TaxTMI Updates e-Newsletter
Mar 12,2020

Exemption for supplies to Government, local authority or governmental authority in relation to functions entrusted to a Panchayat or Municipality under Articles 243G/243W - exemption for pure service or composite supply where value of goods does not exceed 25% - pure service versus composite supply (goods constitute not more than 25% of value) - local authority as recipient - functions under the Twelfth Schedule (public health, sanitation, conservancy, solid waste management) - TDS deduction under section 51 of the Central Goods and Services Tax Act and corresponding TDS notifications

Exemption for supplies to Government, local authority or governmental authority in relation to functions entrusted to a Panchayat or Municipality under Articles 243G/243W - pure service versus composite supply (goods constitute not more than 25% of value) - functions under the Twelfth Schedule (public health, sanitation, conservancy, solid waste management) - local authority as recipient - The Applicant's supply to the Howrah Municipal Corporation is exempt under SI No. 3 of Notification No. 12/2017 (Rate). - HELD THAT: - The Authority applied the statutory scheme and the Governmental Circular to conclude that SI No. 3/3A of the Exemption Notification continues, in substance, the earlier service-tax exemption for services in relation to functions such as public health, sanitation, conservancy and solid waste management. The recipient is a municipal corporation and therefore a local authority. The work orders and specifications show the Applicant performs compaction, transport of compacted garbage, sewer cleaning and desilting using machinery and vehicles supplied by the Applicant, while diesel, oil and spares are provided by the municipal corporation; there is no transfer of property in goods to the municipal corporation and the consideration relates to performance of the work (quantity of garbage compacted). On that material the supply is a pure service (not a transfer of goods) and falls within functions listed in the Twelfth Schedule and entrusted to Municipalities under Article 243W. Consequentially the supply qualifies for exemption under SI No. 3 of the Exemption Notification (a composite supply test under SI No. 3A was unnecessary once the supply is a pure service). [Paras 3]

The Applicant's described supply to HMC is a pure service in relation to a municipal function and is exempt under SI No. 3 of Notification No. 12/2017 (Rate).

TDS deduction under section 51 of the Central Goods and Services Tax Act and corresponding TDS notifications - The TDS Notifications and the provisions of section 51 do not apply to the Applicant's exempt supply. - HELD THAT: - Section 51 and the TDS Notifications mandate deduction of TDS by specified payers only in respect of taxable supplies. Since the Authority has held the Applicant's supply to the municipal corporation to be exempt from GST under SI No. 3, there is no taxable supply on which TDS under section 51 can be deducted. Therefore the notifications that bring section 51 into force for specified persons and prescribe the TDS mechanism are not applicable to the Applicant's exempt supply. [Paras 3]

Section 51 and the TDS Notifications do not apply to the Applicant's exempt supply to HMC; no TDS is deductible under those provisions in respect of this supply.

Final Conclusion: The Authority ruled that the Applicant's services to the Howrah Municipal Corporation, as described, qualify as a pure service in relation to municipal functions (public health, sanitation, conservancy and solid waste management) and are exempt under SI No. 3 of Notification No. 12/2017 (Rate); consequently the provisions of section 51 and the connected TDS notifications are not attracted to these payments.

Exemption for pure services provided to a Governmental authority or Government Entity in relation to functions entrusted under Article 243G - Definition of Government Entity (90% participation or control) - Pure service (services not involving supply of goods) - Exemption limited to services rendered within Panchayat limits

Exemption for pure services provided to a Governmental authority or Government Entity in relation to functions entrusted under Article 243G - Definition of Government Entity (90% participation or control) - Pure service (services not involving supply of goods) - Applicability of S. No. 3 of Notification No. 12/2017 (as amended) to manpower supply services received by the applicant from M/s. Primeone Work Force Pvt. Ltd. - HELD THAT: - The Authority held that S. No. 3 grants exemption to pure services (services not involving supply of goods) provided to a Governmental authority or a Government Entity by way of any activity in relation to a function entrusted to a Panchayat under Article 243G. The applicant's contracted manpower supply was found to be services not involving supply of goods and therefore classifiable as pure service. The applicant was found to fall within the definition of Government Entity because it is a wholly owned subsidiary of M.P. Power Management Co. Ltd., which in turn is wholly owned by the State and exercises control through government shareholding; documentary material (annual accounts) showed 100% shareholding by the State. The function carried out by the applicant-distribution of electricity and electrification-falls under the Eleventh Schedule entry for rural electrification and thus constitutes a function entrusted to Panchayats under Article 243G. Applying these findings, the Authority concluded that the manpower supply services received by the applicant satisfy the conditions of S. No. 3 of the Notification and are eligible for exemption under the amended Notification. [Paras 7, 8]

The services received from M/s. Primeone Work Force Pvt. Ltd. are covered by S. No. 3 of Notification No. 12/2017 (as amended) and are eligible for exemption as pure services provided to a Government Entity in relation to a function entrusted under Article 243G.

Exemption limited to services rendered within Panchayat limits - Function entrusted under Article 243G v. Article 243W - Whether the exemption under S. No. 3 is available irrespective of the geographical area of supply or is limited to services rendered in Panchayat areas. - HELD THAT: - The Authority observed that S. No. 3 is predicated on activities "in relation to any function entrusted to a Panchayat under Article 243G" and therefore the exemption applies only where the service is in relation to functions entrusted under Article 243G. Since the applicant's entrusted function relates to rural electrification (an Eleventh Schedule entry), the exemption applies; however, the Authority limited the benefit to services received in areas falling within Panchayat limits because Article 243G pertains to Panchayat functions and not to municipal functions under Article 243W. [Paras 7, 8]

The exemption is confined to services received in areas covered by Panchayat limits; benefit is not extended for services outside Panchayat jurisdiction or under Article 243W.

Final Conclusion: The Authority ruled that the manpower supply services from M/s. Primeone Work Force Pvt. Ltd. qualify as exempt pure services under S. No. 3 of Notification No. 12/2017 as amended, insofar as they are supplied to the applicant (a Government Entity) in relation to functions entrusted under Article 243G; the exemption is, however, limited to services rendered within Panchayat limits.

Proviso to Section 98(2) regarding non-admission of advance ruling where the question is already pending or decided in proceedings - classification under the Harmonized System of Nomenclature (HSN) - treatment of goods already assessed in earlier customs/GST proceedings - admissibility of advance ruling where prior assessment and tax payment have determined classification

Proviso to Section 98(2) regarding non-admission of advance ruling where the question is already pending or decided in proceedings - classification under the Harmonized System of Nomenclature (HSN) - treatment of goods already assessed in earlier customs/GST proceedings - Whether the application for advance ruling on classification of Re-rolled Bimetal Strip 108 SP can be admitted where the goods have been assessed and taxed by the department under HSN 81110010. - HELD THAT: - The Authority noted that the applicant's consignments of Re-rolled Bimetal Strip 108 SP have been assessed by the customs/GST authorities under HSN 81110010 and IGST/duty applicable to that heading has been paid. The First Schedule to the Customs Tariff Act, 1975 is applicable for tariff items in GST, and the contemporaneous bills of entry and departmental assessments indicate that the classification issue raised in the application has already been decided in existing proceedings. Under the proviso to Section 98(2) of the CGST Act, the Authority is precluded from admitting an application where the question raised is already pending or has been decided in any proceedings in the case of the applicant. Applying that proviso to the material on record, the Authority concluded that the application is not admissible and must be rejected. [Paras 7, 8]

The application for advance ruling is rejected under the proviso to Section 98(2) of the CGST Act because the classification question had already been decided in departmental proceedings and tax/duty paid under HSN 81110010.

Final Conclusion: Application for advance ruling is rejected under the proviso to Section 98(2) of the CGST Act, 2017 on the ground that the classification issue was already decided in earlier customs/GST proceedings by assessment under HSN 81110010 and payment of applicable duty/IGST.

Supply of services - Works contract - Sale of land (Schedule III, serial number 5) - Transaction value under Section 15 - Valuation under GST Valuation Rules - Residual valuation under Rule 31

Supply of services - Works contract - Sale of land (Schedule III, serial number 5) - Classification of the applicant's activities as sale of land under Schedule III(5) or as a supply of services in the nature of a works contract - HELD THAT: - The Authority examined the joint development agreement and held that the applicant does not obtain title to the land and acts primarily to develop the land into residential plots, carrying out construction of roads, drains, water supply, electrical works and allied amenities on behalf of the landowner. The agreement authorises the applicant to get approvals and sell plots only as an incidental mechanism to recover development cost and protect its financial exposure, and proceeds are shared via an escrow arrangement. The applicant therefore performs development services and does not qualify as a seller of land under Schedule III(5), which applies to those who hold title. Consequently, the activities amount to supply of services falling within the ambit of a works contract and are taxable under the GST Act. [Paras 7, 8]

The activities are not sale of land under Schedule III(5) but are taxable as supply of services in the nature of a works contract.

Transaction value under Section 15 - Valuation under GST Valuation Rules - Residual valuation under Rule 31 - Method of valuation of the taxable supply and applicability of Rule 31 of the Valuation Rules - HELD THAT: - The Authority found that the applicant's consideration for the development services is the share of sale proceeds equal to 40% of the value at which each plot is sold, received in money as and when plots are sold. As this constitutes the payment 'in respect of' the supply, it is consideration within the meaning of Section 2(31). Section 15's transaction value principle applies where price actually paid or payable is the sole consideration. Rules 27-30 of the Valuation Rules were held inapplicable to the facts (consideration wholly in money and no distinct persons issues), leaving Rule 31 as the residual provision. Under Rule 31 the value is to be determined by reasonable means consistent with Section 15, and the Authority held that the value of the supply equals the amount received/receivable by the applicant (i.e., 40% of the sale value of each plot). [Paras 7, 8]

Rule 31 applies and the value of the applicant's supply is the amount received/receivable by the applicant, equal to 40% of the amount on which the plots are sold.

Final Conclusion: The Authority ruled that the applicant's activities constitute a taxable supply of services in the nature of a works contract (not sale of land under Schedule III(5)); valuation is governed by Rule 31 and is equal to the consideration received/receivable by the applicant, i.e., 40% of the sale value of the plots.

