TMI Tax Updates - e-Newsletter
August 1, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Highlights / Catch Notes
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GST:
Exemption from CGST - toll charges - annuity (deferred payments) - Validity of clarificatory circular - The deliberation of GST Council in its meeting held on 06.10.2017 and the notifications issued pursuant thereto clearly exempts the entire annuity being paid to the petitioners towards construction and maintenance of roads. It cannot be construed to have not exempted the annuity (deferred payments) towards construction of roads. The impugned circular has the effect of overriding the notifications bearing Nos.32 and 33/2017 dated 13.10.2017 and has to be held as bad in law - HC
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GST:
Levy of CGST and SGST - transportation services rendered by the drivers outside the State of Telangana - OLA - providing an electronic platform to the driver partners and to the customers - the requirement to pay IGST under Section 12(9) of IGST Act and correspondingly the nonliability to pay CGST and SGST insofar the transportation services rendered by the drivers were not considered in the right perspective. That apart though the impugned order is a lengthy one, the substantive portion appears to be without due application of mind to the legal provision. - HC
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Income Tax:
Additional depreciation u/s 32(1)(iia) - asset put to use for less than 180 days - remaining 50% of allowable additional depreciation in the subsequent assessment year - whether the provision for allowing additional depreciation of remaining 50% is allowable in the subsequent year i.e. Assessment Year 2010-11, although the statute allowed the same w.e.f. 01.04.2016 ? - HELD Yes - HC
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Income Tax:
Change of jurisdiction u/s 127 - As in the present case, the Assessing Officer rejected the objection regarding the jurisdiction and referred the matter to the PCIT to decide the issue after sixteen months. Further, the PCIT instead of deciding the issue of jurisdiction ordered that the issue of transfer of the jurisdiction will be decided after the completion of assessment. - the approach adopted by both the AO and PCIT was contrary to the mandate of law, in particular, Section 124(4) - HC
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Income Tax:
Revenue recognition - Accounting method - determination of income on completion of its projects - the method of accounting, namely, the project completion method was followed by the assessee and has been accepted by the Department and, thus, by applying the principle of consistency, the appeal of the revenue is dismissed. - HC
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Income Tax:
Recovery from the directors u/s 179 - Attachment of property - Arrears of taxes other liabilities of private company - here was no satisfaction recorded that the tax cannot be recovered. It needs to be understood that recovery procedure u/s 179 against the directors is not to be resorted to casually and only because it is convenient to do so for affecting recovery of the tax dues. - HC
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Income Tax:
Penalty u/s 271(1) - Unaccounted cash receipts - assessment u/s 153A - the conclusion reached by the Tribunal in the instant case that the notice for imposition of penalty under Section 271(1) (c) of the Act, did not specify which limb of the said provision the penalty was sought to be levied is covered by various decisions of HC - Revenue appeal dismissed - HC
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Income Tax:
Income accrued in India - Royalty u/s.9(1)(vi) - intra-group services fees - Coming to the Indo-Spain DTAA, it is axiomatic that the domestic law has not been linked with the definition of the term `royalties’ as given in the Article. The definition in the Article simply stops at receipt, inter alia, for use or right to use any ‘process’. In that view of the matter, we cannot read Explanation 6 to section 9(1)(vi) of the Act in the definition of the term `royalties’ under the Article. Though the term ‘process’ under the Act also includes payment for leased line charges in the light of Explanation 6, but absence of any analogous provision in para 3 of Article 13 of the DTAA, does not commend us to read the extended scope of the term `process’ in the DTAA. The contrary view espoused by the ld. CIT(A), ergo, cannot be accorded imprimatur. - AT
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Income Tax:
LTCG - Deduction u/s. 54 - scope of amendment - "one" versus "a" - investment of capital gain into more than one residential units - Commissioner though referred the latest provisions of section 54 of the Act, however without giving any definite finding qua applicability of the latest provisions of section 54 as applicable to the case in hand, decided the appeal of the Assessee, while referring some decisions which admittedly pertains to period prior to amended provisions of section 54 of the Act, as applicable to AY 2015-16 involved in this case. - Matter restored back - AT
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Income Tax:
Reopening of assessment u/s 147 - Bogus purchases - In view of failure on the part of the assessee in substantiating the purchases from those two parties, the Assessing Officer in background of the information in investigation report, interalia, those parties were engaged in providing accommodation entries, without physical delivery of goods, held the purchases from those two parties as bogus purchases. - Additions confirmed - AT
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Income Tax:
Addition u/s 68 - unexplained cash credit - unsecured loan - the assessee has not been able to establish the creditworthiness of lender nor has he been able to establish the genuineness of transaction. A perusal of the statement taken on record of the creditor raises serious doubt both on the creditworthiness of the party and genuineness of the transaction. - additions confirmed - AT
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Income Tax:
TP Adjustment to the licence fees paid for time and billing software - Determination of arm's length price at Nil in grounds 1 & 2 and at Rs. 50 lakhs on ad hoc basis in ground 3 is contrary to the provisions of the Act. Resultantly, the benchmarking done by the assessee is more acceptable and the transactions of the assessee with its AE for the services availed is held to be at arm's length. - AT
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Income Tax:
Capital Gain - computation of cost of acquisition - bonus debentures or not - re-investment of dividend amount - An amount was indeed received on behalf of the assessee and this amount has been reinvested in the debentures. The debentures were not ‘bonus’ debentures and the nomenclature given by the AO is thus incorrect. The taxes were duly paid on the deemed dividend in question, and it did constitute income of the assessee, even though received by a merchant banker on behalf of the assesse. - AO erred in declines the claim of the assessee with respect to cost of acquisition in respect of these debentures. - AT
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Income Tax:
Deduction u/s 80IB - failure to produce SSI certificate before the AO - No adverse inferences qua the entitlement of the assessee for deduction u/s 80IB could have been drawn, for the reason that the assessee had in the course of the assessment proceedings failed to place on record its certificate of registration as a SSI. - AT
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Customs:
Validity of SCN - 100% EOU - Private Warehouse - Cancellation of licence under Sub Section 2(b)of Section 58 granted to petitioner under Sub-Section (1) of Section 58 of the Customs Act, 1962 - If Respondent No.2 was relying on any seizure panchanama or any other material, the same should have been mentioned in the show cause notice issued to afford fair and reasonable opportunity to petitioner to respond. That has not been done. Further, Respondent No.2 for issuing show cause notice has relied upon six show cause notices and an offence booked by DRI but none of these had attained finality. They were pending at various stages. - Thus, issuance of show cause notice itself was premature. - HC
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Corporate Law:
Reduction of share capital - the Company has complied with all the statutory requirements as per the directions of the Tribunal and has also filed necessary Affidavits to that effect. It is also pertinent to mention that none of the Creditors objected to the reduction of the Capital. Section 66(1)(b) of the Act enables a Company to reduce its Share Capital ‘in any manner’ provided it is approved by the majority of Shareholders through a Special Resolution. - appeal allowed - AT
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IBC:
Rejection of application for initiation of CIRP - The mere fact that the Corporate Debtor has admitted liability to make payment in its minutes of meeting does not change the character of the transaction into a financial debt. In Clause 18 of the contract contains arbitration clause, for settling amicably by mutual consultation and thereafter approaching the arbitration as per Arbitration & Conciliation Act, 1996. The Appellant ought to have taken recourse to Clause 18 of the Sub-Contract Agreement dated 07.03.2017 and these issues could not have been decided in IBC proceedings. The Adjudicating Authority has rightly held that it was not financial debt and rejected Section 7 Application. - AT
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IBC:
Initiation of CIRP - The Corporate Debtor is not to raise bogie of disputes but there has to be real substantial dispute. The existence of dispute when the Demand Notice was issued is mandatory condition for exercising jurisdiction to reject the Application by the Adjudicating Authority as is referred to in sub-section (5) of Section 9. The statute uses the expression 'existence of a dispute' - since, there exists a pre-existing dispute, the application is rejected - Tri
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PMLA:
Power to investigate under PMLA - the expression “and” occurring in Section 3 has to be construed as “or”, to give full play to the said provision so as to include “every” process or activity indulged into by anyone. Projecting or claiming the property as untainted property would constitute an offence of money-laundering on its own, being an independent process or activity. - Section 5 of the 2002 Act is constitutionally valid. It provides for a balancing arrangement to secure the interests of the person as also ensures that the proceeds of crime remain available to be dealt with in the manner provided by the 2002 Act. The procedural safeguards as delineated by us hereinabove are effective measures to protect the interests of person concerned. - SC
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PMLA:
Constitutional validity and interpretation of certain provisions of the Prevention of Money-Laundering Act, 2002 - procedure followed by the Enforcement Directorate (ED) while inquiring into/investigating offences under the PMLA - The expression “investigation” in Clause (na) of Section 2(1) of the 2002 Act does not limit itself to the matter of investigation concerning the offence under the Act and is interchangeable with the function of “inquiry” to be undertaken by the Authorities under the Act. - SC
Articles
Notifications
Customs-
65/2022 - dated
29-7-2022
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Cus (NT)
Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver
FEMA-
FEMA.3(R)(3)/2022-RB - dated
28-7-2022
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FEMA
Foreign Exchange Management (Borrowing and Lending) (Third Amendment) Regulations, 2022
GST - States-
CCST.Ref.No.12039/125/2022 - dated
22-7-2022
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Andhra Pradesh SGST
Exemption of Tax Payers having Annual Aggregate Turnover upto Rs.2.00 Cr from the requirement of furnishing Annual return for the Financial Year 2021-2022
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G.O. Ms. No. 18 - dated
20-7-2022
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Puducherry SGST
Puducherry Goods and Services Tax (Amendment) Rules, 2022
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G.O. Ms. No. 17 - dated
20-7-2022
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Puducherry SGST
Seeks to extend dates of specified compliances in exercise of powers under section 168A of Puducherry Goods and Services Tax Act, 2017
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G.O. Ms. No. 16 - dated
20-7-2022
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Puducherry SGST
Amendment in Notification G.O. Ms. No. 2, dated the 3rd January, 2018
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G.O. Ms. No. 15 - dated
20-7-2022
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Puducherry SGST
Amendment in Notification G.O. Ms. No. 34, dated the 5th August, 2019
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3240/CTD/GST/2022/1 - dated
11-7-2022
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Puducherry SGST
Seeks to exempt taxpayers having AATO upto Rs. 2 crores from the requirement of furnishing annual return for FY 2021-22
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2022 (7) TMI 1315
Constitutional Validity of Rule 117 of the Jharkhand Goods and Services Tax Rules, 2017 - period of limitation for claiming of Input Tax Credit (ITC) in Form GST TRAN-1 - ultra vires to Section 140 of the Jharkhand Goods and Services Tax Act, 2017 or not - due date to claim transitional credit - HELD THAT:- As per order passed by the Apex Court in UNION OF INDIA ANR. VERSUS FILCO TRADE CENTRE PVT. LTD. ANR. [ 2022 (7) TMI 1232 - SC ORDER] , any aggrieved registered assesse shall file relevant Form TRAN-1 and TRAN-2 or revise the already filed Form irrespective of whether the taxpayer has filed writ petition before the High Court or whether the case of the taxpayer has been decided by Information Technology Grievance Redressal Committee (ITGRC) within this window period of 01.09.2022 till 31.10.2022. As such, case of the petitioner would also abide by the said direction. Writ petition disposed off.
