TaxTMI Updates e-Newsletter
Jan 12,2021

Pure agent exclusion from value of supply under Rule 33 - Value of taxable supply under Section 15 - Conditions for 'pure agent' - contractual authorization, no title, no use for own interest, reimbursement of actual amount - Classification under Service Accounting Code 998519 (Other employment and labour supply services) - GST rate for support services under Entry No. 23 of Notification No. 11/2017 CT (Rate)

Pure agent exclusion from value of supply under Rule 33 - Conditions for 'pure agent' - contractual authorization, no title, no use for own interest, reimbursement of actual amount - Whether the applicant qualifies as a "pure agent" so as to exclude reimbursements to third party labour from the value of its supply. - HELD THAT: - The Authority examined the contract and sample invoices against the conditions in Rule 33 (contractual agreement to act as pure agent; supplier holds no title; supplier does not use procured services for own interest; receipt only of actual amounts). The agreement expressly describes the applicant as a contractor supplying labour, fixes per worker payment, requires the contractor to engage and assume statutory responsibilities for the personnel, and contains indemnity and liability clauses. The invoices describe the charge as "Charges for manpower supply" and levy GST at 18%. These contractual terms demonstrate that the applicant supplies labour on its own account and assumes liabilities, and therefore does not satisfy the statutory conditions to be treated as a pure agent under Rule 33. [Paras 7, 9]

Applicant does not qualify as a pure agent; reimbursements to third party labour cannot be excluded from the value of supply under Rule 33.

Classification under Service Accounting Code 998519 (Other employment and labour supply services) - Support services - employment and labour supply services - Whether the nature of the applicant's service falls within SAC 998519 (Other employment and labour supply services). - HELD THAT: - On the facts and the terms of the labour supply contract, the activity performed by the applicant corresponds to employment and labour supply services. The Authority referred to the Annexure to Notification No. 11/2017 (Rate) which lists Support services and the constituent SACs, and identified the applicant's service as covered by SAC 998519 - other employment and labour supply services not elsewhere classified. [Paras 10]

Service provided by the applicant is classifiable under SAC 998519 (Other employment and labour supply services).

GST rate for support services under Entry No. 23 of Notification No. 11/2017 CT (Rate) - Applicability of 18% GST to services under SAC 998519 - What is the applicable GST rate on the applicant's supply of labour services classified under SAC 998519. - HELD THAT: - Having classed the service under SAC 998519 and having held that the applicant is not a pure agent, the Authority applied Entry No. 23 of Notification No. 11/2017 CT (Rate). That entry treats support services (other than specified tour operator services) at the prescribed rate. The Authority concluded that the applicable tax rate for the applicant's labour supply service is 18% (comprising CGST and SGST components). [Paras 11, 12]

GST at 18% (CGST 9% + SGST 9%) is applicable to the applicant's supply of labour services.

Final Conclusion: The Authority ruled that the applicant does not satisfy the conditions of a "pure agent" under Rule 33 and that its activity is classifiable under SAC 998519; accordingly the supply of labour is taxable at 18% (CGST 9% + SGST 9%) under Entry No. 23 of Notification No. 11/2017 CT (Rate).

Exemption of fumigation services in a warehouse of agricultural produce - definition of agricultural produce - primary market - fumigation in bonded/customs warehouse - classification under SAC 998531 - GST rate for support services (heading 9985)

Exemption of fumigation services in a warehouse of agricultural produce - definition of agricultural produce - primary market - fumigation in bonded/customs warehouse - Fumigation services provided in a warehouse of agricultural produce are taxable and not exempt under Entry No. 54(h) of Notification No. 12/2017-CT (Rate) dated 28.06.2017 in the facts of this case. - HELD THAT: - Entry 54(h) exempts services by way of fumigation in a warehouse of "agricultural produce", but the definition of "agricultural produce" in Explanation 2(d) limits the exemption to goods that have not undergone further processing beyond that which renders them marketable in the primary market. Produce that has undergone subsequent processing for export or import purposes, or that has moved beyond the primary market, falls outside this definition. The applicant supplied fumigation services in a bonded/customs warehouse where stored produce related to import/export and where no evidence was furnished to show exclusivity of storage of unprocessed agricultural produce as defined in the Notification. On these facts, the services do not fall within Sl. No. 54(h) and are therefore not exempt from GST. [Paras 14, 15, 16]

Fumigation services in the bonded/customs warehouse concerned are not exempt under Entry No. 54(h) and are taxable.

Classification under SAC 998531 - disinfecting and exterminating services - fumigation and pest control services - The applicant's fumigation/pest control service is correctly classifiable under Service Accounting Code 99853 (more specifically 998531). - HELD THAT: - The explanatory notes and the Annexure to Notification No. 11/2017-CT (Rate) include fumigation services and pest control within Group 99853 and item 998531 (Disinfecting and exterminating services). The activity of exterminating pests and providing fumigation falls squarely within the scope of SAC 998531 as per the classification entries relied upon by the Authority. [Paras 17]

The service is classifiable under SAC 99853 (998531 for disinfecting and exterminating/fumigation services).

GST rate for support services (heading 9985) - applicable GST rate for fumigation/pest control - The rate of GST applicable to the fumigation/pest control service (classifiable under SAC 99853) is 18% (CGST 9% + SGST 9%). - HELD THAT: - Entry No. 23(ii) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 fixes the rate for support services (other than tour operator services) at 9% CGST and 9% SGST. Since the fumigation/pest control service is a support service classified under the relevant heading, the applicable combined GST rate is 18%. [Paras 18]

The fumigation/pest control service is taxable at 18% (CGST 9% + SGST 9%).

Final Conclusion: On the material on record the fumigation/pest control services provided by the applicant in the bonded/customs warehouse are not covered by the exemption in Entry No. 54(h) of Notification No. 12/2017-CT (Rate) and are taxable; such services are classifiable under SAC 99853 (998531) and attract GST at the rate of 18% (CGST 9% + SGST 9%).

Intermediary - commission agent / agent services - place of supply - location of supplier for intermediary services under Section 13(8)(b) of the IGST Act - intra State supply liable to CGST and SGST - place of supply rules for services where supplier or recipient is outside India

Intermediary - place of supply - location of supplier for intermediary services under Section 13(8)(b) of the IGST Act - intra State supply liable to CGST and SGST - Whether the services rendered by the applicant (acting for a foreign principal and receiving commission) attract IGST or CGST + SGST. - HELD THAT: - The applicant's agreement and conduct show it acts as an agent/intermediary for a foreign principal, arranging and facilitating sales without supplying goods on its own account; therefore the activity falls within the definition of an intermediary. Section 13 identifies place of supply rules where supplier or recipient is outside India; specifically, intermediary services are governed by the rule that the place of supply is the location of the supplier (Section 13(8)(b)). The supplier (applicant) is located in Gujarat; hence the place of supply for the intermediary services is in the taxable territory where the supplier is located, making the supply intra State. Consequentially, such intra State supply of services is leviable to central and State tax and not IGST, and the applicant is liable to pay CGST and SGST for the intermediary services rendered. [Paras 8, 11, 12]

The services provided by the applicant as an intermediary are intra State in nature (place of supply is the supplier's location) and are subject to CGST and SGST.

Final Conclusion: Advance ruling: Applicant acts as an intermediary; place of supply is the supplier's location in Gujarat; therefore CGST and SGST are applicable on the commission/intermediary services and not IGST.

Classification of goods under the First Schedule to the Customs Tariff - interpretation of Chapter Note 5 (narrow woven fabrics) - requirement of selvages for heading 5806 - classification under heading 5407 (woven fabrics of synthetic filament yarn) - application of Notification No.01/2017-Central Tax (Rate) for GST rate determination

Interpretation of Chapter Note 5 (narrow woven fabrics) - requirement of selvages for heading 5806 - classification under heading 5407 (woven fabrics of synthetic filament yarn) - application of Notification No.01/2017-Central Tax (Rate) for GST rate determination - Narrow woven fabrics manufactured by the applicant are not classifiable under Tariff sub heading 58063990 but under Chapter sub heading 5407.10.19 and attract GST at the rate notified for that heading. - HELD THAT: - The Court examined the statutory First Schedule to the Customs Tariff and the Section/Chapter Notes and Explanatory Notes applicable to heading 58.06. Note 5 to Chapter 58 and the Explanatory Notes require that narrow woven fabrics be warp and weft strips of width not exceeding 30 cm and be provided with selvedges (flat or tubular) on both edges. Although the applicant's product is woven from polyester yarn and its width does not exceed 30 cm, the record does not show that the strips are provided with selvedges on both edges. Because the selvedge requirement in Note 5 is not satisfied, the product does not fall within heading 5806. Consequently, the Authority classified the product as woven fabrics of synthetic filament yarn under sub heading 5407.10.19, applying the general rules of interpretation of the First Schedule rather than trade parlance. Having so classified the goods under 5407.10.19, the corresponding rate under Notification No.01/2017 Central Tax (Rate) (and the matching State/Integrated notifications) was applied to determine the GST liability. [Paras 18, 20, 21]

The narrow woven fabrics of polyester yarn of width not exceeding 30 cm but not provided with selvedges on both edges are not classifiable under 58063990 and are classifiable under 5407.10.19; GST applies accordingly at the rate notified for that heading.

Final Conclusion: Advance ruling: The applicant's product is not covered by Tariff sub heading 58063990 (5806) because it lacks the selvedges required by Chapter Note 5; it is classifiable under 5407.10.19 and attracts GST at the rate applicable to that sub heading (2.5% CGST + 2.5% SGST for intra state or 5% IGST for inter state supplies).

Consideration under GST - Valuation of taxable supply - Inclusion of wages and reimbursable expenses in transaction value - Eligibility for input tax credit - Classification under Heading 9985, Group 99852, Service code 998529 (security services)

Consideration under GST - Valuation of taxable supply - Inclusion of wages and reimbursable expenses in transaction value - Classification under Heading 9985, Group 99852, Service code 998529 (security services) - GST is payable on the entire amount charged to clients (including wages paid to security guards and establishment charges) for security services supplied by the applicant. - HELD THAT: - The Authority examined the classification of the applicant's services under the GST rate notification and identified security services as falling under Heading 9985, Group 99852, Service code 998529 attracting 18% GST. The statutory definition of "consideration" in Section 2(31) of the CGST Act, 2017 includes any payment made in respect of or for the inducement of the supply of services. Section 15 of the CGST Act, 2017 prescribes that the value of a supply shall be the transaction value (price actually paid or payable) and further specifies items to be included in the value of supply. On the facts, the applicant charged clients an aggregate amount which comprised wages payable to security guards and a separate element designated as establishment charges. The Authority held that such aggregate payment constitutes the consideration for the supply and therefore the entire amount is includible in the transaction value and subject to GST. The Authority rejected reliance on pre GST service tax jurisprudence invoked by the applicant because valuation and consideration are expressly governed by Sections 2(31) and 15 under the GST regime. [Paras 15, 16, 17, 19]

The applicant must charge and pay GST at 18% on the full amount received from clients, inclusive of wages paid to security guards and establishment charges.

Eligibility for input tax credit - Valuation of taxable supply - Consideration under GST - The applicant may claim input tax credit provided GST is charged/paid on the entire amount received from clients and other statutory conditions for claiming credit are satisfied. - HELD THAT: - Since the Authority concluded that the entire amount charged by the applicant constitutes consideration and is subject to GST, eligibility to claim input tax credit depends on compliance with the CGST Act and Rules. The Authority observed that if the applicant follows the correct method of charging and paying GST on the whole transaction value (wages plus establishment charges), they would be eligible to take input tax credit subject to fulfilment of conditions and provisions prescribed in the CGST Act, 2017 and CGST Rules, 2017. [Paras 18, 19]

Input tax credit is available if GST is charged and paid on the entire amount received and the statutory conditions for credit are met.

Final Conclusion: The Authority ruled that GST at 18% is payable on the aggregate amount charged to clients for security services (including wages paid to guards and establishment charges) and that input tax credit is available if GST is correctly charged/paid on that entire amount, subject to statutory conditions.

