Weekly Bulletin JANUARY 2021 - Prakash Sachin & Co - Prakash Sachin & Co.
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JANUARY 2021
Weekly Bulletin
Prakash Sachin & Co
Chartered Accountants
1| Prakash Sachin & Co. Chartered January 25, 2021
Accountants Delhi & MumbaiSl. Subject Pages No
No.
INCOME TAX ACT
1 Relevant Judgments of the week;
Harvey Heart Hospitals Ltd. Vs. ACIT (Madras High 4
Court)
SCA Hygiene Products AB Vs DCIT (ITAT Mumbai) 5
"Commissioner of Income Tax, Chennai v Tamilnadu 6
Martime Board, Mad HC"
GOODS & SERVICES TAX ACT
1 Relevant Judgments of the week;
Sections 69 and 132 of CGST Act are constitutional
and fall within legislative competence of Parliament
Delhi HC: Dhruv Krishan Maggu v. Union of India 7
Where Competent Authority passed order u/s 74(5)
on assessee without a show cause notice being
issued, assessee was not obliged to pay penalty
under section 74(5): Telangana HC: D. Rama Kotiah 8
& Co. v. State of Andhra Pradesh
No ITC allowed on LNG jetties being civil structure
not plant and machinery: Gujarat AAR: Swan LNG
9
(P.) Ltd.
2|P r ak as h Sa chin & C o. C ha r te red A ccou n ta n ts Del hi & Mum baiCORPORATE LAW
1 Relevant Judgments of the week;
Action Ispat and Power (P.) Ltd. V. Shyam Metalics
11
and Energy Ltd. [2019]
Corporate Law Updates;
Now entities need to file e-form CSR-1 for 15
undertaking CSR activities: MCA
3|P r ak as h Sa chin & C o. C ha r te red A ccou n ta n ts Del hi & Mum baiINCOME TAX ACT
Relevant Judgments of the week;
Harvey Heart Hospitals Ltd. Vs. ACIT (Madras High Court)
FACTS:
In the instant case, with regard to dis-allowance on gains on slump sale and
omission to set off business loss, assessee-company raised a plea that the
sale of business assets though computed under the head income from
capital gains, the sale would partake the character of the business income
and accordingly, would be eligible for set off against business losses brought
forward. Further, AO ought not to have ignored the expenditure incurred and
depreciation and business losses brought forward while arriving at the
business income at ‘nil’.
CIT (A) dismissed the appeal filed by assessee and opined that when once a
capital gain is computed in relation to sale of a capital asset notwithstanding
its being in the nature of a business asset, the same cannot be allowed to be
set off against unabsorbed brought forward business loss within the meaning
of the provisions of Section 72 and also, confirmed the dis-allowance of the
set-off of brought forward unabsorbed depreciation relating to the
assessment year 1997-98 to 2000-01.
Assessee sought the relief in respect of the issue whether the Tribunal was
right in law in holding that the unabsorbed depreciation relating to
Assessment Year 1997-98 to 2000-2001 was not eligible for set off against
any income of assessee for the Assessment Year 2005- 06. It was held by
the Hon’ble Supreme Court, in the case of 2019 (103) Taxmann.com
32(SC) [Commissioner of Income tax v. Bajaj Hindustan Ltd] that
unabsorbed depreciation pertaining to the assessment year 1997-98 to
2001-02 can be carry forward and adjusted after the lapse of eight
assessment years in view of the section 32(2) as amended by the Finance
Act, 2001.
4| Prakash Sachin & Co. Chartered
Accountants Delhi & Mumbai Following the same, it was concluded that unabsorbed depreciation was
eligible for set off against income even after the lapse of eight years.
HELD:
Unabsorbed depreciation pertaining to the assessment year 1997-98 to
2001-02 can be carry forward and adjusted after the lapse of eight
assessment years in view of the section 32(2) as amended by the Finance
Act, 2001.
SCA Hygiene Products AB Vs DCIT (ITAT Mumbai)
FACTS:
Assessee was a company incorporated, and fiscally domiciled, in Sweden. It
had a subsidiary in India by the name of SCA Hygiene Products India Pvt
Ltd (SCA-India). Under a service agreement, assessee was under an
obligation to render services, which included “providing hardware and
software for various ERP systems, CRM Systems and other business
systems” to its India subsidiary at cost. Therefore, assessee provided SAP
software and license to the SCA-India, on a cost to cost basis without any
markup being charged on the same, and received an amount equivalent to
Rs. 1,30,04,613.
