TaxTMI Updates e-Newsletter
Jan 25,2022

Validity of detention and levy where e-way bill validity has lapsed - expiry of e-way bill not by itself establishing tax evasion - Application of Section 129 in circumstances beyond the control of the transporter/consignor - Arbitrariness and violation of Article 14 by administrative action - Abuse of power in imposing tax and penalty - Enhancement of costs for wrongful or mala fide proceedings and State's right of recovery

Validity of detention and levy where e-way bill validity has lapsed - expiry of e-way bill not by itself establishing tax evasion - Application of Section 129 in circumstances beyond the control of the transporter/consignor - Whether the expiry of the e-way bill, without more, justified detention of goods and imposition of tax and penalty on the writ petitioner. - HELD THAT: - The Court upheld the High Court's conclusion that mere lapse of the e-way bill could not sustain an inference of intent to evade tax. The High Court had considered the explanation given by the writ petitioner - including disruption of movement due to public agitation and non-working days - and found no material to show an attempt to sell the goods or otherwise evade tax. In those factual circumstances, the finding of tax evasion based solely on non-extension of the e-way bill was arbitrary and unsustainable. The Supreme Court declined to interfere with the High Court's reasoning that there was no culpable intent on the part of the writ petitioner and that the levy of tax and penalty stood set aside.

The detention and the levy of tax and penalty were set aside; expiry of the e-way bill alone did not constitute proof of tax evasion.

Arbitrariness and violation of Article 14 by administrative action - Abuse of power in imposing tax and penalty - Whether the conduct of the officer (petitioner No.2) in treating the expired e-way bill as amounting to evasion and in detaining/keeping the goods was arbitrary and constituted abuse of power. - HELD THAT: - The Court agreed with the High Court's findings that the officer failed to consider the petitioner's explanations and ignored material facts such as traffic blockage and non-working days, thereby acting arbitrarily. The High Court also noted that the goods were kept at a relative's house of the officer for an extended period, which called the officer's conduct into question. On these facts the action was held to be a blatant abuse of power, lacking evidence of evasion and violating principles of fair administrative action.

The officer's action was arbitrary and an abuse of power; the consequent tax and penalty were quashed.

Enhancement of costs for wrongful or mala fide proceedings and State's right of recovery - Whether the costs awarded by the High Court should be enhanced and whether the State may recover the costs from the person(s) responsible for the litigation. - HELD THAT: - While the High Court had imposed nominal costs on the officer, the Supreme Court found that having regard to the officer's conduct and the harassment caused, enhancement of costs was necessary. The Court increased the costs by an additional sum (over and above the amount awarded by the High Court) to be paid to the writ petitioner within four weeks. The Court also made clear that after payment to the writ petitioner the State would be entitled to recover the amount from the person(s) responsible for the unnecessary litigation.

Costs awarded by the High Court were enhanced; the State may recover the costs from the person(s) responsible for the proceedings.

Final Conclusion: The Special Leave Petition was dismissed. The Supreme Court declined to interfere with the High Court's order quashing the tax and penalty imposed on the writ petitioner, held that expiry of the e-way bill alone did not establish tax evasion and that the officer's conduct was arbitrary and an abuse of power, and enhanced the costs awarded to the writ petitioner while permitting the State to recover such costs from the persons responsible for the proceedings.

Incorporation of draft amendment - show-cause notice - duty to specify grounds in show-cause notice - classification as providing textile services - writ jurisdiction for protection against arbitrary action

Incorporation of draft amendment - Prayer for incorporation of the draft amendment was allowed. - HELD THAT: - The Court granted the specific relief sought in the writ petition in relation to the draft amendment and directed that the necessary incorporation be carried out at the earliest. The order is recorded as an allowance of the draft amendment prayed for, without further elaboration in the order.

Draft amendment allowed and directed to be incorporated forthwith.

Show-cause notice - duty to specify grounds in show-cause notice - classification as providing textile services - writ jurisdiction for protection against arbitrary action - Respondents were required to explain the basis on which a member of the Association was classified as providing textile services and notice was issued to the respondents for that purpose. - HELD THAT: - The Court noted the grievance that CGST and Central Excise authorities had been issuing show-cause notices under the proviso to sub-section (1) of Section 73 of the Finance Act, 1994 read with Section 174 of the CGST Act, 2017 on an erroneous assumption that certain companies render textile services. The Court observed that if authorities contend a party provides textile services, the show-cause notice ought to specify the type of textile services alleged. Rather than dismissing the petition and leaving each addressee to respond, the Court directed issuance of notice to the respondents (including the specific respondents against whom the impugned show-cause notice was issued) to explain how they concluded that the writ applicant against whom an annexed show-cause notice was issued is engaged in providing textile services. The matter was made returnable on a specified date, and service directions were given.

Notice issued to respondents to explain basis for classification and specification in show-cause notices; matter listed for further consideration.

Final Conclusion: The Court allowed the draft amendment and directed its prompt incorporation, and issued notice to the respondents requiring them to explain the basis on which a member of the Association was classified as providing textile services, with the matter listed for further hearing.

Export of services - input tax credit refund - separate legal entity - reconsideration in light of departmental circular

Input tax credit refund - export of services - separate legal entity - reconsideration in light of departmental circular - Impugned order dated 30.07.2021 was set aside and the matter remitted to the original authority for fresh decision on the petitioner's refund claim in light of the Circular dated 20.09.2021. - HELD THAT: - The Court noted that the departmental Circular dated 20.09.2021 (reproducing paras 4.4 and 5.2) treats a company incorporated in India and a foreign company incorporated outside India as separate "person" under the CGST Act and explains that supplies from an Indian company to its related establishments outside India may qualify as "export of services" subject to statutory conditions. The respondents' counter-affidavit acknowledged that the Circular was issued after the impugned orders and accepted that the claim may require fresh consideration in the light of that Circular. In view of this, the Court did not decide the substantive question whether the supplies qualified as export of services on merits; instead, it set aside the appellate order and remitted the claim to respondent No.3 for reconsideration, directing that the authority take a fresh decision after giving notice and hearing the petitioner and having regard to the Circular dated 20.09.2021. [Paras 5, 6]

Impugned order dated 30.07.2021 quashed; matter remitted to respondent No.3 for fresh decision on the refund claim in light of Circular No.161/17/2021-GST dated 20.09.2021, to be decided within six weeks after notice and hearing.

Final Conclusion: Writ petition allowed to the extent that the impugned order dated 30.07.2021 is set aside and the refund claim is remitted for fresh consideration by the original authority in light of Circular dated 20.09.2021; decision to be taken within six weeks. No costs.

Interest on delayed payment of tax - interpretation of Section 50 of the Central Goods and Services Tax Act, 2017 - interest payable on that portion of the tax which is paid by debiting the electronic cash ledger - levy of interest on gross returned tax versus on net cash amount - retrospective substitution of proviso by the Finance Act, 2021 - obligation to issue notice and hear before quantification of interest

Interpretation of Section 50 of the Central Goods and Services Tax Act, 2017 - interest payable on that portion of the tax which is paid by debiting the electronic cash ledger - retrospective substitution of proviso by the Finance Act, 2021 - levy of interest on gross returned tax versus on net cash amount - Scope of interest under the proviso to Section 50 as amended by the Finance Act, 2021 - HELD THAT: - The Court considered the proviso to Section 50 of the CGST Act as it stood prior to substitution and the substituted proviso effected with retrospective effect from 01.07.2017 by the Finance Act, 2021. The substituted proviso clarifies that the interest on tax payable in respect of supplies declared in a delayed return shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger. Having regard to the amended text, the petitioners' grievance that interest was being levied on the gross returned tax rather than on the net cash amount has been addressed by the statutory amendment. The Court therefore accepted that the amended proviso governs the levy of interest and that the petitioners are entitled to relief accordingly. [Paras 6, 7]

The substituted proviso to Section 50 applies and interest is payable only on the portion of tax paid by debiting the electronic cash ledger; the petitioners' foundational grievance is thus redressed.

Obligation to issue notice and hear before quantification of interest - interest on delayed payment of tax - Procedure for quantification and recovery of interest in light of the amended proviso - HELD THAT: - While the substantive interpretation in favour of the petitioners was accepted, the Court left the computation and quantification of interest to the concerned authorities to be worked out under the amended provision. The authorities are directed to issue notice to the petitioners and afford them an opportunity of hearing before finalising the amount of interest payable, thereby ensuring that quantification follows the statutory amendment and principles of natural justice. [Paras 7, 8]

Authorities to compute interest as per the amended proviso and to issue notice and hear the petitioners before quantifying the interest payable.

Final Conclusion: Writ petitions allowed: the substituted proviso to Section 50 (Finance Act, 2021) governs levy of interest, restricting interest to the portion paid by debiting the electronic cash ledger; authorities to issue notice, hear petitioners and quantify interest accordingly.

Detention and seizure of goods in transit - e-way bill requirement - release of seized vehicle on payment of penalty - assessment/determination of tax on detained goods - writ under Article 226

Detention and seizure of goods in transit - e-way bill requirement - assessment/determination of tax on detained goods - Whether the seized vehicle and goods should be released pending challenge to the detention and tax/penalty orders - HELD THAT: - The petition challenged detention of a vehicle and consequential orders determining tax and imposing 100% penalty on the ground that the goods were being transported without a valid e-way bill. The respondents maintained that the e-way bill relied upon by the petitioner did not pertain to the goods seized. The Court noted that the tax component, as per the tax invoice, had been paid by the petitioner and that the vehicle and goods remained under seizure. Balancing the contentions, the Court directed conditional relief: on payment of the penalty imposed, within a specified period, the seized vehicle together with the goods was to be released. The Court confined its order to facilitating release on payment and did not quash or finally adjudicate the impugned detention or tax-determination orders; the direction was limited to release subject to payment of the penalty within four weeks and expressly stated to be only for that purpose. [Paras 7, 8, 9]

Seized vehicle and goods ordered released to the petitioner on payment of the penalty within four weeks; order confined to release and did not quash the impugned orders.

Final Conclusion: Writ petition disposed by directing release of the seized vehicle and goods upon payment of the imposed penalty within four weeks; the order is limited to effecting release and does not amount to quashing of the detention or tax determination orders.

Interest on delayed payment of tax - calculation of interest on tax payable declared in late return - electronic cash ledger - interpretation of Section 50 of the Central Goods and Services Tax Act, 2017 - retrospective amendment

Interpretation of Section 50 of the Central Goods and Services Tax Act, 2017 - calculation of interest on tax payable declared in late return - electronic cash ledger - retrospective amendment - Whether interest under the proviso to Section 50 is to be levied on the gross returned tax or only on the portion paid by debiting the electronic cash ledger, having regard to the Finance Act, 2021 amendment. - HELD THAT: - The proviso to Section 50, as originally worded, limited levy of interest to the portion of tax paid by debiting the electronic cash ledger. The proviso was substituted by the Finance Act, 2021 with retrospective effect from 01.07.2017 and now states that interest shall be payable on that portion of the tax which is paid by debiting the electronic cash ledger. The retrospective substitution alters the basis of levy so as to confine interest liability to the amount paid from the electronic cash ledger for supplies declared in returns furnished after the due date (subject to the proviso's exception for returns filed after commencement of proceedings under sections 73 or 74). In light of the amendment, the petitioners' grievance that interest was being levied on the gross returned amount (rather than on the net/cash portion debited from the electronic cash ledger) stands redressed. [Paras 6, 7]

The amendment effected by the Finance Act, 2021 governs the interest payable under the proviso to Section 50 and redresses the petitioners' grievance; interest is to be determined with reference to the portion paid by debiting the electronic cash ledger.

