TMI Tax Updates - e-Newsletter
July 20, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Supply or not - interest/penalty collected for delay in payment of monthly subscription by the members - The additional amount being charged in delay of payment by whatever name called should be classified as principal supply and the classification of the same cannot differ from the original supply. Hence the additional amount charged on delayed payment shall be taxed as per original supply i.e. supply of financial and related services.
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GST:
Demand of GST - Legality and Validity of notice of intimation under Section 74(5) of GST - It is just an intimation. It is up to the writ applicant whether to pay attention to such intimation or not. If the writ applicant deems fit to ignore it, the same may entail the consequence of further show cause notice under Section 74(1) of the Act, 2017
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GST:
Period of limitation for transitional credit - GST TRANS-1 - In this case, the peremptory word "shall" is used. The relevant rule deals with the time limit for availing Transitional ITC by carrying it forward from the credit balance under tax legislations which have been repealed and replaced by the CGST Act. Thus, the object and purpose of Section 140 clearly warrants the necessity to be finite. ITC has been held to be a concession and not a vested right. - On weighing all the relevant factors, which may be not be conclusive in isolation, in the balance, we conclude that the time limit is mandatory and not directory.
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GST:
Profiteering - purchase of a flat - allegation that the benefit of reduction in the rate of tax not passed on - contravention of section 171 of CGST Act - The State Commissioner GST shall ensure that the above benefit is passed on to the eligible buyers and a report is submitted to this Authority through the DGAP within a period of 4 months from the date of this order.
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Income Tax:
Reopening of assessment u/s 147 - notice in the name of dead person - the applicability of Section 292BB of the Act, 1961 has been held to be attracted to an assessee and not to legal representatives - Once the nature of the proceedings is made known and understood by the assessee, he should not be allowed to take advantage of certain procedural defects. That was the purpose behind the enactment of Section 292BB. It cannot be invoked in cases where the very initiation of proceedings is against a dead person.
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Income Tax:
TCS u/s 206C(1) - Purchase by the assessee as scarp subjected to TCS - In view of the undisputed fact that what was purchased by the assessee is scarp subjected to TCS then the resale of the same material is also be treated as scrap and there is no scope of re-classification of the these goods at the time of sale
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Income Tax:
Slump sale of windmills - capital gains as a slump sale u/s 50B (2) - Wind mills constitute separate undertaking and the Ld.CIT(A) has rightly directed the AO to compute the capital gains as a slump sale u/s 50B (2) and no interference is called for.
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Income Tax:
TP Adjustment - Adjustment on account of provision of loan to AE’s - DRP adopted the interest rate at domestic cost of borrowing + 3% markup - rate of interest was to be determined on basis of rate prevailing in Country where loan had been consumed.
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Income Tax:
Deemed dividend u/s 2(22)(e) - Protective assessment - the addition in the hands of the appellants on protective basis by the A O clearly amounts to a double addition and therefore, is unfair and unreasonable, which deserves to be deleted.
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Income Tax:
Validity of the assessment order framed u/s 153A read with section 143(3) -Assessment has been framed by the AO u/s 143(3), without obtaining the valid approval from the joint Commissioner of income tax. Accordingly, such assessment is not valid under the provisions of law.
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Customs:
Effective date of notification - the notification would come into effect from the date and time when it was electronically printed in the gazette and mere uploading on the website would have no significance. - The respondents are directed to refund the entire excess amount paid by the petitioner as enhanced duty under protest, including the IGST amount, within a period of two months from today.
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Customs:
Evasion of duty - fraudulent availment of advance authorisation scheme - the appellant requested for provisional release for re-export of the goods. In that case, a lenient view can be taken. Needless to say that the appellant shall clear the goods on payment of duty as assessed by the Customs
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Customs:
Continuation of Anti-Dumping Duty - imports of “Grinding Media Balls” - Once the Designated Authority had exercised its discretion in recording findings on the basis of the facts available to it and there is no perversity in the exercise of this discretion, it is not possible to accept the submission of the Domestic Industry that the foreign exporter should have been treated as non-cooperative and residual duty under the Customs Notification issued by the Central Government should have been levied on the foreign exporter.
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Corporate Law:
Permission of Company to revise Board's Report - Corporate Social Responsibility (CSR) report - we are convinced with the reasons furnished by Petitioner to seek the relief as sought for. Therefore, we are inclined allow the application as sought for in the interest of justice, and on the principle of ease of doing business, however, without prejudice to the right(s) of Registrar of Companies to initiate appropriate proceedings, if the Company violate any provisions of Companies Act, 2013 and the Rules made thereunder.
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Indian Laws:
Condonation of delay in service of SCN - Time Limitation - Dishonor of Cheque - insufficient funds - If the complaint is to be dismissed on technical ground i.e. on delay of about 13 days, that will amount to preventing the complainant at the threshold level, without affording him an opportunity to put forth his contention on merits. Even if delay of the said 13 days is to be condoned, no prejudice will be caused to the accused and he can very well contest the matter on merits.
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IBC:
Liquidation process - right of the secured creditor - Respondent can realise a Security Interest as per provision Section 13(9) of the SARFAESI Act. Since the Respondent does not have a requisite 60% value in Secured Interest, therefore, the Respondent does not have right to realize its security interest, because it would be detrimental to the Liquidation process and the interest of the remaining ten Secured Creditors.
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IBC:
CIRP process - police has refused to act on the FIR - Since any action of the police will have to be based on investigation on the subject matter of the transaction, which is directly within the purview of the CIRP, it is to be deemed that the police cannot take further steps in the matter unless and until the CIRP culminates, in a resolution or otherwise.
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Central Excise:
CENVAT Credit - input services - Renting of Immovable Property Service - The services used in relation to setting up of a plant are neither specifically included nor specifically excluded during the relevant period. That takes us to the main part of the definition which, with respect to manufacturer allows CENVAT credit of services used in or in relation to manufacture whether directly or indirectly. - Credit allowed.
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Central Excise:
Validity of declarations filed under Sabka Viswas (Legacy Dispute Resolution) Scheme, 2019 - Scheme was held to be not maintainable on the premise that the case involves the confiscation of goods and imposition of redemption fine and Section 129 of the Finance (No.2) Act, 2019 does not grant any relief from the confiscation or redemption fine - Matter restored back for fresh decision after giving opportunity for personal hearing.
Articles
Notifications
GST - States-
38/1/2017-Fin(R&C)(160)/844 - dated
8-7-2020
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Goa SGST
Amendment in Notification No. 38/1/2017-Fin(R&C)(148), dated 5th June, 2020
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59/2020-State Tax - dated
15-7-2020
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Gujarat SGST
Extension in due date of filing of Form GSTR-4 for financial year 2019-20
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41/2020-State Tax - dated
14-7-2020
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Himachal Pradesh SGST
Supersession Notification No. 15/2020–State Tax, dated 23rd June, 2020
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40/2020-State Tax - dated
14-7-2020
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Himachal Pradesh SGST
Amendment in Notification No. 35/2020-State Tax, dated the 23rd June, 2020
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39/2020-State Tax - dated
14-7-2020
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Himachal Pradesh SGST
Seeks to amend Notification No. 11/2020- State Tax, dated the 23rd June, 2020
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36/2020-State Tax - dated
14-7-2020
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Himachal Pradesh SGST
Amendment in Notification No. 29/2020 – State Tax, dated the 23rd June, 2020
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30/2020-State Tax - dated
14-7-2020
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Himachal Pradesh SGST
Himachal Pradesh Goods and Services Tax (Fourth Amendment) Rules, 2020
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(28/2020)-FD 03 CSL 2020 - dated
16-7-2020
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Karnataka SGST
Seeks to amend Notification No. (08/2019) No. FD 47 CSL 2017 dated 23rd April, 2019
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(27/2020)-FD 03 CSL 2020 - dated
16-7-2020
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Karnataka SGST
Seeks to amend Notification No. (29/2018) No. FD 47 CSL 2017 dated 31st December, 2018
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(26/2020)-FD 03 CSL 2020 - dated
6-7-2020
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Karnataka SGST
Seeks to amend Notification No. (20/2020) No. FD 03 CSL 2020, dated the 16th June, 2020
Income Tax-
49/2020 - dated
17-7-2020
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IT
U/s 10(46) of IT Act 1961 - Central Government notifies " Real Estate Regulatory Authority " in respect of the specified income arising to that Authority
SEBI-
SEBI/LAD-NRO/GN/2020/23 - dated
17-7-2020
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SEBI
Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2020.
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (7) TMI 446
Direction to disburse the refund amount - HELD THAT:- Keeping in view the strict timelines stipulated in Rules 90 and 91 of the Central Goods and Services Tax Rules, 2017 this Court directs the respondent to process the petitioner’s aforesaid manual application within three working days.
