TaxTMI Updates e-Newsletter
Mar 17,2023

Cause of action - clause (2) of Article 226 - jurisdiction where cause of action at least partly arises within territorial limits - territorial jurisdiction of a High Court - petition memo pleading requirements for jurisdictional nexus - forum conveniens - deletion from array of respondents - exercise of writ jurisdiction where impugned act concerns another State

Cause of action - clause (2) of Article 226 - jurisdiction where cause of action at least partly arises within territorial limits - territorial jurisdiction of a High Court - petition memo pleading requirements for jurisdictional nexus - Whether the High Court was justified in holding that at least part of the cause of action arose within its territorial jurisdiction and dismissing the appellant's applications. - HELD THAT: - The Court examined the petition memo to determine whether material facts constituting an integral part of the cause of action had been pleaded as arising within the High Court's territory. Clause (2) of Article 226 requires that at least part of the cause of action arise within the territorial jurisdiction; for a writ petition this means the petitioner must disclose pleaded facts having a nexus with the subject-matter of challenge. The petition in W.P.(C) No. 38 merely asserted that the cause of action arose in Sikkim and that parties were located within that High Court's territory, without pleading how any essential fact giving rise to the challenge occurred in Sikkim. The impugned notification by the Government of Goa operated to levy tax on business carried on in Goa, and the immediate legal consequence complained of (liability to pay tax to Goa) arose in Goa, not in Sikkim. Applying the principle that the substance of pleaded facts determines jurisdiction (and following the reasoning in National Textile Corporation Ltd. v. Haribox Swalram), the Court held that the High Court could not properly conclude that part of the cause of action had been pleaded as arising within its territorial limits. [Paras 6, 14, 15, 16, 17]

High Court's finding that at least part of the cause of action arose within its jurisdiction was unjustified; the applications challenging the appellant's inclusion should not have been dismissed on that ground.

Forum conveniens - exercise of writ jurisdiction where impugned act concerns another State - Whether the High Court should have applied the doctrine of forum conveniens before retaining the writ petitions against the appellant even if a slender part of cause of action were held to arise within its territory. - HELD THAT: - Even assuming, arguendo, that a small part of the cause of action arose within the State of Sikkim, the Court observed that the High Court ought to have considered the doctrine of forum conveniens. Precedents establish that the mere fact that a fragment of cause of action arises within a forum does not render that forum the appropriate or obligatory forum to adjudicate the entire dispute; the court must consider whether another forum is more appropriate to decide the controversy. The High Court failed to undertake this exercise before dismissing the appellant's applications and retaining the appellant as respondent for adjudication on merits. [Paras 18]

High Court erred in not considering forum conveniens; retaining the appellant without that consideration was not justified.

Deletion from array of respondents - petition memo pleading requirements for jurisdictional nexus - Relief to be granted consequent to the High Court's error in dismissing the appellant's applications. - HELD THAT: - Because the High Court erred in finding territorial jurisdiction and in failing to consider forum conveniens, the Supreme Court set aside the impugned order and allowed the appeals. The appropriate remedy was to delete the appellant from the array of respondents in the three writ petitions and to vacate the interim stay so that the High Court may proceed against the remaining respondents. The Court also clarified that the writ petitioners remain free to challenge the impugned notification before the appropriate forum in accordance with law. [Paras 19, 20, 21, 22]

Appeals allowed; appellant deleted from array of respondents; interim stay vacated; petitioners free to approach appropriate court.

Final Conclusion: The High Court wrongly concluded that part of the cause of action arose within its territorial jurisdiction and failed to consider forum conveniens; its order dismissing the applications is set aside, the appellant is deleted as respondent in the three writ petitions, and the High Court may proceed against other parties while leaving petitioners free to challenge the notification before the appropriate forum.

Anticipatory bail - conditions for grant of bail - deposit to protect revenue - custodial interrogation where case is documentary and electronic - punishment prescribed under Section 132(i)(iii) of the GST law - precedential restraint on imposing deposit-condition while granting bail

Conditions for grant of bail - deposit to protect revenue - precedential restraint on imposing deposit-condition while granting bail - Imposition of a condition requiring deposit of alleged revenue loss as a term for grant of anticipatory bail. - HELD THAT: - The Court treated the question whether a condition that the appellant deposit a portion of the alleged revenue loss can be imposed as a prerequisite for anticipatory bail. Reliance was placed on this Court's earlier decisions in Criminal Appeal No. 186/2023 (Subhash Chouhan) and Criminal Appeal No. 523/2023 (Anatbhai Ashokbhai Shah), where orders of High Courts imposing deposit-conditions while granting bail were set aside and it was recorded that such a condition cannot be imposed. The facts of the present case were held to be identical in relevant respects to those earlier matters, and no basis was shown to depart from the principle established by those decisions. Accordingly, the High Court's order imposing or treating deposit as a condition was set aside and the appellant was held entitled to anticipatory bail without imposition of the suggested deposit-condition.

Condition of deposit of alleged revenue loss could not be imposed as a prerequisite for anticipatory bail; the High Court order in that regard is set aside.

Anticipatory bail - custodial interrogation where case is documentary and electronic - punishment prescribed under Section 132(i)(iii) of the GST law - Whether the appellant should be granted anticipatory bail having regard to the nature of the allegations, available documentary/electronic evidence and the statutory punishment. - HELD THAT: - Counsel for the appellant urged that the offence under the GST provisions invoked (Section 132(i)(iii) referenced in argument) carries a term which may extend to one year and the case is predominantly based on documentary and electronic material already on record, negating any need for custodial interrogation. The Court accepted the reasoning of the earlier precedents and, on that basis, held that the appellant is entitled to anticipatory bail. The Court directed that if the appellant is arrested he shall be released forthwith, subject only to such terms and conditions as the Trial Court or investigating agency may deem fit to impose (but not including the deposit-condition struck down).

Appellant entitled to anticipatory bail; if arrested he shall be released forthwith subject to appropriate non-deposit terms and conditions by the Trial Court/Investigating Agency.

Final Conclusion: The High Court order rejecting anticipatory bail is set aside and the appeal is allowed: the appellant is entitled to anticipatory bail and, if arrested, shall be released forthwith subject to such terms as the Trial Court or investigating agency may impose, but not a condition requiring deposit of alleged revenue loss.

Anticipatory bail - pre-arrest bail - summons to witness - cooperation with investigation - reason to believe - power to arrest under Section 69 of the MGST Act - premature application for anticipatory bail - liberty to apply at an appropriate stage

Anticipatory bail - premature application for anticipatory bail - summons to witness - cooperation with investigation - Application for anticipatory (pre-arrest) bail was premature and was rejected while liberty to apply at an appropriate stage was reserved. - HELD THAT: - The court examined whether the applicant was entitled to anticipatory bail before the investigating authority recorded his statement or formed a settled "reason to believe" necessitating arrest. The record shows multiple witness summons were issued to the applicant which he did not comply with and that investigative materials (statements of other accused, whatsapp chats, invoices) prima facie warranted further inquiry. The learned Judge observed that the present stage of proceedings required completion of investigation and cooperation by the applicant rather than grant of anticipatory relief. The Court further noted the statutory scheme under which arrest may be authorized only when there is a reason to believe (as articulated with reference to the power under Section 69 of the MGST Act) and that, in the absence of such crystallised reason and before recording the applicant's statement, apprehension of arrest was unfounded. Consequently the application was refused as premature, the applicant was directed to attend and cooperate when freshly summoned for recording of his statement and production/verification of books of account, and liberty was reserved to seek anticipatory bail later if circumstances so require. [Paras 11, 12, 13, 14, 16]

Application for anticipatory bail rejected as premature; applicant directed to cooperate with investigation and attend on fresh witness summons; liberty to apply for anticipatory bail at an appropriate stage is kept open.

Final Conclusion: The petition for pre-arrest/anticipatory bail is dismissed as premature; the applicant must cooperate with the investigation and attend pursuant to a fresh witness summons, and he may renew his application for anticipatory bail at an appropriate later stage.

Reasoned order requirement in quasi-judicial decisions - cancellation of registration - non-speaking order - appellate authority's power to remand - validation of order by introducing fresh facts - amendment of registration - restoration of registration

Cancellation of registration - non-speaking order - reasoned order requirement in quasi-judicial decisions - appellate authority's power to remand - validation of order by introducing fresh facts - Validity of the cancellation of the appellants' WBGST registration and correctness of the appellate authority upholding the cancellation. - HELD THAT: - The show cause notice and the original order confirming cancellation were found to be vague and devoid of any material specifying the alleged fraud or willful misstatement. The original authority recorded no reasons in support of its conclusion. An appellate authority confronted with an original non speaking order ought to have set aside that order and remanded the matter to the original authority for fresh consideration rather than attempting to validate the original order by introducing fresh facts and reasons on appeal. Consequently, the appellate authority's approach of upholding the cancellation by supplying fresh facts and reasons was improper. [Paras 3, 4, 5]

The order of cancellation and the appellate authority's order upholding it are set aside insofar as they seek to validate a non speaking original order; remand would have been the appropriate course instead of validating by introducing fresh facts.

Amendment of registration - restoration of registration - Effect of the subsequent amendment of the registration and the appropriate relief. - HELD THAT: - The appellants applied for and obtained amendment of the registration to reflect the correct address after inspection and order dated 24th March, 2021. Any earlier discrepancy in uploaded particulars ceased to subsist from the date of the amended registration. Having regard to the amendment, prompt filing of returns and remittance of taxes as placed on record, the Court concluded that the registration should be restored. The Court therefore directed restoration of the registration showing the amended address within seven days of receipt of the certified copy of this judgment. [Paras 6, 7, 8]

Registration is to be restored and the orders of the original and appellate authorities are set aside; the original authority is directed to restore the appellants' registration reflecting the amended address within seven days.

Final Conclusion: The cancellation of the appellants' WBGST registration was set aside because the original order was non speaking and the appellate authority should have remanded rather than validate it by adducing fresh facts; in view of the subsequent amendment of the registration and compliance with filing and tax remittance, the registration is restored and the impugned orders are set aside with a direction to restore the amended registration within seven days.

Cancellation of GST registration - Right to seek cancellation on discontinuance of business - Requirement of a reasoned order and application of mind - Show cause notice must disclose particulars - Retrospective cancellation - Power to recover tax, interest and penalty despite cancellation

Requirement of a reasoned order and application of mind - Show cause notice must disclose particulars - Validity of the order dated 27.12.2021 rejecting the petitioner's application for cancellation of GST registration. - HELD THAT: - The order of rejection purports to record examination of a reply though, as admitted in the record, no reply had been filed by the petitioner. The rejection therefore was passed without application of mind and fails to disclose any cogent reasons; the prior communication that purported to invite a response was itself cryptic and did not set out particulars justifying rejection. For these reasons the rejection order is unsustainable and cannot stand. [Paras 4, 5, 10]

The rejection order dated 27.12.2021 is unsustainable as it was passed without application of mind and without disclosing reasons.

Cancellation of GST registration - Right to seek cancellation on discontinuance of business - Retrospective cancellation - Validity of the respondents' suo moto cancellation dated 24.08.2022 which made the registration defunct with retrospective effect from 02.07.2017 and the appropriate effective date of cancellation. - HELD THAT: - The petitioner had applied for cancellation with effect from 31.07.2021 on the ground of discontinuance/closure of business, a ground on which the petitioner is entitled to seek cancellation. The respondents issued a show cause notice alleging non filing of returns for six continuous months and thereafter cancelled registration retrospectively to 02.07.2017. The retrospective effect is not justified in the circumstances and there is no adequate reason recorded for backdating cancellation to 2017. The petition therefore must be allowed and the respondents directed to cancel the registration with effect from the date sought by the petitioner. [Paras 7, 8, 10, 11]

Respondents' cancellation with retrospective effect to 02.07.2017 is not sustained; registration is to be cancelled with effect from 31.07.2021 as requested by the petitioner.

Power to recover tax, interest and penalty despite cancellation - Whether cancellation of registration as directed precludes the respondents from recovering tax, interest or penalty. - HELD THAT: - The Court clarified that directing cancellation with effect from the petitioner's requested date will not impede the respondents from taking steps to recover any tax, interest or penalty found due in accordance with law. The adjudicatory and recovery powers available to the tax authorities remain intact notwithstanding the grant of the cancellation relief. [Paras 12]

Cancellation directed from 31.07.2021 does not preclude respondents from recovering tax, interest or penalty as may be due under law.

Final Conclusion: The petition is allowed: the rejection order is set aside and the respondent authority is directed to cancel the petitioner's GST registration with effect from 31.07.2021; the authority remains entitled to pursue recovery of any tax, interest or penalty in accordance with law.

Attachment of bank accounts - jurisdiction to attach accounts of non-taxpayer - forum competence to entertain writ petition - draconian measure of attachment as last resort - interim suspension of attachment - deposit in court as condition for interim relief

Forum competence to entertain writ petition - jurisdiction to attach accounts of non-taxpayer - Whether the Delhi High Court may entertain the petition challenging attachment of the petitioner's Delhi bank account and whether the petitioner should be relegated to another jurisdiction. - HELD THAT: - The Court held that the earlier order in W.P.(C) 12361/2022 (Naveen Aggarwal) - being a voluntary withdrawal - does not operate as a precedent to oust this Court's jurisdiction. The petitioner is a registered dealer within Delhi and the bank accounts attached are located in Delhi; on these facts it is not apposite to direct the petitioner to seek relief in another forum. The petition also raises substantial questions regarding the respondent's jurisdiction to attach the petitioner's account given that no proceedings are shown to have been initiated against the petitioner and the only material at this stage is a transfer into the petitioner's account. The Court, therefore, entertained the petition and proceeded to grant interim relief while permitting the respondents opportunity to file a counter and to state reasons for the attachment. [Paras 6, 7, 8, 10, 17]

This Court will entertain the petition; the petitioner need not be relegated to another jurisdiction and the respondents must state the reasons for the attachment.

