TMI Tax Updates - e-Newsletter
August 17, 2021

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Indian Laws

Articles

1. Reasonable and rational extensions are desired to avoid repeated circulars, avoid uncertainty, confusion and to avoid wastage of time of bureaucrats officers and taxpayers and Compliances before last date need to be incentivised.

   By: DEVKUMAR KOTHARI

2. GST on intermediary service

   By: navnath padwal

3. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

News

1. Index Numbers of Wholesale Price in India for the month of July, 2021(Base Year: 2011-12)

Notifications

DGFT

1. 18/2015-2020 - dated 16-8-2021 - FTP

Amendment in Export Policy of COVID-19 Rapid Antigen testing kits.

SEBI

2. SEBI/LAD-NRO/GN/2021/40 - dated 13-8-2021 - SEBI

Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021

Highlights / Catch Notes

GST

• Petitioners Denied Anticipatory Bail for Allegedly Misusing Input Tax Credit via Bogus Invoices; Court Dismisses Petitions.

  Case-Laws - HC : Seeking grant of Anticipatory Bail - input tax credit availed on the basis of bogus invoices - failure to attend before authorities when called for - they are involved in availing and utilizing wrongful input tax credit on the strength of invoices and E-way bills, which are issued from the non-existent and suspicious firms and further passed on input tax credit to various taxpayers throughout the country, thereby causing huge loss to the State Exchequer. - no merit in both these petitions, same are dismissed. - HC
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Income Tax

• Tax Reassessment Invalid: Notice Issued to Minor Instead of Parent u/s 147/148.

  Case-Laws - AT : Reopening of assessment u/s 147 - Validity of reason to believe - notice not in the name of assessee but issued in the name of minor daughter - The right course under the law should have been that the assessee's case, should have been reopened and notice u/s. 148, should have been issued in the name of Father and if there is any undisclosed income belonging to the minor, and a different PAN cannot validate the proceedings - AT
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• Revenue Authority Cannot Selectively Tax Beneficiaries' Shares in Trust Income, Co-ordinate Bench Rules u/ss 164 and 160.

  Case-Laws - AT : Additions u/s 164 r.w.s 160 - Share of the beneficiaries as taxable in the hands of the assessee trust - The Co-ordinate Bench held that revenue cannot pick and choose certain amounts representing the share of the beneficiaries and tax in the hands of the assessee and simultaneously not charging the tax in the hands of the assessee with respect to majority of the beneficiaries. - AT
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• Section 263 Review: Closing Stock Valuation and Tax Neutrality Over Time Analyzed; No Revenue Prejudice Found.

  Case-Laws - AT : Revision u/s 263 - valuation of closing stock, non increasing of closing stock by proportionate other direct expenses - The alleged under valuation of closing stock is a tax neutral exercise when seen over a longer horizon and thus, in effect, not prejudicial to the interest of the Revenue per se. Section 263 of the Act calls for existence of both the pre-requisites, namely; (i) order under revision should be erroneous as well as (ii) prejudicial to the interest of the Revenue. - AT
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• Tax Appeal Success: Construction Costs on Leasehold Land Approved, No Errors Found in Deleting Disallowed Additions.

  Case-Laws - AT : Nature of expenditure - Construction cost incurred on building constructed on leasehold land - there is clear commercial advantage in terms of saving in rent payments - there is no error in the findings recorded by the learned CIT(A) in deleting additions made by the Assessing Officer towards disallowance of cost of construction on leasehold land. - AT
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• Clarification on Debenture Redemption Reserve in Book Profit Calculation u/s 115JB of Income Tax Act.

  Case-Laws - AT : MAT - Addition of debenture redemption reserve in computing Book profit u/s. 115JB - mere fact that the debenture redemption reserve is labeled as a reserve will not render it as a reserve and an amount which is retained by way of providing a known liability is not a reserve within the meaning of explanation (b) of section 115JA / 115JB of the Act. - AT
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• Education Cess Deductible Under Income Tax Act: Section 37(1) Allows Cess Deduction as Non-Income Tax Expense.

  Case-Laws - AT : Claim of deduction towards education cess in computing total income under normal provisions of the Act - The education cess is not “income tax,” so is an allowable deduction u/s. 37(1) of the Act. - AT
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• No Penalty Imposed: Transfer Pricing Adjustments Deemed Debatable, All Related Disallowances and Additions Deleted u/s 271(1)(c.

  Case-Laws - AT : Penalty u/s 271(1)(c) - addition on account of Transfer Pricing adjustment relating to payment of commission - it is evident that these are debatable issues - In any case of the matter, while deciding the quantum appeals of the assessee and the revenue in the earlier part of the order, we have deleted all the disallowances/additions based on which penalty under section 271(1)(c) of the Act was imposed.- No penalty - AT
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• Court Rules 50% Property Addition Unjustified; Payment Made Solely by Assessee's Husband in Co-Ownership Case.

  Case-Laws - AT : Investment in immovable property - co-ownership - 50% addition - the entire payment of sale consideration of flat in dispute was paid by the husband of assessee - additions in the hand of the assessee is not justified - AT
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• High Court Appeal Challenged: Alternate Remedy Exists for Reopening Assessments u/s 147, Directs to Appellate Authority.

  Case-Laws - HC : Maintainability of appeal in High Court - alternate remedy - Reopening of assessment u/s 147 - the opportunity of an aggrieved person to adjudicate the legal grounds must be allowed to be provided before the appellate authority or before the Tribunal, as the case may be. The High Court cannot adjudicate the disputed facts in a writ proceedings for the purpose of considering certain legal grounds. When the appellate authority is competent to adjudicate such legal grounds, the opportunity and the benefit of an appeal cannot be denied to an aggrieved person. - HC
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• High Court Upholds Reopening of Assessment u/s 147 Due to Income Escapement and Assessee's Disclosure Failures.

  Case-Laws - HC : Reopening of assessment u/s 147 - accommodation entry receipts - reasons to believe - The reasons for the formation of the belief by the Assessing Officer in the instant case, appear to have a rational connection with or relevant bearing on the formation of belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. - Order of reopening sustained - HC
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Customs

• Court Denies Amnesty Request for COVID-19 Charges by CFSs and Shipping Lines; No Relief Under Disaster Management Act.

  Case-Laws - HC : Seeking across-the-board amnesty from paying penal charges to CFSs, ICDs and Shipping lines, during the entire period of lockdown enforced by the Government consequent on the COVID-19 pandemic - The State has no direct causal connection with these charges. The powers exerciseable under the Disaster Management Act could not, therefore, be so exercised as to restrain collection thereof, by the shipping lines. - The writ petition is dismissed - HC
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• Petitioner Appeals for Amendment of Bill of Entry u/s 149 Due to Assessing Authority's Error in Duty Calculation.

