CENVAT Credit allowable on Insurance Services incurred for Employee: CESTAT

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Ahmedabad bench has held that cenvat credit is allowable on the insurance services incurred for the employees in compliance with the relevant statutes.

The appellants, M/s Milestone Preservatives Pvt. Limited claimed CENVAT credit in respect of Input Services namely construction services, fee for architectural structural works for factory plant building, group Medi-claim Insurance, Group personal accident insurance, insurance, motor car/vehicle insurance, labour charges for installation, testing & commissioning of components of VRV System (Centrally AC system) in the office building etc.

However, the department rejected the claim observing that such services are not eligible for canvat credit.

Mr. Ramesh Nair, Judicial Member has observed that these are the services as mandated as per the factory Act for the safety of employees.

“Therefore, this cannot be said that the services were used for personal use. Every industry under statutory norms required to take group Medi-claim Insurance, Group personal accident insurance, insurance, motor car/vehicle insurance etc. from the insurance companies for which the payment of premium is paid by the assessee and the same is accounted in their books of accounts as expenditure. Therefore, all these services are in or in relation to manufacture of final products and under the business activities of the assessee.”

Relying on a catena of decisions, the Tribunal observed that Cenvat credit is allowed on Insurance Services.

“As per my above observation and findings, I am of the view that appellant is entitled for the Cenvat credit on such services. However, the appellant have admittedly paid an amount of Rs. 2,29,752/- which stands upheld.”

Repayment of Loan taken for Construction of Building by Assessee Society considered as Income

The Income Tax Appellate Tribunal (ITAT), Chandigarh bench consisting of N.K. Saini, Vice President, and Sudhanshu Srivastava, Judicial Member held that repayment of loan taken for construction of the building by assessee Trust considered as income if for charitable purposes.

The assessee society, M/s. Ram Asra Goyal Education & Research Society was registered under the Societies Registration Act and also registered u/s. 12AA of the Income-tax Act, 1961. The assessee filed its return of income on 03-09-2014 declaring Nil income. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the Assessing Officer (AO) issued the notice to the assessee to show cause as to why the donation was paid to M/s. Ashoka Educational Trust may not be disallowed. The AO after considering the above submissions of the assessee observed that the assessee failed to justify the payments made to M/s. Ashoka Educational Trust, which is registered u/s. 12AA of the Income Tax Act for the Assessment Year (AY) 2015-16. The AO observed that during the inquiry u/s. 133(6) of the Act, it was found that in its reply M/s. Ashoka Educational Trust stated that no amount had been received by it. The AO also observed that for the AY 2014-15 there was no activity seen related to the charity or education by M/s. Ashoka Educational Trust for the A.Y 2014-15 and the investments were made in the fixed assets and therefore, disallowed a sum of Rs. 9,50,000/-.

The Tribunal relied on the judgment in CIT vs. Maharana Mewar Charitable Foundation and held that the anomaly which has arisen that if the Trust takes a loan for the purposes of incurring expenditure for charitable and religious purposes in a particular year and the said loan is repaid out of the income of the subsequent year, the said repayment would be entitled to the exemption from tax u/s. 11(1).

IBC: Recovery Certificate Holder can initiate CIRP as Financial Creditor, rules Supreme CourtRead

A three-judge Bench of the Supreme Court comprising Justices L. Nageswara Rao, B.R. Gavai and A.S. Bopanna, on Monday, held that a liability in respect of a claim arising out of a Recovery Certificate under the Recovery of Debts and Bankruptcy Act, 1993 would be a “financial debt” within the meaning of Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC) and a holder of such Recovery Certificate would be a “financial creditor” under Section 5(7) of the IBC.

The Apex Court held that a person would be entitled to initiate Corporate Insolvency Resolution Process (CIRP) within a period of three years from the date on which such Recovery Certificate is issued.

The bench relied on a two-Judge Bench of the Apex Court in Dena Bank v. C. Shivakumar Reddy and allowed the appeal filed by Kotak Mahindra Bank Ltd. assailing the order of the National Company Law Appellate Tribunal (NCLAT), which had set aside the order of National Company Law Tribunal, Chennai (NCLT), admitting the application filed under Section 7 of the IBC and initiated CIRP, as time-barred. It held that the application was filed within a period of three years from the date on which the Recovery Certificate was issued and was thus within limitation.

Considering the object and purpose of the statute, the Court was of the view that Section 5(8) would include a debt which has crystallised in the form of a decree. “Therefore, the liability in respect of a claim arising out of a Recovery Certificate would be a “financial debt” within the ambit of its definition under clause (8) of Section 5 of the IBC, and the holder of such certificate would be a financial creditor under Section 5(7) of the IBC. The Court noted that a judgment is said to be per incuriam when any provision of a statute, rule or regulation is not brought to the notice of the court or it is inconsistent with previous judgments passed by co-ordinate or larger bench.”