TaxTMI Updates e-Newsletter
Jan 29,2021

Immovable property - movable property - attachment to the earth - permanency test - input tax credit blocked under Section 17(5)(d)

Immovable property - attachment to the earth - permanency test - The temporary structures (hall/pandal/shamiana) erected by the applicant are immovable property for the purposes of the GST law. - HELD THAT: - The Authority applied the definitions in the General Clauses Act and Transfer of Property Act and the jurisprudence on the permanency test to determine whether the structures are "attached to the earth" or permanently fastened. While prior decisions establish that mere fixing by nuts and bolts to a foundation does not automatically render an item immovable where fixation is only for stability and not for permanent assimilation, the factual matrix here led to a different conclusion. The structures were erected on the applicant's own premises with substantial civil work and foundations; the pillars and platform are of large dimensions and the components are not shown to be intended for removal or relocation. Considering the degree and nature of annexation and that the structures cannot be put to beneficial use independent of the foundations, the Authority concluded that the attachment is of a permanent character and therefore the structures qualify as immovable property under the statutory tests and precedents. [Paras 4, 5, 6]

The structure created by the applicant is an immovable property for the purposes of GST Law.

Input tax credit blocked under Section 17(5)(d) - movable property - The applicant is not entitled to claim input tax credit on goods/services used for construction of the said structure. - HELD THAT: - Section 17(5)(d) bars input tax credit where goods or services are received for construction of an immovable property (other than plant or machinery) on one's own account. Having held that the structures are immovable property, the Authority applied Section 17(5)(d) and ruled that the input tax credit claimed on materials and services used in erection/installation is disallowed. The conclusion follows directly from the statutory prohibition once the character of the structure as immovable is established. [Paras 5, 6]

The applicant is not entitled to the credit of input tax in view of Section 17(5)(d) of the CGST/HGST Act, 2017.

Final Conclusion: The Authority ruled that the temporary function-structures erected by the applicant, having been firmly annexed to substantial foundations on the applicant's premises and used for permanent beneficial enjoyment, are immovable property for GST purposes, and accordingly input tax credit claimed on their construction is disallowed under Section 17(5)(d).

Show cause notice under Section 130 of the Act, 2017 - provisional release under Section 67(6) of the Act - confiscation proceedings - judicial non-interference in pending administrative proceedings - perishable goods consideration - direction to decide provisional release within one week - direction to conclude confiscation proceedings by 28.02.2021 - right to adequate opportunity of hearing

Judicial non-interference in pending administrative proceedings - show cause notice under Section 130 of the Act, 2017 - Whether the High Court should interfere with the MOV-GST 10 confiscation proceedings at the interim stage. - HELD THAT: - The Court declined to exercise writ relief at this stage and directed the writ applicant to file a reply to the showcause notice and appear before the authority in the confiscation proceedings. The order records that the Court has not expressed any opinion on the merits of the alleged contravention and refrains from interfering while administrative proceedings are pending. [Paras 4, 7]

Writ petition not interfered with; no opinion expressed on merits.

Provisional release under Section 67(6) of the Act - perishable goods consideration - right to adequate opportunity of hearing - Direction to consider the application for provisional release of the goods and vehicle filed under Section 67(6) and related interim relief. - HELD THAT: - The Court treated the applicant's earlier application as one under Section 67(6) for provisional release despite its imperfect wording. Emphasising the perishable nature of the goods (cumin seeds), the Court directed the authority to immediately consider the application and pass an appropriate order in accordance with law within one week from presentation of this order before the authority. The Court also recorded that the writ applicant shall be given an adequate opportunity of hearing in the confiscation proceedings. [Paras 4, 5]

Authority to consider and decide the Section 67(6) application within one week; applicant to be given opportunity of hearing.

Confiscation proceedings - direction to conclude confiscation proceedings by 28.02.2021 - right to adequate opportunity of hearing - Timeframe for completion of the confiscation proceedings arising from MOV-GST 10. - HELD THAT: - While declining to adjudicate on the merits, the Court directed that the confiscation proceedings be concluded with an appropriate order by 28.02.2021, ensuring the writ applicant is afforded an adequate hearing during those proceedings. [Paras 6]

Confiscation proceedings to be concluded by 28.02.2021 with adequate opportunity of hearing.

Final Conclusion: Writ petition disposed of without adjudication on merits; authority directed to decide the provisional release application under Section 67(6) within one week from presentation of this order and to conclude the confiscation proceedings by 28.02.2021, ensuring the applicant an adequate hearing; no opinion expressed on the alleged contravention.

Provisional attachment under Section 83(2) of the Central Goods and Services Tax Act, 2017 - lapse of provisional attachment on expiry of one-year period - direction to issue instructions to banks upon lapse of attachment - quashing of expired attachment and restoration of bank account operation - preservation of respondents' right to effect fresh attachment

Provisional attachment under Section 83(2) of the Central Goods and Services Tax Act, 2017 - lapse of provisional attachment on expiry of one-year period - direction to issue instructions to banks upon lapse of attachment - quashing of expired attachment and restoration of bank account operation - preservation of respondents' right to effect fresh attachment - Provisional attachment affected on 9th January, 2020 under Section 83 was infructuous on expiry of the one-year period and the respondents were directed to notify banks of its lapse or face quashing thereof. - HELD THAT: - The Court recorded that the provisional attachment impugned in the petition was effected on 9th January, 2020 and that the one-year period during which such attachment under Section 83(2) of the CGST Act could operate expired on 8th January, 2021. The respondents did not dispute this position and also disclosed that no notice under Sections 73 and 74 had been issued to the petitioner. In view of the lapse, the Court directed the respondents to issue, on or before 29th January, 2021, instructions to the banks to that effect. The Court preserved the respondents' right to serve any other order of attachment of the same accounts by the same date; but declared that if no such instructions are issued and no fresh attachment is served on or before 29th January, 2021, the attachment effected on 9th January, 2020 shall stand quashed and the banks shall permit the petitioner to operate the accounts after that date. [Paras 1, 4, 5, 6]

Writ petition disposed; respondents directed to inform banks of lapse of the provisional attachment by 29th January, 2021, failing which the original attachment of 9th January, 2020 shall be quashed and the banks shall allow operation of the accounts, subject to the respondents' right to effect any fresh attachment if served by that date.

Final Conclusion: The writ petition was allowed to the extent that the provisional attachment dated 9th January, 2020 having lapsed by efflux of the one-year period was ordered to be withdrawn by issuing instructions to the banks by 29th January, 2021; in default the attachment stands quashed and the petitioner may operate the accounts, while preserving the respondents' right to effect any fresh attachment if served by the specified date.

Writ under Article 226 - confiscation proceedings - release of detained goods and conveyance subject to payment and undertaking - right to challenge adjudication in accordance with law - principle of law in Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat

Confiscation proceedings - right to challenge adjudication in accordance with law - principle of law in Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat - The adjudicatory authority was directed to proceed with the confiscation proceedings afresh and decide the showcause notice in MOV-10 in accordance with law and the principle laid down in Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat. - HELD THAT: - The Court recorded that the matter remains at the adjudication stage before the authority in MOV-10 and expected the writ applicant to appear, file a reply if not already filed, and participate in the proceedings. The authority was directed to take an appropriate decision in accordance with law, bearing in mind the legal principle explained by this Court in Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat. The order emphasises that the applicant retains the right to challenge the authority's determination in accordance with law, and the Court refrained from expressing any view on the merits of the confiscation claim. [Paras 4]

Proceedings remitted to the adjudicating authority for fresh consideration and decision in accordance with law and the cited principle; petitioner to participate and may file reply.

Release of detained goods and conveyance subject to payment and undertaking - writ under Article 226 - The writ petition was disposed of after recording the interim regime previously ordered for release of goods and vehicle and without expressing any opinion on merits. - HELD THAT: - The Court noted its earlier interim order directing release of the detained goods together with the conveyance subject to payment of tax and penalty as computed by the authorities and filing of a solemn undertaking, and recorded that the present writ application is disposed of on that basis. The Court explicitly declined to pronounce on the substantive merits of the confiscation notice and related claims, leaving those issues to the adjudicating authority and to such further challenge as may be available to the petitioner under law. [Paras 3, 5]

Writ petition disposed of in the terms recorded; no opinion expressed on merits.

Final Conclusion: The writ petition is disposed of: the petitioner is directed to participate in the confiscation proceedings before the concerned authority and the authority shall decide the showcause notice in MOV-10 in accordance with law and the principle in Synergy Fertichem Pvt. Ltd. Vs. State of Gujarat; the Court expresses no opinion on merits.

Cancellation of GST registration without opportunity of hearing - non-application of mind in show cause notice - revocation of cancellation under Section 30 of the CGST Act - remand for fresh consideration and opportunity of hearing

Cancellation of GST registration without opportunity of hearing - non-application of mind in show cause notice - remand for fresh consideration and opportunity of hearing - Validity of the impugned order cancelling GST registration in light of absence of opportunity of hearing and apparent non-application of mind. - HELD THAT: - The Court recorded prima facie satisfaction with the writ applicant's contention that the authority's order cancelling GST registration was passed without affording any opportunity of hearing and that the show cause notice reflected non-application of mind. In view of these prima facie findings the Court directed that the matter be remitted to the authority for fresh consideration so that the writ applicant may be afforded an opportunity of hearing and the authority may pass a fresh reasoned order. The Court accepted the respondents' concession as recorded and treated the appropriate remedy as invocation of the statutory provision for revocation rather than deciding the cancellation on merits in the writ proceedings. [Paras 2]

Prima facie cancellation was vitiated by lack of hearing and non-application of mind; matter remitted for fresh consideration and opportunity of hearing.

Revocation of cancellation under Section 30 of the CGST Act - Procedure to be followed for restoration of registration and final disposal of the writ petition. - HELD THAT: - The Court disposed of the writ petition by directing the writ applicant to file an application under Section 30 of the CGST Act for revocation of cancellation. The respondents, through their standing counsel, undertook that upon filing of such an application the authority concerned would pass an appropriate order. The Court imposed a timeline, directing that the authority shall pass the appropriate order within three days of such application being filed, thus providing an expeditious remedial process rather than adjudicating the revocation substantively in the writ. [Paras 4]

Writ petition disposed with direction to file application under Section 30 and for the authority to pass an appropriate order within three days.

Final Conclusion: Writ petition disposed of by remitting the matter to the authority: the petitioner to file an application under Section 30 of the CGST Act at the earliest and the authority to pass an appropriate order within three days in accordance with the respondents' undertaking.

Speaking to the minutes - De-tagging of matters - Adjournment pending resumption of physical courts

Speaking to the minutes - De-tagging of matters - Whether the note for speaking to the minutes seeking inclusion of the captioned case in the earlier judgment dated 24th July, 2020 should be allowed - HELD THAT: - The court recorded that the note for speaking to the minutes seeking inclusion of the captioned case in the judgment dated 24th July, 2020 is not required to be allowed because the captioned matter had already been de-tagged at the relevant point of time. In those circumstances, there was no necessity to permit the note to alter or affect the earlier order. The court therefore refused the relief sought by the speaking-to-minutes note.

The note for speaking to the minutes is refused; the captioned matter had already been de-tagged.

Adjournment pending resumption of physical courts - When the captioned matter should next be listed for hearing - HELD THAT: - Given the operative position that the matter was de-tagged and in view of the prevailing arrangements for court functioning, the court directed that the matter be listed in the week commencing after regular physical courts are resumed. This preserves the case for hearing once normal physical sittings recommence.

The matter is to be listed in the week commencing after regular physical courts resume.

Final Conclusion: The petition for speaking to the minutes seeking inclusion of the captioned case in the earlier judgment is refused as unnecessary because the matter had been de-tagged; the case will be listed for hearing after regular physical courts resume.

Commensurate reduction in prices - passing on benefit of tax reduction and input tax credit - denial of input tax credit as basis for price increase - DGAP's jurisdiction to conduct detailed investigation under Rule 129 - time limits for investigation and extension under Rule 129(6) - methodology and procedure for determination of profiteering under Rule 126 - deposit in Central and State Consumer Welfare Funds - non-application of penalty retrospectively under Section 171(3A)

Commensurate reduction in prices - passing on benefit of tax reduction and input tax credit - Whether the Respondent passed on the commensurate benefit of the reduction in GST rate to its customers - HELD THAT: - The Authority found that the GST rate on restaurant services was reduced from 18% to 5% w.e.f. 15.11.2017 without ITC and that Section 171(1) required the supplier to pass the benefit to recipients by way of commensurate reduction in prices. On comparison of pre- and post-rate-reduction average item-wise base prices (pre-period data taken into account as described in the report), it was established that the Respondent increased base prices of 1,434 out of 1,650 items by more than the percentage required to offset denial of ITC. Consequently the customers did not receive the commensurate reduction in final prices despite the lower tax rate. The Authority accepted the DGAP's approach of comparing item-wise average selling prices in the pre-rate-change period with actual post-rate-change prices and factoring denial of ITC as a percentage of taxable turnover for the pre-rate period for this determination. [Paras 127, 129, 130, 131, 132]

The Respondent did not pass on the commensurate benefit of the GST rate reduction to its customers and thereby contravened Section 171(1).

Denial of input tax credit as basis for price increase - methodology and procedure for determination of profiteering under Rule 126 - Whether the method of computing denial of ITC and its application in quantifying profiteering was lawful and correctly applied - HELD THAT: - DGAP computed ITC attributable to restaurant service by using the period 01.07.2017 to 31.10.2017 (excluding November 2017 for reasons stated in the report) and determined an ITC-to-turnover ratio. The Authority accepted DGAP's reasoning for that choice of period (incomplete invoice-wise data for early November, reversals and ineligible post-15.11.2017 credits) and noted that DGAP subsequently corrected an omission by including certain ITC amounts availed in 01-14 Nov 2017, revising the ITC ratio to 10.22%. The Authority held that Rule 126 empowers the Authority to determine methodology and that the DGAP's item-wise mathematical comparison (average pre-rate base price plus ITC-impact vs. actual post-rate selling price) was an acceptable application of that methodology for quantification of profiteering. [Paras 21, 26, 32, 132, 133]

DGAP's methodology and its corrected computation (ratio of ITC to turnover revised to 10.22%) for quantifying the impact of denial of ITC and computing profiteering was accepted.