Calculation of interest on tax payable declared in late return - interest on delayed payment of tax - Whether the authorities must re-compute and quantify the interest payable in accordance with the amended proviso and afford the petitioners an opportunity of hearing. - HELD THAT: - Having found that the substituted proviso applies, the Court directed that the detailed quantification of interest payable must be carried out by the concerned authorities in accordance with the amended provision. Before arriving at any quantified demand, the respondents are required to issue notice to the petitioners and hear them so that computation reflects the amended legal position restricting interest to amounts debited from the electronic cash ledger. The order therefore remits the matter to the authorities for computation subject to the requirement of notice and hearing. [Paras 7, 8]

Respondents shall issue notice, hear the petitioners and quantify interest to be paid in accordance with the amended proviso to Section 50 of the CGST Act.

Final Conclusion: Writ petitions allowed: the Finance Act, 2021 substitution of the proviso to Section 50 applies retrospectively and confines interest to the portion of tax paid by debiting the electronic cash ledger; petitioners' grievance is redressed and authorities are directed to issue notice, hear petitioners and quantify interest as per the amended provision.

Concessional rate of tax for parts of warships - classification as parts or components - end use/utilization certificate as evidence of intended use - relevance of technical specifications (MIL DTL) to characterisation of goods - application of declared use to attract entry 252 read with entry 250 of Schedule I

Concessional rate of tax for parts of warships - application of entry 252 read with entry 250 of Schedule I - Applicable rate of tax on supply of the specified cables to Defence Machinery Design Establishment for use in warship building. - HELD THAT: - The Authority examined the nature and end use of the cables supplied to the defence establishment, the purchase orders, contractual technical specifications (including MIL DTL categories) and utilization/end use certificates issued by Naval authorities. The contracts and specifications indicate shipboard/marine application and the utilization certificates state use as stores onboard Indian Navy ships. Applying established principles on what constitutes a component or part of an end product, the Authority held that the supplies qualify as parts of goods falling under the relevant ship headings covered by entry 252 read with entry 250 of Schedule I to Notification No. 01/2017. Consequently, the concessional rate applicable to such parts applies to the supplies in question. [Paras 7, 8]

Supplies qualify for the concessional 5% GST (2.5% CGST and 2.5% SGST) as parts of warships under Entry 252 read with Entry 250 of Schedule I.

Classification as parts or components - end use/utilization certificate as evidence of intended use - relevance of technical specifications (MIL DTL) to characterisation of goods - Whether the supplied cables are to be treated as parts of warships for classification under the notified entries. - HELD THAT: - The Authority found that the purchase orders specify marine/shipboard cable requirements and include MIL DTL specifications used in Navy shipboard applications. Further, utilization/end use certificates from Naval authorities expressly state that the goods are used onboard Indian Navy ships. Relying on judicial exposition that anything entering into and forming part of the end product is a component/part, the Authority concluded that these cables are components/parts of goods classified under headings 8901-8907 (excluding 8903) and thus fall within entry 252 read with entry 250 of Schedule I. The Authority therefore accepted the applicant's classification on the basis of contractual specifications combined with the end use certificates. [Paras 7, 8]

Yes; the cables are parts/components of warships and are classifiable under Entry 252 read with Entry 250 of Schedule I.

Final Conclusion: The Advance Ruling clarifies that the pressure tight, non pressure tight and special cables supplied by the applicant to the defence establishment for use in naval shipbuilding qualify as parts of warships and attract the concessional tax rate of 5% GST (2.5% CGST and 2.5% SGST).

Admission of additional evidence under Rule 46A(3) of the Income-tax Rules, 1962 - Remand for fresh decision to Assessing Officer - Application of earlier coordinate-bench directions - Opportunity of being heard before remand - Statistical disposal

Admission of additional evidence under Rule 46A(3) of the Income-tax Rules, 1962 - Remand for fresh decision to Assessing Officer - Application of earlier coordinate-bench directions - Opportunity of being heard - Whether the order of the CIT(A) admitting additional evidence not placed before the Assessing Officer is sustainable and whether the matter should be remitted to the AO for fresh decision. - HELD THAT: - The Tribunal found that the CIT(A) admitted numerous documents in additional evidence which were not forwarded to the Assessing Officer for examination and verification, thereby contravening the procedure envisaged by Rule 46A(3) of the Income-tax Rules, 1962. The bench noted that the Assessing Officer had no opportunity to consider or verify those documents during assessment proceedings. The Tribunal also observed that an identical issue in the assessee's own case had earlier been remitted to the AO by a coordinate Bench in light of the Supreme Court's decision in CIT v. Karnal Co-operative Sugar Mills Ltd., and that both parties requested remand so that the AO could decide afresh applying those directions. In these circumstances the Tribunal concluded that the CIT(A)'s order was not sustainable and the proper course was to set aside that order and remit the matter to the AO for fresh adjudication, after affording the parties an opportunity of being heard and in the light of the coordinate-bench directions referred to in the order dated 11.10.2017. [Paras 6, 7, 8, 9]

CIT(A)'s order set aside and the case remitted to the Assessing Officer to decide afresh, after giving opportunity of being heard and applying the coordinate-bench directions.

Statistical disposal - Non-pressing of cross objections - Final appellate disposition of the Revenue's appeal and the assessee's cross objections pending before the Tribunal. - HELD THAT: - In consequence of the remand ordered, the Tribunal allowed the Revenue's appeal for statistical purposes. The cross objections filed by the assessee were dismissed on the ground that they were not pressed. The Tribunal thus made no adjudication on the merits of the contested additions and remitted the substantiveissues for fresh decision by the AO. [Paras 10]

Revenue's appeal allowed for statistical purposes; cross objections dismissed as not pressed.

Final Conclusion: CIT(A)'s order admitting additional evidence was set aside as the Assessing Officer had not been given an opportunity to examine the material; the matter is remitted to the AO for fresh decision in the light of the coordinate-bench directions after hearing the parties. The Revenue's appeal is disposed of for statistical purposes and the assessee's cross objections are dismissed as not pressed.

Deduction under section 80IA to be allowed against gross total income - interest under section 244A payable until date of issuance of refund cheque

Deduction under section 80IA to be allowed against gross total income - precedential effect of Supreme Court decision - Assessee's claim of deduction under section 80IA must be considered against gross total income in accordance with the Supreme Court's decision in CIT v. Reliance Energy Ltd, and the matter is remitted to the assessing officer for fresh computation and decision applying that ratio. - HELD THAT: - The Tribunal noted that the sole controversy was whether deduction under section 80IA is to be allowed against gross total income or against total income. The issue has been authoritatively resolved by the Hon'ble Supreme Court in CIT v. Reliance Energy Ltd, which accepted that section 80IA deduction has to be allowed on the gross total income (i.e., income under all heads). Applying that precedent, the Tribunal could not sustain the disallowance effected by the assessing officer when computing income in the order giving effect to the Commissioner(A)'s directions. In consequence, the Tribunal restored the matter to the file of the assessing officer for decision in accordance with the Supreme Court's ratio, directing that the assessee be afforded a reasonable opportunity of being heard. [Paras 6]

Issue remitted to the assessing officer to decide the claim of deduction under section 80IA against gross total income in accordance with the Supreme Court's ratio; appeal allowed for statistical purposes.

Interest under section 244A payable until date of issuance of refund cheque - applicability of CBDT circular for computation of interest - Assessee is entitled to interest under section 244A of the Act up to the date of actual grant of refund, namely the date of issuance of the refund cheque. - HELD THAT: - The Tribunal observed that the order granting the refund was passed on 09-04-2018 but the refund cheque was actually issued on 11-05-2018, and that section 244A(1) requires interest to be allowed until the date of grant of refund. The Tribunal rejected the departmental contention that delay attributable to the refund banker absolves the department, holding that the bank acts as the department's agent and the delay in the actual grant cannot be attributed to the bank. The Tribunal further noted that CBDT Circular No. 20D (XXII-22) supports computation of interest up to the date of issuance of the refund voucher/cheque and relied on earlier tribunal and High Court orders to similar effect. Accordingly, the assessing officer was directed to grant interest under section 244A up to the date the refund cheque was issued. [Paras 10, 11]

Assessing officer directed to compute and grant interest under section 244A up to the date of issuance of the refund cheque; grounds allowed.

Final Conclusion: The Tribunal allowed the appeals: one appeal remitted to the assessing officer to allow deduction under section 80IA against gross total income in accordance with the Supreme Court's ratio, and the other appeal directed the assessing officer to grant interest under section 244A up to the date of issuance of the refund cheque.

Extension of timelines for filing of Income-tax returns and audit reports - Clarification 1 to Explanation 1 to section 234A and levy of interest - technical glitches in the e-filing portal and administrative redressal mechanism - acceptance of physical filing of Tax Audit Reports/Income-tax Returns - CBDT administrative measures including dedicated helpdesk and grievance mechanism - penalty under section 271B and show-cause procedure

Extension of timelines for filing of Income-tax returns and audit reports - Clarification 1 to Explanation 1 to section 234A and levy of interest - Court took notice of and acted on CBDT Circular No.01/22 extending timelines for furnishing audit reports and returns for the Assessment Year 2021-22 and Previous Year 2020-21, subject to the Clarification excluding certain cases from extension for Section 234A purposes. - HELD THAT: - The Court reproduced and took judicial notice of Circular No.01/22 issued by the CBDT dated 11.01.2022 which further extended the due dates for furnishing various audit reports and returns (including extension of audit report deadlines to 15th February 2022 and return deadlines to 15th March 2022). The Court observed Clarification 1 in the circular which states that the extension shall not apply to Explanation 1 to section 234A where the tax payable (after specified reductions) exceeds one lakh rupees. Having considered the circular and the respondents' affidavit explaining the extension, the Court concluded that the extension granted by the CBDT addresses the primary grievance regarding timelines and that no further adjudication on dates was required in these petitions.

The Court accepted the CBDT extension (Circular No.01/22) as addressing the timeline issue and closed the petitions insofar as the extension is concerned; Clarification 1 to section 234A remains operative and was noted by the Court.

Technical glitches in the e-filing portal and administrative redressal mechanism - CBDT administrative measures including dedicated helpdesk and grievance mechanism - Court recorded and accepted the respondents' affidavit detailing steps to remedy technical glitches in the e-filing portal and additional administrative measures to assist taxpayers in filing TAR/ITR online. - HELD THAT: - The CBDT filed an affidavit affirming that (i) electronic filing is the prescribed mode and paper/manual filing is not compatible with processing requirements; (ii) significant numbers of TARs and ITRs had been successfully filed; and (iii) grievance redressal processes and a special supervised helpdesk, including a dedicated TAR email and telephone helplines, would be put in place (with a proposed dedicated team) to resolve technical issues. Departmental officers and system heads joined the hearing and assured the Court that reported glitches would be addressed promptly, and an additional dedicated e-mail id for ITR issues would be set up. On this basis the Court was satisfied that practical administrative measures have been undertaken to mitigate filing difficulties arising from portal issues.

The Court recorded the affidavit and assurances, accepted the administrative remedial steps proposed by the CBDT (including dedicated helpdesks and escalation mechanisms), and declined to order acceptance of physical/manual filings in light of the respondents' stance and the measures undertaken.

