TaxTMI Updates e-Newsletter
Mar 26,2022

Release of detained goods and conveyance subject to undertaking and bond - confiscation proceedings under Section-130 - proceedings at MOV-10 stage - deposit of penalty as condition for provisional release - non-interference with ongoing confiscation proceedings

Proceedings at MOV-10 stage - deposit of penalty as condition for provisional release - release of detained goods and conveyance subject to undertaking and bond - Whether the goods and the conveyance detained during transit could be released pending MOV-10 confiscation proceedings upon payment of penalty. - HELD THAT: - The Court declined to stay or quash the confiscation proceedings then at the MOV-10 stage but exercised its equitable jurisdiction to order provisional release of the goods and vehicle. The release was conditioned upon the writ-applicant having deposited a penalty amount (200% of the tax) and further required the filing of an undertaking on oath to the satisfaction of the authority and execution of a bond for any fine that may ultimately be levied in lieu of confiscation. The Court expressly permitted the Department to continue with confiscation proceedings while allowing provisional relief based on the security and undertaking provided by the applicant. [Paras 9, 10, 11]

Goods and conveyance ordered released subject to deposit already made, filing of an undertaking on oath to the satisfaction of the authority and execution of a bond for the amount that may be levied in-lieu of confiscation; confiscation proceedings not stayed.

Release of detained goods and conveyance subject to undertaking and bond - non-interference with ongoing confiscation proceedings - Whether connected writ-applications where penalty had been paid should be given similar provisional relief. - HELD THAT: - The Court extended the same provisional relief to the two connected matters in which the penalty had been paid. In those matters the goods and conveyances were to be released on the filing of an undertaking on oath to the satisfaction of the authority and upon execution of a bond for any amount that may be levied in-lieu of confiscation, mirroring the conditions applied in the lead matter. [Paras 11, 12]

Connected writ-applications disposed of by directing release of goods and conveyances on filing of undertaking on oath and execution of a bond; same conditions as in the lead matter.

Final Conclusion: Provisional release of detained goods and conveyances granted on payment of penalty already deposited and subject to undertaking on oath and execution of a bond; the Department is permitted to continue confiscation proceedings under Section-130, which have not been stayed or quashed.

Judicial review - writ of certiorari - writ of mandamus - quashing of executive circular as ultra vires - placement in Risky Exporter list and administrative review - administrative decision remand for fresh consideration - refund of IGST and provisional release under Section 54(6) of the CGST Act read with Rule 91 of the CGST Rules - claims under Duty Drawback and RODTEP schemes

Placement in Risky Exporter list and administrative review - administrative decision remand for fresh consideration - Representations made by the petitioner for removal from the Risky Exporter list and related verification were to be decided by respondent No.3 within a specified period. - HELD THAT: - The High Court did not adjudicate the merits of the petitioner's challenge to the impugned circular or substantively direct removal from the Risky Exporter list. Relying on the statement of the Assistant Solicitor General that the representations (Annexure P-10) would be decided in accordance with law, the Court directed respondent No.3 to decide the pending representations within two weeks from receipt of a copy of the order. The Court recorded the petitioner's election to withdraw the petition in the light of that assurance, and accordingly disposed of the petition and all pending applications. No substantive determination was made on the constitutionality of the circular, entitlement to IGST refund, or claims under the Duty Drawback and RODTEP schemes. [Paras 4, 5, 6]

Respondent No.3 to decide the petitioner's representations within two weeks; petition withdrawn and disposed of; no adjudication on merits of other reliefs sought.

Final Conclusion: The petition was withdrawn after the Court directed respondent No.3 to decide the petitioner's pending representations regarding its status as a Risky Exporter within two weeks; the Court did not decide the merits of the challenge to the impugned circular or the substantive claims for IGST refund and benefits under Duty Drawback/RODTEP, and the writ petition along with pending applications was disposed of.

Works contract - works contract service - composite supply - test of permanency - principal supply - transfer of property in goods - classification of machinery for preparing animal feeding stuffs

Works contract - test of permanency - transfer of property in goods - Supply of a functional cattle feed plant inclusive of supply of equipment with erection, installation and commissioning services without civil work is a works contract service. - HELD THAT: - The Authority applied the Supreme Court's "test of permanency" to the factual matrix and found that the machines and equipment supplied are assembled and fitted on foundations/structures at the customer's premises, embedded, aligned, grouted and permanently bolted only after purchaser's witness. The assembled and commissioned plant loses its separate identity and cannot be moved as such without dismantling; therefore the installation results in transfer of property in goods in the execution of the contract. Reliance was placed on the jurisprudence applying the permanency and marketability tests and on administrative guidance that items attached by foundation which cannot be dismantled without substantial damage are not movable. Consequently, notwithstanding the absence of separate civil works in the contract terminology, the practical effect fulfils the test of permanency and the supply is to be treated as a works contract service. [Paras 42, 43, 44, 45, 46]

Supply of cattle feed plant with erection, installation and commissioning but without separate civil work is a works contract service.

Works contract - composite supply - test of permanency - principal supply - Supply of a functional cattle feed plant inclusive of supply of equipment with erection, installation and commissioning services where civil work is involved is a works contract service. - HELD THAT: - The Authority examined the configuration where civil works are involved and held that the presence of civil works further supports the conclusion that the assembled plant is permanently attached and forms an immovable property. The contractual and factual obligations-civil drawings, foundation work, embedding and grouting of anchor bolts, bolting down of equipment, interlinking of parts, cabling and commissioning-demonstrate that the overall supply effects transfer of property in goods as part of the execution of works on immovable property. The Authority followed binding precedents on the test of permanency and treatment of composite contracts for supply plus installation as works contract, and rejected the contention that such supplies should be treated as composite supply of goods with ancillary services. [Paras 42, 43, 44, 45, 46]

Supply of cattle feed plant with erection, installation, commissioning and associated civil works is a works contract service.

Final Conclusion: Both questioned supplies - supply of cattle feed plant with erection, installation and commissioning services (with or without civil work) - are held to be works contract service supplies and accordingly classified as works contract service (SAC 998732) attracting GST at 18%.

Supply of services relating to conduct of examination - exemption under entry 66(b)(iv) of Notification No. 12/2017-CT (Rate) as amended - clarificatory amendment by Notification No. 14/2018-CT (Rate) - advance ruling jurisdiction under Section 95 and questions enumerated in Section 97(2) of the CGST Act - refund not covered within the scope of Section 97(2) CGST Act

Supply of services relating to conduct of examination - exemption under entry 66(b)(iv) of Notification No. 12/2017-CT (Rate) as amended - clarificatory amendment by Notification No. 14/2018-CT (Rate) - Supplies made by the applicant to State Educational Boards for services relating to conduct of examinations are eligible for exemption under the specified entry of the Notification. - HELD THAT: - On examination of the agreement for the years 2021 and 2022 and the nature of services supplied, the Authority found that the applicant supplies services relating to conduct of examinations to State Educational Boards. Such supplies fall within entry 66(b)(iv) of Notification No. 12/2017-CT (Rate). The Authority further held that the insertion of clause 3(iv) to the Explanation of the Notification by Notification No. 14/2018-CT (Rate) is clarificatory, making explicit that State and Central Educational Boards are to be treated as educational institutions for the limited purpose of services by way of conduct of examinations. Applying that clarification, the Authority concluded that the subject supplies are exempt from GST under the said entry as amended. [Paras 12, 13, 14, 15]

The supplies to the State Educational Board by way of services relating to conduct of examinations are exempt from GST under entry 66(b)(iv) of Notification No. 12/2017-CT (Rate) as amended.

Advance ruling jurisdiction under Section 95 and questions enumerated in Section 97(2) of the CGST Act - refund not covered within the scope of Section 97(2) CGST Act - Question seeking refund of taxes paid is not maintainable before the Authority under Section 97(2) CGST Act and was withdrawn by the applicant. - HELD THAT: - The Authority observed that advance rulings under Section 95 are confined to the categories of questions set out in Section 97(2) CGST Act, which include classification, applicability of notifications, determination of time and value of supply, admissibility of input tax credit, liability to pay tax, registration requirement, and whether an activity amounts to supply. The admissibility of refund does not fall within the enumerated categories. The applicant expressly withdrew the question on refund at the personal hearing. Consequently, the Authority held the refund question not maintainable under Section 97(2). [Paras 11]

The question on refund is not maintainable under Section 97(2) CGST Act and has been withdrawn by the applicant.

Final Conclusion: The Authority ruled that the applicant's supplies of services for conduct of examinations to the State Educational Board are exempt from GST under entry 66(b)(iv) of Notification No. 12/2017-CT (Rate) as amended; the applicant withdrew its separate claim for refund, and refund queries are not maintainable as advance ruling questions under Section 97(2) CGST Act.

Pure agent - Value of supply - Reimbursement excluded from taxable value - Rule 33 CGST Rules - conditions for exclusion of expenditure as pure agent - Separate indication in invoice - Supplies procured from third party in addition to services on supplier's own account

Pure agent - Reimbursement excluded from taxable value - Separate indication in invoice - Supplies procured from third party in addition to services on supplier's own account - Reimbursement of stipend paid to trainees by the applicant is not includible in the taxable value as the applicant acts as a pure agent of the Industry partner for that reimbursement. - HELD THAT: - The Authority applied Rule 33 of the CGST Rules and its Explanation. It found that (i) the applicant made payments of stipend to trainees on authorization of the Industry partner, (ii) such payments were separately indicated in the invoices raised by the applicant, and (iii) the services supplied by the trainees to the Industry partner constitute supplies procured from a third party in addition to services supplied by the applicant on its own account. The applicant also demonstrated that it received only the actual stipend amounts and did not retain any portion. On these facts the three conditions of Rule 33 and the Explanation were satisfied with respect to stipend, and therefore the stipends reimbursed to the applicant are excluded from the value of supply and not leviable to GST. [Paras 13]

Reimbursement of stipend is excluded from taxable value as it qualifies for treatment as a pure agent under Rule 33.

Pure agent - Value of supply - Rule 33 CGST Rules - clause (d) of Explanation - Reimbursement excluded from taxable value - Reimbursement of insurance premium charged by the applicant is includible in the taxable value because the applicant failed to prove that it received only the actual insurance cost incurred exclusively for trainees and thus does not satisfy the conditions of Rule 33. - HELD THAT: - Documentary material showed a single insurance policy taken by the applicant covering both trainees and the applicant's own employees; the invoice from the insurer related to the aggregate premium. The applicant was unable to correlate and substantiate the portion of premium exclusively attributable to trainees and to demonstrate that it recovered only that actual amount from the Industry partner. Consequently clause (d) of the Explanation to Rule 33 (receipt of only actual amount incurred) was not satisfied. The Authority rejected reliance on earlier Advance Rulings cited by the applicant because those rulings involved facts showing actual reimbursement. Given the absence of proof that reimbursement equalled the actual trainee-specific premium, the insurance amounts reflected in the applicant's invoices could not be excluded from the taxable value. [Paras 14, 15, 16, 17]

Insurance premium reimbursement is not excluded from taxable value and is leviable to GST.

Final Conclusion: The Authority rules that reimbursement of stipends disbursed to trainees is excluded from the applicant's taxable value as a pure agent under Rule 33, whereas reimbursement of insurance premium is not excluded because the applicant failed to establish that it recovered only the actual trainee-specific insurance cost; the insurance amount reflected in invoices is therefore taxable.

Classification of marine engines as parts of fishing vessels attracting concessional GST rate - due diligence and KYC requirement for entitlement to concessional rate - applicability of Schedule I entry for parts of goods of heading 8902 - distinction between engines classifiable as fishing-vessel parts and other marine engines

Classification of marine engines as parts of fishing vessels attracting concessional GST rate - applicability of Schedule I entry for parts of goods of heading 8902 - Whether marine engines supplied for use in fishing vessels qualify as parts of goods of heading 8902 and attract GST at the concessional rate of 5% - HELD THAT: - The Authority applied the clarification in CBIC Circular 52/26/2018-GST (reproduced in the order) which explains that fishing vessels are classifiable under heading 8902 and attract 5% GST, and that parts of goods of heading 8902 falling under any chapter also attract the 5% rate by virtue of the Schedule entry. On that basis the Authority held that a marine engine supplied as part of a fishing vessel may be regarded as a part of goods of heading 8902 and eligible for the concessional 5% rate where the supply is shown to be for a fishing vessel. [Paras 12, 13]

Marine engines supplied as parts of fishing vessels attract GST at 5% where they are within the scope of the Schedule I entry for parts of goods of heading 8902.

