TaxTMI Updates e-Newsletter
Jan 14,2021

Pure services - Exemption under Notification No. 12/2017-Central Tax (Rate) - Functions entrusted to a Municipality under Article 243W - Definition of Local authority, Governmental authority and Government entity

Pure services - Exemption under Notification No. 12/2017-Central Tax (Rate) - Functions entrusted to a Municipality under Article 243W - Definition of Local authority, Governmental authority and Government entity - Whether supply of para-medical, administrative, technical and other manpower on outsource basis to Seth L.G. General Municipal Hospital is exempt from GST under Serial No. 3 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 - HELD THAT: - The exemption in Serial No. 3 applies only if three conditions are satisfied: (i) the supply is a "pure service" (i.e., not a works contract or composite supply involving goods), (ii) the service is rendered in relation to a function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W of the Constitution, and (iii) the service recipient is the Central Government, a State Government, a Union Territory, a Local Authority, a Governmental Authority or a Government Entity as defined. On the material before the Authority the manpower supply constituted only services without supply of goods and therefore qualified as "pure services" (para 10.1). The services related to healthcare functions listed under Articles 243G/243W and the para-medical and other staff were found to be in relation to the Municipality's public health function (para 10.2). However, the applicant did not produce evidence to establish that Seth L.G. General Municipal Hospital falls within the statutory definitions of Central/State Government, Local Authority, Governmental Authority or Government Entity for the purpose of the notification. In absence of documentary proof that the recipient is covered by those definitions, the benefit of the exemption cannot be extended (paras 10.3.1, 10.3.2). Applying these conclusions, the exemption under Serial No. 3 cannot be availed for the supplies to Seth L.G. General Municipal Hospital on the record before the Authority (para 11). [Paras 10]

Exemption under Serial No. 3 of Notification No.12/2017 is not available for the manpower supply to Seth L.G. General Municipal Hospital on the facts and evidence placed before the Authority.

Final Conclusion: The Advance Ruling answers the question in the negative: the supply of para medical, administrative, technical and other manpower on outsource basis to Seth L.G. General Municipal Hospital is not exempt from GST under Serial No. 3 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 on the record before the Authority.

Pure services - Exemption under Entry No.3 of Notification No.12/2017 - Classification under Heading 9983 - Functions entrusted under Article 243W of the Constitution - Supply involving works contract or other composite supplies - Service provided to Central/State/Local Authority/Governmental Authority/Government Entity

Pure services - Exemption under Entry No.3 of Notification No.12/2017 - Supply involving works contract or other composite supplies - Design and Comprehensive Consultancy Services for Surat Municipal Corporation are exempt under Entry No.3 of Notification No.12/2017. - HELD THAT: - The Authority examined the Surat Municipal Corporation contract terms and scope (concept to completion including architectural, structural, MEPF, internal/external electrification, backup generators, cabling, LAN, signage, interiors and landscaping) and found contractual clauses and tender conditions indicating supply of goods/services beyond pure consultancy and provisions for GST reimbursement in the contract. The Authority held that 'pure service' excludes works contract or composite supplies involving goods; since the first necessary condition (pure service) is not satisfied on the contract terms, the exemption under Entry No.3 cannot apply. Consequently it was unnecessary to examine other conditions of the notification. [Paras 20, 21, 22]

Answered in the negative; the services to Surat Municipal Corporation are not exempt under Entry No.3 as they are not pure services.

Pure services - Exemption under Entry No.3 of Notification No.12/2017 - Functions entrusted under Article 243W of the Constitution - Consultancy services for preparation of design and detailed estimation of Town Hall at Dehgam provided to Ahmedabad Urban Development Authority are exempt under Entry No.3 of Notification No.12/2017. - HELD THAT: - The Authority observed that AUDA's one-page work order was not supplemented by the underlying agreement despite being requested; without the contract terms it could not verify whether the supply was purely services or involved supply of goods/works contract. In absence of the agreement and the necessary verification, the Authority concluded the first condition (pure service) was not satisfied and therefore the exemption could not be allowed. [Paras 20, 21, 22]

Answered in the negative; the services to Ahmedabad Urban Development Authority are not exempt under Entry No.3 as the applicant failed to demonstrate they are pure services.

Pure services - Exemption under Entry No.3 of Notification No.12/2017 - Supply involving works contract or other composite supplies - Medical and design consultancy services for establishment of Medical College, Teaching Hospital and Nursing College provided to Pune Municipal Corporation are exempt under Entry No.3 of Notification No.12/2017. - HELD THAT: - The Pune Municipal Corporation agreement includes extensive deliverables (complete architectural, structural and services design, specifications, medical gas systems, equipment layouts, and express contractual pricing including GST). The contractual language and scope indicate involvement beyond pure services and the contract expressly contemplates GST payment/reimbursement. Consequently the applicant failed to satisfy the 'pure service' requirement of Entry No.3 and exemption was not available. [Paras 20, 21, 22]

Answered in the negative; the services to Pune Municipal Corporation are not exempt under Entry No.3 as they are not pure services.

Pure services - Exemption under Entry No.3 of Notification No.12/2017 - Service provided to Government Entity - Preparation of Master Plan of Green Field Areas and Project Management Consultancy for Rajkot Smart City Development Ltd. are exempt under Entry No.3 of Notification No.12/2017. - HELD THAT: - The Rajkot SPV contract was examined and contains clauses that treat the contract price as inclusive of taxes (including GST) and provides for adjustment on tax changes; such clauses indicate taxes are contemplated and payable under the contract. On the terms, the Authority concluded the services are not confined to 'pure services' and therefore do not meet the first condition for Entry No.3 exemption. Accordingly, exemption could not be allowed despite Rajkot Smart City Development Ltd. being a government-owned SPV. [Paras 20, 21, 22]

Answered in the negative; the services to Rajkot Smart City Development Ltd. are not exempt under Entry No.3 as they are not pure services.

Pure services - Exemption under Entry No.3 of Notification No.12/2017 - Supply involving works contract or other composite supplies - Design and PMC Services for Baramati Hospital provided to Executive Engineer, Public Works (East) Division, Pune are exempt under Entry No.3 of Notification No.12/2017. - HELD THAT: - The pre-GST agreement (signed in 2014) contains provisions requiring the consultant to arrange connections, shifting of utilities and to prepare detailed integrated system specifications and bills of quantities; the scope indicates likely involvement of goods and works contract elements. Given these contractual obligations and the nature of deliverables, the Authority concluded the services are not 'pure services' and thus do not satisfy the first condition for Entry No.3 exemption. [Paras 20, 21, 22]

Answered in the negative; the services for Baramati Hospital are not exempt under Entry No.3 as they are not pure services.

Pure services - Exemption under Entry No.3 of Notification No.12/2017 - Service provided to Government Entity - Consultancy services to Gujarat Technological University for architectural and engineering design and related services are exempt under Entry No.3 of Notification No.12/2017. - HELD THAT: - The GTU agreement requires detailed master planning, building location and connectivity and obtaining statutory approvals; the contractual scope suggests activities beyond mere advisory services and indicates possible supply of goods/works contract elements. Considering the applicant also provides works contract services generally, the Authority found the 'pure service' requirement unmet and therefore Entry No.3 exemption could not be granted. [Paras 20, 21, 22]

Answered in the negative; the services to Gujarat Technological University are not exempt under Entry No.3 as they are not pure services.

Final Conclusion: For each contract examined the Authority found that the services did not satisfy the threshold requirement of being 'pure services' (exclusion of works contract or composite supplies involving goods) and/or the contracts contemplated GST/tax-inclusive pricing; accordingly, none of the applicant's six services agreements qualify for exemption under Entry No.3 of Notification No.12/2017 and are taxable as professional/technical services classified under Heading 9983.

Intermediary services - place of supply under Section 13(8)(b) of the IGST Act, 2017 - classification as services in wholesale trade (Heading 9961) - intra state supply and liability to CGST and SGST - taxability at 18% (9% CGST + 9% SGST)

Intermediary services - place of supply under Section 13(8)(b) of the IGST Act, 2017 - intra state supply and liability to CGST and SGST - classification as services in wholesale trade (Heading 9961) - taxability at 18% (9% CGST + 9% SGST) - Whether the applicant should charge CGST and SGST or IGST on the commission income received from a foreign principal for arranging the sale of goods. - HELD THAT: - The applicant's activity is correctly characterised as services of commission agents/commodity brokers - i.e. intermediary services. Such services are classifiable under Heading 9961 and covered by the notifications prescribing an 18% GST rate. Section 13 applies to determine the place of supply where the supplier or recipient is outside India. Sub section (8)(b) of Section 13 specifically provides that the place of supply for intermediary services is the location of the supplier. The supplier (applicant) is located in Ahmedabad, Gujarat, and therefore the place of supply is in India at the supplier's location. As the place of supply and the supplier both lie within the same State, the supply is to be treated as an intra state supply and not as export/import of service. Consequently, the correct tax treatment is payment of CGST and SGST rather than IGST, and the applicable rate is 18% (9% CGST + 9% SGST) as per the relevant notifications. [Paras 6, 7, 8]

The applicant is liable to pay GST as CGST and SGST (intra state supply) at the rate of 18% (9% CGST + 9% SGST) on the intermediary/commission services.

Final Conclusion: Advance ruling: services rendered by M/s. Dharmshil Agencies, being intermediary/commission services, have their place of supply at the supplier's location under Section 13(8)(b) and are taxable as intra state supplies liable to CGST and SGST at 18% (9% + 9%).

Classification of goods - tariff classification under heading 2302 - raw material versus prepared animal feed - interpretation of beneficial notification/exemption - applicability of Notification No.1/2017 and Notification No.2/2017

Classification of goods - tariff classification under heading 2302 - raw material versus prepared animal feed - applicability of Notification No.1/2017 and Notification No.2/2017 - Whether Maize Bran supplied by the applicant is a 'cattle feed' covered by the NIL-rated entry at Sr.No.102 of Notification No.2/2017 or is classifiable as 'Bran' under Sr.No.103A of Notification No.1/2017 attracting GST at the rate specified therein. - HELD THAT: - The Authority examined the product definition, tariff entries and notifications. The First Schedule to the Customs Tariff specifically lists Maize Bran at sub heading 23021010 within Chapter 23 which deals with residues and prepared animal fodder. Notification No.1/2017 (as amended) inserted an entry at Sr.No.103A covering 'Bran, sharps and other residues' at the relevant tariff item, while Notification No.2/2017 (as amended) grants NIL rate to prepared aquatic/poultry/cattle feed at Sr.No.102. Dictionary meaning and the applicant's own submissions show maize bran is a supplement or ingredient used in manufacture/formulation of animal feed and is of variable composition; it is typically not directly fed to animals but mixed into compound feeds. The applicant's sample invoice also demonstrates sale of maize bran as an input to a cattle feed manufacturer. CBEC Circular No.80/54/2018 clarified that raw materials/inputs (such as bran, fish meal, MBM) used in making animal feed are different from prepared feeds and do not qualify for the NIL rated entry meant for prepared feeds. Applying these principles, maize bran is correctly identified as a raw material/input (Bran under heading 2302) and not as prepared cattle feed under Sr.No.102. Consequently, the product does not attract the exemption at Sr.No.102 and is classifiable under Sr.No.103A of Notification No.1/2017. [Paras 14, 15, 18, 19, 20]

Maize Bran manufactured and supplied by the applicant is not a 'cattle feed' within Sr.No.102 of Notification No.2/2017 and is classifiable under Sr.No.103A of Notification No.1/2017, attracting GST at 5% (2.5% CGST + 2.5% SGST).

Final Conclusion: The Authority rules that the applicant's Maize Bran is an input/raw material (Bran under heading 2302) and not a prepared cattle feed; it is therefore not eligible for the NIL rated entry and is taxable under Sr.No.103A of Notification No.1/2017 at the applicable GST rate of 5% (2.5% CGST + 2.5% SGST).

Outward supply - business (including activity incidental or ancillary to business) - supply of food as a service (Schedule II clause regarding food for consideration) - consideration for supply - supplier - taxable supply under GST - obligation under the Factories Act and its effect on supply characterisation

Outward supply - business (including activity incidental or ancillary to business) - supply of food as a service (Schedule II clause regarding food for consideration) - consideration for supply - taxable supply under GST - GST is applicable on the amount recovered from employees towards third party canteen services provided by the company which are obligatory under the Factories Act. - HELD THAT: - The Authority examined statutory definitions and classifications under the CGST Act. The definition of 'outward supply' requires a supply made in the course or furtherance of business. The definition of 'business' includes activities incidental or ancillary to trade or commerce; accordingly, supply of food to employees qualifies as an activity incidental or ancillary to the applicant's business. Schedule II classifies supply of food or any other article for human consumption for consideration as a supply of service. The payments recovered from employees constitute 'consideration' under the Act. Even if no profit is made and the company acts as an intermediary for a third party canteen provider, the recovery of the employee's share meets the statutory elements of supply by a supplier for consideration. Therefore the amount recovered is an 'outward supply' and taxable under GST. [Paras 11, 12, 13, 15, 16]

The recovery from employees for third party canteen services obligatory under the Factories Act amounts to a taxable outward supply under the CGST Act.

Final Conclusion: The Authority ruled in the affirmative that amounts recovered from employees for canteen services provided through a third party, even when obligatory under the Factories Act and provided on a subsidised/no profit basis, constitute consideration for an outward supply and are taxable under GST.

Recovery of notice pay as consideration - Agreeing to the obligation to refrain from an act or to tolerate an act - Supply of services under Schedule II, Clause 5(e) - GST liability on contractual exit payments

Recovery of notice pay as consideration - Supply of services under Schedule II, Clause 5(e) - Whether recovery of notice pay from employees for not serving contractual notice period is subject to GST. - HELD THAT: - The Authority found that the notice pay is a sum stipulated in the employment contract for breach of the obligation to serve the agreed notice period and is therefore a mutually agreed consideration. Clause 5(e) to Schedule II to the CGST Act, 2017, declares that 'agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act' is to be treated as supply of service. The employer's acceptance of payment in lieu of requiring an employee to serve the notice period constitutes the employer agreeing to tolerate the employee's act of not serving notice. Consequently, the transaction falls within the scope of declared services in Schedule II and attracts GST. The Authority considered prior decisions under the erstwhile service tax regime but held them not directly applicable to the GST levy, and therefore did not accept those precedents as negating GST applicability. Applying the statutory classification, the Authority concluded that recovery of notice pay is taxable as a service (classified under services not elsewhere classified) and liable to GST at the applicable rate. [Paras 11, 12, 13, 14]

Recovery of notice pay from employees who do not serve the contractual notice period is a taxable supply of services under Schedule II Clause 5(e) and is liable to GST.

Final Conclusion: The Authority ruled that notice pay recovered from employees for non serving of contractual notice period is taxable as a service (agreeing to tolerate an act) under Schedule II and is liable to GST; the applicant's question is answered in the affirmative.

