TMI Tax Updates - e-Newsletter
May 13, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Profiteering - supply of a “Used Heidelberg Speed Master Offset Press with complete tools and accessories - The Respondent has acted in contravention of the provisions of Section 171 of the CGST Act, 2017 and has not passed on the benefit of reduction in the rate of tax/ additional ITC
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Income Tax:
Reopening of assessment u/s 147 - Reliance on audit objections - deemed dividend addition u/s 2(22)(e) - This Court, on an independent application of mind and on thorough consideration of material aspects and legal position, is of the considered view that there is no error or infirmity in the reasons assigned by the ITAT in dismissing the appeal filed by the Revenue
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Income Tax:
Assessee is entitled to deduction u/s 54E in respect of the capital gain arising on the transfer of a capital asset on which depreciation has been allowed and which is deemed as short-term capital gain u/s 50
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Income Tax:
Reopening of assessment - AO was not aware about the death of the assessee at the relevant time when he issued notice under section 148 of the Act. Therefore, notice issued by the AO under section 148 of the Act cannot be held as invalid in view of the fact that the AO during the relevant time was unaware of such vital fact. Therefore, the AO cannot be faulted for issuing notice in the name of the deceased assessee under section 148 in the present given facts and circumstances.
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Income Tax:
Deduction u/s 80IB - Additional income - disclosure of income made during the survey proceedings does not mean that the income is to be treated as income from other sources. - such income in the absence of contrary evidences is arising from the business activities of the assessee.
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Income Tax:
Levy of interest - assessee has neither offered seized cash during his statement u/s 132(4) nor he intimated to the Department by letter that his seized cash should be adjusted towards his advance tax/tax liability - Demand confirmed.
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Indian Laws:
The contract was based on a fixed rate. The party, before entering the tender process, entered the contract after mitigating the risk of such an increase. If the purpose of the tender was to limit the risks of price variations, then the interpretation placed by the Arbitral Tribunal cannot be said to be possible one, as it would completely defeat the explicit wordings and purpose of the contract.
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Indian Laws:
Levy of tax on consumption of electricity by captive generative units - if the levy of electricity tax in terms of Sections 3[1] [2] and 4[3] of the Amendment Act, 2013 is examined, the taxable event attracting the levy is consumption, the person on whom the levy is imposed may be the generator also who is obliged to pay the tax. That itself would not be construed as the taxable event to find the levy fatal to its validity.
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VAT:
Levy of interest and penalty - Absence of C-Forms - It is not in dispute that concessional levy of tax which is provided by the legislature is to the benefit of the assessee, if such benefit is denied on technicalities, the purpose and object of extending the concessional rate of tax would be defeated.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (5) TMI 265
Profiteering - supply of a “Used Heidelberg Speed Master Offset Press with complete tools and accessories (Model SM 74-5+LX, Year of manufacture 1997)” - allegation that the benefit of ITC was not passed by way of commensurate reduction in price in terms of Section 171 of the CGST Act, 2017 - contravention of section 171 of CGST Act - imposition of penalty - HELD THAT:- The Central Government implemented GST w.e.f 01.07.2017 and that GST subsumed several taxes hitherto levied by the Central Government and the State Governments. Out of these several taxes, input tax credit of some taxes was not being allowed in the erstwhile tax regime. Such subsumed taxes, the credit of which was not allowed in the erstwhile tax regime, used to get embedded in the cost of the goods or services supplied resulting in an increase in the prices of the goods or services supplied. With the introduction of GST with effect from 01.07.2017, the said taxes got subsumed in GST. Under the GST regime, ITC of the GST paid on inputs is available in respect of all inward supplies of goods and services, unless specifically denied - Thus, the additional benefit of ITC in the GST regime is limited to those input taxes, the credit of which was not allowed in the pre-GST regime, but is allowed in the GST regime. This additional benefit of ITC in the GST regime is required to be passed on by the suppliers to the recipients by way of commensurate reduction in price in terms of Section 171 of Goods and Services Tax Act, 2017.
The Respondent has violated the provisions of Section 171 of the CGST Act 2017 in as much as he had not passed on the benefit of reduction of tax/ additional ITC in respect of the supply effected by him to Applicant No. 1, and therefore, he is liable for action under Rule 133 of the CGST Rules, 2017 - it is established that the Respondent has acted in contravention of the provisions of Section 171 of the CGST Act, 2017 and has not passed on the benefit of reduction in the rate of tax/ additional ITC to the Applicant No. 1 by commensurate reduction in the price. Accordingly, the amount of profiteering is determined as ₹ 6,91,121/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017.
The Respondent has acted in contravention of the provisions of Section 171 of the CGST Act, 2017 and has not passed on the benefit of reduction in the rate of tax/ additional ITC to the Applicant No. 1 by commensurate reduction in the price. Accordingly, the amount of profiteering is determined as ₹ 6,91,121/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017 - the Respondent liability to refund the profiteered amount of ₹ 6,91,121/-, along with the interest to be calculated at 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited/refunded, is established. Further, since the Respondent has already refunded the profiteered amount of ₹ 6,91,121/- to Applicant No. 1 through RTGS dated 12.12.2019 and since the receipt thereof has also been acknowledged by the Applicant No. 1, vide submissions of Applicant No. 1 dated 10.01.2020, we direct the Respondent to pay the interest to be calculated @ 18% from the date when the profiteered amount was collected by him from the Applicant No. 1 till the above amount is paid within a period of 3 months from the date of receipt of this order failing which the same shall be recovered by the Commissioner CGST/SGST as per the provisions of the CGST/SGST Act, 2017.