Acceptance of physical filing of Tax Audit Reports/Income-tax Returns - Request to permit physical/manual filing of TAR/ITR was not accepted by the respondents and the Court did not direct acceptance of physical filing; instead it sought and recorded assurances for improved electronic support. - HELD THAT: - The respondents (CBDT/Union) informed the Court that the existing automated processing architecture does not permit digitization or processing of paper ITRs/TARs and that accepting physical filings would disrupt automated processes. The Court therefore asked for and recorded a high-level affidavit explaining the infeasibility of physical/manual filing and detailing remedial steps for the portal. In view of those assurances, the Court refused to direct acceptance of physical filings and relied upon the respondents' commitment to resolve portal issues and provide dedicated assistance.

Prayer for physical/manual acceptance of TAR/ITR was not granted; the Court instead recorded the respondents' affidavit and administrative undertakings.

Clarification 1 to Explanation 1 to section 234A and levy of interest - The question of levy of interest under Section 234A (as affected by Clarification 1) was not adjudicated in these petitions and is being left for determination in a separate pending writ petition. - HELD THAT: - Counsel for the writ applicants pressed for reliefs restraining levy of interest under Section 234A. The Court declined to decide this controversy in the present petitions because a separate writ challenging Section 234A is already pending before the High Court. The Court expressly reserved the issue for consideration in that pending proceeding rather than addressing it in these petitions.

Issue relating to interest under Section 234A is not decided and will be considered in the pending writ application on that question.

Penalty under section 271B and show-cause procedure - Contentions seeking a direction not to invoke penalty under section 271B for delay in filing audit report were not adjudicated; the Court noted that penalty proceedings require issuance of show-cause notices and factual explanation of inability to file can be taken in such proceedings. - HELD THAT: - The Court observed that imposition of penalty under section 271B is a consequence that arises post-assessment and requires a show-cause notice. It recorded that if an assessee could not file due to technical glitches, that circumstance can be pleaded when called upon to show cause in any penalty proceedings. Therefore the Court did not grant a blanket direction against invocation of section 271B and left the question to be considered in the appropriate proceedings where factual explanations can be examined.

Prayer to preclude invocation of section 271B was not granted; the question is to be addressed in penalty proceedings where the assessee may raise the portal difficulties as a defence.

Final Conclusion: The petitions were disposed of by recording and relying on CBDT's Circular No.01/22 (extending due dates) and the affidavit and assurances given by the respondents regarding technical remediation and additional grievance mechanisms; requests for physical/manual filing and for adjudication on interest under Section 234A and penalty under Section 271B were not granted and remain subject to the respondents' measures or separate adjudication in appropriate proceedings.

Reason to believe - tangible material - change of opinion - reopening of assessment within four years - power to reassess versus power to review - notional interest / notional income not taxable - reasons recorded

Reason to believe - tangible material - change of opinion - reopening of assessment within four years - reasons recorded - Validity of the notice under Section 148 proposing reassessment for A.Y. 2017-18 - HELD THAT: - The Court held that reopening within four years still requires existence of a 'reason to believe' founded on tangible material and must not be based on mere change of opinion. The recorded reasons demonstrate that the information relied upon by the Jurisdictional Assessing Officer was in his possession before the assessment order dated 21st December, 2019; consequently the condition precedent for reopening was not satisfied. Further, the records show that queries arising from that information were put to the assessee under Section 142(1) during the original assessment proceedings and the assessee furnished party-wise details and responses which were available to and considered by the Assessing Officer in completing the assessment. A re-opening based on the same material to take a different view therefore amounts to impermissible change of opinion and is not a valid basis for reassessment. Applying these principles, the Court quashed the notice under Section 148 and the order rejecting objections. [Paras 4, 5, 6, 9, 10]

Notice dated 30th March, 2021 under Section 148 and the order dated 22nd June, 2021 rejecting objections quashed as reopening amounted to change of opinion and lacked requisite reason to believe based on tangible material.

Notional interest / notional income not taxable - power to reassess versus power to review - Whether alleged notional interest on loans advanced (which was not in fact received) could be treated as income escaped assessment - HELD THAT: - The Court reaffirmed that income which has not accrued or been received cannot be taxed as if it had accrued; an Assessing Officer cannot treat hypothetical or 'ought to have charged' interest as income chargeable to tax in the absence of a statutory provision permitting such notional taxation. The formation of a belief that interest ought to have been charged, when no interest was in fact received, does not constitute escapement of income. Reliance on survey or investigative opinion that interest 'should' have been charged does not convert non-realised potential income into taxable income for the assessment year in question. [Paras 7, 8, 9, 10]

Claimed notional interest which was not received cannot be treated as income that escaped assessment; such a basis does not justify reassessment.

Final Conclusion: Petition allowed; the notice dated 30th March, 2021 under Section 148 and the order dated 22nd June, 2021 rejecting objections are quashed and set aside in respect of A.Y. 2017-18.

Reopening of assessment under Section 147/148 - requirement of failure to disclose fully and truly all material facts - First proviso to Section 147 - limitation for reopening after four years - Mere change of opinion is not a valid ground for reopening a completed assessment - Duty of the assessee to disclose primary facts - drawing of legal inferences is for the Assessing Officer

Reopening of assessment under Section 147/148 - requirement of failure to disclose fully and truly all material facts - Mere change of opinion is not a valid ground for reopening a completed assessment - First proviso to Section 147 - limitation for reopening after four years - Duty of the assessee to disclose primary facts - drawing of legal inferences is for the Assessing Officer - Validity of the notice under Section 148 (and the consequent action under Section 147) to reopen the assessment for Assessment Year 2012-13 after the four-year period, on the ground that income had escaped assessment by reason of failure to disclose fully and truly all material facts. - HELD THAT: - The Court found that the assessee had filed the return, revised return, and produced full details, audited accounts and supporting documents during scrutiny proceedings and that the Assessing Officer had earlier accepted the claim for interest deduction in the original assessment. The first proviso to Section 147 applies where reopening after four years is sought to be justified only by failure to disclose fully and truly all material facts; that condition was not satisfied here because the primary facts were available to and examined by the Assessing Officer during the completed assessment. The recorded reasons for reopening show that the assessing officer sought to revisit the legal inference regarding capitalization of interest as against deduction - effectively a change of opinion - and relied on contrary treatment in other assessment years and accounting standards. The Court reiterated the settled principle that where primary facts necessary for assessment have been fully and truly disclosed, the Assessing Officer is not entitled to reopen the assessment merely because he now draws a different legal inference; such change of opinion cannot form the basis for invoking the exceptional power to reopen after four years. The Court relied on earlier authorities including CIT v. Kelvinator of India Limited , the Division Bench decision in Ananta Landmark Private Limited , and Bhavesh Developers to underline that reopening based on material already on record and accepted in the original assessment is impermissible. Consequently, the impugned notice and the order rejecting objections were held to be without jurisdiction and unsustainable. [Paras 11, 12, 13, 14, 15]

Reopening of the assessment for Assessment Year 2012-13 was invalid as there was no failure to disclose fully and truly all material facts; the notice dated 27 March 2019 and the order dated 13 November 2019 rejecting objections were set aside.

Final Conclusion: The petition is allowed: the notice under Section 148 dated 27 March 2019 and the order dated 13 November 2019 rejecting objections are quashed, and the reassessment proceedings for Assessment Year 2012-13 are set aside; no order as to costs.

Registration under Section 12A - Charitable purpose of educational institution - Satisfaction of Commissioner (Exemptions) regarding genuineness of activities - Parity in administrative action - Requirement of filing return and effect of amendments w.e.f. 1-4-2015 - Consideration of government funding threshold under Rule 2BBB

Registration under Section 12A - Charitable purpose of educational institution - Parity in administrative action - Tribunal's direction to remand to the Commissioner of Income Tax (Exemptions) to grant registration under Section 12A for A.Y. 2019-20 if the objectives and activities are the same as those considered for grant of registration for A.Y. 2020-21. - HELD THAT: - The Tribunal remitted the respondent's 12A application to the Commissioner with a direction to grant registration for A.Y. 2019-20 if the objectives and activities matched those on which registration was granted for A.Y. 2020-21. The High Court found that the Tribunal properly noted the undisputed charitable nature of the university's educational activities and that the Commissioner's subsequent grant of registration for the succeeding year indicated satisfaction about charitable activities. The Tribunal's instruction to the Commissioner to examine the earlier and later years on the principle of parity and to grant registration if the objectives and activities are the same was a direction to reconsider in light of relevant factors and therefore not illegal. [Paras 7, 8]

Tribunal's remand and direction to the Commissioner to grant registration on parity was lawful and cannot be characterised as illegal.

Satisfaction of Commissioner (Exemptions) regarding genuineness of activities - Requirement of filing return and effect of amendments w.e.f. 1-4-2015 - Consideration of government funding threshold under Rule 2BBB - Whether any substantial question of law arises from the Tribunal's order allowing the appeal and remanding the matter for reconsideration. - HELD THAT: - The Court reviewed the Tribunal's reasoning, which observed that amendments (including the obligation to file returns from 1-4-2015) and Rule 2BBB's prescription of government funding thresholds meant the university's earlier non-filing could be a bona fide omission. The Tribunal required the Commissioner to consider the charitable objectives and whether activities conformed to them; given the Commissioner's later grant of registration for A.Y. 2020-21, the Tribunal's remand was a direction to reassess on relevant criteria rather than a pure legal error. On this basis the High Court concluded no substantial question of law arose from the Tribunal's order. [Paras 9]

No substantial question of law arises; appeal dismissed.

Final Conclusion: The appeal is dismissed; the High Court held that the Tribunal's direction to remit the 12A application for reconsideration on the principle of parity with the succeeding year was lawful and that no substantial question of law arose from the Tribunal's order. Miscellaneous applications, if any, stand closed.

Direct Tax Vivad Se Vishwas Act, 2020 - declarant - specified date - condonation of delay - deemed pendency of appeal - principles of natural justice - designated authority

Declarant - specified date - condonation of delay - deemed pendency of appeal - Direct Tax Vivad Se Vishwas Act, 2020 - Eligibility of petitioner to file declaration under the Vivad Se Vishwas Act where the appeal was filed after the specified date but an application for condonation was filed and the delay was subsequently condoned - HELD THAT: - The Court analysed the scheme and object of the Vivad Se Vishwas Act, the definitions of 'appellant' and 'specified date' and the Board's Circular No.21/2020 (Q.59). Relying on the purposive intent of the Act to reduce pending tax litigation and on the coordinate-bench decision in Boddu Ramesh, the Court accepted that when an appellate forum condones delay and admits the appeal, the effect is to treat the appeal as filed within time so as to be regarded as pending for the purposes of the Act. The Board's clarification supporting a liberal approach to 'deemed pendency' was noted as consonant with the Act's object; consequently, an appeal admitted after condonation must be treated as relating back for the purpose of determining eligibility as a 'declarant'. Applying these principles to the facts, the Court agreed that the petitioner's appeal, which was filed with an application for condonation and later condoned, cannot be excluded from being treated as pending for the purpose of filing the declaration. [Paras 42, 44]

Petitioner to be treated as eligible for filing declaration under the Act insofar as the appeal, once condoned and admitted, is to be construed as having been filed within time and deemed pending as on the specified date; matter remanded for fresh decision consistent with this view.

Principles of natural justice - designated authority - Direct Tax Vivad Se Vishwas Act, 2020 - Validity of the impugned rejection in absence of notice and opportunity of hearing - HELD THAT: - Although Section 5 does not expressly provide for notice or hearing, the Court held that basic tenets of natural justice require that an adverse decision affecting rights under the scheme should follow notice and an opportunity to be heard. The designated authority's order rejected the declaration without affording any hearing; since the authority had also expressed views on the merits, the Court found a breach of natural justice which independently vitiated the impugned order and warranted interference. [Paras 43, 44]

Impugned rejection set aside on procedural fairness grounds and matter remitted for fresh consideration by a differently assigned designated authority.

