TMI Tax Updates - e-Newsletter
September 25, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Refund of unutilised ITC - inverted duty structure - Denial on Input services - Contradictory Judgements on the same issue - GUJARAT HIGH COURT allows the credit while MADRAS HIGH COURT not
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GST:
Refund of unutilised ITC - inverted duty structure - Denial on Input services - Explanation to Section 54 uses the terms "inputs" and "input services" separately and distinctively, thereby indicating the legislative intent to distinguish one from the other - we are unable to countenance with the submission that the word ''inputs'' should be read so as to include ''input services'' merely because the undefined word ''output supplies'' is used in Section 54(3)(ii)- it is not necessary to interpret Rule 89(5) and, in particular, the definition of Net ITC therein so as to include the words input services. - HC
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GST:
Validity of Notifications - conflict with the recommendations made by Respondent No. 3 in its 15th Meeting - The impression of contradiction that appeared on comparison between the counter affidavit of Respondent No. 3 and the minutes of meeting has been resolved and conclusively settled. The matter has been deliberated by the body whose decision were called in question. We cannot sit in appeal and postulate that the decision of the Council is not what they have unwaveringly held it to be. - Petition dismissed - HC
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Income Tax:
Depreciation on Floor Space Index (FSI) - @ 10% or 25% - depreciation on intangible assets - having not filed appeal against such decision of CIT (A), revenue cannot now raise a dispute as to percentage of depreciation. No good ground to disturb the finding of the Tribunal on this point. - HC
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Income Tax:
Payment of tax collectable at source u/s 206C - Maintainability of Writ petition - The officer has only asked the petitioner to deposit the amount, through a Bank Draft, which is due and payable in accordance with law. In any event we clarify that the amount mentioned in the notice be not construed to be determination of the sum due and payable by the petitioner. - HC
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Income Tax:
Validity of the reopening of assessment - validity of the notice u/s 148 - wrong understanding of the legal position - The assessee, in the case on hand, chose the second option, which, in law, was permissible to be done by the assessee. Therefore, both the CIT(A) as well as the Tribunal fell in error in holding that the assessee was estopped from challenging the validity of the notice u/s 148 - HC
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Income Tax:
Exemption u/s 11 - the activities of the assessee's association cannot be termed either "trade" , "commerce" or "business" simply because the assessee association is receiving some charges or fees for rendering services on non- commercial principles to State Road Transport Undertakings and other concern members for a fee or charges. - AT
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Income Tax:
Loss of precious metal - Notional loss or actual loss - Abnormal loss incurred by the assessee can be treated as revenue expenditure to be allowable during this year or the abnormal loss can be amortised in 2 to 3 years. In our considered view no doubt the losses considerably high, we direct assessing officer to amortise the abnormal loss in 2 years that is 50% during this assessment year and balance in the next assessment year. - AT
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Income Tax:
Loss suffered by the assessee in respect of alleged unrecorded transactions - denial of set off against declared profit by wrongly invoking sec. 115BBE - - Amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. Accordingly, we hold that the assessee current loss is allowable to set off against the current year income. - AT
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Income Tax:
Disallowance of Cath Lab Expenses - During the month of May some specific procedures were also carried out, for which doctors were called for from Mumbai. Professional Fees paid to these doctors were also recovered from the patients and credited to Cath Lab Income A/C. Since the amount paid to doctors was separately considered under the head Professional fees paid, it resulted into enhancement of ratio between Cath lab Income and Cath Lab Expense. No merit in the disallowance so made by the A.O. - AT
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Income Tax:
Stay petition - authorised representative submitted that assessee did not have any assets available with it for furnishing of the security and therefore same cannot be given - Despite declining the stay on the merits of the issue but we are extending the Stay till 31st August, 2020, only for Covid-19 reasons. - AT
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Income Tax:
Exemption u/s 11 - Lease transactions - Merely because the other charitable trust guilty property for accommodation of the person covered under section 13(3) of the Act, such a fact ipso facto does not lead to the addition in the hands of the assessee without first clinching the issue with corroborative piece of evidence. We therefore, hold that there is no justification for addition made by the learned Assessing Officer by invoking the provisions under section 13(2 )( b) - AT
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Customs:
Time and date from which enhanced duty comes into effect - The presentation of the bill of entry under Section 46 is made electronically and is captured with time stamps in terms of the requirements of the Information Technology Act read with Rule 5(1) of the Information Technology (Electronic Service Delivery) Rules 2011. - Notification 5/2019 was uploaded in the e-gazette at a specific time and date and cannot apply to bills of entry which were presented on the customs automated EDI system prior to it, attracting the legal fiction set out in Regulation 4(2) of the 2018 Regulations. - SC
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Customs:
Valuation of imported goods -steel nuts - The evidence on record is not sufficient to determine the impugned goods either as ‘stainless steel’ or as ‘other ally steel’ and, in the absence of such evidence, the declaration cannot be faulted. There is no ground to dispute the valuation. Hence, the enhancement of values and detriment built upon alleged misdeclaration fails - AT
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Central Excise:
Clandestine Removal - illicit production of plywood on the basis of consumption of resin - The onus is definitely on the department to establish manufacture and clearance of such goods and also regarding the receipt of payment - In the absence of such investigation and evidence, the demand of duty cannot be sustained. - AT
TMI Short Notes
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2020 (9) TMI 931
Refund of unutilised Input Tax Credit - accumulation on account of being subjected to an inverted duty structure - constitutional validity of Section 54(3)(ii) of the Central Goods and Services Tax Act, 2017 - constitutional validity of amended Rule 89(5) of the Central Goods and Services Tax Rules, 2017 - ultra vires of Section 54 of the CGST Act and the Constitution of India - Whether it is necessary to read the word “inputs” in Section 54(3)(ii) as encompassing both goods and services so as to ensure that the said provision is not struck down? - Whether the words input services may be read into Section 54(3)(ii) as an exception to the general rule of casus omissus? - Whether the proviso to Section 54(3) qualifies and curtails the scope of the principal clause to the limited extent of specifying the two cases in which registered persons become eligible for a refund of the unutilised input tax credit? - Whether sub-clause (ii) of the proviso merely stipulates the eligibility conditions for claiming a refund of the unutilised input tax credit or whether it also curtails the entitlement to refund to unutilised input tax credit from a particular source, namely, input goods and excludes input services? - Whether the rule making power under Section 164 empowers the Central Government to make Rule 89(5) as amended? - Whether Rule 89(5) of the CGST Rules, as amended, is ultra vires Section 54(3) of the CGST Act? - Whether the definition of the term Net ITC, as contained in Rule 89(5), is liable to be read as encompassing both input goods and input services?
HELD THAT:- If the intention of Parliament was to curtail the quantity of unutilised input tax credit in respect of which a refund claim may be made, it would have been indicated in Section 54(3) by qualifying the words used therein. However, no such qualification is contained therein. As regards the proviso thereto, according to the learned counsel, they set out the two cases in which a registered person may claim a refund of the unutilised input tax credit. The first of these cases relates to zero-rated supplies made without payment of tax. This case pertains to exporters. Even among exporters, only those who make zero-rated supplies without payment of tax by executing a bond or undertaking would be entitled to a refund under Section 54(3). The exporters who undertake supplies upon payment of tax can claim a refund under Section 54(1) but not under Section 54(3). The second case pertains to registered persons who accumulate input tax credit on account of the rate of tax on input goods being higher than the rate of tax on output supplies.
Keeping in mind the scope, function and role of a proviso as adumbrated above, we closely examined the text of Section 54(3)(ii) in order to test the tenability of the rival contentions. We find that Section 54(3) undoubtedly enables a registered person to claim refund of any unutilised input tax credit. However, the principal or enacting clause is qualified by the proviso which states that “provided that no refund of unutilised input tax credit shall be allowed in cases other than” - Parliament has used a double negative in this proviso thereby making it abundantly clear that unless a registered person meets the requirements of clause (i) or (ii) of Sub-section 3, no refund would be allowed. On further examining sub-clause (ii), we find that it uses the phrase “where the credit accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies”.
Given the fact that we concluded that Section 54(3)(ii) enables a registered person to claim a refund of unutilised input tax credit only to the extent that such credit has accumulated on account of the rate of tax on input goods being higher than the rate of tax on output supplies, it remains to be considered whether Rule 89(5) is ultra vires the rule making power and Section 54(3). Keeping in mind that Section 164 confers power on the Central Government to frame rules for carrying out the provisions of the CGST Act and no fetters are discernible therein except that the rules should be in furtherance of the purposes of the CGST Act - Rule 89(5) would be intra vires the CGST Act and the rule making power if it is in line with Section 54(3)(ii) and ultra vires both Sections 54(3)(ii) and 164 if it is not.
Rule 89(5) of the CGST Rules, as amended, is intra vires both the general rule making power and Section 54(3) of the CGST Act. There is no dispute as regards the power to amend with retrospective effect either as such power is conferred under Section 164 of the CGST Act, albeit subject to the limitation that it cannot pre-date the date of entry into force of the CGST Act.
Constitutional Challenge - meaning of inputs - HELD THAT:- Explanation to Section 54 uses the terms "inputs" and "input services" separately and distinctively, thereby indicating the legislative intent to distinguish one from the other - we are unable to countenance Mr.Ghosh's submission that the word ''inputs'' should be read so as to include ''input services'' merely because the undefined word ''output supplies'' is used in Section 54(3)(ii) - it is concluded that both the statutory definition and the context point in the same direction, namely, that the word "inputs" encompasses all input goods, other than capital goods, and excludes input services.
Nature of Refund - HELD THAT:- Although there is a constitutional challenge in this case, the challenge is to a refund provision and this is not a refund claim arising out of a successful challenge to a provision under a tax statute that had imposed a liability. This issue can be approached from another perspective: would a registered person be entitled to such refund but for the statutory prescription in Section 54(3)(i) & (ii)? The answer is a resounding 'no'.
Validity of Classification - HELD THAT:- There is a classification of sources of unutilised input tax credit into sources that give rise to a right to refund, i.e. input goods, and those that do not, i.e. input services. As a corollary, registered persons may be entitled to full, partial or nil refund as regards unutilised input tax credit accumulating on account of being subject to an inverted duty structure - There is no doubt that the object and purpose of the present GST laws is to avoid the cascading of taxes and to impose a tax on consumption, be it goods or services. Thus, the long term objective appears to be to treat goods and services, as far as possible, similarly. Nonetheless, it must be borne in mind that this is an evolutionary process. By way of illustration, we may draw reference to the fact that the concept of input tax credit was not originally available under sales tax law and central excise law. It was first introduced in the form of MODVAT credit. MODVAT credit was initially available only in respect of goods.
After the introduction of service tax through the Finance Act, CENVAT credit was introduced and made available both in respect of goods and services. However, refund of unutilised input tax credit was not provided - Thereafter, the GST laws have been introduced which enable registered persons to avail input tax credit both on goods and services but there are restrictions as regards refund. When viewed objectively and holistically, we find that, under the GST laws, goods and services are treated similarly in certain respects but differently in other respects. Even with regard to rate of tax, almost all services attract a uniform rate of 18%, whereas goods are taxed at rates that vary considerably.
Entitlement to refund of unutilised input tax credit and not the availing of input tax credit - HELD THAT:- Under Section 54(3)(ii), Parliament has provided the right of refund only in respect of unutilised credit that accumulates on account of the rate of tax on input goods being higher than the rate of tax on output supplies. Goods and services have been treated differently from time immemorial, as reflected in the use of the expressions, quantum valebant, as regards the measure of payment for goods, and quantum meruit, as regards the measure of payment for services, supplied non-gratuitously and without a formal contract. While there has been a legislative trend towards a more uniform treatment as between goods and services, the distinction has certainly not been obliterated as is evident on perusal of the CGST Act, including provisions such as Sections 12 & 13, etc., which are specifically targeted at goods and services - Given the fact that we have concluded that Section 54(3)(ii), on a plain reading, does not violate Article 14, it is not necessary to draw definitive conclusions on the scope of reading down or to examine if the casus omissus rule should be deviated from in this case. Nonetheless, extensive submissions were advanced as regards reading down.
Following conclusions are reached at:
(1) Section 54(3)(ii) does not infringe Article 14.
(2) Refund is a statutory right and the extension of the benefit of refund only to the unutilised credit that accumulates on account of the rate of tax on input goods being higher than the rate of tax on output supplies by excluding unutilised input tax credit that accumulated on account of input services is a valid classification and a valid exercise of legislative power.
(3) Therefore, there is no necessity to adopt the interpretive device of reading down so as to save the constitutionality of Section 54(3)(ii).
(4) Section 54(3)(ii) curtails a refund claim to the unutilised credit that accumulates only on account of the rate of tax on input goods being higher than the rate of tax on output supplies. In other words, it qualifies and curtails not only the class of registered persons who are entitled to refund but also the imposes a source-based restriction on refund entitlement and, consequently, the quantum thereof.
(5) As a corollary, Rule 89(5) of the CGST Rules, as amended, is in conformity with Section 54(3)(ii).
Consequently, it is not necessary to interpret Rule 89(5) and, in particular, the definition of Net ITC therein so as to include the words input services.
All the writ petitions challenging the constitutional validity of Section 54(3)(ii) are dismissed.