Penalty - HELD THAT:- It is evident from the case records that the Respondent has denied the benefit of rate reductions/additional ITC in the GST to the Applicant No. 1 in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus profiteered as per the explanation attached to Section 171 of the above Act. Therefore, he is liable for imposition of penalty under Section 171 (3A) of the CGST Act, 2017 - Therefore, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under the above sub-Section should not be imposed on him.
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Income Tax
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2020 (5) TMI 261
Deduction claimed u/s 54 - CIT-A restricted to 50% of the claim made on the reasoning that the new residential house has been purchased in the name of assessee and his son - HELD THAT:- As noticed that the entire consideration towards purchase of new residential house has flown from the bank account of the assessee.
As held in the case of Mrs. Jennifer Bhide [2011 (9) TMI 161 - KARNATAKA HIGH COURT] that the deduction u/s 54 should not be denied merely because the name of assessee’s husband is mentioned in the purchase document, when the entire purchase consideration has flown from the assessee.
Accordingly, following the decision rendered in the case of Mrs. Jennifer Bhide (supra) and the decision rendered by the co-ordinate bench in the case of Shri Bhatkal Ramarao Prakash [2019 (2) TMI 1059 - ITAT BANGALORE] we hold that the assessee is entitled to full deduction u/s 54 of the Act. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow deduction u/s 54 of the Act as claimed by the assessee. - Decided in favour of assessee.
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2020 (5) TMI 263
Reopening of assessment u/s 147 - Reliance on audit objections - deemed dividend addition u/s 2(22)(e) - HELD THAT:- It is obligatory on the part of the Assessing Officer to record reasons for the purpose of believing that the income had escaped assessment AND in the light of the judgment rendered by the Division Bench of Delhi High Court in United Electrical Co. P.Ltd. v. Commissioner of Income Tax and Others [2002 (10) TMI 86 - DELHI HIGH COURT] it is open to the Court to examine whether there was some material available for the Assessing Officer to form the requisite belief and further recorded a finding that even the Additional Commissioner had accorded approval for action under Section 147 of IT Act mechanically.
Reasons recorded in the notice dated 31.03.2014 as to the income escaping assessment and the order of assessment dated 31.03.2015 passed under Section 143(3) r/w. Section 147 of the IT Act are unsustainable on facts as well on law.
CIT (Appeals) has also ordered deletion on the ground that the provision of Sec.2(22)(e) of IT Act do not apply and the reasons for arriving such a conclusion is sustainable in law.
The findings recorded by the ITAT, in the impugned common order as to the non-application of mind on the part of the Assessing Officer to apply his mind independently for the purpose of reopening of assessment is also sustainable for the reason that the very same official, namely Mr.S.Krishna Kumar, in response to the audit objection dated 31.01.2015, had taken into consideration all the materials placed and requested for dropping of the audit objection and therefore, passing of second order of assessment dated 31.03.2015 by him amounts to change of opinion on the very same set of facts.
This Court, on an independent application of mind and on thorough consideration of material aspects and legal position, is of the considered view that there is no error or infirmity in the reasons assigned by the ITAT in dismissing the appeal filed by the Revenue - Decided in favour of assessee.
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2020 (5) TMI 260
Addition of outstanding liabilities u/s 68 - HELD THAT:- A.R is able to demonstrate that the payments have been made after 31.3.2012. All these explanations require verification at the end of the assessing officer. We notice that the tax authorities have not examined these finer details - AO has given details of outstanding creditors to the tune of ₹ 2,50,95,000/-, while the amount of sundry creditors is mentioned initially as ₹ 2,99,20,000/-. The addition has been made by taking the figure of ₹ 2,99,20,000/- only. Accordingly, we are of the view that this issue requires fresh examination at the end of the AO. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for examining it afresh by duly considering the explanations of the assessee. In the set aside proceedings, the AO may examine the above said sellers of land, if it is considered necessary.
Addition of loans taken from directors u/s 68 - HELD THAT:- Before Ld CIT(A), the assessee has submitted bank statements of directors and also ledger account copies. Before the AO, the assessee has submitted copies of their income tax returns. During the course of hearing before us, the Ld A.R also submitted that the assessee could not furnish all these details, since there was change of counsel appearing before the AO.
The fact of change of counsel has been noted by the AO in paragraph 14 of his order. Under these set of facts, in the interest of natural justice, we are of the view that the additional evidences should be admitted and the assessee should be given opportunity to substantiate the loan taken from directors. Accordingly, we admit the additional evidences. Since these evidences require examination at the end of the assessing officer, we set aside the order passed by Ld CIT(A) on this issue and restore this issue for examining it afresh.
Addition of Advances received on sale of sites u/s 68 - HELD THAT:- There is no dispute that the onus is cast upon the assessee to prove the cash credits received by it.
Assessee has furnished certain documents in respect of some of the advances. It has also given explanations with regard to certain other advances. None of these documents and explanations has been examined by the tax authorities. Accordingly, we are of the view that this issue also requires examination at the end of the AO. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for examining it afresh. - Appeal of the assessee is treated as allowed for statistical purposes.
