TMI Tax Updates - e-Newsletter
May 27, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
Addition u/s 14A r.w.r. 8D - Whether all shares held in ‘stock-in-trade’ should be considered for disallowance under section 14A or only those shares which yielded the dividend income? - To be computed by applying the theory of apportionment of expenditure and taking into account only those shares which yielded dividend income
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Income Tax:
Unaccounted purchases - only the profit element in such unaccounted purchase should be made especially when there is no unaccounted stock found during the survey on account of such unaccounted purchases. In our opinion profit rate @10% on such unaccounted purchase will be reasonable and will meet the ends of justice.
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Income Tax:
Disallowance of bank charges as expenses while calculating the interest income - The claim of the assessee has been allowed in succeeding years by the CIT(A) against which no appeal has been filed by the Revenue. We hold that the assessee has merit in her claim; the bank charges being related to the interest income are duly allowable as expenditure in the hands of the assessee.
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Income Tax:
Grant of registration u/s 12AA - apparently the Ld. CIT (Exemptions) was having doubts regarding the genuineness of the activities but instead of having the same verified, he chose to straightway refuse the grant of registration. This was not correct. If the Ld. CIT (Exemptions) was having any kind of doubts, he should have got the same verified.
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Income Tax:
Depreciation on letting out of building for business purposes - For the earlier assessment year, the assessee itself has offered income from letting out property as income from house property. As such, the assessee cannot have any grievance and is entitled to only deduction u/s. 24 of the I.T. Act.
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Customs:
Waiver of Demurrage Charges levied by ICDs/CFSs/Port/Terminal Operators during lockdown - Permission to traders/members of petitioner/Foundation to lift their material from their respective ports without payment of penal charges - lockdown and pandemic COVID situation - there is no material on record which prima facie suggests that any right of the petitioner has been violated by the respondents
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Corporate Law:
Principles of Natural Justice - The appellant having preferred this appeal instead of approaching the Company Judge for preponement of hearing and having taken up the time of this Court and especially after having indulged in concealment of the history of its claim as aforesaid, is not entitled to any indulgence.
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Indian Laws:
Smuggling - contraband item kept in safe custody by income tax officers - The statements of the Income Tax Officers find requisite support in the statements of the applicant recorded under section 67 of the NDPS Act - The action of the officers of the Income Tax department in apprising the said matter of finding the suspicious substance during the course of Income Tax search, in the given circumstances, cannot be said to be inconceivable and unjustifiable.
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IBC:
Time Limitation - CIRP process - A suit for recovery is a separate and independent proceeding distinct from the remedy of winding-up and therefore the contention of the Learned Counsel appearing for the Respondents/ Financial Creditor that the period spent while pursuing SARFAESI Proceedings should extend the period of limitation, cannot be sustained, as the intent of the Court is not to give a new lease of life to the debt which is already time barred.
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VAT:
Principles of natural justice - The revisional authority has dismissed the revision for want of prosecution - If the petitioner after preferring the revision does not choose to appear on any of the dates fixed petitioner runs the risk of dismissal of his Revision for want of prosecution.
Articles
Notifications
Circulars / Instructions / Orders
Case Laws:
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GST
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2020 (5) TMI 555
Furnishing of information - petitioner has impugned the summons 11 th May 2020 by the respondent no-3 seeking various information - HELD THAT:- The petitioner shall be directed to furnish all such information. furnished so far, on or before 8 th June 2020. The would be at liberty to Visit the office premises of the and to collect all such information, if any, with the assistance of the necessary staff. It is clear that if any such permission is required to Visit the office premises of the from the concerned police station, such permission shall be granted to the petitioner and its staff with such conditions as it deems fit. It is made dear that no further extension of time would be granted to the petitioner to furnish such information. No coercive Steps shall be taken against the petitioner till 10 th June 2020 by the respondent no.1 for not furnishing information. After such information is furnished. the respondents shall prepare a report within the time prescribed i.e. upto 30th June 2020. Petition disposed off.
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Income Tax
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2020 (5) TMI 554
Stay of demand - Condition of depositing 20% of the tax demanded complied with - respondent no.2 through Ext.P12 calls upon the petitioner to pay the balance of 80% tax under challenge in Ext.P4 appeal - HELD THAT:- After chronologically taking note of the dates referred to above, this court is of the view that Ext.P12 ought not to have been issued once the petitioner has complied with the condition of depositing 20% of the tax demanded. It could be that, in Ext.P10 stay has been granted upto 30.09.2019 and the appeal in Ext.P4 is not yet heard. This Court is of the view that the amounts demanded through Ext.P12 if is carried out, the appeal filed by petitioner will be more in the nature of academic pursuit of objections. To meet the ends of justice, the writ petition stands disposed of by this judgment, in the circumstances of this case: (a) Ext.P4 appeal is disposed of as expeditiously as possible, preferably within three months from the date of receipt of a copy of this judgment. (b) Stay granted in Ext.P10 order stands extended till the appeal is disposed of and order communicated to petitioner.
