TMI Tax Updates - e-Newsletter
May 19, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Securities / SEBI
Insolvency & Bankruptcy
CST, VAT & Sales Tax
Highlights / Catch Notes
GST
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Supply or not - activity of depositing the timber by the Appellant to the Government Timber Depot - The Depot officials also give lot numbers to the timber logs according to the classification. It is for this service that the Depot charges ‘supervision charges’. This service rendered is outside the scope of clause 3 of Schedule I and hence the consideration received by the depot in the form of supervisions charges are liable to tax as a supply of service.
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Eligibility for GST input tax credit - procurement of detachable wooden and glass partitions - capitalized the same as “furniture and fixture”, and is not capitalized as “immovable property” - Input tax credit can be availed by the Appellant on the detachable sliding and stackable glass partitions which is movable in nature.
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Exemption from GST - renting of dormitory consisting of 12 beds and renting of 2 BHK where the charges per bed (in the case of dormitory) and per room (in the case of 2 BHK) is less than ₹ 1000/- per day - the renting out of beds in a dormitory is also not akin to renting of rooms and hence it will not qualify for exemption under clause 13(b) of the said Notification.
Income Tax
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Condonation of delay - delay of 1422 days - Ex-parte best judgement assessment u/s 144 - Illiterate person - his delay is condoned subject to the condition that the assessee pays a sum of ₹ 10,000/- to the P.M’s Relief Fund within a period of one month from the date of receipt of this order and shall file the proof of the same before the AO, only after which the AO shall take up the assessment proceedings.
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Deduction u/s 80G - CSR expenses - assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing ‘Total Taxable Income”. If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature.
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A person who has already expired cannot be regarded to be a human being as on the date when the order was passed. - Only the legal heirs can be regarded as assessee in view of the provisions of section 2(7) of the I.T.Act. Section 159 also emphasizes that the order passed in the name of a dead person, is not a valid order.
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Recognition of contract revenue under Accounting Standard (AS) 7 - Maintenance activities cannot be clubbed with the construction activity. Having gone through the accounting standards (AS-7 and AS-9), we find that application of the standard to separately identifiable components of single contract is allowable while determining the percentage completion of the project.
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Value of assets for the purpose of calculation of depreciation - sale of assets - u/s.43(6) of the Act, the WDV of the block of assets is to be reduced by the sale proceeds received on sale of one or more of the assets from the block and not the entire WDV of the said asset.
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Deduction u/s 54F on account of construction of house - the assessee doesn’ t have more than one house which is chargeable to tax under the head “ income from house property” other than the one residential house owned on the date of sale of original asset - No addition is warranted.
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Exemption u/s.11 - There is an element of quid pro quo for them and therefore, the students are exactly aware for what purpose their fee is going to be used for. For a moment, even if it is held that development fee is revenue receipts, the same are still eligible for deduction u/s. 11 - there is no violation of either 11(5) or 13
Customs
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Calculation of interest on delayed refund - relevant date - As rightly held by the Tribunal cause of action for claiming interest would arise after 3 months from the date of filing of said refund claim. If at all the application is defective, it would only be an irregularity not illegality.
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DFIA (duty free import authorisation) License - requirement of disclosure of technical characteristics, quality and specifications of the essential oil said to have been used in manufacture of Paan Masala/Gutka - DFI licences were obtained by suppression and distortion of facts - the Department has committed no error by invoking the extended period of limitation.
Corporate Law
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Striking off of the name of the Company, from the Register of Companies - The Income-tax Department is an aggrieved party within the meaning of section 252(1) read with 252(3), as it has to recover taxes payable by Respondent Company and great prejudice will be caused to its revenues, if the name of the Company is not restored back.
IBC
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Maintainability of application - initiation of CIRP - The Corporate Debtor's email establishes the fact that the Petitioner was informed about the cancellation of the contract and that the order was closed. Hence, there is no debt and default committed by the Corporate Debtor.
VAT
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Best Judgement Assessment - addition towards suppressed turnover - There being rationale behind estimation of the turnover, same cannot be held to be untenable. The appellate authority has merely proceeded to set-aside the addition of turnover without examining the applicability of the judgments referred to supra in the right perspective.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (5) TMI 389
Supply or not - activity of depositing the timber by the Appellant to the Government Timber Depot - whether supply in terms of Section 7 of the CGST Act or not - Government Timer Depot - Agent of appellant or not - condonation of delay of 29 days in filing the present appeal - HELD THAT:- The Appellant has stated that the delay had occurred since they wanted to take proper legal advice before filing the appeal and that they were busy with the GST audit. Considering the submissions made by the Appellant, the delay in filing the appeal is hereby condoned in exercise of the power vested in terms of the proviso to Section 100(2) of the CGST Act. Supply or not - HELD THAT:- In the instant case, there is a transaction in goods in as much as timber is being deposited by the Appellant to the GTD. This transaction is mandated by a statute i.e the Karnataka Forest Act, 1963 whereby the purchase and sale of timber is restricted to only the State Government. Further, the activity of felling the timber trees is part of the shade management policy of the Appellant in the course of their business of Coffee/Tea/Pepper plantations. However, the activity of depositing the timber into the GTD does not result in realisation of consideration immediately. The timber is deposited at GTD for which a Deposit Receipt is given by GTD. Where the consideration is not extant in a transaction, such a transaction does not fall within the ambit of supply. Whether the Government Timer Depot is an agent of the Appellant? - HELD THAT:- As per Section 182 of the Indian Contract Act, 1872, an agent is a person employed to do any act for another, or to represent another in dealings with third person. The person for whom such act is done, or who is so represented, is called the principal - In this case the Depots are set up by the State Government in terms of Section 104-A(5) of the Karnataka Forest Act for the purchase and sale of