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2020 (5) TMI 259
Revision u/s 263 - deduction u/s 80IB(A) had not been properly examined by the AO as there is payment of rent also - whether the order passed by the A.O. can be said to be erroneous or prejudicial to the interest of revenue? - HELD THAT:- In the reassessment order passed, the issue had been duly examined and on the basis of the examination of the relevant records and the application of law, one of the possible opinion had been drawn by the A.O., which cannot be said to be erroneous so far as prejudicial to the interest of revenue.
Hon’ble Supreme Court in the case of Malabar Industrial Co. Ld. Vs CIT [2000 (2) TMI 10 - SUPREME COURT] observed that “Section 263 of the Income Tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commission suo moto under it, is that the order of the Income Tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue. Even if one of them recourse cannot be held to Section 263(1) - A.O. after going through the material on record and after considering the explanation of the assessee, had applied his mind. His view was that the amendment are not applicable in the case of the assessee for the year under consideration which is a possible view.
Section 263 of the Act does not empower him to take action on these facts to arrive at the conclusion that the order passed by the ITO is erroneous and prejudicial to the interest of the revenue. Since the material was there on record and the said material was considered by the ITO and a particular view was taken, the mere fact that different view can be taken, should not be the basis for an action U/s 263 of the Ac and it cannot be held to be justified. - Decided in favour of assessee.
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2020 (5) TMI 264
Stay of demand - CIT-A disposed of the application with a direction to the assessee to pay 10% of the disputed amount - HELD THAT:- Authority while deciding on the application for stay was required to take note of the judgments passed in an appropriate manner. Guidelines are not exhaustive and discretion that is available to the Assessing Officer or the Authority considering the application for stay could be exercised taking note of the facts made out and the strength of the case made out in the appeal.
It would be appropriate to modify the order. The submission of learned counsel for the assessee that partial modification of the order of stay would be acceptable, the impugned orders are modified making it clear that the observations made herein are not to be treated as findings on merits.
Accordingly, the orders are set aside. There would be a stay of demand for the Assessment Year 2017 – 2018 during the pendency of the appeal filed challenging the order of assessment of the year 2017 -2018, subject to the assessee paying 10% of the demand out of which 5% would be paid within 31.03.2020 and the remaining 5% would be paid in two equal installments in the months of April 2020 and May 2020.
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2020 (5) TMI 258
Claim of deduction u/s. 10(30) - subsidy received from Tea Board under Special Purpose Tea Fund Scheme - Since the Special Purpose Tea Fund Scheme was yet to be notified by the Central Government, the Assessing Officer held that the assessee is not eligible for exemption u/s. 10(30) - HELD THAT:- CIT(A) has not committed any error in allowing the appeals of the assessee by following the earlier order of the Tribunal in assessee’s own case [2018 (1) TMI 788 - ITAT COCHIN]. Being so, we do not find any infirmity in the order of the CIT(A) and the same is confirmed. Thus, this ground of appeals of the Revenue is dismissed.
Income earned from sale of import licenses as central income - HELD THAT:- As in assessee’s own case [2018 (1) TMI 788 - ITAT COCHIN] import license were obtained by the assessee company on account of a scheme for promoting tea exports. The income from sale of import licenses received on account of export of tea is an integral part of plantation operation of the company. The assessee company undertakes exports taking into consideration the import license benefits. Therefore, the import licenses benefits are clearly part of the tea income. The assessee company has not claimed the income as exempt income (agricultural income) but as a part of the combined operation and hence the CIT(A) was correct in treating the said income as tea income as per Rule 8.
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2020 (5) TMI 257
Income from House Property - ALV determination - treating Municipal taxes paid as rent labile to be taxed u/s 23 - deduction of BMC Taxes - HELD THAT:- As per the terms of lease and license agreement, the licensee alone was liable to pay all taxes / outgoings with respect of leased premises.
Same could be paid by the assessee and the same were reimbursable by licensee. This position has also been reiterated by the assessee in its submissions. However, the liability to pay the taxes was with respect of licensed premises only which was approx. 19% (232 Sq.Meters out of 1246.66 Sq. Meters) of total area of the building.
Therefore, 19% of BMC taxes amounting to ₹ 7,99,519/- could be attributed to licensed premises. The proportionate amount comes to ₹ 1,51,900/-. In our opinion, this amount shall be added back to the rental income of ₹ 76 Lacs earned by the assessee. Consequently, the deduction of ₹ 1,51,900/- shall be allowable to the assessee. The rental income, after statutory deduction of 30%, would work out to ₹ 53.20 Lacs.Ground No.1 & 2 stand partly allowed.
Allowability of business expenditure - HELD THAT:- We find that the assessee has not practically carried out any business activity during the year. Therefore, the expenditure on account of directors’ remuneration would not be allowable to the assessee. However, the expenditure as tabulated at serial nos. 2 to 6 of table extracted in para-2.2 above, could be considered as expenditure incurred to maintain the corporate personality of the assessee and therefore, the same would be allowable business expenditure. The question of deduction of the expenditure under the head Income from other sources do not arise. Ground No.3 stand partly allowed
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2020 (5) TMI 256
Applicable rate of taxation to Long Term Capital Asset - Capital Asset which is business asset, where depreciation is claimed - Short Term Capital Gain computed u/s 50 as per AO - AO taxed it at 30% as against 20% claimed by the assessee - HELD THAT:- As decided in M/S. VELVET HOLDINGS PVT. LTD [2017 (7) TMI 1355 - BOMBAY HIGH COURT] deeming fiction attached to section 50 of the Income-tax Act has to be restricted only for the method of computing the capital gain and cannot be read into while considering the case for non-charge-ability of capital gain - assessee is entitled to deduction u/s 54E in respect of the capital gain arising on the transfer of a capital asset on which depreciation has been allowed and which is deemed as short-term capital gain u/s 50 - See case of CIT vs. ACE Builders Pvt. Ltd. [2005 (3) TMI 36 - BOMBAY HIGH COURT] as approved by the Apex Court in the case of CIT, Panji vs. V.S.Dempo Company Ltd. [2016 (10) TMI 62 - SUPREME COURT]. As the issue raised in the present appeal is already covered in the favour of assessee.
