TaxTMI Updates e-Newsletter
Mar 26,2020

Principal supply in composite supply - composite supply classification under SAC 9989 - supply under Section 7(1)(a) of the CGST Act, 2017 - pure agent under Rule 33 of CGST Rules, 2017 - reverse charge mechanism for Goods Transport Agency - exemption of government-to-government services - classification of printed books under HSN 4901 - treatment of waste and scrap under HSN 4707 and 7204

Composite supply classification under SAC 9989 - supply under Section 7(1)(a) of the CGST Act, 2017 - exemption of government-to-government services - Printing and supply of textbooks, annual reports, receipt/measurement/log books to other departments of the same State Government - HELD THAT: - Where the content is supplied by another department and physical inputs (paper) belong to the applicant, the transaction is a composite supply whose principal element is the printing service and is classifiable under SAC 9989. However, because the applicant is part of the same State Government as the recipients and there is no distinct supplier and recipient, the transactions do not qualify as 'supply' under Section 7(1)(a) and are therefore not exigible to GST when supplied to departments of the same government that have not obtained separate registration. If the recipient department has obtained separate registration, the transaction will qualify as supply and be taxable; in that case the supply is classifiable under SAC 9989 and attracts GST under the relevant notification.

Transactions to unregistered departments of the same State Government do not constitute supply and are exempt; to registered departments they are taxable as printing services (SAC 9989).

Principal supply in composite supply - classification of printed goods under Chapter 48/49 - supply under Section 7(1)(a) of the CGST Act, 2017 - Printing and supply of answer booklets, visiting cards, letterheads, forms, covers, file wrappers, invitation cards, scribbling pads and rubber stamps to Government departments - HELD THAT: - Where such printed items fall within Chapter 48/49 and the physical inputs belong to the printer, para 5 of the circular treats the predominant supply as goods (printing of content ancillary). Accordingly, supplies of these items to other departments of the same government that are not separately registered do not constitute 'supply' under Section 7(1)(a). If supplied to departments which are separately registered, the transactions qualify as supply and are taxable under the applicable HSN headings.

Supplies to unregistered government departments do not qualify as supply and are not taxable; supplies to registered departments are taxable as goods under the relevant HSN entries.

Composite supply classification under SAC 9989 - exemption of government-to-government services - Printing and supply of annual reports and receipt books to autonomous bodies - HELD THAT: - When content is supplied by autonomous bodies and physical inputs belong to the printer, the activity is a printing service (SAC 9989). The exemption for services provided by State Government to another State Government does not extend to supplies made to autonomous bodies. Therefore such supplies are taxable and classifiable under SAC 9989.

Printing and supply to autonomous bodies are taxable as services under SAC 9989 and attract GST.

Classification of printed goods under HSN 4820 - Printing and supply of log books to autonomous bodies - HELD THAT: - Log books are registers classifiable under Chapter Heading 4820. Supplies to autonomous bodies are supplies of goods and fall under the relevant schedule entry for log books.

Supply of log books to autonomous bodies is taxable as goods under HSN 4820.

Classification of printed books under HSN 4901 - Printing and sale of textbooks, Karnataka Kaipidis/Gazettes and Economic Survey to the public and recognised book stalls - HELD THAT: - Where printed books are sold from stock to the public or recognised book stalls and the content does not belong to the recipient, they are goods falling under HSN 4901. Entry No.119 of the relevant notification exempts printed books under HSN 4901, and those items are covered by that exemption.

Printed books supplied to the public or recognised book stalls are goods under HSN 4901 and are exempted.

Treatment of waste and scrap under HSN 4707 - Sale of recovered (waste and scrap) paper - HELD THAT: - Recovered waste and scrap paper are classifiable under Tariff Heading 4707. The entry in the schedule covers such goods and prescribes the applicable GST rate for waste and scrap paper.

Sale of waste paper is taxable and attracts the rate applicable to HSN 4707 (treated as waste/scrap paper).

Treatment of waste and scrap under HSN 7204 - Sale of old printing machinery sold as scrap - HELD THAT: - Old printing machinery of ferrous material sold as scrap is classifiable as ferrous waste and scrap under Tariff Heading 7204 and is subject to the rate applicable to that tariff classification.

Old ferrous machinery sold as scrap is taxable as ferrous waste and scrap under HSN 7204.

Pure agent under Rule 33 of CGST Rules, 2017 - supply under Section 7(1)(a) of the CGST Act, 2017 - Procurement and onward supply of stationery articles purchased from dealers and supplied to Government departments at no profit/no loss - HELD THAT: - To qualify as a 'pure agent' the entity must procure goods or services on behalf of the recipient as part of a supply and meet the conditions in Rule 33. The applicant does not procure goods or services as part of a supply on its own account and therefore does not qualify as a pure agent. Consequently, supplies to other departments of the same government that are not separately registered do not amount to 'supply'; if the recipient is separately registered, the transaction will qualify as supply and be taxable as the underlying goods.

Applicant is not a pure agent; supplies to unregistered departments do not qualify as supply, but supplies to registered departments are taxable as goods.

Reverse charge mechanism for Goods Transport Agency - Taxability of transportation services procured by the applicant - HELD THAT: - If the transporter is a Goods Transport Agency (GTA) and the applicant is in a notified category, GST on GTA services is payable by the applicant under reverse charge. If the transporter is not a GTA (nor a courier), the transportation service of goods by road is exempt under the specified notification. Because in either case the applicant is not paying tax to the supplier, the question of deducting TDS on the GST element does not arise.

GTA services may be taxable to the applicant under reverse charge if conditions are met; non-GTA road transport of goods is exempt; TDS on GST element is not applicable.

Exemption of government-to-government services - Printing and supply of Indian Law Reports to the High Court and issuance of NOCs for change of name to private persons - HELD THAT: - Printing of Law Reports supplied free to the High Court is a printing service where the recipient (High Court) is not a 'business entity' for the exclusion in the exemption entry; as the applicant and recipient form parts of the same government the transaction does not constitute a taxable supply. Issuance of NOC to private individuals for change of name is a service provided by the State Government to individuals; where the consideration does not exceed the prescribed threshold it is exempt under the relevant notification entry.

Printing and supply of Law Reports to the High Court is not a taxable supply; issuance of NOCs to private individuals for nominal consideration is exempt.

Composite supply classification under SAC 9989 - Printing and supply of bus tickets for BMTC - HELD THAT: - Where the logo/content is supplied by the recipient and physical inputs belong to the printer, the principal supply is the printing service and is classifiable under SAC 9989. Such supplies to BMTC are taxable as services under the stated classification.

Printing and supply of bus tickets to BMTC is taxable as a printing service classified under SAC 9989.

Final Conclusion: The Authority ruled category-wise: (i) printing services between departments of the same State Government that are not separately registered do not qualify as 'supply' and are not taxable; (ii) identical activities to registered departments or to autonomous bodies/public/others may be taxable as either printing services (SAC 9989) or goods (appropriate HSN headings) depending on the nature of the item; (iii) specific classifications and applicable rates follow the tariff entries and notifications relied upon by the Authority.

Rule-making power under Section 164(2) - transitional provisions and time-limit for availing input tax credit - concessionary nature of input tax credit under Section 140 - reasonableness and non-arbitrariness under Article 14 - meaning of 'technical difficulties' limited to the GST common portal - use of system logs as admissible and objective evidence - IT Grievance Redressal Mechanism and delegation to technical committee

Rule-making power under Section 164(2) - transitional provisions and time-limit for availing input tax credit - Validity of Rule 117 insofar as it prescribes a time limit for filing FORM GST TRAN-1 (challenge of ultra vires Section 140 and general rule-making power). - HELD THAT: - The Court held that Rule 117(1)'s time-limit is traceable to the wide rule-making power conferred by Section 164(2). Chapter XX of the Act embodies transitional arrangements and Section 164(2) is drafted in broad terms permitting rules for matters which may be prescribed; given the novel and complex GST regime and need for flexibility, the delegation to prescribe a time-limit for transitional credit is within the legislative scheme. The Court treated the input-tax-credit under Section 140(1) as a concession subject to conditions and time-bound regulation; therefore framing a time-limit by rules did not usurp any substantive parliamentary function. Consequently Rule 117(1) is not ultra vires the parent Act. [Paras 47]

Rule 117(1) is intra vires the CGST Act and the time-limit prescribed is valid.

Concessionary nature of input tax credit under Section 140 - reasonableness and non-arbitrariness under Article 14 - Whether the time limit in Rule 117 violates Article 14 as arbitrary or unreasonable. - HELD THAT: - Applying the limited scope of judicial interference in economic legislation, the Court found the time-limit rationally connected to the transitional purpose of Section 140 and to public interest in fiscal certainty and administration. The Court relied on precedents treating transitional/input-credit provisions as concessions subject to conditions, and noted analogous time limits under the GST scheme (Section 16(4)). The Court held that removing the time-limit would render transitional arrangements unworkable and that individual equitable reliefs undermining uniform fiscal administration were inappropriate. Mandating electronic filing did not render the rule discriminatory. [Paras 60]

The time-limit under Rule 117 is not arbitrary or violative of Article 14; it is reasonable and consistent with the Act's transitional purpose.

Meaning of 'technical difficulties' limited to the GST common portal - use of system logs as admissible and objective evidence - IT Grievance Redressal Mechanism and delegation to technical committee - Scope of 'technical difficulties' in Rule 117(1A), legitimacy of the IT Grievance Redressal Mechanism and reliance on system logs for grant of extension. - HELD THAT: - The Court construed 'technical difficulties' in Rule 117(1A] as confined to problems attributable to the GST common portal (not local or individual connectivity or device issues). In that context the IT Grievance Redressal Cell - a technical committee comprising GSTN/IT and tax functionaries - is an appropriate body to examine portal-related difficulties and make recommendations to the Council. The Court held that system logs generated by the portal are objective, auto-generated records and constitute the proper evidence to ascertain whether a portal error occurred; use of such logs neither fetters discretion nor is arbitrary. Thus the extension under Rule 117(1A) is available only where system logs corroborate portal error and a Council recommendation is made. [Paras 68, 73]

The phrase 'technical difficulties' means portal-related errors; the IT Grievance Redressal Mechanism and reliance on GST portal system logs are valid and appropriate.

Use of system logs as admissible and objective evidence - transitional provisions and time-limit for availing input tax credit - Remedy sought by the petitioner to permit filing of TRAN-1 despite absence of portal evidence of error. - HELD THAT: - Applying the above principles, the Court examined the Petitioner's factual claim and evidentiary material. The Petitioner's late-produced browsing-history screenshot was found inadequate because Rule 117(1A) requires portal-system evidence to establish portal-side technical difficulty; the portal system log did not show any error for the petitioner. The Court emphasised that permitting relief on other contemporaneous or non-portal material would undermine the objective, uniform process and certainty intended by the transitional scheme and Rule 117(1A). [Paras 75, 76]

No direction to permit TRAN-1 filing could be granted to the petitioner; the petitioner's claim fails for lack of portal system-log evidence.

Final Conclusion: The writ petition is dismissed. Rule 117(1) is a valid exercise of rule-making power under Section 164(2); the time-limit for filing TRAN-1 is a permissible, reasonable condition of the concession under Section 140 and does not violate Article 14. Rule 117(1A)'s reference to 'technical difficulties' is confined to GST common-portal errors; the IT Grievance Redressal Mechanism and reliance on system logs are legitimate. On the facts, no portal-system-log evidence supports the petitioner's claim, and no relief is granted.

Transitional input tax credit - Section 140 of the Central Goods and Services Tax Act, 2017 - GST-TRAN-1 form - technical glitch in GST portal uploading - administrative remedy by Nodal Officer, GST Division

Transitional input tax credit - Section 140 of the Central Goods and Services Tax Act, 2017 - GST-TRAN-1 form - Petitioner was prevented from claiming the transitional input tax credit due to incorrect/erroneous amount uploaded and inability of the system to accept corrected figures. - HELD THAT: - The Court recorded the petitioner's claim of entitlement to transitional input tax credit on the appointed day and that a lesser amount had been uploaded in the system, preventing the petitioner from availing the full credit. The grievance was that attempts to upload the correct figure were declined by the portal and that administrative authorities had not cooperated to rectify the inadvertent error. In light of the respondents' assurance that the technical/administrative issue would be examined, the Court directed administrative intervention to enable the petitioner to upload the correct amount and a revised GST-TRAN-1 so as to secure the claimed transitional credit. The Court disposed of the petition on the basis of this assurance and direction rather than deciding the quantum of credit on merits.

Petition disposed with direction to enable uploading of the correct figure and revised GST-TRAN-1 so that the petitioner may claim the transitional input tax credit.

Technical glitch in GST portal uploading - administrative remedy by Nodal Officer, GST Division - Requirement that the Nodal Officer, GST Division Range, examine the technical/administrative failure and facilitate correction of the uploaded figures. - HELD THAT: - The Court accepted the submission of the learned Standing Counsel that the Nodal Officer would look into the matter despite earlier refusal, and accordingly issued a direction to that officer to review the technical glitch and the inadvertent error, and to take necessary steps to permit the petitioner to upload the correct figures and a revised GST-TRAN-1. The direction constitutes a remand to the administrative authority for verification and remedial action rather than an adjudication on the entitlement or computation of credit.

Matter remitted to the Nodal Officer, GST Division Range, for examination and facilitation of correction/uploading of the revised GST-TRAN-1; action to be taken in accordance with the Court's direction.

Final Conclusion: The petition is disposed of by directing the Nodal Officer, GST Division Range, to examine the reported technical glitch and the inadvertent error in the uploaded figures, and to enable the petitioner to upload the correct amount and a revised GST-TRAN-1 so as to claim the transitional input tax credit; the Court did not decide the quantum on merits and left remedial action to the administrative authority.

Natural justice - opportunity of being heard - personal hearing - quashing of order for violation of natural justice - ultra vires - remand for fresh decision after hearing

Natural justice - opportunity of being heard - personal hearing - quashing of order for violation of natural justice - ultra vires - Validity of Ext.P-7 order dated 13.1.2020 in view of alleged denial of personal hearing to the petitioner - HELD THAT: - The Court found on the material before it that the 1st respondent had himself issued notice (Ext.P-5(b)) fixing personal hearing on 14.1.2020 but proceeded to pass the impugned order (Ext.P-7) on 13.1.2020 without affording the petitioner any opportunity of being heard. The respondents did not controvert the petitioner's assertion and no specific instructions were placed on record to show that a hearing had in fact been granted. In these circumstances the Court held that the impugned order was rendered in patent violation of the elementary canons of fairness and natural justice, was ultra vires and liable to be quashed. The Court emphasised that where a decision inflicts adverse civil consequences the decision maker must grant a reasonable opportunity of being heard either personally or through an authorised representative/counsel before taking a considered decision. [Paras 4, 5]

Ext.P-7 order dated 13.1.2020 set aside as illegal for want of personal hearing.

