TaxTMI Updates e-Newsletter
Feb 18,2022

Interest on delayed GST payment - Retrospective amendment - Substitution of proviso to section 50(1) of the GST Act - Interest payable only on tax paid by debiting the electronic cash ledger - Refund of tax/interest paid consequent to change in law

Interest on delayed GST payment - Substitution of proviso to section 50(1) of the GST Act - Retrospective amendment - Impugned demand of interest under the adjudication and the appellate orders is unsustainable in law in view of the substituted proviso to section 50(1) of the GST Act. - HELD THAT: - The Finance Act, 2021 substituted the proviso to section 50(1) of the Central Goods and Services Tax Act and declared that substitution to be deemed effective from 1 July 2017. The substituted proviso confines liability for interest on tax payable declared in a belated return to that portion of tax which is paid by debiting the electronic cash ledger, except where the return is furnished after commencement of proceedings under section 73 or 74. Applying this legal position retrospectively, the Court held that the demand of interest made in the impugned adjudication order is not sustainable, and accordingly the appellate authority's order dated March 6, 2020 insofar as it upheld that interest demand is set aside.

Impugned interest demand cancelled; appellate order dated March 6, 2020 set aside insofar as it relates to the interest demand.

Refund of tax/interest paid consequent to change in law - Petitioner's payment made pursuant to the adjudication order is liable to verification and refund if found correct in view of the setting aside of the interest demand. - HELD THAT: - The petitioner produced evidence of payment made against the adjudication demand. Since the adjudication order as to interest has been set aside due to the retrospective amendment, the Court directed the respondent to verify the petitioner's claim of refund and, if the claim is found correct, to refund the amount. The verification is limited to establishing the correctness of the petitioner's claim in light of the substituted proviso to section 50(1). The respondent is directed to complete verification and effect refund within four weeks from communication of the order if the claim is sustained.

Respondent to verify the petitioner's refund claim and, if correct, refund the amount within four weeks of communication of the order.

Final Conclusion: The Court set aside the interest demand in the adjudication and the appellate order insofar as it upheld that demand on the basis of the substituted proviso to section 50(1) (deemed effective from 1 July 2017) and directed the respondent to verify and refund the payment made by the petitioner, if the claim is found correct, within four weeks.

Interference under Article 226 in taxation matters - disputed questions of fact - intent to evade tax - alternative remedy under Section 107 of the CGST Act

Interference under Article 226 in taxation matters - disputed questions of fact - intent to evade tax - alternative remedy under Section 107 of the CGST Act - Writ petition under Article 226 challenging an order passed under Section 130 of the CGST Act was not maintainable where the order records disputed factual findings including intent to evade tax and an alternative statutory remedy exists. - HELD THAT: - The Court examined the impugned order under Section 130 and found that the officer narrated several factual aspects and recorded a conclusion of 'intent to evade tax'. Those findings are essentially disputes of fact requiring appreciation by the adjudicatory forum. It is settled that high courts should not interfere under Article 226 in matters of taxation where determination depends on disputed factual questions. Further, the petitioner has an alternative and efficacious statutory remedy in the form of an appeal under Section 107 of the CGST Act. In view of the existence of this remedy and the factual nature of the controversy, judicial review by writ was inappropriate.

Writ petition dismissed and liberty reserved to the petitioner to pursue the statutory appeal under Section 107 of the CGST Act.

Final Conclusion: The High Court dismissed the writ petition challenging the Section 130 order, holding that disputes of fact (including findings of intent to evade tax) are not ordinarily amenable to relief under Article 226 in taxation matters and that the petitioner may pursue the remedy of appeal under Section 107 of the CGST Act.

Classification of goods by tariff heading - specific heading overrides general heading - application of Section and Chapter Notes of the Customs Tariff First Schedule to rate notifications - residuary entry in GST rate notification - taxability of processed fruit products versus fresh fruit

Classification of goods by tariff heading - specific heading overrides general heading - Chapter 8 entry for Mango Pulp (0804 50 40) - Mango Pulp/Puree is classifiable under Tariff Item 0804 50 40 (Mango Pulp) of the Customs Tariff First Schedule. - HELD THAT: - The Authority examined the intrinsic attributes of the product and applied the rule that classification is to be determined from the heading read with relevant Section and Chapter Notes of the First Schedule to the Customs Tariff Act, 1975. Chapter 8 contains a specific tariff item for 'Mango Pulp' (0804 50 40). Where a specific entry exists, it must be preferred over more general or subsequent chapter entries. The Chapter 20 notes exclude products prepared or preserved by processes specified in Chapter 8 from Chapter 20, reinforcing that mango pulp falls under Chapter 8 and not under Chapter 20. The Authority therefore rejected the appellant's contentions that the product should be treated as fresh fruit or classified under Chapter 20 or as a beverage and upheld classification under 0804 50 40. [Paras 4]

Mango Pulp/Puree is classifiable under Tariff Item 0804 50 40.

Application of Section and Chapter Notes of the Customs Tariff First Schedule to rate notifications - residuary entry in GST rate notification - taxability of processed fruit products versus fresh fruit - In the absence of a specific GST rate entry for mango pulp/puree, the product is taxable at 18% under residuary entry No.453 of Schedule III to Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. - HELD THAT: - The Authority noted that the GST rate notifications must be read with the First Schedule (including Section and Chapter Notes). Although Chapter 8 contains a specific tariff classification for mango pulp, the GST rate schedules do not specify a separate rate entry for this product. The notification exempts only fresh mangoes under a specific entry for fresh fruit; other amended entries cover certain dried or sliced mango products but remain silent on mango pulp. Consequently, where no specific rate is provided in Schedules I, II, IV, V or VI, the residuary entry No.453 of Schedule III applies. That residuary entry covers goods not specified elsewhere in the listed schedules and attracts the rate of 18%. The Authority therefore applied entry No.453 to the classified product. [Paras 4]

Mango Pulp/Puree is chargeable to GST at 18% under entry No.453 of Schedule III to Notification No.1/2017-Central Tax (Rate) dated 28.06.2017.

Final Conclusion: The appeal is allowed in part by modifying the AAR: Mango Pulp/Puree is held classifiable under Tariff Item 0804 50 40 and, in absence of a specific GST rate entry for that product, is taxable at 18% under residuary entry No.453 of Schedule III to Notification No.1/2017-Central Tax (Rate) dated 28.06.2017.

Classification under Customs Tariff headings - Specific heading overrides general heading - Interpretation of Section and Chapter Notes of the Tariff - Exclusion from Chapter 20 where item falls under processes of Chapter 8 - Residuary entry applicability in GST rate notifications - Interpretation of GST rate notifications with reference to the First Schedule to the Customs Tariff Act

Classification under Customs Tariff headings - Specific heading overrides general heading - Interpretation of Section and Chapter Notes of the Tariff - Exclusion from Chapter 20 where item falls under processes of Chapter 8 - Mango Pulp/Puree is classifiable under Tariff Item 0804 50 40 (Chapter 8). - HELD THAT: - The Rate Notification must be read with the First Schedule to the Customs Tariff Act including Section and Chapter Notes for classification. Chapter 8 specifically includes a tariff item for 'Mango Pulp' (0804 50 40). Where a specific entry exists it must be adopted in preference to more general descriptions. Notes to Chapter 20 expressly exclude fruits prepared or preserved by processes specified in Chapter 8 from Chapter 20; therefore Chapter 20 (including heading 2007) does not apply to products covered by Chapter 8. Technical nomenclature or external memoranda (such as the Ministry of Food Processing Industries memorandum equating pulp and puree for other purposes) do not supplant the Tariff entries and chapter notes governing classification. [Paras 4]

Mango Pulp/Puree falls under Tariff Item 0804 50 40 (Chapter 8).

Residuary entry applicability in GST rate notifications - Interpretation of GST rate notifications with reference to the First Schedule to the Customs Tariff Act - Mango Pulp/Puree is liable to GST at 18% under the residuary entry No.453 of Schedule III to Notification No.1/2017-Central Tax (Rate). - HELD THAT: - The GST tariff notification contains discrete entries for mangoes in certain schedules (including exemption for fresh mangoes and specific entries for dried/sliced mangoes), but no specific description for 'mango pulp/puree' in Schedules I, II, IV, V or VI. Consequently, the residuary entry No.453 of Schedule III - which covers goods not specified in the listed schedules - applies. Applying the interpretation rules (linking the Rate Notification to the First Schedule of the Customs Tariff Act), mango pulp/puree is therefore chargeable at the rate specified for the residuary entry, namely 18%. [Paras 4]

Mango Pulp/Puree attracts GST at 18% under entry No.453 of Schedule III.

Final Conclusion: The order of the Authority for Advance Ruling is modified: 'Mango Pulp/Puree' is classified under Tariff Item 0804 50 40 and is chargeable to GST at 18% by application of the residuary entry No.453 of Schedule III to Notification No.1/2017-Central Tax (Rate).

Liquidated damages - supply of service - consideration includes act of forbearance - Schedule II entry 5(e) - time of supply - GST exigibility - Section 55, Indian Contract Act - effect of failure to perform at fixed time

Liquidated damages - supply of service - consideration includes act of forbearance - Schedule II entry 5(e) - GST exigibility - Liquidated damages payable to the applicant for delay in commissioning constitute a supply liable to GST. - HELD THAT: - The Authority applied Section 55 of the Indian Contract Act to show that failure to perform at the agreed time entitles the promisee to compensation. Liquidated damages claimed for delay represent consideration for tolerating an act or situation arising out of the contractual obligation. Entry 5(e) of Schedule II treats agreeing to refrain from an act or to tolerate an act or situation as a supply of services and Section 2(31)(b) recognises the monetary value of an act of forbearance as consideration. Consequently, the monetary recovery by the applicant as liquidated damages is taxable as consideration for supply of service and is exigible to GST. [Paras 7]

Liquidated damages recovered by the applicant are a taxable supply of service and attract GST.

Time of supply - liquidated damages - Schedule II entry 5(e) - The time when liability to pay GST on liquidated damages is triggered. - HELD THAT: - The contract's clause specifying a formula and temporal slabs for computation of liquidated damages and mandating payment within a stipulated period fixes the date on which the amount is determined. The Authority held that the date on which the liquidated damage is determined as per the contractually prescribed formula constitutes the time of supply for the service captured by Schedule II entry 5(e). Therefore, GST liability arises on that determination date. [Paras 7, 8]

GST is triggered on the date the liquidated damages are determined in accordance with the contract's formula.

Final Conclusion: The Authority ruled that liquidated damages for delay in commissioning amount to a taxable supply of service (forbearance) under Schedule II entry 5(e) and that GST liability arises on the date the liquidated damages are determined as per the contractually prescribed formula.

Composite supply - Principal supply - Works contract - Annual Maintenance Contract (AMC) as separate contract - Place of supply of goods - Separate registration in other States - Tax rate on electrical signalling equipment (HSN 8530) - Liability of executing partner / sub-contractor

Works contract - Composite supply - Principal supply - The subject contract for design, supply, installation, testing and commissioning of onboard TCAS is not a works contract but a composite supply, and the rate applicable to the principal supply governs the entire contract. - HELD THAT: - The Authority found that the definition of works contract under the GST Act is confined to supplies pertaining to immovable property. The contract concerns installation of equipment on locomotives (movable property) and therefore does not qualify as a works contract. The TCAS comprises naturally bundled signaling and related electrical goods which operate in unison to achieve a single purpose; accordingly the supply is a composite supply as defined in the CGST Act. For a composite supply the tax rate applicable to the principal supply governs taxation of the entire bundle. Applying this analysis, the principal supply is electrical signalling equipment (HSN 8530) and the composite supply is taxable at the rate applicable to that principal supply. [Paras 7, 8]

The contract is a composite supply, not a works contract, and the entire contract is taxable at the rate applicable to the principal supply.

Tax rate on electrical signalling equipment (HSN 8530) - The applicable GST rate for the contract (principal supply being electrical signalling equipment HSN 8530) is 9% CGST and 9% SGST. - HELD THAT: - Having identified the principal supply as electrical signalling equipment under HSN 8530, the Authority applied the notified rate and observed that this commodity is taxable at 9% under CGST and 9% under SGST as per the notifications relied upon. Consequently, the composite supply (TCAS) is to be taxed at 9% CGST and 9% SGST. [Paras 7, 8]

Supply of TCAS is taxable at 9% CGST and 9% SGST (rate applicable to HSN 8530).

Annual Maintenance Contract (AMC) as separate contract - Composite supply - Principal supply - The AMC envisaged post-warranty is a separate contract and, being a composite supply, is taxable at the rate applicable to its principal supply (9% CGST and 9% SGST). - HELD THAT: - The Authority noted the main contract contains clauses referring to future AMCs which are to be entered into separately after expiry of the warranty; therefore the AMC is a distinct contract enforceable independently of the main contract. Although details of the AMC were not provided, the applicant stated that AMC involves similar goods and services for maintenance of TCAS. Applying the composite-supply principle, the AMC will be taxed at the rate applicable to the principal supply, viz., electrical signalling equipment, i.e., 9% CGST and 9% SGST. [Paras 7, 8]

AMC is a separate contract and will be taxable as a composite supply at 9% CGST and 9% SGST (rate of the principal supply).

Separate registration in other States - Place of supply of goods - The applicant must obtain separate GST registration in other States where supplies are made; place of supply of goods is the location where goods are delivered by the supplier, and tax liability arises in the State of delivery. - HELD THAT: - The Authority reiterated that supplies executed in States other than the applicant's home State require local registration under GST and liability to pay tax in those States as per place of supply rules. Relying on Section 10 of the IGST Act (place of supply of goods), the place of supply is the place where the supplier delivers the goods to the recipient. If delivery to the recipient occurs in another State, the liability to pay tax arises in that State. [Paras 7, 8]

Separate registration in other States is required where supplies are made; place of supply is the State where delivery is made and tax liability arises there.

Liability of executing partner / sub-contractor - The executing partner of the joint venture (and, by extension on the facts submitted, sub-contractors/sub-suppliers) will have the same liability as the joint venture firm which was awarded the contract. - HELD THAT: - The Authority observed that where one partner of the joint venture executes the contract, the attributes of the contract and the tax liability remain the same for the executing partner as they are for the joint venture. Consequently, in the factual matrix presented the executing partner bears the same GST liability as the JV awarded the contract; this reasoning was applied to sub-contractors and sub-suppliers insofar as the facts submitted indicate execution by the partner. [Paras 7, 8]

The executing partner of the JV will have the same GST liability as the JV; similarly placed sub-contractors/sub-suppliers will have corresponding liability under the facts submitted.

Final Conclusion: The Authority ruled that the TCAS contract is a composite supply (not a works contract) taxable at the rate applicable to the principal supply (electrical signalling equipment HSN 8530) - 9% CGST and 9% SGST; the AMC is a separate contract and similarly taxed; separate GST registration is required in States where supplies are delivered and tax liability arises in the State of delivery; and the executing partner/sub-contractor bears the same liability as the JV on the facts presented.

Supply of taxable services - Other professional, technical and business services - Heading 9983 - Educational services - Heading 9992 - Exemption under Notification No.12/2017 - Training services provided to Government for total expenditure borne by Government - Privity of contract

Supply of taxable services - Other professional, technical and business services - Heading 9983 - Exemption under Notification No.12/2017 - Income earned from conducting guest lectures is a taxable supply of services. - HELD THAT: - The Authority found that the applicant's guest lectures on law and legal awareness do not fall within services by way of training or coaching in recreational activities relating to arts or culture under Entry No.80 of Notification No.12/2017. The lectures are professional/educational in nature and therefore fall within the ambit of "other professional, technical and business services" under Heading 9983. Consequently, these services are not covered by the nil-rated exemptions relied upon by the applicant and attract GST at the prescribed rate for Heading 9983. [Paras 15, 22]

Guest lectures constitute taxable supply and are classifiable under Heading 9983 (attracting GST).