AO held that SAP software licence charges were taxable under article
12(3)(a) of India Sweden Double Taxation Avoidance Agreement. It was
held that the receipt of software licence fees by assessee, from its Indian
subsidiary, was reimbursement of software licence fees paid by the
assessee to a third party, and, therefore, it could not constitute income
taxable in the hands of assessee. As this income was not taxable under the
domestic law provisions in India, therefore, Tribunal saw no need to deal
with the other aspects of the matter with respect to non-taxation of this
income under the provisions of the Indo-Swedish tax treaty.
Conclusion:
No income tax applicable on receipt of software license fees from an Indian
subsidiary as it was reimbursement of software licence fees paid by assessee
to a third party, and, therefore, it could not constitute income taxable in the
hands of assessee.
P a g e 5 | 16"Commissioner of Income Tax, Chennai v Tamilnadu Martime
Board , Mad HC"
Issues for Consideration:
Where State Government sanctioned financial assistance for rehabilitation of
tsunami damaged roads and bridges, ports and harbors and Government
order clearly mentioned that assistance was by way of interest free loan,
whether the said interest free loan to be excluded from cost of assets under
section 43(1) of IT Act, 1961?
Facts:
The assessee is a wholly owned State Government Organization formed for
the purpose of administration, management and control of minor ports, prior
to which, the management and control was exercised by the Tamil Nadu Port
Department. The Assessing Officer while passing an assessment order u/s
143(3) held that the amounts provided by the Government of Tamil Nadu to
the assessee was in the nature of grant for execution of various projects and
that it had to be excluded from the cost of the asset as per Explanation 10 to
section 43(1) of the Act. The Assessing Officer, held that the assessee
received only grant and not loan and by applying Explanation 10 to Section
43(1) of the Act, excluded the same from the cost of the asset. During the
assessment proceedings, the assessee produced a Government Order, by
which, the Government decided to treat the assistance rendered to the
assessee as an interest free loan. According to the Assessing Officer, the
said Government Order was an afterthought and therefore, he maintained
his original position and held that the amount received by the assessee was
a grant. Assessee preferred an appeal before CIT(A) which was allowed but
departmental appeal before the Tribunal was dismissed.
Held:
Admittedly, funds were sanctioned by a bank namely the ADB and there was
no record to show that the same was a grant to the assessee. Furthermore,
in the Government Order, it has been clearly stated that it is a loan from the
ADB. Therefore, the financial assistance rendered to the assessee was
treated as a loan at the instance of the bank and subsequently, pursuant to
G.O, the amount expended was treated as an interest free loan to the
assessee. Thus, the CIT(A) and the Tribunal rightly granted relief to the
assessee and the Revenue's appeal is dismissed.
P a g e 6 | 16GOODS & SERVICE TAX ACT
Relevant Judgments of the week;
Sections 69 and 132 of CGST Act are constitutional and fall within
legislative competence of Parliament Delhi HC: Dhruv Krishan Maggu
v. Union of India
FACTS:
Petitioners submitted that Sections 69 and 132 of the CGST Act are
unconstitutional as being provisions of criminal nature, they could not have
been enacted under Article 246A of the Constitution of India, 1950. They
emphasized that the power to arrest and prosecute are not ancillary and/or
incidental to the power to levy and collect goods and services tax. They
further submitted that since power to levy Goods and Services Tax is
provided under Article 246A, power in relation thereto could not be traced to
Article 246 or any of entries in Seventh Schedule. In the alternative, they
submitted that Entry 93 of List 1 confers jurisdiction upon the Parliament to
make criminal laws only with respect to matters in List 1 and not CGST.
Therefore, according to them, Sections 69 and 132 are beyond the
legislative competence of the Parliament.
HELD:
Goods and Services Tax is a unique tax, inasmuch as power as well as filed
of legislation are to be found in a single Article, i.e., Article 246A. Scope of
Article 246A is significantly wide as it not only empowers both Parliament
P a g e 7 | 16and State Legislature to levy and/or enact GST Act, but it also grants power
to make all laws 'with respect to' Goods and Services Tax.
