TaxTMI Updates e-Newsletter
Jan 10,2022

Composite supply - principal supply - value of supply (including non-cash consideration) - exemption under entry serial no. 3A of Notification No. 12/2017-Central Tax (Rate) - activity in relation to a function entrusted to a Panchayat under Article 243G / Municipality under Article 243W - job-work supply taxable at 5%

Composite supply - principal supply - Whether the applicant's activity of milling, fortifying and packing supplied to the State Government constitutes a composite supply with milling as the principal supply - HELD THAT: - The Authority applied the definition of composite supply in clause (30) of section 2 and examined the agreement terms requiring milling, fortification and packing. The activities are naturally bundled and supplied in conjunction with each other in the ordinary course of business and the service of milling is the principal supply. Consequently the supply qualifies as a composite supply with milling as the principal supply. [Paras 4]

The supply qualifies as a composite supply and the service of milling is the principal supply.

Activity in relation to a function entrusted to a Panchayat under Article 243G / Municipality under Article 243W - exemption under entry serial no. 3A of Notification No. 12/2017-Central Tax (Rate) - Whether the composite supply is in relation to a function entrusted to a Panchayat or Municipality and thus capable of falling under entry 3A exemption when other conditions are met - HELD THAT: - The Authority considered the empanelment order and the guidelines under the State Government order executed in terms of the Public Distribution System legislation and relied on the CBIC Circular which notes that public distribution figures at entry 28 of the Eleventh Schedule (activities that may be entrusted to Panchayats). The composite supply to the State Government for distribution under the PDS is therefore an activity in relation to a function entrusted to a Panchayat under Article 243G and so satisfies the territorial/functional predicate for potential application of entry 3A. [Paras 4]

The composite supply is in relation to a function entrusted to a Panchayat under Article 243G and thus meets the functional requirement of entry 3A.

Value of supply (including non-cash consideration) - exemption under entry serial no. 3A of Notification No. 12/2017-Central Tax (Rate) - job-work supply taxable at 5% - Whether the value of goods in the composite supply exceeds 25% of the total value and the treatment of non-cash consideration in value computation - HELD THAT: - The Authority held that value of supply includes consideration in money as well as non-cash consideration such as by-products and retained gunny bags. It noted precedent treating retained by-products as part of consideration. The applicant asserted specific non-cash values, but failed to produce supporting documents for receipts from sale of bran, refractor and gunny bags. Because inclusion of non-cash consideration is required for valuation, the factual question whether goods constitute not more than 25% of the composite supply depends on ascertainment of those non-cash components. In absence of documentary evidence, the Authority could not determine whether the 25% threshold is satisfied. The Authority therefore prescribed the legal consequence: if goods do not exceed 25% the exemption under entry 3A applies; if they exceed 25% the composite supply will be taxable at 5% as a job-work service under entry 26. [Paras 4]

Value of supply must include non-cash consideration; because documents proving non-cash receipts were not furnished, whether the value of goods exceeds 25% is not finally determined. If goods 25% exemption under entry 3A applies; if goods >25% the supply attracts 5% as job-work.

Final Conclusion: The Authority ruled that the applicant's activity constitutes a composite supply with milling as the principal supply and that the supply is in relation to a function entrusted to a Panchayat; value of supply must include non-cash consideration but, lacking documentary proof of such non-cash receipts, the Authority could not finally determine whether the goods component exceeds 25%. Consequently the supply is exempt under entry 3A only if the value of goods does not exceed 25% (including non-cash consideration); otherwise it is taxable at 5% as a job-work supply.

Composite supply - works contract - treatment as supply of services - naturally bundled supplies supplied in conjunction - taxability under rate notification for construction services supplied to a local authority

Works contract - composite supply - treatment as supply of services - naturally bundled supplies supplied in conjunction - Whether the contract for Design & Construction (DB) and Operation & Maintenance (O&M) constitutes a single indivisible contract and qualifies as a works contract treated as a supply of services under the GST Act. - HELD THAT: - The contract arose from a single tender and a single letter of acceptance though two phase agreements (DB and O&M) were executed. Contract terms (GCC clauses reproduced in the record) divide the work into Design & Construction Phase and O&M Phase but link completion, certification and obligations across the phases (including sectional completion, initial takeover, and taking-over certificates) and make contractor's obligations interdependent for achievement of performance outcomes. The scope of O&M includes activities involving transfer/use of materials (repairs, meter installation, etc.). Applying the statutory definitions and Para 6(a) of Schedule II, such interdependent and naturally bundled supplies fall within the definition of a works contract and, therefore, are to be treated as a supply of services. [Paras 4]

The DB and O&M obligations form an indivisible single contract which qualifies as a works contract and is to be treated as a supply of services.

Taxability under rate notification for construction services supplied to a local authority - composite supply - Whether the composite works contract is taxable under the rate notification entry applicable to construction services supplied to government/local authorities and the applicable rates for the relevant periods. - HELD THAT: - The composite works contract involves installation and maintenance of pipeline for water supply and was supplied to Kolkata Municipal Corporation, a local authority. Entry 3(iii) of Notification No. 20/2017 (as amended) covers composite supply of works contract for pipelines for water supply supplied to a local authority. Consequently, the contract falls within that entry and attracts the notified rates: 12% (CGST 6% + SGST 6%) w.e.f. 22.08.2017. For the earlier period 01.07.2017 to 21.08.2017, the supply is taxable under the earlier Notification No. 11/2017 entry 3(ii) at 18% (CGST 9% + SGST 9%). [Paras 4]

The composite works contract with KMC is covered by entry 3(iii) of Notification No. 20/2017 and is taxable at 12% w.e.f. 22.08.2017; for 01.07.2017 to 21.08.2017 it is taxable at 18% under the earlier notification.

Final Conclusion: The Design & Construction and O&M obligations under the single tender form an indivisible works contract treated as a supply of services; the composite works contract supplied to Kolkata Municipal Corporation is taxable under the construction-services notification at 12% (6% CGST + 6% SGST) w.e.f. 22.08.2017 and at 18% (9% + 9%) for 01.07.2017 to 21.08.2017.

Composite supply - value of composite supply - inclusion of non-cash consideration - exemption under entry 3A - condition of value of goods not exceeding 25% - public distribution as function entrusted to a Panchayat/ Municipality - applicable rate for job-work where exemption not available - 5% (CGST + SGST)

Composite supply - Whether the supply by the applicant qualifies as a composite supply with milling service as the principal supply. - HELD THAT: - The Authority found that the activities undertaken - milling of wheat into wholemeal atta, fortification and packing as required by the State - are naturally bundled and supplied in conjunction with each other. Applying clause (30) of section 2, the supply qualifies as a composite supply where the service of milling is the principal supply. The agreement and the contractual requirement to fortify and pack the flour support this characterisation. [Paras 4]

The supply is a composite supply with the milling service as the principal supply.

Public distribution as function entrusted to a Panchayat/ Municipality - Whether the composite supply is in relation to a function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W of the Constitution. - HELD THAT: - The empanelment and supply arrangement arise under Government Order and Guidelines framed in exercise of powers under the Public Distribution System orders. The Authority relied on Circular No. 153/09/2021-GST which recognises public distribution as falling within entry 28 of the Eleventh Schedule. On this basis the Authority concluded that the composite supply is in relation to a function entrusted to a Panchayat/ Municipality within the meaning of entry 3A. [Paras 4]

The composite supply is in relation to a function entrusted to a Panchayat/ Municipality.

Value of composite supply - inclusion of non-cash consideration - exemption under entry 3A - condition of value of goods not exceeding 25% - applicable rate for job-work where exemption not available - 5% (CGST + SGST) - How the value of supply is to be determined for the purpose of entry 3A and the tax consequence where the 25% threshold is not satisfied. - HELD THAT: - The Authority held that value of supply includes consideration in money and components of non-cash consideration (such as by products and retention/receipts claimed by the supplier) and cited earlier authority recognising by products retained as part of consideration. Entry 3A grants exemption to a composite supply provided the value of goods in the composite does not exceed 25% of the total value. The Authority observed that if the value of goods exceeds 25% the supply, being job-work supplied to a registered person, would be taxable at 5% under the job-work entry. However, on the facts before it the applicant had not produced documentary evidence of the non-cash receipts claimed (sale of bran, refractor and value of gunny bags). Consequently the Authority could not determine whether the value of goods exceeds 25% and stated that the exemption under entry 3A applies only when the goods component does not exceed 25% after including non-cash consideration; otherwise the supply shall attract tax at 5%. [Paras 4]

Value of supply includes both monetary and non-cash consideration; entry 3A exemption applies only if the value of goods does not exceed 25% of the composite supply (after including non-cash consideration). If the goods component exceeds 25%, the supply will be taxable at 5% as job work.

Value of composite supply - inclusion of non-cash consideration - Whether, on the materials produced, the value of goods in the applicant's composite supply is within the 25% threshold. - HELD THAT: - The Authority found that the applicant alleged non-cash consideration from retention and sale of by products and gunny bags, but did not furnish documentary proof of such receipts. In absence of supporting documents the Authority was unable to ascertain the extent of non cash consideration and therefore could not conclude whether the goods component exceeds 25% of the total value. [Paras 4]

Factual determination whether the goods component exceeds 25% could not be made for want of documentary evidence and remains to be verified.

Final Conclusion: The supply is a composite supply (milling as principal supply) made in relation to a function entrusted to a Panchayat/Municipality. For the purposes of entry 3A the value of supply includes monetary and non cash consideration; exemption under entry 3A applies only if the goods component does not exceed 25% of the composite supply after including non cash consideration. Absent proof of the non cash receipts the Authority could not determine whether the threshold is met; if it is not met the supply will attract tax at 5% under the job work entry.

Advance ruling - maintainability of application for advance ruling - applicant registered or desirous of registration - supply of goods or services - inadmissibility under Section 98(2) of the CGST Act, 2017

Advance ruling - maintainability of application for advance ruling - applicant registered or desirous of registration - supply of goods or services - inadmissibility under Section 98(2) of the CGST Act, 2017 - Whether the application filed by M/s. U.R. Rao Satellite Centre seeking advance ruling on taxability of insurance premium for launch services is maintainable before the Authority for Advance Rulings. - HELD THAT: - The Authority examined the statutory scope of "advance ruling" and the definition of "applicant" under the CGST Act, 2017, observing that advance rulings are available only to persons who are registered or desirous of registration and in respect of supplies of goods or services being undertaken or proposed to be undertaken by the applicant. The Authority recorded that the applicant is a recipient of services and not a supplier of goods or services; consequently the application does not fall within the class of persons entitled to seek an advance ruling on the supply in question. Applying these principles, the Authority concluded that the application is not maintainable and must be rejected as inadmissible under the statutory provision relied upon. [Paras 9, 10]

The application is rejected as inadmissible and not maintainable under Section 98(2) of the CGST Act, 2017.

Final Conclusion: The Authority dismissed the application for advance ruling as inadmissible under Section 98(2) of the CGST Act, 2017 because the applicant is a recipient of services and not a supplier seeking a ruling in relation to its own supplies.

Admissibility of advance ruling application - first proviso to Section 98(2) of the CGST Act, 2017 - identical question pending or decided in the applicant's proceedings

Admissibility of advance ruling application - first proviso to Section 98(2) of the CGST Act, 2017 - Application for advance ruling on GST applicability to interest-free security deposit is inadmissible under the first proviso to Section 98(2) of the CGST Act, 2017. - HELD THAT: - The Authority examined whether the question raised in the applicant's advance ruling application was already pending or decided in any proceedings in the case of the applicant under the Act. The audit report under section 65(6) recorded an objection on the same issue - treating the security deposit declared as nil-rated turnover - and that objection was in existence when the application was filed. The conditions in the first proviso to Section 98(2) - that the question is the same, relates to the applicant, and is pending or decided under the Act - are therefore satisfied. Because the question in the advance ruling application and the audit objection are one and the same, the proviso precludes admission of the application. [Paras 9, 10, 11, 12]

The application is rejected as inadmissible under the first proviso to Section 98(2) of the CGST Act, 2017.

Final Conclusion: The Authority declined to admit the advance ruling application and rejected it as inadmissible because the question on GST applicability to the security deposit was already the subject of pending proceedings in the applicant's case under the Act.

Residential Real Estate Project (RREP) as defined under the relevant Notification - affordable residential apartment as defined under the relevant Notification - applicable GST rate for construction of affordable residential apartments (effective 1.5% intra-state, abated by one-third for land) - one-time option for ongoing projects to retain old tax rates - valuation abatement treating land as one-third of total amount charged

Residential Real Estate Project (RREP) as defined under the relevant Notification - Whether the project under construction by the applicant is a Residential Real Estate Project (RREP). - HELD THAT: - The Authority observed that the applicant's activities constitute development of a building consisting of apartments for the purpose of selling apartments and therefore fall within the definition of a real estate project. A REP qualifies as an RREP where the carpet area of commercial apartments does not exceed 15% of the total carpet area; the submitted documents indicate no commercial apartments in the project. On that basis the project is treated as an RREP under the relevant Notification. [Paras 4]

The project is a Residential Real Estate Project (RREP) as defined in the Notification.

Affordable residential apartment as defined under the relevant Notification - metropolitan city threshold for carpet area - Whether the apartments in the project qualify as 'affordable residential apartment'. - HELD THAT: - The Authority applied the Notification's criteria: (i) project commencement after 01.04.2019 (or being an ongoing project without exercise of option), (ii) carpet area thresholds (90 sqm for towns other than metropolitan cities), and (iii) gross amount charged not exceeding the prescribed ceiling. The project is located outside the Kolkata metropolitan area and the disclosed carpet areas and consideration fall within the Notification thresholds. The Authority also noted the applicant's project is not an 'ongoing project' for purposes of the schemes referenced, so those schemes do not affect eligibility. On these facts, the apartments meet the definition of affordable residential apartments under the Notification. [Paras 4]

The apartments qualify as affordable residential apartments as defined in the Notification.

Applicable GST rate for construction of affordable residential apartments (effective 1.5% intra-state, abated by one-third for land) - one-time option for ongoing projects to retain old tax rates - valuation abatement treating land as one-third of total amount charged - What GST rate is chargeable on sale of flats in the project. - HELD THAT: - The Authority reviewed the relevant Notification entries and para 2 (valuation) providing that where transfer of land or undivided share is involved the value of the supply attributable to goods and services equals the total charged less the value of land, the latter being deemed one-third of the total. For construction of affordable residential apartments in an RREP commencing after 01.04.2019, the specified central and state tax rates are 0.75% each (total 1.5%) on the value of supply; applying the one-third abatement for land yields an effective rate of 1% (0.5% CGST + 0.5% SGST) on the total amount where land share is transferred. The Authority also explained that different rates apply for ongoing projects depending on whether the promoter exercised the one-time option to retain old rates, but those contingencies do not apply where the project commenced after 01.04.2019. [Paras 4]

GST shall be charged at 1.5% (0.75% CGST and 0.75% SGST) on the value of supply for sale of flats in the project, with the statutory one third abatement for land applied (effective 1% on the total where land share is transferred), except where entire consideration is received after issuance of completion certificate or first occupation.