Refund of integrated tax on export under Rule 96(10) of the CGST Rules, 2017 - exemption under Notification No.79/2017-Customs for imports under Advance Authorisation - interaction between customs exemptions and IGST payment on import - CBEC clarification on scope of Rule 96(10)

Exemption under Notification No.79/2017-Customs for imports under Advance Authorisation - refund of integrated tax on export under Rule 96(10) of the CGST Rules, 2017 - interaction between customs exemptions and IGST payment on import - Whether availing exemption under Notification No.79/2017-Cus dated 13.10.2017 in respect of additional customs duty and anti-dumping duty, but opting to pay IGST on import under Advance Authorisation, amounts to availing the benefits of Notification No.79/2017-Cus within the meaning of Rule 96(10) of the CGST Rules, 2017. - HELD THAT: - The Authority examined the scheme of Notification No.18/2015-Customs and its amendment by Notification No.79/2017-Customs to extend exemption to IGST on imports under Advance Authorisation, the subsequent amendments to Rule 96(10) of the CGST Rules and the CBEC circular clarifying the scope of that sub rule. Rule 96(10), as amended, and the Board's clarifications make the restriction applicable to persons who import supplies on which the benefit of specified notifications (including Notification No.79/2017 Cus) has been availed. The Authority held that even where IGST is paid on import, the concurrent availment of exemptions under Notification No.79/2017 Cus in respect of additional customs duty and anti dumping duty constitutes availing the benefits of that notification for the purposes of Rule 96(10). Applying these legal amendments and clarifications to the applicant's facts, the Authority concluded that the applicant's position falls within the prohibition in Rule 96(10). [Paras 11]

Answered in the affirmative: such availment of exemption coupled with IGST payment on import amounts to availing the benefits of Notification No.79/2017 Cus for the purposes of Rule 96(10).

Refund of integrated tax on export under Rule 96(10) of the CGST Rules, 2017 - CBEC clarification on scope of Rule 96(10) - Whether the applicant may export goods on payment of IGST and claim refund under Rule 96(10) of the CGST Rules, 2017 given the facts and the availment of Notification No.79/2017 Cus benefits. - HELD THAT: - In light of the determination that the applicant has availed the benefits of Notification No.79/2017 Cus for imports under Advance Authorisation, and having regard to the amended text of Rule 96(10) and the Board's clarifications which disallow refund of IGST on exports to persons who have imported supplies benefiting from specified notifications, the Authority held that the applicant is not entitled to claim refund of IGST paid on exports under Rule 96(10). The legal position rests on the retrospective amendments and explanatory circulars which restrict rebate where the importer has directly benefited from the specified customs notifications. [Paras 11, 12]

Answered in the negative: the applicant is not eligible to claim refund of IGST under Rule 96(10).

Final Conclusion: The Authority ruled that availing exemptions under Notification No.79/2017 Cus in respect of additional customs duty and anti dumping duty, even where IGST is paid on import, amounts to availing the benefits of that notification for the purposes of Rule 96(10); consequently the applicant cannot claim refund of IGST on exports under Rule 96(10) of the CGST Rules, 2017.

Exemption under Notification No.02/2017 for chena or paneer other than put up in unit container and bearing a registered brand name - Taxability under Notification No.01/2017 for chena or paneer put up in unit container bearing a registered brand name or a brand name with actionable claim - Definition of unit container - package designed to hold a pre-determined quantity or number with such quantity indicated - Concept of bearing a registered brand name or bearing a brand name on which an actionable claim or enforceable right is available

Definition of unit container - package designed to hold a pre-determined quantity or number with such quantity indicated - Exemption under Notification No.02/2017 for chena or paneer other than put up in unit container and bearing a registered brand name - Taxability under Notification No.01/2017 for chena or paneer put up in unit container bearing a registered brand name or a brand name with actionable claim - Concept of bearing a registered brand name or bearing a brand name on which an actionable claim or enforceable right is available - Whether paneer sold in loose plastic bags/loose carry bags bearing manufacturer details is eligible for exemption under entry at Sr. No. 27 of Notification No.02/2017 - HELD THAT: - The notifications distinguish two mutually relevant conditions for taxability/exemption: (i) whether the product is put up in a unit container and (ii) whether the package bears a registered brand name or a brand name on which an actionable claim/enforceable right is available. The defined test for a unit container requires that the package be (a) designed to hold a pre-determined quantity or number and (b) that such pre-determined quantity or number is indicated on the package. The facts as presented indicate that paneer supplied in loose plastic bags/loose carry bags is sold in different weights as required by customers and it is not established that these packages are designed to hold a pre-determined quantity or that any pre-determined quantity is indicated on them. If a package contains varying weights and no weight is indicated, it does not meet the definition of a unit container and therefore would fall within the expression "other than put up in unit container" in Notification No.02/2017. Separately, the statutory requirement under the Food Safety and Standards Act and its regulations mandates that manufacturer details be shown on food packages. Such mandatory marking (including the name and registered address of the supplier/manufacturer) is to be treated as bearing a brand name for the purposes of the notifications. Consequently, exemption under Sr. No. 27 of Notification No.02/2017 can be availed only if both conditions are satisfied: that the paneer is not put up in a unit container as defined and that the package does not bear a registered brand name or a brand name on which an actionable claim/enforceable right is available. The ruling therefore applies subject to verification of these two conditions in relation to the supplier's mode of packaging and labelling. [Paras 13, 14, 15, 16]

Exemption under Sr. No. 27 of Notification No.02/2017 applies to the applicant's paneer sold in loose plastic/loose carry bags only if (i) the product is not put up in a unit container (i.e., the package is not designed to hold a pre-determined quantity with that quantity indicated) and (ii) the package does not bear a registered brand name or a brand name with an actionable claim/enforceable right.

Final Conclusion: The Authority rules that the applicant may claim exemption under entry at Sr. No. 27 of Notification No.02/2017 in respect of paneer sold in loose form provided (i) the packages do not satisfy the definition of unit container (no pre-determined quantity indicated) and (ii) the packages do not bear a registered brand name or a brand name on which an actionable claim/enforceable right is available; the entitlement is therefore subject to fulfillment of these two conditions.

Classification under Customs Tariff Act, 1975 - Harmonised System of Nomenclature (HSN) - Classification of goods - Distinction between finished slide fasteners and parts of slide fasteners - GST rate by notification - Application of HSN Explanatory Notes

Harmonised System of Nomenclature (HSN) - Distinction between finished slide fasteners and parts of slide fasteners - Application of HSN Explanatory Notes - Classification of the applicant's products - Zip Roll, Finished Zipper and Sliders - under HSN 9607 - HELD THAT: - The Customs Tariff Act, 1975 and the HSN (including chapter and explanatory notes) govern classification. Applying the HSN entries and Explanatory Notes, the product described as 'Finished Zipper' consists of two narrow strips of textile material with scoops fitted on the edges and sliders attached, and thus is a complete slide fastener falling under heading 9607.11/9607.19 (Slide Fasteners). 'Zip Roll' consists of narrow strips of any length mounted with chain scoops supplied without sliders/runners and therefore constitutes parts (narrow strips mounted with chain scoops) falling under sub-heading 9607.20. 'Slider' is a part (slider/runner) and accordingly falls under sub-heading 9607.20. The Authority rejects the applicant's contention that Zip Roll and Finished Zipper are both slide fasteners; Zip Roll is a part because it is supplied without the slider and is a narrow strip mounted with chain scoops as described in the HSN notes. [Paras 10]

Finished Zipper is classified as Slide Fasteners (HSN 9607.11/9607.19); Zip Roll and Slider are classified as Parts of slide fasteners (HSN 9607.20).

GST rate by notification - Classification of goods - Rate application by notified periods - GST rate applicable to Finished Zipper, Zip Roll and Slider for the relevant notified periods - HELD THAT: - Once classification under the Customs Tariff/HSN is determined, the applicable GST rate is determined by the notifications under the GST law. Notification No.1/2017-Central Tax (Rate) (as amended) levied a single rate (CGST 9% + SGST 9% = 18%) on 'Slide Fasteners and parts thereof' for the period 01.07.2017 to 26.07.2018. Notification No.18/2018 amended the schedules w.e.f. 27.07.2018 to separate 'Slide Fasteners' (placed in Schedule II attracting 6% CGST i.e. total 12%) and 'Parts of slide fasteners' (retained in Schedule III attracting 9% CGST i.e. total 18%) for the period 27.07.2018 to 30.09.2019. Notification No.14/2019 (effective 01.10.2019) again grouped 'Slide Fasteners and parts thereof' under the same entry so that both attract the common rate of 12% (CGST+SGST) from 01.10.2019 onwards. Applying these notifications to the classification found, the Finished Zipper follows the rate applicable to slide fasteners and Zip Roll and Slider follow the rate applicable to parts for the stated periods. [Paras 11, 12]

Finished Zipper: GST @ 18% for 01.07.2017 to 26.07.2018; GST @ 12% for 27.07.2018 to 30.09.2019; GST @ 12% from 01.10.2019 onwards. Zip Roll and Slider: GST @ 18% for 01.07.2017 to 26.07.2018 (noting the original single rate period) and @ 18% during 27.07.2018 to 30.09.2019 (as parts); and GST @ 12% from 01.10.2019 onwards.

Final Conclusion: The Authority rules that 'Finished Zipper' is a slide fastener (HSN 9607.11/9607.19) and 'Zip Roll' and 'Slider' are parts of slide fasteners (HSN 9607.20). Consequent GST rates follow the notifications: a common 18% rate applied up to 26.07.2018; from 27.07.2018 to 30.09.2019 slide fasteners attracted 12% while parts attracted 18%; and from 01.10.2019 both attract 12%.

Exemption for legal services under the exemption notification - reverse charge mechanism (RCM) for legal services - definition of "governmental authority" under IGST Act - exemption for services in relation to functions entrusted to a municipality under Article 243W - educational institution exemption for services to students, faculty and staff - tax deduction at source (TDS) under Section 51 and notification for deductors - applicability of participation/ownership threshold to bodies set up by statute

Exemption for legal services under the exemption notification - reverse charge mechanism (RCM) for legal services - definition of "governmental authority" under IGST Act - applicability of participation/ownership threshold to bodies set up by statute - Nirma University is not eligible for exemption in respect of procurement of legal services under Sr. No.45 of Notification No.12/2017-Central Tax (Rate). - HELD THAT: - The Authority examined whether a body set up by a State Legislature falls within the definition of "governmental authority" so as to attract exemption for legal services. It relied on the Circular clarifying that the qualifying condition relating to percentage participation/control applies to both bodies "set up by an Act of Parliament or a State Legislature" and those "established by any Government." The facts show Nirma University is a private university created by a State Act with zero government participation. Therefore it does not satisfy the participation/control requirement in the definition and cannot be treated as a "governmental authority" for the purpose of the exemption. Consequently, legal services procured by the University remain liable under the reverse charge mechanism and the exemption at Sr. No.45 is not available to it. [Paras 49, 50]

Applicant not eligible for exemption under Sr. No.45 for legal services; answer in negative.

Exemption for services in relation to functions entrusted to a municipality under Article 243W - educational institution exemption for services to students, faculty and staff - Services of higher education provided by Nirma University do not qualify for exemption under Sr. No.4 of Notification No.12/2017-Central Tax (Rate). - HELD THAT: - The entry at Sr. No.4 exempts services by specified public authorities "by way of any activity in relation to any function entrusted to a municipality under Article 243W." The Authority found that the applicant is not a Central/State/UT/local authority or a "governmental authority" as defined. Further, higher education is not specified in Article 243W as an activity that would, on the facts, attract the Sr. No.4 exemption. However, the Authority observed that services provided by an "educational institution" to its students, faculty and staff are exempt under Sr. No.66, and that only education delivered as part of a curriculum leading to a qualification recognised by law falls within that educational-institution exemption. [Paras 52, 53, 54, 55]

Higher education services by the applicant do not qualify for exemption under Sr. No.4; answer in negative (but curriculum-based education leading to recognized qualifications may fall under the educational institution exemption at Sr. No.66).

Tax deduction at source (TDS) under Section 51 and notification for deductors - applicability of participation/ownership threshold to bodies set up by statute - Nirma University is not required to register as a Deductor under GST and is not covered by the persons mandated to deduct TDS under Section 51. - HELD THAT: - Section 51 and the relevant notification mandate TDS by certain authorities/boards/bodies which are either set up by statute or established by Government but only where the Government has fifty-one percent or more participation by equity or control. The Authority relied on the CBEC Circular clarifying that the participation threshold applies to both categories. As Nirma University was constituted by a State statute but has zero percent government participation, it does not fall within the notified category of deductors and therefore has no TDS registration obligation under Section 51. [Paras 56, 57]

Applicant not liable to register as a Deductor under GST; answer in negative.

Final Conclusion: The Authority ruled that (i) Nirma University is not eligible for the exemption for legal services under Sr. No.45 and must comply with RCM where applicable; (ii) its higher education services do not qualify for exemption under Sr. No.4 (though curriculum-based courses leading to qualifications recognised by law may be exempt under the educational institution entry); and (iii) the University is not required to register as a Deductor under Section 51/TDS notifications.

Transfer of the right to use goods as supply of services - tests for transfer of right to use goods (goods available for delivery; consensus ad idem; legal right to use; exclusivity of right; non-reusability of transferred right) - pure service versus works contract or composite supply involving supply of goods - exemption under Notification No.12/2017-Central Tax (Rate) for pure services to government in relation to functions under Articles 243G/243W - definitional and eligibility criteria for "governmental authority" and "government entity" under the notification

Transfer of the right to use goods as supply of services - tests for transfer of right to use goods (goods available for delivery; consensus ad idem; legal right to use; exclusivity of right; non-reusability of transferred right) - Whether the services provided by the applicant fall within clause 5(f) of Schedule II to the CGST Act, 2017 (i.e., transfer of the right to use goods treated as supply of services). - HELD THAT: - Clause 5(f) of Schedule II treats a transfer of the right to use goods for consideration as a supply of services. To characterise a transaction as transfer of the right to use goods, the contract must satisfy the concomitant conditions: goods available for delivery; consensus ad idem as to identity of goods; transferee having a legal right to use (with attendant permissions/licenses); exclusivity of the right for the transferee during the period; and that the owner cannot transfer the same right again during that period. On the facts and work orders produced, the applicant brings its own instruments/equipment to the site, provides videography/live-telecast services and re-takes the equipment after the event. Sample work orders show that some engagements require supply/installation and even civil/mechanical/electrical components, indicating that certain contracts involve supply of goods or turnkey obligations. The material does not show satisfaction of the statutory conditions required to treat the transactions uniformly as transfer of the right to use goods; depending on the specific contract the transaction may be service, supply of goods or works contract. Applying these tests to the record, the Authority finds that the services in question do not, on the whole, fall within clause 5(f) of Schedule II. [Paras 18, 19, 20, 21]

Answered in negative.