DGAP's jurisdiction to conduct detailed investigation under Rule 129 - time limits for investigation and extension under Rule 129(6) - Whether DGAP lawfully investigated all items and whether the period of investigation and any extensions were valid - HELD THAT: - The Authority examined Respondent's challenge that DGAP exceeded its mandate by investigating items beyond those mentioned in the complaint and that the Screening Committee/Standing Committee acted beyond prescribed timelines. The Authority held that Rule 129 empowers DGAP to investigate whether benefits have been passed for the relevant service (restaurant service) and there is no provision limiting investigation strictly to those SKUs named in the initial complaint. The Authority also accepted DGAP's explanation regarding the investigation period (15.11.2017 to 30.04.2019) and that the timeline provisions were amended by Notification No.31/2019 so as to extend the period available to DGAP; the Authority granted the requisite extension in terms of Rule 129(6). The Authority further held that the statutory timelines are directory and that the DGAP's investigation covering all supplies of restaurant service was within its remit, given the common ITC pool and the need to examine all SKUs to ascertain passing on of benefits. [Paras 18, 135, 136, 137, 138]

DGAP lawfully investigated all restaurant-service supplies; the chosen investigation period and the extension granted were upheld and DGAP did not exceed its jurisdiction.

Deposit in Central and State Consumer Welfare Funds - inclusion of tax component within profiteered amount - Quantum of profiteering, treatment of collected tax, and relief to be ordered - HELD THAT: - On the basis of item-wise comparisons and the revised ITC ratio, DGAP calculated the net higher sale realization (profiteered amount) and revised it in the supplementary report. The Authority accepted the revised figure of profiteering (inclusive of GST on the base profiteered amount) after corrections made by DGAP. The Authority also held that the tax component collected on the excess base price is part of the benefit denied to consumers and must be accounted for in the profiteered amount; the supplier could have issued credit notes and adjusted tax liability. As the beneficiaries could not be identified, the Authority directed deposit of the profiteered sum in equal halves into the Central and respective State Consumer Welfare Funds, with interest @18% from the dates amounts were realized until deposit. [Paras 25, 26, 123, 149]

Profiteered amount accepted as Rs. 3,10,56,939/- (revised figure); Respondent directed to deposit equal halves into Central and State Consumer Welfare Funds with interest, within three months.

Non-application of penalty retrospectively under Section 171(3A) - Whether penalty under Section 171(3A) could be imposed for contraventions committed during 15.11.2017 to 30.04.2019 - HELD THAT: - Section 171(3A) (penalty for contravention) was inserted w.e.f. 01.01.2020. The Authority found that the Respondent's contraventions occurred in the period 15.11.2017 to 30.04.2019 when the penalty provision was not in force. Therefore the penal provision could not be applied retrospectively to that period. [Paras 150]

No penalty under Section 171(3A) to be imposed retrospectively; notice for penalty not required.

Final Conclusion: The Authority upheld the DGAP's finding that the Respondent failed to pass on the commensurate benefit of the GST rate reduction to customers in respect of restaurant services for the period 15.11.2017 to 30.04.2019; after corrections to ITC computation, the profiteered amount was fixed at Rs. 3,10,56,939/- (inclusive of tax) and the Respondent was directed to deposit equal halves into the Central and State Consumer Welfare Funds with interest @18% within three months. DGAP's jurisdiction, methodology and investigation period were sustained, and penalty under Section 171(3A) was not imposed as that provision was not in force during the violation period.

Additions u/s 68 read with Section 115BB - assessment framed on basis of investigation report without independent enquiry - onus under Section 68 of the Income tax Act- appellate review of factual findings by the ITAT as last fact finding authority

HELD THAT: - The Court examined the material relied upon by the Assessing Officer, including the investigation wing's report and SEBI orders, and the steps taken by the AO such as issuance of notices under Sections 133(6)/131. While the AO's analysis of extraordinary share price movement and suspicious trade patterns was acknowledged, the Court found that the AO proceeded mainly on the investigation report without conducting independent and adequate enquiry or producing cogent corroborative material showing an agreement for accommodation entries or that money had actually been transacted to convert unaccounted funds into purported LTCG.

ITAT, as the last fact finding authority, reviewed the entire conspectus of evidence and concluded that the assessee had discharged the initial onus under Section 68 by demonstrating online purchases, payments through banking channels, dematerialisation and sale through demat accounts. The Court held that suspicion or human probability inferences cannot substitute for proof; in absence of clinching material to rebut the assessee's documentary evidence, the deletion by the ITAT was not perverse. [Paras 11, 12, 13]

The ITAT's deletion of the addition under Section 68 read with Section 115BBE is upheld; there is no perversity in the Impugned Order.

Final Conclusion: The applications for condonation of delay are allowed. On merits, the Revenue's appeals against the ITAT order deleting additions under Section 68 read with Section 115BBE (in relation to alleged bogus LTCG from penny stocks) are dismissed; the ITAT's factual conclusions stand and no substantial question of law arises.

Revisionary powers under section 263 - Erroneous and prejudicial to the interests of the revenue - Interpretation of tax holiday period under section 10A - Eligibility of staffing / human resources services for section 10A deduction - Requirement of application of mind and enquiry by the Assessing Officer

Revisionary powers under section 263 - Erroneous and prejudicial to the interests of the revenue - Requirement of application of mind and enquiry by the Assessing Officer - Validity of invocation of powers under section 263 where the assessment order was subject matter of appeal and where the Assessing Officer had taken a view - HELD THAT: - The Court held that exercise of revisional jurisdiction under section 263 requires two conditions: the order of the Assessing Officer must be erroneous and such error must be prejudicial to the interests of the revenue. Where the Assessing Officer has not recorded reasons or made necessary enquiries and has allowed the deduction without application of mind, the order is erroneous and prejudicial. The mere fact that an assessment order is under appeal does not bar the Commissioner from invoking section 263 if the defect in the assessment (lack of enquiry or absence of reasons) renders it erroneous and prejudicial. Where two reasonable views are possible, revision is inappropriate; but in the present case the Assessing Officer's view was not a plausible view and no reasons were assigned, justifying exercise of revisional jurisdiction. [Paras 11, 12, 13]

Invocation of section 263 was valid; the Commissioner rightly reopened the assessment as the AO's order was erroneous and prejudicial to revenue for want of application of mind and enquiry.

Interpretation of tax holiday period under section 10A - Whether the assessee was eligible to claim deduction under section 10A for Assessment Year 2008-09 in view of the statutory ten year limit - HELD THAT: - Applying the plain language of section 10A (as amended), the Court held that the period of entitlement for the tax holiday commences from the Assessment Year relevant to the previous year in which the undertaking begins production. In this case that commencement was Assessment Year 1995-96 and the statutory period of ten consecutive Assessment Years therefore ended with Assessment Year 2008-09. The statute fixes the outer limit and entitlement cannot be extended by non claim in intermediate years. The Assessing Officer failed to examine this aspect and wrongly allowed the deduction for AY 2008 09; that view was erroneous and prejudicial to revenue. [Paras 13]

Deduction under section 10A was not allowable for AY 2008-09 because the statutory ten year tax holiday period commencing AY 1995-96 had expired; the Assessing Officer's allowance was erroneous.

Eligibility of staffing / human resources services for section 10A deduction - Requirement of application of mind and enquiry by the Assessing Officer - Whether income from staffing / human resources services qualified for deduction under section 10A and whether the Assessing Officer made requisite enquiries before allowing the claim - HELD THAT: - The Court observed that income from staffing was not income from export of computer software and that the Assessing Officer did not examine this aspect or record findings that the services amounted to eligible software exports. Because the AO allowed the claim without enquiry or reasons, the assessment was erroneous and prejudicial to revenue. The Commissioner therefore correctly directed re examination and denial of the deduction in respect of staffing income. [Paras 13]

Income from staffing did not qualify as export of computer software on the record before the AO; allowance without enquiry was erroneous and justified revisional action under section 263.

Final Conclusion: The High Court dismissed the appeal. The Court upheld the Commissioner's exercise of revisional jurisdiction under section 263, held that the ten year tax holiday under section 10A (commencing AY 1995 96) excluded entitlement for AY 2008 09, and found that allowance of deduction for staffing income without enquiry was erroneous and prejudicial to revenue.

Addition under section 68 of the Income Tax Act - onus of proving identity and creditworthiness of share applicants - search and seizure incriminating material - completed assessment - maintainability of memorandum of cross objection - Tribunal's power to decide on grounds not previously urged

Maintainability of memorandum of cross objection - Tribunal's power to decide on grounds not previously urged - Whether the assessee could raise, by way of cross objection before the Tribunal, a legal ground not argued before the CIT(A). - HELD THAT: - The Tribunal held that a party is not precluded from raising a pure legal ground for the first time before the appellate authorities. The Tribunal examined precedents and concluded that it has a broad power to decide appeals on grounds beyond those set forth in the memorandum of appeal so long as the affected party is given an opportunity of being heard. The Tribunal therefore rejected the Revenue's objection to the maintainability of the grounds in the cross objection and admitted the legal challenge regarding validity of assessment under section 153A where no incriminating material was found during search. [Paras 14]

The cross objection was held maintainable and the Tribunal proceeded to adjudicate the legal ground raised therein.

Search and seizure incriminating material - completed assessment - addition under section 68 of the Income Tax Act - onus of proving identity and creditworthiness of share applicants - Whether addition of share application money to income (made under section 68) could be sustained where the assessment was a completed assessment and no incriminating material was found as a result of the search. - HELD THAT: - On the merits the Tribunal found that the addition was made on verification of the assessee's balance sheet and not on any incriminating material discovered during the search. Applying the legal principle that, in the absence of incriminating material found as a result of search, no addition can be made in respect of a completed assessment, the Tribunal allowed the assessee's contention. The Tribunal accepted that the assessee had discharged its onus of proving identity, creditworthiness and genuineness in respect of the share applicants as adjudicated by the CIT(A), and relying on the stated principle concluded that the addition could not be sustained. [Paras 15, 16]

The addition of share application money to income was held unsustainable and was deleted.

Final Conclusion: The cross objection filed by the assessee is allowed; the Revenue's appeal is dismissed.

Disallowance under Section 14A - application of Rule 8D - requirement of Assessing Officer's satisfaction before invoking Rule 8D - treatment of growth mutual fund units for Section 14A disallowance

Disallowance under Section 14A - application of Rule 8D - requirement of Assessing Officer's satisfaction before invoking Rule 8D - Validity of the disallowance of expenditure computed under Rule 8D (amounting to Rs. 7,58,612) made by the AO in relation to exempt income for AY 2014-15. - HELD THAT: - The Tribunal examined the assessment record and the earlier orders in the assessee's own cases for AY 2010-11 and AY 2011-12, concluding that the AO had not complied with the statutory requirement of recording a satisfaction, with reference to the assessee's accounts, that it was not possible to accept the assessee's claim that no expenditure was attributable to earning exempt income. Following the Coordinate Bench decisions (which applied the Supreme Court's mandate in Godrej & Boyce regarding the necessity of AO's satisfaction before applying Rule 8D), the Tribunal held that the disallowance under Rule 8D was made without the requisite satisfaction and was therefore not sustainable. The Tribunal noted that facts and reasons recorded by the AO in the present assessment mirrored those in the prior years where disallowances were vacated, and consequently set aside the assessment addition and the CIT(A)'s partial sustaining of the disallowance. [Paras 7, 8]

Disallowance under Section 14A read with Rule 8D (Rs. 7,58,612) is vacated; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2014-15, holding that the AO improperly applied Rule 8D without recording the required satisfaction that expenses were attributable to earning exempt income; the disallowance made under Section 14A r.w. Rule 8D is set aside.

Exemption under section 11 of the Income Tax Act - rectification under section 154 of the Income Tax Act - mistake apparent from record - processing under section 143(1) of the Income Tax Act - filing of audit report in Form 10B before the due date and condonation of delayed electronic submission - technical omission in ITR-7 regarding auditor's name - application of Tribunal precedent and CBDT circular to condone delayed filing of audit report

Rectification under section 154 of the Income Tax Act - mistake apparent from record - exemption under section 11 of the Income Tax Act - filing of audit report in Form 10B before the due date and condonation of delayed electronic submission - Whether the rectification application under section 154 should have been rejected where the trust obtained and filed the audit report in Form 10B prior to the due date though the auditor's name was omitted in the electronically filed ITR-7, and whether exemption under section 11 ought to be allowed. - HELD THAT: - The Tribunal found that the trust had its accounts audited and that the audit report in Form 10B was obtained on 29.09.2014 and the return was filed on 30.09.2014. The AO rejected the rectification request on the ground that there was no prima facie mistake apparent from record in the intimation under section 143(1) and that details of audit were not furnished in the audit information schedule. The Tribunal applied its earlier decision in Kasturi Foundation and the principle in the CBDT circular that where the audit report has been obtained before filing the return and furnished before the due date under section 139, delayed electronic submission should be condoned. On these facts the omission of the auditor's name in the ITR-7 was treated as a technical defect; since the audit report existed prior to the return's due date and the claim of application of receipts for charitable objects was not controverted, the delay/omission should have been condoned and the exemption under section 11 allowed. The Tribunal concluded that the CIT(A) erred in upholding the rejection of rectification and set aside that order, allowing the assessee's claim. [Paras 7, 8]

The Tribunal allowed the appeal, held that the omission was a technical defect amenable to condonation in view of the audit report being obtained before the due date and the Tribunal precedent/CBDT circular, set aside the CIT(A)'s order and allowed the claim of exemption under section 11.

