TMI Tax Updates - e-Newsletter
August 10, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. Fate of transitional credit is still in ambiguity-Apex Court accepts SLP by UOI in matters of Brand Equity Treaties Limited & Others

   By: Ashish Mittal

2. SUBSTITUTION OF INTERIM RESOLUTION PROFESSIONAL

   By: DR.MARIAPPAN GOVINDARAJAN

3. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

News

1. The Insolvency and Bankruptcy Board of India amends the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016

Notifications

Customs

1. 32/2020 - dated 7-8-2020 - Cus

Seeks to amend notification No. 50/2017-Customs dated 30th June, 2017 so as to exempt goods for KKNP 5 and 6.

2. 70/2020 - dated 7-8-2020 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Silver

GST - States

3. S.O. 147 - dated 7-8-2020 - Bihar SGST

Bihar Goods and Services Tax (Eighth Amendment) Rules, 2020.

4. S.O. 146 - dated 7-8-2020 - Bihar SGST

Seeks to amend Notification No. S.O. 09, dated the 03rd January, 2019

5. S.O. 145 - dated 7-8-2020 - Bihar SGST

Appoints the 30th day of June, 2020, as the date on which the provisions of sections 2 and 12 of the Bihar goods and services tax (second amendment) Ordinance, 2020, shall come into force.

6. S.O. 144 - dated 7-8-2020 - Bihar SGST

Appoints the 18th day of May, 2020, as the date on which the provisions of section 11 of the Bihar goods and services tax (second amendment) Ordinance, 2020, shall come into force.

7. 61/2020-State Tax - dated 6-8-2020 - Gujarat SGST

Amending Notification No. 13/2020 State Tax dated the 27th March, 2020

8. 60/2020-State Tax - dated 6-8-2020 - Gujarat SGST

Gujarat Goods and Services Tax (Ninth Amendment) Rules, 2020.

9. 69/GST-2 - dated 7-8-2020 - Haryana SGST

Notification to amend notification no.12/GST-2 dated 01.01.2019 in order to provide conditional waiver of late fees for the period from July, 2017 to July, 2020 under the HGST Act, 2017

IBC

10. IBBI/2020-21/GN/REG064 - dated 7-8-2020 - IBC

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2020.

Highlights / Catch Notes

Income Tax

• Rental Income as Business Income: Eligible for Section 80IA(4)(iii) Deductions, High Court Confirms Notional Expense Claims.

  Case-Laws - HC : Entitled to deduction u/s 80IA (4)(iii) on rental income - where the main business of the company is to earn rental income as its business income, the income would be taxable under the head “Income” entitling the petitioner Assessee to have the deductions of notional expenses like depreciation and special deductions like Section 80IA - HC
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• High Court Upholds Additions in Bogus Accommodation Entries Case, Citing Corroborated Evidence and Probability Assessment.

  Case-Laws - HC : Bogus accommodation entry - addition in dispute is not solely on the basis of the statement of the persons and the Assessing Officer has relied on other materials. The statements of the persons who controlled the business of providing accommodation entry have been corroborated with the material, surround circumstances and preponderance of probability - Additions confirmed - HC
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• Court Rules Interest Expenses Deductible Against Earned Interest During Pre-Commencement Phase, Citing Case Law Support.

  Case-Laws - AT : Addition of interest income - disallowance of interest income by not allowing proportional deduction of interest expenses - if it is presumed that the assessee did not commence its business operation and was under pre-commencement period than still in view of following case law the interest expenses should be allowed against interest earned in pre-commencement period. - AT
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• AO's Lack of Satisfaction on Section 14A Disallowance Ignored Assessee's Self-Assessed Figures; Disallowance Limited to Initial Offer.

  Case-Laws - AT : Disallowance u/s 14A - non recording of satisfaction - Suo moto disallowances were not commented upon by the Assessing Officer but were completely disregarded and no satisfaction for not accepting the suo moto disallowances was recorded by the AO.AR has also submitted that the disallowances may be restricted to the suo moto disallowance offered by the assessee company. Therefore, we sustain the disallowance u/s 14A, as offered by the assessee company accordingly. - AT
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• Legal Charges for Appellant Company Classified as Routine Business Expenses, Not Capital Expenditure.

  Case-Laws - AT : Nature of expenditure - addition towards Professional Fees and treating the same as Capital Expenditure - Legal and Professional charges paid by the appellant company does not directly or indirectly pertain to the Product development cost nor does it give the benefit of enduring nature but it’s a normal routine business expenditure incurred by the appellant company. - AT
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• PCIT's Attempt to Revise Assessment u/s 263 Fails Due to Lack of Specific Error Identification.

  Case-Laws - AT : Revision u/s 263 - PCIT has used only probability and likelihood to find the error in the assessment order which is not permitted, he ought to find out specific error in the assessment order, and guide the assessing officer, since he has failed to do so in the assessee's case under consideration, therefore order passed by the assessing officer is neither erroneous nor prejudicial to the interest of the revenue - AT
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• Section 35D: Issuing Shares to Qualified Institutional Buyers to Meet Public Shareholding Levels in Compliance with Regulations.

  Case-Laws - AT : Deduction u/s. 35D - shares may have been allotted only to selected Qualified Institutional Buyers ("QIBs") - These regulations provide that when a company has a public shareholding lower than the requirements specified, then the company may issue IPP to QIBs and raise the public shareholding to the required levels. It thus implies that QIBs form part of public. Further, even Reg. 82 which gives conditions for QIP, provides that the same must be in compliance with the requirements of public shareholding. - AT
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Indian Laws

• Cheque Invalid Under Negotiable Instruments Act: Amount in Words Deemed Absurd, Renders Cheque Unusable as Negotiable Instrument.

