TMI Tax Updates - e-Newsletter
June 4, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Quantification of GST - calculation of tax on new car purchase by the company is sold after using it for business purpose - The Value for intended supply shall be the difference between the consideration received for supply of said car and the depreciated value of the said car on the date of supply. Depreciation is as per Section 32 Income Tax Act - GST rate leviable is 18% - AAR
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Income Tax:
Proceedings u/s 179 - Recovery of arrears of tax of the company from the Directors - It is contended that as per the order of ITAT, the very basis of tax liability imposed against the Company has eroded and therefore no tax liability remains - it is explicit that both liabilities made is no longer in force, warranting the issuance of an order under Section 230 of the Act or its continuance for the time being. - HC
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Income Tax:
Levy of penalty u/s 271AAB - Undisclosed Income - since no incriminating material was found during research carried out on group of cases on 03.07.2012, which could have formed the basis of addition in our considered view, penalty could not have been imposed under section 271AAB of the Act only on the basis of addition on account of cash credits u/s 68 found during the course of assessment proceedings. - AT
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Income Tax:
Effect of ruling of Hon’ble AAR - Income taxable in India - Taxability of Software License - Once it is clear that the Revenue authorities only followed the ruling of Hon’ble AAR in assessee’s own case, no fault can be found in their orders in appellate proceedings. No case has been made out that authorities below have not correctly followed the ruling of Hon’ble AAR. - AT
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Income Tax:
Deduction u/s 91 r.w.r 128 - income from foreign country - for the purpose of computing the net profit ratio of total income of the assessee in India which is used as the basis for arriving at the net income of Ghana should include ‘other income’. We have also held that the ‘effective Indian rate of tax’ should include surcharge and education cess i.e. 20.01%. The calculation of deduction u/s.91 as done in the above table is in accordance with our views expressed in the foregoing paragraphs and is a reasonable basis of arriving at the effective rate of tax for Ghana. Hence we are of the considered view that it is reasonable to allow the deduction u/s.91 to the assessee. - AT
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Income Tax:
Penalty u/s 270A - immunity u/s 270AA - misreporting of income - there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreporting" by the Respondents in the penalty order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary. - HC
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Income Tax:
Late filing fee u/s 234E - Fee for default in furnishing statements - This Court had already declared that section 234E has no application prior to 01.06.2015 since section 200A was inserted only from that day. Thus for the period prior to 01.06.2015, respondents had no jurisdiction or authority to impose the late fee. - HC
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Income Tax:
Allowability of fine and penalty as per section 37 - the ‘FINE’ paid by the Assessee is allowed as expenditure u/s 37(1) the amount paid as ‘penalty’is an inadmissible expenditure and not allowable under the provisions of section 37(1) of the Act. Consequently the addition made and affirmed on account of ‘Penalty’is sustained - AT
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Income Tax:
TDS u/s 194H - allegation of payment of as commission to agents / doctors - the doctors were not bound to prescribe the medicines as suggested by the assessee. As such there was no legal compulsion on the part of the doctors to prescribe a particular medicine suggested by the assessee, and therefore, the doctors could not be said to have acted as the agent of the assessee. In absence of the existence of the element of agency between the assessee and the doctors, the provisions contained in Section 194H of the Act could not be invoked. - AT
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Customs:
Seeking provisional release of seized imported goods - misdeclaration of origin of goods - the said goods appear to be of Iran origin and not Zambia - The present case stands at a better footing as the Appellant is agreeable to pay entire duty to secure provisional release of goods. As evident from the Bills of entry, the appellant was always willing to deposit the entire duty of BCD + IGST which is over 25 crores and therefore, the condition to direct the appellant to furnish a bank guarantee of 15% of the value of the goods which is over 100 crores is excessive and arbitrary more importantly when the appellant is willing to deposit the duty payable on the seized goods. - AT
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Indian Laws:
Willful defaulters - declaration by a Bank based on a Master circular of RBI - In the absence of serving the order of COE on the petitioners, there could never have been a declaration of the petitioners as wilful defaulters since the Master Circular as directed by the Supreme Court contemplates declaration as wilful defaulter only after serving the copy of the order of COE and the consequent decision of the Review Committee. The procedure adopted by the 4th respondent while declaring the petitioners as wilful defaulters has thus failed to grant an opportunity to represent on law and on facts against the decision of the COE - HC
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Indian Laws:
State Legislature's encroachment on Judicial powers - Annulling arbitration award through the amendment act - the State Act, which has the effect of annulling the awards which have become “Rules of Court”, is a transgression on the judicial functions of the State and therefore, violative of doctrine of “separation of powers”. As such, the State Act is liable to be declared unconstitutional on this count - what has been done by the State Act, is annulling the awards and the judgments and decrees passed by the court vide which the awards were made “Rule of Court”. As such, the rights which accrued to the parties much prior to the enactment of the State Act have been sought to be taken away by it. - SC
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IBC:
Refusal to entertain the belated claims of Homebuyers as Financial Creditors of the Corporate Debtor - The argument of the Respondents that since CoC has approved the Resolution Plan, the claim of the Appellant(s) have been extinguished, cannot be accepted as there is no extinguishment of claim of the Appellant(s) on approval of Plan by the CoC. - under Regulation 36, sub-regulation 2(l), there is column for other information, which the Resolution Professional deems relevant to the Committee - The purpose of CIRP of Corporate Debtor is to find out all liabilities of the Corporate Debtor and take steps towards resolution. Unless all liabilities of the Corporate Debtor are not known or included in the Information Memorandum, the occasion to complete the CIRP shall not arise. - AT
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IBC:
Initiation of CIRP - existence of debt and dispute or not - Payment withheld by the respondent corporate debtor on the ground of alert circular issued by the GST department - It is submitted that, they are still willing to pay the amount once they provide the bank guarantee for the GST amount involved - The Appellant /OC has factually failed to communicate that there is no existence of dispute. - Appeal dismissed - AT
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Service Tax:
Relevant Date - Rejection of Refund claim - The ‘relevant date’ which determines operation of bar of limitation of time, for the person who has borne the burden of tax, is not so easily placed. The default, among the several circumstances envisaged in section 11B of Central Excise Act, 1944, is date of payment of tax. The original authority has not ascertained the ‘relevant date’ for this purpose. Even with that default benchmark, four of the five invoices pass muster. For that sole invoice of 20th February 2014, the lower authorities have not determined the appropriate ‘relevant date’ by applying the ‘starting points’ in section 11B of Central Excise Act, 1944 adapted for ‘service’ rendering any finding on bar of limitation of time to be faulty. Moreover, that the tax was charged without authority of law is not in doubt. - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2022 (6) TMI 135
Seeking return/refund the amount of Rs. 25,00,000/- along with interest, which was illegally collected from the petitioner - HELD THAT:- The amount voluntarily deposited by the petitioner under Section 73(5) of CGST Act, 2017, is reflected from the receipt itself. Therefore, there are no good reason to direct for refund of the amount at this stage. Learned counsel for the respondent nos. 2 and 3 states on instructions that notice under relevant provisions of CGST Act, 2017, is likely to be issued to the petitioner shortly for adjudication of the case on merit - petition dismissed.
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2022 (6) TMI 134
Maintainability of petition - availability of alternative remedy of appeal - Section 107 of the CGST/ SGST Act, 2017 - Evasion of turnover and tax - HELD THAT:- Perusal of the impugned order shows that the Proper Officer has issued detailed show cause notice based on documentary evidences indicating evasion of turnover and tax. In the impugned order, the Proper Officer under the CGST/ SGST Act, 2017 has recorded a finding that pursuant to the notice, assessee appeared and mainly pressed point Nos.5, 7, 9 and 10 of the show cause notice. Thus, as per the impugned order, it appears that the petitioner has pressed his reply before the Proper Officer only on point Nos.5, 7, 9 and 10 of the show cause notice and his submissions have been noted by the Proper Officer in the impugned order and, thereafter giving reasons, contention of the petitioner has been rejected. Since the petitioner has an alternative remedy of appeal in which questions of fact and law may be raised and, therefore, the writ petition deserves to be dismissed on the ground of alternative remedy of appeal under Section 107 of the CGST/ SGST Act, 2017. It is made clear that in the event the petitioner files an appeal before the appellate authority complying with the statutory provisions, then the appeal shall be heard by the appellate authority without being influenced by any of the observations made in the body of this order. Petition dismissed.
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2022 (6) TMI 133
Quantification of GST - calculation of tax on new car purchase by the company is sold after using it for business purpose - rate of GST - Whether the value of old and used car, sold by the company as mentioned above, can be taken as the value that represent margin of the supplier, on supply of such car, and whether the GST can be charged on such margin? - Whether the value that represent margin of the supplier, on supply of such old and used goods/Car will be inclusive of GST or exclusive? HELD THAT:- The subject car has engine capacity exceeding 1500 cc, length 4000 mm, and ground clearance 170 mm, with diesel as its fuel. As the applicant submits that it has not availed ITC, this used car to fall under the category of sr no 3 to Notification 8/2018-CT (R) dated 25-1-18. The Value for intended supply shall be the difference between the consideration received for supply of said car and the depreciated value of the said car on the date of supply. Depreciation is as per Section 32 Income Tax Act - GST rate leviable is 18% - Valuation, as per Explanation (i) to said Notification 8/2018-CT(R), is exclusive of GST.
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Income Tax
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2022 (6) TMI 155
Reopening of assessment u/s 147 - Notice issued under section 148A(b) - As submitted Petitioner did not have the opportunity to file a reply and the order under Section 148A(d) was not on merits, the Respondent has no objection if the matter is remanded back to the Assessing Officer for a fresh decision - HELD THAT:- Keeping in view the impugned order under Section 148A(d) and the notice issued under Section 148 of the Act dated 31 st March, 2022 for the Assessment Year 2018-19 are set aside and the matter is remanded back to the Assessing Officer for a fresh decision. The Petitioner is given liberty to file its additional reply to the show cause notice issued under Section 148A(b) of the Act within two weeks. The Assessing Officer is directed to decide the matter by way of a reasoned order in accordance with law within eight weeks thereafter. This Court clarifies that it has not commented on the merits of the controversy.
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2022 (6) TMI 154
Direct Tax Vivad Se Vishwas Act - opportunity of hearing - HELD THAT:- Department is justified in their submissions. Ext.P12 is only a notice granting an opportunity to the petitioner, pursuant to his own application for rectifying Form No.3. Though the 2nd respondent has observed that the rectification of errors in Form No.3 will require canceling the erroneous Form No.3 and issuing a corrected Form No.3, a decision has not been taken. On the other hand, an opportunity of hearing has been granted to the petitioner. Even before a decision is taken, it is not proper for the petitioner to approach this Court challenging that opportunity being granted, especially since the same is pursuant to the request of the petitioner to rectify Form No.3. All contentions can be raised by the petitioner before the 2nd respondent. Accordingly, we are of the view that the contentions of the petitioner cannot be adjudicated by this Court as raised in this writ petition and instead, the 2nd respondent ought to proceed with Ext.P12 and pass appropriate orders thereon after hearing the petitioner as mentioned in Ext.P12. Therefore, this writ writ petition is disposed of directing the 2nd respondent to issue a fresh notice providing a fresh date of hearing to the petitioner and thereafter pass appropriate orders on Ext.P10 and Ext.P11, as expeditiously as possible, at any rate, within a period of two months from the date of receipt of a copy of this judgment after granting an opportunity of hearing to the petitioner.
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2022 (6) TMI 153
Proceedings u/s 179 - Recovery of arrears of tax of the company from the Directors - It is contended that as per the order of ITAT, the very basis of tax liability imposed against the Company has eroded and therefore no tax liability remains - proceedings u/s 230 were initiated and an order was issued as Ext.P20 by the 2nd respondent, directing the petitioner not to leave the territory of India by land, sea or air, unless he furnishes a tax clearance certificate issued by the second respondent - HELD THAT:- As already found that the basis tax liability due from the Company had been wiped off by the order of the Appellate Tribunal and the said proceedings are now to be considered afresh by the assessing officer. As of now the Company cannot be stated to be liable to pay any amount of tax, warranting imposition of any order, either u/s 179 or to be imposed with a restrictive order against the Directors of the Company or any other person under Section 230 of the Act. Therefore, the latter liability, referred to in Ext.P20, is no longer in existence. As far as, the individual liability made mention in Ext.P20 is concerned, both Counsel pointed out and rightly too, that, petitioner had cleared that liability on the basis of the modified orders issued. Thus, it is explicit that both liabilities made mention in Ext.P20 is no longer in force, warranting the issuance of an order under Section 230 of the Act or its continuance for the time being. Ext.P20 is liable to be set aside. Therefore the order dated 19.07.2018 issued under Section 230 of the Act is quashed.
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2022 (6) TMI 152
Revision u/s 263 - indexed cost of construction disallowed - long term capital gain under section 50C - ascertaining the eligibility u/s. 54F - HELD THAT:- The assessment order is completely silent on the aspect of exemption u/s.54F, which is integral to the computation and assessment of capital gain. There has been neither any enquiry by the AO on the different aspects of sec. 54F, nor, resultantly, any finding qua the same by him. Shri Gupta, the assessee, also could not during hearing show us any enquiry having been made in its respect in assessment, though would plead as to the correctness of the claim u/s. 54F as per the return of income. That being a matter subsequent, i.e., to be determined after due inquiry and verification, is however not relevant. There is also, as the competent authority states, income from these two properties arising to the assessee, indicating it to be her properties and in her control and possession. The addition u/s. 50C (in assessment) is a matter distinct and apart from the application of s. 54F, and in any case was the subject matter of appellate proceedings. It is the enquiry during assessment and not that in the appellate proceedings, much less de hors the record, that is relevant. The Hon ble Delhi High Court in Gee Vee Enterprises [ 1974 (10) TMI 29 - DELHI HIGH COURT] held, inter alia, that the income tax officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income -tax- Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. In view of the foregoing discussion, we find no infirmity in the order passed by the ld. Pr. CIT u/s. 263 of the Act. - Decided against assessee.