Draconian measure of attachment as last resort - interim suspension of attachment - deposit in court as condition for interim relief - Whether the attachment shall be suspended and on what interim terms the petitioner may operate the attached bank account. - HELD THAT: - Recognising that attachment of bank accounts is a draconian measure to be used as last resort and that there is no material at this stage against the petitioner beyond the fund transfer, the Court suspended the attachment as an interim measure. The suspension is conditional: the petitioner is directed to deposit the amount equal to the sum transferred into the Registry of the Court within one week. The Registry must place the amount in a fixed deposit for six months with auto-renewal. The bank is directed to comply with the petitioner's instruction to remit the sum to the Registrar General notwithstanding the attachment order. The respondents are granted time to file a counter-affidavit and to place the relevant files before the Court. [Paras 13, 14, 15, 16, 17]

Attachment suspended; petitioner may operate the account subject to depositing the specified sum in Court (to be kept in a fixed deposit) and the bank shall comply with remittance to the Registrar General; respondents to file counter and record reasons for attachment.

Final Conclusion: The writ petition was entertained by the Delhi High Court; the attachment of the petitioner's Delhi bank account is suspended on interim terms requiring the petitioner to deposit the transferred sum in Court (to be placed in a fixed deposit) and the respondents directed to file a counter and state reasons for the attachment, with the matter listed for further hearing.

Refund of tax - rectification of return - typographical error in GST return - setting aside adjudication order - remand for fresh consideration - expeditious disposal of pending refund applications

Typographical error in GST return - rectification of return - refund of tax - setting aside adjudication order - remand for fresh consideration - Impugned orders rejecting the petitioner's refund application on account of a typographical error in the declared turnover and non-rectification of the return were liable to be set aside and the matter remitted for fresh consideration. - HELD THAT: - The petitioner's return for April 2019 erroneously recorded the turnover by a misplaced digit; the tax liability and other return details were correctly reflected. The Adjudicating Authority rejected the refund application because the return was not rectified. This Court recorded a prima facie view that the rejection was unsustainable in the circumstances and observed that the petitioner had since provided documents for rectification. In view of these facts and the respondents' acceptance that the petitioner's rectification documents have been furnished, the Court set aside the orders rejecting the refund application and restored the application to the Adjudicating Authority for de novo consideration. The Court directed that the Adjudicating Authority process the refund application expeditiously and preferably within four weeks.

The orders of rejection are set aside; the refund application is restored for fresh consideration by the Adjudicating Authority, to be processed expeditiously (preferably within four weeks).

Final Conclusion: The High Court allowed the petition to the extent of setting aside the adjudication orders which rejected the refund application due to a typographical error, and remitted the application to the Adjudicating Authority for fresh and expeditious adjudication within four weeks.

Arm's length price of Advertisement, Marketing and Promotion (AMP) expenditure - international transaction - characterisation of the assessee as manufacturer versus distributor - promotion of Associated Enterprise's brand and implications for transfer pricing - bifurcation between AMP expenditure and selling expenses - acceptance of inter-company purchases and sales at arm's length

Characterisation of the assessee as manufacturer versus distributor - Whether the assessee is a manufacturer (and not merely a distributor) for the purposes of determining whether AMP expenditure constituted an international transaction attractable to transfer pricing adjustment. - HELD THAT: - The Tribunal examined the assessee's factual matrix, including outsourcing of production to toll/contract manufacturers under licence, procurement and conversion of raw materials, and financial statements showing manufacturing, consumption of raw materials, sales and excise levy. On these facts the Tribunal found that the assessee manufactured products (either directly or through contract manufacturers) and was therefore not merely a distributor. The High Court found no material to dislodge this factual finding or to show perversity in the Tribunal's conclusion, and declined to interfere.

The assessee was correctly held to be a manufacturer (including production through contract manufacturers); the revenue's contention that it was only a distributor was rejected.

International transaction - arm's length price of Advertisement, Marketing and Promotion (AMP) expenditure - Whether AMP expenditure incurred by the assessee in India amounted to an international transaction requiring upward adjustment to arm's length price. - HELD THAT: - The Tribunal found that the revenue had assumed, without supporting material, that AMP expenditure promoted the brand of the Associated Enterprise and thus constituted an international transaction. On examination, the Tribunal concluded that the assessee had not paid royalty or trademark fees to its AEs, that AMP was reflected in pricing fixed by the AEs, and that inter-company purchases and sales and recovery of expenses were accepted as at arm's length. The High Court held that these factual findings sustain the Tribunal's deletion of the upward adjustment, and that mere assumption of brand-promotion or use of a foreign word as the company name does not automatically convert local AMP spending into an international transaction.

The Tribunal rightly deleted the AMP-related upward transfer pricing adjustments; AMP expenditure did not amount to an international transaction warranting the additions.

Promotion of Associated Enterprise's brand and implications for transfer pricing - usage of foreign trade name and relevance to international transaction - Whether use of the foreign word 'Organon' as the assessee's name or allegation of promotion of the AE's brands converts AMP expenditure into promotion of an Associated Enterprise's brand for transfer pricing purposes. - HELD THAT: - The Tribunal held that the corporate name containing a foreign word is immaterial; what matters is whether products or brands of the AE were promoted. After factual scrutiny the Tribunal found no evidence that the assessee promoted the AE's brand or incurred AMP that benefited the AE in a manner attracting compensation. The High Court approved this analysis, noting that mere usage of a foreign word in the company name does not by itself bring the expenditure within the ambit of international transactions.

Usage of the foreign trade name did not convert the AMP expenditure into promotion of the AE's brand; the contention was rejected.

Bifurcation between AMP expenditure and selling expenses - Whether selling expenses incurred by the assessee were rightly characterized as AMP expenditure by the TPO/DRP and included in AMP for transfer pricing adjustment. - HELD THAT: - The Tribunal found on the facts that the expenses in question related purely to the assessee's products and were identified and bifurcated by the assessee at the time of incurrence into AMP and selling expenditure. The revenue had ignored this contemporaneous bifurcation. The Tribunal's factual conclusion that the challenged expenses were selling expenses for the assessee's own products and not AMP benefiting an AE was sustained by the High Court.

The Tribunal correctly excluded the selling expenses from AMP-based transfer pricing adjustments and accepted the assessee's bifurcation.

Acceptance of inter-company purchases and sales at arm's length - Whether the inter-company transactions of purchase of raw materials, purchase and sale of finished goods and recovery of expenses with Associated Enterprises were at arm's length. - HELD THAT: - The Tribunal recorded that these international transactions had been duly accepted as at arm's length on the facts. That finding formed part of the factual basis for rejecting the revenue's claim that AMP expenditure warranted additional compensation. The High Court found no reason to upset the Tribunal's acceptance of these transactions being at arm's length.

Inter-company purchases, sales and recovery of expenses with the AEs were accepted as at arm's length and supported the deletion of AMP-related adjustments.

Final Conclusion: The appeal by the revenue is dismissed. The Tribunal's deletions of the upward transfer pricing adjustments in respect of AMP expenditure for assessment years 2012-13 and 2013-14 are upheld, the substantial question of law is answered against the revenue, and there is no interference with the Tribunal's factual findings.

Disallowance under section 14A read with Rule 8D(2)(ii) - requirement of assessing officer's recorded satisfaction before invoking Rule 8D - apportionment principle under section 14A - availability of own funds as excluding proportionate disallowance - carry forward of depreciation under section 32(1)(iia)

Disallowance under section 14A read with Rule 8D(2)(ii) - requirement of assessing officer's recorded satisfaction before invoking Rule 8D - availability of own funds as excluding proportionate disallowance - apportionment principle under section 14A - Whether the assessing officer could invoke Rule 8D(2)(ii) to compute disallowance under section 14A when he had not recorded satisfaction after examining the assessee's claim and accounts, and where the assessee had sufficient own funds. - HELD THAT: - The Tribunal found that the assessing officer neither examined the assessee's accounts nor recorded any satisfaction as to the correctness of the assessee's claim before invoking Rule 8D(2)(ii), and therefore applied the computation provision impermissibly. The Tribunal also considered a chart produced by the assessee showing that own funds were several times the investments, permitting the inference that borrowed funds were not used for making the investments; on that factual basis the Tribunal declined proportionate disallowance. The High Court treated these findings as consonant with the principle that section 14A operates on the basis of apportionment and that the Assessing Officer must reach an objective satisfaction before replacing the assessee's claim by Rule 8D computation. The Court noted and relied upon earlier judicial conclusions in related authorities, including Commissioner of Income Tax (Large Tax Payers Unit) Kolkata v. M/s. Century Plyboards (I) Ltd. , Kesoram Industries Ltd. , Maxopp Investment Ltd. and South Indian Bank Ltd. , to the effect that where interest-free own funds exceed investments producing exempt income, proportionate disallowance is not warranted and that the AO must record reasons and satisfaction to invoke Rule 8D. Having regard to the Tribunal's factual finding of availability of own funds and absence of any recorded satisfaction by the assessing officer, the Court answered this question against the revenue. [Paras 13, 14, 27, 28]

The Tribunal correctly held that Rule 8D(2)(ii) could not be invoked in the absence of the assessing officer's recorded satisfaction and that, on the recorded facts of sufficient own funds, proportionate disallowance under section 14A was not warranted.

Carry forward of depreciation under section 32(1)(iia) - Whether the assessee is entitled to claim the carry forward portion of depreciation under section 32(1)(iia). - HELD THAT: - The Court observed that the identical question had arisen in the assessee's earlier matter for assessment year 2006-07 in ITA/19/2015, in which the revenue's appeal was dismissed by judgment dated 27th February, 2023. Following that prior decision in the assessee's favour, the Court answered the present substantial question against the revenue.

The assessee is entitled to the carry forward portion of depreciation under section 32(1)(iia); the substantial question is answered against the revenue following the earlier decision.

Final Conclusion: The revenue's appeal is dismissed; both substantial questions of law are answered against the revenue and in favour of the assessee.

Computation of profits and gains of insurance business in accordance with the First Schedule - non-obstante clause in Section 44 giving the First Schedule precedence over other provisions - exclusion of provisions relating to computation under heads of income and Sections 28 to 43B and Section 199 for insurers - inapplicability of general disallowance provisions (including Section 40(a) and Section 43B) where Section 44 governs computation

Computation of profits and gains of insurance business in accordance with the First Schedule - non-obstante clause in Section 44 giving the First Schedule precedence over other provisions - inapplicability of disallowances under general provisions (including Section 40(a) and Section 43B) to insurers where Section 44 applies - The Tribunal erred in sustaining disallowances made by the Assessing Officer for interest on TDS, unpaid bonus and unpaid leave encashment instead of applying Section 44 read with the First Schedule to compute the profits and gains of the life insurance business. - HELD THAT: - The Court held that Section 44 contains a clear non-obstante clause directing that the profits and gains of any insurance business shall be computed in accordance with the rules in the First Schedule, notwithstanding contrary provisions of the Act relating to computation under specified heads of income and specific sections including Section 199 and Sections 28 to 43B. Consequently, where Section 44 and the First Schedule apply to an insurer's business, provisions of the Act such as those relied upon by the Tribunal (including Section 40(a) for TDS interest and Section 43B for certain disallowances) are specifically excluded. The rationale applied by the Tribunal in allowing the deletion of the investment amortization disallowance was held to be equally applicable to the other disallowances; the Tribunal therefore erred in reverting to general disallowance provisions which Section 44 expressly displaces. For these reasons the Tribunal's conclusions on the three challenged disallowances were set aside and the appeal allowed. [Paras 14, 15, 16, 18, 19]

Allow appeal; set aside the Tribunal's order insofar as it sustained disallowances relating to interest on TDS, unpaid bonus and unpaid leave encashment; computation to follow Section 44 read with the First Schedule.

Final Conclusion: The appeal is allowed: the Tribunal misapplied general provisions of the Act to an insurer's income computation where Section 44 and the First Schedule govern, and the impugned disallowances are set aside for AY 2014-15.

Revisionary power under Section 263 of the Income Tax Act - erroneous and prejudicial to the interests of revenue - scope of inquiry under Section 133(6) of the Income Tax Act - limited scrutiny under CASS - reappreciation of evidence by revisional authority - assessment framed under Section 143(3) of the Income Tax Act - deductions of tax at source under Section 194C of the Income Tax Act

Revisionary power under Section 263 of the Income Tax Act - erroneous and prejudicial to the interests of revenue - reappreciation of evidence by revisional authority - assessment framed under Section 143(3) of the Income Tax Act - Whether the Principal Commissioner of Income Tax was justified in invoking his powers under Section 263 to set aside the assessment framed under Section 143(3) in respect of job work payments claimed as expenditure. - HELD THAT: - The Court upheld the Tribunal's conclusion that the PCIT's exercise of jurisdiction under Section 263 could not be sustained. The Tribunal found on the record that the Assessing Officer had specifically queried job work charges, and the assessee had furnished party-wise bills and vouchers, payments were made by account-payee cheques, tax was deducted at source in respect of each payment, and confirmations from parties were available. Given those materials, the PCIT's action amounted to a reappreciation of evidence rather than a finding that the AO's order was erroneous. Further, the practical difficulties of issuing statutory notices under Section 133(6) to largely migrant job-workers for work done in 2014-15 - and the lapse of nearly three years before scrutiny - rendered such an inquiry impracticable and of little utility. The job-work expenditure (around 7.6% of contract receipts) was also consistent with the prior year (about 8.61%), reinforcing the genuineness of the payments. Since the first constituent of Section 263 - that the assessment order is erroneous - was not established, the impugned revisional order could not be sustained. [Paras 23, 24, 25, 27, 31]

The PCIT's order setting aside the assessment under Section 263 was set aside and the assessment framed by the AO under Section 143(3) was upheld.

