TMI Tax Updates - e-Newsletter
September 5, 2022
Case Laws in this Newsletter:
GST
Income Tax
Corporate Laws
Securities / SEBI
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Cancellation of registration granted to the appellant - appellant has been responding to the summons by submitting representations to the department - it is not clear as to why the authorities did not proceed further pursuant to the summons - the suspension of the appellant’s registration should be revoked forthwith with a direction to the appropriate authority to issue show cause notice within a time frame and take up the adjudication proceeding. - HC
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GST:
Seeking grant of Regular Bail - availment of fraudulent Input tax Credit - non-existence firms - as on date they have undergone a total custody period of approximately 01 year and 06 months. The maximum sentence that could be awarded would be 05 years. As yet, even the charges have not been framed and as many as 66 prosecution witnesses are yet to be examined. Therefore, at any rate, the trial cannot be concluded any time soon. - Bail granted - HC
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GST:
Interest for belated remittance of Goods and Service Tax (GST) - delayed filing of return / GSTR 3B - petitioner / assessee had sufficient ITC credit in both the electronic cash ledger (ECR) as well as the electronic credit register (ECrC) - The Court observes that a registered person is obliged to self-assess its turnover after reckoning its eligibility to ITC and Outward Tax Liability (OTL) taking note of the balances lying in its cash or credit ledgers - Demand confirmed - HC
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GST:
Entitlement to tax exemption from VAT after intorduction of GST - The impugned order dated 26.08.2020 is unsustainable in law and that the respondents fell clearly in error in declining the budgetary support for part of the amount for the period January to March, 2020 - HC
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Income Tax:
Disclosure of information respecting assessee u/s 138(1)(b) - Since the authority in this case has categorically set out its satisfaction to the effect that furnishing of information is not in 'public interest', assigning reasons for the same, stating that the material sought for appears only to be for settlement of personal disputes between the parties, find no flaw in the order and no cause to interfere in the subjective satisfaction of the Officer. - HC
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Income Tax:
Offence punishable u/s 276CC - Non filing of return - Maintainability of criminal appeals against Magistrate orders - Stoppage of proceedings - the orders under challenge passed by the Magistrate, stopping proceedings and releasing the accused, is nothing but an order of discharge, which is challengeable under the revisional provisions of Section 397(1) of Cr.P.C. - The question of giving permission to the appellant for converting the criminal appeals into criminal revision petition cannot be granted here, as the respondents will lose an opportunity of appeal to the High Court - HC
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Income Tax:
Assessment to be framed u/s 153C OR u/s 147/148 - Validity of the reassessment proceedings - Initiation of action u/s 153C would arise only if the seized material are handed over to the AO of such other person having jurisdiction of such other person - It is no so in the present case - no fault in the initiation of proceedings u/s 147/148 - AT
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Income Tax:
Deduction u/s 80GGB - Donations to political parties - The transaction is demonstrated through the bank account of the assessee. In any way, the donation paid in cash is as such not allowable under that Section. The provision of Section 80GGB also speaks about the contribution is defined in Section 293A of the companies act 1956. As assessee has shown that the amount is of contribution paid by account payee cheque, merely because receipt is not available it cannot be denied. - AT
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Income Tax:
Revision u/s 263 by CIT - limited scrutiny assessment - Based on the information mentioned in the revisionary order, the learned PCIT should have reprimanded the assessing officer by asking assessee to furnish the information, which were not within the scope of limited scrutiny. Instead of that, PCIT has invoked the provisions of Section 263 on such information. - AT
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Income Tax:
Unexplained expenses u/s 69C - Discrepancy found in the payment of custom duty as per AIR [“Annual Information Report”] - Assessee failed to explain the reasons for variation and the SAD [“Special Additional Duty”] classified as current asset to be reflected in the P&L A/c at the stage of receipt of the funds/set off. - AT
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Income Tax:
TP Adjustment - ALP determination - intra-group services - TPO cannot stand in judgment on what benefits the assessee has derived from the services and assessee's obligation lies to the extent of demonstrating receipt of services. Once, the assessee has been able to demonstrate receipt of services, in our view, Transfer Pricing adjustment without applying any prescribed benchmarking method is unsustainable - AT
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Income Tax:
Depreciation on Buildings - Adoption of WDV based on a valuation report prepared for a different purpose - Sec.32 of the Act mandates depreciation to be allowed as deduction on the WDV as understood under section 43(1)(6) of the Act. The AO therefore could not have tampered with the WDV of the Building Block of Assets based on a valuation report prepared for a different purpose. - AT
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Corporate Law:
Criminal contempt for lowering the authority of this Appellate Tribunal - In the present contempt case, the procedure contemplated under Section 15 of Contempt of Courts Act, 1971 has not been complied, consequently, the Contempt Case is liable to be closed as cognizance was taken in violation of mandatary procedure prescribed in Section 15 and major part of alleged acts of contempt are barred by Limitation prescribed by Section 20 of the Act. - AT
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Indian Laws:
Post-award interest - To be calculated on principal sum due u/s 31(7)(b) of the Act - Claim of post award interest on the aggregte of the principal and pre-award interest - the arbitrator has the discretion to award post-award interest on a part of the ‘sum’; the ‘sum’ as interpreted in Hyder Consulting - SC
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Indian Laws:
Dishonor of Cheque - existence of legally enforceable debt or not - It has been clearly proved that there was absolutely no business transaction between them from the year 1990 and 2004 and the disputed cheque marked as Exhibit 1 had been kept as security and was misused by the complainant to harass the respondent company in the year 2004, after 15 years. - HC
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IBC:
Recovery of electricity dues - When the Corporate Debtor has opined that supply of electricity is essential and is to be continued by the Respondent, it is also under obligation to make payment of electricity dues of the CIRP period and direction issued by the Adjudicating Authority to make the payment of outstanding dues, cannot be faulted. - AT
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IBC:
Liquidation of the Corporate Debtor - Validity of decision of Committee of Creditors - It is true that under the statute CoC is empowered to take a decision to liquidate the Corporate Debtor. Material irregularity has been committed in the process - the sufficient ground exist within the meaning of Section 61(4) to assail the order directing for liquidation. The Adjudicating Authority in the impugned order only relying on the resolution of the CoC in 5th meeting has directed for liquidation without even taking into consideration minutes of subsequent 6th, 7th and 8th meetings of CoC, the steps taken by CoC to invite plan from the Appellant, discussion of the plan and ultimately decision thereon. - AT
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IBC:
Validity of order of NCLT issuing Direction to IBBI not to initiate any enquiry till further orders, if any enquiry is initiated, the same be halted till further direction from the court - the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I&B Code and not to act as a court of equity or exercise plenary powers - The impugned orders are not valid - AT
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SEBI:
Debenture trustees - Whether the debenture holders and other parties in the present case were required to follow the procedure under the SEBI Circular? - The dissenting debenture holders would have been bound by the Resolution Plan if it had been approved in accordance with the Insolvency and Bankruptcy Code, 2016 or under an ICA as acceded to under the SEBI Circular. We accordingly deem it appropriate that dissenting debenture holders should be provided an option to accept the terms of the Resolution Plan. Alternatively, the dissenting debenture holders have a right to stand outside the proposed Resolution Plan framed under the lender‘s ICA and pursue other legal means to recover their entitled dues. - SC
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Service Tax:
Interest on Refund of the pre-deposit amount - In the present case, the amount was deposited by the respondent pursuant to the directions issued under the unamended provisions of the 35F. Such being the position, interest on delayed refund of amount would continue to be governed by the unamended provisions of section 35FF - no interest would be payable to the respondent since the amount was refunded within three months from the date of communication of the order. - AT
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Service Tax:
Levy of penalty - CENVAT Credit - input service - outdoor catering services - As the entire amounts along with interest have been paid prior to issuance of the show cause notice, in view of the Explanation 2 to the sub section (3), there are no merit in the penalty imposed on the appellant under section 78 and set aside the same. - AT
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Central Excise:
Clandestine manufacture and removal - chewing tobacco - In the facts and circumstances (Compounded Levy Scheme), undisclosed income declared before the Income Tax Department has no bearing on the duty payable under Central Excise Act. - AT
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Central Excise:
Extended period of limitation - the fact remains that appellant has not provided the data and is now trying to profit from its own inaction to claim that the demand is time-barred. Therefore, the appellant had actually suppressed the information from the Department and now cannot benefit by claiming that the demand is time-barred. - AT
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Central Excise:
Jurisdiction - genuineness of transfer of Cenvat Credit to GST Tran-1 - competence of the Commissioner Appeal who has passed the impugned order on the ground that the Commissioner (Appeals) as Central Excise officer has no competence to adjudicate the issue with respect to the provisions of CGST Act, 2017 - The contentions of the department challenging the competence of Commissioner (Appeals) are set aside - Revenue Appeal dismissed - AT
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Central Excise:
Imposition of late fee for filing Central Excise return - the factum of said delay was in the notice of department since December’ 2014. Raising this issue in ACS scrutiny of the year 2019 cannot give the benefit to the department for invoking the extended period of limitation. - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2022 (9) TMI 120
Cancellation of registration granted to the appellant - no final order of adjudication passed by the competent authority quantifying the tax liability payable by the appellant - HELD THAT:- The suspension of a license of a dealer will be counterproductive and would work against the interest the revenue. We say so because if the registration of a dealer is cancelled, the dealer cannot carry on its business in the sense that no invoice can be raised by the dealer. This would ultimately impact the recovery of taxes. Therefore, the respondent department has to take a pragmatic view in the matter because a taxpayer is not to be treated as a person hostile to the department. Undoubtedly if the taxpayer has adopted dubious process to evade payment tax then he has to be dealt with firmly.
From the list of dates and events, it is found that summons were repeatedly issued to the appellant and the appellant has been responding to the summons by submitting representations to the department. Furthermore, it is not clear as to why the authorities did not proceed further pursuant to the summons - the suspension of the appellant’s registration should be revoked forthwith with a direction to the appropriate authority to issue show cause notice within a time frame and take up the adjudication proceeding.
The writ petition stand disposed of by directing the respondent authority to forthwith revoke the suspension of the appellant’s license and with a further direction to the respondent authority to issue show cause notice within seven days from the date of receipt of the server copy of this order.
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2022 (9) TMI 119
Seeking grant of Regular Bail - availment of fraudulent Input tax Credit - non-existence firms - cheating and dishonestly inducing delivery of property - forgery for the purpose of cheating using as genuine a forged document - extent of punishment - existence of serious charge - Section 132(1) (a), (b) & (c) of Central Goods & Services Tax Act, 2017 and Punjab Goods & Services Tax Act, 2017 - HELD THAT:- It would be contrary to the concept of personal liberty enshrined in the constitution that any person should be punished in respect of any matter upon which he has not yet been convicted or that in any circumstances he should be deprived of his liberty only upon the belief that he will tamper with the witnesses/evidence, if granted bail except in the most extraordinary circumstances. Undoubtedly, the seriousness of the charges against the accused are no doubt one of the relevant considerations while considering the bail application but it would not be the only factor. The other relevant factor would be the sentence that could be imposed upon the said accused after trial and conviction. If seriousness of the charge was the only test then it would not be balancing the constitutional rights. Further, while considering the grant of bail, the triple/tripod test would also be a relevant consideration. The three factors as set out in the said test are:-
(i) Whether the accused is a flight risk;
(ii) Whether the accused will tamper with the evidence, if granted bail &
(iii) whether the accused could influence the witnesses, if granted bail.
Since the grant or refusal of bail lies in the discretion of the Court the discretion is to be exercised with regard to the facts and circumstances of each case. However, bail is not to be denied to satisfy the collective sentiments of a community or as a punitive measure.
Coming back to the facts of the present case, it may be pertinent to mention here that the petitioners were arrested on 13.03.2021 and the complaint came to be filed on 12.05.2021. Therefore, as on date they have undergone a total custody period of approximately 01 year and 06 months. The maximum sentence that could be awarded would be 05 years. As yet, even the charges have not been framed and as many as 66 prosecution witnesses are yet to be examined. Therefore, at any rate, the trial cannot be concluded any time soon. Further no serious apprehension has been expressed by the prosecution of the petitioners being flight risks, or that they would tamper with the evidence or influence witnesses in case bail was granted to them. Even otherwise the evidence is primarily documentary in nature and in custody of the State.
Without commenting on the merits of the case, the petitions are allowed and the petitioner- Maninder Sharma son of Sh. Satya Varat Rattan, petitioner-Vinod Kumar son of Sh. Om Parkash, Sunny Mehta son of Sh. Kuldeep Mehta and Sandeep Singh son of Sh. Ikbal Singh are ordered to be released on bail subject to the satisfaction of the Trial Court, concerned which is at liberty to impose any stringent conditions that it deems appropriate.
Petition disposed off.
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2022 (9) TMI 118
Interest for belated remittance of Goods and Service Tax (GST) - short disclosure of liability for the period July to October 2017 - specific argument of the petitioner is that it had sufficient ITC credit in both the electronic cash ledger (ECR) as well as the electronic credit register (ECrC) - period from July, 2017 to October, 2017 - section 50 of CGST Act - HELD THAT:- The language of Section 50 used is categoric to the effect that it is only when a remittance is effected by way of debit, that an assessee would be protected from the levy of interest. Acceding to the stand of the petitioner would result in rewriting the proviso, to the effect that, even mere availability of credit would insulate the petitioner from interest, which is impermissible.