Final Conclusion: Impugned order rejecting the declaration dated 03.03.2021 is set aside and the matter is remitted; a new designated authority shall decide the petitioner's declaration afresh in accordance with law, treating the effect of condonation consistently with the Act and after affording notice and opportunity of hearing, within eight weeks.

Conversion of company to LLP and tax consequences - treatment of closing work-in-progress on conversion - application of section 47(xiii)(b) on conversion of company to LLP - succession to business otherwise than on death (section 170) - jurisdiction of the assessing officer over pre-conversion period - procedural lapse versus substantial error in filing returns for different entity periods

Conversion of company to LLP and tax consequences - treatment of closing work-in-progress on conversion - application of section 47(xiii)(b) on conversion of company to LLP - procedural lapse versus substantial error in filing returns for different entity periods - jurisdiction of the assessing officer over pre-conversion period - Whether the disallowance of expenses and reduction of closing work-in-progress in the hands of the LLP arising from pre-conversion transactions was justified or requires fresh examination. - HELD THAT: - The Tribunal examined the Assessing Officer's disallowance of expenses (treated as reduction of closing work-in-progress in the LLP) which stemmed from the conversion of a company into an LLP. The Commissioner (Appeals) had deleted the disallowance but his order was held to be founded on conjecture and hypothetical assumptions - namely that separate returns should have been filed for company and LLP periods but treating that as a mere procedural lapse and assuming no adverse finding by any Assessing Officer. The Tribunal observed that non-filing of separate returns for the respective entity-periods is not merely procedural but a substantial defect affecting the tax characterisation of transactions. Given these factual and jurisdictional complexities, the Tribunal concluded that the matter requires fresh examination by the AO: the AO must reassess the correctness of treating the disputed expenses as allowable in the LLP, examine applicability of the condition in section 47(xiii)(b), and consider succession provisions including section 170, without being influenced by the conjectural reasoning of the CIT(A). The assessee is to be afforded adequate opportunity of hearing during the fresh adjudication. [Paras 6, 7]

Remitted to the Assessing Officer for fresh examination of the disallowance and the adjustment to closing work-in-progress for AY 2013-14, with directions to consider section 47(xiii)(b) and section 170 and to grant the assessee opportunity of being heard.

Treatment of closing work-in-progress on conversion - consequential adjustments in subsequent assessment year - remand for fresh consideration - Whether the deletion of an addition in AY 2014-15 (which arose as a consequence of the adjustment in AY 2013-14) should be sustained or requires re-examination in light of the remand in AY 2013-14. - HELD THAT: - The Commissioner (Appeals) deleted the addition in AY 2014-15 because it was consequential to the reduction in closing WIP for AY 2013-14 which he had not sustained. Because the Tribunal has remitted the primary issue in AY 2013-14 to the Assessing Officer for fresh consideration, any consequential adjustments or additions in AY 2014-15 must also be re-examined. The Tribunal therefore remitted the 2014-15 assessment to the Assessing Officer to enable a consistent determination after the primary facts and legal questions regarding conversion, admissibility of expenses, and the carry-forward of WIP are resolved. [Paras 9, 10]

Remitted to the Assessing Officer for fresh examination of the consequential addition/closing stock issue in AY 2014-15, to be decided in light of the outcome on AY 2013-14.

Final Conclusion: The appeals are allowed for statistical purposes and the matters for AY 2013-14 and AY 2014-15 are remitted to the Assessing Officer for fresh examination of the disputed disallowance and consequential adjustments, with directions to consider the requirements of section 47(xiii)(b) and section 170 and to afford the assessee adequate opportunity of being heard.

Foreign Tax Credit - credit in the year in which the income corresponding to such tax has been offered to tax - pro rata credit when income is offered to tax in more than one year - no credit for disputed foreign tax unless dispute is settled and evidence furnished within stipulated period - application of Rule 128 (Foreign Tax Credit) notified by the CBDT - relief under the DTAA between India and Japan - entitlement to credit under the provisions corresponding to section 90 and section 91

Foreign Tax Credit - credit in the year in which the income corresponding to such tax has been offered to tax - application of Rule 128 (Foreign Tax Credit) notified by the CBDT - relief under the DTAA between India and Japan - Entitlement to foreign tax credit for withholding taxes paid in Japan pertaining to earlier years but for which tax credit certificates were received and income was accounted and declared in assessment year 2014-15. - HELD THAT: - The Tribunal recorded that the assessee received tax credit certificates in financial year 2013-14 (relevant to AY 2014-15) for withholding taxes deducted by the Japanese payer although those taxes pertained to software sales effected in earlier years. The assessee did not claim such credit in the earlier assessment years but admitted the related income and claimed the foreign tax credit in AY 2014-15. Reliance was placed on the CBDT notification implementing Rule 128 which permits a resident assessee to claim credit for foreign tax in the year in which the income corresponding to such tax has been offered to tax in India, and provides for proportionate credit where income is offered in more than one year. The Tribunal noted concurrent findings below that no claim was made in prior years and that the tax credit certificates showed withholding in FY 2013-14. Applying the determinative principle that foreign tax credit is allowable in the year the corresponding income is offered to tax, and that the DTAA and the Rule permit such credit when the income and tax credit are declared in the relevant year, the Tribunal upheld the CIT(A)'s direction to allow the entire credit claimed in AY 2014-15. The challenge that Rule 128 was introduced with effect from 01.04.2017 did not prevent application of the principle that credit follows the year of declaration of income where the certificate and accounting occurred in FY 2013-14; the Tribunal found no infirmity in the CIT(A)'s reasoning and confirmation was warranted. [Paras 4, 5, 6]

The assessee was entitled to claim the foreign tax credit of the withholding taxes received in financial year 2013-14 by way of tax credit certificates and declared in AY 2014-15; the CIT(A)'s allowance of the entire credit is confirmed.

Final Conclusion: The Revenue's appeal is dismissed and the order of the Commissioner (Appeals) allowing foreign tax credit in assessment year 2014-15 is affirmed.

Revision under section 263 - erroneous assessment order - prejudicial to the interest of the Revenue - tax deduction at source under section 194J - first proviso to section 194J - tax deduction at source under section 194C - exception for transport contractors owning ten or less carriages - tax audit turnover mismatch not affecting taxable income - verification of sundry creditors - inclusion of interest on refund under section 244A in taxable income - requirement of AO to discuss material issues in assessment order

Tax deduction at source under section 194J - first proviso to section 194J - erroneous assessment order - prejudicial to the interest of the Revenue - Disallowance of professional fees for non-deduction of TDS under section 194J - HELD THAT: - The Pr. CIT contended that professional fees debited by the Aurangabad branch required deduction of tax at source, but the assessee furnished break-up showing no individual or aggregate payment to a single payee exceeded the threshold that triggers deduction. The Tribunal held that the position is covered by the first proviso to section 194J, requiring no TDS; consequently there was no loss to Revenue. While the assessment order may have omitted specific discussion, that omission did not render it prejudicial to Revenue and therefore did not satisfy the cumulative requirements for exercise of revisionary power under section 263. [Paras 5]

Pr. CIT not justified in revising the assessment on this ground; no disallowance called for.

Tax deduction at source under section 194C - exception for transport contractors owning ten or less carriages - erroneous assessment order - prejudicial to the interest of the Revenue - Disallowance of transport expenses for alleged failure to deduct TDS under section 194C - HELD THAT: - The assessee produced details and PANs showing the payments fell within the statutory exception for contractors in the business of plying, hiring or leasing goods carriages who own ten or less carriages and furnish the prescribed declaration. The Tribunal found these facts uncontroverted before the Pr. CIT and concluded that sub section (6) of section 194C negates the requirement to deduct TDS. Absence of explicit discussion in the assessment order did not make it prejudicial to Revenue; thus the twin conditions for invoking section 263 were not met. [Paras 6]

Pr. CIT not justified in revising the assessment on this ground; no disallowance warranted.

Tax audit turnover mismatch not affecting taxable income - erroneous assessment order - prejudicial to the interest of the Revenue - Alleged mismatch between turnover in tax audit report and income-tax return - HELD THAT: - Although Annexure to the tax audit report recorded a different turnover figure, the Tribunal found that the turnover figure actually used in the trading account and profit computation (and thereby the taxable profit) matched the profit reflected in the profit and loss account and in the audit annexure. The incorrect mention of turnover in one part of the audit report did not affect computation of total income. Mere non discussion by the AO did not render the assessment prejudicial to Revenue. [Paras 7]

Pr. CIT not justified in revising the assessment on this ground; mismatch did not impact taxable income.

Verification of sundry creditors - erroneous assessment order - prejudicial to the interest of the Revenue - Allegation of improper verification of sundry creditors - HELD THAT: - The assessee produced confirmations and details for creditors with material balances (above the identified threshold) and disclosed that only minor balances below that threshold remained unconfirmed. The Tribunal observed that the AO inquired into creditors with substantial balances and that isolated small unverified balances did not demonstrate any prejudice to Revenue. Absent any specific indication of impropriety in those small balances, non discussion in the assessment order did not justify revision under section 263. [Paras 8]

Pr. CIT not justified in revising the assessment on this ground; verifications for material creditors were adequate.

Inclusion of interest on refund under section 244A in taxable income - erroneous assessment order - prejudicial to the interest of the Revenue - Alleged non inclusion of interest on income-tax refund in taxable income - HELD THAT: - The assessee placed ledger copies showing credit of interest on refund and incorporation of the total interest closing balance into the profit and loss account, which was taken into account in computing taxable income. The Tribunal found the interest was disclosed and taxed; therefore the AO's lack of separate mention did not make the assessment prejudicial to Revenue and did not satisfy the dual test for section 263 revision. [Paras 9]

Pr. CIT not justified in revising the assessment on this ground; interest was included in taxable income.

Final Conclusion: The Tribunal held that in respect of AY 2015-16 none of the five grounds justified invoking revisionary jurisdiction under section 263 because, although the assessment order did not explicitly discuss these items, there was no prejudice to the Revenue; the Pr. CIT's revision was set aside and the appeal allowed.

Characterisation of transponder charges as "royalty" - liability to deduct tax at source under section 195 - interaction between domestic amendment to definition of "royalty" and obligations under DTAA - treaty interpretation - domestic law amendment cannot be read into an international treaty - binding effect of jurisdictional High Court precedent on assessment and withholding liability

Characterisation of transponder charges as "royalty" - liability to deduct tax at source under section 195 - interaction between domestic amendment to definition of "royalty" and obligations under DTAA - Payments for satellite transponder services are not "royalty" within the meaning of the relevant DTAAs and the assessee was not liable to withhold tax under section 195 on those payments. - HELD THAT: - The Tribunal upheld the view taken by the Commissioner (Appeals) that transponder fees paid to non resident satellite operators do not constitute royalty in the hands of the recipients under the applicable DTAAs and therefore do not give rise to a withholding obligation under section 195. The decision follows binding precedents of the jurisdictional High Court in New Sports Broadcast Pvt Ltd and the decisions of the Delhi High Court in Asia Satellite Telecommunications Co. Ltd. and New Skies Satellite BV, which held that payments for use of transponder capacity are not royalty. The Tribunal also accepted the principle that a domestic amendment clarifying or expanding the definition of "royalty" in section 9(1)(vi) cannot be read as altering the meaning of similar terms in an international tax treaty absent amendment of the treaty itself; hence Explanation 6 to section 9(1)(vi) cannot be imported to change treaty obligations. Having regard to those authoritative decisions and the Tribunal's own prior decisions on identical payments, the Tribunal found no error in the CIT(A)'s conclusion that no tax was required to be withheld on the transponder charges. [Paras 9, 10, 11]

Revenue's appeals dismissed and CIT(A)'s orders upholding non deduction of TDS on transponder fees affirmed.