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2022 (7) TMI 1314
Exemption from CGST - toll charges - annuity (deferred payments) - Validity of clarificatory circular - Amount collected by the concessionaries for construction, maintenance, operation and providing road access to the vehicle which ply on the road - Notification no.12/2017 dated 28.06.2017 - HELD THAT:- Admittedly, the toll charges collected by the concessionaries for construction, maintenance, operation and providing road access to the vehicle which ply on the road are exempted from GST by notification no.12/2017 dated 28.06.2017 - Though what is exempted is mentioned as service by way of access to a road or a bridge on payment of toll charges, the said toll charges is collected as consideration by the concessionaires towards construction and maintenance of the road. In short, the entire consideration for construction and maintenance of the road by concessionaires which is collected as toll charges is exempt from GST from 01.07.2017 and onwards. Annuity is paid to the concessionaires in lieu of toll charges. GST Council, in its 22nd meeting held on 06.10.2017 took note of the same and as entire toll charges were being exempted from GST has decided to recommend exemption of annuity also, which include the consideration received by concessionaires which is clear from the recordings in the minute book. The said recording makes it clear that it recommended treating annuity on par with the toll charges - Pursuant to the said meeting, the notifications no.32/2017 and 33/2017 dated 13.10.2017 have been issued by respondent no.1 wherein service by way of access to a road or a bridge on payment of annuity has been exempted from GST and no GST was being collected on the entire annuity being paid to the concessionaires which included the consideration towards construction as well as the service that they provide towards maintenance of the said road. The deliberation of GST Council in its meeting held on 06.10.2017 and the notifications issued pursuant thereto clearly exempts the entire annuity being paid to the petitioners towards construction and maintenance of roads. It cannot be construed to have not exempted the annuity (deferred payments) towards construction of roads. The impugned circular has the effect of overriding the notifications bearing Nos.32 and 33/2017 dated 13.10.2017 and has to be held as bad in law - In the instant case, respondent no.1 has issued the notifications under Section 11 of the Central Goods and Services Tax Act, 2017 and Section 6 of the Integrated Goods and Services Tax Act, 2017 exempting the consideration received by concessionaires from highway authorities as annuity from GST. The clarification issued is contrary to the said notifications for the reasons recorded above. If respondent no.1 is desirous of altering the same, it has to issue fresh notifications amending its earlier notifications. The impugned Circular dated 17.06.2021 is hereby set aside - Petition disposed off.
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2022 (7) TMI 1313
Levy of CGST and SGST - transportation services rendered by the drivers outside the State of Telangana - OLA - providing an electronic platform to the driver partners and to the customers - case of petitioner is that he had rightly paid IGST for the audit period and was not required to pay CGST and SGST - audit period April, 2019 to March, 2020 - HELD THAT:- It is prima facie evident that if the passenger is not registered under GST and avails transportation service, by way of legal fiction the place of supply would be the place where the passenger embarks or starts his journey - Though the 3rd respondent has referred to provisions of Section 12(9) of the IGST Act, he has however erroneously recorded that in case of unregistered recipient, the place of supply shall be the location of such recipient, which prima facie appears to be in contravention of Section 12(9) of the IGST Act. Thereafter, 3 rd respondent levied the tax as noted above and issued notice for payment. More particularly the requirement to pay IGST under Section 12(9) of IGST Act and correspondingly the nonliability to pay CGST and SGST insofar the transportation services rendered by the drivers were not considered in the right perspective. That apart though the impugned order is a lengthy one, the substantive portion appears to be without due application of mind to the legal provision. The matter is remanded back to the 3 rd respondent for a fresh decision in accordance with law after giving notice of hearing as well as opportunity of hearing to the petitioner - petition allowed by way of remand.
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Income Tax
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2022 (7) TMI 1312
Additional depreciation u/s 32(1)(iia) - asset put to use for less than 180 days - remaining 50% of allowable additional depreciation in the subsequent assessment year - whether the provision for allowing additional depreciation of remaining 50% is allowable in the subsequent year i.e. Assessment Year 2010-11, although the statute allowed the same w.e.f. 01.04.2016 ? - HELD THAT:- It is not disputed before us that the substantial questions of law raised in this appeal are covered by the decision in the case of Dy. CIT v. Brakes India Ltd [ 2012 (3) TMI 31 - ITAT, CHENNAI] followed in the case of Commissioner of Income Tax, Chennai Vs. Aztec Auto (P) Ltd [ 2020 (9) TMI 541 - MADRAS HIGH COURT] as held that where plant and machinery was acquired by the assessee in the second half of the financial year 2007-2008 was put to use for less than 180 days in that year and, therefore, only 10% of the additional depreciation under Section 32(1)(iia) could be allowed on same in that year, balance additional depreciation of 10% could be allowed on these assets in the relevant subsequent year 2009-10. - Decided against revenue.
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2022 (7) TMI 1311
Change of jurisdiction u/s 127 - whether ITAT has erred in not appreciating that the PAN of the Assessee is lying at Kolkata and for the last six years the returns were being processed at Kolkata and during the period the assessee had never raised any objection to the jurisdiction? - HELD THAT:- Tribunal has found that the acknowledgment receipt of the return of income shows that the respondent assessee had been filing its returns since inception i.e. AY 2005-06 at the address mentioned at New Delhi. It is pertinent to mention that in the Assessment Year 2012-13 when the assessee s case was selected for scrutiny, the assessee had within a month filed its objection to the jurisdiction of the ITO, Ward-10(2), Kolkata stating that the assessee s jurisdiction lies with Assessing Officer, Range-18, New Delhi. This Court is in agreement with the view of the Tribunal that as the assessee had raised objection within the time provided under Section 124(3) Assessing Officer, if not, satisfied with the correctness of the claim should have referred the matter for determination before the assessment was made to the PCIT. As in the present case, the Assessing Officer rejected the objection regarding the jurisdiction and referred the matter to the PCIT to decide the issue after sixteen months. Further, the PCIT instead of deciding the issue of jurisdiction ordered that the issue of transfer of the jurisdiction will be decided after the completion of assessment. This Court is of the view that the approach adopted by both the Assessing Officers i.e. ITO, Ward-10(2), Kolkata as well as PCIT, Kolkata was contrary to the mandate of law, in particular, Section 124(4) of the Act.
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2022 (7) TMI 1310
Revenue recognition - Accounting method - determination of income on completion of its projects - whether percentage computation method should be followed instead of project completion method followed by the assessee - whether Tribunal was justified in law to accept the accounting method followed by the assessee as accounting standard-9 (AS-9) instead of accounting standard-7 (AS-7) despite the fact that the assessing officer arrived at a conclusion finding that the assessee is a contractor and not a builder after analysing the various aspects of the business of the assessee? HELD THAT:- After taking note of the decision in Bilahari Investment (P) Ltd. [ 2008 (2) TMI 23 - SUPREME COURT] and that of Manish Build Well (P) Ltd.. [ 2011 (11) TMI 35 - DELHI HIGH COURT] held that the assessee has been consistently following one of the recognised methods of accounting that is project completion method for computation of income and in the absence of any prohibition or restriction under the provisions of the Income Tax Act. For doing so it cannot be held that approach of the CIT(A) and the tribunal was erroneous or illegal in any manner so as to call for interference by Court. Accordingly, the appeal filed by the revenue was dismissed. In the case on hand the CIT(A) as well as the tribunal have noted the aforementioned decision and also the fact that the method of accounting, namely, the project completion method was followed by the assessee and has been accepted by the Department and, thus, by applying the principle of consistency, the appeal of the revenue is dismissed. Thus, we find that there is no error in the order passed by the tribunal nor any substantial question of law arises for consideration in this appeal.
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2022 (7) TMI 1309
Recovery from the directors u/s 179 - Attachment of property - Arrears of taxes other liabilities of private company - whether the petitioner liable to pay a demand alongwith interest under section 220(2) of the Act which was otherwise due and payable by the company, CPML - HELD THAT:- A reading the show cause notice would therefore clearly suggest that there was no satisfaction recorded that the tax cannot be recovered. It needs to be understood that recovery procedure u/s 179 against the directors is not to be resorted to casually and only because it is convenient to do so for affecting recovery of the tax dues. With a view to show that the respondent No.1 had mechanically resorted to the provisions of section 179 of the Act, the petitioner has relied upon an order of attachment, dated 6th March 2019, whereby the Tax Recovery Offcer-2, Thane has ordered the attachment of land at Village Kalivali, Taluka Panvel, Dist. Raigad to show that if respondent had made an effort, the tax dues could be recovered from the company. An additional affidavit has also been filed by the petitioner. In response to this additional affidavit, an affidavit in reply has also been filed by the Deputy Commissioner of Income Tax- 1(2)(1), Mumbai in which a stand is taken that steps for sale of the property attached would be initiated after getting the fair market value determined. This statement itself has the effect of nullifying the action initiated under section 179 of the Act against the petitioner rendering the order impugned unsustainable in law. Writ Petition is allowed. The impugned order dated 13th February 2018 as also the order dated 12th February 2019 passed under section 264 of the Act are quashed. However, in case, the tax dues are not fully satisfied upon sale of the property that has been attached, then the Assistant Commissioner can proceed in the matter afresh in accordance with law, after giving an opportunity of being heard to the petitioner, in the light of the observations made by us in the preceding paragraphs.
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2022 (7) TMI 1308
Disallowance of compensation paid by the appellant and claimed as business expenditure - whether there was nexus between the compensation paid by the assessee to Shri. Mahesh Bhoopathi with the 'NLI project '? - HELD THAT:- In CIT Vs. Dalmia Cement (Bharat) Ltd [ 2001 (9) TMI 48 - DELHI HIGH COURT ] it is held that once it is established that there is nexus between the expenditure and the purpose of business, the Revenue cannot cannot justifiably claim to put itself in the armchair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximise its profit. The tax authorities must not look at the matter from their viewpoint but that of a prudent businessman. Whether there was nexus between the compensation paid to Shri. Mahesh Bhoopathi and the construction agreement? - The answer must be in the affirmative firstly, because, in para 3 of the JDA cancellation agreement, it is stated that M/s. ITC had approached the parties to the said cancellation agreement. Thus, assessee, Shri.Mahesh Bhoopathi and ITC were considering the proposal for construction of multi-storied residential Complex. Secondly because, in the Sale deed dated April 1, 2006 executed by Sunrise Realty, assessee is one of the confirming parties. Thirdly, because, the Construction Agreement has been entered into between ITC and the assessee on April 1, 2006, and on the very same day, Sunrise Realty has sold the property to M/s. ITC Ltd. Unless the Construction Agreement was finalized earlier, it would not have been possible to execute the same on the date of purchase of the property. Fourthly because, Shri. Mahesh Bhoopathi had sold his property, which was subject matter of JDA in favour of Sunrise Realty. Shri. Aravind contended that the sale is in the name of individual in the name of Shri. Raghunath Vishwanath Deshpande. Shri. Shankar's reply to this contention is, Sunrise Realty was owned by Deshpande family. Further, fifthly because, the Revenue has allowed the expenditure for the A.Y. 2007-08. We are of the considered view that there was nexus between the cancellation of JDA and execution of Construction Agreement. Hence, following the authority in S.A. Builders [ 2006 (12) TMI 82 - SUPREME COURT ] we are of the view that this appeal merits consideration and it is accordingly allowed.