Input Tax Credit - Reversal of input tax credit on goods lost, stolen or destroyed - Section 17(5) overriding prohibition on availability of ITC in respect of goods lost, stolen or destroyed - Inputs consumed in manufacture cease to be used in course or furtherance of business - Captive consumption of intermediate goods - Distinction between inputs and finished/intermediate goods for ITC reversal

Input Tax Credit - Reversal of input tax credit on goods lost, stolen or destroyed - Section 17(5) overriding prohibition on availability of ITC in respect of goods lost, stolen or destroyed - Inputs consumed in manufacture cease to be used in course or furtherance of business - Captive consumption of intermediate goods - Whether input tax credit taken on inputs consumed in dye intermediates (also marketable finished goods) that were lying in stock and destroyed in a fire is required to be reversed - HELD THAT: - The Authority examined the scheme of the GST provisions and concluded that Section 17(5) contains an overriding prohibition denying ITC "in respect of" goods lost, stolen, destroyed or written off. While Section 16(1) permits availing credit where inputs are used or intended to be used in the course or furtherance of business, Section 17(5) specifically disallows ITC in respect of goods destroyed. The Authority reasoned that where inputs and input services have been used in the manufacture of intermediate/finished goods which were held in stock and subsequently destroyed by fire, those inputs cannot be regarded as continuing to be used in the course or furtherance of business. Consequently, the ITC availed on such inputs and related input services must be reversed in view of the prohibition under Section 17(5). The Authority therefore rejected the applicant's contention that ITC on consumed inputs need not be reversed merely because the destroyed items were finished/intermediate goods rather than the raw inputs themselves, and held that reversal is required. [Paras 23, 24]

Input tax credit availed on inputs and input services used in manufacture of the dye intermediates that were lying in stock and destroyed by fire is required to be reversed.

Final Conclusion: The Authority answers the question in the affirmative: the applicant must reverse the input tax credit taken on inputs and input services used in manufacture of the dye intermediates that were in stock and destroyed by the fire, pursuant to the prohibition in Section 17(5).

Constitutionality of Sections 69 and 132 of the CGST Act - Scope of Article 246A - power to make laws "with respect to" goods and services tax - Pith and substance doctrine in legislative competence - Entry 1, List III - legislative power to make criminal law - Applicability of general criminal procedure (Cr.P.C.) to special fiscal statutes - Article 20(3) - protection against self incrimination and status of persons under tax inquiries - Power of Central tax officers to conduct intelligence based enforcement under Section 6 of the CGST Act - Interim relief against arrest in writ jurisdiction - scope and restraint

Constitutionality of Sections 69 and 132 of the CGST Act - Scope of Article 246A - power to make laws "with respect to" goods and services tax - Pith and substance doctrine in legislative competence - Validity of Sections 69 and 132 of the CGST Act as within Parliament's legislative competence - HELD THAT: - At the prima facie stage the Court upheld the constitutionality of Sections 69 and 132. It observed that Goods and Services Tax is a unique subject contained in Article 246A which confers power to make laws "with respect to" GST and must be given a wide amplitude; the power to enact ancillary provisions including arrest and prosecution for GST related offences falls within that scope. Applying the pith and substance doctrine, the Court held that if the true character of the CGST Act is legislation on a subject within Parliament's power then incidental encroachments are permissible. Consequently, on the prima facie record the impugned provisions are not shown to be a clear transgression of constitutional principles and are within legislative competence. [Paras 32, 33, 34, 36, 38]

Prima facie view that Sections 69 and 132 are constitutional and fall within Parliament's legislative competence under Article 246A and, alternatively, within Entry 1 of List III.

Entry 1, List III - legislative power to make criminal law - Alternate basis for validity of Sections 69 and 132 under Entry 1 of List III - HELD THAT: - The Court held that even if the power to create offences relating to GST were not found in Article 246A, such power could be traced to Entry 1 of List III which confers broad power to legislate on criminal law. Relying on the principle that 'criminal law' is of wide scope, the Court took the prima facie view that offences relating to evasion of GST fall within that entry and therefore the provisions would be sustainable on this alternative head as well. [Paras 39, 40, 41]

Prima facie view that Sections 69 and 132 could also be validly enacted under Entry 1 of List III.

Applicability of general criminal procedure (Cr.P.C.) to special fiscal statutes - Article 20(3) - protection against self incrimination and status of persons under tax inquiries - Whether protections under Article 20(3) and provisions of the Cr.P.C. apply so as to render Sections 69/132 unsustainable or to afford additional protections at the interim stage - HELD THAT: - The Court, having considered precedents including Directorate of Enforcement v. Deepak Mahajan and decisions construing statements recorded under fiscal statutes, observed that special Acts do not ipso facto oust the general Code where no contrary provision exists; conversely, the existence of powers under the CGST Act allowing arrest, informing of grounds and production before a Magistrate within 24 hours provides judicial oversight. The Court noted established precedent that persons interrogated in tax enquiries are not necessarily "accused" within Article 20(3) until prosecution is launched. On the prima facie record the submissions that petitioners are prejudiced by denial of Article 20(3) protection or by non application of Cr.P.C. were held untenable. [Paras 42, 44, 45, 46]

At the interim stage the arguments that Article 20(3) protection or Cr.P.C. applicability render Sections 69/132 unconstitutional are rejected as untenable in law.

Power of Central tax officers to conduct intelligence based enforcement under Section 6 of the CGST Act - Validity of Central tax officers conducting intelligence based enforcement against taxpayers administratively assigned to State tax authorities - HELD THAT: - The Court accepted the learned ASG's prima facie contention that Central tax officers are empowered to conduct intelligence based enforcement actions under Section 6 of the CGST Act read with the GST Council circular and consequent cross empowerment notifications. On the material before it, including explanation of the issuance of a search authorisation by the jurisdictional Division and deputation of an inspector, the Court found no basis at the interim stage to vitiate the searches for want of jurisdiction. The factual contest as to the competence of particular officers was left open for final adjudication. [Paras 21, 26, 27, 50]

Prima facie view that Central tax officers are empowered to conduct intelligence based enforcement against taxpayers assigned to State tax administration; search action not vitiated at interim stage.

Interim relief against arrest in writ jurisdiction - scope and restraint - Petitioners' applications for interim protection from arrest - HELD THAT: - Weighing the settled principles that constitutional courts must exercise writ jurisdiction sparingly in pre arrest matters and having regard to the serious allegations of large scale fraudulent ITC/IGST claims made by respondents (as set out in the counter affidavits), the Court declined to grant interim protection. The Court emphasized that while investigation should not be interfered with at writ stage, innocent persons must not be harassed and trial courts will separate baseless allegations at bail/remand proceedings. The Court also noted that divergent interim orders of other courts and interim Supreme Court observations counsel caution in granting pre arrest relief. [Paras 53, 54, 55, 56]

Applications for interim protection dismissed; earlier interim order dated 20.08.2020 vacated, with liberty to petitioners to avail statutory remedies.

Final Conclusion: On the prima facie record the Court found no merit in striking down Sections 69 and 132 of the CGST Act, observed that the provisions fall within Parliament's competence under Article 246A (and alternatively Entry 1, List III), upheld the respondents' power to conduct intelligence based enforcement, declined to extend interim protection from arrest in view of serious allegations and the need to allow investigation to proceed, and vacated the earlier interim order while preserving petitioners' statutory remedies; all observations are prima facie and without prejudice to final adjudication.

Service of notice under Section 74 of the CGST Act - proceeding under Section 74 being pending within the meaning of Section 83(1) - attachment of bank accounts under Section 83 of the CGST Act - requirement of issuance and communication of show-cause notice before exercise of coercive powers

Service of notice under Section 74 of the CGST Act - proceeding under Section 74 being pending within the meaning of Section 83(1) - attachment of bank accounts under Section 83 of the CGST Act - Prima-facie view that communication of the notice under Section 74 is essential before a proceeding under Section 74 can be said to be pending for the purpose of invoking attachment powers under Section 83(1). - HELD THAT: - Section 74 contemplates issuance of a notice to the person chargeable with tax to show cause why the specified amount alongwith interest and penalty should not be paid. Sub section (2) of Section 74 prescribes timing for issuance of such notice in relation to the limitation in sub section (10). On the materials before the Court, the petitioners contended that, despite the letters to the Bank stating that proceedings under Section 74 have been launched, they had not received any notice even after the passage of months. The Court enquired whether mere formation of an opinion or a decision to issue a notice suffices to treat a proceeding under Section 74 as having been initiated or whether actual service/communication of the notice on the person is necessary. The Court recorded its prima-facie opinion that actual communication of the notice under Section 74 is essential before a proceeding can be regarded as pending within the meaning of Section 83(1) so as to justify attachment of bank accounts under that provision. The matter was kept open for the parties to respond and for the respondents to obtain instructions.

Court expressed a prima-facie view that service/communication of the Section 74 notice is necessary before invoking attachment under Section 83(1), and adjourned the petitions for further hearing.

Final Conclusion: On the present record the High Court, in a prima-facie finding, held that actual service/communication of the show cause notice under Section 74 is necessary before a proceeding under Section 74 can be treated as pending for purposes of exercising attachment under Section 83(1); parties were granted time and the matters were listed for further consideration.

Communication of order - limitation for appeal under Section 107 - deemed service and modes of service under Section 169 - service by registered e-mail or web portal - physical service under written acknowledgement

Communication of order - limitation for appeal under Section 107 - Whether the Appellate Authority correctly treated the appeal as time barred without resolving the disputed date on which the best judgment order was communicated to the petitioner. - HELD THAT: - The Court observed that Section 107 prescribes specific limitation periods and a condonable extension, and that when an appeal is dismissed as time barred the appellate authority must determine the date on which the impugned decision was communicated having regard to the circumstances pleaded by the parties. In the present case the Department asserted service in May 2019, while the petitioner asserted that communication occurred only in November 2019 and relied on cancellation and revival orders and other facts to show absence of notice of the best judgment order. The impugned order does not record any consideration of this factual controversy or the circumstances relied upon by the petitioner. Given the lapse of the statutory right of appeal if the communication date is incorrectly fixed, the Appellate Authority was required to decide the contested question of communication before dismissing the appeal on limitation grounds. The Court therefore set aside the impugned order and restored the proceedings for fresh consideration of the date of communication (and consequential limitation question), observing that the Appellate Authority would, in the process of resolving the communication question, also have to consider merits as necessary.

Impugned order set aside and matter remitted to the Appellate Authority for fresh determination of the date of communication and consequent limitation question, with liberty to decide merits as necessary.

Deemed service and modes of service under Section 169 - service by registered e-mail or web portal - physical service under written acknowledgement - What proof is required for treating electronic service or physical acknowledgement as constitutive of communication for limitation purposes. - HELD THAT: - The Court clarified that the deeming provisions in Section 169 operate only where service is effected by modes contemplated by the provision and that, where service is asserted to have been effected by registered e mail or by uploading on the web portal, the Department must establish that the notice was actually sent or uploaded; mere assertion is insufficient. Similarly, where physical service is pleaded to have been effected under an acknowledgement, the Appellate Authority must examine the particulars of that service (including to whom the copy was handed and whether that service imputes knowledge to the assessee) before fixing the date of communication. In the present case the Appellate Authority failed to examine the details of the asserted electronic transmission and the physical acknowledgement relied upon by the Department, and did not consider the petitioner's contentions that the acknowledgement reflected service on a site supervisor and thus did not necessarily impute knowledge to the company.

Appellate Authority directed to examine and require proof of actual electronic transmission or valid physical service before treating such modes as constitutive of communication for limitation purposes.

Final Conclusion: Writ petition allowed; the appellate order dismissing the appeal as barred by limitation is set aside and the matter is remitted to the Appellate Authority for fresh consideration of the date of communication (including examination of proof of electronic transmission and particulars of physical service) and consequent determination of limitation and, if required, the merits.

Exercise of powers under Section 119 of the Income tax Act - relief by writ of mandamus under Article 226 - availability and amendment of e filing utilities and forms - extension of due dates for filing ITR and tax audit reports - administrative duty to consider representations expeditiously

Availability and amendment of e filing utilities and forms - draft amendment - The draft amendment shall be allowed and carried out at the earliest. - HELD THAT: - The Court recorded an immediate operative direction permitting the draft amendment to be implemented and directed that it be carried out at the earliest. This is an affirmative allowance of the proposed amendment and an immediate administrative instruction, not a substantive adjudication on the wider merits of form changes or their impact on due dates. [Paras 1]

Draft amendment allowed and to be implemented forthwith.