Pure service versus works contract or composite supply involving supply of goods - exemption under Notification No.12/2017-Central Tax (Rate) for pure services to government in relation to functions under Articles 243G/243W - definitional and eligibility criteria for "governmental authority" and "government entity" under the notification - Whether the hire/temporary transfer services rendered to governmental recipients are exempt under Sr. No. 3 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. - HELD THAT: - Entry at Sr. No. 3 of the notification requires three cumulative conditions: (i) the supply must be a "pure service" not involving supply of goods or works contract/composite supply; (ii) it must be supplied to Central/State/Union territory/local authority/governmental authority/government entity as defined; and (iii) it must be by way of an activity in relation to a function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W. The Authority examined the sample work orders and found at least one (and potentially others) to be a turnkey engagement involving supply/installation and civil/mechanical/electrical works, thus not a "pure service". The applicant has not produced evidence to establish that all recipients qualify as government entities within the notification's definitions (including the 90% participation/control tests where applicable). Further, whether a particular service relates to a function under Articles 243G/243W depends on the precise nature of the contract and the activity performed. Given the variation in contractual scopes and absence of conclusive evidence that every contract meets all three limbs, the Authority cannot accord a blanket exemption; eligibility for the notification depends on the specific nature of each contract and whether all conditions are met in respect of that supply. [Paras 23, 24, 25, 26]

Answered in negative.

Final Conclusion: The Authority ruled that the applicant's supplies, on the materials before it, do not fall within clause 5(f) of Schedule II and that the applicant is not entitled to a blanket exemption under Sr. No. 3 of Notification No.12/2017-Central Tax (Rate); exemption can be availed only if, in respect of each specific contract, all conditions of the notification are satisfied.

Works Contract - original works - composite supply - pertaining to railways - definition of "railway" under the Railway Act, 1989

Works Contract - composite supply - The contract qualifies as a composite supply in the nature of a Works Contract within the meaning of the CGST Act. - HELD THAT: - The authority found that the contract involves both supply of goods and services and relates to construction of immovable property wherein transfer of property in goods is involved. On that basis the contract falls within the definition of 'Works Contract' as defined in Section 2(119) of the CGST Act, 2017 and therefore satisfies the requirement of being a composite supply of Works Contract for the purpose of Entry 3(v)(a) of the Notification No.11/2017-Central Tax (Rates). [Paras 13, 14]

The first condition - that the contract is a composite Works Contract - is satisfied.

Original works - The works contracted are 'original works' as defined in the relevant notification. - HELD THAT: - The scope of work (laying of track, pavement, construction of admin building and warehouse, electrical and fire fighting works) was held to be in the nature of new constructions. These activities fall within the definition of 'original works' as reproduced from clause (zs) of Notification No.12/2017-Central Tax (Rates) (all new constructions, additions/alterations to make structures workable, erection/installation of plant, machinery or structures). Consequently the second condition for applicability of the reduced rate is satisfied. [Paras 14]

The second condition - that the works are 'original works' - is satisfied.

Pertaining to railways - definition of "railway" under the Railway Act, 1989 - The contract does not, on the materials before the Authority, qualify as works 'pertaining to railways' for the purposes of Entry 3(v)(a). - HELD THAT: - Although the applicant's contract was awarded by RITES Ltd., a PSU associated with the Ministry of Railways, the applicant produced no evidence to establish that the works awarded actually pertain to 'railways' as defined in Section 2(31) of the Railway Act, 1989 (which includes lands, lines, sidings, stations, warehouses and other works constructed for the purpose of or in connection with a railway). The Authority noted the absence of an agreement or other conclusive proof showing that the specific works were for a Government railway or otherwise fell within the statutory definition relied upon. In the absence of such evidence the third condition - that the works pertain to railways - is not satisfied and the reduced rate cannot be applied. [Paras 14]

The third condition - that the contract pertains to railways - is not satisfied on the record; therefore the entry 3(v)(a) reduced rate does not apply.

Final Conclusion: Although the contract qualifies as a composite Works Contract and the works are 'original works', the applicant failed to establish that the works pertain to 'railways' as defined in the Railway Act, 1989; consequently the contract is not covered by Entry 3(v)(a) of Notification No.11/2017 and the reduced GST rate under that entry is not available.

Classification of franchising services as Other professional, technical and business services (Heading 9983 / Service Code 998396) - Distinction between licensing and franchising for GST classification - Supply and its classification under Section 7 read with Schedule II (transfer of business assets treated as supply of goods) - Concept of transfer of a going concern and its non-application to sale of an individual outlet/branch - Inapplicability of exemption for services by way of transfer of a going concern (Notification No.12/2017-nil rate) - Admissibility of Input Tax Credit under Section 16(1) for inputs used in development of the outlet

Classification of franchising services as Other professional, technical and business services (Heading 9983 / Service Code 998396) - Distinction between licensing and franchising for GST classification - Classification of franchisee fee and royalty received for permitting use of trademark, brand and proprietary know-how. - HELD THAT: - The advance ruling authority found the agreements to be franchise agreements and not mere licences. The distinction between licensing and franchising was applied: franchising confers the right to use the business model and brand with substantial control and assistance by the franchisor, whereas licensing typically concerns rights to products or IP without operational control. The CBIC Explanatory Notes and the Scheme of Classification of Services were examined and it was noted that Service Code 997336 (licensing services) covers licensing; the applicant's services fall within the activity of operating franchises and are therefore covered by Group/Service Code 998396 ('Trademarks and franchises') under Heading 9983. Consequently, franchisee fees and royalty are classifiable as other professional, technical and business services under Heading 9983/Service Code 998396 and attract GST at the rate specified for that heading. [Paras 11, 15, 16, 17]

Franchisee fees and royalty are classifiable under Heading 9983, Service Code 998396 (Trademarks and franchises) and attract GST @18%.

Supply and its classification under Section 7 read with Schedule II (transfer of business assets treated as supply of goods) - Concept of transfer of a going concern and its non-application to sale of an individual outlet/branch - Whether transfer/sale of an operational outlet amounts to 'services by way of transfer of a going concern' or is a supply of goods. - HELD THAT: - The authority applied the definition of 'supply' under Section 7 and the deeming treatment in Schedule II. The facts show the applicant develops outlets on rented premises and sells the operational equipment and infrastructure (not land/building). Schedule II entry dealing with transfer of business assets (serial 4) was analysed: clause (a) treats transfer or disposal of goods forming part of business assets as supply of goods. The authority held that the transaction involves sale of equipment/infrastructure (goods) and is therefore a supply of goods. Further, an individual branch/outlet of a single-line business was held not to constitute an independent part of the concern for the purpose of the going-concern exemption; a distinct business vertical is required to qualify as an independent part. Hence the transfer does not amount to 'transfer of a going concern, as a whole or an independent part thereof'. [Paras 19, 20]

Transfer of the operational outlet is a supply of goods (transfer of business assets) and does not qualify as transfer of a going concern or an independent part thereof.

Inapplicability of exemption for services by way of transfer of a going concern (Notification No.12/2017-nil rate) - Whether the transaction is covered by Serial No.2 of Notification No.12/2017 (exemption for transfer of a going concern). - HELD THAT: - Notification No.12/2017 grants nil-rate treatment to services by way of transfer of a going concern. Since the authority concluded the transaction to be a supply of goods and not a supply of services, the exemption for transfer of a going concern (a service exemption) is inapplicable. The absence of transfer of the whole business or an independent part precludes reliance on the notification. [Paras 21, 22]

Notification No.12/2017 Serial No.2 does not apply; the transaction is not exempt under that notification.

Admissibility of Input Tax Credit under Section 16(1) for inputs used in development of the outlet - Whether Input Tax Credit on supplies received in developing the outlet is admissible where the transfer is not a going concern. - HELD THAT: - Having held the transfer to be a supply of goods, the authority examined entitlement to input tax credit under Section 16(1). The equipment and infrastructure forming part of the outlet were sold as business assets; inputs and input services used or intended to be used in the course or furtherance of business are, subject to statutory conditions and restrictions, eligible for credit. Therefore the applicant is eligible to claim Input Tax Credit on taxes paid for supplies used in developing the outlet, subject to fulfillment of conditions and rules for admissibility of ITC. [Paras 24]

Applicant is eligible for Input Tax Credit on supplies used in developing the outlet, subject to statutory conditions and rules.

Final Conclusion: The Authority ruled that (i) franchisee fees and royalty are franchising services classifiable under Heading 9983, Service Code 998396 and attract GST at 18%; (ii) sale/transfer of an individual operational outlet (equipment and infrastructure) is a supply of goods (transfer of business assets) and does not constitute transfer of a going concern or its independent part; (iii) the exemption in Notification No.12/2017 for transfer of a going concern is inapplicable; and (iv) Input Tax Credit on supplies used in developing the outlet is admissible subject to the conditions and restrictions under the GST law.

Right to be heard - natural justice - cancellation of GST registration under Section 29 - non-application of mind - remand for fresh consideration

Right to be heard - natural justice - cancellation of GST registration under Section 29 - non-application of mind - remand for fresh consideration - Impugned order cancelling GST registration was passed without giving the writ-applicant an opportunity of hearing and the show-cause notice reflected non-application of mind; matter remitted to the authority for fresh consideration after affording hearing. - HELD THAT: - The High Court, on prima facie consideration, found that the authority's order under Section 29 cancelling the GST registration did not afford the writ-applicant an opportunity to be heard and that the show-cause notice demonstrated a lack of application of mind. In view of this deficiency affecting the fairness of the administrative action, the Court directed that the matter be remitted to the authority so that the writ-applicant may be given an opportunity of hearing and the authority may thereafter pass a fresh reasoned order. The Court also invited the respondent to consider recalling or withdrawing the proceedings to facilitate such fresh consideration.

Matter remitted to the authority to afford the writ-applicant an opportunity of hearing and to pass a fresh reasoned order; respondents to consider recalling or withdrawing the matter.

Final Conclusion: The Court disposed of the civil application by directing remand for fresh consideration: the cancellation order is set aside for procedural infirmity (lack of hearing/non-application of mind) and the authority is to hear the writ-applicant and pass a reasoned order; the respondents were asked to consider recalling or withdrawing the matter.

Reimbursement of GST/refund of tax component - entitlement to Input Tax Credit and set-off against tax liability - employer's liability to bear GST for pre-GST contracts where guidelines provide reimbursement - judicial direction for administrative compliance and supervisory intervention by Principal Secretary

Reimbursement of GST/refund of tax component - employer's liability to bear GST for pre-GST contracts where guidelines provide reimbursement - Applicant having deposited GST from its own funds is entitled to refund/reimbursement of the additional tax component which respondents were directed to refund. - HELD THAT: - The petitioner entered contracts awarded before the GST regime and, after GST came into force, deposited GST (after setting off available Input Tax Credit) to avoid penal interest. Government of Uttar Pradesh and NRIDA had issued guidelines providing for reimbursement/refund of the increased tax component for ongoing contracts, with the employer bearing the net GST after ITC. The Court recorded that the petitioner had paid the GST and observed that opposite parties had undertaken to refund the due amount. The writ petition was disposed directing the competent authority to take steps for refund of the admissible GST to the petitioner within a month. The compliance affidavit confirms deposit of the tax liability by the company and acknowledges release of funds by the nodal authority; the only remaining default was non-crediting by the Executive Engineer.

The petitioner is entitled to the refund/reimbursement of the GST component and respondents were directed to refund the admissible amount.

Judicial direction for administrative compliance and supervisory intervention by Principal Secretary - disciplinary action against defaulting official for non-compliance - The court directed administrative steps to secure compliance from the respondent authorities, including convening a meeting by the Principal Secretary and permitting initiation of disciplinary proceedings against the officer who withholds the refund. - HELD THAT: - The Court noted that the nodal agency (opposite party no. 1) had released the tax component to the Executive Engineer (opposite party no. 2), but the latter had not credited the amount to the petitioner and raised technical objections. Given the seriousness and the effect on the contractor's working capital, the Court required the Principal Secretary, PWD, to summon the officers, convene a meeting forthwith, and settle the matter. The Court expressly left it open for the Principal Secretary to initiate proceedings, including disciplinary action, if the Executive Engineer was found to be unnecessarily harassing or creating impediments. The Court also directed filing of an affidavit of compliance and fixed a return date with consequences for non-compliance.

Administrative intervention by the Principal Secretary is directed to ensure refund; disciplinary proceedings may be initiated against the defaulting official, and compliance affidavit must be filed by the return date.

Final Conclusion: Writ petition disposed directing refund of the admissible GST/reimbursement to the petitioner; Principal Secretary, PWD, to convene officers and ensure settlement, with liberty to initiate disciplinary proceedings against the officer withholding the amount, and affidavit of compliance to be filed on the listed date.

Summary order. Tax Appeal admitted on the substantial questions of law formulated in the order and directed to be heard along with Tax Appeal No.379 of 2020.

Entitlement to deduction under Section 10(10C)(viii) and relief under Section 89(1) concurrently in respect of Voluntary Retirement Scheme payments - Action without jurisdiction - Exercise of writ jurisdiction notwithstanding availability of alternative statutory remedy where impugned proceedings are without jurisdiction

Entitlement to deduction under Section 10(10C)(viii) and relief under Section 89(1) concurrently in respect of Voluntary Retirement Scheme payments - Entitlement of the petitioner to claim deduction under Section 10(10C)(viii) and relief under Section 89(1) together in respect of amounts received under a Voluntary Retirement Scheme for the relevant assessment year. - HELD THAT: - The Court held that the question is settled by a Division Bench decision of this Court in State Bank of India (supra) which quashed the contrary instructions of the Central Board of Direct Taxes and declared that amounts received under a Voluntary Retirement Scheme are eligible for deduction under Section 10(10C)(viii) and for relief under Section 89(1) simultaneously. The petitioner had claimed both reliefs in his return for the assessment year 2001-2002, the claims were rejected following the Board's instruction, and that instruction having been quashed and the legal position declared in the petitioner's favour, the petitioner was entitled to both the deduction and the relief for the relevant year. [Paras 7, 9]

The petitioner was entitled to claim deduction under Section 10(10C)(viii) and relief under Section 89(1) for amounts received under the Voluntary Retirement Scheme for assessment year 2001-2002.

Action without jurisdiction - Exercise of writ jurisdiction notwithstanding availability of alternative statutory remedy where impugned proceedings are without jurisdiction - Whether the High Court should exercise writ jurisdiction to quash departmental orders and proceedings which were initiated on the premise that the petitioner was not entitled to the concurrent reliefs, despite the existence of an alternative statutory appeal remedy. - HELD THAT: - The Court applied the principle from Calcutta Discount Company Ltd. v. Income Tax Officer that the existence of an alternative statutory remedy is not an absolute bar to exercise of writ jurisdiction where the impugned proceedings are without jurisdiction. Given that the departmental action proceeded on the basis of a Board instruction which this Court has quashed and the legal position was settled in the petitioner's favour, the proceedings must be regarded as without jurisdiction. In the totality of circumstances, including the petitioner having claimed the reliefs in his original return and the subsequent quashing of the Board's instruction, the petitioner need not be relegated to the appellate remedy and relief under Article 226 is appropriate. [Paras 8, 9]

Writ jurisdiction was appropriately exercised; the impugned proceedings being without jurisdiction were quashed and the petitioner need not be relegated to the statutory appeal remedy.