Final Conclusion: Appeals by the Revenue dismissed: payments for transponder services were held not to be "royalty" under the applicable DTAAs and, following binding High Court and Tribunal precedents and the principle that domestic amendments cannot be read into treaties, there was no obligation on the assessee to deduct tax at source under section 195 for the assessment years in dispute.

Revisionary jurisdiction under section 263 - Erroneous and prejudicial to the interests of the Revenue - Requirement of minimal inquiry by the Commissioner before invoking section 263 - Limited scrutiny - scope of enquiry - Distinction between lack of enquiry and inadequate enquiry - Possible view of the Assessing Officer not open to revision merely by disagreement - Explanation 2 to section 263 - scope and limits

Revisionary jurisdiction under section 263 - Erroneous and prejudicial to the interests of the Revenue - Requirement of minimal inquiry by the Commissioner before invoking section 263 - Limited scrutiny - scope of enquiry - Possible view of the Assessing Officer not open to revision merely by disagreement - Whether the Principal Commissioner of Income Tax was justified in invoking revisionary jurisdiction under section 263 by treating the assessment order as erroneous and prejudicial to the Revenue - HELD THAT: - The Tribunal found that the Assessing Officer had issued a detailed questionnaire, received extensive documentary replies and supporting records from the assessee (including trust deed, donor details for amounts above the threshold, head-wise expenses, reconciliations, prior years' scrutiny orders and confirmations) and, after examining those materials, accepted the claim for exemption under section 11. The PCIT's show-cause and order merely alleged lack of verification and directed fresh verification without identifying any incorrectness in the materials or demonstrating that the AO's conclusion was unsustainable in law. The PCIT did not itself undertake the minimal inquiry required to establish that the AO's order was erroneous and prejudicial to Revenue, nor did it point to any specific incorrect or fabricated material in the assessment record. The Tribunal emphasized the established principle that a possible view taken by the AO after application of mind cannot be reopened under section 263 simply because the Commissioner disagrees, and that invoking section 263 requires the Commissioner to show error and prejudice by conducting or recording sufficient enquiry. The Tribunal further held that directing the AO to make fishing or roving inquiries on details already on record amounted to impermissible outsourcing of the PCIT's duty. Although Explanation 2 to section 263 was noted, the PCIT did not rely on it in his order; in any event the Tribunal held that Explanation 2 does not empower the Commissioner to revise every assessment without conducting enquiry that establishes the order is unsustainable in law. Applying these principles to the facts, the Tribunal concluded that the PCIT's order under section 263 was without the requisite enquiry or foundation and therefore unsustainable. [Paras 3, 4]

The order passed by the Principal Commissioner under section 263 is quashed and the assessee's appeal is allowed.

Final Conclusion: The Tribunal quashed the PCIT's revision order under section 263 for A.Y.2015-16, holding that the PCIT failed to conduct the minimal inquiry required to demonstrate that the AO's order was erroneous and prejudicial to the Revenue and impermissibly sought re-verification of matters already considered by the AO.

Taxability under Section 56(2)(viib) - fair market value of shares - discounted cash flow method as a permitted option for valuation under rule 11UA - net asset value method versus DCF - different valuation approaches and non-comparability - assessing officer's power to examine and question valuation but not to substitute chosen method - valuation to be assessed as on the date of valuation and not by hindsight comparison with actuals

Disallowance of business expenses and unabsorbed depreciation - precedential effect of coordinate bench decision for assessment year 2012 - 13 - Deletion by CIT(A) of disallowance of business expenditure and unabsorbed depreciation made by the Assessing Officer was sustained. - HELD THAT: - The Tribunal noted that the identical disallowance had been previously considered and decided in favour of the assessee by a coordinate bench in the assessee's own case for assessment year 2012 - 13. The Assessing Officer had made the impugned disallowance for the present year by applying the same reasoning as in the earlier year. In view of the coordinate bench decision in the assessee's favour, the Tribunal found no reason to deviate and upheld the deletion of the disallowance and allowance of the claimed expenditure and unabsorbed depreciation. [Paras 13]

Grounds attacking the deletion of the disallowance were dismissed and the CIT(A)'s deletion on these counts was upheld.

Taxability under Section 56(2)(viib) - fair market value of shares - discounted cash flow method as a permitted option for valuation under rule 11UA - assessing officer's power to examine and question valuation but not to substitute chosen method - valuation to be assessed as on the date of valuation and not by hindsight comparison with actuals - net asset value method versus DCF - different valuation approaches and non-comparability - Deletion by CIT(A) of addition made under Section 56(2)(viib) on account of alleged excess consideration was sustained; Assessing Officer could not reject the assessee's DCF valuation merely because actual subsequent performance differed from projections or because NAV gave a different result. - HELD THAT: - The assessee had adopted the discounted cash flow (DCF) method - an option available under rule 11UA(2) - and produced a valuation report with projections and working leading to a fair value per share. The Assessing Officer rejected the DCF valuation because actual post-issue performance differed from the projections and proceeded to adopt a net asset value (NAV) approach, arriving at a negative value and making an addition under Section 56(2)(viib). The Tribunal examined the statutory scheme and the nature of valuation methods, observing that rule 11UA permits the assessee to choose DCF and that DCF necessarily involves forward-looking assumptions. A hindsight comparison with actuals does not, by itself, render the DCF valuation invalid. The Assessing Officer is entitled to scrutinise the assumptions, computations and reasonableness of the valuation and to point out specific errors, but he is not authorised to substitute the method chosen by the assessee merely because NAV yields a different result or because projections later proved optimistic. Absent demonstrable errors in the valuer's workings or unreasonable assumptions shown to be unsupported by available data at the valuation date, rejection of the DCF report was not justified. Applying this reasoning to the facts, the Tribunal found no infirmity in the CIT(A)'s deletion of the addition. [Paras 18]

Grounds challenging deletion of the addition under Section 56(2)(viib) were dismissed and the CIT(A)'s deletion was upheld.

Final Conclusion: The appeal filed by the Assessing Officer against the CIT(A)'s order for assessment year 2013 - 14 is dismissed; the deletions of the disallowance of business expenses/unabsorbed depreciation and of the addition under Section 56(2)(viib) are sustained.

Condonation of delay - Restoration and admission of appeal - Principles of natural justice - Remand for de novo adjudication

Condonation of delay - Restoration and admission of appeal - Delay in filing the appeal was condoned and the appeal was admitted for hearing. - HELD THAT: - The assessee filed the appeal 332 days after the prescribed limitation and furnished an affidavit explaining absence from India and inability to provide documents to counsel in time. The Revenue opposed condonation. Applying the principle that substantial justice should prevail over technical forfeiture, and having balanced the competing considerations, the Tribunal exercised its discretion to condone the delay and admit the appeal for hearing. The appeal was accordingly restored and admitted for adjudication. [Paras 5]

Delay condoned and appeal admitted for hearing.

Principles of natural justice - Remand for de novo adjudication - The order of the CIT(A) was set aside and the matter remitted for fresh adjudication because the assessee was not afforded sufficient opportunity of being heard. - HELD THAT: - The Tribunal found that the assessee did not receive the notice of hearing before the CIT(A) and thus could not represent his case, rendering the appellate order ex parte and vitiated by breach of the rule of audi alteram partem. In the interest of justice and fair play, and without deciding the merits, the Tribunal remitted the matter to the file of the CIT(A) for de novo adjudication after affording the assessee sufficient opportunity to be heard and to contest his stand. [Paras 7]

Order of the CIT(A) set aside and matter remitted for fresh adjudication after granting opportunity to the assessee to be heard.

Final Conclusion: Delay in filing the appeal was condoned and the appeal admitted; the CIT(A) order was set aside for breach of natural justice and the matter remitted to the CIT(A) for de novo adjudication after affording the assessee a hearing; appeal treated as allowed for statistical purposes.

Penalty under section 271(1)(c) of the Income Tax Act, 1961 - bonafide typographical mistake - disclosure of particulars of income - false claim versus incorrect/wrong claim - no penalty where particulars are fully disclosed

Penalty under section 271(1)(c) of the Income Tax Act, 1961 - bonafide typographical mistake - disclosure of particulars of income - false claim versus incorrect/wrong claim - no penalty where particulars are fully disclosed - Whether penalty under section 271(1)(c) was leviable where the assessee had made a wrong/typographical claim of long term capital loss but had disclosed the particulars of income in the computation and accepted the mistake during assessment proceedings. - HELD THAT: - The Tribunal found that the facts were not in dispute: the assessee had gifted a plot to his son and, by mistake in the computation, shown a long term capital loss which reduced the assessed capital gain. The Assessing Officer detected the error and the assessee surrendered the claimed loss. The amount had been disclosed in the computation of income and there was no concealment of material particulars. On these facts the claim amounted to an incorrect or wrong claim arising from a bona fide mistake (attributed to the tax consultant/chartered accountant) and not a false claim made with intent to conceal. The Tribunal applied the principle that mere disallowance of a claim, where all particulars are disclosed, does not attract penalty under section 271(1)(c). Reliance was placed on the decisions in CIT Vs. Reliance Petro Products Ltd. and Price Waterhouse Coopers Pvt. Ltd. Vs. CIT, which hold that a bona fide mistake by the assessee, with full disclosure of particulars, precludes imposition of penalty. Guided thereby, the Tribunal held that penalty was not legally imposable on the facts and set aside the orders upholding the penalty. [Paras 8]

Penalty levied under section 271(1)(c) deleted and the addition directed to be deleted; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the order upholding penalty, directed deletion of the impugned addition and held that no penalty under section 271(1)(c) was attractable where the particulars of income were disclosed and the error was a bona fide typographical mistake.

Prohibition of benami transactions and bar to suits to recover benami property - Proof of contribution to purchase and burden of proof for claiming beneficial ownership - Possession acquired by force does not confer title - Scope of interference in second appeal where concurrent findings of fact are recorded

Prohibition of benami transactions and bar to suits to recover benami property - Proof of contribution to purchase and burden of proof for claiming beneficial ownership - Scope of interference in second appeal where concurrent findings of fact are recorded - Whether the appellant established that the suit property was purchased with his money and therefore the settlement deed executed by the father could be set aside and the appellant declared owner. - HELD THAT: - The Courts below found on evidence that the appellant failed to prove he had adequate income or any documentary evidence to show that he contributed money for purchase of the suit property in his father's name. The trial Court and the Appellate Court recorded that the appellant admitted his father had income from agriculture and that the appellant had no documentary proof of income or payments. The judgments correctly applied the legal position that a person cannot maintain a suit to recover rights in respect of property held benami and that benami transactions are prohibited; consequently a claimant must establish contribution and beneficial ownership, which the appellant did not. The Appellate Judge also relied on the appellant's contemporaneous complaint admitting the father as owner, further undermining the claim. Given concurrent findings on these factual matters, there was no basis for interference in the Second Appeal. [Paras 8, 9, 10]

Findings that the appellant failed to prove contribution or beneficial ownership are upheld; the settlement deed and appellant's claim are not supported and warrant no interference.

Final Conclusion: Concurrent findings of fact that the appellant did not establish that the suit property was purchased with his funds, and that he has no legal title (possession being alleged forcible), are affirmed; the Second Appeal is dismissed.

