Prakash Sachin & Co

Prakash Sachin & Co

Delhi Mumbai Jharkhand Kolkata

2 | P r a k a s h S a c h i n & C o

Weekly Newsletter

Volume IV

Prakash Sachin & Co We, Prakash Sachin & Co. is a reputed firm of Chartered Accountants with a perfect blend of

experienced & young mind, active and talented team with a robust network of Associates. The

Firm was founded on September 2004 by Mr. Prakash Sinha FCA, and Mr. Sachin Sinha, FCA.

Today, the firm has a pan India presence and its head office is located at 13D, Atma Ram Building,

1 Tolstoy Marg , Connaught Place New Delhi, India 110001. As on today, the firm has a team size

consisting of five partners and more than 35 professionals working with it and the numbers are

increasing day by day. The firm has its offices in Mumbai, Kolkata, & Jharkhand. The firm has

also marked its presence overseas through its associates in different countries across USA Europe,

Asia and Latin America.

We are a full service professional Chartered Accountants Firm offering services in:

1. Risk & Assurance,

2. Fiscal and Tax Advisory, compliance and litigation Support,

3. Corporate Laws, fiscal statute and regulatory support through advisory, Compliance &

litigation,

4. Business development Support through guidance on various regulatory matters.

5. Business Processes Support by way of process audit, SOP and system compliance.

The motto of the firm is to provide the complete and integrated deliverables. The firm believes in

performance and visible output in terms of delivery. The mantra of the firm is “Delivering

Solutions - Professionally”


Weekly Newsletter

Volume IV

S.

N.

Subject Page No

1 Compliance Calendar 6

INCOME TAX ACT

2 Relevant Judgments and updates of the week;

Forms 15CA/15CB can be filed manually till 15.08.2021 : CBDT

(Press Release dated 20.07.2021)

Section 133A of the Income-Tax Act, 1961 - Survey - Power of

Income Tax Department conducts surveys in Bengaluru (Press

Release dated 13.07.2021)

No disallowance u/s 40A(3) if ultimate payments made to labours

were below threshold limit: ITAT

Sec. 11 exemption to be denied only be to extent of income which

was violative of section 13(1)(d)

9

10

10

12

INDEX


Weekly Newsletter

Volume IV

GST AND OTHET INDIRECT TAX LAWS

3 Relevant Judgments and updates of the week;

IGST payable on reimportation of goods after repair

Clarification on applicability of IGST on repair cost, insurance

and freight, on goods re-imported after being exported for repair

CBIC issued clarification on extension of limitation under GST in

terms of Hon’ble Supreme Court’s Order dated 27.04.2021

Assessment Order passed before 10 months of providing

opportunity of heard is without application of mind, to be set aside

GST registration required for Charitable Trust running medical

store to give medicines without profit

14

14

15

15

16

CORPORATE AND OTHER LAWS

4 Relevant Judgments and Updates of the week;

The MCA notified the commencement date for Section 4 of the

Companies (Amendment) Act, 2020 (July 22, 2021)

The Companies (Incorporation) Fifth Amendment Rules, 2021

(July 22, 2021)

18

18


Weekly Newsletter

Volume IV

Relaxation in timelines for compliance with regulatory

requirements by Debenture Trustees due to Covid-19 (July 20,

2021)

Insolvency and Bankruptcy Board of India amends the Insolvency

and Bankruptcy Board of India (Insolvency Resolution Process for

Corporate Persons) Regulations, 2016 (July 21, 2021)

IBBI has specified the format of CIRP 8 under IBBI (Insolvency

Resolution Process for Corporate Persons) Regulations,

2016, which needs to be filed in respect of every CIRP ongoing or

commencing on or after July 14, 2021.

Insolvency and Bankruptcy Board of India (Insolvency

Professionals) (Second Amendment) Regulations, 2021(July 22,

2021)

The purpose of the ineligibility under Section 29A is to achieve a

sustainable revival and to ensure that a person who is the cause of

the problem either by a design or a default cannot be a part of the

process of solution.