  Case-Laws - HC : Seeking amendment in the bills of entry - The Assessing Authority has failed to consider the fact that Section 149 of the Act does not prescribe any time limit for amending the Bill of Entry filed and assessed. The power to amend under Section 149 of the Act is a discretionary power vested with the authority. Since, it is due to incorrect determination of duty by the assessing authority initially, the petitioner is compelled to seek amendment of Bill of Entry under Section 149 of the Act. Thus, the importer / petitioner cannot be penalized for what the authority ought to have done correctly by himself. - HC
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IBC

• Written Acknowledgment of Debt Restarts Limitation Period, Validating Corporate Insolvency Resolution Process Under IBC Sections 5(21) and 3(12).

  Case-Laws - Tri : Initiation of CIRP - it is established rule that when a party issues acknowledgment of its liability in writing the period of limitation starts afresh. Therefore, the Bench has no doubt that the respondent unequivocal admission of liability negates the contention of the petitioner that the claim is time barred - the Bench is of clear view that there is a debt in terms of Section 5(21) of Code and there is a default in terms of Section 3(12) of Code are clearly established and the debt is also within limitation. - Tri
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• Settlement of Resolution Professional Fees Under IBC: Unauthorized Post-Commencement Contracts Without CoC Approval Highlighted in Section 20(2)(b) Case.

  Case-Laws - AT : Settlement of Fee payable to RP - deduction of professional fees and expenses form such excess amount - Section 20 (2)(b) of the IBC authorizes the IRP to enter into such contracts which were entered into before the commencement of CIRP. In this case there was a new contract of insurance after the commencement of CIRP. The Appellant was aware with this situation that he cannot take such decision, therefore, he has circulated the quotations amongst the Members of CoC alongwith comparison of their premium amount. Thus, the aforesaid provision does not authorize the IRP to renew the insurance policy without approval of CoC at higher premium rate. - AT
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Case Laws:

• GST

• 2021 (8) TMI 621
  Seeking grant of Anticipatory Bail - input tax credit availed on the basis of bogus invoices - failure to attend before authorities when called for - HELD THAT:- The petitioners have failed to appear before the authorities, which has issued the notices, as they are involved in availing and utilizing wrongful input tax credit on the strength of invoices and E-way bills, which are issued from the non-existent and suspicious firms and further passed on input tax credit to various taxpayers throughout the country, thereby causing huge loss to the State Exchequer. No merit in both these petitions - Petitions dismissed.

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• 2021 (8) TMI 618
  Validity of order of provisional attachment - dismissal of its writ petition against the similar order of provisional attachment by the Supreme Court of India - principles of res-judicata - HELD THAT:- Considering the fact that against the earlier provisional attachment order dated 03.02.2021 relating to the same proceedings under the Act, 2017 during pendency of the Writ Petition No. 5804 (MB) of 2021 [ 2021 (8) TMI 596 - ALLAHABAD HIGH COURT] before this Court, wherein also the said order was under challenge, the petitioner filed a writ petition before Hon ble Supreme Court of India as noticed hereinabove, and the same was dismissed on merits, as is evident from the observations made therein, and also considering the fact that the subsequent order of provisional attachment dated 25.02.2021 was available with the petitioner during the pendency of the proceedings before this Court as also before the Supreme Court of India, as it had been annexed with the counter affidavit of the opposite parties in Writ Petition No. 5804 (MB) of 2021, the burden is heavy upon the petitioner s counsel to explain as to how this petition is maintainable against the order dated 25.02.2021; firstly on account of dismissal of its writ petition against the similar order of provisional attachment by the Supreme Court of India on 01.07.2021, which infact, had been filed in May, 2021; and secondly, as to why it should not be treated as barred by the principles of constructive res judicata, and/ or the principles contained in the Order II Rule 2 C.P.C. List this case on 20.08.2021 as fresh.

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• Income Tax

• 2021 (8) TMI 620
  Reopening of assessment u/s 147 - accommodation entry receipts - reasons to believe - HELD THAT:- The function of the assessing authority at this stage is to administer the statute and what is required is a reason to believe and not to establish fact of escapement of income and therefore, looking to the scope of Section 147 as also sections 148 to 152 of the Act, even if scrutiny assessment has been undertaken, if substantial new material is found in the form of information on the basis of which the assessing authority can form a belief that the income of the petitioner has escaped assessment, it is always open for the assessing authority to reopen the assessment. Assessing Officer has reason to believe that the petitioner is a beneficiary of accommodation entry and basis for formation of such belief is several inquiries and the investigation by the Investigation Wing, Kolkata and report thereof. The reasons for the formation of the belief by the Assessing Officer in the instant case, appear to have a rational connection with or relevant bearing on the formation of belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. Accordingly, no interference is called for at the hands of this Court in this petition under Article 226 of the Constitution of India. - Decided against assessee.

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• 2021 (8) TMI 616
  Maintainability of appeal in High Court - alternate remedy - Reopening of assessment u/s 147 - issuance of show cause notice by an improper authority - violations of the principles of natural justice - HELD THAT:- As observed earlier, Institutional respect is of paramount importance. Even the point of jurisdiction, limitation, error apparent on the face of the record, are on merits and all are to be adjudicated before the appellate authority and the appellate authority, more specifically, the Appellate Tribunal or the Commissioner (Appeals), as the case may be, is empowered to adjudicate all such legal grounds raised by the respective parties and make a finding on merits. Thus, usurping the powers of the appellate authorities by the High Court by invoking its powers under Article 226 of the Constitution of India is certainly unwarranted. The parties must be provided an opportunity to approach the appropriate authorities for redressal of their grievances in the manner known to law. In the event of entertaining all such writ petitions, the High Court will not only be over-burdened, but usurping the powers of the appellate authority is certainly not desirable. Regarding the contentions raised on behalf of the writ petitioner with reference to the jurisdiction and violations of the principles of natural justice, they are not striking the conscious of this Court, so as to invoke the extraordinary jurisdiction, as the adjudication on disputed facts became necessary. The point of jurisdiction and principles of natural justice are pleaded commonly, which all are deeply associated with the disputed facts and circumstances. Thus, an elaborate adjudication with reference to the original documents and records are necessary. Undoubtedly, the appellate authority or the Tribunal, as the case may be, are the quasi-judicial authorities and competent to adjudicate the ground raised regarding jurisdiction and violations of principles of natural justice. Thus, the opportunity of an aggrieved person to adjudicate the legal grounds must be allowed to be provided before the appellate authority or before the Tribunal, as the case may be. The High Court cannot adjudicate the disputed facts in a writ proceedings for the purpose of considering certain legal grounds. When the appellate authority is competent to adjudicate such legal grounds, the opportunity and the benefit of an appeal cannot be denied to an aggrieved person. In such circumstances, the aggrieved persons are loosing one opportunity of adjudication for the purpose of redressing their grievances. This Court emphatically made it clear that all the Orders-in-Original are to be decided before the appellate authority, in the event of an appeal provision under the statute concerned. Thus, in the present case, the petitioner is at liberty to prefer an appeal before the jurisdictional appellate authority in the prescribed format and by complying with the provisions of the statute.