Final Conclusion: The appeal is allowed: the Tribunal set aside the CIT(A)'s order, condoned the technical omission concerning the auditor's details in the ITR-7 in light of the timely obtaining of Form 10B and applicable precedent/CBDT guidance, and allowed the assessee's claim of exemption under section 11 for AY 2014-15.

Unexplained cash credit under section 68 - identity, capacity and genuineness of creditor - examination of lender to verify source - remand for fresh consideration

Unexplained cash credit under section 68 - identity, capacity and genuineness of creditor - examination of lender to verify source - Addition of Rs. 20 lakhs as unexplained cash credit in the hands of the assessee was set aside and remanded for further proceedings - HELD THAT: - The AO treated a Rs. 20 lakhs receipt shown as an unsecured loan from M/s. Annapurneshwari Rice Industries as an unexplained cash credit after noting that the assessee had deposited Rs. 20 lakhs into the firm's bank account shortly before the firm advanced the amount to the assessee, and on the ground that the firm's declared income indicated limited capacity to lend. The assessee furnished a written explanation, evidence of payment of interest and TDS, and the lender responded to the statutory notice confirming the loan and produced bank statements. The Tribunal held that, in the circumstances, it was not permissible to draw a conclusive inference of sham or that the amount was the assessee's own money without affording an opportunity to examine Mr. Nagaraj (partner of the lender). If on examination Mr. Nagaraj admits having lent the sum, the addition cannot be sustained; conversely, the Tribunal declined to permit, in the set-aside proceedings, an enquiry into the source of Mr. Nagaraj's funds (i.e., source of source). For these reasons the Tribunal set aside the CIT(A)'s order and remanded the matter to the assessing officer to afford the parties the opportunity of being heard and to examine the lender as necessary. [Paras 8, 9]

Order of CIT(A) confirmed to the AO was set aside and the addition under section 68 remanded for fresh consideration including examination of the lender.

Final Conclusion: Appeal allowed for statistical purposes; matter remitted to the assessing officer for fresh adjudication with opportunity to examine the lender and hear the parties.

Disallowance of bogus purchases by estimating embedded profit - application of 12.5% benchmark for embedded profit - unexplained expenditure under section 69C - reliance on information from Sales Tax authorities as trigger for verification - verification of purchase prices to detect over invoicing

Disallowance of bogus purchases by estimating embedded profit - application of 12.5% benchmark for embedded profit - unexplained expenditure under section 69C - Whether the disallowance on account of alleged bogus purchases should be restricted to an estimated profit element of 12.5% of the purchases instead of disallowing the entire purchases - HELD THAT: - The Assessing Officer treated the entirety of purchases from seven suppliers as unexplained and disallowed them as unexplained expenditure based on information received from the Sales Tax Department and non response to notices under section 133(6). The CIT(A) examined the appellant's bank payments, delivery challans, stock and sales records and concluded that while the purchases could not be accepted as fully verifiable at arm's length and could not be fully rejected, the correct approach is to estimate the excess profit element embedded in such unverifiable purchases rather than disallow the entire purchase value. Applying judicial precedents (including the Gujarat High Court decision in CIT v. Simit P. Sheth) and having regard to the accepted sales, the CIT(A) adopted 12.5% of the contested purchases as a reasonable benchmark for the profit element to be added to income. The Tribunal found that the CIT(A)'s application of the 12.5% profit rate following the authority cited was reasonable and declined to interfere. [Paras 7]

The disallowance was correctly restricted to 12.5% of the disputed purchases as the estimated profit element, and the Tribunal upheld the CIT(A)'s order; the appeals are dismissed.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals)'s decision to treat the disputed purchases as not wholly rejectable but to bring to tax the estimated profit element by applying a 12.5% benchmark; the assessee's appeals for AY 2009-10 and AY 2010-11 are dismissed.

Validity of notice under section 143(2) as foundational step - assumption of jurisdiction by a non jurisdictional assessing officer - jurisdiction of the assessing officer - void ab initio of assessment for lack of jurisdiction - curability under section 292BB

Validity of notice under section 143(2) as foundational step - assumption of jurisdiction by a non jurisdictional assessing officer - void ab initio of assessment for lack of jurisdiction - curability under section 292BB - Notice under section 143(2) issued by a non jurisdictional Income tax Officer and subsequent assessment framed is void ab initio and not a mere irregularity curable under section 292BB. - HELD THAT: - The Tribunal found that the notice initiating scrutiny under section 143(2) was issued by Income tax Officer, Ward 52(5), who had no jurisdiction to issue such notice in respect of the assessee, a non resident Indian whose cases fall within ITO (International Taxation). The notice under section 143(2) is a foundational step to initiate assessment proceedings; issuance by a non jurisdictional AO cannot be treated as a curable irregularity under section 292BB. The Tribunal relied on CBDT instructions regarding jurisdictional allocation and on settled precedents holding that notices and orders issued by authorities lacking jurisdiction render the proceedings illegal. Applying these principles, the Tribunal held that subsequent framing of assessment by the jurisdictional ITO could not validate the prior invalid notice and therefore the assessment order is void ab initio. The Tribunal also permitted the assessee to raise the jurisdictional ground as an additional ground and decided it on the basis of the record without requiring fresh factual inquiry. [Paras 11, 12, 13, 14, 19]

Assessment order is quashed as void ab initio; the assessee's appeal is allowed and the Revenue's appeal is dismissed as infructuous.

Final Conclusion: The Tribunal quashed the assessment for AY 2016-17 because the notice under section 143(2) was issued by a non jurisdictional AO, rendering the assessment proceedings void ab initio; the assessee's appeal was allowed and the Revenue's appeal became infructuous.

Penalty under section 271(1)(c) of the Income Tax Act - additions determined on estimate / income assessed on estimate basis - deeming provisions in Explanation 1(B) to section 271(1)(c) - onus on Revenue to prove concealment or furnishing of inaccurate particulars - penalty proceedings are distinct from assessment proceedings - requirement of discernible satisfaction in assessment order for initiation of penalty - principles of natural justice in penalty notice

Penalty under section 271(1)(c) of the Income Tax Act - additions determined on estimate / income assessed on estimate basis - onus on Revenue to prove concealment or furnishing of inaccurate particulars - deeming provisions in Explanation 1(B) to section 271(1)(c) - penalty proceedings are distinct from assessment proceedings - Whether penalty under section 271(1)(c) could be sustained where the assessment/addition was made on estimate and no concrete evidence of concealment or inaccurate particulars was brought on record. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals)'s deletion of penalty where the addition was made on an estimated basis. Relying on the reasoning adopted by the CIT(A) and earlier authority cited therein, the Tribunal held that additions based solely on estimation, without concrete evidence that the returned income understated actual income, do not establish concealment or furnishing of inaccurate particulars required for levy of penalty under section 271(1)(c). The decision reiterates that the Department bears the onus to prove a positive act of concealment or that the explanation offered by the assessee is false or not bona fide; mere differences of opinion on estimates between assessing and appellate authorities cannot, by themselves, attract the penalty. The Tribunal also noted established principles that penalty proceedings are distinct from assessment proceedings and that deeming provisions in Explanation 1(B) operate only when the requisite satisfaction or direction is discernible from the assessment order; absent such satisfaction and concrete evidence, imposition of penalty is not automatic. Having found no cogent material to controvert the appellate authority's conclusions, and that the CIT(A) had passed a reasoned order deleting the penalty, the Tribunal declined to interfere.

Penalty under section 271(1)(c) deleted as additions were made on estimate and Revenue failed to prove concealment or inaccurate particulars; order of CIT(A) affirmed and revenue appeal dismissed.

Final Conclusion: The appeal by the revenue is dismissed; the Tribunal affirms the CIT(A)'s deletion of the penalty under section 271(1)(c) because the addition was based on estimation and the Department did not establish concealment or furnishing of inaccurate particulars.

Registration under section 12AA - examination of objects and genuineness of activities - Distinction between registration under section 12AA and exemption/assessment under section 11 - Taxability of contributions to corpus fund not to be decided at registration stage

Registration under section 12AA - examination of objects and genuineness of activities - Distinction between registration under section 12AA and exemption/assessment under section 11 - Taxability of contributions to corpus fund not to be decided at registration stage - Whether the Commissioner was justified in refusing registration under section 12AA by examining taxability of donations credited to corpus funds and non-payment of tax thereon. - HELD THAT: - The Tribunal held that the proper scope of scrutiny at the registration stage under section 12AA is confined to whether the objects of the trust are charitable in nature and whether its activities are genuine. The Commissioner, while considering the application, went beyond this scope and examined whether donations credited to the corpus fund had escaped assessment and whether taxes had been paid thereon. Such examination pertains to the question of exemption or assessment under section 11 and related taxability issues, which are distinct from the registration exercise. The Tribunal noted reliance placed by the assessee on Ananda Social and Educational Trust and other authorities establishing the separation between registration and assessment; it observed that the Commissioner had lost sight of this distinction and therefore the reasoning for denying registration could not be sustained. Consequently the impugned order was set aside and the Commissioner was directed to grant registration under section 12AA.

Impugned order rejecting registration under section 12AA is set aside and the Commissioner is directed to grant registration under section 12AA.

Final Conclusion: The appeal is allowed: the order denying registration under section 12AA is quashed and the Commissioner is directed to grant registration, since taxability of corpus donations and assessment under section 11 cannot be decided at the registration stage.

Unexplained cash credit - onus of proof for identity and genuineness of loan creditors - verification by assessing officer - application of income where charitable registration is effective - registration under section 12AA - disallowance under section 40A(3) in computation of income under section 11

Unexplained cash credit - onus of proof for identity and genuineness of loan creditors - verification by assessing officer - Whether the unsecured loans shown in the balance sheet could be treated as unexplained cash credits and added to the assessee's income, and the extent to which the matter required fresh verification by the AO. - HELD THAT: - The Tribunal recorded that the primary onus to prove unsecured loans - by establishing the identity and capacity of the loan creditors and the genuineness of the transactions - lay on the assessee and that the assessee had failed to discharge that onus during assessment proceedings. The Tribunal also noted that the AO had carried out enquiries in respect of certain creditors only and that substantial loan amounts represented opening balances which could not be treated as income of the year. Balancing these facts and submissions about opportunity to explain, the Tribunal held that the opening balance portion could not be added in the year under consideration and that the remaining loan amount required fresh opportunity and verification by the AO to enable the assessee to establish identity, capacity and genuineness of the loans. [Paras 5]

Opening balance portion of the unsecured loans shall not be treated as unexplained cash credit in the year under consideration; the AO is directed to verify afresh the remaining loan amount of Rs. 4,10,05,680/- after giving the assessee one more opportunity to prove identity, capacity and genuineness of the concerned creditors and transactions.

Application of income where charitable registration is effective - registration under section 12AA - Whether the finance cost claimed as part of Capital Work-in-Progress is disallowable where the assessee society has been granted registration under section 12AA. - HELD THAT: - The Tribunal noted that the assessee society was granted registration under section 12AA w.e.f. A.Y. 2012-13 and that finance cost paid on loans utilised for charitable purpose is an application of income. In view of effective registration, the Tribunal held that the finance cost could not be disallowed as revenue expenditure merely on the ground that it was reflected under Capital Work-in-Progress; the AO was directed to verify the claim and grant appropriate relief. [Paras 7]

The disallowance of the finance cost is set aside and the AO is directed to verify the claim and allow appropriate relief in favour of the assessee.

Disallowance under section 40A(3) in computation of income under section 11 - application of Tribunal precedent in favour of registered charitable societies - Whether the disallowance made under section 40A(3) is sustainable while determining income under section 11 of a society registered under section 12AA. - HELD THAT: - Relying on consistent decisions of the Tribunal, including a decision of the Hyderabad Bench, the Tribunal held that no disallowance under section 40A(3) can be made in computing income under section 11 where the assessee is registered under section 12AA. Applying that principle, and noting that the society is now registered, the Tribunal deleted the disallowance confirmed by the lower authorities. [Paras 8]

The disallowance under section 40A(3) is deleted and the ground is allowed in favour of the assessee.

Final Conclusion: The Revenue appeal is partly allowed in respect of the unsecured loans issue, which is remanded to the AO for fresh verification of the specified loan amount after affording opportunity to the assessee; the assessee's cross-objections concerning the finance cost and the disallowance under section 40A(3) are allowed and the AO is directed to give consequential relief as indicated.

Deletion of addition as bogus loss - client code modification - burden on revenue to bring material evidence - reliance on exchange intelligence/report insufficient without inquiry - transactions accepted by clients and compliance with KYC negate sham allegation

Deletion of addition as bogus loss - client code modification - burden on revenue to bring material evidence - Validity of the addition treated as bogus loss on account of client code modification - HELD THAT: - The Tribunal affirmed the CIT(A)'s deletion of the addition made by the AO treating the loss as bogus on account of client code modification. The AO's action was predicated on information from the Director of Income Tax (I&CR) and the stock exchange report alleging misuse of the client code modification facility, but the AO did not bring material to show the modifications were not genuine nor did he undertake any elementary inquiry to verify the assessee's explanations. The Tribunal applied precedent reasoning that where clients do not disown transactions, have complied with KYC and declared resultant profits or losses in their returns, and where the exchange acknowledges the inevitability of some client code modifications (with penalty mechanisms for discouragement), adverse conclusions based solely on exchange reports and suspicion are unsustainable. In those circumstances the burden on the Revenue to produce independent material to rebut the assessee's case was not discharged and the deletion was justified. [Paras 7, 8]

The addition made on account of alleged bogus loss by client code modification is deleted and the order of the CIT(A) is affirmed.

Final Conclusion: The Revenue's appeal is dismissed and the order of the CIT(A) deleting the addition arising from alleged client code modification is affirmed.

