TMI Tax Updates - e-Newsletter
July 7, 2020
Case Laws in this Newsletter:
GST
Income Tax
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Search and Seizure - presence of witnesses in case of search - Section 67 of CGST Act - The submission of counsel for petitioner is that the search should be carried out in the presence of the Advocate, but counsel for petitioner has failed to point out any statutory provision or any such legal right in favour of the petitioner.
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GST:
Classfication of supply - supply of patent-applied LED stem (long bulb) with fittings when both are manufactured in the applicant's factory and supplied as a single unit - LED lights or fixtures including LED lamps classified under CTH 9405 are taxable to 12% of GST
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GST:
Levy of GST - Maintenance and Repair Contract with respect to the machinery and equipment it had supplied - Supply of the MARC Holder to BCCL is not import of service within the meaning of section 2 (11) of the IGST Act. The MARC Holder should be treated as a supplier located in India triggering clause 9.2.2 of the MARC, and made liable to pay GST, the place of supply being determined in terms of section 12 (2) (a) of the IGST Act.
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GST:
Requirement for registration of Liquidator under GST - The sale of the assets of the applicant by NCLT appointed liquidator is a supply of goods by the liquidator, who is required to take registration under section 24 of the GST Act.
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GST:
Exemption from GST - service of providing vocational training courses at Vocational Training Centre - BEMVT is registered with DGET and its courses on formal trade skills of diesel mechanic, welder and sewing technology are approved by NCVT. It is, therefore, imparting education as a part approved vocational education courses - Benefit of exemption available.
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Income Tax:
Disallowance of Puja expenses - non business expenses - Since it has been found that the expenses incurred are for the smooth functioning of the business of plying trucks, the expenses need to be allowed. However, taking into consideration the peculiar facts and circumstances of the case, 10% of the expenses may be disallowed for plugging the revenue loss if any.
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Income Tax:
Addition u/s. 56[2] [viib] - method for valuation of the shares - equity and preference shares allotted by assessee to various residents at a premium - Discounted Cash Flow [DCF] method for valuation of the shares v/s net asset method - AO should follow DCF method only.
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Income Tax:
Time limit for completion of assessment and reassessment u/s 153 - Fresh Order passed in remand proceedings - the provisions of Section 153(3) of the Act apply to the fact situation of the case and the tribunal therefore, committed an error of law in holding that the order passed by the CIT(A) was passed u/s 153(2A).
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Income Tax:
Long term capital gain - section 45(2) applicability - Property received by assessee on partial partition of Hindu Undivided Family - expenses claimed u/s 37(1) - Properties held as stock in trade by the joint family - no factual foundation has been made in the pleading with regard to the findings of fact arrived at by the tribunal and no material has been placed on record to demonstrate that the findings of fact recorded by the tribunal are perverse.
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Income Tax:
TP Adjustment - Interest charged on the average share application money advanced by the assessee to the AE - we uphold the deletion of the addition that was made by the A.O/TPO towards charging of notional interest on share application money pending allotment of shares with its wholly owned subsidiary company
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IBC:
CIRP Process - scope of Financial Creditor - The Financing Documents do not in any manner curtail or limit the rights of the 'Financial Creditor'- 'Bank of India' in its individual capacity to enforce its rights against the 'Corporate Debtor' in regard to the financial debt which is payable in law and in fact and in respect whereof default as alleged is not disputed
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Central Excise:
Refund of CENVAT Credit - export of goods - input services or not - the issue of admissibility of Input Service has been clearly examined by the refund sanctioning authority and the issue attained finality therefore, subsequently issue the Show Cause Notice on the same Input Service Credit is not proper and legal.
Articles
Notifications
Customs-
29/2020 - dated
6-7-2020
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Cus
Seeks to further amend notification no. 152/2009 dated 31.12.2009, to increase the rate of duty of customs on imports of Phthalic Anhydride originating in Korea RP and imported under the India-Korea Comprehensive Economic Partnership Agreement, on recommendation of preliminary findings of Directorate General of Trade Remedies under India-Korea Comprehensive Economic Partnership Agreement (Bilateral Safeguard Measures) Rules, 2017.
GST - States-
CCT/26-2/2018-19/58/570 - dated
2-7-2020
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Goa SGST
Seeks to amend Notification No. CCT/26-2/2018-19/54/02 dated 31st March, 2020
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58/2020-State Tax - dated
3-7-2020
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Gujarat SGST
Gujarat Goods and Services Tax (Eighth Amendment) Rules, 2020
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57/2020-State Tax - dated
3-7-2020
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Gujarat SGST
Conditional waiver of late fees for Form GSTR-3B by amending Notification No- 52-2020-State Tax
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54/GST-2 - dated
6-7-2020
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Haryana SGST
Amendment in Notification No.112/ST-2 dated 18.10.2017 under section 96 of the HGST Act, 2017
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8/2020 - State Tax - dated
25-6-2020
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Jharkhand SGST
Jharkhand Goods and Services Tax (Second Amendment) Rules, 2020.