That apart, there is some force to the submissions of the respondents that credit cannot, prior to availment be taken to construe the payment . There are any number of situations where credit may be found to have been availed erroneously or on a mistaken interpretation of law. Thus, it would be risky, from the view-point of the revenue, to state as a general proposition that the mere availability of electronic credit should be assumed to be utilization that would insulate the petitioner from the levy of interest. Thus, unless an assessee actually files a return and debits the respective registers, the authorities cannot be expected to assume that available credits will be set-off against tax liability.
The specific issue raised relates to the levy of interest u/s 50 of the Act in a situation where the petitioner has not filed its returns of turnover for a particular period and the remittance of taxes for the aforesaid periods is admittedly belated. The petitioner argues that no interest need be levied on the strength of the balances lying to its credit in the ECR and ECrR. - The issue decided against the assessee.
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2022 (9) TMI 117
Compilation of documents, which seem to suggest that the grievance of the petitioner has been redressed - HELD THAT:- Ms Manish says that since the grievance of the petitioner stands redressed, the writ petition can be closed.
The writ petition and pending application are closed.
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2022 (9) TMI 116
Refund of IGST - zero rated supplies - shipping bills could be treated as refund applications or not - Section 54 of the Central Goods & Service Tax (CGST) Act, 2017 read with Rule 96 of the CGST Rules 2017, as also Section 16 of the IGST Act of 2017 - HELD THAT:- In the prayer clause of the writ petition, the amount claimed towards IGST is Rs. 99,11,273/-, and likewise, towards duty drawback, the amount claimed is Rs. 6,96,027/-.
Issue Notice.
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2022 (9) TMI 115
Entitlement to tax exemption from VAT after intorduction of GST - Decline of budgetary support for the period January to March, 2020 - argument of petitioner is that no reason has been assigned for rejecting the part of the claim for the budgetary support and that no notice or opportunity of hearing was given before doing so - principles of natural justice - HELD THAT:- The petitioner has been duly granted exemption/budgetary support till the beginning of the year 2020. Even, for the period January to March, 2020 part of the claim for budgetary support has been accepted meaning thereby that the petitioner is eligible for the grant of such benefits - No reason has been assigned anywhere as to why the claim in respect of the balance amount has been rejected.
The ineligibility of the petitioner to receive the budgetary support has been decided on the basis of the office memorandum dated 26.07.2021. The said office memorandum was not in existence on the date on which the impugned order was passed i.e. on 26.08.2020. Therefore, it is misconceived to allege that the petitioner was denied benefit of budgetary support on account of ineligibility.
The impugned order dated 26.08.2020 is unsustainable in law and that the respondents fell clearly in error in declining the budgetary support for part of the amount for the period January to March, 2020 - The writ petition is disposed of.
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Income Tax
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2022 (9) TMI 159
Deduction u/s.80P - Denial of deduction as assessee did not furnish the renewal certificate - CIT(A) observed that the renewal license filed by the assessee and the consequential renewal certificate did not pertain to the period of previous year relevant to the assessment year under consideration - HELD THAT:- As AR submitted that such certificate was furnished before the ld. CIT(A) which skipped his attention and prayer was made that the matter may be sent back to the AO for examining necessary renewal certificate and the availability of deduction u/s.80P.
No serious objection was taken by the ld. DR. In view of the above factual position, set-aside the impugned order and remit the matter to the file of the AO for deciding afresh the granting or otherwise of the deduction u/s.80P after allowing reasonable opportunity of hearing to the assessee. Assessee appeal is allowed for statistical purposes.
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2022 (9) TMI 158
Disallowance of deduction u/s. 54F - reinvestment of capital gains in a residential house at Pune - CIT-A deleted the addition - second round of proceedings between the parties before the tribunal - HELD THAT:- We make it clear that there is no stipulation in section 54F which could be held to have been violated in assessee’s impugned development agreement. We thus invoke stricter interpretation in light of Commissioner of Customs Vs. Dilip Kumar and Co.[2018 (7) TMI 1826 - SUPREME COURT] to affirm the CIT(A) action deleting the impugned disallowance - Decided against revenue.
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2022 (9) TMI 111
Income deemed to accrue or arise in India - FTS - amounts payable to the non-resident after grossing up - Payment for training services - India does not have a DTAA with Hongkong - fees paid to non-residents for training services - whether payment by the assessee to the non-resident can be regarded as a fee for technical services (FTS) within the meaning of Explanation to section 9(1)(vii)? - HELD THAT:- Fee for the provision of a service will not be a technical fee, unless that special skill or knowledge is required when the service is provided to the customer. Employees developing leadership skill through service provided by the non-resident do not use such knowledge when they provide BPO service to the customers of the assessee and hence, the services rendered cannot be regarded as technical service.
The service cannot be regarded as managerial service because the service rendered by the non-resident does not teach the employees of the assessee how the business has to be run but relates only developing leadership skills and hence the service provided by the non-resident cannot be regarded as managerial services. It cannot be regarded as consultancy service also because provision of advice by someone, such as a professional, who has special qualifications allowing him to do so, would be consultancy service but imparting training in leadership skills cannot be said to be providing advice by a professional.
Assessee in the case of Ershisanye Construction Group India (P) Ltd. [2017 (8) TMI 736 - ITAT KOLKATA], the tribunal had to deal with taxability of training fee paid to non-resident, being a tax resident of Republic of China - The definition of FTS under the DTAA between India and China and under the Act was identical.
Assessee the sum paid to non-resident cannot be regarded as FTS within the meaning of Sec.9(1)(vii) and cannot be taxed in the hands of the non-resident in India. Consequently, the assessee would be entitled to grant of refund of taxes paid together with interest thereon as per law. The question of rate of tax to be deducted on payments made to non-resident in terms of Sec.206AA of the Act becomes academic and hence not adjudicated - Appeal by the assessee is allowed.
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2022 (9) TMI 157
Depreciation on windmill - number of days Asset put to use - as per AO windmill purchased by the assessee company during the period under consideration was not put to use during F.Y. 2011-12 - additional evidence filed by the assessee - HELD THAT:- The claim of the assessee of having put to use the windmill turbine on 31.03.2012 was found to be correct by the AO on verification of the additional evidence filed by the assessee.
As categorically stated by AO in the remand report, the additional evidence filed by the assessee including especially the letter dated 25.10.2016 issued by the Deputy Director of GEDA was sufficient to establish that the assessee-company having put to use the windmill turbine on 31.03.2012 was eligible for credit of units on that date. The claim of the assessee of having put to use the windmill turbine on 31.03.2012 and having started the wind farm power generation on 31.03.2012 thus was duly established on the basis of relevant evidence and the same was accepted even by the AO on verification of the said evidence as categorically stated by him in the remand report.
Based on this finding of fact recorded by the AO himself in the remand report CIT(A) allowed the claim of assessee for depreciation on windmill; and, at the time of hearing before us, even the learned DR has not been able to rebut or controvert the finding recorded by the AO - We, therefore, find no justifiable reason to interfere with the order of the CIT(A) allowing the claim of the assessee for depreciation on windmill and upholding the same on this issue, we dismiss the appeal filed by the Revenue.
Addition on account of depreciation while computing book profit u/s 115JB - We find that the issue raised by the assessee in Cross Objection is squarely covered in favour of the assessee by the decision of Co-ordinate Bench of this Tribunal in the case of Kansara Popatlal Tribhuvan Metal Pvt. Ltd. [2022 (8) TMI 618 - ITAT AHMEDABAD] and respectfully following the same, we delete the addition made by the Assessing Officer and confirmed by the learned CIT(A) on account of depreciation while computing the book profit u/s 115JB.
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2022 (9) TMI 156
Assessment u/s 153A - Additions of contract income not offered for taxation - HELD THAT:- As in the case of Pr. CIT v. Jaypee financial services [2021 (2) TMI 1186 - DELHI HIGH COURT] held that where AO during the course of post search proceedings under section 153A against assessee-share trader found certain evidences showing client code modification done by assessee which were not for genuine reasons and, accordingly, made addition on account of such client code modification, since impugned addition was not made by AO based on any incriminating material found during search against assessee and assessment was not pending on date of search, impugned addition was unjustified and same was to be deleted. Department has not been able to produce any material to suggest / substantiate that the assessment order was passed on the basis of any incriminating material found during the course of search.
In view of well settled proposition of law that completed assessment can be interfered by the Assessing Officer while making assessment u/s. 153A only on the basis of some incriminating material unearthed during the course of search documents or undisclosed income or property discovered in the course of search, which were not produced or not already disclosed or made in the course of original assessment, we are of the considered view that in the instant facts, CIT(A) has not erred in facts and in law in deleting the additions for assessment year 2007-08.
Even on merits of the case, we find no infirmity in the observations made by the Ld. CIT(Appeals) in the appeal order. The Department has not been able to bring anything on record to point out any error in the factual findings of the CIT(Appeals) in the appeal order, while deciding the issue on merits. Accordingly, in our considered view, CIT(Appeals) has not erred in facts and in law in deleting the additions made on account of contract income not offered for taxation.
Addition u/s 41(1) - CIT(Appeals) erred in facts and law in confirming the addition on the ground that the assessee has not been able to prove that the liability was actually subsisting at the end of the financial year.- Decided in favour of assessee.
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2022 (9) TMI 155
Validity of Reopening of assessment u/s 147 - addition u/s 68 - whether original return of income was not taken up for scrutiny assessment? - HELD THAT:- AO noted that the assessee has not disclosed the above transaction in the return of income filed. After appraisal of these materials on record, there is enough reason to believe that the assessee has clearly failed to disclose all material facts for determination of income. This information along with the material on record constitutes a tangible material to form the belief that the income assessable to tax and claimed as exempt from tax has escaped assessment.
Once the original return of income was not taken up for scrutiny assessment, then the said information and facts discovered by the Investigation Wing Kolkata constitutes a material on the basis of which the AO can reasonably form a belief that the income in the shape of long term capital gain claimed as exempt has escaped assessment within the meaning of section 147 - At the stage of reopening of the assessment what is required is prima facie reason to believe that income assessable to tax has escaped assessment and the AO is not required to establish the fact by legal evidence or conclusion. Accordingly we do not find any error or illegality in the impugned order of CIT (A) qua this issue. This ground of the assessee is dismissed.
Bogus sale of shares claimed u/s 10(38) - Penny stock - As in the absence of any contrary material or evidence brought on record by the AO, the transaction of purchase and sale of the shares in question cannot be held as bogus merely on the basis of Report of the Investigation Wing of the Department in some other cases where some persons were found indulged in providing accommodation entry, and further it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long term capital gain.
Taking into consideration various documentary evidences produced by the assessee in support of his claim and further relying upon various decisions of this Tribunal as well as the decision of Hon’ble Jurisdictional High Court including the decision in case of CIT vs. Pooja Agarwal [2017 (9) TMI 1104 - RAJASTHAN HIGH COURT] as well as in case of PCIT vs. Pramod Jain & Others [2018 (2) TMI 300 - ITAT JAIPUR]. we allow the claim of exemption under section 10(38) of the Act and accordingly delete the addition made by the AO. The order of ld. CIT (A) is set aside.
Commission paid for the accommodation entries - As when we have given a finding that the transaction of purchase and sale of shares and consequential Long Term Capital Gain cannot be treated as bogus, then the addition made by the AO on account of notional commission paid treating the same as undisclosed expenditure under section 69C will not be sustainable being consequential hence the same is deleted.
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2022 (9) TMI 154
Assessment to be framed u/s 153C OR u/s 147/148 - Validity of the reassessment proceedings - accommodation entry provided by the assessee - information was received from ADIT (Inv.) which was forwarded to PCIT and through him to the AO according to which a search and seizure action was carried out - HELD THAT:- It is clear that the provision of Section 153C of the Act can be invoked in case of “Other Person” if the recovery of any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to person other than the searched person, then section 153C of the Act would be justified.
In the present case, it is an undisputed fact that AO has noted that during the course of search conducted on 18.11.2015 at the various premises of Pradeep Kumar Jindal and on the basis of documents found during the course of survey at various other places, various incriminating material was found and seized, statement of various persons were recorded.
Merely on the basis of information available with the AO or certain information made available prior to the handing over of the materials would not be sufficient to initiate proceedings u/s 153C of the Act and would not confer any power on the AO to initiate proceedings u/s 153C - In order to initiate proceedings to assess or reassess u/s 153C of the Act, the AO should mandatorily possess the seized material or other books of accounts etc and only after handing over of the materials to the AO of the other person, the AO is empowered to issue notice u/s 153C of the Act and that too after recording necessary satisfaction.
Initiation of action u/s 153C would arise only if the seized material are handed over to the AO of such other person having jurisdiction of such other person. In the present case, it will be relevant to note that there is neither any material on record nor any evidence has been placed on record by the assessee to demonstrate that the seized and impounded material of the searched person was handed over to the AO of the assessee when the AO had initiated proceedings u/s 147 of the Act and the AO had recorded satisfaction as contemplated u/s 153C of the Act.
Thus in the light of the decision of Hon’ble Madras High court in the case of Karti Chidambaram [2021 (7) TMI 393 - MADRAS HIGH COURT] find no fault in the initiation of proceedings u/s 147/148 of the Act by the AO and thus that there is no merit in the contention of the Ld AR that the AO should have initiated proceedings u/s 153C and not u/s 147/148 of the Act.
