TMI Tax Updates - e-Newsletter
May 14, 2020
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Insolvency & Bankruptcy
Service Tax
Indian Laws
Highlights / Catch Notes
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GST:
Profiteering - purchase of Flat no. A-802 in Respondent’s project “Azea Botanica” - allegation that benefit of reduction in the rate of GST not passed on - contravention of section 171 of CGST Act - the Respondent, vide his submissions, has himself admitted that he has resorted to profiteering in as much as the ITC benefit that has accrued to him was not passed on to his customes/ flat buyers/ recipients.
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GST:
Profiteering - supply of “American Tourister Sky Tracer HL Blue 68 cm Hard Trolley” - allegation that the Respondent did not reduce the selling price of the above product when the GST rate was reduced and thus, the benefit of reduction in the GST rate was not passed on to the recipients by way of commensurate reduction in its price - contravention of section 171 of CGST Act - Since, the recipients in this case are not identifiable, the above Respondent is directed to deposit the amount of profiteering of ₹ 25,73,82,482/- along with interest in the CWFs of the Central and the concerned State Governments.
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GST:
Profiteering - Fly Ash Blocks supplied by the Respondent - allegation that the benefit of reduction in the rate of tax not passed on and instead increased the unit base price - contravention of section 171 of CGST Act - Allegation found to be proved.
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GST:
Classification of goods - carbonated fruit juices - classified as Fruit Juices or aerated drinks? - the issue of classification of the products similar to that in the case at hand has been dealt with by the committee of Secretaries, Fitment Committee in the GST Regime. Discussions in the GST Council meeting though not controlling, has persuasive value. - GST Council has agreed to the above recommendation as can be seen from the Minutes of the Meeting - Order of AAR sustained.
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Income Tax:
Revision u/s 263 - Expenditure incurred on payments to sister concerns u/s 40A(2)(b) - Inaction on the part of the AO has caused prejudice to the Revenue as contemplated u/s 263 - The plea of the assessee that the payment incurred towards services rendered by sister concern to be revenue neutral is also without any supporting evidence. It is not the tax rate but the tax amount in absolute figures which matters.
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Income Tax:
Deemed income u/s 69B - notional interest as income on loan/advances to sister concern - Since there is no specific provision in the Income Tax Act for bringing to tax notional interest as income on loan/advances to sister concern, no additions can be made.
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Income Tax:
Deduction u/s 80lB - CIT(A) held that the assessee has not maintained separate books of accounts, it employed the same employees for manufacture of all products, there was no physical separation of units, separate power connection and separate stock registers, etc. On such findings, he has come to the conclusion, that no new undertaking has come up by substantial investment, the so called new unit is not an integrated unit by itself, the subsequent purchases of new machinery's after the purchase of old unit was done in the ordinary course of expansion of the business and not in the nature of new industrial undertaking within the meaning of Section 80IB - Order of CIT(A) sustained.
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Direct Taxes:
In view of the discussions and after perusal of the judgments cited by both the parties it is held that the Single Member Bench can clarify the orders passed by the Division Bench under the relevant provisions of the said Act discussed above in the given facts and circumstances of the case and also by following the doctrine of necessity.
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Indian Laws:
Dishonor of Cheque - cheque was returned unpaid - The complaint filed under Section 138 of the Negotiable Instruments Act, 1881 is not maintainable because the complainant /respondent sent a notice to the applicants after passing of the wind up order by this Court meaning thereby on the date of issuance of notice to the applicants the company was in liquidation and cannot be stated to have committed any offence, therefore, summoning order is bad in law
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IBC:
Initiation of CIRP - sub-sequent application was maintainable, as we find that financial debt is payable to the appellants, particularly the second appellant as there is a default and the "corporate debtor" has failed to make out a case that it is barred by limitation and is not payable in law, we hold that this was a fit case for Adjudicating Authority to admit the application under section 7 and initiate "corporate insolvency resolution process"
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Service Tax:
Deduction of service tax from the amount payment (consideration) as per the contract terms - scope of the terms of agreement - the parties did not envisage deduction in the agreed rate from alleged service tax payment. The agreed rate was understood by the parties to be all inclusive and the same would bind the parties. - The respondent have acted illegally, wrongly and malafidely withholding the amount on the alleged ground that service tax is not applicable to the agreed rate.
Articles
Notifications
Customs-
22/2020 - dated
12-5-2020
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Cus
Seeks to confirm the provisional increase of 5% in the rate of duty of customs levied vide notification No. 29/2019-Cus dated 04.09.2019, for a period of 180 days, on imports of “Refined Bleached Deodorized Palmolein and Refined Bleached Deodorized Palm Oil”, falling under tariff item [1511 90 10] or tariff item [1511 90 20] of the First Schedule to the Customs Tariff Act, 1975, originating in Malaysia and imported under India-Malaysia Comprehensive Economic Cooperation Agreement.
GST - States-
30/2020-State Tax - dated
8-4-2020
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Chhattisgarh SGST
Chhattisgarh Goods and Services Tax (Fourth Amendment) Rules, 2020.
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09/2020 - State Tax - dated
8-4-2020
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Chhattisgarh SGST
Seeks to exempt foreign airlines from furnishing reconciliation Statement in FORM GSTR-9C
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16/2020 -State Tax - dated
31-3-2020
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Chhattisgarh SGST
Chhattisgarh Goods and Services Tax (Third Amendment) Rules, 2020.