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2022 (7) TMI 1307
Penalty u/s 271(1) - whether defective notice issued? - Unaccounted cash receipts - assessment u/s 153A - as per Tribunal penalty order did not clearly advert to the ground on which the penalty was being levied, that is, for concealment of income or nondisclosure of material particulars in the original return - HELD THAT:- First, the revised return filed pursuant to notice issued u/s 153A would not, by itself, lead to an inference that there has been concealment; the revenue would have to show that there was incriminating evidence available in that behalf before penalty could be imposed. Second, Section 153A of the Act is a complete code, the provisions of section 139 of the Act, which concerns original returns, would not be applicable. In other words, the so-called revised return filed, would be the original return. Third, if Explanation 5 to Section 271(1) of the Act were to be relied upon, the revenue would have to establish that the assets, such as money, bullion etc. were seized during the search conducted on the premises of the assessee and that the said assets related to the income of the assessee for the relevant assessment years. Explanation 5, as noted in the said judgement, was inserted in the statute by Taxation Laws (Amendment) Act, 1984, w.e.f. 01.10.1984. In our opinion, the conclusion reached by the Tribunal in the instant case that the notice for imposition of penalty under Section 271(1) (c) of the Act, did not specify which limb of the said provision the penalty was sought to be levied is covered by various decisions of HC. We are in agreement with the view taken in SSA s Emerald [ 2016 (8) TMI 1145 - SC ORDER] and Manjunatha Cotton [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] ) and, in any event, are bound by the view taken by the coordinate bench of this court in the Sahara India case. Insofar as the view taken in the Neeraj Jindal case [ 2017 (9) TMI 123 - SC ORDER] is concerned, that does not arise from the order of the Tribunal in this case, although, there is much weight in the conclusions reached by a coordinate bench in the said case. Like in the Neeraj Jindal case, in this case as well, search was conducted against the Bakshi group which led to the issuance of notice under of the Act. Appeal dismissed.
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2022 (7) TMI 1306
Computation of capital gain u/s 54F - acquisition date of plot/property sold - Assessee claimed that the date of allotment i.e. 30.12.2006 on which date plot buyers agreement dated 30.12.2006 with BPTP Ltd. (the vendor) for purchase of the plot/land under consideration was executed, is relevant for consideration as date of acquisition and for the benefit of indexation to claim capital gain or tax u/s 54 and therefore the Assessee is entitled to get benefit of long term capital gain because the Assessee acquired the property under consideration 30.12.2006 and sold the same on 14.10.2015 - HELD THAT:- Considering the peculiar facts and circumstances, we deem it appropriate to set aside the order passed by the ld. Commissioner and to direct the Assessing Officer to recompute the capital gain/loss of the Assessee u/s. 54 of the Act, while considering the date of plot buyer s agreement dated 31.12.2006 as acquisition date of plot/property sold and for indexation benefit. Ordered accordingly. Assessee appeal stands allowed.
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2022 (7) TMI 1305
Penalty levied u/s 271(1)(c) - LTCG Computation - adoption of adopt the fair market value cost of acquisition as on 01.04.1981 - HELD THAT:- Addition in the assessment was based on mere estimation basis as estimated by different authorities at different times rates. It is settled position in law that addition based on estimation no penalty is leviable. As the estimation of valuation are not final and may differ on the subjective satisfaction of different authorities. Therefore, we are of the constrained view that in such estimation of valuation no penalty is leviable under section 271(1)(c) of the Act. Even otherwise the addition of LTCG in the assessment order is based on the difference of opinion, which cannot be made basis of the levy of penalty under section 271(1)(c). Therefore, we direct the Assessing Officer to delete the remaining / entire penalty levied under section 271(1)(c) - Decided in favour of assessee.
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2022 (7) TMI 1304
Capital gain computation - Adoption of the Stamp Duty Valuation as full value consideration as per section 50C - AO has made an addition u/s 50C to the short term capital gain by adopting the Stamp Duty Valuation as full value consideration as against the sale consideration shown by the assessee - HELD THAT:- It is a matter of fact that the Stamp Duty authority has valued the property in question at Rs. 16,88,000/- on 27th February, 2015 and then within a period of one month, 10% of the said land was valued by the Stamp Duty authority at Rs. 28,05,000/- which shows that there is a steep hike in the valuation for the purpose of Stamp Duty and that too within a period of one month. Thus, such an enhancement / increase in the Stamp Duty Valuation is possible only when some abnormal or inordinary event happened. All these facts explained by the assessee before the Assessing Officer which lead to the fair inference that the assessee has seriously objected to the adoption of Stamp Duty Valuation as full value consideration in terms of section 50C(2) of the Income Tax Act and consequently the AO is duty bound to refer the valuation of the property in question to the DVO for determination of fair market value of the property. Only after getting the fair market value determined by the DVO, the Assessing Officer ought to have computed the capital gain and consequential addition, if any. Thus the impugned order is set aside and the matter is remanded to the record of the Assessing Officer to redo computation of the capital gain after referring valuation of the property to the DVO for determination of the fair market value, as per section 50C(2) of the Income Tax Act. Needless to say, the assessee be given an appropriate opportunity of hearing before passing the fresh order. Appeal of the assessee is allowed for statistical purposes
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2022 (7) TMI 1303
Revision u/s 263 by CIT - disallowance of deduction u/s 54F - CIT observed that the assessment order was passed without making inquiries or verification, and without following the directions of the Pr.CIT in the order u/s 263 which should have been followed with regard to the issue of deduction u/s 54F for which the Pr.CIT had made a specific direction - HELD THAT:- Admittedly, CIT has passed an order u/s 263 dated 06.03.2018 with a direction to examine whether the assessee is entitled for claiming exemption u/s 54F, since the assessee is having two residential properties and also offered rental income for the relevant assessment year. After issuance of notice and on physical verification of the residential properties, the AO opined that the property is not residential house and it is a small portion of construction and the assessee has let out the same and offered the income. Accordingly, the AO has completed the assessment dated 143(3) dated r.w.s. 263 - Therefore, we are of the view that initiation of proceedings u/s 263 is incorrect and not permissible under law. Therefore, we hold that the assessment order passed u/s 143(3) r.w.s. 263 dated 16.08.2018 holds good and thus quash the order passed u/s 263 dated 24.03.2021. Therefore, the grounds raised by the assessee are allowed.
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2022 (7) TMI 1302
Income accrued in India - addition towards intra-group services fees received by the assessee, having been claimed as Managerial services fees not chargeable to tax but treated AO as `fees for technical services' - Whether the receipt is FTS under the Act? - HELD THAT:- As e-mails exchanges between the assessee and the Indian entity read in conjunction with the services as described in the Agreement, it becomes overt that the services mainly envisage i) formulating the global policies in the spheres of the business, including, Administration, Purchases, and Human resources so as to have world-wide uniformity in compliance; ii) ensuring application of the such policies by all the global entities including the Indian AE; and iii) evaluating their compliance. The services also cater to giving expert advice on certain matters to the Indian entity, such as, Legal services (falling within the domain of consultancy services) and also giving expert technical opinion on Quality and environment, Research and I.T. Support (falling within the domain of technical services). Thus consideration received by the assessee is partly for the managerial and partly for the consultancy or technical services. Ergo, it satisfies the requirement of taxability under the Act. Whether the receipt is FTS under the DTAA? - AO held that the consideration for the services is FTS under the DTAA between India and Spain - Though the assessee, in principle, can seek the benefit of the India-USA DTAA, but the consideration for the `development and transfer of a technical plan or technical design in the terms discussed above, falling under the second part of the Article 12(4)(b) of the India- USA DTAA, would qualify for taxation. Since such amount is not readily ascertainable from the material on record, we set aside the impugned order pro tanto and direct the AO to work out such taxable amount on some rational basis, after allowing a reasonable opportunity of hearing to the assessee. CIT(A), after holding the amount falling under FTS and hence chargeable tax in India, did not examine the alternate viewpoints of the AO of taxing the same as Dividend under Article 11 or `Other income as per Article 23(3) of the DTAA. He held that: `Since I have confirmed the learned AO s decision to tax the services, I do not discuss the Appellant s arguments on the learned AO s decision to tax the receipt on an alternative basis as either `dividend or as `other income under the relevant article of the DTAA. As the decision of the ld. CIT(A) on the intra-group services, being, in the nature of FTS stands partly modified, we need to examine if the amount can be considered as Dividend or Other income under the India Spain DTAA. Non-adjudication by the ld. CIT(A) on this issue has to be considered as determining the issue against the assessee and requiring adjudication by the Tribunal in the hue of CIT Vs. India Cements Ltd. [ 2019 (8) TMI 1485 - MADRAS HIGH COURT] which has been invoked by the ld. AR requesting our adjudication on the issue of Protocol to the DTAA, which was also not decided by the ld. CIT(A) and we have dealt with the same supra . On both the scores Protocol; and taxability as Dividend/Other sources - the AO has returned the findings against the assessee. It is not a case in which such issues are being raked up for the first time and no discussion on them is available in the orders of the authorities below. We, thus, espouse these issues also for consideration and decision. Whether the receipt is Dividend under Article 11 of the DTAA? - Testing the facts of the case on the touchstone of the definition of the term `dividend , it transpires that the consideration received by the assessee is for rendition of intra group services and not either as income from shares etc. or income from other corporate rights or from any participation in profits. Thus, the amount under consideration cannot be characterized as `dividend income falling under Article 11 so as to magnetize taxability. Whether the receipt is `Other income under Article 23(3) of the DTAA? - Para 3 of Article 23 starts with a non obstante clause qua paras 1 and 2 and states that the items of income of a resident of Spain not dealt with in the foregoing articles of this convention and arising in India may be taxed in India. The crucial words used in para 3 are the items of income not dealt with in the foregoing articles of this Convention . To put it simply, if a particular item of income is covered in an earlier Article of the DTAA, that cannot find place under Article 23(3). The item of income under view is consideration for rendition of services. If it is in the nature of FTS, then it falls under Article 12, otherwise it assumes the character of `Business profits under Article 7 of the DTAA. As the income from intra-group services falls either under Article 13 or Article 7, it cannot be covered within the purview of Article 23(3). The consideration of Rs.3.99 crore and odd is chargeable to tax u/s 9(1)(vii) of the Act, but the India USA DTAA will restrict the chargeable amount as discussed. It is neither dividend nor other sources income as per the DTAA. Addition of reimbursement on leased line charges amounting as Royalty u/s.9(1)(vi) of the Act and also under Article 13 of the DTAA - Is it covered under clause (iva) of Expl.2 to sec. 9(1)(vi)? - HELD THAT:- The facility of Telefonica does not process the data but simply facilitates its free flow between the group companies through its leased lines. Neither the processing of information is warranted nor is the essence of the transaction. The assessee and the group companies are not paying for using any industrial, commercial or scientific equipment of Telefonica but simply for getting the leased line provided by it with the help of its facility. As such, Explanation 2 (via) is not applicable to the facts of the instant case. Is it covered under Expls. 2/6 of sec. 9(1)(vi)? - On a perusal of the above definition under the DTAA, it can be seen that it has certain features of the definition of the term `royalty as given in section 9(1)(vi) of the Act. The term `process has been used in the definitions - both under the Act as well as the DTAA. However, the important point to accentuate here is that unlike the definition of the term process as given in Explanation 6 amplifying the scope of the term `process , applying to the Explanation 2 to section 9(1)(vi), there is no similar definition of the term `process as given in Article 13(3) of the DTAA. Coming to the Indo-Spain DTAA, it is axiomatic that the domestic law has not been linked with the definition of the term `royalties as given in the Article. The definition in the Article simply stops at receipt, inter alia, for use or right to use any process . In that view of the matter, we cannot read Explanation 6 to section 9(1)(vi) of the Act in the definition of the term `royalties under the Article. Though the term process under the Act also includes payment for leased line charges in the light of Explanation 6, but absence of any analogous provision in para 3 of Article 13 of the DTAA, does not commend us to read the extended scope of the term `process in the DTAA. The contrary view espoused by the ld. CIT(A), ergo, cannot be accorded imprimatur. Addition towards reimbursement of software charges - HELD THAT:- As seen that there is no disputation on the nature of transaction, which is crystal clear inasmuch as the assessee purchased Norton Antivirus software for its entire group. The cost of such software, having been provided to Indian entity, was recovered as such without any mark-up. What the assessee procured from Norton was a software product and not any copyright in the software. Recently, the Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd.[ 2021 (3) TMI 138 - SUPREME COURT] has reversed the decision in Samsung Electronics Pvt. Ltd.( 2011 (10) TMI 195 - KARNATAKA HIGH COURT] by holding that payment for use of a software product does not constitute Royalty. This position was fairly admitted by the ld. DR as well. In view of the binding precedent available on this issue, we delete the addition. Charging of interest u/s.234B - levying interest for default in payment of advance tax - HELD THAT:- As an amendment has been carried out to section 209(1) by insertion of proviso w.e.f. 1.4.2012 providing, inter alia , that for computing liability for advance tax, income-tax calculated under clause (a) or clause (b) or clause (c) shall not be reduced by the aforesaid amount of incometax which would be deductible during the said financial year under any provision of this Act from any income, if the person responsible for deducting tax has paid or credited such income without deduction of tax. The essence of the amendment is that the earlier position of non-levy of interest u/s.234B where the income in question is otherwise liable for deduction of tax at source, irrespective of the fact that whether the tax was actually deducted or not, has been dispensed with. As the amendment is applicable from 1.4.2012, it will not administer the instant assessment year 2010-11 under consideration. We, therefore, direct not to charge interest u/s.234B.
