TMI Tax Updates - e-Newsletter
August 6, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Service of summons - can summons be issued to the concerned person - Revenue submitted that, if summons are served on the Petitioner’s employee for furnishing information or to seek his presence before the concerned officer and if a request is made that the employee summoned would be represented through an authorised agent, such request will be considered and in case such a request is declined, reasons for the same will be furnished. - Petition disposed off - HC
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Income Tax:
Assessee in Default for non deduction of TDS - period of limitation - There is no doubt in the mind of Bench that the impugned order of assessment passed was without jurisdiction as the same was passed beyond the limitation period of two years and accordingly the ground no. 1 as raised stands allowed in favour of the assessee declaring assessment order to be void ab initio requiring no further determination of issues. - AT
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Income Tax:
Addition of deemed dividend u/s 2(22)(e) - the loan obtained being not gratuitous in nature, do not fall within the mischief of Section 2(22)(e) of the Act. We thus opine that the action of the Assessing Officer runs counter to the mandate of Section 2(22)(e) of the Act on this score alone- AT
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Income Tax:
Capital gain - Nature of land sold - capital asset or agricultural land - It is salutary principle of interpretation of law that a provision of law must be understood in its plain meaning and the effect should be given to each and every word employed therein. Therefore, the language employed in the Act and the Notification cannot be stretched to include the word 'aerial'. As per the Certificate of the Tahasildar produced before the Assessing Officer and PWD Engineer's Certificate produced before the CIT(A), the distance between the lands in question and BBMP is more than 8 kms. - HC
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Income Tax:
Rectification u/s 154 - return filled treated as inconsistent and defective u/s. 139(9) - We find the order of CIT(A) in confirming the order of AO in treating the return of income as invalid, made the assessee remediless and there is no option to claim exemption u/s. 11 - we find force in the arguments of the ld. AR that the assessee shall get an opportunity to file details of investments/deposits before the AO. - AT
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Income Tax:
Deduction u/s 80IB - The methodology adopted by the assessee for apportionment of common head office expenses and selling expenses has consistently been followed year-on-year basis which has been held to be reasonable and scientific. It is thus noted that the issue in hand before us is no longer res integra considering the decisions in assessee’s own case. - AT
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Income Tax:
Capitalization of the amount of interest disallowed u/s 36(1)(iii) - Here the assessee is claiming that if interest corresponding to investment in mutual funds is not allowed as revenue expenditure, then same should be treated as cost of acquisition of the said mutual fund. We are of the opinion that the issue of claim of the interest amount as cost of acquisition will arise at the time of the sale of the said mutual funds and therefore issue is premature at this stage - AT
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Income Tax:
Revision u/s 263 - deduction /exemption u/s 10(24) - Assessee is not a business entity and does not work for profit. It is an association for the welfare of certain category of persons who writes in the film industry and other audio visual media and its objective is to protect the interest of its members though there is income generated not for profit but for the purpose of the welfare of the association and its members. PCIT has failed to establish that it is a business entity - Revision order quashed - AT
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Customs:
Valuation of imported consignments - retraction of relied statements - In the instant case, it is not established that the computer in question was in regular use by the appellant in the course of his business. No certificate whatsoever, as required under the provisions of Section 138C (2) was obtained. It is settled proposition of law that if a certain act is to be done by a certain authority, in a particular manner, the same should be done in the manner in which it is ordained. There are no short cuts in investigation. - the rejection of declared value, on the basis of value declared to insurer, is not legal, proper and justified. - AT
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IBC:
Scope of IBC - dishonor of cheque - compounding of offences - Recovery of the dues - Section 65(1) of the Code does not expressly mention ‘Debt Recovery Action’ under ‘for any purpose other than resolution of insolvency..’, keeping in view the factual occurrence of the events of this particular matter, we hold that the ‘intent’ may not be a ‘malafide intent’, but is nevertheless a fundamental attempt to obtain an edge/ advantage / an upper hand in ‘recovering their dues’. - ‘A Recovery Proceeding’ of this nature does fall within the scope and ambit of the words ‘for any purpose other than Resolution’, as defined under Section 65 (1) of the Code - AT
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IBC:
Appointment of IRP - the provisions of law empower the CoC contemplated under Section 22 of the I&B Code, 2016 either to continue the IRP as RP or replace the IRP. When the provisions are unambiguous and authorises the CoC to act in accordance with law the same cannot be interfered with by the Tribunals unless and until it is arbitrary, illegal and irrational and dehors the provisions of the Code and the Rules. - this Tribunal comes to an irresistible and inescapable conclusion that the Appellant has made a prima-facie case to be interfered with the order passed by the Adjudicating Authority. - AT
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IBC:
Revocation of liquidation process enabling the Corporate Debtor to revive and reconstruct by implementing the scheme sanctioned - The order of the Adjudicating Authority dated 10.01.2020 to which the Appellant is a party has not challenged the said order dated 10.01.2020 and the same has attained finality. Therefore, the Appellant is estopped from challenging the said order in this Appeal. The filing of the present Appeal is an abuse of process of law and wasting the precious time of this Tribunal - this Tribunal comes to an irresistible and inescapable conclusion that the Appeal is frivolous and vexatious and the same is liable to be dismissed. - AT
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IBC:
Preferential Transactions or not - documents being “Transaction Audit Report” and “Forensic Audit Report” were not provided to the Appellants - whether the impugned transactions fall within the ambit of Sections 43, 45 or 66 of the Code? - the Respondent/Liquidator made the application before the Adjudicating Authority after having sufficient evidence/material to establish the case of the Appellants beyond reasonable doubt. The basis for the application before the Adjudicating Authority is the report of the auditor and the observations and conclusions arrived at by the auditor. - NCLT rightly admitted the claim - AT
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IBC:
Initiation of CIRP - The Adjudicating Authority (NCLT’s) couched with the powers to be exercisable as enshrined in the I&B Code, 2016. For the purpose of entertaining Sections 7, 9 or 10, of the I&B Code, the Adjudicating Authority has to see whether debt is payable on the part of the Corporate Debtor and committed default. In such cases, the Adjudicating Authority invariably admit the application under the above provisions of law. - This Tribunal is of the view that in the present case, the debt and default has been proved and the Adjudicating Authority rightly admitted the Application under Section 7. - AT
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Central Excise:
CENVAT Credit - The Ld. Commissioner made a fundamental error while observing that payments have not been made to the original supplier (OEMs) but to the Contractor against the separate set of commercial invoices - In any case, whether or not the payment has been made against the excise invoices issued by the OEM or the commercial invoice issued by the Contractor who has procured the goods on behalf of the Appellant for use in the power plant is completely irrelevant. - AT
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VAT:
Interstate sate - consignment transfer/stock transfer - Declaration in Form F by bogus dealer - It may be true that once a statutory declaration is furnished, the recipient of such declaration cannot be held responsible for any incorrectness of the details filled in by the dealer issuing such declaration. However, the same cannot be understood to mean that a declaration in "Form F" or for that matter any declaration form of a dealer found to be non-existent/fictitious, which is nothing but a fraud played on the State, must also be extended the benefit of a valid declaration. - Demand confirmed - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2022 (8) TMI 252
Grant of Bail - evasion of GST - issuance of bogus invoices without supply of goods, in the name of fake firms created by him - Sections 132 (1) (B) (I), Central Goods & Services Tax Act, 2017 - HELD THAT:- In Y.S. JAGAN MOHAN REDDY VERSUS CENTRAL BUREAU OF INVESTIGATION [2013 (5) TMI 896 - SUPREME COURT], the Hon'ble Supreme Court was dealing with allegations of offences which were punishable with upto life imprisonment, but in the present case, the maximum punishment that can be imposed upon the applicant is five years' imprisonment. Moreover, the offence is compoundable as per the provision contained in Section 138 of the CGST Act, sub-Section (1) whereof provides that "Any offence under this Act may, either before or after the institution of prosecution, be compounded by the Commissioner on payment, by the person accused of the offence, to the Central Government or the State Government, as the case be, of such compounding amount in such manner as may be prescribed".
Thus, the applicant has been implicated on the basis of the statement of a co-accused Chandra Prakash Kriplani, who has already been granted bail by this Court - applicant himself had been granted anticipatory bail by this Court - the department had initiated proceedings on 31.12.2019 by issuing a summons under Section 70 of CGST Act and after completion of the investigation, on 22.11.2021 the department has filed a complaint in the Court of Special Chief Judicial Magistrate, Agra and, therefore, it cannot be said that now the applicant is in a position to influence the investigation of the case - the applicant is languishing in jail since 26-09-2021; (6) the maximum punishment that can be imposed upon the applicant is five years' imprisonment - the offence is compoundable as per the provision contained in Section 138 of the CGST Act, the applicant is entitled to be released on bail.
Let the applicant be released on bail - the instant bail application is allowed.