Scope of inquiry under Section 133(6) of the Income Tax Act - limited scrutiny under CASS - deductions of tax at source under Section 194C of the Income Tax Act - Whether absence of inquiry under Section 133(6) rendered the assessment erroneous and prejudicial to revenue in the facts of the case. - HELD THAT: - The Court agreed with the Tribunal that mere non-issuance of notices under Section 133(6) did not, in the circumstances, make the assessment erroneous. The nature of the assessee's construction business, reliance on migrant and mobile labour, the passage of time (job work carried out in 2014-15 and scrutiny initiated after about three years), and the existence of supporting documentation, cheque payments and withholding of tax under Section 194C made such inquiries impracticable and unlikely to be fruitful. The PCIT did not place any material showing the job-work payments were bogus or inflated; therefore the lack of Section 133(6) inquiry could not, by itself, justify revision under Section 263. [Paras 22, 23]

Non-issuance of notices under Section 133(6) did not render the assessment erroneous or justify exercise of jurisdiction under Section 263 in the present facts.

Final Conclusion: The High Court dismissed the Revenue's appeal, affirming the Tribunal's order setting aside the PCIT's revisionary order under Section 263 and upholding the assessment framed under Section 143(3), on the grounds that the revisional jurisdiction was impermissibly invoked after reappreciation of evidence and that absence of a Section 133(6) inquiry did not render the assessment erroneous in the circumstances of 2014-15.

Power to rectify or recall orders under Section 254(2) of the Income Tax Act - rectification of mistake from the record - opportunity of hearing and setting aside ex parte orders - Rule 25 of the Income Tax Appellate Tribunal Rules, 1963 - recall of ex parte orders - condonation of delay in re-filing appeals

Condonation of delay in re-filing appeals - Application for condonation of delay of 100 days in re-filing the appeals was allowed. - HELD THAT: - The applications filed on behalf of the appellant/revenue sought condonation of 100 days' delay in re-filing the appeals. Having considered the reasons set out in the applications, the High Court accepted them and condoned the delay. The Court disposed of those applications accordingly. [Paras 4]

Delay in re-filing the appeals of 100 days is condoned.

Power to rectify or recall orders under Section 254(2) of the Income Tax Act - rectification of mistake from the record - opportunity of hearing and setting aside ex parte orders - Rule 25 of the Income Tax Appellate Tribunal Rules, 1963 - recall of ex parte orders - Tribunal was justified in recalling its earlier ex parte order rendered on merits by exercising power to rectify its mistake and set aside the ex parte order. - HELD THAT: - The Tribunal's recall followed findings that the respondent/assessee had not received notice of the hearing date and filed an affidavit to that effect, a fact not controverted by the revenue. The record also contained a mistaken notation as to appearances. The Court held that where a mistake by the Tribunal causes prejudice, the Tribunal may rectify that mistake under the provision empowering rectification and may in any event act under Rule 25 to set aside an ex parte order if the respondent satisfies the Tribunal of sufficient cause for non-appearance. The High Court rejected the contention that an order rendered on merits could not be recalled when the recall was corrective of a Tribunal's mistake and necessary to afford the parties an opportunity of hearing; the availability of the power, even if not expressly cited by the Tribunal, justified the recall in the interest of justice. [Paras 9, 10, 11, 12, 13]

The Tribunal was entitled to recall its order dated 26.10.2018 to rectify the mistake and to restore the matter for hearing; the recall was upheld.

Final Conclusion: The appeals are dismissed; the Tribunal's order recalling its earlier ex parte order is sustained and the delay in re-filing the appeals is condoned.

Long term capital gains exemption under section 10(38) - sham transaction / accommodation entry to mask undisclosed income - rejection of claim on the basis of preponderance of probabilities and surrounding circumstances - addition as unexplained income on the basis of investigation reports and material from brokers/entry providers - quantification of commission/charges as unexplained expenditure - taxation under section 115BBE

Long term capital gains exemption under section 10(38) - sham transaction / accommodation entry to mask undisclosed income - rejection of claim on the basis of preponderance of probabilities and surrounding circumstances - Whether the assessee's claim of exempt long term capital gains under section 10(38) in respect of sale of penny stock shares was genuine or was a colourable device/accommodation entry to account for undisclosed income. - HELD THAT: - The Tribunal affirmed the conclusions of the Assessing Officer and the First Appellate Authority that the alleged LTCG was not genuine. The transaction involved penny stock shares which yielded an extraordinary return (17,960%) in a short period - a circumstance that, together with investigative material and the surrounding facts, indicated the use of a colourable device. The CIT(A) found that documents produced by the assessee served as a smoke screen and that the authorities had correctly separated apparent from real transactions using reliable information. Applying the test of human conduct, surrounding circumstances and preponderance of probabilities, the authorities' factual conclusion that the transactions were sham/accommodation entries was upheld. [Paras 5]

The claim of exempt LTCG under section 10(38) was rejected as the transactions were held to be sham/accommodation entries and the addition was sustained.

Addition as unexplained income on the basis of investigation reports and material from brokers/entry providers - quantification of commission/charges as unexplained expenditure - Whether the AO was justified in adding the LTCG as unexplained income and in quantifying and adding alleged commission/charges as unexplained expenditure based on statements and investigation material. - HELD THAT: - The Tribunal concurred with the AO and CIT(A) that, in view of the finding that the share transactions were arranged to create bogus profit, the amounts representing the purported LTCG were properly assessable as unexplained income. Furthermore, the AO's quantification of commission/charges as unexplained expenditure - made on the basis of statements of brokers/entry providers and other material gathered during investigation - was held to be reasonable in the facts of the case. The appellate authority's view that arranging such accommodation entries entails payment of commission and that the AO had correctly quantified and added such amounts was affirmed. [Paras 5]

The additions of the alleged LTCG as unexplained income and of the commission/charges as unexplained expenditure were upheld.

Taxation under section 115BBE - Whether the authorities were justified in invoking special taxation provisions in relation to the additions (as contested by the assessee). - HELD THAT: - The Tribunal noted that the orders of the AO and CIT(A) were speaking and elaborate and found no infirmity in their approach, which included treatment of the amounts derived from the sham transactions for tax consequences. By upholding the findings that the gains were colourable and the additions and related quantifications were correct, the Tribunal implicitly sustained the tax treatment applied by the authorities in the assessment chain. [Paras 5, 6]

The tax treatment applied by the authorities, including invocation of the relevant taxation provision for the additions, was sustained.

Final Conclusion: The Tribunal dismissed the assessee's appeal for Assessment Year 2015-16, upholding the Assessing Officer's and CIT(A)'s findings that the claimed LTCG were not genuine but accommodation entries, sustaining the additions as unexplained income and the quantification of commission/charges, and affirming the tax treatment applied by the authorities.

Bogus purchases - Estimation of profit on bogus purchases - Judicial approach to quantum of addition in accommodation-entry cases - Reassessment under section 147 and notice under section 148 (reopening of assessment)

Reassessment under section 147 and notice under section 148 (reopening of assessment) - Reopening of assessment was not pressed by the assessee and related grounds are dismissed as not pressed. - HELD THAT: - The assessee did not press the grounds challenging the validity of the reassessment proceedings before the Tribunal. The learned Departmental Representative did not object to the non-pressing. Consequently the Tribunal recorded that the grounds relating to reopening of the assessment are dismissed as not pressed and did not adjudicate the merits of validity of reopening. [Paras 7]

Grounds challenging the validity of reopening of assessment dismissed as not pressed.

Bogus purchases - Estimation of profit on bogus purchases - Judicial approach to quantum of addition in accommodation-entry cases - Extent of addition to be made where purchases from identified accommodation-entry suppliers are held to be bogus; whether the addition should be entire bogus purchase or a percentage, and what percentage is appropriate on the facts. - HELD THAT: - The Assessing Officer, relying on information from the Investigation Wing, concluded that purchases of Rs.25,63,834/- from three entities were accommodation entries and made addition of the entire amount. The CIT(A) reduced the addition by applying a 25% estimation of profit as recognised in several precedents and practice in accommodation-entry cases. The Tribunal noted that the books of account were not rejected, sales were accepted, payments were made through banking channels, and affidavits from the supplier were on record confirming sales, although the suppliers had earlier been implicated in investigations. Having considered the totality of facts, the Tribunal found reason to adjust the quantum fixed by the CIT(A). Applying its evaluative discretion and taking into account industry norms and the authorities cited showing lower estimation percentages in comparable cases, the Tribunal modified the CIT(A)'s order and directed the Assessing Officer to restrict the addition to 15% of the purchases treated as bogus, rather than 25%. The Tribunal gave effect to this direction in respect of all three appeals for the relevant assessment years. [Paras 11, 12, 14]

Addition restricted to 15% of the purchases held to be bogus; appeals partly allowed.

Final Conclusion: The Tribunal dismissed as not pressed the grounds attacking reopening of assessment and, on the merits of quantum, reduced the addition sustained by the CIT(A) and directed the Assessing Officer to restrict the disallowance to 15% of purchases held to be bogus for the assessment years before the Tribunal; all three appeals are partly allowed.

Admissibility of statements recorded under section 133A - Reliance on confessions made during survey/search - Requirement of corroborative credible evidence for additions - Retraction of statement and its evidentiary effect - Double taxation of same transaction

Admissibility of statements recorded under section 133A - Requirement of corroborative credible evidence for additions - Retraction of statement and its evidentiary effect - Deletion of addition of Rs.2,00,00,000/- made solely on the basis of the director's statement recorded during survey. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the addition because the Assessing Officer relied only on a statement made during a survey under section 133A, which was subsequently retracted by the director by affidavit. The CBDT instruction F.No.286/2/2003-IT (Inv.) (10.03.2003) advises that confessions made during search/survey should not be the basis of additions unless supported by credible evidence. Judicial precedents hold that statements recorded during survey under section 133A have no conclusive evidentiary value and cannot alone sustain an addition. As the Revenue had no other material or corroborative evidence besides the retracted statement, the addition could not be sustained. [Paras 14, 15, 19, 20]

Addition made solely on the basis of the survey statement was rightly deleted for want of corroborative credible evidence and in view of retraction.

Double taxation of same transaction - Reliance on confessions made during survey/search - Whether the same transaction being offered to tax by M/s. PL Raju Constructions Pvt. Ltd. precludes making the same addition in the hands of the assessee. - HELD THAT: - The CIT(A) recorded, and the Tribunal accepted, that M/s. PL Raju Constructions Pvt. Ltd. had offered amounts relating to transactions with the assessee to tax in its return filed under section 153A (as per the remand confirmation). The appellate authority found that bringing the same receipts to tax again in the hands of the assessee on the basis of a self-admission would amount to double taxation of income arising from the same transaction. This factual position, coupled with absence of independent evidence against the assessee, supported deletion of the addition to avoid double taxation. [Paras 13, 20]

Deletion upheld insofar as the impugned receipts/transactions had been offered to tax by M/s. PL Raju Constructions Pvt. Ltd., and re-taxation in the assessee's hands on the same basis was not warranted.

Final Conclusion: The Tribunal dismissed the revenue appeal and upheld the CIT(A)'s deletion of the Rs.2,00,00,000/- addition for A.Y.2017-18: the addition rested only on a retracted survey statement unsupported by credible corroborative evidence and the same transactions had been offered to tax by the contracting party, making re taxation impermissible.

Revision under section 263 - erroneous and prejudicial to the interests of the Revenue - lack of inquiry versus inadequate inquiry - Assessing Officer's application of mind - plausible view of the Assessing Officer - preclusion by adjudication in appellate proceedings

Revision under section 263 - erroneous and prejudicial to the interests of the Revenue - plausible view of the Assessing Officer - Sustainability of the Principal Commissioner's order under section 263 revising the assessment. - HELD THAT: - The Tribunal held that an order under section 263 is tenable only if the Assessing Officer's order is erroneous and prejudicial to revenue or made without requisite enquiries. Where the AO has made enquiries, applied his mind and taken a plausible view on the materials, the Commissioner cannot, by invoking section 263, substitute his own appraisal merely because he would have preferred a different or higher assessment. Judicial authorities establish that inadequate inquiry alone does not justify revision if some inquiry was made and the AO reached a view in accordance with law. Applying these principles to the facts, the AO had investigated the agricultural receipts, issued notices to third parties, and treated 50% of agricultural income as unexplained and taxable under section 68 read with relevant provisions; that conclusion represented an exercise of quasi judicial discretion and a plausible view not amenable to being branded erroneous by the PCIT. [Paras 6]

Principal Commissioner's revisional order under section 263 is unsustainable and is set aside.

Lack of inquiry versus inadequate inquiry - Assessing Officer's application of mind - Whether the Assessing Officer failed to make enquiries or failed to apply his mind in assessing the agricultural income. - HELD THAT: - The Tribunal found that the AO conducted enquiries during assessment proceedings, procured records, issued notices to parties to whom sales were allegedly made and, after evaluating the material, treated 50% of the agricultural receipts as unaccounted income. The existence of enquiries and the AO's consideration of material show application of mind; therefore the case cannot be treated as one of 'lack of inquiry' that would justify exercise of revisional jurisdiction under section 263. The Commissioner cannot reopen or supplant the AO's judgment simply because he would have conducted further inquiries or reached a different conclusion. [Paras 6]

The AO carried out enquiries and applied his mind; there was no failure of inquiry or application of law warranting revision.

Preclusion by adjudication in appellate proceedings - revision under section 263 - Whether the Principal Commissioner could initiate revision under section 263 in respect of the same agricultural income after the issue had been adjudicated by the Commissioner (Appeals). - HELD THAT: - The Tribunal observed that once the taxability of the agricultural income had been examined by the AO and subsequently adjudicated by the Commissioner (Appeals) in the assessee's appeal, the Principal Commissioner was precluded from revisiting the same issue under section 263. Jurisprudence supports that concurrent or subsequent appellate consideration limits the scope of revisional proceedings and that the Commissioner should not assume jurisdiction over matters already taken up in appeals, lest there be duplicity and interference with finality of adjudication. [Paras 6]

PCIT could not exercise revisional jurisdiction over issues already considered and adjudicated by the Commissioner (Appeals); exercise of section 263 was barred in the circumstances.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2017-18, set aside the Principal Commissioner's order under section 263 as unsustainable, and confirmed that the Assessing Officer's enquiries and the view taken on the agricultural income were not amenable to revision, particularly where the same issue had been adjudicated by the Commissioner (Appeals).

