TMI Tax Updates - e-Newsletter
May 12, 2021
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Grant of Bail - GST evasion - Fraudulent availment of ITC -Looking at point (vi) above and considering the magnitude and the scale of the alleged fraud involving public money and the critical stage, when investigation to get hold of the mastermind/ king pin and other key conspirators as well as the modus operandi is underway in which Petitioner through his sole proprietary concern, as well as through the Pvt. Limited Company, is alleged to be an active participant, at this stage, we are not inclined to indulge into the request for grant of bail under Article 226 of the Constitution of India. - HC
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Income Tax:
Validity of the application filed u/s 245(C) - Settlement Commission - the prime consideration and pre-condition for entertaining an application is true and full disclosure of income and subsequent adding, deletion or insertion would dis-entitle the Settlement Commission from entertaining an application. - In the present case, the Settlement Commission exceeded its jurisdiction by settling the issues, even after filing of the additional statement of facts by the assessee on two occasions, providing further disclosure of income. - the Settlement has caused prejudice to the interest of the Revenue and therefore, regular assessment is to be made to cull out the truth and proceed with the matter in the manner known to law. - HC
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Income Tax:
Reopening of assessment u/s 147 - Bogus LTCG - AO had applied his independent mind to the information and upon due satisfaction, led to form an opinion that, the amount of claim of LTCG claimed by the assessee is chargeable to tax has escaped assessment, which facts suggests that, there is live link between the material which suggested escapement of income and information of belief - the assessee failed to make out a case - HC
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Income Tax:
Capital gain on sale of land - Nature of land - it is undisputed fact that assessee has sold agricultural land on which he was carrying out agricultural activities prior to its sales. Thus , we note that assessee is an agriculturist and has been carrying out agricultural operation on the land for many years. In the Revenue records the said land is an agricultural land. - based on the factual position, we are of the view that assessee has sold an agricultural land which is not a capital asset - AT
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Income Tax:
Capital receipt chargeable to tax u/s.45 - claim of exemption u/s.10(2A) - amount received by the assessee partner from the partnership firm - There was no transfer of relinquishment of rights in favour of the continuing partners. We find that in the instant case the firm i.e. Pranik Landmark Associates had only paid the amounts lying to the credit of the partner i.e. the assessee and had not paid even a penny more than the amount lying in the credit of the partner’s current account - AT
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Income Tax:
Unsecured loans u/s 68 - As the directors of the lending companies had filed affidavits confirming the loan transactions before the ld AO which had not been disputed. Once the averments made in the affidavit are not disputed or refuted, the same are to be construed as true and correct - Decision of apex court of 1956 followed - AT
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Income Tax:
Addition on account of negative reserves - The negative reserves would be nothing but premium receivable by the insurance company. However, there would always be a chance that policyholder might not continue with the insurance polity bought by him which would result in non-receipt of premium which was otherwise receivable by the insurance company. Therefore, the same could not be taxed. - AT
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Income Tax:
Disallowance of redemption on account of provisions made for redemption of preference shares while computing the books profit u/s 115JB - Since the issue is fully covered in favour of the assessee in his own case - the CIT(A) is quite justifiable which is not liable to be interfere with at this appellate stage - AT
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Income Tax:
Addition in respect of interest paid on External Commercial Borrowings (ECB), payment of guarantee fee and service fee - the assessee has been able to substantiate that the payments have been made for the purpose of assessee’s business. The TPO cannot sit in the judgment whether these expenses were necessary for conducting the business or whether any benefit has been derived from the expenditure so incurred. - AT
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Customs:
Validity of detention and seizure of goods - classification of scrap - The DRI has firstly detained the goods, which later on had been seized. Assuming that the stage of adjudication of show cause notice is yet to come, this Court has no intent to go into the issue of classification at all as it would be for the proper officer to workout the same on following the due procedure and on requisite scrutiny however, noticing that the order of detention and seizure by the DRI itself is unsustainable, we allow the petition by quashing and setting aside the seizure and the panchnama. - HC
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IBC:
Approval of Resolution Plan - The RP cannot be permitted to ride piggyback on the CoC's decision. - The facts and circumstances of the present application point only to one inescapable conclusion, that the application has been filed by the RP only to avoid any adverse scrutiny by the IBBI. That reason is not good enough to overcome major lacunae that the present application suffers from - The application does not deserve any consideration. - Tri
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IBC:
Classification of applicant - unsecured creditors or not - the Applicant cannot take to plea that he is not aware of the fact that he is classified as unsecured creditor. Instead of going into further detail of the matter, the fact remains that even after having the knowledge with regard to the classification as unsecured creditor, the Applicant has not taken any steps and filed instant application almost after 551 days, when Code provide that an appeal has to be filed within 14 days after rejection of the claim by Liquidator. Therefore, the application is barred by limitation. - Tri
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IBC:
Condonation of delay of 796 days delay in filing the claim before the Liquidator - In view of the IBC, 2016 being a time bound process as well as the Learned Liquidator being under a compulsion to complete the liquidation process within a period of one year from the date of commencement of liquidation, the application is dismissed. - Tri
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IBC:
Initiation of CIRP - Failure to pay outstanding salary dues to the employees - Operational Creditor has not received his dues from the Corporate Debtor and the submissions made by the Corporate Debtor in this regard appears to be after thought and was not submitted by any documentary evidence. - The Operational Creditor is yet to receive his salary dues from the Corporate Debtor. The submissions made by the Corporate Debtor is not convincing and accordingly the application for CIRP of the Operational Creditor has been admitted. - Tri
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Central Excise:
Maintainability of appeal - availability of efficacious alternative remedy of appeal - Classification of goods - This Court has no hesitation in arriving a conclusion that the petitioners are bound to exhaust the Appellate Remedy as contemplated under Section 35-B of the Central Excise Act, 1944. T - HC
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VAT:
Refund of ITC - Export Sales - case of Revenue is that the petitioner should have applied for refund under Section 18(3) of the TNVAT Act, within 180 days by filing Form W under Rule 11(2), since the ITC represents ITC towards exports - The High Court cannot conduct the roving enquiry with reference to the disputed facts and circumstances, which is to be done based on the documents and evidences. - HC
Articles
Notifications
GST - States-
(07/2021) FD 16 CSL 2021 - dated
6-5-2021
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Karnataka SGST
Seeks to extend specified compliances falling between 15.04.2021 to 30.05.2021 till 31.05.2021 in exercise of powers under section 168A of KGST Act
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(06/2021) FD 16 CSL 2021 - dated
6-5-2021
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Karnataka SGST
Seeks to amend Notification No. (08/2019) FD 47 CSL 2017, dated the 23rd April, 2019
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(05/2021) FD 16 CSL 2021 - dated
6-5-2021
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Karnataka SGST
Seeks to amend Notification No. (29/2018) FD 47 CSL 2017, dated the 31st December, 2018
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(04/2021) FD 16 CSL 2021 - dated
6-5-2021
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Karnataka SGST
Provide relief by lowering of interest rate for the month of March and April, 2021
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(03/2021) KGST.CR.01/17-18 - dated
3-5-2021
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Karnataka SGST
Seeks to amend Notification No. (15/2020), KGST.CR.01/17-18 dated the 12th November, 2020
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(02/2021) KGST.CR.01/17-18 - dated
3-5-2021
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Karnataka SGST
Seeks to extend the due date for furnishing of FORM ITC-04 for the period Jan-March, 2021 till 31st May, 2021
Income Tax-
59/2021 - dated
10-5-2021
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IT
Corrigendum - Notification No. 56/2021 dated 7th May, 2021
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58/2021 - dated
10-5-2021
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IT
Corrigendum - Notification No. 35/2021 dated 22 April 2021
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57/2021 - dated
10-5-2021
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IT
Corrigendum - Notification No. 54/2021 in F.No. 370142/46/2020-TPL, dated the 5th May, 2021
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2021 (5) TMI 334
Grant of Bail - Constitutional Validity of section 132 (1)(b) of the Central Goods and Services Act, 2017 - power of arrest under Section 69 of the Central Goods and Services Act, 2017 to be exercised only after the proper assessment/ determination of liability - de-attachment of Bank Accounts of petitioner - Fraudulent availment of ITC - HELD THAT:- The concerned officer has on the basis of the information given so far by the Petitioner is in the process of identifying other key conspirators/ master mind in the fraudulent availment of ITC, the concerned officer has recorded her reasons to believe that Petitioner has floated the two firms with the core objective to defraud the Government Ex-chequer; that Petitioner is only doing paper transactions involving 66 Crores of revenue which is huge by any standards and, has authorized his arrest under Section 69 of the CGST Act. It is observed from the file notings that in furtherance of the on going investigation, the Revenue authorities are in the process of issuing summons to them and other key persons and coaccused to interrogate and record statements.