  Case-Laws - DSC : Dishonor of Cheque - the effect of section 18 NI Act is that in case of amount is stated differently in words and figures, the amount stated in figures would be immaterial and it is only the amount stated in words that has to be considered. - However, the amount written in words is “forty four lacs eighteen lacs eight hundred and ninety six only.”. This amount cannot be said to be a certain amount of money as it is an absurdity which makes that amount unquantifiable. - The cheque was not a valid negotiable instrument - DSC
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Central Excise

• Amendment Clarifies "Substitute" Scope for Cenvat Credit Refund; Relevant Date is Payment Receipt in Foreign Exchange.

  Case-Laws - HC : Effect of amendment in the notification - Scope of the term "Substitute" - Refund of Cenvat credit - time limitation - relevant date for filing refund claim - the reasoning of the respondent adduced in the impugned order that the relevant date would be the date of receipt of payment in convertible foreign exchange and thereby, the findings that the application was time barred, cannot be found fault with. - HC
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• CENVAT Credit Allowed for Tour Packages to Dealers as Sales Promotion; Considered Dealer's Commission Under Cenvat Rules.

  Case-Laws - AT : CENVAT Credit - input services - tour packages provided to dealers - nexus with sales promotion or not - it was possible for the appellant to pay in cash expenses for tour. Instead they have provided them tour packages. Therefore, the said tour packages can be considered as dealer’s commission. Therefore, Cenvat credit of service tax paid on tour packages are admissible as Cenvat credit in the present case. - AT
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VAT

• Tamil Nadu Lacks Jurisdiction to Tax DEPB Sale Completed in Maharashtra, Court Rules Tax Levy Invalid.

  Case-Laws - HC : Tax on sale of Duty of Entitlement Pass Book (DEPB) - The aforesaid order is self explanatory. As such, the respondent (Tamil Nadu) herein will not have jurisdiction to levy tax on sale of a Duty Entitlement Pass Book for a sale and delivery, which was completed in Maharastra. As such, the levy of tax itself is liable to be quashed. - HC
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• High Court Restores Assessment Order for Reconsideration Due to Natural Justice Breach Amid COVID-19 Lockdown Impact.

  Case-Laws - HC : Validity of assessment order - Nothing prevented officer to follow principles of natural justice which are conspicuously absent from the impugned order as it reflects only of affording two opportunities - It is also matter of concern that during the period when the appeals were taken up and dismissed in default there was already a threat of Corona Virus/COVID- 19 pandemic though the lock down only began on 24.03.2020 with a lock down of one day on 22.03.2020. - Matter restored back - HC
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Case Laws:

• GST

• 2020 (8) TMI 159
  Profiteering - sale of refrigerator Whirlpool FP313D PROTTON ROY MIRROR - contravention of provisions of Section 171 of CGST Act - HELD THAT:- Petitioner is directed to deposit Rs. 4,07,451/- with Central and State Consumer Welfare Boards within two months - The interest amount as well as penalty and further investigation with regard to other impacted products as well as the letters dated 02nd July, 2020 and 23rd July, 2020 issued by the DGAP are stayed till further orders. Issue Notice - List the matter on 28th September, 2020.

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• 2020 (8) TMI 158
  Permission for withdrawal of petition - Cancellation of registration - CGST Act - HELD THAT:- The Commercial Taxes and Registration Department of the Government of Tamil Nadu has passed G.O.Ms.No.102 dated 26.06.2020 consequent upon the above CBIT Notification. The petitioner is so permitted to withdraw the Writ Petition and in addition is granted liberty to approach the Appellate Authority by the cut-off date provided in the Notification seeking restoration of registration. Petition dismissed as withdrawn.

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• Income Tax

• 2020 (8) TMI 157
  Seeking a direction to the respondent to pass appeal effect orders and determine the consequential refunds - HELD THAT:- Learned Senior Standing counsel states that refund for the assessment year 2004-2005 has been processed yesterday. He also states that all the necessary documents have now been received from the petitioner. Also assures this Court that refunds for the aforesaid remaining assessment years shall be processed shortly. Applicant-petitioner also assures this Court that in case further documents are required, the same shall be furnished forthwith. Keeping in view the aforesaid, the respondent is directed to pass appeal effect orders and determine the consequential refunds for the aforesaid assessment years along-with applicable statutory interest within three months from today in accordance with law.

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• 2020 (8) TMI 156
  Validity of reopening of assessment - notice issued u/s 148 to the deceased- assessee - HELD THAT:- Since in the present case, the petitioner has filed appeals which are pending adjudication in different forums, it would not be appropriate to entertain the present writ petition. Accordingly, the present writ petition and pending application are dismissed. However, the CIT (Appeals) and ITAT are directed to expedite the disposal of the appeals pending before them. It is clarified that this Court has not expressed any opinion on the merits of the matter and all the rights and contentions of the parties are left open.

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• 2020 (8) TMI 155
  Entitled to deduction u/s 80IA (4)(iii) on rental income - income derived from letting out of property to tenant for the purpose of running technological park is income from business and not income from house property - HELD THAT:- The burden of the argument for the Revenue, perhaps emanated from only the name of the company, forgetting that the main business activity of the company from its motor business had been diversified into developing a special kinds of property and earning lease rental income as its main business income. By no stretch of imagination, could a software park developed with the special facilities and amenities for software companies, be earning rental income as income from house property. The Tribunal not only relied upon an earlier decision of Elnet Technologies Ltd. [ 2012 (11) TMI 671 - MADRAS HIGH COURT] but also having considered all these aspects in great detail, the Division Bench of this Court to which one of us (VKJ) was a member, in M/s. PSTS Heavy Lift and Shift Ltd. had clearly held that where the main business of the company is to earn rental income as its business income, the income would be taxable under the head Income entitling the petitioner Assessee to have the deductions of notional expenses like depreciation and special deductions like Section 80IA - Decided against revenue.