List on 23rd July, 2020.
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2020 (7) TMI 445
Legality and Validity of notice of intimation under Section 74(5) of the Goods and Service Tax Act, 2017 of the amount of tax - HELD THAT:- A writ application challenging the notice of intimation in the FORM GST DRC-01A issued under Section 74(5) of the Act is not maintainable in law. It is just an intimation. It is up to the writ applicant whether to pay attention to such intimation or not. If the writ applicant deems fit to ignore it, the same may entail the consequence of further show cause notice under Section 74(1) of the Act, 2017. In any view of the matter, even if a further notice under Section 74(1) of the Act, 2017 is issued, an opportunity of hearing will definitely be given to the writ applicant before his actual liability is determined under the Act, 2017.
Application rejected.
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2020 (7) TMI 444
Principles of Natural Justice - validity of impugned order dated 22.05.2020 passed by the authority under Section 74 of the Goods and Service Tax Act, 2017 - grievance of the writ applicant is that the impugned order dated 22.05.2020 came to be passed without giving any opportunity of hearing to the writ applicant - the order came to be passed during the period of complete lock-down.
HELD THAT:- The Department has agreed to give an opportunity of hearing to the writ applicant and thereafter pass an appropriate fresh order - the impugned order dated 22.05.2020 is hereby quashed and set aside.
The matter is remitted to the respondent No.2 for giving an opportunity of hearing to the writ applicant and thereafter pass appropriate order in accordance with law - Application allowed by way of remand.
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2020 (7) TMI 443
Validity of Period of limitation for transitional credit - GST TRANS-1 - Validity of Rule 117 of the Central Goods and Service Tax Rules, 2017 - Vires of Section 140 of the Central Goods and Services Tax Act, 2017 - direction to file Form GST TRANS – 1 either electronically or manually to claim the transitional input tax credit - principal contention of the learned counsel for the Petitioner was that Rule 117 of the CGST Rules does not impose a mandatory obligation on registered persons, such as the Petitioner, to file Form GST TRAN-1 within the prescribed period - HELD THAT:- The statutory and constitutional challenge, in this case, is on the basis that Rule 117 of the CGST Rules is ultra vires Section 140 of the CGST Act and Article 14 and 300-A of the Constitution - Section 140 stipulates that a registered person making a claim for input tax credit should furnish a return, within such time, and in such manner as may be prescribed. The rule making power is contained in Section 164, which is couched in wide terms, and enables the Government to frame rules to give effect to the provisions of the Act and, in particular, to make rules for matters that are required to be prescribed by the CGST Act. Interestingly, the power to frame rules with retrospective effect is also conferred subject to the limitation that it should not pre-date the date of entry into force of the CGST Act. Pursuant thereto, Rule 117 was framed whereby a time limit was fixed for submitting the on line Form GST TRAN -1. By the Finance Act of 2020, the words “within such time” were introduced in Section 140, with retrospective effect from 01.07.2020, thereby conferring expressly the power to prescribe time limits in Section 140 even without relying entirely on the generic Section 164. In this statutory context, there are reason to conclude that Rule 117 of the CGST Rules is intra vires Section 140 of the CGST Act but none to conclude otherwise.
Whether the time limit in Section 19(11) of TNVAT is mandatory or directory? - HELD THAT:- The said Section 19(11) also pertains to the time limit for claiming ITC and uses the word "shall". After examining the language of Section 19(11) and the context, including the object and design of the statute, the Hon'ble Supreme Court concluded that the time limit specified in Section 19(11) is mandatory.
In this case, the peremptory word "shall" is used. The relevant rule deals with the time limit for availing Transitional ITC by carrying it forward from the credit balance under tax legislations which have been repealed and replaced by the CGST Act. Thus, the object and purpose of Section 140 clearly warrants the necessity to be finite. ITC has been held to be a concession and not a vested right. In effect, it is a time limit relating to the availing of a concession or benefit. If construed as mandatory, the substantive rights of the assessees would be impacted; equally, if construed as directory, it would adversely impact the Government's revenue interest, including the predictability thereof. On weighing all the relevant factors, which may be not be conclusive in isolation, in the balance, we conclude that the time limit is mandatory and not directory.
Also, Rule 117 specifies that the return in Form GST TRAN – 1 is required to be filed electronically on the common portal - This requirement is not satisfied by handing over the form in person to the Sales Tax Collection Inspector, Tiruvannamalai. Consequently, in our view, the Petitioner has completely failed to make out a case to direct the Respondents to permit the Petitioner to file Form GST TRAN -1 and claim the Transitional ITC of ₹ 4,70,008/-.
Petition dismissed.
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2020 (7) TMI 442
Profiteering - purchase of a flat - allegation that the benefit of reduction in the rate of tax not passed on - contravention of section 171 of CGST Act - imposition of penalty - HELD THAT:- The amount of benefit of ITC which was required to be passed on by the Respondent or the profiteered amount is determined as ₹ 1,70,28,230/- including the GST @12% on the basic profiteered amount of Rs. as has been mentioned in Annexure-25 of the Report dated 10.12.2019, in terms of Rule 133 (1) of the above Rules. This amount includes an amount of ₹ 488/- including GST @12% on the base amount of ₹ 435/- which has been profiteered by the Respondent from the Applicant No. 1. The Respondent has also realized an additional amount of ₹ 1,70,27,742/- which includes both the profiteered amount @5.38% of the taxable amount (base price) and GST on the said profiteered amount from the other 176 flat buyers who were not party in the present proceedings.
It is also clear from the facts of the case that the Respondent has been directed to pass on the benefit of ITC till 30.04.2019 as data only till April, 2019 was available. Any benefit of ITC which may become available to the Respondent post 30.04.2019 would a so be passed on by the Respondent to the eligible buyers, The State Commissioner GST shall ensure that the above benefit is passed on to the eligible buyers and a report is submitted to this Authority through the DGAP within a period of 4 months from the date of this order.
Penalty - HELD THAT:- It is also evident that the Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in his Project ‘Sky Terraces’ in contravention of the provisions of Section 171 (1) of the CGST Act. 2017. Therefore, he is apparently liable for imposition of penalty as per the provisions of Section 171 (3A) read with Rule 133 (3) (d) of the CGST Act, 2017. Therefore, notice be issued to him to explain why penalty should not be imposed on him.
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2020 (7) TMI 448
Classification of services - segregation, treatment, recycling of Municipal Solid Waste (MSW) and thus clearing MSW landfills - exemption under SI.No.3 of Notification 12/2017 dated 28.07.2017 as amended - service recipient i.e., M/s. Tirupati Smart City Corporation - Governmental Authority or not - liability of Governmental Authority to deduct TDS as per the provisions of section for the services rendered.
Classification of services - whether the nature of the activities of the applicant falls under SAC Code No 9994? - HELD THAT:- We concur with the opinion of the applicant after a thorough examination of the nature of the services of the applicant by classifying them under Sl.No.32 of Heading 9994 of Notification No: 11/2017 Central Tax (Rate) dt. 28.06.2017.
Whether services provided by the applicant is exempted under SI.No.3 of Notification 12/2017 dated 28.07.2017 as amended? - HELD THAT:- Sl. No. 3 of the above notification describes pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a panchayat under article 243G of the constitution or in relation to any function entrusted to a Municipality under article 243W of the constitution.
Whether the services rendered by the applicant are pure services? - HELD THAT:- The Services rendered by the applicant as seen from the record, are devoid of any incorporation of goods in the process of supply and the agreement copy between the applicant and Tirupati Smart City Corporation Limited reveals the same citing the approximate value of the work to be done under the agreement for a sum of ₹ 18,64,00,000/- (Rupees Eighteen Crore Sixty Four lakh only) for 2,00,000 MT (Contract Price). Hence, they are classifiable as pure services, excluding works contract service and other composite supplies involving supply of any goods.
Whether the service recipient i.e., M/s. Tirupati Smart City Corporation is a “Governmental Authority” as per the definition of Notification No: 12/2017 Central Tax (Rate) dt:28.06.2017 as amended? - HELD THAT:- The applicant satisfies all the conditionalities as described under Section 2(16) of the IGST Act, or as defined vide Notification No. 31/2017 - Central Tax (Rate), dated: 13.10.2017 - the service recipient is a Governmental Authority.
Thus, services provided by the Applicant are exempted under SI.No.3 of Notification No. 12/2017 dated 28.07.2017 as amended further by Notification No. 32/2017 - Central Tax (Rate), dated: 13.10.2017.