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13/2020 – State Tax - dated
25-6-2020
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Jharkhand SGST
Supersession Notification No.70/2019 – State Tax, dated the 10th February, 2020
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12/2020 – State Tax - dated
25-6-2020
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Jharkhand SGST
Amendment in Notification No. 21/2019- State Tax, dated the 28th June, 2019
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11/2020 – State Tax - dated
25-6-2020
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Jharkhand SGST
Notifies registered persons (hereinafter referred to as the erstwhile registered person), who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)
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09/2020 – State Tax - dated
25-6-2020
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Jharkhand SGST
Seeks to exempt foreign airlines from furnishing reconciliation Statement in FORM GSTR-9C
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56/2020-State Tax - dated
3-7-2020
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Maharashtra SGST
Seeks to amend notification no. 46/2020-State Tax in order to further extend period to pass order under Section 54(7) of MGST Act till 31.08.2020 or in some cases up to fifteen days thereafter.
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55/2020—State Tax - dated
3-7-2020
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Maharashtra SGST
Seeks to amend notification no. 35/2020-State Tax in order to extend due date of compliance which falls during the period from "20.03.2020 to 30.08.2020" till 31.08.2020.
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G.O. Ms. No.29 - dated
25-6-2020
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Puducherry SGST
Government appoints the 8th day of June, 2020, as the date from which the provisions of the Puducherry Goods and Services Tax (Fifth Amendment) Rules, 2020, shall come into force.
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (7) TMI 138
Search and Seizure - presence of witnesses in case of search - Sealing of premises of petitioner - Section 67 of the CGST Act - allegation of evasion of tax - HELD THAT:- In terms of sub-section 10 of Section 67, presence of two or more independent and respectable inhabitants of the locality is necessary as witness to the search.
The search is yet to take place in the present case and the counsel for respondents has duly assured this court that the aforesaid provision will be complied with therefore no direction in this regard at this stage is required - Another submission of counsel for petitioner is that the search should be carried out in the presence of the Advocate, but counsel for petitioner has failed to point out any statutory provision or any such legal right in favour of the petitioner.
The submission of the counsel for petitioner to carry out the search and seizure operation in the presence of the petitioner cannot be accepted - Petition dismissed.
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2020 (7) TMI 137
Refund of Input Tax Credit - exports of goods outside India - Zero rated supplies - Section 54 of the Central Goods and Services Tax Act, 2017 - denial of refund on the ground that petitioner had exported goods through foreign Post Offices, while Notification dated 04th June, 2018 read with Circular No.14/2018-Customs dated 04th June, 2018 has notified Exports by Post Regulations, 2018 w.e.f. 21st June, 2018 which provides for an entry to be presented to proper officer at the foreign Post Office of clearance - HELD THAT:- Issue Notice.
List on 9th September, 2020.
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2020 (7) TMI 142
Exemption from GST - service of providing vocational training courses at Vocational Training Centre, Bankura - applicability of entry no 64 or 66 of Notification 12/2017 - Central Tax (Rate) dated 28/06/2017 (State Notification No. 1136-FT dated 28/06/2017), as amended time to time - HELD THAT:- The applicant is not the Government or local authority. Entry No. 64 of the Exemption Notification is not, therefore, applicable. A reference is made to the services provided by the applicant as a project implementation agency under the Deendayal Upadhyaya Grameen Kausalya Yojana. It is exempt under Entry 71 of the Exemption Notification. However, the applicant provides no evidence that BEMVT is acting as a project implementation agency under the above scheme.
Clause h(ii) of the Exemption Notification defines an “approved vocational course” as a modular employable skill course, approved by NCVT and run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship. BEMVT is registered with DGET and its courses on formal trade skills of diesel mechanic, welder and sewing technology, as mentioned in the Table in para 2.2 above, are approved by NCVT. It is, therefore, imparting education as a part approved vocational education courses.
The applicant is, therefore, an educational institution in terms of clause 2(y)(iii) of the Exemption Notification, and its supplies to the students, faculty and staff relating to the courses imparting skills of diesel mechanic, welder and sewing technology are exempt in terms of Entry 66 (a) of the Exemption Notification.
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2020 (7) TMI 141
Requirement for registration of Liquidator under GST - Sale of assets of company in Liquidation - HELD THAT:- NCLT appoints the ‘resolution professional’ (hereinafter RP), as defined under section 3 (27) of IBC, as the liquidator subject to her consent. If she is already registered as a distinct person of the corporate debtor in terms of Notification No. 11/2020 – Central Tax dated 21/03/2020, she should continue to remain registered till her liability ceases under section 29 (1) (c) of the GST Act. It may be noted that the RP/liquidator acts as the authorized person of the corporate debtor. Once an insolvency professional takes registration as the authorized person of the corporate debtor, it remains in effect with suitable amendment in the certificate of registration if the status or person of the authorized person gets changed.
Supply or not - supply of goods or services - sale done by the liquidator of the assets of the applicant - rate of GST - HELD THAT:- The sale of the assets of the applicant by NCLT appointed liquidator is a supply of goods by the liquidator, who is required to take registration under section 24 of the GST Act.
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2020 (7) TMI 140
Levy of GST - Maintenance and Repair Contract with respect to the machinery and equipment it had supplied - reverse charge mechanism - N/N. 10/2017 – Integrated Tax (Rate) dated 28/06/2017 - HELD THAT:- The MARC Holder maintains suitable structures in terms of human and technical resources at the sites of BCCL. It ensures supervision of the equipment, supply of spares and consumable and overheads for 5000 annual working hours for seventeen years, indicating sufficient degree of permanence to the human and technical resources employed at the sites. The MARC Holder, therefore, supplies the service at the sites from fixed establishments as defined under section 2 (7) of the IGST Act. The location of the supplier should, therefore, be in India in terms of section 2 (15) of the IGST Act.