Remand for fresh decision after hearing - opportunity of being heard - personal hearing - Procedure to be followed on remand in respect of penalty and consequential decision-making - HELD THAT: - Having quashed Ext.P-7 the Court remitted the matter relating to the proposed penalty to the 1st respondent for fresh consideration. The petitioner was directed to file written submissions before the 1st respondent within 10 days of receipt of a certified copy of the judgment. Thereafter the 1st respondent must issue notice of hearing to the petitioner by registered post with acknowledgment due and grant a reasonable opportunity of personal hearing to the petitioner or his authorised representative/counsel before taking a considered decision in accordance with law. [Paras 4]

Penalty proceedings remitted to the 1st respondent for fresh decision after serving notice and affording personal hearing; petitioner to submit written submissions within 10 days.

Final Conclusion: Ext.P-7 order dated 13.1.2020 quashed for violation of natural justice; penalty matter remitted to the 1st respondent to decide afresh after the petitioner files written submissions and is granted a registered notice and reasonable personal hearing.

Stay of demand under Section 220(6) of the Income-tax Act - Interim stay pending disposal of appeal - Applicability of Section 40(a)(ia) in relation to non-deduction of tax at source - Duty of the first appellate authority to decide appeals expeditiously

Stay of demand under Section 220(6) of the Income-tax Act - Interim stay pending disposal of appeal - Stay of the demand notice issued pursuant to the assessment order dated 28th December, 2019 was granted until the first appellate authority decides the appeal. - HELD THAT: - The High Court, without expressing any opinion on the merits of the assessment, recorded that it would be in the interest of justice to grant an interim stay of the demand until the first appellate authority adjudicates the appeal. The Court noted that the petitioner had already made a part payment of the outstanding dues and directed that, until the appellate authority renders its decision within the specified timeframe, the demand notice shall remain stayed. This order was made as a protective measure pending expeditious disposal of the statutory appeal and does not constitute a determination on applicability of substantive provisions such as Section 40(a)(ia). [Paras 12, 15]

Till decision is rendered on the appeal by the first appellate authority within the period specified, there shall be stay of the demand notice issued pursuant to the assessment order dated 28th December, 2019.

Duty of the first appellate authority to decide appeals expeditiously - Applicability of Section 40(a)(ia) in relation to non-deduction of tax at source - The first appellate authority was directed to hear and decide the appeal filed by the petitioner within four months from receipt of an authenticated copy of the order. - HELD THAT: - The Court declined to adjudicate the substantive controversy regarding the application of Section 40(a)(ia) or the correctness of the assessment order, and instead remitted the matter to the first appellate authority for determination in accordance with law. The direction imposes a timeline of four months for disposal from receipt of an authenticated copy of the High Court's order, thereby requiring fresh consideration of the appeal on merits by the statutory forum. [Paras 13]

The first appellate authority shall hear the appeal and decide the same in accordance with law within four months from the date of receipt of an authenticated copy of this order.

Final Conclusion: Writ petition disposed; interim stay of the demand arising from the assessment order dated 28th December, 2019 granted until the first appellate authority decides the appeal, which is directed to be heard and disposed of within four months from receipt of an authenticated copy of this order.

Tax Deducted at Source - Form 26AS - Form 16A - Section 203AA - Mandamus - Duty to reflect TDS in departmental records

Form 16A - Form 26AS - Tax Deducted at Source - Duty to reflect TDS in departmental records - Petitioner directed to approach the Income Tax Department with the Manual Form 16A for TDS deducted by the bank and the department directed to consider the claim and pass orders within a stipulated time. - HELD THAT: - The Court recorded that the bank had deducted tax from interest on the petitioner's term deposits and issued a Manual Form 16A but did not generate Form 26AS/26A, with the consequence that the payment did not reflect in the records maintained by the Income Tax Officer. The Income Tax Department, through its counsel, stated that upon receipt of an appropriate application with enclosures (including the Manual Form 16A), it would consider the petitioner's claim and pass appropriate orders. Rather than issuing a direct writ commanding generation of Form 26AS or a certificate under Section 203AA, the Court disposed the petition by directing the petitioner to avail the departmental remedy and by mandating the Income Tax Officer to consider and decide the application within four weeks. [Paras 4, 5]

Petitioner to apply to the Income Tax Officer with necessary enclosures (including Manual Form 16A); on receipt, the Income Tax Officer shall consider the application and pass orders within four weeks.

Final Conclusion: Writ petition disposed by directing the petitioner to approach the Income Tax Officer with the Manual Form 16A and other enclosures; the Income Tax Officer to consider the claim and pass appropriate orders within four weeks.

Exemption under Section 10A - treatment of other income as part of business profits - inclusion of export turnover where realization falls outside prescribed period - deduction of foreign currency insurance and telecommunication expenditure from export turnover - followership of precedent - no substantial question of law

Exemption under Section 10A - treatment of other income as part of business profits - inclusion of export turnover where realization falls outside prescribed period - deduction of foreign currency insurance and telecommunication expenditure from export turnover - followership of precedent - Validity of the Tribunal's order dismissing the revenue's appeal and allowing the assessee's cross contentions by applying this Court's precedent. - HELD THAT: - The Tribunal's decision to dismiss the revenue's appeal for the assessment years 2010-11 and 2011-12 was founded on this Court's earlier decision in CIT v. M/s Hewlett Packard Global Soft Ltd. The Tribunal applied that precedent in relation to (a) treating receipts such as sale of scrap as part of business profits eligible for exemption under Section 10A, (b) treating export receipts not realized within the prescribed period as export turnover of the subsequent year, and (c) the question whether foreign currency insurance and telecommunication expenditures are deductible from export turnover for computing the Section 10A benefit. Because the Tribunal followed the pronouncement of this Court, the impugned order was held to be free from infirmity and did not warrant interference by this Court. [Paras 4, 5]

The Tribunal's order was upheld as correctly following this Court's precedent; the revenue's appeal is without merit and dismissed.

No substantial question of law - Whether any substantial question of law arises for consideration in the appeal under Section 260A. - HELD THAT: - Having found that the Tribunal's order was based on and followed the decision of this Court, the High Court concluded that no substantial question of law arises for its consideration. The appeal did not present any novel or divergent legal question warranting reference or reconsideration. [Paras 5]

No substantial question of law arises; the appeal fails and is dismissed.

Final Conclusion: The revenue's appeal under Section 260A is dismissed; the Tribunal's order-which followed this Court's precedent-stands affirmed and no substantial question of law is held to arise.

Condonation of delay under Section 119(2)(b) - genuine hardship - substantial justice - remand for fresh consideration - judicial review of administrative exercise of discretion

Condonation of delay under Section 119(2)(b) - genuine hardship - substantial justice - Whether the application for condonation of delay (Ext.P3) should be reconsidered by the income-tax authority in light of the petitioner's claim of genuine hardship arising from his child's prolonged medical treatment. - HELD THAT: - The Court found that the petitioner's case involved serious medical hardship (treatment of his young daughter for cancer) which, if adequately supported by documentary and sworn evidence, engages the discretionary power under Section 119(2)(b) to avoid genuine hardship. The Court observed that the 1st respondent's rejection (Ext.P4) was rendered without full consideration of all relevant materials because the petitioner had not placed comprehensive medical records and an affidavit setting out particulars of the treatment and the relevant periods. The Court noted precedents cautioning against hyper-technical rejections and endorsing a fair and liberal approach where delay is not shown to be deliberate, culpable negligence or mala fides. In view of the deficiency of materials before the authority, the Court quashed the impugned order and remitted Ext.P3 for fresh consideration on merits. The petitioner was directed to file all relevant medical records and an affidavit within the specified short period, and the 1st respondent was directed to afford hearing and decide the application afresh expeditiously, taking into account the additional material and the applicable judicial dictum.

Ext.P4 quashed; Ext.P3 remitted to the 1st respondent for fresh consideration after the petitioner files additional medical records and an affidavit, and after affording opportunity of hearing; 1st respondent to decide expeditiously.

Final Conclusion: The impugned order rejecting the application for condonation of delay is quashed and the matter is remitted to the income-tax authority for reconsideration on merits after the petitioner furnishes specified additional medical evidence and an affidavit; the authority is to afford hearing and decide the application expeditiously.

Registration under Section 12A of the Income-tax Act - Nature of objects and genuineness of activities for registration - Section 13(1)(b) - trusts established for the benefit of a particular religious community or caste - Distinction between threshold for registration under Section 12A and disqualification from exemption under Sections 11/12

Registration under Section 12A of the Income-tax Act - Nature of objects and genuineness of activities for registration - Section 13(1)(b) - trusts established for the benefit of a particular religious community or caste - Whether the Commissioner was justified in refusing registration under Section 12A on the ground that the trust was created for the benefit of the Sindhi community and thus attracted Section 13(1)(b). - HELD THAT: - The Court affirmed the Tribunal's approach that, at the registration stage under Section 12A, the proper enquiry is limited to the nature of the trust's objects and the genuineness of its activities rather than adjudicating, on the papers, whether the trust is disqualified from exemption under Section 13(1)(b). Applying the Supreme Court's reasoning in Dawoodi Bohra Jamat and this Court's earlier decision in Bayath Kutchhi Dasha Oswal Jain Mahajan Trust, the court held that clause 22 and clause 20 of the will do not confine the trust exclusively to religious purposes or show that benefits are restricted so as to attract Section 13(1)(b). The trustee composition and the wish to assist Sindhi beneficiaries with a proviso that any surplus may be given to non Sindhis do not establish that the trust's objects are confined to a particular religious community for the purposes of Section 13(1)(b). The Court emphasized that where a deed contains broader charitable objects, it is for the Assessing Officer at assessment to determine, on material, whether expenditures or activities amount to benefit of a particular community disqualifying exemption; that determination is not a ground to refuse registration which is confined to assessing the object's nature and genuineness. [Paras 5, 6, 9, 10]

The refusal to grant registration under Section 12A was incorrect; the trust is charitable and religious and not shown to benefit only a specific religious community, and registration under Section 12A is to be granted.

Final Conclusion: The appeal is dismissed; the Tribunal's order allowing registration under Section 12A is affirmed and the assessee trust is entitled to registration, with no order as to costs.

Transfer pricing - comparability - arm's length price - transactional net margin method (TNMM) - profit level indicator (OP/OC) - operating cost - working capital adjustment - risk adjustment - related party transaction filter

Comparability - transfer pricing - arm's length price - Exclusion of M/s HCCA Business Services Pvt. Ltd. from the final list of comparables - HELD THAT: - The Tribunal applied the coordinate-bench reasoning in Electronics for Imaging India Pvt. Ltd. and noted that HCCA's principal operations are payroll processing services, materially different from the assessee's marketing and sales support services. In the absence of contrary material evidencing functional similarity, the Tribunal held that HCCA is functionally dissimilar and not a valid comparable for determining the arm's length margin under TNMM. Consequently the AO/TPO was directed to exclude HCCA from the comparable set. [Paras 10]

M/s HCCA Business Services Pvt. Ltd. excluded from the comparables.

Comparability - transfer pricing - arm's length price - Exclusion of M/s Killick Agencies & Marketing Ltd. from the final list of comparables - HELD THAT: - The Tribunal compared Killick's documented business - acting as agent for foreign principals, dealing in dredging and maritime equipment and earning substantial commission/after-sales revenues - with the assessee's provision of marketing support services to its AEs. The Tribunal found the functions performed by Killick (principal-agent sales/commission model) materially different from the assessee's pure support/service functions, and therefore not functionally comparable. On that basis Killick was directed to be excluded from the comparable list. [Paras 11]

M/s Killick Agencies & Marketing Ltd. excluded from the comparables.

Related party transaction filter - comparability - transfer pricing - Treatment of M/s Hindustan Housing Co. Ltd. for comparability - HELD THAT: - Hindustan Housing was found to provide a diversified range of services and to have related party transactions exceeding 25%. Following the coordinate-bench decision in Alcon Laboratories Pvt. Ltd., the Tribunal did not finally decide comparability but restored Hindustan Housing to the AO/TPO for fresh examination, including application of the RPT filter and any other relevant comparability criteria. [Paras 12]

M/s Hindustan Housing Co. Ltd. restored to the file of the AO/TPO for fresh examination regarding comparability and the RPT filter.

Operating cost - profit level indicator (OP/OC) - transfer pricing - Computation methodology for OP/OC of IDC (Cyber Media Research Ltd.) requiring re-examination - HELD THAT: - The assessee challenged the TPO's treatment of components of operating cost, contending that depreciation should be included and financial costs excluded when computing OP/OC. The Tribunal emphasised that a uniform methodology must be followed for computing operating cost across the assessee and comparables. As it was unclear whether a consistent approach was applied, the Tribunal remanded the matter to the AO/TPO for examination and determination of the correct and uniform treatment of depreciation and financial expenses in operating cost. [Paras 14]

Computation of IDC (Cyber Media Research Ltd.)'s mark-up remanded to AO/TPO for fresh examination to ensure uniform treatment of operating cost components.

Working capital adjustment - risk adjustment - transfer pricing - Claim for working capital and risk adjustments remitted for verification and decision - HELD THAT: - The assessee sought working capital and risk adjustments. The AO/TPO reported that required details were not furnished. The Tribunal directed the assessee to provide the necessary details and remanded the issue to the AO/TPO for fresh consideration in accordance with law, permitting AO/TPO to grant adjustments if substantiated. [Paras 15, 16]

Working capital and risk adjustment claim remanded to the AO/TPO for consideration after the assessee furnishes required details.

Final Conclusion: The Tribunal excluded two companies (HCCA Business Services Pvt. Ltd. and Killick Agencies & Marketing Ltd.) from the comparable set, restored one company (Hindustan Housing Co. Ltd.) to the AO/TPO for fresh scrutiny under the RPT filter, and remanded for re-examination the issues of IDC's operating-cost computation and the assessee's claims for working capital and risk adjustments; the appeal is treated as allowed for statistical purposes.

Addition on account of undisclosed stock discovered during survey - double taxation / double addition - verification of claim that amount was offered in earlier assessment year - remand for fresh consideration - restoration to Assessing Officer for verification and fresh decision - survey under section 133A of the Act

Addition on account of undisclosed stock discovered during survey - double taxation / double addition - verification of claim that amount was offered in earlier assessment year - remand for fresh consideration - Whether the addition made in AY 2015-16 on account of difference in stock found during survey should be sustained when the assessee claims the same amount was offered to tax in AY 2014-15 - HELD THAT: - The Tribunal noted that the survey under section 133A recorded a stock discrepancy which the assessee admitted during survey and which the Assessing Officer added in AY 2015-16. The assessee contended that the differential stock had been brought into account and taxed in AY 2014-15 by increasing closing stock for that year and by paying tax accordingly, so that repeating the addition in AY 2015-16 would amount to double taxation. The Revenue submitted that the claim required verification because neither the Assessing Officer nor the Commissioner (Appeals) had verified whether the amount was in fact offered and assessed in AY 2014-15. The Tribunal found merit in the Revenue's submission, observed that the assessee did not oppose a remand, and held that the proper course is to restore the matter to the Assessing Officer for verification of the claim that the disputed amount was offered in AY 2014-15. The Tribunal directed that if the Assessing Officer, after such verification, finds the assessee's claim to be correct, the addition made in AY 2015-16 shall be deleted as amounting to double addition; otherwise the Assessing Officer shall decide afresh on merits. [Paras 6]

Matter remitted to the Assessing Officer for verification of the assessee's claim that the disputed stock difference was offered and taxed in AY 2014-15; if verified, the addition in AY 2015-16 to be deleted, otherwise to be decided afresh.