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2022 (6) TMI 151
Addition u/s 68 - unexplained cash deposit - deposits during demonetization period - unexplained amount collected by the assessee in the form of Specified Bank Notes from is customers by way of deposits during demonetization period - HELD THAT:- In the instant case, there is no dispute with regard to the fact that sources for making deposit by the assessee into its bank account are the money collected from its members. AO is also not doubting that all the SBNs have been collected by the assessee from its members. Accordingly, following the above said decision [ 2022 (2) TMI 1243 - ITAT BANGALORE] we hold that the addition made u/s 68 of the Act is not justified. A.R also submitted that the SBNs have been collected by the assessee prior to the appointed date of 31.12.2016, i.e., only from 31.12.2016, the assessee is precluded from accepting SBNs from its members. In this view of the matter, the reasoning relating to contravention of rules of RBI also fails. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the impugned disallowance.- Appeal of assessee allowed.
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2022 (6) TMI 150
STCG - Allowability of sum paid to Cosmos bank against the total sale consideration - deduction towards amount of principal and interest paid on the outstanding loan from M/s Cosmos cooperative Bank Ltd, which was paid directly by the purchaser to the bank, for the purpose of issuing NOC by the said bank and releasing the mortgaged properties with this bank - allowability of deduction from the sale consideration received on account of sale of factory premises, plant and machinery, furniture and fixture etc. on slump sale basis to M/s Sukriti Polymers - HELD THAT:- In our considered view, it is difficult to accept the argument of the assessee that this amount of ₹ 3.8 crores is a charge by overriding title and hence this sum never accrued to the assessee in the first instance. In a considered view, this charge on property was created by the assessee company itself since it took business loan from M/s Cosmos Bank Ltd by mortgaging the impugned property. Therefore, clearly this amount represents application of income and not diversion by overriding title and the assessee cannot claim deduction thereof from the sale consideration. In light of the above analysis and the case of CIT vs. Attili N. Rao [ 2001 (10) TMI 5 - SUPREME COURT] and CIT v. Roshanbabu Mohammed Hussein Merchant [ 2005 (1) TMI 53 - BOMBAY HIGH COURT] , which are directly and squarely applicable to the assessee s set of facts, we are of the considered view, that the said amount represents application of income and does not qualify as diversion of income by overriding title and the assessee is not entitled in the instant set of facts to claim deduction thereof from the sale consideration received on the impugned property in question. The cases relied upon by the assessee are not directly applicable to the assessee s set of facts and are distinguishable in the instant set the facts. In the result, we hold that the Ld. CIT (Appeals) has not erred in facts and law in confirming the action of the AO in disallowing the sum of ₹ 3,80,00,000/-from the sale consideration. Estimation of net profit @ 2.5% as against business loss - HELD THAT:- It is seen that the books of account were never produced either before the AO or Ld. CIT(Appeals) for their consideration. Accordingly, in absence of production of books of account, in our considered view, the Ld. CIT(Appeals) has been quite reasonable in restricting the net profit @2.5% of the total turnover. Therefore, we are of the view that Ld. CIT(Appeals) has not erred in facts and law in restricting the net profit @2.5% of the total turnover in instant set of facts.
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2022 (6) TMI 149
Levy of penalty u/s 271AAB - Undisclosed Income - unexplained cash credits - assessee argued there is no deliberate intention of appellant to defraud the revenue for concealment of income - whether if the assessment proceedings are conducted in consequence to search carried out at the group s premises, and subsequently during the course of assessment, unexplained cash credits are unearthed, the penalty can be imposed under section 271AAB? - HELD THAT:- Admittedly, in this case the unexplained cash credits were not discovered/unearthed during the course of search on Dhanjimama group, but were unearthed during the course of assessment proceedings on the assessee, albeit the assessment proceedings on the assessee were conducted as a consequence to search proceedings. A perusal of the assessment order reveals that the AO has not mentioned anything about unearthing of any undisclosed income in respect of the assessee, during search action carried out in the Dhanjimama group of cases on 03.07.2012. The income unearthed/discovered by the Assessing Officer during the course of assessment proceedings was independent and unconnected with the information found during the course of search action carried out in the Dhanjimama group of cases. Therefore, while the same may be relevant for assessment of the income under section 68 and also for the levy of penalty under section 271(1)(c) however, so far as penalty under section 271AAB of the Act is concerned, the foundation thereof is independent of assessment proceedings. Therefore, in the instant set of the facts, since no incriminating material was found during research carried out on Dhanjimama group of cases on 03.07.2012, which could have formed the basis of addition in our considered view, penalty could not have been imposed under section 271AAB of the Act only on the basis of addition on account of cash credits u/s 68 found during the course of assessment proceedings. Therefore, in our view, CIT(Appeals) has erred in fact and law in confirming action of the assessing officer imposing penalty under section 271AAB of the Act, in the instant set of facts. - Decided in favour of assessee.
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2022 (6) TMI 148
Effect of ruling of Hon ble AAR - Income taxable in India - Taxability of Software License - ascertaining the taxability in India of the payments received from EYGBS and EYME and for withholding taxes - ruling of Hon ble AAR - Binding through advance ruling pronounced by the Authority under section 245R - AO referred to the provisions of section 245S of the Income-tax Act for the proposition of binding nature of the order pronounced by Hon ble AAR, accordingly, rejected the assessee s pleas by holding that the order of Hon ble AAR was binding - HELD THAT:- Upon careful consideration, we find ourselves in agreement with the submissions made by the ld. DR for the Revenue. AO has only followed the ruling of AAR in assessee s own case and as per the provisions of section 245S of the Act, ruling of Hon ble AAR is binding upon the Revenue authorities. Once it is clear that the Revenue authorities only followed the ruling of Hon ble AAR in assessee s own case, no fault can be found in their orders in appellate proceedings. No case has been made out that authorities below have not correctly followed the ruling of Hon ble AAR. It is also not a case that Hon ble High Court has reversed the order of Hon ble AAR. In this view of the matter, we do not find any infirmity in the order of ld. CIT (A), hence we uphold the same. This appeal filed by the assessee stands dismissed.
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2022 (6) TMI 147
Assessment u/s 153A - addition u/s 68 - As argued by assessee since no incriminating material had been found during the course of search with respect to sale of property, the impugned addition could not have been made - HELD THAT:- We note that the AO has not mentioned any incriminating material relating to this impugned transaction in the assessment order and when the issue was raised by the assessee before the Ld. First Appellate Authority, he dismissed the same in para 5.3 of the order in which he has placed reliance on the judgment of the Hon'ble Kerala High Court in the case of CIT Vs. K.P. Ummer [ 2019 (3) TMI 225 - KERALA HIGH COURT ] as well as Raj Kumar Arora [ 2014 (10) TMI 255 - ALLAHABAD HIGH COURT ] However, we note that apart from the judgments cited by the Ld. CIT(A) in the impugned order and also relied upon by the Ld. Sr. DR, there are numerous judgments of other Hon'ble High Courts which are in favour of the assessee on the issue as to whether in the case of assessments framed u/s. 153A of the Act, addition could be made in absence of any incriminating material in those years where no assessment proceedings were pending and assessment had been made u/s. 143(1)/143 - See Malabuilders Private Limited In absence of any incriminating material found during the course of search with respect to the impugned transaction, the AO did not have any power to make the impugned addition. We set aside the order of the Ld. CIT(A) and direct the AO to delete the addition. - Decided in favour of assessee.
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2022 (6) TMI 146
Addition u/s 68 - Assessee argued no share premium has been received by it during this year, rather it was an opening balance of earlier years. - CIT-A deleted the addition - Revenue has pleaded that the ld. CIT(Appeals) has entertained fresh evidence and did not provide an opportunity to the Revenue for rebutting this fresh evidence and, therefore, the ld. 1st Appellate Authority has violated the conditions enumerated in Rule 46A of the Income Tax Rules, 1962 - HELD THAT:- There is no doubt that if on the request of appellant, the ld. 1st Appellate Authority admits certain fresh evidence as an additional evidence, then, an opportunity is to be granted to the ld. Assessing Officer for rebutting that evidence. This has been provided under Rule 46A sub-clause (3) of the Rules. With the assistance of the ld. D.R., we have gone through the record carefully, but she was unable to pin-point, which is the additional evidence, filed before the ld. CIT(Appeals). The ld. 1st appellate authority has re-appreciated the position of accounts available in the balance-sheet right from the earlier years. The ld. 1st appellate authority has categorically recorded a finding that these amounts were not received by the assessee during the accounting year relevant to the assessment year. Therefore, no addition can be made in this assessment year. The ld. 1st appellate authority for buttressing his finding made reference to the CBDT Circular bearing No. 246/151/2017-A PAC-1 dated 10.01.2018. After perusal of the finding of the ld. CIT(Appeals), we do not find any error in it and there is no substance in the grounds of appeal raised by the Revenue. Accordingly, this appeal is dismissed.
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2022 (6) TMI 145
Addition u/s 40(a)(ia) - assessee had violated provision u/s 201 of the Act by not deducting of TDS from the parties - HELD THAT:- The said amount paid to the parties was duly declared in the return of the contractees. The certificates produced before learned CIT(A). But the Learned Authority did not consider the said documents and passed the Order Accordingly. In Case of, ACIT-III, Kanpur v. Raja Chkravarty [ 2015 (8) TMI 753 - ITAT LUCKNOW] observed that no disallowance under section 40(a)(ia) can be made if it is established that deductee has paid tax on amount received. In this stage we are unable to verify the sanctity of the documents. Hence, the matter is setting aside to the Ld. CIT(A) for de-novo adjudication by considering the evidences of assessee. Further, the assessee should get the reasonable opportunity for representing its case. Appeal of the assessee is allowed for statistical purpose.
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2022 (6) TMI 144
Assessment u/s 153A - valid initiation of search - panchnama was drawn against the assessee or not? - HELD THAT:- As decided in M/S BALALJI UNIVERSAL TRADELINK PVT. LTD. [ 2016 (10) TMI 1361 - ITAT MUMBAI] search carried out by the income tax Department was held to be invalid in view of absence of any warrant, Panchanama as well as the report of the learned Assessing Officer dated 01.03.2016. The Impugned assessment orders before us is also arising out of the same search. The assessment order framed under section 153A of the Act is also one of the six years for which assessment is framed. Departmental Representative was specifically asked whether the order of the co ordinate Bench has been contested before the higher Forum and if not or if it is not reversed, why it should not be followed. The learned Departmental Representative merely relied upon the orders of the lower authorities. Further, the decision relied upon by the learned Departmental Representative in case of MDLR Resorts Pvt. Ltd. [ 2013 (12) TMI 1116 - DELHI HIGH COURT] has also been extensively considered by the co ordinate Bench in paragraph no. 2.19. Therefore, the decision of the co ordinate Bench binds us. Therefore, we respectfully following the same hold that the order passed under section 153A of the Act is not valid. Accordingly, we allow the appeal of the assessee on this ground.
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2022 (6) TMI 143
Deduction u/s 91 r.w.r 128 - credit for the amount of foreign tax paid by him by way of deduction - computing the effective rate of tax in Ghana - agreement for double taxation relief for avoidance of double taxation - deductions as calculate by applying the lower of effective Indian rate of tax or effective rate of tax of other country (Ghana) on such doubly taxed income - HELD THAT:- The expression rate of tax of the said country means income-tax and super-tax actually paid in the said country in accordance with the corresponding laws in force in the said country after deduction of all relief due but before deduction of any relief due in the said country in respect of double taxation divided by the whole amount of income as assessed in the said country. Tax actually paid is Ghana is Rs.1,05,36,759. The assessee has not brought anything on record to show what is the income assessed in Ghana. AR during the course of the hearing submitted that the said details are not available with the assessee. Thus for the purpose of computing the net profit ratio of total income of the assessee in India which is used as the basis for arriving at the net income of Ghana should include other income . We have also held that the effective Indian rate of tax should include surcharge and education cess i.e. 20.01%. The calculation of deduction u/s.91 as done in the above table is in accordance with our views expressed in the foregoing paragraphs and is a reasonable basis of arriving at the effective rate of tax for Ghana. Hence we are of the considered view that it is reasonable to allow the deduction u/s.91 to the assessee. AO is therefore directed to re-compute the income of the assessee. Appeal of the assessee is partially allowed.
