TaxTMI Updates e-Newsletter
Feb 11,2022

Refund of IGST paid on zero-rated supplies - deeming fiction under Rule 96 that shipping bill is deemed application for refund - withholding of refund permissible only under Rule 96(4) - option between higher duty drawback and IGST refund - circular cannot override statutory rule - interest on delayed refund at statutory rate - binding effect of precedent

Refund of IGST paid on zero-rated supplies - deeming fiction under Rule 96 that shipping bill is deemed application for refund - option between higher duty drawback and IGST refund - Sanction of IGST refund in respect of the three shipping bills despite initial incorrect selection of higher drawback code where higher and lower drawback rates are the same. - HELD THAT: - The Court held that the shipping bills filed for the exports are to be treated as applications for refund of the IGST paid and the petitioner was entitled to refund in respect of the three shipping bills. The petitioner had subsequently clarified that the higher and lower duty drawback rates applicable to these exports were identical and that the erroneous punching of the higher drawback code was inadvertent and corrected in correspondence and returns. The matter was squarely covered by the binding decision in Amit Cotton Industries and its follow-up authority, which interpreted Section 16 read with Section 54 and Rule 96 to permit IGST refund where the statutory conditions are met. In view of those authorities and the petitioner's compliance, the respondents were directed to sanction the refunds for Shipping Bills No.8465051, 8459617 and 8455069. [Paras 4, 5, 6]

Refund of IGST paid in respect of the three specified shipping bills is to be sanctioned.

Withholding of refund permissible only under Rule 96(4) - circular cannot override statutory rule - binding effect of precedent - Validity of relying on departmental Circular No.37/2018 (and similar instructions) to withhold IGST refund where none of the contingencies in Rule 96(4) exist. - HELD THAT: - The Court rejected the respondents' reliance on the departmental circular as a basis to withhold the IGST refund. It held that Rule 96(1)-(4) creates a deeming fiction that the shipping bill is an application for refund and specifies exhaustively the circumstances in which a claim may be withheld. A circular in the nature of administrative instructions cannot run contrary to the statutory rule and cannot defeat the deeming fiction or expand the grounds for withholding beyond Rule 96(4)(a) and (b). Where the respondents conceded that neither ground in Rule 96(4) applied, the circular did not justify denial of the refund, particularly in light of the binding High Court and Supreme Court outcomes on the same point. [Paras 2, 4, 5, 6]

Withholding the refund on the basis of the departmental circular was not sustainable; withholding is permissible only under the grounds enumerated in Rule 96(4).

Interest on delayed refund at statutory rate - binding effect of precedent - Entitlement to interest on the delayed refund and the period from which interest is payable. - HELD THAT: - The Court awarded interest on the refund at the rate prescribed under the statute, directing payment of interest from 01.07.2019. The Court noted earlier High Court orders which directed interest to run if the refund was not paid within a specified period, but treated the present default by the department as unjustified given binding precedent and the petitioner's repeated representations. Consequently, interest was directed to be paid along with the sanctioned refund within six weeks from receipt of the order. [Paras 5, 6, 7]

Respondents to pay interest at the statutory rate from 01.07.2019 along with the sanctioned refund within six weeks.

Final Conclusion: The writ petition is allowed: the respondents are directed to sanction the IGST refund in respect of Shipping Bills No.8465051, 8459617 and 8455069 and to pay interest at the statutory rate from 01.07.2019; payment to be made within six weeks of receipt of the order.

Condonation of delay - Applicability of the first proviso to Section 68 to earlier assessment years - Validity of reassessment under Section 147 for escapement of income - Additions under Section 68 in the first year of incorporation - Revision under Section 263 directing further enquiry - Whether lack of enquiries renders assessment erroneous and prejudicial to revenue - Standard for perversity/no material or mere conjecture in tribunal findings

Condonation of delay - Delay of 116 days in filing the appeal and application for condonation of delay - HELD THAT: - The Court considered the affidavit in support of the application for condonation of delay and found the reasons advanced to be acceptable. Sufficient cause was held to have been shown for condonation of the delay in filing the appeal.

Delay condoned and the application for condonation of delay allowed.

Validity of reassessment under Section 147 for escapement of income - Whether lack of enquiries renders assessment erroneous and prejudicial to revenue - Whether the Tribunal was correct in holding that alleged lack of proper enquiries into share capital/premium rendered the reassessment erroneous and prejudicial to the revenue - HELD THAT: - The Court, following the decision in Rajmandir Estates Private Limited -versus- Principal Commissioner of Income Tax, held that the Tribunal's conclusions on the adequacy of enquiries were correctly determined against the assessee. On the facts and circumstances of the case and in light of the precedent relied upon by the Court, the substantial questions of law on this aspect were answered against the assessee.

Substantial question(s) framed on the adequacy of enquiries in reassessment answered against the assessee; appeal dismissed on this ground.

Additions under Section 68 in the first year of incorporation - Standard for perversity/no material or mere conjecture in tribunal findings - Whether additions on account of share capital/share premium can be made under Section 68 in the first year of incorporation and whether the Tribunal's finding was perverse or based on no material - HELD THAT: - Relying on the reasoning in the earlier decision cited, the Court found that the Tribunal's approach to additions under Section 68 and its assessment of the material before the Assessing Officer were correctly dealt with against the assessee. The Tribunal's findings were not displaced by the Court in the present appeal and were treated as correctly decided on the merits.

Claims against the Tribunal's conclusions on additions under Section 68 in the first year and on perversity were rejected; appeal dismissed on these grounds.

Revision under Section 263 directing further enquiry - Whether lack of enquiries renders assessment erroneous and prejudicial to revenue - Whether the Commissioner of Income Tax under Section 263 could set aside the assessment order and direct the Assessing Officer to conduct a thorough enquiry notwithstanding the Assessing Officer's powers under Sections 142(1) and 143(2) - HELD THAT: - The Court, following the parallel decision, upheld the Tribunal's conclusions adverse to the assessee regarding the Commissioner's exercise of revisionary jurisdiction and the direction for further enquiries. The matter was decided against the assessee on this question of law.

Substantial question on the validity of exercise of revisionary powers answered against the assessee; appeal dismissed on this ground.

Applicability of the first proviso to Section 68 to earlier assessment years - Applicability of the first proviso to Section 68, inserted by the Finance Act, 2012 w.e.f. 1.4.2013, to Assessment Year 2009-10 - HELD THAT: - The Court expressly left open the substantial question relating to the retrospective or prospective applicability of the first proviso to Section 68 as inserted by the Finance Act, 2012. That specific question was not decided and remained undetermined by the Court in this order.

Question on applicability of the first proviso to Section 68 to AY 2009-10 left open.

Final Conclusion: The application for condonation of delay is allowed. Following the decision in Rajmandir Estates Private Limited -versus- Principal Commissioner of Income Tax, the appeal is dismissed on the substantial questions of law nos.(b) to (f) against the assessee; the question regarding applicability of the first proviso to Section 68 to AY 2009-10 is left open. The interim application for stay is dismissed.

Amortisation of expenditure under voluntary retirement scheme - paid means actually paid or incurred according to the method of accounting - mercantile (accrual) system of accounting - distinction between accrued liability and actual cash payment for deduction - capital versus revenue expenditure

Amortisation of expenditure under voluntary retirement scheme - paid means actually paid or incurred according to the method of accounting - mercantile (accrual) system of accounting - distinction between accrued liability and actual cash payment for deduction - Allowance under Section 35DDA is to be computed on the basis of the accrued liability (amortised as per the scheme) recognised under the mercantile system and not restricted to actual payments made during the year. - HELD THAT: - The Court construed Section 35DDA in the context of the definition of 'paid' in Section 43(2), which equates 'paid' to amounts actually paid or incurred according to the method of accounting on the basis of which business profits are computed. Since the assessee follows the mercantile (accrual) system and the liability under the Voluntary Retirement Scheme was ascertained and accrued in the accounting year 2000-01, the amount so incurred falls within 'paid' for the purposes of Section 35DDA. The statutory scheme contemplates amortisation of the expenditure by one-fifth in the year of incurrence and equal instalments in the succeeding four years; there is no textual requirement that deduction be limited to cash disbursements in that year where accrual accounting has been followed. The ITAT and authorities below erred in treating deduction as confined to amounts actually paid in cash during the relevant year. [Paras 10, 12]

Deduction under Section 35DDA must be allowed on the basis of the entire accrued liability incurred in the accounting year, amortised as provided, and not only on actual payments made in the Assessment Year.

Capital versus revenue expenditure - mercantile (accrual) system of accounting - The expenditure recognised as liability for settlement of VRS dues is not to be treated as capital expenditure merely because it was amortised; it is deductible as business expenditure under the accrual method. - HELD THAT: - The Court rejected the conclusion of the CIT(A) that the amortisation of the recognised VRS liability constituted capital expenditure. The Department had not contended, nor demonstrated, that the liability incurred for settling VRS dues was capital in nature. Given that the assessee's accounts are maintained on the mercantile/accrual basis and the liability was incurred and reflected in the balance sheet, there was no warrant to re-characterise the expenditure as capital. The Characterisation adopted by the lower authorities was therefore unsustainable. [Paras 11, 13]

The expenditure relating to the VRS liability is not capital in nature and is deductible as business expenditure in accordance with accrual accounting and Section 35DDA's amortisation scheme.

Final Conclusion: The appeal is allowed: the impugned orders of the AO, CIT(A) and ITAT are set aside to the extent they restricted deduction to actual payments or treated the expenditure as capital; allowance under Section 35DDA shall be computed on the basis of the entire accrued liability amortised as provided. No order as to costs.

Right to personal hearing under faceless assessment - Principles of natural justice (audi alteram partem) - Requirement of express request for personal hearing - Maintainability of writ petition during pendency of statutory appeal - Strict construction of taxing statutes

Right to personal hearing under faceless assessment - Requirement of express request for personal hearing - Principles of natural justice (audi alteram partem) - Whether the assessee was denied the statutory right to personal hearing under Section 144B(7)(vii) of the Income-tax Act and thereby deprived of principles of natural justice. - HELD THAT: - Section 144B(7)(vii) confers on the assessee a right to request personal hearing to make oral submissions in faceless assessments, but this right is contingent on an express request by the assessee. The petitioner relied on a paragraph in his reply which objected to the show cause notice and requested completion of assessment on returned income and stated willingness for video-conferencing 'in case of any doubt.' That communication did not constitute an unqualified, specific request for a personal hearing; it left it to the Assessing Authority to call for video-conferencing if the Authority had doubts. The record of proceedings shows that the Assessing Authority issued notices under Sections 143(2) and 142(1), considered the petitioner's responses and documents, issued a final show cause notice, and afforded reasonable opportunity to be heard before passing the assessment order. On these facts, the non-grant of an explicit, specific personal hearing request cannot be treated as denial of the statutory right or breach of audi alteram partem. The correctness of the assessment order on merits was not adjudicated and remains for the statutory appellate forum. [Paras 5, 6, 7, 8, 9]

No violation of the statutory right to personal hearing under Section 144B(7)(vii) or of principles of natural justice is made out on the record.

Maintainability of writ petition during pendency of statutory appeal - Strict construction of taxing statutes - Whether the petitioner could directly invoke writ jurisdiction under Article 226 despite an appeal pending under the Income-tax Act. - HELD THAT: - The petition raised several contentions going to the merits of assessment which are the subject of a statutory appeal under Section 246A. The Court refrained from entering into merits which are properly to be considered by the Appellate Authority. Further, in tax matters the Court emphasised that taxing statutes must be strictly construed and nothing should be read into them by implication. Given that the petitioner had not made a specific entitlement-establishing showing of denial of a statutory right and that an effective remedy by appeal was available and pending, relief by writ in this proceeding was not appropriate. The petitioner was therefore directed to pursue the statutory appellate remedy. [Paras 2, 4, 9, 11]

Writ relief is not warranted in the presence of the pending statutory appeal; the petition is dismissed with liberty to pursue the appeal.

Final Conclusion: The petition is dismissed. The Court found no denial of the statutory right to a personal hearing under Section 144B(7)(vii) nor breach of audi alteram partem on the record, and, in view of the pending statutory appeal, directed the petitioner to pursue remedies before the Appellate Authority; no merits were decided.

