assessment is not justified. - Decided in favour of assessee. 2021 (3) TMI 344 Estimation of income - assessee s books of accounts is not verifiable - HELD THAT:- Assessee is not maintaining books of accounts, as such, the income of the assessee was estimated by A.O. by invoking the provisions of section 44AF of the Act @ 10% of the total turnover as income of the assessee. The assessee has adopted the net profit rate at 4.08% to 7.91% from one year to another. There is high volatility in adopting the rate of profit by the assessee. In our opinion, to meet the ends of justice, it is appropriate to estimate the income of the assessee at 8% of the gross turnover instead of 10% adopted by the A.O. Addition u/s 69C/68 - contention of the A.R. is that once the income of the assessee estimated by applying the section 44AF of the Act, there cannot be any further addition for any lapse in the books of accounts - HELD THAT:- In the present case, the plea of the assessee that payment towards various cards like Citi Bank Card, ICICI Card, American Express card out of earlier withdrawals used for the business purpose and same was redeposited towards credit card payments and there should be due credit to be given. In our opinion, where the credit card withdrawals on earlier occasion from various credit cards was used for business purpose are to be established by the assessee by filing necessary evidence and establishing that assessee has used the credit card withdrawals for business purpose and thereafter it has withdrawn the money from the business to clear credit card dues. Accordingly, we remit this issue for the purpose of establishing the nexus between credit card withdrawals and by using it for business purposes and repay the card dues out of business receipts. In the present case, the A.O. not accepted the turnover declared with assessee and he considered the turnover on the basis of VAT return, which is evident from the table reproduced in para 6 of this order. Accordingly, we are not considered the above judgement in the case of Delux Roadlines Pvt. Ltd. [ 2014 (10) TMI 855 - KARNATAKA HIGH COURT ] Further, assessee s counsel relied on the judgement of Indwell Constructions [ 1998 (3) TMI 121 - ANDHRA PRADESH HIGH COURT ] for the proposition that where the books of accounts have been rejected, revenue cannot rely on the same books for additions of an exact item in the profit loss account. In the present case, the facts are entirely different. The assessee is not maintained any books of accounts and the income of the assessee was estimated on the basis of turnover declared in the VAT returns. Thereafter, A.O. considered the bank statements and credit card statements to make addition u/s 68/69C of the Act. Being so, the judgement relied by the assessee s counsel in the case of Indwell Constructions have no application. Appeals of the assessee are partly allowed. 2021 (3) TMI 343 Claim for refund of the taxes paid abroad, by the Indian tax authorities - Indian taxpayer refunds claims from the Government of India - taxes paid by the said taxpayer outside India, i.e., the foreign Governments, in respect of the income taxes paid abroad on income earned in the respective tax jurisdictions - making a contribution to, say, the US Exchequer because an income was earned there, and claiming that the Indian Treasury refunds the said tax because the aggregate of overall taxable income, from all the operations worldwide- including India, is in negative, i.e., a loss figure - India is a major Indian bank, with several branches abroad - a few in the treaty partner jurisdictions, i.e., the countries with which India has entered into Double Taxation Avoidance Agreements under section 90, and remaining in the non-treaty partner jurisdictions. HELD THAT:- No part of the income earned abroad had actually suffered tax in India, relief under section 91 is not admissible in respect of the same. We, therefore, reject the foreign tax credit claim in respect of taxes paid in non-tax treaty partner jurisdictions as well. As regards dividend taxes paid abroad, the assessee has not addressed any specific arguments in respect of the same, and it, therefore, appears that the assessee has not proceeded on the basis that if the assessee is to be allowed any foreign tax credits in respect of the taxes paid abroad in respect of the profits of its PEs, the same fate must follow for the taxes paid abroad on the dividend. For the detailed reasons set out above, we have rejected these claims. In this view of the matter, and in the absence of any other specific arguments, this claim of the assessee is also dismissed as devoid of legal merits. We answer the first question that we had identified for our adjudication, i.e., whether or not the assessee is eligible for foreign tax credits for taxes paid in treaty partner jurisdictions, in non-treaty partner jurisdictions, and in respect of foreign dividends, we answer the same in negative, and against the taxpayer. These claims for the foreign tax credits are thus dismissed. Claim for deduction in respect of taxes paid abroad - whether or not the assessee is eligible for a deduction being taxes paid abroad on its income in the respective tax jurisdiction in respect of which the assessee has not been granted any tax credit? - HELD THAT:- We find that this issue is squarely covered, in favour of the assessee, by a judgment of Hon ble jurisdictional High Court, in the case of Reliance Infrastructure Limited [ 2016 (12) TMI 1293 - BOMBAY HIGH COURT ] - we reject the plea of the learned Departmental Representative, uphold the plea of the assessee, and direct the Assessing Officer to allow the deductions in respect of taxes paid by the assessee abroad, in respect of which no foreign tax credit is granted to the assessee, in the light of the decision of Hon ble jurisdictional High Court in the case of Reliance Infrastructure decision (supra), and examine the matter be afresh in this light. To this extent, this plea of the assessee is upheld. Conclusion: - The assessee is declined the foreign tax credits and, accordingly, we hold that the assessee is not entitled to seek a refund of that money from the Indian tax exchequer. As we hold so, we may add that in the present case, our entire focus was on whether these foreign tax credits could be allowed even when such tax credits lead to a situation in which taxes paid abroad could be refunded in India, but that must not be construed to mean that, as a corollary to our decision, these foreign tax credits would have been allowed, even if there is no domestic tax liability in respect of the related income in India if it was not to result in such a refund situation A full tax credit, which goes beyond eliminating double taxation of an income, actually ends up subsidizing the foreign exchequer, to the extent that the taxes paid to the foreign exchequer are allowed to discharge exclusive domestic tax liability, rather than eliminating double taxation of an income, and that is the reason that even in the solitary full credit situation visualized in the Indian tax treaties, in the Indo Namibia tax treaty (supra), it s one-way traffic inasmuch as while India, as a relatively developed nation, offers, under article 23(2), full credit for taxes paid in Namibia, whereas, in contrast, Namibia, as a developing nation, offers, under article 23(1), proportionate credit for taxes paid in India. It reinforces our understanding that the full foreign tax credits cannot be inferred to be permissible as a matter of course and normal practice. Just because the coordinate benches have subconsciously taken a stand that seems to be condoning, and in a way legitimizing, a contrary perception, even if that be so, we cannot, particularly after taking a closer look at the situation, follow the same course. When such huge national revenues, involving thousands of crores, are involved in this macro issue, we cannot afford to be superficial, or perfunctory, in our approach. On a separate note, nevertheless, we do uphold the claim of the assessee that these taxes paid abroad will be allowed as a deduction in the computation of the business income of the assessee. 2021 (3) TMI 342 Undisclosed income offered during the course of search - AO has alleged that the assessee is beneficiary of bogus long term capital gain derived from sale of penny stocks - AO making additions only on the basis of statements recorded during the course of search without reference to any incriminating material found during the course of search to suggest undisclosed income - HELD THAT:- As explained by the assessee, the disclosure is only on adhoc offer without any specific reference to any material found at the time of search. Wherever, it is with reference to specific material that does not relate to this year. The declaration by the assessee itself being incorrect, therefore we are of the considered view that the additions made by the AO towards undisclosed income offered in the statement recorded during the course of search was neither based on any evidence collected during the course of search nor relates to the assessee. In fact, the assessee had agreed to offer additional income only to buy peace and from the fact that nondisclosure of income was not admitted in the return itself is a rebuttal of statement. Hence, we are of the considered view that the AO as well as the CIT(A) were completely erred in making additions towards undisclosed income on the basis of statements recorded during the course of search, even though, there is no evidence collected during the course of search which suggest undisclosed income for the relevant assessment year. Hence, we direct the AO to delete additions made towards undisclosed income. - Decided in favour of assessee. Deemed dividend u/s.2(22)(e) - Addition credit balance - HELD THAT:- In the present case, there is no personal benefit at all to the assessee. The AO himself accepts the fact that the funds were utilized during the course of business and therefore, this transaction at any point did not get out of the business circle at all. The provisions of section 2(22)(e) of the Act, is a deeming provision and should be construed strictly. It is an established fact that the said transaction took place during the course of business and there being no personal/individual benefit accrued to the assessee and hence section 2(22)(e) of the Act cannot be invoked. Had it been the case of the AO that the assessee had directly borrowed loans and advances from the company to his proprietorship concern, then the AO could have invoked the provisions of section 2(22)(e) of the Act. In this case, as rightly observed by the AO, the assessee has indirectly borrowed the funds of M/s. Infinity Jewellers and M/s. Mariyam Creations and that allegation of indirect benefit is only a formulative theory of circuitous transactions without there being any evidence to prove that these transactions are loans and advances giving benefit to the shareholder. Therefore, we are of the considered view that the AO as well as the CIT(A) were completely erred in coming to the conclusion that amount due in the books of M/s. AK Exports to M/s. Infinity Jewellers and M/s. Mariyam Creations is diversion of funds from LJM to the assessee and such transactions comes under the purview of deemed dividend u/s.2(22)(e) -at commercial transactions in the books of M/s. AK Exports due to M/s. Infinity Jewellers and M/s. Mariyam Creations cannot be considered as indirect borrowing from LJM to treat the same as deemed dividend u/s.2(22)(e) of the Act. Hence, we direct the ld.AO to delete the addition made towards deemed dividend u/s.2(22)(e) of the Act.- Decided in favour of assessee. Bogus LTCG - Disallowance of exemption claimed u/s.10(38) towards long term capital gain derived from transfer of equity shares of M/s. Mahavir Advanced Remedies Limited - Addition based on the investigation report by SEBI pertaining to certain cases based from Kolkatta wherein share prices rigged substantially over a period of time - HELD THAT:- Merely on suspicion and surmises, this disallowance was made without any corroborative evidence. The AO failed to bring on record any evidence indicating bogus transactions. The essential requirements for a claim u/s. 10(38) are that; the income should arise from a sale of LTC Asset; that LTCA is an equity share in the company or unit of an equity oriented fund or unit of business trust; The transaction of sale entered comes on or after FA 2004 came into force; Such transaction is subject to Securities Transaction Tax. In this case, the genuineness of the transaction is not disputed by the lower authorities at all. All these transactions are through proper banking channels, Dematted and subjected to securities transaction tax. When the pre-requisite conditions imposed by the legislature stands complied in toto, the AO cannot proceed to treat the same as bogus and disallow the same solely based on the fact that the shares prices went up substantially. More importantly, said company Mahavir Remedies haven t been termed as SHELL Company which involved in unlawful trading of scripts. AO as well as the ld.CIT(A) were erred in holding that long term capital gain derived from transfer of equity shares of M/s. Mahavir Advanced Remedies Ltd., is bogus in nature, which is assessable as unexplained credit under the head income from other sources . Hence, we direct the AO to delete additions made towards long term capital gain derived from transfer of shares.- Decided in favour of assessee. Addition towards unexplained jewellery u/s.69 - HELD THAT:- It is an admitted fact that there was a difference in diamond jewellery found during the course of search, for which no proper explanation was offered by the assessee. Although, the assessee explained that his wife has brought some diamonds at their wedding but failed to substantiate his claim with necessary evidences. Therefore, we are of the considered view that there is no error in the findings recorded by the AO and affirmed by the CIT(A) to confirm addition towards unexplained jewellery amounting to ₹ 10,17,000/-. Hence, we are inclined to uphold the findings of CIT(A) and reject the ground taken by the assessee. 2021 (3) TMI 341 Disallowance of the claim of depreciation on intangible asset - amalgamation scheme initiated - As per assessee's contention the business has been transferred as a going concern to the transferee - valuation for the purpose of slump sale -HELD THAT:- As per assessee's contention the business has been transferred as a going concern to the transferee, but, as per the above section 2 the intellectual property of the transferor has not been transferred the above assets, then how the assessee has calculated all intangible assets in the form of goodwill. We observe that when there is no transfer of the asset as well as there is no valuation of the asset, there cannot be any claim of ownership or claim of depreciation. With regard to non-compete agreement, there is no such agreement on record and even if it exists, the amount paid for non-compete agreement is capital payment and not eligible for depreciation. Clauses 10.2.7 and 10.2.8 of the valuation report clearly indicate that the amount is only a balancing entry and may exclude certain closing account adjustments and the conclusion does not reflect the outcome of any due diligence procedures. The balancing entry treated as goodwill as per accounting standards is fictional in nature in the present case and does not represent any real intangible and the accounting procedure in double entry accounting system cannot override the provisions of Income Tax Act. We observe that the cost in the hands of transferor company is 'nil' by virtue of section 55(2)(a)(ii) and therefore the cost is 'nil' in the hands of the transferee-assessee also. We are of the opinion that this is a fit case for application of third proviso to section 43(1) because the business transfer agreement is part of a comprehensive international arrangement between two groups and there is no rationale for the fixation of the transfer price. No infirmity in the order of CIT(A) in confirming the disallowance of the claim of depreciation and dismiss the ground Nos. 2 to 6 raised by the assessee on this count. Rectification of mistake u/s 154 - Enhance depreciation - Disallowance of the claim of depreciation by the AO as per order u/s. 154 was ₹ 99,09,96,797/- and not ₹ 44,04,03,000/-, therefore, the CIT(A) ought to have decided the appeal against disallowance of depreciation of ₹ 99,09,96,797/- We find that the assessment order was passed on 30/12/2016 u/s. 143(3) of the Act by making disallowance of depreciation at ₹ 44,04,43,000/-. The AO enhanced the addition to ₹ 99,09,96,797/- by issuing notice u/s. 154 dated 21/24/04/2017 and passed order u/s. 154 on 24th August, 2017 enhancing the disallowance to 99,09,96,797/- instead of ₹ 44,04,43,000/- made u/s. 143(3) order. On perusal of grounds raised by the assessee before the CIT(A), which were mentioned at page 2 of CIT(A)'s order, in ground No. 2 the assessee mentioned disallowance of depreciation of ₹ 99,09,96,797/- and nowhere in the grounds mentioned the appeal is against 154 order. The CIT(A) nowhere discussed about the enhancement of disallowance u/s. 154 order. The CIT(A) decided the issue against 143(3) order. Therefore, the issue of enhancement addition is raised before us for the first time which is not decided by CIT(A) cannot be accepted, hence, this ground raised by the assessee in regard to enhanced depreciation is not entertained and accordingly, dismissed. Assessee appeal dismissed. 