Attachment of bank accounts under Section 110(5) of the Customs Act, 1962 - status of respondents as proper officer within the meaning of Section 234 of the Customs Act, 1962 - effect of Supreme Court decision in Canon India Pvt. Ltd. on the question of authority to attach bank accounts

Attachment of bank accounts under Section 110(5) of the Customs Act, 1962 - Direction to respondents to consider and respond to the petitioner's representation and legal notice regarding alleged bank account attachments - HELD THAT: - The Court noted that the petitioner's representation dated 22.10.2021 and the legal notice dated 20.12.2021 had not been answered. Rather than adjudicating the substantive controversy over the validity of the bank attachments, the writ petition was disposed at the stage of admission by directing the first respondent to give a proper reply or pass appropriate orders on the said representation and legal notice within fifteen days from receipt of a copy of this order. The Court observed uncertainty as to whether the attachments were made at the behest of the first and second respondents or by the jurisdictional customs officers, and recorded that the petitioner's legal contentions had been placed before the respondents for consideration. The petitioner was also permitted to make additional submissions or representations before the first respondent. [Paras 7, 8, 9, 10, 11]

Writ petition disposed by directing the first respondent to reply/pass appropriate orders on the representation and legal notice within fifteen days; petitioner allowed to make further submissions.

Status of respondents as proper officer within the meaning of Section 234 of the Customs Act, 1962 - effect of Supreme Court decision in Canon India Pvt. Ltd. on the question of authority to attach bank accounts - Substantive question whether the respondents were authorised to attach the petitioner's bank accounts was not finally decided and was left for consideration by the authority - HELD THAT: - The Court recorded rival submissions: the petitioner contended that the respondents lacked authority to attach bank accounts because they were not proper officers under Section 234 and relied on the decision in Canon India Pvt. Ltd.; the respondents countered that the Canon order was under challenge before the Supreme Court and thus not finally conclusive. The Court refrained from resolving this legal controversy on merits and instead directed the administrative authority to consider the petitioner's representation and legal notice and pass appropriate orders, thereby leaving the question of law and the validity of the attachments to be considered by the respondents in the exercise of their statutory powers. [Paras 3, 4, 5, 6, 8]

Substantive dispute over authority to attach bank accounts and applicability of Canon India decision remitted to respondents for fresh consideration; no adjudication on merits by this Court.

Final Conclusion: The writ petition was disposed at the admission stage by directing the first respondent to respond to the petitioner's representation dated 22.10.2021 and legal notice dated 20.12.2021 within fifteen days, with liberty to the petitioner to make additional submissions; the Court did not decide the substantive question of the legality of the bank account attachments or the respondents' authority to effect such attachments.

Extension of warehousing period under customs law - proviso to Section 61(1) of the Customs Act, 1962 - notice under Section 72(1) of the Customs Act, 1962 - abeyance of proposed confiscation action pending adjudication - consideration of extension applications during Covid lockdown - private warehousing facility under Section 58 of the Customs Act, 1962

Extension of warehousing period under customs law - proviso to Section 61(1) of the Customs Act, 1962 - consideration of extension applications during Covid lockdown - private warehousing facility under Section 58 of the Customs Act, 1962 - abeyance of proposed confiscation action pending adjudication - The petitioner's representation dated 22.09.2021 made under the proviso to Section 61 of the Customs Act, 1962 for extension of the warehousing period was directed to be considered afresh by the first respondent, and the proposed action under the impugned notice was ordered to be kept in abeyance pending such consideration. - HELD THAT: - The High Court did not decide the merits of the petitioner's claim for extension but noted factors relevant to the exercise of administrative discretion, including the petitioner's application for a private warehousing facility and the impact of two Covid lockdowns in Tamil Nadu. In view of these circumstances the Court directed the first respondent to pass appropriate orders on the representation dated 22.09.2021 under the proviso to Section 61 within 15 days from receipt of the order. Pending that adjudicatory step the Court ordered that the proposed action under the earlier notice under Section 72(1) remain in abeyance. The Court expressly declined to express any opinion on the merits and confined itself to issuing a time-bound direction for fresh consideration. [Paras 5, 6]

Representation dated 22.09.2021 to be considered afresh by the first respondent within 15 days; proposed action under the impugned notice kept in abeyance; no expression on merits.

Final Conclusion: Writ petitions disposed by directing the authority to decide the representation under the proviso to Section 61(1) within 15 days, with the challenged action kept in abeyance pending that decision; Court did not express any view on the merits.

Refund of Special Additional Duty (SAD) under Notification No.102/2007-Cus. - correlation between imported goods and subsequent domestic sale invoices - acceptability of statutory auditor/Chartered Accountant certificate as evidence of correlation - interpretation and application of Circular No.06/2008-Cus. para 5.1 - effect of descriptive mismatch or use of short forms in invoices on refund eligibility

Refund of Special Additional Duty (SAD) under Notification No.102/2007-Cus. - interpretation and application of Circular No.06/2008-Cus. para 5.1 - Entitlement to refund of SAD where the adjudicating authority allowed refund based on records and a statutory auditor/Chartered Accountant certificate, but Commissioner (Appeals) denied refund for alleged mismatch of description between bill of entry and sale invoices. - HELD THAT: - The Tribunal examined Notification No.102/2007-Cus. and the clarificatory Circular No.06/2008-Cus., particularly para 5.1 which requires original tax payment documents and states that a certificate from the statutory auditor/Chartered Accountant correlating payment of ST/VAT with sale invoices is required along with originals. The adjudicating authority had sanctioned refund on the basis of such certificate and original documents; the Commissioner (Appeals) denied refund solely on perceived non-correlation of descriptions in the import and sale documents. The Tribunal held that where the statutory auditor/Chartered Accountant certificate, together with the original tax payment documents, establishes correlation between imported goods and goods sold, the requirement of the notification and circular is satisfied and the refund cannot be denied on the ground of descriptive mismatch alone. [Paras 2, 3]

Denial of refund by Commissioner (Appeals) was set aside and refund ordered, since the statutory auditor/Chartered Accountant certificate jointly with original tax documents established correlation as contemplated by Circular No.06/2008-Cus.

Correlation between imported goods and subsequent domestic sale invoices - effect of descriptive mismatch or use of short forms in invoices on refund eligibility - acceptability of statutory auditor/Chartered Accountant certificate as evidence of correlation - Whether use of short forms or abbreviated descriptions in sale invoices disentitles an importer to refund when a statutory auditor/Chartered Accountant certificate affirms correlation between imports and sales. - HELD THAT: - The Tribunal observed that short forms and abbreviated descriptions in invoices are common commercial practice and do not, by themselves, demonstrate lack of correlation. Where a statutory auditor/Chartered Accountant certificate correlates the imported items with the sale invoices and original tax payment documents are produced, a prudent view permits acceptance of such descriptions as evidencing the same goods. The Tribunal also treated the auditor's certificate as admissible evidence under Section 45 of the Indian Evidence Act as an opinion of an expert, reinforcing that mere mismatch in description does not automatically disentitle the claimant from refund under the notification. [Paras 3]

Mismatch in description due to short forms in invoices does not disentitle the appellant to refund where correlation is certified by the statutory auditor/Chartered Accountant and original tax payment documents are available.

Final Conclusion: Appeals allowed; orders of Commissioner (Appeals) denying refund of SAD were set aside and the appellants are entitled to the refunds as sanctioned by the adjudicating authority, with interest, to be paid within three months.

Zero Duty EPCG Scheme - Status Holder Incentive Scheme (SHIS) - repayment with interest - confiscation - penalty under Section 112/114AA - suppression of facts - bonafide error - no penal action - surrender/refund of SHIS before availing EPCG

Penalty under Section 112/114AA - bonafide error - no penal action - repayment with interest - Whether penalty imposed on the appellant-firm and its partner under Section 112/114AA was rightly imposed. - HELD THAT: - The Tribunal found no malafide on the part of the appellant. The appellant had applied for SHIS and EPCG in close temporal sequence, the DGFT/office also granted both benefits, and on discovery of the error the appellant promptly repaid the duty with interest and the unutilised portion. Having regard to the Directorate General of Foreign Trade Public Notice addressing incorrectly issued simultaneous benefits and treating such cases as bonafide errors where no penal action should be taken, the Tribunal concluded that penal action under Section 112/114AA was not justified. In view of the absence of deliberate suppression or mala fides and the corrective steps taken by the appellant, the imposition of penalty was set aside. [Paras 9]

Penalty imposed on the firm and on the partner under Section 112/114AA set aside.

Confiscation - Zero Duty EPCG Scheme - surrender/refund of SHIS before availing EPCG - Whether confiscation of the imported capital goods and the redemption fine were rightly imposed for availing benefits under Zero Duty EPCG and SHIS in the same year. - HELD THAT: - The Tribunal noted that the confusion arose from concurrent grants and that the appellant repaid the duty amount with interest upon learning of the mistake. The Public Notice by DGFT provided procedural relief and treated erroneous concurrent benefits as bonafide errors, precluding penal measures by customs formations. Considering the absence of deliberate concealment and the corrective repayment, the Tribunal exercised the discretion to set aside the confiscation, the option-to-redeem condition and associated redemption fine, directing that the appellants be given consequential benefits as per law. [Paras 9]

Confiscation, redemption fine and related punitive measures set aside; appellants entitled to consequential benefits in accordance with law.

Final Conclusion: Appeals allowed; confiscation, fine and penalties imposed by the lower authorities set aside in view of absence of mala fide, prompt repayment with interest and the DGFT guidance treating simultaneous grant of SHIS and Zero Duty EPCG as bonafide error; appellants to receive consequential benefits as per law.

Exemption for advance received in connection with consideration for immovable property under Rule 2(1)(c)(xii)(b) of the Companies (Acceptance of Deposits) Rules, 2014 - definition of "deposit" under the Companies (Acceptance of Deposits) Rules, 2014 - when an advance becomes a deposit by virtue of lack of necessary permission or approval (proviso to Rule 2(1)(c)(xii)(b)) - offence under Section 73 of the Companies Act, 2013 and complaint under Section 76-A - quashing of criminal proceedings as abuse of process under Section 482 Cr.P.C.

Exemption for advance received in connection with consideration for immovable property under Rule 2(1)(c)(xii)(b) of the Companies (Acceptance of Deposits) Rules, 2014 - definition of "deposit" under the Companies (Acceptance of Deposits) Rules, 2014 - when an advance becomes a deposit by virtue of lack of necessary permission or approval (proviso to Rule 2(1)(c)(xii)(b)) - Advances received by the petitioner for sale of immovable property fall outside the definition of 'deposit' and are exempt under Rule 2(1)(c)(xii)(b), having regard to the proviso. - HELD THAT: - The proviso to Rule 2(1)(c)(xii)(b) renders an amount taxable as a deposit only where the amount becomes refundable (with or without interest) because the company does not have necessary permission or approval to deal in the property or service for which the money was taken. The petitioners had purchased agricultural land, obtained conversion to non agricultural status and permission for development into layouts, entered into written agreements/arrangements with applicants, and adjusted or refunded advances in accordance with the terms. There is no material on record that the advances became refundable for want of requisite permission or approval. The complaint's allegation that advances were collected without intention to sell was not supported by cogent evidence, and the facts showed that refunds were made where applicable and sale deeds were executed in several transactions. Applying the proviso, the advances are thereby excluded from the statutory definition of 'deposit' and attract the exemption under Rule 2(1)(c)(xii)(b).

