TaxTMI Updates e-Newsletter
Jan 01,2021

Advance ruling admissibility - classification of goods - flavoured milk - supply under a common brand - shareholding and control - pendency of proceedings against brand owner - first proviso to Section 98(2) of the CGST Act, 2017 - application rejected as inadmissible

Advance ruling admissibility - flavoured milk - supply under a common brand - pendency of proceedings against brand owner - first proviso to Section 98(2) of the CGST Act, 2017 - Admissibility of the applicant's request for advance ruling on classification of 'flavoured milk'. - HELD THAT: - The Authority examined whether the applicant's advance ruling application on classification of 'flavoured milk' is maintainable in view of pending proceedings against the brand owner. The applicant supplies the impugned product under the 'Nandini' brand, which is owned by M/s KMF, and admitted that it is a shareholder in M/s KMF. The Authority found that because the applicant is a shareholder of the brand owner and supplies the same product under that brand, the pendency of classification proceedings against M/s KMF before the DGGI extends to the applicant. Consequently, the matter falls within the bar created by the first proviso to Section 98(2) of the CGST Act, 2017, rendering the application inadmissible. The Authority therefore declined to decide the classification issue on merits and rejected the application as inadmissible under the cited proviso. [Paras 6, 7]

Application for advance ruling is rejected as inadmissible under the first proviso to Section 98(2) of the CGST Act, 2017.

Final Conclusion: The Authority dismissed the application for advance ruling on classification of 'flavoured milk' as inadmissible, holding that pendency of proceedings against the brand owner (M/s KMF) applies to the applicant and therefore the application is barred by the first proviso to Section 98(2) of the CGST Act, 2017.

Advance ruling admissibility - prohibition on ruling where matter is pending in proceedings against a related person under the first proviso to Section 98(2) of the CGST Act, 2017 - effect of ownership and managerial control on relatedness for admissibility - classification of goods (not decided on merits)

Advance ruling admissibility - prohibition on ruling where matter is pending in proceedings against a related person under the first proviso to Section 98(2) of the CGST Act, 2017 - effect of ownership and managerial control on relatedness for admissibility - Whether the application for advance ruling on classification of 'flavoured milk' is admissible in view of pending proceedings against the brand owner. - HELD THAT: - The authority found that the applicant admitted that the brand owner (M/s KMF) holds 90% shareholding and exercises management/administrative control over the applicant. The applicant manufactures and supplies the impugned flavoured milk under the same brand owned by M/s KMF and acts as a job-worker to that brand owner. Given the pending proceedings against M/s KMF before the DGGI on classification of the same product, the authority held that the pendency of those proceedings extends to the applicant by virtue of the close nexus and control, attracting the bar in the first proviso to Section 98(2) of the CGST Act, 2017. Consequently, the advance ruling application was held to be inadmissible and rejected without adjudicating the classification issue on merits. [Paras 6, 7]

Application rejected as inadmissible under the first proviso to Section 98(2) of the CGST Act, 2017 because proceedings on the same issue are pending against the related brand owner.

Final Conclusion: The Authority rejected the applicant's request for an advance ruling as inadmissible because the same classification issue was the subject of pending proceedings against the brand owner who, by virtue of substantial shareholding and control, was held to be related to the applicant.

Failure to pass on benefit of input tax credit - anti-profiteering - obligation under Section 171(1) of the CGST Act to pass on additional ITC - penalty under Section 171(3A) - non-retrospective application

Failure to pass on benefit of input tax credit - obligation under Section 171(1) of the CGST Act to pass on additional ITC - anti-profiteering - The Respondent denied the benefit of additional input tax credit to buyers of flats in the project 'Green Court' for the period 01.07.2017 to 31.08.2018, thereby violating Section 171(1) of the CGST Act, 2017. - HELD THAT: - The Authority considered the DGAP report dated 28.02.2019 and the materials placed before it, issued notice and heard parties, and in Order No. 57/2019 determined that the Respondent had not passed on the benefit of additional ITC to the applicants and other home buyers in the specified project for the period 01.07.2017 to 31.08.2018. On that basis the Authority held that the Respondent had indulged in profiteering and had violated the statutory obligation under Section 171(1) of the CGST Act, 2017. [Paras 2, 6]

The Respondent was held to have violated Section 171(1) by not passing on additional ITC for the period 01.07.2017 to 31.08.2018.

Penalty under Section 171(3A) - non-retrospective application - Whether penalty under Section 171(3A) of the CGST Act, 2017 can be imposed on the Respondent for the violation that occurred between 01.07.2017 and 31.08.2018. - HELD THAT: - The Authority noted that sub section 171(3A) was inserted by the Finance (No. 2) Act, 2019 and brought into force from 01.01.2020. As the penalty provision did not exist during the period when the contravention occurred (01.07.2017 to 31.12.2018), the Authority concluded that the penalty under Section 171(3A) could not be imposed retrospectively. Consequently, the notice seeking imposition of penalty under Section 171(3A) was withdrawn and the penalty proceedings were dropped. [Paras 7, 8]

Penalty under Section 171(3A) could not be imposed for the period 01.07.2017 to 31.08.2018; the penalty proceedings were withdrawn and dropped.

Final Conclusion: The Authority upheld the DGAP's finding that the Respondent failed to pass on the benefit of additional ITC to flat buyers in the 'Green Court' project for 01.07.2017 to 31.08.2018 and thus violated Section 171(1) of the CGST Act, 2017; however, penalty proceedings under Section 171(3A) were withdrawn because the penalty provision was enacted and brought into force after the period of the contravention and therefore cannot be applied retrospectively.

Violation of Section 171(1) - failure to pass on benefit of reduction in rate of tax - Applicability of penal provision under Section 122(1)(i) to anti profiteering - Non retroactivity of penal provision inserted by Finance Act, 2019 (Section 171(3A))

Violation of Section 171(1) - failure to pass on benefit of reduction in rate of tax - Respondent did not pass on the benefit of reduction in the rate of tax to customers for the product "Vaseline VTM 400 ml" for the period 15.11.2017 to 31.01.2018. - HELD THAT: - The Authority, upon consideration of the DGAP's report and the parties' submissions, reaffirmed that the respondent failed to effect a commensurate reduction in the price consequent to the tax rate reduction and thereby violated the mandate of Section 171(1) of the CGST Act, 2017. The finding that the base price was enhanced equal to the amount of reduced tax reflects that the benefit was denied to customers. This conclusion reiterates the earlier determination of profiteering and contravention for the specified period. [Paras 6]

Violation of Section 171(1) established for the period 15.11.2017 to 31.01.2018.

Applicability of penal provision under Section 122(1)(i) to anti profiteering - Penalty under Section 122(1)(i) of the CGST Act, 2017 is not attracted for mere non passing of benefit under Section 171(1). - HELD THAT: - A review of Section 122(1)(i) shows that it penalises issuance of incorrect or false invoices while charging excess consideration and GST, but does not, on its face, prescribe penalty for failure to pass on benefits of a tax rate reduction under Section 171(1). As no specific penalty was provided in the statute for the anti profiteering contravention during the relevant period, the show cause notice invoking Section 122(1)(i) for that breach could not be sustained. [Paras 7]

Penalty under Section 122(1)(i) cannot be imposed for the violation of Section 171(1) in the period in question.

Non retroactivity of penal provision inserted by Finance Act, 2019 (Section 171(3A)) - The penal provision introduced by Section 112 of the Finance Act, 2019 (inserting Section 171(3A)) coming into force w.e.f. 01.01.2020 cannot be applied retrospectively to penalise conduct occurring between 15.11.2017 and 31.01.2018. - HELD THAT: - The Authority observed that specific penalty provisions for breach of Section 171(1) were inserted only by the Finance Act, 2019 and became effective from 01.01.2020. Since no penalty provision existed at the time the contravention occurred, imposing the later enacted penal provision retrospectively would be impermissible. Consequently, the proceedings initiated for levy of penalty based on the earlier show cause notice were withdrawn and dropped. [Paras 8, 9]

The penalty under the subsequently inserted Section 171(3A) cannot be imposed retrospectively; penalty proceedings are withdrawn and dropped.

Final Conclusion: The Authority reaffirms that the respondent committed a violation of Section 171(1) for the period 15.11.2017 to 31.01.2018, but holds that no penal provision existed at that time and that neither Section 122(1)(i) nor the penal provision later inserted as Section 171(3A) (effective 01.01.2020) can be invoked retrospectively; accordingly, the notice for penalty is withdrawn and the penalty proceedings are dropped.

Violation of Section 171(1) - failure to pass on benefit of tax rate reduction - Penalty under Section 122(1)(i) for issuing incorrect or false invoices - Non-retrospectivity of penal provision inserted as Section 171(3A) effective 01.01.2020

Violation of Section 171(1) - failure to pass on benefit of tax rate reduction - The Respondent did not pass on the benefit of rate reduction to customers for the period 15.11.2017 to 31.01.2018 and thus violated the provisions of Section 171(1) of the CGST Act, 2017. - HELD THAT: - The Authority, having considered the DGAP's investigation report and the material on record, found that the Respondent failed to pass on the benefit of reduced GST rates to the complainant and other customers who purchased items during the specified period. The Authority recorded that such failure constituted a contravention of Section 171(1). The finding restates and affirms the determination made in the Authority's earlier order that the profiteered amount was assessable for the stated period. [Paras 6]

Respondent held to have violated Section 171(1) for the period 15.11.2017 to 31.01.2018.

Penalty under Section 122(1)(i) for issuing incorrect or false invoices - Penalty under Section 122(1)(i) cannot be imposed for failure to pass on the benefit of rate reduction as contemplated by Section 171(1), because Section 122(1)(i) does not cover that violation. - HELD THAT: - The Authority examined whether the penal provision in Section 122(1)(i), which addresses issuance of incorrect or false invoices while charging excess consideration and GST, could be invoked for the contravention of Section 171(1). On construction, the Authority found that the offence addressed by Section 122(1)(i) does not encompass mere non-passing of rate reduction benefits under Section 171(1). Consequently, the show cause notice issued under Section 122(1)(i) for the same was without basis and withdrawn. [Paras 7]

Penalty proceedings under Section 122(1)(i) withdrawn as that provision does not apply to the violation of Section 171(1).

Non-retrospectivity of penal provision inserted as Section 171(3A) effective 01.01.2020 - The penal provision inserted as Section 171(3A) by Section 112 of the Finance Act, 2019, which came into force w.e.f. 01.01.2020, cannot be imposed retrospectively for the period 15.11.2017 to 31.01.2018. - HELD THAT: - The Authority noted that specific penalty provisions for violation of Section 171(1) were introduced only by the Finance Act, 2019, through insertion of Section 171(3A) effective from 01.01.2020. As no penalty provision existed for the period when the contravention occurred, the Authority held that the subsequently enacted penal provision could not be applied retrospectively to impose penalty for the earlier period. Accordingly, the penalty proceedings initiated earlier were dropped. [Paras 8, 9]

Penalty under the newly inserted Section 171(3A) cannot be imposed retrospectively for violations occurring between 15.11.2017 and 31.01.2018; penalty proceedings dropped.

Final Conclusion: The Authority affirmed that the Respondent violated Section 171(1) for the period 15.11.2017 to 31.01.2018 but held that neither Section 122(1)(i) nor the penal provision subsequently inserted as Section 171(3A) (effective 01.01.2020) could be applied to impose penalty for that period; the penalty notice issued under Section 122(1)(i) was withdrawn and the penalty proceedings dropped.

Anti-profiteering under Section 171 of the CGST Act - passing on benefit of reduction in rate of tax by way of commensurate reduction in prices - commensurate reduction in prices as the legally prescribed mechanism for passing on tax-rate benefits - determination and computation of profiteered amount - deposit of profiteered amount in Central and State Consumer Welfare Funds - interest on profiteered amount

Reduction in GST rate - Rate of GST on admission to exhibition of cinematograph films for specified ticket-price slabs was reduced w.e.f. 01.01.2019. - HELD THAT: - The Authority found as a matter of fact, unchallenged by the respondent, that the Central and State Governments reduced GST rates on admission to cinematograph films: for tickets priced Rs.100 or less the rate was reduced from 18% to 12% and for tickets above Rs.100 the rate was reduced from 28% to 18% with effect from 01.01.2019. This factual and legal conclusion formed the predicate for the application of Section 171's anti-profiteering obligations in the present case. [Paras 9, 21]

GST rate reduction w.e.f. 01.01.2019 is accepted as established.

Passing on benefit of reduction in rate of tax by way of commensurate reduction in prices - anti-profiteering under Section 171 of the CGST Act - Whether the respondent passed on the benefit of the GST rate reduction to recipients for the ticket categories complained of. - HELD THAT: - Applying Section 171(1), the Authority held that a supplier must pass on a tax-rate benefit by a commensurate monetary reduction in the final price payable by the consumer. Examination of invoice-level sales data showed three ticket categories pre- and post-rate reduction. For Upper and Lower Balcony tickets the cum-tax price fell from Rs.118 to Rs.112 and base price remained unchanged. For First Class and Second Class tickets the respondent increased base prices after the rate change such that the cum-tax selling prices remained at pre-reduction levels (Rs.80 and Rs.50 respectively), instead of being reduced to the commensurate cum-tax levels. Contentions about licensing regime, procurement costs, dynamic pricing, payments to producers/distributors or absence of ITC benefit were either unsupported by documentary evidence or irrelevant to the statutory requirement to pass on the tax-rate reduction. The Authority also noted that temporary reductions effected for a limited period (11.03.2019 to 08.05.2019) were considered in computation, but overall non-compliance continued through 30.06.2019. [Paras 14, 15, 29]

Respondent failed to pass on the benefit of the GST rate reduction in respect of First Class and Second Class tickets for the period 01.01.2019 to 30.06.2019.