Classification of goods - Preparations of a kind used in animal feeding - HS Code 23099090 - Exemption under Notification No. 02/2017-CT(Rate) - Application of Chapter Note to heading 2309 - Evidence required to establish end-use for classification

Classification of goods - HS Code 23099090 - Exemption under Notification No. 02/2017-CT(Rate) - Evidence required to establish end-use for classification - The product 'Preparation of a kind used in Animal Feeding - Bio Processed Meal' is not classifiable under HS Code 23099090 and is not entitled to nil rate of GST under Notification No. 02/2017-CT(Rate). - HELD THAT: - The Authority examined the product description, manufacturing process and the applicant's submissions that the end product is intended solely for animal feed. Although heading 2309 and its explanatory note cover preparations used in animal feeding and Notification No. 02/2017-CT(Rate) exempts specified animal feeds, classification under 23099090 requires demonstrable proof that the product is of the kind used in animal feeding. The applicant, a manufacturer of both human-consumption and animal-feed soya products, failed to furnish evidence establishing exclusive use as animal feed. A material amendment in the applicant's filings-correcting a typographical statement to read that protein content is 'up to 52%' and omitting the earlier assertion that the product was 'not fit for human consumption'-undermined the claim of exclusive animal-feed use. In absence of supporting evidence and having regard to the applicant's product mix, the Authority concluded that the product could not be held to fall within tariff item 23099090 and hence could not be accorded the nil rate under the cited notification. [Paras 7, 8]

Application for classification under HS Code 23099090 and claim to nil GST under Notification No. 02/2017-CT(Rate) rejected for want of evidence establishing exclusive use as animal feed.

Final Conclusion: The Advance Ruling holds that 'Preparation of a kind used in Animal Feeding - Bio Processed Meal' is not classifiable under HS Code 23099090 and is not eligible for exemption under Notification No. 02/2017-CT(Rate); the applicant's claim is disallowed for lack of evidence demonstrating exclusive animal-feed use.

Detention and seizure of goods in transit - bona fide dispute as to tax exigibility and classification - powers of inspecting officer versus jurisdiction of assessing officer - release of detained goods on payment or furnishing security - procedural limits on detention pending transmission of report

Detention and seizure of goods in transit - bona fide dispute as to tax exigibility and classification - powers of inspecting officer versus jurisdiction of assessing officer - Whether the Kerala inspecting officers were entitled to detain and seize the petitioner's consignment on the ground of alleged incorrect classification and higher tax liability, or were limited to short detention for transmitting a report to the jurisdictional assessing officer in Tamil Nadu. - HELD THAT: - The Court held that Section 129, though opening with a non-obstante clause, must be read in light of established principles that the power of detention is not to be exercised where there is a bona fide dispute about the exigibility or rate of tax. Reliance was placed on the reasoning in Synergy Fertichem Pvt. Ltd. and the Kerala High Court decision in N.V.K. Mohammed Sulthan Rawtger & Sons , as well as the principles in J.K. Synthetics Limited and Rams v. Sales Tax Officer , to the effect that where the documents (invoices, returns and e-way bill) are in order and the dealer has declared and paid tax in good faith, detention is not the appropriate remedy. An inspecting or squad officer may intercept and detain goods only for a short, reasonable period to prepare papers and transmit a report to the jurisdictional assessing authority; prolonged detention or seizure aimed at resolving a bona fide classification dispute is impermissible. Applying those principles to the admitted facts - invoices, returns and e-way bill showing classification under HSN 2202 99 20 and payment of tax at 12% - the impugned detention and the notice in Form GST MOV-07 were found unsustainable. The Court directed that the inspecting authority in Kerala shall prepare and forward a report to the Tamil Nadu assessing officer for appropriate action, rather than retain the goods or decide the classification issue at the check-post. [Paras 6, 7, 8]

Impugned detention order and consequential notice quashed; goods to be released and Kerala inspecting authority to forward report to Tamil Nadu assessing authority.

Final Conclusion: The detention and notice issued by the Kerala inspecting authority were quashed as not sustainable in a case of bona fide dispute over classification and tax rate; the goods are to be released and the Kerala authority directed to transmit a report to the Tamil Nadu assessing officer for any further action under law.

Disallowance under section 14A of the Income-tax Act - Computation under Rule 8D(2)(iii) - Restriction of 14A disallowance to extent of exempt income - Consideration of only investments yielding exempt income for averaging - Disallowance under Rule 8D(2)(ii) - interest expenditure - Allowability of mark-to-market loss on derivatives - Capital nature of discount on buy back of debentures

Disallowance under section 14A of the Income-tax Act - Disallowance under Rule 8D(2)(ii) - interest expenditure - Deletion of disallowance computed under Rule 8D(2)(ii) in respect of interest expenditure was sustained. - HELD THAT: - The CIT(A) deleted the disallowance made under Rule 8D(2)(ii) after finding that the assessee's own interest free funds were sufficient to cover the investments and by following the jurisdictional High Court authority. The Revenue placed no material to controvert the CIT(A)'s factual and legal conclusion. The Tribunal finds no infirmity in and affirms the deletion of disallowance under Rule 8D(2)(ii). [Paras 8]

The Revenue's ground challenging deletion of disallowance under Rule 8D(2)(ii) is dismissed.

Computation under Rule 8D(2)(iii) - Restriction of 14A disallowance to extent of exempt income - Consideration of only investments yielding exempt income for averaging - Computation of disallowance under Rule 8D(2)(iii) remitted to the Assessing Officer for recomputation in conformity with the principles that (a) disallowance under section 14A should be restricted to the extent of exempt income earned, and (b) only investments yielding exempt income should be considered for computing average value of investments. - HELD THAT: - The Tribunal recorded that the assessee earned a small amount of exempt dividend income and had made a suo motu disallowance which the AO materially increased under Rule 8D(2)(iii). Citing the Special Bench decision and the High Court ruling in PCIT v. State Bank of Patiala (followed by dismissal of SLP), the Tribunal concluded that Rule 8D(2)(iii) must be applied by considering only those investments that actually yield exempt income and that the overall disallowance should not exceed the exempt income earned. For this limited purpose the matter is restored to the file of the Assessing Officer for recomputation in accordance with these principles. [Paras 9]

Issue remanded to the Assessing Officer for recomputation of disallowance under Rule 8D(2)(iii) in line with the stated principles.

Allowability of mark-to-market loss on derivatives - Provision for mark to market loss on derivatives is allowable; the Revenue's disallowance is rejected. - HELD THAT: - The Assessing Officer treated the provision for mark to market loss as an unascertained liability and disallowed it. The CIT(A) followed the Tribunal's earlier view in the assessee's own and group cases that mark to market losses claimed by the assessee are allowable. The Tribunal, respectfully following its coordinate bench decisions in the assessee's own case, finds no infirmity in the allowance and dismisses the Revenue's ground. [Paras 12]

Ground of Revenue challenging allowance of mark to market loss is dismissed.

Capital nature of discount on buy back of debentures - Receipts arising from buy back (premature redemption) of debentures at less than face value are capital in nature and not taxable as revenue receipts. - HELD THAT: - The Assessing Officer characterised the difference between face value and buy back consideration as revenue income and made an addition. The CIT(A) held, and the Tribunal agrees following the Karnataka High Court authority, that the buy back at a discount merely reduces a capital loan liability and does not constitute real income to the assessee. Substance over form reasoning led to the conclusion that the surplus shown on redemption is not income. The Tribunal upholds the CIT(A)'s reversal of the addition. [Paras 13]

Revenue's addition in respect of discount on buy back of debentures is dismissed.

Disallowance under section 14A of the Income-tax Act - Other grounds challenging disallowance under section 14A r.w. Rule 8D not argued before the Tribunal are dismissed. - HELD THAT: - The assessee did not press arguments on the remaining grounds directed to disallowance under section 14A r.w. Rule 8D; accordingly those grounds were not entertained and are dismissed. [Paras 10]

Unargued grounds relating to section 14A/Rule 8D are dismissed.

Final Conclusion: For Assessment Year 2012-13 the assessee's appeal is partly allowed (remand limited to recomputation under Rule 8D(2)(iii) in accordance with the principles that disallowance be restricted to exempt income and only investments yielding exempt income be considered), other reliefs granted by the CIT(A) (deletion of Rule 8D(2)(ii) disallowance; allowance of mark to market loss; treatment of buy back discount as capital) are affirmed, and the Revenue's appeal is dismissed.

Determination of fair market value for indexation of cost of acquisition - Use of District Valuation Officer's report vis-a -vis Government/Registered Valuer report - Application of section 50C for stamp duty valuation versus declared sale consideration - Acceptance of co-ordinate bench/precedent decision in identical factual matrix

Determination of fair market value for indexation of cost of acquisition - Use of District Valuation Officer's report vis-a -vis Government/Registered Valuer report - Acceptance of co-ordinate bench/precedent decision in identical factual matrix - Adoption of FMV per sq.mtr for computing indexed cost of acquisition in respect of sale of agricultural land - HELD THAT: - The Tribunal found the facts identical to those in the co-owners' case of Smt. Hemaben Bharatbhai Desai and accepted the appellate reasoning in that decision. The Tribunal examined the competing valuations - the assessee's approved/registered valuer (higher), the DVO (lower) and the CIT(A)'s adjusted figure - and observed deficiencies in each valuation method. Taking a holistic view and relying on the co-owners' decision, the Tribunal held that the average of the three values is reasonable and directed adoption of FMV at Rs. 210 per sq.mtr for reworking the index cost of acquisition and recomputing long-term capital gain. The ground was thus partly allowed and remittal to the AO was limited to recomputation on the directed FMV. [Paras 6, 7]

FMV to be taken at Rs. 210 per sq.mtr for reworking index cost of acquisition; long term capital gain to be recomputed accordingly; appeal on this ground partly allowed.

Application of section 50C for stamp duty valuation versus declared sale consideration - Acceptance of co-ordinate bench/precedent decision in identical factual matrix - Whether addition under section 50C based on stamp duty valuation can be sustained where stamp duty valuation exceeds declared consideration by less than 10% - HELD THAT: - The Tribunal followed the decision in the co-owners' case (and other coordinate-bench authorities) holding that where the difference between the stamp valuation and the declared sale consideration is less than 10%, the discrepancy is de minimis and the declared consideration should be adopted. On the facts, the difference in respect of the assessee's share was found to be less than 10% of the stamp duty valuation; accordingly the addition made under section 50C was deleted and the AO was directed to adopt the sale consideration declared by the assessee. [Paras 12, 14, 15]

Addition under section 50C deleted; AO directed to adopt the declared sale consideration of the assessee.