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2022 (8) TMI 251
Service of summons - thrust of the argument is that only when the contesting respondents are able to demonstrate that a particular person in the company is involved in infractions or suspected of committing infractions, can summons be issued to the concerned person - HELD THAT:- It is Mr. Singh’s (Revenue's) stand before us that in future, if summons are issued, regard will be had to the aforementioned circulars and guidelines framed in that behalf. - Mr. Singh further submits, that if summons are served on the Petitioner’s employee for furnishing information or to seek his presence before the concerned officer and if a request is made that the employee summoned would be represented through an authorised agent, such request will be considered and in case such a request is declined, reasons for the same will be furnished.
Having regard to the statement made by Mr. Singh, which is in line with the contents of the circulars and guidelines, the writ petition is disposed off based on the statement made by Mr. Singh.
Petition disposed off.
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Income Tax
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2022 (8) TMI 248
Rectification u/s 154 - return filled treated as inconsistent and defective u/s. 139(9) - assessee considered non - enclosing the details of investments/deposits u/s. 11 - objection of CIT(A) was that the assessee claimed excess accumulation and no details regarding investments/deposits were filed with the return of income, though the said discrepancies was brought to the notice of assessee by the AO (CPC), but no compliances made by the assessee in order to rectify the said mistake - contention of ld. AR is that the assessee ready to file all the investments/deposits, because of treating return of income as invalid, the proceedings u/s. 11 will go against the assessee -
HELD THAT:- We find the rectification application u/s. 154 wherein, it is noted that the assessee enclosed the details of investments/deposits for ready reference of AO and requested the AO to accept the same.
AO did not consider the same and held the return of income as invalid. We find on similar issue the Co-ordinate Bench of this Tribunal in the case of Deere & Company [2021 (11) TMI 503 - ITAT PUNE] held that, no technicality can be allowed to operate as a speed breaker in the course of dispensation of justice. If a particular relief is legitimately due to an assessee, the authorities cannot circumscribe it by creating such circumstances leading to its denial.
We find the order of CIT(A) in confirming the order of AO in treating the return of income as invalid, made the assessee remediless and there is no option to claim exemption u/s. 11 - we find force in the arguments of the ld. AR that the assessee shall get an opportunity to file details of investments/deposits before the AO.
Therefore, we deem it proper to remand the issue to the file of AO with a direction to treat the return of income filed by the assessee on 17-06-2015 as valid return and complete the assessment thereon. The assessee is liberty to file evidence, if any, in support of its claim. Thus, the grounds raised by the assessee are allowed for statistical purpose.
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2022 (8) TMI 247
Unexplained investment u/s 69 - investment in Mutual Fund unexplained - HELD THAT:- The proceeds of FD maturity was transferred to assessee wife bank account and from there an amount of Rs. 85 lakh was transferred to the assessee bank account and accordingly investment was made in the unit of mutual fund of different banks for an amount aggregating to 80 Lakh. The explanation of the assessee was rejected by the CIT (A) for the reason that it was not established that investment was made out of foreign remittance.
We have perused the paper book submitted by the assessee where FD maturity advice along bank statement of assessee’s wife Smt. Meena Nausik Desai - Form perusal of the document we find there several deposit were matured during F.Y. 2009-10 and maturity amount were credited in the bank account of Smt. Meena Nausik Desai. All these deposit were created during F.Y. 2007-08 and 2008-09 in USD.
We further find an amount of Rs. 50 Lakh and 35 Lakh were transferred from bank account of Smt. Meena Nausik Desai to the assessee bank as on 02-12-2010 and 24-12-2010 respectively. From the above documentary evidences there remains no doubt with regard to sources of fund in the hand of the assessee which were utilized in making investment in mutual fund. Thus we are of the considered view that the assessee has sufficiently discharged the obligation cast under 69 by explaining the nature of investment and sources of fund. Therefore, we hereby set aside the order of the CIT(A) and direct the assessee to delete the addition of Rs. 80 Lakh made under section 69 - Decided in favour of assessee.
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2022 (8) TMI 246
Unexplained money u/s. 69A - cash deposited during the demonetization period - HELD THAT:- The cash loan of Rs. 50,00,000/- said to be received by the assessee from Ramesh Corporation is being clearly reflecting in the bank account of the assessee and the assessee had withdrawn Rs. 50,00,000/- on 02.01.2014. The assessee submission of redeposit of a sum of Rs. 37,00,000/- in her bank account of Bank of Baroda is also reflecting in the bank statement. So, the remaining cash in hand of Rs. 12,78,000/- in which the assessee made deposit of Rs. 12,75,000/- during the demonetization period.
The assessee’s explanation that the demonetized currency notes of Rs. 500/- and Rs. 2000/- available with the assessee as cash in hand were being deposited during the demonetization period. Thus the same cannot be treated as not properly explained by the assessee. As it can be seen from the bank statement, the source of withdrawal of the money is being clearly demonstrated and their deposit of money on various occasions is also established by the assessee through her bank account. The same cannot be doubted by the Assessing Officer as unexplained money.
As relying on SHAILESHKUMAR RASIKLAL MEHTA [2013 (11) TMI 1600 - GUJARAT HIGH COURT] and MANOJ INDRAVADAN CHOKSHI [2014 (8) TMI 1042 - GUJARAT HIGH COURT] we have no hesitation in allowing the grounds raised by the assessee and the impugned addition made by the Assessing Officer u/s. 69A is hereby deleted. - Decided in favour of assessee.
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2022 (8) TMI 221
Undisclosed stock - discrepancies in the stock between the value of stock shown in the Profit & Loss Account and the value of stock shown in the ACEM Software - excess stock was found and the same was offered as additional income by revising the return of income - HELD THAT:- Assessee firm had discharged primary onus lying upon it by explaining the difference between the stock as per Profit & Loss Account and stock as per stock register maintained through computer software ‘ACME Software’. On receipt of the explanation, AO had not done anything to verify the veracity of the explanation of the respondent-assessee firm. He simply proceeded with by making addition by observing that the explanation of the respondent-assessee firm cannot be believed for the reason that stock received from the customers in respect of the gold, diamond, silver jewelleries either under gold deposits scheme or gold received for making ornaments were not accounted in the books of accounts of the respondent-assessee firm.
This reasoning of AO has no legs to stand in view of the well-settled position of law that the presence and absence of entries in the books of accounts do not determine the true nature of the transaction. Reference in this regard can be made to the decision of Kedarnath Jute Mfg. Co. Ltd. [1971 (8) TMI 10 - SUPREME COURT] - Further, it is not even the case of the Assessing Officer that the respondent-assessee firm had failed to discharge the primary onus lying upon it i.e. filing full details of the customers from whom gold was received under gold deposits scheme or for the purpose of making the ornaments. Without making any further enquiries,AO cannot make any addition based on the conjectures and assumptions as well as without bringing any conclusive evidence on record.
Reference can be made on the decision in the case of Dhakeswari Cotton Mills Ltd. [1954 (10) TMI 12 - SUPREME COURT]. In these circumstances, we are of the considered opinion that the order of the ld. CIT(A) is fair and reasonable and based on the appreciation of material facts of the case. - Decided against revenue.
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2022 (8) TMI 220
Addition u/s 56(2)(viia) - difference between the Fair Market Value (FMV) of the shares and the consideration paid when they are bought back - company buys back its own shares from the shareholders whereby the liability is reduced - HELD THAT:- As shares should become property of the recipient company in order to apply the provisions under section 56(2)(viia) of the Act and in that case, such shares should be the shares of other company and cannot be its own shares, because a company cannot hold its own shares in order that such shares become its property.
Provisions under section 56(2)(viia) should be applicable only in cases where the receipt of shares become property in the hands of the recipient and the shares shall become property of the recipient only if those are ‘shares of any other company’. With reference to the buying back of own shares by a company which become extinguished by reducing the capital, it is clear that the test of ‘becoming property’ and also ‘shares of any other company’ fails thereby rendering the provisions under section 56(2)(viia) of the Act inapplicable to the cases of buyback of own shares.
No other view of any higher fora is brought to our notice. We, therefore, while respectfully following the view taken in the case of Vora Financial Services (P) Ltd., [2018 (7) TMI 64 - ITAT MUMBAI] hold that the addition made by invoking the provisions u/s 56(2)(viia) of the Act cannot be sustained. We accordingly allow the appeal of the assessee.
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2022 (8) TMI 219
Assessee in Default for non deduction of TDS - Validity of order u/s 201(1) and 201(1A) - period of limitation - TDS u/s 192 - re-imbursement made under Leave Fare Concession (‘LTD’) scheme of the State Bank of India to employees who have carried out circuitous tour, covering foreign destination - benefit of exemption u/s 10(5) - AO denied the benefit of Section 10(5) observing that the bank was bound to deduct tax u/s 192 - Assessee argued that order of assessment passed is beyond jurisdiction of the AO on account of being passed after prescribed period of limitation - HELD THAT:- There is no dispute to the fact that for assessment year 2010-11 summons was issued on 20.01.2018 and notice u/s 201(1)/ 201(1A) of the Act were issued on 29.01.2018 while in case also the summons were issued on 20.01.2018 and notice was issued on 29.01.2018. The assessment orders u/s 201(1)/ 201(1A) of the Act have been passed on 05.03.2018. There is no doubt that Section 201(3) of the Act provides that the assessment orders under sub section 1 of Section 201 against assessee in default for failure to deduct the whole or any part of the tax from a person resident in India can be passed before expiry of two years from the end of financial year in which the payment is made.