Final Conclusion: The Tribunal set aside the Commissioner (Appeals) order on this issue and restored the matter to the file of the Assessing Officer for verification and fresh decision; appeal treated as allowed for statistical purposes.

Requirement of incriminating material for additions in unabated assessments under Section 153A - Limit on reopening completed assessments under Section 153A - additions only on basis of incriminating material seized - Incriminating material excludes routine books, balance sheet, ledger or bank statements unless they demonstrate transactions are not genuine - Onus on Assessing Officer to correlate seized material and statements with specific transactions of the assessee - Entries in regular books or day book are not per se incriminating - Validity of proceedings under Section 153A where warrant of authorization names the assessee despite absence of name in panchnama

Requirement of incriminating material for additions in unabated assessments under Section 153A - Incriminating material excludes routine books, balance sheet, ledger or bank statements unless they demonstrate transactions are not genuine - Onus on Assessing Officer to correlate seized material and statements with specific transactions of the assessee - Addition under section 69/68 in assessment framed under section 153A for the unabated Assessment Year 2011-12 where no incriminating material was found in the course of search - HELD THAT: - The Tribunal held that for unabated assessments (assessments completed prior to the search) Section 153A permits interference with the completed assessment only if incriminating material is unearthed during the search that directly relates to and justifies the addition. Mere suspicion, extraction of regular books or ledger entries, or bank statements found in the course of search do not amount to incriminating material unless they demonstrate that entries in the regular books do not represent the true state of affairs. On the facts the AO failed to point to any seized document that was incriminating: the document relied upon was a print-out of the assessee's day book and other seized material formed part of regular books. The statements of alleged entry operators did not specifically implicate the assessee or show that subscription monies or sale proceeds were bogus, and the AO did not afford opportunity for cross-examination or bring corroborative evidence linking those statements to the assessee's transactions. The AO's fund-flow and billing charts, without independent positive evidence or examination of the intermediate parties, amounted to suspicion and conjecture. In these circumstances the addition of the sale proceeds of investments as unexplained investments was unsustainable and correctly deleted by the CIT(A). [Paras 16, 22]

Addition of Rs. 35,54,34,500/- made in the assessment under section 153A/69 for AY 2011-12 deleted; revenue appeal dismissed on this ground.

Validity of proceedings under Section 153A where warrant of authorization names the assessee despite absence of name in panchnama - Whether proceedings under section 153A were invalid because the assessee's name did not appear in the panchnama drawn at the conclusion of search - HELD THAT: - The Tribunal found that although the panchnama did not mention the assessee's name, the warrant of authorization executed for the search contained the assessee's name. On that basis the initiation of proceedings under section 153A was held valid. The absence of the assessee's name from the panchnama was not decisive where the warrant of authorization included the assessee. [Paras 33]

Cross objection alleging invalidity of section 153A proceedings for want of valid search dismissed; initiation of proceedings held valid.

Final Conclusion: The Tribunal upheld the deletion by the CIT(A) of the addition made under section 69/68 in the assessment framed under section 153A for AY 2011-12 on the ground that no incriminating material was found during search to justify interference with the completed assessment; the revenue appeal is dismissed. The assessee's challenge to the validity of initiation of section 153A proceedings for want of search particulars is rejected because the warrant of authorization named the assessee.

Revision under Section 263 - erroneous and prejudicial to the interests of revenue - Inadequate or lack of inquiry by the Assessing Officer - Telescoping of undisclosed receipts against hundi loans - Deduction under section 35AC - genuineness and source verification - Depreciation rate for medical equipment (PET CT scan) - Verification of TDS on salary payments - Remand for fresh verification - year wise investments and credit sources

Revision under Section 263 - erroneous and prejudicial to the interests of revenue - Inadequate or lack of inquiry by the Assessing Officer - Whether the Principal Commissioner was justified in invoking section 263 to set aside the assessment on the ground that the assessing officer failed to make necessary enquiries and verification. - HELD THAT: - The Tribunal examined the record of assessment proceedings, survey disclosures, the AO's summonses and replies, the AO's use of a commission u/s 131(1)(d), and directions issued u/s 144A by the JCIT. It applied settled principles that section 263 can be invoked only if the AO's order is shown to be erroneous and prejudicial to revenue - ordinarily requiring either lack of inquiry or that the view taken by the AO is unsustainable in law. The Tribunal found that on several contested points the AO had in fact made enquiries (including issuance of notices, receipt of voluminous replies and documents, commission inquiry and JCIT scrutiny) and that the Pr. CIT had not himself conducted independent enquiries to demonstrate that the assessment findings were unsustainable. Consequently the Pr. CIT's general remitting of matters to the AO without recording a clear finding that the AO's conclusions were erroneous was contrary to authorities requiring the revisional officer to reach a definite conclusion before remittance.

Section 263 could not be sustained as a broad remand on the ground of mere dissatisfaction where the AO and JCIT had made enquiries; the Pr. CIT's exercise of jurisdiction was therefore not fully justified.

Telescoping of undisclosed receipts against hundi loans - Inadequate or lack of inquiry by the Assessing Officer - Whether the telescoping/set off of disclosed hospital cash receipts against hundi loans (reduction to Rs. 6,21,25,115) was permitted and whether the AO's allowance of that set off rendered the assessment order erroneous and prejudicial to revenue. - HELD THAT: - The Tribunal analysed the survey statements, the subsequent affidavit retracting part of the survey surrender, the ledger and hundi documents produced before the AO and JCIT, and the JCIT's directions u/s 144A which permitted set off after consideration. It noted that the core basis for the AO's decision was the material available (impounded hundis, ledgers and replies) and that the AO and JCIT had considered the reasons for reduction of the surrendered amount. Absent cogent material showing that the maturity receipts were not available to the assessee or that the set off was legally unsustainable, the Tribunal held that there was no infirmity in allowing telescoping merely because the Pr. CIT would have taken further enquiries; where enquiries were in fact made and JCIT had directed set off, Pr. CIT could not simply remand without recording that the AO's view was unsustainable in law.

The Tribunal did not uphold revision on this ground; the AO/JCIT allowance of telescoping was not held to be erroneous such as to attract section 263.

Deduction under section 35AC - genuineness and source verification - Inadequate or lack of inquiry by the Assessing Officer - Whether the allowance of deduction under section 35AC for the donation to Geetanjali University Trust was the product of inadequate enquiry and therefore susceptible to revision u/s 263. - HELD THAT: - The Tribunal reviewed the steps taken by the AO including the commission u/s 131(1)(d) to DDIT (Inv)-Jaipur, the documents (Form 58A, certificate, university returns, bank statements and government notification) placed on record by the assessee, and the JCIT's directions. It found that independent enquiries had been made into the donee and that no adverse report was returned by the investigating officer. The Tribunal also noted that, even if the source of funds was questioned by the Pr. CIT, the AO had considered the material in the assessment. On the facts before it, and having regard to precedents recognising that once enquiries are made the revisional authority must show the AO's view to be unsustainable, the Tribunal found no merit in disturbing the allowance under section 35AC.

Revision u/s 263 on the ground of alleged inadequate enquiry into the deduction u/s 35AC was not sustained and that part of the Pr. CIT's order was set aside.

Remand for fresh verification - year wise investments and credit sources - Whether the Pr. CIT was correct in directing fresh verification in respect of year wise investments and the identity/genuineness of hundi parties and their receipts. - HELD THAT: - The Tribunal accepted that the AO had not conducted detailed year wise verification of investments and had not verified party wise particulars, PANs, dates of receipt and dates of deposit vis a vis hundi maturities in full detail. Unlike other contested points where specific enquiries and a commission had been used, the Tribunal found that the Pr. CIT's observation that further verification of year wise accretion of investments and the sources of bank credits was warranted was sustainable. The Tribunal therefore sustained the direction insofar as the Pr. CIT required focused enquiries on year wise investments and verification of the identity and genuineness of hundi recoveries.

That part of the order directing fresh, focused verification year wise and party wise into investments/recoveries is sustained and remitted to the AO for enquiry and fresh adjudication.

Depreciation rate for medical equipment (PET CT scan) - Whether the allowance of depreciation at 40% on the PET CT scan machine by the AO was an error justifying revision u/s 263. - HELD THAT: - The Tribunal examined the material on record and the technical characterisation of the PET CT scan machine. It noted that the AO had examined the fixed asset chart and the claimed rate and that the Pr. CIT had not recorded a categorical finding that the allowable rate was 15% rather than 40% or shown why the AO's conclusion was unsustainable in law. On the available material, and having regard to precedents recognising PET/CT equipment as qualifying for higher depreciation in appropriate circumstances, the Tribunal found no ground to sustain revision on this issue.

Revision u/s 263 on depreciation claim is not sustained.

Verification of TDS on salary payments - Whether the AO's allowance of salary expense without verifying TDS compliance rendered the assessment erroneous and prejudicial to revenue. - HELD THAT: - The Tribunal observed that the assessee had placed on record TDS details, Form 26AS extracts and supporting schedules in response to AO queries; the AO's order and file records reflect receipt of those documents. The Pr. CIT's objection that TDS verification was not carried out was not supported by the record before the Tribunal. Absent demonstration that the AO failed to consider filed TDS evidence, revision on this ground could not be sustained.

Revision u/s 263 on TDS verification was not sustained.

Final Conclusion: The appeal is partly allowed. The Tribunal set aside the Pr. CIT's exercise of revision insofar as it sought to reopen and remit findings where the AO and JCIT had inquired (notably the telescoping of hundi receipts, the section 35AC deduction, depreciation and TDS verification), but sustained the Pr. CIT's direction that the AO make focused, year wise and party wise verification of investments/recoveries (remand limited to those specific enquiries) and directed fresh adjudication on those limited points.

Fee for Technical Services - "make available" doctrine - Most-Favoured-Nation clause (protocol) - invocation of restrictive DTAA provisions - Reimbursement of social security contributions of seconded employees - Corporate guarantee fee - characterization - Tax credit for tax deducted at source (TDS) - verification - Levy of surcharge and education cess where DTAA prescribes a gross withholding rate

Fee for Technical Services - Most-Favoured-Nation clause (protocol) - invocation of restrictive DTAA provisions - "make available" doctrine - Management fees charged by the assessee for services to its Indian associated enterprise to be examined afresh for treaty characterisation - HELD THAT: - The Tribunal recorded that the Assessing Officer and the DRP decided the issue on the basis of the agreement alone without consideration of corroborative documentary material (correspondence, conduct and implementation evidence) necessary to determine whether services fall within the restricted definition invoked through the MFN/protocol and whether they "make available" technical knowledge, skill or know how. Given the factual matrix and the treaty interpretative questions (application of the Indo UK restrictive definition via the MFN protocol and the constituent limbs of Article 13(4) including ancillary/subsidiary character and the "make available" limb), the Tribunal held that the matter requires verification of the full gamut of evidence and restituted the issue to the Assessing Officer for fresh adjudication after calling for and considering all documentary evidence and affording the assessee an opportunity of being heard. [Paras 5]

Issue restored to the file of the Assessing Officer for fresh consideration and determination in accordance with law after verification of documents and giving the assessee opportunity of being heard.

Corporate guarantee fee - characterization - Fee for Technical Services - Corporate guarantee fee received by the assessee is not chargeable as Fee for Technical Services - HELD THAT: - The Assessing Officer alleged that the corporate guarantee fee was in reality consideration for managerial/technical/consultancy services but did not bring on record particulars of the services or evidence of their nature; the DRP directed verification against other associated enterprises. The Tribunal found no material to support that the guarantee fee represented managerial, technical or consultancy services and recorded that the AO's contention lacked evidential foundation. Absent proof that the fee remunerated managerial/technical/consultancy services, the corporate guarantee fee cannot be classified as FTS either under section 9(1)(vii) or Article 13 of the India France DTAA. [Paras 6]

Addition disallowing the corporate guarantee fee as FTS set aside; ground allowed.

Reimbursement of social security contributions of seconded employees - Fee for Technical Services - "make available" doctrine (secondment/attachment analysis) - Reimbursement of social security contributions remitted by the assessee on behalf of secondee employees restored for verification by the Assessing Officer - HELD THAT: - The Assessing Officer treated reimbursements as FTS on the ground that the assessee had not produced signed agreements or evidence and the DRP relied on Centrica (Delhi HC) reasoning that reimbursements for seconded employees who retain lien with parent and make available technical knowledge may be taxable as FTS. The Tribunal observed that neither the Assessing Officer nor the DRP examined the secondment agreement, the employment contract between the employee and the assessee, nor the local employment contract with the Indian entity. In the absence of examination of those documents and other relevant evidence, the Tribunal considered it appropriate in the interest of justice to remit the matter to the Assessing Officer for verification of the agreements and factual circumstances and fresh decision in accordance with law after affording the assessee adequate opportunity to be heard. [Paras 7]

Issue restored to the file of the Assessing Officer for verification of secondment and employment documentation and fresh adjudication.

Levy of surcharge and education cess where DTAA prescribes a gross withholding rate - Education cess and secondary and higher education cess are not leviable in addition to the DTAA prescribed gross withholding rate - HELD THAT: - Applying precedent (including the BOC Group Ltd. decision and reasoning that education cess is in substance an additional surcharge and Article 2 of relevant DTAAs covers income tax 'including any surcharge thereon' and 'identical or substantially similar taxes' introduced subsequently), the Tribunal held that when a DTAA prescribes a gross withholding rate for royalties/FTS, the prescribed rate must be followed without adding education cess or secondary and higher education cess. The Tribunal directed the Assessing Officer to delete the levied cesses from the gross basis tax computed under the India France DTAA. [Paras 8]

Levy of education cess and secondary and higher education cess on tax computed under the India France DTAA deleted; ground allowed.

Tax credit for tax deducted at source (TDS) - verification - Claim of credit for tax deducted at source by the Indian payer restored for verification - HELD THAT: - The Tribunal treated the question as one of verification of entitlement to tax credit and directed the Assessing Officer to verify the assessee's documentary evidence of TDS, including credits available in the income tax department's database, and to allow credit in accordance with law after verification. [Paras 9]

Issue restored to the Assessing Officer for verification of TDS evidence and allowance of credit as per law.

Final Conclusion: Both appeals are allowed in part: the corporate guarantee fee and the levy of education and related cesses were ruled in favour of the assessee, while the issues of management fees, reimbursement of social security contributions and entitlement to TDS credit were remitted to the Assessing Officer for fresh consideration and verification after calling for and examining requisite documentary evidence and affording the assessee an opportunity of being heard.