Limitation for completion of block assessment under section 158BE of the Income tax Act - conclusion of search for limitation purposes - relevance of successive panchnama entries and inventories to determine date of search conclusion - seized material as basis for additions in block assessment - onus on the assessee to explain seized documents and discharge evidentiary burden - assessment validity where AO acts with prior approval of superior authority - dismissal of revenue appeal on account of low tax effect (CBDT instruction)

Limitation for completion of block assessment under section 158BE of the Income tax Act - conclusion of search for limitation purposes - relevance of successive panchnama entries and inventories to determine date of search conclusion - Whether the assessment framed on 25.7.2001 under the block assessment provisions was barred by limitation. - HELD THAT: - The Tribunal examined the three panchnamas dated 23.3.1999, 21.5.1999 and 16.7.1999 placed on record and the inventories annexed thereto. The 3rd panchnama dated 16.7.1999 recorded inventories (credit cards, foreign visit records, mobiles) that were not reflected in the earlier panchnama(s), and various new valuables were inventorised by the search team in July 1999. On that basis the search was held to be validly concluded in July 1999. As limitation under section 158BE runs from the end of the month in which the search is concluded, the two year period expired on 31.7.2001 and the assessment dated 25.7.2001 was within time. The assessee's contention that the search concluded on 23.3.1999 was rejected because the documentary record showed continued restraint/orders and fresh items recorded subsequently, and there was no legal bar to continuation of search activity where new material was discovered. [Paras 8]

Assessment dated 25.7.2001 is not time barred; ground alleging limitation is dismissed and the CIT(A)'s order on this issue is upheld.

Seized material as basis for additions in block assessment - onus on the assessee to explain seized documents and discharge evidentiary burden - treatment of multiple additions founded on search material - Whether the additions made by the AO (and upheld by the CIT(A)) based on seized documents for various heads should be sustained. - HELD THAT: - The Tribunal reviewed the assessment order, the seized material and the appellate order. For each challenged addition the AO confronted the assessee with documentary evidence and issued questionnaires; the assessee either denied ownership/transactions without supporting evidence or remained non cooperative and failed to avail opportunities to explain or produce proofs. Where seized records, balance sheets, cashbooks or inventories linked the assessee to deposits, investments, transfers and profits (e.g., investments in Esam India Ltd., commission income, foreign travel expenditures, bank deposits, repairs/renovation evidence, vehicle ownership, receipts via various concerns, diary entries and documents seized from the ex wife's premises), the Tribunal found the AO's reliance on the seized material reasonable and the CIT(A)'s detailed appellate findings to be justified. Limited relief granted by the CIT(A) where appropriate was noted. The Tribunal concluded that, on the facts and material before it, the assessee failed to discharge the evidentiary onus so as to overturn the additions. [Paras 9]

The additions made by the AO and upheld by the CIT(A) are sustained; the assessee's appeal on these merits is dismissed.

Dismissal of revenue appeal on account of low tax effect (CBDT instruction) - Whether the Revenue's appeal challenging deletion of an addition should be admitted despite tax effect being below threshold. - HELD THAT: - The Tribunal noted the Revenue's challenge related to an addition whose tax effect fell below the threshold prescribed by the CBDT Circular relied upon by the assessee (Circular No.17/2019). The Revenue did not oppose dismissal on that ground. In consequence and in view of the Board's instruction, the Tribunal dismissed the Revenue's appeal for low tax effect. [Paras 11]

Revenue's appeal is dismissed on account of low tax effect; the assessee's cross objection is rendered infructuous and dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s conclusion that the search was validly concluded in July 1999 and that the block assessment dated 25.7.2001 was within limitation; it sustained the multiple additions founded on seized material for lack of satisfactory explanation by the assessee and dismissed the assessee's appeal. The Revenue's appeal was dismissed on account of low tax effect; the cross objection became infructuous and was dismissed. All appeals and the cross objection are dismissed.

Depreciation on computer software as intangible asset - rate of depreciation 60% versus 25% - existence of capitalised software / work-in-progress - addition under section 68 as unexplained cash credit - identity, creditworthiness and genuineness of creditors - precedent of coordinate bench and principle of consistency

Depreciation on computer software as intangible asset - rate of depreciation 60% versus 25% - existence of capitalised software / work-in-progress - precedent of coordinate bench and principle of consistency - Whether the assessee was entitled to claim depreciation on computer software at 60% and whether the capitalised work-in-progress software claimed during the year existed for the purpose of allowing depreciation. - HELD THAT: - The Tribunal examined the nature of the assessee's business, the director's report describing multiple in-house software products and platforms, the opening gross block and work-in-progress figures, and prior appellate and coordinate-bench decisions in the assessee's own case. The coordinate-bench and earlier appellate orders had repeatedly held that computer software is an intangible asset eligible for depreciation at the revised rate of 60%, and those orders were followed by the CIT(A). The AO had neither produced evidence to show the software assets were fictitious nor distinguished the coordinate-bench rulings. Where software was developed in-house, absence of purchase bills was not indicative of non-existence; the assessee maintained books and a fixed-assets schedule showing work-in-progress and capitalization. On these facts and by application of the consistent appellate precedent, the Tribunal found no justification to restrict depreciation to 25% or to treat the capitalised work-in-progress as non-existent, and therefore upheld allowance of depreciation at 60% and deletion of the disallowances. [Paras 9, 10, 11]

Depreciation on the computer software allowed at 60% and disallowances relating to non-existence of capitalised software/work-in-progress deleted; grounds 1-4 and 7 dismissed.

Addition under section 68 as unexplained cash credit - identity, creditworthiness and genuineness of creditors - Whether the sum received on issue of convertible warrants during the year could be treated as unexplained cash credit under section 68 given that identical transactions from the same parties in subsequent years were accepted by the AO. - HELD THAT: - The AO made additions under section 68 after examining bank statements and observing inter-company fund movements, common directors among subscriber companies, and regulatory limits. On appeal, the assessee produced detailed material - PANs, bank statements, audited financials, income-tax returns and confirmations - and the CIT(A) noted that the same subscribers and identical documentary material were examined in subsequent assessment years where the AO accepted their identity, creditworthiness and genuineness and did not make additions. The Tribunal found that the assessee had discharged the initial onus by furnishing the statutory particulars and that the AO had not recorded any adverse finding against the assessee-specific material nor made further enquiry in the year under appeal; acceptance of the same material in later years undermined the addition in the impugned year. The CIT(A)'s deletion was thus upheld. [Paras 16, 17, 18]

Addition under section 68 deleted; grounds 5 and 6 dismissed and the AO's appeal on this issue rejected.

Final Conclusion: The appeal filed by the Department is dismissed: the Tribunal upholds the CIT(A)'s allowance of depreciation on software at 60% and deletion of disallowances relating to alleged non-existent software, and also upholds deletion of the addition made under section 68 in respect of convertible-warrant receipts for AY 2011-12.

Double taxation - accrual of income - real income - association of persons/AOP - taxation in proper hands - application of notional profit rate on contract receipts - onus of verification of books of a distinct legal entity

Double taxation - accrual of income - application of notional profit rate on contract receipts - association of persons/AOP - taxation in proper hands - onus of verification of books of a distinct legal entity - Whether the addition by applying 8% profit on contract receipts in the hands of the JV is sustainable where the lead partner Kiran Infra Engineers Ltd. executed the contract, accounted for and paid tax on the receipts in its books. - HELD THAT: - The Tribunal found on the material on record and the JV agreement that the lead partner KIEL alone executed the contract, incurred the expenses, accounted for the entire contract receipts in its books and paid tax on the resultant profit. The concept of accrual requires that income must have accrued or arisen to the person sought to be taxed; where in reality the receipts and profits belonged to and were declared by KIEL, no income in that real sense accrued to the JV. The AO applied a notional profit rate of 8% to the JV's contract receipts without obtaining or verifying the books of KIEL, and despite the assessee having placed KIEL's audited financials, ITR and cost control account on record. The AO also did not exercise powers to summon KIEL's records (for example under section 131) or make direct enquiries, but drew an adverse inference and treated the receipts as income of the JV. The Tribunal relied on authorities on the principles of accrual and real income and on a coordinate Bench decision where, on identical facts, taxing the JV when receipts were owned and taxed in the constituent's hands was held to be impermissible double taxation. Given that the receipts and profit had been accounted for and taxed in KIEL's hands (accepted under section 143(1)), taxing the same amount in the JV amounted to double taxation contrary to settled principles unless expressly provided by statute. Applying these principles to the facts, the Tribunal concluded that the addition could not be sustained. [Paras 13, 17, 18]

Addition of Rs. 1,18,96,853/- by applying 8% profit on contract receipts in the hands of the JV is deleted; the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal for A.Y. 2010-11, deleted the addition made by applying an 8% profit rate on contract receipts in the hands of the JV and held that taxing the receipts already owned, accounted for and taxed in the hands of the lead partner would amount to impermissible double taxation.

Restoration of company to register under Section 252 of the Companies Act, 2013 - striking off and restoration of company name - directions for compliance and filing of statutory documents on restoration - activation of DINs and defreezing of bank accounts upon restoration - publication of restoration order in the Official Gazette - payment of costs for revival of company pursuant to NCLT order - preservation of Registrar of Companies' power to take action for other violations

Restoration of company to register under Section 252 of the Companies Act, 2013 - striking off and restoration of company name - Application under Section 252 for restoration of the company's name in the register of companies allowed. - HELD THAT: - The Tribunal found that the company, incorporated on 16.07.2007, had failed to file financial statements and annual returns due to inadvertence and not with any deliberate intention. The Registrar of Companies' report recording issuance of notices under the Act and subsequent striking off was considered. The Tribunal accepted the applicant's explanation, noted that the requisite documents were ready and that the company would make good pending statutory compliances upon restoration, and was satisfied that restoration was appropriate in the interest of the company, its shareholders and creditors. Exercising powers under Section 252 and Rule 87-A of the NCLT (Amendment) Rules, 2017 read with the NCLT Rules, 2016, the Tribunal allowed the application to restore the company as if its name had not been struck off. [Paras 10, 12]

Application CA No. 265/252/HDB/2020 is allowed and the company's name is ordered to be restored.

Directions for compliance and filing of statutory documents on restoration - Obligation of the applicant/company to file pending statutory documents and forms within the time specified after restoration. - HELD THAT: - As a condition of restoration the Tribunal directed the company to file all statutory documents along with INC-28 and to pay prescribed fees, additional fee and fines as decided by the RoC within thirty days from the date of restoration. This direction follows the Tribunal's reasoning that outstanding compliances are to be regularised promptly once restoration is granted and places personal responsibility on the applicant to ensure compliance of the order.

The company is directed to file all statutory documents with INC-28 and pay applicable fees/fine within 30 days of restoration.

Activation of DINs and defreezing of bank accounts upon restoration - publication of restoration order in the Official Gazette - Obligations of the Registrar of Companies consequential to restoration of the company. - HELD THAT: - The Tribunal ordered the Registrar of Companies to restore the company's status on the register as if the name had not been struck off, to change the company's status to active for e filing, to restore and activate DINs if applicable, and to intimate bankers so as to enable defreezing of bank accounts. Further, upon delivery of a certified copy of this order and after compliance by the company, the RoC was directed to publish the order in the Official Gazette under his office name and seal. These directions are consequential to the restoration and are mandated to give effect to the company's revived status.

RoC (Hyderabad) to restore company status, activate DINs, inform bankers to defreeze accounts and publish the restoration order in the Gazette after compliance.

Payment of costs for revival of company pursuant to NCLT order - Payment of costs as condition for restoration. - HELD THAT: - The Tribunal directed payment of costs of Rs. 60,000 through online payment on the MCA portal under the miscellaneous head, specifying the particulars for payment as cost for revival pursuant to the Tribunal's order in CA No. 265/252/HDB/2020. The condition is imposed as part of the restorative relief granted by the Tribunal.

Restoration is subject to payment of the specified costs by the company.

Preservation of Registrar of Companies' power to take action for other violations - Scope of the restoration order and preservation of RoC's rights. - HELD THAT: - The Tribunal expressly confined its order to violations that led to the striking off and clarified that the restoration does not fetter the Registrar of Companies from taking appropriate actions under law for any other violations or offences committed by the company prior to or during the striking off. This preserves the RoC's statutory powers to proceed on separate or continuing non-compliances.

Order confined to violations leading to striking off; RoC remains free to take lawful action for any other violations.

Final Conclusion: The Tribunal allowed the shareholder's application and ordered restoration of M/s Gavi Metallics Private Limited to the register with consequential directions to the RoC to reactivate corporate status, DINs and notify bankers, subject to the company filing all pending statutory documents (with INC-28) and payment of specified costs within the time directed; the RoC's powers to act on other violations remain unaffected.

Scheme of Arrangement under Sections 230 to 232 of the Companies Act, 2013 - Transfer and vesting by way of demerger - Appointed Date and effectiveness of the scheme - Share entitlement ratio on demerger - Compliance with Regional Director report and accepted undertakings - Dissolution of transferor company without winding up - Filing of certified order with Registrar and stamp duty adjudication

Scheme of Arrangement under Sections 230 to 232 of the Companies Act, 2013 - Transfer and vesting by way of demerger - Sanction of the Scheme of Arrangement between Giftease Technologies Private Limited (Demerged Company) and Cybage Software Private Limited (Resulting Company). - HELD THAT: - The Tribunal, having heard the petitioners and considered the Regional Director's report and the undertakings given by the Petitioner Companies, found the Scheme to be fair and reasonable, not violative of law, and not contrary to public policy or public interest. The material on record, absence of objections and the accepted clarifications and undertakings by the petitioners satisfied the Tribunal that statutory requirements for sanction were fulfilled. Consequently, the court exercised its sanctioning power under the Companies Act and made the petition absolute. [Paras 11, 12, 13, 14, 15]

The Scheme is sanctioned and the petition is made absolute.