Supply of the MARC Holder to BCCL is not, therefore import of service within the meaning of section 2 (11) of the IGST Act. The MARC Holder should be treated as a supplier located in India triggering clause 9.2.2 of the MARC, and made liable to pay GST, the place of supply being determined in terms of section 12 (2) (a) of the IGST Act. The applicant, being the registered branch of the Foreign Company, should be treated as the domestic MARC Holder in terms of clause 9.2.2 of the MARC and be liable to pay tax accordingly.
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2020 (7) TMI 136
Filing of Form TRAN-I - availment of credit of excess VAT reflected in Returns - technical glitches on the GST Portal - vires of Rule 117(1A) of Haryana GST Rules, 2017 - HELD THAT:- The Petitioner has challenged vires of Rule 117 (1A) of Rules, however we do not think it appropriate to declare it invalid as we are of the considered opinion that Petitioner is entitled to carry forward Cenvat Credit accrued under Central Excise Act, 1944. The Respondents have repeatedly extended date to file TRAN-I where there was technical glitch as per their understanding. Repeated extensions of last date to file TRAN-I in case of technical glitches as understood by Respondent vindicate claim of the Petitioner that denial of unutilized credit to those dealers who are unable to furnish evidence of attempt to upload TRAN-I would amount to violation of Article 14 as well Article 300A of the Constitution of India.
The Respondents are directed to permit Petitioner to upload TRAN-I on or before 30.06.2020 and in case Respondent fails to do so, the Petitioner would be at liberty to avail ITC in question in GSTR-3B of July 2020 - Petition allowed.
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2020 (7) TMI 135
Delay in filing GST returns - demand notice includes the interest and as well as the gross tax whereas it should have been on the net tax excluding the input tax credits - HELD THAT:- This writ petition is disposed off directing the 1st respondent to afford an opportunity of being heard to the petitioner with regard to the details expressed in the representation and take a decision as expeditiously as possible within a period of two months from the date of receipt of a copy of this judgment. It is made clear that till such time, the operation of Exhibit-P7 demand notice is ordered to be kept in abeyance.
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2020 (7) TMI 139
Classfication of supply - supply of patent-applied LED stem (long bulb) with fittings when both are manufactured in the applicant's factory and supplied as a single unit - GST Tariff Code - rate of GST - Composite supply or Mixed Supply - HELD THAT:- Chapter 94 falls under Section XX which covers 'Miscellaneous Manufactured Articles'. Lamps and light fittings can be of any source and made of any material. Further, those lamps and light fittings covered under Chapter 85 are not covered under this heading by the specific exclusion in the Chapter Notes. Further, lamps for exterior lighting are covered under CTH 9405. In the instant case, the product is a LED lamp fixture with LED light integrated into it which can function independently as garden lights. Therefore, they are classifiable under CTH 94054090 as 'others electric lamps and light fitting'.
It is seen that LED lights or fixtures including LED lamps classified under CTH 9405 are taxable to 6% CGST vide SI.No. 226 of Schedule II of Notification No. 01/2017-C.T. (Rate) dated 28.06.2017 as amended and 6% SGST as per S.No. 226 of Schedule-II of G.O. (M.S.) No. 62 dated 29.06.2017 as amended.
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Income Tax
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2020 (7) TMI 130
Reopening of assessment - bogus purchases - According to AO, merely using of banking channels for payments could not establish the genuineness of the transaction, when the accommodation entry provider has himself on oath submitted that they are providing accommodation entry - HELD THAT:- Similar matter has been adjudicated by this Tribunal. It has been brought to my notice by the ld.AR of the assessee that this Tribunal has deleted similar addition in the case of M/s. M.B Jewellers & Sons vs. DCIT [2018 (5) TMI 1695 - ITAT KOLKATA] wherein on similar grounds/facts the additions made by the AO on the strength of statement of ShriRajendra Jain had been deleted. - Decided in favour of assessee.
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2020 (7) TMI 129
Correct head of income - Interest from Fixed deposits made in connection with Contract business - income from ‘Other sources’ or ‘Business income’ - HELD THAT:- As noted that though the assessee has replied to the AO vide dated18-12-2017 the aforesaid facts like the FDR was used as security for obtaining the contract and was essential condition for bagging the contract, however, the assessee has not bothered to give any material/evidence to show that the interest accrued on the FDRs/deposit was incidental and that the main purpose of FDR’s was it was a condition for getting the contract or to avail the bank guarantee/security deposit/ E-money/tender money etc. As noted that the assessee only made these contentions, but failed to produce any material to substantiate his contention that the interest accrued from FDR should be treated as income from business.
As noted that there is shortfall of (₹ 93,46,927 – ₹ 91,65,482)= ₹ 2,31,445/- because even if the contention of assessee is correct, then he should have shown the contract/business income at ₹ 88,00,954 + ₹ 5,45,973= ₹ 93,46,127.80, thus there is a clear shortfall of ₹ 2,31,445/-.
