TaxTMI Updates e-Newsletter
Feb 01,2019

Amendment of pleadings - Allocation of assessee to State Tax Authorities under the GST regime - Jurisdiction to forward grievances to GSTN - Application for credit under Form-GST TRAN-1 - Service of notice

Amendment of pleadings - Draft amendment tendered on behalf of the petitioner was allowed. - HELD THAT: - The Court received a draft amendment from the petitioner and granted leave to amend in terms of the draft. The order directs that the amendment shall be carried out forthwith, recording the Court's acceptance of the proposed modification to the pleadings. [Paras 1]

Amendment allowed in terms of the draft and to be carried out forthwith.

Allocation of assessee to State Tax Authorities under the GST regime - Jurisdiction to forward grievances to GSTN - Application for credit under Form-GST TRAN-1 - Court recorded that the petitioner is allocated to State Tax Authorities under GST and noted uncertainty whether the petitioner raised the grievance with the proper State Nodal Officer; petitioner permitted to apply for credit under Form-GST TRAN-1 to both State and Central Tax Authorities. - HELD THAT: - The Court, relying on averments in the respondents' affidavit, noted that the petitioner falls within the jurisdiction of the State Tax Authorities and observed that the Nodal Officer of respondent No.3 had forwarded the petitioner's grievance to GSTN. Given uncertainty whether the petitioner had approached the State Nodal Officer (the proper officer to forward such grievances), the petitioner's counsel stated an intention to make an application for allowing credit under Form-GST TRAN-1 to both the State and the Central Tax Authorities. The Court recorded this position without adjudicating the merits of the credit claim and permitted the petitioner to make the stated application. [Paras 2]

Petitioner may apply for allowing credit under Form-GST TRAN-1 to both the State Tax Authorities and the Central Tax Authorities; the Court recorded the allocation and the factual uncertainty about prior steps taken.

Service of notice - Notice to newly added respondent Nos. 6 and 7 was ordered and returnable on the specified date; direct service permitted. - HELD THAT: - The Court directed that notice be issued to the newly added respondents, fixed a returnable date, instructed the Assistant Government Pleader to take instructions, and expressly permitted direct service on the respondents. This is a procedural direction to advance the proceedings against the newly impleaded parties. [Paras 3]

Notice issued to respondent Nos. 6 and 7 returnable on the stated date; direct service permitted and respondents to be served.

Final Conclusion: The petitioner's draft amendment was permitted and ordered to be carried out immediately; the Court recorded the petitioner's allocation to State Tax Authorities under GST, permitted the petitioner to apply for credit under Form-GST TRAN-1 to both State and Central Tax Authorities, and ordered issuance of notice to the newly added respondents with direct service allowed.

Reopening of assessment under Section 147 read with Section 148 - first proviso to Section 147 - failure to disclose fully and truly all material facts - disclosure of primary material facts - change of opinion - application of Section 46A to buy-back transactions

Reopening of assessment under Section 147 read with Section 148 - first proviso to Section 147 - failure to disclose fully and truly all material facts - disclosure of primary material facts - change of opinion - application of Section 46A to buy-back transactions - Validity of the notice issued on 26.2.2018 under Section 148 to reopen the assessment for Assessment Year 2011-12, having regard to the first proviso to Section 147 and the alleged failure to disclose fully and truly all material facts. - HELD THAT: - The notice was issued beyond four years from the end of the relevant assessment year in a case where assessment had earlier been completed under Section 143(3). The Assessing Officer's reasons relied on facts and material that were already available during the original assessment proceedings, including disclosure by the assessee that income arose from surrender of shares under buy-back of a subsidiary and the assessee's claim of exemption under Section 47(iv) and (v). The Revenue contended there was nondisclosure because the assessee did not draw attention to the applicability of Section 46A. The Court applied the settled test that an assessee must disclose fully and truly the primary material facts necessary for assessment; where such primary facts were disclosed during the regular assessment, reopening cannot be sustained as a case of failure to disclose or mere change of opinion. The facts showing receipt of income on buy-back were placed before the Assessing Officer in the original proceedings and the Assessing Officer had considered the claim in scrutiny and passed the assessment order. Reliance on the same material already before the Assessing Officer, and the Revenue's subsequent view that a different provision (Section 46A) applies, amounted to a change of opinion and not to discovery of undisclosed material warranting reopening under the first proviso to Section 147. Consequently, the notice was held to be hit by the first proviso to Section 147 and thus without jurisdiction. [Paras 6, 8, 9]

Impugned notice for reopening assessment quashed as barred by the first proviso to Section 147 since there was no failure to disclose fully and truly the primary material facts and the Revenue's case amounted to a change of opinion.

Final Conclusion: The petition is allowed; the notice dated 26.2.2018 under Section 148 seeking reopening of Assessment Year 2011-12 is quashed and set aside as being without jurisdiction.

Reopening of assessment beyond four years - requirement of failure to disclose fully and truly all material facts - reason to believe that income has escaped assessment - change of opinion and its impermissibility as a basis for reassessment - adequacy and validity of reasons recorded for issuance of notice under section 147

Reopening of assessment beyond four years - requirement of failure to disclose fully and truly all material facts - reason to believe that income has escaped assessment - adequacy and validity of reasons recorded for issuance of notice under section 147 - change of opinion and its impermissibility as a basis for reassessment - Validity of the notice of reopening of assessment issued beyond four years from the end of the relevant assessment year - HELD THAT: - The Court held that the impugned notice could not be sustained because the Assessing Officer's recorded reasons did not establish the mandatory prerequisite for reopening assessments beyond four years - namely, a failure by the assessee to disclose truly and fully all material facts so as to give the AO a reason to believe that income had escaped assessment. The reasons relied upon merely recited that a sum had been debited without evidence of allowability, but the material showed that the claimed amount formed part of a larger claim which was examined during original scrutiny and was expressly considered and disallowed by the AO in the assessment order. Where the AO had already examined the claim, reproduced the assessee's representations and rejected them in the assessment order, the requisite satisfaction that facts were hidden or embedded so as to evade discovery with due diligence was absent. The Court therefore found the recorded reasons legally deficient and based on an erroneous premise amounting to impermissible change of opinion rather than discovery of previously undisclosed material. [Paras 5, 6, 8]

The notice of reopening of assessment issued beyond four years was set aside as the statutory requirement for reassessment beyond that period was not satisfied and the reasons recorded were invalid.

Final Conclusion: The petition succeeds; the notice of reopening for Assessment Year 2011-12 is quashed and the reassessment proceedings are set aside.

Capitalization of brokerage as part of inventory/WIP - selling expenses versus cost of construction - percentage of completion method - disallowance under Section 14A - treatment of software and allied IT maintenance expenses - precedential effect of coordinate bench and earlier departmental treatment

Disallowance under Section 14A - Cheminvest principle on absence of exempt income - Disallowance under Section 14A for the assessment year 2008-09 - HELD THAT: - The appellate authorities found that the assessee had not indicated any tax-exempt income for the relevant year; applying the principle in Cheminvest Ltd. v. CIT, the ITAT held that Section 14A did not bite. The High Court agreed that the ITAT correctly applied the settled test and that the finding was one of fact and law as settled by precedent, hence no substantial question of law arises. [Paras 7]

The disallowance under Section 14A was held not to be attracted; no question of law arises and ITAT's view is sustained.

Capitalization of brokerage as part of inventory/WIP - selling expenses versus cost of construction - percentage of completion method - precedential effect of coordinate bench and earlier departmental treatment - Allowability of brokerage and commission claimed by the assessee (whether to be capitalized or allowed as revenue expenditure) for the assessment year 2008-09 - HELD THAT: - The Assessing Officer disallowed the brokerage claimed, treating it as required to be capitalized or spread over periods; the CIT(A) and ITAT disagreed. They applied Accounting Standards (AS-2 and AS-17 as read with AS-7) and earlier tribunal and departmental decisions in the group, treating brokerage as selling/finance expense not forming part of cost of construction or inventory/WIP. The ITAT followed coordinate-bench precedent (including this Court's earlier decision in DLF Universal Ltd. where the assessee's consistent treatment and non-challenge by Revenue weighed in favour of allowing such expenses) and observed that AO had not distinguished facts or shown why the coordinate decision should not apply. The High Court held that the issue concerned application of accounting treatment (POCM/AS-7) and precedential consistency, and found no substantial question of law arising, upholding the deletion of the addition. [Paras 2, 3, 4, 5, 6]

The disallowance in respect of brokerage and commission was deleted; ITAT's affirmance of CIT(A) stands and no question of law is made out.

Treatment of software and allied IT maintenance expenses - application of accounting/agreement terms to classification of expenditure - Allowability/classification of claimed expenditure on software up gradation and related services (including computer maintenance and broadband services) for the assessment year 2008-09 - HELD THAT: - The Court recorded that the CIT(A) and ITAT reached factual conclusions after examining the nature of the agreements and the character of the services; the Assessing Officer had failed to examine the service agreements. The High Court treated these as findings of fact regarding classification of expenditure and observed that such factual conclusions by the lower authorities cannot be faulted on appeal. Consequently no substantial question of law was made out. [Paras 8]

The factual findings allowing/affirming the assessee's treatment of software and allied IT expenses are sustained; no question of law arises.

Final Conclusion: The Revenue's appeal is dismissed. The High Court upholds the ITAT's deletion of the brokerage disallowance, affirms that Section 14A is not attracted on the facts, and accepts the factual classification of software and related IT expenses; no substantial question of law arises from the impugned order.

Disallowance under Section 14A read with Rule 8D of the Income Tax Rules, 1962 - presumption of application of interest free funds where both interest free and interest bearing funds are available - concurrent finding of fact - no substantial question of law

Disallowance under Section 14A read with Rule 8D of the Income Tax Rules, 1962 - presumption of application of interest free funds - concurrent finding of fact - Deletion of the proportionate interest disallowance made under Section 14A r.w. Rule 8D was legally sustainable. - HELD THAT: - The Tribunal and the CIT(A) concurred on the primary factual finding that the investments yielding exempt dividend income were made out of the assessee's own (interest free) funds and not out of borrowed (interest bearing) funds. Applying the principle in Reliance Utilities and Power Ltd., viz., where both interest free and interest bearing funds are available the presumption is that investments are made from interest free funds, the Tribunal upheld deletion of the proportionate interest disallowance. The High Court reinforced that the same principle has been applied in analogous decisions and that, on those concurrent findings of fact, there was no error in deleting the disallowance under Section 14A read with Rule 8D. Because the determination turned on concurrent factual findings about the source of funds and application of the stated presumption, no substantial question of law arose for interference. [Paras 5, 6, 7, 8]

Tribunal's deletion of the proportionate interest disallowance under Section 14A r.w. Rule 8D is upheld.

Final Conclusion: Revenue's appeal is dismissed; no substantial question of law is made out and the Tribunal's order deleting the proportionate interest disallowance is upheld.

Re-opening of assessment under Section 148 - rectification versus re-opening of assessment - application of the Dalmia Manganese principle - treatment of partner's share following a Settlement Commission order - limitation for issuance of notice

Re-opening of assessment under Section 148 - rectification versus re-opening of assessment - application of the Dalmia Manganese principle - treatment of partner's share following a Settlement Commission order - Whether the Assessing Officer was entitled to proceed under Section 148 to assess the partners after a Settlement Commission order enhanced the firm's income, or whether proceedings should have been under the rectification provision relied on by the assessee. - HELD THAT: - The Court accepted the Tribunal's conclusion distinguishing the facts from Dalmia Manganese Corporation. In Dalmia the matter concerned withdrawal of an allowance in an existing regular assessment and a subsequent rectification under the provision for correction of mistakes; the Supreme Court held that where a specific provision governs re-opening/rectification of a completed assessment, resort cannot be had to a general provision. Here, however, there was no completed assessment of the partners which included the share as found by the Settlement Commission. Section 155(1)(c) (rectification in respect of a partner's assessment) applies only where the partner's completed assessment already includes the share so found; that condition was absent. Consequently the Assessing Officer rightly proceeded by issuing notice under Section 148 to re-open the assessment of the partners and completed the assessment on the basis of the Settlement Commission's determination. The Tribunal's application of law to these facts was accepted and no interference was warranted.

The Assessing Officer acted correctly in proceeding under Section 148; the Dalmia ratio is not attracted where there was no completed assessment of the partners including the Settlement Commission's determination.