Having noted the all records and the scale of the alleged scam as well as the involvement of Petitioner, we are not inclined to interfere with the investigation at this stage,as that may tantamount to foreclosing the out-come to the investigation and would rather hamper the same - considering the magnitude and the scale of the alleged fraud involving public money and the critical stage, when investigation to get hold of the mastermind/ king pin and other key conspirators as well as the modus operandi is underway in which Petitioner through his sole proprietary concern, as well as through the Pvt. Limited Company, is alleged to be an active participant, at this stage, we are not inclined to indulge into the request for grant of bail under Article 226 of the Constitution of India.
Bail application dismissed - List the matter on 21st June, 2021 for further consideration.
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2021 (5) TMI 333
Refund of CGST alongwith interest - period from April, 2020 to May, 2020 - HELD THAT:- The concerned respondent authorities are directed to decide the claim of the petitioner for refund as stated in the memo of this writ petition, in accordance with law, rules, regulations and Government policies applicable to the facts of the case.
Petition disposed off.
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Income Tax
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2021 (5) TMI 323
Disallowance u/s 14A - dividend amount received - HELD THAT:- It is a settled position that disallowance of expenditure u/s. 14A read with Rule 8D shall not exceed exempt income earned for the year as per case law Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT], Chettinad Logistics Private Limited [2017 (4) TMI 298 - MADRAS HIGH COURT] and CIT vs. Corrteck Engineering Pvt. Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT]. Therefore, we direct the AO to restrict the disallowance u/s 14A rwr 8D to ₹ 4,99,674/- in AY 2013-14 and ₹ 4,28,292 in AY 2014-15.
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2021 (5) TMI 332
Validity of the application filed u/s 245(C) - consequential order passed by the Settlement Commission - maintainability of the writ petition filed by the Commissioner of Income Tax, challenging the order passed by the Settlement Commission - As contended that in the eventuality of no pendency of case during the relevant assessment year, the application under Section 245(C) of the Act is not maintainable before the Settlement Commission - HELD THAT:- In the instant case, the power of the Settlement Commission is well enumerated under Section 245C and 245D of the Act. The manner in which settlement is to be arrived is also contemplated under the Act. Certain preconditions are also stipulated. Thus, the Settlement Commission cannot enter into the venture of assessment, which is the power of an Assessing Officer under Section 153A. Therefore, this Court is of an opinion that in the absence of any true and full disclosure, the Settlement Commission cannot go beyond the scope of Section 245C of the Act and adjudicate the additional income found by the Department during seizure, which is admittedly not disclosed in the application filed at the first instance by the assessee.
Assessee in the present case filed statement of facts in vide two letters dated 10.03.2008 and 14.03.2008, offering additional income and the Settlement Commission also proceeded and settled the issues, it is to be inferred that the assessee at the first instance, had not disclosed true and full income and therefore, the subsequent additional statements cannot be relied upon in order to satisfy the requirements of the provisions u/s 245(C).
The principles involved in Section 245(C) of the Income tax is that the person approaching the Settlement Commission should file an application with clean hands and surrender the full and true disclosure of income. Only in the eventuality of proving the genuinity, then alone the Settlement Commission is empowered to settle the disputes and not otherwise. Thus, the prime consideration and pre-condition for entertaining an application is true and full disclosure of income and subsequent adding, deletion or insertion would dis-entitle the Settlement Commission from entertaining an application.
In such an event, the genuinity of the assessee became questionable and the matter is to be sent back for assessment before the jurisdictional AO This being the scope of the provision under Section 245(C) for entertaining an application for settlement. In the present case, the Settlement Commission exceeded its jurisdiction by settling the issues, even after filing of the additional statement of facts by the assessee on two occasions, providing further disclosure of income.
The petitioner could able to establish that the Settlement has caused prejudice to the interest of the Revenue and therefore, regular assessment is to be made to cull out the truth and proceed with the matter in the manner known to law.
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2021 (5) TMI 320
Capital gain on sale of land - Nature of land - capital asset u/s 2(14) or agricultural land - whether land is used solely for agricultural purposes? - HELD THAT:- We note that during the course of assessment proceedings, the Assessing Officer noted that the assessee has sold agricultural land bearing R. S. No. 12/1, B 17/1 located at village Nava Gam. Tal. Kamrej. Dist. Surat during the year under assessment, for sale consideration of ₹ 4,41,00,000/-. The population of village Navagam is less than 10,000 therefore, one of the conditions of section 2(14) of the Act, has failed, and hence such land is not a Capital Asset, consequently capital gains provisions are not attracted.
Based on the other conditions, as mentioned by the ld Counsel in his arguments, the said land is an agricultural land. The assessee, right from the beginning, is an agriculturalist, his source of income is only agriculture. He is residing at village Navagam of Dist. Surat. He has sold agricultural land located outside SMC limits, and he was cultivating the land up to the date of sale. He has not obtained any permission to make use of land for non-agriculture purpose. There is no any non-agriculture activities carried out upon the same land till the date of sale. The Assessing Officer has accepted the fact of selling of rural agricultural land by the assessee vide his order at Para no. 2. The CIT(A) has also accepted the said fact.
Thus, it is undisputed fact that assessee has sold agricultural land on which he was carrying out agricultural activities prior to its sales. Thus , we note that assessee is an agriculturist and has been carrying out agricultural operation on the land for many years. In the Revenue records the said land is an agricultural land.
Certificate of Hon’ble Dy. Collector, Kamrej Circle, Kamrej Dist., Surat clearly explains that till the date of sale the assessee`s land was an agricultural land and said land was being used for agricultural purposes. Thus, it is abundantly clear that till the date of sale, the land was an agricultural land. Besides, the population of village Navagam is less than 10,000, at that point of time, therefore, one of the conditions of section 2(14) has failed and hence such land is not a Capital Asset, consequently capital gains provisions are not attracted. Therefore, based on the above factual position, we are of the view that assessee has sold an agricultural land which is not a capital asset hence we direct the assessing officer to treat the said land as an agricultural land.
Disallowance of deduction under section 54B - HELD THAT:- Since the assessee has made payment for purchase of another agricultural land and took possession of land therefore he is entitled to take deduction under section 54B of the Act. Hence considering the facts narrated above, as the assessee has fulfilled the essential conditions of section 54B of the Act. Therefore, we direct the assessing officer to allow deduction under section 54B of the Act.
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2021 (5) TMI 330
Reopening of assessment u/s 147 - Claim of deduction under Section 80-IA - assessee is eligible only for 30% pay of the deduction claim and remaining 70% is to be taxed - HELD THAT:- As there is a definite 'reason to believe' that the deduction of ₹ 61,10,78,973/- is excess deduction to the tune of income chargeable to tax as escaped assessment. When it is categorically stated that on account of certain informations provided by the assessee, a wrong assessment has been made and the excess deduction was made, so as to cause loss to the Revenue, then it is to be construed that the assessee has not disclosed fully and truly all material facts.
Facts regarding the deduction claim u/s 80-IA, all would have stated by the assessee in the return of income. However, during the scrutiny and while passing that the final order of assessment by the Assessing Officer, which was done based only on the informations provided by the assessee and thereafter, if the authorities identified some materials for reopening of assessment, then they have got every reason to believe that the assessment is to be reopened.
In the event of not reopening the assessment, the interest of the Revenue would be prejudiced. This Court is of the considered opinion that the petitioner cannot merely say that he has produced all the informations. Certain informations, which were not provided fully and truly caused loss to the Revenue with reference to the deductions made u/s 80-IA of the Act and such materials identified by the Department, while reopening the assessment must be adjudicated with reference to the documents and evidences available and the petitioner is at liberty to defend his case by submitting his objections or by producing documents and evidences.
High Court cannot adjudicate the intricacies in the Accounting System made by the assessee, which was scrutinized by the Income Tax Department. When prima facie case made out by the respondents to arrive a conclusion that there is a reason to believe, then the Revenue must be permitted to proceed with the reopening proceedings and mere reopening would not cause any prejudice to the assessee and during adjudication, the assessee would get an opportunity to defend his case in the manner known to law. Thus, the mere initiation based on some new materials would not cause any prejudice or violate the rights of the assessee. However, if the assessee could able to establish that there is absolutely no new materials or informations made available for the purpose of reopening of assessment, then alone, the High Court may interfere and not otherwise.
This being the principles to be followed, the petitioner is at liberty to defend the case by availing the opportunities to be provided by the respondents as contemplated under the provisions of the Income Tax Act.
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2021 (5) TMI 304
Capital receipt chargeable to tax u/s.45 - claim of exemption u/s.10(2A) - amount received by the assessee partner from the partnership firm - amount received by partner on retirement from a firm - HELD THAT:- Similar ground of appeal was raised in the case of co-partner of the said firm PLA, M/s Rahas Investments Private Limited (now merged with the assessee i.e Lupin Investments Private Limited) [2020 (2) TMI 564 - ITAT MUMBAI] there cannot be any levy of capital gains or any levy in the nature of income within the meaning of Section 2(24) of the Income Tax Act in the hands of the assessee.