Final Conclusion: The writ appeal is allowed: Exts.P1, P4 and P6 are quashed; the petitioner is held entitled to deduction under Section 10(10C)(viii) and relief under Section 89(1) for amounts received under the Voluntary Retirement Scheme for assessment year 2001-2002, and any amounts paid pursuant to demands arising from denial of those reliefs shall be refunded within two months.

Computation of book profit under section 115JB - provision for bad and doubtful debts - retrospective insertion of clause (i) to Explanation 1 to section 115JB(2) by Finance (No.2) Act, 2009 - doctrine that law does not require performance of impossible acts - disallowance under section 14A read with rule 8D - addition of disallowance under section 14A to book profit for MAT purposes - Minimum Alternate Tax (MAT)

Provision for bad and doubtful debts - computation of book profit under section 115JB - retrospective insertion of clause (i) to Explanation 1 to section 115JB(2) by Finance (No.2) Act, 2009 - doctrine that law does not require performance of impossible acts - Whether the write back of provision for bad and doubtful debts credited to profit & loss account (Rs. 14,77,53,747/-) was required to be added to net profit for computing book profit under section 115JB for AY 2009-10. - HELD THAT: - The Court followed the settled pre-amendment position that provisions for bad and doubtful debts could not be required to be added to book profit under Explanation to section 115JB (as held in HCL Comnet). Clause (i) to Explanation 1 to section 115JB(2), inserted retrospectively by Finance (No.2) Act, 2009 with effect from 01.04.2001, makes such provisions required additions. However, the Court held that an assessee could not be required to perform an impossible act of adding back provisions in years prior to the insertion when those years had elapsed; the law does not contemplate retroactive performance of acts which could not have been done at the relevant time. The assessee demonstrated at the earliest opportunity that even after hypothetical addition the book profit remained negative, and it had earlier made similar additions for Assessment Years 1998-99 to 2000-01. On these grounds the write back was not to be treated as an addition for AY 2009-10.

Write back of provision for bad and doubtful debts need not be added to net profit for computing book profit for AY 2009-10; answered in favour of the assessee.

Retrospective insertion of clause (i) to Explanation 1 to section 115JB(2) by Finance (No.2) Act, 2009 - computation of book profit under section 115JB - immediate application of retrospective amendment to prior elapsed years - doctrine that law does not require performance of impossible acts - Whether the retrospective amendment by Finance (No.2) Act, 2009 required authorities to recompute book profits for earlier assessment years and thereby permit deduction of the write back under proviso to clause (i) of Explanation 1 to section 115JB(2). - HELD THAT: - Although clause (i) was enacted with retrospective effect, the Court emphasised that retrospective enactment cannot compel performance of an act that was impossible to perform in the past. The assessee could not, in the elapsed years, add back provisions which were not then required by law. The assessee, on the first subsequent occasion, showed that even if such additions were made the book profit remained negative; therefore no adverse consequence should follow. Having regard to the impossibility principle and the assessee's demonstration, the retrospective insertion did not justify treating the write back as an addition for the assessment in question.

Retrospective amendment does not operate to compel impermissible retrospective additions where performance was impossible; question answered for the assessee.

Computation of book profit under section 115JB - provision for bad and doubtful debts - prior additions for Assessment Years 1998-99 to 2000-01 - Whether, in view of the assessee having added back provisions for certain earlier years, it was entitled at least to deduction of reversal of provision for bad and doubtful debts to that extent. - HELD THAT: - The Court noted that the assessee had in earlier years added provision for bad and doubtful debts (1998-99 to 2000-01) and, on the first available opportunity, had demonstrated that even after hypothetical addition the book profit remained negative. Given that the assessee could not have effected the addition in elapsed years and had shown no benefit to revenue from treating the write back as an addition, the Tribunal's refusal to allow relief was unjustified. Consequently the assessee was entitled to relief to the extent argued.

Assessee entitled to relief in respect of reversal to the extent indicated; question answered in favour of the assessee.

Disallowance under section 14A read with rule 8D - addition of disallowance under section 14A to book profit for MAT purposes - computation of book profit under section 115JB - Whether the disallowance under section 14A read with rule 8D (Rs. 49,75,359/-) required addition to net profit in computing book profit under section 115JB, thereby importing section 14A into MAT computation. - HELD THAT: - For reasons recorded in the Court's earlier judgment in I.T.A. No.203/2015 dated 04.01.2021 (referred to in the order), the Court answered this substantial question in favour of the assessee. The tribunal's conclusion that the section 14A disallowance must be added back to book profit was quashed to the extent it operated against the assessee. The Court therefore rejected the contention that section 14A disallowance automatically imports itself into MAT computation for the facts of this case.

Disallowance under section 14A read with rule 8D is not to be added to net profit for MAT computation in this case; answered in favour of the assessee.

Final Conclusion: The appeal is allowed. The Tribunal's order dated 02.05.2014 is quashed insofar as it treated the write back of provision for bad and doubtful debts and the section 14A disallowance as additions to book profit; the substantial questions of law raised are answered in favour of the assessee and against the revenue for AY 2009-10.

Genuineness of purchases - independent enquiry by Assessing Officer - burden on assessee to prove expenditure under Section 37 - reliance on Sales Tax verification/report - remand for fresh consideration

Independent enquiry by Assessing Officer - reliance on Sales Tax verification/report - Whether the Assessing Officer made an independent enquiry into the genuineness of purchases and whether the Tribunal was correct in holding otherwise. - HELD THAT: - The Assessing Officer caused enquiries at the addresses shown in supplier invoices and bank account opening forms, obtained a report from the jurisdictional Sales Tax Officer that the suppliers were not present at the stated addresses and were not registered, analysed bank statements showing immediate withdrawals upon credit to the suppliers' accounts, noted introducer details and common signatures on pay-in and cheque leaves, and recorded that stamps of APMC and check-post seals were absent and that receipt/weightment/inward slips were self-prepared. These findings (set out in the assessment order extracts) demonstrate that an independent enquiry was conducted by the Assessing Officer. The Tribunal's contrary finding that no independent enquiry was made is thereby held to be perverse and unsustainable on the record. [Paras 7, 8, 10]

Assessment Officer conducted independent enquiry; Tribunal's finding that no independent enquiry was made is perverse and set aside.

Genuineness of purchases - burden on assessee to prove expenditure under Section 37 - remand for fresh consideration - Whether the Tribunal correctly held that purchases were genuine notwithstanding findings of bogus suppliers and whether the matter requires fresh adjudication. - HELD THAT: - The Tribunal accepted in part that the suppliers were non-existent yet concluded that the entire purchases were not bogus and restricted disallowance to 20% without addressing the detailed conclusions recorded by the Assessing Officer. The Court observed that the burden to prove that expenditure was laid out wholly and exclusively for business (under the legal principle embodied in Section 37) remained on the assessee and that the Tribunal failed to consider the Assessing Officer's determinative findings. In view of the Tribunal's cryptic treatment and its failure to deal with the AO's conclusions and the burden on the assessee, the Tribunal's order cannot stand. The matter is therefore quashed and remitted to the Tribunal for fresh consideration in light of the observations made by this Court. [Paras 10]

Tribunal's conclusion that purchases were genuine and limiting disallowance to 20% is set aside; matter remitted to the Tribunal for fresh decision after considering AO's findings and the assessee's burden to prove genuineness.

Final Conclusion: The Tribunal's order is quashed insofar as it held that no independent enquiry was conducted and insofar as it upheld the genuineness of purchases without dealing with the Assessing Officer's findings; the matter is remitted to the Tribunal to decide afresh in the light of this judgment.

Computation of Gross Annual Value under section 23(1)(a) - estimation of notional rent without supporting basis - capital work in progress and occupation certificate as trigger for notional rent - deduction of interest under section 24(b) - deeming fiction in section 23(1)

Computation of Gross Annual Value under section 23(1)(a) - estimation of notional rent without supporting basis - deeming fiction in section 23(1) - Validity of the Assessing Officer's adoption of an ad hoc rate to compute Gross Annual Value (GAV) without evidential basis - HELD THAT: - The Assessing Officer proceeded to adopt an ad hoc percentage of the property's value as annual value without bringing any evidence of the quantum of rent realizable. Section 23(1)(a) requires the annual value to be assessed as the sum for which the property might reasonably be expected to let from year to year. The Tribunal concurs with the conclusion of the Commissioner (Appeals) that estimation of notional rent by the AO without providing a basis is unsustainable. Reliance placed by the lower authority on coordinate decisions rejecting unsupported notional rent estimates and on the principle that interest on loan for acquisition/ construction must be considered under section 24(b) supports this view. Consequently, the AO's GAV computation ignoring the mandatory approach under section 23(1)(a) cannot be sustained. [Paras 9]

AO's ad hoc computation of GAV without basis is not sustainable and must be re-done in accordance with section 23(1)(a).

Capital work in progress and occupation certificate as trigger for notional rent - deduction of interest under section 24(b) - Correct period for computing GAV in view of occupation certificate and treatment of capital work in progress subject to interest deduction under section 24(b) - HELD THAT: - On the facts, the assessee's property was reflected as Capital Work in Progress in the financial statements, and the owner obtained an occupation certificate up to the 17th floor on 14.12.2012 while the assessee was granted permission to occupy the 10th floor w.e.f. 30.03.2013. The Commissioner (Appeals) directed computation of GAV from 14.12.2012 to 31.03.2013 after ascertaining the prevailing Capital W.I.P. and allowing interest expenditure under section 24(b). The Tribunal finds no illegality or perversity in this factual and legal conclusion: the occupation certificate date is a relevant trigger for applying the notional income provisions and interest on the loan for the property is to be allowed under section 24(b) while determining the income from house property. [Paras 11, 13]

Direction to compute GAV from 14.12.2012 to 31.03.2013 after ascertaining Capital W.I.P. and allowing deduction of interest under section 24(b) is upheld.

Final Conclusion: The Tribunal dismisses the Revenue's appeal. The AO's unsupported ad hoc fixation of annual value is set aside and the Commissioner (Appeals)'s direction to compute GAV for the period 14.12.2012-31.03.2013, after taking prevailing Capital W.I.P. and allowing interest under section 24(b), is affirmed.

Arms Length Price (ALP) - Transfer Pricing Officer (TPO) determination - Intra-group services / group service fees - Evidence test / rendition test / benefit test - Most Appropriate Method and Comparability Analysis - Remand for fresh determination of ALP

Arms Length Price (ALP) - Intra-group services / group service fees - Transfer Pricing Officer (TPO) determination - Evidence test / rendition test / benefit test - Most Appropriate Method and Comparability Analysis - Remand for fresh determination of ALP - Whether the ALP adjustment to group service fees paid to Associate Enterprises was sustainable or required fresh determination. - HELD THAT: - The Tribunal held that the TPO's approach of treating the ALP as 'Nil' without carrying out a proper functional, asset and risk (FAR) analysis and without applying the applicable tests was not acceptable. Relying on the Tribunal's decision in the assessee's own case for AY 2012-2013, the Bench observed that once an international transaction is recognised, the ALP must be determined by application of the law and relevant transfer pricing analysis; the TPO cannot simply set ALP at nil on the ground that the assessee purportedly did not benefit or did not require the services. The Tribunal directed that the assessee must satisfy the Evidence/rendition/benefit tests as envisaged by the statute and that the AO/TPO should determine the ALP by applying the most appropriate transfer pricing method and a proper comparability analysis based on documents placed on record. Accordingly, the matter was restored to the AO/TPO to follow the same directions given in the Tribunal's order for AY 2012-2013 and to determine ALP afresh. [Paras 8, 9]

Matter remanded to the AO/TPO to determine ALP of the impugned international transaction afresh, applying the evidence/rendition/benefit tests and the most appropriate method with comparability analysis.

Final Conclusion: The appeal is allowed for statistical purposes and the assessment is set aside to the AO/TPO for fresh transfer pricing determination of the ALP of the group service fees in accordance with the Tribunal's directions in the assessee's own case for AY 2012-2013.

Condonation of delay - point of taxation of capital gains under Joint Development Agreement - application of Section 53A of the Transfer of Property Act and Section 17(1A) of the Registration Act to JDA - precedential value of coordinate-bench ITAT decisions

Condonation of delay - Whether the delay of 52 days in filing the appeal before the CIT(A) should be condoned and the appeal admitted for adjudication. - HELD THAT: - The assessee explained the delay on the ground of being out of station when the assessment order was served. After hearing both sides the Tribunal held that this explanation amounted to a reasonable cause within the meaning of the Act and therefore the delay in filing the appeal before the CIT(A) was to be condoned. The appeal was accordingly admitted for adjudication on merits. [Paras 5]

Delay of 52 days condoned and appeal admitted for adjudication.

Point of taxation of capital gains under Joint Development Agreement - application of Section 53A of the Transfer of Property Act and Section 17(1A) of the Registration Act to JDA - precedential value of coordinate-bench ITAT decisions - Whether long term capital gain arising from the JDA dated 27.06.2006 accrued in the financial year 2006-07 (AY 2007-08) or in a later year (AY 2014-15) when an allocation agreement was executed. - HELD THAT: - The Tribunal considered the earlier coordinate-bench decisions holding that taxability of LTCG pursuant to the JDA dated 27.06.2006 arises in the financial year 2006-07 (AY 2007-08) when the landowner entered into the JDA and physically handed over possession to the developer. Although the Revenue sought to distinguish those decisions by reference to the amended provision in the Registration Act and Section 53A of the Transfer of Property Act, the Tribunal found the facts of the present case identical to the co-owners' cases which were decided in favour of the landowners. On that basis and following the coordinate-bench precedents, the Tribunal held that the capital gain accrued in FY 2006-07 (AY 2007-08) and not in AY 2014-15 based on the subsequent allocation agreement dated 10.07.2013, and directed deletion of the additions made by the AO for AY 2014-15. [Paras 6, 10]

Long term capital gain on transfer pursuant to JDA dated 27.06.2006 accrues in FY 2006-07 (AY 2007-08); additions for AY 2014-15 deleted and appeal allowed on merits.

Final Conclusion: The Tribunal condoned the delay in prosecuting the first appeal and, following coordinate-bench decisions, held that LTCG under the JDA dated 27.06.2006 accrued in FY 2006-07 (AY 2007-08); consequent additions made for AY 2014-15 were deleted and the appeal was allowed.

Penalty under section 271E - reasonable cause - genuineness of transactions - technical and venial violation - application of Hindustan Steel principle

Penalty under section 271E - reasonable cause - genuineness of transactions - technical and venial violation - Whether the penalty levied on the assessee under section 271E for repayment of finance in cash is sustainable. - HELD THAT: - The Assessing Officer imposed penalty under section 271E on the ground that the assessee repaid instalments in cash to finance companies on specified dates. The assessee explained that cash payments were made urgently to avoid loan default, to preserve creditworthiness and obtain timely NOC for sale of vehicle, and that signed cheque books were not available; the financiers confirmed the circumstances and genuineness of the transactions. The Commissioner (Appeals) upheld the penalty although the genuineness of the transactions was not disputed. The Tribunal applied the principle that where a violation is technical and venial and the transaction is genuine, penalty should not be levied; relying on the reasoning in Hindustan Steel that penalties are inappropriate for venial breaches, the Tribunal accepted that the assessee had reasonable cause for paying in cash and that the payments were bona fide. On these findings the penalty was held unsustainable and cancelled.