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13/2020 - State Tax - dated
31-3-2020
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Chhattisgarh SGST
Seeks to exempt certain class of registered persons from issuing e-invoices and the date for implementation of e-invoicing extended to 01.10.2020
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12/2020 - State Tax - dated
31-3-2020
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Chhattisgarh SGST
Seeks to waive off the requirement for furnishing FORM GSTR-1 for 2019-20 for taxpayers who could not opt for availing the option of special composition scheme under notification No. 2/2019-State Tax (Rate)
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11/2020 - State Tax - dated
31-3-2020
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Chhattisgarh SGST
Seeks to provide special procedure for corporate debtors undergoing the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016
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03/2020-Statel Tax (Rate) - dated
31-3-2020
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Chhattisgarh SGST
Seeks to amend notification No. 1/2017-State Tax (Rate) to prescribe change in CGGST rate of goods.
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02/2020- State Tax (Rate) - dated
31-3-2020
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Chhattisgarh SGST
Seeks to amend Notification No. 11/2017-State Tax (Rate) dt. 28.06.2017 reducing CGGST rate on Maintenance, Repair and Overhaul (MRO) services in respect of aircraft from 18% to 5% with full ITC
SEZ-
S.O. 1454 (E) - dated
12-5-2020
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SEZ
Central Government notifies the 40.945 hectares area comprising the survey numbers at Nandiambakkam Village, Minjur Panchayat Union, Ponneri Taluk, Triuvallur District in the State of Tamil Nadu and constitutes an Approval Committee
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (5) TMI 287
Profiteering - purchase of Flat no. A-802 in Respondent’s project “Azea Botanica” - allegation that benefit of reduction in the rate of GST not passed on - contravention of section 171 of CGST Act - Penalty - HELD THAT:- It is clear from the plain reading of Section 171 (1) that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP’s Report that there has been no reduction in the rate of tax in the post GST period; hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST.
On the issue of net benefit of ITC, it has been revealed from the DGAP’s Report that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 1.33% and during the post-GST period (July-2017 to December-2018), it was 5.17%. This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 3.84% (5.17% - 1.33%) of his turnover and the same was required to be passed on to the Applicant No. 1 and the other flat buyers. The DGAP has calculated the amount of ITC benefit to be passed on to all the flat buyers as ₹ 2,72,21,5351- which was availed by the Respondent vide Table- C Supra on the basis of the information supplied by the Respondent, which the Respondent has himself accepted that he was in agreement with the DGAP Report dated 24.09.2019 and hence the amount of profiteering computed by the DGAP is hereby accepted as correct - the Respondent, vide his submissions, has himself admitted that he has resorted to profiteering in as much as the ITC benefit that has accrued to him was not passed on to his customes/ flat buyers/ recipients. by way of commensurate reduction in the prices of the flats/ units.
The DGAP has calculated the total profiteered amount as ₹ 2,72,21,5321- for the period from 01.07.2017 to 31.03.2019, out of which, an amount of ₹ 2,04,77,678/- was claimed to be passed on by the Respondent to the home buyers by way of reduction in the demand raised by him on his customers/ flat buyers/ recipients. The DGAP, vide his report dated 02.01.2020, has also reported that the claim of the Respondent that he had passed on the ITC benefit amounting to ₹ 2,04,77,6781- to his customers/ flat buyers by way of reducing the amount from their demand letters, has been duly verified by the DGAP with the data submitted by the Respondent and had been found to be correct as per the calculations made in the table-D & para-22 of the DGAP Report dated 24.09.2019. Table-D of the DGAP Report dated 24.09.2020 reveals that the amount of ITC benefit required to be passed on by the Respondent to the customers/flat buyers was ₹ 2,72,21,532/-, out of which an amount of ₹ 2,04,77,678/- had been claimed to have been passed on to his customers by the Respondent. The same has been verified by the DGAP. Hence, only the balance profiteered amount of ₹ 73,61,290/- is still required to be passed on by the Respondent, which was in the process of being passed on by him to his customers/ flat buyers/ recipients.
There are no reason to differ from the above-detailed computation of profiteering and hence the profiteered amount for the period from 01.07.2017 to 31.03.2019, in the instant case, is determined as ₹ 2,72,21,532/-. This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats/shops commensurate with the benefit of ITC received by him - out of the total profiteered amount of ₹ 2,72,21,532/- (inclusive of GST), the balance amount of benefit of ₹ 73,61,288/- shall be passed on, forthwith, by the Respondent to the customers/ flat buyers/ recipients, including Applicant No. 1, in accordance with Annexure-12 of the DGAP Report dated 24.09.2019.
Interest - HELD THAT:- The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. ₹ 2,72,21,532/-. Hence the Respondent is directed to also pass on interest @18% to the customers/ flat buyers/ recipients, including Applicant No. 1, on the entire amount profiteered, starting from the date from which the above amount was profiteered till the date of passing on/ payment, as per provisions of Rule 133 (3) (b) of the CGST Rules 2017.
Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Project ‘Azea Botanica’ in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus apparently committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the above Section - Accordingly, a notice be issued to him directing him to explain as to why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.
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2020 (5) TMI 286
Profiteering - supply of “American Tourister Sky Tracer HL Blue 68 cm Hard Trolley” - allegation that the Respondent did not reduce the selling price of the above product when the GST rate was reduced and thus, the benefit of reduction in the GST rate was not passed on to the recipients by way of commensurate reduction in its price - contravention of section 171 of CGST Act - penalty - HELD 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 to his recipients by commensurate reduction in the prices. Accordingly, the amount of profiteering is determined as ₹ 25,73,82,482/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent is therefore directed to reduce the prices of his products as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount of ₹ 25,73,82,482/- along with the interest to be calculated © 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited in terms of the Rule 133 (3) (b) of the CGST Rules, 2017.
Since, the recipients in this case are not identifiable, the above Respondent is directed to deposit the amount of profiteering of ₹ 25,73,82,482/- along with interest in the CWFs of the Central and the concerned State Governments as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017 in the ratio of 50:50 along with interest @ 18%, till the same is deposited.
