Case Details: Surendra Kumar Patwa vs. Dharmendra Vohra - [2024] 168 taxmann.com 445 (Madhya Pradesh)

Judiciary and Counsel Details

• Sanjay Dwivedi, J.
• Abhinav Malhotra, Adv. for the Petitioner.
• Rohit Mangal & Anuj Agrawal, Advs. for the Respondent.

Facts of the Case

In the instant case, one of creditors of petitioner filed an application for initiating insolvency resolution process under Section 95 of IBC. NCLT, in terms of Section 96 of IBC, declared interim-moratorium with respect to all debts of petitioner and all proceedings pending against him.

Meanwhile, respondent had preferred a criminal complaint under Section 138 of N.I. Act against petitioner. The petitioner filed an application seeking stay on proceedings pending before Trial Court on basis of interim-moratorium declared. Said application was rejected by Trial Court.

Later, Revisional Court dismissed revision holding that IBC did not contain any provision regarding stay on proceedings of Section 138 of N.I. Act. It was observed that provisions of IBC had overriding effect as had already been observed by Supreme Court because of a special enactment.

Further, it was also observed in case of P. Mohanraj Vs. Shah Brothers Ispat Private Limited (2021) 6 SCC 258, that moratorium declared under Section 96 of IBC had also application over proceedings of Section 138 of N.I. Act.

That ratio of P. Mohanraj (supra) had not been disturbed even in case of Ajay Kumar Radheyshyam Goenka Vs. Tourism Finance Corporation of India Limited 2023 SCC OnLine SC 266, but on contrary, Supreme Court had followed ratio of P. Mohanraj (supra) and therefore, no question regarding ignoring legal position as had been settled by Supreme Court in case of P. Mohanraj (supra) arises.

High Court Held

Therefore, High Court observed that the interim-moratorium would apply to proceedings initiated against petitioner in respect of any of transactions in which he was involved and proceedings were initiated for recovery of debts from such debtor.

Thus, order passed by revisional Court was not sustainable in eyes of law and accordingly, the High Court held that the instant application by petitioner was to be allowed directing that proceedings initiated against petitioner under Section 138 of N.I. Act, would remain stayed till moratorium declared by NCLT in a pending proceeding of Section 96 of IBC, was in operation.

List of Cases Reviewed

• P. Mohanraj v. Shah Brothers Ispat Private Limited (2021) 6 SCC 258 (Para 21) followed

List of Cases Referred to

• P. Mohanraj & Others v. Shah Brothers Ispat Private Limited (2021) 6 SCC 258 (para 7)
• Kaushalya Devi Massand v. Roopkishore Khore (2011) 4 SCC 593 (para 13)
• Atul Singh v. Indian Oil Corporation Writ Petition No.5339 of 2021 (para 13).

The post Interim Moratorium Barred Continuation of Proceedings u/s 138 of NI Act Against Petitioner Due to IBC’s Overriding Effect | HC appeared first on Taxmann Blog.

Case Details: Celir LLP vs. Sumati Prasad Bafna - [2024] 169 taxmann.com 381 (SC)

Judiciary and Counsel Details

• J.B. Pardiwala & Manoj Misra, JJ.

Facts of the Case

In the instant case, original borrower availed credit facility from bank against which, a simple mortgage was created over a land and buildings (secured asset) belonging to borrower vide a mortgage deed.

Borrower defaulted in repayment of said loan amount and accordingly, bank issued a demand notice under section 13(2) of SARFAESI Act, 2002, for repayment of principal amount along with interest, cost, charges, etc.

Later, Bank issued a possession notice under section 13(4) and took symbolic possession of secured asset – Bank decided to put secured asset to auction – Pursuant to 9th notice of sale, auction proceedings were conducted.

In said 9th auction conducted by bank, petitioner submitted its bid and was declared as highest bidder. Bank sent a sale confirmation letter to petitioner, declaring him as highest bidder in auction of secured asset.