Final Conclusion: The Authority ruled that the applicant's project is an RREP, the apartments qualify as affordable residential apartments under the Notification, and the applicable intra state GST is 1.5% (0.75% CGST + 0.75% SGST) on the value of supply, subject to the one third abatement for land which yields an effective rate of 1% on the total where transfer of land or undivided share is involved.

Each assessment year is separate - Use of materials collected subsequent to assessment year - Rejection of books of account under section 145 after completion under section 143(3) - Estimation of income on gross profit margin

Each assessment year is separate - Use of materials collected subsequent to assessment year - ITAT erred in affirming conclusions based on materials collected during a period subsequent to the assessment year - HELD THAT: - The Court examined the assessment record and found that the AO, and subsequently the CIT(A) and ITAT, relied upon observations made during a survey operation on 8-10-2007, which occurred after the close of the previous year relevant to AY 2005-06. The survey evidence was used to justify rejection of the assessee's valuation of closing stock and to support estimating profit. The court held that events or materials collected after the relevant previous year cannot be taken into account for making findings in respect of that assessment year because each assessment year is separate. For these reasons the Court concluded that reliance on post-period materials to uphold additions for AY 2005-06 was erroneous and set aside the corresponding portions of the AO's and CIT(A)'s orders which were sustained by the ITAT (paras 8, 11). [Paras 8, 11]

The question of law is answered in the affirmative in favour of the assessee; the ITAT erred in affirming conclusions based on materials collected subsequent to the assessment period and those parts of the AO's and CIT(A)'s orders are set aside.

Rejection of books of account under section 145 after completion under section 143(3) - Estimation of income on gross profit margin - Validity of invoking section 145 to reject the assessee's books of account after assessment under section 143(3) and reworking gross profit - HELD THAT: - The Court noted that the assessment for AY 2005-06 had been completed under section 143(3) after the assessee produced its books of account. The ITAT nevertheless upheld rejection of the books under section 145 and proceeded to rework the gross profit margin on the basis of conjectures and material partly drawn from the subsequent survey. The Court found this approach to be a serious error: once the assessment was completed under section 143(3) with production of books, invoking section 145 to reject the accounts and then reworking the gross profit on that basis was impermissible. Consequently, the reworking of gross profit and the addition sustained on that basis could not stand (paras 9, 10). [Paras 9, 10]

Rejection of the assessee's books under section 145 and the reworking of gross profit after completion under section 143(3) is unsustainable; the ITAT's approach in this regard was in error.

Final Conclusion: The appeal is allowed: the ITAT erred in affirming conclusions based on materials collected after the assessment period and in sustaining rejection of books under section 145 following completion under section 143(3); the corresponding parts of the AO's and CIT(A)'s orders are set aside.

Alternate remedy - exercise of writ jurisdiction in fiscal matters - relegation to appellate remedy under Section 246A of the Income Tax Act - violation of principles of natural justice - Whirlpool exceptions

Alternate remedy - exercise of writ jurisdiction in fiscal matters - relegation to appellate remedy under Section 246A of the Income Tax Act - Whether the writ petition should be entertained despite the availability of an alternate statutory remedy by way of appeal under Section 246A of the IT Act - HELD THAT: - The Court applied the well established principle that availability of an effective statutory remedy ordinarily disentitles a petitioner to relief under Article 226, particularly in matters involving revenue where the rule is to be applied with rigour. After noting the sequence of earlier statutory notices and that 25% of the demand has already been deposited pursuant to an interim order, the Court held that the alternate remedy by way of appeal under Section 246A is efficacious and should be availed of. Reliance on the line of authorities emphasising restraint in fiscal matters and the exceptions carved out by the Supreme Court (including the Whirlpool/Commercial Steel principles) informed the conclusion that no exceptional circumstance existed to justify bypassing the statutory remedy. The petitioner was accordingly relegated to the appellate forum and the Court declined to interfere with the impugned orders. [Paras 7, 8, 9, 10, 11]

Writ petition dismissed on the ground that an effective alternate remedy under Section 246A is available; petitioner relegated to that remedy.

Violation of principles of natural justice - Whirlpool exceptions - Whether the impugned assessment/demand orders involved any breach of natural justice or other exception permitting writ jurisdiction despite the alternate remedy - HELD THAT: - The Court examined the factual matrix of prior notices and the show cause notice dated 23.11.2019, and observed that the petitioner had been given adequate opportunities and that there was no established breach of principles of natural justice. The Court referred to the recognized exceptions (the Whirlpool exceptions and subsequent elucidation in Commercial Steel) and found that none of those exceptions-such as breach of fundamental rights, manifest violation of natural justice, excess of jurisdiction, or challenge to vires-were made out. Consequently, the exceptional circumstances necessary to entertain a writ in the face of an available statutory remedy were not present. [Paras 7, 8, 9, 10]

No violation of natural justice or other exception was shown; therefore writ jurisdiction could not be invoked.

Exercise of writ jurisdiction in fiscal matters - Whether the Court should interfere with the impugned assessment order dated 09.12.2019 and the consequential demand notice dated 09.12.2019 - HELD THAT: - Applying the foregoing conclusions on alternate remedy and absence of any Whirlpool exception, the Court declined to disturb the impugned assessment and demand notices. The Court made clear that if the petitioner approaches the appellate authority, that authority is free to decide the appeal on merits uninfluenced by any observations in this order. [Paras 11]

No interference with the impugned assessment order and demand notice; writ petition disposed accordingly.

Final Conclusion: The writ petition challenging the assessment order dated 09.12.2019 and the consequential demand notice dated 09.12.2019 is dismissed and the petitioner is relegated to the statutory remedy of appeal under Section 246A of the Income Tax Act; the appellate authority may decide the appeal on merits without being influenced by this order.

Nature of bank guarantee commission - commission versus fee for banking services - principal-agent relationship - constructive agent - tax deduction at source under Section 194H - precedential reliance on prior decisions treating bank charges as fees

Nature of bank guarantee commission - commission versus fee for banking services - tax deduction at source under Section 194H - principal-agent relationship - Bank guarantee commission retained by a bank is a fee for banking services and not commission liable to deduction of tax at source under Section 194H on the part of the assessee. - HELD THAT: - The Court considered whether the charge retained by the bank for issuing a bank guarantee could be characterised as commission paid to an agent (attracting withholding under Section 194H) or whether it was a fee for banking services. Concluding that the point was no longer res integra, the Court followed earlier decisions which held that the amount retained by the bank is a fee for rendering banking services and cannot be treated as commission or brokerage paid to an agent acting on behalf of another. The Court rejected the contention that the bank stood as a principal agent or a constructive agent of the assessee such that the payment would fall within Section 194H. On this basis the Tribunal's finding that no tax was deductible at source under Section 194H was upheld.

The Tribunal's conclusion that bank guarantee charges are banking service fees and not commission within Section 194H is affirmed; no TDS under Section 194H was attracted.

Final Conclusion: The appeal is dismissed and the substantial questions of law are answered against the revenue, affirming that bank guarantee charges are fees for banking services and not commission attracting deduction under Section 194H.

Allowability of punitive railway charges under the explanation to Section 37(1) of the Income Tax Act, 1961 - compensatory nature of payments made to remove an impediment to carrying on business (distinction between compensatory/revenue and capital expenditure) - characterisation of Net Present Value (NPV) paid to Forest Department as revenue or capital expenditure - application of precedents Prakash Cotton Mills and Bikaner Gypsums in determining revenue nature of statutory/compensatory payments

Allowability of punitive railway charges under the explanation to Section 37(1) of the Income Tax Act, 1961 - compensatory nature of payments made to remove an impediment to carrying on business - application of Prakash Cotton Mills precedent - Punitive/overloading charges paid to Railways are allowable as revenue expenditure under the explanation to Section 37(1) of the Act. - HELD THAT: - The Court affirmed the Tribunal's conclusion that payments made to the Railways for overloading were compensatory in nature and thus deductible under the explanation to Section 37(1). The Tribunal had applied the Supreme Court decision in Prakash Cotton Mills which treated payments to Railway for overloading as compensatory and allowable. On the facts, the Tribunal noted practical inability to weigh goods at the originating station (no weighbridge) and treated the charges as incurred in the ordinary course of business to remove an impediment to dispatch, rendering them revenue in nature. The High Court found no error in this approach and answered the substantial questions on these points against the revenue.

Addition under Section 37 in respect of Railway punitive/overloading charges was rightly deleted; payments held allowable as revenue expenditure.

Characterisation of Net Present Value (NPV) paid to Forest Department as revenue or capital expenditure - compensatory payment to remove obstacle to exercise of pre-existing licence rights - application of Bikaner Gypsums precedent - NPV paid to the Forest Department is revenue in nature and deductible; not a capital expenditure. - HELD THAT: - The Court followed prior decisions in the assessee's group-company matters where the Tribunal and this Court applied the reasoning in Bikaner Gypsums Ltd. That reasoning distinguishes payments that secure or enable the exercise of a pre-existing right (revenue/compensatory) from payments that procure a new or enhanced right (capital). Here the mining licence already existed; the NPV was a one-time statutory/compensatory payment mandated to remove an impediment to carrying on mining operations and did not confer a new right or extend the licence. On that basis the Court held the NPV to be revenue expenditure, applying the precedent and rejecting the revenue's contention that it was capital in nature.

NPV payment treated as revenue expenditure; concurrent findings in favour of the assessee sustained and revenue's challenge dismissed.

Final Conclusion: The appeal by the revenue is dismissed. Substantial questions of law concerning (i) allowability of Railway punitive/overloading charges and (ii) characterisation of NPV paid to the Forest Department were answered against the revenue, the Tribunal's deletions being upheld.

Unexplained cash credit under section 68 - genuineness of share application money and creditworthiness of investors - notional interest on interest-free advances to directors - verification of source of funds and reserves and surplus as source of investment - remand for de novo verification of documents

Unexplained cash credit under section 68 - verification of source of funds - Addition of share capital/share application money received from five Kolkata based companies treated as unexplained under section 68. - HELD THAT: - The Tribunal examined the material on record including the AO's remand report and the balance-sheet and P&L of M/s. Tirumala Dealers Pvt. Ltd. The remand report continued to record the AO's view that all five companies were bogus; the balance-sheet of Tirumala showed losses and indicated that the investment of Rs. 7,05,00,000 was made out of earlier reserves and surplus, the exact provenance of which was not established. It was also not disputed that all five companies shared the same registered address in a deserted building. On these facts the Tribunal found the CIT(A)'s deletion of the addition to be erroneous and held that the AO's conclusion treating the amounts as unexplained cash credits was sustainable. [Paras 7]

Order of the AO upheld and addition confirmed in favour of the Revenue.

Notional interest on interest-free advances to directors - application of interest disallowance where advances made out of interest-bearing funds - Disallowance by computation of notional interest on advances made to directors where no interest was received. - HELD THAT: - The AO determined that advances to directors were made out of the assessee's interest-bearing funds and, since no interest was received from the directors, computed interest at 12% p.a. and disallowed the same. The assessee failed to produce evidence before the Tribunal to show that the advances were from interest-free funds. In the absence of proof to the contrary the Tribunal found no reason to interfere with the AO's computation or the CIT(A)'s confirmation of the addition. [Paras 8]

Addition on account of notional interest upheld; assessee's ground dismissed.

Unexplained cash credit under section 68 - genuineness of share application money and creditworthiness of investors - Share application money of Rs. 1,18,10,000 received from M/s. Jagadamba Cotton Industries Pvt. Ltd. and Smt. Susheelabai Rungta. - HELD THAT: - For M/s. Jagadamba Cotton Industries Pvt. Ltd the assessee produced income-tax returns and statement of affairs before the Tribunal, but the revenue authorities' orders did not discuss those documents. Given the absence of consideration of the newly filed documents, the Tribunal remitted the issue to the AO for de novo verification of the veracity of those documents and the creditworthiness of the investor. As to the amount received from Smt. Susheelabai Rungta, the assessee produced nothing before the Tribunal to establish genuineness; accordingly the Tribunal did not interfere with the AO/CIT(A)'s finding treating that amount as unexplained under section 68. [Paras 9]

Amount from M/s. Jagadamba remitted to AO for fresh verification; amount from Smt. Susheelabai Rungta upheld as unexplained credit.

Final Conclusion: The Revenue's appeal is allowed insofar as the addition relating to share capital received from the Kolkata companies is confirmed. The assessee's appeal is partly dismissed: the disallowance of notional interest on advances to directors is sustained; share application money from Smt. Susheelabai Rungta is treated as unexplained; the claim regarding share application money from M/s. Jagadamba Cotton Industries Pvt. Ltd. is remitted to the AO for de novo verification.

Section 50C - reference to Valuation Officer where assessee objects to stamp valuation - Assessment completed under section 144 r.w.s.147 - consequences of non appearance and later appellate submissions - Unexplained investment under section 69 - assessability limited to payments made during the relevant assessment year

Section 50C - reference to Valuation Officer where assessee objects to stamp valuation - Assessment completed under section 144 r.w.s.147 - consequences of non appearance and later appellate submissions - Validity of invoking section 50C and addition based on stamp valuation where assessee objected to the value before the first appellate authority but did not appear before the Assessing Officer. - HELD THAT: - The Tribunal examined whether the Assessing Officer lawfully invoked section 50C by adopting the stamp valuation without referring the matter to the Departmental Valuer (DVO) after the assessee objected to the value. The assessee had purchased the property earlier at a lower price and later sold at a price much below the stamp valuation; the assessment was completed under section 144 r.w.s.147 because the assessee did not appear before the AO. At the appellate stage the assessee produced documents and explained that title litigation depressed the market value and objected to the SRO value. The CIT(A) considered the remand report and the assessee's submissions, observed that section 50C(2) empowers the AO to refer valuation to the Valuation Officer when the assessee objects, and noted that the AO did not make such a reference. The Tribunal found the decision relied on by the Revenue distinguishable because there the assessee had not sought reference to the DVO; in the present case the assessee had objected and furnished material at the appellate stage prompting the remand. The Tribunal accordingly upheld the CIT(A)'s finding that the addition under section 50C could not be sustained in the absence of reference to the DVO and having regard to the assessee's objections and evidence. [Paras 6, 9, 10, 11]

The deletion of the addition made under section 50C by the CIT(A) is upheld and the Revenue's appeal is dismissed.