Set aside the impugned order of the ld. CIT(A) and remand the matter back to the AO with a direction to examine the matter afresh regarding the characterization/nature of receipt in the light of the above mentioned case laws as well as the facts which the assessee bring to the notice of the AO. And if the assessee brings the notice of AO the terms of contract etc and is able to show that the FDR’s in question was essential/necessary for obtaining the contract, then the interest income from these FDRs to be treated as business income and if the assessee fails to do so, then AO is at liberty to treat it as income from Other Sources and assessment may be framed in accordance to law. - Appeal of assessee is allowed for statistical purpose.
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2020 (7) TMI 128
Addition u/s. 56[2] [viib] - method for valuation of the shares - equity and preference shares allotted by assessee to various residents at a premium of ₹ 800 per share - Discounted Cash Flow [DCF] method for valuation of the shares as per assessee v/s net asset method prescribed under Rule 11UA(1)(c)(b) as per revenue - HELD THAT:- As decided in M/S. VBHC VALUE HOMES PVT. LTD., M/S. VBHC VALUE HOMES PVT. LTD.[2020 (6) TMI 318 - ITAT BANGALORE] it is seen that the Tribunal has followed the judgment of Hon’ble Bombay High Court rendered in the case of VODAFONE M-PESA LIMITED VERSUS PRINCIPAL COMMISSIONER OF INCOME-TAX AND 6 OTHERS [2018 (3) TMI 530 - BOMBAY HIGH COURT] and restored the matter back to the file of the AO for a fresh decision with some directions that AO should follow DCF method only and he cannot change the method opted by the assessee as has been held by the Hon’ble Bombay High Court. Grounds raised by the assessee are allowed for statistical purposes.
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2020 (7) TMI 127
Penalty u/s 271(1)(c) - non specification of charge - defective notice - Disallowance on account of interest - AO has to prove that there was concealment of particulars of income or that the assessee has furnished inaccurate particulars of such income - HELD THAT:- A bare perusal of the notices issued to the assessee u/s 274 read with section 271(1)(c) of the Act goes to prove that assessee has not been called upon to explain if it has concealed the particulars of income or furnished inaccurate particulars of such income.
As relying on Manjunatha Cotton [2013 (7) TMI 620 - KARNATAKA HIGH COURT] we are of the considered view that when the assessee has not been specifically made aware of the charges leveled against it as to whether there is a concealment of income or furnishing of inaccurate particulars of income on his part, the penalty u/s 271(1)(c) of the Act is not sustainable. - Decided in favour of assessee.
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2020 (7) TMI 126
Disallowance of miscellaneous expenses - non business expenses - HELD THAT:- As noticed that due to the bad conditions of the road and since it is hilly terrain due to the incessant rain and bad weather the conditions of the road are bad and, therefore, the truck drivers incurred expenses for repairs of the trucks, (frequent tyre burst etc.) for which the local repair shops insist on cash and were reluctant to give any bills/vouchers. The truck drivers claimed the refund from the assessee the expenses through self made vouchers and since the assessee’s central office is at Kolkata it was not possible to collect all the vouchers. These expenses in cash duly shown in the ledgers and books regularly maintained in the course of business and later are put cumulatively under the head ‘Miscellaneous Expenses’ for which only self made vouchers could be produced.
Assessee’s accounts are audited and the auditor has not found any mistakes or short-comings. The AO as well as the CIT(A) has made the disallowance without rejecting the books of accounts. It is noted that the expenses claimed by the assessee as miscellaneous expenses while plying the trucks in remote areas of Assam, Meghalaya and Mizoram cannot be said to be an unreasonable expense when the assessee has a turnover of ₹ 10.63 cr. and it returns gross profit of ₹ 2.75 cr. which comes to G.P of 25.80%. Therefore disallowance was not warranted.
Puja expenses - disallowance as expenses are incurred in cash and since no supporting documents could be produced - DR contended that at least 50% of the claim should be disallowed - HELD THAT:- assessee is into the business of truck plying in North-East States and it is common knowledge that the drivers and cleaners before they start their journey on their trucks conduct puja of the God they believe and they incur expenses for buying garlands, bhog etc. for safe and smooth running of the vehicle while they go to the pre-destined location which are located in the remote areas of Assam, Meghalaya and Mizoram to deliver/collect goods. The expenses thus it is noted are incurred by the assessee for puja is for the smooth functioning of the business of transport as discussed cannot be disallowed. Since it has been found that the expenses incurred are for the smooth functioning of the business of plying trucks, the expenses need to be allowed. However, taking into consideration the peculiar facts and circumstances of the case, 10% of the expenses may be disallowed for plugging the revenue loss if any and the balance amount is directed to be deleted. Appeal of assessee is partly allowed.
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2020 (7) TMI 125
Disallowance u/s 14A r.w Rule 8D(2)(iii) - assessee had offered a suo motto disallowance - HELD THAT:- As relying on own case [2019 (10) TMI 995 - ITAT MUMBAI] we restore the matter back to the file of learned AO on similar lines. The learned AO is directed to reappreciate the disallowance made by the assessee and invoke Rule 8D only if not satisfied with assessee’s working of disallowance. It is made clear that if the disallowance is computed in terms of Rule 8D(2)(iii) then apart from the directions of Ld. CIT(A) to exclude certain investments, those investments which have not yielded any exempt income during the year under consideration would also be excluded as per the decision of ACIT Vs. Vireet Investment (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI]. Accordingly, Ground No.1 of assessee’s appeal may be treated as partly allowed for statistical purposes.