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2020 (5) TMI 553
Addition u/s 14A r.w.r. 8D - determining the disallowance under rule 8D(2)(ii) of the I.T.Rules AO took the gross interest as against the net interest - Whether AO ought to take net interest for the purpose of computation of disallowance under Rule 8D(2) (ii) of the Rules? - HELD THAT:- We note that this issue is no longer res integra. There are plethora of precedents wherein it was held that only net interest should be taken for the purpose of computation of disallowance under Rule 8D(2) (ii) of the Rules. See M/S UNIVERSAL INDUSTRIAL FUND LTD. [ 2018 (3) TMI 207 - ITAT KOLKATA] and M/S. SUHAMI POWER FINANCE CORPORATION VERSUS ACIT, RANGE -17 (3) , MUMBAI [ 2019 (7) TMI 1621 - ITAT MUMBAI] We direct the AO to compute the disallowance under rule 8D(2) (ii) only after taking net interest (interest received minus interest paid). The assessee is also directed to furnish the details of interest received/paid, before the assessing officer along with documentary evidence, if any. Therefore, we allow the issue of computation of disallowance under rule 8D(2) (ii) of the Rules for statistical purposes. Average value of stock-in-trade will not be taken in determining the disallowance under section 14A read with rule 8D - Counsel submits that the value of investment will not include the value of shares held as stock-in-trade, as the main object of the assessee is to purchase and sale of shares - HELD THAT:- In the light of the above stated judgment of the Hon`ble Supreme Court in the case of Maxopp Investment [ 2018 (3) TMI 805 - SUPREME COURT] it is abundantly clear that the expenditure incurred in acquiring those shares, which is held in stock-in-trade will have to be apportioned. Therefore, section 14A read with rule 8D will be applicable in a situation when the assessee keeps shares in stock-in-trade . Whether all shares held in stock-in-trade should be considered for disallowance under section 14A or only those shares which yielded the dividend income? - HELD THAT:- As respectfully following the judgment of Hon`ble Supreme Court, in the case of Maxopp Investment (supra) and respectfully following the judgment of the Coordinate Bench of Kolkata in the case of REI Agro Ltd [ 2013 (9) TMI 156 - ITAT KOLKATA] we direct AO to compute the disallowance under section 14A read with rule 8D in respect of shares held in stock-in -trade by applying the theory of apportionment of expenditure and taking into account only those shares which yielded dividend income.For statistical purposes, the second issue raised by the assessee is allowed. Order being pronounced after the 90 days of hearing - Covid-19 pandemic - HELD THAT:- Taking note of the extraordinary situation in the light of the Covid-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion, we rely upon the decision of the Co- ordinate Bench of the Mumbai Tribunal in the case of DCIT vs. JCB Limited [ 2020 (5) TMI 359 - ITAT MUMBAI]
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2020 (5) TMI 552
Addition u/s 69 - Theory of peaking credit for ascertaining unexplained investment - whether the bank account is being used for the purpose of the business in which sale proceeds have been deposited and purchases were made by using that account? - HELD THAT:- Certain ambiguities in the details filed by the assessee vis- -vis considered by the AO. The amounts have been used for the purpose of commodity trading, and the amounts have been withdrawn periodically. Similar amounts have been deposited at roughly ₹ 49,000/- per transaction. It appears that these amounts must have been used by the assessee for trading activities, and therefore, only the peak positive or negative balance occurred in these accounts deserves to be considered as unexplained income of the assessee, because deposits and withdrawals from the same account, though through cross-bearer cheques also According to the assessee, he has availed benefit of cheque discounting and re-circulated this money for commodity trading. Possibility of truth in this allegation cannot be ruled out. It can only be ruled out, had the AO called one of the persons to whom cheques was issued, and inquired who has collected cash from the bank. Had this exercise was done, with regard to one Shri Janardhan who has withdrawn ₹ 2.50 lakhs on 12th June, then the stand of the assessee could be falsified. But no such exercise was done by the AO. Therefore alternative submission of the assessee is accepted for assessing his income at peak of credit/negative balance in this account. Thus, confirm addition which is a negative balance as on 5.9.2009 in place of ₹ 23,87,399/- made by the AO and confirmed by the ld.CIT(A). Appeal of the assessee is partly allowed.
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2020 (5) TMI 551
Bogus LTCG - Penny stock purchases - unexplained credit u/s.68 - onus to prove - HELD THAT:- Since, the right to exemption must be established by those who seek it, the onus therefore lies on the assessee. In order to claim the exemption from payment of income tax, the assessee had to put before the Income Tax Authorities proper materials which would enable them to arrive at a conclusion . [ 1958 (10) TMI 9 - SUPREME COURT]. However, in this case, it is seen from the order of the Ld.CIT(A), supra, that the assessee has not placed relevant material and proved the genuineness of the impugned transactions. Although, an appeal against the above order has been filed before this tribunal, even before us also, the assessee has not challenged the findings recorded by the lower authorities with relevant material and hence we dismiss the appeal of assessee.