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2022 (6) TMI 142
Reopening of assessment u/s 147 - validity of re-assessment proceedings - Reopening merely on the basis of AIR information of cash deposit - onus to prove source of bank deposits - HELD THAT:- Similarly, the Chandigarh Bench of the ITAT in the case of ACIT Vs. Kisco Castings Pvt Ltd [ 2012 (10) TMI 314 - ITAT, CHANDIGARH] has held that where the information is factual and not false and the same has merely been communicated to AO he would be within his statutory right to invoke the provisions of section 147 read with 148 of the Act. The Coordinate Bench of the Tribunal went on to hold that the information being factually correct and the assessee failing to respond to the proceedings under the Act, the AO had rightly assumed jurisdiction u/s 147 read with section 148 of the Act. We also note that the Ld. CIT(A) has also cited and relied on the judicial precedents which we have quoted in the above mentioned paragraphs and we are in complete agreement with the reliance so placed by the CIT(A). Therefore, on an overall facts of the case, we uphold the action of the CIT(A) in upholding the initiation of re-assessment proceedings. Accordingly, ground No.1 of the assessee s appeals stands dismissed. Cash deposits - We would be inclined to dismiss the assessee s appeal on the merits of the case also. However, we also note that the assessee is an Army Veteran who retired from the Army in 1984. As per his own admission, he had income only from agricultural activity as well as from pension. We also note that in the paper book which has been filed by the assessee, the assessee has filed copy of letters as obtained by commission agent that assessee had received an amount of Rs. 50,00,000/- during the year from sale of agricultural receipts. The assessee has also filed affidavit on his own behalf as well as of Shri Sukhjinder Singh, Numberdar, wherein, it has been stated that the actual value of the land sold by the assessee was Rs. 70,00,000/-. Although, these evidences were filed as additional evidences before the Ld. CIT(A), the Ld. CIT(A) did not accept them as there was no further corroborative evidence in support of the same. However, ignoring the past conduct of the assessee and on the peculiar facts of this case, duly noting that the assessee is a retired Army veteran, we would like to afford one more opportunity to him to explain the source of deposits before the Ld. First Appellate Authority and to come out with clean hand once of all. Therefore, in the interest of substantial justice, we restore this appeal to the file of the CIT(A) to be decided on merits of the addition after affording due opportunity to assessee to present its case. We also direct the assessee to submit all documentary evidences and submissions which the assessee wishes to rely upon in support of its claim without any delay and whenever the Ld. CIT(A) directs him to do so, failing which, the Ld. First Appellate Authority shall be at liberty to proceed ex-parte qua the assessee and decide the case on merits in accordance with law. Appeal of the assessee stands allowed partly for statistical purposes.
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2022 (6) TMI 141
Revision u/s 263 - Addition u/s 68 on account of share capital and share premium - HELD THAT:- AO came to a conclusion that identity, genuineness and creditworthiness of investor entities were duly established by the assessee and therefore, these transactions were accepted to be genuine transactions. The fact that due enquiries were made by AO is also evident from the perusal of order-sheet entries of the assessment proceedings. Therefore, it could be concluded that the issue of receipt of share capital and share premium was specifically examined by Ld. AO with due application of mind and accepted after carrying out necessary enquiries and verification. Simply because the revisionary authority felt that various other aspects were also to be examined or the same very issue was to be examined from another angle, the same could not be a valid ground to revise the assessment order. If this is allowed, there would be no end to litigation and there would not be finality to the assessment. The pre-conditions to revise the order is that there should be lack of enquiry on the part of Ld. AO which made the order erroneous as well as prejudicial to the interest of the revenue - as noted in preceding paragraphs, the issue was duly examined and subjected to due verification by Ld. AO during earlier assessment proceedings and there was due application of mind to the issue. This being so, the second revision on the same very issue could not be held to be sustainable in the eyes of law. Therefore, by quashing the revisionary order we allow the appeal of the assessee.
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2022 (6) TMI 132
MAT Computation u/s 115JB - Revisions proceedings u/s 263 - CIT directed the AO to make certain additions to book profit u/s 115JB - HELD THAT:- We have some reservations on the observation made in the impugned judgment that the Commissioner, while exercising the power of revision under Section 263 of the Income Tax Act, 1961, cannot examine an issue on merits. However, we are not inclined to issue notice as we find that on merits, the order passed by the Commissioner under Section 263 of the Income Tax Act, 1961 is not sustainable. Recording the aforesaid, the petition for special leave to appeal is dismissed.
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2022 (6) TMI 131
Validity of assessment u/s 147 read with Sections 144 144B - Petitioner states that notice has been issued by a non-jurisdictional assessing officer to a non-existent entity - HELD THAT:- A perusal of the paper book reveals that none of the aforesaid submissions and contentions have been considered by the AO - Since in the present case, the issue of jurisdiction is a mixed question of fact and law, this Court is of the view that it is necessary that the AO gives its opinion on the said issue. Accordingly, this Court sets aside the impugned assessment order and demand notice u/s 156. Assessing Officer is directed to consider the aforesaid submissions and contentions advanced by the parties as well as the reply dated 29th March, 2022 filed by the Petitioner and pass a fresh reasoned order in accordance with law within twelve weeks.
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2022 (6) TMI 130
Penalty u/s 270A - immunity u/s 270AA - misreporting of income - non-specification of correct charge - HELD THAT:- This Court is of the opinion that the only addition in the assessment order framed by Respondent No.1 is in respect of disallowance u/s 14A - Petitioner has made a disallowance of Rs.3,20,14,010/- which was recomputed by the AO - Thus, this is a case where the amount of underreporting of income is consequent to increase in the disallowance voluntarily estimated by the assessee. This court is conscious of the fact that there can be cases where underreporting of income may result in misreporting of income, however, in peculiar facts of the present case, underreporting allegedly done by the assessee cannot amount to misreporting as the assessee had furnished all the details of the transactions relating to disallowance made under Section 14A of the Act and the AO as well as assessee has used the same details to arrive at different conclusions i.e. differing quantum of disallowances under Section 14A of the Act. This by no stretch of imagination can be held to be misreporting . This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word misreporting by the Respondents in the penalty order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary. The impugned penalty order dated 28th March, 2022 passed by Respondent No.1 under Section 270A of the Act is quashed and Respondent No.1 is directed to grant immunity under Section 270AA of the Act to the Petitioner.
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2022 (6) TMI 129
TDS u/s 194J - Addition u/s 40(a)(ia) - whether payment of interconnect user charges as it could not be categorized as fee for technical services? - HELD THAT:- Admittedly, the Karnataka High Court in Commissioner of Income Tax, TDS, Bangalore vs. Vodafone South Ltd. [ 2016 (8) TMI 422 - KARNATAKA HIGH COURT] and various Tax Tribunals have taken the view that there is no human intervention involved in providing the interconnect services whether it be for data link or roaming. The Supreme Court in Berger Paints India Ltd. vs. Commissioner of Income Tax, [ 2004 (2) TMI 4 - SUPREME COURT] has held that if the revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, then it is not open to the revenue to challenge its correctness in the case of other assessee without just cause. Keeping in view the aforesaid mandate of law and the letter dated 21 st April, 2022, this Court is of the view that the appellant-revenue has consciously elected not to challenge the aforesaid judgment of the Karnataka High Court, which hold that no TDS is required to be deducted by the assessee on payment of interconnect user charges as it cannot be categorized as fee for technical services. Consequently, this Court is of the view that it is not open to the revenue to challenge the correctness of the finding rendered by the Karnataka High Court in Vodafone South Ltd. (supra) in the case of other assessee without just cause.
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2022 (6) TMI 128
Late filing fee u/s 234E - Fee for default in furnishing statements - HELD THAT:- This Court had already declared that section 234E has no application prior to 01.06.2015 since section 200A was inserted only from that day. Thus for the period prior to 01.06.2015, respondents had no jurisdiction or authority to impose the late fee. The decision in M/s.Sarala Memorial Hospital's [ 2018 (12) TMI 1818 - KERALA HIGH COURT] case has become final and binding. Since the judgment of the jurisdictional High Court was not considered by the Appellate Authority, Ext.P6, Ext.P7, Ext.P8 and Ext.P9 are perverse, warranting interference under Article 226 of the Constitution of India. Since the judgment in M/s.Sarala Memorial Hospital's case [ 2018 (12) TMI 1818 - KERALA HIGH COURT] declared that late fee under Section 234E cannot be imposed prior to 01.06.2015, no purpose will be served by sending the case back to the Tribunal. The levy of late fee is without authority and legally invalid.
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2022 (6) TMI 127
Exemption u/s 11 - disallowance of claim of depreciation - HELD THAT:- As through the decision of the Hon ble Apex Court in the case of Rajasthan and Gujarati Charitable Foundation Poona [ 2017 (12) TMI 1067 - SUPREME COURT] we are in agreement with the assessee that the issue of disallowance of depreciation, in the backdrop of the fact that the assessee has already been allowed the cost of investment in fixed assets as application of income as per the provisions of Section 11 of the Act, has already been settled by the Hon ble Apex Court in favour of the assessee, categorically holding that the assessee is entitled to the same. We have noted that the Hon ble Apex Court has taken note of the amendment to the Act in this regard in Section 11 (6) vide Finance Act 2/2014,denying claim of depreciation in such circumstances and has held the same to be prospective in nature, with effect from assessment year 2015-16. Thus with the assessee being a charitable trust registered as such u/s. 12AA of the Act and having claimed depreciation on assets, investments in which had been allowed as application of income in preceding years as per the provisions of Section 11 of the Act and the impugned assessment year being assessment year 2014-15, the issue we find is squarely covered by the decision of the Hon ble Apex Court in its favour. In view of the same, we hold that the assessee is entitled to deduction of depreciation and the A.O. is directed accordingly to allow the same for the purposes of computing its income. Ground of appeal raised by the assessee is accordingly allowed.
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2022 (6) TMI 126
Deduction u/s 80P - AO vide order u/s 154 rejected the application of the appellant as it had not claimed the deduction in its return of income - HELD THAT:- AO could hardly dispute the clinching fact that the assessee had not raised the impugned section 80P deduction claim in its return of income filed u/s 139(1) which forms a mandatory condition u/s 80A(5) r.w.s. 80AC of the Act as per decision in M/s. EBR Enterprises vs. Union of India [ 2019 (6) TMI 484 - BOMBAY HIGH COURT] deciding the issue in Revenue s favour. We therefore reject the assessee s instant sole substantive grievance as well as the main appeal for this precise reason alone.
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2022 (6) TMI 125
Income taxable in India - Taxability of Software License - ascertaining the taxability in India of the payments received from EYGBS and EYME and for withholding taxes - HELD THAT:- In light of the favourable order of Hon'ble HC setting aside the order of Hon'ble AAR to the extent passed against the assessee, the order passed by AO and CIT(A) does not stand. Accordingly, payments received by appellant towards software license maintenance charges, global technology charges and GWAN connectivity charges are not taxable in India. Accordingly, upon careful consideration, we find that undoubtedly Hon ble Delhi High Court [ 2021 (12) TMI 571 - DELHI HIGH COURT ] reversed the order of AAR but the Hon ble High Court order was not in existence when the authorities below passed the order. Hence it would be appropriate to remit the cases to the AO to follow the Hon ble High Court order and give effect accordingly - Appeals filed by the assessee stand allowed for statistical purposes
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2022 (6) TMI 124
Exemption u/s 11 - denial of registration u/s.12A - denial of recognition u/s.80G - HELD THAT:- For the period prior to the application for registration, the assessee has produced the required statutory audit report as required under sub-clause(e) of sub-rule(1) of Rule 17A. There is absolutely no requirement to produce the physical books of account and bills vouchers under Rule 17A. This being so, as all the details called for by the CIT(E) has been produced before him and as the books of account and bills and vouchers as called for by the ld CIT(E) is beyond the purview of the requirement for registration u/s.12A r.w Rule 17A, we are of the view that the assessee has complied with all the requirements for registration u/s.12A of the Act. Consequently, the order of the ld CIT (E) denying the assessee registration u/s.12A is set aside and the ld CIT(E) is hereby directed to register the assessee as charitable institution u/s.12A of the Act in the Register of the Revenue. The registration u/s.12A granted to the assessee does not preclude the AO from verification of the accounts and compliance thereof under the provisions of sections 11,12 13 of the Income tax Act, 1961 in the course of assessment. In these circumstances, the appeal of the assessee stands allowed. Coming to the issue of recognition u/s.80G of the Act, as we have already granted the assessee registration u/s.12A of the Act and as the requirement of producing physical books and accounts and bills and vouchers are not a requirement for granting recognition u/s.80G as also on the ground that the statutory audit report has been produced before the CIT(E), the order of the ld CIT(E) denying the recognition u/s.80G is set aside and the CIT(E) is hereby directed to grant the assessee recognition u/s.80G under the Income Tax Act, 1961. The grant of recognition u/s.80G does not preclude the AO from doing the necessary verification in respect of compliance of the provisions of section 80G in the course of assessment. Appeal of assessee allowed.
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2022 (6) TMI 123
Revision u/s 263 by CIT - Assessee declared interest income from fixed deposit made with Co-operative Bank which was claimed as exempted under the provision of section 80P(2)(a)(i) - PCIT was of the view that assessee being credit society was eligible for deduction under section 80P(2)(i)(a) of the Act for interest income earned from credit facility provided to its members only whereas the interest income from fixed deposit made with Co-operative bank is not allowable deduction under section 80P(2)(a)(i) - HELD THAT:- As different Hon ble High Courts have taken different view with respect to the deduction of the interest income earned by the assessee from the co-operative bank. Some of the judgements are in favour of the assessee and some of them are against the assessee. It is also an admitted fact that the Hon ble High Court of Gujarat is in favour of the assessee with respect to the interest on deposits made with the co-operative bank - See Sabarkantha District Cooperative Milk Producers Union Ltd. [ 2014 (6) TMI 977 - GUJARAT HIGH COURT] Based on the above, it is transpired that the AO has taken one of the possible view for allowing the deduction to the assessee under the provisions of section 80P(2)(d)/80P(2)(a)(i)(a) of the Act. Where two view are possible on the issue and the AO has taken one of the possible view, however the PCIT does not agree with the view adopted by the AO, in such scenario, the order of the AO cannot be held as erroneous. See Mehsana District Co. Op. Milk Producers Union Ltd. [ 2003 (4) TMI 77 - GUJARAT HIGH COURT ] Thus we find no error in the order of AO so as to justify the initiation of proceedings under section 263 of the Act by the Ld. Pr. CIT. Thus, the revisional order passed by the learned PCIT is not sustainable and therefore we quashed the same - Decided in favour of assessee.