Educational services - Heading 9992 - Training services provided to Government for total expenditure borne by Government - Privity of contract - Exemption under Notification No.12/2017 - Income from research and training projects funded by Government bodies is not entitled to exemption under Heading 9992 unless both statutory conditions are satisfied; absence of information on the recipient/privity precludes the exemption. - HELD THAT: - The Authority identified two cumulative conditions for classification under Heading 9992 and the attendant nil-rate exemption: (a) the training services must be provided only to Central/State/Union territory administration, and (b) the total expenditure must be borne by that Government entity. The applicant did not demonstrate privity of contract with the Government or expressly identify the recipient as the Government; the MOU with an educational centre did not establish privity between the applicant and the Government. In the absence of factual material establishing satisfaction of both conditions, the services cannot be placed under Heading 9992 and its exemption. [Paras 19, 20, 21, 22]

Research and training projects do not qualify for nil-rate exemption under Heading 9992 unless both statutory conditions are proved; on the material before the Authority the exemption is not available.

Other professional, technical and business services - Heading 9983 - Research and Development services - Heading 9981 - In the absence of information about the recipient, the research/training services are classifiable under Heading 9983 and attract GST; research activity may alternatively fall under Heading 9981 if established as R&D services. - HELD THAT: - Given the lack of particulars regarding the recipient and the absence of proof satisfying the conditions for Heading 9992, the Authority classified the services under SAC/Heading 9983 as "other professional, technical and business services" which attract tax. The Authority further observed that where the taxpayer is engaged in research projects of an R&D character, such services may be classifiable under Heading 9981 (Research and Development services) and would similarly attract tax unless exemption conditions apply. [Paras 21, 22]

In the absence of recipient details the services are classifiable under Heading 9983 (taxable); research services, if established as R&D, may be classifiable under Heading 9981.

Final Conclusion: The Advance Ruling holds that the applicant's income from guest lectures is a taxable supply classifiable under Heading 9983 and not eligible for the recreational/arts exemption; research and training projects funded by Government bodies are exempt under Heading 9992 only if both (i) services are provided to Government and (ii) total expenditure is borne by Government, facts which are not established here; consequently, on the material before the Authority the services are classified under Heading 9983 and attract GST.

Classification of goods - determination of liability to pay tax - GST rate on marine engines supplied as part of fishing vessels - applicability of Schedule I Sl. No. 252 - concessional rate for parts of goods of heading 8902

GST rate on marine engines supplied as part of fishing vessels - concessional rate for parts of goods of heading 8902 - Outboard motors (marine engines) and their spare parts supplied for use as part of fishing vessels attract GST at the concessional rate specified for parts of goods of heading 8902. - HELD THAT: - The Authority noted that fishing vessels are classifiable under Customs Tariff Heading 8902 and attract GST @ 5% under the Schedule entry for such vessels. By virtue of Sl. No. 252 of Schedule I to Notification No.01/2017-Central Tax (Rate), goods of any chapter which are parts of goods of heading 8902 attract the concessional rate. The CBIC Circular No.52/26/2018-GST confirms that marine engines and their spare parts supplied for use in fishing vessels (as parts of the fishing vessel) fall within that concession. Applying these provisions and the circular to the admitted facts that the applicant supplies marine engines and spares for fishing vessels, the Authority held that such supplies attract GST at 5% (2.5% CGST + 2.5% KGST). [Paras 9, 10]

Supply of outboard motors and spare parts for use as part of fishing vessels attracts GST at 5% (2.5% CGST + 2.5% KGST) under Sl. No. 252 of Schedule I.

Classification of goods - determination of liability to pay tax - Rate of GST on outboard motors supplied for uses other than as parts of fishing vessels is to be determined according to their applicable Customs Tariff Heading. - HELD THAT: - The Authority distinguished supplies of marine engines made specifically for incorporation in fishing vessels from supplies for other uses. Where a marine engine is not supplied for use as part of a fishing vessel, the concessional Sl. No. 252 does not apply; instead, the GST rate applicable to the goods is the rate corresponding to the Customs Tariff Heading under which they are classified (for example, the general tariff classification such as heading 8407), and the tax must be charged accordingly. [Paras 9, 10]

If outboard motors are supplied for use other than as parts of fishing vessels, GST shall be payable at the rate applicable to their respective Customs Tariff Heading.

Final Conclusion: The Authority ruled that outboard motors and their spares supplied for use as parts of fishing vessels attract GST at 5% (2.5% CGST + 2.5% KGST) under Sl. No. 252 of Schedule I; supplies of such engines for other uses are taxable at the rate applicable to their Customs Tariff Heading.

Taxability of educational services - exemption under GST for career-long learning/CME - services to healthcare professionals - not an educational institution for exemption - intermediary/liaison services and agent collection of charges - taxability of portfolio management services - admissibility of advance ruling on determination of liability to pay tax

Taxability of educational services - exemption under GST for career-long learning/CME - not an educational institution for exemption - Paid educational content used by health care professionals or students to fulfill a mandatory requirement of their professional body or institute is taxable and not exempt under the GST laws. - HELD THAT: - The Authority examined the nature of the applicant's service and found that the applicant does not provide health-care services nor is it a clinical establishment; nor does it qualify as an educational institution as defined for the purpose of the exemption notification. The service consists of redistribution and hosting of accredited online educational material and facilitation of access for professionals to meet mandatory continuing education requirements, but is not part of a curriculum leading to a degree from a recognised university. On these findings the Authority concluded that the activity is not covered by the entries granting exemption and therefore the consideration charged for the paid educational content is taxable under the CGST/KGST/IGST framework. [Paras 10, 11]

Paid educational content supplied to meet mandatory professional requirements is not exempt from GST.

Intermediary/liaison services and agent collection of charges - taxability of portfolio management services - services to healthcare professionals - Fees charged for portfolio management services (liaison/record-keeping/collection on behalf of professional bodies) are taxable and not exempt under the GST laws. - HELD THAT: - The Authority found that the applicant enters into agreements with professional bodies to maintain records, liaise with members, expose them to standardized content and collect/distribute fees on behalf of the bodies. The applicant does not itself provide education but acts as an intermediary/liaison and collects charges (distribution fee, certification fee and fund fee) payable by health care professionals. Given that these services are essentially agent/intermediary and administrative in nature and not covered by exemption entries applicable to educational institutions or health-care providers, the portfolio management fee is not eligible for exemption and is therefore taxable. [Paras 10, 11]

Fee for portfolio management services is not exempt from GST.

Final Conclusion: The Advance Ruling holds that (i) paid educational content used to satisfy mandatory professional continuing education requirements and (ii) fees for portfolio management/liaison services collected by the applicant are not exempt and are taxable under the Central, Karnataka and Integrated Goods and Services Tax Acts.

Exclusion of expenses from export turnover and corresponding exclusion from total turnover for computation of deduction under Section 10A - Ordinary meaning and contextual interpretation of statutory terms where not expressly defined - Stage of deduction under Sections 10A/10B - deduction to be made while computing gross total income of the eligible undertaking under Chapter IV and not after Chapter VI set off and carry forward provisions - Non application of set off of unabsorbed depreciation and brought forward losses of other units against profits of an eligible undertaking before computing deduction under Section 10B

Exclusion of expenses from export turnover and corresponding exclusion from total turnover for computation of deduction under Section 10A - Ordinary meaning and contextual interpretation of statutory terms where not expressly defined - Whether expenses such as foreign travel and telecommunication charges excluded from 'export turnover' must also be excluded from 'total turnover' when computing deduction under Section 10A. - HELD THAT: - The Court followed the reasoning in the Supreme Court decision reproduced from HCL Technologies Ltd., holding that when a term is not defined in Section 10A, its ordinary and contextual meaning must be adopted so as to make the statutory formula workable. Expenses properly excluded from the numerator (export turnover) under Explanation 2(iv) cannot be excluded from the numerator without being excluded from the denominator (total turnover) because one component of total turnover is export turnover; treating them differently would produce absurd and unworkable results. The Court therefore endorsed the principle that deductions (such as freight, telecommunication and expenses in foreign exchange attributable to delivery or technical services provided outside India) excluded from export turnover shall be excluded from total turnover in the same proportion for computation of deduction under Section 10A.

Held for the assessee: such expenses excluded from export turnover must also be excluded from total turnover for computing deduction under Section 10A.

Stage of deduction under Sections 10A/10B - deduction to be made while computing gross total income of the eligible undertaking under Chapter IV and not after Chapter VI set off and carry forward provisions - Non application of set off of unabsorbed depreciation and brought forward losses of other units against profits of an eligible undertaking before computing deduction under Section 10B - Whether unabsorbed depreciation or brought forward losses of other units can be set off against the profits of an eligible Section 10B undertaking before allowing the deduction under Section 10B. - HELD THAT: - Relying on the ratio of the Supreme Court in Yokogawa and the assessee's earlier decision, the Court held that Sections 10A and 10B, though cast as deductions, operate at the stage of computing the gross total income of the eligible undertaking under Chapter IV. Consequently, the provisions for set off and carry forward in Chapter VI (including application of unabsorbed depreciation and brought forward losses of other units) are not to be applied prior to the computation and allowance of deduction under Section 10B for the eligible undertaking. The method adopted by the Revenue - applying carry forward/unabsorbed depreciation first and thereby nullifying the eligible undertaking's deduction - was contrary to the law laid down by the Apex Court and therefore unsustainable.

Held for the assessee: unabsorbed depreciation and losses of other units cannot be set off against profits of the eligible Section 10B undertaking prior to allowing deduction under Section 10B; deduction is to be computed at the undertaking level under Chapter IV.

Final Conclusion: All substantial questions of law were answered in favour of the assessee; the appeals filed by the Revenue are dismissed and connected petitions are closed with no costs.

Initiation of proceedings under Section 148 of the Income Tax Act, 1961 - notice issued to a deceased person - interim stay of tax reassessment proceedings - prima facie determination - condition of payment of process fee for interim relief

Notice issued to a deceased person - initiation of proceedings under Section 148 of the Income Tax Act, 1961 - interim stay of tax reassessment proceedings - Challenge to notices issued under Section 148 of the Income Tax Act, 1961 on the ground that the notices were addressed to a deceased person and whether further proceedings should be stayed. - HELD THAT: - On prima facie consideration the Court noted that the petition contests the impugned notices on the ground that they were issued to a dead person. The petitioner's counsel placed reliance on earlier decisions of this Court and other High Courts which have taken the view that notices issued to deceased persons cannot serve as a valid basis for proceedings under Section 148. Having regard to those submissions and the prima facie nature of the challenge, the Court directed a stay of further proceedings pursuant to the impugned notice dated 30.03.2021 until the next date of hearing. The interim order was made conditional upon payment of process fee as directed; failure to comply would render the interim order ineffective.

Further proceedings pursuant to the impugned notice dated 30.03.2021 are stayed until the next date of hearing, subject to payment of process fee as directed.

Final Conclusion: Notice issued; interim stay granted on prima facie grounds against further proceedings under the impugned Section 148 notice dated 30.03.2021 until the next hearing, subject to payment of process fee; matter listed on 03.03.2022.

Re-opening of assessment - proviso to Section 147 requiring tangible material and failure to disclose - change of opinion - deemed consideration of replies to queries in original assessment - procedure for objections to reopening - four-week rule in Asian Paints

Re-opening of assessment - proviso to Section 147 requiring tangible material and failure to disclose - change of opinion - deemed consideration of replies to queries in original assessment - Validity of the notice dated 20th March, 2020 under Section 148 read with Section 147 for A.Y. 2013-14 - HELD THAT: - The Court examined the reasons recorded for reopening and found no material to show that the assessee failed to fully and truly disclose material facts; the facts and documents relied upon were already placed before the Assessing Officer during the original assessment proceedings. The re-opening rested on a different view being taken by the Assessing Officer on the same set of material, which amounts to a change of opinion. The Court also noted that queries were raised during assessment and the assessee had replied with details and documents, and that even if the assessment order did not expressly discuss the matter, the Assessing Officer is deemed to have considered those replies. Re-opening based merely on a change of opinion, without fresh tangible material demonstrating non-disclosure, is impermissible under the proviso to Section 147.

Notice dated 20th March, 2020 under Section 148 read with Section 147 for A.Y. 2013-14 quashed and set aside.

Procedure for objections to reopening - four-week rule in Asian Paints - Validity of the assessment order dated 29th September, 2021 passed after rejection of objections to reopening - HELD THAT: - The Court held that the assessing authorities failed to comply with the procedural requirement enunciated in Asian Paints which mandates that if objections to reopening are not accepted, the Assessing Officer shall not proceed further for a period of four weeks from service of the objections order. The impugned assessment order was passed within five days of rejecting objections, contrary to the prescribed procedure, and therefore the assessment order was set aside on this ground alone.

Assessment order dated 29th September, 2021 set aside for breach of the four-week procedural requirement following rejection of objections to reopening.

Final Conclusion: The notice under Section 148/147 for A.Y. 2013-14 was quashed as re-opening was based on change of opinion without fresh tangible material or non-disclosure; the consequent assessment order was also set aside for breach of the four-week waiting rule after rejection of objections. Petition disposed.

Pendency of application for revision under Section 264 of the Income-tax Act - eligibility under Direct Tax Vivad se Vishwas Act 2020 - specified date 31st January 2020 - absence of power in Income Tax Officer under DTVSV Act to decide Section 264 applications - processing of declaration under Vivad se Vishwas Scheme

Pendency of application for revision under Section 264 of the Income-tax Act - eligibility under Direct Tax Vivad se Vishwas Act 2020 - specified date 31st January 2020 - absence of power in Income Tax Officer under DTVSV Act to decide Section 264 applications - processing of declaration under Vivad se Vishwas Scheme - Whether the petitioner's declaration under the Direct Tax Vivad se Vishwas Act 2020 was improperly rejected on the ground that no Section 264 revision petition was pending as on the specified date. - HELD THAT: - The Court held that the DTVSV Act requires only that an application for revision under Section 264 of the Income-tax Act be pending on the specified date (31st January 2020) for the person to qualify as an appellant under the Scheme. The petitioner's revision application, which included a request for condonation of delay, had not been rejected and therefore remained pending on the specified date. The Court observed that an Income Tax Officer has no authority under the DTVSV Act to decide or dispose of a Section 264 revision application; the maintainability or merits of the Section 264 application were matters for the Commissioner before whom it was pending. Consequently, the respondents' rejection of the Form-1 declaration on the basis that no petition was pending on 31.01.2020 was incorrect. The Court directed respondents to process the Form-1 declaration filed on 25th December 2020 and pass such orders as required by law, and to examine and give credit for any payments already made pursuant to Form-1. [Paras 4, 5, 6, 7, 9]

Petition allowed; respondents directed to process the declaration under the DTVSV Act (Form-1 filed on 25th December 2020) for the stated assessment years and to give credit for any payments already made.

Final Conclusion: The High Court allowed the petitions and held that the petitioner's DTVSV Act declaration was wrongly rejected because the Section 264 application was pending as on 31.01.2020; respondents were directed to process the Form-1 declarations for the specified assessment years and to credit any payments already tendered.