There was no transfer of relinquishment of rights in favour of the continuing partners. We find that in the instant case the firm i.e. Pranik Landmark Associates had only paid the amounts lying to the credit of the partner i.e. the assessee and had not paid even a penny more than the amount lying in the credit of the partner’s current account - Decided against revenue.
Undisclosed / unaccounted /out of books income / investment - HELD THAT:- It cannot be said that the purpose behind restructuring of the partnership firm (i.e admission and retirement) was done primarily for tax avoidance as contended by the ld AO. In fact the firm PLA held the property as its owner which was also reflected in its audited accounts. When the said property was sold as a result of the said restructuring to the new firm PLA-2 , the due tax was paid by the firm and this cannot be re-taxed in the hands of the assessee as tax avoidance.
The said amount is the amount of devaluation of the investment which is forming part of the books of accounts. Hence, it is completely misconceiving to treat the same amount as undisclosed income / investments. We find that the ld CIT-A had duly appreciated the contentions of the assessee and had rightly deleted the addition made in this regard, on which, we do not find any infirmity. Accordingly, the Ground No. 4 raised by the revenue is dismissed.
Correct head of income - rent received as business income or income from house property - HELD THAT:- CIT-A rightly observed that the assessee had leased the factory premises along with plant & machinery to Lupin Ltd for which it was paid rental income of ₹ 500 per month. Further , the assessee was offering ₹ 12 lakhs per annum as tax under the head income from business. However, the ld AO computed this income as income from house property. The ld CITA by placing reliance on following decisions held that rental income in letting factory building and plant and machinery would be business income for exploitation of commercial assets and this was also accepted in the past assessment years.
We find that the ld CIT-A also applied the rule of consistency by stating that assessee offering business income in this regard has been accepted by the revenue since Asst Year 2006-07 and there was absolutely no change in facts and circumstances of the instant case for the year under consideration. Hence, we do not find any infirmity in the order of the ld CIT-A in this regard - Decided against revenue.
Addition made on account of notional interest to interest free deposit received by the assessee on Ankleshwar factory premises and Santacruz property - HELD THAT:- We find that the assessee placed reliance on the decision of J K Investors (Bombay ) Ltd [2000 (6) TMI 9 - BOMBAY HIGH COURT] wherein it was pointed out that computation of property income was concerned with annual value or actual rent and not notional interest on interest free deposits. The assessee also placed reliance on CIT vs Moni Kumar Subba [2011 (3) TMI 497 - DELHI HIGH COURT] wherein it was categorically held that notional interest on interest free deposit cannot be taken as determinative factor to arrive at the ‘fair rent’.
It is duty of the ld AO to find out or bring on record the reasonable or fair rent or standard rent and then compare the same with the actual rent received or receivable to find out the Annual Value.This should be done after due inquiries being conducted by the ld AO.
None of these facts have been brought on record by the ld AO in the instant case. Hence we find that the ld CITA had rightly deleted the notional interest on interest free deposit. - Decided against revenue.
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2021 (5) TMI 303
Unsecured loans u/s 68 - AO observed that the assessee had shown unsecured loans from various parties in its balance sheet - CIT-A deleted the addition and directing the ld AO to allow interest paid on such unsecured loans - HELD THAT:- Once the assessee has furnished the complete details about the loan creditors together with their latest addresses as available with it and affidavits from directors duly notarised including details of loan repayments made to those companies and confirmations from them for the loans advanced to the assessee, the onus cast on the assessee u/s 68 of the Act stands duly discharged and no addition could be made in its hands merely on because the lenders fail to appear before the ld AO or the assessee failing to produce them before the ld AO. See M/S. ORCHID INDUSTRIES PVT. LTD. [2017 (7) TMI 613 - BOMBAY HIGH COURT]
No addition could be made on mere presumption that the assessee routed its own cash in the form of unsecured loans without any concrete evidence to this effect. See M/S. ACQUATIC REMEDIES PVT. LTD. [2018 (8) TMI 347 - BOMBAY HIGH COURT]
As the directors of the lending companies had filed affidavits confirming the loan transactions before the ld AO which had not been disputed. Once the averments made in the affidavit are not disputed or refuted, the same are to be construed as true and correct, as held by the Hon’ble Supreme Court in the case of Mehta Parikh & Co. [1956 (5) TMI 4 - SUPREME COURT].
We find no infirmity in the order of the ld CIT-A deleting the addition made towards unsecured loans u/s 68 of the Act and correspondingly allowing interest on such unsecured loans by duly appreciating the facts and evidences on record. Grounds raised by the revenue are dismissed.
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2021 (5) TMI 302
Rectification u/s 254 - Transfer pricing adjustment on account of comfort guarantee - HELD THAT:- We hold that this Tribunal had duly adjudicated the ground of appeal raised by the Revenue which was enclosed alongwith Form No.36 and which was also duly signed by the ld. AO. In any case, the Tribunal is expected to adjudicate the grounds raised before it by the ld. AO that has been duly done in the instant case. Hence, we hold that this is not a fit case warranting any rectification u/s.254(2) of the Act, hence, the grounds raised in the Miscellaneous Application are dismissed.
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2021 (5) TMI 301
Addition u/s 36(1)(iii) - bad debts written off - assessee had debited a sum against the head sundry balances written off - assessee nowhere explained the transaction essential during the course of business - assessee also received the loan - HELD THAT:- As the assessee failed to prove this fact that the loan was given in the ordinary course of business of banking or money lending carried out by the assessee.
Out of the amount of ₹ 2,31,02,343/-, ₹ 36,35,000/- was advanced to employees which undoubtedly would be in the ordinary course of business of the assessee. The assessee was not in the business of banking or money lending. The condition in view of the provisions u/s 36(2)(i) of the Act has not been satisfied. The facts are not distinguishable at this stage. No material of any kind has been produced to which it can be assumed that the finding of the CIT(A) is not justifiable. We dismiss the appeal of the assessee.
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2021 (5) TMI 300
Deduction u/s 80P(2)(d) - interest received from co-operative bank - assessee is a Co-Operative Housing Society deriving income from interest from Saving Bank Account and interest on fixed deposits - Whether Scheduled Co- operative banks are at par with commercial banks and therefore interest earned there from is not covered by the concept of mutuality and it not allowable for deduction u/s 80P(2)(d)? - CIT(A) has held that the interest income from the deposit with the Co-operative Bank is liable to be exempt u/s 80P(2)(d) - HELD THAT:- CIT(A) has considered the number of decisions such as Totgars Co- operative Sale Society Ltd. [2010 (2) TMI 3 - SUPREME COURT], PCIT Vs. Totagars Co-operative Sale Society [2017 (1) TMI 1100 - KARNATAKA HIGH COURT], PCIT Vs Totagars Co-operative Sale Society [2017 (7) TMI 1049 - KARNATAKA HIGH COURT], State Bank of India [2016 (7) TMI 516 - GUJARAT HIGH COURT], Kaliandas Udyog Bhavan Premises Co-operative Society Ltd. Vs. ITO [2018 (4) TMI 1678 - ITAT MUMBAI], Lands End Co-operative Housing Society Ltd. Vs. ITO [2016 (2) TMI 620 - ITAT MUMBAI], Sea Green Co-operative Housing Society Ltd.[2017 (3) TMI 1728 - ITAT MUMBAI]& Merwangeecama Park Co-operative Housing Society Ltd. Vs. ITO [2017 (10) TMI 58 - ITAT MUMBAI].
After going through all the decisions, the CIT(A) has held that the interest income from the deposit with the Co-operative Bank is liable to be exempt u/s 80P(2)(d) of the Act. Moreover, we noticed that the issues have duly been covered with the assessee’s own case for the A.Y.2013-14. [2017 (9) TMI 564 - ITAT MUMBAI]
Thus finding of the CIT(A) is quite correct which is not liable to be interfere with at this appellate stage. Accordingly, we affirm the finding of the CIT(A) on these issues and decide these issues in favour of the assessee against the revenue.
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2021 (5) TMI 299
Estimation of income - Bogus purchases - CIT(A) restricting the addition to the extent of 12.5% - HELD THAT:- CIT(Appeals) has decided the matter of controversy on the basis of the decision of Gujarat High Court in the case of CIT vs. Simit P. Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] and on the basis of the decision in case of Ratnagiri Steels [2017 (4) TMI 402 - ITAT MUMBAI]. The CIT(A) has restricted the addition to the extent of 12.5% on the basis of the gross profit (G.P.) of the Assessee under year consideration shown in the regular books of accounts.
Thus finding of the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with - Decided against revenue.
Disallowance u/s 14A r.w.r. 8D - assessee has voluntarily disallowed the expenses to earn the exempt income - HELD THAT:- In this year the exempt income has been shown by assessee nil. Anyhow, voluntarily offered and assessed by CIT(A) seems justifiable which is not even challenged by assessee, hence, we find it justifiable to restrict the addition to the extent of ₹ 2,17,682/-. No illegality and infirmity found, therefore, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue.