TP Adjustment - Interest charged on the average share application money advanced by the assessee to the AE Saudi Ensas Company, treated by the TPO as loan - HELD THAT:- transfer pricing adjustment as regards charging of notional interest on the share application money that was given by the assessee to its wholly owned subsidiary company viz. Saudi Ensas Company for Engineering Services WLL, UAE, for which allotment of shares was pending on 31.03.2012, remains the same as was there before the Tribunal in the assessee's own case for A.Y 2009-10 and A.Y 2010-11 [2019 (10) TMI 995 - ITAT MUMBAI] .Finding ourselves to be in agreement with the aforesaid view of the Tribunal, we respectfully follow the same. Accordingly, we uphold the deletion of the addition that was made by the A.O/TPO towards charging of notional interest on share application money pending allotment of shares with its wholly owned subsidiary company - Decided against revenue.
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2020 (7) TMI 134
Long term capital gain - section 45(2) applicability - Property received by assessee on partial partition of Hindu Undivided Family - expenses claimed u/s 37(1) - Properties held as stock in trade by the joint family before they were allotted to the respondent on partition - substantial question of law involving in the case or not? - whether tribunal was correct in law in holding that the provisions of Section 45(2) and 49(1) of the Income Tax Act are not applicable in respect to the property received by assessee on partial partition of Hindu Undivided Family and thereby deleting the long term capital gain? - as per tribunal cost of the properties received in partial partition of HUF to be adopted as claimed by the assessee under Section 37 (1) of the Income Tax Act as deduction while computing the income under the head ‘Profit and Gains of Business or Profession’.
HELD THAT:- From perusal of clause (iii) of memorandum of partition, it is axiomatic that asset, which were taken over were forming part of stock in trade of real estate business and continued to be in nature of stock in trade in the hands of the assessee. There is no iota of material on record to show that the assets obtained by the assessee were capital assets. The character of assets received on partition did not change and there is no provision in the Act to indicate that assets received on partition are capital assets, as no deeming provisions have been enacted by the Legislature. Section 45(2) of the Act are not applicable in the fact situation of the case as the asset received is stock in trade. Alternatively, it is worth noticing that there is nothing on record to indicate that any capital asset has been converted to stock in trade and provisions of Section 49(1) are not applicable to stock in trade. The definition of ‘capital asset’ in Section 2(14) expressly excludes stock in trade.
The substantial questions of law framed by this court are in fact questions of fact and the findings on the questions involved in this appeal have been arrived at by the tribunal on the basis of meticulous appreciation of material on record.
It is well settled in law that the tribunal is a fact finding authority and a decision on the facts of the tribunal can be gone into by the high court only if a question has been referred to it, which says that the finding of the tribunal is perverse. [SEE: ‘SUDARSHAN SILKS AND SAREES VS. CIT’[2008 (4) TMI 5 - SUPREME COURT]
In ‘SANTOSH HAZARI VS. PURSHOTTHAM TIWARI’[2001 (2) TMI 131 - SUPREME COURT] while dealing with the expression ‘to be a question of law involving in the case’, there must be first a foundation for it laid in pleadings and the questions emerged from sustainable findings of fact arrived at by courts of fact and it must be necessary to decide that question of law for a just and proper decision of the case.
In the instant case, it is pertinent to note that no factual foundation has been made in the pleading with regard to the findings of fact arrived at by the tribunal and no material has been placed on record to demonstrate that the findings of fact recorded by the tribunal are perverse. Therefore, the substantial question of law framed by a bench of this court in fact do not arise for consideration in this appeal as the matter is concluded by findings of fact. - Revenue Appeal dismissed.
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2020 (7) TMI 133
Time limit for completion of assessment and reassessment u/s 153 - Fresh Order passed in remand proceedings - whether order passed by the assessing officer is beyond the period of limitation as prescribed under Section 153(2A)? - HELD THAT:- As perused the submissions of the assessee, the paper book etc. from which it could not derived whether the assessee has received from MPSEB an amount to the extent of 85% of the cost of the equipment. Therefore, obviously, the CITA) has accepted the arguments of the assessee of its face value. The various circumstances as existing in the instant case go to raise a lot of doubt in the entire transaction.
One aspect that is absent in the instant case is the enquiry from the State Electricity Board with reference to the sale invoice raised on the assessee, the lease agreement entered into with the assessee payment of 20% of ₹ 4.93 Crores to the assessee and the answer to the question whether the assessee received 85% of ₹ 4.93 Crores or not. We are therefore, of the view that the matter requires reexamination at the level of the assessing officer.
The order of remand has been issued with a view to give effect to the findings of the tribunal and neither the order of assessment has been set aside nor the assessing officer has been directed to carry out fresh assessment. Order passed by the tribunal is a remand on a limited issue as indicated in para 12 of the order. Therefore, the provisions of Section 153(3) of the Act apply to the fact situation of the case and the tribunal therefore, committed an error of law in holding that the order passed by the Commissioner of Income Tax (Appeals) was passed under Section 153(2A) of the Act.
Substantial questions of law framed by bench of this court are answered in favour of revenue and against assessee.