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2020 (9) TMI 930
Demand of GST alongwith interest and penalty as well as encashment of 8 Bank Guarantee - detention of goods on the ground that e-way bills were faulty and undervalued and detention order passed - HELD THAT:- Admittedly, there is IGST demand of ₹ 2,36,63,256.00 with equal amount of penalty imposed, together the total dues comes to ₹ 4,73,26,512.00 - As against this, petitioner had paid IGST of ₹ 2,36,63,256.00. At the stage of preferring the first appeals petitioner had deposited 10% of the IGST dues amounting to ₹ 23,66,326.00. Thereafter while filing the second appeals under section 112 of the CGST Act petitioner deposited ₹ 47,32,651.00 being 20% of the IGST dues. Thus, petitioner had deposited an amount of ₹ 70,98,977.00 in addition to IGST dues already deposited. In all petitioner has deposited ₹ 3,07,62,233.00.
The amount covered by the eight bank guarantees is ₹ 4,73,26,512.00. If both the figures are added i.e., the amount covered by the bank guarantees and the dues paid by the petitioner, the amount would be ₹ 7,80,88,745.00 (₹ 4,73,26,512.00 + ₹ 3,07,62,233.00) which amount is now with the respondents as against demand and penalty of ₹ 4,73,26,512.00. From the above, it is evident that an amount of ₹ 3,07,62,233.00 (₹ 7,80,88,745.00 ₹ 4,73,26,512.00) is lying in excess with the respondents. Even if the appeals filed by the petitioner under section 112 of the CGST Act are dismissed, petitioner would be required to pay a further amount of ₹ 1,65,64,279.00 only whereas respondents are holding onto an amount of ₹ 3,07,62,233.00 of the petitioner much in excess of the dues.
There is provision for filing further appeal to the appellate tribunal under Section 112. As per sub-section (1), any person who is aggrieved by an order passed against him under Section 107 or by the revisional authority under Section 108 may prefer appeal to the appellate tribunal against such order within three months from the date on which the order sought to be appealed against is communicated to the aggrieved person. As per sub-section 8(b), no appeal shall be filed under subsection (1) unless the appellant has paid a sum equal to 20% of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of Section 107. Subsection (9) clarifies that when the appellant pays the pre-deposit as per sub-section (8), recovery proceedings for the balance amount shall be deemed to be stayed till disposal of the appeal - That being the position and without entering into the controversy as to whether respondent No.4 received request of the petitioner for extension of the bank guarantees before encashment, we are of the view that having regard to the facts and circumstances of the case, the following directions will meet the ends of justice:-
a. Respondent Nos.3 and 4 shall refund the amount of ₹ 4,73,26,512.00 covered by the eight encashed bank guarantees with applicable statutory interest thereon to the petitioner within a period of four weeks from the date of receipt of a copy of this order;
b. Petitioner to furnish fresh bank guarantee(s)from nationalized bank to respondent No.4 for an amount of ₹ 1,65,64,279.00 covering the balance amount of penalty imposed on the petitioner within a period of four weeks from the date of receipt of a copy of this order.
Petition disposed off.
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2020 (9) TMI 929
Validity of Notifications - N/N. 1/2017-Central Tax (Rate) dated 28.06.2017 issued by Respondent No. 1 under Section 9(1) of the CGST Act, 2017 - N/N.1/2017Integrated Tax (Rate) dated 28.06.2017 also issued by Respondent No. 1 under Section 5(1) of the IGST Act, 2017 - N/N. 1/2017-State Tax (Rate) dated 30.06.2017 issued by Respondent No.2 under Section 9(1) of the DGST Act, 2017 -conflict with the recommendations made by Respondent No. 3 in its 15th Meeting held on 03.06.2017 - HELD THAT:- This Court referred the matter to Respondent No. 3 in view of the seeming ambiguity in the minutes of the 15th GST Council Meeting, as portrayed by the learned counsel for the Petitioner. The Court prima facie comprehended that the affidavit filed on behalf of Respondent No. 3 was only a proposal of the Joint Secretary (TRU-1), CBEC that was not agreed to or approved by the Council. In these circumstances, in order to have certainty in the matter, the Court deemed that the best course of action would be to have the opinion of the GST Council. Now, the Council in its 38th meeting on 18.12.2019 has deliberated on the matter and has unequivocally confirmed that it had indeed recommended the GST rate of 12% for the fabrics falling under Chapters 56 to 59 of the Customs Tariff.
The learned counsel for the Petitioners is not satisfied and persists that the Respondent No. 3 has recommended tax at the rate of 5% for all fabrics. To buttress his contention, he relies upon the reply given by the Union Minister for Finance in response to a starred question raised on 18.07.2017 in the Rajya Sabha. We find the aforesaid contention to be unconvincing and meritless. A perusal of the response reveals that the Union Minister for Finance while responding to a question raised in connection with organized traders and unorganized sellers in textile sectors, stated that the GST rate structure for textile sector was discussed in detail in the GST Council Meeting held on 03.06.2017, and that the Council recommended the detailed rate structure for textile sector. The tabulation which form part of the response reflects the notified GST rates as 5%. This response of the Union Minister for Finance to a query, cannot prevail over the decision of the GST Council.
The rate of taxes is jointly decided by the centre and states on the recommendations of the Council. The Council has the power and prerogative to issue recommendations on issues in terms of Article 279A (4) of the Constitution. The composition of Respondent No. 3 and the constitutional scheme of taxation is a clear indication that the functioning of the GST Council is based on collaborative efforts that embody the spirit of cooperative federalism. The coming together of the stakeholders has given rise to a unified system of taxation for the entire country.
The impression of contradiction that appeared on comparison between the counter affidavit of Respondent No. 3 and the minutes of meeting has been resolved and conclusively settled. The matter has been deliberated by the body whose decision were called in question. - We cannot sit in appeal and postulate that the decision of the Council is not what they have unwaveringly held it to be - petition dismissed.
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Income Tax
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2020 (9) TMI 923
Unexplained investment u/s 69A - acquisition of jewellery - HELD THAT:- Assessee had furnished an affidavit of his wife, wherein the receipt of gifts on specific events have been clearly mentioned. Averments made in the affidavit have not been dislodged or proved false by the A.O. by bringing any contrary evidence on record.
Status/reputation of the assessee and the amount of income he has declared annually in the return of income filed, it cannot be denied that the assessee is a man of means and had the capacity to make the investment in gold/diamond jewellery as well as silver articles. A.O. has allowed an allowance of 500 grams in respect of gold jewellery only in respect of assessee and his wife. Whereas, as per CBDT Instruction No. 1916 dated 11.05.1994, the allowance of 500 grams has to be granted in respect of each married lady and 250 grams for each unmarried girl and 100 grams for each male member of the family.
As well settled that the aforesaid CBDT Circular would also be applicable in respect of addition made u/s. 69A of the Act. If one goes by the aforesaid CBDT Instruction, then, there will be no unexplained jewellery to be treated as unexplained investment u/s. 69 A of the Act. Thus, looked at from any angle, the addition made by the A.O. on account of unexplained investment u/s.69A of the Act cannot survive. Accordingly, we delete the addition.
Levy of interest u/s. 234B - claim of the assessee that in the year under consideration, the assessee did not have any income chargeable under the head profits and gains of business and profession and further he is a Senior Citizen of more than 60 years old - HELD THAT:- Sub section (2) of section 207 which has been inserted by Finance Act, 2012 w.e.f. 01.04.2012 carves out an exception by stating that sub section (1) would not be applicable to a resident individual assessee who does not have any income chargeable under the head profits and gains of business and profession and if he has attained the age of 60 years or more at any time during the relevant previous year. As per the copy of PAN card submitted before us, the date of birth of the assessee is 03.05.1949. Thus, during the previous year relevant to the assessment year under dispute, the assessee has crossed the age of 60 years. Further, it is the claim of the assessee that during the year under consideration, the assessee had no income which is chargeable under the head profits and gains of business and profession.
In case, the aforesaid claim of the assessee is correct, no interest u/s. 234B of the Act can be levied in view of the provision contained under sub section (2) of section 207. The A.O. is directed to factually verify the aforesaid claim of the assessee and delete the interest charged u/s. 234B of the Act. This ground is allowed for statistical purposes.
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2020 (9) TMI 922
Dependent Agency Permanent Establishment of the assessee company in India - Income accrued in India - HELD THAT:- We find the issue stands squarely covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for asstt. Year 2005-06 wherein it was held that MIPL is not a Dependent Agency PE of the assessee.
Attribution of profits to DAPE - HELD THAT:- Respectfully following the consistent decisions of the Tribunal in assessee’s own case for the preceding assessment years [2020 (2) TMI 1053 - ITAT DELHI] and in absence of any contrary material brought to our notice we hold that no further profit could be attributed since assessee is not a Dependent Agency Permanent Establishment.
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2020 (9) TMI 921
Computation of Long Term Capital Gain - Adoption of sale value - difference between the value declared by the assessee and value assessed by the DVO - HELD THAT:- CIT(A) has adopted the said value assessed by the DVO and had directed the AO to re-compute the income in his hands. Where the difference between the value declared by the assessee and value assessed by the DVO is 4.74% i.e. marginal difference which is less than 10% of difference between value declared and value estimated. Since it is case of estimation of value by the DVO, the Courts have held that the marginal difference needs to be ignored. We place reliance on the ratio laid down in Honest Group of Hotels vs ACIT [2001 (11) TMI 1016 - HIGH COURT OF JAMMU & KASHMIR] and Rahul Construction vs DCIT [2012 (1) TMI 229 - ITAT PUNE]. Accordingly, we direct the Assessing Officer to adopt the sale value declared by the assessee for computing the Income from Long Term Capital Gains in the hands of the assessee.
Extent of ownership of the assessee - assessee claimed that it is an ancestral property which was owned by three co-owners - HELD THAT:- Both the sale deed have been executed by two co-owners and the sale consideration has been bifurcated amongst three persons. In these facts and circumstances, we find no merit in the orders of the authorities below and direct the Assessing Officer to adopt 1/3rd net capital gains in the hands of the assessee and balance 1/3rd share in the hands of the Shri Anil Swarup.
Cost of improvement claimed 100% - said expenditure was disallowed as no evidence was filed by the assessee - HELD THAT:- We are of the view that principle of justice would meet in case ₹ 1,00,000/- each is allowed as cost of improvement. Accordingly, we hold so.
Addition made on account of cash deposits in the bank accounts - unexplained deposits in HDFC bank and unexplained deposits in State Bank of India - HELD THAT:- Assessee had failed to produce the necessary evidence with regard to the cash deposits and also the source of cash deposits before Assessing Officer. In the interest of justice, we are of the view that the onus is upon the assessee to strictly explain each and every deposits in two bank accounts i.e. HDFC bank and State Bank of India, as both these accounts were not declared in the return of income. Following the principal of natural justice, matter may be set-aside to the file of the Assessing Officer with direction to the assessee to file necessary evidence explaining the source of cash deposits or by cheque in the aforesaid accounts. AO shall allow reasonable opportunity of hearing to the assessee and decide the issue accordingly.
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2020 (9) TMI 928
Depreciation on Floor Space Index (FSI) - @ 10% or 25% - depreciation on intangible assets - as per AO grant of FSI was not in the nature of any asset and only a payment made to the government for increasing the size of the building - Whether grant of additional FSI is not in the nature of any kind of assets until and unless the additional flooring/building is constructed, therefore, not eligible for depreciation in this case? - Tribunal held that the assessee would be eligible for depreciation for the entire amount of premium debited to the account of the asset - Tribunal held that the assessee would be entitled to depreciation @ 10% on the whole of the consideration towards FSI and not @ 25%
HELD THAT:- View taken by the Tribunal is a reasonable one, having regard to the provisions contained in sections 32 (1)(ii) and 43(6)(c) - revenue had not questioned the finding of CIT(A) that the amount spent by the assessee would add to the value of the existing building as additional FSI would be available to the assessee; the amount spent was for the purpose of business and was of enduring nature; since it related to the building block of the asset, the overall cost of the building block would increase by this amount; therefore CIT(A) directed the Assessing Officer to add the amount spent during the year to the building block of asset and allow depreciation as per law i.e. on the rate applicable to the building which is 10% and not 25%.
Documents placed on record that the order of the CIT(A) was accepted by the revenue and a conscious decision was taken not to file further appeal. When the revenue sought to file cross-objection belatedly the same was dismissed on the ground of limitation. That apart, having not filed appeal against such decision of CIT (A), revenue cannot now raise a dispute as to percentage of depreciation. No good ground to disturb the finding of the Tribunal on this point. Therefore, we are of the view that no substantial question of law arises from the order of the Tribunal on this issue. - Decided against revenue.
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2020 (9) TMI 927
Reopening of assessment - non-availing of the procedure by the petitioner - Exemption u/s 10(15)(iv)(h) denied on interest received on tax free bonds - Revenue submits that the writ petition filed is not maintainable in as much as the procedure laid down in GKN Driveshafts (India) Limited Vs. Income Tax Officer [2002 (11) TMI 7 - SUPREME COURT] has not been followed by the petitioner - HELD THAT:- The present case is one were the impugned notice issued under section 148 of the Act is clearly beyond four years from the end of the assessment year in question. What is relevant to note is that AO must have or form reason to believe that any income of the petitioner chargeable to tax has escaped assessment by reason of the failure on the part of the petitioner to disclose fully and truly all material facts. Change of opinion cannot be a ground for re-opening concluded assessment.
In the instant case, the impugned notice was issued on 30.03.2001 and the reasons were furnished by respondent No.1 to the petitioner on 04.12.2001; all before the judgment was rendered in GKN Driveshafts (India) Limited [2002 (11) TMI 7 - SUPREME COURT]. Therefore, a view can be taken that since the impugned notice and furnishing of reasons had preceded the judgment in GKN Driveshafts (India) Limited, the later may not have applicability in the present case.
