Issues: Whether departmental appeals concerning an unasserted fiscal demand could continue after final approval of a corporate resolution plan.

Analysis: The resolution plan had attained finality through the insolvency proceedings, and the relevant fiscal authority had not lodged any claim in respect of the demand forming the subject matter of the appeals.

Conclusion: The final resolution plan governed the unasserted demand, and the substantial questions of law were left unanswered.

Issues: Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, filed on 17.11.2022, was within limitation.

Analysis: The disclosed date of default was 02.12.2018 and the ordinary three-year limitation period would have expired on 02.12.2021. The period from 15.03.2020 to 28.02.2022 stood excluded under the Supreme Court's COVID-19 limitation directions. As the unexpired balance period falling within the exclusion period was 626 days, which exceeded the minimum 90-day period available from 01.03.2022, that longer balance period was available from 01.03.2022. The limitation consequently expired on 17.11.2023. The calculation confined to a 90-day extension did not give effect to the longer balance period.

Conclusion: The Section 9 application filed on 17.11.2022 was within limitation.

Issues: Whether liquidation by sale of the corporate debtor as a going concern commenced on the date of the liquidation order that incorporated the committee of creditors' recommendation and expressly directed such sale, notwithstanding that no auction notice had been issued or asset sale process document finalised before the subsequent regulatory amendment.

Analysis: Section 5(17) fixes the liquidation commencement date as the date on which liquidation proceedings commence under Section 33. A recommendation under Regulation 39C, when placed before the Adjudicating Authority and incorporated into the liquidation order, becomes part of the judicially directed mode of liquidation. The saving clause in the amendment regulations operates prospectively and cannot displace rights and obligations crystallised under the earlier regulatory framework. Neither the Code nor the Liquidation Regulations make issuance of an auction notice or finalisation of an asset sale process document the legal point at which a going-concern sale commences. Constitution of the stakeholders' consultation committee, consideration of assets and liabilities, reserve price, marketing strategy, auction process and draft sale notice were all steps in one continuing process. The restraint against issuing an auction notice could not be used to prejudice the Liquidator, and the ninety-day period for endeavouring the sale was directory and capable of extension.

Conclusion: The going-concern sale commenced on 21.02.2024 with the liquidation order. The subsequent omission of the going-concern-sale provisions did not govern that process, which remained subject to the regulatory framework in force on the liquidation commencement date.

Issues: (i) Whether amounts withdrawn from the bankrupt's bank account after commencement of bankruptcy, including proceeds of sold jewellery, formed part of the bankruptcy estate or were excluded assets; (ii) Whether refusal to recall the ex parte order directing return of the withdrawn amount was justified.

Issue (i): Whether amounts withdrawn from the bankrupt's bank account after commencement of bankruptcy, including proceeds of sold jewellery, formed part of the bankruptcy estate or were excluded assets.

Analysis: The bankruptcy estate vested in the Bankruptcy Trustee by operation of law from the commencement date, irrespective of the bankrupt's knowledge. A bank-account balance constituted estate property. The exclusions under Section 155(2) read with Section 79(14) were exhaustive. The protection for personal ornaments was confined to qualifying unencumbered ornaments within the prescribed monetary limit and did not extend to their sale proceeds credited to a bank account. The jewellery proceeds exceeded that limit, and no qualifying ornaments existed on the commencement date.

Conclusion: The withdrawals were dealings with bankruptcy-estate property, and the jewellery sale proceeds were not excluded assets; the direction to return the withdrawn amount was valid.

Issue (ii): Whether refusal to recall the ex parte order directing return of the withdrawn amount was justified.

Analysis: Recall of an ex parte order is not available as of right. The asserted inability to make submissions due to connectivity issues was unsupported, and no prejudice was established despite adequate opportunity to respond to the underlying application.

Conclusion: Refusal to recall the ex parte order was justified.

Final Conclusion: The bankruptcy estate remained vested in the Bankruptcy Trustee, and the statutory exclusion for specified personal ornaments could not be extended to their sale proceeds held in a bank account.

Ratio Decidendi: Upon commencement of bankruptcy, property standing to the bankrupt's credit vests in the Bankruptcy Trustee by operation of law, and a statutory exclusion for specified assets cannot be enlarged to cover their sale proceeds.

