TMI Tax Updates - e-Newsletter
May 20, 2020
Case Laws in this Newsletter:
GST
Income Tax
Insolvency & Bankruptcy
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Levy of GST on inward supplies - service supplied by the sub-contracts - landscape development and maintenance of garden work for State and Central Government Departments - the supply of services by the sub-contractors to the Appellant is not eligible for the benefit of exemption
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GST:
Levy of GST - activity of development and sale of land - While the Joint Development agreement is entered into for the two parties to jointly reap the benefits of the sale of the land to customers, there is a clear rendering of a service by the developer to the landowner in developing the land which belongs to the landowner. Therefore, the activity of developing the land is a supply of service by the Appellant.
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GST:
Classification of services - sub-contract - NHAI has executed an agreement with a Contractor for the development of a four-lane highway - the activity to be undertaken by the applicant cannot be treated as a part of main contract of NHAI thus the applicant who is supposed to execute an independent work cannot be treated as sub-contractor of the main contractor.
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Income Tax:
Denial of credit of TDS - Tax deducted by the Tenant should be granted as refund to the assessee as rent collected is its income in hands of the assessee and rent paid to the Government is its expenses. AO as well as the CIT(A) was not right in denying the credit of TDS to the assessee.
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Income Tax:
Claim of depreciation @ 60% on racks, Xerox machine - AO/TPO directed to verify the actual use and nature of Xerox machines and the accessories that has been considered as computer peripherals. In the event it is ascertained able that these accessories and Xerox machines could not be independently used but could only be used on being attached to computer 60% depreciation should be allowed.
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Income Tax:
Unexplained cash credit u/s 68 - discharge of initial onus or not - when full particulars, inclusive of the confirmation with name, PAN, copy of Income-tax returns, balance sheet Profit & Loss Account computation of income are furnished and same reflected in their books of accounts - addition so made is rightly deleted by the Ld. CIT (A).
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Income Tax:
Nature of expenditure - Expenditure being contribution to Cricket Academy u/s 37 - t expenditure in question was revenue expenditure and should be allowed as a deduction.
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VAT:
Benefits of Investment subsidy - the Petitioners are entitled to have the benefit of Investment Subsidy to an extent of 25% of the infrastructure cost , subject to a ceiling of the Sales Tax / VAT / CST paid in the State for the first ' five ' years - Respondents-State are permitted to set off / adjust the investment subsidy payable to the Petitioners, against the tax liability to be cleared by the Petitioners in respect of any past, present or future transactions.
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VAT:
Levy of Entry Tax - entry of goods in to Railway area - There is no dispute with regard to the fact that the goods brought by the Applicant herein are scheduled goods (i.e. either Schedule II or III) and the dispute is only with regard to the place to which the goods are brought, contending that the place being a land belonging to the Railways, it is not a 'local area'.
Articles
Notifications
Customs-
44/2020 - dated
18-5-2020
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Cus (NT)
Appointment of CAA in case of M/s Shilpa Medicare Ltd & ors.
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43/2020 - dated
18-5-2020
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Cus (NT)
Appointment of CAA in case of M/s L & T Hydrocarbon Engineering Ltd & ors.
GST - States-
G.O.Ms.No.147 - dated
15-5-2020
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Andhra Pradesh SGST
Seeks to prescribe the due date for furnishing FORM GSTR-1 for the quarters April, 2020 to June, 2020 and July, 2020 to September, 2020 for registered persons having aggregate turnover of up to 1.5 crore rupees in the preceding financial year or the current financial year
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G.O.Ms.No.146 - dated
15-5-2020
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Andhra Pradesh SGST
Specification of class of persons, other than individuals who shall undergo authentication of Aadhaar Number in order to be eligible for registration
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G.O.Ms.No.145 - dated
15-5-2020
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Andhra Pradesh SGST
Notification of the date from which an individual shall undergo authentication, of aadhaar number in order to be eligible for registration
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G.O.Ms.No.144 - dated
15-5-2020
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Andhra Pradesh SGST
Notification of the provisions of sub-section (6B) or sub-section (6C) of the said act shall not apply to a person who is not a citizen of India or to a class of persons
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G.O.Ms.No.143 - dated
15-5-2020
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Andhra Pradesh SGST
Andhra Pradesh Goods and Services Tax (Third Amendment) Rules, 2020.
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G.O.Ms.No.142 - dated
15-5-2020
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Andhra Pradesh SGST
Exemption of certain class of registered persons capturing dynamic QR Code and the date for implementation of QR Code to be extended to 01.10.2020
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G.O.Ms.No.141 - dated
15-5-2020
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Andhra Pradesh SGST
Exemption of certain class of registered persons from issuing e-invoices and extension of the date for implementation of e-invoicing to 01 .10.2020
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G.O.Ms.No.140 - dated
15-5-2020
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Andhra Pradesh SGST
Seeks to amend Notification No. G.O.Ms.No.301, Revenue (Commercial Taxes-II) Department, Dated 16-5-2019
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G.O.Ms.No.137 - dated
15-5-2020
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Andhra Pradesh SGST
Andhra Pradesh Goods and Services Tax (Second Amendment) Rules, 2020
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G.O.Ms. No. 139 - dated
15-5-2020
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Andhra Pradesh SGST
Providing special procedure for corporate debtors undergoing the corporate insolvency resolution process under the insolvency and bankruptcy code, 2016
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G.O.Ms. No. 138 - dated
15-5-2020
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Andhra Pradesh SGST
Exemption of foreign airlines from furnishing reconciliation statement in form GSTR-9C
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (5) TMI 416
Levy of GST on inward supplies - service supplied by the sub-contracts - landscape development and maintenance of garden work for State and Central Government Departments, all government local bodies (Municipalities and Corporations) etc. and other government undertakings through contract from sub-contracts - recipient of services - challenge to AAR decision - HELD THAT:- In this case, the Appellant who is the recipient of the supply from the sub-contractor is a Co-operative Society and not an entity specified in SI.No 3 and 3A. When this criterion of the Notification is not satisfied, the sub-contractors as suppliers of service, will not be eligible for the exemption under the entries 3 or 3A of the above said Notification. It is the argument of the Appellant that if the exemption is not available to the sub-contractors, then the GST paid by the Appellant on the inward supply from the sub-contractors will become a cost to them since they will not be eligible to avail the input tax credit of the tax paid on the inward supply, for the reason that the output supply made by them to the Government Department is exempted. While we agree that the Appellant will not be eligible for the input tax credit of the tax paid on the inward supply from the sub-contractors, we do not agree that this should be a ground for allowing the sub-contractors to avail the benefit of exemption. It is a well settled law that exemption notifications are to be interpreted strictly as to their eligibility. One cannot be influenced by extraneous factors while determining a person's eligibility to an exemption notification. Therefore, on a strict interpretation of the entry Sl.No 3 and 3A, we hold that the supply of services by the sub-contractors to the Appellant is not eligible for the benefit of exemption under either SL.No 3 or 3A of Notification No 12/2017 CT (R) dated 28-06-2017 - decision of AAR upheld.