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2020 (5) TMI 550
Validity of issuance of notice u/s. 153C - HELD THAT:- Since the AO has issued the notice u/s. 153C and the assessment has been completed u/s. 153C therefore, we do not find and substance in the additional grounds raised by the assessee. Accordingly the above grounds are dismissed. Addition of unexplained deposits - adoption of rate of 3% commission - HELD THAT:- AO to adopt the profit rate of 0.5% as commission on such accommodation entry of ₹ 23,56,61,255/-. Accordingly the order of the CIT(A) is modified and the AO is directed to restrict the addition to ₹ 11,78,306/- being commission @0.5% of ₹ 23,56,61,265/- as against ₹ 70,69,838/- adopted by him and upheld by the CIT(A). Coming to the addition on protective basis we find from the order of the AO as well as the CIT(A) that there is no such addition on substantive basis in any other hand. AO has made the addition on protective basis without making any addition on substantive basis in any other hand. It has been held in various decisions that if no substantive addition has been made in any other hand, then there cannot be any protective addition. The Delhi Bench of the Tribunal in the case of Sh. Anuj Kumar [ 2018 (6) TMI 1700 - ITAT DELHI] and Fussi Financial Services Private Limited [ 2017 (6) TMI 1164 - ITAT DELHI] has held that when AO has not made any addition on substantive basis there cannot be any protective addition. It has been held that there may be substantive assessment without there being a protective assessment.There cannot be any protective assessment or addition without any substantive assessment or addition. Since in the instant case the AO has not made any substantive assessment or addition in any other hand, therefore, the protective addition made in the hands of the assessee being not in accordance with law has to be deleted. We accordingly set aside the order of the CIT(A) and direct the AO to delete the addition made by him on protective basis without making any addition on substantive basis. Unaccounted purchases - HELD THAT:- AO in the instant case, on the basis of documents seized marked as Annexure-A-1 containing 80 pages which were impounded during the course of survey noted that the said note sheet contains unexplained purchase and accordingly made addition of the same which has been upheld by the CIT(A). The addition made by the AO on account of business income from outside books of account and unexplained initial investment has been deleted by the CIT(A) and the revenue is not in appeal before us and, therefore, we are not concerned with the same. So far as the addition on account of unaccounted purchases is concerned in our opinion only the profit element in such unaccounted purchase should be made especially when there is no unaccounted stock found during the survey on account of such unaccounted purchases. In our opinion profit rate @10% on such unaccounted purchase will be reasonable and will meet the ends of justice. Set aside the order of the CIT(A) on this issue and direct the AO to restrict the addition made by the AO and sustained by the CIT(A). The grounds raised by the assessee are accordingly partly allowed.
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2020 (5) TMI 549
Non-admittance of the appeal by the CIT(A) - tax liability arising on account of returned income has not been paid by the assessee - HELD THAT:- Assessee is deceased and the appeal is represented by the legal heir of the assessee. Admittedly, the taxes were not paid by the assessee alongwtih return of income; though repeated pleas, were raised before the authorities below to sell the gold ornaments seized and adjust the sale proceeds against the tax payable by the assessee, but no such exercise was carried out by the Department. Thereafter, the assessee claims that she sold house property and paid the taxes due with interest on returned income before her death during 18.03.2015 to 12.08.2015. Thus especially where the assessee had demised, it is deemed fit to admit the appeals of the assessee and decide the issue on merits. We do not find any merit in setting aside the issue to the CIT(A) and proceed to decide present appeals. Disallowance of bank charges as expenses while calculating the interest income for the respective years - claim of bank charges debited by the foreign bank account maintained by the assessee with HSBC Bank, Switzerland - HELD THAT:- The Hon ble Supreme Court in the case of Seth R.Dalmia vs CIT [ 1977 (9) TMI 1 - SUPREME COURT] was held that for allowability of such deduction, the dominant purpose of the expenditure incurred must be to earn income. The connection between the expenditure and the earning of income need not be direct; even an indirect connection could prove the nexus between the expenditure incurred and the income. The claim of the assessee has been allowed in succeeding years 2010-11 2011-12 by the CIT(A) against which no appeal has been filed by the Revenue. We hold that the assessee has merit in her claim; the bank charges being related to the interest income are duly allowable as expenditure in the hands of the assessee. Accordingly, we hold so. AO is directed to allow the deduction on account of bank charges against the interest income assessed in the hands of the assessee. - Decided in favour of assessee.
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2020 (5) TMI 548
Deduction u/s 10A/10AA - direction of DRP to allow deduction of telecommunication expenses and foreign travel expenses from Total turnover also while computing deduction u/s 10A/10AA - HELD THAT:- We notice that the Ld DRP has followed the binding decision rendered by the Hon ble jurisdictional High Court in the case of Tata Elxsi Ltd [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] in giving the said direction. Since the Ld DRP has followed the decision rendered by the jurisdictional High Court in directing the AO to exclude telecommunication foreign travel expenses both from Export turnover and Total turnover while computing deduction u/s 10A/10AA of the Act, we do not find any reason to interfere with the said direction. TP Adjustment - exclusion of two comparable companies , viz., M/s E-Clerx Services Ltd and M/s Acropetal Technologies Ltd. - HELD THAT:- M/s E-Clerx Services Ltd, as examined by the Special bench of the Tribunal in the case of M/s Maersk Global Centres (India) Private Limited vs. ACIT [ 2014 (3) TMI 1159 - ITAT MUMBAI] and the Special bench has given a finding that the above said company is mainly engaged in providing high-end services involving specialised knowledge and domain expertise in the field and hence the same cannot be compared with a company engaged in providing low end services to the group concerns as like assessee in present case. M/s Acropetal Technologies Ltd company is engaged in the development of computer software. So it appears that the nature of engineering design services provided by the above said company is in the form of development computer software and it may be in the nature of high end services. However, the assessee herein is providing low end ITES services. We hold that this company cannot be considered to be a good comparable. Accordingly we uphold the decision rendered by Ld DRP on this