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• 2020 (8) TMI 154
  Reopening of assessment u/s 147 - petitioner has not filed a return of income in pursuance to notice under Section 148 of the Act, as it is statutorily required to - HELD THAT:- It is incumbent upon the assessee to file a return of income in response to a notice under section 148 or to state that the return filed earlier should be taken to have been filed in compliance to the notice. The petitioner has done neither. Also not inclined to accept the explanation offered now in this regard, to the effect that the mismatch in PAN would have stood in the way of the return being accepted online, as it does not figure either in the correspondence inter se the petitioner and the Department or in the affidavit filed in support of the writ petition, and is made only orally and thus believe that the same is an afterthought. This Court sitting under Article 226 of the Constitution of India is not expected to resolve factual issues and errors arising out of multiplicity of PANs, particularly when the assessee/petitioner had admittedly applied for and obtained separate PAN numbers voluntarily. There is thus every possibility that the multiplicity of PANs has given rise to the confusion/error, if any, in the case. We are inclined to relegate the petitioner to statutory appeal. Since the petitioner expresses apprehension that on account of technical glitches, he would be unable to file the appeal, the petitioner is permitted to file an appeal manually and such appeal, if filed within a period of four (4) weeks from today, will be accepted by the Officer of the Commissioner of Income Tax (Appeals) holding jurisdiction in the matter.

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• 2020 (8) TMI 153
  Bogus accommodation entry - burden of proof was on the revenue to sustain the addition by leading cogent evidence - Addition by the AO holding the same as part of accommodation entry business of providing bogus long-term/short-term capital loss - Penny Stocks - HELD THAT:- AO asked the assessee to justify the rationale behind investment in these penny stock companies not having financial worth, however, the assessee failed to justify the same. AO provided as why the investment in the shares transacted by the assessee was not justified in view of the comparison of the other shares available. AO also pointed out the price fluctuation in the shares of the companies over a period, dividend history and other financial parameters to substantiate that there was no financial logic for investment in the company except for claim of bogus short-term capital loss against receipt of cash money. AO accordingly concluded that the addition was made on the basis of the material available on record, the surrounding circumstances, the human conduct and preponderance of probabilities. We find that in instant case addition in dispute is not solely on the basis of the statement of the persons and the Assessing Officer has relied on other materials. The statements of the persons who controlled the business of providing accommodation entry have been corroborated with the material, surround circumstances and preponderance of probability. We accordingly uphold the finding of the CIT(A) on that issue in dispute. The relevant grounds of the appeal of the assessee are accordingly rejected.

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• 2020 (8) TMI 152
  Addition u/s 68 - claim of receipt by way of loan from the son-in-law - reimbursement of litigation expenses met by his son-in-law - HELD THAT:- ITAT stated that the litigation expenditure of Rs. 3 lakh being reimbursement claimed to be given to Mr.Ruben Thomas is connected with the loan of Rs. 5.75 lakh. The above finding of the ITAT has attained finality since the revenue nor the assessee had taken the matter in further proceedings. The assessee had not produced the criminal complaint to prove that a sum of Rs. 5.75 lakh was given by way of loan by the son-in-law of the assessee nor has the assessee proved the amount of sum of Rs. 5.75 lakh was given to Mr.A.L.Prasad in the year 2001. Since the ITAT s order in [ 2016 (4) TMI 1393 - ITAT COCHIN] has clearly stated that the sum of Rs. 5.75 lakh is to be sustained if the documents relating to criminal proceedings did not contain anything about the claim of receipt of Rs. 5.75 lakh by way of loan from the son-in-law of the assessee, sustain the above additions because the assessee has failed to furnish the documents relating to the criminal proceedings neither before the Income Tax Authorities nor before the ITAT - Appeal filed by the assessee is dismissed.

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• 2020 (8) TMI 151
  Addition of interest income - disallowance of interest income by not allowing proportional deduction of interest expenses - HELD THAT:- AO himself has allowed the amortization of preliminary expenses which is always allowed upon commencement of business activities. Thus the assessee was not in pre-commencement period and set-off of interest income with interest expenses was claimed as allowable balance has been capitalized in the respective fixed assets. We also found that investment in interest earning advances were out of interest bearing funds borrowed by the assessee. In this regard, we observe that in AY 2008-09 in which the company was incorporated, the share capital was entirely utilized in investment of fixed assets and thereafter the subsequent borrowing were made either for purchase of more assets or in intervening period for advancing loans to other entities on which interest was earned. The assessee has also established nexus of interest paid with interest received i.e. utilisation of interest bearing borrowed funds into interest earning advances. There is no justification for disallowing interest expenditure so incurred. Even if the interest received by the assessee is treated as taxable under the head Income from Other Sources then still the deduction on a/c of interest paid by the assessee to the parties from whom the assessee taken loan and utilized to advance the money to persons from whom interest received should be allowed to the assessee. For computing the income taxed under the head Income from Other Sources u/s 56 of the Income tax Act the deduction of payment of interest made to earn such income should be allowed to the assessee as per provisions of section 57 (iii). Even otherwise also if it is presumed that the assessee did not commence its business operation and was under pre-commencement period than still in view of following case law the interest expenses should be allowed against interest earned in pre-commencement period. We confirm the detailed findings so recorded by the ld. CIT(A) which is as per materials placed on record, requiring no interference at our part. - Decided against revenue.

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• 2020 (8) TMI 150
  Capital gain on sale of land - value as per DLC rate determined by the Sub-Registrar while registering the sale deed - addition u/s 50C - declared sale consideration more than DLC - HELD THAT:- If buyer is an individual then the fair market value would be Rs. 3,66,36,487/- and if the buyer is a company or firm or institution then the fair market value of the property would be 1.5 time of the normal value, this cannot be intention of Section 50C which require substitution of fair market value i.e. DLC in place of sale consideration mentioned in the sale deed, if it is found to be lower than DLC. Stamp duty authority levied the stamp duty arbitrary by assessing the value @ 1.5 time of value declared in the sale deed valued for stamp duty purpose at Rs. 7,38,00,000/- for stamp duty purpose as against 1.5 time of normal DLC. As per provisions of Income Tax Act if the AO does not agree with the explanation of the assessee with regard to consideration disclosed by him then he should refer the matter to DVO for getting its market rate estimated as on date of the sale. In case AO is not satisfied with the explanation of the assessee, he should refer the matter to the DVO for the valuation purpose. Thus as per provisions of this section if the assessee raise any sort of objection regarding the value adopted by the registrar authority and if the AO is not satisfied on that then the AO should refer the matter to DVO. This is a legal requirement which must be complied with by the AO. It is undisputed fact that assessee had declared sale consideration more than DLC, accordingly there is no justification for making any addition u/s 50C - Appeal of the assessee is allowed