Consequently, Sale certificate was issued to petitioner. Later, borrower filed a writ petition before High Court seeking directions to bank to permit them to redeem mortgage of secured asset – High Court by impugned order permitted borrower to redeem mortgage.

Supreme Court Held

The Supreme Court observed that right of borrower to redeem secured asset would be available only till date of publication of notice under Rule 9(1) of SARFAESI Rules and not till completion of the sale or transfer of secured asset in favour of auction purchaser.

Since no challenge had been laid to 9th auction proceedings on ground of it being either fraudulent or vitiated by inadequate pricing or underbidding, the Supreme Court held that the auction could not be said to suffer from any fundamental procedural error, and as such did not warrant the interference of instant Court.

Thus, sale of secured asset to petitioner was confirmed and title conferred through sale certificate was declared to be absolute. Also, borrower would also unconditionally withdraw securitisation application pending before DRT.

Further, the subsequent Transferee would hand over peaceful physical possession of Secured Asset along with its original title deeds to Bank. Also, bank would refund amount paid by borrower towards redemption of mortgage without any interest.

List of Cases Referred to

The post Borrower’s Right to Redeem Secured Asset Ends on Publication of Notice u/s 9(1) of SI Rules, Not After Sale Completion | SC appeared first on Taxmann Blog.

Case Details: ACIT vs. Vireet Investments (P.) Ltd. - [2024] 169 taxmann.com 379 (Delhi-Trib.)

Judiciary and Counsel Details

• S. Rifaur Rahman, Accountant Member & Sudhir Kumar, Judicial Member
• Manish Jain, CA for the Appellant.
• Ms Sapna Bhatia, CIT DR for the Respondent.

Facts of the Case

The assessee-company was engaged in business of dealing in shares, stocks, debentures, etc. in the line of securities transactions. It claimed expenditure of general administration and Portfolio Management Services (PMS) towards maintenance of securities against income declared under capital gains. The Assessing Officer (AO) rejected the same contending that there was no provisions in section 48 to claim such expenses.

On appeal, the CIT(A) allowed the assessee’s claim. Aggrieved by the order, an appeal was filed to the Delhi Tribunal.

ITAT Held

The Tribunal held that it was observed that the assessee was dealing in the business of shares and securities. The assessee incurred certain expenses on PMS to monitor such securities. Thus, this expenditure was directly related to the securities transaction. The nature of the transaction demands such expenditures.

Relying on the decision of Pune Tribunal in Deputy Commissioner of Income-tax vs Serum Institute of India Ltd.* [2016] 72 taxmann.com 361 (Pune – Trib.) and Mumbai Tribunal in Nadir A. Modi vs JCIT, Tax 11(3), Mumbai [2017] 88 taxmann.com 868 (Mumbai – Trlb.), wherein it was held that the ‘PMS’ fees paid by the assessee is an allowable deduction from the capital gains, the Tribunal allowed the claim of the assessee.

With respect to general administrative expenses, it was observed that the assessee has incurred these expenditures on salaries, administration, depreciation etc,. and claimed these expenses in its profit and loss account. In the income tax computation, the assessee computed the income under the head income from business as well as capital gain. The income tax provisions allow the assessees to compute the income under different heads of income and the assessee was allowed to claim the expenses based on the relevant heads of income.

In the instant case, the assessee can claim the general expenses of running the business only under the head business income. Even if there is no income declared under the head business income, the assessee is allowed to claim these expenses as business expenditure, if there is no business income and the assessee is allowed to carry forward the same in case the assessee does not have income under other heads of income other than loss under the head capital gains.

Since the assessee has declared profit under the head capital gains, the assessee is allowed to adjust the same under section 71. Hence, the general administrative expense cannot be claimed under the head capital gains under section 48.

The post Expenses Incurred on Portfolio Management Services Directly Related to Securities Transaction Allowed While Computing Capital Gains | ITAT appeared first on Taxmann Blog.

