TaxTMI Updates e-Newsletter
Jan 02,2024

Refund of IGST - deduction of differential duty drawback - interest on refund - binding nature of High Court directions - quashing of orders passed in disobedience of court directions

Refund of IGST - deduction of differential duty drawback - interest on refund - binding nature of High Court directions - Impugned appellate order contrary to this Court's directions in Special Civil Application No. 14974 of 2019 insofar as it charged interest on the differential duty drawback and reduced the directed rate of interest on IGST refund. - HELD THAT: - The Court found that the respondent-authorities implemented the refund order in a manner inconsistent with the directions previously issued by this Court and affirmed by the Supreme Court. The authorities (i) levied interest on the differential duty drawback contrary to the entitlement to deduct that differential from the IGST refund and (ii) reduced the rate of interest on the IGST refund from 7% (as directed by this Court) to 6%, and applied 15% interest on the differential duty drawback. Those departures were held to be without justification. Once this Court's directions are issued, they are binding on the respondent-authorities and cannot be ignored or varied in the exercise of their functions under Article 226. Consequently the appellate order was quashed and the authorities were directed to sanction the refund of IGST after deducting the differential duty drawback and to grant interest at 7% simple interest from the date of shipping bill until actual refund, in accordance with this Court's earlier direction; the exercise to be completed within four weeks from receipt of this order. [Paras 6, 7]

Impugned order quashed; respondents directed to comply with this Court's earlier directions and sanction refund of IGST after adjustment of differential duty drawback with 7% simple interest within four weeks.

Final Conclusion: Petition allowed; the appellate order dated 11.03.2022 is quashed to the extent it departs from this Court's directions and the respondents are directed to sanction the IGST refund after deduction of differential duty drawback and payment of 7% simple interest, to be completed within four weeks.

Refund claim and limitation under Section 54(1) of the Bihar Goods and Services Tax Act, 2017 - time barred refund applications - discretion to extend limitation for refund applications

Refund claim and limitation under Section 54(1) of the Bihar Goods and Services Tax Act, 2017 - time barred refund applications - Whether the writ petition can be entertained to direct acceptance of a refund application lodged beyond the two year period prescribed by Section 54(1). - HELD THAT: - The Court recorded that Section 54(1) prescribes a two year period from the relevant date within which an application for refund must be made in the prescribed form and manner. The petitioner admittedly did not file the refund application within that statutory period for the tax periods 2017 18 and 2018 19, pleading a dispute with the counter party as the reason for delay. The Court found the stated reason not to be a satisfactory ground for extending the limitation and held that the limitation prescribed by Section 54(1) could not be extended in the circumstances. The petition therefore raised no ground to invoke writ jurisdiction to compel the department to open the portal or accept a physical application outside the statutory period. [Paras 2, 3]

Writ petition dismissed; no direction to accept or entertain the refund application filed beyond the two year period under Section 54(1).

Final Conclusion: The High Court dismissed the petition seeking acceptance of the refund application for 2017 18 and 2018 19 because the application was not filed within the two year period prescribed by Section 54(1) of the Bihar GST Act, 2017, and the asserted reason for delay did not warrant extension of the limitation.

Penalty for transporting vehicle after expiry of e-way bill - absence of deliberate intention to evade tax - entitlement to refund of penalty subject to compliance of legal formalities

Penalty for transporting vehicle after expiry of e-way bill - absence of deliberate intention to evade tax - Validity of the penalty imposed for transporting the vehicle after the e-way bill had expired when the interception occurred about nine hours after expiry and no deliberate evasion of tax was shown. - HELD THAT: - The Court considered the factual matrix that the e-way bill expired on 27.12.2022 at 11:59 p.m. and the vehicle was intercepted at 8:37 a.m. on 28.12.2022, a time gap of approximately nine hours (less than a day). The appellate authority had confirmed the penalty imposed by the adjudicating authority for transporting the vehicle after expiry of the e-way bill. The respondents were unable to demonstrate any deliberate or willful intention on the part of the petitioner to avoid or evade tax. Having regard to the record and the Court's earlier orders relied upon by the petitioner, the Court found that the penalty could not be sustained in the circumstances. The Court therefore set aside the impugned orders of the adjudicating and appellate authorities and directed that the petitioner be entitled to a refund of the penalty, subject to compliance with legal formalities. [Paras 4, 5]

Impugned orders confirming the penalty set aside; petitioner entitled to refund of the penalty subject to compliance with legal formalities.

Final Conclusion: Writ petition allowed; orders of the adjudicating and appellate authorities imposing and confirming the penalty for transporting the vehicle after expiry of the e-way bill are set aside and the petitioner is entitled to refund of the penalty, subject to compliance of legal formalities.

Show cause notice - defect for non-identification of adjudicating officer - opportunity of being heard - suspension of GST registration

Show cause notice - defect for non-identification of adjudicating officer - opportunity of being heard - Validity of the show cause notice dated 21.03.2023 in view of absence of designation or name of the officer before whom the petitioner was directed to appear, and the appropriate remedy. - HELD THAT: - The impugned communication called upon the petitioner to appear "before the undersigned" on a specified date but did not identify the officer or give the designation of the official before whom appearance was required; the show cause notice also resulted in suspension of the petitioner's GST registration. The Court observed the omission and directed respondents to furnish the identity of the officer; on being informed that the officer is the Superintendent of Central GST and Central Excise, Theni Range, the Court did not quash the notice but provided a remedial direction. In exercise of supervisory jurisdiction the Court permitted the petitioner to answer the show cause notice and directed personal appearance before the identified officer on a specified date, treating the impugned communication as the show cause notice itself, thereby securing the petitioner's right to be heard without disturbing the proceedings on merits. [Paras 4, 6, 7, 8]

The petitioner shall answer the show cause notice dated 21.03.2023 and appear before the Superintendent of Central GST and Central Excise, Theni Range, on 28.06.2023; the impugned communication shall be treated as the show cause notice.

Final Conclusion: Writ petition disposed by directing the petitioner to appear and answer the show cause notice before the identified officer on the stipulated date; no quashing of the notice or order as to costs.

Unexplained investment under section 69B - assessment of excess stock as business income - survey under section 133A and computation of excess stock by applying gross profit rate - disallowance of expenses in absence of supporting details

Unexplained investment under section 69B - assessment of excess stock as business income - survey under section 133A and computation of excess stock by applying gross profit rate - Treatment of excess stock detected during survey - whether to be assessed as unexplained investment under section 69B or as business income - HELD THAT: - During a survey under section 133A physical inventory produced an estimated excess stock of Rs.54,89,056 which the Assessing Officer treated as unexplained investment under section 69B. The Tribunal examined the computation of excess stock which was based on applying a gross profit rate of 22% and noted that the assessee furnished purchase ledger details and pointed out that the gross profit rate declared in the preceding three years was substantially higher (26.84%, 27.51% and 31.48%), which, if applied, would bring the physical stock valuation close to book stock. The Tribunal observed that the departmental computation was essentially an estimate made in a limited-time physical verification and that the Revenue did not value items by quality or explain how each item was valued. On these facts the Tribunal concluded that the excess detected was not shown to be an unexplained investment and directed that the amount be assessed as business income as declared by the assessee and not as unexplained investment chargeable under section 69B or at the special rate under section 115BBE. [Paras 6]

Excess closing stock found during survey to be assessed as business income and not as unexplained investment under section 69B.

Disallowance of expenses in absence of supporting details - Validity and extent of 30% disallowance of expenditure imposed by the Assessing Officer - HELD THAT: - The Assessing Officer made a blanket disallowance of 30% of total expenditure for lack of details, which the Commissioner (Appeals) had confirmed. The Tribunal accepted that absence of supporting evidence justifies some disallowance but concluded that a 30% deduction was excessive on the material before it. Applying a pragmatic restriction in the absence of particulars, the Tribunal reduced the disallowance to 20% and directed the Assessing Officer to compute the disallowance accordingly. [Paras 8]

Disallowance restricted to 20% instead of 30%; Assessing Officer to give effect accordingly.

Final Conclusion: The appeal is partly allowed: the excess stock discovered in survey is to be treated and assessed as business income for AY 2019-2020 (not as unexplained investment under section 69B), and the disallowance of expenditure is reduced from 30% to 20%.

Deduction under Section 80P(2)(a)(i) for co-operative societies - Revision under Section 263 - erroneous and prejudicial to the interests of Revenue - Distinction between a co-operative bank and a primary agricultural credit society; banking activity and RBI licence - Interpretation of Section 80P(4) as excluding only co-operative banks engaged in banking business (i.e., licensed by RBI)

Deduction under Section 80P(2)(a)(i) for co-operative societies - Revision under Section 263 - erroneous and prejudicial to the interests of Revenue - Distinction between a co-operative bank and a primary agricultural credit society; banking activity and RBI licence - Interpretation of Section 80P(4) as excluding only co-operative banks engaged in banking business (i.e., licensed by RBI) - Whether the Revision order u/s 263 setting aside the assessment insofar as it allowed deduction u/s 80P(2)(a)(i) in respect of interest income from Central Co operative Bank and Tamil Nadu State Apex Co operative Bank was justified - HELD THAT: - The Tribunal found that the Assessing Officer correctly allowed the deduction under Section 80P(2)(a)(i) for interest earned from deposits with the Central Co operative Bank and the Tamil Nadu State Apex Co operative Bank. The decision proceeds on the established distinction that a society is a co operative bank only if it carries on banking as defined in the Banking Regulation Act and holds a licence from the Reserve Bank of India; where the society's activities are confined to members and it is not licensed as a bank, it is to be treated as a primary agricultural credit society and eligible for the Section 80P deduction. The Tribunal relied on and followed higher and coordinate authority, including the Hon'ble Supreme Court decision in Mavilayi Service Co operative Bank Limited , the Madras High Court decisions affirming entitlement of primary agricultural credit societies, and earlier Tribunal and coordinate bench precedents holding that associate or nominal members admitted under the State Co operative Societies Act fall within the term 'members' in Section 80P(2)(a)(i). Applying these principles to the undisputed facts that the interest income arose from deposits with the State cooperative entities which are governed by the State Co operative Societies Act and are not licensed banks, the Tribunal concluded that the proviso/exception in Section 80P(4) does not apply and the AO's allowance was lawful; hence the Revision under Section 263 was unwarranted. [Paras 6, 7]

Revision order under Section 263 set aside; Assessing Officer's allowance of deduction under Section 80P(2)(a)(i) in respect of the interest income is upheld and the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, holding that interest income from the specified co operative entities qualified for deduction under Section 80P(2)(a)(i), and that the Principal Commissioner's revision under Section 263 was unjustified; the assessment insofar as it related to the Section 80P claim is restored in favour of the assessee.