Exercise of powers under Section 119 of the Income tax Act - relief by writ of mandamus under Article 226 - extension of due dates for filing ITR and tax audit reports - administrative duty to consider representations expeditiously - The Union of India (Ministry of Finance) is directed to consider the representation dated 12th October 2020 and take an appropriate decision in accordance with law by 12th January 2021. - HELD THAT: - Having noted the petitioners' grievances and precedent emphasising the Board's beneficial power under Section 119 to mitigate genuine hardship, the Court declined to decide the substantive question of extending filing dates on merits. Instead, it retained the writ petition pending and issued a mandatory administrative direction to respondent No.1 to examine the representation expeditiously and decide in accordance with law, bearing in mind prior observations on CBDT's powers and the extended timelines for officials in view of the pandemic. The order requires reporting back to the Court and lists the matter for hearing after the specified date. [Paras 21, 22]

Respondent No.1 to consider the representation and take an appropriate decision by 12th January 2021; matter listed thereafter.

Final Conclusion: The Court allowed the draft amendment to be implemented immediately and, without adjudicating the substantive request for extension of filing dates, directed the Union (Ministry of Finance) to consider the petitioners' representation and decide in accordance with law by 12 January 2021; the writ petition is kept pending and listed for further hearing.

Mandamus to investigate tax evasion - Abuse of process of court - Public Interest Litigation standards and compliance - Judicial restraint against using court to settle private disputes - Informants/Whistleblower scheme and alternative remedy - Non-joinder of interested parties

Public Interest Litigation standards and compliance - Abuse of process of court - Non-joinder of interested parties - Judicial restraint against using court to settle private disputes - Maintainability of the petition as a public-spirited PIL seeking mandamus to investigate tax-evasion complaints lodged by the petitioner. - HELD THAT: - The Court found that although the petitioner characterised the petition as public-spirited, he did not file it as a Public Interest Litigation in compliance with the High Court's PIL Rules which require an express declaration of absence of personal interest. The petition disclosed that the subject entities involved included the petitioner's late father-in-law's partnership and that the petitioner's wife is a legal heir asserting unsettled accounts, prima facie indicating a personal stake. On this basis the Court concluded the proceedings were being used to press or coerce private claims against those entities and amounted to an abuse of the Court's process. The Court emphasised that its machinery cannot be invoked to settle private scores and that such invocation without compliance with PIL requirements cannot be permitted. [Paras 3, 4]

Petition not maintainable as a public-spirited PIL and constituted an abuse of process; such invocation of court process was declined.

Mandamus to investigate tax evasion - Informants/Whistleblower scheme and alternative remedy - Whether the Court should issue mandamus directing respondents to conduct a time bound investigation and treat the petition as an Informants Reward Scheme claim. - HELD THAT: - The Court observed that while departmental schemes encourage reporting of tax evasion, the petitioner did not place a copy of any such scheme or identify any provision entitling him to invoke judicial process to compel the respondents to take specified investigative steps. Absent a demonstrated statutory or scheme-based right to seek mandamus for compulsion of investigation, and given the identified personal interest and abuse, the Court refused to grant the relief sought. The petitioner's counsel elected to withdraw the petition on recognising the defect. The Court, however, explicitly preserved the petitioner's liberty to pursue remedies, if any, under the Income Tax Department's Informants Scheme. [Paras 5, 6, 7, 8]

No mandamus issued; petition dismissed as withdrawn with liberty to pursue any remedy available under the Informants Scheme.

Final Conclusion: Petition dismissed as withdrawn; court refused to exercise its process to compel investigation where the petition disclosed personal interest and amounted to an abuse of process, but liberty granted to pursue remedies under the Income Tax Department's Informants Scheme.

Section 40(a)(ia) of the Income Tax Act - Section 195 of the Income Tax Act - tax deduction at source (TDS) - condition precedent for invocation of disallowance under Section 40(a)(ia) - requirement of reasons by a quasi judicial authority - remand for fresh consideration

Requirement of reasons by a quasi judicial authority - remand for fresh consideration - Whether the order of the Income Tax Appellate Tribunal could be sustained where it recorded a conclusion that the entries were mere journal entries but did not assign reasons in support of that conclusion. - HELD THAT: - The tribunal's order (extract reproduced in the judgment) recorded a bare conclusion that the income and expenses were recorded by way of journal entry and therefore tax deduction under Section 195 did not arise, but it did not advert to or grapple with the findings recorded by the Assessing Officer or the Commissioner of Income Tax (Appeals). The court reiterated the settled principle that reasons are essential to quasi judicial decision making and to ensure transparency and fairness. In the absence of any reasoning explaining how the tribunal reached its conclusion or why it disagreed with the detailed findings of the lower authorities, the tribunal's order is legally defective. Consequently the impugned tribunal order was quashed and set aside and the substantial question of law was answered against the validity of the non reasoned order. [Paras 9, 10]

The tribunal's order is quashed for failure to assign reasons and cannot be sustained.

Section 40(a)(ia) of the Income Tax Act - Section 195 of the Income Tax Act - condition precedent for invocation of disallowance under Section 40(a)(ia) - tax deduction at source (TDS) - remand for fresh consideration - Whether the matter must be remitted to the tribunal for fresh adjudication on the question of applicability of Section 40(a)(ia) read with Section 195 and whether the condition precedent for invoking the disallowance has been satisfied. - HELD THAT: - Having quashed the tribunal's non reasoned order, the court directed that the tribunal must decide the assessee's claim afresh. The tribunal is to consider the material on record and specifically to advert to and examine the reasoning assigned by the Assessing Officer and the Commissioner of Income Tax (Appeals). The tribunal must address whether the statutory preconditions for invoking Section 40(a)(ia) (in conjunction with Section 195) are fulfilled on the facts - including the nature of the entries, whether payments were made by the assessee or by another person, and whether services were in fact rendered by the non resident - and give reasons for its findings. The remand is for substantive re examination and decision on the merits in accordance with law. [Paras 7, 10]

Matter remitted to the tribunal to decide afresh on the applicability of Section 40(a)(ia) read with Section 195 and whether the condition precedent for disallowance is satisfied, with reasons to be recorded.

Final Conclusion: The tribunal's order is quashed for want of reasons; the matter is remitted to the tribunal to decide afresh on the assessee's claim under Section 40(a)(ia) read with Section 195 for Assessment year 2008-09, having regard to the material on record and the reasons recorded by the Assessing Officer and the Commissioner of Income Tax (Appeals).

Admission of additional evidence - telescoping of undisclosed receipts - application of undisclosed income to work-in-progress - taxability of on-money under project completion method - profit element of on-money taxable, receipts not income per se - treatment of undisclosed income declared by associated concern - allowability of interest where funds advanced to group concerns as commercial expediency - diversion of borrowed funds and section 36(1)(iii) implications

Admission of additional evidence - Admissibility of additional evidence filed before the Tribunal. - HELD THAT: - Majority of the documents tendered as additional evidence were either already on the Revenue's record, public domain records, assessment orders of subsequent years or were documents earlier furnished to the CIT(A). The Tribunal applied settled principles that additional evidence may be admitted where the assessee was not given sufficient opportunity by lower authorities or where the evidence merely rebuts adverse factual observations made without confronting the assessee. The Tribunal found that the CIT(A) had made an uncontradicted and unexplained finding that the project was substantially completed without confronting the assessee and that the Assessing Officer had not issued any specific show-cause or queries before making the disallowance. In these circumstances and having regard to precedent permitting the Tribunal to decide issues when all material is before it, the Tribunal admitted and proceeded to adjudicate the additional evidence.

Additional evidence admitted and taken on record for adjudication.

Application of undisclosed income to work-in-progress - telescoping of undisclosed receipts - treatment of undisclosed income declared by associated concern - Whether the assessee could claim application (telescoping) of undisclosed on-money receipts to increase its WIP and thereby avoid double taxation. - HELD THAT: - The Tribunal noted the undisclosed receipts were offered to tax on the basis of a statement which also promised to furnish details of application; those details were supplied by the assessee and no cash was seized. The CIT(A) had accepted that expenditure was incurred but denied application on conjectural grounds including a finding that the project was substantially completed. Relying on higher and tribunal precedents, the Tribunal held a statement relied upon for taxing undisclosed receipts must be read as a whole and, where the source has been taxed, expenditure out of that source cannot be disallowed so as to effect double taxation. The Tribunal also followed authorities permitting telescoping/allowance of application in favour of the assessee and considered precedents holding that undisclosed receipts used in the same project ought to be allowed as application to WIP.

Claim for application of undisclosed receipts to WIP allowed in part by permitting telescoping.

Taxability of on-money under project completion method - profit element of on-money taxable, receipts not income per se - Quantum and timing of taxability of 'on-money' receipts (whether entire receipt is taxable in A.Y. 2011-12 or only profit element and whether balance is taxable on project completion). - HELD THAT: - The Tribunal accepted that the assessee consistently followed the project completion method and that the Department had accepted that method in earlier and subsequent years. Citing authorities that on-money is part of sale consideration (receipts) and not income per se and that only the profit element embedded in such receipts is taxable, the Tribunal held the assessee was entitled to follow its established accounting method. Applying the principle of consistency and relevant precedents, the Tribunal concluded that only the profit element (as claimed by the assessee, 10%) is taxable in the year under appeal and the balance is to be recognised in the year of completion of the project. Consequently the telescoping/application allowed was restricted to the difference between the on-money declared and the 10% profit offered in the year.

Only the profit element (10%) of the on-money is taxable in A.Y. 2011-12; the balance is taxable on project completion; telescoping/application allowed to the extent of the differential.

Treatment of undisclosed income declared by associated concern - telescoping of undisclosed receipts - Whether amounts declared as undisclosed income by an associate/sister concern could be telescoped in the assessee's hands as application to its WIP. - HELD THAT: - The Tribunal examined precedents where undisclosed receipts taxed in the hands of one person were not again taxed in the hands of another where the connection was established and telescoping was appropriate. Applying those principles to the facts, the Tribunal held that a similar telescoping/applicability arises and allowed the claim in favour of the assessee to the extent consistent with the assessment of profit element and subject to the limitation applied to the assessee's own on-money (i.e., restricted by the 10% profit assumption adopted for timing).

Telescoping in respect of the amount declared by the sister concern is allowed to the extent consistent with the deduction granted to the assessee (subject to the 10% profit-year recognition rule).

Diversion of borrowed funds and section 36(1)(iii) implications - allowability of interest where funds advanced to group concerns as commercial expediency - Whether interest on borrowings added to WIP was disallowable under section 36(1)(iii) on the ground that borrowed funds were diverted to sister concerns for non-business purposes. - HELD THAT: - On remand the Assessing Officer himself examined utilization and concluded a portion of borrowings was for the assessee's business; the CIT(A) allowed interest proportionately relying on that remand report. The Tribunal noted that the assessee had adequate interest-free own funds and that the subsidiaries/sister concerns were in the same line of business so advances were made as commercial expediency to further group business. Citing binding and persuasive authorities, the Tribunal held that where advances to related concerns are for commercial expediency and to further the assessee's business, interest deduction under section 36(1)(iii) is not forfeited merely because borrowed funds were used.

Proportionate disallowance of interest deleted; interest attributable to borrowings used for business purposes allowed; Department's appeal on this issue dismissed.

Final Conclusion: The Tribunal admitted the additional evidence and, on merits, partly allowed the assessee's appeal and dismissed the Revenue's appeal. The Tribunal held that (i) telescoping/application of the undisclosed on-money to WIP is permissible (subject to restricting current-year recognition to the profit element), (ii) only the profit element (10%) of the on-money is taxable in A.Y. 2011-12 with the balance taxable on project completion, (iii) telescoping in respect of the sister concern's disclosure is allowed to the extent consistent with the above, and (iv) the proportionate disallowance of interest under section 36(1)(iii) was not sustainable and is deleted.

Assumption of jurisdiction under section 153C - Requirement of satisfaction note by Assessing Officer of searched person - Seized incriminating material as basis for proceedings under section 153C - Addition under section 68 in absence of proof of identity, creditworthiness and genuineness - Admission of additional grounds in second round of appeal - Powers of the Tribunal under section 254 to decide new legal grounds

Admission of additional grounds in second round of appeal - Powers of the Tribunal under section 254 to decide new legal grounds - Additional grounds challenging jurisdiction raised for the first time before the Tribunal were admitted for adjudication. - HELD THAT: - The Tribunal considered authorities showing that purely legal or jurisdictional grounds may be raised at a later stage if the facts necessary to decide them are on record and admission would advance justice. Reliance was placed on jurisdictional High Court and other precedents holding that when the point goes to root of jurisdiction the Tribunal has wide powers and such grounds need not be confined to those in the original memorandum. In view of those authorities and the material on record the Tribunal admitted the additional legal grounds for adjudication. [Paras 11]

Admitted additional grounds challenging jurisdiction for decision on merits.