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• 2020 (8) TMI 149
  Rectification of mistake u/s 254 - Bogus purchases - addition to the extent of 12.5% of the alleged bogus purchases without reducing the GP already shown by the appellant on these alleged bogus purchases - HELD THAT:-Explanations given by the assessee have been duly considered. In the impugned order all the submissions and explanations by the assessee have been summarized and then a finding has been arrived at. The issue has been decided after considering the facts in entirety available on record. A perusal of the above facts clearly indicate that the applicant has not pointed out any mistake apparent from the record. A mistake apparent on the record must be an obvious mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. This view is supported by the decision of the Hon ble Supreme Court in T.S. Balaram, ITO v. Volkart Bros. [ 1971 (8) TMI 3 - SUPREME COURT]. In fact, not a single error in the impugned order has been pointed out by the Ld. counsel for the applicant. What the applicant wants is a review of the order passed by the Tribunal. The Tribunal is a creature of the statute. The Tribunal cannot review its own decision unless it is permitted to do so by the statute. Hon ble Supreme Court has held in Patel Narshi Thakershi v. Pradyumansinghji Arjunsinghji [ 1970 (3) TMI 163 - SUPREME COURT] that the power to review is not an inherent power. It must be conferred by law either specifically or by necessary implication. It is a settled law that the Tribunal has no power to review its order in the garb of section 254(2) of the Act as held in CIT v. Globe Transport Corpn. [ 1991 (1) TMI 23 - RAJASTHAN HIGH COURT] - Rectification application dismissed.

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• 2020 (8) TMI 148
  Disallowance of 40% of general licence fee - addition as same as not incurred wholly and exclusively for the purpose of business of the assessee - HELD THAT:- This issue is squarely covered in favour of the assessee by the orders of the Hon ble High Court and the Tribunal in assessee s own case in earlier Asst. Years. We also note that this issue was also decided in favour of the assessee by dismissing the Department s ground in immediately preceding Asst. Year: 2009-10 [2020 (7) TMI 567 - ITAT DELHI] by a Co-ordinate Bench of this Tribunal - we uphold the findings of the Ld. CIT (A) on the issue and dismiss the ground raised by the Department vis a vis license fee in all the years under consideration. Rate of depreciation to be allowed on UPS - assessee has claimed deprecation @ 60% in all the years under appeal whereas the AO has restricted the same to 15% - CIT (A) deleted the disallowance - HELD THAT:- We note that this issue is squarely covered in favour of the assessee by numerous orders of the Tribunal as well as of the Hon ble Delhi High Court. Even in Asst. Year 2009-10 [2020 (7) TMI 567 - ITAT DELHI] the Tribunal, in assessee s own case has decided the issue in favour of assessee by upholding the order of the Ld. CIT (A) on the issue. Now even the depreciation schedule provides depreciation on UPS @ 60%. Thus, the controversy is now settled by the amendment in the depreciation schedule itself. Accordingly, in Asst. Year 2010-11 we dismiss the ground raised by the Department and in Asst. Year: 2011-12 we allow the ground raised by the assessee with respect to depreciation on UPS and direct that the assessee should be given benefit of depreciation on UPS @ 60%. Disallowance u/s 14A - non recording of satisfaction - Suo moto disallowance - Department s challenge to a part deletion of the disallowance by the Ld. First Appellate Authority by holding that no disallowance could have been made in respect of interest expenses as the assessee had accumulated surplus - HELD THAT:- We find that this issue stands covered in favour of the assessee by the order of the Tribunal in Asst. Year: 2009-10 [2020 (7) TMI 567 - ITAT DELHI] We also note that although the Ld. CIT-DR has submitted that the issue of recording the satisfaction has to be examined every year and that there is no res-judicata in Income Tax proceedings, all the same, a perusal of the Asst. orders for the years under appeal shows that the Assessing Officer has made identical observations in all the years under appeal and in all the years the factum of recording of satisfaction is completely absent. Suo moto disallowances were not commented upon by the Assessing Officer but were completely disregarded and no satisfaction for not accepting the suo moto disallowances was recorded by the AO.AR has also submitted that the disallowances may be restricted to the suo moto disallowance offered by the assessee company. Therefore, we sustain the disallowance u/s 14A, as offered by the assessee company accordingly. Depreciation on pollution control equipment and energy saving devices - AO denied depreciation on the ground that the assessee could not establish that the pollution control equipment and energy saving devices were put to use by the assessee - HELD THAT:- We note that this issue is also covered in favour of the assessee by the order of the Co-ordinate Bench of the ITAT in assessee s own case for Asst. Year 2009-10 [2020 (7) TMI 567 - ITAT DELHI] wherein the Tribunal has upheld the findings of the Ld. CIT (A) in deleting the said depreciation disallowance made by the Assessing Officer. we dismiss the ground raised by the Department on the issue of disallowance of depreciation on pollution control equipment and energy saving devices in all the five years under appeal. Revenue appeal dismissed.