Due diligence and KYC requirement for entitlement to concessional rate - distinction between engines classifiable as fishing-vessel parts and other marine engines - What factual verification is required to treat a supplied marine engine as a part of a fishing vessel for the concessional rate and the rate applicable in other cases - HELD THAT: - The Authority recorded that the applicant conducts customer due diligence (KYC) and obtains documentary proof such as Certificate of Registry of Fishing Boat or Certificate of Licence of Fishing Boat from customers. The Authority held that where such due diligence establishes that the purchaser is a registered/licensed fisherman and the engine is supplied for use in a fishing vessel, the engine will be treated as part of the fishing vessel and taxed at 5%. Conversely, where such verification is not undertaken or the supply cannot be shown to be for a fishing vessel, the concessional classification is not available and the general rate applies. [Paras 11, 14]

Where the supplier has established, by due diligence and documentary proof of the customer's entitlement to operate a fishing boat, that the engine is supplied for a fishing vessel, GST at 5% applies; in the absence of such proof the engine is taxable at 28%.

Final Conclusion: The Authority ruled that determination of the GST rate on marine engines is case specific: engines shown by due diligence and documentary proof to be supplied for fishing vessels qualify as parts of heading 8902 and attract 5% GST, whereas other supplies of marine engines attract 28%.

Classification of goods under GST aligned with HSN - Textile products and articles for technical uses - End use / functional use classification - Section Note XI(1)(h) exclusion (woven/knitted fabrics impregnated/coated with plastic) - Chapter Note 7 inclusion of coated/laminated textile fabrics for technical purposes - Doctrine of harmonious construction - Principles of ejusdem generis and noscitur a sociis

Textile products and articles for technical uses - End use / functional use classification - Section Note XI(1)(h) exclusion (woven/knitted fabrics impregnated/coated with plastic) - Chapter Note 7 inclusion of coated/laminated textile fabrics for technical purposes - Doctrine of harmonious construction - Geomembrane manufactured by the applicant is classifiable under HSN 5911, tariff item 59111000. - HELD THAT: - The Authority applied the general rules of interpretation for HSN classification and examined the product against the Section and Chapter Notes. Although Section Note XI(1)(h) excludes woven fabrics impregnated or coated with plastic from the Textile Section, Chapter Note 7 expressly brings within Heading 5911 textile products and articles used for technical purposes, including textile fabrics coated or laminated with other material. The Authority gave weight to end use/functional use and accepted the technical applications of the HDPE reinforced Geomembrane (e.g. pond lining with Biofloc technology). It found that the strips woven from HDPE met the Section XI weaving test and that the product consequently satisfied Chapter Note 7(1)(a) as a coated textile fabric used for technical purposes. Applying harmonious construction between the Notes, the Authority held that Geomembrane is a textile article within Heading 5911 and that the Chapter 59 provisions and relevant HSN description govern classification. [Paras 39]

Geomembrane is a textile article for technical uses and is classifiable at HSN 5911 (59111000).

Classification of goods under GST aligned with HSN - Section Note XI(1)(h) exclusion (woven/knitted fabrics impregnated/coated with plastic) - Principles of ejusdem generis and noscitur a sociis - Woven Tarpaulin manufactured by the applicant is not a textile article under Heading 5911 and is classifiable as a plastic tarpaulin under HSN 3926 (tariff item 39269099). - HELD THAT: - The Authority examined the nature and uses of the tarpaulin and found its uses to be general (covering and protecting objects; packing) rather than technical. The product is manufactured from HDPE and is coated/laminated with plastic; accordingly Section Note XI(1)(h) excludes it from the Textile Section. The Authority observed that tarpaulin is specifically referenced in other headings (HSN 3926 for plastic tarpaulins and HSN 6306 for certain textile tarpaulins) and rejected classification under Chapter 59. Applying ejusdem generis and noscitur a sociis to the context of Heading 6306, the Authority found the applicant's tarpaulin not to be of the same kind as the items surrounding tarpaulin in that heading (awnings, sunblinds), and therefore not classifiable there. In view of the product's plastic composition and general end uses, the Authority held it to be a plastic article classifiable under HSN 3926. [Paras 40, 41, 42, 43, 44]

Tarpaulin is a plastic article and is classifiable at HSN 3926 (39269099).

Final Conclusion: The Authority ruled that the applicant's Geomembrane is a textile article for technical uses and is classifiable under HSN 5911 (59111000), whereas the applicant's Tarpaulin is a plastic article and is classifiable under HSN 3926 (39269099).

Composite supply of works contract - predominantly meant for use other than for commerce, industry, or any other business or profession - classification under Notification No. 11/2017-CT (Rate) - sub-contractor to the main contractor - applicability of GST rate 12% or 18%

Composite supply of works contract - predominantly meant for use other than for commerce, industry, or any other business or profession - classification under Notification No. 11/2017-CT (Rate) - Subject supply falls under Entry 3(vi) of Notification No. 11/2017-CT (Rate). - HELD THAT: - The Authority examined the conditions for coverage under serial number 3(vi): (i) supply must be a composite works contract, (ii) supplied to Central/State/UT/local authority/Government Authority or Government Entity, and (iii) the civil structure/original works must be predominantly meant for use other than commerce, industry or any other business or profession. The Service Order in the present case evidences supply of a Toll Management System (TMS) by the applicant to a private entity (Adani) and not to any government entity. Further, the activity of toll collection and the nature of the TMS are commercial in character and therefore do not satisfy the requirement of being predominantly for use other than commerce, industry or any other business or profession. On these findings the Authority concluded that the conditions of entry 3(vi) are not satisfied in the subject matter. [Paras 9, 13]

Not covered by Entry 3(vi) of Notification No. 11/2017-CT (Rate).

Composite supply of works contract - classification under Notification No. 11/2017-CT (Rate) - Subject supply falls under Entry 3(iv) of Notification No. 11/2017-CT (Rate). - HELD THAT: - The Authority set out the qualifying conditions for entry 3(iv): the supply must be a composite works contract by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of (a) a road, (b) a bridge, (c) a tunnel, or (d) a terminal for road transportation for use by the general public. The Service Order relates only to supply, erection and commissioning of a Toll Management System on an already constructed national highway stretch and does not involve construction of the road, bridge, tunnel or terminal itself nor does the TMS perform the broader functions (such as providing real-time traffic, pollution or weather information) that would characterise the listed infrastructure. The Authority therefore found that the supply does not satisfy the conditions of entry 3(iv). [Paras 10, 13]

Not covered by Entry 3(iv) of Notification No. 11/2017-CT (Rate).

Sub-contractor to the main contractor - Composite supply of works contract - classification under Notification No. 11/2017-CT (Rate) - applicability of GST rate 12% or 18% - Services rendered by the applicant as a sub-contractor are covered by Entry 3(ix) such that GST would be at 12%, or alternatively not covered and taxable at 18%. - HELD THAT: - The Authority considered whether Entry 3(ix), which covers composite works contracts provided by a sub-contractor to a main contractor supplying services specified in item (iii) or item (vi) to government entities, applies. The applicant's contract is with Adani (a private entity) for supply of TMS only; the applicant's contract was not a contract for road construction and the subject supply was not held to fall under entry 3(vi). Consequently, the preconditions for entry 3(ix) are not met in this case. Having ruled out entries 3(iv), 3(vi) and 3(ix) on the facts, the Authority determined that the subject supply is not entitled to the concessional rate and is leviable at the applicable standard rate. [Paras 11, 13]

Entry 3(ix) is not attracted; GST is leviable at 18% under the residual entry (Sr. No. 3(xii) of Notification No. 11/2017-CT (Rate)).

Final Conclusion: The Authority ruled that the supply of the Toll Management System by the applicant to Adani does not qualify under Entries 3(iv), 3(vi) or 3(ix) of Notification No. 11/2017-CT (Rate); accordingly the supply is not eligible for the concessional 12% rate and is taxable at 18% under the applicable entry of the Notification.

Advance Ruling - Maintainability of application under Section 97(2) CGST Act - Admissibility of input tax credit - Determination of liability to pay tax - Binding effect of advance ruling on applicant and jurisdictional officer

Advance Ruling - Maintainability of application under Section 97(2) CGST Act - Admissibility of input tax credit - Determination of liability to pay tax - Binding effect of advance ruling on applicant and jurisdictional officer - The application for advance ruling by M/s Acme Holding is not maintainable as the questions raised do not fall within the matters enumerated in Section 97(2) CGST Act and is therefore rejected. - HELD THAT: - The Authority examined the applicant's questions against the catalogue of matters amenable to advance ruling under Section 97(2), noting that advance rulings are confined to issues such as classification, applicability of notifications, time and value of supply, admissibility of input tax credit, determination of liability to pay tax, requirement of registration and whether a particular act amounts to supply. The Authority found that the applicant primarily sought a ruling on its customer's entitlement to claim input tax credit (Question 3), which cannot be binding on the customer and thus falls outside the applicant-specific scope of advance ruling. The applicant thereafter withdrew Questions 2 and 3 and identified Question 1 (validity of the invoice) as its principal question; however, the Authority concluded that the invoice validity issue, as framed, did not fit within the matters specified in Section 97(2). In addition, the Authority reiterated that an advance ruling, as defined, binds only the applicant and the concerned jurisdictional officer, and cannot be issued to determine third-party rights. For these reasons the application was held not maintainable and rejected. [Paras 10, 11, 12, 13]

Application for advance ruling is not maintainable and is rejected.

Final Conclusion: The Advance Ruling application filed by M/s Acme Holding is rejected as not maintainable because the questions raised do not fall within the matters specified in Section 97(2) CGST Act; the Authority accordingly refused to pronounce a ruling.

Classification under GST Tariff aligned with the HSN - General Interpretative Rules for GST Tariff Classification - HSN Explanatory Notes - Fitment Committee and GST Council decision on rate and classification - Thermally processed fruit beverages versus carbonated fruit beverages

FSSAI standards not determinative of GST classification - classification under GST Tariff aligned with the HSN - Whether the Food Safety and Standards Regulations (FSSAI) determine classification of the applicant's beverages under the GST Tariff - HELD THAT: - The Authority held that classification under the GST scheme must follow the GST Tariff and HSN-based General Interpretative Rules and that FSSAI standards, being framed under a different statute for food-safety purposes, are not authoritative for GST classification. While FSSAI regulations may be relevant as background technical material, they do not have power under the GST scheme to direct classification. The Authority relied on the legal position that definitions in one statute with a different object cannot be mechanically applied to another statute and recorded that the burden of classification is on the Revenue, which did not appear in this case. [Paras 41, 42, 44]

FSSAI regulations cannot determine GST classification; classification must be made under the GST Tariff/HSN framework.

HSN Explanatory Notes - common parlance and product characteristics - classification under GST Tariff aligned with the HSN - Classification of 'Apple Cola Fizzy' and 'Malt Cola Fizzy' under the Tariff headings 2202 10 and 2202 99 - HELD THAT: - On the facts, the goods contain water, sugar, apple juice concentrate (1.9% equivalent to 12.7% reconstituted), added flavours and are aerated with carbon dioxide, bottled in airtight containers. The Authority examined HSN Explanatory Notes to heading 2202 and found that the ingredients and presentation satisfy the description of aerated/flavoured waters and beverages (subheading 2202.10) including beverages such as cola that are often aerated with CO2. Although the goods also prima facie satisfy the description of fruit pulp or fruit juice based drinks (2202.99.20), the Authority considered the competing headings and applied the guidance of the Fitment Committee and GST Council which classified carbonated beverages with fruit juice under 2202.10. The Authority therefore treated the products as carbonated beverages with fruit juice. [Paras 47, 50, 51, 52, 56]

Apple Cola Fizzy and Malt Cola Fizzy are carbonated beverages with fruit juice classifiable under HSN 2202 10 (22021090).

Fitment Committee and GST Council decision on rate and classification - GST rate and compensation cess applicability - Applicable GST rate and compensation cess on the classified goods - HELD THAT: - The Authority noted the Fitment Committee's recommendation and the GST Council's approval classifying carbonated beverages with fruit juice under HSN 2202.10, and the consequent rate entries in the GST rate schedule. Relying on that administrative classification and the Council's decision (whose role as the deliberative forum for GST rates was recognised), the Authority applied the notified rates corresponding to HSN 2202.10 for carbonated beverages with fruit juice. [Paras 53, 54, 55, 57]

GST leviable at 28% and GST Compensation Cess leviable at 12% on the goods.

Final Conclusion: Apple Cola Fizzy and Malt Cola Fizzy are ruled to be carbonated beverages with fruit juice classifiable at HSN 22021090; GST is leviable at 28% and Compensation Cess at 12%; FSSAI regulations do not by themselves determine GST classification and HSN rules together with the Fitment Committee/GST Council decision govern the outcome.

Levy of GST on amounts collected on behalf of a service provider - Supply to employees within employer-employee relationship - Collection of charges without retention of profit (pure collection agency)

Levy of GST on amounts collected on behalf of a service provider - Supply to employees within employer-employee relationship - Collection of charges without retention of profit (pure collection agency) - GST is not leviable on the amount representing the employees' portion of canteen charges collected by the applicant and paid to the Canteen Service Provider. - HELD THAT: - The applicant arranged a canteen for its employees which is operated by an independent Canteen Service Provider. Part of the canteen charges is borne by the employer and the remaining part by employees. The employees' portion is collected by the applicant and remitted to the Canteen Service Provider. The applicant does not retain any profit margin in the activity of collecting the employees' portion. In these circumstances the amount collected by the applicant, being a mere collection and remittance of employees' contribution towards a facility provided exclusively to employees within the employer-employee relationship and without any element of profit or supply by the applicant, does not attract GST at the hands of the applicant. The Authority therefore declined to treat the collected employees' portion as a taxable supply by the applicant. [Paras 5]

GST is not leviable on the employees' portion of canteen charges collected by the applicant and paid to the Canteen Service Provider.