Penalty - HELD THAT:- The Respondent has denied the benefit of rate reduction of the GST to the consumers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering. Hence, he has committed an offence under Section 171 (3A) of the CGST Act, 2017 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section - Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.
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2020 (5) TMI 285
Profiteering - Fly Ash Blocks supplied by the Respondent - allegation that the benefit of reduction in the rate of tax not passed on and instead increased the unit base price - contravention of section 171 of CGST Act - penalty - HELD THAT:- It is revealed that the Central Government, on the recommendation of the GST Council, had reduced the GST rate on the “Fly Ash Blocks” supplied by the Respondent from 12% to 5% w.e.f. 01.01.2019, vide Notification No. 24/2018-Central Tax (Rate) dated 31.12.2018 which has also not been contested by the Respondent. Therefore, it is evident that rate of tax has been reduced on the above product which was admittedly being supplied by the Respondent. Therefore, the provisions of Section 171 (1) which state that “any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.” squarely apply in this case and the Respondent is bound to pass on the benefit of the above tax reduction to his recipients w.e.f. 01.01.2019.
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 to his recipients by commensurate reduction in the prices. Accordingly, the profiteered amount is determined as ₹ 55,60,340/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent is therefore directed to reduce the prices of his products as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients.
Penalty - HELD THAT:- The Respondent has denied the benefit of rate reduction of GST to his recipients in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering. Hence, he has committed an offence under Section 171 (3A) of the CGST Act, 2017 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section - Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.
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2020 (5) TMI 284
Classification of goods - carbonated fruit juices - classified as Fruit Juices or aerated drinks? - challenge to AAR decision - AAR has ruled that The products Richyaa Darner Lemon’ and ‘Licta Lemon’ to be supplied by the applicant are classifiable under CTH 22021020 and all others i.e. Richyaa Darner Cola’, ‘Licta Cola’, Richyaa Darner Jeera Soda’, ‘Licta Jeera Masala’, Richyaa Darner Orange’ and ‘Licta Orange’ are classifiable as ‘Other’ under CTH 22021090.
HELD THAT:- The issue of classification of the products similar to that in the case at hand has been dealt with by the committee of Secretaries, Fitment Committee in the GST Regime. Discussions in the GST Council meeting though not controlling, has persuasive value. The observation of the Fitment Committee, which recommended for no change in the prevailing rates under Annexure-III of their recommendations placed for consideration by the GST Council during the 37th Council Meeting - GST Council has agreed to the recommendation holding that From item No. 43 to 57 of Annexure-III, the Council had no objection and approved the recommendation or Fitment Committee. The Hon’ble Minister from Uttar Pradesh raised the issue about item at Si. No. 58 of Annexure III i.e. Extra Neutral Alcohol (ENA).
The above decision of the GST Council also supports the classification ruled by the Lower Authority - there are no reason to interfere with the Order of the Advance Ruling Authority in this matter.
Appeal dismissed.
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Income Tax
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2020 (5) TMI 283
Computation of long-term capital gain - benefit of deduction of the compensation paid to M/s Shikhar Travels (India) Pvt. Ltd., from the net sale consideration for computing the long-term capital gain - HELD THAT:- No merit in the argument of the ld. Counsel that the AO cannot sit in the arm chair of a businessman and decide how much compensation should be given for vacating the property and, thereafter, to sell the same to a third party. Since the transaction in the instant case is not doubted, therefore, merely because the parties are related or that the agreement was not registered or notarized, the same, in our opinion, cannot be a ground to deny the benefit of deduction of the compensation paid to M/s Shikhar Travels (India) Pvt. Ltd., from the net sale consideration for computing the long-term capital gain. In this view of the matter, we are of the considered opinion that the ld.CIT(A) was not justified in restricting the compensation paid to M/s Shikhar Travels (India) Pvt. Ltd. to ₹ 38,50,000/- as against the payment of ₹ 1.90 crores for the purpose of computing the long-term capital gain. The grounds raised by the assessee on this issue are accordingly allowed.
Deduction u/s 54 - AO denied the claim of deduction u/s 54 on the ground that the assessee sold a piece of land and not a residential house - existence of any structure/fixtures on land cannot be said to be a residential house however, allowed the benefit of deduction u/s 54F - HELD THAT:- We find although the assessee challenged the action of the AO in denying the benefit u/s 54, the CIT(A) has not adjudicated the same. We find from the various details that the assessee had filed various documents before the CIT(A) to substantiate that there was a residential unit on the farm house. However, he has not given any finding on this issue. We, therefore, deem it proper to restore this issue to the file of the CIT(A) with a direction to adjudicate the issue of deduction u/s 54 which was specifically challenged before him by the assessee. CIT(A) shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. The second issue raised in the grounds of appeal is accordingly allowed for statistical purposes.
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2020 (5) TMI 282
Revision u/s 263 - purchase agreements executed with vendors in relinquishment of their rights in land produced before AO to justify the cost associated with acquisition of land - HELD THAT:- Profit on sale of land can be deduced only after subtraction of corresponding purchase costs. It is not the case of the Revisional Commissioner that purchase cost has been separately claimed. Claim made on behalf of the assessee that relevant facts towards cost associated with the acquisition were placed before the AO in the course of assessment.
It would be reasonable to infer that AO has applied his mind to such aspect. The confusion resulted from improper accounting method whereby the sale receipts have been netted of with purchase costs and net sale consideration was wrongly shown instead of reflecting gross sale consideration and corresponding purchase cost separately, has not ultimately resulted in any under reporting of income. Therefore, no manifest prejudice has resulted to the interest of the Revenue - conditions for exercise of power u/s 263 of the Act are not satisfied in respect of this aspect. We accordingly set aside the action of the Pr.CIT and restore the assessment order to this extent.