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2021 (5) TMI 298
Exemption on dividend income u/s 10(34) - computing the income of insurance company - CIT-A allowed exemption considering the fetters prescribed in Section 44 - HELD THAT:- As decided in own case [2020 (11) TMI 601 - ITAT MUMBAI] CIT(A) has relied upon host of binding decisions to arrive at the conclusion that exemption u/s 10(34) with respect to dividend income would be available to the assessee and further, the provisions of Sec. 14A would not apply to insurance company. Thus Exemption u/s 10(34) could not be denied to the assessee - Decided against revenue.
Addition on account of negative reserves - CIT(A) has allowed the claim of the assessee - HELD THAT:- As decided in own case [2020 (11) TMI 601 - ITAT MUMBAI] Assessee’s income was to be computed as per Sec. 44 of the Act and the assessee would be required to take Actuarial valuation Report in accordance with insurance Act, 1938. The negative reserves would be nothing but premium receivable by the insurance company. However, there would always be a chance that policyholder might not continue with the insurance polity bought by him which would result in non-receipt of premium which was otherwise receivable by the insurance company. Therefore, the same could not be taxed. See LIFE INSURANCE CORPN. OF INDIA VERSUS ADDL. CIT [2013 (6) TMI 377 - ITAT MUMBAI] - Decided against revenue.
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2021 (5) TMI 297
Estimation of income - Bogus purchases - CIT(A) restricting the suppressed profit to the extent of 12.5% of the purchases made from the bogus entities - HELD THAT:- We noticed that the CIT(A) has allowed the claim of the assessee on the basis of decision of Hon’ble Bombay High Court Nikunj Eximp [2013 (1) TMI 88 - BOMBAY HIGH COURT] and Balaji Textile [1993 (8) TMI 100 - ITAT BOMBAY-B] and Bholanath Polyfab Pvt. Ltd. [2013 (10) TMI 933 - GUJARAT HIGH COURT] In the instant case, sale is not doubted, therefore, the CIT(A) has restricted the addition to the extent of 12.5% of the total bogus purchase . The facts are not distinguishable at this stage. Taking into account, all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Appeal filed by the revenue is hereby dismissed.
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2021 (5) TMI 296
Penalty u/s. 271(1)(c) - Bogus purchases - As onus was on the assessee to establish the genuineness of such purchases by producing such parties before the Assessing Officer and the assessee failed to discharge his onus - CIT-A deleted the penalty - HELD THAT:- CIT(A) has decided the matter of controversy on the basis of decision in the case of Naresh Chand Agarwal [2013 (6) TMI 68 - ALLAHABAD HIGH COURT] and M/s. Manohar Manak Alloys P. Ltd. [2017 (1) TMI 1698 - ITAT MUMBAI] and M/s. Yashraj Films Pvt. Ltd. [2015 (7) TMI 1363 - ITAT MUMBAI] and Simit P. Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT]. Moreover, the Hon’ble Gujarat High Court in the case of National Textiles [2000 (10) TMI 19 - GUJARAT HIGH COURT] has held that the penalty is not leviable when the profit was added on estimation basis. Taking into account all the facts and circumstances of the case, we are of the view that the CIT(Appeals) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with - Decided against revenue.
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2021 (5) TMI 295
Disallowance u/s 14Ar.w.r.8D - Assessee had suo moto made the disallowance - HELD THAT:- We find that the exempt income of the assessee was of ₹ 6,300/-. The assessee has suo-moto disallowed the expenses to earn the exempt income in sum of ₹ 2,03,136/-. There are number of decisions of the higher authorities in which it has been specified that the expenses to earn the exempt income should not be more than exempt income. In the present case assessee disallowed the expenses to earn the exempt income to the tune of ₹ 2,03,136/- suo-moto which is more than the exempt income.
We also find in support of the decision of Hon‟ble Delhi High Court in the case of Vireet Investment Pvt. Ltd. Vs. CIT . [2017 (6) TMI 1124 - ITAT DELHI] in which it is specifically held that the disallowance could not be exceed more than the exempt income. Taking into account all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, we decide this issue in favour of the assessee against the revenue.
Disallowance of redemption on account of provisions made for redemption of preference shares while computing the books profit u/s 115JB - CIT-A deleted the addition as the assessee never credited the amount of reserves to the profit and loss account and thereafter reduce the reserve used for redemption of preference shares from net profit - HELD THAT:- we find that the CIT(A) has allowed the claim of the assessee on the basis of the decision of Hon‟ble ITAT in the assessee‟s own case for the A.Y. 2012-13 & 2014-15 [2018 (6) TMI 1751 - ITAT MUMBAI] The CIT(A) has reproduced the finding of the Hon‟ble ITAT on record. There is nothing on record to which it can be assumed that the said order has been changed or varied. The facts are not distinguishable at this stage. Since the issue is fully covered in favour of the assessee in his own case for the A.Y.2012-13 to 2014-15 vide order dated 13.06.2018, therefore, we are of the view that the finding of the CIT(A) is quite justifiable which is not liable to be interfere with at this appellate stage. Accordingly, we decide this issue in favour of the assessee against the revenue.
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2021 (5) TMI 294
Addition u/s 69 - Transfer pricing adjustments - extending loan facility to Tata Tea UK as part of consortium/syndicate - letter written by one of the employee indicating that the assessee has extended loan of GBP 37.50 million as per part of syndicate and the participation/commitment fee of GBP 1,50,000 has been received by the assessee - HELD THAT:- Apart from the said letters, there is no other material on record to corroborate that the assessee in any manner participated in extending loan facility to Tata Tea UK as part of consortium/syndicate.
The findings of the TPO and the Assessing Officer in draft assessment order that the assessee has advanced loans from undisclosed sources is merely based on surmises and conjunctures. It is a well settled legal proposition that suspicion, howsoever strong, cannot take place of evidence. Except from the letters referred above there is no material to back the observations made by the TPO/AO. On the contrary, the assessee has furnished various documents to substantiate that the assessee was not part of syndicate that has extended loan facility to Tata Tea UK, however, the same have been ignored by the TPO and the assessing officer while passing the draft assessment order. In the absence of any cogent evidence, the Revenue has failed to discharge its onus while alleging that there was an outflow of funds from India by assessee or receivables from Rabobank London have been squared off for diversion of funds to syndicate for advancing loan to Tata Tea UK. The assessee cannot be expected to prove negative.
We find that the TPO and the assessing Officer in draft assessment order has placed reliance solely on the letters furnished by an employee of the assessee without there being any corroborative evidence for making addition u/s.69
Commitment charges received by the assessee are in fact, part of interest income on the loan advanced - The assessee has clarified that the role of assessee was limited to identifying and referring the opportunity to Rabobank London. Rabobank London is the lead arranger for the loan and the other financial institutions/banks joined hands to form a consortium for extending loan facility to Tata Tea UK. The assessee is remunerated for the services rendered by way of share in upfront fee, participation/commitment fee. The share in participation/commitment fee at some percentage (0.40%) of the credit allocation of GBP37.5 million was the method of remunerating the assessee for the functions performed - As already held that the assessee had not participated in extending loan facility to Tata Tea UK through the consortium in any manner whatsoever, the remuneration received by the assessee in lieu of the services rendered cannot be termed as interest income of the assessee from the alleged advancing of loan. The aforesaid income received by the assessee has already been offered to tax, this fact has not been disputed by the Revenue. We find no merit in ground No.1 and 2 raised by the Revenue in appeal, the same are dismissed.
Addition in respect of interest paid on External Commercial Borrowings (ECB), payment of guarantee fee and service fee - charges/payments disallowed primarily for the reason that the assessee has not been able to establish need for the services and the benefit derived from the said services - HELD THAT:- In the instant case the assessee has borrowed funds from Rabobank Hong Kong to finance its working capital requirements. The interest paid to Rabobank Hong Kong on ECB has been reflected in the books. Tax has been duly deducted on the payment of interest. Similarly, in respect of guarantee fee and service fee the assessee has been able to substantiate that the payments have been made for the purpose of assessee’s business. The TPO cannot sit in the judgment whether these expenses were necessary for conducting the business or whether any benefit has been derived from the expenditure so incurred. The requirement of the law is that the expenditure should have been incurred ‘wholly and exclusively’ for the purpose of business.
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2021 (5) TMI 293
Unexplained cash credit u/s. 68 - assessee group was subjected to search action as triggered on the basis of pre-search enquiries conducted by the department that the assessee received accommodation entries from various concerns being run /operated by Shri Pravin Kumar Jain Group and Shri Mukesh Choksi Group - HELD THAT:- The key person of the assessee agreed to offer the said amount in various years to tax. However, the said statement was retracted immediately upon receipt of copies of statement from the department - Upon filing of retraction, another statement on oath u/s 131 has been recorded by Ld. AO from Shri Kishore P. Agarwal on 27/01/2016 wherein it has been reiterated that earlier confessional statement was given under force and in a state of confusion.