Reassessment notice under Section 148 - reopening of assessment - proviso to Section 147 - failure to truly and fully disclose material facts - change of opinion - assessment completed under Section 143(3)

Reopening of assessment - change of opinion - proviso to Section 147 - failure to truly and fully disclose material facts - Validity of the reassessment notice issued after four years where original assessment was completed and reasons for reopening show change of opinion but do not allege non-disclosure of material facts. - HELD THAT: - The Court examined the reasons recorded for reopening and the material available to the Assessing Officer at the time of the original assessment. The reasons merely showed that the reassessment was proposed on the basis of the Assessing Officer's different view of the same material facts already on record, not on any omission or concealment by the assessee. The proviso to Section 147 applies where there is failure to truly and fully disclose material facts; it does not permit reopening merely because the Assessing Officer entertains a change of opinion. The Assessing Officer who had made the original assessment had the primary facts before him and had drawn an inference; reopening on identical material to reach a different conclusion is impermissible. Consequently, the reassessment notice and consequent order issued beyond four years, unsupported by a finding of non-disclosure of material facts, cannot be sustained. [Paras 1, 2, 5, 6]

Reassessment notice and the order made thereon quashed as being founded on an impermissible change of opinion and not on failure to truly and fully disclose material facts.

Final Conclusion: The writ petition is allowed; the reassessment notice dated 31st March 2019 under Section 148 and the order dated 22nd November 2019 are quashed and set aside because reopening was based on a change of opinion and not on nondisclosure of material facts.

Existing solely for educational purposes and not for purposes of profit - predominant object test - approval by the prescribed authority for exemption under section 10(23C)(vi) - no requirement of registration under section 12AA for claiming exemption under section 10(23C)(vi) - mere generation of surplus is not a basis for rejection of exemption - power to withdraw approval on breach of conditions

Existing solely for educational purposes and not for purposes of profit - approval by the prescribed authority for exemption under section 10(23C)(vi) - Assessee Association of Persons entitled to exemption under section 10(23C)(vi) for the year in question. - HELD THAT: - The Tribunal applied the statutory test that an entity must exist solely for educational purposes and not for purposes of profit and that the prescribed authority must be satisfied before granting approval. Having considered the nature and activities of the AOP (formation by two registered charitable trusts, filing of returns, receipts and application of surplus to educational purposes, and supporting documents including Form 10BB and permissions from the education department), the Tribunal found no material to show violation of the conditions for the year under consideration. On an overall view the AOP's dominant objective was educational and not profit-making and therefore it satisfied the conditions for approval under section 10(23C)(vi). [Paras 24, 30, 31]

Allowing the appeal and directing the Commissioner (Exemption) to grant exemption under section 10(23C)(vi).

No requirement of registration under section 12AA for claiming exemption under section 10(23C)(vi) - Registration under section 12AA is not a precondition for grant of exemption under section 10(23C)(vi). - HELD THAT: - Relying on CBDT Circular No.14/2015 and judicial precedents, the Tribunal held that the statutory scheme for section 10(23C)(vi) operates independently of the registration regime under sections 11-12; there is no mandate that an applicant for approval under section 10(23C)(vi) must be registered under section 12AA. The absence of a separate memorandum or registration therefore could not, by itself, justify denial of exemption where the substantive statutory conditions are satisfied. [Paras 20, 24]

Rejecting refusal of exemption on the sole ground of non-registration under section 12AA.

Mere generation of surplus is not a basis for rejection of exemption - predominant object test - Generation of surplus does not defeat charitable/educational character if surplus is applied to educational purposes; dominant-object test governs. - HELD THAT: - The Tribunal applied the predominant-object principle from Supreme Court and High Court decisions: an incidental surplus does not convert an educational institution into one existing for profit. The accounts showed surplus was not distributed but invested/used for educational purposes and fixed assets were created for education. Consequently, mere earning of surplus or existence of an original clause permitting distribution (which was shown not to have been acted upon) did not demonstrate a profit motive that would disqualify the AOP. [Paras 21, 25, 28]

Holding that the assessee's surplus usage is consistent with educational purpose and does not negate entitlement to exemption.

Approval by the prescribed authority for exemption under section 10(23C)(vi) - power to withdraw approval on breach of conditions - Rejection could not be sustained where no breach of conditions was shown; remedies for future breach remain available to revenue. - HELD THAT: - The Tribunal noted that the statute and CBDT circular provide monitoring and power to withdraw approval if conditions are later found to be violated. For the year under consideration, no evidence of breach (such as distribution of profits or diversion of funds) was produced. The availability of withdrawal as a remedy did not justify denial of approval for the period before any contravention was shown. [Paras 18, 27, 30]

Directing grant of approval for the year while recognising the authority's power to withdraw on future breach.

Existing solely for educational purposes and not for purposes of profit - predominant object test - Assessee AOP was running the educational institute and permissions/certificates relevantly referred to the AOP and its members. - HELD THAT: - The Tribunal examined the certificates from the education department and corporate chronology (including merger documents) and concluded that the permissions and certificates, together with Form 56D/10BB, bank receipts and accounts, demonstrated that the AOP received fees, incurred educational expenses and created fixed assets in its name. The CIT(E)'s conclusion that the school was run solely by one member and not by the AOP was factually incorrect on the material before the Tribunal. [Paras 13, 24, 29]

Finding that the Association of Persons was in fact running the school and rejecting the contention that the institute was not operated by the AOP.

Final Conclusion: The Tribunal allowed the appeal, holding that the Association of Persons satisfied the conditions of section 10(23C)(vi) for assessment year 2018 - 19 (being solely for educational purposes and not for profit), that registration under section 12AA is not a prerequisite for such approval, and directing the Commissioner (Exemption) to grant the exemption while noting the authority's statutory power to withdraw approval on proof of any future breach.

Revision under section 263 - erroneous and prejudicial to the interests of revenue - Explanation 2 to section 263 - order passed without making inquiries or verification - Deduction under section 57(iii) - expenditure laid out wholly and exclusively for the purpose of making or earning income - Capital Gains Deposit Account Scheme and section 54F - no statutory requirement that deposit must be made only from sale consideration - No deeming fiction to treat loan for CGDA deposit as source of mutual fund investment

Revision under section 263 - erroneous and prejudicial to the interests of revenue - Explanation 2 to section 263 - order passed without making inquiries or verification - Whether the Principal Commissioner was justified in invoking jurisdiction under section 263 on the ground that the assessment order was erroneous and prejudicial to the interests of revenue for lack of proper enquiry by the Assessing Officer - HELD THAT: - The Tribunal examined the record of assessment and the notices and replies exchanged under sections 142(1) and 142(2). The Assessing Officer had specifically queried the claim of deduction under section 57, asked for the loan statement and details of fixed deposits, and received documentary responses showing the loan from HSBC and credit/debit entries linking the loan to fixed deposits under the CGDA Scheme. Notwithstanding these enquiries, the Principal Commissioner took the view that the AO had not made the necessary enquiries and therefore the assessment was erroneous and prejudicial to revenue. The Tribunal found on a review of the material that the AO had made inquiries and verifications which were germane to the claim and had applied his mind before allowing the deduction. However, on the question of adequacy of enquiry the Tribunal concluded that the AO had not examined the claim in the proper perspective and had proceeded on an incorrect assumption of facts and law; accordingly the PCIT was entitled to form an opinion under Explanation 2 to section 263 that the order was erroneous and prejudicial to revenue. The Tribunal therefore sustained the invocation of section 263 on the ground that a fuller enquiry was warranted before allowing the claim. [Paras 17, 18, 20, 21, 22]

The exercise of jurisdiction by the Principal Commissioner under section 263 was held to be justified because the Assessing Officer's enquiries were not, on the Tribunal's appraisal, adequate in the required perspective and the AO's order was thus erroneous insofar as prejudicial to the interests of revenue.

Deduction under section 57(iii) - expenditure laid out wholly and exclusively for the purpose of making or earning income - Capital Gains Deposit Account Scheme and section 54F - no statutory requirement that deposit must be made only from sale consideration - No deeming fiction to treat loan for CGDA deposit as source of mutual fund investment - Whether interest paid on loan taken to make deposit in the CGDA Scheme can be deducted under section 57(iii) against interest income earned from investments in mutual funds - HELD THAT: - The Tribunal applied the settled test under section 57(iii) that the expenditure must be laid out wholly and exclusively for the purpose of making or earning the income in question. The factual position was that sale proceeds were invested in mutual funds (which produced interest income), whereas the loan from HSBC was taken to make the deposit under the CGDA Scheme pursuant to a claim under section 54F; the borrowed funds were not used to acquire the mutual fund investments which produced the interest income. Relying on precedent and on the principle that there is no statutory deeming that the CGDA deposit must be treated as being made from sale consideration, the Tribunal held that the interest on the loan taken for the CGDA deposit was not incurred for the purpose of earning the interest from mutual funds. Consequently, the interest could not be allowed as a deduction under section 57(iii). The Tribunal followed its earlier decision in the connected matters and concluded that the assessee's grounds on this point lacked merit. [Paras 24, 25, 29, 30, 31]

Interest paid on the loan taken to make the CGDA deposit cannot be set off as a deduction under section 57(iii) against interest earned from mutual funds, and the assessee's claim is rejected.

Final Conclusion: The Tribunal dismissed the appeal: it held that the Principal Commissioner was justified in invoking section 263 because the Assessing Officer's enquiries were inadequate in perspective, and on the merits the interest on the loan taken for the CGDA deposit was not deductible under section 57(iii) against interest from mutual funds.

Permanent Establishment (PE) - Dependent Agent PE - Independent agent - Agency PE - Fixed place of business / installation PE - Software installation as PE - Business connection - Article 7 of the India-USA DTAA (business profits) - Authority to conclude contracts / habitual exercise of authority - Arm's length / independent status test for agents

Business connection - Article 7 of the India-USA DTAA (business profits) - Whether income from money transfer services in respect of remittances to individuals in India is taxable in India as business profits - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that, notwithstanding the existence of a business connection, the assessee's income from money transfer remittances is not taxable in India as business profits under Article 7 of the India-USA DTAA. The Bench followed the consistent view of coordinate Benches in earlier assessment years which held that in the absence of a Permanent Establishment in India profits attributable to India operations could not be assessed as business profits. The Revenue offered no comparable reason to depart from the long standing coordinate bench decisions relied upon by the CIT(A), and the Departmental Representative conceded the applicability of those precedents. [Paras 5, 6, 7, 8]

Income from the money transfer business in question is not taxable in India as business profits under Article 7 for A.Y. 2015 16.

Permanent Establishment (PE) - Fixed place of business / installation PE - Software installation as PE - Whether the assessee had a fixed place PE in India by reason of software installed at agents' premises - HELD THAT: - The Tribunal accepted the coordinate bench reasoning that the mere installation or use of the assessee's software on agents' premises, without the assessee having a right to use those premises or having parted with ownership of the software, does not create a fixed place PE in India. The coordinate Bench observed that installation as a PE under the treaty is conceptually linked to installations for exploration/exploitation of natural resources and that mere access to the assessee's mainframe via software from premises owned or hired by independent agents does not convert such premises plus software into a PE. [Paras 6]

The software installed on agents' machines does not constitute a fixed place PE in India.

Independent agent - Arm's length / independent status test for agents - Whether the agents in India were independent agents under the DTAA - HELD THAT: - Applying the tests reproduced from coordinate bench decisions, the Tribunal concluded that the agents acted in the ordinary course of their business, their activities were not wholly or almost wholly devoted to the assessee, and the transactions (compensation) were at arm's length. The authorities considered factors such as the agents' own business activities, the duration and nature of agency arrangements, training and standards, and the absence of evidence showing the agents' economic dependence on the assessee. On these facts the agents qualified as independent agents under Article 5.5 of the DTAA. [Paras 6]

The agents are independent agents and do not create a PE under Article 5.5.

Dependent Agent PE - Authority to conclude contracts / habitual exercise of authority - Whether the representatives/agents in India constituted a dependent agent PE by having authority or habitually exercising authority to conclude contracts on behalf of the assessee - HELD THAT: - Following the coordinate bench analysis, the Tribunal held that even if agents were not independent, it was necessary to show that they had and habitually exercised authority to conclude contracts on behalf of the assessee. The contractual scheme and factual matrix showed no express authority to conclude contracts; the agents merely executed the payment leg of contracts already concluded abroad between remitter and the assessee. The appointment of sub agents and performance of duties to make payments did not amount to authority to conclude contracts nor habitual exercise of such authority. Consequently, the agents did not constitute a dependent agent PE under Article 5.4. [Paras 6]

The representatives/agents in India do not constitute a dependent agent PE; they do not have or habitually exercise authority to conclude contracts.

Permanent Establishment (PE) - Article 7 of the India-USA DTAA (business profits) - Whether any profits should be attributed to India by reason of a PE - HELD THAT: - Because the Tribunal found no fixed place PE and no agency (dependent) PE in India, it followed that there were no profits attributable to a PE in India to be taxed under Article 7. The Bench applied the established coordinate bench rulings to the facts of A.Y. 2015 16 and declined to attribute any part of the assessee's profits to India. [Paras 5, 6, 7]

No profits are attributable to India for taxation purposes on account of a PE for A.Y. 2015 16.

Final Conclusion: On the facts and following consistent coordinate bench precedents, the Tribunal dismissed the revenue's appeal for A.Y. 2015 16, holding that the assessee had no PE in India (neither fixed place nor dependent agent), that software on agents' premises did not create a PE, the agents were independent, and consequently no profits were taxable in India under Article 7 of the India-USA DTAA.

Penalty under section 271(1)(c) - furnishing of inaccurate particulars of income - bona fide claim - depreciation on block of assets - existence of asset as determinative of culpability - application of precedent in penalty cases

Penalty under section 271(1)(c) - furnishing of inaccurate particulars of income - bona fide claim - depreciation on block of assets - existence of asset as determinative of culpability - Sustainability of penalty under section 271(1)(c) for disallowance of depreciation where assessee claimed depreciation on block assets while offering rental receipts as business income and bona fide contends that plant & machinery were let out along with premises. - HELD THAT: - The Tribunal found no dispute that the assessee was not carrying on manufacturing business in the year and that the Assessing Officer disallowed depreciation because the lease deed did not record letting of plant & machinery. The Assessing Officer imposed penalty for furnishing inaccurate particulars without verifying the factual claim that the machinery existed in the let-out premises and was subsequently sold in a later year, facts which the assessee consistently maintained and which, according to the assessee, resulted in short term capital gain/loss being offered to tax in AY 2018-19. The NFAC/CIT(A) upheld the penalty by applying Sundaram Finance (where depreciation was claimed on non-existent assets). The Tribunal held that Sundaram Finance is distinguishable because in the present case the asset did in fact exist and the assessee advanced a bona fide explanation that depreciation on the block was allowable. Mere disallowance of a claim by the Assessing Officer, when the claim was bona fide and the asset existed, does not demonstrate that the assessee furnished inaccurate particulars or acted with concealment; therefore imposition of penalty was not justified on the facts of the case. Applying the ratio that bona fide mistakes or claims not shown to be false or fraudulent do not attract penalty, the Tribunal allowed the appeal and set aside the penalty. [Paras 7, 8, 10, 11]

Penalty under section 271(1)(c) deleted as the depreciation claim was a bona fide claim on existing block assets and mere disallowance did not amount to furnishing inaccurate particulars; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal and set aside the penalty levied under section 271(1)(c) for AY 2015-16, holding that the depreciation claim was bona fide and that mere disallowance did not establish furnishing of inaccurate particulars or concealment.