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• 2021 (8) TMI 612
  Investment in immovable property - co-ownership - 50% addition - appellant s share of investment in purchase of immovable property overlooking the facts and assessment completed with respect to same property in the case of appellant s spouse, the primary holder - HELD THAT:- From the aforesaid details which are duly supported by the statement of accounts of husband of assessee, we find that the entire payment of sale consideration of flat in dispute was paid by the husband of assessee. We further noted that similar issue was examined by the AO/ACIT-35, Mumbai and accepted the similar explanation for reopening of case and no addition was made in the assessment order dated 26/12/2011. In view of the aforesaid factual discussions, we are of the view that additions in the hand of the assessee is not justified, which were fully explained before ld CIT(A). The grounds of appeal raised by the assessee are allowed. In the result, appeal of the assessee is allowed.

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• 2021 (8) TMI 609
  TP Adjustment - addition made on account of adjustment to the arm s length price (ALP) of export commission paid to the overseas associated enterprises (AE) - HELD THAT:- In none of the assessment years till assessment year 2001-02, the TPO has proposed any adjustment to the rate at which export commission was paid to the AE. It is evident, only in assessment years 2002-03 2003-04, TPO has proposed adjustment. It is further relevant to observe, in assessment year 2004-05, though, the TPO had made an adjustment to the rate of export commission by determining the ALP at 6.6%; however, in an appeal preferred by the assessee Commissioner (Appeals) has deleted such adjustment. Against the decision of Commissioner (Appeals), the department has not preferred any further appeal. It is also evident, in assessment year 2005-06, the TPO himself has accepted the commission paid at 12.5% to be at arm s length. Even applying the rule of consistency and past history relating to similar transaction, the export commission paid at 12.5% has to be accepted to be at arm s length. In view of the aforesaid, we are inclined to delete the adjustment made to the ALP of export commission paid to the AE. This ground is allowed. Disallowing full deduction of VRS and early retirement incentive granted to employees - HELD THAT:- As respectfully following the decisions of the co-ordinate bench in assessee s own case,[ 2014 (8) TMI 831 - ITAT MUMBAI] we allow the deduction claimed by the assessee. Disallowance of depreciation on obsolete assets - claim disallowed simply for the reason that similar claim made by the assessee in preceding assessment years has been disallowed - HELD THAT:- As decided in own case [ 2014 (8) TMI 831 - ITAT MUMBAI] depreciation was allowable on obsolete assets to the assessee. Disallowance of interest expenditure u/s 14A - HELD THAT:- We find, while deciding identical issue in preceding assessment years [ 2014 (8) TMI 831 - ITAT MUMBAI] the Tribunal has deleted the disallowance of interest expenditure made under section 14A. Disallowance being expenditure incurred towards computer software charges - HELD THAT:- As decided in own case [ 2014 (8) TMI 831 - ITAT MUMBAI] expenditure had not created any new asset or new source of income. It was held that expenditure was revenue in nature. Addition u/s 145(A) of the Act on account of unutilised modvat credit - HELD THAT:- As decided in own case [ 2014 (8) TMI 831 - ITAT MUMBAI] valuation of purchase and sale of goods and inventory has to tie made on the basis of method of accounting regularly followed and further adjustment is required to be made to include the amount of any tax, duty, cess to bring the goods to the place of its location condition on the date of the valuation. Therefore, under the provision u/s 145A adjustment on account of lax, duty etc has to be made at all stages that is, opening stock, purchases and safes and losing stock - Adjustment u/s 145A has to be made both to tha opening stock and closing stock. This issue therefore in our view requires fresh examination. Disallowance of deduction claimed under section 80HHC - availability of deduction under section 80HHC of the Act on sales-tax set off - HELD THAT:- The issue with regard to allowing claim of deduction in respect of sales tax set off and refund, the assessee is not eligible in view of Explanation (baa) to Section 80HHC. Accordingly, we dismiss this ground of assessee s appeal and direct the AO to reduce the amount of sales tax refund from the eligible profit for computing claim of deduction u/s.80HHC. Restore the issue back to the file of the assessing officer for reducing only the net receipt from the eligible business profit in terms of Explanation (baa) to section 80HHC. Bad debts recovered should be excluded from the eligible profit for computing deduction under section 80HHC of the Act. Disallowance of bad debts written off - HELD THAT:- As per the amended provision of section 36(1)(vii) of the Act, any bad debt written off in the books of account as irrecoverable is an allowable deduction. The effect of the aforesaid statutory provision has been lucidly explained by the Hon ble Apex Court in case of TRF Ltd [ 2010 (2) TMI 211 - SUPREME COURT] . Therefore, once the conditions of section 36(1)(vii) are fulfilled, assessee s claim has to be allowed. Keeping in view the uncontroverted factual position that the conditions of section 36(1)(vii) are satisfied, we allow assessee s claim. This ground is allowed. Addition/enhancement made to the ALV need to be deleted. Computation of deduction under section 80HHC - As sales tax set off and refund are not eligible for deduction in view of Explanation (baa) to section 80HHC. Therefore, 90% of such receipt has to be excluded from the business profits as well as turnover for computing deduction under section 80HHC. Penalty u/s 271(1)(c) - HELD THAT:- For addition on account of Transfer Pricing adjustment relating to payment of commission as rightly observed by Commissioner (Appeals), such disallowances cannot automatically lead to the conclusion that the assessee has either furnished inaccurate particulars of income or has concealed its income. We also agree with Commissioner (Appeals) that the issues relating to disallowances/additions, based on which penalty has been imposed are debatable issues on which more than one opinion is possible - transfer pricing adjustment was made on purely estimate basis. Thus, as rightly held by learned Commissioner (Appeals), such additions/disallowances, based on difference of opinion, cannot lead to the inference that assessee has either furnished inaccurate particulars of income or concealed its income so as to levy penalty under section 271(1)(c) On record that while deciding the appeal arising out of the quantum proceeding, learned Commissioner (Appeals) has granted relief to the assessee in respect of the aforesaid additions/disallowances which further goes to prove that these are debatable issues. In any case of the matter, while deciding the quantum appeals of the assessee and the revenue in the earlier part of the order, we have deleted all the disallowances/additions based on which penalty under section 271(1)(c) of the Act was imposed. That being the case, the penalty order passed u/s 271(1)(c) cannot survive. Accordingly, we uphold the decision of learned Commissioner (Appeals) on the issue by dismissing the grounds raised by the revenue.