Arm's length price - transfer pricing adjustment - recognition of warranty revenue and matching principle - selection and exclusion of comparables and RPT filter - working capital/receivables adjustment - grace period for credit given to associated enterprises - notional interest on outstanding receivables - rate of interest: LIBOR + 200 bps

Recognition of warranty revenue and matching principle - arm's length price - transfer pricing adjustment - Whether the warranty-segment margin must be computed by including warranty revenue recognised from contract deferred revenue and thereby delete the transfer pricing adjustment made by the TPO - HELD THAT: - The Tribunal examined the assessee's accounting policy and supporting records and held that warranty services span multiple years; revenue and related expenses must be matched to the financial years in which services are rendered. The assessee had recognised warranty income in the profit and loss account by transferring amounts from contract deferred revenue and had offered that revenue to tax. The TPO erred by excluding the accrued warranty revenue from the revenue base while including the segment expenses, producing an anomalous negative margin. Accepting the assessee's approach as consistent with revenue recognition principles and the materials on record, the Tribunal computed the tested party margin including the entire warranty revenue recognised in the P&L and found the assessee's margin to exceed the median of comparables. Accordingly the transfer pricing addition relating to warranty services was deleted. [Paras 16, 17, 18, 19, 21]

Transfer pricing adjustment of the TPO in respect of provision of warranty services is deleted; the warranty-segment margin is to be computed including the total revenue of INR 19,16,24,516 recognised in P&L, yielding a tested party margin higher than the comparables' median.

Selection and exclusion of comparables and RPT filter - arm's length price - transfer pricing adjustment - Which comparable companies are to be included or excluded for benchmarking the software development services and whether the TPO's adjustment stands - HELD THAT: - The Tribunal reviewed the functional profiles, RPT percentages and prior acceptance by the TPO in adjacent years. It found that four companies (Sonata Software Limited, Tavant Technologies Limited, Dynamic Digital Technology Pvt. Ltd. and Saven Technologies Ltd.) had RPT exceeding the applied threshold and directed the TPO to verify and, if RPT > 25%, exclude them. The Tribunal also held that ten other companies were functionally dissimilar on the recorded reasons and must be excluded. Conversely, where the same entities had been accepted as comparables in immediately preceding or subsequent years, the TPO's blanket and general rejection (without specific reasons) was held improper; the Tribunal directed inclusion of seven named companies (including C G-V A K Software & Exports Ltd., Harbinger Systems Pvt Ltd., Sagarsoft (India) Ltd., Evoke Technologies Pvt Ltd., Kireeti Soft Technologies Ltd., Maveric Systems Limited, and Akshay Software Technologies Limited). For Sasken Technologies Ltd. the Tribunal directed the TPO to verify and, if segmental results are available, use the segmental numbers. The TPO was directed to give effect to these inclusions/exclusions and recompute the ALP accordingly. [Paras 33, 34, 35, 36, 37]

Certain comparables to be excluded for functional dissimilarity or RPT > 25% (subject to verification); specific companies are directed to be included; TPO to verify segmental data for Sasken and thereafter recompute the arm's length range and adjustment.

Notional interest on outstanding receivables - working capital/receivables adjustment - grace period for credit given to associated enterprises - rate of interest: LIBOR + 200 bps - How the notional interest on outstanding receivables from associated enterprises is to be computed (amount/days), appropriate grace period and applicable rate of interest - HELD THAT: - The Tribunal held that imputation of interest must be based on actual days of delay on each invoice beyond an appropriate grace period and that charging interest on closing balances without invoice wise computation is incorrect. The determination of the grace period depends on (a) contract terms with the AEs and/or (b) market practice; because the assessee is a captive service provider and no comparable non AE transactions were available on record, the matter is remanded to the TPO to examine agreements and market practice and to grant a reasonable grace period. The Tribunal further held, following judicial precedents cited, that the rate to be applied is LIBOR + 200 basis points. The TPO was directed to compute interest on each invoice for days outstanding beyond the grace period and apply LIBOR + 200 bps; the assessee was directed to furnish complete invoice-wise information to the TPO. [Paras 39, 42, 43, 44, 45]

Issue remanded to the TPO for invoice-wise computation of interest beyond a grace period to be determined by examining agreements or market practice; apply LIBOR + 200 bps on the determined outstanding days.

Final Conclusion: The appeal is partly allowed. The transfer pricing addition in respect of warranty services is deleted. The software services benchmarking is to be revised by excluding and including specified comparables (and by verifying segmental data where directed) with recomputation of ALP by the TPO. The notional interest claim is remitted to the TPO for invoice wise computation beyond a grace period to be ascertained from agreements or market practice, and the rate of interest fixed at LIBOR + 200 bps.

Penalty under section 271D - contravention of section 269SS - requirement of recorded satisfaction in the assessment order - pari materia between section 271D and section 271E - binding precedent of the Supreme Court in Jai Laxmi Rice Mills

Penalty under section 271D - requirement of recorded satisfaction in the assessment order - pari materia between section 271D and section 271E - Penalty under section 271D cannot be validly levied unless satisfaction as to contravention of section 269SS is recorded in the assessment order. - HELD THAT: - The Tribunal examined whether imposition of penalty under section 271D of the Income-tax Act is permissible without a satisfaction recorded in the assessment order. Relying on the ratio of the Supreme Court in Jai Laxmi Rice Mills and the jurisdictional High Court's decision applying that ratio, the Tribunal noted that sections 271D and 271E are in pari materia and that the law requires recorded satisfaction in the original assessment order as a precondition for initiating penalty proceedings under these provisions. The Tribunal held that an adjudicating authority is bound to follow the Supreme Court's decision and that, in the absence of such satisfaction recorded in the assessment order, the penalty under section 271D is unsustainable. Consequently the orders imposing and confirming the penalty were found to be bad in law. [Paras 6, 7, 8, 9]

Orders levying and confirming penalty under section 271D were quashed and the appeal was allowed.

Final Conclusion: Following the Supreme Court and the jurisdictional High Court, the Tribunal held that penalty under section 271D cannot be sustained without recorded satisfaction in the assessment order; the impugned penalty orders were quashed and the assessee's appeal was allowed.

Extension of due date for filing return of income by administrative circular - interest under section 234A of the Act - beneficial construction / reading down of administrative clarification - compensatory nature of interest as explained in Prannoy Roy - quantification and verification of interest liability for applicability of extension

Extension of due date for filing return of income by administrative circular - beneficial construction / reading down of administrative clarification - Clarification No.1 to Circular No.17/2021 must be read down so that the extension of due date till 31/12/2021 applies generally and is not made otiose by a fluctuating computation of interest liability. - HELD THAT: - The circular extended the due date to 31/12/2021 to meet difficulties in electronic filing. Clarification No.1, by conditioning the extension on the amount of tax (as reduced) not exceeding Rs. 1 lakh, produces an anomalous result because quantification of interest under section 234A varies with time and could render the declared date of 31/12/2021 meaningless. Reading the circular purposively and to avoid redundancy, Clarification No.1 is read down so that the extension of the due date operates generally in furtherance of the circular's objective. This approach aligns the circular with its stated purpose and avoids creating multiple, fluctuating due dates for assessees in the same class. [Paras 11, 12, 13]

Clarification No.1 is read down; the extension of due date till 31/12/2021 shall prevail generally.

Interest under section 234A of the Act - compensatory nature of interest as explained in Prannoy Roy - quantification and verification of interest liability for applicability of extension - Where the assessee deposited tax on a date at which the interest liability under section 234A did not exceed the threshold in the circular, the deposit is to be treated as having been made before the extended due date; the matter is remitted for verification whether the payment covered the interest liability as on that date. - HELD THAT: - Applying the Prannoy Roy principle that interest under section 234A is compensatory and is leviable where tax has not been deposited before the due date, the Tribunal held that if taxes were deposited on a date when the computed interest did not exceed the threshold contemplated by the circular, the assessee is entitled to the extended due date and no further interest should attach. The record shows the assessee paid taxes on 27/09/2021 and filed the return on 29/12/2021; consequently the assessing officer is directed to verify whether the payment on 27/09/2021 covered the interest liability up to that date, and if so, to delete the addition made. [Paras 13, 14, 15]

Matter remitted to the Assessing Officer to verify whether the payment on 27/09/2021 covered the interest liability then; if so, delete the addition.

Final Conclusion: The appeal is allowed: Clarification No.1 to Circular No.17/2021 is read down so the extended due date of 31/12/2021 applies generally; the assessing officer is directed to verify whether the assessee's payment on 27/09/2021 covered the interest liability, and to delete the addition if verification is in the assessee's favour.