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2020 (7) TMI 124
Penalty u/s 271 (1)(c) - defective notice - as per AO assessee has furnished inaccurate particulars by claiming ‘Provisions of Fines & Penalties’ in its ITR and concealed the income to that extent - HELD THAT:- AO has not made it clear under which limb of the provisions of Section 271(1)(c) of the Act, the penalty is being levied. There is glaring discrepancy between initiation of the penalty and levy of penalty. This is a jurisdictional issue arising out of the penalty order before us.
DR heavily relied on the judgment of Sundaram Finance Ltd. Vs CIT [2018 (5) TMI 259 - MADRAS HIGH COURT] and argued that the Hon’ble High Court held that where notice did not show the nature of default, it was a question of fact. The assessee has understood purport and import of the notice, hence, no prejudice was caused to the assessee.
As decided in M/S. SAHARA INDIA LIFE INSURANCE COMPANY, LTD. [2019 (8) TMI 409 - DELHI HIGH COURT] notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1)(c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. Also see M/S SSA'S EMERALD MEADOWS [2016 (8) TMI 1145 - SC ORDER] - We hereby hold that the penalty levied by the Assessing Officer cannot be held to be legally valid in the eyes of law. - Decided in favour of assessee.
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2020 (7) TMI 132
Stay petition - Direction to petitioner to pay 20% of the disputed demand pending disposal of the appeals but on an application preferred by the petitioner before the Principal Commissioner of Income Tax [2nd respondent] order was passed reducing the amount to 15% of the disputed demand - HELD THAT:- Petitioner is ready to pay an amount of ₹ 25,00,000/- [Rupees Twenty Five lakhs only] as against the demand in Ext.P6 order pending disposal of the appeals by the Appellate Authority.
Taking note of the peculiar situation that existed during the pandemic period when the petitioner’s business has come under a lockdown, we deem it appropriate to dispose this writ petition by directing the 3rd respondent, before whom Ext.P2 series of appeals are pending, to consider and pass orders on the same, after hearing the petitioner, within six months from the date of receipt of a copy of this judgment. It is made clear that on the petitioner paying an amount of ₹ 25,00,000/- within two months, there shall be a stay of recovery of balance amounts confirmed against the petitioner by the assessment orders till such time as the 3rd respondent passes orders in the appeals and communicate those orders to the petitioner.
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2020 (7) TMI 131
Stay of recovery - petitioner paid an amount equal to 20% of the tax demand - Attachment over the bank accounts of the petitioner - HELD THAT:- Respondents have already recovered an amount of ₹ 1,51,00357/- from the petitioner through garnishee proceedings, and the appeal preferred by the petitioner against the assessment order has been heard finally by the 2nd respondent Appellate Authority, who is expected to pass orders in the appeal in the near future, there need not be a further recovery effected from the petitioner at this stage. Accordingly, while upholding the recovery already effected by the respondents for the time being, we deem it to be sufficient for safeguarding the interests of the revenue pending disposal of the appeal by the 2nd respondent.
Writ petition is disposed, by directing the respondents to lift the attachment over the bank accounts of the petitioner maintained with respondents 4 to 6 banks forthwith, with a further direction to the 2nd respondent to pass final orders in the appeal within an outer time limit of two months from the date of receipt of a copy of this judgment.
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Insolvency & Bankruptcy
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2020 (7) TMI 123
CIRP Process - scope of Financial Creditor - whether the 'Inter-Creditor Agreement' devising a mechanism for enforcement of rights qua the 'Corporate Debtor' would bar an individual Creditor from triggering 'Corporate Insolvency Resolution Process' in the event of default qua outstanding liability in respect of its financial debt without the consent of other lenders forming the consortium of the same 'Corporate Debtor' - HELD THAT:- The statutory right across the ambit of Section 7 of the 'I&B Code' cannot be curtailed or made subservient to any 'Inter-Creditor Agreement'. The contractual rights, unless recognised by the statute as a permissible mode, would not override the statutory mechanism and right created and enforceable under statute - The language employed in this clause is eloquent enough to hold that each lender who is a member of the consortium may separately enforce its rights and no Rupee Lender having separate and independent rights shall be responsible for the obligations of any other Rupee Lender.
Clause 1.3 speaks in unambiguous terms that the 'Inter-Creditor Agreement' would not in any manner alter, modify or impair any of the rights vesting in the Rupee Lenders against the Borrower under the Finance Documents. This leaves no room for the 'Corporate Debtor' to contend that these financing documents do in any manner enure to the benefit of the 'Corporate Debtor' who has absolutely no locus to raise an issue in this regard.
The Financing Documents do not in any manner curtail or limit the rights of the 'Financial Creditor'- 'Bank of India' in its individual capacity to enforce its rights against the 'Corporate Debtor' in regard to the financial debt which is payable in law and in fact and in respect whereof default as alleged is not disputed - Appeal dismissed.
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2020 (7) TMI 122
Approval of Resolution Plan - Section 31(1) of the Code - CIRP process - extension of CIRP period till 3-1-2019 - HELD THAT:- The resolution plan states that upon NCLT Approval Date, an Interim Monitoring Committee will be constituted. The constitution of the Committee is given in para no VIII of the plan. The terms of the plan and its implementation schedule is stated to be 90 days from the approval of the plan by the Adjudicating Authority. The RA will make full and final payment of ₹ 5150 lakhs to secured financial creditor i.e. SBI out of which ₹ 500 lakhs will be deposited at the end of 30 days from the approval of the resolution plan and the balance ₹ 4650 lakhs will be paid in an Escrow Account within 90 days from the approval of the resolution plan. The payment of ₹ 24.43 lakhs to operational creditors is proposed to be made in priority over secured and unsecured financial creditors. Payment of dues to workmen and employees is proposed to be made within 30 days of approval of resolution plan by AA in the manner provided for in Para 11.2 of the Resolution Plan.