Final Conclusion: The Advance Ruling holds that the employer's collection and payment to the Canteen Service Provider of the employees' share of canteen charges, where no profit is retained by the employer, does not attract GST at the employer's hands.

Validity of assessment order in the name of the amalgamating company - assessment framed in the name of the non-existent company - procedural defect - HELD THAT:- High Court has followed the judgment of this Court in Principal Commissioner of Income Tax, New Delhi vs Maruti Suzuki India Limited [2019 (7) TMI 1449 - SUPREME COURT] the revenue seeks to make a factual distinction between the position as it obtained in that case with the facts of the present case. Reading the order of the High Court, we do not find that any such submission has been urged before the High Court.

Department would be advised to file a review petition before the High Court bringing the distinguishing features on the record of the High Court. We make no expression of opinion on that aspect. Granting liberty to the petitioners to pursue appropriate proceedings in accordance with law including by way of a review before the High Court, the Special Leave Petition is disposed of.

Deduction under Section 80P - Applicability of Section 80P(4) to cooperative credit societies - Writ petitions versus statutory remedy of appeal - Duty of appellate authority to decide appeals on merits in light of binding precedent - Follow and give effect to Supreme Court precedent

Writ petitions versus statutory remedy of appeal - Entitlement of the Revenue to insist that assessees pursue statutory appeals rather than seeking relief under Article 226 where statutory appeals have been filed and are pending. - HELD THAT: - The Court observed that assessment orders have been passed and statutory appeals against those orders are pending before the appellate authority. Rather than adjudicating the merits in writ petitions, the Court directed that the respondents should press all contentions, including eligibility under Deduction under Section 80P, before the appellate authority. The appellate authority was directed to consider and decide the pending appeals on merits and in accordance with law. The High Court therefore refrained from finally deciding the substantive tax liability in writ petitions and channelled the dispute to the statutory appellate process for adjudication. [Paras 10]

Respondents to raise all contentions in the pending statutory appeals and the appellate authority to decide those appeals on merits and in accordance with law.

Deduction under Section 80P - Applicability of Section 80P(4) to cooperative credit societies - Duty of appellate authority to decide appeals on merits in light of binding precedent - Follow and give effect to Supreme Court precedent - Whether the claim for deduction under Section 80P made by cooperative credit societies should be considered by the appellate authority in the light of higher judicial decisions. - HELD THAT: - The Court noted that a Division Bench of this Court had held that cooperative credit societies are entitled to the benefit of Deduction under Section 80P, and that the Supreme Court in subsequent proceedings permitted withdrawal of an appeal leaving questions of law open. The Court also took cognisance of the Supreme Court decision in Mavilayi Service Co-operative Bank Ltd. which articulated that Section 80P is to be read liberally in favour of assessees and clarified the scope of Section 80P(4). In view of these precedents, the High Court directed that the appellate authority must take these decisions into account while considering the statutory appeals and determine the respondents' entitlement to the deduction on merits and in accordance with law. [Paras 7, 8, 10]

Appellate authority to examine and decide the respondents' claim under Section 80P on merits, having regard to the Division Bench and Supreme Court decisions referred to by the Court.

Final Conclusion: Writ appeals by the Revenue dismissed with direction that respondents shall pursue all contentions, including the claim under Section 80P, in the pending statutory appeals; the appellate authority is directed to decide those appeals on merits and in accordance with law, taking into account the cited Division Bench and Supreme Court decisions. No costs.

Addition as undisclosed income - search and seizure under section 132 - CBDT Instruction No.1916 on seizure of jewellery of married women - rejection of explanation and charging seized articles as income - concurrent finding of fact and impermissibility of High Court re-appreciation of evidence

Addition as undisclosed income - rejection of explanation and charging seized articles as income - CBDT Instruction No.1916 on seizure of jewellery of married women - concurrent finding of fact and impermissibility of High Court re-appreciation of evidence - Whether the addition of Rs.4,07,880/- representing the value of 887 grams of jewellery, made after search and seizure, was rightly confirmed as undisclosed income despite the assessee's explanation of gifts and the CBDT guideline on seizure of jewellery of married women. - HELD THAT: - The Court recorded that there was no dispute about the search and seizure of 1,387 grams of jewellery. The assessee claimed portions as gifts from relatives, but produced no bills, documents or corroborative material and relied only on her oral statement. The assessing officer, after allowing 500 grams in view of the CBDT instruction, treated the balance 887 grams as undisclosed income and made the addition. The CIT(A) confirmed that addition and the Tribunal affirmed, noting absence of any evidence to substantiate the claim of gifts or showing disclosure by the donors. The High Court held that in the absence of documentary evidence the authorities were entitled to reject the explanation and to treat the value of the jewellery as the assessee's income. The Court emphasised that concurrent findings of fact based on the material on record cannot be lightly interfered with and that re-appreciation of evidence or substitution of concurrent findings by the High Court is impermissible, relying on the principle articulated in P. Mohanakala. The CBDT instruction limiting seizure to 500 grams in the case of married women was acknowledged, and the assessing officer's allowance accordingly was noted, but the remaining seized jewellery was properly charged as undisclosed income in the absence of proof of genuine gifts. [Paras 8, 9, 10, 11, 12]

The concurrent factual findings upholding the addition of Rs.4,07,880/- as undisclosed income were correct and are not liable to be interfered with.

Final Conclusion: The tax case appeal is dismissed; the Tribunal's confirmation of the addition of the value of 887 grams of jewellery as undisclosed income is upheld and there is no substantial question of law warranting interference.

Ex parte dismissal - Section 250(6) recording reasons and deciding on merits - Principles of natural justice - Remand for fresh adjudication

Ex parte dismissal - Section 250(6) recording reasons and deciding on merits - Whether the appellate order of the CIT(A) dismissing the assessee's appeal ex parte in limine without discussing the issues on merits is sustainable. - HELD THAT: - The Tribunal found that the CIT(A) dismissed the appeal ex parte in limine after issuing two hearing notices but without adjudicating the issues raised by the assessee on merits. Reliance is placed on the requirement under Section 250(6) recording reasons and deciding on merits, which obliges the CIT(A) to record reasons and decide the appeal on the issues raised. An ex parte dismissal without a reasoned consideration of the merits was held to be unsustainable. Although the assessee bore responsibility to be vigilant after filing the appeal, that circumstance did not validate the absence of a reasoned order by the CIT(A).

The appellate order of the CIT(A) dismissing the appeal ex parte without discussing the merits is set aside as unsustainable.

Principles of natural justice - Remand for fresh adjudication - Whether the matter should be restored to the file of the CIT(A) for fresh adjudication and what directions should be given on remand. - HELD THAT: - Both parties and the Tribunal concurred that the proper course is to remit the matter for fresh consideration. The Tribunal directed that on remand the CIT(A) shall give proper and adequate opportunity of hearing in accordance with the Principles of natural justice, admit and consider the evidences/explanations furnished by the assessee in accordance with law, and pass a reasoned and speaking order addressing all issues raised in the appeal. The remand is for de novo adjudication of the issues on merits rather than mere quantification or limited verification.

Matter is restored to the file of the CIT(A) for fresh, de novo adjudication on merits with directions to afford hearing, admit evidence in accordance with law, and pass a reasoned and speaking order.

Final Conclusion: The Tribunal set aside the ex parte appellate order of the CIT(A) for AY 2013-14 as unsustainable for want of a reasoned consideration under Section 250(6), and remitted the matter to the CIT(A) for fresh adjudication on merits in accordance with the principles of natural justice; the appeal is allowed for statistical purposes.

Undisclosed income - penalty under section 271AAB of the Income-tax Act, 1961 - search under section 132 of the Income-tax Act, 1961 - books of account or other documents maintained in the normal course - voluntary disclosure during search under section 132(4) - time available till end of relevant assessment year to record income

Undisclosed income - penalty under section 271AAB of the Income-tax Act, 1961 - search under section 132 of the Income-tax Act, 1961 - books of account or other documents maintained in the normal course - voluntary disclosure during search under section 132(4) - time available till end of relevant assessment year to record income - Whether penalty under section 271AAB was sustainable in respect of commission income offered during search where the amount was not discovered from books or other documents during the search and the assessee had time till the end of the relevant assessment year to record the income. - HELD THAT: - The Tribunal held that for an amount to qualify as "undisclosed income" under clause (c)(i) of section 271AAB it must be an item found in the course of a search which (A) had not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to the specified previous year, or (B) otherwise not been disclosed to the revenue before the date of search. In the present case the commission income was not, in fact, discovered from any diary, note book or other document seized or found during the search; the only material was the assessee's voluntary admission under section 132(4) and subsequent offering of the amount in the return. The assessee, an individual not required to maintain books under section 44AA, had time until 31.03.2013 (end of the relevant assessment year) to record the income in other documents. In the absence of any discovery/seizure of material during the search which revealed the commission income, and given the time available to the assessee to record the same, the Tribunal concluded that the disclosure did not fall within the statutory definition of "undisclosed income" in clause (c)(i) of section 271AAB. The Tribunal further adopted the reasoning of its earlier decision in the group case of M/s. Rashmi Metaliks, applying that precedent mutatis mutandis to uphold deletion of the penalty by the CIT(A).

Penalty under section 271AAB cannot be sustained in respect of the declared commission for AY 2013-14; the CIT(A)'s deletion of the penalty is upheld.

Final Conclusion: The revenue's appeal is dismissed and the order of the CIT(A) deleting penalty under section 271AAB for AY 2013-14 is sustained.

Penalty under section 271AAA - Conditions of section 271AAA(2) - Definition of "undisclosed income" in the Explanation to section 271AAA - Judicial discretion in levy of penalty

Penalty under section 271AAA - Conditions of section 271AAA(2) - Judicial discretion in levy of penalty - Whether penalty under section 271AAA was leviable in respect of the amount of Rs. 3,38,57,991/- which the assessee admitted and substantiated during search and included in assessment. - HELD THAT: - The Tribunal examined subsection (1) and subsection (2) of section 271AAA and noted that levy of penalty under subsection (1) is discretionary ('may') and that subsection (2) exempts the assessee from subsection (1) if the three conditions in clauses (i) to (iii) are satisfied. On the facts, the assessee, through the statement recorded under section 132(4) and the disclosure petition, admitted undisclosed income of Rs. 3.78 crores and had specifically identified and substantiated Rs. 3,38,57,991/- as arising from false commodity and saree loss (supported by seized documents BSL/05 & BSL/06). The AO accepted these amounts in the assessment (with adjustments) and the assessee paid tax with interest. Applying the statutory test, the Tribunal held that the conditions in section 271AAA(2) were met in respect of Rs. 3,38,57,991/-, so the AO erred in levying penalty on that portion; the discretion to levy penalty could not be exercised against amounts qualifying for exemption under subsection (2). [Paras 8]

Penalty under section 271AAA cannot be levied in respect of Rs. 3,38,57,991/- because the assessee satisfied the conditions of section 271AAA(2).

Definition of "undisclosed income" in the Explanation to section 271AAA - Penalty under section 271AAA - Whether the deficit amount of Rs. 40,00,000/- (accepted by the AO in assessment) constituted 'undisclosed income' within the meaning of the Explanation to section 271AAA so as to attract penalty. - HELD THAT: - The Tribunal analysed the statutory Explanation to section 271AAA which defines 'undisclosed income' by reference to discoveries in the course of search (money, bullion, jewellery, entries, documents or transactions not recorded on or before the date of search). The Rs. 40 lakhs was a conditional, cautious offer in the disclosure petition to cover any contingencies or discrepancies and was not supported by any seized material or specific entry/document discovered during the search identifiable as undisclosed income. The AO's addition of Rs. 40 lakhs rested on the broad statement of admission rather than on any material falling within the statutory description. Therefore the Rs. 40 lakhs did not qualify as 'undisclosed income' for the purposes of section 271AAA and penalty under that section could not be sustained in respect of that amount. [Paras 9]

The Rs. 40,00,000/- does not fall within the definition of 'undisclosed income' under section 271AAA and no penalty under section 271AAA can be sustained on that amount.

Final Conclusion: The appeal is allowed: penalty under section 271AAA is not sustainable-no penalty is leviable in respect of Rs. 3,38,57,991/- as the assessee satisfied section 271AAA(2), and the Rs. 40,00,000/- does not qualify as 'undisclosed income' under the Explanation to section 271AAA.