Arm's length price - transfer pricing benchmarking - treatment of credit/debit notes for transfer pricing adjustments - real income theory - evidentiary value of SEZ/customs entry stamps - reliance on Section 133(6) notices and consequence of non-response

Arm's length price - transfer pricing benchmarking - treatment of credit/debit notes for transfer pricing adjustments - real income theory - Whether the year-end credit note of Rs. 94,00,617/- could be treated as suppression of sales or was a bona fide adjustment made to achieve an arm's length benchmark (cost plus 15%) and therefore not exigible to addition. - HELD THAT: - The Tribunal found that the assessee consistently benchmarked international transactions with the associated enterprise on a cost-plus 15% basis and that this practice was accepted during assessments. The credit/debit notes were used as year end account settlements to achieve the agreed TP markup; the corresponding adjustment was reflected in the assessee's books and corroborated by the AE's auditor certificate. In these circumstances, and applying the principle that once transactions between AEs are held to be at arm's length no further attribution can be made, the AO and the DRP were in error in treating the credit note as an afterthought and treating the amount as unaccounted sales. The Tribunal relied on the legal proposition, as explained by the Supreme Court in Morgan Stanley, that where TP adjustment establishes arm's length pricing, further additions on hypothetical income are not permissible. Having regard to consistent practice across the A.Y.s noted in the record, the addition was deleted. [Paras 17, 18]

The addition of Rs. 94,00,617/- as unaccounted sales is deleted; the credit note is held to be a bona fide TP adjustment and not subject to addition.

Evidentiary value of SEZ/customs entry stamps - reliance on Section 133(6) notices and consequence of non-response - genuineness of expenses - Whether the disallowance of certain purchases and advertisement expenses was justified on the ground that supporting invoices were not provable or were forged, and whether non response to Section 133(6) notices justified disallowance of petty expenses. - HELD THAT: - The Tribunal accepted the AO/DRP's finding that for five specified suppliers the invoices did not bear requisite SEZ/customs entry stamps and therefore those particular expenses could not be taken as proven; disallowance in respect of those invoices was upheld. Conversely, for the remaining petty sundry expenses the Tribunal held that non compliance by suppliers in responding to Section 133(6) notices, without more, did not justify disallowance where the assessee produced primary evidence, PAN and payment proofs; such minor expenses could not be disallowed merely on the ground of non-reply. Handwritten or self-made vouchers were examined in context and where supporting evidence existed the disallowance was not sustained. The result was a partial allowance of the assessee's challenge to expenditure disallowances. [Paras 19, 20]

Disallowance in respect of invoices lacking SEZ/customs entry stamps is upheld; disallowance of other minor expenses is set aside and those items are allowed.

Final Conclusion: The appeal is allowed insofar as the addition of Rs. 94,00,617/- as unaccounted sales is deleted, and is partly allowed on the expenditure issues - disallowances relating to invoices without SEZ/customs entry stamps are sustained while disallowances of the remaining petty expenses are vacated.

Goodwill arising on amalgamation and eligibility for depreciation - Application of Explanation 5 to Section 32(1) regarding allowance of depreciation whether or not claimed - Power of appellate authorities to admit and decide claims not made in the original or revised return (Goetze principle) - Inapplicability of explanations/provisos relating to transfer of block of assets where goodwill arises for first time on amalgamation - CBDT Circular duty of revenue to assist taxpayer in claiming reliefs - Binding effect of Supreme Court decision in Smifs Securities on depreciability of goodwill

Goodwill arising on amalgamation and eligibility for depreciation - Binding effect of Supreme Court decision in Smifs Securities on depreciability of goodwill - Depreciation is allowable on goodwill arising on amalgamation and goodwill is an intangible asset eligible for depreciation. - HELD THAT: - The Tribunal followed the binding decision of the Hon'ble Supreme Court in Smifs Securities that goodwill of a business or profession is a depreciable intangible asset. The Tribunal observed that the legislative amendment by Finance Act, 2021 excluding goodwill from the block of intangible assets came into force from 01/04/2021 and does not affect the assessment year under consideration. The Tribunal rejected the DRP's attempt to distinguish Smifs Securities on the basis that certain statutory explanations or provisos were not adverted to in that decision, holding that a Supreme Court pronouncement bindingly establishes the legal position unless and until altered by the Legislature. Applying these principles, the Tribunal held that goodwill arising on the amalgamation in this case is eligible for depreciation. [Paras 12, 14]

Allow depreciation on goodwill arising on amalgamation as it is an intangible asset eligible for depreciation.

Power of appellate authorities to admit and decide claims not made in the original or revised return (Goetze principle) - Appellate authorities can entertain and decide a claim for deduction even if it was not made in the original or a revised return. - HELD THAT: - The Tribunal applied the principle laid down by the Hon'ble Supreme Court in Goetze (India) Ltd., holding that there is no bar on appellate authorities (and the Tribunal under its statutory powers) to consider additional claims not raised in the original or revised return when the facts supporting the legal point are before the authority. Consequently, the claim for additional depreciation made otherwise than by filing a revised return could be entertained and adjudicated on merits by the appellate forum. [Paras 11]

Entertain and decide the assessee's claim for depreciation notwithstanding it was not raised in the original or revised return.

Inapplicability of explanations/provisos relating to transfer of block of assets where goodwill arises for first time on amalgamation - Statutory explanations and provisos cited by the DRP (relating to transfer of existing block of assets and apportionment) do not preclude depreciation where goodwill arises for the first time on amalgamation and was not an asset of the amalgamating company. - HELD THAT: - The Tribunal examined the DRP's reliance on various statutory explanations and provisos and concluded they apply where an existing block of assets or an asset previously held is transferred to the amalgamated company. In the present case, goodwill arose on amalgamation as a result of excess consideration paid and did not exist in the hands of the amalgamating company; therefore Explanation 2 to Section 43(6), the 6th proviso to Section 32(1) and Explanation 7 to Section 43(1) (as relied upon by the DRP) were inapplicable. On that basis the Tribunal rejected the contention that those provisions prevent allowance of depreciation on such goodwill. [Paras 13]

Statutory explanations and provisos relied upon do not operate to deny depreciation on goodwill that arises for the first time on amalgamation.

Application of Explanation 5 to Section 32(1) regarding allowance of depreciation whether or not claimed - CBDT Circular duty of revenue to assist taxpayer in claiming reliefs - Explanation 5 to Section 32(1) mandates that the provisions apply irrespective of whether depreciation was claimed, and the Revenue has an obligation to allow such relief and assist the taxpayer. - HELD THAT: - The Tribunal relied on Explanation 5 to Section 32(1) which provides that the provisions shall apply whether or not the assessee has claimed the deduction for depreciation. Reading this alongside the CBDT Circular directing departmental officers to assist taxpayers and not take advantage of ignorance, the Tribunal held that the Revenue was obliged to allow depreciation even though the assessee had inadvertently not claimed it in the original return. The Tribunal found the authorities' denial of the claim contrary to these mandates and therefore unsustainable. [Paras 15, 16]

Depreciation must be allowed notwithstanding the assessee's failure to claim it in the original return; the Revenue is obligated to permit such relief.

Final Conclusion: Appeal allowed: the Tribunal held that goodwill arising on amalgamation is a depreciable intangible asset; the appellate authority could entertain the claim though not made in the original return; statutory explanations relied upon by the DRP were inapplicable where goodwill arose for the first time on amalgamation; and Explanation 5 to Section 32(1) together with departmental guidance requires allowance of the depreciation which the authorities below had wrongly disallowed.

Royalty under section 9(1)(vi) - copyright - live broadcast rights - bifurcation of consideration between live and non-live rights - use of process under section 9(1)(vi) - tax deduction under section 195

Royalty under section 9(1)(vi) - copyright - live broadcast rights - bifurcation of consideration between live and non-live rights - tax deduction under section 195 - Right to broadcast live events does not constitute copyright and payments for Live Rights are not taxable as royalty under section 9(1)(vi). - HELD THAT: - The Tribunal examined authorities and the contracts on record and concluded that a right to broadcast live events is not a work in which copyright subsists. The agreements and invoices in the case clearly bifurcate consideration for Live Rights and Non Live Rights; where such bifurcation exists the Department cannot treat payments for Live Rights as part of a bundled copyright entitlement. On this basis payments made for Live Rights cannot be characterised as "royalty" under section 9(1)(vi) and therefore do not attract withholding under section 195 as royalty. [Paras 14]

Payments for Live Rights are not royalty under section 9(1)(vi) and are not taxable as copyright; the assessment treating such payments as royalty is erroneous.

Use of process under section 9(1)(vi) - satellite/operators - tax deduction under section 195 - Payments in dispute were not for use of any "process" as envisaged in section 9(1)(vi) and therefore are not chargeable as royalty on that ground. - HELD THAT: - The Tribunal found that the contested payments were made to overseas rights holders and not to satellite operators nor for use of any satellite or process as defined for the purposes of section 9(1)(vi). Consequently, the payments cannot be characterised as consideration for use of a process and cannot be taxed as royalty on that basis. The Assessing Officer erred in treating the remittances as made for use of a process. [Paras 16]

Payments are not for use of a "process" under section 9(1)(vi); the AO's treatment charging them as royalty on that ground is flawed.

Final Conclusion: The appeal is allowed: payments made for broadcasting live events are neither copyright nor payments for use of a process under section 9(1)(vi), and the orders treating such remittances as royalty and attracting withholding under section 195 are set aside.

Taxability of sponsorship payments as "royalty" - application of Article 12 of the India-Singapore DTAA - withholding tax under section 195 of the Income Tax Act - limited licence for use of Event Marks, footage and still images - incidental use of proprietor's trade mark or logo - precedential weight of co ordinate Bench decisions in identical facts

Taxability of sponsorship payments as "royalty" - application of Article 12 of the India-Singapore DTAA - limited licence for use of Event Marks, footage and still images - incidental use of proprietor's trade mark or logo - Payments made by the assessee under the Sponsorship Agreement do not constitute "royalty" within the meaning of section 9 of the Act or Article 12 of the India-Singapore DTAA. - HELD THAT: - The Tribunal examined Schedule 4 of the Official Sponsor (Worldwide) Agreement and found the sponsor was granted non exclusive, time limited licences to use, reproduce and publish Event Marks and to access footage and still images strictly for advertising and promotional purposes, subject to express restrictions and without acquisition of proprietary rights. The rights were ancillary to the commercial objective of advertising and promotion and amounted to a limited licence rather than a transfer of proprietary rights or a surrender of control over the marks or advertising sites. The Bench relied on co ordinate Bench authorities addressing identical facts (notably Hero MotorCorp Ltd. and Global Cricket Corporation PTE Ltd.), which held similar sponsorship fees were not royalty where the use of trade marks/logos was incidental to advertising and the recipient did not part with control or ownership. The decision in SoktasTekstil was distinguished on its facts, as that case involved an agreement amounting to a trademark licence that conferred different rights. Applying these principles, the Tribunal concluded the payments in question are not taxable as royalty under domestic law or the DTAA. [Paras 6, 10, 11, 12]

Payments under the Sponsorship Agreement are not "royalty"; therefore they are not taxable in India as royalty under section 9 or Article 12 of the DTAA.