Expenditure incurred on payments to sister concerns u/s 40A(2)(b) - consultancy charges and development charges paid to parties - HELD THAT:- We are constraint to observe that AO failed to carry out the duty assigned to him on such vital aspect. Same is the case for payment made towards so called development expenses paid to Chetan Builders. No cogent evidence was shown to have been produced before the AO in justification of such expenses. The nature of services rendered with some degrees of objectivity ought to have been examined by the AO. Inaction on the part of the AO has caused prejudice to the Revenue as contemplated u/s 263 - The plea of the assessee that the payment incurred towards services rendered by sister concern to be revenue neutral is also without any supporting evidence. It is not the tax rate but the tax amount in absolute figures which matters. It was for the assessee to demonstrate that the amount of tax saved on account of such expenses has been corresponding paid by the sister concern.
In the absence of such demonstration, the plea of the assessee towards tax neutrality cannot be appreciated in perspective. No error in the action of the Revisional CIT in setting aside the order of the AO for a direction to re-determine the issue in accordance with law. We thus decline to interfere on the second limb of direction connected to the expenses incurred which are susceptible to provisions of Section 40A(2)(b) - Appeal filed by the assessee is partly allowed.
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2020 (5) TMI 281
Chargeability of interest awarded under Section 28 of the Land Acquisition Act - exemption under Section 10(37) or Income from other sources u/s 56 - AR submitted interest under Section 28 of the Land Acquisition Act, 1984 cannot be considered/equated as interest as referred under Section 56(2)(viii) of IT Act which has been inserted w.e.f. 1.4.2009 effectively from Assessment Year 2010-11 - HELD THAT:- We found the assessee has claimed exemption under Section 10(37) of the Act whereas as per Section 28 of Land Acquisition Act, the compensation to be awarded in excess of the sum awarded by the Land Acquisition Officer, the Court may direct the Land Acquisition Officer to pay interest @ 9% per annum from the date of compensation on land to the date of payment of such excess deposit in the Court. We found the co-ordinate Bench of the Tribunal dealt on the issue in the case of ITO, Ward 1 Vs. Basavaraj M Kudarikannur [2018 (6) TMI 1529 - ITAT BANGALORE] as held interest under section 28 of the Act of 1894 is an accretion to compensation and forms part of the compensation and, therefore, exigible to tax under section 45(5) of the Act. Interest under section 28 of the Act of 1894 is part of the amount of compensation whereas interest under section 34 thereof is only for delay in making payment after the compensation amount is determined. Interest under section 28 is a part of the enhanced value of the land which is not the case in the matter of payment of interest under section 34 - See CIT v. Ghanshyam (HUE) [2009 (7) TMI 12 - SUPREME COURT].
Allowing exemption u/s. 10(37) of the Act on the interest received by the assessee u/s. 28 of the Land Acquisition Act, 1894 - Decided in favour of assessee.
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2020 (5) TMI 280
Disallowance of business promotion expenses - assessee is incurred these expenses for promotion of its business - assessee incurred major expenses which consist of corporate membership of Mumbai Cricket Association, on social functions and donation - HELD THAT:- Hon’ble jurisdictional High Court in Otis Elevator [1991 (4) TMI 53 - BOMBAY HIGH COURT] held that when the assessee incurred expenses for promotion of club fees with a view to enable the assessee to improve its relation and prospects, the payment must be allowed as business expenditure. The other expenses, genuineness of which were not disputed by the lower authorities which mainly consist of either donation to various charitable organizations, distribution of Notebook to poor student and expenses incurred during the festival season for erecting hoarding are also allowable expenses. Considering the nature and expenses, AO is directed to allow all the expenses and delete the disallowance accordingly. In the result, Ground No.A of the appeal is allowed.
Disallowance of interest u/s 40A(2)(a) - HELD THAT:- Neither the AO has brought on record that the interest paid by the assessee is on higher side as compared to the market rate for getting the unsecured loan for such business as undertaken by assessee. Nor the AO has recorded that assessee made the payment to its sister concern for evasion of tax. We have noted that on similar rate of interest, the addition was deleted in assessee’s group case in Puspanjali Realtors [2018 (1) TMI 1588 - ITAT MUMBAI] and on appeal before the ITAT, the order of ld. CIT(A) was confirmed. In view of the above discussion, and respectfully following the order of the coordinate bench in Puspanjali Realtors Pvt. Ltd. In the ground of appeal raised by the assessee is allowed.
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2020 (5) TMI 279
Deemed income u/s 69B - notional interest as income on loan/advances to sister concern - addition has been made on account of notional interest - HELD THAT:- It is not the case of the AO that the loan advanced to the sister concern was not recorded in the books of accounts. It is not also the case of the AO that interest expenditure claimed as deduction by the assessee should have been disallowed under the provision of section 36(1)(iii)
The fact remains that the AO has proceeded to bring to tax notional income without there being any machinery provisions in the Act. Assesee’s case is covered in its favour by the judgment of the Hon’ble Delhi High Court in the case of Shivnandan Buildcon (P.) Ltd. [2015 (5) TMI 192 - DELHI HIGH COURT] had held that notional income on advances could not be brought to tax in absence of any specific provision of the Act. The order of Punjab Stainless Steel Inds Vs CIT. [2010 (5) TMI 53 - HIGH COURT OF DELHI] does not come to the aid of the department because in that case the AO had made disallowance out of interest claimed as deduction u/s 36 (1)(iii) of the Act. Since there is no specific provision in the Income Tax Act for bringing to tax notional interest as income on loan/advances to sister concern, we are unable to agree with the submission of the Ld. CIT (DR) and, therefore, while upholding the findings of the Ld. CIT (A) on the issue, we dismiss this ground.
Reopening of assessment - addition of the share application money received - HELD THAT:- As assessee was asked to show cause as to why addition of the share application money received should not be added to the income of the assessee or permission to get approval to issue notice u/s 148 be moved for assessment year 2011-12. Thus, apparently, the AO himself was aware that the share application money had not been received during the year under consideration but during the preceding assessment year.