Validity of search authorization under Section 132 - Assessment under Section 153A - Quashing of warrant vitiates consequential assessment - Application of precedent mutatis mutandis

Validity of search authorization under Section 132 - Assessment under Section 153A - Quashing of warrant vitiates consequential assessment - Application of precedent mutatis mutandis - Search authorization issued for the joint locker was legally vitiated and the assessment framed under Section 153A in consequence thereof is unsustainable. - HELD THAT: - The Tribunal accepted the assessee's submission that the warrant of authorization for search in respect of the joint locker (held by the assessee and her sister) was quashed by the Hon'ble Delhi High Court in proceedings initiated by the sister. The Tribunal held that the legal infirmity found by the High Court in relation to the jointly-held locker applies mutatis mutandis to the assessee as the other joint holder. On that basis, without addressing the merits of the additions, the Tribunal concluded that the search authorization under Section 132 was arbitrary and devoid of legal basis and therefore the consequential assessment under Section 153A, being founded on that invalid authorization, must be set aside. Grounds 2-4 of the Cross Objection were not pressed and dismissed accordingly. [Paras 10, 11, 12]

The search authorization for the joint locker is quashed and the assessment under Section 153A is set aside; Ground No.1 of the Cross Objection is allowed and the Revenue's appeal is dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the Cross Objection is partly allowed in that the search authorization was quashed and the consequential assessment under Section 153A is set aside, with other grounds of the Cross Objection dismissed as not pressed.

Allowability of interest on delayed payment of service tax as business expenditure - deductibility of software acquisition and upgrade expenses: revenue v. capital - treatment of software license renewal and applicability of TDS on resident software payments - non allowability of write off of inter company financial accommodation as bad debt or trading loss

Allowability of interest on delayed payment of service tax as business expenditure - Interest paid on delayed payment of service tax is allowable as a business expenditure. - HELD THAT: - The Tribunal held that collections of service tax in the course of providing services are trading receipts and their remittance to the Government is connected with the business; entries in the books do not solely determine chargeability. Following coordinate decisions which treated interest on late deposit of indirect taxes as allowable under the business expenditure principle, the Tribunal concluded that interest on delayed payment of service tax is an expenditure incurred in connection with the business and therefore deductible. The appellate order disallowing the claim was set aside and the Assessing Officer was directed to delete the disallowance. [Paras 3]

Allow interest on delayed payment of service tax as deduction; set aside the disallowance.

Deductibility of software acquisition and upgrade expenses: revenue v. capital - application of jurisdictional precedent on application software being revenue in nature - Expenditure on upgrading/customisation of application software that enhances productivity is revenue in nature and allowable as deduction. - HELD THAT: - Relying on the jurisdictional High Court's reasoning that application software which enhances efficiency without creating an identifiable capital asset is revenue expenditure, the Tribunal held that the amount paid for upgrading the software (treated as add on/customisation/support) increases productivity and is deductible. Accordingly, the Tribunal set aside the appellate authority's finding treating that part as capital and directed the AO to allow it as revenue expenditure. [Paras 4]

Allow the software upgrade/customisation charges as revenue expenditure; set aside the capital treatment.

Treatment of software license renewal and applicability of TDS on software payments - Liability to deduct TDS on resident software license renewal charges was not finally adjudicated and was directed to be examined by the Assessing Officer in light of the CBDT notification and relevant Supreme Court decision. - HELD THAT: - The Tribunal noted the CBDT Notification No.21/2012 and that its scope must be read with the Supreme Court's pronouncements on TDS applicability for software payments to non residents. Given these legal propositions, the Tribunal did not decide the TDS consequence on the licence renewal payment itself but modified the appellate order to require the AO to examine applicability of section 40(a)(ia) and TDS compliance in light of the notification and the Supreme Court authority, leaving the factual and legal determination to the AO. [Paras 4]

Remit the question of TDS applicability on the software license renewal payment to the AO for examination in light of the CBDT notification and Supreme Court law.

Non allowability of write off of inter company financial accommodation as bad debt or trading loss - Write off of amounts representing financial accommodation to a sister concern is not allowable as a bad debt under the trading provisions or as a trading loss/business expenditure. - HELD THAT: - On review of the ledger accounts maintained by the related company, the Tribunal found that the written off balance related to a ledger reflecting sums advanced or payments made on behalf of the sister concern and not outstanding trade receivables from sales. The Tribunal agreed with the appellate authority that these transactions constituted financial accommodation/support and were not related to the assessee's trading operations; consequently the write off cannot be treated as a bad debt under the trading provisions or as a trading loss or business expenditure. The disallowance was therefore confirmed. [Paras 5]

Confirm disallowance of the bad debt claim; write off of inter company financial accommodation is not deductible as bad debt or trading loss.

Final Conclusion: The appeal is partly allowed: the interest on delayed service tax payment and specified software upgrade/customisation charges are allowable deductions; the claim for write off of amounts advanced to a sister concern is disallowed; the issue of TDS on the software license renewal payment is remitted to the Assessing Officer for fresh examination in light of the CBDT notification and Supreme Court authority.

Admission of fresh evidence - Objection by Assessing Officer to admission of additional evidence - Principles of natural justice - Remand for de novo consideration - Addition under section 68 of the Income tax Act - Effect of returned/service of summons on admissibility of evidence

Admission of fresh evidence - Objection by Assessing Officer to admission of additional evidence - Principles of natural justice - Remand for de novo consideration - Whether the CIT(A) could admit and decide additional evidence on merits despite the Assessing Officer's objection, without calling for the AO's comments, and whether the matter required remand. - HELD THAT: - The AO, by letter dated 8.2.2019, objected to admission of the fresh evidence on the ground that summons issued to creditors under the address provided were returned unserved and that the assessee had not furnished correct particulars despite opportunities. The CIT(A) proceeded to consider the additional documents filed by the assessee and decided the issue in her favour on merits without addressing or inviting the AO's comments on the merits of that evidence. The Tribunal held that, once the AO had expressly objected to admission of the evidence, it was incumbent on the CIT(A) to either record a reasoned decision refusing admission or to inform the AO that the objections would be disregarded and to call for the AO's comments on the merits before deciding the issue. By failing to obtain the AO's comments after the AO's written objection, the CIT(A)'s conduct resulted in a breach of the principles of natural justice. In the interest of justice and fair adjudication, the Tribunal remitted the issue to the Assessing Officer for fresh consideration of the additional evidence, with directions to afford the assessee proper opportunity of hearing and to examine the documents and correspondence (including service/return of summons) afresh before arriving at a decision. [Paras 3, 4]

The issue is remitted to the file of the Assessing Officer for de novo consideration of the additional evidence, with opportunity of hearing; departmental appeal allowed for statistical purposes.

Final Conclusion: The Tribunal found a violation of natural justice in the CIT(A)'s decision to admit and decide additional evidence without obtaining the AO's comments after the AO's objection; the matter is remitted to the AO for fresh consideration and hearing. The revenue's appeal is allowed for statistical purposes.

Principles of natural justice - Reliance on third party reports without confronting the assessee - Remand for fresh adjudication to enable compliance with natural justice - Disallowance of depreciation on luxury vehicles for lack of business connection - Requirement of contemporaneous records to establish business use of vehicles - Wholly and exclusively for the purpose of business - Capitalisation of legal expenses where project completion method applies

Principles of natural justice - Reliance on third party reports without confronting the assessee - Remand for fresh adjudication to enable compliance with natural justice - Addition made by relying on NHB data for alleged suppression of agricultural expenses remitted for fresh adjudication for want of compliance with natural justice. - HELD THAT: - The assessing officer relied upon National Horticultural Board data to conclude that the assessee understated cultivation expenses and inflated exempt agricultural income, making an addition. The Tribunal found that those reports relied upon by the AO were not furnished to or confronted with the assessee and, applying the mandate of Principles of natural justice and the authority placed on record, held that the assessee was entitled to prior notice and an opportunity to meet the material. In view of non furnishing of the NHB material and the concession of the Department, the matter cannot be sustained without giving the assessee an opportunity; accordingly the order of the CIT(A) is set aside on this point and the issue is remitted to the file of the AO for de novo consideration after providing the reports and complying with natural justice. [Paras 4]

Order set aside on this ground and the issue remanded to the AO to re adjudicate after supplying the reports relied upon and affording opportunity to the assessee.

Disallowance of depreciation on luxury vehicles for lack of business connection - Requirement of contemporaneous records to establish business use of vehicles - Disallowance of 20% depreciation on luxury cars upheld for want of proof of business use. - HELD THAT: - The AO disallowed a portion of depreciation on luxury cars on the basis that no business was carried on during the year and no log books were maintained to establish business usage. The CIT(A) confirmed that finding. Before the Tribunal the assessee failed to produce evidence to demonstrate business activity or to connect vehicle use with business purposes. Applying the principle that depreciation attributable to non business use is not allowable in absence of proof of business connection, the Tribunal agreed with the revenue that the claim could not be sustained. [Paras 6]

Addition confirmed and ground dismissed; disallowance of depreciation on luxury vehicles upheld.

Wholly and exclusively for the purpose of business - Capitalisation of legal expenses where project completion method applies - Disallowance of legal and professional expenses upheld on the basis they were not shown to be wholly and exclusively for business and required capitalization/project completion treatment. - HELD THAT: - The AO treated the legal payments largely as connected with land disputes and not as revenue expenditure relatable to the construction/real estate business, observing that no project income was offered and the assessee followed project completion method. The CIT(A) found no convincing evidence that the expenses were incurred wholly and exclusively for business, noting sample bills for litigation unrelated to revenue generation. The assessee did not demonstrate business operations or a business nexus for the claimed expenses; accordingly the Tribunal found the subordinate authorities' conclusion that the amounts were not allowable as revenue expenditure to be justified. [Paras 6]

Disallowance of legal and professional expenses upheld and the ground dismissed.

Final Conclusion: The appeal is partly allowed for statistical purposes: the addition based on NHB data is set aside and remitted to the AO for fresh adjudication after complying with the principles of natural justice; the disallowances of depreciation on luxury vehicles and of legal and professional expenses are affirmed.

Effective connection to Permanent Establishment - fees for technical services versus income attributable to PE - taxation on net basis under section 44DA - taxation on gross basis as FTS - precedent and coordinate bench reliance

Effective connection to Permanent Establishment - fees for technical services versus income attributable to PE - taxation on net basis under section 44DA - Receipts from contracts entered into on or after 1st April 2003 are effectively connected to the assessee's PE in India and are taxable on a net basis under section 44DA rather than as FTS on a gross basis. - HELD THAT: - The Tribunal considered that the factual matrix for assessment year 2012-13 was identical to earlier assessment years in which coordinate-bench decisions held that the contracts were negotiated and signed in India by the branch head, operations and supervision were carried out by the branch office, invoices were raised and bank accounts operated by the branch and substantial execution occurred in India. The Assessing Officer's selective distinction based on date of contract was found to be unsupported by the record and contrary to the earlier Tribunal findings for assessment years 2008-09, 2009-10 and 2010-11. Applying that precedent and on appreciation of the materials, the Tribunal concluded that the receipts are effectively connected with the Indian PE and therefore attract taxation on net income under section 44DA rather than gross taxation as FTS. [Paras 5, 6, 7]

Followed the coordinate-bench decisions and upheld the CIT(A)'s finding that the receipts are effectively connected to the PE and are taxable on net basis under section 44DA; revenue ground dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision that the receipts from the contracts are effectively connected to the assessee's PE in India and are taxable on net basis under section 44DA for A.Y. 2012-13.

Commencement of business - capitalization as work-in-progress - percentage of completion method of accounting - matching principle under Accounting Standard-7 - admissible depreciation as indicium of business commencement - deferred revenue expenditure - genuineness of expenditure

Commencement of business - admissible depreciation as indicium of business commencement - Whether the business had commenced and whether non-commencement precluded allowance of claimed expenditure. - HELD THAT: - The Tribunal observed that the Assessing Officer had allowed admissible depreciation to the assessee. That allowance demonstrates acceptance of business commencement for tax purposes and therefore the question of formal commencement was not material to the claim for expenditure. The Tribunal treated the AO's stance that business had not commenced as not germane in view of the depreciation being allowed and accordingly did not sustain disallowance solely on the ground of non-commencement. [Paras 6, 8]

Commencement was effectively accepted for the purposes of the assessment; non-commencement was not a valid basis to sustain the disallowance.

Capitalization as work-in-progress - percentage of completion method of accounting - deferred revenue expenditure - genuineness of expenditure - matching principle under Accounting Standard-7 - Whether the expenditures claimed in the computation could be disallowed on the ground that they were shown as deferred/capitalized in the books and whether the claimed amounts should be allowed or capitalized. - HELD THAT: - On examining the books and supporting details, the Tribunal concluded that the expenses shown as 'other expenses' in the Profit & Loss Account and the construction expenses shown as work-in-progress are distinct sets and not manifestations of the same deferred revenue expenditure. The assessee followed the percentage of completion method; under that method revenue recognition and allocation of costs depend on proportionate completion and units sold. Given that the genuineness of the expenditures was not disputed, and considering the accounting method adopted, the Tribunal held that the Assessing Officer's finding to disallow the claimed expenditure was incorrect. The Tribunal directed the AO to allow capitalization of the construction expenditure as work-in-progress and to allow the other expenses debited to Profit & Loss Account accordingly. [Paras 7, 8]

The disallowance was set aside; the Assessing Officer was directed to capitalize the construction expenditure as work-in-progress and allow the other debited expenses.

Final Conclusion: The appeal is partly allowed: the Tribunal directed the Assessing Officer to capitalize the construction expenditure and to allow the other expenses debited to the Profit & Loss Account, holding that non-commencement was not a sound basis for disallowance and that the AO's finding of deferred revenue expenditure was incorrect.

Onus of proof in claiming joint family property - proof of adequate nucleus for coparcenary claim - presumption of ownership of property standing in female's name - claim for injunction requires title and possession - effect of non-pleading and non-production of Will on admissibility of evidence - Order 14 Rule 2 CPC - duty to pronounce on all issues

Onus of proof in claiming joint family property - proof of adequate nucleus for coparcenary claim - presumption of ownership of property standing in female's name - claim for injunction requires title and possession - Whether the plaintiffs proved that the suit property is joint family/coparcenary property and are entitled to declaration and injunction. - HELD THAT: - Applying the settled principle that a claimant asserting joint family or coparcenary title must first establish an adequate nucleus from which the property was acquired, the courts below correctly held that the plaintiffs failed to discharge the onus. The plaint alleged purchase from joint family funds but no sale deed was produced and the kist receipts and cash bills exhibited were in the name of the first defendant. In view of authoritative guidance that property standing in the name of a female member is presumed to be her own unless there is definite, clinching proof to the contrary, the scant documentary material adduced by the plaintiffs was insufficient to rebut that presumption. Because title and possession in favour of the plaintiffs were not established, the plaintiffs were not entitled to the declaration or the injunction sought. [Paras 15, 16, 17, 18, 19]

Plaintiffs have not proved joint family title; declaration and injunction claims are rejected.