Penalty under section 271E deleted as the cash repayments were genuine and made for reasonable cause; the breach was technical and venial.

Final Conclusion: The appeal is allowed and the penalty imposed under section 271E for A.Y. 2013-14 is cancelled on the ground of reasonable cause and the venial nature of the violation.

Deductibility of demolition expenses - Taxation of sale of scrap - Indexed cost of acquisition / cost of construction - Proof of existence of asset by municipal tax receipts - Classification of capital gains as long-term and short-term - Apportionment of sale consideration between land and building - Guideline (SRO) value versus registered valuer's report - Remand for recomputation based on valuation

Deductibility of demolition expenses - Taxation of sale of scrap - Allowability of demolition charges where sale of scrap from demolished building has been taxed - HELD THAT: - The Tribunal found that the assessee admitted and the AO taxed the sale of scrap realized on demolition of the building. The existence of the building being demolished is accepted on the parties' own records. The AO disallowed the demolition expense without giving reasons. Having taxed the sale of scrap arising only upon demolition, the AO ought to have allowed the corresponding demolition expenditure. The Tribunal set aside the orders of the lower authorities and allowed the assessee's claim for demolition charges. [Paras 7]

Demolition charges allowed; appeal allowed on this issue.

Indexed cost of acquisition / cost of construction - Proof of existence of asset by municipal tax receipts - Acceptance of indexed cost of construction for building constructed in F.Y.1994-95 despite absence of contemporaneous construction accounts - HELD THAT: - The assessee produced municipal tax receipts evidencing payment from 2003-04 to 2011-12 and had admitted sale of scrap; both support existence of the building constructed in 1994-95. The Tribunal held that due to the passage of time the assessee may not retain original construction documents and that the municipal tax receipts together with the taxed sale of scrap constitute adequate evidence of the building's existence. In these circumstances there was no justification for denying the indexed cost of construction; the orders below were set aside and the indexed cost of acquisition of the building was allowed. [Paras 8]

Indexed cost of construction allowed; appeal allowed on this issue.

Classification of capital gains as long-term and short-term - Classification of sale proceeds: land as long-term capital asset and flats as short-term capital asset - HELD THAT: - The Tribunal observed that the flats were in possession of the assessee for less than 36 months since construction was completed close to the date of sale; consequently the sale of flats was correctly taxed as short-term capital gains while sale of land (held since 1980) constituted long-term capital gains. The Tribunal affirmed the approach of the authorities below on classification. [Paras 15]

Sale of land treated as long-term capital gain and sale of flats treated as short-term capital gain; classification upheld.

Apportionment of sale consideration between land and building - Guideline (SRO) value versus registered valuer's report - Remand for recomputation based on valuation - Recomputation of apportionment: AO's adoption of SRO value unacceptable where assessee objected and a registered valuer's report is available - HELD THAT: - The AO adopted guideline (SRO) value per sq.yd. as the sale consideration for land over the assessee's objection and without obtaining a departmental valuer's opinion. The Tribunal held that guideline value is not necessarily the sale consideration and that once the assessee had objected the AO should have referred the matter to the departmental valuer. A registered valuer engaged in the proceeding valued the land at a higher rate and the Department did not controvert or show defect in that report. In view of the absence of contrary material from the Department, the Tribunal accepted the registered valuer's valuation and directed the AO to consider land cost as determined by that report and to recompute long-term and short-term capital gains accordingly. The matter was remanded for recomputation on the stated basis. [Paras 15]

Apportionment remitted to AO to adopt the registered valuer's land valuation and recompute long-term and short-term capital gains; appeal partly allowed.

Final Conclusion: For A.Y.2013-14 the Tribunal allowed the assessee's appeals by permitting demolition charges and accepting the indexed cost of construction. For A.Y.2015-16 the Tribunal upheld classification of land as long-term and flats as short-term capital gains, and directed recomputation of apportionment by the AO using the registered valuer's determination of land value, remitting the matter for recalculation.

Treatment of admitted undisclosed firm income in partner's hands - survey admission's evidentiary value under section 133A - source of funds available from firm for partners' capital accounts - addition as unexplained investment - distribution of firm proceeds to partners and taxability

Treatment of admitted undisclosed firm income in partner's hands - source of funds available from firm for partners' capital accounts - survey admission's evidentiary value under section 133A - addition as unexplained investment - Whether the addition of Rs. 61,96,070 made as unexplained income in the hands of the assessee is sustainable where excess stock of the partnership firm was admitted on survey and the sale proceeds were taken to partners' capital accounts including that of the assessee. - HELD THAT: - The Tribunal recorded that a survey under section 133A resulted in an admission by the firm of excess stock of Rs. 1,87,50,000 which was offered as additional income in the firm's computation though not recorded in the firm's books; VAT and income-tax were paid by the firm on that admitted amount. The admitted excess stock generated sale proceeds which, having not been brought back into the firm's books, remained available to the partners in cash or kind. The assessee, being a partner, introduced his share of those proceeds into his capital account. The AO treated the increase in the assessee's capital as unexplained investment and made an addition. The Tribunal found this approach unsustainable: once the firm admitted and offered the excess stock as income and tax was paid, the proceeds constituted a genuine source available to the partners and could lawfully be applied to the assessee's capital account. In these circumstances the assessee had satisfactorily explained the source of the capital credit and no unexplained investment addition was warranted. [Paras 6, 7]

Addition of Rs. 61,96,070 as unexplained income is set aside and the appeal is allowed.

Final Conclusion: The order of the Commissioner (Appeals) confirming the addition is set aside; the Tribunal held that the assessee satisfactorily explained the source of the capital credit by reference to the firm's admitted excess stock and permitted the amount to stand in the assessee's capital account, allowing the appeal.

Treatment of foreign Free Zone Establishment as a separate body corporate under the definition of company - taxation of income of foreign entity on the basis of proprietary concern / residence - application of transfer pricing rules and benchmarking of international transactions between associated enterprises - invocation of section 14A and computation under Rule 8D for expenditure in relation to exempt income - allowability and restriction of deduction under section 35D for public issue expenses - acceptability of manufacturing burning/metal loss as deductible loss within industry norms - treatment of warranty expenses for computation of book profit under section 115JB - characterisation of corporate guarantees - shareholder/quasi capital activity versus a service/international transaction - applicability of section 145A (inclusive vs exclusive method) to unutilised CENVAT/MODVAT credit - classification of electrical fittings/installation as part of plant & machinery for depreciation

Treatment of foreign Free Zone Establishment as a separate body corporate under the definition of company - taxation of income of foreign entity on the basis of proprietary concern / residence - Income of Vega Industries (Middle East) FZE (Ajman Free Zone) could not be taxed in hands of the assessee as income of a proprietary concern; Vega UAE is a separate body corporate and its profits are not taxable in India as the assessee's income. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the A.O.'s addition after applying the coordinate bench ITAT decision in the assessee's own earlier year. Documentary evidence (certificate of formation, memorandum of incorporation, tax residence certificate and the relevant Amiri Decree) established that Vega ME/FZE was incorporated under Ajman law with body corporate capacity. The A.O.'s reliance on the sole shareholding and certain articles permitting lifting of the corporate veil did not negate separate corporate personality; those were limited circumstances for veil lifting and did not establish that Vega ME was a proprietorship. In view of the prior ITAT ruling on identical facts and the material demonstrating incorporation and residence, the profits of Vega ME were not brought to tax in India as the assessee's income. The Tribunal therefore dismissed the revenue appeals on this ground. [Paras 3, 4, 5, 11, 14]

Addition treating Vega ME as proprietorship and taxing its profits in assessee's hands deleted; Vega ME accepted as separate company.

Application of transfer pricing rules and benchmarking of international transactions between associated enterprises - treatment of Vega entities as distributor vs marketing service provider for ALP determination - Transfer pricing upward adjustments made by the TPO/Assessing Officer in respect of international transactions with Vega entities were not sustainable and were deleted or restricted, following the coordinate bench findings that Vega ME acted as a distributor. - HELD THAT: - The Tribunal endorsed the CIT(A)'s reliance on the coordinate bench ITAT decision in the assessee's own earlier assessment year, which after detailed FAR analysis held Vega UAE to be a distributor (bearing inventory and credit risk) and not merely a marketing service provider. Once characterized as a distributor, ALP had to be determined on profit on sale basis; the comparable analysis and margins relied upon by the assessee were held to justify rejection of the TPO's operating margin based adjustments. Consequently the TP adjustments proposed by TPO/DRP were not sustained and were deleted or restricted in the appeals that raised identical factual and functional profiles. [Paras 5, 24, 39]

TP upward revisions in respect of transactions with Vega entities deleted/restricted; no TP adjustment called for on the facts.

Invocation of section 14A and computation under Rule 8D for expenditure in relation to exempt income - Disallowance under section 14A was restricted having regard to the assessee's accounts, availability of substantial interest free funds and absence of specific satisfaction recorded by the AO; administrative expense disallowance limited to Rs. 15 lakhs (with set off of assessee's own computed amount). - HELD THAT: - The Tribunal affirmed the approach that AO must record specific satisfaction, with reference to the accounts, before invoking the rule 8D machinery; absent such pointed dissatisfaction and given the assessee's demonstrated large interest free funds and detailed bifurcation of expenses (including a self computed small disallowance), the Tribunal restricted administrative expense disallowance to a reasonable aggregate (Rs.15 lakhs) and allowed credit for the amount already disallowed by the assessee. The Tribunal relied on the need for AO to examine and record reasons in accounts before applying Rule 8D and applied earlier findings in the same set of appeals for subsequent years. [Paras 15, 18]

Section 14A disallowance reduced and restricted; AO's large Rule 8D computed disallowance not sustained in full.

Allowability and restriction of deduction under section 35D for public issue expenses - Disallowance under section 35D was restricted to the correct quantum after accounting for the 5% of project cost cap; AO's straight disallowance of 20% of ineligible expenses was reduced to the difference computed by reference to eligible amount. - HELD THAT: - The Tribunal agreed with CIT(A) that where the aggregate eligible public issue expenditure is capped by the 5% of project cost rule, the correct disallowance is the 20% of the excess of claimed over eligible amount. The AO had incorrectly straightaway disallowed 20% of the total expenses treated as ineligible. Following AO's and CIT(A)'s computations and the statutory scheme of section 35D, the Tribunal sustained the CIT(A)'s direction to limit the disallowance to the computed differential amount. [Paras 6, 7, 8]

Disallowance under section 35D restricted to the differential amount as held by CIT(A); AO's larger disallowance set aside.

Acceptability of manufacturing burning/metal loss as deductible loss within industry norms - The Assessing Officer's general restriction of burning loss to 2% was not sustainable; the claimed burning loss was accepted and the addition deleted. - HELD THAT: - The Tribunal concurred with CIT(A)'s finding that the manufacturing process here involved multiple stages (melting, moulding, fettling, machining etc.) where cumulative metal loss can exceed a single process melting norm; the assessee had historical years' acceptances, excise supervision without dispute, industry input output norms (export import policy) and precedent decisions (including ITAT direction in related entity) supporting higher loss percentages. Absent evidence of fictitious purchases or defective accounts, a blanket 2% restriction based on unspecified internet data was inappropriate. The addition was therefore deleted. [Paras 9, 11]

Addition on account of burning loss deleted; claimed manufacturing loss accepted.

Treatment of warranty expenses for computation of book profit under section 115JB - Actual warranty expenses claimed were not to be added back to book profit under section 115JB; the provision/estimate basis did not render them unallowable. - HELD THAT: - The Tribunal accepted CIT(A)'s view and precedent that warranty provisions/expenses, when based on reasonable estimation and supported by actual claims and accounting treatment, are allowable and need not be added back to book profit under section 115JB. Reliance was placed on Supreme Court and High Court authorities and factual finding that warranty expense claimed related to actual claims and had been accepted in normal assessment. [Paras 12, 14]

Warranty expenses not added back to book profit; AO's addition under section 115JB deleted.

Characterisation of corporate guarantees - shareholder/quasi capital activity versus a service/international transaction - application of Section 92B (and retrospective Explanation) to guarantees and benchmarking - Corporate guarantees issued on behalf of Vega group companies were, on the facts, to be treated as shareholder/quasi capital activity and not a chargeable international transaction for transfer pricing purposes; where benchmarking was applied by TPO, the quantum was restricted in part by CIT(A) and further restricted/deleted by the Tribunal following coordinate bench authority. - HELD THAT: - After considering OECD guidance, domestic definition of 'international transaction' and coordinate bench jurisprudence (Micro Ink and allied decisions), the Tribunal found that guarantees which are effectively shareholder support/quasi capital (and which did not have demonstrable bearing on profits/income/losses/assets on the facts) fall outside the scope of chargeable intra group services. Where fees were actually charged in comparable instances, that could bring guarantees within TP scope; however on the facts the guarantees constituted shareholder activity and no bearing on profits/assets was demonstrated. Accordingly the Tribunal followed coordinate decisions in deleting or restricting ALP adjustments and endorsed CIT(A)'s moderation of quantification where some internal/comparable evidence existed. [Paras 26, 27, 28]

TP adjustments in respect of corporate guarantees deleted or restricted; guarantees characterised as shareholder/quasi capital activity on the facts and not chargeable as international transaction.

Applicability of section 145A (inclusive vs exclusive method) to unutilised CENVAT/MODVAT credit - Unutilised CENVAT/MODVAT credit relating to capital goods accounted under exclusive method was not taxable and need not be added to income under section 145A; addition deleted. - HELD THAT: - The Tribunal upheld CIT(A)'s deletion of the AO's addition, following coordinate bench authority and higher court precedents which recognise that unavailed MODVAT/CENVAT credit on capital goods does not constitute income and when accounts are prepared on exclusive basis with reconciliation showing revenue neutrality, section 145A does not require inclusion as income. The assessee's tax audit schedules evidenced the credit as pertaining to capital goods and shown as current asset; this supported deletion. [Paras 33, 35]

Addition of unutilised CENVAT credit deleted; exclusive accounting method accepted for capital goods credit.

Classification of electrical fittings/installation as part of plant & machinery for depreciation - Electric installation/ fittings incurred with plant and machinery are part of plant & machinery and eligible for higher depreciation rates; AO's disallowance refused. - HELD THAT: - On the facts the electric installation formed an integral part of newly installed plant & machinery and without it the plant could not operate. Following CIT(A) and coordinate bench precedents, the Tribunal held that such installations are to be treated as plant & machinery for depreciation purposes and additional/ higher depreciation could be allowed accordingly. [Paras 36, 38]

Electric installation treated as part of plant & machinery; AO's disallowance of higher depreciation set aside.