company. Working capital adjustment - whether working capital adjustment could be given or not? - HELD THAT:- As earlier noticed that the TPO has granted rebate towards working capital adjustment to the tune of 0.23%. The contention of the assessee before Ld DRP was that the TPO has actually worked out the working capital adjustment at 0.64%, but granted the rebate only to the tune of 0.23%. The Ld DRP, hence, directed the TPO to correct the mistake, if any. Since the direction given by Ld DRP relates to correction of mistake only, we do not find any infirmity in the direction so given. Revenue recognition - foreign exchange gain can be taken as operating income or not? - DRP held that the foreign exchange gain should be considered as part of operating income - HELD THAT:- We notice that the Ld DRP has followed the decision rendered by the coordinate bench in the case of SAP labs India (P) Ltd [ 2010 (8) TMI 676 - ITAT, BANGALORE] . Identical view has also been expressed by another co-ordinate bench in the case of CISCO Systems (India) Private Ltd [ 2014 (11) TMI 849 - ITAT BANGALORE] . Accordingly, we do not find any infirmity in the direction given by Ld DRP on this issue. Direction given by DRP to apply export filter in ITES segment - contention of the revenue is that the said direction actually amounts to setting aside the draft order and hence the same is beyond the scope of the DRP - HELD THAT:- DRP has applied the export filter on all the comparables and accordingly rendered its decision. Hence we are of the view that the said action will not amount to setting aside the draft order as contended by the revenue. Rejection of claim for deduction u/s 10AA on the amount of transfer pricing adjustment voluntarily made by the assessee - HELD THAT:- Assessee is eligible for deduction u/s 10AA of the Act in respect of voluntary Transfer Pricing adjustment made by it. See A.T. KEARNEY INDIA PVT. LTD. VERSUS ACIT, CIRCLE 1 (1) , NEW DELHI. [ 2019 (6) TMI 1092 - ITAT DELHI]
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2020 (5) TMI 547
Grant of registration u/s 12AA denied - cash from undisclosed sources is being introduced in the society in the form of school fees - HELD THAT:- Assessee society has been running a school and that the society is also having recognition from the Department of Education, Government of Haryana. As observed by the Ld. CIT (E) that the school was being run from premises that consisted of one hall and eight rooms only and was actually situated in a Gali . The Ld. CIT (Exemptions) has observed that it was unbelievable that receipts to the tune of nearly ₹ 1 crore are generated from such small premises. Thus, apparently the Ld. CIT (Exemptions) was having doubts regarding the genuineness of the activities but instead of having the same verified, he chose to straightway refuse the grant of registration. This, in our considered opinion, was not correct. If the Ld. CIT (Exemptions) was having any kind of doubts, he should have got the same verified. The issue needs a relook and reconsideration by the Ld. CIT (Exemptions) and, therefore, we deem it fit to restore the issue to the file of the Ld. CIT (Exemptions) for reconsidering - Decided in favour of assessee for statistical purposes.
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2020 (5) TMI 546
Non-prosecution by assessee - explained the facts of business, status of assessee, surrounding circumstances for non-appearance by assessee - HELD THAT:- CIT(A) has sent three notices to the assessee through e-mail but same were not complied with and therefore the appeal of the assessee was dismissed for non prosecution. The assessee submitted that the assessee is an HUF where Karta is the proprietor of M/s. Chunnu Fashions. In fact, it is BM Sarin HUF who is the assessee. AO has passed an order in the name of M/s. Chunnu Fashions, the ld CIT(Appeals), in the statement of facts before him it is categorically stated that the assessee is an HUF, he also passed an order in the name of Chunnu Fashion. Even appeal before us is also filed in the name of Chunnu Fashions. In the total proceedings, the assessment order has never been framed on the correct persons i.e. BM Sarin HUF, but has been passed in the name of Chunnu Fashions. Karta of the HUF, Mr. BM Sarin is more than 70 years old and has closed his business. The notices were sent through emails but the assessee being a senior citizen could not look into those emails. He is not a computer literate and has no business as the business of the assessee was closed 5 years ago due to heavy losses. There is a genuine reason for not appearing before the ld CIT(A). It is also alarming that the assessment orders have been passed on non-existent party i.e. M/s. Chunnu Fashions which does not exists at all. In fact the assessment order and the appellate orders should have been in the name of BM Sarin HUF. This fact also deserves to be looked into. As before us also, appeal is filed in the name of M/s Chunnu Fashions incorrectly. We are correcting the title of appeal in the name of [B.M. Sarin, HUF]. Therefore, we set aside the order of the CIT(A) and sent it back for re-examination of the total facts by giving opportunity to the Assessee for hearing as the issue have not been decided on the merits of the case. Appeal of the assessee is allowed for statistical purposes.
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2020 (5) TMI 545
Depreciation on letting out of building for business purposes - HELD THAT:- The assessee has declared income from letting out building as income from business for the assessment year 2010-11 and 2011-12. It is an admitted fact that the assessee had let out 25% of the building in the assessment years under consideration. It cannot be said that the portion of the building is not entitled for depreciation. In our opinion, the order of the Tribunal in assessee s own case we direct the Assessing Officer to assess the income from letting out building under the head income from business and to grant depreciation for the assessment years 2010-11 and 2011-12. For the assessment year 2012-13, the assessee itself has offered income from letting out property as income from house property. As such, the assessee cannot have any grievance and is entitled to only deduction u/s. 24 of the I.T. Act. Disallowance u/s. 14A r.w.s. 8D - Whether assessee had sufficient interest free own funds available to make the above investments? - HELD THAT:- Assessee has not established in the cash flow statements about the availability of enough own funds at the time of making investments in the exempted income yielding assets before the lower authorities. Hence, it is appropriate to verify the fact whether enough own funds are available with the assessee as on the date of making investments in the exempted income yielding assets. Being so, the assessee is directed to produce cash flow statements showing availability of enough own funds for making such investments with supporting documents which have to be examined by the Assessing Officer before making disallowance u/s. 14A read with Rule 8D of the I.T. Rules. Accordingly, we remit this entire issue in dispute to the file of the Assessing Officer for fresh consideration - Appeals filed by the assessee are partly allowed for statistical purposes.