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• 2021 (8) TMI 608
  Capitalization of interest expenses - Asset put to use - HELD THAT:- The interest expenses till date the asset is put to use has to be capitalized to the cost of asset and after commencement of power production the interest (i.e. post the assets are put to use) the expenditure was rightly debited to the P L Account and claimed as revenue expenditure and therefore no fault can be attributed to the action of Ld. CIT(A). The only objection pointed out by the Ld. CITDR that the Ld. CIT(A) has believed the facts noted by the Auditor s Report and has taken the date of commissioning of Thermal Project as on 25.09.2012 without making any enquiry or calling remand report from AO is not agreeable for the simple reason that we have reproduced, the AO s action on this issue and perusal of the same would reveal that the AO has noted the date of commissioning of Thermal Project as on 25.09.2012 from the same source i.e. Auditor s Report and has not disputed this fact and in fact has accepted it. When the AO in the assessment order has accepted the date of commissioning of thermal project as on 25.09.2012, the Ld. CIT(A) has accepted the said fact and proceeded to examine the claim of the assessee in respect of capitalization of interest expenditure till the date of commissioning of Thermal Project which was legally correct. CIT(A) has allowed the claim of the assessee on the well settled principle of law on this subject. Therefore, we do not find any infirmity in the order of the Ld. CIT(A) and confirm the same. These grounds of appeal of revenue are dismissed. Addition of debenture redemption reserve in computing Book profit u/s. 115JB - According to the AO Debenture Redemption Reserve was carried to reserve so it should be added back under Explanation 1(b) to sec. 115JB of the Act and thus added back this amount - HELD THAT:- As noted that the amount transferred to DRR is not in excess of the amount to be required to paid at the time of repayment of the debentures, so it cannot be treated as reserve for the purpose of Schedule VI to the Companies Act, 1956; and as discussed the amount set apart to meet a known liability as such the DRR cannot be considered as reserve to attract explanation 1(b) of section 115JB of the Act. Moreover, we note that the Ld. CIT(A) has allowed the claim by referring to the decision of this Tribunal in SREI Equipment Finance Ltd. [ 2019 (2) TMI 1721 - ITAT KOLKATA] wherein the Tribunal has relied on the ratio of the decision laid by the Hon ble Bombay High court in the case of CIT Vs. Raymond Ltd. [ 2012 (4) TMI 128 - BOMBAY HIGH COURT] wherein it has been held that mere fact that the debenture redemption reserve is labeled as a reserve will not render it as a reserve and an amount which is retained by way of providing a known liability is not a reserve within the meaning of explanation (b) of section 115JA of the Act. Therefore, in view of the discussion (supra) we do not find any infirmity in the order passed by the Ld. CIT(A) and, therefore, we confirm the same and dismiss this ground of appeal of revenue. Claim of deduction towards the education cess in computing total income under normal provisions of the Act - HELD THAT:- The issue is no longer res integra in the light of the decision of this Tribunal in the case of SREI Infrastructure Finance Ltd.[ 2014 (9) TMI 1240 - ITAT KOLKATA] wherein held Section 40(a)(ii) applies only to taxes and not to education cess - . Thus, we are of the opinion that the issue raised by the assessee is no longer res integra. The education cess is not income tax, so is an allowable deduction u/s. 37(1) of the Act. Therefore, we allow this ground of appeal of the assessee and direct the AO to allow the claim of the deduction of the education cess while computing the total income of the assessee. Non-exclusion of profit on sale of fixed assets and investments (net) in computation of Book Profits u/s. 115JB of the Act - CIT(A) held that profits on transfer of assets should be considered while considering MAT and, therefore, he upheld the action of the AO wherein he had added profit on sale of assets and investments - HELD THAT:- In the light of the aforesaid decision of the Special bench of this Tribunal in Rain Commodities Ltd. [ 2010 (7) TMI 794 - ITAT HYDERABAD] this issue is no longer res-integra and therefore we are of the opinion that the Ld. CIT(A) rightly upheld the action of AO on this issue, which does not require any interference from our part, so we confirm his action and dismiss this ground of assessee.

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• 2021 (8) TMI 607
  Disallowance of foreign exchange loss - assessee itself has failed to prove that the said loans were not used in investment in equity shares and the loan was used wholly exclusively for business purpose - CIT(A) deleting the 50% addition - HELD THAT:- As relying on assessee s own case [ 2020 (5) TMI 674 - ITAT DELHI ] the matter is being referred to the file Assessing Officer for verification of the utilization of the loan for business purpose by taking into account the amount of the loan raised, the quantum of the own capital and the reserves surplus, utilization of the amount for day-to-day running of the business and utilization of the amount for investment in the equity shares of the subsidiary company or the amount invested for infusion of the capital in any other company. The AO may then take a considered decision with regard to disallowance of interest on loan and bank charges in accordance with the provisions of the Income Tax Act - Appeal allowed for statistical purposes.

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• 2021 (8) TMI 605
  Disallowance u/s.14A r.w.r. 8D - assessee has paid interest on certain loans which are borrowed for specific purposes. Therefore, if the assessee is able to prove utilization of loans for specific purposes, then interest relatable to said loans cannot be included for computation of disallowances under Rule 8D(2)(ii) of Income Tax Rules, 1962 - HELD THAT:- Assessee claimed that while computing disallowance under Rule 8D(2)(iii), the Assessing Officer has included investments made in overseas subsidiaries and income from which is taxable under Indian laws. We find that it is a well settled principles of law that dividend earned from overseas investments is taxable in Indian law, therefore, for the purpose of computing other expenses under Rule 8D(2)(iii), those investments need to be excluded. It is well settled principles of law by the decision in the case of ACIT Vs. Vireet Investments Pvt .Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] that only those investments which yielded exempt income for the year needs to be considered for computation of disallowance of other expenses. The assessee has filed working explaining computation of disallowance u/s.14A r.w. Rule 8D of the Income Tax Rules, 1962. The said computation was not available to the AO at the time of assessment proceedings - we are of the considered view that the issue needs to go back to the file of the AO for re-consideration in light of revised working filed by the assessee. Hence, we set aside the appeal to the file of AO and direct him to recompute disallowance of expenses relatable to exempt income u/s.14A of the Act in accordance with our directions given herein above.

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• 2021 (8) TMI 604
  Nature of expenditure - Construction cost incurred on building constructed on leasehold land - revenue or capital expenditure - CIT-A opined that the AO has erred in treating expenditure incurred for construction of building on leasehold land as capital in nature and accordingly, deleted additions - HELD THAT:- In this case, CIT(A), after considering the fact that case of the assessee is squarely covered by the decision of the Hon ble Supreme Court in the case of M/s. Madras Auto Service (P) Ltd. [ 1998 (8) TMI 1 - SUPREME COURT] has held that when the assessee constructs building on leasehold land without ownership, then cost incurred for construction of building is revenue expenditure which deductible. The said findings of the learned CIT(A) is supported by the decision of the Hon ble Supreme Court in the case of M/s. Madras Auto Service (P) Ltd. (supra) and the decision of Hon ble High Court of Madras in the case of TVS Lean Logistics Ltd. [ 2007 (6) TMI 44 - HIGH COURT, MADRAS] CIT(A) has also recorded categorical finding of fact that the assessee has derived clear advantage of saving in rent by incurring expenditure on construction of building in lieu of rent. Further, there is clear commercial advantage in terms of saving in rent payments as narrated by the ld. CIT(A) in her order. Therefore, we are of the considered view that there is no error in the findings recorded by the learned CIT(A) in deleting additions made by the Assessing Officer towards disallowance of cost of construction on leasehold land. We are of the considered view that there is no error in the findings recorded by the learned CIT(A) to delete additions made by the Assessing Officer towards cost of construction incurred on leasehold land, hence, we are inclined to uphold order of the learned CIT(A) and reject grounds taken by the Revenue.