Co-ordinate Bench at Delhi in the case of HCL Technologies Ltd. [2020 (7) TMI 643 - ITAT DELHI] has also relied the Hon’ble Gujarat High Court judgment[2016 (2) TMI 414 - GUJARAT HIGH COURT]. The distinction attempted to be brought by Ld. Sr. DR by submitting that under the un-amended sub section 3 of Section 201 there were two clauses and first clause provided two years limitation was in case where statement of TDS were filed and there was limitation of six years where no such statement is filed and has no foundation because in the present case admittedly the statement was filed by the assessee and the question was only with regard to the issue if TDS was required to be deducted in cases involving payment of LTC reimbursements to employees who had taken circuitous routes involving travel abroad to one or more domestic destinations.
There is no doubt in the mind of Bench that the impugned order of assessment passed was without jurisdiction as the same was passed beyond the limitation period of two years and accordingly the ground no. 1 as raised stands allowed in favour of the assessee declaring assessment order to be void ab initio requiring no further determination of issues.
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2022 (8) TMI 250
Reopening of assessment u/s 147 - Validity of order u/s 148A(d) and notice u/s 148 - HELD THAT:- As this Court finds that if the averments in the writ petition are true and correct, then the scrutiny assessment of VSFPL had concluded even prior to the issuance of the notice u/s 148A(d) of the Act to the Petitioner. It is strange that the said information was not reported by the VFSPL’s Assessing Officer to the Petitioner’s Assessing Officer.
In any event, to cut the controversy short, the impugned order passed under Section 148A(d) and the notice issued under Section 148 both dated 6th April 2022 are set aside and the AO is directed to pass a fresh order within four weeks u/s 148A(d) after considering the averments & documents placed on record in the present writ petition and the scrutiny assessment order passed in the case of VFSPL as well as the fact that VFSPL had furnished the PAN/GSTIN details in response to the notice issued under Section 142(1).
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2022 (8) TMI 218
Delayed payment of employees’ contribution deposited by employer with the EPF and ESIC authorities - Payment beyond the due date specified under the relevant laws relating to contribution of EPF and ESIC, but before the due date for filing the return of income under section 139 - Scope of amendment - HELD THAT:- The Hon’ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd., [2014 (3) TMI 386 - KARNATAKA HIGH COURT] has taken the view that employee’s contribution under section 36(1)(va) would also be covered under section 43B of the Act and therefore if the share of the employee’s share of contribution is made on or before due date for furnishing the return of income under section 139(1) of the Act, then the assessee would be entitled to claim deduction. Therefore, the issue is covered by the decision of the Hon’ble Karnataka High Court. In this case there is no dispute that the assessee made payment of the Employees share of PF/ESI on or before the due date for filing return of income for AY 2017-18 u/s.139(1).
Whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also? - The explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act, deserves to be deleted.
The legislature did not choose to make the amendment retrospective. Secondly, the amendment seeks to fasten a liability on the Assessee and the amendment does not seek to remove any hardship faced by an Assessee. Therefore the amendment has to be regarded as only prospective, even going by the parameters laid down by the Hon’ble Supreme Court in ZILE SINGH [2004 (10) TMI 553 - SUPREME COURT] - Decided in favour of assessee.
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2022 (8) TMI 245
Deduction u/s 80IB - profits derived from its industrial undertakings located at Jammu - apportionment of common head office and selling expenses for the purpose of computation of profit of units eligible for deduction u/s. 80IB - Whether the CIT(A) was correct in rejecting the methodology of deduction u/s.80-IB computed by the A.O particularly when the actual expenses are determinable on actual accounts maintained in previous year in question was not the methodology to attribute expenses on the basis of inflation incorrect? - HELD THAT:- As there is no change in the fact pattern and applicable law in respect of the claim of deduction made by the assessee u/s 80IB in the year under consideration before us vis-à-vis the years for which appellate orders of Co-ordinate of ITAT Kolkata [2017 (4) TMI 106 - ITAT KOLKATA] or that of Hon’ble jurisdictional High Court of Calcutta in assessee’s own case [2021 (12) TMI 728 - CALCUTTA HIGH COURT] have been referred and relied upon. The methodology adopted by the assessee for apportionment of common head office expenses and selling expenses has consistently been followed year-on-year basis which has been held to be reasonable and scientific. It is thus noted that the issue in hand before us is no longer res integra considering the decisions in assessee’s own case.
Admittedly, it is a fact that this is a recurring issue from preceding assessment years. By adopting judicial consistency in the given facts and circumstances, we affirm the order of ld. CIT(A) and direct to delete the addition made by the ld. AO. Thus, ground no. 1 is dismissed.
Disallowance u/s 14A read with rule 8D - CIT-A deleted the addition - HELD THAT:- As hon’ble Supreme Court in the case of South Indian Bank Ltd. [2021 (9) TMI 566 - SUPREME COURT] wherein it was held that where interest free own funds available with assessee-banks exceeded their investments in tax-free securities; investments would be presumed to be made out of assessee's own funds and proportionate disallowance was not warranted under section 14A on ground that separate accounts were not maintained by assessee for investments and other expenditure incurred for earning tax-free income.
As in respect of deletion of disallowance by the CIT(A), we note from the details of disallowance furnished by the assessee that this includes expenses towards electricity, lease rent, corporate tax, printing and stationery, upkeep/administration, telephone, books & periodicals, in-house computer, depreciation and salary. These were considered by the assessee on the basis of facility/time utilized by the persons managing the investments.
Thus, admittedly, it’s a fact on record that assessee has incurred expenses which pertain to managing the investments yielding exempt income and the same have been suo motto disallowed by the assessee in its computation of total income reported in the return for the year. On a specific query by the bench on this factual position, ld. Counsel candidly admitted for its correctness of the suo motto treatment given by the assessee in the return. We thus, direct the ld. AO to restore and restrict the disallowance u/s 14A which has been suo motto disallowed by the assessee in its return of income. Accordingly, ground no. 3 is partly allowed.
Deduction u/s 80IB on income from sale of scrap - income from sale of scrap whether income from sale of scrap generated in the manufacturing process employed in the eligible unit can be taken into consideration for deduction under section 80IB - HELD THAT:- As decided in own case [2021 (12) TMI 728 - CALCUTTA HIGH COURT] we direct to delete the addition made by the ld. AO which is eligible for claiming deduction u/s 80IB of the Act. Accordingly, this ground of appeal is dismissed.
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2022 (8) TMI 217
Addition u/s 40A(2)(b) - amount incurred on Moulds Manufacturing & Repair expenses - As argued assessee is engaged in the business of manufacturing of plastic goods and has obtained services under AMC related to Mould Manufacturing and Repair Expenses from the related party and CNC Services from unrelated party and both the services are not comparable and thus cannot be the basis for determination of fair market value by invoking the provisions of Section 40A(2)(b) - HELD THAT:- We find justification in the case made out on behalf of the assessee. While the assessee has demonstrated that the nature of services are different, the CIT(A) has confirmed the action of the Assessing Officer without taking cognizance of such facts. Secondly, the CIT(A) has observed that the Assessing Officer has made disallowance towards excessive payment to relative party under Section 40A(2)(b) on the basis of fair market value but however the source of fair market value is in unknown territory. Except for the comparison with the amount paid to Kalsi Mould and Dyes vis-à-vis amount paid to sister concern (Jaypee Technoplast Pvt. Ltd. which are stately engaged in rendering different services and also, one is time based on seamless basis while other is essentially service based, the comparison is rightly claimed to be unjustifiable. We thus find merit in the plea of the assessee for lack of sound basis for determination of ‘fair market value’ and consequent inapplicability of Section 40A(2)(b).
Addition of deemed dividend u/s 2(22)(e) - assessee (partner firm) obtained loan from the sister concern and one of the partners of the firm, Ms. Anita Jain holding profit sharing ratio of 25% in the firm (recipient of loan) is also holding 14.52% shares in the lender company - HELD THAT:- As in the case of Pradip Kumar Malhotra [2011 (8) TMI 16 - CALCUTTA HIGH COURT] has observed that advances given by lender firm was not for the individual benefit of the shareholder but for business purposes and therefore such transactions could not fall within the sweep of deeming fiction created under Section 2(22)(e) of the Act. This reason on a standalone basis is sufficient to exclude the applicability of Section 2(22)(e) of the Act on the money received by the assessee firm. Also see MOHAN BHAGWATPRASAD AGRAWAL [2020 (1) TMI 1139 - GUJARAT HIGH COURT]
Hence, the loan obtained being not gratuitous in nature, do not fall within the mischief of Section 2(22)(e) of the Act. We thus opine that the action of the Assessing Officer runs counter to the mandate of Section 2(22)(e) of the Act on this score alone. Hence, we are not inclined to examine other limbs of arguments raised on behalf of the assessee.