Final Conclusion: Following the Tribunal's earlier decision in the identical co-owners' case, the appeal is partly allowed: FMV for indexation is fixed at Rs. 210 per sq.mtr and long term capital gain is to be recomputed; additions under section 50C are deleted and the declared sale consideration is to be adopted.

Stay of attachment under Section 226(3) of the Income Tax Act, 1961 - conditional lifting of bank attachment subject to payment of disputed tax in installments - operation of bank accounts during pendency of appeal - consequence of default and liberty to revenue to initiate recovery proceedings - balance between public interest and protection of assessee's business

Stay of attachment under Section 226(3) of the Income Tax Act, 1961 - conditional lifting of bank attachment subject to payment of disputed tax in installments - Whether the attachment order dated 07.02.2020 issued under Section 226(3) should be stayed or lifted so as to enable the appellant to comply with the installment condition fixed by the Single Judge. - HELD THAT: - The Court found that mutual trust and cooperation, and protection of public interest, require permitting the appellant to operate its bank accounts so as to enable compliance with the Single Judge's direction to deposit 20% of the disputed demand in five equal monthly installments. Although the attachment was validly issued, insisting on immediate unconditional enforcement would nullify the benefit conferred by the earlier order and would likely defeat the appellant's ability to make the installment payments. Consequently, the Court modified the prior order by staying the attachment until 01.04.2020 on condition of payment of the first installment by 30.03.2020, and providing for renewal of the stay upon subsequent timely deposits up to 30.07.2020, with absolute stay upon payment of the fifth installment. [Paras 8]

Attachment under Section 226(3) is stayed until 01.04.2020 subject to payment of the first installment by 30.03.2020, with continued conditional stays for subsequent installments and absolute stay upon final installment.

Operation of bank accounts during pendency of appeal - direction to banks to permit normal business operations - Whether banks should be instructed to enable the appellant to operate its bank accounts in the usual course of business while the conditional stay operates. - HELD THAT: - Recognising that the appellant's business (a chit-fund) involves collection and payment of public money and that freezing accounts could cause irreparable harm to its operations and goodwill, the Court directed respondents to give necessary instructions to concerned banks to permit the appellant to operate its accounts in the ordinary course, subject to the condition of timely installment payments. This direction was integral to ensuring the appellant could meet the payment schedule ordered by the Single Judge and to preserve the value of the relief granted. [Paras 8]

Respondents directed to instruct banks to enable the appellant to operate bank accounts in the usual course, subject to compliance with installment schedule.

Consequence of default and liberty to revenue to initiate recovery proceedings - protection of public interest - What are the consequences if the appellant fails to make the installment payments as ordered? - HELD THAT: - The Court made clear that the conditional concession would be automatically withdrawn if the appellant failed to pay the amounts on the dates fixed by the Single Judge. In that event the respondents are at liberty to take appropriate recovery proceedings in accordance with law. The order thus balances the temporary relief afforded to the appellant with the respondents' right to enforce tax recovery where the appellant defaults, preserving the revenue's remedies. [Paras 8]

Concession stands withdrawn upon default; respondents may initiate appropriate recovery proceedings in accordance with law.

Final Conclusion: The appeal is disposed by staying the attachment dated 07.02.2020 until 01.04.2020 on condition of payment of the first installment by 30.03.2020, with conditional renewal of the stay upon timely subsequent payments up to 30.07.2020 and absolute stay upon final installment; banks are directed to permit normal account operation during the conditional stay, and the respondents retain liberty to resume recovery if the appellant defaults.

Procedure for re-assessment under Section 148 - duty of assessing officer to furnish reasons for reopening - time-barring assessment and manual order upload with DIN - service of assessment order and statutory appellate remedy

Procedure for re-assessment under Section 148 - duty of assessing officer to furnish reasons for reopening - service of assessment order and statutory appellate remedy - Whether the petitioner had complied with the procedure on receipt of a notice under Section 148 and what relief should follow where reasons for reopening were sought late and an assessment order was thereafter served - HELD THAT: - The Court recalled the procedure in GKN Driveshafts: on receipt of a Section 148 notice the noticee should file a return and may seek the reasons for reopening; the assessing officer is bound to furnish reasons within a reasonable time and to dispose of objections by a speaking order before proceeding. In the present case the petitioner filed a return but did not seek reasons contemporaneously; a request for reasons was made only on 02.11.2019 and was ignored by the assessing authority. The assessing authority proceeded with interlocutory steps including issuance of notice under Section 143(2) and questionnaires to which the assessee responded. The revenue's practice for time barred assessments by manual order upload was noted: a DIN was generated (28.12.2019), the manual assessment order was franked and posted (30.12.2019) and the order was served (endorsed 'left') on 02.01.2020; the original assessment order was produced in Court. Having considered these facts and the procedural framework, the Court did not set aside the assessment but afforded the petitioner an opportunity to pursue its statutory remedies by granting a time limited relief. [Paras 4, 5, 7, 8, 9]

Petitioner permitted to file a statutory appeal against the assessment order within thirty days from the date of the order; recovery proceedings to commence after thirty days; petitioner directed to furnish current address to the Department.

Penalty notices under Section 274 read with Section 271B - service of notices - Challenge to penalty notices for AY 2013-14 - HELD THAT: - The writ petition challenging penalty notices dated 28.12.2019 for AY 2013-14 was before the Court along with the challenge to the assessment for AY 2012-13. The order records the petitions and disposes them. No independent substantive adjudication on the merits of the penalty notices appears in the reasons, and the Court concluded the proceedings by disposing the writ petitions and closing connected miscellaneous petitions. [Paras 2, 10]

Writ petitions disposed; no costs; connected miscellaneous petitions closed.

Final Conclusion: The writ petitions were disposed: the petitioner is granted thirty days to file a statutory appeal against the assessment for AY 2012-13, recovery to commence after thirty days, and the petitions (including the challenge to penalty notices for AY 2013-14) are disposed with no costs.

Deemed registration - interpretation of Section 12AA(2) - deeming fiction - statutory construction-mandatory vs directory - remedy under Article 226

Deemed registration - interpretation of Section 12AA(2) - statutory construction-mandatory vs directory - deeming fiction - Non-disposal of an application for registration under Section 12AA(2) within six months does not result in a deemed grant of registration. - HELD THAT: - The Court examined Section 12AA and the jurisprudence on deeming provisions, including the Full Bench decision of the Allahabad High Court relied upon, and concluded that Parliament has not enacted a deeming fiction in Section 12AA(2). The word 'shall' in sub section (2) cannot be read as creating an automatic consequence of deemed registration where the statute does not itself provide such a legal fiction. The Court emphasised the established canon that courts must construe taxing statutes by their plain language and should not introduce a casus omissus or legislate by creating a deeming provision unless required by clear legislative intent. Reliance on alternative remedies was held appropriate: delay by the Commissioner in disposing of the application can be remedied by recourse to constitutional jurisdiction under Article 226. Applying these principles, the Tribunal's conclusion that non disposal within six months resulted in deemed registration was held to be incorrect. [Paras 10, 22, 24]

Answered against the assessee: non disposal within six months under Section 12AA(2) does not amount to deemed grant of registration.

Remand for decision on merits - procedure for registration - opportunity of hearing - The Tribunal's order allowing registration on the ground of deemed grant was set aside and the matter was remitted to the Tribunal for fresh decision on merits after giving an opportunity of hearing to the assessee. - HELD THAT: - Having held that deemed registration could not be read into Section 12AA(2), the Court quashed the impugned order of the Tribunal which had allowed the appeal on that ground. The Court remitted the case to the Tribunal to decide the registration application on merits in accordance with law, ensuring procedural fairness by directing that the respondent assessee be given an opportunity of hearing before disposal. [Paras 24]

Tribunal's order set aside; matter remitted to the Tribunal for fresh adjudication on merits after giving the assessee an opportunity of hearing.

Final Conclusion: The appeal is allowed; the view that non disposal within six months under Section 12AA(2) results in deemed registration is rejected and the Tribunal's order is quashed, with the matter remitted to the Tribunal for fresh decision on merits after giving the assessee an opportunity of hearing.

Maintainability of settlement application - payment of additional tax as condition precedent - rejection of settlement application as invalid - adjustment of TDS and tax credits - hearing on merits by the Settlement Commission

Maintainability of settlement application - payment of additional tax as condition precedent - rejection of settlement application as invalid - adjustment of TDS and tax credits - hearing on merits by the Settlement Commission - Validity of the Settlement Commission's order treating the petitioner's applications for AYs 2011-12 to 2017-18 as invalid for non-payment/short payment of additional tax, and the course to be followed. - HELD THAT: - The Commission rejected the petitioner's settlement applications as 'invalid' on the ground that additional tax had not been paid, relying on reports indicating shortfalls for AY 2013-14, 2015-16 and 2016-17. Subsequent material placed on record by the revenue - including verification of TDS credits and a consolidated position of pending demands - established that, as on the present date, there is no shortfall in the tax remitted by the petitioner. The High Court found that the apparent shortfalls arising from computational differences and timing of adjustments/TDS credits were not indicative of a conscious short-payment of admitted tax by the assessee. Given these factual developments and the relative insignificance of the differences in the context of total payments, the Court concluded that it would be in the interests of substantial justice to allow the applications to be considered on merits. Consequently, the Commission's summary treatment of the applications as invalid was not sustained and the matter was directed to be heard and decided on merits by the Settlement Commission in accordance with law. [Paras 6, 7]

Order treating the settlement applications as invalid is set aside and the Settlement Commission is directed to hear the applications on merits and pass appropriate orders in accordance with law.

Final Conclusion: Writ petition allowed; impugned order of the Settlement Commission set aside and the Commission directed to take the petitioner's applications for AYs 2011-12 to 2017-18 up for hearing on merits. Connected petitions closed with no costs.