The requirements under section 31(1) of the Code are satisfied in the present case. In para No. 4 of Form H the RP has certified that the resolution plan complies with all the provisions of the Code and Regulations and does not contravene any of the provisions of the law for the time being in force. The RP has also certified that the resolution applicant New Ram traders has submitted affidavit pursuant to Section 30(1) of the Code confirming its eligibility under section 29A of the Code to submit the resolution plan and the contents of the said affidavit are in order - the decision taken by the financial creditors falls within the ambit of its commercial and banking wisdom and is therefore, not being interfered with.
In view of the provisions of Section 30(4) of the Code, we approve the resolution plan submitted by M/s. New Ram Traders as approved by the CoC. The resolution so approved shall be binding on the corporate debtor and its employees, members, creditors [including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed,] guarantors and other stakeholders involved in the resolution plan.
Resolution Plan approved - moratorium cease to have effect - RP shall forward all records relating to the conduct of the CIRP and the resolution plan to the Board to be recorded on its database.
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2020 (7) TMI 121
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - scope of Financial Creditor - HELD THAT:- On detailed perusal of the clause 64 & 65 it is evident that a transaction will fall in the residuary clause (f) of section 5(8) under the category of financial debt, only if the transaction has commercial effect of borrowing, as such it will not fall within the category of financial debt. Moreover, Hon'ble Supreme Court in this clause 65 made reference to real estate allottee in order to conclude this observation which is not the case here as the transaction is in relation to purchase of land which does not fall within the ambit of real estate transaction.
This bench is of the view that the contentions/ or claims being raised by the M/s. Versatile Commotrade Private Limited as a financial creditor is correct, M/s. Versatile Commotrade has a right to claim the advances and therefore, shall within the definition of Financial Creditor. Also, liquidated damages after being proven can be deducted.
The sale transaction between the corporate debtor and M/s. Versatile Commotrade Private Limited was entered by the corporate debtor to make huge profit and money paid by the M/s. Versatile Commotrade Private Limited to the Corporate Debtor was in the nature of advance paid for particular purpose for purchase of the property and Corporate Debtor was to give back equivalent money paid by executing sale deed and the corporate debtor being in the business of real estate, was obviously doing the same for huge profit purpose. Thus, advance money paid had commercial effect of borrowing. As such, above amount paid by M/s. Versatile was a debt disbursed against the consideration of time value of money under Sale Agreement having the commercial effect of borrowing - RP had rightly treated M/s. Versatile Commotrade Private Limited as a "Financial Creditor".
Application disposed off.
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2020 (7) TMI 120
Maintainability of application - challenge on the ground that Winding up Petition against Shree Ram Urban Infrastructure Ltd. has already been admitted by the Hon'ble High Court of Bombay on 5th October, 2016 - HELD THAT:- The similar issue fell for consideration before the Hon'ble Supreme Court in Forech India (P.) Ltd. v. Edelweiss Assets Reconstruction Co. Ltd. [2019 (1) TMI 1442 - SUPREME COURT]. In the said case, the Hon'ble Supreme Court noticed the pendency of the Application under sections 433 and 434 of the Companies Act, 1956 and winding up petition, being 42 of 2014 was filed by Forech India Ltd. before the Hon'ble High Court of Delhi. It was held by this Appellate Tribunal that since there was no winding up order by the Hon'ble High Court, the Financial Creditor's petition would be maintainable. As a result of this the Appellant's Appeal was dismissed.
The case of the Appellant is covered by the decision of the Hon'ble Supreme Court in Forech India Ltd., therefore, the Application under section 7 of the I&B code filed by the Respondent - SERI Equipment Finance Limited is not maintainable - Appeal dismissed.
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PMLA
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2020 (7) TMI 119
Jurisdiction - power of Tribunal to grant stay/pass order of status quo - Retention of documents, digital devices and other things seized/recovered - section 17(4) of the PMLA - whether the Appellate Tribunal has jurisdiction to grant stay or passed any order of status quo which has the consequence of stalling the investigation?
HELD THAT:- Section 26 (1) clearly provides that the appeal to this Tribunal is to be preferred against an order passed by the Adjudicating Authority. The Adjudicating Authority has passed the impugned order under Section 8(3) of the said Act allowing the application filed by the Respondent in the interest of investigation and interest of justice and permitted that the records seized in the case to be retained in terms of Section 17(4) of the PMLA, 2002. Since the order under challenged is an order passed by the Adjudicating Authority so this Tribunal has inherent jurisdiction to grant stay of the impugned order but the stay as sought in the present appeals, by the appellant cannot be granted as the appellant is seeking stay of the impugned order consequence of which is to stall the investigation.