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2020 (5) TMI 415
Levy of GST - activity of development and sale of land - Applicability of provision of Rule 31 in ascertaining the value of land and supply of service - challenge to AAR decision - HELD THAT:- In the instant case there are two activities involved, viz: development of land and sale of plots. The transaction relating to the sale of land is not a supply of either goods or service under GST (entry 5 of Schedule III of the CGST Act refers). This activity of sale of land cannot be considered as an 'exempt supply' for the reason that the activity is not at all a supply and hence the question exempting it under Section 11 of the Act does not arise. On the other hand, the activity of development of land is a supply in terms of Section 7 of the CGST Act. A combination of two activities one of which is not a supply under GST cannot be said to be a composite supply - this contention of appellant cannot be agreed upon. The landowner shall obtain all required licences, sanctions, consents, permissions, no-objections and such other orders as are required to procure the Sanctioned Plan. Further, in case the Appellant-Developer intends to modify the plans, the landowner shall obtain the required modifications to the sanctioned plan. The Appellant-Developer shall develop the project on the property subject to the obtaining of the sanctioned plan by the owners. Therefore, it is evident that the onus is on the landowner to comply with the provisions of Section 32 of the Karnataka Urban Development Authorities Act. It is the owner of the schedule property who agrees to transfer the ownership of the roads, drains, water supply mains, parks and open spaces, civic amenity areas to the Urban Development Authority. The Appellant-Developer has no role to play in obtaining the sanctions and in transfer of ownership. Therefore, this argument of the Appellant does not hold good. While the Joint Development agreement is entered into for the two parties to jointly reap the benefits of the sale of the land to customers, there is a clear rendering of a service by the developer to the landowner in developing the land which belongs to the landowner. Therefore, the activity of developing the land is a supply of service by the Appellant. The findings of the lower Authority on the question of taxability of the activity of development and sale of land and also the finding on the question relating to the value of supply is upheld - decision of AAR upheld.
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2020 (5) TMI 414
Scope of Advance Ruling application - Section 97(2) CGST Act 2017 - Availability of FIRC in respect of Export proceeds with respect to services for funds received through service providers - Documents required for export without payment of tax - refund proceedings, due to non-availability of FIRC or any other supporting documents - HELD THAT:- The question sought by the applicant is outside the scope of Section 97 (2) of CGST Act 2017 therefore the application is liable for rejection without going in to the merit of the case under Section 98(2) of CGST Act 2017. Since question sought by the applicant is outside the scope of Section 97(2) of CGST Act 2017 therefore, the application is not admitted.
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2020 (5) TMI 413
Permission for withdrawal of Advance Ruling application - classification of goods - determination of tax rates - HDPE SPRINKLER FEMALE COUPLER, HDPE SPRINKLER MALE COUPLER, HDPE SPRINKLER TEE, HDPE SPRINKLER BEND, HDPE SPRINKLER END CAP, HDPE PUMP CONNECTING NIPPLE, HDPE SPRINKLER ADOPTOR, HDPE SPRINKLER REDUCER and HDPE NIPPLE - HELD THAT:- The request to withdraw the application is considered. Application dismissed as withdrawn.
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2020 (5) TMI 412
Classification of services - rate of tax - works contract or not - sub-contract - NHAI has executed an agreement with a Contractor for the development of a four-lane highway - applicability of Entry (iv) of Heading 9954 of the Rate Notification - HELD THAT:- The applicant is proposing to submit a bid for shifting / erection of electrical lines only to M/s Sadbhav Jodhpur Ring Road Pvt. Ltd who is the main Contractor of NHAI. Thus the activity to be carried out by the applicant is restricted to shifting / erection of electrical lines only - Further, the details mentioned in the Article XI of the agreement as well 05.12.2019, as description of work mentioned in said letter dated specifically indicates the independent nature of work to be carried out by the applicant for which such cost will be borne by the authority or by the owning entity of the respective utility. As per the details mentioned in the Article XI of the agreement and description of work mentioned in the letter dated 05.12.2019, the supply made by the applicant is regarding Electrical utility shifting / erection of 11 KV lines and is of independent nature. Further, such cost will be borne separately by the Authority or the utility owning entity. Hence, the payment of the above said work which will be made to the concessionaire (Main Contractor) is not part of the/main contract (concession agreement) which also indicates the work is of independent nature. The entry number 3(iv)(a) of the Notification No 11/2017-CT (Rate) dated 28.6.2017allows concessional rate in case of works contract is for construction of road, bridge, tunnel or terminal for road transportation for use by general public - in the present case the proposed activity carried out by the applicant is of shifting /erection of 11 KV lines only and the same cannot be categorised as construction of road as classified under Entry number 3 (iv)(a) of the Notification No 11/2017-CT (Rate) dated 28.6.2017 (as amended). Since such cost of the above said activity will be borne by the Authority or by the entity owning such utility therefore such payment of above mentioned activity is not the part of the main contract i.e. construction of road as awarded to main contractor by NHAI. Thus, there establish no nexus between the main contract awarded for construction of road by the NHAI and the work proposed to be undertaken by the applicant. Therefore, the question of covering the activity under entry number 3(iv)(a) of the Notification No 11/2017-CT (Rate) dated 28.6.2017 does not arises - activity proposed to be undertaken by the applicant does not fall under entry no. (iv)(a) of the Notification No. 11/2017- CT(R) dated 28.6.2017. Whether the activity carried out by the applicant fall under entry no. (ix) of N/N.11/2017-CIYR? - HELD THAT:- The proposed activity carried out by the applicant is of shifting /erection of 11 KV lines only as already discussed above. We further, observe that the cost of the above said activity will be borne by the Authority or by the entity owning such utility as such payment of above mentioned activity is not the part of the main contract which is evident from the lines The cost of such shifting shall be borne by the Authority or by the entity owning such utility written in the Article XI of the main contract (concession agreement) awarded to main contractor by NHAI. Thus, there establish no nexus between the main contract awarded for construction of road by the NHAI and the work proposed to be undertaken by the applicant - the activity to be undertaken by the applicant cannot be treated as a part of main contract of NHAI thus the applicant who is supposed to execute an independent work cannot be treated as sub-contractor of the main contractor. The activity proposed to be undertaken by the applicant does not fall under entry no. (ix) of the Notification No. 11/2017-CT(R) dated 28.6.2017.
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Income Tax
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2020 (5) TMI 411
Deduction u/s 80HHC - export sale proceeds received in accordance with and in terms of the export contract and with approval of RBI inclusion - HELD THAT:- Extra realization made in rupees for export sale proceeds in foreign exchange due to adverse exchange rate of rupee would be part of the export turnover in the year of receipt subject to the foreign exchange coming into the country within the statutorily prescribed time period. We are also of the view that export sale proceeds received in accordance with and in terms of the export contract and with approval of RBI could not be ignored for the purpose of relief under Section 80-HHC of the said Act. The questions of law on which the instant appeal was admitted are answered accordingly. Grounds on which the CIT and the learned Tribunal rejected the appellant s claim are not tenable in law. With regard to the appellant s alternative contention for treatment of the amount in question as export turnover for the assessment year 1993-94 and 1994-95, both the CIT and the learned Tribunal held that the receipt was brought into India long after the end of the previous year relevant to the assessment year 1994-95 and such belated receipt had not been authorized by the Commissioner/Chief Commissioner. The fact remains that the appellant s application before the Commissioner was never taken up for consideration and disposal. Ends of justice will be served if the matter is remanded to the learned Tribunal for fresh consideration taking into account the subsequent development including the order of the RBI stated to have been passed on June 11, 2005 and also in light of the observations made in this judgment. In the result, the appeal succeeds. The order under appeal is set aside. The matter is remanded to the learned Tribunal for fresh consideration
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2020 (5) TMI 410
Denial of credit of TDS - rental income collected by the appellant under an agreement on behalf of Development Commissioner (Handicrafts) Ministry of Textiles in respect of Rajeev Gandhi Handicrafts Bhawan, New Delhi - HELD THAT:- Assessee was collecting rent on behalf of Government of India from the tenants and then remits that rent as it is back to the Government. The building is owned by the Government of India. Assessee is not the beneficial owner of the rent as property was given by the Government to the assessee for its use. Assessee was merely collecting the rent. Rent collected by the assessee is definitively its income and rent paid back to the Government is its expenses. It is a lease in lease out agreement/understanding. On the rent paid to the assessee by the tenants, tax is deductible under Section 194I. As assessee pays the same to the Government, it does not need to deduct tax at source on its repayment to the Government. In all practical purposes rent collected by the assessee from its tenants and rent paid to the Government (actual transfer of rent to the Government) is its outgo. Tax deducted by the Tenant should be granted as refund to the assessee as rent collected is its income in hands of the assessee and rent paid to the Government is its expenses. AO as well as the CIT(A) was not right in denying the credit of TDS to the assessee. - Decided in favour of assessee.