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2020 (5) TMI 544
Deduction u/s 80P(2)(d) - Interest income received from Thiruvananthapuram District Cooperative Bank Ltd. - plea of the assessee is that the assessee is entitled for deduction u/s. 80P(2) and 80P(2)(a)(i) if the assessee is not granted deduction u/s. 80P(2)(d) - HELD THAT:- As seen from the order of the CIT(A), the CIT(A) has given very cryptic findings and not addressed the above grounds. Hence, we remit this issue to the file of the CIT(A) for fresh consideration by passing a speaking order. Accordingly, the grounds of appeal of the assessee are partly allowed for statistical purposes. Deduction u/s 80P(2)(d) on the interest income received from Thiruvananthapuram District Cooperative Bank Ltd - According to the Ld. AR, this alternative claim of the assessee is to be examined by the CIT(A) by passing a speaking order - HELD THAT:- As seen from the order of the CIT(A), the CIT(A) has given very cryptic findings and not addressed the above grounds. Hence, we remit this issue to the file of the CIT(A) for fresh consideration by passing a speaking order. Accordingly, the grounds of appeal of the assessee are partly allowed for statistical purposes.
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2020 (5) TMI 543
Reopening of assessment u/s 147 - unexplained cash credit u/s 68 - HELD THAT:- No fault with the action of the ld AO, as the information was received from AIR and the return of income of the assessee did not show the complete details about the above deposit. Further, in response to the query letters of the AO, assessee did not reply. Therefore, AO has reason to believe about escapement of income. Thus ground no 1 is dismissed. Though the assessee has supported the same with the cash flow statement as well as the sum received from her professional practice and from partnership firm - when the assessee filed her return of income she included the professional income of ₹ 518831/- as well as remuneration and interest from partnership firm of Priyadarshi Hospital ₹ 219415/-. Her individual gross receipt from private practice shows Gross professional income of ₹ 885690/- which was deposited in that bank account. While explaining the source the assessee has categorically stated that, the above professional receipt was deposited in the bank account of the assessee. Therefore, addition to that extent naturally amounts to double addition. She was having opening cash balance in hand of ₹ 325492/- which was also deposited. Therefore, the addition on that account also deserves to be deleted in absence of any other finding contrary by the revenue. This left us the sum of ₹ 3 lakh received by the assessee from Priyadarshi Hospital. The assessee was a partner in that firm. Undoubtedly, the account submitted by the assessee was not authenticated by stating the PAN. We also do not find information about return of income etc of that firm in the paper book submitted by the assessee. In view of this, we direct the ld AO to delete the addition to the extent of ₹ 325492/- and ₹ 885690/-. However, with respect to the receipt of ₹ 3 lakhs from Priyadarshi Hospital requires proper verification. Accordingly, to that extent only, we set aside the issue of verification of cash receipt of only ₹ 3 lakh from Priyadarshi Hospital by the assessee back to the file of the ld AO with a direction to the assessee to submit the authentic ledger stating PAN of that partnership firm. - Appeal of the assessee is partly allowed
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2020 (5) TMI 533
Deemed dividend u/s 2(22)(e) - Business transaction - amount being advanced and received back - HELD THAT:- Tribunal with regard to related concerns, wherein it was noted that though advances were made but on the same date, there were transaction of receipt and payments itself by both the parties. Tribunal thus addressed itself as to whether such transaction is covered in the definition of deemed dividend in the hands of the assessee u/s 2(22)(e) or not. Tribunal held the issue to be covered by the decision of Praveen Bhimsi Chheda Shivsadan vs DCIT OFFICER [ 2011 (5) TMI 857 - ITAT MUMBAI] against which the Hon ble Bombay High Court in the case of CIT vs Pravin Bhimsi Chheda [ 2014 (7) TMI 141 - BOMBAY HIGH COURT] has dismissed the appeal of the Revenue holding that when the company got back its funds on the same day, it cannot fall into the definition of the deemed dividend. Same parity of reasoning and decision of Hon ble Bombay High Court, the issue was decided in favour of the assessee holding that where the transaction entered into by two companies were business transactions; where both the parties were engaged in similar trade and activities; then it was not hit by the provisions of section 2(22)(e). The issue is similar wherein the business transaction was between two parties and the assessee had produced the bank statements during the course of hearing before us evidencing the amount being advanced and received back on the same date. Accordingly, we find no merit in the addition in the hands of the assessee u/s 2(22)(e) of the Act and the same is deleted. - Decided in favour of assessee.