This document addresses the accounting treatment of residual value and depreciation for pipelines in accordance with Ind AS 16 and Schedule II of the Companies Act, 2013. The company in the case study has adopted a uniform residual value of 5% for all its pipelines, despite varying operational conditions and disposal scenarios that affect the recoverable amounts of these assets.

The case study highlights concerns raised during an audit regarding the appropriateness of this standardized approach, which could result in an overstatement of Property, Plant, and Equipment (PPE) and profits, as well as understated depreciation. The study delves into the compliance of the company’s policy with relevant accounting standards and regulations, while also exploring the implications of a more tailored approach to determining residual values based on specific asset conditions. It also provides guidance on the periodic review of residual values and how the company can better align its accounting practices with regulatory requirements.

Click Here To Read The Full Story

The post Evaluating the Impact of a Uniform Residual Value Approach for Pipelines on Ind AS 16 Requirements appeared first on Taxmann Blog.

Editorial Team – [2024] 169 taxmann.com 435 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week.

1. Russia enacted the law on the taxation of cryptocurrency;
2. Dutch Government announces delay in Box 3 tax system reform;
3. Hong Kong commits to implementing the OECD’s Crypto-Asset reporting framework for enhanced tax transparency; and
4. Malayasia publishes guidelines and FAQs for implementing Global Minimum Tax

Click Here To Read The Full Article

The post [World Tax News] Russia Enacted the Law on the Taxation of Cryptocurrency and More appeared first on Taxmann Blog.

R. Muthukumaran – [2024] 169 taxmann.com 393 (Article)

1. Introduction

Section 76 of the Central Goods and Services Tax (CGST) Act, 2017, is a crucial provision that ensures the tax collected from customers is remitted to the Government, regardless of whether the supplies were taxable or exempt. This section also addresses the scenario where the tax is collected but not paid, highlighting the potential liabilities for taxpayers. While taxpayers might assume that they are safe once the time limits under Section 73 or Section 74 are barred, Section 76 remains a tool for the Government to recover the tax collected but not remitted.

Key Provisions of Section 76

1. Tax Collected but Not Remitted:

• Section 76 applies when a person collects tax from any other person but fails to remit it to the Government. This obligation remains even if the supplies in respect of which the tax was collected are exempt or non-taxable.
• The failure to pay the collected tax to the Government renders the taxpayer liable for penalties and interest, as outlined under the provisions of this section.

2. Scope of Section 76:

• Non-Taxable or Exempt Supplies: Taxpayers who collect tax on non-taxable or exempt goods or services are still required to remit the collected tax to the Government.
• No Time Limit for Recovery: Unlike Sections 73 and 74, which have specific time limits for issuing notices and initiating proceedings, Section 76 does not have a time limit for initiating recovery actions. This means that even after the time limits for assessments under Sections 73 or 74 are barred, the Government can still recover the tax amount through Section 76.

3. Interest on Collected but Unpaid Tax:

• Interest is calculated from the date the tax was collected until it is paid to the Government. The interest rate is prescribed under Section 50 of the CGST Act, which is typically 18% per annum.

4. Penalty for Non-Remittance:

• A penalty of 100% of the tax amount or Rs. 10,000, whichever is higher, is imposed on the taxpayer for failing to remit the collected tax to the Government.

5. Time Limit for Issuing an Order:

• The proper officer must issue an order within one year from the date of the notice. However, if the issuance of the order is stayed by a court or appellate tribunal, the stay period is excluded from the time limit.

Click Here To Read The Full Article

The post [Opinion] Section 76 | Tax Collected but Not Paid to the Government – Key Provisions and Practical Insights appeared first on Taxmann Blog.

Case Details: Bum Bum Corporation v. State of Madhya Pradesh - [2024] 169 taxmann.com 360 (Madhya Pradesh)

Judiciary and Counsel Details

• Sanjeev Sachdeva & Vinay Saraf, JJ.
• Mukesh Agrawal & Ayush Gupta, Advs. for the Petitioner.
• R.D. Padraha, Govt. Adv. for the Respondent.