Penalty under section 271(1)(c) - inaccurate particulars of income - minimum alternate tax under section 115JB - assessment under normal provisions versus MAT computation - CBDT Circular No. 25 of 2015 dated 31.12.2015

Penalty under section 271(1)(c) - inaccurate particulars of income - minimum alternate tax under section 115JB - CBDT Circular No. 25 of 2015 dated 31.12.2015 - assessment under normal provisions versus MAT computation - Whether penalty under section 271(1)(c) was rightly deleted where tax liability was determined under section 115JB (MAT) and the case fell within the scope of CBDT Circular No. 25 of 2015. - HELD THAT: - The Tribunal accepted the finding of the CIT(A) that, after making the additions in the assessment, the assessee's tax liability was determined on the basis of book profits under section 115JB. Relying on CBDT Circular No. 25 of 2015, which provides that penalty under section 271(1)(c) is not attracted in cases where tax payable under normal provisions is less than tax payable under the MAT provision, the CIT(A) deleted the penalty levied by the AO. The Revenue failed to point out any error in the CIT(A)'s factual finding nor to show that reliance on the CBDT circular was misplaced. In absence of any demonstrable fallacy in the lower authority's conclusion, the Tribunal saw no reason to interfere and upheld deletion of the penalty. [Paras 8, 9, 10]

Penalty levied under section 271(1)(c) deleted; Revenue's appeals dismissed.

Final Conclusion: Both appeals filed by the Revenue for A.Y. 2012-13 and A.Y. 2013-14 are dismissed; the deletion of the penalty under section 271(1)(c) by the CIT(A), based on tax liability under section 115JB and CBDT Circular No. 25 of 2015, is upheld.

Retrospective application - clarificatory amendment - tolerance band - safe harbour - section 56(2)(x) - addition based on difference between stamp duty value and consideration - income from other sources

Retrospective application - clarificatory amendment - tolerance band - section 56(2)(x) - addition based on difference between stamp duty value and consideration - Whether the enhancement of the tolerance band from 5% to 10% by Finance Act, 2020 in section 56(2)(x) is clarificatory/curative and applies retrospectively so as to preclude addition where the difference between stamp duty value and actual consideration is less than 10%. - HELD THAT: - The Tribunal noted that Finance Act, 2020 increased the tolerance band under section 56(2)(x) to 10% with effect from 01.04.2021 but examined whether that enhancement is clarificatory/curative and therefore retrospective. Relying on the reasoning of the Coordinate Bench in Maria Fernandes Cheryl and the subsequent Kolkata decision in Karb Associates Pvt. Ltd., the Tribunal accepted the view that the amendment remedied an unintended consequence of the deeming provision and was aimed at mitigating genuine hardship where small variations exist between stamp duty valuation and declared consideration. The Coordinate Bench's analysis-that the rationale for tolerating variations up to 10% applied equally to earlier periods and that the amendment was therefore curative-was applied by the Tribunal. Given the undisputed fact that the difference (5.93%) between stamp duty value and actual consideration is below 10%, the deeming fiction under section 56(2)(x) does not mandate substituting stamp duty value for the stated consideration, and no addition to income is warranted. [Paras 6, 7]

The enhancement of the tolerance band to 10% is clarificatory/curative and to be read retrospectively; since the undisputed difference is 5.93%, no addition under section 56(2)(x) is called for.

Final Conclusion: Appeal allowed; the addition made by the Assessing Officer under section 56(2)(x) is deleted as the undisputed difference between stamp duty value and actual consideration falls within the retrospectively applied 10% tolerance band.

Definition of "rent" in Explanation to section 194-I - tax deduction at source under section 194-I versus section 194C - common area maintenance (CAM) charges not constituting consideration for exclusive use of immovable property - relevance of separate/tri-party agreement in characterisation of CAM charges for TDS

Definition of "rent" in Explanation to section 194-I - tax deduction at source under section 194-I versus section 194C - common area maintenance (CAM) charges not constituting consideration for exclusive use of immovable property - relevance of separate/tri-party agreement in characterisation of CAM charges for TDS - Whether common area maintenance (CAM) charges paid by the assessee are to be treated as "rent" for the purpose of TDS under section 194-I or as payments for services subject to TDS under section 194C. - HELD THAT: - The Tribunal examined the Explanation to section 194-I and held that the term "rent" for TDS purposes denotes payment for the "use" of immovable property (or appurtenances) conferring exclusive beneficial user to the lessee. CAM charges relate to maintenance of common areas which are accessible to others (cotenants, landlord, visitors) and do not confer exclusive use upon the lessee; hence such payments are not consideration for "rent" under the Explanation to section 194-I. The Tribunal relied on coordinate Bench decisions considering identical facts where the existence of a separate agreement/tri-party arrangement or separate invoices and separation of clauses distinguishing rent from CAM supported treating CAM as payment for services. The Punjab & Haryana High Court decision cited by Revenue (Sunil Kumar Gupta) was held distinguishable because that decision concerned computation of annual value under different statutory provisions and does not control the meaning of "rent" under the Explanation to section 194-I for TDS purposes. Applying these principles to the facts - absence of CAM being the exclusive use of the lessee and the lack of composite rent - the Tribunal concluded that CAM charges attract withholding under the provisions governing payments for services (section 194C) and not section 194-I.

CAM charges are not "rent" for TDS under section 194-I and the assessee was not required to deduct TDS at the rate applicable to rent; the grounds raised by the assessee are allowed.

Final Conclusion: The appeal is allowed: common area maintenance charges paid by the assessee are not to be treated as rent for TDS under section 194-I but as payments for services (TDS under section 194C), and the Assessing Officer's direction to deduct TDS as rent is set aside.

Bad debts deduction - business expenditure under Section 37(1) - capital gains arising from joint development agreement - transfer under Section 2(47)(v) read with Section 53A of the Transfer of Property Act - nexus and commercial expediency - remand for fresh consideration on production of evidence

Bad debts deduction - business expenditure under Section 37(1) - onus of proof - Disallowance of bad debts written off of Rs.24,20,000 - HELD THAT: - The Tribunal examined the claim that amounts written off as advances (property advance and salary/trainee advance) were business bad debts. The assessing officer disallowed the claim for lack of documentary proof of the transactions, identity and addresses of the payees, particulars of the property, employment records, and evidence of attempts to recover the amounts. The Tribunal found that the assessee failed to establish that the amounts were incurred in the regular course of business or that they could not be recovered, and that the onus to prove commercial character and genuineness rested on the assessee. Given the absence of supporting documents and inability to substantiate nexus with business, the Tribunal saw no reason to interfere with the concurrent findings of the lower authorities. [Paras 9]

Disallowance of the bad debts claim upheld.

Business expenditure under Section 37(1) - nexus and commercial expediency - remand for fresh consideration on production of evidence - Disallowance of professional and consultancy charges of about Rs.2 crores paid to a third party - HELD THAT: - The Tribunal analysed whether the large payment to the third party was incurred wholly and exclusively for business and whether sufficient documentary evidence established the nexus and commercial expediency. The AO and CIT(A) found defects in the assessee's explanation, temporal inconsistencies with the JDA and earlier advances, absence of documentary proof of the middleman's credentials or role in the transaction, and lack of linkage in the JDA and responses from the developer. The Tribunal reiterated the principle that the assessee must prove nexus and commercial expediency for allowance under Section 37(1) and rejected the contention that double taxation concerns (payment declared by the third party) prevent scrutiny of allowability. In view of evidentiary deficiencies before the authorities but acknowledging the possibility of relevant documents, the Tribunal remanded the matter to the CIT(A) for fresh examination on the basis of evidence the assessee may produce and directed cooperation with proceedings. [Paras 16]

Issue remitted to the CIT(A) for fresh consideration on production of supporting evidence; no final allowance by Tribunal.

Capital gains arising from joint development agreement - transfer under Section 2(47)(v) read with Section 53A of the Transfer of Property Act - stock-in-trade vs capital asset - Taxability as capital gains on execution of the JDA and computation of capital gain - HELD THAT: - The Tribunal examined the terms of the Joint Development Agreement and relevant facts including receipt of refundable and non-refundable deposits. The JDA clauses show that the owner granted licence/possession to the developer for construction and that conveyance of undivided interest to the developer was to occur only simultaneously with delivery of the owner's built-up area and occupancy certificate; the agreement expressly disavowed part performance/transfer under Section 53A. On these terms the Tribunal concluded that ownership was not transferred in the year under consideration and no taxable event for capital gains arose in that year. The assessee's position that the property constituted stock-in-trade and that profit would crystallise on appropriation/allotment of built-up share was found consistent with the agreement and facts. [Paras 22]

Capital gains addition deleted; no capital gain taxable in the assessment year under consideration.

Final Conclusion: The appeal is partly allowed: the disallowance of bad debts is upheld; the professional/consultancy payment disallowance is remitted to the CIT(A) for fresh consideration upon production of evidence; the capital gains addition arising from the JDA is set aside and deleted for the year under consideration.

Moratorium on proceedings under section 33(5) of the Insolvency and Bankruptcy Code - overriding effect of the Insolvency and Bankruptcy Code over other enactments - liquidator stepping into the shoes of the corporate debtor - obligations of liquidator and interaction with tax proceedings under section 178 of the Income-tax Act - liberty to recall judicial orders in view of insolvency proceedings and limitation governed by New Delhi Municipal Council v. Minosha India Ltd.

Moratorium on proceedings under section 33(5) of the Insolvency and Bankruptcy Code - liquidator stepping into the shoes of the corporate debtor - overriding effect of the Insolvency and Bankruptcy Code over other enactments - Effect of NCLT liquidation order on pending income-tax appellate proceedings and the consequences of non-appearance by the Official Liquidator - HELD THAT: - The Tribunal recorded that NCLT had ordered liquidation of the assessee-company and appointed a liquidator who, from the appointment, exercises the powers of the company and steps into its shoes. In view of the NCLT liquidation order and the statutory bar in section 33(5) of the IBC preventing suits or other legal proceedings against a corporate debtor after liquidation, along with the Apex Court's recognition that the IBC (section 238) overrides inconsistent provisions of other enactments, the Tribunal held that the pendency of liquidation and the absence of representation by the Official Liquidator rendered continuation of the appeal inappropriate. The Tribunal further noted the amended provisions of section 178 of the Income-tax Act which regulate the interface between tax proceedings and liquidation, but recorded that the Official Liquidator had not appeared or taken steps in these proceedings. On these bases the Tribunal dismissed the appeal while recognising that the IBC regime has primacy in parallel proceedings and that the moratorium/limitations created by the IBC apply to pending tax proceedings insofar as they are inconsistent with the IBC regime. [Paras 5, 6]

Appeal dismissed on account of the liquidation order and the IBC moratorium/overriding effect, in view of non-appearance by the Official Liquidator.

Liberty to recall judicial orders in view of insolvency proceedings and limitation governed by New Delhi Municipal Council v. Minosha India Ltd. - obligations of liquidator and interaction with tax proceedings under section 178 of the Income-tax Act - Whether the Tribunal may grant a right to reopen or recall the dismissed appeal once the Official Liquidator acts or circumstances change, and the question of limitation for any fresh proceedings - HELD THAT: - The Tribunal granted the Official Liquidator/assessee liberty to apply for recall of the order when occasion warrants, thereby preserving the ability to revive or re-initiate the matter once the liquidator engages or the liquidation context permits. The Tribunal observed that the question of limitation for filing any fresh appeal or application to recall would be governed by the Supreme Court's decision in New Delhi Municipal Council v. Minosha India Ltd., and noted precedent of coordinate benches adopting a similar course of dismissing appeals during liquidation while leaving liberty to recall. [Paras 7, 8]

Appeal dismissed with liberty to the Official Liquidator/assessee to seek recall of the order; limitation for any fresh action to be governed by the Supreme Court's decision cited.

Final Conclusion: The Tribunal dismissed the assessee's appeal in view of the NCLT liquidation order and the statutory moratorium and overriding effect of the IBC on parallel tax proceedings, while granting liberty to the Official Liquidator/assessee to move for recall of the order when appropriate and observing that any question of limitation for fresh proceedings will be governed by the Supreme Court's authority cited.

Foreign Tax Credit - Form No.67 filing requirement under Rule 128(9) - Directory versus mandatory procedural requirement - DTAA / Section 90 overriding domestic rules - Claim of FTC notwithstanding delayed filing of supporting form

Foreign Tax Credit - Form No.67 filing requirement under Rule 128(9) - Directory versus mandatory procedural requirement - DTAA / Section 90 overriding domestic rules - Whether denial of Foreign Tax Credit on the ground that Form No.67 was filed after the due date under section 139(1) was justified. - HELD THAT: - The Tribunal accepted the assessee's contention and that of coordinate benches that Rule 128(9) does not prescribe disallowance of FTC for delayed filing of Form No.67. The requirement to furnish Form No.67 is procedural and directory in nature and non-compliance of this procedural requirement is not fatal to the substantive right to claim FTC under Section 90 read with the applicable DTAA. The Tribunal applied the principle that where a tax treaty provision (Article 24 read with Section 90) confers a beneficial right, the domestic rules cannot operate to deny that right; accordingly the Rules framed under Section 295 cannot be read to extinguish the treaty-based entitlement by creating a substantive bar. The Tribunal relied on its coordinate bench decisions (including Shashidhar Seetharam Sharma and Brinda Rama Krishna) and subsequent followings, and concluded there was a single legally correct view available on the issue. In consequence, the AO's and CIT(A)'s refusal to grant FTC solely on the ground of delay in filing Form No.67 was held to be incorrect and the matter was remanded to the AO for grant of the credit in accordance with law. [Paras 7, 8]

Denial of FTC for late filing of Form No.67 was set aside; the AO directed to allow the Foreign Tax Credit.