Determination and computation of profiteered amount - deposit of profiteered amount in Central and State Consumer Welfare Funds - interest on profiteered amount - Quantification of profiteering and remedial directions where recipients are not identifiable. - HELD THAT: - Using the respondent's outward-supply data for the investigation period, the Authority computed the excess base price per ticket and the corresponding profiteered amount (including GST on the profiteered portion) for First Class and Second Class tickets for 01.01.2019 to 30.06.2019. The total profiteered amount was determined to be Rs.2,23,850 for the period under investigation. As recipients were not identifiable from the records, the Authority ordered deposit of half the profiteered amount into the Central Consumer Welfare Fund and half into the Telangana State Consumer Welfare Fund. The respondent was directed to deposit the profiteered amount along with interest at 18% from the date of collection until deposit, to reduce ticket prices in accordance with the tax-rate reduction, and compliance monitoring was entrusted to the State Commissioners under DGAP supervision. [Paras 15, 29, 30, 31]

Profiteering quantified at Rs.2,23,850 for 01.01.2019 to 30.06.2019; respondent directed to deposit Rs.1,11,925 in the Central CWF and Rs.1,11,925 in the Telangana State CWF with 18% interest, reduce prices, and comply with monitoring directions.

Final Conclusion: The Authority held that GST rates on cinema admission were reduced w.e.f. 01.01.2019 and that the respondent did not pass the benefit of the reduction to cine goers for two ticket categories during 01.01.2019 to 30.06.2019; profiteering was quantified at Rs.2,23,850, and the respondent was directed to reduce prices, deposit the apportioned amount into the Central and State Consumer Welfare Funds with 18% interest, and comply with supervisory monitoring.

Revisionary jurisdiction under Section 263 of the Income Tax Act - erroneous order prejudicial to the interests of the revenue - classification of income between business profits and capital gains - Explanation 2(a) to Section 263 - duty to conduct inquiry - principle that divergent views of assessing officer and revisional authority do not per se render an order erroneous

Revisionary jurisdiction under Section 263 of the Income Tax Act - erroneous order prejudicial to the interests of the revenue - classification of income between business profits and capital gains - Explanation 2(a) to Section 263 - duty to conduct inquiry - principle that divergent views of assessing officer and revisional authority do not per se render an order erroneous - Validity of invocation of revisional power under Section 263 against the Assessing Officer's classification of receipts from sale of properties as business income for Assessment year 2009-10 - HELD THAT: - The Court applied the twin tests under Section 263 - that the AO's order must be both erroneous and prejudicial to revenue. It recalled the principle that where two reasonable views are possible, an AO's conclusion cannot be treated as an erroneous order merely because a different view is available. On the facts the Assessing Officer had issued a detailed questionnaire (36 questions including questions directed to classification), conducted enquiries, issued several notices, recorded particulars of purchases and sales with dates and found properties were bought and sold within a maximum period of about 20 months. The Court held that the AO had performed the inquiry contemplated by Explanation 2(a) to Section 263 and that material existed to support the AO's conclusion that the transactions were in the nature of business. Consequently the Commissioner and the Tribunal erred in holding that the AO had not made requisite enquiries or that his order was per se erroneous and prejudicial to revenue. Since the AO's view was a possible view on the material, the revisional jurisdiction under Section 263 could not be invoked to substitute that view.

The invocation of Section 263 was unsustainable on the facts; the revisional order and the Tribunal's order are quashed and the appeal is allowed.

Final Conclusion: The Court answered the substantial question of law in favour of the assessee, held that the Assessing Officer had conducted sufficient inquiry and taken a tenable view classifying the receipts as business income, and therefore quashed the orders of the Commissioner dated 02.01.2014 and the Tribunal dated 28.11.2014; the appeal is allowed.

Charitable Trust - Exemption under section 10(23C)(iv)- Institution engaged in cultural and intellectual activities - Charitable purpose - Activities of providing accommodation, food and beverages and related charges - Charitable activities​​​​​​​ - proviso to Section 2(15) (commercial activity/public benefit test) - Principle of mutuality - no-profit no-loss characterisation - precedential effect and finality of Tribunal and High Court orders - Reasons of denying exemption u/s 10(23C)(iv) by the AO is that the activities of the assessee Trust are hit by the proviso to section 2(15) of the Act - activities of providing food and beverages, accommodation against which charges are made from the members and non-members constitute commercial activities.

Exemption under section 10(23C)(iv) - proviso to Section 2(15) (commercial activity/public benefit test) - no-profit no-loss characterisation - HELD THAT:- The Assessing Officer denied exemption under section 10(23C)(iv) treating the assessee's provision of accommodation and food & beverages for charges as commercial activities falling within the proviso to Section 2(15), and noted recurring surpluses despite the assessee's claim of operating on a 'no profit no loss' basis. The Tribunal examined these contentions in light of earlier identical findings for prior assessment years and the orders of coordinate benches which had held that providing accommodation and allied services by the Trust did not constitute commercial activity attracting the proviso to Section 2(15). In the absence of any change in facts or law in the years under appeal, the Tribunal upheld the CIT(A)'s conclusion that the Assessing Officer's denial was not sustainable and that the activities in question did not, on the material before the record, disentitle the assessee to exemption under section 10(23C)(iv). [Paras 7, 8, 10]

Denial of exemption under section 10(23C)(iv) on the ground of commercial activity/proviso to Section 2(15) is not sustained; exemption claim allowed as per the CIT(A)'s orders.

Precedential effect and finality of Tribunal and High Court orders - HELD THAT: - The Tribunal found that the Assessing Officer's reasons for denial in 2013-14 and 2014-15 were identical to those considered and rejected in earlier proceedings (notably ITA No. 3124/Del/2014 for AY 2009-10 and subsequent orders for AY 2011-12), whose conclusions were accepted by coordinate benches and upheld by the High Court (with further appeal to the Supreme Court dismissed). There was no showing of any change in facts or law for the years in issue. In these circumstances the CIT(A)'s reliance on the prior final orders was proper and the Revenue's appeals, repeating identical grounds, were held to be devoid of merit. [Paras 8, 9, 10]

CIT(A) correctly followed prior final orders of the Tribunal and High Court; Revenue's appeals dismissed as lacking merit.

Final Conclusion: Revenue appeals for assessment years 2013-14 and 2014-15 dismissed; the CIT(A)'s allowance of exemption under section 10(23C)(iv), following prior final Tribunal and High Court decisions that the assessee's accommodation and allied activities do not attract the proviso to Section 2(15), is confirmed.

Reopening of assessment - reasons to believe - tangible material - borrowed satisfaction - application of mind - quashing of reassessment

Reopening of assessment - tangible material - borrowed satisfaction - application of mind - reasons to believe - Validity of reassessment proceedings initiated under section 147/148 based on information from the investigation wing without independent inquiry - HELD THAT: - The Tribunal held that the reopening was founded on information received from the investigation wing but the Assessing Officer did not undertake any independent enquiry or apply his mind to establish a nexus between that information and escapement of income. Relying on the reasoning of the Delhi High Court in the cited decisions, the Tribunal accepted that information from the investigation wing, without further inquiry or corroborative material, does not by itself constitute tangible material sufficient to form the requisite reasons to believe. The assessment was therefore held to be based on borrowed satisfaction and contrary to the requirement that the AO must record independent satisfaction after applying his own mind to the material before issuing a notice under section 148. [Paras 8, 11]

Reassessment under section 147/148 quashed and the addition deleted as the reopening lacked tangible material and was based on borrowed satisfaction.

Final Conclusion: The appeal is allowed: the notice under section 148 was held illegal and the reassessment completed thereunder is quashed; consequential additions made in the assessment are deleted. Other grounds were rendered academic and not adjudicated.

Unexplained credit under section 68 - burden of proof on assessee to prove identity, genuineness and creditworthiness - explanation by reference to creditor's existing capital and tax-exempt/non-taxable receipts - verification and remand for factual verification by Assessing Officer - assessment under section 153C and jurisdiction in search-related cases

Unexplained credit under section 68 - burden of proof on assessee to prove identity, genuineness and creditworthiness - explanation by reference to creditor's existing capital and tax-exempt/non-taxable receipts - verification and remand for factual verification by Assessing Officer - Whether the credits shown in the assessee's books from two creditors were rightly treated as unexplained credits under section 68 or were satisfactorily explained by the assessee. - HELD THAT: - The Tribunal found that the AO had limited his challenge to the creditors' capacity (creditworthiness) and had erred in relying solely on the creditors' taxable income as shown in their returns without undertaking a proper factual enquiry. On the material produced and submissions made before the Tribunal (including bank statements and creditors' balance-sheets), the Tribunal concluded that the amounts credited in the assessee's books were traceable to the creditors' existing capital and/or tax-exempt/non-taxable receipts. In respect of Tarun Khatri, the receipts shown in bank statements and the creditor's balance-sheet reasonably demonstrated capacity for the sums credited and the credit was to be regarded as an unsecured loan explained for section 68 purposes. In respect of Jetha Nand Khatri, the bank receipts (including tax-exempt capital gains on sale of shares) and the creditor's balance-sheet similarly covered the credits. However, the Tribunal directed limited verification by the AO of certain documents and computations (including confirmation of the creditors' balance as on 31/3/2015 and verification of claimed long term capital gains and transaction particulars) before giving effect to the order. The Tribunal emphasised that the matter is essentially factual and observed that both the AO and CIT(A) had failed to undertake necessary verifications, resulting in escalation to the second appellate stage. [Paras 3]

The assessee discharged the onus under section 68 in respect of the impugned credits; the additions were deleted subject to the AO verifying the specified confirmations and computations and giving appeal effect accordingly.

Assessment under section 153C and jurisdiction in search-related cases - Whether the assessment was invalid for being made under section 153C (search-related provision) or otherwise beyond jurisdiction because documents had been seized from a third party. - HELD THAT: - The Tribunal rejected the contention that seizure of documents from a third party by itself conferred jurisdiction to proceed under section 153C. Jurisdiction under search related provisions requires the AO to be positively satisfied that the seized material has a bearing on the assessee's income for a specified year or years, and such satisfaction must be demonstrable. There was no indication that the AO had relied upon or recorded any such satisfaction in framing the assessment, nor was any seized material pointed out as having been the basis for assessment. Consequently, the challenge that the assessment was vitiated for being under section 153C was unfounded on both facts and law. [Paras 4]

The plea that the assessment was bad in law as having been framed under section 153C was dismissed.

Final Conclusion: The Revenue's appeal is dismissed. The Tribunal confirms the order of the CIT(A) deleting the additions under section 68, subject to the Assessing Officer verifying the specified creditors' confirmations and computations and giving effect to the order; the challenge based on section 153C is rejected.

Transfer of capital asset - registration of agreement and effect under Section 53A - joint development agreement / collaboration agreement - assessment year determination for capital gains - offer of capital gains in a subsequent assessment year

Transfer of capital asset - registration of agreement and effect under Section 53A - joint development agreement / collaboration agreement - assessment year determination for capital gains - offer of capital gains in a subsequent assessment year - Whether the transaction was a 'transfer' chargeable to tax in Assessment Year 2007-08 or in Assessment Year 2009-10. - HELD THAT: - The Tribunal examined whether the collaboration (JDA) dated 1.6.2006 effected a transfer in the financial year 2006-07 (chargeable in AY 2007-08) or whether the transfer occurred on completion/possession on 19.08.2008 (chargeable in AY 2009-10). Relying on the Supreme Court's decision in Balbir Singh Maini, the Tribunal held that an unregistered joint development/collaboration agreement has no efficacy for the purposes of Section 53A of the Transfer of Property Act after the 2001 amendment and therefore cannot be treated as a contract creating a transfer under Section 2(47)(v) of the Income-tax Act. Since the collaboration agreement in the present case was not registered, it could not be taken to effect a transfer on its execution; consequently, the presumption of delivery of possession on signing the agreement (in AY 2007-08) could not be sustained. The assessee had in any event offered the capital gain in AY 2009-10 on the date possession was handed over, and the Tribunal found no contrary factual or legal basis to charge the gain in AY 2007-08. In view of this legal principle and the assessee's offer of income in AY 2009-10, the Tribunal allowed the grounds asserting that the transfer was assessable in AY 2009-10. [Paras 14, 16, 18]

Transfer did not occur for tax purposes in AY 2007-08; the capital gain is assessable in AY 2009-10 and the assessee's appeal on this point is allowed.