Limitation for issuance of notice - Whether the assessment was barred by limitation in view of two notices said to have been issued under Section 148. - HELD THAT: - The Court did not finally decide the limitation point. Although the limitation ground was raised before the First Appellate Authority, it was not pressed at that stage in the same form, and questions regarding the effect of two notices and limitation were left to be considered further. The Court expressly left the remand on the limitation issue to the First Appellate Authority for consideration.

Limitation issue remanded to the First Appellate Authority for fresh consideration.

Final Conclusion: Appeals dismissed; questions of law resolved against the assessees and in favour of the Revenue on the correctness of re-opening under Section 148, while the question of limitation (two notices) is remanded to the First Appellate Authority for consideration.

Revision under Section 263 - claim under Section 80IB - limitation under Section 263(2) - merger of assessment order with appellate order - return filed pursuant to notice under Section 153A - separate accounts and audit requirement for Section 80IB

Limitation under Section 263(2) - revision under Section 263 - claim under Section 80IB - Limitation for invoking revision under Section 263 in respect of the claim under Section 80IB for assessment year 2001-2002. - HELD THAT: - The Court examined the chronology of assessment and appellate orders. The first order giving effect to the appellate direction allowing deduction under Section 80IB is Annexure-I dated 31.08.2005; limitation under Section 263(2) runs from the end of the financial year in which that order was passed and thus expired before the Commissioner passed the revisional order dated 25.03.2009. The reasons relied on in the revisional order related to fundamental conditions for allowing deduction under Section 80IB (maintenance of separate accounts, audit of eligible business and filing of Form No.10CCB), which applied to the amount allowed by Annexure-I; consequently the Commissioner could and should have proceeded against Annexure-I within the limitation period. Because the revisional order was passed after expiry of limitation, it could not be sustained. [Paras 7, 8, 9, 10, 11]

Question of law answered in favour of the assessee: the Section 263 revision in respect of the Section 80IB claim for AY 2001-2002 was time-barred and is not sustainable.

Return filed pursuant to notice under Section 153A - claim under Section 80IB - revision under Section 263 - Effect of the miscellaneous application and consequent status of I.T.A. No.87 of 2012. - HELD THAT: - The Tribunal allowed M.A. No.59/Kochi/2012 on the question raised and that order dated 07.09.2012 stands unchallenged by the Revenue. There being no challenge and the matter rendered academic by the Tribunal's interlocutory order, the appeal was treated as infructuous and closed accordingly. [Paras 12]

I.T.A. No.87 of 2012 is closed as infructuous and the Court refused to answer the question of law raised therein.

Merger of assessment order with appellate order - revision under Section 263 - claim under Section 80IB - Whether assessment orders rejecting Section 80IB claims for AYs 2005-2006 and 2006-2007 were open to revision under Section 263 after they had merged with the first appellate orders. - HELD THAT: - For both years the Assessing Officer's orders rejecting the Section 80IB claim were placed before the first appellate authority, which allowed the claim and directed the Assessing Officer to grant the deduction. Once the appellate order was passed in favour of the assessee and became the operative determination, the original assessment order stood merged with the appellate order and was no longer available for revision under Section 263. The Revenue's choice to proceed by invoking Section 263, rather than in further appeal, was therefore erroneous. [Paras 13, 14, 15]

Questions of law answered in favour of the assessee: the assessment orders for AYs 2005-2006 and 2006-2007 having merged with the appellate orders, they were not amenable to revision under Section 263 and the revisional orders are set aside.

Final Conclusion: The Court allows the appeals insofar as limitation and merger doctrines were relied upon: the Section 263 revisional order for AY 2001-2002 is time barred and set aside; the assessments for AYs 2005-2006 and 2006-2007 having merged with first appellate orders could not be revised under Section 263 and those revisional orders are set aside. I.T.A. No.87 of 2012 is closed as infructuous. Parties to bear their respective costs.

Retrospective effect of statutory proviso - curative and declaratory proviso - Section 40(a)(ia) proviso - deemed deduction upon furnishing of return by the payee - assessee not deemed to be in default under first proviso to Section 201(1)

Section 40(a)(ia) proviso - retrospective effect of statutory proviso - curative and declaratory proviso - Whether the second proviso to Section 40(a)(ia) operates with retrospective effect so as to defeat the disallowance under Section 40(a)(ia) in the facts of this case. - HELD THAT: - The court considered earlier judicial treatment where the second proviso-inserted w.e.f. 1.4.2013-has been treated as beneficial, curative and declaratory and held to have retrospective effect from the date of insertion of the main proviso. The Division Bench of the Delhi High Court in CIT v. Ansal Land Mark Township P Ltd was noted as a leading authority adopting this view, and the Supreme Court's observation in Hindustan Coca Cola Beverages P Ltd-that where the payee has already paid tax the payer/deductor can at best be asked to pay interest on delay-was relied on to demonstrate that the proviso operates to avert a disallowance where the payee has discharged tax by filing return. Having regard to these authorities and the character of the proviso as curative and beneficial, the court found no substantial question of law requiring interference with the Tribunal's conclusion rejecting the disallowance under Section 40(a)(ia). [Paras 2, 3]

Tribunal's rejection of the disallowance under Section 40(a)(ia) is upheld; the proviso is treated as curative/beneficial and no question of law arises warranting interference.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's decision rejecting the disallowance under Section 40(a)(ia) is affirmed and no substantial question of law arises for consideration.

Deduction under Section 80M - inter-corporate dividend - dividend declared versus dividend distributed - dividend distributed on or before the due date for furnishing return - declaration of dividend in an earlier year but payment in the relevant year

Deduction under Section 80M - dividend declared versus dividend distributed - declaration of dividend in an earlier year but payment in the relevant year - Tribunal was right in holding that for the purpose of Section 80M, 'dividend distributed' includes dividends declared in an earlier year but paid out in the current year. - HELD THAT: - Section 80M allows a deduction in respect of dividend income to the extent such amount does not exceed the amount of dividend distributed by the assessee on or before the due date for furnishing the return. In the present case the assessee had declared dividends relating to earlier financial years but the actual distribution (payment) occurred during the financial year relevant to Assessment year 2003-04 and prior to the due date for filing the return. The Court found no statutory fetter requiring that the declaration itself must have been made in the same earlier year for the distribution to qualify. To accept the Revenue's contention would amount to importing an unwrittencondition into the statute. The Tribunal's conclusion that dividends declared earlier but paid in the relevant year qualify as "dividend distributed" for the purposes of Section 80M was therefore upheld. [Paras 6, 7, 8, 9]

Accepted the Tribunal's view; dividends declared earlier but paid in the relevant year prior to the due date qualify as 'dividend distributed' for Section 80M deduction.

Deduction under Section 80M - temporal operation of fiscal provisions - effect of Section 80M being introduced from 01.04.2003 - Tribunal was right in holding that dividends declared for a period when Section 80M was not in force but paid out after the section came into effect could be treated as part of the dividend distributed in the current year for computing deduction under Section 80M. - HELD THAT: - The Revenue argued that dividends declared in periods when Section 80M was not in force could not be availed of after the section's coming into force. The Court rejected this contention, observing that the statute requires distribution to have occurred on or before the due date for furnishing the return and contains no prohibition against claiming deduction for dividends declared earlier but paid after the provision's effective date. The Court concluded that imposing the Revenue's restriction would amount to reading an additional condition into the legislation, which is impermissible. Earlier High Court decisions in similar terms were noted as supportive. [Paras 8, 9, 10, 12]

Held that dividends declared prior to the coming into force of Section 80M but paid after its commencement (and before the due date) are eligible for deduction under Section 80M.

Final Conclusion: Both substantial questions of law were answered in favour of the assessee and against the Revenue; the Tribunal's order allowing the Section 80M deduction was upheld and the appeal is dismissed.

Levy of penalty under section 271(1)(c) - Furnishing of inaccurate particulars of income - Penalty not automatic upon assessment disallowance - Appreciation of evidence during penalty proceedings - Disallowance of expenditure not ipso facto attract penalty - CIT v. Reliance Petro Products Pvt. Ltd.

Levy of penalty under section 271(1)(c) - Furnishing of inaccurate particulars of income - Appreciation of evidence during penalty proceedings - Disallowance of expenditure not ipso facto attract penalty - CIT v. Reliance Petro Products Pvt. Ltd. - Whether the penalty under section 271(1)(c) was correctly levied on the assessee in respect of disallowance of consultancy fees. - HELD THAT: - The Tribunal found that the assessee had produced, during the penalty proceedings, the bills describing the service as a Goods Manufacturing Practice (GMP) Audit and also placed the audit report on record. Those particulars were not appreciated by the revenue while imposing penalty. The Tribunal reiterated the principle that levy of penalty under section 271(1)(c) is not automatic upon disallowance in assessment; mere disallowance of expenditure for non-appreciation of facts does not establish furnishing of inaccurate particulars or concealment. Applying the ratio of CIT v. Reliance Petro Products Pvt. Ltd. , the Tribunal held that where relevant details are furnished and not appreciated by authorities, penalty cannot be sustained.

Penalty levied under section 271(1)(c) set aside and directed to be cancelled; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, held that penalty under section 271(1)(c) was not sustainable as the assessee had furnished relevant particulars (including the GMP audit report) during penalty proceedings and cancellation of the penalty was directed.

Dependence of penalty on sustenance of quantum additions - Penalty for furnishing inaccurate particulars and concealment of income (s. 271(1)(c)) - Setting aside penalty where underlying disallowance/addition is vacated - Remand for fresh adjudication in light of appellate/quantum decision

Dependence of penalty on sustenance of quantum additions - Penalty for furnishing inaccurate particulars and concealment of income (s. 271(1)(c)) - Sustenance of penalty could not be upheld after the underlying quantum additions/disallowances were set aside by the Tribunal in the quantum appeal. - HELD THAT: - The Tribunal noted that the quantum additions/disallowances which formed the basis for imposing penalty under s. 271(1)(c) were set aside by a coordinate bench in the quantum proceedings. Since the essential foundation for the penalty no longer subsisted, the order of the CIT(A) confirming the penalty could not be sustained. The Appellate Tribunal therefore set aside the CIT(A)'s order in relation to the penalty for the present, observing that the penalty's viability depended on the outcome of the quantum appeal. [Paras 3, 4]

The confirmation of penalty was set aside because the underlying additions/disallowances have been vacated; the basis for penalty does not survive.

Remand for fresh adjudication in light of appellate/quantum decision - The matter was remitted to the CIT(A) for fresh adjudication of penalty in the light of the outcome in the quantum appeal. - HELD THAT: - Having set aside the CIT(A)'s confirmation of penalty on account of the vacatur of the quantum additions, the Tribunal restored the matter to the file of the CIT(A) for fresh consideration. The fresh adjudication is to be undertaken in the light of the quantum appellate order, thereby permitting reassessment of the penalty issue consistently with the final position on the quantum aspects. [Paras 4, 5]

Penalty matter remitted to the CIT(A) for fresh adjudication in light of the quantum appeal; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the CIT(A)'s confirmation of penalty because the quantum additions underlying the penalty were vacated by a coordinate bench; the penalty issue is remitted to the CIT(A) for fresh adjudication in light of the quantum decision (appeal allowed for statistical purposes).

Addition on account of suppressed debtors - onus on the assessee to reconcile and corroborate bank statements with audited books by independent evidence - addition based on inflated stock/production statements furnished to banking authorities - reliance on audited books of account and vouchers where books are found genuine - prohibition of double addition for the same concealed production/consumption and sales

Addition on account of suppressed debtors - onus on the assessee to reconcile and corroborate bank statements with audited books by independent evidence - Validity of addition made by AO (and confirmed by CIT(A)) on account of difference between debtors shown to bank and in audited accounts - HELD THAT: - The Tribunal affirmed the view that where the assessee provides two different sets of debtors figures (one submitted to the bank and another in audited financials), the burden lies on the assessee to reconcile the discrepancy with independently verifiable evidence such as ledger extracts or bank entries. The assessee could not produce case wise reconciliation or corroborative documents to satisfy the assessing officer. In these circumstances the appellate forum found no infirmity in the AO's and CIT(A)'s conclusion that the unexplained difference warranted addition. [Paras 7]

Addition on account of suppressed debtors upheld and the ground of appeal dismissed.