Validity of penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - explanation 7 to section 271(1)(c) vis-a -vis international transactions - presumptive taxation under section 44BBB - permanent establishment (PE) under Article 5 of the India-Germany Tax Treaty - taxation as fees for technical services under Article 12 of the India-Germany Tax Treaty - bonafide belief or misconceived claim as defence to penalty - identity of returned income and assessed income as relevant factor in penalty assessment

Validity of penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - explanation 7 to section 271(1)(c) vis-a -vis international transactions - presumptive taxation under section 44BBB - bonafide belief or misconceived claim as defence to penalty - identity of returned income and assessed income as relevant factor in penalty assessment - Whether penalty under section 271(1)(c) read with explanation 7 is sustainable where the assessee declared the same income as was ultimately assessed, relied on presumptive taxation under section 44BBB and a certificate under section 197, and acted under a bonafide belief regarding PE and treaty characterisation of receipts. - HELD THAT: - The Tribunal found that the assessee consistently declared the same income which was ultimately assessed and that the dispute related to the rate and characterisation of income (presumptive basis under section 44BBB and treaty treatment) rather than concealment of income. The assessee had acted on a bona fide belief that no permanent establishment arose in India (Article 5) and that amounts were taxable as fees for technical services (Article 12), and had a certificate under section 197 supporting lower withholding. The Tribunal relied on the principle that a claim which is not sustainable in law does not ipso facto amount to furnishing inaccurate particulars or deliberate concealment - accepting the reasoning of Reliance Petro Products Pvt. Ltd and the Tribunal's decision in Nortel Networks Ltd which treated similar disputes over tax computation/rates as not attracting penalty where returned income equals assessed income. Applying these authorities and the facts that explanations were furnished and not shown to be mala fide or dishonest, the Tribunal held that the prerequisites for levy of penalty under section 271(1)(c) were not satisfied and the penalty could not be sustained. [Paras 9, 11]

Penalty under section 271(1)(c) read with explanation 7 deleted; appeals allowed.

Final Conclusion: The Tribunal allowed the appeals for assessment years 2004-05 and 2005-06, deleting the penalty imposed under section 271(1)(c) (read with explanation 7) on the ground that the assessee had declared the same income as assessed, acted on a bona fide belief (including reliance on presumptive taxation and a section 197 certificate) and there was no concealment or furnishing of inaccurate particulars warranting penalty.

Deduction under section 54B - Definition of agriculture to include plantations and trees - Indexed cost of improvement under section 55 - remand for verification

Deduction under section 54B - Definition of agriculture to include plantations and trees - Allowability of deduction under section 54B against long term capital gain on sale of the agricultural land at Gat No. 55/1B, Chunchale, Dist. Nasik - HELD THAT: - Section 54B requires that the land transferred was being used by the assessee for agricultural purposes in the two years immediately preceding the date of transfer and that the assessee purchased other agricultural land within two years thereafter. The Department did not dispute the second condition and the Assessing Officer's denial of the deduction rested solely on the finding that agricultural operations were not carried out during the requisite two-year period. The Tribunal examined the 7/12 extracts, which recorded extensive plantations (including 350 teak trees and other trees) on the land from F.Y. 2006-07 to 2011-12, noted the declaration of agricultural income in the return, and relied on the Supreme Court's construction that 'agriculture' includes plantations and forest products. The Tribunal found the AO's factual conclusion-that the land was barren and not used for agriculture-contrary to the 7/12 extracts and the assessee's evidence, and further held that the CIT(A)'s contrary factual findings were erroneous. Since the statutory prerequisite in section 54B (use for agricultural purposes in the two years preceding transfer) was satisfied on the material on record, no further consideration (such as the purchaser's intention) was relevant to allow the exemption. [Paras 9]

Deduction under section 54B allowed; the finding of the CIT(A) denying the deduction is reversed.

Indexed cost of improvement under section 55 - remand for verification - Claim for indexed cost of improvement included under cost of acquisition and whether the disallowed amount of Rs. 7,31,847/- should be admitted - HELD THAT: - The Assessing Officer disallowed the claimed component of indexed improvement cost for lack of verifiable details. The CIT(A) did not adjudicate the issue. The assessee produced a contractor's confirmation letter which reached the AO after the assessment order was passed and sought verification. In the interest of justice and on concession by the Department, the Tribunal directed that the issue be restored to the file of the AO for verification and re adjudication in accordance with law, observing that the AO must give the assessee a reasonable opportunity of hearing and verify the confirmation and supporting evidence. [Paras 11]

Issue remanded to the Assessing Officer for verification and re-adjudication; ground allowed for statistical purposes.

Final Conclusion: The appeal is partly allowed: the deduction under section 54B is granted on the facts and material on record; the claim for indexed cost of improvement under section 55 is remitted to the Assessing Officer for verification and fresh adjudication in accordance with law.

Deduction under section 80IA(4) - developer versus contractor distinction - consistency and precedential application of Tribunal's earlier decisions in assessee's own case - Explanation to section 80IA and its applicability - application of contractual risk, finance and expertise test

Deduction under section 80IA(4) - developer versus contractor distinction - consistency and precedential application of Tribunal's earlier decisions in assessee's own case - application of contractual risk, finance and expertise test - Allowability of deduction claimed by the assessee under section 80IA(4) of the Income-tax Act for A.Y. 2012-13 and A.Y. 2013-14 - HELD THAT: - The Tribunal examined whether the assessee, engaged in infrastructure projects (water supply, irrigation, sewerage, roads), was a "developer" entitled to deduction under section 80IA(4) or merely a "contractor" excluded by the Explanation. The earlier decisions in the assessee's own case for A.Ys 2003-04 to 2011-12, placed on record and followed by the first appellate authority, had consistently held that where the assessee procures projects from the State, yet brings its own finance, technical expertise, plant and machinery, employees, undertakes design/development/construction, furnishes security and assumes defect-correction and other liabilities, such contracts cannot be treated as simple works contracts and the assessee operates as a developer. The Tribunal adopted the same legal test: a "contractor" acts merely under directions and dependence on government funding without independent application of mind or provision of finance/expertise, whereas a "developer" independently visualises, finances and executes the project using its own resources and expertise. Finding the facts for the two assessment years identical to those previously considered and no contrary binding precedent or fresh material placed by Revenue, the Tribunal upheld the CIT(A)'s reliance on the coordinate decisions and concluded that the assessee qualifies as a developer for the purposes of section 80IA(4). [Paras 8, 9, 10, 11]

Deduction under section 80IA(4) is allowable to the assessee for A.Y. 2012-13 and A.Y. 2013-14; Revenue's appeals dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeals and upheld the CIT(A)'s allowance of deduction under section 80IA(4) for A.Y. 2012-13 and A.Y. 2013-14, following consistent prior decisions in the assessee's own case that the assessee meets the developer criteria (provision of finance, expertise and assuming project risks) rather than being a mere contractor.

Allowability of provision as deduction - provision for known liability - deduction under section 37(1) - deduction on actual payment basis - prohibition of double deduction - remand for fresh quantification and verification - accounting norms governing creation and reversal of provisions

Provision for known liability - allowability of provision as deduction - remand for fresh quantification and verification - Deductibility of Medical Check-up Provision (MCP) created by the assessee for A.Y. 2013-14 - HELD THAT: - The Tribunal found that the assessee created MCP contemporaneously with sale of health packages to meet an ascertained liability payable to empanelled hospitals and that detailed package-wise working was supplied only before the CIT(A) and not to the AO. Because the AO did not have those particulars when making the addition and the CIT(A) deleted the addition without obtaining a remand report from the AO, the Tribunal considered it appropriate to set aside the assessment on this issue and remit to the AO for fresh adjudication. The AO is directed to allow deduction of the MCP to the extent properly determined on the basis of number and type of packages sold in the year, reduced by reversals on expiry of the three year period for non utilisation; the assessee must place on record the necessary package-wise details to enable correct quantification. [Paras 3]

Set aside and remitted to the AO for fresh determination of deductible MCP for A.Y. 2013-14, with directions to allow deduction consistent with package-wise sales reduced by three year reversals and after giving the assessee opportunity to furnish necessary details.

Allowability of provision as deduction - deduction on actual payment basis - prohibition of double deduction - accounting norms governing creation and reversal of provisions - Treatment and quantum of deduction in respect of Escrow Disbursement Provision (EDP) for A.Y. 2013-14 - HELD THAT: - The Tribunal held that the manner in which the assessee created and retained the EDP (without writing back excess provision when CDs fail to qualify for incentive) was not in accordance with proper provisioning principles and resulted in an ever increasing outstanding provision. While the AO's disallowance of the entire closing balance was not sustainable as a mechanical addition, the Tribunal concluded that, in the peculiar factual matrix, deduction for escrow/incentive should be allowed on actual payment basis in the year of payment, subject to avoiding double deduction for amounts already deducted earlier when provisions were created. Consequently the matter was set aside and remitted to the AO to determine deduction by bifurcating payments made in the year between (a) payments in respect of packages sold during the year (allowable on payment basis) and (b) payments in respect of packages sold in earlier years (not again deductible to the extent already allowed earlier). The Tribunal illustrated the proper test by reference to the assessee's own incentive payment records and directed the AO to give the assessee opportunity of hearing while recomputing allowable deduction. [Paras 16, 20]

Set aside and remitted to the AO to recompute allowable deduction for EDP in A.Y. 2013-14 on the basis of actual payments in the year, after excluding amounts attributable to packages for which deduction was already allowed in earlier years; assessee to be heard and to produce supporting records.

Allowability of provision as deduction - deduction on actual payment basis - remand for fresh quantification and verification - prohibition of double deduction - Treatment and quantum of deduction in respect of Escrow Disbursement Provision (EDP) for A.Y. 2014-15 - HELD THAT: - The facts for A.Y. 2014-15 being mutatis mutandis similar to A.Y. 2013-14, the Tribunal applied the same legal principle: deduction in respect of escrow/incentive payments is to be allowed on actual payment basis in the year of payment, but payments relating to packages for which deduction was already allowed in earlier years cannot be allowed again. The Tribunal therefore set aside the CIT(A)'s order and remitted the matter to the AO to effect the computation for A.Y. 2014-15 accordingly, allowing the assessee adequate opportunity of hearing. The Tribunal additionally clarified that, while remitting, it cannot direct enhancement beyond the disallowance already made by the AO; any disallowance in excess of the AO's figure cannot be directed by the Tribunal. [Paras 22]

Set aside and remitted to the AO to recompute allowable deduction for EDP in A.Y. 2014-15 on payment basis subject to adjustment for prior deductions; AO to give opportunity of hearing and Tribunal's power to enhance disallowance is limited.

Final Conclusion: The Tribunal allowed the appeals for statistical purposes by setting aside the impugned assessments on the disputed provision claims: (i) MCP for A.Y. 2013-14 remitted to the AO for fresh quantification on package wise basis with three year reversal adjustments; and (ii) EDP for A.Ys. 2013-14 and 2014-15 remitted to the AO to allow deduction only to the extent of actual incentive payments in the year after excluding amounts already allowed earlier, subject to opportunity of hearing and the Tribunal's limitation against directing enhancement beyond the AO's disallowance.

Deduction under section 36(1)(va) - employees' contribution to provident fund and ESI - timing of deposit - deposit before due date of filing return vs deposit by statutory due date - prospective application of Finance Act, 2021 amendment/explanation - binding effect of jurisdictional High Court decisions on appellate authorities

Deduction under section 36(1)(va) - employees' contribution to provident fund and ESI - timing of deposit - deposit before due date of filing return vs deposit by statutory due date - Whether employees' contribution to ESI and PF, though deposited after the statutory due date but before the due date of filing the return under section 139(1), is allowable as a deduction under section 36(1)(va) for assessment year 2019-20. - HELD THAT: - The Tribunal recorded that it was not in dispute that the employees' contributions to ESI and PF were deposited before the due date for filing the return under section 139(1). Having regard to binding decisions of the jurisdictional High Court and consistent precedents of Coordinate Benches of the Tribunal, the appellate authority was required to follow the Punjab & Haryana High Court view which permits allowance where the contributions are paid before the filing date of the return. The Tribunal therefore held that the disallowance made while processing the return could not be sustained for the assessment year under consideration. [Paras 6]

Disallowance under section 36(1)(va) deleted and deduction allowed as the contributions were paid before the due date of filing the return for AY 2019-20.

Prospective application of Finance Act, 2021 amendment/explanation - binding effect of jurisdictional High Court decisions on appellate authorities - Whether the amendment by Finance Act, 2021 (Explanation to section 36(1)(va) / to section 43B) applies retrospectively to assessment year 2019-20. - HELD THAT: - The Tribunal noted that Explanation inserted by the Finance Act, 2021 was held by various Benches of the Tribunal and by the applicable High Court decisions to operate with effect from assessment year 2021-22 and cannot be applied retrospectively to earlier assessment years. Given the divergent views of different High Courts, the Tribunal emphasised that the order under appeal should follow the binding position of the jurisdictional High Court. Consequently, the Finance Act, 2021 amendment was not applied to the impugned assessment year. [Paras 6]

The Finance Act, 2021 amendment is not applicable to AY 2019-20 and cannot sustain the disallowance.