Revision under section 263 - erroneous and prejudicial to the interest of the revenue - principle of no enquiry versus inadequate enquiry - Explanation 2 to section 263 (clarificatory scope of 'erroneous') - unexplained cash credit and taxation under section 68 - telescoping of undisclosed income - penalty under section 271(1)(c)

Revision under section 263 - erroneous and prejudicial to the interest of the revenue - principle of no enquiry versus inadequate enquiry - Explanation 2 to section 263 (clarificatory scope of 'erroneous') - Validity of the Principal Commissioner's order under section 263 setting aside the assessment framed u/s 143(3) for AY 2012-13 - HELD THAT: - The Tribunal examined whether the twin conditions for exercise of revisional jurisdiction under section 263 - that the assessing officer's order is both erroneous and prejudicial to the interests of the revenue - were satisfied. The record showed detailed enquiries by the AO (notices u/s 143(2)/142(1), questionnaires, multiple submissions and verification of books and impounded hundis) and that the AO had applied his mind and made additions (including addition of unexplained cash). The PCIT's order mainly directed further inquiries and remitted the matter without forming a clear, independent finding that the AO's order was unsustainable in law; it relied on the view that more or different enquiries should have been made. The Tribunal applied settled authorities distinguishing cases of 'no enquiry' from 'inadequate enquiry' and held that where the AO has made enquiries and reached a plausible conclusion, the PCIT must itself conduct enquiries and record a clear finding that the order is erroneous and prejudicial before exercising s.263. On the facts, the AO's approach was reasonable and not legally unsustainable; hence the PCIT erred in assuming jurisdiction and the section 263 order was quashed, with restoration of the assessment u/s 143(3). [Paras 45, 46]

Order u/s 263 dated 30.03.2017 set aside; assessment order dated 24.03.2015 restored.

Proceedings rendered infructuous - revision under section 263 - Fate of the assessment framed pursuant to the section 263 directions (ITA No.57/Ind/2017) - HELD THAT: - Because the Tribunal quashed the PCIT's order under section 263 (which was the foundation for the subsequent reassessment), the later assessment proceedings and the order passed thereunder became without basis. The Tribunal held that the appeal arising out of the assessment framed pursuant to the now-quashed section 263 order is therefore infructuous. [Paras 49]

ITA No.57/Ind/2017 dismissed as infructuous.

Unexplained cash credit and taxation under section 68 - telescoping of undisclosed income - principle of telescoping of secret/undisclosed fund - Validity of the addition of Rs. 7,34,79,097 as unexplained cash credit u/s 68 for AY 2012-13 and entitlement to telescoping benefit - HELD THAT: - The Tribunal examined whether cash deposits in Feb-Mar 2012 were explained by maturity proceeds (principal and interest) of hundis impounded during the survey and by which the assessee had already surrendered unaccounted income. The AO and CIT(A) had treated the deposits as unexplained, relying in part on delayed receipt dates and background suspicion (Vyapam allegations). The Tribunal found: (a) the hundis were impounded in survey and later produced; (b) the assessee had offered the surrendered amount to tax and recorded entries in books (debit party, credit undisclosed income) and had subsequently recovered principal and interest which were reflected as cash and deposited in bank; (c) there was no material to show the assessee received unaccounted bribe in the year under appeal; and (d) judicial precedents permit telescoping where undisclosed funds constitute a source from which subsequent receipts or deposits are made. Applying those principles and noting that books were not rejected, the Tribunal held the deposits had direct nexus with the surrendered hundi proceeds and allowed telescoping, deleting the addition u/s 68. [Paras 58, 59]

Addition of Rs. 7,34,79,097 u/s 68 deleted; telescoping benefit allowed.

Penalty under section 271(1)(c) - Whether failure to initiate penalty u/s 271(1)(c) for alleged inaccurate particulars (difference in interest claim) rendered the assessment erroneous and prejudicial - HELD THAT: - The Tribunal noted the assessee had filed a revised return before selection for scrutiny and corrected the interest claim; tax on the corrected figure was paid. Applying settled law on mens rea and levy of penalty, the Tribunal held that mere non-initiation of penalty where the assessee rectified particulars and taxes were paid did not make the assessment order erroneous or prejudicial to revenue. The AO was therefore justified in not initiating penalty for that item, and the PCIT could not base revision on omission to initiate penalty. [Paras 40]

No error in AO's non-initiation of penalty; not a basis for invoking section 263.

Final Conclusion: The Tribunal quashed the Principal Commissioner's order under section 263 (thereby restoring the assessment dated 24.03.2015), held the reassessment proceedings under that section to be infructuous, and allowed the assessee's appeal against the unexplained cash-credit addition by deleting the addition under section 68 on the ground that the bank deposits were explained by maturity proceeds of hundis (telescoping permitted). Appeals ITA No.350/Ind/2017 and ITA No.66/Ind/2017 allowed; ITA No.57/Ind/2017 dismissed as infructuous.

Disallowance under Section 14A read with Rule 8D - addition under Section 69C for unexplained/unverifiable purchases - disallowance under Section 40A(3) for cash payments - acceptance of sales as evidence of corresponding purchases - application of gross profit margin to quantify unverifiable purchases

Disallowance under Section 14A read with Rule 8D - Deletion of the disallowance made under Section 14A read with Rule 8D. - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that the assessee had not received any exempt income during the year under consideration. As that factual basis was not disputed by the Revenue, the basis for invoking the disallowance under Section 14A read with Rule 8D did not exist. The CIT(A)'s deletion of the disallowance was therefore upheld. [Paras 7]

Disallowance under Section 14A read with Rule 8D deleted; Revenue's ground dismissed.

Addition under Section 69C for unexplained/unverifiable purchases - disallowance under Section 40A(3) for cash payments - acceptance of sales as evidence of corresponding purchases - application of gross profit margin to quantify unverifiable purchases - Sustainability of the addition made under Section 69C treating the cash purchases as bogus and the correctness of CIT(A)'s deletion of that addition. - HELD THAT: - The Tribunal found that the Assessing Officer did not dispute the assessee's sales and that quantitative tally of purchases and corresponding exports were reflected in the assessee's bank credits and records. The Tribunal agreed with the CIT(A)'s view that the Assessing Officer had conflated two different issues - source of investment versus genuineness of parties - and that past practice of disallowances under Section 40A(3) (and their deletion on appeal) was a relevant contextual fact. The Assessing Officer's reliance on non-delivery of notices and signature variances did not, on the record, justify treating the entire cash purchases as bogus. The Tribunal held the case laws relied upon by Revenue to be distinguishable on facts and found no reason to interfere with CIT(A)'s deletion of the addition under Section 69C. [Paras 7]

Addition under Section 69C deleted by CIT(A) affirmed; Revenue's ground dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the CIT(A)'s deletions of the disallowance under Section 14A read with Rule 8D and the addition under Section 69C are upheld for Assessment Year 2011-12.

Revisionary power to examine assessments as erroneous and prejudicial to the revenue (section 263) - duty to re-examine alleged diversion of funds and large suspense account opening balances before completing assessment - set aside of assessment order for fresh inquiries and recomputation - quashing of a subsequent order as non surviving where the underlying assessment has earlier been quashed

Revisionary power to examine assessments as erroneous and prejudicial to the revenue (section 263) - duty to re-examine alleged diversion of funds and large suspense account opening balances before completing assessment - set aside of assessment order for fresh inquiries and recomputation - Validity of the Commissioner's exercise of power under section 263 in setting aside the assessment and directing the Assessing Officer to re examine issues relating to ADS proceeds and the opening suspense balance. - HELD THAT: - The Tribunal examined the assessment order passed under section 143(3) r.w.s. 147 and the Commissioner's show cause and 263 order which recorded reports of diversion of ADS proceeds, alleged non crediting to bank accounts, confessional statements, SFIO and forensic findings, and a large opening suspense balance in the restated accounts. The Tribunal found that the assessing officer's order did not deal with or record examination of those specific and grave issues and that the Commissioner was justified in concluding that the assessment was erroneous and prejudicial to the revenue. In view of the significance of the alleged diversion and the unexplained opening balance, the Commissioner's direction to the Assessing Officer to examine those matters in detail and pass an appropriate order in accordance with law and merits was appropriate; there was no reason for interference with the exercise of revisional power in the facts of the case. [Paras 8]

The appeal against the Commissioner's order under section 263 is dismissed; the Commissioner was justified in setting aside the assessment and directing re examination.

Quashing of a subsequent order as non surviving where the underlying assessment has earlier been quashed - effect of earlier Tribunal order on consequent revisional action - Whether the order passed by the Commissioner of Wealth Tax under section 25 setting aside the Wealth Tax Officer's order survives where the revised wealth tax assessment had been quashed earlier by the Tribunal. - HELD THAT: - The Tribunal noted that the revised wealth tax assessment order dated 23/12/2009 had already been quashed by the Tribunal in WTA No.02/H/2012 for AY 2002-03 by order dated 08/01/2014. Because that quashing disposed of the foundation of the Commissioner of Wealth Tax's direction made under section 25, the subsequent order dated 26/03/2012 did not survive. The Revenue did not controvert this point. Accordingly, the Tribunal held that the section 25 order must be quashed as it no longer subsisted in law. [Paras 10]

The wealth tax Commissioner's order under section 25 is quashed; the appeal in the wealth tax matter is allowed.

Final Conclusion: For AY 2002-03 the Tribunal upholds the Commissioner's exercise of revisional power under section 263 to set aside the income tax assessment for fresh detailed examination of alleged diversion of ADS proceeds and the large opening suspense balance, dismissing the assessee's income tax appeal; separately, the Tribunal quashes the Commissioner of Wealth Tax's section 25 order as it does not survive the earlier quashing of the revised wealth tax assessment, and allows the wealth tax appeal.

Rectification of mistake apparent from record under section 254(2) - inadmissibility of review in rectification proceedings - presumptions arising from search and seizure under section 132(4) and 132(4A) - evidentiary value of documents seized during search - onus to rebut search presumptions

Rectification of mistake apparent from record under section 254(2) - inadmissibility of review in rectification proceedings - Miscellaneous application under section 254(2) filed by the assessee was not maintainable as it sought review of the Tribunal's earlier appellate decision and therefore was liable to be dismissed. - HELD THAT: - The Tribunal examined the miscellaneous application which sought 'rectification' of the Tribunal's common order for A.Y. 2007-08 and A.Y. 2008-09. The application raised the same factual and legal contentions which had been considered and decided in the earlier ITAT order (including findings on incriminating seized documents, statement under section 132(4) and presumptions under section 132(4A)). The Tribunal reproduced the material findings of its earlier order to show that the grievances raised amounted to a request for review on merits rather than correction of an apparent clerical mistake. A rectification under section 254(2) cannot be used to re-open or review the reasoning and conclusions of the Tribunal; such attempt to re-agitate the merits is impermissible. Having regard to the earlier detailed reasoning and the nature of the present application, the Tribunal concurred with the departmental contention that the application was a disguised review and not a permissible rectification, and disposed of the miscellaneous application accordingly. [Paras 5, 6]

Miscellaneous application dismissed as an impermissible attempt to review the Tribunal's earlier order; rectification under section 254(2) refused.

Final Conclusion: The miscellaneous application under section 254(2) was dismissed because it impermissibly sought review of the Tribunal's prior order on A.Y. 2007-08 and A.Y. 2008-09 rather than correction of a mistake apparent from the record.

Liability to deduct TDS under section 195 - Consequences of failure to deduct tax: provisions of section 201(1) and section 201(1A) - Characterisation of payments (bandwidth, networking, direct costs, legal and professional charges) for TDS purposes - Set off of brought forward unabsorbed depreciation - Precedential effect of Coordinate Bench decisions

Liability to deduct TDS under section 195 - Characterisation of payments (bandwidth, networking, direct costs, legal and professional charges) for TDS purposes - Consequences of failure to deduct tax: provisions of section 201(1) and section 201(1A) - Precedential effect of Coordinate Bench decisions - Assessee was not liable to deduct tax at source on payments described as bandwidth charges, networking/direct costs, and legal and professional charges; therefore levy under section 201(1) and interest under section 201(1A) could not be sustained. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) by applying and following earlier co-ordinate-bench decisions in the assessee's own case which held that payments for bandwidth, connectivity and related services represent payments for services and do not constitute royalty or fees chargeable under section 195. Having found no legal liability on the assessee to deduct TDS on those payments, the statutory consequences of default under section 201(1) and interest under section 201(1A) could not arise. The Tribunal therefore found no error in the appellate order cancelling the demand and dismissed the Revenue's appeal on these grounds. [Paras 7, 8]

Revenue's appeal challenging deletion of demands under sections 201(1) and 201(1A) for non-deduction of TDS on the specified payments dismissed.

Set off of brought forward unabsorbed depreciation - Precedential effect of Coordinate Bench decisions - Assessee entitled to set off brought forward unabsorbed depreciation; appellate order allowing set off was sustained. - HELD THAT: - The Tribunal applied the co-ordinate-bench decision in the assessee's own case which, following relevant High Court authority, held that unabsorbed depreciation carried forward is available for set off without the temporal restriction contended by the Revenue. As the issue was squarely covered by that precedent and there was no conflicting factual or legal basis to interfere, the Tribunal found no infirmity in the Commissioner (Appeals) allowing the set off and dismissed the Revenue's appeal. [Paras 11, 12]

Revenue's appeal against allowance of set off of unabsorbed depreciation dismissed.

Final Conclusion: Both Revenue appeals-challenging levy of tax and interest for non-deduction of TDS in relation to specified payments for AY 2009-10 and challenging disallowance of set off of unabsorbed depreciation for AY 2011-12-were dismissed by the Tribunal, the orders of the Commissioner (Appeals) being sustained in each respect.

Power to facilitate trade under Section 143AA - Delegation of powers under Section 152 - Control of goods in a customs area under Section 141 - Facility permitting importers to pay terminal handling charges directly to terminal operators - Contractual right to recover terminal handling and ancillary charges - Judicial review under Article 226 of the Constitution

Power to facilitate trade under Section 143AA - Control of goods in a customs area under Section 141 - Delegation of powers under Section 152 - Facility permitting importers to pay terminal handling charges directly to terminal operators - Contractual right to recover terminal handling and ancillary charges - Validity of Public Notice No.05/2020 (Ext.P1) permitting eligible importers to pay terminal handling and related charges directly to port terminals, and its effect on existing contractual arrangements between shipping lines and their clients. - HELD THAT: - The Court examined Ext.P1 in the context of the Customs Act provisions relied upon by the petitioners. Section 141(2) prescribes manner and responsibilities for handling goods in customs areas but does not oust the Board's power. Section 143AA expressly empowers the Board to prescribe separate procedures or measures to facilitate trade, including maintaining transparency and reducing transaction costs. The notice was issued on behalf of the Board by an authorised officer, and the scheme of delegation under Section 152 permits exercise of Board's powers by empowered officers. Ext.P1, therefore, falls squarely within the statutory power to prescribe facilitative procedures. The court further held that the notice does not extinguish contractual rights; shipping lines retain their contractual entitlement to recover terminal handling and other pre agreed charges, and any deviation by parties would at best give rise to contractual or money disputes between private parties. Consequently the petitioners have no sustainable cause of action to impugn the notice as beyond jurisdiction or as nullifying their contractual rights. [Paras 5, 6, 7]

Ext.P1 is intra vires the Board's powers under Section 143AA and validly issued through delegated authority; it does not negate the petitioners' contractual rights to recover charges and therefore does not warrant quashing.