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Customs
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2020 (5) TMI 542
Waiver of Demurrage Charges levied by ICDs/CFSs/Port/Terminal Operators during lockdown - Permission to traders/members of petitioner/Foundation to lift their material from their respective ports without payment of penal charges - lockdown and pandemic COVID situation - case of petitioner is that petitioner/Foundation is not seeking complete waiver of charges levied by CFS on importers/ traders for handling and clearance of cargo, but is praying for waving off of ground rent penal charges, demurrage, Container Detention Charges etc., especially when they themselves have been exempted from paying Port ground rent charges during the lock down. Whether the guidelines/letters which are only advisory in nature and contain no directions under any statute can bind CFS and direct them not to charge ground rent etc.? HELD THAT:- The advisory issued by CFS Association shows that it is also alive to the situation and taking a sympathetic view and giving considerable discount in ground rent/ penal charges. Letters issued by the concerned Ministries - HELD THAT:- On careful examination of all the facts and submissions made by the Ld. Counsels for the parties, this Court is of the opinion that petitioner has failed to make out a prima facie case for grant of injunction. The circulars/guidelines and advisories issued by respondent no.1 and 2 are not binding upon respondent no. 3 to 6. Some of the advisories only contemplate that authorities concerned should adopt sympathetic and humanitarian approach and has advised them not to charge ground rent or penal charges. In these circumstances, there is no material on record which prima facie suggests that any right of the petitioner has been violated by the respondents. This Court is further of the opinion that since respondent no.3 to 6 are not bound by various guidelines/ letters/ advisories issued by respondent no.1 2, the balance of convenience also does not lie in favour of the petitioner. There are no grounds for grant of injunction/restrain order in favour of the petitioner and against the respondents are made out at this stage - The application filed by petitioner under Section 151 CPC for injunction is, therefore, dismissed.
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Corporate Laws
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2020 (5) TMI 541
Principles of Natural Justice - refusal to transfer the shares - principal grievance of the appellant in this appeal as well as as argued by the counsel for the appellant is, that the Company Judge has erred in disposing of the application of the appellant, without considering the merits thereof and in terms of the order dated 13th May, 2020 in applications of others and to which the appellant was not a party - HELD THAT:- The appellant, after the alleged purchase of shares in 1997 and refusal of transfer thereof to its name soon thereafter, remained quiet for nearly 14 years, till about October, 2011 when CA No.2436/2011 was filed for directions for transfer of the shares to its name and which application was opposed by the counsel for OL and probably owing to which opposition, the then counsel for the appellant deemed it appropriate to withdraw the relief claimed of transfer of shares from the name of CRB to the name of the appellant with liberty to pursue the claim before the OL. The appellant conveniently concealed the said facts, while filing CA No.491/2019 as well as while filing CA No.242/2020 order of dismissal whereof is impugned in this appeal. Even in this appeal, no reference whatsoever is made to the claim made as far back as in 2011 for transfer of shares to own name and failure therein. Such conduct of the appellant alone is sufficient for dismissal of this appeal. The appellant having preferred this appeal instead of approaching the Company Judge for preponement of hearing of CA No.491/2019 and having taken up the time of this Court and especially after having indulged in concealment of the history of its claim as aforesaid, is not entitled to any indulgence. The present is clearly a case of re-litigation by the appellant of its claim as made in CA No.2436/2011 and which itself was barred by time and belated and was withdrawn. While considering the question of grant of any interim relief to the appellant by way of CA No.242/2020, during the pendency of CA No.491/2019, the merits of CA No.491/2019 definitely have to be considered and once no merit is found in CA No.491/2019, the question of granting any interim relief to the appellant does not arise. Appeal dismissed.
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2020 (5) TMI 540
Grant of Interim Bail - COVID-19 pandemic situation - main thrust which has been canvassed by learned counsel for the applicants is that due to Covid-19 (Corona Virus) infection, the applicants being diabetic patients have great risk to their lives if they are kept in jail where there are much chances of they being infected by Corona Virus - HELD THAT:- As a result of fraudulent activities, the Company has defaulted against outstanding liabilities of ₹ 3578/- crores approximately to Banks and Public Financial Institutions thereby causing wrongful loss to them and their acts and omission are punishable under section 447 and 448 of the Companies Act, 2013. Learned Assistant Solicitor General appearing on behalf of the respondents through his objection filed has drawn the attention of the Court that the applicants have been arrested for the commission of offence of fraud with Public Sector Banks and Financial Institutions involving total amount of ₹ 7500/- crores approximately (₹ 4000/- crores approximately in RGPL and ₹ 3500/- crores in F.I.L.) and the Ministry of Corporate Affairs vide order dated 21.2.2018 ordered investigation into the affairs of 11 Companies of Rotomac Group and Frost International Ltd. and during investigation, it has been revealed that the approval was taken from Ministry of Corporate Affairs to investigate the affairs of another Company, i.e., F.I.L. and Ministry of Corporate Affairs vide order dated 22.8.2019 granted the said approval. Taking into account the nature and gravity of the offence which shakes the conscience of the society and public at large, the investigation being still pending and there are strong apprehensions that there would be chances of tampering of evidence by the applicants, the prayer for grant of interim bail is hereby refused.