Approval given by Addl. CIT and PCIT u/s 151 of the Act was in a mechanical way and without application of mind and therefore in the absence of proper satisfaction recorded by the competent authority, the assessment is invalid - Addl. CIT has after considering the reasons recorded by the AO has recorded his satisfaction and approval which in my view is valid approval - no merit in the contention of the Ld AR that sanction under section 151 of the Act was granted by the competent authority in a mechanical manner - statutory provisions do not require that the satisfaction has to be recorded in a particular manner. Ld AR has not placed on record any material to demonstrate the entire proposal along with the necessary details and the reasons recorded by the Income Tax Officer were not placed before the Addl.CIT and Principal CIT.
See Experion Developers (P.) Ltd. [2020 (2) TMI 1061 - DELHI HIGH COURT] wherein held that there is no requirement to provide elaborate reasoning to arrive at a finding of approval when the Principal Commissioner is satisfied with the reasons recorded by the AO - no merit in the contentions of Learned AR about the satisfaction being recorded mechanically. Ground of the assessee is dismissed.
Addition u/s 68 - As lower authorities by well reasoned orders and for the reasons stated in their orders have upheld the addition. Before us AR has neither pointed to any fallacy in the findings of the lower authorities nor has placed any material on record to controvert the findings of lower authorities. In such a situation, I find no reason to interfere with the order of CIT(A) and thus dismiss the ground of the assessee.
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2022 (9) TMI 153
Revision u/s 263 - excess deduction claimed u/s 80P(2)(c)(ii) - As per CIT assessee had been wrongly allowed claim of deduction of interest income earned from the deposits/FDRs in bank as per section 80P(2)(d) of the Act, noting that bank from which interest income was earned did not qualify as “cooperative bank” for the purpose of being eligible to claim deduction - HELD THAT:- Order of the ld.Pr.CIT is liable to be set aside also for the reasons that though the assessee had canvassed that his claim of deduction under section 80P(2) qualified under sub-clause (d) thereof, the ld.Pr.CIT chose to dwell on the issue of its allowability under clause (a)(i) of section 80P(2) finding it to be not allowable under the said clause and as a consequence holding the assessment order to be erroneous for allowing the claim of the assessee and did not apply his mind at all, to the claim being alternatively allowable under sub-clause (d) of section 80P(2).
Since the assessee had demonstrated his claim being allowed alternatively under another clause of section 80P(2), the ld.Pr.CIT ought to have dealt with this claim of the assessee before arriving at a finding of error in the assessment order holding the claim of deduction u/s 80P of the Act as being incorrectly allowed by the AO. It is only after dealing with this alternative claim and finding it to be incorrect that it could be said that the allowance of deduction of interest income had resulted in prejudice to the Revenue, which condition also needs to be satisfied alongwith finding the assessment order erroneous for exercising revisionary jurisdiction u/s 263 of the Act. In the circumstance that the assesses claim is found allowable under section 80P(2)(d) of the Act, the allowance of deduction u/s 80P(2)(a)(i) of the Act by the AO cannot be said to be to the prejudice of the Revenue since in any case the assesses claim of deduction was allowable.
Having not so dealt with alternative claim of the assessee, there could not be said to be any finding of the error causing prejudice to the Revenue in the order of the AO and for this reason also the order passed by the ld.Pr.CIT needs to be aside.
Thus we hold that the order passed under section 263 of the Act is not accordance with law. The same is hereby set aside, and order of the AO is restored. Appeal of assessee allowed.
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2022 (9) TMI 152
Disallowance u/s 36 (1) (iii) - interest expenditure - as submitted the assessee is following the percentage completion method, the above interest should form part of work in progress and as soon as part of revenue is offered for taxation assessee is entitled to claim the same in that proportion deduction of the same - HELD THAT:- As decided in assessee own case for assessment year 2014 –15 [2020 (4) TMI 842 - ITAT MUMBAI] we confirm the order of the learned CIT – A in deleting the disallowance of ₹ 2,241,160,000/–. Accordingly, ground number 1 and 2 of the appeal of the AO is dismissed.
Disallowance of expenses u/s 14 A of the act invoking the provisions of rule 8D - HELD THAT:- Undisputed fact shows that there is no exempt income and during the year by the assessee. If there is no exempt, income naturally there cannot be any disallowance u/s 14 A of the act because no expenditure has been incurred on any exempt income during the year. Further the reliance placed by the learned departmental representative on the amendment made by the finance act 2022 applies prospectively as held in PCIT versus Era infrastructure private limited [2022 (7) TMI 1093 - DELHI HIGH COURT. In view of this we do not find any infirmity in the order of the learned CIT – A in deleting the disallowance u/s 14 A of the act. Accordingly, ground number 3 of the appeal of the learned AO is dismissed.
Nature of expenditure - expenses towards software - revenue or capital expenditure - AO held it to be a capital expenditure - alternative plea of the assessee was adjudicated and depreciation was allowed at the rate of 60% - HELD THAT:- The assessee has incurred ERP expenditure and license fees for the software. Case of Raychem RPG Ltd [2011 (7) TMI 953 - BOMBAY HIGH COURT] covers the issue as decided this issue also in favour of the assessee and hold that this expenditure is revenue expenditure - Decided in favour of assessee.
Claim of the assessee u/s 80GGB - assessee has given a donation to three different parties - HELD THAT:- Assessee has produced all the receipts except in case of ₹ 6,534,000 paid to Bharatiya Janta party. The transaction is demonstrated through the bank account of the assessee. In any way, the donation paid in cash is as such not allowable under that Section. The provision of Section 80GGB also speaks about the contribution is defined in Section 293A of the companies act 1956. As assessee has shown that the amount is of contribution paid by account payee cheque, merely because receipt is not available it cannot be denied. Therefore, we set-aside this issue to the file of the learned assessing officer to examine the claim of the assessee with respect to ₹ 6,534,000/– contribution made the political party by the assessee by examination of the bank account of assessee and assessee is directed to prove that same is contribution in terms of provisions of Section 293A of the companies act. Accordingly, ground number 2 of the appeal is set-aside to the file of the learned assessing officer to decide it afresh.
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2022 (9) TMI 151
Revision u/s 263 by CIT - charging notional rent on house property u/s 23 - Whether AO cannot be said to be erroneous so far as prejudicial to the interest of the revenue in case of limited scrutiny assessment cases, where AO has not made any enquiry on other aspects other than the issues involved in limited scrutiny notice? - HELD THAT:- AO collected information beyond his powers, but based on such information, which has been collected by the learned assessing officer, PCIT could not have stated that addition with respect to the income from house property has not been charged by the learned AO, though it was not part of the limited scrutiny issue, therefore, the order of the assessment is erroneous in so far as prejudicial to the interest of revenue. several judicial precedents cited before us also supports the case of the assessee. The reason given for rejection of this argument by the learned PCIT is also not palatable.
It is held by him that as assessee has succumbed to the jurisdiction of the assessing officer and supplied certain information, the assessee loses his right to challenge the same later on. Based on the information mentioned in the revisionary order, the learned PCIT should have reprimanded the assessing officer by asking assessee to furnish the information, which were not within the scope of limited scrutiny. Instead of that, PCIT has invoked the provisions of Section 263 on such information. The action of the PCIT also is not in consonance with the direction/ instructions of the central board of direct taxes on limited scrutiny. Therefore, we have no hesitation that the order passed by the learned that PCIT is without jurisdiction therefore we quash it. Appeal of assessee allowed.
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2022 (9) TMI 106
Addition u/s. 41(1) - liability towards sundry creditors - assessee has not been able to prove that the liability - Assessee submitted liability was existing and company has to pay the same, but due to financial crisis and acute liquidity problems faced by the company, these creditors have not been paid - HELD THAT:- The actual liability of the creditors was Rs. 8,97,893/- and not Rs. 10,21,420/-. Further we note that the fact that assessee had paid back a sum of Rs. 6,21,182/- back to the creditors in the subsequent years and an amount of Rs. 2,76,726/- was written off in the subsequent period and offered to income in the subsequent year demonstrates that there was an existing liability of Rs. 8,97,893/- against the assessee as that the end of the financial year under consideration. Therefore, in our considered view, in the instant facts, CIT(Appeals) erred in facts and law in confirming the addition on the ground that the assessee has not been able to prove that the liability was actually subsisting at the end of the financial year. Appeal of the assessee is allowed.
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2022 (9) TMI 150
Foreign Travelling Expenses - Disallowance as expenses not incurred for business purposes - HELD THAT:- We are of the considered opinion that owing to the nature of business of the assessee company, which works as an agent in India and abroad dealing in non conventional energy engineering equipments, it is obligatory for the directors to travel abroad for the purpose of business of the assessee. It is also pertinent to point out that the assessee has earned commission income arising out of the foreign travel in subsequent years also. We conclude that the said expenses claimed by the assessee was for business purpose thereby allowing this ground of appeal filed by the assessee.
Revision u/s 264 - CIT- A directing the AO to reduce sale consideration due to revised sale price and the share of M/s WMI Cranes Ltd as the assessee had finally received lesser consideration from the funds that was in the escrow account as per the terms of sale agreement - HELD THAT:- As observed that the assessee has raised an additional ground before the Ld.CIT(A) claiming that the actual consideration received on sale of shares of WMI Cranes Ltd was less than the consideration taken for computing the capital gains after reducing the amount of consideration which was transferred to the escrow account. CIT(A) though has called for the remand report from the AO has failed to adjudicate on the additional ground filed by the assessee on the contention that the same was a subject of petition under section 264 before the Principal CIT-7, Mumbai.
CIT(A) has held that since this ground was raised in an application u/s 264 before the PCIT thereby rejected, the Ld.CIT(A) held that he had no jurisdiction to consider the same grounds in appeal before him.
CIT(A) has erred in not deciding this ground of appeal filed as additional ground before him by the assessee which ought to have been decided on merits. CIT(A) is not barred from deciding this ground of appeal on merits inspite of the fact that section 264 application was rejected by the PCIT-7, Mumbai. On the above observation, we direct the Ld.CIT(A) to consider this ground of appeal on merits and adjudicate the issue pertaining to the reduction of capital gain. We remand back this file to the Ld.CIT(A) for deciding this issue on merits.
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2022 (9) TMI 149
Discrepancy found in the payment of custom duty as per AIR [“Annual Information Report”] - unexplained expenses u/s 69C - HELD THAT:- As stated that a sum was treated as direct expenses in the statement of Profit & Loss A/c during the period ending on 31.03.2015. It is further stated that the assessee company has been following Accepted Accounting Standard and the same method is being consistently followed by the assessee company and duly accepted by the Department. It was further stated that the assessee company disclosed in balance sheet and followed Customs Act Circular No.6/2008-Customs dated 28th April 2008 and Notification No.102/2007 dated 14.09.2007. As stated that the assessee company had paid custom duty during the year under consideration amounting and as per custom law, the assessee did not route the amount through P&L A/c due to the fact that amount is not nature of expense since same has been claimed as exempt as per the Custom Act.
Assessee failed to explain the reasons for variation and the SAD [“Special Additional Duty”] classified as current asset to be reflected in the P&L A/c at the stage of receipt of the funds/set off. Even before this Tribunal, no explanation is made by the assessee despite sufficient opportunities were given to the assessee and the assessee chose not to attend the proceedings. No reason to interfere in the finding of Ld.CIT(A), the same is hereby affirmed. Thus, grounds raised by the assessee are dismissed.
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2022 (9) TMI 114
Seizure of cash - undisclosed income of the petitioner u/s 69/69A - HELD THAT:- This matter has been listed for hearing on several occasions and the Standing counsels have been directed to provide clarity on the assessment proceedings in the name of Bilash Khatiwada and the fate of the balance amount after adjustment of a portion of the amount in the hands of Bilash Khatiwada.
Income tax authorities concerned, at Delhi, have also been impleaded in the hope that some clarifications and updates will be forthcoming on the aforesaid issues. However, though the impugned order makes it clear that a portion of the amount seized has, according to the Department, been assessed in the hands of Bilash Khatiwada, as to the balance, the respondents are unable to provide any clarity and, learned standing counsels say that there has been response to their communications in this regard from their counterparts in Delhi.
We see merit in the request of the petitioner to challenge order by way of appeal against the non-grant of credit of a sum of Rs.50,00,000/- as directed by the Commissioner of Income Tax (appeals) in order - The appellate authority would be better positioned, seeing as the issue in this matter relates, prima facie, the double taxation of the amount once in the hands of the petitioner and secondly, in the assessment of Bilash Khatiwada.
The petitioner is granted liberty to avail of appellate remedy within four weeks from today and appeal, if filed as aforesaid, shall be entertained by the Commissioner (Appeals) without reference to limitation.
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2022 (9) TMI 148
Revision u/s 263 - Addition u/s 14A - HELD THAT:- AO has not examined the issues of 14A of the Act and the interest subsidy and grant in aid received from the Government which was to be recognized as income as per section 2(24)(xviii) - AR argued that the amount was treated by the PCIT as difference between the opening and the closing balance of interest subsidy receivable from the Central Government as mentioned in the balance sheet.