19

19

21

21

22

https://ibbi.gov.in/uploads/legalframwork/f6c188806f3e1357ec641821cfc62d7e.pdf







Weekly Newsletter

Volume IV

S.

No.

Particulars Due Date

Income Tax/PF/ESI

1 Due date for deposit of Tax deducted/collected for the month of June,

2021

07.07.2021

2 Due date for deposit of Equalisation Levy for the month of June, 2021 07.07.2021

3 Due date for deposit of ESIC for the month of June, 2021 15.07.2021

4 Due date for deposit of PF for the month of June, 2021 15.07.2021

5 Due Date for furnishing TDS Quarterly returns for the period Jan to

Mar 2021

15.07.2021

6 Due Date for furnishing TDS Quarterly returns for the period Apr to

Jun 2021

31.07.2021

7 Due Date for filing Equalisation Levy Form 1 for FY 2020-21 31.07.2021

8 Due Date for the Certificate of TDS in Form No.16, required to be

furnished to the employee by employer for FY 2020-21

31.07.2021

9 Due Date for the Statement of Income paid or credited by an

investment fund to its unit holder in Form No. 64D for the FY 2020-21

15.07.2021

COMPLIANCE CALENDAR


Weekly Newsletter

Volume IV

10 Due Date for the Statement of Income paid or credited by an

investment fund to its unit holder in Form No. 64C for the FY 2020-21

31.07.2021

11 Due Date for the Quarterly Statement in Form No. 15CC to be

furnished by authorized dealer in respect of remittances made for the

quarter ending on 30th June, 2021

31.07.2021

12 Due Date for the Annual Statement required to be furnished u/s 9A(5)

of the Act by the eligible investment fund in Form No. 3CEK for the

FY 2020-21

31.07.2021

13 Due Date for exercising of option u/s 245M(1) of the Act in Form No.

34BB

31.07.2021

Goods & Services Tax

14 The due date for GSTR-3B having an Annual Turnover of more

than 5 Crores for May, 2021 with 9% interest and No Late Fee

05.07.2021

15 The due date for GSTR-3B having an Annual Turnover of upto 5

Crores for May, 2021 with NIL interest and No Late Fee

05.07.2021

16 GST Challan Payment if no sufficient ITC for May,2021 (for all

Quarterly Filers) with NIL interest rate

05.07.2021

17 GSTR 7 is a return to be filed by the persons who is required to

deduct TDS (Tax deducted at source) under GST for June, 2021

10.07.2021

https://taxguru.in/income-tax/tax-deducted-source-tds.html


Weekly Newsletter

Volume IV

18 GSTR-8 is a return to be filed by the e-commerce operators who

are required to deduct TCS (Tax collected at source) under GST

for June, 2021

10.07.2021

19 Taxpayers having an aggregate turnover of more than Rs. 1.50

Crores or opted to file Monthly Return (GSTR 1 for June, 2021)

11.07.2021

20 GST return for the taxpayers who opted for QRMP scheme

(Optional), Form GSTR 1 IFF (QRMP) for June 2021

13.07.2021

21 GSTR 6 by Input Service Distributors (ISDs) for June, 2021 13.07.2021

22 Due date of filing of GST CMP-08 for dealers opted for

composition scheme(Apr-Jun 2021).

18.07.2021

23 The due date for GSTR-3B having an Annual Turnover of more

than 5 Crores for June, 2021 with NIL interest and No Late Fee

20.07.2021

24 GSTR 5 & 5A by Non-Resident Taxpayers and ODIAR services

provider for June, 2021

20.07.2021

25 GST Challan Payment if no sufficient ITC for June 2021 (for all

Quarterly Filers) with NIL interest rate

22.07.2021/

24.07.2021

Company/RBI Law

26 Foreign Liabilities and Assets Return (FLA Return) for the

Financial Year Ended on 31st March, 2021

15.07.2021

https://taxguru.in/income-tax/tax-collected-source-tcs.html


Weekly Newsletter

Volume IV

Relevant Judgments and updates of the week;

Forms 15CA/15CB can be filed manually till 15.08.2021

CBDT (Press Release dated 20.07.2021)

CBDT grants further relaxation in electronic filing of Income Tax Forms 15CA/15CB. In view

of difficulties reported by taxpayers in electronic filing of Income Tax Forms 15CA/15CB on

the portal www.incometax.gov.in, it had earlier been decided by CBDT that taxpayers could

submit Forms 15CA/15CB in manual format to the Authorised dealer till 15 th July, 2021.