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2022 (6) TMI 122
Allowability of fine and penalty as per section 37 - whether the Assessee as per Explanation 1 to section 37(1) of the Act, is entitled to claim expenditure incurred in respect of fine and penalty as imposed u/s 125(1) and 112(a) of the Customs Act 1962 respectively? - HELD THAT:- The goods i.e. used digital multifunction printer and copying machines were imported by the Assessee without getting license from the DGFT and therefore, the same were confiscated by the Custom Authorities{we are referring only one order in original passed by the Ld. Joint Commissioner of Custom, Group-V, Nhava, Sheva-I, Maharashtra u/s 111(d) of the Custom Act, 1962} and consequently, determined the value of the goods imported at Rs. 13,48,479/- and gave an option to the Assessee to redeem the goods on payment of fine of Rs. 2,15,000/- u/s 125(1) of the Custom Act, 1962 on the condition that option to redeem the goods shall be exercised within 15 days on receipt of the order and on payment of appropriate duty as other dues as applicable. Section 125 of the Custom Act, 1962 prescribes the imposition of fine and option to pay fine in lieu of confiscation - The provisions speaks clearly that whenever confiscation of the goods is authorized by the Customs Act, the Custom Authority/Officer Adjudgingis empowered to give an option to the owner of the goods [or, where such owner is not known, the person from whose possession or custody such goods have been seized] to pay in lieu of confiscation such fine as the said officer thinks fit. From the order passed by the Custom Authority it is clear that the said authority while exercising powers entrusted u/s 125 of the Act, imposed the FINE under challenge to redeem the goods and therefore, the said fine amounts to compensatory in nature and is an allowable expenditure u/s 37(1) of the Act, as also held by the Hon ble Delhi High Court in the case of Usha Micro Process Control Ltd (supra) and Hon ble Madras high Court in the case of CIT Vs. Parthasmarathy (supra) in the identical facts. Consequently the FINE paid by the Assessee is allowed as expenditure u/s 37(1) of the Act and resultantly the addition made and sustained on account of fine paid by the Assessee to the Custom Authorities, stands deleted. Penalty imposed by the Ld. JCIT (Customs)and paid by the Assessee, can be claimed as admissible expenditure under section 37(1) - In the instant case, the imposition for penalty u/s 112(a) of the Custom Act is prescribed in order to avoid doing or omit to do and abetting the doing or omission of such an act which causes violation of prohibited acts under the Custom Act and therefore in our considered opinion, imposition of Penality is penal in nature and the payment made for discharge of punishment for violation of prohibited acts and/or restriction(s) imposed under the provisions of law, cannot be considered as compensatory in nature. Hence on the the facts and circumstances of this case, conclusions drawn by the authorities below and analyzations made above,, the amount paid as penalty is an inadmissible expenditure and not allowable under the provisions of section 37(1) of the Act. Consequently the addition made and affirmed on account of Penalty is sustained. - Decided partly in favour of assessee.
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2022 (6) TMI 121
Disallowance u/s 14A r.w.r 8D - HELD THAT:- It is observed that no income exempt under tax was actually earned by the assessee during the year under consideration and there was thus no exemption claimed by the assessee in respect of any income in the return of income filed for the year under consideration. This being the undisputed position, we find that this issue is squarely covered in favour of the assessee by the decision of Hon ble Gujarat High Court in the case of Corrtech Energy Pvt. Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT ] wherein it was held that no disallowance under Section 14A of the Act could be made when no exemption in respect of any income was actually claimed by the assessee. The learned CIT(A), in our opinion, was fully justified in deleting the disallowance made by the Assessing Officer under Section 14A r.w. Rule 8D by relying on the decision of Hon ble jurisdictional High Court in the case of Corrtech Energy Pvt. Ltd. (supra) and upholding his impugned order giving relief to the assessee on this issue, we dismiss Ground No.1 of the Revenue s appeal. Addition on account of Mark to Market Exchange Loss on Foreign Exchange Derivatives - As contended that the assessee-company by following the Principle of Prudence recognized M2M loss as at the end of the year on outstanding SWAP contract as per Accounting Standard-11 and this method was consistently followed by the assessee regarding Forex loss/gain from M2M - HELD THAT:- We find merit in the contention raised by the learned Counsel for the assessee on this issue. Moreover, as pointed out by him, the issue under consideration is squarely covered in favour of the assessee, in addition to the judicial pronouncements referred to and relied upon by the learned CIT(A) in his impugned order, by the latest decision of the Coordinate Bench of this Tribunal rendered in other group case of M/s. Adani Hazira Port Pvt. Ltd [ 2022 (4) TMI 850 - ITAT AHMEDABAD ] wherein it is held that M2M loss on SWAP contract was allowable where loans were converted into foreign currency loan to take benefit of low interest rate and loss recognized on account of foreign exchange fluctuation as per notified Accounting Standard 11 was an accrued and subsisting liability and not merely a contingent or hypothetical liability. The learned DR, on the other hand, has not been able to cite any judicial pronouncement in support of the Revenue s case on this issue. We, therefore, find no infirmity in the impugned order of the learned CIT(A) allowing the claim of the assessee for deduction on account of Mark-to- Market Exchange Loss in respect of Foreign Currency Derivatives Contracts and upholding the same, we dismiss Ground No.3 of the Revenue s appeal. Addition on account of excess depreciation allegedly claimed by the assessee on office equipment - HELD THAT:- As pointed out by the learned Counsel for the assessee, besides the decision of Hon ble Bombay High Court in the case of Park Devis (India) Ltd [ 1994 (12) TMI 46 - BOMBAY HIGH COURT ] relied upon by the learned CIT(A) in his impugned order to give relief to the assessee on this issue, the decision of Hon ble Gujarat High Court in the case of CIT vs. Tarun Commercial Mills Ltd.[ 1983 (9) TMI 23 - GUJARAT HIGH COURT ] is also in favour of the assessee wherein it was held that the air-conditioners and electric fans installed in the office premises are entitled to depreciation at the same rate as applicable to plant and machinery. Respectfully following the decision of Hon ble jurisdictional High Court, we uphold the impugned order of learned CIT(A) allowing the claim of the assessee for deprecation at a higher rate of 15% on office equipments which were installed at site and formed integral part of plant and machinery. Ground No.4 of the Revenue s appeal is accordingly dismissed. Excess depreciation allegedly claimed by the assessee on computer software - HELD THAT:- It is observed that the claim of the assessee for depreciation @ 60% on computer software has been allowed by the CIT(A) vide his impugned order by relying on the decisions of Co-ordinate Bench of this Tribunal in the cases of M/s. Voltamp Transformers Ltd [ 2013 (3) TMI 804 - ITAT AHMEDABAD ] and Zydus Infrastructure (P) Ltd [ 2016 (8) TMI 696 - ITAT AHMEDABAD ] wherein a similar issue has been decided by the Tribunal in favour of the assessee. At the time of hearing, learned DR has not cited any case law which is in favour of the Revenue on this issue. We, therefore, respectfully follow the decisions uphold the impugned order of the learned CIT(A) allowing the claim of the assessee for depreciation @ 60% on computer software. Ground No.5 of the Revenue s appeal is accordingly dismissed. Loss arising from difference in rates of Forex - Sum debited by the assessee on account of exchange difference - HELD THAT:- As relevant details and documents to support and substantiate this explanation were not furnished by the assessee either before the Assessing Officer during the course of assessment proceedings or even before the learned CIT(A) during the course of appellate proceedings. In the absence of the same, the nature of the relevant transactions could not be ascertained by the authorities below and the claim of the assessee for the loss in question as a revenue loss was disallowed by them. Even before the Tribunal the assesse has not been able to produce the relevant details and documents to explain the exact nature of relevant transactions and to establish that the loss in question is in the nature of revenue loss. The learned Counsel for the assessee, however, has made an alternative claim that the loss in question having been held to be capital in nature, the same may be added to the cost of relevant fixed asset and depreciation thereon may be allowed. We are inclined to accept this alternative contention of the learned Counsel for the assessee and since the learned DR has not raised any objection in this regard, we direct the Assessing Officer to allow the alternative claim of the assessee for depreciation after necessary verification. Ground No. 1 of the assessee s appeal is accordingly treated as partly allowed. Disallowance u/s 14A - HELD THAT:- Insofar as the disallowance made by the Assessing Officer on account of interest is concerned, the learned CIT(A) found from the relevant financial statement of the assessee-company that the assessee had sufficient own funds at the relevant time to make the corresponding investments. At the time of hearing before us, the learned DR has not been able to bring anything on record to dispute this finding of facts recorded by the learned CIT(A). We, therefore, find no justifiable reason to interfere with the impugned order of the learned CIT(A) deleting the disallowance made by the Assessing Officer on account of interest under Section 14A r.w. Rule 8D. Disallowance made on account of common administrative expenses under Section 14A r.w. Rule 8D(2)(iii) - Since this issue is covered in favour of the assessee by various judicial pronouncements cited by the learned Counsel for the assessee, we modify the impugned order of the learned CIT(A) on this issue and direct the Assessing Officer to re-compute the disallowance on account of common administrative expenses as per Rule 8D(2)(iii) by taking into consideration only those investments from which dividend income was actually earned by the assessee in the year under consideration. Disallowance under Section 14A while computing the book profit under Section 115JB - HELD THAT:- As the issue involved in the present case as well as all the material facts relevant thereto are similar to the case of M/s. Mazda Limited [ 2020 (4) TMI 251 - ITAT AHMEDABAD ] we respectfully follow the decision rendered by the Co-ordinate Bench in the said case and sustain the disallowance made by the Assessing Officer on account of expenses incurred in relation to the exempt income while computing the book profit under Section 115JB of the Act to the extend of Rs.43,266/- being 1% of the exempt income actually received by the assessee in the year under consideration. Addition as penalty paid by the assessee to the Ministry of Railways as compensation for overloading of cargo in railway racks - HELD THAT:- As decided in the case of M/s. Taurian Iron Steel Co. Pvt Ltd. [ 2011 (12) TMI 410 - ITAT, MUMBAI ] punitive charges paid to Railways for overloading of the wagons is compensatory in nature and the same therefore cannot be disallowed by invoking Explanation to Section 37(1) of the Act. Since the issue involved in the present case as well as all the material facts relevant thereto are similar to M/s Taurian Iron Steel Co. Pvt. Ltd. (supra) decided by Bombay Bench of this Tribunal, we respectfully follow the decision of the Tribunal rendered in the said case and uphold the impugned order of the learned CIT(A) deleting the addition. Depreciation on staff quarters - claim of the assessee for depreciation @ 10% on staff quarters was restricted by the Assessing Officer at 5% treating the same as building as upheld by CIT-A - HELD THAT:- CIT(A) upheld the action of the Assessing Officer on this issue observing that the depreciation allowed by the Assessing Officer on staff quarters being building was as per the prescribed rate given in the relevant rules. At the time of hearing before the Tribunal, the learned Counsel for the assessee has not raised any material contention to challenge the impugned order of the learned CIT(A) on this issue. We, therefore, find no justifiable reason to interfere with the impugned order of the learned CIT(A) on this issue whereby depreciation @ 5% was allowed on staff quarters as per the prescribed rate applicable to the building.
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2022 (6) TMI 120
Penalty u/s 271(1)(c) - disallowance of deduction u/s 10AA and disallowance on allocation of loss premium - HELD THAT:- The first addition is with respect to the disallowance of deduction under Section 10AA of the Act. The co-ordinate Bench [ 2019 (6) TMI 858 - ITAT MUMBAI] has deleted the above disallowance. Merely, because the same has been agitated before the Hon'ble High Court, the penalty cannot be levied. As on this date the above addition does not stand and it is decided in favour of the assessee, the penalty to that extent has been correctly deleted by the learned Commissioner of Income-tax (Appeals). Addition/disallowance of loss on option premium allocated to the SEZ unit the co-ordinate Bench has remanded the matter back to the file of the learned Assessing Officer. Therefore, when the particular addition has been restored back to the file of the learned Assessing Officer, the power of the learned Assessing Officer for initiation of penalty proceedings, if in set aside proceedings, the learned Assessing Officer is satisfied that there is concealment of income or furnishing of inaccurate particulars of income to initiate the penalty. However, at the present stage there is no infirmity in the order of the learned CIT(A). Hence, we uphold the order of the learned CIT(A) deleting the penalty under Section 271(1)(c) of the Act. Accordingly, the order of the learned Assessing Officer is dismissed.