Notice under Section 148 for reassessment - Amalgamation and successor-in-interest - Assessment in name of amalgamating company - Estoppel by conduct - Setting aside ex parte assessment and remand for fresh hearing

Notice under Section 148 for reassessment - Amalgamation and successor-in-interest - Assessment in name of amalgamating company - Estoppel by conduct - Validity of reassessment proceedings initiated in the name of the transferor company (OAS) after amalgamation with the petitioner (OGT). - HELD THAT: - The Court held that the jurisdictional notice issued to the transferor company did not vitiate the reassessment where the Revenue was unaware of the amalgamation and the transferee's conduct had contributed to that unawareness. The petitioner (OGT) had filed returns and received refunds in the name of OAS post-amalgamation and only brought the amalgamation to the Department's notice on 14.09.2017. In these circumstances the petitioner's contention that proceedings should have been issued only in the name of the transferee was rejected. The Court relied on precedents which establish that where the Department has been put on notice of amalgamation, proceedings in the name of the non existent entity may be void; however, where the Department is not so informed and the transferee's conduct reinforces the continued existence of the transferor, the assessment proceedings are not vitiated. Applying these principles to the facts, the Court found no legal infirmity in the assumption of jurisdiction and validity of the reassessment proceedings. [Paras 14]

Reassessment proceedings in the name of OAS (amalgamated with OGT) held valid; petitioner's challenge on this ground rejected.

Setting aside ex parte assessment and remand for fresh hearing - Whether the ex parte assessment order dated 30.12.2017 should be set aside and the petitioner granted an opportunity to file a return and be heard. - HELD THAT: - Although the Court upheld the validity of the Department's assumption of jurisdiction, it found infirmity in the manner in which the ex parte assessment order of 30.12.2017 was passed without addressing the petitioner's request (by letter dated 20.12.2017) regarding manual filing of a return. In view of this procedural lapse the Court set aside the ex parte order and granted liberty to the petitioner to file a return within two weeks. The Assessing Officer was directed, after hearing the petitioner, to complete the reassessment on merits within four weeks from filing of the return. [Paras 16]

Order dated 30.12.2017 set aside; liberty granted to file return within two weeks and reassessment to be completed within four weeks after filing.

Final Conclusion: Writ petitions dismissed, with liberty to the petitioner to file a return within two weeks; ex parte assessment dated 30.12.2017 set aside and Assessing Officer directed to hear the petitioner and complete reassessment on merits within four weeks of filing the return; no costs.

Tonnage Tax Scheme - Chapter XII-G as a complete code - Inapplicability of transfer pricing provisions to income computed under TTS - Characterisation of advance for share application money versus loan - Negative lien distinguished from guarantee - Use of LIBOR for interest on foreign currency advances - Interest on inter-corporate deposits as business income - Deductibility of interest as business expenditure u/s 36(1)(iii) - Alternative deduction of interest under u/s 57(iii) - Apportionment of common interest on basis of assets employed (cost of financing) - Limited recalculation/remand to AO/TPO for period-correct interest computation

Inapplicability of transfer pricing provisions to income computed under TTS - Chapter XII-G as a complete code - Transfer pricing adjustment in respect of interest on purchase price of two ships held not sustainable for ships covered by Tonnage Tax Scheme and deleted. - HELD THAT: - The Tribunal followed its coordinate-bench precedents and reasoning that Chapter XII-G constitutes a self-contained charging and computation code for qualifying ships, whereby tonnage income is computed by prescribed formulae dependent on registered tonnage and days held and is not affected by actual receipts or expenditures. Since application of Chapter X (transfer pricing) cannot alter the tonnage income computed under Chapter XII-G, transfer pricing adjustments made by TPO in respect of the purchase-price interest were held to have no application to operations of qualifying ships covered by TTS. On the facts, the transactions fell within the TTS ambit and, respectfully following earlier orders in the assessee's own case, the Tribunal found no justification for the AO's addition and directed deletion. [Paras 6, 7, 8, 14]

TPO's transfer pricing adjustment relating to interest on purchase price of the two ships deleted; TP provisions do not apply to operations of qualifying ships taxed under TTS.

Negative lien distinguished from guarantee - Adjustment for guarantee-like arrangements - Adjustment in respect of fee for providing a negative lien reduced (not equated to full guarantee commission). - HELD THAT: - The Tribunal examined the nature of the negative lien which merely restricted transfer of 49% shares without creating any contingent liability on the assessee. Unlike a guarantee, the negative lien did not expose the assessee to payment obligations in case of borrower default. Taking the nature and terms of the letter and totality of facts into account, the Tribunal held that some adjustment was warranted but at a lower rate than the AO/TPO had applied. On these facts the Tribunal directed the AO to apply 0.25% (instead of 0.5%) for computing the adjustment. [Paras 10, 14]

Adjustment confirmed in part by reducing the rate to 0.25% to compute the fee-equivalent for the negative lien.

Characterisation of advance for share application money versus loan - Use of LIBOR for foreign currency interest - Advance given as share application money recharacterised as loan for TP purposes and interest adjustment upheld but interest rate to be LIBOR. - HELD THAT: - The Tribunal found that where share application money did not result in allotment and was refunded, the AO/TPO was justified in treating the transaction as a loan/advance. However, because the transaction was in foreign currency, the appropriate benchmark for interest rate is LIBOR. Applying authorities and precedents, the Tribunal directed the TPO/AO to restrict the adjustment by adopting LIBOR as the rate of interest. The result was allowance of the AO's characterisation but modification of the interest-rate basis. [Paras 16, 20, 21]

Advance treated as loan for TP purposes; adjustment sustained but to be computed at LIBOR rate (ground allowed in part).

Interest on outstanding receivables - Limited recalculation/remand to AO/TPO for period-correct interest computation - TPO's adjustment for uncharged interest on delayed receivables upheld in principle but computation to be redone limited to the relevant year end. - HELD THAT: - The Tribunal agreed that where an agreement stipulates interest for delayed payments, the TPO can compute appropriate adjustment if interest was not charged. However, the Tribunal found the TPO's computation extended beyond the relevant previous year. Consequently the matter was remitted to the TPO/AO to recompute the interest chargeable confined to the period up to the end of the year under consideration (31/03/2013). [Paras 22, 23, 25]

Adjustment in principle sustained; interest computation remitted to TPO/AO to be confined to the year ending 31/03/2013.

Interest on inter-corporate deposits as business income - Deductibility of interest as business expenditure u/s 36(1)(iii) - Alternative deduction of interest under u/s 57(iii) - Doctrine of consistency - Interest earned on ICDs given to subsidiaries held to be business income; corresponding interest expense allowable under section 36(1)(iii) (and alternatively under section 57(iii)); AO directed to treat interest income as business income and allow deduction. - HELD THAT: - The Tribunal analysed the assessee's objects, commercial context and documentary bank nexus and concluded that advances/ICDs to group/subsidiary companies were made for furthering the assessee's oilfield business carried out through subsidiaries and not merely to earn interest. Citing precedent and earlier treatment in prior assessment years, the Tribunal held the interest on such ICDs forms part of business income. Consequently, interest expense incurred on borrowings used to provide ICDs was held deductible as business expenditure under section 36(1)(iii); alternatively, if assessed under other sources, such expense would be allowable under section 57(iii). The Tribunal also applied the rule of consistency given unchanged facts and directed corresponding relief. [Paras 34, 36, 40, 43, 44]

Interest on ICDs to subsidiaries to be taxed as business income; corresponding interest expenditure to be allowed under s.36(1)(iii) (and alternatively s.57(iii)); AO to give effect accordingly.

Apportionment of common interest on basis of assets employed (cost of financing) - Apportionment of common interest expenditure must be on the basis of assets employed; matter remitted to AO for recomputation accordingly. - HELD THAT: - The Tribunal observed that common interest is a periodic cost of borrowing and should be apportioned according to the cost of financing (value of assets employed) between tonnage and non-tonnage activities. Turnover bears no relation to financing cost; therefore the AO's apportionment by turnover was incorrect. The issue was restored to the AO to recompute the apportionment in the ratio of assets employed. [Paras 45]

Common interest disallowance set aside and remitted to AO to reallocate interest on the basis of assets employed.

Grounds not pressed / dismissed - Grounds not pressed were dismissed; double inclusion of tonnage income in normal business income to be corrected. - HELD THAT: - Ground No.1 and ground No.9 were not pressed by the assessee and accordingly dismissed as not pressed. On ground No.10 (consequential to ground No.9), the Tribunal found the AO had correctly treated the relevant income as tonnage income but had inadvertently included the same again in normal business income producing double taxation; the AO was directed to verify and remove the duplicate addition. [Paras 2, 46, 47, 48]

Grounds not pressed dismissed; AO directed to eliminate inadvertent double taxation by reducing the duplicate amount from normal business income.

Final Conclusion: Appeal allowed in part: transfer pricing adjustment on interest for qualifying ships deleted; negative lien adjustment reduced to 0.25%; advance for share application treated as loan but interest to be computed at LIBOR; interest on delayed receivables remitted for recomputation limited to the year end; interest on ICDs to subsidiaries held to be business income with corresponding interest deduction allowed (u/s 36(1)(iii) or alternatively u/s 57(iii)); common interest apportionment remitted to AO to allocate by assets employed; certain unpressed grounds dismissed and inadvertent double taxation to be corrected by AO.

Disallowance under section 14A cannot be made in absence of exempt income - computation of disallowance under Section 14A read with Rule 8D - disallowance under section 14A limited to amount of exempt income - disallowance of interest under Section 36(1)(iii) for diversion of borrowed funds - business purpose test for interest deduction

Disallowance under section 14A cannot be made in absence of exempt income - Cheminvest principle - Deletion of disallowance under section 14A for assessment year 2015-16 where the assessee did not earn any exempt income. - HELD THAT: - The Tribunal found on facts that the assessee had not earned any income exempt from tax (no dividend or share income) in AY 2015-16. Applying the settled principle that section 14A contemplates actual receipt of income not includible in total income before any corresponding expenditure can be disallowed, the Tribunal held that section 14A could not be invoked in the absence of exempt income. The CIT(A)'s deletion of the addition was affirmed and the disallowance directed to be deleted. [Paras 3, 5]

Disallowance under section 14A for AY 2015-16 deleted; appeal allowed.

