AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 771
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....onstruction (hereinafter referred to as the 'Board') which was admitted and registered as Case No.17/1997. The Board conducted enquiry into the working of Company to determine whether it had become a sick industrial company and in the process appointed the Managing Director, State Bank of India (MA) (RCB), Mumbai as the Operating Agency (OA) to enquire into and make a report with respect to certain matters which was specified in the orders passed by the Board in this behalf. The Board, on the completion of the enquiry, satisfied itself that Company had become a sick industrial company. A Draft Rehabilitation Scheme (DRS) was prepared by the OA which was submitted to the Board and the Board circulated the said Scheme vide its order dated 14.01.2000. In this DRS, following income tax reliefs were proposed: (a) To exempt from the applicability of the provisions of Section 41(1) of the Income Tax Act, 1961 and to allow carry forward of unabsorbed losses and allowances beyond eight years. (b) To lift attachment order imposed by Income Tax Department against immovable and movable properties including Debtors and Bank Accounts. Thereafter, not to attach any property includin....
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....e and movable properties of GTC including debtors and bank accounts and thereafter not to attach any property including movable properties of the company during the rehabilitation period without prior consent of BIFR. The recovery proceedings against demands raised by Income Tax Department against disputed liabilities shall remain suspended and refunds due to company, if any, would not be adjusted against such demands." 4) The said relief was not envisaged under the head reliefs and concessions asked from CBDT in Para 9(Q) and such direction was given under the head General Terms and Conditions, without consent of the appellants required under Section 19(2) of SICA. Further, in Para 6(t) of the Sanctioned Rehabilitation Scheme (SS-02), the Board referred to the assumptions of the projected profitability Statement at Annexure II of the SS-02. The assumptions of profitability, to be considered part of the Sanctioned Scheme, included inter alia the following: (i) The sales would comprise of own manufacture of cigarettes and cigarettes purchased from convertors. (ii) That the in-house capacity utilization would be in the range of 54% to 75%. Further, as per the projected pr....
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....at the company would settle/pay the income tax dues, if any, which would become payable after sanction/implementation of SS-02 i.e. w.e.f. 01.04.2003 onwards in the normal course and neither the Company nor its promoters would be entitled for any protection under SICA for delay/non-payment of such dues. 8) When the position stood thus, on 29.06.2007 the Company submitted before the Board that its net-worth became positive on 31.03.2007 and sought de-registration from SICA/Board. The Board, passed order dated 29.06.2007 holding that since net-worth of the company had turned positive as on 31.03.2007, it has seized to be a sick industrial undertaking within the meaning of Section 3(1)(O) of SICA and discharged the company from the purview of SICA. Operative part of the direction in the said order read as under: "(i) The SBI is hereby relieved from the responsibility as the MA. (ii) The unimplemented provision(s) of the SS-02 for the unexpired period of the Scheme and also the unimplemented provisions of the subsequent order(s) issued by the Board in this regard, if any, would continue to be implemented by the concerned agencies and their implementation would be monitored by ....
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....ed M.A. bearing No. 200/2010 before the Board seeking stay of any coercive action proposed to be taken by the Revenue. This application was contested by the Revenue, inter alia, on the ground that since the company had been discharged from SICA vide order dated 29.06.2007, the Board had no jurisdiction left over implementation of the Scheme and the company could no longer enjoy protection under Section 22(1) of SICA. On this application, order dated 09.04.2010 was passed by the Board directing the Revenue not to take any coercive action against the company. It was also directed that the unimplemented provisions of SS-02, particularly, paragraph 10-k thereof, should be implemented by DIT(R). 12) This order of the Board was challenged by the Revenue by filing appeal before the Appellate Authority for Industrial and Financial Reconstruction (hereinafter referred to as the 'AAIFR'). In this appeal, interim order dated 03.06.2010 was passed directing both the parties to maintain status quo. According to the Revenue, despite the aforesaid order, the Company invited online forward auction for the land situated in Marol Industrial Area which forced the Revenue to file MA No.448/....