Share entitlement ratio on demerger - The share swap / entitlement ratio to be applied upon demerger. - HELD THAT: - The Tribunal recorded the Share Entitlement Ratio as provided in the modified Scheme: eleven equity shares of the Resulting Company of INR 10 each fully paid for every sixteen equity shares of the Demerged Company of INR 10 each fully paid. The Scheme as filed, incorporating this ratio, was accepted and sanctioned by the Tribunal. [Paras 8, 16]

The specified share entitlement ratio is approved and shall be implemented in accordance with the Scheme.

Appointed Date and effectiveness of the scheme - Fixation of the Appointed Date and the date from which the Scheme will be effective. - HELD THAT: - The Tribunal fixed the Appointed Date as the opening hours of business on 1st April 2019, as defined in the Scheme, and declared that the Scheme shall be effective from that Appointed Date. This finding was made after considering the Scheme's definitions and the petitioners' compliance with statutory requirements and clarifications regarding timing. [Paras 6, 11, 16, 17]

The Appointed Date is fixed as the opening hours of business on 1st April 2019 and the Scheme shall be effective from that date.

Compliance with Regional Director report and accepted undertakings - Acceptance of the clarifications and undertakings given in response to the Regional Director's report. - HELD THAT: - The Regional Director raised observations concerning accounting entries, confirmation of Appointed Date, compliance with meeting and notice requirements, identity of filed Scheme versions, statutory filings under section 13, and ROC observations. The petitioners furnished clarifications and undertakings addressing each point, including undertaking to comply with applicable accounting standards, confirming the Appointed Date and compliance with the Ministry's circular, confirmation regarding shareholders' meetings and notices to creditors, confirmation that the Scheme versions are identical, undertaking to file necessary forms under section 13, and proof of service to unsecured creditors. The Tribunal accepted these clarifications and undertakings as resolving the RD's concerns. [Paras 10, 11, 12, 13]

The Tribunal accepted the petitioners' clarifications and undertakings in response to the Regional Director's report.

Dissolution of transferor company without winding up - Dissolution of the Transferor (Demerged) Company consequent to the scheme. - HELD THAT: - Upon sanctioning the Scheme and its coming into effect from the Appointed Date, the Tribunal directed that the Transferor Company be dissolved without winding up, consistent with the transfer and vesting provisions of the Scheme and the corporate reorganisation effected thereby. [Paras 17]

The Transferor Company is to be dissolved without winding up.

Filing of certified order with Registrar and stamp duty adjudication - Directions for post-sanction compliance including filing of certified order with Registrar of Companies and lodging for stamp duty adjudication. - HELD THAT: - The Tribunal directed the Petitioner Companies to file a certified copy of the sanction order along with the Scheme with the concerned Registrar of Companies electronically in e-Form INC-28 within 30 days, and to lodge a certified copy with the Superintendent of Stamps for adjudication of stamp duty within 60 days. The Tribunal further directed that all concerned regulatory authorities act on a certified copy of the order and Scheme. [Paras 18, 19, 20]

Petitioner Companies must file the certified order and Scheme with the ROC and lodge for stamp duty adjudication within the prescribed timelines; regulatory authorities to act on certified copy.

Final Conclusion: The Tribunal sanctioned the Scheme of Arrangement between Giftease Technologies Private Limited and Cybage Software Private Limited, fixed the Appointed Date as 1st April 2019, approved the share entitlement ratio as in the Scheme, accepted the petitioners' undertakings addressing the Regional Director's observations, directed dissolution of the Transferor Company without winding up, and ordered requisite filings with the Registrar of Companies and for stamp duty adjudication.

Dispensation of meetings of shareholders and creditors under Section 230 - Amalgamation of wholly owned subsidiary into its holding company - Notice to Regional Director, Registrar of Companies and Income Tax Authority under Section 230(5) - Service on Official Liquidator and presumption of no objection on non-receipt - Effect of scheme on shareholders' and creditors' rights - Filing of compliance report in lieu of affidavit owing to COVID-19 lockdown

Dispensation of meetings of shareholders and creditors under Section 230 - Amalgamation of wholly owned subsidiary into its holding company - Effect of scheme on shareholders' and creditors' rights - Dispensation of convening and holding meetings of the equity shareholders and unsecured creditors of the Transferor Company and non-requirement of meetings of certain classes of members of the Transferee Company. - HELD THAT: - The Tribunal accepted the application for the first stage dispensation of meetings in respect of the Transferor Company and held that, as the Transferor is a wholly owned subsidiary of the Transferee Company, all equity shareholders of the Transferor have given consent by affidavit and there are no secured creditors. The Transferee Company's equity and preference shareholders have also given consent. The Tribunal recorded that the scheme does not affect the rights of creditors or shareholders because no consideration shares are to be issued and the Transferee's assets and net worth will be sufficient to discharge claims. On these findings the convening and holding of meetings of the Transferor Company's equity shareholders and unsecured creditors was dispensed with.

Application allowed and meetings of the Equity Shareholders and Unsecured Creditors of the Transferor Company dispensed with.

Notice to Regional Director, Registrar of Companies and Income Tax Authority under Section 230(5) - Service on Official Liquidator and presumption of no objection on non-receipt - Directions for service of the application and scheme on regulatory authorities and the Official Liquidator and the consequence of no response within thirty days. - HELD THAT: - The Tribunal directed the Applicant Companies to serve the application and a copy of the proposed scheme on the Regional Director (Western Region), Registrar of Companies, and the Income Tax Authority within whose jurisdiction the companies are assessed, in accordance with the statutory procedure. It further directed service on the Official Liquidator. The Tribunal specified that if no response or representation is received from these authorities within thirty days of receipt of the notice, it will be presumed that they have no objection to the scheme. These directions implement the procedural requirement of notifying statutory authorities and set a thirty-day presumption period for non-receipt of objections.

Applicants to serve statutory authorities and Official Liquidator; absence of response within 30 days to be treated as no objection.

Filing of compliance report in lieu of affidavit due to COVID-19 lockdown - Relaxation of the mode of filing the compliance affidavit of service and related documents owing to the COVID-19 lockdown. - HELD THAT: - In view of the prevailing COVID-19 pandemic and attendant lockdown measures, the Tribunal dispensed with the customary affidavit of service and directed that the Applicant Companies shall file a compliance report in the Registry at least seven days before the date fixed for holding any meetings. This direction is procedural and tailored to the prevailing public-health restrictions while ensuring that the registry receives evidence of compliance prior to any further stage.

Applicants to file a compliance report in lieu of the customary affidavit of service not less than seven days before the meeting date.

Final Conclusion: The application for first-stage dispensation of meetings in the proposed amalgamation of the wholly owned subsidiary into its holding company is allowed; meetings of the Transferor Company's equity shareholders and unsecured creditors are dispensed with, statutory authorities and the Official Liquidator are to be served and given thirty days to respond, and a compliance report (in lieu of affidavit) is to be filed due to COVID-19.

Restoration of company name to register under Section 252(3) of the Companies Act, 2013 - strike off for non filing of financial statements and annual returns - reactivation of Director Identification Number (DIN) - filing of outstanding statutory documents with prescribed fees and additional fees - direction to intimate bankers to defreeze accounts - undertaking as to non use of company accounts for tainted money during demonetization - power of Registrar to proceed for late filing despite restoration

Restoration of company name to register under Section 252(3) of the Companies Act, 2013 - strike off for non filing of financial statements and annual returns - Restoration of the appellant company's name in the Register of Companies under Section 252(3). - HELD THAT: - The Tribunal, having considered the appellant's explanation that the company was carrying on business and that non filing resulted from inadvertence and clerical oversight, and after perusal of the appellant's statutory records and the ROC report, held that it would be just and equitable to restore the name. The Tribunal applied the test in Section 252(3) that restoration may be ordered if the company was carrying on business or in operation at the time of strike off or if justice requires restoration, and concluded restoration appropriate on the stated grounds. [Paras 11, 12]

Allowed; Registrar directed to restore the company's name as if it had not been struck off.

Reactivation of Director Identification Number (DIN) - direction to intimate bankers to defreeze accounts - Whether the Registrar should be directed to re activate the DINs of the company's directors and to inform bankers so that company accounts may be defrozen. - HELD THAT: - On restoration the Tribunal directed consequential actions necessary to place the company in the position it would have occupied had its name not been struck off. Those consequential actions include re activation of DINs and change of company status from 'Strike off' to 'Active' for e filing, together with an instruction to the Registrar to intimate bankers to enable defreezing of accounts, thereby restoring the company's formal operational capacity. [Paras 12]

Registrar directed to re activate DINs and to intimate bankers to defreeze accounts upon restoration.

Filing of outstanding statutory documents with prescribed fees and additional fees - Requirement for the appellant company to file outstanding Financial Statements and Annual Returns and payment of prescribed fees/additional fees as condition of restoration. - HELD THAT: - The Tribunal accepted the appellant's offer to file all outstanding statutory documents and made such filing a condition of restoration. The appellant is directed to submit the Financial Statements and Annual Returns (noted in the appeal as for Financial Years ending 31.03.2017 to 31.03.2020) together with prescribed fees/additional fee/fine as decided by the Registrar within 30 days from restoration. This ensures statutory compliance is completed as a precondition to full effect of restoration. [Paras 5, 12]

Appellant to file outstanding documents with prescribed/additional fees within 30 days of restoration.

Undertaking as to non use of company accounts for tainted money during demonetization - filing conditions and costs for restoration - Imposition of ancillary conditions as part of restoration: undertaking regarding demonetization and payment of costs to PM CARES FUND. - HELD THAT: - The Tribunal imposed specific ancillary conditions as just and equitable measures attendant to restoration. The shareholders/directors must jointly submit an undertaking that the company accounts were not used to transact tainted money during demonetization. Further, the appellant is directed to pay the costs ordered to the PM CARES FUND and furnish proof to the Registrar within three weeks when submitting documents; failure to comply will cause the order to lapse. These conditions were treated as part of equitable relief granted. [Paras 12]

Undertaking and payment to PM CARES FUND ordered as conditions precedent to the continued effect of restoration; non compliance will lapse the order.

Restriction on alienation of assets pending compliance - publication of restoration order in Official Gazette - power of Registrar to proceed for late filing despite restoration - Whether the Tribunal should impose restrictions on disposition of assets pending compliance, order publication of restoration, and whether restoration precludes action for earlier non compliance. - HELD THAT: - The Tribunal directed that until all compliances are made the company shall not alienate or dispose of valuable assets, ensuring assets remain available to satisfy any future liabilities. It further ordered the Registrar to publish the restoration order in the Official Gazette after compliance. The Tribunal expressly preserved the Registrar's statutory power to proceed against the company and its directors for alleged late filings and other non compliances under the Act, clarifying that restoration does not confer immunity from enforcement for prior breaches. [Paras 12]

Asset disposal prohibited pending compliance; Registrar to publish restoration; Registrar's power to proceed for prior non compliances preserved.

Final Conclusion: Appeal allowed on equitable terms: the Tribunal ordered restoration of the company's name and directed consequential actions including re activation of DINs and banker intimation, subject to filing of outstanding statutory documents with prescribed/additional fees within 30 days, submission of a demonetization undertaking, payment of directed costs to PM CARES FUND, prohibition on alienation pending compliance, publication of the restoration order, and without prejudice to the Registrar's power to proceed for earlier defaults.

Restoration of struck off company under Section 252 - striking off under Section 248 - carrying on business or in operation as test for restoration - dormant company status under Section 455 - judicial restraint on 'or otherwise' power in restoration

Restoration of struck off company under Section 252 - carrying on business or in operation as test for restoration - judicial restraint on 'or otherwise' power in restoration - Whether the Tribunal should restore the name of the Appellant Company struck off by the Registrar of Companies. - HELD THAT: - The Tribunal applied the principle that restoration under Section 252 is permissible only if the Tribunal is satisfied that the company was carrying on business or in operation at the time of striking off, or that restoration would be just in the circumstances. Reliance was placed on the decision of the NCLAT which held that the phrase "or otherwise" cannot be read to permit arbitrary restoration where there is a specific finding that the company was not in operation or carrying on business. The RoC's report and the material placed on record (nil revenue in balance sheets, nil income tax returns and insignificant bank entries) were found to indicate that the company was not carrying on business and did not qualify for restoration. The Bench therefore declined to exercise the restorative power in favour of the appellant, upholding the striking off action under Section 248. [Paras 10, 11]

Appeal dismissed; striking off by the Registrar of Companies under Section 248 upheld and restoration refused.

Final Conclusion: The Tribunal refused to restore the appellant company's name to the register, upholding the RoC's action of striking off the company's name for failure to carry on business and comply with statutory filings; the appeal is dismissed.

Restoration of name under Section 252(3) of the Companies Act, 2013 - Strike off from the register of companies - Going concern - Power of the Tribunal to restore struck off companies - Directions and conditions for restoration including filing of statutory documents and payment of costs

Restoration of name under Section 252(3) of the Companies Act, 2013 - Going concern - Strike off from the register of companies - The company was carrying on business/is a going concern and its name should be restored to the register of companies. - HELD THAT: - The Tribunal examined the material on record including provisional balance sheets and provisional income-tax returns filed by the applicants for financial years 2017-18 and 2018-19, the audited balance sheet as at 31.03.2017 and the ROC report. The provisional profit and loss statements showed revenue from operations for 2017-18 and 2018-19 and the balance sheet as at 31.03.2017 recorded assets and revenue, which the Tribunal found indicative that the company was in existence and operating as a going concern. The Tribunal noted that the applicants complied with requirements pointed out by the ROC and applied the test in Section 252(3) to conclude that it was just to restore the company's name to the register. [Paras 5, 6, 7]

The Tribunal allowed restoration of the company's name on the ground that the company was in existence and operating as a going concern.