Judicial review under Article 226 of the Constitution - Facility permitting importers to pay terminal handling charges directly to terminal operators - Whether the issuance of Ext.P1 called for interference by writ under Article 226. - HELD THAT: - After considering the scope and object of Ext.P1 - namely facilitation, transparency and reduction of logistics costs - and the statutory power under Section 143AA to frame facilitative procedures, the Court found no legal infirmity justifying judicial intervention. The grievance of the petitioners was essentially prospective apprehension of contractual deviation; any dispute about payments or alleged shortfall would be a private contractual or monetary dispute and not a ground for exercising extraordinary writ jurisdiction. The Court relied on analogous reasoning in the cited Bombay High Court decision to the effect that facility notices aim at facilitation and do not operate to deprive parties of contractual remedies. [Paras 7]

No interference under Article 226; writ petition dismissed.

Final Conclusion: The challenge to Public Notice No.05/2020 was dismissed: the notice was within the Board's power to prescribe facilitative procedures, validly issued through delegated authority, and did not warrant exercise of writ jurisdiction since contractual remedies remain available to the petitioners.

Merchandise Exports from India Scheme (MEIS) - export benefit - intention to claim reward - inadvertent omission - mechanical denial - physical verification of export consignment - no discrimination - No Objection Certificate

Intention to claim reward - inadvertent omission - mechanical denial - Denial of MEIS claim solely because the exporter failed to tick the 'Yes' box in the web portal where other entries and the shipping bill manifest the intention to claim the reward. - HELD THAT: - The Court held that where the exporter, though having omitted to check the specific 'Yes' box due to a default or inadvertent setting in the software, has otherwise manifested a clear intention to claim MEIS benefit (including an express statement in the shipping bill and relevant entries in the portal), refusal of the claim on the sole ground of that technical omission would be a mechanical approach and not justified. The learned Single Judge's conclusion that the intention was evident from other particulars was endorsed and such an inadvertent failure to tick the box does not warrant automatic denial of the benefit.

Denial of the MEIS claim on the sole ground of non-ticking of the 'Yes' box set by default was held to be unjustified and the writ petitions were rightly allowed on this ground.

Physical verification of export consignment - export benefit - Whether physical verification of the consignment at the later stage is necessary to decide entitlement to MEIS benefit where shipping details and earlier verification identify the goods. - HELD THAT: - The Court rejected the contention that absence of a contemporaneous claim barred later allowance because physical verification could not now be undertaken. It reasoned that exports undergo physical verification and the shipping details and prior verifications already recorded the identity of goods; if those recorded particulars demonstrate that the exported goods are eligible for MEIS, there is no requirement for fresh physical verification to decide the claim.

No further physical verification was held necessary where existing shipping and verification records establish the identity and eligibility of the exported goods for MEIS.

No Objection Certificate - no discrimination - Validity of limiting relief by a Circular to exporters who applied within six months of the Scheme's introduction, when others seek relief later based on the same manifested intention. - HELD THAT: - The Court found no logical basis for imposing a six-month limitation (as per the Circular) for condoning the omission to tick the 'Yes' box where the intention to claim was otherwise evident. Such a temporal restriction would produce unjustifiable discrimination between exporters who applied within six months and those who applied later but whose records manifested the same intention. Consequently, the Single Judge's direction for fresh consideration and issuance of necessary No Objection Certificates for processing claims was endorsed.

The Circular's imposition of a six-month limitation for condonation was rejected as arbitrary; exporters who otherwise manifested intention cannot be discriminated against, and authorities were directed to reconsider claims and issue NOCs where appropriate.

Final Conclusion: The High Court affirmed the Single Judge: exporters who inadvertently omitted to tick the portal 'Yes' box but otherwise manifested intention to claim MEIS are entitled to have their claims reconsidered on merits; fresh physical verification is not required if shipping records establish eligibility; temporal restriction of six months for condonation was disallowed; the authorities were directed to reconsider claims and issue necessary No Objection Certificates for processing.

Interpretation of executive notification - re-export of re-imported goods - mandatory requirement of examination by proper officer - benefit of notification - standard of perversity in appellate review

Re-export of re-imported goods - interpretation of executive notification - benefit of notification - Whether the tribunal erred in holding that the appellant failed to re-export the re-imported goods in accordance with the notification and thereby forfeited the benefit of the notification. - HELD THAT: - The tribunal dismissed the appellant's appeal on the ground that the conditions of the notification governing re-export of re-imported goods had not been complied with. Although the appellant contended that the conditions were observed, the tribunal found facts indicating non-compliance-specifically, certification by a preventive officer where the notification required examination and identification by a higher officer. The High Court declined to reappraise the evidence and accepted that the tribunal's conclusion of non-compliance and consequent denial of the benefit of the notification was a plausible finding supported by the record.

The tribunal's conclusion that the appellant did not satisfy the mandatory conditions of the notification and therefore was not entitled to its benefit is upheld as a plausible finding.

Mandatory requirement of examination by proper officer - standard of perversity in appellate review - Whether the High Court should interfere with the tribunal's factual finding that examination was not carried out by the proper officer and whether that finding is vitiated by perversity. - HELD THAT: - The tribunal found that examination and identification required by the notification must be conducted in the presence of the Deputy Commissioner/Assistant Commissioner; certification by a preventive officer did not satisfy that mandatory condition and suggested suspect compliance. The High Court held that it was not empowered in the exercise of its jurisdiction to reappraise those factual findings and that there was no perversity in the tribunal's conclusion. The court therefore refused to disturb the finding that the required higher-level examination had not taken place.

The High Court will not interfere with the tribunal's factual finding; there is no perversity warranting reappraisal, and the finding as to absence of examination by the proper officer stands.

Final Conclusion: The appeal and the connected stay application are dismissed; the tribunal's dismissal for non-compliance with the notification and its finding that examination by the required higher officer did not occur are affirmed as plausible and not perverse.

Transfer of proceedings - jurisdiction to order transfer of appeal between zonal benches - bias and impartiality in adjudication - appointment and composition of Technical Member on CESTAT benches

Transfer of proceedings - jurisdiction to order transfer of appeal between zonal benches - Whether this Court can order transfer of the petitioner's appeal from the South Zonal Bench (Bengaluru) of CESTAT to the West Zonal Bench (Mumbai). - HELD THAT: - The Court examined the petitioner's prayer for transfer of the appeal to the West Zonal Bench and recorded that it is not vested with jurisdiction to pass such an order. The petitioner's counsel expressly declined to press the prayer in this Court and indicated an intention to move the Appellate Tribunal under the statutory provision relied upon. In these circumstances the Court refrained from adjudicating the transfer prayer and did not exercise any power to order transfer. [Paras 7]

Prayer for transfer from the Bengaluru Bench to the Mumbai Bench is not adjudicated by this Court for want of jurisdiction; petitioner to seek appropriate remedy before the Appellate Tribunal.

Bias and impartiality in adjudication - appointment and composition of Technical Member on CESTAT benches - Whether the petitioner's apprehension about the participation of a particular Technical Member (who was impleaded/respondent in the Supreme Court writ challenging appointment of Technical Members) warranted a direction for the appeal to be heard by a judicial member together with a different Technical Member. - HELD THAT: - The Court recognised the fundamental expectation that hearings be conducted impartially and acknowledged the petitioner's apprehension arising from the fact that the touring Technical Member of the Bengaluru Bench had been impleaded in the writ petition before the Supreme Court challenging validity of appointments. Although the Supreme Court disposed of that writ petition subject to certain measures and permitted the technical members to continue until fresh Rules are framed, the present Court found the apprehension not to be without substance. The respondents did not oppose the inclusion of a different Technical Member and the Court observed that the presiding judicial member would have no objection to a change in the Technical Member composing the quorum. In the interest of equity and justice the Court directed that the petitioner's appeal before CESTAT, Bengaluru, shall be heard by a judicial member accompanied by a different touring Technical Member, excluding those Technical Members who were respondents in the Supreme Court writ petition. [Paras 8, 9]

The appeal pending before CESTAT, Bengaluru shall be heard by a judicial member together with a different touring Technical Member, other than those Technical Members who were respondents in the Supreme Court writ petition.

Final Conclusion: Writ petition disposed: the Court declined to order transfer of the appeal for want of jurisdiction and directed that the appeal pending before CESTAT, Bengaluru be heard by a judicial member with a different touring Technical Member (excluding the Technical Members who were respondents in the Supreme Court writ petition).

Title to goods under CIF / cash against documents - Right of consignor/exporter to destuff and sell cargo pending clearance - Liability for container detention, ground rent and demurrage charges - Duty to permit electronic or manual customs filings (ICEGATE) - Availability of arbitration and contractual remedies for recovery - Interpretation of "importer" after statutory amendment

Right of consignor/exporter to destuff and sell cargo pending clearance - Title to goods under CIF / cash against documents - Whether the petitioner is entitled to a writ directing destuffing, removal to alternate storage and sale or disposal of the cargo covered by specified bills of lading. - HELD THAT: - The court examined the contractual terms (Ext.P1) including CIF and the arrangements for payment by DP/telegraphic transfer and noted that title and related rights under the contract were matters tied to those terms and to any insurance cover. The petition sought extraordinary reliefs to permit the petitioner to destuff and sell cargo to avoid further retention charges. The court held that it could not, in exercise of writ jurisdiction, alter or supplement the contract or grant the proprietary reliefs sought in the absence of a demand by the customs authority or a clear legal basis to displace the position created by the bills of entry submitted by the consignee. The court also observed that remedies in contract/arbitration or insurance, if available, are the appropriate fora for such disputes.

Petition for direction to destuff, move, sell or dispose of the cargo is dismissed.

Liability for container detention, ground rent and demurrage charges - Whether the court should direct respondents 3 to 5 to refrain from demanding or recovering container detention charges and ground rent from the petitioner, or direct them to recover such charges from respondent No.2 instead. - HELD THAT: - The petitioner sought restraint against respondents 3-5 from demanding detention/ground rent from it and alternatively sought a direction to make respondent No.2 liable. The court noted that no demand had been made by the Customs Department against the petitioner that would necessitate such relief. It further observed that the statutory scheme (including the power under Section 48 to sell goods to recover dues) and the factual matrix did not warrant judicial interference to shift or pre-empt contractual or statutory liabilities. The court declined to grant the preventive or reallocation reliefs sought, emphasising that any contention as to mischief or breach by respondent No.2 is a matter for contractual or arbitral proceedings or for enforcement if and when a valid demand arises.

Prayer to restrain recovery of detention/ground rent from the petitioner or to direct recovery from respondent No.2 is refused; petition dismissed on these claims.

Duty to permit electronic or manual customs filings (ICEGATE) - Whether respondent No.1 should be directed to permit the petitioner or its agents to make or prefer necessary filings electronically via ICEGATE or manually in relation to the imported goods. - HELD THAT: - The petitioner sought a writ mandating facilitation of filings either electronically or manually. The court found no compelling need to issue such a direction in the circumstances because the consignee had already submitted bills of entry on specified dates and there was no demonstrated failure by the customs authority to permit filings that justified extraordinary relief. The court treated facilitation of filings as a procedural matter governed by the Customs Act and existing systems, not as a ground for the present writ relief.

No writ will be issued directing respondent No.1 to permit filings; this relief is refused.

Availability of arbitration and contractual remedies for recovery - Title to goods under CIF / cash against documents - Whether the petitioner should pursue contractual remedies, arbitration or insurance claims rather than seek the interlocutory reliefs in this writ petition. - HELD THAT: - The court observed that the contract contains an arbitration clause and that claims for recovery of price or damages arising out of the contract can properly be pursued through arbitration. It also noted the existence of CIF and the potential role of insurance in covering freight-related loss, but recorded uncertainty on whether the petitioner had pursued insurer remedies. The court held that in the absence of an appropriate showing that statutory or administrative demands have been made, the petitioner should resort to arbitration or contractual remedies (and insurance claim processes where applicable) instead of seeking the extraordinary reliefs prayed for before the High Court.

Petitioner is directed to pursue arbitration/contractual and insurance remedies for recovery; writ relief is not granted.

Interpretation of "importer" after statutory amendment - Liability for container detention, ground rent and demurrage charges - Whether the amended definition of 'importer' (by inclusion of owner or beneficial owner or any person holding himself to be an importer) must be interpreted in the manner contended by the petitioner for the purpose of fixing liability in the present dispute. - HELD THAT: - The court noted that the question of whom liability for port/port-related charges can be fastened upon has been the subject of inconsistent decisions and has been referred to a larger Bench of the Supreme Court for resolution. Given that the higher court has left unsettled issues such as the relevance of title passing to determine liability and related questions, this Court declined to resolve the statutory interpretation point in the writ proceedings or to override the contractual allocation. The court observed that it cannot change contract terms or supplement them and that the authoritative resolution of the statutory interpretation is pending before a larger Bench.

Interpretation of the amended definition of 'importer' in the contested sense is not decided here and remains for determination by the larger Bench; no relief granted on that basis.

Final Conclusion: The writ petition is dismissed. The High Court declined to grant directions to destuff, move, sell or dispose of the cargo, to mandate customs filing facilitation, or to restrain or reallocate container detention and ground rent liabilities; the petitioner is directed to pursue contractual, arbitral and insurance remedies. The broader question of statutory interpretation of 'importer' has been left for the larger Bench and was not decided in these proceedings.

Regulation 17(4) of Customs Brokers Licensing Regulations, 2018 - entitlement to cross-examine - right to cross-examination in disciplinary enquiry - principles of natural justice - failure to record reasons for denial of cross-examination - remand for fresh enquiry

Regulation 17(4) of Customs Brokers Licensing Regulations, 2018 - entitlement to cross-examine - right to cross-examination in disciplinary enquiry - failure to record reasons for denial of cross-examination - principles of natural justice - Denial of the licensee's request to cross-examine witnesses relied upon in the enquiry and whether such denial complied with regulation 17(4) and principles of natural justice. - HELD THAT: - The Tribunal found that the enquiry authority did not act in conformity with regulation 17(4) by refusing the licensee's request to cross-examine persons whose statements formed the basis of the show-cause proceedings without recording justifiable reasons. The statements of logistics agents, exporters and representatives of liners were treated as the foundation of the show-cause notice and, given the defence that substitution of goods occurred during transit, the licencee ought to have been permitted the opportunity to test that evidence by cross-examination. The enquiry authority's brief disposal of the request, without addressing its impact on the outcome or stating reasons for refusal as required, compounded the breach of the statutory prescription and the principles of natural justice. On that basis the Tribunal held the final order unacceptable and inconsistent with law and required a fresh adjudicatory process.

Impugned order and the proceedings following the show-cause notice set aside; matter remitted to the original authority for fresh enquiry under regulation 17 of the Customs Brokers Licensing Regulations, 2018, with directions to permit compliance with the statutory entitlement to cross-examination and to record reasons where it is declined.

Final Conclusion: The Tribunal allowed early hearing, held that the enquiry authority's refusal to permit cross-examination contrary to regulation 17(4) and principles of natural justice vitiated the proceedings, set aside the impugned order and remitted the matter for fresh enquiry with directions to comply with the Regulations.