2021 (3) TMI 334 Advance ruling - Taxability of transfer of shares in an Indian company - Capital gains tax in India - India-Singapore DTAA - sale of shares held by Company tax resident of Singapore ( BG Asia or Seller ) in Gujarat Gas company Limited ( GGCL ), an Indian company whose shares are listed on recognized stock exchanges in India, to a buyer, , a company incorporated in India (herein after referred to as the Buyer - whether the LOB conditions as prescribed in Article 3 of the Protocol are satisfied in this case? - HELD THAT:- Whether the affairs of BG Asia were arranged with the primary purpose to take advantage of the benefit in Article 1 of the Protocol? - In pursuance to the general business policy decision to divest non-core business interest, the Board of Directors of BG Asia had passed a resolution dated 28/09/2012 for sale of shares of GGCL. It is also relevant to consider that similar sale of shares of non-core holding was made in other countries viz. Brazil Italy. Further, BG Asia had not divested all its share holdings in all the companies in all the countries. Rather it still continued to hold the investment in other companies. It is thus evident from these facts that the decision to sell the shares of GGCL was non-India specific decision and pursuant to bona fide business restructuring. Therefore, it cannot be said that the affairs of BG Asia in the form of sale of shares of GGCL were arranged with the primary purpose to take advantage of the benefits of Article 1 to the Protocol to India-Singapore DTAA and to avail the benefits of Article 13.4 of the Treaty. Whether BG Asia is having bonafide business activities? - No merit in contention of the Revenue that the group investment holding undertaken by BG Asia was not a bona fide business activity. It was categorically held by the AP High Court In the case of Sanofi [ 2013 (2) TMI 589 - ANDHRA PRADESH HIGH COURT ] that creation of wholly owned subsidiaries for domestic or overseas investment was a well-established business and that investment in itself was a legitimate, established and globally well recognized business. Therefore, the LOB clause in Explanation to Article 3 of the Protocol that a legal entity not having bona-fide business activities shall be covered by Article 3.1 of the Protocol is not found attracted in this case. Whether BG Asia is a shell/conduit Company? - Business activity carried on by BG Asia was not only continuous but also real. It is also not the case that BG Asia had negligible or nil business operations. The investment held by the BG Singapore was of a very high order. BG Asia has brought on record its audited account for the financial year ending 31/12/2004 onwards and it is found there from that BG Asia had disclosed considerable amount of dividend on a regular basis in all the years, which will be reproduced subsequently while examining the expenses. Therefore, it cannot be held that BG Asia had negligible or nil business operations in Singapore. As mentioned earlier the condition that the company had no real and continuous activity in Singapore was also not fulfilled in the case. Therefore, all the ingredients of shell / conduit company as prescribed in Article 3.2 of the Protocol are found missing in this case. In view of these facts, the LOB conditions of Article 3.2 of the Protocol are also not found applicable and, therefore, BG Asia is not a shell or conduit company in terms of the Protocol. Whether the total annual expenditure on operations was less than Singapore $200, 000 in immediately preceding 24 months from the date of capital gains? - In the present case the certificate regarding fulfilment of LOB clause of the Treaty in respect of annual expenditure as issued by the Singapore Tax Authority is in the realm of interpretation of the clause of the DTAA and cannot be taken as conclusive and the Revenue is entitled to rebut the same. However, the Revenue has not brought any material or evidence on record to contradict the certificate as issued by the Singapore Authority. Further, the genuineness of these certificates has also not been questioned. BG Asia was not only engaged in a continuous business activity but it was also incurring administrative expenses every year. We also find recharge of employee cost in each of the year. BG Asia was following a business model wherein one of the group companies in a particular country was making available the necessary services to all the group companies on cost sharing basis. Accordingly, the administrative expenses including the employee cost were recharged to BG Asia. It is not the case that this model was practised only in the two years prior to arise of capital gains so as to overcome the LOB clause in respect of the prescribed limit of the expenditure of operation. Rather this practice was followed all along, as is evident from the above table. It is also seen that the administrative expense in all the years was much above the prescribed limit as stipulated in Article 3.3 of the Protocol to the DTAA. Thus, there cannot be a case that these expenses were artificially jacked up in the 24 months period prior to arising of capital gains so as to overcome the prescribed limit in the said Article. The condition in Article 3.3 of the Protocol that the total annual expenditure on operations in the contracting state should be at least S$ 200,000 in the immediately preceding period of 24 months from the date the gain arises is also found fulfilled in this case. The fact that BG Asia had fulfilled the limit of operational expense of S$ 200,000 is also confirmed by the appraisal of independent evidences brought on record, as already discussed earlier. Therefore, the contention of the Revenue that the applicant was not having enough operational expense and that the LOB bar in Article 3.3 of the Protocol was attracted in this case is found to be without any basis. As the total annual expenditure on operations of BG Asia in Singapore was more than Singapore $200,000 in immediately preceding 24 months from the date of capital gains the bar in Article 3.3 of the Protocol to Singapore DTAA is not found attracted. LOB conditions as prescribed in Article 3 of the Protocol of the India-Singapore DTAA are satisfied and BG Asia is eligible to avail the exemption under Article 13(4) of the India-Singapore DTAA. As BG Asia is resident of Singapore, the capital gains arising to it on sale of shares of GGCL will be liable to tax in Singapore only in accordance with the provisions of Article 13(4) of the India Singapore DTAA. The capital gain on sale of shares of GGCL is liable to tax in India under the provisions of the Income Tax Act. However, as per section 90(2) of the Act the provisions of the Act will apply to the extent they are more beneficial vis- -vis the provisions of the tax treaty. Ruling:- As in the present case the provisions of DTAA between India and Singapore are more beneficial to BG Asia, the chargeability of capital gains on sale of shares of GGCL will be guided by the provisions of the DTAA and not that of the Act. Accordingly, the capital gain on sale of shares of GGCL cannot be taxed in India under the provisions of the Income Tax Act. Therefore, the answer to Question No. 1 raised by the applicants is given in favour of BG Asia. No questions in respect of rate of tax on such capital gain and the applicability of TDS provisions thereon, are no longer relevant and need not be answered. 2021 (3) TMI 333 Advance ruling application u/s 245R - Amount received/receivable under Purchase Order in relation to offshore supplies of High Efficiency Traction Motors ('HETMs') from a port in Japan to DMRC in India - liability to tax in India under the provisions of the Act and/ or the Agreement for Avoidance of Double Taxation between India and Japan ('the Treaty') - only objection of the Revenue is that the transaction was designed prima-facie for avoidance of tax - CIT has contended that there was a business connection of the applicant in India which constitutes Permanent Establishment and an appropriate profit needs to be attributable to the P.E. in India. Therefore, the transaction was designed for avoidance of tax - HELD THAT:- We do not find any design to avoid tax by any illegal or improper means. The submission of the Revenue is mostly on the merits of the case which has to be considered in the course of merit hearing. Merely because the applicant has taken over the responsibility of risk of loss or damage till the equipments were delivered in Delhi and also that of insurance etc; it does not establish that the transaction was designed prima-facie for avoidance of tax. The question of Permanent Establishment has to be examined in the course of merit hearing and if it is established that there was a P.E., the natural consequence will follow. Department has not brought out any material to establish that there was a prima-facie case of avoidance of tax. Therefore, the application is admitted u/s 245 R (2) of the Act. 2021 (3) TMI 332 Reopening of assessment u/s 147 - whether notice issued prior to the concerned officer obtaining necessary administrative approval? - HELD THAT:- Notice under Section 148 of the Act was issued after obtaining requisite administrative approval, we are not satisfied with the explanation given in the counter affidavit [if it all, it can be called, as an explanation] as no attempt has been made to explain what is stated in paragraph 1 of the impugned order dated 28.09.2018. As far as the other aspect is concerned, in our view, since the proof put in place by the petitioner-assessee with regard to the acknowledgement of return filed for AY 2011-2012 has not been disputed by the Revenue, as noticed above, the challenge to the impugned notice and the impugned order will have to be sustained. Therefore, for the foregoing reasons, we are inclined to quash the impugned notice dated 27.03.2018 as also the impugned order dated 28.09.2018. It is ordered accordingly. 2021 (3) TMI 331 Rate of tax deduction certificate under Section 197 - Tax deduction certificates qua offshore supply contracts were issued at the rate of 1.72% - For offshore supplies, the rate of withholding tax has been enhanced to 10% - in the earlier years, the assessee was contesting the stand of the revenue that it had the Permanent Establishment (in short PE ) in India - HELD THAT:- We direct that, for the moment, the concerned officer will issue a Tax deductor certificate under Section 197 of the Act for the FY 2020-2021 (Assessment Year 2021-2022) in line with the rate applied for FY 2018-2019 and FY 2019-2020. Assessee will file an affidavit within 10 days from today which will inter alia indicate that in case it were to, ultimately, fail in the captioned writ petition, it will deposit the deficit amount within four weeks of such a direction being issued by the Court. List the captioned writ petition on 16.04.2021. 2021 (3) TMI 330 Reopening of assessment u/s 147 - reopening after the expiry of 4 years - information provided by the DDIT (Inv.) Surat. relied upon - bogus transaction from entry provider u/s 68 - HELD THAT:- A plain reading of the reasons recorded revels that the Assessing Officer has solely relied on the information received from the Investigation Wing- Surat. AO has not applied his independent mind while recording the reasons that the income has escaped assessment. The original assessment record was with the Assessing Officer. The scrutiny assessment framed by the respondent has been challenged by the assessee company and the appeal is pending before the Appellate Tribunal. As the issue of alleged transaction was earlier added by the then Assessing Officer under Section 68 of the Act at the original assessment stage, the same amount cannot be brought to tax once again in the reassessment proceedings. It is not the case of the revenue that the transaction as reported by the Investigating Wing, Surat was distinct and has no relation with the earlier scrutiny assessment made under Section 143(3) of the Act. Thus, as such there was no tangible material in the hands of the Assessing Officer for reopening of the proceedings. Assessing Officer has acted mechanically based on the information received from the Investigating Wing, Surat for the purpose of reopening of the assessment and any independent satisfaction to the effect that the income chargeable to tax has escaped assessment is not reflected. It is a settled principle of law that the respondent cannot justify by taking recourse to some material and information beyond the scope of the reasons recorded by the Assessing Officer prior to reopening. In the instant case, the respondent has traveled beyond the scope of reasons recorded in order to justify the action of reopening. It is pertinent to note that while disposing of the objections against the reopening, Assessing Officer has observed that it has credible information as received by the office pertaining to the transaction claimed as a part of turnover and same can be clearly made out from the copy of the reasons recorded provided by the office. After close scrutiny of the reasons recorded, the Assessing Officer did not have refer the facts that the transactions was part of the turnover. Therefore, we hold that the formation of belief entertained by the Assessing Officer seems to be vague and based on irrelevant material. - Decided in favour of assessee. 2021 (3) TMI 329 Reopening of assessment u/s 147 - Notice after four years - Eligibility of reasons to believe - HELD THAT:- In the present case, the assessment year relating to the re-assessment is 2012-13 and the notice for re-assessment has been issued on 29.03.2018 beyond the period of four years. In response to the same, the petitioner has written to the revenue on 08.04.2019 to the effect that the return of income already filed be adopted in response to the notice under Section 148 and requesting the reasons for re-assessment. This letter has been received by the revenue on 09.04.2019. Nothing has transpired till August, 2019. Under cover of email dated 11.08.2019, the Assessing Authority issues a communication dated 16.08.2019 calling for various particulars on merits. It is relevant to note that the reasons as sought for have not been furnished at that juncture and this is in contravention of the procedure set out. Notwithstanding the same, the petitioner responds under cover of email dated 16.08.2019 to which letter, there is silence till 29.12.2019 when, under cover of email of even date, the reasons are supplied. On 30th December, a notice under Section 143(2) is issued to which the assessee responds on 31.12.2019 and the impugned order has come to be passed on the same day. Reasons are to be furnished promptly extending an opportunity to the petitioner to challenge the assumption of jurisdiction under Section 147. A speaking order is to be thereafter passed by the Authority on the aspect of assumption of jurisdiction and notice to proceed with the assessment on merits would become relevant only thereafter and subject to the decision taken by him on the question of assumption of jurisdiction. These stages are conspicuous by their absence in the present case and the Assessing Authority has passed the order on 31.12.2019 without affording any opportunity to the petitioner and in complete violation of the stipulated procedure. The impugned order of assessment is thus annulled and this writ petition allowed 2021 (3) TMI 328 Revision u/s 263 - Addition u/s 68 - HELD THAT:- For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditworthiness of share applicants, these Companies are having enough capital and the investment made in the appellant company is only a small part of their capital. Transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers as held by Hon ble jurisdictional High Court in CIT vs DATAWARE [ 2011 (9) TMI 175 - CALCUTTA HIGH COURT] which has not been done, so no adverse view could have been drawn. Third ingredient is genuineness of the transactions, for which we note that the monies have been directly paid to the assessee company by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. It will be evident from the paper book that the appellant has even demonstrated the source of money deposited into their bank accounts which in turn has been used by them to subscribe to the assessee company as share application. Hence the source of source of source is proved by the assessee in the instant case though the same is not required to be done by the assessee as per law as it stood/ applicable in this assessment year. The share applicants have confirmed the share application in response to the notice u/s 133(6) of the Act and have also confirmed the payments which are duly corroborated with their respective bank statements and all the payments are by account payee cheques. Assessee has discharged the onus on it; and twice the AO enquired about it and in the reassessment this issue has been thoroughly enquired as discussed supra and the view taken by AO is a plausible view in line with the judicial precedence supra and so it cannot be called erroneous. So the Ld PCIT erred in holding the AO s re-assessment order as erroneous. AO has conducted enquiries in respect of share capital premium collected by the assessee company before accepting the share subscribers identity, creditworthiness and genuineness of the transaction and being satisfied did not find it necessary to make any addition u/s 68 of the Act, which action could not have been interfered by the Ld. PCIT u/s 263 of the Act since the jurisdictional condition precedent for invoking the same is not satisfied in the facts of this case. However in case still if he (Ld. PCIT) wanted to exercise his jurisdiction despite the AO making enquiries as found by us then he (Ld. PCIT) should have himself conducted preliminary enquiry and should have been able to show that AO s enquiry was not correctly made by finding deficiency/infirmity in the documents/ material collected by the AO or even able to disprove the transaction of share capital by bringing material to suggest that the share transaction of assessee was an eye wash. This exercise the Ld. PCIT has not carried out. So according to us, in the light of the enquiries conducted by the AO in respect of share transaction, the Ld. PCIT could not have found the action of AO to be erroneous for want of no enquiry. And the view taken by the AO in respect of share transaction is a plausible view; and at any rate cannot be termed as un-sustainable view. We note that the action of Ld. PCIT smacks of arbitraries and is bad in law for non-application of mind and the Ld. PCIT proceeded on wrong, assumption of facts. Since the Ld. PCIT has interfered by invoking 263 jurisdiction without satisfying the condition precedent i.e. AO s order to be erroneous as well as prejudicial to the Revenue, the issuance of SCN and consequent impugned action is null in the eyes of law. Therefore, the assumption of revisional jurisdiction is bad in law and so quashed. - Decided in favour of assessee. 2021 (3) TMI 327 Denial of claim of deduction u/s. 80IA(4)(iii) - new industrial undertaking with development of industrial park - HELD THAT:- We find that the assessee, Salarpuria Softzone vis- -vis M/s. Soft Zone Tech Park Ltd was approved by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, Notification No. S.O 305(E), New Delhi, the 8th September, 2020. The approval is for the period of 1st day of April, 1997 to 31st day of March, 2006. The Central Govt. has approved the said Industrial Park vide Ministry of Commerce and industry s letter No. 15/23/2006-IPC/D dt. 25th July, 2006. In view of above discussion, we respectfully follow the proposition of law by the coordinate bench of this Tribunal in assessee s own case [ 2016 (2) TMI 1293 - ITAT KOLKATA] and in view of the Notification of the Central Govt. referred above, the order of the Ld. CIT(A) has to be reversed on this issue on the grounds on which the disallowance of claim was made are not legally and factually sustainable. - Decided in favour of assessee. 