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2022 (7) TMI 1301
Penalty u/s 271(1)(c) - AO without recoding any satisfaction, initiated the penalty proceedings under section 271(1)(c) - HELD THAT:- The penalty provisions of section 271(1)(c) are attracted, where the Assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) carry different meanings. Therefore, it is imperative for the AO to specify the relevant limb so as to make the Assessee aware as to what is the charge made against him so that he can respond accordingly. Having regard to the manner in which the AO has issued the notice dated 28.03.2013 u/s 274 r.w.s. 271(1)(c) without specifying the limb under which the penalty proceedings have been initiated and proceeded with, apparently goes to prove that notice in this case has been issued in a stereotyped manner without applying mind which is bad in law, hence can not be considered a valid notice sufficient to impose penalty u/s 271(1)(c) and therefore we are of the penalty is not leviable we have no hesitation to delete the penalty levied by the AO and affirmed by the Ld. Commissioner - Assessee appeal allowed.
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2022 (7) TMI 1300
LTCG - Deduction u/s. 54 - scope of amendment - one versus a - investment of capital gain into more than one residential units - HELD THAT:- It is a fact that section 54 has been amended by Finance Act (2) 2014 w.e.f. 01.04.2015 applicable from 2015-16 onwards, wherein the legislature amended the word one residential house in place of a residential and the said amendment is applicable to the instant case as well. Commissioner though referred the latest provisions of section 54 of the Act, however without giving any definite finding qua applicability of the latest provisions of section 54 as applicable to the case in hand, decided the appeal of the Assessee, while referringsome decisions which admittedly pertains to period prior to amended provisions of section 54 of the Act, as applicable to AY 2015-16 involved in this case. Hence, in our considered view, substantial justice would be met by setting aside the impugned order and remanding the case to the file of Commissioner to decide the issue involved de nova in its right perspective, while taking into consideration the provisions of section 54 as amended by Finance Act 2014 and applicable to AY 2015-16 which is relevant in this case.
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2022 (7) TMI 1299
Additions towards unexplained investment in land - as per assessee sources for the same is out of earlier period savings in salary derived from Yugaandhar Housing Private Limited and also current year salary - HELD THAT:- Admitted facts are that the assessee s sources of income from salary Rs. 18 lakhs was not disputed by the AO and the Ld. AO has considered Rs. 13 lakhs as surplus available for investment made by the assessee. It is observed that the AO has not given any credit for the savings made by the assessee out of the salary income earned during the earlier years. We find merit in the argument of the AR that the amount is met out of the own savings of the assessee and cannot be treated as unexplained investment. AO has merely stated that the savings from salary earned in the previous years is not acceptable and hence could not be treated as investment in the immovable properties. AO has considered a surplus balance available with the assessee Rs. 13 lakhs out of the salary income of Rs. 18 lakhs earned during the current Financial Year but has failed to appreciate the fact that the similar savings shall be available with the assessee for the earlier assessment years. We are of the considered view that the mere assumption of the AO that the assessee was not having sufficient accumulated cash balances out of the salary income earned during the earlier years is not acceptable and therefore we hereby quash the orders of the Ld. Revenue Authorities and allow the appeal of the assessee.
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2022 (7) TMI 1298
Revision u/s 263 - unexplained cash credit u/s.68 - addition towards share capital and share premium - addition of share premium of Re. 1/- per share contemplated by the ld. PCIT by assuming revision jurisdiction u/s.263 on the premise that assessee had not furnished any details either before the ld. AO or before him - HELD THAT:- Addition in respect of face value of Rs.10/- per share on account of share capital has already been made by the ld. AO and the same is the subject matter of appeal before the ld.CIT(A) and it is pending. Hence, we do not want to give any finding or opinion on the veracity of the addition made u/s.68 of the Act in respect of face value of Rs.10/- per share. At the same time going by the documents filed by the assessee both before the ld. AO and before the ld. PCIT, which fact had been duly acknowledged by both the parties in their respective orders, we find that the ld. PCIT had erred in assuming revision jurisdiction u/s.263 in the instant case as it is based on the mistaken premise that assessee had not furnished any documents to prove the three ingredients of Section 68 and further on another mistaken premise that the AO had made addition after considering all the submissions of the assessee. Hence, it could be safely concluded that the entire assumption of jurisdiction by the ld. PCIT u/s.263 of the Act is based on incorrect assumption of fact. On this primary ground itself revision order u/s.263 passed by the ld. PCIT deserves to be quashed and is hereby quashed. - Decided in favour of assessee.
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2022 (7) TMI 1297
Rejection of books of accounts - addition to the gross profit - HELD THAT:- The books of accounts of the assessee have been rejected mainly in absence of books of accounts, bills vouchers etc. produced before the AO and on the allegation of accommodation entry transactions carried out with M/s Mirah D cor group entities. Before us, the assessee has submitted that during the year under consideration there was no transaction with M/s Mirah Group entities. This fact of vital importance, has not been verified by the AO in absence of books of accounts and bills and vouchers etc. produced by the assessee. Now before us, in written submissions, the assessee has expressed willingness to produce books of accounts, bills vouchers etc. for verification by the AO. We feel it appropriate to restore the issue-in-dispute to the file of the Assessing Officer for deciding afresh. The ground No. one of the appeal is accordingly allowed for statistical purposes. Addition in respect of loans which have been held as cash credit u/s 68 - AO held that assessee failed to establish (i) identity of the loan provider (ii) creditworthiness of loan providers and (iii) genuineness of the transactions, and therefore he held those loans as unexplained cash credit in terms of section 68 - assessee filed a letter before the CIT(A) wherein the assessee had requested for filing additional evidences, because those evidences could not be filed before the Assessing Officer.HELD THAT:- We find that in the case of M/s Sunrise Associate [ 2022 (7) TMI 934 - ITAT MUMBAI] in view of retraction of statement by Sh. Gautam Bhanwarlal Jain, has restored the matter of addition u/s 68 , back to the Assessing Officer for re-examination. DR could not controvert that there was limited time frame in which the assessee was asked to provide the information and before the assessee could file the said information, the assessment order was passed on 22/12/2017. In our opinion, the assessee fulfils the circumstances under Rule 46A(1)(d) i.e. no sufficient opportunity, therefore additional evidences are eligible for admission. Since in respect of the ground No. 1 of the appeal, we have already restored the issue-in-dispute to the file of the Assessing Officer and therefore, for avoiding multiplicity of simultaneous proceedings, instead of restoring the matter to the file of Ld. CIT(A), we feel it appropriate to restore the issue GP Estimation - estimation of the brokerage income - HELD THAT:- Assessee has declared gross profit @ 5.12% on the transactions recorded in the books of account - AO has treated those very transactions related to M/s M/s Mirah Group as transaction of providing accommodation entry without any real business but has not excluded the income offered by the assessee from said transactions of business. AO has separately made addition @ 2% on the very same transaction on which the AO has declared gross profit rate of 5.12%. In our opinion, a separate addition for the brokerage or commission is not required in the facts of the case. The commission or brokerage @ 2% can be considered as generated from accommodation entry transactions, which subsumes in the gross profit @ 5.12% already declared by the assessee. The only difference is of characterization of the source of the income which according to the AO is from the issuing accommodation entry bills whereas according to the assessee profit has been earned from business activity recorded in books of account. Thus lower authorities are not justified in making addition over and above the income @ 5.12% offered by the assessee from business transaction
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2022 (7) TMI 1296
Reopening of assessment u/s 147 - Bogus purchases - accommodation entries - failure to explain the consumption by way of production register or stock register - whether there is a live link between the material coming to the notice and formation of the belief regarding escapement of income? - HELD THAT:- in the instant case assessment year involved is 2010-11 and the assessment has been reopened on 19/03/2015, which is within four years from the end of the relevant assessment year. Thus, the reliance placed by the Ld. counsel of the assessee on the decision of the Hon ble Bombay High Court in the case of Hindustan Lever Ltd [ 2004 (2) TMI 41 - BOMBAY HIGH COURT] is of no assistance being distinguishable on facts. Bogus purchase - accommodation entries - HELD THAT:- AO issued notice under 133(6) of the Act for verification of the purchase parties however those notices were returned un-served with the remark by the postal authorities as parties left or not known . The Assessing Officer made effort to serve notice on those purchase parties through inspector of his office, however those parties could not be located at the given address. AO asked the assessee to provide the current address of those parties, however the assessee failed to provide the address from where an independent verification of existence of those parties could have been done and also asked the assessee to produce those parties, however the assessee also failed in compliance. AO then ask the assessee to substantiate the purchases from those parties by way of evidence in support of the delivery or payment for transport of the goods, but the assessee failed on this account also and no evidence were filed by the assessee in this regard. In view of failure on the part of the assessee in substantiating the purchases from those two parties, the Assessing Officer in background of the information in investigation report, interalia, those parties were engaged in providing accommodation entries, without physical delivery of goods, held the purchases from those two parties as bogus purchases. Finding of the Ld. CIT(A) on the issue in dispute are justified, according to which first category of cases, where a percentage of profit could be added in cases where sales corresponding to the bogus purchases are verifiable from the day-to-day inventory tally or from the stock register and sales have been made to government bodies or export sales , then in such cases an assumption can be drawn that actual purchases were made from unknown parties whereas only bills were taken from bogus billers. In such case, unexplained investment made for purchases made from the unknown parties may also be considered. But in second category of cases, where purchases have been claimed as consumed in manufacturing or non-trading activity and the assessee fails to explain the consumption by way of production register or stock register, then in those cases purchases clearly goes to reduce the profit earned by the assessee and therefore in such cases 100% percent purchases are liable for disallowance. The case of the assessee falls under second category of the cases and therefore, we uphold the finding of the Ld. CIT(A) on the issue in dispute and dismiss the ground of the appeal of the assessee.