Characterisation of income as capital gains or business income - intention test for classification of shares as investment or stock in trade - volume and frequency of transactions as evidence of intention - principle of consistency in tax assessments - inapplicability of res judicata to income tax proceedings - retrospective or prospective applicability of administrative circulars

Characterisation of income as capital gains or business income - intention test for classification of shares as investment or stock in trade - volume and frequency of transactions as evidence of intention - Income arising from purchase and sale of shares and mutual funds in AY - 2006- 07 is to be treated as short term capital gain and not as business income. - HELD THAT: - The Tribunal and the Court found on the facts that the assessee had long been engaged in investment in shares, mutual funds and debentures and that for the years adjacent to the year under consideration the Department had accepted the transactions as giving rise to capital gains. The Court rejected the revenue's contention that the transactions were stock in trade, noting that the record (as found by the Tribunal and the CIT) showed they were held as investments. The Court held that mere volume or frequency of transactions cannot, by itself, convert investments into trading stock; frequency is not conclusive on intention. Applying the intention test and having regard to the consistent treatment in the previous and subsequent years, the Court upheld the Tribunal's characterisation of the receipts as short term capital gains.

Tribunal's finding that the receipts were short term capital gains is upheld; they are not business income.

Principle of consistency in tax assessments - inapplicability of res judicata to income tax proceedings - The principle of consistency applies where facts and circumstances are identical across assessment years, but res judicata does not operate to bar re examination in income tax proceedings. - HELD THAT: - The Court recognised that res judicata is not applicable in income tax proceedings; however, it held that where the material facts are identical and the Department has previously accepted the characterisation of transactions as capital gains (and likewise in the subsequent year), a solitary divergent view for the single assessment year cannot be sustained. The Tribunal correctly applied the consistency principle in preferring the long standing treatment of the assessee's transactions over a contrary stand taken in the reassessment directed under Section 263.

Principle of consistency supports the Tribunal's acceptance of capital gains treatment; revenue's contrary stand for the isolated year is rejected.

Retrospective or prospective applicability of administrative circulars - CBDT circular dated 29/2/2016 is not applicable to adjudicate the correctness of an assessment order for AY - 2006- 07. - HELD THAT: - The Court observed that the circular relied upon by the assessee was issued in 2016 and therefore cannot be used to test the correctness of an assessment passed for AY - 2006-07. Administrative guidance issued after the assessment year cannot be applied retroactively to recharacterise transactions in an earlier assessment.

Circular dated 29/2/2016 is inapplicable to AY - 2006- 07 and does not affect the Tribunal's decision.

Final Conclusion: Revenue's appeal is dismissed; the Tribunal's order holding the receipts as short term capital gains for AY - 2006- 07 is upheld and the substantial questions of law are answered against the revenue.

Addition on account of unaccounted commission - assessment under section 153A and reliance on third party seized material - failure to provide opportunity of cross examination of witnesses recorded in search - seized documents as dumb documents without corroboration - unchallenged declaration by a director as evidentiary value - additions based on conjecture and surmise

Addition on account of unaccounted commission - failure to provide opportunity of cross examination of witnesses recorded in search - seized documents as dumb documents without corroboration - unchallenged declaration by a director as evidentiary value - additions based on conjecture and surmise - Deletion of the addition of Rs. 2,26,89,000 made by the Assessing Officer on account of alleged commission income for AY 2009-10. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) in deleting the addition. The AO relied on statements recorded during search and on seized documents which purportedly referred to the assessee and commission rates. Those statements were not made available to the assessee for cross examination and the AO admitted copies were not provided; accordingly the statements could not be used to draw an adverse inference. The seized papers, where the name "Ashwani" or mobile numbers appeared, did not, on careful scrutiny, establish payment of commission to the assessee and were treated as dumb documents incapable of supporting the AO's conclusion. Further, a subsequent uncontradicted declaration by a director denying any payment of fees/commission to the assessee was neither considered nor rejected by the AO with reasons. In the absence of corroborative evidence and given that the additions rested on presumptions, conjecture and surmise rather than admissible and probative material, the Tribunal found no basis to sustain the addition and accordingly upheld its deletion. [Paras 10, 11, 12]

The addition was deleted; no adverse inference could be drawn against the assessee and the Revenue's appeal was dismissed on merits.

Assessment under section 153A and reliance on third party seized material - procedural challenge under Rule 27 of the ITAT Rules - Application by the assessee under Rule 27 of the ITAT Rules raising preliminary objections to the AO's jurisdictional approach. - HELD THAT: - The Tribunal admitted the application for consideration but, having dismissed the Revenue's appeal on merits, treated the Rule 27 application as academic. Although a decision of the Delhi ITAT was noted as being in support of the assessee's position, there was no need for adjudication of the preliminary legal objection once the substantive appeal was decided in the assessee's favor. [Paras 15, 16]

Application admitted but dismissed as infructuous because the Revenue's appeal was dismissed on merits.

Final Conclusion: The Tribunal dismissed the Revenue's appeal for AY 2009-10, upholding the deletion of the addition made on account of alleged commission income as unsupported by admissible and corroborative evidence; the assessee's Rule 27 application was admitted but rendered infructuous and dismissed after the substantive disposal.

No incriminating material rule in assessments under Section 153A - addition based solely on statement not sustainable - deletion of additions under Section 144 read with Section 153A where unrelated to seized material - proof of disclosed source by banking channels and audited financials - family-wise treatment of seized jewellery and avoidance of double taxation - allocation of seized cash to the actual owner corroborated by his return

No incriminating material rule in assessments under Section 153A - addition based solely on statement not sustainable - deletion of additions under Section 144 read with Section 153A where unrelated to seized material - Sustainability of additions made in assessment year 2011-12 for unexplained renovation share and investment in shares where no incriminating material was seized. - HELD THAT: - The Tribunal found that the search took place on 17.01.2014 whereas the return for AY 2011-12 had been filed earlier and no incriminating material relating to that year was seized. The Assessing Officer made additions - inter alia for a 1/10th share in renovation of Mumbai flats and for purchase of shares - essentially on the basis of the assessee's statement and without any seized material to support the additions. The Tribunal applied the settled principle that in completed assessments under Section 153A (read with Section 144) additions cannot be sustained in absence of any incriminating material unearthed from the search; moreover, where the alleged investment/payments are reflected in audited financials and routed through banking channels, the claim of unexplained investment fails. Consequently the additions confirmed by the lower authorities were deleted. [Paras 6, 7, 8, 10, 11]

Additions on account of renovation share and investment in shares for AY 2011-12 deleted.

No incriminating material rule in assessments under Section 153A - proof of disclosed source by banking channels and audited financials - deletion of additions under Section 144 read with Section 153A where unrelated to seized material - Sustainability of addition made in assessment year 2012-13 for unexplained investment in co-ownership of a flat at Goodwill Apartments, Mumbai. - HELD THAT: - The Tribunal noted that the search occurred after completion of assessment for AY 2012-13 and that no incriminating material pertaining to that year was seized. The ledger, bank account entries, audited financials and conveyance deed demonstrated that the purchase price was paid through banking channels and the property was disclosed in the assessee's accounts. In absence of any seized material linking the investment to undisclosed sources, and given documentary proof of payment from disclosed accounts, the addition framed under Section 153A/144 could not be sustained and was deleted. [Paras 13, 14, 15, 16, 17]

Addition of Rs. 20,64,300/- for AY 2012-13 deleted.

Family-wise treatment of seized jewellery and avoidance of double taxation - allocation of seized cash to the actual owner corroborated by his return - deletion of additions under Section 144 read with Section 153A where unrelated to seized material - Validity of additions in assessment year 2014-15 for jewellery and seized cash found at the assessee's residence. - HELD THAT: - Regarding jewellery, the Tribunal recorded that seized jewellery from the premises related to multiple family members and that the assessee's father had offered and shown undisclosed jewellery/income in his return which, as per a co-ordinate Tribunal order in a related family appeal, had been treated and taxed as part of the father's undisclosed income. On that basis, a separate addition against the assessee for the same jewellery was not sustainable and was deleted. As to the cash of Rs. 50,000 seized, the assessee had stated during search that it belonged to his uncle; this was corroborated by the uncle's declaration of additional income in his return. The Tribunal held that where seizure is attributable to another family member and corroborated by that person's return, no separate addition could be sustained in the assessee's hands, and the addition was deleted. [Paras 25, 26, 27, 28, 29]

Additions in respect of jewellery and seized cash for AY 2014-15 deleted.

Final Conclusion: All appeals for assessment years 2011-12, 2012-13 and 2014-15 allowed: the Tribunal deleted the impugned additions because they were not supported by incriminating material seized during the search, where payments were evidenced through disclosed banking/audited records, or where seized assets/cash had been accounted for in the returns of other family members and taxed accordingly.

Validity of notice under Section 148 on a struck-off / non-existent company - reopening of assessment on the basis of Form 26AS entries - assessment completed under Section 144 in absence of return - effect of striking off by Registrar of Companies on tax proceedings

Validity of notice under Section 148 on a struck-off / non-existent company - effect of striking off by Registrar of Companies on tax proceedings - Whether the assessment for Assessment Year 2008-09 is valid when proceedings under Section 147/148 were taken against a company struck off by the Registrar of Companies - HELD THAT: - The Tribunal recorded that the company was struck off from the register of the Registrar of Companies vide an ROC order dated 18.05.2011, a fact communicated to the department by letter dated 25.08.2015. In view of the company being struck off and thus not in existence, there could be no director authorised to verify returns or to comply with notices issued by the Income Tax Department. The Assessing Officer had reopened assessment on the basis of Form 26AS entries and completed the assessment under Section 144 read with Section 147 after attempts at service (Speed Post and affixture). The Tribunal held that proceedings and the assessment carried out against an entity that was no longer in existence are not valid, and therefore the assessment order could not stand. Applying this principle, the Tribunal set aside the assessment order for the stated year.

The assessment order for Assessment Year 2008-09 is quashed and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal and set aside the assessment for Assessment Year 2008-09 on the ground that the company had been struck off the ROC register and was not in existence when the reassessment proceedings were conducted.

Additional depreciation under section 32(1)(iia) - assessee engaged in the business of manufacture or production - requirement that the specific asset be used in manufacture - processing of milk and the meaning of "manufacture" - deduction under section 80P(2)(e) for letting of godowns or warehouses - scope of "facilitating the marketing of commodities" vis-a -vis milk parlours

Additional depreciation under section 32(1)(iia) - assessee engaged in the business of manufacture or production - requirement that the specific asset be used in manufacture - processing of milk and the meaning of "manufacture" - Claim for additional depreciation under section 32(1)(iia) on new plant and machinery including machinery used for processing of milk. - HELD THAT: - Section 32(1)(iia) requires that the assessee claiming additional depreciation be an assessee engaged in the business of manufacture or production of any article or thing; it does not mandate that each new machine claimed for additional depreciation itself be used in the manufacture or production of that article or thing. The coordinate bench decision in Texas Instruments India Pvt. Ltd. was followed to hold that once it is established that the assessee is engaged in manufacturing or production (as evidenced by allowance of additional depreciation on machines used for manufacture of butter, ghee, pedha, etc.), additional depreciation is allowable on other newly acquired machinery even if those machines are not themselves used in manufacture. The appellant's separate contention that processing of milk amounts to manufacture was rejected: the special bench decision in B.G. Chitale (and the statutory position) was held to support that pasteurization/standardization does not convert milk into a distinct manufactured article because the product remains "milk"; merely changing chemical composition does not change its character into a different article for the purposes of "manufacture." Applying these principles, the Tribunal directed the AO to grant additional depreciation on the plant and machinery used for processing of milk as well, on the alternative ground that the assessee is a manufacturer and the specific-asset-use requirement is not a precondition for allowance under section 32(1)(iia). [Paras 7, 8, 9, 10]

Allowed the claim for additional depreciation; directed the AO to grant additional depreciation on machinery used for processing of milk.

Deduction under section 80P(2)(e) for letting of godowns or warehouses - scope of "facilitating the marketing of commodities" vis-a -vis milk parlours - Whether rental income from letting of milk parlours is eligible for deduction under section 80P(2)(e). - HELD THAT: - Section 80P(2)(e) grants deduction in respect of income derived by a co-operative society from letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. The Tribunal held that milk parlours do not fall within the category of 'godowns or warehouses' contemplated by the provision. The function and character of milk parlours (as places for retail sale of products) distinguish them from godowns or warehouses used for storage/processing/facilitating marketing in the statutory sense. The CIT(A)'s rejection of the deduction in respect of rental income from milk parlours was therefore upheld. [Paras 11, 14]

Deduction under section 80P(2)(e) for rental income from milk parlours denied; CIT(A)'s order confirmed.