Directions and conditions for restoration including filing of statutory documents and payment of costs - Power of the Tribunal to restore struck off companies - Restoration is ordered subject to specified compliance conditions and directions to ROC and the company. - HELD THAT: - Exercising powers under Section 252 and relevant rules, the Tribunal directed the Registrar of Companies to restore the company's status to active and take consequential actions (including reactivation of DINs and informing bankers). The Tribunal imposed conditions on the company to file all statutory documents with prescribed fees/additional fees/fines within 30 days of restoration, required personal assurance of compliance by the company's representative, and directed payment of a specified cost to the MCA. The Tribunal also permitted delivery of a certified copy of the order for publication in the Official Gazette and clarified that the order is confined to violations that led to striking off and does not preclude ROC from taking lawful action for other violations. [Paras 8]

Restoration was ordered with directions that the company file outstanding statutory documents within 30 days, pay costs and comply with other specified steps; ROC to publish the order and may take further action for other violations if necessary.

Final Conclusion: The Tribunal allowed the application and ordered restoration of M/s. SRM Urban Infrastructure India Private Limited to the register of companies as an active company, subject to specified compliance conditions, payment of costs and consequential actions by the Registrar of Companies, Hyderabad; the order does not prevent ROC from taking any other lawful action for unrelated violations.

Scheme of Amalgamation - convening meetings under Section 230-232 - dispensation of meeting of shareholders - appointment of chairperson and scrutinizer for convened meetings - notice and service requirements for meetings and statutory authorities - e-voting and proxy procedures for creditor and shareholder meetings - prima facie satisfaction of statutory requirements for sanctioning scheme

Scheme of Amalgamation - convening meetings under Section 230-232 - appointment of chairperson and scrutinizer for convened meetings - Convening meetings of shareholders and unsecured creditors of the Transferor Company and appointment of Chairperson and Scrutinizer for those meetings. - HELD THAT: - The Tribunal considered the joint application under the Companies Act seeking directions to convene meetings in relation to the proposed Scheme of Amalgamation. The Tribunal recorded that the proposed scheme prima facie satisfied the fundamental requirements for sanction subject to the Tribunal's approval and that the Applicant Companies had followed the statutory provisions and rules. Consequently, the Tribunal directed that meetings of the shareholders and unsecured creditors of the Transferor Company be convened on the specified date and platform, fixed the quorum for those meetings, and appointed a Chairperson and a Scrutinizer with specified fees to preside over and supervise the conduct of those meetings. The directions include publication and service of notices and requirements for the Chairperson to file an affidavit reporting compliance and to report the conclusion of the meetings in accordance with the Rules. [Paras 11, 12]

Meetings of shareholders and unsecured creditors of the Transferor Company are ordered to be convened; Chairperson and Scrutinizer are appointed; procedural directions for notice, quorum, e-voting/proxy and compliance reporting are issued.

Dispensation of meeting of shareholders - convening meetings under Section 230-232 - appointment of chairperson and scrutinizer for convened meetings - Dispensation of the meeting of shareholders of the Transferee Company and convening of meetings of its secured and unsecured creditors, together with appointment of Chairperson and Scrutinizer. - HELD THAT: - The Tribunal accepted the Applicants' submission that all shareholders of the Transferee Company had given their consent by sworn affidavits and that, on a prima facie consideration, dispensing with the shareholders' meeting would not prejudice any aggrieved party from approaching the Tribunal at the final stage. Accordingly, the Tribunal dispensed with convening the meeting of shareholders of the Transferee Company, directed convening of meetings of its secured and unsecured creditors on the specified date and platform, fixed the quorum for those meetings, and appointed a Chairperson and a Scrutinizer with specified fees for the conduct and supervision of those creditor meetings. [Paras 11, 12]

Meeting of shareholders of the Transferee Company dispensed with; meetings of secured and unsecured creditors to be convened; Chairperson and Scrutinizer appointed; procedural directions given.

Notice and service requirements for meetings and statutory authorities - publication of notice - service on Regional Director, Registrar and Income Tax Authority - service on Reserve Bank of India - e-voting and proxy procedures - Directions regarding publication and service of notices, service upon statutory authorities, voting method, and reporting by the Chairpersons. - HELD THAT: - The Tribunal issued detailed procedural directions to ensure statutory compliance for the convened meetings: publication of notices in specified newspapers; issuance of notices to shareholders and creditors by registered/speed post, courier, air mail, email or hand delivery at least one month prior in the prescribed Form; service of notice on the Regional Director, Registrar of Companies and the Income Tax Authority with prescribed presumptions if no response is received within 30 days; and service upon the Reserve Bank of India. The Tribunal directed voting to be by e-voting or by person/proxy/authorized representative with filing of proxies in the prescribed form 48 hours prior, and required the appointed Chairpersons to file affidavits at least seven days before the meeting reporting compliance and to report the conclusion of the meetings under the Rules. [Paras 12]

Publication and service of notices, service upon statutory authorities, e-voting/proxy arrangements, and compliance reporting by Chairpersons are directed in accordance with the Companies (Compromises, Arrangements and Amalgamations) Rules.

Final Conclusion: The Tribunal allowed the first-stage joint application, directed convening of meetings for the Transferor Company's shareholders and unsecured creditors, dispensed with the Transferee Company's shareholders' meeting while directing meetings of its secured and unsecured creditors, appointed Chairpersons and Scrutinizers, and issued procedural directions regarding notice, service on statutory authorities, voting, publication and compliance reporting to facilitate consideration of the proposed Scheme of Amalgamation.

Scheme of Amalgamation - Dispensation of meetings of equity shareholders and creditors - Consent affidavits waiving right to convene meetings - Compliance with Accounting Standards under Section 133 - Statutory notice to authorities under subsection (5) of section 230 - Approval of scheme by Tribunal

Dispensation of meetings of equity shareholders and creditors - Consent affidavits waiving right to convene meetings - Dispensation of meetings of equity shareholders of all Applicant Companies and dispensation/acceptance of creditor consents as a basis for not convening meetings - HELD THAT: - The Tribunal considered the individual consent affidavits filed by all equity shareholders of each applicant company and the affidavits of unsecured and secured creditors where applicable. On the produced consents and attendant certificates, the Tribunal accepted that the equity shareholders of each Applicant Company had given written consent approving the Scheme and waived their right to convene and hold meetings. Where unsecured and secured creditors had provided affidavits consenting to the Scheme, those consents were treated as valid for dispensing with creditor meetings. In view of these consents and the accompanying certifications, the Tribunal dispensed with convening the meetings of equity shareholders of all four Applicant Companies and treated the creditor consents as satisfying the statutory requirement to consider the Scheme without holding separate meetings. [Paras 14, 15, 16, 18, 19]

Meetings of equity shareholders of all Applicant Companies are dispensed with and creditor consents accepted in lieu of convening meetings.

Statutory notice to authorities under subsection (5) of section 230 - Requirement to send notices to specified statutory authorities and time for representations - HELD THAT: - The Tribunal directed compliance with subsection (5) of section 230 and Rule 8 of the Companies (CAA) Rules, 2016 by sending Form CAA.3 along with the Scheme, explanatory statement and requisite disclosures to the Regional Director (North Western Region), Registrar of Companies, concerned Income Tax Authorities and the Official Liquidator (where applicable). The Tribunal specified that these authorities shall have 30 days from receipt of such notice to make representations to the Tribunal, failing which it shall be presumed they have no objection. [Paras 17]

Applicants to send statutory notices to the specified authorities and any representations must be filed within 30 days of receipt of notice.

Compliance with Accounting Standards under Section 133 - Accounting treatment in the Scheme found to be in conformity with prescribed Accounting Standards - HELD THAT: - The Tribunal noted production of certificates dated 30.10.2020 for the Transferor Companies and 04.11.2020 for the Transferee Company, issued under Section 133 by the auditors certifying that the accounting treatment specified in the Scheme conforms with the Accounting Standards prescribed by the Central Government. On the basis of these certificates, the Tribunal accepted that the specified accounting treatment conforms with the applicable standards. [Paras 9]

Accounting treatment in the Scheme is in conformity with the prescribed Accounting Standards as certified by the auditors.

Approval of scheme by Tribunal - Final disposal of the company application allowing the Scheme of Amalgamation - HELD THAT: - Having considered the Scheme, the consent affidavits of equity shareholders and creditors where applicable, the auditors' certificates and the absence of pending investigations or winding up petitions against the Applicant Companies as stated in the application, the Tribunal found the prerequisites for sanctioning the Scheme to be met. The Tribunal recorded that consents and certificates were in order and, accordingly, allowed the company application. [Paras 10, 11, 18, 19]

Company Application is allowed and disposed of; the Scheme of Amalgamation is sanctioned in accordance with the order.

Final Conclusion: The Tribunal, having accepted auditors' certificates and the written consents of equity shareholders and applicable creditors, dispensed with convening the meetings and directed statutory notices to specified authorities; the company application sanctioning the Scheme of Amalgamation is allowed and the matter is disposed of.

Binding effect of approved resolution plan - extinguishment of liabilities under a resolution plan - prohibition on initiation of proceedings post-approval of resolution plan - overriding effect of the Insolvency and Bankruptcy Code - duty of an adjudicating officer to decide pleas of immunity under the IBC

Binding effect of approved resolution plan - extinguishment of liabilities under a resolution plan - prohibition on initiation of proceedings post-approval of resolution plan - overriding effect of the Insolvency and Bankruptcy Code - Whether the adjudicating officer could issue a show cause notice and impose penalty on the appellant for alleged contraventions relating to the period prior to the approved resolution plan. - HELD THAT: - The Tribunal held that an approved resolution plan is binding on the corporate debtor and all stakeholders, including government and regulatory authorities, and that the plan's express terms extinguishing financial liabilities and deeming withdrawal or dismissal of prior inquiries preclude initiation of proceedings or imposition of penalty against the appellant in respect of periods prior to the acquisition. The Court relied on the statutory mandate that an approved resolution plan is binding and on the approved resolution plan's provisions which expressly extinguish liabilities (including penalties, contingent or otherwise) and deem prior inquiries and proceedings withdrawn or dismissed. Consistent with the reasoning in authority cited in the judgment, permitting fresh proceedings or penalties against the successful resolution applicant in respect of pre-acquisition periods would undermine the scheme and purpose of an IBC-approved plan. Applying these principles to the facts, the Tribunal concluded that the show cause notice and the adjudication which imposed penalty for contraventions prior to acquisition could not be sustained and set aside the impugned order. [Paras 9, 11, 13, 15, 18]

The impugned order imposing penalty for alleged contraventions during the period prior to the approved resolution plan is quashed, the appeal is allowed.

Duty of an adjudicating officer to decide pleas of immunity under the IBC - Whether the adjudicating officer was justified in declining to address the appellant's contention that proceedings could not be initiated against it after approval of the resolution plan. - HELD THAT: - The Tribunal criticised the adjudicating officer for abstaining from addressing the appellant's contention that the resolution plan precluded initiation of proceedings against the appellant, observing that the adjudicating officer's function under the Adjudication Rules, 1995, includes adjudicating whether the charge can be fastened on the noticee. The adjudicating officer's statement that it was beyond her ambit to comment on whether proceedings should be initiated against the new or erstwhile management was held to be an abdication of quasi-judicial duty. The Tribunal recorded this as a serious procedural lapse and admonished that the matter be noted for administrative consideration by the SEBI Chairman. [Paras 5, 6, 19]

The adjudicating officer erred in declining to decide the plea that the approved resolution plan barred proceedings; that failure was noted as an abdication of duty and administrively remarked upon.

Final Conclusion: The Tribunal held that the approved resolution plan, being binding and extinguishing pre-acquisition liabilities, precluded SEBI from issuing the show cause notice or imposing penalty on the appellant for the period from 2013 to 2014; the impugned order is quashed and the appeal allowed, while recording objection to the adjudicating officer's failure to decide the immunity plea.

Expulsion from membership - declaration as defaulter - misuse of client assets - failure to fulfil investor obligations - repeat violator - inspections and compliance lapses - claims and investor complaints - opportunity to rectify and surrender of license

Misuse of client assets - inspections and compliance lapses - failure to fulfil investor obligations - repeat violator - Validity of the expulsion of the appellant from the Exchange and its declaration as a defaulter based on inspection findings and past disciplinary history. - HELD THAT: - The Tribunal accepted the inspection findings and admissions of the appellant that established repeated and serious compliance breaches over multiple years, including misuse of client funds and securities, unreconciled balances, operating without required certification, and erosion of net worth. The Exchange's Committee recorded that the appellant remained unable to discharge its financial obligations to investors and was a repeat violator with prior penalties and suspension. Although time was granted to rectify and to settle investor complaints, material complaints remained outstanding and additional claims were received during proceedings. Given the continued violations, admitted lapses, prior disciplinary measures, and unresolved investor claims, the Tribunal found no reason to interfere with the Committee's conclusion that continuation of the appellant's membership would threaten the Exchange and investor interests. [Paras 4, 9, 10, 11, 13]

The expulsion and declaration of the appellant as a defaulter were upheld and the order of the Exchange was not interfered with.

Claims and investor complaints - opportunity to rectify and surrender of license - Whether the appellant's plea that it was resolving complaints, intended to surrender its licence, and that amounts held by another exchange would satisfy claims justified setting aside the expulsion. - HELD THAT: - The Tribunal noted that the appellant had repeatedly been granted time to redress investor complaints and had admitted the underlying violations; nonetheless material complaints remained unresolved as found by the Committee. The claim that funds were due from the other exchange was raised belatedly and was not shown to have been relied upon before the Committee. Further complaints were filed during pendency of proceedings. In these circumstances, the Tribunal found the appellant's contentions insufficient to vitiate the Committee's conclusion that the appellant could not fulfil obligations and that continued membership posed a risk. [Paras 7, 8, 12, 13]

The plea to allow time for surrender of licence or to await realization of amounts from the other exchange did not warrant interference; the appeal was dismissed.