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2022 (7) TMI 1295
Addition u/s 68 - unexplained cash credit - unsecured loan - HELD THAT:- Pune ITAT in the case of Sanjay Waman Co. [ 2001 (11) TMI 273 - ITAT PUNE] held that it is part of the duty of the assessee to furnish evidence regarding the creditworthiness of the creditors. Delhi ITAT in the case of Anandtex international (P.) Ltd. [ 2022 (3) TMI 831 - ITAT DELHI] held that where assessee received share application money and claimed that same was invested by its director by taking advance from a company P, however assessee failed to establish creditworthiness of share applicant or genuineness of transaction, AO was justified in making additions under section 68 and concluding that assessee routed its own money in books of account through conduit of investor companies. In the instant facts, in our view, the assessee has not been able to establish the creditworthiness of lender nor has he been able to establish the genuineness of transaction. A perusal of the statement taken on record of the creditor raises serious doubt both on the creditworthiness of the party and genuineness of the transaction. Therefore since the assessee has failed to establish both the genuineness of transaction and creditworthiness of party, in our view, he has not been able to discharge the onus cast upon him u/s 68 - Therefore, we are of the considered view that Ld. CIT(A) has not erred both in law and on the facts of the case in confirming the action of AO of making an addition as unexplained cash credit u/s.68 in respect of loan taken from lender. - Decided against assessee.
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2022 (7) TMI 1294
TP Adjustment - Comparable selection - CG-VAK Software and Exports Ltd., as a good comparable - HELD THAT:- CG-VAK Software and Exports Ltd., had earned profit in A.Y.2007-08 and 2009-10 and had incurred loss only in A.Y.2008-09. Hence, it has earned profit in two out of three past consecutive financial years. In view of the same and in view of our aforesaid judicial precedents, we hold that CG-VAK Software and Exports Ltd., should be included as a good comparable with that of the assessee company. AR Stated that once this comparable is included in the final list of comparables, it would be well within the +/-5% tolerance band and hence, no transfer pricing adjustment would be required to be made in respect of ITES segment of the assessee. In view of this, inclusion and exclusion of other comparables challenged by the assessee are not adjudicated by this Tribunal and they are left open. Accordingly, ground No. 1 2 raised by the assessee are allowed. Addition on account of un-reconciled receipts with Form 26AS in respect of unit eligible for deduction u/s.10A - HELD THAT:- It is not in dispute that assessee is eligible for deduction u/s.10A of the Act. It is not in dispute that the said un-reconciled receipts from sister concern also pertains to 10A unit of the assessee. The deduction u/s.10A of the Act as directed by the ld. DRP was not granted to the assessee on the ground that the said un-reconciled receipt of Rs.10,33,974/- was not included in Form No.56F issued by the Chartered Accountant for claiming deduction u/s.10A of the Act. We hold that once the receipt whether reconciled with AIR data or not reconciled with AIR data, pertains to 10A Unit, then the whole of the profits of the said undertaking / eligible unit would be eligible for deduction u/s.10A of the Act. This is the mandate provided in the provisions of Section 10A of the Act itself. Accordingly, any addition made which goes to increase the profits of the 10A Unit would only result in consequential increase in grant of deduction u/s.10A - we direct the ld. AO to grant deduction u/s.10A of the Act for unreconciled receipt of Rs.10,33,974/-. Accordingly, the ground No.3 raised by the assessee is allowed.
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2022 (7) TMI 1293
TP Adjustment to the licence fees paid for time and billing software - assessee has adopted CUP method to benchmark this transaction by taking AE as tested party - HELD THAT:- It is admitted that in the transfer pricing study report, where all the international transactions of the assessee have been aggregated and have been benchmarked applying CUP as the most appropriate method. AO/TPO has rejected the benchmarking made by the assessee in the transfer pricing study report for the reason that the assessee has not provided complete details of the cost incurred by the AE for the impugned transactions. We are of the considered opinion that the TPO should have determined the ALP of the impugned international transactions by applying anyone of the prescribed methods, but the TPO has failed to do so. Determination of arm's length price at Nil in grounds 1 2 and at Rs. 50 lakhs on ad hoc basis in ground 3 is contrary to the provisions of the Act. Resultantly, the benchmarking done by the assessee is more acceptable and the transactions of the assessee with its AE for the services availed is held to be at arm's length. Disallowance of foreign travel expenses - HELD THAT:- As evident that the foreign travel expenses for the family of the employees disallowed by the Assessing Officer pertains to the family members of the employees, who are other than the employees of the assessee. Admittedly, the assessee had no supporting evidences to substantiate its claim. Following the decision of the co-ordinate bench of this Tribunal, we direct the AO to verify the claim of the assessee that if fringe benefit tax has been paid by the assessee, in order to allow the claim and thereby pass consequential orders as per the provisions of the Act.
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2022 (7) TMI 1292
Rectification u/s 254 - entitled for the deduction u/s 80IC and violation of sub rule (4) of Rule 18BBB - HELD THAT:- On going to the page 9 at para 4, we find that the issue of section 80IA(7) and 80IC(7) have been examined and dealt by the Co-ordinate Bench of the Tribunal. The Tribunal has also examined the remand report of the AO and also the applicability of Rule 18BBB and provision of section 80IA(8) and 80IA(12). Further, the Tribunal has also examined the application of section 80IA(8) and 80IA(10) and considered the decision has been taken to restore the issue back to the file of the AO. Placing reliance on the judgment of Hon ble Apex Court in the case of CIT (Intl. Taxation-4), Mumbai Vs. M/s Reliance Telecom Ltd. [ 2021 (12) TMI 211 - SUPREME COURT ] and CIT (Intl. Taxation-4), Mumbai Vs. M/s Reliance Communications Ltd. [ 2021 (12) TMI 211 - SUPREME COURT ] we hold that the MA filed before the Tribunal beyond the provision of section 254(2) and hence being dismissed herewith. MAs of the assessee are dismissed.
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2022 (7) TMI 1291
Validity of assessment u/s 147 - Non-issuance of the notice u/s 143(2) - Whether curable defect u/s 292BB or not? - HELD THAT:- This additional ground is first time taken by the assessee before the ITAT. Considering the gravity of the fact, this issue should be reconsidered by the Ld. CIT(A) for adjudication. The respectful observation of apex court in the case of Commissioner of Income Tax v. Laxman Das Khandelwal [ 2019 (8) TMI 660 - SUPREME COURT] the non-issuance of the notice u/s 143(2) of the Act is not curable u/s 292BB of the Act. We directed for further adjudication of the issue before the Ld. CIT(A). Accordingly, we accept the additional ground of the assessee. The Additional Ground numbers 10 11 are setting aside before the Ld. CIT(A) for further adjudication related to issuance of notice u/s 143(2) of the Act. The assessee, in turn, is directed to substantiate its case. Assessee made payments in cash to use the unaccounted money for business transactions - As from the record of the assessee, M/s Shivam Communication is dubious in nature. As per the Ld. counsel, the assessee had not entered anything of all the transaction with the party during the financial year. In fact, any of the Revenue Authorities had not made any cross examination in between the assessee and the party. The documents relied on the Ld. AO was not properly verified through the cross examination. The reasonable opportunity of the assessee should not be denied. We decide that the matter should be returned back to the CIT(A) for further adjudication. Accordingly, we are setting aside the ground of appeal before the Ld. CIT(A) for further adjudication. On the other hand, the assessee should get a reasonable opportunity for redressal the grievance.
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2022 (7) TMI 1290
Estimation of income - bogus purchases - CIT-A disallowing only 12.5% of the total bogus purchase in the case of the assessee who was engaged in the business of construction activities - HELD THAT:- As CIT(A) correctly held that only the profit embedded in respect of the sale on the purchases in question (bogus) should be brought to tax and not the entire purchases as done by the AO. - he correctly relied on the ratio of CIT Vs. P. Simit Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] wherein held that the entire purchases cannot be added, but only the profit element embedded in such questionable purchases should be added to the income of the assessee. Therefore, the Ld. CIT(A) has restricted the addition to 12.5% of the bogus purchases correctly. Deduction u/s 80IB(10) - whether substantial compliance has been made by the assessee for claiming the exemption/deduction? - admission made in the report by MCGM rejected - HELD THAT:- Applying the principle of substantial compliance in the facts of this case it can be seen that the assessee had complied sufficiently the requirement of law as stipulated in section 80IB(10) of the Act and as per the said provision it was bound to complete the building project before 31.03.2012 and it had filed the partial completion certificate in-respect of wing (A B ) on 12.07.2011 and C wing on 24.12.2011 and thus it is noted that the assessee not only filed the architect certificates of completion of the project Blue Meadow, it also had filed the certificate of structure, the lift certificate as well as NOC of the fire brigade and all these certificates were filed before MCGM by Feb, 2012. And moreover it is noticed that on 27.02.2012 itself possession of the flats were given to the allottees who had made the full and final payment which fact is evident from perusal of the letter given to the allottees of housing units for possession of the flats and that one hundred twenty one (121) flats/units got occupied at Blue Meadow Project (which were regularised later) and therefore according to us, the legislative intent/conditions stipulated for giving deduction/incentive for developers like assessee u/s 80IB(1) have been sufficiently/substantially fulfilled. Therefore the deduction u/s 80IB(10) should not be denied merely because MCGM did not accept/issue occupancy certificate on 05.01.2012 or before 31.03.2012. - Decided against revenue.