We also note that the assessment proceedings for assessment year 2011-12 were subsequently reopened u/s 147 of the Act and order u/s 147 read with section 143 (3) of the Act was passed on 10.4.2019 wherein the impugned sum of ₹ 87 crores has been added to the income of the assessee in assessment year 2011-12.
Since this impugned amount has already been brought to tax in assessment year 2011-12 and since the impugned amount does not relate to this year under appeal, we agree with the findings of the Ld. CIT (A) on this issue and uphold his order of deleting the said amount. The related grounds stand dismissed.
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2020 (5) TMI 278
Deduction u/s 80lB - whether the assessee has set up a new unit or undertaking capable of producing entirely different products or articles from the existing unit and also as to whether the assessee is eligible for claim of deduction u/s 80lB in respect of profits declared in the returns of income filed by it? - HELD THAT:- Appellant has sold entire old machineries during the financial year 2007-08.
The appellant has shown the same as sale of scrap vide his invoice dated 09.01.2009. Then how come, the chartered engineer verified the old machinery on 07.01.2014 when that has already become scrap during the FY 2007-08 and also disposed on 09.01.2009.
CIT(A) held that the certificate given by the chartered engineer cannot be the basis for holding a view that old machines are not capable of manufacturing so called businessman range products and appellant has established entirely new industrial undertaking. Thus, the only external evidence, filed by the assessee has become totally unreliable.
CIT(A) held that the assessee has not maintained separate books of accounts, it employed the same employees for manufacture of all products, there was no physical separation of units, separate power connection and separate stock registers, etc. On such findings, he has come to the conclusion, that no new undertaking has come up by substantial investment, the so called new unit is not an integrated unit by itself, the subsequent purchases of new machinery's after the purchase of old unit was done in the ordinary course of expansion of the business and not in the nature of new industrial undertaking within the meaning of Section 80IB - On such cumulative findings, the assessee has not laid any fresh material to prove that the appellant has established a new undertaking which is capable of manufacturing new products with distinct characteristics has come into existence during the assessment year 2001-02 which is the initial year for the claim of deduction u/s.80IB. We do not find any reason to interfere with the order of the ld.CIT(A) and hence, the corresponding grounds of the assessee are dismissed.
Disallowance of payments made to ASTA Beab Certification Service and China Inspection Company Ltd., as testing / certification fees, invoking provisions of Section 40(a)(i) - HELD THAT:- Since the payment is towards certification, it is purely professional services and in the absence of any business connection and activity being carried out by ASTA and China Inspection Company Ltd., in India, the same is not taxable in India and hence, we find merit in the grounds of the assessee and hence allow the appeals.
AR pleaded that the AO has not given the credit of advance tax and self-assessment tax amounting to ₹ 16,02,767/- and ₹ 1,41,80,738/- respectively for the assessment year 2008-09. The issue was raised before the CIT(A) vide ground No.6, however the ground has not been adjudicated. Therefore the assessee pleaded that AO may be directed to allow correct credit of taxes. We direct the AO to examine and allow the correct credit of taxes.
Incorrect computation of interest U/s.234B which was not adjudicated by the CIT(A) - Therefore the assessee pleaded that AO may be directed to verify and recompute. We direct the AO to verify and recompute accordingly.
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Benami Property
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2020 (5) TMI 277
Benami transactions - Provisional Attachment - Whether Single Member Bench can hear the appeals filed under the said Act and pass such orders as deem fit to meet the ends of justice? - HELD THAT:- Direction in the order dated 15-5-2019 was that no further steps shall be taken on the notice issued by the I.O. Liberty was granted to the respondent to initiate the proceedings on the basis of fresh reference, if registered and they may proceed by registering the second reference in accordance with law. In the said order dated 15-5-2019, the respondent had also undertook that if necessary the respondent shall proceed with in accordance with law after serving the notice under section 24 (1) of the said Act.
The second order dated 13-8-2019, a clear order that has been passed with the direction that "no further steps shall be taken by the respondent in view of the impugned order". Here also there is a mention of/reference to impugned order. The relevant portion of the impugned order has already been clarified in the preceding para no.39.
Not in agreement with the learned counsel for the appellants that a Single Member Bench cannot clarify the orders passed by Division Bench in the given facts and circumstances of the appeals. The appellants cannot be allowed to take the advantage of an order which does not meant to be interpreted in the way now the appellants are interpreting. If the interpretation of the orders dated 15-5-2019 & 13-8-2019 are allowed to be interpreted the way the appellants are interpreting then it would amount to stall the investigations and scuttle the power given under the statue to the statutory authority under the said Act.
In view of the discussions and after perusal of the judgments cited by both the parties it is held that the Single Member Bench can clarify the orders passed by the Division Bench under the relevant provisions of the said Act discussed above in the given facts and circumstances of the case and also by following the doctrine of necessity.
It is clarified that no bar has been imposed in the orders dated 15-5-2019 & 13-8-2019 on the respondent to proceed with investigations/calling for documents from the appellants in accordance with law. It is further clarified that for the same, the respondent has to register a fresh reference as per law provided under the said Act and to follow the procedure as directed in the order dated 15-5-2019. Accordingly clarified.
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Insolvency & Bankruptcy
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2020 (5) TMI 275
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - application dismissed on the ground that there is no debt payable in fact as the account balance shows that "Nil" amount is payable by the "operational creditor" - time limitation - HELD THAT:- The communication made by the "corporate debtor" on August 5, 2013 shows that there is no amount payable to the "operational creditor", which was not disputed by the "operational creditor" - In the present case, before issuance of the demand notice under section 8(1) on December 26, 2017 the "corporate debtor" has disputed the claim and taken plea that it was barred by limitation. Such plea having been taken by the "corporate debtor" prior to December 26, 2017 we hold that there was a pre-existence of dispute.