Final Conclusion: The appeal is allowed; the disallowance made in processing the return under section 143(1) for non-deposit of employees' contribution to ESI and PF is deleted for assessment year 2019-20, the Finance Act, 2021 amendment not being applicable to the year in issue and the Tribunal following the binding view of the jurisdictional High Court.

Deduction of employees' share of provident fund and ESI as expenditure under section 36(1)(va) of the Income tax Act - Interaction between section 36(1)(va) and section 43B and the legal consequence of delayed payment - Retrospective effect of amendments made by the Finance Act, 2021 to section 36(1)(va) and section 43B - Exemption for awards instituted by State Government under section 10(17A) of the Income tax Act - Credit for tax deducted at source on production of physical TDS certificate (Form 16A) despite mismatch in Form 26AS

Deduction of employees' share of provident fund and ESI as expenditure under section 36(1)(va) of the Income tax Act - Interaction between section 36(1)(va) and section 43B and the legal consequence of delayed payment - Retrospective effect of amendments made by the Finance Act, 2021 to section 36(1)(va) and section 43B - Whether employees' share of PF/ESI paid by the assessee is allowable as deduction for AY 2018-19 where payment was made before the due date for filing return but after statutory due dates under respective Acts, and whether the Finance Act, 2021 amendment applies retrospectively. - HELD THAT: - The Tribunal analysed the distinction between employees' contribution (governed by clause (va) of section 36(1)) and employer's contribution (governed by section 43B), noting that Courts have recognised different parameters and consequences for delay in payment. The Hon'ble Karnataka High Court's decision in Essae Teraoka treating employees' contribution as covered by section 43B if paid on or before the return filing due date was found applicable. The Tribunal examined the Finance Act, 2021 amendments (explanations inserted into sections 36(1)(va) and 43B) and observed from the explanatory memorandum that the amendments are introduced with effect from 01.04.2021. Absent express legislative language making those amendments retrospective, and given that they impose liability, they cannot be applied retrospectively. Following precedent of various tribunals on the identical question, the Tribunal concluded that the Finance Act, 2021 amendments do not apply to the assessment year in issue and therefore the additions under section 36(1)(va) stand deleted. [Paras 5, 6, 8]

Additions disallowing employees' share of PF/ESI under section 36(1)(va) for AY 2018-19 deleted; Finance Act, 2021 amendments held prospective and not applicable to the year under appeal.

Exemption for awards instituted by State Government under section 10(17A) of the Income tax Act - Whether the cash award received from the Government of Karnataka qualifies for exemption under section 10(17A). - HELD THAT: - The Tribunal considered the Government of Karnataka's proceedings documenting the criteria for the 'Chief Minister's Annual Ratna Award', which show the award was conferred on account of sustained profits, payment of dividends and CSR activities by the selected public enterprises. Section 10(17A) requires that the award be instituted in public interest by the Central or State Government. The Tribunal found that the institutional criteria and purpose evidenced in the proceedings did not demonstrate the requisite public interest character for exemption under section 10(17A). Consequently, the First Appellate Authority's confirmation of the assessment position was upheld. [Paras 14]

Claim of exemption under section 10(17A) in respect of the award denied; CIT(A)'s order confirmed.

Credit for tax deducted at source on production of physical TDS certificate (Form 16A) despite mismatch in Form 26AS - Whether TDS credit should be allowed where the assessee produces physical Form 16A but the entry is missing or mismatched in Form 26AS. - HELD THAT: - The Tribunal noted that the assessing officer denied TDS credit owing to a mismatch in Form 26AS, whereas the assessee produced a physical TDS certificate (Form 16A). Reference was made to CBDT instruction No. 5/2013 which directs that physical certificates should be accepted and credit given in absence of details in the Form. In accordance with that instruction and law, the Tribunal directed that the matter be taken cognisance of by the AO and credit be granted as per the produced Form 16A. [Paras 15]

Issue remanded to the AO to verify the Form 16A and grant TDS credit in accordance with law.

Final Conclusion: The appeal is partly allowed: the addition disallowing employees' share of PF/ESI under section 36(1)(va) for AY 2018-19 is deleted (Finance Act, 2021 amendments held prospective), the claim of exemption under section 10(17A) for the government award is rejected and confirmed as taxable, and the question of TDS credit is remanded to the AO for verification of Form 16A and grant of credit as per law.

Deductibility of employees' contribution under section 36(1)(va) - requirement of deposit within prescribed statutory due dates versus deposit before filing return - prospective operation of Finance Act, 2021 amendment to Sections 36(1)(va) and 43B

Deductibility of employees' contribution under section 36(1)(va) - requirement of deposit within prescribed statutory due dates versus deposit before filing return - prospective operation of Finance Act, 2021 amendment to Sections 36(1)(va) and 43B - binding effect of jurisdictional High Court decisions - Whether the disallowance under section 36(1)(va) for alleged late deposit of employees' contribution to ESI and PF can be sustained where such contributions were deposited before the due date of filing the return of income for assessment year 2019-20, having regard to the amendment by the Finance Act, 2021. - HELD THAT: - The Tribunal recorded that it was undisputed the employees' contributions were deposited before the due date for filing the return under section 139(1). The Ld. CIT(A) had followed a Gujarat High Court view and relied on the amendment effected by the Finance Act, 2021 which introduced an Explanation to sections 36(1)(va) and 43B. The Tribunal observed that the Finance Act, 2021 amendment applies with effect from assessment year 2021-22 and is not retrospective. In the presence of divergent High Court views, the Tribunal held that the Assessing Officer and appellate authorities within the jurisdiction of the Punjab & Haryana High Court are bound to follow that jurisdictional High Court's decisions which consistently held that payment before the due date of filing the return suffices for allowability in earlier years. The Tribunal noted consistent decisions of coordinate Benches of the Tribunal to the same effect and rejected the departmental contention that the amendment is clarificatory and retrospective. Consequently, for assessment year 2019-20 the amendment could not be invoked to sustain the disallowance and the addition made in processing under section 143(1) was not maintainable.

The disallowance made under section 36(1)(va) in respect of employees' contribution to ESI and PF for AY 2019-20 is to be deleted as the contributions were paid before the due date for filing the return and the Finance Act, 2021 amendment is prospective (w.e.f. AY 2021-22) and not applicable.

Final Conclusion: Appeal allowed; the addition made in processing the return under section 143(1) for non-deposit within prescribed statutory due dates is deleted for AY 2019-20 because the employees' contributions were deposited before the due date for filing the return and the Finance Act, 2021 amendment operates prospectively.

Undisclosed cash credit / unexplained cash deposits under section 68 - statements recorded under section 133A and their evidentiary value - reassessment notice under section 148 / recording of reason to believe under section 147 - validity / service of notice under section 143(2) - seized/impounded diaries as documentary material and their probative value - estimation of income by rejection of books and enhancement under section 251(2) - ad-hoc disallowance of expenses and requirement of cogent basis - treatment of advances / sundry creditors in real-estate business and onus of proof - scope of additions under section 69C where expenditure explained by source

Undisclosed cash credit / unexplained cash deposits under section 68 - Whether addition on account of alleged unexplained cash deposits in bank accounts for A.Y. 2011-12 could be sustained. - HELD THAT: - Tribunal found that the AO made the addition solely on the basis of an Individual Transaction Statement (ITS) without any adverse material contradicting the assessee's explanations. The assessee furnished detailed date-wise bank statements, reconciliation of cash inflows (including cash withdrawals and advances from customers) and registered sale deeds; these documents were forwarded for remand and the AO did not dispute their genuineness or point to any specific defect. The Tribunal accepted the commercial realities of real estate transactions (installment/advance receipts, delayed recognition on execution of sale deed) and observed that deposits in business bank accounts are not ipso facto taxable as income - only the net profit element is taxable. On the facts, the assessee satisfactorily explained each deposit and the AO could not demonstrate any discrepancy; therefore the addition under section 68 was rightly deleted by CIT(A) and is upheld. [Paras 8]

Addition under section 68 for A.Y. 2011-12 deleted; Revenue ground dismissed.

Statements recorded under section 133A and their evidentiary value - Whether additional amounts admitted during a survey under section 133A could be treated as separate taxable income over and above amounts declared in returns for A.Ys. 2011-12, 2012-13 and 2013-14. - HELD THAT: - The assessee had admitted aggregate amounts during the survey but later furnished year-wise returns showing equal or higher incomes for the respective years. Tribunal agreed with CIT(A) that statements under section 133A (not on oath) have limited evidentiary value; where the AO had no corroborative material beyond the survey admission and could not show retraction or other evidence of additional undisclosed receipts, separate additions could not be sustained. On the material, the admitted amounts were not shown to be over and above the income already returned and assessed; accordingly the additions based solely on the survey admissions were deleted. [Paras 9, 10]

Additions based on survey admissions for A.Y. 2011-12, A.Y. 2012-13 and A.Y. 2013-14 deleted; Revenue grounds dismissed.

Reassessment notice under section 148 / recording of reason to believe under section 147 - validity / service of notice under section 143(2) - Whether initiation of reassessment under section 148 and framing of assessment (without issuance of section 143(2) notice) for A.Y. 2011-12 was invalid. - HELD THAT: - Tribunal examined the AO's record of reasons and procedural steps following the survey. It found that reasons to believe were recorded and a notice under section 148 was issued; the AO had also issued subsequent notices under section 142(1) and attempted compliance steps, and the assessee did not file a return in response to the section 148 notice. On the question of absence of a section 143(2) notice, the Tribunal accepted CIT(A)'s finding that where no valid return was filed in response to a section 148 notice there was no necessity to issue a section 143(2) notice prior to framing the assessment. Therefore the contentions of the assessee on these procedural grounds were dismissed. [Paras 11, 12]

Notice under section 148 and consequent assessment upheld; assessee's legal grounds dismissed.

Seized/impounded diaries as documentary material and their probative value - scope of additions under section 69C where expenditure explained by source - Whether addition on account of excess expenditure over income based on summaries from impounded diaries (A.Y. 2012-13) was sustainable. - HELD THAT: - AO relied on summaries from two impounded diaries to allege large unexplained excess payments. The assessee demonstrated that the diaries spanned two financial years, were partial records maintained by clerical staff, and did not constitute complete books of account. The assessee produced detailed day to day reconciliations, bank statements, sale/booking receipts and registered sale deeds; the AO's remand reports did not rebut those documents or show specific discrepancies. Tribunal agreed with CIT(A) that reliance on partial diaries without corroboration distorts results and that many payments were evidenced through bank channels or matched to advances/receipts. In absence of any cogent defect shown by the AO, the impugned addition was unsustainable and deleted. [Paras 13, 14]

Addition for excess expenditure based on diaries deleted; Revenue ground dismissed.

Estimation of income by rejection of books and enhancement under section 251(2) - Whether CIT(A)'s enhancements by estimating turnover and net profit (resulting in additions for A.Y. 2012-13 and A.Y. 2013-14) were sustainable. - HELD THAT: - CIT(A) had estimated turnover and applied a flat net profit rate of 15% after indicating inclination to reject books. Tribunal reviewed returns, audited financials and declared net profit rates shown by the assessee (13.73% for A.Y. 2012-13 and 22.43% for A.Y. 2013-14). No specific instance of suppression of sales or on money was produced by AO or CIT(A). Given the business nature and the actual declared profit ratios (which were higher than the rate applied by CIT(A) in one year), Tribunal found no basis for the arbitrary estimations and deleted the enhancements made by CIT(A). The assessee's grounds challenging estimation were allowed. [Paras 14]

Enhancements by estimating turnover/net profit for A.Y. 2012-13 and A.Y. 2013-14 deleted; assessee's grounds allowed.

Ad-hoc disallowance of expenses and requirement of cogent basis - Whether ad-hoc disallowances of various expenses made by AO for A.Y. 2012-13 and A.Y. 2013-14 were sustainable. - HELD THAT: - AO made percentage-based disallowances without identifying specific defects. Assessee furnished audited profit & loss, ledgers and supporting vouchers during remand and appellate proceedings; AO's remand reports did not point to particular discrepancies. Tribunal held that ad-hoc disallowances cannot be sustained when supporting documentation and plausible business explanations exist and no concrete adverse finding was made by AO. Given the nature of expenses in real estate business and the reasonable net-profit ratios declared, the CIT(A)'s deletion of ad-hoc disallowances was upheld. [Paras 15, 16]

Ad-hoc disallowances of expenses for both years deleted; Revenue grounds dismissed.

Treatment of advances / sundry creditors in real-estate business and onus of proof - requirement to examine individual credit entries before invoking section 68 - Whether ad-hoc additions treating sundry creditors/advances as bogus for A.Y. 2012-13 and A.Y. 2013-14 were sustainable. - HELD THAT: - AO made percentage additions against sundry creditors/advances without examining individual entries. Assessee produced booking forms, project-wise advance schedules, bank receipts and numerous registered sale deeds showing that advances were received (partly through bank channels) and many sales were later completed. On remand the AO did not point to specific customers denying payments nor identify defects in the documentary proofs. Tribunal accepted CIT(A)'s reasoning that advances in real estate projects are ordinarily recognized on completion and that an ad hoc lump sum disallowance of creditors lacks statutory basis; section 68/69C require examination of individual credits. On the facts the deletions were justified. [Paras 17, 18]

Ad-hoc additions treating sundry creditors/advances as bogus deleted for both years; Revenue grounds dismissed.