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• 2020 (8) TMI 147
  Validity of assessment u/s 153A - non obtaining prior approval of the Joint Commissioner of Income Tax as required as required u/s 153D - HELD THAT:- Wordings and language used in Section 153D of the Act and the heading Prior approval necessary for assessment in cases of search or requisition which has been provided under section 153D of the Act, do not leave an iota of doubt about the very intention of the legislature to make the compliance of section 153D, a mandatory. In other words, the compliance of section 153D is mandatory in nature. Therefore, assessment order passed by the Income Tax Officer, in the assessee s case, without taking prior approval from JCIT, is null in the eye of law. As the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench in the case of Shri Swapan Kumar Paul [ 2019 (7) TMI 1659 - ITAT GUWAHATI] . and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Coordinate Bench (supra). We find no reason to interfere in the said order of the Coordinate Bench (supra). In view of the decision of Coordinate Bench in the case of Shri Swapan Kumar Paul (Supra) and position of law provided u/s 153D of the Act, we hold that impugned assessment order framed in absence of obtaining prior approval of the Joint Commissioner of Income Tax (JCIT), for the assessment year under consideration is invalid and null in the eye of law, therefore we quash the assessment order - Decided against revenue.

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• 2020 (8) TMI 146
  Reopening of assessment u/s 147 - addition u/s 68 - Validity of reasons to believe - HELD THAT:- AO in the reasons recorded has not even alleged that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In the absence of such an allegation or failure on the part of the assessee, the reopening after 4 years from the end of the assessment year when the original assessment was completed under section 143(3) is not permitted. D/R has relied upon the Explanation-1 to section 147, however, said explanation has a limited application only to consider the plea of the assessee that he has produced the books of accounts before the AO and thereby all the facts and details were disclosed during the course of scrutiny assessment. In the case in hand, when finally the accommodation entries were found to be on account of sales made by the assessee which is the primary record as part of the Profit Loss account as well as computation of income and, therefore, in the absence of any allegation by the AO, the Explanation-1 to section 147 cannot be pressed into service. All the sales including the sales in dispute are duly accounted in the books of account which were audited and subject to scrutiny of the Commercial Taxes Department, therefore, the assessee cannot be held guilty for not furnishing all the information necessary for assessment. If the AO proposed to treat some of the sale transactions as bogus, then the assessee is not expected to disclose any other fact than the transaction itself which is duly recorded in the books of account and part of the primary record of the assessee. Therefore, the primary facts disclosed by the assessee at the time of original assessment and in the absence of any allegation on the part of the AO in the reasons recorded for reopening that there is a failure on the part of the assessee to disclose fully and truly all the relevant facts necessary for assessment, the reopening is hit by the provisions of section 147. Appeal of the revenue is dismissed.

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• 2020 (8) TMI 145
  Interest on delayed payment not charge - even written off as deduction - HELD THAT:- Assessee was not able to recover the interest from the said party and on account of termination of the agreement, the impugned amount was left with M/s. PACL India Ltd., and on agreement it was decided between the parties that assessee would raise a debit note and both parties have agreed that only part amount would be paid and balance amount shall not be paid to the assessee. Therefore, explanation of assessee is very specific and supported by the documents on record that assessee was not able to recover the amount from the party, therefore, it was adjusted against the Bill and was rightly written-off from the accounts as deduction. Since the issue of interest has reached finality on deleting the addition by the Ld. CIT(A), therefore, the fact is very clear that assessee was not able to recover the whole amount from the concerned party and on final settlement of the dues, if impugned amount could not be recovered by the assessee, it is certainly a business loss to the assessee, for which, no addition should have been made by the authorities below. Disallowance of remuneration to the Director - HELD THAT:- The assessee company has declared income of Rs. 59,71,541/- in the return of income. Total turnover of the assessee is 5.85 Cr. as per Profit Loss A/c. The salary and other benefits paid to the staff is at Rs. 1.82 crores in assessment year under appeal. There is no dispute that there is increase in the salary to the staff and there is increase in the turnover as well. If the assessee company paid salary of Rs. 50,000/- P.M. to the Director, we are of the view that it would not be unreasonable or exorbitant. Considering the history of the assessee company as noted above, we are of the view that salary paid of Rs. 6 lakhs per annum to the Director is wholly reasonable and appropriate and as such, no disallowance is required to be done. A.O. has not brought any evidence on record, if no salary is paid to the Director. We set aside the Orders of the authorities below and delete the entire addition. - Decided in favour of assessee.

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• 2020 (8) TMI 144
  Exemption u/s 54F - two residential units purchased during the year - whether the assessee can claimed deduction/exemption under section 54F as applicable for the year under consideration for the investment made in more than 1 residential units - HELD THAT:- As specified u/s 54F of the Act, the assessee can claim exemption for the investment made in a residential house. The question arises whether a residential house reads as one residential house. To resolve the controversy, we note that different courts have taken different views. Some of them have interpreted the investment in a residential house as limited to one house only whereas some of the courts have taken a view the word a residential house uses under section 54F of the Act does not refer to one residential unit. As decided in favour of assessee in SMT. KG. RUKMINIAMMA [ 2010 (8) TMI 482 - KARNATAKA HIGH COURT] - there was an amendment under the provisions of section 54F of the Act wherein the word a residential house was replaced with one residential house . Such amendment was brought by the Finance Act 2014 which is effective from 1 April 2015 corresponding to assessment year 2015-16. Whether a residential house should be read as one residential house prior to such amendment has been put to rest by changing the language in the provisions of the Act but the same is effective from the assessment year 2015-16. Thus in such a situation we can safely conclude that the assessee prior to such amendment was eligible for exemption under section 54F even he makes the investment in more than one residential properties. There is no ambiguity that the case before us pertains to the assessment year 2014-15 prior to the amendment brought under the provisions of section 54F. Accordingly, we direct the AO to allow the assessee the benefit of exemption under section 54F for the investment made in both the properties. Hence the ground of appeal of the assessee is allowed.