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2020 (5) TMI 409
Addition u/s 68 - Disallowance of share premium on the grounds that the assessee has not filed the valuation report pertaining to the value of the land for which share premium @ ₹ 90 /- per share has been received - HELD THAT:- Premium paid by the share holders is not without a proper reasons. The company is in possession of the land and also going ahead with development of residential complex which are reasons sufficient for payment of the premium. We are unable to concur with the finding of the Ao that the worth of the assessee at the time of issue of shares was negative - AO has ignored the fact on record that the assessee has purchased land at the cost of ₹ 3.19 crores at Village Khirki Daula which adequately supports the share premium raised by the assessee. There is no iota of evidence about the concealment or plough back of undisclosed income to the assessee - AO has not disputed the identity, genuineness and creditworthiness of the share holders. Hence, the invocation of the provisions of Section 68 for the simple reason of non filing the valuation report by the assessee and by not referring the cost of the land to the DVO, and without bringing any material on record to fulfill the criteria of Section 68, cannot be justified in this case.- Decided against revenue. Addition u/s 2( 22)(e) - Deemend dividend addition - substantial interest or not - HELD THAT:- As per the provisions of the Act it needs to meet the conditions in the instant case that Sh. Allimudin should have been a share holder in the companies paying the amount and also he should have been having a substantial interest in the assessee company. Section 2(32 ) refers to person who has a substantial interest in the company in relation to a company means a person who is the beneficial owner of the shares not being shares entitled to a fixed rate of dividend whether with are without a right to participate in profits carrying not less than 25 % of voting power. In order to tax the receipt, it has to be proved that the amounts received has been utilized by the assessee company could have been distributed as dividend by the lending company. We find that this is not the fact in the case of the instant assessee. Coupled with this fact, since, it has been proved that the advances are given for the business purpose, we hold that the provisions of Section 2(22)(e) of the Act are not attracted in the case of the assessee. - Decided against revenue.
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2020 (5) TMI 408
Revision u/s 263 - claim allowed by the AO u/s 57 - PCIT held that for allowing the deduction u/s 57, nexus between the income earned and the expenditure incurred to earn this income is a mandatory requirement and this requirement has not been established during the assessment proceedings - HELD THAT:- Loan has been an ongoing financial transaction with the assessee for a minimum period of three years. Confirmation has also been obtained the AO along with details of the cheques issued on account of interest payment. The details of TDS have also been filed before the AO. Assessee has also received salary bonus from BHL Forex Finlease Ltd. which has been duly offered to tax. Regarding the payment of interest, the details of opening balance, closing balance of the loans received have also been filed and examined by the AO. The opening balance with Multiplex Fincap Ltd. was ₹ 1,50,00,000/-. The interest received during the year is ₹ 12,00,000/- and the closing balance of ₹ 1,62,000/- has been reflected in the details filed by the assessee as examined by the AO. Thus, we find that this is also an ongoing transaction between the assessee and loanee. Both the parties are having regular transactions with the assessee over a period of time. Hence, the clause (a) of the Explanation II to Section 263 finds no application to the facts of the case. PCIT has not brought anything on record as to how the action of the Assessing Officer culminated in treating the assessment order as erroneous and prejudicial to the interest of the revenue. We find that the order of the AO is neither erroneous as it did not violate any provisions of Explanation II to Section 263 nor it is prejudicial to the interest of the revenue as no loss of revenue could be brought to light by the ld. PCIT in the revisionary proceedings - Decided in favour of assessee.
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2020 (5) TMI 407
TP Adjustment - subcontracting charges paid to 3rd - whether considered in the operating profit while computing assessee s margin? - contention of assessee that subcontracting charges should be excluded for computing margin of software development services in the hands of assessee - HELD THAT:- As decided in own case [ 2020 (2) TMI 259 - ITAT BANGALORE] cost of software development services cannot be treated in this fashion as claimed by the assessee. Hence we do not find any merit or substance in the contention raised by the assessee on this issue. Comparability analysis - Assessee provides software development and support services to Applied Inc. In this regard assessee employed services of 3rd party service providers for sub contracting specific part of their work. Core activities of software development cycle are conducted in house by assessee and a part of non-core activities are subcontracted to third-party service provider, thus companies functionally dissimilar with that of assessee need to be deselected. Disallowance of depreciation @ 60% on racks, Xerox machine and accessories, batteries and stabiliser - AO disallowed the claim and granted 15% depreciation for the reason that they are not integral part of computers which has been upheld by DRP - HELD THAT:- Undoubtedly machines like racks, batteries stabilisers can function without a computer and is attachable to any other electrical appliances. Therefore these machines do not form part of computer peripherals. Insofar as the Xerox machine is concerned, it is an ascertained able at this stage whether these machines could be exclusively and independently used without being attached to a computer as such kinds of Xerox machines do exist. Assessee has also not been able to establish details of accessories that has been categorised to be forming part of computer peripherals. We set aside this issue back to Ld.AO/TPO for verifying the actual use and nature of Xerox machines and the accessories that has been considered as computer peripherals. In the event it is ascertained able that these accessories and Xerox machines could not be independently used but could only be used on being attached to computer 60% depreciation should be allowed. Insofar as racks, batteries and stabilisers are concerned these do not fall within the category of computer peripherals and we uphold the depreciation being allowed only at 15%. Not granting MAT credit - HELD THAT:- It is observed that Ld.AO has not verified the claim and has denied it to assessee. We direct Ld.AO to verify the claim of assessee and if found eligible the same should be granted to assessee in accordance with law.