Unexplained investment under section 69 - assessability limited to payments made during the relevant assessment year - Correctness of the addition treating the entire purchase consideration as unexplained investment and the quantum of such addition for assessment year 2009-2010. - HELD THAT: - The AO treated the entire purchase consideration as unexplained investment under section 69 because the assessee did not file returns or attend proceedings; assessment was completed under section 144/147. On appeal the assessee produced evidence showing payments towards the purchase were made over a period spanning before and during the relevant year. The CIT(A) examined dates of payments and remand reports, concluded that only payments of Rs. 9,00,000 and Rs. 8,00,000 fell within the relevant period and restricted the addition to the aggregate of those payments. The assessee did not challenge this factual limitation before the Tribunal. Having considered the material, the Tribunal found no infirmity in the CIT(A)'s restriction of the addition to the amount corresponding to payments made in the relevant assessment year. [Paras 15, 16]

The CIT(A)'s order restricting the unexplained investment addition to the payments made during the relevant year is sustained and the assessee's appeal is dismissed.

Final Conclusion: Both appeals are dismissed: the Revenue's appeal for AY 2010-2011 is dismissed upholding the CIT(A)'s deletion under section 50C for failure to refer to the Valuation Officer and on the assessee's objection; the assessee's appeal for AY 2009-2010 is dismissed upholding the CIT(A)'s restriction of the unexplained investment addition to the payments made in the relevant year.

Mandatory jurisdictional requirement of notice under section 143(2) - reassessment under section 147/notice under section 148 - protection under section 292BB limited to defective service, not complete absence of notice - quashing of reassessment for non issuance of mandatory notice

Mandatory jurisdictional requirement of notice under section 143(2) - protection under section 292BB limited to defective service, not complete absence of notice - quashing of reassessment for non issuance of mandatory notice - Reassessment completed without issuance of notice under section 143(2) is invalid and liable to be quashed. - HELD THAT: - The Tribunal found on record that after completion of the original assessment and issuance of notice under section 148 the assessee filed a return in response to the section 148 notice, but no notice under section 143(2) was issued prior to completion of reassessment. The Assessing Officer, in a remand report, accepted that a notice under section 143(2) was not available on record and the only documentary material produced later related to a notice dated 30/09/2011 issued in an earlier original scrutiny assessment, which was irrelevant to the section 147/148 reassessment. The Tribunal held that mere recital in the assessment order that a notice under section 143(2) was issued does not substitute for actual issuance and recordal of such notice in the proceedings. Relying on binding precedents of the Hon'ble Supreme Court and High Courts, the Tribunal applied the principle that issuance of notice under section 143(2) is a mandatory, jurisdictional precondition to complete a scrutiny assessment once a return is filed in response to a section 148 notice; omission to issue such notice is not a curable procedural irregularity. The Tribunal further held that section 292BB cannot cure a situation of complete non issuance of the notice as it only validates infirmities in service where the notice has in fact emanated from the department. In these circumstances the reassessment was held to be without jurisdiction and therefore void ab initio. [Paras 6, 7]

Impugned reassessment order for A.Y. 2010-11 quashed for want of notice under section 143(2); appeal allowed.

Final Conclusion: Following the finding that no notice under section 143(2) was issued in the reassessment proceedings and that section 292BB does not cure complete non issuance, the reassessment order for A.Y. 2010-11 is quashed and the assessee's appeal is allowed.

Deduction under Section 80P(2)(a)(i) for societies engaged in providing credit to members - deduction under Section 80P(2)(d) for interest/dividend from investments in co-operative societies - distinction between income from business and income from other sources for co-operative societies - exclusion of co-operative banks from Section 80P by operation of Section 80P(4) and legislative intent - allowance of proportionate expenses against interest assessed as income from other sources

Deduction under Section 80P(2)(a)(i) for societies engaged in providing credit to members - distinction between income from business and income from other sources for co-operative societies - deduction under Section 80P(2)(d) for interest/dividend from investments in co-operative societies - exclusion of co-operative banks from Section 80P by operation of Section 80P(4) and legislative intent - Whether interest and dividend earned by the assessee on deposits/investments with co-operative banks and other banks are deductible under Section 80P(2) of the Income Tax Act, 1961 - HELD THAT: - The Tribunal applied the binding precedent of the Karnataka High Court (following the Supreme Court in Totagars) and held that interest earned on deposits is in the nature of income from other sources and not income of the business of providing credit to members, and therefore is not eligible for deduction under Section 80P(2)(a)(i). The Court noted that Section 80P(2)(d) contemplates deduction in respect of income out of investments with co-operative societies, but that co-operative banks are excluded from the beneficial ambit of Section 80P by Section 80P(4) and by subsequent legislative indications, so interest from co-operative banks or other banks does not qualify for full deduction under Section 80P(2)(d). The Tribunal therefore sustained the authorities' disallowance of the claimed deduction to the extent the interest was treated as income from other sources, distinguishing any limited category of investments in co-operative societies which, if applicable and within Section 80P(2)(d), would be treated differently. [Paras 7, 8, 9, 10]

Deduction under Section 80P(2)(a)(i) is not allowable for the interest income in question; interest on deposits with banks (including co-operative banks, in view of Section 80P(4) and legislative intent) is taxable as income from other sources and not deductible under Section 80P(2).

Allowance of proportionate expenses against interest assessed as income from other sources - remand for quantification and verification of allowable proportionate expenses - Whether the assessee is entitled to deduction of proportionate cost, administrative and other expenses in computing taxable interest income assessed under the head 'income from other sources', and the consequent quantification of disallowance - HELD THAT: - Relying on the Tribunal's precedent (Puttur Primary Co-operative Bank) and the Karnataka High Court decision permitting allowance of proportionate expenses where interest is assessed as income from other sources, the Tribunal found merit in the assessee's alternative claim. The Tribunal did not decide the quantum on merits but remitted the matter to the Assessing Officer for fresh computation of the disallowance, directing the AO to afford the assessee an opportunity to produce evidence and to allow proportionate expenses, administrative and other costs as appropriate while reassessing the interest income treated as income from other sources. [Paras 12, 13, 14]

Question of quantum is remitted to the AO to decide afresh in accordance with the Tribunal's directions: allow proportionate cost and administrative expenses against the interest income if the AO assesses it under 'other sources', after giving the assessee an opportunity to be heard and to produce evidence.

Final Conclusion: The Tribunal upheld the denial of the claimed deduction under Section 80P(2)(a)(i) for the interest income, treated that interest as income from other sources (and observed that interest from banks/co-operative banks does not generally qualify under Section 80P(2)), but remitted the matter to the Assessing Officer for recomputation of the disallowance so as to permit allowance of proportionate cost and administrative expenses against such interest after opportunity to produce evidence; appeal partly allowed for statistical purposes.

Scope of assessment under section 153A in unabated assessments - incriminating material found in the course of search as a prerequisite for additions in unabated assessments - treatment of declared agricultural income versus income from other sources in post search assessments - presumption as to documents found during search under section 292C - proof of source for investments and receipts found during search

Scope of assessment under section 153A in unabated assessments - incriminating material found in the course of search as a prerequisite for additions in unabated assessments - treatment of declared agricultural income versus income from other sources in post search assessments - Addition of declared agricultural income to income from other sources in assessments made under section 153A for AY 2009-10 to 2011-12 where no incriminating material emanating from the search supported the addition. - HELD THAT: - The Tribunal found that the returns for AY 2009-10 to 2011-12 had been accepted and no notice under section 143(2) was issued within the statutory time, hence those assessments were unabated and continued as valid. In unabated assessment proceedings under section 153A, the scope to make additions is confined to undisclosed income that is detected or which emanates from materials found in the course of the search relating to the assessee. Where an addition (here, treating declared agricultural income as income from other sources) is not based on any incriminating material discovered during the search, it cannot be sustained. Applying the principle as explained by the Karnataka High Court in M/s Delhi International Airport Ltd. (referenced in the judgment), the Tribunal deleted the impugned additions for these years as they were not supported by any material found in the search. [Paras 6, 9, 10, 11]

Addition treating declared agricultural income as income from other sources for AY 2009-10 to 2011-12 deleted as not based on incriminating material found in the course of search.

Treatment of declared agricultural income versus income from other sources in post search assessments - Addition treating declared agricultural income as income from other sources in AY 2008-09 and AY 2013-14. - HELD THAT: - On the facts, the Tribunal accepted that agricultural holdings were not disputed and that the assessee (aged about 80 years) had declared modest agricultural income. While lack of crop specific bills might justify inquiry as to quantum, it was not a ground in these peculiar facts to treat the entire declared agricultural income as income from other sources. Therefore, the Tribunal held the AO's treatment unsustainable in the circumstances and deleted the additions for AY 2008-09 and AY 2013-14. [Paras 11]

Additions treating declared agricultural income as income from other sources for AY 2008-09 and AY 2013-14 deleted on facts.

Presumption as to documents found during search under section 292C - proof of source for investments and receipts found during search - Addition under section 69C in respect of LIC premium receipts found during search (amounts alleged to be paid by assessee but receipts and policy in name of assessee's daughter) in ITA Nos.683 and 684/Bang/2020. - HELD THAT: - Although section 292C permits a presumption in respect of documents found during search, the Tribunal held that the mere finding of a receipt in the assessee's premises does not automatically attribute payment to the assessee where the policy and receipts are in the name of the assessee's daughter. The presumption does not compel attributing the payment to the assessee when the documentary position indicates the daughter as the person who incurred the expenditure. On this basis the Tribunal concluded that the additions made as unexplained expenditure in the hands of the assessee were unsustainable and ordered their deletion. [Paras 14, 15, 16, 17]

Additions under section 69C in respect of LIC premium receipts found in search and standing in the name of the assessee's daughter deleted.

Proof of source for investments and receipts found during search - Addition in respect of NSC investment standing in the name of the assessee's daughter (ITA No.685/Bang/2020). - HELD THAT: - The NSC certificate seized in the search stood in the name of the assessee's daughter. The Tribunal accepted that where the investment instrument bears the daughter's name, the assessee cannot be called upon to explain the source for that investment. Consequently, the addition treated as unexplained investment in the hands of the assessee was held unsustainable and deleted. [Paras 18, 19]

Addition in respect of NSC certificate in the name of the assessee's daughter deleted.

Proof of source for investments and receipts found during search - Addition in respect of fixed deposit found in the name of the assessee (ITA No.685/Bang/2020). - HELD THAT: - A fixed deposit in the assessee's name was seized. The assessee explained the FD was from past savings and evidence showed the FD was issued in 2010 and matured in 2012; considering the assessee's past declared income and advanced age, the Tribunal found the plea of existing savings plausible. The AO's treatment as unexplained investment was therefore not warranted on the facts, and the Tribunal accepted the explanation and deleted the addition. [Paras 20, 21]

Addition in respect of fixed deposit in the name of the assessee deleted on acceptance of source as past savings.

Final Conclusion: The Tribunal allowed all appeals: deletions were directed of additions treating declared agricultural income as income from other sources for the relevant assessment years where no incriminating material from the search supported such additions; additions based on documents or investments standing in the name of the assessee's daughter were deleted; and the addition in respect of the fixed deposit in the assessee's name was deleted on acceptance of past savings as the source.

Reopening of assessment on the basis of change of opinion - tangible material for initiation of reassessment - escapement of income - rental income - deduction of municipal (property) taxes - apportionment between co-owners

Reopening of assessment on the basis of change of opinion - tangible material for initiation of reassessment - Reopening of assessment under section 148 was invalid as it was founded on reappraisal of the same material and not on any new tangible material coming into possession of the Assessing Officer. - HELD THAT: - The Tribunal examined the reasons recorded and the material on file and found that the Assessing Officer reopened the assessment merely by perusing the same records which were available and considered during the original assessment completed under section 143(3). The assessee had furnished the rent agreement, month-wise rent details, tenant's ledger and Form 26AS during the original assessment, and these materials showed rent was received for 11 months and that security deposit adjustments were made in February 2009. The AO's conclusion that the assessee's receipt represented 32.17% of total rent was an arithmetical re calculation based on the same documents and not a conclusion based on fresh tangible material. Reopening on such reappraisal constitutes change of opinion and does not satisfy the requirement of tangible material to form a reason to believe that income had escaped assessment. On these findings the assumption of jurisdiction under section 148 was held improper and reassessment quashed. [Paras 11, 12]

Reopening of assessment quashed for want of tangible material; reassessment proceedings invalid.

Escapement of income - rental income - Addition on account of alleged escaped rental income was deleted as there was no under assessment in view of rent actually received for 11 months and evidence on record. - HELD THAT: - On merits the Tribunal accepted the assessee's evidence - rent agreement specifying the assessee's entitlement, bank receipts, tenant's ledger and Form 26AS - showing receipt of rent for April to February only and adjustment from security deposit in February 2009. The AO's computation treating rent as receivable for 12 months and arriving at an escapement was contrary to the documentary record which had been available at original assessment. Since rent was received only for 11 months and properly offered to tax, the addition for escaped rent was unsustainable and deleted. [Paras 11, 13]

Addition of Rs. 4,96,125/- as escaped rental income deleted.

Deduction of municipal (property) taxes - apportionment between co-owners - Disallowance of municipal taxes was deleted as the assessee validly claimed 50% of property tax pertaining to the properties owned jointly by him and his brother; AO erred in apportioning total tax across three premises including property not owned by the assessee. - HELD THAT: - The Tribunal found that the rent agreement and title allocation showed that of three premises let to the same tenant, one (101A) was owned by another company while two (101B and 101C) were jointly owned by the assessee and his brother. The assessee claimed 50% of property tax attributable to the two premises owned by him; the AO wrongly took total property tax for all three premises and applied a 32.17% apportionment based on an erroneous computation of the assessee's share of total rent. The AO's construction of the rent agreement and aggregation of taxes across properties owned by different persons was incorrect. Accordingly the claimed deduction was held to be correctly allowable and the addition for excess municipal taxes was deleted. [Paras 11, 14]

Addition of Rs. 8,77,820/- on account of excess municipal taxes disallowed; deduction of municipal taxes as claimed by the assessee upheld.

Final Conclusion: The Tribunal allowed the appeal partly: it quashed the reopening of assessment for AY 2009-10 as invalid, deleted the addition for alleged escaped rental income and deleted the addition for excess municipal taxes; other grounds were held to be moot and dismissed.

Credit under section 199 read with Rule 37BA - Assessment year in which TDS credit is to be allowed - Form No. 26AS as basis for TDS credit - Verification of assessable year for TDS certificates - Prohibition on double claiming of TDS

Credit under section 199 read with Rule 37BA - Assessment year in which TDS credit is to be allowed - Form No. 26AS as basis for TDS credit - Verification of assessable year for TDS certificates - Allowability of TDS credit claimed on the basis of TDS certificates where such credit appears in Form No. 26AS of a succeeding year - HELD THAT: - The Tribunal held that under the law prevailing for the relevant period credit for tax deducted at source is to be given in the assessment year for which the corresponding income is assessable and not necessarily in the year in which the deductor deposited the tax or the credit first appears in Form No. 26AS. Rule 37BA(3)(i) requires that TDS credit be given for the assessment year in which the income is assessable; where income is assessable over years, credit is to be apportioned. Applying these principles to the TDS certificates produced by the assessee, the Tribunal found three categories of certificates: (i) one certificate where the year of assessability needed verification; (ii) certificates showing income credited in AY 2011-12 though tax was deposited in AY 2012-13 - for which credit is allowable in AY 2011-12 subject to verification; and (iii) certificates where the deductor credited income in AY 2012-13 and the assessee must establish that such income was assessable in AY 2011-12. The Tribunal set aside the CIT(A)'s disallowance on this point and restored the matter to the Assessing Officer to verify, by enquiries (including books, invoices, dates of billing and entries), the assessment year in which the income corresponding to the TDS certificates is assessable and to grant credit accordingly, ensuring no double allowance in any year. [Paras 12, 13, 14, 15, 16]

Finding of the CIT(A) on disallowance of the TDS credit is set aside; issue remanded to the Assessing Officer for verification of the assessment year in which the corresponding income is assessable and allowance of credit in accordance with section 199/Rule 37BA.