Advances received for sale of immovable property are exempt from being treated as 'deposits' under Rule 2(1)(c)(xii)(b) and therefore do not constitute the offence under Section 73 as alleged.

Quashing of criminal proceedings as abuse of process under Section 482 Cr.P.C. - offence under Section 73 of the Companies Act, 2013 and complaint under Section 76-A - Continuation of the criminal prosecution based on the complaint is an abuse of process and liable to be quashed under the inherent powers of the High Court. - HELD THAT: - Given the legal conclusion that the advances are exempt from the definition of 'deposit' and in view of the absence of material showing lack of requisite permissions or that advances became refundable for that reason, the prosecution founded on the complaint under Section 76 A (for alleged contravention of Section 73) lacks basis. Further, the complaint originated from repeated, apparently vexatious complaints by a third party who is not an allottee or directly involved in the transactions. In these circumstances, permitting criminal proceedings to continue would amount to abuse of process of the Court. Exercising the Court's inherent jurisdiction under Section 482 Cr.P.C., the continuation of C.C.No.28 of 2020 against the petitioners is quashed.

Proceedings in C.C.No.28 of 2020 are quashed as an abuse of process, and the complaint alleging offences under Section 73 based on deposits is dismissed.

Final Conclusion: The Court allowed the criminal petition, holding that the advances for sale of immovable property are exempt from the definition of 'deposit' under Rule 2(1)(c)(xii)(b) and that continuation of the prosecution based on the complaint would be an abuse of process; accordingly C.C.No.28 of 2020 is quashed.

Validation of transaction under section 536(2) of the Companies Act, 1956 - avoidance of voluntary transfers within one year under Section 531-A of the Companies Act, 1956 - transactions during pendency of winding up and protection for bona fide purchaser - effect of filing date of winding up petition as commencement date for avoidance provisions - requirement of fraud, preference or lack of good faith to invalidate transfers

Validation of transaction under section 536(2) of the Companies Act, 1956 - transactions during pendency of winding up and protection for bona fide purchaser - requirement of fraud, preference or lack of good faith to invalidate transfers - Whether the sale of the company's land, factory and machinery to the applicant is liable to be set aside under the avoidance provisions and whether it is to be validated under section 536(2) of the Companies Act, 1956. - HELD THAT: - The Court found on undisputed facts that the registered sale deed in favour of the applicant was executed and registered prior to admission of the winding up petition. The applicant paid the entire sale consideration by making payment to the secured creditor bank which released its charge, obtained title clearance and statutory transfer permissions, and the Official Liquidator and creditors did not demonstrate that the transaction was effected fraudulently, as a fraudulent preference, or without valuable consideration. Applying the principle that transfers during the pendency of winding up are not ipso facto void if entered into in good faith for valuable consideration and absent proof of fraud or preferential treatment, the Court held that the transaction cannot be impugned under the avoidance provisions and is susceptible to validation under section 536(2). The Court therefore validated the sale and directed the Official Liquidator not to take possession. [Paras 6, 7, 8, 9]

The transaction is validated under section 536(2) of the Companies Act, 1956 and is not hit by sections 531 and 531-A; the Official Liquidator is directed not to take possession.

Final Conclusion: Application allowed; the registered sale dated 24-9-2012 of lands, factory and machinery to the applicant is declared valid and the Official Liquidator is directed not to take possession.

Power to restore under Section 252(3) of the Companies Act, 2013 - striking off under Section 248(5) of the Companies Act, 2013 - carrying on business or in operation - just and fair restoration - failure to file financial statements as determinative of restoration

Power to restore under Section 252(3) of the Companies Act, 2013 - carrying on business or in operation - just and fair restoration - failure to file financial statements as determinative of restoration - The appeal under Section 252(3) seeking restoration of the company struck off under Section 248(5) was dismissed for failure to demonstrate that the company was carrying on business or in operation, or that restoration would be otherwise just and fair. - HELD THAT: - The Tribunal examined the material placed by the appellant and found it insufficient to satisfy the statutory test for restoration. The agreements to sell filed by the company merely recorded advances and did not establish ownership or real estate development in furtherance of the company's objects. The bank statements relied upon pertained to the post strike-off period and thus could not demonstrate operation at the time of striking off. Form 26AS entries showing TDS deposits were held inadequate in the absence of corresponding Income Tax Returns or contemporaneous financial statements. Critically, the appellant failed to produce audited financial statements for the two financial years immediately preceding the date of strike-off, which the Tribunal treated as a determinative lacuna. The Tribunal applied the principle in Alliance Commodities (as cited) that restoration under Section 252(3) requires satisfaction that the company was carrying on business or in operation or that it is otherwise just and fair to restore; the phrase "or otherwise" cannot be used to permit arbitrary restoration where there is a specific finding of non-operation. On this basis the Tribunal found no ground to interfere with the ROC's action of striking off the company's name. [Paras 9, 10, 11, 13, 14]

Appeal dismissed; no restoration of the company's name.

Final Conclusion: The Tribunal dismissed the appeal under Section 252(3) and upheld the Registrar's strike-off under Section 248(5), holding that the appellant failed to demonstrate that the company was carrying on business or in operation in the two financial years preceding strike-off or that restoration would be otherwise just and fair.

Discrimination among similarly situated creditors - exclusive charge / security interest - classification of financial creditors into categories based on core and non-core assets - priority and value of security interest under Section 30(4) of the IBC - Regulation 38 - mandatory contents of a resolution plan - commercial wisdom of the Committee of Creditors - binding effect of approved resolution plan under Section 31 - remand to Committee of Creditors for distribution in conformity with Section 30(4) r/w Regulation 38

Exclusive charge / security interest - Memorandum of Understanding and its temporal effect - Appellant's entitlement to an exclusive security/charge over the trademarks - HELD THAT: - The hypothecation deed dated 03.09.2012, executed by the Corporate Debtor and its ex-promoters in favour of the Appellant, establishes that the trademarks are jointly owned by the Corporate Debtor and the promoters and were hypothecated to the Appellant. The subsequent MOU among certain lenders (dated 30.05.2014) was a limited, time bound private arrangement (valid for 12 months) to facilitate sale and did not alter or override the hypothecation deed or the ownership/charge created thereunder. There is no evidence that the MOU's validity was extended or that it effected a change in inter se priorities. The Adjudicating Authority's finding that the Appellant had only a 1/6th charge is not supported by the record. On the facts, the Appellant holds an exclusive charge over the trademarks as per the hypothecation deed. [Paras 56, 57, 58, 59, 60]

Appellant has an exclusive charge over the trademarks.

Classification of financial creditors into categories based on core and non-core assets - intelligible differentia for creditor classification - Validity and principled basis of the criteria for FC category A and B - HELD THAT: - The Resolution Applicant divided Financial Creditors into category A (core asset creditors) and category B (creditors with exclusive charge on non core assets). While such a classification may be conceptually defensible, the Resolution Applicant failed to justify the actual basis and methodology adopted for the categorisation and for the inter se distribution among category A creditors. The Adjudicating Authority resorted to an unpleaded principle (distribution strictly by security value) not advanced or evidenced by parties. On the record, the categorisation and the distribution methodology lack a sound, explained principle. [Paras 61, 62, 63, 64]

The criteria for classifying FCs into category A and B and the basis for distribution are not shown to be based on a sound principle.

Discrimination among similarly situated creditors - equitable treatment within a creditor class - Whether the Resolution Plan is discriminatory and violates the IBC - HELD THAT: - Comparison of admitted claims and the upfront cash distribution shows that certain Financial Creditors (e.g., Canara Bank) received amounts materially above their pro rata entitlement while the Appellant received less than its pro rata share. The Resolution Applicant and other respondents failed to provide a sufficient justification for this unequal treatment among creditors who are in the same class. The resolution plan, as structured, results in discrimination between similarly situated secured financial creditors and therefore contravenes the requirement of non discrimination and equitable treatment. [Paras 65, 66]

Resolution Plan is discriminatory between similarly situated Financial Creditors and violates the IBC.

Commercial wisdom of the Committee of Creditors - judicial review where discrimination is unexplained - Whether approval by the CoC precludes challenge to a discriminatory plan - HELD THAT: - While the commercial wisdom of the CoC is generally not amenable to interference, that principle does not shield a resolution plan from scrutiny where the plan effects unexplained discrimination between creditors of the same class. The Appellant raised objections during the CoC meeting and before the Adjudicating Authority; accordingly, a dissenting creditor may challenge a plan that discriminates against similarly situated creditors when the CoC/Resolution Applicant cannot justify the differentiation. [Paras 67, 68, 69, 70]

Approval by the CoC does not bar challenge to a resolution plan that discriminates between similarly situated creditors where the discrimination is not satisfactorily justified.

Priority and value of security interest under Section 30(4) of the IBC - Regulation 38 - mandatory contents of a resolution plan - remand to Committee of Creditors for distribution in conformity with Section 30(4) r/w Regulation 38 - Whether the Appellant was required to challenge the later approval and the appropriate relief - HELD THAT: - Section 30(4) (as amended) and Regulation 38 require that a resolution plan's manner of distribution may take into account order of priority under Section 53(1), including priority and value of security, and that dissenting financial creditors who did not vote in favour be appropriately dealt with. The plan and its approval did not conform to the amended statutory and regulatory scheme insofar as the Appellant, a dissenting financial creditor, was not afforded distribution consistent with priority/value of security and Regulation 38's mandate. The Appellant was not obliged to first challenge the subsequent approval order; the Tribunal found the impugned Adjudicating Authority order and the approval unsustainable and set them aside. The matter is remitted to the CoC to re distribute the resolution amount in conformity with Section 30(4) r/w Regulation 38. [Paras 74, 75, 76, 77, 78]

Appellant was not required to challenge the later approval; the impugned order and the approval are set aside and the matter is remitted to the CoC to re distribute the resolution amount in conformity with Section 30(4) r/w Regulation 38.

Final Conclusion: Appeal allowed; impugned order dated 09.05.2019 and the subsequent approval dated 03.06.2019 set aside. Finding that the Appellant holds an exclusive charge over the trademarks, that the categorisation and distribution under the Resolution Plan lacked a sound principled basis and resulted in unexplained discrimination, the matter is remitted to the Committee of Creditors with directions to re distribute the resolution amount in conformity with Section 30(4) of the IBC read with Regulation 38 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Declared service - Service - Consideration - Compensation - Liquidated damages - Agreement to tolerate an act - Provision of service by an employee to the employer - Notice pay / termination pay

Declared service - Agreement to tolerate an act - Consideration - Compensation - Notice pay / termination pay - Provision of service by an employee to the employer - Whether amounts recovered by the employer from employees for resignation without requisite notice are exigible to service tax as a declared service under Section 66E(e) of the Finance Act, 1994. - HELD THAT: - The Tribunal held that both 'service' and 'declared service' require an activity to be performed for a 'consideration' and that Section 66E(e) captures agreements whose very purpose is to refrain from, tolerate or do an act in return for consideration. A distinction was drawn between consideration (the object of the contract arising from performance) and compensation or liquidated damages (a fall-back payment for frustration or non-performance). Liquidated damages or pre agreed compensation built into a contract for breach do not convert the breach related payment into consideration for a service; they remain compensation. Employment contracts, although containing notice periods and pre agreed compensation for breach, are entered into for the employer employee relationship and not for tolerating resignations; notice pay recovered on premature resignation is compensation for breach rather than consideration for a declared service. The Tribunal noted CBEC guidance and followed the Madras High Court decision in GE T&D India Ltd. that notice pay in lieu of termination does not give rise to rendition of service by employer or employee. Applying these principles, the Tribunal concluded that amounts recovered from employees for premature resignation do not fall within Section 66E(e) and are not exigible to service tax. [Paras 14, 16, 17, 19, 20]

Demand of service tax on notice pay recovered from employees for premature resignation under Section 66E(e) set aside.