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2022 (6) TMI 119
Bogus purchases - unaccounted purchase and sales - CIT(A) while deleting the addition has noted that the original order of the Commercial Tax Department which was the basis of the addition made by AO was set aside by Additional Commissioner of Commercial Tax (Appeals) - HELD THAT:- Additional Commissioner of Commercial Tax (Appeals) had restored the matter back to the file of Assessing Officer of Commercial Tax Department. Before us, none of the sides have placed the final order passed in pursuant to the direction of Additional Commissioner of Commercial Tax (Appeals) dated 26.06.2014. In such a situation, we are of the view that the matter needs to be relooked in the light of the final order passed by Assessing Officer of Commercial Tax Department consequent to the directions of Additional Commissioner of Commercial Tax (Appeals) dated 26.06.2014. We, therefore, restore the issue back to the file of CIT(A) to decide the issue afresh after considering the final order passed by Assessing Officer of Commercial Tax Department. Thus the ground of appeal is allowed.- Appeal of the Revenue is allowed for statistical purposes
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2022 (6) TMI 118
Ad hoc disallowance made of expenditure incurred from goods replaced - disallowance of expenditure on account of goods given to players for sale promotion and disallowance on account of discount given to Indian customers - What necessitated the disallowance of expenditure? - HELD THAT:- We find that identical issue arose in assessee's own case in A.Y. 2013-14 2014-15 and the ad hoc disallowance made by AO has been deleted. We further find that for A.Y. 2016-17 2017-18, the AO has completed assessment u/s. 143(3) and no additions has been made by AO on the aforesaid issues. Disallowance by the AO has been made on ad hoc basis without pointing out any instance which necessitated the disallowance of expenditure. We further find that CIT(A) while deciding the issue in assessee's favour has given a finding that the facts of the case in the year under consideration are identical to that of A.Y. 2013-14 2014-15. The aforesaid fact noted by CIT(A) has not been controverted by Revenue. Considering the totality of the aforesaid facts, we are of the view that CIT(A) has rightly deleted addition and to the extent of sale promotion expenses, he has upheld that disallowance to the extent of 10% made by AO for which the assessee also has no grievance. Considering the aforesaid fact, we find no reason to interfere in the order of CIT(A). Thus the grounds of Revenue are dismissed.
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2022 (6) TMI 117
TDS u/s 194H - allegation of payment of as commission to agents / doctors - expenditure of regional conference and scientific conferences have two parts i.e. for participation and for reimbursement of expenses - HELD THAT:- As decided in own case INTAS PHARMACEUTICALS LTD. [ 2021 (8) TMI 1005 - GUJARAT HIGH COURT] Explanation to Section 194H of the said Act cannot be interpreted so widely as to include any payment receivable, directly or indirectly for the services in the course of buying or selling of goods. To fall within the Explanation, the payment received or receivable directly or indirectly has to be by a person acting on behalf of the assessee for the services rendered, not being professional services or for the services in the course of buying or selling of goods or in relation to any transaction relating to any assets, valuable articles or thing. Therefore, to fall within the explanation to Section 194H, the commission payment must have been received by a person who is acting on behalf of the assessee. As rightly observed by the Tribunal, the doctors were not bound to prescribe the medicines as suggested by the assessee. As such there was no legal compulsion on the part of the doctors to prescribe a particular medicine suggested by the assessee, and therefore, the doctors could not be said to have acted as the agent of the assessee. In absence of the existence of the element of agency between the assessee and the doctors, the provisions contained in Section 194H of the Act could not be invoked. - Decided in favour of the assessee
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2022 (6) TMI 116
Unabsorbed depreciation and carry forward of unabsorbed business loss - HELD THAT:- We find that the learned Assessing Officer has granted assessee the same in subsequent years and therefore, assessee is not aggrieved with that. Even otherwise, we direct the learned Assessing Officer to determine the carried forward of loss to be set off against subsequent years and up to which assessment year. Further, the unabsorbed depreciation becomes the depreciation of current year in the subsequent year; we do not find any reason to give any direction to the learned Assessing Officer. On both these issues, the assessee has been granted requisite relief without any dispute by the learned Assessing Officer therefore, we do not find that it needs any interference from our side. Accordingly, ground no. 1 of the appeal is dismissed. Short grant of interest under section 244A - Grant of refund till the date of issue of refund - HELD THAT:- As relying on Pfizer Limited [ 1991 (3) TMI 121 - BOMBAY HIGH COURT ] relying on case of CIT vs. Pfizer Limited we direct the learned Assessing Officer to allow interest up to the date of issue of refund under Section 244A of the Act. Accordingly, ground no. 2 of the appeal is allowed.
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2022 (6) TMI 115
Disallowance u/s. 14A r.w.r. 8D - restricting the addition under Rule 8D of the Income-tax Rules, 1962 by considering only such investments which yielded tax free dividend income - HELD THAT:- As seen that the Hon'ble Delhi High Court in ACB India Ltd.[ 2015 (4) TMI 224 - DELHI HIGH COURT] has held that the average value of investments, for the purposes of Rule 8D(2)(iii), should be confined to those securities in respect of which exempt income is earned and not the total investments. Similar view has been taken by the Special Bench of the Tribunal in the case of ACIT vs. Vireet Investments (P) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] . We set aside the impugned order to this extent and remit the matter to the file of the AO for re-computing the disallowance under Rule 8D(2)(iii) by considering only such investments, in calculating the average value of investments, which yielded exempt income during the year. The assessee will be allowed hearing opportunity in such fresh proceedings. Appeal is partly allowed for statistical purposes.
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2022 (6) TMI 114
Addition of interest payment u/s 36(1)(iii) - relief of interest was granted to the extent of amount of loan which was vehicle loan and for business purposes - HELD THAT:- CIT(A) while upholding the addition has noted that Assessee had given Rs. 1,77,99,844/- advance against share application money, no shares were allotted within a reasonable period of 60 days and Assessee had also not given any evidence to show that the shares were allotted on the share application money advanced by the Assessee. He has further given a finding that the advancing for share application money has not been proved to be for business purpose. As far as other interest free amounts advanced, he has given a finding that Assessee has not proved that the loan was given for commercial expediency. Before us no material has been placed by Assessee to point to any fallacy in the findings of CIT(A). We thus find no reason to interfere with the order of CIT(A) and thus the ground of assessee is dismissed. Disallowance u/s 40(ia) on account of non deduction of TDS - CIT(A) has granted relief to the extent of the TDS that was deducted and paid by the Assessee till the filing of return - HELD THAT:- With respect to the amount of Rs. 8,51,234/-, the disallowance of which has been upheld, he has given a finding that no evidence has been placed by assessee to demonstrate that the required TDS was deducted and deposited with the appropriate authorities. Before us, no fallacy in the findings of CIT(A) has been pointed by the Assessee. In such circumstances, we find no reason to interfere with the order of CIT(A) and thus the ground of Assessee is dismissed. Addition u/s 40A(3) - assessee had made payments in cash aggregating to Rs. 6,00,000/- - HELD THAT:- We find that CIT(A) while upholding the addition has noted that Assessee has neither given the details or justification for cash payment before Assessing Officer and him. Before us also, no material has been placed by Assessee to point any fallacy in the finding of CIT(A). We therefore find no reason to interfere with the order of CIT(A) and thus the ground of Assessee dismissed. Disallowance of interest expenses on FBT holding it to be penal in nature - HELD THAT:- Before us, no material has been placed by Assessee to point any fallacy in the findings of CIT(A). We therefore find no reason to interfere with the order of the CIT(A) and thus the ground of Assessee is dismissed.
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2022 (6) TMI 113
Payment of employees' contribution to ESI PF - assessee failed to make the payment of employees' contribution to ESI PF account within the due date provided under the PF ESI Act - HELD THAT:- As decided in [ 2021 (11) TMI 926 - ITAT KOLKATA ] if employees' contribution received by an assessee and paid to ESI and PF accounts before the due date of filing of the return, then the assessee will be eligible to claim the deduction of such amounts - we have specifically gone through the record and find that payments have been made within the due dates of filing of the return. With the above observation, these appeals of the assessee are treated as allowed. The disallowance stand deleted - Decided in favour of assessee.
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2022 (6) TMI 112
Revision u/s 263 by CIT - As per CIT AO during the course of assessment proceedings did not examine the genuineness of the transaction and capacity of the loan creditors of new loans added during the year - Also did not even call for confirmations of loan transactions from the purported loan creditors - HELD THAT:- Though, the return filed by the assessee was selected for Complete Scrutiny under the Category CASS , however, there is no discussion on examination/verification conducted by the AO on the issues highlighted by the learned PCIT in the assessment order. There is also no mention in the assessment order about the notices being issued and reply being filed on these issues during assessment proceedings. It is pertinent to note that as per Explanation 2 to section 263 of the Act, order passed by the AO shall be deemed to be erroneous insofar as it is prejudicial to the interest of revenue if the said order is passed without making inquiries or verification, which should have been made by the Assessing Officer. In view of the facts as are available on record, we are of the considered view that the present case clearly falls within the ambit of provision of the aforesaid Explanation. Thus, the impugned revision order passed under section 263 of the Act is completely justified in the facts of the present case. Accordingly, the grounds raised by the assessee are dismissed.
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2022 (6) TMI 111
Revision u/s 263 - investment and income relating to properties - PCIT perused the record and noted that the order passed by the AO is erroneous and prejudicial to the interest of the revenue - AO has not called for the bank account from which the payments were made to the seller, Sh. Madan Pal Singh to verify whether the payments were made by the assessee from his individual bank account or from the bank account of Kulwant Kaur Kukreja Educational Society - AO has also not examined the violation of the provisions of Section 13(1)(c) which prohibits any trust/society from diverting its income directly or indirectly for the benefit of any person referred to in Sub-Section (3) - HELD THAT:- It is surprising to note that neither the AO has called for the bank account from which such huge amounts of more than Rs.8 crores has been paid to the seller nor the assessee has filed any document before us that he has filed the bank account before the AO from which the payments were made. The submissions of ld. Counsel for the assessee that he has verbally explained the issue to the AO during the course of assessment proceedings cannot be accepted as proper inquiry by the AO during the course of assessment proceedings in absence of any query raised by the AO to this effect. So far as, the arguments of the ld. Counsel for the assessee that the Assessment Order in the case of Kulwant Kaur Kukreja Educational Society was passed u/s 143(3) and no action u/s 147/263 has been taken is concerned, we find the said order is dated 27.12.2018 i.e. after the passing the order of the assessee on 02.11.2018. In our opinion, when the case was selected for limited scrutiny for the purpose of verification of investment in properties and the AO failed to examine the issue for which the case was selected by not asking for the bank account, the source, the applicability of provisions of Section 13(1)(c) therefore, the order passed by the AO without examining the basic details in our opinion, makes the order erroneous as well as prejudicial to the interest of the revenue. We, therefore, uphold the order of the ld. PCIT in cancelling the assessment under the provisions of Section 263 of the I.T. Act with a direction to the AO to pass the fresh Assessment Order after due verification and after affording proper opportunity of being heard to the assessee. Accordingly, the grounds raised by the assessee are dismissed.
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2022 (6) TMI 95
Disallowance of delayed remittance of employees contribution to PF ESI beyond the due date as prescribed in the relevant Acts - HELD THAT:- In the case of the assessee, it had remitted the employee s contribution towards PF/ESIC beyond the due date for payment as specified in PF/ESIC Act, but within the due date for filing the return of income, therefore,we consider that Ld. CIT(A) is not justified in disallowing the impugned claim of deduction of the assessee. Accordingly, we decide this issue in favour of the assessee.
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Customs
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2022 (6) TMI 139
Seeking provisional release of seized imported goods - misdeclaration of origin of goods - the said goods appear to be of Iran origin and not Zambia - validity of demand from Appellants to furnish a bank guarantee to the extent of 15% of value of seized imported goods - Power of Department to review an order passed under section 110A of Customs Act - HELD THAT:- The overall value of goods in the present case is over 100 crores. The fact that the earlier order dated 04.02.2022 issued by the deputy commissioner of Customs, Tumb was withdrawn by the office of Respondent shows that the issue of provisional release was being done under the approval of the Respondent. Under the Customs Act, there is no provision granting power to the department to review an order passed under Section 110A and accordingly the impugned order is bad in law - In the present case, once the provisional release order was passed, the Office of the Commissioner of Customs, Ahmedabad, Respondent herein had no jurisdiction under the Customs Act to review the earlier order dated 4th February 2022 granting provisional release to the goods imported vide the Bills of Entry impugned in the present case. The correct approach would have been for the Respondent to challenge the correctness of the said provisional release order before this tribunal. The condition of furnishing the bank guarantee to the extent of 15% of the value of goods or 15% of the duty value itself requires to be tested in terms of the law delivered on the issue in the case of AMIT ENTERPRISES VERSUS UNION OF INDIA [ 2011 (5) TMI 375 - PUNJAB HARYANA HIGH COURT] , wherein the Hon ble Punjab and Haryana was pleased to modify the condition of furnishing of bank guarantee of 25% of the market value of the seized goods on the ground that the petitioner therein had paid duty as per the valuation of the department. Tribunal in the case of M/S SRK MANUFACTURING VERSUS COMMISSIONER OF CUSTOMS, LUHIANA (VICE-VERSA) [ 2022 (1) TMI 220 - CESTAT CHANDIGARH] had deleted the condition of furnishing the bank guarantee equivalent to the 30% of the value of goods on the ground that the appellant therein had paid duty on the declared value and had accepted to pay the entire differential duty as well. The present case stands at a better footing as the Appellant is agreeable to pay entire duty to secure provisional release of goods. As evident from the Bills of entry, the appellant was always willing to deposit the entire duty of BCD + IGST which is over 25 crores and therefore, the condition to direct the appellant to furnish a bank guarantee of 15% of the value of the goods which is over 100 crores is excessive and arbitrary more importantly when the appellant is willing to deposit the duty payable on the seized goods. There is no dispute on the valuation or classification of the goods as is clear from the impugned provisional release order - the law laid down in the aforesaid decisions is squarely applicable to the facts of the present case as well and the condition to direct the Appellant to furnish bank guarantee of 15% of the value of goods is arbitrary, excessive and bad in law. The conditions imposed in the impugned provision release order is not justified and correct. However keeping in mind the interest of justice and safeguard of revenue s interest also, it is held that the seized goods shall be released provisionally on payment of custom duty on the conditions that the appellant shall execute a bond of full value of the seized imported goods and shall furnish bank guarantee of Rs. 1 Crore. Appeal allowed.