As in the first Ajanta Pharma case i.e. [2003 (11) TMI 32 - BOMBAY HIGH COURT] this Court after referring to the Constitution Bench judgment in Calcutta Discount Company Limited Vs. Income Tax Officer, [1960 (11) TMI 8 - SUPREME COURT] held that Supreme Court in GKN Driveshafts (India) Limited (supra) nowhere lays down the law to the effect that the noticee is totally debarred from approaching the High Court under Article 226 of the Constitution of India when the exercise of power by the authority under section 148 of the Act ex-facie appears to be without jurisdiction.
This writ petition was admitted for hearing by issuing rule way back on 27.06.2002. Having admitted the petition for hearing and such a long period having elapsed, it would neither be fair nor reasonable to relegate the petitioner to file objection to the reasons recorded before respondent No.1. This is more so because respondent No.1 has filed affidavits justifying the reasons recorded and issuance of the impugned notice. In other words, to direct the petitioner to file objection before respondent No.1 would be a mere formality, respondent No.1 having already disclosed his mind. We are unable to accept the preliminary objection raised on behalf of the revenue.
Reason to believe that income of the petitioner chargeable to tax for the assessment year 1990-91 had escaped assessment by reason of failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment? - Assessee company was entitled to a rebate on the gross dividends and not on the net dividends i.e., not after deducting proportionate management expenses.
Though section 14A was inserted in the Act by Finance Act, 2001 with retrospective effect from 01.04.1962, the same may not be of any assistance to the revenue in as much as the retrospective amendment of law would only negate the inference sought to be drawn of the failure to disclose material facts, which aspect was highlighted by this Court in DIL Limited [2012 (2) TMI 85 - BOMBAY HIGH COURT] As a matter of fact, respondent No.1 has stated in the affidavit that its action of seeking to reopen the assessment is not based on section 14A of the Act.
No reasonable view can be taken that there was failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment year 1990-91. If that be so then respondent No.1 could not have formed any reason to believe that any income of the petitioner chargeable to tax for the said assessment year had escaped assessment. Condition precedent for re-opening the concluded assessment of the petitioner is absent in the present case. In such circumstances, issuance of the impugned notice under section 148 of the Act is clearly without jurisdiction and is therefore illegal and invalid. - Decided in favour of assessee.
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2020 (9) TMI 920
Penalty u/s 271(1)(c) - Defective show cause notice - A.O. has mentioned both the limbs of Section 271(1)(c) that assessee has concealed the particulars of income or furnished inaccurate particulars of such income - HELD THAT:- Show cause notice Dated 28.02.2014 to be bad in Law as it did not specify under which limb of Section 271(1)(c) of the I.T. Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing inaccurate particulars of income. A.O. in the assessment order initiated the penalty proceedings for furnishing inaccurate particulars of income, but, in the penalty order, levied the penalty for concealment of particulars of income. See M/s. Sahara India Life Insurance Company Ltd. [2019 (8) TMI 409 - DELHI HIGH COURT].
We are of the view that since notice issued before levy of the penalty is bad in Law, therefore, the entire penalty proceedings are vitiated and as such, penalty is liable to be cancelled. We set aside the Orders of the authorities below and cancel the penalty. Appeal of the Assessee allowed.
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2020 (9) TMI 919
Exemption u/s 11 & 12 - Assessee failed to qualify as an organization for charitable purposes - charitable activity u/s 2(15) - assessee association is receiving some charges or fees for rendering services on non- commercial principles to State Road Transport Undertakings and other concern members for a fee or charges - HELD THAT:- There is evidence and material to show that the activity were carried out on sound and recognized business principles and persuaded with reasonable continuity then it would constitute business even if there is no profit motive as we have already noted that in assessee's own case for A.Y. 1989-90, 1990-91 and 1993-94 [2000 (12) TMI 225 - ITAT DELHI-E] it was held that the aims and objects of the assessee were to render common services to members and assist them in such matters as standardization of equipment, purchase of materials for thereon use at economical prices, promotional efficiency of Road Transport Services and deduction is operational cost of member State Road Transport Undertakings are the activities of charitable purpose towards promotion of main objects set out in the Memorandum of Association of the assessee association, thus, in absence of any substantial allegation or incriminating material.
We are unable to accept view of the CIT that the assessee association is conducting these activities with the main object of earning profits. In the present case, the activities of the assessee's association cannot be termed either "trade" , "commerce" or "business" simply because the assessee association is receiving some charges or fees for rendering services on non- commercial principles to State Road Transport Undertakings and other concern members for a fee or charges.
As Indian Trade Promotion Organisation vs. DGIT [2015 (1) TMI 928 - DELHI HIGH COURT]wherein it was held that thus, first proviso to section 2(15) of the Act would have been to be read down and interpreted in the context of section 10 (23C) (iv) of the Act as the context requires such interpretation where assessee is not driving primarily by desired or motive to earn profit but to pursue activities in furtherance of its objects of general public utility then it must be recognized as an institution established for charitable purposes.
Hon'ble Delhi High Court in the case of Institute of Chartered Accountant of India vs. DGI [2011 (9) TMI 77 - DELHI HIGH COURT] held that the object of the first proviso to section 2(15) of the Act is to include any transaction for a fee or money and the activity would be business if it is undertaken with the profit motive but in some cases this fact must be determinative and the profit motive test should be specified and viewed in the context of section 10 (23C) (iv) - Decided against revenue.
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2020 (9) TMI 926
Exemption under Section 10(23C) (vi) and (via) - appropriate authority for the purposes of grant of exemption u/s 10(23C)(vi) & (via) - HELD THAT:- Similar application(s) filed by the petitioner for the subsequent periods were dealt with by the competent authority. With respect to the year in question, it is the case of the Revenue that the application filed, if any, was not before the competent authority, and as such, none other than the authorized authority was under any obligation to deal with the same. We are in agreement.
Even though the petitioner diligently pursued similar application for the period subsequent to the one in question, but did not take any steps for pursuing the application purportedly filed on 31 st of October, 2002/ refiled on 4th of February, 2003. For more than eight years petitioner allowed the matter to be slept over.
Revenue does not admit filing of the application (Annexures P-1 and P-2), but only avers that neither any application was filed nor was it pending with the competent authority. In view of disputed question of fact, applying the ratio laid down in Commissioner of Income Tax & Anr. v. Karnataka Planters Coffee Curing Work Private Limited [2016 (11) TMI 893 - SUPREME COURT] we refrain from passing any order which the petitioner so desires - Petition dismissed.
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2020 (9) TMI 918
TP Adjustment - comparable selection - HELD THAT:- Assessee is a captive service entity engaged in rendering marketing support and general administrative support services (as technical support services) and software development services to its overseas AEs , thus companies functionally dissimilar with that of assessee need to be deselected from final list. Companies with high turnover need to be excluded.
Amortization of goodwill - whether expenditure/amortization of goodwill is not part of segmental operating cost? - HELD THAT:- Assessee should have allocated the unallocated expenses in the ratio of 85.15 : 14.85 between the segments (which is the ratio of operating revenue). In the given case the amortisation of goodwill is not an operating expenses, it should be allocated based on the segmental revenue between the segments and accordingly we are directing the TPO to allocate 14.85% of the amortized value of goodwill for this year to the software and Development Services Segment. In order to carry out the TP study, it is relevant to determine the operating margin of the segment before it can be compared with other comparative companies. The assessee has arrived the margin of the R&D segment at 12% by allocating the unallocated expenses without proper basis. When we allocate the unallocated expenses in the operating revenue basis, we will know the exact operating profit from the segment and then the TP analysis can be carried out based on the updated segment results. Accordingly, we are directing AO/TPO to calculate the updated segment results and do TP adjustment. Accordingly, the ground raised by the assessee is partly allowed.
Foreign exchange fluctuation - difference in the exchange rate on the date of raising of invoices and exchange rate on the date of realization of invoice - assessee submitted that it used to raise the invoices for services rendered in USD equivalent to Indian rupees recorded in its books of accounts - HELD THAT:- Forex loss reported by the assessee in segment reporting as operating expenditure and since assessee has surrendered the same in income tax computation, the same has to be eliminated from the operating expenses. We are in agreement with the submission of the Ld. AR that this reversal of expenditure will have a direct impact on operating expenses declared by the assessee. When the AO accepts the segment reporting reported by the assessee and forex loss as part of operating expenses, the same expenses were surrendered by the assessee as non-deductible expenses then, this expenses should also be removed from the operating expenses in the segment statement. Accordingly, we direct TPO to eliminate the forex loss declared by the assessee as operating expenses and rework the operating profit of the R&D segment. Since the assessee has declared ₹ 71.18 lakhs as Forex loss for this segment and we noticed that assessee has declared the loss voluntarily, we direct TPO to remove the forex loss from the calculation and then rework the operating profit of the segment and do the TP adjustment accordingly.
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2020 (9) TMI 917
Loss of precious metal - Notional loss or actual loss - replenishing the loss in precious metal on account of wear and tear - HELD THAT:- There is no doubt that assessee has entered into lease agreement with its parent company for utilisation of their specialised machineries and reimburse the actual loss due to wear and tear. During this assessment year assessee has already quantified and reimburse the same. During this year as submitted by the assessee due to abnormal circumstances assessee has to replace feeder/nozzles due to frequent leakages in the feeder. These are all abnormal and special circumstances in which utilisation of metal has increased abnormally during this assessment year when compared to previous assessment year, however when we compare the loss in the subsequent assessment year, it does not look abnormal.
We do not have any record of subsequent assessment year to appreciate the loss incurred by the assessee. Considering the abnormal situation existed during this year, in our considered view, the loss of precious metal during this year is abnormal. The abnormal utilisation of precious metal, however big, it is utilised as machinery consumables only, it does not or will not increase the life of the machinery.
Abnormal loss incurred by the assessee can be treated as revenue expenditure to be allowable during this year or the abnormal loss can be amortised in 2 to 3 years. In our considered view no doubt the losses considerably high, we direct assessing officer to amortise the abnormal loss in 2 years that is 50% during this assessment year and balance in the next assessment year.
With regard to observation of the assessing officer that assessee has purchased from the vendor and the documentation does not show that it is refurbished the machineries. We observe from the certificate issued by technical engineers from the company that assessee has purchased these precious metals and the internal technical department has carried out the respective work of re-fabrication of damaged feeders/nozzles. Therefore, we do not notice anything wrong in purchasing of the precious metals and carrying on repair work of the machineries internally by the assessee. Accordingly ground No. 2 raised by the assessee is partly allowed.
Substantial repair of the internal road inside the factory - AO disallowed the above expenditure with the observation that assessee has not carried out repairs to the road at its factory but it is a case of complete construction of new road right from dismantling the existing road, excavation of entire road up to depth of 1.5 m and filling the excavated area by soil, placing a layer of plain cement concrete et cetera with top layer with RCC. This nature of work does not constitute petty repairs - HELD THAT:- Laying of new road and construction/finishing surrounding work results in benefit of enduring nature to the assessee. Accordingly, he treated the above expenses as capital expenses. Considering the substantial amount of expenses incurred to re-lay the road and it will certainly give enduring benefit to the assessee and we are in agreement with the findings of assessing officer that it is capital expenses. Since he treated the expenses as capital in nature incurred for the purpose of smooth functioning of the business, therefore these expenses were incurred for the purpose of business only. In our considered view, assessee is eligible to claim depreciation on the cost of construction of Road. Therefore, we are directing the assessing officer to allow the depreciation on the expenditure incurred to construct the road. Accordingly, ground raised by the assessee is partly allowed.
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2020 (9) TMI 916
Addition u/s 2(22)(e) for deemed dividend - CIT-A deleted the addition - HELD THAT:- The debit balance has been notionally worked out by the assessing officer by working out the balance in ledger account of shareholder on the basis of clearing date of cheque received (not paid) in the bank account, which is not correct. As per accounting principles entries in the books of accounts are required to be made on the basis of transactions entered which is the receipt of cheque, which was subsequently honoured by the bank, hence the entries appearing in the ledger account is correct and same cannot be ignored and balance cannot be worked out on notional basis and even if he wants to do the same, then also the amount was never paid to the Share Holder but in fact was received from the Share Holder and the date of debit should also be transferred to the date on which the amount was cleared. In no way by this company has paid any amount to the shareholder and thus provisions of section 2(22)(e) are not applicable.
The substance of section 2(22)(e) is “any payment made by a company that too by way of advance or loan” which shows that for invoking the provisions of section 2(2)(e), there must be a payment by way of advance or loan. This vital aspect is missing in the case of the assessee as neither there is any payment nor the company made any advance or loan to the assessee, thus debit balance worked out by the assessee company will not fall within the ambit of the provisions of section 2(22)(e) and thus are not applicable in the case of the assessee.
Detailed finding recorded by the ld. CIT(A) are as per the material on record, accordingly, we do not find any reason to interfere in the order of the ld. CIT(A) for deleting the addition so made. Hence, we uphold the same.
Addition u/s 56(2(vii)(c) - Allotment of shares - difference calculated between fair market value and that of face value under section 56(2)(vii)(c) - CIT-A deleted the addition - HELD THAT:- Mumbai Bench of ITAT in the case of ACIT Vs Subodh Mennon [2018 (12) TMI 981 - ITAT MUMBAI] have held that only when a higher than a propionate allotment of fresh shares issued by a company is received by a shareholder, the provisions of section 56(2)(vii) get attracted; provisions of section 56(2)(vii) are not applicable to the facts of the case - addition under 56(2)(vii)(c) being the difference between alleged fair market value of shares and the subscribed value of shares was not sustainable. It is only when a higher than propionate allotment of fresh shares issued by a company is received by a shareholder, the provisions of section 56(2)(vii) get attracted.
Detailed finding so recorded by the ld. CIT(A) while deleting the addition made U/s 56(2)(vii)(c) are as per material on record which do not require any interference on our part. - Decided against revenue.