Facts of the Case

The petitioner was aggrieved by the action of the GST department whereby coercive measures had been taken for recovery of alleged outstanding demand for the period of 2018-19. It filed writ petition before the Madhya Pradesh High Court and contended that the demand was already challenged before the Appellate Authority and the said demand was set aside. However, a tax demand was created against petitioner and it was willing to deposit statutory pre-deposit amount.

High Court Held

The Honorable High Court noted that the petitioner intended to impugn the said order before the Appellate Tribunal but the Tribunal was not functioning. It was also submitted that by coercive measures, the Electronic Credit Ledger (ECL) had been blocked and bank account of the petitioner had been put on hold. The Court also noted that the Board has issued guidelines for recovery of outstanding dues in cases where first appeal has been disposed of till the Appellate Tribunal comes into operations.

Therefore, the Court directed that the ECL of the petitioner shall be unblocked to enable it to make pre-deposit of the said amount as the petitioner had ample credit in the ECL to cover the 20% pre-deposit requirement. On petitioner making pre-deposit of said amount and complying with other requirements of Circular dated 11.07.2024, no further coercive action shall be taken against petitioner.

The post Unblocking of Credit Ledger Directed as Assessee Was Unable to Make Pre-Deposit to File Appeal Due to Blocked Credit Ledger | HC appeared first on Taxmann Blog.

Notification No. 128/2024, dated 19-12-2024

Section 197A prescribes that no deduction of tax shall be made, or deduction of tax shall be made at such lower rate, from such payment to such person or class of persons, including institution, association or body or class of institutions, associations or bodies, as may be notified by the Central Government in the Official Gazette, in this behalf.

In this regard, the Central Board of Direct Taxes (CBDT) has notified that no TDS shall be deducted under Chapter XVII on any payment received by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). The notification has been issued in exercise of the powers conferred by section 197A(1F).

Click Here To Read The Full Notification

The post No TDS on Payments to Credit Guarantee Fund Trust for MSEs Referred in Section 10(46B) | CBDT appeared first on Taxmann Blog.

Case Details: Mahindra and Mahindra Ltd. vs. Assistant Commissioner of Income-tax - [2024] 169 taxmann.com 333 (Bombay)

Judiciary and Counsel Details

• G.S. Kulkarni & Advait M. Sethna, JJ.
• Devendra Jain & Shashank Mehta, Advs. for the Petitioner.
• N.C. Mohanty, Adv. for the Respondent.

Facts of the Case

The assessee was issued a show cause notice under section 148A(b). The assessee filed an appeal and a review application before the Principal Chief Commissioner under section 264, and both the proceedings were pending. The assessee contended that the impugned order and the impugned notice would stand covered by the decision of this Court in Hexaware Technologies Limited v. Assistant Commissioner of Income Tax (2024) 464 ITR 430 as also the decision of the division Bench in Siemens Financial Services Pvt. Ltd. v. Deputy Commissioner of Income Tax [2024] 160 taxmann.com 243 (Bombay) in regard to the applicability of section 151 of the provisions of the Act as the sanction had not been granted by the appropriate authority as specified under the said provisions.

Considering the decision of this Court being of the jurisdictional High Courts, the assessee filed a writ petition before the Bombay High Court.

High Court Held

The High Court held that once the assessee availed of an alternate remedy as provided under the Income Tax Act, and if the assessment order as also the notices are contrary to the substantive provisions of section 151A and section 151, as interpreted by Court in Hexaware Technologies Limited and Siemens Financial Services Pvt. Ltd., the Appellate Authority as also the Revisionary Authority being bound by the said decisions of the jurisdictional High Court, need to consider such legal position.

Thus, the assessee was not precluded from raising all such contentions, as raised in the present proceedings, before the said authority.