Final Conclusion: Appeal partly allowed: additional depreciation under section 32(1)(iia) granted on machinery used for processing of milk (AO directed to allow); deduction claimed under section 80P(2)(e) for rental income from milk parlours disallowed and CIT(A)'s order confirmed.

Temporary erection and 100% depreciation - capital expenditure versus revenue expenditure - admission of additional evidence - remand for fresh consideration to the Assessing Officer

Admission of additional evidence - Admission of the Architect's certificate produced as additional evidence - HELD THAT: - The Tribunal found that the Architect's certificate directly addresses the determinative controversy - whether the constructions were temporary and demolished after project completion - and thus goes to the root of the dispute. In the interests of justice and equity and for substantial cause (the assessee having acted bona fide in relying on earlier material), the Tribunal exercised its discretion to admit the additional evidence and placed it on record for consideration. [Paras 7]

The Architect's certificate is admitted on record.

Temporary erection and 100% depreciation - capital expenditure versus revenue expenditure - remand for fresh consideration to the Assessing Officer - Whether the expenditure on model houses, offices and related constructions is revenue expenditure or capital in nature, and alternatively whether such constructions qualify as temporary erections entitled to 100% depreciation - HELD THAT: - Having admitted the Architect's certificate, the Tribunal held that the factual controversy underlying the nature of the expenditure requires fresh examination by the Assessing Officer. The Tribunal did not decide the merits on record; instead it directed the AO to consider the newly admitted certificate and the material already on record and to determine (a) whether the expenditure is revenue in nature or forms a capital asset, and (b) alternatively, whether the constructions qualify as temporary erections (as exemplified by the Rules) and thereby attract 100% depreciation. The Tribunal observed that these determinations should be made afresh in the light of the additional evidence and relevant material, thereby restoring to the AO the task of factual and legal assessment. [Paras 7]

Matter remanded to the Assessing Officer to examine afresh whether the expenditure is revenue or capital and alternatively whether the constructions qualify for 100% depreciation; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal admitted the Architect's certificate as additional evidence and remitted the matter to the Assessing Officer to re-examine whether the expenditure is capital or revenue and, alternatively, whether the constructions qualify as temporary erections attracting 100% depreciation; appeal allowed for statistical purposes.

Condonation of delay - admission of additional evidence in tax proceedings - remand to Assessing Officer for fresh examination - cash credits assessed as unexplained credit under section 68 - taxation of unexplained income under section 115BBE - treatment and proof of agricultural income

Condonation of delay - Admission of the appeal despite delay in filing before the Tribunal - HELD THAT: - The Tribunal examined the explanation for the delay in filing the appeal against the order of the Commissioner of Income Tax (Appeals). Having heard parties and perused the record, the Tribunal found that there was a reasonable cause for the delay (including time taken to collate documents and the onset of the pandemic) and accordingly exercised discretion to condone the delay and admit the appeal for hearing. [Paras 3]

Delay condoned and appeal admitted.

Cash credits assessed as unexplained credit under section 68 - admission of additional evidence in tax proceedings - remand to Assessing Officer for fresh examination - taxation of unexplained income under section 115BBE - Whether addition of Rs. 23,00,000 treated as unexplained cash credit should stand or be re-examined in view of additional evidence - HELD THAT: - The assessee produced additional documents purporting to show that the impugned amount was an opening balance brought forward and furnished bank statements and earlier return copies to support that contention. In the interest of natural justice the Tribunal admitted the additional evidence. Because these documents bear directly on the legitimacy of the cash credit and the Assessing Officer had not previously examined them, the Tribunal set aside the appellate authority's confirmation of the addition and restored the matter to the file of the Assessing Officer for fresh consideration after affording the assessee an opportunity of being heard. [Paras 6, 9]

Additional evidence admitted; order of CIT(A) on the cash-credit addition set aside and the issue remanded to the AO for fresh examination.

Treatment and proof of agricultural income - admission of additional evidence in tax proceedings - remand to Assessing Officer for fresh examination - Whether the addition of alleged agricultural income should stand in absence of previously furnished evidence - HELD THAT: - The assessee furnished land-holding documents and a crop certificate as additional evidence to substantiate the claim of agricultural income. The Tribunal, invoking principles of natural justice and the interest of justice, admitted these documents. As the Assessing Officer had not yet considered this material, the Tribunal set aside the confirmation of the addition by the appellate authority and remanded the matter to the AO for fresh adjudication after giving the assessee an opportunity to be heard. [Paras 7, 9]

Additional evidence admitted; order of CIT(A) on agricultural income set aside and the issue remanded to the AO for fresh examination.

Final Conclusion: Delay in filing the appeal was condoned and the appeal admitted; additional evidence relating to the cash-credit addition and the claim of agricultural income was admitted, the CIT(A)'s confirmations on both issues were set aside, and both issues were restored to the Assessing Officer for fresh examination after affording opportunity of hearing; appeal allowed for statistical purposes.

Estimation of income on basis of turnover - share-broking commission/brokerage percentage as basis for estimating income - precedent in assessee's own case as binding factual precedent - consequential interest and penal provisions

Estimation of income on basis of turnover - share-broking commission/brokerage percentage as basis for estimating income - precedent in assessee's own case as binding factual precedent - Validity of sustaining addition by estimating income at 1.25% of the turnover and whether the addition should be restricted to 0.50% - HELD THAT: - The Tribunal examined the assessment completed by the AO and the appellate modification by the CIT(A) which sustained an addition by estimating commission income at 1.25% of the turnover. The assessee relied on the decision in his immediately preceding assessment year (AY 2006-07) by the same Bench, where this Tribunal had recorded that revenue authorities themselves accepted that commission/brokerage in share-broking normally ranges from 0.115% to 0.50% and, on that factual basis, restricted the addition to 0.50%. No contrary material was placed by Revenue before the Tribunal in the present appeal. Applying that factual precedent in the assessee's own case, the Tribunal found no reason to estimate income at 1.25% and directed the AO to restrict the addition to 0.50% of the turnover. [Paras 5, 7]

Addition sustained by assessing authorities at 1.25% reduced and restricted to 0.50% of turnover; grounds 1-4 partly allowed.

Consequential interest and penal provisions - Challenge to charging of interest under sections 234A, 234B, 234C & 234D - HELD THAT: - The Tribunal treated the grievance as consequential to the primary adjustment on income. Having modified the addition by restricting it to 0.50% of turnover, the Tribunal disposed of the contention regarding interest as consequential to that decision and did not uphold separate relief on interest in the body of the order. [Paras 8]

Ground relating to interest dismissed as consequential.

Final Conclusion: The appeal is partly allowed: the addition made by the assessing authority/CIT(A) is set aside to the extent that income is to be estimated at 0.50% of turnover for AY 2007-08; the challenge to interest is dismissed as consequential; the AO is directed to give effect to this order.

Incriminating material requirement for reassessment under Section 153A - Effect of search on earlier completed assessments and scope of reassessment - Reliability of additions based solely on vague or uncorroborated statements - Proof of salary receipts by vouchers and bank records to repel addition

Incriminating material requirement for reassessment under Section 153A - Reliability of additions based solely on vague or uncorroborated statements - Validity of additions on account of alleged undisclosed salary for Assessment Years 2009-10 to 2014-15 where no incriminating material was recovered during search - HELD THAT: - The Tribunal held that Section 153A proceedings require some incriminating material relating to the particular assessment year to justify making additions in that year. In the present facts no document or data was found in the search connecting the assessee to unaccounted payments and the only basis for the addition was a vague and inconsistent statement which was not corroborated or confronted. The salary vouchers and bank records on the assessee's file supported the returned income and were verifiable from the assessee's records. Reliance on the principle articulated by the Gujarat High Court in PCIT v. Soumya Construction (as cited before the Tribunal) supports the conclusion that if no incriminating material is found for a particular year the earlier completed assessment must be reiterated and additions under Section 153A cannot be sustained for that year. Applying that principle, the Tribunal allowed the additional ground and held that the additions do not survive for AYs 2009-10 to 2014-15. [Paras 8, 9]

Additions made under Section 153A for AYs 2009-10 to 2014-15 on account of alleged undisclosed salary are deleted and the appeals are allowed.

Effect of search on earlier completed assessments and scope of reassessment - Proof of salary receipts by vouchers and bank records to repel addition - Unexplained investments and requirement of credible evidence to sustain additions - Sustainability of additions for Assessment Year 2015-16 made under regular assessment proceedings and of additions on account of unexplained investments - HELD THAT: - For AY 2015-16 the Tribunal found that the addition made under Section 143(3) was based on the same search which did not disclose any document contrary to the assessee's records. The assessee had explained salary income with supporting evidence, including vouchers and bank records, which the Assessing Officer and CIT(A) could not displace by independent or corroborative material found during the search. As to unexplained investments, the assessee furnished records and explanations which were not doubted by the Assessing Officer during assessment; the addition was therefore held to be based on vague grounds only. On these facts the Tribunal concluded that the additions for AY 2015-16 do not sustain. [Paras 10, 11]

The additions for AY 2015-16 - both the alleged undisclosed salary and unexplained investments - are deleted and the appeal is allowed.

Final Conclusion: All appeals for Assessment Years 2009-10 to 2015-16 are allowed: additions on account of alleged undisclosed salary (AYs 2009-10 to 2015-16) and additions for unexplained investments (AY 2015-16) are deleted, the assessments are reiterated where appropriate, and the appellant's appeals are allowed.

Deductibility of employees' contribution to provident fund and ESI when remitted before due date for filing return - amendment to section 36(1)(va) and section 43B of the Income tax Act by Finance Act, 2021 and its retrospective/prospective operation - binding precedent of the jurisdictional High Court in Essae Teraoka Pvt. Ltd. v. DCIT applied by the Tribunal - clarificatory legislation doctrine and its inapplicability where the amendment alters existing law

Deductibility of employees' contribution to provident fund and ESI when remitted before due date for filing return - binding precedent of the jurisdictional High Court in Essae Teraoka Pvt. Ltd. v. DCIT applied by the Tribunal - Employees' contribution to PF and ESI paid by the employer before the due date for filing the return under section 139(1) is allowable as deduction for the relevant assessment years. - HELD THAT: - The Tribunal followed the binding decision of the jurisdictional High Court in Essae Teraoka Pvt. Ltd. v. DCIT, which held that where the employer remits the employee's contribution to the statutory fund before the due date for filing the return under section 139(1), the contribution qualifies for deduction and is not to be treated as the employer's income. On the facts, the assessee had remitted the employees' contributions prior to the due date for filing the return for the assessment years in question. Applying the cited precedent, the Tribunal concluded that the disallowance contained in the intimation under section 143(1) was untenable and directed the Assessing Officer to allow the deduction. [Paras 7]

Disallowance of employees' contribution to PF/ESI deleted and deduction granted for payments made before the due date of filing the return.

Amendment to section 36(1)(va) and section 43B of the Income tax Act by Finance Act, 2021 and its retrospective/prospective operation - clarificatory legislation doctrine and its inapplicability where the amendment alters existing law - The Finance Act, 2021 amendments to section 36(1)(va) and section 43B are not to be treated as retrospective for the assessment years under appeal and do not apply to those years. - HELD THAT: - The Tribunal examined whether the 2021 amendment was clarificatory and retrospective. Relying on Supreme Court guidance that a provision said to be 'for removal of doubts' cannot be read retrospectively if it changes the earlier law, and on several tribunal decisions, the Tribunal held that the amendments effect an alteration adverse to the assessee's position and were effective from 01.04.2021 for assessment year 2021-22 onwards. Consequently, the amended provisions did not apply to the assessment years 2018-19 and 2019-20, and could not justify the disallowance for those years. [Paras 7]

Amendments by Finance Act, 2021 held prospective and not applicable to the relevant assessment years; cannot sustain the disallowance for those years.

Final Conclusion: Appeals allowed: the Tribunal deleted the disallowance of employees' contribution to PF/ESI for A.Y. 2018-2019 and A.Y. 2019-2020, directing the Assessing Officer to grant the deduction; the 2021 amendments to sections 36(1)(va) and 43B were held prospective and not applicable to these assessment years.