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Insolvency & Bankruptcy
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2020 (5) TMI 539
Time Limitation - CIRP process - attachment of property and possession taken over - appellant contended that the Application under Section 7 is barred by limitation, the date of default being 15.10.2013; there is no Acknowledgment Of Debt to take benefit under Section 18 of the Limitation Act 1963; the letter dated 20.03.2018 offering OTS is beyond the limitation period of three years - HELD THAT:- The issue of limitation is to be addressed to, keeping in view the ratio laid down by the Hon ble Supreme Court in B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES [ 2018 (10) TMI 777 - SUPREME COURT ] where the Hon ble Supreme Court has laid down that Limitation Act is applicable to Applications filed under Section 7 and 9 of the Code from the inception of the Code and that Article 137 of the Limitation Act, getsattracted. The right to sue therefore accrues when a default occurs. If the default has occurred over 3years prior to the date of filing of the Application, the Application would be barred under Article 137 of the Limitation Act, 1973. In the instant case, the date of default as mentioned in part IV of the Application is 15.10.2013. It is the Respondent s case that the date of default is to be taken as 30.06.2014 as observed by the Adjudicating Authority - We observe from the letter dated 02.07.2014, that the date of default is 30.06.2014 though the date of default mentioned in Part IV of the Application, is 15.10.2013. In this case the right to sue accrues on 30.06.2014 and 3 years limitation period ends on 29.06.2017, whereas the Application was filed on 08.11.2017 - the contention of the Learned Counsel that the Financial Creditor has also initiated proceedings under DRT and under the SARFAESI Act 2002, and therefore this period should be excluded, cannot be sustained. Applicability of benefit under Section 14 (2) - HELD THAT:- In the instant case benefit under Section 14 (2) cannot be given to the Applicant as there is no material on record to show that the subject Application was being prosecuted with due diligence in a court of First Instance or of Appeal or Revision which has no jurisdiction - In a catena of judgments it has been observed that proceedings under IBC cannot be construed to be that of a recovery or a Money Suit. In the present case there is no evidence brought on record to establish that the provisions of Sec 18 have been complied with. A perusal of Annexure 5 relied upon by the counsel for the first respondent is neither signed by the concerned party against whom the right is claimed nor by any person through whom he derives his title or liability. Viewed from any angle, this statement does not construe Acknowledgement Of Debt as mandated under Sec 18. While addressing this issue, the Adjudicating Authority has failed to consider that the Acknowledgment relied upon by the Applicant and observed so in the Order, i.e. 20.03.2018 is beyond 3 years of the date of default. Thus, the suit for recovery based upon a cause of action even if it is within limitation, it cannot in any manner impact the separate and independent remedy of a winding-up proceeding. A suit for recovery is a separate and independent proceeding distinct from the remedy of winding-up and therefore the contention of the Learned Counsel appearing for the Respondents/ Financial Creditor that the period spent while pursuing SARFAESI Proceedings should extend the period of limitation, cannot be sustained, as the intent of the Court is not to give a new lease of life to the debt which is already time barred. The Application preferred by Respondent under Section 7 of the I B Code is dismissed.
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CST, VAT & Sales Tax
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2020 (5) TMI 538
Maintainability of petition - Jurisdiction - power of Excise Officials of the Golaghat district to search and seize any IMFL consignments originating from the State of Arunachal Pradesh which is meant for State of Nagaland - HELD THAT:- In the present case in hand, it is the Inspector of Excise, Golaghat (Sadar) who initiated the search in the consignments which were on transit from Arunachal Pradesh to Nagaland purportedly through a specified route from Naharlagun in the State of Arunachal Pradesh to Dimapur in the State of Nagaland via State of Assam through Bandordewa, Tezpur and Golaghat as per the consignment notes. The vehicles were seized on 24.11.2019 and on 25.11.2019 for violation of route as it was seized at a place called Telgarom in the Golaghat district. The provisions of Sections 42 and 43 of the Act 2000 are taken note of in order to show the legislative intent and purpose of the Government of Assam in Excise Department vesting the sphere of activity in the field of crime detection and crime punishment upon the officials of Excise department inasmuch as investigation of an offence is the field exclusively reserved for the executive through the Police Department, the Superintendence over which vests in the State Government. The report to the learned CJM, Golaghat dated 10.01.2020, records the suspicion of the Excise official about the commission of an offence which he was empowered to investigate due to violation of route indicated in the passes issued by the officials of Arunachal Pradesh. Once such suspicion is recorded, the empowered Excise official is authorized to exercise the power conferred upon a police officer carrying out an investigation under Sections 160-171 of the Cr.P.C. The investigation envisaged in the Act 2000 is the one defined under Section 2(h) of the Code of Criminal Procedure 1973 which includes all the proceedings under the Code for the collection of evidence conducted by a police officer - the action of the Excise official or officials in breaking the digital lock of the consignments falls under Section 165 Cr.P.C. read with Sections 42 and 43 of the Act, 2000. Chapter IX of the Act, 2000 prescribes the penalties and procedure for the offences covered by it. For investigation the offences as mentioned in the report of Excise official requires no proof but a prima facie satisfaction is required and not beyond that. Merely, the consignments were exported from a State and imported to another one and there being no applicability in both the States of the Act, 2000 that itself cannot be the ground to hold that the Excise officials had no jurisdiction to carry on the search and seizure of the consignments while on transit through an area covered by the force of the Act, 2000 - The jurisdiction exercised for investigation by the Excise officials of the Golaghat district is proper inasmuch as it evolves out of Section 183 under Chapter XIII of the Cr.P.C., 1973 through Sections 42 and the investigation part under Section 43 of the Act, of 2000. Petition dismissed.
