Quvisor’s weekly refresher on Legal updates in India : Sep 1, 2018


Wastage and scrap of logs used for manufacturing of plywood not classifiable as cuttings & trimmings of plywood
GST/Excise & Customs: Where assessee, a manufacturer of plywood, had cleared wastage and remnant of logs which had undergone an activity of peeling for purpose of manufacturing plywood, said goods would not be classifiable under Heading No. 440840

Processed tea leaves can’t be considered as agricultural produce; not exempted from GST: AAR
GST : Where applicant-company, engaged in providing services in nature of warehousing, loading, unloading, packing, and storage of agricultural produce, is storing manufactured tea of Unilever which finally culminates into packing of Lipton Pure and Simple 100s tea bags, since activity of Unilever of processing of raw tea leaves into tea which results in emergence of a new product having distinct name i.e. Tea is manufacture as defined in clause (72) of section 2 of GST Act but final product considering various processes undertaken by Unilever cannot be considered as Agricultural Produce, Tea being stored in applicant’s godown are not agricultural produce as per definition given in Notification No. 12/2017-Central Tax (Rate) dated 28-6-2017, and Exemption provided in serial no. 54 to Notification No. 12/2017-Central Tax (Rate) is not applicable to activity carried by applicant-company

Seized goods to be released after furnishing Bank Guarantee: Allahabad HC
CGST/Uttar Pradesh GST: Where Competent Authority had seized goods of assessee under transport as well as vehicle on ground that goods were not accompanying E-way bill and also imposed penalty, Competent Authority was directed to release goods and vehicle on furnishing bank guarantee of Rs. 5 lakhs by assessee


Income tax:

No deemed dividend if assessee wasn’t a registered shareholder in lending Co.
IT: Where AO made addition to income of assessee-company under section 2(22)(e) in respect of loan on ground that there was a common shareholder in case of assessee and lender company, since addition if any, could be made in hands of such registered shareholder, same deserved to be deleted in assessee’s case

Providing hostel facility to students falls under purview of ‘education’ under Sec. 2(15): ITAT
IT: Where providing hostel facility to students is an essential component of education institution and also an aid for attaining educational object, said activity would fall under purview of ‘education’ as provided under section 2(15)

Sum paid in settlement for acquiring possession of business premises was to be treated as capital exp.
IT: Amount paid by assessee to its tenant in terms of settlement in order to obtain vacant and peaceful possession of its business premises, was capital expenditure not eligible for deduction under sec. 37(1)

No deduction of finance charges if assessee was engaged in making investments just to earn dividend income: ITAT
IT : Where assessee company made advances to its subsidiary companies out of borrowed funds who further gave said advances to SPVs of assessee who utilized it for carrying on business activity of construction and development of airports, since there was no business activity undertaken by assessee except for making investment and earning dividend, expenditure incurred under head finance charges was not allowable under section 36(1)(iii)

No TDS on commission paid to NR for procuring sales orders from parties outside India
IT/ILT: Where payments were made by Indian company on account of commission for procuring sales orders to non-resident from parties outside India, tax was not required to be deducted at source under section 195


Corporate Laws:

Private co. was to be wound up when number of its members reduced below two: HC
CL: Where private company had not commenced operations since its inception and had made default in delivering statutory report to Registrar and in holding statutory meetings and upon death of one of directors, number of members was reduced below two, company was to be wound up

Under PMLA property purchased from accused could not be attached if entire consideration was paid
PMLA: Where respondents i.e., Vijay Mallaya had been accused for offence u/s 3 and appellant had purchased a property in a project developed by respondents after paying entire consideration and appellant had no family relation with any of respondents, appellant not being involved in offence of money laundering her property could not be attached as same was not involved in money laundering

Consent terms introduced after commencement of winding up process could be termed as fraudulent preference: HC
CL: Where applicant entered into consent terms with company-in-liquidation after commencement of winding up proceedings i.e. recommendation of winding up by BIFR, consent decree obtained on basis of such terms was fraudulent preference within meaning of section 531


Insolvency & Bankruptcy Code:

Insolvency plea was to be admitted as all objections raised by debtor were satisfactorily answered: NCLT
I&B Code: Where application for initiation of corporate insolvency resolution process filed by financial creditor against corporate debtor was complete and there was overwhelming evidence to prove default and all objections raised by corporate debtor were satisfactorily answered, instant application was to be admitted

Shareholder’s approval is required before filing an application to initiate insolvency resolution process
IBC: Articles of Association (AoA) of company provided certain matters as ‘affirmative vote matters’ and since decision to file application to initiate insolvency resolution process squarely covered by affirmative vote matters for which, as per article 9.1 of AoA of company, prior written consent of shareholders to file said application was mandatory, application filed by corporate debtor without prior consent of its shareholders was not maintainable

Insolvency plea was to be rejected due to pre-existence of disputes between parties: NCLT
IBC: Where there was existence of dispute prior to issuance of demand notice under section 8, petition filed by operational creditor under section 9 against corporate debtor for non-payment of dues in respect of paints supplied by it to corporate debtor was not maintainable

Plea to initiate insolvency process was to be admitted when debtor had defaulted in repayment of dues
IBC: Where there was no dispute that corporate debtor had committed default in repayment of outstanding amount and moreover, application of financial creditor to initiate insolvency resolution process was complete and there was no disciplinary proceeding pending against proposed IRP, instant application under section 7 was to be admitted



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