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2020 (9) TMI 915
Assessment u/s 153A - Estimation of profits - A.O. estimated profits @ 1% on sales from 24-11-2014 to 31-3-2015 on transaction recorded in regular books of accounts as well as not recorded in regular books of accounts and for MCX portal transactions making a lump sum addition without any basis while actual profit earned from those transactions was correctly worked out by assessee from record found in survey and submitted before A.O. - HELD THAT:- A.O. wrongly held that books of accounts are rejected invoking section 145 (3) which is uncalled for. As far as transactions found in ‘Hazir’ software of computer it records all transactions whether recorded in regular books of accounts or not recorded in regular books of accounts including transaction made by assessee on MCX Portal which are also found correct and completely maintained from which income could have been properly deduced and assessee has submitted complete account of transactions i.e. purchases, sales and profit resulting from those transactions alongwith complete quantitative details separately i.e. accounted, unaccounted & on MCX portal in said Hazir software as is evident from assessment order itself.
A.O. also accepted the purchases, sales, op. stock & closing stock resulted from the transactions recorded therein as such in ‘Hazir’ software without pointing out any defect or deficiency therein and so also in law even those accounts cannot be rejected by invoking section 145 (3). The A.O. while accepting all transaction in ‘Hazir’ software in toto is just not accepting the profit resulted from said details which is not correct in law and so cannot be a ground for invoking section 145 (3).
G.P. rate of 1% applied by the A.O. on the sales found recorded in ‘Hajir’ software is thus wrong, unwarranted and uncalled for. CIT(A) is also wrong and bad in law in sustaining the lump sum addition in the hands of assessee as against the addition made by the AO.
Undisclosed profit from undisclosed transaction with MCX - HELD THAT:- AO in the assessment order made lump sum addition of ₹ 1000000/- to the income of the assessee on account of alleged profit on unaccounted transactions at MCX. That the profit from transaction with MCX is computable from record found in ‘Hazir’ software and assessee submitted before A.O. the resultant profit from MCX transaction which A.O. verified the same and found it correct and accepted it and added the same in income of assessee assessed by A.O.
Besides that, the A.O. further made an lump sum addition without any reason or basis or finding any shortcoming in resulted profit computed from transaction on MCX. Addition is purely based on surmises and conjectures and accordingly the Ld. CIT(A) is correctly deleted the same.
Investment of capital for alleged unrecorded transactions - HELD THAT:- A.O. without any basis or material held that assessee would have made investment of capital for alleged unrecorded transactions of sales/purchases found recorded in ‘Hazir’ software and worked out total investment for business on the basis of alleged total turnover of ₹ 5,47,31,72,177/- which is worked out by him in proportion to actual capital of ₹ 3496965/- for declared turnover of ₹ 2,03,30,09,914/- and made addition of ₹ 59,17,397/-. The record found in ‘Hazir’ software do not have any investment of capital by assessee nor there is any credit his name otherwise also the unrecorded transactions in gold/silver are on day to day basis. The modus operandi of the business as also evident and verifiable from the Hazir software that the transaction of purchases and sales are placed simultaneously and as such capital investment is required. The buyer first makes payment and assessee delivers gold/silver which he purchased making the payment which it received from buyer and earns his profit requiring no capital investment. As the addition made is without any basis, material or reason it is just on hypothesis and arbitrary which cannot be sustained in law.
Loss suffered by the assessee in respect of alleged unrecorded transactions is not eligible for set off against declared profit by wrongly invoking sec. 115BBE - Clarification regarding set off of losses against deemed undisclosed income - HELD THAT:- Amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. Accordingly, we hold that the assessee current loss is allowable to set off against the current year income.
In M/s Pitamber Commodity Futures P Ltd. [2018 (4) TMI 19 - ITAT JAIPUR] by confirming the appeal order of CIT (A) – 4, Jaipur held that amended provisions are applicable from 01-04-2017 only and cannot be applied retrospectively. The issue in this case is thus being exactly the same and is covered by the said judgement of ITAT, Jaipur Bench, Jaipur. The CIT (A) thus is wrong and has erred in law in not allowing the set off of net unaccounted loss from the accounted income of assessee.
Unexplained investment purchase of Gold - HELD THAT:- CIT(A) is correct in deleting the addition made by the AO on account of alleged undisclosed investment in purchase of Gold.
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2020 (9) TMI 925
Payment of tax collectable at source u/s 206C - Maintainability of Writ petition - applicability of section 206C to a contract of settlement of Balu Ghats? - whether TCS cannot be recovered from the petitioner? - as contented mechanism provided under Section 206(c) of the Income Tax Act would be unavailable to recover of the amount - HELD THAT:- All these contentions can be raised by the petitioner, in fact already stands raised vide representation dated 14.3.2008 (Annexure-8), which is still pending consideration before the authority.
No reason to interfere with the impugned notice dated 18.04.2009 (Annexure-11), more so from the return filed by the petitioner, it does not appear as to whether, and if any, amount of component of TCS was deposited by the petitioner.
Also as contended that only for the year in question the issue is pending, as for the subsequent period petitioner has already deposited the amount - issues raised before us are left open to be considered by the appropriate authority which in the instant case is the Assistant Director who issued notice dated 8.04.2009.
We are not in agreement with the submission made that the Assistant Director has already prejudged the issue inasmuch as he has asked the petitioner to pay the amount by way of a Demand Draft - impugned notice cannot be read in such a manner. The Officer has to adjudicate the amount only after hearing the parties and affording adequate opportunity of filing reply and substantial compliance of principles of natural justice. The officer has only asked the petitioner to deposit the amount, through a Bank Draft, which is due and payable in accordance with law. In any event we clarify that the amount mentioned in the notice be not construed to be determination of the sum due and payable by the petitioner.
We direct the petitioner to appear before the Assistant Director on 5th October, 2020.
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2020 (9) TMI 924
Validity of the reopening of assessment - validity of the notice u/s 148 - wrong understanding of the legal position - Whether assessee was estopped from challenging the validity of the notice under Section 148? - HELD THAT:- CIT(A) issued a direction in the order to the Assessing Officer to assess the turnover as commission received. There were two options open to the assessee. One was to prefer an appeal against the order passed by the CIT(A) dated 20.10.2005, which, in fact, was an order in an appeal filed for the assessment year 2002-03. The other option open to her was to contest the matter before the Assessing Officer upon issuance of the notice under Section 148 of the Act.
The assessee, in the case on hand, chose the second option, which, in law, was permissible to be done by the assessee. Therefore, both the CIT(A) as well as the Tribunal fell in error in holding that the assessee was estopped from challenging the validity of the notice under Section 148 of the Act dated 22.12.2005.
Period of limitation exceeded on the date of issuance of the notice u/s 148 - As per Section 149 of the Act as it stood prior to amendment by the Finance Act 2001 with effect from 01.6.2001, the limitation provided under Section 149(b)(iii) of the Act was seven years, but not more than 10 years from the end of the relevant assessment year unless income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to ₹ 50,000/- or more for that year. After amendment, in terms of Section 149(1)(b) of the Act, no notice under Section 148 shall be issued for the relevant assessment year if four years, but not more than six years have lapsed from the end of the relevant assessment year unless the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to one lakh rupees or more for that year.
Admittedly, the notice under Section 148 of the Act was issued by the AO on 22.12.2005 and the law applicable as on date prescribed the limitation of four years, but not more than six years. Thus, the notice issued on or after 31.3.2004 would suffer from lack of jurisdiction as it is clearly hit by the limitation prescribed under the Statute. Unfortunately, the Tribunal failed to take note of this very important legal issue, which has been settled by the Hon'ble Supreme Court. In fact, the assessee, at the earliest point of time, referred to the decision of the Hon'ble Supreme Court in the case of K.M.Sharma [2002 (4) TMI 7 - SUPREME COURT] which was erroneously distinguished by the Assessing Officer, the CIT(A) and the Tribunal and they committed an error in gross violation of the Statute. - Decided in favour of assessee.
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2020 (9) TMI 914
Disallowance of discount and amount written off - addition @ 50% - Difference between rate charged from these institutions and normal rate of hospitals and Percentage wise discount on the bill amount - HELD THAT:- All the details were available but since the details were bulky (109 pages/more than 4000 entries) and further furnishing addresses would have made the details further bulkier which results into wastage of stationery and manpower unnecessary.
Assessee is running Heart & General Hospital and due to medico legal reason assessee Company is expected to have address of each patient.
Complete books of accounts along with supporting vouchers, bills containing addresses of the patients and other evidences were produced on 6th, 14th & 21st October, 4th, 12th November, 2008. The AO could have very well cross verified the details and found out the addresses from the bills produced has he so desired. However, no proper verification was made with respect to books produced before him and arbitrarily disallowed 50% of such discount.
Even before the ld. CIT(A), copies of bills raised and some page of patient register evidencing that complete details of patients were available with the company were filed - it is general practice in any profession to allow discounts to the relative and known, which cannot be denied and can’t be termed as perquisites in the hands of doctors.
No merit in the observation of the A.O. to the effect that when Company was in losses it was not justifiable for the Company to allow discount to patients. The AO has transgressed into the arena of businessman. How business is to be conducted is the sole prerogative of the assessee. The AO cannot sit in the arm chair of the businessman and dictate the terms at which business is to be conducted.
Even the past history of the assessee, where the assessments were framed U/s 143(3) of the Act and no disallowance was made in the A.Y. 2004-05 and 2005-06. Thus discount claimed by the assessee Company is justified which deserves to be allowed.
Disallowance of orthopedic consumption expenses - HELD THAT:-Since the complete expense is fully verifiable as evident from above table, AO as well as CIT(A) has wrongly observed that consumption declared in the month of June have not been used for business purpose. In view of above, orthopedic expense claimed by the assessee Company is fully verifiable.
Disallowance of Cath Lab Expenses - AO estimating Cash Lab Receipts based on ratio between Cath Lab Income and Cath Lab Expense - HELD THAT:- AO has estimated the Gross Cath Lab Income on the basis of ratio of Cath Lab expense and Cath Lab income for the month of May. He has failed to co-relate the expense incurred with the income recorded in the month of May. Most of the expenses which have actually been incurred in May month were booked in the month of June - expenditure in relation to any particular income was not necessarily booked in the same month. Therefore, month wise correlation done by the AO between Cath Lab incomes and expenditures is baseless. The AO ignoring the above facts applied the ratio of 175% Although applied by AO 150%), to the Cath Lab expense for determining Cath Lab receipts which is not justified.
During the month of May some specific procedures were also carried out, for which doctors were called for from Mumbai. Professional Fees paid to these doctors were also recovered from the patients and credited to Cath Lab Income A/C. Since the amount paid to doctors was separately considered under the head Professional fees paid, it resulted into enhancement of ratio between Cath lab Income and Cath Lab Expense. No merit in the disallowance so made by the A.O.
Disallowance of salary u/s 40A(2)(b) - salary paid to director of the Company as assessee failed to justify this expenditure - HELD THAT:- The above director was looking after the administration work of the assessee Company. He was 83 years old and earlier working as administrator at M/s Heart Hospital & Research Centre and Purchase executive in M/s Capstan Meters India Ltd. For more than 40 years and looking to his vast experience, salary paid to him was reasonable - in view of the above factual position and keeping in view the work undertaken by Shri Guman Mal Tongia, there is no justification for disallowance of salary of ₹ 1,09,300/-.
Disallowance of rent paid to Shri Guman Mal Uongia and M/s Heart Hospital & research Centre u/s 40A(2)(b) - HELD THAT:- Rent to M/s Heart hospital & research Centre was paid for accommodation for keeping records and for providing residence to Dr. Ravindra Tongia, Director of the Company.
Salary paid to Shri Ravindera Tongia, we observe that the premise is situated at 8/A, Yudhister Marg, C-scheme, Jaipur which is near to hospital of the assessee Company
Looking to the area occupied by the assessee Company. The proximity to the Hospital and posh locality of the premises, the rent paid is reasonable. The services of Dr. R.K. Tongia are required by the assessee Company on 24 hours basis. The area occupied for Dr. R.K. Tongia’s residence is approximately 4000 sq. ft. And area occupied for record keeping is approximately 188 sq. ft.
Assessee Company has also paid the same rent in AY 2005-06 which was allowed by in the assessment made u/s 143(3) of the Act. In view of the above, there is no justification for the disallowance made by the A.O. amounting to ₹ 2,76,000/-.
Disallowance of Job paid Charges - HELD THAT:- After going through the details of job charges paid and reasoning given by the A.O., we restrict the disallowance on account of job paid charges to ₹ 25,000/-.
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2020 (9) TMI 913
Bogus purchase - information received from the Sales Tax Department, Govt of Maharashtra that the assessee has obtained bogus purchase bills - HELD THAT:- During the course of assessment proceedings, the AO asked the assessee to produce the party i.e Hanuman Steels (Prop. Shri Jignesh K Desai) along with evidence to verify the identity of the party and the genuineness of the purchase transactions. In response to it, the assessee filed before the AO ledger extracts of the said party thereby stating that payments have been made through account payee cheque only. The assessee could not produce the said party before the AO.
Issue revolves around the genuineness of the purchases and also the fact that the assessee had sought adjournment before the Ld. CIT(A) on 05.11.2018 and 10.01.2019, whereas the assessee failed to appear before him on the final opportunity given by the Ld. CIT(A) on 17.01.2019, we are of the considered view that the assessee may be given another opportunity by the first appellate authority before deciding the appeal on merit.
Therefore, we set aside the order of the Ld. CIT(A) and restore the matter back to him to decide the case on merit - Decided in favour of assessee for statistical purposes.