2021 (3) TMI 326 TDS u/s 194C - disbursements made to Driver-Partners on behalf of Uber B.V - non-deduction of tax at source - default u/s 201(1) / 201(1A) - person responsible for payment - Uber Technologies Inc. is a company incorporated in the United States of America and is the owner of the Uber Application ( Uber App ) which provides lead generation services to independent Driver-Partners who are interested in providing transportation services to Riders ( Users ) - Uber group had set up a subsidiary namely, Uber India Systems Private Limited (UISPL) in India ( i.e. the assessee company) on 16 August 2013 to market and promote the use of the Uber App in India and provide support services in connection with the same - HELD THAT:- Uber B.V. (through Uber India Systems Private Limited ( UISPL ), acting as its limited payment and collection service provider), also acts as the Driver-Partners' payment and collection agent, solely for the purpose of collecting the fare paid by the Users through digital modes, for the transportation services provided by the Driver-Partners and disbursing the same toDriver-Partner after deducting its Service Fee, if so required on an each trip basis by the User. This enables Users to electronically effect payment to the Driver-Partner for the transportation services rendered by the latter to the former. It is pertinent to note here that the Users can equally choose to pay by cash, which is paid directly to the Driver-Partners upon completion of the trip. The legislature in its wisdom had duly provided for the relevant provisions in the Act by specifically mentioning mere remitter of money to deduct tax at source as is provided in section 204(iv) of the Act, wherein, Drawing and Disbursing Officer (DDO) i.e. the remitter of money for Government, wherever required, need to deduct tax at source being person responsible for paying. The said provision is restricted to payment made by DDO on behalf of the Government and the same cannot be extended to other payments made by outsiders. Hence UISPL (i.e. the assessee company) being a mere remitter of collections made on behalf of the Driver-Partner at the direction of Uber B.V. cannot be held as the Person responsible for paying within the meaning of section 194C read with section 204 of the Act. Applicability of provisions of section 194C - Uber B.V. is involved in rendering lead generation service to the Driver-Partner and transportation service is not provided by Uber B.V. or UISPL. The transportation service is provided by the Driver- Partner to the User for which the car is arranged by the Driver-Partner, all the expenses are incurred by the Driver-Partner, necessary permits and licenses are obtained by the Driver-Partner and the liability arising out of the transaction of transportation service is assumed by the Driver-Partner.Uber B.V. is neither responsible for providing transportation service nor any liability arising out of the transportation service provided by the Driver-Partners. The transportation service provided by the Driver-Partner to Users is a contract between them to which Uber B.V. is not a party. For providing lead generation service, the Driver-Partner pays a percentage of the ride fare as a service fee to Uber B.V. Therefore, it is clear that UISPL is not a part of the contract and no payment obligation is imposed either under the agreement with the Driver-Partner or under the agreement with the User. Hence it could be safely concluded that the provisions of section 194C of the Act are not applicable in the instant case of the assessee as a) UISPL is not the person responsible for making payment b) UISPL has not entered into any contract with the Driver-Partners c) no work is carried out by the Driver-Partners for UISPL. We find that the ld. AR drew our attention to the fact that Uber B.V. has been recognized as an aggregator under the Service Tax Law. Section 66B of Finance Act, 1994 provides that service tax to be paid at prescribed percentage on the value of services provided in India - one wing of the legislature has recognized Uber B.V. as an aggregator and not a service provider which again brings us to the same point that the transportation service is provided by Driver-Partner to Users directly for which User is making the payment and it is the User who is the person responsible for making payment. And, Uber B.V. and UISPL are not a party to the contract of transportation entered into between a User and a Driver-Partner. Principle of Consistency in the assessment made bv the Department - We find that the ld. AO while passing the assessment order under section 143(3) of the Act for the Asst Year 2016-17 dated 8.12.2018 had duly accepted the fact that UISPL is an entity engaged in the business of providing marketing and support services to Uber B.V. and not in the business of providing transportation service. Accordingly, no disallowance u/s 40(a)(ia) of the Act was made thereon. Even for earlier assessment years, i.e., AY 2014-15 and AY 2015-16, when the payment was collected and disbursed directly by Uber B.V. from an account outside India, Department has not invoked provisions of section 194C of the Act for the payments made to Driver-Partners in those years. Department has been consistently taking a view that the provision of section 194C of the Act are not applicable in the hands of UISPL and has assessed UISPL as a marketing and support service provider to Uber B.V. without making any disallowance under section 40(a)(ia). Hence, in the absence of any change in the facts and circumstances of the case, the department is not permitted to take a different view in the matter for the years under consideration. Conclusion : - UISPL cannot be treated as a person responsible for paying for the purpose of section 194C read with section 204 of the Act, for more than one reason and also the provisions of section 194C of the Act cannot be made applicable thereon. Hence the assessee company i.e. UISPL cannot be treated as an assessee in default and no order could be passed u/s 201 / 201(1A) of the Act in its hands for the years under consideration. - Decided in favour of assessee. 2021 (3) TMI 325 Allocating expenses to agricultural income and non-agricultural income - Apportionment of the expenses relatable to the earning of exempted agricultural income for making disallowance and consequently erred in sustaining the addition in the computation of taxable total income without assigning proper reasons and justification - HELD THAT:- As gone through orders of the authorities below Admittedly, the assessee has maintained separate books of accounts for agricultural activity and for Head Office operations. Further, at Head Office level except interest income, no other business activity was carried out for impugned assessment year. On perusal of expenses claimed at Head Office level, we find that except director remuneration all other expenses are related to business activity of the assessee. As claim of assessee before the AO that director salary is related to agricultural operations because director personally takes care of estate activity. We are of the considered view that if at all allocation of expenses is required between agricultural income and non-agricultural income, then only director s remuneration can be apportioned to agricultural operations and non-agricultural operations. Since assessee himself has admitted that agricultural operations were taken care of by the director, we are of the considered view that remuneration to the director amounting to ₹ 3,00,000/- is related to agricultural operations and hence, direct the Assessing Officer to restrict apportionment of expenses to the extent of director s remuneration. Accordingly, apportionment of all other expenses in the ratio of agricultural income and non-agricultural income has been deleted. AO has assessed interest income under the head income from other sources and further disallowed total expenditure incurred at Head Office on the ground that said expenditure is relatable to agricultural operations of the assessee - AO having accepted fact that Head Office expenses needs to be apportioned between agricultural income and non-agricultural income, has erred in disallowing total expenses for impugned assessment year without there being any change in facts. We are of the considered view that Assessing Officer has erred in disallowing total expenditure incurred at Head Office and considered as expenditure incurred for agricultural operations - for impugned assessment year also, if we consider nature of expenditure incurred at Head Office, director remuneration and other expenditure are similar to expenditure incurred for previous financial year. Further, for immediately preceding financial year, we have considered identical issue and held that except director remuneration no other expenses can be apportioned to agricultural income and non-agricultural income. Therefore, consistent with view taken by us for immediately preceding year, we are of the considered view that only director remuneration can be apportioned to agricultural operations because director is personally taking care of estate activity. Hence, we direct the Assessing Officer to consider director remuneration to agricultural operations. Interest income - Assessing Officer in the immediately preceding year has accepted interest income offered by assessee under the head income from business has suddenly changed head of income to income from other sources without there being any change in facts and circumstances for impugned assessment year. Therefore, we direct the Assessing Officer to consider interest income under the head income from business as claimed by assessee and further direct the Assessing Officer to allow expenditure incurred at Head Office except director salary against interest income. 2021 (3) TMI 324 Credit of TDS deducted on account of capital gains by the Koutons Group in case of assessee but not deposited with the state exchequer - assessee, being a non-Resident Indian holding a British passport, sold 25% shareholding in Koutons Group, a private limited company - CIT (A) gave part relief to the assessee to the extent that the assessee cannot be treated as assessee in default in respect of tax demand but has not given the credit of TDS to the assessee on the ground that TDS amount has not been deposited in the state exchequer by Koutons Group - whether assessee whose TDS on account of capital gains was deducted by M/s. Koutons Group but not deposited with the state exchequer, is entitled to credit of TDS? - HELD THAT:- Revenue Department itself has accepted that TDS of assessee was deducted by the Koutons Group though not deposited with the state exchequer, the assessee cannot be treated as assessee in default and as such cannot be denied the credit thereof with consequential refund. When deductor of TDS, Koutons Group in this case, made a deduction under statutory obligation on behalf of the Revenue as its agent, in case, there is any omission on the part of the deductor in depositing the tax deducted at source, it is liable to be prosecuted u/s 409 of the Indian Penal Code being an agent of Revenue Department. Revenue Department has not taken any action under the Act or under the Indian Penal Code against the Koutons Group rather assessee had filed a complaint with the concerned police station, available at pages 128 to 133 of the paper book, against Koutons Group and its Directors for illegal misappropriation of an amount of ₹ 2,04,96,695/- and this intimation was given to the Revenue Department. Strangely enough, Revenue Department has not moved the law into motion even after filing the complaint by the assessee. TDS to the tune of ₹ 2,04,96,695 deducted by the Koutons Group on account of capital gains earned by the assessee and amount of ₹ 50,00,000 deposited by the assessee with the Revenue Department minus the capital gains depicted in the table given in the preceding para is liable to be refunded along with statutory interest within two months from the date of this order. - Decided in favour of assessee. 2021 (3) TMI 323 Rectification u/s 154 - Assessment u/s 153A - Addition made towards unexplained investment - HELD THAT:- The powers conferred by the statute u/s 154 of the Act on the CIT(A) are very limited and are circumscribed by the restrictions mentioned therein. In the case on hand, on earlier occasion, the CIT(A) has passed his order purely based on facts and material produced before us which alone forms basis for the CIT(A) to decide the issue, where the decision of the CIT(A) is right or wrong is a different issue which cannot be adjudicated by way of proceedings u/s 154 of the Act. The facts remain that the CIT(A) after duly considering all aspects and applying his mind, has taken conclusive and conscious view though in the opinion of the assessee is wrong, cannot be said to be mistake apparent from record since the said view has been arrived at after due application of mind to the facts and circumstances of the case and the relevant material on record. More so, the view of the CIT(A) was confirmed by the Tribunal vide their order dated 14.7.2017. It is well settled that a mistake apparent on record must be an obvious and blatant mistake and not something which could be arrived by a long drawn process of reasoning on accounts on which there may be conceivably two opinions. In the present case, the CIT(A) have categorically decided the issue against the assessee in first round that also confirmed by the Tribunal after considering the materials available on record and applying the mind such finding of the CIT(A) cannot be challenged by way of proceedings u/s 154. Entertaining the application filed by assessee u/s 154 would only amounting to review of the earlier order of the CIT(A) for which the CIT(A) has no power as discussed earlier. In case the assessee is aggrieved against the decision of the CIT(A), the remedy de-facto does not allow by way of proceedings u/s 154 of the Act before CIT(A) to readdress the grievance of the assessee but elsewhere. In view of the above discussion, we are of the opinion that there is no mistake apparent on record in the order of the CIT(A) which can be legally rectified by way of proceedings u/s 154 of the Act by the assessee. Therefore, we are unable to agree with the finding of the CIT(A) in his proceedings u/s 154. 2021 (3) TMI 322 Addition u/s 68 - Unexplained share capital - proof of identity, creditworthiness and genuineness of the share applicants - onus to prove - HELD THAT:- The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee. If he could not do so, then evidence furnished by assessee cannot be brushed aside by the AO to draw adverse view and such an action cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the AO against the assessee, we hold that addition cannot be sustained merely based on inferences drawn by circumstance. Applying the propositions laid down in these case laws to the facts of this case, we are inclined to delete the addition confirmed by the Ld. CIT(A). Section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source of it shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the share application and premium received by it was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed before the AO - assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified - no addition was warranted under Section 68 - Decided in favour of assessee. 2021 (3) TMI 321 Addition u/s 14A r.w.r. 8D - suo moto disallowance - HELD THAT:- In Assessment Year 2008-09 in [ 2019 (12) TMI 1457 - ITAT DELHI] on the issue of disallowance u/s 14A the Co-ordinate Bench of the Tribunal had considered the issue of disallowance and remitted the issue back to the file of the Assessing Officer to work out of the disallowance by calculating average investments under Rule 8D(2)(ii)/(iii) by taking only those investments which have actually yielded dividend income during the relevant year and also directed that if the same exceeded the dividend income then to restrict the same to the extent of exempt income only. Disallowance u/s 14A of the Act had again restored the issue to the file of the AO with the direction to ascertain the investment which have yielded dividend income and to consider only those investments for computing the average value of investments. Therefore, on identical facts and with consent of both the parties, we deem it appropriate to restore this issue also to the file of the AO with a direction to include only those investments which have yielded dividend income for computing the average value of investments for the purpose of computing the amount of disallowance u/s 14A - AO is directed to offer reasonable opportunity to the assessee to present its case before proceeding to re-compute the disallowance. Since this ground also relates to the ground raised in the Department s appeal, the Department s ground also stands restored to the file of the AO with similar directions. Disallowance of non-compliance charges amounting paid to National Stock Exchange - HELD THAT:- As seen that the Ld. Authorized Representative has given a detailed break up and description of the various amounts constituting the impugned total amount and has vehemently argued that these penalties and fines levied by National Stock Exchange were more in the nature of regulatory/disciplinary fees and were not in the nature of any penalty levied for violation of any law. The fact remains that the submissions regarding the actual nature of fines and penalties levied by NSE were not explained before the Lower Authorities. The fact also remains that in the tax audit report, the auditor, in his own wisdom, has stated that this amount was liable to be disallowed and added back to the income of the assessee. In our considered opinion, interest of substantive justice would be met if the assessee is allowed an opportunity to explain and establish before the Assessing Officer as to how these amounts do not fall within the mischief of section 37(1) of the Act. We, accordingly, restore this issue to the file of the Assessing Officer with a direction to examine the matter afresh after giving proper opportunity to the assessee to present its case. Thus, Ground allowed for statistical purposes. 