Effect of non-pleading and non-production of Will on admissibility of evidence - Order 14 Rule 2 CPC - duty to pronounce on all issues - Whether the courts below were required to consider the Will alleged by defendants after the death of the first defendant and whether failure to answer issues relating to the Will was fatal. - HELD THAT: - The first defendant died pending trial and the defendants alleged a registered Will in her favour. The Court noted that the plaintiffs did not amend the plaint to reflect the death nor implead the legal representatives of the deceased, nor was the alleged Will produced and pleaded for adjudication. It is settled that evidence on a matter not properly pleaded cannot be considered. Consequently the lower courts were not obliged to decide devolution under the Will in the absence of appropriate pleading and proof. The Court observed that the plaintiffs' remedy, if any, lies in instituting appropriate proceedings (for partition or otherwise) after proper pleading and impleading, and therefore declined to decide the question of devolution on the merits in this Second Appeal. [Paras 20, 21]

Non-production and non-pleading of the Will precluded consideration of that issue; courts below were not required to answer it in this appeal and the question of devolution remains undetermined for want of proper pleading and proof.

Final Conclusion: The concurrent findings of the trial and First Appellate Court that the plaintiffs failed to prove joint family title and are not entitled to declaration or injunction are confirmed; the contention regarding the Will was not decided on merits because the plaint was not amended and the Will not properly pleaded or produced.

Levy of anti-dumping duty upon importation - Applicability of Customs Act provisions to anti-dumping duty under Section 9A(8) - Date for determination of rate of duty for warehoused goods under Section 15 - Re-assessment of duty after verification under Section 17 - Claimed confiscation and penalties under Sections 111(m), 112(a), 114A and 114AA - Interest on delayed payment under Section 28AA

Levy of anti-dumping duty upon importation - Applicability of Customs Act provisions to anti-dumping duty under Section 9A(8) - Date for determination of rate of duty for warehoused goods under Section 15 - Anti-dumping duty is leviable on goods warehoused prior to imposition of the ADD notification and is to be determined with reference to the date of clearance from the warehouse in terms of Section 15, read with Section 9A(8). - HELD THAT: - The Tribunal held that anti-dumping duty is to be construed as a customs duty and that Sub section (8) of Section 9A makes the relevant provisions of the Customs Act and its rules applicable to anti dumping duty, including provisions governing the date for determination of rate of duty. Section 15 expressly makes the rate/valuation applicable to goods cleared from a warehouse be the rate in force on the date a bill of entry for home consumption is presented. Consequently, where goods were imported and stored in a warehouse before issuance of an ADD notification but cleared after the notification, the ADD applicable on the date of clearance is leviable. The Tribunal rejected reliance on earlier authorities distinguishable on facts and pre date the 2009 amendment to Section 9A(8), and noted that arguments about semantic distinctions between 'import' and 'importation' were unnecessary to the outcome. [Paras 14, 15, 17]

Upholds the demand of anti-dumping duty on the warehoused goods, determined as on the date of clearance from the warehouse.

Re-assessment of duty after verification under Section 17 - Re-assessment under Section 17 is a permissible mechanism to re-assess duties (including ADD) where self-assessment is found incorrect on verification; the reassessment carried out in the present case is sustainable to the extent of the duty demand. - HELD THAT: - The Tribunal noted Section 17 permits verification of self-assessment and re assessment where the self assessment is incorrect. Given that provisions of the Customs Act apply to anti dumping duty, reassessment to recover ADD on goods cleared from warehouse after the notification is within the statutory scheme. The Tribunal therefore upheld the reassessment and consequent duty demand in respect of the impugned clearances. [Paras 13, 17]

Re-assessment upheld insofar as it results in a lawful demand for ADD on the goods cleared after imposition of the notification.

Interest on delayed payment under Section 28AA - Interest consequential to the confirmed duty demand is payable and, if there is delayed payment, interest is to be computed from the date of ex bonding/clearance. - HELD THAT: - While the Tribunal sustained the duty demand, it held that interest (if any) arising from delayed payment is consequential to the duty demand and therefore payable from the date of ex bonding by the importer. The Tribunal accordingly upheld the department's claim for interest in respect of the specified clearance. [Paras 19, 20]

Interest on the ADD is payable and is to be computed from the date of ex bonding/clearance.

Claimed confiscation and penalties under Sections 111(m), 112(a), 114A and 114AA - Confiscation, redemption fine and the penalties imposed are set aside as there was no finding of conscious suppression or misrepresentation warranting such measures; department may, however, recover the ADD by regular proceedings. - HELD THAT: - The Tribunal found no material to show that the appellants consciously suppressed facts or misrepresented information to attract confiscation or punitive penalties. Although ADD escaped assessment, the proper course is recovery under the Customs Act rather than confiscation and penalty in the absence of deliberate concealment. Consequently, confiscation, redemption fine and penalties were held unsustainable and set aside. The Revenue appeal was dismissed except to the extent of the lawful levy of duty and interest. [Paras 20, 21]

Confiscation, redemption fine and penalties set aside; department's appeal rejected except insofar as the duty and interest demand is upheld.

Final Conclusion: Appeal by the importer is partly allowed: the demand for anti dumping duty and consequential interest on the goods cleared after the ADD notification is upheld; confiscation, redemption fine and penalties are set aside. Revenue's appeal is dismissed except for the upheld levy of ADD and interest.

Shift of burden under Section 123 of the Customs Act - confiscation of smuggled goods - absolute confiscation and discretion of the Commissioner - penalty under Section 112(b) of the Customs Act - concealment of goods and irrelevance of mens rea - undeclared dutiable goods carried by a passenger

Shift of burden under Section 123 of the Customs Act - confiscation of smuggled goods - concealment of goods and irrelevance of mens rea - Whether, after concealed undeclared gold was found on the passenger, the burden shifted to the appellant under Section 123 and confiscation was justified. - HELD THAT: - The Tribunal held that discovery of undeclared gold concealed on the appellant gave rise to a reasonable belief of smuggling and thereby shifted the evidential onus onto the appellant under Section 123. The appellant's statement that the jewellery was handed to him by a third party and his failure to produce proof of lawful acquisition, employment in Dubai, invoices or any corroborative explanation meant he did not discharge that onus. Mens rea was treated as immaterial in light of the concealment and the statutory scheme; possession of well-concealed gold rendered the goods smuggled and liable to confiscation under the relevant provisions. [Paras 8]

Burden under Section 123 shifted to the appellant; confiscation of the seized gold upheld for want of satisfactory discharge of that burden.

Absolute confiscation and discretion of the Commissioner - undeclared dutiable goods carried by a passenger - Whether the Commissioner's exercise of discretion to order absolute confiscation and to refuse redemption of the seized gold should be interfered with. - HELD THAT: - The Tribunal observed that the appellant neither declared the gold nor sought to pay applicable duty, nor proved bona fide purchase. Given these facts and the appellant's consistent claim that a third party supplied the jewellery, there was no basis to fault the Commissioner's discretion in refusing redemption. The authority's decision to confiscate absolute was therefore supported by the absence of proof of lawful importation or entitlement to bring the gold into the country. [Paras 9]

No interference with the Commissioner's order of absolute confiscation; discretion to deny redemption sustained.

Penalty under Section 112(b) of the Customs Act - penalty proportionality and mitigation - Whether imposition of penalty under Section 112(b) was justified and whether the quantum required modification. - HELD THAT: - The Tribunal agreed that penalty under Section 112(b) was legally warranted because the passenger was found in possession of hidden undeclared gold beyond permissible limits, making the statutory imposition appropriate. However, the appellant had consistently described himself as a carrier for a named third party and the record did not disclose further investigation or linking of that third party to the offence. In view of these mitigating factual aspects, the Tribunal exercised its discretion to reduce the punitive quantum as a deterrent but not excessive punishment. [Paras 10]

Penalty under Section 112(b) upheld as justified but reduced to a mitigated amount of Rs. 100,000.

Final Conclusion: The appeal is disposed of by upholding confiscation of the undeclared concealed gold and the liability for penalty under Section 112(b), while moderating the penalty to Rs. 100,000; the Commissioner's exercise of discretion in refusing redemption is not disturbed.

Provisional assessment and its finalization under Section 18 - provisional duty bonds (PD bonds) and effect of their cancellation - interim nature of provisional assessment and requirement of passing final assessment - valuation of export goods at the time and place of export - refund of duty following final assessment and consequential computation

Provisional assessment and its finalization under Section 18 - provisional duty bonds (PD bonds) and effect of their cancellation - interim nature of provisional assessment and requirement of passing final assessment - Cancellation/return of the provisional duty bonds did not amount to finalization of the provisional assessment and could not be treated as a deemed final assessment for purposes of rejecting the refund claim. - HELD THAT: - The bond condition showed liability to pay fine/penalty arose only if Fe content exceeded the stipulated threshold. The Chemical Examiner's report (CRCL, Cochin) established Fe content below that threshold and both parties accepted that finding, rendering the PD bonds void as to their specified contingency. However, the provisional assessment regime is interim in nature and, as interpreted by the Tribunal, requires completion by passing a final assessment order in accordance with the statutory scheme. Section 18 contemplates provisional assessment followed by final assessment (including refund within the prescribed period and consideration of unjust enrichment where pleaded). Law does not permit a deeming fiction that treats a provisional assessment as finally concluded merely because PD bonds were cancelled or returned; provisional assessment must be taken to its logical conclusion by a speaking final order determining actual duty liability. The lower authorities' reliance on the cancellation/return of PD bonds as equivalent to finalization was therefore unsustainable.

Impugned orders rejecting refund on the ground of PD bond cancellation are set aside and the matter is remanded to the adjudicating authority to pass a speaking final assessment order.

Valuation of export goods at the time and place of export - refund of duty following final assessment and consequential computation - Valuation must be determined adopting the accepted Fe content from the CRCL report and consequential refund (if any) must be worked out and granted after finalization of assessment. - HELD THAT: - Both parties accepted the Chemical Examiner's report that Fe content was below the threshold. Given that acceptance, the Tribunal directed that the adjudicating authority, while finalizing the provisional assessment, must adopt the correct value reflective of the accepted Fe/moisture findings and compute any refund consequentially. The Tribunal noted that no allegation of unjust enrichment had been made by the Revenue; therefore, once final assessment adopts the accepted test results, the excess duty paid as declared on the shipping bill must be reworked and refunded as per law.

Assessment to be finalized by the adjudicating authority adopting the accepted CRCL Fe content for valuation and computing and granting consequential refund, if any.

Final Conclusion: The Tribunal allowed the appeals by setting aside the orders denying refund, remanded the matters to the adjudicating authority with directions to pass speaking final assessment orders adopting the accepted Chemical Examiner's findings for valuation and to compute and grant consequential refunds in accordance with law.

Competence of officer to issue show cause notice under Section 28 - propriety of show cause notice issued by Directorate of Revenue Intelligence - vitiation of proceedings by issuance of unauthorized show cause notice - transaction value under Customs Valuation Rules and burden of proof

Competence of officer to issue show cause notice under Section 28 - propriety of show cause notice issued by Directorate of Revenue Intelligence - The show cause notice issued under Section 28 by officers of the Directorate of Revenue Intelligence was without authority and not maintainable. - HELD THAT: - The Tribunal applied the ratio in Canon India and subsequent decisions holding that a demand under Section 28 can be issued only by the ''proper officer'' - namely the officer who made the assessment (the ICD, JRY Kanpur officer in this case). The show cause notice in this case was issued by DRI officers, who were therefore not competent to issue a notice under Section 28. The assessment having been done by the ICD officer, only that officer could lawfully issue the demand notice. The Tribunal noted that this principle has been followed by the Supreme Court, various High Courts and the Tribunal in a series of decisions, and held that issuance of the show cause notice by DRI was without authority of law. [Paras 4, 5]

The show cause notice issued by DRI officers under Section 28 was invalid for want of competence and therefore without authority of law.

Vitiation of proceedings by issuance of unauthorized show cause notice - transaction value under Customs Valuation Rules and burden of proof - An unauthorized show cause notice vitiates the entire proceedings and the impugned order must be set aside irrespective of the merits; the Tribunal need not decide valuation issues once jurisdictional defect is established. - HELD THAT: - Relying on the established line of authority, the Tribunal held that since the show cause notice was issued without authority, the ensuing adjudication (order-in-original and order-in-appeal) is vitiated and cannot be sustained. The Tribunal recorded that it was unnecessary to examine the merits regarding rejection of transaction value because the jurisdictional defect in issuance of the notice determined the outcome. The Tribunal therefore set aside the impugned order and granted consequential relief to the appellant. [Paras 7, 8]

The impugned order is set aside on account of the unauthorized issuance of the show cause notice; merits were not adjudicated as the jurisdictional defect was decisive.

Final Conclusion: Following Canon India and subsequent authorities, the Tribunal held the show cause notice issued by DRI under Section 28 to be without authority, vitiating the proceedings; the impugned order was set aside and the appeal allowed with consequential relief.

Release of seized goods subject to furnishing of indemnity/security - modification of earlier judicial directions - retention of goods pending resolution of proprietary/third party claim - right to seek appropriate legal remedy for disputed goods

Release of seized goods subject to furnishing of indemnity/security - modification of earlier judicial directions - Release of a portion of the seized consignment by modifying the Coordinate Bench's order dated 18th August 2020 - HELD THAT: - The Revenue applied for clarification/modification of the earlier directions which had ordered release of the goods upon deposit and furnishing of an indemnity bond securing the balance differential duty. After hearing the parties and receiving instructions, the department agreed to a limited modification: instead of releasing all 1821 television sets, 1307 sets shall be released in favour of the respondent subject to the conditions already imposed by the Coordinate Bench in paragraph 9 of the order dated 18th August 2020 (including the requisite deposit/indemnity/security procedure). The Court directed immediate release of 1307 sets in accordance with those conditions and timelines prescribed earlier. [Paras 6, 8]

1307 television sets to be released to the respondent subject to the conditions and timings set out in the order dated 18th August 2020.

Retention of goods pending resolution of proprietary/third party claim - right to seek appropriate legal remedy for disputed goods - Status of the remaining 514 television sets owned by the proprietary concern of one partner - HELD THAT: - The department apprehended competing claims because 514 TV sets belonged to the proprietary concern of one Shri Satish Vora, who is also a partner in the partnership firm. The Court recorded the departmental concern and, instead of adjudicating the ownership dispute, permitted the department to retain those 514 sets. The Court kept the proprietary party's claim over those 514 sets open and expressly left it open to the opponent to pursue appropriate legal remedies before the proper forum in accordance with law. [Paras 7]

The department will retain the 514 television sets; the claim over them remains open and may be pursued by the claimant before an appropriate forum.

Final Conclusion: The application is disposed of by directing immediate release of 1307 television sets in accordance with the earlier order dated 18th August 2020 and by permitting the department to retain 514 sets while leaving the rival claim over those 514 sets open for determination by the appropriate forum.

Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013 - Reasonableness and bona fides of a compromise or arrangement - Transfer of undertaking, assets, liabilities and employees on amalgamation - Obligation to maintain true and fair financial statements and statutory compliance - Accounts rectification - disclosure of lease rental, provision for depreciation, cash flow statements - Tribunal's power to impose directional compliance as condition of sanction - Non-exemption from stamp duty and taxes upon sanction

Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013 - Reasonableness and bona fides of a compromise or arrangement - Sanction of the proposed Scheme of Amalgamation between Luit Valley Enterprises Pvt. Ltd. (Transferor) and Nemcare Hospital Tezpur Pvt. Ltd. (Transferee). - HELD THAT: - The Tribunal examined the scheme, its stated rationale, statutory compliance and the supporting records including board approvals, auditor's certificate and affidavit of compliance. Applying the settled principle that approval by the statutory majorities is strong evidence of reasonableness and that the Tribunal should not go into merits where a scheme appears bona fide and fair, the Bench found that statutory requirements under Sections 230-232 were satisfied, the scheme to be genuine and in the interest of shareholders and creditors, and entitled to sanction. The sanction is, however, subject to specified compliance directions and without conferring any exemption from payment of stamp duty, taxes or other charges. [Paras 13, 14, 17, 23]

The Scheme of Amalgamation is sanctioned as prayed, subject to the terms and conditions and directions specified by the Tribunal.