timber since the Act mandates that timber can only be purchased and sold by the State Government. The sale of the timber by the Depot is done by way of auction. The proceeds of the sale are remitted to the Appellant. Therefore, notwithstanding the fact that the Depot is set up under the aegis of a statute, it functions in the capacity of an agent. CBIC Circular No 57/2018 dated 4-09-2018 defines the scope of principal-agent relationship was explained. In terms of the said Circular, the key ingredient for determining the principal-agent relationship under GST would be whether the invoice for the further supply of goods on behalf of the principal is being issued by the agent or not. Where the invoice for further supply is being issued by the agent in his name then, any provision of goods from the principal to the agent would fall within the fold of the said entry - In the instant case, once a lot of timber is sold to a successful bidder in the auction, the purchaser is required to pay 114th value of the timber purchased along with applicable taxes to the Principal Chief Conservator of Forests (PCCF). On receipt of the amount, the forest department will send a sale confirmation letter to the Purchaser at which time the purchaser will pay the balance dues. Once the material is lifted by the Purchaser after payment of the sale value plus taxes, the concerned Range Forest Officer will raise a bill which will be forwarded to the Deputy Conservator of Forest (DCF). The DCF will prepare a separate bill and send the same to the Chief Conservator of Forests (CCF) who will issue the letter of credit (LOC). The LOC will be forwarded to the treasury who will issue the cheque to the DCF and the DCF will issue the same to the Appellant. Therefore, it is observed that the sale of timber happens through the GTD and not to the GTD as claimed by the Appellant. The proceeds of the timber sold through the auction process by the GTD is given to the Appellant on completion of the auction process. As such, the GTD acts in the capacity of agent of the Appellant and this transaction of depositing of timber by the Appellant in the GTD amounts to a supply in terms of clause 3 of Schedule I of the CGST Act. What will be the value of supply if the activity of depositing timber to the GTD is held to be a supply ? - HELD THAT:- The act of depositing the timber at GTD is a supply in terms of clause 3 of Schedule I of the CGST Act. It is a supply of goods that is made without consideration by the Appellant as a principal to his agent. The Depot acting as an agent, renders a service of being the custodian of the timber at the depot till such time the timber is sold by the Depot in the auction process. Further, the depot also does the measurement and classification of the timber received from the Appellant since the Depot also stores the timber belonging to the Govt and other private parties - The Depot officials also give lot numbers to the timber logs according to the classification. It is for this service that the Depot charges supervision charges . This service rendered is outside the scope of clause 3 of Schedule I and hence the consideration received by the depot in the form of supervisions charges are liable to tax as a supply of service. The decision of AAR upheld.
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2020 (5) TMI 388
Eligibility for GST input tax credit - detachable 14mm Engineered Wood with Oak top Wooden Flooring which is movable in nature - detachable sliding and stacking glass partition which is movable in nature - capitalized as furniture and fixture , and is not capitalized as immovable property - challenge to AAR decision - HELD THAT:- In the instant case, the foremost test to be applied for triggering the restriction under Section 17(5)(d) is whether an activity of fixing the detachable sliding and stackable glass partitions qualifies as construction of an immovable property or not. The normal understanding of the term construction is to make or build something. For the purpose of Section 17(5)(d), the term construction has been defined to include re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property. In the Appellant s case, as per the above said explanation, the addition of glass partitions qualifies as construction . This construction is done by the Appellant on his own account. Further, the detachable sliding and stackable glass partitions are accounted in the Appellant s books of account as fixed assets under the head furniture and fixtures . They are not capitalised as immovable property but rather as movable assets. The lower Authority has observed that declaring the fixtures under the head Furniture and Fixtures does not make the items movable and they continue to be immovable property. However, the glass partitions are movable property by applying the tests of extent and object of annexation. There is no permanency in affixing such partitions as the same can be dismantled and re-fixed to signify a change in the dimensions of the work space. The fixing of the partitions to the ground using nuts and bolts only serves to give a false sense of permanency while in reality it is not so. The detachable sliding and stackable glass partitions are movable property and addition /fixing of glass partitions does not amount to construction of immovable property. Therefore, the procurement of detachable sliding and stackable glass partitions will be eligible for input tax credit and will not be hit by the provisions of Section 17(5)(d) of the CGST Act. Input tax credit can be availed by the Appellant on the detachable sliding and stackable glass partitions which is movable in nature - the decision of AAR modified.
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2020 (5) TMI 387
Exemption from GST - renting of dormitory consisting of 12 beds and renting of 2 BHK where the charges per bed (in the case of dormitory) and per room (in the case of 2 BHK) is less than ₹ 1000/- per day - entry SI.No 13 of Notification No 12/2017 CT (R) dated 28-06-2017 - challenge to AAR decision - HELD THAT:- On a conjoint reading of the clause (b) of Sl.No 13 and the exclusions, it is evident that the exemption under clause (b) applies to renting of rooms where the charges are less than ₹ 1000/- per day, renting of premises, community halls, kalayana Mantapsor open area, and the like where charges are less than ₹ 10,000/- per day and to renting of shops or other spaces for business or commerce where charges are less than ₹ 10,000/- per month. In the instant case, the Appellant had erected temporary accommodations at Kumbalagodu Village, Mysore Road, KengeriHobli, Bangalore North Taluk where the religious event was conducted. The Appellant is not renting out rooms but rather is renting out units of accommodation comprising of 2 bedrooms, hall, kitchen, restroom, toilet. The entire unit with facilities like water, electricity, cot, bed, pillow, bedspread and air-conditioner is given out on rent. The devotee is also given cooking facility in this unit. Therefore, a unit of accommodation of this kind which is termed by the Appellant as a 2BHK Category I type of accommodation cannot be considered as renting of rooms and will not be covered in the entry SI.No 13 of Notification No 12/2017 CT (R) dated 28-06-2017 - Similarly, the renting out of beds in a dormitory is also not akin to renting of rooms and hence it will not qualify for exemption under clause 13(b) of the said Notification. We agree with the ruling of the lower Authority and hold that the renting of the 2 BHK unit and the dormitory will be chargeable to GST as a single unit where the value of supply will be the charges for the full 2BHK unit / dormitory and not the charges for each room / bed and is liable to tax.in terms of entry SI.No 7 of Notification No 11/2017 CT(R) dated 28-06-2017 as amended by Notification No 20/2019 CT (R) dated 30-09-2019. AAR ruling upheld.