Addition based on inflated stock/production statements furnished to banking authorities - reliance on audited books of account and vouchers where books are found genuine - prohibition of double addition for the same concealed production/consumption and sales - Sustainability of addition made for alleged suppressed consumption of raw material and suppressed production/sales where monthly stock statements submitted to bank differed from audited books - HELD THAT: - The Tribunal found that the assessee's books of account were audited and no adverse remarks were recorded by the auditor; the assessing officer had not pointed out defects in the books nor rejected them. The statements furnished to the bank were admitted to be provisional/estimated and primarily intended to obtain enhanced credit; stocks were hypothecated and no physical verification by the bank was shown to have been carried out. In these circumstances, and having regard to binding decisions of the jurisdictional High Court accepting that inflated statements to banks, by themselves, do not justify additions where books and vouchers are genuine, the Tribunal held that the addition could not be sustained. Having also accepted that addition should not be made twice for the same matter, the Tribunal deleted the addition made in respect of excess yarn consumption. [Paras 13]

Addition on account of suppressed consumption of yarn deleted and Ground No.2 allowed.

Prohibition of double addition for the same concealed production/consumption and sales - Alternate plea that if AO's action were accepted, addition should be limited to estimated profit on suppressed production/sales - HELD THAT: - The Tribunal observed that this alternate contention became infructuous because the primary addition in respect of suppressed consumption of yarn was deleted. Since the main addition was set aside, there was no need to consider the alternate relief, and the ground advocating estimated profit was dismissed as moot. [Paras 14]

Alternate ground dismissed as infructuous.

Final Conclusion: The appeal is partly allowed: the addition in respect of difference in debtors submitted to the bank versus audited accounts is sustained, while the addition in respect of alleged suppressed consumption of yarn (and related suppressed production) is deleted; the alternative claim for estimated profit is rendered infructuous.

Allowability of provision as deduction - adjusting events under Accounting Standard 4 - liability in praesenti not a contingent liability - distinction from contingent liability jurisprudence - rule of consistency in assessment treatment

Allowability of provision as deduction - adjusting events under Accounting Standard 4 - liability in praesenti not a contingent liability - distinction from contingent liability jurisprudence - Deductibility of the provision debited to the profit and loss account for the assessment year 2012-13. - HELD THAT: - The Tribunal accepted the assessee's contention that the obligation crystallized as on the balance sheet date and was therefore an adjusting event within the meaning of AS-4, since the liability existed at the end of the financial year though payment was made thereafter but before approval of accounts. Relying on the ratio in Bharat Earth Movers, the liability in praesenti though discharged at a future date is not a contingent liability and is allowable as an expenditure. The decision in Gajapathy Naidu, which disallows contingent liabilities, was distinguished on the ground that the present liability had already crystallized during the financial year. The Tribunal also noted that prior year accounts showed similar treatment without disallowance and applied the rule of consistency, observing that no illegality was shown in the assessee's accounting treatment. Applying these principles, the provision was held to be an allowable deduction for the year in which it was made.

The provision debited to the profit and loss account for the relevant year is an allowable deduction; the CIT(A)'s deletion of the addition is confirmed.

Final Conclusion: Revenue's appeal is dismissed and the order of the Commissioner (Appeals) deleting the addition is confirmed.

Registration or refusal under Section 12AA - qualification of registration as 'general public utility' - charitable purpose and the scope of Section 2(15) - annual examination by the Assessing Officer of activities under Section 2(15)

Registration or refusal under Section 12AA - qualification of registration as 'general public utility' - Whether the Commissioner may qualify the registration of a trust by describing it as a 'general public utility trust' instead of simply registering or refusing registration under Section 12AA. - HELD THAT: - Section 12AA empowers the Commissioner to call for documents, satisfy himself about the objects and genuineness of activities, and thereafter either pass an order registering the trust or pass an order refusing registration. The statute contemplates a binary exercise of power - registration or refusal - and does not authorize the Commissioner to attach a label or qualification such as 'general public utility trust' while granting registration. The power to specify or determine which activities will attract exemption is not to be exercised by qualifying the registration; such assessment of activities is for the Assessing Officer in the course of assessment proceedings. [Paras 5, 7]

The Commissioner is not to qualify the registration as 'general public utility trust' and must either register the trust or refuse registration under Section 12AA.

Charitable purpose and the scope of Section 2(15) - annual examination by the Assessing Officer of activities under Section 2(15) - Who must examine, and when, whether the activities of the trust fall within the statutory definition of 'charitable purpose' under Section 2(15). - HELD THAT: - The definition of 'charitable purpose' in Section 2(15) identifies categories such as relief of the poor, education and medical relief, and advancement of objects of general public utility subject to specified exceptions. Determination of whether the trust's activities in any financial year fall within these clauses is a factual and evaluative exercise for the Assessing Officer during assessment proceedings. The Commissioner, while performing the registration function under Section 12AA, is not to pre specify which activities will attract exemption; rather, the Assessing Officer will examine genuineness and applicability of Section 2(15) in each relevant year. [Paras 6, 7]

Assessment-year wise scrutiny by the Assessing Officer is the appropriate forum to determine whether the trust's activities qualify as 'charitable purpose' under Section 2(15).

Final Conclusion: The order under appeal is modified to direct that the trust be registered under Section 12AA without any qualification as a 'general public utility trust'; the Assessing Officer shall examine in the course of assessment whether the trust's year to year activities fall within 'charitable purpose' as defined in Section 2(15). The appeal is allowed.

Treatment of sums credited as unexplained cash credit under section 68 - proof of identity, creditworthiness and genuineness of creditor by bank confirmation and party confirmation - bank remittances through banking channel as evidence of genuineness of transaction - reconciliation of cashbook with bank withdrawals to explain cash deposits - remand for verification of ledger entries and liabilities

Treatment of sums credited as unexplained cash credit under section 68 - proof of identity, creditworthiness and genuineness of creditor by bank confirmation and party confirmation - bank remittances through banking channel as evidence of genuineness of transaction - Whether foreign remittances from LTC College, London were loans (not assessable income) or unexplained cash credits to the assessee's books - HELD THAT: - The Tribunal accepted the appellate finding that substantial part of the foreign remittances were unsecured loans from LTC College, London supported by bank confirmations and a loan confirmation from the college. The AO's initial view treating the receipts as "commission" was displaced by the evidence obtained during remand proceedings which established that funds were remitted through banking channels and that the creditor had confirmed the loan of Rs. 3,52,33,234/-. The Tribunal upheld the CIT(A)'s deletion of the addition in respect of Rs. 3,52,33,234/- on the basis that the evidences filed were not controverted and the AO had himself confirmed the identity of the remitter. However, the Tribunal also agreed with the appellate finding that the assessee failed to explain a residual sum of Rs. 66,12,213/- (being part of the larger remittance aggregate) and that amount was rightly treated as unexplained cash credit and added to income. [Paras 4, 6, 7, 8]

Deletion of addition in respect of Rs. 3,52,33,234/- upheld; amount of Rs. 66,12,213/- treated as unexplained cash credit and added to income.

Remand for verification of ledger entries and liabilities - Whether the sum of Rs. 47,07,699/- formed part of remittance from LTC College or was a liability of the assessee requiring deletion - HELD THAT: - The CIT(A) directed verification of ledger and records to ascertain that the amount of Rs. 47,07,699/- was not remitted by LTC College but represented an outstanding payable by the assessee; if so, the addition should be deleted. The Tribunal noted this direction and recorded that the AO was to verify the materials and delete the amount if found to be a liability rather than a receipt from the remitter. [Paras 4, 7, 8]

Matter remanded to the AO for verification of books and records to determine whether Rs. 47,07,699/- is a liability; if so, delete the addition.

Reconciliation of cashbook with bank withdrawals to explain cash deposits - Whether cash deposits totalling approximately Rs. 1.43 crores in two bank accounts were unexplained and taxable as unexplained credits - HELD THAT: - The assessee produced a date-wise reconciliation of cash withdrawals and subsequent cash deposits together with the cashbook narrations explaining entries. The AO's remand reports did not record any adverse findings controverting the reconciliation submitted. The CIT(A) accepted the reconciliation and deleted additions to the extent of Rs. 1,34,19,000/-, while confirming a small residual addition of Rs. 8,81,000/- for which no explanation was furnished. The Tribunal, after considering the remand reports and the material on record, found no reason to interfere with the appellate conclusion. [Paras 5, 8]

Deletion of addition of Rs. 1,34,19,000/- upheld; addition of Rs. 8,81,000/- confirmed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal: it upheld the CIT(A)'s deletion of the addition in respect of Rs. 3,52,33,234/- as genuine loans backed by confirmations and bank remittances, confirmed the addition of Rs. 66,12,213/- as unexplained cash credit, remanded verification of Rs. 47,07,699/- to the AO, and upheld deletion of Rs. 1,34,19,000/- of cash-deposit additions while confirming Rs. 8,81,000/-.

Penalty for concealment or furnishing inaccurate particulars under section 271(1)(c) - Explanation 1 to section 271(1)(c) - concealment by furnishing inaccurate particulars - Explanation 7 to section 271(1)(c) - bona fide transfer pricing adjustments - arm's length price computation and use of multiple-year data in transfer pricing - transfer pricing documentation, due diligence and good faith - capacity utilisation adjustments in transfer pricing

Penalty for concealment or furnishing inaccurate particulars under section 271(1)(c) - Explanation 1 to section 271(1)(c) - concealment by furnishing inaccurate particulars - Explanation 7 to section 271(1)(c) - bona fide transfer pricing adjustments - arm's length price computation and use of multiple-year data in transfer pricing - transfer pricing documentation, due diligence and good faith - capacity utilisation adjustments in transfer pricing - Whether the penalty under section 271(1)(c) imposed on the assessee for A.Y. 2007-08 was sustainable in view of the assessee's transfer pricing exercise and documentation - HELD THAT: - The Tribunal examined the Assessing Officer's invocation of Explanation 1 and the first appellate authority's reliance on Explanation 7 to section 271(1)(c) after adjustments made in assessment (two of four adjustments having been upheld by the Tribunal). The Tribunal noted that the TPO had accepted the bench marking done by the assessee and that there was no dispute as to the comparables. The Assessing Officer's core objection was the assessee's use of multiple year data to compute the arm's length price; however, at the time the return was filed this was a debatable legal position. Adoption of multiple year data in such circumstances was held to be a bona fide exercise undertaken with due diligence and in good faith, and therefore did not amount to furnishing inaccurate particulars or concealment. The Tribunal further observed that the denial of the assessee's claim on account of capacity utilisation, though an accepted transfer pricing principle and ultimately not allowed in this case, did not establish lack of good faith or due diligence in the preparation of the transfer pricing report. Considering the transfer pricing documentation in totality, the Tribunal concluded that neither Explanation 1 nor Explanation 7 to section 271(1)(c) applied, and that the penalty was not justified.

Penalty levied under section 271(1)(c) deleted and the appeal allowed.

Final Conclusion: The Tribunal set aside the penalty imposed under section 271(1)(c) for A.Y. 2007-08, holding that the assessee's transfer pricing computations and documentation constituted a bona fide exercise undertaken with due diligence and good faith, and therefore neither Explanation 1 nor Explanation 7 applied; the appeal is allowed.

Exemption under Notification No.13/81-Cus - standard input-output norms (SION) - disposal of scrap/waste/remnants - Condition No.6 - bond and satisfaction of the Assistant Collector - use of imported goods for manufacture of articles for export - duty demand on excess wastage

Exemption under Notification No.13/81-Cus - Condition No.6 - bond and satisfaction of the Assistant Collector - use of imported goods for manufacture of articles for export - Raw materials (including material contained in waste) imported duty free under Notification No.13/81-Cus remain eligible for exemption where they have been used in manufacture of export goods and export obligations are fulfilled, notwithstanding excess wastage. - HELD THAT: - The notification is principally concerned with ensuring that imported goods are used in manufacture of articles for export and that export obligations are fulfilled; it does not prescribe any criterion limiting exemption by reference to extent of wastage. Condition No.6 requires satisfaction of the Assistant Collector that goods have been used in manufacture for export to guard against diversion or clandestine removal. In the present case there was no allegation of diversion or clandestine removal, the imported fabric was used in manufacture and export obligations were met. Therefore the benefit of the exemption cannot be denied merely because wastage exceeded standard norms. [Paras 16, 17, 20]

Notification No.13/81-Cus exemption applies despite wastage in excess of SION where use in manufacture for export and export obligations are established and no diversion is pleaded.