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• 2021 (8) TMI 603
  Disallowance u/s.68 - addition made towards unsecured loan taken from Shri R.D. Sukumar Babu - assessee could not prove the credit worthiness of the said loan with evidences - HELD THAT:- We find from the order of the ld.CIT(A) that the loan has been taken from shareholder of the company, that means the identity of the creditor is not disputed by the AO. As regards, genuineness of the transaction, loan has been taken through bank and part of loan has been repaid through cheque. The assessee had also paid interest after deducting applicable TDS. Therefore, there is no reason for doubting the genuineness of transaction. As regards, creditworthiness of the creditor, the assessee has filed necessary evidences to discharge creditworthiness including financial statements filed for the relevant assessment year. The CIT(A) after considering relevant facts has deleted addition made by the AO towards unsecured loan u/s.68 of the Act. Facts remain unchanged. Revenue has failed to bring on record further evidences to counter the findings of the facts recorded by the ld.CIT(A). Hence, we are inclined to uphold the findings of ld.CIT(A) and reject the ground taken by the Revenue. Disallowance of commission expenses u/s.37 - HELD THAT:- Assessee has paid commission to M/s. Credila Financial Services Pvt. Ltd., which is in commensurate with volume of business generated from them. The assessee has also filed necessary evidences to prove genuineness of payment and nexus between expenditure and business of the assessee by filing various evidences including Form 16 issued to the party for deduction of TDS on said payment. CIT(A) after considering relevant facts has rightly deleted addition made by the AO towards disallowance of commission expenditure. The Revenue neither bring on record any evidence to prove that expenditure incurred under the head commission expenditure is not genuine nor counter the findings of fact recorded by the ld.CIT(A). Therefore, we are of the considered view that there is no error in the findings recorded by the CIT(A) and hence, we are inclined to uphold the order of the CIT(A) and reject the ground taken by the Revenue. Adhoc disallowance of miscellaneous expenses - AO has disallowed 20% of various expenses including printing stationery, office maintenance and electricity charges, on the ground that the assessee has not filed any evidences to prove that said expenses are normal business expenses which had to be incurred wholly and exclusively for the business of the assessee - CIT-A deleted the addition - HELD THAT:- No reason to interfere with the findings recorded by the CIT(A) to delete adhoc disallowance of miscellaneous expenses for the simple reason that AO has made ad-hoc disallowance of expenses without pointing out any discrepancy in expenditure debited in the profit loss account. It is an admitted fact that in order to disallow any expenditure, there should be some finding of fact that either the expenditure was not incurred wholly and exclusively for the purpose of business or the assessee is not able to substantiate the expenditure with necessary evidences. In this case, no such finding is recorded by the AO before making any adhoc disallowance. The CIT(A) after considering relevant facts has rightly deleted addition. - Decided against revenue.

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• 2021 (8) TMI 602
  Treatment of deemed dividend of the unsecured loan received by the assessee from group Company - HELD THAT:- CIT(A) accepted the assessee s plea that the disallowance if any should be restricted to be 75 lakhs. However as regards the plea of the assessee that assessee is not a registered shareholder of the company from where it has received the loan, the learned CIT(A) referred to the fact that on this issue the matter has travelled to the Supreme Court and the Hon ble Supreme Court has referred the matter to a Larger Bench. He noted that on similar facts ITAT has directed that the AO should await the order of Supreme Court and then decide the issue. Hence, the learned CIT(A) remitted the matter to the AO and directed him decide the issue after the receipt of Supreme Court order on the above. We note that the NATIONAL TRAVEL SERVICES VERSUS COMMISSIONER OF INCOME TAX, DELHI, VIII [ 2018 (1) TMI 1159 - SUPREME COURT] has not reversed its order on the issue but has referred to a Larger Bench. Further we note that as per section 251 of the Act there is no power of learned CIT(A) to remand the matter. In this view of the matter the order of learned CIT(A) remanding the issue the file of assessing officer is not at all sustainable. In this regard learned counsel of the assessee has also referred to the decision of honourable Bombay High Court for the proposition that the issue is covered in favour of the assessee. Upon careful consideration we find that interest of justice demands that issue be remitted to the file of learned CIT(A), as he has no power to remand the issue to the assessing officer. The learned CIT(A) is directed to consider the issue afresh after considering all facts. Needless to add assessee should be granted adequate opportunity of being heard - Appeal by the assessee is partly allowed for statistical purposes.

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• 2021 (8) TMI 601
  Revision u/s 263 - valuation of closing stock, non increasing of closing stock by proportionate other direct expenses contravention of provisions of Section 40A(3) of the Act by purchasing land and cash - HELD THAT:- As specific queries were raised towards the difference in the closing stock valuation and the AO did not disturb the closing stock after making several rounds of enquiry. Pertinently, the law does not require to stretch enquiries and verification to an extent which may tantamount to oppression and harassment of a taxpayer. The assessee has offered explanation for difference in the valuation on account of apportionment towards internal road and garden etc. which represented cost of project and thus represented as an outgo which could not have been included in the closing stock. The explanation appears plausible. Assessee that similar method of valuation have been adopted in the earlier years as well as in the subsequent assessment years and there is no departure in the valuation of closing stock as certified by the statutory auditors of the company year after year as mandated in law. The tabulated statement showing comparison of closing stock year after year vouches the claim of the assessee on consistency of method of valuation and tax neutrality. In these circumstances, the action of the AO in accepting the closing stock cannot be blamed as erroneous by a two line show cause notice on the issue. The alleged under valuation of closing stock is a tax neutral exercise when seen over a longer horizon and thus, in effect, not prejudicial to the interest of the Revenue per se. Section 263 of the Act calls for existence of both the pre-requisites, namely; (i) order under revision should be erroneous as well as (ii) prejudicial to the interest of the Revenue. Both the conditions must coexist simultaneously. Also every loss of the Revenue as a consequence of an order of the AO cannot necessarily be treated as pre-judicial to the interest of the Revenue. In the instant case, the AO after examining the issue has taken a view which is plausible. This apart, the Revenue cannot be said to be prejudiced in a Revenue neutral exercise. Thus, none of the conditions required for invocation of Section 263 of the Act are fulfilled. Thus, the exercise of jurisdiction in respect of first point of the issue is not justified when tested on the touchstone of Section 263 of the Act. The findings of the CIT on this score is thus set aside and cancelled. The second limb of the show cause notice is rendered infructuous as fairly submitted on behalf of the assessee and therefore not determined. As regards the purchase of land in cash and alleged contravention of provisions of Section 40A(3) of the Act, we find merit in the case made out on behalf of the assessee. The land parcels purchased are stated to have been registered and documented. Therefore, the parties are identifiable and genuineness of transaction is established. The provisions of Section 40A(3) of the Act have been read down by the Hon ble Jurisdictional High Court in R.P. Real Estate Pvt. Ltd. [ 2016 (3) TMI 1303 - CHHATTISGARH HIGH COURT] in such a situation. Hence, the action of the AO in not applying Section 40A(3) of the Act being consistent with the observations of the Hon ble Jurisdictional High Court cannot be termed as erroneous per se. Consequently, the directions of the CIT on the third limb of the show cause notice is also set aside and quashed.