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Income Tax
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2020 (5) TMI 386
Validity of reopening of assessment - no notice u/s 143(2) - HELD THAT:- No notice under Section 143(2) was issued before the completion of the assessment. The assessee has filed return of income at NIL in response to notice u/ 148. CIT(A) has rightly relied upon the decision of the Tribunal in case of ITO vs. Sanjay [ 2020 (3) TMI 1165 - ITAT DELHI] and held that the impugned assessment order is defective in law and is annulled. Revenue is protected under the provisions of Section 150 - AO was further directed to reopen the Assessment u/s 147 and thereafter, reframe the assessment order after following the due process of law and after issuing necessary notices to the assessee as per law and after giving to the assessee reasonable opportunity of being heard and considering the evidence laid by the assessee - CIT(A) has given a elaborate findings which does not require any interference - Decided against revenue.
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2020 (5) TMI 385
Reopening of assessment u/s 147 - basis of information with regard to cash deposit in a bank account - HELD THAT:- In the present case the information was received by the Assessing Officer and the proper reasoning has been recorded after taking necessary approval as per the mandate of Section 147 of the Income Tax Act. AR could not point out that there is lack of reasoning or no necessary approval taken from the higher authorities. The case laws submitted by the Ld. AR also factually different from the present case as in the present case, the assessee has not filed any return prior to issuance of Section 148 notice and has not given any details to the AO as relates to cash deposits. CIT(A) was right in holding that there is no infirmity in the reopening proceedings. Ground No. 2 is dismissed. No valid notice u/s 143(2) - HELD THAT:- From the perusal of records, the Ld. AR could not point out that the notice was not duly served upon the assessee. In fact, the records shows that the notice was served to the assessee, but the assessee could not attend the assessment proceedings which leads to passing of Assessment Order u/s 144 of the Act. The reliance of case laws by the Ld. AR will not help in the present case, as the assessee could not demonstrate that the notice was not served to him at his address mentioned in the records. Approval/satisfaction as required u/s 151 is not proper and valid in law - HELD THAT:- In the present case the information was received by the Assessing Officer and the proper reasoning has been recorded after taking necessary approval as per the mandate of Section 147 of the Income Tax Act. The Ld. AR could not point out that there is lack of reasoning or no necessary approval taken from the higher authorities. The case laws submitted by the Ld. AR also factually different. The approval is not mechanical but is in conformity with the reasoning given by the Assessing Officer which describes the nature of cash transactions and its relevance to the escapement of tax liability on behalf of the assessee. Thus, the CIT(A) was right in holding that there is no infirmity in the re-opening proceedings. Ground No. 4 and 5 are dismissed. Admission of additional evidence - HELD THAT:- In the present case, the assessment order was passed under Section 144 of the Act which shows that the AO has not seen any evidences while making additions. Thus, we are admitting the additional evidence filed before the CIT(A). We further find that it is just and proper to remand back the issue on merit to the file of the AO in the present case for proper adjudication after taking cognizance of the additional evidences. Needless to say, the assessee be given proper opportunity of hearing by following principles of natural justice. Ground No. 1 is partly allowed for statistical purpose.
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2020 (5) TMI 384
Reopening of assessment - client code modification - ingenuine transaction - diversion of income - HELD THAT:- Investigation Directorate, Ahmedabad carried out survey u/s 133(A) to examine the misuse of Client Code Modification for tax evasion. In this case, the client code of the assessee was SS 493 as per the AO the error by the operator could be in the form of punching Client Code as FS-493, HS-493, SS-439 or similar phonic sounds but certainly Code was S-1. Hence, the modification in this case, was not found genuine by the Assessing Officer as well as CIT (A). Before the AO, the assessee has not at all proved as to why the error has incurred. In the written submissions as well, the assessee submitted that the details of trading and how the loss come across, but the same was not fully satisfied before the AO as well as before the CIT(A) by the assessee. AO has rightly made addition and the same was properly confirmed by the CIT (A). There is no need to interfere with the said finding of the CIT (A). The appeal of the assessee is dismissed.
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2020 (5) TMI 383
Penalty u/s 271(1)(c) - non recording of satisfaction - HELD THAT:- AO did not record his satisfaction for initiation of penalty proceedings, because while passing the assessment order passed u/s.143(3) of the I.T. Act, the AO has stated that Penalty proceedings u/s. 274 read with section 271(1)(c) has been issued separately for concealment of income and furnishing of inaccurate particulars of such income which is not sufficient and therefore, the penalty proceedings cannot be said to be validly initiated under such circumstances - nowhere in the assessment order states the specific charge of alleged concealment and / or furnishing of inaccurate particulars of income. Similarly, in the penalty order passed u/s. 271(1)(c) the Dy. Commissioner of Income Tax, Circle-1, Ghaziabad has mentioned that it is a case of deliberate concealment of income by furnishing inaccurate particulars. Therefore, penalty u/s. 271(1)(c) is clearly attracted in this case which is not sufficient to levy the penalty in dispute. Therefore, the entire penalty proceedings stand vitiated, because it is not in accordance with law, in view of the law settled in case CIT Anr. Vs. M/s SSA s Emerald Meadows [ 2015 (11) TMI 1620 Karnataka High Court ] - Decided in favour of assessee.