As not produced before the AO for examination. As contended that the Appellant has already offered 1% and 2% interest subsidy as income which is credited in the profit and loss account and is verifiable from total interest income on loans and advances reported in the profit and loss account for the year under consideration which includes interest subsidy as evident from break-up of total interest income - We are not convinced and satisfied with the argument of the AR that since the issue of interest subsidy has not been touched upon by the AO. The interest subsidy being credited in the profit and loss account and is verifiable from total interest income on loans and advances certainly need examination and de novo verification in compliance the revisionary order passed u/s 263 by the Pr. CIT.
As in “Sir Dorabji Tata Trust Vs. DCIT(E) [2020 (12) TMI 1121 - ITAT MUMBAI] we understand that the PCIT was satisfied that the necessary inquiries are not made and necessary verifications are not done, and that, in the absence of this exercise by the AO, a conclusive finding is not possible one way or the other. That is perhaps the situation in which, in our humble understanding, the CIT, in the exercise of his powers u/s 263, can set aside an order, for lack of proper inquiry or verification, and ask the AO to conduct such inquiries or verifications afresh.
Accordingly, we hold that the ld. Pr.CIT is justified facts in law in holding that the assessment order passed by the AO without making enquiries in respect of interest subsidy as erroneous so far as prejudicial to the interest of the Revenue. Thus, the impugned order is sustained.
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2022 (9) TMI 147
LTCG on transfer of land - Nature of land - capital asset u/s 2(14) or agricultural land - as per AO assessee held the land for less than a year, this land was received as a gift from his brother and there was no intention of doing any agricultural activity and land was to be held as a capital asset on which assessee was liable to pay capital gain - CIT(A) observed that the land in question was agricultural land in the light of the notification of the CBDT dt. 06/01/1994 as well as the Himachal Pradesh Tenancy and Land Reforms Act, 1972, the aerial distance from municipal limits was not applicable to the state of Himachal Pradesh for the relevant A.Y. 2013-14 and the assessee had Pine and Deodar trees also on the above land -
HELD THAT:- It is not in dispute that the agricultural land has not been defined in the Act, however the Agriculture land is not an asset for the purposes of levying the capital gain. As per the notification of Himachal Pradesh Tenancy and Land Reforms Act, 1972. The Ghasni land is an agricultural land which is outside the purview of capital asset under section 2(14)(b) as it was situated in the State of Himachal Pradesh.
Also noticed that the land situated in the Himachal Pradesh had not been notified up to the A.Y. 2013-14 in the Official Gazette. Moreover brother of the assessee Shri Vijay Garg had grown Pine and Deodar trees on the land in question which was Ghasni Land and used for grazing of animal, the said activity had been held as pasture of land and was an agricultural activity as defined by the Himachal Pradesh Tenancy and Land Reforms Act, 1972.
In the present case the department alleged that the assessee obtained “change in land use” certificate, however, the document placed at page no. 24 of the assessee’s compilation, clearly revealed that M/s Gable Promoters Pvt. Ltd. applied for change of land use and not the assessee. No valid ground to interfere with the detailed findings given by the Ld. CIT(A) in the impugned order on this issue and accordingly do not see any merit in this appeal of the Department.
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2022 (9) TMI 113
Disclosure of information respecting assessee u/s 138 (1) (b) - information in the opinion of the Board or other income-tax authority, be necessary for the purpose of enabling the officer, authority or body to perform his or its functions under that law HELD THAT: - Sub-Section 1 (a) provides for the Board or any other Income Tax Authority to furnish or cause to be furnished any information in its/their possession to an officer under the Foreign Exchange Management Act, 1999 or any other Officer/Authority or body performing functions under any other law as may be prescribed by the Central Government, having regard to public interest, and to enable the Officer/Authority/body concerned to perform their functions under that law.
Clause (b) of Section 138 (1) entitles 'any person' to make an application to the Principal Chief Commissioner or Chief Commissioner, information relating to any other assessee and the Authority concerned, if it is satisfied that it is in 'public interest', may supply such information of his decision to supply such information shall be final and not be called in question in any Court of law.
A copy of the application filed by the petitioner read with order dated 13.07.2022 does not reveal any flaw in the satisfaction exercised by the Officer/Authority/body concerned in passing the order.
Clause (b) of Section 138 (1) states that the requisite information as sought for by the applicant may be furnished if the Officer were to be 'satisfied' that it is in 'public interest' to do so. Since the authority in this case has categorically set out its satisfaction to the effect that furnishing of information is not in 'public interest', assigning reasons for the same, stating that the material sought for appears only to be for settlement of personal disputes between the parties, find no flaw in the order and no cause to interfere in the subjective satisfaction of the Officer.
The requirement of personal hearing prior to disposal of the request for information, as the consideration of the request is based upon the application, seeking information and the satisfaction of the Officer. It is only when the application filed is unclear or the authority requires further information that the question of calling upon the applicant will arise and the Mandamus as sought for is not liable to be issued.
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2022 (9) TMI 146
TP Adjustment - ALP determination - intra-group services availed by the Appellant from Associated Enterprises - India related services rendered or not? - services rendered by the overseas Head Office/Regional Office - whether factually it can be concluded that the assessee has availed India related services from its global/regional headquarters? - HELD THAT:- TPO has taken a rather restrictive view while coming to the conclusion that no India related services have been rendered in the instant set of facts. Assessee took us through various e-mails exchanged between the assessee and its overseas offices. The services received in the form of e-mails have been classified under various heads viz. Treasury functions, Controlling functions, Information Technology, Finance support, Information Technology support, CFO functions etc.
On perusal of the Summarized Chart furnished to us (along-with copies of emails), we observe that India specific support has been provided via GHO/RHO Services to the assessee and it would be incorrect to conclude entirely that no India related services have been provided/no benefit has been received at the India level.
It would be incorrect to brush aside all evidences and conclude that all services are general in nature and do not relate to Indian entity.
Assessee submitted before us voluminous Paper-Books and took us through the services rendered which are aimed at giving India specific benefit. On numerous occasions, we see the overseas staff had meetings with the assessee to provide Regional Management support/Business management Support to provide support at the India level. While we agree that a perusal of Agreement suggests that some information/support may be of general nature aimed at providing general guidance to the Ineos Group as a whole/or may not have been availed during the year under consideration, but that cannot lead to the conclusion that no India specific services have been availed by the assessee in India
TPO as well as DRP have not fully appreciated the substantial evidence placed on record to come to the conclusion the assessee has not been able to substantiate that no services have rendered by the overseas Head Office/Regional Office or that the assessee has not been able to discharge the onus of receipt of India specific services, thereby making it impossible to compute arm's length price for the aforesaid services.
Whether Ld. TPO is correct is computing ALP of the services at "Nil" on the basis that no services have been rendered for which any third independent party would pay and/or whether the Ld. TPO is under a legal requirement to compute ALP based at least one of the methodologies provided for under the Income Tax Act, 1961 read with I.T. Rules? - The judicial opinion on this issue is unanimous that where TPO does not resort to any transfer pricing exercise as per any of methods prescribed in section 92C(1) and determines ALP at Nil, transfer pricing adjustment with respect to such services received by assessee from its foreign AE is not sustainable.
In the case of Henkel Chembond Surface Technologies Ltd. [2021 (2) TMI 773 - ITAT MUMBAI] held that where TPO did not resort to any transfer pricing exercise as per any of methods prescribed in section 92C(1) and determined ALP of regional management services at nil, transfer pricing adjustment with respect to regional management services received by assessee from its foreign AE be deleted.
In the present case, no search was conducted to find out the independent entity in a comparable transaction and the arm's length price of the international transaction was treated to be NIL. In the present case, no doubts about payments made by the assessee have been raised by the Assessing Officer under section 37 of the Act. Further, accrual of benefit to assessee or the commercial expediency of any expenditure incurred by the assessee cannot be the basis for disallowing the same, as held by Hon'ble Delhi High Court in the case of EKL Appliances Ltd. [2012 (4) TMI 346 - DELHI HIGH COURT]
Assessee has been able to demonstrate, with substantial supporting material that it availed India specific services from its Head Office/Regional Office. TPO in view has taken a rather restrictive view in coming to the conclusion that no services were rendered for which any independent third party would pay and hence it was not possible to determine arm's length price in the instant set of facts.
TPO cannot stand in judgment on what benefits the assessee has derived from the services and assessee's obligation lies to the extent of demonstrating receipt of services. Once, the assessee has been able to demonstrate receipt of services, in our view, Transfer Pricing adjustment without applying any prescribed benchmarking method is unsustainable and Ld. TPO cannot determine ALP at "Nil" and has to determine ALP under any one of the methods prescribed under the Income Tax Act read with the IT Rules. Accordingly, in our view, Ld. TPO has erred in facts and in law in treating the value of the transactions at "Nil'.
Assessee appeal allowed.
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2022 (9) TMI 145
Depreciation on Buildings - Adoption of WDV of the Building Block of Assets based on a valuation report prepared for a different purpose - HELD THAT:- As per the provisions of section 43(1)(6) WDV of an asset as per the books of accounts has to be arrived at only by adding to opening WDV assets acquired during the previous year and reducing the value of assets sold or discarded during the previous year and thereafter closing WDV has to be arrived at after providing for depreciation. Sec.32 of the Act mandates depreciation to be allowed as deduction on the WDV as understood under section 43(1)(6) of the Act. The AO therefore could not have tampered with the WDV of the Building Block of Assets based on a valuation report prepared for a different purpose. The addition is not warranted in the facts and circumstances of the case and hence, the same is directed to be deleted.
Addition being unpaid service tax liability u/s 43-B - HELD THAT:- After hearing the rival submissions, we are of the view that the addition cannot be sustained. In CIT Vs Noble And Hewitt (I) (P) Ltd.. [2007 (9) TMI 238 - DELHI HIGH COURT] the assessee maintained a mercantile system of accounting and held in view of the provisions of Section 43B since the assessed had not claimed a deduction there was no question of disallowing the deduction which was not even claimed.
The case of Boraiah Shivanajaiah [2022 (4) TMI 1015 - ITAT BANGALORE] the decision rendered in the case of M/s. Wyzmindz Solutions Private Ltd.[2020 (2) TM has I 80 - ITAT BANGALORE] was followed and it was held that if the assessee has received the service tax from its customers, then the amount has to be disallowed under section 43B, if not paid to the credit of the Government. The aspect that section 43B will apply only when a deduction is claimed by the assessee and not otherwise not been considered by the Bench in the aforesaid case. Hence, the decision of the Hon’ble Delhi High Court on this issue is being followed. Consequently, the disallowance made by the AO and sustained by CIT(A) is directed to be deleted.
Appeal of assessee allowed.
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2022 (9) TMI 112
Offence punishable u/s 276CC - Non filing of return - Maintainability of criminal appeals against Magistrate orders - Stoppage of proceedings - appeals are filed by the Income Tax Department u/s 378 of the Code of Criminal Procedure, 1973 instead of invoking revision provisions of Section 397 of Cr.P.C. - HELD THAT:- On a bare reading of the provision of Section 258 of Cr.P.C., it is clearly held in the last line that ‘stoppage of proceedings is made after the evidence of the principal witnesses has been recorded, pronounce a judgment of acquittal, and in any other case, release the accused, and such release shall have the effect of discharge”.
The very provision of Section 258 of Cr.P.C. defines, any stoppage of the proceedings is made after evidence of the principal witnesses has been recorded, pronounce a judgment of acquittal. Therefore, once a case ended in acquittal then the aggrieved complainant has to file an appeal under Section 378 of Cr.P.C. but not a revision, as evidence of some of the witness was already recorded, therefore, it cannot be said as ‘discharge’.
The definition of Section 258 of Cr.P.C. reads “in any other case, release the accused and such release shall have the effect of discharge”. That means, without recording evidence of the parties, if the proceedings were closed by way of stopping the proceedings, then it amounts to discharge and such order shall have to be challenged only under Section 397 of Cr.P.C. before the learned Sessions Judge or before the High Court.
Thus the orders under challenge passed by the Magistrate, stopping proceedings and releasing the accused, is nothing but an order of discharge, which is challengeable under the revisional provisions of Section 397(1) of Cr.P.C.
As per Section 372 of Cr.P.C., no appeal lies unless and otherwise provided by the Code of Criminal Procedure. Such being the case, the appellant-Income Tax Authority cannot invoke the provisions of either Section 372 or Section 378 of Cr.P.C. Hence, in the present case on hand, the appellant has to challenge under the revisional provisions of Section 397 of Cr.P.C.
Appellant wants to file a memo for converting the criminal appeals into criminal revision petitions, but the same is objected by the respondents’ counsel stating that the respondents will lose one more opportunity of challenging the order before the High Court if the revision petition filed before the High Court. The objection of the respondents is sustainable under law.
The question of giving permission to the appellant for converting the criminal appeals into criminal revision petition cannot be granted here, as the respondents will lose an opportunity of appeal to the High Court either under Section 482 or Section 397 of Cr.P.C. Therefore, I hold that these criminal appeals are not maintainable and liable to be dismissed and liberty can be granted to the appellant to file an application for condonation of delay, for having spent time in wrong forum, while filing revision petition before the learned Sessions Judge.
Accordingly, all the criminal appeals are dismissed as not maintainable. However, liberty is granted to the appellant to file a revision petition under Section 397 of Cr.P.C. before the learned Sessions Judge with liberty to file necessary application for condonation of delay under Section 14 of the Limitation Act for spending time before this Court.
