TaxTMI Updates e-Newsletter
Mar 09,2021

Condonation of delay - appeal under Section 107 of the GST Act, 2017 - period of limitation for preferring appeal and statutory extension of thirty days - non-application of Section 5 of the Limitation Act to a statutory limitation with prescribed condonation period - appellate authority becoming functus officio after expiry of the prescribed limitation and permitted extension - statutory bar to condoning delay beyond the period expressly provided by statute

Period of limitation for preferring appeal and statutory extension of thirty days - condonation of delay - appeal under Section 107 of the GST Act, 2017 - Whether the appellate authority could entertain and condone the petitioner's appeal filed beyond the three months limitation and the further statutory extension of thirty days provided for appeals under the relevant provisions. - HELD THAT: - The Court held that the statutory scheme prescribes a three months period for filing the appeal against the order dated 15.10.2018, with a specific further extension of thirty days for condonation. The power to condone delay is therefore confined to that thirty days period and the general provision in Section 5 of the Limitation Act cannot be invoked to extend the limitation beyond the statute-specified extension. Once the total prescribed period including the thirty days extension expires, the appellate authority has no power to entertain the appeal and becomes functus officio. The Court relied on the principle that allowing condonation beyond the expressly prescribed period would defeat the legislative intent and cited authoritative Supreme Court decisions to the effect that a court or authority cannot disregard a statutory limitation by condoning delay beyond the period provided by statute. Applying these principles to the facts, the petitioner's appeal filed after the expiry of the statutory period and the thirty days extension was rightly rejected as time-barred. [Paras 4, 5, 6, 7, 8]

The appellate order dismissing the appeal as barred by limitation was upheld; the appellate authority had no power to condone delay beyond the thirty days extension and correctly rejected the belated appeal.

Final Conclusion: Writ petition dismissed; the impugned appellate order dated 09.01.2020 rejecting the appeal as barred by limitation is sustained as the appellate authority lacked power to condone delay beyond the statutory extension.

Technical glitches in GST portal - reopening of GST/CENVAT portal - manual acceptance of applications due to portal failure - verification of CENVAT credit claim - permitting electronic tax payment despite portal malfunction

Technical glitches in GST portal - reopening of GST/CENVAT portal - permitting electronic tax payment despite portal malfunction - Directions to respondents to reopen the portal and to allow the petitioner to transact on the electronic system or, if the portal remains closed, to accept and process the application manually. - HELD THAT: - The Court found on the material before it that the petitioner was unable to submit the CENVAT credit form due to persistent technical glitches in the GST portal. Applying the approach taken by this Court and the cited Bombay High Court authority, the Court directed respondents to reopen the portal within two weeks of service of the order. If the portal is not reopened, respondents are to entertain the petitioner's application manually and process it. The Court also directed that the petitioner be permitted to pay taxes using the regular electronic system maintained for credit use, to prevent penal consequences arising from the portal malfunction.

Respondents directed to reopen portal within two weeks or accept the petitioner's application manually and to ensure the petitioner may pay taxes via the electronic system.

Manual acceptance of applications due to portal failure - verification of CENVAT credit claim - Adjudicatory consideration of the petitioner's CENVAT credit claim was remitted to the authority for verification and decision. - HELD THAT: - Although the Court acknowledged the petitioner's entitlement to seek adjustment of CENVAT credit granted earlier, it did not decide the merits of the credit claim. Instead, the Court remitted the matter to the respondents to entertain the application (manually if necessary) and to pass an order after due verification of the credit claimed by the petitioner. The direction contemplates fresh consideration and adjudication by the authority consistent with verification of records and applicable principles.

The claim for CENVAT credit is remitted to the respondents for verification and fresh decision (to be entertained manually if portal remains closed).

Final Conclusion: Petition disposed directing respondents to reopen the GST/CENVAT portal within two weeks or else to accept and decide the petitioner's CENVAT-credit application manually after due verification; petitioner to be allowed to use the electronic tax-payment system in the interim.

Condonation of delay - inordinate delay - restoration of appeal - liberal approach to condonation - doctrine of prejudice - substantial question of law - approbate and reprobate

Condonation of delay - inordinate delay - restoration of appeal - liberal approach to condonation - Tribunal's refusal to condone a delay of 1924 days in filing miscellaneous application for restoration of the appeal and consequent dismissal of the restoration application. - HELD THAT: - The Tribunal found an inordinate delay of 1924 days in filing the miscellaneous application and noted absence of an affidavit explaining the chronology of events. It applied the principles governing condonation of delay, including that a liberal approach is tempered by reasonableness and that inordinate delay attracts the doctrine of prejudice and warrants a strict approach. The Tribunal examined the explanation offered (transfer/retirement of officers and change of tax consultants, and later detection during reconciliation) and recorded that no satisfactory or tenable explanation was placed on record. The High Court, on review of the materials and the Tribunal's reasoning, held that the Tribunal's conclusion that the delay could not be condoned was supported by the record and legally sound, particularly in light of the assessee's conduct of having earlier opposed restoration for the revenue and thereafter seeking revival long after the relevant Supreme Court ruling was available. The High Court therefore upheld the Tribunal's exercise of discretion in refusing condonation and dismissing the restoration application. [Paras 14, 15, 16]

The Tribunal rightly refused to condone the inordinate delay and dismissed the application for restoration; its order is upheld.

Substantial question of law - restoration of appeal - approbate and reprobate - Whether the appeal under Section 260A raises any substantial question of law warranting interference with the Tribunal's order dismissing the MA for restoration. - HELD THAT: - Section 260A jurisdiction requires a substantial question of law. The High Court observed that the impugned Tribunal order was a fact-based determination on delay and reasonableness rather than an adjudication on merits of the assessment. The Court noted that the assessee had knowledge of the relevant Supreme Court decision yet did not act promptly; indeed, the assessee had earlier opposed the revenue's restoration and only sought revival many years later. Given that the Tribunal's order rests on factual evaluation and discretionary denial of condonation, the High Court found no substantial question of law arising from the impugned order and concluded that Section 260A interference was not justified. [Paras 6, 8, 16]

No substantial question of law is involved; the appeal under Section 260A does not warrant interference and is dismissed.

Final Conclusion: The High Court dismissed the appeal, upholding the Tribunal's refusal to condone the inordinate delay in seeking restoration and concluding that no substantial question of law arises for interference under Section 260A.

Arm's length price under the Transactional Net Margin Method (TNMM) - operating revenue/costs for ALP determination - inclusion of prior period income in operating revenue - allocation of operating costs across accounting periods for a multi-year international transaction - restricting transfer pricing adjustment to international transactions - verification of comparables' Profit Level Indicator (PLI) - application of turnover filter in benchmarking - deductibility of education cess and secondary and higher education cess

Inclusion of prior period income in operating revenue - operating revenue/costs for ALP determination - arm's length price under the Transactional Net Margin Method (TNMM) - Inclusion of commission characterised as 'Prior period income' in the operating revenue base for determination of ALP of marketing support services under TNMM. - HELD THAT: - Rule 10B(1)(e) requires determining the assessee's net profit margin from the international transaction by considering operating revenues and costs 'qua' that international transaction. The scope and temporal coverage for ALP are governed by the transaction's scope, as defined by the parties' agreement, and not merely the accounting year in which items are recorded. The agreement shows the marketing support service comprises three steps ending in realization by the AE and issuance of credit notes; income accrues on completion (step three). Where credit notes were issued in the year under consideration and thus the international transaction concluded in that year, corresponding commission income so recorded (though styled 'Prior period income') is part of operating revenue for ALP determination. Conversely, amounts for which credit notes were not issued in the relevant year prima facie fall outside operating revenue unless it is shown that the transaction was completed and the AE delayed issuance. The AO/TPO must ascertain, for each disputed item, whether the credit-note issuance timing reflects completion of the international transaction or a delay by the AE; only then exclude or include the amounts. Further, if disputed prior-period commission income is included in revenue, corresponding operating costs incurred in earlier years relating to the same international transaction must be included in the cost base while determining ALP. The Tribunal set aside the ALP determination of the Distribution activity and remanded the matter to AO/TPO for fresh determination in accordance with these principles, with opportunity to the assessee to be heard. [Paras 9, 11, 12, 14, 15]

The amount of commission of Rs. 5.65 crore characterized as 'Prior period income' must be included in operating revenue for ALP determination where the credit notes' issuance shows completion of the international transaction; AO/TPO to verify completion versus AE delay and include corresponding prior-year operating costs where appropriate; ALP determination set aside and remitted for fresh decision.

Verification of comparables' Profit Level Indicator (PLI) - arm's length price under the Transactional Net Margin Method (TNMM) - Correctness of PLIs adopted for specific comparables (Cuprum Bagrodia Ltd. and George Oakes Limited). - HELD THAT: - The Tribunal recorded that the DRP directed segmental data consideration for Cuprum Bagrodia Ltd.; the TPO subsequently adjusted its PLI but the assessee contends for a different figure. For George Oakes Ltd., the DRP observed that the TPO had included non-operating items; adjusted PLI was adopted but the assessee disputes the correctness. The AO/TPO is directed to verify the assessee's contentions on the correct computation of PLIs (segment-wise figures for Cuprum Bagrodia and exclusion of non-operating items for George Oakes) and adopt the correct PLIs while determining ALP. [Paras 16, 17]

AO/TPO to verify and, if warranted, adopt the assessee's contended PLIs for the two comparables in final ALP computation.

Application of turnover filter in benchmarking - arm's length price under the Transactional Net Margin Method (TNMM) - Compliance with DRP's direction on the turnover filter applied to select comparables. - HELD THAT: - The DRP modified the turnover filter in its directions. While giving effect to the DRP, the AO inadvertently overlooked this modification. The Tribunal directed the AO to comply with the DRP's direction on the turnover filter when finalizing benchmarking and ALP. [Paras 18]

AO to implement the DRP's modified turnover filter as directed when finalizing the ALP.