AO has termed the retraction made after approx. 18 months as mere afterthought and therefore, chose to disregard the same overlooking the fact that despite repeated reminders, copies of statement was provided to the assessee only on 12/12/2015 and the retraction was made immediately after receipt of statement by the assessee. In such a case, the confession made by the assessee, in our opinion, would lose considerable credibility unless the confession was supported by some incriminating material as unearthed by the department during the course of search action on assessee.
Another pertinent accepted fact is that cash allegedly used by the assessee to procure accommodation entries to have been sourced partly out of on-money received in real estate business of assessee’s sister concern namely M/s Sahakar Infracon Projects Private Limited.
This cash has also been treated as assessee’s unexplained money despite concurrence of Ld. AO of the fact that accommodation entries were sourced partly out of cash generated by M/s Sahakar Infracon Projects Private Limited. No addition is shown to have been made in the hands of M/s Sahakar Infracon Projects Private Limited.
These two entities, in our opinion, are separate legal entities and the one entities’ unaccounted money could not be added to the income of the other entity’s income.
Entities not belonging to tainted group with no incriminating material - The fact of huge share premium could not be held against the assessee in the absence of any incriminating material. In the light of retraction, Ld. AO was duty bound to make water-tight case against the assessee by making necessary enquires and by bringing cogent evidences on record to prove otherwise. It was obligatory on the part of Ld. AO to collect more evidences against the assessee during the course of assessment proceedings to disprove the documentary evidences filed by the assessee. The failure to do so would make the addition unsustainable in the eyes of law since it could be said that the assessee had discharged the primary onus of proving these transactions in terms of requirement of Section 68. Similar is the position before us.
No new material could be placed before us. Therefore, in our considered opinion, no infirmity could be found in the impugned order with respect to these entities. We order so. Resultantly, the grounds raised by the revenue, in this regard, stand dismissed.
Entities belonging to tainted group where cash was exchanged - The second set of entities comprises-off of 3 entities belonging to Shri Mukesh Chokshi Group. From the factual matrix, it is quite evident that cash was given to these entities out of cash-in-hand held by the assessee in its books of accounts. The cash was generated out of cash intensive toll business carried out by the assessee. In such a case, the same could not be treated as unexplained money of the assessee since the cash would be generated only out of toll receipts credited by the assessee in its books of accounts. In other words, it could not be said that the entries were sourced from cash generated out of the books and therefore, the entries to that extent could not be said to be unexplained money of the assessee. This is further fortified by the undisputed fact that the entries of ₹ 9 Crores have subsequently been reversed by the assessee, in its books of accounts, in financial year 2013-14. Therefore, on the facts and circumstances, the Ld. CIT(A), in our considered opinion, has rightly estimated commission income against these entries. Therefore, no interference is called for in the impugned order, in this regard also. The grounds thus raised in the cross-appeals stand dismissed.
Remaining entities belonging to tainted group - Upon perusal of facts, it is noted that the additions have primarily been made on the basis of statement of Shri Pravin Kumar Jain and in view of the allegations that there was buy back of shares in subsequent years.
Further, the notices u/s 133(6) remained un-responded. However, we find that the opportunity to cross-examine Shri Pravin Kumar Jain was never provided to the assessee. Nor the copies of statements were furnished / confronted to the assessee. The failure to do so would make the additions unsustainable in the eyes of law in view of settled legal position as enumerated by us in para 6.5. Further, we find that all these entities have duly furnished replies to Ld. AO which are placed on Page nos. 34 to 64 of the paper book wherein the transactions have been confirmed by these entities along with sufficient documentary evidences in the shape of Income Tax Returns, bank statements, financial statements, source of investments, copies of Memorandum & Articles of Association, details of directors, basis of investment, details of purchase of shares, allotment letter etc. They have confirmed that there was no buy back of shares. These entities are not listed as entities to whom the cash is stated to have been paid by the assessee in exchange of accommodation entries. Therefore, the allegations of lower authorities would have no legs to stand. Consequently, the addition in AY 2009-10 stand deleted. The assessee’s appeal for AY 2009-10 stands allowed.
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2021 (5) TMI 324
Reopening of assessment u/s 147 - Bogus LTCG - Assessee earned long term capital gain on shares and claimed it as ‘exempt income’ under Section 10(38) - whether the revenue is justified in reopening the assessment for the year under consideration? - HELD THAT:- At the stage of issuing the notice, the court cannot investigate into adequacy or sufficiency of the reasons. When no scrutiny assessment made under section 143(1) of the Act, the requirement for reopening is only reason to believe. Considering the facts of the present case, the Assessing Officer has caused of justification that, the alleged transaction of penny stock, claiming amount of long term capital gain has escaped assessment - the word “reason” in the phrase “reason to believe” in Section 147, would means cause or justification. If the assessing officer has cause or jurisdiction to know or suppose that income has escaped assessment he can be said to have reason to believe that income has escaped assessment. The expression cannot be read to mean that the assessing officer should have finally ascertained the fact by legal evidence or conclusion.
A plain reading of reasons recorded reveals that, the case of the assessee is reopened under Section 147 of the Act, since the information was received as per AIMS module and as per the penny stock transaction data, the assessee had sold 85,000 shares of Tuni Textile Limited for the consideration.
Assessing Officer himself was satisfied with regard to the information and other materials on record, he formed an opinion that, the income has escaped assessment. Therefore, when the information was specific with regard to transactions of penny stock entered into by the assessee with the Tuni Textiles Ltd., and the Assessing Officer had applied his independent mind to the information and upon due satisfaction, led to form an opinion that, the amount of claim of LTCG claimed by the assessee is chargeable to tax has escaped assessment, which facts suggests that, there is live link between the material which suggested escapement of income and information of belief. Under the circumstances, we are satisfied that, there was enough material before the Assessing Officer to initiate proceedings under Section 147 of the Act.
We do not agree with the contention that, merely on the information, the Assessing Officer has recorded the reasons and on the basis of borrowed satisfaction, he formed an opinion with respect to the income chargeable to tax has escaped assessment.
Valid sanction - We take the notice of the fact that, the copy of the approval has been provided to the assessee at the stage of passing the order of disposing the objections raised by the assessee. Therefore, it is evident that, in the instant case, the authorities concerned have given approval after due application of mind and expressed their satisfaction with regard to the reasons recoded for reopening of the assessment.
No hesitation to hold that it could not be said to have that there was no material or grounds before the Assessing Officer and the assumption of jurisdiction on the part of the Assessing Officer under Section 147 of the Act to reopen the assessment by issuing impugned notice under Section 147 of the Act is without authority of law, which render into the notice unsustainable. Therefore, the assessee failed to make out a case. - Decided against assessee.
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Customs
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2021 (5) TMI 327
Validity of detention and seizure of goods - allegation is that scraps in different forms seized from the premises were found to be imported without payment of appropriate customs duty - classification of goods - discarded and non-serviceable semi-broken/broken motor under CTH 7204 49 00 under the Other Ferrous Waste and scrap or not - jurisdiction to entertain this petition in wake of the availability of the alternative efficacious remedy - HELD THAT:- The law on the point if is regarded, it is quite clear that jurisdiction under Article 226 of the Constitution of India is not to be resorted to ordinarily when the alternative and efficacious remedy is available, unless of course the very issuance of notice is not sustainable under the law - The writ jurisdiction under Article 226 is not to be entertained against the show cause notice when statute provides for mechanism which is efficacious, alternative and productive as the very purpose of issuance of show cause notice to afford opportunity of hearing to the party concerned and on showing of the cause to the statutory authority, a final decision is to be rendered, it is pre-matured to interfere with the show cause notice by the court. Although, the Court has wide powers under Article 226 of the Constitution and it can also exercise in certain circumstances at the stage of issuance of show cause notice (when the show cause notice is totally non est etc.) Accordingly such powers are not to be exercised by the Court and this approach of self restraint and self limitation is adopted by the High Court always and that being a well settled position of law, no further dilation is needed.
The writ jurisdiction under Article 226 is not to be entertained against the show cause notice when statute provides for mechanism which is efficacious, alternative and productive as the very purpose of issuance of show cause notice to afford opportunity of hearing to the party concerned and on showing of the cause to the statutory authority, a final decision is to be rendered, it is pre-matured to interfere with the show cause notice by the court. Although, the Court has wide powers under Article 226 of the Constitution and it can also exercise in certain circumstances at the stage of issuance of show cause notice (when the show cause notice is totally non est etc.) Accordingly such powers are not to be exercised by the Court and this approach of self restraint and self limitation is adopted by the High Court always and that being a well settled position of law, no further dilation is needed.