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• 2021 (8) TMI 600
  Late filing fees u/s. 234E - delay in furnishing the submission of tax deduction at source - HELD THAT:- It is undisputed fact that assessee has made delay in furnishing submission of tax deduction at source as prescribed under rule 31A of Income Tax Rule, 1962. Considering the decision of RAJESH KOURANI VERSUS UNION OF INDIA, AND 4 [ 2017 (7) TMI 458 - GUJARAT HIGH COURT] we do not find any error in the decision of ld. CIT(A), therefore, the appeal of the assessee is dismissed.

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• 2021 (8) TMI 599
  Additions u/s 164 r.w.s 160 - Share of the beneficiaries as taxable in the hands of the assessee trust - HELD THAT:- The assessee is a special purpose trust created for the benefit of its beneficiaries and there were 38 members who were having definite shares as beneficiaries in the trust. During the course of assessment proceedings, the assessee has submitted that the shares of the persons who are entitled to are determinate and known and the recipients are only to be subjected to tax. As submitted that the trust in fact is only escrow mechanism in the form of specific trust created for the purposes. As submitted that assessee was liable to distribute such income to its beneficiaries which was claimed as expense by the assessee. As noticed that same group of beneficiaries comprising of five members have also not claimed their share of income on account of similar dispute with the assessee trust as was in the earlier assessment year 2013-14 and 2015-16. The Co-ordinate Bench held that revenue cannot pick and choose certain amounts representing the share of the beneficiaries and tax in the hands of the assessee and simultaneously not charging the tax in the hands of the assessee with respect to majority of the beneficiaries. The facts of the case and issue involved in the present appeal are identical to the assessment year 2013-14 and 2015-16, therefore, respectfully following the decision of the Co-ordinate Bench of the ITAT [ 2017 (5) TMI 1411 - ITAT CHENNAI] , on similar issue and identical facts, this ground of appeal of the assessee is allowed.

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• 2021 (8) TMI 598
  Reopening of assessment u/s 147 - Validity of reason to believe - notice not in the name of assessee but issued in the name of minor daughter - HELD THAT:- AO sought to make the assessee as representative assessee u/s. 160(ii), then it was incumbent upon him to issue a notice u/s.148 in the case of the assessee as a representative assessee. Notice cannot be validated even if a notice has been issued in a different name with different PAN and at the same time the income can be assessed in the hands of different assessee, because, Shri Harneet Singh Chandhoke is otherwise an independent assessee assessable to tax. It is not a case of rectifiable mistake u/s. 292B, because even in the reasons recorded the AO has entertained reasons to believe that it was the escapement of income in the hands of Ms. Jyotika Chandhoke and not the assessee. Action of the AO itself shows that there is no application of mind on the material coming into his possession as to whether income escaping assessment belongs to the assessee and not to the assessee s minor daughter. The right course under the law should have been that the assessee s case, should have been reopened and notice u/s. 148, should have been issued in the name of Shri Harneet Singh Chandhoke and if there is any undisclosed income belonging to the minor, then same ought to have been taxed in the hands of the assessee. Thus, the assessment order passed u/s. 147/143 (3) which has been framed on the basis of notice issued in the name of minor daughter, Ms. Jyotika Chandhoke and a different PAN cannot validate the proceedings. Hence, the same is quashed as void ab initio. Accordingly, the appeal of the assessee is allowed.

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• 2021 (8) TMI 597
  Penalty u/s.271(1) - deduction u/s 80P(2)(a)(i) - AO opined that the activity of making investment in mutual funds or income from mutual funds did not fall under the head Business of banking as these transactions were not with the members of assessee society and hence no deduction u/s 80P was admissible - HELD THAT:- We do not find much force in the contention of Revenue for the obvious reason that when the business itself was not allowed to be carried on to the assessee, the investment made in mutual funds, etc. cannot amount to fetching business income. Ex consequenti, the profit or loss from transfer of such mutual funds, etc. would fall under the head Capital gains . On the question of taxability of interest on FDRs with nationalized banks, we hold that the same shall be taken as `Income from other sources and cannot be construed as income from business. We, therefore, accord our imprimatur to the finding given by the ld. CIT(A) in this regard. Allowing set off of loss against the income from transfer of capital gains - We hold that the assessee is entitled to set off the loss from mutual funds, etc. against the income from mutual funds, etc. However, this exercise requires examination of the amount of loss incurred from sale of mutual funds, etc. during the year and the amount of loss brought forward from earlier years eligible for set off against income from mutual funds during the year. Such an exercise can be carried out only after considering the break-up of the loss, which information is not available on record. We, therefore, overturn the impugned order on this score and remit the matter to the file of the AO for examining the details of loss incurred by the assessee during the year and that brought forwarded from earlier years and then allow set off in terms of sections 70/71 (for the same year) and section 74 (for the brought forward losses) of the Act. Both the sides agree that the facts and circumstances of the appeal for the later year are mutatis mutandis similar. Following the view taken hereinabove for the A.Y. 2007-08, we hold that income from sale of mutual funds, etc. would fall under the head Capital gains , interest on FDs, etc. would fall under the head Income from other sources and the amount of loss for the year and brought forward loss from sale of mutual funds would be set off in terms of sections 70/71 and 74 of the Act.In the result, these two appeals are partly allowed for statistical purposes. Defective notice u/s 274 - Where the charge is not properly set out in the notice u/s 274 viz., both the limbs stand therein without striking off of the inapplicable limb, but the penalty has, in fact, been levied for one of the two, such a penalty order gets vitiated. Turning to the facts of the extant case, we find from the notice u/s 274 of the Act that the AO did not strike out the irrelevant limb. Respectfully following the Full Bench judgment of the Hon ble jurisdictional High Court, we affirm the order of ld. CIT(A) in rightly deleting the penalty levied by AO.