Final Conclusion: The appeal is allowed; the impugned order confirming service tax demand on amounts recovered from employees for premature resignation (notice pay) is set aside.

Eligibility for refund of service tax on input services used in or in relation to export of goods - refund under Notification No. 41/2012 as substituted by Notification No. 01/2016 - correlation of courier/transportation bills with export/shipping bills - remand for verification and re adjudication of correlation - refund of Swachh Bharat Cess and Krishi Kalyan Cess as component of service tax refund

Eligibility for refund of service tax on input services used in or in relation to export of goods - refund under Notification No. 41/2012 as substituted by Notification No. 01/2016 - Denial of refund qua certain input services (tailoring units, corporate office services, clearing and forwarding, advertisement, legal and accounting services) held to be unsustainable and appeals allowed on that ground. - HELD THAT: - The Tribunal accepted that the services disallowed by the Adjudicating Authority were used not within the factory premises but in other places or premises of production or manufacture of the goods for export (for example tailoring units, corporate office, clearing and forwarding, advertisement, legal and accounting services). Applying the conditions of Notification No. 41/2012 as substituted by Notification No. 01/2016, the Tribunal held that such use satisfies the statutory conditions for refund and that the reasons given by the lower authority for denial could not be sustained. Consequently the impugned orders insofar as they denied refund on these services were set aside and relief granted with consequential benefits as per law. [Paras 4]

Appeals allowed insofar as refund of service tax on the specified input services was denied; impugned orders set aside on this ground.

Correlation of courier/transportation bills with export/shipping bills - remand for verification and re adjudication of correlation - Claimed rejection of refund for courier bills remanded for fresh consideration to verify correlation with exports/shipping bills. - HELD THAT: - The Tribunal noted that the appellant had produced a Chartered Accountant's certificate purportedly correlating courier bills with the relevant exports/shipping bills, a matter which the Adjudicating Authority had not considered. In the interests of justice the Tribunal set aside the impugned order on this issue and restored the matter to the Adjudicating Authority for cross verification with the assistance of the appellant/appellant's representative regarding the claimed correlation, leaving all contentions on the issue open for fresh adjudication. [Paras 5]

Issue remanded to the Adjudicating Authority for verification of correlation and fresh adjudication.

Refund of Swachh Bharat Cess and Krishi Kalyan Cess as component of service tax refund - Claim for refund of Swachh Bharat Cess and Krishi Kalyan Cess remitted to the Adjudicating Authority for reconsideration consequent to the remand on correlation. - HELD THAT: - The Tribunal observed that the question of refund of these cesses is directly consequential to the adjudication on correlation of courier/transportation bills with exports. Since the correlation issue was remanded for fresh verification, the Tribunal also remitted the claim relating to Swachh Bharat Cess and Krishi Kalyan Cess to the Adjudicating Authority, leaving the appellant's contentions open for determination after re adjudication of correlation. [Paras 6]

Matter sent back to the Adjudicating Authority for reconsideration of refunds of the two cesses consequent to the remand on correlation.

Final Conclusion: The Tribunal applied its earlier order to the present appeals: the denial of refund for certain input services was set aside and allowed; the rejection of courier bill refunds was set aside and remanded for verification of correlation; and the claims for Swachh Bharat Cess and Krishi Kalyan Cess refunds were remitted to the Adjudicating Authority for reconsideration in view of the remand.

CENVAT credit on inputs used in the manufacture of capital goods - Definition of "input" - Explanation 2 to Rule 2(k) of the CENVAT Credit Rules, 2004 - Admissibility of input credit notwithstanding capital goods being immovable or non-excisable - Distinction between input-credit cases and service-provider infrastructure (tower/prefabricated building) cases

CENVAT credit on inputs used in the manufacture of capital goods - Definition of "input" - Explanation 2 to Rule 2(k) of the CENVAT Credit Rules, 2004 - Admissibility of input credit notwithstanding capital goods being immovable or non-excisable - Whether steel used in fabrication/installation of chimneys and storage tanks (silos) that qualify as capital goods is eligible for CENVAT credit as "inputs" under Explanation 2 to Rule 2(k), even if such capital goods are embedded/immovable or not dutiable/excisable. - HELD THAT: - The Tribunal accepted the appellant's contention that steel used in fabrication of chimneys and storage tanks are goods used in the manufacture of capital goods which are further used within the factory of production, and thus fall within the wide definition of "input" including Explanation 2 to Rule 2(k). Reliance was placed on consistent judicial authority (including decisions involving cement companies and Tribunal benches) holding that inputs used to fabricate storage tanks/silos or chimneys are entitled to credit. The Tribunal rejected the Revenue's contention that immovability or non-dutiability/excisability of the resulting capital goods disentitles the inputs to credit, observing that the dutiability of the capital goods is irrelevant to the statutory test in Explanation 2; so long as inputs are used in manufacture of capital goods which are further used in the factory, input credit is permissible. The decision distinguished precedents concerning service-provider infrastructure (such as tower parts or pre-fabricated buildings) as inapplicable to inputs used in manufacture of capital goods for production of excisable goods. [Paras 6, 7, 8]

Credit of CENVAT on steel used in fabrication/installation of chimneys and storage tanks as inputs under Explanation 2 to Rule 2(k) is allowable; the impugned order denying such credit is set aside and the appeal is allowed on merits.

Penalty in view of successful challenge to credit on merits - Whether imposition of penalty remains relevant once the appeal on entitlement to credit succeeds on merits. - HELD THAT: - The Tribunal observed that since the appeal succeeded on merits as to entitlement of credit, ancillary issues such as imposition of penalty become irrelevant in the circumstances of the case. The Tribunal therefore did not proceed to sustain penalty where credit was found allowable. [Paras 8]

Penalty issue rendered irrelevant by the finding in favour of the appellant on entitlement to credit.

Final Conclusion: Appeal allowed on merits: CENVAT credit in respect of steel used to fabricate chimneys and storage tanks (capital goods) is admissible under Explanation 2 to Rule 2(k); consequential relief, and penalty issue held irrelevant.

Refund of reversed CENVAT credit - unjust enrichment - admissibility of Chartered Accountant certificate as evidence - tax incidence and passing on of duty - evidentiary weight of accounting entries

Refund of reversed CENVAT credit - unjust enrichment - Appellant entitled to refund of CENVAT credit reversed earlier and credited to the consumer welfare fund. - HELD THAT: - The Tribunal found that the CENVAT credit, which had been reversed by the appellant at the instance of the department and subsequently became the subject of adjudication, was held to be admissible by the Commissioner (Appeals). The refund sanctioning authority had refused to credit the refund to the appellant and instead credited it to the consumer welfare fund. The Tribunal held that such refusal was not justified. The decision recognises that reversal followed by adjudication and a subsequent acceptance of admissibility entitles the appellant to the refundable amount; the departmental action of diverting the refund to the consumer welfare fund was set aside. The Tribunal therefore allowed the appeal and directed refund with applicable interest. [Paras 2, 5]

Appeal allowed; order of Commissioner (Appeals) set aside and appellant entitled to refund of reversible CENVAT credit, to be refunded with interest.

Admissibility of Chartered Accountant certificate as evidence - tax incidence and passing on of duty - evidentiary weight of accounting entries - Chartered Accountant certificates were admissible and sufficient to rebut the inference that the duty incidence was passed on to customers merely because the amount was shown as expenditure in books. - HELD THAT: - The Tribunal examined the submissions and authorities relied upon by both parties regarding whether amounts shown in Profit & Loss account as expenditure necessarily establish that the incidence of duty was passed on to customers. It observed that accounting entries alone do not automatically prove passing on; where a CENVAT credit reversal occurs and its fate is uncertain pending appeal, standard accounting practice may not record it as receivable. The appellant produced two Chartered Accountant certificates stating that the appellant had not passed on the duty incidence and that no debit notes or supplementary invoices were raised to recover the duty. The Tribunal held that such certificates (in the footing of a statutory auditor's certificate and an expert opinion under Section 45 of the Indian Evidence Act) could not be summarily discredited and were capable of rebutting the presumption of passing on. The Tribunal also rejected reliance on unverified internet sources and emphasised that absence of specific evidence of price revision or recovery from customers means the burden of proving passing on was not discharged by the department. [Paras 4, 5]

Chartered Accountant certificates accepted as probative evidence; showing the reversal as expenditure in books does not by itself establish passing on of duty.

Final Conclusion: The appeal is allowed; the order of the Commissioner (Appeals) is set aside and the appellant is entitled to refund of the reversed CENVAT credit (which had been credited to the consumer welfare fund). The respondent is directed to refund the amount with applicable interest to the appellant within three months from receipt of the order.

Ultra vires declaration of Rule 96ZQ - interest and penalty not leviable under an invalidated rule - redetermination of annual production capacity - exclusion of rail gallery length in chamber count - use of corrected chamber length for capacity computation - recalculation of abatement and duty after redetermination - challenge to determination order not prerequisite for contesting demand or claiming refund

Ultra vires declaration of Rule 96ZQ - interest and penalty not leviable under an invalidated rule - Whether interest and penalty can be imposed under Rule 96ZQ after the rule has been declared ultra vires by the Supreme Court. - HELD THAT: - The Tribunal accepted the binding effect of the Supreme Court's declaration that Rule 96ZQ is ultra vires and accordingly held that interest and penalty cannot be demanded under that Rule. The adjudicating authority's imposition of interest and penalty was set aside in view of the apex Court's decision. [Paras 7, 8]

Demand of interest and imposition of penalty under Rule 96ZQ set aside.

Redetermination of annual production capacity - exclusion of rail gallery length in chamber count - use of corrected chamber length for capacity computation - recalculation of abatement and duty after redetermination - The matter of computing annual production capacity (number of chambers) and consequent recalculation of duty and abatement is remitted for fresh determination. - HELD THAT: - The Tribunal found that the calculation of chambers had erred by including the rail gallery length and by using an incorrect chamber length. Applying the principle in the cited Supreme Court decision on chamber counting, the Tribunal directed that the adjudicating authority shall redetermine annual production capacity using chamber length 6231 and excluding rail galleries. The authority is directed to recalculate the abatement available to the appellant and pass a fresh order in accordance with law. [Paras 8]

Matter remanded to the adjudicating authority to redetermine annual production capacity excluding rail galleries, use chamber length 6231, and to recompute abatement and duty accordingly.

Challenge to determination order not prerequisite for contesting demand or claiming refund - Whether failure to challenge the final determination order of annual production capacity prevents the assessee from contesting a subsequent demand based on that determination. - HELD THAT: - Relying on precedent of the High Courts, the Tribunal held that there is no requirement to have independently challenged the final determination order of annual production capacity in order to contest a demand raised on the basis of that determination. The assessee may raise objections to the demand and seek relief without a prior separate proceeding challenging the capacity determination. [Paras 7]

Appellant's failure to challenge the capacity determination does not bar contesting the demand or claiming refund; issues on quantum to be considered on merits.

Final Conclusion: The impugned order is set aside. Interest and penalty under Rule 96ZQ are quashed. The matter is remanded to the adjudicating authority to redetermine annual production capacity excluding rail galleries and using chamber length 6231, to recompute abatement and duty in accordance with law, and to pass a fresh reasoned order. Appeal disposed by remand.