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Corporate Laws
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2022 (9) TMI 144
Criminal contempt for lowering the authority of this Appellate Tribunal, interfering with the course of proceedings before this Tribunal and for obstructing administration of justice, finding them guilty for Contempt of Court - limitation for action of contempt - Section 20 of the Contempt of Courts Act - HELD THAT:- Admittedly, the Contempt case is filed on 14th September, 2021, the alleged acts of Contemnors constituting criminal contempt must be within a year proceeding to the date of filing i.e., 14th September, 2021. For the contemptuous acts of Contemnors beyond one year preceding to date of filing, the Tribunal is not competent to issue notice for criminal contempt. The alleged acts of contemnors prior to 14th September, 2020 are not cognizable.
The Contemnors nos. 1 & 4 being erstwhile Resolution Professionals and Members of Supervising Committee did not take steps to implement the Resolution Plan. The Contemnors are only Supervising Committee Members, not the SRA who is under obligation to implement the Resolution Plan infusing funds, when the Contempt Case against SRA is not prosecuted, the Contemnor Nos. 1 and 4, who are Members of Supervising Committee, cannot be found guilty for criminal contempt for the reason that the SRA has to infuse funds to implement Resolution Plan and unless the SRA infused funds, the Committee can do nothing to implement the Resolution Plan. Therefore, the alleged acts of Contemnors 1 and 4 cannot be said to be willful or intentional, to saddle with any liability for criminal contempt. Criminal Contempt is defined under Section 2(C) of Contempt of Courts Act, 1917.
A special procedure is provided to take cognizance of criminal contempt, other than criminal contempt in the face of Supreme Court or High Court. In case of criminal contempt, other than contempt referred under Section 14 of the Act, Supreme Court or High Court may take action on its own motion or on a motion made by Advocate General or any other person, with the consent in writing of Advocate General. In relation to Union Territory of Delhi, such Law Officer, as the Central Govt. may by notification in the Official Gazette, specifying in this behalf or any other person with the consent of such Law Officer in writing - In the present contempt case, the procedure contemplated under Section 15 of Contempt of Courts Act, 1971 has not been complied, consequently, the Contempt Case is liable to be closed as cognizance was taken in violation of mandatary procedure prescribed in Section 15 and major part of alleged acts of contempt are barred by Limitation prescribed by Section 20 of the Act.
There are no ground to punish the Contemnor Nos 1 and 4. However, it is open to the Creditors to take action, if any, in accordance with provisions of IBC and regulations thereunder, subject to permissibility - the Contempt Case is closed.
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Securities / SEBI
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2022 (9) TMI 110
Procedure to be followed by debenture trustees - suit before the Bombay High Court - Evolution of the law surrounding the resolution of debts - Whether the debenture holders and other parties in the present case were required to follow the procedure under the SEBI Circular? - scope of Debenture Trust Deeds - Bombay High Court exercised jurisdiction over the subject matter of the suit - RCFL‘s case that the SEBI Circular is applicable only if the debenture holders choose to enter into an ICA under the RBI Circular - bar to the civil court’s jurisdiction - HELD THAT:- Section 15Y of the SEBI Act stipulates that no civil court shall have the jurisdiction to entertain any suit in respect of any matter which an adjudicating officer appointed under the SEBI Act is empowered to determine. Section 15-I of the SEBI Act provides that an adjudicating officer may be appointed to adjudge cases under Sections 15A, 15B, 15C, 15D, 15E, 15EA, 15EB, 15F, 15G, 15H, 15HA, 15HB. None of the sections mentioned in Section 15-I of the SEBI Act would confer jurisdiction on the adjudicating officer to grant the relief sought by the plaintiffs in the first instance. Hence, the bar in Section 15Y would not operate as against the suit in the present case.
Similarly, Section 430 of the Companies Act provides that no civil court shall have the jurisdiction to entertain any suit in respect of any matter which the National Company Law Tribunal or the National Company Law Appellate Tribunal is empowered to determine. Nothing in the Companies Act 2013 or any other law for the time being in force vests either the National Company Law Tribunal or the National Company Law Appellate Tribunal with the jurisdiction to adjudicate upon a challenge to the RBI Circular. Hence, the bar in Section 430 is not attracted.
Single Judge of the Bombay High Court (in the first instance) as well as the Division Bench of the Bombay High Court properly exercised jurisdiction over the subject matter of the suit.
SEBI Circular is applicable if debenture holders wish to implement a Resolution Plan to which the lenders are a party -By issuing the SEBI Circular, SEBI subscribed to the overall framework of the RBI Circular and permitted debenture holders to participate in the process specified in the RBI Circular to enter into a Resolution Plan. Under the RBI Circular, the Resolution Plan cannot come into existence without an ICA. The SEBI Circular does not disturb this position. When the SEBI Circular came into force, it specified the conditions under which the debenture holders (through the Debenture Trustees) could access this Resolution Plan and participate in its formulation via the ICA.
By arguing that Clauses 22 and 23 of the Fifth Schedule to the Debenture Trust Deed(s) are not concerned with signing an ICA or with the subject matter of the SEBI Circular in general, RCFL is suggesting that the ICA and the Resolution Plan are distinct and severable. The implication is that debenture holders may opt in to the Resolution Plan after it has been formulated, without concerning themselves with the ICA. This is an incorrect interpretation of the circulars in question. The ICA and the Resolution Plan are inextricably intertwined and the latter has its genesis in the former, and flows from it.
We agree that the language in Regulation 15(7) of the 1993 Regulations and the SEBI Circular is facilitative and not mandatory. This is in recognition of the fact that debenture holders may opt to exercise their rights through mechanisms other than the execution of a Resolution Plan. The language cannot be construed to be facilitative in the sense of providing debenture holders with the option of by-passing the modalities prescribed by the SEBI Circular while accepting a Resolution Plan. The ICA continues to be the foundation or mother document for the Resolution Plan.
Dissenting ISIN level debenture holders are bound by the ICA / Resolution Plan - Dissenting creditors do not have the option of “exiting” the compromise or arrangement arrived at in terms of Section 230 Companies Act. The NCLT will look into the overall fairness of the compromise or arrangement under Section 230 Companies Act Similarly, dissenting lenders do not have the option of “exiting” the ICA / Resolution Plan under the RBI Circular. The RBI Circular states that the ICA may provide for the protection of dissenting lenders The respective majorities provided for in each of these laws bind dissenting creditors. It is along these lines that the SEBI Circular binds dissenting debenture holders. Indeed, the SEBI Circular could bind dissenting debenture holders even in the absence of similar provisions in other laws.
The argument that the SEBI Circular is not applicable because a single debenture holder will be able to frustrate the Resolution Plan is a consequential one. The applicability of a circular cannot be determined on the basis of such a concern. We need not comment upon this aspect in the absence of a challenge to the SEBI Circular. We also note that it is open to the relevant stakeholders to approach SEBI with any concerns, commercial or otherwise, and request an amendment to the SEBI Circular. SEBI as a statutory regulator can always look at such concerns and has the power to factor them in if it deems fit to do so in public interest and for the orderly functioning of the securities‘ market.
SEBI Circular has retroactive application - In the present case, RCFL issued the debentures and defaulted on the payments to the debenture holders prior to the issuance of the SEBI Circular. However, as of 13 October 2020 (the date on which the SEBI Circular came into force), a compromise or agreement on the restructuring of the debt owed by RCFL did not exist. The debenture holders were not vested with any rights with respect to the resolution of RCFL‘s debt. The existence of the debt and the subsequent default by RCFL was the status of events, which existed prior to 13 October 2020. Once it came into force, the SEBI Circular applied to the manner of resolution of debt, as specified therein.
Even assuming that debenture holders were vested with the right to sanction a compromise or arrangement in terms of the special majority in Clause 23 to the Fifth Schedule of the Debenture Trust Deed, they were divested of such a right upon the issuance of the SEBI Circular. Clause 59 of the Debenture Trust Deed stipulates that any provision in the Debenture Trust Deed which is in conflict with the 1993 Regulations is null and void. In so doing, it lays down a trigger for the divestment of rights under the Debenture Trust Deed. A contractually vested right may be taken away by the operation of a statutory instrument. A fortiori, in the present case, the SEBI Circular owes its existence to statutory powers conferred by a special legislation enacted with a view to protect the interests of investors and to ensure the stable and orderly growth and development of the market for securities.
SEBI Circular was issued partly in exercise of the powers under the 1993 Regulations.28 Further, Regulation 15(7) of the 1993 Regulations lays the foundation for the conditions specified in the SEBI Circular. As such, the phrase “provisions of the [1993 Regulations]” in Clause 59 must be read to include the SEBI Circular. Clauses 22 and 23 of the Fifth Schedule to the Debenture Trust Deed are evidently in conflict with the SEBI Circular as they each provide for different voting mechanisms. Therefore, Clauses 22 and 23 must give way to the SEBI Circular, which will take precedence
Exercise of this Court’s power under Article 142 of the Constitution - The different voting mechanism proposed under the SEBI Circular will further delay the resolution process and potentially disrupt the efforts undertaken by the stakeholders, including the retail debenture holders. Such unscrambling of the resolution process will not only prove time-consuming, but may also adversely affect the agreed realized gains to the retail debenture holders, who have already consented to the negotiated settlement before the High Court.
Depending upon the facts and circumstances of a case, this Court can, having regard to Article 142 of the Constitution of India, stipulate suitable directions to mitigate the potential denial of rights.
Pertinently, the SEBI Circular only contemplates two situations where ISIN-wise voting is mandated: (i) non-enforcement of security; and (ii) entering into an ICA. Although it applies retroactively, it admittedly does not contemplate a scenario where the debenture holders could give ex post facto consent to ICAs agreed prior to the commencement of the SEBI Circular, that is 13 October 2020. In the present case, the application of the SEBI Circular will lead to a scenario where a Resolution Plan validly agreed upon by the ICA lenders under the RBI Framework will have to be unscrambled. For this reason, we consider it necessary to extend the benefit under Article 142 to the retail debenture holders by allowing the Resolution Plan to pass muster. We would like to reiterate that this Court is issuing the directions to mould the relief under Article 142 in view of the peculiar facts and circumstances of the present case noted above.
Dissenting debenture holders in the present case - It is clear that a compromise arrived under the SEBI Circular or Section 230 of the Companies Act effectively assimilates the rights of the dissenting creditors. The SEBI Circular adopts a higher voting threshold of 60% by number and 75% to bind dissenting/ abstaining debenture holders.
SEBI submits that debenture holders are entitled to full outstanding amounts due (principal plus interest) if their debt cannot be resolved under the compromise/ resolution mechanism. However, it has been argued that the compromised arrived at in terms of the direction of the Division Bench will also bind all the other debenture holders, who were not a party to the original suit before the High Court. This will prejudice the dissenting debenture holders as they have to settle for a lesser amount – 24.96% of the principal among with a further 5% of the principal outstanding. We agree with SEBI‘s submission that the compromise arrived at the Debenture Trust Deed level among the consenting debenture holders should not bind the dissenting debenture holders.
The dissenting debenture holders would have been bound by the Resolution Plan if it had been approved in accordance with the Insolvency and Bankruptcy Code, 2016 or under an ICA as acceded to under the SEBI Circular. We accordingly deem it appropriate that dissenting debenture holders should be provided an option to accept the terms of the Resolution Plan. Alternatively, the dissenting debenture holders have a right to stand outside the proposed Resolution Plan framed under the lender‘s ICA and pursue other legal means to recover their entitled dues.
For the reasons indicated in the text of the judgment, we accept the submissions which have been urged by SEBI and disapprove of the interpretation placed by the Division Bench of the Bombay High Court on the SEBI Circular. The appeal is allowed in part, subject to the directions issued above under Article 142 of the Constitution.
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Insolvency & Bankruptcy
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2022 (9) TMI 143
Recovery of electricity dues - Time Limitation - whether the Adjudicating Authority was right in issuing direction to the Appellant to make payment of outstanding electricity dues during CIRP period within 90 days? - HELD THAT:- The CIRP against Corporate Debtor has commenced on 30.08.2018 by order of the Adjudicating Authority and during the moratorium period the Respondent has continued to supply the electricity to the Corporate Debtor even though DFA came to an end on 24.10.2019, when Respondent issued notice to take over the Distribution Franchisee Agreement. Thereafter, the Resolution Professional filed the IA No.1661 of 2021 seeking the directions as noticed above. In the Application, which was filed by Resolution Professional, it was categorically pleaded that continuance of Franchisee Infrastructure is essential to maintain the value of the Corporate Debtor for the incoming Resolution Applicant.
The scheme delineated by Section 14(1) explanation as well as Section 14(2-A) is same, that is, all benefits, which were enjoyed by the Corporate Debtor given by Government or authority should be continued, but subject to condition that there is no default of payment of current dues. Sub-section (2-A) also envisage continuation of the essential supply and provides for such termination, suspension or extension when payment has not been made for the such supply during the moratorium - Sub-section (2) of Section 14 has to be read with the legislative intent, which is now reflected by Explanation to Section 14(1) and 14(2-A). In the facts of the present case, when Corporate Debtor took a decision that supply of electricity is necessary to make the value of Corporate Debtor as has been specifically pleaded, the Corporate Debtor is obliged to make payment.