Final Conclusion: The appeal is allowed: the Tribunal held that delayed filing of Form No.67 is not a valid ground to deny Foreign Tax Credit, that Rule 128(9) is directory and cannot override the assessee's treaty right under Section 90/DTAA, and directed the Assessing Officer to allow the FTC for AY 2018-19.

Interest on delayed refunds under Section 27A - Completeness of refund application and deemed date of receipt under Regulation 2 Explanation - Deficiency memo and its impact on commencement of interest - Writ court's limitation in re-appreciation of disputed factual evidence

Interest on delayed refunds under Section 27A - Completeness of refund application and deemed date of receipt under Regulation 2 Explanation - Deficiency memo and its impact on commencement of interest - entitlement to interest under Section 27A where refund applications were disputed as incomplete and deficiency memos were issued - HELD THAT: - The Court held that Section 27A liability to pay interest arises only after a complete application is received for the purposes of the deemed-date rule in the Explanation to Regulation 2. Regulation 2 requires the Proper Officer to scrutinise applications and either acknowledge a complete application or return an incomplete one with a deficiency memo within ten working days. Where deficiency memos were issued and the authority thereafter processed refunds only after receipt of requisite documents, the application is to be treated as received on the date of the acknowledged complete application and not on the initial filing. Consequently, interest under Section 27A is not payable for any period prior to the date on which a complete application, as acknowledged by the Proper Officer, was received. The Court concluded that petitioner is not entitled to interest in respect of those applications where deficiencies were pointed out and refunds were made within the statutory period counted from receipt of complete applications; interest would be payable only if, even after compliance with deficiency memos and submission of requisite documents, the refund was made beyond the statutory period.

Petitioner is not entitled to interest under Section 27A for refund applications in respect of which deficiency memos were issued and refunds were processed within the statutory period after receipt of complete applications; interest is payable only where, despite compliance, refund was delayed beyond the statutory period.

Writ court's limitation in re-appreciation of disputed factual evidence - scope of writ jurisdiction to re-appreciate factual disputes regarding completeness of refund applications and supporting documents - HELD THAT: - The Court observed that the question whether refund applications were filed in the prescribed manner with requisite supporting documents is a disputed question of fact requiring appreciation of evidence. In exercise of writ jurisdiction under Article 226 the High Court cannot function as an evidence-scrutinising authority to reappraise record-level documentary controversies. Where the respondents contend that deficiency memos were issued and refunds were processed only after receipt of complete documents, the correctness of that factual stance must be determined on appreciation of evidence and record, not by the writ court in the absence of such fact-finding.

Writ court will not re-appreciate disputed evidentiary facts about completeness of refund applications; such factual issues cannot be resolved in writ proceedings without appropriate evidence-based adjudication.

Final Conclusion: Writ petition dismissed on merits save that respondents are directed to verify the record and, if any interest is found due in accordance with the Court's analysis, to pay such interest to the petitioner within four weeks of communication of the order; no order as to costs.

Judicial restraint in economic and fiscal policy - role of Reserve Bank of India as regulator - bank loan restructuring and master circulars - remedies under Insolvency and Bankruptcy Code, 2016 - remedies before Real Estate Regulatory Authority (RERA) - no judicial direction to frame tax scheme for home buyers

No judicial direction to frame tax scheme for home buyers - judicial restraint in economic and fiscal policy - Whether this Court should direct the Central Government to frame and implement a comprehensive scheme granting tax benefits to home buyers from the date of first EMI payment and related reliefs sought in the PIL. - HELD THAT: - The Court declined to issue the sweeping policy directions sought. It noted that matters of fiscal and economic policy, including formulation of tax benefit schemes, fall within the province of the Government and expert regulatory bodies and are ordinarily not amenable to judicial direction. Having considered the submissions and the extant regulatory framework, the Court held that no further judicial intervention was warranted to require the Central Government to frame the proposed scheme. [Paras 1, 3, 12, 13]

The prayer for directions to frame and implement a scheme granting the claimed tax benefits was refused and the petition dismissed.

Role of Reserve Bank of India as regulator - bank loan restructuring and master circulars - Whether the Reserve Bank of India or scheduled commercial banks are liable to be directed to assume responsibility for completion of real estate projects or to be made accountable in the manner sought by the petitioner. - HELD THAT: - The Court observed that RBI is a statutory regulator equipped to issue binding directions within its mandate and has issued master circulars laying down norms for lending and housing finance. Banks exercise discretion, under the oversight of their boards, in sanctioning and recovery of loans within the RBI framework. The Court recorded that no specific averment of RBI's dereliction was pleaded and that banks cannot be converted into developers; their role is regulated but does not extend to undertaking builders' obligations. The master circulars provide guidance on due diligence, staged disbursement, and restructuring, and the Court emphasised the limited role of judiciary in supervising economic/regulatory policy. [Paras 5, 6, 7, 10, 11]

No directions were issued against RBI or banks to assume the role of builders; the existing regulatory framework and RBI master circulars were held to be the appropriate instruments to address lending practices.

Remedies under Insolvency and Bankruptcy Code, 2016 - remedies before Real Estate Regulatory Authority (RERA) - bank loan restructuring and master circulars - Whether home buyers have available remedies and, if so, whether the Court should direct utilization of those remedies instead of issuing the policy relief sought. - HELD THAT: - The Court noted that aggrieved home buyers have extant statutory and regulatory remedies: banks may initiate insolvency proceedings before the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016 to revive projects or appoint resolution professionals; buyers may seek redressal from RERA; and borrowers may apply to banks for loan restructuring consistent with RBI master circulars. The Court observed existing precedents where courts tailored directions in specific facts but concluded that, in the present public interest petition, the available mechanisms and regulatory guidance were sufficient without additional judicial mandates. [Paras 10, 11, 12]

The Court directed no further action by itself, recognising NCLT, RERA and RBI guided restructuring as the appropriate avenues for remedy.

Final Conclusion: Having regard to the regulatory framework established by the Reserve Bank of India, the availability of remedies under the Insolvency and Bankruptcy Code and RERA, and the principle of judicial restraint in economic and fiscal policy, the petition seeking directions to frame a comprehensive tax and accountability scheme for home buyers is dismissed and no further orders are passed.

Resolution plan - Corporate Insolvency Resolution Process - claims extinguished after approval of resolution plan - binding nature of approved resolution plan on all stakeholders - prohibition on revival of claims not made during CIRP - monetary claim simpliciter - operational firewall/e-indenting access

Resolution plan - claims extinguished after approval of resolution plan - prohibition on revival of claims not made during CIRP - operational firewall/e-indenting access - Whether the respondent Railway could enforce or revive monetary demands relating to the pre-Resolution Plan period and deny the petitioner access to the e-indenting system after approval of the Resolution Plan. - HELD THAT: - The Court found that the petitioner-corporate debtor's Resolution Plan was approved by the NCLT on 4th September, 2019, confirmed by the NCLAT and the Supreme Court, and that the impugned demands relate to periods prior to approval of the Resolution Plan (notably 2015-2016). Relying on the established doctrine that once a resolution plan is duly approved under the IBC the claims not provided for in the plan stand frozen or extinguished and the corporate debtor resumes operations with a clean slate, the Court held that claims not lodged during the CIRP cannot be revived thereafter. The material shows the Railways did not lodge these dues with the Resolution Professional or Committee of Creditors during the CIRP; the Railways' demand letters therefore sought to enforce claims that were extinguished by operation of law upon approval of the Resolution Plan. The Court further observed that the Railways' letter of 21st September, 2015 was addressed to the merged entity prior to the appointed date and that the demand is a monetary claim simpliciter. Consequently, the Railways cannot impose operational restrictions such as blocking access to the e-indenting system or otherwise penalize the petitioner for non-payment of those extinguished dues. [Paras 5, 6, 7, 8, 9]

The Railways' belated monetary demands relating to the pre-Resolution Plan period stood extinguished and the respondent was directed to permit the petitioner to place indents on the e-indenting system within seven days.

Final Conclusion: Writ petition allowed; respondent South Eastern Railway directed to permit the petitioner to place indents for supply of raw material on the e-indenting system within seven days, the impugned pre-Resolution Plan monetary claims having been held extinguished by operation of law.

Validity of composite resolution plan - requirement of lessor's prior consent for transfer of development and sale rights under lease/sub-lease - inclusion of leasehold land in a resolution plan where third party proprietary/lessor rights exist - jurisdiction of the Adjudicating Authority to examine legality of resolution plans in relation to rights not vested in the corporate debtor - non infructuousness of an application challenging a resolution plan despite subsequent CoC approval - allegation of violation of principles of natural justice (respondent party status of RP)

Requirement of lessor's prior consent for transfer of development and sale rights under lease/sub-lease - inclusion of leasehold land in a resolution plan where third party proprietary/lessor rights exist - Whether the transfer of development and sale rights by the sub lessee to a third party without NOIDA's prior approval rendered the Collaboration Agreement void for purposes of the CIRP and precluded dealing with the leased land in the resolution plans. - HELD THAT: - The Tribunal recorded and relied on the terms of the Lease Deed and Sub Lease Deed which required prior approval of the lessor for transfer of the whole plot, built up space or change in role in the project, and which provided that breach could lead to cancellation of the lease. The Collaboration Agreement by which development and sale rights were transferred to Brys International Pvt. Ltd. was executed without NOIDA's approval and, on the material placed, transferred sale/development rights in a manner inconsistent with the sub lease obligations. Consequently, the NCLT correctly held that the rights in the leased land could not be treated as assets of the corporate debtor for inclusion or disposition under the resolution plans in the absence of the lessor's consent, and that the challenged transfer was ineffective for the purposes of the CIRP. [Paras 11, 13, 14, 17, 18]

Adjudicating Authority's finding that the transfer of development/sale rights without NOIDA's prior permission violated the lease/sub lease and precluded dealing with the leased land in the resolution plans is upheld.

Validity of composite resolution plan - non infructuousness of an application challenging a resolution plan despite subsequent CoC approval - Whether the Application filed by NOIDA became infructuous after the CoC approved the resolution plans and whether the Adjudicating Authority could direct that a composite plan not be considered. - HELD THAT: - The Tribunal held that the principal relief sought - to restrain acceptance of a composite resolution plan that proposed inter dependence between two separate CIRPs and that sought to deal with rights in the leased land - survived despite subsequent CoC voting. The Adjudicating Authority was entitled to consider and grant relief against approval of a composite plan which, on the material, was impermissible because it sought to deal with rights not lawfully available to the corporate debtor. The argument that the application was rendered infructuous by CoC approval was therefore rejected. [Paras 18, 23]

Application was not rendered infructuous by CoC approval; NCLT rightly entertained and granted the substantive relief against consideration of the composite plan.

Jurisdiction of the Adjudicating Authority to examine legality of resolution plans in relation to rights not vested in the corporate debtor - jurisdiction of the Adjudicating Authority to examine legality of resolution plan - Whether the Adjudicating Authority (NCLT) had jurisdiction under the Code to adjudicate NOIDA's challenge to the resolution plans insofar as they purported to deal with rights that did not arise solely from the insolvency of the corporate debtor. - HELD THAT: - Relying upon the statutory scheme and relevant precedent, the Tribunal observed that NCLT/NCLAT have jurisdiction to adjudicate disputes that arise from or relate to the insolvency of the corporate debtor but must not usurp fora vested with jurisdiction over disputes that do not have the necessary nexus. In the present facts the challenge by NOIDA directly related to the legality of the resolution plans submitted in the CIRP and to whether the plans sought to deal with rights which the corporate debtor did not possess. The Tribunal found no merit in the contention that the Adjudicating Authority lacked jurisdiction and rejected RP's argument to that effect, emphasising the RP's duty to ensure compliance with the Code and Regulations and that the NCLT may examine whether a plan is contrary to law or stakeholders' interests. [Paras 21, 22]

NCLT had jurisdiction to entertain NOIDA's challenge to the resolution plans and to direct that the composite plan not be accepted insofar as it purported to deal with rights not lawfully available to the corporate debtor.

Allegation of violation of principles of natural justice (respondent party status of RP) - Whether principles of natural justice were violated because the successful resolution applicant was not a party to NOIDA's application. - HELD THAT: - The Tribunal noted that the Resolution Professional was impleaded and opposed the application and that the RP represented and was responsible for the conduct of the CIRP and for placing the resolution plans before the CoC. Given that the RP was heard and opposed the application, and that the challenge concerned the legality of the plans which the RP had certified compliant, the Tribunal found no breach of natural justice in the NCLT entertaining NOIDA's application. [Paras 24]

Complaint of violation of natural justice is rejected; no breach established.

Final Conclusion: The appeals are without merit and are dismissed. The NCLT's order directing that the challenged composite resolution plan (which sought to deal with leasehold land and contingent inter dependent plans) not be accepted was upheld; no order as to costs.

Claims by workmen and employees - Claim with proof - Proof of claim in Form D - Proof of claim by authorised representative in Form E - Regulation 9 of the CIRP Regulations (proof of claims) - Obligation to comply with prescribed claim procedure - IBC as a complete code

Claims by workmen and employees - Claim with proof - Proof of claim in Form D - Regulation 9 of the CIRP Regulations (proof of claims) - Obligation to comply with prescribed claim procedure - Whether the workmen represented by the trade union office bearers had validly lodged claims in compliance with Regulation 9 (by filing 'claim with proof' in Form D or through an authorised representative in Form E). - HELD THAT: - The Tribunal examined Regulation 9 and the prescribed Schedules (Form D and Form E) and noted that Regulation 9(1) uses 'shall' requiring each workman/employee to submit 'claim with proof' in Form D, and Regulation 9(2) permits, as a convenience, an authorised representative to submit a consolidated claim in Form E. The amendment making the requirement a 'claim with proof' (w.e.f. 04.07.2018) necessitates lodging of the claim together with supporting documents and the requisite declaration and verification set out in the Forms. On the material before the Adjudicating Authority, no individual Form D claims by the Appellants' constituents were filed, and the annexed list (Annexure B) was not shown to have been received by the RP as required; Annexure A4 did not constitute authority under Form E. The RP contemporaneously received and admitted claims from 11 employees who complied with Form D and also considered four belated claims. The Tribunal held there was total non compliance by the Appellants with Regulation 9(1) and no valid submission under Regulation 9(2). [Paras 11, 12, 13, 14, 15]

The claims purportedly represented by the trade unions were not validly lodged in compliance with Regulation 9 and therefore could not be allowed.