Final Conclusion: The Tribunal allowed the appeal by holding that the unregistered collaboration agreement could not constitute a transfer under the income tax provisions (in light of the Supreme Court's ruling), and that the capital gain is chargeable in Assessment Year 2009 10; all other grounds were held to be academic.

Revisionary jurisdiction under section 263 - Error prejudicial to revenue - Rectification under section 154 - Cost of new asset for section 54F - integral items versus contents - Distinction between jurisdictional error and rectifiable computation mistake

Revisionary jurisdiction under section 263 - Error prejudicial to revenue - Whether the Pr. CIT was justified in invoking section 263 and setting aside the assessment order as erroneous and prejudicial to the interest of revenue. - HELD THAT: - The Tribunal held that the Pr. CIT was justified in invoking section 263 because the Assessing Officer had allowed the deduction under section 54F by permitting the entire claimed investment as a deduction instead of computing the eligible deduction on the proportionate basis mandated by section 54F(1). Although the assessee submitted that the excess was an inadvertent error rectifiable under section 154, no rectification action by the Assessing Officer was placed on record. In that factual matrix the Pr. CIT's conclusion that the assessment order was erroneous and prejudicial to revenue was sustainable and warranted revisional action under section 263.

Invocation of section 263 and setting aside the assessment on the ground of excess deduction under section 54F was upheld.

Distinction between jurisdictional error and rectifiable computation mistake - Rectification under section 154 - Whether the excess deduction under section 54F constituted a mere computation/mistake apparent from record rectifiable under section 154 or a jurisdictional error attracting section 263. - HELD THAT: - The Tribunal emphasised the legal distinction between rectification under section 154 and revision under section 263: rectification addresses mistakes apparent on the record, whereas section 263 requires an order that is erroneous and prejudicial to revenue (a jurisdictional error). On the facts the primary dispute concerned the quantum taken as 'cost of new asset' for proportionate computation under section 54F. Since no rectification under section 154 had been undertaken by the Assessing Officer, the Pr. CIT was entitled to exercise revisional jurisdiction. The Tribunal therefore accepted that the matter went beyond a simple self-executing arithmetic correction in the absence of any recorded rectification step by AO.

The excess deduction was not treated as a mere rectifiable lapse in the circumstances and the revisional exercise under section 263 was sustained.

Cost of new asset for section 54F - integral items versus contents - Whether items such as furniture, air conditioners and other household/electrical fittings form part of the 'cost of new asset' for the purpose of computing deduction under section 54F. - HELD THAT: - The Tribunal reviewed authorities recognising that the 'cost of new asset' is not confined to civil construction and, where items (furniture, fixtures, electrical installations etc.) are integral to making the house habitable or are part of the contract for construction, they may be included in the cost of the new residential house for section 54F purposes. Applying that principle, the Tribunal found that the record did not clearly establish whether the claimed furniture and electronic items were part of the construction contract. Consequently the Tribunal modified the Pr. CIT's direction: the Assessing Officer was directed to allow such items as part of the cost of new asset only if they were demonstrably part and parcel of the construction contract; otherwise they would not automatically be included.

Expenses on furniture and electrical items can be included in 'cost of new asset' only if they are shown to be integral to or part of the construction contract; direction to AO modified accordingly.

Final Conclusion: The assessee's appeal is partly allowed: the Tribunal upheld the Pr. CIT's exercise of revisional jurisdiction under section 263 to set aside the assessment for allowing excess deduction under section 54F (in the absence of rectification under section 154), but modified the direction so that items like furniture and air conditioners will be treated as part of the cost of the new house for section 54F only if shown to be integral to the construction contract; the matter is remitted to the Assessing Officer for fresh adjudication in accordance with these observations.

Recall of tribunal order - miscellaneous application under section 254(2) for mistake apparent on record - reopening of assessment on the basis of Revenue Audit objections - exception to monetary limits under CBDT Circular No. 03/2018 where audit objection is accepted by the Department - inconsistent or contrary stand before courts

Miscellaneous application under section 254(2) for mistake apparent on record - reopening of assessment on the basis of Revenue Audit objections - exception to monetary limits under CBDT Circular No. 03/2018 where audit objection is accepted by the Department - recall of tribunal order - Dismissal of Miscellaneous Application seeking recall of ITAT order dated 22.08.2019 in ITA No. 379/Ind/2017 in respect of AY 2007-08. - HELD THAT: - The Revenue sought recall of the Tribunal's order which had dismissed departmental appeals on the basis of the monetary limits in CBDT Circular No.03/2018 (as amended). The Department relied on clause 10(c) of the Circular (exception where a Revenue Audit objection has been accepted by the Department) to contend that the monetary-limit bar did not apply and that the Tribunal should have decided the appeal on merits. The Tribunal examined the record and found that, in earlier proceedings before the High Court of Madhya Pradesh, the Revenue had taken the contrary position that the reassessment was not initiated on the basis of an audit objection. The Court held that a Miscellaneous Application under section 254(2) can be entertained only for a mistake apparent on the record and not to resolve disputed factual contentions or to review the correctness of a conclusion. The question whether the reassessment was initiated on the basis of an audit objection (and whether that objection was accepted by the Department) was a matter of dispute and not an apparent error on the face of the record. In view of the Revenue's inconsistent stand and the absence of an incontrovertible record demonstrating acceptance of an audit objection, there was no ground to recall the Tribunal's order; permitting the MA would amount to impermissible review rather than correction of a manifest error. [Paras 4, 5]

Miscellaneous Application dismissed; recall of the Tribunal's order refused.

Final Conclusion: The Revenue's application to recall the ITAT order for AY 2007-08 was dismissed: the contention that reassessment was based on an accepted audit objection was a disputable factual matter and, given the Department's contrary stance before the High Court, no mistake apparent on the record was shown to justify recall under section 254(2).

Jurisdiction under Explanation 2(a) to Section 263 - erroneous and prejudicial to the interests of the revenue - due verification by the Assessing Officer in scrutiny assessment - scope of enquiries in a scrutiny assessment (watch dog not bloodhound) - corpus of the trust and accretion by bonus shares - application of proviso to section 13(1)(d) for corpus investments - section 13(2)(h) substantial interest test - tax neutrality of dividend exempt under section 10(34) versus denial under section 11 - principle of consistency and precedential value of earlier factual findings

Jurisdiction under Explanation 2(a) to Section 263 - erroneous and prejudicial to the interests of the revenue - due verification by the Assessing Officer in scrutiny assessment - scope of enquiries in a scrutiny assessment (watch dog not bloodhound) - Whether the Commissioner validly invoked revision jurisdiction under section 263 on the ground that the assessment order was passed without inquiries or verification which should have been made. - HELD THAT: - The Tribunal held that Explanation 2(a) to section 263 is subject to judicial scrutiny and the Commissioner's subjective view cannot be accepted without an objective finding that the Assessing Officer failed to carry out inquiries or verifications which a prudent, judicious and reasonable Assessing Officer would have carried out. The proper test is whether, on the facts, the AO's enquiries fell short of what a prudent officer would do in the ordinary course, not whether more or different inquiries could have been made in ideal circumstances. While lack of necessary inquiries can justify invocation of section 263 in cases where an adverse inference can be drawn on available material, or where, absent inquiries, no conclusive view is possible and a remand is necessary, the Commissioner cannot use Explanation 2(a) to embark on roving or fishing inquiries. Applying these principles to the record, the Tribunal found the AO's course of action to be a bonafide and permissible course of action in the circumstances and that the Commissioner's conclusion was not sustainable.

The invocation of revision jurisdiction under section 263 was unsustainable; the revision order was quashed on this ground.

Corpus of the trust and accretion by bonus shares - application of proviso to section 13(1)(d) for corpus investments - principle of consistency and precedential value of earlier factual findings - Whether the Assessing Officer failed to verify that shareholdings were part of the corpus (thereby attracting section 13(1)(d)), and whether that failure rendered the assessment order erroneous and prejudicial to revenue. - HELD THAT: - The Tribunal found that detailed information showing holdings as at 1 June 1973 and subsequent bonus accretions was placed before the AO during assessment and in year end statements; the AO was entitled to accept the long standing factual position that these were corpus holdings, particularly given decades of consistent treatment and earlier notification/acceptance by the CBDT. The Tribunal emphasised the precedential and consistency value of earlier factual acceptance and held that, on these facts, it was not unreasonable for the AO not to reopen the corpus character after four decades when there was no material change or trigger. Even if a defect existed, any denial of exemption for such investments would have been limited to dividend income and, because of the statutory position in the relevant year, would have been tax neutral. Consequently the AO's conduct did not constitute an error prejudicial to revenue warranting revision.

The Commissioner's direction to re examine corpus/section 13(1)(d) was disapproved and the assessment was not set aside on this ground.

Section 13(2)(h) substantial interest test - roving and fishing inquiries - Whether the AO's alleged failure to examine applicability of section 13(2)(h) (investment in concerns in which persons in section 13(3) have substantial interest) rendered the assessment erroneous and prejudicial to revenue. - HELD THAT: - The Tribunal held that once the assessee had clarified that none of its trustees had a substantial interest in the investee company, and there was no material on record to indicate otherwise, there was no justification for treating the AO's order as erroneous on this ground. The mere fact that the trust itself held more than 20% did not, without more, indicate substantial interest of persons specified in section 13(3). Reliance on another trust's decision was inapposite; absent material to trigger a deeper probe, invoking section 263 to direct further enquiries would amount to impermissible roving investigations.

No failure under section 13(2)(h) was found; revision on this ground was quashed.

Tax neutrality of dividend exempt under section 10(34) versus denial under section 11 - Whether any non verification of the mode/sources of interest and dividend income caused prejudice to the revenue. - HELD THAT: - The Tribunal observed that interest and dividend details were on record (including Form 26AS and schedules to financial statements) and that the investments were in permissible modes. Further, dividend income in the relevant year was exempt under section 10(34); accordingly, even if exemption under section 11 had been denied for that income, the result would have been tax neutral for the assessee in the assessment year under consideration. For these reasons the AO's alleged non verification did not cause prejudice to revenue and did not justify revision under section 263.

No prejudice to revenue on account of non verification of interest/dividend was found; revision on this ground was quashed.

Due verification by the Assessing Officer in scrutiny assessment - office note and subsequent remedial action - Whether the AO's office note recording prima facie concerns based on late third party material, and his decision to complete the assessment due to time bar while leaving open remedial action, rendered the assessment order erroneous and prejudicial to revenue. - HELD THAT: - The Tribunal held that receipt of voluminous third party material at the fag end of assessment proceedings - with only a few working days left - justified the AO's course of recording a prima facie view and completing the assessment while leaving open further remedial action. The AO's conduct was a bonafide, reasonable response to the time constraints and did not amount to an error prejudicial to revenue; moreover, using section 263 to obtain effectively an extension of time for scrutiny was impermissible.

The Commissioner's reliance on the office note to set aside the assessment was rejected.

Principle of consistency and precedential value of earlier factual findings - Whether past consistent treatment and prior acceptance (including CBDT/notification) could be disregarded to reopen the corpus character of investments for the year under consideration. - HELD THAT: - The Tribunal recognised that res judicata strictly does not apply in successive assessment years, but emphasised the strong precedential value of long standing factual conclusions consistently accepted over decades, including CBDT's earlier scrutiny and notification. In absence of any material change or cogent fresh evidence, it was not appropriate to disturb those settled factual findings; treating such settled historical facts as triggerless grounds for revision would be unreasonable.

Past consistent acceptance weighed against reopening the issue; Commissioner's attempt to revisit those findings was disapproved.

Final Conclusion: The Tribunal held that the Commissioner's exercise of revisionary jurisdiction under section 263 (as interpreted in Explanation 2(a)) was not justified on the record: the Assessing Officer's inquiries were, on the facts, a bonafide and reasonable course of action, the corpus character of the shareholdings was established by long standing treatment and earlier acceptance, there was no material to support invocation of section 13(2)(h), and alleged non verifications did not prejudice revenue. The impugned revision order was quashed and the appeal allowed.

Transfer pricing adjustment under international transactions using TNMM with OP/TC as PLI - Comparability analysis and exclusion of comparable companies in transfer pricing - Computation of book profit under section 115JB - treatment of provision for bonus as contingent or ascertained liability - Disallowance under section 14A of the Income-tax Act and applicability of Rule 8D - prospectivity and reasonable basis for disallowance - Use of a benchmark percentage (2%) for section 14A disallowance prior to Rule 8D

Transfer pricing adjustment under international transactions using TNMM with OP/TC as PLI - Comparability analysis and exclusion of comparable companies in transfer pricing - Exclusion of four specified comparable companies from the set of comparables for benchmarking - HELD THAT: - The Tribunal considered the assessee's challenge to inclusion of four companies (Geometric Software Solutions Co. Ltd., Bodhtree Consulting Ltd., Flextronics Software Systems Ltd. (Seg.), and Tata Elxsi Ltd. (Seg.)). It relied on concurrent decisions of co-ordinate benches which held that these companies were functionally dissimilar or otherwise unsuitable as comparables (product-based operations, related party transaction proportions, lack of segmental service profits, or specialised/embedded software activities). Following the reasoning in the co-ordinate bench decisions, the Tribunal directed exclusion of the four companies from the list of comparables and thereby directed modification of the transfer pricing adjustment accordingly. [Paras 8]

Four specified companies are excluded from the comparable set and the transfer pricing adjustment is to be modified accordingly.