Seized incriminating material as basis for proceedings under section 153C - Addition under section 68 in absence of proof of identity, creditworthiness and genuineness - Addition of amount as unexplained cash credit was unsustainable where the Assessing Officer made no specific reference to incriminating material seized during search. - HELD THAT: - The AO made an addition under section 68 treating advances as income because the assessee did not produce documentary evidence; however the AO did not point to any incriminating material seized during the search relating to those advances. The Tribunal held that framing an assessment under section 153C (and making additions) without reference to seized incriminating material is contrary to settled law and therefore such addition cannot be sustained. The Tribunal applied the principle that proceedings under section 153C must be founded on seized material that links the addition to the search, and absent such reference the addition is invalid. [Paras 16]

Addition under section 68 set aside for lack of reference to seized incriminating material.

Requirement of satisfaction note by Assessing Officer of searched person - Assumption of jurisdiction under section 153C - Assessment framed under section 153C was quashed because the Assessing Officer of the searched person had not recorded the requisite satisfaction that the seized documents belonged to another person. - HELD THAT: - Undisputedly no satisfaction note recorded by the AO of the searched person stating that the seized documents belong to the other person was placed on record. The Tribunal noted binding precedents and the statutory scheme of section 153C which make the recording of such satisfaction by the AO of the searched person a precondition to transfer seized material and to confer jurisdiction on the AO of the other person. In absence of that satisfaction the assumption of jurisdiction under section 153C was held to be not in accordance with law and the consequent assessments were quashed. [Paras 21]

Assessments framed under section 153C quashed for want of the mandatory satisfaction by the AO of the searched person.

Final Conclusion: The Tribunal admitted the assessee's additional jurisdictional grounds and, on merits, set aside the addition under section 68 for lack of reference to incriminating seized material and quashed the assessments framed under section 153C for absence of the mandatory satisfaction note by the AO of the searched person; other merits-based contentions were rendered academic.

Reimbursement not constituting taxable income - fees for technical services - 'make available' requirement - most favoured nation clause - automatic application of more restricted scope - ancillary and subsidiary services to the enjoyment of a right - royalties versus fees for technical services

Reimbursement not constituting taxable income - royalties versus fees for technical services - Receipt of SAP licence charges of Rs. 1,30,04,613 from the Indian subsidiary is not taxable as royalty or income in the hands of the non resident assessee. - HELD THAT: - The assessee purchased SAP licences from an independent third party and received equivalent amounts from its Indian subsidiary on a strict cost to cost basis without any markup. A pure reimbursement that lacks any income element cannot be treated as taxable income. The Tribunal accepted documentary evidence of purchase and a certification of cost to cost recharge, rejected the Revenue's argument that routing through the assessee alters character of the receipt, and held that coordinate decisions relied upon by the Revenue do not support taxation where the payment is a bona fide reimbursement. Consequently the amount cannot be brought to tax under domestic law or as royalty under the treaty on the facts of this case. [Paras 6, 7]

SAP licence charges received as reimbursement are not taxable in the hands of the assessee.

Most favoured nation clause - automatic application of more restricted scope - fees for technical services - 'make available' requirement - The MFN/protocol clause in the Indo Swedish treaty brings into effect the more restricted 'make available' scope of Article 12 as contained in the later India Portugal treaty without need for a separate governmental notification. - HELD THAT: - The Tribunal analysed different modes of implementing MFN clauses in treaties and examined the Indo Swedish protocol wording which provides that where India limits its source taxation or scope vis a vis an OECD member under another convention, the same rate or scope 'shall also apply' under the Indo Swedish convention. Following earlier coordinate bench precedent (ITC Ltd) and the decision of the Delhi High Court in Steria, the Tribunal held that the Indo Swedish protocol operates automatically to import the more restricted scope (including the 'make available' test) from the Indo Portuguese treaty. AAR conclusions to the contrary were not treated as binding. [Paras 16, 22]

The 'make available' limitation from the India Portugal treaty applies to the Indo Swedish treaty by virtue of the MFN/protocol clause.

Fees for technical services - 'make available' requirement - Consultancy/project leadership services of Rs. 1,97,94,209 do not 'make available' technical knowledge, skill or know how to SCA India and hence are not taxable as FTS under the treaty. - HELD THAT: - Applying the settled test of 'make available', the Tribunal emphasised that a service only qualifies when it imparts enduring technical knowledge or skills enabling the recipient to perform independently in future. The services in issue involved planning, steering, coordination and on site execution by the assessee's project leader; they did not transfer tools, methodologies or technical know how that would enable SCA India to replicate the services without recourse to the provider. The DRP's factual conclusions that schedules, charts or controls were handed over were found to be incorrect on the record. As the 'make available' test is not satisfied, the receipts cannot be taxed as FTS under Article 12. [Paras 23, 24]

Consultancy fees are not taxable as fees for technical services because the 'make available' requirement is not met.

Ancillary and subsidiary services to the enjoyment of a right - fees for technical services - 'make available' requirement - Information Technology support services of Rs. 57,47,684 are not taxable under Article 12 either as services ancillary and subsidiary to enjoyment of the SAP system or as FTS under the 'make available' limb. - HELD THAT: - The Tribunal rejected the DRP's view that the IT services were intrinsically linked to enjoyment of the SAP system so as to fall within the ancillary/subsidiary limb, noting that only a small part (if any) of the services could be ancillary but such part was neither identified nor paid to the same person who received the royalty for the software. Article 12(4)(a) applies where the same person receives royalty and the ancillary services; that factual nexus is absent here because the software vendor and the service provider are different. Further, for the 'make available' test the Tribunal reiterated that incidental benefits, efficiency gains or user training do not suffice to show transfer of enduring technical ability enabling independent performance. On these bases the IT support receipts are not taxable under Article 12. [Paras 25]

IT support service receipts are not taxable under Article 12 as ancillary/subsidiary services or under the 'make available' limb.

Final Conclusion: The Tribunal allowed the appeal. The SAP licence reimbursements, the consultancy/project leadership fees and the IT support charges received by the non resident assessee from its Indian subsidiary were held not taxable in India: the licence receipts were bona fide reimbursements, and the services did not satisfy the 'make available' test nor were they properly ancillary/subsidiary to a royalty receipt; the MFN/protocol clause was held to import the 'make available' limitation into the Indo Swedish treaty but, on the facts, that limitation was not satisfied.

Applicability of Section 153C as amended - 'pertains to' and non-obstante override - Obligation to issue notice under Section 153C and assess under Section 153A where seized books/documents pertain to another person - Vitiation of reassessment under Section 147/148 when Section 153C is attracted - Evidentiary value of seized 'dumb' documents recovered from a third party - Inapplicability of Section 68 in absence of credit entry in assessee's books

Applicability of Section 153C as amended - 'pertains to' and non-obstante override - Obligation to issue notice under Section 153C and assess under Section 153A where seized books/documents pertain to another person - Vitiation of reassessment under Section 147/148 when Section 153C is attracted - Whether reassessment framed under section 147/148 was valid when incriminating documents found during search at a third party 'pertained to' the assessee and the amended Section 153C (w.e.f. 01/06/2015) applied. - HELD THAT: - The Tribunal held that the search on the third party occurred on 10/09/2015 and therefore the amended Section 153C (effective 01/06/2015) applied. The amended provision replaces the earlier 'belong to' test with 'pertain to'/'relates to' and begins with a non obstante clause that overrides sections including Section 147 and 148. Where seized books/documents or information contained therein pertain to a person other than the person searched, the material must be handed over to the Assessing Officer having jurisdiction over that other person and notices and assessment/reassessment must be made under Section 153A in terms of Section 153C(1). The Tribunal found that the seized pages and their image in the third party's mobile pertained to the assessee and thus the Assessing Officer should have proceeded under Section 153C/153A. Proceeding under Section 147/148 in such circumstances was contrary to the statutory mandate and vitiated the reassessment; accordingly the reassessment framed under Section 147/148 was quashed and the impugned additions did not survive. [Paras 8, 9]

Reassessment under Section 147/148 quashed because Section 153C applied; AO was obliged to issue notice and proceed under Section 153C/153A.

Evidentiary value of seized 'dumb' documents recovered from a third party - Inapplicability of Section 68 in absence of credit entry in assessee's books - Whether the addition made under Section 68 on the basis of the seized documents was sustainable and whether the seized documents, without corroboration, supported the addition. - HELD THAT: - The Tribunal noted that to invoke Section 68 there must be a credit entry in the assessee's books; in the present case no such credit was found and the AO's case rested on alleged 'on money' entries noted on seized papers recovered from a third party. Cross examinations showed denial by buyers, the third party and the assessee of any cash/on money transactions; the third party disclaimed authority to undertake financial dealings and retracted earlier statements. In the absence of corroborative evidence, the seized papers-being 'dumb' documents recovered from a third party-could not carry sufficient evidentiary weight to sustain the addition. Consequently, the addition under Section 68 was not tenable and had no legs to stand. [Paras 10, 11, 12]

Addition under Section 68 discarded for lack of book entries and corroborative evidence; the seized documents alone insufficient to sustain the addition.

Final Conclusion: The Tribunal quashed the reassessments framed under Section 147/148 for AY 2010-11 to AY 2013-14 because the amended Section 153C applied (seized documents pertained to the assessee) and the Assessing Officer should have proceeded under Section 153C/153A; additions made under Section 68 were also held unsustainable. Assessee's appeals are partly allowed; Revenue's appeals (AY 2012-13 & AY 2013-14) are dismissed as infructuous.

Deduction under Section 80JJAA of the Income Tax Act - Definition of "regular workman" and "additional wages" - Remand to Assessing Officer for fresh adjudication - Disallowance under section 40(a)(ia) for failure to deduct tax at source - Retrospective imposition of TDS liability and impossibility of performance - Deductibility of education cess and secondary/higher education cess as business expenditure

Deduction under Section 80JJAA of the Income Tax Act - Definition of "regular workman" and "additional wages" - Remand to Assessing Officer for fresh adjudication - Claim of deduction under Section 80JJAA for the year under appeal remitted to the Assessing Officer for fresh examination - HELD THAT: - The Tribunal noted extensive factual and legal contest on whether the employees qualified as "regular workmen" and whether claims related to earlier assessment years were maintainable. Having regard to precedent and earlier co ordinate bench decisions in the assessee's own case, the Tribunal held that the matter should be re examined by the Assessing Officer. The Assessing Officer is directed to re adjudicate the claim after affording the assessee full opportunity to produce the employee details and to pass a reasoned and speaking order; the assessee is directed to cooperate and furnish the information called for. The Tribunal therefore did not decide the merits on the record before it but remitted the issue for fresh consideration and computation in accordance with law. [Paras 6]

Issue remitted to the Assessing Officer for fresh consideration after giving the assessee adequate opportunity; ground allowed for statistical purposes.

Disallowance under section 40(a)(ia) for failure to deduct tax at source - Retrospective imposition of TDS liability and impossibility of performance - Disallowance of Annual Maintenance Contract and software purchase expenses under section 40(a)(ia) deleted where TDS liability could not be fastened retrospectively - HELD THAT: - The Tribunal followed the coordinate bench decisions which held that where payments for software or similar services were made prior to later judicial pronouncements or retrospective statutory clarifications treating such payments as taxable as "royalty", the payer could not be retrospectively fastened with TDS liability. Applying those precedents, the Tribunal concluded that the assessee could not be treated as an assessee in default for amounts paid prior to the change in law/interpretation and set aside the CIT(A)'s disallowance in respect of AMC and software expenses. The Tribunal directed deletion of the impugned addition and remitted related computationary aspects to the AO as necessary. [Paras 10]

Disallowance under section 40(a)(ia) in respect of AMC and software payments deleted; ground allowed in favour of the assessee.