Standard input-output norms (SION) - disposal of scrap/waste/remnants - duty demand on excess wastage - Demand of customs duty on imported raw materials contained in wastage solely because consumption exceeded the standard input-output norms is not justified. - HELD THAT: - Paragraph 190 of the Import Export Policy deals with disposal of scrap/waste and permits sale in DTA subject to norms; where no Board-fixed norms exist, norms under the Duty Exemption Scheme apply. However, norms for disposal of waste are a separate regulatory mechanism and cannot be conflated with the question of entitlement to exemption under Notification No.13/81-Cus. The mere fact of excess wastage vis-a -vis SION, without evidence of diversion or non-use in manufacture for export, does not permit the department to disallow the exemption or to demand duty on the excess waste. Further, ad hoc fixation of wastage (15%) and permission to destroy waste by competent authority reinforces that disposal was regularised and does not warrant duty demand. [Paras 11, 18, 19, 20]

Duty cannot be demanded on imported material contained in wastage merely on the basis that consumption exceeded SION; disposal norms and exemption entitlement are distinct.

Appellate Tribunal's confirmation of duty and penalty - duty demand on excess wastage - The Appellate Tribunal was not justified in upholding the demand of customs duty and penalty based solely on excess wastage compared to input-output norms; its order is set aside. - HELD THAT: - Given that there was no finding or allegation of diversion, clandestine removal or non-use of imported fabrics in manufacture for export, and export obligations were fulfilled, confirmation of duty and penalty by the Appellate Tribunal on the ground of excess wastage was unsustainable. The Court holds that the Tribunal erred in applying SION for disposal-norm purposes to deny exemption under Notification No.13/81-Cus and therefore the impugned order confirming duty and penalty must be quashed. [Paras 20, 21]

Impugned order of the Appellate Tribunal confirming duty and penalty is quashed and set aside.

Final Conclusion: The appeal is allowed: the demand of customs duty and penalty confirmed by the Appellate Tribunal for wastage in excess of input-output norms is quashed as the exemption under Notification No.13/81-Cus applies where imported material was used in manufacture for export and export obligations were met, with no allegation of diversion.

Clearance of imported scrap "as such" - segregation as part of manufacture - process waste - change of identity of imported goods - application of Board circulars to classification of segregated waste - clause (3) of Notification No.52/2003-Cus - clearance of by products, rejects, waste and scrap on payment of excise

Clearance of imported scrap "as such" - segregation as part of manufacture - change of identity of imported goods - application of Board circulars to classification of segregated waste - Segregation of imported mixed brass scrap into foundry and non-foundry fractions is part of the manufacturing process and the segregated non foundry waste cannot be treated as clearance of imported scrap "as such". - HELD THAT: - The court accepted the Tribunal's conclusion that what was imported was brass scrap for manufacture of brass articles and that segregation to remove brass and foundry items is a necessary first step in that manufacturing process. The non foundry waste emerging from segregation loses the essential characteristic of the imported brass scrap and has a different character, use, classification and value per unit; consequently it cannot be treated as the same goods imported "as such" for levy of customs duty. The court further held that the Board's circular dated 10.05.2016, which treats segregated foreign materials as process waste and not inputs "as such", is applicable in principle to the facts of this case, whereas Circular No.62/2001/Cus (relating to plastic waste cleared "as such") is distinguishable because there the identity of imported goods and cleared goods remained the same. The Tribunal's reliance on the 2016 circular and its conclusion that segregated waste is not removal of inputs "as such" were upheld as legally sustainable. [Paras 6, 7, 8, 9, 10]

Segregated non foundry waste is process waste arising in manufacturing and not goods imported "as such"; no customs duty arises on that basis.

Clause (3) of Notification No.52/2003-Cus - clearance of by products, rejects, waste and scrap on payment of excise - process waste - Clearance of segregated waste in the Domestic Tariff Area on payment of appropriate excise duty, with permission of the Development Commissioner in accordance with export/import policy, falls within the scope of clause (3) of Notification No.52/2003-Cus and is not liable to recovery of customs duty on that account. - HELD THAT: - Clause (3) of Notification No.52/2003-Cus exempts from customs duty waste and scrap arising in the course of production or manufacture and permits their sale in the DTA on payment of appropriate excise duty subject to conditions and permissions under the EXIM policy. The court noted that the segregated waste in this case arose in the course of manufacture of brass articles; the Commissioner of Customs recorded that such waste had been cleared on payment of duty after obtaining requisite permission from the Development Commissioner. Therefore the conditions of clause (3) were satisfied and the Tribunal rightly held that the customs demand on the basis of norms/ratios was unsustainable. [Paras 11]

Clearance of segregated process waste on payment of excise duty with required permission is covered by clause (3) of Notification No.52/2003-Cus and does not attract recovery of customs duty.

Final Conclusion: The Tribunal's order was upheld: segregation of imported brass scrap into non foundry waste is part of the manufacturing process and such segregated waste is process waste, not goods imported "as such"; clearance of that waste into the DTA on payment of excise duty with appropriate permission falls within clause (3) of Notification No.52/2003-Cus. The appeals are dismissed.

Anti-dumping duty - statutory power to levy duty - rescission/revocation of notification - mandamus restraining collection - protection of revenue pending appeal

Anti-dumping duty - statutory power to levy duty - mandamus restraining collection - protection of revenue pending appeal - entitlement of respondents to collect anti-dumping duty on imports of soda ash after the expiry of the governing notification and after DGAD's negative recommendation - HELD THAT: - The Court found as an admitted fact that the notification authorising levy of anti-dumping duty on soda ash expired on 02.07.2018 and that, subsequently, the Designated Authority (DGAD) by proceedings dated 14.12.2018 concluded that continuation of the anti-dumping duty was not warranted and did not recommend extension. In those circumstances there is no subsisting statutory power to levy or collect the anti-dumping duty. The respondents' contention that the interest of Revenue required interim protection because the DGAD order is appealable was rejected: absent any present notification or statutory authority to levy the duty, the respondents cannot insist upon security or other protection from the petitioner to safeguard a revenue claim that no longer exists. The determinative reasoning is that protection of Revenue pending an appeal cannot be invoked where the underlying statutory power to levy the duty has ceased and the competent authority has not recommended its continuation. [Paras 6, 7]

Petition allowed; respondents restrained from collecting anti-dumping duty on the petitioner's soda ash imports in respect of the lapsed notification.

Final Conclusion: Writ petition allowed: in view of expiry of the notification on 02.07.2018 and DGAD's finding dated 14.12.2018 against continuation, the respondents have no statutory right to collect anti-dumping duty and cannot demand interim security; relief granted restraining collection.

Rejection of declared value under Customs Valuation Rules and exercise of power under Section 14 of the Customs Act - relevance of amendment to sales contract for determination of transaction value - assessment of truth and accuracy of declared transaction value - remand for fresh consideration by the adjudicating authority

Relevance of amendment to sales contract for determination of transaction value - rejection of declared value under Customs Valuation Rules and exercise of power under Section 14 of the Customs Act - remand for fresh consideration by the adjudicating authority - Whether the matter should be remanded to the Commissioner for fresh adjudication after considering the amendment dated 14.10.2010 and other documents before deciding on rejection of the declared value. - HELD THAT: - The Tribunal found that the amendment dated 14.10.2010 to the sales contract, which altered quantity and final destination, bears on the question of the correctness of the declared value. The Tribunal did not decide the merits of the valuation dispute but observed that the Commissioner had rejected the declared value without considering that amendment. In view of the bearing of the amendment on the issue, the Tribunal directed that the matter be remitted to the Commissioner for fresh consideration. The Commissioner is to examine all documents produced by the appellants, including the amendment dated 14.10.2010, and hear the appellants on all relevant issues/points before arriving at a decision under the Customs Valuation Rules read with Section 14 of the Customs Act.

Appeal allowed by way of remand to the Commissioner for fresh adjudication after considering the amendment dated 14.10.2010 and hearing the appellants; merits left open.

Final Conclusion: The Tribunal allowed the appeal by remanding the matter to the Commissioner for fresh consideration of the declared value, directing examination of all documents (including the 14.10.2010 amendment) and an opportunity to the appellants to be heard; the substantive valuation issue was not decided.

Confiscation for prohibited imports versus restricted imports - restricted import requiring licence not equivalent to prohibition - confiscation under Section 111(d) of the Customs Act, 1962 - penalty under Section 112 contingent on goods being liable to confiscation - redemption fine under Section 125 of the Customs Act, 1962

Confiscation for prohibited imports versus restricted imports - confiscation under Section 111(d) of the Customs Act, 1962 - Whether the imported betel nuts could be confiscated under Section 111(d) because their declared value was below the minimum price fixed by DGFT Notification No.12(RE-2013)/2009-14. - HELD THAT: - The Tribunal applied the principle that a restriction requiring a licence does not amount to a prohibition on importation and therefore does not automatically attract confiscation under Section 111(d). Relying on the Tribunal's decision in International Seaport Dredging Ltd. v. C.C. & S.T., Visakhapatnam, the Bench held that goods cleared after collection of duty on the basis of tariff rate cannot be treated as prohibited merely because they required licence or fell below a DGFT fixed minimum price. The factual matrix showed provisional clearance on payment of duty and no absolute prohibition in force; consequently invocation of Section 111(d) was not sustainable and confiscation could not be upheld. [Paras 4]

Confiscation of the betel nuts under Section 111(d) set aside.

Penalty under Section 112 contingent on goods being liable to confiscation - redemption fine under Section 125 of the Customs Act, 1962 - Whether penalty under Section 112 and redemption fine under Section 125 are imposable once confiscation is held not sustainable. - HELD THAT: - Section 112(a) authorises penalty where an act renders goods liable to confiscation; Section 125 provides for redemption fine consequent to confiscation. Having held that the goods were not liable to confiscation under Section 111(d), the Tribunal found that the statutory foundation for imposing penalty under Section 112(a) and redemption fine under Section 125 was absent. The imposition of both penalty and redemption fine was therefore held to be unjustifiable and liable to be set aside. [Paras 6]

Penalty under Section 112 and redemption fine under Section 125 set aside.

Final Conclusion: The impugned adjudication order is set aside to the extent of confiscation, penalty and redemption fine; the appellant's appeal is allowed with consequential reliefs, if any.

Discharge application - prima facie evidence to frame charge - role of witness statements in prima facie satisfaction - conspiracy - expeditious trial

Discharge application - prima facie evidence to frame charge - role of witness statements in prima facie satisfaction - Application for discharge against the applicant was rightly rejected and charge may be framed as there is sufficient prima facie material. - HELD THAT: - The Court examined the charge-sheet and the statements of prosecution witnesses (Naresh Chandan, Dimple Kamlesh Kanungo and Dheeraj B. Shah). Those statements show that the applicant, a chartered accountant for the parties and WWML Company, suggested and facilitated investments, signed an MOU as a witness, and was involved in transactions through which amounts were transferred. On the limited judicial scrutiny appropriate at the discharge stage, such material is sufficient to create a prima facie satisfaction that the applicant participated in the alleged scheme; therefore the learned Special Judge did not err in refusing discharge. The High Court noted that the proper test at framing is assessment of prima facie materials on record and that detailed merits are for trial. The Court also observed that its remarks do not affect trial merits and recorded that trial is to proceed expeditiously. [Paras 7, 10]

Revision dismissed; no discharge ordered and trial to proceed.

Final Conclusion: The High Court found no merit in the revision against the Special Judge's order rejecting the discharge application, holding that prima facie material in the form of witness statements established a case for framing charge; the revision is rejected and trial to continue expeditiously.

Repayment of deposits accepted before commencement - Enlargement of time by the Tribunal under Section 74(2) - Penal liability for failure to repay under Section 74(3) - Interim protection by the Appellate Tribunal affecting criminal proceedings - Abuse of process where criminal complaint is rendered infructuous by appellate order

Enlargement of time by the Tribunal under Section 74(2) - Interim protection by the Appellate Tribunal affecting criminal proceedings - Penal liability for failure to repay under Section 74(3) - Validity of the summoning order dated 20.09.2016 issued on the complaint of the Registrar of Companies in view of interim orders of the Appellate Tribunal extending the period for repayment up to 31.12.2016. - HELD THAT: - The criminal charge under the penal clause requires proof that the company failed to repay deposits within the period allowed by the Tribunal. An order of the Tribunal granting time is subject to appeal and the Appellate Tribunal may modify that period on appeal. The Appellate Tribunal, while entertaining the appeal, had first stayed coercive steps and subsequently by order dated 03.11.2016 extended the date for payment to depositors up to 31.12.2016. That extension superseded the earlier tribunal order insofar as time allowed by the Tribunal is concerned and thereby rendered the criminal complaint, which had been the basis for cognizance and issuance of process on 20.09.2016, premature and infructuous. Continuation of prosecution after the appellate order would amount to abuse of process of the court. [Paras 8, 10, 11, 12]

Impugned summoning order dated 20.09.2016 is set aside and vacated.