Here is the case where the petitioner has filed Electronic Bill of Entry in the EDI system, where it can claim a particular exemption or a particular classification. On subsequently having noticed that the Copper and Aluminum elements would not permit the exemption under the Notification at the rate of 2.5% by itself would not make the import of the goods as clandestinely having been done, the least that could have been done was to term the same as mala fide when otherwise the relevant material had been already placed with the department - the communication dated 03.08.2020 in post clearance audit of Bill of Entry was on the basis of various documents including the certificate of analysis, when it was realized by the department that the product consists of the Copper scrap also to the extent of around 10%. The DRI has firstly detained the goods, which later on had been seized. Assuming that the stage of adjudication of show cause notice is yet to come, this Court has no intent to go into the issue of classification at all as it would be for the proper officer to workout the same on following the due procedure and on requisite scrutiny however, noticing that the order of detention and seizure by the DRI itself is unsustainable, we allow the petition by quashing and setting aside the seizure and the panchnama.
Petition allowed.
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2021 (5) TMI 326
Release of imported goods - used ventilators - non-hazardous goods - HELD THAT:- The petitioner has relied upon a certificate of the chartered engineer in support of its contention that the used ventilators imported constitute non-hazardous goods. In my view, the appropriate authority to confirm the nature of goods would not be the chartered engineer. Thus, in the course of adjudication, the assessing authority shall make a reference to the competent authority either under the Hazardous Substance Management Division/R1 or any other authority competent for this purpose, to determine whether the used ventilators imported by the petitioner would constitute hazardous material, bearing in mind the definition of the term in the Hazardous Waste Management Rules 2016.
Petition dismissed as withdrawn.
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Corporate Laws
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2021 (5) TMI 292
Seeking for adjournment - entire office of the Counsel is struck with COVID, they are not in a position to appear before this Tribunal today and have instructed Ld. Counsel for RI to R4 to seek for an adjournment - HELD THAT:- The mediation efforts between the parties are still going on.
Taking into consideration the same, post this matter on 05.05.2021.
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Insolvency & Bankruptcy
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2021 (5) TMI 322
Approval of Resolution Plan - RP has filed an application alleging preferential, undervalued and fraudulent transactions - alleged transactions in favour of related parties - HELD THAT:- To file an application alleging preferential, undervalued and fraudulent transactions, the RP has to adhere to sections 43 and 46 of the Code read with regulation 35A of the CIRP Regulations. Section 43 and 46 envisage that the alleged transactions in favour of related parties should be within two preceding years, while in the case of non-related parties it should be within one year. Further, under regulation 35A the RP has to form an opinion whether there has been any avoidable transaction in the Corporate Debtor company on or before seventy-fifth day of the CIRP commencement date. Thereafter, on or before one hundred and fifteenth day of forming such opinion, the RP shall make a determination that the Corporate Debtor has been subjected to avoidable transaction.
In the case at hand, the Applicant has failed to provide any date on which the purported avoidable transactions were made. Without any such date being mentioned, no conclusion can be given on whether such alleged transactions were made within the lookback period of two years, as envisaged under sections 43 and 46 of the Code, or beyond the said period.
The determination to be made by the RP in terms of regulation 35A(2) is an independent determination to be made on the basis of the transactional auditor's report, and the CoC has no role to play in this. Therefore, to that extent, the act of the RP in placing the transactional auditor's report for discussion at the ninth meeting of the CoC was not proper. The IBC and the regulations envisage no such role for the CoC. The CoC's role is limited to granting approval for the appointment of the auditor and fixing the fee, and not to an analysis of the transactions. The latter, being a creditor of the corporate debtor, will be an interested party. Therefore, any resolution by the CoC will have the effect of influencing the RP in determining whether the transactions fall within the boundaries of avoidance transactions fit enough to file applications before the adjudicating authority for consideration. The RP cannot be permitted to ride piggyback on the CoC's decision.
The facts and circumstances of the present application point only to one inescapable conclusion, that the application has been filed by the RP only to avoid any adverse scrutiny by the IBBI. That reason is not good enough to overcome major lacunae that the present application suffers from - The application does not deserve any consideration.
Application dismissed.
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2021 (5) TMI 321
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- It is an admitted liability and that the documents submitted by the operational creditor are enough to establish the debt upon the corporate debtor and hence the contentions made by the corporate debtor cannot be relied upon. Also, they defaulted in repaying the debt amount which is more than the threshold of ₹ 1,00,000/- to each individual operational creditor. Hence, all the requisite conditions for admission of a petition under Section 9 have been found to be fulfilled and therefore, this petition deserves to be admitted.
Application admitted - moratorium declared - petition allowed.
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2021 (5) TMI 319
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- It is a fact that the Financial Creditor has supplied the material as per the purchase order issued by the Corporate Debtor. Due to non-payment as per the terms of the invoice, the Financial Creditor herein has converted the due amount into a loan and accordingly the Loan Agreement has been entered into between the parties on 05.03.2018 to repay the amount claimed to be in default in twelve (12) equal instalments commencing from 05.03.2018.
The present Financial Creditor has supplied the goods as per the purchase order issued by the Corporate Debtor. However, the amount due under the purchase order issued by the Corporate Debtor was not paid even though the goods were supplied as per the purchase order issued by the Corporate Debtor. In view of the default, both the parties have converted the due amount into a Loan Agreement on 05.03.2018 repayable in twelve (12) instalments starting from April, 2018 to March, 2019. Thereby, the operational debt has become financial debt in view of the Agreement entered into between the parties.
The Applicant filed the application under Section 7 as subsequently Loan Agreement entered into between the parties for repayment of the due amount. As such, the contention of the Corporate Debtor that it is an amount was due only for supply of goods is untenable and cannot be taken as stand for dismissing the application. Taking into account, the subsequent developments in the matter which was agreed for by both the parties.
There is a financial debt which was due and not paid. Accordingly, the application has been admitted - Moratorium declared.
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2021 (5) TMI 318
Classification of applicant - unsecured creditors or not - Direction to opponent to rectify the erroneous classification of claim of Applicant as 'Unsecure' and categorize the same as 'Secured' - time limitation - HELD THAT:- On perusal of the record, it is found that on 5th July 2019, the liquidator classified the Applicant as Unsecured Financial Creditor in the liquidation process of the Corporate Debtor and in view of Section 42 of the Insolvency and Bankruptcy Code, the creditor may appeal before the Adjudicating Authority against the decision of the liquidator within 14 days on receipt of such decision. However, the present application is filed after around 551 days - The instant application is admittedly filed in much belated stage.
In view of such express provisions of section 77(3) of the companies Act, 2013 and Regulation 21 of the Liquidation Regulation, the Liquidator, acting in accordance with the provisions of Section 77(3) of the Companies Act and Regulation 21 of the Liquidation Regulations, is bound to reject the claim submitted by the Applicant as a secured claim - While filing the instant application, the Applicant has miserably failed to explain the reason of delay in filing the instant application and also not prayed for any condonation of delay for the same.
Time Limitation - HELD THAT:- That apart, it is also admitted fact that Applicant is always attending the CoC meeting being the member of the CoC constituted in the liquidation process of the Corporate Debtor and the liquidator in all its meeting reported all the developments in the liquidation process of the Corporate Debtor and also inviting suggestions from the members of the CoC on various aspects of the liquidation process of the Corporate Debtor, however the Applicant did not raise any objection. Thus, the Applicant cannot take to plea that he is not aware of the fact that he is classified as unsecured creditor. Instead of going into further detail of the matter, the fact remains that even after having the knowledge with regard to the classification as unsecured creditor, the Applicant has not taken any steps and filed instant application almost after 551 days, when Code provide that an appeal has to be filed within 14 days after rejection of the claim by Liquidator. Therefore, the application is barred by limitation.
Under such circumstances, if the application of the Applicant will be allowed ignoring the specific Rules and Regulations of the Liquidation. In that event, the very sanctity of those provisions will be diluted and in that event there is every likelihood that number of application will come before this Adjudicating Authority for the same - application dismissed.
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2021 (5) TMI 317
Seeking of hearing - unsuccessful Resolution Applicant claims that they are not only a necessary party but also a proper party and is required to be heard while disposing of application for approval of Resolution Plan - HELD THAT:- The Supreme Court in various judgments has noted that a view has to be taken on a liberal side. This Adjudicating Authority is not hesitant to say that the unsuccessful Resolution Applicant i.e. Applicant is not only a necessary party but also a proper party for adjudication of the lis involved between the parties.
It is not out of place to mention that this Bench has a doubt on the legal point whether an Asset Reconstruction Company can be a Resolution Applicant or not. This aspect of question of law can also be cleared by the unsuccessful Resolution Applicant or any person once they are impleaded as a party apart from various other issues with regard to the approval of the resolution plan by the CoC and its minutes can also be brought on record for perusal of the Adjudicating Authority at the time of approval of the Resolution Plan.
Application allowed by impleading the Applicant as proper and necessary party - List TA No. 537/2020 on 05.05.2021.