Restricting transfer pricing adjustment to international transactions - arm's length price under the Transactional Net Margin Method (TNMM) - Whether transfer pricing adjustment may be applied at entity level or must be restricted to international transactions with associated enterprises. - HELD THAT: - Section 92 requires income arising from an international transaction to be computed having regard to arm's length price; the statutory scheme contemplates ALP and consequential adjustments only in respect of international transactions and not entity-level results. The TPO had computed adjustments at entity level; the Tribunal directed that adjustments must be restricted to the international (AE) transactions under consideration and not applied to the entity as a whole. [Paras 20]

Transfer pricing adjustment to be restricted to the relevant international transactions with associated enterprises and not to entity-level transactions.

Deductibility of education cess and secondary and higher education cess - Allowability of deduction for education cess and secondary and higher education cess while computing total income for the year. - HELD THAT: - The Tribunal held that the issue is no longer res integra in view of the jurisdictional High Court decision in Sesa Goa Ltd. v. JCIT and earlier authority of the Rajasthan High Court; education cess is not disallowable expenditure under section 40(a)(ii). The AO is directed to allow deduction for education cess and secondary and higher education cess after verification. [Paras 23, 24]

Deduction for education cess and secondary and higher education cess allowed subject to verification.

Final Conclusion: The appeal is partly allowed: the ALP determination for the Distribution activity is set aside and remitted to the AO/TPO for fresh determination in accordance with the Tribunal's directions on inclusion of prior-period commission and related prior-year costs, verification of specified comparables' PLIs, and application of the DRP's turnover filter; transfer pricing adjustments must be confined to international transactions; deduction for education cesses is allowed after verification. A reasonable opportunity of hearing to the assessee to be provided.

Allowability of business expenditure under section 37(1) - burden on Revenue to rebut documentary evidence of genuine transactions - inadmissibility of a statement recorded without confrontation or opportunity of cross-examination - payments through banking channel and deduction of TDS as corroborative evidence of genuineness - rejection of books of account under section 145(3) as prerequisite to disbelieve book-records

Allowability of business expenditure under section 37(1) - payments through banking channel and deduction of TDS as corroborative evidence of genuineness - burden on Revenue to rebut documentary evidence of genuine transactions - rejection of books of account under section 145(3) as prerequisite to disbelieve book-records - inadmissibility of a statement recorded without confrontation or opportunity of cross-examination - Whether the addition of the amount claimed as sub-brokerage/commission should be sustained by the Assessing Officer or deleted. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the addition. The assessee proved payment of sub-brokerage to the named party by producing bills, ledger extracts, bank payments and TDS records; the books of account were not rejected under section 145(3). The A.O.'s contrary conclusion rested solely on information from a search and on a statement of a third person, but the assessment order did not explain how that statement incriminated the assessee nor show that the statement was confronted to or tested against the assessee. Reliance on an untested statement recorded at the back of the assessee was held impermissible in view of precedents, and therefore could not rebut the documentary proof of business expenditure. In the absence of any other documentary evidence from Revenue to displace the assessee's records, and given that payments were routed through banking channels with TDS reflected, the Tribunal found no justification to interfere with the appellate authority's conclusion that the expenditure was laid out wholly and exclusively for business and allowable under allowability of business expenditure under section 37(1). [Paras 6, 7]

The addition disallowing the claimed sub-brokerage was deleted and the order of the CIT(A) was upheld; Revenue's appeal dismissed.

Final Conclusion: The Tribunal affirmed the deletion of the addition relating to sub-brokerage, holding that documentary evidences (bills, ledger entries, bank payments and TDS) proved the expenditure as genuine and business related, that the Assessing Officer failed to rebut those records or to rely on a properly confronted statement, and accordingly dismissed the Revenue's appeal.

Set-off of brought forward losses - income assessed under section 69 (unexplained investment) - section 115BBE - pre-amendment and post-amendment effect - CBDT Circular No. 11/2019 - legislative intent behind Finance Act, 2016 amendment

Set-off of brought forward losses - income assessed under section 69 (unexplained investment) - section 115BBE - pre-amendment and post-amendment effect - CBDT Circular No. 11/2019 - Allowance of set-off of brought forward business loss and depreciation against income assessed under section 69 for the assessment year before the Tribunal. - HELD THAT: - The Tribunal examined section 115BBE as it stood prior to the Finance Act, 2016 amendment and held that the pre-amendment text prohibited deduction of expenditure or allowance when computing income referred to in sub section (1)(a) but did not expressly bar set off of brought forward losses. The Finance Act, 2016 inserted the words 'or setoff of any loss' into section 115BBE(2) with effect from 01.04.2017 (applicable from AY 2017 18), thereby expressly disallowing set off thereafter. The CBDT Circular No. 11/2019 was considered and relied upon to clarify legislative intent: since the express bar on set off was introduced only by the Finance Act, 2016, an assessee is entitled to claim set off of losses against income determined under section 115BBE up to AY 2016 17. Applying this principle to the assessment year before the Tribunal, the Tribunal allowed the claimed set off of unabsorbed depreciation and brought forward business loss against the surrendered income assessed under section 69 and set aside the disallowance confirmed by the lower authorities. [Paras 7]

Set-off of brought forward business loss and depreciation against income assessed under section 69 is allowable for the assessment year before the Tribunal (preceding the AY 2017 18 amendment); appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that, in view of the pre amendment text of section 115BBE and the CBDT clarification, set off of brought forward losses and unabsorbed depreciation is permissible against income assessed under section 69 for the assessment year before the Tribunal, with the legislative bar on such set off applying only from AY 2017 18 onwards.

Jurisdictional notice under section 143(2) and jurisdiction of the Assessing Officer - transfer of jurisdiction under section 127 of the Income tax Act - nullity of assessment for want of jurisdictional notice

Jurisdictional notice under section 143(2) and jurisdiction of the Assessing Officer - transfer of jurisdiction under section 127 of the Income tax Act - nullity of assessment for want of jurisdictional notice - Validity of assessment where a notice under section 143(2) was issued by a non jurisdictional Assessing Officer within the statutory period and no order transferring jurisdiction under section 127 was produced. - HELD THAT: - The Tribunal found on record that the assessee filed returns and previously dealt with Range 2, Meerut; no material or order under section 127 was produced by Revenue to show transfer of jurisdiction from Meerut to Malegaon (Nasik). Although a notice under section 143(2) dated 18.09.2015 was issued by the ITO, Malegaon, that officer did not have jurisdiction over the assessee and the jurisdictional ITO at Meerut did not issue the statutory notice within the period of limitation. The assessee objected to Malegaon's jurisdiction and contemporaneous communications indicate filing and connections with Meerut. In absence of evidence of a valid transfer of jurisdiction, the first notice having been issued by a non jurisdictional officer could not confer jurisdiction; accordingly the entire assessment proceedings were vitiated as a nullity. The Tribunal applied settled principle that service of the jurisdictional notice within the statutory period by the officer having jurisdiction is a condition precedent to validly commencing scrutiny assessment, and quashed the assessment. [Paras 6]

Assessment quashed as null and void for want of service of a jurisdictional notice under section 143(2) by the ITO having jurisdiction; appeal allowed.

Final Conclusion: The Tribunal set aside the orders below and quashed the assessment for A.Y. 2014 2015 on the ground that no jurisdictional notice under section 143(2) was served by the ITO, Meerut, and no valid transfer of jurisdiction under section 127 was shown.

Deduction under section 80IC - operational subsidies as revenue receipts - direct nexus between subsidies and business profits - profit-linked incentives

Deduction under section 80IC - operational subsidies as revenue receipts - direct nexus between subsidies and business profits - Whether transport subsidy, power subsidy and interest subsidy received by the assessee qualify for deduction under section 80IC as profits and gains derived from the eligible business. - HELD THAT: - The Tribunal applied the binding ratio of the Hon'ble Supreme Court and the decisions of the Guwahati High Court which held that transport, power and interest subsidies are revenue receipts reimbursing elements of cost relating to manufacture and sale. Because these subsidies reduce cost of production and thereby increase operational profits, there exists a direct nexus between such subsidies and the profits and gains of the industrial undertaking. The Court's reasoning establishes that such operational subsidies are within the scope of profit-linked incentives and thus fall within amounts in respect of profits and gains "derived from" the eligible business for the purpose of allowing deductions under the relevant Chapter VIA provision. In view of the authoritative precedents, the Tribunal directed the Assessing Officer to allow the claimed deduction under section 80IC in respect of the subsidies. [Paras 9, 10, 11]

The claim for deduction under section 80IC in respect of transport subsidy, power subsidy and interest subsidy is accepted and the Assessing Officer is directed to allow the deduction.

Final Conclusion: The appeal is allowed; the subsidies in question are held to be revenue receipts having direct nexus with the business and eligible for deduction under section 80IC, and the Assessing Officer is directed to give effect to this decision.

Deduction under section 80P(2)(a)(i) - definition of "co-operative society" under section 2(19) - registration under the Karnataka Souharda Sahakari Act, 1997 - entitlement to benefit of section 80P

Deduction under section 80P(2)(a)(i) - definition of "co-operative society" under section 2(19) - registration under the Karnataka Souharda Sahakari Act, 1997 - Whether the assessee registered under the Karnataka Souharda Sahakari Act, 1997 is a "co-operative society" for the purposes of section 2(19) and therefore entitled to claim deduction under section 80P(2)(a)(i). - HELD THAT: - The Assessing Officer and the CIT(A) denied the deduction solely on the ground that the assessee's registration under the Karnataka Souharda Sahakari Act, 1997 meant it did not fall within the definition of "co-operative society" under section 2(19). This Tribunal accepted the binding reasoning of the Karnataka High Court in M/s. Swabhimani Souharda Credit Co-operative Ltd., which declared that entities registered under the KSSA, 1997 fit the statutory definition of "co-operative society" and are therefore entitled, subject to other conditions, to claim benefits under section 80P. The Tribunal also noted consistent findings in earlier Tribunal decisions reasoning that Souharda cooperatives operate on cooperative principles and are registrable under a State law for registration of cooperative societies and thus fall within section 2(19). The Assessing Officer's factual finding that the assessee provides credit facilities to members and earns interest from such operations does not negate the legal conclusion that the assessee is a cooperative society for the purpose of section 80P. Having held that the assessee is a "co-operative society" within the meaning of section 2(19), the Tribunal allowed the appeal and granted the relief sought by the assessee in respect of the qualifying legal character; the assessment on merits was adjusted accordingly by allowing the claim that had been denied only on the ground of registration under the KSSA, 1997. [Paras 2, 7, 8, 9]

The assessee registered under the Karnataka Souharda Sahakari Act, 1997 is a "co-operative society" within section 2(19) and, on that basis, the deduction claimed under section 80P(2)(a)(i) is allowed in appeal.