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2020 (5) TMI 382
Revision u/s 263 - Capital gain computation - non referring the issue of valuation to the DVO - HELD THAT:- Going by the language used, it is not mandatory in the AO to make a reference to the DVO in all cases where the stamp duty valuation exceeds the fair market value - order of the Assessing Officer cannot be held to be erroneous in so far as being prejudicial to the interest of the Revenue on this count. In Jitindar S. Chadha Vs. Pr. CIT [ 2019 (1) TMI 272 - ITAT DELHI] wherein it had been held that the powers of the Assessing Officer u/s 55A of the Act were discretionary and that the AO can take plausible view of the matter. Thus, in the present case also, it is our considered opinion that by not referring the issue of valuation to the DVO, the Assessing Officer had taken one of the possible views and this discretion of the Assessing Officer cannot be termed as being erroneous as has been held by the Ld. Pr. CIT. Valuation of residential flat at Nehru Apartments, Kalkaji New Delhi to the District Valuation Officer for the purposes of Sec.50C - Assessee had duly submitted the details of renovation which were carried out in the flat sold by him and the Assessing Officer, by taking one of the possible two views, accepted the sam - it cannot be said that the Assessing Officer did not make any enquiry what so ever in this regard. The Assessing Officer called for certain details and the assessee submitted them. On the Assessing Officer being satisfied with the same, the Assessing Officer took one of the possible views to which the Ld. Pr. CIT might not been in agreement but which the Ld. Pr. CIT has no power to change if the same has been taken after enquiry by the Assessing Officer. Cannot be held that order passed by the Assessing Officer was erroneous in so far as being prejudicial to the interest of the Revenue. Non deduction of tax on the expenditure claimed towards cost of improvement - It was never a part of the show cause notice and a perusal of the reply submitted by the assessee before the Ld. Pr. CIT also makes it apparent that the assessee was not confronted with this issue and was not given any opportunity to respond to the same. The impugned order also does not mention that the assessee was later required to respond on this issue. Thus, there was a complete lack of natural justice on the part of the Ld. Pr. CIT while setting aside the assessment order for this reason. Therefore, we are afraid, the same cannot be taken as a reason for treating the assessment order as erroneous. As decided in the case of CIT vs. Amitabh Bacchan [ 2016 (5) TMI 493 - SUPREME COURT] without providing a proper opportunity on the issue the commissioner cannot exercise the revisionary powers. - Decided in favour of assessee
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2020 (5) TMI 381
Condonation of delay - delay of 1422 days - Ex-parte best judgement assessment u/s 144 - Illiterate person - HELD THAT:- Hon'ble Bombay High Court in the case of CIT vs. KF Bioplants (P) Ltd [ 2015 (3) TMI 614 - BOMBAY HIGH COURT] has condoned the delay of 1845 days in filing of the appeal by the Revenue on the ground that the failure of the revenue to remove the objection within time was an unintentional lapse and admission of the appeal by itself would not cause any prejudice to the assessee therein. In none of the above decisions, the circumstances therein are exactly similar to the case of the assessee. However, from the principles laid down therein, that ordinarily a litigant does not benefit by the delay and by refusing to condone the delay a meritorious matter might be thrown out at the very threshold and cause of justice being defeated, inclined to condone the delay and remand the issue to the file of the AO for a decision on merits after giving the assessee a fair opportunity of hearing. This delay is condoned subject to the condition that the assessee pays a sum of ₹ 10,000/- to the P.M s Relief Fund within a period of one month from the date of receipt of this order and shall file the proof of the same before the AO, only after which the AO shall take up the assessment proceedings. The assessee shall also cooperate with the AO for an early completion of the assessment. Assessee s appeal is treated as allowed for statistical purposes.
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2020 (5) TMI 380
Deduction u/s 10A - telecommunication expenses and other expenses incurred in foreign currency need to be excluded from export turnover as per clause (iv) of Explanation 2 - HELD THAT:- Expenses and other expenses incurred in foreign currency need to be excluded from export turnover as per clause (iv) of Explanation 2 to section 10A however, they are also required to be excluded from the total turnover . CIT(A) held that the same are to be excluded in turn relying on the decision of case of CIT vs Tata Elxsi Ltd. and others [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] Comparable selection - substantial transaction to the tune of more than 25 % with related parties were excluded - HELD THAT:- If the related party transactions do not have material effect on the overall profit margins then still that company can be considered as a comparable. The Act does not provide directly as to what percentage of related party transactions can have material effect on the overall margins. Guidance can be taken from definition of the Associated Enterprise from Section 92A(2)(e) where in it is prescribed that one enterprise holding 26% shares in the other enterprise can be considered as an associate enterprise. Similarly in the provisions of Section 40A(2)( b) the persons having substantial interest is described as a person carrying not less than 20% of voting power in that company. 20 % or 26% interest is considered as substantial interest. As the provisions of Section 92A(2 )( a) are from the transfer pricing chapter itself, a limit of 25 % is applied as the threshold limit for the related party transactions. If the limit is reduced further it would only result in eliminating more and more companies, on the other hand if the limit is relaxed then companies with predominantly related party transactions would get included which would not represent uncontrolled transactions. The companies having more than 25% related party transactions should therefore be rejected as comparables. We order that the decision of the ld. CIT (A) on the issue of RPT cannot be upheld. Accordingly, we direct the exclusion of concerns Accel Transmatic Ltd., Geometric Ltd., R.Systems International Ltd. and Ishir Infotech Ltd. in the software development segment of the appellant and Apollo Health Street Limited, Caliber, Point Business Solutions Ltd., HCL Comnet Systems and Services Ltd. and Informed Technologies Ltd. in the ITES segment. Regarding the KALS Information Systems Ltd., we find that the company has got significant revenue from software products and as no segmental are available this needs to be excluded. Similarly, with the case of Lucid Software Ltd. which is predominantly product Development Company, hence the same cannot be taken as a comparable. Similarly Tata Elxsi Ltd. is a product company and the same cannot be taken as a comparable. Regarding the Persistent Systems Ltd., the same is to be excluded owing to extra ordinary event with regard to restructuring during the relevant year wherein the subsidiary Control Net (India) Ltd. was merged with the comparable company. The assessee pleaded for inclusion of the concern Media Soft Solutions Ltd. The TPO had excluded the same because of the low margins. The case of the assessee is that the same merits to be included. However, we find no merit in the same. ITES segment wherein the assessee has chosen 15 comparables to benchmark its transaction - Accentia Technologies Ltd. is found to be functionally not comparable and also owing to the amalgamation of two companies namely, Iridium Technologies Ltd. and Geo Soft Technologies Ltd. Similarly, Bodhtree Consulting Ltd. is excluded; the comparable being mainly into software solutions. Similarly, we find Eclerx Services, Informed Technologies India Ltd. are KPO hence cannot be taken into consideration as a comparable. The concern Infosys BPO Ltd. is engaged in diversified activities and owns intangible and hence cannot be included as comparable. Owing to the reported fraud in the management Maple e-Solutions and Traton Corporation Ltd. cannot be considered as right comparables. The concern High Services Ltd. are providing high-end services and is engaged in web hosting which is not functionally comparable to the assessee. Similarly, Mold Tec Technologies Ltd. is to be excluded as it is providing KPO services. We find Vishal Information Technologies Ltd. has outsourced 43 % of the sales and owing to low employee cost to sales ratio of 2.2 this will not be a correct comparable. Accurate Data Convertor is a development services company and Wipro Ltd. has invested in R D activities for development of IP, hence not meeting the criteria of FAR.
