Issues: (i) Whether fund allocations received through NEC constituted consideration for taxable services rendered by the appellant; (ii) Whether amounts relating to work performed for NTPC were liable to service tax; (iii) Whether the extended period of limitation could be invoked.

Issue (i): Whether fund allocations received through NEC constituted consideration for taxable services rendered by the appellant.

Analysis: The allocations were funds transmitted by the Ministry of Water Resources through NEC for the appellant's activities. No service provider-recipient relationship existed between the appellant and NEC, and the allocations could not be characterised as consideration for a taxable service.

Conclusion: The demand based on fund allocations through NEC was unsustainable, in favour of the assessee.

Issue (ii): Whether amounts relating to work performed for NTPC were liable to service tax.

Analysis: Circular No. 96/7/2007-ST dated 23.08.2007 clarifies that statutory and sovereign functions performed by public authorities, with prescribed fees remitted to the Government, are not services rendered for consideration. The appellant performed sovereign functions, remitted the collections to the Government, and retained no amount; NTPC had also not paid the service-tax amount shown in the invoices.

Conclusion: The demand arising from the NTPC transactions was not legally sustainable, in favour of the assessee.

Issue (iii): Whether the extended period of limitation could be invoked.

Analysis: The appellant, being part of the Ministry of Water Resources, entertained a bona fide belief that its sovereign functions were outside service-tax liability. The principal demand related to governmental grants, and service tax had not been collected in the NTPC transactions. These circumstances did not establish suppression of facts.

Conclusion: Invocation of the extended period was invalid, in favour of the assessee.

Final Conclusion: The confirmed service-tax demands failed on merits and, independently, insofar as raised for the extended period, on limitation.

Issues: (i) Whether Bhujia and Cheese Balls cleared in sealed retail packages qualify for the specific nil-rate exemptions under Sl. No. 29 of Notification No. 03/2006-C.E. dated 01.03.2006 and Sl. No. 37 of Notification No. 12/2012-C.E. dated 17.03.2012; (ii) Whether classification under Tariff Item 2106 90 99 excludes the goods from exemption entries referring to Tariff Sub-heading 2106 90.

Issue (i): Whether Bhujia and Cheese Balls cleared in sealed retail packages qualify for the specific nil-rate exemptions under Sl. No. 29 of Notification No. 03/2006-C.E. dated 01.03.2006 and Sl. No. 37 of Notification No. 12/2012-C.E. dated 17.03.2012.

Analysis: Sl. No. 29 and Sl. No. 37 specifically cover Bhujia, namkeen and similar edible preparations in ready-for-consumption form without imposing a restriction concerning sealed-container clearances. Bhujia is expressly named in Sl. No. 37. Cheese Balls, having the character of savoury ready-to-consume preparations, answer the description of namkeen or similar edible preparations under the common parlance test.

Analysis: On the specific-over-general principle, the residual entries for ready-to-eat packaged food under Sl. No. 30 and food preparations not cleared in sealed containers under Sl. No. 38 apply only where the goods do not satisfy the specific exemption description. The sealed-container condition expressly confined to Sl. No. 38 cannot be imported into Sl. No. 37. The Board circular under the earlier notification likewise recognises that packaged goods covered by the specific description retain the nil rate.

Conclusion: Bhujia and Cheese Balls qualify for the respective nil-rate exemptions notwithstanding their clearance in sealed retail packages; the duty demands and consequential interest and penalties are unsustainable. This conclusion is in favour of the assessee.

Issue (ii): Whether classification under Tariff Item 2106 90 99 excludes the goods from exemption entries referring to Tariff Sub-heading 2106 90.

Analysis: Under the tariff classification hierarchy, Tariff Item 2106 90 99 forms part of Tariff Sub-heading 2106 90 and is not mutually exclusive of it. Supplementary Note 6 to Chapter 21 confirms that Tariff Item 2106 90 99 includes namkeen, Bhujia and related preparations. The use of the broader sub-heading in the exemption entries does not justify importing an exclusion for goods classified under its eight-digit tariff item.

Conclusion: Classification under Tariff Item 2106 90 99 does not prevent the goods from falling within the reference to Tariff Sub-heading 2106 90 in the specific exemption entries. This conclusion is in favour of the assessee.