Issues: (i) Whether construction for individual purchasers and landowners before 01.07.2010 was taxable. (ii) Whether construction for an educational institution was a works contract service primarily for commerce or industry. (iii) Whether the remaining post-01.07.2010 construction and separately contracted site formation activities were taxable. (iv) How the surviving works-contract services were to be valued and whether the composition option was available. (v) Whether the extended limitation period, interest and penalties were sustainable. (vi) Whether rejection of the Section 74 rectification application foreclosed valuation relief in appeal.

Issue (i): Whether construction for individual purchasers and landowners before 01.07.2010 was taxable.

Analysis: The Explanation deeming construction intended for sale to be a taxable service was introduced with effect from 01.07.2010 and operated prospectively. Transfer of property in goods in the construction contracts did not independently create a taxable construction or works-contract service for the earlier period. The contemporaneous departmental clarifications supported the pre-amendment position for developer construction and landowner-share construction completed before that date.

Conclusion: Construction for individual purchasers and landowners before 01.07.2010 was not taxable. The related demand was set aside in favour of the assessee.

Issue (ii): Whether construction for an educational institution was a works contract service primarily for commerce or industry.

Analysis: The statutory requirement was that the building be primarily for commerce or industry. Characterising education as an industry under a different enactment, or relying on the charging of fees, did not establish that requirement. No independent finding established that the educational building was intended primarily for commercial or industrial use.

Conclusion: Construction for the educational institution was not taxable as a works contract service primarily for commerce or industry. The related demand was set aside in favour of the assessee.

Issue (iii): Whether the remaining post-01.07.2010 construction and separately contracted site formation activities were taxable.

Analysis: Residential construction for prospective buyers after 01.07.2010 was taxable where the statutory conditions were met. The construction of a complex and a godown involved transfer of goods and was not shown to be wholly outside the applicable taxable entries. The separately recorded site-development receipts were not established to be part of construction and were correctly classifiable as site formation service.

Conclusion: The post-01.07.2010 residential construction, remaining construction activities and separately contracted site formation activity were taxable, subject to period-specific valuation and statutory conditions. This finding is in favour of Revenue.

Issue (iv): How the surviving works-contract services were to be valued and whether the composition option was available.

Analysis: Rule 2A required determination of the service element of a works contract after excluding the value attributable to goods. The composition option under Rule 3(3) depended on whether service tax had been paid before the option was exercised, not merely on the earlier receipt of consideration. Its availability required contract-wise verification of returns, challans and payment records. The applicable valuation provisions, abatements and retrospective amendment to Rule 2A had to be applied activity-wise and period-wise; denial of composition could not justify taxation of gross receipts including the value of goods.

Conclusion: The composition option must be determined contract-wise by applying the prior-payment requirement, and the surviving works-contract demand must be recomputed on the legally applicable taxable service portion. This is in favour of the assessee to that extent.

Issue (v): Whether the extended limitation period, interest and penalties were sustainable.

Analysis: The extended period required wilful suppression or misstatement with intent to evade. Registration, earlier return filing, disclosed construction activities, and the interpretational and valuation disputes did not establish deliberate concealment. Interest could arise only on tax ultimately and lawfully determined. The absence of the ingredients for the extended period also removed the basis for penalty for suppression, while any independent return-filing penalty required separate reconsideration, including reasonable cause.

Conclusion: The extended period and penalty for suppression were unsustainable and were set aside in favour of the assessee. Interest and any independent return-filing penalty require consequential determination under the applicable law.

Issue (vi): Whether rejection of the Section 74 rectification application foreclosed valuation relief in appeal.

Analysis: Rectification cannot substitute for an appeal in respect of debatable matters, but rejection of a rectification request does not validate an incorrect valuation. The appellate jurisdiction independently permits correction of the tax demand according to the applicable valuation provisions, while the composition option remains subject to its statutory conditions.

Conclusion: Rejection of the Section 74 application did not foreclose valuation relief in appeal. This finding is in favour of the assessee.

Final Conclusion: The non-taxable pre-01.07.2010 residential and landowner-share construction and the educational construction are excluded; any remaining liability must be confined to the normal period and quantified under the applicable period-specific valuation framework.

Ratio Decidendi: Service-tax liability for construction activities must be determined under the charging and valuation provisions applicable to the relevant statutory period, and a later expansion of taxability cannot be applied retrospectively.