Final Conclusion: Appeal allowed: the assessee being a society registered under the Karnataka Souharda Sahakari Act, 1997 was held to be a "co-operative society" within section 2(19) and the denial of deduction under section 80P(2)(a)(i) was set aside for AY 2016-2017.

Agricultural income - deemed agricultural income for saplings and seedlings grown in a nursery (Explanation 3 to section 2(1A)) - basic and subsequent agricultural operations - integrated agricultural operations doctrine (Raja Benoy Kumar Sahas Roy) - composite contract - sale of plants grown in own nursery

Deemed agricultural income for saplings and seedlings grown in a nursery (Explanation 3 to section 2(1A)) - basic and subsequent agricultural operations - composite contract - sale of plants grown in own nursery - Whether amounts claimed as agricultural income under Explanation 3 to section 2(1A) qualify as agricultural income where the assessee executed composite contracts involving supply of plants and on-site landscaping/softscape services. - HELD THAT: - The Tribunal examined the statutory definition and Explanation 3 to section 2(1A), and the Apex Court exposition in Raja Benoy Kumar Sahas Roy that agricultural operations comprise basic operations performed on the land (tilling, sowing, planting) and subsequent operations when carried out in conjunction with those basic operations. The assessment of facts (purchase orders, final bill of quantities and invoices) established that the assessee grew saplings and seedlings in its nursery but also entered into composite contracts which included preparing client sites, supplying soil and fertilizer, planting at the client's premises, engaging horticulturists, insurance and maintenance. The Tribunal held that Explanation 3 renders only income from sale of saplings and seedlings grown in the assessee's own nursery as deemed agricultural income. Secondary or subsequent operations qualify as agricultural only if they are in conjunction with basic operations carried out on the same land; where such subsequent activities (supply of soil/fertilizer, planting in client's site, engagement of manpower and maintenance) are performed at the client's site and the plants become the client's property, those services are maintenance/contractual services and are not agricultural operations within the definition. The Tribunal distinguished the authorities relied upon by the assessee on the factual basis that those cases involved both basic and subsequent operations carried out on the assessee's land, whereas in the present case only growing in the nursery was performed on the assessee's land while other works were off-site. Applying these principles, the Tribunal upheld the factual conclusion that 50% of the amount claimed as exempt could properly be treated as business income arising from non-agricultural components of the composite contracts. [Paras 7]

Income attributable to activities other than sale of saplings and seedlings grown in the assessee's own nursery, including on-site landscaping and related services performed at client premises as part of composite contracts, is not agricultural income under section 2(1A) and may be treated as business income; the CIT(A)'s confirmation of the assessment is upheld.

Final Conclusion: The Tribunal dismissed the assessee's appeal and upheld the assessment and the CIT(A)'s conclusion that only income from sale of saplings and seedlings grown in the assessee's nursery is agricultural income under Explanation 3 to section 2(1A), while amounts attributable to composite contract services performed at client sites are taxable as business income.

Deduction under section 35(2AB) - approval in Form No.3CM - Form No.3CL - legal sanctity of DSIR certification prior to amendment - amendment to Rule 6(7A)(b) w.e.f. 1.7.2016 - penalty under section 271(1)(c) - effect of quantum deletion on penalty

Deduction under section 35(2AB) - Form No.3CL - approval in Form No.3CM - legal sanctity of DSIR certification prior to amendment - amendment to Rule 6(7A)(b) w.e.f. 1.7.2016 - Whether absence of Form No.3CL from DSIR disentitles the assessee to deduction under section 35(2AB) for A.Y. 2012-13 and whether the weighted deduction claimed should be sustained. - HELD THAT: - The Tribunal's reasoning, adopted by this Bench, notes that prior to the Income Tax (10th Amendment) Rules, 2016 (w.e.f. 1.7.2016) Form No.3CL did not have the statutory function of quantifying the weighted deduction; the prescribed authority's approval of the in-house R&D facility (evidenced by Form No.3CM) and the existence of expenditure on R&D are the determinative preconditions for allowance under section 35(2AB). The authorities and judicial precedents cited establish that Rule-based requirements (such as furnishing audited details by 31 October and submission procedures for Form No.3CL) do not convert Form No.3CL into a condition precedent for claiming the deduction for periods prior to the 2016 amendment. In the present case the Assessing Officer had allowed 100% of the expenditure under section 35(1)(i) and the Tribunal concluded, following precedent and the scheme of the provisions, that the assessee was entitled to the weighted 200% deduction under section 35(2AB) for AY 2012-13. The Bench accordingly upheld the Tribunal's deletion of the quantum disallowance and directed allowance of the claimed weighted deduction. [Paras 3]

Absence of Form No.3CL did not disentitle the assessee to deduction under section 35(2AB) for A.Y. 2012-13; the approval in Form No.3CM and incurred expenditure justified allowing the 200% weighted deduction as directed by the Tribunal.

Penalty under section 271(1)(c) - effect of quantum deletion on penalty - Whether penalty under section 271(1)(c) could be sustained once the quantum additions were deleted by the Tribunal. - HELD THAT: - The penalty levied was premised on the assessment that the deduction claim was incorrect. The Tribunal allowed the assessee's appeal on quantum, holding the weighted deduction was permissible. Given the deletion of the quantum additions by the Tribunal, there remained no basis to sustain the penalty. This Bench, following the Tribunal's reversal of the quantum disallowance, confirmed the CIT(A)'s deletion of the penalty. [Paras 4]

Penalty under section 271(1)(c) deleted as a consequential effect of the Tribunal's deletion of the quantum additions.

Final Conclusion: The revenue's appeal is dismissed: the Tribunal's allowance of the weighted deduction under section 35(2AB) for A.Y. 2012-13 (despite absence of Form No.3CL) is affirmed, and the penalty under section 271(1)(c) is confirmed deleted as consequential to the quantum decision.

Penalty under section 271(1)(c) for concealment of income - penalty under section 271(1)(c) for furnishing inaccurate particulars of income - mere disallowance of claim not amounting to concealment where full disclosure is made - effect of certified statutory/tax audit report and full disclosure on levy of penalty - civil liability nature of penalty and absence of requirement of wilful concealment

Penalty under section 271(1)(c) for concealment of income - mere disallowance of claim not amounting to concealment where full disclosure is made - effect of certified statutory/tax audit report and full disclosure on levy of penalty - Validity of penalty imposed under section 271(1)(c) on the assessee in respect of disallowed additional depreciation where the claim was disclosed in the return and supported by the tax audit report. - HELD THAT: - The Tribunal examined the Assessing Officer's levy of penalty which treated the disallowance of additional depreciation as concealment of income. The Tribunal noted that the penalty proceeding was initiated on the charge of furnishing inaccurate particulars but ultimately recorded concealment; however, on the facts the assessee had made full disclosure of the claim supported by the statutory/tax audit certification. Applying the settled principle that mere incorrect or unsuccessful claims on merits do not necessarily amount to concealment where there is full disclosure and a debatable legal position, the Tribunal relied on coordinating precedents holding that when the claim is disclosed and certified by a chartered accountant, penalty u/s 271(1)(c) is not justified merely because the claim is disallowed on merits. Although the Assessing Officer invoked the civil-liability character of the penalty and observations from higher authority regarding lack of requirement of wilful concealment for imposition, the Tribunal held that on these facts there was no mens rea or concealment: the assessee's claim was bona fide, made in the regular course and supported by audit certification, and therefore the imposition of penalty could not be sustained. [Paras 6, 8, 9]

Penalty under section 271(1)(c) in respect of the disallowed additional depreciation was quashed; the Revenue's appeal was dismissed.

Final Conclusion: The Appellate Tribunal dismissed the Revenue's appeal and sustained the Commissioner (Appeals)'s deletion of the penalty imposed under section 271(1)(c) for Assessment Year 2011-2012, holding that mere disallowance of an additional depreciation claim-when fully disclosed and supported by the statutory/tax audit report-does not warrant penalty.

Penalty under Section 271(1)(c) in proceedings against a dissolved/amalgamating company - effect of court-approved amalgamation - transfer of liabilities and cessation of transferor's legal existence - jurisdictional defect from issuance of notice to a non existent entity - assessment/penalty order void ab initio if framed in the name of a dissolved transferor

Penalty under Section 271(1)(c) in proceedings against a dissolved/amalgamating company - jurisdictional defect from issuance of notice to a non existent entity - assessment/penalty order void ab initio if framed in the name of a dissolved transferor - Validity and maintainability of penalty proceedings and order levying penalty in the name of the amalgamating (transferor) company after court approved amalgamation - HELD THAT: - The Tribunal found on the admitted facts that the scheme of amalgamation approved by the High Court with effect from 01.10.2013 dissolved the transferor company (Edelweiss Financial Advisors Ltd.) so that it ceased to exist as a juridical person from that date. The issuance of jurisdictional notice and continuation of penalty proceedings in the name of the dissolved entity was therefore impermissible. Reliance was placed on the reasoning in the Apex Court's decision in PCIT v. Maruti Suzuki India Ltd. and on coordinate bench decisions following that ratio, holding that proceedings and final orders issued in the name of a non existent transferor are a nullity and cannot be cured as mere procedural irregularity. Applying that principle, the Tribunal held that the ACIT had no jurisdiction to levy penalty or pass order in the name of the dissolved transferor and that the penalty order is void ab initio. Because the maintainability issue disposed of the dispute, the Tribunal refrained from adjudicating the merits and treated other grounds as infructuous. [Paras 6, 7, 8]

Penalty proceedings and the penalty order framed in the name of the dissolved amalgamating company are void ab initio; the penalty is quashed.