Deductibility of education cess and secondary/higher education cess as business expenditure - Interpretation of section 40(a)(ii) and legislative history - Claim for deduction of education cess and secondary/higher education cess admitted and allowed - HELD THAT: - The Tribunal admitted the additional legal ground and, following recent judicial developments (including the reasoning that Section 40(a)(ii) prohibits deduction of 'any rate or tax levied' but does not refer to 'cess' and legislative history/CBDT circular supports allowing cess), held that education cess and secondary/higher education cess are not barred from deduction under section 40(a)(ii). The Tribunal considered authorities permitting deduction and the CBDT circular explaining the deliberate omission of the word 'cess' from the provision and allowed the additional ground, holding that the cess is allowable as expenditure in computing business income. [Paras 12, 16]

Additional ground admitted and deduction of education cess and secondary/higher education cess allowed.

Final Conclusion: The appeal is partly allowed: the Section 80JJAA claim is remitted to the Assessing Officer for fresh, reasoned adjudication after affording opportunity to the assessee; the disallowance under section 40(a)(ia) in respect of AMC and software payments is deleted; and the additional ground for deduction of education cess and secondary/higher education cess is admitted and allowed.

Exemption under section 54B - use of land for agricultural purposes for two years immediately preceding the date of transfer - agricultural land outside the meaning of capital asset under section 2(14) - burden on revenue to disprove nexus between taxed receipt and subsequent investment - prohibition of double taxation / double addition - requirement of corroborative evidence beyond statements and seized notes

Exemption under section 54B - use of land for agricultural purposes for two years immediately preceding the date of transfer - Whether exemption under section 54B is allowable on capital gain arising from sale of Motera land for A.Y. 2010-11. - HELD THAT: - Section 54B requires that the land transferred must have been used by the assessee for agricultural purposes in the two years immediately preceding the date of transfer. The authorities below did not dispute the assessee's pleaded use of the Motera land for agricultural operations during the relevant two year period and the assessee had declared agricultural income. In these circumstances the precondition in section 54B is satisfied and the denial of exemption on the ground that the land had been converted to non agricultural status in revenue records was not determinative of entitlement under section 54B. Reliance placed on High Court precedent considering 'use' rather than mere nomenclature supports allowance of the exemption. [Paras 12]

Assessee's claim of exemption under section 54B in respect of the Motera land for A.Y. 2010-11 is allowed; order of CIT(A) set aside and AO directed to grant the exemption.

Agricultural land outside the meaning of capital asset under section 2(14) - Whether the impugned Nardipur land is outside the definition of 'capital asset' under section 2(14) and hence not chargeable to capital gains (A.Y. 2010-11). - HELD THAT: - The statutory tests for exclusion from 'capital asset' (distance from municipal limits and village population criteria) were examined. The material on record (census extract and geographical distances) showed that Nardipur village had population below the prescribed threshold and lay at the requisite distance from sub district and district headquarters, fulfilling the conditions to treat the land as agricultural land outside section 2(14). On that basis the land was held not to be a capital asset and the charge to capital gains did not arise. [Paras 20]

Additional ground allowed; the Nardipur land is outside the ambit of 'capital asset' under section 2(14) and the addition is deleted.

Exemption under section 54B - agricultural land outside the meaning of capital asset under section 2(14) - Whether exemption under section 54B and the contention that the property is not a capital asset should be allowed in the appeal of Shri Shailesh B. Patel (A.Y. 2010-11). - HELD THAT: - The Tribunal applied the reasoning adopted in the co assessee's appeal: (a) where land was used for agriculture for the requisite period, section 54B exemption is available, and (b) where the land qualifies as agricultural land outside section 2(14), capital gains do not arise. The identical factual and legal questions were resolved in favour of the assessee by following those determinations. [Paras 22, 23, 24, 25]

Appeal allowed by following the determinations in the co ordinate appeal; exemption under section 54B allowed and additional ground that land is not a capital asset accepted.

Unexplained investments - burden on revenue to disprove nexus between taxed receipt and subsequent investment - prohibition of double taxation / double addition - Whether additions for unexplained investments in lands at Rupal, Acher and Nardipur (A.Y. 2009-10) should be sustained where assessee showed cash flow linking investments to sale proceeds already offered to tax. - HELD THAT: - Seized documents indicated cash receipts from sale of Motera property and the assessee offered the corresponding amount to tax in earlier assessment years. The assessee produced a cash flow statement and corroborative entries (loose papers and bank withdrawals) showing receipts and subsequent cash payments for land purchases. The AO had not pointed to any defect in that cash flow reconciliation nor produced material disproving the claimed nexus. In absence of cogent contrary material from Revenue, addition would amount to double taxation. Authorities' deletion of additions was therefore sustainable. [Paras 28, 29, 33]

Revenue's appeal dismissed; CIT(A)'s deletions of additions for unexplained investments are upheld.

Requirement of corroborative evidence beyond statements and seized notes - CBDT guidance on statements recorded during search/survey - Whether addition made on account of admitted/unaccounted receipt alleged from sale of Motera property (A.Y. 2011-12) is sustainable where material on record does not corroborate receipt as assessable income of the assessee. - HELD THAT: - Seized loose papers recorded amounts but the property title stood in the assessee's son's name and the assessee produced affidavits and contemporaneous material asserting the sale deal did not materialise and that post dated cheques were not encashed. The authorities below had not verified bank accounts, buyers or obtained corroboration under section 133(6)/131, nor applied computation under section 48 to ascertain capital gain. CBDT instructions caution against relying solely on statements recorded during search without independent evidence. On this record the Tribunal found the addition unsubstantiated and liable to deletion. [Paras 41, 42, 44]

Assessee's appeal allowed; addition sustained by AO/CIT(A) set aside and deleted.

Final Conclusion: All three appeals filed by the assessees are allowed on the grounds stated (allowance of section 54B exemption where statutory 'use' test is satisfied; recognition of certain lands as agricultural and outside 'capital asset' under section 2(14); deletion of additions where taxed receipts were shown to fund subsequent investments or where seized notes lacked corroborative evidentiary support). The single revenue appeal is dismissed.

Unexplained cash credit under Section 68 - onus on assessee to prove identity, creditworthiness and genuineness - shift of burden to Assessing Officer upon prima facie discharge - disallowance of interest on unexplained cash credit - inquiry under Section 133(6) for verification

Unexplained cash credit under Section 68 - onus on assessee to prove identity, creditworthiness and genuineness - shift of burden to Assessing Officer upon prima facie discharge - disallowance of interest on unexplained cash credit - Whether the loans of Rs.22,00,000 advanced to the assessee could be treated as unexplained cash credit under Section 68 and whether the corresponding interest disallowance was sustainable. - HELD THAT: - The Tribunal held that the initial onus under Section 68 to establish (i) identity of the creditors, (ii) their creditworthiness/capacity to advance funds and (iii) genuineness of the transactions was discharged by the assessee by producing confirmations, PAN details and bank statements. Once these particulars were placed on record, the burden shifted to the Assessing Officer to make further inquiries or to produce contrary evidence. The AO did not undertake independent verification despite having the necessary details nor did he bring any material to disprove the lenders' explanations (including the claim that one lender had sourced funds from a third person and the availability of commission evidence in respect of another lender). The Tribunal applied the principle that mere non-filing of returns by lenders or suspicion is not sufficient to sustain an addition without appropriate investigation, and noted the availability of power to inquire under Section 133(6) which the AO could have exercised. On these findings the Tribunal concluded that the cash credits were explained within the parameters of Section 68 and consequently the addition and the related disallowance of interest could not be sustained. [Paras 9]

Addition treating the loans as unexplained cash credit under Section 68 and the consequent disallowance of interest are deleted; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for Assessment Year 2013-2014, holding that the assessee had discharged the onus under Section 68, the Assessing Officer failed to rebut or verify the evidence, and therefore the addition under Section 68 and the associated interest disallowance were deleted.

Deduction of tax at source when expense not incurred or claimed - Assessee in default for non-deduction of tax at source - Interest on deep discount bonds and applicability of TDS provisions - Chapter XVII-B deduction at source: time of credit or payment - Reliance on payee's inclusion of income as relevant to TDS liability

Deduction of tax at source when expense not incurred or claimed - Chapter XVII-B deduction at source: time of credit or payment - Interest on deep discount bonds and applicability of TDS provisions - Whether the assessee was liable to be treated as an assessee in default for non-deduction of TDS in respect of interest on deep discount bonds where the assessee had not incurred or claimed the interest expense for the year. - HELD THAT: - The Tribunal examined the statutory scheme in Chapter XVII-B which requires deduction at the time of credit of income to the payee or at the time of payment, whichever is earlier. It observed that the question of income in the hands of the payee ordinarily arises when the payer has incurred the expense and claimed deduction; if the payer has not incurred or claimed the expense there is ordinarily no obligation to deduct. The assessee contended it had not claimed any interest expense in the year and therefore could not be an assessee in default. The Tribunal considered the reply from HDFC Bank which showed the bank had recorded receipt of interest, creating an apparent inconsistency with the assessee's claim. The assessee nevertheless produced its schedule of interest expenses and the learned Departmental Representative did not controvert the assessee's primary contention at hearing. On the material before it and in the absence of any effective challenge by the revenue to the assessee's accounts showing no claim of the interest expenditure, the Tribunal held that the condition precedent for attracting TDS-incurrence/claim of the expenditure by the payer-was not established. Consequently, provisions of deduction at source were not attracted and the assessee could not be treated as an assessee in default for non-deduction in respect of the interest on the deep discount bonds.

Revenue's appeal dismissed; no liability for deduction at source arose since the assessee had not incurred or claimed the interest expense for A.Y. 2007-08.

Final Conclusion: The Tribunal dismissed the Revenue's appeal for A.Y. 2007-08, holding that no TDS obligation arose because the assessee had not incurred or claimed the interest expense on the deep discount bonds in the year under consideration.

Maintainability of writ under Article 226 - automatic disqualification by operation of law under Section 164(2) - vacation of office under Section 167 - disqualification for reappointment for five years - remand to competent authority for adjudication of disqualification

Maintainability of writ under Article 226 - efficacy of alternate remedy - Whether a writ petition under Article 226 is maintainable for seeking declaration of disqualification of directors under Section 164(2) of the Companies Act, 2013 - HELD THAT: - The Court held that the Companies Act, 2013 does not provide an administrative procedure for disqualification under Section 164(2) and that respondents admitted that the Company Court cannot entertain applications to declare offices vacant. Given that civil proceedings and resultant appeals ordinarily take more than five years and thus would not provide an efficacious remedy against a disqualification which operates for five years, the Court found the civil remedy to be inadequate. Consequently, a writ petition under Article 226 is maintainable in appropriate cases to challenge or seek relief in respect of disqualification arising under Section 164(2). [Paras 20]

Writ petition under Article 226 is maintainable as civil remedy is not an efficacious alternate remedy in appropriate cases.

Automatic disqualification by operation of law under Section 164(2) - vacation of office under Section 167 - Whether disqualification under Section 164(2) and vacation of office under Section 167 occur automatically upon non-filing of financial statements/annual returns for a continuous period of three financial years - HELD THAT: - The Court examined Sections 164(2) and 167 and concluded that Section 164(2) disqualifies any person who is or has been a director of a company which has not filed financial statements or annual returns for any continuous period of three financial years from being reappointed or appointed in other companies for five years from the date of default. Section 167(1)(a) mandates vacation of office where a director incurs any disqualification specified in Section 164. The Court therefore held that the disqualification and consequent vacation of office occur by operation of law and are automatic, not requiring a separate administrative decision. [Paras 21, 22, 26]

Disqualification under Section 164(2) and vacation under Section 167 operate automatically by operation of law upon the company's non-filing for a continuous period of three financial years.

Disqualification under Section 164(2) - remand to competent authority - Whether respondents 4 to 7 are to be declared disqualified under Section 164(2) and whether the Court should itself declare such disqualification - HELD THAT: - The Court found that although the Yogam had not filed financial statements/annual returns for the continuous period 2013-'14 to 2015-'16, the writ petition did not contain sufficient positive pleadings that respondents 4 to 7 were directors during those specific three consecutive years (except limited averment regarding the 4th respondent). Given the seriousness of declaring disqualification which affects rights to hold office and the presence of other directors not impleaded who might also be affected, the Court declined to make a declaration against respondents 4 to 7 in this petition. Instead, the Court observed that the petitioner had already placed the matter before the competent authority (the Inspector General of Registration) in Ext.P4 and directed that authority to consider the representation after giving opportunity of hearing and permitting production of additional documents. [Paras 28, 29]

Court declined to declare respondents 4 to 7 disqualified for reappointment for want of sufficient pleadings and directed the competent authority to consider Ext.P4 afresh with opportunity of hearing.