2021 (3) TMI 320 Loss on sale of depreciable assets - Disallowance of short term capital loss on sale of machinery and short term capital loss on sale of furniture - AR submitted that the assessee was engaged in the business of sale and supply of marble tiles which was discontinued since last 3-4 years and there is no business activity during the year under consideration - HELD THAT:- No finding of the AO regarding the claim of short term capital loss in the assessment proceedings and only during the remand proceedings, the matter was examined by the AO wherein the assessee submitted that since it has sold land and building, it has also sold old plant and machinery, and furniture. AO in his remand report thereafter stated that the claim of the assessee is not verifiable and hence, not acceptable. We therefore find that the AO had some apprehension about the value of such plant and machinery and furniture and in order to verify the same, had issued the summons to the purchaser, however due to death of the purchaser, the sale consideration could not be verified. However, he has not disputed the fact that such assets have been found recorded in the assessee s books of accounts as on the beginning of the year and have since been disposed off way back in 2008, therefore, mere apprehension cannot be a basis to deny the fact that these assets have been sold at the stated consideration as evidenced by the sale receipts. Similarly, the findings of the ld CIT(A) that no evidence for sale of plant and machinery was brought on record is incorrect as the assessee has submitted the sale receipts in support of such transactions which have infact been taken on record by the ld CIT(A) and sent for AO s comments and verification. Lastly, non-filing of the return of income by due date can be basis for denial of claim for carry forward of losses as per section 139(3) of the Act, therefore, in the instant case, where admittedly and undisputedly there is no such claim by the assessee in terms of carry forward of such losses on account of sale of plant and machinery and furniture, the reasoning adopted by the ld CIT(A) is not sustainable as the same is not in accordance with law. In the result, the AO is directed to allow the claim of short term capital loss on sale of plant and machinery and furniture for being set off against other income as per provisions of law for the impugned assessment year. Appeal of the assessee is allowed. 2021 (3) TMI 319 Accrual of income - assessment year - Addition by treating the advance received from the parent company as the income for the relevant assessment year - HELD THAT:- It does not fit in the order of the things that having accepted the offering of ₹ 2.67 crores received by the assessee in the financial year 2010-11 to tax in the assessment year 2012-13 and also having accepted the offering of ₹ 3.05 crores received by the assessee in the financial year 2011-12 to tax in the Assessment Year 2013-14, the learned Assessing Officer would have held that all the amounts that were received during the financial year 2011-12, irrespective of the fact that corresponding services were rendered during that year are not, should be brought to tax in the assessment year 2012-13 itself. We hold that the reasoning adopted by the Ld. CIT(A) and the conclusions reached by him in deleting this amount of ₹ 3.05 crores which is in fact the advance amount but retreated by Assessing Officer as income for the assessment year 2012-13, are perfectly legal and not warrant any interference. We, accordingly, declined to interfere with the same and dismiss grounds 1 to 3 Revenue's appeal. Disallowance of business promotion expenses - HELD THAT:- There is no dispute that the assessee produced the details and documents like sample invoices, copy of Ledger, summary mentioning the category of gifts and the list of people to whom gifts were given etc were furnished before the authorities and no discrepancies are specifically pointed out with any of these documents. AO himself admitted that it is customary under Indian tradition to offer gifts on the festive occasions like Diwali Festival. Ld. CIT(A) held that maintenance of cordial relations with customers are required for obtaining the market information which is for the furtherance of the assessee's business. By no stretch of imagination could be said that offering of gifts by a businessman to is customers is barred by any law for the time being in force. Now coming to the quantum of disallowance learned AO made it at 60% whereas the Ld. CIT(A) restricted the same to 20%. As observed by is about, no discrepancies found with the books of accounts of the assessee as to the incurring of these expenses or to show that there is any illegality of purpose of this expense. In the absence of any concrete basis to determine the disallowance of the expense and in the absence of a specific finding that the expenses were not exclusively and fully for the purpose of business, we find it difficult to sustain the disallowance year at 60% or 20%. With this view of the matter we delete the addition made by disallowing the business promotion expenses. 2021 (3) TMI 318 Deduction u/s 80IAB - case of the assessee was selected for scrutiny assessment - as per AO no development or insignificant development of SEZ was carried out by the assessee-company, and therefore it is not entitled for deduction under section 80IAB - Assessee has infringed SEZ Act and Rules while claiming lease rental from sister concern, as eligible for grant of deduction under section 80IAB - HELD THAT:- Once the approval to such activity is granted by the prescribed authority, and such approval is valid, it will no longer be open for the AO to verify the satisfaction of the conditions prescribed under Rule 18DA in order to refuse deduction under section 80IB(8A). The DPCL had made application to the Development Commissioner for approval for setting up SEZ on 29.3.2011 which was granted by the Development Commissioner on 22.6.2011. The said application was duly received by KASEZ on 29.3.2011. The assessee had submitted complete details about the procedural documentation on this aspect and as per Rule 6(2)(a) of the SEZ Rules, one of the units in SEZ could start commercial production within three years from the date of letter of approval granted by the BOA. Unless the land is being purchased, how production could be started. This aspect has been considered by the ld.CIT(A) while taking note of these facts in paragraph 3.4 at page no.38 of the impugned order. We have taken cognizance of this paragraph in the earlier part of this order, therefore we are of the view that the ld.CIT(A) has appreciated the facts in right perspective on this reasoning also, and rightly did not agreed with the AO. AO has observed that MD of DPCL, Shri J.R. Vyas has accepted that a wrong claim of deduction under section 80IBA was made but as gone through the details recorded on this fold of reasoning. It was demonstrated that this statement was given under misconception of the facts demonstrated before the MD by the survey team. It is pertinent to note that statement made during the course of survey under section 131(1A)(3) of the Act was without administrating oath, because the authorized officer conducting survey is not empower to administer oath, and such statement does not carry much evidentiary value. It is a just an information for corroboration purpose. Therefore, on the strength of this statement, the ld.AO cannot deny the deduction to the assessee. This aspect has also been gone through by the ld.CIT(A). After going through the well reasoned finding of the ld.CIT(A) we do not wish to interfere in it on this issue. BOA has granted approval to the assessee. This approval has not been cancelled or suspended. It was valid. The assessee has offered a piece of land measuring 299151 sq.meters to DPCL at ₹ 1400/- per sq.meter as lease rent for a period of 99 years, and ₹ 2100/- per sq.meter towards development charges. Now this amount computed at the rate of ₹ 1400/- per sq.meter has been shown by the assessee as income from SEZ. Sister concern has already applied to the BOA Before the 31st March for approval. It could not be doubted by referring an aspect that capital expenditure shown and capitalized under the head work-in-progress was bogus. On the basis of such an observation, deduction otherwise admissible to the assessee cannot be denied. The assessee has fulfilled all necessary conditions under section 80IAB of the Act. It was having valid approval from BOA, and therefore, it has rightly claimed deduction. The ld.CIT(A) in the well reasoned order has examined all these reasoning given by the AO and thereafter observed that this aspect has been considered by the ITAT in various decisions, and the case of the assessee duly fall within the ambit of section 80IAB of the Act for grant of deduction. - Decided in favour of assessee. Expenditure for financial charges - assessee has debited a sum in the profit loss account which was treated as penal interest - Whether not for any violation of infringement of any law, and therefore, these are allowable - HELD THAT:- CIT(A) has justified in accepting the contention of the assessee that the expenses incurred for late submissions of the documents to IDBI Bank wholly and exclusively for purpose of assessee s business, and not incurred for any offence prohibited by the law or for violation of any provisions. Explanation 1 to section 37(1) of the Act provides that the payment of any amount which was prohibited by law was not a business expenditure and it could not be allowed as an expenditure. It is needless to mention here that this type of expenditure do happen during normal incident of business. Late submission of the documents and payment for such lapse were not common in the normal course of business activities, and therefore, it cannot be termed as an expenditure for infraction of law so as to attract the Explanation-1 of section 37(1) of the Act, which is a residuary section for allowance business expenditure, besides allowance of the expenditure as per sections 30 to 36. Therefore, we are of the view the case of assessee does not fall under the Explanation 1 to section 37(1), and therefore, we confirm the action of the ld.CIT(A) in allowing the expenditure incurred towards late submissions of the documents. Disallowance of expenditure as not genuine and actually incurred - disallowance u/s 40A(3) of the Act for the year under consideration on the ground that since the expenditure in question is not claimed in P L Account, the question of deciding its allowability does not arise - disallowance of interest - expenditure in question is not claimed in P L Account, the question of deciding its allowability does not arise - HELD THAT:- All these items the assessee has not claimed in profit loss account, and therefore, the question of deciding their allowable cannot be taken up in this accounting year. Taking into consideration the academic nature of the issue under these four heads of the appeal, we record a finding that ends of justice would meet if we vacate the finding of the AO that these expenditures are nongenuine, because in this year, there should not have been any occasion to record this finding when the expenditure have not been claimed in the accounts as well as in the return. It will be open for the Revenue to decide the genuineness of the expenditure as and when they are being claimed in future years by the assessee. With the above observation, the above four grounds of the appeal are partly allowed. Addition in respect of interest income after holding that the same is required to be treated as Income from other sources - HELD THAT:- We find that Hon ble jurisdiction High Court in the assessee s own case for the earlier period has held that interest income earned by the assessee is derived from business of the undertaking and therefore allowable as business expenditure. We are of the view that the incidental activity of parking of surplus funds with the banks is a part of business decision taken in view of the commercial expediency and the interest income earned incidentally cannot be detached from its profits and gains derived by the undertaking; and therefore, in this year also claim of the assessee is to be allowed. Accordingly, we allow the claim of the assessee and treat the interest income as business income derived from the undertaking of the assessee. Recasting of the balance sheet by observing that expenditure debited in the work-in-progress has not been claimed in the profit loss account - HELD THAT:- By filing CO, the department cannot take up a new issue. The scope of CO is discernible from plain reading of sub-section (4) of section 253 of the Income Tax Act, 1961. It contemplates that the respondent could file a CO against impugned order on any part of the order. In other words, if the Revenue has any grievance with the impugned order of the CIT(A), and on that issue it has not filed appeal, then on receipt of notice in the assessee s appeal, it can file CO. But here the Revenue wants to rake up altogether a new issue which was not subject matter of appeal before the ld.CIT(A); even it was not a subject matter before the AO in the assessment proceedings. Therefore, such CO is not maintainable, hence dismissed. 2021 (3) TMI 317 Accrual of income - Addition on failure to declare full income from production of feature film Shoe Bite - HELD THAT:- CIT(A) called for remand report and thereafter concluded that as per the contract, the income accrued on the completion on a definite land mark in each stage of production and that the entire receipt does not accrue a signing of the contract. Therefore, he held that income relating to those activities which have either not been completed by the assessee or which have not been initiated at all, will not accrue. Comment of the AO that the assessee has claimed all the expenses, while the entire revenue was not offered to tax, is factually incorrect. On facts, he records that the assessee has not claimed expenses relating to dubbing, post production and production of first censor copy. Thus, he held that even going by the matching principle, the income recognised by the assessee during the year is correct. No infirmity in this factual finding of the ld. CIT(A). The income to the extent contract work is done has been recognised by the assessee. Thus, we uphold the order of the ld. CIT(A) on this issue and dismiss this ground of the Revenue. Bogus sundry creditors - CIT-A deleted the addition - HELD THAT:- CIT(A) has recorded the fact that Shabnam Parvez Khan has issued a confirmation letter - a finding of fact that the assessee has furnished copies of bills, as well as ledger accounts which were sent to the AO and that the AO has not commented adversely. Thus, on facts, he held that Shabnam Parvez Khan performed work of a casting coordinator and that proper bills have been raised on the assessee company. He held that this is a genuine transaction and deleted the addition. We find no infirmity in this factual finding of the ld. CIT(A). Hence, we do not interfere in this order. Thus, we dismiss this ground of the Revenue. 2021 (3) TMI 316 Unexplained deposits - Rejection of Additional information submitted before the CIT (A)- violation of Rule 46A of I.T. Rules - DR submitted that the assessee had filed only part information before the AO and has filed certain additional information before the CIT (A) who granted relief to the assessee by accepting the said evidence and CIT (A) has neither verified the evidence nor called for a remand report from the AO and therefore, the order of the CIT (A) is in violation of Rule 46A of I.T. Rules - HELD THAT:- We find that the assessee had filed only part information before the AO and before the CIT (A) the assessee has filed the following additional evidence: (a) with regard to the sale of agricultural land, the assessee has filed pattedar pass books; (b) with regard to the long term borrowings, the copy of the agreement of sale evidencing the advance payment verified; (c) with regard to the agricultural income, the assessee filed evidence that he has offered agricultural income in the earlier years which was accepted by the AO; (d) with regard to bank transactions in HDFC Bank, the evidence to the effect that the assessee has received share application money from various parties during the relevant A.Ys was filed. We find that the CIT (A) has neither verified the evidence by herself nor has called for any remand report from the AO, but has summarily accepted the evidence filed by the assessee. The additional evidence filed by the assessee before the CIT (A) ought to have been verified by the AO. In view of the same, we deem it fit and proper to set aside the issue to the file of the AO with a direction to the assessee to file all the relevant information before the AO and the AO shall re-adjudicate the issue denovo in accordance with law. Revenue s appeal is treated as allowed for statistical purposes. 2021 (3) TMI 315 Assessment u/s 153A - Addition u/s 68 - HELD THAT:- As the undisputed fact is that the additions made in this order passed u/s 153A r.w.s. 143(3) of the Act. are not based on any incriminating material found during search and as the assessment for the Assessment Year 2011-12 has not abated, we delete the additions by the Assessing Officer applying the principles laid down in M/s. Salasar Stock Broking Ltd.[ 2016 (8) TMI 1131 - CALCUTTA HIGH COURT ] on this issue. Even otherwise, on merits all the share applicant companies have been assessed to tax by the Income Tax Department and their assessment orders are passed u/s. 143(3) of the Act. Appeal of the assessee is allowed. 2021 (3) TMI 314 Estimation of income - Bogus purchases - disallowance @ 12.5% restricted by CIT-A - HELD THAT:- We find that the Ld. CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and the averments in the Assessment Order and following in the case of CIT v. Simit P. Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT ] restricted the disallowance to 12.5% of the non-genuine purchases. No infirmity in the order passed by the Ld. CIT(A) in restricting the addition/disallowance to the extent of 12.5% of the purchases. - Decided in favour of assessee. 2021 (3) TMI 313 Estimation of income - Bogus purchases - disallowance @ 12.5% restricted by CIT-A - HELD THAT:- We find that the Ld. CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and the averments in the Assessment Order and following in the case of CIT v. Simit P. Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT ] restricted the disallowance to 12.5% of the non-genuine purchases. No infirmity in the order passed by the Ld. CIT(A) in restricting the addition/disallowance to the extent of 12.5% of the purchases. - Decided in favour of assessee. 