Final Conclusion: The appeal is partly allowed: the penalty levied under Section 271(1)(c) is quashed as the proceedings were continued and the order passed in the name of the amalgamating company which ceased to exist on the effective date of the court approved amalgamation; other grounds were not decided as they became infructuous.

Deduction of tax at source under section 194-IA - consideration for transfer of immovable property in a development agreement - refundable security deposit versus consideration - deemed transfer under section 2(47)(v) and part performance under section 53A - assessee in default under section 201(1) - interest liability under section 201(1A) - primary liability of recipient under section 4 and section 191 - accounting characterisation and evidentiary weight of books of account

Deduction of tax at source under section 194-IA - refundable security deposit versus consideration - consideration for transfer of immovable property in a development agreement - deemed transfer under section 2(47)(v) and part performance under section 53A - accounting characterisation and evidentiary weight of books of account - Whether the refundable security deposit paid under the development agreement is 'consideration' for transfer of immovable property attracting TDS under section 194-IA. - HELD THAT: - The Tribunal examined the development agreement clauses and the nature of the Rs.21.85 crore payment described as an interest-free refundable security deposit recoverable through sale of the owners' constructed area. It noted specific contractual provisions (licence to enter, obligation to obtain approvals, timelines for sanction and construction, recovery of deposit through sale of owners' constructed area, and clauses preserving that the permission to enter shall not be construed as delivery of possession in part performance under section 53A). On the facts, no sanctioned plan or construction commencement was shown to have occurred in the relevant year and the agreement expressly disclaimed delivery of possession as part performance. The Tribunal accepted that TDS under Chapter XVII applies only in respect of sums that amount to income or consideration for transfer and that characterization in the parties' agreement and in the books (deposit treated as current asset/liability) is of evidentiary value. Applying authorities and statutory scheme, the Tribunal held that the security deposit retained the character of a repayable deposit (not income of the landowners) and that the conditions for invoking deemed transfer under section 2(47)(v) (and thus treating the payment as consideration under section 194-IA) were not satisfied. Consequently the obligation to deduct tax under section 194-IA did not arise in the year under consideration. [Paras 5]

Refundable security deposit paid under the JDA does not constitute 'consideration' for transfer attracting deduction under section 194-IA; section 194-IA not applicable on these payments in the assessment year.

Assessee in default under section 201(1) - interest liability under section 201(1A) - primary liability of recipient under section 4 and section 191 - Whether the assessee can be held an 'assessee in default' under section 201(1) and made liable to interest under section 201(1A) for failure to deduct TDS in respect of the refundable security deposit. - HELD THAT: - The Tribunal applied the statutory scheme and precedent recognizing that the primary charge to tax is on the recipient and TDS is a vicarious, substitutionary mechanism. It observed that the first proviso to section 201 codifies that a payer is not an assessee in default if the payee files return, takes the sum into account and pays tax (with prescribed certificate). The Tribunal found that, because the impugned payments did not amount to income/consideration in the hands of the landowners (and the conditions for section 194-IA were not met), there was no foundational basis to treat the payer as an assessee in default. Further, on the factual matrix no finding was recorded that payees had failed to pay tax directly. Accordingly, the Assessing Officer erred in invoking section 201(1); the assessee could not be held an assessee-in-default and interest under section 201(1A) could not be sustained in the circumstances. [Paras 5]

Assessee cannot be treated as an assessee-in-default under section 201(1) in respect of the refundable security deposit and the consequent interest under section 201(1A) is not sustainable on the facts; demand is set aside.

Final Conclusion: The Tribunal allowed the assessee's appeal: the refundable security deposit paid under the JDA did not attract TDS under section 194-IA for AY 2014-2015, and the assessee could not be held an assessee-in-default under section 201(1) nor made liable to interest under section 201(1A) in respect of those payments; the assessing officer was directed to recompute liabilities accordingly and the appeal is allowed.

CSR expenditure as business expenditure - deductibility under section 37(1) of the Income-tax Act - mobilization advance interest - recognition of income versus contingent claim - crystallization principle for recognition of income in contentious disputes - application of section 14A read with Rule 8D and requirement of assessing officer's satisfaction

CSR expenditure as business expenditure - deductibility under section 37(1) of the Income-tax Act - Allowability of CSR and sustainable development expenses claimed as business expenditure for the assessment year 2012-13. - HELD THAT: - The Tribunal allowed the ground following coordinate Bench precedents which examined identical projects and facts and held that CSR/Sustainable Development expenditures incurred by a government undertaking pursuant to directions/guidelines of Government/Department of Public Enterprises are incidental to business and deductible under section 37(1). The Tribunal noted the assessee's consistency in treatment in earlier years, the absence of controverting evidence by the Revenue, and binding guidance from earlier decisions (including decisions holding that payments made by public sector companies pursuant to governmental directions may be business expenditure). Applying those findings to the facts of the present assessment year, the disallowance by the AO was held to be mechanistic and reversed. [Paras 8]

Disallowance of CSR & SD expenses deleted; ground allowed in favour of the assessee.

Mobilization advance interest - recognition of income versus contingent claim - crystallization principle for recognition of income in contentious disputes - Whether interest on mobilization advance represents income accruing to the assessee or is a contingent/ non crystallized claim not exigible to tax for the assessment year 2012-13. - HELD THAT: - Following the reasoning of the jurisdictional High Court in the assessee's own earlier case for AY 2008-09, the Tribunal accepted that the entitlement to receive amounts (including interest) from a disputed/contested contractor had not crystallized because of competing claims, termination and arbitration proceedings. The accounting practice of the government undertaking to recognize items only upon approval and the contentious nature of the dispute led to the conclusion that no accrued taxable income had arisen. On that basis the addition treating the interest as income was held without basis and deleted. [Paras 11]

Addition on account of interest on mobilization advance deleted; ground allowed in favour of the assessee.

Application of section 14A read with Rule 8D and requirement of assessing officer's satisfaction - Validity of the disallowance made under section 14A read with Rule 8D in absence of the assessing officer recording requisite satisfaction. - HELD THAT: - The Tribunal followed coordinate Bench decisions in the assessee's own cases for earlier years which held that before invoking Rule 8D the assessing officer must record a satisfaction as required by section 14A(2); no such satisfaction was recorded in the assessment under challenge. On that statutory and precedential basis the disallowance was held to be unsustainable and was deleted. [Paras 16]

Disallowance under section 14A read with Rule 8D deleted; ground allowed in favour of the assessee.

Final Conclusion: The appeal for A.Y. 2012-13 is allowed in entirety: disallowance of CSR & SD expenses, addition on account of interest on mobilization advance, and disallowance under section 14A r.w. Rule 8D are set aside in favour of the assessee.

Deduction under section 80P(2)(d) - Applicability of section 80P(4) to co-operative banks - Co-operative bank treated as co-operative society - Validity of initiation of revision under section 263 - Allowability of provisions under mercantile system and section 37(1) - Assessing Officer's duty to verify accounting records and invoices - Disallowance under section 43B for bonus paid after due date - Suo-moto disallowance in computation of income

Deduction under section 80P(2)(d) - Applicability of section 80P(4) to co-operative banks - Co-operative bank treated as co-operative society - Validity of initiation of revision under section 263 - Claim of deduction under section 80P(2)(d) in respect of interest received from Ajmer Central Co-operative Bank Ltd. is allowable and the Pr. CIT's initiation of proceedings under section 263 insofar as it challenges the AO's allowance of that deduction is not sustainable. - HELD THAT: - The Tribunal examined precedent and statutory scheme and concluded that interest earned by a co-operative society from investments with a co-operative bank is eligible for deduction under section 80P(2)(d) where the bank qualifies as a co-operative society. Coordinate-bench decisions and High Court authorities were relied upon to hold that a co-operative bank, being registered as a co-operative society, falls within the expression 'co-operative society' for the purposes of section 80P(2)(d), and that the insertion of subsection (4) does not preclude a co-operative society from claiming deduction in respect of interest derived from investments with such a bank. Given those legal conclusions and the Tribunal's prior decision in the assessee's own case on the same issue, the AO's allowance of the deduction could not be characterised as erroneous and prejudicial; accordingly the Pr. CIT's direction to re-open that issue under section 263 was set aside. [Paras 9, 10, 12, 13]

Pr. CIT's order under section 263 set aside insofar as it directed re-examination of the claim under section 80P(2)(d); the AO's allowance of the deduction is not held erroneous.

Allowability of provisions under mercantile system and section 37(1) - Assessing Officer's duty to verify accounting records and invoices - Validity of initiation of revision under section 263 - Allowability of various specific provisions claimed under the mercantile system (audit fee, cess, repairs & maintenance, leave encashment, milk DCS, packing material, TA & others) was remanded for fresh consideration by the AO. - HELD THAT: - The assessee contended that the provisions were specific, crystallised liabilities recognized under the mercantile system and supported by the tax audit report and annexures. The Pr. CIT found the assessment erroneous because the AO had not verified ledgers and requisite details on record and the allowability was therefore unclear. The Tribunal observed that although annexures in the tax audit report mention these items, their context is not clear and an assessing officer may call for and must examine supporting details. In the absence of evidence on the assessment file that such verification was made, the Tribunal upheld the Pr. CIT's conclusion that the assessment was erroneous and prejudicial in that respect, and set the matter aside to the AO for fresh enquiry and opportunity to the assessee. [Paras 11, 13]

Assessment order set aside to the file of the AO for fresh examination of the allowability of the specified provisions after verification and after giving the assessee an opportunity of being heard.