Validity / service of notice under section 143(2) - Whether assessment framed under section 144 for A.Y. 2013-14 is void for want of valid service of notice under section 143(2). - HELD THAT: - Assessee contested non-service of section 143(2) notice and filed affidavit. CIT(A) found sufficient opportunities had been given (142 notices) and that evidentiary material was admitted under Rule 46A on appeal; Tribunal agreed that on merits the assessee obtained substantial relief making the challenge academic. Consequently, the legal ground concerning non-service of section 143(2) was dismissed as academic after noting that adequate opportunity was provided in the proceedings. [Paras 19, 20]

Assessee's ground on non-service of section 143(2) dismissed as academic; assessment upheld on procedural challenge.

Final Conclusion: After considering remand reports, documentary evidence and arguments, the Tribunal upheld the deletions and relief granted by CIT(A) on the principal additions and ad hoc disallowances; Revenue appeals for A.Y. 2011-12 to A.Y. 2013-14 are dismissed. Assessee's cross-appeals against enhancements (estimation) were allowed in part; overall the assessee obtained substantial relief and the appeals are disposed as recorded.

Allowability of incidental revenue expenditure under section 57(iii) - treatment of unregistered charitable trust as Association of Persons for tax computation - requirement of audit report for triggering CPC adjustments in processing under section 143(1) - impermissibility of presumption of filing of audit report without documentary evidence

Allowability of incidental revenue expenditure under section 57(iii) - treatment of unregistered charitable trust as Association of Persons for tax computation - Whether the expenditure of Rs. 73,10,521/- incurred by the assessee-trust is allowable when the trust is not registered under section 12AA and must be treated as an AOP. - HELD THAT: - The Tribunal found on admitted facts that the assessee was not registered under section 12AA and therefore must be treated as an Association of Persons for tax computation. Applying normal accounting principles and the view taken by the Co ordinate Bench of the Tribunal in Shri Vaishnav Polytechnic College (Indore), all incidental revenue expenditures incurred wholly and exclusively for the purpose of earning the receipts must be allowed under section 57(iii). The Revenue did not controvert that the expenditures were incurred wholly and exclusively for the trust's activities. Consequentially, the claimed expenditure recorded in column 4(i) of the e return qualifies for deduction and must be allowed, leaving the remaining receipts as the taxable surplus. [Paras 9, 10, 11]

Expenditure of Rs. 73,10,521/- is allowable as incidental revenue expenditure under section 57(iii) where the trust is unregistered and treated as an AOP; surplus receipts alone are taxable.

Requirement of audit report for triggering CPC adjustments in processing under section 143(1) - impermissibility of presumption of filing of audit report without documentary evidence - Whether the addition disallowing the expenditure can be sustained on the basis that the AO CPC must have relied on an audit report when no audit report was in fact filed or proved. - HELD THAT: - The Tribunal observed that the CIT(A) presumed that the AO CPC captured data from an audit report, but there was no documentary evidence that any audit report had been filed; the assessee contended no audit was required and none was filed. The presumption of filing by the CIT(A) was not supported on the record. Given absence of any challenge to the factual claim that the expenditure was incurred and that no audit report was filed, the addition made at processing under section 143(1) cannot be sustained on the basis of a presumed audit report. The Tribunal therefore directed the AO to allow the expenditure and treat only the surplus receipts as taxable. [Paras 4, 11]

The CIT(A)'s confirmation based on a presumption of an audit report is unsustainable in absence of evidence; the AO is directed to allow the expenditure and tax only the surplus.

Final Conclusion: The appeal is allowed: the expenditure of Rs. 73,10,521/- is to be allowed as incidental revenue expenditure under section 57(iii) in view of the assessee's status as an unregistered trust treated as an AOP, and the addition confirmed by the authorities based on a presumed audit report is set aside; the AO is directed to allow the expenditure and assess only the surplus receipts for AY 2018-19.

Limitation under Article 137 - Effect of acknowledgment in writing under Section 18 of the Limitation Act - Maintainability of Section 9 application under the I&B Code where debt fell due beyond three years

Limitation under Article 137 - Maintainability of Section 9 application under the I&B Code where debt fell due beyond three years - Application under Section 9 was barred by limitation as the debt fell due on 30.12.2016 and the Section 9 petition was filed on 13.03.2020. - HELD THAT: - The adjudicating authority recorded that the date on which the debt fell due was 30.12.2016 as mentioned by the applicant in Part-IV of the Section 9 application. Since the petition was filed on 13.03.2020, it was beyond three years from the date when the right to apply accrued. Applying the principle of limitation under Article 137, the Appellate Tribunal agreed with the Adjudicating Authority that the application was time-barred. The Court examined the record and found no merit in the contention that limitation was otherwise excused or inapplicable to the present claim. [Paras 5, 10]

The Section 9 application was not maintainable as it was barred by limitation.

Effect of acknowledgment in writing under Section 18 of the Limitation Act - Effect of emails as acknowledgment - E-mails dated 26.03.2017 and 27.04.2017 did not constitute an acknowledgment of debt within the meaning of Section 18 of the Limitation Act and therefore did not extend the limitation period. - HELD THAT: - The appellant relied on two e-mails to invoke Section 18 of the Limitation Act and to show acknowledgment of the debt. The Tribunal examined the content of the e-mails and held that the communication - stating that a person had been asked to "look into your case on priority" and expressing hope for a resolution - was not an acknowledgment of liability or acceptance of the debt as required by Section 18. The Tribunal further observed that the subsequent e-mail of 27.04.2017, written by an employee, similarly could not be read as an acknowledgment by the corporate debtor within the meaning of Section 18. Explanation (a) to Section 18 was considered and the Court held it inapplicable on the facts. Consequently, no extension of limitation could be derived from the e-mails. [Paras 6, 8, 9]

The e-mails do not amount to an acknowledgment in writing under Section 18; they do not extend the limitation period.

Final Conclusion: The appeal is dismissed as the Section 9 application was rightly rejected by the Adjudicating Authority being barred by limitation; the emails relied upon did not qualify as acknowledgments under Section 18 and did not extend the limitation period.

Voluntary liquidation under the Insolvency and Bankruptcy Code, 2016 - compliance with Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 - dissolution on satisfaction of statutory compliances - filing of Form GNL-2 and intimation to Registrar of Companies - notice to Registrar of Companies and ROC's no-objection

Voluntary liquidation under the Insolvency and Bankruptcy Code, 2016 - compliance with Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 - filing of Form GNL-2 and intimation to Registrar of Companies - no claims from stakeholders in response to public announcement - Whether the company may be dissolved on completion of the voluntary liquidation process and after necessary statutory compliances. - HELD THAT: - The Tribunal recorded that the company's board resolved for voluntary liquidation, a voluntary liquidator was appointed, statutory notices and publications were made, intimation under the relevant tax provision was given, the voluntary liquidator submitted preliminary and final reports, the bank account was closed after distribution of assets in accordance with the Code, and Form GNL-2 was submitted to the Registrar of Companies. The Registrar of Companies was served and filed a status report expressing no objection to the acceptance of the application. No claims were received in response to the public announcement. On these factual findings and satisfaction of the procedural and statutory requirements under Section 59 of the Code and the IBBI (Voluntary Liquidation Process) Regulations, the Tribunal concluded that the conditions for dissolution were fulfilled. [Paras 5, 6]

The company stands dissolved with effect from the date of the order; a copy of the order is to be filed with the Registrar of Companies and the petition for voluntary liquidation is allowed.

Final Conclusion: On finding that the statutory and regulatory requirements for voluntary liquidation were complied with and that the Registrar of Companies raised no objection, the Tribunal allowed the petition and ordered dissolution of the company effective from the date of the order.

Pre-existing dispute - proof of delivery of demand notice - limitation period for operational debt - initiation of Corporate Insolvency Resolution Process under section 9 of the Insolvency and Bankruptcy Code, 2016

Pre-existing dispute - operational creditor's claim - There existed a pre-existing dispute regarding the quality and completion of services rendered by the Operational Creditor which disentitled the Operational Creditor from invoking CIRP. - HELD THAT: - The Tribunal found that the Corporate Debtor had, prior to the demand notice, raised a substantive complaint about the adequacy and upkeep of litigation work by the Operational Creditor in an email response to Sterling (a third party) and had indicated willingness to pay the outstanding amount only if the remaining work was completed by the Operational Creditor. The Registry record does not contain an affidavit of no-dispute from the Operational Creditor, and the material on record shows that the Corporate Debtor had contemporaneously communicated the dispute over services. On this basis the Tribunal concluded that a pre-existing dispute was established, and that the petition under section 9 could not be maintained. [Paras 6, 7, 8, 9]

Petition rejected insofar as it sought initiation of CIRP on account of a pre-existing dispute regarding the services rendered.

Proof of delivery of demand notice - requirement under Section 8 of the IBC, 2016 - The Operational Creditor failed to furnish proof of delivery of the demand notice as required, and absence of such proof warranted rejection of the petition. - HELD THAT: - The Tribunal observed that the demand notice dated 16.11.2018 is on record but the proof of its delivery to the Corporate Debtor is not. Proof of service/delivery of the demand notice is a requisite under the statutory scheme to invoke the remedy under section 9. In the absence of proof of delivery, the Tribunal held that the petition could not be allowed to proceed. [Paras 9]

Petition rejected for want of proof of delivery of the demand notice.

Limitation period for operational debt - Three of the invoices were beyond the three-year limitation period, while the invoice dated 31.03.2016 fell within limitation. - HELD THAT: - The Tribunal noted that of the four invoices totaling the claimed amount, three (dated 05.01.2015, 13.07.2015 and 06.10.2015) lay beyond the three-year limitation period, whereas the invoice dated 31.03.2016 for the remaining amount was within limitation. This factual finding on limitation was recorded in the course of the Tribunal's examination of the claim. [Paras 8]

Only the invoice dated 31.03.2016 was within the period of limitation; the earlier three invoices were time-barred.

Final Conclusion: The petition under section 9 of the IBC, 2016 was rejected and disposed of on the grounds of an established pre-existing dispute as to the services rendered and for want of proof of delivery of the demand notice; the Tribunal also recorded that three earlier invoices were time-barred while one invoice remained within limitation.

Pre-existing dispute - operational creditor's claim under Section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - plausibility test for disputes per Mobilox - initiation of Corporate Insolvency Resolution Process

Pre-existing dispute - plausibility test for disputes per Mobilox - Existence of a pre-existing dispute between the operational creditor and the corporate debtor. - HELD THAT: - The Tribunal found that the corporate debtor had raised a dispute prior to issuance of the demand notice by issuing a debit note by way of 'Journal Voucher' dated 31.03.2018. The record also shows that the corporate debtor engaged a third party to complete the remaining work and directed the applicant to remove its belongings from the site with effect from June 2017. Applying the test in Mobilox Innovative Pvt. Ltd., the Tribunal assessed whether the dispute was a plausible contention requiring further investigation and concluded that the dispute was not a spurious or illusory defence but a genuine pre-existent controversy. Consequently the contention raised by the corporate debtor disentitled the applicant from proceeding under the Code at this stage. [Paras 6, 8]

There existed a pre-existing dispute between the parties which was raised before the demand notice and which disentitles the applicant from relief under the Code.

Operational creditor's claim under Section 9 of the Insolvency and Bankruptcy Code, 2016 - initiation of Corporate Insolvency Resolution Process - Maintainability of the Section 9 application for initiation of Corporate Insolvency Resolution Process. - HELD THAT: - In view of the established pre-existing dispute and applying the principle that an adjudicating authority must reject an insolvency application where a bona fide dispute exists, the Tribunal concluded that the applicant failed to prove its claim to the satisfaction required at the threshold. The Tribunal therefore held that the Section 9 application seeking initiation of the Corporate Insolvency Resolution Process was not maintainable. [Paras 8, 9]

The Section 9 petition for initiation of the Corporate Insolvency Resolution Process was rejected.

Final Conclusion: The application under Section 9 was dismissed on the ground of a pre-existing dispute raised by the corporate debtor prior to the demand notice; no costs were awarded.

Refund of training costs - default under Insolvency and Bankruptcy Code - pre-existing dispute - jurisdiction of insolvency forum to decide disputed questions of fact - limitation under Article 137 of the Limitation Act

Refund of training costs - jurisdiction of insolvency forum to decide disputed questions of fact - Operational Creditor is not entitled to refund of the training costs of Rs. 25,00,000/- - HELD THAT: - The Employment Agreement contemplates payment of training costs and contains clauses governing recovery in case of early termination. The Tribunal found that the Operational Creditor had received training (was on the rolls and probationary service was recognised) and did not plead that no training was imparted. Disputed questions of fact remain as to the manner, extent and completion of training and whether the contractual conditions for refund are triggered. The Tribunal held that where such factual disputes are material, the insolvency forum does not have jurisdiction to finally adjudicate them and cannot grant an uncrystallised monetary claim for refund in the summary proceedings under Section 9.