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2022 (7) TMI 1289
Capital Gain - computation of cost of acquisition - bonus debentures or not - re- investment of dividend amount - treating the cost of acquisition of the bonus debentures received in the nature of dividend on which dividend Distribution Tax had been discharged as Nil while computing the capital gains arising on the sale of these debentures - HELD THAT:- We have noticed that the assessee had made specific submissions explaining the cost of acquisition of the debentures of BDEL but none of the authorities below has dealt with these contentions by way of a speaking order. These contentions have been simply brushed aside and dealt with in a summary manner. An amount was indeed received on behalf of the assessee and this amount has been reinvested in the debentures. The debentures were not bonus debentures and the nomenclature given by the AO is thus incorrect. The taxes were duly paid on the deemed dividend in question, and it did constitute income of the assessee, even though received by a merchant banker on behalf of the assesse. The scheme under which the amount is received by the merchant banker, on behalf of the shareholders-including the assessee, and reinvested on behalf of these shareholders, is duly approved by the Hon ble High Court, vide order dated 19th September 2014. The fact of, and bonafides of, the transaction cannot thus be disputed. The amount of Rs. 13,85,580/- so reinvested, out of dividend, was the consideration paid for debentures. In the light of these discussions, as also bearing in mind entirety of the case, we uphold the plea of the assessee that the Assessing Officer erred in declines the claim of the assessee with respect to cost of acquisition in respect of these debentures. The assessee, therefore, must get the relief accordingly. We order so.
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2022 (7) TMI 1288
Validity of assessment u/s 153B - belated notice issued u/s 143(2) - HELD THAT:- In view of the decision of Hon ble Supreme Court in Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT ] AO in the instant case has no jurisdiction to make assessment on the basis of belated notice issued under Section 143(2) of the Act. The defect, being substantive, is not curable under Section 292B of the Act. Section 292BB also does not apply as the notice issued under Section 143(2) itself has been issued after limitation period and merely served belatedly. The impugned assessment order culminated from a belated jurisdictional notice is thus nonest and deserves to be quashed. - Decided in favour of assessee.
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2022 (7) TMI 1287
Deduction u/s 80IB - observation of the AO that as the assessee firm had failed to obtain and place on record a certificate from a competent authority that it is a SSI, therefore, for the said reason it was not entitled for deduction u/s 80IB - whether or not the CIT(Appeals) is justified in concluding that as the filing of an audit report in Form 10CCB is procedural and directory in nature, therefore, pursuant to filing of the same by the assessee i.e, both in the course of the reassessment proceedings and also in the course of the proceedings before him, no adverse inference qua its entitlement for deduction u/s 80IB was liable to be drawn? - whether the failure on the part of the assessee to file a certificate from the competent authority evidencing that it was registered as a SSI would divest its entitlement towards deduction u/s 80IB? - HELD THAT:- As is discernible from Clause (g) of sub-section (14) of Sec. 80IB, the same only contemplates the definition of a SSI i.e an industrial undertaking which as on the last day of the previous year is regarded as a small-scale industrial undertaking under Sec. 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951). As such, what is required is that the stipulations for being regarded as a SSI under the Industries (Development and Regulation) Act, 1951 are required to be complied with and there is no obligation cast upon the assessee to file any certificate from the competent authority that it is registered as a SSI. Involving identical facts, we find that the assessee s claim for deduction u/s 80IB was, inter alia, dislodged by the CIT vide his order passed under Sec. 263 of the Act for AY 2009-10. However, on appeal, the Tribunal had vide its order passed [ 2018 (3) TMI 1937 - ITAT RAIPUR] vacated the adverse inferences drawn by the CIT on the aforesaid count and, had observed, that the registration of the assessee as a SSI was not a precondition for availing deduction u/s 80IB of the Act. Be that as it may, we find that the assessee had vide its letter dated 25.01.2017 filed before the CIT(Appeals) a copy of its registration certificate as a SSI. No adverse inferences qua the entitlement of the assessee for deduction u/s 80IB could have been drawn, for the reason that the assessee had in the course of the assessment proceedings failed to place on record its certificate of registration as a SSI. We, thus, not finding any infirmity in the view taken by the CIT(Appeals) who had held the assessee s claim for deduction u/s 80IB of the Act as being in order, uphold his order.
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2022 (7) TMI 1286
Deduction u/s 80IB(10) - AO denying section 80IB(10) deduction holding that the corresponding residential units had built up BUA area exceeding 1500 sq.ft. - HELD THAT:- We first of all note that the CIT(A) s common order herein as followed his conclusion drawn in A.Y. 2009-10 s which has been reproduced in the preceding paragraphs. The same appears to have attained finality as there is no material on record to suggest the contrary. This is coupled with the fact that the corresponding site plan of these four units O1-1, O1-2, O2-1 and O2-2 in issue is on record (page 10) wherein it is clearly indicates that this garden area is meant for the concerned allottees exclusive use and ownership and falls within the walls only than any common area not covered u/s 80IB(14)(a) of the Act. We further wish to reiterate here that legislature has not only defined inner measurements of the residential unit at the floor level in section 80IB(14)(a) but also the same has to be increased by the thickness of the walls. It is in this backdrop that this tribunal s order in Kumar Builders Consortium [ 2013 (11) TMI 465 - ITAT PUNE ] has already decided the issue in Revenue s favour. We therefore, adopt judicial consistency to affirm both the lower authorities action disallowing the assessee s 80IB(10) deduction claim to this effect. Assessee had allotted more than one flat to one person i.e. Smt. Sandhya Rakesh Sharma and therefore, the same violates section 80IB(10)(f) - The fact remains that Mr. Jain has neither placed on record the corresponding joint sale deed that Ms.Syamlee only owned or possessed the entire share in Flat I-1 independently. This is in addition to the fact that the Commission s report in assessee s paper book dated 22.01.2015 at pages number 1 to 9 held that it had allotted more than one flat to Smt.Sandhya Rakesh Sharma and therefore, we find no merit in the taxpayer s stand. The Revenue succeeds in all of its corresponding substantive ground(s) to this effect. Assessee s scheduled date of completion of its residential project Flora City was 31.03.2012 whereas the last completion certificate stood issued only on 02.09.2011 which disentitles it for the impugned deduction - HELD THAT:- We note that the instant issue is hardly res-integra as this tribunal co-ordinate bench in A.Y. 2009-10 involving Revenue and assessee s cross appeals [ 2014 (7) TMI 1366 - ITAT PUNE] rejects the former s very stand - Revenue is fair enough in not pin-pointing any distinction on facts as well as in law. We thus adopt the judicial consistency to affirm the CIT(A) s foregoing findings under challenge. This second substantive issue is decided in assessee s favour. Assessee s residential unit(s) sold in the impugned assessment year had not exceeded the prescribed area 1500 sq.ft thereby excluding terrace part - HELD THAT:- As it has come on record that the foregoing judicial precedents have already held that such that a terrace in a residential unit does not satisfy the section 80IB(14)(a) basic benchmark of inner measurement since open to sky. We, thus, adopt the very reasoning mutatis-mutandis to uphold the CIT(A) action deleting the impugned disallowance qua this terrace inclusion issue. This third substantial ground canvassed at the Revenue behest stands declined. Treating the assessee s alleged on money receipts as eligible for sec 80IB(10) deduction - HELD THAT:- As the assessee is eligible for sec 80IB(10) deduction on proportionate basis only as it has already failed on the foregoing garden area and multiple allotment issues in preceding paras. We make it clear that it has not filed any evidence on record that the impugned on-money pertains to sec 80IB(10) s eligible units only. Or that the remaining allottees except Smt.Sharma or those having garden area only had paid the entire sum. Faced with this situation, we restore the impugned disallowance on account of the assessee s failure to prove all the foregoing clinching factual aspects. The Revenue succeeds in all of its corresponding substantive grounds to this effect. Whether CIT(A) has further erred in granting the assessee s proportionate sec 80IB(10) deduction regarding the eligible housing units only? - HELD THAT:- Revenue could not pin-point any judicial precedent to the contrary. We accordingly uphold the CIT(A) foregoing directions granting proportionate section 80IB(10) deduction to the assessee. Ordered accordingly.
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2022 (7) TMI 1277
Revision u/s 263 - Entitlement to claim interest as deduction u/s. 24(b) - HELD THAT:- Assessee availed loan from Reliance Home Finance Limited for Rs.8,68,50,000/- and paid interest thereon @ 12.50%. Admittedly, the said borrowed loan was paid to statutory tenants in pursuance of relinquishing deed dated 05-04-2011. The PCIT held the interest paid on such borrowed amount does not fit into provisions of clause (b) of section 24. Assessee purchased the said property in the year 2001 and the relinquishment agreement at Page 56 shows that the assessee as landlord , therefore, as rightly pointed by the PCIT, the claim of the assessee is not entitled to claim interest as deduction u/s. 24(b). On perusal of the assessment order dated 31-12-2015 clearly shows there was no discussionor reference to deduction claimed and how deduction is allowed - AO had wrong assumption of facts and by applying incorrect law without due application of mind allowed claim of interest paid on borrowed capital u/s. 24(b) - Therefore, in our opinion, the PCIT correctly exercised its jurisdiction in holding the assessment order dated 31-12-2015 is erroneous and prejudicial to the interest of Revenue. Thus, we do not find any infirmity in the order of PCIT and it is justified and the grounds raised by the assessee are dismissed.
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Customs
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2022 (7) TMI 1285
Validity of SCN - 100% EOU - Private Warehouse - Cancellation of licence under Sub Section 2(b)of Section 58 granted to petitioner under Sub-Section (1) of Section 58 of the Customs Act, 1962 - demand of appropriate customs and central excise duties under the Customs and Central Excise Act, 1944 on the capital goods and raw material procured duty free, semi finished and finished goods lying in stock on the date of cancellation of the said licence - HELD THAT:- The entire show cause notice proceeds on the basis of six show cause notices that had been issued to petitioner and an offence have been booked by DRI against petitioner and hence it appears that petitioner has contravened the provisions of Section 71, 72 of the Customs Act, 1962 read with Condition No. 6 of licence dated 14 th November 2003 and 18th October 1994. There is nothing more in the show cause notice. Even in the impugned order which was passed almost more than three months later, there is no reference to any of the orders being passed as suggested by Mr. Kantharia. Even the impugned order proceeds on the basis of show cause notice issued to petitioner which was pending adjudication and the offence that had been booked by DRI which was pending investigation. Respondent No.2 gives finding against petitioner of diverting of goods in contravention of the provisions of Section 71 of the Act and he also relies on certain panchanams. None of these points were mentioned in the show cause notice to enable petitioner to satisfactorily show cause - The points which Respondent No.2 has mentioned in the impugned order do not even find mention in the show cause notice that was issued to petitioner. Issuance of show cause notice is not an empty formality. Its purpose is to give a reasonable opportunity to the affected persons to contend with the allegations in the show cause notice are not correct. The person issuing show cause notice shall inform a person who is likely to be affected by any order proposed to be made about the materials on the basis of which the authority proposes to take action and give a fair and reasonable opportunity to such person to represent his case and to correct or controvert the material sought to be relied upon against him. If Respondent No.2 was relying on any seizure panchanama or any other material, the same should have been mentioned in the show cause notice issued to afford fair and reasonable opportunity to petitioner to respond. That has not been done. Further, Respondent No.2 for issuing show cause notice has relied upon six show cause notices and an offence booked by DRI but none of these had attained finality. They were pending at various stages. At the time show cause notice in the case at hand was issued there was every possibility that the show cause notices and the complaint on which Respondent No.2 had relied upon to issue show cause notice could have been discharged or withdrawn against petitioner. Thus, issuance of show cause notice itself was premature. Petition disposed off.