Prohibition on double claiming of TDS - Form No. 26AS as basis for TDS credit - Validity of direction to withdraw TDS credit already availed in preceding assessment years - HELD THAT: - The Tribunal upheld the CIT(A)'s direction to withdraw that portion of TDS credit which the assessee had already claimed and obtained in preceding assessment years. The assessee's alternative contention (to claim the same credit in the current year) was inconsistent with its own admission that the TDS corresponding to certain amounts had already been claimed earlier. Hence the Assessing Officer was directed to withdraw the credit to the extent already availed in prior years and to ensure no duplicate allowance. [Paras 17]

Direction of the CIT(A) to withdraw TDS credit already availed in earlier assessment years is upheld; ground dismissed.

Final Conclusion: The appeal is partly allowed: the Tribunal set aside the CIT(A)'s disallowance of certain TDS credits and remanded the matter to the Assessing Officer to verify the assessment year in which the income corresponding to the TDS certificates is assessable and to allow credit in accordance with section 199/Rule 37BA, subject to ensuring no double claiming; the CIT(A)'s direction to withdraw TDS credit already availed in preceding years was upheld.

Allowability of deduction of education cess - characterisation of software development expenditure as revenue or capital - claim of depreciation on block of computer equipment and admissibility of supporting invoices

Claim of depreciation on block of computer equipment and admissibility of supporting invoices - restoration for fresh verification - Whether the claim of depreciation on additions to the block of computer equipment should be adjudicated afresh by the Assessing Officer on production and examination of invoices totalling Rs. 6,18,80,241 (depreciation claimed Rs. 3,62,98,140). - HELD THAT: - The Tribunal noted that the Assessing Officer initially disallowed the depreciation for want of supporting invoices, that the assessee subsequently filed a rectification application with reconciliation and copies of invoices, and that the CIT(A) concluded the invoices were not legible or were already before the AO. The Tribunal observed that the assessment was taken up at the fag end of the period and that the assessee had limited opportunities of hearing. Having examined the paper book and the submissions, and noting that legible copies of invoices were placed on record, the Tribunal found it appropriate in the interests of justice to restore the matter to the file of the AO for fresh examination. The AO is directed to examine the invoices in respect of Rs. 6,18,80,241 and, if found in order, to grant the depreciation claimed; the Tribunal thus did not decide the entitlement on merits but remanded for verification and fresh decision in accordance with law. [Paras 4]

Issue remanded to the Assessing Officer for fresh examination of invoices and decision on grant of depreciation.

Characterisation of software development expenditure as revenue or capital - requirement of appreciation of business model and fresh enquiry - Whether software development expenses of Rs. 2,05,05,279 are revenue in nature or capital and thereby deductible or admissible as depreciation. - HELD THAT: - The Tribunal recorded the factual position that the assessee undertakes country adaptation, model development and testing based on base software from the parent; expenditures included testing charges, purchase of electronic items and disposable testing phones with certificates of destruction. The CIT(A) regarded the expenses as capital, giving enduring benefit, whereas the assessee explained they were project-specific, consumed or discarded on completion and thus revenue in nature. The Tribunal found that the CIT(A) had not adequately appreciated the assessee's business model and that the question requires fresh fact-sensitive examination. Accordingly, the Tribunal restored the issue to the AO for examination on merits, directing the AO to afford a reasonable opportunity of hearing and to determine whether the expenditure is capital or revenue. [Paras 5]

Issue remanded to the Assessing Officer to determine, after hearing, whether the software development expenses are capital or revenue in nature.

Allowability of deduction of education cess - interpretation of disallowance under section 40(a)(ii) and relevance of omission of the word 'cess' - Whether education cess and secondary and higher education cess paid (but not claimed in return) are allowable as deduction in computing income for AY 2012-2013. - HELD THAT: - The Tribunal considered recent High Court decisions and the CBDT circular relied upon by the assessee, observing that the legislature omitted the word 'cess' from the provision corresponding to section 40(a)(ii) and that judicial pronouncements (including Sesa Goa and Chambal Fertilizers) held that 'cess' is not to be disallowed under that provision. The Tribunal held the issue to be a pure question of law not requiring factual verification, admitted the additional ground, followed the cited authorities and the CBDT circular reasoning, and allowed the deduction of the education cess paid. [Paras 6]

Education cess is allowable as a deduction; the additional ground is admitted and allowed.

Final Conclusion: The appeal is partly allowed: the claims relating to depreciation on computer equipment and classification of software development expenditure are restored to the Assessing Officer for fresh examination and decision after affording hearing; the claim for deduction of education cess is allowed.

Allowability of depreciation on securities - valuation of investments as stock-in-trade and treatment under banking accounting and RBI guidelines - allowability of contribution to employees' pension fund under section 36(1)(iv) read with Rule 87 and Rule 88 of the Income tax Rules - disallowance under section 14A and the methodology under Rule 8D - computation of book profit under section 115JB and adjustments consequent to disallowances

Allowability of depreciation on securities - valuation of investments as stock-in-trade and treatment under banking accounting and RBI guidelines - computation of book profit under section 115JB - Deletion of addition disallowing depreciation on securities upheld in favour of the assessee. - HELD THAT: - The Tribunal affirmed the view adopted by the CIT(A), following coordinate-bench decisions in the assessee's own earlier years. The Revenue did not point to any distinguishing fact or any higher forum overruling those decisions. The Assessing Officer's conclusion was based on a theoretical suspicion that depreciation claimed earlier was not reflected as reduced opening stock on subsequent sale; no verifiable exercise was carried out to show any escapement of income in relation to specific scrips. The Tribunal noted that the bank maintained accounts on mercantile basis and followed RBI-prescribed valuation, and earlier tribunal and Supreme Court authority (as applied by the coordinate bench) supported the assessee's treatment. Consequently there was no reason to interfere with the deletion of the addition, and the related contention as to book profit adjustment did not survive independently. [Paras 10]

Ground dismissed; CIT(A)'s deletion of the addition for depreciation on securities upheld.

Allowability of contribution to employees' pension fund under section 36(1)(iv) read with Rule 87 and Rule 88 of the Income tax Rules - computation of book profit under section 115JB - Deletion of disallowance of excess contribution to Pension Fund in favour of the assessee upheld; corresponding book profit adjustment rejected. - HELD THAT: - The Tribunal, following coordinate-bench decisions in the assessee's earlier years, agreed with CIT(A) that the facts were identical and no change in law or adverse higher court ruling was placed before it. The Assessing Officer's disallowance based on interpretation of Rule 87 percentages was not sustained in view of earlier tribunal findings and precedents relied upon by the assessee; the fact of actual contribution strengthened the assessee's case. As there was no distinguishing feature, the Tribunal found no reason to upset the deletion of the addition, and accordingly the issue of adjustment to book profit under section 115JB fell away. [Paras 17]

Ground dismissed; CIT(A)'s deletion of the disallowance of pension fund contribution (and related book profit adjustment) upheld.

Disallowance under section 14A and the methodology under Rule 8D - distinction between shares held as stock-in-trade and other investments for section 14A - Partial disallowance under Rule 8D(2)(iii) sustained and deletion of disallowance under Rule 8D(2)(ii) affirmed as per CIT(A); overall deletion of the assessed disallowance under section 14A (as contended by Revenue) sustained to the extent described by CIT(A). - HELD THAT: - The Tribunal followed the coordinate-bench decisions and subsequent appellate pronouncements, including the principles in the Supreme Court's Maxopp decision, which distinguish treatment where securities are held as stock in trade. On identical facts, and in absence of any distinguishing circumstance or contrary higher court ruling, the Tribunal found that the AO's blanket disallowance under Rule 8D(2)(ii) was not justified; the CIT(A)'s limited sustainment of disallowance under Rule 8D(2)(iii) was retained. The Revenue did not advance any material to displace the coordinate bench/Higher Court conclusions relied upon by the assessee. [Paras 24]

Ground dismissed; CIT(A)'s order on section 14A/Rule 8D maintained (deletion of the major disallowance and sustainment of limited disallowance).

Final Conclusion: The Tribunal, following coordinate bench decisions in the assessee's own earlier years and applicable precedents, found no distinguishing facts or overruling authorities and accordingly dismissed the Revenue's appeal: additions/disallowances contested (depreciation on securities, pension fund contributions, and the major section 14A disallowance) were not sustained as assessed, and the CIT(A)'s orders in favour of the assessee are upheld.

Prohibition on continuation of proceedings during moratorium under the Insolvency and Bankruptcy Code, 2016 - condonation of delay in filing appeals - maintainability of appeal where appeals are filed by director during corporate insolvency resolution process and subsequent rectification by official liquidator - restoration/remand for fresh adjudication

Prohibition on continuation of proceedings during moratorium under the Insolvency and Bankruptcy Code, 2016 - condonation of delay in filing appeals - maintainability of appeal where appeals are filed by director during corporate insolvency resolution process and subsequent rectification by official liquidator - restoration/remand for fresh adjudication - Whether the Commissioner of Income Tax (Appeals) was correct in rejecting the assessee's application for condonation of delay and treating the appeals as non maintainable where the company was under corporate insolvency resolution and the appeals were filed by a director, later rectified by filing under the official liquidator. - HELD THAT: - The Tribunal found that although there was a 23 month delay in filing the appeals and the CIT(A) recorded that the assessee filed late to avoid penalty, the impugned rejection of the condonation application and consequent dismissal for want of maintainability was made in contravention of the statutory moratorium established by Section 14 of the IBC, which prohibits continuation of proceedings against the corporate debtor during the moratorium. The Tribunal accepted that the appeals initially bore the signature of a director while an interim resolution professional had been appointed; however, upon production of documents it was shown that the director was authorised by the IRP and that subsequently the defect was cured by substitution/verification through the official liquidator. In view of the moratorium and the rectification by the official liquidator, the Tribunal concluded that the CIT(A)'s order could not stand and directed restoration of the appeals to the file of the CIT(A) for fresh consideration of the condonation application and, if admitted, adjudication on merits after issuing notices to and dealing with the official liquidator and after granting opportunity of hearing. [Paras 11, 12, 13]

Appeals restored to the file of the CIT(A) for fresh adjudication of the condonation of delay after the assessee places revised forms signed by the official liquidator and after the CIT(A) issues notice to and affords opportunity to the official liquidator; if admitted, the appeals to be decided on merits.

Final Conclusion: The Tribunal allowed the appeals for the limited purpose of remanding them to the CIT(A) to reconsider the condonation of delay and maintainability in light of the IBC moratorium and upon proper substitution/verification by the official liquidator, directing fresh hearing and consequential adjudication on merits if the appeals are admitted.

Notice under section 274 read with section 271(1)(c) - penalty under section 271(1)(c) - omnibus show-cause notice - vagueness and natural justice - separate statutory scheme for penalty proceedings

Notice under section 274 read with section 271(1)(c) - omnibus show-cause notice - vagueness and natural justice - penalty under section 271(1)(c) - Whether the show-cause notice dated 18.03.2015 was invalid for not specifying whether penalty was for concealment of income or for furnishing inaccurate particulars of income, and whether the penalty should therefore be deleted. - HELD THAT: - The Tribunal examined the statutory notice and found it did not specify whether the penalty was imposed for concealment of particulars of income or for furnishing inaccurate particulars. Relying on the view of the Jurisdictional High Court in Mohd. Farhan A. Shaikh v. DCIT and the coordinate-bench decision applying that precedent, the Tribunal held that penalty proceedings are governed by a distinct statutory scheme and the assessee must be informed of the grounds of penalty by a precise statutory notice. An omnibus show-cause notice that leaves ambiguity as to the specific charge indicates non-application of mind and gives rise to prejudice, impinging on principles of natural justice. Following the cited authorities and applying the principle that ambiguity in a penal notice must be resolved in favour of the assessee, the Tribunal found the notice to be bad in law and set aside the penalty without adjudicating the merits of the charge. [Paras 10]

The penalty levied under section 271(1)(c) pursuant to the notice dated 18.03.2015 is deleted; the appeal is allowed.

Final Conclusion: Following the Jurisdictional High Court and the coordinate-bench precedent, the Tribunal held the statutory notice to be ambiguous and invalid for failing to specify the ground of penalty, set aside the penalty under section 271(1)(c) for AY 2009-10 and allowed the appeal.

Finding of fact - appellate tribunal's factual conclusion - no interference with findings of fact

Finding of fact - appellate tribunal's factual conclusion - no interference with findings of fact - Whether the Court should interfere with the Customs, Excise and Service Tax Appellate Tribunal's finding of fact - HELD THAT: - The Supreme Court examined the matter in light of the factual finding recorded by the Customs, Excise and Service Tax Appellate Tribunal. The Court found that the Tribunal's conclusion on the facts was supported by the record and there was no basis for interference by this Court. Consequently, the appellate factual determination was treated as unassailable and left undisturbed. Procedural relief conceding delay was granted, but the substantive challenge to the Tribunal's factual conclusion was dismissed on merits.

The Tribunal's finding of fact is upheld and the Civil Appeal is dismissed.

Final Conclusion: Delay in filing condoned; appeal dismissed as the Tribunal's factual conclusion required no interference; pending applications disposed of.

Summary order. Admission refused and the civil appeal is dismissed.

Exemption from terminal excise duty - Refund of terminal excise duty - Application of amended Foreign Trade Policy paragraph 8.3(c) - Remand for fresh consideration - Right to personal hearing

Application of amended Foreign Trade Policy paragraph 8.3(c) - Exemption from terminal excise duty - Refund of terminal excise duty - Remand for fresh consideration - Right to personal hearing - Impugned orders rejecting the petitioner's claim were quashed and the matter remanded for fresh consideration with reference to pre-amended and amended paragraph 8.3(c) of the Foreign Trade Policy, 2009-2014. - HELD THAT: - The Court noted that the petitioner's transactions fell before the amendment to paragraph 8.3(c) of the Foreign Trade Policy effected by Notification No. 4 (RE-2013)/2009-2014 dated 18-4-2013 and that the second respondent had applied the amended provision in issuing the impugned orders dated 17-7-2013, 31-10-2013 and 26-9-2013 (reaffirmed 25-11-2013). The petitioner contended that the pre-amended paragraph should govern its case. Given this controversy over which version of paragraph 8.3(c) applies, the Court did not decide the substantive entitlement to exemption or refund of terminal excise duty on merits but set aside the impugned orders and remanded the matter to the second respondent for fresh consideration of the claims in the light of the pre-amended and amended provisions. The Court directed the second respondent to consider the applications and documents filed by the petitioner, to afford personal hearing if requested, and to pass a reasoned decision expeditiously, preferably within eight weeks, after the petitioner files copies of the applications and documents within two weeks of receipt of the order. [Paras 2, 3, 4]

Impugned orders set aside and matter remanded to the second respondent for fresh consideration of the claim with reference to the pre-amended and amended paragraph 8.3(c), with a direction to consider records, grant personal hearing if sought, and decide preferably within eight weeks after compliance by the petitioner.