Interim protection by the Appellate Tribunal affecting criminal proceedings - Abuse of process where criminal complaint is rendered infructuous by appellate order - Whether the Registrar of Companies is precluded permanently from initiating criminal proceedings in respect of the same facts. - HELD THAT: - The setting aside of the specific summoning order does not create a bar to fresh criminal action. The Court clarified that nothing in its order inhibits the ROC from initiating criminal proceedings in accordance with law in light of subsequent facts; petitioners retain their legal defences in any such future prosecution. [Paras 13]

ROC remains free to initiate criminal action in accordance with law based on subsequent facts; petitioners' defences are preserved.

Final Conclusion: The petitions are allowed: the summoning order dated 20.09.2016 in CC No.01/2016 is set aside as the Appellate Tribunal's interim order extending the repayment period to 31.12.2016 rendered the complaint premature; this does not bar the Registrar of Companies from instituting fresh proceedings in accordance with law based on subsequent facts.

Classification between financial creditor and operational creditor - Article 14 equality and manifest arbitrariness - Section 29A persons not eligible to be resolution applicant - Section 12A withdrawal of application after admission - information utilities as prima facie evidence of default - resolution professional administrative powers not adjudicatory - committee of creditors composition, voting rights and protection of operational creditors - Section 53 distribution waterfall on liquidation - appointments of NCLT/NCLAT members and compliance with Madras Bar Association judgments - NCLAT circuit benches and administrative control of tribunals

Appointments of NCLT/NCLAT members and compliance with Madras Bar Association judgments - Appointments of members of the NCLT and NCLAT were made in conformity with this Court's directions and need not be set aside; selection process has complied with the Madras Bar Association judgments. - HELD THAT: - The Court considered the challenge that members were appointed contrary to Madras Bar Association (I) and (III). The Union filed an affidavit showing that Selection Committees constituted in 2015 and reconstituted in 2017 (including two Supreme Court Judges and two senior bureaucrats) had made appointments in compliance with this Court's directions; consequently the contention that appointments were invalid was rejected and further detention on that point was unnecessary. [Paras 13]

Challenge to appointments of NCLT/NCLAT members dismissed on the basis that appointments were made in compliance with this Court's directions.

NCLAT circuit benches and administrative control of tribunals - appointments of NCLT/NCLAT members and compliance with Madras Bar Association judgments - NCLAT must establish Circuit Benches and the Union was directed to set them up; administrative support for tribunals should conform to this Court's earlier directions. - HELD THAT: - Relying on Madras Bar Association (II), the Court recorded that the NCLAT having only a seat at New Delhi impairs convenience and efficacious remedy; the Attorney General assured the Court that circuit benches would be constituted. The Court directed the Union to set up Circuit Benches of the NCLAT within six months. The Court also reiterated that administrative support should follow the law declared in Madras Bar Association (I), and called upon the Union to align administration accordingly. [Paras 15, 16, 17, 19]

Directed establishment of NCLAT Circuit Benches within six months and urged compliance with this Court's directions on administrative support for tribunals.

Classification between financial creditor and operational creditor - Article 14 equality and manifest arbitrariness - Classification separating financial creditors from operational creditors is not discriminatory or arbitrary and does not violate Article 14. - HELD THAT: - The Court applied the intelligible differentia test and the doctrine of deference in economic regulation. It held that financial creditors differ from operational creditors in nature of contracts, documentation, number, typical quantum involved, security interest, ability and role in assessing viability and restructuring, and the availability of records in information utilities. These distinctions bear a rational relation to the Code's objects of time bound resolution and maximization of asset value. The Court rejected submissions that the classification was manifestly arbitrary under Shayara Bano, finding the legislative policy and expert committee reasoning (BLRC/ILC) sufficient. The Court also explained procedural safeguards (notice, opportunity to be heard, penalties for mala fide initiation, mechanisms for set off/counterclaim) which mitigate hardship from financial creditor triggered proceedings. [Paras 34, 35, 36, 37, 38]

Classification upheld as constitutionally valid; Article 14 challenge rejected.

Notice, hearing and set-off or counterclaim qua financial debts - information utilities as prima facie evidence of default - Financial creditors are required to furnish evidence and the Adjudicating Authority must give the corporate debtor notice and an opportunity to be heard; information utility records constitute prima facie but rebuttable evidence of default. - HELD THAT: - The Court reviewed Section 7, relevant Rules and NCLT Rules and held that at the stage of admission the Adjudicating Authority must ascertain default from information utility records or other evidence and ensure the corporate debtor receives a copy of the application and opportunity to reply and be heard before admission. Information Utility records are regulated, must authenticate and verify information and communicate with the debtor; such records are prima facie and rebuttable. The Court also noted statutory deterrents against fraudulent initiation and false information, and explained that set offs and counterclaims are preserved for the claims admission process and adjudication under Section 60. [Paras 32, 33, 34, 35, 36]

Procedural safeguards ensured: default based on information utilities is prima facie and corporate debtor has notice and hearing; set offs/counterclaims preserved for claim/adjudication stages.

Committee of creditors composition, voting rights and protection of operational creditors - Article 14 equality and manifest arbitrariness - Excluding operational creditors from voting in the committee of creditors (subject to representation where aggregate dues 10%) and vesting decision making powers in financial creditors does not violate Article 14. - HELD THAT: - The Court examined Sections 21 and 24, the BLRC and Joint Parliamentary Committee reports, and subsequent statutory amendments (authorised representatives, Regulations 16A/16B, Reg. 38). It held financial creditors are best placed to assess viability and restructure debts; operational creditors' interests are protected by the requirement that resolution plans provide at least liquidation value to operational creditors, by Adjudicating Authority oversight, and by regulatory amendments enhancing representation and priority in payment. Expert committee recommendations and regulatory safeguards were relied upon to conclude absence of manifest arbitrariness. [Paras 44, 45, 46, 47, 48]

Committee composition and voting rules upheld; Article 14 challenge by operational creditors rejected.

Section 12A withdrawal of application after admission - committee of creditors composition, voting rights and protection of operational creditors - Section 12A, requiring ninety per cent approval of the committee of creditors for withdrawal of an admitted application, is constitutionally valid. - HELD THAT: - The Court accepted the ILC rationale that once proceedings are in rem they implicate all creditors and that withdrawal post admission should be permitted only with near unanimous creditor consent to protect collective interests. It observed that where the CoC is not yet constituted the NCLT may exercise inherent powers to permit withdrawal in exceptional cases. The Court noted that the committee's decision remains subject to judicial review under Section 60, and Regulation 30A sets procedural safeguards. The ninety per cent threshold was treated as a legislative policy choice not shown to be arbitrary. [Paras 49, 50, 51, 52, 53]

Section 12A upheld; withdrawal post admission requires ninety per cent CoC approval subject to judicial oversight and limited NCLT discretion pre constitution of CoC.

Information utilities as prima facie evidence of default - Evidence held by private information utilities is admissible as prima facie evidence of default and is rebuttable; setting up private IUs is permissible under the Code and Regulations. - HELD THAT: - The Court examined the policy rationale (BLRC) and the Information Utilities Regulations (including authentication, verification and communication requirements). It held information utilities must expeditiously authenticate and notify parties, and their records serve as prima facie evidence of default but remain rebuttable by the corporate debtor. Regulatory safeguards and registration requirements address concerns about private entities holding such information. [Paras 54, 55, 56, 57]

Private information utilities may provide prima facie evidence of default; their records are admissible but rebuttable and subject to regulatory safeguards.

Resolution professional administrative powers not adjudicatory - Resolution professionals do not exercise adjudicatory powers; their functions are administrative and subject to CoC oversight and Adjudicating Authority review. - HELD THAT: - The Court reviewed Sections 18 and CIRP Regulations (regulations on substantiation, verification and determination of claims) and distinguished the role of liquidator (who makes quasi judicial determinations under Sections 38-42). The resolution professional's role is to collect, collate, verify and estimate claims and to facilitate the resolution process; where he forms opinions on preferential/avoidable transactions he must apply to the Adjudicating Authority for relief. The CoC supervises the RP and may replace him; the RP's functions are therefore administrative. [Paras 58, 59, 60, 61]

Resolution professional's powers are administrative and not adjudicatory; any adjudicatory relief lies with the Adjudicating Authority.

Section 29A persons not eligible to be resolution applicant - Section 29A is constitutionally valid in its object and scope, including clause (c) concerning NPAs, clause (j) concerning connected persons, and related provisos and explanations; Section 29A is not retrospective so as to impair vested rights. - HELD THAT: - The Court analysed Section 29A's text, legislative history, the Ordinance and Amendment Act differences, and prior decisions (ArcelorMittal, Chitra Sharma). It held: (a) no vested right exists in a resolution applicant to have its plan considered so the provision is not impermissibly retrospective; (b) Section 29A serves the legitimate objective of excluding undesirable or unfit persons (including those whose past conduct or financial status indicate unfitness) to protect collective creditors' interests and maximize asset value; (c) clause (c)'s one year NPA period aligns with RBI classification (substandard/doubtful) and is a policy choice grounded in RBI norms; (d) clause (j) and the definition of related/connected persons must be read with noscitur a sociis so that only persons connected to the business activity/management are covered, avoiding overbreadth; and (e) the proviso to Section 35(1)(f) (bar on liquidator selling to ineligible persons) follows the same legislative purpose. The Court also noted the ILC and Government responses and legislative amendments exempting MSMEs where appropriate. [Paras 72, 73, 74, 75, 76]

Section 29A upheld as constitutionally valid, with explanations as to scope and application; provisos and explanations to be read in context to avoid overreach.

EXEMPTION OF MICRO, SMALL, AND MEDIUM ENTERPRISES FROM SECTION 29A - Parliament's exemption of MSMEs from clauses (c) and (h) of Section 29A (via Section 240A) is a valid legislative response to practical hardship and has been upheld as an appropriate policy measure. - HELD THAT: - The Court referred to the ILC's findings that MSMEs are economically distinct and may not attract external resolution applicants; to avoid liquidation and protect livelihoods, the Committee recommended exemptions. The Legislature enacted Section 240A with retrospective effect to exclude MSME corporate debtors from certain ineligibility clauses. The Court recognised this as proper executive/legislative monitoring and remedial action in the Code's implementation. [Paras 77, 78, 79, 80, 81]

MSME exemptions from parts of Section 29A validated as permissible legislative policy.

Section 53 distribution waterfall on liquidation - Article 14 equality and manifest arbitrariness - Section 53's priority scheme for distribution on liquidation is constitutionally valid and not violative of Article 14. - HELD THAT: - Relying on the BLRC rationale and comparative international practice, the Court held the Code's waterfall (insolvency costs, secured and certain priority debts, unsecured financial creditors, government dues, remaining debts, then shareholders) serves the legislative purpose of promoting availability of credit, developing markets for unsecured financing, and maximizing recoveries. Differentiation between secured financial debts and unsecured operational debts is an intelligible policy choice with relation to the Code's object. The existing priority for workmen's dues and employee protection further mitigates concerns. [Paras 82, 83, 84]

Section 53 upheld; distribution order on liquidation not arbitrary or discriminatory under Article 14.

Final Conclusion: The constitutional challenges to the Insolvency and Bankruptcy Code, 2016 and to the impugned provisions examined in these petitions are rejected; the Code and the challenged provisions (including classification of creditors, Section 29A, Section 12A, information utility regime, committee of creditors rules, powers of resolution professionals, and Section 53) are upheld subject to the Court's directions (including establishment of NCLAT Circuit Benches and adherence to administrative prescriptions). All petitions are disposed of in terms of this judgment; no order as to costs.