Issues: (i) Whether the amounts paid towards short-paid education cess, secondary and higher education cess, and applicable interest were liable to appropriation; and (ii) Whether penalties imposed for the alleged payment defaults were sustainable.

Issue (i): Whether the amounts paid towards short-paid education cess, secondary and higher education cess, and applicable interest were liable to appropriation.

Analysis: The demand concerned short-paid cesses and statutory interest under the central excise regime. The evidence on record established that the entire cess liability and applicable interest had been paid.

Conclusion: The amounts paid towards the cesses and interest were validly appropriated.

Issue (ii): Whether penalties imposed for the alleged payment defaults were sustainable.

Analysis: The applicable ratio in the assessee's earlier matter had treated the restrictive consequences flowing from Rule 8(3A) of the Central Excise Rules, 2002 as unsustainable, following decisions declaring that provision ultra vires. In view of that ratio and the discharge of the entire liability with interest, penal consequences did not survive.

Conclusion: The penalties were set aside, in favour of the assessee.

Final Conclusion: The cess and interest liabilities stand satisfied through appropriation, and no penal liability remains.

Ratio Decidendi: A penalty founded on the restrictive default-payment regime under Rule 8(3A) cannot survive where that regime has been held ultra vires and the substantive liability with applicable interest has been discharged.

Issues: (i) Whether alleged clandestine manufacture and clearance, by treating traded spare parts and components as manufactured goods, was proved; (ii) Whether SSI exemption was available for actual manufacturing clearances during the relevant financial years; (iii) Whether the extended period of limitation was validly invoked; (iv) Whether the penalties under Section 11AC of the Central Excise Act, 1944 and Rules 26 and 27 of the Central Excise Rules, 2002 were sustainable.

Issue (i): Whether alleged clandestine manufacture and clearance, by treating traded spare parts and components as manufactured goods, was proved.

Analysis: A charge of clandestine manufacture requires cogent, affirmative and corroborated evidence of manufacture and unaccounted clearance. The limited vendor investigation, supplier registrations, payments through account-payee cheques, and vendor confirmations did not establish that documented purchases were fictitious. A transporter's statement not tested in accordance with Section 9D of the Central Excise Act, 1944 could not be treated as substantive evidence. The logo on components, disparity between trading and equipment turnover, and absence of buyer orders specifically requiring manufacture were insufficient without evidence of excess raw materials, power consumption, labour, production capacity, transportation or sale proceeds.

Conclusion: In favour of the assessee: clandestine manufacture and clearance were not proved, and the entire trading turnover could not be treated as manufactured goods.

Issue (ii): Whether SSI exemption was available for actual manufacturing clearances during the relevant financial years.

Analysis: The Chartered Accountant's certificate, separating manufacturing and trading values, was accepted in the absence of material discrediting it. Manufacturing clearances for 2010-11 to 2012-13 were below the prescribed threshold under Notification No. 08/2003-C.E. dated 01.03.2003. Manufacturing clearances for 2013-14 and 2014-15 exceeded that threshold, although eligibility for exemption up to the prescribed limit for those years followed because the preceding-year clearances had not crossed the relevant threshold. The claimed payment of duty on the actual manufacturing clearances for 2013-14 and 2014-15 required verification.

Conclusion: In favour of the assessee: SSI exemption is available for 2010-11 to 2012-13 and up to the eligible limit for 2013-14 and 2014-15; verification of duty payment for the actual manufacturing clearances of the latter two years is remitted for limited verification.

Issue (iii): Whether the extended period of limitation was validly invoked.

Analysis: The Department had prior knowledge of the dual manufacturing and trading activities through an earlier notice on substantially the same factual basis and through periodical disclosures. Those circumstances negated suppression of facts with intent to evade duty.

Conclusion: In favour of the assessee: invocation of the extended period of limitation was not sustainable.

Issue (iv): Whether the penalties under Section 11AC of the Central Excise Act, 1944 and Rules 26 and 27 of the Central Excise Rules, 2002 were sustainable.

Analysis: Penalty for deliberate evasion and personal penalty of a director required a legally established foundation of clandestine manufacture and conscious involvement, which was absent. The separate contravention concerning non-maintenance of prescribed records was independent of the principal clandestine-removal demand and remained unrebutted.

Conclusion: Partly in favour of the assessee: the penalties under Section 11AC and Rule 26 were set aside, while the penalty under Rule 27 for non-maintenance of records was sustained.