Computation of book profit under section 115JB - treatment of provision for bonus as contingent or ascertained liability - Provision for bonus is an ascertained liability and is not to be added back while computing book profit under section 115JB - HELD THAT: - The Tribunal examined whether the 'provision for bonus' debited to profit and loss constituted a contingent (unascertained) liability requiring addition to book profit. Relying on earlier Tribunal authority (ACIT v. Sun Paper Mills Ltd.) and the fact that the assessee had determined the liability and paid the bonus in the subsequent year, the Tribunal held that the liability was ascertained (at most only the quantum could be uncertain) and therefore not a contingent liability for section 115JB purposes. Consequently, the addition made by the AO and confirmed by the CIT(A) was set aside and the AO directed to exclude the provision from book profit. [Paras 11]

The provision for bonus is an ascertained liability and shall be excluded from book profit computation under section 115JB.

Disallowance under section 14A of the Income-tax Act and applicability of Rule 8D - prospectivity and reasonable basis for disallowance - Use of a benchmark percentage (2%) for section 14A disallowance prior to Rule 8D - Disallowance under section 14A for AY 2005-06 cannot be computed by Rule 8D (prospective) and should be restricted to a reasonable basis - directed to be limited to 2% of exempt dividend income - HELD THAT: - The Tribunal noted that Rule 8D has been held prospective (applicable from AY 2008-09) and therefore could not be applied to AY 2005-06. However, section 14A itself is applicable; hence some disallowance on a reasonable basis is called for. Having regard to precedents upholding a 2% benchmark for earlier years and in absence of a rule-based computation for the year under consideration, the Tribunal directed the AO to restrict the disallowance under section 14A to 2% of the exempt dividend income. [Paras 14]

Rule 8D is not applicable for AY 2005-06; disallowance under section 14A is to be made on a reasonable basis and is directed to be limited to 2% of the exempt dividend income.

Final Conclusion: The appeal is partly allowed: the transfer pricing comparable list is modified by excluding four companies; the provision for bonus is excluded from book profit under section 115JB; and the section 14A disallowance for AY 2005-06 is to be recomputed and restricted to 2% of exempt dividend income.

Liability to deduct tax at source under section 195 - Accrual versus payment/credit basis for triggering TDS - Waiver of interest and its tax consequences - Order under section 201(1) and 201(1A) - Limitation for proceedings under section 201(3) where statute prescribes limitation and reasonable time where statute is silent - Reasonable time doctrine for initiation/completion of revenue proceedings

Liability to deduct tax at source under section 195 - Accrual versus payment/credit basis for triggering TDS - Waiver of interest and its tax consequences - Whether the assessee was liable to deduct tax at source in respect of coupon/interest under the debenture subscription agreement for F.Y. 2010-11 (relevant to A.Y. 2011-12). - HELD THAT: - The Tribunal examined the terms of the subscription and amendment agreements, the accounting treatment and the facts that no interest was credited to the payee's account nor paid or provided for in the assessee's books for F.Y. 2010-11. The agreement fixed the first coupon payment date as 30.04.2011 (falling in F.Y. 2011-12) and no interest expenditure was claimed in the financial statements for F.Y. 2010-11. The assessee also produced evidence of amendment/addendum and letters indicating waiver and the audit under section 142(2A) supported that no income accrued to the assessee on account of waiver. Relying on judicial authorities, including the Karnataka High Court and ITAT precedents on the effect of non-payment/non-provision and on interpretation of 'paid' under DTAAs, the Tribunal held that where no payment was made, no amount was credited or treated as income of the non-resident payee and no tax deduction obligation under section 195 arose in the year under consideration. Consequently, there was no default attracting deeming order under section 201(1). [Paras 9]

Liability to deduct tax under section 195 did not arise for F.Y. 2010-11 (A.Y. 2011-12); revenue's appeal on merits dismissed.

Limitation for proceedings under section 201(3) where statute prescribes limitation and reasonable time where statute is silent - Order under section 201(1) and 201(1A) - Reasonable time doctrine for initiation/completion of revenue proceedings - Whether the order passed under section 201(1) and 201(1A) for the year F.Y. 2010-11 (A.Y. 2011-12) was barred by limitation. - HELD THAT: - The Tribunal considered the statutory history of section 201(3) (as amended by the Finance Acts) and the line of judicial authorities holding that where a statute prescribes no time limit a reasonable time must be read in. Although the CIT(A) had relied on the view that the specific time limits in section 201(3) did not apply to payments to non-residents, the Tribunal analysed precedent (including Special Bench and High Court decisions) and the facts: notice was issued on 19.03.2018 and the order passed on 31.03.2018, which was seven years from the end of the financial year 2010-11. Applying the reasonable time doctrine and relevant judicial dicta, and having regard to the delay in initiating and completing proceedings, the Tribunal concluded that on the facts of this case the order under section 201(1)/201(1A) was not passed within a reasonable time and was therefore barred by limitation. [Paras 10, 11]

Order under section 201(1)/201(1A) for A.Y. 2011-12 was barred by limitation; cross-objection of the assessee allowed.

Final Conclusion: The Tribunal dismissed the revenue's appeal on merits (no obligation to deduct TDS under section 195 for the year under consideration) and, on limitation grounds, held that the order under section 201(1)/201(1A) was barred by limitation; accordingly the revenue's appeal is dismissed and the assessee's cross-objection is allowed.

Comparability of comparable companies - functional comparability - inclusion and exclusion of comparable companies - transfer pricing documentation - remand to Assessing Officer/TPO for verification - admission of additional grounds - use of judicial precedent in transfer pricing comparability

Comparability of comparable companies - use of judicial precedent in transfer pricing comparability - Persistent Systems Limited excluded from the assessee's list of comparables - HELD THAT: - The Tribunal examined the material on record and followed a coordinate-bench precedent which had excluded Persistent Systems Limited because segmental details necessary to test functional comparability were not available. In the absence of segmental break-up and on the basis of the cited judicial precedent, the Tribunal held that Persistent Systems Limited cannot be treated as a comparable and directed the TPO/Assessing Officer to exclude the company from the comparables. [Paras 5]

Persistent Systems Limited to be excluded from the list of comparables.

Comparability of comparable companies - functional comparability - use of judicial precedent in transfer pricing comparability - Sasken Communication Technologies Limited excluded from the assessee's list of comparables - HELD THAT: - The Tribunal considered rival contentions and earlier tribunal treatment which found Sasken functionally distinguishable owing to its involvement in media products and R&D without adequate segmental information. Applying that precedent and on the record before it, the Tribunal concluded that Sasken is not functionally comparable to the assessee and directed its exclusion from the comparables. [Paras 5]

Sasken Communication Technologies Limited to be excluded from the list of comparables.

Remand to Assessing Officer/TPO for verification - functional comparability - Inclusion/exclusion of E Zest Solutions Limited and LGS Global Limited remitted to Assessing Officer/TPO for fresh decision - HELD THAT: - The Tribunal admitted the additional grounds and observed that the questions of functional dissimilarity (E Zest) and factual verification regarding employee costs/segmental information (LGS Global) require further fact finding. Following precedent and the parties' submissions, the Tribunal remitted these issues to the Assessing Officer/TPO for fresh examination and decision, including exercise of powers to obtain information where appropriate. [Paras 6]

Issues of inclusion/exclusion of E Zest Solutions Limited and LGS Global Limited remitted to the file of the Assessing Officer/TPO for fresh consideration.

Comparability of comparable companies - inclusion and exclusion of comparable companies - Evoke Technologies Pvt. Ltd. to be included in the list of comparables - HELD THAT: - Having considered the parties' submissions and a coordinate-bench decision which found no valid basis for the DRP's suo motu exclusion (noting that both revenue and assessee sought inclusion), the Tribunal held that exclusion on account of low margins was not a sound reason absent demonstration of peculiar or non recurring circumstances. On that basis the Tribunal directed inclusion of Evoke Technologies Pvt. Ltd. as a comparable. [Paras 6]

Evoke Technologies Pvt. Ltd. to be included in the list of comparable companies.

Admission of additional grounds - use of judicial precedent in transfer pricing comparability - Additional grounds of appeal admitted for adjudication - HELD THAT: - The Tribunal, relying on relevant precedents, observed that the additional grounds did not require fresh investigation of facts beyond what could be adjudicated and that the assessee was not estopped from pointing to mistakes even when those arose from evidence earlier adduced by it. Consequently, the Tribunal admitted the additional grounds for consideration. [Paras 4]

Additional grounds of appeal admitted for adjudication.

Final Conclusion: The Tribunal partly allowed the appeal: Persistent Systems Limited and Sasken Communication Technologies Limited are excluded from the comparables; Evoke Technologies Pvt. Ltd. is to be included as a comparable; the issues concerning E Zest Solutions Limited and LGS Global Limited are remitted to the Assessing Officer/TPO for fresh consideration; the additional grounds were admitted. The appeal is partly allowed for statistical purposes.

Taxability of remission of debt/waiver on buyback of FCCBs - Characterisation of receipts as capital or business income - Depreciation on enhanced cost due to foreign exchange fluctuation - Applicability of Accounting Standard-11 and Companies (Accounting Standards) Amendment Rules, 2009 - Applicability of section 43A to indigenous assets funded by foreign currency borrowings - Carry forward of losses of a 100% Export Oriented Unit under section 10B - Computation of book profit under section 115JB and disallowance under section 14A

Taxability of remission of debt/waiver on buyback of FCCBs - Characterisation of receipts as capital or business income - Whether the discount/benefit on buyback of FCCBs is chargeable to tax as business income or remission of liability (and hence taxable) for A.Y. 2009-2010. - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the discount on repurchase of FCCBs was not exigible to tax as business income. The assessee had raised FCCBs for capital purposes and utilised the proceeds to acquire capital (largely depreciable) assets, a fact not controverted by the AO and verified from the balance-sheet. Section 41(1) was inapplicable because the FCCB principal was never claimed as an expenditure or trading liability in earlier years; section 28(iv) was also inapplicable because the assessee was not engaged in money-lending or trading in such instruments and the benefit was received in cash. The Tribunal applied the Delhi High Court's ratio in Logitronics P. Ltd. that waiver/discount on loan taken for acquiring capital assets is not taxable as business income, and confirmed deletion of the addition. [Paras 8]

Addition of Rs. 26,35,58,122/- on account of buyback/discount on FCCBs deleted; amount not taxable as business income for A.Y. 2009-2010.

Depreciation on enhanced cost due to foreign exchange fluctuation - Applicability of Accounting Standard-11 and Companies (Accounting Standards) Amendment Rules, 2009 - Applicability of section 43A to indigenous assets funded by foreign currency borrowings - Whether exchange fluctuation loss/capitalised increase in liability attributable to assets acquired in India out of FCCB proceeds can be added to cost and depreciation allowed (A.Y. 2009-2010 and A.Y. 2012-2013). - HELD THAT: - The Tribunal sustained the CIT(A)'s conclusion that AS-11 (and the Companies (Accounting Standards) Amendment Rules, 2009) governs treatment of foreign exchange differences and permits, as an irrevocable option, addition of exchange differences to the cost of depreciable assets where long-term foreign currency monetary items relate to acquisition of such assets. Section 43A, by its language and purpose, applies to assets acquired from outside India and to realised exchange fluctuations on payment; it does not apply to indigenous assets acquired in India out of foreign currency borrowings. The AO's invocation of section 43A was therefore incorrect. Precedents of the Supreme Court and various Tribunals (including DDIT v. Staubil A.G. India Branch Office) were followed. Consistency of earlier appellate treatment and the assessee's adoption of AS-11 were also noted. Applying these principles, depreciation on the enhanced cost arising from exchange fluctuation was allowed for the years in issue. [Paras 9, 10, 11, 21]

Depreciation on exchange-fluctuation-enhanced cost is allowable; disallowance sustained by AO is set aside for the years under appeal and depreciation claim allowed.

Carry forward of losses of a 100% Export Oriented Unit under section 10B - Whether the loss of the assessee's 100% EOU (Chopanki unit) for A.Y. 2009-2010 was allowable to be carried forward as business loss under section 10B. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the AO's adjustment and directed that the loss of the Chopanki unit be carried forward as business loss. The AO's revision was contrary to the Tribunal's earlier order in the assessee's own case for A.Y. 2008-09 and to legal position clarified by amendment to subsection (6) of section 10B (as interpreted in later decisions and in group appeals before the Supreme Court). The Tribunal held that the statutory amendment permits carry forward of losses of a unit eligible for deduction under section 10B and followed the assessee's earlier favourable appellate outcome and the Supreme Court's reasoning in Yokogawa and related authorities. [Paras 12]

Addition of Rs. 56,28,605/- in respect of Chopanki unit deleted; loss of the 100% EOU allowed to be carried forward as business loss.