Appeal dismissed.
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2020 (5) TMI 274
Voluntary liquidation of the corporate person - compliance with the provisions of section 59 of the Insolvency and Bankruptcy Code, 2016 read with regulation 3 of the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 before dissolution of the company or not - HELD THAT:- As per section 59(3)(a) of the Code, a declaration from the majority of the directors of the company verified by an affidavit to the effect that, they have made a full inquiry in to the affairs of the company and they have formed an opinion that, either the company has no debt or that it will able to pay its debt in full from the proceeds of the assets to be sold in the voluntary liquidation and the company is not being liquidated to defraud any person has to be filed - The directors of the company passed a resolution for voluntarily liquidating the company. The liquidator also filed the declaration of solvency by directors dated March 31, 2018, i. e., Mr. Gunupati Venkateswara Prasad and Ms. Gunupati Anuradha, who have given their declaration of solvency as contemplated under section 59(3)(a) of the Insolvency and Bankruptcy Code, 2016.
The concerned Income-tax Officer vide his letter dated October 22, 2019 has conveyed to the liquidator stating that there are no tax arrears out-standing against M/s. Good Earth Properties and Services P. Ltd., and the said office has no objection to the liquidation process involving the said assessee - The liquidator stated in its application that company did not have any creditors as on the date of liquidation commencement.
The liquidator has complied with the liquidation process as per the provisions of section 59 of the Code and also as per the IBBI (Voluntary Liquidation Process) Regulations, 2017 and moved this application under section 59(7) for seeking dissolution of the corporate person "Good Earth Properties and Services P. Ltd.". Therefore, the said corporate person stands dissolved - "Good Earth Properties and Services P. Ltd." is ordered to be dissolved with effect from November 6, 2019 - Application allowed.
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2020 (5) TMI 273
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- This Bench is of the view that the averments regarding the dispute raised by the corporate debtor with respect to the usage of sub-standard quality material, is not supported by any documentary evidence. Therefore, the dispute raised by the corporate debtor does not merit any further consideration.
The operational creditor has established the default on the part of corporate debtor in payment of the operational debt. The petition filed under section 9 fulfils all the requirements of law - Therefore, the petition is admitted in terms of section 9(5) of the IBC.
Application admitted - moratorium declared.
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2020 (5) TMI 272
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- The resolution professional in all his pleadings has made a submission that the claim of the applicant is under process and that a part of the applicant's claim has already been admitted. However, it is to be noted herein that the claim of the applicant was filed in June 4, 2018, it has been more than 4 months since then, the resolution professional has not yet decided the claim of the applicant - It is an undisputed fact that the land on which the resolution professional/corporate debtor currently has his possession on, belongs to the applicant herein. Keeping in mind that the applicant is being deprived from his right of using the land that owns is patently illegal and wrong, therefore cannot be allowed.
It is trite law that this Tribunal has been provided with vast powers under section 60(5) of the Code. Therefore, based on the above this Bench is of the view that the actions or rather inaction on the part of the resolution professional in not taking a decision with respect to the claim of the applicant is an abuse of the powers given to him under the Code and contrary to justice and public policy. His actions are nothing more but an abuse of his dominant position - Further, this is a very peculiar case where the resolution professional maliciously neither paid the rent nor vacated the premises and on the other hand, he wanted to hand over the said premises to the successful resolution applicant as a going concern, putting the landowner to further trouble - This kind of injustice carried out by the resolution professional herein is completely unacceptable. The landowner is just not entitled to receive the licence fee but also, he has to right to receive the possession of the said premises. The tenancy rights automatically get terminated, the moment default in payment of rent is committed.
This miscellaneous application is allowed with cost, and the resolution professional is directed to hand over of the possession of the said premises forthwith to the applicant and pay the claim amount as raised by the applicant in his claim within a week from the date of this order - Application allowed.
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2020 (5) TMI 271
Liquidation of Corporate Debtor - appointment of the liquidator read with rule 11 of the National Company Law Tribunal Rules, 2016 - initiation of CIRP - HELD THAT:- As per section 33(1)(a) of the Code, if the resolution professional has not received any resolution plan under section 30(6) with in CIRP period, the Tribunal is left with no other option but to pass a liquidation order. The resolution professional has not filed any resolution plan before this Tribunal under section 30(6) within CIRP period. By relying on section 33(1)(a) of the Code, the resolution professional having not submitted any resolution plan within CIRP period leads to passing an order of liquidation.
As per section 34(1) of the Code after passing the order of liquidation of corporate debtor, the resolution professional appointed for CIRP process shall act as the liquidator for conducting the liquidation process - Mr. A. V. S. Krishna Mohan/applicant is appointed as the liquidator. The resolution professional has given his consent for appointing him as a liquidator.
The application is allowed and the corporate debtor M/s. Yag Mag Labs P. Ltd., is ordered to be liquidated - The order of moratorium passed under section 14 of the Code shall cease to have its effect.
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2020 (5) TMI 270
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - dishonor of cheexistence of debt and dispute or not - service of notice - HELD THAT:- In Alloysmin Industries v. Raman Casting P. Ltd. [2019 (3) TMI 194 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] of the hon'ble National Company Law Appellate Tribunal, on which the learned counsel for the petitioner, placed reliance, it was held that "if the demand notice under section 8 is served on the corporate debtor either on its registered office or its corporate office, it should be treated to be valid service of notice under section 8 and application under section 9 on failure of payment, if filed after 10 days, is maintainable" and hence the contention of the respondent's counsel that the demand notice not served at the registered office of the corporate debtor, is unsustainable.