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2021 (5) TMI 315
Condonation of delay of 796 days delay in filing the claim before the Liquidator - Regulation 39 of the IBBI (Liquidation Process) Regulations, 2016 read with Section 60(5) of the Insolvency and Bankruptcy Code - HELD THAT:- Section 40 of the I&B Code, 2016 mandates the Liquidator to record the reason in writing for rejection of the claim and the same is also required to be communicated to the Applicant. In relation to his decision of admission or rejection, the Liquidator is required to communicate to both the creditors and the Corporate Debtor within seven days of such admission or rejection of the claim. As against the rejection of the claim, Section 42 of I&B Code, 2016 provides for a time window of 14 days upon receipt of such decision to the creditor to file an appeal to the Adjudicating Authority against the said decision of the Liquidator - Further, it may be noted that under Regulation 44(1) of the IBBI (Liquidation Process) Regulations, 2016, the Liquidator is directed to liquidate the Corporate Debtor within one year from the date of commencement of the liquidation proceedings and Regulation 44(2) stipulates that, after the expiry of one year, the liquidator shall file an application to the Authority to continue the liquidation period along with a report and explain why the liquidation has not been completed.
In view of the IBC, 2016 being a time bound process as well as the Learned Liquidator being under a compulsion to complete the liquidation process within a period of one year from the date of commencement of liquidation, the application is dismissed.
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2021 (5) TMI 314
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - High Seas Sale - HELD THAT:- It is crystal clear that projecting this High Seas Sale Agreement as the source document by the Applicant their claim as Financial Debt and the Applicant claiming themselves to be the Financial Creditor is misconceived and we are not inclined to treat this transaction as Financial Debt.
The Corporate Debtor have obtained a Letter of Credit for the payment of the said amount opened in Corporation Bank which is said to have been honoured. Since there appears to have been a dispute between the parties they referred the matter to the sole Arbitrator and an award had been passed in favour of the Applicant which is appealed before the Hon'ble High Court of Bombay and the appeal was dismissed and some email communication is seen to have been exchanged between the parties with a view to settle the claim - As may be seen from the nature and characteristics of the transaction governed by the said High Seas Sale Agreement such transaction cannot be re-christened as Financial Debt.
As evidenced by the source document namely High Seas Sale Agreement, written submissions and pleadings, the Applicant cannot be treated as Financial Creditor and there is no Financial Debt, this application is liable to be dismissed.
Application dismissed.
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2021 (5) TMI 313
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Service of notice - HELD THAT:- The notice of summons issued to respondent was returned with the endorsement "left". Hence notice by way of publication was ordered. As per the order of this Tribunal dated 10.02.2021, the operational creditor was directed to take fresh notice to the respondent in the leading newspapers and same was effected in leading newspapers one in English and another in vernacular Tamil both dated 26.02.2021. Inspite of this, the Corporate Debtor remained absent. On 23.03.2021, the respondent was called absent and set ex-parte.
Upon perusal of pleading, documents and submission, this Adjudicating Authority is of the view that debt and default has been established by the Operational Creditor - application admitted - moratorium declared.
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2021 (5) TMI 312
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors or not - Existence of debt and dispute or not - HELD THAT:- Till the date of this order, no payment was made by the Corporate Debtor to the Applicant/Operational Creditor.
All other requirements is complied with, which are required for a complete application - Application is admitted - moratorium declared.
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2021 (5) TMI 311
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditors - existence of debt and dispute or not - Time Limitation - HELD THAT:- The period of limitation prescribed under section 137 of the Limitation Act is 3 years - In the present case, the debit notes raised by the Corporate Debtor is more than 3 years from the date of filing this application on 24.10.2019 and last payment received from the corporate debtor on 23.02.2016. Even, in this case, the Operational Creditor has not filed condone delay in filing application on the cause of action.
By taking into consideration the facts, this application is hit by the limitation - Application dismissed.
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2021 (5) TMI 310
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- In the Purchase Order dated 19.10.2018 enclosed at Page 13 of the application, it is clear that the Respondent placed a Purchase Order for a sum of ₹ 62,31,780/-. On perusal of the Purchase Order, it clearly shows that there is no Clause mentioned in respect of interest for the delayed payments - As per the Purchase Order also, it was mutually agreed between the parties that the materials plus or minus 5% shall be adjusted after transactions. The Applicant failed to quantify the "debt amount" and "default".
Thus, it is clear that there is a pre-existing dispute between the parties - In the matter of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [2017 (9) TMI 1270 - SUPREME COURT], the Hon'ble Apex Court held that all that the Adjudicating Authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is a mere bluster.
Application dismissed.
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2021 (5) TMI 309
Condonation of delay in submitting the claim before the Liquidator - direction to Liquidator to accept the claim of the Appellant and grant such other further orders which are deemed fit - HELD THAT:- It is to be noted here that the provisions of IBC, 2016 mandate that the Claimants are required to submit the claim to the Liquidator in such form and in such manner along with such supporting documents as specified by the Board. Thereafter, upon submission of the claim, the Liquidator is required to verify the claims within the time limits specified by the Board and in this connection referring to the relevant Regulations namely, IBBI (Liquidation Process) Regulations, 2016 and more specifically under Regulation 30, the Liquidator is required to verify the claim submitted within a period of 30 days from the last date of receipt of the claims and may either admit or reject in whole or part as the case may be of such claim. Section 40 of the I&B Code, 2016 mandates the Liquidator to record the reason in writing for rejection of the claim and the same is also required to be communicated to the Applicant.
It may also be seen that the Applicants during the CIRP period also has not preferred to file a claim before the IRP/RP and as per the provisions of IBC, 2016 the Applicant ought to have filed the claim before the Liquidator at least after the commencement of the Liquidation proceedings, immediately after the public announcement was made of, which the Applicant is very much aware of.
The Hon'ble Supreme Court in Gaurav Hargovindbhai Dave -Vs- Asset Reconstruction Company (I) Ltd. & Another [2019 (9) TMI 1019 - SUPREME COURT], in relation to the aspect of limitation has restated the well established and well settled principle that "there is no equity about limitation", this Application cannot be entertained.
In view of the IBC, 2016 being a time bound process as well as the Learned Liquidator being under a compulsion to complete the liquidation process within a period of one year from the date of commencement of liquidation, the application stands dismissed.
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2021 (5) TMI 308
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- In the instant case, though there is an authority letter issued by other partners of the firm (page 40), it does not bear any date in order to make out as to whether the said authorisation is given prior to the issuance of demand notice. In absence of such vital information i.e. the 'date' on which such authority letter is/was executed, it is difficult to come to the conclusion that the demand notice is/was issued on the basis of the authority letter. In the result, the application so filed gets vitiated.
The petition is not maintainable and deserves to be dismissed - Petition dismissed.
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2021 (5) TMI 307
Seeking release of title deeds before the CoC of the respondent - title deeds of the assets/rights of the Corporate Debtor - Resolution Applicants are not banking company, but a private organization, while the Financial Creditors have facilities to securely hold the same under safe custody - HELD THAT:- The Tribunal was constrained to summon the Resolution Professional as well as the Financial Creditors. They were asked to produce original title deeds. Today, they were present before the Tribunal along with the original title deeds as directed by the Tribunal. The Resolution Professional and the Financial Creditors have represented their respective cases. The Financial Creditors have submitted that the holding company too is under CIRP and they have apprehension that if the original title deeds are handed over to the successful Resolution Applicant, he may dispose of the properties in question, wherein there is charge for holding company, which is under CIRP.
The Financial Creditors are directed to hand over the original title deeds to the successful Resolution Applicant in respect of lands at Bhoothpur and Vadodara and also to give No Objection Certificate (NOC) in favour of Resolution Applicant as provided in the Resolution Plan, and to release pledge of shares - successful Resolution Applicant shall not dispose of/alienate the properties of the Corporate Debtor without prior and specific order of this Tribunal, in order to protect the interest of the Financial Creditors and all the stakeholders.
Application disposed off.
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2021 (5) TMI 306
Liquidation process - priority of settlement of claim of creditors - Financial Creditors or not - prior to the commencement of CIRP against the Corporate Debtor, the maturity date of the subject CCCDs has long expired - consideration of CCCD holder as Financial Creditor or other Creditor/stakeholder? - HELD THAT:- The Applicant has issued a letter to AMW Auto Component Limited on 28.07.2016, whereby the Applicant confirmed the role over of the CCCDs on or after 01.07.2017 on the request made by the Corporate Debtor (Auto Component Limited) with respect to CCCDs held by Essar Steel India Limited that are compulsorily converted into equity shares of AACL on or after 01.07.2017. All the other terms and conditions of CCCD's will remain same. Admittedly, the same was not converted into equity share till Corporate Debtor went into CIRP. Further, RP in his reply admitted the fact that CCCD was issued primarily to raise capital and not to raise the money by way of a loan/debt. The terms of CCCDs never postulated any payment of interest or repayment of principal, other than for the initial period of 2 years when the CCCDs could be redeemed at the option of the Corporate Debtor until 22.12.2013. Even if it is assumed for the time being that it is not a loan/debt, then even it attracts interest for the initial period of 2 years when the CCCDs could be redeemed at the option of the Corporate Debtor.