Proof of claim by authorised representative in Form E - Obligation to comply with prescribed claim procedure - IBC as a complete code - Whether the resolution plan and conduct of the RP/SRA resulted in failure to provide for workmen dues or discrimination against the Appellants' constituents. - HELD THAT: - The Tribunal reviewed the information memorandum and the resolution plan. The information memorandum recorded gratuity liabilities as on the insolvency commencement date. The RP admitted and provided for claims of the 11 employees who complied with Form D and even considered four late claims; the resolution plan recorded admitted claims, set out unclaimed dues as per financial statements, and provided for a contingency (20% of the unclaimed amount) to address potential future claims. Given the Appellants had not complied with the prescribed claim procedure, the allegation of discrimination lacked foundation; the RP had taken steps to recognize admitted claims and to make provision in the plan for other potential workmen dues. The Tribunal found no illegality in the Adjudicating Authority's conclusion that the application by the unions was unsubstantiated and correctly dismissed. [Paras 5, 8, 15, 16]

The resolution plan and the RP's conduct did not unlawfully omit or discriminate against workmen dues; the Adjudicating Authority rightly dismissed the unions' application.

Final Conclusion: The appeal is dismissed. The claims alleged by the trade unions were not filed in accordance with Regulation 9 (Form D/Form E) and the Adjudicating Authority rightly found no substance in their application; the RP had admitted and provided for claims that were properly lodged and made contingency provision in the resolution plan.

Section 29A(h) - executed guarantee versus offer to execute a guarantee - personal guarantee - invocation and non-payment of guarantee - res judicata - review

Section 29A(h) - executed guarantee versus offer to execute a guarantee - personal guarantee - invocation and non-payment of guarantee - The letter dated 03.06.2015 did not constitute an executed personal guarantee attracting ineligibility under Section 29A(h) of the Code. - HELD THAT: - The letter of 03.06.2015 was examined in light of Section 29A(h), which refers to a person who "has executed a guarantee" in respect of the corporate debtor and such guarantee has been invoked and remains unpaid in full or in part. The language of the letter shows a commitment to provide or execute personal guarantees only upon a future contingency - i.e., in case of failure by the corporate debtor to pay the outstanding dues, the undersigned would provide/execute personal guarantees within 30 days of such failure. There is no contemporaneous executed guarantee on record, nor any document showing that a guarantee had been executed and invoked by the creditor and remained unpaid. On this factual and legal basis the court concluded that the requirement of Section 29A(h) was not satisfied and the erstwhile promoters could not be held ineligible under that provision. [Paras 12, 17, 18]

The erstwhile promoters were not rendered ineligible under Section 29A(h) because the letter dated 03.06.2015 amounted only to an undertaking to execute a guarantee upon a future event and not to an executed, invoked and unpaid guarantee.

Res judicata - review - Neither review of the earlier order nor res judicata was established by the appellant. - HELD THAT: - The appellant contended that the impugned order effectively reviewed the earlier order dated 06.01.2021 and also raised a plea of res judicata. The Tribunal examined the record and found no factual or legal basis for either contention. The impugned order did not adjudicate the guarantee issue afresh in a manner constituting impermissible review of the prior adjudication, and the respondent had not been a party in a manner that would attract res judicata as pleaded by the appellant. Consequently, neither ground succeeded. [Paras 14, 15, 16]

The pleas of review and res judicata were rejected as not made out on the facts and law.

Final Conclusion: The appeal is without merit and is dismissed; the decision that the erstwhile promoters were not ineligible under Section 29A(h) stands and the appellant's challenges, including review and res judicata pleas, fail.

Fraudulent or malicious initiation of proceedings - initiation of corporate insolvency resolution process (initiation date) - insolvency commencement date (date of admission) - maintainability of an application under Section 65 upon filing of Section 7/9/10 application - locus standi to file proceedings under Section 65

Fraudulent or malicious initiation of proceedings - initiation of corporate insolvency resolution process (initiation date) - insolvency commencement date (date of admission) - maintainability of an application under Section 65 upon filing of Section 7/9/10 application - An application under Section 65 of the Insolvency & Bankruptcy Code is maintainable once an application under Section 7, 9 or 10 has been filed (i.e. at the stage of initiation), and is not confined to a stage after admission and commencement of CIRP. - HELD THAT: - The Tribunal erred in construing the word "initiates" in Section 65 to mean admission of the application and commencement of CIRP. The scheme of the Code and the definitions in Section 5 establish a distinction between the "initiation date" and the "insolvency commencement date": Section 5(11) treats the "initiation date" as the date on which an eligible applicant files an application for initiating CIRP, whereas Section 5(12) (the "insolvency commencement date") is the date of admission by the Adjudicating Authority. The reasoning of the Hon'ble Supreme Court in Ramesh Kymal vs. Siemens Gamesa Renewable Power Private Limited , as relied upon by the Appellate Tribunal, confirms that initiation occurs on filing while commencement/commencement date follows admission. Applying that distinction, an application under Section 65, which addresses "fraudulent or malicious initiation of proceedings", is competent at the initiation stage (i.e., after filing of the Section 7/9/10 application) and need not await the insolvency commencement date determined by admission. [Paras 13, 14, 15, 16, 17]

Held that Section 65 applications are maintainable after the filing of an application under Section 7, 9 or 10 (i.e. at the initiation stage); the Tribunal's view that Section 65 is maintainable only post-admission/commencement is overruled.

Locus standi to file proceedings under Section 65 - The question of the Appellant's locus standi to maintain the Section 65 application was not finally adjudicated and is remanded to the Tribunal for decision. - HELD THAT: - The Appellate Tribunal declined to decide the Respondents' objection to the Appellant's locus standi. That issue must be examined afresh by the Adjudicating Authority: the Tribunal is directed to consider the objection(s) raised by the Respondents, afford the Appellant an opportunity to be heard, and decide the question in accordance with law. The appellate court expressly left the determination of locus standi to the Tribunal rather than resolving it on the present appeal. [Paras 18, 19]

Remanded to the Tribunal to decide the locus standi objection after hearing the parties and in accordance with law.

Final Conclusion: The appeal is allowed; the NCLT order dismissing the Section 65 application for being maintainable only after admission is set aside. The matter is remanded to the Tribunal with directions that the Section 65 application is maintainable at the initiation stage and that the Tribunal shall decide the locus standi objection after giving the parties an opportunity to be heard.

Money laundering depends on criminal activity relating to a scheduled offence - scheduled offence / predicate offence - maintainability of ECIR - effect of judicial closure/acceptance of closure report on ED proceedings

Scheduled offence / predicate offence - maintainability of ECIR - money laundering depends on criminal activity relating to a scheduled offence - Whether the ECIR registered by the Enforcement Directorate survives where the predicate scheduled offence has been finally closed by the criminal courts. - HELD THAT: - The Court found as a matter of fact that the trial Court accepted the police 'C' summary report and dismissed the private complaint, and the Sessions Court confirmed that order which has attained finality (paras 6-8). Applying the principle laid down by the Apex Court in Vijay Madanlal Choudhary , the Court observed that an offence under the PMLA is dependent on illegal gain as a result of criminal activity relating to a scheduled offence and that authorities cannot proceed on a notional assumption that a scheduled offence has been committed. Where the scheduled offence (predicate offence) stands finally closed by a competent court (by discharge, acquittal or acceptance of closure report), there can be no continuing offence of money laundering in respect of property linked to that scheduled offence. The ED did not dispute that no scheduled offence remains pending against the petitioners and did not press the submission that the ECIR, being an internal document, should be permitted to survive in these circumstances (paras 7-13). Applying the settled legal principle to the admitted facts, the Court concluded that the ECIR could not be maintained and must be quashed. [Paras 7, 9, 13, 14]

Impugned ECIR/MBZO-II/01/2020 quashed and set aside insofar as it pertains to the petitioners.

Final Conclusion: The petitions are allowed; since the predicate scheduled offence against the petitioners has been finally closed by the criminal courts, the ECIR registered by the Enforcement Directorate cannot survive and is quashed and set aside in respect of the petitioners.

Adjudication order - right to appeal to appellate authority - pre-deposit condition - stay of coercive action - limitation not to be a ground for rejection - personal hearing

Adjudication order - stay of proceedings - Whether admission of the writ petition required continuation of protection against the operation of the adjudication order. - HELD THAT: - The Court observed that the impugned order is an order of adjudication and that the correctness of such an order is to be tested by the appropriate appellate authority which can re-appreciate facts and consider jurisdictional questions. The Court held that keeping the writ petition pending would not serve any useful purpose to either party and therefore declined to maintain a protective stay of the adjudication on the basis of mere admission of the writ petition. [Paras 5]

Admission of the writ petition did not warrant continuation of protection against the adjudication order; the matter is to be pursued before the appellate authority.

Right to appeal to appellate authority - pre-deposit condition - The procedure and conditions by which the appellant must challenge the adjudication order. - HELD THAT: - The Court directed that the appellant shall challenge the adjudication order by filing an appeal before the appropriate appellate authority within a specified short period and after complying with the statutory pre-deposit requirement. The Court fixed the pre-deposit as 7.5% of the disputed tax and prescribed a time limit of three weeks from receipt of the certified copy of this order for filing the appeal, allowing the appellant to raise all points, including jurisdiction, before the appellate forum. [Paras 7]

Appellant to file appeal to the appellate authority within three weeks after receipt of the certified copy and after payment of 7.5% pre-deposit; all grounds, including jurisdiction, may be urged in that appeal.

Stay of coercive action - limitation not to be a ground for rejection - personal hearing - Interim protection and the manner in which the appellate authority should consider the appeal pending compliance by the appellant. - HELD THAT: - While directing the appellant to pursue the statutory appeal, the Court granted interim protection by restraining the respondents from initiating any coercive action until the appeal is filed. The Court further directed that the appellate authority shall decide the appeal on merits and in accordance with law, shall not reject the appeal on limitation grounds, and shall afford the appellant an opportunity of personal hearing before passing orders. [Paras 8]

Respondents restrained from coercive action until filing of the appeal; appellate authority to decide on merits, not reject on limitation, and grant personal hearing.

Final Conclusion: Writ petition and intra-Court appeal disposed by directing the appellant to file the statutory appeal within three weeks after obtaining the certified copy and after depositing 7.5% of the disputed tax; respondents restrained from coercive action pending filing, and the appellate authority directed to decide the appeal on merits, not to reject it on limitation grounds, and to afford personal hearing.

Service tax on ocean freight - special audit under Section 72A of the Finance Act, 1994 - setting aside of demand and show cause notice - pre-consultation and opportunity to be heard - correction of errors in adjudicatory documents - limitation - absence of material establishing fraud, wilful misstatement or suppression

Setting aside of demand and show cause notice - service tax on ocean freight - Validity of the demand letter dated 06.04.2022 and the Show Cause Notice dated 21.04.2022 and the consequent interim relief - HELD THAT: - The Court set aside the demand letter and the Show Cause Notice impugned in the petition. While the petitioner had challenged the imposition of service tax on ocean freight charges and relied on a Gujarat High Court decision, the present order does not adjudicate the substantive question on the levy of service tax on ocean freight. The Court instead quashed the specific demand and notice issued on the stated dates and restored the parties to the position prevailing on 05.04.2022. The Court thereby granted interim relief by annulling the two adjudicatory communications impugned in the petition.

Demand letter dated 06.04.2022 and Show Cause Notice dated 21.04.2022 set aside; parties restored to position as on 05.04.2022.

Special audit under Section 72A of the Finance Act, 1994 - pre-consultation and opportunity to be heard - correction of errors in adjudicatory documents - limitation - absence of material establishing fraud, wilful misstatement or suppression - Procedural obligations of the Department before issuing any fresh Show Cause Notice following a special audit report - HELD THAT: - The Court directed that the Department shall place the parties in the same position as on 05.04.2022 and give the petitioner full opportunity to respond to the observations in the special audit report. Any fresh pre-consultation or Show Cause Notice may be issued only after the petitioner's explanations to the audit observations have been duly considered and any numerical or other errors in the earlier Show Cause Notice corrected. The Court noted the petitioner's contention on limitation and absence of material of fraud or suppression, and left all substantive contentions open for determination in the appropriate proceedings (subject to the interlocutory directions), thereby confining the order to procedural safeguards rather than deciding merits.

Department permitted to issue fresh pre-consultation and, after considering the petitioner's explanations and correcting errors, a fresh Show Cause Notice may be issued; all substantive contentions left open for adjudication.

Final Conclusion: The petition is disposed by setting aside the demand letter dated 06.04.2022 and the Show Cause Notice dated 21.04.2022, restoring the parties to their position as on 05.04.2022, and directing the Department to afford the petitioner full opportunity to respond to the special audit observations and to correct any errors before issuing any fresh notice; substantive issues remain open for determination in accordance with these directions.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - tax dues - waiver of interest under SVLDRS - interest demanded by a show cause notice or order in original - reconsideration in accordance with CBIC instructions

Tax dues - interest demanded by a show cause notice or order in original - waiver of interest under SVLDRS - Validity of rejection of the petitioner's SVLDRS-1 declaration on the ground that it related only to interest and not to 'tax dues'. - HELD THAT: - The Court examined the instructions issued by the Central Board of Indirect Taxes and Customs dated 06.10.2022 which clarified that, for purposes of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, the expression 'tax dues' includes cases where interest has been demanded by a show cause notice or by an order in original. In light of that clarificatory instruction, the impugned order declining acceptance of the petitioner's SVLDRS-1 on the sole ground that it pertained only to interest could not be sustained. The Court therefore set aside the Designated Committee's order rejecting the declaration and held that the Revenue must reconsider the petitioner's claim having regard to the Board's instruction.