Accounts rectification - disclosure of lease rental, provision for depreciation, cash flow statements - Obligation to maintain true and fair financial statements and statutory compliance - Tribunal's power to impose directional compliance as condition of sanction - Requirement for the Transferor Company to rectify its financial statements and for the Transferee to incorporate revised figures in consolidated accounts. - HELD THAT: - The Regional Director and ROC reports raised material deficiencies in the Transferor's financial statements (non-disclosure of lease rent, non-provision of depreciation on building, absence of cash flow statements for specified years, and potential non-provision of property taxes). The Petitioners' explanations were considered but the Tribunal found them inadequate to displace the statutory requirement of true and fair presentation. Consequently, as a condition of sanction the Transferor Company was directed to show lease rental as income, provide depreciation for the building, pay building taxes if any, prepare cash flow statements for 2016-2017 to 2019-2020 and file a revised Balance Sheet as on 31/03/2020 with the Registry and ROC within 45 days. The Transferee Company was directed to incorporate the revised Transferor figures in the consolidated Balance Sheet as on the appointed date 01/04/2020. [Paras 5, 6, 15, 16]

Transferor to revise and file financials (including lease income, depreciation, cash flow statements and tax liabilities) within 45 days; Transferee to reflect revised figures in consolidated accounts as on appointed date.

Transfer of undertaking, assets, liabilities and employees on amalgamation - Continuation of pending proceedings against transferee - Consequences of sanction: transfer/vesting of assets, liabilities, proceedings and employment continuity. - HELD THAT: - On sanction, the Tribunal directed that the whole of the Transferor's property, rights and powers be transferred and vested in the Transferee without further act or deed, subject to existing charges, and that all liabilities, taxes and duties shall stand transferred to the Transferee. Pending proceedings by or against the Transferor are to be continued by or against the Transferee. All employees of the Transferor will become employees of the Transferee without interruption of service. The Tribunal made clear that these outcomes do not confer any exemption from payment of stamp duty, taxes or other charges. [Paras 17]

On coming into effect, assets, liabilities, proceedings and employees of the Transferor stand transferred to/transmitted to the Transferee; obligation to pay applicable duties and taxes remains.

Quantification of fees and compliance with directions of Official Authorities - Filing and stamping obligations post-sanction - Payment of quantified legal fees and procedural filing/stamp formalities following sanction. - HELD THAT: - The Tribunal quantified legal fees payable to the Office of the Official Liquidator and to the Regional Director and directed the Transferee Company to pay such fees within four weeks from issuance of certified copy of the order. The Petitioners were directed to lodge a copy of the order, the schedule of immovable assets and the Scheme with the Superintendent of Stamps for adjudication of stamp duty within 60 days, and to file the order and Scheme with the Registrar of Companies electronically with Form INC-28 within 30 days from issuance of the certified copy, in addition to physical filing as required by statute. [Paras 18, 19, 21, 22]

Transferee to pay quantified fees to Official Liquidator and Regional Director within four weeks; petitioners to comply with stamp adjudication and ROC filing timelines as directed.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation between Luit Valley Enterprises Pvt. Ltd. and Nemcare Hospital Tezpur Pvt. Ltd. as bona fide and in the interests of shareholders and creditors, subject to specified compliance directions including rectification and filing of Transferor's financial statements, incorporation of revised figures in the consolidated accounts, payment of quantified fees, and completion of stamp duty adjudication and ROC filings; the sanction does not confer exemption from payment of stamp duty, taxes or other charges.

Bench composition requirement - Recusal and effect on difference of opinion - Administrative direction for listing before appropriate Bench - Status quo as an interim/interlocutory order

Bench composition requirement - Recusal and effect on difference of opinion - Administrative direction for listing before appropriate Bench - The main Company Petition must be listed before a Bench consisting of a Judicial Member and a Technical Member and the Registrar is to place a copy of this order before the Hon'ble President for appropriate administrative directions. - HELD THAT: - The Tribunal noted earlier orders including the original order recording recusal of the Judicial Member and its own direction dated 24.08.2020 that the matter be placed before a Bench comprising a Judicial Member and a Technical Member. The earlier recusal means there is no genuine difference of opinion between two members that would justify reference to a Single Member on that ground; consequently the matter ought to be listed before a Bench with both a Judicial and a Technical Member as earlier directed. The Registrar was directed to place a copy of this order before the President for passing appropriate administrative orders within a week to secure such listing. [Paras 8, 9]

Registrar to place copy of this order before the Hon'ble President and the President to pass appropriate administrative order for listing the main petition before a Bench consisting of a Judicial Member and a Technical Member.

Status quo as an interim/interlocutory order - The appeal against the Adjudicating Authority's interim order of status quo dated 17.12.2021 is not entertained and is disposed of subject to further orders of the Adjudicating Authority. - HELD THAT: - The Tribunal observed that the impugned order is interim in character and made in the context of the matter awaiting administrative directions from the President; being interlocutory and subject to further orders by the Adjudicating Authority, there is no ground to disturb it at this stage. The Appellant remains at liberty to seek appropriate reliefs, including vacation of the interim order, before the Adjudicating Authority if so advised. [Paras 10]

Appeal against the interim status quo order is disposed of without entertaining interference; appellant may apply for further reliefs including vacation of the interim order before the Adjudicating Authority.

Final Conclusion: Appeal disposed: direction issued for administrative listing before a Bench comprising a Judicial Member and a Technical Member; the challenge to the interim status quo order is declined without prejudice to the appellant's right to seek further orders before the Adjudicating Authority.

Committee of Creditors' commercial wisdom and binding effect of CoC resolution to liquidate - Liquidation under Section 33 of the Insolvency and Bankruptcy Code - Time limits for CIRP and extensions under Section 12 - Ownership of immovable property determined by registered title deeds and effect of settlement/transfer deeds - Memorandum of deposit of title deeds and equitable mortgage - Interaction between SARFAESI proceedings and the IBC; moratorium inapplicable to personal guarantors - Ineligibility of promoters/related parties under Section 29A - Duty of resolution professional/liquidator to take custody of assets

Committee of Creditors' commercial wisdom and binding effect of CoC resolution to liquidate - Liquidation under Section 33 of the Insolvency and Bankruptcy Code - Time limits for CIRP and extensions under Section 12 - Validity of the adjudicating authority's liquidation order passed pursuant to the CoC resolution - HELD THAT: - The Tribunal upheld the impugned liquidation order. It found that the CoC, holding 73.44% voting share, had validly passed a resolution for liquidation on 18.10.2019 after the CIRP period (including the brief extension granted) lapsed and no resolution plan materialised. The Adjudicating Authority acted within the Code when it ordered liquidation under Section 33 in consequence of the CoC's resolution and the absence of an approved resolution plan. The Court applied the settled principle that the commercial decision of the CoC is given primacy and is not ordinarily subject to judicial re appraisal where statutory conditions are met, and that liquidation is the prescribed consequence where no plan is approved within the prescribed timelines or the CoC resolves to liquidate. [Paras 86, 87, 88, 137, 147]

The liquidation order is free from legal infirmity and is upheld.

Ownership of immovable property determined by registered title deeds and effect of settlement/transfer deeds - Memorandum of deposit of title deeds and equitable mortgage - Registration Act and requirement of registered instrument to transfer immovable property - Whether the subject property forms part of the corporate debtor's estate or is the personal property of the appellant - HELD THAT: - The Tribunal concluded, on the material before it, that the title to the subject property vests in the appellant. It examined the chain of registered instruments - allotment, sale deed, rectification deed, settlement deed and the deed of solemn undertaking - and the Regional Director's finding in the Section 87 proceeding that the charge related to property belonging to the appellant. The Tribunal emphasised that ownership of immovable property is governed by valid registered title documents and that an entry in the corporate balance sheet does not, by itself, confer title. On that basis the Tribunal negatived the appellant's contention that the property was an asset of the corporate debtor. [Paras 104, 105, 121, 122, 124]

The Tribunal held that the subject property does not, on the available record, form part of the corporate debtor's assets and that title vests with the appellant.

Interaction between SARFAESI proceedings and the IBC; moratorium inapplicable to personal guarantors - Memorandum of deposit of title deeds and equitable mortgage - Lawfulness of the 1st respondent's possession and SARFAESI steps vis a vis the appellant and effect of moratorium - HELD THAT: - The Tribunal held that moratorium under Section 14 of the IBC does not apply to personal guarantors and that the secured creditor could lawfully proceed under the SARFAESI Act against the guarantor's security. The appellant had stood as mortgagor/guarantor and executed a memorandum of deposit of title deeds in favour of the 1st respondent; earlier possession and the orders of magistrate and DRT in favour of the 1st respondent were noted. The Tribunal therefore accepted that the 1st respondent had enforceable rights in respect of the mortgaged property and could proceed under SARFAESI notwithstanding the insolvency proceedings against the corporate debtor. [Paras 58, 60, 61, 125, 126]

The 1st respondent's SARFAESI actions and possession taken in respect of the property owned by the appellant were not barred by the IBC moratorium and were legally maintainable.

Ineligibility of promoters/related parties under Section 29A - Whether the appellant is eligible to participate in the resolution process or submit a resolution plan - HELD THAT: - Applying Section 29A and the statutory scheme, the Tribunal found that the appellant, being a promoter/suspended director and having prior involvement and defaults, was ineligible to take part in the resolution process or submit a resolution plan. The Tribunal observed that Section 29A operates to exclude persons who have been in management and whose debts have remained unpaid prior to CIRP, and therefore the appellant could not participate as a resolution applicant. [Paras 146]

The appellant is not entitled to participate in the corporate insolvency resolution process or submit a resolution plan under Section 29A.

Duty of resolution professional/liquidator to take custody of assets - Interaction between SARFAESI proceedings and the IBC; moratorium inapplicable to personal guarantors - Validity of the Adjudicating Authority's order in IA No.699 directing Greater Chennai Corporation to hand possession to the 1st respondent pending adjudication of MA/363/2019 - HELD THAT: - The Tribunal found the Adjudicating Authority's order permitting the 1st respondent to hold possession of the hospital premises until adjudication of MA/363/2019 to be legally unflawed. It recorded that the Greater Chennai Corporation had taken temporary possession for COVID 19 purposes and thereafter the 1st respondent sought restoration of possession, and the Adjudicating Authority directed delivery of keys to the 1st respondent to hold possession until the pending adjudication of MA/363/2019. The Tribunal upheld that direction, noting the factual matrix and the limited, interim nature of the relief. [Paras 149, 155, 156]

The order in IA No.699 directing handover of possession to the 1st respondent until MA/363/2019 is adjudicated is upheld.

Deed of solemn undertaking and effect of unregistered/ancillary instruments on title - Registration Act and requirement of registered instrument to transfer immovable property - Legal significance of the deed of solemn undertaking executed in 2002 vis a vis title - HELD THAT: - The Tribunal observed that the deed of solemn undertaking is not a substitute for a registered conveyance and cannot, by itself, override the requirement that transfer of immovable property be effected by valid registered instruments. It noted the inconsistency in the appellant's claim that vesting occurred in 1988 and emphasised that ownership must be traced to registered title documents; the deed of undertaking did not alter the conclusions drawn from the sale/settlement/registration records and the Regional Director's earlier finding. [Paras 105, 116, 118, 120]

The deed of solemn undertaking does not suffice to establish a title different from that disclosed by the registered instruments; title must be determined by registered documents.

Final Conclusion: The appeals are dismissed. The Tribunal upheld the Adjudicating Authority's liquidation order passed pursuant to a CoC resolution, found on the available record that the disputed property title vests in the appellant (with the consequence that the secured creditor's SARFAESI remedies against the guarantor were maintainable), held the appellant ineligible under Section 29A to participate in resolution, and upheld the interim direction restoring possession to the 1st respondent until the pending MA/363/2019 is adjudicated. The ultimate determination of title remains for decision in the pending MA/363/2019.

Approval of resolution plan under Section 31 - Commercial wisdom of Committee of Creditors non-justiciable - Compliance with valuation process under Regulation 35 - Extinguishment of statutory and local authority dues upon approval of resolution plan - Insolvency Code prevailing over other laws (overriding effect) - Requirement that resolution plan must not contravene law (Section 30(2)(e))

Approval of resolution plan under Section 31 - Requirement that resolution plan must not contravene law (Section 30(2)(e)) - Commercial wisdom of Committee of Creditors non-justiciable - Validity of the Adjudicating Authority's approval of the Resolution Plan despite the Appellant's contention that admitted operational claim was largely unpaid and the plan was therefore contrary to law - HELD THAT: - The Tribunal held that the Adjudicating Authority was required to satisfy itself that the plan met the requirements of Section 30(2) before approving under Section 31. The courts are, however, circumscribed by authoritative precedents which restrict judicial interference with the commercial decision of the Committee of Creditors (CoC). The record showed the CoC-approved offer exceeded the liquidation value and the valuation exercise followed the prescribed process; no material was produced to demonstrate that the plan contravened any law or that the distribution mechanism suppressed stakeholders' interests. Given these facts and settled law limiting review of CoC's commercial wisdom, the approval of the Resolution Plan was not set aside. [Paras 12, 13, 16, 19]

The approval of the Resolution Plan was valid and not vitiated by the Appellant's challenge; the appeal on this ground fails.

Compliance with valuation process under Regulation 35 - Question of valuation is primarily a question of fact - Allegation that valuation was faulty because valuers did not physically inspect the property and therefore liquidation/fair value were understated - HELD THAT: - The Tribunal noted Regulation 35 requires two registered valuers to submit fair and liquidation value estimates after physical verification and that the average of the two closest estimates is to be taken. The record showed two valuers were appointed and their estimates averaged. The Tribunal applied established precedent that valuation is essentially a question of fact and courts are normally reluctant to interfere where valuation is based on relevant material on record. There was no material before the Tribunal to displace the valuers' conclusions or to demonstrate non-compliance with the prescribed valuation methodology sufficient to invalidate the plan. [Paras 11, 12]

The challenge to the valuation process fails; the valuers' estimates and the resultant liquidation value stand.

Extinguishment of statutory and local authority dues upon approval of resolution plan - Insolvency Code prevailing over other laws (overriding effect) - Whether the Resolution Applicant's proposed exemption from Noida SEZ charges (clause 10.9) and the Appellant's claim for statutory/transfer charges could be pursued after approval of the Resolution Plan - HELD THAT: - Relying on the Supreme Court's exposition, the Tribunal observed that the 2019 amendment and related precedents make clear that once a resolution plan is approved under Section 31, claims not part of the plan against the corporate debtor - including dues owed to Central/State/local authorities - stand extinguished and proceedings in respect of such pre-approval dues cannot be continued. Section 238 gives the Code overriding effect over inconsistent provisions of other laws. In the circumstances, objections based on the Special Economic Zone Act or on the transfer/renewal charges could not prevail against an approved and implemented resolution plan. [Paras 17, 18, 20]

Statutory dues and claims not incorporated in the approved plan stand extinguished; the SEZ objection does not invalidate the approved Resolution Plan.