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2020 (5) TMI 255
Deduction u/s 80IB(3) - Whether Appellant as engaged in business of manufacturing of mills machinery parts and chemicals has satisfied all the conditions relating to allowably of deduction? - assessee has claimed deduction being 25% of the profit u/s 80IB - HELD THAT:- Undisputed fact that the assessee has been claiming deduction under section 80IB of the Act for the last several years and the same was accepted by the Revenue in the assessment framed under section 143(3).
Activity of the assessee has already been accepted by the Revenue as eligible for the deduction under section 80IB of the Act. Since there is no change in the facts and circumstances for the year under consideration viz a viz the earlier assessment years, we are of the view that the principles of consistency need to be applied. See M/S. SONATA SOFTWARE LTD VERSUS ADDL. COMMISSIONER OF INCOME TAX [2015 (3) TMI 353 - ITAT MUMBAI]
In the similar facts and circumstances the jurisdictional High Court in the case of Saurashtra Cement & Chemical Industries Ltd. [1979 (1) TMI 249 - GUJARAT HIGH COURT] has held that “The tax holiday under section 80J cannot be discontinued in the subsequent year without disturbing the relief granted in the earlier year. “
We hold that the claim of the assessee for the deduction u/s 80IB cannot be denied for the year under consideration as the claim has been accepted by the revenue in the earlier assessment years which was not withdrawn. - Decided in favour of assessee.
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2020 (5) TMI 254
Reopening of assessment - notice issued upon the dead person - notice to Legal representatives - AO never had any clue about the death of the assessee as well as there was no intimation from the side of the legal representative of the assessee about such fact - whether AO has available time limit to issue fresh notice under section 148 when he comes to know the fact that the assessee is deceased? - HELD THAT:- On perusal of the provision of the clause (b) of sub-section 1 of the section 149, we note that the AO has available time of six years from the end of relevant assessment year i.e. 31.03.2013 which ends as on 31.03.2019. Admittedly, the assessee died dated 03-11-2013 and the notice was issued upon him under section 148 dated 28.01.2015.
AO was not aware about the death of the assessee at the relevant time when he issued notice under section 148 of the Act. Therefore, notice issued by the AO under section 148 of the Act cannot be held as invalid in view of the fact that the AO during the relevant time was unaware of such vital fact. Therefore, the AO cannot be faulted for issuing notice in the name of the deceased assessee under section 148 in the present given facts and circumstances.
AO during the proceedings became aware of the fact about the death of the assessee, hence he framed the assessment in the name of legal representative but without issuing the notice under section 148 to them (legal representatives) despite having the time for doing so. However, the pertinent fact is that the legal representative never raised any question about the issuance of notice to the other legal representatives during the assessment proceedings but raised 1st time before the 1st appellate authority. Therefore, non-implication of all the legal heirs can amount to a procedural defect which will not make the assessment invalid. See JAI PRAKASH SINGH [1996 (3) TMI 7 - SUPREME COURT]. - No merits in the ground of appeal raised by the assessee. Hence we dismiss the same.
As provisions of section 159 of the Act require to implicate all the legal heirs in the proceedings initiated under section 147 of the Act we set aside the entire assessment framed under section 147 of the Act to the AO to frame the same afresh in the name of all the legal heirs as per the provisions of law - Appeal of the assessee is allowed for the statistical purposes.
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2020 (5) TMI 262
Stay petition - petitioner has filed an application before the PCIT seeking review of the order rejecting application for stay - HELD THAT:- The question of intervening as regards to the assessment order at this stage is not appropriate. However, as regards the contention that the consideration of application for stay and further exercise of power of the PCIT keeping in mind the circular bearing No.1914 as amended on 21.5.2017, 29.2.2016 and 31.7.2017, the request of the petitioner is to be considered in a meaningful manner.
Power of granting stay has been considered by the High Court of Judicature at Madras in the case of M/s. Shriram Finance [2019 (3) TMI 1478 - MADRAS HIGH COURT] wherein, certain guidelines have been referred to in para-5 which may be taken note of. So also the manner of exercise of power of the Principal Commissioner of Income Tax is detailed in Flipkart’s case [2017 (3) TMI 802 - KARNATAKA HIGH COURT]which needs to be kept in mind. This Court refrains from expressing any opinion on the merits of contentions raised, but reiterates that the PCIT is to exercise power conferred upon him as per the circulars in a meaningful manner.
The petitioner to be present before the Principal Commissioner of Income Tax and the request of petitioner as contained in the representation dated 05.02.2020 would be disposed of in light of the observations made above.
PCIT to dispose of the representation of the petitioner within a period not later than one week from the date of appearance of the petitioner.
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2020 (5) TMI 253
Unexplained expenditure u/s 69C - assessee has incurred an expense without recording the same in the books of accounts - HELD THAT:- In the present case there is no iota of evidence available before the AO suggesting that the assessee has incurred any expense which were not disclosed in the books of accounts except the value of the Jantri determined by the superintendent of stamps.