Final Conclusion: The excise liability cannot be enlarged by recharacterising documented trading transactions as manufacture; it is confined to any verified liability arising from actual manufacturing clearances, while the independent record-keeping contravention remains enforceable.

Ratio Decidendi: A charge of clandestine manufacture and clearance must be proved by cogent, affirmative and corroborated evidence; suspicion, unverified investigative statements and inferential circumstances cannot substitute such proof.

Issues: Whether disallowance of input tax credit on account of mismatch could be sustained without full disclosure of mismatch particulars and adequate opportunity of hearing.

Analysis: The show-cause notice did not fully furnish the mismatch details necessary for the appellant to respond. The mismatch chart was produced only subsequently and had not been available before the adjudicating authority. Further, sufficient opportunity of personal hearing was not afforded in the first appellate proceedings. These deficiencies constituted a gross breach of the principles of natural justice at both stages.

Conclusion: The input tax credit claim requires fresh adjudication after supplying mismatch particulars and granting sufficient opportunity to explain the case.

Issues: (i) Whether 2304.029 MTs of the disputed goods was Crude Palm Oil eligible for the concessional rate under Serial No. 57 of Notification No. 50/2017-Customs; (ii) Whether the loading time log, ship's ullage report, e-mail correspondence, statements and laboratory reports could be relied upon; (iii) Whether classification of the disputed goods under Customs Tariff Item 1511 9090 was sustainable; (iv) Whether the appropriate Basic Customs Duty rate for Customs Tariff Item 1511 9090 had been correctly applied; (v) Whether invocation of the extended period under Section 28(4) was sustainable; (vi) Whether confiscation and redemption fine were sustainable; (vii) Whether penalties under Sections 114A and 114AA were sustainable.

Issue (i): Whether 2304.029 MTs of the disputed goods was Crude Palm Oil eligible for the concessional rate under Serial No. 57 of Notification No. 50/2017-Customs.

Analysis: Contemporaneous tank-wise loading records identified the disputed quantity as RBD Palmolein, while the balance cargo was separately identified as Crude Palm Oil. The laboratory reports, despite variations across samples, corroborated the presence of two categories of palm oil. Food-safety specifications were relevant only as corroborative material and did not govern customs classification. Deletion of acid-value and carotenoid parameters from the exemption notification did not dispense with the threshold requirement that the imported goods answer the description of Crude Palm Oil. Under the strict construction of exemption notifications, the claimant bore the burden of establishing such eligibility.

Conclusion: Against the assessee: the disputed quantity was not Crude Palm Oil and was ineligible for the concessional rate.

Issue (ii): Whether the loading time log, ship's ullage report, e-mail correspondence, statements and laboratory reports could be relied upon.

Analysis: The loading records were prepared during vessel-loading operations, contained tank-wise particulars, and were consistent with the contemporaneous e-mail correspondence. Their authenticity was not materially discredited, and the e-mail was acknowledged by its recipient. The documents and laboratory reports formed a consistent body of corroborative evidence satisfying the standard of preponderance of probabilities. A procedural deficiency in certification did not, on these facts, negate the admissibility of electronic evidence whose authenticity was not genuinely in dispute.

Conclusion: Against the assessee: the documentary, electronic and laboratory evidence was reliable and could be relied upon.

Issue (iii): Whether classification of the disputed goods under Customs Tariff Item 1511 9090 was sustainable.

Analysis: Classification had to be determined by the identity and condition of the goods at the time of importation. The finding that the goods became neither Crude Palm Oil nor RBD Palmolein because of alleged mixing during discharge could not support classification. Nevertheless, the contemporaneous evidence established that the goods were RBD Palmolein at import, falling within the tariff entry for palm oil and its fractions other than Crude Palm Oil.

Conclusion: Against the assessee: classification under Customs Tariff Item 1511 9090 was upheld on the basis that the goods were RBD Palmolein at the time of importation.

Issue (iv): Whether the appropriate Basic Customs Duty rate for Customs Tariff Item 1511 9090 had been correctly applied.

Analysis: The applicable duty rate depended on the tariff and notification in force on the date of import. The record did not contain a complete verification of the competing rate notifications, making recalculation necessary without reopening the concluded findings on description, classification, or exemption eligibility.

Conclusion: The applicable duty rate and consequential differential duty were remitted for limited verification and recomputation.