Withholding tax under section 195 of the Income Tax Act - refund of tax deducted at source - state cannot charge tax in excess of due - Assessee is entitled to claim refund of any TDS/withholding tax paid on the challenged remittances if tax was deducted and remitted pursuant to the orders now reversed. - HELD THAT: - Having held that the payments do not constitute royalty and thus are not taxable in India as such, the Tribunal observed the settled legal position that the State cannot retain tax not due. Consequently, if tax was deducted and deposited by the assessee on the payments now held not to be taxable as royalty, the assessee may seek refund in accordance with law. [Paras 13]

Assessee may claim refund of any TDS/withholding tax paid on the payments, in accordance with law.

Final Conclusion: For the reasons stated, the Tribunal allowed the appeals, holding that the sponsorship payments are not royalty under domestic law or the India-Singapore DTAA and permitting the assessee to claim refund of any tax deducted and paid on such payments.

Disallowance under Section 40(a)(ia) - tax treaty / fee for technical services and applicability of Section 195 - allowability of compensation on termination of marketing rights as business expenditure / commercial expediency - income received but not accrued - revenue recognition and accounting policy - disallowance under Section 36(1)(iii) - notional interest on interest free advances - remand for detailed/speaking order and verification

Disallowance under Section 40(a)(ia) - tax treaty / fee for technical services and applicability of Section 195 - remand for detailed/speaking order and verification - Whether the disallowance under Section 40(a)(ia) in respect of payments to non-resident translators was sustainable - HELD THAT: - The Tribunal found that the Commissioner (Appeals) had allowed the assessee without addressing critical legal and factual facets - notably the applicability of tax-treaty provisions, whether the payments constituted fees for technical services, the applicability of Section 195, and the presence or absence of Forms 15CA/15CB. Because the appellate order contained no reasoning on these determinative questions and the recipients were residents of multiple treaty jurisdictions, the Tribunal restored the issue to the file of the Commissioner (Appeals) directing a detailed, speaking order with verification of treaty and Section 195 applicability and documentary compliance. [Paras 7]

Matter restored to CIT(A) for fresh, detailed speaking findings and verification.

Allowability of compensation on termination of marketing rights as business expenditure / commercial expediency - remand for detailed/speaking order and verification - Whether compensation paid on termination of marketing rights was allowable as business expenditure/amortizable or liable to be disallowed for want of agreements and genuineness - HELD THAT: - The Tribunal observed that the Commissioner (Appeals) allowed the claim without controverting the Assessing Officer's factual findings or addressing the absence of original grant or termination agreements. The Commissioner (Appeals) did not make findings on authenticity of the agreements (a termination document produced before the Tribunal was unsigned by the counterparty). Given the lack of a reasoned appellate finding on the genuineness and documentary basis of the claimed expenditure and its nexus to the business, the Tribunal restored the issue to the CIT(A) to carry out necessary verification and to pass a detailed speaking order. [Paras 12, 13]

Matter restored to CIT(A) for verification and detailed speaking adjudication.

Income received but not accrued - revenue recognition and accounting policy - remand for detailed/speaking order and verification - Whether the amount shown as 'income received but not accrued' was properly not offered to tax in the year of receipt - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) accepted the assessee's accounting practice without explaining why the amount received during the year did not accrue in that year and without articulating the accounting standard or principles that justified deferral. Because the appellate order lacked a reasoned basis for treating the receipt as not accrued, the Tribunal directed restoration of the issue to the CIT(A) to give detailed and reasoned findings on the recognition of revenue and the accounting policy relied upon. [Paras 19]

Matter restored to CIT(A) for detailed, reasoned findings on accrual and revenue recognition.

Disallowance under Section 36(1)(iii) - notional interest on interest free advances - interest free funds / own funds versus borrowed funds - Whether the Assessing Officer was justified in making a notional interest addition under Section 36(1)(iii) on interest free advances - HELD THAT: - The Commissioner (Appeals) accepted the assessee's case that advances were given out of substantial interest free own funds (capital, reserves and non interest creditors) and that many advances were made in earlier years or were for business purposes (including branch set up and advances for software/design services), so that Section 36(1)(iii) did not attract disallowance. The Tribunal, on review of the appellate reasoning and factual material, found no error in law or fact in the CIT(A)'s conclusion that the addition was not justified and affirmed the appellate view that the advances were out of interest free funds and/or for business purposes. [Paras 24, 25]

Disallowance under Section 36(1)(iii) deleted; departmental appeal dismissed on this issue.

Final Conclusion: Both departmental appeals for A.Y. 2012-13 and A.Y. 2013-14 are partly allowed for statistical purposes by restoring the issues of disallowance under Section 40(a)(ia), compensation on termination of marketing rights and the question of accrual/recognition of the lump-sum receipt to the Commissioner (Appeals) for detailed speaking adjudication; the addition under Section 36(1)(iii) in respect of notional interest on interest-free advances is deleted and the Department's challenge on that point is dismissed.

Estimation of income based on seized material - reliability of rough/daily cash books - corroboration of incriminating material - CBDT instruction for estimation of income from fish culture - apportionment of unaccounted receipts among group entities - deletion of addition for lack of corroborative evidence - assessment following search and seizure under section 153A

Estimation of income based on seized material - reliability of rough/daily cash books - corroboration of incriminating material - deletion of addition for lack of corroborative evidence - Validity of the addition made by the Assessing Officer for AY 2015-16 based on uncorroborated seized hand-written books and apportionment of unaccounted receipts. - HELD THAT: - The Tribunal examined whether the Assessing Officer (AO) was justified in adding the difference between unaccounted receipts computed from seized hand-written books and the amount admitted by the assessee. The AO relied on seized daily cash receipts/payments, treated them as systematic and apportioned the aggregate unaccounted receipts among three group entities by reference to accounted turnover, and made an addition without entity-wise identification, without deducting bund area or distinguishing leased lands, and without independent corroborative evidence. The sworn statement of the assessee's managing director described the seized books as rough records possibly containing duplicates and non-material entries and explained practical difficulties in maintaining regular books in the non organised aqua culture sector. The Tribunal accepted the CIT(A)'s conclusion that the AO had not furnished adequate justification or corroboration for his estimation and that the average per acre income admitted by the assessee (Rs. 74,458/- per acre) is reasonable in light of CBDT guidance for estimating fish culture income and the jurisdictional ITAT precedent relied upon. Given these circumstances, the AO's generalized apportionment and addition, unsupported by corroborative material and without necessary adjustments, could not be sustained. [Paras 7, 8]

Addition for AY 2015-16 based on seized hand written books is deleted; the CIT(A)'s order upholding the admitted per acre income is affirmed and the Revenue's ground is dismissed.

Estimation of income based on seized material - CBDT instruction for estimation of income from fish culture - apportionment of unaccounted receipts among group entities - Applicability of the same reasoning to AYs 2016-17 to 2019-20 and fate of Revenue's appeals for those years. - HELD THAT: - The Tribunal considered whether the determinative reasoning applied in AY 2015-16 (lack of corroboration for AO's estimation, acceptance of the assessee's admitted per acre income in light of CBDT guidance and relevant precedent) applies mutatis mutandis to AYs 2016-17 to 2019-20. The Revenue raised identical grounds for these years. The Tribunal held that the same deficiencies in the AO's approach and the same factors favouring the assessee (admitted additional income per acre being reasonable and above the rate accepted by the jurisdictional Bench) obtain for these assessment years as well. [Paras 9, 11]

Revenue's appeals for AYs 2016-17 to 2019-20 are dismissed on the same grounds; the CIT(A)'s deletions are upheld for these years.

Final Conclusion: The Tribunal dismissed the Revenue's appeals for AYs 2015-16 to 2019-20, upholding the CIT(A)'s deletions of additions computed from seized hand written books because the AO's estimation lacked corroborative evidence, involved unsupported apportionment and failed to make necessary adjustments; cross objections by the assessee were disposed of as infructuous.

Invalidity of communication for failure to generate Document Identification Number (DIN) under CBDT Circular No.19/2019 - prior approval under Section 153D as a jurisdictional pre requisite and not an internal communication - non application of mind in approval under Section 153D vitiating assessment passed under Section 153A r.w.s. 144 - impermissible alteration of an approved draft assessment order without fresh approval - quashing of assessment orders passed under Section 153A r.w.s. 144 where approval is invalid or mechanical

Invalidity of communication for failure to generate Document Identification Number (DIN) under CBDT Circular No.19/2019 - prior approval under Section 153D as a jurisdictional pre requisite and not an internal communication - Approval dated 30-09-2021 under Section 153D lacking a DIN renders the approval invalid and the consequential assessment orders passed u/s 153A r.w.s. 144 are void. - HELD THAT: - The Tribunal examined CBDT Circular No.19/2019 which mandates that communications relating to approvals and assessment orders issued on or after 01-10-2019 must quote a computer generated DIN, subject only to narrowly drawn exceptions requiring prior written higher approval and specific recording. The approval under Section 153D was found not to bear a DIN, no exceptional circumstance or prior higher approval was recorded to regularise manual issuance, and the Circular treats non compliant communications as invalid and 'deemed to have never been issued.' The Tribunal held that an approval under Section 153D is a statutory, jurisdictional prerequisite (not mere internal correspondence) and therefore falls within the ambit of the Circular; absence of DIN vitiates the approval and the assessment orders passed pursuant thereto. The Tribunal followed precedents of the Bombay and other High Courts applying the Circular to satisfaction/approval notes and assessment orders, and quashed the assessments accordingly. [Paras 24, 25, 30, 33, 47]

Approval dated 30-09-2021 under Section 153D is invalid for non mentioning of DIN; consequential assessment orders for the specified assessment years are quashed.