Power of arrest conferred by section 69 is not a general power of arrest, but
is restricted to certain offences which are specified under section 69 namely
some of offences covered under section 132 and offences so specified are all
offences relating to goods and services tax, consequently, expression 'with
respect to' goods and services tax used in Article 246A, being a
constitutional provision, must be given its widest amplitude and would
include power to enact criminal law with regard to goods and services tax.
Even if it is assumed that power to make offence in relation to evasion of
goods and services tax is not to be found under Article 246A, then, same can
be traced in Entry 1 of List III. Term 'Criminal Law' used in aforesaid entry is
significantly wide and includes all criminal laws except exclusions i.e., laws
made with respect to matters in List II.
Where Competent Authority passed order u/s 74(5) on assessee
without a show cause notice being issued, assessee was not obliged
to pay penalty under section 74(5): Telangana HC: D. Rama Kotiah &
Co. v. State of Andhra Pradesh
FACTS:
The proceedings under challenge in this Writ Petition is the order passed by
the department on 20-8-2018, for the tax period March, 2018, directing the
petitioner to pay tax and penal interest without issuing an Show cause notice
under section 61 of the GST Act.
HELD:
Section 74(5) of the APGST Act stipulates that a person, chargeable with
tax, may, before service of notice under sub-section (1), pay the amount of
tax along with interest payable under section 50 and a penalty equivalent to
15% of such tax on the basis of his own ascertainment of such tax or the tax
as ascertained by the proper officer, and inform the proper officer in writing
of such payment.
P a g e 8 | 16Therefore, the power conferred on the assessing authority to recover
penalty, equivalent to the tax specified in the notice, is only after a notice is
issued calling upon the petitioner to show cause why penalty should not be
imposed on him.
No ITC allowed on LNG jetties being civil structure not plant and
machinery: Gujarat AAR: Swan LNG (P.) Ltd.
FACTS:
Applicant has entered into a Concession Agreement dated 18th October,
2017 with the Gujarat Maritime Board ('GMB') to, inter-alia, implement the
development, construction, operation and maintenance of Liquefied Natural
Gas ('LNG') Port with a Floating Storage and Regasification Unit ('FSRU')
facility in Jafrabad, Gujarat under the Build, own, Operate and transfer
('BOOT') basis. As part of developing the LNG Port and FSRU facility, the
applicant would be developing an Import Terminal for FSRU near the village
Bhankodar near Jafrabad, Gujarat for an output of 10 MMTPA. After
development of the said Import Terminal, it would be providing LNG
regasification services to prospective customers.
QUESTIONS:
(1) Whether in terms of Section 17 of the GST Act, the LNG jetties
proposed to be built by the applicant can be said to be covered within
expression 'plant and machinery' as foundation to equipment,
apparatus, machinery to be installed on it?
(2) Whether as per Section 16 read with Section 17 of the said Acts, the
applicant can accordingly avail 'input tax credit' of GST paid in
inputs, input services as well as capital goods procured for the
purpose of building the LNG jetties?
P a g e 9 | 16HELD:
(1) The LNG jetties proposed to be built by the applicant are not covered
within the expression 'plant and machinery' as foundation to
equipment, apparatus, machinery to be installed on it do not appear
to be covered under the definition of 'factory premises'.
(2) The applicant cannot avail 'input tax credit' of GST paid on inputs,
input services as well as capital goods procured for the purpose of
building the LNG jetties in terms of Section 16 read with Section 17
of the GST Act.
P a g e 10 | 16CORPORATE LAW
Background
Where liquidator had taken possession and control of registered office of
company and its factory premises, records and Books but no irreversible
steps towards winding up of company had otherwise taken place, Company
Court had correctly exercised discretion vested in it by 5th proviso to section
434(1)(c) by transferring winding up petition to National Company Law
Tribunal (NCLT).
Action Ispat and Power (P.) Ltd. V. Shyam Metalics and Energy Ltd.
[2019]
ROHINTON FALI NARIMAN, K.M JOSEPH AND KRISHNA MURARI, JJ.
CIVIL APPEAL NOS. 4041 TO 4043 OF 2020
This petition is filed under sections 433(e) and (f), 434 and 439 of the
Company Act, 1956 (hereinafter referred to as 'the Act') seeking winding up
of the respondent company.