Final Conclusion: The exemption scheme assigns the nil rate to specifically described savoury and similar ready-for-consumption preparations, while the residual packaged-food entries operate only for goods outside those specific descriptions.

Ratio Decidendi: A specific nil-rate exemption for named or similar ready-for-consumption edible preparations prevails over residual entries, and a sealed-container restriction stated only in a separate entry cannot be imported into that specific exemption; an eight-digit tariff item remains within its parent tariff sub-heading.

Issues: Whether a secured creditor with a security interest registered with CERSAI has priority over an unregistered CGST charge and whether the restraint on issuance of NOC for the secured assets was valid.

Analysis: Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 accords first priority to the dues of a secured creditor whose security interest is registered with CERSAI. The petitioner bank's security interest stood registered from 20.12.2020, whereas the revenue authority failed to establish registration of its charge with CERSAI. The provisional attachment under Section 83 of the Central Goods and Services Tax Act, 2017 did not displace the bank's statutory priority.

Conclusion: The petitioner bank's registered security interest has priority over the revenue dues, and the letter restraining issuance of NOC in respect of the secured flats was invalid.

Issues: (i) Whether the Supreme Court's deferral direction concerning delayed adjudication required the writ petition to remain pending; (ii) Whether, following the adjudication orders, the petitioner should be relegated to the statutory appellate remedy.

Issue (i): Whether the Supreme Court's deferral direction concerning delayed adjudication required the writ petition to remain pending.

Analysis: The deferral direction was issued in the context of matters concerning pending adjudication and the larger issue of delay. The provisional assessments in question had culminated in adjudication orders, including an order that pre-dated the writ petition. The controversy was therefore no longer confined to delayed finalisation of provisional assessments.

Conclusion: The issue was answered in the negative; the writ petition was not required to remain pending awaiting the Supreme Court proceedings.

Issue (ii): Whether, following the adjudication orders, the petitioner should be relegated to the statutory appellate remedy.

Analysis: Section 128(1) of the Customs Act, 1962 provides an efficacious appeal against the adjudication orders. The appellate forum can consider the legality of those orders, the legal effect of the alleged delay, and consequential claims concerning the securities furnished. No exceptional circumstance justified bypassing that remedy. The material non-disclosure of the pre-existing adjudication order also supported refusal of discretionary writ jurisdiction.

Conclusion: The issue was answered in the affirmative; the challenges and available contentions must be pursued through the statutory appellate remedy.

Final Conclusion: The legality of the adjudication orders, the consequences of any delay in their making, and related claims concerning bank guarantees remain open for determination by the competent appellate forum in accordance with law.

Ratio Decidendi: Where appealable adjudication orders have been passed and no exceptional circumstance is shown, writ jurisdiction should not bypass an efficacious statutory appellate remedy.

Issues: Whether interest on the refund of amounts deposited during investigation is payable from the date of deposit until the date of refund, notwithstanding that the Revenue's challenge to the order setting aside the demand was dismissed subsequently.

Analysis: The confirmed demand had been set aside, with the result that the investigation deposit was not payable from inception. The amount was deposited in 2008 and retained until its refund in 2024. Applying the established principle governing interest on delayed refund of investigation deposits, the subsequent dismissal of the Revenue's challenge did not justify retention of money that was never lawfully due without interest for the period of such retention.

Conclusion: Interest is payable to the assessee on the refunded investigation deposit from the date of deposit until the date of refund.

Issues: Whether the Supreme Court ruling concerning State legislative competence over intoxicating liquors supported an additional ground challenging the service-tax demand on job-work production.

Analysis: The constitutional ruling relied upon concerned the respective legislative fields relating to intoxicating liquors, including the scope of State power under Entry 8 of List II and Parliamentary control over industries under Entry 52 of List I. It did not determine the levy of service tax on services used for production of goods on a job-work basis. A precedent governs what it actually decides and cannot be extended to a distinct service-tax issue not considered therein. Reliance on an otherwise relevant decision could also be made during hearing without a separate application.

Conclusion: The cited constitutional ruling did not establish that the service-tax demand or jurisdiction to levy service tax on the job-work service was invalid.