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.... order of the Board was by majority of 2:1. Whereas two members were of the opinion that the order of the Board did not require any interference and gave their detailed reasoning in support of the said view, the Chairman of the Board, who was retiring on the same day, observed that he had no time to write a detailed order but expressed his view that this case should be remanded back to the Board for an enquiry to be conducted regarding the violation of clause 10(f)(b) of the Sanctioned Scheme by the Company entering into an agreement for transfer/development of their property at Ville Parle. According to the Chairman, as per para 9(5)(b) of the sanctioned Scheme, there was a provision for sale or development of any other surplus asset and the plea of the Company regarding extension of time needed a detailed enquiry by the Board. Notwithstanding these observations of the Chairman, who was the dissenting member, majority view was that the appeal was bereft of any merit and the order of the Board did not suffer from any legal error and on this basis majority had dismissed the appeal. Obviously the effect was that the appeal of the Company stood dismissed. 16) Knowing the aforesaid ....
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....in the following discussion by the High Court. "The violation alleged by the petitioners is broadly that respondent no. 1 has been indulging in sale of assets without defraying the income tax liabilities in consonance with paragraph 9S(b) of the sanctioned scheme. It is the learned counsel's say that the Department had not taken, in past, coercive action for recovery of huge amounts of income tax dues in accordance with the provisions of paragraph 10(k) of the sanctioned scheme. It is submitted that this course of action of sale of assets to satisfy the scaled down claim of the petitioners in terms of the scheme is not permissible. It is the say of the Department that since it is a scheme of revival, respondent no. 1 ought not be allowed to sell the assets without paying the dues to the Department. In our considered view, the impugned orders cannot be faulted, which are, predicated on the factual position at that stage of time. If the grievance is, as is now sought to be urged before us; the appropriate remedy for the petitioner is to move the BIFR for lifting of the bar under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 by articulating befor....
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....en those steps were taken, jurisdiction of the Board over the Company continued under Section 18(9) and Section 18(12) of SICA. In the opinion of the Appellate Authority, since the Company had availed itself of and was continuously availing the beneficial measures of SS-02, which included rehabilitation measures for the Mumbai unit, it was obligatory on the part of the Company to seek and obtain the prior permission of the Board to close the Mumbai unit, shift its plant and machinery to the Vadodara and engage in reality business. Thus, while rejecting the argument of the Company that there was no violation of the Scheme in dismantling the Ville Parle Unit and selling its land and building, the Appellate Authority took the view that it had altered the essential ingredients of the SS-02 as a result of which that Scheme stood mutilated and, therefore, seeking extension of such Scheme was untenable. While discussing this aspect, the Appellate Authority, repelling the argument, also remarked as under: "12. The only option available to the company was to seek modification of the scheme under Section 18(5) of SICA which had to be considered through appropriate procedure prescribed und....
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.... of income tax dues as made by the Revenue was not correct. On this aspect both the sides made their detailed submissions. 27) By affidavit dated 02.05.2016 filed by Ms. Anita Sinha, Additional Director General (Recovery) C.B.D.T., following dues are claimed: "a. Principal amount of tax Rs.81.66 crores b. Principal amount of Penalties Rs.83.29 crores c. Interest u/s. 220(2) till Rs.487.50 crores 30.04.2016 Total Rs.652.45 crores" 28) This is the revised figure given on 02.05.2016. As pointed out above, in the special leave petition filed by the Revenue, a demand for sum of Rs. 761.35 crores was made. 29) On the other hand, it is the say of the Company that the demands were reduced at an amount of Rs. 52.53 crores by April, 2012 itself. It was submitted that in the reply filed by the Revenue to I.A. 6 of 2014 filed by the Company, the latest position of tax demand and status of appeals was mentioned. The Revenue had stated the outstanding of Rs. 635.96 crores (principal amount of tax and penalty Rs. 164.96 crores + interest upto June, 2015 @ 471.01 crores). Referring to the details in the ....