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2020 (5) TMI 406
Rectification of mistake u/s 254 - eligibility for deduction u/s 80P - DR further submitted that the Tribunal did not considered CBDT s Circular No. 6/2010 dated 20.09.2010 which clarified and Circular No. 319 dated 11.01.1982 deeming RRB s to be cooperative societies stands withdrawn for application with effect from 2007-08 - HELD THAT:- Order was passed on 18.09.2018 therefore, the Misc. Application ought to have been filed on or before 31.03.2019, but the Revenue filed the Misc. application on 10.04.2019. Present Misc. Application is time barred. The revenue has not made the case that the Misc. Application is filed within the stipulated time limit given under the Act. Besides this, the appeal filed by the Revenue is disposed off on merits and department has not filed any appeal before the Hon ble High Court. Order has attained finality. The Circular No. 6/2010 dated 20.09.2010 which has been taken in grounds of appeal is not applicable in the present case as the assessee is a Co-operative Society and is not a Regional Rural Bank. This circular has withdrawn the benefit of Sec. 80P in case of RRB s only. The decision in CAVALIER TRADING PVT. LTD., KALPIT TRADING PVT. LTD. VERSUS DY. COMMISSIONER OF INCOME TAX - OSD-II, CENTRAL RANGE 7 ANR. [ 2020 (2) TMI 271 - BOMBAY HIGH COURT] also supports the case of the assessee, since the present Misc. Application is barred by limitation. The department is seeking judicial review of the order passed by the Tribunal which is not permissible under the Income Tax Act. We have considered all the aspects in the order dated 18.09.2018. The Ld. DR could not point out any apparent mistake in the order of the Tribunal, therefore, there is no need to rectify the order. Thus, Misc. Application filed by the Revenue is dismissed.
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2020 (5) TMI 405
Penalty u/s 271(1)(c) - Addition of salary and bank interest received by the assessee - penalty proceedings initiated on the directions of the ld. PCIT u/s 263 (1) - HELD THAT:- Assessee has been out of India and has been receiving salary from three different employers and the returns have been prepared by a consultant. TDS on the salary has been already deducted and deposited to the department. Further, the ESOP amount is a non-cash transaction and on which the TDS has also been deducted and the Form 26 AS has clearly shown the TDS deducted. Assessee has been in different jobs and out of India, the returns have been prepared by a consultant, the explanation of the assessee could fairly substantiate that such explanation is bonafide and material relevant to the computation of the total income have been disclosed by him. In the case of Pitambar Das Dulichand [ 2003 (12) TMI 11 - MADHYA PRADESH HIGH COURT] held that no penalty is leviable in such case where there is no even an iota of evidence to suggest that the mistake was with the consent and knowledge would be treated as a deliberate act. In the absence of any such deliberate act on the part of the assessee, no penalty u/s 271(1)(c) of the Act is leviable. Also MS. SANIA MIRZA [ 2013 (2) TMI 220 - ANDHRA PRADESH HIGH COURT] held that an error committed by the assessee does not necessarily attract the penalty proceedings if that error was accepted and the amount was surrendered to tax. - Decided in favour of assessee.
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2020 (5) TMI 404
Deduction u/s 11 12 - Councel submitted since the assessment for the year under consideration was pending before the Assessing Officer, hence, the assessee is entitled to deduction as per provisions of sections 11 12 - HELD THAT:- Considering the submissions of the Ld. AR of the assessee, that where the registration has been granted to a Trust or Institution u/s 12AA of the Act, then the provisions of section 11 12 shall apply to the income of such an assessee from the property held under the trust of any preceding assessment year also subject to the condition of the assessment of such preceding year is pending before the AO on the date of such registration, the matter is restored to the file of the AO for verification of the facts and if the contention of the assessee is found true, the AO will allow the benefit of the relevant provisions to the assessee in accordance with law. - Appeal of the assessee stands allowed for statistical purposes.
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2020 (5) TMI 403
Unexplained cash credit u/s 68 - discharge of initial onus or not - providing identity of creditors and creditworthiness - HELD THAT:- Assessee has discharged the initial onus which lay on him in the terms of section 68 of the Act by providing identity of creditors and same has not been doubted by the AO also. Assessee has proved the creditworthiness by way of filing ITR returns, bank account, balance sheet, confirmation of the creditors. Assessee is not expected to prove the genuineness of cash deposits in bank accounts of those e creditors because under the law the assessee can be asked to prove source of credit but not the source of the source as held in the case of Orient Trading Co. v. CIT [ 1962 (8) TMI 69 - BOMBAY HIGH COURT] Therefore, in such a situation and considering above fact and finding , we are in complete agreement with the reasoning given by the Ld. CIT (A) that when full particulars, inclusive of the confirmation with name, PAN, copy of Income-tax returns, balance sheet Profit Loss Account computation of income are furnished and same reflected in their books of accounts - addition so made is rightly deleted by the Ld. CIT (A). In view of these facts and circumstances, we do not find any infirmity in the order of CIT (A), accordingly, same is upheld. Accordingly, all the grounds of appeal of as taken by the Revenue are therefore, dismissed.
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2020 (5) TMI 402
Rejection of books of accounts - Addition on account of low gross profit - CIT-A deleted the addition - HELD THAT:- Books of accounts were rejected by the AO merely on the basis of variation of signatures of karigars, workers as appearing in the salary register. However, no specific defects have been pointed out by the AO. Therefore, the difference in signature cannot be a ground to reject the books of accounts. CIT(A) has rightly observed that the AO is not hand writing expert to distinguish the signature of the karigar. CIT(A) has rightly allowed the ground of rejection of books of accounts u/s.145(3) of the Act in favour of the assessee. GP addition - Genuineness of the labour charges cannot be doubted. Further, the GP ratio has gone down because as against the rise in average purchase cost of imports and local purchases by 51% and 34% respectively in AY.2009-10, the rise in average price of export is only to the extent of 22.51%, therefore, the fall in GP is quite justified - there was overall recession in the diamond industry during the relevant period and most of the sales were export sales of the assessee, whereas the GP was disclosed at 3.71% - the export sales of the assessee constituted almost 99% of the total sales while local sales were only at 1.14%. Deletion of GP addition is justified, hence, we do not find any infirmity in the order of CIT(A) for deleting of GP addition. CIT(A) has upheld the addition of an amount of electricity expenses of to be added to the manufacturing cost to calculate the closing stock by taking the average cost of ₹ 11318.91 per carat which has been arrived after reducing the GP margin of 3.71% from the average export price of ₹ 11756.69 per carat. Therefore, this ground of assessee is dismissed. Forward contract cancellation loss disallowed - forward contract were not booked for any specific export and import and not utilized in business and terminated without affecting delivery of foreign exchange - HELD THAT:- The assessee is in the business of export of diamonds wherein the assessee is exposed to the risk of fluctuation in the exchange rate of currency. In order to hedge against losses, the assessee had booked foreign exchange in the forward market with bank and on cancellation on the contracts, the appellant is either entitled to profit or loss depending on the rate of contracts prevailing at the time of cancellation. The assessee has entered to this forward exchange contract in order to protect against fluctuation in the rate of foreign exchange currency to minimize the risk. Therefore, the assessee has not entered into any speculation transaction as held by the CIT(A). The ld. counsel has placed reliance on the decision of Friends Friends Shiping Pvt. Ltd [ 2013 (5) TMI 458 - GUJARAT HIGH COURT] wherein held that where assessee exporter entered into foreign exchange contract as incidental to its export business and incurred loss in said contracts, said loss was not speculative loss but business loss. Similar loss was also expressed in the case of Badridas Gauridu (P) Ltd [ 2003 (1) TMI 61 - BOMBAY HIGH COURT] and CIT v. Panchmahal Steel Ltd. [ 2013 (5) TMI 686 - GUJARAT HIGH COURT] . In view of these facts, we do not find any infirmity in the order of CIT(A). Valuation of closing stock - direction to the AO to recalculate the value of closing stock after considering electricity expenses in manufacturing expenses and thereby increasing the value of closing stock - HELD THAT:- As we have uphold that finding of CIT(A) to consider, the electricity expenses in manufacturing expenses and thereby increase the value of closing stock. Since the value of closing stock has been increased during this year, it becomes opening stock for the next year. Therefore, the AO is directed to consider to increase the opening stock of the equal amount in AY.2010-11 in the opening stock. Therefore, this ground of appeal of the assessee is allowed. Rectification u/s 154 - Calculation of closing stock by adopting the cost of sale - whether AO has committed an error while giving effect to the appeal effected to the appeal order and he should have calculated the closing stock by adopting the cost of sale at ₹ 11,318.91/- per carat, after reducing the GP margin of 3.71% - HELD THAT:- In the appeal order dated 18.04.2013 it was held that the working of the AO in the remand report of recalculation of the closing stock by including exports sales and local sales to work out the average price is not the correct method to calculate the closing stock. So the cost of the sales should have been reduced at ₹ 11,318/- per carat instead of ₹ 11211 per carat. The AO suggested to enhance the closing stock by ₹ 1,97/82,848/- in the remand report and this working was not accepted in the appeal order except in respect of the electricity expenses of ₹ 52,30,2447- which was to be included in the manufacturing cost. AO while giving effect to the appeal order should have calculated the closing stock by adopting the cost of sales at ₹ 11,318.91/- per carat after reducing the GP margin of 3.71%. Similar direction was also given while deciding the appeal order against the 154 application dated 17.01.2014. The AO is directed to give the appeal effect order as per the directions mentioned above. The ground of appeal is allowed.