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2020 (5) TMI 379
Denial of exemption claimed u/s 11 12 - assessee is a trade association which was created for the cause of Indian Automobiles - assessee has generated some access of receipt over expenses in undertaking these activities - corpus donation was treated as income of the assessee - whether the assessee had shown any such corpus donation and also whether the assessee claimed any exemption under the provisions of the Act on account of such amounts? - HELD THAT:- The perusal of the income expenditure account would reflect that after the income from various sources was shown and the expenditure was claimed under various heads, hence amounts were transferred. While drawing up the excess of expenditure carrying forward the amounts and the balance as excess income over expenditure. In the schedule to the balance sheet if we look at the corpus fund, the amounts of ₹ 90 Lakhs transferred to corpus funds and the narration is transfer from income and expenditure account i.e. for ₹ 90 Lakhs . Amounts have been transferred to the different funds as tabulated above. While drawing up the income for the year under consideration, the assessee has very clearly pointed out that that all these amounts which are transferred to funds are not to be considered as application of income and accordingly, the income has been computed in the hands of the assessee. We find no merit in the exercise undertaken by the AO, which has been confirmed by the CIT(A), we reverse the findings of the CIT(A) in this regard and direct the AO to delete the aforesaid addition made in the hands of the assessee. Thus, Ground No.4 raised by the assessee is allowed. Addition made on account of alleged foreign grants received during the year on account of pending approval under Foreign Contribution Regulation Act (in short FCRA ) - whether the said foreign grant received by the assessee and the interest on the same are taxable in the hands of the assessee? - HELD THAT:- Bank interest earned on such deposits was in the form of foreign contribution and the same does not approve to the assessee till specific approval for utilization of funds was given by the Central Government. There is no merit in access the foreign grant received pending sanction as income of the assessee. Now coming to the second aspect of the issue that where the assessee has following cash system of accounting, can be added in the hands of the assessee. CIT vs Om Prakash Khaitan [ 2015 (7) TMI 785 - DELHI HIGH COURT] had laid down the proposition that the characterization of a receipt could taxable only at the time of appropriation and not at the time of receipt which at best was advanced received, which did not bear in particular characterization for the purpose of treating it as income. Applying the said proposition to the issue in hand, we find no merit including the foreign grant as pending approval as income of the assessee. Ground raised by the assessee is allowed.
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2020 (5) TMI 378
Deduction u/s 80G - amount paid to trust - AO disallowed claim as the amount was forming part of CSR expenses debited to profit and loss account - HELD THAT:- AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, Income from Business and Profession . It has been submitted that some payments forming part of CSR were claimed as deduction under section 80G for computing Total taxable income , which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing Total Taxable Income . If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature. Authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) of the Act. We are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. - Decided in favour of assessee for statistical purposes.
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2020 (5) TMI 377
Order passed in the name of a dead person - legal heirs of the deceased - proceedings against the legal representatives - HELD THAT:- Assessee in the case of a deceased person will be the person who are regarded as the legal heirs of the deceased as they can be regarded as a human being. In view of this, a person who has already expired cannot be regarded to be a human being as on the date when the order was passed. Only the legal heirs can be regarded as assessee in view of the provisions of section 2(7) of the I.T.Act. Section 159 also emphasizes that the order passed in the name of a dead person, is not a valid order. Accordingly,set aside the order of the CIT(A), which is passed in the name of a dead person, and direct him to bring on record the name of legal heir and decide the issue afresh after affording a reasonable opportunity of being heard to the assessee (legal heir). Appeal filed by the assessee is partly allowed for statistical purposes.
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2020 (5) TMI 376
Deduction u/s.80P(2)(a)(i) - co-operative registered as Souharda Sahakari cannot be regarded as co-operative societies - HELD THAT:- As decided in SIDDARTHA PATTINA SOUHARDA SAHAKARI NIYAMITHA VERSUS THE INCOME TAX OFFICER, WARD 5, RAICHUR. [ 2019 (7) TMI 1390 - ITAT BANGALORE] Souharda Cooperatives enjoy functional autonomy in design and implementation of their Business plans, customer service activities, etc., based on the needs of their members. Unlike other forms of cooperatives in India, the interference of State / Central in day-to-day operations of Souharda Cooperatives is almost minimal. The above discussion would show that souharda co-operatives are also one form of co-operative societies registered under a law in force in the State of Karnataka for registration of co-operative societies. Therefore the conclusion of the revenue authorities that co-operative societies and co-operatives are different and that co-operative registered as Souharda Sahakari cannot be regarded as co-operative societies is unsustainable. Assessee should be allowed deduction u/s.80P(2)(a)(i) of the Act, as the ground on which the same was denied to the Assessee is held to be incorrect. Other conditions for allowing deduction u/s. 80P(2)(a)(i) needs to be examined by the AO. Remand the question of allowing deduction u/s. 80P(2)(a)(i) to the AO, except the issue already decided above. - Decided in favour of assessee for statistical purposes.