2021 (3) TMI 312 Revision u/s 263 - TP Adjustment - CIT (IT TP) has found that there was error in the calculation of the PLI of the assessee company i.e. adoption of the operating cost and also allocation of operating cost between the branded food segment and SIT segment and the assessee has not been able to point out that these discrepancies are not arising out of the TPO s order - HELD THAT:- There is clearly an error committed by the TPO, in computing the operating revenue while determining the ALP. Thus, the TPO order was clearly erroneous in so far as it was prejudicial to the interest of the revenue. Whether the CIT (IT TP) could have revised the TPO order? - Where the direction of the DRP have been held to be part of the assessment order, then, there can be no doubt that TP order is also part of assessment order and is thus amenable to jurisdiction of the CIT u/s.263 of the Act and particularly on the issues which were not considered by the TPO and DRP. Thus, assessee s grounds of appeal No.1 to 3(i), (ii) (iii) are rejected. Assessee s objection that the Tasty Bites and Eastables Ltd does not satisfy the filter adopted by the TPO - We find that the TPO has himself adopted the RPT filter of more than 25% and in the case of Tasty Bites and Eatables Ltd., it s RPT is clearly beyond the range fixed by the TPO, its RPT transactions are much more than 50%, but nearly 75%. In such circumstances, the TPO ought not to have considered the said company as a comparable company. Though the assessee may not have challenged the same before the TPO, assessee has challenged it before the DRP, but the DRP has not adjudicated the same and since there was no demand arising due to the consequential order passed by the AO, there was no occasion for the assessee to file an appeal before the ITAT. Therefore, in our opinion, the CIT (IT TP) ought to have directed the TPO to consider assessee s objections to Tasty Bites and Eatables Ltd before concluding the assessment proceedings. We direct the AO to examine and verify whether the RPT transaction of Tasty Bites Eatables Ltd with its AE is more than 25% and if it is found to be correct, then the said company shall be excluded from the final list of comparables. With these directions, the order of the CIT u/s 263 is modified and the AO/TPO is directed to recompute the ALP by excluding the Tasty Bites Eatables Ltd, and if thereafter the PLI of the assessee is less than +-5% of the comparable companies, then no TP adjustment is called for. With these directions, the appeal of the assessee against the order u/s.263 of the Act, is partly allowed. 2021 (3) TMI 311 TP Adjustment - comparable selection - Exclusion of two comparable companies viz., M/s Infosys BPO Ltd and M/s TCS E-Serve Limited - HELD THAT:- Companies having high brand value cannot be considered as comparable companies can be conveniently applied to the year under consideration also. We have also noticed that M/s Infosys BPO Ltd is being consistently excluded in the assessee s own case in the earlier years. M/s TCS E-serve Ltd has been excluded, inter alia, for the reason that it is providing KPO services and further it is explicitly stated that it is an integral part of Tata Consultancy Services strategy to build on its Full Service offerings that offer global customers an integrated portfolio of services ranting from IT services to BPO services - Assessee herein is undertaking backend processing of accounting and other transactions, back office operations, customer support services to various Associated Enterprises. Hence they are in the nature of BPO services only, while M/s Infosys BPO Ltd and M/s TCS E serve Ltd are providing variety of other services. Besides both the above said companies are supported by their parent companies, having huge brand value. Accordingly, we hold that both the above said companies cannot be considered as comparable companies. Accordingly, we direct the AO/TPO to exclude both M/s Infosys BPO Ltd and M/s TCS E serve Ltd from final list of comparables. Treatment of foreign exchange gain/loss as operating income/expenses or not - HELD THAT:- As relying on M/s Arctern Consulting Pvt Ltd [ 2019 (10) TMI 1286 - ITAT BANGALORE ] has taken the view that the foreign exchange fluctuation gain/loss is operating in nature. Accordingly, following the same, we hold that that foreign exchange fluction gain/loss should be treated as operating profit/loss in nature while computing the profit margin of the assessee as well as of the comparable companies. ALP of the transactions require to be determined afresh in the light of decisions rendered supra. Accordingly, we restore this matter to the file of the AO/TPO. Customs 2021 (3) TMI 310 Provisional release order - HELD THAT:- Mr. Parth Divyeshwar, the learned Standing Counsel appearing for the respondents would submit that, within 48 hours, appropriate orders in accordance with law shall be passed by the respondent No.2 herein. Mr. Divyeshwar informed the Court that Mr. Sankhesh Mehta is very much sitting in his office chamber. According to Mr. Divyeshwar, Mr. Shankhesh Mehta is apologetic for what has happened in the present case. The present civil application stands disposed of. Corporate Laws 2021 (3) TMI 309 Seeking reliefs in respect of the functioning of the NCLT and for constitution/appointment of various benches of the NCLT - submission of the Petitioner is that NCLT benches are to be constituted and set up in all States and at this point there are only 19 judicial members and 22 technical members - appointments to the NCLT and NCLAT are considerably delayed - HELD THAT:- This Court has perused the judgment of the Supreme Court in MADRAS BAR ASSOCIATION VERSUS UNION OF INDIA ANR. [ 2020 (12) TMI 3 - SUPREME COURT ]. Clearly, the judgment covers the issues which have been raised by the Petitioner, including in respect of appointments to Tribunals, enquiries against members, monitoring of the functioning and the filling up of vacancies in Tribunals, as well as assessment of the workload and providing all adequate infrastructure. Directions have been issued for setting up of the `National Tribunals Commission and, in the interregnum, for the setting up of a separate `tribunals wing in the Ministry of Finance. Thus, the reliefs sought herein are completely covered by the said judgment - Considering that it has been more than three months since the judgement has been rendered, it only needs to be emphasised that the directions given by the Supreme Court ought to be implemented expeditiously by the Respondent Authorities. Petition disposed off. 2021 (3) TMI 308 Seeking to direct the respondents to permit the petitioners to file e-form ACTIVE, INC-22A without insisting on appointment of a whole-time Company Secretary - seeking to declare that the restriction imposed in filing e-form ACTIVE, INC-22A with regard to non- compliance of Section 203 of a whole-time Company Secretary or Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is arbitrary and illegal - HELD THAT:- The petitioners have been permitted to file e-form ACTIVE, INC-22A without insisting the appointment of a whole-time Company Secretary, on a provisional basis. Section 203(5) of the Companies Act provides that if any Company makes any default in complying with the provisions of Section 203 relating to appointment of Key Managerial Personnel, such Company shall be liable to a penalty of ₹ 5 lakhs and every Directors and Key Managerial Personnel of the Company, who is in default, shall be liable to a penalty of ₹ 50,000/- and where the default is a continuing one, with further penalty of ₹ 1,000/- for each day after the first during which such default continues but not exceeding ₹ 5 lakhs. It is evident that the petitioner-Companies have not adhered to the provisions of the Companies Act, especially Section 203 thereof. In such circumstances, the respondents are empowered to proceed against the petitioner-Companies, in accordance with law. Petition disposed off. 2021 (3) TMI 307 Maintainability of suit before Civil Court instead of NCLT - lack of a specific plea of family settlement in the pleadings, with further reasoning that the issues raised were covered under the Companies Act, 2013 - Family arrangement - resolution of disputes amongst family members who are shareholders of Respondent No. 1 Company - Whether a plea of Family Settlement was made in the suit? - HELD THAT:- The law on pleadings is well-settled. Order VI Rule 2 of the CPC requires that the pleadings should contain a statement in a concise form of material facts which the party relies upon for pleading his case or defence. The material facts are those which must be proved in order to establish Plaintiff/Appellant s right to the relief sought for in the plaint, or the Respondent No. 1 s defence in the written statement. The narration of material facts is essential to disclose the complete cause of action. It needs no emphasis to say that a case can only be decided on the particulars laid out in the pleadings, and a relief not founded thereon, cannot be granted. Parties cannot travel beyond the pleadings and necessary material facts must be stated in support of the case set-up. There can be no departure from them in evidence - the Appellant has not narrated any material facts in relation to the family settlement. In absence of pleadings, evidence cannot be permitted to be adduced. We cannot see any accidental slip or omission on the part of the Appellant in drafting the suit, deserving laxity. The suit has been drafted with serious thought and is intentionally vague on the plea of family settlement. Therefore, having regard to the frame-work of the suit, even if we were to give liberal construction to the pleadings, law does not permit the Appellant to supplement the deficiency and omission in the pleadings, by producing evidence, for which trial is being requested - there are no reason to upturn the finding of learned Single Judge on this score. Whether the Board Resolution constituted a Family Settlement/Arrangement and appellant as a shareholder can seek its enforcement against Respondent no.1 in a Civil Suit? - HELD THAT:- We are conscious of the fact that under the Companies Act, 1956 there was no provision like Section 430 providing for ouster of jurisdiction, however, there cannot be any dispute that as on this day, the civil remedy would be completely ousted under Section 430 of the Companies Act, 2013. Relegating the parties to continue with the civil suit would thus not be appropriate remedy, considering the manner in which Section 430 of the Act is couched and the appropriate course for the Appellant would be to avail its remedy before the NCLT. Further even if one were to examine the issue is the context of Companies Act, 1956, there is sufficient case law that holds that the jurisdiction of the Civil Court in matters relating purely to issues pertaining the management of the company can not be gone into any civil suit. Here it also becomes relevant that since the father of the Appellant was pursuing a remedy before the NCLT, the appropriate course of action for the Appellant is to approach the said forum. We therefore, do not find any error in the reasoning of the learned Single Judge on this count, as well - there are no merit in the submission of the Appellant that the Board Resolution was in line with the Article/ Memorandum of Company. This contention is advanced merely on the basis of the pleadings without placing any material on record and thus the observations made by the learned Single cannot be faulted with. Whether reliance placed on SMT. DEEPA ANANT BANDEKAR VERSUS RAJARAM BANDEKAR (SIRIGAO) MINES (P.) LTD. [ 1990 (11) TMI 322 - HIGH COURT OF BOMBAY] case by the appellant was correct? - HELD THAT:- Since it is already held that there is no family settlement on record, the proposition advanced by the Appellant is misconceived - We have also perused the decision of the Bombay High Court in Deepa Anant case. The Deepa Anant-1990 case, in para 1 notes the proposition as whether the family arrangement dated March 11, 1987 is binding on the company , however, the reasoning given in para 23 has not dealt with the same. Moreover, subsequently the 1990 decision was set-aside, but the Appellant did not bring the said fact to the notice of the court. Thus, the learned Single Judge was correct in noting that the Deepa Anant1990 case relied upon by the counsel for the Appellant, was later set aside in terms of a compromise arrived at by the parties, and the company is still existing till date. For these reasons, we do not find any merit in this contention of the Appellant, urged before us. Whether Respondent No. 1 made any admission in its written statement filed in the suit, and whether the Learned Single Judge was correct in exercising jurisdiction under order XII Rule 12 CP? - HELD THAT:- The jurisprudence relating to the exercise of power under Order XXII Rule 6 of CPC is now well established. Under the said provision the Court may, on its own, deliver judgment based on admissions either in the pleadings or otherwise. The said provision is to be interpreted widely having regard to its objective and the Court is thus not precluded to examine the question of maintainability of a suit at a stage after the issues have been framed. Indisputably, this aspect had not been examined at any anterior stage, and therefore we cannot find any error in the approach of the learned Single Judge in delving into this question and exercising jurisdiction under Order 12 Rule 6 of CPC. The Appellant had contended that the learned Single Judge erroneously held that the Appellant herein had failed to even establish that he was an independent shareholder in the Respondent No.1 and proceeded to rule adversely on this basis. To our minds, there is little doubt regarding the factum of shareholding of the Appellant in the Respondent Company, without which, a case for the Appellant s right vis- -vis the Company could not have prima facie not arisen. The learned Single Judge has proceeded in the matter with the presumption of shareholding, and thus this, debate is wholly immaterial. There are no infirmity in the impugned judgment - appeal dismissed. 2021 (3) TMI 306 Seeking to make suitable amendments in the Company Petition and the Interlocutory Applications to ensure compliance of Rule 121 of the National Company Law Tribunal Rules, 2016 - seeking direction to applicant to strictly comply with Rules 120 and 121 of the National Company Law Tribunal Rules, 2016 while making appearance in the Company Petition and all connected Interlocutory Applications - HELD THAT:- This Tribunal has no jurisdiction to entertain a complaint of violation of Standards of Professional Conduct and Etiquette by an Advocate. The matter falls under the jurisdiction of the Bar Council of India. Applicants may approach the Bar Council of India, for redressal of their grievance. 2021 (3) TMI 305 Seeking to set aside all the allotment of shares made in violation of the provisions of Section 62(1)(a), 62(1)(c) and Section 62(2) in the 1st Respondent Company - seeking to remove the name of persons whose names are entered in the Register of Members of the 1st Respondent Company through the aforementioned allotment of shares - seeking to set aside all the decisions taken by the 2nd and 3rd Respondent without complying with the provisions of Section 173 and Secretarial Standards - seeking to issue appropriate order for the revisions of the Audited Financial Statements for the Financial Years 2015-16, 2016-17 and 2017-18 in view of the violation of the provisions of Section 129 and Section 134 of the Act - seeking to rectify the accounting entry wrongly posted as Unsecured Loan in the books of accounts of the 1st Respondent Company - seeking to take action against the 2nd and 3rd Respondents and the 1st Respondent Company for violating the provisions of Section 73 of the Act - seeking to appoint an independent Chairman for the Board of the Company with such powers as the Tribunal may deem fit - seeking to appoint an Independent Chartered Accountant to conduct an investigative audit and draw up the accounts of the Company to identify the Accounting Fraud in the Financial Statements of the Company - seeking to take action under Section 447, 448 ,449 and 450 of the Act against the 2nd 3rd Respondents for filing of false statement and adducing false evidence. Allotment of shares - HELD THAT:- On-going through the Company petition and the relevant records placed before this Tribunal, it is observed that application has been filed in the said company petition for ordering production of original of 107 documents under Rule 43 of the NCLT Rules, 2016 which is pending. This Tribunal note that Section 62(1)(a) of the Companies Act, 2013 deals with issuance of shares on the principle of Rights basis. Section 62(1)(b) of the Companies Act, 2013 deals with issuance of shares to employees under a scheme of employees stock option, subject to special resolution passed by Company and subject to such conditions as may be prescribed. Section 62(1)(c) deals with issue of shares to any person. The present case is covered under Section 62(1)(a) of the Act because there was an issue of Offer Letter to the existing shareholders of the Company in the proportion of their existing shareholding regarding the alleged allotments. The shares so issued must have the compliance of Section 62(1)(a). Therefore, in case shares are not issued under Section 62(1)(a), the law envisaged that special resolution is a must whenever the shares are to be issued under Section 62(1)(b) or 62(1)(c) - The Respondents have produced documents to show that they have conducted the Board Meeting and passed resolution in this regard, and thereafter issued Letter of Offer of Right Issue to both the Petitioners and allotment of shares has been offered at the face value of Re.1/-38. This Tribunal is of the opinion that the compliance of Section 62(1)(a) ensures that the allotment is done to existing shareholders at a price which is not prejudicial to the interests of other shareholders or to the interests of the Company. Apart from the allegation of share allotment the petitioners have in detail alleged about the Directorship and fraudulent filings. Section 161(1) of the Companies Act, 2013 speaks about the appointment of the Additional Director. The Board of Directors may appoint an Additional Director to the Board only if they have given power in Articles of Association - In the present case, the Petitioners were appointed as Additional Directors at the Board Meeting held on 04.11.2013 till the date of the ensuing Annual General Meeting or the last date on which Annual General Meeting (due date of Annual General Meeting for the Financial Year ended 