When the Corporate Debtor has opined that supply of electricity is essential and is to be continued by the Respondent, it is also under obligation to make payment of electricity dues of the CIRP period and direction issued by the Adjudicating Authority to make the payment of outstanding dues, cannot be faulted. The direction of Adjudicating Authority to continue the DFA, that is, to continue to supply the electricity was subject to payment of outstanding dues within 90 days as directed by the Adjudicating Authority. The Appellant cannot enjoy the benefit of direction of one part, that is, to continue the DFA and deny the payment of electricity dues of the CIRP period.
Thus, no exception can be taken to direction of the Adjudicating Authority to make the payment of outstanding dues to the Respondent during the CIRP period within 90 days - appeal dismissed.
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2022 (9) TMI 109
Modification/alteration of approved Resolution Plan - Resolution Plan is submitted to Resolution Professional claiming right to use brands and Trademarks, approved by CoC and Adjudicating Authority - declaration that the Corporate Debtor is the owner of Trademarks - alteration or modification of Resolution Plan approved by CoC is valid or not - Whether declaration of ownership over Trademarks after approval of Resolution Plan by CoC, which is not a part of Resolution Plan amount to modification or alteration of approved resolution Plan by CoC, if so, the order is liable to be set aside? - HELD THAT:- Since the Resolution Plan satisfied the legal requirements, it was approved by CoC in its commercial wisdom and also approved by Adjudicating Authority subject to rider. The Resolution Professional filed IA No. 155/2018 claiming ownership on the brands “Deccan Chronicle” and “Andhra Bhoomi” during pendency of petition under Section 31 of IBC, but the IA No. 155/2018 was allowed by Adjudicating Authority. If for any reason the CoC decision i.e. approval is against any law, the course open to the Adjudicating Authority is to return the Plan for fresh consideration and approval - The role of Resolution professional is only a facilitator, cannot act either as Creditors or Corporate Debtor or Adjudicating Authority but the Resolution Professional has filed the I.A. No. 155/2018, may be to protect the interest of CoC for maximization of value of assets of Corporate Debtor.
Right to use is distinct from right and title to incorporeal property, right to use is only licence but title creates ownership, which is superior right. Hence creation of superior right in incorporeal property i.e., Trademarks tantamount to alteration or modification of approved Plan by CoC in its commercial wisdom, though conditional and such conditional approval by Adjudicating Authority is contrary to law.
There are no hesitation to conclude that right or ownership, if any, claimed after approval of Resolution Plan by CoC is extinguished and if ownership of Corporate Debtor is declared over the Trademarks, it would amount to modification or alteration of approved Resolution Plan by CoC which is impermissible. Hence the order of Adjudicating Authority to the extent of declaring the ownership of Corporate Debtor over the Trademarks “Deccan Chronicle” and “Andhra Bhoomi” is illegal and the Adjudicating Authority transgressed the jurisdictional limits.
This point is held in favour the Appellant and against the Respondents.
Whether the Adjudicating Authority under IBC is vested with jurisdiction to decide title or right or ownership over Trademarks, when jurisdiction is conferred on District Judge as per the provisions of Trademarks Act, if not the order passed is liable to be set aside? - HELD THAT:- Since this point relates to jurisdiction of Adjudicating Authority to decide the ownership of Trademarks, no finding need be recorded in view of the above point, while leaving it open to the parties to approach appropriate authority or Tribunal at appropriate time, whenever need arises.
Appeal allowed.
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2022 (9) TMI 142
Liquidation of the Corporate Debtor - Validity of decision of Committee of Creditors - Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Whether the Corporate Debtor on the strength of acknowledgement declaration filed in Part II before the District Industries Centre on 29.01.2007/30.01.2007 can be treated to be an MSME registered under Micro, Small and Medium Enterprises Development Act, 2006? - HELD THAT:- From the materials on the record and the minutes of the CoC meeting, it is apparent that the Resolution Professional did not form any clear opinion that Appellant is a Registered MSME nor advised the CoC to treat the Appellant as Registered MSME. We, thus, are of the opinion that the Appellant is a Registered MSME within the meaning of Act, 2006 and the filing of Entrepreneurs’ Memorandum in Part II which was acknowledged on 30.01.2007 is sufficient to treat the Appellant as a Registered MSME.
In event it is found that the Corporate Debtor is an MSME, whether it was entitled to file Resolution Plan to revive Corporate Debtor as per Section 240A of the I&B Code? - Whether the CoC which permitted the Corporate Debtor to file a Resolution Plan erred in not considering the Resolution Plan of the Appellant on the ground that no plan having been invited by the CoC, hence, the Resolution Plan of the Corporate Debtor cannot be considered? - Whether in the facts and circumstances of the present case, the decision of the CoC taken in the 5thCoC meeting to liquidate the Corporate Debtor is a sustainable decision? - HELD THAT:- The I&B Code provide for special protection of MSME by inserting Section 240A w.e.f. 06.06.2018 where provision of clause (c) and (h) of Section 29A had been made not applicable to in respect of CIRP of any Micro, Small and Medium Enterprise.
In the present case, although in 5th CoC meeting, the CoC had taken a decision to liquidate the Corporate Debtor but subsequently in the 6th CoC meeting, the Appellant appeared before the CoC and claimed to file a plan to revive the Corporate Debtor. In the Agenda Item No. 12, in the 6th CoC meeting, the CoC and Resolution Professional advised the Appellant to file Resolution Plan by August 14, 2020 - It is relevant to notice that the permission was granted to the Appellant to file plan in 6th CoC meeting held on 23.07.2020 subsequent to the 5th CoC meeting held on 24.02.2020 when CoC had decided to liquidate. The permission granted by the CoC itself indicate that the Appellant was treated to be eligible to file Resolution Plan to revive the Corporate Debtor.
When in the CoC meeting Appellant was permitted to file a Resolution Plan, it cannot be said that Appellant was not invited to submit a Resolution Plan. It is another issue that CoC ought to have given opportunity to others to submit Resolution Plan by directing for issuance of Form G which was never done - the Appellant was not considered as MSME during the proceedings of the CoC and the Liquidators view as reflected in the meeting of CoC and as submitted before us is clearly refuting the claim of the Appellant as Registered MSME. Non-acceptance of Corporate Debtor as a Registered MSME is a material irregularity which has been committed in the Insolvency Resolution Process.
The entire object and purpose of the I&B Code is to revive the Corporate Debtor and put it back on the track. The CoC had not taken any effort to issue any Form G to find out as to whether there can be resolution of the Corporate Debtor by any Resolution Applicant. Without even making one effort, CoC jumped on conclusion to liquidate. It is true that under the statute CoC is empowered to take a decision to liquidate the Corporate Debtor. Material irregularity has been committed in the process - the sufficient ground exist within the meaning of Section 61(4) to assail the order directing for liquidation. The Adjudicating Authority in the impugned order only relying on the resolution of the CoC in 5th meeting has directed for liquidation without even taking into consideration minutes of subsequent 6th, 7th and 8th meetings of CoC, the steps taken by CoC to invite plan from the Appellant, discussion of the plan and ultimately decision thereon.
The decision of the CoC in the 5th meeting to liquidate the Corporate Debtor is unsustainable - appeal allowed.
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2022 (9) TMI 141
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of dues of Financial Creditors - application not maintainable for want of valid authorization - maintainability also questioned on the ground that the loan advanced by the Appellant was converted into equity by her own act and conduct and as such it does not fall within the definition of financial debt which is due and payable.
HELD THAT:- The facts are not much in dispute but, during the course of the hearing, Counsel for the Respondent was pertinently asked to show any document available on record indicating the consent by the Appellant for converting her loan into capital contribution. It is pertinent to mention that no such document was shown by Counsel for Respondent. Thus, in view of the fact that the loan advanced by the Appellant has been converted into capital contribution without her consent cannot be treated as a capital contribution in order to dismiss the application filed under Section 7 of the Code by her. No other point has been raised.
Appeal allowed by way of remand.
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2022 (9) TMI 140
Validity of order of NCLT issuing Direction to IBBI not to initiate any enquiry till further orders, if any enquiry is initiated, the same be halted till further direction from the court - HELD THAT:- Hon’ble Supreme Court in the case of K. Sashidhar Vs. Indian Overseas Bank & Ors. [2019 (2) TMI 1043 - SUPREME COURT] has held that the prescribed authorities (NCLT/NCLAT) have been endowed with limited jurisdiction as specified in the I&B Code and not to act as a court of equity or exercise plenary powers.
This Appellate Tribunal in the case of M/S. MOHAN GEMS & JEWELS PRIVATE LIMITED THROUGH ITS LIQUIDATOR DEBASHISH NANDA VERSUS VIJAY VERMA, INSOLVENCY AND BANKRUPTCY BOARD OF INDIA [2021 (8) TMI 1000 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] and INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (IBBI) VERSUS SHRI RISHI PRAKASH VATS AND ORS. [2019 (8) TMI 629 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], has held similar view.
The impugned orders passed by the Adjudicating Authority cannot be sustained in the eye of law - Appeal allowed.
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2022 (9) TMI 138
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- On perusal of record, it can be seen that the date of default has not been mentioned in the petition. According to section 3(11) of the Code, a “debt” means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. Further, according to section 3(12), “default” means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the Corporate Debtor. Therefore, in order to determine the date on which the cause of action arose, and the date from which the limitation would ensue, it is crucial to determine the date of default.
In the instant matter, no date of default has been mentioned in the Form 5 of the petition. Further, the brief synopsis provided in the petition mentions that the last payment was made on 04.11.2016. in the absence of the date of default, the date of cause of action cannot be determined.
Since the MOU has been used to establish the basis of the financial relation with the Corporate Debtor, the same cannot be used to support the claims of the petitioners who are not parties to the MOU. The Financial Creditors’ contention that the other financial creditors gave the money to the Corporate Debtor on behest of the said MOU, and at the request of Shri Shyam Sundar Poddar and Shri Sital Kumar Poddar, is untenable in absence of any document supporting the same - As an evidence of the same, the Corporate Debtor has provided the payment details which show that amounts equal to the principal sums lent by the Financial Creditors being Impex India Inc., S.K. Engineering, SRMB Ionic International, Bimal Jajodia, Deepti Poddar, Nirmala Poddar, Manju Lohia and Shyam Sundar Poddar (HUF) have been transferred by the Corporate Debtor.
The Financial Creditors, in order to establish default of re-payment on part of the Corporate Debtor, have mentioned about various dishonoured cheques. All the cheques have been dated 02.09.2019 and are signed by Rajib Guha and Aloke Kumar Banerjee i.e directors of the Corporate Debtor - The issue of the validity and genuineness of the cheques, which are pivotal to establish default of the Corporate Debtor, can only be done in appropriate proceedings by leading evidence and not in summary proceedings under the Code.
This Adjudicating Authority, therefore, is not satisfied that default on part of the Corporate Debtor is established. Further, in absence of an explicit date of default in the petition, the same is incomplete. As such, the instant petition is liable to be rejected.
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2022 (9) TMI 137
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The Financial Creditor has satisfactorily established the existence of debt of Rs. 15,00,000/- and default of the outstanding dues aggregating to Rs. 17,84,219/- as evidenced by the records of the Financial Statements attached to this Petition. The date of default is 16th January 2017 and this Petition was filed on 8th November 2019 therefore it is noted that the Petition is not barred by Limitation.
The Financial Creditor has thus successfully demonstrated and proved the debt and default in this case. Therefore, this Bench is of the view that that this Petition satisfies all the necessary requirements for admission under Section 7 of the Code.
Petition admitted - moratorium declared.
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2022 (9) TMI 136
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - whether the Petition under section 7 of the Code is barred by limitation or not? - HELD THAT:- Upon perusal of the record it is apparent that transaction between the parties was purely financial in nature and there is an existence of Financial Debt. From the above records it is apparent that the Financial Creditor under SARAL KARJ BHUGTAN YOJNA extended One Time Settlement offer to the Corporate Debtor and the same was accepted by the Corporate Debtor - Balance sheet for year ending as on 2017 - 2018 of the Corporate debtor reflects that Corporate Debtor has certain short term borrowings which is showing that there exists cash credit facilities from the Bank. Further, as per the Auditors’ Report of the Corporate Debtor for financial year ending as on 2017 – 2018 (page 104 of the Supplementary Affidavit), it states that the Corporate Debtor has defaulted in the repayment of loans or borrowings to financial institutions, banks.
The present petition filed by the Financial Creditor is complete in all respects as required by law. The Petition establishes that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under section 4 (1) of the Code, stipulated at the relevant point of time.
Petition admitted - moratorium declared.
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2022 (9) TMI 135
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- On having seen the loan disbursement and documents supporting agreement between the parties conferring obligation upon the Corporate Debtor to repay the Loan amount including interest, this Financial Creditor has proved existence of debt and default. Moreover, the Corporate Debtor has admitted the debt in its own reply. The present petition was filed on 28.12.2021 and the Corporate Debtor was having enough time to settle the outstanding amounts of the Financial Creditor, but the Corporate Debtor failed to do so.
Under the said circumstances, since the debt and default on the part of the Corporate Debtor is being proved and also by looking at the consent given by the Insolvency Professional, the application is admitted.
The application is admitted - moratorium declared.