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2020 (5) TMI 375
Recognition of contract revenue under Accounting Standard (AS) 7 - Construction Contracts - whether the costs and expenses pertaining to O M Phase are includable or not while calculating percentage completion method as per the provisions of AS 7 (accounting standard relating to construction contract)? - HELD THAT:- The payment pattern reveals that the assessee has raised separate invoices for O M phase on a regular basis as per Section 5 of TOR Clause 8.3 and the same have been duly accounted in the years in which it has been received. On going through the entire facts of the case, we find that the three different phases of the work which are totally separate in execution. Keeping in view the fact, that the O M phase cannot be a part of the construction activity as the O M phase involves the supply of water to the residence giving connections and monitoring the connections which is clearly a post construction activity, we hold that the amount allotted for O M phase cannot be included in determining the percentage of completion method in recognition of the revenue. The amounts of O M phase have been duly offered to tax in the year of receipts. We also find that the Phase-I and the Phase- II are the preparatory construction phases over a period of 18 months whereas the operations maintenance ( O M phase) of such constructed project is of 60 months. Maintenance activities cannot be clubbed with the construction activity. Having gone through the accounting standards (AS-7 and AS-9 ), we find that application of the standard to separately identifiable components of single contract is allowable while determining the percentage completion of the project. Since, the O M phase commences after the construction of activity of rehabilitation phase, we hereby hold that the amount pertaining to O M phase needs to be separately considered while determining the profits out of the construction activities. C onsideration of VAT for recognizing the revenue under AS-7 - HELD THAT:- AO has considered this amount for calculating the revenues of the year. CBDT Circular No. 4 /2008 dated 04.04.2008 clarified that service tax doesn t partake the nature of income. The Circular was issued while dealing with Section 194-I. Since, the sum and substance of the circular is that the service tax doesn t form a part of the income of the assessee, the same need not be considered for calculating the profits of the assessee for the year. Similarly, the Value Added Tax which do not form the part of the income of the assessee also needs to be excluded while determining the revenues of the year in the instant case. As a result, appeal of the assessee on ground is hereby allowed.
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2020 (5) TMI 374
Condonation of delay - delay of 368 (Three Six Eight) days - HELD THAT:- Decisions of the Hon'ble Supreme Court in the case of Collector, Land Acquisition Vs. Mst.Katiji Ors [ 1987 (2) TMI 61 - SUPREME COURT] and the decision in the case of CIT Vs. K.S.P.Shanmugavel Nadar [ 1984 (4) TMI 24 - MADRAS HIGH COURT] we find that the assessee is not benefitting in any way by not filing the appeal in time before the Tribunal. The assessee has explained the reasons as misplacement of papers by one of the office staff. This is one of the possible reasons for not being able to file the appeal within the time. Further, after hearing the assessee on merits also, we find that the assessee has an arguable case on merits. Hence, we are inclined to condone the delay of 368 (Three Six Eight) days and proceed to dispose-of the appeal on merits. Value of assets for the purpose of calculation of depreciation - total value of the assets, namely 'Plant and Machinery' sold during the year was only and the Appellant itself deleted this value from block of assets, for the purpose of calculation of depreciation - HELD THAT:- We find that the Hon'ble High Court of Bombay in the case of CIT Vs. Parle Soft Drinks (Bangalore (P) Ltd) [ 2017 (11) TMI 1311 - BOMBAY HIGH COURT] has held that the sale proceeds of soft drink bottles being capital assets, could not be held to be a revenue receipt and after sale of old bottles, block of assets had to be reduced by amount of whole proceeds and accordingly, whatever was there in block of assets, depreciation had to be allowed in accordance with the provisions of law. It is clear that u/s.43(6) of the Act, the WDV of the block of assets is to be reduced by the sale proceeds received on sale of one or more of the assets from the block and not the entire WDV of the said asset. Therefore, we direct the AO to reduce only the sale proceeds only from the WDV of the block of the assets and allow the depreciation on the balance of the WDV. Appeal of assessee is allowed.
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2020 (5) TMI 373
Deduction u/s 54F on account of construction of house - assessee has already purchased the residential flat at Rajendra Nagar out of the sale proceeds - HELD THAT:- Revenue authorities have mislead themselves on holding that the purchase of the Rajendra Nagar flat out of the sale proceeds of the original asset was on the basis of wrong facts. Keeping in view the facts of the case that the capital gains have been utilized for construction of house at D-279, Defence Colony, New Delhi and as per the provisions of the Act, the assessee doesn t have more than one house which is chargeable to tax under the head income from house property other than the one residential house owned on the date of sale of original asset, we hereby hold that the addition made by the revenue authorities is unwarranted. - Decided in favour of assessee.
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2020 (5) TMI 372
Disallowance of certain expenses - HELD THAT:- As seen as an admitted position that all the expenses were not properly vouched. Some of the expenses were recorded even on the basis of information provided orally by the drivers, for which there was no material to back the same. It cannot be said that all the expenses were properly vouched and there was no infirmity in the claim. Taking into consideration the peculiarity of the facts and circumstances obtaining in the instant case, disallowance at 10% as sustained in the first appeal is in order, which does not call for any further interference. This ground is not allowed. Disallowance u/s. 40A(2) - excess freight of ₹ 25/- per ton was paid to related parties - HELD THAT:- Vehicles were dedicated specifically to the assessee in contrast to the outsiders, who were providing vehicles only on request and sometimes such a request was not acceded to as well. Since the vehicles of the related parties remained available round the clock and were dedicated specifically to the assessee, the rate charged by the third party transporters cannot constitute a good base for comparison with the rate of freight paid to the related parties. It is further a matter of fact that all the recipients furnished their returns by including the amount of freight received from the assessee and offered the same to tax - disallowance u/s.40A(2) has been wrongly made and sustained.Therefore, order to delete the addition.
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2020 (5) TMI 371
Exemption u/s.11 - registration u/s.12A cancelled - allegatin that, assessee charges fees to students as per its prospectus but no charitable work is carried out as students are enrolled with full fees and other expenses which they have to incur. - assessee has set apart 15% of the amount to be carried forward to subsequent years - HELD THAT:- In the case of the assessee, students who get admission pay the development fee and without the same, there would be no admission for them. There is an element of quid pro quo for them and therefore, the students are exactly aware for what purpose their fee is going to be used for. For a moment, even if it is held that development fee is revenue receipts, the same are still eligible for deduction u/s.11 of the Act in the light of the fact that there is no violation of either 11(5) or 13 of the Act in the case of the assessee as has been held by the Pune Bench of the Tribunal in assessee s own case [ 2013 (9) TMI 1120 - ITAT PUNE] in the 12A matter. Therefore, addition made was deleted by the Ld. CIT(Appeals). - Decided against revenue.