It has now been decided to extend the aforesaid date to 15th Aug, 2021, In view thereof, taxpayers

can now submit the said Forms in manual format to the authorised dealers till 15 th Aug, 2021.

Authorized dealers are advised to accept such Forms till 15 th Aug, 2021 for the purpose of

Foreign Remittances. A facility will be provided on the new e-filing portal to upload these forms

at a later date for the purpose of generation of the Document Identification Number.

Section 133A of the Income-Tax Act, 1961 - Survey - Power of Income Tax Department

conducts surveys in Bengaluru

Press Release dated 13.07.2021

Income Tax Department carried out a survey operation on 08.07.2021 on two business premises

in Bengaluru on one of India's leading manpower services provider. The assessee has been

Income Tax Act

http://www.incometax.gov.in/


Weekly Newsletter

Volume IV

claiming huge deduction u/s 80JJAA which incentivises new employment generation, subject to

fulfilment of certain conditions such as emoluments paid to the employee (which should be less

than Rs. 25,000 per month) and number of days of employment etc.

During the course of the survey operation, evidences of tax evasion have been gathered regarding

wrongful claims of deduction u/s 80JJAA. The investigations further revealed, that, even though

the emoluments of new employees added were more than Rs. 25,000 per month, the assessee has

been wrongfully claiming deduction u/s 80JJAA by excluding certain components of

emoluments of such employees to fit into the eligible emoluments limit of Rs. 25,000 per month.

Further, it has been found that deduction u/s 80JJAA has been claimed in subsequent years, even

though certain eligible employees were no longer on the payroll of the assessee.

Overall, the survey has resulted in detection of concealment of income to the tune of Rs. 880

crores spread over various assessment years.

Further investigations are in progress.

No disallowance u/s 40A(3) if ultimate payments made to labours were below threshold

limit

ITAT: Gali Subba Raju v. ACIT dated 07.04.2021, AY 2015-16

FACTS:

All the grounds of appeal are related to the addition made by the AO u/s 40A(3) of the Act which

was sustained by the CIT(A). The assessee filed the return of income admitting total income of

Rs. 15,53,860/-. During the course of assessment proceedings, the AO found that the assessee

has made the labour payment of Rs. 18 lakhs on 22.12.2014 in cash in violation of the provisions

of section 40A(3) of the Act and hence made the disallowance u/s 40A(3) of the act.


Weekly Newsletter

Volume IV

Against the order of the AO, the assessee went on appeal before the CIT(A) and submitted that

the payment of Rs. 18 lakhs recorded on 22.12.2014 was the expenses incurred in project sites,

wherein lot of labour charges were paid to number of labourers working in the project sites. It

was not the payment made on 22.12.2014 to a single person and it was a transfer entry for labour

charges paid to various workmen at site. In support of the assessee's claim, the assessee has

produced the site ledger details of labour payments, before the AO as well as the CIT(A). The

Ld. CIT(A) examined the attendance register and ledger copy of labour charges and observed

from the ledger copies that all the payments were made below Rs. 20,000/- per transaction,

however, the Ld. CIT(A) could not find the valid reason for payment of the sum of Rs.18 lakhs

on a single day i.e. on 22.12.2014, therefore, confirmed the addition made by the AO.