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2020 (9) TMI 912
Bogus purchases - estimated addition @12.5% - HELD THAT:- Although the assessee defended the purchases by furnishing purchase invoices, bank statements evidencing payment through banking channels, quantitative details etc. but failed to produce any of the suppliers for confirmation of transactions. Assessee also failed to furnish delivery challans, transport receipts, octroi receipts etc. to substantiate the delivery of material. Accordingly, a view was taken that the purchases were inflated to suppress the true profits. AO estimated an addition of 12.5% against these purchases following the decision in CIT V/s Simit P. Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] and completed the assessment.
Assessee remained negligent in attending the appellate proceedings despite being provided with various opportunities of being heard. Keeping in view of principle of natural justice and keeping in mind the facts and circumstances, we deem it fit to grant another opportunity to the assessee to represent his case before first appellate authority. Accordingly, the case stands remitted back to the file of Ld. CIT(A)for re-adjudication with a direction to the assessee to defend his case before first appellate authority failing which Ld. CIT(A) shall be at liberty to adjudicate the appeal on the basis of material on record. - Appeal stands allowed for statistical purposes.
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2020 (9) TMI 911
TP Adjustment - determination of Arms' Length Price (ALP) in respect of the international transaction of rendering ITeS to the AE - Comparable selection - distinction between the KPO & BPO - HELD THAT:- Assessee in engaged in the business of provision of Information Technology Enabled Services (ITES) to its wholly owned holding company thus companies functionally dissimilar with that of assessee need to be deselected from final list.
Companies providing high end services cannot be compared to companies providing back office support services. See MAERSK GLOBAL CENTRES (INDIA) PRIVATE LIMITED VERSUS ASST. COMMISSIONER OF INCOME TAX- CIRCLE 6 (3) , MUMBAI. [2014 (3) TMI 1159 - ITAT MUMBAI].
Depreciation on capital assets - Disallowance on the basis that no tax has been deducted at source while making payment for such asset - argument of assessee that depreciation is a statutory allowance and it cannot be disallowed by invoking the provisions of section 40a(i)/(ia) - HELD THAT:- The question whether in such circumstances, provisions of section 40a(i)/(ia) can be invoked has already been decided by the Mumbai Tribunal in the case of SKOL Breweries Ltd. [2013 (1) TMI 623 - ITAT MUMBAI] as held The deduction under section 32 is not in respect of the amount paid or payable which is subjected to TDS; but it is a statutory deduction on an asset which is otherwise eligible for deduction of deprecation. Depreciation is not an outgoing expenditure and therefore, the provisions of Section 40(a)(i) are not attracted on such deduction. Also see M/S MARK AUTO INDUSTRIES LTD. [2013 (1) TMI 448 - PUNJAB AND HARYANA HIGH COURT] - Decided against revenue.
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2020 (9) TMI 910
Addition u/s 14A read with rule 8D - assessee during the year has earned dividend income which was claimed as exempted from tax under section 10(34) - AO disagreed the contention of the assessee and invoked the provisions of section 14A read with rule 8D of Rules for making the disallowance against such exempted income - whether the disallowances made under section 14A r.w rule 8D can exceed the amount of exempted income earned during the year under consideration? - HELD THAT:- Disallowance of the expenses in relation to the income which does not form part of the total income under this Act.
The term used under section 14A of the Act "amount of expenditure incurred in relation to such income” implies that the expenditure cannot exceed the amount of exempted income. So we find support and guidance from the judgment in the case of Joint investments Private Ltd versus CIT [2015 (3) TMI 155 - DELHI HIGH COURT].
Identical facts and circumstances has decided that the amount of disallowance of the expenditure cannot exceed the amount of exempted income in the case of CIT versus Vision Finstock Stock Ltd. [2017 (7) TMI 1277 - GUJARAT HIGH COURT]. We hold that the disallowance of the expenses under section 14A read with rule 8D cannot exceed the amount of exempted income.
Addition on account of prior period expenses - HELD THAT:- There is no ambiguity to the fact that such item of prior period expenses represents the excise duty paid by the assessee in the year under consideration. Similarly, the provisions of section 43B, being overriding section, provides to allow the deduction to the assessee on payment basis with respect to certain items including the excise duty. As the assessee has paid the excise duty, pertaining to the earlier year, in the year under consideration, we are of the view that such payment of excise duty is eligible for deduction in the current year.
The case law referred by the AO i.e. Saurashtra Cement and chemicals industries Ltd [1994 (10) TMI 30 - GUJARAT HIGH COURT] the principles of it are not applicable to the present facts and circumstances as the issue therein was in relation to the expenses other than the expenses covered under section 43B of the Act whereas the issue on hand relates to the deduction of excise duty which is an allowable deduction under the provisions of section 43B - No infirmity in the order of the learned CIT (A) and accordingly we decline to interfere in his order. Thus the ground of appeal of the revenue is dismissed.
Addition u/s 41(1) - trading receivable as income under the provisions of section 41(1) - HELD THAT:- As referring the provisions of section 41(1) reveals that it is applicable with respect to the trading liabilities and not with respect to the trading receivable. Thus the trading receivable shown by the assessee along with the sundry creditors cannot be treated as trading liabilities. Thus the question of treating such trading receivable as income under the provisions of section 41(1) of the Act does not arise. DR at the time of hearing has also not brought anything on record contrary to the finding of the learned CIT (A).
We also note that even if we assume that such amount represents the trading liability, then also it cannot be treated as income of the assessee under the provisions of section 41(1) of the Act as the same has not ceased to exist in the books of accounts.
Addition on account of professional fees - HELD THAT:- We find that impugned professional expenses represents the expenditure incurred in relation to the market survey of the existing product. Furthermore, no new assets or benefit of enduring nature has come into existence. The purpose of the survey report was to ascertain the market share of the assessee in the existing products in which it was already dealing. Accordingly we are of the view that such expenditure was incurred in the normal course of business and without generating any benefit of enduring nature. No infirmity in the order of learned CIT (A). Accordingly we dismiss the ground of appeal raised by the revenue.
Disallowance on account of employees PF contribution - HELD THAT:- The deduction for the delayed deposit made to the employees Provident fund and ESIC is not eligible for deduction by virtue of the decision of Hon’ble Gujarat High Court in the case of CIT versus GSRTC [2014 (1) TMI 502 - GUJARAT HIGH COURT].
Disallowance u/s 14A read with rule 8D determining the income under section 115 JB - HELD THAT:- Adhoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB - We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB of the Act. Thus the ground of appeal of the the assessee is partly allowed.
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2020 (9) TMI 909
Disallowance u/s. 14A - assessee had earned share of profit from the firms which was exempt u/s. 10(2A) - AO disallowed expenses incurred towards earning exempt income from the investment made in the partnership firm - HELD THAT:- As observed that assessee's own fund as well as interest free fund were more than investment made in partnership firm, therefore, disallowance on account of interest u/s. 14A is not sustainable in view of the decision of SHRI SURESHBHAI RANCHHODBHAI PATEL VERSUS ACIT, CIRCLE-12, AHMEDABAD [2015 (6) TMI 1208 - ITAT AHMEDABAD] we set aside the issue to the file of assessing officer for re-computing the disallowance of interest after excluding owned funds and interest free funds as directed above in the finding of Co-ordinate Bench in respect of disallowance u/s. 14A for the A.Y. 2012-13 to 2014-15.
Assessment u/s 153A - incriminating material found during search in the case of unabated assessment u/s. 153A(l)(b) - HELD THAT:- In the case of DCIT Central Circle Agra vs. Gupta Academic Pvt. Ltd. [2010 (6) TMI 883 - ITAT AGRA] has held that the documentary evidences were seized in the case of the search but in fact they were impounded in the course of survey in the premises of the assessee hence the very basis assuming jurisdiction r.w.s. 153C becomes untenable, therefore, the very order passed u/s. 153A is held to be void. In the light of the above facts and findings and judicial pronouncements, we consider that addition of ₹ 1.8 crores made in the unabated assessment u/s. 153A of the Act on the basis of document impounded during the course of survey at the associated premises of the firm is not valid, therefore, we set aside the order of ld. CIT(A) on this issue and allow the appeal of the assessee. Since we have quashed addition made in the assessment framed u/s. 153A of the Act based on the document found and impounded during survey u/s. 133 A of the Act, therefore, we do not find any need to adjudicate the remaining grounds of appeal on merit. - Decided in favour of assessee.
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2020 (9) TMI 908
Assessment u/s 153A - seized material found from the premises of the assessee can be made the foundation of the addition - Unaccounted investment u/s.69 - payments been made by the partners - HELD THAT:- No infirmity in the decision of Id. CIT(A) after placing reliance on the decision of Saumya Construction [2016 (7) TMI 911 - GUJARAT HIGH COURT] wherein it is held that if in relation to any assessment year no incriminating material is found no addition or disallowance can be made in relation to that assessment year in exercise of power u/s. 153A.
Addition u/s 69 - During the course of survey u/s. 133 A carried out along with action u/s. 132 of the act a document as banakhat between a seller Shri R. N. Desai and purchaser Shri Suresh R. Patel was impounded from the shop no. 22/23 of Shayona Complex. As stated that in the banakhat that an amount of ₹ 1.8 crores in cash has been paid by Shri Suresh Patel to Shri R.N. Desai at the time of execution of the said banakhat.
As per the banakhat the total consideration of the land. AO has added the differential in the case of assessee firm on protective basis u/s. 69 - As finding of CIT(A) it is undisputed fact that the said document was belonged to Shri Sureshbhai Patel which he had executed in individual capacity. There was no mention of making of any payment by the assessee firm. We consider that Id. CIT(A) has correctly deleted this protective addition holding that assessee firm was not a party and completely stranger to the document. Therefore, this ground of appeal of the revenue is also dismissed.
Addition u/s 40A(3) - HELD THAT:- CIT(A) in his finding the whole of the purchase price for the land at serial no. 210/2 has been shown in the balance sheet under the head deposits and advances and the amount has not been debited to the P & L account. Therefore, the provision of section 40A(3) has been wrongly applied by the assessing officer. Considering the above facts that land was not stock in trade as the same was shown in the balance sheet therefore we do not find any infirmity in the decision of Id. CIT(A). Therefore this ground of appeal of the revenue is dismissed.
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2020 (9) TMI 907
NP estimation - Ad hoc disallowance of contract expenses - assessee had shown net profit of 10.41% on the gross contract receipts - case was selected for scrutiny/s 143(3) of the Act on the basis of CASS - HELD THAT:- It is evident from the record that the assessee has declared NP rate of 10.41% of gross receipt subject to further deduction of depreciation and interest which is much more than 8% therefore, no further trading addition should be made as held in so many cases by this Tribunal, as cited by the ld. AR of the assessee.
In assessee’s own case, the Tribunal [2018 (1) TMI 1608 - ITAT JAIPUR]for the A.Y. 2013-14 had deleted all the additions wherein the NP declared by the assessee was at 8.09% of gross receipts. Thus, looking to the past accepted NP rate of the assessee, the net profit for the year under consideration at 10.41% is very reasonable, no further disallowance is warranted. Accordingly, we direct the A.O. to delete the disallowance so upheld by the ld. CIT(A). - Decided in favour of assessee.
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2020 (9) TMI 906
Stay petition - authorised representative submitted that assessee did not have any assets available with it for furnishing of the security and therefore same cannot be given - HELD THAT:- Total net worth of the company is invested in government dues. The main reason of the negative net worth of the company is apparent from the balance sheet of 2017 wherein cumulatively assessee has written of the investment in subsidiaries of ₹ 1772 crores. Along with the audited accounts, the financial statement or audited financial statements of subsidiaries were not provided. But, according to the words of the assessee, total investment in the subsidiary of ₹ 1772 crores is worthless.
Without having the financials of the subsidiary company and mainly the loss arising on account of writing of the permanent diminution in the value of the investment in the subsidiaries of the company of ₹ 1772 crores, it cannot be measured whether the assessee has anything to pay to the government of India towards this tax dues. In this situation, as per the order of the coordinate bench dated first of January 2020, the interest of the revenue is grossly hampered if the assessee is granted further stay of demand, despite assessee paying further ₹ 5 crores towards the outstanding dues. In view of the above situation, it is not even worth mentioning state of affairs of the assessee and further litigations shown to us by the learned authorised representative for extension of the stay.
Even assuming while denying, the assertions made by the learned authorised representative that assessee has a strong prima facie case, we are not inclined to grant further stay of the above demand advocate the stay already granted forthwith. It is further to note that subsequent to the order of the coordinate bench dated first of January 2020, of all these financial affairs were not brought to the notice of the coordinate bench either by the assessee or by the revenue.
Therefore on looking at the overall compactus of the fact of the issue involved in the appeal, the financial status of the company appellant petitioner, the present status of the working of the company, known disclosure of the financial statements of the subsidiaries whose investments have been written of, known provision of the names of the present directors, we are not in a position to extend the stay. Further so far as the interest of the revenue is concerned it is our prime and foremost duty to safeguard it when the stay is granted. Subsequent statement of affairs presented before us do not show that we are in any way be keeping the interest of the revenue safeguarded.
Despite declining the stay on the merits of the issue but we are extending the Stay till 31st August, 2020, only for Covid-19 reasons.
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2020 (9) TMI 905
Disallowance u/s 14A r. w. Rule 8D(2) (iii) - assessee failed to establish the nexus between that interest free funds with the investment resulting in exempt income - CIT-A deleted the addition - HELD THAT:- CIT(A) has allowed the claim of the assessee on the basis of the decision of Hon’ble ITAT in the assessee’s own case for the A.Y.2009-10 to 2011-12. The finding of the Hon’ble ITAT has been confirmed by Hon’ble Bombay High Court. Taking into account all the facts and circumstances and also considering this fact that the issue has duly been covered by the assessee’s own case decided by Hon’ble ITAT for the A.Y. 2009-10 to 2011-12, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, we decide these issue in favour of the assessee.