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Customs
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2020 (5) TMI 370
Calculation of interest on delayed refund - relevant date - correction of calculation of interest from 27.01.2010 namely from the date on which the interest claimed is to be paid - Section 27(1)(a) of the Customs Act, 1962 - HELD THAT:- Tribunal after considering rival contentions raised has rightly held that claims were returned due to deficiency and deficiency memos having been addressed itself would evidence that there cannot be a claim for interest as no show cause notice was issued, is erroneous conclusion as provisions of Section 11B of the Central Excise Act, 1944, do not contemplate for returning of any refund claims - As rightly held by the Tribunal cause of action for claiming interest would arise after 3 months from the date of filing of said refund claim. If at all the application is defective, it would only be an irregularity not illegality. The application for refund would not be contrary to Section 11B of the Central Excise Act, 1944 and as such we are not inclined to admit this appeal, since there is no substantial question of law involved in this appeal for being adjudicated - appeal dismissed.
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2020 (5) TMI 369
Smuggling - Contraband Gold - Confiscation - imposition of penalty u/s 112(a) of the Customs Act, 1962 - HELD THAT:- Reading of Section 122 of the Customs Act, 1962 indicates that in every case under the said Chapter i.e., Chapter XIV under which anything is liable to be confiscated or any person is liable to be imposed with the penalty has to be adjudicated under Clause (a) of Section 122 of the Act by the Principal Commissioner of Customs or Commissioner of Customs or a Joint Commissioner of Customs without limit. Under Clause (b) the penalty has to be adjudicated by the Assistant Commissioner of Customs or Deputy Commissioner of Customs where the value of goods came to be confiscated does not exceed ₹ 5 Lakhs and under Clause (c) same shall be adjudicated by a Gazetted Officer of Customs lower in rank than an Assistant Commissioner of Customs where the value of the goods confiscated would not exceed ₹ 50,000/-. Undisputedly, in the instant case, value of goods was more than ₹ 5 lakhs and as per the appraisal value, who had appraised the gold bar so confiscated and had certified the weight at 2566.05 grams of 24 carot gold of foreign origin he had valued at ₹ 77,87,962/-. Before levy of penalty show cause notice came to be issued by Additional Commissioner of Customs proposing to levy penalty on appellant. It would clearly emerge from the orders of the original authority as affirmed by the appellate authority the statement of appellant recorded under Section 108 of the Customs Act penalty under Section 112(a) came to be imposed. In fact, whatsapp messages exchanged between the noticees including the appellant herein, which formed part and parcel of the show cause notice and adjudication order, it came to be held that appellant herein has admitted in his statement furnished under Section 108 of the Customs Act and his role in the act of smuggling of gold - In fact, appellant has not retracted his retrospective statement and it has never been contended by the appellant that statement has been obtained from him under threat or duress or coercion. It is only after show cause notice was issued proposing to levy penalty, appellant has tried to retrace his steps and not before the said date. Appeal dismissed.
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2020 (5) TMI 368
DFIA (duty free import authorisation) License - requirement of disclosure of technical characteristics, quality and specifications of the essential oil said to have been used in manufacture of Paan Masala/Gutka - contention of the exporter that the declaration requirement of the exception notification is applicable only if the exported goods are included in the list of items enumerated in paragraph 4.55.3 was not accepted by the Hon ble High court - HELD THAT:- No doubt the show cause notice in the present case has been issued after a period of expiry of two years as mentioned in the said section. But the show cause notice itself has alleged the suppression of facts on part of the exporter. The same has even been confirmed by the original adjudicating authority as in Para-21 of the order dated 04.06.2015 it is appreciated that the non-disclosure of the technical characteristics as a consciously done at of the exporter. When this order was challenged before the Hon'ble High court in para-6 of the order by high court, the commissioner's view that DFI licences were obtained by suppression and distortion of facts has been observed with no contrary finding to the said observations. From the record, no other reason found to differ from the said observations of suppression and distortion of facts and the act being a consciously done act of the exporter - the Department has committed no error by invoking the extended period of limitation. Appeal dismissed.
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Corporate Laws
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2020 (5) TMI 367
Striking off of the name of M/s. Mandakini Vacations Pvt. Ltd. (the Company), from the Register of Companies - Appellant contends that in order to recover the taxes on the undisclosed income of the Company statutory dues and recover the revenue from the transactions of the company, there is a need of restoration of M/s. Mandakini Vacations Pvt. Ltd. in the Register of Companies. HELD THAT:- The Respondent No. 2 Company has also filed an Appeal bearing 340/252/ND/2019 for restoring its name in the Register of ROC. The Respondent No. 1 i.e. ROC has not filed its reply despite several opportunities. However, the representative of RoC present during the proceedings, did not rais any objection. The Income-tax Department is an aggrieved party within the meaning of section 252(1) read with 252(3), as it has to recover taxes payable by Respondent Company and great prejudice will be caused to its revenues, if the name of the Company is not restored back. Accordingly, in sequel to the above, the Appeal is allowed. The Registrar of Companies, is directed to restore the name of M/s. Mandakini Vacations Pvt. Ltd, in its Register, as if the name of the Company had not been struck off in accordance with section 248(1) of the Companies Act, 2013. Petition allowed.