Assignment of debt - related party - committee of creditors - verification and admission of claims by resolution professional - validity of resolution plan - registration under the Registration Act - overriding effect of the Insolvency and Bankruptcy Code - compulsory registration and stamping

Assignment of debt - registration under the Registration Act - compulsory registration and stamping - verification and admission of claims by resolution professional - Validity of the assignment agreements dated 24th November, 2016 by which Synergies Castings Limited purportedly assigned debts to Millennium Finance Limited, and the consequent entitlement of Millennium Finance Limited to be a voting financial creditor. - HELD THAT: - The Tribunal examined the three assignment agreements and the contemporaneous creation of charges in Form CHG-I, noting that the assignments were executed on 24th November, 2016 and subsequently registered (with payment of prescribed fines for delayed presentation). The court accepted that registration under the Registration Act relates back to date of execution and that creation of charge with the Registrar of Companies constituted contemporaneous third party evidence of transfer. There was no material or cogent evidence of fraud or mala fides placed on record to vitiate the transactions. The Adjudicating Authority was therefore justified in treating Millennium Finance Limited as having acquired rights under the assignments and in admitting its claim; the resolution professional's verification and admission (and constitution of the Committee of Creditors giving voting rights to Millennium Finance Limited) was held to be in order on the facts. The Tribunal rejected the contention that proximity of the assignments to repeal of SICA or questions pending before BIFR rendered the assignments invalid or barred admission. [Paras 63, 64, 65, 66, 69]

The assignment agreements dated 24th November, 2016 are valid and enforceable; Millennium Finance Limited was a competent financial creditor entitled to participate in the Committee of Creditors.

Validity of resolution plan - committee of creditors - overriding effect of the Insolvency and Bankruptcy Code - Legality of the Adjudicating Authority's approval of the Resolution Plan submitted by Synergies Castings Limited and whether the plan violated provisions of other laws (including sections 230-232 of the Companies Act) or section 30(2) of the I&B Code. - HELD THAT: - The Tribunal held that a Resolution Plan approved by the Committee of Creditors and sanctioned under section 31 of the I&B Code is binding on stakeholders. Proposals in a resolution plan for merger or amalgamation are permissible under the Code and Regulation 37; objections based on the need for prior orders under sections 230-232 of the Companies Act cannot be sustained at the approval stage because the I&B Code is a self-contained code with overriding effect where conflict arises. The Tribunal found no infirmity in the Adjudicating Authority's approval of the plan on these grounds and noted the plan had overwhelming creditor approval; procedural or interlocutory objections to the conduct of creditors or to antecedent transactions did not vitiate the approval in the absence of cogent proof. [Paras 70, 71, 72, 73]

The Adjudicating Authority's approval of the Synergies Castings Limited Resolution Plan is lawful and sustainable; the objections based on Companies Act provisions and related contentions are rejected.

Final Conclusion: The appeals are dismissed. The assignment deeds dated 24th November, 2016 in favour of Millennium Finance Limited are held validly executed and registered and Millennium Finance Limited was properly admitted as a voting financial creditor; the Resolution Plan of Synergies Castings Limited approved by the Committee of Creditors and sanctioned by the Adjudicating Authority is lawful and is affirmed.

Voting share - committee of creditors (CoC) - present and voting - majority versus threshold voting - authorized representative - purposive interpretation - deadlock in CIRP - en-bloc / proportional representation of a creditor class - exceptions for withdrawal, approval of resolution plan and liquidation

Voting share - committee of creditors (CoC) - majority versus threshold voting - deadlock in CIRP - en-bloc / proportional representation of a creditor class - exceptions for withdrawal, approval of resolution plan and liquidation - Procedure for determining voting share for passing resolutions in a Committee of Creditors comprising multiple classes of financial creditors where a Real Estate/Home Buyers class holds 50% or more voting share and a deadlock has arisen - HELD THAT: - The Bench recorded a difference of opinion and did not pronounce a binding interpretation. The Judicial Member opined that where the CoC comprises a Real Estate/Home Buyers class holding 50% or more of voting share and there is a deadlock in passing resolutions, the resolution supported by the highest voting share in favour should be treated as passed for continuing CIRP, except in respect of withdrawal of applications, approval of a resolution plan and liquidation, which must still meet the statutory thresholds. The Technical Member opined that Home Buyers should be treated as a separate homogenous class with en-bloc/proportional representation: votes actually cast by members of that class should be proportionately scaled up to represent the class as a whole (subject to a proposed minimum representative participation threshold), thereby avoiding dilution of Home Buyers' collective voice while retaining the statutory thresholds for critical decisions. Both opinions arise from concern that large-scale non-participation by thousands of dispersed and unorganised Home Buyers has created a practical deadlock that frustrates the objects of the I&B Code and the Amendment Act. The Tribunal therefore concluded that the legal and procedural question requires determination by other Members of the Tribunal under section 419(5) of the Companies Act read with Rule 60 of the NCLT Rules, rather than being finally decided in this order. [Paras 56, 57, 58, 63]

Matter referred to the Hon'ble President, NCLT, New Delhi under section 419(5) of the Companies Act read with Rule 60 of the NCLT Rules for hearing by one or more other Members on the procedure to determine voting share for passing resolutions in a multi-class CoC where a Real Estate/Home Buyers class holds 50% or more and a deadlock exists.

Final Conclusion: CA Nos. 223/2018 and 266/2018 disposed by referring the disputed question on the procedure for determining voting share in a multi-class CoC (where Real Estate/Home Buyers hold majority and a deadlock exists) to the Hon'ble President, NCLT for consideration by one or more other Members; liberty granted to seek exclusion of time for CIRP if necessary.

Distribution methodology among financial creditors - classification of financial creditors based on security interest - discrimination among similarly situated financial creditors - estoppel and acquiescence arising from Committee of Creditors' voting - Committee of Creditors' commercial decision-making by majority vote - approval of a resolution plan under Section 31 - compliance with Section 30(2) and IBBI Regulations (Regulation 38/39) - exclusion of pendency period of inter-party litigation for counting CIRP period

Estoppel and acquiescence arising from Committee of Creditors' voting - distribution methodology among financial creditors - Maintainability of CA(IB) No.1092/KB/2018 challenging the distribution methodology approved by the CoC - HELD THAT: - The application challenging the distribution methodology was held not maintainable. The CoC resolution approving the methodology was passed on 21/04/2018 by a substantial majority and IFCI had voted in favour while SREI had abstained. The Tribunal applied the principles of estoppel/waiver/acquiescence: a party which elected or consented to a methodology by vote cannot later resile from that choice absent a statutory bar or public interest. No provision of the Code or Regulations was shown to render the approved methodology illegal at the time of the vote, and the objectors had opportunity to challenge the methodology earlier including before the Appellate Tribunal when plans were reconsidered. On these grounds the objection was barred and the IA was dismissed. [Paras 28, 31, 35]

CA(IB) No.1092/KB/2018 is not maintainable and is dismissed.

Classification of financial creditors based on security interest - discrimination among similarly situated financial creditors - Committee of Creditors' commercial decision-making by majority vote - Whether the distribution methodology that classifies creditors according to security interest and then allocates remaining amounts by voting share is discriminatory or contrary to the Code/Regulations - HELD THAT: - The Tribunal found that classification of creditors according to the nature and rank of security interest is an established commercial concept and not per se illegal. The decisions in Binani and Sirpur Paper Mills were examined and distinguished: those authorities condemned discrimination between similarly situated creditors; here the financial creditors were not similarly situated as many held differing secured interests (first charge, second charge, unsecured etc.). The CoC's methodology provided for distribution up to liquidation value respecting security ranking and for sharing any remaining amount pro rata by voting share. No provision of the Code or Regulations was shown to prohibit such classification at CIRP stage; the CoC, acting by majority, may adopt a commercially reasoned distribution methodology. Consequently the challenged methodology was not held to be arbitrary or discriminatory. [Paras 36, 40, 43, 49]

The distribution methodology is not discriminatory or contrary to the Code or Regulations and need not be disturbed.

Compliance with Section 30(2) and IBBI Regulations (Regulation 38/39) - approval of a resolution plan under Section 31 - Whether the Restated Final Resolution Plan of Bhagwati Power & Steel Ltd. meets statutory/regulatory requirements and is approvable - HELD THAT: - The Tribunal screened the resolution plan and found it to satisfy the mandatory contents stipulated by the Code and Regulations (including treatment of insolvency costs, operational creditors, management and implementation arrangements, Form H and affidavits under Section 29A). The plan was found to be fair, equitable and not discriminatory to the objecting financial creditors. Having regard to compliance with Section 30(2) and applicable IBBI Regulations, the Tribunal concluded that the plan merited approval and exercised its power under Section 31(1) to approve the plan. [Paras 52, 53, 55]

The Resolution Plan of Bhagwati Power & Steel Limited is approved under Section 31(1).

Exclusion of pendency period of inter-party litigation for counting CIRP period - Whether the period of inter-party litigation before the Appellate Tribunal is to be excluded for counting the 270-day CIRP timeline and whether the approval application was filed within time - HELD THAT: - Relying on the Appellate Tribunal's directions, the Tribunal excluded the period of inter-party litigation between 28/04/2018 and 13/11/2018 (199 days) for the purpose of computing the 270-day CIRP period. After exclusion, the extended CIRP period was held to expire on 04/12/2018 and the Resolution Professional's filing of the approval application on 26/11/2018 fell within the extended timeline. Accordingly, the plan was held to have been filed in time. [Paras 54]

The inter-party litigation period of 199 days is excluded and the Resolution Plan was filed within the CIRP period.

Final Conclusion: The Tribunal dismissed the challenge to the CoC's distribution methodology as not maintainable and not discriminatory, excluded the inter party litigation period for CIRP timeline computation, held the approval application to be within time, and approved the Resolution Plan of Bhagwati Power & Steel Limited under Section 31(1).

Initiation of corporate insolvency resolution process by financial creditor - Financial creditor - home buyers/allottees deemed financial creditors - Financial Debt - amounts raised from allottees have commercial effect of a borrowing - Admission under Section 7(5)(a) - satisfaction of default and completeness of application - Estoppel against corporate debtor resisting earlier conduct - Appointment of Interim Resolution Professional - Moratorium under Section 14

Financial creditor - home buyers/allottees deemed financial creditors - Financial Debt - amounts raised from allottees have commercial effect of a borrowing - The petitioners (home buyers/allottees) are financial creditors covered by the amended definition and the amounts raised from them constitute financial debt. - HELD THAT: - The Tribunal noted that the Insolvency and Bankruptcy Code was amended (effective 06.06.2018) to treat amounts raised from allottees under a real estate project as having the commercial effect of a borrowing and to recognise allottees as "Financial Creditors." Applying this amendment to the facts, the petitioners who paid the sale consideration under the allotment agreement fall within the amended definition and thereby qualify as financial creditors entitled to invoke Section 7. The Tribunal also relied on the Appellate Tribunal's observation that an allottee under a real estate project is to be regarded as a financial creditor after the amendment. Therefore the petitioners are financial creditors for the purposes of initiating CIRP against the corporate debtor. [Paras 15, 16, 17, 18]

Petitioners are financial creditors and the amounts paid by them constitute financial debt.

Admission under Section 7(5)(a) - satisfaction of default and completeness of application - Initiation of corporate insolvency resolution process by financial creditor - The application under Section 7 is complete, a default has occurred exceeding the statutory threshold, and the petition is admitted under Section 7(5)(a). - HELD THAT: - The Tribunal examined Section 7(2) and Section 7(5)(a) requirements and the prescribed form and manner under the Rules. It found the application filed on the prescribed form and that the proposed resolution professional had made the necessary disclosures and had no disciplinary proceedings pending. On the material, the Tribunal was satisfied that a default amounting to more than the statutory minimum had occurred. Accordingly, the application was found complete and, pursuant to Section 7(5)(a), admission was warranted. [Paras 13, 14, 22, 23]

Application under Section 7 is admitted as complete and a default exceeding the threshold is established.

Estoppel against corporate debtor resisting earlier conduct - The objection that the second applicant was not a joint allottee because his signature was absent on the agreement is rejected on the basis of estoppel given the corporate debtor's prior conduct. - HELD THAT: - The Tribunal observed that the corporate debtor had itself sent cheques and deducted TDS in favour of the second applicant, and had filed Form 16A indicating payments to him. In these circumstances the corporate debtor cannot take a contrary stand regarding the absence of the co-allottee's signature; principles akin to estoppel apply. Therefore the plea of non-execution by the second applicant was held to be without substance and rejected. [Paras 8, 10, 19]

Objection based on absence of co-allottee's signature is rejected; corporate debtor estopped from denying status of applicant No.2.