Addition of unexplained cash deposits - acceptance of lenders' confirmations as proof of loan - agricultural income supported by sale receipts - evaluation of spousal bank withdrawals as source - holistic consideration of facts and credibility - deletion of additions where explanations are credible

Addition of unexplained cash deposits - acceptance of lenders' confirmations as proof of loan - agricultural income supported by sale receipts - evaluation of spousal bank withdrawals as source - holistic consideration of facts and credibility - Whether the addition of Rs. 13,05,000 made on account of cash deposited in the assessee's bank account was justified. - HELD THAT: - The Tribunal examined the sources of deposits totaling Rs. 15.05 lakh made between November 2010 and March 2011 and accepted the assessee's explanations on a composite appraisal of evidence. Confirmations from two lenders, stating advances for the daughter's foreign studies, were furnished and not controverted or shown to be non-genuine; the Tribunal held that such confirmations sufficed as proof of bona fide loans and that no additional documentary proof specifically showing that the loans were for the daughter's studies was required. Sale receipts for agricultural produce relied upon to explain agricultural income of Rs. 6.87 lakh were not found to be forged or otherwise discredited, and the assessee's regular engagement in agricultural operations was not disputed; accordingly the receipts were acceptable as corroboration of agricultural receipts. A withdrawal from the spouse's agricultural bank account was also accepted as a plausible source; even if re-deposited earlier, that did not negate the assessee's ability to account for the remaining amounts given his agricultural activity and salary. The Tribunal emphasised that the facts should be viewed holistically rather than by a pedantic, technical approach; in light of the credible explanations and absence of adverse material, the addition could not be sustained and was deleted in full. [Paras 4, 5, 6, 7]

The addition of Rs. 13,05,000 in respect of cash deposits is deleted and the appeal is allowed.

Final Conclusion: On a holistic appraisal of lender confirmations, sale receipts for agricultural produce and spousal bank withdrawals, the Tribunal found the explanations for the bank deposits credible and deleted the addition made by the Revenue for AY 2011-12.

Condonation of delay in filing appeal - remand for fresh consideration and decision on merits - reopening of assessment under section 147 of the Income-tax Act - assessment reopened within four-year period - classification of rental income as income from house property - eligibility for depreciation on let-out portion of building

Condonation of delay in filing appeal - remand for fresh consideration and decision on merits - Whether the delay in filing appeal before the Commissioner (Appeals) for AY 2012-13 should be condoned and the matter remitted for adjudication on merits. - HELD THAT: - The Tribunal noted a delay of 44 days in filing the appeal before the Commissioner (Appeals) and that the assessee's condonation petition attributed the delay to the authorised representative being abroad. The Commissioner (Appeals) declined condonation on the ground that particulars regarding the authorised person (identity, travel dates, destination and supporting evidence) were not furnished. The assessee submitted that such details and flight tickets were available but were not called for by the Commissioner (Appeals). Having considered the record and rival contentions, the Tribunal directed the assessee to furnish complete details as required and directed the Commissioner (Appeals) to consider those details afresh for condonation of delay and thereafter decide the appeal on merits after affording an opportunity of hearing. [Paras 4]

Appeal allowed for statistical purposes and remitted to the Commissioner (Appeals) for fresh consideration of condonation and adjudication on merits after giving the assessee an opportunity of hearing.

Reopening of assessment under section 147 of the Income-tax Act - assessment reopened within four-year period - Validity of reopening assessment for AY 2011-12 under section 147 (notice under section 148). - HELD THAT: - The assessment for AY 2011-12 was reopened by issuance of notice under section 148 on 27.03.2015 and completed under section 143(3) r.w.s.147 on 11.03.2016. The Tribunal examined the time period within which reopening was effected and found that the proceedings were completed well within the four-year statutory period applicable to the facts of the case. The ground contesting jurisdiction to reopen, which was not raised before the lower authorities, was thus considered and rejected on merits. [Paras 6]

Ground challenging the reopening dismissed as devoid of merits; reopening held valid being within the four-year time limit.

Classification of rental income as income from house property - eligibility for depreciation on let-out portion of building - Whether 50% depreciation on the factory building is allowable where 50% of the building was let out and the rental income was assessed as income from house property for AY 2011-12. - HELD THAT: - The Assessing Officer restricted depreciation to 50% on the ground that half the factory building was let out and treated the rent receivable as income from house property (after treating the agreed lease consideration as such), while the assessee had offered rental receipts under other sources. The Commissioner (Appeals) upheld the AO's treatment, observing that once rental income is held to be income from house property, depreciation for that portion cannot be allowed. The Tribunal noted the distinguishing facts from the Supreme Court decision relied upon by the assessee, where the assessee's object was solely to hold and let properties. In the present case the assessee is a manufacturing concern which let out part of its factory; hence the rent was properly held to be income from house property and the claim for depreciation on the let-out portion was rightly disallowed. [Paras 9]

Assessee's grounds on disallowance of 50% depreciation and treatment of rental income dismissed; rental income treated as income from house property and depreciation on the let-out portion disallowed.

Final Conclusion: The Tribunal remitted the appeal for AY 2012-13 to the Commissioner (Appeals) for fresh consideration of condonation of delay and merits after filing of required particulars; the challenge to reopening for AY 2011-12 was dismissed as time-bar compliant; and the disallowance of depreciation and classification of rental income as income from house property for AY 2011-12 was affirmed.

Interim direction for investment of escrow monies in interest bearing fixed deposits - maintenance of escrow and prohibition on appropriation by escrow bank - liberty to seek appropriation or interim distribution - leave to intervene in pending proceedings

Interim direction for investment of escrow monies in interest bearing fixed deposits - maintenance of escrow and prohibition on appropriation by escrow bank - Whether the Tribunal should direct that amounts lying in the escrow accounts of RMGL and RMGSL be invested in fixed deposits in a nationalised bank - HELD THAT: - The Tribunal recalled its interim direction of 01.12.2021 which had directed that monies in the escrow accounts of RMGL and RMGSL be invested in fixed deposits in a nationalised bank. The Court noted that the Supreme Court's order dated 26.03.2020 required that deposits into the escrow account continue to be maintained in escrow and not appropriated by the escrow bank without specific permission, and that a clarification application seeking permission to create fixed deposits had been dismissed by the Supreme Court on 27.09.2021. Multiple applications for interim distribution and appropriation of escrowed amounts were pending and listed for consideration on 24.02.2022. In that factual and procedural context the Tribunal found there was no necessity at this stage to direct investment of the escrow amounts in fixed deposits and accordingly declined to grant the prayers in I.A. No. 2404 of 2021, while preserving liberty for the applicants to make submissions when the questions of appropriation or interim distribution are heard. [Paras 4, 11, 12, 13, 14]

Interim direction to invest the escrow monies in fixed deposits is recalled and the prayer in I.A. No. 2404 of 2021 is refused at this stage; liberty to renew submissions when appropriation or interim distribution is considered.

Leave to intervene in pending proceedings - liberty to renew applications when appropriation or interim distribution is considered - Whether certain applicants should be permitted to intervene and/or renew prayers relating to escrow monies - HELD THAT: - The Tribunal allowed intervention by Haryana Mass Rapid Transport Corporation Limited and Haryana Shehri Vikas Pradhikaran in I.A. 1982 of 2021 and permitted other applicants to file intervention applications or responses within the time frames directed. The Court also recorded that applicants (including those seeking fixed deposit direction) would have liberty to renew their prayers when the Tribunal considers the question of appropriation or interim distribution of the escrowed amounts. [Paras 16, 17]

Intervention permitted for specified applicants; liberty granted to all applicants to renew their prayers when appropriation or interim distribution is taken up.

Closure of interlocutory applications and contempt proceedings - Disposition of pending interlocutory applications and contempt proceedings predicated on the interim direction - HELD THAT: - In view of the Tribunal's decision not to continue with the interim fixed deposit direction and because the matters concerning interim distribution and appropriation are listed for hearing, I.A. Nos. 311 and 292 of 2022 were closed and Contempt Case No. 04 of 2022 was also closed. [Paras 15]

I.A. Nos. 311 and 292 of 2022 and Contempt Case No. 04 of 2022 are closed.

Liberty to file applications under insolvency provisions - Whether applicants seeking modification of earlier order to permit filing of Section 7 applications should be given liberty and whether notice should be issued - HELD THAT: - An application seeking liberty to move an application under Section 7 against certain respondents was considered; the Tribunal granted liberty and issued notice, directing the respondent to file reply within two weeks and listed the matter for further hearing. The Tribunal also directed that if an adjournment is sought before the Adjudicating Authority in the related petition, it shall be allowed and a date fixed after the Tribunal's listed date. [Paras 19, 20, 21]

Notice issued in I.A. No. 296 of 2022, reply directed within two weeks and matter listed for further hearing; liberty to move Section 7 applications permitted.

Final Conclusion: The Tribunal recalled its interim direction for investing escrowed amounts in fixed deposits and declined to grant the prayer in I.A. No. 2404 of 2021 at this stage, closed certain interlocutory and contempt matters connected to that direction, permitted specified interventions and afforded liberty to applicants to renew relevant prayers when interim distribution or appropriation is heard, and issued notice with directions in respect of the application seeking leave to file proceedings under Section 7.

Continuing guarantee - invocation of corporate guarantee - claims in corporate insolvency resolution process (CIRP) - time barred claims and applicability of the Limitation Act - enforceability of arbitral award as a financial debt - reconsideration of creditor's claim by the resolution professional

Continuing guarantee - invocation of corporate guarantee - claims in corporate insolvency resolution process (CIRP) - time barred claims and applicability of the Limitation Act - Claim by the appellant based on corporate guarantee was invokable and filed within the relevant time-frame and thus constitutes a live liability capable of being considered in CIRP. - HELD THAT: - The Tribunal found on the record that the deed of guarantee was a continuing guarantee, that termination cum arbitration notices had been issued and that the appellant invoked the corporate guarantee within the subsistence of the loan agreements. The appellant submitted its claim to the interim resolution professional within the period prescribed after invitation of claims. The Tribunal noted the existence of undischarged live liability and that a guarantor's obligation is a distinct collateral contract; depending on its terms a guarantor's liability may subsist even when a claim against the principal debtor is time barred. Having considered statutory definitions of 'claim' and 'financial debt' under the Code and the authorities cited, the Tribunal held that on the facts the claim was not a time barred or non enforceable claim and that the invocation and claim filing were within the relevant timeframe. The Tribunal therefore concluded that the rejection of the claim on the ground of non invocation or time bar (as recorded by the Adjudicating Authority) was not sustainable on the material before it.

The Tribunal held that the guarantee had been invoked and the appellant's claim represented a live liability capable of being considered in CIRP.

Enforceability of arbitral award as a financial debt - reconsideration of creditor's claim by the resolution professional - claims in corporate insolvency resolution process (CIRP) - Whether the arbitration award and related documents, which were not placed before the resolution professional at Form C stage, ought to be considered and the claim re decided. - HELD THAT: - The Tribunal observed that the arbitration award supporting the appellant's claim had not been placed before the resolution professional and therefore was not considered when the claim was rejected. Noting that the award had been placed on record before the Adjudicating Authority only later, the Tribunal held that because the claim is supported by an arbitral award which was not taken into account below, the matter requires fresh consideration. The Tribunal remitted the matter for de novo consideration of the appellant's claim by the resolution professional and directed restoration of the I.A. to file so that the claim, including the arbitration award and all relevant documents, may be considered in accordance with law.

The Tribunal set aside the impugned order and remanded the claim for fresh consideration by the resolution professional, directing restoration of the I.A. to file.

Final Conclusion: Appeal allowed; impugned order set aside; I.A. No.340 of 2020 in CP(IB) No.561/7/NCLT/AHM/2018 to be restored to file and the resolution professional directed to reconsider the appellant's claim (including the arbitral award and supporting documents) and proceed in accordance with law. No order as to costs.