Final Conclusion: Writ petitions allowed; impugned orders quashed and matter remanded for fresh consideration and decision in accordance with the directions given, no costs.

Seizure and confiscation - provisional release - bona fide purchaser - remand for speaking order - trade facilitation

Seizure and confiscation - bona fide purchaser - Validity of the seizure of coal and vehicles where exporter presented shipping bill and there was no allegation of mis-declaration - HELD THAT: - The record shows the goods were presented for export by the appellant under a shipping bill and there was no allegation of mis-declaration. The seizure was made on the basis that the coal had been procured through public auction and, as per Coal India policy, was not eligible for export. The adjudicatory officer observed that the appellant purchased the coal from a third party and professed bona fide belief in eligibility for export. The appellate authority noted that mere presentation in the Customs area and lack of mis-declaration weighed against immediate seizure and that, if ineligible, the department could have asked the exporter to withdraw the consignment rather than resort to seizure. The authority also recorded that subsequent developments (including a later relaxation by Coal India) and judicial treatment of analogous facts undermined the basis for an immediate, non-speaking seizure. Given these circumstances the authority did not finally adjudicate the legal validity of confiscation but found the seizure and consequent handling to be questionable and deserving of reconsideration. [Paras 5, 6]

Seizure and its validity were not finally adjudicated; the matter is remanded to the respondent for fresh consideration and a reasoned decision.

Provisional release - remand for speaking order - trade facilitation - Legality and reasonableness of provisional release conditions (cash security and bond) and absence of a speaking order in provisional release and seizure orders - HELD THAT: - The records show provisional release was ordered subject to cash security of specified percentages and a bond. The appellate authority observed that the seizure and the provisional release orders were non-speaking and lacked adequate reasoning; imposing cash security where the validity of seizure itself was questionable was seen as an additional and burdensome condition contrary to the spirit of trade facilitation. Rather than deciding the propriety of the cash security on merits, the authority concluded that the departmental orders required a reasoned and speaking reconsideration in the light of the facts and legal position, and therefore directed fresh, reasoned examination by the respondent within a limited timeframe. [Paras 5, 6, 7]

Provisional release conditions and non-speaking nature of earlier orders to be reconsidered by the respondent; case remanded for a well-reasoned speaking order within 15 days.

Final Conclusion: The appeal is disposed of by remanding the matter to the respondent department to reconsider the seizure, provisional release conditions and related orders and to pass a well reasoned, speaking order within 15 days; the appellant is directed to assist the department by furnishing any further documents or clarifications to facilitate decision.

Revival of company - recall of winding up order - jurisdiction of High Court to recall winding up order despite transfer provisions - transfer of proceedings to National Company Law Tribunal under Section 434 of the Companies Act, 2013 - government company - compromise and arrangement by members/shareholder approval - bona fide decision of shareholder to meet liabilities

Jurisdiction of High Court to recall winding up order despite transfer provisions - transfer of proceedings to National Company Law Tribunal under Section 434 of the Companies Act, 2013 - Whether the High Court retains the power to recall its earlier winding up order and revive a company despite transfer provisions under Section 434 of the Companies Act, 2013 - HELD THAT: - The Court examined the effect of the 2013 Act transfer provisions and the nature of the present application which sought recall of an antecedent winding up order passed by the High Court in 1997 in respect of a Government Company. The Court accepted precedents of other High Courts holding that where a winding up order has been made by the High Court itself, recall of that order and revival of the company can be undertaken by the High Court and need not be transferred to the National Company Law Tribunal. On this basis the technical objection raised under the transfer provisions was rejected and the High Court exercised its jurisdiction to recall the winding up order.

The High Court has jurisdiction to recall its winding up order and revive the company and the objection based on transfer to the NCLT under Section 434 is not sustained.

Government company - compromise and arrangement by members/shareholder approval - bona fide decision of shareholder to meet liabilities - Whether the State Government's decision, as sole shareholder of the company, to pay outstanding liabilities and to revive the company is sufficient ground to recall the winding up order - HELD THAT: - The Court noted that the company is wholly owned by the State and that the State Cabinet approved a proposal to pay the company's outstanding liabilities and meet expenses. The Court considered the bona fides of the State's decision, the valuation and liability information placed on record, and the principle that members (shareholders) may propose arrangements or compromises in respect of a company in liquidation. Finding no mala fide intention or purpose to defraud creditors, and observing that the State undertook to discharge liabilities and reimburse expenses, the Court treated the shareholder's proposal as an acceptable basis for revival.

The State Government's bona fide proposal and undertaking to meet the company's liabilities and expenses was accepted as sufficient to recall the winding up order and permit revival.

Revival of company - recall of winding up order - Whether outstanding objections of the Official Liquidator, particularly relating to reimbursement of expenses and absence of a formal revival scheme, precluded recalling the winding up order - HELD THAT: - The Official Liquidator objected that no detailed scheme or demonstration of funds had been filed and that expenditures incurred in liquidation should be reimbursed. During proceedings the Advocate General stated that past expenses had been reimbursed and that the State would continue to pay expenses until properties were returned. Given these concessions and the State Cabinet approval of the revival plan, the Court concluded that the Official Liquidator's practical objections were addressed and did not bar recall of the winding up order.

The objections of the Official Liquidator do not prevent recall; expenses already reimbursed and the State's undertaking suffice to permit revival.

Final Conclusion: The application of the State of Rajasthan to recall the High Court's winding up order of 03.09.1997 and to revive Rajasthan State Agro Industries Corporation Limited is allowed: the High Court may exercise jurisdiction to recall its winding up order despite Section 434 transfer provisions, the State's bona fide undertaking to meet liabilities and reimburse expenses is accepted, and the company is revived. List on 06.01.2022.

Exclusion of advances for sale of immovable property from definition of "deposit" under Rule 2(1)(c)(xii)(b) of the Companies (Acceptance of Deposits) Rules, 2014 - Proviso deeming amounts refundable for lack of required permission/approval to be deposits - Quashing of criminal proceedings under Section 482 Cr.P.C. as abuse of process - Abuse of process of court by vexatious/foisted complaints

Exclusion of advances for sale of immovable property from definition of "deposit" under Rule 2(1)(c)(xii)(b) of the Companies (Acceptance of Deposits) Rules, 2014 - Proviso deeming amounts refundable for lack of required permission/approval to be deposits - Whether amounts collected as advances for sale of immovable property by the petitioner-company fall within the definition of "deposit" or are excluded under Rule 2(1)(c)(xii)(b) read with its proviso, and whether proceedings under Section 73 (complaint under Section 76-A) are maintainable. - HELD THAT: - The Court examined Rule 2(1)(c)(xii)(b) which excludes from the definition of "deposit" amounts received as advances in connection with consideration for property under an agreement or arrangement, provided such advance is adjusted against the property in accordance with the terms of the agreement. The proviso to the sub-clause renders an amount to be a deposit only if it becomes refundable (with or without interest) because the company accepting the money does not have necessary permission or approval, and such amounts are deemed deposits on expiry of fifteen days from the date they become due for refund. On the material before it the Court noted that the petitioner-company had purchased agricultural land, obtained conversion and development permissions and entered into written agreements/arrangements with applicants; advances were taken in the course of that business and, where required, refunded with interest in accordance with the agreement. There was no material to show that the advances became refundable for the reason specified in the proviso (i.e., lack of required permission/approval to deal in the property). The complaint rested on allegations by a third party who had repeatedly filed vexatious complaints against the company and was not an allottee or party to the transactions. In those circumstances the advances fell within the exemption in Rule 2(1)(c)(xii)(b) and did not qualify as "deposits" under the Rules, and the prosecution under Section 73 (via complaint under Section 76-A) was therefore not maintainable.

Advances received by the petitioner for sale of immovable property are excluded from the definition of "deposit" under Rule 2(1)(c)(xii)(b) and, having regard to the proviso and the facts, the complaint is not maintainable; continuation of proceedings would be an abuse of process.

Final Conclusion: The Criminal Petition is allowed; the proceedings in C.C.No.23 of 2020 before the Special Judge for Economic Offences, Hyderabad, against the petitioners are quashed as continuation would amount to abuse of process.

Refusal of registration of transfer of shares - Rectification of register of members - Application of SEBI circular SEBI/HO/MIRSD/DOS3/CIR/P/2018/139 to physical share transfers - Transferee's remedy under Section 58(4) and Section 59 of the Companies Act, 2013 - Procedure for registration in cases of signature mismatch/non-availability of transferor's PAN - Entitlement to dividends on transferred shares

Refusal of registration of transfer of shares - Rectification of register of members - Transferee's remedy under Section 58(4) and Section 59 of the Companies Act, 2013 - Application of SEBI circular SEBI/HO/MIRSD/DOS3/CIR/P/2018/139 to physical share transfers - Procedure for registration in cases of signature mismatch/non-availability of transferor's PAN - Registration of the transfer and rectification of the register of members in favour of the applicants and applicability of the SEBI circular - HELD THAT: - The Tribunal found that the applicants purchased the shares in 2012, obtained executed transfer deeds (Form 7B) and later submitted Form SH-4 and the indemnity/undertaking required under SEBI/HO/MIRSD/DOS3/CIR/P/2018/139. The RTA repeatedly declined registration citing non-submission of PAN and signature mismatch despite the applicants' compliance with the SEBI procedure and payment of stamp duties and requested stamps. The Tribunal held that the SEBI circular applies to transfer deeds executed prior to the SEBI (LODR) notification and that the company/RTA was obliged to follow the prescribed procedure (including publicity, lock-in and disclosure) where objection memos could not be delivered or the transferor did not cooperate. Having regard to the totality of the materials and compliance by the applicants with the SEBI-prescribed documents, the Tribunal concluded that the RTA/company was making unjustified delays and directed registration and rectification after following the SEBI procedure. [Paras 18, 19, 21, 22, 23]

The 1st and 2nd Respondents are directed to register the transfers under Folio Nos. 817 and 855, issue fresh share certificates or record dematerialised details and rectify the register of members after complying with SEBI/HO/MIRSD/DOS3/CIR/P/2018/139.

Entitlement to dividends on transferred shares - Rectification of register of members - Right of the applicants to receive dividends declared on the transferred shares from 2012 till date - HELD THAT: - The Tribunal, having ordered registration of the transfer and rectification of the register, further held that dividends declared on the shares transferred should be paid to the applicants for the period from 2012 to date. The Tribunal conditioned the payment on the company/ RTA complying with the SEBI circular procedures before giving effect to the transfer and dividend payments. [Paras 23, 24]

The 1st Respondent is directed to pay dividends applicable on the transferred shares to the applicants from 2012 till date, after complying with SEBI/HO/MIRSD/DOS3/CIR/P/2018/139.

Transferee's remedy under Section 58(4) and Section 59 of the Companies Act, 2013 - Maintainability and limitation of the application under Section 58(4) and Section 59 - HELD THAT: - The Tribunal noted that Section 58(4) permits the transferee to appeal where a public company without sufficient cause refuses registration within thirty days. The intimation from the RTA dated 18.01.2020 was received by the applicants on 28.01.2020 and the appeal was filed on 12.03.2020. The Tribunal found the application to have been filed within the statutory limitation and proceeded to adjudicate the merits. [Paras 16, 17, 21]

The application is within time and is maintainable under Sections 58(4) and 59 of the Companies Act, 2013.

Final Conclusion: The company application is allowed: the RTA and company are directed to comply with SEBI/HO/MIRSD/DOS3/CIR/P/2018/139, register the transfers and rectify the register of members, issue fresh share certificates or record dematerialised details in the applicants' names, and, upon compliance with that procedure, pay dividends on the transferred shares to the applicants from 2012 to date.

Scheme of Amalgamation - sanction of a scheme of amalgamation under Sections 230-232 of the Companies Act, 2013 - dispensation of meetings of shareholders and creditors - appointed date for amalgamation and for reduction of share capital - vesting of assets and liabilities pursuant to Section 232(3) of the Companies Act, 2013 - continuance of proceedings by or against the transferor in the name of the transferee - employees to become employees of the transferee without break - filing of certified copy of sanction order with Registrar of Companies and dissolution of transferor - direction to remit differential fee for enhancement of authorised capital - Official Liquidator's investigation report and direction to pay auditor's remuneration - certification of accounting treatment and compliance with applicable Indian Accounting Standards - sanction not to be construed as exemption from payment of stamp duty, taxes or other statutory charges

Scheme of Amalgamation - sanction of a scheme of amalgamation under Sections 230-232 of the Companies Act, 2013 - dispensation of meetings of shareholders and creditors - Sanction of the Scheme of Amalgamation between the Transferor Company and the Transferee Company. - HELD THAT: - On consideration of the Scheme, the statutory filings, the valuation and accounting certifications, the responses (or absence thereof) from notified statutory authorities and the Official Liquidator's enquiries, the Tribunal found the Scheme prima facie beneficial and not detrimental to the interests of the companies' shareholders. The earlier directions dispensing with certain meetings and directing others under Sections 230-232 were recorded; statutory compliance including publication and service of notices was held to have been made. In the absence of objections from notified authorities and with requisite certifications placed on record, the Tribunal sanctioned the Scheme as presented.

The Scheme of Amalgamation is sanctioned and the Company Petition is allowed on the terms set out in the order.

Appointed date for amalgamation and for reduction of share capital - Regional Director's observation on appointed dates - Determination of the appointed dates for Part II (Amalgamation) and Part III (Reduction of Share Capital) of the Scheme. - HELD THAT: - Having noted the two appointed dates specified in the Scheme and the Regional Director's report, the Tribunal fixed the appointed date for Part II (Amalgamation) as 01.04.2020 and the appointed date for Part III (Reduction of Share Capital) as 31.03.2021, as specified in the Scheme, in terms of the statutory provision governing appointed dates.

Appointed date for amalgamation fixed as 01.04.2020; appointed date for reduction of share capital fixed as 31.03.2021.