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2020 (7) TMI 447
Supply or not - interest/penalty collected for delay in payment of monthly subscription by the members - classification and rate of duty applicable - whether there is any Tax Liability on such additional amount (termed as Interest) charged on delayed payment? - HELD THAT:- The applicant is chit company engaged in the activity of distribution of prize money to its members and the additional amount is being collected in the form of interest for delay payment from the members as consideration as a fixed percentage of transaction value. Having regard to the trade parlance it is also clear that chit company gives a reasonable time to its customer to make the payment however if the customer do not make the payment within the stipulated time then an additional amount is being charged and it may be termed as different names i.e. Interest, Late fee or Penalty - The additional amount being charged on delayed payment termed as Interest, late fee or penalty on the amount delayed in specified time cannot be bifurcated as such additional payment do not have its own classification. It is taking colour from original supply i.e., supply of financial and related services.
The entry No 27 of Notification no 12 / 2017 of CGST dated 28th June 2017 exempt the services by the way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services). Further, interest is also defined vide Section No.2 z(k) as means ‘interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) but does not include any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised’.
It is further clarified in circular No.102/21/2019-GST dated 28th June, 2019 that “any service fee/charge or any other charges that are levied by M/s. ABC Ltd in respect of the transaction relating to extending deposits, loans or advances does not qualify to be interest as defined in notification 12/2017-Central Tax (Rate) dated 28th June, 2017, and accordingly will not be exempt”.
The additional amount being charged in delay of payment by whatever name called should be classified as principal supply and the classification of the same cannot differ from the original supply. Hence the additional amount charged on delayed payment shall be taxed as per original supply i.e. supply of financial and related services.
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Income Tax
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2020 (7) TMI 441
Reopening of assessment u/s 147 - notice in the name of dead person - applicability of section 292BB - notice upon a dead person and non-service of notice does not come under the ambit of mistake, defect or omission - duty upon the legal representatives to intimate the factum of death of an assessee to the income tax department - HELD THAT:- Purpose of issue of notice is to make the noticee aware of the nature of the proceedings. Once the nature of the proceedings is made known and understood by the assessee, he should not be allowed to take advantage of certain procedural defects. That was the purpose behind the enactment of Section 292BB. It cannot be invoked in cases where the very initiation of proceedings is against a dead person. Hence, the second contention cannot also be upheld.
Even a Coordinate Bench of this Court in Rajender Kumar Sehgal [2018 (12) TMI 697 - DELHI HIGH COURT] has held “If the original assessee had lived and later participated in the proceedings, then, by reason of Section 292BB, she would have been precluded from saying that no notice was factually served upon her. When the notice was issued in her name- when she was no longer of this world, it is inconceivable that she could have participated in the reassessment proceedings, (nor is that the revenue's case) to be estopped from contending that she did not receive it. The plain language of Section 292BB, in our opinion precludes its application, contrary to the revenue's argument.”
Consequently, the applicability of Section 292BB of the Act, 1961 has been held to be attracted to an assessee and not to legal representatives. - Decided in favour of assessee.
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2020 (7) TMI 440
Reopening of assessment u/s 147 - change of opinion - expenses incurred on the cost of construction of building on the lease hold building/land - HELD THAT:- Respondent - assessee filed computation statement along with the original assessment, which showed the expenditure on construction of building on lease hold land/building and this was specifically mentioned and claimed as a revenue expenditure. The assessment was completed after examining the computation statement and break-up details furnished by the assessee.
After taking into consideration these facts and the fact that the assessment was reopened beyond a period of four years and also after considering the Proviso to Section 147 Tribunal held that the reopening was one of change of opinion. The First Appellate Authority and the Tribunal, on facts, found that the respondent – assessee made a full disclosure of the expenditure and claimed the same as a revenue expenditure. We hold that no substantial question of law arises.
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2020 (7) TMI 438
TCS u/s 206C(1) - Purchase by the assessee as scarp subjected to TCS - Assessee is dealing in scraped material and has purchased railway scrap in auction - First contention of the assessee is that the material sold by the assessee which was purchased from the railways in the auction does not fall in the definition of scrap as provided in clause (b) of Section 206C - HELD THAT:- Scrap sold by the railway was certainly not usable due to its breakage or wear and tear and it was also subjected to TCS for which the assessee has not raised any objection. Once the assessee has accepted the goods purchased from the railway as scrap and allowed the TCS then the resale of the same goods by the assessee will not part take a different character. In view of the undisputed fact that what was purchased by the assessee is scarp subjected to TCS then the resale of the same material is also be treated as scrap and there is no scope of re-classification of the these goods at the time of sale. No merits or substance in the contention of the assessee. The decisions relied upon by the assessee are on specific facts of those cases and therefore, would not help the case of the assessee.
As regards the contention of the assessee that some of the sales considered by the AO as scrap was actually sale of new goods. We note that the AO has considered the sale on the basis of the spot verification. However, now the assessee has also placed certain sale bills in support of his contention that the sales to the extent of ₹ 1,88,60,145/- is sale of new iron goods and not scrap. Since, this is a factual aspect of the matter and needs proper a verification. Therefore, we set aside on this issue to the record of the Assessing Officer for verification of the same by considering the evidence filed by the assessee and then decide the same. Needless to say the assessee be given an appropriate opportunity of hearing before passing the fresh order on this issue. Appeal of the assessee is partly allowed for statistical purposes
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2020 (7) TMI 437
Validity of assessment u/s. 144C - no objection to the draft order of assessment filed by the Assessee before DRP - alternate remedy - HELD THAT:-The understanding of the CBDT in para 45.4 of Circular No. 5/2010 is that, the availing of the remedy to go before the DRP, would not take away the right of appeal. Therefore, it is clear that an Assessee has the option to avail the alternative mechanism of filing appeal before the CIT(A) against the final order of assessment where there is no objection to the draft order of assessment filed by the Assessee before DRP.
We agree with the submission of the assessee that the CIT(Appeals) was not right in holding that since the assessee has not filed objections to the draft assessment order before the Disputes Resolution Panel [DRP] u/s. 144C of the Act, the assessee was precluded from raising objection against the final assessment order before him. As rightly contended by the ld. counsel for the assessee, in terms of provisions of section 144C, the assessee has an option either to file the objection before the DRP against the draft assessment order or obtain a final assessment order and challenge the same before the CIT(Appeals).
Since the CIT(A) has not decided the appeal on merits, we deem it fit and proper to remit the issues raised in this appeal to the CIT(A) for consideration afresh. - Decided in favour of assessee for statistical purposes.
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2020 (7) TMI 436
Slump sale of windmills - capital gains as a slump sale u/s 50B (2) - windmill as separate undertaking - assessee is engaged in the business of aqua culture, export of frozen shrimp, sale of hatchery seed and wind power generation - Eligibility to deduction u/s 80IA - HELD THAT:- In the instant case, there is no dispute that the assessee has sold the wind mills and claimed it as a separate undertaking. Separate undertaking is one which can be separated from the business unit and both the business units of the assessee should be run separately, independent of each and they should not be dependent on each other.
The definition of undertaking is given in 2(42C) and section 2(19) wherein undertaking is defined as any part of an undertaking or unit or division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination thereof not constituting the business activity. From the definition of Income Tax Act, the windmills satisfy all the conditions for treating it as a separate undertaking as discussed by the Ld.CIT(A) in para No.6.3 of the order.
Since the assessee has sold the windmills along with assets and all the liabilities, it also falls in the definition of slump sale u/s 2(42C) of the Act.
Though the assessee has not separately maintained the books of accounts, separate ledger accounts are maintained and claiming deduction u/s 80IA separately for the income generated from the individual units each year. As per the Profit & Loss account, we observe that the assessee is computing profits separately, from wind mills and in a position to ascertain the income and expenditure separately for the windmills as well as for the assessee’s business. As argued assessee, the Hon’ble Andhra Pradesh High Curt in the case of CIT Vs. Abhirami Cotton Mills (P) Ltd. [1995 (7) TMI 14 - ANDHRA PRADESH HIGH COURT] held that non maintenance of separate books of accounts does not make the assessee disentitled for deduction u/s 80J(4).
In the case of Ajanta (P) Ltd. [2016 (12) TMI 1557 - GUJARAT HIGH COURT] held that the deduction u/s 80IA cannot be denied solely on the ground that separate Profit & Loss account and balance sheet are not produced. As decided in M/S. SARGAM RETAILS PVT. LTD. [2017 (12) TMI 1257 - ITAT PUNE] windmill is a separate undertaking.
We hold that wind mills constitute separate undertaking and the Ld.CIT(A) has rightly directed the AO to compute the capital gains as a slump sale u/s 50B (2) and no interference is called for. Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue.
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2020 (7) TMI 435
TP Adjustment - comparable selection - HELD THAT:- Primary function of the assessee is to provide business process outsourcing services (BPO), consisting of inbound customer services, outbound collections, transaction processing, financing and accounting services, knowledge management of complex technologies, telemarketing and invoice processing thus companies functionally dissimilar with that of assessee need to be selected from final list.