Penalty u/s 271(1)(c) - HELD THAT:- The penalty imposed under Section 271(1)(c) cannot survive for twin reasons as the quantum additions itself is devoid of merit and the issue involved, at any rate, is highly debatable and thus no case of any concealment of income/furnishing of inaccurate particulars of income per se could be successfully made out by the Revenue. The penalty imposed by the Revenue are thus reversed and cancelled. Assessee appeal allowed.
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2022 (8) TMI 244
Disallowance of expenditure incurred for non-business use - HELD THAT:- In the case of Seal For Life India (P.) Ltd [2018 (8) TMI 2086 - ITAT AHMEDABAD] ITAT held that ad-hoc disallowance could not be made from total travel and conveyance expenses incurred by assessee company on ground that expenses were in respect of use of vehicles by directors of assessee company was personal in nature.
In the case of Kushal Virendra Tandon [2021 (9) TMI 288 - ITAT MUMBAI] the ITAT held that in absence of specific finding by lower authorities regarding documentary evidence which pointed out that expenditure were not incurred wholly and exclusively for purpose of business or profession, disallowance of expenses in arbitrary manner on an ad-hoc basis has to be set aside.
In the case of ACIT v. Vanesa Cosmetics Adhoc [2021 (4) TMI 1191 - ITAT DELHI] additions made by Assessing Officer on account of interest expenses on car having element of personal use, tour and travelling expenses and conveyance expenses respectively, without assigning any reason would not be sustainable in eyes of law. In view of the consistent position taken by various Tribunals on the issue of disallowablility of expenses on purely adhoc basis, without the AO having rejected books of accounts, including the jurisdictional Rajkot ITAT, we are hereby allowing the assessee’s appeal in respect of the ad-hoc disallowance. - Decided in favour of assessee.
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2022 (8) TMI 249
Capital gain - Nature of land sold - capital asset or agricultural land - whether lands sold by the assessee are non-agricultural lands and fall within the definition of capital assets under Section 2(14)(iii) and therefore attract tax on the Capital gains? - HELD THAT:- Section 2(14)(iii)(b) of the Act, prior to amendment, does not indicate measurement of distance aerially. We have also perused the Notification dated 06.01.1994 relied upon by Shri. Shankar. In column No.4 of the Schedule to the Notification, the distance is mentioned as 8 kms. from municipal limits in all directions.
It is salutary principle of interpretation of law that a provision of law must be understood in its plain meaning and the effect should be given to each and every word employed therein. Therefore, the language employed in the Act and the Notification cannot be stretched to include the word 'aerial'. As per the Certificate of the Tahasildar produced before the Assessing Officer and PWD Engineer's Certificate produced before the CIT(A), the distance between the lands in question and BBMP is more than 8 kms. Therefore, Shri. Sanmathi's contention with regard to the distance from the Municipal area fails.
Conversion of land - as argued admittedly, the lands have been converted and Tribunal was not justified in holding them as agricultural lands - HELD THAT:- As in the case on hand, the Tribunal has recorded that though the land was converted, the assessee had continued agricultural operations which was evident from the fact that the income derived from the agricultural operations declared by the assessee were accepted by the revenue - no evidence was brought on record by the revenue to suggest that the lands in question were used for any other purpose other than cultivation after conversion.
The Tribunal has also recorded a finding of fact in para 7.2.5 that the land was inspected by the Tribunal on 10.04.2014 and during the inspection the Tribunal had noticed that the subject property was a part of large tract of land having agricultural operations. There were fruit yielding trees. The Tribunal has also adverted to the certificate of Senior Assistant Director of Horticulture certifying that there were fruit yielding mangoes, sappota, coco, cashew, jackfruit, rose apple, guava trees aged 25 to 30 years.
It is settled that ITAT is the last fact finding authority. It has inspected the lands on 10.04.2014 and recorded a finding that agricultural operations were undertaken by the Assessees and there were trees aged 25-30 years on the land. Further, as per the Notification issued by the Central Government, the lands do not fall within 8 kms. from Municipality of Bangalore. Above all, assessments for the accounting years for the period from 2004-05 to 2009-10 have attained finality except for the period 2008-09. Thus order passed by the ITAT is based on evidence on record and does not call for any interference.
Lands cannot be treated as agricultural lands as they fall within the notified area under BIAPAA - HELD THAT:- As inclusion of lands in Special Zone cannot be a determining factor. mere inclusion of land without any infrastructure development does not convert the land into non-agricultural land. On appeal, the High Court in Smt. T. Urmila [2013 (7) TMI 1184 - TELANGANA HIGH COURT] has held that HADA is not a body within the meaning of clauses (a) and (b) of Section 2 (14) (iii) of the Act and affirmed the decision of the ITAT that the sale of said land did not form part of capital gains. Thus the argument of Shri. Sanmathi that the lands in these cases fall within the BIAPAA and therefore the sale of lands attract capital gains tax also fails.
Decided in favour of assessee.
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2022 (8) TMI 243
Disallowance u/s 36(1)(iii) - proportionate interest for fund utilized for business purpose - HELD THAT:- As investment made in debt mutual fund was part of business activity because funds being ideal for invested for earning income, the argument of counsel does not in any manner establish that investment in mutual fund is part of the business activity of the assessee. The assessee has clearly admitted that it was engaged in advancing loan to corporate and bill discounting. In the profit loss account, the assessee has shown interest income from advancing loan only and this activity of investment in mutual fund is not the business activity irrespective of the fact that ideal funds have been invested. The funds have not been invested due to business or commercial expediency, and same have been invested for earning income on ideal funds. Therefore, interest corresponding to borrowed money utilized in said investment is disallowed. The ground No. 1 of the appeal of the assessee accordingly is dismissed.
Calculation of the funds utilised for business purpose - HELD THAT:- The amount of interest allowable was required to be considered after including above two amounts. Accordingly, we accept this contention of the assessee. We set aside the order of the Ld. CIT(A) on the issue in dispute and restore the matter to the file of the AO for re-computation of the amount of the interest allowable in terms of section 36(1)(iii) in view of the plea of including the amount representing doubtful debt and representing as amount lying in bank account for funds utilized for business purposes. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. In the result, the ground No. 2 of the appeal is partly allowed for statistical purposes.
Capitalization of the amount of interest disallowed u/s 36(1)(iii) - HELD THAT:- Here the assessee is claiming that if interest corresponding to investment in mutual funds is not allowed as revenue expenditure, then same should be treated as cost of acquisition of the said mutual fund. We are of the opinion that the issue of claim of the interest amount as cost of acquisition will arise at the time of the sale of the said mutual funds and therefore issue is premature at this stage, therefore, we are not adjudicating upon the said issue. The ground No. 3 of the appeal is accordingly dismissed.
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2022 (8) TMI 242
Disallowance of expenses u/s 14A - as argued assessee did not receive any dividend and hence did not make any disallowance under section 14A - CIT(A) deleted the disallowance - HELD THAT:- Since the assessee has not earned in dividend income, no disallowance is called for as per the decision rendered in the case of PCIT Vs. Il & Fs Energy Development Company (2017 (8) TMI 732 - DELHI HIGH COURT]. Since the decision rendered by Ld CIT(A) gets support from the above said decision, we do not find any reason to interfere with the order passed by him on this issue.
Disallowance of Provision for inventory written off - AO accepted that the debit made in the profit and loss account and reduction made in material consumption have mutual effect but since the closing stock of raw material is resultant figure after adjustment he took the view that the same has resulted in double deduction - HELD THAT:- We noticed that the Ld CIT(A) had confirmed identical disallowance made in AY 2009-10 and hence the assessee had challenged the same before Tribunal in A.Y. 2009-10 and the ITAT has deleted the disallowance by following the decision rendered by the Tribunal in assessee’s own case in A.Y. 2008-09.
Thus we notice that the assessee has done an accounting adjustment only, which may not lead to double deduction as presumed by the AO. Accordingly, following the order passed by the Tribunal in AY 2009-10, we confirm the relief granted by learned CIT(A) on this issue.
Disallowance of interest expenditure relating to loan given to the subsidiary - AO noticed that the assessee has advanced interest free loan to its subsidiary, group and associate companies, accordingly he disallowed proportionate interest expenditure u/s 36(1)(iii) - HELD THAT:- We notice that the Tribunal has deleted identical disallowance made in the earlier years on the ground that the loans to subsidiaries & group companies have been given out of own funds. During the current year, it is noticed from the order passed by Ld CIT(A), the outstanding amount of loan due from sister concerns - However, we could not find details of own funds/interest free funds available with the assessee. In the absence of relevant details, we have no other option but to restore this issue to the file of AO for examining this issue by following the ratio of the decision rendered by the Tribunal in the hands of the assessee in the earlier years after verifying relevant facts. Accordingly, we restore this issue to the file of AO.
Disallowance of bad debts claim - AO disallowed the claim observing that the assessee has not furnished any proof regarding its liability as per provisions of section 36(1)(vii) read with section 36(2) - CIT-A allowed the claim - HELD THAT:- In this year, the break-up details of bad debts written off have not be furnished. The main grievance of the AO is that the assessee has not proved the compliance of conditions prescribed in sec. 36(2) of the Act, i.e., the amount claimed as bad debts has been offered as income in the current year or in any of the earlier years. We notice that the Ld CIT(A) has also not examined this aspect. Accordingly, we are of the view that this issue also requires fresh examination at the end of AO. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of AO for examining it afresh. The assessee is also directed to furnish the details of compliance of requirement of sec.36(2) of the Act to the AO.