Default - acknowledgement of debt under Section 18 of the Limitation Act, 1963 - admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - enforcement of arbitral award and post-award non-compliance

Default - enforcement of arbitral award and post-award non-compliance - Whether there was a default by the corporate debtor in repayment of the loans and whether evidence placed by the financial creditor established the default. - HELD THAT: - The Tribunal found that the financial creditor produced the loan agreements, sanction letters, disbursement details, recall notices, statements of account and particulars of last payments which together establish non-payment as per the repayment schedules. The corporate debtor did not contest and arbitration proceeded ex parte; notwithstanding two arbitral awards in favour of the financial creditor, the corporate debtor failed to comply. On the materials before it the Tribunal was satisfied that a default had occurred under the loan contracts and that the financial creditor had placed sufficient evidence of such default. [Paras 5, 6]

Default by the corporate debtor is established and evidenced; entitlement to proceed under the Code arises.

Acknowledgement of debt under Section 18 of the Limitation Act, 1963 - Whether the petition was within the limitation period having regard to acknowledgements in the corporate debtor's audited balance sheets. - HELD THAT: - The Tribunal accepted the financial creditor's contention that the corporate debtor's audited balance sheets for 2016-17 and 2017-18, which referenced the loans from the financial creditor, constituted acknowledgements in writing within the meaning of Section 18 of the Limitation Act, 1963. The balance sheet dated 05.09.2018 was held to restart the limitation period and, with the petition filed on 18.11.2019, the application fell within three years from the last acknowledged date. The Tribunal also observed that even if limitation were to be counted from the last bank transactions in 2017, the petition would remain within the three-year period. [Paras 5]

Petition is within the limitation period by reason of the acknowledgements recorded in the audited balance sheets.

Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Whether the Section 7 application was complete and liable to be admitted. - HELD THAT: - Applying Section 7(5), the Tribunal found that the application was complete in terms of Sections 7(2) and 7(3) and that the established default entitled the adjudicating authority to admit the petition. The Tribunal recorded the absence of any defence by the corporate debtor and noted the documentary matrix placed on record by the financial creditor to demonstrate default and compliance with filing requirements. [Paras 5, 6]

The Section 7 petition is complete and is admitted.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - Directions consequent to admission: imposition of moratorium and appointment of the Interim Resolution Professional, including interim expenses. - HELD THAT: - Upon admission the Tribunal directed that moratorium under Section 14 operate from the date of the order, specifying the prohibitions included in subsections (a) to (d) and related provisos. The Tribunal approved the financial creditor's proposed IRP, accepted the written consent and appointed the named professional to perform statutory duties under the Code. The financial creditor was directed to deposit an amount to meet the IRP's immediate expenses, which would be accountable and recoverable as CIRP costs. [Paras 7, 8, 9]

Moratorium is declared and the proposed IRP is appointed; financial creditor to deposit funds for IRP's immediate expenses.

Final Conclusion: The Section 7 petition filed by the financial creditor is admitted: the Tribunal found established default, held the petition within limitation by reason of acknowledgements in the audited balance sheets, declared the moratorium under Section 14 of the IBC and appointed the proposed Interim Resolution Professional with directions for interim expenses.

Financial debt - promissory note - negotiable instrument - acknowledgement of debt - issuance of notice under Section 7 - default

Financial debt - promissory note - negotiable instrument - Promissory note falls within the definition of "financial debt" under the Insolvency and Bankruptcy Code, 2016. - HELD THAT: - The Tribunal examined the scope of financial debt in Section 5(8) of the IBC, 2016 which includes amounts raised pursuant to notes, bonds or similar instruments. It considered the definition of a promissory note under Section 4 and that a promissory note is a negotiable instrument under Section 13 of the Negotiable Instruments Act. On a conjoint reading, the promissory note qualifies as a similar instrument contemplated by Section 5(8)(c) of the IBC and therefore constitutes a financial debt for the purposes of the Code. The Tribunal accordingly held that the claim based on the promissory note is a claim for a financial debt. [Paras 7, 8, 9, 10, 11]

Promissory note is a financial debt under the IBC, 2016.

Acknowledgement of debt - default - issuance of notice under Section 7 - Absence of a board resolution authorising the borrowing did not preclude issuance of notice under Section 7 where the corporate debtor had acknowledged the debt and default was established. - HELD THAT: - The Tribunal noted that the applicant did not produce a board resolution authorising the borrowing but relied on the corporate debtor's books and an account confirmation (Annexure-A7) showing the balance as on 31st March, 2020 and on cheques issued by the corporate debtor which were dishonoured. For the limited purpose of issuing summons under Section 7, the adjudicating authority must be satisfied that the claim is for a financial debt and that there is a default. Having held that the promissory note is a financial debt, and on the material showing acknowledgement in the balance-sheet and returned cheques indicating non-payment, the Tribunal found the applicant had established default sufficient to justify issuance of notice under Section 7 and directed service of notice by all modes. [Paras 12, 13, 14, 15]

Notice under Section 7 to be issued notwithstanding non-production of a board resolution, as debt and default are established by acknowledgement and dishonoured cheques.

Final Conclusion: The Tribunal held that the claim founded on the promissory note is a financial debt under the IBC and, on the material showing acknowledgement of the debt and dishonour of payment instruments, directed issuance of notice under Section 7 to the corporate debtor.

Operational debt - Section 9 of Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process - plausible contention test for dispute - moonshine dispute - Appointment of Interim Resolution Professional - Moratorium under Section 14

Plausible contention test for dispute - moonshine dispute - The corporate debtor's plea of a pre-existing dispute in employment dues is not established and is a spurious contention. - HELD THAT: - The Tribunal examined the relieving and no-dues certificates and the materials filed by the corporate debtor. The relieving certificate recorded no dispute at the time of resignation and the corporate debtor failed to produce evidence to substantiate allegations of breach of employment terms or unpaid loan adjustments. Mere allegations without supporting evidence do not amount to a pre-existing dispute. Applying the principle that a defence must be a plausible contention requiring further investigation and not a patently feeble assertion, the Tribunal held that the so-called dispute is a moonshine dispute and does not bar admission of the Section 9 petition. [Paras 8, 9, 11]

The alleged pre-existing dispute is not established and is rejected as a spurious contention.

Operational debt - Section 9 of Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process - The Section 9 petition by the operational creditor is maintainable and the applicant has established default in payment of operational debt. - HELD THAT: - On the material on record and parties' submissions, the Tribunal found that the applicant was relieved from service and that salary dues remained unpaid. The corporate debtor failed to prove payment or a legitimate defence. Considering the absence of a bona fide dispute and the documents supporting the claim, the Tribunal concluded that default in payment of the operational debt occurred and that the Section 9 application was otherwise complete and liable to be admitted. [Paras 10, 12]

The Section 9 petition is admitted and the Corporate Insolvency Resolution Process is initiated against the corporate debtor.

Appointment of Interim Resolution Professional - An Interim Resolution Professional (IRP) is appointed for the corporate debtor. - HELD THAT: - The applicant did not propose an IRP. The Tribunal appointed Mr. Akhil Ahuja as Interim Resolution Professional subject to the condition that no disciplinary proceedings are pending against him and directed the IRP to file the required consent and disclosures as mandated under the Code and regulations. [Paras 13]

Mr. Akhil Ahuja is appointed as the Interim Resolution Professional subject to required consents and disclosures.

Corporate Insolvency Resolution Process - A security deposit is directed to be furnished to meet IRP's initial expenses. - HELD THAT: - In exercise of its powers on admission, the Tribunal directed the operational creditor to deposit a specified sum with the IRP within one week to meet expenses of functions assigned to him under the regulations. The deposit was ordered to be subject to adjustment by the Committee of Creditors and returned as accounted for by the IRP. [Paras 14]

The applicant must deposit the directed amount with the IRP within one week; the amount is subject to adjustment by the Committee of Creditors.

Moratorium under Section 14 - Moratorium under Section 14 of the Code applies consequent to admission of the Section 9 petition. - HELD THAT: - Upon admission of the petition under Section 9(5), the Tribunal directed that the moratorium prescribed by Section 14(1) shall apply to the corporate debtor, with the relevant provisos and the continuance of provisions under Sections 14(2) to 14(4) during the moratorium period, thereby restraining specified actions against the corporate debtor as enumerated in the Code. [Paras 15]

The statutory moratorium under Section 14 is imposed on the corporate debtor following admission.

Final Conclusion: The Section 9 petition was admitted: the corporate debtor's contention of a pre-existing dispute was rejected as a spurious/moonshine dispute; an Interim Resolution Professional was appointed; the operational creditor was directed to deposit funds for IRP's expenses; and the statutory moratorium under Section 14 was imposed.

Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - financial debt - deemed financial debt arising from amounts received from allottees in a real estate project - existence of default - limitation and equitable tolling by concealment/fraud - moratorium under the Insolvency and Bankruptcy Code - appointment of Interim Resolution Professional

Financial debt - deemed financial debt arising from amounts received from allottees in a real estate project - Payments made by allottees to the corporate debtor in respect of allotment of residential plots constitute a "financial debt" within the meaning of the Code as explained in the definition. - HELD THAT: - The Tribunal applied the definition of "financial debt" and the Explanation to the relevant clause, holding that amounts raised from an allottee under a real estate project are deemed to have the commercial effect of borrowing. The Financial Creditors furnished receipts and other documents evidencing payments received by the Corporate Debtor for plot allotments. On that basis the Tribunal accepted that the sums paid by the allottees fall within the statutory concept of financial debt and are actionable under the Code.

Payments by the applicants/allottees to the Corporate Debtor are financial debt and qualify the application under the Code.

Existence of default - admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - There exists a default and the Section 7 application is complete and thus liable to be admitted. - HELD THAT: - Having considered the receipts, list of applicants, and supporting documents, the Tribunal found evidence of denial of refunds and non-performance by the Corporate Debtor. Relying on the mandate in Section 7(5), the Tribunal was satisfied that default had occurred and that the application complied with the requirements of Sections 7(2) and 7(3). Consequently, the Tribunal concluded that the application was fit for admission under Section 7.

The Section 7 application is admitted on the ground of established default and completeness of the petition.

Limitation and equitable tolling by concealment/fraud - The application was held to be within the period of limitation in view of the appellants' averments of concealment and fraudulent conduct by the Corporate Debtor. - HELD THAT: - The Financial Creditors asserted delay in project completion arising from concealment and misrepresentations by the Corporate Debtor, and pointed to communications and a third party advertisement as the occasion when the alleged fraud became apparent. The Tribunal accepted that these facts and the denial of refunds supported the contention that the application was filed within the limitation period, treating concealment and the debtor's conduct as relevant to the timeliness of the petition.

The petition is within limitation and not barred by delay.

Moratorium under the Insolvency and Bankruptcy Code - appointment of Interim Resolution Professional - On admission, moratorium was declared and an Insolvency Resolution Professional was appointed with a direction for an interim deposit to meet IRP expenses. - HELD THAT: - Pursuant to admission, the Tribunal ordered the moratorium to operate forthwith in the terms set out under the Code, restraining suits, transfer of assets, enforcement of security and related actions. The IRP initially proposed withdrew consent; the Tribunal therefore appointed a named registered Insolvency Professional from the IBBI panel and directed the Financial Creditor to deposit a specified sum to meet immediate IRP expenses, to be accounted for and recoverable as CIRP costs.

Moratorium ordered; IRP appointed and interim expense deposit directed.

Final Conclusion: The Section 7 petition filed by the Financial Creditors was admitted: the amounts paid by the allottees were held to be financial debt, default was found, the petition was treated as within limitation, moratorium was declared, and an IRP was appointed with directions for interim funding of the IRP's immediate expenses.

Corporate Insolvency Resolution Process - Insolvency Resolution Process period - liquidation order under Section 33(1)(a) of the IBC - powers and duties of the Resolution Professional - constitution of the Committee of Creditors - termination of CIRP - effect of liquidation on moratorium and discharge

Termination of CIRP - Insolvency Resolution Process period - Corporate Insolvency Resolution Process - Whether the Corporate Insolvency Resolution Process can be terminated on the request of the Interim Resolution Professional where no claims were received and the Committee of Creditors was not constituted after expiry of the insolvency resolution period. - HELD THAT: - The Tribunal noted that the CIRP was initiated on 25.11.2019 and more than the maximum insolvency resolution period (330 days, i.e. amended period) had elapsed. The Code does not provide for termination of a CIRP on the IRP's request. The statutory scheme contemplates either completion of the CIRP by approval of a resolution plan or initiation of liquidation under Section 33 where no resolution plan is received within the insolvency resolution period or the maximum permitted period. Given that no claims were received and the CoC was not constituted, the proper course is to invoke the liquidation provision rather than to 'terminate' the CIRP at the IRP's instance. [Paras 5, 6, 12, 13]

CIRP cannot be terminated on the IRP's request; when the insolvency resolution period has expired without constitution of the CoC or receipt of a resolution plan, the Adjudicating Authority is required to pass a liquidation order under Section 33(1)(a).