Vesting of assets and liabilities pursuant to Section 232(3) of the Companies Act, 2013 - continuance of proceedings by or against the transferor in the name of the transferee - employees to become employees of the transferee without break - Consequences of sanction: vesting of properties, transfer of liabilities, continuation of proceedings, and employment continuity. - HELD THAT: - The Tribunal directed that, pursuant to the statutory provision relied upon in the Scheme, all properties, rights and interests of the Transferor would stand transferred and vested in the Transferee without further act or deed, and all liabilities, obligations and duties would likewise transfer to the Transferee. It further ordered that pending proceedings by or against the Transferor shall continue by or against the Transferee, and that employees of the Transferor in service immediately before the effective date shall become employees of the Transferee without any break in service.

Assets and liabilities vest in the Transferee; pending proceedings continue against the Transferee; employees transfer to the Transferee without interruption.

Official Liquidator's investigation report and direction to pay auditor's remuneration - Consideration of the Official Liquidator's report and fixation of professional fees for the auditor who examined the Transferor Company's affairs. - HELD THAT: - The Official Liquidator placed on record a report prepared by an appointed chartered accountant who examined the Transferor Company's records and made observations regarding filings, tax compliance and loans. The Tribunal directed that the Transferor Company pay a professional fee to the Official Liquidator for the auditor who conducted the investigation, thereby accepting the OL's report for purposes of the sanction process and providing for remuneration to be paid.

Official Liquidator's report taken on record and the Transferor Company directed to pay the auditor's professional fee as ordered.

Certification of accounting treatment and compliance with applicable Indian Accounting Standards - sanction not to be construed as exemption from payment of stamp duty, taxes or other statutory charges - no bar to action for statutory violations despite sanction - direction to remit differential fee for enhancement of authorised capital - filing of certified copy of sanction order with Registrar of Companies and dissolution of transferor - Ancillary obligations and clarifications associated with sanction-accounting certification, tax/stamp duty and other statutory compliance, payment of differential fees, filing with RoC, and preservation of enforcement rights. - HELD THAT: - The Tribunal noted certificates from statutory auditors that the accounting treatment complies with applicable Indian Accounting Standards. It clarified that sanctioning the Scheme does not confer exemptions from stamp duty, taxes or other charges and that any deficiencies or violations under any enactment remain subject to appropriate action in accordance with law. The Tribunal directed the Transferee to file revised constitutional documents with the Registrar of Companies, remit any differential fee on enhancement of authorised capital after adjustment, and caused a certified copy of the order to be delivered to the RoC for registration, upon which the Transferor Company shall be dissolved and files consolidated.

Accounting treatment certified; sanction subject to payment of applicable duties/fees and does not bar subsequent legal action; Transferee to file revised MOA/AOA and remit differential fees; certified copy to RoC to effect dissolution of Transferor.

Final Conclusion: The Tribunal, having recorded requisite statutory compliances, responses of statutory authorities and certifications on valuation and accounting, sanctioned the Scheme of Amalgamation between the companies on specified appointed dates, directed vesting of assets and liabilities in the Transferee, provided for continuity of proceedings and employees, accepted the Official Liquidator's report and fixed payment for the investigating auditor, and imposed ancillary obligations including filing with the Registrar of Companies and payment of any statutory duties or differential fees; the Company Petition is allowed on the terms stated.

Jurisdiction of the adjudicating authority under Section 60(5)(c) of the IBC to determine insolvency resolution process costs - insolvency resolution process costs include the fees of the resolution professional - requirement of a reasoned order when fixing the fee of a resolution professional - remand for fresh consideration where an adjudicatory order is non speaking or shows abdication of jurisdiction

Jurisdiction of the adjudicating authority under Section 60(5)(c) of the IBC to determine insolvency resolution process costs - insolvency resolution process costs include the fees of the resolution professional - Adjudicating authority has jurisdiction to determine the amount payable to the resolution professional as part of insolvency resolution process costs. - HELD THAT: - The Court relied on its earlier reasoning in Alok Kaushik to hold that claims relating to fees of professionals engaged as an incident of the CIRP fall within the adjudicating authority's power under Section 60(5)(c) to determine amounts payable as part of the CIRP costs. Regulation 34 of the IRP Regulations defines insolvency resolution process costs to include the fee payable to the resolution professional. Whether work claimed was done and its nature are factual matters for the adjudicating authority to assess; this supports the NCLT's competency to decide the RP's claim rather than rendering it functus officio. [Paras 13, 14]

The NCLT is empowered to determine the fee payable to the resolution professional as part of CIRP costs and must assess the claim on its merits.

Requirement of a reasoned order when fixing the fee of a resolution professional - remand for fresh consideration where an adjudicatory order is non speaking or shows abdication of jurisdiction - The impugned orders lacked reasons and showed an abdication of jurisdiction, warranting remand to the adjudicating authority for fresh decision. - HELD THAT: - The NCLT order merely directed payment of expenses and fixed an ad hoc consolidated fee without considering or recording the basis of the RP's claim, the technical and financial bid, or the respondent's verification; the NCLAT affirmed the figure as reasonable without reasons. The absence of reasoning prevents appellate or supervisory review of the basis for the fee fixation. Where an order is non speaking and the adjudicating authority has not applied its mind to the submissions and materials, the proper course is to set aside the orders and remit the matter for fresh adjudication. The Court therefore set aside both the NCLT and NCLAT orders and directed the NCLT to decide the MA afresh within a stipulated timeframe. [Paras 16, 17]

Impugned orders are set aside for want of reasons; MA No. 223/2020 is remitted to the NCLT for fresh decision within one month.

Final Conclusion: Appeal allowed; the NCLT and NCLAT orders fixing the RP's fee are set aside for lack of reasons and remanded to the NCLT for fresh decision on the RP's claim as part of CIRP costs, to be completed within one month from receipt of certified copy.

Mandatory nature of the 330 day time limit under the Insolvency and Bankruptcy Code - extension of the corporate insolvency resolution process in exceptional cases - maximisation of value of the corporate debtor as an objective of the IBC - res judicata / finality of orders of the Adjudicating Authority and Appellate Tribunal

Res judicata / finality of orders of the Adjudicating Authority and Appellate Tribunal - Whether the subject matter of I.A. No. 479/KB/2021 was different from the prayer in I.A. No. 426/KB/2021 such that the later application was maintainable. - HELD THAT: - The Adjudicating Authority had earlier on 16.03.2021 condoned delay and directed the resolution plan to be placed before the CoC and fixed timelines. The appellant's I.A. No. 426/KB/2021 challenged the CoC's subsequent actions and the Adjudicating Authority dismissed that application on 30.04.2021 after voting had taken place. This Tribunal, when seized of CA (AT)(Ins.) No. 536/2021, declined to interfere and directed the authority to consider the resolution plan; by that time the plan had been approved by the CoC and the matter had progressed to approval proceedings before the Adjudicating Authority. The subsequent I.A. No. 775/KB/2021 seeks effectively the same relief as I.A. No. 426/KB/2021 (dismissal of the RP's application for approval and a direction for liquidation) despite the earlier order and appellate consideration. The Adjudicating Authority therefore correctly found that the subject matter was similar and that the issue had been settled by the earlier orders which had attained finality in the proceedings between the parties. [Paras 19, 20]

The Adjudicating Authority rightly held that I.A. No. 479/KB/2021/ I.A. No. 775/KB/2021 pertained to the same subject matter as I.A. No. 426/KB/2021 and was therefore not maintainable in view of the earlier orders which had been considered by this Tribunal.

Mandatory nature of the 330 day time limit under the Insolvency and Bankruptcy Code - extension of the corporate insolvency resolution process in exceptional cases - maximisation of value of the corporate debtor as an objective of the IBC - Whether the 330 day outer limit for completion of CIRP under Section 12 of the IBC is mandatory so as to compel liquidation upon its expiry. - HELD THAT: - The Code aims at resolution of the corporate debtor and maximisation of its value. The Supreme Court in Essar Steel (as explained in the impugned judgment) struck down the word "mandatorily" in the proviso to Section 12(3) as arbitrary, and held that while 330 days remains the outer limit ordinarily, the Adjudicating Authority or Appellate Tribunal may, in exceptional cases, extend time beyond 330 days where it is shown that a short additional period would serve stakeholders' interest and where delay is attributable to factors not ascribable to the litigants (including time taken in legal proceedings or institutional tardiness). Applying that ratio, the Tribunal held that the time limit is not an absolute bar mandating liquidation upon expiry of 330 days and that the Adjudicating Authority may exercise discretion in exceptional circumstances to extend time so as to enable resolution rather than liquidation. [Paras 21, 22, 23, 24]

The 330 day limit is not an inflexible mandate compelling liquidation; in exceptional cases the Adjudicating Authority/Appellate Tribunal may extend time beyond 330 days to facilitate resolution.

Final Conclusion: Applying the foregoing, the Tribunal found no ground to interfere with the Adjudicating Authority's order dismissing the application and upholding the process followed; the appeal is dismissed.

Operational Debt - Verification and determination of claims under Regulations 13 and 14 - Duties of Resolution Professional - Moratorium under Section 14 - Liquidation mechanism and waterfall mechanism under Section 53 - Termination of lease and computation of notice period - Refund of security deposit conditional on handover of vacant possession

Operational Debt - Verification and determination of claims under Regulations 13 and 14 - Liquidation mechanism and waterfall mechanism under Section 53 - Claims for unpaid rent and maintenance during the lockdown period to be filed as operational debt and collated by the Resolution Professional for admission and payment as per the Code's mechanism; scope of period for which claims may be filed. - HELD THAT: - The Adjudicating Authority held that the amounts due to the appellants constitute Operational Debt and directed the respondents to file claims before the Resolution Professional (RP) who would verify and determine the amounts in terms of Regulations 13 and 14 and collate admitted claims to be paid as per the waterfall mechanism under Section 53. The Tribunal agreed with the Adjudicating Authority's approach that the RP, being charged with custody of the corporate debtor's assets and bound to maintain the list and verify claims, is the appropriate authority to admit and quantify such claims. However, having regard to the factual matrix, the settlement discussions and the minutes of CoC dated 09.09.2020 which treated termination as 15.09.2020, the Tribunal held that claims should be permitted up to 15.09.2020 (and not restricted only to the period 25.03.2020 to 28.07.2020 as earlier directed). The Tribunal thus modified the Impugned Order only to extend the period for which claims may be filed up to 15.09.2020, while confirming the directive that the RP verify and admit claims under Regulations 13 and 14 and process payment in accordance with Section 53. [Paras 14]

Direction to file claims as operational debt and for the RP to verify and collate them is confirmed, but the period for claims is extended to include amounts up to 15.09.2020.

Termination of lease and computation of notice period - Moratorium under Section 14 - Duties of Resolution Professional - Validity and operative date of the Termination Notice and the effective date of termination of the Lease Deed and Maintenance Agreement. - HELD THAT: - The record includes the Termination Notice dated 13.02.2020 and a letter acknowledging receipt and indicating the lease would expire on 12.05.2020; settlement discussions recorded before the CoC subsequently treated the termination date as 15.09.2020 (with an agreed extended period for vacating). The Tribunal accepted the Adjudicating Authority's conclusion that, in the circumstances and having regard to the moratorium under Section 14 and the RP's duties under Section 25, the operative termination date for present adjudicatory purposes is 15.09.2020. This finding underpins the Tribunal's modification to allow claims up to that date. [Paras 7, 11, 14]

The Lease Deed and Maintenance Agreement are treated as terminated with effect from 15.09.2020 for the purposes of claim admissibility.

Refund of security deposit conditional on handover of vacant possession - Moratorium under Section 14 - Duties of Resolution Professional - Whether the appellants were entitled to immediate refund of the security deposit notwithstanding possession not having been handed over, and whether the Adjudicating Authority's direction to refund within 30 days stands. - HELD THAT: - The Lease Deed provides that refund of the security deposit is simultaneous with handover of vacant possession and permits certain deductions for unpaid undisputed dues. The Tribunal observed that the moratorium under Section 14 precludes unilateral enforcement of security interests (including any attempted deduction from deposits) after initiation of CIRP. The record did not show that appellants had adjusted amounts against the security deposit after CIRP commenced. The Adjudicating Authority directed refund of the security deposit within 30 days while also recognizing the appellants' right to claim rent for the extended period by filing claims before the RP. The Tribunal, after reviewing the contractual provisions and the RP's admitted communications, confirmed the remaining directions of the Adjudicating Authority (including the refund direction) subject to the RP's duties and the mechanism for verification and admission of claims. [Paras 8, 13, 14]

The Adjudicating Authority's directions on refund of the security deposit are confirmed, while noting that refund and any deductions are governed by the contract, the moratorium under Section 14 and the RP's verification and admission process.

Final Conclusion: The appeal is partly allowed: the Impugned Order is affirmed except that the Tribunal modifies the directions to permit the appellants to file claims for unpaid rent and maintenance up to 15.09.2020 (instead of only up to 28.07.2020). The Resolution Professional is to verify and collate the claims under Regulations 13 and 14 and process admitted claims as per the Code; other directions of the Adjudicating Authority are confirmed.

Right of set-off - general lien - charged assets - additional security clause requiring prior request - moratorium bars enforcement of security interest during CIRP - Resolution Professional's request to realise corporate assets during CIRP - Committee of Creditors' commercial wisdom in approving a resolution plan

Charged assets - additional security clause requiring prior request - right of set-off - general lien - moratorium bars enforcement of security interest during CIRP - Whether the fixed deposits held by the corporate debtor with the bank were liable to be closed by the bank and appropriated/withheld by the bank on the basis of a lien, charge, additional security or exercise of set-off after commencement of CIRP. - HELD THAT: - The Tribunal found as an admitted and established fact that the fixed deposits in question were never charged to the bank either originally as charged assets or subsequently as additional security. The facility agreement's Clause 10(c), relied upon by the bank to claim 'additional security', requires the bank to first ask the borrower to furnish such security; no request or documentary evidence of any such request was placed on record. The clause defining 'charged assets' confines the bank's right to assets expressly charged under security documents; since the FDRs were not so charged nor registered as such, the bank had no contractual basis to treat them as charged assets. Further, the bank's asserted right of set-off or general lien was not shown to have been validly invoked prior to or independent of the CIRP: the bank did not exercise set-off at the time of loan recall and has not established a continuing enforceable lien over the FDRs. Finally, the Tribunal reiterated that the moratorium incident to CIRP operates as a bar on enforcement of any security interest in respect of the corporate debtor, and thus no recovery action by way of lien or set-off could be enforced in discharge of pre-CIRP dues. On these premises the adjudicating authority's direction to close the FDRs and transfer the amounts to the TRA was not shown to be illegal. [Paras 28, 29]

The adjudicating authority correctly held that the fixed deposits were not subject to charge/additional security or enforceable set-off/lien and that enforcement was barred by the CIRP moratorium; the impugned order was upheld.

Final Conclusion: The appeal is dismissed and the order of the Adjudicating Authority dated 04.01.2021 is affirmed; there is no interference with the direction to transfer amounts on closure of the fixed deposits to the TRA and the appeal is without merit.