Final Conclusion: The writ petition was held maintainable; the Court determined that disqualification under Section 164(2) and vacation under Section 167 operate automatically upon non-filing for a continuous period of three financial years (2013-'14 to 2015-'16); however, for lack of sufficient pleadings the Court did not itself declare respondents 4 to 7 disqualified and directed the Inspector General of Registration to consider the petitioner's Ext.P4 representation afresh and decide it within three months after hearing affected parties and permitting further documents.

Reduction of share capital - special resolution approving reduction - articles of association empowering reduction of capital - competent authority's no-objection to the scheme - requirement of notice to creditors and publication of minutes - registration of order with Registrar of Companies

Reduction of share capital - special resolution approving reduction - articles of association empowering reduction of capital - competent authority's no-objection to the scheme - Approval of the proposed reduction of the company's paid-up share capital and sanction of the minutes of reduction. - HELD THAT: - The Tribunal considered the petition under the Companies Act, 2013 for reduction of capital supported by a Board resolution and a special resolution passed in the Extraordinary General Meeting. The Articles of Association empower the company to reduce its share capital. The Registrar of Companies filed a report indicating that the Regional Director, as the competent authority under delegated powers of the Central Government, had examined the scheme and decided not to object. No objections were filed to the petition. The company produced auditor's certificate and directors' declaration regarding absence of deposits and creditors. On these materials and in the absence of any adverse representation, the Tribunal found the statutory requirements fulfilled and made the petition absolute, allowing the reduction and approving the proposed minutes. [Paras 4, 8, 9, 11, 14]

The proposed reduction of paid-up share capital is sanctioned and the form of minutes recording the reduction is approved.

Requirement of notice to creditors and publication of minutes - registration of order with Registrar of Companies - Relief sought to waive the requirement of issuing notice to creditors and publishing the newspaper advertisement and the Tribunal's directions regarding publication and registration. - HELD THAT: - Although the petitioner sought waiver of the requirement to issue notice to creditors and to publish advertisement, the Tribunal, having found no objections and having received a no-objection communication from the competent authority, nonetheless directed compliance with statutory formalities for registration and publicity. The Tribunal directed the petitioner to file the order with the Registrar of Companies within 30 days and to publish notices about registration of the order and minutes in two specified newspapers circulating in Kerala within 30 days of registration. All concerned regulatory authorities were directed to act on certified copies of the order. [Paras 2, 11, 12, 13]

Waiver of notice/publication was not granted; the company must register the order with the RoC and publish notices in the specified newspapers as directed.

Final Conclusion: The Tribunal sanctioned the reduction of the company's paid-up share capital and approved the minutes of reduction, relying on the Articles, special resolution, supporting certificates and the competent authority's no-objection; it did not waive publicity/registration formalities and directed filing with the Registrar of Companies and publication of notices in two newspapers.

Scheme of Amalgamation - Appointed Date - Effective Date - Sanction by Tribunal - Continuity of employment and protection of service rights - Substitution in statutory and trust funds - Compliance with Section 232(3)(i) - Filing in E Form INC 28 - Amendment of Memorandum and Articles of Association - Form CAA 7

Scheme of Amalgamation - Appointed Date - Sanction by Tribunal - Sanction of the Scheme of Amalgamation and fixation of the Appointed Date. - HELD THAT: - The Tribunal after considering the petition, the reports of the Registrar of Companies and the Official Liquidator, and the amendments made to the Scheme, sanctioned the Scheme of Amalgamation of M/s Toonz Infrastructure Private Limited and M/s Toonz Animation India Private Limited with M/s Asian Institute of Films and Media Studies Private Limited. The Appointed Date originally proposed was amended pursuant to the Regional Director's direction and is fixed as the opening hours of 1st April, 2019. The Tribunal recorded that the Scheme shall be operative from the Appointed Date and effective on the Effective Date and consequently granted sanction and disposed of the TCP. [Paras 17, 18]

Scheme sanctioned; Appointed Date fixed as 01.04.2019; TCP (CAA)/04/KOB/2020 disposed.

Amendment of Memorandum and Articles of Association - Sanction by Tribunal - Whether absence of an enabling amalgamation clause in the transferee's Memorandum is fatal to sanctioning the Scheme. - HELD THAT: - The Tribunal considered the objection of the Official Liquidator regarding the first transferor's memorandum and the related question of whether the transferee's memorandum must contain an explicit amalgamation clause. Having noted and relied on the decision of the High Court of Madras cited by petitioners, the Bench accepted that a Court/Tribunal may sanction a scheme notwithstanding absence of a specific enabling clause in the transferee company's memorandum provided the proposal is not detrimental to the interests of transferor or transferee stakeholders. The petitioners revised the Scheme addressing the reports and objections; on that basis the Tribunal proceeded to sanction the Scheme. [Paras 16, 17]

Objection on absence of explicit amalgamation clause in memorandum not fatal; sanction allowed after revisions and on the stated precedent.

Continuity of employment and protection of service rights - Substitution in statutory and trust funds - Compliance with Section 232(3)(i) - Filing in E Form INC 28 - Form CAA 7 - Amendment of Memorandum and Articles of Association - Directions and consequential compliances to be followed upon sanction of the Scheme. - HELD THAT: - The Tribunal recorded the operative provisions of the Scheme concerning employee continuity, protection of terms of service and substitution in provident, gratuity and other funds, and directed specific post sanction compliances. These included filing the certified order and Scheme with regulatory authorities, electronic filing with the Registrar of Companies in E Form INC 28 within 30 days, the Transferee Company making an application to the ROC Kerala for payment of any balance fee as required under Section 232(3)(i), filing amended Memorandum and Articles of Association with the ROC, lodging the certified order and Scheme with the Superintendent of Stamps for adjudication within 60 days, and the Registrar of the Tribunal drawing up Form CAA 7 with the transferor companies furnishing the schedule of properties within four weeks. The Tribunal also permitted authorities or any interested person to seek further directions if necessary. [Paras 11, 17]

Post sanction compliance directions issued (filing with ROC in INC 28, payment under Section 232(3)(i), filing amended MoA/AoA, stamp adjudication, Form CAA 7 and schedule of properties); employee protections acknowledged.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation of the two Transferor Companies with the Transferee Company, fixed the Appointed Date as 1st April 2019, disposed of the TCP, and issued directions for statutory and consequential compliances including filings with the Registrar of Companies, payment of fees under Section 232(3)(i), amendment filings of MoA/AoA, stamp adjudication and Registrar's compliance under Form CAA 7.

Restoration of struck off company under Section 252 - carrying on business or being in operation as determinative for restoration - non-filing of financial statements as ground for striking off - effect of dissolution under Section 250 - limited scope of the "or otherwise" limb in Section 252 to prevent arbitrary restoration

Restoration of struck off company under Section 252 - carrying on business or being in operation as determinative for restoration - Whether the Appellant Company's name should be restored to the Register of Companies under Section 252 on the ground that it was carrying on business or in operation when struck off. - HELD THAT: - The Tribunal examined the material placed by the Appellant and observed that the Balance Sheets for the relevant years show 'nil' revenue from operations (paras. 7(i)-(ii)). No bank statements, income tax returns or other documents were produced to demonstrate that the company was carrying on business or operating in accordance with its objects at the time of striking off (para. 7(iii), para. 12). The Bench applied the statutory criterion under Section 252(3) that restoration depends on satisfaction that the company was carrying on business or in operation or that it would be just to restore the name. Reliance was placed on the NCLAT decision in Alliance Commodities for the principle that the "or otherwise" limb cannot be used to permit arbitrary restoration where there is a specific finding that the company was not in operation or carrying on business (para. 13). On these findings, the Tribunal concluded that the Appellant failed to establish that it was carrying on business or in operation when its name was struck off. [Paras 7, 12, 13, 14]

Restoration is not warranted because the Appellant did not prove it was carrying on business or in operation when struck off; appeal dismissed.

Effect of dissolution under Section 250 - payment of post striking off tax demand not a ground for restoration - Whether discharge of an Income tax demand after striking off justifies restoration of the company's name. - HELD THAT: - The Tribunal noted the Income tax demand (for assessment years 2008 09 to 2017 18) was paid on dates after the company had been struck off (para. 9). It observed that payment of such demand only discharges the company's liabilities under Section 250 but does not demonstrate that the company was in operation at the time of striking off or otherwise provide a basis for restoration. The statutory effect of dissolution under Section 250 was applied to conclude that post dissolution payment does not convert into a ground for restoration (para. 10). [Paras 9, 10, 11]

Payment of income tax demand after striking off does not justify restoration; it only discharges liabilities post dissolution.

Final Conclusion: The Tribunal found no merit in the appeal; the Appellant failed to establish that it was carrying on business or in operation when its name was struck off and payment of tax liabilities after striking off does not warrant restoration. The appeal is dismissed.

Avoidance applications under Section 25(2)(j) of the Code - effect of pending avoidance applications on approval of a resolution plan - disclosure in Form H by the Resolution Professional - role of the Adjudicating Authority (NCLT) in adjudicating avoidance applications and determining eligibility under Section 29A - timelines for the Resolution Professional to examine objectionable transactions

Avoidance applications under Section 25(2)(j) of the Code - effect of pending avoidance applications on approval of a resolution plan - disclosure in Form H by the Resolution Professional - Whether the petitioner can direct the Insolvency and Bankruptcy Board of India to require that avoidance applications be finally decided before a resolution plan by a promoter is considered or approved. - HELD THAT: - The Court held that the scheme of the Code and the timelines prescribed require the Resolution Professional to examine objectionable transactions, form an opinion and place details before the NCLT, normally by means of Form H, at the time the Resolution Plan is submitted. Venus Recruiters (supra) was cited for the proposition that avoidance applications are to be processed within prescribed timelines so that the NCLT has the requisite details when approving a plan, and that the existence of Form H does not permit avoidance applications to survive beyond the CIRP for adjudication after plan approval. Accordingly, it is for the NCLT (the Adjudicating Authority), and not the Board by general directions at this stage, to consider the effect of any pending avoidance applications and to determine eligibility under Section 29A at the appropriate time in the resolution process. Given that the CIRP proceedings in the matters concerning respondent nos.5 and 6 remain pending before the NCLT, the petition seeking the Board-level directions was held to be premature and was declined. [Paras 7, 8, 9, 10]

Petition dismissed as premature; it is for the NCLT to consider pending avoidance applications and their effect on approval of a resolution plan and on eligibility under Section 29A, and the petitioner may pursue appropriate proceedings at the appropriate stage.

Final Conclusion: The petition seeking writ directions to the Board to mandate disposal or pre-approval determination of avoidance applications and eligibility was dismissed as premature; the adjudication of such applications and consideration of their effect on resolution plans and Section 29A eligibility lies with the NCLT in the CIRP process.

Validity of demand notice under Section 8(1) of the Insolvency and Bankruptcy Code, 2016 - Advocate's authority to issue demand notice - requirement of board resolution for authorization - initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 - remand for fresh consideration of admission having regard to debt and default

Validity of demand notice under Section 8(1) of the Insolvency and Bankruptcy Code, 2016 - Advocate's authority to issue demand notice - requirement of board resolution for authorization - A demand notice in the prescribed form issued and delivered by an Advocate duly instructed by the Operational Creditor is a valid notice for initiation of CIRP and does not require a Board Resolution to validate the Advocate's issuance. - HELD THAT: - The Tribunal applied the settled principle that delivery of a demand notice in the prescribed Form-3 is a sine qua non for initiation of CIRP under Section 9 and that a demand notice issued by an Advocate acting under instructions of the Operational Creditor is valid for this purpose. The Adjudicating Authority's conclusion that the notice was unauthorized for want of a Board Resolution is unsustainable because where an Advocate issues the demand notice on instructions of the Operational Creditor, there is no separate requirement of a Board Resolution to validate the Advocate's authority. The Tribunal noted consistent precedent of the Apex Court and prior orders of the Adjudicating Authority endorsing that an Advocate can issue such a notice on behalf of the client; absent any positive finding that the Advocate was not duly instructed, the notice cannot be treated as invalid. [Paras 4, 5, 6]

The finding that the demand notice was invalid for lack of authorization is set aside; a demand notice issued by a duly instructed Advocate is valid.