Revenue appeal is partly allowed.
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2022 (8) TMI 241
Revision u/s 263 - deduction /exemption u/s 10(24) by accepting the income /receipts of the assessee under the head ‘Income from other sources’ - HELD THAT:- It is an admitted fact that the assessee is a registered Trade Union of Film and Television Writers registered under the Trade Union Act, 1926. The assessee holds certificate of registration of Trade Union since 1960 earlier in the name of ‘Film Writer’s Association, Bombay’ subsequently was re-named as ‘Screen Writer’s Association’. The terms of constitution of Association contains various clause which on perusal does not appear to us to have any business activity. It is trite to reproduce the aims and objectives of the association for better understanding of the functions of the association.
PCIT said that “Any receipt which is a direct consequence of its core activities will always form part of income from business and profession, irrespective of whatever name is lent to the receipt” does not hold good and is according to our considered opinion a mere conjecture and surmises. The receipts of the assessee under various heads are those collected from its members namely Life Member, Regular Member, Associate Member and fellow Member. As admittedly accepted that such association requires fund for the purpose of carrying out its activities and such funds can be raised by charging its member various fees such as admission fees, admission form fee, confederation fees, constitution book fees, ID card fees, Life membership fee, registration fee, etc. This undoubtedly will not fall under the category of business activity as there are no profit motive in such association.
Assessee is not a business entity and does not work for profit. It is an association for the welfare of certain category of persons who writes in the film industry and other audio visual media and its objective is to protect the interest of its members though there is income generated not for profit but for the purpose of the welfare of the association and its members. PCIT has failed to establish that it is a business entity and hence the order of the PCIT is directed to be quashed, thereby allowing the claim of deduction /exemption made by the assessee u/s 10(24) - Decided in favour of assessee.
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Customs
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2022 (8) TMI 238
Levy of penalty on the appellant u/s 112(b) of the Customs Act, 1962 of the Customs Act - smuggling of cigarettes of foreign origin from Singapore - HELD THAT:- The only allegation against this appellant is that he introduced the actual importer Habib-uz-Zaman and Badi-uz-Zaman to the IEC holder, who agreed for the use of his IEC on consideration agreed to be provided by Habib-uz-Zaman. Thereafter, there is no role of this appellant forthcoming. None of the co-noticee has stated anything against this appellant save and except that he has introduced the importer and the IEC holder.
Thus, none of the condition as stipulated in Section 112(b) of the Act is attracted for imposing penalty - Appeal allowed - decided in favor of appellant.
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2022 (8) TMI 239
Seeking grant of anticipatory bail - illegal import of white sugar from foreign country - payment of custom duty assessed to the tune of Rs.16.17 crores - HELD THAT:- On the last date of hearing i.e. 30.05.2022, petitioner – Harish Goyal had been directed to pay an amount of Rs.4 crores, which has already been deposited, making total paid amount as Rs.13.56 crores approximately out of total custom duty to the tune of Rs.16.17 crores. Thus, this Court is of the opinion that a substantial amount already stands paid. In these circumstances, this Court in exercise of inherent powers conferred under Section 482 Cr.P.C. accepts the petition on behalf of petitioner - Rajesh Goyal i.e. CRM-M-18759- 2022 and the time afforded by the trial Court for depositing the balance amount out of Rs.16.17 crores is extended upto 30.11.2022. In case, the said amount is not deposited by the said date, the trial Court would be free to pass any order as deemed appropriate in the facts and circumstances of the case. It is made clear that no further application for extension of time shall be entertained by this Court.
Having regard to the factual position, regarding deposit of the substantial amount of Rs.13.56 crores approximately, this Court does not deems it to be a case warranting custodial interrogation. The petition filed on behalf of petitioner – Harish Goyal i.e. CRM-M-20066-2022 is also accepted and the interim directions issued by this Court vide order dated 30.05.2022 are hereby made absolute subject to the condition that the petitioner shall join investigation as and when called upon to do so and cooperate with the Investigating Officer and shall also abide by the conditions as provided under Section 438 (2) Cr.P.C.
Application disposed off.
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2022 (8) TMI 237
Valuation of imported consignments - Linen Yarn, Ramie Yarn and other misc. items from various overseas suppliers, based in China - rejection of declared value - redetermination of the rejected value - retraction of relied statements - Section 28 of Customs Act,1962 - HELD THAT:- The requirements of Section 17 ibid have not been complied with diligently by the Customs department inasmuch as the value declared by the importer at the stage of self-assessment was not disputed, the payments made towards the duty liability was accepted and that the disputed goods were also cleared for the intended purpose. These facts are evidenced for the findings recorded in the impugned order at paragraphs 5.9, 6.1(ii) and (iv) - it can be concluded that in absence of non-compliance of the provisions contained in Section 17 ibid, more particularly, sub-section (5) therein, the assessments cannot be considered as complete or final.
The provisions with regard to search of premises are contained in Section 105 ibid. It has been mandated that the provisions of Code of Criminal Procedure, 1898 relating to searches shall, as the case may be, apply to searches conducted under the Customs Act, 1962. The basic purpose and objective of drawing Panchanama has been made clear in Section 100(4) in the said code. As per the statutory mandates and the law laid down by the judicial forums, the purpose for drawing the Panchanama is to conveyance the court that the officer-in-charge has in fact carried out the investigation, search or seizure, if any, and have acted upon the directions of the court and guard the case from unfair dealings on the part of the officers - it is apparent that the manner of drawing a Panchanama prescribed in the statute has not been scrupulous followed by the Department. It is also an admitted fact on record that excepting the Panchanama used as a corroborative piece of evidence; no substantive documents were relied upon to strengthen the case of Revenue that there was mis-declaration of goods.
Section 138C ibid deals with the situation, where the computer printouts cannot be considered having evidentiary value in certain circumstances. Various conditions have been prescribed under the statute. Admittedly, in this case, the prescribed conditions have not at all been complied with by the department. More particularly, the required certificate in terms of sub-section (4) of Section 138C ibid has not been furnished by the department.
Further, in the case of TELE BRANDS (INDIA) PVT LTD, HITESH ISRANI, SHREENATH ENTERPRISES, PRAKASH CHANDRA PANDYA, GNG & CO, NANDGOPAL NAIDU VERSUS COMMISSIONER OF CUSTOMS (IMPORT) , MUMBAI [2016 (1) TMI 97 - CESTAT MUMBAI], the Tribunal by relying upon various authoritative judgments has also held that the computer printouts allegedly recovered from the computer of the assessee cannot be relied upon as admissible evidence, in absence of compliance of the conditions laid down in Section 138C ibid - In the instant case, it is not established that the computer in question was in regular use by the appellant in the course of his business. No certificate whatsoever, as required under the provisions of Section 138C (2) was obtained. It is settled proposition of law that if a certain act is to be done by a certain authority, in a particular manner, the same should be done in the manner in which it is ordained. There are no short cuts in investigation.
Seizure of CPU and alleged data retrieved - department has concluded that there was parallel set of invoices for the 21 Bills of Entry, wherein the actual invoice values have been shown, which were less than the declared invoice values - HELD THAT:- The procedures laid down under Section 138C have not been observed by the department, in addition to non mentioning of the details of the CPU, the place of installation in the premise, custodian of the CPU etc. - the documents retrieved, lost their evidentiary value and cannot be relied upon for upholding the charges of undervaluation of goods and demand of the differential duty.
The higher insured value of consignments and payment of premium to the insurance companies cannot be the justifiable ground for rejection of the transaction value, as several factors are involved for negotiation between the parties to the contract of sale, including the insurance companies. Higher value may be declared for insurance purposes for claiming higher compensation in case or damaged to the insured goods. Moreover, there is every chance that the appellants have mis-declared the value to the insurance companies. Such mis- declaration at the best may be an offence under some other law but cannot be a conclusive proof for establishing undervaluation of imported goods - Department has not conducted any enquiry to find out the reasons for declaring high value for insurance policies by the overseas entity and as to whether such values were correct - the rejection of declared value, on the basis of value declared to insurer, is not legal, proper and justified.
Retraction of statements - HELD THAT:- The statements were recorded by the department from Shri Mahesh Chandra Sharma on different dates in a span of 3 years. However, the copies of same were not furnished to the appellant immediately on completion of the summon proceedings. Upon receipt of the SCN together with the RUD’s, the appellant came to know about the content in the statements, though made by him and thus, had sent the retraction letter within the reasonable time. Thus, it cannot be said that there is inordinate delay in filing the retraction letter. Further, the letter of retraction cannot be discarded on such ground, without examining the genuineness of the transactions and for that purpose, to verify the authenticity of available documents and those retrieved during the course of investigation, which admittedly has not been done by the department. In this context, the law is well settled that merely because an assessee has, under the stress of investigation, signed a statement admitting tax liability and having also made a few payments as per the statement, it cannot lead to self- assessment or self-ascertainment - The whole case cannot rest simply on the basis of a retracted statement though belatedly.