In the present case, during the course of hearing it is submitted by the learned Sr. counsel for the appellant that they have received summons to unlock the cell phones, which according to the appellant, violates privacy of the appellants. What it appears is that, actually, the appellant wants a direction from this Tribunal to issue an order of status quo re qua the cell phones which is nothing but in the guise to stall the investigation and the same is not within the jurisdiction of this Tribunal as the matter pertains to issue of summons was not before the Adjudicating Authority. The submissions made with regard to issue of summons/unlock of cell phones and the violation of the fundamental rights as enshrined under Articles 20(3) & 20(1) are not within the jurisdiction of this Tribunal.
We have to read Section 17(1)(i) to (iv) in conjunction with Section 8(3)(a) wherein it is clearly provided that the retention of record shall continue during investigation for a period not exceeding 365 days, as the case may be. From the above, it appears that both the provisions are inter-related so the records are meant for the investigations - the appellants do not have a prima facie case for grant of any stay or status quo order with respect to records including digital devices seized during the search made by the Respondent.
Application dismissed.
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Service Tax
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2020 (7) TMI 118
Principles of Natural Justice - rejection of declaration filed under Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019 - petitioner had not placed the entire correspondence exchanged between the parties - HELD THAT:- This Court had directed the petitioner to place on record the entire correspondence exchanged between the parties. Petitioner has filed a supplementary affidavit dated 01st July, 2020 in which it is stated that the present case is of delayed payment of service tax for which the petitioner had filed the application under the Scheme 2019. It has also been stated in the affidavit that the respondents’ reference to communication dated 26th September, 2019 is incorrect as no such communication was sent to the petitioner.
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Central Excise
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2020 (7) TMI 116
Refund of CENVAT Credit - export of goods - input services or not - Outward Freight Charges i.e. Indian Customs Ports to foreign destination for transportation of export goods - HELD THAT:- The appellant have been exporting their goods and in context of export of goods they had claimed refund in respect of Input Services used in relation to the export of goods under Rule 5 of Cenvat Credit Rules, 2004 - It is obvious that the refund claim under Rule 5 is sanctioned only after ascertaining the admissibility of Cenvat Credit in respect of Input Service for which the refund is sought for. Therefore, the issue of admissibility of Input Service has been clearly examined by the refund sanctioning authority and the issue attained finality therefore, subsequently issue the Show Cause Notice on the same Input Service Credit is not proper and legal.
Revenue cannot take two yard sticks, one for allowing the refund and other for allowing the Cenvat Credit.
Time Limitation - HELD THAT:- The appellant have been filing the refund claim periodically from 2013 onwards in respect of the Input Service which is the subject matter in this case. Moreover appellant had been filing ER2 returns regularly. Therefore there is no suppression of fact on the part of the appellant, hence the demand is also hit by limitation.
Appeal allowed - decided in favor of appellant.
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2020 (7) TMI 117
Sabka Vishwas (Legaly Dispute Resolution) Scheme, 2019 - validity and legality of the rejection of the petitioner's scheme - Last date for making payment arrived - HELD THAT:- It would not be appropriate for us to confirm the quantification of balance final estimated amount payable under the scheme at ₹ 55,56,045.00, especially when it is the petitioner's case that respondent No. 3 Committee has failed to consider the petitioner's case in the light of the interpretation and application of the above provisions and has not heard the petitioner before confirming the balance final demand.
Learned counsel for the petitioner submitted that the petitioner is ready and willing to deposit the amount of ₹ 55,56,045.00 with the revenue within a period of one week from today. The order dated 23.6.2020 records the last date for making payment was likely to be extended further beyond 30.6.2020, however we are not being informed of the same today. We permit the petitioner to deposit the same within a period of one week from today.
Petition disposed off.
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2020 (7) TMI 115
CENVAT Credit - inputs/capital goods - immovable goods or not - goods permanently embedded to earth - M.S. angles, channels, plates, defective plates, M.S. Rounds/Rods, Chequered coil, Liquid Oxygen/Oxygen Gas, Paints, pipes & tubes of steel, spare for control valve Aluminium sheet, Casting materials, Coupling, HR coil/plate, joist, cement etc. - HELD THAT:- Reliance can be placed in the case of COMMR. OF C. EX., VISAKHAPATNAM-II VERSUS SAI SAHMITA STORAGES (P) LTD. [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] where it was held that credit is allowed on such items - appellant is entitled to CENVAT Credit.
The second contention in the show cause notice is that the appellant could have taken only 50% of the CENVAT Credit during that year and another 50% has to be taken in the following year - HELD THAT:- This issue is no longer relevant at this stage since several years have passed. It is never the law that the appellant was entitled to only 50% CENVAT Credit only that he can take 50% in one year and 50% in the following year.
Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (7) TMI 114
Concessional rate of tax - difficulty in obtaining C-Forms - HELD THAT:- The State has, after the date of the above order, filed a Writ appeal in W.A.No.3403 of 2019 challenging the decision in the case of THE COMMISSIONER OF COMMERCIAL TAXES, CHEPAUK, CHENNAI, THE ADDITIONAL COMMISSIONER (CT) VERSUS THE RAMCO CEMENTS LTD. AND THE STATE TAX OFFICER, THE JOINT COMMISSIONER (CS) (SYSTEMS) VERSUS SUNDARAM FASTENERS LIMITED [2020 (3) TMI 450 - MADRAS HIGH COURT] that has been considered and dismissed by a Division Bench of this Court on 09.03.2020. Mr.Shaffiq agrees that there is complete identity on facts and in law in the matter before me as well as in the matter considered earlier.
Petition allowed.
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