Withdrawal of application under Section 12A of the IBC - Approval of ninety percent voting share of the committee of creditors - Pre-constitution withdrawal under Regulation 30A(1)(a) - Inherent powers under Rule 11 of the NCLT/NCLAT Rules - Effect of settlement and payment on maintainability of CIRP

Withdrawal of application under Section 12A of the IBC - Approval of ninety percent voting share of the committee of creditors - Pre-constitution withdrawal under Regulation 30A(1)(a) - Inherent powers under Rule 11 of the NCLT/NCLAT Rules - Whether approval of ninety percent voting share of the Committee of Creditors was required for permitting withdrawal of the Section 9 application filed before constitution of the Committee of Creditors. - HELD THAT: - Section 12A prescribes withdrawal of an admitted application with approval of ninety percent voting share of the Committee of Creditors, which presupposes that a Committee of Creditors exists. Regulation 30A distinguishes between withdrawal applications made before constitution of the Committee (to be filed by the applicant through the Interim Resolution Professional) and those made after constitution (which require the Committee's consideration). The Supreme Court in Swiss Ribbons permits parties to approach the Adjudicating Authority prior to constitution of the Committee, which may, under its inherent powers (Rule 11), allow or disallow withdrawal after hearing relevant parties. Accordingly, the statutory scheme and the cited precedents establish that the ninety percent approval requirement is applicable only where the Committee of Creditors has been constituted; an application filed prior to constitution falls to be considered by the Adjudicating Authority (or by exercise of inherent powers) without first obtaining ninety percent CoC approval. The Adjudicating Authority erred in requiring ninety percent CoC approval for an application filed on 25.08.2021, the date on which no Committee had been constituted and when Regulation 30A(1)(a) governed the procedure. [Paras 11, 12, 13, 18]

The requirement of ninety percent voting share approval of the Committee of Creditors did not apply to the withdrawal application filed before constitution of the Committee; the Adjudicating Authority's refusal on that ground was incorrect.

Effect of settlement and payment on maintainability of CIRP - Pre-constitution withdrawal under Regulation 30A(1)(a) - Whether, on the facts of this case (settlement dated 25.08.2021 and subsequent payment), the withdrawal application should be allowed and the CIRP terminated. - HELD THAT: - The parties executed a Memorandum of Understanding on 25.08.2021 and the interim resolution professional filed the withdrawal application the same day, before constitution of the Committee of Creditors. Although a cheque initially given was dishonoured, the outstanding amount was paid by RTGS on 17.09.2021 prior to the Adjudicating Authority's order of 29.09.2021. As the entire payment due to the applicant had been discharged pursuant to the settlement, there remained no debt in respect of the applicant's claim and no basis to continue the CIRP against the corporate debtor in respect of that petition. Applying Regulation 30A(1)(a) and the established principle that pre-constitution withdrawal applications may be allowed after hearing relevant parties, the Tribunal held that the withdrawal ought to have been permitted and that the Adjudicating Authority should have allowed the IA filed on 25.08.2021. [Paras 14, 16, 18, 19]

The withdrawal application filed on 25.08.2021 is allowed and, in view of the settlement and subsequent payment, the admission order dated 04.08.2021 is set aside and the CIRP is terminated insofar as that petition is concerned.

Final Conclusion: Appeals allowed; the Adjudicating Authority's order of 29.09.2021 is set aside, I.A. No. 267/2021 filed on 25.08.2021 is allowed, and the earlier admission order dated 04.08.2021 is set aside, as the withdrawal application filed prior to constitution of the Committee of Creditors was maintainable and the settlement/payment discharged the applicant's claim.

Operational debt - operational creditor - claim - debt - default - maintainability of an application under Section 9 of the IBC, 2016

Operational debt - operational creditor - claim - debt - default - Whether the applicant qualifies as an operational creditor and whether the application under Section 9 of the IBC, 2016 is maintainable. - HELD THAT: - The Tribunal examined statutory definitions of claim, debt, default, operational creditor and operational debt under the IBC, 2016 (paras. 10-11). It articulated a sequential test: (a) the amount in default must be a claim under Section 3(6); (b) that claim must constitute a debt under Section 3(11); (c) the debt must fall within the definition of operational debt under Section 5(21); and (d) the debt must be owed by the corporate debtor to the claimant so as to make the claimant an operational creditor under Section 5(20) (para. 11). Applying this test to the material facts, the Tribunal found on the admitted averments and the agreement dated 01.12.2016 that it was the corporate debtor who supplied goods to the applicant and not vice versa, and that the applicant's claim arose from a deposit placed with the corporate debtor (para. 12). The Tribunal concluded that failure to repay the deposit does not constitute an operational debt within Section 5(21), and consequently the applicant does not qualify as an operational creditor; therefore the Section 9 petition is not maintainable (para. 12). [Paras 10, 11, 12]

The applicant does not qualify as an operational creditor; the Section 9 application is not maintainable.

Final Conclusion: The petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 is dismissed on the ground that the claim arises from a deposit repayment and does not constitute an operational debt, hence the applicant is not an operational creditor.

Admission of Section 9 application under IBC, 2016 - Initiation of Corporate Insolvency Resolution Process and moratorium under Section 14 - Appointment of Interim Resolution Professional and supersession of Board of Directors - Pre existing dispute requirement for operational creditor demands (Mobilox test) - Inapplicability of COVID relief under Section 10A where default pre dates cutoff - Supply of essential goods and uninterrupted services during moratorium

Pre existing dispute requirement for operational creditor demands (Mobilox test) - There was no pre existing dispute between the parties prior to the demand notice/invoice; the defence of short supply was raised only after the Section 9 application and thus is not a valid pre existing dispute to defeat the petition. - HELD THAT: - The Tribunal applied the principle in Mobilox Innovations Pvt. Ltd. v. Kitusa Software (P) Ltd., that a dispute must be demonstrably pre existing to the receipt of the demand notice or invoice to be a valid defence under the Code. The Tribunal examined the correspondence and found an email dated 04.09.2020 in which the Corporate Debtor acknowledged the outstanding and furnished a payment schedule, and the specific contention of short supply was raised only after the petition was filed (email dated 17.10.2020). On these facts the Tribunal concluded that no pre existing dispute had been made out and the defence was belated and inadmissible for the purpose of opposing admission of the Section 9 petition. [Paras 16]

The contention of short supply does not amount to a pre existing dispute and cannot defeat the Section 9 application.

Inapplicability of COVID relief under Section 10A where default pre dates cutoff - Section 10A relief (COVID related protection) was not available to the Corporate Debtor because the default in payment occurred prior to the relevant cutoff date. - HELD THAT: - The Tribunal noted that the date of default and the cheque dishonours occurred prior to 25.03.2020 and therefore the Corporate Debtor could not avail the shelter of Section 10A of the Code. In view of the temporal fact that the defaults pre dated the COVID relief provision, the statutory protection under Section 10A was held inapplicable. [Paras 14, 17]

Section 10A does not apply as the default occurred before the specified cutoff; the Corporate Debtor cannot seek COVID related protection.

Admission of Section 9 application under IBC, 2016 - Initiation of Corporate Insolvency Resolution Process and moratorium under Section 14 - Appointment of Interim Resolution Professional and supersession of Board of Directors - Supply of essential goods and uninterrupted services during moratorium - The Section 9 petition was admitted; CIRP was initiated, moratorium imposed, an Interim Resolution Professional was appointed, and directions issued concerning the IRP's duties and interim funding. - HELD THAT: - Having found no valid pre existing dispute and Section 10A inapplicable, the Tribunal exercised its power under Section 9(5) to admit the petition. Since the Operational Creditor had not named an IRP, the Tribunal appointed an IRP from the IBBI list subject to disclosures and absence of pending disciplinary proceedings, directed the IRP to perform statutory functions and file reports, and declared the moratorium operative as provided under Section 14. The Tribunal also recorded that supplies critical to preserve the corporate debtor as a going concern are not to be terminated during moratorium as envisaged in the Code, and directed the Operational Creditor to pay a contribution toward IRP expenses to enable performance of functions. [Paras 19, 20, 21, 22, 23]

The petition is admitted under Section 9(5); CIRP is initiated, moratorium imposed, an IRP is appointed and directed to act in accordance with the Code and Regulations, and interim expenses are ordered to be paid.

Final Conclusion: The Tribunal admitted the Operational Creditor's Section 9 petition, held that no pre existing dispute existed and Section 10A was inapplicable, initiated the CIRP with appointment of an Interim Resolution Professional, imposed the moratorium, and directed interim funding and statutory steps by the IRP.

Export of Services - Place of Provision of Services - Rule 3 - Delivery of report as completion of service - Bundled Services under Section 66F - Exemption for export of services

Export of Services - Place of Provision of Services - Rule 3 - Delivery of report as completion of service - Exemption for export of services - Whether the services rendered by the appellants (including stability studies and technical testing and analysis) qualify as export of service and are therefore not taxable. - HELD THAT: - The Tribunal applied Rule 3 of the Place of Provision of Service Rules and followed the Tribunal's earlier decision in B.A. Research India Ltd., holding that the performance of testing and analysis is not complete until the testing/analysis report is delivered to the client. Where such reports are delivered to a client located outside India and used outside India, the service is treated as exported and eligible for exemption. The Bench noted that the facts show delivery of reports to the foreign recipient and that the department itself has taken a consistent view in subsequent proceedings including allowance of refund. In view of these considerations and the precedent, the impugned Order-in-Original confirming service tax could not be sustained. [Paras 5, 6]

Services held to be export of service under Rule 3 and exemption applied; impugned order set aside.

Bundled Services under Section 66F - Whether the pre-production activities relied upon by the department constitute 'bundled services' attracting taxability. - HELD THAT: - The Tribunal observed that the department characterised multiple pre-production activities as bundled services, but found that the lower authorities' view could not be sustained in light of the applicable tests and the conclusion that the core taxable services (testing/analysis and related reports) were exported. The Bench recorded that the matter had been considered in the appellant's favour in an earlier Final Order of the Tribunal and that the department had accepted a similar approach subsequently. Thereby the classification as bundled services for denying export treatment was rejected. [Paras 5, 6]

Characterisation as bundled services rejected; impugned order set aside insofar as it denies export treatment on that basis.

Final Conclusion: The Tribunal allowed the appeal, holding that the services in question qualify as export of services under the Place of Provision Rules (performance completes on delivery of reports outside India) and that the Department's view on bundled services could not be sustained; the Order-in-Original confirming service tax was set aside.

Lapse of Cenvat credit under Rule 11(3) - conditional exemption versus absolute exemption under Section 5A - transitional provision for reversal of Cenvat credit - utilisation of balance Cenvat credit after opting for conditional notification

Lapse of Cenvat credit under Rule 11(3) - conditional exemption versus absolute exemption under Section 5A - utilisation of balance Cenvat credit after opting for conditional notification - Whether the balance Cenvat credit remaining after reversal of credit on inputs, input-in-process and inputs contained in finished goods lapses when the manufacturer opts for Notification No. 30/2004-CE (a conditional exemption) and whether such balance can be utilized for payment of duty thereafter. - HELD THAT: - The Tribunal examined Rule 11(3) of the Cenvat Credit Rules, 2004 and distinguished sub clauses (i) and (ii). Sub rule (3)(i) applies where an assessee opts for exemption under a notification issued under Section 5A and requires payment of an amount equivalent to Cenvat credit attributable to inputs lying in stock, in process or contained in finished products; sub rule (3)(ii) applies only where the final product has been exempted absolutely and expressly provides that any remaining balance shall lapse. Notification No. 30/2004 CE carries a specific condition that it shall not apply where Cenvat credit on inputs has been taken, and therefore is a conditional (not absolute) exemption. On a plain reading, the statutory scheme treats the two alternatives as mutually exclusive; the presence of a semicolon and the disjunctive 'or' reinforces that sub rules (i) and (ii) are distinct, with different consequences. Applying that legal construction and following consistent precedents of the Tribunal (including Jansons Textile Processors, Patodia Filaments, CCE v. Orient Syntex, Sitaram India Ltd., Wearit Global Ltd. and Kanchan India Ltd.), the Tribunal held that where a conditional notification like Notification No. 30/2004 CE is availed and reversal as mandated in Rule 11(3) has been made for inputs, input in process and inputs contained in finished goods, any balance Cenvat credit does not automatically lapse under Rule 11(3)(ii) and may be available for utilization; the lapsing provision under sub rule (3)(ii) is attracted only for absolute exemptions. The adjudicating authority's view that issuance of the notification under Section 5A alone renders the balance liable to lapse was rejected as unsound in light of the statutory distinction between conditional and absolute exemptions and the consistent Tribunal jurisprudence applying Rule 11(3). [Paras 4, 5]

Balance Cenvat credit did not lapse on account of the appellants opting for Notification No. 30/2004 CE (a conditional notification); the impugned order confirming recovery was set aside and the appeal allowed.

Final Conclusion: The Tribunal held that Notification No. 30/2004 CE is a conditional exemption; accordingly, after reversal of credit attributable to inputs, input in process and inputs contained in finished goods, any balance Cenvat credit does not lapse under Rule 11(3)(ii) and the adjudication confirming demand was set aside.

Admissibility of statements recorded by revenue officers - admission under Section 52 of the Indian Evidence Act - recovery of incriminating documents during search - corroboration by electricity consumption and production records - clandestine removal and suppression of production - third party records not binding on the assessee - confirmation of demand and concomitant penalty

Admissibility of statements recorded by revenue officers - admission under Section 52 of the Indian Evidence Act - recovery of incriminating documents during search - corroboration by electricity consumption and production records - clandestine removal and suppression of production - Whether the statement of the proprietor recorded during the search and documents recovered from his premises, corroborated by production and electricity consumption records, suffice to sustain the finding of clandestine removal and demand of duty. - HELD THAT: - The Tribunal accepted that incriminating documents (diaries, ledgers, files) were recovered from the premises of the proprietor and that his statement, recorded during the search, amounted to an admission. Comparison of physical furnace capacity, electricity consumption and production records provided corroboration for suppression of production of MS ingots and clandestine removals. The statement was held admissible in evidence and not retracted; therefore, under the principle that admissions need no further proof, the adjudicating authority was justified in drawing an inference of intentional clandestine removal and confirming the duty demand. The Tribunal found no infirmity in upholding the demand and concomitant orders against the appellant on this basis. [Paras 9]

The statement and documents recovered from the appellant's premises, corroborated by production and electricity records, are sufficient proof of clandestine removal; the demand is rightly confirmed.

Third party records not binding on the assessee - recovery of incriminating documents during search - confirmation of demand and concomitant penalty - Whether the favourable treatment given to other co noticees (where demands were set aside because evidence was only from a third party) extends to the present appellant whose records and statement were seized at his own premises. - HELD THAT: - The Tribunal distinguished the present appellant from other co noticees whose premises were not searched and whose alleged involvement rested only on records recovered from a third party (M/s. Monu Steels). Those co noticees were granted relief because there was no direct evidence against them. By contrast, the present appellant (proprietor of M/s. Monu Steels) had incriminating documents recovered from his own premises and had given admissions; consequently, the benefit extended to others could not be availed by him. The Tribunal therefore declined to extend the co noticees' relief to the appellant and upheld the order confirming demand. [Paras 8, 10]

Benefit given to other parties based solely on third party records does not extend to the appellant where direct evidence (documents seized from his premises and his admission) exists; the demand stands confirmed.