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2020 (5) TMI 401
Disallowance being staff welfare expenses - Allowable business expenses - HELD THAT:- We find that the assessee has incurred this expenditure under staff welfare expense on account of purchase of washing machine for director and umbrellas given to selected staff. Hence, this expenditure is in the name of gifts, which cannot be allowed as business expenses. We further observe that the Tribunal also confirmed such disallowance in the assessment year 2001-02 [ 2009 (8) TMI 1255 - ITAT AHMEDABAD] in the case of the assessee. In view of these facts, this ground of appeal is dismissed. Disallowance of sale promotion expenses - AO observed that the assessee has debited sale promotion expenses which inter-alia included expenditure on gift to foreign clients, organizer diary etc. claimed to have been incurred to develop the relationship with them accordingly disallowed 1/5th of the same also confirmed by CIT (A) - HELD THAT:- Assessee submitted that such expenditure has been incurred for the purpose of business hence, same is allowable as deduction. Further, the issue is covered in favour of the assessee by order of Tribunal [ 2009 (8) TMI 1255 - ITAT AHMEDABAD] . We find that the AO has disallowed the same on estimate basis without any justification. Hence, same are directed to be allowed. This ground of appeal is therefore, allowed. Characterization of receipt - transfer of technical know-how and for undertaking non-compete obligation - capital receipt or not? - HELD THAT:- We find that the issue is now squarely covered in favour of the assessee by the judgement of Hon`ble Jurisdictional High Court of Gujarat in the assessee`s own case [ 2014 (4) TMI 168 - GUJARAT HIGH COURT] wherein after considering the decision of Hon`ble Supreme Court in the case of Guffic Chem (P.) Ltd. v. CIT [ [ 2011 (3) TMI 6 - SUPREME COURT] which held that non-compete fees received for from refraining from carrying on business was capital receipt and non-compete fees received prior to 01.04.2003 was not taxable under section 28(va) of the Act and CIT v. Sapthagiri Distilleries Ltd. [ 2014 (11) TMI 1078 - SUPREME COURT] it was held that compensation amount received towards loss of source of income and non-competition fees would only be treated as capital receipt and was not liable to tax, held in favour of the assessee. Assessee has received non-compete fees for non-compete obligation resulting in loss of source of income and further more non-compete fees is chargeable under section 28(va) from assessment year 2003-04 and not for assessment year under appeal, therefore, the non-compete fees in question amounts to receipt of capital in nature, not chargeable to tax for assessment year under consideration - Decided in favour of assessee. Non granting deduction u/s 80HHC on receipts by way of non-compete fees and on the receipts on transfer of technical know-how treated as royalty and assessed the income from business - HELD THAT:- Since, we have allowed the appeal of the assessee in respect of Ground No. 5 6 of non-compete fees. As capital receipt as per judgement of Hon`ble High Court. Therefore, the claim of deduction under section 80HHC becomes academic in nature and infructuous, hence, same is not being adjudicated hence, it is treated as dismissed. Deduction u/s 80-O on receipts treated as non-compete fees and assessed as business income purely on technical ground - revised certificate in Form No. 10HA is not filed - HELD THAT:- Since, we have allowed the appeal of the assessee in respect of non-compete fees. As capital receipt as per judgement of Hon`ble High Court. Therefore, the claim of deduction under section 80HHC becomes academic in nature and infructuous, hence, same is not being adjudicated hence, it is treated as dismissed. Not considering interest income as income from business for computing deduction under section 80HHC - HELD THAT:- We find that the issue under consideration is squarely covered by the decision of full bench of Hon`ble Rajasthan High Court in the case of Reliance Trading Corporation v. ITO [ 2015 (5) TMI 689 - RAJASTHAN HIGH COURT] as against assessee. Non considering insurance claim received and miscellaneous income as income from business for the purpose of computing deduction under section 80HHC - HELD THAT:- Insurance claim and misc. income have been received against business loss, hence, such receipt is not income derived from export business. However, an amount of ₹ 54,316 was received against damage, which is covered in favour of the assessee by the decision of Co-ordinate Bench of Tribunal in the case of the assessee in [ 2009 (8) TMI 1255 - ITAT AHMEDABAD] . Hence, same is allowed. Thus, this ground of appeal is therefore, partly allowed. Not to exclude the amount of DEPB Credit from the profits eligible for deduction under section 80HHC - as per AO though the same has no direct nexus with the export activity of the assessee - HELD THAT:- We have already decided this issue in favour of the assessee in a separate judgment in Topman Exports v. CIT [ 2012 (2) TMI 100 - SUPREME COURT] and we have held that not the entire amount received by the assessee on sale of DEPB, but the sale value less the face value of the DEPB will represent profit on transfer of DEPB by the assessee. The first issue is, therefore, decided accordingly. Therefore, respectfully following same we do not find any infirmity in the order of CIT (A), accordingly, same is upheld. Accordingly, this additional ground of appeal of the Revenue is therefore, dismissed. Payments of PF and ESIC - Whether payment made before filing of return of income are eligible for deduction without considering the fact that the due date in the respective Acts for said payment is 15th and 21st of every months? - HELD THAT:- We find that this ground of appeal was also come before us in A.Y. 2002-03 in the case of the assessee, wherein we have allowed the Revenue appeal, by following decision of Hon ble Gujarat High Court in the case of CIT v. Gujarat State Road Transport Corporation [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] . Therefore, following same, this ground of appeal is allowed in favour of the Revenue. Disallowance u/s 40A(2)(b) - payment made to related party for purchase of material was excessive as compared to other party - CIT (A) has deleted this ground by observing that the assessee has purchased the material for related parties at arm s length price and no excessive payment has been made and considering the business exigency - HELD THAT:- AO has not brought on record any such facts. In view of this, we do not find any infirmity in the order of CIT (A), accordingly, it is upheld. This ground of appeal is dismissed. Profits eligible for deduction under section 80HHC - HELD THAT:-Where interest income was received on investments, while interest paid on borrowings pertained to business expenditure, not 90 percent of gross interest , but 90 percent of net interest was to be reduced for computing section 80HHC deduction See GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD. [ 2015 (1) TMI 1024 - GUJARAT HIGH COURT] . For the purpose of computation of deduction under section 80HHC of manufacture and exporter of steel utensils, proceeds generated from sale of scrap would not be included in total turnover . Excise duty and sales would not be included in the total turnover while calculating the deduction under section 80HHC - HELD THAT:- Issue is covered in favour of the assessee by the decision of Hon`ble Supreme Court in the case of CIT vs. Laxmi Machine Works [ 2007 (4) TMI 202 - SUPREME COURT] and also by the decision of Tribunal in assessee`s case [ 2009 (8) TMI 1255 - ITAT AHMEDABAD] Deduction under section 80-O disallowed - rendering of the commercial service and receiving commission in foreign exchange - HELD THAT:- We note that the assessee has rendered technical service from India and are received in India from the foreign company in convertible foreign exchange. Hence, the rendering of the commercial service and receiving commission in foreign exchange by the assessee would entitle the assessee to the benefit of section 80-O. Foreign exchange earned is foreign exchange saved. The CBDT Circular No. 700 dated March 23, 1995 clarified section 80-O by stating that as long as the technical and professional services arc rendered from India and are received by the foreign Government or enterprise outside India, deduction under section 80-O of the Act would be available to the person rendering the service, even if the foreign recipient of the service utilizes the benefit of such services in India. In view of above facts, we are of the considered opinion that the assessee is entitled to claim of deduction under section 80-O of the Act. Accordingly, this ground is allowed.