Computation of book profit under section 115JB and disallowance under section 14A - Whether expenditure attributed to exempt income under section 14A / Rule 8D can be added to book profits under clause (f) of Explanation 1 to section 115JB and whether disallowance under section 14A can exceed the exempt income (A.Y. 2012-2013). - HELD THAT: - The Tribunal followed the Delhi Special Bench decision that the computation under clause (f) of Explanation 1 to section 115JB(2) must be made without resort to the computation envisaged by section 14A read with Rule 8D; accordingly, the addition to book profit under section 115JB on account of section 14A disallowance was deleted. Separately, and consistently with High Court authority, the Tribunal held that any disallowance under section 14A cannot exceed the exempt income; on the facts the disallowance is to be restricted to the dividend amount actually received. [Paras 22, 23, 25]

Addition of Rs. 24,48,822/- to book profit under section 115JB deleted; disallowance under section 14A to be restricted to the exempt income actually received (Rs. 2,37,896/-).

Final Conclusion: The Departmental appeal for A.Y. 2009-2010 is dismissed. The Tribunal confirmed deletion of the addition on buyback/discount of FCCBs, allowed depreciation on exchange-fluctuation-enhanced cost for assets acquired in India out of FCCB proceeds, and allowed carry forward of the 100% EOU loss. For A.Y. 2012-2013 the Tribunal allowed the assessee's depreciation claim (set aside lower authorities) and deleted the book-profit addition under section 115JB arising from section 14A, while directing that any section 14A disallowance be limited to the exempt income actually received.

Selection of the tested party - choice of the least complex entity as tested party - functional analysis (FAR) - comparability analysis and selection of comparables - Transactional Net Margin Method (TNMM) - determination of arm's length price - remand for fresh transfer pricing analysis - penalty proceedings premature

Selection of the tested party - choice of the least complex entity as tested party - functional analysis (FAR) - Whether the rejection of the assessee's associated enterprise as the tested party was sustainable or required fresh examination. - HELD THAT: - The Tribunal found that the TPO and the CIT(A) did not record any cogent reason or point to any deficiency in the assessee's functional analysis or the reliability of data when rejecting the associated enterprise as the tested party. The Tribunal relied on recognised guidance that the tested party should normally be the less complex party and the one for which the most reliable comparables can be found, citing OECD/UN/other authorities for the principle that functional profile governs selection. Because the TPO failed to apply or note any relevant comparative deficiencies in the assessee's proposal and the CIT(A) did not deal with the objection in proper perspective, the Tribunal concluded that the matter of selection of the tested party requires re-examination. The Tribunal therefore restored the issue to the file of the TPO for fresh analysis and verification, directing the TPO to consider the functional analysis and reliability of data and to afford the assessee proper opportunity to present its case. [Paras 6]

Issue restored to the TPO for fresh consideration and verification of the choice of tested party; not finally decided on merits by the Tribunal.

Comparability analysis and selection of comparables - Transactional Net Margin Method (TNMM) - determination of arm's length price - Whether the TPO's selection of 99 comparables and the benchmarking exercise were valid or required fresh determination. - HELD THAT: - The Tribunal noted that the TPO selected 99 comparables without conducting a proper FAR-based qualitative and quantitative screening and without assigning reasons for inclusion or exclusion of individual comparables. The CIT(A) dismissed the assessee's objections by general observations (e.g., insufficiency of data) without adequate analysis. Having reviewed the record, including the evidence and workings filed by the assessee, the Tribunal concluded that the transfer pricing exercise must be redone. Consequently, the Tribunal restored the comparables/benchmarking issue to the TPO for a fresh, reasoned exercise in accordance with law, with opportunity to the assessee to present its contentions and supporting data. [Paras 6]

Benchmarking and selection of comparables restored to the TPO for fresh analysis and verification; transfer pricing adjustment not sustained by the Tribunal at this stage.

Penalty proceedings premature - Whether initiation of penalty proceedings under section 271(l)(c) should be sustained at this stage. - HELD THAT: - The Tribunal observed that proceedings for penalty under the cited provision were premature in the context of unsettled transfer pricing adjustments which were restored for fresh consideration. Given the remand and absence of final determination on the primary transfer pricing issues, the Tribunal dismissed the assessee's challenge to the initiation of penalty proceedings as premature. [Paras 6]

Objections to initiation of penalty proceedings dismissed as premature.

Final Conclusion: Both appeals were partly allowed for statistical purposes: transfer pricing issues (choice of tested party and selection/bench-marking of comparables) were restored to the TPO for fresh analysis and verification with opportunity to the assessee; challenge to initiation of penalty proceedings was dismissed as premature.

Revisionary jurisdiction under section 263 of the Income tax Act - effect of subsequent events on validity of an assessment order - merger/finality of appellate order passed by CIT(A) - two views doctrine in assessment proceedings - condonation of delay in filing appeal due to pandemic - refund/adjustment of excess appeal fees

Condonation of delay in filing appeal due to pandemic - Whether the delay in filing the appeals against the order dated 16.03.2020 could be condoned. - HELD THAT: - The Tribunal accepted the assessee's submission that the impugned order was received on 17.03.2020 and the statutory due date was 16.05.2020, and that filing was delayed due to the pandemic and within the period extended by relevant governmental notification. The Revenue did not object. Applying the exceptional circumstances relied upon by the assessee and the extension provided by notification, the Tribunal exercised its discretion to condone the delay in filing the appeals. [Paras 3, 4]

Delay in filing the appeals is condoned.

Refund/adjustment of excess appeal fees - Whether the excess appeal fee remitted by the assessee is liable to be refunded or adjusted. - HELD THAT: - The Tribunal noted that under the relevant provision the appeal fee payable was Rs. 500 per appeal (total Rs. 1,500 for three appeals), whereas the assessee remitted Rs. 30,000. The Registry was directed to refund or adjust the excess amount against any outstanding demand, or grant refund, within one month from receipt of the order. [Paras 5, 6]

Registry directed to refund or adjust the excess appeal fees within one month.

Revisionary jurisdiction under section 263 of the Income tax Act - effect of subsequent events on validity of an assessment order - merger/finality of appellate order passed by CIT(A) - two views doctrine in assessment proceedings - Whether the Principal Commissioner of Income tax's order under section 263 setting aside the assessments for AY 2014 15 to 2016 17 was valid. - HELD THAT: - The Tribunal examined the chronology and materials: the Assessing Officer framed assessments on 11.12.2017 after considering available information; subsequently the Settlement Commission passed an order on 26.06.2018 in respect of the builder admitting certain transactions; thereafter the PCIT initiated revisionary proceedings under section 263 on 11.04.2019 relying on the Settlement Commission's findings. The Tribunal held that a subsequent event or development (the Settlement Commission order) which arose after the AO passed the assessment cannot be used to render the AO's earlier order 'erroneous' for the purposes of section 263. Further, the very issue had been contested before and decided by the CIT(A) (order dated 21.09.2018), which was not appealed by the department and had attained finality; by virtue of Explanation 1(c) to section 263 the PCIT's powers do not extend to matters which were considered and decided in appeal. The Tribunal also noted that the AO had applied his mind and taken a plausible view (and that divergent views existed), so the PCIT could not substitute his opinion merely because he preferred the Settlement Commission's later findings. The Tribunal found that the PCIT had not himself conducted fresh investigation or afforded cross examination of persons whose statements formed the basis of the Settlement Commission order, and therefore the PCIT's exercise amounted to re opening the matter on the basis of subsequent material rather than correcting a pre existing error of law or fact available to the AO at the time of assessment. [Paras 16, 17, 18, 19, 20]

Order passed by the PCIT under section 263 for AYs 2014 15 to 2016 17 is quashed; the assessments as framed by the AO (and as adjudicated on appeal by the CIT(A)) stand.

Final Conclusion: All three appeals filed by the assessee are allowed: delay in filing the appeals is condoned; excess appeal fees remitted are to be refunded or adjusted by Registry; and the PCIT's orders under section 263 for AY 2014 15 to 2016 17 are quashed because they relied on subsequent events and sought to reopen matters already considered on appeal, so the PCIT had no valid jurisdiction to revise those assessment orders.

Jurisdiction u/s. 263 of the Act - validity of notice issued under revisional jurisdiction - erroneous order - prejudicial to the interest of the revenue - twin conditions for exercise of revisionary power - application of mind by Assessing Officer - verification of source of investment and enquiry by AO - principles of natural justice

Validity of notice issued under revisional jurisdiction - jurisdiction u/s. 263 of the Act - The notice dated 25-01-2019 signed by ITO, Technical-9, Kolkata, challenging the assessment under revisional jurisdiction was not invalid and did not vitiate the proceedings. - HELD THAT: - The assessee contended that the first notice dated 25-01-2019 was invalid because it was signed by the ITO, Technical-9, Kolkata. The Tribunal observed that the purpose of the notice was duly conveyed to the assessees, who filed written submissions in response and were aware that proceedings under section 263 were to commence. There was no technical defect shown which prevented the assessees from participating or which rendered the notice void. On these facts and in law the legal ground raised by the assessees that the notice was invalid was found to be without merit and dismissed. [Paras 3]

The contention of invalidity of the notice dated 25-01-2019 is dismissed.

Jurisdiction u/s. 263 of the Act - erroneous order - prejudicial to the interest of the revenue - twin conditions for exercise of revisionary power - verification of source of investment and enquiry by AO - application of mind by Assessing Officer - Whether the Principal CIT rightly invoked revisional jurisdiction by holding the assessment order erroneous and prejudicial to the interest of the revenue for failure to verify the source of funds for purchase of residential property. - HELD THAT: - The Tribunal examined the record and found that the Assessing Officer had issued notices under section 142(1), called for details of the investment and source thereof, and that the assessee furnished bank statements, cash book, and a letter dated 29-06-2016 (received 01-07-2016) explaining the source of investment. The AO examined and test-checked the material and thereafter framed assessment under section 143(3). Applying the twin conditions as articulated in Malabar Industries (that the AO's order must be erroneous and that the erroneous order must be prejudicial to the revenue), the Tribunal held that where the AO has made enquiries and taken a view after examination, mere disagreement by the Principal CIT does not render the order erroneous or prejudicial unless the view taken by the AO is unsustainable in law or shown to be founded on incorrect facts, law, absence of application of mind or violation of natural justice. The Principal CIT did not demonstrate, with specific evidence or reasons, that the AO failed to verify the source of investment or that the AO's order was erroneous and prejudicial. Consequently the exercise of revisional jurisdiction was held to be arbitrary and without adequate satisfaction. [Paras 8, 9]

The order passed by the Principal CIT under section 263 is quashed as arbitrary and bad in law.

Final Conclusion: Both appeals are partly allowed: the challenge to the notice dated 25-01-2019 is dismissed, but the order passed by the Principal CIT under section 263 is quashed and set aside.

Scheme of Arrangement by way of Amalgamation - Dispensing with convening of shareholders' meetings - Dispensing with convening of unsecured creditors' meetings where unanimous consents recorded - Convening meetings of unsecured creditors via video conferencing - Quorum for creditors' meetings - Appointment of chairperson, alternate chairperson and observer for creditors' meetings - Notice, publication and service requirements under the Companies Act, 2013 for schemes - Appointed date

Dispensing with convening of shareholders' meetings - Dispensing with convening of meetings of equity shareholders of each applicant company where affidavits of consent from all shareholders holding 100% voting share are on record. - HELD THAT: - The Tribunal recorded that, for each of the applicant companies, consent affidavits from all equity shareholders representing 100% of the voting share have been placed on record. In view of those unanimous consents the Tribunal dispensed with convening the meetings of shareholders/members of the respective companies and directed that no shareholders' meeting need be held. [Paras 15, 16, 17, 18, 21]

Meetings of shareholders dispensed with for all applicant companies where unanimous shareholder consents are on record.

Dispensing with convening of unsecured creditors' meetings where unanimous consents recorded - No secured creditors - no meeting required - Whether meetings of secured creditors or unsecured creditors must be convened for each applicant company. - HELD THAT: - The Tribunal found that none of the applicant companies had any secured creditors; accordingly, convening meetings of secured creditors was unnecessary. Where all unsecured creditors of a Transferor Company have given their consent by affidavit (notably Transferor Company No.3 and Transferor Company No.5 had no unsecured creditors or had their consents), the Tribunal dispensed with convening meetings of unsecured creditors for those companies. For other companies where unsecured creditors' consents were not unanimous, the Tribunal directed convening of meetings. [Paras 16, 17, 18, 20, 21]

No meetings for secured creditors; meetings of unsecured creditors dispensed with only where all unsecured creditors have given consent; otherwise meetings to be convened as directed.

Convening meetings of unsecured creditors via video conferencing - Quorum for creditors' meetings - Calling, convening and holding of meetings of unsecured creditors for specified applicant companies on 13.02.2021 by video conferencing, with prescribed times and quorum numbers. - HELD THAT: - The Tribunal directed that where unsecured creditors' consents were not on record, meetings of unsecured creditors be convened on 13.02.2021 by video conferencing (CISCO Webex) at specified times. The Tribunal fixed the quorum for each meeting (Transferor Company No.1: 10; No.2: 4; No.4: 9; No.6: 3; Transferee Company No.7: 15). Transferor Company No.3 and Transferor Company No.5 required no meetings for unsecured creditors as consents or absence of creditors were recorded. [Paras 20, 21]

Meetings of unsecured creditors to be convened on 13.02.2021 by video conferencing at specified times with prescribed quorums for the companies where consents are not unanimous.