Issue (v): Whether invocation of the extended period under Section 28(4) was sustainable.

Analysis: The bills of entry described the entire cargo as Crude Palm Oil notwithstanding contemporaneous shipping records identifying the disputed quantity as RBD Palmolein. This material misdeclaration enabled availment of a lower concessional duty and was not merely a debatable classification choice on disclosed facts.

Conclusion: Against the assessee: invocation of the extended period was sustained, with interest consequential upon the recomputed differential duty.

Issue (vi): Whether confiscation and redemption fine were sustainable.

Analysis: The incorrect description was material to classification, exemption eligibility and duty assessment, supporting confiscation for misdeclaration and breach of the conditions of the claimed concession. As the goods were not prohibited and the contravention concerned description, classification and duty, proportionality of redemption fine required reduction of the amount.

Conclusion: Confiscation was sustained against the assessee; redemption fine was reduced to Rs. 1,00,00,000 in favour of the assessee.

Issue (vii): Whether penalties under Sections 114A and 114AA were sustainable.

Analysis: The misdescription caused short-payment of duty, attracting penalty under Section 114A, but its quantum had to correspond with the duty finally recomputed. A separate penalty under Section 114AA required identification of a distinct knowing or intentional false declaration or document beyond the import declaration already forming the basis of the duty demand and Section 114A penalty. No such distinct document or conduct was identified.

Conclusion: Penalty under Section 114A was sustained against the assessee only to the extent of the recomputed differential duty, while the separate penalty under Section 114AA was set aside in favour of the assessee.

Final Conclusion: The findings on the nature of the goods, their tariff classification, denial of the concession, extended-period demand and confiscation remain closed; only the applicable duty rate and consequential monetary liability require limited recomputation, with the fine and penalties adjusted as directed.

Ratio Decidendi: Eligibility for a concession restricted to Crude Palm Oil requires the importer to establish that the goods answered that description at importation, and classification must rest on the goods' identity at that time rather than any post-import mixing or dilution.

Issues: Whether a bank could impose a debit freeze on an already activated customer account for breach of an internally fixed transaction threshold or alleged suspicious transactions under the KYC regulatory framework.

Analysis: Clause 17.3 of the Reserve Bank of India (Commercial Banks - Know Your Customer) Directions, 2025 prohibits undertaking a transaction or commencing an account-based relationship without completing Customer Due Diligence; it does not confer a power to freeze an account after the account has been opened and activated upon completion of that process. Clauses 52 and 53 require reporting of prescribed transactions to the Financial Intelligence Unit, while Clause 54 expressly prohibits restrictions on account operations merely because a suspicious transaction report has been filed. An internal threshold-limit circular cannot override those binding regulatory directions or create a coercive power to investigate legitimate customer transactions. The debit freeze was also imposed without prior notice or an opportunity of hearing, contrary to the principles of natural justice. A subsequent AML-system flag could not retrospectively validate the pre-existing restriction.

Conclusion: The debit freeze was unlawful; the account was directed to be made operational and the debit restriction removed forthwith.

Issues: Whether timely credit of the tax amount in the Electronic Cash Ledger, followed by delayed filing of FORM GST DRC-03A for crediting the Electronic Liability Register, satisfies the payment requirement for amnesty under Section 128A.

Analysis: Section 128A provides waiver of interest and penalty upon fulfilment of the prescribed settlement conditions. Rule 164(2) requires payment to be credited to the Electronic Liability Register against the debit entry created by the relevant order. The amount had been credited to the Electronic Cash Ledger within the prescribed period, while FORM GST DRC-03A was filed later to appropriate that amount. Although the proviso to Rule 88B(1) did not directly govern amnesty payments, it recognised the legal significance of timely credit in the Electronic Cash Ledger for determining receipt of tax by the State. The timely deposit established bona fide compliance, and the subsequent procedural appropriation completed the requirement under Rule 164(2).

Conclusion: Timely credit in the Electronic Cash Ledger, coupled with subsequent compliance through FORM GST DRC-03A, entitled the taxpayer to the Section 128A amnesty benefit; the benefit could not be denied solely for delay in filing the appropriation form.

Issues: (i) Validity of the 20% disallowance of travel, miscellaneous, machinery-repairs, and stores-and-spares expenditure under Section 37(1); (ii) Entitlement to set-off of MAT credit under Section 115JAA.