Facts of the case: -
1 This application is filed seeking transfer of the present petition being Co.
. Pet. No. 731/2016 to NCLT. This application has been filed by State Bank
of India stating that an application under section 7 of the IBC is pending
before NCLT. It has been pleaded that the respondent company had failed
to pay outstanding dues of about Rs. 722 Crores to the applicant bank and
hence this proceeding have been initiated before NCLT. The applicant
bank is also a lead bank of the consortium of banks which have
outstanding dues of about Rs. 1100 Crores.
2 This court had admitted the present winding up petition on 27-8-2018 and
. appointed the OL as the provisional liquidator of the respondent company.
3 The learned counsel appearing for the OL submits that the OL has already
. sealed the registered office of the respondent company at New Delhi and
factory premises at Orissa. He further submits that the OL has incurred
heavy expenses in protecting the factory premises at Orissa in the given
facts and circumstances.
4 The Ex. Management however objects to transfer of this petition. They
P a g e 11 | 16. have submitted that they have had no opportunity to defend the
proceedings before NCLT.
5 Learned counsel for SBI states that the creditors will reimburse the
. expenses of the OL.
6 This court has already in CP 152/2016 vide decision dated 27-9-2018 in
. Rajni Anand v. Cosmic Structures Ltd. held that the power under
section 434(1)(c) of the Companies Act, 2013 for transfer of a petition to
NCLT is discretionary and has to be exercised in the facts and
circumstances of the case so as to expeditiously deal with the
proceedings/ winding up.
7 In my opinion, it would be in the interest of justice and in the interest of
. the respondent company and the creditors that the matter be transferred
to NCLT in exercise of the discretionary powers of the court under section
434 of the Companies Act, 1956. The order appointing the OL is a recent
order and not much time has elapsed since then. The OL has only taken
steps to seize the office of the respondent company and the factory
premises and further exercise is yet to be carried out. The application is
allowed as above. The present petition is transferred to NCLT.
8 In view of the above order, the present petition is transferred to NCLT. All
. pending applications, if any, stand disposed of. The order admitting the
petition and appointing the OL as the provisional liquidator dated 27-8-
2018 stands revoked.
9. The OL will give details of necessary expenses to SBI. The costs/expenses
will be borne by SBI and also consortium of banks. The OL will hand over
the possession of the assets as directed by NCLT.
A. Shri Sidharth Luthra, learned Senior Advocate appearing on behalf
of the appellant company, referred to three judgments of this Court,
namely, Jaipur Metals & Electricals Employees Organization v. Jaipur
Metals & Electricals Ltd. [2019] 4 SCC 227 ["Jaipur Metals"], Forech India
Ltd. v. Edelweiss Assets Reconstruction Co. Ltd. 2019 SCC OnLine SC 87
["Forech"], and Kaledonia Jute & Fibres(P.) Ltd. v. Axis Nirman &
Industries Ltd. & Ors. 2020 SCC OnLine SC 943 ["Kaledonia"]. According
to him, none of the judgments apply to the facts of the present case
inasmuch as, on the facts in the present case, once a winding up order
P a g e 12 | 16has been passed by the Company Judge, winding up proceedings alone
must continue before the High Court and parallel proceedings under the
Code cannot continue. He argued that Jaipur Metals (supra) makes it
clear that even independent proceedings under the Code can only
continue when the stage is before a winding up order is passed, which
was the case on the facts before the Court. Likewise, in Forech (supra)
also, the stage of the winding up proceeding was post service of notice of
the winding up petition and before a winding up order was passed, as a
result of which the 5th proviso to section 434(1)(c) of the Companies Act,
2013 was applied. Likewise, in Kaledonia (supra), though a winding up
order had been passed on the facts of that case, the aforesaid order had
been kept in abeyance. On facts therefore, these three cases are entirely
distinguishable and would have no application to a scenario in which a
winding up order has been passed and the Official Liquidator has in fact
seized the assets of the company in order to begin the process of
distribution to creditors and others which would ultimately result in
dissolution of the company.
B. Shri K.K. Venugopal, learned Attorney General for India appearing
on behalf of SBI, countered all these submissions. According to him,
this Court has unequivocally laid down that the 5th proviso to section
434(1)(c) of the Companies Act, 2013 now makes it clear that a
discretion is vested in the Company Court to transfer winding up
proceedings to the NCLT without reference to the stage of winding up.