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Securities / SEBI
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2020 (5) TMI 366
Money mobilization - Public issue - Whether the Company came out with the Offer of RPS [Redeemable Preference Share] as stated in the Interim Order? - whether the Offer of RPS is in violation of Section 56, Section 60 and Section 73 of Companies Act, 1956? - HELD THAT:- As neither the company nor the directors have disputed the same. Also perused the documents/information obtained from the 'MCA 21 Portal' and other documents available on records. It is noted, that OIL has issued and allotted RPS to 4,191 investors during the financial years 2011-12 and 2012-13 and raised a total amount of ₹ 5,46,48,000/- - number of allottees and funds mobilized has been collated from the information from Ministry of Corporate Affairs (MCA) Portal and the documents submitted with the complaint received by SEBI. Therefore, it is possible that the actual number of allottees and amount mobilized could be more than 4,191 allottees and ₹ 5,46,48,000/- respectively. Therefore conclude that OIL came out with an Offer of RPS as outlined above. Securities to more than 49 persons - public issue and the provisions of Section 56 not followed - Violation of Section 56, Section 60 and Section 73 of Companies Act, 1956 - HELD THAT:- OIL assessee has issued RPS to more than 50 persons and it is noted that in financial years 2011-12 and 2012-13 RPS has been issued to 4,191 allottees. It may be noted that even in cases where the issue is made in tranches and any one of the tranche has not exceeded forty nine people, reference may be made to the in Neesa Technologies Ltd. v. SEBI [ 2017 (4) TMI 1500 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] which lays down that In terms of Section 67(3) of the Companies Act any issue to '50 persons or more' is a public issue and all public issues have to comply with the provisions of Section 56 of Companies Act and ILDS Regulations. Accordingly, in the instant matter the appellant has violated these provisions and their argument that they have issued the NCDs in multiple tranches and no tranche has exceeded 49 people has no meaning . Therefore, I hold that even if one or more of the tranche is 49 or less, in view of this judgment, the issue qualifies as deemed public issue. OIL has allotted RPS to more than forty-nine allottees, I find the offer of RPS is a public issue within the first proviso of Section 67(3) of Companies Act. Hence, the Offer of RPS are deemed to be public issues and OIL was mandated to comply with the 'public issue' norms as prescribed under the Companies Act. Since the Offer of RPS is a public issue of securities, such securities shall also have to be listed on a recognized stock exchange, as mandated under section 73 of the Companies Act. As per section 73(1) and (2) of the Companies Act, a company is required to make an application to one or more recognized stock exchanges for permission for the shares or debentures to be offered to be dealt with in the stock exchange and if permission has not been applied for or not granted, the company is required to forthwith repay with interest all moneys received from the applicants. Allegations of non-compliance of the above provisions were not denied by OIL or its directors. I also find that no records have been submitted to indicate that it has made an application seeking listing permission from stock exchange or refunded the amounts on account of such failure. Therefore, I find that OIL has contravened the said provisions. Moreover, the allegations of non-compliance of the above provisions are not denied by the Directors of the company. OIL has contravened the provisions of sections 73(1) and (2) of the Companies Act. No material is available on record or submitted by the aforesaid Directors of OIL to show that the amount collected by the company was kept in a separate bank account. OIL has also not complied with the provisions of section 73(3) which mandates that the amounts received from investors shall be kept in a separate bank account. As the Offer of RPS was a deemed public issue of securities, OIL was required to register a prospectus with the RoC under section 2(36) read with Section 60 of the Companies Act. OIL has not submitted any record to indicate that it has registered a prospectus with the RoC, in respect of the Offer of RPS. OIL has not complied with the provisions of Section 60 of the Companies Act, 1956. As per section 56(3) of the Companies Act, 1956, no one shall issue any form of application for shares in a company, unless the form is accompanied by abridged prospectus, containing disclosures as specified. Neither OIL nor its directors produced any record to show that it has issued Prospectus containing the disclosures mentioned in section 56(1) of the Companies Act, 1956, or issued application forms accompanying the abridged prospectus. Therefore, OIL has not complied with sections 56(1) and 56(3) of the Companies Act, 1956. OIL was engaged in fund mobilizing activity from the public, through the Offer of RPS and has contravened the provisions of sections 56(1), 56(3), 2(36) read with 60, 73(1), 73(2), 73(3) of the Companies Act, during the financial years 2011-2012 and 2012-2013. Liability for violations committed - A person cannot assume the role of a Director in a company in a casual manner. The position of a 'Director' in a company comes along with responsibilities and compliances under law associated with such position, which have to be fulfilled by such director or face the consequences for any violation or default thereof. The aforesaid Directors cannot therefore wriggle out from liability. A Director who is part of a company's Board shall be responsible and liable for all acts carried out by a company. Accordingly, I note that aforesaid Directors are responsible for all the deeds/acts of the company during the period of their directorship and are obligated to ensure refund of the money collected by the company to the investors as per the provisions of Section 73 of Companies Act. Natural consequence of not adhering to the norms governing the issue of securities to the public and making repayments as directed under section 73(2) of the Companies Act, is to direct OIL and its Directors, viz., Md Mahfuz Alam, Parwez Alam, Md Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam, Punam Bharati to refund the monies collected, with interest to such investors. Further, in view of the violations committed by the Company and its Directors, to safeguard the interest of the investors who had subscribed to such RPS issued by the Company, to safeguard their investments and to further ensure orderly development of securities market, it also becomes necessary for SEBI to issue appropriate directions against the Company and the other Noticees.
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Insolvency & Bankruptcy
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2020 (5) TMI 365
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- Though the purchase orders were placed with amendments from time to time, post inspection of the said machines, the machines were not delivered to the Corporate Debtor. The Corporate Debtor's email dated 5-8-2019 establishes the fact that the Petitioner was informed about the cancellation of the contract and that the order was closed. Hence, there is no debt and default committed by the Corporate Debtor. Application dismissed.
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CST, VAT & Sales Tax
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2020 (5) TMI 364
Best Judgement Assessment - addition towards suppressed turnover - rejection of VAT-100 Form - validity of proceedings initiated by the revisional authority under Section 64(1) of KVAT Act - HELD THAT:- Where the accounts are acceptable as genuine and substantially correct, the assessment could be made on the basis of the accounts maintained. Indisputably, the assessee has compounded the offence by accepting the suppression at the time of inspection and discharged the tax liability of ₹ 75,180/- towards suppressed turnover of ₹ 5,56,982/-. It is obvious that the pattern of maintaining the account books was not in order. On rejecting the accounts and the VAT-100 Form submitted by the assessee, the prescribed authority has made best judgment assessment by adding the turnover equal to the suppressed turnover over and above detection made. It is imperative that no suppression would have come to light in the absence of inspection - There being rationale behind estimation of the turnover, same cannot be held to be untenable. The appellate authority has merely proceeded to set-aside the addition of turnover without examining the applicability of the judgments referred to supra in the right perspective. At any stretch of imagination, it cannot be held that the 3rd respondent had no jurisdiction to invoke the revisional power under Section 64(1) of the Act. The twin conditions i.e., the appellate order being erroneous and prejudicial to the interest of the revenue being satisfied, the 3rd respondent was justified in setting aside the order of the appellate authority and restoring the order of the prescribed authority - the questions of law are answered against the assessee and in favour of the Revenue. Appeal dismissed.
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