Thus, it is evident that none of the evidences relied upon by the department, to allege the under valuation resorted to by the appellants, stand the scrutiny of Law - the department reliance on retracted statements, documents retrieved from computer without following due procedure as per law and the arguments on the basis of insurance policies fall flat - appeal allowed.
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2022 (8) TMI 240
Inadvertent mistake in checking the column ‘N’ instead of ‘Y’ - when right from the very beginning the respondent had declared the intention to claim the rewards under the MEIS (Merchandise Export from India Scheme) - HELD THAT:- The special leave petition stands dismissed.
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Insolvency & Bankruptcy
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2022 (8) TMI 236
Competency of Adjudicating Authority to pass order under Section 66 of IBC during currency of moratorium under Section 14 of IBC - core contention of the appellant is that the prohibition under Section 14 (1) (a) is applicable to Section 66 of IBC also - HELD THAT:- In the present facts of the case there is absolutely no inconsistency or repugnancy between Section 14 (1) (a) and Section 66 of IBC. Section 14 of IBC is a bar against institution and prosecution of any suits or proceedings or execution of orders and decrees in other courts or Tribunals but not a bar to pass appropriate order in the pending proceedings against the resolution professional or suspended directors and related parties, before the Adjudicating Authority, during the insolvency resolution process or liquidation process.
Section 66 of IBC empowered the Tribunal to pass appropriate orders when the suspended directors or insolvency professional of the Corporate Debtor carried on fraudulent trading or business during resolution process. Therefore, the Adjudicating Authority passed the impugned order only by exercising power that conferred on it by Section 66 of IBC. Hence, the contention that during moratorium, the Adjudicating authority shall not pass an order impugned in this appeal is unsustainable, without any merit.
Section 60 (5) (a) of IBC permits the Adjudicating Authority to pass any order on any application or proceeding by or against the corporate debtor or corporate person notwithstanding anything to the contrary contained in any other law for the time being in force. Non-obstante clause contained in Section 60 (5) authorizes the Tribunal to pass such orders and the present order is one such order passed under Section 66 of IBC, exercising power under Section 60 (5) (a) of IBC - on harmonious construction of Section 14 (1) (a), Section 66 read with Section 60 (5) (a), to make the statute (IBC) effective and workable, that the order passed by the Adjudicating Authority is in accordance with law, warrants no interference of this Tribunal.
The appeal is liable to be dismissed.
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2022 (8) TMI 235
Scope of IBC - dishonor of cheque - compounding of offences - Recovery of the dues - whether the Section 7 Application admitted against a Solvent Company, in the background where the Company has issued two cheques as security for the amount lent, and one cheque amount has been paid, (pursuant to the Order of the Trial Court under Section 138 of the NI Act, 1881, to compound one of the cases), and for the balance second cheque amount, does the initiation of Insolvency Proceedings fall within the ambit of the scope, objective and spirit of the Code which is ‘Resolution’ and not ‘Recovery’? - Whether the Adjudicating Authority while admitting a Section 7 Application, as in this case, examine only if there is a ‘Debt’ and ‘Default’ but also assess if the intent of the Applicant is primarily only ‘Recovery of the dues’?
HELD THAT:- From the particulars of ‘Financial Debt’, it is clear that the amount claimed as ‘default’ is Rs.87,50,000/- which is inclusive of cheque amount of Rs.57,00,000/- issued on 01.09.2016 and against which the ‘Corporate Debtor’ paid an amount of Rs.67,90,000/- vide a Demand Draft dated 09.09.2019 before the Trial Court to compound one of the cases. It is an admitted fact that the said payment led to the closure of Case No. 1505 of 2017 which was filed for the dishonour of the cheque of Rs.57,00,000/- - In Part IV of the Application, the debt amount is claimed to be Rs.87,50,000/-. It is pertinent to mention that the said Application was filed on 30.11.2018 while there were parallel proceedings for recovery of the amount under Section 138 of the NI Act, 1881 before the District Court, Gurgaon.
The amounts claimed pertain to the period prior to the date of Notification. We also do not wish to delve into the other submissions of the Appellant regarding the nature of transactions, absence of Financial Contract, non-registration of debt with the information utility whether interest at 18% per annum was ever concluded between the parties except for reference in the legal Notice issued by the second Respondent.
The Preamble of IBC is carefully worded to describe the spirit and objective of the Code to be ‘Reorganisation’ and ‘Insolvency Resolution’, specifically omitting the word ‘Recovery’. The Parliament has made a conscious effort to ensure that there is a significant difference between ‘Resolution’ and ‘Recovery’ - Section 65(1) of the Code does not expressly mention ‘Debt Recovery Action’ under ‘for any purpose other than resolution of insolvency..’, keeping in view the factual occurrence of the events of this particular matter, we hold that the ‘intent’ may not be a ‘malafide intent’, but is nevertheless a fundamental attempt to obtain an edge/ advantage / an upper hand in ‘recovering their dues’.
‘A Recovery Proceeding’ of this nature does fall within the scope and ambit of the words ‘for any purpose other than Resolution’, as defined under Section 65 (1) of the Code - this Appeal is allowed and the Order of the Adjudicating Authority is set aside.
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2022 (8) TMI 234
Appointment of IRP - Learned Adjudicating Authority was of the view that the present IRP is eligible to be appointed as an RP since there is no adverse comments against him and there is no reason to replace him - whether the decision taken by the CoC in their commercial wisdom can be interfered with? - HELD THAT:- Admittedly, the Appellant had filed the Application before the Learned Adjudicating Authority under Section 22(3)(b) of the I&B Code, 2016 with a specific prayer to appoint Shri CA Mahalingam Suresh Kumar Insolvency Professional as the Resolution Professional of the Corporate Debtor. The Application filed by the Appellant is in accordance with law and rightly invoked the provisions of law. As per sub-section (3) of Section 22, the Committee of Creditors in its 1st Meeting by a majority vote not less than 66% of the voting share either to continue the IRP as RP under sub-clause (a) of sub-section (3) - Since the Appellant had complied with the provision of law as mandated and the Adjudicating Authority ought to have considered the same without going into the other technicalities. When the Applicant comply with the provisions of law and there is no scope to reject the prayer or relief as sought by the Applicant.
In the present case, admittedly the 1st CoC was held on 21.01.2022 and at Agenda Item No. B-4 the CoC in accordance with Section 22(2) of the I&B Code, 2016, was resolved unanimously resolved for appointment of Shri CA Mahalingam Suresh Kumar as the Resolution Professional in respect of the Corporate Debtor. Thus, it can be seen that the Appellant is having 98.03% voting share in the Committee of Creditors filed the Application for appointment of RP, hence the voting share of the Appellant in passing the Resolution is much more than the required voting percentage i.e. 66% - This Tribunal is of the view that, since two Members of CoC participated it is deemed 100% voting share in favour of the Resolution and it is a unanimous. In any case, the Appellant is having the majority voting share accorded the Resolution for appointment of new RP.
In view of the decision of the Hon’ble Supreme Court that the commercial wisdom of the CoC is paramount and cannot be interfered with by the Tribunals. Further, the provisions of law empower the CoC contemplated under Section 22 of the I&B Code, 2016 either to continue the IRP as RP or replace the IRP. When the provisions are unambiguous and authorises the CoC to act in accordance with law the same cannot be interfered with by the Tribunals unless and until it is arbitrary, illegal and irrational and dehors the provisions of the Code and the Rules.
This Tribunal comes to an irresistible and inescapable conclusion that the Appellant has made a prima-facie case to be interfered with the order passed by the Adjudicating Authority - Appeal allowed.
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2022 (8) TMI 233
Seeking to convene meeting of unsecured creditors - Section 421 of the Companies Act, 2013 - HELD THAT:- The Learned PCS with the permission of this Tribunal filed Notes on Submission dated 16.06.2022, which was received on 17.06.2022 by the registry of NCLAT, Chennai. At para 18 of Page 3, it is stated that all the unsecured creditors (49) have been fully paid. From the list as enclosed and from the Notes of Submission, it is unequivocal that the unsecured creditors have been paid fully.
Since the unsecured creditors have been fully paid and no other issue involved in this Appeal, therefore, this Tribunal comes to a resultant conclusion that no meeting of unsecured creditors is warranted.
The direction passed by the NCLT dated 01.06.2022 with regard to convening the meeting of unsecured creditors of Appellant No.1 (Demerged Company) is dispensed with - Appeal allowed.
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2022 (8) TMI 232
Revocation of liquidation process enabling the Corporate Debtor to revive and reconstruct by implementing the scheme sanctioned - qualification of the Respondents to be scheme proponents under Sections 230 to 232 is in contravention to Section 29A read with Section 35(1)(f) and the IBBI Regulations - payment of fee to the Appellant stating that the Adjudicating Authority erroneously interpreted the impugned order - liquidator’s fee will be payable only as per the occurrence of the event reflected in the table - HELD THAT:- In view of the directions passed by the Adjudicating Authority, the Appellant obtained an affidavit from the Respondents dated 17.01.2020, whereby the Respondents have clearly stated that they were eligible to submit the scheme under Sections 230-232 of the Companies Act, 2013 and did not suffer from any disqualification under Section 29A of the Code - The order of the Adjudicating Authority dated 10.01.2020 has not been appealed by the Appellant and the said order has attained finality. Further, the Appellant filed its report before the Adjudicating Authority after receipt of affidavit from the Respondents.