Disallowance under section 14A limited to amount of exempt income - computation of disallowance under Section 14A read with Rule 8D - Restriction of disallowance under section 14A for assessment year 2014-15 to the amount of exempt income actually earned (dividend). - HELD THAT: - For AY 2014-15 the assessee had earned exempt dividend income. Following precedents that disallowance under section 14A cannot exceed the exempt income, the Tribunal held that the disallowance computed by the revenue should be restricted to the quantum of exempt income earned by the assessee and directed accordingly. The Tribunal applied the principle as a limit on the section 14A computation (including considerations relevant to Rule 8D). [Paras 7]

Disallowance under section 14A for AY 2014-15 restricted to the amount of exempt income; direction given to limit disallowance accordingly.

Disallowance of interest under Section 36(1)(iii) for diversion of borrowed funds - business purpose test for interest deduction - related-party interest-free advances - Validity of disallowance of interest under section 36(1)(iii) for AY 2014-15 on account of borrowed funds diverted to interest-free loans to related parties. - HELD THAT: - The AO disallowed interest expenses to the extent borrowed funds were found to be used for interest-free advances to related parties. The assessee's assertions that such advances were for business purposes or funded from own resources were not substantiated with credible evidence before the CIT(A) or the Tribunal. For three specified parties where the assessee claimed interest income, the CIT(A) directed verification and credit if higher interest was actually received. For the remaining related parties (including loans to a director and to group/other companies), the Tribunal upheld the CIT(A)'s rejection of the business-purpose pleas and confirmed disallowance, noting absence of agreements, corroborative payments, or other credible material to establish nexus with business operations or capital nature. [Paras 12, 13, 16, 17, 18]

Disallowance of interest under section 36(1)(iii) on account of diversion to interest-free related party advances broadly confirmed; limited verification directed for three parties where interest receipt claim may adjust the disallowance.

Final Conclusion: ITA No.2286/Bang/2018 (AY 2015-16) allowed by deleting section 14A disallowance; ITA No.2287/Bang/2018 (AY 2014-15) partly allowed-section 14A disallowance limited to exempt income while majority of interest disallowances under section 36(1)(iii) on diversion to related parties are confirmed subject to verification of interest receipts for certain parties.

Benefit of section 11 - proviso to section 2(15) - dominant objective test - principle of mutuality - implementation agency status and government control - following coordinate bench decision

Benefit of section 11 - proviso to section 2(15) - dominant objective test - principle of mutuality - implementation agency status and government control - Whether the assessee's activities are charitable and eligible for exemption under section 11 or whether they are commercial/business activities attracting the proviso to section 2(15). - HELD THAT: - The Tribunal noted that the assessee is a society constituted by the Development Commissioner (Handloom), Ministry of Textiles, and that its executive committee is wholly constituted of government officers. The assessee's objects and activities are to promote the handloom sector by organizing exhibitions and procuring/distributing government orders to member societies, providing a marketing platform to weavers and primary/apex societies. No new facts were brought on record for AY 2012-13 compared to AY 2010-11. Applying the dominant objective test, the Tribunal accepted the findings of the CIT(A) and the Coordinate Bench which held that the activities are not driven by profit motive, receipts are applied to the society's activities, and there is no private gain or profit sharing. The principle of mutuality was considered by the Assessing Officer but the Tribunal agreed with the CIT(A) that there is no identity of contributors/participators amounting to a mutual trading relationship that would attract the proviso to section 2(15). On these grounds, the Tribunal held that the proviso to section 2(15) is not attracted and the assessee is entitled to the benefit of section 11 with consequential relief, respectfully following the order in the assessee's own case for AY 2010-11.

Assessee's activities are charitable in nature; the proviso to section 2(15) is not attracted and the benefit of section 11 is to be allowed with consequential benefits.

Final Conclusion: Revenue's appeal is dismissed; the order of the CIT(A) upholding exemption under section 11 for AY 2012-13 is upheld and the Assessing Officer is directed to allow the benefit of section 11 with consequential relief.

Validity of satisfaction note for issuance of notice under section 158BD - Block assessment under section 158BC/158BD and its para materia application with section 153C - Admissibility of documented explanations and creditors in block proceedings - Non-attribution of pre-block unaccounted property to block period - Penalty under section 158BFA(2) and applicability of provisos

Validity of satisfaction note for issuance of notice under section 158BD - Block assessment under section 158BC/158BD and its para materia application with section 153C - Whether the satisfaction recorded in the assessment of the searched person sufficed for issuance of notice under section 158BD to the co-owner/third party. - HELD THAT: - The Tribunal found that the Assessing Officer in the searched person's assessment under section 158BC had reproduced and recorded the relevant satisfaction regarding undisclosed income attributable to the present assessee and had identified the co-owners. The AO of the searched person and the AO issuing notice under section 158BD were the same officer. On that basis the Tribunal held the recorded satisfaction in the searched person's order (dated 30.03.2004) constituted valid satisfaction for issuing notice to the present assessee on 20.12.2005. The Tribunal distinguished Manish Maheshwari where no satisfaction was recorded, and relied on the fact of a recorded satisfaction in the searched person's order to reject the assessee's challenge to jurisdiction and validity of the notice. [Paras 6]

The objection to the notice on the ground of absence of satisfaction is rejected; the satisfaction recorded in the searched person's assessment is held valid for issuance of notice under section 158BD.

Admissibility of documented explanations and creditors in block proceedings - Non-attribution of pre-block unaccounted property to block period - Whether additions of one-fourth share of amounts shown as liabilities (to Malik, Javid/Navid, and Raju) are sustainable in the assessee's block assessment. - HELD THAT: - The Tribunal examined the AO's own findings and seized material. As to the liability to Malik (Rs.20 lakhs), the AO had recorded that the liability was cleared through property transactions and not by cash payment during the block period; there was no finding that any clearing was by transfer of property acquired during the block period. The Tribunal held that if the liability was discharged by property acquired before the block period (or otherwise not shown to be an undisclosed block-period asset), it cannot be added in the block assessment, and accepted the source/explanation. As to the Rs.25 lakhs to Javid/Navid, the AO himself described the explanation as documented and prima facie reasonable but rejected it because the creditor was not produced for examination; the Tribunal held that rejection for non-production was not justified when the explanation was documented and prima facie reasonable, and observed that the AO could have summoned the person. As to the Rs.12 lakhs to Raju, the AO recorded it was cleared through land transaction settlement but did not find that this involved undisclosed property of the block period or cash payment; on the same reasoning as for Malik, the Tribunal accepted the explanation. Applying these conclusions, the Tribunal deleted the additions of one-fourth of these three amounts (total deletion of 1/4th of Rs.20L, Rs.25L and Rs.12L). [Paras 9, 11, 12, 13, 14]

The three impugned liabilities are accepted as explained and the corresponding additions (1/4th share totalling the deleted amount) are deleted.

Application of co-owner parity in block assessments - Deletion of additions where liabilities existed or cleared prior to block period - Whether the quantum findings (deletion/confirmation of specific additions) in the searched person's case apply equally to the co-owners (Smt. Farah Rafi and Shri Fasi Baig) and what additions remain confirmed. - HELD THAT: - The Tribunal held that facts and merits were identical across the co-owners except for limited differences. The final payment of Rs.30 lakhs made by way of sale deed executed after the date of search was held not to be part of the block period; accordingly the 1/4th share of that payment deleted in the searched person's case was likewise deleted for the co-owners. Applying the deletions of the three liabilities (as held above) to each co-owner, the Tribunal deleted the bulk of the additions and confirmed only a smaller portion of the additions in some cases (notably confirmation of an assessed undisclosed amount of Rs.4 lakhs in the case of Smt. Farah Rafi and confirmation of Rs.4 lakhs in the case of Shri Fasi Baig and Mr. Raffi Baig as appropriate). The appeals on quantum are therefore partly allowed. [Paras 14, 18, 21]

Quantum appeals of the co-owners are partly allowed: the bulk of the additions are deleted on parity and fact, and only the limited confirmed undisclosed amount (as indicated) is sustained.

Penalty under section 158BFA(2) and applicability of provisos - Whether penalty under section 158BFA(2) is sustainable and, if so, on what quantum. - HELD THAT: - The Tribunal reproduced the statutory scheme and observed that penalty under section 158BFA(2) is mandatorily leviable unless the conditions of the proviso are satisfied. In the present cases the assessees did not file returns under the proviso after receipt of notice under section 158BD and therefore the proviso did not apply. Consequently the Tribunal upheld the levy of penalty but directed recomputation of the penalty in each case limited to the undisclosed income upheld on merits (i.e., only on the reduced/confirmed addition of Rs.4 lakhs in each relevant case), since the larger additions had been deleted on quantum. [Paras 22, 23, 24]

Penalty sustained but remitted for recomputation by the AO to be calculated only on the quantum of undisclosed income upheld by the Tribunal.

Final Conclusion: All three quantum appeals and both penalty appeals are partly allowed: notices under section 158BD upheld as valid; major additions arising from three creditor/transactional items and the post-search sale-deed payment are deleted on facts and parity; a small portion of undisclosed income (as indicated) is confirmed for certain assessees; penalties under section 158BFA(2) are sustained but must be recomputed by the AO only on the reduced undisclosed income upheld by the Tribunal.

Most appropriate method - Resale Price Method (RPM) - Transactional Net Margin Method (TNMM) - Transfer pricing adjustment in respect of AMP expenses - Existence of international transaction for AMP expenses - Economic ownership of brand - Bright Line Test (BLT) - Comparability of uncontrolled comparables

Resale Price Method (RPM) - Transactional Net Margin Method (TNMM) - Most appropriate method - Comparability of uncontrolled comparables - Appropriateness of the method for benchmarking the trading/distribution transactions - HELD THAT: - The Tribunal examined whether RPM or TNMM is the most appropriate method for the assessee's trading segment. The TPO had rejected RPM on the basis that the assessee incurred substantial AMP-related expenditures and performed additional functions that warranted testing at net margin level under TNMM. The Tribunal found that the assessee imported finished goods from its AE and resold them without value addition; the TPO's conclusion relied on surmise and absence of tangible material showing that AMP expenditures resulted in value addition for the AE. Precedents cited by the parties and earlier Tribunal decisions were considered, showing that where a distributor sells products purchased from an AE without value addition, RPM is generally the most appropriate method. On the facts, RPM was held to be better suited and more reliable than TNMM for determining ALP of the trading transactions. [Paras 11, 18]

Resale Price Method is the most appropriate method for benchmarking the trading/distribution transactions; AO/TPO directed to adopt RPM and determine ALP accordingly.