31.03.2014 (being 30.09.2014)), on this ground of operation of law under section 161 (1) of the Companies Act, 2013, the Petitioners ceased to be Directors of the Respondent No.1 Company - this Tribunal rejects the contentions of the Petitioners that the above allotments on 24.03.2017, 15.03.2018 30.05.2018 was in violation of the Companies Act, 2013. Conversion of professional fee to unsecured loans - HELD THAT:- It is found that the Chairman discussed about the bad financial position of the Company and in order to improve its financial position, the Board decided to transfer the professional fee to the loan accounts . The names of both the petitioners were mentioned in that minutes. It is also found from the counter statement that the Company would pay off all dues of the petitioners when the financial position of the Company is improved. Being a part of the Board Meeting and the discussions held therein and passing the agenda to transfer the professional fee and thereafter by making allegation of oppression against the Company cannot be accepted. Decisions taken by the 2nd and 3rd Respondent without complying with the provisions of Section 173 and Secretarial Standards - HELD THAT:- A perusal of Section 241(1) of the Act would show that a petition field thereunder may be based on a complaint that the affairs of the Company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member of members including any one or more of themselves. Thus it will be clear that the foundation of a petition under Section 241 (1) will be the allegation or complaint that the affairs of the Company were being conducted in a manner prejudicial to public interest which will necessarily and naturally involve giving particulars as to how it was prejudicial to public interest. Similarly, an averment or allegation as to the affairs of the Company being conducted in a manner oppressive to any member must necessarily involve giving particulars as to what constituted oppressive manner . Section 241 (1) of the Act in its turn contemplates a complaint that the affairs of the Company were being conducted in a manner prejudicial or oppressive to public interest or in a manner prejudicial to the interests of the Company. The opinion of this Tribunal is that if a dispute is to be resolved and litigation is to be settled, then both the sides are required to take a pragmatic approach. To settle a dispute a thumb rule is that both the sides have to sacrifice some of their rights. Simultaneously both the sides have to forget about the past especially the events triggering the dispute or may be hurting each other's repute. Keeping this benevolent approach in mind this Bench is of the view that on one hand the Petitioner be directed to surrender the shareholdings in favour of the Respondents and on the other hand the price duly determined by a Valuer be paid to the Petitioner. Additionally, the Petitioner should also be paid Professional Fees and perquisites for a reasonable period, which was already been converted into unsecured loans even if with the permission. The Respondents are also directed to file necessary forms to change the petitioners name from the MCA portal, if they no longer hold the position of Additional Director. On the basis of several years past experience, it is worthwhile to draw an analysis that a Court-decree or a Court-Judgment do not satisfy 100% both the litigants, either Petitioner or Respondent. The Tribunals do not pass a Judgment for the satisfaction of the litigants but a Judgment is based upon principle of natural justice and equity. What is most appropriate, fair, justifiable and reasonable are the landmarks for a judicial decision. In the instant case, the petitioners have failed to prove the continuing oppressive acts conclusively and this Tribunal cannot rely upon a single act of the Respondents as an oppressive act - this Tribunal do not find any reason to entertain the Company Petition and to set aside the allotment of shares in the 1st Respondent Company and consequently all other reliefs sought in the Company Petition is to be rejected. Petition dismissed without costs. Insolvency & Bankruptcy 2021 (3) TMI 340 Termination by the appellant of its Power Purchase Agreement (PPA) with Astonfield Solar (Gujarat) Private Limited third respondent or Corporate Debtor - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - Power of NCLT/NCLAT over disputes arising from contracts such as the PPA - appellant s right to terminate the PPA in terms of Article 9.2.1(e) read with 9.3.1 is regulated by the IBC. Whether the NCLT/NCLAT can exercise jurisdiction under the IBC over disputes arising from contracts such as the PPA? - HELD THAT:- In the present case, the PPA was terminated solely on the ground of insolvency, since the event of default contemplated under Article 9.2.1(e) was the commencement of insolvency proceedings against the Corporate Debtor. In the absence of the insolvency of the Corporate Debtor, there would be no ground to terminate the PPA. The termination is not on a ground independent of the insolvency. The present dispute solely arises out of and relates to the insolvency of the Corporate Debtor - the RP can approach the NCLT for adjudication of disputes that are related to the insolvency resolution process. However, for adjudication of disputes that arise dehors the insolvency of the Corporate Debtor, the RP must approach the relevant competent authority. For instance, if the dispute in the present matter related to the non-supply of electricity, the RP would not have been entitled to invoke the jurisdiction of the NCLT under the IBC. However, since the dispute in the present case has arisen solely on the ground of the insolvency of the Corporate Debtor, NCLT is empowered to adjudicate this dispute under Section 60(5)(c) of the IBC. The residuary jurisdiction of the NCLT under Section 60(5)(c) of the IBC provides it a wide discretion to adjudicate questions of law or fact arising from or in relation to the insolvency resolution proceedings. If the jurisdiction of the NCLT were to be confined to actions prohibited by Section 14 of the IBC, there would have been no requirement for the legislature to enact Section 60(5)(c) of the IBC - Section 60(5)(c) would be rendered otiose if Section 14 is held to be the exhaustive of the grounds of judicial intervention contemplated under the IBC in matters of preserving the value of the corporate debtor and its status as a going concern . The question of the validity/invalidity of ipso facto clauses is one which the court ought not to resolve exhaustively in the present case. Rather, what we can do is appeal in earnest to the legislature to provide concrete guidance on this issue, since the lack of a legislative voice on the issue will lead to confusion and reduced commercial clarity. Whether the appellant s right to terminate the PPA in terms of Article 9.2.1(e) read with 9.3.1 is regulated by the IBC? - HELD THAT:- In accordance with Article 9.3.1, the appellant, on the occurrence of an Event of Default under Article 9.2.1, can issue a Default Notice which shall specify in reasonable detail the Event of Default giving rise to the default notice, and call upon the Corporate Debtor to remedy it. At the expiry of 30 days from such notice, unless otherwise agreed, if the default has not been remedied, the appellant can terminate the PPA. Further, the Corporate Debtor shall have the liability to make payments towards compensation to the appellant which is equivalent to three years billing based on the first-year tariff considered on normative PLF while determining the tariff by GERC, within 30 days from the termination notice. In accordance with Article 10.4, when differences or disputes between the parties are not settled through mutual negotiation within 60 days of the dispute arising, it shall be adjudicated by the State Commission, in accordance with Law - In accordance with Article 12.9, assignment of the Corporate Debtor s rights under the PPA is permissible, with the prior written consent of the other party. The proviso to this Article makes it clear that any assignee shall expressly assume the Corporate Debtor's obligations thereafter arising under the PPA, on the furnishing of satisfactory documentation. By virtue of the PPA with the appellant being the sheet-anchor of the Corporate Debtor s business and consequently of the CIRP, its continuation assumes enormous significance for the successful completion of the CIRP. The termination of the PPA will have the consequence of cutting the legs out from under the CIRP. Validity of the termination of PPA - HELD THAT:- The question of the validity/invalidity of ipso facto clauses has been discussed in a variety of documents over the years, such as: (a) UNCITRAL Guide of 2004; (b) J.J. Irani Committee Report of 2005; (c) Vidhi s Report of 2018 critiquing the IBC; and (d) IBBI s Report of 2020, which acknowledges the issue of ipso facto clauses in relation to government grants. All these materials were available to the members of the various committees which discussed the IBC. Further, suspension of contracts during insolvency was specifically allowed under Section 22(3) of SICA, which was the erstwhile statutory regime - Although various provisions of the IBC indicate that the objective of the statute is to ensure that the corporate debtor remains a going concern , there must be a specific textual hook for the NCLT to exercise its jurisdiction. The NCLT cannot derive its powers from the spirit or object of the IBC. Section 60(5)(c) of the IBC vests the NCLT with wide powers since it can entertain and dispose of any question of fact or law arising out or in relation to the insolvency resolution process. In this case, the PPA has been terminated solely on the ground of insolvency, which gives the NCLT jurisdiction under Section 60(5)(c) to adjudicate this matter and invalidate the termination of the PPA as it is the forum vested with the responsibility of ensuring the continuation of the insolvency resolution process, which requires preservation of the Corporate Debtor as a going concern. In view of the centrality of the PPA to the CIRP in the unique factual matrix of this case, this Court must adopt an interpretation of the NCLT s residuary jurisdiction which comports with the broader goals of the IBC. The terms of our intervention in the present case are limited. Judicial intervention should not create a fertile ground for the revival of the regime under section 22 of SICA which provided for suspension of wide-ranging contracts. Section 22 of the SICA cannot be brought in through the back door. The basis of our intervention in this case arises from the fact that if we allow the termination of the PPA which is the sole contract of the Corporate Debtor, governing the supply of electricity which it generates, it will pull the rug out from under the CIRP, making the corporate death of the Corporate Debtor a foregone conclusion. Thus, it is concluded that: (i) The NCLT/NCLAT could have exercised jurisdiction under section 60(5)(c) of the IBC to stay the termination of the PPA by the appellant, since the appellant sought to terminate the PPA under Article 9.2.1(e) only on account of the CIRP being initiated against the Corporate Debtor; (ii) The NCLT/NCLAT correctly stayed the termination of the PPA by the appellant, since allowing it to terminate the PPA would certainly result in the corporate death of the Corporate Debtor due to the PPA being its sole contract; and (iii) We leave open the broader question of the validity/invalidity of ipso facto clauses in contracts for legislative intervention. 2021 (3) TMI 304 NBFC kept the shares and transferred debt to the Appellant (Another NBFC) in the course of Corporate Insolvency Resolution Process - Entitlement to be included in Committee of Creditors - HELD THAT:- When Respondent No. 2 was treated as Financial Creditor (related party) Respondent No. 2 had challenged the decision of Insolvency Resolution Professional before the Adjudicating Authority vide I.A. No. 677 of 2019. There is order dated 20.11.2019 (Page 221 of the Appeal Paper Book) which shows that for reasons recorded in that order, especially in paragraph 10 benefit of 2nd Proviso to Section 21(2) of IBC was not given and the claim of the Respondent No. 2 that it was not a related party, was rejected. In paragraph 11 of the Order the acceptance of Part claim of Respondent No. 2 was not disturbed and for balance liberty was given to approach Resolution Professional. There is no dispute with regard to the fact that such Order of the Adjudicating Authority was not challenged by anybody and especially Respondent No. 2 and that the Order has attained finality. Undisputedly, when the claim was made before the Resolution Professional, at that point of time the Assignment Deed dated 18th May, 2020 was not yet registered and the Resolution Professional mentioned this in his letter dated 11th June, 2020 as one of the reasons why he was not acting upon the same. At the time of arguments, we had asked specifically asked the Counsel for Appellant if the Appellant again made a claim before the Resolution Professional after registering the document on 18th May, 2020 - We do not find fault with the Adjudicating Authority for the observations that when the claim was made before the Resolution Professional the document being unregistered, the Resolution Professional rightly ignored the same. Appeal dismissed. 2021 (3) TMI 303 Validity of Resolution Plan - allegation is that the approved Resolution Plan failed to deal with the interests of the all the stakeholders including the Appellant who was offered a meagre amount of slightly over ₹ 2 Crores as against its admitted claim of an amount exceeding ₹ 13 Crores without even considering the valuation of the security held by the Appellant in its Resolution Plan which had a valuation of approximately ₹ 12 Crores - HELD THAT:- Section 3(10) of the I B Code provides that the Creditor means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree holder. Holding that the equitable treatment of creditors is equitable treatment only within the same class, the Hon ble Apex Court in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta and Others , [ 2019 (11) TMI 731 - SUPREME COURT ], observed that reorganization is a collective remedy designed to find an optimum solution for all parties connected with a business in the manner provided by the Code. Protecting creditors in general is, no doubt, an important objective but protecting creditors from each other is also important which means that the I B Code should not be read so as to imbue creditors with greater rights in a bankruptcy proceeding than they would enjoy under the general law, unless it is to serve some bankruptcy purpose. On a plain reading of Section 53 of the I B Code, it is manifestly clear that the considerations regarding feasibility and viability of the Resolution Plan, distribution proposed with reference to the order of priority amongst creditors as per statutory distribution mechanism including priority and value of security interest of Secured Creditor are matters which fall within the exclusive domain of Committee of Creditors for consideration. These considerations must be present to the mind of the Committee of Creditors while taking a decision in regard to approval of a Resolution Plan with vote share of requisite majority. As regards amendment introduced in Section 30(4), be it seen that the amendment that it, introduced vide Section 6 (b) of Amending Act of 2019 vests discretion in the Committee of Creditors to take into account the value of security interest of a Secured Creditor in approving of a Resolution Plan. It s a guideline and not imperative in terms, which may be taken into account by the Committee of Creditors in arriving at a decision as regards approval or rejection of a Resolution Plan, such decision being essentially a business decision based on commercial wisdom of the Committee of Creditors. While it is true that prior to amendment of Section 30(4) the Committee of Creditors was not required to consider the value of security interest obtaining in favour of a Secured Creditor while arriving at a decision in regard to feasibility and viability of a Resolution Plan, legislature brought in the amendment to amplify the scope of considerations which may be taken into consideration by the Committee of Creditors while exercising their commercial wisdom in taking the business decision to approve or reject the Resolution Plan. Such consideration is only aimed at arming the Committee of Creditors with more teeth so as to take an informed decision in regard to viability and feasibility of a Resolution Plan, fairness of distribution amongst similarly situated creditors being the bottomline - Appeal dismissed. 