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• 2020 (8) TMI 143
  Addition u/s 56(1) - also alternatively u/s 68 - share premium receipts - whether CIT(A) erred in considering the share premium as a genuine transaction by treating the Discounted Cash Flow Method valuation at Rs. 230.40 and Rs. 2,457.12 for Equity Shares and Compulsory Convertible Preference Shares of Rs. 10/- respectively as correct? - HELD THAT:- AO assessed the share premium received as income from other sources by holding that this is nothing but profits received by the assessee. Alternatively, the Ld. AO has also recorded findings in the reassessment order that said receipt can also taxed as unexplained cash credit in the books of the assessee company. The Ld.CIT(A) has passed a very reasoned and speaking order justifying the deletion of additions by dealing with all the issues as raised by the revenue including the provisions of section 78 of the Companies Act . Therefore we do not find any infirmity or defect legal or otherwise in the order of the Ld.CIT(A) and hence the conclusion drawn by the Ld.CIT(A) is affirmed by dismissing the ground No.1 raised by the revenue. Addition on account of consultancy fees - A.O. without appreciating the accounting system came to a conclusion that since the invoice has been raised irrespective of time period and usage of software, the full amount needs to be accounted as income for appellant company and thereby made an addition shown as Current Liability in the appellant s books - HELD THAT:- The assessee has accounted for one time Activation Fees and Customization Fees as current year s Income and 15 days Contract Income for use of software as the fees of the appellant company based on the accrual system of accounting. On the other hand the Assessing Officer went on the basis of Invoices raised during the year and as such treated the same as Income of the Appellant Company for current Assessment Year without understanding the concept of accrual basis and he simply made an addition based on the Invoices raised. The ld. CIT(A) also confirmed the addition citing the reasons that agreements were not before the authorities below by ignoring the facts of the case. Hence the issue is restored to the AO for limited purpose of examining whether accounted for in the next year or not and if offered to tax the addition is to be deleted . The AO is directed accordingly. The ground is allowed for statistical purpose. Nature of expenditure - addition towards Professional Fees and treating the same as Capital Expenditure - HELD THAT:- Legal and Professional charges paid by the appellant company does not directly or indirectly pertain to the Product development cost nor does it give the benefit of enduring nature but it s a normal routine business expenditure incurred by the appellant company. CIT(A) has given a finding that the said expenses included legal consultancy, vetting charges for documents , architect fee and compliance related fee. In our opinion the conclusion of ld. CIT(A) upholding the order of AO that these were capital in nature appears to be wrong and contrary to the findings recorded in the appellate order and hence cannot be sustained. Assessee has filed the break-up of Legal Fees paid to various Professionals have been provided. After perusing all these details and nature of these expenses , we are of the opinion that these are revenue in nature and have to be allowed as deduction. - Decided in favour of assessee.

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• 2020 (8) TMI 142
  Disallowance of interest u/s. 36(1)(iii) - Method of accounting followed by assessee - HELD THAT:- As decided in own case if the revenue expenditure has been incurred in a particular year and assessee claims that expenditure in that year, the revenue cannot deny the expenditure and it has to be allowed; Secondly, the loans are not project specific and it is undisputedly a revenue expenditure and same has to be allowed in the year it has been incurred irrespective of the fact that, whether the assessee is following project completion method . Otherwise also, this issue stands allowed in favour of the assessee by the Tribunal in assessee s own case right from the AYs 1993-94 to AY 2002-03. Thus, respectfully following the earlier years precedence and the decision of Hon ble Supreme Court in Taparia Tools [ 2015 (3) TMI 853 - SUPREME COURT ] we direct the AO to allow the interest claimed by assessee during the year. - Decided against revenue. Disallowance u/s. 14A r.w. Rule 8D - HELD THAT:- Since the assessee was having more surplus funds than the closing value of investments we do not find any infirmity in the order passed by the Ld.CIT(A) in deleting the disallowance under Rule 8D(2)(ii) of I.T. Rules, the same is sustained. Disallowance under Rule 8D(2)(iii) of I.T. Rules - CIT(A) restricted the disallowance to the exempt income earned by the assessee during the year - assessee before us pleaded that in view of the decision of the Special Bench of Delhi Tribunal in the case of ACIT v. Vireet Investments Private Limited [ 2017 (6) TMI 1124 - ITAT DELHI ] only those investments which yielded dividend income should be considered for the purpose of computing the disallowance - HELD THAT:- We direct the Assessing Officer to apply the ratio of the decision of the Special Bench of the Delhi Tribunal in the case of ACIT v. Vireet Investments Private Limited (supra) and compute the disallowance accordingly. 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 (8) TMI 141
  Revision u/s 263 - PCIT was of the view that a very low rate of net profit was considered by assessing officer on undisclosed business turnover of the assessee and the undisclosed income so added by the AO to the total income of the assessee, should have been treated and taxed as per provisions of section 115BBE - HELD THAT:- Assessing Officer has duly assessed the deposits in the bank account No. 2195697434 of Central Bank of India, to the tune of Rs. 95,33,717/-, treating Rs. 91,48,326/- as undisclosed business receipts/undisclosed turnover. Thereafter the assessing officer computed the margin of profit @4% of undisclosed business receipts at Rs. 3,65,933/- (that is 4%Rs. 95,33,717). The AO also made addition on account of interest on saving bank account at Rs. 11,521/-.Therefore, the bank account A/c No. 2195697434 has been verified by the assessing officer One of the grounds on which the ld PCIT had exercised jurisdiction (that the net profit of Rs. 3,65,933/- considered by the Assessing officer on the undisclosed business turnover of Rs. 91,48,326/-was without any verification and proper analysis which needs to be examined properly), has been examined by the assessing officer properly. Therefore, when the order of the Assessing Officer is not erroneous, section 263 cannot be invoked to direct the Assessing Officer to hold another investigation [Infosys Technology Ltd. v. JCIT [ 2005 (6) TMI 211 - ITAT BANGALORE-B] . Therefore, so far this first ground is concerned, the ld PCIT was not right in exercising the jurisdiction under section 263 of the Act. AO had failed to tax the undisclosed income as per provisions of section 115BBE - whether business receipts/business turnover is taxable under section 115BBE of the Act? - HELD THAT:- As per the intention of legislature, the burden to apply section 115BBE and section 68 to section 69D of the Act rest on revenue shoulder. That burden cannot be discharged on the basis of assumption and presumption made by the assessing officer. Having gone through the section 115BBE, as noted above, we are of the view that business activity related income may not ordinarily get placed u/s 68 to section 69D. We note that assessing officer in his assessment order has also treated the undisclosed amount in bank account as undisclosed business receipts/turnover. Since, the assessing officer has applied his mind and treated the undisclosed amount in bank account as undisclosed business receipt or turnover of the assessee, therefore provisions of section 115BBE does not apply to the assessee. AO while giving appeal effect to the order of ld PCIT under section 263 of the Act, had shown the undisclosed amount of bank account under the head business income, vide order of assessing officer under section 143(3)/263 of the Act dated 28-11-2019. Our view is further fortified by the Judgment of the Coordinate Bench of Mumbai in the case of ACT Central Circle-13 Mumbai v. Rahil Agencies [ 2017 (2) TMI 30 - ITAT MUMBAI] wherein it was held that section 115BBE does not apply to business receipts/business turnover. Since the Department itself accepting the undisclosed amount of assessee in his bank account as undisclosed business receipts/turnover, therefore, section 115BBE does not attract here and hence order passed by the assessing officer, after application of mind, under section 143(3) dated 30-12-2016 is neither erroneous or prejudicial to the interest of revenue. PCIT has used only probability and likelihood to find the error in the assessment order which is not permitted, he ought to find out specific error in the assessment order, and guide the assessing officer, since he has failed to do so in the assessee s case under consideration, therefore order passed by the assessing officer is neither erroneous nor prejudicial to the interest of the revenue. - Decided in favour of assessee.