Impugned order dated 11.02.2020 quashed; rejection of the declaration upheld to be unsustainable in view of the CBIC instruction that 'tax dues' includes interest demanded by SCN/O-i-O.

Reconsideration in accordance with CBIC instructions - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Direction to the Designated Committee to reconsider the petitioner's claim under SVLDRS in accordance with the CBIC instructions. - HELD THAT: - The Court directed the Designated Committee (SVLDRS) to revisit and decide the petitioner's application afresh, applying the Board's clarificatory instruction that interest demanded by a show cause notice/order in original falls within 'tax dues' for the Scheme. The reconsideration was ordered to be completed within a specified time frame and in accordance with law, thereby remitting the matter for fresh decision rather than deciding entitlement on the merits itself.

Designated Committee directed to reconsider the petitioner's claim and pass appropriate orders within 60 days in accordance with law and the CBIC instructions.

Final Conclusion: The writ petition is allowed: the Designated Committee's order refusing the SVLDRS-1 is quashed and the Committee is directed to reconsider the petitioner's claim within 60 days in accordance with the CBIC instruction that 'tax dues' includes interest demanded by a show cause notice or order in original.

Deemed supply by agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act - liquidated damages - declared services - consideration and contractual nexus - administrative circular as interpretive guidance - remand for fresh adjudication in light of new policy/circular

Deemed supply by agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act - liquidated damages - administrative circular as interpretive guidance - consideration and contractual nexus - remand for fresh adjudication in light of new policy/circular - Impugned order confirming service tax demand on amounts claimed as liquidated damages set aside and matter remanded to the original adjudicating authority to decide taxability afresh in light of CBIC Circular No.178/10/2022-GST dated 03.08.2022. - HELD THAT: - The Tribunal found that Para 5(e) of Schedule II of the CGST Act is identically worded to Section 66E(e) of the Finance Act, 1994, both describing the service of "agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act." The CBIC Circular No.178/10/2022-GST (03.08.2022) addresses the taxability of transactions termed as "liquidated damages" and explains that such payments are taxable only where they constitute consideration for an independent agreement to tolerate or refrain from an act (i.e., there is an express or implied contractual obligation with corresponding consideration). The Tribunal observed that the adjudicating authority had not had the benefit of this circular when deciding the matter. Because the circular articulates the administrative stance and interprets the identical statutory expression relied upon for levy, the Tribunal concluded that the dispute should be reconsidered by the original authority applying the circular's guidance and examining whether, on facts, the impugned payments represent consideration under an independent contract or are merely compensatory payments/events arising from breach of contract. Accordingly the impugned order was set aside and the matter remanded for fresh adjudication in light of the circular and the parties' arguments thereon. [Paras 4, 5, 7, 8]

Impugned order set aside; matter remanded to original adjudicating authority to decide taxability of amounts claimed as liquidated damages afresh in light of CBIC Circular No.178/10/2022-GST (03.08.2022).

Final Conclusion: The Tribunal vacated the confirmation of service tax demand and remitted the case for fresh adjudication so that the question whether the amounts received as liquidated damages constitute taxable consideration under the identical expression in the service tax and GST entries may be examined in the light of the CBIC circular.

Admissibility of CENVAT credit of input services - requirement of registration as Input Service Distributor for distribution of credit - use of invoices and internal consolidation for centralized availing of credit - penalty under Section 78 of the Finance Act, 1994 and applicability of Section 80

Admissibility of CENVAT credit of input services - requirement of registration as Input Service Distributor for distribution of credit - use of invoices and internal consolidation for centralized availing of credit - Whether the assessee (a banking company) was entitled to avail CENVAT credit of input services despite not treating zonal/branch offices as registered Input Service Distributors and by relying on consolidated/internal documents - HELD THAT: - The adjudicating authority examined the bank's practice of centralized accounting, collection of branch-level details by zonal offices, consolidation at regional and head office levels and availability of credit on the basis of invoices. It held that an office qualifies as an Input Service Distributor only if it satisfies all ingredients of the definition and registers as such when it seeks to distribute credit; however, distribution is not the sole mode by which CENVAT credit can be availed. Where services are procured and utilized by branch or regional offices but accounted centrally and proper invoices are available, the main office may directly avail credit without any statutory requirement that every office must be registered as an Input Service Distributor. The DSCN's allegation that credit was taken on the basis of internal D-2 statements and estimation was rejected on the material before the authority, including the departmental audit note which confirmed that branches availed credit based on invoices and that internal consolidation was an information procedure. On these findings the show cause notice was found to be without merit and dropped.

DSCN alleging irregular availment of CENVAT credit was dropped; the impugned order holding that registration as Input Service Distributor was not required in the facts and that credit availed was not irregular is upheld.

Penalty under Section 78 of the Finance Act, 1994 and applicability of Section 80 - Whether penalty under Section 78 (fraud/collusion/wilful mis-statement/suppression/contravention with intent) was imposable on the assessee for the alleged wrong availment of credit - HELD THAT: - The adjudicating authority noted that Section 78 is attracted only where service tax has not been levied/paid or has been short-levied/short-paid or erroneously refunded by reason of fraud, collusion, wilful misstatement, suppression or contravention with intent. The charges in the DSCN related to alleged erroneous availment of credit and not to non-levy or short-payment of tax attributable to the culpable mental states enumerated in Section 78. The authority found no material establishing fraud, collusion, wilful misstatement or suppression of facts and observed the bank's status as a nationalized government undertaking with timely filing and payment history and past audits. Consequently, imposition of penalty under Section 78 was not warranted and invocation of the more appropriate provisions of Section 80 was indicated.

Penalty under Section 78 could not be sustained; imposition of such penalty was rejected and the DSCN was dropped while noting applicability of Section 80.

Final Conclusion: The Appellate Tribunal upheld the adjudicating authority's order dropping the show cause notice; Revenue's appeal was dismissed and the assessee (Allahabad Bank) was exonerated of the charges framed in the DSCN.

Survey and Exploration of Minerals Service - Test, Inspection and Certification Services - Technical Testing and Analysis Services - classification of services as legal issue - invocation of extended period in cases of departmental confusion and lack of intent to evade

Survey and Exploration of Minerals Service - Test, Inspection and Certification Services - Technical Testing and Analysis Services - classification of services as legal issue - Activities performed by the appellant fall within the ambit of Survey and Exploration of Minerals Service and are not to be taxed as Test, Inspection and Certification Services or treated otherwise. - HELD THAT: - The Tribunal examined the nature of services performed by the appellant during the impugned period and found that the decisions cited by the appellant (M/s. Mineral Exploration Corporation Ltd. and Fugro Geonics P. Ltd.) and the Board Circular support classification of the activities as Survey and Exploration of Minerals Service. Classification is a question of law which the assessee may contest when subsequent legal developments provide clarity; the record shows departmental inconsistency in classifying identical activities under different service heads. In view of the authorities relied upon and the Board guidance, the Tribunal concluded that the appellant's activities are covered by the Survey and Exploration of Minerals Service and therefore not taxable under the competing service descriptions previously applied by the department. [Paras 4]

Classification accepted in favour of the appellant; activities held to be Survey and Exploration of Minerals Service.

Invocation of extended period in cases of departmental confusion and lack of intent to evade - Extended period of limitation invoked by the department for demand cannot be sustained. - HELD THAT: - The Tribunal found that the department itself had been inconsistent in classifying the same type of services and that clarity on the correct classification emerged only later through judicial decisions around 2014-2015. Because the departmental confusion meant there was no clear basis to infer an intention on the part of the appellant to evade tax, invocation of the extended period was not justified. Consequently the demand raised by invoking the extended period could not be maintained. [Paras 4]

Extended period invocation quashed; limitation defence accepted.

Final Conclusion: Appeal allowed on merits and on limitation; the appellant's services are classified as Survey and Exploration of Minerals Service and the departmental demand raised by invoking the extended period is not sustainable.

Construction of complex service - Residential complex - exclusion for construction intended for personal use - Personal use (includes permitting use as residence by another person on rent or without consideration) - Works contract service - Liability of subcontractor where main contractor engages subcontractors - Service tax not leviable where builder/developer directly contracts with owner for personal use

Construction of complex service - Residential complex - exclusion for construction intended for personal use - Personal use (includes permitting use as residence by another person on rent or without consideration) - Service tax not leviable where builder/developer directly contracts with owner for personal use - Whether service tax is leviable on the construction of residential houses made by the appellant for Essar Limited where the houses are used by Essar for its own staff - HELD THAT: - The Tribunal examined the contention that residences constructed by the appellant for Essar Limited were for Essar's own staff and thus amounted to "personal use" within the definition of a residential complex, attracting the exclusion from construction of complex service. Relying on the Tribunal's decision in CR Patel and other precedents, the Court noted that where the owner directly engages a builder/developer who provides design, planning and construction and the complex is intended for the owner's personal use (which, by explanation, includes permitting use as residence by another person on rent or without consideration), the construction does not fall within the taxable definition of construction of complex service. Applying that principle to the facts, and observing that the residences were made for Essar's employees, the Tribunal found the exclusion applicable and that the impugned demand for service tax could not be sustained.

Demand of service tax on construction of residential houses for Essar Limited (for its staff) is not sustainable; the impugned order set aside and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that construction of the residential houses for use by Essar Limited's staff falls within the exclusion for residential complexes intended for personal use; the demand of service tax was set aside.

Denial of Cenvat credit on basis of third party transport records - evidentiary value of Daily Loading Reports / Monthly Loading Reports and RTO check post records - supply of relied upon documents and principles of natural justice - requirement of corroborative evidence for clandestine removal allegations - acceptance of Cenvat credit where statutory records and production account tallies

Denial of Cenvat credit on basis of third party transport records - requirement of corroborative evidence for clandestine removal allegations - Validity of denial of Cenvat credit where department relied primarily on transporters' statements, DLR/MLR and RTO records alleging diversion of imported inputs. - HELD THAT: - The Tribunal found that the Revenue's case rested chiefly on third party records (transporters' statements, DLRs/MLRs and RTO check post reports) alleging diversion of imported inputs and non receipt at the factory. Contrastingly, the statutory records (RG 23 Part I/II), books of account, bills of entry, production and clearance of finished goods, payment of transportation by account payee cheque (with TDS), and absence of shortage at the factory all supported receipt and use of inputs. The Tribunal reiterated the settled principle that third party records alone, without clinching corroborative evidence of clandestine manufacture/removal or substitution of raw material, cannot sustain a demand. Given there was no evidence of substitution, no buyer of alleged diverted goods was found, and no inculpatory admission, the Revenue failed to discharge its onus to prove diversion and non receipt. The Tribunal therefore upheld the adjudicating authority's conclusion that the Cenvat credit could not be denied on the basis of the material relied upon by the department. [Paras 5]

The denial of Cenvat credit based solely on the third party transport and RTO records is not sustainable; the credit taken by the respondent is to be upheld.

Evidentiary value of Daily Loading Reports / Monthly Loading Reports and RTO check post records - acceptance of Cenvat credit where statutory records and production account tallies - Whether DLR/MLR and RTO check post reports, by themselves, can be treated as conclusive evidence of non transportation of goods to the factory. - HELD THAT: - The Tribunal examined the reliability of DLR/MLR and RTO reports and observed practical realities (drivers using alternate routes, non recording at certain check posts) and inherent infirmities in the RTO extract (inconsistent In/Out entries). It noted that DLR/MLR are rough third party records kept by drivers/supervisors and, without corroboration, are insufficient to infer clandestine diversion. Given the availability of alternate routes and driver statements explaining omissions in check post records, and in absence of corroborative evidence demonstrating how manufacture proceeded without inputs, the Tribunal held that such third party records cannot, by themselves, displace the statutory and accounting records showing receipt and use of inputs. [Paras 5]

DLR/MLR and RTO reports are of limited evidentiary value and cannot, standing alone, rebut the statutory records and bookkeeping that demonstrate receipt and use of inputs.

Supply of relied upon documents and principles of natural justice - Whether failure by the investigating agency/department to furnish copies of relied upon documents to the noticee vitiates the show cause proceedings. - HELD THAT: - The Tribunal recorded that the investigating agency had not furnished copies or produced acknowledgements of delivery of the relied upon documents to the respondent or to the adjudicating authority despite repeated requests and correspondence. Relying on established precedent and principles of natural justice, the Tribunal held that non supply of relied upon documents prejudices the noticee's ability to answer the allegations and lead evidence, and therefore vitiates the proceedings. The Revenue also failed to produce those documents before the Tribunal despite being granted time; this reinforced the finding that supply was not effected and that the adjudicating authority's conclusions on non availability of RUDs cannot be faulted. [Paras 5]

Proceedings vitiated for non supply of relied upon documents; failure to furnish RUDs justified the adjudicating authority's dropping of the show cause notice.

Final Conclusion: On the facts of the case - where statutory records, accounting entries, production and duty paid clearances supported receipt and use of imported inputs, and where the department relied principally on uncorroborated third party transport and RTO records while failing to supply relied upon documents - the Tribunal upheld the adjudicating authority's order dropping the show cause notice and dismissed the Revenue's appeals.