Disallowance under section 43B for bonus paid after due date - Suo-moto disallowance in computation - Validity of initiation of revision under section 263 - The claim relating to provision for bonus (disallowance under section 43B) was not held erroneous; the AO had accepted a suo-moto disallowance of the bonus in computing income and therefore the Pr. CIT's direction to re-open that aspect under section 263 was set aside. - HELD THAT: - The assessee had itself excluded the bonus amount in its computation under business income, and the Tribunal on examining the computation found that the amount of bonus claimed had been suo-moto disallowed by the assessee and accepted in assessment. Where the assessment already reflects the disallowance required under section 43B, the AO's order cannot be regarded as erroneous and prejudicial for that item; accordingly the Pr. CIT's invocation of section 263 on this ground was not sustained. [Paras 12]

Pr. CIT's direction under section 263 set aside insofar as it sought re-examination of the bonus disallowance under section 43B.

Final Conclusion: The appeal is partly allowed: the Pr. CIT's revision under section 263 is set aside in respect of the claim under section 80P(2)(d) and in respect of the bonus disallowance under section 43B; the Pr. CIT's direction is sustained insofar as the allowability of various specific provisions under the mercantile system is concerned, and that issue is remitted to the Assessing Officer for fresh enquiry and decision after giving the assessee an opportunity of being heard.

Condonation of delay - sufficient cause - limitation and substantial justice - income-tax proceedings treated as civil proceedings - change of counsel as explanation for delay - requirement to afford opportunity and make further inquiry

Condonation of delay - change of counsel as explanation for delay - sufficient cause - limitation and substantial justice - income-tax proceedings treated as civil proceedings - requirement to afford opportunity and make further inquiry - Whether the Commissioner (Appeals) was justified in refusing to condone the delay of 84 days in filing the appeal for AY 2011-12. - HELD THAT: - The Tribunal found that the sole explanation for the delay was change of counsel and that the Commissioner (Appeals) did not disbelieve the explanation nor ask for further details. The CIT(A)'s categorical rejection, relying on precedents, ignored the fundamental principle that income-tax proceedings are civil in nature and that rules of limitation should be given liberal construction to advance substantial justice. Applying the reasoning in Thunuguntla Jagan Mohan Rao (and the guiding principle in N. Balakrishnan v. M. Krishnamurthy), the Tribunal held that where an explanation does not exhibit mala fides or a dilatory strategy, the delay ought not to be mechanically dismissed; at the least the adjudicating authority should have sought further particulars if needed or afforded an opportunity before rejecting condonation. Accordingly, the Tribunal directed that the delay of 84 days be condoned and that the appeal be adjudicated on merits after granting the assessee a reasonable opportunity of being heard. [Paras 11, 12, 13]

Delay of 84 days is condoned and the matter is remitted to the CIT(A) to decide the appeal on merits after affording a reasonable opportunity of hearing.

Condonation of delay - mutatis mutandis application of decision - Whether the decision in respect of AY 2011-12 applies to the other appeals for AYs 2012-13, 2013-14, 2015-16 and 2017-18. - HELD THAT: - The Tribunal recorded that the grounds of appeal and the material facts in the remaining four appeals are identical to those in the appeal for AY 2011-12. Consequently, the Tribunal applied its conclusion in ITA No. 03/NAG/2021 to ITA Nos. 04 to 07/NAG/2021 mutatis mutandis and directed that those appeals similarly be treated for the purpose of condonation and adjudication on merits. [Paras 15]

The finding on condonation and remand for adjudication on merits in respect of AY 2011-12 applies mutatis mutandis to AYs 2012-13, 2013-14, 2015-16 and 2017-18; those appeals are partly allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the CIT(A)'s refusal to condone delay, directed condonation of 84 days and remitted the matters to the CIT(A) to decide the appeals on merits after affording reasonable opportunity; the same directions apply mutatis mutandis to the other four assessment years, and all appeals are partly allowed for statistical purposes.

Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - acknowledgement of liability - limitation - existence of dispute - admission of petition and moratorium under Section 14 of the IBC

Acknowledgement of liability - limitation - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Effect of the letter dated 30.09.2014 acknowledging arrears on the limitation defence and maintainability of the Section 9 petition. - HELD THAT: - The Court examined the series of acknowledgements, in particular the letter dated 30.09.2014 which appended a detailed list of amounts due up to the date of retirement. It held that an acknowledgement by the then Managing Director on 30.09.2014 restarted limitation so that the petition filed on 27.07.2017 was within time for at least the arrears subsisting for the three years prior to 30.09.2014. The Court rejected the characterization of the Employees Provident Fund Organisation letter dated 13.04.2016 as determinative of the arrears of salary, treating it as a red-herring with no bearing on the admitted liability. Applying these facts, the NCLT was right to admit the Section 9 petition and to appoint an interim resolution professional and impose a moratorium under Section 14. [Paras 3, 8, 10]

The acknowledgement dated 30.09.2014 saves the claim from being time-barred insofar as amounts within three years prior to that acknowledgement, and the Section 9 petition was maintainable and correctly admitted by the NCLT.

Existence of dispute - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether the NCLAT was justified in setting aside the NCLT order on the ground of 'existence of dispute' and unexplained delay. - HELD THAT: - The Court reviewed the NCLAT's conclusion that a dispute existed and that the operational creditor had failed to explain an 18-year delay. It found that given the contemporaneous acknowledgements of liability, particularly the 30.09.2014 letter, there was no real dispute as to the admitted principal amount; consequently the NCLAT erred in reversing the NCLT. The Court also accepted the appellant's submission that the NCLAT's reliance on alleged delay was misplaced where an acknowledgement had validly extended limitation. [Paras 6, 7, 10]

The NCLAT was incorrect in holding that the petition was not maintainable for want of explanation of delay or on the ground of existence of dispute; its order is set aside and the NCLT order is restored.

Final Conclusion: The appeal is allowed: the Supreme Court set aside the NCLAT order, restored the NCLT admission of the Section 9 petition (relying on the 30.09.2014 acknowledgement to cure limitation for the relevant period), and dismissed the alternative contentions raised by the corporate debtor.

Liquidation as a measure of last resort - Corporate Insolvency Resolution Process (CIRP) - Time is of the essence under the Insolvency and Bankruptcy Code - Forfeiture of deposits for non-compliance with a Resolution Plan - Stay of liquidation pending compliance with court directions - Reversion of management to the liquidator upon forfeiture

Time is of the essence under the Insolvency and Bankruptcy Code - Liquidation as a measure of last resort - Stay of liquidation pending compliance with court directions - Whether the interim stay of the liquidation order should be continued in view of the appellant's failure to deposit the upfront amount as directed by this Court. - HELD THAT: - The Court observed that liquidation is a last resort and the IBC advances a wider public interest in timely resolution of corporate insolvency. Despite repeated opportunities and interim directions (including a clarified deadline), the appellant failed to deposit the stipulated upfront amount within the extended time. Time-bound performance was essential to the scheme; permitting indefinite delay would defeat the statutory object. The appellant's inability to raise funds and its insistence on changing the company's status before lenders would advance finance did not justify further extension of time. In these circumstances the Court found no reason to continue the stay and refused to further entertain the appeal. [Paras 9, 10, 11]

The appeal is dismissed for failure to comply with the Court's directions; the interim stay will not be continued and the consequences envisaged by the earlier order follow.

Forfeiture of deposits for non-compliance with a Resolution Plan - Reversion of management to the liquidator upon forfeiture - Whether the amounts deposited by the appellant should be forfeited and what is the consequent position of management of the Corporate Debtor. - HELD THAT: - The Court recorded that the appellant had been put expressly on notice that failure to comply with the deposit obligation would result in forfeiture of the amounts already deposited. Given the appellant's non-compliance, the Court held that the forfeiture consequence must follow. As a result of the forfeiture and dismissal of the appeal, management of the corporate debtor reverts to the liquidator who shall take steps in accordance with law. [Paras 9, 11, 12]

The amounts deposited stand forfeited as ordered earlier; management of the Corporate Debtor reverts to the liquidator.

Corporate Insolvency Resolution Process (CIRP) - Liquidation as a measure of last resort - Whether the Court should direct statutory authorities to change the status of the Corporate Debtor to 'active' and record new directors/signatories to facilitate funding. - HELD THAT: - The appellant sought directions to statutory authorities to alter the corporate status and record new directors to enable lenders to advance funds. The Court held that the core order of liquidation had not been set aside and that altering the company's status to facilitate fundraising, when the appellant had failed to comply with time-bound obligations, was unacceptable. The Court declined to grant such relief and disposed of pending applications accordingly. [Paras 5, 6, 11, 12]

No direction is given to change the company's status or to record new directors; pending applications are disposed of.

Final Conclusion: The Court dismissed the appeal for non-compliance with its directions, ordered forfeiture of the deposits previously made by the appellant, directed reversion of management to the liquidator, and declined to grant further relief to facilitate fundraising or to alter the company's status.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - declaration of Wilful Defaulter under RBI guidelines - liability of directors during Corporate Insolvency Resolution Process - surety exclusion under Section 14(3)(b) of the IBC - piercing the corporate veil

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - declaration of Wilful Defaulter under RBI guidelines - Whether continuation of proceedings for declaration of Wilful Defaulter in respect of a corporate debtor undergoing CIRP is barred by the moratorium under Section 14 of the IBC. - HELD THAT: - Section 14(1) enjoins a moratorium on institution or continuation of suits or proceedings against the corporate debtor and on actions to foreclose, recover or enforce any security interest. Although the RBI scheme for declaring a Wilful Defaulter is not literally an action to foreclose or recover, its practical effect would impede the resolution professional's functions and conflict with the CIRP. Read contextually with the IBC provisions governing the scope and functioning of the resolution professional, proceedings for declaration of Wilful Defaulter in respect of the borrowing company fall within the purview of the moratorium and are therefore restrained during CIRP. [Paras 21, 22]

Proceedings for declaration of Wilful Defaulter against the corporate debtor are covered by the moratorium under Section 14 and cannot continue during CIRP.