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2020 (5) TMI 400
Reopening of assessment u/s 147 - creation of bogus capital - HELD THAT:- We find that the AO has duly considered the addition to be made because of opening capital, but did not make separate addition of said amount, as he allowed set-off of the same against the investment holding that same is made out of bogus capital created by the assessee - contention of the assessee that no addition is made on account of opening capital is devoid of any merits and not correct on facts and in law. Hence, same is rejected. Accordingly, we hold that the reopening of the assessment done by the AO is perfectly in order and as per law. Addition on account of alleged unexplained cash u/s.69A - HELD THAT:- There were two balance sheets prepared by the assessee, however, one was appeared to be authentic and has been prepared by Pankaj Danawala, and Chartered Accountant for bogus capital entry and assets, without any actual transaction has taken place. Therefore, the addition, if any, can be made any respective of one balance sheet for the same period, therefore, the addition of ₹ 64,806/- is confirmed and the other addition on amount of ₹ 67,535/- is deleted. This ground of appeal is partly allowed. Unexplained and undisclosed investment u/s.69B - assessee has invested in bank FD - HELD THAT:- We find that the FDR of ₹ 13,482/- dated 29-02-2000 and the other FDR does not fall during the year under consideration. Hence, the addition of ₹ 13,482/- is confirmed and the balance addition therefore, is deleted. This ground of appeal is therefore, partly allowed. Unexplained investment in building u/s.69B - HELD THAT:- Since the property in question was purchased in the year 1989 and same was registered in 1990. Therefore, the investment so made does not pertains to assessment year under consideration. The investment thereon is shown out of disowned balance sheet. Therefore, said addition is also not justified. In view of these facts and circumstances, the addition made by the AO is therefore, deleted. This ground of appeal is allowed. Unexplained investment on account of alleged unexplained expenditure and unaccounted investment made under section 69A - HELD THAT:- We find that the addition made for the assessment year under consideration does not pertains to assessment year under consideration, hence, same is therefore, is deleted. This ground of appeal is allowed. Addition related to disowned balance sheet , which was prepared by Shri Danawala Chartered Accountant, for certain of bogus balance sheet and bogus assets without any actual investment made by the assessee. The assessee has disowned the said balance sheet. In number of case laws, it was found to be bogus and addition stand deleted. Therefore, considering these facts, these addition made by the AO are therefore, directed to be deleted. Enhancement of income - power to Assessing Officer in relation to items of assessment which were never framing part of appeal before appellate authority - power under Income Tax Act, to enhance the assessment in Appeal - HELD THAT:- AO cannot enhanced the income originally assessed under section 143 (3) Is set-aside proceeding in consequence of direction of the tribunal. Since in original assessment, the addition were made in respect of unexplained investment in FDRs and addition made on account of unexplained investment which in fresh assessment has been made. Therefore, the original addition made by the AO in subsequent fresh assessment is only at ₹ 1,35,000/ i.e. [ ₹ 1,10,000 + 25,000=1,35,000] has been returned in set-aside assessment. Hence, only addition can be sustained up to ₹ 1,35,000 as per original assessment. Therefore, other additions so made are amounts to enhancement of income to that extent, which is not permissible in law. Hence, same is therefore, deleted. We are aware that original assessment was made at ₹ 4,64,870 whereas set-aside assessment has been made at ₹ 22,59,341 including returned income of ₹ 70,550. Therefore, we set-aside this issue for Limited verification by the AO whether there is other addition which has been made in original assessment and same is again retained set-aside assessment by the AO, if so he has liberty modify the figures of income to that extent. Ground No. 1 to 9 of appeals are partly allowed.
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2020 (5) TMI 399
Addition of cash deposited in bank - assessee showed his unwillingness to continue as authorized representative of the assessee - CIT(A) deleted the additions made by AO in ex-parte assessment u/s 144 - HELD THAT:- After conducting assessment proceedings and to arrive at the correct income of the assessee in the cases selected for scrutiny, the assessee is duty bound to furnish all the information and details to the satisfaction of the Ld. A.O who is the first authority to examine the details and assess correct income. The assessee has not appeared before Ld. A.O but subsequently he appeared before Ld. CIT(A) who also in the instant case has not given any reference of remand report which he should have been taken from the Ld. A.O before deciding the issues. Interest of justice and fair play all the issues raised by the revenue in this appeal needs to be set aside to the file of Ld. A.O for afresh examination and passing denovo assessment order. Reasonable opportunity of being heard is to be provided to the assessee but in case the assessee do not appear in person or through Authorized Representative in the second round on first three dates of hearing except for unavoidable circumstances, A.O will be at liberty to go ahead and frame the assessment after assessing the income as per the provisions of Income Tax Act. appeal of the revenue is allowed for statistical purposes.
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2020 (5) TMI 398
Additional evidence rejected - Addition of unexplained cash credit, unexplained investments and disallowance u/s 80C - HELD THAT:- CIT(A) rejected the additional evidence produced before the CIT(A) without assigning any cogent reason. Thus it will be appropriate to admit the additional evidence in this matter. Therefore, we are remanding back the matter to the file of the CIT(A) for adjudicating the appeal on merits. Needless to say, the assessee be given opportunity of giving by following principles of natural justice. The appeal of the assessee is partly allowed for statistical purpose.
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2020 (5) TMI 397
Disallowance of commission expenses u/s.37 - AO observed that these payments of commission is not justifiable and it is nothing but inflation of expenses by the assessee company in order to reduce its tax liability - Non speaking order by CIT-A - HELD THAT:- AO has brought out a case of tax evasion by the assessee company and when we peruse the order of the Ld. CIT(Appeals), he has not passed a speaking order. He has summarily disposed of the appeal of the assessee with a cryptic order which is devoid of any reasons on facts. CIT(Appeals) also did not deal with each and every factual aspect as brought out by the AO in his order. That even after having power co-terminus with that of the Assessing Officer, the Ld. CIT(Appeals) has not conducted any verification or enquiry as to the modus of operation of the assessee company and whether the finding brought on record by the Assessing Officer is correct or not, nothing has been specifically dealt with in his order. CIT(Appeals) has also mentioned in his order that Since each assessment year is separate in itself, facts needs to be verified. Set aside the order of the Ld. CIT(Appeals) and remand the matter back to his file for passing a speaking order - Appeal of the assessee is allowed for statistical purposes.