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2022 (6) TMI 110
Entitlement to interest on the belated refunds - limitation under Section 128 of the Customs Act - HELD THAT:- The ld. Commissioner (Appeals) has mis-conceived the issue of interest by rejecting the same by referring to the provisions of Section 128 of the Customs Act. It is held that the appellant is entitled to interest from the end of three months from the date of refund application before the Adjudicating Authority, till the date of grant of refund in cash. The Adjudicating Authority are directed to disburse the interest within a period of 45 days from the date of receipt/service of copy of this order. Appeal allowed.
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2022 (6) TMI 109
Entitlement to interest on the grant of belated refunds - limitation under Section 128 of the Customs Act - HELD THAT:- The ld. Commissioner (Appeals) has mis-conceived the issue of interest by rejecting the same by referring to the provisions of Section 128 of the Customs Act. The appellant is entitled to interest from the end of three months from the date of refund application before the Adjudicating Authority, till the date of grant of refund in cash. The Adjudicating Authority are directed to disburse the interest within a period of 45 days from the date of receipt/service of copy of this order. Appeal allowed.
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Insolvency & Bankruptcy
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2022 (6) TMI 108
Refusal to entertain the belated claims of Homebuyers as Financial Creditors of the Corporate Debtor - rejection of claim having been filed after delay of eight months from the cut-off date - whether after approval of the Resolution Plan on 20.07.2021 by CoC, the claim of the Appellant(s) stood extinguished? - Resolution Professional is required to include details of Homebuyers as reflected in the records of the Corporate Debtor in the Information Memorandum, even though they have not filed their claim before the Resolution Professional within time? - dealing with Resolution Plan regarding Homebuyers, whose names and claims are reflected in the record of the Corporate Debtor, although they have not filed any claim. Whether the Adjudicating Authority has rightly rejected the IAs filed by the Appellant(s) seeking direction to include their claims, which was belatedly filed? - HELD THAT:- There is no dispute between the parties that the claim by the Appellant(s) were filed beyond the timeline prescribed in Form-A. Form-A required that the claims to be filed by 11.11.2020, whereas the claims were filed by the Appellant(s) on 14.07.2021, 23.07.2021 and in 09.11.2021. The List of Creditors was already published by Resolution Professional, which did not include the name of the Appellant(s). The Resolution Plan as submitted by Resolution Applicant was based on List of Creditors as published by Resolution Professional. It is true that Homebuyers whose number runs in several hundred in real estate project belong to different class of Financial Creditors. All Homebuyers who have booked a flat may not normally be residing in the area where Corporate Debtor has its corporate office and registered office - The Homebuyers are a class belonging to middle class of society and majority of whom, who book flat has taken loan from Banks and other financial institutions and they are saddled with liability to pay their loan from their hard-earned income they make payment to the Corporate Debtor in hope of getting a possession of the flat for their residence. Non-submission of claim within the time prescribed is a common feature in almost all project of real estate. But as law exists today, they cannot be included in the List of Creditors and that too after approval of Plan by CoC. There are no ground to interfere with order of the Adjudicating Authority rejecting their Application for admission of their claim. Whether after approval of the Resolution Plan on 20.07.2021 by CoC, the claim of the Appellant(s) stood extinguished? - HELD THAT:- The Hon ble Supreme Court in GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. [ 2021 (4) TMI 613 - SUPREME COURT ] while dealing with the similar question, concluded in paragraph 102.1 and held that once Resolution Plan is approved by the Adjudicating Authority, the claims as provided in the Resolution Plan shall stand frozen and all such claims, which are not part of Resolution Plan shall stand extinguished - It is thus clear that extinguishment of claim of the Appellant(s) shall happen only after approval of the Plan by the Adjudicating Authority. The argument of the Respondents that since CoC has approved the Resolution Plan, the claim of the Appellant(s) have been extinguished, cannot be accepted as there is no extinguishment of claim of the Appellant(s) on approval of Plan by the CoC. Whether the Resolution Professional was obliged to include the details of Homebuyers as reflected in the records of the Corporate Debtor in the Information Memorandum, even though they have not filed their claim before the Resolution Professional within time? - Whether Resolution Applicant ought to have also dealt with Resolution Plan regarding Homebuyers, whose names and claims are reflected in the record of the Corporate Debtor, although they have not filed any claim? - HELD THAT:- Looking to the procedure as is prevalent regarding filing of the claim by Financial Creditors, large number of Homebuyers are unable to file their claim within the time due to various genuine reasons related to such Homebuyers. Homebuyers make payment to the Corporate Debtor, receive allotment letter from the Corporate Debtor and also enter into Builder Buyers Agreement. All the documents pertaining to Homebuyers are on the record of the Corporate Debtor and Interim Resolution Professional/ Resolution Professional does take charge also of all the records of the Corporate Debtor. Even though, Interim Resolution Professional/Resolution Professional are not obliged to include the name of such Homebuyers, who have not filed the claim within the time in their List of Creditors, but there is no reason for not collating the claims of such Homebuyers whose claims are reflected from the records of the Corporate Debtor, including their payments and allotment. When the allotment letters have been issued to the Homebuyers, payments have been received, there are Homebuyers and there is obligation on the part of real estate Company to provide possession of the houses along with other attached liabilities. The liability towards those Homebuyers, who have not filed their claim exists and required to be included in the Information Memorandum. Further, under Regulation 36, sub-regulation 2(l), there is column for other information, which the Resolution Professional deems relevant to the Committee - The purpose of CIRP of Corporate Debtor is to find out all liabilities of the Corporate Debtor and take steps towards resolution. Unless all liabilities of the Corporate Debtor are not known or included in the Information Memorandum, the occasion to complete the CIRP shall not arise. In the present case there is no denial that details of the Appellant(s) and other Homebuyers, who could not file their claims has not been reflected in the Information Memorandum. There being no detail of claims of the Appellant(s), the Resolution Applicant could not have been taken any consideration of the claim of the Appellant(s), hence, Resolution Plan as submitted by Resolution Applicant cannot be faulted - the ends of justice would be met, if direction is issued to Resolution Professional to submit the details of Homebuyers, whose details are reflected in the records of the Corporate Debtor including their claims, to the Resolution Applicant, on the basis of which Resolution Applicant shall prepare an addendum to the Resolution Plan, which may be placed before the CoC for consideration. Appeal disposed off.
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2022 (6) TMI 107
Auction - extension of 30 days time for filing auction bid - non-speaking order - HELD THAT:- On examination of the email of the Appellant there is no difficulty to infer that the Appellant was not at all interested to participate but his sole object was to delay the bid. Even though as per auction notice which was held on the date fixed i.e. 20.04.2021 total 16 bidders participated but much belatedly the Appellant started raising dispute and finally he filed IA Petition before the Adjudicating Authority assailing the bid. Of course, the order of the Adjudicating Authority is not elaborate but on perusal of the same it is reflected that despite indulgence given by the Adjudicating Authority for depositing the amount as stated by the Appellant, he never comply with the same and one way or the other he was trying to delay the proceeding and as such the learned Adjudicating Authority was left with no option but to reject the same - The sanction letter which was annexed with the additional affidavit of the Appellant filed before the Adjudicating Authority makes it clear that the Appellant s application for capital bridge funding was of Rs.300 lakhs whereas sanction of funding was shown as Rs.700 lakhs. Such stand taken by the appellant itself creates serious doubts on the conduct of the appellant. The appellant has initiated the present proceeding only and only with a view to defeat the auction sale - Appeal dismissed.
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2022 (6) TMI 106
Initiation of CIRP - existence of debt and dispute or not - Payment withheld by the respondent corporate debtor on the ground of alert circular issued by the GST department - It is submitted that, they are still willing to pay the amount once they provide the bank guarantee for the GST amount involved - NCLT rejected the application - HELD THAT:- It is not in dispute that the Appellant is a Trader and whenever he used to get any order from any source, he used to put corresponding order on the supplier/manufacturer of that particular goods and used to directly ask them to make direct supply to the concerned source/CD - the Respondent has raised the dispute on the issue of the Input Tax Credit in the reply to the demand notice itself. Although they have not replied within 10 days which is directory in nature but has replied in a very short period (Demand notice is dated 01st July, 2019. Reply received from CD by Appellant on 22nd July, 2019). Hence, it meets the criteria of Section 9 of the Code for raising the dispute. As in the circumstances stated, this is not a moonshine defence. The IBC is a summary proceeding. The role of the Code is limited to Insolvency Resolution to Corporate Persons in a time bound manner in case of initiation of CIRP by Operational Creditor, the Operational debt must be undisputed. As far as the GST dispute is concerned, he is free to approach Appropriate Forum under Chapter V of the Sale of Goods Act, 1930 for redressal of its grievance - I B Code clearly provides for the requirements of following three criteria s before admission of a petition under Section 9 of the Code for initiation of CIRP by Operational Creditor (i) the Debt must be due and payable in law (ii)there must be occurrence of default (iii) the Debt must be undisputed. It is very much clear that the amount is outstanding. But the amount is not due and payable in the law as is very much evident from the facts that one of the supplier of the Appellant has on the basis of intelligence input and investigation conducted by anti invasion branch of the Commissionerate of GST has revealed that the concerned supplier has taken registration under GST Regime is nonexistent and fictious, resulting into perceived loss of more than two times of the outstanding amount loss to the CD without any mistake on the part of the CD - it can be concluded that it is not meeting the criteria of either debt is due and payable in law or the Debt must be undisputed which are the pre-requisite for the admission of case under Section 9 of the Code. The Appellant is not even meeting the criteria as enunciated in Section 9(5)(d) as no notice of dispute has been received by the Operational Creditor. The Operational Creditor has raised the issue with a dispute that the Appellant is not providing bank guarantee. The Appellant /OC has factually failed to communicate that there is no existence of dispute. The Hon ble Supreme Court in TRANSMISSION CORPORATION OF ANDHRA PRADESH LIMITED VERSUS EQUIPMENT CONDUCTORS AND CABLES LIMITED [ 2018 (10) TMI 1337 - SUPREME COURT] has already held that IBC is not intended to be a substitute to a recovery forum and also laid down that whenever there is existence of real dispute, the IBC provisions cannot be invoked. The Code cannot be used whenever there is existence of real dispute and also whenever the intention is to use the Code as a means for chasing of payment or building pressure for releasing the payments. Appeal dismissed.
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2022 (6) TMI 105
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues/defaulting settlement deed - Operational Creditors - existence of debt and dispute or not - HELD THAT:- On behalf of the Applicant herein the settlement deed dated 20.04.2022 has been placed on record, wherein it is clearly mentioned that an amount of Rs. 5,25,00,000/- to be paid by the Corporate Debtor to the Applicant and out of the settled amount of Rs. 2,01,92,143/- shall be payable against the principal and Rs. 3,23,07,857/- shall be payable towards interest to the Operational Creditor. Further it is agreed that post-dated cheques 069333 to 069345 (Total 13) of different amounts shall be given by the Respondent/Corporate Debtor to the Operational Creditor towards the above-said amount. In the said settlement, it is also mentioned that the payment shall be either made through cheques or RTGS. A copy of demand draft dated 10.05.2020 of an amount of Rs. 45 lacs has also been placed on record, existing in the name of Shobha Cards Private Limited, which further indicates that the respondent has intent to pay the amount as per settlement deed. Thus, the Operational Creditor merely wants to recover that amount and not having a fair intent to trigger CIR proceedings. Had, it would have been there, the Operational Creditor might have not withdrawn the earlier petition. NCLT cannot be permitted to move at the whims and wishes of unscrupulous persons, as the main intent of the legislation was to keep the Corporate Debtor as going concern. The parties, who are coming forward to file the petition under Section 7 or 9 of the code with malicious intent to initiate CIR proceedings are to be curbed at the very outset. NCLT cannot allowed to become Recovery Tools for such like litigants. This Tribunal is of affirm view that the no cause of action has arisen to initiate CIR proceedings and the present applicant has also not come with clean hands to trigger the same - application not maintainable and is dismissed.
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2022 (6) TMI 104
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - maintainability of application in terms of Section 4 of the IBC, 2016 - threshold limit involved - HELD THAT:- Notification of MCA dated 24.3.2020 makes it unambiguously clear that the threshold limit to be considered for section 9 application will be Rs. 1 crore. This threshold limit will be applicable for application filed u/s. 7 or 9 on or after 24.3.3020 even if the debt is of date earlier than 24.03.2020 - Since the application under section 9 of the code has been filed on 09.09.2021, therefore the threshold limit of Rs. 1 crore of debt will be applicable in the given facts. In the present application the Operational Creditor demanded Rs. 82,13,604/- and the said amount doesn't come within the threshold limit. In fact, the date of the filing has to be seen and not the date of the default or the date of the demand notice, which is immaterial. The intent of legislation to fix the threshold limit was to save the Companies from being rotted to NCLT for initiation of CIRP proceedings, due to COIVD-19 effect. The said notification was always prospective in nature but having retrospective repercussion also. Hence, even if the amount was due prior to 24.03.2020 and the demand notice was send prior to that the petition u/s. 7 or 9 of the Code cannot be filed against the Corporate Debtor. Application not maintainable and is dismissed.
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2022 (6) TMI 103
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - maintainability of application in terms of Section 4 of the IBC, 2016 - threshold limit of amount involved - HELD THAT:- Notification of MCA dated 24.3.2020 makes it unambiguously clear that the threshold limit to be considered for section 9 application will be Rs. 1 crore. This threshold limit will be applicable for application filed u/s. 7 or 9 on or after 24.3.3020 even if the debt is of date earlier than 24.03.2020 - Since the application under section 9 has been filed on 17.08.2020, though the demand notice was send on 03.01.2020, therefore, the threshold limit of Rs. 1 crore of debt will be applicable in the present facts. The intent of legislation to fix the threshold limit was to save the Companies from being rotted to NCLT for initiation of CIRP proceedings, due to COIVD-19 effect. The said notification was always prospective in nature but having retrospective repercussion also. Hence, even if the amount was due prior to 24.03.2020 and the demand notice was send prior to that the petition u/s. 7 or 9 of the Code, it cannot be filed against the Corporate Debtor. Henceforth, for the above-mentioned reasons, the present Application cannot be admitted. Accordingly, the same being not maintainable stands dismissed with no order to costs.