There was the survey operations carried out under section 133A of the Act and no details was found during the survey operation suggesting that there was the expenses incurred by the assessee outside the books of accounts.
In the absence of any information, we do not find any infirmity in the order of the learned CIT (A). Hence the ground of appeal of the Revenue is dismissed.
Deduction u/s 80IB - certificate issued by the competent authority for the completion of the entire projec - HELD THAT:- Completion certificate has been issued by the competent authority on the different occasions. First certificate was issued for part completion of the project dated 27 September 2011, the 2nd certificate was issued for part completion of the project dated 15th of December 2011 and the final certificate for the completion of the project was issued dated 22 March 2012. Thus from the final certificate issued by the competent authority for the completion of the entire project, it is established that there was the no violation of the provisions of law as specified under the provisions of section 80IB(10) of the Act. At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT (A).
No reason to interfere in the order of the learned CIT (A). Thus the ground of appeal of the Revenue is dismissed.
Treating the income from regular business holding that the same is eligible for deduction under section 80IB(10) - HELD THAT:- Admittedly, the assessee is not engaged in any activity other than the construction activity as discussed above. Moreover, the revenue has not brought anything on record evidencing that such income disclosed during the survey proceedings is not arising from its construction activity. As such the onus was upon the revenue to disprove the contention of the assessee based on the documentary evidence. But the revenue has failed to do so - disclosure of income made during the survey proceedings does not mean that the income is to be treated as income from other sources. Accordingly, we are of the view that such income in the absence of contrary evidences is arising from the business activities of the assessee. Hence we do not find any infirmity in the order of CIT (A). Hence, the ground of appeal of the Revenue is dismissed.
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2020 (5) TMI 252
Levy of interest - Cash amount seized during the search operation adjusted against tax/advance tax payable by assessee, with effect from 05.09.2013, i.e. the date of search - HELD THAT:- It is one sided approach adopted by the assessee just to cheat the Department by demonstrating that assessee has suo-moto adjusted the seized cash towards his advance tax/tax liability.
We note that just to make an entry in the Return of Income, suo-moto, without intimating to the Department, is not a compliance. Hence, it is abundantly clear that assessee had never intimated to the Department that his seized cash should be adjusted against his advance tax/tax liability therefore the Department is entitled to levy the interest on the outstanding demand.
In the assessee`s case under consideration, we note that assessee has neither offered seized cash during his statement u/s 132(4) nor he intimated to the Department by letter that his seized cash should be adjusted towards his advance tax/tax liability, therefore we do not find merit in these three appeals filed by different assessees, hence we confirm the order passed by the ld. CIT(A). - Decided against assessee.
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2020 (5) TMI 251
Addition u/s 69C - unexplained expenditure - unaccounted interest paid by the assessee - assessee submitted that the issue under consideration relates to the addition u/s 194A r.w.s. 40(a)(ia) - HELD THAT:- There is requirement of reading the loan agreement between the assessee and M/s Religare Finvest Ltd., EMI particulars, actual interest payable by the assessee to M/s Religare Finvest Ltd., the application of TDS provisions of the Act to the interest payment etc. AO should go by the documentation and the liability of the assessee in matters of interest payments and not by the TDS figures available on the TDS certificate or Form No.26AS of M/s Religare Finvest Ltd.
AO is directed to apply the TDS provisions of the Act strictly and re-do the assessment on this addition. In any case, the CIT(A) also given certain directions that he should be considered strictly in tune with the provisions of the Act. With these directions, this issue is remanded to the file of the Assessing Officer. The Assessing Officer shall grant reasonable opportunity of being heard to the assessee in accordance with set principles of natural justice. Thus, the grounds raised by the assessee are allowed for statistical purposes.
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Customs
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2020 (5) TMI 250
Contempt petition on Customs Broker (CB) alongwith several official enquiry - applicability of Section 147(2) of the Customs Act, 1962 - principles of natural justice - HELD THAT:- Section 147(2) of the Customs Act, 1962 is applicable to the exporter and not applicable to the agent. The petitioners are the agent and they are nothing to do with the exporters obligations. However, the respondents issued time barred show-cause notice, without jurisdiction - petitioners further submit that the time to reply the show cause notice was expired.
The petitioners are permitted to canvass all those points before the adjudicating authority, by way of proper reply, on or before 31.03.2020, and thereafter, the 1st respondent shall complete the adjudication proceedings in respect of show-cause notice dated 25.02.2020 and pass appropriate order, in accordance with law, on or before 31.04.2020 - Petition allowed by way of remand.
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2020 (5) TMI 249
Maintainability of appeal - present appeal was filed by the assessee himself whereas the proper remedy was to file revision petition before the appropriate authority - condonation of delay caused due to filing of this appeal before the wrong forum - HELD THAT:- The assertion of the Learned Advocate for the appellant is found to be true since the appeal has been filed wrongly before this forum whereas the proper remedy was to approach the Revisional Authority. Hence, the appeal is required to be rejected as not maintainable before this forum.
The Hon’ble Supreme Court in the case of MP. STEEL CORPORATION VERSUS COMMISSIONER OF CENTRAL EXCISE [2015 (4) TMI 849 - SUPREME COURT] has categorically held that the principles of Section 14 of the Limitation Act, 1963 would apply to the proceedings even before quasi-judicial authorities and accordingly, had directed the Commissioner (Appeals), who had rejected the appeal of the assessee therein as time-barred, to decide the case on merits.