Final Conclusion: The Tribunal disposed of a series of appeals (A.Y. 2008-09 to 2013-14) largely in favour of the assessee: additions treating Vega ME (Ajman FZE) income as assessable to the assessee were deleted (Vega held to be a separate body corporate); multiple transfer pricing adjustments in relation to Vega entities were deleted or restricted following coordinate bench findings that Vega ME functioned as a distributor; section 14A disallowances were curtailed after reviewing AO's satisfaction and the assessee's funds position; section 35D disallowance was limited to the correct quantum; claimed manufacturing burning losses and warranty expenses were accepted; corporate guarantee adjustments were largely rejected on the facts as shareholder/quasi capital activity; unutilised CENVAT on capital goods was not brought to tax; and electrical installations were held to be part of plant & machinery for depreciation purposes. The revenue appeals were dismissed in large part while several assessee appeals were partly allowed as recorded in the order.

Long-term capital gain - Holding period - Possession / part performance for determining date of acquisition - Beneficial ownership and 'held' for capital gains purposes - Deduction under section 54F - Evidentiary sufficiency of documents and rejection of suspicion without inquiry

Long-term capital gain - Holding period - Possession / part performance for determining date of acquisition - Evidentiary sufficiency of documents and rejection of suspicion without inquiry - Whether the capital gain on sale of the land is long-term or short-term - HELD THAT: - The Tribunal considered whether the assessee acquired and held the property for more than thirty-six months. The assessee produced a Sadakhat-cum-Kabja receipt dated 29.09.2006, banker's evidence of substantial payments (cheques of Rs.5,00,000 on 04.09.2006 and Rs.5,82,000 on 29.09.2006) and asserted possession from 29.09.2006, with final registration of sale deed later. The Assessing Officer treated the Sadakhat as an afterthought, observing the stamp paper bore another name, but made no further enquiries from the vendor, the stamp vendor or the named advocate and produced no adverse material. The Tribunal held that, in absence of any adverse evidence and in view of substantial payments through banking channels and asserted handing over of possession, the Assessing Officer's suspicion was unsustainable. Reliance on authority where beneficial ownership and possession under installment agreements led to treatment as acquisition for computing holding period was noted. Applying these considerations, the Tribunal concluded the asset was held for more than thirty-six months and the gain was long-term capital gain. [Paras 6, 7, 8]

The gain on sale of the land is long-term capital gain; Ground No.1 is allowed.

Deduction under section 54F - Remand for fresh consideration - Examination of the assessee's claim for deduction under section 54F - HELD THAT: - The Assessing Officer had not examined the section 54F claim after treating the gain as short-term. Having reversed that treatment and held the gain to be long-term, the Tribunal restored the claim to the file of the Assessing Officer for fresh adjudication. The Assessing Officer is to examine the claim and pass orders in accordance with law after giving the assessee an opportunity of hearing. [Paras 10]

Claim under section 54F is remanded to the Assessing Officer for fresh consideration and adjudication.

Final Conclusion: The appeal is partly allowed: the capital gain is held to be long-term (ground No.1 allowed), and the claim for deduction under section 54F is restored to the Assessing Officer for fresh consideration after opportunity of hearing.

Allowability of amortisation of premium on government securities held under the Held to Maturity category - classification of bank investments under HTM / HFT / AFS and its tax consequences - treatment of profit or loss on sale of securities as business income where banking accounting and RBI norms indicate trading nature - obligation to deduct tax at source under section 194J on processing / MICR charges - consequence where the recipient has offered the receipt to tax on the question of disallowance at the hands of the payer

Allowability of amortisation of premium on government securities held under the Held to Maturity category - classification of bank investments under HTM / HFT / AFS and its tax consequences - Deductibility of amortised premium paid on government securities held by the bank - HELD THAT: - The Tribunal followed consistent precedents and CBDT/RBI instructions and held that where government securities are classified as HTM, the premium paid over face value is required to be amortised over the remaining period of maturity and such amortisation is allowable as deduction. The decision took into account RBI classification of bank investments into HTM/HFT/AFS and CBDT Instruction No.17/2008 explaining that HTM investments are carried at acquisition cost and premiums (where acquisition cost exceeds face value) should be amortised. The Tribunal also relied on coordinate decisions and High Court authority recognising that accounting and regulatory treatment under banking laws and RBI guidelines determine the tax treatment, and that such consistent accounting practice supports allowing the claim. Applying these principles to the facts, the Tribunal allowed the ground in favour of the assessee. [Paras 8, 9]

Disallowance of amortised premium was reversed and the amortisation on HTM government securities was allowed as deduction.

Obligation to deduct tax at source under section 194J on processing / MICR charges - consequence where the recipient has offered the receipt to tax on the question of disallowance at the hands of the payer - Sustainability of disallowance for non-deduction of tax on MICR processing charges paid to State Bank of India - HELD THAT: - The Tribunal examined the assessee's contention that MICR processing is mechanised and does not attract TDS under section 194J and noted conflicting precedents. Rather than conclusively adjudicating the legal character of the payment, the Tribunal accepted the assessee's alternative submission that if the recipient (SBI) has included the receipts in its taxable income and paid tax thereon, no disallowance ought to survive at the hands of the payer. The Tribunal therefore directed the assessing officer to verify whether SBI had offered the MICR charges to tax; if so, the disallowance would be deleted. Consequently the ground was allowed for statistical purposes and remitted for factual verification rather than finally decided on the substantive TDS question. [Paras 13, 14]

Disallowance deleted subject to verification whether the recipient has offered the MICR charges to tax; matter remitted to AO for verification.

Final Conclusion: The appeal is partly allowed: the disallowance of amortised premium on HTM government securities is reversed and allowed as deduction; the disallowance relating to MICR processing charges is directed to be deleted if the recipient has offered the receipts to tax, and was allowed for statistical purposes pending verification.

Carry forward and set-off of deficit by a charitable trust - computation of income of charitable trusts on commercial principles - amortisation/adjustment of earlier years' expenditure as application of income - prohibition against double benefit

Carry forward and set-off of deficit by a charitable trust - amortisation/adjustment of earlier years' expenditure as application of income - computation of income of charitable trusts on commercial principles - prohibition against double benefit - Whether the claim of the assessee for carry forward of deficit and its set-off against subsequent years' income is permissible and whether such adjustment results in an impermissible double benefit. - HELD THAT: - The Tribunal upheld the CIT(A)'s allowance of the assessee's claim to carry forward and set off the deficit against subsequent years' income. The Tribunal relied on authoritative decisions of the Karnataka High Court and the Bombay High Court which hold that income of a trust is to be computed on commercial principles and that earlier years' expenditures (including amortisation or depreciation treated as application of funds) may be brought forward and adjusted against income in subsequent years. Those precedents (including the judgment in Sisters of St. Anne and the decisions in Ohio University Christ College and Institute of Banking) establish that such adjustments represent application of income in the year of adjustment and do not constitute a forbidden double benefit where book/commercial principles have been correctly applied. Having regard to these precedents and the coordinate Tribunal decision in ITO v. Shraddha Trust, the Tribunal found no infirmity in the CIT(A)'s conclusion and declined to disturb the allowance of the carry forward and set-off. [Paras 9, 10, 11]

The carry forward and set-off of the deficit claimed by the charitable trust was allowed; the CIT(A)'s order was upheld and the revenue's appeal dismissed.

Final Conclusion: In view of binding and persuasive precedents recognising computation of trust income on commercial principles and permitting amortisation/adjustment of earlier years' expenditures, the Tribunal dismissed the revenue's appeal and upheld the CIT(A)'s allowance of the carry forward of deficit.

Addition under section 68 - burden of proof on assessee to explain identity, genuineness and creditworthiness - assessment in hands of partners versus firm - veracity of creditor statements and scope of AO's enquiry

Addition under section 68 - burden of proof on assessee to explain identity, genuineness and creditworthiness - veracity of creditor statements and scope of AO's enquiry - Whether the addition of Rs.2,12,50,000/- made under section 68 in the hands of the firm was sustainable in view of explanations and evidence produced by the partners and creditors. - HELD THAT: - The Tribunal found that the partners and 79 unsecured creditors appeared and gave sworn statements, and that no specific defect or deficiency in the evidence was identified by the Assessing Officer in his order. The AO's conclusion describing the answers as "stereotyped" or the creditors as fishermen/agriculturists with white ration cards did not specify why the creditors' creditworthiness or the transactions were inherently improbable. The CIT(A) had recorded that the AO had not elicited particulars of financial capability and that the AO could not disregard the results of his own enquiries without pointing to specific infirmities. Applying these facts, the Tribunal held that the assessee had discharged the onus of explaining the identity, genuineness and creditworthiness and that the AO's addition founded on mere preponderance and generalized disbelief could not be sustained. [Paras 3, 4, 7]

Addition under section 68 held unsustainable; order of the CIT(A) deleting the addition upheld.

Assessment in hands of partners versus firm - scope of enquiry under section 68 vis-a -vis partnership contributions - Whether, assuming any doubt as to the source of amounts brought into the firm as capital, the addition ought to be made in the hands of the individual partners and not in the hands of the firm. - HELD THAT: - Relying on the principle adopted by the jurisdictional High Court and followed by this Tribunal, the Tribunal noted that where amounts are admitted to be contributions by partners to the capital account, Section 68 cannot be legitimately used to treat such pooling of capital as undisclosed credits in the hands of the firm. Any inquiry into source of funds contributed by partners must be directed to the individual partners, who alone can be required to explain the source. On identical facts, the Tribunal respectfully followed that precedent and agreed with the CIT(A) that addition, if any, should be considered against the partners and not levied on the firm. [Paras 7]

Principle applied that capital introduced by partners cannot be assessed as unexplained credit of the firm; AO not entitled to make addition in hands of firm on that basis.

Final Conclusion: Revenue's appeal dismissed; the Tribunal upheld the CIT(A)'s deletion of the addition under section 68 and confirmed that contributions admitted as capital by partners cannot be treated as unexplained credits of the firm, leaving the AO, if so advised, free to examine the individual partners.

Summary order. Special Leave Petition dismissed; pending interlocutory application(s), if any, disposed of.

Restoration of company name - strike off from the register of companies for non filing of financial statements and annual returns - power to restore company name under Section 252(3) - just and equitable ground for restoration - conditional restoration requiring filing of outstanding statutory documents and payment of fees - direction to Registrar to restore status, notify bankers and publish restoration - reservation of Registrar's power to proceed for late filing and other compliances

Restoration of company name - power to restore company name under Section 252(3) - just and equitable ground for restoration - The Tribunal allowed the appeal and held that it was just and equitable to restore the name of the company to the Register of Companies. - HELD THAT: - The Tribunal considered the appellant's explanation that non filing of statutory documents for the financial years ending 31.03.2017 to 31.03.2019 occurred inadvertently due to financial difficulties and not with any mala fide intent, and noted the appellant's readiness to file all outstanding Financial Statements and Annual Returns with the requisite fees. The Registrar's report, which recorded compliance with statutory strike off procedure and the company's failure to file returns, was examined. Balancing the appellant's representations against the facts of non filing and procedural regularity of strike off, the Tribunal concluded that restoration under the statutory power was warranted as being just and equitable and therefore ordered restoration of the company's name to the register. [Paras 10, 13]

Appeal allowed; Registrar directed to restore the name of the company in the Register of Companies and take consequential actions to change status to active and intimate bankers.

Strike off from the register of companies for non filing of financial statements and annual returns - conditional restoration requiring filing of outstanding statutory documents and payment of fees - Restoration was made subject to the company filing all outstanding statutory documents and paying prescribed fees/additional fee within a specified time. - HELD THAT: - In exercise of the restorative power, the Tribunal imposed conditional requirements to place the company and third parties as nearly as possible in the pre strike off position. The company was directed to file all statutory documents (Financial Statements and Annual Returns for the specified periods) along with prescribed fees/additional fees/fines as determined by the Registrar within 30 days from the date of restoration. The Tribunal thereby tied restoration to fulfillment of statutory filing and fee obligations to regularize the company's compliance status. [Paras 13]

Restoration ordered on condition that the company files all outstanding statutory documents with prescribed fees/additional fees within 30 days of restoration.

Direction to Registrar to restore status, notify bankers and publish restoration - conditions for restoration (undertaking regarding demonetization period and restraint on alienation) - reservation of Registrar's power to proceed for late filing and other compliances - The Tribunal directed ancillary measures and imposed conditions: undertaking about non use of accounts for tainted money during demonetization, restraint on alienation of assets until compliance, payment of costs to PM CARES Fund, and preserved Registrar's power to proceed for alleged late filings. - HELD THAT: - Alongside restoration, the Tribunal directed the Registrar to notify bankers and publish the restoration order, required the shareholders/directors to submit a joint undertaking affirming non use of accounts for tainted money during demonetization, and restrained the company from alienating valuable assets until compliances were completed. The Tribunal imposed a cost of Rs. 30,000 payable to the PM CARES Fund and required proof of payment; failure to comply would cause the order to lapse. Finally, the order expressly did not preclude the Registrar from taking action against the company and its directors for alleged late filings or other breaches under the Companies Act. [Paras 11, 13, 14]

Restoration subject to undertaking, compliance conditions, payment of costs, restraint on alienation until compliance, and without circumscribing the Registrar's power to initiate proceedings for non compliance.

Final Conclusion: The Tribunal allowed the company appeal and ordered restoration of the company's name to the Register of Companies as if it had not been struck off, subject to specified conditions: filing outstanding Financial Statements and Annual Returns with prescribed fees/additional fees within 30 days of restoration, submission of a joint undertaking regarding non use of accounts during demonetization, payment of costs to the PM CARES Fund, prohibition on alienation of assets until compliance, and publication of the restoration by the Registrar; the Registrar's statutory powers to proceed against the company and its directors for alleged late filings remain unimpaired.

Disclosure of price sensitive information - Materiality for continuous disclosure under Listing Agreement and PIT Regulations - Contingent contracts versus disclosure obligations - Board-authorised acts and committee/authorisation inference - Laches in regulatory enforcement - Mitigation of penalty for delay

Disclosure of price sensitive information - Materiality for continuous disclosure under Listing Agreement and PIT Regulations - Contingent contracts versus disclosure obligations - Whether the Binding Implementation Agreement signed by an authorised Executive Director with dominant shareholders constituted material and price sensitive information requiring immediate disclosure under clause 36 of the Listing Agreement and Regulation 12(2) of the PIT Regulations, 1992. - HELD THAT: - The Tribunal held that disclosure law tests materiality and price-sensitivity, not contract-law certainty. Clause 36 and PIT Regulation 2(ha) mandate immediate dissemination of events likely to materially affect securities, and Schedule II requires prompt disclosure on a continuous basis. The Binding Agreement was signed by a Board-authorised Executive Director of the appellant and by representatives of the dominant shareholders (one signatory also being a director of the transferor bank), and the document itself contained swap ratio and time-frames, and was followed the same day by board meetings and eventual board approvals. The factual matrix - prior meetings between parties, rapid completion of formalities (power of attorney delivered, board meetings convened and approvals granted within hours), and the appellant's own disclosure describing anticipated synergies and risks - established reasonable certainty and materiality from an ex-ante market perspective. The Tribunal rejected the appellant's submission that contingent-contract principles (requirement of fulfillment of all conditions precedent for enforceability) controlled the disclosure obligation, observing that waiting for legal finality (eg. shareholder or regulator approval) would render disclosure-based regulation and insider-trading prevention ineffective. Accordingly, the signed Binding Agreement was a material and price sensitive event that should have been disclosed immediately. [Paras 21, 24, 25, 28, 29]

The Binding Agreement was material and price sensitive and ought to have been disclosed immediately; the impugned finding that there was a delay in disclosure is upheld.