Liquidation order under Section 33(1)(a) of the IBC - effect of liquidation on moratorium and discharge - powers and duties of the Resolution Professional - Whether a liquidation order should be passed and what consequential directions should follow. - HELD THAT: - Exercising power under Section 33(1)(a), the Tribunal ordered immediate liquidation of the corporate debtor since 330 days had elapsed without a resolution plan and the CoC was not constituted. The Tribunal directed the liquidator to take custody and control of assets and to make a public announcement in terms of the Liquidation Process Regulations. It held that provisions of Section 33(5)-(7) will operate immediately, that the earlier moratorium under Section 14 shall cease and a fresh moratorium during liquidation shall commence, and that the order shall be deemed a notice of discharge to officers, employees and workmen. The liquidator was directed to submit a preliminary report within the time prescribed by the Regulations. The Registry was directed to communicate the order to the operational creditor, corporate debtor, ROC and IBBI for updating records. [Paras 13, 14]

Liquidation ordered with immediate effect; liquidator to assume custody, make public announcement, operate consequences of Section 33 including fresh moratorium and deemed discharge, file preliminary report, and Registry to communicate the order to relevant authorities.

Appointment and discharge of IRP - powers and duties of the Resolution Professional - Appointment of a liquidator where the Interim Resolution Professional does not give consent to act as liquidator. - HELD THAT: - The Tribunal recorded that the present IRP had not consented to act as liquidator. Consequently, it listed the matter for consideration of appointment of a liquidator so that the liquidation process may proceed in accordance with statutory requirements. [Paras 14, 15]

Matter listed for appointment of a liquidator since the IRP did not consent to act as liquidator.

Final Conclusion: The Tribunal held that CIRP cannot be terminated at the IRP's request after the insolvency resolution period has expired without constitution of the CoC or receipt of claims; directed immediate liquidation under Section 33(1)(a) with consequential directions regarding custody of assets, public announcement, moratorium, deemed discharge and preliminary report, and listed the matter for appointment of a liquidator as the IRP declined to act as such.

Personal guarantor - Insolvency resolution process against personal guarantor - Abatement of proceedings on death - Proceedings under the IBC not being recovery proceedings - Closure/rejection of Section 95 application

Personal guarantor - Abatement of proceedings on death - Insolvency resolution process against personal guarantor - Proceedings under the IBC not being recovery proceedings - Whether the Section 95 application for initiation of insolvency resolution process against the personal guarantor must be closed on the death of the personal guarantor. - HELD THAT: - The Resolution Professional's enquiry under Section 99 recorded that the personal guarantor, who stood surety for the corporate debtor, had died, supported by a death certificate. The RP recommended closure on the ground that proceedings under Section 95 are for initiating an insolvency resolution process against an individual guarantor and are not proceedings in the nature of recovery. The Tribunal accepted the RP's reasoning that on the demise of the individual personal guarantor the proceedings would abate and cannot be continued against a deceased person. Consequently the Section 95 application could not be maintained and had to be closed. [Paras 5, 6]

The Section 95 application is rejected and the insolvency proceedings against the personal guarantor are closed on account of his death.

Final Conclusion: The Tribunal accepted the RP's report and recommendation and closed the Section 95 proceedings against the deceased personal guarantor; the application is rejected and proceedings abate on the guarantor's death.

Corporate Insolvency Resolution Process - operational creditor - operational debt - demand notice - forged invoice - collusive petition - initiation under section 9 of the Insolvency and Bankruptcy Code, 2016

Operational debt - demand notice - forged invoice - collusive petition - admission - Whether the applicant established existence of a genuine operational debt and complied with the requirements for initiating corporate insolvency proceedings under the Code, or whether the petition was collusive/forged and therefore liable to be dismissed. - HELD THAT: - The Tribunal examined the documentary and factual matrix and found no agreement governing supply of materials between the parties, only a single unendorsed bill, and absence of prior correspondence evidencing demand or supply. The demand notice sent by speed post was returned with the remark "No such Firm In Their Address" though an email was sent to which the respondent merely acknowledged receipt. On filing of the petition the respondent's later conduct suggested an admission, but the Tribunal treated that as insufficient in the face of surrounding circumstances. The Tribunal concluded that the bill appeared to be forged and fabricated and that there was active collusion between the parties to invoke the rigours of the Code and to defraud other creditors. On this basis the applicant failed to establish that he actually supplied materials or that an amount was due to him; consequently the statutory threshold for initiation of the Corporate Insolvency Resolution Process under section 9 was not met. [Paras 5]

The petition under section 9 of the Code is dismissed on the ground that the applicant failed to prove a genuine operational debt and the petition is collusive/forged.

Final Conclusion: The application for initiation of Corporate Insolvency Resolution Process stands dismissed for failure to prove a genuine operational debt and on findings of collusion/forgery; no costs ordered.

Undervalued transaction - voidable transaction under section 45 - related party - ordinary course of business - misappropriation/fraudulent transaction under section 66 - possession and entitlement to compensation - liquidator's power to realise assets and complete sale - specific performance by deposit of balance consideration

Voidable transaction under section 45 - undervalued transaction - related party - ordinary course of business - Whether the transaction between the corporate debtor and the respondent falls within the scope of voidable transaction under section 45 as an undervalued transaction during the relevant period and not in the ordinary course of business. - HELD THAT: - The Tribunal noted the transaction originated by an allotment letter dated August 4, 2013 and the agreement for sale dated September 2, 2016 was a continuation of that transaction. The relevant period for invoking the provision (as defined under the Code) falls within the years preceding the CIRP commencement date; the allotment in 2013 is therefore outside that relevant period. The Tribunal also recorded the respondent's submission that the agreed price in 2013 exceeded the then prevailing Ready Reckoner value and that sale of units was the corporate debtor's ordinary course of business. On the basis of the parties' negotiations, admissions in the draft agreement exchanged between them, and the Tribunal's direction to effect sale by deposit of balance consideration, the Tribunal did not declare the transaction void under section 45 and proceeded by directing completion of the sale by deposit of the balance consideration with the liquidator. [Paras 11, 20, 26, 29, 36]

The transaction was not adjudicated as void under section 45; the respondent was directed to deposit the balance sale consideration with the liquidator for completion of the sale.

Possession and entitlement to compensation - specific performance by deposit of balance consideration - liquidator's power to realise assets and complete sale - Whether the respondent must pay the balance consideration or otherwise be divested by liquidator's exercise of sale powers, and the remedy to secure recovery/transfer of the property. - HELD THAT: - Having regard to earlier orders (including the April 8, 2019 direction offering options and the January 28, 2020 interim direction accepting the balance payable), the Tribunal required the respondent to deposit the balance consideration with the liquidator within a stipulated time so that, on receipt, the liquidator would proceed with execution/registration of the sale agreement. The Tribunal recorded that if the respondent failed to deposit the balance amount within the stipulated time, the liquidator was authorised to take necessary steps for fresh sale of the subject property. Thus the Tribunal exercised a remedial route short of annulling the transaction by ordering payment and completion or, failing that, resale by the liquidator to protect the interests of stakeholders. [Paras 9, 11, 25, 36, 37]

Respondent to deposit the balance sale consideration with the liquidator within 15 days for completion of sale; if he fails, the liquidator is authorised to proceed with a fresh sale of the property.

Misappropriation/fraudulent transaction under section 66 - related party - Whether the respondent's dealings constituted a fraudulent transaction attracting section 66 remedial action. - HELD THAT: - The liquidator alleged the respondent was a related party and that the arrangement involved fraudulent adjustment of amounts (including an alleged Rs. 43,00,000) and misappropriation. The respondent denied and produced submissions showing payments and a draft agreement acknowledging the balance payable. The Tribunal did not reach a finding that the transaction was set aside as fraud under section 66; instead, having regard to admitted payments and parties' negotiations, it directed deposit of the admitted balance and completion or resale, thereby addressing realisation of the asset rather than making a declaratory finding of fraudulent conveyance under section 66. [Paras 4, 6, 7, 8, 36]

No declaratory finding of fraud under section 66 was made; the Tribunal directed payment and completion or, in default, fresh sale by the liquidator.

Possession and entitlement to compensation - Whether the respondent should be directed to vacate the premises and pay retrospective monthly compensation for occupation. - HELD THAT: - The liquidator sought eviction and retrospective monthly compensation from date of occupation. Earlier interim directions (April 8, 2019) contemplated either deposit of full consideration or payment of monthly compensation. The final order, however, did not direct eviction or award retrospective monthly compensation; rather it focused on deposit of the balance consideration and completion of sale or, failing that, resale by the liquidator. Thus the claim for eviction and retrospective compensation was not granted in the operative directions of the final order. [Paras 5, 9, 15, 36]

Claim for eviction and retrospective monthly compensation was not granted; the Tribunal ordered deposit of balance consideration for completion of sale or, in default, fresh sale by the liquidator.

Dispute over allotment of car parking spaces - Whether the dispute concerning allotment of three car parking spaces was finally adjudicated by the Tribunal. - HELD THAT: - A dispute remained between the parties regarding inclusion of three car parking spaces in the revised agreement; this dispute influenced the respondent's stoppage of the final cheque payment. The Tribunal's directive to deposit the balance and proceed to registration implicitly required resolution in the process of completing the sale, but the order does not record a definitive adjudication on entitlement to the car parking spaces. The Tribunal authorised completion of sale on receipt of balance consideration and, in case of default, resale - leaving the car parking dispute effectively to be resolved in the course of completion or by subsequent steps. [Paras 13, 28, 29, 36]

The issue of allotment of three car parking spaces was not finally adjudicated and remains to be addressed in the course of completing the sale or consequent proceedings.

Final Conclusion: The Tribunal directed the respondent to deposit the balance sale consideration with the liquidator within the stipulated time for completion and registration of the sale; on receipt, the liquidator shall execute the sale agreement, and in default of deposit the liquidator is authorised to proceed with a fresh sale of the property. No declaration was made voiding the transaction under section 45 nor was a definitive finding of fraudulent conveyance under section 66 recorded; the Tribunal resolved the dispute by directing payment and completion or resale to protect stakeholders' interests.

Classification of services between "fashion designing" and "design services" - application of rule 3(ii) of the Taxation of Service (Provided from Outside India and Received in India) Rules, 2006 - location of performance of service versus location of service recipient in determining taxable import of services - section 65A principle of classifying services by most specific description

Classification of services between "fashion designing" and "design services" - section 65(43) "fashion designing" - section 65(36b) "design services" - Services in relation to patterns and designs of footwear received from abroad are classifiable as "fashion designing" services and not as "design services". - HELD THAT: - The Court compared the statutory definitions and observed that "fashion designing" expressly includes activities relating to creating designs and preparing patterns for "any other articles intended to be worn by human beings", whereas "design services" refers to designing of furniture, consumer products, industrial products and related items. Footwear, being an article intended to be worn by human beings, falls within the language of "fashion designing". The 2007 Circular and the earlier instructions relied upon by the Department do not restrict "fashion designing" to garments alone and do not exclude footwear from that category. The Tribunal's earlier acceptance of the classification of the same services as "fashion designing" for earlier periods, and the Board's explanatory paragraph treating items covered by "fashion designing" as excluded from "design services", reinforced that footwear-related design activity is within "fashion designing". Consequently, the Court held that section 65A's rule of classifying by the most specific description could not override the express inclusion of footwear within "fashion designing" when the statutory definitions already cover it. [Paras 21, 23, 24, 25, 27]

The services received by the appellant in relation to footwear designs are "fashion designing" services and not "design services".

Application of rule 3(ii) of the Taxation of Service (Provided from Outside India and Received in India) Rules, 2006 - location of performance of service versus location of recipient - Where "fashion designing" services are entirely performed outside India, they are not taxable under rule 3(ii) of the Import Rules merely because the recipient is located in India. - HELD THAT: - Rule 3(ii) subjects to tax those specified taxable services which "are performed in India"; the proviso treats a partly performed service as performed in India. The Court observed that "fashion designing" falls within the list in rule 3(ii) but, applying the rule and precedent, services wholly performed outside India cannot be taxed under that provision. Reliance on the Tribunal's decision in Intas Pharmaceuticals was noted for the proposition that if services are entirely provided outside India, the proviso to rule 3(ii) is not attracted and no tax can be levied. Since the services in the present case were performed outside India, rule 3(ii) did not render them taxable in India. [Paras 28, 29]

Services entirely performed outside India under the head of "fashion designing" are not taxable under rule 3(ii) of the Import Rules.