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2022 (6) TMI 102
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- It is observed that the Corporate Debtor had raised a dispute for the first time vide its email dated 09.05.2017 with respect to the products delivered to the Operational Creditor. Subsequently on several occasions i.e. 12.05.2017, 22.05.2017, 24.05.2017, 23.06.2017, 01.07.2017, 04.07.2017, 06.07.2017 and 25.07.2017 disputes were raised with respect to the quantity and quality of the fabric delivered to the Corporate Debtor. Therefore, it can be seen that there was clever dispute between the parties with respect to the quality and quantity of the material supplied by the Operational Creditor to the Corporate Debtor. On perusal of contents of the emails dated 9.05.2017, 12.05.2017, 22.05.2017, 24.05.2017, 23.06.2017, 01.07.2017, 04.07.2017, 06.07.2017 and 25.07.2017 the 'dispute' has been raised by the Corporate Debtor 'problem in bulks, shortage in bulks' and the 'dispute' raised by the Corporate Debtor does not appears to be hypothetical or illusory. From the, averments in petition and reply thereto and all other documents placed on record, this Bench is of the view that there is a dispute, which requires further investigation. There was pre-existing dispute between the parties; accordingly the present petition is not maintainable - Petition dismissed.
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Service Tax
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2022 (6) TMI 138
Relevant Date - Rejection of Refund claim - the tax paid was exempted in the hands of the appellant - rejection on the ground of time limitation - locus standi of appellant to claim refund - HELD THAT:- This is not a tax paid by mistake on the part of the appellant or a tax that was to be discharged by the appellant within the deadline obligated in rule 6 of Service Tax Rules, 1994. It is, in a manner of speaking, tax exacted at gunpoint by an assessee who did not bother to ascertain taxability and bundled the presumed obligation in the liability of the appellant who had engaged them for an activity. It is a tax that was exempted in the hands of the appellant though without provision in law for repelling such collection and the sole restitution available after contracting out such activity exempted from tax in such circumstances is section 11B of Central Excise Act, 1944 by application of section 83 of Finance Act, 1994. The claim was, accordingly, preferred but was rejected leading to appeal against that denial before Commissioner of CGST Central Excise (Audit-II), Mumbai. Tax is levied on the taxable event or, as in the case of service tax , on activity and not on persons; unlike the erroneous enunciation by the first appellate authority, the exemption, likewise, is on the service and not the provider of service , who is, effectively, an agent of the tax administration for collection of tax from the recipient of service along with the contracted payment. The tax paid by the appellant to the provider of service should not, owing to the exemption, have been charged in the invoice. In such circumstances, retention thereof in the face of claim for it is, unless in accordance with procedure laid down in law, repugnant to constitutional authority for levy and collection of tax. Indeed, the refund mechanism of section 11B of Central Excise Act, 1944, as made applicable to Finance Act, 1994, is not restricted to assessee, or person liable to pay tax , but also is within the right of any person. The impugned order has erred in concluding otherwise on right to claim refund and in attributing the intent of the exemption to deployment of service of the provider of service for itself. The essence of service , at least as far as tax is concerned, is the transaction between provider and recipient for consideration, certainly excluding activities undertaken for oneself that, doubtlessly, is devoid of consideration from the scheme of tax which appears not to have weighed with the first appellate authority. The locus standi of the appellant to claim refund of tax borne by him has, therefore, been wrongly assailed in the impugned order. Considering the contrived disposal of the grievance by the first appellate authority and the plausible cause of that, the facts and submissions, suffices for disposal of this appeal without much further ado. More so, as the rejection by the original authority was not preceded by a show cause notice, which is the foundation of any proceedings, as well as the limiting framework of a tax dispute. The absence of show cause notices forecloses the scope for remand. The relevant date which determines operation of bar of limitation of time, for the person who has borne the burden of tax, is not so easily placed. The default, among the several circumstances envisaged in section 11B of Central Excise Act, 1944, is date of payment of tax. The original authority has not ascertained the relevant date for this purpose. Even with that default benchmark, four of the five invoices pass muster. For that sole invoice of 20th February 2014, the lower authorities have not determined the appropriate relevant date by applying the starting points in section 11B of Central Excise Act, 1944 adapted for service rendering any finding on bar of limitation of time to be faulty. Moreover, that the tax was charged without authority of law is not in doubt. Appeal allowed - decided in favor of appellant.
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2022 (6) TMI 101
Refund of the unutilised input services - Rule 5 of Cenvat Credit Rules read with Notification No. 27/2012-CE (NT) - Rejection of refund on the ground of time limitation - HELD THAT:- The Court below have erred in taking the date of defect removal as the date of filing the refund claim. Date of filing refund claim in the facts of the present case is 30.03.2017 and accordingly, it is held that the appellant has filed refund claim within the period of limitation. The Adjudicating Authority is directed to disburse the refund claim within a period of 45 days from the date of receipt of copy of this order alongwith interest under Section 11BB of the Act - appeal allowed - decided in favor of appellant.
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2022 (6) TMI 100
Maintainability of appeal - appeal dismissed on the ground of time limitation - HELD THAT:- The learned Commissioner (Appeals) have erred in drawing the presumption of service only on the basis of despatch of order-in-original by speed post. The law does not provide for any presumption, and proof of delivery needs to be brought on record. In these circumstances, it is found that the impugned order is fit to be set aside. Further, it is found that the order-in-original was passed ex-parte as the Range Superintendent passed the order ignoring the written representation filed by the appellant. Accordingly, this appeal is allowed by way of remand to the Range Superintendent, with the direction to hear the appellant and pass a reasoned order in accordance with law. Appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2022 (6) TMI 140
Maintainability of petition - remedy of revision under Section 11 of the Uttar Pradesh Excise Act, 1910 - present petition was filed directly before this Court, on the plea of lack of jurisdiction - Levy of Consideration Fee/ Pratiphal Shulk - alleged excess loss of High Strength Malt Spirit (HSMS) - legislative competence of the State of U.P. to enact any law to subject loss of imported HSMS- to Consideration Fee/ Pratiphal Shulk - HELD THAT:- In face of the first issue raised being purely legal, and in absence of any dispute as to fact, the objection raised by the State - to availability of pleadings (in the writ petition) - to support the first ground of challenge raised, is not accepted - Here, as a fact, the impost of Consideration fee/'Pratiphal Shulk is not on the quantities of HSMS received by the petitioner, at its distillery. Rather, that impost has arisen on the excess and therefore, unaccounted loss of HSMS, while that imported article was transported inside the State of Uttar Pradesh. The text of the show-cause-notices dated 22.09.2018 and 26.09.2018 (Annexure No. 7 to the writ petition), clearly refers to the facts - against two transactions of 24,400 and 24,596 Bulk litres of Malt Spirit of strength 68% and 67.6% v/v, imported from William Grant, as cleared by the Customs authorities, 24346 and 24593 Bulk litres, were received at the petitioner's distillery, bearing strength 66.2% and 66.6% v/v, respectively. Whether it was permissible for the State revenue authorities to impose Consideration fee/'Pratiphal Shulk', against alleged loss of revenue on foreign liquor, springing from excess loss of the commodity HSMS, during its transportation from a bonded warehouse at I.C.D. Dadri, Gautam Budh Nagar, to the petitioner s distillery at Modi Nagar? - HELD THAT:- The applicable provisions - Section 15 and 16 of the Act have been quoted in paragraph 40 above. Clearly, those provisions are regulatory laws and not levy provisions. Therefore, under the Scheme of the Act, intoxicant, or liquor (as defined under Section 3 and 11 of the Act) including HSMS, stood covered under the regulatory provisions under the Act. Thus, amongst others, by virtue of Section 15 of the Act, HSMS could not be imported or transported within the State of Uttar Pradesh, except in accordance with the provisions of Section 16 of the Act. That provision of the Act mandatorily prescribes issuance of Pass, amongst others, for import and/or transportation of intoxicant including liquors, inside the State of U.P. - Section 12(2) of the Act only excludes the applicability of Section 12(1) of the Act, to intoxicants imported in India against Customs duty payment under Central enactments. Plainly, it has no application to Section 15 16 of the Act. There is no similar exclusion clause under those regulatory law provisions. For the imposition of tax or Customs duty liability, on imported HSMS, it must be accepted and recognised, the goods were imported across the customs frontiers of the country at I.C.D. Dadri, in Gautam Budh Nagar. Therefore, no amount of Excise duty may have been imposed under the Act, on those goods till they remained HSMS - Merely because no Excise duty could be levied under the Act on HSMS, there is no reason to accept those goods imported into the country would be exempt from operation of the regulatory law, inside the State of Uttar Pradesh though similar goods originating in any part of the country, would be subject to such regulatory law when imported into the State of Uttar Pradesh. The words import , importer and imported used in Paragraphs 608, 609, 610, 613 etc. of the Excise Manual must be read in their complete/wider/natural sense - to include within their sweep, a transaction of transportation (inside the State of Uttar Pradesh) of goods imported into India. That context (of regulatory law), requires, a departure to be made from the narrower statutory meaning of the word import , as contained in Section 3(17) of the Act. In other words, to preserve the efficacy of the regulatory law, it must be given - the word import used in the regulatory provisions of the Act and the Excise Manual must be given a wider more generic meaning than the narrower meaning given under Section 3(17) of the Act. That interpretation is permissible and necessary to be adopted by virtue of the opening words of Section 3 of the act namely, In this Act, unless there is something repugnant in the subject or context . Therefore, Consideration fee/ Pratiphal Shulk may be levied on excess loss of HSMS, whether imported from outside the country or procured from another State of India. Therefore, the injunction sought against that levy, by looking at the provision of law providing for levy of Consideration fee/ Pratiphal Shulk on excess loss of HSMS when transported within the State, from a distillery inside the State of Uttar Pradesh, is misconceived and inapplicable. The geographical place where the goods HSMS commenced their journey (upon being cleared from home consumption) remained inside the State of Uttar Pradesh, i.e., at Dadri, in Gautam Budh Nagar. Yet, HSMS had not been produced inside the State of Uttar Pradesh. In fact, they were imported into the country, at the I.C.D., Dadri, in Gautam Budh Nagar. Therefore, those goods became available for home consumption, under the umbrella of local regulatory laws of the State of Uttar Pradesh, only. Keeping these facts in mind, for the purpose of levy of Consideration fee/ Pratiphal Shulk , on excess transportation loss of HSMS, the applicable law for computation of that regulatory fee would remain the laws of the State of Uttar Pradesh, only. It would not be right to say - the Act and the Excise Manual create levy of Consideration Fee/'Pratiphal Shulk' only on dispatches made from the distillery and not to the distillery. All transportation of liquor within the State, is covered within the regulatory sweep of Sections 15 16 of the Act. The petitioner applied and the respondents granted Pass to the petitioner (to transport HSMS from I.C.D. Dadri, in Gautam Budh Nagar to petitioner s distillery at Modi Nagar, Ghaziabad), on Form FL-22, against bond. That procedure was not contrary to the law. The petitioner was bound by the terms of the Pass read with the Excise Manual. Petition dismissed.
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2022 (6) TMI 99
Exemption from tax - point of second sale - cassette manufacturers purchase blank cassettes from the registered dealers within the State upon payment of sales tax and record the devotional songs/film songs etc., in the blank cassettes and thereafter, sell the pre-recorded cassettes to the appellant by charging the total value of the prerecorded cassettes and the sales tax - HELD THAT:- Without going into the merits of the case as well as the issue with regard to the validity of the circular impugned in the writ petition, this court, by setting aside the assessment alone, directs the appellant to furnish all the required documents in support of their claim to the first respondent, within a period of four weeks from the date of receipt of a copy of this order. On such submission, the first respondent shall consider the same in the light of the circulars issued by the Commissioner and pass appropriate orders, on merits and in accordance with law, after affording an opportunity of hearing to the appellant, within a period of four weeks thereafter. Appeal disposed off.
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2022 (6) TMI 98
Levy of Sales Tax - delivery/rental charges - said charges represents pre-sale charges or not - levy of tax on cylinder holding charges under section 3-A of the Act, on the ground that there has been a transfer of right to use the goods, when the cylinders are delivered to the customers - levy of penalty - whether cylinder delivery charges and handling charges are liable to be taxed or not? - HELD THAT:- This issue is no longer res integra and it is answered by the Honourable Supreme Court in the decision in STATE OF ORISSA AND ANOTHER VERSUS ASIATIC GASES LTD. [ 2007 (5) TMI 322 - SUPREME COURT ] where it was held that the cylinders filled with medical oxygen/industrial gas were loaned to the customers. The loan was free from payment of charges for 14 days. The over-retention charges were levied after 14 days. In the circumstances the levy was on the transfer of the right to use the goods for consideration. The cylinder delivery charges and handling/rental charges are liable to be taxed and it was rightly held by the first respondent - there are no infirmity in the order passed by the first respondent warranting interference - petition dismissed.