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2020 (5) TMI 396
Condonation of delay - delay of 358 days - assessee could not appear before the AO and ''Ld.CIT (A)'' due to shifting his employment as contended in the condonation petition - HELD THAT:- Admittedly, the onus lies on the assessee to file the appeal within the time. But the provision of section 253(5) authorizes us to condone the delay if the appeal was not presented by the assessee within the time due to some unavoidable reason. In the present case we find that the assessee could not file the appeal due to change in the place of employment i.e. from Ahmedabad to Pune. Revenue has not brought anything on record contrary to the contention of the assessee justifying the delay in filing the appeal. We presume content of the application filed by the assessee is correct despite of the fact that the condonation petition was not supported with the corroborative evidences for shifting employment from Ahmedabad to Pune - in the interest of justice and fair play we impose the cost upon the assessee for ₹ 5000/- for not presenting the appeal within the prescribed time. Accordingly, the assessee is directed to deposit cost of ₹ 5000/- in the Income Tax Office. We condone the delay in filing the appeal by the assessee as discussed above and proceed to decide the issue on merit. Assessee has not appeared before the authorities below. Hence, the additions were made by the AO which were subsequently confirmed by the ''Ld.CIT (A)'' without hearing the assessee - impugned addition has been made and sustained without considering the relevant evidences which might result recovery of the taxes on the additions which are not sustainable in the eyes of Law. Indeed, the primary onus lies on the assessee to co-operate in the proceedings before the authorities below. In case he does not do so he deserve to be penalized. Again we feel that the penalty to be imposed upon the assessee should be commensurate to the default committed by him. As such we are of the view that the assessee should not suffer for his nonappearance for the addition of the income which is not sustainable under the Act. Undoubtedly, the additions have been made and sustained by the respective authorities merely on the reasoning that the assessee failed to provide the supporting evidences which might result in the recovery of the tax with respect to the additions which are not liable to tax - we are inclined to set aside the order of the ''Ld.CIT (A)'' for fresh adjudication as per the provision of Law to the file of the AO. However, we are of the view that the assessee deserve to be penalized for non-appearance before the authorities below. Accordingly we impose penalty of ₹ 5000/- upon the assessee to deposit the same in the Income Tax Officer before the commencement of his proceedings before the AO. - Appeal filed by the assessee is allowed for statistical purposes.
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2020 (5) TMI 395
Nature of expenditure - Expenditure being contribution to Cricket Academy u/s 37 - Revenue or capital expenditure - AO took the view that under the agreement assessee had marketing rights with regard to the Academy players, related rights i.e. with regard to admission of players and also the right to sign contracts of the players from the Academy thus would be capital in nature - HELD THAT:- In respect of an identical payment made by the assessee under the very same agreement for establishing cricket Academy for assessment year 2010-11, the issue was considered by this Tribunal in [ 2018 (10) TMI 1163 - ITAT BANGALORE] the Tribunal held that expenditure in question was revenue expenditure and should be allowed as a deduction. - Decided in favour of assessee.
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Insolvency & Bankruptcy
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2020 (5) TMI 394
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 found that the Petitioner Bank has submitted the documents duly executed by the Corporate Debtors and guarantors along with the Statement of Accounts with Certificate under the Banker's Book of Evidence Act, 1891, in support of their IB Petition for initiation of C.I.R.P. - The CD has defaulted in making repayment of credit facilities to the Petitioner Bank and the date of default is 30-5-2015. The statement of accounts as on 7-7-2018 along with the Banker's Book Evidence Certificate annexed with the Petition confirms the amount in default is ₹ 310,21,71,498.38Ps as on 7-7-2018. Further, the CIBIL Reports submitted by the Applicant Bank confirm the existence of liability to the Financial Creditor and default committed by the Corporate Debtor - The Petitioner Bank has filed the petition within the period of limitation, as the last payment into the account has come on 20-8-2015 and the application has been filed on 13-7-2018 besides submission of OTS Proposal on 25-9-2018. It is a settled legal position that the pendency of SARFAESI proceeding or other dispute does not prevent a Financial Creditor to trigger the C.I.R.P. because the nature of remedy being sought for under the provisions of the I.B. Code is Remedy in Rem in respect of the CD. Also, application is filed by the Respondent under section 60(5) read with section 442 of Companies Act, 2013 against the Applicant Bank with a prayer to refer the matter for mediation and conciliation panel - At this stage, this Adjudicating Authority is only to decide whether the petition filed by the Financial Creditor under section 7 of IBC is to be admitted or rejected, considering the facts that whether the default has occurred or not and the application under section 7 filed under sub-section 2 of the IBC is complete or not in all respects. When the application is yet to be admitted, the question of referring the petition to the Mediation and Conciliation panel does not arise and moreover the Ld. Lawyer of the Financial Creditor strongly opposed to this prayer of the Corporate Debtor as the Applicant Bank has not accepted the OTS proposal submitted on 27-8-2018 and they are not giving consent for referring the mater to Mediation and Conciliation Panel. The present IB Petition is admitted as found complete in all respects - application admitted - moratorium declared.
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2020 (5) TMI 393
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Applicability of time limitation - time barred debt or not - Whether Limitation Act is applicable in this matter as the Petition is filed on 29.09.2017? - HELD THAT:- The issue is now well settled in view of B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES [ 2018 (10) TMI 777 - SUPREME COURT] , that section 238A of the IBC is applicable from the commencement of the Code i.e. 01.12.2016 irrespective of the fact that this section has been added in the second amendment to the code on 06.06.2018. Hence, if a claim is hit by limitation, the same will not survive in the light of provisions of Limitation Act, 1963 as well as section 238A of the IBC - this Bench is of the View that the provisions of Limitation Act do apply while implementing the provisions of Insolvency Code. So, the outcome of this discussion is that if the facts of the case narrates that twelve years is to apply instead of three years, the applicability of those provisions of the limitation act are to be examined in the light of the facts and circumstances of a particular case. Whether the debt is time barred in the present case in hand? - HELD THAT:- As per article 62 of the Limitation Act, 1963, the limitation period is twelve years from the date when the money sued for becomes due. Here, the Date of Default is 11.03.2015 as per Form I annexed to the petition and the petition is filed on 29.09.2017. In the absence of any specific denial or evidence from the side of the Debtor, it is unreasonable and unjustifiable not to believe the date of default as 11-3-2015. Hence, this Bench is of the view that in either case, i.e. three years or twelve years, this petition is well within limitation and the contention of the respondent that the debt is time barred is rejected. A defaulter cannot dictate a term on the creditor to choose its line of action for due security of the debt. The decision of the creditor to form a consortium of lenders or to join a lending forum is a prerogative of the lender which cannot be intervened by the borrower. In this case, it is also important to place on record that at that point of time when this decision was taken by the petitioner/lender, there was no resistance or objection from the side of the Corporate Debtor. Since as long as there is a 'debt' and a 'default', this Tribunal is inclined to admit the petition - Furthermore, it is considered by this Bench that the debt is undisputedly unpaid with regard to Term Loan III in view of the Demand Promissory Note dated 24.05.2012 issued by the Corporate Debtor to the Financial Creditor. The Financial Creditor has established that the loan was duly sanctioned and duly disbursed to the Corporate Debtor but there has been default in payment of Debt on the part of the Corporate Debtor - thus, the nature of Debt is a Financial Debt as defined under section 5 (8) of the Code. It has also been established that admittedly there is a Default as defined under section 3 (12) of the Code on the part of the Debtor. The Petition is hereby Admitted - The commencement of the Corporate Insolvency Resolution Process shall be effective from the date of the Order.