Issues: Whether the Tribunal had jurisdiction to entertain an appeal concerning gold chains brought into India by an international passenger.

Analysis: The first proviso to Section 129A(1) expressly excludes the Tribunal's appellate jurisdiction over orders relating to goods imported or exported as baggage. The gold chains were brought by the appellant as an arriving international passenger; their recovery from his person, alleged non-declaration, intended use, concealment, invoice, or duty-evasion allegations concern the merits and do not change the goods' character as baggage. Section 129DD provides revision before the Central Government for such orders.

Conclusion: The impugned order related to goods imported as baggage, and the Tribunal therefore lacked appellate jurisdiction; the available recourse is revision under Section 129DD of the Customs Act, 1962.

Issues: (i) Whether e-governance portal and data-digitisation services provided to government departments and educational institutions were taxable as OIDAR, business auxiliary, or business support services before 1 July 2012; (ii) Whether portal services supplied to universities and educational institutions after 1 July 2012 were exempt from service tax; and (iii) Whether interest earned on fixed deposits from temporarily retained collections was liable to service tax.

Issue (i): Whether e-governance portal and data-digitisation services provided to government departments and educational institutions were taxable as OIDAR, business auxiliary, or business support services before 1 July 2012.

Analysis: OIDAR requires the service provider to provide access to data possessed by it. The appellant merely created and operated a network enabling government officers and citizens to access data owned by the State Government; it did not provide access to its own data. The support rendered to State departments, universities, and educational institutions was directed to governmental and educational functions and was not supplied to entities engaged in business or commerce.

Conclusion: The services were not taxable as OIDAR, business auxiliary, or business support services for the pre-negative-list period, in favour of the assessee.

Issue (ii): Whether portal services supplied to universities and educational institutions after 1 July 2012 were exempt from service tax.

Analysis: Although services were generally taxable after the negative-list regime commenced, portal services supplied to universities and educational institutions fell within Entry 9(d) of Exemption Notification No. 25/2012-ST dated 20.06.2012.

Conclusion: The portal services provided to universities and educational institutions were exempt from service tax after 1 July 2012, in favour of the assessee.

Issue (iii): Whether interest earned on fixed deposits from temporarily retained collections was liable to service tax.

Analysis: The fixed-deposit interest arose because amounts collected towards government fees, educational fees, utility bills, and premiums were remitted after the stipulated short interval. Interest represented the time value of money paid by the bank for the deposits and was not consideration for any service rendered by the appellant.

Conclusion: Fixed-deposit interest was not exigible to service tax under either the pre-negative-list or post-negative-list regime, in favour of the assessee.

Final Conclusion: The disputed e-governance and educational-service receipts either did not constitute taxable services or were exempt, while fixed-deposit interest lay outside the charge of service tax.

Issues: (i) Whether separately billed food and beverages supplied by room/grand-room service were taxable restaurant or accommodation services; (ii) Whether consideration for exclusive branding and display of liquor brands constituted taxable sponsorship/promotional activity; (iii) Whether electricity charges recovered at actual consumption from tenants formed taxable consideration; (iv) Whether the demand beyond the normal limitation period was sustainable.

Issue (i): Whether separately billed food and beverages supplied by room/grand-room service were taxable restaurant or accommodation services.

Analysis: Section 65(105)(zzzzv) of the Finance Act, 1994 confined restaurant service to serving food or beverages in the premises of an air-conditioned restaurant licensed to serve alcohol. Hotel rooms were not restaurant premises, and the food was separately invoiced without evidence that its value formed part of the room tariff. Such separately charged food was a sale/transfer of goods excluded from service under Section 65B(44) of the Finance Act, 1994.

Conclusion: The room and grand-room food and beverage receipts were not taxable services. In favour of the assessee.

Issue (ii): Whether consideration for exclusive branding and display of liquor brands constituted taxable sponsorship/promotional activity.

Analysis: The agreements required exclusive branding and promotion of specified liquor brands and mandatory display of branded accessories. The receipts were therefore consideration for promotional and branding activity, rather than trade margins arising solely from liquor sales. For the pre-negative-list period, the arrangements fell within the statutory scope of sponsorship; for the post-negative-list period, they were services under Section 65B(44) of the Finance Act, 1994 and were not covered by Section 66D of that Act.