Appointment of chairperson, alternate chairperson and observer for creditors' meetings - Appointment of persons to chair and observe the unsecured creditors' meetings and fixation of their consolidated fees and reporting timeline. - HELD THAT: - The Tribunal appointed Ms. Deepa Krishan as chairperson, Mr. Ishwar Chandra Mohapatra as alternate chairperson and Mr. Harshit Pandey as observer for all the unsecured creditors' meetings. It fixed consolidated fees for these appointees and directed that the chairperson(s) file their reports within one week from the date of the meetings. The appointments and fee structure were recorded as part of the directions for conducting the meetings. [Paras 21]

Chairperson, alternate chairperson and observer appointed with fees fixed; chairperson(s) to file reports within one week of the meetings.

Notice, publication and service requirements under the Companies Act, 2013 for schemes - Contents, mode and timeline for sending notices of creditors' meetings, publication in newspapers and service of the application on statutory authorities. - HELD THAT: - The Tribunal directed that notices of the unsecured creditors' meetings be sent by registered post, courier or email at least 30 days prior to the scheduled meetings, accompanied by the scheme of amalgamation, explanatory statement and prescribed documents, and that the applicants publish notices in specified newspapers not less than 30 days before the meetings. The Tribunal further directed service of the application and notice on specified authorities including the Regional Director, Registrar of Companies, Income Tax Department (with AO and PAN details), Official Liquidator and relevant sectoral regulators to enable timely replies. [Paras 21, 22]

Applicants to serve statutory notices, publish prescribed public notices and serve the application on specified authorities at least 30 days before the meetings.

Appointed date - Adopted appointed date for the Scheme. - HELD THAT: - The Tribunal recorded the appointed date as specified in the Scheme and noted it is 01st April, 2019, subject to directions of the Tribunal. This date was recorded for the purpose of the Scheme's implementation. [Paras 19]

Appointed date for the Scheme recorded as 01st April, 2019, subject to Tribunal's directions.

Final Conclusion: The Tribunal directed that shareholders' meetings be dispensed with where unanimous shareholder consents are on record; meetings of secured creditors are not required; meetings of unsecured creditors be convened by video conferencing on 13.02.2021 with prescribed times and quorums for those companies without unanimous creditor consent; appointing chairperson, alternate and observer with fees and reporting timelines; and directing statutory notices, newspaper publication and service of the application on specified authorities. The appointed date in the Scheme is recorded as 01.04.2019.

Restoration of name in register of companies - just and equitable doctrine - failure to file statutory returns - opportunity to take remedial measures - conditional restoration subject to filing outstanding documents - payment of costs to Prime Minister's Relief Fund - setting aside freezing of bank accounts

Restoration of name in register of companies - just and equitable doctrine - failure to file statutory returns - opportunity to take remedial measures - conditional restoration subject to filing outstanding documents - payment of costs to Prime Minister's Relief Fund - Restoration of the appellant company's name in the Register of Companies and ancillary directions including costs and compliance conditions. - HELD THAT: - The Tribunal applied the statutory power to restore a struck-off company's name where it is "just and equitable" to do so. The Bench accepted the appellant's evidence of continuing business activity, audited financial statements for the defaulting years and income-tax filings as establishing that restoration was warranted and that striking off, without affording the appellant remedial opportunity, would be excessive. The Tribunal held that failure to file annual returns, caused by inadvertence and lack of professional guidance, did not preclude restoration in the absence of exceptional circumstances. Restoration was therefore allowed subject to the appellant filing all outstanding statutory documents for the defaulting years and completing all formalities including payment of any late fees or charges leviable for late filing. As a condition of allowing the appeal, the Tribunal directed payment of costs of Rs. 25,000 to the Prime Minister's Relief Fund and required the respondent to restore the company's name in the Register as if it had not been struck off once compliance was verified. [Paras 6, 7, 8]

The appeal is allowed and the company's name shall be restored in the Register of Companies on compliance with filing outstanding documents, payment of applicable fees and costs to the Prime Minister's Relief Fund.

Setting aside freezing of bank accounts - consequential effects of restoration - Whether the direction freezing the appellant company's bank account(s) should continue after allowance of the appeal. - HELD THAT: - The Tribunal found that once restoration is permitted and the company is to be enabled to carry out its business, any order freezing the company's bank account(s) on the sole ground of striking off must be lifted. Consequently, the direction freezing the bank account(s) shall be set aside immediately to permit operation of the company's business. The respondent is required to give effect to restoration with all consequential effects upon compliance by the appellant within the stipulated timeframe. [Paras 9]

The direction freezing the appellant's bank account(s) is set aside immediately; respondent to give effect to restoration with consequential effects on compliance by the appellant.

Final Conclusion: The appeal is allowed; the Registrar of Companies is directed to restore the company's name in the Register on the appellant's compliance with filing outstanding statutory documents and payment of levy/fees, and the bank accounts frozen on the ground of striking off are to be unfrozen immediately; costs of Rs. 25,000 to be paid to the Prime Minister's Relief Fund.

Transmission of shares by operation of law - refusal of registration and appeal against refusal - rectification of the register of members - natural legal heirs - mandatory time-limits for dealing with transmission requests

Transmission of shares by operation of law - rectification of the register of members - mandatory time-limits for dealing with transmission requests - The Applicants, as the undisputed natural legal heirs of the deceased shareholder, are entitled to transmission of the shares and the Company is obliged to effect transmission and rectify its Register of Members. - HELD THAT: - The Tribunal noted that the Petitioners are the undisputed natural legal heirs of the deceased shareholder and had submitted the documents supporting their claim. Section 58 requires a company to act within the prescribed period upon delivery of intimation of transmission and provides for appeal where the company refuses or fails to act. The Company neither registered the transmission nor communicated any refusal; its inaction after receipt of the request and documents was contrary to the statutory mandate. Given there was no contentious dispute over title between parties, the Tribunal held that the matter did not require adjudication on disputed facts and that the Company must proceed to effect the transmission and make necessary entries in the register, subject to filing of the requisite documents by the Applicants. [Paras 6, 7]

Applicants entitled to transmission of shares; Company directed to take appropriate action to transmit the shares and rectify its register.

Natural legal heirs - Absence of a Will did not preclude transmission where the legal heirs are undisputed and supporting documents were produced. - HELD THAT: - The Respondent contended that a Will in favour of the Applicants was not produced. The Tribunal observed that the Company did not allege any dispute regarding the identity of the legal heirs. In such circumstances, production of a Will is not a precondition to transmission; the statutory scheme contemplates transmission to heirs recognised in law upon submission of supporting documents. Therefore the objection based solely on absence of a Will was rejected. [Paras 7]

Company's contention regarding absence of a Will is not tenable; transmission is not dependent on production of a Will where heirs are undisputed.

Mandatory time-limits for dealing with transmission requests - refusal of registration and appeal against refusal - The Tribunal issued specific procedural directions fixing time-frames for submission of documents by the Applicants and for the Company to effect transmission. - HELD THAT: - After finding that the Applicants were entitled to transmission, the Tribunal directed the Applicants to submit the requisite documents, including an indemnity bond, within one week and directed the Respondent Company to complete the transmission and update the register within three weeks. These directions operationalise the statutory requirement that companies act within specified periods and provide a timetable to cure the Company's prior inaction. [Paras 8]

Applicants to file requisite documents within one week; Company to effect transmission and update register within three weeks.

Final Conclusion: The petition is disposed of: the Tribunal ordered transmission of the shares to the Applicants (undisputed legal heirs), rejected the objection based on absence of a Will, directed the Applicants to file requisite documents within one week and directed the Company to effect transmission and rectify the register within three weeks; no order as to costs.

Dispensing with meeting of shareholders - Dispensing with meeting of unsecured creditors - Notice to statutory authorities under Section 230(5) of the Companies Act, 2013 - Presumption of no-objection on non-response by statutory authorities - Appointment of Chartered Accountant to scrutinize books on behalf of Official Liquidator - Obligation to host scheme and file proof of compliance

Dispensing with meeting of shareholders - Dispensation of the requirement to convene meetings of equity (and preference) shareholders of the transferor companies - HELD THAT: - The Tribunal accepted the Applicants' evidence of unanimous or requisite shareholder consent by affidavit. Applicant No. 1 (First Transferor Company) has seven equity shareholders who furnished affidavits consenting to the proposed scheme and therefore the meeting of its equity shareholders was dispensed with. Applicant No. 2 (Second Transferor Company) produced affidavits from its eight equity shareholders and its sole preference shareholder consenting to the scheme; accordingly, meetings of both classes of shareholders of Applicant No. 2 were dispensed with. The dispensation was granted on the basis of the filed affidavits demonstrating consent in lieu of convening physical meetings. [Paras 8, 9]

Meetings of shareholders of Applicant No. 1 and of the equity and preference shareholders of Applicant No. 2 are dispensed with.

Dispensing with meeting of unsecured creditors - Dispensation of the requirement to convene meetings of unsecured creditors of the transferor companies - HELD THAT: - For Applicant No. 1 the Tribunal noted the existence of 12 unsecured creditors and was informed that the unsecured creditors would not be affected as liabilities would be taken over by the Transferee; taking these facts and the Chartered Accountant's certification into account, the meeting of unsecured creditors of Applicant No. 1 was dispensed with subject to service of notices to unsecured creditors under the Tribunal's directions so they may make representations. For Applicant No. 2, one unsecured creditor holding 91.426% of outstanding debt had given affidavit consent; on that basis the Tribunal dispensed with the meeting of unsecured creditors of Applicant No. 2. [Paras 11, 12, 13]

Meetings of unsecured creditors of Applicant No. 1 and Applicant No. 2 are dispensed with subject to issuance of notices and opportunity to submit representations.

Notice to statutory authorities under Section 230(5) of the Companies Act, 2013 - Presumption of no-objection on non-response by statutory authorities - Directions for service of notice on prescribed authorities and the consequence of non-response - HELD THAT: - The Tribunal directed service of notices in the prescribed form to the Regional Director (Western Region), Registrar of Companies, the relevant Income Tax Authorities (identifying the PAN of the concerned Applicant companies), and the Reserve Bank of India. It recorded that pursuant to Section 230(5) and the applicable rules, if no representation is received by the Tribunal from such authorities within 30 days of receipt of notice, it will be presumed that they have no representation or objection to the proposed scheme. [Paras 14]

Applicants must serve prescribed notices on the specified authorities; non-response within 30 days will be deemed to signify no objection.

Appointment of Chartered Accountant to scrutinize books on behalf of Official Liquidator - Appointment of a Chartered Accountant from the Official Liquidator/MCA panel to scrutinize accounts and report to the Tribunal - HELD THAT: - The Tribunal directed that the Applicant Companies serve notice on the Official Liquidator, High Court, Bombay and appointed a Chartered Accountant from the Official Liquidator/MCA panel to scrutinize the books of Applicant No. 1 and Applicant No. 2 and submit a report to the Tribunal as suggested by the Official Liquidator's office. The Applicants are directed to bear the professional charges of the appointed Chartered Accountant, subject to a fee ceiling specified by the Tribunal. If the Official Liquidator does not file any representation/objection within 30 days of receipt of notice, it will be presumed there is no objection. [Paras 15]

A Chartered Accountant from the Official Liquidator/MCA panel shall scrutinize the accounts of the Applicant companies and report to the Tribunal; Applicants shall bear the CA's fees within the prescribed ceiling.

Obligation to host scheme and file proof of compliance - Requirement to host notices and the scheme on the applicants' websites and to file electronic proof of compliance with the Tribunal's directions - HELD THAT: - The Tribunal directed the Applicant Companies to host the notices along with a copy of the scheme on their respective websites, if any, and to file proof of compliance electronically confirming that directions regarding issuance of notices and hosting on websites have been complied with. This procedural direction ensures stakeholders have access to the scheme and that the Tribunal receives verification of compliance prior to further proceedings. [Paras 16, 17]

Applicants shall host the notices and scheme on their websites (if any) and file electronic proof of compliance with the Tribunal's directions.

Final Conclusion: The Tribunal, on the material and affidavits produced, dispensed with statutory meetings of shareholders and unsecured creditors where consent or certification justified dispensation, directed service of prescribed notices to statutory authorities and the Official Liquidator (with a 30 day presumption of no-objection on non-response), appointed a Chartered Accountant from the Official Liquidator/MCA panel to scrutinize accounts with fees to be borne by the Applicants, and required hosting of the scheme and filing of proof of compliance.