Final Conclusion: The appeal is dismissed; the Exchange's order expelling the appellant and declaring it a defaulter is upheld in view of admitted and established misuse of client assets, recurrent compliance failures, unresolved investor claims and the appellant's status as a repeat violator.

Service of notice under Section 8(1) of IBC, 2016 - Requirement of Form-3 and Form-4 under Rule 5 (Application to Adjudicating Authority) Rules, 2016 - Admissibility of application under Section 9 of IBC, 2016 - Pre-existing dispute - Incurable procedural defect

Service of notice under Section 8(1) of IBC, 2016 - Requirement of Form-3 and Form-4 under Rule 5 (Application to Adjudicating Authority) Rules, 2016 - Incurable procedural defect - Admissibility of application under Section 9 of IBC, 2016 - Non-compliance with the prescribed form and contents of notice under Section 8(1) read with Rule 5, and its effect on admitability of the Section 9 application. - HELD THAT: - The Tribunal held that compliance with the statutory requirement of delivering a notice in the prescribed form (Form-3 or Form-4 as envisaged by Rule 5) is crucial to Section 8 proceedings so that a Corporate Debtor is furnished with all relevant information and supporting documents and is thereby enabled to raise any dispute within the 10-day period. The notice produced in the present case did not contain the prescribed details nor were the requisite documents attached. In view of established precedent from coordinate benches and the NCLAT emphasizing the necessity of the prescribed forms and contents, the defect was treated as not merely technical but as fatal to the maintainability of the petition. Consequently, the application under Section 9 could not be admitted and dismissal was warranted on account of this incurable procedural non-compliance. [Paras 6]

The application under Section 9 is dismissed for failure to serve a notice in the prescribed form and with the requisite contents/documents, the defect being held incurable.

Final Conclusion: The petition to initiate CIRP is dismissed and the company petition is disposed of for non-compliance with the mandatory notice requirements under Section 8 read with Rule 5; the defect is held incurable.

Asset of the corporate debtor - No Lien Account - asset under Section 18(f) of the Insolvency and Bankruptcy Code, 2016 - banker's lien - powers and duties of the Resolution Professional in CIRP

Asset of the corporate debtor - No Lien Account - asset under Section 18(f) of the Insolvency and Bankruptcy Code, 2016 - Whether the amount of Rs. 1,00,00,000 kept in the 'No Lien Account' by the bank is an asset of the corporate debtor and liable to be released for the purposes of the CIRP and dealt with by the Resolution Professional. - HELD THAT: - The Tribunal found that the corporate debtor furnished the cheque and specifically requested that the proceeds be kept in a 'No Lien Account' and be adjusted only upon approval of the one-time settlement, with no adjustment towards interest or principal until then. The respondent bank, prior to initiation of CIRP, did not adjust the amount against the loan account but retained it in a separate 'No Lien Account' as instructed, thereby accepting the restrictions placed on use of the funds. On initiation of CIRP, money kept in that separate account in accordance with the corporate debtor's instruction was held to be an asset of the corporate debtor. Consequently, the Resolution Professional is entitled to deal with the amount in the manner prescribed by the Insolvency and Bankruptcy Code, 2016. The Tribunal's conclusion rests on the factual finding that the bank kept the sum separately and did not treat it as its own asset prior to CIRP, and therefore the funds fall within the ambit of assets to be administered in the CIRP. The Tribunal did not accept the bank's contention that title had passed to the bank or that the amount was never the corporate debtor's asset where the bank itself had held the funds in a segregated account as per the corporate debtor's instructions and had not adjusted them against the loan. [Paras 11, 12, 13]

Application allowed; amount in the 'No Lien Account' is held to be an asset of the corporate debtor and the Resolution Professional is entitled to deal with and have the same released for the purposes of the CIRP; application disposed of with no order as to costs.

Final Conclusion: The Tribunal directed release of the amount lying in the 'No Lien Account' for the purposes of the CIRP, holding that the segregated funds constituted an asset of the corporate debtor to be dealt with by the Resolution Professional; the application is allowed and disposed of with no order as to costs.

Admissibility of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Establishment of default and undisputed debt - Service and compliance with Section 8 and Section 9(3)(b) - Completeness of application under Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Limitation and timeliness of Section 9 application - Jurisdiction of Adjudicating Authority based on registered office - Admission and appointment of Interim Resolution Professional - Imposition of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Direction to deposit funds to meet IRP expenses

Admissibility of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Establishment of default and undisputed debt - The Section 9 application is admissible on the ground that default has occurred and the debt is due and payable, and the claim remained uncontroverted. - HELD THAT: - The Tribunal examined the applicant's invoices, ledger entries and correspondence evidencing supply of transportation services and non-payment. The demand notice under Section 8 was sent and served. The corporate debtor did not controvert the claim in these proceedings; further, the corporate debtor's own Section 10 application recorded admission of the applicant's claim. On the basis of these documents and uncontested position of the corporate debtor, the Tribunal concluded that default is established and the admitted amount is outstanding and unpaid, thereby warranting admission of the Section 9 application. [Paras 6, 7, 8, 9, 14]

Section 9 application is admitted as default and a due, unpaid and uncontroverted debt has been established.

Limitation and timeliness of Section 9 application - The application was filed within the period of limitation and is not time-barred. - HELD THAT: - The Tribunal noted the date of default as 06.03.2019 and the filing date of the present application as 16.03.2020, and concluded that the application falls within the permissible limitation period for initiating proceedings under the Code. [Paras 10]

Application is not barred by limitation and is timely filed.

Jurisdiction of Adjudicating Authority based on registered office - This Tribunal has jurisdiction to entertain the application as the registered office of the corporate debtor is situated within its territorial limits. - HELD THAT: - The Tribunal relied on the registered office address of the corporate debtor in Delhi to conclude that the Adjudicating Authority (this Tribunal) has territorial jurisdiction to entertain and try the Section 9 application. [Paras 11]

Tribunal has jurisdiction to entertain the application.

Service and compliance with Section 8 and Section 9(3)(b) - Completeness of application under Rule 6 - The application complies with the statutory requirements of Section 9(3)(b) and the prescribed format under Rule 6 and is complete for adjudication. - HELD THAT: - The record shows that the demand notice under Section 8 was issued and served, and the applicant filed the requisite affidavit in compliance with Section 9(3)(b). The application was made in the proforma prescribed by Rule 6 of the Rules and the Tribunal found the filing to be complete for the purposes of admission. [Paras 6, 7, 12, 13]

Application is in compliance with Section 9(3)(b) and Rule 6 and is complete.

Admission and appointment of Interim Resolution Professional - On admission of the Section 9 application, the Tribunal appointed an Interim Resolution Professional (IRP). - HELD THAT: - Having admitted the application, the Tribunal observed that the applicant had not proposed an IRP and therefore appointed Mr. Rajesh Ramnani as Interim Resolution Professional, subject to the condition that no disciplinary proceedings are pending against him. The IRP was directed to submit consent and disclosures as mandated under the IBBI Regulations within one week. [Paras 15]

Mr. Rajesh Ramnani is appointed as Interim Resolution Professional, subject to compliance with consent and disclosure requirements.

Imposition of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Moratorium under Section 14(1) of the Code is imposed on the corporate debtor consequent to admission of the application. - HELD THAT: - The Tribunal directed that upon admission under Section 9(5), the moratorium as envisaged under Section 14(1) shall follow in relation to the corporate debtor, with applicable provisions of Sections 14(2) to 14(4) operating during the moratorium period. [Paras 16]

Moratorium under Section 14 is imposed upon the corporate debtor.

Direction to deposit funds to meet IRP expenses - The applicant is directed to deposit a specified sum with the IRP to meet out expenses and enable performance of his functions. - HELD THAT: - To enable the Interim Resolution Professional to undertake his functions and meet initial expenses, the Tribunal directed the applicant to deposit the directed sum with the IRP within one week of receipt of the order; the amount is to be accounted for by the IRP and is subject to adjustment by the Committee of Creditors. [Paras 17]

Applicant must deposit the directed sum with the IRP within the prescribed time for meeting IRP expenses.

Final Conclusion: The Section 9 application was admitted: the Tribunal found default and an undisputed debt, held the application to be timely, complete and within its jurisdiction, appointed an Interim Resolution Professional subject to consent and disclosures, imposed the moratorium under Section 14, and directed the applicant to deposit funds to meet initial IRP expenses.

Sale of corporate debtor as a going concern - dissolution under section 54 of the Insolvency and Bankruptcy Code - sale of assets versus sale of the corporate debtor - vires of subordinate/delegated legislation (ultra vires doctrine) - regulatory power of the Insolvency and Bankruptcy Board of India under section 240 and functions under section 196 - scope of liquidator's powers under section 35 of the Code - competence of Tribunal to test subordinate legislation

Sale of corporate debtor as a going concern - dissolution under section 54 of the Insolvency and Bankruptcy Code - sale of assets versus sale of the corporate debtor - Closure of the liquidation process without dissolving the corporate debtor where the corporate debtor is sold as a going concern is not permissible. - HELD THAT: - The Tribunal held that Section 54 of the Code mandates dissolution of the corporate debtor once its assets have been completely liquidated and that subordinate regulations cannot be read so as to displace this statutory mandate. The Regulations which provide for filing an application for closure of the liquidation process where the corporate debtor is sold as a going concern (Regulation 45(3)(a) read with Regulation 32A and CIRP Regulation 39C) cannot be construed to dispense with the dissolution requirement under Section 54. A company, being a juridical person with perpetual succession, cannot be sold in place of dissolution; what the Code contemplates is liquidation of assets (including sale of assets or business as a going concern), not alienation of the corporate debtor itself. The liquidator's powers under Section 35 and the IBBI's regulatory powers are confined to the manner of evaluation and sale of assets and cannot be read as authorising closure of liquidation without dissolution of the corporate debtor. [Paras 4, 5, 26, 33, 35]

Application for closure of liquidation process without dissolving the corporate debtor dismissed; liquidator cannot close liquidation circumventing dissolution under Section 54.

Vires of subordinate/delegated legislation (ultra vires doctrine) - regulatory power of the Insolvency and Bankruptcy Board of India under section 240 and functions under section 196 - sale of assets versus sale of the corporate debtor - Regulations (including Regulation 32A of the Liquidation Process Regulations and CIRP Regulation 39C) insofar as they are relied upon to permit sale of the corporate debtor and to permit closure of liquidation without dissolution are not in conformity with the Code and are therefore flawed. - HELD THAT: - The Tribunal analysed Sections 196 and 240 and concluded that IBBI's power to make regulations is to prescribe procedures consistent with and subsidiary to the Code, confined largely to the matters enumerated in Section 240(2) and to carry out provisions of the Code. Delegated legislation cannot supplant or override a clear statutory mandate. The amendments and insertions (Regulation 32A and CIRP Regulation 39C) create a concept of selling the corporate debtor as a going concern and implicitly direct the Adjudicating Authority to permit closure without dissolution - a concept not authorised by any provision of the Code. Where Section 54 contains no provision allowing the Board to prescribe otherwise (no "as specified by the Board" carve out in Section 54), IBBI regulations cannot legitimately dispense with dissolution; to that extent the regulations are ultra vires and inconsistent with the Code. [Paras 25, 29, 30, 31, 33]

Regulatory provisions relied upon to treat the corporate debtor itself as saleable and to enable closure of liquidation without dissolution are flawed and cannot be acted upon.

Competence of Tribunal to test subordinate legislation - vires of subordinate/delegated legislation (ultra vires doctrine) - Tribunal is competent to examine the vires of subordinate/delegated legislation made under the Code. - HELD THAT: - Relying on established precedent, the Tribunal observed that while a Tribunal cannot test the vires of its parent statute, it is competent to test the vires of subordinate or delegated legislation made under that statute. Thus the Adjudicating Authority may examine whether IBBI regulations exceed the regulatory power conferred by the Code or are inconsistent with the statute. [Paras 10, 11]

Adjudicating Authority is competent to enquire into and rule upon the vires of the subordinate regulations impugned in these proceedings.

Final Conclusion: The application for closure of the liquidation process without dissolving the corporate debtor (IA1940/2020) is dismissed as misconceived. Regulations and amendments relied upon to sell the corporate debtor itself and to dispense with dissolution are not in conformity with the Code; the liquidator cannot close liquidation while avoiding the statutory dissolution under Section 54.

Eligibility under Section 29A of the Code - commercial wisdom of the Committee of Creditors and its non-justiciability - inter-se bidding for maximisation of value - maintainability of interlocutory applications during approval of a CoC approved resolution plan

Eligibility under Section 29A of the Code - attesting witness and evidentiary weight - Whether the successful Resolution Applicant (R7) was ineligible under Section 29A of the Code and whether signatures of a common witness established collusion. - HELD THAT: - The Tribunal examined the applicant's allegations and evidence regarding connection between R7 and a CoC member, including that a common person signed as witness on several documents. The counter affidavits showed that the witness (R10) was not an employee of R7 at the time he signed the documents and that signing as an attesting witness does not establish knowledge of contents or an interested connection. The applicant produced no material to show that the successful Resolution Applicant fell within any category of persons ineligible under Section 29A. Absent such proof, the prayer to declare R7 ineligible under Section 29A could not be sustained. [Paras 14, 16, 17]

The request to declare R7 ineligible under Section 29A is negatived for lack of evidence.