Disallowance u/s 14A r.w. Rule 8D(2)(ii) in view of the Clause (f) to Explanation-1 to Section 115JB - HELD THAT:- The issue has been decided on the basis of CIT Vs. Bengal Finance & Investments Pvt. Ltd [2015 (2) TMI 1263 - BOMBAY HIGH COURT]and ACIT vs. Vireet Investment (P.) Ltd [2017 (6) TMI 1124 - ITAT DELHI]. Accordingly, it has been specifically held that the ground of disallowance computed u/s 14A cannot be imported to the computation of books of profit u/s 115JB of the Act. The facts are not distinguishable at this stage and no law contrary to the law relied upon the CIT(A) has been produced before us. Taking into account all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, we decide this issue in favour of the assessee.
Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI]
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2020 (9) TMI 904
Exemption u/s 11 - Lease transactions - rentals received in respect of the property of the assessee - assessee gave property on rent to another charitable trust - alternative ground taken by the assessee before the Ld. CIT(A) stating that in the event that exemption is not allowed, a sum to be excluded from the taxable income - assessee undertaking any activities in the nature of trade, commerce or business, donations received by the assessee forms part of the corpus of trust - HELD THAT:- We are in agreement with the Ld. CIT(A) that not only on the basis of the rule of consistency but also on the basis of the facts relating to the rent received by the assessee from HLI vis-à-vis the rent under the Delhi Rent Control Act. Without vouchsafing the correctness of the information received from the website and without correlating the information furnished by the property dealers without realities on ground with a specific reference to the property in dispute, it is not open for the Assessing Officer to proceed to make addition, that disturbing the accepted position for about more than two decades.
No change of facts and circumstances are brought on record and no independent evidence with a specific relation to the property in dispute is available on record. Merely because the other charitable trust guilty property for accommodation of the person covered under section 13(3) of the Act, such a fact ipso facto does not lead to the addition in the hands of the assessee without first clinching the issue with corroborative piece of evidence. We therefore, hold that there is no justification for addition made by the learned Assessing Officer by invoking the provisions under section 13(2 )( b)
Order:- a) Provisions of Section 13(2 )(B) are not applicable to the case of the assessee
b) No individual benefit has been derived with regard to the lease transactions
c) Alternate ground becomes infructuous
d) Corpus donations are in the nature of capital receipts in the instant case and hence doesn’ t constitute a part of income and expenditure statement.
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Customs
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2020 (9) TMI 903
AS PER JUSTICE DR DHANANJAYA Y CHANDRACHUD
Enhancement of Customs Duty - post-Pulwama Attack - Time and date from which enhanced duty comes into effect - issuance of notification under Section 8A of the Customs Tariff Act 1975 introducing a tariff entry by which all goods originating in or exported from the Islamic Republic of Pakistan were subjected to an enhanced customs duty of 200% - the contention of the Union government before the High Court was that under Section 15 of the Customs Act, 1962 the relevant date for determining the rate of duty is the date of the presentation of the bill of entry - submission was that the amended rate of duty under notification 5/2019 came into force on 16 February 2019; hence, the importers were liable to pay duty on the basis of the amended rate. The submission was that the customs authorities were entitled to re-assess the bills of entry under Section 17(4).
HELD THAT:- The purpose of the notification being to discourage the import of goods from Pakistan, it has prospective effect: the object and purpose is not to penalize Indian importers who had completed their imports, presented bills of entry for home consumption and had completed self-assessment in terms of the provisions of the Customs Act and the Regulations, prior to the issuance of the notification.
Determination of the rate under Section 15 of the Customs Act 1962 - HELD THAT:- Section 15(1)(a) uses two expressions (i) the rate and valuation “in force”; and (ii) “on the date” of the presentation of the bill of entry for home consumption under Section 46. The provisions of Section 15(1)(a) have to be read in conjunction with the provisions of Section 46 which are referred to in the former provision. Section 46 has incorporated a regime which encompasses the submission of the bill of entry for home consumption or warehousing in an electronic format, on the customs automated system in the manner which is prescribed. The Regulations of 2018 stipulate the manner in which the bill of entry has to be presented. The deeming fiction in Regulation 4(2) specifies when presentation of the bill of entry and ‘selfassessment’ are complete. The rate of duty stands crystallized under Section 15(1)(a) once the deeming fiction under Regulation 4(2) comes into existence. The regulations have to be read together with the statutory provisions contained in Section 15(1)(a) and Section 46, while determining the rate of duty.
Precedent - HELD THAT:- In Bharat Surfactants (Private) Limited vs. Union of India [1989 (5) TMI 66 - SUPREME COURT], customs duty was imposed on the import of edible oil by the petitioners at the rate of 150 per cent on the basis that the import was made on the date of the inward entry, which was 31 July 1981. The vessel arrived and registered in the Port of Bombay on 11 July 1981 but since a berth was not available, the cargo could not be unloaded. The vessel left Bombay and proceeded to Karachi and returned towards the end of July 1981. The rate of customs duty prevailing on 11 July 1981 was 12.5 per cent and the contention of the importer was that but for the fact that the vessel was unable to secure a berth, it would have delivered the cargo - The Constitution Bench held that the date of entry inwards of the vessel in the Customs’ register was mentioned as 31 July 1981 and the rate of import duty and tariff valuation would be that which was in force on that day.
The presentation of a bill of entry for home consumption under Section 46 is hence the definitive event with reference to which the customs’ duty payable for import is determined. The duty in force on the day when the bill of entry for home consumption is presented is the duty which is applicable under Section 15(1)(a) - It is in view of this principle that the entry of the vessel into territorial waters, before the presentation of the bill of entry, has been held not to fix the rate of duty where the rate of duty has undergone a change.
Interpreting ‘day’ and ‘date’ - HELD THAT:- The submission of the ASG, simply put, is that because notification 5/2019 was issued on 16 February 2019, the court must regardless of the time at which it was uploaded on the e-Gazette treat it as being in existence with effect from midnight or 0000 hours on 16 February 2019. The consequence of this interpretation would be to do violence to the language of Section 8A(1) of the Customs Tariff Act, and to disregard the meaning, intent and purpose underlying the adoption of provisions in the Customs Act in regard to the electronic filing of the bill of entry and the completion of self-assessment.
Notification under Section 8A of the Customs Tariff Act - HELD THAT:- A notification which is issued in terms of the provisions of Sub-section (1) of Section 8A is akin to the exercise of a delegated legislative power. The Central government is empowered to issue a notification enhancing the rate of duty where it is satisfied that immediate action is necessary to increase the rate of customs duty on an article specified in the First schedule. The effect of the notification is to amend the First schedule to the Customs Tariff Act in respect of the import duty leviable on an article under Section 12 of the Customs Act. In issuing a notification under Sub-section (1) of Section 8A, the Central government exercises power as a delegate of the legislature. The issue now to be considered is whether the notification that was issued by the Central government under Section 8A(1) at 20:46:58 hours on 16 February 2019 took effect commencing from 0000 hours on that day.
The rate of customs duty is determined on the date on which the bill of entry for home consumption is presented (Section 15). The presentation of the bill of entry has to be made electronically (Section 46 read with the 2018 Regulations). The presentation is required to be made on the customs automated system. The provisions in the Customs Act for the electronic presentation of the bill of entry for home consumption and for self-assessment have to be read in the context of Section 13 of the Information Technology Act which recognizes “the dispatch of an electronic record” and “the time of receipt of an electronic record” - The presentation of the bill of entry under Section 46 is made electronically and is captured with time stamps in terms of the requirements of the Information Technology Act read with Rule 5(1) of the Information Technology (Electronic Service Delivery) Rules 2011.
Notification 5/2019 was uploaded in the e-gazette at a specific time and date and cannot apply to bills of entry which were presented on the customs automated EDI system prior to it, attracting the legal fiction set out in Regulation 4(2) of the 2018 Regulations.
Retrospectivity - HELD THAT:- For the purpose of the present decision the point which needs emphasis is that in empowering the Central Government to exercise power under Section 8A of the Customs Tariff Act, Parliament has not either expressly or by necessary implication indicated that a notification once issued will have force and effect anterior in time. The provisions of sub-sections (3) and (4) of Section 7 of the Customs Tariff Act bring to bear legislative oversight and supervision over the power which is entrusted to the Central Government under Section 8A. That however does not lead to the inference that a notification under Section 8A has retrospective effect. Plainly, a notification enhancing the rate of duty under Section 8A has prospective effect.
In the present case the twin conditions of Section 15 stood determined prior to the issuance of Notification 5/2019 on 16 February 2019 at 20:46:58 hours. The rate of duty was determined by the presentation of the bills of entry for home consumption in the electronic form under Section 46. Self-assessment was on the basis of rate of duty which was in force on the date and at the time of presentation of the bills of entry for home consumption. This could not have been altered in the purported exercise of the power of re-assessment under Section 17 or at the time of the clearance of the goods for home consumption under Section 47. The rate of duty which was applicable was crystallized at the time and on the date of the presentation of the bills of entry in terms of the provisions of Section 15 read with Regulation 4(2) of the Regulations of 2018. The power of reassessment under Section 17(4) could not have been exercised since this is not a case where there was an incorrect self-assessment of duty. The duty was correctly assessed at the time of self-assessment in terms of the duty which was in force on that date and at the time. The subsequent publication of the notification bearing 5/2019 did not furnish a valid basis for re-assessment.
Appeal dismissed.
AS PER K.M. JOSEPH, J.
Does a notification under Section 8A of the Customs Tariff Act, 1975 increasing the import duty published late in the evening of 16th Feb 2019, date back to the midnight of the previous day? Does a day include its fractions? - HELD THAT:- The Customs Act is a consolidating Act. It is intended, inter alia, to deal with the menace of smuggling. It contains various sanctions. It also provides for the levy of Customs duty on import and export. It is a law which provides revenue to the State. It is also an important tool in the hands of the nation to arrange its economic affairs to make it best suited to the welfare of the people otherwise. Indisputably, the charging Section is Section 12. The taxable event is import into or export of goods from India. Ordinarily, the Tariff Act provides the rates at which duty is imposed on imports and exports. There is no dispute that India and Pakistan being S.A.A.R.C. Countries they were parties to an agreement under which the trade between the countries was subjected only to duty on concessional rates. It is while so, following the unfortunate incident of Pulwama that the Government of India in exercise of its powers under Section 8A of the Tariff Act decided to increase the rate of import duty on all goods in the manner done. The Notification was issued on 16.02.2019. It was published at about 20:46:58 hrs. In the meantime, during the course of the day, the writ petitioners before us who imported goods had filed Bills of Entry electronically. The goods were present in the Customs Station.
The Tariff Act and whether the notification is a form of Delegated Legislation - HELD THAT:- A Notification issued under Section 8A, increasing the import duty, is a species of delegated legislation. It must be remembered that Article 265 of the Constitution of India declares that no tax shall be levied except by the authority of Law. An increase in the rate of duty cannot obviously be affected by an Executive Order. That is not to say that when the Executive is empowered to increase the rate of duty by way of delegated legislation, it would not fulfill the requirement of Article 265 and there can be no hesitation in holding that it is law within the meaning of Article 13 of the Constitution of India and it is a species of delegated legislation.
The Scheme of the Customs Act Qua Rate of Duty on imports and assessment to duty - HELD THAT:- There is no dispute that the imported goods were very much in the Customs Station and the Bills of Entry were presented under Section 46(1) on 16.2.2019. It is clear that the rate of duty, for the purpose of the cases before the Court, is to be determined with reference to the presentation of the Bills of Entry. The law does not take into consideration even the time of payment of the duty which is self-assessed by the importer. This is noted for the reason that the importer, who presents a Bill of Entry under Section 46 and who carries out self-assessment, is duty-bound to pay such duty on the very same date. The consequence of failure is only the liability to pay interest under Section 47 besides disabling him from clearing the goods. It does not postpone the point of time at which the rate of duty is to be determined.
As far as the Notification issued under Section 8A of the Tariff Act is concerned, the Notification would come into force on the date on which it is published in the Gazette. The question, however, which arises in this case is, as far as this Court is concerned, res integra, viz., whether having regard to the time at which it was published, whether Notification would come into force on 16.02.2019, by including the whole of the day or will it operate from the time of its publication, or whether the Notification is to be enforced only after excluding 16.02.2019 - The question would pointedly arise whether it was to have effect for the whole of the day, viz., 16.02.2019, which means, since the day 16.02.2019 was born, immediately after the midnight on 15.02.2019, does a day mean the first moment after the midnight? If that were the effect, what would be its impact on the Bills of Entry which were electronically presented under Section 46(1) of the Customs Act read with Rule 4(2) of the 2018 Regulations. It is here that it becomes necessary to notice the provisions of Section 9 of the General Clauses Act, 1897.
Section 9 of the General Clauses Act, 1897 - HELD THAT:- Section 9 of the General Clauses Act enunciates the principle, that for, excluding the first in a series of days or any other period of time, it suffices to use the word “from”. It also provides, likewise, for the devise of using the word “to”, for the purpose of including the last in the series of days or other period of time. It is clear from Section 9 that it contemplates a period, or a series of days which is marked by both terminus aquo and terminus ad quem. Section 9 is expressly intended to apply to a Central Act or Regulation.