Conclusion: The branding-related receipts constituted taxable promotional activity and not mere trading income. Against the assessee.

Issue (iii): Whether electricity charges recovered at actual consumption from tenants formed taxable consideration.

Analysis: The charges represented actual electricity consumption recorded through sub-meters, collected from tenants and remitted to electricity suppliers. They were not consideration for renting services. Rule 5(1) of the Service Tax (Determination of Value) Rules could not include such reimbursement in taxable value, having been held ultra vires.

Conclusion: Electricity charges recovered on actual-consumption basis were not taxable consideration. In favour of the assessee.

Issue (iv): Whether the demand beyond the normal limitation period was sustainable.

Analysis: The notice did not invoke the proviso to Section 73(1) of the Finance Act, 1994, and the record did not establish a deliberate act of suppression or other conduct evidencing intent to evade tax. Mere non-declaration or omission did not establish wilful suppression.

Conclusion: Recovery beyond the normal limitation period was unsustainable; the sponsorship-service demand could survive only for the normal period. In favour of the assessee.

Final Conclusion: Only the service-tax liability on sponsorship/promotional activity for the normal limitation period survives; the remaining impugned demands are set aside.

Issues: (i) Taxability of pre-July 2012 construction services and entitlement to abatement and recipient-side tax liability; (ii) Valuation of post-July 2012 works contract services under Rule 2A and entitlement to abatement and recipient-side tax liability; (iii) Inclusion of free-of-cost materials supplied by customers in the taxable value of works contracts; (iv) Classification of the services treated as exclusive service contracts; (v) Appropriation of service tax allegedly deposited during investigation; (vi) Validity of penalty for non-payment of service tax and non-filing of returns.

Issue (i): Taxability of pre-July 2012 construction services and entitlement to abatement and recipient-side tax liability.

Analysis: Construction of a hospital is commercial or industrial construction service unless evidence establishes that it was intended to be a charitable hospital. The applicable abatement had already been extended, and the tax liability was correspondingly reduced wherever the recipient was required to discharge part of the tax.

Conclusion: The demand for the pre-July 2012 period was sustained; against the assessee.

Issue (ii): Valuation of post-July 2012 works contract services under Rule 2A and entitlement to abatement and recipient-side tax liability.

Analysis: Rule 2A of the Service Tax (Determination of Value) Rules, 2006 permits exclusion of the actual value of goods where established, or valuation on the prescribed presumptive basis. The assessment had allowed the applicable abatement and reduced provider-side liability wherever reverse-charge liability applied. No material established that the actual value of goods exceeded the abatement already allowed.

Conclusion: The valuation and demand for the post-July 2012 works contract services were sustained; against the assessee.

Issue (iii): Inclusion of free-of-cost materials supplied by customers in the taxable value of works contracts.

Analysis: Materials supplied free of cost by customers do not form part of the gross amount charged for determining the taxable value of a works contract.

Conclusion: The service tax demand attributable to free-of-cost customer-supplied materials was set aside; in favour of the assessee.

Issue (iv): Classification of the services treated as exclusive service contracts.

Analysis: The assertion that the services classified as exclusive service contracts were works contracts was unsupported by material in the appeal.

Conclusion: The classification and corresponding demand were sustained; against the assessee.

Issue (v): Appropriation of service tax allegedly deposited during investigation.

Analysis: The alleged deposits require verification as to whether they were paid as service tax.

Conclusion: Any amounts verified as service tax deposits shall be appropriated against the confirmed demand; in favour of the assessee to that extent.

Issue (vi): Validity of penalty for non-payment of service tax and non-filing of returns.

Analysis: The assessee neither paid service tax nor filed returns or declared the services, and the transactions emerged only through investigation.

Conclusion: The penalty under Section 76 of the Finance Act, 1994 was sustained; against the assessee.

Final Conclusion: The tax component attributable to customer-supplied free-of-cost materials is excluded, while the remaining valuation, classification, and penalty findings stand, with adjustment of verified tax deposits.

Ratio Decidendi: Free-of-cost materials supplied by the recipient cannot be included in the gross amount charged for valuation of works contract service.