Transfer pricing adjustment in respect of AMP expenses - Existence of international transaction for AMP expenses - Bright Line Test (BLT) - Economic ownership of brand - Validity of transfer pricing adjustment made in respect of AMP expenses - HELD THAT: - The Tribunal addressed whether AMP expenditures gave rise to a separable international transaction with the AE and whether benchmarking of those AMP expenses by the TPO was justified. Following earlier decisions of the Tribunal and the High Courts, the Tribunal held that the revenue must establish the existence of an international transaction by tangible material before undertaking benchmarking of AMP expenses; the Bright Line Test has been rejected as a valid means to infer such a transaction. Where the Indian entity is the economic owner of the brand or enjoys the economic benefits from AMP spend, the expenditure is for its own benefit and does not automatically create an international transaction requiring compensation from the AE. On the facts, the revenue failed to demonstrate existence of an international transaction in respect of AMP spend and, in any event, the assessee's operating margins satisfied TNMM comparability, so no separate adjustment for AMP was warranted. [Paras 16, 17]

Transfer pricing adjustment in respect of AMP expenses deleted; no TP adjustment in respect of AMP expenditures.

Final Conclusion: The Tribunal allowed the appeals: for both assessment years the Resale Price Method was held to be the most appropriate method for the trading/distribution transactions and the transfer pricing adjustments in respect of AMP expenses were deleted for lack of tangible evidence of an international transaction and on the basis of applicable precedents.

Associated enterprises - deeming fiction under section 92A(2)(c) - loan threshold test - characterisation of receipts as business advances vis-a -vis loans

Associated enterprises - deeming fiction under section 92A(2)(c) - loan threshold test - characterisation of receipts as business advances vis-a -vis loans - Whether M/s Sovereign Ship Management Ltd, UK and M/s Premier Ship Management Ltd, UK are associated enterprises of the assessee within the meaning of section 92A(2)(c) of the Income Tax Act. - HELD THAT: - The Tribunal held that section 92A(2)(c) must be read according to its plain and unambiguous language, which requires that a loan advanced by one enterprise to the other enterprise individually constitute not less than 51% of the book value of total assets of the other enterprise. The DRP erred in aggregating loans advanced by two separate enterprises to reach the 51% threshold; such combination is not authorised by the statutory text. Further, the receipt shown as an advance from Sovereign Ship Management Ltd was found to be in the nature of business advances for rendering ship management and consultancy services and not a loan; once so characterised and excluded, neither of the two entities independently advanced loans exceeding 51% of the assessee's book value of total assets. The Tribunal followed coordinate-bench precedents holding that Section 92A(1) must be read in conjunction with the specific deeming provisions of Section 92A(2) and that de facto participation does not supplant the statutory conditions. Applying these principles, the Tribunal concluded that the two UK entities cannot be deemed to be associated enterprises under section 92A(2)(c), and accordingly no transfer-pricing adjustments arise therefrom; having so decided, adjudication of the remaining grounds was rendered academic. [Paras 7]

Sovereign Ship Management Ltd, UK and Premier Ship Management Ltd, UK are not associated enterprises of the assessee under section 92A(2)(c); therefore no ALP adjustments on that basis are warranted.

Final Conclusion: Appeal partly allowed: the Tribunal set aside the DRP/AO conclusion that the two UK entities are associated enterprises under section 92A(2)(c) for A.Y.2011-12, deleted the consequential transfer-pricing adjustment on that ground, and observed that other grounds became academic.

Jurisdictional invalidity of enhancement notice - requirement of fresh show cause notice under section 251(2) of the Income tax Act, 1961 - competence of the issuing officer to initiate appellate enhancement - appellate authority's duty to comply with appellate remand directions and to consider record evidence - applicability of section 68 as test for genuineness, identity and creditworthiness of unexplained credits - applicability of section 69 for unexplained investments and its requirement that investments be outside books of account - applicability of section 69C to unexplained application of money

Jurisdictional invalidity of enhancement notice - competence of the issuing officer to initiate appellate enhancement - Validity of the show cause notice dated 16.05.2016 issued in the appellate file and competence of the Inspector to issue the same. - HELD THAT: - The Tribunal found the enhancement notice dated 16.05.2016 to be invalid. The order sheet shows the Inspector issued the notice on 16.05.2016 while the recorded approval by the CIT(A)-I is dated 17.05.2016, indicating issuance prior to approval. The notice was signed by the Inspector and directed the assessee to reply before the Inspector, despite the Inspector lacking authority to assume the functions of the CIT(A) for enhancement. The Tribunal held that issuance of the show cause notice is a vital pre requisite to assume jurisdiction for enhancement and that a notice issued without lawful competence and without proper approval is void ab initio. The impugned enhancement, being founded on that notice, was consequently held to be without jurisdiction. [Paras 5]

The show cause notice dated 16.05.2016 was held invalid and the enhancement founded on it lacked jurisdiction.

Requirement of fresh show cause notice under section 251(2) of the Income tax Act, 1961 - appellate authority's duty to comply with appellate remand directions and to consider record evidence - Whether the CIT(A) complied with the ITAT's directions on remand and whether a fresh enhancement notice should have been issued before restoring the earlier enhanced assessment. - HELD THAT: - The Tribunal recorded that it had set aside the earlier CIT(A) order and remitted the issues for fresh adjudication with a direction to consider the paper book (pages 1-518) and afford opportunity. On remand the CIT(A) fixed hearings, rejected adjournment requests on technical grounds and restored the earlier enhancement without issuing a fresh notice under section 251(2). The Tribunal held that the CIT(A) did not properly consider the documentary evidence placed on record as directed by the ITAT and ought to have issued a fresh show cause notice to give the assessee a proper opportunity to substantiate claims. The failure to follow the remand directions and to issue a fresh notice amounted to non application of mind and procedural infirmity rendering the impugned order unsustainable. [Paras 5]

The CIT(A) failed to comply with the ITAT's remand directions and should have issued a fresh show cause notice; the impugned order is procedurally flawed and not sustainable.

Applicability of section 68 as test for genuineness, identity and creditworthiness of unexplained credits - applicability of section 69 for unexplained investments and its requirement that investments be outside books of account - applicability of section 69C to unexplained application of money - Sustainability of the enhancements under sections 68, 69 and 69C in light of documentary evidence on record. - HELD THAT: - On the material placed before the Tribunal (paper book pages 1-518) it was noted that the AO had examined and verified documents relating to the alleged unsecured loans, work in progress and reserve & surplus, including confirmations, ledgers, bank statements, partnership deed, title deeds, vouchers and project maps. The CIT(A)'s enhancements under section 68 (short term borrowings), section 69 (work in progress) and section 69C (negative reserve & surplus) were made without independent enquiry and without properly addressing the documentary evidence. For section 69 the Tribunal reiterated that the provision applies to investments not recorded in books; the 'work in progress' was recorded in the audited balance sheet and the show cause notice itself sought only re classification. Given the AO's prior verification and the assessee's production of supporting documents, the Tribunal found the enhancements not tenable in the circumstances and that the assessee had discharged its onus such that the revenue had not established a contrary case. [Paras 5, 6]

The enhancements under sections 68, 69 and 69C were not sustained on the record and the impugned additions are liable to be cancelled.

Final Conclusion: The appeal is allowed. The Tribunal set aside the impugned order of the CIT(A) dated 29.10.2018, held the show cause notice dated 16.05.2016 to be invalid, found procedural non compliance with the ITAT remand directions and recorded that the enhancements under sections 68, 69 and 69C were not tenable on the documents before the authorities; the CIT(A)'s enhancement is therefore cancelled.

Weighted deduction under section 35(2AB) - approval by DSIR - remand for fresh consideration - treatment of excise duty refund as income for deduction under section 80IB - classification of a receipt as capital or revenue - transfer pricing adjustment / ALP benchmarking of royalty - capitalisation of interest towards CWIP under section 36(1)(iii) - foreign exchange fluctuation treated as business income for section 80IB

Weighted deduction under section 35(2AB) - approval by DSIR - Whether expenditures excluded by DSIR (contract labour, professional fees, GET salary) are eligible for weighted deduction under s.35(2AB) once the in house R&D facility is approved. - HELD THAT: - The Tribunal applied the principle established by the Gujarat High Court in CIT v. Claries Lifescience Ltd. and held that once an in house R&D facility is approved by the prescribed authority (DSIR), the expenditure incurred for development of that facility is eligible for weighted deduction under s.35(2AB). The Tribunal disagreed with the CIT(A)'s approach of restricting eligibility to the period from the date specified by DSIR, concluding that the statutory language and legislative purpose support allowance of the entire expenditure incurred for the development of the approved facility. The Tribunal therefore allowed the assessee's grounds on this issue for the years under appeal and followed the same reasoning in the later connected assessment year. [Paras 38]

Assessee's appeals allowing the weighted deduction disallowances sustained by lower authorities are reversed for the relevant years; disallowances under s.35(2AB) are deleted.

Remand for fresh consideration - Claim for domestic travel expenses under s.35(2AB) that was not considered by the Assessing Officer. - HELD THAT: - The Tribunal noted that the domestic travel expense claim was made for the first time before the CIT(A) and the AO had not adjudicated it. In view of the absence of adjudication at assessment stage, the Tribunal remitted the matter to the Assessing Officer for consideration in accordance with law. [Paras 39]

Issue remitted to the Assessing Officer for fresh consideration.

Treatment of excise duty refund as income for deduction under section 80IB - classification of a receipt as capital or revenue - Whether excise duty refunds constitute profits derived from the industrial undertaking eligible for deduction under s.80IB, and whether the same may alternatively be treated as capital receipts to be excluded from book profit computation under s.115JB. - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the excise duty refund has a direct nexus with the assessee's manufacturing activity and is derived from the business, thereby qualifying for consideration under s.80IB. The Tribunal relied on its earlier decisions in the assessee's own cases and other precedents treating such refunds as reimbursements linked to production and thus revenue in nature. Consequently the alternative contention that the refunds are capital receipts was held to be inconsistent and therefore infructuous; an item accepted as business income for s.80IB purposes cannot simultaneously be treated as a capital receipt for the same purpose. [Paras 41, 42, 43, 44]

Excise duty refunds held to be revenue receipts derived from the industrial undertaking and eligible for s.80IB; alternate plea treating them as capital receipts rejected as infructuous.