The appeal is held as not maintainable and the original orders of lower authorities, if filed, may be returned to the appellant for his benefit - Appeal dismissed.
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Corporate Laws
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2020 (5) TMI 247
Recovery Proceedings - Winding up petitions filed by a creditor during the time - HELD THAT:- Based on such recovery certificate issued by the Debts Recovery Tribunal, the petitioner bank initiated the proceeding before the Recovery Officer. At this point, a creditor of respondent No.2 had filed a winding up petitions under the provisions of the Companies Act in Company Petition No.8/2010. The said proceeding has resulted in the Company Court passing the winding up order. It is in that light the official liquidator is put in charge of the assets and the affairs of the respondent No.2 Company.
In order to protect the interest of the workmen and also the other creditors of the respondent No.2 Company, the Official Liquidator raised certain objections in the recovery proceedings in before the Recovery Officer. In the interregnum the petitioner company having invoked the provisions of SARFAESI Act had brought the secured assets which belonged to the respondent No.2 Company to sale by conducting an e-auction through the notice dated 15.12.2017.
The fact that the respondent No.2 Company is in liquidation due to the order passed in the Company Petition No.8/2010 is not in dispute. If that be the position, the provision as contained in Section 529-A of the Companies Act would come into play and the distribution of the amount recovered in the liquidation proceedings will have to be made in the order of preference as provided under the said provision. If that be so, the dues to the workmen and the dues payable to any other secured creditors, if indicated in the records, will have to be taken note by the Company Court and an appropriate order is required to be passed. If that be the position, the entire amount which has been realized by the petitioner and has been appropriated to the loan account cannot be appropriated to the detriment of the other preferential creditors as indicated in Section 529-A of the Act - when the position of law on that aspect is clear and at this juncture since the petitioner has already appropriated the amount, the contention with regard to the petitioner having right to sell the property under the provision of the SARFAESI Act need not be adverted at this juncture.
If these aspects are kept in view and if the interest of the preferential creditors of the Company in the liquidation proceedings is protected, the direction issued by the Recovery Officer would not be sustainable at this point - the order passed by the Recovery Officer is set aside - petition disposed off.
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2020 (5) TMI 246
Transfer of leasehold rights - rejection of application on the ground that the alleged transfer is not a bonafide transfer and not entered into in the interest of the company and its creditors - Section 536(2) of the Companies Act, 1956 - According to the Appellants, Lakshmi Narayana Choudhary (deceased) did not have knowledge about the pendency of winding up petition filed against STEPL, at the time of entering into the deed of transfer of leasehold rights dated 30.01.1997 - HELD THAT:- The effect of section 536(2) of the Companies Act is that where a winding up proceeding is by or subject to the supervision of the Court, any disposition of the property of the company which is made after the commencement of the winding-up is void, unless the Court otherwise orders - Under Section 441 (2) of the Companies Act, 1956, a winding up of a company by the Court is deemed to have commenced at the time of presentation of the petition for winding up. Sub section 2 of Section 536 confers an enabling power on the Court to direct that a disposition of the property of a company shall not be void, though it was effected after the commencement of the winding up proceedings. This principle is incorporated to protect bonafide transactions carried out and completed in the ordinary course of the current business of a company.
Whether the learned Single Judge was right in coming to the conclusion that the applicant was not a bonafide transferee and the application is also barred by law of limitation? - HELD THAT:- Unless and until, the applicant (Lakshmi Narayana Choudhary) established that he is a bonafide transferee under the Deed of transfer of leasehold rights dated 30.01.1997, he cannot be permitted to file a suit against the company in liquidation. The applicant (Lakshmi Narayana Choudhary) has sought leave to institute a suit for recovery of money as well as for mandatory permanent injunction against the company in liquidation. The learned Single Judge has rightly dismissed the leave application in C.A.No.1010 of 2015 filed under Section 446 (1) of the Companies Act, 1956 - the applicant (Lakshmi Narayana Choudhary) is not a bonafide transferee and therefore, he cannot be permitted to file a suit against the company in liquidation.
Appeal dismissed.
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2020 (5) TMI 245
Maintainability of appeal - Possession of the four flats with Official Liquidator - police protection granted - protection under Section 53A of the Transfer of Property Act - the Ex-Management submits that the present appeal is not maintainable as it is in the nature of a second appeal - HELD THAT:- The present appeal is maintainable as it is not in the nature of a statutory second appeal. In the present case, the initial claims were decided not by the Official Liquidator but by a Committee appointed by a Division Bench - Consequently, the preliminary objection raised by the learned counsel for the Ex-Management is rejected.
The appellants had failed to prove their ownership to the flats in question as they had not produced any original title documents, but only photocopies. Even during the course of hearing, it was admitted before us that the appellants had not produced their income tax returns to prove the payment of consideration to M/s J.V.G. Finance Ltd. despite being repeatedly asked by the learned Single Judge.
Moreover, the purchasers under the alleged title documents i.e. the appellants had not stepped into the witness box. The argument of the appellants that there was no necessity in the present case for the appellants to step into the witness box is contrary to facts and untenable in law. It is settled law that to succeed in a suit for specific performance (which is the nature of the claim filed by the appellants), the appellants had to prove that a valid agreement of sale was entered into by the company in liquidation in their favour and also the terms thereof; that the company in liquidation committed breach of the said agreements; and the appellants were always ready and willing to perform their part of the obligations in terms of the agreement - If the appellants had to prove that they were always ready and willing to perform their part of the agreement, that is, to perform their obligations in terms of the contract, necessarily they should have stepped into the witness box and given evidence that they had all along been ready and willing to perform their part of the contract and subjected themselves to cross-examination on that issue.