Liability of directors during Corporate Insolvency Resolution Process - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Whether the moratorium under Section 14 extends to directors so as to bar proceedings against them in their capacity as directors once CIRP commences. - HELD THAT: - Sections 17, 18 and 20 vest management and the powers of the board in the interim resolution professional and suspend the powers of the Board of Directors. From the inception of CIRP the directors are dissociated from the management and have no role in the functioning of the corporate debtor. The rationale of the moratorium-avoiding conflicting steps against the corporate debtor-does not require extending immunity to directors whose authority over the company is suspended. Consequently, proceedings directed at directors in their capacity as directors do not interfere with the CIRP and are not covered by the moratorium. [Paras 25, 26, 27, 28, 29]

Directors are not entitled to immunity under Section 14 by virtue of the company's CIRP; proceedings against them in their capacity as directors may continue.

Surety exclusion under Section 14(3)(b) of the IBC - declaration of Wilful Defaulter under RBI guidelines - Whether a director who is also a guarantor / surety of the corporate debtor is protected by the moratorium under Section 14. - HELD THAT: - Section 14(3)(b) expressly excludes a surety in a contract of guarantee to a corporate debtor from the moratorium of Section 14(1). The petitioners admitted that they stand as guarantors. Even if proceedings against the corporate debtor are stayed, the statutory exclusion removes any moratorium protection in respect of the surety's liability, permitting proceedings against guarantors to be continued. [Paras 30]

A director who is a guarantor of the corporate debtor is not covered by the moratorium and proceedings against him as surety may continue.

Piercing the corporate veil - declaration of Wilful Defaulter under RBI guidelines - Whether, in proceedings for declaration of Wilful Defaulter, the corporate veil can be pierced to examine the role of directors. - HELD THAT: - The scheme of the RBI guidelines contemplates examination of the conduct of promoters and whole-time directors and the Master Circular aims to protect public interest by preventing further bank finance to Wilful Defaulters. In such proceedings it is permissible and indeed necessary to lift the corporate veil to scrutinise the role of directors in the actions of the corporate debtor that lead to a proposed declaration of Wilful Defaulter. Directors cannot, therefore, claim parity with the corporate debtor to seek protection of the moratorium. [Paras 31, 32]

In Wilful Defaulter proceedings the corporate veil may be pierced to examine directors' conduct; directors cannot invoke Section 14 immunity by equating themselves with the corporate debtor.

Final Conclusion: Writ petition dismissed. While the moratorium under Section 14 stays proceedings against the corporate debtor for declaration as Wilful Defaulter during CIRP, directors are not entitled to that immunity and may be proceeded against in their personal capacities (and, where applicable, as guarantors), and the corporate veil may be pierced in such proceedings.

Reduction of share capital - Fair value of shares - Revaluation based on latest audited accounts - Legitimate expectation of minority shareholders - Actus curiae neminem gravabit - Dividend Distribution Tax and change in law - Application of Section 66 of the Companies Act, 2013

Fair value of shares - Revaluation based on latest audited accounts - Legitimate expectation of minority shareholders - Whether minority/non promoter shareholders were adequately compensated where the company relied on valuation reports made in 2017 but the NCLT sanction was granted in 2020 - HELD THAT: - The Tribunal found that the NCLT erred in sanctioning the reduction of capital on the basis of valuation reports dated October 2017 without taking into account the material and admitted improvement in the Company's financial position up to 2018-19 and by the date of the NCLT order in October 2020. The Appellate Tribunal did not examine or upset the methodology of the independent valuers, but emphasised that public shareholders are entitled to a fair price and to share in the profits of a going concern; where there has been a demonstrable and substantial change in financials after the valuation, equity and principles of natural justice require revaluation. For these reasons the Tribunal directed revaluation by a registered independent valuer based on the latest audited accounts, required the Company to furnish all audited accounts to the valuer and ordered that the higher value so arrived at be paid to the public shareholders. The Appellate Tribunal thus modified the NCLT order to secure the economic interest of the minority shareholders and to ensure that the price reflects current audited financials. [Paras 42, 43, 47, 49, 51]

Directed revaluation of the shares by a registered independent valuer based on the latest audited accounts and ordered payment of the higher fair value so determined to the public/non promoter shareholders; NCLT order modified accordingly.

Dividend Distribution Tax and change in law - Actus curiae neminem gravabit - Whether the Appellate Tribunal should interfere with the effect of abolition of Dividend Distribution Tax (DDT) on the transaction and whether the Company is estopped from relying on the changed law - HELD THAT: - The Tribunal observed that the explanatory statement in 2017 recorded the law as it stood then (where companies paid DDT) but that the DDT was thereafter abolished w.e.f. 01.04.2020 by amendment to the Income tax Act. The Appellate Tribunal held that the Company never admitted a continuing liability to pay DDT irrespective of subsequent change in law and that the amendment is effective unless and until set aside by a competent court. The appellants had not challenged the statutory amendment; accordingly the Tribunal declined to interfere with the effect of the change in law and did not hold the Company estopped from adopting the position mandated by the amended statute. The principle of actus curiae neminem gravabit was noted in relation to delays in court approval which were not attributable to the Company. [Paras 40, 41, 43, 52]

Declined to interfere with the legal effect of the abolition of DDT; held that the Company is not estopped from relying on the amended law and did not direct the Company to bear DDT.

Final Conclusion: Appeal allowed in part: the reduction of share capital as sanctioned by the NCLT is not set aside, but the company is directed to obtain a fresh valuation by a registered independent valuer based on the latest audited accounts, to furnish audited accounts to the valuer, and to pay the higher fair value so arrived at to the public/non promoter shareholders; no interference with the abolition of DDT.

Effect of approved resolution plan under Section 31 of the Code - takeover of assets and liabilities by the resolution applicant - validity of revenue recovery charge entered in land revenue records after approval of resolution plan - release of charge noted on 7/12 extracts and direction to revenue authorities

Effect of approved resolution plan under Section 31 of the Code - takeover of assets and liabilities by the resolution applicant - validity of revenue recovery charge entered in land revenue records after approval of resolution plan - release of charge noted on 7/12 extracts and direction to revenue authorities - Charge created by the Sugar Commissioner/Collector on the Corporate Debtor's land revenue records pursuant to Revenue Recovery Certificates is not maintainable against the properties after approval of the resolution plan and takeover by the resolution applicant, and the entries are to be removed. - HELD THAT: - The Tribunal noted that the Corporate Insolvency Resolution Process culminated in approval of the resolution plan by this Bench (paragraph 4). On approval under Section 31, the resolution applicant takes over the assets of the corporate debtor and is obliged only to perform the liabilities as agreed in the approved resolution plan. The approved plan provided for a settlement towards farmers' claims aggregating to Rs. 2,00,00,000 to be paid in two instalments (paragraphs 8, 12). Having taken over the assets pursuant to the approved plan, the resolution applicant cannot be saddled with any new liability beyond the agreed payments in the plan (paragraph 14). The Revenue Recovery action had earlier resulted in creation of a charge noted in the land revenue records; but in view of the takeover and the agreed settlement in the resolution plan, the Tribunal held that the charge created by the Revenue Recovery Proceedings is non est in law and must be released (paragraph 15). The Tribunal therefore directed the Sugar Commissioner and the District Collector to advise the concerned revenue authorities to remove the entry of the Government of Maharashtra on the 7/12 extracts and release the specified GAT Nos. from the charge, and disposed of the application (paragraphs 15-16). [Paras 4, 12, 14, 15, 16]

The charge noted on the specified GAT Nos. is set aside as non est in law; R1 and R3 are directed to cause removal of the Government's entry on the 7/12 extracts and advise the revenue authorities to release the properties forthwith; IA 1096/2020 disposed.

Final Conclusion: The Tribunal allowed the application of the successful resolution applicant insofar as it sought removal of the Revenue Recovery charge on the specified land parcels, holding that approval of the resolution plan transfers assets to the resolution applicant and precludes imposition of fresh liabilities beyond the plan; directions were issued to the Sugar Commissioner and the District Collector to remove the entries and release the properties, and the application was disposed of.

Automatic extension of contract - interpretation of contract validity clause - termination in accordance with contractual termination clause - duties of the Resolution Professional under the Insolvency and Bankruptcy Code, 2016

Automatic extension of contract - interpretation of contract validity clause - termination in accordance with contractual termination clause - Whether the work orders dated 18.02.2019 and 07.03.2019 were extendable automatically for the year 2020-21 and whether the Resolution Professional was justified in inviting fresh tenders. - HELD THAT: - The contract clause providing that the contract "is extendable to another year i.e. 1st April 2020 to 31st March 2021 based on your performance, unless terminated earlier in accordance with Clause 6" must be read in context. The Tribunal held that the clause does not mean a mere discretionary option in favour of the employer; rather, subject to two pre-conditions-(1) satisfactory performance of the contractor and (2) non-termination in accordance with Clause 6-the contract is to be extended for the second year. Thus satisfactory performance and absence of termination operate as conditions precedent to an automatic extension. The Resolution Professional had extended the work orders for three months, which the Tribunal construed as an indication of satisfactory performance. Having found both essential pre-conditions satisfied, the Tribunal concluded that the contract stood extended for the year 2020-21 and that steps by the Resolution Professional to invite fresh tenders for 2020-21 were therefore unwarranted. [Paras 8, 9, 10, 11]

The contract was extended for the period 01.04.2020 to 31.03.2021 by operation of the clause in view of satisfactory performance and non-termination; the steps proposed by the Resolution Professional to invite fresh tenders for 2020-21 were not warranted.

Final Conclusion: IA No.560/2020 is allowed; the Resolution Professional's proposed steps to invite fresh tenders for the year 2020-21 are held unwarranted and the application is disposed as allowed.