Transfer pricing adjustment / ALP benchmarking of royalty - Validity of upward transfer pricing adjustment (benchmarking of royalty) made by the TPO and sustained by the AO. - HELD THAT: - The Tribunal followed its earlier coordinate bench decisions in the assessee's own case and found the facts and explanations identical; effective rate (net of specified deductions) rather than the bare contract rate is decisive. On that basis and in light of prior ITAT orders in the assessee's case, the Tribunal found no infirmity in the CIT(A)'s deletion of the TPO's upward adjustment and dismissed the Revenue's appeals on this point. [Paras 46]

Revenue's transfer pricing/ALP additions on royalty payments are deleted; appeals dismissed on this ground.

Capitalisation of interest towards CWIP under section 36(1)(iii) - Whether interest capitalised to CWIP should be disallowed under s.36(1)(iii). - HELD THAT: - The Tribunal accepted the CIT(A)'s factual finding that interest bearing surplus funds and the CWIP investments were for business purposes and that interest capitalisation was not chargeable to disallowance. The Revenue failed to rebut the detailed factual and legal considerations recorded by the CIT(A), and the Tribunal found no infirmity in deleting the AO's addition. [Paras 48]

Addition on account of capitalisation of interest towards CWIP under s.36(1)(iii) deleted; Revenue's ground dismissed.

Foreign exchange fluctuation treated as business income for section 80IB - Whether forex gain arising from import of raw materials and revaluation of foreign currency working capital is to be treated as business income eligible for deduction under s.80IB or as income from other sources. - HELD THAT: - Following prior orders in the assessee's own cases, the Tribunal agreed with the CIT(A) that forex fluctuations here arise directly from day to day business transactions (imports and working capital) and therefore constitute business revenue. The Tribunal found established jurisprudence and fact based reasoning supporting treatment of such gains as part of business profits eligible for s.80IB. [Paras 49, 50]

Forex gain treated as business income and allowed for s.80IB computations; Revenue's ground dismissed.

Weighted deduction under section 35(2AB) - Whether the CIT(A)'s confirmation of disallowance of weighted deduction in the cross objection for A.Y. 2013 14 should stand. - HELD THAT: - The Tribunal observed that the CIT(A) had followed his earlier order which the Tribunal has reversed for A.Y. 2011 12. Applying the same reasoning, the Tribunal allowed the assessee's cross objection in part and directed deletion of the disallowance in respect of weighted deduction where DSIR approval principles applied as in the earlier allowed years. [Paras 61, 62]

Cross objection partly allowed: disallowance of weighted deduction for A.Y. 2013 14 set aside in line with the decision for earlier years.

Final Conclusion: The Tribunal allowed the assessee's appeals for A.Y. 2011 12 and 2012 13 insofar as weighted deduction under s.35(2AB) was denied despite DSIR approval (and allowed the similar ground for A.Y. 2012 13); remitted the unadjudicated domestic travel expense claim to the AO; held excise duty refunds to be business receipts eligible for s.80IB and rejected the alternative capital receipt plea as infructuous; dismissed Revenue's grounds on TPO benchmarking, capitalisation of interest to CWIP, forex gain treatment, and related years' challenges; and partly allowed the assessee's cross objection for A.Y. 2013 14 in line with these conclusions.

Mandatory nature of time limits in Regulation 20 of the Customs Brokers Licensing Regulations, 2013 - procedural timeline under Regulation 20(1), 20(5) and 20(7) of the Customs Brokers Licensing Regulations, 2013 - doctrine of waiver and acquiescence in relation to statutory limitation - power to revoke a customs broker's licence and consequential procedure - remand for fresh consideration on merits

Mandatory nature of time limits in Regulation 20 of the Customs Brokers Licensing Regulations, 2013 - procedural timeline under Regulation 20(1), 20(5) and 20(7) of the Customs Brokers Licensing Regulations, 2013 - Whether the 90 day time limits in Regulation 20(1), 20(5) and 20(7) of CBLR, 2013 are mandatory or directory. - HELD THAT: - The Court reviewed precedent of this High Court and other High Courts and Coordinate Benches holding that the 90 day limits prescribed in the predecessor and current Regulations are mandatory. Applying that consistent line of authority, the Court held that the time limits in Regulation 20 must be strictly followed and are not merely directory. The Court therefore re affirmed that the limitation periods at each stage of proceedings under Regulation 20 are sacrosanct and cannot be lightly ignored. [Paras 11, 12, 13, 16]

The limitation periods in Regulation 20(1), 20(5) and 20(7) of CBLR, 2013 are mandatory and must be strictly followed.

Procedural timeline under Regulation 20(1), 20(5) and 20(7) of the Customs Brokers Licensing Regulations, 2013 - Whether the Revenue complied with the three sequential 90 day limits in the present case or failed at any stage. - HELD THAT: - The Court examined the material dates. The offence report was dated 09.06.2017 and the show cause notice was issued on 06.09.2017 (87 days), therefore Regulation 20(1) was complied with. The enquiry report was submitted on 29.11.2017 (83 days from 06.09.2017), therefore Regulation 20(5) was complied with. The enquiry report dated 29.11.2017 and the final revocation order dated 08/09.05.2018 were separated by 159 days, exceeding 90 days contemplated by Regulation 20(7). On face of it, the third stage was beyond the prescribed period, but the Court proceeded to examine factual reasons recorded in the departmental note file before treating the excess as a failure by the Revenue. [Paras 18, 19]

Regulation 20(1) and 20(5) were complied with; the final order under Regulation 20(7) was passed after 159 days and thus, on a prima facie calculation, beyond 90 days.

Doctrine of waiver and acquiescence in relation to statutory limitation - procedural timeline under Regulation 20(7) of the Customs Brokers Licensing Regulations, 2013 - Whether the respondent's conduct constituted waiver or acquiescence of the limitation under Regulation 20(7) so as to disentitle it from impugning the delayed final order. - HELD THAT: - The Court considered the departmental note file showing that the respondent requested deferral and expressly agreed on 12.02.2018 that the period spent in abeyance "will be reduced from the time limits when the case is decided", and the managing director signed the note. Relying on settled principles of waiver and acquiescence, the Court held that a party may, by conduct or written agreement, voluntarily relinquish a statutory right to insist on limitation. Given the respondent's written request and signed agreement to exclude the abeyance period from the 90 day clock, the excess period between the enquiry report and the final order was attributable to the respondent and not to inaction by the Revenue. The Court further observed that these factual aspects were not considered by the CESTAT. [Paras 29, 31, 33, 39, 40]

The respondent waived/acquiesced to exclusion of the abeyance period from the Regulation 20(7) limitation; therefore the delayed final order cannot be impugned on limitation grounds attributable to the Revenue.

Remand for fresh consideration on merits - Whether the CESTAT's order setting aside the revocation solely on limitation grounds should be sustained or whether the matter should be remitted for fresh adjudication on merits. - HELD THAT: - Although the Court found that limitation is mandatory and that the Revenue had not failed in the present case because of the respondent's waiver, it noted that the CESTAT decided the appeal only on limitation and did not consider merits. In the interest of adjudicating the controversy fully, and since material facts concerning waiver and the merits were not addressed by the Tribunal, the Court set aside the CESTAT order and remitted the matter to the CESTAT for fresh hearing and decision on merits without entertaining the limitation plea. The Court directed the CESTAT to allow both parties opportunity to agitate and address merits and to decide the matter at the earliest within a reasonable time. [Paras 42, 43]

CESTAT order is set aside and the matter is remitted to CESTAT for fresh consideration on merits; limitation point is excluded from the Tribunal's consideration.

Final Conclusion: The Court reaffirmed that the 90 day time limits in Regulation 20 of CBLR, 2013 are mandatory; on the facts the Revenue complied with the first two stages and the apparent delay at the third stage was attributable to the respondent's written request and signed agreement to exclude the abeyance period (waiver/acquiescence). The CESTAT's order setting aside the revocation on limitation grounds is set aside and the matter is remitted to the CESTAT for fresh adjudication on merits. The substantial questions of law are answered in favour of the Revenue; no order as to costs.

Refund of Special Additional Duty - Special Additional Duty (SAD) refund under Notification No.102/2007-Cus - decision of Customs, Central Excise and Service Tax Appellate Tribunal accepted by Department - writ petition allowed - direction to file refund application and grant refund

Refund of Special Additional Duty - Special Additional Duty (SAD) refund under Notification No.102/2007-Cus - decision of Customs, Central Excise and Service Tax Appellate Tribunal accepted by Department - direction to file refund application and grant refund - Writ petition challenging appellate order confirming rejection of SAD refund was allowed because the Department had accepted availability of SAD refund in consequence of the Tribunal's decision. - HELD THAT: - The Court noted that the Commissioner of Customs (Appeal) confirmed the order rejecting claim for refund of SAD under Notification No.102/2007-Cus dated 14.09.2007. However, both parties conceded, and the record showed, that the Customs, Central Excise and Service Tax Appellate Tribunal had decided the issue in favour of the importer by its order dated 02.06.2017 and that the Department had accepted that decision. The High Court relied upon its earlier common order dated 23.09.2019 in batch W.P. Nos. 3700, 2431 to 2433 of 2017 etc., which directed petitioners to seek refund by filing applications within two weeks and directed respondents to pass necessary orders for refund. In view of that admitted position and the prior order, the present writ petition was allowed and the same relief was granted.

Writ petition allowed; direction to file application for SAD refund and for the respondent to pass necessary orders; no costs; connected petitions closed.

Final Conclusion: The writ petition was allowed as the Department had accepted the Tribunal's decision in favour of importers on entitlement to SAD refund; petitioners may apply for refund within the stipulated period and the respondents are directed to pass necessary orders; no costs.