Rejection of companies having RPT of more than 25% of the operating revenue as well as companies having different financial year ending.
Adjustment on account of provision of Corporate and performance guarantee - HELD THAT:- As decided in M/S. EVEREST KENTO CYLINDERS LTD. [2015 (5) TMI 395 - BOMBAY HIGH COURT]manner in which the Transfer Pricing Officer has proceeded to determine the arm's length rate based on the probable rate being charged by the commercial banks is not justified. In this view of the matter, three per cent rate of guarantee commission fee determined as arm's length rate by the income-tax authorities cannot be approved, though the ld. DRP in its direction has already restricted it to 1.5%. In the alternative, the addition that is required to be sustained is the position canvassed by the assessee before the Transfer Pricing Officer i.e. adoption of 0.50 per cent as arm's length rate for the purpose of determining the arm's length income on account of guarantee commission fee in the instant case. Considering the entirety of facts and circumstances of the case and on the basis of the material available on record, the rate of 0.50 per cent is to be upheld for the purpose of determining the arm's length rate of the guarantee commission fee. In the result this ground of appeal is partly allowed.
Adjustment on account of provision of loan to AE’s - HELD THAT:- Assessee vehemently submitted that direction of ld. DRP resulted in to total rate of interest at 8.8%. The Hon’ble Delhi High Court in CIT Vs Cotton Naturals (I) (P) Ltd [2015 (3) TMI 1031 - DELHI HIGH COURT] while considering the question of law whether the Income-Tax Appellate Tribunal was right in holding that the interest @ 4% p.a. charged by the respondent assessee from its subsidiary i.e. the Associated Enterprise was arm's length rate of interest and the adjustment made in the Assessment Order determining the arms' length rate of interest at 12.20% was unwarranted, held that Arm's length interest rate for loan advanced to foreign subsidiary by Indian company should be computed based on market determined interest rate applicable to currency in which loan has to be repaid.
Hon’ble Jurisdictional High Court in CIT Vs Tata Autocomp System Ltd [2012 (5) TMI 45 - ITAT MUMBAI] also held that where assessee advanced loans to its AE situated in Germany, rate of interest was to be determined on basis of rate prevailing in Germany where loan had been consumed. Considering the aforesaid decisions of Hon’ble High Courts, we direct the AO/TPO to recompute the adjustment of interest on loan by following the decision of CIT Vs Tata Autocomp System Ltd (supra). The assessee is directed to provide necessary details to AO/TPO. In the result this Ground of appeal is allowed for statistical purpose.
Income from sub-lease as income from other sources - Eligibility for deduction u/s 10A - HELD THAT:- Assessee has claimed deduction under section 10 A against the business income list of the assessee also credited a rental income of ₹ 6.53 crore in its profit and loss account and the same was included in the head of income from business on which the assessee claimed deduction under section 10A. The assessing officer took his view that the rental income is not eligible for deduction under section 10A.
The DRP affirm the action of assessing officer as the same is not qualified for deduction under section 10A. Before us, the learned AR of the assessee failed to bring any convincing fact to treat the said rental income as a business income of the assessee.
As noted that the DRP on the application of assessee for seeking rectification for its direction dated 07/09/2012, vide order dated 21st December 2012 has already directed the assessing officer/TPO to allow expenditure incurred in earning such income. Therefore, in our considered view no further direction is required.
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2020 (7) TMI 434
Personal expenditure - Expenditure accounted under the head subscription and membership fees - assessee is engaged in the business of assembling, trading and marketing of diesel generator sets of Kirloskar - HELD THAT:- Due to the inherent nature of the business of the assessee, each contract for supply and erection of the diesel generator is obtained after considerable amount of negotiations and discussions with clients which includes builders, hotels, hospitals, business complexes, individuals etc., across the State of Kerala. Since the value of the product range is comparatively high, to convince the customers, a series of presentations, negotiations and discussions at various levels of the client would occur before the finalization of a particular order.
Most of such presentations, meetings and discussions are held at various hotels, clubs. Such expenses incurred at hotels, clubs, for meeting, discussions, travelling etc. are accounted under the said head of subscriptions and membership fees, and also, travelling and other expenditures incurred for attending conferences / meetings with the dealer – Kirloskar is also accounted under the said head of expenses.
The expenditure incurred is fully supported and are incurred through by banking channels. It is to be further noted that there are no qualifications, observations made by the Auditors in their report regarding these expenses are not incurred. AO has made an arbitrary adhoc disallowance of 30% without giving any reasons for the findings. A.O. has also not found out any defect / deficiency. Disallowance made is on the higher side taking into the given facts and circumstances of the case. As personal element in such expenses cannot be totally ruled out, and to meet the ends of justice 10% of the disallowance of the said expenditure would be sufficient on facts and circumstances of the case
Adhoc disallowance under various expenses debited to the profit and loss account - HELD THAT:- The expenditures are very much in the nature of unavoidable expenditure in a small scale manufacturing unit.
The quantum of such expenditure is also very small when compared to the volume of operations of the assessee. The assessee is running a small scale manufacturing unit and this expenditure incurred are in the ordinary course of business and are mostly paid to unorganized sectors and hence in most of the cases only self made vouchers are available for incurring such expenses. None of these expenditures are of personal nature. AO has not brought on record any material to show that these impugned expenses are not incurred by the assessee and are not an allowable deduction. It is now well settled law that no adhoc disallowance could be made unless the A.O. brings any specific detail on record which may call for any disallowance. Thus hold that the disallowance of 10% in the facts and circumstances of the case is uncalled for and delete the same.
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2020 (7) TMI 433
Deemed dividend u/s 2(22)(e) - Additions on protective basis - The appeal in the case of other assessee is pending before the Apex court - HELD THAT:- With regard to the addition of ₹ 3 Crores confirmed by the Hon’ble ITAT, Chennai M/S. SUBHAVARSHA INFOTECH [2018 (12) TMI 522 - ITAT CHENNAI] in the hands of the firm, the firm has not accepted the ITAT’s decision and has contested in appeal before the Hon’ble High Court of Madras which is pending now . In such facts and circumstances, the Ld CIT(A) ‘s decision “since the issue under consideration has not reached finality in the apex court, of the considered opinion that as of now, in view of the Hon’ble ITAT Chennai’s decision of the confirmation of addition of ₹ 4.54 Crores, the addition in the hands of the appellants - Mr.S.Sundaramoorthy and Mr.T.Padmakumaron a protective basis by the A O clearly amounts to a double addition and therefore, is unfair and unreasonable, which deserves to be deleted.” does not require any interference and hence the Revenue’s above appeals are dismissed. - Decided against revenue.
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2020 (7) TMI 439
Sale of equity shares through Share Purchase Agreement having non-compete clause - allowable business income u/s 28(va) - Tribunal held that amount given for take over of business including Non-Compete covenant contained in the Sale Purchase Agreement was only share purchase agreement and not business take over, where the valuation is pursuant to Regulations 3[1] and 4 of the Securities and Exchange Board of India [Substantial Acquisition of Shares and Take overs] Regulations 2011, which deal with valuation of shares resulting in transfer of business? - HELD THAT:- As decided by ITAT Market rate in the Stock Exchange on the date of sale was ₹ 71/- per share and therefore, the excess price of ₹ 10/- per share received by the respondent/assessee was treated as non-compete fee by the AO and the Agreement also stipulates that no non-compete fee would be paid by the purchaser and on account of the fact that the assessee selling a large amount of 2,82,50,291 equity shares to M/s.Tube Investments of India to get control over the company and that apart, same amount has been paid to third party general public also.
As brought to the knowledge of this Court by the learned counsel for the respondent/assessee that the rate of ₹ 81/- per share was offered to all shareholders vide Regulations 3[1] and 4 of the Securities and Exchange Board of India [Substantial Acquisition of Shares and Take overs] Regulations, 2011.
CIT [Appeals] as well as ITAT, ''D'' Bench, Chennai, had exhaustively dealt with those issues and arrived at a categorical finding deciding those issues/questions in favour of the respondent/assessee. No substantial questions of law
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2020 (7) TMI 432
Penalty u/s. 271(1)(c) - non specific charge - concealment of income or furnishing inaccurate particulars of income - HELD THAT:- AO has not levied the penalty on the specific charge as mandated u/s 271(1)(c) of the Act. In such facts and circumstance the Hon'ble Jurisdictional High Court in the case of Snita Transport Pvt. Ltd. Vs. Assistant Commissioner of Income Tax [2012 (12) TMI 981 - HIGH COURT OF GUJARAT] has held that penalty cannot be imposed without mentioning the specific charge.
AO has not mentioned the specific charge in its penalty order whether it was levied for concealment of income or for furnishing inaccurate particulars of income. Penalty levied by the AO and confirmed by the learned CIT (A) is not sustainable.