Manufacture by breaking up of ships - Admissibility of CENVAT credit on inputs and by-products - Definition of "input" under the Cenvat Credit Rules - Admissibility of CVD credit on fuels and oils removed from imported ships - Reliance on departmental circular for credit of CVD on imported ships

Manufacture by breaking up of ships - Admissibility of CENVAT credit on inputs and by-products - Admissibility of CVD credit on fuels and oils removed from imported ships - Reliance on departmental circular for credit of CVD on imported ships - CENVAT credit of CVD paid on fuels and oils found on ships imported for breaking is admissible as credit of input/by-product for the ship-breaking activity deemed to be manufacture. - HELD THAT: - The Tribunal held that the process of obtaining goods and material by breaking up of ships is deemed to be manufacture under note 9 to Section XV, and therefore the entire ship as imported constitutes the "input" for a ship-breaking unit. Although fuels and oils are non-excisable items under the tariff, they are stores on board the ship which are inevitably required to be removed as part of commencing the ship breaking operation. Removal of such fuels and oils forms the initiation of the manufacturing process and they qualify as by-products or inputs used in or in relation to the manufacture. The Tribunal relied on the settled principle-reflected in the CBEC manual-that CENVAT credit is admissible in respect of inputs contained in any by-product and is not to be denied merely because the by-product is non-excisable. Further, paragraph 6 of Circular No. 1014/2/2016-CX clarifies that once CVD is paid on import of the ship, cenvat credit of that CVD cannot be denied for payment of central excise duty on breaking of that ship. Applying these principles to the facts-including the admitted position that fuels and oils are removed for safe and efficient breaking-the Tribunal concluded there was no reason to deny CENVAT credit of the CVD paid on fuels and oils removed from the ships imported for breaking. [Paras 5, 6]

CENVAT credit of the CVD paid on fuels and oils found on the imported ships is admissible as part of the input/by-product for the ship breaking manufacture; the Commissioner (Appeals) order setting aside the adjudicating authority's demand is upheld.

Final Conclusion: The departmental appeal is dismissed; the Commissioner (Appeals)'s order allowing the respondent's claim of CENVAT credit on CVD paid on fuels and oils removed from ships imported for breaking is upheld.

Availability of CENVAT credit on goods used in the manufacture of capital goods and for repair/maintenance - availability of CENVAT credit on structural items and consumables used in fabrication of support structures for capital goods - user test for determining capital goods - effect of amendment to the definition of 'input' w.e.f. 07.07.2009 on retrospective application - penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944

Availability of CENVAT credit on goods used in the manufacture of capital goods and for repair/maintenance - availability of CENVAT credit on structural items and consumables used in fabrication of support structures for capital goods - user test for determining capital goods - Entitlement to CENVAT credit on welding electrodes, cement, MS plates, MS angles, channels and similar items used in manufacture of storage tanks, pollution control equipment and in fabrication of support structures for capital goods for the periods 2007-08 and 2008-09. - HELD THAT: - The Tribunal applied established authorities holding that goods used in the manufacture of capital goods, and items used for repair and maintenance, fall within the definition of 'input' and are eligible for Cenvat credit. The court applied the "user test" to structural steel items used to fabricate support structures for capital goods, observing that such fabricated goods become parts/components of the machines and thereby qualify as capital goods (including components, spares and accessories). Earlier decisions of appellate and High Courts allowing credit on welding electrodes and structural items were followed. On this basis the disallowance of credit by the lower authorities was found unsustainable for the tax periods in question. [Paras 3, 5]

Credit on the disputed welding electrodes and structural items used in manufacture of storage tanks, pollution control equipment and in fabrication of support structures for capital goods for 2007-08 and 2008-09 is allowable; impugned disallowances set aside.

Effect of amendment to the definition of 'input' w.e.f. 07.07.2009 on retrospective application - Whether the amendment to the definition of 'input' effected w.e.f. 07.07.2009 (excluding certain construction items) applied retrospectively to deny credit for the periods 2007-08 and 2008-09. - HELD THAT: - The Tribunal noted that the amendment of 07.07.2009 was held not to operate retrospectively by higher fora and that the period under adjudication precedes that amendment. Reliance was placed on judicial decisions holding that the 2009 amendment cannot be treated as clarificatory with retrospective effect. Consequently, the exclusion introduced by that amendment did not operate to deny credit for the earlier periods. [Paras 3, 4, 5]

The 07.07.2009 amendment to the definition of 'input' does not apply retrospectively to deny credit for 2007-08 and 2008-09.

Penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Validity of the penalty imposed concomitant with disallowance of CENVAT credit. - HELD THAT: - Since the disallowance of credit was found unsustainable and credit was held allowable for the periods in question, the consequential penalty imposed under Rule 15(2) read with Section 11AC could not be sustained. The Tribunal set aside the adjudicating authority's order which had imposed penalty equal to the disallowed amount. [Paras 1, 5]

Penalty imposed along with the disallowance is set aside as the underlying disallowance has been quashed.

Final Conclusion: The appeal is allowed; the impugned orders disallowing CENVAT credit and imposing penalty for the periods 2007-08 and 2008-09 are set aside and the appellant is entitled to consequential relief as per law.

CENVAT Credit - input services - input service distributor - business auxiliary services - trading as an exempted service - Rule 6(3A) formula for reversal of credit attributable to exempted activity - distribution of credit by Head Office - place of consumption not determinative for availment of credit - Rule 7 prior to 2012 - no prescribed manner of distribution

CENVAT Credit - business auxiliary services - input services - place of consumption not determinative for availment of credit - Eligibility of CENVAT credit on business auxiliary services paid and accounted at the Head Office where the services were not physically consumed at the manufacturing unit. - HELD THAT: - During the relevant period the definition of input services included activities relating to business. The Tribunal upheld the Commissioner (Appeals) finding that services characterized as business auxiliary services (such as reimbursements for freight, manager salary, corporate IT share and corporate overheads) were eligible for CENVAT Credit even though they were received or consumed at the Head Office rather than within the factory premises. The Court observed that it was not necessary that input services be consumed in the factory itself for credit to be admissible and therefore the distribution of credit by the Head Office did not vitiate entitlement to credit under the law as existing for the disputed period. [Paras 11, 12]

Credit on the impugned business auxiliary services availed at Head Office is admissible and the fact of non-consumption within the manufacturing unit does not disentitle the assessee to CENVAT credit.

Distribution of credit by Head Office - Rule 7 prior to 2012 - no prescribed manner of distribution - Validity of distribution of the entire input service credit by the Head Office to a single manufacturing unit prior to the 2012 amendment of Rule 7. - HELD THAT: - The Tribunal accepted the submission that, prior to the amendment of Rule 7 effective 1-4-2012, there was no statutory prescription governing the manner of distribution of input service credit among units. Reliance was placed on earlier Tribunal decisions which held that no restriction existed under the relevant rules limiting distribution of service tax credit. The appellate authority therefore correctly found that distribution by the Head Office to the Ranipet unit did not contravene the rules as they stood during the disputed period. [Paras 12]

Distribution of input service credit by the Head Office to a single unit was permissible under the law prevailing for the disputed period.

Trading as an exempted service - Rule 6(3A) formula for reversal of credit attributable to exempted activity - Whether credit attributable to trading (an exempted activity) must be reversed and whether the formula in Rule 6(3A) (effective 01.04.2008) could be applied for calculation and reversal for the disputed period. - HELD THAT: - The Tribunal agreed with the Commissioner (Appeals) that credit attributable to exempted activity (trading) could not be retained. Although Rule 6(3A) prescribing a formula for reversal came into effect on 01.04.2008, the Tribunal held that adoption of that formula to quantify and reverse credit attributable to trading activity for the portion of the disputed period falling on or after its effective date was appropriate. The appellate order directing the assessee to compute the proportionate credit attributable to trading activity, reverse/pay the same and furnish worksheets and a Chartered Accountant certificate was held to be a proper and pragmatic mechanism to resolve the issue; the Tribunal found no infirmity in applying the Rule 6(3A) methodology as directed. [Paras 13]

Credit attributable to trading activity must be reversed; application of Rule 6(3A)'s formula (effective 01.04.2008) to compute and reverse the attributable credit is permissible and the directions given by the Commissioner (Appeals) are upheld.

Final Conclusion: The departmental appeal is dismissed. The Tribunal upheld (i) admissibility of CENVAT credit on business auxiliary services availed at Head Office even if not consumed within the manufacturing unit, (ii) permissibility of the Head Office distributing credit to a single unit under the law prevailing prior to the 2012 amendment of Rule 7, and (iii) the requirement to reverse credit attributable to trading (an exempted activity), applying the Rule 6(3A) formula effective 01.04.2008 for quantification, with directions to furnish computation and certification.

Inclusion of value of free supplied inputs in assessable value - application of MODVAT/CENVAT credit scheme - Rule 4(5)(a) of CENVAT Credit Rules, 2004 - pari materia between Rule 4(5)(a) CCR and Rule 57F(2) Central Excise Rules - re-determination of transaction value under Section 4(1)(a) of the Central Excise Act, 1944

Inclusion of value of free supplied inputs in assessable value - application of MODVAT/CENVAT credit scheme - Rule 4(5)(a) of CENVAT Credit Rules, 2004 - Value of inputs supplied free of cost by the buyer need not be included in the assessable value of the intermediate product cleared on payment of duty by the intermediate manufacturer. - HELD THAT: - The Tribunal applied the ratio of the Supreme Court in International Auto Ltd. and subsequent Tribunal and Supreme Court decisions following that ratio. Where a manufacturer of the final product is entitled under the MODVAT/CENVAT credit scheme to take credit for duty paid on all inputs at the time of clearance of the final product, the cost of inputs supplied free to the intermediate manufacturer does not require inclusion in the assessable value of the intermediary product. The Tribunal treated Rule 4(5)(a) of the CENVAT Credit Rules, 2004 as pari materia with Rule 57F(2) of the Central Excise Rules, 1944 and relied on consistent precedents of this Tribunal (including SRF Ltd. and Dymos Lear Automotive India Pvt. Ltd.) and the Supreme Court to hold that operation of the credit scheme on the manufacturer of the final product renders the valuation dispute of the intermediary product immaterial. Applying these authorities to the facts, the demand confirmed by the lower authorities was unsustainable. [Paras 2, 5, 6]

Impugned order set aside; appeals allowed and demands annulled with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeals, holding that the value of inputs supplied free by the buyer need not be included in the assessable value of the intermediate product when the final product manufacturer is entitled to take CENVAT/MODVAT credit; the impugned orders confirming duty and interest were set aside with consequential relief.

Requirement of assessment order before enforcement - coercive recovery under Section 45 of the TNVAT Act, 2006 - attachment of bank funds by communication to a bank - quashing of composite attachment order covering unassessed years

Quashing of composite attachment order covering unassessed years - attachment of bank funds by communication to a bank - Validity of the impugned communication dated 30.01.2023 which directed the bank to withhold petitioner's funds purportedly for assessment years 2006-07 to 2016-17 when assessment orders for some of those years had not been passed. - HELD THAT: - The court examined the Tabular Column produced by the first respondent and found that assessment orders had been passed only for some of the years within 2006-07 to 2016-17. The impugned single communication dated 30.01.2023, however, directed the bank to withhold funds in respect of the entire range of years, including years for which no assessment orders had been made prior to the communication. The court held that the first respondent cannot exercise coercive recovery powers under Section 45 of the TNVAT Act in respect of years where no assessment orders exist, and that a composite proceeding covering both assessed and unassessed years is invalid to the extent it seeks enforcement for unassessed years. Applying these conclusions, the court quashed the impugned communication as a single proceeding covering all the stated years because it included years still unassessed at the time of issuance. [Paras 7, 8, 9]

Impugned proceedings dated 30.01.2023 quashed insofar as they seek to attach funds for assessment years in respect of which no assessment orders had been passed.

Requirement of assessment order before enforcement - coercive recovery under Section 45 of the TNVAT Act, 2006 - Whether coercive steps under Section 45 of the TNVAT Act, 2006 may be taken only in respect of assessment years for which assessment orders have been passed. - HELD THAT: - The court reiterated that coercive recovery proceedings under Section 45 can be initiated only after assessment orders have been passed for the relevant assessment years. Consequently, the first respondent remains entitled to enforce sums by lawful coercive measures under Section 45 only in respect of those assessment years for which assessment orders had already been passed prior to 30.01.2023. This clarification separates the enforceability of demands as between assessed years (where enforcement is permissible) and unassessed years (where enforcement is impermissible). [Paras 4, 7, 10]

Coercive steps under Section 45 are permissible only for assessment years where assessment orders have been passed; enforcement against the petitioner may proceed for those years in accordance with law.

Final Conclusion: The Court allowed the writ petition and quashed the communication dated 30.01.2023 to the extent it sought attachment of the petitioner's bank funds for assessment years for which no assessment orders had been passed; the revenue remains free to enforce only those assessment years for which orders were already passed.

Deduction under Section 3-B(2) of the Tamil Nadu General Sales Tax Act, 1959 in respect of works contracts - claim for exemption of labour and incidental charges in turnover - admissibility of documents produced at second appeal stage - non-production of supporting documents as a question of fact - burden of proof for exemptions in assessment proceedings - distinction between question of fact and substantial question of law

Deduction under Section 3-B(2) of the Tamil Nadu General Sales Tax Act, 1959 in respect of works contracts - claim for exemption of labour and incidental charges in turnover - burden of proof for exemptions in assessment proceedings - non-production of supporting documents as a question of fact - admissibility of documents produced at second appeal stage - Whether the assessee was entitled to deduction from turnover for labour and incidental charges under Section 3-B(2) in the absence of supporting documents and whether appellate/tribunal rightly sustained the disallowance. - HELD THAT: - The appellate authority and the Tribunal declined the claimed deduction because the assessee failed to produce documentary evidence at assessment or first appeal to show that the establishment/establishment charges represented payments such as P.F., E.S.I. and similar labour-related outgoings. Documents sought to be produced at the second appeal stage were not placed before the assessing authority or the Appellate Assistant Commissioner and therefore were not permitted to be relied upon. The courts below treated non-production of supporting documents as a factual deficiency; they did not refuse entitlement to deduction as a matter of law but found the claim untenable on the available material. The High Court concurred with this approach, holding that the matter turned on fact and proof (absence of supporting documents and inadmissibility of belated documents) and that no substantial question of law arose for interference. [Paras 8, 9, 10, 11]

The disallowance of the claimed deduction was correctly sustained by the Appellate Assistant Commissioner and the Tribunal for failure to produce requisite supporting documents; the non-production is a question of fact and no substantial question of law is made out.

Final Conclusion: The High Court dismissed the Tax Case Revision, confirming the orders of the lower authorities upholding the disallowance of the claimed deduction for want of supporting documents; no costs.