Claim for refund of the training costs is not sustainble before this Tribunal and is rejected.

Default under Insolvency and Bankruptcy Code - pre-existing dispute - No amount was found to be due from the Corporate Debtor to the Operational Creditor and there was a pre-existing dispute - HELD THAT: - On the material placed on record the full and final settlement documents indicated amounts payable and were acknowledged by the Operational Creditor. The Corporate Debtor explained non-payment of certain sums by reference to expiry of licence and contractual provisions permitting termination for cause. The Tribunal accepted that, on the facts and documents produced, no undisputed debt was established in favour of the Operational Creditor and that the Corporate Debtor had a bona fide contesting case that no amounts were due. Consequently there is no proved default that would trigger insolvency proceedings.

The claim of an undisputed operational debt and default is rejected.

Limitation under Article 137 of the Limitation Act - The application under Section 9 is barred by limitation - HELD THAT: - Relying on the principle that Article 137 applies to proceedings under Sections 7 and 9 of the IBC, the Tribunal observed that the right to sue accrues on occurrence of default and if the alleged default occurred more than three years before filing, the application is time-barred. The Tribunal found that the application was filed beyond three years from the date of alleged default and invoked the limitation bar to reject the petition. This conclusion was applied to the facts of the present case to hold the petition liable to be dismissed on limitation grounds.

The petition is barred by limitation and thus liable to be dismissed.

Final Conclusion: The Section 9 petition is dismissed: the claim for refund of training costs cannot be adjudicated in summary insolvency proceedings where material factual disputes exist; no undisputed operational debt or default was established; and the application is time barred under Article 137 of the Limitation Act.

Constitutional validity of the twin conditions in Section 45(1) of the PMLA - Non bailable categorisation under the PMLA and its effect on grant of bail - Grant of bail in economic offences where investigation is complete and complaint/charge sheet filed - Conditions as safeguards on bail: deposit of passport, personal and surety bonds, surrender of travel documents - Principle that liberty favours grant of bail when trial is likely to be prolonged

Constitutional validity of the twin conditions in Section 45(1) of the PMLA - Non bailable categorisation under the PMLA and its effect on grant of bail - Whether the petitioner could be granted regular bail in a PMLA prosecution notwithstanding the contention regarding revival of the twin conditions in Section 45(1). - HELD THAT: - The Court noted the Supreme Court's decision in Nikesh Tarachand Shah declaring the twin conditions in Section 45(1) of the PMLA unconstitutional insofar as they imposed extra conditions for grant of bail, and observed that subsequent legislative amendment and conflicting judicial views on whether that amendment revived those conditions remain a live issue before the Supreme Court. In view of the divergence of opinions and the pendency of the question at the apex court, the High Court proceeded to decide the bail application on merits without applying the discredited twin conditions. The Court applied settled principles: where investigation is complete and complaint/charge sheet filed and trial is likely to be protracted, personal liberty weighs in favour of bail, subject to adequate conditions to secure attendance and prevent tampering. Considering the petitioner's custody since 26.07.2021, completion of investigation and attachment of properties, the Court found release on bail appropriate while imposing conditions designed as safeguards against flight or interference with the prosecution.

Petition allowed; regular bail granted subject to conditions (personal and surety bonds/cash bail as interim, surrender/deposit of passport, residence proof, attendance obligations, prohibition on leaving jurisdiction without permission and non tampering with evidence).

Final Conclusion: The petition for regular bail is allowed: the petitioner is released on furnishing specified personal and surety bonds (or interim cash bail) and on compliance with conditions (passport surrender/deposit, residence proof, attendance, restrictions on travel and non tampering). Observations do not affect trial merits.

Maintainability of a petition under Section 482 Cr.P.C. in presence of an alternative statutory remedy - confiscation of conveyance - appeal to judicial authority under Section 72(7) of U.P. Excise Act, 1910 - civil appeal as the appropriate remedy against confiscation

Maintainability of a petition under Section 482 Cr.P.C. in presence of an alternative statutory remedy - confiscation of conveyance - appeal to judicial authority under Section 72(7) of U.P. Excise Act, 1910 - civil appeal as the appropriate remedy against confiscation - Whether the application under Section 482 Cr.P.C. for release of a vehicle confiscated under the U.P. Excise Act is maintainable when an alternative statutory remedy by way of appeal exists. - HELD THAT: - The Court examined the provisions of the U.P. Excise Act, 1910, noting that clause (e) of sub-section (1) of Section 72 renders conveyances used in commission of excise offences liable to confiscation and that sub-section (7) provides an appeal against such confiscation to a judicial authority appointed by the State Government. The State has by notification designated the District Judge as the appellate judicial authority, and the appeal is to be regarded as a civil appeal. The vehicle in question had been confiscated by the District Magistrate and the applicant had not challenged that order before the prescribed appellate forum. In these circumstances the Court held that the existence of the specific statutory remedy under Section 72(7) precludes entertaining the present exercise of the inherent jurisdiction under Section 482 Cr.P.C. and that the criminal petition for release is not maintainable. [Paras 8, 9, 10, 11, 12]

The petition under Section 482 Cr.P.C. is not maintainable in view of the alternative statutory remedy by way of civil appeal under Section 72(7) of the U.P. Excise Act, 1910; the application is dismissed and the applicant is permitted to file the civil appeal before the District Judge subject to limitation.

Final Conclusion: The application under Section 482 Cr.P.C. is dismissed as not maintainable because the vehicle has been confiscated under the U.P. Excise Act and the applicant has an alternative remedy by way of civil appeal to the District Judge under Section 72(7) of the U.P. Excise Act, 1910; the applicant is left free to pursue that appeal subject to the law of limitation.

Summary order. Special leave petitions dismissed; the question of law is left open; pending applications disposed of.

Input tax credit - refund of input tax credit - deferment of tax scheme / deferred payment of tax - presumptive tax and composition scheme - non-availability of ITC where selling dealer opted for presumptive/composition - verifiability of refund

Section 11(7)(c)(iii) - deferment of tax scheme / deferred payment of tax - presumptive tax and composition scheme - Applicability of the bar in Section 11(7)(c)(iii) to purchases from a selling dealer availing benefit under the deferment (deferred payment) scheme notified under Section 62(5). - HELD THAT: - The Court held that the embargo in Section 11(7)(c)(iii) operates only where the selling dealer has opted to pay presumptive tax under Section 7 or lump sum by way of composition under Section 16(2) (as prescribed by rules). There was no material to show that the selling dealer had opted for presumptive tax or composition. The deferment scheme arising under notifications made in exercise of Section 62(5) is a distinct statutory field and cannot be equated or conflated with the scheme of presumptive/composition tax under Sections 7 and 16(2) and the rules thereunder (including Rule 45). The Court therefore rejected the Tribunal's reliance on Section 11(7)(c)(iii) to disallow ITC in respect of purchases from a dealer who availed deferment/converted to upfront payment under the deferred payment scheme. [Paras 20, 21, 24]

Section 11(7)(c)(iii) does not apply to purchases from a selling dealer covered by the deferment (deferred payment) scheme under Section 62(5); the embargo under Sections 7/16(2) cannot be extended to the deferment scheme.

Refund of input tax credit - verifiability of refund - interest on refundable amount - Whether the Commissioner and Tribunal rightly disallowed refund of part of the claimed ITC on the ground that the corresponding tax had not been deposited in the Government treasury by the selling dealer under the deferment/notification mechanism, and whether the petitioner is entitled to interest on the refundable amount. - HELD THAT: - The Court found that the selling dealer had availed the benefit of the deferment scheme which, by notification dated 26.07.2005, permitted conversion to an upfront deemed payment of 65% of tax liability for the relevant period; such upfront payment is to be treated as payment of tax according to the return. The shortfall arising from the State's scheme cannot be made a basis to penalize the purchasing dealer who legitimately claimed ITC. The entitlement of the petitioner to the claimed ITC was not disputed on substantive grounds; the disallowance was therefore arbitrary and contrary to the statutory scheme. Consequently the portion of refund disallowed as 'unverifiable' was held payable, and the petitioner was entitled to interest on that amount from the date it fell due until actual payment. [Paras 22, 23, 24, 25]

The disallowance of refund of Rs. 17,06,715/- as unverifiable was wrongful; petitioner entitled to refund of that amount together with interest at 6% per annum from the date it fell due until actual payment.

Final Conclusion: Revision petition allowed. Orders of the Tribunal dated 29.08.2015 and of the Commissioner dated 28.05.2012 are set aside to the extent they disallowed Rs. 17,06,715/- of ITC; petitioner entitled to refund of that amount with interest at 6% per annum from the date it fell due till payment.

Taxation of betting and gambling - Entry 62 of List II - betting and gambling - lotteries organised by the Government of India or the Government of a State - Entry 40 of List I - power to tax distinct from power to regulate - doctrine of pith and substance - territorial nexus

Entry 40 of List I - Entry 62 of List II - power to tax distinct from power to regulate - doctrine of pith and substance - Whether placing 'lotteries organised by the Government of India or the Government of a State' in Entry 40 of List I excludes the State's power to impose tax under Entry 62 of List II. - HELD THAT: - The Court held that Entry 40 of List I is primarily a regulatory head and does not, by itself, strip Entry 62 of List II of its taxing content. Taxing powers are separate and distinct from regulatory powers under the Seventh Schedule and must be traceable to a specific taxation entry. Applying the doctrine of pith and substance and harmonising the Lists, the Court construed Entry 62 as a specific taxation entry covering the genus of 'betting and gambling' and refused to read a taxing power into Entry 40 by implication or as residuary power under Entry 97. Accordingly, carving out lotteries for regulation under Entry 40 does not denude the State of its express taxing competence under Entry 62. [Paras 111, 113, 114, 118, 119]

Entry 40 does not exclude the State's power to tax under Entry 62; the taxing power under Entry 62 survives despite regulatory allocation to Entry 40.

Betting and gambling - lotteries organised by the Government of India or the Government of a State - territorial nexus - taxation of betting and gambling - Whether 'lotteries', including those organised by the Central Government or a State Government, fall within the ambit of Entry 62 of List II and are taxable by State Legislatures. - HELD THAT: - After reviewing authorities and dictionary definitions, the Court confirmed that lottery is a species of gambling and that Entry 62's reference to taxes on 'betting and gambling' embraces all kinds of gambling activities, including lotteries, irrespective of the organiser. The Court explained that where a State permits the conduct of a lottery within its territory a sufficient territorial nexus exists to levy a tax on the gambling activity in that State. Thus, taxation under Entry 62 applies to lotteries conducted by Central or State governments as well as other authorised organisers when the activity occurs within the State. [Paras 105, 117, 118, 120]

Lotteries (including State- or Central-organised lotteries) are within the genus of 'betting and gambling' and may be taxed by State Legislatures under Entry 62 when there is territorial nexus.

Karnataka Tax on Lotteries Act, 2004 - Kerala Tax on Paper Lotteries Act, 2005 - taxation of betting and gambling - doctrine of pith and substance - Whether the Karnataka Act, 2004 and the Kerala Act, 2005 were within the legislative competence of the respective State Legislatures and therefore valid. - HELD THAT: - Applying the constitutional scheme, the Court concluded that the impugned State enactments were taxes on the activity of gambling (lotteries) and thus traceable to Entry 62 of List II. The legislation specified taxable event, measure (draw), rates and incidence (promoters), and the State had competence to levy such taxes when the gambling activity occurred within the State. Consequently, the High Courts erred in holding those Acts ultra vires for lack of competence or on the ground of extra-territorial operation, and the appeals by Karnataka and Kerala were allowed. [Paras 90, 96, 119, 122, 124]

The Karnataka and Kerala taxation Acts were within State legislative competence under Entry 62 and are valid; the High Courts' contrary orders were set aside.

Final Conclusion: The appeals are allowed. The Court held that lotteries are a species of 'betting and gambling' and that Entry 62 of List II (taxation of betting and gambling) empowers State Legislatures to levy taxes on lotteries (including those organised by Central or State Governments) when the activity occurs within the State; Entry 40 of List I remains a regulatory head only. The impugned Karnataka and Kerala taxation statutes were therefore upheld and the High Courts' declarations of invalidity were set aside.