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2022 (9) TMI 134
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - NPA - Financial Creditors - existence of debt and dispute or not - whether the Petition under section 7 of the Code is barred by limitation or not? - HELD THAT:- Upon perusal of the record it is apparent that transaction between the parties was purely financial in nature and there is an existence of Financial Debt. From the above records it is apparent that from time to time the Financial Coeditor under SARAL KARJ BHUGTAN YOJNA extended One Time Settlement offer to the Corporate Debtor and the OTS was accepted by the Corporate Debtor - it is evident that the Corporate Debtor is still acknowledging the debt due to the financial creditor being the Financial Creditor in the instant case.
It is seen from the record that the date of default has been mentioned as 30 June, 2011, which stood revived with the acceptance of the OTS proposal by the Corporate Debtor on 28 December, 2018. Moreover, upon perusal of the records at page 231 and 232 of the Petition, it is apparent that the Corporate Debtor also made part payment of the OTS proposed amount. Further, the settlement proposal under the SARAL KARJ BHUGTAN YOJNA provided for the payment of the balance amount within 31 March, 2019.
The Petition establishes that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under section 4 (1) of the Code, stipulated at the relevant point of time - the present petition filed by the Financial Creditor is complete in all respects as required by law - Petition admitted - moratorium declared.
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2022 (9) TMI 133
Seeking directions of this Tribunal to take action against the Respondent Company, the Creditor - wilful and false disclosure and concealment of facts in Claim Form-C in an attempt to be considered as a Financial Creditor and be a member of the Committee of Creditors - Power of Resolution Professional to suo moto review, modify or vary the claim of a creditor once the same has been admitted/verified by IRP/RP - Section 235A of IBC, 2016 - whether Applicant as a member of the COC is adjudicatory in nature or otherwise and whether it amounts to review of his decision? - related party of the Corporate Debtor or not.
HELD THAT:- The duties of IRP have been enumerated under Section 18 and duties of the RP have been enumerated under Section 25 of the Code, under which, the IRP and RP are duty bound to perform their duties as envisaged under the said provisions. Further, the IRP/RP are also guided by the CIRP Regulations while verifying the claims and determining the amount of such claims. The relevant provisions which come into play are Regulations 10, 12, 13 & 14 of the CIRP Regulations - It is noticed that the RP sought clarification from the Applicant vide e-Mail dated 24.11.2021 after receiving information/documents from Punjab National Bank, to which, the Applicant did not reply. Therefore, the RP in discharge of his duties as stipulated under the Act as well as in the Regulations updated the claim on the basis of documents received by him and re-designated the Applicant from Financial Creditor to Financial Creditor - Related party.
The action of the RP in issuing e-Mail dated 29.11.2021 cannot said to be the adjudicatory in nature and it is in fact administrative in nature - the RP has acted well within his limits and took into consideration the material placed before him subsequently by Punjab National Bank which is supported by State Bank of India as well as by the promoters of corporate debtor.
Whether the Applicant can be held to be a related party of the Corporate Debtor in the facts & circumstances of the present case? - HELD THAT:- It is seen that both the parties will have share on profits and furthermore the brokerage will be shared by them. It is thus clear that there is a nexus between the Applicant and the Corporate Debtor and its prima-facie establishes that the Applicant is a related party of the Corporate Debtor - there are no hesitation to hold that the Applicant is a related party to the Corporate Debtor in terms of Section 5(24)(i) of the IBC.
Application dismissed.
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2022 (9) TMI 139
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- It is pertinent to note that the Corporate Debtor has been subjected to CIRP in the matter of REXSONA TILES PVT. LTD. VERSUS WAAMAN PRODUCTS PVT. LTD. [2022 (9) TMI 11 - NATIONAL COMPANY LAW TRIBUNAL , NEW DELHI BENCH] which is an Application under Section 9 of IBC, 2016.
The Operational Creditor i.e. New Pearl Vitrified Pvt. Ltd. is, therefore, directed to approach the IRP appointed in the above-referred matter and take further steps for filing their claim - Matter disposed off.
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PMLA
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2022 (9) TMI 132
Seeking grant of Bail - money laundering - cheating large number of investors of Jharkhand by inducing them to purchase plots of land - siphoning off of funds - twin conditions under section 45 of PMLA attracted or not - HELD THAT:- This Court is of the considered view that the provisions of Section 45 of the Act, 2002 prior to judgment of Ho’ble Apex Court in the case of NIKESH TARACHAND SHAH VERSUS UNION OF INDIA AND ANR. [2017 (11) TMI 1336 - SUPREME COURT] had been declared unconstitutional; but the defects in provisions of the said Act was cured by Parliament by way of Amendment Act 13 of 2018 and consequently, the twin conditions of Section 45 while disposing of the bail application under the Act, 2002 stood revived.
The twin conditions under Section 45 (1) for the offences classified thereunder a Part-A of the Schedule was held arbitrary and discriminatory and invalid in the case of Nikesh Tarachand Shah. Subsequently, the Section 45 of the Act, 2002 has been amended by Amendment Act, 13 of 2008, whereby the words “imprisonment for a terms of imprisonment of more than three years under Part A of the schedule” has been substituted with “accused of an offence under this Act.”
The Hon’ble Apex Court in THE ASST. DIRECTOR ENFORCEMENT DIRECTORATE VERSUS DR. V.C. MOHAN [2022 (1) TMI 511 - SUPREME COURT] held once the prayer for bail is made for the offence under PMLA 2002, the rigors & principle underlying Section of 45 get triggered on.
There are reasonable grounds for believing that applicant is guilty of the offences of money laundering and he is likely to commit any offence, if enlarged on bail - Bail application dismissed.
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Service Tax
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2022 (9) TMI 131
Interest on Refund of the pre-deposit amount - entitlement of interest from the date of deposit of the said amount or not - section 35FF of the Central Excise Act, 1944 - HELD THAT:- The ‘Heading’ of the amended section 35FF does not deliberately make a mention of any amount deposited under the proviso to section 35F for the simple reason that post 06.08.2014 the amount is deposited under the amended section 35F and not the proviso to the unamended section 35F. Section 35FF, post 06.08.2014, provides that where an amount deposited by the appellant under section 35F is required to be refunded consequent upon the order of the appellate authority, there shall be paid to the appellant interest at such rate, not below 5% and not exceeding 36% on such amount from the date of payment of the amount till of such amount. It is, therefore, apparent that the amended section 35FF deals with amount that is deposited post 06.08.2014 under section 35F and not to any amount that is deposited under the proviso to the unamended 35F - It is only under the proviso to the unamended section 35F that the amount is determined towards pre-deposit. On the other hand, it is the amended section 35F that requires the appellant to deposit 7.5% of the duty.
In the present case, the amount was deposited by the respondent pursuant to the directions issued under the unamended provisions of the 35F. Such being the position, interest on delayed refund of amount would continue to be governed by the unamended provisions of section 35FF.
It is not in dispute that if the unamended provisions of section 35FF are applicable to the facts of the present appeal, no interest would be payable to the respondent since the amount was refunded within three months from the date of communication of the order.
Appeal allowed.
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2022 (9) TMI 130
Reversal of CENVAT Credit - inputs - input services - common services used for both taxable and exempted services rendered by the appellant - receipt of ‘interest’ in the course of rendering service that is not liable to tax - non-maintenance of separate records - rule 3 of CENVAT Credit Rules, 2004 - HELD THAT:- The lower authorities had not considered the manner in which the reversal was to be handled as per rule 6 of CENVAT Credit Rules, 2004 and that ‘exempted services’, as defined in rule 2 of CENVAT Credit Rules, 2004, should have been the basis for determining the ineligibility for continued maintenance of the credit availed.
In the absence of details of credit taken during the disputed period and utilized, we are unable to come to conclusion of the reversal, if any, required under the CENVAT Credit Rules, 2004. It would, therefore, be appropriate for the notice to be decided afresh by the original authority - matter remanded back to the original authority to consider the submissions of the assessee.
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2022 (9) TMI 129
Levy of penalty - tax paid before the issuance of the Show Cause Notice - mala fide intent to evade payment of service tax or not - sections 77(1)(a), 77(2) and 78 of the Finance Act, 1994 - HELD THAT:- The issue involved in this appeal is no more res integra in view of the decision of the Tribunal in the case of M/S BHORUKA ALUMINIUM LIMITED. VERSUS THE COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, MYSORE [2016 (11) TMI 1292 - CESTAT BANGALORE] where it was held that the contention of the appellant that he bonafide believed that he is not liable to pay service tax but during the audit, the audit party informed him that he is liable to pay service tax, then he immediately paid the entire service tax along with interest. Except mere allegation of suppression, the Department did not bring any material on record to prove that there was suppression and concealment of facts to evade payment of tax.
Appeal allowed - decided in favor of appellant.
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2022 (9) TMI 128
CENVAT Credit - input service - outdoor catering services - period 2012-13, from 01.07.2012 to 2017-18 upto June 2018 - time limitation - HELD THAT:- As per the exclusion clause, it is very clear that services in relation to outdoor category have been excluded from the definition of input service. These services have been used for the personal use or consumption of the employee of the appellant. Cenvat credit scheme is a beneficial piece of legislation which allows for tariff in respect of the taxes paid on the input service and capital goods used by the manufacturer/service provider to be utilised for payment of central excise duty or service tax in respect of the goods manufactured and cleared for that output services provided - The definition of input services specifically excludes the outdoor catering services from the purview of the scheme. The argument that this service has been provided as per the Maharashtra Shops and Establishments (Regulation of Employment & Conditions of Service) Act, 2017 cannot be sustained in view of the specific exclusion provided by the definition incorporated in the scheme.
This issue came for consideration of Hon’ble High Court of Karnataka in the case of Toyota Kirolsaka Motor Pvt Ltd [2021 (5) TMI 880 - KARNATAKA HIGH COURT] where it was held that There is no ambiguity in the statute and therefore, as it is a taxing statute, this Court cannot add or substitute words in the statutory provisions while interpreting the statutory provision. The statute does not leave any room for any other interpretation and therefore, in the considered opinion of this Court, the judgment does not help the appellant in any manner.
In view of the express provision of Rule 2 (l) defining the input services to exclude the outdoor catering services, and the decision of larger bench of tribunal in case of Wipro Ltd., referred above the decision rendered by the Single Member Bench in case of M/S HAWKINS COOKERS LIMITED VERSUS COMMISSIONER OF CGST, THANE [2021 (3) TMI 789 - CESTAT MUMBAI] is per incurriam and cannot be relied upon as binding precedence. The view expressed in the case of Wipro Ltd., has been approved by the Hon’ble High Court of Karnataka, Hon’ble High Court of Bombay and Hon’ble Supreme Court.
Time Limitation - HELD THAT:- The issue of limitation is the question of fact based on the existence of the ingredients provided by Section 73 of Finance Act, 1994 for invoking the extended period of limitation. The facts which were in the knowledge of the appellant but not disclosed at any time to the Revenue would be a suppression of fact with intention to evade payment of service tax. I am very clear in my mind that the demand made invoking extended period of time can be sustained. Even otherwise in the present case the appellant has deposited this amount on 03.07.2018 and the show cause notice was issued on 18.07.2018.
It is also noted on being pointed out by the audit, the appellant has deposited the entire amount of the tax due along with the interest under protest. The amounts paid have been appropriated by the order-in-original against the demand. As the entire amounts along with interest have been paid prior to issuance of the show cause notice, in view of the Explanation 2 to the sub section (3), there are no merit in the penalty imposed on the appellant under section 78 and set aside the same.
Appeal is partly allowed to the extent of setting aside the penalty imposed under Section 78 of the Finance Act, 1994.
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2022 (9) TMI 127
Refund of unutilised credit in relation to CENVAT credit - inclusion of amount of export turnover for the calculation refund claim, for which payment has not been received during the relevant period - July, 2014 to September, 2014 - Rule 5 of Cenvat Credit Rules read with Notification No. 27/2012-CE(NT) - HELD THAT:- There is no dispute with regard to export turnover, which is Rs.17,60,67,491/-. Further, there is no dispute with regard to the eligible /net cenvat credit, which is Rs. 2,43,54,808/-. As regards the denominator, it is held that the correct figure is Rs. 22,71,89,438/-.
The Adjudicating Authority to recalculate the amount of refund as discussed and directed and allow the balance amount of refund with interest to the appellant within a period of sixty days from the receipt of copy of this order - the appellant is directed to file a calculation sheet as per the order of the Tribunal, before the Adjudicating Authority for perusal.
The appeal is allowed.
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Central Excise
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2022 (9) TMI 126
Clandestine manufacture and removal - chewing tobacco - cross-examination of various persons - applicability of Compounded Levy Scheme - extended period of limitation - HELD THAT:- Section 3A of the Act read with the Chewing Tobacco Rules is a complete code in itself. It provides for the detailed procedure for determination of duty on the basis of capacity of production. Further, the said Rules also provides for detailed procedure for determination of duty payable and also provides for penalty in case of violation or mis-declaration by the assessee. It also provides that if any undeclared packing machines are found by the Department, the manner of determination of duty on such machines and the penalty imposable.
Admittedly, in the facts of the present case, Revenue have not found any undeclared machine(s) in manufacturing premises/ factory. Further, no such undeclared machine(s) was found at any undisclosed premises. It is further found that duty has been demanded on the basis of assumptions and presumption, which is not permissible under the scheme of compounded levy on the product manufactured by the appellant. The appellant have regularly filed declarations for capacity determination under Rule 6(1) of the Chewing Tobacco Rules, and the said declarations were adjudicated upon and duty payable determined (assessment order) by the Adjudicating Authority. Such adjudication orders have attained finality, as these have not been appealed against by the Department - the factory of the appellant was regularly visited from time to time by the Officers of the Department and they have never found any undeclared packing machine being operated by the appellant.