Issue (i): Validity of the 20% disallowance of travel, miscellaneous, machinery-repairs, and stores-and-spares expenditure under Section 37(1).

Analysis: Section 37(1) permits deduction of business expenditure subject to substantiation. Detailed expenditure and party-wise particulars, including PAN details where available, had been furnished through the additional evidence. The disallowance rested only on self-made vouchers, unverifiable authenticity, and a presumed possibility of personal travel, without identification of any specific unsupported item or verification enquiry by the Assessing Officer. A blanket 20% disallowance founded on assumptions rather than material could not be sustained.

Conclusion: The 20% disallowance of the specified expenses is deleted in favour of the assessee.

Issue (ii): Entitlement to set-off of MAT credit under Section 115JAA.

Analysis: Section 115JAA provides for set-off of eligible MAT credit paid under Sections 115JA or 115JB. The availability and quantum of the claimed credit require factual verification.

Conclusion: The MAT-credit claim is remitted to the Assessing Officer for verification and decision under Section 115JAA.

Final Conclusion: The impugned expense disallowances are deleted, while the MAT-credit claim must be examined by the Assessing Officer under the statutory framework.

Ratio Decidendi: A percentage disallowance of claimed business expenditure cannot rest solely on unverified self-made vouchers or presumptions where detailed supporting records are furnished and no specific defect or verification failure is demonstrated.

Issues: (i) Whether the arm's-length-price adjustment for business support services required fresh adjudication after admission of additional evidence; (ii) Whether compulsorily convertible debentures could be recharacterised as equity and the related interest payment assigned a nil arm's-length price and disallowed; (iii) Whether the claim for deduction under section 80JJAA required factual examination by the Assessing Officer.

Issue (i): Whether the arm's-length-price adjustment for business support services required fresh adjudication after admission of additional evidence.

Analysis: The additional review report and supporting records directly concerned the rendition of services, allocation of costs and benchmarking of the international transaction. Since this material had not been evaluated by the transfer-pricing authorities, its evidentiary value could not appropriately be determined for the first time at the appellate stage. Admission of the evidence was warranted in the interest of substantial justice under Rule 29.

Conclusion: The additional evidence is admitted and the business-support-services adjustment is remitted for fresh adjudication after considering the complete material and affording opportunity of hearing.

Issue (ii): Whether compulsorily convertible debentures could be recharacterised as equity and the related interest payment assigned a nil arm's-length price and disallowed.

Analysis: The debentures carried a fixed coupon, conferred no voting rights before conversion and created a debtor-creditor relationship during their subsistence. Compulsory conversion as the agreed mode of ultimate discharge did not, by itself, alter their character during the pre-conversion period. A nil arm's-length price could not be determined merely by substituting the character of the transaction without applying the prescribed transfer-pricing framework. The alternative disallowance of the same interest under sections 36(1)(iii) and 37(1), being founded substantially on its treatment as equity, also could not stand on that basis.

Conclusion: The interest adjustment and the corresponding alternative interest disallowance are deleted; this issue is decided in favour of the assessee.

Issue (iii): Whether the claim for deduction under section 80JJAA required factual examination by the Assessing Officer.

Analysis: The deduction claim, revised computation and supporting certification had been furnished during the assessment proceedings. The applicability of section 80A(5), compliance with the statutory conditions for deduction, the timing and evidentiary value of the prescribed form, and the plea concerning impossibility of procedural compliance required factual examination that had not been undertaken.

Conclusion: The deduction claim is remitted to the Assessing Officer for examination in accordance with law, without any opinion on its allowability.

Final Conclusion: The debt-equity recharacterisation forming the basis of the interest adjustment is unsustainable, while the business-support-services and deduction questions require determination afresh on the complete record.

Ratio Decidendi: A compulsorily convertible debenture that creates a debtor-creditor relationship during its tenure cannot be treated as equity merely because conversion is compulsory, and the related interest cannot be assigned a nil arm's-length price without determination under the prescribed transfer-pricing framework.

Issues: (i) Whether internal Transactional Net Margin Method (TNMM) based on the assessee's non-AE freight-forwarding segment was a reliable method for benchmarking the AE transactions, rather than external TNMM; (ii) Whether a transfer-pricing adjustment under external TNMM could be computed on entity-wide results including non-AE transactions.