Disqualification under Section 164(2) and its effect on directorship - deactivation of Director Identification Number (DIN) allocated under Section 154 - absence of statutory power to deactivate DIN - application of Audi Alteram Partem / opportunity of hearing before deactivation - scope of disqualification limited to the defaulting company

Disqualification under Section 164(2) and its effect on directorship - scope of disqualification limited to the defaulting company - Disqualification incurred by a director on account of a particular company's default cannot, by itself, disqualify that director from acting as director of other companies which did not commit the default. - HELD THAT: - The court accepted the view in earlier decisions that the disqualification contemplated by the statutory scheme operates in relation to the defaulting company and does not automatically denude the director of his capacity in other companies which are not alleged to have defaulted. Reliance was placed on division bench and Single Judge precedents which held that deactivation or disqualification arising from a company's striking off or non filings cannot, without more, be extended to affect the director's directorships in unrelated companies. Consequently, deactivating the DIN in respect of companies other than the defaulting company was held to be impermissible. [Paras 6, 7, 8, 16, 17]

DIN deactivation could not operate in respect of companies other than the defaulting company; existing directorship in other companies remains unaffected by the disqualification of the defaulting company.

Deactivation of Director Identification Number (DIN) allocated under Section 154 - absence of statutory power to deactivate DIN - application of Audi Alteram Partem / opportunity of hearing before deactivation - RoC does not have an unfettered statutory power under the Companies Act to deactivate an existing DIN on the sole ground of a director's disqualification under Section 164(2)/vacation under Section 167(1), and in any event a person must be given notice and an opportunity of hearing before such deactivation is effected. - HELD THAT: - The court observed that DINs are allocated under the statutory framework and there is no provision in the Companies Act expressly empowering the RoC to deactivate an existing DIN merely because a director is said to have incurred disqualification under Section 164(2)(a) or his office has become vacant under Section 167(1)(a). The court adopted the reasoning in the Allahabad division bench decision that, absent express statutory provision, the RoC cannot silence a DIN on that basis. Further, even where deactivation is proposed (as distinct from striking off a company), natural justice requires that the individual director be given individual notice and an opportunity to contest the allegations before deactivation is effected; the failure to give such hearing rendered the deactivation unsustainable. [Paras 12, 17, 18, 19]

The RoC's orders deactivating the petitioners' DINs were set aside; DINs were directed to be reactivated or new numbers allocated, and the RoC was held not to possess a statutory basis to deactivate DINs without giving the affected persons notice and an opportunity of hearing.

Final Conclusion: Writ petitions allowed; impugned orders deactivating the petitioners' DINs quashed. Respondents directed to reactivate the DINs or allocate new DINs and take consequential steps within a fortnight; no costs.

Infructuousness of reliefs - locus standi of shareholders after corporate insolvency resolution process and approved resolution plan - effect of corporate insolvency resolution process on subsisting shareholder rights - dismissal of petition as academic - petition under section 111 of the Companies Act, 1956

Infructuousness of reliefs - locus standi of shareholders after corporate insolvency resolution process and approved resolution plan - effect of corporate insolvency resolution process on subsisting shareholder rights - petition under section 111 of the Companies Act, 1956 - Petition dismissed as the reliefs sought became infructuous because the corporate insolvency resolution process was initiated and a resolution plan approved, resulting in petitioners ceasing to have a subsisting interest. - HELD THAT: - The Tribunal noted that after institution of this petition a petition under section 7 of the I&B Code was admitted on July 5, 2017 and a resolution plan in respect of respondent No. 1 was approved on June 3, 2019. In those circumstances the petitioners no longer retained any subsisting interest in the company. Given that the controversy concerned rights in the company's shares, the initiation and completion of CIRP and approval of the resolution plan rendered the reliefs claimed by the petitioners infructuous. Consequently the Tribunal declined to enter upon the merits of the rival contentions regarding invocation of the pledge and other factual or legal disputes and disposed of the petition on the ground of infructuousness and lack of locus to continue proceedings. [Paras 8, 9]

Petition dismissed on the ground that the reliefs sought became infructuous and the petitioners ceased to have locus to continue the proceedings; no adjudication on merits.

Final Conclusion: The petition under section 111 of the Companies Act, 1956 is dismissed because subsequent initiation of CIRP and approval of a resolution plan for the company rendered the claimed reliefs infructuous and the petitioners ceased to have a subsisting interest.

Corporate Insolvency Resolution Process - Operational debt - Default - Limitation - Pre-existing dispute - Moratorium - Interim Resolution Professional - Interest claim not recognised where no contractual provision

Operational debt - Default - Existence of operational debt and occurrence of default - HELD THAT: - The Adjudicating Authority examined the application, the contract, ledger/statement of accounts and the reply of the Corporate Debtor and found that the Corporate Debtor admitted the principal liability. The material on record establishes that an operational debt exceeding the statutory threshold exists and that a default occurred on 01.04.2016. The Authority recorded that the Corporate Debtor did not dispute the existence of the debt or the quality of services supplied, leading to a finding of default. [Paras 19, 20]

Operational debt is established and default on 01.04.2016 is recorded.

Limitation - Application filed within limitation - HELD THAT: - On the material presented, the Adjudicating Authority noted the date of first default as 01.04.2016 and that the petition was filed on 08.01.2019. Having considered the relevant dates, the Authority concluded that the petition was filed within the limitation period prescribed for initiation of CIRP under the Code. [Paras 19, 20]

Petition is within the limitation period.

Pre-existing dispute - Absence of pre existing dispute before filing - HELD THAT: - The Authority considered the correspondence, the reply of the Corporate Debtor and the sequence of events and observed there was no record of a dispute having been raised prior to the filing of the application. The Corporate Debtor's admissions in the reply and its request for time to pay did not constitute a pre-existing dispute capable of defeating the petition under section 9. [Paras 19, 20]

No pre-existing dispute existed before filing; the defence of a pre existing dispute is rejected.

Interest claim not recognised where no contractual provision - Claim for interest not allowed in absence of contractual provision - HELD THAT: - Although the Operational Creditor claimed interest at 18% from 01.04.2017, the Authority found that the contract did not provide for payment of interest for delay in payment. In consequence, the claimed interest component was not recognised by the Adjudicating Authority. [Paras 19, 27]

Interest claim is not recognised because there is no contractual provision for interest on delayed payment.

Corporate Insolvency Resolution Process - Interim Resolution Professional - Moratorium - Admission of petition, appointment of IRP and declaration of moratorium - HELD THAT: - Having found existence of debt, default, absence of pre existing dispute and compliance with limitation and procedural requirements, the Adjudicating Authority held the section 9 application to be complete and admitted the petition. The Authority declared moratorium in terms of sections 13 and 14 of the Code with the stipulated prohibitions and appointed an Interim Resolution Professional from the IBBI panel, directing him to perform statutory duties, make public announcement and file requisite disclosures. [Paras 20, 21, 22, 23, 25]

IB petition admitted; moratorium declared; Shri Bhavan Trivedi appointed as Interim Resolution Professional.

Final Conclusion: The Adjudicating Authority admitted the section 9 petition, held that an operational debt and default existed (first default 01.04.2016), found no pre existing dispute and that the petition was within limitation, disallowed the claimed interest for want of contractual provision, declared moratorium under the Code and appointed an Interim Resolution Professional to conduct the CIRP.

Invocation of an on demand bank guarantee - bank guarantee as an independent and separate contract - court/tribunal interference with invocation only in case of fraud or invocation not in terms - summary jurisdiction under the Insolvency and Bankruptcy Code not suitable for deciding disputed questions of fact - irreparable injury requirement for grant of injunction against encashment

Invocation of an on demand bank guarantee - bank guarantee as an independent and separate contract - court/tribunal interference with invocation only in case of fraud or invocation not in terms - irreparable injury requirement for grant of injunction against encashment - Whether the applicant is entitled to injunction restraining the resolution professional/corporate debtor from invoking and encashing the performance bank guarantee. - HELD THAT: - The Tribunal applied settled principles that an unconditional on demand bank guarantee is a separate and independent contract and, if invoked in terms, courts should be slow to grant injunctions restraining its encashment. Interference is permissible only where invocation is not in terms of the guarantee or there is fraud of an egregious nature or allowing encashment would cause irretrievable harm. The applicant bore the burden of showing fraud or irreparable injury; no material was placed before the Adjudicating Authority to establish that the invocation was fraudulent or would cause irreparable harm. The respondent asserted that the guarantee is being invoked in terms because the applicant had not extended the advance bank guarantee and that disputed questions whether the applicant breached the contract require evidence. Absent proof of fraud or irreversible prejudice, and given that invocation was in terms of the guarantee, injunction could not be granted. [Paras 14, 15]

Application for injunction restraining invocation and encashment of the performance bank guarantee is dismissed.

Summary jurisdiction under the Insolvency and Bankruptcy Code not suitable for deciding disputed questions of fact - invocation of an on demand bank guarantee - Whether the Tribunal should decide contested factual disputes about performance of the contract in the summary proceeding seeking injunction against invocation of the bank guarantee. - HELD THAT: - The Tribunal noted that the applicant's principal contention - that it had performed the contract and therefore the guarantee should not be invoked - raises disputed questions of fact and law which require evidence. Reliance was placed on authorities indicating that complicated disputes of fact cannot be resolved in summary proceedings under the Code. Consequently, the Tribunal declined to adjudicate these factual disputes in the present summary application and treated them as matters for appropriate fora or fuller proceedings. [Paras 13, 14]

Contested factual issues relating to performance and breach cannot be determined in the summary proceeding; they are not grounds to restrain invocation of the bank guarantee in this application.

Final Conclusion: The application under section 60(5) seeking interim and permanent injunctions against invocation and encashment of the performance bank guarantee is dismissed for want of material showing fraud or irreparable injury and because the underlying disputes of fact as to contractual performance cannot be resolved in the summary jurisdiction of the Tribunal; any invocation made in terms of the guarantee cannot be restrained.

Prior approval of the Adjudicating Authority for institution of proceedings by the liquidator - ex post facto ratification / de facto sanction of proceedings instituted by the liquidator - inherent jurisdiction and rule 11 powers of the Adjudicating Authority to regularise irregular acts - maximisation of assets in liquidation as the object of the Insolvency and Bankruptcy Code

Prior approval of the Adjudicating Authority for institution of proceedings by the liquidator - Whether the liquidator was required to obtain prior approval of the Adjudicating Authority before instituting proceedings and the legal effect of non compliance. - HELD THAT: - The Tribunal recognised that section 33(5) of the Insolvency and Bankruptcy Code requires prior approval of the Adjudicating Authority before a liquidator institutes any suit or legal proceeding on behalf of the corporate debtor (paragraphs 3-5). The Tribunal examined analogous authorities under company law which have held that failure to obtain leave does not inevitably render a proceeding void for all purposes and that leave may operate retrospectively to regularise an otherwise ineffective proceeding. Applying this reasoning to the IBC context, the Tribunal treated non compliance as an irregularity capable of being cured by subsequent approval rather than as an absolute nullity that mandates dismissal, having regard to the object of liquidation and the provision for prior sanction (paragraphs 6-8). [Paras 3, 4, 5, 6, 8]

Failure to obtain prior approval under section 33(5) constitutes an irregularity which, in the circumstances, did not preclude subsequent regularisation by the Adjudicating Authority.

Ex post facto ratification / de facto sanction of proceedings instituted by the liquidator - inherent jurisdiction and rule 11 powers of the Adjudicating Authority to regularise irregular acts - maximisation of assets in liquidation as the object of the Insolvency and Bankruptcy Code - Whether the Adjudicating Authority could, in exercise of its powers (including under rule 11 and inherent jurisdiction), grant ex post facto approval to permit pending section 34 arbitration applications to proceed, and whether such approval should be granted in the present case. - HELD THAT: - The Tribunal considered whether an application under rule 11 or inherent jurisdiction could be invoked to cure non compliance with the statutory requirement of prior approval. While inherent powers are to be used sparingly and only to fill statutory vacuums, the Tribunal held that, in the interests of justice and consistent with the IBC's objective of maximising asset value, the Adjudicating Authority can grant retrospective approval to regularise an appeal or proceeding instituted without prior sanction where circumstances justify it (paragraphs 5-8, 10). The Tribunal noted that the respondent had earlier been granted leave in a related application (paragraph 9) and, balancing the statutory scheme with the object of liquidation, exercised its power to grant ex post facto leave to proceed with A.S. Nos. 58 and 59 of 2019 (paragraphs 10-11). [Paras 6, 8, 9, 10, 11]

The Adjudicating Authority has power in the circumstances to grant ex post facto approval and, applying that principle here, the Tribunal allowed the application and granted retrospective leave to proceed with the pending section 34 applications.

Final Conclusion: The Misc. Application was allowed: the Tribunal granted ex post facto approval to the liquidator to proceed with A.S. Nos. 58 and 59 of 2019 under section 34 of the Arbitration and Conciliation Act, 1996, treating the earlier failure to obtain prior sanction as an irregularity capable of retrospective regularisation in the interests of justice and the IBC's object of maximising asset value.

Authorization of authorised representative under the Insolvency and Bankruptcy Code - existence of default for a financial debt - completeness of an application under section 7 - appointment of interim resolution professional - moratorium under section 14 of the Code

Authorization of authorised representative under the Insolvency and Bankruptcy Code - The person signing and presenting the Section 7 petition was authorised to file the application on behalf of the financial creditor. - HELD THAT: - The Tribunal examined the objection that the power of attorney holder was not competent to present the petition. Applying the principle in the cited NCLAT decision, a general authorisation by a financial creditor in favour of its officers to undertake legal proceedings is sufficient and the use of the term 'power of attorney' does not vitiate such authorisation. The petitioner produced a letter of authorisation dated 22-02-2019 from the bank's general manager appointing Mr. Dineshkumar V. Chavda to file the Section 7 application. On the materials, the Authority was satisfied that the filing was made by an authorised representative of the financial creditor. [Paras 9, 10, 11, 12, 14]

Objection as to competence of the signatory is rejected and the petitioner is held to have been duly authorised to file the Section 7 petition.

Existence of default for a financial debt - There was a default by the corporate debtor in payment of the financial debt claimed by the financial creditor. - HELD THAT: - The Tribunal considered the material placed on record including sanction letters, account statements with banker's certificate, the computation of amounts claimed and the Section 13(2) notice. The corporate debtor had availed multiple facilities and acknowledged the debt over time; no bona fide defence on substantial grounds was shown. Relying on the settled test that the Adjudicating Authority must be satisfied that a default has occurred, the Authority concluded from the documentary evidence that a default in payment of the financial debt existed. [Paras 15, 16, 17, 18, 19]

Default is established and the debt claimed is a financial debt owed by the corporate debtor to the petitioner.

Completeness of an application under section 7 - appointment of interim resolution professional - The Section 7 application was complete in all respects and the proposed interim resolution professional was acceptable and appointed. - HELD THAT: - The Tribunal verified that the application was filed in the prescribed form with the prescribed fee and that the petitioner had proposed a resolution professional with the required registration and a declaration that no disciplinary proceedings were pending. Having satisfied itself on the completeness of the application and on the absence of disciplinary proceedings against the proposed IRP, the Authority appointed Ms. Vineeta Maheshwari as interim resolution professional. [Paras 20, 21]

The Section 7 application is complete and Ms. Vineeta Maheshwari is appointed as interim resolution professional.