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• Customs

• 2020 (8) TMI 139
  Provisional assessment of imported goods - Dry Dates - it is submitted by petitioner that it will suffice for the disposal of this writ petition, if the respondents are directed to conduct provisional assessment of the goods in question at the earliest - HELD THAT:- The respondent authorities are directed to conduct provisional assessments of the goods in question (Dry Dates) which have been imported against Bill of Entry No.8025279 dated 29th June, 2020 in accordance with law, rules, regulations and Government policies applicable to the facts of the case, within a maximum period of two weeks from today. Petition disposed off.

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• Central Excise

• 2020 (8) TMI 138
  Effect of amendment in the notification - Scope of the term Substitute - Refund of Cenvat credit - time limitation - relevant date for filing refund claim - one year from the relevant date and the relevant date would be the date of receipt of payment in convertible foreign exchange with regard to the export - whether the reckoning of the relevant period brought about through the notification No.14/16 dated 01.03.2016 by substitution would be prospective or retrospective in nature? HELD THAT:- Originally, Notification No.27/12 dated 18.06.2012 prescribed the procedure for filing the refund claims, by which, the claimant was required to file the application before the expiry of period specified in Section 11B of the Central Excise Act. Clause 3(b) of the Notification No.27/12 dated 18.06.2012 came to be substituted , whereby the relevant date would be one year from the date of receipt of payment in convertible foreign exchange, where provision of service has been completed prior to payment. The Notification No.14/2016 is a substitution to the original paragraph 3(b) of Notification No.27/2012. The term Substitution literally means as a thing acting or used in place of another - to substitute certain words or phrases or sentences in the original notification, would mean that the subsequent substitution would replace those words, phrases or sentences. In effect, what originally stood in the notification is replaced with the subsequent notification brought through substitution. While that being so, it cannot be construed as a new amendment for giving effect to certain procedures prospectively, but rather requires to be interpreted as having replaced the original procedure and thereby, the replacement would come into effect for the same time as the original procedure was provided for. If this interpretation is applied to the facts of the case involved, the reasoning of the respondent adduced in the impugned order that the relevant date would be the date of receipt of payment in convertible foreign exchange and thereby, the findings that the application was time barred, cannot be found fault with. Petition dismissed.

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• 2020 (8) TMI 137
  CENVAT Credit - input services - tour packages provided to dealers - nexus with sales promotion or not - HELD THAT:- Hon ble Gujarat High Court in the case of GUJARAT STATE FERTILIZERS AND CHEMICALS LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, SURAT-II [ 2016 (1) TMI 1063 - GUJARAT HIGH COURT] had examined the particular agreement and it was clear that as per the said agreement the agents were appointed as stockiest - in the present case the tour packages were arranged for dealers. Further, this Tribunal in the case of SIMBHAOLI SUGAR LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MEERUT-II [ 2018 (4) TMI 1657 - CESTAT ALLAHABAD] have held that if commission is paid to sales commission agent for effecting sale of goods manufactured by the assessee then service tax paid on such commission would be available as input service credit to the manufacturer. Thus, it was possible for the appellant to pay in cash expenses for tour. Instead they have provided them tour packages. Therefore, the said tour packages can be considered as dealer s commission. Therefore, Cenvat credit of service tax paid on tour packages are admissible as Cenvat credit in the present case. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2020 (8) TMI 136
  Reopening of assessment - levy of tax on turnover - tax on sale of Duty of Entitlement Pass Book (DEPB) - it was claimed that since the relevant exports have been transacted at Chennai, the transfer of DEPB credit had to be in Tamil Nadu - HELD THAT:- The object of DEPB scheme is to neutralize the incidence of customs duty of the import content of the export product. The neutralization is granted by way of grant of duty credit against the export product, thereby enabling the exporter to claim set-off of the customs duty component at the time of import. The petitioner was granted the DEPB under the provisions of the MVAT Act at Mumbai and the sale and delivery of the pass book was completed in Maharashtra - Section 2(33) of the Tamil Nadu Value Added Tax Act restricts levy of tax on sales that takes place outside the State of Tamil Nadu. The petitioner s right to claim set-off had originated by grant of the DEPB in the State of Maharashtra and delivered for sale in Maharashtra. The petitioner was also subjected to sales tax in the State of Maharashtra. The issue with regard to respondent s right to levy tax for a sale that takes place outside the state of Tamil Nadu was the subject matter in PREMIER MARINE PRODUCTS VERSUS THE ASSISTANT COMMISSIONER (CT) (ADDITIONAL) [ 2020 (6) TMI 546 - MADRAS HIGH COURT ], whereby this Court, had answered the issue in favour of the assessee, by holding that there being no dispute on the position that the goods in question, the DEPB, and additionally, the seller as well as the buyer were all located in Bombay at the time when the transaction in question was finalised, the turnover from the transaction is liable to tax only in Maharashtra. The aforesaid order is self explanatory. As such, the respondent herein will not have jurisdiction to levy tax on sale of a Duty Entitlement Pass Book for a sale and delivery, which was completed in Maharastra. As such, the levy of tax itself is liable to be quashed. Petition allowed - decided in favor of petitioner.