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Indian Laws
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2022 (6) TMI 137
Dishonor of Cheque - the trial Court by refusing to issue summons to the witnesses of the accused petitioner (DW) had denied the constitutional right of the accused to defend himself in a criminal proceeding - HELD THAT:- From a plain reading of Sub Section (2) of Section 243 Cr.P.C it would emerge that after the accused in a case has entered upon his defence and applies to the Magistrate to issue process for compelling the attendance of any witness for examination or cross-examination or for production of any document or other things, it is obligatory on the part of the Magistrate to issue such process. Under Sub Section (2) Magistrate can refuse to issue such process on the ground that it is made for the purpose of vexation or delay or for defeating the ends of justice. Moreover, such ground should be recorded in writing by the Magistrate. The reasons assigned by the trial Court as well as by the learned Sessions Judge for refusing the prayer of the accused for issuing summons to his witnesses are not acceptable in view of the law laid down by the Apex Court in the cases MRS. KALYANI BASKAR VERSUS MRS. M.S. SAMPORNAM [ 2006 (12) TMI 545 - SUPREME COURT] and T. NAGAPPA VERSUS Y.R. MURALIDHAR [ 2008 (4) TMI 789 - SUPREME COURT] . The petitioner is an accused under Section 138 N.I Act punishment of which may extend to imprisonment for a term up to two years or with fine which may extend to twice the amount of cheque or with both. Therefore, he should be allowed fair and proper opportunity to prove his innocence. Adducing evidence in support of his defence is a valuable right of him which cannot be denied to him. If for non submission of the true particulars of the witnesses, the trial Court felt it difficult to issue summons to the defence witnesses, trial Court could have asked the accused to submit proper particulars of the witnesses. One of the reasons assigned by the trial Court is that in a complaint case it is the duty of the accused to produce the defence witnesses on his own and court cannot issue summons to the defence witnesses. It is true that accused should not be allowed to unnecessarily protract the trial or request the Court to issue summons to the witnesses whose evidence would not at all be relevant for deciding the case. In such situation the trial Court may discard the petition of the accused on the ground of vexation and delay. In the case in hand, no such ground has been assigned by the trial Court for refusing to issue summons to the witnesses of the accused - the impugned order passed by the learned Sessions Judge affirming the order of the trial Court stands set aside. The criminal revision petition is disposed of.
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2022 (6) TMI 136
Wilful defaulters - declaration by a Bank based on a Master circular dated 01.07.2013 issued by the Reserve Bank of India - invocation of extraordinary jurisdiction under Article 226 of the Constitution of India - HELD THAT:- On a perusal of the clauses in the Master Circular, it can be understood that the impact of declaring a person as a wilful default is drastic and may even have a tendency to impact the fundamental rights of a citizen. Though the learned counsel for petitioners questioned the validity of the Master Circular conferring power upon the banks to declare a person as wilful defaulter, since such a pleading is absent, this Court refrains from considering the said contention. Whether the Reserve Bank of India is vested with powers to confer the banks with authority to declare a person as wilful defaulter or not and whether those are reasonable restrictions are issues that are therefore kept open for consideration, in an appropriate case. In the decision in STATE BANK OF INDIA VERSUS M/S. JAH DEVELOPERS PVT. LTD. ORS. [ 2019 (5) TMI 862 - SUPREME COURT] , while considering the question as to whether a person is entitled to have a right to be represented by an Advocate before the Committees, it was held that the COE and the Review Committee are only in-house Committees which are purely administrative in nature, not vested with any judicial powers - the Supreme Court also reveals that the decision of the COE ought to be given to the borrower, as soon as it is made and thereafter an opportunity is to be given to the borrower to represent against the said decision, based on which the Review Committee must pass a reasoned order. The order of the Review Committee must also be given to the borrower. Apart from the above, a perusal of the Master Circular reveals that the COE must consider the explanation submitted by the borrower and give reasons for recording the fact of wilful default. With the aforesaid salient features of the Master Circular, when this Court appreciate the contentions raised by the learned counsel for the petitioners, it grabs the immediate attention that the impugned orders Ext.P19 and Ext.P21 fails to satisfy the safeguards provided in the Master Circular. In the absence of serving the order of COE on the petitioners, there could never have been a declaration of the petitioners as wilful defaulters since the Master Circular as directed by the Supreme Court contemplates declaration as wilful defaulter only after serving the copy of the order of COE and the consequent decision of the Review Committee. The procedure adopted by the 4th respondent while declaring the petitioners as wilful defaulters has thus failed to grant an opportunity to represent on law and on facts against the decision of the COE - this Court is of the considered view that the process by which petitioners have been declared as wilful defaulters is perverse and contrary to the Master Circular of the Reserve Bank of India apart from conflicting with the peremptory directions of the Supreme Court in State Bank of India v. M/s.Jah Developers Pvt. Ltd. and Ors. This Court notices the total lack of application of mind in the order of COE. There is also a manifest failure to consider the explanation offered by the borrower/ guarantors. The only reason mentioned in Ext.R4(d) under the column 'latest developments' is a failure of the firm to settle the account and the request for grant of additional working capital limits - the question relating to the constitution of the Review Committee is not required to be considered. Petition allowed.
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2022 (6) TMI 97
Power to annual the arbitration award through the amendment act - Legislative competence of the Kerala State Legislature to enact the Kerala Revocation of Arbitration Clauses - Reopening of Awards Act, 1998 - whether the State Act encroaches upon the judicial power of the State? Legislative competence of the Kerala State Legislature to enact the State Law? - HELD THAT:- This Court has observed that the subject of arbitration finds place in Entry 13 of List III, i.e., the Concurrent List of the Seventh Schedule to the Constitution of India. It has been held that the legislation pertaining to the said entry could be made either by the Parliament or the State Legislature. It has been held that since the subject of arbitration is in the Concurrent List, the State can also make a law with regard to the same. The only requirement is that to validate such a law, it is necessary to reserve the same for consideration of the President of India and obtain his assent. When such an assent is obtained, the provisions of the State Law or Act so enacted would prevail in the State concerned, notwithstanding its repugnancy with an earlier Parliamentary enactment made on the subject. It is not in dispute that in the present case also, the State Act was reserved for consideration of the President of India and the assent of the President of India has been obtained. As such, the State Act so enacted would prevail in the State of Kerala - It will further be pertinent to note that in the case of MP Rural 2012, the M.P. Madhyastham Adhikaran Adhiniyam, 1983 (State enactment) provided for mandatory statutory arbitration in the State of M.P. irrespective of the arbitration agreement in respect of works contracts in the State of M.P. or its instrumentalities. This Court, in the cases of G.C. KANUNGO VERSUS STATE OF ORISSA [ 1995 (5) TMI 264 - SUPREME COURT] and MP Rural 2018, has specifically held that the 1940 Act, the 1996 Act and the State Acts legislated by the Orissa and M.P. Legislatures are referable to Entry 13 of List III of the Seventh Schedule to the Constitution of India. As such, in view of the Presidential assent under clause (2) of Article 254 of the Constitution of India, the State Legislature would prevail. UNCITRAL Model Law, a decision or recommendation? - HELD THAT:- The General Assembly of the United Nations has recommended that all countries give due consideration to the UNCITRAL Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practices are concerned - there is no binding decision at the General Assembly of the United Nations to implement the UNCITRAL Model Law. In any case, that recommendation is with regard to only international commercial arbitration practices. No doubt that the Parliament, with certain modifications, has given due consideration to the UNCITRAL Model Law for legislation on the domestic arbitration. However, that cannot by itself be said to be binding on the Parliament to enact the law in accordance with UNCITRAL Model Law. Whereas, the 1986 Act and the NGT Act have been enacted specifically to implement the decisions taken at the international conferences, the 1996 Act is enacted on the basis of the Resolution passed by the General Assembly of the United Nations in 1985, whereby the General Assembly only recommended the adoption of UNCITRAL Model Law insofar as international commercial arbitration practices are concerned. As such, the 1986 Act and the NGT Act are directly referable to Entry 13 of List I of the Seventh Schedule and Article 253 of the Constitution of India. State Legislature's encroachment on Judicial powers - HELD THAT:- This Court has observed that the judgments and decrees made by the civil courts in making the awards of the Special Arbitration Tribunals the Rules of Court are for the sole purpose of their enforceability through the machinery of courts and therefore, cannot be such judgments and decrees of civil courts made in exercise of the judicial power of the State exclusively vested in them under the Constitution of India. This Court, therefore, held that the 1991 Amendment Act, which nullifies the judgments and decrees of the court by which awards of Special Arbitration Tribunals are made Rules of Court , cannot be said to be an encroachment upon the judicial powers of the State exercisable by the courts under the Constitution of India. The Court goes on to hold that the awards made under the 1984 Amendment Act by the Special Arbitration Tribunals are sought to be nullified by the 1991 Amendment Act. As such, the legislative power of the State Legislature is used by enacting the impugned 1991 Amendment Act to nullify or abrogate the awards of the Special Arbitration Tribunals by abrogating to itself a judicial power - the Court goes on to hold that the awards passed by the Special Arbitration Tribunals are the awards passed by the Tribunals exercising the judicial power and as such, when the State nullifies such awards, it abrogates to itself a judicial power and the Statute which annuls it, is unconstitutional being encroachment on the judicial power of the State. The perusal of the scheme of the 1940 Act would itself reveal that the passing of the judgment and decree under Section 17 of the 1940 Act is not a mere formality. The judgment can be pronounced only when the court is satisfied that no cause is made out for remitting the award or setting aside the award. The court is also entitled to remit or modify the awards. As such, it cannot be said that the court, while passing a judgment, which is followed by a decree, does not exercise judicial power. The court is not supposed to act mechanically and be a Post Office - It has been held by this Court that the restrictions which inhere the exercise of the power of the court also apply to the exercise of the appellate power by the Central Government. It has been held that the Central Government has to decide whether in exercising their power, the directors are acting oppressively, capriciously or corruptly, or in some way mala fide. The perusal of the judgment in the case of G.C. Kanungo would reveal that though the court has recorded the submissions of the counsel for the petitioners therein, that the Legislature has no power to render ineffective the earlier judicial decisions by making a law and though judgments were cited in support of the said proposition, the court did not consider it necessary to refer to the said decisions. However, without considering the provisions of the 1940 Act or the two judgments of the Constitution Bench in the cases of HARINAGAR SUGAR MILLS LTD. VERSUS SHYAM SUNDER JHUNJHUNWALA [ 1961 (4) TMI 23 - SUPREME COURT] and SHANKARLAL AGGARWALA VERSUS SHANKARLAL PODDAR [ 1963 (1) TMI 40 - SUPREME COURT] , it went on to hold that the powers exercised by a court while making an award Rule of Court , are not judicial powers. We find that the finding to that effect in the case of G.C. Kanungo, apart from being per incuriam the provisions of the 1940 Act and the law laid down by the Constitution Bench in the cases of Harinagar Sugar Mills Ltd. and Shankarlal Aggarwala and Others, would also be hit by the rule of sub silentio. It could thus be seen that this Court in unequivocal terms has held that the powers exercised by the Chief Justice of the High Court or Chief Justice of India under Section 11(6) of the 1996 Act are not administrative but are judicial powers. It would thus not sound to reason, that when a power under Section 11(6) of the 1996 Act for appointment of an arbitrator has been held to be a judicial power, the power to make an award a Rule of Court , which can be made only upon the satisfaction of the court on the existence of the eventualities set out in Section 17 of the 1940 Act, is not an exercise of judicial power. Thus, the State Act, which has the effect of annulling the awards which have become Rules of Court , is a transgression on the judicial functions of the State and therefore, violative of doctrine of separation of powers . As such, the State Act is liable to be declared unconstitutional on this count - what has been done by the State Act, is annulling the awards and the judgments and decrees passed by the court vide which the awards were made Rule of Court . As such, the rights which accrued to the parties much prior to the enactment of the State Act have been sought to be taken away by it. It is thus concluded in summary as follows: (i) That the State Act in pith and substance is referable to Entry 13 of List III of the Seventh Schedule to the Constitution of India and not to the Entries 12, 13, 14 and 37 of List I of the Seventh Schedule nor to Article 253 of the Constitution of India. The State Act, therefore, is within the legislative competence of the State Legislature. In any case, in view of the Presidential assent under Article 254(2) of the Constitution of India, the State Act would prevail within the State of Kerala. The finding of the High Court of Kerala, to the contrary, is erroneous in law; (ii) That the finding in the case of G.C. Kanungo to the effect that the powers exercised by the courts in passing judgments and decrees for making the arbitration awards Rule of Court is not an exercise of judicial power, is per incuriam the provisions of the 1940 Act and the judgments of the Constitution Bench in the cases of Harinagar Sugar Mills Ltd. and Shankarlal Aggarwala and Others; and (iii) That the High Court of Kerala is right in law in holding that the State Act encroaches upon the judicial power of the State and is therefore liable to be struck down as being unconstitutional. Appeal disposed off.
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2022 (6) TMI 96
Money Laundering - scheduled offences or not - untainted property - statement recorded under Section 50 of PMLA Act - constitutional validity of twin conditions of Section 45 of PMLA Act - HELD THAT:- This Court is of the considered view that the provisions of Section 45 of the Act, 2002 prior to judgment of Hon ble Apex Court in the case of Nikesh Tarachand Shah [ 2017 (11) TMI 1336 - SUPREME COURT ] had been declared unconstitutional; but the defects in provisions of the said Act was cured by Parliament by way of Amendment Act 13 of 2018 and consequently, the twin conditions of Section 45 while disposing of the bail application under the Act, 2002 stood revived - The twin conditions under Section 45 (1) for the offences classified thereunder in Part-A of the Schedule was held arbitrary and discriminatory and invalid in Nikesh Tarachand Shah. There are reasonable ground for believing that applicant is guilty of the offences of money laundering and he is likely to commit any offence, if enlarged on bail - Application dismissed.
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