Evidently, provisions of the IB Code, categorically recognises that a debt disbursed against the time value of money and includes any amount raised by debtors (Corporate Debtor) pursuant to any note purchase facility or the issue of bonds, notes, debentures (CCCD), loan stock or any similar instrument would fall under Financial Debt - Further, as per the terms given in the Certificate, it provides that an IRR at the rate of 9% face value of the debentures from the date of issue to the date of conversion. That further meets all the requirements to be classified as 'Financial Debt' under the IB Code. That apart, CCCD continue to be recorded as debt in the books of the Corporate Debtor and have not been converted into equity till date (page No. 53 of the application). It can be seen from the Second CoC meeting that CCCD continue to be reflected in the books of the Corporate Debtor. Therefore, it is an admission of debt liability of the Corporate Debtor towards AMNS.
The debenture holder of GCCD will be considered as Financial Creditor under the IB Code - Application allowed.
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2021 (5) TMI 305
Maintainability of application - initiation of CIRP - Failure to pay outstanding salary dues to the employees - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - no sufficient proof submitted by Corporate debtor with regard to their claim - HELD THAT:- The arguments made by the Corporate Debtor is that incurring of losses due to the failures in managerial decisions and downfall in the business area of the Corporate Debtor had added more impact on the financial position of the Corporate Debtor and faced numerous difficulties to arrange funds and pay salaries to its employees. The counsel has not submitted any proof that they raised this service issues in response to Form-3 notice or demand notice nor thereafter. It appears to be an afterthought that they are raising this issue in their counter. After perusing the records, we are convinced that Operational Creditor has not received his dues from the Corporate Debtor and the submissions made by the Corporate Debtor in this regard appears to be after thought and was not submitted by any documentary evidence.
The Operational Creditor is yet to receive his salary dues from the Corporate Debtor. The submissions made by the Corporate Debtor is not convincing and accordingly the application for CIRP of the Operational Creditor has been admitted.
Application admitted - moratorium declared.
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Central Excise
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2021 (5) TMI 331
Maintainability of appeal - availability of efficacious alternative remedy of appeal - Classification of goods - Herbal Sherbat Granules - whether classified under subheading No. 2101 2090? - HELD THAT:- Undoubtedly, the High Court may pass an order of remand in the event of non-consideration of certain vital issues raised by the parties concerned. However, if an efficacious Appellate Remedy is available before the Appellate Tribunal, then the High Court need not go into those facts unnecessarily and the institutional respects are to be maintained and the statutory appeals are to be exhausted in all circumstances. The Tribunal has got powers to adjudicate all the factual as well as the legal grounds raised by the respective parties. More so, the Tribunal is empowered to consider the merits with reference to the documents as well as the evidences. Such an exercise cannot be done by the High Court under Article 226 of the Constitution of India. The order impugned is passed by the 1st respondent, who is the original authority in the present case. Thus, the petitioner has to avail the further opportunity of appeal for effective adjudication of the issues with reference to the original documents and evidences, which all are relied on by the parties concerned.
Thus, this Court is of the opinion that exhausting of an appeal remedy under the Customs Act is of paramount importance for effective adjudication of the issues with reference to the original documents and evidences produced by the respective parties to the lis.
This Court has no hesitation in arriving a conclusion that the petitioners are bound to exhaust the Appellate Remedy as contemplated under Section 35-B of the Central Excise Act, 1944. The petitioners are at liberty to approach the Appellate Authority by filing an appeal in a prescribed form and by complying with the provisions of the Act - Petition dismissed.
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2021 (5) TMI 316
Determination of Annual Production capacity - reduced annual production capacity on the basis of reduction of parameters in their mills - Rule 5 of Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 - HELD THAT:- On the plain reading of the Rule 5 of Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997, it is clear that even if the parameter is changed the APC should be fixed based on the annual production of the year 1996-1997. However, the vires of Rule 5 is pending before the Hon’ble Supreme Court in M/S. BHUWALKA STEEL INDUSTRIES LTD. & ANOTHER VERSUS UNION OF INDIA & OTHERS [2017 (3) TMI 1357 - SUPREME COURT]. Therefore, in the interest of justice, as regard the issue of determination of APC and demand of duty it should be decided only after the Hon’ble Supreme Court judgment. Therefore, only for the issue of demand of duty, the matter is remanded to the adjudicating authority.
Demand of interest on the duty liability - HELD THAT:- It is found that Hon’ble supreme Court in the case of M/S. SHREE BHAGWATI STEEL ROLLING MILLS VERSUS COMMISSIONER OF CENTRAL EXCISE & ANOTHER [2015 (11) TMI 1172 - SUPREME COURT] has clearly held that the levy of interest cannot be made under rule 96ZO, 96ZP, 96ZQ of Central Excise Rules, 1944 as section 3A of the Central Excise Act, 1994 which provided for compounded levy scheme itself does not stipulate levy of interest - Interest set aside.
Appeal allowed in part..
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CST, VAT & Sales Tax
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2021 (5) TMI 329
Refund of ITC - Export Sales - case of Revenue is that the petitioner should have applied for refund under Section 18(3) of the TNVAT Act, within 180 days by filing Form W under Rule 11(2), since the ITC represents ITC towards exports - HELD THAT:- In the present case, a revision is provided under Section 54 of the TNVAT Act - Admittedly, the petitioner approached this Court without exhausting the revisional remedy contemplated under the Act. The Principles of Law expects that an aggrieved person has to exhaust the statutory remedies available and the writ petition is to be filed only after exhausting the remedies contemplated. Moreover, there are certain disputed facts and circumstances raised.
The High Court cannot conduct the roving enquiry with reference to the disputed facts and circumstances, which is to be done based on the documents and evidences.
The petitioner is at liberty to approach the Revisional Authority under Section 54 of the Act, for the purpose of redressing the grievances. In the event of filing any such revision petition, the Appellate Authority has to consider the same on merits and in accordance with law by affording an opportunity to the writ petitioner - Petition disposed off.
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2021 (5) TMI 328
Violation of principles of Natural Justice - opportunity of hearing not granted - works contract - HELD THAT:- In the present case there has been no personal hearing afforded to the petitioner, which is violation of principles of natural justice and also the statutory mandate under Section 27 of the Act to afford an effective hearing prior to finalisation of assessment.
The petitioner has sought some time to respond. Thereafter, notice dated 25.02.2021 was issued, to which a written reply was filed enclosing documentary evidence. It was incumbent upon the Assessing Authority to hear the petitioner thereafter which has not been done - Since no personal hearing has, admittedly, been afforded, the impugned order is set aside. The petitioner will appear before the Assessing Authority on Thursday, the 6th of May, 2021 at 10.30 a.m. along with all/any materials in support of its contention, without expecting any further notice in this regard.
Appeal allowed by way of remand.
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2021 (5) TMI 325
Validity of assessment order - recovery action - non-compliance of the condition stipulated while granting interim order - HELD THAT:- This Court had made it clear that if the petitioners failed to pay 25% of the demand amount, interim stay shall stand automatically vacated and petition shall stand automatically dismissed - Therefore, the consequence of non-compliance of the condition stipulated while granting interim order will be only on the interim application. It will not cast any cloud for availing relief that may be finally claimed by the writ petitioners. I will not non-suit the petitioners on the ground of non-fulfilment of the condition imposed while granting interim relief.
Going into the merits of the matter, it is seen that there are two assessment years involved. The petitioners had challenged only the assessment order dated 30.09.2003 in respect of the assessment year 1997-98. Though the other assessment order was passed on the same day, in the present writ petition, there is no formal challenge to the same - it would be appropriate if the petitioners file an independent writ petition questioning the other assessment orders made for the assessment year 1998-99.
Validity of the assessment order - HELD THAT:- The assessing officer should have served notice on the three legal heirs. It appears that the marriage of the petitioners herein had taken place long prior to the assessments and that they had left for their respective marital homes. The assessing officer does not appear to have been taken the trouble to ascertain the details regarding all the legal representatives. The assessing officer thought that it was enough if Subbulakshmi alone was served with notice. It appears that Subbulakshmi was an illiterate woman. The petitioners herein were not parties to the said assessment proceedings that were concluded in the year 2003 - In the case on hand there is nothing on record to indicate that the petitioners herein had accepted the representation of the estate of Late. Velusamy Konar by his wife Subbulakshmi. It is for this reason that I am constrained to interfere with the order impugned in this writ petition.
The matter is remitted to the file of the respondent to pass orders afresh in accordance with law - Petition allowed by way of remand.
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