Non application of mind in approval under Section 153D vitiating assessment passed under Section 153A r.w.s. 144 - quashing of assessment orders passed under Section 153A r.w.s. 144 where approval is invalid or mechanical - Approval granted by the Additional CIT on the same day as forwarding of draft and passing of final assessment was held to be mechanical (without application of mind) and vitiates the assessments. - HELD THAT: - The Tribunal considered the chronology: draft assessment forwarded, approval granted by Additional CIT, and final assessment passed all on 30-09-2021. Having regard to the voluminous seized material in the group (thousands of pages and multiple storage devices) and authorities emphasising that prior approval is an in built protection requiring application of mind, the Tribunal found it humanly impossible that the approving authority examined the material adequately. Reliance was placed on judicial decisions holding that mechanical or rubber stamp approvals under Section 153D invalidate assessments. On this ground too the Tribunal concluded that the approval was given without proper consideration and hence vitiated the assessment orders. [Paras 36, 37, 39, 41]

Approval was mechanical and without application of mind; assessments passed pursuant to such approval are vitiated and quashed.

Impermissible alteration of an approved draft assessment order without fresh approval - quashing of assessment orders passed under Section 153A r.w.s. 144 where approval is invalid or mechanical - Where the Assessing Officer altered the draft assessment order after obtaining approval without obtaining fresh approval for the altered final order, the final assessment was invalid. - HELD THAT: - The Tribunal noted instances where the draft order (approved by the Additional CIT) did not apply a particular charging provision (e.g., Section 115BBE), whereas the final order passed by the AO-after approval-applied that provision. Citing precedent that the AO must pass the final order in accordance with directions/approval of the approving authority and cannot vary or depart from the approved draft without fresh approval, the Tribunal held that such post approval alterations render the final assessment invalid. The Court declined remand for curing the defect, following authorities that non obtaining or non compliance with statutory approval is not a curable defect. [Paras 21, 43, 45]

Final assessment orders altered after approval without fresh approval are invalid; the assessments are quashed on this ground.

Assessment consequences and ancillary reliefs - Consequential claims such as levy of interest under Section 234A were treated as consequential and dismissed where the underlying assessment was quashed. - HELD THAT: - The Tribunal recorded that several grounds (other additions, computations, and interest levies) became academic once the primary ground-that approvals and assessments were invalid-was decided in favour of the assessee. Accordingly, interest claims under Section 234A were dismissed as consequential in the appeals decided for the assessee; the Revenue's cross appeal on merits similarly became academic and was dismissed. [Paras 48, 49, 73, 75]

Other grounds, including interest under Section 234A, are consequential and dismissed where assessments are quashed; Revenue's appeal dismissed as academic.

Final Conclusion: For A.Y. 2014-15 to A.Y. 2020-21 the Tribunal held that the approval under Section 153D dated 30-09-2021 was invalid for want of a DIN and, independently, was given mechanically without application of mind; further, final assessment orders were altered after approval without fresh sanction. Consequentially, the assessments completed u/s 153A r.w.s. 144 of the Act were quashed, other grounds became academic, interest under Section 234A was dismissed as consequential, and the Revenue's appeal was dismissed.

Unexplained investment - search and seizure proceedings - assessment under section 153C read with section 144 - jurisdiction to assess other persons on basis of material seized - burden of proof in additions under the cloak of books of account - interest for delayed filing of return under section 234A

Unexplained investment - burden of proof in additions under the cloak of books of account - The additions made as unexplained investments were sustainable on the material and on the assessee's failure to satisfactorily explain the source. - HELD THAT: - The Tribunal held that the primary onus for additions characterised as unexplained investments lies on the Revenue to show the investment; once discovery of the investment is established the assessee must satisfactorily explain the source. The assessee failed to discharge this burden: no books of account were found during search, returns were not filed in response to notices (returns subsequently filed being non-est), and the assessee did not establish the identity, capacity or genuineness of the alleged creditors or sources. Routing of investments through books produced much later was held to be a ruse and could not substitute for regular contemporaneous accounts. Consequently the additions under the head of unexplained investment (u/s.69, with related discussion of section 68 where entries appear in books) were upheld on the evidence and reasoning given by the AO and affirmed by the CIT(A) and Tribunal. [Paras 4]

Additions for unexplained investments sustained for both years as the assessee failed to satisfactorily explain the source.

Assessment under section 153C read with section 144 - jurisdiction to assess other persons on basis of material seized - search and seizure proceedings - An assessment under section 153C in respect of a person other than the person searched is valid only where incriminating material seized or requisitioned in the search of the person searched has a bearing on the income of that other person; the decision in Pr. CIT v. Abhishar Buildwell does not negate this principle or assist the assessee in the facts before the Tribunal. - HELD THAT: - The Tribunal recognised that the special jurisdiction to assess persons other than the person searched arises only on satisfaction that seized or requisitioned material bears on the income of such other person. The assessee did not challenge the assumption of jurisdiction under section 153C at any stage; nor did it show absence of incriminating material. The Apex Court's decision in Abhishar Buildwell was held to affect assessments in the case of the person searched and does not render inapplicable the requirement of incriminating material as the basis for 153C assessments of other persons. Given the seized documents and the assessee's non-filing/non-production of books contemporaneously, the Tribunal found no merit in the contention that no incriminating material existed or that jurisdiction was absent. [Paras 4, 6]

The section 153C assessments stand on the seized/requisitioned material which was not challenged; reliance on Abhishar Buildwell was misplaced in the facts of these 153C assessments.

Interest for delayed filing of return under section 234A - effect of subsequent reassessment or appellate variation on period for charging interest - Interest under section 234A for non-furnishing of returns is to be computed up to the date of the first regular assessment (here, 28.12.2010) and is not extended by subsequent amendments or appellate orders; subsequent variation affects only the quantum of interest, not the period. - HELD THAT: - Section 234A(1)(b) treats the first assessment made under section 147 or section 153A as a regular assessment for purposes of charging interest. The Tribunal found that no valid return was furnished prior to the assessment dated 28.12.2010 and therefore that date is the completion of the first regular assessment and the terminal date for computing interest under section 234A. An appellate or revision order under section 254 may alter the assessed tax and thereby increase or reduce interest payable (section 234A(4)) but does not extend the period for which interest is charged. Applying these principles, the Tribunal directed interest to be computed up to 28.12.2010 and rejected Revenue's claim to charge interest up to the later assessment date. [Paras 5, 6]

Interest under section 234A to be charged up to the date of the first regular assessment (28.12.2010), not up to the date of the later appellate/revision assessment.

Condonation of delay - The Tribunal condoned the delay in filing the appeals and admitted them after considering the undisputed personal reasons in the affidavit. - HELD THAT: - The appeals filed 27 days late were accompanied by an affidavit explaining personal reasons for the delay. The reasons were not disputed by the Revenue. In the exercise of discretion, the Tribunal accepted the explanation and condoned the delay, admitting the appeals for hearing. [Paras 2]

Delay in filing appeals condoned and appeals admitted.

Final Conclusion: The appeals were partly allowed: the Tribunal upheld the additions for unexplained investments for AY 2008-2009 and AY 2009-2010 on account of the assessee's failure to satisfactorily explain sources; it rejected the plea that Abhishar Buildwell assisted the assessee in these section 153C assessments; it directed interest under section 234A to be computed only up to the date of the first regular assessment (28.12.2010); and it admitted the appeals by condoning the delay.

Condonation of delay - Exemption from filing documents - Interference with High Court order - Surrender to trial court - Liberty to apply for regular bail

Condonation of delay - Application for condonation of delay in filing the Special Leave Petition - HELD THAT: - The Court considered the delay application and granted condonation. The order records that delay is condoned after hearing counsel and perusal of the record, thereby permitting the petition to be taken on file.

Delay is condoned.

Exemption from filing documents - Application for exemption from filing certain documents - HELD THAT: - The Court reviewed the exemption application and allowed it, thereby permitting the petitioner relief from strict compliance with the filing requirement as sought in the exemption application.

Exemption application is allowed.

Interference with High Court order - Challenge to the High Court's impugned order by way of Special Leave Petition - HELD THAT: - After considerable hearing and careful perusal of the material on record, the Court was not inclined to interfere with the impugned order of the High Court. The petition was considered on its merits and the Court declined to overturn the High Court's decision.

Special Leave Petition dismissed; no interference with the High Court order.

Surrender to trial court - Direction to the petitioner regarding surrender pursuant to dismissal - HELD THAT: - Having dismissed the petition, the Court directed that the petitioner surrender before the concerned Trial Court within three weeks from the date of the order. This is an operative direction to effectuate the consequences of dismissal.

Petitioner directed to surrender before the concerned Trial Court within three weeks.

Liberty to apply for regular bail - Petitioner's entitlement to seek regular bail after surrender - HELD THAT: - The Court clarified that the petitioner shall be at liberty to file an application for release on regular bail. Any such application is to be considered by the Trial Court on its own merits and in accordance with law, without any fetter imposed by this Court.

Petitioner is at liberty to apply for regular bail; such application to be considered on merits and in accordance with law.

Final Conclusion: The Special Leave Petition is dismissed after condoning delay and allowing the exemption application; the petitioner is directed to surrender to the Trial Court within three weeks and is permitted to move for regular bail, which shall be considered on its merits and in accordance with law.

Summary order. Delay condoned; notice issued returnable in four weeks; Dasti service granted; respondent accepted notice.