Moratorium under Section 14 of the Code - The petition is admitted under Section 7 and the moratorium under Section 14 is declared. - HELD THAT: - Having found that the petitioner satisfied the requirements of Section 7 and that default existed, the Tribunal admitted the petition. Consequent upon admission, the statutory moratorium was declared prohibiting institution or continuation of suits or proceedings against the corporate debtor, transfer or disposition of assets, enforcement of security, and recovery of property occupied by the corporate debtor; and directions were given to maintain supplies of goods and essential services during the moratorium subject to statutory exceptions. The moratorium takes effect from the date of receipt of the authenticated copy of the order until completion of the CIRP or further order. [Paras 22, 23, 24, 25, 26]

The petition is admitted, the corporate insolvency resolution process is ordered to commence and moratorium under Section 14 is imposed.

Final Conclusion: The Section 7 petition filed by the financial creditor is admitted: the signatory was duly authorised, default by the corporate debtor is established, the application is complete, Ms. Vineeta Maheshwari is appointed as interim resolution professional, and a moratorium under Section 14 is declared; the petition is disposed of with no order as to costs.

Approval of resolution plan under section 31(1) - compliance of resolution plan with section 30(2) - role and commercial wisdom of the committee of creditors - priority of distribution under section 53 - operational creditors' non-participation in CoC where aggregate dues < 10% (section 24(3)(c)) - no automatic waiver of statutory approvals upon plan approval

Approval of resolution plan under section 31(1) - compliance of resolution plan with section 30(2) - Whether the resolution plan dated June 20, 2019 with final addendum dated September 11, 2019 conforms to the requirements of section 30(2) and is fit for approval under section 31(1). - HELD THAT: - The Adjudicating Authority examined the resolution plan and the verification made by the resolution professional that the plan conforms to the conditions in section 30(2) and the requirements specified by the Board and under regulation 38 of the CIRP Regulations. The Committee of Creditors approved the plan with 92.44% voting share. On perusal, the plan was found to provide for payment of insolvency resolution process costs, payment to operational creditors not less than liquidation value, management and implementation arrangements, and did not contravene applicable laws. The Authority, being mindful of precedent that it should not interfere with the commercial wisdom of the CoC, concluded that the plan meets statutory requirements and is approvable subject to observations recorded in the order. [Paras 9, 14]

I. A. No. 664 of 2019 is allowed and the resolution plan dated June 20, 2019 with addendum dated September 11, 2019 is approved under section 31(1), subject to the observations and directions in the order.

Role and commercial wisdom of the committee of creditors - Whether the Adjudicating Authority may re-appraise the commercial decision of the Committee of Creditors in approving the resolution plan. - HELD THAT: - The Authority reiterated the objective of the IBC to promote resolution over liquidation and relied on the principle that the Adjudicating Authority has no jurisdiction to second-guess the commercial wisdom of the CoC when the plan conforms to statutory requirements. The order refers to Supreme Court authority and the IBC's object of maximizing the value of the corporate debtor, concluding that approval is the rule where statutory criteria are satisfied and the CoC has approved the plan by requisite majority. [Paras 13, 14]

The Adjudicating Authority will not interfere with the commercial decision of the CoC where the resolution plan satisfies the statutory conditions and has requisite CoC approval.

Priority of distribution under section 53 - operational creditors' non-participation in CoC where aggregate dues < 10% (section 24(3)(c)) - Observations on the position of operational creditors in the resolution process and the priority of payments in liquidation. - HELD THAT: - The Authority noted that section 53 sets out the order of priority for distribution of proceeds on liquidation, placing operational creditors behind secured financial creditors in the priority waterfall. It also observed that operational creditors holding less than 10% of aggregate debt are not eligible to attend or vote in CoC meetings under section 24(3)(c). These statutory positions inform why operational creditors do not determine approval of a resolution plan and do not confer locus to challenge the CoC's commercial decision in that regard. [Paras 11, 12]

Operational creditors with aggregate dues below the statutory threshold do not participate in CoC voting, and section 53 confirms the priority of payments in liquidation; these statutory positions do not preclude approval of a compliant resolution plan.

No automatic waiver of statutory approvals upon plan approval - Whether clause No. (e) of Chapter IV of the resolution plan, which seeks that business permits be treated as granted or reinstated at no additional cost, can be accepted as part of the approved plan. - HELD THAT: - Clause (e) sought an entitlement effectively to have permits granted or reinstated at no cost. The Authority held that approval of a resolution plan does not operate as an automatic waiver, abatement or exercise of powers of other competent authorities that alone have jurisdiction over statutory permits and approvals. Such matters fall within the domain of those authorities and the resolution applicant may approach them for reliefs sought under clause (e). Therefore clause (e), insofar as it seeks to bind competent authorities or obtain automatic statutory concessions, cannot be allowed as part of the plan. The Authority recorded that disallowing this clause will not hinder implementation of the plan and granted the applicant liberty to seek appropriate reliefs from competent fora. [Paras 15, 16, 17]

Clause No. (e) of Chapter IV of the resolution plan is not allowed; the resolution applicant may independently approach the appropriate competent authorities for any concessions or reliefs required.

Effective date and conditions of approved resolution plan - Directives regarding the coming into force of the approved resolution plan and compliance with other laws and formalities. - HELD THAT: - The Authority directed that the approved resolution plan shall come into force immediately, remain subject to existing laws and requirements specified by the Board and other statutory authorities, and that the resolution applicant shall obtain necessary approvals under applicable laws within one year from the date of approval (or within any longer period provided by such law). The resolution professional was directed to forward records of the CIRP and the plan to the Insolvency and Bankruptcy Board of India for recording. [Paras 18]

The resolution plan shall take immediate effect subject to statutory compliances and approvals within the stipulated period; the RP shall forward CIRP records to the IBBI.

Final Conclusion: The Adjudicating Authority, being satisfied that the resolution plan dated June 20, 2019 with final addendum dated September 11, 2019 conforms to section 30(2) and related regulations and having been approved by the CoC with requisite majority, allowed I.A. No. 664 of 2019 and approved the resolution plan under section 31(1) subject to the observations that clause (e) of Chapter IV is disallowed, statutory approvals remain the domain of competent authorities, and the plan shall operate immediately subject to compliance with applicable laws and directions recorded.

Default - financial creditor - corporate insolvency resolution process under section 7 - force majeure clause - time being of the essence / reasonable time for performance - appointment of interim resolution professional - moratorium under section 14

Default - financial creditor - corporate insolvency resolution process under section 7 - The corporate debtor committed default and the application under section 7 is liable to be admitted. - HELD THAT: - The Tribunal found that the allotment agreement obligated the corporate debtor to deliver possession within 36 months from booking with a six month grace period, which expired in July/August 2016. The project remained incomplete with an inordinate delay of more than three years and the corporate debtor failed to establish any reason amounting to force majeure that would justify such delay. The applicant had disbursed consideration as shown in the record and the outstanding financial debt exceeded the statutory trigger amount. Viewing the matter as one of default by the corporate debtor and noting that proceedings under the Code are for corporate insolvency resolution and not direct recovery, the Tribunal concluded that the statutory requirements for admission under section 7(5)(a) were satisfied and the application warranted admission. [Paras 14, 16, 18, 19]

Application under section 7 is admitted as the corporate debtor has committed default.

Force majeure clause - time being of the essence / reasonable time for performance - The corporate debtor's plea of force majeure and contention that time was not of the essence is rejected insofar as it absolves the corporate debtor of liability for the prolonged non-delivery of possession. - HELD THAT: - The Tribunal examined clause 12 (time for handing over possession) and clause 28 (force majeure) of the allotment agreement. It held that no material was placed to establish any force majeure event that would reasonably justify the ongoing delay. The court emphasised that the non-completion even after a reasonable extension is wholly unreasonable and constitutes a fundamental breach; thus the obligation to deliver possession within a reasonable period could not be excluded by contract. Consequently, the force majeure defence could not be sustained to defeat the claim of default. [Paras 14]

Force majeure defence and the contention that time was not of essence are rejected; delay amounts to fundamental breach.

Financial creditor - standing of the financer under tripartite agreement - The corporate debtor's contention that the financier (PNB Housing Finance Ltd.) would step into the applicant's shoes does not negate the applicant's status as a financial creditor for the purpose of triggering CIRP. - HELD THAT: - The corporate debtor relied on the tripartite agreement which contemplated that the financier could step into the borrower's shoes in certain events. The Tribunal noted, however, that the applicant had paid an amount which, as admitted by the corporate debtor, exceeded the monetary threshold required to trigger insolvency proceedings. On that basis the defence that the financier's rights displace the applicant's entitlement to invoke section 7 was held to be untenable. [Paras 15]

The contention about PNB stepping into borrower's shoes fails; applicant retains standing as financial creditor to file section 7 application.

Appointment of interim resolution professional - moratorium under section 14 - Interim reliefs and directions consequential to admission are ordered, including appointment of an interim resolution professional, public announcement, imposition of moratorium and ancillary administrative directions. - HELD THAT: - Upon admission, the Tribunal appointed the proposed resolution professional as interim resolution professional and directed immediate public announcement in accordance with the Regulations. The moratorium under section 14 was declared to operate as provided by the Code, with clarifications about exceptions and supply of essential goods and services. Further directions included performance obligations of the IRP under the Code, deposit of an initial amount by the financial creditor to meet IRP expenses, and directions to the ex-management to hand over documents and information to the IRP within one week, with coercive steps contemplated for non-compliance. Administrative directions were given for communication of the order and updation of Registrar of Companies' master data. [Paras 22, 23, 24, 25, 26]

Mr. Jitesh Gupta appointed as interim resolution professional; public announcement, moratorium and related administrative and compliance directions are ordered.

Final Conclusion: The application filed by the home-buyer as a financial creditor under section 7 is admitted on finding of default by the corporate debtor; an interim resolution professional is appointed, the moratorium under the Code is imposed and ancillary directions (public announcement, deposit for IRP expenses, handing over of documents and Registrar of Companies updation) are issued.

Cenvat credit on inputs used in manufacture of exempted goods - Rule 6(3) of the CENVAT Credit Rules, 2004 - separate accounts requirement under Rule 6(2) of the CENVAT Credit Rules - option to pay six per cent in lieu of maintaining separate accounts - distinction between manufacture and clearance of goods - presumption of mala fide conduct in tax credit claims

Rule 6(3) of the CENVAT Credit Rules, 2004 - cenvat credit on inputs used in manufacture of exempted goods - separate accounts requirement under Rule 6(2) of the CENVAT Credit Rules - option to pay six per cent in lieu of maintaining separate accounts - presumption of mala fide conduct in tax credit claims - distinction between manufacture and clearance of goods - Whether the assessee was entitled to benefit of Rule 6(3) despite earlier manufacture of exempted goods and whether the Tribunal's factual findings that dutiable goods were cleared on 5.11.2012 and that mala fide conduct was not proved are perverse. - HELD THAT: - The Court accepted the Tribunal's factual finding that dutiable goods were cleared on 5.11.2012 and that the respondent had cleared goods on payment/adjustment of duty under Rule 6(3). Rule 6(2) does not prescribe any minimum ratio between manufacture of exempted and dutiable goods; where separate accounts are not maintained, Rule 6(3) provides the statutory option to pay six per cent of the value of exempted goods. The submission that the respondent manufactured only exempted goods until 4.11.2012 was held to be based on presumption and inconsistent with the Tribunal's finding of clearance of dutiable goods on 5.11.2012; absence of evidence supporting mala fide intention or manipulation meant the allegation of fraud could not be sustained. The Court emphasized the legal distinction between manufacture and clearance and that mere existence of earlier manufacture of exempted goods does not, without contrary material, disentitle a manufacturer to follow the statutory option under Rule 6(3). In the facts, no perversity in the Tribunal's conclusion was shown and the findings of fact were binding on the Court.

The Tribunal's order upholding the respondent's entitlement to follow Rule 6(3) (including payment/adjustment of duty and benefit claimed) and rejecting mala fide/fraud allegations is not perverse and requires no interference.

Final Conclusion: The appeals are dismissed; the Tribunal's factual findings that dutiable goods were cleared on payment/adjustment under Rule 6(3) and that mala fide or fraudulent conduct was not established are sustained, and the assessee may avail the statutory option under Rule 6(3) where separate accounts are not maintained.

Cenvat Credit - serially numbered invoice - pre-printed serial numbers - genuineness of invoices and payment of service tax by service provider - verification at service-provider's end - denial of credit for mere procedural discrepancies

Cenvat Credit - serially numbered invoice - pre-printed serial numbers - genuineness of invoices and payment of service tax by service provider - verification at service-provider's end - Denial of Cenvat credit on the ground that input service invoices bear handwritten serial numbers is not justified where genuineness of invoices and payment of service tax by the service provider are not in dispute. - HELD THAT: - The Tribunal held that the statutory requirement is that invoices be "serially numbered" but the rule does not mandate that serial numbers must be pre-printed. Mere absence of pre-printed serial numbers, or procedural lapses such as non-mention or overwriting of registration number on the invoice, are not sufficient basis to deny Cenvat credit so long as there is no dispute about the genuineness of the invoices and the service tax having been discharged by the service provider. Where the department has doubts, it is open to verify the invoices at the service-provider's end; audit verification showing payment of service tax negates the basis for denial. The present appeal was decided by applying the earlier decision of this Bench in the appellant's own case, which set aside a like impugned order and remanded for consideration limited to verification of payment by the service provider; having regard to that earlier conclusion, the Tribunal in the present appeal set aside the impugned order and allowed the appeal.

Impugned order set aside and appeal allowed, following the earlier decision of this Bench that handwritten serial numbers on invoices do not warrant denial of Cenvat credit where genuineness and payment of service tax by the provider are not disputed.

Final Conclusion: The appeal is allowed; denial of Cenvat credit solely because invoices bear handwritten serial numbers is not sustainable where the invoices are genuine and service tax has been paid by the service provider, and the Revenue may verify payment at the service-provider's end if necessary.

Fast track assessment - Re-opening of assessment only on fresh receipt of materials pertaining to tax evasion - Limitation for assessment of escaped turnover - Outer time limit under Section 19 applies to escaped turnover - Fast track assessments subject to limitation under Section 19 (ratio: Section 17D does not oust limitation)

Fast track assessment - Limitation for assessment of escaped turnover - Outer time limit under Section 19 applies to escaped turnover - Re-opening of assessment only on fresh receipt of materials pertaining to tax evasion - Validity of notices and demand issued in 2019-2020 under the fast track procedure in respect of assessment year 2004-2005 in view of limitation under Section 19 of the KGST Act. - HELD THAT: - The Court examined Section 17D and Section 19 of the KGST Act and concluded that although Section 17D prescribes the fast track method and provides that assessments completed by teams shall not be re-opened unless there is fresh receipt of materials pertaining to tax evasion, it does not operate to displace the time limit applicable to determination of escaped turnover. Section 19 empowers the assessing authority to proceed within five years from the expiry of the year to which the tax relates to determine escaped turnover. The proviso extending completion for years up to and including 2004-05 to 31.03.2011 was noted. In the absence of any material showing fresh receipt of information justifying re-opening and given that the notices and demand in the present matter were issued many years after the outer time limit, the Court held that the fast track reassessment could not validly be taken up beyond the reasonable period prescribed by Section 19. The Court further observed that the assessment order and notices do not refer to any additional material forming the basis for undertaking a fast track reassessment, and therefore the proceedings cannot be sustained. [Paras 7, 8, 9, 10]

The fast track assessment notices and demand in respect of assessment year 2004-2005 issued in 2019-2020 are barred by limitation and are unsustainable.