Admission under Section 7(5)(a) - satisfaction of default and completeness of application - Objection as to calculation of default is left open for the Committee of Creditors (COC) or subsequent proceedings; it does not defeat the admission. - HELD THAT: - The Tribunal noted that Section 4 requires only that the default be at least the statutory minimum and that, since default in the present case is in lakhs, the challenge to the computation does not preclude admission. Calculation disputes were held to be matters that can be decided later (for instance by the COC) and therefore did not merit rejection of the application at the admission stage. [Paras 20]

Objection regarding calculation is not a ground to decline admission and is left open for subsequent consideration.

Appointment of Interim Resolution Professional - Moratorium under Section 14 - An Interim Resolution Professional is appointed and moratorium under Section 14 is declared with directions for public announcement and duties of the IRP. - HELD THAT: - Upon admission, the Tribunal appointed the proposed resolution professional as Interim Resolution Professional and directed him to make the public announcement within the period specified in the IBBI Regulations. The Tribunal declared the moratorium and recited the prohibitions flowing from Section 14(1)(a)-(d). It also set out obligations and duties incumbent on the IRP under the Code and directed communication of the order to relevant parties and the Registrar of Companies for updating records. [Paras 24, 25, 26, 28, 29]

Interim Resolution Professional appointed; moratorium declared and directions issued for public announcement and IRP duties.

Final Conclusion: The petition filed by the allottees is admitted under Section 7(5)(a) of the Code: the petitioners are financial creditors, a default exceeding the statutory threshold is established, an Interim Resolution Professional is appointed and moratorium under Section 14 is declared; computation disputes and other quantification issues are left open for the appropriate fora during the CIRP.

Maintainability of joint application under Section 7 of the I&B Code - treatment of collaborating corporate entities as a single composite entity for initiation of CIRP - agency/empowerment of developer to act on behalf of land owner under collaboration agreement - remand for admission and verification by Adjudicating Authority

Maintainability of joint application under Section 7 of the I&B Code - treatment of collaborating corporate entities as a single composite entity for initiation of CIRP - agency/empowerment of developer to act on behalf of land owner under collaboration agreement - Whether an application under Section 7 of the Insolvency and Bankruptcy Code filed jointly against two corporate debtors who have collaborated for a joint venture project is maintainable. - HELD THAT: - The Tribunal held that where two corporate entities (developer and land owner) have entered into a collaboration agreement and have operated and presented the project jointly (including marketing, sale and power of attorney/authority to the developer), they can be treated jointly for the purpose of initiating the Corporate Insolvency Resolution Process under Section 7. The collaboration agreement conferred rights on the developer to undertake development, marketing and to receive sale proceeds and to act for certain purposes on behalf of the land owner; the parties to the project were referred to collectively as the "Company" in subsequent understandings with allottees. On these facts the 2nd respondent could not disown the transaction merely because it was not a signatory to the MOU relied upon by the allottee, the developer having been empowered under the collaboration arrangements to represent the joint venture. Consequently a petition under Section 7 is maintainable jointly against both corporate debtors where they have formed and acted as a joint venture/collaborative corporate unit in respect of the project. [Paras 11, 12, 14, 15, 16]

Application under Section 7 is maintainable jointly against the two corporate debtors who collaborated on the project; they may be treated jointly for initiation of CIRP.

Remand for admission and verification by Adjudicating Authority - What is the appropriate procedural direction following the finding on maintainability. - HELD THAT: - The Tribunal set aside the Adjudicating Authority's order dismissing the petition on the ground of non maintainability and remitted the matter to the Adjudicating Authority, New Delhi Bench, to proceed with admission if the record is complete after notice to the parties. The respondents were permitted the opportunity to settle the matter before admission and the allottee may withdraw the petition in case of settlement. The remand is for the Adjudicating Authority to consider admission in light of the Tribunal's determinative finding on joint maintainability and after completing the usual procedural steps. [Paras 13, 16]

Impugned order set aside and the case remitted to the Adjudicating Authority for admission if records are complete, after notice; parties may settle prior to admission.

Final Conclusion: The appeal is allowed: the Tribunal held a joint Section 7 petition maintainable against two collaborating corporate debtors who jointly conducted the project (developer empowered to act for the land owner), set aside the Adjudicating Authority's rejection, and remitted the matter to the Adjudicating Authority for admission after notice, leaving the parties free to settle before admission.

Appeal against order under Section 51 of FERA - Appellate Tribunal under Section 19 of FEMA - Special Director (Appeals) under Section 17 of FEMA - Transfer of pending appeals on repeal - Construction of repeal and saving provisions - Purposive interpretation to avoid anomalous results - Hierarchy of appellate authorities

Appeal against order under Section 51 of FERA - Appellate Tribunal under Section 19 of FEMA - Special Director (Appeals) under Section 17 of FEMA - Transfer of pending appeals on repeal - Construction of repeal and saving provisions - Purposive interpretation to avoid anomalous results - Appeal arising from an adjudication order passed under Section 51 of FERA, 1973 after repeal, lies before the Appellate Tribunal under Section 19 of FEMA and not before the Special Director (Appeals) under Section 17 of FEMA. - HELD THAT: - The Court held that appeals filed after the repeal of FERA (01.06.2000) against orders passed under Section 51 of FERA in proceedings initiated under FERA lie before the Appellate Tribunal under Section 19 of FEMA. The reasoning is: (a) under FERA an order under Section 51 was appealable to the Appellate Board under Section 52(2); (b) Section 49(5)(b) of FEMA specifically transfers appeals pending before the Appellate Board to the Appellate Tribunal constituted under FEMA, reflecting legislative intent that such adjudications be dealt with by a single appellate authority; (c) by parity and a fortiori reasoning, appeals filed after repeal against comparable Section 51 orders must likewise lie before the Appellate Tribunal and not be split between two appellate fora; (d) Section 81(c) of earlier FERA and the comparable saving/transfer provisions support interpreting the new scheme to avoid creating two separate appellate routes for identical orders; (e) practical and hierarchical considerations-the Special Director (Appeals) being subordinate to the Appellate Tribunal-and the anomalous consequence that one appellant would have a right of appeal to the High Court while another (whose appeal was heard by the Special Director) would not, further support a purposive construction favouring the Appellate Tribunal; (f) accordingly the High Court's view that the Special Director (Appeals) had jurisdiction was rejected and the appeals filed before the Special Director were ordered transferred to the Appellate Tribunal for disposal on merits. [Paras 31, 37, 40, 41, 42]

The appeals against the adjudication order dated 05.12.2003 under Section 51 of FERA are maintainable only before the Appellate Tribunal under Section 19 of FEMA; the appeals filed before the Special Director (Appeals) are transferred to the Appellate Tribunal.

Final Conclusion: The appeal is allowed; the High Court's order is set aside and the appeals filed before the Special Director (Appeals) are transferred to the Appellate Tribunal constituted under FEMA for disposal on merits in accordance with law.

Simultaneous imposition of penalties under Section 76 and Section 78 - retrospective effect of a clarificatory amendment - remand for adjudication where a finding is recorded but no penalty order is passed - penal liability for non-declaration, non-filing of returns and failure to obtain centralized registration

Simultaneous imposition of penalties under Section 76 and Section 78 - retrospective effect of a clarificatory amendment - Validity of seeking imposition of penalty under Section 76 where penalty under Section 78 has been imposed. - HELD THAT: - The Tribunal noted settled law that penalty under Section 78 and Section 76 cannot be imposed simultaneously. It relied on the decision of the High Court holding that the amendment precluding imposition of Section 76 when Section 78 is imposed is clarificatory and retrospective, and that subsequent High Court follow-up supports the principle. Applying that principle to the present facts, where the adjudicating authority has imposed penalty under Section 78, any imposition of penalty under Section 76 is impermissible.

Revenue's appeal seeking imposition of penalty under Section 76 is dismissed; the setting aside of penalty under Section 76 is legal and proper.

Penal liability for non-declaration, non-filing of returns and failure to obtain centralized registration - remand for adjudication where a finding is recorded but no penalty order is passed - Whether penalty under Section 77 should be imposed where the adjudicating authority recorded findings of non-declaration, non-filing and lack of centralized registration but did not pass an order imposing penalty. - HELD THAT: - The adjudicating authority recorded a clear finding identifying conduct constituting the requisites for penal action under Section 77 (non-declaration of service charges, non-filing of ST-3 returns for the stated period, and failure to obtain centralized service tax registration). However, no penalty order under Section 77 was actually passed. In view of the recorded finding and absence of an adjudicatory order on penalty, the Tribunal remanded the matter to the adjudicating authority for it to pass an appropriate order on Section 77, thereby leaving the question of imposition and quantum for fresh adjudication. [Paras 35]

Issue of penalty under Section 77 is remanded to the adjudicating authority for passing a reasoned order in accordance with law.

Final Conclusion: The appeal is disposed: the Revenue's plea for penalty under Section 76 is dismissed because penalty under Section 78 has been validly imposed; the question of penalty under Section 77 is remanded to the adjudicating authority for adjudication in light of the recorded findings.

Attachment of property for recovery of government dues - service of notice under rule 4 of the Recovery Rules - authority to subordinate officer to serve notice - proportionality in attachment (rule 6 of the Recovery Rules) - interim relief restraining enforcement of attachment

Amendment of pleadings - The amendment sought by the petitioner was allowed in terms of the draft. - HELD THAT: - The learned advocate for the petitioner tendered a draft amendment which the Court permitted. The order records that the amendment is allowed and shall be carried out forthwith, thereby permitting the petitioner to amend its pleadings as presented to the Court.

Amendment allowed in terms of the draft and to be carried out forthwith.

Attachment of property for recovery of government dues - service of notice under rule 4 of the Recovery Rules - proportionality in attachment (rule 6 of the Recovery Rules) - interim relief restraining enforcement of attachment - Whether the attachment order dated 8.1.2019 should be stayed preliminarily pending further adjudication. - HELD THAT: - The petitioner submitted that no notice as required by rule 4 of the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995 was served and that attachment under rule 5 could not validly follow; it also contended that the property attached was disproportionate to the dues sought to be recovered, contrary to rule 6. Having considered these contentions, the Court issued notice returnable on 31st January, 2019 and, by way of ad-interim relief, restrained the respondents from proceeding further pursuant to the attachment order dated 8.1.2019. The order thereby preserves the petitioner's position for adjudication while requiring the respondents to refrain from enforcement steps until the returnable date.

Notice issued returnable 31st January, 2019 and respondents restrained from proceeding further pursuant to the attachment order dated 8.1.2019 (ad-interim relief).

Service of process on respondents - Permission for direct service on respondents No.1 and 2 was granted. - HELD THAT: - The Court permitted direct service on the respondents No.1 and 2 on the date of the order to ensure their notice of these proceedings and of the interim restraint.

Direct service on respondents No.1 and 2 permitted.

Final Conclusion: The Court allowed the petitioner's amendment, issued notice returnable 31st January, 2019 on the challenge to the attachment dated 8.1.2019, granted ad interim restraint against further action pursuant to that attachment, and permitted direct service on respondents No.1 and 2.

Cenvat Credit - input service - used in relation to the manufacture of final product - maintenance and repair services as admissible input services - testing, inspection and analysis as input services

Cenvat Credit - input service - used in relation to the manufacture of final product - maintenance and repair services as admissible input services - testing, inspection and analysis as input services - Entitlement to Cenvat credit in respect of various services (maintenance of computers, software upgrades and training, calibration, testing of power cables, server maintenance, testing, inspection and analysis, website maintenance, office maintenance, disinfection of wooden boxes, repair of electric motors, repair and maintenance of crane, maintenance of air conditioners, and fitting of bolts on equipment) used in the appellant's manufacturing operations. - HELD THAT: - The Tribunal found that the disputed services were used by the appellant in relation to the manufacture of the final product and therefore qualify as input services under the Cenvat Credit Rules. Maintenance of computers, software upgrades, training on software enhancement and calibration were held integral to computer/software functioning necessary for factory operations. Testing of power cables and maintenance of servers were held to be routine and essential for uninterrupted manufacturing. Testing, inspection and analysis were held to be routine manufacturing necessities. Website maintenance and office maintenance services, disinfection of wooden boxes used for packing, repair of electric motors used in production, repair and maintenance of cranes used for internal loading/unloading, maintenance of air conditioners installed in the plant, and services for fitting bolts on equipment were each held to be essential for running the manufacturing operations and directly related to manufacture. On these grounds, there was no reason to deny Cenvat credit and the impugned order was set aside allowing the appeal. [Paras 4]

All the disputed services are input services used in relation to manufacture and Cenvat credit is admissible; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allows the appeal, holding that the disputed services qualify as input services used in relation to the manufacture of the final product and that Cenvat credit is admissible; the impugned order is set aside.