Bail - prima facie findings - conditions of bail - retraction of statements under Section 50 of the Prevention of Money laundering Act, 2002 - prima facie absence of mastermind role - cancellation of bail

Bail - prima facie findings - conditions of bail - retraction of statements under Section 50 of the Prevention of Money laundering Act, 2002 - prima facie absence of mastermind role - cancellation of bail - Whether the Court should interfere with the impugned order granting bail to the respondent. - HELD THAT: - The Court examined the impugned order granting bail which rested on identified prima facie factual findings: prolonged incarceration already undergone by the respondent; the maximum sentence exposure; absence of criminal antecedents; limited interrogation in custody; that the evidence included statements under Section 50 of the Prevention of Money laundering Act, 2002 which were retracted; and a prima facie conclusion that those statements do not establish the respondent as the mastermind. The Court treated those findings as prima facie for the limited purpose of considering bail and noted stringent conditions imposed by the trial court. The legality of one specific bail condition (limited interrogation condition) is being considered in another matter and was not challenged by the respondent in this petition. The Court observed that any breach or misuse of liberty under the bail order would permit the petitioner to seek cancellation of bail before the appropriate forum. In light of the foregoing, the Court found no ground to interfere with the impugned exercise of discretion in granting bail.

The Special Leave Petition is dismissed and the impugned order granting bail is not interfered with; liberty to seek cancellation of bail remains open on breach or misuse.

Final Conclusion: The Special Leave Petition challenging the grant of bail is dismissed; the Supreme Court declines to interfere with the trial court's prima facie findings and conditions of bail, while leaving open the remedy of cancellation if bail conditions are breached.

Bail pending trial - pre-trial incarceration - prosecution witness - absence of charges framed - release on bail in the interest of justice - observations for disposal without adjudication on merits

Bail pending trial - pre-trial incarceration - prosecution witness - absence of charges framed - Grant of bail to the appellant, Benoy Babu, pending trial in Complaint Case No. 31 of 2022 (ECIR/HIU-II/14/2022). - HELD THAT: - The Court considered that the appellant was an employee (Regional Manager) of the liquor manufacturer and is not an accused in the CBI charge-sheet but appears as a prosecution witness; it was asserted that no money was paid by or to him. The appellant had already suffered about thirteen months' incarceration and formal trial had not commenced as charges have not been framed. Having regard to these circumstances and the period of pre-trial detention already undergone, the Court exercised its discretionary power to admit the appellant to bail pending trial. The Court further clarified that the observations made in granting bail are confined to disposal of the present appeal and do not constitute findings on the merits of the underlying allegations.

Appeal allowed; impugned order set aside and appellant directed to be released on bail in Complaint Case No. 31 of 2022 (ECIR/HIU-II/14/2022).

Final Conclusion: The appeal is allowed and the appellant, Benoy Babu, is directed to be released on bail in Complaint Case No. 31 of 2022 (ECIR/HIU-II/14/2022); the Court's observations are limited to disposal of the appeal and do not decide the merits.

Summary order. Permission to withdraw the Special Leave Petition granted; the Special Leave Petition dismissed as withdrawn.

Summary order. Petition dismissed as not pressed; no opinion expressed on the merits; pending applications, if any, disposed of.

Exercise of jurisdiction under Article 136 - prima facie observations in bail order not prejudicial to trial - condonation of delay - dismissal of Special Leave Petition

Condonation of delay - Application for condonation of delay in filing the Special Leave Petitions. - HELD THAT: - The Court recorded satisfaction with the explanation for delay and accordingly condoned the delay. The order therefore proceeds on the basis that the petitions are maintainable notwithstanding the initial delay in filing.

Delay in filing condoned.

Exercise of jurisdiction under Article 136 - prima facie observations in bail order not prejudicial to trial - dismissal of Special Leave Petition - Whether the Supreme Court should exercise its discretionary jurisdiction under Article 136 to interfere with the impugned order granting bail and containing certain observations. - HELD THAT: - After hearing counsel, the Court declined to interfere with the impugned order under Article 136. The Court explained that the observations made in the impugned judgment were prima facie in nature and were confined to the limited purpose of considering bail; those observations were not intended to, and would not, prejudice the trial on merits. On this basis the discretionary jurisdiction was not invoked to set aside or modify the impugned order.

Special Leave Petitions dismissed; impugned order left undisturbed with clarification that its prima facie observations for bail will not prejudice the trial.

Final Conclusion: Delay in filing the petitions is condoned. The Court declined to exercise Article 136 jurisdiction to interfere with the impugned order; the observations in that order are treated as prima facie for the limited purpose of bail and shall not prejudice the trial. The Special Leave Petitions stand dismissed and the pending application is disposed of.

Anticipatory bail under Section 438 of the Code of Criminal Procedure, 1973 - applicability of Section 45 of the Prevention of Money Laundering Act, 2002 - bail test and proviso - economic offences - anticipatory bail to be exercised sparingly - parity in grant of bail and limits where factual matrix differs

Anticipatory bail under Section 438 of the Code of Criminal Procedure, 1973 - economic offences - anticipatory bail to be exercised sparingly - Anticipatory bail application of the applicant under Section 438 Cr.P.C. - HELD THAT: - The Court applied the settled principle that power under Section 438 Cr.P.C. is extraordinary and must be exercised sparingly, particularly in economic offences which affect the economic fabric of society. Reliance was placed on the Supreme Court decisions cited in the judgment establishing that courts should be cautious in granting pre-arrest bail in economic-offence matters. The allegations against the applicant involve unexplained acquisition of movable and immovable property substantially disproportionate to known income, and the matter relates to proceeds of crime. In light of these facts and the precedents emphasising restraint in economic-offence cases, the Court concluded that anticipatory bail is not warranted. [Paras 9, 10, 11]

Anticipatory bail application dismissed.

Parity in grant of bail and limits where factual matrix differs - first proviso to Section 45 PMLA - woman/minor/sick/infirm and lesser amount exception - Application of parity with co-accused (wife) who obtained relief from the Supreme Court. - HELD THAT: - The Court examined the contention of parity with the co-accused (the applicant's wife) whose petition was allowed by the Supreme Court. It observed that the first proviso to Section 45 PMLA permits release of certain categories (including women) where the amount involved is less than the threshold mentioned in the proviso. The Court found that the applicant is the main accused and that the factual matrix differs from that of the co-accused who obtained relief; therefore parity could not be invoked to grant anticipatory bail to the applicant. [Paras 5, 7]

Parity not applicable; co-accused's relief does not entitle the applicant to anticipatory bail.

Applicability of Section 45 of the Prevention of Money Laundering Act, 2002 - bail test and proviso - Effect of Section 45 PMLA on grant of anticipatory bail in the present case. - HELD THAT: - The Court considered Section 45 PMLA, which makes offences under that Act cognizable and non-bailable except where the court, after permitting the Public Prosecutor to oppose, is satisfied there are reasonable grounds to believe the accused is not guilty and is not likely to commit an offence while on bail; the proviso carves out limited exceptions (including women and specified circumstances). The prosecution averred that investigation is ongoing and that the applicant is dealing with proceeds of crime. Applying Section 45 and the facts of the case, the Court found the statutory bail-test not satisfied and held that the applicant cannot be released on anticipatory bail under PMLA principles. [Paras 6, 8]

Section 45 PMLA applies and operates against grant of anticipatory bail to the applicant.

Final Conclusion: The anticipatory bail petition under Section 438 Cr.P.C. is dismissed: the Court refused pre-arrest bail in view of the economic-offence character of the allegations, the applicability of Section 45 PMLA, and the absence of parity with co-accused whose factual position differed.

Negative list exemption under Section 66D of the Finance Act, 1994 - liability of the service provider to collect and remit service tax where payment is made by the service availer - distinction between services rendered by a local authority and services rendered on behalf of a local authority - quashing of administrative order - mandamus directing consideration of representations and payment of amounts found due

Negative list exemption under Section 66D of the Finance Act, 1994 - distinction between services rendered by a local authority and services rendered on behalf of a local authority - liability of the service provider to collect and remit service tax where payment is made by the service availer - Whether the services in question fall within the exemption under sub-clause (a) of Section 66D of the Finance Act, 1994, and which party is liable to pay the service tax. - HELD THAT: - The Court found that the negative-list exemption in sub-clause (a) of Section 66D applies only where the Government or local authority itself provides the service and receives the charges for that service. In the present transactions the petitioners rendered computer training to candidates and were paid by the Corporation; the petitioners therefore acted as service providers and the Corporation as the service availer paying for services on behalf of the students. Consequently the services were not services "by" the Corporation within the meaning of the negative list exemption. The obligation to collect and remit service tax lies on the service providers who receive payment; the Corporation's contention that it is exempt under Section 66D is misplaced where it has not itself provided the service or received the charges directly from the beneficiaries. The corporation's reliance on a legal opinion based on Section 66D does not avail it. These conclusions are reached on the facts that the students did not pay and the Corporation paid the petitioners, and on the statutory character of the negative-list exemption as confined to services provided by the Government or local authority itself. [Paras 16, 17, 18, 19, 20]

The transactions do not fall within the exemption under Section 66D; the petitioners as service providers are liable to collect and remit service tax and the Corporation is not exempt from liability on the basis asserted.

Final Conclusion: Writ petitions allowed; the administrative order dated 19.02.2013 is quashed in the two specified petitions, and the respondent Corporation is directed to consider the petitioners' representations, calculate service tax due on amounts paid or payable to the petitioners and release the said amounts within the time directed by the Court.