Issue (i): Whether internal Transactional Net Margin Method (TNMM) based on the assessee's non-AE freight-forwarding segment was a reliable method for benchmarking the AE transactions, rather than external TNMM.

Analysis: Rule 10B permits comparison with the enterprise's own comparable uncontrolled transaction as well as an unrelated enterprise's transaction, subject to functional, asset, risk, contractual and economic comparability. Entity-level losses did not by themselves establish unreliability of segmental results. The AE and non-AE freight-forwarding segments both incurred losses, but the AE segment's margin was better; the non-AE segment also constituted a substantial and separately identifiable part of the business. No material difference in functions, assets, risks, air-sea shipment composition, or profitability was demonstrated. An internal comparable was consequently more reliable because enterprise-specific variables were neutralised.

Conclusion: Internal TNMM based on the non-AE segment was accepted and external TNMM could not replace it. The finding is in favour of the assessee.

Issue (ii): Whether a transfer-pricing adjustment under external TNMM could be computed on entity-wide results including non-AE transactions.

Analysis: Sections 92 and 92C confine determination of arm's length income to international transactions with associated enterprises. Uncontrolled transactions with independent parties cannot be subjected to an adjustment merely because entity-wide margins are used for benchmarking.

Conclusion: Any adjustment under external TNMM had to be confined to AE international transactions and could not be computed on entity-wide results. The finding is in favour of the assessee.

Final Conclusion: The international freight-forwarding transactions satisfied the arm's-length principle under internal TNMM, rendering the transfer-pricing adjustment of Rs. 3,37,76,000 unsustainable.

Ratio Decidendi: Transfer-pricing benchmarking must use reliable comparable uncontrolled transactions, with internal TNMM preferred where the same enterprise's controlled and uncontrolled segments are materially comparable, and any adjustment confined to AE international transactions.

Issues: (i) Whether consideration received for cloud application and IT support services is taxable as royalty under Article 12(4) of the India-Netherlands DTAA; and (ii) Whether consideration received for cloud application and IT support services is taxable as fees for technical services under Article 12(5) of the India-Netherlands DTAA.

Issue (i): Whether consideration received for cloud application and IT support services is taxable as royalty under Article 12(4) of the India-Netherlands DTAA.

Analysis: Article 12(4) does not encompass equipment royalty following the treaty modification effective from 1 April 1998. The service recipient was not provided equipment or any right to use or control the underlying cloud infrastructure; it received managed cloud and IT support services. The services were factually indistinguishable from those in the group concern's earlier decision, and the Revenue's intended challenge to that decision did not furnish a factual basis to depart from it.

Conclusion: The receipts are not taxable as royalty under Article 12(4) of the India-Netherlands DTAA. This issue is decided in favour of the assessee.

Issue (ii): Whether consideration received for cloud application and IT support services is taxable as fees for technical services under Article 12(5) of the India-Netherlands DTAA.

Analysis: Article 12(5) applies where services are ancillary and subsidiary to a qualifying royalty payment or satisfy the make-available test. Since the services did not generate royalty, and no technical knowledge, experience, skill, know-how or process was made available to enable independent use by the recipients, the treaty conditions for fees for technical services were not met.

Conclusion: The receipts are not taxable as fees for technical services under Article 12(5) of the India-Netherlands DTAA. This issue is decided in favour of the assessee.

Final Conclusion: The impugned service receipts cannot be characterised under Article 12 of the India-Netherlands DTAA as either royalty or fees for technical services.

Ratio Decidendi: Consideration for managed cloud and IT support services is not royalty or fees for technical services under Article 12 where the customer receives only service output, has no right to use or control the underlying equipment, and is not enabled to independently apply any technical knowledge or know-how.

Issues: (i) Whether limitation for the first appeal against the section 154 refusal could be reckoned from an earlier section 143(1) intimation, and whether the delay warranted condonation; and (ii) Whether an adjustment of a contingent liability disclosed in the tax audit report, but neither debited nor claimed as a deduction, was rectifiable as a mistake apparent from the record.

Issue (i): Whether limitation for the first appeal against the section 154 refusal could be reckoned from an earlier section 143(1) intimation, and whether the delay warranted condonation.

Analysis: An order refusing rectification under section 154 is independently appealable. Under section 249(2), limitation had to be assessed with reference to service of the rectification order or its intimation, not by substituting the date of an earlier processing intimation. The rectification order and accompanying intimation pertained to 2025, whereas the appellate order relied on an unrelated 2021 date and contained conflicting entries regarding the date of filing. The assessee's pursuit of rectification and the confused chronology justified condonation of such delay as was reckonable from service of the rectification order.