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• 2020 (8) TMI 135
  Validity of assessment order - appeal dismissed in default - benefits of the limitation as per provisions of Section 25(1) of KVAT Act - HELD THAT:- Appeals preferred against the assessment orders Exts.P1 to P3 and appeals Exts.P4 to P6 were filed have been dismissed in default vide order dated 16.03.2020 Exts.P9 to P11 - Section 55(5) of the Kerala erstwhile Act, 2003 do not specifically envisage any said provisions for appellate authority to dismiss appeal in default but said provisions as contended by the Government Pleader empowers the appellate authority to pass such an order it may deem appropriate. Nothing prevented officer to follow principles of natural justice which are conspicuously absent from the impugned order as it reflects only of affording two opportunities - It is also matter of concern that during the period when the appeals were taken up and dismissed in default there was already a threat of Corona Virus/COVID- 19 pandemic though the lock down only began on 24.03.2020 with a lock down of one day on 22.03.2020. Matter is remitted and ordered to be revisited at the level of first appellate authority to hear the appeals afresh in accordance with law, after affording an opportunity of hearing - appeal allowed by way of remand.

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• Indian Laws

• 2020 (8) TMI 134
  Dishonor of Cheque - amount in words and figures differs - the amount written in words is also uncertain - ambiguity in amount to be paid - very factum of the instrument in dispute - valid cheque or not - application seeking discharge was moved - application for discharge was dismissed and the framing of notice u/s 251 Cr.P.C. was ordered - HELD THAT:- In view of section 6 of the NI Act, a cheque is a bill of exchange which is drawn on a specified banker and is payable otherwise than on demand. Therefore to be a cheque, an instrument has to satisfy the conditions of being a bill of exchange first and thereafter, if it is a valid bill of exchange and directed to a banker, it will become a cheque. There could have been no dispute about this instrument being a cheque within the definition of section 6 of the NI Act but for its failure to meet the certainty of the amount to be paid - However, as per the scheme of the NI Act 1881, an instrument does not become invalid merely because the amount ordered to be paid is stated differently in figures and in words. Therefore, as per the provisions of section 18 NI Act, merely because the amount to be paid as stated in figures and words is different, a cheque or an instrument does not become invalid and the amount stated in words shall be considered to be amount undertaken or ordered to be paid - In the usual course of things, if a cheque has ambiguity with regard to the amount, it can be settled by falling back upon the amount written in words and that amount shall be considered to be the amount undertaken or ordered to be paid through that instrument or cheque. The effect of section 18 NI Act is that in case of amount is stated differently in words and figures, the amount stated in figures would be immaterial and it is only the amount stated in words that has to be considered. In the present case, there is an uncertainty with regard to the amount which has been ordered to be paid through the instrument in question. However, in view of section 18 of NI Act, it can still be a valid instrument if, on the basis of the amount written in words, a certainty can be arrived at with regard to the amount ordered to be paid. Surprisingly, in the present case, the amount written in words is forty four lacs eighteen lacs eight hundred and ninety six only. . This amount cannot be said to be a certain amount of money as it is an absurdity which makes that amount unquantifiable. It is correct that if the amount written in figures when read had made a sense, it would have become a certain amount and could have satisfied the condition of certainty as to the amount as required by section 5 of NI Act. In the present case, even section 18 of NI Act cannot be applied to the instrument in question. This is because of the absurdity of the amount as mentioned in words in the instrument. Once there is a difference in the amount in the instrument as written in words and figures, the amount written in figures becomes immaterial and cannot be resorted to find what was the intended sum of money ordered to be paid through such instrument. The amount stated in words is absurd and thus the certainty which is required by sections 5 6 of the NI Act with regard to the amount to be paid is missing in this instrument. That being the case, this instrument was not a valid cheque when presented before the bank. If such an instrument was presented and dishonoured, would it amount an offence u/s 138 of the NI Act? - HELD THAT:- The offence u/s 138 NI Act is stated to be committed by a person when a cheque issued by him, in discharge of a legally recoverable debt or liability, is dishonoured and such dishonour is on account of insufficiency of funds or on account that it exceeded arrangements with the bank. Further, the drawer of the cheque despite receipt of a legal notice within the stipulated time, fails to pay the amount of the cheque. It is to be seen that the entire section 138 of NI Act talks about a cheque. The word cheque used in section 138 of NI Act carries the same meaning as defined u/s 6 of the NI Act. Thus, the offence u/s 138 NI Act can only be said to have been committed if, the instrument that was presented and dishonoured was a cheque as defined by section 6 of the NI Act - In the present case, as discussed above, the instrument which was presented to the bank was not a valid cheque for lack of certainty as to the amount that was ordered to be paid and the bank had also refused to honour this instrument only on the ground that cheque was irregularly drawn / amount in words and figures differed. The material presented before the trial court was sufficient to conclude that as the instrument on the basis of which complaint was filed was not a valid cheque within the definition of section 6 of NI Act, no notice u/s 251 Cr.P.C could have been framed against the accused/ revisionists - the application of the revisionists/ accused seeking discharge was dismissed and notice for the offence u/s 138 NI Act was ordered to be framed, cannot be sustained. Impugned order is set aside - The revisionists stand discharged.

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