Issues: Whether an arrest under Section 26 of the Health Security and National Security Cess Act, 2025 is lawful when the recorded reasons to believe of the competent officer were not communicated to the arrestees before arrest.

Analysis: Section 26 establishes a two-stage arrest process: the competent officer must first record reasons to believe based on material and evidence, following which another authorised officer may execute the arrest. Communication of those reasons to the person proposed to be arrested is necessary to enable an effective challenge and pursuit of anticipatory bail. This requirement applies to arrests predating the judicial pronouncement that elucidated it, since constitutional adjudication declares the existing law unless its operation is expressly made prospective. Production of the reasons before the Magistrate at remand does not substitute their communication to the arrestees.

Conclusion: Non-communication of the reasons to believe rendered the arrest unlawful and violative of Articles 21 and 22 of the Constitution; the arrest was quashed and the petitioners were directed to be released if not required in any other case.

Issues: Whether receipts from the sale of flats constructed on land held by the assessee were taxable as capital gains eligible for deduction under Section 54, or as business income from an adventure in the nature of trade.

Analysis: The character of a transaction depends on the total effect of the relevant facts, including the nature and quantity of the asset, improvement undertaken to enhance its saleability, the manner of financing and sale, and the intention disclosed by surrounding circumstances. Although the land had been held for about sixteen years and the assessee was not a regular property trader, twelve flats were constructed on it, the substantial construction cost was financed through advances from prospective purchasers before construction, and eight flats were sold to unrelated persons. These circumstances were consistent with commercial development and sale by a real-estate developer. A single transaction may constitute an adventure in the nature of trade; regularity of similar transactions is not determinative. The cited instances involving mere plotting of land or development through an independent builder were materially distinguishable.

Conclusion: The sale of flats constituted an adventure in the nature of trade and was taxable as business income, not capital gains. Deduction under Section 54 was unavailable; however, the proportionate cost of land and construction attributable to the flats sold was deductible in computing the business income.

Issues: Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 survives after the sole underlying unexplained cash-credit addition under Section 68 is deleted.

Analysis: The addition under Section 68 had already been deleted in the quantum appeal. That addition was the sole foundation for the penalty, and its deletion left no basis to sustain the penalty.

Conclusion: The penalty under Section 271(1)(c) cannot survive and is directed to be deleted, in favour of the assessee.

Issues: Whether the entire value of alleged suppressed sales, inferred from a shortage in stock, could be added as income where the underlying stock represented explained opening stock.

Analysis: Although non-production of books of account justified their rejection, the computation of alleged suppressed sales commenced with the opening stock disclosed in the audited accounts. There was no finding that the jewellery allegedly sold outside the books represented an undisclosed investment. The allegation was of unrecorded sales rather than excess or unexplained stock. Accordingly, the sale proceeds could not wholly constitute undisclosed income; only the profit embedded in those transactions was taxable. The gross-profit rate of 2.32%, already adopted in the assessment, was considered appropriate.

Conclusion: Addition was sustainable only to the extent of 2.32% of the alleged suppressed sales; the balance addition representing the value of jewellery sold was deleted.

Issues: (i) Whether bank credits representing transfers between the assessee's own bank accounts could be treated as unexplained money under Section 69A; and (ii) Whether the assessee could claim the 30% standard deduction from admitted rental income despite not filing a return of income.

Issue (i): Whether bank credits representing transfers between the assessee's own bank accounts could be treated as unexplained money under Section 69A.

Analysis: The bank statements established that the impugned credits were transfers between the assessee's Deutsche Bank and ICICI Bank accounts. The source of the transfers was salary income credited in the assessee's account, on which tax had been deducted at source. The credits were therefore duly explained.

Conclusion: The bank credits could not be treated as unexplained money under Section 69A, and the addition was deleted in favour of the assessee.

Issue (ii): Whether the assessee could claim the 30% standard deduction from admitted rental income despite not filing a return of income.

Analysis: Section 24 permits the statutory standard deduction from rental income, and the Income-tax Act does not bar that claim merely because the return of income was not filed. Since the rental receipts were admitted, the deduction was allowable against such receipts.

Conclusion: The assessee was entitled to the 30% standard deduction from rental income; the rental-income addition was sustained only after allowing that deduction, partly in favour of the assessee.