Laches in regulatory enforcement - Mitigation of penalty for delay - Whether the inordinate delay by SEBI in issuing the show cause notice and passing the penalty order vitiates the proceedings or warrants mitigation of penalty. - HELD THAT: - The Tribunal found there was an inordinate delay by SEBI: the preliminary investigation report was available in August 2012 but the show cause notice was issued on June 26, 2018, and the penalty order followed in September 2019, resulting in substantial delay between the event and regulatory action. The Tribunal recognised that undue delay can cause prejudice to a corporate entity and undermines the regulator's behaviour-modification function. Although the appellant had not raised laches before the Adjudicating Officer, the Tribunal observed that pleadings should be construed liberally and that laches - being a mixed question of law and fact that goes to the root of the case - can be considered when raised in the appeal. On the particular facts, while laches did not vitiate the merits of the finding of disclosure violation, it did render the quantum of penalty inappropriate. [Paras 32, 33, 34, 35, 36]

Proceedings are not set aside for laches, but the penalty imposed is reduced: the monetary penalty is substituted by a warning.

Final Conclusion: The Tribunal upheld the finding that the signed Binding Agreement was material and price sensitive and ought to have been disclosed immediately, but having regard to SEBI's inordinate delay in prosecuting the matter, the imposed monetary penalty is set aside and replaced with a warning; appeal is partly allowed.

Liquidation order under the Insolvency and Bankruptcy Code - commercial wisdom of the Committee of Creditors - validity of Committee of Creditors' vote for liquidation - inclusion of leasehold rights in liquidation value - non-justiciability of CoC's business decision

Liquidation order under the Insolvency and Bankruptcy Code - validity of Committee of Creditors' vote for liquidation - non-justiciability of CoC's business decision - The order for liquidation passed by the Adjudicating Authority under Section 33(2) of the I&B Code based on the CoC resolution. - HELD THAT: - The Tribunal held that the CoC, after deliberation, resolved to propose liquidation and approved the resolution by a vote share of 87.30%, exceeding the statutory threshold. The law (as explained in K. Sashidhar and subsequent authority) assigns paramountcy to the commercial wisdom of the CoC and limits the jurisdiction of the Adjudicating Authority and the Appellate Tribunal to re-evaluate that commercial decision. The minutes show that the Resolution Plans were considered, directions were given for revision, and ultimately the CoC concluded that no viable, compliant plan was available and therefore voted for liquidation. In view of the statutory scheme and governing precedents, the Adjudicating Authority was obliged to pass a liquidation order on the CoC's decision and had no power to substitute its view for the CoC's commercial determination. [Paras 23, 24, 25, 33, 35]

The liquidation order founded on the CoC's resolution (87.30% vote) is valid and non-justiciable on merits of CoC's commercial decision; therefore the challenge to the liquidation order fails.

Inclusion of leasehold rights in liquidation value - Municipal Corporation of Greater Mumbai v. Abhilash Lal - Whether leasehold rights in favour of the corporate debtor could be counted in liquidation value and whether the MCGM decision precluded that inclusion. - HELD THAT: - The Tribunal found the facts distinguishable from MCGM: in the present case lease deeds in favour of the corporate debtor were executed (2006 and 2008) and contain provisions for transfer subject to payment of applicable fees, unlike MCGM where the lease deed had not been executed. Consequently the ratio in MCGM, which prevented overriding a third party's statutory control where no lease had vested, does not apply. The Tribunal also noted statutory amendment and the factual existence of executed leases, and held that inclusion of those leasehold interests in assessing liquidation value was permissible on the facts of this case. [Paras 12, 13, 14, 30, 31]

The challenge based on MCGM is inapplicable on the facts; the executed leasehold rights could be considered in ascertaining liquidation value in this case.

Duties of the Resolution Professional - voting procedure and presentation of resolution plans to CoC - Whether the Resolution Professional failed in duty by not placing compliant resolution plans for voting or by steering process towards liquidation. - HELD THAT: - On review of the CoC minutes and record, the Tribunal concluded that resolution plans compliant with the Code were laid before the CoC, CoC repeatedly directed the RP to seek revisions, and ultimately the CoC, after discussions, decided that the plans were non-compliant or unviable and directed liquidation. The Tribunal rejected the contention that plans were summarily dismissed without voting; the record shows deliberations and directions followed by a formal vote on liquidation. Given that the CoC exercised its commercial judgment and the RP acted in accordance with those directions, the alleged dereliction of duty by the RP did not succeed as a ground to invalidate the liquidation order. [Paras 11, 20, 21, 23, 25]

Allegations that the Resolution Professional failed to discharge duties by not placing plans to vote or by favouring liquidation are rejected; the RP laid plans and followed CoC directions, and the CoC voted for liquidation.

Final Conclusion: The Appeals are dismissed as devoid of merit. The CoC's resolution to liquidate (approved by requisite majority) and the consequent liquidation order are upheld; interim directions are vacated and related IA disposed of.

Limited judicial scrutiny under Section 31 - commercial wisdom of the Committee of Creditors - maximisation of value of assets - inadmissibility of resolution plans from persons not part of CIRP - adjudicating authority exceeding jurisdiction by quantitative price comparison

Limited judicial scrutiny under Section 31 - commercial wisdom of the Committee of Creditors - adjudicating authority exceeding jurisdiction by quantitative price comparison - Scope of powers of the Adjudicating Authority under Section 31 of the I&B Code. - HELD THAT: - The Tribunal held that once a resolution plan is approved by the Committee of Creditors (COC), the Adjudicating Authority's role under Section 31(1) is confined to testing the plan against the requirements of Section 30(2) (and where applicable Section 30(4)). The Authority has only limited judicial scrutiny and must not interfere with the commercial decisions of the COC. The Adjudicating Authority exceeded its jurisdiction in the impugned order by undertaking a quantitative analysis (comparing liquidation value, fair value and competing offers) and directing reconsideration of the COC on the basis that a higher bid existed; such comparative price evaluation and overturning of COC's commercial wisdom is not permissible under Section 31. [Paras 12, 13, 14]

Adjudicating Authority has limited powers under Section 31 and erred in undertaking quantitative price comparison and interfering with COC's commercial decision.

Inadmissibility of resolution plans from persons not part of CIRP - maximisation of value of assets - commercial wisdom of the Committee of Creditors - Whether the Adjudicating Authority can direct the COC to consider a resolution plan submitted by a person who did not participate in the CIRP process. - HELD THAT: - The Tribunal found that a person who did not submit a resolution plan pursuant to the expression of interest and therefore was not part of the CIRP cannot have its plan entertained by the Adjudicating Authority under Section 31. There is no provision empowering the Authority to direct the COC to consider a plan of a non-participant, and permitting such a procedure would frustrate CIRP timelines and allow post-disclosure opportunistic enhancement of bids before the Authority. Reliance was placed on this Tribunal's earlier decisions which reject suo motu directions to the COC to reconsider approved plans merely because a higher offer is filed later before the Authority. [Paras 15, 16, 17]

Adjudicating Authority erred in entertaining and directing the COC to consider the resolution plan of a person who did not participate in CIRP.

Maximisation of value of assets - commercial wisdom of the Committee of Creditors - Whether the conduct of the successful resolution applicant during CIRP affects the adjudication of the impugned order. - HELD THAT: - The Tribunal considered objections about prior orders and related-party filings (Kalinga Enterprises Ltd.) and held that the earlier order directing placement of KEL's plan before the COC was not relevant to the present appeal. The Tribunal observed that procedural history or delay by the successful applicant does not justify entertaining a belated application from a non-participant. It concluded that when an application for approval under Section 31 is pending, the Adjudicating Authority cannot permit a non-participant to file or have its plan considered merely because it offers a higher amount, as that would render the CIRP process interminable. [Paras 18, 19, 20, 21]

The Appellant's conduct or related filings do not validate entertaining the non-participant's plan; impugned order is unsustainable and set aside.

Final Conclusion: The appeal is allowed. The impugned order directing the Respondent's plan (filed by a person not part of CIRP) to be placed before the COC is set aside; the Adjudicating Authority exceeded its limited jurisdiction under Section 31 by undertaking quantitative comparison and directing reconsideration. The Adjudicating Authority is directed to proceed with the RP's application for approval of the resolution plan as per law.

Proof of claim and time-bar under liquidation - Admission and verification of claims by Liquidator - Invocation of bank guarantee and consequential recovery - Remedy under Section 42 of the Insolvency and Bankruptcy Code, 2016 against liquidator's decision

Invocation of bank guarantee and consequential recovery - Reasonableness of overlapping claims after recovery - The claim for additional cost alleged to have been incurred by the applicant on account of non supply of transformers is unreasonable and rejected because the applicant had already recovered by invocation of the bank guarantee. - HELD THAT: - The Liquidator verified the documents and found that the applicant had invoked a bank guarantee of Rs. 27,58,498/- in respect of non supply of transformers. The applicant nevertheless sought an additional claim of Rs. 14,49,973/- as extra burden shifted to the corporate debtor. The Tribunal accepted the Liquidator's finding that the amount claimed as additional cost coincides with the recovery effected through the bank guarantee and is therefore unreasonable. On that basis the claim for additional cost was rejected. [Paras 8, 10, 11, 12]

Claim for additional cost consequent to non supply of transformers rejected as already recovered by invocation of bank guarantee.

Proof of claim and time-bar under liquidation - Admission and verification of claims by Liquidator - Remedy under Section 42 of the Insolvency and Bankruptcy Code, 2016 against liquidator's decision - The application under Section 42 seeking condonation of delay and direction to the Liquidator to admit the entire claim is not maintainable and is dismissed. - HELD THAT: - The applicant filed its claim after the prescribed date for submission of claims in the liquidation process. The Liquidator, while verifying the belated claim, accepted only the portion relating to non repair of transformers under warranty (subject to Adjudicating Authority approval) and rejected the unreasonable overlapping claim. Having regard to the Liquidator's verification and the unrecovered/overlapping nature of the rejected claim, the Tribunal held that the applicant's plea for condonation and direction to admit the entire claim cannot be sustained and the application under Section 42 does not succeed. [Paras 12]

Application under Section 42 dismissed; portion of claim accepted by Liquidator stayed subject to Adjudicating Authority approval, remainder rejected.

Final Conclusion: The Tribunal dismissed the Section 42 application: the Liquidator's partial acceptance of the claim (for non repair under warranty) stands subject to the Adjudicating Authority's approval, while the claim for additional cost related to non supply was rejected as already recovered by invocation of the bank guarantee.

Financial debt - default - admission under Section 7 - corporate insolvency resolution process - interim resolution professional - moratorium under Section 14 - set-off and counterclaim not a ground for disputing financial debt

Financial debt - default - set-off and counterclaim not a ground for disputing financial debt - Existence of financial debt and default by the corporate debtor in repayment of amounts due to the financial creditor. - HELD THAT: - The Tribunal found from the record, including the admission in the corporate debtor's affidavit and the material placed by the financial creditor, that the corporate debtor had outstanding liabilities to the financial creditor and had not repaid the same despite opportunities to do so. The Tribunal applied the settled approach articulated by the Supreme Court in Innoventive Industries Ltd. and Mobilox Innovations Pvt. Ltd. , that where a financial debt and default are established in an application under Section 7, the adjudicating authority is obliged to admit the application. In that context, defences framed as set-off or counterclaims do not constitute a disputed question of fact or law sufficient to bar admission under Section 7. On the facts, the Tribunal was satisfied that there was a debt and a default by the corporate debtor. [Paras 12, 13]

There is a financial debt and a default by the corporate debtor.

Admission under Section 7 - corporate insolvency resolution process - Whether the Section 7 petition filed by the financial creditor should be admitted and CIRP initiated. - HELD THAT: - Having concluded that a financial debt and default existed, and applying the legal position that an admitted Section 7 application triggers the corporate insolvency resolution process, the Tribunal held that the petition must be admitted under Section 7(5) of the I&B Code, 2016. The Tribunal noted earlier interlocutory indulgences granted to the corporate debtor to pursue settlement efforts but observed that no payment was made and the admitted outstanding debt remained unpaid. On this basis, and in view of the statutory scheme and the authority of the Supreme Court decisions cited, the Tribunal admitted the application and directed initiation of the CIRP. [Paras 14, 19]

The Section 7 application is admitted and the CIRP is initiated.

Interim resolution professional - moratorium under Section 14 - Appointment of the proposed Interim Resolution Professional and imposition and scope of the moratorium consequent to admission. - HELD THAT: - The financial creditor had proposed a named professional and filed the requisite written communication in the prescribed form. The Tribunal appointed the proposed individual as Interim Resolution Professional and directed him to perform duties under the Code, including filing his report within twenty days. Consequent to admission, the Tribunal declared the moratorium under Section 14, stating its effect in terms of prohibition on institution or continuation of suits, transfer or disposal of assets, enforcement of security, and recovery of property occupied by the corporate debtor, and noted exceptions and durations as provided in Sections 14(2), 14(2A), 14(3) and 14(4). The powers of the board of directors stand suspended for the CIRP period. [Paras 15, 16, 17, 18, 19]

The proposed Interim Resolution Professional is appointed; moratorium under Section 14 is imposed with the statutory scope and duration.

Final Conclusion: The petition under Section 7 is admitted: the Tribunal found that a financial debt and default existed, initiated the CIRP, appointed the proposed Interim Resolution Professional who is to act and file his report within twenty days, and declared the statutory moratorium under Section 14 with its specified scope and duration.

Eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - quantified/quantification of tax dues as a pre condition for eligibility - written communication (including letter intimating duty or admission during enquiry) as constituting quantification - notice under section 87(b) of the Finance Act, 1994 as a recovery measure - principles of natural justice requiring supply of adverse documents and opportunity of hearing - obligation of the Designated Committee to grant hearing where declaration is disputed

Quantified/quantification of tax dues as a pre condition for eligibility - written communication (including letter intimating duty or admission during enquiry) as constituting quantification - eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Declaration was admissible under the scheme despite non finalisation of departmental adjudication where tax dues had been quantified by written communication before the cut off date. - HELD THAT: - The Court held that for the purpose of eligibility under the scheme the word "quantified" means a written communication of the amount of duty payable, which includes a letter intimating duty demand or a duty liability admitted by the person during enquiry, investigation or audit. Reliance was placed on the Board's circular dated 27th August, 2019 and the Court's earlier decisions which construed written communications and admissions before 30.06.2019 as sufficient for quantification. Applying that principle to the facts, the petitioner's intimation dated 14th September, 2018 and the notice under section 87(b) dated 3rd December, 2018 (both prior to 30.06.2019) demonstrated quantification for the relevant period, and therefore rejection of the declaration on the ground of ineligibility was not justified. [Paras 30, 31, 32, 33, 34]

Petitioner was eligible to file the declaration under the enquiry/investigation/audit category as its tax dues had been quantified by written communication prior to the cut off date.