As we have deleted the penalty imposed by the AO & confirmed by the ld. CIT-A on the technical ground, i.e. no specific charge has been invoked as discussed above. Therefore, we are inclined to refrain ourselves from adjudicating the grounds of appeal of assessee raised on merits.
Penalty u/s 271(1)(c) - addition was made on estimated basis - HELD THAT:- There cannot be any penalty qua to the addition made on estimated basis. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in the case of ITO Vs. Bombay wala readymade stores [2014 (11) TMI 1099 - GUJARAT HIGH COURT]. We set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI]
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2020 (7) TMI 431
Penalty u/s 271(1)(c) - unaccounted sale - whether the assessee has concealed the particulars of income with respect to such business turnover not disclosed in the income tax return? - HELD THAT:- The term concealment of particular of income has not been defined under the provisions of section 271(1)(c) or elsewhere in the Act the Act - meaning of the term concealed /inaccurate has been discussed in the case of Reliance Petroproducts (P) Ltd [2010 (3) TMI 80 - SUPREME COURT] wherein it was held that the term ‘inaccurate’ signifies deliberate act or omission on the part of the assessee. As such, the details/informations contained in the return of income /financial statements /audit report which are not correct according to truth, and were furnished by the assessee with the dishonest intent shall be treated as inaccurate particulars.
There was no information available with the Revenue for the unaccounted sale made by the assessee. Thus it is transpired that there was no deliberate act, on the part of the assessee not to disclose the business receipts in the income tax return.
The Revenue has also not brought any material suggesting that the assessee deliberately furnished the inaccurate particulars of income.
Addition/disallowances made during the quantum proceedings does not automatically justify the levy of the penalty under section 271(1)(c) - Besides the element of income added in the quantum proceedings, there must be some material/circumstantial evidences leading to the reasonable conclusion that there was conscious concealment or the act of furnishing of inaccurate particulars on the part of the assessee. We are not convinced with the finding of the authorities below. Hence we set aside the order of the learned CIT (A) and direct the AO to delete the penalty levied by him under section 271(1)(c). - Decided in favour of assessee.
Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI]
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2020 (7) TMI 430
Validity of the assessment order framed u/s 153A read with section 143(3) - whether such order was passed without obtaining the proper approval from the Additional CIT and that too in mechanical matter? - Unexplained cash found during search - HELD THAT:- Assessment has been framed by the AO under section 143(3) of the Act, without obtaining the valid approval from the joint Commissioner of income tax. Accordingly, such assessment is not valid under the provisions of law. In holding so we draw support and guidance from the judgment of Hon’ble jurisdictional High Court in case of CIT vs. Sunrise Finlease [2017 (12) TMI 674 - GUJARAT HIGH COURT].
Revenue has not brought anything on record contrary to the arguments advanced by the learned AR for the assessee. As the assessee succeeds on the preliminary issue raised by him, we do not find any reason to adjudicate the other issue raised by the assessee challenging the validity of the assessment as well as on merits. Hence the ground of appeal of the assessee is allowed.
Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI]
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Customs
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2020 (7) TMI 428
Evasion of duty - fraudulent availment of advance authorisation scheme - appellant have been incurring detention and demurrage charges on account of live consignment - case of appellant is that the respondent has imposed exorbitant conditions for provisional release of goods for home consumption - HELD THAT:- There is prima-facie case of malafide on the part of the appellant to claim exemption fraudulently. However, this is not our conclusion on the merits of the case as the detailed investigation is pending. It is also found that the appellant requested for provisional release for re-export of the goods. In that case, a lenient view can be taken. Needless to say that the appellant shall clear the goods on payment of duty as assessed by the Customs - In these circumstances, the appellant deserve for some leniency as regards terms of provisional release of the seized goods. Accordingly, the goods may be provisionally released on furnishing bond of total value with bank guarantee of the amount of 50% of the total duty.
Appeal allowed in part.
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2020 (7) TMI 427
Provisional release of imported seized goods - appellant’s grievance is that the terms of provisional release are very harsh and the goods may be allowed to be provisionally released only on furnishing of bond on payment of differential duty and without any bank guarantee - HELD THAT:- The differential duty against the bills of entries Nos. 7740144 dated 22.08.2018 and 8549092 dated 22.10.2018 has been worked out and indicated in the show cause notice to ₹ 6,56,589/-. Also the appellant have already given bank guarantee of ₹ 13,69,682, however the same is against other bills of entries. But, since the adjudication to take place combinedly in respect of all the bills of entries including the present two bills of entries, the said bank guarantee amount can be adjusted against overall demand of penalty and fine, if any, imposed at the time of adjudication.
The merit of the case is undervaluation of import goods which needs to be established beyond doubt. However, at the present stage, it is premature to opine on the conclusion of the merits of the case - the justice will be done if the appellant deposit principal duty at the time of clearance of the goods and furnish a bond of ₹ 99,66,273/- with bank guarantee of ₹ 4,00,000/- with auto renewal clause.
Appeal allowed in part.
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2020 (7) TMI 429
Effective date of notification - Validity of Notification issued by the respondent Customs Department dated 1.3.2018 under Section 25 of the Customs Act, 1962 - Import of Crude Vegetable Oils in bulk by the petitioner company for manufacture of Soya Food products - It is the contention of the petitioner that the said notification dated 1.3.2018 was updated on 2.3.2018 and came to be published in the Official Gazette on 6.3.2018 - HELD THAT:- On the issue of the date of publication, the Delhi High Court in M.D. OVERSEAS LTD., KUNDAN CARE PRODUCTS LTD., MINK TRADECOM PVT. LTD., VERSUS UNION OF INDIA & ORS. [2019 (11) TMI 130 - DELHI HIGH COURT] while dealing with a similar notification held that the notification would come into effect from the date and time when it was electronically printed in the gazette and mere uploading on the website would have no significance - The reasoning given by the Division Bench of the Delhi High Court in M.D.Overseas Ltd. (supra) does not appear to be suffering from any legal infirmity, nor any material or argument has been placed before us to take a different view in the matter. We, therefore, accept the contention of the learned counsel for the petitioner on this count.
The respondents are directed to refund the entire excess amount paid by the petitioner as enhanced duty under protest, including the IGST amount, within a period of two months from today - petition allowed.
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2020 (7) TMI 426
Continuation of Anti-Dumping Duty - imports of “Grinding Media Balls” (excluding forged grinding media balls) - initiation of sunset review investigation by Domestic Industry - validity of Notification dated July, 13, 2018 - computation of landed value by considering the Preferential Rate of Duty (Nil Rate), as applicable under the ASEAN Agreement - Domestic Industry is earning superlative profits and its “Return on Capital Employed” is in excess of 22%.
The first contention advanced by learned Chartered Accountant for the Appellant is the application that had been filed by the Domestic Industry for initiation of sunset investigation was not duly substantiated - HELD THAT:- It is not possible to accept this submission. Such a ground has not been taken in this anti-dumping appeal filed by the Thailand exporter and, therefore, we find substance in the submission advanced by learned Counsel for the Respondents that in such a situation the Appellant should not be permitted to raise this issue in this Appeal - rule 7 of the 1996 Procedure Rules applies rule 10 of the 1982 Procedure Rules to anti-dumping appeals and rule 10 of the 1982 Procedure Rules provides that the Appellant shall not, except with the leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal. The Appellant has not sought any leave of the Tribunal to urge or to be heard in support of this ground not taken in the memorandum of appeal. It, however, needs to be noted that the Designated Authority in the initiation Notification dated July 4, 2017 has recorded a categorical finding that a duly substantiated application had been filed by the Domestic Industry.
The second submission advanced by learned Chartered Accountant for the Appellant is that the Designated Authority incorrectly computed the landed value of the dumped goods by considering the preferential rate of duty which was nil under the ASEAN Agreement - HELD THAT:- The landed value of the dumped imports is computed by taking the assessable value with the applicable basic duty of customs. Under the ASEAN Treaty, imports of subject goods from Thailand are chargeable to nil rate of duty, provided a certificate to establish that the goods are of Thailand origin is submitted. The Appellant has also not placed any material to show that any basic duty of customs was actually paid on the subject goods exported by the Appellant - A finding has been recorded that the Designated Authority adopted its consistent practice of evaluation of the landed value with the applicable customs duty. The applicable customs duty in the present case is “nil” in view of the ASEAN Treaty.