Waiver of requirements under Section 244(1) - Prima facie case for entertaining a petition under Section 241 - Discretionary power of tribunal to grant waiver in genuine or hardship cases - Oppression and mismanagement jurisdiction of the Tribunal - Res judicata and issue estoppel - Jurisdiction of Civil Court vis-a -vis the Tribunal - Delay and laches as a defence to petitions under Section 241

Waiver of requirements under Section 244(1) - Prima facie case for entertaining a petition under Section 241 - Discretionary power of tribunal to grant waiver in genuine or hardship cases - Validity of the National Company Law Tribunal's order allowing IA No. 170 of 2020 and waiving the conditions prescribed under Section 244(1) to admit C.P. No. 110/BB/2019 for final adjudication. - HELD THAT: - The Appellate Tribunal reviewed whether the Tribunal had rightly exercised its discretion under the proviso to Section 244(1) to waive compliance with eligibility conditions so that the proposed petition under Section 241 could be entertained. The court noted that the Tribunal considered the averments in the proposed petition and formed the view that the petitioner had made out a prima facie case of acts complained of as oppression and mismanagement (including alleged dilution of shareholding by a rights issue). The appellate court reiterated that a meritorious or triable litigation should not be dismissed at the threshold where the averments require in-depth examination and evidence; the power to grant waiver is discretionary and may be exercised in genuine or hardship cases. Applying these principles to the material before it, the Appellate Tribunal found no reason to interfere with the Tribunal's exercise of discretion in allowing the waiver application and admitting the main petition for final hearing. [Paras 54]

The impugned order granting IA No. 170 of 2020 and waiving the requirements under Section 244(1) to admit the main company petition is upheld; the appeal is dismissed.

Res judicata and issue estoppel - Jurisdiction of Civil Court vis-a -vis the Tribunal - Delay and laches as a defence to petitions under Section 241 - Whether prior civil proceedings, findings of the civil court, estoppel/res judicata, delay or other preliminary objections preclude the Tribunal from proceeding with the petition under Sections 241/242. - HELD THAT: - The Appellate Tribunal observed that questions of res judicata, issue estoppel, jurisdictional bar of civil courts, delay and laches, and related factual and legal pleas are mixed questions of fact and law which the appellants remain free to raise and to have decided on the merits at the stage of final hearing. The court treated the Tribunal's allowance of the waiver application as an interlocutory admission to enable full adjudication; interlocutory observations do not finally preclude the respondents from advancing factual or legal defences (including locus standi, estoppel, res judicata, delay/laches) in their replies and at the final hearing, and the Tribunal must decide such contentions fairly and on merits. [Paras 53]

Preliminary objections relating to res judicata, estoppel, civil court jurisdiction, delay and laches were not finally decided and remain open for adjudication at the final hearing of the main petition; appellants may raise these pleas in their response.

Final Conclusion: The Appellate Tribunal found no infirmity in the NCLT's discretionary grant of waiver under Section 244(1) to admit the Company Petition for final adjudication and accordingly dismissed the appeal; preliminary defences such as res judicata, estoppel, jurisdictional bar and delay were left open for adjudication at the final hearing.

Existence of undisputed operational debt - pre-existing dispute - barred by limitation - Code not a recovery forum - insolvency requires insolvency of the corporate debtor / ongoing concern

Existence of undisputed operational debt - pre-existing dispute - barred by limitation - Code not a recovery forum - insolvency requires insolvency of the corporate debtor / ongoing concern - Maintainability of the petition under Section 9 of the IBC for initiation of CIRP against the corporate debtor. - HELD THAT: - The Tribunal found that the application filed by the Operational Creditor was, in substance, a recovery application and not one founded on the insolvency of the Corporate Debtor. The invoices relied upon spanned from 27.10.2014 to 10.08.2018, and only amounts from 06.02.2017 fall within limitation, leaving a substantial portion time-barred. A debit note dated 21.04.2017 and contemporaneous dealings showed that a dispute as to quality of goods existed well before issuance of the demand notice dated 27.12.2019. Where a pre-existing dispute exists and is reflected in the record, the provisions of the Code cannot be invoked to initiate CIRP. Further, the audited financials for year ending 31.03.2018 and 31.03.2019 demonstrated substantial turnover, positive profit before tax and positive net worth, indicating the Corporate Debtor to be an ongoing solvent concern; pushing such an entity into CIRP merely for recovery would be contrary to the objects of the Code. In view of the existence of dispute prior to the demand notice, the time-barred character of much of the claim, and the Corporate Debtor's financial position, the petition was not maintainable under Section 9. [Paras 8, 9, 10, 11, 12]

The petition under Section 9 is dismissed as not maintainable since the claim involved pre-existing dispute and time-barred invoices, and the Corporate Debtor is a solvent ongoing concern; the Code cannot be used as a recovery mechanism.

Final Conclusion: CP (IB) No.105/BB/2020 filed by the Operational Creditor is dismissed for want of maintainability; the order leaves open the Operational Creditor's remedy in other fora for recovery of dues.

Default for the purposes of the Insolvency and Bankruptcy Code - maintainability of an application under Section 7 of the Insolvency and Bankruptcy Code - effect of orders under the SARFAESI Act on initiation of CIRP - role of Information Utility record as evidence of default - appointment and duties of Interim Resolution Professional and imposition of moratorium

Default for the purposes of the Insolvency and Bankruptcy Code - role of Information Utility record as evidence of default - Whether the Financial Creditor proved that the Corporate Debtor committed a default so as to maintain a Section 7 application. - HELD THAT: - The Adjudicating Authority examined whether the two statutory facts for admission under Section 7 were established: (i) existence of a debt greater than the statutory threshold and (ii) default in repayment by the Corporate Debtor. The Tribunal noted that the Corporate Debtor did not contend that the loan had been fully repaid. Record produced by the Financial Creditor, including the revised repayment schedule after restructuring showing instalments payable in 2015-16 through 2018-19 and an Information Utility report dated 24.08.2020 recording default, established that amounts had become due and payable and remained unpaid. The Tribunal applied the settled statutory definition of "default" under Section 3 of the Code and affirmed that, on the material on record, default was proved for the purposes of admission under Section 7. [Paras 12, 13]

Default by the Corporate Debtor was established and the Section 7 application was maintainable.

Effect of orders under the SARFAESI Act on initiation of CIRP - Whether the DRT/DRAT orders quashing the SARFAESI demand notice and holding the NPA date to be incorrect precluded initiation of CIRP under Section 7. - HELD THAT: - The Tribunal recognised the DRT and DRAT findings that the demand notice under Section 13 of the SARFAESI Act was unsustainable insofar as the NPA date was concerned. However, it emphasized that the present proceeding under Section 7 is not a recovery proceeding under SARFAESI but an insolvency resolution proceeding where the determinative question is whether default has occurred. The Tribunal expressly declined to express any opinion contrary to the DRT/DRAT on SARFAESI issues but held that those orders did not negate the evidence proving default for the purposes of Section 7, particularly in view of the other documentary material on record. [Paras 10, 11]

The DRT/DRAT orders on SARFAESI do not preclude admission of the Section 7 petition where default is otherwise established.

Maintainability of an application under Section 7 of the Insolvency and Bankruptcy Code - appointment and duties of Interim Resolution Professional and imposition of moratorium - Whether the Corporate Debtor should be admitted into CIRP and the IRP appointed with moratorium imposed. - HELD THAT: - Having found that the statutory preconditions for admission under Section 7 were satisfied, the Tribunal proceeded to admit the Corporate Debtor into the Corporate Insolvency Resolution Process. The Tribunal recorded that the proposed Interim Resolution Professional had furnished consent and there were no pending disciplinary proceedings against him. Consequent to admission, the Tribunal directed appointment of the named IRP, declared the commencement date of CIRP, and imposed the moratorium under Section 14, while also setting out the IRP's duties to make public announcement, call for claims and preserve the assets and manage operations as a going concern. The Tribunal further restrained actions including recovery under SARFAESI and directed interim payment to the IRP towards fees and expenses. [Paras 14, 15]

The Corporate Debtor was admitted into CIRP; the nominated IRP was appointed and the moratorium under the Code was imposed.

Final Conclusion: The Tribunal admitted the Section 7 petition, holding that default by the Corporate Debtor was proved despite DRT/DRAT findings on SARFAESI proceduralities; the Corporate Debtor was placed under CIRP, the named Interim Resolution Professional was appointed, and moratorium and ancillary directions were issued.

Admission of claim in liquidation under Insolvency and Bankruptcy Code - effect of failure to submit claim by last date for submission of claims - time-barred claim arising from expired contract - condonation of delay on grounds of pandemic - liquidator's filing of list of stakeholders and recourse to Adjudicating Authority

Admission of claim in liquidation under Insolvency and Bankruptcy Code - effect of failure to submit claim by last date for submission of claims - Application for admission of claim filed after the last date for submission of claims is not maintainable. - HELD THAT: - The Applicant did not submit any claim to the Liquidator before the last date fixed by the public announcement (31.10.2019) and placed the claim for the first time on 22.05.2020. The Tribunal found that the claim was submitted at a belated stage and that no cogent reason was shown to admit the claim after the deadline. In these circumstances the application under Section 42 and 60(5) seeking admission of the claim could not be entertained and is not maintainable. [Paras 3, 4, 5]

Application for admission of the belated claim is not maintainable and is dismissed.

Condonation of delay on grounds of pandemic - effect of failure to submit claim by last date for submission of claims - The plea that the COVID-19 pandemic justified delay in filing the claim is unsustainable. - HELD THAT: - The Applicant relied on the pandemic as the reason for delay in filing the claim after 31.10.2019. The Tribunal observed that the pandemic-related restrictions did not exist at the end of 2019 and consequently held the pandemic plea to be frivolous. Accordingly, pandemic-related condonation of delay was rejected. [Paras 4, 5]

Pandemic plea for condonation of delay is rejected; it does not justify admission of the belated claim.

Time-barred claim arising from expired contract - admission of claim in liquidation under Insolvency and Bankruptcy Code - The claim was time-barred on the basis that the underlying contract had expired prior to the insolvency process. - HELD THAT: - The Liquidator pointed out that the Gas Sale Transmission Agreement between the Applicant and the Corporate Debtor covered the period 01.01.2011 to 31.12.2015. On the record, the Tribunal accepted that the contractual period had expired well before the liquidation and that the claim, asserted after the last date for submission, was time-barred. This formed an independent basis for refusing admission of the claim. [Paras 3, 4]

Claim held to be time-barred in view of the expired contractual period and not liable to be admitted.

Liquidator's filing of list of stakeholders and recourse to Adjudicating Authority - The Applicant's contention that statutory publication in Ahmedabad only (while its office is in New Delhi) justified late filing was not accepted. - HELD THAT: - The Applicant contended that the statutory publication was made only in Ahmedabad editions and that its principal office being in New Delhi caused delay. The Tribunal noted that the Applicant had a zonal office in Ahmedabad as reflected in its application and therefore the publication point could not sustain excusing the delay. The Liquidator had already filed the list of stakeholders and the Applicant was advised to approach the Adjudicating Authority, but no sufficient ground was shown to admit the late claim. [Paras 4]

Publication-location argument is unsustainable and does not justify admission of the belated claim.

Final Conclusion: The application for admission of the Applicant's claim in the liquidation of the Corporate Debtor is dismissed as not maintainable: the claim was filed after the last date for submission, the pandemic and publication-location pleas were rejected, and the claim was held to be time-barred.

Eligibility of Cenvat credit for warranty services - nexus between input services and manufacturing activity - place of availing input services not determinative for credit - definition of Input Service post-amendment - inclusion of service value in assessable value not prerequisite for credit

Eligibility of Cenvat credit for warranty services - nexus between input services and manufacturing activity - definition of Input Service post-amendment - Warranty services availed by the assessee qualify as input services eligible for Cenvat credit because they have nexus with the manufacturing activity. - HELD THAT: - The Tribunal accepted the contention that supply of parts and services during the warranty period is intrinsically connected to the manufacturing and sale of goods and therefore bears the requisite nexus with manufacturing activity to be treated as input services. The decision in LUCAS TVS LTD. was applied, noting that even after removal of the phrase "activity relating to business" from the definition of Input Service, warranty-related repairs and supply of parts during warranty claims relate to and have nexus with the manufacturing activity. The Tribunal rejected the proposition that input services must be availed within the factory or place of removal, observing that the restriction applicable to inputs does not extend to input services and that availing such services beyond the place of removal does not, by itself, disqualify them. On these bases the credit was held allowable. [Paras 4]

Credit for warranty services allowed as input services having nexus with manufacturing activity.

Inclusion of service value in assessable value not prerequisite for credit - It is not necessary that the value of warranty services be included in the assessable value for Central Excise before allowing Cenvat credit. - HELD THAT: - The Tribunal noted and applied precedent to hold that there is no requirement in the definition of Input Service that the value of the service must be included in the assessable value for excise purposes as a precondition for credit. Reliance was placed on the reasoning that warranty services are impliedly part of the sale consideration and, more importantly, that the statutory definition does not impose the inclusion-in-assessable-value test for entitlement to credit. Consequently, the contention that credit is permissible only where service value figures in assessable value was rejected. [Paras 6]

Credit not made contingent on inclusion of service value in assessable value; such inclusion is not a prerequisite.

Final Conclusion: The appeals are allowed: warranty services for supply of parts and repairs during the warranty period qualify as input services with requisite nexus to manufacturing and attract Cenvat credit; availing such services beyond the place of removal does not by itself disqualify credit and inclusion of the service value in assessable value is not a precondition for allowing credit.