Conclusion: The issue was decided in favour of the assessee: limitation could not be calculated from the earlier section 143(1) intimation, and the delay was condoned.

Issue (ii): Whether an adjustment of a contingent liability disclosed in the tax audit report, but neither debited nor claimed as a deduction, was rectifiable as a mistake apparent from the record.

Analysis: Section 37 concerns the allowability of expenditure and does not apply to an amount merely disclosed as a contingent liability. The financial statements did not show a debit or recognised liability of Rs. 40,00,000, while the processing intimation recorded nil in the assessee's column and independently introduced the amount in the computation. A tax-audit disclosure, without a corresponding claim for deduction, could not furnish a basis for increasing income through disallowance. Comparison of the audit disclosure, financial statements and processing intimation established a mistake apparent from the record under section 154, without requiring adjudication of the underlying disputed income-tax demand.

Conclusion: The issue was decided in favour of the assessee: the refusal of rectification was unsustainable, and the Rs. 40,00,000 adjustment was required to be deleted.

Final Conclusion: The erroneous limitation treatment was displaced, and rectification was required to remove the unclaimed contingent-liability adjustment while recomputing income, tax and consequential interest.

Ratio Decidendi: An amount merely disclosed as a contingent liability, without debit to the accounts or a claim for deduction, cannot be added as a disallowance; an adjustment based solely on such disclosure is a mistake apparent from the record rectifiable under section 154.

Issues: Whether the entire cash payment reflected in the ledger account could be sustained as unexplained money.

Analysis: The addition had been made under Section 69A of the Income-tax Act, 1961, for cash payments reflected in the ledger account. On substantially similar facts, a coordinate decision had restricted such addition to 10% of the disclosed amount. Applying that decision, the addition was restricted to 10% of the cash payment and directed to be taxed under the normal provisions of the Act.

Conclusion: The addition for unexplained cash payment was restricted to Rs. 40,840, being 10% of Rs. 4,08,400.

Issues: Whether the accused rebutted the statutory presumptions of consideration and legally enforceable liability arising from the cheque, rendering the conviction under Section 138 of the Negotiable Instruments Act, 1881 unsustainable.

Analysis: The presumptions under Sections 118(a) and 139 of the Negotiable Instruments Act, 1881 are rebuttable. An accused may establish a probable defence on the standard of preponderance of probabilities through direct evidence or circumstances on record; upon such rebuttal, the evidentiary burden shifts to the complainant to prove the legally enforceable debt or liability by acceptable evidence.

Analysis: The pre-presentation complaints alleging misuse of the cheque, the stop-payment instruction and dishonour endorsement, the disputed signature, the consultancy relationship, the absence of security or documentary proof for the alleged cash loan, and the failure to establish the source and capacity to advance it collectively constituted a probable defence. The complainant did not thereafter produce cogent evidence establishing the alleged loan or legally enforceable liability.

Conclusion: The statutory presumptions stood rebutted, and the conviction under Section 138 of the Negotiable Instruments Act, 1881 could not be sustained.

Issues: Whether amounts received under an employer's early-retirement scheme were taxable as profits in lieu of salary.

Analysis: The payments were received under a scheme framed upon closure of the employer's unit. Following the co-ordinate-bench ruling on materially identical payments to similarly placed employees, the ex gratia payment was found to be voluntary and not founded on any obligation of the employer under the service terms. Such a payment does not constitute compensation within Section 17(3) of the Income-tax Act, 1961.

Conclusion: The voluntary ex gratia amount was not taxable as profits in lieu of salary under Section 17(3) of the Income-tax Act, 1961, and the addition was deleted in favour of the assessee.

Issues: Whether an assessment completed without issuing a show-cause notice on a proposed prejudicial variation complied with the mandatory faceless assessment procedure.

Analysis: Section 144B requires issuance of a show-cause notice where a variation prejudicial to the assessee is proposed. The record established, and the Revenue conceded, that no such notice was issued before disallowing the cost of acquisition/construction. The omission violated the mandatory statutory procedure and principles of natural justice.

Conclusion: The issue was decided in favour of the assessee; the assessment order was declared non-est in law.