Final Conclusion: The unexplained-money addition was wholly deleted, while the rental-income addition was reduced by the statutory deduction.

Issues: Whether transactions recorded in an impounded diary could be assessed wholly as unexplained income or were business receipts liable to income estimation.

Analysis: The diary entries were found to reflect cash sales, bank deposits and movement of business cash of an ice-cream and milk-products business. Although complete transaction-wise correlation was unavailable, the entries were accepted as business proceeds rather than independent unexplained income. Applying presumptive taxation, income was estimated at 8% of the recorded sums under Section 44AD of the Income-tax Act, 1961.

Conclusion: The additions were restricted to estimated income of Rs. 84,800 for assessment year 2015-16 and Rs. 3,16,432 for assessment year 2016-17, with the remaining additions deleted, in favour of the assessee.

Issues: Whether gross profit could be estimated on the difference between turnover reported in monthly GST returns and turnover disclosed in the books where the difference was reconciled as duplicate reporting.

Analysis: Although non-compliance during assessment permitted an ex parte best-judgment assessment under Section 144 of the Income-tax Act, 1961, the assessment was required to determine the correct taxable income. The turnover mismatch in the monthly GSTR-1, without independent material showing unaccounted sales, purchases, receipts or bank transactions, did not by itself establish suppression of turnover. The sales ledgers, monthly GST returns and annual GSTR-9 reconciled the difference as January and February 2020 sales inadvertently included again in the March 2020 GSTR-1. The annual turnover in GSTR-9 matched the books and profit and loss account, and no material contradicted the reconciliation. Once the alleged undisclosed turnover was not established, estimation of gross profit thereon had no basis.

Conclusion: The differential turnover was duplicate reporting and not undisclosed business turnover; the addition of gross profit thereon was deleted in favour of the assessee.

Issues: Whether the final assessment order required restoration because the DRP had not adjudicated the objections concerning separate transfer-pricing benchmarking of global procurement charges and outstanding receivables, and rejection of the Transactional Net Margin Method.

Analysis: Under the framework of Section 144C(13) of the Income-tax Act, 1961, the final assessment order followed the DRP directions. The objections that the disputed transactions were interlinked with other international transactions and that the Transactional Net Margin Method had been accepted in earlier years under the Principle of Consistency were specifically raised before the DRP. The directions did not address those objections, necessitating Reasoned Adjudication.

Conclusion: In favour of the assessee, the final assessment order was set aside and the matter was restored to the DRP to adjudicate all the objections by a reasoned order.

Issues: (i) Whether the 4 per cent payment for know-how and licence rights, falling at the upper boundary of the arm's-length range determined by the DRP, was required to be treated as the arm's-length price under Rule 10CA(5) of the Income-tax Rules; (ii) Whether the arm's-length price of SBS, CPS and administrative intra-group services could be determined at nil; (iii) Whether expenditure on those intra-group services was allowable under Section 37(1) of the Income-tax Act, 1961.

Issue (i): Whether the 4 per cent payment for know-how and licence rights, falling at the upper boundary of the arm's-length range determined by the DRP, was required to be treated as the arm's-length price under Rule 10CA(5) of the Income-tax Rules.

Analysis: The Comparable Uncontrolled Price method was applied to the royalty transaction. Under Rule 10CA(4) to (6), where the actual price falls within the 35th-to-65th-percentile arm's-length range, it is deemed to be the arm's-length price; the median applies only where the actual price lies outside that range. The range retained after the DRP's exclusions was 3 per cent to 4 per cent, and the actual royalty rate of 4 per cent fell within that range, including its upper boundary.

Conclusion: The 4 per cent royalty rate was deemed to be the arm's-length price under Rule 10CA(5), and the royalty adjustment was deleted in favour of the assessee.

Issue (ii): Whether the arm's-length price of SBS, CPS and administrative intra-group services could be determined at nil.

Analysis: The arm's-length principle required examination of business need, actual rendition, expected economic or commercial benefit, duplication and shareholder activity, followed by a statutory pricing exercise under Section 92C of the Income-tax Act, 1961. The operational records, identified users, service tickets, system access details, agreements, invoices and cost-allocation workings established that SBS supported accounting, procurement, sales and inventory operations, CPS supported customer and project management, and the administrative services supported business functions. No specific duplicate service or shareholder activity was identified. The allocation keys based on locations, users and relative revenue were not shown to be unreliable. After rejecting TNMM, the nil determination under the Other Method lacked an objective pricing foundation, as no comparable uncontrolled transaction, quotation, valuation or other reliable economic material was identified.