Since the respondent-corporate debtor have agreed and admitted its liability to pay the debt, and its default, by tendering a cheque of ₹ 61,46,231 to the petitioner-operational creditor, as evidenced by order dated May 24, 2019 of this Tribunal, which was subsequently dishonoured and since the application is otherwise, complete, there is no need to consider any other aspect, in view of the settled position of law, and accordingly, this petition is admitted.
Petition admitted - moratorium declared.
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2020 (5) TMI 269
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - time limitation - HELD THAT:- As on the date of hearing, learned counsel for the corporate debtor failed to produce any document to prove that there is no debt and default on the part of the corporate debtor. So, from the perusal of averments made in the counter-affidavit filed on behalf of the respondent, I find that the respondent has raised the question of maintainability on the ground referred in the counter-affidavit.
Time Limitation - HELD THAT:- Further, it is matter of record that the statement of account which has been filed shows that on October 3, 2016 an amount of ₹ 3,00,000 has been deposited and the applicant/financial creditor has filed this application on November 30, 2018, and on this the learned counsel for the petitioner submitted that this petition is covered by section 19 of the Limitation Act -
From the perusal of section 19 of the Limitation Act, it appears to this Adjudicating Authority that it is admitted position of law that subsequently if any payment is made by the borrower then the limitation shall run from the date when the last amount was paid by the corporate debtor. There-fore, this Adjudicating Authority finds force in the contention of the submission placed by learned counsel for the petitioner, that this case comes under section 19 of the Limitation Act.
It is admitted position of law that article 62 will not apply to the applications filed under section 7 of the Insolvency and Bankruptcy Code, 2016 rather it would fall only under article 137 of the Limitation Act. Therefore, this Adjudicating Authority does not finds force in the contention of the submission placed by learned counsel for the petitioner, that this case comes under article 62 of the Limitation Act - In counter affidavit filed by the respondent and reply to the counter affidavit filed by the petitioner, this Adjudicating Authority finds, the corporate debtor in the counter affidavit admits the debt and his only grievance is the entire properties of the corporate debtor are in hands of the financial creditor.
The application filed on behalf of the financial creditor/applicant under section 7 of the IBC is found complete and it is within limitation. It further appears that there is default in non-payment of the debt owed by the corporate debtor, the applicant has annexed sufficient evidence to show the default on behalf of the corporate debtor. Therefore the application filed under section 7 of the IBC deserves to be admitted.
Application admitted - IRP appointed - moratorium declared - List on October 23, 2019 for the filing of the progress report.
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2020 (5) TMI 268
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- It is apparent from the records that the payment of claim amount has been defaulted by the Corporate Debtor and despite the issuance of section 8 notice under the Insolvency & Bankruptcy Code, 2016 by the Applicant and the receipt of the same by the Corporate Debtor, the payment was not made. The claim stands established and prima facie the presumption is raised that there is default in payment of the amount due to the Applicant and no dispute is in existence - Hence, this Tribunal is inclined to initiate the proceedings namely, Corporate Insolvency Resolution Process (CIRP) as against the Corporate Debtor as envisaged under the Provisions of the IBC, 2016 and this application is admitted.
Application admitted - Moratorium declared.
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2020 (5) TMI 276
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - application rejected on the ground that it is barred by limitation and no financial debt is in existence - HELD THAT:- If there is a debt and default, normally the Adjudicating Authority is bound to admit the application provided the "corporate debtor" with evidence takes plea that it is not payable in law or in fact.
Time Limitation - HELD THAT:- The matter relating to the Income-tax pending with the office of the Assistant Commissioner of the Income-tax, Chennai, whereby letter dated June 26, 2012, the Assistant Commissioner of Income-tax referred to the balance-sheet of "M/s. Radha Exports (India) P. Ltd." showing therein the name of Smt. Shobha Jayaram (the second appellant) and stated that on verification it found that a sum of ₹ 90,00,000 for loan advanced by Smt. Shobha Jayaram to the proprietary concern "M/s. Radha Exports" transferred as share application money after the incorporation of "M/s. Radha Exports (India) P. Ltd." - the demand notice was issued by the appellants to the "corporate debtor" on December 7, 2017 under the "I&B Code" to which the "corporate debtor" replied on December 14, 2017. The matter was again moved before the Adjudicating Authority which by impugned order dated April 12, 2018 passed in C. P. No. 77/IB/CB/2018 allowed to withdraw the application with liberty to the appellants to file afresh application. It is only thereafter application under section 7 was filed in Form 1 on April 25, 2018.
The claim of the appellants is not barred by limitation as at appropriate stage, the appellants moved application under section 433(e) of the Companies Act, 2013 for winding up of the company. In view of the amendments made, the "I and B Code" was given effect and section 433 having been deleted from the Companies Act, 2013, the appellants had no other option but to move an application under the provisions of the "I and B Code".
Financial creditors or not - HELD THAT:- Admittedly, the amount as shown by the Assistant Commissioner of Income-tax amounting to ₹ 90,00,000 shows that the amount is disbursed by the second appellant-Smt. Shoba Jayaram for consideration of time value of money and it is subsequently converted as share application money of the "corporate debtor". However, no share was issued by the "corporate debtor" in spite of the demand notice - In that view of the matter, the appellants not being the "operational creditors", there was no occasion for them to issue demand notice under section 8(1) and for the said reason, if the Adjudicating Authority allowed them to withdraw the application under section 9 of the "I and B Code" to enable the appellants to file application under section 7, we hold that sub-sequent application was maintainable, as we find that financial debt is payable to the appellants, particularly the second appellant as there is a default and the "corporate debtor" has failed to make out a case that it is barred by limitation and is not payable in law, we hold that this was a fit case for Adjudicating Authority to admit the application under section 7 and initiate "corporate insolvency resolution process" against "M/s. Radha Exports (India) P. Ltd".