In the facts and circumstances (Compounded Levy Scheme), undisclosed income declared before the Income Tax Department has no bearing on the duty payable under Central Excise Act. Further, it is undisputed that the amount of Rs.92,14,154/-, which was voluntarily offered to Income Tax and was confirmed in the Assessment order as undisclosed income, on appeal by the appellant, the ld. Commissioner of Income Tax (Appeals) vide Appellate Order dated 05.10.2016 have set aside the said amount - the appellant has given a cogent explanation with regard to the sheet/ survey report found from the premises of Sh. Purohit, which have been arbitrarily rejected by the Adjudicating Authority.
Extended period of limitation - HELD THAT:- The invocation of extended period of limitation is bad and not available to Revenue, as no case of `suppression or contumacious conduct is made out.
Appeal allowed - decided in favor of appellant.
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2022 (9) TMI 125
Extended period of limitation - Remission of duty - appellant’s contention is that it was switching over to a new system which caused teething troubles because which of it was unable to provide the data within time - Rule 21 of the Central Excise Rules - HELD THAT:- The learned Authorised Representative for the Revenue that this is not a decision on application for remission of duty by the appellant but is a case of demand of duty on the goods which were not received in the LMIs as required under Rule 20 of the Central Excise Rules. It is also evident that the appellant had not provided the required data despite being repeatedly asked by the Range officer. Having not provided the data despite repeated requests, the appellant cannot now take shelter on the ground that the demand is time barred. The information of the extent of losses is within the exclusive knowledge of the appellant and it is its responsibility to provide the data.
The appellant’s contention is that it was switching over to a new system which caused teething troubles because which of it was unable to provide the data within time. Even if it be so, the fact remains that appellant has not provided the data and is now trying to profit from its own inaction to claim that the demand is time-barred. Therefore, the appellant had actually suppressed the information from the Department and now cannot benefit by claiming that the demand is time-barred.
When a demand is made, the noticee has a right to put up whatever the defence it wants to and which may be considered and accepted or rejected by the adjudicating authority. Now the only question which remains is if the extent to which the claim of remission on account of losses has been rejected by the Commissioner is correct or otherwise - in respect of certain commodities such as Sulphur, Naptha, JBO, ATF etc, the Commissioner has reckoned condonable limit of 0%. This is probably because these products were not mentioned in Circulars of 1956 and 1959. However, since the 1981 Circular of the Board clarifies that losses of up to 1% can be allowed without detailed scrutiny and loss above 1% can be condoned after scrutiny, we find no reason to not condone losses in these cases as claimed. There is no allegation, let alone evidence, that the losses were not genuine or that the products were suspected to have been diverted or pilfered.
The appellant is entitled to remission of the losses as claimed and consequently the demand of duty on the appellant cannot be sustained - Appeal allowed.
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2022 (9) TMI 124
Jurisdiction - genuineness of transfer of Cenvat Credit to GST Tran-1 - competence of the Commissioner Appeal who has passed the impugned order on the ground that the Commissioner (Appeals) as Central Excise officer has no competence to adjudicate the issue with respect to the provisions of CGST Act, 2017 - HELD THAT:- The foremost perusal of the order under challenge, the preamble thereof clarify that the Order-in-Appeal has been passed by Sugrive Meena, Commissioner (Appeals) not only for the Central Excise but also for the CGST, Jaipur. This particular perusal makes it clear that the contention of Department is wrong and is therefore not acceptable.
Coming to the another contention that order assailed in the impugned appeal pertains to the provisions of CGST, it is observed that the amount in question admittedly is the closing balance of Cenvat Credit for the month of June, 2017 as is apparent from para 2 of the impugned Show Cause Notice dated 19.11.2018 - Admittedly, that is the amount reflected in the ER-1 return only. Admittedly, the revised return is also the excise return. Thus it becomes clear that the remaining amount involved herein is not the amount with respect to the provisions of CGST but is the Cenvat Credit balance lying with the appellant of the excise law era though proximate to the time of launch of new GST law. The said act came into force from 1.7.2017 and the amount in question is of June 2017. This perusal falsify the another contention raised by the department.
The fact still remains that the amount in question is the amount for the period of which Central Excise Act is not applicable. Department has failed to produce on record to show that figures mentioned in the revised return of 16.7.2017 about the amount lying as balance of Cenvat Credit were correct figures and thus credit availed on Rs. 59,86,899/-. instead of Rs.55,15,048/-, that is the amount for an amount Rs.4,71,851/- is wrongly availed - keeping in view that by the time this return was revised the appointed date has already arrived, whereafter the fund as shown in the ER-1 was to be transferred into TRANS-1.
The amount of credit in question being taken on the amount of return of 10.7.2017 and that the return is impressed as correct also in absence of any evidence by the department to falsify the same and in absence of any response of the department to the intimation letter dated 17.7.2017, the findings confirming the reversal of the impugned amount are held to be are not sustainable.
The contentions of the department challenging the competence of Commissioner (Appeals) are set aside - Appeal dismissed - decided against Revenue.
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2022 (9) TMI 123
Imposition of late fee for filing Central Excise return - Many returns are Nil return - delay for filing returns has been considered for a period from December 2014 to June 2017 - Rule 12(6) of Central Excise Rules, 2002 - HELD THAT:- As apparent from the table given in para 5.2 of the impugned show cause notice, it is observed that out of alleged 31 delayed returns, 18 returns therein are ‘NIL’ returns i.e. for the respective period of said returns i.e. the appellant was not liable to pay duty for the respective period of returns. Hence, appellant cannot be called as “assessee” for the said particular period. Resultantly, Rule 12 (6) (the amended one) will actually not be applicable upon the appellant for the period during which ‘NIL’ returns were filed.
With regard to the remaining 13 returns, from the aforesaid table of show cause notice that returns though have regularly been filed but with delay, it is clear that the factum of said delay was in the notice of department since December’ 2014. Raising this issue in ACS scrutiny of the year 2019 cannot give the benefit to the department for invoking the extended period of limitation. - Otherwise also extended period can be invoked only in the case when there is willful mis-declaration or willful suppression.
Further, perusal of Rule 12 (6) of Central Excise Rules shows that the late fee cannot be charged over and above Rs. 20,000/- for a period of delay in submission of each return. Seen from that angle, the demand of Rs. 5,42,700/- as late fee is held to be on excessive side - there is no restriction in Rule 12 (6) as has been mentioned by Commissioner (Appeals) in its findings at para 8 of order under challenge.
All the entire period of demand is held to be beyond the normal period for which the demand could have been raised - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (9) TMI 122
Reversal of input tax credit (ITC) - period 2014-15 - Section 19(2)(v) of TNVAT Act, 2006 - HELD THAT:- Issue decided in favour of the assessee by a recent decision of a Division Bench of this Court in the case of THE STATE OF TAMIL NADU REPRESENTED BY ITS SECRETARY COMMERCIAL TAXES DEPARTMENT, THE DEPUTY COMMISSIONER (CT) (FAC) VERSUS M/S. EVEREST INDUSTRIES LIMITED [2022 (4) TMI 1204 - MADRAS HIGH COURT] where it was held that The position as regards section19(2)(ii) and the proviso inserted vide Act 28 of 2013 and its subsequent omission vide Amendment Act 5 of 2015 and the claim of refund, shall be examined - To that extent, the appeals filed by the State are partly allowed.
Petition allowed.
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2022 (9) TMI 121
Maintainability of second appeals - non-compliance with condition with the pre-deposit - Section 58 of the TNVAT Act - HELD THAT:- Unambiguously, the statutory condition requires deposit of the entirety of the disputed tax as ordered by the first Appellate Authority. The provision was also challenged, as rightly pointed out by learned counsel for the petitioners, in the case of K.M.Corporation [2007 (4) TMI 641 - MADRAS HIGH COURT] and has been upheld.
In the case of Tecnimont Pvt. Ltd. [2019 (9) TMI 788 - SUPREME COURT], the Hon'ble Apex Court was concerned with an appeal filed as against the decision of the Punjab and Haryana High Court in the context of Section 62(5) of the Punjab Value Added Tax Act, 2005. That provision stated that no appeal shall be entertained unless such appeal was accompanied by satisfactory proof of payment of 25% of the additional demand created, penalty and interest, if any.
Petition dismissed.
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Indian Laws
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2022 (9) TMI 107
Dishonor of Cheque - existence of legally enforceable debt or not - rebuttal of the presumption - production of cogent evidence to show as to when the disputed cheque was issued to payoff legally enforceable debt or any other liability - cross-examination of witnesses - cheque kept as security was misused by the complainant to harass the respondent company in the year 2004, after 15 years - section 138 of NI Act - HELD THAT:- The contention of the accused respondent is that the cheque was kept as security with the complainant’s company and the business of the accused was closed down in the year 1990 as also the bank account was closed in the year 1990 and it is a fact that the appellant could not prove a single document to show that there was a business transaction between the accused and the complainant between the period 1990 to 2004, i.e. the year when the alleged disputed cheque dated 21st July, 2004 was issued - Exhibit 6/3 is a cheque bearing no. 087106 dated 6.11.1989; Exhibit 6/4 is a cheque bearing no. 067107 dated 17.11.1989; Exhibit 6/5 is a cheque bearing no. 087108 dated 27.11.1989 and Exhibit 6/6 is a cheque bearing no. 087109 dated 28.11.1989. All these four cheques were issued by the accused in favour of the complainant in the year 1989.
Surprisingly the disputed cheque bearing no. 087110 in the next cheque in the cheque book was allegedly issued on 21.07.2004. It is thus found that after the cheque being Exhibit 6/6 was issued, the next cheque in the same Cheque Book being disputed cheque marked as Exhibit 1 was issued after fifteen years. This is totally unbelievable and as such the said fact totally supports the case of the accused respondent and also supports all the contention of the accused respondent that the cheque was handed over to the complainant as a security and was not issued to meet off any legally enforceable debt or any other liability towards the complainant.
The presumption against the accused in respect of the said cheque could not be proved in view of the evidence as discussed.
Considering the materials on record this Court finds that it has been clearly proved before the Court that the accused respondent’s bank account was closed in the year 1990 and his business was also closed in the same year. There has been no business transaction between the parties to this case from 1990 to 2004. Exhibit 6/6, is the cheque just prior to the disputed cheque marked as Exhibit 1, the gapping period between the said two cheques is fifteen years. This goes against the case of the complainant and totally supports the defence of the accused respondent - It has been clearly proved that there was absolutely no business transaction between them from the year 1990 and 2004 and the disputed cheque marked as Exhibit 1 had been kept as security and was misused by the complainant to harass the respondent company in the year 2004, after 15 years.
This Court finds no reason to interfere with the judgement and order under appeal - Appeal dismissed.
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2022 (9) TMI 108
Post-award interest - To be calculated on principal sum due u/s 31(7)(b) of the Act - Claim of post award interest on the aggregte of the principal and pre-award interest - whether the arbitrator has the discretion to grant post-award interest only on the principal sum due under Section 31(7)(b) of the Act? - HELD THAT:- The issue is whether the phrase ‘unless the award otherwise directs’ in Section 31(7)(b) of the Act only provides the arbitrator the discretion to determine the rate of interest or both the rate of interest and the ‘sum’ it must be paid against. At this juncture, it is crucial to note that both clauses (a) and (b) are qualified. While, clause (a) is qualified by the arbitration agreement, clause (b) is qualified by the arbitration award. However, the placement of the phrases is crucial to their interpretation. The words, “unless otherwise agreed by the parties” occurs at the beginning of clause (a) qualifying the entire provision. However, in clause (b), the words, “unless the award otherwise directs” occurs after the words ‘a sum directed to be paid by an arbitral award shall’ and before the words ‘carry interest at the rate of eighteen per cent”. Thereby, those words only qualify the rate of post-award interest.
When a discretion has been conferred on the arbitrator in regard to the grant of pre-award interest, it would be against the grain of statutory interpretation to presuppose that the legislative intent was to reduce the discretionary power of the arbitrator for the grant of post-award interest under clause (b). Clause (b) only contemplates a situation where the arbitration award is silent on post-award interest, in which event the award-holder is entitled to a post-award interest of eighteen percent.
The purpose of granting post-award interest is to ensure that the award-debtor does not delay the payment of the award. With the proliferation of arbitration, issues involving both high and low financial implications are referred to arbitration. The arbitrator takes note of various factors such as the financial standing of the award-debtor and the circumstances of the parties in dispute before awarding interest. The discretion of the arbitrator can only be restricted by an express provision to that effect. Clause (a) subjects the exercise of discretion by the arbitrator on the grant of pre-award interest to the arbitral award. However, there is no provision in the Act which restricts the exercise of discretion to grant post-award interest by the arbitrator. The arbitrator must exercise the discretion in good faith, must take into account relevant and not irrelevant considerations, and must act reasonably and rationally taking cognizance of the surrounding circumstances.
Thus, according to Section 31(7)(b), if the arbitrator does not grant post-award interest, the award holder is entitled to post-award interest at eighteen percent - the arbitrator must exercise the discretionary power to grant post-award interest reasonably and in good faith, taking into account all relevant circumstances - appeal dismissed.
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