Against the order of the Ld. CIT(A), the assessee filed appeal before this Tribunal. During the

course of appeal proceedings, the Ld. AR submitted that payment of Rs. 18 lakhs was made to

labourers working throughout the month at the project sites on various dates. The assessee has

furnished the attendance register, the acquaintance register, vouchers for making the individual

payment which shows that it was less than Rs. 20,000/- to each individual. The payments were

made to various labourers, who were stated to be engaged in construction of hostel building at

Govt. Junior College, Rajavommangi and Musurumilli. The Ld.AR submitted that it was the

payment made at site by the site manager and submitted that the AO was not correct in making

the addition of Rs. 18 lakhs as agreed addition, since the AR had never accepted for addition.

The Ld. AR further stated that the assessee has undertaken the civil works during the FY 2014-

15 in the agency area of Rajavommangi and Musurumilli of East Godavari Dist and there is no

easy access to reach the place, and the labour force did not accept payments other than cash.

Though the payment was related to multiple sites and number of labourers, the accountant has

made the single transfer entry on 22.12.2014, instead of making entries in subsidiary books in

respect of two sites at Rajavommangi and Musurumilli, East Godavari Dist. Therefore, submitted

that since the payment is genuine and substantiated by the evidences such as attendance register


Weekly Newsletter

Volume IV

as well as the acquaintance register and the each payment was less than Rs.20,000/- to each

individual, the question of disallowance u/s 40A(3) does not arise and hence requested to set

aside the order of the Ld. CIT(A) and to delete the addition made by the AO.

HELD:

Where AO made disallowance under section 40A(3) in respect of labour charges of Rs. 18 lakhs

paid in cash by assessee, in view of fact that payment was not made on a single day to a single

person and it was only a transfer entry for labour charges paid to various workmen at site and all

payments were below Rs. 20,000 to each individual, impugned disallowance u/s 40A(3) was to

be deleted.

Sec. 11 exemption to be denied only be to extent of income which was violative of section

13(1)(d): HC (St. Xavier Educational Trust v. CIT(E) dated 23.03.2021, AY 2016-17)

FACTS:

The petitioners herein are the Public Charitable Trusts that have been registered u/s 12(A)(a)

of the Act and are enjoying exemption u/s 11 of the Act. During the AY 2016-17, the Trusts were

found to have made certain payments to M/s. Amali Builders Private Limited. In the said

company, the Trustees being specified persons are found to be having substantial interest. These

materials were discovered during the survey. That apart, substantial honorarium was paid to

the Trustees and their family members. The department felt that these payments are substantially

high and unreasonable and have been made directly for the benefit of the person specified u/s

13(3) of the Act. Certain bogus bills and vouchers were also allegedly found during the survey.

Therefore, the impugned notices were issued calling upon the respective Trustees to show cause


Weekly Newsletter

Volume IV

as to why the exemptions claimed by the Trusts u/s 11 of the Act should not be denied in these

cases, as the payment out of income from property held under Trusts have been paid directly for

the benefit of persons referred to section 13(3) of the Act. The stand of the department is that

these payments are clear violation as per section 13(1)(c) of the Act. Challenging these notices,

the writ petitions came to be filed.

The respondents have filed a detailed counter affidavit controverting the stand taken in the writ

petitions. The learned standing counsel took me through the contentions set out therein. It is

strongly contented that these writ petitions having been filed at the show cause notice stage itself

deserve dismissal. The learned Standing Counsel placed reliance on the decision of the Hon'ble

Supreme Court in Union of India v. Kunisetty Satyanarayana [2006] 12 SCC 28.

HELD:

During a survey conducted upon assessee, it was found that trust had made certain payments to

a company in which trustees, being specified persons, were having substantial interest. Further,

substantial honorarium was found to be paid to trustees and their family members. Therefore,

impugned notice was issued against assessee for denial of exemption u/s 11 on ground that

payment out of income from property held under trust was paid directly for benefit of persons

referred to in section 13(3). Assessee filed an instant writ petition against said SCN for reason

that impugned notice threatened to cancel primary exemption enjoyed by trust. It is a settled law

that denial of exemption u/s 11 should only be to extent of income which is violative of section

13(1)(d) and not total denial of exemption. Thus, revenue was to be directed to only forfeit

exemption u/s 11 in respect of offending payments.