Authorization for Assignment - Obligation to obtain AFA before undertaking assignment after 31st December, 2019 - Regulation 7A of the IP Regulations - Code of Conduct of insolvency professionals - Section 208 obligations - Disciplinary action by Insolvency Professional Agency

Regulation 7A of the IP Regulations - Authorization for Assignment - Obligation to obtain AFA before undertaking assignment after 31st December, 2019 - Whether the insolvency professional contravened the requirement of Regulation 7A by accepting the liquidator assignment without a valid Authorization for Assignment after 31st December, 2019. - HELD THAT: - The Disciplinary Committee found that Regulation 7A plainly requires an insolvency professional to hold a valid Authorization for Assignment (AFA) on the date of acceptance or commencement of any assignment undertaken after 31st December, 2019, subject to the limited proviso for assignments already being undertaken as on that date. Regulation 7A was inserted well before the cut-off date, giving professionals time to obtain AFA. In the present case, the IP's acceptance of the assignment was on 28th August, 2019, i.e., before the regulation's cut-off of 31st December, 2019, and the confirmation of his appointment on 3rd February, 2020 did not render the earlier acceptance ineffective for purposes of the proviso. The DC also examined the record to correct an inconsistent date recorded by the IPA's Disciplinary Committee and concluded the correct date of acceptance is 28th August, 2019. Given these findings, the facts did not establish a breach of Regulation 7A as the acceptance pre-dated the applicability cut-off. [Paras 4]

The DC concluded that the IP's acceptance of the assignment pre-dated the applicability of Regulation 7A and therefore did not amount to a contravention of that regulation.

Disciplinary action by Insolvency Professional Agency - Code of Conduct of insolvency professionals - Section 208 obligations - Whether further action by the Board was required in view of disciplinary measures already taken by the insolvency professional agency. - HELD THAT: - The DC noted that the ICSI Institute of Insolvency Professionals had already conducted disciplinary proceedings and issued a warning to the IP, directing that he not accept new assignments without obtaining AFA. Section 208 and the conditions of registration require IPs to abide by the bye-laws and the Code of Conduct, and the IPA's disciplinary action addressed those obligations. Exercising the powers under Regulation 11 of the IP Regulations, the DC treated the IPA's action as a relevant and sufficient regulatory response and determined that no additional direction from the Board was necessary in the circumstances. [Paras 4, 5]

In view of the disciplinary action already taken by the IPA, the DC disposed of the show-cause notice without issuing any further directions against the insolvency professional.

Final Conclusion: The show-cause notice was disposed of: the acceptance of the assignment was held to have been given before the Regulation 7A cut-off date and, having regard to the warning and directions already imposed by the insolvency professional agency, no further action by the Board was directed.

Renting of immovable property service - service tax on vacant land - non-refundable contribution towards infrastructure - service by a company to its own members not taxable - retrospective amendment to the definition of taxable service

Renting of immovable property service - non-refundable contribution towards infrastructure - service tax on vacant land - The one-time non refundable contribution paid by member units to the appellant SPV is not taxable as 'renting of immovable property service'. - HELD THAT: - The Tribunal found the facts and legal position identical to an earlier order in the appellant's own case and followed that decision. The scheme establishing the SPV, the share subscription agreements and lease deeds, and the mechanism for collection of contributions were devised and executed before levy of service tax on renting of immovable property and before levy on vacant land. The Finance Act, 2010 introduced levy on vacant land with retrospective effect only from specified dates; prior to that there was no service tax on vacant land. The scheme was prepared under supervision of the Ministry of Textiles and its Project Management Consultant, and there was no evidence that the contribution was a disguised rent. On these findings the Tribunal concluded that the one time contribution cannot be treated as consideration for renting and set aside the demand. [Paras 4, 5]

Demand of service tax on the one time non refundable contribution under the head of renting of immovable property service is not sustainable and is set aside.

Service by a company to its own members not taxable - Services provided by the incorporated SPV to its own members do not attract service tax under the principle laid down in Calcutta Club. - HELD THAT: - The Tribunal applied the ratio of the Supreme Court in State of West Bengal v. Calcutta Club Limited that services rendered by a company incorporated under the Companies Act to its own members are not taxable. The appellant is an incorporated SPV and the impugned receipts arise from its dealings with its members; accordingly the Calcutta Club principle applies directly and supports exclusion of the receipts from service tax. [Paras 6]

Receipts from services rendered by the incorporated SPV to its members are not taxable; the Calcutta Club ratio applies and supports setting aside the demand.

Final Conclusion: The appeals are allowed; the demands of service tax under the head of renting of immovable property service on the one time contribution and on services rendered by the incorporated SPV to its members are set aside, with consequential relief.

Pre-deposit requirement for stay of excise appeal - classification of printed wrapping papers as nil-duty under heading 4901.90 - prima facie case based on subsequent Supreme Court precedent - remand for fresh adjudication on merits without pre-deposit

Pre-deposit requirement for stay of excise appeal - prima facie case based on subsequent Supreme Court precedent - Whether the Tribunal's orders directing pre-deposit as a condition for proceeding with the appeal could be sustained in view of a strong prima facie case arising from subsequent authoritative precedent. - HELD THAT: - The High Court found that in light of the subsequent decision of the Supreme Court holding that papers printed for wrapping fall under subheading 4901.90 attracting nil duty, the petitioners had an arguable prima facie case. The Court observed that the Tribunal's order directing a substantial pre-deposit (and its refusal to modify that direction) had led to dismissal of the appeal for non-compliance. Given the petitioners' financial inability to make any deposit and the persuasive subsequent precedent, the Court concluded that the pre-deposit condition should not stand as a bar to the Tribunal hearing the appeal on merits. The Court relied on established practice permitting relaxation of pre-deposit requirements where a strong prima facie case is shown and remediable prejudice would otherwise arise.

Impugned orders prescribing and upholding the pre-deposit requirement were set aside; the matter was remanded for hearing of the appeal without any pre-deposit.

Classification of printed wrapping papers as nil-duty under heading 4901.90 - remand for fresh adjudication on merits without pre-deposit - Direction to the Tribunal on the scope of re-hearing following remand. - HELD THAT: - The High Court directed that the Tribunal should decide the appeal on its merits and expressly directed that the Tribunal not be influenced by any interim observations made at earlier stages or by this order. All substantive points raised in the appeal were left open for the Tribunal to decide afresh, except that the question of requiring a pre-deposit was finally removed as a barrier to the appeal being heard. The Court thereby remitted the controversy for adjudication on merits in accordance with law and without imposing any deposit condition.

Tribunal directed to hear and decide the appeal on merits afresh, uninfluenced by interim observations, and without requiring any pre-deposit.

Final Conclusion: The High Court set aside the Tribunal's orders requiring pre-deposit and remanded the appeal for fresh consideration on merits without any pre-deposit; all substantive issues are left open for decision by the Tribunal, and there is no order as to costs.

Standard input-output norms as indicative evidence - standard input-output norms not conclusive proof of non-use or diversion - validity of Show Cause Notice where no allegation of diversion is made - requirement of permission of the proper officer for disposal of wastage - extended period of limitation under proviso to Section 28 - vacation of penalty where no diversion established

Standard input-output norms as indicative evidence - standard input-output norms not conclusive proof of non-use or diversion - validity of Show Cause Notice where no allegation of diversion is made - Whether the standard input-output norms could be the sole basis for issuing the Show Cause Notice and sustaining the adjudication when there was no allegation of diversion of imported material. - HELD THAT: - The Court held that standard input-output norms are only an indicator and cannot by themselves furnish a cause of action for initiating proceedings or sustain an adverse adjudication in the absence of any allegation or satisfactory evidence of diversion. Reliance solely on deviation from prescribed norms, without additional material showing diversion or non-use, is inadequate for the Assistant Collector to record satisfaction that imported material was not used for manufacture for export. The assessee's explanation and industry practice, and absence of an unconditional admission of diversion, meant the Show Cause Notice and the consequent Order-in-Original could not be sustained on the basis of norms alone.

Standard input-output norms cannot be the sole basis for issuing the Show Cause Notice or sustaining the Order-in-Original where no diversion is alleged; the Order-in-Original is unsustainable on that ground.

Requirement of permission of the proper officer for disposal of wastage - vacation of penalty where no diversion established - extended period of limitation under proviso to Section 28 - Whether the Tribunal's failure to arrive at definitive findings of fact and the invocation of the extended period of limitation under the proviso to Section 28 could be sustained, and whether the penalty confirmation could stand. - HELD THAT: - The Court observed that the Tribunal correctly vacated the penalty because there was no finding of diversion established by the material; the purported letter by the assessee did not amount to an unconditional admission of diversion. Given that the penalty was vacated and that there was no substantiated diversion, the extended limitation provision invoked by the lower authority need not be traversed further. The appellate conclusion sustaining vacation of penalty and holding that the adjudication could not rest solely on norms was affirmed.

The Tribunal's vacation of the penalty is sustained; in view of absence of proven diversion, the extended limitation proviso underpinning the demand need not be applied to uphold the adjudication.

Final Conclusion: Appeal allowed on the ground that deviation from standard input-output norms, without any allegation or proof of diversion, cannot support issuance of the Show Cause Notice or sustain the Order-in-Original; the Tribunal's order vacating the penalty is affirmed and the Order-in-Original set aside.

Liability of purchaser for vendor's tax arrears - bona fide purchaser without notice - security/mortgage under Form XIX-B to secure tax - Section 24-A exception under the Tamil Nadu General Sales Tax Act, 1959 - encumbrance certificate and constructive notice - right to recover security amount and liberty to proceed against assessee

Liability of purchaser for vendor's tax arrears - security/mortgage under Form XIX-B to secure tax - bona fide purchaser without notice - Section 24-A exception under the Tamil Nadu General Sales Tax Act, 1959 - encumbrance certificate and constructive notice - Whether the petitioner, who purchased the property and produced an Encumbrance Certificate showing no charge, can be fastened with the vendor's arrears of tax when the vendor had executed Form XIX-B mortgaging the property as security for tax. - HELD THAT: - The Court found that the vendor (father of the second respondent) had executed Form XIX-B on 23.02.2000 creating a mortgage/charge on the specified property to secure the Commercial Tax Department for a sum of Rs. 50,000/-. That Form XIX-B was placed on record and establishes that the property was mortgaged to secure tax. The petitioner purchased the property from the vendor (not from the assessee in default) after obtaining an Encumbrance Certificate dated 28.10.2013 which did not reflect any charge, and paid adequate consideration. On these facts the defence available under the exception in Section 24-A of the Tamil Nadu General Sales Tax Act, 1959 (purchase for adequate consideration and without notice of arrears) is available to the petitioner. Since the property had been mortgaged only to secure a maximum of Rs. 50,000/-, the Court held it was not open to fasten the entire arrears of the proprietary concern on the purchaser. The Court distinguished earlier decisions relied on by the respondent where either Form XIX-B was not placed on record or there were successive layered transactions such that bona fides could not be determined in writ jurisdiction. Having found the factual position determinative, the Court quashed the impugned recovery notice insofar as it sought the arrears of the concern but upheld payment of the amount of the security reflected in Form XIX-B as the proper encumbrance charge on the property. [Paras 12, 13, 14, 18, 19]

Impugned recovery notice quashed insofar as it seeks the total arrears; petitioner entitled to Section 24-A protection as purchaser from the vendor, but directed to pay Rs. 50,000/- being the value of the security recorded in Form XIX-B.