Consistency in departmental classification and estoppel - The Department, having earlier accepted the classification of the same services as "fashion designing" for prior periods, could not legitimately reclassify identical services under "design services" in subsequent proceedings to impose demand. - HELD THAT: - The Court noted that in earlier proceedings the appellant's payments classified as "fashion designing" were not disputed by the Department and that the Commissioner (Appeals) and the Tribunal had accepted that classification in earlier rounds. On this basis the Tribunal observed that the Department cannot be permitted to take a different stand in later proceedings and reclassify the same element of service under a different head to sustain a demand. That prior acceptance militates against retrospective reclassification for the periods in question. [Paras 22]

The Revenue was not entitled to reclassify the same services previously accepted as "fashion designing" into "design services" for the period in dispute.

Final Conclusion: The impugned demand confirmed by the Commissioner was set aside: the services in issue are "fashion designing" services, not "design services", and being wholly performed outside India are not taxable under rule 3(ii) of the Import Rules; the Revenue could not reopen classification previously accepted for earlier periods.

Admissibility of Cenvat credit under Rule 9 of CCR - transfer of pre-GST credit to GST regime by filing TRAN-1 - double reflection of credit in ER-1 and ST-3 returns - reverse charge mechanism payments evidenced by challans - validity of show cause notice and recovery/penalty for already transferred credit

Admissibility of Cenvat credit under Rule 9 of CCR - reverse charge mechanism payments evidenced by challans - Whether the appellant was entitled to take Cenvat credit of input services in respect of amounts paid under reverse charge and supported by challans. - HELD THAT: - The Tribunal noted that the Assistant Commissioner recorded that the Cenvat credit arose from payment of Service Tax under the reverse charge mechanism and was supported by challans. The credit of the same amount was shown in the ER-1 return and was allowed without dispute. In these circumstances, the Tribunal found that the taking of credit was supported by documentary evidence and that the Revenue's contention of invalid credit under Rule 9 of the CCR was misplaced on the facts of this case. The determinative finding is that the credit was rightly available to the appellant as evidenced by the reverse charge payment documents. [Paras 7]

Credit taken by the appellant in respect of reverse charge payments supported by challans was admissible and correctly reflected in ER-1.

Transfer of pre-GST credit to GST regime by filing TRAN-1 - double reflection of credit in ER-1 and ST-3 returns - validity of show cause notice and recovery/penalty for already transferred credit - Whether the show cause notice proposing recovery and penalty in respect of the amount reflected in ST-3 should have been issued when the same credit was reflected in ER-1 and transferred by TRAN-1 to the GST regime. - HELD THAT: - The Tribunal observed that the identical amount of credit had been reflected in the ER-1 return, accepted by the Revenue, and carried forward to the GST regime by an accepted TRAN-1 filing. There was concurrent confusion on part of both Revenue and the appellant because the same credit also appeared in ST-3 returns. Given that the TRAN-1 was accepted and the credit had been allowed to be carried forward, the issuance of the show cause notice and the demand with penalty in respect of the same credit was inappropriate. The Tribunal concluded that in the factual matrix-where allowance and transfer of the credit via TRAN-1 had been permitted-the SCN should not have been issued and the recovery/penalty could not be sustained. [Paras 2, 3, 4, 7, 8]

Show cause notice, demand and penalty in respect of the credit already reflected in ER-1 and transferred by TRAN-1 were not maintainable and were set aside.

Final Conclusion: The appeal is allowed; the impugned order holding the appellant liable to recovery and penalty in respect of the specified Cenvat credit is set aside, and the appellant is entitled to consequential benefits in accordance with law.

Payment of service tax on gross value under Section 67 - Availment of Cenvat Credit on inputs - Works Contract Service - Determination of value under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 - Applicability of precedents and departmental circular

Payment of service tax on gross value under Section 67 - Availment of Cenvat Credit on inputs - Determination of value under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 - Works Contract Service - Whether the appellant providing retreading of tyres (a Works Contract Service) could discharge service tax on the gross amount received under Section 67 and concurrently avail Cenvat credit on inputs, instead of determining taxable value under Rule 2A. - HELD THAT: - The Tribunal noted that the appellant had discharged service tax on the gross amount charged under Section 67 and had availed Cenvat credit on inputs, while the Department contended that value must be determined under Rule 2A for Works Contract Service and that credit on inputs was not permissible. The Tribunal applied its earlier decision in the appellant's own case (and followed precedents including S.V. Jiwani and Interarch Building Products), observed that the Bombay High Court dismissed the Department's challenge and that the Department accepted that view by Circular. The Tribunal found that Section 67 did not preclude paying service tax on gross value and that goods used in the retreading activity fell within the definition of inputs under the Cenvat Credit Rules, 2004; consequently the appellant's payment on gross value and availment of input credit were permissible. Applying these authorities and the appellant's earlier favourable order, the Tribunal concluded that the impugned demands, interest, penalties and disallowance of credit could not be sustained and therefore set aside the orders.

The impugned orders confirming demand, interest, penalties and disallowing input credit were set aside; appeals allowed.

Final Conclusion: The Tribunal allowed the appeals, holding that the appellant could pay service tax on the gross amount under Section 67 and avail Cenvat credit on inputs for tyre retreading services treated as Works Contract Service; the impugned orders were set aside and consequential reliefs granted.

Taxability of interest on loans - reimbursements as non taxable consideration - money transfer service and export of service - agency/sub representative relationship and immediate service beneficiary - exemption under notification for agents of MTSOs - remand for verification of discharged tax liability - penalties and limitation

Taxability of interest on loans - nomenclature of receipts - exclusion of interest from taxable value - Interest labelled as incidental charges, risk interest or interest on gold loans is not exigible to service tax. - HELD THAT: - The appellants are NBFCs charging interest on gold loans; portions of receipts shown as 'incidental charges' (pre October 2008) and later as 'risk interest'/'interest on gold loan' were held to be interest in substance. The Finance Act definition of 'interest' contemplates interest payable in any manner and Rule 6(2)(iv) of the Service Tax (Determination of Value) Rules, 2006 excludes interest on loans from taxable value. Fixation or the lawfulness of an interest rate is a matter for RBI/regulatory authorities and does not convert interest into a taxable service simply because it exceeds a prescribed benchmark. Revenue failed to adduce documentary evidence to establish that the receipts were not interest. The appellate authority's conclusion that service tax demand on such interest is unsustainable is upheld. [Paras 9, 13]

Demand of service tax on incidental charges/risk interest/interest on gold loans set aside.

Reimbursements as non taxable consideration - excludability of reimbursable expenses - Token charges and postage charges recovered as reimbursement of expenses are not includible in taxable value and are not subject to service tax. - HELD THAT: - Token charges (for unique identity tokens) and postage charges represent incidental expenditures reimbursed by customers. The Tribunal applied the ratio of the apex court holding that reimbursable expenses are excludable from the value for service tax purposes and rejected Revenue's attempt to distinguish the category of expenses on that basis. Distinguishing on the basis of expense category was not accepted; the principle of exclusion of reimbursable expenses applies. [Paras 10, 13]

Demand of service tax on token charges and postage charges set aside.

Money transfer service and export of service - agency/sub representative relationship and immediate service beneficiary - Service tax demand on money transfer activity carried out by the appellants as sub representative of an Indian intermediary is sustainable; the activity is not an export of service by the appellants. - HELD THAT: - The appellants contracted with an Indian entity (Wall Street Finance Ltd.), which in turn contracted with the MTSO (Western Union). The Tribunal emphasised that the nature of service must be determined from the contract: the immediate contractual beneficiary of the appellants' service is the Indian intermediary, not the overseas remitter. A strained chain argument that treats all downstream providers as exporters was rejected. Therefore, the appellants cannot claim export of service treatment; the services rendered to the Indian intermediary are taxable, and Notification No.19/2015 ST (granting exemption to agents of MTSOs for a specified period) does not apply to the appellants. [Paras 11, 13]

Demand of service tax on money transfer service upheld (including interest).

Remand for verification of discharged tax liability - evidence of prior discharge of service tax - Verification remand of claimed prior payment of service tax on travel agency and insurance commission services. - HELD THAT: - Appellants asserted they had discharged service tax on air/rail/bus travel agent services and on commission for insurance and placed challans on record before the Tribunal; Revenue contended adjudicating authority received no documentary proof. The Tribunal found documentary verification is necessary and remanded these specific claims to the adjudicating authority for limited purpose of examining and verifying the appellants' documentary proof of discharge of service tax. [Paras 12, 13]

Matter remanded to the adjudicating authority for limited verification of claimed prior payment of service tax on travel agent and insurance commission services.

Penalties and limitation - Penalties imposed by the adjudicating authority are set aside. - HELD THAT: - On the facts and the Tribunal's conclusions regarding the non taxability of interest and reimbursable charges, and the absence of proven suppression or mala fides, the penalties imposed were found unsustainable and were set aside by the Tribunal. [Paras 6, 13]

All penalties imposed are set aside.

Departmental appeal against dropping of demand - Departmental appeal No.ST/21862/2018 is set aside. - HELD THAT: - The departmental appeal challenging the Commissioner's dropping of demand (on risk interest portion) was considered and set aside by the Tribunal, thereby sustaining the adjudicating authority's decision to drop that demand. [Paras 1, 13]

Departmental appeal No.ST/21862/2018 set aside.

Final Conclusion: The Tribunal set aside service tax demands in respect of incidental charges/risk interest/interest on gold loans and of token/postage reimbursements, upheld the demand on money transfer services rendered as sub representative to an Indian intermediary (including interest), remanded verification of claimed discharge of service tax on travel agency and insurance commission receipts to the adjudicating authority, set aside all penalties, and dismissed the departmental appeal challenging the dropping of the risk interest demand.

Pre-deposit under Section 35F - interest on delayed refund under Section 35FF - deposit during investigation - relevant date for refund - treatment of excess deposit over mandatory pre-deposit

Deposit during investigation - treatment of excess deposit over mandatory pre-deposit - pre-deposit under Section 35F - interest on delayed refund under Section 35FF - Whether interest is payable under Section 35FF on amounts deposited during investigation which exceed the mandatory pre-deposit required under Section 35F. - HELD THAT: - The Tribunal found that the appellant had suo moto deposited amounts during investigation which later became refundable only after the appellate order. Section 35F prescribes the mandatory pre-deposit (7.5% or 10% as applicable) required for filing appeals and Section 35FF provides for interest specifically on that mandatory pre-deposit. Amounts paid in excess of the statutory pre-deposit are not covered by the entitlement to interest under Section 35FF. Therefore interest is not accruable on deposits over and above the mandatory pre-deposit required for entertaining the appeal. The Tribunal rejected the appellant's contention that all deposits made during investigation should attract interest from date of payment, holding that excess deposits beyond the statutory requirement do not qualify for interest under the statutory scheme. [Paras 5]

Interest on the portion of deposit over and above the mandatory pre-deposit under Section 35F is not payable under Section 35FF; the claim for such interest was rightly rejected.

Relevant date for refund - deposit during investigation - interest on delayed refund under Section 35FF - Whether the relevant date for claiming refund and for computation of interest arises from the date of the Tribunal's order declaring the deposits refundable. - HELD THAT: - The Tribunal observed that the amounts deposited during investigation became refundable only as a consequence of the CESTAT order dated 12.01.2018. Before that order there was no basis for refund and therefore no right to interest arising on that ground. The relevant date for filing a refund claim (and for any time-based consequences) is the date from which the refund arose, i.e., the appellate order making the amounts refundable; accordingly no interest is due prior to that date where refund was not then claimable. [Paras 5]

The relevant date for the refund (and related interest entitlement) is the date of the appellate order declaring the amounts refundable; no interest arises prior to that date where refund was not claimable.

Final Conclusion: The impugned order rejecting interest on amounts deposited in excess of the mandatory pre-deposit is upheld; the appeal is dismissed.