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Central Excise
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2020 (5) TMI 392
Remand of the case - Coordinate Bench of this Court [in which Dr.Vineet Kothari, J. was one of the Member] in the case of THE COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, COIMBATORE. VERSUS PRICOL LIMITED, CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL, SOUTH ZONAL BENCH CHENNAI [ 2019 (8) TMI 759 - MADRAS HIGH COURT] had also upheld the remand of the matter to the Tribunal - HELD THAT:- Since the matter already stands remanded back to the First Appellate Authority by the order of the learned Tribunal, we are not inclined to make any observations on the merits of the case and the parties are directed to raise their rival contentions before the First Appellate Authority - the First Appellate Authority will decide the case in accordance with law - Appeal disposed off.
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CST, VAT & Sales Tax
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2020 (5) TMI 391
Benefits of Investment subsidy - Chhattisgarh State Infrastructure Cost Fixed Capital Investment Subsidy Rules, 2004 framed and published with retrospective effect from 01.11.2004 - entitlement for a subsidy adjustment / reimbursement of 25% of the infrastructure cost for establishing industry outside industrial area, upto a maximum amount equivalent to the amount of commercial tax / central sales tax paid in the State for 5 years - subsequently issued Annexure-P/9 Notification dated 10.08.2011, virtually curtailing the benefit of concession payable under the Investment Subsidy Scheme, whereby the maximum limit (which was originally fixed as 25% of the investment subject to a maximum of 5 years' sales tax paid) was restricted as '₹ 3 crores'. HELD THAT:- There is no dispute with regard to the sequence of events. It was based on the specific need felt of the newly formed State that the 'Industrial Policy (2001-2006', later substituted by 2004-2009) was formulated and notified inviting entrepreneurs to set up industries in the State to achieve rapid economic growth offering to make use of the advantages available in the State and the concessions assured. This offer was acted upon by the Petitioners to set up the industries, making huge investments under the firm belief that they were entitled to have the benefit of investment subsidy to an extent of 25% of the infrastructure cost, subject to maximum of the Sales Tax / CST paid in the State during the first 'five' years. Obviously, there is a cap / ceiling fixed already with regard to the extent of benefit payable as per the Industrial Policy notified at the first instance, as incorporated in the Rules notified subsequently, to the effect that it would be 25% of the infrastructure cost made by the entrepreneurs subject to maximum of the Sales Tax / CST paid in the State for the first 'five' years. The commodity thus manufactured fixing the 'sale price' (based on the above factors, also reckoning the element of 'investment subsidy' surely to get as offered / assured as per the notified Industrial Policy / Rules) has already been marketed and as such, if the amount payable towards the Investment Subsidy as per the original terms of the Policy / Rules is sought to be denied after expiry of the Policy period, it will simply result in rupturing the financial base of the Petitioners, as the unconscionable financial burden cannot be recovered by them 'by resetting the sale price' of the commodity which they had already sold out - The Petitioners have made out a case that they were having 'Legitimate Expectation' to have had the benefits flowing from the Industrial Policy for year 2004-2009 and incorporated as part of the Rules notified and existed throughout the Policy period. This is more so since, similar terms of benefit were offered in the Industrial Policy originally notified for the period 2001-2006, in respect of which, no plea is raised from the part of the State as to any mistake having occurred therein. Admittedly, the said Policy was prematurely terminated and a new Policy was introduced for the period 2004-2009; when also the need to fix any additional capping of benefit was never felt by the Government. As such, the explanation now offered from the part of the Government, that it was only a mistake, which required to be rectified in 'public interest' does not hold any water at all. The course of action pursued by the Respondent-State in the case of the Petitioners herein, curtailing the benefit of Investment Subsidy, which ought to have been extended to them on the strength of the original Industrial Policy 2004-2009 and declared in the Investment Subsidy Rules, 2005 (as originally notified in the Gazette) is not correct or proper - It is declared that the Petitioners are entitled to have the benefit of Investment Subsidy to an extent of 25% of the infrastructure cost , subject to a ceiling of the Sales Tax / VAT / CST paid in the State for the first ' five ' years . In the said circumstances, all the orders / proceedings passed in the case of the Petitioners, insofar as they stand against said declaration are set aside. The State might be permitted to set off the subsidy amount to be disbursed to the Petitioners against subsequent / remaining the tax liability to be cleared by the Petitioners, considering the totality of the facts and circumstances involved, the Respondents-State are permitted to set off / adjust the investment subsidy payable to the Petitioners, against the tax liability to be cleared by the Petitioners in respect of any past, present or future transactions - Petition allowed.
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2020 (5) TMI 390
Levy of Entry Tax - entry of goods in to Railway area - the assessment was finalized by the Assessing Authority levying Entry Tax with interest and penalty as per Annexure RA/4 order, which was sought to be challenged by filing an appeal before the Deputy Commissioner (Appeals) - specific contention raised by the Applicant was that the place to which the goods were brought by the Applicant / Assessee, was part of the Railway land which was not a local area as defined under Section 2(d) of the Chhattisgarh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976. HELD THAT:- Section 6 of the said Act dealing with the principles governing levy of Entry Tax on dealer or person under sub-section (1) (a), that Entry Tax shall not be payable unless the dealer or such person effects entry of goods specified in Schedule II or Schedule III into a 'local area'. Under Section 6 (1) (b), it is stated that where any such goods are consumed, used or sold in a local area by the dealer or such person, it shall be presumed, until the contrary is proved by him, that such goods had entered into that local area for consumption, use or sale there - There is no dispute with regard to the fact that the goods brought by the Applicant herein are scheduled goods (i.e. either Schedule II or III) and the dispute is only with regard to the place to which the goods are brought, contending that the place being a land belonging to the Railways, it is not a 'local area'. Section 131 of the Orissa Municipal Act, 1950 refers to the power of the Municipality to impose taxes including Octroi Duty on the goods brought within the limits of the Municipal area. The significant thing to be noted, as held by the Apex Court, was that Octroi Duty could fall within the ambit of Section 184 (1) as a tax in aid of the fund or any local authority; which will not apply to the tax of Entry Tax leviable under Section 3(1) of the said Act of 1999 (which tax is imposed and collect by the State Government). It was also observed that the words any tax in Section 184 of the Railways Act, 1989 was required to be read in the context of Article 285 of the Constitution of India and to be understood as any tax on property or income as a direct tax. The Railways/licensor had clearly alerted the Applicant / Assessee that it would be for the Applicant / licensee to satisfy the various charges / fees as mentioned therein in respect of the use of the said plot plus local taxes, such as all Municipal rights and taxes, if any to the Government as and when demanded; besides the liability to satisfy the occupation fees, whenever enhanced by the Railways with retrospective effect. Application dismissed.
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