Validity of Rule 5A(2) of the Service Tax Rules, 1994 - Power to conduct audit and inspection - Effect of declaration of invalidity and interim stay - Doctrine of savings under Section 174(2) of the CGST Act - Conflict of precedents and need for authoritative adjudication - Referral to a larger Bench for reconsideration

Validity of Rule 5A(2) of the Service Tax Rules, 1994 - Effect of declaration of invalidity and interim stay - Conflict of precedents and need for authoritative adjudication - Whether the question of the validity of Rule 5A(2) and the conflicting decisions in Travelite/Mega Cabs vis-a -vis Aargus/Viannar should be referred to a larger Bench. - HELD THAT: - The Court identified an apparent conflict between earlier Division Bench decisions that struck down Rule 5A(2) (Travelite, Mega Cabs) and later decisions which upheld or saved actions under that Rule (Aargus, Viannar). It observed that the Supreme Court has stayed the earlier decisions but that such interim orders do not efface the declaration of invalidity nor revive the provision. Given the resulting state of legal uncertainty and the issuance of fresh notices by the Department relying on Aargus, the Court held that a definitive authoritative determination is required. In view of the conflict and the public importance of the question regarding the power to conduct audits/inspections under Rule 5A(2), the matters in the present batch should be placed before a larger Bench to decide whether Aargus was correctly decided and whether Travelite and Mega Cabs require reconsideration. [Paras 10, 11, 14, 15, 16]

The batch is referred to a larger Bench to consider the validity of Rule 5A(2) and the conflict between the cited decisions.

Doctrine of savings under Section 174(2) of the CGST Act - Effect of declaration of invalidity and interim stay - Whether the interim stay of Travelite and Mega Cabs by the Supreme Court revives Rule 5A(2) or bars the High Court from granting relief. - HELD THAT: - The Court held that the Supreme Court's interim stay of earlier decisions does not efface the declarations of invalidity contained in those judgments and does not, by itself, revive the provision struck down. The High Court may nonetheless consider and adjudicate the questions raised despite pending appeals, particularly because conflicting decisions (including Aargus which relied on the saving provision in the CGST Act) have created uncertainty. Consequently, it was appropriate to refer the core questions to a larger Bench rather than await the final outcome of the pending appeals. [Paras 10, 11, 12, 13, 14]

The interim stay does not revive the struck-down provision and does not preclude the High Court from referring the matter for authoritative determination; interim orders in the petitions are directed to continue till the next date.

Final Conclusion: The High Court directed that the present batch of matters be placed before the Chief Justice for constitution of a larger Bench to consider (A) whether Aargus correctly upheld Rule 5A(2) and (B) whether Travelite and Mega Cabs require reconsideration; earlier interim orders shall continue until the next hearing.

Service tax on Banking and Financial Services - Exemption under Notification 3/2000 ST in relation to National Agricultural Insurance Scheme - Extended period of limitation invoked for suppression - Quantification of demand within the normal period of limitation - Service charges deducted by outstation banks for collection of outstation cheques - Wrongly deducted banking cash transaction tax credited back - Cancellation/set aside of penalty for demand within normal limitation

Service tax on Banking and Financial Services - Quantification of demand within the normal period of limitation - Liability to service tax on service charges collected @1% of total salary disbursed for two primary schools for the period 10.09.2004 to 31.03.2008, and remand for limited quantification of the normal period of demand, if any. - HELD THAT: - The Tribunal found that services rendered by the bank to the two primary schools do not fall within any specific exemption from the category of 'Banking and Financial Services' and accordingly the service charges collected are liable to service tax as falling within Banking and Financial Services. However, the extended period invocation was not sustained on the facts because the department relied only on balance sheet information and did not produce evidence of suppression. Consequently, any service tax liability is confined to the normal period of limitation. The matter is remanded to the adjudicating authority solely for quantification/ computation of the demand within the normal limitation period. [Paras 5, 6]

Service tax payable on the salary related service charges but limited to the normal period of limitation; remanded for quantification of that normal period of demand.

Extended period of limitation invoked for suppression - Sustainability of demand invoked under the extended period on the ground of suppression. - HELD THAT: - The Tribunal accepted the appellant's submission that the department failed to bring evidence of suppression and had based the demand on balance sheet information alone. In absence of proof of suppression, invocation of the extended period is not sustainable and the demand cannot be sustained beyond the normal limitation period. [Paras 5]

Demand confirmed by invoking the extended period is not sustainable; liability, if any, confined to normal limitation period.

Exemption under Notification 3/2000 ST in relation to National Agricultural Insurance Scheme - Chargeability of service tax on amounts received from Agricultural Insurance Company of India Ltd. for collection of crop insurance premium under the National Agricultural Insurance Scheme. - HELD THAT: - Applying Notification No.3/2000 ST dated 06.07.2000, the Tribunal held that services in relation to general insurance business provided under the National Agricultural Insurance Scheme are exempt from service tax. The cited decision in Shri Rajkot District Co Operative Bank Ltd. was held to be squarely applicable; the collection of premium in relation to the government scheme falls within the scope of the exemption and therefore the demand on this count is unsustainable. [Paras 5]

Demand on receipts from Agricultural Insurance Company of India Ltd. is not sustainable and is set aside.

Service charges deducted by outstation banks for collection of outstation cheques - Liability for service tax on service charges deducted by outstation banks for collection of outstation cheques. - HELD THAT: - The Tribunal found that the appellant did not receive any amounts from outstation banks in respect of collection charges; those charges were deducted by the outstation banks. Since no receipt accrued to the appellant, no service tax liability arises on that account. [Paras 5]

Demand on service charges deducted by outstation banks is not sustainable.

Wrongly deducted banking cash transaction tax credited back - Chargeability of service tax on the amount wrongly deducted by State Bank of India as banking cash transaction tax and later credited back. - HELD THAT: - The Tribunal recorded that the amount in question was wrongly deducted by the bank and subsequently credited back to the appellant's account. As the amount was restored, no service tax liability arises on that sum. [Paras 5]

Demand on the wrongly deducted amount is not sustainable and is set aside.

Cancellation/set aside of penalty for demand within normal limitation - Sustainability of penalties imposed in the impugned order. - HELD THAT: - In view of the Tribunal's findings that extended period invocation was unsustainable and that several components of the demand were set aside, the Tribunal held that penalties imposed in the impugned order cannot be sustained. No penalty is imposable on any demand that may be confirmed within the normal period of limitation. [Paras 6]

Penalties imposed in the impugned order are set aside; no penalty shall be imposed on any demand confirmed for the normal limitation period.

Final Conclusion: The consolidated demand in the impugned order is modified: service tax is payable on the salary related service charges only within the normal period of limitation and the matter is remanded for quantification of that demand; demands relating to collection of crop insurance premium, outstation cheque collection charges and the wrongly deducted banking cash transaction tax are set aside; penalties are vacated; appeal disposed accordingly.

Declared service under section 66E(e) of the Finance Act, 1994 - consideration - reverse charge mechanism - payment by operation of law - obligation to refrain from an act or to tolerate an act - suppression for invocation of extended period - penalty under Section 78 of the Finance Act, 1994

Declared service under section 66E(e) of the Finance Act, 1994 - consideration - payment by operation of law - reverse charge mechanism - Payment of Net Present Value (NPV) to the Compensatory Afforestation Fund (CAMPA) is not consideration for a declared service under section 66E(e) and does not attract service tax under reverse charge. - HELD THAT: - The Tribunal accepted that NPV payments are made by operation of law pursuant to statutory environmental and forest conservation mandates and the appellant had no choice in making such payments. The reasoning in the Kolkata Tribunal decisions (Mahanadi Coalfields Ltd. and MNH Shakti Ltd.)-relied upon by this Court-was applied: toleration as a taxable service presupposes a voluntary choice to tolerate in exchange for consideration, which is absent where payments are statutory. The clearance granted by the Ministry for non-forest use and the statutory charges (NPV, compensatory afforestation charges) are statutory obligations to restore ecological balance and cannot be characterised as consideration for a declared service under section 66E(e). Consequently the demand of service tax based on classifying the NPV as consideration for a declared service is unsustainable. [Paras 10, 11]

Demand of service tax under reverse charge on NPV payments set aside and appeal allowed on this ground.

Suppression for invocation of extended period - penalty under Section 78 of the Finance Act, 1994 - Extended period and penalty under Section 78 cannot be invoked as there was no suppression of facts by the appellant in relation to NPV payments. - HELD THAT: - The Tribunal's reasoning, endorsed by this Court, establishes that the appellant paid the entire NPV to the CAMPA Fund as required by law and did not suppress information from the department. In the absence of suppression, invocation of the extended period for demand is not permissible and penalty under Section 78 is not imposable. The impugned order's demands by extended period and penalty therefore fail. [Paras 10, 11]

Extended period and penalty set aside; no liability for penalty under Section 78 or demands by extended period.

Final Conclusion: Appeal allowed; the order dated 15.12.2022 of the Principal Commissioner confirming service-tax demand on NPV payments, with interest and penalty, is set aside.

Preventive detention - subjective satisfaction of the detaining authority - judicial reviewability of preventive detention - public order versus law and order - live and proximate link / staleness of grounds - consideration of extraneous materials and mala fides - requirement of application of mind by detaining authority - advisory board confirmation and discretion in fixing detention period - strict compliance with procedural safeguards and timelines

Public order versus law and order - preventive detention - live and proximate link / staleness of grounds - Detention was not based on activities prejudicial to the maintenance of public order and therefore the Detention Order is indefensible. - HELD THAT: - The Court examined whether the offences relied upon in the Detention Order had the requisite impact on the community as a whole to amount to a disturbance of public order rather than mere breaches of law and order. Applying settled principles that public order requires a live and proximate link between past conduct and a real likelihood of future conduct prejudicial to the maintenance of public order, the Court found the listed offences to be separate, stray acts affecting private individuals and not such as to disturb the even tempo of community life. The incident involving a minor and the other listed offences did not, on the material before the Court, establish the necessary nexus to public order. The Court therefore held that the Act's extraordinary preventive detention power ought not to have been invoked in this case and the Detention Order was indefensible. [Paras 39, 40]

The Detention Order is quashed as it was not founded on conduct prejudicial to the maintenance of public order.