Weekly Newsletter

Volume IV

Relevant Judgments and updates of the week;

IGST payable on reimportation of goods after repair

Notification: 36/2021-Customs dated 19.07.2021

In order to nullify the impact of the judgement of Hon'ble Delhi CESTAT in the case of M/s

Interglobe Aviation Limited vs. Commissioner of Customs [2020] 121 taxmann.com 70 (New

Delhi - CESTAT), the Government has made amendment in Notification No. 45/2017 & 46/2017

both dated June 30, 2017 to provide that IGST & Compensation Cess shall be payable on the goods

re-imported after repair. Similar amendment is made for import of Cut & polished precious and

semi-precious stones.

Clarification on applicability of IGST on repair cost, insurance and freight, on goods re-

imported after being exported for repair

CIRCULAR NO. 16/2021-CUSTOMS [F. NO. CBIC-190354/96/2021-TO(TRU-I)-

CBEC], DATED 19-7-2021

CBIC has clarified that Notification Nos. 45/2017-Customs and 46/2017-Customs, both dated the

30th of June, 2017 were issued to implement the decision of the GST Council taken earlier, that

re-import of goods sent abroad for repair attracts IGST on a value equal to the repair value,

insurance and freight. Further, in the light of the recommendations of the GST Council in its 43rd

Meeting, a clarificatory amendment has been made in the said Notifications, vide notification Nos.

36/2021-Customs and 37/2021-Customs, both dated 19th July, 2021, without prejudice to the

leviability of IGST, as above, on such imports as it stood before the amendment.

GST AND OTHER INDIRECT TAX LAWS


Weekly Newsletter

Volume IV

CBIC issued clarification on extension of limitation under GST in terms of Hon’ble

Supreme Court’s Order dated 27.04.2021

Circular No. 157/13/2021-GST dated 20.07.2021

CBIC issued circular to clarify that the extension of timelines granted by Hon’ble Supreme Court

vide its Order dated 27.04.2021 is applicable in respect of any appeal which is required to be filed

before Joint/ Additional Commissioner (Appeals), Commissioner (Appeals), Appellate

Authority for Advance Ruling, Tribunal and various courts against any quasi-judicial order or

where proceeding for revision or rectification of any order is required to be undertaken, and is not

applicable to any other proceedings under GST Laws

Assessment Order passed before 10 months of providing opportunity of heard is without

application of mind, to be set aside

Madras HC: ARSK Hardwares & Traders v. State Tax Officer,Madurai

FACTS:

The petitioner is the proprietor. The place of business of petitioner was inspected by the

Department and certain defects were noticed for the Tax period 2017-18, 2018-19 and 2019-20.

The petitioner filed the objection against it. However on 07.02.2020, the department concluded the

impugned ex-parte assessment, for the tax period 2017-18, 2018-19 and 2019-20 without

considering the objections filed by the petitioner and without offering opportunity of personal

hearing of being heard as contemplated under sections 75(4) and 126 of the GST Act. After that

notice for personal hearing was issued on 31-12-2020. Further, the Deputy Commissioner

(ST)(Int), Madurai, has filed appeals under section 107 of TNGST Act, before the Appellate


Weekly Newsletter

Volume IV

Deputy Commissioner (Appeal), Goods and Service Tax, Madurai, against the above said

assessment orders passed by the 1st respondent, dated 7-2-2020 pointing out certain defects.

Therefore, the petitioner prays for setting aside the impugned order by filing Writ Petition.

HELD:

HC set aside the order on the ground that the impugned order of assessment has been passed

on 7-2-2020, whereas personal hearing has been on 3-12-2020, after much latter the impugned

order of assessment made, which clearly shows non-application of mind on the part of the

Department. Even the Deputy Commissioner (ST)(Int), Madurai, has filed an appeal under section

107 of GST Act, before the Appellate Deputy Commissioner (Appeal), as against the above said

assessment orders passed by the Department, pointing out certain deficiency.