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Corporate Laws
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2022 (7) TMI 1282
Rejection of confirmation of scheme for reduction of share capital proposed by the Appellant Company - reduction of this Share Capital was approved unanimously by the Shareholders by way of a Special Resolution - Section 421 of the Companies Act, 2013 - HELD THAT:- It is seen from the record that the Reduction of the Share Capital was approved by the Shareholders of the Appellant Company unanimously by way of a Special Resolution with the objective of reducing the overall weighted average cost of Capital and improving the earnings per share. In IN RE: RECKITT BENCKISER (INDIA) LIMITED [ 2005 (5) TMI 665 - DELHI HIGH COURT] , the Hon ble Delhi High Court has upheld the view that the question of reduction of Share Capital will be treated as a matter of domestic concern i.e., it is the decision of the majority which prevails. If majority by Special Reduction decides to reduce the Share Capital of the Company, which also has the right to decide as to how this reduction should be carried into effect - This Tribunal in RHI INDIA PRIVATE LIMITED, RHI CLASIL PRIVATE LIMITED, ORIENT REFRACTORIES LIMITED VERSUS UNION OF INDIA [ 2021 (1) TMI 725 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , NEW DELHI] , has held that it is not for the Courts to reject Schemes on grounds not required to be delved into for the determination of the Scheme In the instant case, admittedly, the reduction of this Share Capital was approved unanimously by the Shareholders by way of a Special Resolution. It is seen from the record that the Company has complied with all the statutory requirements as per the directions of the Tribunal and has also filed necessary Affidavits to that effect. It is also pertinent to mention that none of the Creditors objected to the reduction of the Capital. Section 66(1)(b) of the Act enables a Company to reduce its Share Capital in any manner provided it is approved by the majority of Shareholders through a Special Resolution. The Appellant Company operates a 15MW power generating station and supplies electricity to GUVNL under a long-term PPA and is a going concern . Having regard to the fact that the Appellant had deposed in a Clarificatory Affidavit regarding its financial position which is not in the negative and also that the reduction of the Share Capital was approved by the Shareholders of the Appellant Company unanimously by way of a Special Resolution and that the Creditors of the Company have also not objected to the same and further that this reduction does not cause any prejudice to any class of Creditors, it is opined that the ratio laid down by the Hon ble Madras High Court in IN RE: PANRUTI INDUSTRIAL CO. (PRIVATE) LTD. [ 1959 (9) TMI 59 - MADRAS HIGH COURT] , and is applicable to the facts of the attendant case and hence, this Tribunal is of the considered view that the reduction of the Share Capital, as approved by the majority of Shareholders by way of a Special Resolution, be confirmed and the proposed Minutes be approved. This Appeal is allowed and the Order of the NCLT is set aside.
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Insolvency & Bankruptcy
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2022 (7) TMI 1284
Rejection of application for initiation of CIRP - Period of limitation - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - application was required to be filed within a period of three years from the date of default - what is the import of Section 25(3) of the Indian Contract Act, 1872? - whether the period of limitation has been extended in view of Section 18 of the Limitation Act, 1961 with the time-to-time partial payment and admission of debt by the Corporate Debtor? - HELD THAT:- It is an admitted fact that the period of three years had expired from the alleged date of default occurred in the year 1998 but there is no denial to the fact also that the Assignment Agreement was executed on 27.09.2013 between TFCI and the Appellant, assigning their entire debt of the Corporate Debtor and in the said agreement the Corporate Debtor and one Mr. Paresh Shah (as mortgagor) were confirming parties to the Assignment Agreement. As a matter fact, with the execution of the Assignment Agreement dated 27.09.2013, a fresh agreement for the payment of dues came into being and a period of three years began from the said date. There is no dispute about the fact that the debt has been acknowledged by the Corporate Debtor in its balance sheet for the year 2013-14. The first partial repayment of Rs. 75,00,000/- was made by the Corporate Debtor on 12.06.2015. The finding recorded by the Adjudicating Authority does not talk of this partial payment which acknowledges the debt and extends the period of limitation from the said date i.e. 12.06.2015 for another period of three years. It is needless to mention that the partial repayment of Rs. 75,00,000/- was made between 27.09.2013 to 27.09.2016 and because of said payment on 12.06.2015 the period of limitation had once again extended upto 12.06.2018. The Adjudicating Authority has further lost sight of the fact that another partial repayment of Rs. 50,00,000/- was made by the Corporate Debtor on 24.06.2018 which means that now the limitation would stand extended for a period of three years up to 24.06.2018. During the period of limitation i.e. 24.06.2014 to 24.06.2018 the Corporate Debtor vide letter dated 05.12.2016 confirmed and acknowledged its entire debt due and payable to the Appellant and as a result thereof, the limitation was extended from the said date i.e. 05.12.2016 to 05.12.2019. The Adjudicating Authority has only referred to the letter dated 05.12.2016 in Para VII of the impugned order to hold that Section 18 of the Limitation Act, shall not be applicable because the acknowledgement was made on 05.12.2016 which was beyond the period of three years from 27.09.2013. Thus, the Adjudicating Authority has committed error in appreciating the facts available on record in coming to the conclusion which is apparently contrary to the record. There are no hesitation to hold that the Adjudicating Authority has committed a patent error of law and fact while passing the impugned order, which deserves to be set aside - the matter is remanded back to the Adjudicating Authority to consider and decide the application filed under Section 7 of the Code in accordance with law - appeal allowed by way of remand.
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2022 (7) TMI 1283
Rejection of application for initiation of CIRP - Failure to invoke arbitration clause - Consequence of acknowledging the debt in the minutes of meetings of corporate debtor - Period of limitation - Financial Creditors - existence of debt and dispute or not - HELD THAT:- Both the sub-contract which has been brought on the record clearly indicate that financial liability taken by the Appellant as well as the Corporate Debtor towards carrying out the project was divided and all those financial liabilities were towards the completion of the project. There was no disbursement of the loan for the time value of money which is essential requirement for a debt to be treated as financial debt under Section 5(8) of the IBC. The minutes of meeting dated 16.03.2018 on which Counsel for the Appellant has much relied admits the liability of the Corporate Debtor to make the payment. The mere fact that the Corporate Debtor has admitted liability to make payment in its minutes of meeting does not change the character of the transaction into a financial debt. In Clause 18 of the contract contains arbitration clause, for settling amicably by mutual consultation and thereafter approaching the arbitration as per Arbitration Conciliation Act, 1996. The Appellant ought to have taken recourse to Clause 18 of the Sub-Contract Agreement dated 07.03.2017 and these issues could not have been decided in IBC proceedings. The Adjudicating Authority has rightly held that it was not financial debt and rejected Section 7 Application. There is no error in delivering the judgment invoking Rule 151 of the NCLT Rules, 2016 due to absence of Technical Member who has already agreed with the judgment - Appeal dismissed.
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2022 (7) TMI 1281
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Pre-Existing Dispute between the parties prior to the issuance of the Demand Notice under Section 8 of the Code, or not - HELD THAT:- A perusal of the Ledger Account for the period 01.04.2016 to 31.03.2017 shows that the Debit Notes were issued by the Respondent Company to the Appellant Company contemporaneously. This Bench has perused the Debit Notes dated 23.01.2017, 31.12.2015 and 26.11.2015, wherein it is clearly specified that the debit note is being raised on account of bad and rejected material dispatched by the Appellant Company. The Hon ble Supreme Court in MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [ 2017 (9) TMI 1270 - SUPREME COURT] , has observed A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defense as vague, got-up and motivated to evade liability. Merely because there were settlement talks between the parties it cannot be construed that the debt is due and payable as envisaged under the Code, specifically keeping in view the ratio of the Hon ble Supreme Court in Mobilox Innovations Private Limited - In their Reply to the Section 8 Notice, the Respondent Company has clearly raised a dispute and the material on record evidences that the Debit Notes were raised on account of rejection of poor quality material and therefore we are of the considered view that there is a plausible contention which requires further investigation and that the Dispute is not a patently feeble legal argument or an assertion of fact unsupported by evidence. This Tribunal is satisfied that the dispute truly exists in fact and is not spurious, hypothetical or illusory - there are no substantial grounds to interfere with the well-reasoned Order of the Adjudicating Authority. Appeal dismissed.
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2022 (7) TMI 1280
Dissolution of the Corporate Debtor - Section 59 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- A bare perusal of the material available on record shows that the partners of the LLP has taken a conscious decision for closing down the partnership, because the LLP was incorporated for the object as stated hereinabove and the applicant is not carrying any business for the several past financial years due to availability of no business opportunities in India. Thus, the partners have unanimously proposed to liquidate the LLP by invoking the provisions of voluntary liquidation under Section 59 of the Code. From the perusal of the record of the case, it is seen that the Liquidator, after his appointment has duly performed his duties and completed necessary formalities to complete the liquidation process of the applicant LLP, which has been averred in the present petition and, thus, the liquidator has prayed for an order from this Tribunal to dissolve the applicant LLP. Apart, as per record of the present case, it is seen that the LLP is not found involved in such kind of business activities, which are detrimental to the interest of public at large. Further, it is not the case that the proposed liquidation may affect adversely to its partners or is contrary to the provisions of law - The present application deserves to be allowed for the proposed Liquidation/Dissolution of the LLP.
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2022 (7) TMI 1279
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - quantum of operational debt - HELD THAT:- The operational debt of Rs. 17,13,326/- towards the outstanding rentals (including CAM, AHU, Electricity) of Elante store claimed by the applicant cannot be considered as supply of goods or rendering of any services and thus, cannot fall within the definition of Operational Debt as envisaged under the Code, 2016. Further, whether or not the alleged amount of Rs. 17,13,326/- towards the outstanding rentals (including CAM, AHU, Electricity) of Elante store, to be reimbursed by the respondent corporate debtor would be an issue of trial between the parties. Alleged dispute in respect of the interest amount - HELD THAT:- Since the principle amount due and payable towards the secondary sale is well above the minimum threshold of Rs. 1 Crore as stipulated in Section 4 of the Code, 2016, we are not inclined to indulge in the exercising of quantifying the operational debt. Pre-existing dispute - HELD THAT:- In order to substantiate the plea of preexisting dispute between the parties, the respondent corporate debtor has stated contentions in its reply along with relevant documents including e-mail correspondences exchanged between the parties, ledger account for the year 2017-2019, copy of corporate debtor reply dated December 01, 2019 to the legal notice dated September 13, 2019 issued by the applicant intimating the applicant about the existence of dispute between the parties with regard to fulfillment of obligations as specified in the term sheets dated 02.09.2017, short supply of stocks, existence of outstanding debt - The Hon'ble Supreme Court in catena of Judgements has laid down the principle that pre-existing dispute which may be ground to thwart an application under Section 9 has to be real dispute a conflict or controversy, a conflict of claims or rights should be apparent from the reply as contemplated by Section 8(2). The Corporate Debtor is not to raise bogie of disputes but there has to be real substantial dispute. The existence of dispute when the Demand Notice was issued is mandatory condition for exercising jurisdiction to reject the Application by the Adjudicating Authority as is referred to in sub-section (5) of Section 9. The statute uses the expression 'existence of a dispute'. There exists a pre-existing dispute with respect to the store located in Elante Mall, Chandigarh and Pavilion Mall, Ludhiana as far as initiation of proceedings by Operational Creditor against the Corporate Debtor is concerned. Petition dismissed.