Subjective satisfaction of the detaining authority - consideration of extraneous materials and mala fides - requirement of application of mind by detaining authority - The detaining authority's satisfaction was vitiated by consideration of extraneous and stale materials and by reliance on antecedent detention that had been quashed, demonstrating failure properly to apply mind. - HELD THAT: - The Court analysed whether the Commissioner had formed his subjective satisfaction in accordance with law. It observed that although past criminal antecedents can be relevant, they must have a direct and proximate nexus to the immediate need for detention. The Detention Order unduly rehearsed antecedent offences-including reference to a prior detention order quashed by the High Court-and thus imported stale and extraneous material into the reasoning. By failing to distinguish relevant proximate history from invalid or stale antecedents and by relying on the fact of earlier bail orders rather than material showing a present threat to public order, the Commissioner's satisfaction was rendered unreliable. Such consideration of extraneous matters and the influence of prior quashed findings negatived the lawful exercise of subjective satisfaction. [Paras 43, 46, 48, 51]

The order of detention is vitiated because the detaining authority did not apply its mind to relevant circumstances and was influenced by extraneous/stale material.

Advisory board confirmation and discretion in fixing detention period - strict compliance with procedural safeguards and timelines - The Government's discretion to fix the period of detention under the Act is not to be exercised mechanically for the maximum period; some indication of application of mind is required though the Court did not lay down a rigid formula that absence of any reason will always invalidate confirmation. - HELD THAT: - The Court reviewed principles governing confirmation of detention and fixing of its duration. While recognising that the Government has discretion to fix the period up to the statutory maximum, the Court emphasised that routine continuation for the maximum period without any perceptible application of mind is objectionable. The Advisory Board's role is a safeguard but does not mandate that the maximum period be routinely imposed; the Government should record reasons or indicate the imponderables considered when fixing the maximum period. The Court, however, refrained from pronouncing that a detention otherwise lawful must be invalidated solely for lack of explicit reasons in every case, leaving the precise contours to be addressed when occasion arises. [Paras 58, 63, 70]

Authorities must exercise discretion reasonably when fixing detention periods and should avoid mechanically imposing the maximum term; confirmation should reflect application of mind.

Final Conclusion: The Detention Order of 24th March, 2023 and the High Court's judgment dismissing habeas corpus were quashed; the detenu shall be released forthwith. The Court laid down that preventive detention must be sparingly used, the detaining authority must form a subjective satisfaction free from extraneous or stale material with a live nexus to public order, and the Government should exercise real discretion when fixing the duration of detention rather than treating the maximum period as routine.

Presumption under Section 139 of the Negotiable Instruments Act - Probable defence - Rebuttal of presumption by evidence of financial incapacity - Admissibility and proof of handwriting expert report - Power to receive additional evidence at the appellate stage under Section 391 Cr.P.C. - Scope of appeal against acquittal and standard for interference (possible view / perversity)

Scope of appeal against acquittal and standard for interference (possible view / perversity) - Whether the High Court should interfere with the trial court's acquittal. - HELD THAT: - The Court applied established principles that an appeal against acquittal must be approached with caution and interference is warranted only if the trial court's view is not a possible one or is perverse (i.e., against the weight of evidence). The appellate court has power to reappraise evidence but must give due weight to the trial judge's advantage of seeing witnesses, the presumption of innocence and the benefit of doubt. On the facts, the trial court's conclusion that the presumption under Section 139 was rebutted was a reasonable view that could be formed on the evidence and therefore not open to be disturbed in appeal. [Paras 15, 16, 35]

The High Court declined to disturb the acquittal, holding the trial court's view to be a possible and reasonable one.

Admissibility and proof of handwriting expert report - Whether the trial court could rely on the handwriting expert report without examination of the expert. - HELD THAT: - The Court held that the handwriting expert's opinion is not automatically admissible and must be proved in accordance with law; reliance on the report without examining the expert was erroneous. The judgment referred to earlier authority establishing that handwriting expert reports are not covered by the category of reports admissible under Section 293 Cr.P.C. and therefore require proof by production and examination of the expert. [Paras 18, 19]

The trial court erred in relying upon the handwriting expert report without examination of the expert.

Presumption under Section 139 of the Negotiable Instruments Act - Probable defence - Rebuttal of presumption by evidence of financial incapacity - Whether the presumption under Section 139 was rebutted on the evidence in this case. - HELD THAT: - The Court reaffirmed that Section 139 raises a presumption that a cheque was issued for discharge of liability, shifting an evidential burden to the accused to raise a probable defence. The accused may rebut by showing, on preponderance of probabilities, non-existence of debt or other circumstances. On the material before the trial court the complainant had admitted his annual income and particulars which, together with lack of corroborative proof that third parties had advanced funds to him, made it improbable that he could have advanced the loan. The trial court reasonably concluded the presumption was rebutted and that the complainant failed to prove financial capacity, a view the High Court found to be a possible and non-perverse conclusion on the evidence. [Paras 30, 31, 32, 33]

The presumption under Section 139 was held to have been rebutted on the evidence; the trial court's finding in this regard was sustained.

Power to receive additional evidence at the appellate stage under Section 391 Cr.P.C. - Whether the complainant should be permitted to produce additional evidence (Income Tax Return) and be recalled under Section 311 Cr.P.C./Section 391 Cr.P.C. - HELD THAT: - The Court applied the settled test that additional evidence at the appellate stage is permissible only in exceptional circumstances where it serves the interests of justice and is not used merely to fill lacunae in the case; if the evidence could and should have been produced at trial, the appellate court should not admit it. The complainant offered no plausible explanation for failure to produce the Income Tax Return at trial; the document came into existence during pendency and was available to him. Consequently, the application for recall and for reception of additional evidence was properly denied. [Paras 21, 22, 25]

The application for recall and for reception of additional evidence was dismissed; additional evidence was not permitted.

Final Conclusion: The High Court dismissed the appeal and refused to disturb the trial court's acquittal: although reliance on the handwriting expert's report without examination was erroneous, the overall view that the presumption under Section 139 was rebutted by evidence of the complainant's financial incapacity and other circumstances was a possible and reasonable conclusion, and the request to admit additional evidence was correctly refused.

Power under Section 311 Cr.P.C. to summon, recall or re-examine witnesses - Essential to the just decision of the case - Discretionary exercise of Section 311 Cr.P.C. in the interests of substantial justice - Permissible reception of belated/additional evidence to avoid failure of justice - Scope of interference under Section 482 Cr.P.C. with exercise of discretion by trial court

Power under Section 311 Cr.P.C. to summon, recall or re-examine witnesses - Essential to the just decision of the case - Permissible reception of belated/additional evidence to avoid failure of justice - Scope of interference under Section 482 Cr.P.C. with exercise of discretion by trial court - Validity of the Magistrate's order allowing recall/re-examination and reception of additional evidence under Section 311 Cr.P.C., and whether High Court should exercise jurisdiction under Section 482 Cr.P.C. to set aside that order. - HELD THAT: - The Court examined the trial Magistrate's satisfaction that additional evidence (including statement Ex. DW-3/A and bank evidence) was necessary for a just decision and that the application under Section 311 Cr.P.C. was properly founded. The power under Section 311 is wide and discretionary and may be exercised at any stage where the Court considers evidence essential to the just decision; it must be exercised to discover truth and do substantial justice, not capriciously. The Supreme Court's guidelines were applied: the power should be used to prevent failure of justice, be germane to the issues, allow opportunity of rebuttal, and be exercised with care and circumspection. On the facts, statement Ex. DW-3/A originated from a related proceedings involving the accused's father and was not available at the complainant's earlier cross-examination; this linkage rendered the additional evidence material and its late production excusable in the interest of justice. The Magistrate also imposed costs, recording belated filing but allowing relief in fairness. The revisional court affirmed the Magistrate's order. In these circumstances the High Court concluded that there was no illegality, perversity or irregularity warranting exercise of inherent jurisdiction under Section 482 Cr.P.C. to interfere with the discretionary order of the trial court. [Paras 15, 16, 19, 20, 21]

The Magistrate's order granting the application under Section 311 Cr.P.C. was held to be lawful and not liable to be set aside; the petition under Section 482 Cr.P.C. was dismissed.

Final Conclusion: The petition under Section 482 Cr.P.C. challenging the trial Magistrate's exercise of discretion under Section 311 Cr.P.C. to recall/re-examine the complainant and receive additional evidence is dismissed; the impugned order, affirmed in revision, did not exhibit irregularity, illegality or perversity warranting interference.

Offence under Section 138 of the Negotiable Instruments Act - vicarious liability under Section 141 of the Negotiable Instruments Act - condition precedent of company conviction for attracting vicarious liability - doctrine of strict construction in imposing vicarious liability

Offence under Section 138 of the Negotiable Instruments Act - vicarious liability under Section 141 of the Negotiable Instruments Act - condition precedent of company conviction for attracting vicarious liability - Whether the Managing Director could be convicted under Section 138 of the N.I. Act when the company was acquitted - HELD THAT: - The Court applied the settled principle that vicarious liability under Section 141(1) of the N.I. Act arises only if the juristic person (the company) is found to have committed the offence; commission of the offence by the company is a condition precedent to prosecute or convict persons referred to in Section 141. Reliance was placed on the reasoning in Aneeta Hada and subsequent authority emphasising that the words in Section 141 must be strictly construed and read conjunctively so that liability of individuals is coextensive with, and dependent upon, the company's liability. The appellate court's upholding of the Managing Director's conviction despite the acquittal of the company was contrary to this legal principle. The cheque was issued in the capacity of the Managing Director towards discharge of the company's liability and there was no finding that the petitioner personally owed the amount. Consequently, the conviction of the Managing Director could not stand once the company's acquittal became final. [Paras 20, 21, 22]

The conviction of the Managing Director under Section 138 of the N.I. Act was set aside and he was acquitted.

Final Conclusion: The revision petition is allowed: the impugned appellate conviction of the revision petitioner under Section 138 of the N.I. Act is set aside; the petitioner is acquitted, his bail bond cancelled and he is released forthwith.