This Tribunal is also of view that the Appellant filed the present Appeal on 05.10.2020 whereas the limitation period expires on 09.02.2020 and the Appellant has not filed any application seeking condonation of delay. Even otherwise, this Tribunal cannot condone the delay beyond the period as prescribed under Section 61(2) of the I&B Code, 2016. On this ground itself the Appeal is liable to be dismissed to the extent challenging the order dated 10.01.2020. However, this Tribunal has dealt with the issue even on merits to give a quietus to the litigation initiated by the Appellant.
From the sequence of events, the Respondent have submitted scheme as directed by this Tribunal. The consequences thereof follow namely convening meeting of creditors and shareholders and filing an application before the Adjudicating Authority seeking approval of the scheme as per the directions of this Tribunal - The Appellant is a party even to the Appeal filed by the promoters before this Tribunal in appeal and subsequent to all other proceedings. Being a party to the proceedings the Appellant is bound by the decisions of the Adjudicating Authority and this Tribunal and the precedents of the Hon’ble Supreme Court.
The order of the Adjudicating Authority dated 10.01.2020 to which the Appellant is a party has not challenged the said order dated 10.01.2020 and the same has attained finality. Therefore, the Appellant is estopped from challenging the said order in this Appeal. The filing of the present Appeal is an abuse of process of law and wasting the precious time of this Tribunal - this Tribunal comes to an irresistible and inescapable conclusion that the Appeal is frivolous and vexatious and the same is liable to be dismissed.
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2022 (8) TMI 231
Preferential Transactions or not - documents being “Transaction Audit Report” and “Forensic Audit Report” were not provided to the Appellants - whether the impugned transactions fall within the ambit of Sections 43, 45 or 66 of the Code? - NCLT admitted the claim - HELD THAT:- For comprehensive and fair scrutiny of books of accounts by an expert person, the Respondent in exercise of powers under Regulation 7 of IBBI (Liquidation Process) Regulations, 2016 appointed professional Chartered Accountant/Auditor to conduct a detailed and thorough transaction audit of the Corporate Debtor - The objectives of the audit is to identify preferential transactions, undervalued transactions, transactions defrauding creditors, identify extortionate credit transactions and fraudulent trading or wrongful trading. The auditor has given the report on all the above observations. However, the Adjudicating Authority confined to only preferential transactions of an amount of Rs.1,38,78,397/-.
The Auditor also gave his observations and conclusions on avoidance of undervalue transactions, defrauding creditors and fraudulent trading or wrongful trading. At the end of the report, it is seen that the Auditor addressed letters to Shri Reji Sivankutty, Shri Tinu Jose (Suspended Director) and Giriraj & Associates previous Auditor requesting them to provide books of accounts for carrying out the audit. In the report at page 156 under the caption limitation of scope it is mentioned that “the Corporate Debtor had discontinued their operations from August 2018. Presently, they neither have a registered office nor employees from who we could extract documents and information for the purpose of our audit - in the present case, though the Respondent/Liquidator mentioned various provision of the I&B Code, however a specific relief sought praying the Adjudicating Authority to hold that the loan of Rs.42,50,397/- repaid to the Director during the Financial Year 2017-18 is in preference to trade payables, statutory dues and salary to staff, during that year. Further, it is prayed that to hold that Rs.6,28,000/- paid to Mrs. Revathy Radhakrishnan w/o Suspended Managing Director on 01.07.2018 as loan to be repaid to the Corporate Debtor with interest and cost thereof.
This Tribunal is of the view that the Respondent/Liquidator made the application before the Adjudicating Authority after having sufficient evidence/material to establish the case of the Appellants beyond reasonable doubt. The basis for the application before the Adjudicating Authority is the report of the auditor and the observations and conclusions arrived at by the auditor. Therefore, the ratio arrived at by the Adjudicating Authority is free from any legal infirmity, hence no interference is called for - this Tribunal comes to an irresistible conclusion that the Appeal sans merit - Appeal dismissed.
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2022 (8) TMI 230
Maintainability of application - initiation of CIRP - Corporate Debtors failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - whether the Respondents claim fall within the category of Financial Creditors and whether there exists a debt and any default occurred there at? - HELD THAT:- In the present case, admittedly, the Respondents are the Financial Creditors within the meaning of sub-section (7) of Section 5 of the I&B Code, 2016 and the debt borrowed by the Corporate Debtor is a financial debt within the meaning of sub-section (8) of Section 5, which establishes from the loan agreements all dated 04.12.2019 and from the information utility record. Admittedly, the debt has not been repaid to the Financial Creditors - The Learned Counsel for the Appellant contend that there is a collusion between the Respondents/Financial Creditors and the Corporate Debtor is concerned, the NCLT’s being the Adjudicating Authorities under the IBC and exercising its summary jurisdiction, cannot go into the aspect of collusion, fraud etc. The Adjudicating Authority (NCLT’s) couched with the powers to be exercisable as enshrined in the I&B Code, 2016. For the purpose of entertaining Sections 7, 9 or 10, of the I&B Code, the Adjudicating Authority has to see whether debt is payable on the part of the Corporate Debtor and committed default. In such cases, the Adjudicating Authority invariably admit the application under the above provisions of law.
This Tribunal is of the view that in the present case, the debt and default has been proved and the Adjudicating Authority rightly admitted the Application under Section 7.
The debt has been proved from the documents available on records including information utility and the default has occurred in clear terms - appeal dismissed.
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Central Excise
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2022 (8) TMI 228
CENVAT Credit availed by the appellant company on capital goods - credit has been availed on the strength of excise invoices issued by the manufacturer (OEM) of equipment - invocation of extended period of limitation - HELD THAT:- The Ld. Commissioner in para no. 79 to 81 has arrived at the conclusion that though the entire work for construction of power plant (CPP) is a turnkey contract on EPC basis, the work orders have been segregated to split into supply of goods and works & services for their mutual convenience to enable the contractor to claim deduction of value of goods for arriving at value of taxable services for charging service tax. It is found that by making the above observation, the Ld. Commissioner has not conclusively drawn any inference to state whether there is any embargo to avail Cenvat Credit on capital goods, more so ever when there is no dispute with regard to availment of credit on input service in the hands of the appellant.
The Ld. Commissioner made a fundamental error while observing that payments have not been made to the original supplier (OEMs) but to the Contractor against the separate set of commercial invoices - In any case, whether or not the payment has been made against the excise invoices issued by the OEM or the commercial invoice issued by the Contractor who has procured the goods on behalf of the Appellant for use in the power plant is completely irrelevant. The Ld. Commissioner has thus made a fundamental error while taking into consideration the above payment related aspect while deciding the eligibility to avail credit on capital goods.
Extended period of limitation - HELD THAT:- There are no positive evidence to show that there was any fraud or willful suppression inasmuch as the availment of credit has been duly shown in the monthly returns and credit entries have been duly recorded in the Credit Register which form part of the Annexure to SCN. Thus, there are no ingredient to justify invocation of extended period of limitation and therefore, the impugned proceedings are also barred by limitation.
The order cannot be sustained and is therefore set aside - Penalty also set aside - appeal allowed - decided in favor of appellant.
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2022 (8) TMI 227
Clandestine removal - MS Ingots - corroborative evidences or not - whole case of Revenue is based on third party record as well as statement of the Director of M/s PIL - HELD THAT:- There is no corroboration of the allegation of Revenue with the record of this appellant. Nor there is any admission of the alleged clandestine transaction on the part of the appellant. Further, the third party record are not corroborated and unsubstantiated. Further, such third party record and the statement of the Director of M/s PIL cannot be used against this appellant both for non joinder of the parties and also failure on the part of Revenue to examine Sh. Pankaj Agarwal as its witness in the adjudication proceedings.
Appeal allowed - decided in favor of appellant.
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2022 (8) TMI 226
Benefit of Exemption Notification - On receipt of certain amounts for tools/dyes as well as for manufacture of motor vehicle parts, it was observed that the said motor vehicle parts have been cleared to M/s. Force Motors Ltd. without payment of Central Excise duty - Whether the appellant is liable to pay Excise duty on the impugned tools/dyes and that benefit of Notification No. 67/95-CE dated 16.03.1995 is not available to the appellant? - reversal of CENVAT credit - interest and penalty - HELD THAT:- Apparently and admittedly, the tools/dyes were not cleared by the appellant despite being manufactured by it and the duty liability has been denied claiming the benefit of exemption Notification No. 67/95 –CE dated 16.03.1995.