Final Conclusion: The Appeals are dismissed. The Tribunal upheld the Adjudicating Authority's approval of the Resolution Plan: the valuation and distribution comply with the statutory process and established precedents; the commercial wisdom of the CoC is not open to reappraisal in these proceedings; and statutory or local authority dues not included in the approved plan are extinguished under the Code.

Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - financial creditor - financial debt - default in repayment - appointment of Interim Resolution Professional - moratorium under Section 14 of the IBC, 2016

Financial creditor - financial debt - The applicant qualifies as a Financial Creditor and the amount advanced constitutes a financial debt owed by the Corporate Debtor. - HELD THAT: - The Tribunal examined the Part I and Part III particulars of the application and the loan agreement dated 13.06.2016 annexed to the petition. Relying on the statutory definition of Financial Creditor under Section 5(7) of the IBC, 2016, the Tribunal found that the applicant is a person to whom a financial debt is owed. The loan agreement and ancillary documents show that money was lent to the Corporate Debtor and that the disbursed sum has the commercial effect of borrowing by the Corporate Debtor. Accordingly the amount disbursed qualifies as a 'financial debt' within the meaning of the Code. [Paras 2, 8, 9]

Applicant held to be a Financial Creditor and the amount advanced held to be a financial debt.

Default in repayment - admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - There was default by the Corporate Debtor in repayment of the financial debt and the Section 7 application is to be admitted. - HELD THAT: - The Tribunal considered the correspondence between the parties (letters dated 05.09.2017 and subsequent letters at pages 35-39) and the documentary material filed with the application, and noted absence of any effective defence or representation by the Corporate Debtor. On the material before it, the Tribunal concluded that the Corporate Debtor had defaulted in repayment of the financial debt which was due and payable. Applying Section 7(5) of the IBC, 2016 to these facts and in view of no objection by the Corporate Debtor, the Tribunal found that the statutory threshold for admission of the application was met. [Paras 5, 7, 9, 10]

Section 7 application admitted and CIRP to be initiated against the Corporate Debtor.

Appointment of Interim Resolution Professional - An IRP is appointed by the Tribunal notwithstanding the Financial Creditor's proposed nominee, because no valid authorization for appointment (AFA) was found for the proposed IRP. - HELD THAT: - Although the Financial Creditor proposed a specific Insolvency Professional as IRP, the Tribunal upon verification found no valid AFA in support of that nomination. Exercising its power to ensure proper conduct of the CIRP, the Tribunal appointed an alternative Insolvency Professional (name and registration recorded in the order) to act as Interim Resolution Professional and directed him to perform statutory functions and file his report within the stipulated period. [Paras 3, 11]

Tribunal appointed an IRP other than the Financial Creditor's nominee and directed the IRP to take steps under the Code.

Moratorium under Section 14 of the IBC, 2016 - A moratorium under Section 14 of the IBC, 2016 is declared with effect from the date of the order for the duration of the CIRP, subject to statutory exceptions. - HELD THAT: - On admission of the Section 7 application, the Tribunal applied Section 14(1)-(4) and recorded that the moratorium provisions shall operate from the date of the order until completion of the CIRP, with the explained statutory exceptions and protections for supply of essential goods and services. The order specifies the prohibitions and the scope of the moratorium and notes the statutory provisos regarding continuation of licences and exceptions enumerated in the Code. [Paras 12, 13, 14, 15]

Moratorium declared effective from the date of the order until completion of the CIRP, subject to Code provisions.

Final Conclusion: The Tribunal admitted the Section 7 application, held that the applicant is a Financial Creditor and that a financial debt and default existed, appointed an Interim Resolution Professional (not the Financial Creditor's nominee for lack of valid AFA) and declared the moratorium under Section 14 of the IBC, 2016 with effect from the date of the order until completion of the CIRP.

Minimum amount of default - pecuniary jurisdiction - notification under the proviso to section 4 of the Insolvency and Bankruptcy Code, 2016 raising threshold to one crore - retrospective application of threshold notification - maintainability of application under section 9 of the IBC, 2016

Minimum amount of default - notification under the proviso to section 4 of the Insolvency and Bankruptcy Code, 2016 raising threshold to one crore - retrospective application of threshold notification - maintainability of application under section 9 of the IBC, 2016 - Maintainability of the Section 9 IBC application filed on 15.09.2021 in view of the notification dated 24.03.2020 specifying Rs. 1 crore as the minimum amount of default. - HELD THAT: - The Tribunal examined Section 4 of the IBC and the Central Government's notification S.O. 1205(E) dated 24.03.2020 specifying one crore rupees as the minimum amount of default. The Tribunal accepted the position that the notification raised the threshold for admissibility of applications under Sections 7 and 9 to Rs. 1 crore. Reliance was placed on the view in Jumbo Paper Products v. Hans Raj Agrofresh Pvt. Ltd., which holds that the enhanced threshold applies to applications filed on or after 24.03.2020 even if the debt arose earlier. As the present petition under Section 9 was filed on 15.09.2021 (i.e., after 24.03.2020), the higher threshold is applicable and the debt in default as claimed does not meet that threshold. Consequently the application is not maintainable for want of requisite pecuniary jurisdiction. [Paras 9, 10, 11, 12, 13]

Application under Section 9 dismissed for want of maintainability as the minimum amount of default of Rs. 1 crore prescribed by the notification dated 24.03.2020 is applicable to the petition filed on 15.09.2021.

Final Conclusion: The Tribunal dismissed the Section 9 petition as the claimed default does not satisfy the revised minimum amount of default of Rs. 1 crore prescribed by the notification dated 24.03.2020, which applies to applications filed after that date.

Applicability of Limitation Act to applications under Section 9 of the IBC - acknowledgment in writing under Section 18 of the Limitation Act - effect of payment on account of debt under Section 19 of the Limitation Act - computation of fresh period of limitation from acknowledgment or payment - delivery of demand notice as a mandatory prerequisite for a Section 9 application

Applicability of Limitation Act to applications under Section 9 of the IBC - acknowledgment in writing under Section 18 of the Limitation Act - effect of payment on account of debt under Section 19 of the Limitation Act - computation of fresh period of limitation from acknowledgment or payment - Maintainability of the Section 9 petition in view of limitation and whether the alleged acknowledgment and subsequent payment revived the limitation period - HELD THAT: - The Tribunal held that the Limitation Act applies to proceedings under Section 9 of the Insolvency and Bankruptcy Code and that Article 137 (three years) governs the period for filing such applications. The Corporate Debtor had acknowledged a balance of Rs. 50,00,000 on 01.04.2014, which, if effective, would compute a fresh period of limitation from that date. However, the last invoice date (date of default) was 24.04.2012 and the acknowledgement on 01.04.2014 only extended limitation until 01.04.2017. A subsequent payment of Rs. 3,50,000 on 28.05.2019 was made beyond three years from the date of acknowledgment; Sections 18 and 19 of the Limitation Act operate to compute a fresh period only when acknowledgement or payment occurs within the prescribed period. Because the payment on 28.05.2019 was outside the prescribed period, it could not revive the claim or extend limitation for the present petition. Consequently the petition is time barred. [Paras 10, 11, 12, 13]

The petition under Section 9 is barred by limitation; the alleged payment on 28.05.2019 does not revive the limitation period.

Delivery of demand notice as a mandatory prerequisite for a Section 9 application - Whether the Section 9 petition is maintainable in absence of proof of delivery of the demand notice - HELD THAT: - The Tribunal observed that delivery of the demand notice in the prescribed form is mandatory for a Section 9 application. The Operational Creditor did not place proof of delivery of the demand notice on record. As the proof of delivery is essential to maintain a Section 9 petition and is missing in the present record, the petition fails on this ground as well. [Paras 14, 15]

The petition is not maintainable for want of evidence of delivery of the demand notice.

Final Conclusion: The application under Section 9 is dismissed as time barred and also for want of proof of delivery of the mandatory demand notice; petition rejected. No order as to costs.

Replacement of Resolution Professional - maintainability of applications under Section 27 r/w Section 60(5) of the IBC, 2016 - disciplinary jurisdiction of the Adjudicating Authority - complaint to IBBI under Section 217 - inspection and investigation by IBBI under Section 218 and disciplinary committee under Section 220

Replacement of Resolution Professional - maintainability of applications under Section 27 r/w Section 60(5) of the IBC, 2016 - Application seeking removal and replacement of the Resolution Professional is not maintainable before this Tribunal. - HELD THAT: - The Tribunal held that the applicant is not entitled to file the present application for replacement of the Resolution Professional because the statutory provisions permitting replacement are circumscribed and the Adjudicating Authority does not exercise disciplinary jurisdiction over an IRP/RP in this context. The Tribunal noted earlier proceedings relied upon by the applicant (MA/96/2019) were dismissed and that intervening orders of the High Court had stayed earlier directions, facts which were recorded. By treating the relief sought as one for replacement/removal of the RP, the Tribunal concluded such relief could not be entertained in the present application and therefore the application was unsustainable before this forum. [Paras 6, 8]

Application for removal/replacement of the RP dismissed as not maintainable before this Tribunal.

Disciplinary jurisdiction of the Adjudicating Authority - complaint to IBBI under Section 217 - inspection and investigation by IBBI under Section 218 and disciplinary committee under Section 220 - Disciplinary action against an IRP/RP lies with the IBBI and not with the Adjudicating Authority; aggrieved persons must invoke IBBI processes. - HELD THAT: - The Tribunal reiterated that it cannot initiate or enforce disciplinary proceedings against an IRP/RP and identified the statutory scheme under which a person aggrieved by the conduct of an RP may file a complaint to the IBBI under Section 217. If the IBBI, on receiving a complaint, believes there has been contravention, it may direct inspection or investigation under Section 218 and refer the matter to a disciplinary committee under Section 220 which, if satisfied, may impose penalties. The Tribunal therefore directed that complaints regarding the RP's conduct be pursued before the IBBI rather than by treating them as a ground for removal before this Tribunal. [Paras 6, 7]

Allegations concerning misconduct of the RP are to be pursued before the IBBI; this Tribunal will not conduct disciplinary proceedings against the RP.

Final Conclusion: IA/971/2020 dismissed; the Tribunal declined to replace the Resolution Professional and directed that any disciplinary or complaint proceedings regarding the RP be pursued before the IBBI under the statutory scheme.

Extension of CIRP beyond 270 days - time-bound mandate under Section 12 of the Insolvency and Bankruptcy Code - one-time extension of 90 days - strict adherence to IBC timelines - value preservation principle in insolvency proceedings - liquidation as the consequent remedy where CIRP timelines are not met

Extension of CIRP beyond 270 days - time-bound mandate under Section 12 of the Insolvency and Bankruptcy Code - one-time extension of 90 days - strict adherence to IBC timelines - liquidation as the consequent remedy where CIRP timelines are not met - Extension of time beyond 270 days by way of second extension when no concrete resolution plan is before the Committee of Creditors - HELD THAT: - The RP sought a second extension of 60 days beyond the 270-day period on the basis of anticipated enquiries and potential fresh plans. The Tribunal observed that the RP had already availed the one-time extension of 90 days and that Section 12 of the Code requires CIRP to conclude within 330 days (comprising the normal 180 days, one-time extension up to 90 days, and time taken in legal proceedings). The record showed no concrete resolution plan placed before the CoC within the 270-day timeline and only an enquiry from a promoter; the CoC's resolution to seek further time was therefore not supported by a demonstrable, pending plan. Relying on the need to preserve asset value and the principle of timeliness in insolvency proceedings, the Tribunal held that starting the process afresh without any concrete plan does not justify a further extension. The order further clarified that refusal to extend does not prevent the liquidator, during liquidation, from attempting sale of the corporate debtor as a going concern within the timelines permitted under the IBC Rules. On these grounds the application for extension was rejected and the RP was directed to file for liquidation forthwith. [Paras 7, 8, 9, 10, 11]

Application for second extension of 60 days beyond 270 days dismissed; RP directed to move liquidation application immediately.

Final Conclusion: The Tribunal refused to grant a second extension beyond 270 days in the absence of any concrete resolution plan before the CoC, emphasising strict compliance with IBC timelines and directing the Resolution Professional to initiate liquidation proceedings forthwith.

Definition of "Order" under Section 121(o) of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - definition of "Appellate Forum" under Section 121(f) of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - eligibility under "litigation category" of SVLDRS - meaning of "amount in arrears" under Section 121(c) of SVLDRS - twin objectives of SVLDRS: liquidation of legacy disputes and disclosure of unpaid taxes

Definition of "Order" under Section 121(o) of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - definition of "Appellate Forum" under Section 121(f) of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - eligibility under "litigation category" of SVLDRS - Whether an order refusing an application for rectification under Section 74 of Chapter V of the Finance Act, 1994 is an "Order" within the meaning of Section 121(o) of the SVLDRS and whether an appeal under Section 85 against such rectification order renders the declarant eligible under the "litigation category" of the Scheme. - HELD THAT: - The Court held that an order allowing or refusing an application for rectification under Section 74 necessarily modifies and must be read with the original order passed in pursuance of a show cause notice; such rectification order therefore falls within the meaning of an "Order" under Section 121(o) of the Scheme. The Court noted statutory machinery in Section 74(4), (5) and (7) which contemplates written amendment and implementation by the assessing officer and observed that a rectification order that enhances liability or reduces refund operates as an amendment of the original determination. The definition of "Appellate Forum" under Section 121(f) includes Commissioner (Appeals), and there is no textual limitation to appeals arising only from original orders; appeals against orders on applications under Section 74 are likewise appeals before the Commissioner (Appeals). Given that the petitioner's appeal under Section 85 was pending as on 30/06/2019, the petitioner fell within the Scheme's requirement that declarations under the litigation category are maintainable where appeal before the appellate forum had not been finally heard by that date. The Court rejected the respondents' contention that eligibility is confined to appeals against original orders only and concluded the petitioner was eligible to seek relief under the litigation category. [Paras 17, 18, 20, 21, 22]

The order refusing rectification under Section 74 is an "Order" within Section 121(o) and an appeal under Section 85 against such order engages the "Appellate Forum" for purposes of eligibility under the SVLDRS litigation category; the petitioner was eligible as the appeal was pending on 30/06/2019.

Meaning of "amount in arrears" under Section 121(c) of SVLDRS - twin objectives of SVLDRS: liquidation of legacy disputes and disclosure of unpaid taxes - Whether the Designated Committee's classification of the petitioner's declaration as "arrears category" and the resulting demand was contrary to the Scheme's objects and established judicial exposition, and what remedial directions should follow. - HELD THAT: - The Court, having applied the principles underlying the Scheme and earlier decisions emphasising a liberal and purposive construction to facilitate liquidation of legacy disputes and enable disclosure, found the Designated Committee's placement of the petitioner's declaration in the arrears category to be contrary to law and the scheme's intent. The Court referred to precedents and the Scheme's objects and CBIC instructions which tasked authorities to implement the Scheme to unload legacy litigation. As the petitioner's appeal was pending within the appellate forum timeframe and the rectification order qualifies as an "Order", treating the declaration as an arrear also conflicted with the statutory definition of "amount in arrears" under Section 121(c). In consequence the impugned order of 06/03/2020 was quashed. The declaration was restored to file and remitted to the designated authority to consider under the litigation category; the petitioner was directed to pay the dues, if any, as reflected in SVLDRS-1 within two weeks and the authority was directed to issue the discharge certificate within 30 days of such payment. [Paras 29, 30, 31, 32, 33]

Impugned order of 06/03/2020 placing the declaration under arrears is quashed; the declaration is remitted to the Designated Authority for consideration under the litigation category, with directions for payment as per SVLDRS-1 and issuance of discharge certificate within the prescribed time.