HC remand back the matter to pass fresh orders, after affording an opportunity of personal hearing

to the petitioner.

GST registration required for Charitable Trust running medical store to give medicines

without profit

Gujarat HC: Nagri Eye Research Foundation v. Union of India

FACTS:

Appellant is a charitable Trust set up with various objectives basically and essentially of

undertaking eye and research activities as well as procurement and management of funds for the

purpose of education and charitable activities in eye research and prevention of blindness. The

appellant trust is also running a medical store where the medicines are sold at a lower rate. The


Weekly Newsletter

Volume IV

appellant had filed an application before the Advance ruling authority(AAR) for the following

questions:

i. GST Registration is required for medical store run by Charitable Trust? And

ii. Medical store providing medicines at a lower rate is it amounts to supply of goods?

AAR came to the conclusion that the petitioner Trust was required to obtain GST Registration for

the medical store run by the Trust and that the medical store providing medicines at a lower rate

amounted to supply of goods. Being aggrieved by the said Advance ruling, appellant filed an

appeal before AAAR. AAAR confirmed the ruling of AAR. Being aggrieved by the order,

appellant filed a writ before HC.

HELD:

HC held that the Medical Store providing medicines would amount to supply of goods and

appellant is required to take registration. The reason behind that is any trade or commerce whether

or not for a pecuniary benefit, would be included in the term 'business' as defined under section

2(17) of the GST Act.


Weekly Newsletter

Volume IV

MCA Updates: -

The MCA notified the commencement date for Section 4 of the Companies (Amendment)

Act, 2020 (July 22, 2021)

The MCA has appointed September 01, 2021 as the commencement date of Section 4 of the

Companies (Amendment) Act, 2020 for implementation of amendments in the Rectification of

Name of Company provisions under Section 16 of the Companies Act, 2013.

The Companies (Incorporation) Fifth Amendment Rules, 2021 (July 22, 2021)

The MCA has notified the Companies (Incorporation) Fifth Amendment Rules, 2021 to insert a

new rule 33A in the Companies (Incorporation) Rules, 2014 relating to the allotment of a new

name to the existing company under section 16(3) of the Companies Act, 2013 which shall come

into effect from September 01, 2021.

As per the new rule, in case a company fails to change its name or new name, as the case

may be, in accordance with the direction issued under section 16(1) of the Companies Act, 2013

within a period of three months from the date of issue of such direction, the letters “ORDNC”

(which is an abbreviation of the words “Order of Regional Director Not Complied”), the year of

passing of the direction, the serial number and the existing Corporate Identity Number (CIN) of

the company shall become the new name of the company without any further act or deed by the

company, and the Registrar shall accordingly make entry of the new name in the register of

companies and issue a fresh certificate of incorporation in Form No.INC-11C.

However, the above provisions shall not be applicable in case e-form INC-24 filed by the

company is pending for disposal at the expiry of three months from the date of issue of direction

by Regional Director unless the said e-form is subsequently rejected. Further, a company whose

name has been changed as above shall at once make necessary compliance with the provisions of

CORPORATE LAW AND OTHER LAWS


Weekly Newsletter

Volume IV

section 12 of the Companies Act, 2013 and the statement, “Order of Regional Director Not

Complied (under section 16 of the Companies Act, 2013)” shall be mentioned in brackets below

the name of company, wherever its name is printed, affixed or engraved.

Provided, no such statement is required to be mentioned in case the company subsequently changes

its name in accordance with the provisions of section 13 of the Companies Act, 2013.

SEBI Updates: -

Relaxation in timelines for compliance with regulatory requirements by Debenture Trustees

due to Covid-19 (July 20, 2021)

SEBI extended the timelines for debenture trustees to comply with certain regulatory requirements

in view of the prevailing situation due to Covid-19 pandemic and representations received from

the Debenture Trustees. Under the regulatory norms, debenture trustees are required to perform

periodical monitoring and disclose various reports, certificates to stock exchanges and on their

websites within prescribed timelines. Debenture Trustees were required to make disclosure by July

15, 2021, but now the timeline has been extended till August 31, 2021, for certain submissions and

till October 31, 2021, for other disclosures.