Interim stay of demand - deposit of 50% for grant of stay - exercise of discretion in granting stay - direction to appellate tribunal for expeditious disposal - no expression on merits

Interim stay of demand - deposit of 50% for grant of stay - exercise of discretion in granting stay - direction to appellate tribunal for expeditious disposal - Interim stay of the remaining 50% of the demanded amount pending disposal of the appeal before the Andhra Pradesh VAT Appellate Tribunal. - HELD THAT: - The petitioner had filed an appeal before the Tribunal against the demand and had deposited 50% of the disputed amount. The authority below had rejected the petitioner's prayer for stay but that rejection order was not placed before this Court and the urgent notice was issued after a substantial lapse of time. Having considered that the petitioner has paid 50% of the demand and noting that a Coordinate Bench had granted stay in similar circumstances, the Court found it appropriate to grant interim relief. The Court therefore directed an interim stay of the remaining 50% of the demanded amount until the appeal is finally disposed of by the Tribunal and requested the Tribunal to take steps for early disposal. The Court expressly refrained from expressing any opinion on the merits of the tax demand.

Interim stay granted of the remaining 50% of the demanded amount until disposal of the appeal by the Tribunal; Tribunal requested to expedite disposal; no observation on merits.

Final Conclusion: Writ petition disposed by granting interim stay of the remaining 50% of the challenged demand pending disposal of the appeal before the Tribunal; the Tribunal is requested to decide the appeal at the earliest and the Court has not expressed any view on the merits.

Maintainability of writ petition for challenge to assessment - failure to participate in assessment proceedings and forfeiture of writ jurisdiction - delay and laches in seeking extraordinary relief - statutory appeal as alternative remedy - pre-deposit requirement for entertaining statutory appeal - tax rate under Section 3(4) of the TNVAT Act, 2006 and Notification No.II(1)/CTR(a-1)/2007 G.O.Ms.No.2

Maintainability of writ petition for challenge to assessment - failure to participate in assessment proceedings and forfeiture of writ jurisdiction - delay and laches in seeking extraordinary relief - Whether the writ petition challenging the assessment order is maintainable in view of the petitioner's failure to reply to notices and the delay in approaching the Court. - HELD THAT: - The Court found that the petitioner did not file replies to multiple notices issued during assessment proceedings and thus failed to participate in the statutory process. Given this non-participation, and that the petition was filed two years after the impugned order without satisfactory explanation, the Court held that the petitioner is not entitled to invoke the extraordinary jurisdiction of the High Court. The combination of neglect to contest the proposal during assessment and unexplained delay in seeking writ relief persuaded the Court to refuse relief in writ jurisdiction and to dismiss the petition as lacking merits and belated. [Paras 6, 7]

Writ petition not maintainable and dismissed on grounds of non-participation in assessment proceedings and delay.

Tax rate under Section 3(4) of the TNVAT Act, 2006 and Notification No.II(1)/CTR(a-1)/2007 G.O.Ms.No.2 - statutory appeal as alternative remedy - pre-deposit requirement for entertaining statutory appeal - Disposition of the petitioner's claim that turnover should have been assessed at 0.5% (by reason of the notification) instead of higher rates in the impugned assessment order. - HELD THAT: - The Court did not adjudicate the substantive claim on the applicable rate of tax on merits. Instead, recognising that the assessment order stands and that the petitioner had alternative statutory remedies, the Court declined to entertain the writ and granted liberty to file a statutory appeal before the Appellate Commissioner within forty-five days from receipt of the order. The Court directed that, if such appeal is filed in time, the Appellate Commissioner shall entertain and decide the appeal on merits in accordance with law, subject to the petitioner complying with the statutory pre-deposit requirements applicable under the respective Acts. [Paras 8, 9]

Substantive claim on the tax rate left to be raised and decided in the statutory appeal; petitioner permitted to file appeal within forty-five days and to make requisite pre-deposit.

Final Conclusion: Writ petition dismissed for non participation in assessment proceedings and unexplained delay; petitioner granted liberty to pursue a statutory appeal within forty five days, which the Appellate Commissioner is to entertain and decide on merits subject to statutory pre deposit.

Service of notices under Rule 19(1)(a) of the Tamil Nadu Value Added Tax Rules, 2007 - Explanation to Rule 19(1)(a) - endorsement by person who delivers notice as proof of service - Reasonable opportunity to show cause under the proviso to Section 27(1) and (2) of the Tamil Nadu Value Added Tax Act, 2006 - Distinction between 'reasonable opportunity to show cause' and 'personal hearing'

Service of notices under Rule 19(1)(a) of the Tamil Nadu Value Added Tax Rules, 2007 - Explanation to Rule 19(1)(a) - endorsement by person who delivers notice as proof of service - Pre-revisional notices dated 18.08.2014 were not conclusively established to have been served on the writ petitioner-dealer on 31.08.2014 - HELD THAT: - The court examined the mode of service recorded by the Revenue and found that service was asserted to have been effected under Rule 19(1)(a). The explanation to Rule 19(1)(a) requires an endorsement by the person who delivers the notice, and such endorsement constitutes proof of service for the purposes of that sub rule. The extracts of record produced before the court did not contain the required endorsement and the signature shown was not established to belong to anyone connected with the writ petitioner. On this short point of defective proof of service, the court concluded that service had not been conclusively proved and, therefore, the presumption of valid service could not be sustained. [Paras 8, 9]

Benefit of doubt given to the writ petitioner; service not conclusively established and pre-revisional notices cannot be treated as duly served.

Reasonable opportunity to show cause under the proviso to Section 27(1) and (2) of the Tamil Nadu Value Added Tax Act, 2006 - Distinction between 'reasonable opportunity to show cause' and 'personal hearing' - Impugned revisional orders under Section 27 were set aside for infraction of the proviso requiring a reasonable opportunity to show cause and the matter remanded for fresh consideration - HELD THAT: - The court observed that Section 27(1) and (2) contain a common proviso that no order shall be passed without giving the dealer a reasonable opportunity to show cause. Because service of the pre-revisional notices was not conclusively proved, the statutory requirement of providing a reasonable opportunity was breached. The court clarified, by reference to its earlier decision in State Bank of India Officer's Association, that the statutory phrase 'reasonable opportunity to show cause' does not mandatorily import a personal hearing; rather, it guarantees a reasonable chance to respond, while personal hearing remains at the assessing officer's discretion depending on facts. Having found procedural infraction, the court set aside the revisional orders and directed that the notices be furnished to the dealer, the dealer be given a fortnight to respond, and the Assessing Officer undertake the Section 27 revisional exercise afresh in accordance with law within the stipulated time. [Paras 10, 11, 12]

Impugned orders set aside for breach of the proviso to Section 27; matter remanded for fresh opportunity to show cause and reconsideration in accordance with law.

Final Conclusion: The revisional orders dated 30.06.2015 for the assessment years 2010-11 to 2013-14 are set aside because service of the pre-revisional notices was not conclusively established under Rule 19(1)(a) and, consequently, the proviso to Section 27(1) and (2) requiring a reasonable opportunity to show cause was infringed; the notices are to be furnished to the dealer, the dealer given a fortnight to respond, and the Assessing Officer is to reconsider the matter afresh in accordance with law within the directed time. The court expressed no opinion on the merits.

Statutory bail under Section 167(2), CrPC - filing of charge-sheet as compliance with proviso (a) to Section 167(2) - cognizance not prerequisite for statutory bail - indefeasible right to default bail upon non-filing of charge-sheet within the prescribed period - continuity of custody between the Magistrate and the trial court

Statutory bail under Section 167(2), CrPC - filing of charge-sheet as compliance with proviso (a) to Section 167(2) - cognizance not prerequisite for statutory bail - indefeasible right to default bail upon non-filing of charge-sheet within the prescribed period - continuity of custody between the Magistrate and the trial court - Whether an accused is entitled to statutory (default) bail under Section 167(2), CrPC on the ground that cognizance has not been taken before the expiry of the prescribed period of 60/90 days from the date of remand. - HELD THAT: - The Court held that the entitlement to statutory bail under proviso (a) to Section 167(2), CrPC arises only where the investigation has not been completed and the charge-sheet has not been filed within the prescribed period. The filing of the charge-sheet within the statutory period is sufficient compliance with proviso (a) and terminates the accused's indefeasible right to default bail, irrespective of whether cognizance has been taken by the trial court within that period. The judgment in Bhikamchand Jain was followed as dispositive: once the charge-sheet is filed within the stipulated time the stage of investigation is complete and the matter proceeds to the court for cognizance and trial, with custody of the accused remaining continuous first with the Magistrate and thereafter, upon cognizance, with the court trying the offence. Earlier decisions referring to cognizance (including Madar Sheikh) were explained as fact-specific and not introducing an independent requirement that cognizance must be taken within the statutory period for proviso (a) to be satisfied. Subsequent cases (including M. Ravindran) that considered enforcement of the right where an application had already been filed were not held to be inconsistent with Bhikamchand Jain. In the present case the complaint/charge-sheet was filed before the expiry of 60 days and therefore the High Court's grant of statutory bail on the ground that cognizance was not taken within 60 days was incorrect. [Paras 9, 10, 15, 16]

The accused are not entitled to statutory bail merely because cognizance was not taken before the expiry of the statutory period where the charge-sheet/complaint was filed within that period; the High Court order granting bail was set aside.

Final Conclusion: The Appeals are allowed; the impugned High Court order dated 31.05.2019 granting bail was set aside because filing of the charge-sheet within the prescribed period defeats the claim to statutory bail under Section 167(2), CrPC even if cognizance had not been taken by that date.

Ingredients of offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Proof of dishonour by cheque return memo and bank intimation - Demand notice requirement under Section 138 of the Negotiable Instruments Act - Blank cheque given as security and defence of misuse - Appellate interference with trial court's findings of fact

Ingredients of offence under Section 138 of the Negotiable Instruments Act - Proof of dishonour by cheque return memo and bank intimation - Demand notice requirement under Section 138 of the Negotiable Instruments Act - Whether the prosecution proved the ingredients of the offence under Section 138 of the Negotiable Instruments Act so as to sustain conviction - HELD THAT: - The Court upheld the Trial Court's finding of acquittal on the ground that the prosecution failed to establish essential ingredients of Section 138. The evidence disclosed discrepancies and lacunae: the cheque return memo or the bank's detailed memo indicating reasons for dishonour was not placed on record though Exhibit-39 referred to such a memo; the office copy of notice was produced but the RPAD receipt and proof of service were not proved in evidence; foundational documents recording supply and outstanding dues (agreement, statements of account, correspondence with inward numbers) were not produced; there were overwritings and variations in dates and handwriting on material documents and the cheque was not presented on the date appearing on it. Given these infirmities the Court held that the complainant did not prove that the cheque was issued in discharge of a legally enforceable debt or that the statutory procedure required for prosecution under Section 138 was complied with, and therefore conviction could not follow. [Paras 9, 11, 14, 15]

The acquittal was sustained as the prosecution failed to prove the ingredients of Section 138.

Presumption under Section 139 of the Negotiable Instruments Act - Whether the statutory presumption under Section 139 could be invoked in favour of the complainant - HELD THAT: - The Court held that the presumption under Section 139 did not arise because the foundational facts necessary to attract that presumption were not established by the complainant. The absence of the cheque return memo, deficiencies in proof of service of notice, and lack of documentary proof of the alleged outstanding liability meant that the statutory preconditions for applying Section 139 were not satisfied. [Paras 14, 16]

Presumption under Section 139 did not arise and could not be relied upon by the prosecution.

Blank cheque given as security and defence of misuse - Whether the defence that blank cheques were given as security and subsequently misused by the complainant was a probable explanation sufficient to create reasonable doubt - HELD THAT: - The Court noted that in a prior, factually similar case between the same parties the defence that cheques were handed over as security and were misused by filling in amounts was accepted as a probable defence; the witnesses in the present case admitted payments received from the accused which cast doubt on the claimed outstanding amount. Those factors, coupled with irregularities in handwriting and ink and missing foundational documents, rendered the defence of misuse plausible and reinforced the Trial Court's conclusion of reasonable doubt. [Paras 17]

The defence of blank cheque given as security and its misuse was a probable explanation that contributed to the acquittal being upheld.

Final Conclusion: The appeal is dismissed; the High Court concurs with the Trial Court that the prosecution failed to prove the statutory ingredients of Section 138 and that the presumption under Section 139 did not arise, and the acquittal is accordingly affirmed.