As observed from the Notification, the same is absolutely silent about the sale of manufactured goods to be a criteria for non applicability of said Notification. It only says that the goods to seek exemption should be the goods manufactured by the assessee and should have been retained by the assessee for further manufacture. Customized manufacture is also not the criteria for non-applicability of said Notification. Thus it is clear that the ground raised by the department supporting the order under challenge is not sustainable for denying the benefit of aforesaid Notification to the appellant. Further, there is no evidence by the department to show that the said goods were never captively consumed by the appellant - There is no denial to the fact the goods retained were used for further manufacture. This observation is sufficient to hold that the tools/dyes were kept with the appellant for the purpose of manufacturing motor vehicle parts in future also though only for M/s. Force Motors Ltd.
The appellant has challenged the findings on the ground that the cost received by the appellant towards the manufacture of tools/dyes has been amortized by the appellant and for the said reason also appellant is not liable to discharge any duty of excise thereupon. It is observed that the Adjudicating Authority below has not considered the said contention for want of evidence in the form of certificate of Chartered Engineer - Apparently and admittedly, the same is not the fact of the present case. Further the manufacturer therein has not amortized the cost of tools/dyes manufactured by him rather it included the said cost in the cost of components manufactured out of said tools/dyes. Apparently and admittedly this also is not the fact of the present case. That in the purchase order, the amount of cost of tools/dyes (moulds manufactured by the appellant) included in the cost of tools manufactured by the appellant out of said moulds but the tax invoices are revealing appropriate amortization of the cost of said moulds.
Appeal allowed - decided in favor of appellant.
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2022 (8) TMI 225
CENVAT Credit - CVD paid through Challan - non-fulfilment of export obligation - case of the department is that the challan is not a proper document in terms of Rule 9 of CCR, 2004 - whether the appellant is entitled for the cenvat credit on the strength of challan whereby the CVD was paid subsequent to the import of goods? - HELD THAT:- The very same issue has been considered by this Tribunal in the case of HUBERGROUP INDIA PVT LTD VERSUS C.C.E. & S.T. -DAMAN [2021 (11) TMI 945 - CESTAT AHMEDABAD] where it was held that in the instance case the original duty paying document is bill of entry and the challans are the documents on the strength of which additional duty has been paid. Thus, even going by the logic given by the Commissioner in the impugned order there is no bar on availing credit on the strength of challans. Thus, we find no merit in this argument of the Commissioner in the impugned order.
The issue is no longer res integra - Appeal allowed - decided in favor of appellant.
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2022 (8) TMI 229
Maintainability of appeal - monetary amount involved in the appeal - Interpretation and validity of Rule 8(3A) of the Central Excise Rules, 2002 - HELD THAT:- The Revenue should not have preferred the petition for special leave to appeal keeping in view the meager amount involved. In fact, the administrative expenses etc. may well be much higher than the tax involved.
The petition for special leave to appeal is dismissed.
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CST, VAT & Sales Tax
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2022 (8) TMI 224
Seeking to grant deduction on the freight charges received by the petitioner towards the crude oil supplied to its customer - Explanation 3 to Section 2(n) of the TNGST Act, 1959 - Rule 6 (c)(i) of TNGST Rules - HELD THAT:- Deduction of freight charges from turnover under Rule 6 (c)(i) of TNGST Rules, is admissible only if the two conditions set-out therein viz., (i) Freight must not be included in the price of the goods sold; and (ii) The amount charged by way of freight must be specified and charged separately, are cumulatively satisfied.
The examination of the 1st condition viz., whether freight forms part of the price of goods sold, would necessarily lead one to the question as to when the sale was completed, for which, the consistent view taken is that the expenses incurred for making the goods available to the purchaser or pre-sale expenses, would be liable to tax. The said test is also applicable, while examining the claim of deduction of freight from turnover while arriving at taxable turnover. The expenditure incurred by way of freight upto the place of sale, would form part of the price of the goods sold.
Price Ex- Factory or Works - conclusive delivery Ex-Factory or not - HELD THAT:- The price being ex-works may have no bearing on the claim of deduction of freight charges, if the delivery is not ex-works and the transfer of property in goods is postponed until the delivery of goods at the buyers premises, which we would think on the facts of the cases, takes place at the premises of MRL.
Relevance of transfer of property in determining the claim of deduction of freight charges - HELD THAT:- A claim for deduction of freight charges would have to be determined not on the basis of whether price is Ex-Works or F.O.R. Destination, instead for determining such deduction, the enquiry ought to be the point where the property passes and who bears the risk until the delivery. The freight charges until passing of property would form part of the “sale price”/taxable turnover. The fact that risk is borne by the seller until a particular point, is again prima facie indicative that the property does not pass until and unless it is shown that risk was borne by the seller in the capacity of an agent - in the present case, there is nothing to indicate that delivery is Ex-Narimannam/Nannilam. To the contrary, the concurrent finding of fact by all the three authorities viz., assessing officer, First Appellate Authority and the Tribunal is that the property passes only at the storage point of the buyer viz., MRL. Thus, the claim of deduction towards freight charges rejected by the Tribunal is on the basis of the finding of facts based on evidence, which ought not to be disturbed unless shown to be perverse or not based on evidence, which is not the case here.
Relevance of Instructions by Oil Coordination Committee - HELD THAT:- A reading of the instructions issued by the Oil Co-ordination Committee, apart from the fact that there is no indication that it has any statutory force, would also reveal that the producers are entitled to recover the transportation rates, as evident from a reading of Clause 6 of the communication dated 04.11.1992. Though Clause 1 speaks about the price of goods both onshore and offshore, the price is only “Basic Price”, which is again not indicative of whether the freight element is included or otherwise. Normally, the freight charges are not included in the basic price. It may also be relevant to note that assuming these instructions are executive/ administrative in nature, the same may override the terms of contract, but cannot override the statutory provisions, which mandate that freight would form part of the sale price/ taxable turnover if the same is pre-sale expenditure, but eligible for deduction in case it is a postsale expenditure.
Thus, there is nothing expressed in the Oil Coordination Committee Instructions, which indicate that the transportation is made by the producers as an agent after completion of sale necessary to claim the deduction. To the contrary, the findings of fact by all the authorities below and the nature of the commodity and the mode of transport would lead one to the conclusion that the claim of deduction of the freight element by the petitioner is liable to be rejected.
The freight charges form part of the price of the goods and thus, not entitled to deduction, in the absence of the petitioner showing that the property stood transferred in terms of the contract or Oil Co-ordination Committee instructions at the point of despatch i.e., Narimannam - petition dismissed.
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2022 (8) TMI 223
Interstate sate - consignment transfer/stock transfer - Declaration in Form F by bogus dealer - whether the claim for non-liability on consignment transfer/stock transfer in terms of Section 6 A of the Central Sales Tax Act, 1956 (CST Act) can be sustained, on the strength of declaration in "Form F" allegedly issued by a dealer, who was found to be bogus/nonexisting/ fictitious? - HELD THAT:- It may be true that once a statutory declaration is furnished, the recipient of such declaration cannot be held responsible for any incorrectness of the details filled in by the dealer issuing such declaration. However, the same cannot be understood to mean that a declaration in "Form F" or for that matter any declaration form of a dealer found to be non-existent/fictitious, which is nothing but a fraud played on the State, must also be extended the benefit of a valid declaration.
Yet another reason, as to why the Form “F” Declaration would be inadequate to claim the benefit under Section 6 A of the CST Act, once the dealer issuing the Form 'F' declaration is found to be non-existent/bogus, is also in view of the settled position that “fraud vitiates most solemn proceedings”.
There are no reasons to interfere with the orders of the 1st Respondent/Tamil Nadu Sales Tax Appellate Tribunal - petition dismissed.
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Indian Laws
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2022 (8) TMI 222
Dishonor of Cheque - principal ground before the learned Sessions Judge, the entire amount payable under the dishonoured cheques was cleared - Section 141 of the N. I. Act, 1881 - HELD THAT:- Evidently, it does not appear that the accused had specifically indicated the debt towards which the amount was to be appropriated. Section 59 of the Indian Contract Act provides for appropriation of payments by the debtor. Where the debtor makes a payment either with express intimation, or under circumstance implying that the payment is to be applied to the discharge of some particular debt, the payment, if accepted must be applied by the creditor to that particular debt.
Undoubtedly the attendant circumstances of a given case are required to be taken into account while exercising the discretion to close the proceedings in exercise of the power under Section 143 of the N.I. Act read with Section 258 of the Code. The nature of the underlying transaction, the nature of the relationship between the parties; jural and otherwise, the special damages which the complainant suffered on account of the dishonour of the cheque, the existence of pressing circumstances which make the payment of the amount covered by the cheque the essence of the transaction between the parties, the circumstances in which the amount could not be paid within the grace period under clause “c” of the proviso to Section 138 of the Act, the proximity of the payment or offer of payment to the institution of the complaint and the element of the bona fide, are few of the factors which bear upon the decision to close the proceedings.
The conspectus of discussion is that in the facts of the case at hand since the amount covered by the dishonoured cheques is indisputably paid, the Court would be justified in invoking the power under Section 143 read with Section 258 of the Code of Criminal Procedure to close the proceedings upon payment of interest and costs of proceedings - petition allowed.
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