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• Customs

• 2021 (8) TMI 622
  Seeking amendment in the bills of entry - non-availability of the decision in the case of M/S SRF LTD., M/S ITC LTD VERSUS COMMISSIONER OF CUSTOMS, CHENNAI, COMMISSIONER OF CUSTOMS (IMPORT AND GENERAL) , NEW DELHI [ 2015 (4) TMI 561 - SUPREME COURT] at the time of the clearance of the goods pertaining to the Bills of Entry in the present case - re-assessment, pertaining to a different period has not been considered by the 2nd respondent - assessment of the Bills of Entry - appealable order or not - HELD THAT:- It provides a remedy of appeal against any order passed by the Dy. Commissioner of Customs, who is lower in rank than a Commissioner of Customs, to the Commissioner (Appeals) - the petitioner has a remedy of an appeal against the assessment of the BoEs in question. So Sec.149 is an additional remedy available to the petitioner to seek amendment of the BoEs subject to the condition that such amendment is sought on the basis of documentary evidence which was in existence at the time the goods were cleared, deposited or exported as the case may be In the decision of the Supreme Court in ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [ 2019 (9) TMI 802 - SUPREME COURT] while holding that the refund cannot be granted by way of a refund application under Section 27 of the Act until and unless an assessment order is modified and a fresh order of assessment is passed and duty re-determined, the Supreme Court nowhere said that such amendment or modification of an assessment order can only be done in an Appeal under Section 128 - thus, even the Supreme Court clearly indicated that the modification of the assessment order can be either under Section 128 or under other relevant provisions of the Act i.e. Section 149. The stand of the respondents in the counter affidavit that only reassessment under Section 128 is the remedy available to the petitioner, and Section 149 cannot be invoked, is not tenable - the plea of the 2nd respondent that there is no possibility of getting modified an order of assessment under any other relevant provision and that petitioner is trying to overcome limitations stipulated in Section 128 is also rejected. The Assessing Authority has failed to consider the fact that Section 149 of the Act does not prescribe any time limit for amending the Bill of Entry filed and assessed. The power to amend under Section 149 of the Act is a discretionary power vested with the authority. Since, it is due to incorrect determination of duty by the assessing authority initially, the petitioner is compelled to seek amendment of Bill of Entry under Section 149 of the Act. Thus, the importer / petitioner cannot be penalized for what the authority ought to have done correctly by himself. The impugned order passed by the 2nd respondent cannot be sustained and is violative of Articles 14, 19(1)(g), 265 and 300A of the Constitution of India and also the Customs Act, 1962, and it is accordingly set aside - petition allowed.

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• 2021 (8) TMI 617
  Seeking across-the-board amnesty from paying penal charges to CFSs, ICDs and Shipping lines, during the entire period of lockdown enforced by the Government consequent on the COVID-19 pandemic - Contractual rights between private individuals and the regulation, thereof, by statutory/Governmental authorities in public interest - justification for Inability to move or transport their export/import goods, during the said period - amnesty schem - levy of penal charges by ICDs/CFSs, for the period, beyond a certain number of free days , during which the goods continue to remain in their premises, and levied by shipping lines, in the event the containers are not returned to them within a fixed number of free days - CBEC Circular 22nd December, 1995 - Disaster Management Act - the Major Port Trusts Act - the Merchant Shipping Act - the Customs Act (along with the Handling of Cargo in Customs Areas Regulations, 2009, issued thereunder). HELD THAT:- The TAMP, under Section 48, merely fixes and approves the scales of rates for services to be performed by the Board or other persons. Even in respect of any CFS which may be located within the area of a Major Port and may, therefore, conceivably be amenable to Section 48 of the Major Port Trusts Act, all that the Section regulates are the scales of rates for the services to be performed by the CFSs or ICDs. There is no provision, in the Major Port Trusts Act, which can regulate the levying, charging or recovery, by the CFSs or ICDs, from their customers, of charges payable against storage of goods which would include penal charges in the event of the goods remaining in the premises of the CFSs or the ICDs beyond the free period. There is a fundamental difference, in basic fiscal jurisprudence, between fixation of a tariff and levy and collection of charges in terms thereof. The TAMP has no concern with the recovery and collection of penal charges, whether in the name of ground rent, demurrage or detention charges, by ICDs, CFSs or shipping lines - A conjoint reading of para 3(iii) and 10 of the MOS Circular dated 21st April, 2020 would seem to indicate that the Major Ports have been directed to ensure non-recovery of penal charges, demurrage and detention charges on any port user including importers and exporters, CFSs, ICDs and shipping lines. This circular, has, however, been expressly issued under Section 111 of the Major Port Trusts Act. We have already seen that Section 111 empowers the Central Government to issue directives only to the Board or to the TAMP. The direction for non-recovery of penal charges, by ICDs, CFSs and shipping lines from the importers or exporters obviously has no link with the TAMP, as the authority of the TAMP, under the Major Port Trusts Act, extends only to fixation of the tariff and not to regulation of collection of charges in accordance therewith. The Board, too, is not invested by the Major Port Trusts Act, to regulate, much less interdict, the levy, recovery and collection of charges by the CFSs, ICDs or shipping lines from the importers or exporters. Section 53 of the Major Port Trusts Act does authorise the Board to, in special cases and for reasons to be recorded in writing, exempt either wholly or partially any goods or vessels or class of goods or vessels from the payment of any rate or of any charge leviable in respect thereof according to any scale in force under this Act or remit the whole or any portion of such rate of charge so levied - Directions, issued by an executive authority in exercise of the power invested in such authority to do so, have necessarily to be such as would be amenable to compliance by the authority to whom the directions are issued. The authority issuing directions, in exercise of powers conferred by statute in that regard, has also to ensure that the body to whom the directions are issued is empowered to comply with such directions. It is as much folly, in law, to issue directives in excess of the authority vested in the one, as to issue directives to perform acts in excess of the authority vested in the other. Even under the Disaster Management Act, the directions contained in paras 3(iii) and 10 of the Circular/order dated 21st April, 2020, issued by the MOS, could neither be sustained nor enforced by issue of a mandamus - the reliance, by the petitioners, on the Circulars/Orders dated 31st March, 2020 and 21st April, 2020 of the MOS cannot support the prayers contained in the petitions. The relationship between shipping lines and their customers was expressly contractual in nature, and the prerogative to decide on the charges leviable from the customers for continuing to retain the containers beyond the free period vested in the shipping lines, is governed by negotiated contract ad idem. The State has no direct causal connection with these charges. The powers exerciseable under the Disaster Management Act could not, therefore, be so exercised as to restrain collection thereof, by the shipping lines. The aspect of the charges recovered, by ICDs of CFSs, from importers or exporters was, clearly, not even remotely in the contemplation of the authorities while issuing the aforesaid Circular dated 8th June, 2009. The Circular has been issued for a very specific purpose and to clarify certain specific aspects relating to the functioning of ICDs and CFSs and the distinction between the two and cannot, therefore, be used as a ground to seek waiver, or exception, from payment of penal charges to ICDs, CFSs or shipping lines, beyond the free periods . Nor can this Circular be used to support the contention that all instructions issued by the CBIC are, ipso facto, binding on ICDs and CFSs. Writ petition dismissed.

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• Corporate Laws

• 2021 (8) TMI 611
  Oppression and Mismanagement - Refusal to grant ad interim stay to the holding of EGM - Seeking to give direction for stay regarding the removal of Gajanan Dhakane as a Director of Respondent No. 9 company - refusal to grant stay to the proposed changing the designation of Pralhad Hage from that of Managing Director to Executive Director - seeking declaration of already held EGM as illegal - HELD THAT:- Where EGM was held on 7.8.2020, and thereafter a Board of Directors meeting was held on 26.10.2020wherein certain resolutions were passed and where the Appellants had sought ad interim stay, no final order was passed by the NCLT after adjudicating on the oppression of the minority shareholders, or mismanagement in the affairs of the company. The question of granting ad interim stay to the holding of EGM and Board of Directors meeting has to be looked at, from a very limited point of view of prima facie illegality, balance of convenience to the parties and irreparable loss to the Applicants. The two impugned orders do not require any intervention as they do not suffer from any illegality - Since the main petition is presently being heard by NCLT, we refrain from giving any opinion on the larger issue of oppression and mismanagement, as has been alleged in the said petition by the Appellants/Petitioners - Appeal dismissed.