Turnover escaping assessment - Wrongly allowed tax credit - Reassessment under Section 35 of the Gujarat VAT Act, 2003 - Quashing of reassessment order

Turnover escaping assessment - Wrongly allowed tax credit - Reassessment under Section 35 of the Gujarat VAT Act, 2003 - Whether the reassessment under Section 35 was maintainable where the same input tax credit had already been disallowed in the original assessment. - HELD THAT: - Section 35 permits reassessment where the Commissioner has reason to believe that taxable turnover has escaped assessment, been underassessed, been assessed at a lower rate, a wrongful deduction has been allowed, or a tax credit has been wrongly allowed in the earlier assessment; only in such circumstances may the Commissioner serve notice and determine the tax to the best of his judgment. In the present case the original assessment had disallowed the input tax credit; there was no instance of a credit having been wrongly allowed in the previous assessment. Consequently there was no statutory foundation to invoke Section 35 to disallow the same credit afresh by way of reassessment. The reassessment therefore was not tenable in law.

The reassessment order dated 24.03.2020 is quashed and set aside as Section 35 could not be validly invoked where no tax credit had been wrongly allowed in the earlier assessment.

Final Conclusion: Writ allowed; impugned reassessment quashed. The decision in the pending Special Civil Application No.18263 of 2019 is unaffected and shall be disposed of on its own merits.

Failure to consider statutory returns and representations - right to personal hearing before passing assessment - requirement of a reasoned order - bar of limitation for assessment -

Failure to consider statutory returns and representations - right to personal hearing before passing assessment - requirement of a reasoned order - - Assessment order set aside for failure to consider the petitioner's reply and CST returns and remitted for fresh consideration with opportunity of personal hearing and requirement to pass a reasoned order. - HELD THAT: - The Court found that the assessing authority did not advert to or deal with the petitioner's written response dated 20.11.2019 to the show-cause notice and failed to refer to or take into account the CST returns filed by the petitioner. The learned Special Counsel for Commercial Taxes could not explain this omission. Such failure vitiates the impugned assessment because the authority was obliged to consider the representations and returns before arriving at a tax conclusion. In consequence, the assessment order was set aside and the matter remitted to the assessing authority with directions to provide a personal hearing, permit filing of further responses and supporting material, consider the returns and submissions, and thereafter pass a reasoned order in accordance with law and communicate it to the petitioner. [Paras 5, 7, 8]

Impugned Assessment Order No.51615 dated 31.03.2020 set aside; matter remitted for fresh consideration after providing personal hearing and considering the petitioner's reply and CST returns, and a reasoned order to be passed.

Bar of limitation for assessment - - Claim of limitation in respect of the period April, 2015 to February, 2016 is to be permitted and considered afresh by the assessing authority. - HELD THAT: - The Court noted the petitioner's contention that assessment for April 2015 to February 2016 is barred by limitation and observed that the assessing authority had proceeded on figures from waybills and electronic records instead of adopting the turnovers declared in returns. Rather than deciding the limitation plea on the merits, the Court allowed the petitioner to press the plea before the assessing authority and remitted the issue for fresh adjudication so that the authority may consider the limitation plea along with the returns and other material during the fresh assessment proceeding. [Paras 6, 8]

Petitioner permitted to raise and press the plea of bar of limitation for April, 2015 to February, 2016 before the assessing authority; issue remitted for fresh consideration.

Writ petition allowed; impugned assessment set aside and remitted to the assessing authority for fresh consideration after affording personal hearing, permitting additional responses and materials (including a plea of limitation for April, 2015 to February, 2016), and directing the authority to pass a reasoned order in accordance with law and communicate it to the petitioner.

Bona fide purchaser - encumbrance certificate showing nil encumbrance - constructive notice - attachment for recovery of arrears

Bona fide purchaser - encumbrance certificate showing nil encumbrance - constructive notice - attachment for recovery of arrears - The attachment dated 06.10.2015 over the property purchased by the petitioner was illegal and was quashed as the petitioner was a bona fide purchaser who acquired the property prior to the attachment and had no actual or constructive notice of any charge. - HELD THAT: - The petitioner obtained an encumbrance certificate dated 08.08.2014 showing nil encumbrance and thereafter purchased the property on 04.09.2014. The impugned attachment was effected only on 06.10.2015 in respect of arrears allegedly payable by the vendor's father. The respondents produced no evidence that the petitioner had actual knowledge of the recovery proceedings. Applying the principle that a bona fide purchaser takes property free of charges of which he has no actual or constructive notice, and following the Division Bench authority relied upon, the Court found that constructive notice was not established - there was no registered charge or other circumstance that would have required enquiry by a prudent purchaser. In these circumstances the attachment was arbitrary and unlawful and was liable to be set aside; the encumbrance reflected as on 06.10.2015 was ordered to be removed. [Paras 8, 9, 12, 13]

Impugned order of attachment dated 25.10.2019 quashed; encumbrance reflected as on 06.10.2015 to be removed by the second respondent within one week.

Final Conclusion: Writ petition allowed; attachment quashed and encumbrance ordered removed; no costs.

Procedure for dealing with system-generated mismatch of ITC - centralised mechanism for reconciliation of returns and ITC - affordance of opportunity of hearing and issuance of reasoned orders - remand for fresh enquiry in consultation with other assessing officers - fresh show cause notice and exclusion of limitation plea against it

Centralised mechanism for reconciliation of returns and ITC - procedure for dealing with system-generated mismatch of ITC - remand for fresh enquiry in consultation with other assessing officers - Validity of the impugned notice/order issued on the basis of mismatch of sales transactions without following a prescribed centralised procedure and requirement for fresh consideration by the assessing officer. - HELD THAT: - The Court accepted that departmental practice of issuing notices on reconciliation mismatches without a centralised or consultative procedure is unsustainable. Having referred to the Court's earlier decision in J.K.M. Graphics Solution Pvt. Ltd. and to the subsequent Circular issued by the Commissioner, the Court held that the impugned order cannot be sustained and that matters must be remanded for fresh enquiry. The assessing officer is directed to undertake a fresh exercise, issue a fresh show cause notice containing all required details in respect of the alleged mismatch invoices and conduct a thorough enquiry in consultation with the assessing officers of the other end dealer, following the prescribed departmental procedure and any centralised mechanism that is or will be evolved. The remand is for fresh consideration and decision on merits in accordance with law. [Paras 4]

Impugned order set aside and the matter remanded to the assessing officer for fresh enquiry and decision in accordance with the prescribed procedure and in consultation with other assessing officers.

Affordance of opportunity of hearing and issuance of reasoned orders - fresh show cause notice and exclusion of limitation plea against it - Procedural rights to be afforded on remand, including issuance of fresh show cause notice, opportunity to explain, and the effect on limitation pleas. - HELD THAT: - The Court directed that on remand the assessing officer must issue a fresh show cause notice with all required particulars relating to the alleged mismatch and must afford the petitioner an opportunity to submit explanations within the prescribed time. The assessing officer is obliged to pass a reasoned order dealing with each contention raised, communicate the decision under written acknowledgment and to follow the departmental instructions embodied in the Circular. The Court further held that when a fresh show cause notice is issued in terms of this order the petitioner shall not be permitted to raise any plea of limitation in respect of that fresh notice. [Paras 4, 5]

Assessing officer to issue fresh show cause notice, afford hearing, pass reasoned orders and communicate them; petitioner cannot raise limitation defence against the fresh notice.

Final Conclusion: Writ petition allowed: the impugned order is set aside and the matter remanded to the assessing officer to issue a fresh show cause notice, conduct a fresh enquiry in consultation with other assessing officers following the prescribed/centralised procedure, afford the petitioner an opportunity of hearing, pass reasoned orders and communicate them; the petitioner shall not be permitted to raise a limitation plea against the fresh show cause notice. Consequent miscellaneous petition closed; no costs.

Natural justice - lockdown restrictions - opportunity of personal hearing - limitation for completion of assessment - remand for fresh consideration

Natural justice - lockdown restrictions - opportunity of personal hearing - limitation for completion of assessment - Validity of assessment orders passed during the period of lockdown without affording opportunity to the petitioners to represent and be heard - HELD THAT: - The Court found that Government Order G.O. Ms. No. 45 (22.03.2020) imposed an immediate lockdown requiring closure of shops, commercial establishments and offices, and prescribed penal consequences for violations, thereby preventing the petitioners from attending offices, compiling records or appearing before assessing authorities from 22.03.2020 onwards. Although the assessing authorities faced limitation for completing assessments for assessment year 2015 - 16, they could not validly pass assessment orders after 22.03.2020 without issuing notice and affording an opportunity to the assessees to file objections or appear for personal hearing. Passing orders behind the petitioners' back while they were complying with lockdown measures amounted to a breach of the principles of natural justice. The Court noted that the assessing authorities' compulsion arising from impending time-bar was not a justification for denying hearing during the lockdown period. [Paras 16, 17, 18, 19]

Impugned assessment orders passed after 22.03.2020 are invalid for violation of principles of natural justice and liable to be set aside.

Remand for fresh consideration - opportunity to file objections and personal hearing - Relief to be granted and procedure on remand - HELD THAT: - The Court set aside the assessment orders dated 26.03.2020, 28.03.2020, 30.03.2020 and 31.03.2020 and remitted the matters to the respective assessing authorities for fresh decision. The authorities are directed to issue fresh notice to the concerned petitioners; petitioners are granted six weeks from receipt of the show cause notice to file explanations/objections with supporting material; and the assessing authorities shall consider the objections and afford an opportunity of personal hearing before passing orders anew. The Court expressly refrained from adjudicating other grounds raised by the petitioners, leaving those to be urged before the assessing authorities. [Paras 20, 21]

Assessment orders set aside and matters remitted for fresh adjudication after notice, filing of objections within six weeks and affording personal hearing.

Final Conclusion: Writ petitions allowed; assessment orders dated 26.03.2020, 28.03.2020, 30.03.2020 and 31.03.2020 set aside for breach of natural justice as they were passed during the lockdown period without affording petitioners an opportunity to be heard; matters remitted for fresh decision after notice and opportunity to file objections and obtain personal hearing.

Inter-state sale - Deemed transfer of documents of title - Pre-deposit for filing appeal - Power under Article 226 to relax pre-deposit - Prime facie case - Assessment framed under PVAT Act

Inter-state sale - Deemed transfer of documents of title - Assessment framed under PVAT Act - Prime facie case - Validity of the assessment orders dated 15.12.2015, 16.11.2018 and 20.11.2019 for AYs 2010-11, 2011-12 and 2012-13 - HELD THAT: - The Court declined to quash the impugned assessment orders. On scrutiny of the contract terms, accompanying documents including Forms E-1 and C, and earlier departmental conduct in issuing Form C, the Court found that two of the three conditions for deemed inter-state sale (movement of goods between States and movement concluding in a State other than that from which goods started) were not in dispute and that the transfer of title by endorsement/transfer of documents was stipulated in the contract. Having regard to these facts and authorities relied upon, the Court concluded that the petitioner has a prime facie case on merits but did not find grounds to set aside the assessments in exercise of writ jurisdiction.

Impugned assessment orders not quashed; petitioner found to have a prime facie case but assessments stand.

Pre-deposit for filing appeal - Power under Article 226 to relax pre-deposit - Prime facie case - Penalty for tax default - Whether condition of pre-deposit under Section 62(5) of the PVAT Act should be relaxed or reduced to enable hearing of appeals - HELD THAT: - Recognising that the Appellate Authority requires pre-deposit (25% of additional demand) but mindful that the petitioner had documentary support (including undisplaced Forms C) and that the department had accepted the transactions earlier by issuance of Form C, the Court exercised its power under Article 226 to moderate the pre-deposit requirement in a deserving case. The Court observed that the matter involved interpretation rather than fraud and that imposing the full statutory pre-deposit including interest and enhanced penalty would be harsh. Accordingly, the Court ordered a reduced and quantified pre-deposit to secure the right of appeal and to enable adjudication on merits by the appellate forum.

Petitioner's pre-deposit requirement reduced; directed to deposit Rs. 7.5 Crore within one month as condition for admission of appeals.

Pre-deposit for filing appeal - Appellate consideration - Prime facie case - Directive to the First Appellate Authority to hear and decide the appeals upon compliance with the reduced pre-deposit - HELD THAT: - Having fixed the reduced pre-deposit, the Court directed that upon proof of deposit the Deputy Excise and Taxation Commissioner (Appeals) shall admit, hear and decide the appeals on merits. The appellate authority was given a timeline to decide the appeals preferably within three months. This directs the appellate forum to undertake fresh adjudication of the appeals subject to the specified pre-deposit and does not circumscribe its power to decide issues on merits.

On proof of deposit, appeals to be heard and decided by the First Appellate Authority preferably within three months.

Final Conclusion: Writ petitions dismissed insofar as quashing of assessments is sought; in exercise of jurisdiction under Article 226 the Court reduced the statutory pre-deposit and directed the petitioner to deposit the specified amount within one month, whereupon the First Appellate Authority shall admit and decide the appeals for AYs 2010-11, 2011-12 and 2012-13 preferably within three months.