Final Conclusion: The appeals are dismissed; the adjudicating authority's confirmation of duty (and connected consequences) against the appellant is upheld on the basis of admissible admissions and corroborative documents recovered from his premises.

Admissibility of third-party records as sole evidence for clandestine removal - Requirement of corroborative evidence for establishing clandestine manufacture and removal - Liability of company director for penalty under Section 11AC - Interpretation of signature/acknowledgement on third party annexure

Admissibility of third-party records as sole evidence for clandestine removal - Requirement of corroborative evidence for establishing clandestine manufacture and removal - Whether demand for duty based solely on diary entries and statement of a third party (M/s. Monu Steels / S.K. Pansari) can be sustained in absence of independent corroborative evidence. - HELD THAT: - The Tribunal found that the department's case rested exclusively on entries in a third party diary and the statement of the diary's proprietor without adducing independent evidence demonstrating clandestine manufacture or movement of goods from the appellant to any buyer. The impugned order did not supply clinching evidence of clandestine manufacture or removal beyond those third party records, nor did the Revenue show enquiries from alleged buyers or other corroboration. Precedents of this Tribunal and the High Court were applied to hold that third party documents, standing alone, are insufficient to sustain a demand for clandestine clearance unless supported by corroborative evidence establishing actual manufacture, movement or receipt by buyers. In view of the absence of such corroboration the Tribunal set aside the demand made on that basis. [Paras 13, 14, 15, 16, 17]

Demand based solely on third party diary entries and statements, without corroborative evidence, cannot be sustained; impugned demand set aside.

Interpretation of signature/acknowledgement on third party annexure - Liability of company director for penalty under Section 11AC - Whether the director's statement amounted to an admission of clearance of 218.220 MTs of M.S. ingots and whether penalty imposed on the director was sustainable. - HELD THAT: - The Tribunal examined the statement of the director recorded under Section 14 and concluded that it was misinterpreted by the Commissioner. The director's statement merely recorded that he had seen entries in the annexure and was affixing his signature as having seen and perused those entries, and expressly denied having cleared ingots through the commission agent without invoices or payment of duty and denied payment of commission. The finding in the impugned order that the director had acknowledged the clearances was therefore not borne out by the record. Consequently, the penalty imposed on the director under Section 11AC (and related provisions) could not be sustained. [Paras 5, 6, 17]

Director's statement did not amount to admission of clandestine clearances; penalty imposed on the director set aside.

Final Conclusion: The appeal is allowed; the impugned order confirming demand based solely on third party diary entries is set aside for lack of corroborative evidence, and the penalty imposed on the director is also set aside.

Jurisdictional fact - writ jurisdiction under Article 226 - alternative statutory remedy of appeal - works contract v. supply of goods - input tax credit on capital goods - appreciation of disputed questions of fact - exclusion of time for limitation

Jurisdictional fact - writ jurisdiction under Article 226 - appreciation of disputed questions of fact - works contract v. supply of goods - Whether the writ court should entertain challenge to assessment orders under Article 226 where the existence of the jurisdictional fact (transfer of property / works contract) turns on disputed questions of fact and mixed questions of law and fact. - HELD THAT: - The Court held that interference under Article 226 is appropriate where an authority acts without or in excess of jurisdiction, but where the existence of the jurisdictional fact can be decided only by appreciation of disputed questions of fact, the parties must be relegated to the statutory appellate remedy. The assessing officer relied upon various circumstances to characterise the Ext.P1 agreement as a works contract; the correctness of those circumstances requires detailed factual appreciation. Mere magnitude of the assessment or the nomenclature in the agreement is not sufficient to invoke writ jurisdiction. Consequently, the writ petitions challenging assessment orders were not maintainable in public law and must be dismissed so that the factual controversies can be adjudicated in appeal. [Paras 9, 10, 11, 13, 15]

Writ jurisdiction under Article 226 declined in respect of assessment orders because the jurisdictional fact (whether the agreement is a works contract involving transfer of property) involves disputed factual and mixed questions to be decided in the statutory appeal.

Input tax credit on capital goods - works contract v. supply of goods - appreciation of disputed questions of fact - Whether the rejection of claim for input tax credit for tax paid on capital goods can be adjudicated by the writ court where the rejection is founded on the finding that the supply was part of a works contract. - HELD THAT: - The Court observed that the rejection of input tax credit was founded on the same factual conclusion that the contract was a works contract. That finding is intrinsically connected to the factual characterisation of the Ext.P1 agreement and thus requires appreciation of disputed facts. Since resolution of that factual question cannot be undertaken in writ jurisdiction, the petitioner must pursue the statutory appellate remedy to challenge the rejection of input tax credit. [Paras 12, 15]

Writ challenge to rejection of input tax credit declined; petitioner to seek remedy by statutory appeal as the issue requires factual determination linked to whether the agreement is a works contract.

Alternative statutory remedy of appeal - exclusion of time for limitation - Whether the period during which the writ petitions were pending before this Court should be excluded while computing limitation for filing the statutory appeals. - HELD THAT: - The Court noted that the writ petitions were instituted shortly after the assessment orders and remained pending at the admission stage until the date of this order. Having declined to entertain the writ petitions, the Court directed that the period spent pursuing these writ petitions shall be permitted to be excluded while calculating limitation for filing the appeals. This relief was granted to avoid prejudice to the petitioner arising from pursuing the writ remedy before the Court. [Paras 14, 15]

Petitioner entitled to seek exclusion of time for the period the writ petitions were pending when preferring the statutory appeals; liberty to pursue appeals reserved.

Final Conclusion: Writ petitions dismissed. The High Court declined to exercise writ jurisdiction under Article 226 because the determinative question-whether the agreement amounts to a works contract involving transfer of property and consequent denial of input tax credit-requires appreciation of disputed facts and mixed questions of law and fact; the petitioner is relegated to the statutory appellate remedy and is permitted to seek exclusion of the period during which the writ petitions were pending for computation of limitation in the appeals.

Classification of goods under Entry No. 150 (lower of shoes) - component v. finished product - Classification of goods under Entry No. 40 - iron and steel (as defined by Section 14 of the Central Sales Tax Act, 1956) - Construction of schedule entries and legislative intent in tax classification - Remand for fresh consideration where a tribunal omits adjudication on a pleaded ground

Classification of goods under Entry No. 150 (lower of shoes) - component v. finished product - Construction of schedule entries and legislative intent in tax classification - Whether the shoe shank manufactured and sold by the revisionist is covered by Entry No. 150 (lower of shoes) and taxable at the rate applicable to that entry. - HELD THAT: - The Court examined Entry No. 150 which expressly lists items such as upper and lower of shoes, sole, ilet, shoe laces. The statutory entry does not indicate that each component of a lower of shoe is itself to be treated as the lower of shoe for taxation purposes. The lower of shoe, as observed, comprises multiple components (outsole, shank and heel). The revisionist sells only the shank as a separate item; therefore it cannot be equated with the composite article 'lower of shoe' referred to in the entry. Had the legislature intended to include every component used in manufacture of the lower of shoe, there would have been no need to single out items such as the sole in the entry. On this construction and by application of legislative intent, the Court rejected the contention that the shoe shank is taxable under Entry No. 150.

Claim that the shoe shank falls under Entry No. 150 (lower of shoes) is rejected; the item is not covered by that entry.

Classification of goods under Entry No. 40 - iron and steel (as defined by Section 14 of the Central Sales Tax Act, 1956) - Remand for fresh consideration where a tribunal omits adjudication on a pleaded ground - Whether the Tribunal failed to consider the alternative contention that the goods sold by the revisionist are iron/steel items falling under Serial No. 40 and require fresh adjudication. - HELD THAT: - The Court noted that the revisionist pleaded that the shoe shanks are manufactured from steel strips and that chemical analysis shows the final product corresponds to the raw material, seeking classification under Serial No. 40 as iron and steel (as defined in Section 14 of the Central Sales Tax Act, 1956). Although the Tribunal recorded the argument, it did not address or decide that contention in its reasons. Where a material ground of classification is urged and not considered by the last fact-finding forum, the proper course is to remit the matter for fresh consideration so that the Tribunal can examine the contention and the supporting material (including chemical analysis and any other admissible evidence) and decide whether the item falls within Serial No. 40.

Matter remanded to the Tribunal for fresh consideration and decision on whether the goods are iron/steel within Serial No. 40 (as defined under Section 14 of the Central Sales Tax Act, 1956).

Final Conclusion: Revision disposed of: the claim that the shoe shank is covered by Entry No. 150 is rejected; the matter is remanded to the Tribunal for fresh consideration on the alternative contention that the item is iron/steel under Serial No. 40 (Section 14 CST Act) and to decide classification accordingly. Questions of law answered as above.

Revision of assessment - pre-revision notice - revisional order - crystallisation of tax liability - demand notice - Tamil Nadu Value Added Tax Act, 2006

Revisional order - crystallisation of tax liability - demand notice - Impugned demand notice set aside for lack of a revisional order crystallising tax liability and penalty. - HELD THAT: - The Court held that a demand under Section 42 of the TNVAT Act cannot validly issue merely on the basis of a pre-revision notice under Section 27. In the absence of a revisional order determining the tax liability and penalty, there was no foundation on which the impugned demand notice could stand. Consequently, the demand notice dated 06.12.2021 was set aside solely on that ground. The Court emphasised that this conclusion was prompted by the procedural deficiency-no revisional order having been made after the pre-revision notice-and not by an adjudication of the substantive merits of the liability. [Paras 6, 9]

Demand notice dated 06.12.2021 set aside because no revisional order crystallising tax liability and penalty had been made pursuant to the pre-revision notice dated 08.11.2019.

Pre-revision notice - revision of assessment - revisional order - Procedure ordered for fresh consideration: petitioner to file written objections and respondent to pass revisional order on merits. - HELD THAT: - The Court directed that the writ petitioner be afforded an opportunity to file written objections to the pre-revision notice and that the respondent consider those objections and pass a revisional order on merits and in accordance with law within specified time frames. This was treated as a one time indulgence tied to the facts of the case and without creating any precedent. The Court therefore remanded the matter for fresh consideration limited to filing of objections by the petitioner and adjudication by the respondent, leaving open the respondent's entitlement to demand tax and penalty depending on the revisional order. [Paras 9]

Writ petitioner directed to file written objections by the specified date; respondent to consider objections and pass revisional order on merits within the time stipulated; respondent may thereafter demand tax and penalty if the revisional order so determines.

Final Conclusion: Writ petition disposed by setting aside the demand notice for want of a revisional order; petitioner granted time to file objections and matter remanded to the respondent to pass a revisional order on merits within the stipulated timeline, after which demand may, if appropriate, be issued.

Presumption under Section 118 of the Negotiable Instruments Act - blank promissory note and filling up under Section 20 - rebuttal of statutory presumption - proof of execution and admission of signature - assessment of witness credibility and contradictions - recovery of advance paid with interest

Proof of execution and admission of signature - presumption under Section 118 of the Negotiable Instruments Act - rebuttal of statutory presumption - assessment of witness credibility and contradictions - Whether Ex.A1 promissory note was proved to have been executed by the defendant and whether the presumptions under the Negotiable Instruments Act could be invoked in favour of the plaintiff. - HELD THAT: - The Court examined the pleadings, the reply notice (Ex.A4) and oral evidence and found that the defendant did not admit the signature on the suit promissory note in the reply notice but instead pleaded that a signed unfilled promissory note was delivered as security in connection with an advance under a proposed sale. Given the absence of an unequivocal admission of signature, the contention that statutory presumptions under Section 118 (and filling-up under Section 20) must be automatically invoked in favour of the plaintiff could not be accepted. The Court further assessed the plaintiff's evidence and attestation; material contradictions in the testimonies, the computerized preparation of Ex.A1 and the improbability of the attestor's involvement (P.W.2) due to existing civil disputes undermined the plaintiff's proof. On the combined appraisal, the Courts below were held to have rightly concluded that the suit promissory note was not established as executed by the defendant so as to attract the statutory presumptions. [Paras 15, 16, 17]

The promissory note Ex.A1 was not proved to have been executed by the defendant and the presumptions under the Negotiable Instruments Act were not attracted in favour of the plaintiff.

Recovery of advance paid with interest - Whether the plaintiff was entitled to any recovery despite the dismissal of the claim on the promissory note. - HELD THAT: - The Court accepted that the defendant had received an advance of Rs.1,90,000 from the plaintiff as pleaded by the parties. Although the principal claim on the promissory note failed, the factual finding that the advance was received was upheld and the defendant was held liable to repay that advance with interest. Having regard to the nature of the transaction, the Court fixed interest at a modest rate and directed repayment accordingly. [Paras 18]

The defendant is liable to repay the advance of Rs.1,90,000 to the plaintiff with interest at 3% per annum.

Final Conclusion: Second Appeal dismissed; the judgments and decrees of the courts below are confirmed, and the defendant directed to repay the advanced amount to the plaintiff with interest at 3% per annum.

Offence under Section 138 of the Negotiable Instruments Act - Dishonour of cheque for insufficiency of funds - Signatory to cheque - Liability of joint account holder - Quashing of criminal proceedings - Abuse of process of law - Cognizance by Magistrate

Offence under Section 138 of the Negotiable Instruments Act - Signatory to cheque - Liability of joint account holder - Quashing of criminal proceedings - Abuse of process of law - Proceedings against the petitioner/A.2 in the several complaint cases for alleged offence under Section 138 of the NI Act are liable to be quashed because she is a joint account holder but not a signatory to the disputed cheques. - HELD THAT: - The Court found on the record, including the complaints, that the disputed cheques were drawn on a joint account but bear only the signature of A.1; the petitioner/A.2 is not a signatory. Section 138 penalises the person who draws the cheque on an account maintained by him; the provision does not on its face extend criminal liability to a non-signatory joint account holder. The Court applied the principles stated by the Apex Court in Alka Khandu Avhad and Mrs. Aparna A. Shah, holding that a joint account holder cannot be prosecuted under Section 138 unless the cheque is signed by that joint account holder. Penal provisions must be strictly construed and the mere fact that trial has commenced does not cure the absence of ingredients of the offence against a non-signatory. In these circumstances, continuation of proceedings against the petitioner/A.2 would be an abuse of the process of law, and the Magistrates erred in taking cognizance against her when no ingredients of Section 138 were made out as regards her. [Paras 12, 13]

Proceedings against the petitioner/A.2 are quashed.

Final Conclusion: Criminal Petition Nos.5069, 5076, 5081 and 5068 of 2021 are allowed; the proceedings against the petitioner/A.2 in the specified complaint cases are quashed and related miscellaneous petitions stand closed.