Remand for fresh consideration of admission having regard to debt and default - opportunity to settle the claim before admission - The impugned order is set aside and the matter is remitted to the Adjudicating Authority to pass a fresh order on admission after verifying completeness of the application and the key ingredients of debt and default, and after affording the Corporate Debtor an opportunity to settle the claim. - HELD THAT: - The Tribunal directed that, upon remand, the Adjudicating Authority should examine whether the application is complete and, having regard to the essential elements of debt and default, admit or reject the application as warranted by law. Before passing such order, the Adjudicating Authority must provide the Corporate Debtor an opportunity to settle the Operational Creditor's claim. The order remits the matter for fresh consideration rather than deciding admission on merits itself, thereby leaving factual and adjudicatory determinations to the Adjudicating Authority. [Paras 7]

Impugned order set aside; matter remitted to the Adjudicating Authority with directions to consider admission on completeness and merits and to afford the Corporate Debtor an opportunity to settle the claim.

Final Conclusion: Appeal allowed; impugned order dated 4th September, 2020 set aside and matter remitted to the Adjudicating Authority for fresh consideration in accordance with directions; Appellant directed to appear before the Adjudicating Authority on 15th February, 2021.

Ad-interim relief - Prima facie case - Opportunity of hearing / Natural justice - Moratorium under Section 14, Insolvency and Bankruptcy Code, 2016 - Service of notice

Ad-interim relief - Prima facie case - Opportunity of hearing / Natural justice - Moratorium under Section 14, Insolvency and Bankruptcy Code, 2016 - The writ applicant made out a strong prima facie case and was entitled to ad-interim relief. - HELD THAT: - The writ applicant showed that a show cause notice dated 27 August 2020 was issued and that the impugned order in original was passed without affording an opportunity to file a reply or a personal hearing. The applicant also informed the court that the Corporate Insolvency Resolution Process had been admitted by the National Company Law Tribunal and relied on the statutory moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016. Having considered the materials on record and the submissions, the High Court was satisfied that a strong prima facie case existed and that interim protection was warranted. The court therefore granted the ad-interim relief sought in paragraph 29(c) of the writ petition. [Paras 4, 7]

Ad-interim relief granted to the writ applicant on the basis of a strong prima facie case and concerns as to absence of opportunity of hearing and the moratorium.

Service of notice - Returnable notice - Notice was ordered to be issued to the respondents and made returnable on the specified date. - HELD THAT: - In view of the grant of interim relief and the contentions raised, the court directed that notice be issued to the respondents. The order fixed the returnable date as 8th February 2021 and directed that respondents be served directly through e-mail. [Paras 6, 7]

Notice issued to respondents, returnable on 8th February 2021, with service to be effected by e-mail.

Final Conclusion: The High Court issued notice returnable on 8th February 2021 and granted ad-interim relief to M/s Educomp Solutions Ltd on a prima facie basis, having regard to absence of opportunity of hearing and the asserted moratorium under the Insolvency and Bankruptcy Code; respondents to be served by e-mail.

Rectification of mistake apparent from record - Section 35C(2) of the Central Excise Act, 1944 - patent mistake - limits on rectification power - reconsideration/reappreciation of evidence - review of own order

Rectification of mistake apparent from record - Section 35C(2) of the Central Excise Act, 1944 - patent mistake - limits on rectification power - reconsideration/reappreciation of evidence - review of own order - Whether applications filed under Section 35C(2) seeking recall of the Tribunal's order so as to reappreciate evidence and reconsider points argued are maintainable as rectification of mistake apparent from the record. - HELD THAT: - The Tribunal held that applications under Section 35C(2) are confined to correction of an obvious and patent mistake on the face of the record and cannot be used to re-open or reappreciate evidence or to review a legal or factual conclusion previously reached. Relying on the principle in RDC Concrete, the Court reiterated that a mistake which requires a long-drawn process of reasoning, re-evaluation of evidence, or reconsideration of a debatable point of law is not amenable to rectification under Section 35C(2). Allowing recall of the Tribunal's order to revisit arguments and the impugned order would amount to the Tribunal reviewing its own decision, which is impermissible in exercise of rectification jurisdiction. Accordingly, the applications seeking reconsideration of evidence and arguments were not maintainable as rectification applications.

Applications for rectification under Section 35C(2) dismissed as not maintainable; the Tribunal's order of 15.04.2019 stands.

Final Conclusion: The Revenue's applications for rectification under Section 35C(2) seeking recall of the Tribunal's order to reappreciate evidence and arguments were dismissed; rectification is limited to obvious, patent mistakes and cannot be used to review or redecide matters requiring reappraisal of evidence or legal conclusions.

Violation of principles of natural justice - service of assessment notices by e-mail not authorised under Rule 64(1)(b) of the Telangana VAT Rules, 2005 - acceptance of 'C' Forms after finalisation of assessment - remand for fresh consideration with pre-assessment show-cause notice and personal hearing

Violation of principles of natural justice - service of assessment notices by e-mail not authorised under Rule 64(1)(b) of the Telangana VAT Rules, 2005 - Validity of the service of notices by e-mail and consequent compliance with principles of natural justice in the assessment for 2015-16. - HELD THAT: - The Court found that the notices impugned (dated 26.08.2019, 19.11.2019 and the Final Notice dated 07.03.2020) were communicated by e-mail and that Rule 64(1)(b) of the Telangana VAT Rules, 2005 does not contemplate service of notices by e-mail. The respondents did not dispute that Rule 64(1)(b) does not authorise e-mail service. In these circumstances the Court concluded that the mode of service resulted in a breach of the principles of natural justice and caused grave prejudice to the petitioner. Having reached that conclusion, the Court set aside the impugned assessment order and directed remedial steps to cure the defect in service and to afford the petitioner an opportunity to be heard. [Paras 2, 5, 6, 7]

Impugned Assessment Order A.O.No.49657 dt.30.03.2020 is set aside for breach of natural justice caused by service by e-mail; matter remitted for fresh consideration with directions to serve a pre-assessment show-cause notice in accordance with Rule 64(1)(b) and to afford a personal hearing.

Acceptance of 'C' Forms after finalisation of assessment - remand for fresh consideration with pre-assessment show-cause notice and personal hearing - Treatment of 'C' Forms tendered by the petitioner and procedure on remand. - HELD THAT: - The Court noted the petitioner's contention that 'C' Forms were sent on 19.11.2020 but were not taken on record by the assessing authority. The respondents conceded that it is open to an assessee to submit 'C' Forms even after the finalisation of assessment. In view of the finding of violation of natural justice, the matter was remitted to the assessing authority for fresh consideration. The authority was directed to serve a pre-assessment show-cause notice indicating the turnover proposed to be taxed and the tax proposed, to grant the petitioner six weeks from receipt of that notice to file objections with supporting material (which would include any 'C' Forms), to afford a personal hearing, and thereafter to pass a reasoned order in accordance with law and communicate it to the petitioner. [Paras 3, 4, 5, 7]

Remitted to the assessing authority to accept and consider any 'C' Forms or other supporting material filed within six weeks of the pre-assessment notice, afford personal hearing, and pass a reasoned order.

Final Conclusion: Writ petition allowed; impugned assessment order for 2015-16 set aside for breach of natural justice caused by unauthorised service by e-mail; matter remitted for fresh consideration with directions to serve a pre-assessment show-cause notice under Rule 64(1)(b), allow six weeks for filing objections (including 'C' Forms), afford personal hearing and pass a reasoned order; no order as to costs.

Condonation of delay in filing revision on account of COVID-19 - Penalty under Section 54(1)(14) of U.P. Value Added Tax Act for under-valuation and tax evasion - Intention to evade tax as inferred from discrepancy between invoice value and assessed value - Reliance on vendor's post-facto documents and explanation versus contemporaneous inspection report - Appellate reappraisal of evidentiary weight of Form C and consignor's certificate

Condonation of delay in filing revision on account of COVID-19 - Application for condonation of delay in filing the Trade Tax Revision - HELD THAT: - The court examined the explanation that the revisionist received the Tribunal's judgment on 19.3.2020 and, due to the COVID-19 lockdown, was unable to approach counsel until July 2020 and filed the revision on 5.8.2020. Having regard to the exceptional circumstances of the pandemic and the observations of the Supreme Court in suo moto proceedings, the Court found the delay to be largely attributable to the COVID-19 situation and held that the delay was liable to be condoned. Consequently the revision was treated as filed in time. [Paras 3, 4, 5]

Delay in filing the Trade Tax Revision is condoned and the revision is treated as filed in time.

Penalty under Section 54(1)(14) of U.P. Value Added Tax Act for under-valuation and tax evasion - Intention to evade tax as inferred from discrepancy between invoice value and assessed value - Reliance on vendor's post-facto documents and explanation versus contemporaneous inspection report - Appellate reappraisal of evidentiary weight of Form C and consignor's certificate - Validity of imposition of penalty under Section 54(1)(14) for alleged under-valuation and tax evasion and whether the revisionist was exculpated by the vendor's explanation and documents - HELD THAT: - The Court considered the material showing that on inspection the Mobile Inspection Squad found all tile boxes bearing MRP of Rs. 200/-, whereas the invoice disclosed three varieties of tiles with differing per-box values and a lower aggregate invoice value; physical verification produced a higher assessed value than invoiced. The First Appellate Authority had accepted a consignor's certificate and Form C to exculpate the revisionist, treating the discrepancies as inadvertent mistakes by the consignor. The Tribunal, however, inferred collusion and intention to evade tax, noting the temporal sequence (inspection on 2.11.2016 and Form C dated 9.7.2017) and inconsistent explanations given by the revisionist before different authorities. The Court found that the Assessing Officer's factual finding of discrepancy was undisputed, that the revisionist's explanations differed before authorities, and that the transaction manifestly showed under-valuation indicative of intent to evade tax. On that basis the Court found no legal or factual infirmity in the Tribunal's order upholding the penalty. [Paras 12, 13, 23, 24, 25]

The penalty imposed under Section 54(1)(14) was upheld; the Tribunal's finding of intention to evade tax and the consequent imposition of penalty are sustained and the Trade Tax Revision is dismissed on merits.

Final Conclusion: Application for condonation of delay allowed; on merits the Court found no infirmity in the Tribunal's conclusion that the discrepancy between invoiced and actual value, inconsistent explanations and post-facto documentation justified inference of intention to evade tax and upheld the penalty, dismissing the Trade Tax Revision.

Mismatch of ITC - fresh show cause notice - opportunity of hearing - remand for fresh enquiry and verification - centralised mechanism for dealing with mismatch cases - assessing officer to consult officers of other end dealer - deviation from Enforcement/ISIC proposals to be recorded with reasons - bar on raising limitation plea against fresh notice

Fresh show cause notice - opportunity of hearing - remand for fresh enquiry and verification - Impugned notice/order issued on verification of sales transactions for 2009-2010 set aside and matter remitted for fresh proceeding - HELD THAT: - The Court found that the impugned order could not be sustained in view of the need for a proper preliminary exercise and adherence to a fair procedure when dealing with alleged mismatches in sales/ITC records. Reliance was placed on the Court's earlier decision in J.K.M. Graphics Solution Private Limited which directed that matters involving mismatch be re-examined by the Assessing Officers after consultation with officers of the other end dealer and that a centralised mechanism and fair procedure be evolved. The Commissioner's Circular No. 3/2019 prescribing procedures for handling Enforcement/ISIC proposals and mismatch cases was noted as the operative administrative guidance. In consequence, the Court set aside the impugned order and directed the assessing officer to issue a fresh show cause notice containing all required details relating to mismatch invoices, afford the petitioner an opportunity to explain within the prescribed time, and pass reasoned orders dealing with each contention and communicate the same under written acknowledgment. [Paras 3, 4]

Impugned order set aside; assessing officer to issue fresh show cause notice, afford hearing, conduct inquiry in consultation with other end dealer officers and pass reasoned order.