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• Insolvency & Bankruptcy

• 2021 (8) TMI 615
  Seeking clarification of the order dated 04.03.2021 - Rule 11 of National Company Law Appellate Tribunal, Rules, 2016. Clarification - I It is requested that the exclusion for the period when the order was passed i.e. 04.03.2021 may be granted, otherwise it would cause irreparable loss to the Applicant and also all the homebuyers - HELD THAT:- As per earlier order, the allottees were directed to deposit balance amount and pay 90% by 15.03.2020. Now, the allottees are directed to deposit balance amount and pay 90% by 31.08.2021. Clarification II In Para 18 of the order dated 04.03.2021 this Tribunal has observed that the amount invested by him as financial creditor in terms of the judgment shall stand forfeited and - It is stated that such observation is amounting to altering the judgment dated 05.02.2020, therefore, this condition may be removed/deleted - there are no reason to remove/delete aforesaid condition. Clarification III The Adjudicating Authority may be directed to decide the Application for replacement of IRP in time bound manner. As we have already noted above that the Adjudicating Authority vide order dated 01.06.2021 replaced the IRP and appointed Mr. Manoj Kulshrestha as IRP, who has taken charge on 22.06.2021. Therefore, no clarification or direction is required. Application disposed off.

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• 2021 (8) TMI 614
  Settlement of Fee payable to RP - Payment of excess insurance premium amount without approval of CoC - deduction of professional fees and expenses form such excess amount - Section 60 (5) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 33 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (Regulations) - HELD THAT:- It is apparent that without approval of the CoC the Appellant has taken decision to go with United India Insurance Company and renewed the insurance by paying higher insurance premium. Section 20 (2)(b) of the IBC authorizes the IRP to enter into such contracts which were entered into before the commencement of CIRP. In this case there was a new contract of insurance after the commencement of CIRP. The Appellant was aware with this situation that he cannot take such decision, therefore, he has circulated the quotations amongst the Members of CoC alongwith comparison of their premium amount. Thus, the aforesaid provision does not authorize the IRP to renew the insurance policy without approval of CoC at higher premium rate. The Appellant without any approval appointed CS Jignesh Shah for the purpose of seeking legal opinion in the matter of related party. It is also pertinent to note that Mr. Hiten Parikh and Jignesh Shah have not authorized the Appellant to file Application on behalf of them. Thus, the Appellant cannot pursue their claims before the Adjudicating Authority. The Resolution Plan has been approved by the Adjudicating Authority and therefore, the CoC has already been dissolved and the RP has been discharged. In such circumstances, Ld. Adjudicating Authority has righty dismissed the Application - Appeal dismissed.

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• 2021 (8) TMI 613
  Liquidation of Corporate Debtor - Section 61 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Liquidation process is governed by Chapter III Part - II of the Code. The Regulation governing Liquidation process providing elaborate provisions on Realizations of Assets vide Chapter VI of IBBI (Liquidation Process) Regulations, 2016. The Appellant is forcing the Liquidator to sale the property to them only which is not permissible under the provisions of the Code and Regulations. It is undisputed fact that Appellant has no locus standi and accordingly he cannot seek the sale of the property to the Appellant only. The Appellant is reagitating the same matter in different rounds before the Adjudicating Authority. The Code provides for time bound resolution and if such frivolous actions are allowed, it will be never ending process to complete the liquidation. The Appeal is not maintainable and deserves to be dismissed and is accordingly dismissed.

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• 2021 (8) TMI 610
  Liquidator seeking appropriate directions/order in respect of modifications in the List of Stakeholders Report - Section 42 of IBC - HELD THAT:- The Respondent modified the entries in the list of the claims of the workmen/employees based on the books of account of the Corporate Debtor and uploaded it on the website of the Corporate Debtor and that the respondent had also sent the said order vide email dated 21.08.2020 in respect of individual claims. On perusal of the filing dates of these appeals, it was found that application were filed on 13.03.2020, which were prior to or on the same day of the modified order of the Liquidator, which was communicated by e-mail dated 21.08.2020. The present Applications should have been filed within 14 days of the decision of the Liquidator i.e., on 21.08.2020. However, the applications were filed before or on the date of the final order of the Liquidator - the applicants failed to make out any case so as to interfere in the impugned action of the respondent. Application dismissed as premature.

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• 2021 (8) TMI 606
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Existence of debt and dispute or not - claims barred by limitation or not - HELD THAT:- The bench is of the view that minor defects which have arisen during the completion of project were adequately attended to by the petitioner and no dispute existed at the time of the filing of the petition. Time limitation of claims - HELD THAT:- The respondent mentioned that the debt was due on 28.07.2015 and the company petition was preferred in October 2018, therefore, it is after a period of 3 years, therefore, it is hit by limitation. In this regard, the petitioner has mentioned that in the running account, the last invoice was raised by the petitioner on 26.06.2015 and ordinarily the limitation period would have expired 3 years from the due date. However, since the respondent had issued two unequivocal admission of its liability by way of sharing respondent s books of accounts on 19.10.2015 and again on 22.03.2017 with the petitioner, it amounts to admission of liability. The bench notes that it is established rule that when a party issues acknowledgment of its liability in writing the period of limitation starts afresh. Therefore, the Bench has no doubt that the respondent unequivocal admission of liability negates the contention of the petitioner that the claim is time barred - the Bench is of clear view that there is a debt in terms of Section 5(21) of Code and there is a default in terms of Section 3(12) of Code are clearly established and the debt is also within limitation. Thus, the present Company Petition satisfies all the necessary requirement for admission. Petition admitted - moratorium declared.

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• Indian Laws

• 2021 (8) TMI 619
  Dishonor of Cheque - Validity of Summon Order passed by the Additional Court - grounds necessary for taking cognizable as provided under Section 142 of N.I. Act has not been established by the complainant - it is alleged that the trial court has not considered this fact that post dated cheque has been collected by the Finance Company and the same has become time barred - willingness to compound the case - HELD THAT:- Having regard to the provision of Section 139 and 140 of the N.I. Act the defence that cheque was post dated and was not issued in lieu of legally enforceable debt is not available to the applicant and for the sake of argument, if it is presumed that he is having any such defence the same could only be taken during the course of trial which has not been started yet. Willingness to compound the case - HELD THAT:- It has been specifically provided under Section 147 of the N.I. Act that the offence punishable under this Act (Negotiable Instruments Act 1988) shall be compoundable. Petition disposed off.

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