IBC Updates: -

Insolvency and Bankruptcy Board of India amends the Insolvency and Bankruptcy Board

of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (July 21,

2021)

The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy

Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment)

Regulations, 2016 on 14th July, 2021.


Weekly Newsletter

Volume IV

The amendment regulations enhance the discipline, transparency, and accountability in corporate

insolvency proceedings:

1. A corporate debtor (CD) may have changed its name or registered office address prior to

commencement of insolvency. The stakeholders may find it difficult to relate to the new name

or registered office address and consequently fail to participate in the CIRP. The amendment

requires an insolvency professional (IP) conducting CIRP to disclose all former names and

registered office address(es) so changed in the two years preceding the commencement of

insolvency along with the current name and registered office address of the CD, in all its

communications and records.

2. The interim resolution professional (IRP) or resolution professional (RP) may appoint any

professional, including registered valuers, to assist him in discharge of his duties in conduct of

the CIRP. The amendment provides that the IRP/RP may appoint a professional, other than

registered valuers, if he is of the opinion that the services of such professional are required and

such services are not available with the CD. Such appointments shall be made on an arm’s

length basis following an objective and transparent process. The invoice for fee shall be raised

in the name of the professional and be paid into his bank account.

3. The RP is duty bound to find out if a CD has been subject to avoidance transactions, namely,

preferential transactions, undervalued transactions, extortionate credit transactions, fraudulent

trading and wrongful trading, and file applications with the Adjudicating Authority seeking

appropriate relief. This not only claws back the value lost in such transactions increasing the

possibility of reorganization of the CD through a resolution plan, but also disincentivises such

transactions preventing stress to the CD. For effective monitoring, the amendment requires the

RP to file Form CIRP 8 on the electronic platform of the Board, intimating details of his

opinion and determination in respect of avoidance transactions. (The IBBI has specified the

format of CIRP 8 through a Circular issued. This Form needs to be filed in respect of every

CIRP ongoing or commencing on or after 14th July, 2021.)


Weekly Newsletter

Volume IV

IBBI has specified the format of CIRP 8 under IBBI (Insolvency Resolution Process for

Corporate Persons) Regulations, 2016, which needs to be filed in respect of every CIRP

ongoing or commencing on or after July 14, 2021.

Regulation 35A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations,

2016 (CIRP Regulations) requires the Resolution Professional to form an opinion on transactions

covered under sections 43, 45, 50 and 66 by 75 day, make a determination on such transactions by

115 day, and file an application before the Adjudicating Authority by the 135 day of the insolvency

commencement date. Further regulation 40B(IB) of the CIRP Regulations require the resolution

professional to file Form CIRP 8 intimating details of his opinion and determination under

Regulation 35A, by 140 day of the insolvency commencement date. For effective monitoring, the

amendment requires the RP to file Form CIRP 8 on the electronic platform of the Board, intimating

details of his opinion and determination in respect of avoidance transactions.

Insolvency and Bankruptcy Board of India (Insolvency Professionals) (Second Amendment)

Regulations, 2021(July 22, 2021)

The Insolvency and Bankruptcy Board of India (Insolvency Professionals) (Second Amendment)

Regulations, 2021 inter-alia provides that in the Insolvency and Bankruptcy Board of India

(Insolvency Professionals) Regulations, 2016 (hereinafter referred to as the “principal

regulations”), in regulation 5, in clause (c),- for sub-clause (iii), the following sub-clause shall be

substituted, namely: -

“(iii) experience of –

(a) ten years in the field of law, after receiving a Bachelor’s degree in law;

(b) ten years in management, after receiving a Master’s degree in Management or two year

full time Post Graduate Diploma in Management; or

(c) fifteen years in management, after receiving a Bachelor’s degree,

from a university established or recognized by law or an Institute approved by All India

Council of Technical Education; or”







Weekly Newsletter

Volume IV

The purpose of the ineligibility under Section 29A is to achieve a sustainable revival and to

ensure that a person who is the cause of the problem either by a design or a default cannot

be a part of the process of solution.