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2022 (7) TMI 1278
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- Upon appreciation of the documents placed on record to substantiate the claims, this Adjudicating Authority is of the view that there is a pre-existing dispute. As per the records shown by the Corporate Debtor, the work of the Operational Creditor has not been satisfactory despite repeated requests for rectification by the Corporate Debtor. Infact, the issue of polishing of the stone floor has remained unresolved. It appears that the Operational Creditor is using this forum as a recovery mechanism for retention money which is not the purpose or intention of the IBC 2016. Additionally, the threshold requirement for debt default given under S. 4 of the Insolvency and Bankruptcy Code 2016 is not satisfied in this case. Application dismissed.
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PMLA
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2022 (7) TMI 1316
Constitutional validity and interpretation of certain provisions of the Prevention of Money-Laundering Act, 2002 - procedure followed by the Enforcement Directorate (ED) while inquiring into/investigating offences under the PMLA - effect of amendment in Section 45 of the 2002 by NIKESH TARACHAND SHAH VERSUS UNION OF INDIA AND ANR. [ 2017 (11) TMI 1336 - SUPREME COURT] reviving the effect of twin conditions specified in Section 45 to offences under the 2002 Act - initiation of penal proceedings against an individual, without informing him of the charges - based on ECIR, the ED can summon accused persons and seek details of financial transactions or not - proceeds of crime-an untainted property? - Explanation added to Section 44(1)(d) of the PMLA by way of Finance (No. 2) Act, 2019, which posits that a trial under the PMLA can proceed independent of the trial of scheduled offence - investigation outside the purview of Section 154 or 155 of the Cr.P.C. - constitutionality of Section 50 of the PMLA, which pertains to recording of statement of a person summoned during the course of an investigation - Sections 161 and 162 of the Act, concerning inadmissible evidence in the trial of an offence, unless it is used only for the purpose of contradiction as stipulated in Section 145 of the 1872 Act - constitutional validity of vires of Section 50 of the PMLA regarding whether a police officer is in a position to compel a person to render a confession giving incriminating statement against himself under threat of legal sanction and arrest? - procedure established by law has to be in the form of a statute or delegated legislation and pass the muster of the constitutional protections, violative of Article 21 of the Constitution of India or not - non-supplying of the ECIR to the accused is in gross violation of Article 21 of the Constitution or not - onerous bail conditions under Section 45 of the Act - burden of proof under Section 24 of the PMLA - constitutionality of Sections 17 and 18 concerning absence of safeguards in lieu of searches and seizures - section 5(1) concerning attachment independent of the existence of a predicate offence - reversal of presumption of innocence at the stage of bail as an accused by Section 45(1) of the PMLA - correctness of maximum punishment of seven (7) years under PMLA, it was argued that it is disproportionate when comparing the same to other offences under the IPC which are far more serious in nature and are punishable with death - Explanation to Section 44 is contrary to Section 3 read with Section 2(1)(u) - whether money-laundering is a standalone offence or dependent on the scheduled offence? - Explanation to Section 44(1)(d) requiring the two trials to be conducted before the Special Court, but as separate trials - adjudicatory paralysis in the Appellate Tribunal - constitutional validity of Section 50(3) and Section 63(2)(a) and (c) of the PMLA, insofar as they relate to the accused persons, are ultra vires being violative of Articles 20(3) and 21 of the Constitution of India - proceedings under Section 50 is clearly a part of investigation for the collection of evidence or not - whether prosecution for money-laundering is permissible if the commission of scheduled offence and proceeds of crime takes place prior to the PMLA coming into force? - essential ingredient of knowledge of the person for taking an action and exposing himself to criminal liability - impact of insertion of Clause (ii) of the Explanation to Section 3 vide the 2019 amendment with regard to continuing offence - constitutional validity of Section 44(1)(a) of the PMLA, having nexus of the said Section with the object of the PMLA or not - interpretation of Section 3, post addition of the Explanation vide the 2019 amendment - true meaning of the words take possession of property under Section 8(4) should be constructive possession instead of physical possession since it is highly prejudicial for the accused during the pendency of the trial?. HELD THAT:- The conclusion on seminal points in issue have been arrived in the following terms: - (i) The question as to whether some of the amendments to the Prevention of Money-laundering Act, 2002 could not have been enacted by the Parliament by way of a Finance Act has not been examined in this judgment. The same is left open for being examined along with or after the decision of the Larger Bench (seven Judges) of this Court in the case of ROJER MATHEW VERSUS SOUTH INDIAN BANK LTD. OTHERS [ 2019 (11) TMI 716 - SUPREME COURT] . (ii) The expression proceedings occurring in Clause (na) of Section 2(1) of the 2002 Act is contextual and is required to be given expansive meaning to include inquiry procedure followed by the Authorities of ED, the Adjudicating Authority, and the Special Court. (iii) The expression investigation in Clause (na) of Section 2(1) of the 2002 Act does not limit itself to the matter of investigation concerning the offence under the Act and is interchangeable with the function of inquiry to be undertaken by the Authorities under the Act. (iv) The Explanation inserted to Clause (u) of Section 2(1) of the 2002 Act does not travel beyond the main provision predicating tracking and reaching upto the property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence. (v) (a) Section 3 of the 2002 Act has a wider reach and captures every process and activity, direct or indirect, in dealing with the proceeds of crime and is not limited to the happening of the final act of integration of tainted property in the formal economy. The Explanation inserted to Section 3 by way of amendment of 2019 does not expand the purport of Section 3 but is only clarificatory in nature. It clarifies the word and preceding the expression projecting or claiming as or ; and being a clarificatory amendment, it would make no difference even if it is introduced by way of Finance Act or otherwise. (b) Independent of the above, we are clearly of the view that the expression and occurring in Section 3 has to be construed as or , to give full play to the said provision so as to include every process or activity indulged into by anyone. Projecting or claiming the property as untainted property would constitute an offence of money-laundering on its own, being an independent process or activity. (c) The interpretation suggested by the petitioners, that only upon projecting or claiming the property in question as untainted property that the offence of Section 3 would be complete, stands rejected. (d) The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money-laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money-laundering against him or any one claiming such property being the property linked to stated scheduled offence through him. (vi) Section 5 of the 2002 Act is constitutionally valid. It provides for a balancing arrangement to secure the interests of the person as also ensures that the proceeds of crime remain available to be dealt with in the manner provided by the 2002 Act. The procedural safeguards as delineated by us hereinabove are effective measures to protect the interests of person concerned. (vii) The challenge to the validity of sub-section (4) of Section 8 of the 2002 Act is also rejected subject to Section 8 being invoked and operated in accordance with the meaning assigned to it hereinabove. (viii) The challenge to deletion of proviso to sub-section (1) of Section 17 of the 2002 Act stands rejected. There are stringent safeguards provided in Section 17 and Rules framed thereunder. Moreover, the pre-condition in the proviso to Rule 3(2) of the 2005 Rules cannot be read into Section 17 after its amendment. The Central Government may take necessary corrective steps to obviate confusion caused in that regard. (ix) The challenge to deletion of proviso to sub-section (1) of Section 18 of the 2002 Act also stands rejected. There are similar safeguards provided in Section 18. We hold that the amended provision does not suffer from the vice of arbitrariness. (x) The challenge to the constitutional validity of Section 19 of the 2002 Act is also rejected. There are stringent safeguards provided in Section 19. The provision does not suffer from the vice of arbitrariness. (xi) Section 24 of the 2002 Act has reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act and cannot be regarded as manifestly arbitrary or unconstitutional. (xii) (a) The proviso in Clause (a) of sub-section (1) of Section 44 of the 2002 Act is to be regarded as directory in nature and this provision is also read down to mean that the Special Court may exercise judicial discretion on case-to-case basis. (b) We do not find merit in the challenge to Section 44 being arbitrary or unconstitutional. However, the eventualities referred to in this section shall be dealt with by the Court concerned and by the Authority concerned in accordance with the interpretation given in this judgment. (xiii) (a) The reasons which weighed with this Court in Nikesh Tarachand Shah, for declaring the twin conditions in Section 45(1) of the 2002 Act, as it stood at the relevant time, as unconstitutional in no way obliterated the provision from the statute book; and it was open to the Parliament to cure the defect noted by this Court so as to revive the same provision in the existing form. (b) We are unable to agree with the observations in Nikesh Tarachand Shah, distinguishing the enunciation of the Constitution Bench decision in KARTAR SINGH VERSUS STATE OF PUNJAB [ 1994 (3) TMI 379 - SUPREME COURT] ; and other observations suggestive of doubting the perception of Parliament in regard to the seriousness of the offence of money-laundering, including about it posing serious threat to the sovereignty and integrity of the country. (c) The provision in the form of Section 45 of the 2002 Act, as applicable post amendment of 2018, is reasonable and has direct nexus with the purposes and objects sought to be achieved by the 2002 Act and does not suffer from the vice of arbitrariness or unreasonableness. (d) As regards the prayer for grant of bail, irrespective of the nature of proceedings, including those under Section 438 of the 1973 Code or even upon invoking the jurisdiction of Constitutional Courts, the underlying principles and rigours of Section 45 may apply. (xiv) The beneficial provision of Section 436A of the 1973 Code could be invoked by the accused arrested for offence punishable under the 2002 Act. (xv) (a) The process envisaged by Section 50 of the 2002 Act is in the nature of an inquiry against the proceeds of crime and is not investigation in strict sense of the term for initiating prosecution; and the Authorities under the 2002 Act (referred to in Section 48), are not police officers as such. (b) The statements recorded by the Authorities under the 2002 Act are not hit by Article 20(3) or Article 21 of the Constitution of India. (xvi) Section 63 of the 2002 Act providing for punishment regarding false information or failure to give information does not suffer from any vice of arbitrariness. (xvii) The inclusion or exclusion of any particular offence in the Schedule to the 2002 Act is a matter of legislative policy; and the nature or class of any predicate offence has no bearing on the validity of the Schedule or any prescription thereunder. (xviii) (a) In view of special mechanism envisaged by the 2002 Act, ECIR cannot be equated with an FIR under the 1973 Code. ECIR is an internal document of the ED and the fact that FIR in respect of scheduled offence has not been recorded does not come in the way of the Authorities referred to in Section 48 to commence inquiry/investigation for initiating civil action of provisional attachment of property being proceeds of crime. (b) Supply of a copy of ECIR in every case to the person concerned is not mandatory, it is enough if ED at the time of arrest, discloses the grounds of such arrest. (c) However, when the arrested person is produced before the Special Court, it is open to the Special Court to look into the relevant records presented by the authorised representative of ED for answering the issue of need for his/her continued detention in connection with the offence of money-laundering. (xix) Even when ED manual is not to be published being an internal departmental document issued for the guidance of the Authorities (ED officials), the department ought to explore the desirability of placing information on its website which may broadly outline the scope of the authority of the functionaries under the Act and measures to be adopted by them as also the options/remedies available to the person concerned before the Authority and before the Special Court. (xx) The petitioners are justified in expressing serious concern bordering on causing injustice owing to the vacancies in the Appellate Tribunal. We deem it necessary to impress upon the executive to take corrective measures in this regard expeditiously. (xxi) The argument about proportionality of punishment with reference to the nature of scheduled offence is wholly unfounded and stands rejected.
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