Therefore, a third party who has no personal knowledge and is not an immediate relative cannot give evidence about such readiness and willingness, even if he/she is an attorney holder of the person concerned.
The appellants have failed to step into the witness box and/or prove the payment of any consideration amount to the company in liquidation, there is no question of Section 53A of the Transfer of Property Act being attracted to the present proceedings - Petition dismissed.
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2020 (5) TMI 244
Voluntary Liquidation - no default committed - HELD THAT:- As per section 59 of the Code, "A Corporate Person, who intends to liquidate itself voluntarily and has not committed any default, may initiate voluntary liquidation proceedings under the provisions of Chapter V of the Code subject to fulfilment of conditions are prescribed thereunder. The Liquidator has complied with all the conditions and procedural requirements as specified under various provisions of section 59 of the Insolvency and Bankruptcy Code, 2016 and also Regulation 3 of IBBI (Voluntary Liquidation Process) Regulations, 2017 before initiating Voluntary Liquidation Process of the Corporate Person.
The Liquidator has followed due process of law, and thus affairs of the Company were completely wound up, and its assets were completely liquidated - the instant Petition/Application deserves to be allowed - M/s. Viyes Consultancy Private Limited, Corporate Person is hereby dissolve with immediate effect.
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Insolvency & Bankruptcy
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2020 (5) TMI 248
Maintainability of application - Financial Creditor seeks to appoint Insolvency Professional for the company and start of Corporate Insolvency Resolution Process - It is further stated that on the failure of Corporate Debtor, the Financial Creditor had moved Madras High Court for the recovery of interest and restraining corporate debtor from alienating the assets of the Corporate Debtor. Application filed by Corporate Debtor for opposing the suit had been dismissed by Madras High Court on the ground that suit is continuing breach of tort and every act of breach giving rise to fresh cause of action.
HELD THAT:- This Tribunal hereby is of the opinion that the intention of both the parties is manifested in the Master Facility Agreement and the Debenture Subscription Agreement. The parties have made arrangement for an investment in the business of the Corporate Debtor in order to scale up their business operations. The investment was sought to be made by the Financial Creditor by way of subscribing to the Debentures in consideration of the money brought in by the Financial Creditor into the coffers of the Corporate Debtor. Fully convertible debentures are a financial instrument within the meaning of section 5(8) of the Insolvency and Bankruptcy Code, 2016 - Convertible Debenture is in the nature of financial debt; though it is hybrid in nature, it cannot be treated as equity unless converted into equity; it cannot par take the characteristics of equity until the conversion is done.
The Financial Creditor has taken all precautions to safeguard his interest so long as the Convertible Debenture remains as debenture. It is also seen from the documents that a Simple Mortgage is seen to have been created in favour of the Financial Creditor which shows that there is debt which is a financial debt based on the principle that "once a mortgage; always mortgage". It postulates that unless and until a mortgage is discharged it remains as a mortgage and as such the financial debt - On a perusal of clause 8.1.2 of the Master Facility agreement, a "default" is said to have occurred when there is non-payment in full, any of the interest amount that becomes due within a period of 30 days on which such amounts become payable. Therefore, it cannot be contented by the Respondent that no sum was liable to be returned or repaid. Apart from payment of a sum of ₹ 39,86,371.36 for the quarter ending September, 2007, interest amount was not paid for the remaining period by the Respondent and there is a clear default on part of the Respondent.
This Application as filed by the Applicant - Financial Creditor is required to be admitted under section 7(5) of the I&B Code, 2016 - Application admitted - moratorium declared.
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CST, VAT & Sales Tax
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2020 (5) TMI 243
Levy of interest and penalty - turnover on the interstate sales of equipments, machineries and spares not covered by C-Forms - petitioner submitted that the Appellate Tribunal failed to provide reasonable opportunity to the assessee to furnish the declaratory forms - HELD THAT:- It is apparent that the petitioner has not placed on record satisfactory material to establish the circumstance of consignment agent and purchasers withholding the concerned declaratory Forms disabling the petitioner in producing the same within the relevant time prescribed under Rule 12(7) of the Rules. Similarly, the original C-Forms now placed before this Court requires to be examined in the light of the material to be placed by the petitioner to substantiate the reasons for the delay subject to authenticity of the documents.
It is not in dispute that concessional levy of tax which is provided by the legislature is to the benefit of the assessee, if such benefit is denied on technicalities, the purpose and object of extending the concessional rate of tax would be defeated.
Matters remanded to the Appellate Tribunal to reconsider the applications submitted by the petitioner for production of C-Forms as well as original C-Forms now furnished before this Court - appeal allowed by way of remand.
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Indian Laws
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2020 (5) TMI 242
Arbitral Award - interpretation of the terms of the contract by the Arbitral Tribunal - the Respondent challenged the same under Section 34 of the Arbitration Act before the District Judge. On 04.07.2006, the learned District Judge, upheld the award and held that the findings of the tribunal were not without basis or against the public policy of India or patently illegal and did not warrant judicial interference.
Whether the interpretation provided to the contract in the award of the Tribunal was reasonable and fair, so that the same passes the muster under Section 34 of the Arbitration Act?