FACTS:

The issue for determination in this appeal was that on one hand, Appellant submitted that the

ineligibility under Section 29A of the IBC, 2016 attaches to the proceedings under the IBC

alone, involving the submission of a resolution plans.

On the other hand, Respondent submitted that when an order of liquidation has been passed

under and in pursuance of proceedings which were initiated under the IBC, Section 230 of

the Companies Act, 2013 expressly contemplates that the liquidator appointed under the IBC

may move the AA where a compromise or arrangement is proposed. Hence, the proposal for

a compromise or arrangement under Section 230, where a company is in liquidation under

the IBC, is in continuation of that liquidation process.

Hence, according to respondent, a person who is ineligible under Section 29A of IBC cannot

propose a scheme for revival under Section 230 of the Companies Act, 2013.

OBSERVATION:

The Supreme Court observed that IBC has made a provision for ineligibility under Section 29A

which operates during the CIRP. A similar provision is engrafted in Section 35(1)(f) of IBC which

forms a part of the liquidation provisions contained in Chapter III as well. In the context of the

statutory linkage provided by the provisions of Section 230 of the Act of 2013 with Chapter III of

the IBC, where a scheme is proposed of a company which is in liquidation under the IBC, it would

be far-fetched to hold that –


Weekly Newsletter

Volume IV

the ineligibilities which attach under Section 35(1)(f) read with Section 29A would not apply when

Section 230 is sought to be invoked. Such an interpretation would result in defeating the provisions

of the IBC and must be eschewed.

The court found no merit in contention by the appellants and the petitioners that attaching

the ineligibilities under Section 29A and Section 35(1)(f) of the IBC to a scheme of compromise

and arrangement under Section 230 of the Act of 2013 would be violative of Article 14 of the

Constitution as the appellant would be “deemed ineligible” to submit a proposal under Section 230

of the Act of 2013.

The Court further explained that the stages of submitting a resolution plan, selling assets

of a company in liquidation and selling the company as a going concern during liquidation, all

indicate that the promoter or those in the management of the company must not be allowed a back-

door entry in the company and are hence, ineligible to participate during these stages. Proposing a

scheme of Compromise or Arrangement under Section 230 of the Companies Act, 2013, while the

company is undergoing liquidation under the provisions of the IBC lies in a similar continuum.

Thus, the prohibitions that apply in the former situations must naturally also attach to the latter to

ensure that like situations are treated equally. It was further stated that the scheme of compromise

or arrangement under Section 230 of the Act of 2013 cannot certainly be equated with a withdrawal

simpliciter of an application, as is contemplated under Section 12A of the IBC.

HELD: -

The Supreme Court dismissed the appeal stating that no merit was found in appeal. It further stated

that the prohibition placed by the Parliament in Section 29A and Section 35(1)(f) of the IBC must

also attach itself to a scheme of compromise or arrangement under Section 230 of the Companies

Act of 2013, when the company is undergoing liquidation under the auspices of the IBC. As such,

Regulation 2B of the Liquidation Process Regulations, specifically the proviso to Regulation 2B

(1), is also constitutionally valid.

The civil appeals and writ petitions were accordingly dismissed.


Weekly Newsletter

Volume IV

Prakash Sachin & Co. Chartered Accountants

13-D, 13th Floor, Atma Ram House, 1, Tolstoy Marg,

New Delhi. India. 110001 + 91 11 23355285/42173536 Branch – New Delhi & Mumbai

www.psc.co.in skype-prakashsachinca

Disclaimer This is a series of Tax bulletin released every Saturday 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.

http://www.psc.co.in/


Weekly Newsletter

Volume IV

Documents

Prakash Sachin & Co