2021 (3) TMI 302 Seeking extension of Liquidation proceedings - seeking permission for private sale of 9 cents owned by the company to Sh. Mishael Jose for a price of ₹ 6 lakhs arrived at by reducing 25% from the Reserve price of ₹ 8 lakhs, as certified by the Registered Valuer in compliance with IBC 2016 and sub Clause 4(A) of Clause 1 of the Schedule- I of The Ibbi (Liquidation Process) Regulations, 2016 - Regulation 33 of IBBI (Liquidation Process) Regulations, 2016 - HELD THAT:- Admittedly, in this case, Liquidator had stated that the first e-auction was held on 26.04.2019, in which no bidders were shown their interest. The second round of e-auction was held on 26.06.2019, even though one bid was received, the transaction could not be done due to technical issues. Based on the direction from NCLT, Chennai Bench, another round of e-auction was conducted on 09.08.2019. The sole bidder had given separate bid as laid down in public notice for three shop rooms only. Other assets of the company have no bidders for the second and third e-auction sale - During the hearing on 27.01.2021, this Tribunal finds that the Liquidator has not attached any document to show that the 9 cents of land is owned by the Company. The liquidator has also not produced the valuation certificate issued by the valuer. The liquidator was therefore, directed to file an affidavit with proof, within a week with regard to the ownership of 9 cents of land and the certificate of the valuer on the value of the aforesaid 9 cents. The liquidator was further directed to include in his affidavit the details of the present assets of the Corporate Debtor including movable and immovable properties and its value. Considering the present circumstances of the case, on examining the 12th progress report filed by the Liquidator and the provisions under Regulation 33 of IBBI (Liquidation Process) Regulations, 2016, this Tribunal is of the opinion that it is necessary to aid the Liquidator in the process of fulfilling his duties in the process of the Corporate Insolvency Resolution. Hence, the reliefs sought by the Liquidator is to be allowed - this Tribunal extends the liquidation proceedings in the matter of M/s. Orieon Kuries and Loans Private Limited for another one year from 15.01.2021 to 15.01.2022. Application disposed off. 2021 (3) TMI 301 Revision of claim towards salary after the approval of resolution plan - ledger does not show that such an increase of salary was credited every month to his salary account being the salary for each month - Whether the applicant is eligible to get the relief sought for in this application based on the documents produced by him as per the order dated 14.12.2020 by this Tribunal and whether the documents were submitted within the time prescribed in the order? - HELD THAT:- As per the Resolution Professional, the Applicant had submitted his claim by citing his salary as ₹ 12,05,000/- (Rupees Twelve Lakhs Five Thousand Only) per month from August, 2017 to April, 2019 and claimed the privilege leave, PF and gratuity by taking the said amount as base salary. However, during verification of records by the R.P, it was found that the salary due entries are not shown in the ledger of Mr. P Jayagovind (applicant) from FY 2017-18 onwards, in the books of the Corporate Debtor. For this purpose, he has relied upon the relevant records of the Corporate Debtor as well as the internal information shared with him while conducting the verification of the claim. Based on the same, he had re-computed the salary and allowances payable to the applicant (claimant) in view of the information available on record, which amounts to ₹ 91,10,085. But, an amount of ₹ 1,11,08,088/- is shown as paid in advance to Mr. Jayagovind as per the ledger data. The Claim submitted by the Applicant is silent on that aspect. Timely submission of documents with RP - HELD THAT:- The applicant should have submitted the documents sought for by the RP within 2 weeks from 14.12.2020. In the order in MA/177/KOB/2020, it was clearly stated that since the Resolution Professional (R.P) had already been received Resolution Plan from the prospective Resolution Applicant and the same is under consideration of the Committee of Creditors; the R.P was directed to explore all possibilities to settle the claim of the applicant and give a reply to the applicant before finalisation of the Resolution Plan. The 14 days from 14.12.2020 expired on 27.12.2020. However, the applicant has submitted his documents only on 28.12.2020. Being aware that the Resolution Plan is to be considered and got approved from the Adjudicating Authority; the applicant should not have waited till the last moment of convening the CoC. Furthermore, it is a well-established principle of law Vigilantibus Et Non Dormientibus Jura Subveniunt which means the law assists those who are vigilant with their rights, and not those that sleep thereupon. The Applicant had very conveniently decided to sleep over his right from the order dated 14.12.2020. It is only at this ripe stage when the CoC has already approved the Resolution Plan that the Applicant suddenly decided to make his claim again. Hence there is no error in not considering the claim of applicant submitted after the time allowed, that too after the CoC meeting. Application dismissed. 2021 (3) TMI 300 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- It is apparent that the TMT Bars were supplied and delivered and a debt towards it is due because of the non-payment. The petition made by the Operational Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is in excess of the minimum amount of one lakh rupees as stipulated under section 4(1) of the Code at the relevant time. Therefore the default stands established and there is no reason to deny the admission of the petition. In view of this, this Adjudicating Authority admits this petition and orders initiation of CIRP against the Corporate Debtor. Application allowed - petition admitted - moratorium declared. 2021 (3) TMI 299 Maintainability of application - initiation of CIRP - Corporate debtor committed default in paying the operational debt - Service of demand notice - pre-existing dispute or not - HELD THAT:- It is not in dispute that the operational creditor supplied the material sought for by the corporate debtor. Some of the materials delivered after 9 months from the date of purchase order. In purchase order the said material was claimed within 15 days from its date and the purchase order was supported with the PDC for the price of the goods supplied. In view of the above facts, it is to be held that the goods were supplied by inordinate delay - The operational creditor vide letter dated July 25, 2017 acknowledged short fall of the goods, which was prior to the demand notice but the fact remained on record is that later on the remaining goods were supplied by the operational creditor and corporate debtor accepted the same without any protest. It shows that the corporate debtor gave us its dispute relating to late delivery and now they cannot use that fact as defence. Service of Demand Notice - HELD THAT:- It is now well-settled law that delivery of demand notice under section 8 of the Insolvency and Bankruptcy Code, 2016 is sine qua non for initiating the corporate insolvency resolution process of under section 9 of the Insolvency and Bankruptcy Code, 2016 against the corporate debtor - It has consistently been hold by the hon'ble National Company Law Appellate Tribunal that non-delivery of the demand notice to the corporate debtor is the ground to reject the application under section 9 of the Insolvency and Bankruptcy Code, 2016 - In the present case, the demand notice was rightly sent to the registered office of the corporate debtor. Postal track report in this regard shows that the notice was served upon the corporate debtor. It is not in dispute that the corporate debtor did not reply the notice within 10 days raising any dispute. The operational creditor filed the affidavit stating that the they did not receive reply of the notice from the corporate debtor pointing out any disputes. They did not receive the payment as claimed by them and thereby compliance provision section 9(3)(b) and (c) of the Insolvency and Bankruptcy Code, 2016. The application is defect free - The application is admitted and the moratorium is declared. 2021 (3) TMI 298 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - debt due and payable by the corporate debtor more than permissible limit or not - HELD THAT:- In this case, the corporate debtor failed to pay the interest amount or the instalment payable towards principle debt periodically. Hence, the corporate debtor has defaulted in paying the debt - Considering the fact that loan of sum of ₹ 10 lakhs was disbursed in the year 2017, hence, by the time, this application was filed (in the year 2019), the default amount was more than rupees one lakh (i. e., minimum limit as stated under section 4 of the IB Code to file such application). Corporate debtor submitted that the cheque in dispute (later on dishonoured) was not given for repayment of loan but it was handed over as a security cheque to the loan granted - it has been established conclusively that the corporate debtor was liable to pay debt more than rupees one lakh and it has committed a default in paying the sum. Hence, it is not required to enter in to controversy whether the cheque was towards the payment of debt or it was so called security cheque only. Even on the basis of admitted facts, it is held that the corporate debtor had handed over the cheque for the sum lent by the financial creditor, is enough to draw presumption that the cheque was drawn by the corporate debtor in favour of the financial creditor towards consideration shown in the cheque. The cheque was dishonoured. Thus, the corporate debtor has committed the default in payment of the debt. The application is defect free and hence deserves to be admitted - application admitted - moratorium declared. 2021 (3) TMI 297 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - only contention of the corporate debtor is that since the applicant itself asked respondent to cancel the allotment and refund the principal amount, therefore the applicant ceased to exist as an allottee of the corporate debtor - existence of debt and default or not - HELD THAT:- Since the amount has been raised from the applicant/allottee under a real estate project, not only the debt has a commercial effect of borrowing and comes within the scope of financial debt but also the applicant comes within the definition of financial creditor - Accordingly, the applicant being a financial creditor 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. The present application under section 7 of the Code for initiation of CIRP has been filed by the applicant/financial creditor in form 1 in terms of rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 accompanied with required information, documents and records as prescribed under the Rules. Existence of debt and default or not - HELD THAT:- In the present case neither the possession of the flats has been given to the applicant nor the corporate debtor has returned even the amount collected from the applicant since the year 2014. It is pertinent to mention here that the corporate debtor in its reply has itself admitted that ₹ 2,48,88,466 is still due and payable to the applicant out of the amount paid by applicant for the said allotment. There is thus sufficient material on record to conclude that the respondent/corporate debtor has committed default in repayment of the financial debt - There is no denial of default and the amount of default exceeds much more than ₹ 1,00,000. Once there is a debt and default and the application is complete, the Adjudicating Authority is bound to admit the application preferred under section 7 of the Code. Though considerable period has since lapsed, the possession of the space has not been given to the applicant. Even the principal amount disbursed has not been repaid by the respondent/corporate debtor. It is accordingly reiterated that respondent/corporate debtor has committed default in repayment of the outstanding financial debt which exceeds the statutory limit of ₹ 1,00,000. Besides it is also seen that the application filed in form 1 under section 7 of the Code read with rule 4 of the Rules is complete and there is no infirmity in the same - application admitted - moratorium declared. 2021 (3) TMI 296 Rejection of fresh claim after the approval of Resolution Plan - Ld. counsel for the appellant submits that the RP has not been fair in communication as the RP did not inform that the resolution plan was already approved. - HELD THAT:- Considering the fact that the resolution plan was already approved on March 19, 2020 and the appellant filed claim on June 15, 2020 keeping in view provisions of the IBC (Insolvency and Bankruptcy Code, 2016), we do not think that it is a matter where things can be undone. The proceedings for CIRP are proceedings which are initiated with public notice and resolution plan takes its own time to get passed. The claims are to be filed in response to public notice which RP/IRP issued. In such contingency, after the resolution plan has already been approved in March, 2020, fresh claim cannot be entertained in June, 2020. The party aggrieved is required to follow the procedure under the provisions of the IBC. The appellant appears to have filed claim after much delay and the appellant cannot be granted the relief as is being sought - appeal dismissed. 2021 (3) TMI 295 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - time limitation of insolvency resolution - applicant was unable to submit his claims within the stipulated time before the IRP/RP and is requesting for condoning the delay in filing the claims - HELD THAT:- It is the matter of record that on November 2, 2018 the Adjudicating Authority passed an order admitting the application filed under section 9 of the IB Code against the corporate debtor and public announcement was made in compliance of the provision of the IB Code inviting claims from the creditors/stakeholders, if any, or as the case may be. It is also a matter of record that the corporate debtor owes liability towards L T Finance Ltd., and the same has been assigned to Kotak Mahindra Bank Ltd. (present applicant) - Hence, taking the plea that the applicant had no knowledge of the CIRP cannot be believed upon since the applicant has purchased the liability from L T Finance Ltd. On perusal of the record, it is found that the applicant has approached the IRP on April 18, 2020 where the resolution plan was already passed on March 19, 2020. Under such circumstances, when the IRP/RP has already been discharged, definitely he will show his inability to accept the claim. Furthermore, the instant application is filed on August 14, 2020 on such a belated stage when the corporate debtor has already been acquired by the successful resolution applicant in due process of law. Hence, the total process cannot be reversed as there is no such provision under the IB Code. Moreover, the CIRP was completed in a time bound manner. It is pertinent to mention herein that as per the legal principle of Indian Contract Act, 1872, i. e. caveat emptor , it is the applicant's/buyers' duty to be aware of his responsibilities. Mere plea of ignorance or playing blame game will not aid in reaping the desired results. Further, in number of cases, the courts have taken the view that insolvency resolution is a time bound process and it needs to be completed within the stipulated period - the applicant is not maintainable and hence, is rejected. Service Tax 2021 (3) TMI 294 Rejection of application under SVLDRS - Effect of remanding back the order by the Tribunal for De-Novo adjudication - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - seeking to direct the respondents to accept its application in terms of the said scheme under the category of litigation - seeking direction to the respondents to accept the subsequent application of the petitioner in terms of the said scheme under the category of arrears after quashing its rejection on 30.01.2020 - HELD THAT:- From a perusal of the order dated 08.11.2019, it is seen that in the appeal, petitioner No.1 had challenged the order-in-original on the ground of erroneous computation in determining duty liability resulting in higher duty liability; impropriety in imposition of penalty etc. However, at the time of hearing, it was primarily argued that the show cause notice dated 24.12.2014 was barred by limitation. Therefore, the duty liability etc. beyond the period of limitation could not have been levied. CESTAT came to the conclusion that the adjudicating authority did not apply its mind to the essential aspect of limitation which has a bearing on the outcome of the process initiated by the show cause notice. Therefore, the impugned order-in-original was set aside and the matter was remanded back to the original authority for a fresh decision on the point of limitation after granting an opportunity to the appellant (petitioner No.1 herein) to be heard on all the submissions made in the appeal - What therefore transpires from the above is that firstly, the order-in-original dated 16.06.2015 has been set aside. When the original order passed by the primary authority is set aside by the appellate authority, the legal consequence would be that the original order would cease to remain on record. It would stand erased from the record as if it was never passed. The second aspect is that the question of limitation was found to be the main point by CESTAT because it goes to the root of the demand. If this is upheld then the demand would not survive; but if it is negatived then the demand can certainly be assailed on other grounds since the order-in-original dated 16.06.2015 no longer subsists. This means that the petitioners have been reverted to the stage of hearing by the adjudicating authority on the show cause notice, reply to which was filed by the petitioners. But this hearing after remand has not taken place till date. In the meanwhile, central government introduced the scheme through the Finance (No.2) Act, 2019. The situation which arises in the present case is not covered by the eligibility exclusions under sub-section (1) of section 125 or under any of the provisions of the scheme. This is so because though the appeal of petitioner No.1 was heard by CESTAT on 10.05.2019 (which was certainly prior to 30.06.2019), it was finally disposed of subsequently on 08.11.2019. While disposing of the appeal, CESTAT set aside the order in original dated 16.06.2015 and remanded the matter back to the adjudicating authority for de novo decision on the show cause notice dated 24.12.2014 firstly by confining to the point of limitation - the decision of the designated committee i.e., respondent No.2 dated 13.01.2020 rejecting the declaration of petitioner No.1 under the litigation category on the ground of ineligibility was not correct and is liable to be interfered with. Since we have arrived at this finding, it would not be necessary for us to proceed to the subsequent declaration under the arrears category and its rejection by respondent No.2 on 30.01.2020. Matter remitted back to respondent No.2 to take a fresh decision in accordance with law after giving due opportunity of hearing to the petitioners by treating its declaration dated 12.12.2019 under the litigation category as a valid declaration - petition allowed by way of remand. 