Accordingly, it was opined that the proceedings which were pending before the CIT(A) as also the Revisionary proceedings, be decided considering the contentions of the petitioner, namely as to whether the impugned assessment order as also the notice under section 148 was illegal when tested on the law as declared by this Court in the decisions mentioned above.

An approach shouldn’t be followed when the appellate authority is already involved in proceedings. Writ petitions should be entertained only to adjudicate matters that can be decided by the appellate authority, considering the Court’s decisions. As rightly pointed out, entertaining writ petitions in such circumstances would require the Court to entertain all pending matters involving the applicability of its decisions, which is impractical.

Hence, it would be appropriate that the assessee pursues the pending proceedings as filed before the appropriate Appellate Authority. Accordingly, the present proceedings that assail the assessment order are not entertained when an appeal is already filed by the assessee, which is pending. Hence, the petition was disposed of.

List of Cases Reviewed

• Hexaware Technologies Limited v. Assistant Commissioner of Income Tax [2024] 464 ITR 430
• Siemens Financial Services Pvt. Ltd. v. Deputy Commissioner of Income Tax [2024] 160 taxmann.com 243 (Bombay) [Para 11] – followed.

List of Cases Referred to

• Hexaware Technologies Ltd. v. Asstt. CIT [2024] 162 taxmann.com 225/464 ITR 430 (Bombay) (para 3)
• Pr. CIT v. Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375/265 Taxman 515/416 ITR 613 (SC) (para 5).

The post Assessee to Pursue Pending Proceedings Before Appellate Authority Instead of Filing Writ Petition | HC appeared first on Taxmann Blog.

Case Details: Vish Wind Infrastrukture LLP v. Shailen Shah, Resolution Professional of Wind World (India) Ltd. - [2024] 169 taxmann.com 347 (SC)

Judiciary and Counsel Details

• Abhay S. OKA & Augustine George Masih, JJ.
• A.M. Singhvi, Sr. Adv., Alok Dhir, Ms Maneesha Dhir, Sachin Gupta, Ms Varsha Banerjee, Kanishk Khetan & Ms Mahima Ahuja, Advs., Karan Batura, AOR, for the Appellant.

Facts of the Case

In the instant case, the appellant-operational creditor had entered into an agreement with the corporate debtor for the supply of Wind Turbine Generators (WTGs). The corporate debtor supplied WTGs for which payments were made by the appellant.

Meanwhile, the CIRP was initiated against the corporate debtor and, the appellant had filed its claim of Rs. 132 crores, claiming it to be an advance payment made to the corporate debtor for the supply of WTGs. The claim of the appellant was admitted in the CIRP.

Later, the appellant made a request to RP to supply WTGs in terms of the agreement. The RP rejected the said request on the ground that the appellant owed an amount along with an interest to the corporate debtor and, the appellant’s claim had already been admitted in the CIRP.

The appellant had filed an application before the NCLT seeking a direction for RP to adhere to the terms of agreement and supply immediately WTGs. However, the NCLT vide order rejected the said application. The appellant then challenged the said order before the NCLAT.

NCLAT Held

The NCLAT vide the impugned order rejected the said application on the ground that the corporate debtor had not received dues from the appellant for which arbitration proceedings were pending. Thus, the decision taken by RP not to handover WTGs was as per the wisdom of RP, who was to run the corporate debtor as a going concern.

The NCLAT further held that RP’s decision to refuse the handover of 26 WTGs lying with the corporate debtor was a decision that RP was entitled to take as per the scheme of the Code, which decision could not be said to be contrary to any provisions of the Code or in breach of any right of the appellant.

The Supreme Court held that the appeal filed by the appellant against the order of the NCLAT was to be dismissed.

List of Cases Reviewed

• Vish Wind Infrastructure LLP v. Shailen Shah [2024] 169 taxmann.com 131 (NCLAT -New Delhi) (para 3) affirmed

The post RP Justified in Refusing to Hand Over Wind Turbine Generators as Appellant-OC Failed to Make Payment of Dues Lying with CD | SC appeared first on Taxmann Blog.