Even post admission, according to the learned Attorney General, if no
irreversible steps have been taken, then a combined reading of the 5th
proviso to section 434(1)(c) and section 238 of the Code would lead to
the result that the winding up proceeding be transferred to the NCLT, as
not only is the Code a special enactment with a non-obstante clause
which would, in cases of conflict, do away with the Companies Act, 2013,
but also that, given the judgment of this Court in Swiss Ribbons (P.) Ltd.
& Anr. v. Union of India & Ors. [2019] 4 SCC 17 ["Swiss Ribbons"],
winding up is a last resort after all efforts to revive a company fail.
According to him, the discretion exercised by the Company Court and the
Division Bench has been judiciously and correctly exercised, warranting
no interference at our hands.
P a g e 13 | 16The Court therefore finally held:
1. The Companies Act, 2013 deals with winding up of companies in a
separate chapter, being Chapter XX. When a petition to wind up a
company is presented before the Tribunal, the Tribunal is given the
power under section 273 to dismiss it; to make any interim order as it
thinks fit; to appoint a provisional liquidator of the company till the
making of a winding up order; to make an order for the winding up of
the company; or to pass any other order as it thinks fit - see section
273(1).
2. The Tribunal is then to consider the aforesaid report and fix a time limit
within which the proceedings shall be completed and the company
dissolved, which time limit may be revised - see section 282(1).
3. Importantly, the company's properties shall, on the order of the
Tribunal, be taken over by the Company Liquidator and be deemed to
be in custodia legis - see section 283(1) and 283(2).
4. Where a company has been dissolved, such dissolution may be set aside
within a period of two years from the date of such dissolution under
section 356 of the Companies Act, 2013.
5. In the facts of the present case, the concurrent finding of the Company
Judge and the Division Bench is that despite the fact that the liquidator
has taken possession and control of the registered office of the appellant
company and its factory premises, records and books, no irreversible
steps towards winding up of the appellant company have otherwise
taken place. This being so, the Company Court has correctly exercised
the discretion vested in it by the 5th proviso to section 434(1)(c).
Resultantly, civil appeal arising out of SLP (Civil) No. 26415 of 2019
stands dismissed.
CONCLUSION: -
The liquidator has taken possession and control of the registered office of
the appellant company and its factory premises, records and books, no
irreversible steps towards winding up of the appellant company have
otherwise taken place. This being so, the Company Court has correctly
exercised the discretion vested in it by the 5th proviso to section 434(1)(c).
P a g e 14 | 16Now entities need to file e-form CSR-1 for undertaking CSR
activities: MCA
The Ministry of Corporate Affairs (MCA) has vide NOTIFICATION NO. GSR
40(E) notified the Companies (Corporate Social Responsibility Policy)
Amendment Rules, 2021 wherein provisions related to CSR expenditure, CSR
reporting, transfer of unspent amount have been discussed in details. In
addition to that, entities need to file e-form CSR-1 for undertaking CSR
activities w.e.f. 01, April, 2020
P a g e 15 | 16Prakash Sachin & Co.
Chartered Accountants
13-D, 13th Floor, Atma Ram House,
1, Tolstoy Marg,
New Delhi. India. 110001
+ 91 11 23355285/22235907/42173536
Branch – Gurugram & Mumbai
www.psc.co.in
skype-prakashsachinca
Prakash Sachin & Co is Chartered Accountants firm having a practice is the subject of Direct
Taxation ( including International Taxation and Transfer pricing Matters ), Indirect Tax (
customs , Excise , Services Tax and VAT matters ) , FEMA , FTP and Company law matters .
The firm is in Business Advisory services and Representation services like Appeal,
Litigation and compounding matters.
This is a series of Tax bulletin released every Monday from the firm. It is only for
knowledge sharing purpose and has no professional advice or consultation. The
information contained herein is of general nature and is not intended to address the
circumstances of any particular individual or entity. Although we endeavor to provide
accurate and timely information, there can be no guarantee that such information is
accurate as of the date it is received or that it will continue to be accurate in the future. No
one should act on such information without appropriate professional advice after a
thorough examination of the particular situation.
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