The Third submission of learned Chartered Accountant for the Appellant is that there is no necessity for continuation of anti-dumping duty since the Domestic Industry is earning “superlative” profits and its “Return on Capital Employed” is in excess of 22% - HELD THAT:- Apart from the fact that EBIDTA is not one of the listed injury parameters in Annexure-II of the 1995 Rules, the figures in the annual report contain details of all the products, including the product under consideration, and, therefore, the figures in the annual report cannot be made the basis for determining the profitability of the product under consideration in the domestic market. It needs to be noted that the anti-dumping investigations are confined to the product under consideration and, therefore, the profitability of the company as a whole has not to be seen - On behalf of the Domestic Industry, it has also been stated that actually the capital employed of the Domestic Industry is 13%, which is well below the bench mark of 22% that has been consistently adopted by the Designated Authority. It has also been stated by the Domestic Industry that the profits are below 10%, which cannot be termed to be “superlative”.
The fourth submission advanced by the learned Chartered Accountant for the Appellant is that the Domestic Industry is a monopoly and is exploiting the situation by abusing its dominant position in Indian market by taking advantage of anti-dumping duty and raising the prices above the international level - whether the Domestic Industry has a monopoly in the Indian market? - HELD THAT:- It is seen from the records that there are eight producers of the subject goods in India out of which two are the applicant domestic industry. From a perusal of the chart contained in paragraph 65 of the final findings of the Designated Authority, it is clear that for year 2016-17 the market share in demand of the Domestic Industry ( the applicant) is 52.19%, whereas the market share in demand of the remaining six producers is 47.37 %. It cannot, therefore, be said that applicant Domestic Industry is a monopoly since term monopoly envisages existence of a sole producer/seller in the market. This apart, the Appellant has not been able to substantiate that the Domestic Industry has been exploiting the Indian market or that its selling prices are higher than international prices - the submission cannot be accepted.
The fifth submission advanced by learned Chartered Accountant for the Appellant is that non-disclosure of “non-injurious price” calculation sheet has resulted in denial of principles of natural justice and in this connection, reliance has been placed on the decision of the Gujarat High Court in NIRMA LIMITED VERSUS UNION OF INDIA & 6 [2017 (2) TMI 1206 - GUJARAT HIGH COURT] - HELD THAT:- It is not possible to accept this submission of the Appellant. The “non-injurious price” computation is based on the confidential cost of production of the Domestic Industry. It would be a serious breach of the confidentiality provisions contained in rule 7 of the 1995 Rules if the same were to be disclosed to the foreign exporter.
The judgment of the Gujarat High Court in Nirma Ltd. does not help the Appellant on this issue. The High Court held that calculation is required to be disclosed to the Domestic Industry on whose data the computation of “the non-injurious price” is carried out for there can possibly be no bar of confidentiality in relation to a party which has provided the information - In the present case, the information was provided by the Domestic Industry and it is the foreign exporter who is demanding “the non-injurious price” computation. The Designated Authority was, therefore, justified in not disclosing the confidential costing information of the Domestic Industry, that formed the basis for calculation of the “non-injurious price”, to the foreign exporter.
The sixth submission advanced by learned counsel for the Appellant is that insignificant imports could not have caused any injury to the Domestic Industry so as to warrant an extension of anti-dumping duty in the sunset review - HELD THAT:- The test to be applied in a sunset review is the likelihood of continuation or recurrence of dumping and injury. This aspect has been considered by the Designated Authority in Paragraph 99 of the final findings. The Designated Authority has recorded a categorical finding that since it was required to determine recurrence of injury, the actual volume of import would not be relevant for analysis of likelihood of injury. It is, therefore, not possible to accept the sixth submission of the Appellant.
The seventh submission advanced on behalf of the Appellant is that an erroneous finding has been recorded by the Designated Authority on the issue of likelihood of continuation or recurrence of dumping and injury - HELD THAT:- The Designated Authority noted that it was required to evaluate the existing surplus capacities of the foreign exporter to explore the possibility of diversion to the Indian market. The Designated Authority found as a fact that the Thailand exporter had ample production capacities and it was also exporting the product under consideration to other countries in the world.
The eighth contention of learned Chartered Accountant for the Appellant is that the rate of duty was required to be modified, having regard to the current dumping margin and injury margin in terms of section 9A of the Tariff Act - whether in a sunset review, where an affirmative order for extension of anti-dumping duty is made on the basis that there is a likelihood of recurrence of dumping and injury, the rigours of section 9A(1) of the Tariff would still apply? - HELD THAT:- The scope of a sunset review was examined by the Supreme Court in UNION OF INDIA AND ANOTHER VERSUS M/S. KUMHO PETROCHEMICALS COMPANY LIMITED AND ANOTHER [2017 (6) TMI 526 - SUPREME COURT] and by the Tribunal in THAI ACRYLIC FIBRE CO. LTD. VERSUS DESIGNATED AUTHORITY [2010 (4) TMI 389 - CESTAT, NEW DELHI] - The Supreme Court pointed out that in a sunset review, focus is on the issue whether withdrawal of anti-dumping duty would lead to continuation or recurrence of dumping and injury to the Domestic Industry - Tribunal in Thai Acrylic Fibre have also been reproduced in paragraph 27 of this order. The Tribunal observed that since a sunset review entails a likelihood determination, the present levels of dumping are not that relevant as the likelihood of continuance or recurrence of dumping. Further, since during the period of investigation, the anti dumping duty is in force, the current level of dumping may be non-existent or minimum. Thus, the criteria under section 9A(1) that anti-dumping duty should not exceed the dumping margin would have no practical application for continuance of the anti-dumping duty under section 9A(5) of the Tariff Act - the submission cannot be accepted.
The ninth submission advanced by learned Chartered Accountant for the Appellant is that the Designated Authority did not examine the causal link between the dumped imports and the injury to the Domestic Industry - HELD THAT:- This submission of learned counsel for the Appellant cannot also be accepted. It is in an original investigation, where the determination is based on the existence of current dumping and current injury, that it is necessary for the Designated Authority to establish that the injury is not on account of any factors, other than the dumped imports. In fact, clause (v) of Annexure-II to the 1995 Rules gives a list of factors which are required to be examined for this purpose. In a sunset review the Designated Authority is required to examine the likelihood of recurrence of dumping and injury on the expiry of the anti-dumping duty. Thus, causal link in a sunset review is not required to be re-established, as the same had been established at the time of original investigation.
Thus, once the Designated Authority had exercised its discretion in recording findings on the basis of the facts available to it and there is no perversity in the exercise of this discretion, it is not possible to accept the submission of the Domestic Industry that the foreign exporter should have been treated as non-cooperative and residual duty under the Customs Notification dated July 13, 2018 issued by the Central Government should have been levied on the foreign exporter.
The Appeal filed by the Domestic Industry, therefore, deserves to be dismissed.
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Corporate Laws
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2020 (7) TMI 424
Advance Deposit - Section 2(31) of the Companies Act, 2013 read with Rule 2(c)(xii)(b) of the Companies (Acceptance of Deposits)Rules, 2013 - main contention was that the advance against immovable property is deposit and such deposit was given to 1st Respondent based on fraudulent representations of 2nd and 3rd Respondent as their sole intent was to defraud the appellant - HELD THAT:- The appellant has raised the issue of ‘deposit’ in its Company Petition. But this issue has not been determined by the NCLT. Such determination will requiring looking into the facts and the nature of the transactions which may call for more submissions to be examined to arrive at a conclusion. In absence of such exercise having not been done by NCLT, we are unable to express our opinion on this issue.
Matter remanded back to NCLT to decide whether the advance received by the Respondent against allotment of flat is ‘deposit’ in terms of Section 2(31) of Companies Act, 2013 read with the Rule 2(c)(xii) of the Companies (Acceptance and Deposits) Rules, 2014 and whether the Tribunal has the jurisdiction under the Companies Act, 2013 - Appeal allowed by way of remand.
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2020 (7) TMI 423
Permission of Company to revise Board's Report - Corporate Social Responsibility - Section 135 of the Companies Act - HELD THAT:- The instant petition is filed in accordance with law and due notice were ordered to the ROC and the Income-Tax Department, and they have also filed respective affidavits. Therefore, we are convinced with the reasons furnished by Petitioner to seek the relief as sought for. Therefore, we are inclined allow the application as sought for in the interest of justice, and on the principle of ease of doing business, however, without prejudice to the right(s) of Registrar of Companies to initiate appropriate proceedings, if the Company violate any provisions of Companies Act, 2013 and the Rules made thereunder. And the Petitioner is also at liberty to file Application suo-moto seeking to compound of any violation if it thinks so.
The Petitioner Company is permit to revise the Board's report, as sought for, as per Annexure-4 and with a direction to follow all the extant provisions of Section 135 of the Companies Act, 2013, the Company (CSR) Rules, 2014 amended from time to time, and also Rule 77 of NCLT Rules,2016 - Application disposed off.