HELD THAT:- The High Court, in its reasoning, suggests that Clause 23 is akin to a force majeure clause. We need to understand the utility and implications of a force majeure clause. Under Indian contract law, the consequences of a force majeure event are provided for under Section 56 of the Contract Act, which states that on the occurrence of an event which renders the performance impossible, the contract becomes void thereafter - When the parties have not provided for what would take place when an event which renders the performance of the contract impossible, then Section 56 of the Contract Act applies. When the act contracted for becomes impossible, then under Section 56, the parties are exempted from further performance and the contract becomes void - However, there is no doubt that the parties may instead choose the consequences that would flow on the happening of an uncertain future event, under Section 32 of the Contract Act.
Although, the Arbitral Tribunal correctly held that a contract needs to be interpreted taking into consideration all the clauses of the contract, it failed to apply the same standard while interpreting Clause 23 of the Contract - We also do not completely subscribe to the reasoning of the High Court holding that Clause 23 was inserted in furtherance of the doctrine of frustration. Rather, under Indian contract law, the effect of the doctrine of frustration is that it discharges all the parties from future obligations. In order to mitigate the harsh consequences of frustration and to uphold the sanctity of the contract, the parties with their commercial wisdom, chose to mitigate the risk under Clause 23 of the contract.
Based on an appreciation of the evidence, the Court ruled that additional tax burden could be recovered under the clause as such an interpretation was a plausible view that a reasonable person could take and accordingly sustained the award. However, we are of the opinion that the aforesaid case and ratio may not be applicable herein as the evidence on record does not suggest that the parties had agreed to a broad interpretation to the clause in question - the interpretation of Clause 23 of the Contract by the Arbitral Tribunal, to provide a wide interpretation cannot be accepted, as the thumb rule of interpretation is that the document forming a written contract should be read as a whole and so far as possible as mutually explanatory. In the case at hand, this basic rule was ignored by the Tribunal while interpreting the clause.
The contract was based on a fixed rate. The party, before entering the tender process, entered the contract after mitigating the risk of such an increase. If the purpose of the tender was to limit the risks of price variations, then the interpretation placed by the Arbitral Tribunal cannot be said to be possible one, as it would completely defeat the explicit wordings and purpose of the contract. There is no gainsaying that there will be price fluctuations which a prudent contractor would have taken into margin, while bidding in the tender. Such price fluctuations cannot be brought under Clause 23 unless specific language points to the inclusion - The interpretation of the Arbitral Tribunal to expand the meaning of Clause 23 to include change in rate of HSD is not a possible interpretation of this contract, as the appellant did not introduce any evidence which proves the same.
Appeal dismissed.
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2020 (5) TMI 241
Constitutional validity of Sections 3[1] and [2] and Sections 4[3] of the 1959 Act amended by Sections 5 and 6 of the Karnataka Electricity [Taxation on Consumption] [Amendment] Act, 2013 - Levy of tax on consumption of electricity by captive generative units - Validity of notification bearing No.EN 27 EBS 2013, Bengaluru dated 24.11.2014 - HELD THAT:- In MP CEMENT MANUFACTURERS VERSUS STATE OF MADHYA PRADESH AND OTHERS [2003 (12) TMI 581 - SUPREME COURT], the Hon’ble Apex Court while considering Section 3[2] of [Sanshodhan] Adhyadesh, 2001 held that imposing cess on generation of electricity is beyond the competence of the State.
In view of the Constitutional validity of subsections [1] and [2] of Section 3 of the Act, 2013 being upheld by this Court, now the challenge would only revolve around Section 4[3] of the Act, 2013.
Section 4[3] of the Act, 2013 deals with the payment of tax. In terms of sub-section [3] of Section 4, the incidence of tax is on the consumption. The consumption of electricity relates to every person generating electricity by himself, and or who supplies electricity free of charge or otherwise to any other person through his own system - The electricity tax is payable as per Section 3, the charging Section. Section 4[3] is the payment of tax to be made by different class of persons.
The Hon’ble Apex Court in the case of GOVIND SARAN GANGA SARAN VERSUS COMMISSIONER OF SALES TAX AND OTHERS [1985 (4) TMI 65 - SUPREME COURT], has held that the components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If these components are not clearly and definitely ascertainable it is difficult to say that the levy exists in point of law - Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity. Keeping this principles in mind, if the levy of electricity tax in terms of Sections 3[1] [2] and 4[3] of the Amendment Act, 2013 is examined, the taxable event attracting the levy is consumption, the person on whom the levy is imposed may be the generator also who is obliged to pay the tax. That itself would not be construed as the taxable event to find the levy fatal to its validity. These two are different aspects and cannot be integrated together in order to bring the incidence of tax on the generation, merely for the reason that the generator is paying the tax. Moreover, the heading of Section 4[3] denotes payment of tax i.e., the person who is liable to pay the tax, the same cannot invalidate the charging section since generator is made liable to pay the tax on its consumption.
The notification impugned dated 24.11.2014 prescribes the rate of tax on captive consumption and auxiliary consumption of electricity generated by the captive generation plant/co-generation plant which is in conformity with the provisions of the Amendment Act, 2013.
Thus, the amended Sections 3[1], 3[2] and 4[3] of the Act, 2013 are validly enacted by the State Legislature and held to be intra vires the Constitution - the Notification dated 24.11.2014 impugned as well as the consequential demand notices are held to be justifiable.
Petition dismissed.
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