Cases under Contracts of Insurance - HELD THAT:- It is clear that the situation which is presented before us, is not covered by the principle which is embedded in Section 9 of General Clauses Act, 1897. In other words, having regard to the terms of the Notification, which is a form of delegated legislation, by which the Central Government has increased the rate of import duties of goods imported from Pakistan, though the notification is gazetted on 16.02.2018 at 20:46:58 hrs., there is no period for which it is to last as already noticed, and in that sense, it can be argued that there would be no occasion for exclusion of the date on which it was issued.
Whether Section 5(3) of the General Clauses Act applies to the Notification - HELD THAT:- It is quite clear that the notification which is issued is one which is issued under Section 8A of the Tariff Act. The notification is not one which is made by Central Legislature, namely, the Parliament. It therefore is not a Central Law as defined in the Act. We have also noticed the definition of the word ‘Regulation’. The notification is not a regulation as defined in General Clauses Act. There is no merit in the contention of the Union of India that by virtue of Section of 5(3) of the General Clauses Act, the notification must be treated as effective from the point of time immediately after mid night on 15/16 February, 2019.
Existence of possible views - HELD THAT:- Having regard to the Scheme, which, in the case of import duty, consists of filing of Bill of Entry for home consumption, self-assessment and payment of duty on the basis of the same and the rate being clearly fixed with reference to the particular point of time when the Bill of Entry is presented and there is a deemed presentation and even a deemed assessment, which is otherwise in order, and bearing in mind the principle that Section 8A does not provide power for increase of rate of duty with retrospective effect, the Notification must be treated as having coming into force not before its publication which is at 20:46:58 hrs. on 16.02.2019. This would necessarily mean that the Notification cannot be used to alter the rate of duty on the basis of which, in fact, there was presentation of Bill of Entry several hours ago, the self-assessment was done and what is more, the self-assessment was completed under Regulation 4(2) of the 2018 Regulations. There cannot be reassessment. The interpretation based on time of publication is in harmony with a view that accords respect for vested rights.
Two inconsistent rates at the same point of time - HELD THAT:- There is no merit in the submission of the appellants in this regard. Once it is found that the notification upon publication would take effect from the time of its publication then in regard to the bills of entries which stand presented within the meaning of Section 46 of the Customs Act read with 4(2) of the 2018 Regulations, earlier to such publication, the rate of duty in regard to the same would be only the rate of duty which prevailed at the time of the deemed presentation under Regulation 4(2) of the 2018 Regulations.
Effect of the Word ''Otherwise'' in section 17(4) of the Customs Act, 1962 - HELD THAT:- The expression “otherwise” in Section 17(4), will not come to the rescue of the appellants, in the facts of the instant case. While the word “otherwise” may be capable of taking care of situations which are not covered by the preceding expressions, viz., verification, examination, attesting of the goods, it cannot mean that it will empower the Officer to alter the rate of duty which is prevalent at the time of the self-assessment following the due presentation of the Bill of Entry. If it is otherwise, it will be open to the Department to reopen cases of concluded assessments by virtue of the deemed completion of assessment under Regulation 4(2) without any legal justification. That would be plainly impermissible being illegal. This is not a case where the assessment is assailed on any other ground except by insisting on a rate of duty which is in applicable.
By its very nature, delegated legislation is legislative in character but if it is to be a Central Act within the meaning of Section 5 of General Clauses Act, it must be made by the legislature. Delegated legislation which is called administrative legislation in England, is exercise of legislative power by the executive. It is to be further noticed the fact that the notification issued under Section 8A is in the exercise of its legislative power or that it may have to be read in the same manner as if it is a part of the Act, will not detract the Court from ascertaining as to who is the author of the exercise of the legislative power, namely, whether it is an exercise of power by the legislature or by its delegate. Upon answer to the question, namely, that the author of the legislative effort is the executive, the question would necessarily arise as to whether there is publication. In the scheme of the Customs Act, the Tariff Act and the 2018 Regulations, the time at which the notification under Section 8A is published would indeed have relevance as already found.
Appeal dismissed.
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2020 (9) TMI 902
Valuation of imported goods -steel nuts - misdeclaration of value - enhancement of value with the consolation of reducing the fine - primary contention of the appellant is that there has been no misdeclaration, that specific authority for adoption of London Metal Exchange (LME) prices is not on record and that the fine and penalty are not proportionate to the extent of alleged undervaluation - HELD THAT:- On perusal of note 1 in chapter 72 of the First Schedule to Customs Tariff Act, 1975, it is observed that several forms of ‘iron and steel’ have been described and while all of them are intended for determining the rate of duty in relation to goods enumerated in the said chapter, those of ‘steel’, ‘stainless steel’ and ‘other alloy steel’ in (d), (e) and (f) in the note are intended to apply to such descriptions anywhere in the schedule. The first appellate authority cannot be faulted for reference to these descriptions for the purpose of chapter 73 of the First Schedule to Customs Tariff Act, 1975.
The lower authorities have relied upon the ascertained chromium content. It is abundantly clear that to conform to description as ‘other alloy’ it should not be ‘stainless steel’ which is distinguished by being ‘alloy steel’ with the carbon content restricted to 1.2% or less and with chromium content of at least 10.5%. Consequently, it would appear that ‘other alloy steel’ should have at least 0.3% of chromium content - As pointed out by Learned Consultant, the proceedings lack any record of determination of such contents. We also take note that the rate of duty is not in dispute.
The evidence on record is not sufficient to determine the impugned goods either as ‘stainless steel’ or as ‘other ally steel’ and, in the absence of such evidence, the declaration cannot be faulted. There is no ground to dispute the valuation. Hence, the enhancement of values and detriment built upon alleged misdeclaration fails - Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2020 (9) TMI 901
Striking off the name of the company from the ROC - Section 252 of the Companies Act, 2013 - grounds contemplated under section 252 of Companies Act, 2013, are that the company was carrying on business or was in operation at the time of striking off its name, and where it appears “just” to the Adjudicating Authority that the name of the company is to be restored to the Register of Companies and the Section 252(1) of the Act - HELD THAT:- The Appellant has submitted sufficient evidence that it has been in operation during the period preceding strike off, therefore it could not be termed as a defunct company as per section 252 of the Act. Thus, taking into consideration the provisions of Section 252(1) of the Companies Act,2013, which vests this Tribunal with a discretion where the Company, whose name has been struck off, and such Company is able to demonstrate that it is just to do so, can restore the name of the Company, in the Register and in the interest of all stakeholders, including the Appellant itself, who seeks restoration of the name of the Company in the register maintained by Registrar of Companies, the company deserve to be restored.
The Public Notice of Registrar of Companies,striking off the name of the company,is hereby declared illegal and set aside. The restoration of the company’s name to the Register of Registrar of Companies is ordered subject to its filing of all outstanding documents with proper filing fees along with additional fees required under law and completion of all formalities - Appeal allowed.
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2020 (9) TMI 900
Striking off the name of the Company passed by the RoC/Respondent - Section 248 of the Companies Act, 2013 - HELD THAT:- From the contention raised by the Counsel for the Applicant it can be seen that the Applicant is relying on the "just ground" as envisaged under Section 252(3) of the Companies Act, 2013 to restore the name of the Company in the Register of Companies maintained by the RoC/Respondent - Apart from the said "just ground" relied on by the Applicant from the typed set of documents filed in the Application, it may be seen as rightly pointed out in the Report of the RoC/Respondent that the Company has not filed any Income Tax Returns for the period from 2003-2019 nor any GST Returns in order to show that the Company is a going concern. However, as already stated that the Applicant relies only upon the "just ground" as contemplated under the provisions of Section 252 of the Companies Act, 2013.
It is just for this Tribunal to restore the name of the Company to the Register of Companies maintained by the RoC/Respondent. However, it may be seen that the Company has not filed its Annual Return and Balance Sheet with the RoC/Respondent from the year 2003 to till date - the Company is required to be imposed an exemplary cost in a sum of ₹ 50,000/- payable to the PM CARES Fund - Application disposed off.
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2020 (9) TMI 889
Referral of case to arbitrator - declare the notice of EGM dated 16th December 2019, invalid - cancellation of the proposed EGM and during the pendency - direction to Respondent to maintain the status quo in the shareholding of the Respondent-1 - HELD THAT:- Merely, plain reading of the provisions of Section 45 of the Arbitration and Conciliation Act, 1996 shows that the word unless it is prima facie find is added by amendment dated 30.08.2019 in Section 45 of the Arbitration and Conciliation Act, 1996, which shows that if prima facie it is find that the agreement is null and void or inoperative or incapable of being performed then Section 45 of the Arbitration and Conciliation Act, 1996 is not applicable.
Admittedly, the main application is pending for consideration and during the pendency of the main application, the present two interlocutory applications, which we have referred have been filed by the respective parties - we would also like to refer the contention raised on behalf of the Learned Counsel appearing for the Petitioner, who in course of his arguments submitted that if an application under Section 241 and 242 of the Companies Act, 2013 for the Oppression and Mismanagement is filed, in that case, the Section 45 of the Arbitration and Conciliation Act, 1996 is not applicable because Section 241 and 242 of the Companies Act, 2013 are in respect of the Oppression and Mismanagement in the Company, which cannot be decided by the Arbitrator.
Whether there is Oppression and Mismanagement as alleged by the Petitioner and that cannot be decided unless we consider the averment made in the main Company Petition and that can only be done, if we give both the parties to place their case at the time of final hearing of main Application, therefore, in our considered view, the application filed by the Respondent-2 under Section 45 of the Arbitration and Conciliation Act, 1996 can only be considered at the time of final hearing of the Company petition and not at this stage, by formulating the preliminary questions, if there is an arbitration clause then the party will be governed by the Arbitration clause and not entitled to file an application under Section 241 and 242 of the Companies Act, 2016.
This issue can only be decided at the time to final hearing of the application and not at this stage. Therefore, instead of passing any order on the merit of the application filed on behalf of the Respondent-2 under Section 45 of the Arbitration and Conciliation Act, 1996, we think it is proper to give liberty to the Respondent-2 to raise this issue during the course of final hearing and order shall be passed on merit after considering the submissions of both the parties at the time of final hearing on the point, whether Section 45 of the Arbitration and Conciliation Act, 1996 can be invoked or not?
Whether the notice of the EGM dated 16.12.2019 is invalid, illegal and on the basis of that the proposed EGM can be cancelled or not? - HELD THAT:- As we have already referred the clause 4.9 of the Joint Venture Agreement which shows that the quorum is not said to be completed unless one Director nominated by PR and one Director by SPAL. Admittedly, the Petitioner was not participating in that meeting - since the Petitioner has tendered his resignation, therefore, he has not participated in the meeting. He was not party to the meeting.
Applicability of JVA - HELD THAT:- The contention of the Respondents that JVA is not binding upon the respondent is not liable to be accepted, rather we are of the considered view that since the JVA dated 19th September 2006 is ratified and approved by the Board of Directors by Respondent Company on 16th October 2006, therefore, it is binding upon the parties.
Whether quorum of the Board meeting was completed in the absence of non-participation of the Petitioner in that Board meeting? - HELD THAT:- We have no option but to hold that presence of the Petitioner in the board meeting is necessary in order to constitute the quorum for the board meeting, if the Petitioner has not participated or absent in the board meeting then the board has no other option but to adjourn the meeting in view of clause 4.9 of the Joint Venture Agreement - there are no force in the contention raised on behalf of the Learned Counsel appearing for the Respondent that Joint Venture Agreement is not binding upon the company.
Since in the case in hand, the Petitioner was not the part of that meeting of Board of Directors in which it was decided to call the extraordinary general meeting, therefore, in our considered view that decision is against the provision contained under Section 100 of the Companies Act, 2013 and any notice issued under Section 101 of the Companies Act, 2013 is not the valid notice - we have no option but to hold that notice issued by the Respondent-3 by which he informed the Petitioner that the extraordinary general meeting is going to be held on 13th January 2019 is not valid and on the basis of which no meeting can be held on that day.
Whether the company can raise the fund or not? - HELD THAT:- Since company needs fund under such circumstances, we cannot restrain the company to raise the fund. Of course, it must be in accordance with the law and it must be placed before the duly constituted meeting of the Board of Directors and therefore, we are unable to accept the submissions of the Petitioners that the company be restrained from raising the fund, the decisions upon the Petitioner place reliance on this issue, we have gone through the decisions and in our considered view if there is need of fund for the smooth functioning of the company in that case, no restrain order can be passed, which stop the company from raising the fund.
The prayer of the Petitioners to grant status quo in respect of shareholding of the Respondent-1, rather, we made it clear if the raising of fund is duly approved by the Board constituted as per the JVA and then the Company is at liberty to raise the fund in any manner which will be approved by the Board of Directors duly constituted under JVA is rejected.
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Insolvency & Bankruptcy
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2020 (9) TMI 896
Liquidation of the Corporate Debtor - appointment of the Liquidator - section 33(1), 33(2) & 34(l) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It is found that no response was received from any person or proposed Resolution Applicant and also, there is no ongoing business of the Corporate Debtor. Therefore, the CoC has resolved for liquidation of the Corporate Debtor vide its Fourth meeting dated 15.06.2020. It is also to be noted that this Adjudicating Authority has no jurisdiction to interfere in the commercial wisdom of the CoC.
Application is allowed and the Adjudicating Authority passes an order for initiation of liquidation of the Corporate Debtor viz., Shree Santosh Cotton Spin Private Limited. The RP i.e. Mr. Bhupendra Singh Narayan Singh Rajput, shall act as the Liquidator for the purpose of liquidation of the Corporate Debtor.
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2020 (9) TMI 895
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- There is no doubt that there is an admitted debt and a default as per the agreed terms between the two parties. On the other hand the Petitioner admits that the present loan was renewed as the Respondent had been repaying the earlier debts. Thus, there is a running account between the two and the Respondent has given an undertaking that it has made arrangements for paying the debt and only requires some more time to settle the debt.