Final Conclusion: Writ petition allowed; the Designated Committee's order dated 06/03/2020 is quashed and the petitioner's declaration is restored and to be considered under the SVLDRS "litigation category"; petitioner to pay dues as per SVLDRS-1 within two weeks and the designated authority to issue discharge certificate within 30 days thereafter.

Taxable service - taxable territory - service - charge of service tax - relevant date under section 11B - limitation - unjust enrichment - deeming provision - non taxable territory

Relevant date under section 11B - limitation - Whether the refund claims filed by the appellant were barred by limitation under the mechanism of section 11B as applied to Finance Act, 1994. - HELD THAT: - The Tribunal found that the appellant, having borne the tax component under protest and while litigation challenging leviability was pending (with payments made conditionally as recorded), was not disentitled from preferring refund claims. Section 11B shifts computation of the claim period to the relevant date and does not prohibit filing of claims prior to judicial disposal; the authority could have kept claims pending until outcome. The Tribunal therefore held that, on the facts of the dispute and reliance on the pendency of judicial proceedings, there was no legal ground to reject the claims as time barred and the claims were filed within the period permitted under section 11B. [Paras 11, 16]

Claims not barred by limitation; filed within period permitted under section 11B.

Taxable service - taxable territory - service - charge of service tax - deeming provision - non taxable territory - Whether Finance Act, 1994 authorised levy of service tax on the payments made by the appellant to the airport concession holder for operation of duty free shops for the disputed periods. - HELD THAT: - The Tribunal examined the nature of the contractual relationship and the statutory scheme. It observed that mere labelling of the payment as 'rent' by the concession holder and equating 'taxable territory' with territorial limits of India without identifying the taxable provider and recipient was legally insufficient. The licence arrangement, pre designated space, and collaborative sharing of sale proceeds pointed to remuneration for participation in airport operations rather than a straightforward rent transaction susceptible to service tax. The Tribunal further held that the constraints in the charging provisions and the concept of 'taxable territory' (as interpreted in Government of India orders and High Court authority) render the impugned levy without lawful authority in the circumstances of these claims. Consequently, the levy as applied to these transactional flows was held not to be authorised by law and the denial of refunds unsustainable. [Paras 18, 19, 20, 21, 22]

Levy under Finance Act, 1994 on the payments in dispute was not authorised; claims relate to tax which law did not permit to be collected.

Unjust enrichment - Whether the bar of unjust enrichment precluded refund to the appellant. - HELD THAT: - The Tribunal found that the original adjudicating authority had not invoked unjust enrichment in the show cause notice and that the first appellate authority impermissibly introduced and relied upon that doctrine beyond the scope of the notice. The nature of duty free retail pricing, the tendered chartered accountant certificate asserting incidence of tax, and absence of any finding of insufficiency of that evidence weighed against application of unjust enrichment. The Tribunal concluded that the finding of unjust enrichment was both beyond the scope of the proceedings and legally unsustainable. [Paras 23]

Unjust enrichment inapplicable; first appellate authority erred in invoking it to deny refund.

Final Conclusion: Appeals allowed: refund claims upheld as within limitation, the asserted levy lacked lawful authority as applied to the transactional relationship between the appellant and airport concession holder, and the reliance on unjust enrichment by the first appellate authority was unsustainable; consequential relief granted.

Cargo Handling Service - Goods Transport Agency (GTA) - Composite/bundled service - essential character - Pure Agent (Rule 5(2) of Service Tax (Determination of Value) Rules, 2006) - Classification under Section 65A / Section 66F - Separately invoiced reimbursements not taxable - Value determination - effect of Intercontinental decision

Cargo Handling Service - Goods Transport Agency (GTA) - Composite/bundled service - essential character - Classification under Section 65A / Section 66F - Whether the respondent's activities fall within Cargo Handling Service or are classifiable as Goods Transport Agency (GTA). - HELD THAT: - The Tribunal examined the statutory definition of Cargo Handling Service and the clarifications issued by the Board. Cargo Handling Service requires provision of loading, unloading, packing or unpacking and may include ancillary activities, but expressly excludes mere transportation. Applying Section 65A(2) and the principle that the most specific description or the element giving the composite its essential character must govern classification, the Tribunal found that the respondents' dominant activity was transportation of containerized goods (road and sea). The invoices and documents showed road transportation/GTA activity and separate reimbursement of sea carriage and port handling paid to shipping lines. Even if the services were treated as composite, their essential character was transportation, not cargo handling. Board circulars and precedent were held to support treating the transaction as GTA when transportation is the principal service and ancillary activities are included in invoices by the GTA. Accordingly, the services were rightly classified as GTA and not Cargo Handling Service. [Paras 6]

Services provided by the respondent are GTA (transportation) and do not fall under Cargo Handling Service.

Separately invoiced reimbursements not taxable - Cargo Handling Service - Composite/bundled service - essential character - Whether amounts shown separately in invoices for road and sea transportation/port handling can be included in the value of Cargo Handling Service. - HELD THAT: - The Tribunal relied on Board clarifications and binding precedent holding that where transportation charges are shown separately in invoices, tax cannot be demanded on such separately shown component as cargo handling. The invoices in this case separately displayed road freight and sea/port handling reimbursements (verifiable by documentary evidence of shipping line bills), and the Tribunal found that deducting the transport components would extinguish the departmental demand for the initial years. The Tribunal also noted that where lump-sum billing without substantiation exists, different rules apply, but on the facts here the components were separately shown and supported. [Paras 6]

Separately invoiced and documentary-supported transportation and port handling reimbursements are not exigible as Cargo Handling Service value.

Pure Agent (Rule 5(2) of Service Tax (Determination of Value) Rules, 2006) - Separately invoiced reimbursements not taxable - Value determination - effect of Intercontinental decision - Whether payments made to shipping lines and recovered on actuals from customers qualify as expenditure incurred as a "pure agent" and hence excluded from taxable value. - HELD THAT: - The Tribunal analysed Rule 5(2) prerequisites and the Explanation defining "pure agent". On the facts-authorization by consignor/consignee, separate indication in invoices, recovery of only actual amounts paid to third parties, and procurement of services in addition to the GTA services-the respondents satisfied all conditions of a pure agent. The Tribunal also addressed the legal landscape on valuation, noting the Supreme Court decision in Intercontinental which struck down parts of Rule 5; however, on the facts the Tribunal treated the respondents as pure agents and found reimbursements excluded from the taxable value of the GTA component. Documentary evidence (shipping line invoices) and the manner of invoicing supported the exclusion. [Paras 6]

Payments to shipping lines made and recovered on actuals by the respondent qualify as being incurred as a pure agent and are excluded from taxable value.

Value determination - effect of Intercontinental decision - Service Tax (Determination of Value) - Whether service tax demand based on inclusion of reimbursed costs is maintainable in view of judicial pronouncements striking down parts of Rule 5 (Intercontinental). - HELD THAT: - The Tribunal observed that the Supreme Court in Intercontinental struck down the provision of Rule 5 purporting to mandate inclusion of certain expenditures in taxable value for periods up to 14.05.2015. The demand in this case related in part to periods up to 31.03.2015. Given that Rule 5's applicability was curtailed by the Supreme Court, the department's demand for the pre-14.05.2015 period based on inclusion of such amounts is not maintainable. The Tribunal thus held the departmental demand unsustainable for the years covered by that precedent. [Paras 6]

Demand for periods up to 31.03.2015 based on inclusion of reimbursed costs is not maintainable in view of the Intercontinental jurisprudence.

Limitation / Extended period (Section 73) - Whether extended period under Section 73 can be invoked. - HELD THAT: - The Tribunal observed that the Revenue pleaded limitation and extended period, but since the appeal was decided on merits in favour of the respondent, the Tribunal did not adjudicate the limitation issue and expressly refrained from deciding other ancillary issues including invocation of extended period. [Paras 6]

Not decided by the Tribunal; limitation/extended period issue not adjudicated.

Penalty on directors - Whether personal penalties proposed against the directors are sustainable. - HELD THAT: - Because the substantive demand was held to be unsustainable, the Tribunal concluded there was no basis for imposing personal penalties on the directors. The Tribunal also noted administrative instructions and monetary thresholds relevant to filing departmental appeals in revenue matters and observed that the proposed personal penalty amount fell within limits rendering Revenue's appeals not maintainable on monetary grounds. [Paras 6, 7, 8]

Personal penalties against the directors are not sustainable and the revenue's appeals on that score are dismissed.

Final Conclusion: The appellate order upholding the adjudicating authority's dropping of the demand is affirmed: the respondent's activities constituted Goods Transport Agency services (not Cargo Handling Service); separately invoiced reimbursements to shipping lines qualified as pure-agent recoveries and were not exigible; demands for periods up to 31.03.2015 based on inclusion of such amounts are not maintainable in view of binding precedent; limitation and extended-period issues were not adjudicated; personal penalties against directors are not sustainable. All Revenue appeals are dismissed.

Taxability of differential/operating income - classification of services for service tax - valuation and determination of taxable services cannot be based solely on accounting entries - onus on assessee to furnish breakup of receipts - remand for redetermination of taxable portion - non taxability of reimbursable expenses and incomes held non taxable by precedents

Taxability of differential/operating income - classification of services for service tax - valuation and determination of taxable services cannot be based solely on accounting entries - onus on assessee to furnish breakup of receipts - Whether the demand in the impugned orders for service tax on the difference between gross receipts shown in financial statements and declared taxable services is sustainable in the absence of a breakup of the differential income and in light of precedents on freight forwarding and reimbursable items. - HELD THAT: - The Tribunal observed that freight forwarding and related activities may give rise to multiple sources of income, some taxable and some not, and that taxability is determined by the nature of the service rendered and not by accounting nomenclature. In the absence of the appellant furnishing the breakup of the differential operating income, the Commissioner adopted a best judgment approach and treated the entire difference as taxable under Business Auxiliary Services. The Tribunal held that the impugned order cannot be sustained because the record does not permit determination of what portion (if any) of the differential income is attributable to taxable services; further, amounts which are non taxable or reimbursable as held in the precedents relied upon by the appellant cannot be subjected to service tax. Consequently, the Tribunal directed remand to the original authority for redetermination of the amount subject to service tax on the basis of the breakup and information to be supplied by the appellant, and required the adjudicating authority to exclude from taxation amounts held to be non taxable or reimbursable by the relevant decisions. The Tribunal emphasised that the appellant must cooperate by providing the relevant information and that the remand disposal be completed within three months. [Paras 4, 5]

Impugned order set aside; matter remanded to the original authority for redetermination of taxable amount after the appellant supplies breakup of differential income, excluding non taxable/reimbursable portions, with remand proceedings to be completed within three months.

Final Conclusion: The Tribunal allowed the appeal by setting aside the impugned orders and remanding the matter to the original authority for fresh determination of the amount subject to service tax for the period October 2009 to September 2011 after the appellant furnishes the breakup of the differential income; the remand is to be completed within three months.

Marketability - manufacture and marketability as taxable event - classification as sugar syrup blends requiring specified fructose content - captive consumption of intermediate goods and excise liability - requirement of chemical testing to establish composition for classification - burden on revenue to prove marketability - test of marketability is capability of being bought and sold - precedential weight of Tribunal and Supreme Court decisions on marketability

Marketability - requirement of chemical testing to establish composition for classification - classification as sugar syrup blends requiring specified fructose content - captive consumption of intermediate goods and excise liability - burden on revenue to prove marketability - Whether sugar syrup produced and used captively in the manufacture of exempt biscuits is liable to central excise duty as a marketable intermediate good classified under sub-heading 17029090. - HELD THAT: - The Tribunal examined whether the sugar syrup produced by the appellant meets the dual tests of 'manufacture' and 'marketability' necessary to attract excise. It applied earlier decisions holding that classification under the sugar-syrup sub-heading requires proof of specified fructose content and that marketability is a question of fact to be established by evidence. The appellate body found no chemical test evidence on record to establish that the syrup contained the requisite fructose proportion to fall within the sugar-syrup blend description relied upon by Revenue. Further, the Tribunal held that Revenue failed to prove that the product, in the condition it emerges from the appellant's factory, is known in the market or capable of being bought and sold; mere shelf-life or generalized circulars relating to other products was insufficient. Certificates from traders indicating that such sugar syrup is not bought and sold supported the appellants' position. Reliance on precedents (including Nicholas Piramal India Ltd. on the correct factual approach to marketability) showed that marketability must be determined on the facts and by evidence; short shelf-life alone does not establish marketability. Applying these principles, the Tribunal concluded that Revenue did not discharge the burden to show classification and marketability, and therefore excise liability could not be sustained.

The finding of excise liability on the sugar syrup was not sustained; the impugned order confirming duty, interest and penalty was set aside and the appeal allowed.

Final Conclusion: On the facts and in view of binding precedents, absence of chemical test evidence to establish fructose content and lack of proof of marketability, the Tribunal set aside the orders confirming duty, interest and penalty in respect of sugar syrup produced and captively used by the appellant, and allowed the appeal for the period July 2010 to October 2010.

Clandestine removal - principles of natural justice - cross-examination of witnesses - remand for fresh consideration - opportunity of personal hearing - setting aside of adjudication order

Principles of natural justice - cross-examination of witnesses - remand for fresh consideration - Impugned adjudication order set aside for failure to decide the appellant's plea for cross-examination and remanded for fresh adjudication. - HELD THAT: - The Tribunal found that, in proceedings arising from allegations of clandestine removal, the adjudicating authority did not deal with the appellant's specific request to cross-examine named third parties whose records were relied upon. The appellate bench observed that the appellant had expressly sought cross-examination of identified persons and that the adjudicating authority dismissed the request by a passing remark without a considered determination. Relying on the reasoning applied in an earlier Tribunal order (which followed the ratio of the High Court), the Tribunal held that such omission constituted a violation of the principles of natural justice. Consequently, without expressing any view on the merits of the clandestine removal allegation, the Tribunal set aside the impugned order, directed that cross-examination of the persons indicated by the appellant be allowed, granted four weeks for filing a detailed reply, and required the adjudicating authority to afford personal hearing and pass a reasoned fresh order keeping all issues open.

Impugned order set aside and matter remanded to the adjudicating authority to allow cross-examination of the named witnesses, permit filing of a detailed reply, provide personal hearing and pass a reasoned order.

Final Conclusion: Appeal allowed by way of remand: the adjudication order is set aside for breach of natural justice in not deciding the plea for cross-examination, and the matter is remitted for fresh consideration after permitting cross-examination, filing of reply, and personal hearing.

Dismissal for non-prosecution - service of notice by email and speed post

Dismissal for non-prosecution - service of notice by email and speed post - Whether the appeal should be dismissed for non-prosecution after repeated non-appearance of the appellant despite notices - HELD THAT: - The Tribunal recorded that the appellant failed to appear for hearing on multiple dates and that notices were sent by email and speed post on 7.7.2021 as directed. The matter had an earlier history (including a previous remand on the question of limitation), but on the present occasion the appellant was absent on call and did not avail the additional opportunity granted. In these circumstances the Tribunal proceeded with an ex parte hearing and, applying its procedural power to dismiss matters where the appellant does not prosecute the appeal despite service of notice and adjournments, dismissed the appeal for non-prosecution.

Appeal dismissed for non-prosecution.

Final Conclusion: The Tribunal dismissed the appeal for non-prosecution after the appellant repeatedly failed to appear despite notices sent by email and speed post and an additional opportunity to be heard.