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2020 (5) TMI 537
Principles of natural justice - reasonable opportunity of being heard denied - levy of Entry Tax - revision dismissed for want of prosecution - HELD THAT:- The records do not reveal in specific terms as to whether the notices were served on the petitioner or not as there is no endorsement as regards receipt of the notices by the petitioner. However, the fact remains that the revision was preferred by petitioner and not by the Revenue and therefore it was the bounden duty of petitioner to be abreast with the dates of hearings. Since the Revision was filed by the petitioner it was his responsibility to be aware of the dates of hearing. The petitioner cannot pass on the buck to anyone else and thus cannot take shelter of non-service of notice as regards date of hearing. The revisional authority has dismissed the revision for want of prosecution - If the petitioner after preferring the revision does not choose to appear on any of the dates fixed petitioner runs the risk of dismissal of his Revision for want of prosecution. This court does not see any illegality, impropriety or rampant irregularity in the impugned order passed by the Revisional authorities which accordingly does not deserve any interference and therefore the present petition deserves to be dismissed - petition dismissed.
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2020 (5) TMI 536
Completion of assessment proceedings - Time Limitation - amendment in Section 25(1), where assessment was five year which was amended to six years - HELD THAT:- The assessment in respect of the period of limitation for reopening has already expired and cannot be reopened in view of the provisions of the Act. Petition allowed.
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2020 (5) TMI 535
Maintainability of petition - effective alternative remedy by way of Revision - Section 56 of the Kerala Value Added Tax Act, 2003 - whether the product of the appellant will fall under entry 36 in accordance with Rule 23 of the Rules of Interpretation? - HELD THAT:- There are no authoritative pronouncement of this court or the hon'ble Supreme Court with respect to the interpretation of the amended provision. Therefore, whether the exercise done by the Ist respondent by invoking the powers under Section 56(1) is sustainable or not, can be decided only on an elaborate consideration into the merits of the issue. In that respect, we perfectly agree with the findings rendered by the learned Single Judge that the orders do not suffer from any jurisdictional error or violation of natural justice or contravention of the provisions. All the contentions raised herein above can be effectively agitated in a properly constituted Revision Petitions filed under Section 59 of the KVAT Act - the intra-court appeal filed is upheld. If the appellant prefers a statutory Revision Petition before the Commissioner, the same shall be entertained by the said authority. If any delay condonation application is filed along with the Revision Petition, the time spent by the petitioner in prosecuting the writ petition as well as this writ appeal shall be taken into consideration in deciding the question of condoning the delay. So also, if any interim application is filed seeking stay of further proceedings, pending disposal of the Revision Petition, the Commissioner shall consider the same and pass appropriate orders without any further delay. Appeal disposed off.
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Indian Laws
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2020 (5) TMI 534
Smuggling - contraband item kept in safe custody by income tax officers - Interpretation of statute - true import and construction of the provisions contained in sections 41 and 42 of the NDPS Act - whether the act of the Income Tax Officers of collecting and keeping the contraband in the safe custody on 7th January 2014 constitutes a seizure? HELD THAT:- The phraseology of sections 41 and 42 of NDPS Act, indicates that the powers under those sections cannot be exercised by an officer who is not either empowered or authorized. A search and seizure operation by an officer not empowered or authorized would be without mandate of law. Such search and seizure cannot be banked upon to visit a person with the consequences envisaged by the provisions of the Act. Can this prescription be applied with equal vigour when the contraband is found per chance by the officers who are neither empowered nor authorized under the NDPS Act, is the real question. Here the context provides a legitimate answer. If the search and seizure operation is carried out by the officers who are neither empowered nor authorized with the purpose or under a belief that the suspect possesses the contraband substance, then the provisions of the Act would apply with full force and the prosecution would not be permitted to rely upon such search and the trial on the strength of such seizure would stand vitiated. However, when the officers stumbled upon the contraband substance in possession of a person in a totally different proceedings, like the income tax search at hand, different considerations ought to come into play lest the ground of non-compliance of the provisions contained in sections 41 and 42 of the NDPS Act, even in case of an accidental recovery of contraband substance, would cause serious prejudice to the cause of administration of criminal justice. A profitable reference in this context can be made to the judgment of the Supreme Court in the case of STATE OF HIMACHAL PRADESH VERSUS SUNIL KUMAR [ 2014 (3) TMI 1164 - SUPREME COURT] , wherein, in the context of compliance of the provisions contained in section 50 of the Act, the Supreme Court considered the question : whether the accidental or chance recovery of narcotic drugs during a personal or body search would attract the provisions of section 50 of the NDPS Act?. Placing reliance upon the earlier judgment in the case of STATE OF PUNJAB VERSUS BALBIR SINGH [ 1994 (3) TMI 173 - SUPREME COURT] and the Constitution Bench judgment in the case of State of Punjab Vs. Baldev Singh [1999 (7) TMI 630 - SUPREME COURT] , the Supreme Court held that the question posed in that case was no longer res-integra and answered the same in the negative. In the case at hand, there is material to indicate that the Income Tax search was underway from 7th January 2014 to 10th January 2014. The panchanama drawn by the Income Tax Authorities evidences the said fact. At this juncture, it would be rather hazardous to draw an inference that the said income tax search was a subterfuge. The statements of the Income Tax Officers find requisite support in the statements of the applicant recorded under section 67 of the NDPS Act - The action of the officers of the Income Tax department in apprising the said matter of finding the suspicious substance during the course of Income Tax search, in the given circumstances, cannot be said to be inconceivable and unjustifiable. The learned Special Judge was within his rights in recording a finding that there was adequate material which justified a strong suspicion of accused No.1-applicant having committed the offence punishable under section 8(c) read with section 21(b) of the NDPS Act. Thus, no interference is warranted in exercise of revisional jurisdiction - Revision dismissed.
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