Cenvat Credit - rent-a-cab service exclusion - capital goods - definition of capital goods under Rule 2(a)(B) - input service

Cenvat Credit - rent-a-cab service exclusion - capital goods - input service - Entitlement to Cenvat credit on rent-a-cab service where the rented motor vehicles are capital goods - HELD THAT: - The Tribunal examined the exclusion to input services which disallows Cenvat credit for "rent a cab service provided by way of renting of motor vehicle... insofar as it is not a capital goods." The records established that the vehicles taken on rent by the appellant fall within the definition of capital goods as set out in Rule 2(a)(B). Since the exclusion applies only where the rented motor vehicle is not a capital good, the rent-a-cab service in the present facts does not fall within the exclusion. The Tribunal relied on and followed its earlier decision in AIA Engineering Ltd. which applied the same construction of the exclusion and held rent-a-cab to be an admissible input service when the vehicle is a capital good. On that basis the impugned denial of Cenvat credit was set aside and credit allowed.

Denial of Cenvat credit on rent-a-cab service set aside; Cenvat credit allowed as the rented vehicles are capital goods and the exclusion does not apply.

Final Conclusion: Appeal allowed: Cenvat credit on rent-a-cab service admitted because the rented motor vehicles qualify as capital goods and therefore the statutory exclusion for rent-a-cab services (applicable only where the vehicle is not a capital good) is inapplicable.

Transit Declaration Form (TDF) - Presumption under Section 52 and Rule 58 - Rebuttable presumption - Machinery provision - Power to seize goods under Section 50 and Section 48 - Burden of proof to rebut presumption - Requirement of opportunity of hearing before seizure

Transit Declaration Form (TDF) - Presumption under Section 52 and Rule 58 - Rebuttable presumption - Whether the judgments in M/s Prakash Transport Corporation and M/s S.B. International lay down the correct general proposition of law regarding non production of TDF and the presumption under Section 52/Rule 58. - HELD THAT: - The Court held that neither decision establishes a binding general proposition. The Single Judge view in Prakash Transport that goods cannot be seized merely for absence of TDF was confined to that case's facts where other documents were genuine and the presumption was effectively rebutted. The S.B. International decision proceeded largely on parties' concession and did not examine the statutory scheme to lay down a rule of universal application. The statutory scheme and precedents (including discussion in Sodi Transport) show that the provision creates a rule of evidence raising a presumption in favour of revenue which is rebuttable; therefore isolated factual rulings or concession based orders do not supplant the statutory principle.

Neither judgment is a precedent laying down a general rule; Prakash Transport is fact specific and S.B. International proceeded on concession and neither displaces the statutory principle of a rebuttable presumption.

Transit Declaration Form (TDF) - Machinery provision - Power to seize goods under Section 50 and Section 48 - Burden of proof to rebut presumption - Requirement of opportunity of hearing before seizure - Whether production of TDF is mandatory and whether absence of TDF mandates drawing the conclusion that goods are sold within the State and authorises seizure as a matter of course. - HELD THAT: - The Court concluded that the obligation to carry and produce TDF is a machinery requirement: its production during transit prevents the authorities from drawing the statutory presumption under Section 52/Rule 58. However, absence of TDF only gives rise to a rebuttable presumption that the goods are meant for sale within the State. Seizure is not automatic on mere non production; Section 50(4), Rule 55 and Section 48 require a prima facie satisfaction, after giving the person an opportunity of hearing, that goods are being transported in an attempt to evade tax or that accompanying documents are false, incorrect, incomplete or invalid. At the show cause stage a short, practicable opportunity should be afforded (the Court suggested 48 hours to a week) to produce cogent, reliable evidence (for example pre existing TDF or other unimpeachable documents) to rebut the presumption; if satisfied, the seizing authority must discharge the notice. If the explanation is not satisfactory, seizure may follow and the statutory scheme provides for deposit/security and subsequent penalty proceedings where fuller evidence can be led.

Carrying TDF is a mandatory machinery requirement that avoids the presumption, but absence of TDF only raises a rebuttable presumption; authorities may seize goods only after a hearing and prima facie satisfaction of attempted evasion or invalidity/incompleteness of documents, and the person may rebut the presumption both at seizure stage (within a short timeframe) and more fully during penalty proceedings.

Final Conclusion: Reference answered: neither of the two earlier decisions lays down a general proposition of law; the TDF regime is a machinery provision - production during transit prevents the statutory presumption, but non production only raises a rebuttable presumption. Seizure is permissible only after a hearing and prima facie satisfaction of attempted evasion or defective/invalid documents, and the person in charge may rebut the presumption at the seizure stage (within a short timeframe) and more fully in penalty proceedings.

Grant of bail - parity as ground for bail - possession-based recovery as ground for denial of bail - charge-sheet not a determinative change of circumstance - expedited trial and liberty to renew bail

Grant of bail - parity as ground for bail - possession-based recovery as ground for denial of bail - charge-sheet not a determinative change of circumstance - Second bail application of the accused-applicant, Saurabh Pandey, during pendency of trial - HELD THAT: - The Court examined whether the accused-applicant should be released on bail in light of (a) prior rejection of his first bail application, (b) subsequent grant of bail to several co-accused, and (c) the prosecution material including alleged recovery of bribe money from the accused-applicant and intercepted conversation. The Court found that the prosecution case contains evidence that the accused-applicant had knowledge of and accepted the bribe of Rs. 1,50,000/-, that the amount was recovered from his possession in open condition in presence of independent witnesses, and that intercepted communications corroborate his awareness. These facts distinguish his role from co-accused who were granted bail. The Court further held that filing of the charge-sheet was not a new circumstance, since it existed at the time the first bail application was rejected, and therefore does not constitute a substantial change entitling the accused to bail. On this basis the plea of parity was rejected as inapplicable to the accused-applicant whose possession-based recovery and incriminating material render his case distinguishable and grave vis-a -vis those released on bail.

Bail application rejected.

Expedited trial and liberty to renew bail - Directions regarding trial conduct and future bail application if trial is not concluded - HELD THAT: - The Court directed the trial court to expedite the trial and make all endeavours to conclude it as early as possible. The Court granted the accused-applicant liberty to move again for bail before the appropriate court if the trial is not concluded within one year from the date of the order.

Trial court directed to expedite trial; accused may renew bail application if trial not concluded within one year.

Final Conclusion: The second bail application of Saurabh Pandey is dismissed: the recovery of bribe money from his possession and corroborative material distinguish his case from co-accused granted parity bail; the trial court is directed to expedite the trial and the accused is permitted to seek bail again if trial is not completed within one year.

Rebuttable presumption under section 118 read with section 139 of the Negotiable Instruments Act - legally enforceable debt or liability for the purpose of section 138 - acquittal on benefit of doubt where presumption is rebutted

Rebuttable presumption under section 118 read with section 139 of the Negotiable Instruments Act - legally enforceable debt or liability for the purpose of section 138 - Whether the presumption that the cheque was issued in discharge of a legally enforceable debt or liability stood rebutted and thereby the accused was entitled to acquittal under section 138 of the Negotiable Instruments Act. - HELD THAT: - The Court examined the complainant's admissions that he had an ongoing business relationship with the company of which the accused was a director, that payments from the company were ordinarily by pay order/cheque/DD and that a demand draft for the disputed amount was handed over by the company on 25.8.2001. Having regard to the explanation to section 138, the offence is attracted only if a legally enforceable debt or liability subsisted on the date of drawal of the cheque. The Court held that, on the preponderance of probabilities and on the basis of the complainant's own admissions, it could not be positively concluded that the cheque was drawn to discharge any existing legally enforceable personal liability of the accused. The factual matrix indicated that the payment in question related to the company and that the complainant did not clarify that the demand draft was a separate transaction unconnected with the cheque. On these findings the trial court's drawing of the statutory presumption was rebutted. The Court further noted that the accused had deposited the disputed sum in Court and directed appropriate civil proceedings if necessary for recovery of that amount, but that the criminal presumption having been rebutted, conviction under section 138 could not stand. [Paras 6, 9, 10]

Statutory presumption under section 118 read with section 139 was rebutted on preponderance of probabilities and the accused was entitled to benefit of doubt leading to acquittal under section 138.

Final Conclusion: Criminal Revision allowed; convictions and sentences under section 138 of the Negotiable Instruments Act recorded by the trial and appellate courts were quashed and set aside, and the applicant/accused was acquitted. Directions issued regarding refund/realisation of any amount deposited in Court and civil remedy for recovery, if applicable.

Offence under Section 138 of the Negotiable Instruments Act - Acquittal upheld on appreciation of evidence - Forgery and fabrication of documents - Misuse of blank cheque - Costs for wrongful prosecution - Duty of appreciation of documentary and oral evidence

Offence under Section 138 of the Negotiable Instruments Act - Acquittal upheld on appreciation of evidence - Misuse of blank cheque - Duty of appreciation of documentary and oral evidence - Leave to appeal against the judgment acquitting respondent no.1 under Section 138 was refused and the acquittal was upheld. - HELD THAT: - The High Court found that the trial Judge had correctly appreciated documentary and oral evidence and recorded findings in consonance with the record. Material findings include that the complainant/ applicant had issued a blank cheque in favour of LIC which was later misused; the complainant produced a photocopy of the cheque made before submission for the policy; parallel ATM withdrawals and other documentary discrepancies undermined the complainant's account; the complainant had himself been the subject of a complaint to LIC and was demoted after enquiry. The Court accepted the trial Court's conclusion that the applicant had cheated and had fabricated documents (including the so-called 'Ekrar Nama'), and that the prosecution of respondent no.1 was unsustainable. On these grounds the application for leave to appeal was dismissed and the acquittal maintained. [Paras 8, 9]

Application for leave to appeal dismissed; acquittal of respondent no.1 under Section 138 is maintained.

Forgery and fabrication of documents - Costs for wrongful prosecution - The applicant was held responsible for fabrication and forgery in the prosecution of respondent no.1 and ordered to pay costs to respondent no.1. - HELD THAT: - The Court recorded that the prosecution caused respondent no.1 to undergo an ordeal of trial for about ten years and that the evidence indicated fabrication of documents by the complainant, including a forged 'Ekrar Nama'. In view of the wrongful prosecution and the findings on fabrication, the Court imposed costs on the applicant and directed payment to the respondent. The Court also noted that LIC and others retained rights to initiate further criminal proceedings against the applicant for forgery and fabrication, without prejudicing the present order. [Paras 9, 13, 14, 15]

Applicant directed to pay costs of Rs.25,000 to respondent no.1 within eight weeks; respondent permitted to apply for withdrawal of the amount; rights of LIC/accused to pursue other proceedings preserved.

Administrative notice to corporation employing the agent - Protection of public faith in insurance relationships - A copy of the judgment was directed to be sent to the Life Insurance Corporation of India and its Branch Office for administrative action regarding the agent. - HELD THAT: - Given the findings of malpractices by the applicant in his capacity as an LIC agent and the impact on public trust in the insurer, the Court ordered that the judgment and order be forwarded to LIC's registered office and the relevant branch office where the applicant is employed, addressing the need for administrative action in respect of the agent. The Court observed that LIC may suspend services of such agents and that it had already demoted the applicant following enquiry. [Paras 11, 12, 17]

Judgment to be forwarded to the registered office and branch office of LIC of India for appropriate administrative action concerning the applicant/agent.

Final Conclusion: The High Court dismissed the application for leave to appeal, upheld the trial Court's acquittal of respondent no.1 under Section 138 on the basis of proper appreciation of evidence and findings of fabrication by the complainant, awarded costs of Rs.25,000 in favour of respondent no.1 to be deposited within eight weeks, and directed that copies of the order be sent to the Life Insurance Corporation of India for administrative action.