Principles of natural justice requiring supply of adverse documents and opportunity of hearing - obligation of the Designated Committee to grant hearing where declaration is disputed - Authority's reliance on an internal departmental letter not furnished to the petitioner and summary rejection without hearing violated principles of natural justice. - HELD THAT: - The Court observed that when an authority relies on a document to take an adverse decision, a copy of that document or its essence must be furnished to the affected party so that it can defend itself. Further, where the Designated Committee's estimate disputes the declarant's declared amount, the scheme envisages an opportunity of hearing before insisting on higher payment; summary rejection without affording a chance to explain would contravene natural justice and the object of the scheme. The impugned rejection relied on a departmental letter of 5th February, 2020 which was not supplied to the petitioner and no hearing was granted; that procedure was therefore impermissible. [Paras 35, 36]

Rejection of the declaration without furnishing the relied upon departmental letter and without granting a hearing was contrary to natural justice and unsustainable.

Eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - remand for fresh consideration with hearing and speaking order - Matter remanded to respondent for fresh consideration of the petitioner's declaration with an opportunity of hearing and a speaking order within a stipulated time. - HELD THAT: - Having concluded that the petitioner was prima facie eligible and that natural justice required furnishing of the document relied upon and an opportunity of hearing, the Court set aside the order rejecting the declaration and remitted the matter to respondent No.6 to treat the declaration as valid for consideration under the investigation/enquiry/audit category. The respondents were directed to afford personal hearing, communicate the basis of any adverse view, and pass a speaking order; the exercise was to be completed within six weeks from receipt of the Court's order. [Paras 37]

Order rejecting the declaration set aside; matter remanded for reconsideration with hearing and speaking order within six weeks.

Final Conclusion: Writ petition allowed to the extent of quashing the rejection order; the declaration is to be reconsidered as valid under the scheme and respondents must provide hearing, furnish relied upon material and pass a speaking order within six weeks; no order as to costs.

Video Tape Production Service - export of services - post-production film activity - definition to be read in totality - literal construction of taxation provisions

Video Tape Production Service - post-production film activity - export of services - definition to be read in totality - Whether the services rendered by the appellant to foreign clients fall within the ambit of Video Tape Production Service and are taxable for the period in dispute. - HELD THAT: - The Tribunal examined the nature of the appellant's activities - Computer Graphics, Digital Restoration and Reverse Telecine performed on old films - and found that these do not involve recording any programme, event or function but are post-production activities performed on inputs received. The Tribunal applied the principle that the definition of "Video Tape Production Service" must be read in its entirety and part of the definition cannot be selectively relied upon to bring post-production work within that ambit. Taxing provisions must be construed literally and no additional meaning can be read into the definition in the absence of ambiguity. The Tribunal therefore followed its earlier decisions in which identical facts were decided in the appellant's favour and, since no stay was in operation, held that the services to foreign clients qualified as export of services and did not fall under "Video Tape Production Service" for the period in dispute. [Paras 4, 5, 6]

The services rendered to foreign clients are not covered by "Video Tape Production Service" and the appeal is allowed with consequential benefits.

Final Conclusion: Appeal allowed; the impugned demand for the period 01.04.2010 to 31.03.2011 is set aside as the services in question are post-production activities and do not fall within the definition of "Video Tape Production Service," with consequential benefits, if any, to the appellant.

Refund of tax paid consequent to appellate order - invocability of extended period of limitation - effect of assessee's admission of tax liability - finality of Tribunal's order

Refund of tax paid consequent to appellate order - invocability of extended period of limitation - finality of Tribunal's order - Appellant entitled to refund of service tax paid for the period held by the Tribunal to be beyond the period of limitation, together with interest. - HELD THAT: - The Tribunal had earlier held that the extended period of limitation was not invokable and accordingly set aside the demand for service tax and interest for that extended period; that order has become final. The adjudicating authority and Commissioner (Appeals) rejected the subsequent refund claim on the ground that the appellant had not contested liability earlier or had paid and concluded proceedings. Those conclusions are contrary to law because they fail to give effect to the final appellate order. Where an appellate tribunal has finally determined that the extended period of limitation is not invokable and has dropped the demand, a refund claim filed consequent to that final order is admissible. The Tribunal therefore set aside the impugned order and allowed the refund with interest. [Paras 6, 7]

Impugned order set aside; refund of service tax paid for the extended period of limitation with interest allowed.

Effect of assessee's admission of tax liability - Earlier admission of service tax liability by the appellant did not preclude grant of refund in view of the subsequent final order of the Tribunal setting aside the extended-period demand. - HELD THAT: - The Department relied on precedents to contend that an admission by the assessee of tax liability is final and cannot be reopened. The Tribunal found those decisions inapplicable because the present case involves a subsequent final adjudication by the Tribunal holding that the extended period of limitation was not invokable. Since the appellate order is final and favorable to the appellant, the question of earlier admission does not defeat the statutory right to refund arising from the final decision. [Paras 6]

The submissions based on the assessee's prior admission do not bar the refund claim in light of the final Tribunal order.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order and directed that the refund of service tax paid for the extended period of limitation, together with interest, be paid by the department within one month.

Input Tax Credit - Extended period of limitation - Benefit of exemption notification - Divergent views of Revenue - Limitation bar to recovery

Extended period of limitation - Divergent views of Revenue - Limitation bar to recovery - Denial of input tax credit is barred by limitation where the show cause notice invokes the extended period despite divergent views of Revenue and allowance of credit to similarly placed assessees. - HELD THAT: - The Tribunal noted that similarly placed assessees were allowed the credit and that appeals against those orders were filed by the Revenue, demonstrating divergent views within the Revenue. In such circumstances the Tribunal held that the extended period of limitation is not applicable. Since the show cause notice in this appeal was issued by invoking the extended period, the denial of credit is time barred. The Tribunal therefore set aside the impugned order without deciding the substantive merits of entitlement to credit and allowed the appeal with consequential relief, if any.

Impugned order set aside and appeal allowed on the ground that the denial of credit is barred by limitation.

Final Conclusion: The appeal is allowed and the impugned order denying input credit is set aside on the ground that the proceedings were time barred because the extended period of limitation could not be invoked in view of divergent views of the Revenue and allowance of credit to similarly placed assessees.

Reopening of assessment - reasons recorded for reopening - revised return filed in response to notice under section 17 - reconciliation of jewellery found on search - remand for fresh verification/reconciliation - beneficial ownership - offshore discretionary trust - assets of offshore entities not exigible as assessee's wealth - foreign bank balances not 'assets' under the definition of assets - precedential value of Income Tax Settlement Commission findings before Wealth Tax authorities

Reopening of assessment - reasons recorded for reopening - Validity of reassessment where reasons recorded for reopening were not supplied to the assessee - HELD THAT: - The Tribunal held that the Assessing Officer did not furnish the reasons recorded for reopening the assessment to the assessee and that this omission is a non-curable defect vitiating the reassessment proceedings. Relying on jurisdictional High Court precedents, the Tribunal concluded that failure to supply reasons denied the assessee the right to file objections and thereby rendered the entire reassessment void. For these reasons Ground No.1 is allowed. [Paras 41]

Reassessment quashed for non-supply of reasons recorded for reopening; Ground No.1 allowed.

Revised return filed in response to notice under section 17 - revised return filed in response to notice under section 17 - Whether a belated return filed in response to a notice under section 17 can be treated as revisable under section 15 - HELD THAT: - The Tribunal agreed with the Commissioner that the return filed under section 17 was belated and that the statutory scheme does not permit treating such a belated return as a regular return under section 15 for purposes of revision. Consequently the appellant's contention that a combined reading of sections 17 and 15 permits revision was rejected and the ground was dismissed. [Paras 42]

Assessee's plea to treat the belated section 17 return as revisable under section 15 rejected; ground dismissed.

Reconciliation of jewellery found on search - remand for fresh verification/reconciliation - Treatment of jewellery found on search and whether additions based on non-reconciliation should stand - HELD THAT: - The Tribunal observed that the jewellery found during search belonged to the assessee and various family members and that complex reconciliation was necessary. It held that the AO had improperly relied upon figures from a revised return he had rejected and that the assessee must be afforded an opportunity to reconcile items with family and group records. Accordingly the Tribunal remitted the matter to the AO to redo reconciliation of jewellery of all family members and to complete assessment after giving the assessee proper opportunity. [Paras 43, 44]

Issue remitted to the AO for de novo reconciliation of jewellery and fresh adjudication; remand ordered (allowed for statistical purpose).

Offshore discretionary trust - beneficial ownership - assets of offshore entities not exigible as assessee's wealth - precedential value of Income Tax Settlement Commission findings before Wealth Tax authorities - Whether offshore assets held through an irrevocable discretionary trust and corporate vehicles are exigible to wealth tax in the hands of the assessee as beneficial owner - HELD THAT: - On construction of the declaration of trust the Tribunal found the arrangement to be an irrevocable discretionary offshore trust settled by a non-resident settlor with multiple beneficiaries, the assessee being one of them. The Tribunal held that the mere power to appoint or remove trustees (or KYC/AML entries referring to a 'beneficial owner') does not collapse the trust or render trust corpus the personal asset of a beneficiary. The trustees continue to hold legal control and distributions are within their absolute discretion; no distribution to the assessee was shown. The Tribunal also held that the ITSC income-tax order is not binding on Wealth Tax authorities and may be considered at the Tribunal's discretion. Applying these principles the Tribunal allowed the assessee's challenge to the additions treating offshore trust assets as his personal wealth and allowed Ground No.3. [Paras 32, 33, 34, 35]

Additions of offshore trust and corporate assets to assessee's net wealth disallowed; Ground No.3 allowed.

Foreign bank balances not 'assets' under the definition of assets - beneficial ownership - Whether deposits in foreign bank accounts of offshore entities can be treated as the assessee's taxable wealth (as non-productive 'cash in hand') - HELD THAT: - The Tribunal held that the bank balances were in the names of offshore companies and trusts which are separate taxable entities governed by trustees; KYC/AML designation of the assessee as a 'beneficiary' does not establish legal ownership. The Tribunal found no basis in the statutory definition of 'assets' under section 2(ea) to equate offshore bank balances with taxable 'cash in hand' of the assessee and concluded that the AO's addition treating aggregate foreign deposits as the assessee's wealth was unsupported by evidence of ownership. Consequently the addition was held to be without evidential foundation and was deleted. [Paras 36, 37, 38, 40]

Addition of aggregate deposits in foreign bank accounts to assessee's net wealth disallowed; ground allowed.

Final Conclusion: The appeals are partly allowed. Reassessment proceedings were quashed for non-supply of reasons recorded for reopening; additions treating offshore trust/corporate assets and foreign bank deposits as the assessee's personal wealth are disallowed; the claim on unreconciled jewellery is remanded to the AO for fresh reconciliation and adjudication after giving the assessee full opportunity; other grounds disposed as indicated above.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of statutory presumption on preponderance of probabilities - liability of directors and company for offences under Section 138 of the Negotiable Instruments Act - pleading and applicability of Section 141 of the Negotiable Instruments Act - probative effect of admission of signature and cheque issuance - effect of police 'B' report on criminal prosecution under the N.I. Act

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of statutory presumption on preponderance of probabilities - probative effect of admission of signature and cheque issuance - effect of police 'B' report on criminal prosecution under the N.I. Act - Whether the Trial Judge erred in holding that the complainant failed to establish the offence under Section 138 of the N.I. Act and in not drawing the presumption under Section 139 having regard to the admitted signatures, issuance of cheques and the defence of theft/loss - HELD THAT: - The Court held that once the cheques were admitted in evidence, signatures were not disputed and statutory notice requirements were complied with, the mandatory presumption under Section 139 of the N.I. Act arises. The accused's plea that the cheques were lost/stolen rested on Ex.D1 and Ex.D2, but those documents did not specify when or how the cheques were lost nor establish how they reached the complainant. The police had filed a 'B' report in respect of the accused's private complaint, and that factual circumstance did not discharge the accused's onus to adduce probable evidence on a preponderance of probabilities to rebut the statutory presumption; an accused is not required to disprove the complainant's case beyond reasonable doubt but must produce evidence reasonably tending to show that the presumed fact is not true. Here D.W.1 admitted issuing the cheques, admitted the contents were handwritten by him and acknowledged that an ordinary prudent person would not sign and retain signed cheques. The Trial Court's conclusion that the accused had successfully rebutted the presumption was found to be perverse because the accused led no adequate evidence to explain how signed cheques came into the complainant's hands or to establish the loss/theft defence on probabilities. Accordingly the High Court concluded that the presumption under Section 139 should have been drawn and that the acquittal was erroneous. [Paras 35, 36, 38]

Trial Court's acquittal set aside; accused Nos.1 to 3 convicted under Section 138 of the N.I. Act as the statutory presumption applied and was not adequately rebutted.

Liability of directors and company for offences under Section 138 of the Negotiable Instruments Act - pleading and applicability of Section 141 of the Negotiable Instruments Act - Whether the complaint sufficiently pleaded and established liability of the directors (accused Nos.2 and 3) and whether absence of a board resolution for borrowing affected the prosecution under Section 138 read with Section 141 - HELD THAT: - The Court found that the complaint specifically averred that accused No.1 was a company and accused Nos.2 and 3 were its directors, that they approached the complainant and obtained loan and that as on the date of borrowing and issuance of the cheques they were in charge and responsible for conduct of the company's business and financial transactions. Ex.P15 (loan application) was signed by accused Nos.2 and 3 and the cheque bore the company's common seal. The Trial Court erred in holding that no resolution was passed and that Section 141 was not pleaded. The High Court held that where directors have been specifically alleged to be in charge and responsible for company affairs and the cheques bear the company's seal and signatures of the directors, the directors are amenable to prosecution under Section 138; absence of a formal resolution (more commonly insisted for public companies) did not absolve the directors where pleadings and admissions linked them to the transaction. [Paras 37, 38]

Directors (accused Nos.2 and 3) held liable; Trial Court's view that Section 141 was not complied with was incorrect and did not preclude prosecution.

Final Conclusion: Appeals allowed; impugned judgment of acquittal set aside; accused Nos.1 to 3 convicted for the offence under Section 138 of the Negotiable Instruments Act. Accused Nos.2 and 3 ordered to pay fines in the two appeals as directed, failing which to undergo the sentences ordered; Trial Court records to be transmitted for execution of sentence and levy of fine.