No case has been made out by the Petitioner that the Respondent has become insolvent or has lost its substratum such that it cannot pay its debts or run its business. On the other hand, the Respondent is a leading renewable energy developer in Karnataka, and employs over 200 employees across its 21 power generation projects, with a total revenue of ₹ 177.50 Crore. Hence, it would defeat the purpose of the Code, if a going concern generating good revenue and having a huge number of employees is subjected to the rigours of corporate insolvency resolution process.
In the facts of the instant case as brought on record and discussed above, especially that it has already received funds to be utilised for repaying its debts, we are of the considered view that the Respondent's plea that it be given some more time to repay the debt needs to be accepted, and the Respondent/Corporate Debtor be directed to settle the debt at the earliest in consultation with the Petitioner/Financial Creditor - considering the amount involved and the present economic scenario, despite the argument of the Petitioner that it is a fit case for admission.
Petition disposed of by directing the Respondent / Corporate Debtor to repay the balance debt or the amount as settled with the Petitioner within a period of 60 days, failing which the Petitioner would be at liberty to file a fresh petition for admission.
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2020 (9) TMI 894
Maintainability of application - initiation of CIRP- Corporate Debtor failed to make repayment of dues - recovery of alleged outstanding dues - appropriate forum or not - time limitation - HELD THAT:- It is settled position of law, that the provisions of the Code cannot be invoked for recovery of alleged outstanding amount, that too, after long lapse of time, without explaining the delay caused.
The Hon'ble Supreme Court in the case of Mobilox Innovations Private Limited vs. Kirusa Software Private limited [2017 (9) TMI 1270 - SUPREME COURT ], has inter-alia, held that IBC, 2016 is not intended to be substitute to a recovery forum - It is not in dispute that the Petitioner has received part payment and the instant Petition is filed to recover the balance amount which is against the object of the Code and the Law.
The instant Company Petition is filed with an intention to recover the alleged outstanding due, which is not permissible under law - Moreover, the Petitioner has not explained the reasons for delay for issuing the Demand Notice belatedly i.e. 24.10.2019, and filing this instant Application only on 10th February 2020, even though the Demand Notice specifically mentioned that the Respondent has to pay the outstanding due or to raise the dispute, within a period of 10 days from the date of receipt copy of Demand Notice. It is not in dispute that law of limitations is applicable to the provisions of the Code - Therefore the instant Petition is not maintainable either on facts and or law and thus it is liable to be dismissed.
Petition dismissed.
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2020 (9) TMI 893
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - time limitation - HELD THAT:- The application filed on behalf of financial creditor/Applicant under Section 7 of IBC is found complete. The present petition being filed in 04.02.2020 is well within limitation and the date of default is 31st August, 2017 is much prior to the amendment made in Insolvency and Bankruptcy Code on 05th of June, 2020 - in the present application the date of default in the present application is 31st August, 2019, thus the amendment made will not be applicable in the present petition.
This adjudicating Authority is inclined to admit this petition and initiate CIRP of the Respondent Company. Accordingly, this petition is admitted - moratorium declared.
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2020 (9) TMI 892
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - Operational Debt or not - existence of debt and dispute or not - HELD THAT:- The unpaid petitioner, who rendered services to the Corporate Debtor, comes within the purview of 'Operational creditor' - The procedure in relation to the Initiation of Corporate Insolvency Resolution Process by the "Operational Creditor" is delineated under Section 9 of the Code. The present application filed by operational creditor, accordingly, has to be dealt with in terms of Section 9 of the Code.
Sub-section (1) of Section 9 mandates filing of the petition only after expiry of the period of 10 days from the date of delivery of notice or invoice demanding payment under sub-section (1) of Section 8 - In the present case admittedly the demand notice in Form-3 as per Section 8 of the Code was sent on 09.10.2019. It is thus seen that before filing the present application under Section 9 of the Code, requisite notice under Section 8 was duly served on the Respondent. In response to Section 8 notice, respondent corporate debtor has filed its reply acknowledging the outstanding amount and expressed its inability to pay the debt due to financial difficulty.
The present application under Section 9 of the Code has been filed in requisite Form-5, wherein it was specifically mentioned that in the reply received from the corporate debtor there has been admission of debt and default and no dispute was raised against the claim of the applicant operational creditor. The application under Section 9 is thus complete and the required particulars have been furnished along with details of subsistence of default - in compliance of sub-section (3) (b) and (C) of Section 9 of the Code, the petitioner has affirmed that respondent corporate debtor has not raised any dispute in respect of the unpaid operational debt.
There is a clear admission of debt and default and therefore there is no need to comply with any additional requirement as provided in Clauses (d) and (e) of sub-section (3) of Section 9 of the Code - In the present application all the aforesaid requirements have been satisfied. It is seen that the application preferred by applicant operational creditor is complete in all respect. The material on record clearly goes to show that the respondent committed default in payment of the claimed operational debt even after demand made by the applicant operational creditor. Respondent company also did not raise any dispute regarding the existence of operational debt. In fact, the claim of default committed by the corporate debtor has not been denied. Once the application is complete and in the absence of any dispute and with the subsistence of default, the application is liable to be admitted.
Application admitted.
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2020 (9) TMI 891
Liquidation of Corporate Debtor - Section 33(2) of the IBC, 2016 - HELD THAT:- Since, in the 5th CoC meeting held on 13.01.2020, the Committee of Creditors has deliberated about the current affairs of the Corporate Debtor and also on the future course of action to be taken and as such the CoC was unwilling to consider the Resolution Plan and extend the time limit for completion of the CIRP and based on its commercial wisdom has decided to liquidate the Corporate Debtor and thus by taking into consideration the provisions of Section 33 of IBC, 2016 and in the absence of any opposition to the Application from the Promoters/Directors of the Corporate Debtor and also guided by the decision of the Hon'ble Supreme Court in the matter of Mr. K. Sasidharan -Vs- Indian Overseas Bank [2019 (2) TMI 1043 - SUPREME COURT ] this Tribunal orders for the liquidation of the Corporate Debtor.
The Liquidator of the Corporate Debtor is directed to carryout the liquidation process subject to the directions issued - Liquidator shall strictly act in accordance with the provisions of IBC, 2016 and the attendant Rules and regulations including Insolvency and Bankruptcy (Liquidation Process) Regulations, 2017 as amended upto date enjoined upon him.
Application disposed off.
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2020 (9) TMI 890
Approval of Resolution Plan - payment of award amount - HELD THAT:- Since the petitioner says that they have 30 per cent of shareholding in the first respondent company and have also filed application under 241- 242 of the Companies Act, this application ought to be decided in the interest of justice.
In IA No. 17/CTB/2020, the first respondent shall not distribute the award amount to the second respondent until further orders of this Tribunal. The respondents shall file their counter on or before 31.03.2020 in the registry after serving the copy to the other side. Petitioners shall file their rejoinder, if any on or before 13.04.2020.
Post the matter on 17.04.2020 for further hearing.
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2020 (9) TMI 888
Condonation of delayed 400 days in filing petition - recovery of outstanding dues - Section 5 of the Limitation Act - HELD THAT:- The applicant has filed an application under Section 9 of the IB Court, which is registered as CP(303) 2020 and in part 4 of the application at page 12 the application mentioned the default period is from April 2012 and May 2012 and at page 16, the applicant mentioned the date from which the debt became due that is 12th July 2012 to 6th January 2020 - it is found that last invoice is dated 3rd July 2012 and the last payment was made in the month of July 2012 as mentioned at page 12 of the application. We further find, thereafter in the year 2015, a company petition being Company Petition No. 6 of 2015 was filed before the Hon'ble Allahabad Bench which was disposed of 19.11.2018 and the present application is filed on 16.01.2020.
The right to apply accrues in the month of July 2012, when the last payment was made by the corporate-debtor to the applicant.
As per the contention of the learned counsel appearing for the applicant the company petition was filed, on 10th July 2015, whereas the right to apply accrue on 12th July 2012 which means the company petition was filed, according to the submissions of the learned counsel appearing for the applicant, one day prior to the limitation period of three years comes to an end, and if we shall exclude the period spent during that proceeding under Section 14(2) of the Limitation Act, then, the applicant was required to file the present applications on 20th November 2018 that is on the next date of disposal of the company petition by the Hon'ble Allahabad High Court. But the same is filed on 16.01.2020, therefore, we are of the considered view that even we shall exclude the period spent by the petitioner in the legal proceeding before the Hon'ble Allahabad High Court from 10th July 2015 to 19th November 2018, the present petition is barred by limitation.
Mere plain reading of the provisions shows that Section 5 of the Limitation Act is not applicable in condoning the period, where, there is a specific provision under the Limitation Act, which prescribe the period for filing any applications, which relates to recovery of money within such period the same can be condoned only either Under Section 14 or 18 of the Limitation Act, as we have already held that even if we shall exclude the period spent in the litigations before the Hon'ble Delhi High Court, the present application is barred by limitations, therefore, we are unable to accept the contention of the applicant that the delay is liable to be condoned under Section 5 of the Limitation.
There are no option but to reject the condonation application of the applicant to condoning the delay either under Section 5 of the Limitation under Section 14 of the Act, accordingly, we hereby reject the prayer of the applicant but condone the delay under Section 5 of the Limitation Act, and so far exclusion of the period spent during the proceedings before the Hon'ble Allahabad High Court is concerned, we have already held that even if we shall exclude that period, the present application is barred by limitation, accordingly, the application filed by the application under Section 9 of the Act, is not maintainable since it is barred by limitation, hence the same is hereby dismissed.
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2020 (9) TMI 887
Order directing IDBI Trusteeship Services Limited (Security Trustee) refraining from issuing instructions to IDBI Bank Limited to make any payments to creditors of the Corporate Debtor from monies available in the Trust and Retention Accounts - HELD THAT:- It is true that the present application is filed by the applicant before admission of his application filed under section 7 of I&B Code against the corporate debtor. The applicant is seeking interim order with regard to the amount lying in the Trust and Retention Account maintained in respondent No. 2-Bank. The only grievance of the applicant is that money is to be applied to all the creditors, if petition under section 7 of the I&B Code is admitted. IRP/ RP will take control of the amount lying in the account and the same forms asset of the corporate debtor. The applicant is seeking a direction to maintain status quo in respect of the money lying in the Trust and Retention Account.
The learned counsel for respondent No. 3 has drawn attention to various documents, particularly, Inter-creditor Agreement and Trust and Retention Account and also No Objection Certificate given by the applicant. It is not a dispute between the applicant and the corporate debtor. The documents, to which the applicant is a party would go to establish that the amount in Trust and Retention Account to be applied at the first instance to the priority lender. When such is the case and applicant being a party to the said agreements, namely, Inter-creditor Account Agreement and Trust and Retention Agreement, then the relief sought by the applicant cannot be granted in favour of the applicant.
There is no dispute that the applicant is also a party to the said agreements. Then the same are binding on the applicant and the applicant cannot be permitted to seek relief against the terms of the agreements - application dismissed.
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Central Excise
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2020 (9) TMI 897
Clandestine Removal - illicit production of plywood on the basis of consumption of resin - demand based only on presumption only without any corroborative evidences - case of appellant is that while issuing the demand, the consumption of resin has been calculated on average basis and not on the basis of thickness viz. resin consumption which was declared at the time of search proceedings - HELD THAT:- It is observed that no investigation has been undertaken by the Revenue towards procurement of additional raw materials clandestinely. No other corroborative documents have been produced. Investigations against the consignees have also not been done before raising demand on the allegation of clandestine clearance. The onus is definitely on the department to establish manufacture and clearance of such goods and also regarding the receipt of payment - In the absence of such investigation and evidence, the demand of duty cannot be sustained.
Penalty - HELD THAT:- Once the demand for duty payable is not sustained, there is no justification to impose penalty on the appellant firm as well as on the partner.
Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (9) TMI 899
Concessional benefit of tax - purchase of High Speed Diesel - difficulty in obtaining C Forms - HELD THAT:- The petitioner is entitled to the inclusion of ‘High Speed Diesel Oil’ as a commodity in the registration certificate.
Let this exercise be carried out within a period of four (4) weeks from date of uploading of this order. The request of the petitioner for issuance of ‘C’ Forms is allowed as a consequence thereof.
Petition allowed.
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Indian Laws
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2020 (9) TMI 898
Dishonor of Cheque - uncontroverted document i.e. Form-32 to prove resignation of Director - case of petitioner is that that despite the petitioner having resigned as a Director (independent and non-executive) from the accused Company on 22nd September, 2010, the petitioner has been arrayed as an accused on the basis of a dishonoured cheque dated 1st June, 2014 - alleged offences punishable under Sections 138 r/w 141 and 142 of the Negotiable Instruments Act - HELD THAT:- A perusal of Form – 32 shows that the petitioner had resigned from the accused Company on 22nd September, 2010. It is pertinent to note, that the said document, Form – 32 has not been controverted by the learned counsel for the respondent No.2. Learned Counsel states that he has no document or any material to show that the petitioner, post his resignation, was in any way concerned with the said accused Company. The cheque dated 1st June, 2014, which was dishonoured, was issued by the accused Nos.1 and 2 Company, post the petitioner's resignation, forms the basis of the complaint.
The petitioner has relied on the certified copy of Form – 32, which shows the date of resignation as 22nd September, 2010, almost 4 years prior to issuance of the cheque in question - Also as noted above, the said document has not been controverted by the respondent No.2 nor any document is brought on record to show that the petitioner continued to be concerned with the affairs of the Company, post his resignation in 2010.
The continuation of the proceedings qua the petitioner will clearly be an abuse of the process of the Court - petition allowed.
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