Right to recover security amount and liberty to proceed against assessee - Consequences and incidental directions following quashal of the recovery notice. - HELD THAT: - The Court directed that on payment of the security amount recorded in Form XIX-B by the petitioner to the Commercial Tax Department within thirty days, the property shall stand free from any encumbrance. The petitioner was granted liberty to recover that amount from the estate of the vendor. The Department was granted liberty to initiate appropriate proceedings against the assessee (second respondent) to recover the arrears of tax by other lawful means. These incidental directions preserve the Department's claim against the assessee while protecting the purchaser from being saddled with the entire tax arrears. [Paras 19, 20, 21]

Petitioner to pay Rs. 50,000/- to first respondent within thirty days to free the property; petitioner given liberty to recover the amount from the vendor's estate; first respondent entitled to proceed against the assessee by appropriate proceedings.

Final Conclusion: Writ petition partly allowed: impugned recovery notice quashed insofar as it attempted to fasten the vendor's entire tax arrears on the petitioner; petitioner directed to pay Rs. 50,000/- being the security shown in Form XIX-B to free the property, with liberty to seek recovery from the vendor's estate and liberty to the Department to proceed against the assessee for the arrears.

Pre-deposit under Section 62(5) of the Punjab VAT Act, 2005 - writ of certiorari to challenge appellate dismissal for non-compliance with statutory pre-deposit - extraordinary writ jurisdiction under Article 226 in case of extreme hardship - vires of Section 62(5) upheld by the Supreme Court in M/s Technimont Pvt. Ltd.

Pre-deposit under Section 62(5) of the Punjab VAT Act, 2005 - extraordinary writ jurisdiction under Article 226 in case of extreme hardship - writ of certiorari to challenge appellate dismissal for non-compliance with statutory pre-deposit - vires of Section 62(5) upheld by the Supreme Court in M/s Technimont Pvt. Ltd. - Whether the High Court should waive the mandatory 25% pre-deposit under Section 62(5) and entertain the petitioner's appeal by exercising writ jurisdiction under Article 226 on grounds of hardship, thereby permitting challenge to the appellate orders dismissing the appeal for non-compliance. - HELD THAT: - Petitioner contended that losses shown in the balance sheet constituted extreme hardship warranting waiver of the statutory pre-deposit and sought writ relief to quash the assessing authority's order for 2013-14 and the appellate orders which dismissed the appeal for non-compliance. The Court examined the claim of hardship against the settled position that the vires of Section 62(5) has been upheld by the Supreme Court in M/s Technimont Pvt. Ltd., which rejected the proposition that the 25% pre-deposit condition is onerous or violative of Article 14. Applying that precedent, the Court held that absent demonstrable extreme hardship of a character that would justify exercise of extraordinary writ jurisdiction, the mandatory statutory requirement must be complied with. Because the petitioner had not met the pre-deposit condition and the case did not present such extreme hardship as would call for interference under Article 226, the Court declined to exercise its extraordinary jurisdiction to waive the deposit and observed that the petitioner could not challenge the appellate and Tribunal orders dismissing the appeal for non-compliance by means of certiorari. [Paras 3, 4, 5]

Petition dismissed; no waiver of the 25% pre-deposit under Section 62(5) and no interference with appellate or Tribunal orders dismissing the appeal for non-compliance.

Final Conclusion: The writ petition is dismissed; the petitioner must comply with the mandatory pre-deposit requirement under Section 62(5) and the appellate orders dismissing the appeal for non-compliance are not interfered with.

Refund of excess tax paid in inter state sale of excluded goods (HSD) - application of State VAT refund provisions to transactions governed by the CST Act - claimant bearing incidence of tax and unjust enrichment - duty of revenue authorities to process refund claims supported by court orders

Application of State VAT refund provisions to transactions governed by the CST Act - refund of excess tax paid in inter state sale of excluded goods (HSD) - Respondent erred in applying the refund provisions of the HVAT Act to deny refund of excess CST paid by the petitioner when the transaction was governed by the CST Act and the petitioner proved it bore the burden of the excess tax. - HELD THAT: - The Court observed that high speed diesel remained governed by the CST Act for inter state transactions after 01.07.2017. The petitioner produced documentary evidence showing purchase in the course of inter state trade, the higher CST charged due to non issuance of C Forms and proof of bearing the excess tax. Reliance was placed on earlier decisions (including the Rajasthan High Court and Gujarat High Court authorities discussed in the judgment) holding that where ultimate consumers purchased HSD in inter state trade for use in mining activities and bore the incidence of the higher tax, the revenue authorities could not refuse to process refund claims on the technical ground that refund must be made only to the person from whom tax was charged. Applying these authorities, the Court concluded that the department was not justified in refusing to process the petitioner's claim by invoking Sections 20(1) and 20(7) of the HVAT Act, since the transaction and the challenge related to CST and the petitioner had established it had borne the tax burden.

The petitioner's challenge to the rejection of the refund claim was allowed and the respondent's application of HVAT refund provisions to deny refund under the circumstances was held to be incorrect.

Duty of revenue authorities to process refund claims supported by court orders - claimant bearing incidence of tax and unjust enrichment - Respondents were directed to process and grant the petitioner's refund claim and, once processed in favour of the petitioner, the seller (Indian Oil Corporation) would not be entitled to claim the same refund. - HELD THAT: - The Court directed the respondents to process the petitioner's refund claim and grant the tax amount collected from the petitioner and deposited by the seller in accordance with law within four weeks from receipt of the certified copy of the judgment. The direction follows the reasoning that the petitioner is the ultimate consumer who bore the excess tax and that processing the claim does not permit double recovery; accordingly the Court clarified that Indian Oil Corporation would be precluded from claiming the refund once the petitioner's claim is allowed.

Respondents must process and grant the refund within four weeks; upon such processing and grant, the seller shall not be entitled to claim the refunded amount.

Final Conclusion: Writ petition allowed; respondents directed to process and grant refund of the excess CST borne by the petitioner for FY 2017 18 within four weeks, and once so granted the seller (Indian Oil Corporation) is not entitled to claim that refund.

Territorial jurisdiction under Article 226 - cause of action - forum non conveniens - alternative remedy not a bar where there is violation of natural justice - principle of natural justice (audi alteram partem) - standard of proof in disciplinary proceedings as quasi criminal (beyond reasonable doubt) - suo motu cognizance in disciplinary matters

Territorial jurisdiction under Article 226 - cause of action - High Court at Gwalior has territorial jurisdiction to entertain the writ petition arising out of the Disciplinary Committee's order. - HELD THAT: - The petitioner resides and practices in Gwalior, the complaint originated from Gwalior and substantial part of the acts complained of occurred there. Following authoritative principles that a High Court may exercise writ jurisdiction where the cause of action, wholly or in part, arose within its territorial limits, the Court held that mere location of the Disciplinary Committee at New Delhi does not oust the territorial jurisdiction of this Court to entertain the petition under Article 226. [Paras 3, 4, 5, 6]

The writ petition is maintainable before the High Court at Gwalior on territorial jurisdiction grounds.

Alternative remedy not a bar where there is violation of natural justice - principle of natural justice (audi alteram partem) - Existence of an alternative statutory remedy did not bar exercise of writ jurisdiction because the disciplinary proceedings suffered breach of natural justice. - HELD THAT: - The Court applied settled doctrine that while alternative efficacious remedies are a relevant consideration, they do not operate as an absolute bar to exercise of writ jurisdiction where exceptional circumstances exist. Reliance was placed on precedents holding that writs may be entertained where there is violation of natural justice, lack of jurisdiction, or other exceptional factors. The disciplinary proceedings are shown to have denied the petitioner opportunity to cross examine and to lead defence evidence; therefore the writ petition could be entertained despite the availability of an appellate remedy under the Act. [Paras 7, 8]

The presence of an alternative remedy does not preclude adjudication of the petition because the proceedings are tainted by breach of natural justice.

Principle of natural justice (audi alteram partem) - standard of proof in disciplinary proceedings as quasi criminal (beyond reasonable doubt) - suo motu cognizance in disciplinary matters - The Disciplinary Committee's order was vitiated by procedural infirmity and inadequacy of proof, warranting quashing of the impugned order. - HELD THAT: - The Court found that the Committee proceeded despite the complainant filing an affidavit to withdraw the complaint and relied on possibilities of collusion and circumstantial inferences rather than substantive material proving guilt. The Bench emphasised that a charge of professional misconduct is quasi criminal in nature and requires proof beyond reasonable doubt; instead the Committee applied a preponderance of probability standard. Further, the Committee did not afford the petitioner effective opportunity to cross examine key witnesses or to lead defence evidence. The respondent authority's contention that it could proceed suo motu was held inapplicable because the proceedings originated on a complaint and the Committee continued on mere possibilities without adequate basis. [Paras 9, 10, 14, 15]

The impugned disciplinary order is unsustainable for breach of natural justice and inadequate standard of proof, and is therefore quashed.

Final Conclusion: Writ petition allowed; the Disciplinary Committee's order dated 7.8.2020 is quashed on grounds of territorial maintainability of the petition, violation of natural justice in the disciplinary proceedings and inadequacy of proof; no order as to costs.