The Adjudicating Authority having failed to notice the aforesaid fact while wrongly erred that the appellants are not "financial creditors", we set aside the impugned order dated December 19, 2018 and remit the case to the Adjudicating Authority, Chennai with direction to admit the application after notice to the "corporate debtor" so as to enable the "corporate debtor" to settle the claim prior to the admission of application under section 7 of the "I and B Code" - Appeal allowed.
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Service Tax
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2020 (5) TMI 267
Deduction of service tax from the amount payment (consideration) as per the contract terms - scope of the terms of agreement - services of lifting/collecting of municipal solid waste/garbage/malba/drain silt etc. and dumping the same to nearby designated site - appellant claims that consideration payable gets reduced on the ground that the petitioner was liable to pay service tax under the contract but was exempted - HELD THAT:- The agreed rate was of ₹ 1934/- per day per vehicle for eight hours of working. The rate was all inclusive including service tax, labour cess, accident claims etc. Escalation on the awarded rate was allowed in case of increase /decrease in fuel and minimum wages as stipulated only - The important thing that follows is that the aforesaid rate is all inclusive. It is subject to increase/decrease only in case of variation of fuel rates and minimum wages. There is no stipulation that in case service tax, insurance, registration charges, parking charges, etc. are varied, the charges payable will be increased/decreased. It is manifest that there is no stipulation in the agreement that the charges are in any manner linked with the service tax. In fact, there is nothing in the contract that even specifies what rate of the service tax is allegedly payable. The respondent is needlessly adding words to the agreement to try and justify the deductions for alleged nonpayment of service tax.
In view the conduct of the parties, it is clear that the parties did not envisage deduction in the agreed rate from alleged service tax payment. The agreed rate was understood by the parties to be all inclusive and the same would bind the parties.
Recovery of money - case of respondent is that petitioner was obliged to file a suit for recovery - HELD THAT:- Where facts are not in dispute and where the collection of money was without authorities of law, a reference may be ordered.
Hence, normally a writ petition would not lie for recovery of money. However, depending on the facts and circumstances of a case, the power to direct refund can be exercised sparingly. In my opinion the facts of this case warrant exercise of this power to direct the respondent to release amounts wrongly withheld for a non-existing service tax. The petitioner was the lowest bidder at ₹ 1972/- per vehicle per day. This amount after negotiations was reduced to ₹ 1934/- per day. When the tender was floated on 15.03.2012 or when the negotiation of rates took place or on 02.06.2012 when the work order was issued or on 27.08.2012 when the Agreement was executed, there was no service tax leviable on Service of Waste Collection or disposal - Simply because the existing position was re-interacted by the State by issue of a notification dated 20.06.2012 did not warrant the act of the respondent to in 2015 claim refund of payments already made on the plea that the petitioner is wrongly being paid an amount for service tax. The respondent has acted in a grossly arbitrary manner and cannot justify withholding the said amount.
The respondent have acted illegally, wrongly and malafidely withholding the amount on the alleged ground that service tax is not applicable to the agreed rate. A writ is issued to the respondent directing release all pending payments to the petitioner deducted on the ground of non-payment of service tax - Petition disposed off.
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Indian Laws
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2020 (5) TMI 266
Dishonor of Cheque - cheque was returned unpaid - existence of legal debt - Section 138 of the NI Act - respondent opposed the application by contending that the cheque in question worth of ₹ 4,24,800/- has been issued by the applicants company for discharge of legal debt and the same was dishonoured, therefore, the applicants are liable to be prosecuted for commission of offence punishable under Section 138 of the NI Act - HELD THAT:- This Court, vide order dated 14/05/2018 permitted the Official Liquidator to took the actual physical possession of assets of the Company M/s Plethico Pharmaceuticals Ltd. in liquidation. After that, on 23/05/2018, the respondent /complainant gave a notice to the applicants for payment of the cheque amount and when the applicants fails to pay the cheque amount, then the respondent/complainant filed private complaint against the applicants under Section 138 of the Negotiable Instruments Act, 1881 on 05/07/2018, which was got registered vide order dated 27/07/2018.
Where cheque presented is dishonoured and complaint is filed under Section 138 of the Negotiable Instruments Act against the company and its Directors after the company has already been ordered to be wound up. Whether such a complaint would be maintainable? - HELD THAT:- After the winding up orders and taking over the affairs of the company by the Official Liquidator since erstwhile the directors seized to be the directors as on the date of dishonour of the cheque because they were not in-charge of day to day affairs of the company. Offence is committed under Section 138 of the Act only on the dishonour of cheque amount and issuance of notice for demand of the cheque amount. As on that day, no such notice could be issued to the Company, which was in liquidation and the creditors is not to be paid as per the statute of the Companies Act, Therefore, the liability on them also cannot be fastened under Section 141 of the Negotiable Instruments Act, 1881.
Interpretation of the expression “fails to make payment” - HELD THAT:- The drawer in the instant case would be a company, which has gone into liquidation and case of a company is on different footing and is governed by the statute, namely, the Companies Act.
What is emphasized is that actual offence has to be committed by the company and then alone the Directors can become liable for the offence. When the company goes into liquidation and the cheque is presented thereafter, it cannot be said that the company has committed the offence as it is because of legal bar that it is precluded from making the payment. Once dishonour of the cheque by the Bank and failure to make payment of amount by the company is beyond its control, the Directors (who are in fact ex-Directors) can also not be held liable - such a complaint would not be maintainable, when the cheque is presented after the company has already been ordered to be wound up.
The complaint filed under Section 138 of the Negotiable Instruments Act, 1881 is not maintainable because the complainant /respondent sent a notice to the applicants on 23/05/2018 i.e. after passing of the wind up order by this Court meaning thereby on the date of issuance of notice to the applicants the company was in liquidation and cannot be stated to have committed any offence, therefore, summoning order is bad in law - Petition allowed.
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