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Difference in drawer's signature on cheque - Cheque issued as security versus discharge of debt or liability - Defences triable at trial and not on cognizance - Precedential application of Laxmi Dyechem over Vinod Tanna

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Difference in drawer's signature on cheque - Precedential application of Laxmi Dyechem over Vinod Tanna - Dishonour of a cheque on account of difference in the drawer's signature attracts penal liability under Section 138 of the NI Act. - HELD THAT: - The Court examined Section 138 and the judicial precedents interpreting its scope. While Section 138 on its face refers to dishonour for insufficiency of funds or exceeding arrangement, the Supreme Court has adopted an expansive construction to effectuate the statute's remedial object, bringing within its ambit dishonour for reasons other than mere insufficiency. Although an earlier bench in Vinod Tanna had held that dishonour due to incomplete or non-matching signatures would not attract Section 138, a later coordinate-bench decision in Laxmi Dyechem (which is subsequent and treats Vinod Tanna as per incuriam) held that criminal proceedings should not be quashed where cheques were returned for non-matching signatures. Applying the later ratio, the Court rejected the petitioner's contention that difference in signature precludes application of Section 138 and held that the proceedings at the stage of cognizance could be continued. [Paras 11, 14, 15]

Contention that dishonour for difference in drawer's signatures does not constitute an offence under Section 138 is rejected; proceedings may continue.

Cheque issued as security versus discharge of debt or liability - Defences triable at trial and not on cognizance - Issuance of a cheque as security does not by itself exclude the applicability of Section 138; whether a cheque was issued only as security or in discharge of a debt is a triable issue not to be decided at cognizance or in petition under Article 226. - HELD THAT: - The Court reviewed authorities establishing that the expression 'any cheque' and 'other liability' in Section 138 bring within its scope cheques issued for varied purposes, including by guarantors or as security. Recent precedent confirms that a cheque given as security may be presented once the underlying liability is due, and failure to prove prior discharge or altered understanding constitutes a defence to be raised at trial. Accordingly, even if the cheque was issued as security pursuant to a memorandum of understanding, that fact does not ipso facto negate criminal liability; its veracity and effect are matters for trial. The trial Magistrate must therefore adjudicate these contentions on evidence rather than at the stage of taking cognizance. [Paras 16, 17, 18, 19, 20]

Claim that the cheque was issued merely as security and thus Section 138 is not attracted is not accepted as a matter of law; the factual/contention is remitted for trial as a triable defence.

Final Conclusion: Petition dismissed; the order of cognizance and issuance of process is sustained and the matter is directed to proceed to trial, with the trial court to decide the factual contentions regarding issuance of the cheque as security in accordance with law.

Presumption under Section 139 of the Negotiable Instruments Act - Burden on drawer to rebut presumption of legally enforceable debt - Alleged alteration of cheque date and limitation defence - Value of handwriting expert report without oral evidence - Re-appreciation of evidence by revisional court limited to perversity - Sentencing under Section 138 - need for deterrence; objection to fee bite sentence

Presumption under Section 139 of the Negotiable Instruments Act - Burden on drawer to rebut presumption of legally enforceable debt - Conviction under Section 138 of the N.I. Act sustained on the finding that the accused failed to rebut statutory presumption of legally enforceable debt. - HELD THAT: - Both trial Court and Appellate Court found that the accused did not dispute his signature on the cheque and that notice and complaint were within limitation. In terms of Section 139, once issuance of the cheque is admitted, a presumption arises that it was issued for discharge of a debt; it was for the accused to displace that presumption. Apart from alleging an alteration of the date, the accused did not produce evidence to show absence of any legally enforceable debt. The Handwriting Expert's report indicating alteration could not be given weight because the expert was not examined; no other evidence was led to establish that the cheque was not issued for a debt. The finding of guilt by the two Courts is not shown to be perverse, and therefore conviction is sustained. [Paras 12, 13, 15, 16]

Conviction under Section 138 maintained; accused failed to rebut presumption of legally enforceable debt.

Value of handwriting expert report without oral evidence - Handwriting expert report indicating alteration was held to be of no value since the expert was not examined. - HELD THAT: - The record contained a handwriting report suggesting alteration of the cheque date, but the handwriting expert was not called for cross examination or oral evidence. The Appellate Court correctly observed that in the absence of examination, no importance can be attached to the report. The accused's allegation of alteration therefore remained unsubstantiated by admissible oral evidence. [Paras 15]

Handwriting expert report not relied upon because the expert was not examined.

Re-appreciation of evidence by revisional court limited to perversity - Revisional interference with findings of the trial and appellate Courts was not warranted as there was no perversity in their appreciation of evidence. - HELD THAT: - The High Court noted that a revisional Court cannot re appreciate evidence unless the findings are perverse. Having regard to the admitted issuance of the cheque, the timing of notice and complaint, the absence of admissible evidence displacing the presumption under Section 139, and the treatment of the handwriting report, the judgments of the trial and Appellate Courts did not exhibit perversity warranting interference. [Paras 16]

No interference by revisional Court with findings of trial and Appellate Courts on evidence.

Sentencing under Section 138 - need for deterrence; objection to fee bite sentence - Order of the Appellate Court setting aside the substantive sentence of rigorous imprisonment and converting it into a fee bite sentence was set aside; substantive sentence of rigorous imprisonment for three months restored. - HELD THAT: - The Appellate Court had confirmed conviction but set aside the substantive sentence without recording cogent reasons; its observations referred to leniency based on submissions of age and handicap without documentary proof. The High Court observed that Section 138's penal policy requires sentences that give proper effect to deterrence and the object of the legislation; a fee bite sentence frustrates that object where the amount remains unpaid since 2004. In view of the lack of justification for the leniency shown, the Appellate Court's modification of substantive sentence was unwarranted and interfered with. [Paras 17, 18, 21]

Modification of substantive sentence by Appellate Court set aside; three months rigorous imprisonment awarded by trial Court restored.

Final Conclusion: The High Court dismissed the revision filed by the accused and allowed the revision filed by the complainant insofar as the Appellate Court had set aside the substantive sentence; conviction under Section 138 was upheld and the trial Court's order awarding three months rigorous imprisonment was restored.

Section 138 of the Negotiable Instruments Act - interest at 9% p.a. - special circumstances - compensation by way of fine/conviction - Kalamani Tex and Another v. P. Balasubramaniyan

Interest at 9% p.a. - special circumstances - compensation by way of fine/conviction - Section 138 of the Negotiable Instruments Act - Kalamani Tex and Another v. P. Balasubramaniyan - Whether the appellate court erred in not awarding interest at 9% p.a. and in confirming the compensation/fine awarded by the trial court under Section 138 NI Act. - HELD THAT: - The High Court examined the judgments of the trial court and the lower appellate court and the single contention pressed before this Court limited to non-award of interest at 9% p.a. It was noted that the trial court convicted and imposed imprisonment, fine and an order for payment of the cheque amount by way of compensation, and that the grievance about interest at 9% p.a. was raised for the first time before the lower appellate court. Reliance upon the Apex Court's observation in Kalamani Tex was considered; however, the Court held that in the absence of any evidence or pleading showing special circumstances warranting interest, neither the trial court nor the appellate court committed error by not awarding interest at the prescribed rate. The applicant was required to place on record the special circumstances in evidence before the trial court to found a claim for interest; failure to do so disentitled the applicant to relief on that ground. On the question of adequacy of compensation/fine, the High Court found no illegality or perversity in the orders of the courts below that would justify interference. [Paras 6, 7, 8, 9]

The objection to non-award of interest at 9% p.a. is rejected for want of pleaded or proved special circumstances; the conviction and orders of compensation/fine passed by the courts below are confirmed and the revision is dismissed.

Final Conclusion: Revision application dismissed; impugned judgments and orders of the trial court and the District and Sessions Court are not interfered with for lack of pleaded or proved special circumstances to claim interest at 9% p.a.

Compounding of offence under Section 138 of the Negotiable Instruments Act - Inherent powers under Section 482 of the Code of Criminal Procedure - Application of Damodar S. Prabhu guidelines for compounding after conviction - Condition of deposit with Legal Services Authority as pre condition for compounding

Compounding of offence under Section 138 of the Negotiable Instruments Act - Inherent powers under Section 482 of the Code of Criminal Procedure - Application of Damodar S. Prabhu guidelines for compounding after conviction - Impugned conviction under Section 138 N.I. Act quashed in view of amicable settlement between the parties and compounding permitted under the court's inherent jurisdiction. - HELD THAT: - The Court considered that the accused had been convicted by the trial court under Section 138 of the Negotiable Instruments Act but the complainant and accused have since amicably settled the dispute and the complainant has filed an affidavit stating no objection to quashing the conviction. Applying the ratio and guidelines of Damodar S. Prabhu as explicated in this Court's earlier order in Khokhar Iliyas Bismilla Khan, and recognising that offences under the N.I. Act are compoundable and primarily concern private parties, the Court held it would be in the interest of justice to exercise its inherent powers under Section 482 CrPC to quash the conviction rather than relegating the parties to appellate remedy. The Court therefore permitted compounding under the principles laid down by the Supreme Court and this Court's precedents and set aside the conviction and all consequential proceedings.

Impugned judgment and order of conviction dated 16.10.2021 and consequential proceedings are quashed and set aside.

Application of Damodar S. Prabhu guidelines for compounding after conviction - Condition of deposit with Legal Services Authority as pre condition for compounding - Compounding was permitted subject to the accused depositing the prescribed percentage of the cheque amount with the Legal Services Authority, as per the Damodar S. Prabhu guidelines applicable to High Court/appeal stage. - HELD THAT: - Relying on the guidelines in Damodar S. Prabhu, which prescribe graduated percentages for deposit when compounding is sought at successive appellate levels, the Court directed compliance with the percentage applicable to compounding before the High Court. Having noted the cheque amount and the complainant's consent, the Court ordered that the accused deposit the required sum with the Gujarat State Legal Services Authority within four weeks and produce the receipt; upon production, the order quashing conviction shall take effect.

Accused directed to deposit the prescribed percentage with the Gujarat State Legal Services Authority within four weeks; production of the receipt will give effect to the quashing order.

Final Conclusion: The criminal conviction and consequential proceedings arising from the trial court's order dated 16.10.2021 under Section 138 N.I. Act are quashed in view of the parties' amicable settlement; compounding is permitted on the condition that the accused deposits the prescribed percentage of the cheque amount with the Gujarat State Legal Services Authority within four weeks and produces the receipt, whereupon this order shall be given effect.

Section 138 of the Negotiable Instruments Act - requirement of notice and fifteen days period under proviso to section 138 - deemed service and presumption under Section 27 of the General Clauses Act - cognizance and limitation under section 142 of the Negotiable Instruments Act - maintainability of complaint filed prematurely and effect on subsequent trial - permission to institute a fresh complaint subject to condonation of delay

Section 138 of the Negotiable Instruments Act - requirement of notice and fifteen days period under proviso to section 138 - cognizance and limitation under section 142 of the Negotiable Instruments Act - deemed service and presumption under Section 27 of the General Clauses Act - maintainability of complaint filed prematurely and effect on subsequent trial - Complaint filed on 16.02.2013 was premature and not a complaint in the legal sense because the complainant failed to establish that the drawer had been afforded fifteen clear days from receipt of demand notice before filing, thereby vitiating cognizance and the subsequent trial. - HELD THAT: - The cheque was drawn on 08.01.2013 and dishonoured on 09.01.2013. A demand notice was sent by registered post through the complainant's advocate on 18.01.2013 and neither postal acknowledgement nor the envelope was returned. Applying the presumption of service under Section 27 of the General Clauses Act and the principle in Subodh S. Salaskar, the date of deemed service, in the absence of evidence to the contrary, is thirty days from issuance of the notice (i.e., 17.02.2013). Under clause (c) of the proviso to section 138 the drawer must be given fifteen days from receipt of notice to make payment (i.e., up to 04.03.2013). The complaint having been filed on 16.02.2013, it was instituted before the cause of action crystallised and therefore was not a valid complaint. The Appellate Court rightly held that the complainant failed to prove that the drawer had a clear fifteen days from receipt of the notice before filing; consequently cognizance taken by the trial court was bad in law and the resulting trial was vitiated. The Court relied upon and applied governing precedents including Yogendra Pratap Singh and Subodh S. Salaskar in reaching this conclusion.

The order of acquittal by the Appellate Court is sustained because the complaint was prematurely filed and cognizance taken by the trial court was invalid; leave to appeal is refused.

Permission to institute a fresh complaint subject to condonation of delay - maintainability of second complaint/condonation of delay - Whether the complainant may file a fresh complaint with an application for condonation of delay was left open for the trial court to consider; the High Court authorised filing of a fresh complaint with a condonation application within one month, to be decided in accordance with law. - HELD THAT: - The High Court, without expressing any view on merits, observed that if the complainant files a fresh complaint together with an application to condone delay within one month, the learned Magistrate shall consider it in accordance with the ratios laid down by the Supreme Court and this Court concerning maintainability of a second complaint on the same facts. This observation does not decide the merits of any such application but directs that statutory and judicial principles governing condonation and maintainability be applied by the Magistrate when such a petition is presented.

A fresh complaint coupled with a condonation application may be filed within one month and shall be dealt with by the Magistrate in accordance with law and established precedents; no further relief is granted by this Court now.

Final Conclusion: Leave to appeal against the Appellate Court's order of acquittal is refused; the acquittal is sustained because the original complaint was prematurely filed, and the petitioner is permitted to file a fresh complaint with a delay condonation application within one month for consideration by the trial court in accordance with law.