Final Conclusion: The assessment order dated 14.12.2009 (Ext.P1) and the demand notice dated 10.02.2020 (Ext.P7) are quashed and the writ petition is allowed.

Classification under Entry 100-D of Schedule-C - taxability of unclassified goods - drink made of fruit - predominant fruit content requirement - distinct identity of processed fruit products - preferable view in favour of the assessee where two views are possible

Classification under Entry 100-D of Schedule-C - drink made of fruit - predominant fruit content requirement - distinct identity of processed fruit products - preferable view in favour of the assessee where two views are possible - Whether the mango-based drink 'Slice' falls within Entry 100-D of Schedule-C to the HVAT Act and is liable to tax as a fruit drink rather than as an unclassified item. - HELD THAT: - The Court held that Entry 100-D, which covers products 'made of fruits/vegetables' including 'drink', must not be given an unduly narrow meaning so as to require a very high percentage of fruit content that would render such drinks undrinkable. A distinction exists between concentrated fruit material and a ready-to-drink beverage made of fruit; the latter may contain water, sugar and other additives yet remain a 'drink made of' the fruit. Decisions of higher courts recognising that processed fruit beverages retain a character derived from the fruit, and that entries using inclusive language attract a wider construction, were held applicable. Where two reasonable views are possible, the view favourable to the assessee is to be preferred. Applying these principles, the Court found that 'Slice' is a fruit drink covered by Entry 100-D and accordingly is not to be treated as an unclassified item taxable at the higher rate. The Tribunal's and Revisional Authority's conclusions to the contrary were therefore erroneous. [Paras 15, 18, 19, 21]

The product 'Slice' is covered by Entry 100-D of Schedule-C to the HVAT Act and is not an unclassified item; the impugned orders of the Revisional Authority and the Tribunal are set aside.

Final Conclusion: Appeal allowed; impugned orders set aside, the product 'Slice' held to fall under Entry 100-D of Schedule-C for AY 2010-11 and refund of any excess tax directed to be issued within four weeks; no order as to costs.

Permission to file draft amendment - interim stay of order - stay of operation, implementation and execution of impugned order - direction for issuance of notice - leave for substituted service

Permission to file draft amendment - Grant of permission to file a draft amendment in the petition under Article 226. - HELD THAT: - The High Court allowed the petitioner-State to file the draft amendment sought in the writ petition. The order records grant of the draft amendment at the outset and proceeds to entertain the challenge to the NCLT order while permitting the proposed amendment to be placed on record for adjudication in the petition. [Paras 1]

Draft amendment granted.

Interim stay of order - stay of operation, implementation and execution of impugned order - direction for issuance of notice - leave for substituted service - Whether the impugned order of the NCLT should be stayed pending disposal of the writ petition. - HELD THAT: - On the State's challenge to the NCLT order dated 18.11.2019 directing lifting of attachment for sale and distribution under the Code, the High Court issued notice to the respondents returnable on the fixed date and, as an interim measure, stayed the operation, implementation and execution of the impugned NCLT order until final disposal of the petition. The Court also directed that service be effected today and permitted direct service. No adjudication on the substantive controversy between the State and the liquidator/NCLT was undertaken; the order is interlocutory and preserves the status quo pending adjudication. [Paras 8]

Operation, implementation and execution of the impugned NCLT order is stayed; notice issued and direct service permitted.

Final Conclusion: The High Court permitted filing of the draft amendment and, while issuing notice, granted an interim stay of the NCLT order dated 18.11.2019 restraining its operation, implementation and execution until final disposal of the writ petition.

Retrospective amendment - definition of "urban land" - refund of tax paid due to retrospective exemption - revision under section 25 of the Wealth Tax Act - authority of CBDT Circular - officers' duty to assist assessee - Article 265 of the Constitution - remand for reconsideration

Retrospective amendment - definition of "urban land" - refund of tax paid due to retrospective exemption - authority of CBDT Circular - Article 265 of the Constitution - Whether the appeals should be reconsidered in the light of the retrospective amendment excluding certain agricultural land from wealth-tax and the CBDT Circular authorising refund/revision despite expiry of statutory time-limits - HELD THAT: - The Tribunal noted that by an amendment (with retrospective effect from 1.4.1993) lands classified as agricultural land in government records and used for agricultural purposes are not 'urban land' and hence are not exigible to wealth tax. The CBDT Circular dated 11.6.2015 recognises that assessees may have paid wealth-tax on such land earlier and, exercising powers under section 10(2)(b) of the Wealth-tax Act, authorises Principal Commissioners/Commissioners to admit revision applications under section 25 of the Act beyond the statutory period and to decide them on merits, directing disposal within a prescribed timeframe and entitlement to interest where refund is ordered. While the assessee had not filed the application within the period specified in the circular, the Tribunal held that the amendment and the Circular together entitle the assessee to have the matter reconsidered on merits rather than be foreclosed by prior admissions; the constitutional principle in Article 265 and the established duty of revenue officers to assist taxpayers support that taxes not leviable by law should not be retained. Accordingly, the appeals were not decided on merits by the Tribunal but were remitted for fresh consideration in accordance with the amended law and the CBDT Circular. [Paras 5, 6, 10]

Appeals remitted to the file of the Assessing Officer for reconsideration in accordance with the retrospective amendment and CBDT Circular; assessee directed to approach the Principal Commissioner under section 25 for refund/revision and the Principal Commissioner to dispose of the application within one year from the end of the financial year in which it is received; AO to refund taxes if so directed.

Final Conclusion: Appeals treated as partly allowed for statistical purposes and remanded for fresh adjudication in accordance with the retrospective amendment excluding certain agricultural land from wealth-tax and the CBDT Circular permitting revision/refund; the assessee must apply to the Principal Commissioner under section 25 and relief, if granted by the Principal Commissioner, shall be implemented by the Assessing Officer.

Taxability of urban land as a taxable asset under section 2(ea) of the Wealth-tax Act - exemption where land is categorized as agricultural in Government records and used for agricultural purposes - requirement of demonstrable agricultural use / productive use - retrospective amendment by Finance Act, 2013 to Explanation 1 to section 2(ea)

Taxability of urban land as a taxable asset under section 2(ea) of the Wealth-tax Act - exemption where land is categorized as agricultural in Government records and used for agricultural purposes - requirement of demonstrable agricultural use / productive use - Whether the urban land held by the assessee is excluded from wealth-tax under the amended Explanation 1 to section 2(ea) on the ground that it is agricultural in government records and used for agricultural purposes. - HELD THAT: - The Tribunal accepted the factual finding that the assessee did not produce any documentary evidence before the assessing officer, the Commissioner (Appeals) or before the Tribunal to establish that the lands were actually used for agricultural purposes. The appellate authority's reasoning - emphasising that the amended Explanation 1 requires both that land be categorized as agricultural in Government records and that it be demonstrably used for agricultural purposes - was upheld. The authorities below correctly observed that the conjunctive word 'and' in the Explanation makes actual, manifest agricultural use a distinct and compulsory requirement; mere entry in government records (pattadar passbook) or conjecture is insufficient. In the absence of evidence of organized or productive agricultural activity on the land, the exemption could not be allowed and the additions made in assessment were rightly sustained. The Tribunal found no basis to interfere with the Commissioner (Appeals)'s conclusions and applied that determinative reasoning to both appeals. [Paras 5, 6]

Findings of the Commissioner (Appeals) upholding the assessing officer's inclusion of the urban land under section 2(ea) were affirmed and the appeals dismissed.

Final Conclusion: Both appeals dismissed; the Tribunal upheld the conclusion that, absent any documentary evidence of agricultural use, the lands could not be excluded from wealth-tax under the amended Explanation 1 to section 2(ea).

Taxability of urban land as an 'asset' within the meaning of section 2(ea) of the Wealth-tax Act - exemption for one residential house under section 5(vi) of the Wealth-tax Act - effect of inter vivos gift (including oral Hiba under Muslim law) on wealth tax liability - relevance of documentary evidence for establishing transfer and beneficial ownership - remand for fresh adjudication after affording reasonable opportunity of hearing

Taxability of urban land as an 'asset' within the meaning of section 2(ea) of the Wealth-tax Act - exemption for one residential house under section 5(vi) of the Wealth-tax Act - Whether the five plots (other than the residential house) were correctly brought to tax as assets under section 2(ea) of the Wealth tax Act - HELD THAT: - The Tribunal found that the revenue authorities accepted the assessee's residential house as exempt under the provision allowing one residential house but proceeded to treat the remaining five plots as taxable assets under section 2(ea) without properly appreciating the explanations and documentary material placed on record. The Tribunal noted that, in respect of certain plots, material was filed by the assessee (including unregistered stamp paper indicating gifts) which the authorities did not adequately consider. Given these deficiencies in adjudication, the Tribunal did not decide the taxability on merits but set aside the CIT(A)'s order and remitted the matters to the CIT(A) for fresh adjudication in accordance with law after permitting the assessee to substantiate his claims. [Paras 10, 12, 13]

Order of the CIT(A) sustaining the additions is set aside and the matter is remitted to the CIT(A) for fresh adjudication after affording reasonable opportunity to the assessee.

Effect of inter vivos gift (including oral Hiba under Muslim law) on wealth tax liability - relevance of documentary evidence for establishing transfer and beneficial ownership - Whether properties alleged to have been gifted (oral Hiba and other gifts) are taxable in the assessee's hands - HELD THAT: - The Tribunal observed that the assessee asserted transfers by way of gift (including an oral Hiba under Muslim law) in relation to specified properties, and filed materials in support. The CIT(A) rejected these pleas as afterthoughts and declined to accept oral Hiba without considering the supporting material and details. The Tribunal concluded that the question of whether the alleged gifts effect transfer of beneficial ownership for wealth tax purposes requires fresh consideration on the basis of evidence and therefore remitted this issue to the CIT(A) for adjudication afresh. [Paras 6, 10]

Issue remitted to the CIT(A) for fresh decision on the merits after considering documentary evidence and giving the assessee opportunity to be heard.

Relevance of municipal/GHMC limits in determining urban status for wealth tax - remand for fresh adjudication after affording reasonable opportunity of hearing - Whether certain plots fall within municipal/GHMC limits (and thereby attract wealth tax as urban land) and whether the assessee was given adequate opportunity to substantiate his position - HELD THAT: - The Tribunal recorded the assessee's contention that some properties lie outside GHMC limits or are under Gram Panchayat and that mere HUDA layout does not establish inclusion within GHMC without appropriate notification. The Tribunal found that the CIT(A) proceeded to confirm additions without adequately giving the assessee time or opportunity to substantiate these contentions. In view of the lack of proper consideration and opportunity, the Tribunal directed remand to the CIT(A) to examine municipal/notification status and afford a reasonable opportunity of hearing before deciding the taxability. [Paras 8, 10]

Matter remitted to the CIT(A) with directions to consider the assessee's contentions on municipal/GHMC status and to decide after giving reasonable opportunity of hearing.

Final Conclusion: The Tribunal set aside the CIT(A)'s order and remitted the appeals to the CIT(A) for fresh adjudication on the merits in respect of the disputed properties, directing that the assessee be given a reasonable opportunity to produce and rely upon documentary evidence; appeals are disposed of as allowed for statistical purposes.

Maintainability of arbitration for non compliance with pre arbitral DAB procedure - Substantial compliance of pre arbitral procedure - appointment and replacement mechanism of Dispute Adjudication Board (DAB) - Section 16 objection to jurisdiction - waiver of pre arbitral steps by conduct and invocation of arbitration clause - jurisdiction of the Arbitral Tribunal to adjudicate disputes - capacity of a joint venture to invoke arbitration and file appeal

Maintainability of arbitration for non compliance with pre arbitral DAB procedure - Substantial compliance of pre arbitral procedure - appointment and replacement mechanism of Dispute Adjudication Board (DAB) - Section 16 objection to jurisdiction - waiver of pre arbitral steps by conduct and invocation of arbitration clause - jurisdiction of the Arbitral Tribunal to adjudicate disputes - Whether the arbitration proceedings were maintainable despite non compliance with sub clause 67.1(d) of the COPA (pre arbitral DAB procedure) and whether the Arbitral Tribunal had jurisdiction. - HELD THAT: - The court examined sub clause 67.1(d) of the COPA, which required initial reference to a DAB and prescribed an appointing body or official to replace a DAB member if parties failed to agree. In the present case no appointing body or official named in the Appendix to Bid existed, so strict or complete compliance with sub clause 67.1(d) by the parties was impossible. The claimant's letter expressing willingness to continue the sole DAB member and its subsequent notice invoking arbitration were sent after the respondent failed to respond; the respondent thereafter appointed its nominee arbitrator and thereby invoked the arbitration clause. On these facts the respondent could not, after consciously invoking arbitration, successfully challenge jurisdiction on the ground of non compliance with the DAB procedure. The court accepted that where contractual pre arbitral machinery cannot be followed in its entirety because the mechanism to effectuate it does not exist, and the employer by conduct invokes arbitration, a plea of lack of jurisdiction based on non compliance with that machinery is not sustainable. The court found the Arbitral Tribunal's recall order (entertaining review) unobjectionable but held that the majority decision dismissing the arbitration for non compliance was vitiated by illegality and perversity on the stated facts and directed the Arbitral Tribunal to proceed to adjudicate the disputes on merits and publish award within a fixed time.

Majority decision of the Arbitral Tribunal dated November 22, 2018 holding the arbitration not maintainable for non compliance with sub clause 67.1(d) set aside; Arbitral Tribunal directed to decide the disputes on merits and publish award by June 2019.

Capacity of a joint venture to invoke arbitration and file appeal - Whether the appeal filed by the appellant joint venture is maintainable. - HELD THAT: - The court held that the joint venture, as the contracting claimant that invoked the arbitration clause and was the claimant before the Arbitral Tribunal, is entitled to maintain the appeal. Order XXX of the Code of Civil Procedure and authorities concerning a joint venture's status under unrelated statutes were found inapplicable to bar the present appeal; the court relied on contractual privity and the claimant's role in the arbitration to sustain maintainability.

The appeal by the joint venture is maintainable and therefore the challenge to the Arbitral Tribunal's majority decision could be heard.

Final Conclusion: The appeal succeeds. The majority decision of the Arbitral Tribunal dated November 22, 2018 setting aside the arbitration for alleged non compliance with the COPA's DAB procedure is quashed; the Arbitral Tribunal is directed to adjudicate the disputes on merits and to make and publish the award within the month of June 2019. The appeal and stay application are disposed of; no order as to costs.