Mismatch of ITC - centralised mechanism for dealing with mismatch cases - deviation from Enforcement/ISIC proposals to be recorded with reasons - bar on raising limitation plea against fresh notice - Procedural consequences and limitations on defence when fresh show cause notice is issued in mismatch cases - HELD THAT: - The Court emphasized procedural safeguards: assessing officers may deviate from Enforcement/ISIC proposals if reasons are recorded; issues other than ITC mismatch may be finalized leaving mismatch pending until an appropriate mechanism is evolved; notices in mismatch cases must be maintained to keep matters alive; and administrative directions in Circular No.3/2019 (including timelines for disposal and inter-office consultation) are to be followed. The Court also expressly held that the petitioner shall not be permitted to raise a plea of limitation in response to the fresh show cause notice issued pursuant to this order. [Paras 3, 4]

Assessing officers to follow procedures in Circular No.3/2019, record reasons for deviations, maintain notices for mismatch issues and the petitioner barred from raising limitation objection to the fresh notice.

Final Conclusion: Writ petition allowed; impugned order quashed and matter remanded for de novo proceedings by the assessing officer in accordance with the Court's directions and administrative Circular No.3/2019, including issuance of a fresh show cause notice, opportunity of hearing and disposal by reasoned order; connected miscellaneous petition closed.

Bail under Section 439 Cr.P.C. - grant of bail pending trial - conditions of bail - requirement of local surety - non-tampering with prosecution witnesses - obligation to remain available for investigation and trial

Bail under Section 439 Cr.P.C. - grant of bail pending trial - conditions of bail - requirement of local surety - non-tampering with prosecution witnesses - obligation to remain available for investigation and trial - Petitioner entitled to be released on bail in FIR No.198 of 2020 (registered under Sections 376, 506 and 417 IPC). - HELD THAT: - The High Court, without commenting on the merits, considered the entirety of facts and material on record including the status report, documents placed by parties, arrest and presentation of challan. Balancing the rival contentions and circumstances of arrest and residence, the Court concluded that, at the stage of bail, discretionary relief was justified. Bail was ordered subject to furnishing a personal bond with two sureties (one to be local), compliance with conditions to ensure availability for investigation and trial, prohibition on inducement, threat or tampering with witnesses or obstruction of investigation/trial, prohibition against committing similar offences and restrictions on travel without prior information. The Court left it open to the trial Court or prosecution to impose additional necessary conditions and cautioned that any violation may attract cancellation of bail. [Paras 10, 11, 12, 13]

Petition allowed; petitioner released on bail on furnishing bond and sureties and subject to specified conditions (including a local surety), with liberty for prosecution or trial Court to impose further conditions and for cancellation of bail on breach.

Final Conclusion: Bail petition allowed: petitioner released on bail in FIR No.198 of 2020 under Sections 376, 506 and 417 IPC on conditions including personal bond, two sureties (one local), restraints against tampering with witnesses and obligation to remain available for investigation/trial; prosecution/trial Court may impose further conditions and seek cancellation if conditions are violated.

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of statutory presumption by preponderance of probabilities - Admissibility and evidentiary weight of affidavit-evidence and documentary proof - Reliance on proforma invoice and absence of account statements to establish liability - Standard for interference with acquittal on appeal - perversity and appreciation of evidence

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of statutory presumption by preponderance of probabilities - Whether the Trial Court erred in not drawing the presumption under Section 139 N.I. Act and in acquitting the accused for offence under Section 138 N.I. Act. - HELD THAT: - The Court re appreciated the evidence on record in an appeal against acquittal. P.W.1's evidence was discarded because he was not tendered for cross examination; only P.W.2's affidavit evidence remained and was subjected to cross examination (paras.33 35). Material contradictions were shown between the complaint, P.W.1's affidavit and P.W.2's affidavit - notably as to whether the claim related to 6,000 MTs (as pleaded) or 25,000 MTs (as deposed) and the invoice basis for the claim (paras.35 38). Key documents relied upon by the complainant were either proforma invoices or bore dates prior to the cheque and were not supported by finalized account statements; invoices specifically pleaded in the complaint were not produced (paras.35 38). The court observed that although the drawer's signature on the cheque was not disputed (which ordinarily gives rise to a Section 139 presumption), the presumption is rebuttable. The cumulative effect of contradictory affidavits, failure to produce account statements/invoices relied upon in the complaint, and marked court documents showing substantial payments to the complainant created a sufficient basis for the Trial Court to conclude that the statutory presumption had been rebutted on preponderance of probabilities (paras.36 39). Given this appraisal, the High Court found no error in the Trial Court's conclusion that the complainant failed to prove the case beyond reasonable doubt and that the accused had successfully raised a probable defence sufficient to rebut the presumption (paras.39 40). [Paras 36, 37, 38, 39, 40]

The Trial Court did not err in declining to draw the Section 139 presumption; the presumption was rebutted on available evidence and the acquittal was proper.

Admissibility and evidentiary weight of affidavit-evidence and documentary proof - Reliance on proforma invoice and absence of account statements to establish liability - Whether the Trial Court misappreciated the oral and documentary evidence in concluding that the complainant failed to establish legally enforceable debt. - HELD THAT: - The High Court reviewed the evidentiary value of the materials placed before the Trial Court. P.W.1's evidence was excluded because he was not cross examined; P.W.2's affidavit contained inconsistencies with the complaint and with P.W.1's earlier averments (paras.33 36). Documents introduced during examination (Exs.P8-P10) were shown to be proforma in nature, dated prior to the cheque, and not supplemented by account statements or finalized records evidencing an ascertained liability (paras.35 38). Marked court documents (Exs.C1-C3) indicated significant payments by the accused which were not denied and which had been relied upon in other proceedings; those court documents undermined the complainant's pleaded case and were not denied by the complainant (para.36 37). In these circumstances the Trial Court's reliance on the totality of evidence - including contradictions, absence of pleaded invoices and account statements, and the marked court documents - was reasonable and not perverse (paras.37 40). [Paras 35, 36, 37, 38, 40]

The Trial Court's appreciation of affidavit evidence and documents was justified; absence of supporting invoices and account statements rendered the complainant's case unproved.

Standard for interference with acquittal on appeal - perversity and appreciation of evidence - Whether this Court should reverse the Trial Court's order of acquittal on appellate review. - HELD THAT: - An appellate court may overturn an acquittal only if the Trial Court's findings are perverse or material evidence was not considered. The High Court examined whether the Trial Court ignored material evidence or misapplied legal principles (paras.32, 40). Having re evaluated the record, including contradictions in pleadings and affidavits, the nature and dates of invoices, absence of account statements and the marked court documents, the High Court found no perversity in the Trial Court's conclusion that the complainant failed to prove the offence beyond reasonable doubt. Therefore there was no justification to exercise appellate jurisdiction to reverse the acquittal (paras.39 40). [Paras 32, 39, 40]

No interference with the acquittal; appellate jurisdiction not attracted as there is no perverse appreciation of evidence.

Final Conclusion: The appeal is dismissed. The order of acquittal by the Trial Court in respect of the offence under Section 138 of the Negotiable Instruments Act is upheld.

Offence under Section 138 of the Negotiable Instruments Act - Sentencing - reduction/modification in revision - Proportionality of sentence - Balancing compensation and punishment under Section 143 of the Negotiable Instruments Act - Effect of plea under Section 252 of the Code of Criminal Procedure on sentencing

Offence under Section 138 of the Negotiable Instruments Act - Conviction for the offence under Section 138 of the Negotiable Instruments Act confirmed - HELD THAT: - The revision petitioner expressly did not challenge the conviction recorded by the Trial Court and affirmed by the Appellate Court. The High Court therefore declined to revisit the merits of conviction and confirmed the finding of guilt for the offence punishable under Section 138 of the Negotiable Instruments Act, leaving intact the Trial Court's and Sessions Court's conclusions on liability. [Paras 6]

Conviction under Section 138 of the Negotiable Instruments Act is confirmed.

Sentencing - reduction/modification in revision - Proportionality of sentence - Balancing compensation and punishment under Section 143 of the Negotiable Instruments Act - Effect of plea under Section 252 of the Code of Criminal Procedure on sentencing - Whether the sentence of one year simple imprisonment should be interfered with and, if so, the appropriate sentence - HELD THAT: - The Court examined sentencing in light of proportionality and relevant precedent noting that punishment under Section 138 need not be the objective where compensation meets ends of justice, particularly when the accused pleads guilty under Section 252 Cr.P.C.; however, the petitioner had not pleaded guilty and had pursued repeated remedies. The Court observed that the original one-year sentence was disproportionate to the proven guilt, especially since an earlier conviction in the same case had attracted a two-month term. Balancing the need to enforce the complainant's rights and the accused's repeated but unsuccessful litigation, the Court concluded that imprisonment was warranted but the term should be moderated to correspond to the gravity of the offence. [Paras 8, 10]

Sentence of one year simple imprisonment reduced to two months; default sentence reduced accordingly; fine of Rs. 21,000/- confirmed and apportionment left undisturbed.

Final Conclusion: Revision petition partly allowed: conviction under Section 138 of the Negotiable Instruments Act affirmed; sentence reduced from one year to two months simple imprisonment (default sentence reduced proportionately); fine of Rs.21,000/- confirmed and apportionment unaffected; records to be transmitted to the Trial and Sessions Courts.

Meaning of "use" for incidence of tax - Section 12(2) - surrender and bar on tax during non-use - Rule 22(4) - effect of non-extension of surrender after three months - Rule 22-A - write-off/exemption for non-existing vehicles - Interaction of Motor Vehicles Act registration/fitness with Taxation Act - Remand for fresh consideration under Rule 22-A

Meaning of "use" for incidence of tax - Section 12(2) - surrender and bar on tax during non-use - Interaction of Motor Vehicles Act registration/fitness with Taxation Act - Whether tax/additional tax could be levied where registration was surrendered and the vehicle had no valid fitness/registration such that it was not in use. - HELD THAT: - Section 2(o) of the Taxation Act imports meanings from the Motor Vehicles Act; incidence of tax under the Taxation Act depends on the vehicle being "in use." Section 12(2) prescribes that where registration and related documents are surrendered before the date tax is due, no tax/additional tax is payable for each complete calendar month during which the vehicle remains withdrawn and documents remain surrendered, subject to the proviso that tax is payable if the vehicle is found plying. The Motor Vehicles Act provisions on registration and fitness (Sections 55/56) are material because absence of a valid fitness/registration renders the vehicle incapable of lawful use. While Rule 22(4) provides that surrender not extended beyond three months may be deemed revoked, that procedural rule does not eliminate the Taxation Officer's obligation to be satisfied on the question of actual use before levying tax. The Taxation Officer and appellate authority must therefore consider whether, on the material placed, the vehicle was non-existent or not in use before raising a demand; automatic imposition of tax without such satisfaction is impermissible.

Benefit of Section 12(2) and the Motor Vehicles Act's requirement of valid fitness/registration was held material; tax could not be levied without satisfaction that the vehicle was plying. The demand for tax for the period 1.1.2013 to 30.4.2013 was set aside to the extent stated.

Rule 22-A - write-off/exemption for non-existing vehicles - Remand for fresh consideration under Rule 22-A - Rule 22(4) - effect of non-extension of surrender after three months - Whether the Taxation Officer and appellate authority were obliged to examine and grant relief under Rule 22-A and whether the demand for the earlier period requires reconsideration. - HELD THAT: - Rule 22-A empowers the Taxation Officer, on information and after enquiry, to exempt or write-off arrears of tax/additional tax where a vehicle is lost, destroyed, rendered permanently incapable of use or otherwise not in existence; the rule does not prescribe that information must be given within any particular prior date. The appellate authority erroneously refused to consider Rule 22-A on the ground that no information existed prior to a specified date; the Taxation Officer had also not considered Rule 22-A in the original order. Once a show cause was issued and the petitioner formally sought relief, the matter required adjudication under Rule 22-A by appropriate inquiry. Accordingly the question whether arrears for the period 01.12.2010 to 31.10.2012 are leviable must be remitted for fresh consideration under Rule 22-A.

The demand for the period 01.12.2010 to 31.10.2012 is remanded to the Taxation Officer to decide afresh after holding such enquiry as may be necessary under Rule 22-A; petitioner directed to produce relevant documents on the date fixed.

Final Conclusion: Writ petition partly allowed: demand for tax for 1.1.2013 to 30.4.2013 set aside; demand for 01.12.2010 to 31.10.2012 remanded to the Taxation Officer for fresh inquiry and decision under Rule 22-A of the U.P. Motor Vehicles Taxation Rules, 1998, with directions for expeditious disposal.