2021 (3) TMI 293 Amnesty scheme - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - seeking to issue discharge certificate under SVLDRS - declaration under FORM SVLDRS-1 was rejected on the ground of ineligibility, with the remarks that Demand has neither been quantified nor has been communicated to the assessee and Submit SVLDRS-4 of main noticee - Whether the communication dated 18th June, 2019 issued to the Superintendent, Anti Evasion Group-1, Central Excise Service Tax, can be considered to be as an admission of duty liability so as to render the petitioner eligible under the SVLDRS? - HELD THAT:- The quantification of the amount has to be before 30th June, 2019. Moreover, in terms of Section 121(r) of the Act, the word quantified has been defined to mean a written communication of the amount of duty payable under the indirect tax enactment. Further, Section 124(1)(d)(ii) provides that in respect of cases where the tax dues are linked to an enquiry, investigation or audit against the declarant, the relief shall be calculated on the amount quantified on or before the 30th day of June, 2019. Petitioner s case falls within the ambit of enquiry or investigation , as the Petitioner was issued summons dated 10.05.2019 by the Anti-Evasion Group 4, Central Excise Service Tax. In respect of such cases, by virtue of the aforesaid circulars, the Respondents have clarified that the benefit of SVLDRS can also be given to those cases where the duty involved is quantified before 30.06.2019 - Since quantification has co-relation and is interlinked with tax relief under the scheme, and the Petitioner has not made a voluntary disclosure, but has rather approached for settlement in respect of case under investigation, there are merit in the submission of the Revenue that unilateral quantification by the Petitioner by writing the letter/communication dated 18.06.2019 cannot render him eligible. It would only be an admission of service tax liability of that amount, and such admission in itself would not rendered the petitioner eligible under SVLDRS. The quantification in the instant case was understood to be done on the issuance of the SCN. There is not much difference between the amounts as mentioned in the communication dated 18.06.2019 and the SCN issued by the department subsequent to the completion of investigation. However, that in itself cannot be a measure to interpret the concept of quantification . The quantification of the amount in question, as defined under the relevant provisions, and further clarified under the circulars noted above, can only mean to be a duty liability which has been determined by the department. In the present case, since amount could not be said to have been quantified , the petitioner was not eligible, and therefore, the reasoning given by the respondent in rejecting the application does not call for any interference - petition dismissed. 2021 (3) TMI 290 Maintainability of petition - Validity of Show Cause Notice - Principles of natural justice - SCN issued by the department without providing audit report to the petitioner - petitioner alleges that there is nothing left with the authority to decide in the matter finally, as a bare reading of the SCN clearly shows that the Adjudicating Authority has already made up its mind and pre-determined the demand - HELD THAT:- The writ petition filed by the petitioner deserves to be dismissed for the reasons; firstly the matter is at the stage of show cause notice and opportunity of filing reply and personal hearing is still available with the petitioner; secondly the petitioner, if aggrieved by the order of the Adjudicating Authority, has a statutory remedy of filing appeal before the Appellate Authority as provided under Section 85 of the Act; thirdly against the order of the Appellate Authority, the petitioner has a right to file second appeal before the Appellate Tribunal as provided under Section 86 of the Act. Petition dismissed. Central Excise 2021 (3) TMI 292 Applicability of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 to the cases involving confiscation and redemption fine - Rejection of the declaration made by the petitioners by the Designated Committee formed under SVLDRS. HELD THAT:- The Special Leave Petition under Article 136 of the Constitution need not be interfered - SLP dismissed. 2021 (3) TMI 291 Classification of goods - Relays manufactured by the appellant used only as Railway signaling equipment - fall under Chapter 86, Tariff Item 8608 as claimed by the appellant or under Chapter 85 Tariff Item No.8536.90 as claimed by the Department? - time limitation of SCN - absence of any fraud, collusion, willful misstatement or suppression of facts, especially since the classification list submitted by the appellant have been approved on 27.08.1993 - Section 11A of the Central Excise Act,1944. Classification of Relays - HELD THAT:- What is recognized in Note 3 can be called the suitability for use test or the user test . While the exclusion under Note 2(f) may be of goods which are capable of being marketed independently as electrical machinery or equipment, for use otherwise than in or as Railway signaling equipment, those parts which are suitable for use solely or principally with an article in Chapter 86 cannot be taken to a different Chapter as the same would negate the very object of group classification. This is made clear by Note 3 - It is conceded by the Revenue that the relays manufactured by the appellant are used solely as part of the railway signaling/ traffic control equipment. Therefore, the invocation of Note 2(f) in Section XVII, overlooking the sole or principal user test indicated in Note 3, is not justified. As pointed out by the Commissioner (Appeals), the goods were previously classified (before 1993) under Subheading 8536.90, but a revised classification list, classifying them under subheading 8608, submitted by the appellant, was approved by the competent Authority on 27.08.1993. After such specific approval of the classification list, it is not proper on the part of the Authorities to invoke Note 2(f) of Section XVII - decided in favour of the appellant and against the Revenue. Whether the show cause-cum-demand notices issued by the Department on various dates during the period 19951998 were not barred by time under Section 11A of the Central Excise Act, 1944, in the absence of any fraud, collusion, willful misstatement or suppression of facts, especially since the classification list submitted by the appellant have been approved on 27.08.1993? - HELD THAT:- All show cause notices were of a date prior to 12.05.2000 and hence the normal period of limitation was only six months; and (ii) that at least a couple of show cause notices were issued in respect of a period partly or fully beyond the period of limitation. Unfortunately neither the Appellate Authority nor CESTAT took care to analyze the show cause notices individually with reference to the period covered by them. In any case all the show cause notices were issued only on and after 30.08.1995, raising a classification dispute, after having approved the classification list submitted on 27.08.1993. The dispute in the case on hand was one of classification alone, applicable to the product manufactured during the entire period after 27.08.1993. The dispute was not invoice-centric. Therefore, what was sought to be done by the Original Authority was actually to review the approval of the classification list submitted on 27.08.1993 by cleverly issuing separate notices covering certain specific periods. What is to be seen here is that the attempt to undo the effect of the approval of the classification done on 27.08.1993, was actually time barred. Therefore, despite the fact that some of the individual notices were issued within the period of limitation either in respect of the part of the period or in respect of the whole of the period covered by them, the very invocation of Section 11A, in the facts and circumstances of the case, cannot be said to be within time. Both questions of law are answered in favour of the appellant - Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2021 (3) TMI 289 Demand of additional sales tax from the petitioner for the years 2001-2002 to 2004-2005 as also the penalty of the said authority imposed under Section 13 of Tripura Sales Tax Act, 1979 - HELD THAT:- The petitioner had claimed that sizeable quantity of cement was damaged in railway transportation which the petitioner was forced to sell at a very low price. The Assessing Officer in absence of reliable evidence and documents did not accept this theory and after issuing notice to the petitioner proceeded to pass the order of assessment, relevant portion of which we have reproduced earlier. Perusal of the order of Assessing Officer would show that entire issue is factual in nature and no question of law would arise since the petitioner has not demonstrated any perversity in the factual findings of the Assessing Officer. Even the revisional authority has examined the issue all over again and found no reason to set aside the assessment order. Penalty - HELD THAT:- In the present case, however, we are not inclined to terminate the penalty proceedings permanently but will allow the Assessing Officer to pass a fresh order after hearing the petitioner. Petition disposed off. 2021 (3) TMI 288 Violation of principles of natural justice - objections given by the petitioner have not at all been considered and non speaking orders have been passed - Finalization of petitioner's annual returns - impugned orders came to be passed confirming the proposals set out in the pre revision notices - HELD THAT:- The impugned orders are liable to be quashed. This is for the simple reason that the objections given by the petitioner have not at all been considered and non speaking orders have been passed. For instance, one allegation made against the petitioner is that there was non reporting of certain sales transactions. The petitioner tried to explain the same by pointing out that even though in the Form I return, they were not indicated, all the details have been properly disclosed in the Annexure II of the Form I return. When such an explanation has been given, it is the duty of the assessing authority to give finding as to whether the said explanation is correct or not. The failure on the part of the assessing authority to take note of the objections raised by the petitioner vitiates the entire proceedings. On this sole ground, the orders impugned in the writ petitions are quashed - The matter is remitted to the file of the second respondent - petition allowed by way of remand. 2021 (3) TMI 287 Refund claim - concessional sale against C forms - Bogus forms - HELD THAT:- The matter has since been listed before the Joint Registrar on several dates between 14th October, 2019 and 22nd January, 2021, however the Petitioner or the counsel for the Petitioner have not appeared on any of the said dates. Furthermore, despite directions, rejoinder to the reply has also not been filed. Today again there is no appearance on behalf of Petitioner. It appears that the Petitioner is not interested in pursuing the matter - the petition is dismissed in default. Indian Laws 2021 (3) TMI 286 Dishonor of Cheque - Rebuttal of presumption - petitioner submitted that the petitioner is willing to pay the amount, provided some more time is given to him and prayed that six months time be granted and he also stated that an undertaking in this regard will be filed by him within one week - HELD THAT:- The Supreme Court has time and again examined the scope of Section 397/401 of Cr.P.C and the ground for exercising the revisional jurisdiction by the High Courts. In State of Kerala v. Puttumana Illath Jathavedan Namboodiri, [ 1999 (2) TMI 676 - SUPREME COURT ] , the Supreme Court held that the High Court exceeded its jurisdiction in interfering with the conviction of the respondent by reappreciating the oral evidence. The High Court also committed further error in not examining several items of evidence relied upon by the Additional Sessions Judge, while confirming the conviction of the respondent. There is no perversity in the orders of the Courts below warranting interference by this Court under Section 397/401 Cr.P.C. This Court does not find any infirmity in the amount of compensation imposed on the petitioner. The petitioner has abused the indulgence granted by this Court. On 01.11.2019, the petitioner undertook to pay the amount of compensation in 4 instalments. He has gone back on the undertaking given to this Court which amounts to contempt. The petitioner is therefore not entitled to any indulgence from this Court. The revision petition is dismissed 2021 (3) TMI 285 Dishonor of Cheque - applicant preferred this revision on the ground that learned trial Court did not consider the provisions of Section 138 of NI Act in proper perspective. It is a compensatory aspect rather than preventive - offence of civil nature - HELD THAT:- After going through all the orders passed by Hon ble the Apex Court, this Court, appellate Court and by the trial Court, it is reflected that the applicant was released on bail and his jail sentence was suspended by this Court due to widespread of Covid-19 pandemic. The applicant was having an opportunity to renew the bank draft but despite the orders passed by this Court and by Hon ble the Apex Court, the applicant did not obey the directions. It reveals that the conduct of the applicant is not bonafide for the payment of compensation and he breached the faith of commercial transaction for which NI Act was enacted. This Court does not find any cogent reason to reduce the sentence of one year s rigorous imprisonment to the period already undergone by the applicant - It is pertinent to mention here that the applicant s jail sentence was suspended only for a limited period but the applicant after being released on bail, not surrendered before the trial Court within prescribed time after lapse of period of temporary bail - This is also not a good conduct of the applicant, which has to be taken into consideration. In such circumstances, this Court is of the firm view that the applicant is not entitled for reduction of sentence awarded to him. This criminal revision is partly allowed - Only sentence of fine of ₹ 10,000/- for each four counts is set aside and remaining other sentences imposed by the appellate Court is affirmed - Since the applicant is not in jail at present, the applicant is directed to surrender before the trial Court within 15 days from the date of this order to undergo the remaining part of jail sentence. 2021 (3) TMI 284 Dishonor of Cheque - undated cheque was given as security - failure of the respondent to pay the amount in spite of the issuance of the notice - whether cheques were issued for discharge of debt or not? - HELD THAT:- The respondent as DW1 had stated that he was involved in an NGO which used to undertake various development works in different places of Tripura, and the complainant being a Mechanic was engaged as a Site Manager with that NGO to open a Driving School and two blank cheques were signed by the respondent and handed over to the complainant to run the institution. But, on 21.11.2014, the complainant reported the respondent that those two cheques were missing from his custody for which the respondent reported the same to the police station and also to the bank. DW1, i.e. the respondent also deposed that the complainant had misused the cheques for his illegal gain. The entire scheme of Negotiable Instruments Act, 1881 draws a clear distinction between a check issued for a debt in present but payable in future and second for a debt which may become payable in future upon the occurrence of a contingent event - In the present case, it is aptly clear that the complainant provided loan to the respondent for a sum of ₹ 50,000/- on 20.09.2014 and ₹ 1,00,000/- on 19.10.2014 and on the same date, on providing of such loan to the respondent, he received two cheques(Exbt.1/A and Exbt.1/B) from the respondent. According to the complainant, towards repayment of the said amount, the respondent had issued the said two cheques. Thus, it is apparent that the respondent issued the cheques on the dates of borrowing the loan from the complainant as is revealed from the deposition of the complainant itself that the respondent promised to make repayment of the loan in the month of November, 2014 i.e., the cheque would be effective on a future date. It is trite that in a criminal jurisprudence, the burden to prove that the accused has committed the offence would lie on the complainant. Prosecution must prove the guilt of an accused beyond all reasonable doubt. The standard of proof so as to prove a defence on the part of an accused is preponderance of probabilities . Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which he relies - Thus, even assuming for a moment that the appellant has failed to probabilise the defence of misuse of blank undated cheques, it is found that the complainant has failed to establish by acceptable evidence that indeed the subject cheques were issued in discharge of legally enforceable debt or liability. Thus, as an undated cheque having been given only as a security, the provision of Section 138 of the Negotiable Instruments Act are not at all attracted and hence, the charges framed against the respondent cannot sustain - appeal dismissed. 2021 (3) TMI 283 Increase of compensation awarded by the Appellate Court - rejection of Application of the complainant for modification of the said Order by its impugned Order dated 28th September 2020 - HELD THAT:- It is a fact on record that, the complainant had instituted complaint on 30th December 2010 and the same came to be decided on 11th February 2020 i.e. almost after nine and half years. As noted earlier, the Trial Court has directed the accused to pay a compensation of ₹ 1,88,30,000/-. The conduct of the accused clearly indicates that, he is intending to procrastinate the litigation. As of today, the accused is a convict and his sentence has been suspended by the Order dated 27th February 2020 passed below Exh.-4 by the Appellate Court. It is also a fact on record that, the accused as of today is successful in protracting the trial for more than 9 and half years and the complainant is the ultimate sufferer for the same - Section 143 of the N.I. Act deals with power of Court to try cases summarily and states that, notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences under this Chapter shall be tried by Judicial Magistrate of the First Class or by a Metropolitan Magistrate and the provisions of Sections 262 to 265 (both inclusive) of the said Code shall, as far as may be, apply to such trials. By amending Act of 20 of 2018 which came into effect from 1st September 2018, Section 143A has been inserted in this statute. Section 143A gives power to the Court trying an Offence under Section 138 of the Act to Order the drawer of the cheque to pay interim compensation to the complainant. Under Section 148(1) of the N.I. Act, the Appellate Court can direct the drawer of the cheque in an Appeal against conviction under Section 138 of the Act to deposit such sum which shall be minimum of twenty percent of the fine or compensation awarded by the Trial Court. This Court is of the considered opinion that, the direction of the Appellate Court to deposit 25% of compensation amount is inadequate and needs to be enhanced. Accordingly, the accused is directed to deposit 50% of the total compensation amount in the Registry of the Appellate Court within a period of four weeks from the date of the uploading of the present Order on the High Court website - Petition dismissed.
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