Conclusion: The nil arm's-length price determination for the intra-group services was unsustainable, and the transfer-pricing adjustment was deleted in favour of the assessee.

Issue (iii): Whether expenditure on those intra-group services was allowable under Section 37(1) of the Income-tax Act, 1961.

Analysis: The Section 37(1) enquiry is distinct from arm's-length pricing and concerns whether expenditure was genuinely incurred wholly and exclusively for business. The established use of the systems and support services in accounting, procurement, sales, inventory, customer management, compliance, treasury, human resources, legal and tax functions demonstrated a direct business nexus. There was no finding that the expenditure was capital, personal, prohibited by law or unrelated to business. Commercial expediency cannot be displaced merely because the Revenue considers that the business could have functioned differently or obtained greater benefit.

Conclusion: The expenditure was allowable under Section 37(1), and the alternative disallowance was deleted in favour of the assessee.

Final Conclusion: Neither the royalty payment nor the demonstrated intra-group service charges could be reduced through a pricing approach that disregarded the statutory arm's-length framework and the established business use of the services.

Ratio Decidendi: Transfer-pricing adjustments must follow the prescribed statutory pricing methodology and cannot rest on subjective assessments of commercial necessity or benefit in place of an objective arm's-length determination.

Issues: (i) Whether two adjoining flats purchased under separate conveyances and bearing separate flat numbers can constitute "one residential house" for exemption under section 54F; (ii) Whether ownership of one pre-existing residential house attracts the bar in clause (a)(i) of the first proviso to section 54F; (iii) Whether joint registration of the new property with the assessee's wife defeats exemption where the investment was made by the assessee.

Issue (i): Whether two adjoining flats purchased under separate conveyances and bearing separate flat numbers can constitute "one residential house" for exemption under section 54F.

Analysis: Section 54F confines the exemption to investment in one residential house in India, but does not prescribe a single municipal flat number, a single conveyance instrument, or municipal/RERA amalgamation approval as an independent condition. The relevant enquiry is whether the units are, in their actual physical and functional character, a composite residential dwelling rather than independent residential houses. Separate deeds, titles, parking spaces and flat numbers are relevant evidentiary circumstances but are not conclusive. The post-2014 substitution of "one residential house" restricts investment in multiple independent houses and does not exclude interconnected units constituting one house.

Conclusion: Two adjoining units may qualify as one residential house under section 54F if they are physically interconnected and function as one composite dwelling; separate conveyances, flat numbers and absence of amalgamation approval do not by themselves defeat the exemption. This issue is decided in favour of the assessee.

Issue (ii): Whether ownership of one pre-existing residential house attracts the bar in clause (a)(i) of the first proviso to section 54F.

Analysis: The statutory bar applies only where the assessee owns more than one residential house, other than the new asset, on the date of transfer. Ownership of a single pre-existing residential house does not meet that statutory threshold once the adjoining units are treated as one new residential asset.

Conclusion: Ownership of one other residential house does not attract clause (a)(i) of the first proviso to section 54F. This issue is decided in favour of the assessee.

Issue (iii): Whether joint registration of the new property with the assessee's wife defeats exemption where the investment was made by the assessee.

Analysis: Mere inclusion of the spouse's name in conveyance documents is insufficient to displace the assessee's investment where no material establishes a financial contribution by the spouse towards acquisition of the new residential property.

Conclusion: Joint registration with the assessee's wife does not by itself bar exemption under section 54F where the assessee alone made the investment. This issue is decided in favour of the assessee.

Final Conclusion: The legal eligibility for exemption on a composite residential house is accepted, while the balance claim is confined to factual verification of whether the adjoining units are physically interconnected and actually used as one dwelling.

Ratio Decidendi: For section 54F, legally distinct residential units constitute one residential house where their actual physical configuration and functional residential use establish a single composite dwelling; separate conveyances or flat numbers are not determinative.