Date of determination of rate of duty under Section 15 of the Customs Act - payment of duty at the rate in force on the date of debonding - treatment of imported capital goods removed from warehouse under section 68 - treatment of indigenously procured capital goods on debonding - positive Net Foreign Exchange (NFE) criteria and debonding - exemption from interest under Notification No. 132/2004-Cus

Date of determination of rate of duty under Section 15 of the Customs Act - payment of duty at the rate in force on the date of debonding - treatment of imported capital goods removed from warehouse under section 68 - Appellant's liability to pay customs duty on imported capital goods is to be determined at the rate prevailing on the date of debonding. - HELD THAT: - The Tribunal applied Section 15(1)(b) of the Customs Act which fixes the applicable rate of duty for goods cleared from a warehouse under section 68 as the rate in force on the date when the goods are actually removed from the warehouse. The appellant, being a 100% EOU which failed to achieve positive NFE and which filed bills of entry at the time of demanding debonding, is therefore liable to pay duty at the rate prevailing on the date of debonding. This conclusion is consistent with the relevant clauses of Notification No. 52/2003-Cus (and related provisions) which contemplate payment of duty at the rate in force on the date of debonding where positive NFE is not achieved; the Revenue was directed to compute duty accordingly. [Paras 12, 15]

Imported capital goods: duty payable at the rate prevailing on the date of debonding; duty to be calculated by Revenue.

Payment of duty at the rate in force on the date of debonding - treatment of indigenously procured capital goods on debonding - positive Net Foreign Exchange (NFE) criteria and debonding - Appellant's liability to pay duty on indigenously procured capital goods is to be determined at the rate prevailing on the date of debonding. - HELD THAT: - Clause 8(i) of Notification No. 22/2003-CE (as extracted) expressly provides that clearance or debonding of capital goods may be allowed on payment of excise duty on the depreciated value at the rate in force on the date of debonding where positive NFE criteria are relevant. Applying that provision, the Tribunal held that differential duty claimed by Revenue in respect of indigenously procured capital goods must be computed using the rate in force on the date of debonding, and directed that duty be calculated accordingly. [Paras 13, 15]

Indigenously procured capital goods: duty payable at the rate prevailing on the date of debonding; duty to be calculated by Revenue.

Exemption from interest under Notification No. 132/2004-Cus - payment of duty at the rate in force on the date of debonding - No interest is payable by the appellant on the duty demanded. - HELD THAT: - The Tribunal relied on Notification No. 132/2004-Cus which exempts interest accrued on customs duties payable by an export oriented undertaking in specified circumstances, and on earlier decisions of the Bench (including the cited appellate precedents) which held that interest is not leviable where the statutory provisions and notifications so provide and where debonding/delay aspects have been considered. Applying that principle, the Tribunal held that the appellant is not liable to pay interest on the duties determined and recorded the same in the operative order. [Paras 14, 15]

No interest payable by the appellant.

Final Conclusion: Appeal allowed in part: for both imported and indigenously procured capital goods the duty shall be calculated at the rate prevailing on the date of debonding; no interest is payable; Revenue to compute any amount payable and collect it within one month.

Existence of undisputed operational debt - pre-existing dispute/notice of dispute - admission under Section 9 of Insolvency and Bankruptcy Code, 2016 - jurisdiction of the Adjudicating Authority - limitation for initiating Corporate Insolvency Resolution Process

Jurisdiction of the Adjudicating Authority - The Adjudicating Authority (NCLT, Cuttack Bench) has jurisdiction to entertain the Section 9 application. - HELD THAT: - The Corporate Debtor's registered office is situated at Raipur, Chhattisgarh. On that basis the Tribunal held that the matter falls within the territorial jurisdiction of the Cuttack Bench and therefore the Adjudicating Authority has competence to hear the petition under Section 9 of the Code. [Paras 4]

Jurisdiction established in favour of NCLT, Cuttack Bench.

Limitation for initiating Corporate Insolvency Resolution Process - The Section 9 application was filed within the period of limitation. - HELD THAT: - The application was filed on 20.06.2018 and the transactions relied upon relate to the years 2016 and 2017. The Tribunal recorded that, on the stated dates of supply, the petition was within the prescribed limitation period for initiating CIRP under the Code. [Paras 5]

Application held to be within limitation.

Existence of undisputed operational debt - pre-existing dispute/notice of dispute - admission under Section 9 of Insolvency and Bankruptcy Code, 2016 - The application under Section 9 was liable to be dismissed because there existed a pre-existing dispute in respect of the invoices, so the requisite condition of an undisputed operational debt was not satisfied. - HELD THAT: - The Tribunal examined the invoices, the debit notes and the parties' pleadings and noted that the Corporate Debtor had raised disputes against each invoice. Applying the test reiterated by the Supreme Court in Transmission Corporation of Andhra Pradesh Ltd. v. Equipment Conductors & Cables Ltd., the Adjudicating Authority considered whether documentary evidence showed a debt that was due and payable and whether there was a pre-existing dispute or notice of dispute prior to receipt of the demand notice. The Tribunal found that a plausible dispute existed (i.e., not merely spurious or illusory) and therefore the Section 9 application could not be admitted. Consequently, the petition was dismissed under the mandate of Section 9(5). [Paras 6, 7, 8, 9, 10]

Section 9 application dismissed due to existence of pre-existing dispute over the claimed operational debt.

Final Conclusion: The petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 was dismissed: the Tribunal found jurisdiction at NCLT, Cuttack, held the application to be within limitation, but rejected admission because of a pre-existing dispute over the invoices, leaving the petitioner free to pursue other remedies.

Mandatory conditions and procedures for rebate under Notification No. 19/2004-C.E. - self-sealing procedure for export goods - substantive condition versus procedural condition - non-waiver of mandatory conditions under Rule 18 of Central Excise Rules, 2002

Self-sealing procedure for export goods - mandatory conditions and procedures for rebate under Notification No. 19/2004-C.E. - Merchant-exporter is not eligible to claim rebate by treating goods cleared from its own warehouse as exported under the self-sealing procedure where the procedural and substantive prerequisites of the Notification were not complied with. - HELD THAT: - The notification prescribes two distinct options for a merchant-exporter to claim rebate: (i) removal directly from the manufacturer's premises under self-sealing; or (ii) sealing in presence of Central Excise authorities from another place of dispatch. The word 'shall' in Para 2(a)-(g) and the mandatory procedure in Para 3(a)(i)-(iii) indicate that both the substantive requirement (duty paid character and identity of goods) and the sealing/examination procedure are obligatory. The Commissioner (Appeals) erred in construing the warehouse of the merchant-exporter as falling within the self-sealing facility available for removal directly from the manufacturer's premises; the factual matrix here involved goods cleared from the respondent's warehouse without prior intimation or prescribed verification, thereby failing to establish the mandatory conditions and identity/duty-paid character required by the notification. Reliance on the Government order in the cited Oil/warehouse pipeline case was factually distinguishable and inapplicable to the present circumstances. [Paras 5, 6]

Commissioner (Appeals) was incorrect in treating the merchant-exporter's warehouse as eligible for self-sealing; the requisite conditions and procedure were not complied with.

Substantive condition versus procedural condition - non-waiver of mandatory conditions under Rule 18 of Central Excise Rules, 2002 - Contravention of mandatory conditions and procedures specified in Para 2 and Para 3 of Notification No. 19/2004-C.E. cannot be waived or relaxed under Rule 18 of the Central Excise Rules, 2002. - HELD THAT: - The Court (Government in revision) applied the established distinction between substantive and merely procedural/technical conditions: non-observance of substantive conditions is not condonable. The conditions in Para 2 and the procedural requirements in Para 3 are mandatory and intended to ensure identity and duty-paid character of exported goods; hence they cannot be relaxed under the rule-making power. On this basis the grant of rebate by the Commissioner (Appeals) was held to be unsustainable and the revision was allowed. [Paras 6, 7, 8]

Mandatory conditions and procedures in Para 2 and Para 3 of Notification No.19/2004-C.E. are non-waivable; revision is allowed on this ground.

Final Conclusion: Revision application allowed; the Order-in-Appeal granting rebate was found erroneous for failure to comply with mandatory conditions and procedures of Notification No.19/2004-C.E., and the relief granted by the Commissioner (Appeals) was set aside.

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttable presumption - Offence under Section 138 of the Negotiable Instruments Act - Dishonour of cheque where account closed - Burden of proof on accused - Probable defence - Reverse onus clause and proportionality

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttable presumption - Burden of proof on accused - Probable defence - Whether the presumption under Section 139 was rightly drawn in favour of the complainant and whether the accused rebutted that presumption. - HELD THAT: - The courts below found the cheque bore the signature of the applicant and that it had been given to the complainant to present to the bank. Section 139 creates a rebuttable presumption in favour of the holder that the cheque was received for discharge of any debt or liability. The accused did not lead any evidence to rebut that presumption; mere denial of the debt was held insufficient. The Court relied on settled principles that, while the presumption is rebuttable and the accused may raise a probable defence, an undischarged presumption shifts the onus to the accused. Having considered the evidence, the High Court held that the presumption was rightly raised and not displaced.

Presumption under Section 139 was rightly drawn in favour of the complainant and was not rebutted by the accused.

Offence under Section 138 of the Negotiable Instruments Act - Dishonour of cheque where account closed - Whether the dishonour of the cheque with endorsement 'account closed' satisfied the ingredients of Section 138 NI Act. - HELD THAT: - Section 138 penalises drawing a cheque on an account maintained with a bank that is returned unpaid because the amount standing to the credit is insufficient or the account is closed. The cheque in question was presented within validity and returned with the endorsement that the applicant's account was closed. The Court observed that closing the account after issuance, resulting in non-payment, falls within the scope of Section 138. Applying these principles to the facts, the courts below correctly held that the ingredients of Section 138 were made out.

Dishonour with endorsement 'account closed' satisfied the ingredients of Section 138 and justified conviction.

Burden of proof on accused - Rebuttable presumption - Whether alleged defects in service of the statutory notice or absence of witness to refusal vitiated the complaint under Section 138. - HELD THAT: - The complainant's evidence showed the notice was issued and the applicant refused to accept it. The courts noted absence of the postman or a witness to the refusal was relied upon by the accused, but the accused did not adduce evidence to controvert the complainant's account or to establish non-service. Given the presumption under Section 139 and the accused's failure to lead evidence to rebut material facts, the High Court found no merit in the contention that notice defects ousted criminal liability under Section 138.

Alleged defects in notice/service did not vitiate the prosecution where the accused failed to rebut the complainant's evidence.

Final Conclusion: The High Court found no illegality or perversity in the concurrent findings of the trial and appellate courts: the presumption under Section 139 was rightly drawn and not rebutted, the dishonour of the cheque marked 'account closed' fulfilled the ingredients of Section 138, and defects alleged in notice/service did not undermine the conviction; the revision is dismissed.