Inter-se bidding for maximisation of value - commercial wisdom of the Committee of Creditors and its non-justiciability - Whether the applicant's request to have its earlier (lower) bid of Rs. 27.00 Crores accepted should be granted. - HELD THAT: - The Tribunal held that the Code's objective of maximisation of value supports the CoC's decision to call for inter se bidding and to accept the highest bid. The Applicant itself submitted higher revised bids (including participation in inter se bidding and bids up to Rs. 42.71 Cr) and withdrew only after being outbid. Asking the Adjudicating Authority to direct acceptance of an earlier lower bid would frustrate the maximisation objective and was therefore unreasonable. The Tribunal relied on the primacy of CoC's commercial decision making in such matters. [Paras 18]

The prayer to direct acceptance of the Applicant's earlier Rs. 27.00 Crores offer is rejected.

Maintainability of interlocutory applications during approval of a CoC approved resolution plan - commercial wisdom of the Committee of Creditors and its non-justiciability - Whether the Application (IA) seeking interim reliefs and stay of finalization/approval of the CoC approved resolution plan is maintainable before the Adjudicating Authority at this stage. - HELD THAT: - Relying on settled principles and authority that the commercial wisdom of the CoC is non justiciable at the pre approval stage, and on precedents restricting interlocutory challenges during submission and approval of a CoC approved plan, the Tribunal found that no rights of the applicant are presently affected so as to sustain an IA seeking stay of approval. The CoC had approved the resolution plan by requisite majority and the matter stood for determination under Section 31; interlocutory reliefs challenging the process at this stage are therefore not maintainable before the Adjudicating Authority. [Paras 21, 22, 23]

The IA seeking stay and other interlocutory reliefs is dismissed as not maintainable.

Final Conclusion: The application is dismissed as not maintainable. The Tribunal found no evidence to render the successful Resolution Applicant ineligible under Section 29A, rejected the prayer to direct acceptance of the applicant's earlier lower bid, and refused to stay or otherwise interfere with the CoC approved resolution plan pending its determination under the Code.

Approval of resolution plan under section 31(1) of the Code - compliance with section 30(2) of the Code - Committee of Creditors approval and voting - Regulation 39(4) / Form H compliance - appointment and role of Monitoring Professional - handover of management control to Resolution Applicant - cessation of moratorium upon approval

Approval of resolution plan under section 31(1) of the Code - compliance with section 30(2) of the Code - Committee of Creditors approval and voting - Whether the Resolution Plan dated 26th February, 2020 submitted by M/s Shri Sai Priya Sugars Limited is fit for approval under section 31(1) of the IBC. - HELD THAT: - The Tribunal examined the Resolution Plan, the proceedings of the CIRP and the CoC minutes, and the Compliance Certificate. It found that the plan addresses the requirements of section 30(2) - including payment of insolvency resolution process costs, provision for operational creditors, management and implementation arrangements, and that it does not contravene existing law. The CoC approved the plan with 100% voting share after assessing feasibility and viability, evaluation matrix and funding sources; the RP certified compliance (Form-H) and that no avoidance/section 66 transactions called for action. On these foundations the Tribunal was satisfied about fund infusion, projected cash flows, credentials of the Resolution Applicant and the supervision mechanisms, and concluded that no prejudice would be caused by approval. [Paras 6, 7]

Resolution Plan dated 26th February, 2020 is approved under section 31(1) of the Code and declared binding on the corporate debtor and all stakeholders.

Regulation 39(4) / Form H compliance - appointment and role of Monitoring Professional - Whether the procedural compliances with CIRP Regulations (including filing of Form-H and the plan's provisions for monitoring and supervision) are satisfactory for approval. - HELD THAT: - The RP filed the Compliance Certificate in Form-H under Regulation 39(4) and produced minutes and evaluation records showing adherence to the RFRP, eligibility checks, e-voting procedure and valuation reports. The Resolution Plan provides for appointment of a Monitoring Professional, specifies duties, certification of implementation and a one year implementation period. The Tribunal found these procedural and supervisory arrangements to be in conformity with the Code and CIRP Regulations and adequate for effective implementation and oversight. [Paras 6, 7]

Procedural compliances including Form-H and the plan's monitoring/supervision provisions are satisfactory and accepted.

Cessation of moratorium upon approval - handover of management control to Resolution Applicant - Consequential directions following approval of the Resolution Plan: effect on moratorium, management handover, records and implementation timeframe. - HELD THAT: - On approving the plan the Tribunal directed that the moratorium imposed earlier shall cease from the date of communication of the order. The RP was directed to hand over management control, assets and records on an as is where is basis to the Resolution Applicant and to cease to be the RP. The RP must forward all CIRP and plan records to the Board for inclusion in its database. The Resolution Applicant was directed to obtain any statutory approvals required for implementation within one year from the date of approval (or as allowed by law) and was granted liberty to seek clarifications via miscellaneous applications if needed. [Paras 8]

Moratorium shall cease on communication of the order; management control and records to be handed over to the Resolution Applicant; RP to forward CIRP records to the Board; statutory approvals to be obtained within one year.

Committee of Creditors approval and voting - Whether the CoC's process of considering bids, inviting EOIs, handling a belated EOI and conducting voting complied with CIRP requirements. - HELD THAT: - The record shows the CoC considered eligible resolution plans, invited EOIs in accordance with Form G timelines, rejected a belated EOI (Bilagi Sugar Mills) for non compliance with timelines and Regulation 36A, and proceeded to consider the two timely bids. Voting was conducted in the CoC meeting and through electronic voting kept open as required; the plan secured 100% voting in favour. The Tribunal accepted the CoC's procedural conduct and voting outcome as compliant with the Code and Regulations. [Paras 2, 6, 7]

The CoC's consideration of EOIs, rejection of belated EOI and the voting process were in accordance with the CIRP Regulations; the approval by CoC is valid.

Final Conclusion: The Tribunal approved the Resolution Plan dated 26th February, 2020 submitted by M/s Shri Sai Priya Sugars Limited under section 31(1) of the IBC, directed cessation of the moratorium upon communication of the order, ordered handover of management and records to the Resolution Applicant, required forwarding of CIRP records to the Board, and disposed of the main petition and pending applications with no order as to costs.

Application of mind in taking cognizance - prima facie satisfaction for issuance of process - order of cognizance and issuance of summons - provisional attachment under the PMLA - proceeds of crime - adjudicatory remedy under the PMLA - continuing nature of scheduled offences

Application of mind in taking cognizance - prima facie satisfaction for issuance of process - order of cognizance and issuance of summons - Sunil Bharti Mittal principle on cognizance - Validity of the order of taking cognizance and issuance of summons dated 06.02.2017 in Spl.C.C.No.68/2017 - HELD THAT: - The order of the Presiding Officer recording that 'on perusal there are sufficient materials' was a bald, unreasoned order which does not disclose application of mind to the allegations or specify the offences for which process was issued. In accordance with the principle in Sunil Bharti Mittal, taking cognizance requires the Magistrate to form and record an opinion that the material discloses a prima facie case; the order must state the basis for such satisfaction (though detailed reasons are not required). The impugned order fails this statutory-judicial requirement and is therefore ex facie vitiated. In consequence, the order of cognizance and summons is set aside and the complaint is remitted to the Principal City Civil & Sessions Judge to consider the complaint afresh in accordance with law. [Paras 14, 15, 16]

Order of taking cognizance and issuance of summons dated 06.02.2017 is set aside and the matter is remanded for fresh consideration in accordance with law.

Provisional attachment under the PMLA - proceeds of crime - adjudicatory remedy under the PMLA - continuing nature of scheduled offences - Challenge to registration of ECIR dated 03.12.2016, private complaint dated 31.01.2017, unnumbered original complaint in PAO No.2/2017 dated 26.01.2017, and provisional attachment order No.02/2017 dated 26.01.2017 - HELD THAT: - The court considered whether initiation of proceedings and provisional attachment under the PMLA were unlawful because properties were acquired before the Act or because predicate proceedings had been closed. The court held that prosecution under section 3 of the PMLA targets activities connected with proceeds of crime and does not require prior conviction in a predicate offence; the existence of proceeds of crime is the relevant consideration. The provisional attachment order was passed by an authorized officer who recorded reasons and relied on material, and the PMLA provides for an adjudicatory mechanism under section 8 which the petitioner availed and contested before the Adjudicating Authority. On these grounds, no illegality was established in registration of the ECIR, filing of complaints or in the provisional attachment and confirmation, and the prayer to quash these orders was rejected. [Paras 9, 10, 11, 12, 13]

Petition to quash the ECIR, the private complaint, the original complaint before the Adjudicating Authority and the provisional attachment order is rejected; those orders stand.

Final Conclusion: Petition allowed in part: the order of cognizance and issuance of summons dated 06.02.2017 is set aside and remitted to the Principal City Civil & Sessions Judge for fresh consideration; all other reliefs seeking quashment of ECIR, complaints and the provisional attachment order are rejected.

Ownership for wealth-tax purposes - effect of pending challenge to family settlement/MOU on title - inclusion and valuation of assets in taxable net wealth - exemption for house used as own residence under section 5(1)(vi) - reassessment reopened under section 17 - remand for re-examination by Assessing Officer

Effect of pending challenge to family settlement/MOU on title - ownership for wealth-tax purposes - inclusion and valuation of assets in taxable net wealth - Whether assets purportedly received under a family settlement/MOU can be included in taxable net wealth when the MOU is the basis for distribution but its validity is challenged in pending litigation. - HELD THAT: - The Tribunal found that the AO and the Commissioner (Appeals) proceeded to include the residential property and diamonds in the assessee's taxable net wealth solely on the basis of the MOU cum Deed of family settlement which was the instrument of distribution. However, the assessee had filed a plaint before the Madras High Court seeking declaration that the MOU was null and void and alleging non-receipt of the assets. Where the very document relied upon to confer title is the subject-matter of a pending challenge seeking to declare it void, that document cannot be treated as conclusively conferring title on the assessee for the purpose of charging wealth-tax. The Tribunal held that, unless the assessee is owner of the asset as on the valuation date, the asset cannot be included in taxable wealth; accordingly the AO and CWT(A) erred in assessing the residential property and diamonds without taking into account the pending dispute and the averments made in the plaint. The matter therefore required fresh examination in light of the pending litigation and the factual claim of non-delivery of assets. [Paras 7, 9]

Findings of AO and CWT(A) treating the MOU as conferring title were set aside; inclusion of the residential property and diamonds in taxable net wealth cannot be sustained without re-examination by the AO in light of the pending challenge to the MOU.

Exemption for house used as own residence under section 5(1)(vi) - inclusion and valuation of assets in taxable net wealth - remand for re-examination by Assessing Officer - Whether the residential property at Mc Nichols Road is exempt as the assessee's own residence and whether its valuation/inclusion should stand. - HELD THAT: - The assessee asserted that the property was used for own residence and thus exempt under section 5(1)(vi). The Tribunal noted the legal position that a property used as own residence is outside the definition of asset for wealth-tax, but emphasized that the burden lies on the assessee to prove the use as residence. In the present case no documentary or other evidence was placed before the authorities or the Tribunal to substantiate the claim. Given the absence of evidence and the concurrent dispute about title, the Tribunal declined to decide the exemption on merits and directed the AO to re-examine the claim and the valuation of the property in accordance with law and on the basis of evidence to be led by the assessee. [Paras 8, 9]

Issue remanded to the AO for re-examination of the claim of exemption as own residence and for reconsideration of valuation/inclusion in taxable wealth in light of supporting evidence (if any).

Final Conclusion: Appeals for assessment years 2006-07 and 2007-08 are set aside to the file of the Assessing Officer for fresh consideration of (i) whether the residential property and diamonds can be included in taxable net wealth in view of the pending challenge to the family settlement/MOU, and (ii) the claim that the residential property is the assessee's own residence exempt under section 5(1)(vi); in consequence the appeals are treated as allowed for statistical purposes.

Suppression in valuation of jewellery - valuation of jewellery based on gross weight as on search date - holistic approach to family-held jewellery valuation - exemption under section 5(vi) of the Wealth Tax Act - treatment of multi-storey building as a single residential unit for wealth-tax exemption - enhancement in wealth on basis of municipal unit numbers

Suppression in valuation of jewellery - valuation of jewellery based on gross weight as on search date - holistic approach to family-held jewellery valuation - Additions made by the authorities in respect of valuation of jewellery were unsustainable and were to be deleted. - HELD THAT: - The search on 17.12.2012 resulted in jewellery of several family members being mixed and valued by the departmental valuer, and the jewellery remained in departmental custody when the wealth returns were filed. Given the mixing and the practical reality that designs change while weight remains, the Tribunal adopted a holistic approach by considering the aggregate gross weight of jewellery of all family members as declared in the wealth returns and as found at the time of search. Comparison of aggregate weights showed no material suppression; individual variations were explained by mixing and inclusion of another family member's jewellery. On this basis the Tribunal found the additions confirmed by the CIT(A) to be unwarranted and directed deletion of the impugned enhancements. [Paras 16, 17, 18, 19, 20]

Enhancements in the value of jewellery imposed by the authorities are deleted.

Exemption under section 5(vi) of the Wealth Tax Act - treatment of multi-storey building as a single residential unit for wealth-tax exemption - enhancement in wealth on basis of municipal unit numbers - Denial of exemption under section 5(vi) on the ground that the properties are multiple residential units was incorrect and the enhancements based on that denial were to be deleted. - HELD THAT: - The Tribunal examined the record and noted that the properties in question are multi-storey buildings. Relying on precedent permitting exemption for buildings comprising multiple rooms/units, and on factual ownership allocation of floors among family members, the Tribunal held that treating a multi-floor house as separate residential units for the purpose of denying exemption was incorrect. The CIT(A)'s view that multiple municipal numbers rendered the properties ineligible for exemption was rejected and the impugned enhancement in valuation was ordered to be deleted. [Paras 21, 22, 23, 24]

Denial of exemption and resultant enhancements in respect of the properties are deleted; exemption allowed as claimed.

Final Conclusion: The Tribunal allowed the appeals, deleted the enhancements made in respect of jewellery and the impugned enhancements in valuation of the properties, and directed the assessing authority to give effect to this order.