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Insolvency & Bankruptcy
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2020 (7) TMI 422
Liquidation process - right of the secured creditor - Permission to cause the sale of assets of the Surana Power Limited in Liquidation under Regulation 32 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations 2016 - Application rejected mainly on the ground that BHEL is a Secured Creditors, entitle to proceed under section 52 to realize its Security Interest - HELD THAT:- In the present case, the Secured Creditors which 73.76% in value have already relinquished the Security Interest into the liquidation estate. Thus, it would be prejudicial to stall the liquidation process at the instance of a single creditor having only 26.24% share (in value), in the secured assets. The Respondent does not hold a superior charge from the rest of the Secured financial creditors in the secured Assets. The above provision of SARFAESI Act will be applicable in this case to end this deadlock, and the decision of 73.76% of majority Secured Creditors, who have relinquished the Security Interest shall also be binding on the dissenting secured creditors, i.e. Respondent.
It is pertinent to mention that the facts of the present case are different from that in the case of JM FINANCIAL ASSET RECONSTRUCTION COMPANY LTD. VERSUS FINQUEST FINANCIAL SOLUTIONS PVT. LTD., MR. RAVI SHANKAR DEVARAKONDA, EDELWEISS ASSET RECONSTRUCTION COMPANY, L&T FINANCE LIMITED, BANK OF INDIA, UNION BANK OF INDIA, PUNJAB NATIONAL BANK, ASSET RECONSTRUCTION COMPANY (INDIA) LTD. [2020 (1) TMI 275 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] because in this case, the Liquidator has already concluded that the respondents charge on the Secured Assets is not exclusive. Therefore, the Respondent can realise a Security Interest as per provision Section 13(9) of the SARFAESI Act. Since the Respondent does not have a requisite 60% value in Secured Interest, therefore, the Respondent does not have right to realize its security interest, because it would be detrimental to the Liquidation process and the interest of the remaining ten Secured Creditors.
The Appellant/Liquidator is directed to complete the Liquidation Process - Appeal allowed.
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2020 (7) TMI 421
Dissolution of Corporate Debtor - section 54(1) of the IBC, 2016 R/w Rule 11 of NCLT Rules, 2016 - CIRP process - HELD THAT:- The total outstanding amount payable by Corporate Debtor to Creditors was ₹ 8, 17, 19,714.00 as on date of Admission, out of which IRP/RP received total amount of ₹ 4,31,14,104.00. The total realizable Assets value of the Company as per the valuation done by the IBBI approved Valuers in terms of Regulation 27 is ₹ 8,00,234.00, against which Resolution Professional has recovered ₹ 8,70,479.19, which is over and above the liquidation and Fair Value. Therefore, the Resolution Professional paid on 20.03.2020 with breakup of, IRP/RP Professional Fee - ₹ 3,35,000.00; Towards Publication cost (reimbursement to IRP) - ₹ 29,778.00; To Valuers (4 Nos.) with GST-₹ 1,18,000.00. Therefore, the balance amount is ₹ 3,87,701.19, which is to be disbursed to the workmen as decided and approved by COC in its meeting held on 21.03.2020. However, the total claim of workmen is ₹ 5,29,203.00, which covers the period of twenty-four months preceding the Dissolution order date - it would be just and proper to permit the Resolution Professional to pay an amount of ₹ 3,72,363.00 to workmen on pro-rata basis, on making provision of ₹ 15,338.19 towards Bank service charges levied by the Bank.
There would be no useful purpose be served, by placing the Corporate Debtor under Liquidation process, under the extant provisions of Code. Since the Assets of Company were realized and realised amounts were also distributed to the respective claimants except workmen, the liquidation process under the provisions of Code is deemed to have completed under Chapter Ill of Part Il of Code, and thus it would be just and proper for the Adjudicating Authority to dissolve the Company subject to finally distribute the remaining amounts, as stated by Resolution Professional - the instant Application is filed in accordance with law and the Resolution in question to dissolve the Corporate Debtor was approved by the Sole COC.
It is hereby dissolved the Applicant Company, M/S. My Choice Knit & Apparels Pvt. Ltd., with immediate effect.
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2020 (7) TMI 420
Condonation of delay in filing appeal - Appeal has been filed on 11-11-2019 after about 150 days of the Impugned Order - CIRP process - HELD THAT:- The Appellant admittedly had noted all the passing of the Resolution Plan, at last on 4-7-2019. It is stated that when admittedly Appeal has to be filed at the most within 45 days from the date of the knowledge, the Present Appeal is apparently time barred. The ground raised in the Appeal Para 6 that during the pendency of the said proceedings before "CERC" the Appellant was not in a position to quantify the Operational Debt and do so only when the proceeding was initiated on 25th September, 2019 can not be accepted. The Appellant had admittedly filed claim before the IRP/RP of which major part was admitted by the IRP/RP. Inability to quantify the Operational Debt, as claimed when again, be no reason or obstruction in filing of the Appeal against the Impugned Order.
Appeal is time barred and is dismissed.
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2020 (7) TMI 416
CIRP process - grievance of the writ petitioner is that the police has refused to act on the First Information Report registered by them at the behest of the petitioners against the private respondents - HELD THAT:- A perusal of the affidavit-in-opposition filed by the police authorities, taken in its full perspective, shows that the police took sufficient steps in connection with the complaint lodged by the present petitioners - However, since the intervening commencement of the CIRP and the moratorium following therefrom, to which effect an order has also been passed by the National Company Law Tribunal, Kolkata Bench, whatever action the police may take, will ultimately lead to an investigation as to the transactions of the company, which are the subject matter of the CIRP.
Therefore, although agreeing with the principle that a moratorium under section 14 might not, in certain circumstances, directly stop a criminal proceeding from going on, however, in the present case, as is evident from the affidavit-in-opposition of the police, the police has done its level best up to the time when the moratorium started operating, and the order in connection with the CIRP was passed - Since any action of the police will have to be based on investigation on the subject matter of the transaction, which is directly within the purview of the CIRP, it is to be deemed that the police cannot take further steps in the matter unless and until the CIRP culminates, in a resolution or otherwise.
The allegation, that the police are not taking sufficient steps on the complaint of the petitioners, cannot be accepted by this court - petition dismissed.
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PMLA
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2020 (7) TMI 425
Grant of Bail - Money Laundering - siphoning of funds - proceeds of crime - money circulation scheme - cheating and defrauding by alluring to invest ₹ 10,000/- in the attractive investment Scheme - HELD THAT:- In the instant case, the petitioner has been in possession of the “proceeds of crime” and it appears that he along with others have attempted to project the same as untainted money by transferring the same to different bank accounts in a bid to camouflage it and project it to be genuine transactions. The contention of the petitioner in so far as the question of being a pre-existing “knowledge” as per Section 3(b) of the Act and in order to be held culpable under Section 4 of the Act, the same deserves to be rejected for the simple reason that the question as to whether the accused had prior knowledge needs to be culled out from the facts and circumstances of the case - Even otherwise, the use of the disjunctive “or” in Section 3 makes it clear that presence of knowledge is not the only criteria making the accused culpable under the Act.
The offence of Money Laundering is nothing but an act of financial terrorism that poses a serious threat not only to the financial system of the country but also to the integrity and sovereignty of a nation. The International Monetary Fund estimates that laundered money generates about $590 billion to $1.5 trillion per year, which constitutes approximately two to five percent of the world's gross domestic product - The offences, such as this, are committed with a deliberate design with an eye on personal profit and often shown to be given scant regard for a sordid residuum left behind to be borne by the unfortunate “starry eyed” petty investors. The perpetrators of such deviant “schemes,” including the petitioner herein, who promise utopia to their unsuspecting investors seem to have entered in a proverbial “Faustian bargain” and are grossly unmindful of untold miseries of the faceless multitudes who are left high and dry and consigned to the flames of suffering.
The issue of retrospective application of penal laws/scheduled offences which has been vehemently raised by the petitioner, but for the purposes of the instant application, the said issue need not be gone into, especially in view of the materials on record which point towards prima facie involvement of the petitioner herein and thus at this stage, what is required to be ascertained is the question of the prima facie involvement of the petitioner in the light of Section 24 of the Act - There is no hard and fast rule regarding grant or refusal to grant bail. Each case has to be considered on its facts and circumstances and on its own merits. However, the discretion of the Court has to be exercised judiciously sans any element of arbitrariness.
This Court is not inclined to release the accused Petitioner on bail - Bail application dismissed.
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2020 (7) TMI 415
Money Laundering - provisional attachment order - whether the appellant has made out a prima facie case for grant of order of status quo ante? - HELD THAT:- Since the respondent has followed the procedure prescribed, there are no illegality in getting the amount transferred in the account of ED.
The appellant has offered Bank Guarantee for the retransfer of the aforesaid amount is not agreed by the respondent. During the course of hearing, the ld. senior counsel for the appellant submitted that the appellant is economically hard pressed and the aforesaid amount would be utilized by them for their real estate business. The aforesaid amount is alleged to be the proceeds of crime, therefore, the said amount cannot be allowed to be used by the appellant at this stage. Appropriate decision would be taken after hearing the parties on the merits of the appeal. At this stage, the offer of the appellant cannot be allowed.
The application seeking ad-interim order for reversal of the transfer of funds and restoration of status quo-ante is dismissed - The appeal is already listed on 11th September, 2020.
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2020 (7) TMI 412
Money Laundering - transfer of the amount directed even prior to the expiry of the period of the limitation for filing of an appeal as prescribed under Section 26(3) of the Prevention of Money Laundering Act, 2002 - HELD THAT:- The appeal is already filed by the petitioner(s) before the learned Appellate Tribunal, the present petitions are disposed of requesting the learned Appellate Tribunal to consider and dispose of the application(s)/appeal(s) filed by the petitioner(s), as expeditiously as possible and preferably within a period of three weeks from today. The petitioner(s) shall be at liberty to produce this order before the learned Appellate Tribunal in support of their request for early hearing of the appeal(s)/application(s) filed by them.
Petition disposed off.
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Central Excise
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2020 (7) TMI 419
Validity of declarations filed under Sabka Viswas (Legacy Dispute Resolution) Scheme, 2019 - issuance of discharge certificates under Section 127(8) of the Finance Act, 2019 - Scheme was held to be not maintainable on the premise that the case involves the confiscation of goods and imposition of redemption fine and Section 129 of the Finance (No.2) Act, 2019 does not grant any relief from the confiscation or redemption fine - HELD THAT:- The writ applicants could not be said to have got a fair opportunity of hearing before the concerned respondent. We are at one with Mr. Dhaval Shah, the learned counsel appearing for the writ applicants that the concerned respondent could not have fixed the personal hearing during the period of lockdown. We are of the view that one opportunity should be given to the writ applicants to put forward their case before the concerned respondent in person - We do not propose to go into the merits of the various issues raised as regards the claim to avail the benefit under the Scheme. We are of the view that all the relevant aspects of the matter should be explained by the writ applicants before the concerned respondent in person.
The impugned communication in Form SVLDRS-3 is hereby quashed and set aside. The matter is remitted to the respondent No.3 herein i.e. the Designated Committee, Ahmedabad-South for fresh hearing on the issues in question - Appeal allowed by way of remand.
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2020 (7) TMI 414
CENVAT Credit - input services - Renting of Immovable Property Service - service tax paid under the deeds for infrastructure development agreement, lease deed and subsequent maintenance on which service tax was paid by the input service provider under the head of renting of immovable property service - effect of amendment with effect from 01.04.2011 - HELD THAT:- As can be seen from the three components of the definition of input service under Rule 2(l) of CENVAT Credit Rules 2004, the initial part says that any service used by a service provider in connection with provision of output service or by a manufacturer in or in relation to manufacture of the final products whether directly or indirectly is covered under the definition of input service - This definition has been further enlarged by adding several other input services such as those services used in relation to setting up, modernisation renovation etc. The terms “setting up” has been deleted with effect from 01.04.2011 and hence was not on the Statute during the relevant period - The third part of the definition excludes certain types of services and this exclusion part of the definition also does not have in it, the services used in setting up of the plant.
The services used in relation to setting up of a plant are neither specifically included nor specifically excluded during the relevant period. That takes us to the main part of the definition which, with respect to manufacturer allows CENVAT credit of services used in or in relation to manufacture whether directly or indirectly. This definition is wide enough to cover in its compass any services used for setting up a Plant especially when the services are used for obtaining the land on lease - there is a direct nexus between the manufacture of the final products and the services used for setting up of plant by leasing the land.
The appellant is entitled to CENVAT credit of the disputed amounts and the impugned order needs to be set aside - Appeal allowed - decided in favor of appellant.
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2020 (7) TMI 413
COD application - Area Based Exemption - Refund of the amount - statutory time limit with statutory condonable period - can the Commissioner or this Tribunal go beyond provisions of statute and condone the delay beyond the condonable limits, where there is a statutory time limit with statutory condonable period? - If the exemption notification provides for exemption subject to some conditions and if one of the conditions required for getting a larger refund has not been fulfilled by the appellant, can the exemption notification be read, ignoring such conditions? - HELD THAT:- On the question of condonable limit for delay in the case of Singh Enterprises vs CCE, Jamshedpur [2007 (12) TMI 11 - SUPREME COURT] the Hon’ble Supreme Court has held that where a statutory time limit is fixed for condonation, the delay cannot be condoned beyond the time limit so fixed.
Interpretation of the exemption notification - HELD THAT:- There were several views on how exemption notifications must be interpreted i.e., either strictly or liberally. There were judgments taking both views at various levels including by the Hon’ble Apex Court, some case laws viewing exemption notifications strictly and others viewing them liberally. It has also been held in some decisions that beneficial notifications must be viewed liberally and the substantive benefits should not be denied on procedural grounds.
It is now well settled that the exemption notification must be strictly construed against the person who is claiming it. In this case, if the appellant wants to claim a higher rate of refund under exemption notification, the condition therein that they should have made an application by 30th of September must be fulfilled. If they were prevented by sufficient cause from making such application the Commissioner could have condoned the delay only up to 30th of October and not beyond. The application was clearly made beyond the condonable time limit and therefore, was correctly rejected - there are no infirmity in the impugned order.
Appeal dismissed.
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CST, VAT & Sales Tax
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2020 (7) TMI 417
Validity of assessment order - time limitation - case of the petitioners is that notices/assessment orders are beyond limitation as prescribed under section 29(4) of the Act - HELD THAT:- As per section 29(1), if any amount is found due on the basis of return filed, an intimation is to be sent to the person specifying the sum payable then the same shall be deemed as demand notice. The first proviso to sub- section (1) states that acknowledgment of the return shall be deemed to be intimation under the sub-section either that no sum is payable or no refund is due. Sub-section (2) provides for best judgment assessment in the circumstances prescribed in clauses (a) to (e). As per sub-section (3), the Commissioner on his own motion or on an information received can order framing of an assessment by designated officer by any person or any class of persons for the period prescribed. Sub-section (4) provides limitation for making assessment under sub-section (2) or sub-section (3) - it is evident that during the relevant time the limitation prescribed for making the assessment was within three years from the date when the annual statement was filed or was due to be filed, whichever was later. The said provision was amended and the period was extended to six years. In the Explanation added, it was clarified that the period of six years would apply to those cases in which the period of six years had not yet expired.
Thus, we are not considering the issue as to whether the amended period of limitation of six years would apply to the present cases or not. We are proceeding by assuming that there was period of six years from the date of filing of the annual statement or when it was due.
The facts are not disputed, admittedly the notices are beyond limitation and it is in these circumstances that interference is made in the writ petitions. The impugned notices/assessment orders are set aside - Petition allowed.
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Indian Laws
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2020 (7) TMI 418
Condonation of delay in service of SCN - Time Limitation - Dishonor of Cheque - insufficient funds - offence punishable under section 138 of Negotiable Instruments Act, 1881 - It is contended that the accused deliberately issued the cheque without maintaining the required balance in his account and he had also not repaid the cheque amount after receipt of the legal notice - HELD THAT:- By way of amendment w.e.f. 6-2-2003, the proviso to Section 142 (1)(b) was appended to, thereby enabling the Court to condone the delay in filing the complaint, if the complainant is successful in satisfying the Court about the sufficient cause for not making the complaint within time.
Admittedly the complainant had filed I.A.No.1 seeking condonation of delay even though I.A.No.1 is filed under section 141 of the Act. It is well settled proposition of law that quoting of the wrong provision of law cannot be a ground to reject the application.
The complainant produced the postal endorsement issued by the Department of Posts dated 4-1-2010 in reply to the complaint dated 09-12-2009, enquiring about Registered Letter acknowledgement Due bearing No. 1705 dated 27-10-2009 and informing that the said RLAD has been delivered on 28-10-2009. Therefore it was clear that even though the Registered Letter with acknowledgement Due was issued on 27-10-2009, addressing the accused, the complainant had not received any intimation regarding its service and it was only on 4-1-2010, the complainant was intimated regarding its service. This reason assigned by the complainant in the application cannot be said to be unreasonable - If the complaint is to be dismissed on technical ground i.e. on delay of about 13 days, that will amount to preventing the complainant at the threshold level, without affording him an opportunity to put forth his contention on merits. Even if delay of the said 13 days is to be condoned, no prejudice will be caused to the accused and he can very well contest the matter on merits.
The delay caused in filing the complaint may be condoned in the interest of justice - the impugned order passed by the trial Court is liable to be set aside, the complaint is to be restored on file and the matter is to be remanded back to the trial Court to try the same in accordance with law.
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