TaxTMI Updates e-Newsletter
Mar 30,2021

Rectification of mistake (Section 102) and scope limited to errors apparent on the face of the record - composite supply and principal supply test - exemption under Entry 3 and Entry 3A of Notification No. 12/2017 CT(R) with the 25% goods-value threshold - no reformatio in peius - persuasive value of advance rulings - debatable questions of law or fact not amenable to rectification

Rectification of mistake (Section 102) and scope limited to errors apparent on the face of the record - debatable questions of law or fact not amenable to rectification - Whether the ROM application under Section 102 disclosed a mistake apparent on the face of the record warranting rectification of the AAAR order No. KAR/AAAR-04/2020-21 dated 27th Sept 2020. - HELD THAT: - Section 102 permits amendment only to correct a patent, manifest and self-evident error which is apparent on the face of the record and does not require examination of evidence or argument. An error is not 'apparent' if its demonstration requires travelling beyond the record or engaging in debate. The Authority held that the matters raised in the ROM application involve issues on which reasonable differences of opinion exist and require consideration of facts and law already argued in appeal; such disputed points cannot be corrected under Section 102. The Authority applied the test from the cited Supreme Court authority to conclude that the applicant's contentions do not disclose the kind of glaring, self-evident mistake that Section 102 contemplates. [Paras 8, 14, 15]

ROM application does not disclose an error apparent on the face of the record and therefore cannot be entertained under Section 102.

No reformatio in peius - rectification of mistake (Section 102) and scope limited to errors apparent on the face of the record - Whether the appellate order put the appellant in a worse position than the advance ruling and thus required rectification. - HELD THAT: - The principle of no reformatio in peius prevents an appellate body from placing a party in a worse position by going beyond the subject-matter of the appeal where the other side has not appealed. The Authority found that the appeal before it encompassed the nature of supply and the applicable rate - matters that were in the original application and were contested on appeal. The Authority examined the terms of the contract and submissions and legitimately altered the characterization of the supply and the tax rate within the scope of issues before it; hence the appellant was not impermissibly prejudiced by the appellate order. [Paras 10, 11, 12]

The plea that the impugned order placed the appellant in a worse position is rejected; the modification was within the subject-matter of the appeal.

Composite supply and principal supply test - exemption under Entry 3 and Entry 3A of Notification No. 12/2017 CT(R) with the 25% goods-value threshold - Whether the Authority erred in its treatment of the contract as a composite supply with principal supply being service and in concluding that the appellant did not qualify for exemption under Entry 3 or Entry 3A (25% goods threshold). - HELD THAT: - The Authority revisited the terms of the ESCO agreement, the arguments advanced before the lower authority and on appeal, and the applicant's submissions regarding projected revenue and contractual clauses. Having considered these materials, the Authority concluded that the supply is a composite supply whose principal element is a service and that the appellant had not established entitlement to exemption under Entry 3 or Entry 3A. These conclusions involved contested questions of fact and law argued in appeal; such determinations are debatable and cannot be re-opened by way of rectification unless a patent error is shown. The ROM application therefore did not demonstrate a manifest mistake in the impugned findings on composite supply or the 25% criterion. [Paras 11, 13, 14]

No error apparent on the face of the record in the Authority's conclusions on composite supply and the appellant's non-entitlement to the claimed exemptions.

Persuasive value of advance rulings - rectification of mistake (Section 102) and scope limited to errors apparent on the face of the record - Whether non-consideration of advance rulings from other Authorities (such as VFS Global and Super Wealth Financial) amounted to a mistake apparent on the face of the record requiring rectification. - HELD THAT: - The Authority noted that the Maharashtra ruling (VFS Global) was on different facts and that the Odisha ruling relied upon was not placed before the Authority during the personal hearing and did not form part of the submissions. While advance rulings may have persuasive value, they are not binding precedent; non-consideration of other authorities' rulings on differing facts does not, by itself, constitute a patent error. The applicant's reliance on those rulings amounted to an attempt to re-open contested issues rather than to point to an obvious mistake in the impugned order. [Paras 13]

Non-consideration of the other advance rulings does not constitute a mistake apparent on the face of the record and does not warrant rectification.

Rectification of mistake (Section 102) and scope limited to errors apparent on the face of the record - Final disposition of the ROM application filed by M/s Karnataka State Electronics Development Corporation Limited. - HELD THAT: - After considering the application, written submissions, oral arguments and authorities relied upon, and applying the legal standard for rectification, the Authority found no patent error in its earlier order. The matters raised involve debatable points of law and fact already considered in the appeal and therefore are not amenable to correction under Section 102. [Paras 15, 16]

ROM application rejected and the AAAR order No. 04/2020-21 dated 27th Sept 2020 is not rectified.

Final Conclusion: The Appellate Authority rejected the application for rectification under Section 102, holding that the matters raised involved debatable questions of law and fact or issues within the scope of the appeal rather than patent, self evident errors; accordingly the AAAR order dated 27th September 2020 remains unaltered.

Jurisdictional conflict between Central and State GST authorities - Section 6(2)(b) of the WBGST Act - stay of proceedings - blocking of electronic credit ledger - vires of Rule 86A of the CGST Rules - vires of Section 16(2)(c) of the CGST Act

Jurisdictional conflict between Central and State GST authorities - Section 6(2)(b) of the WBGST Act - stay of proceedings - Validity of summons issued by State GST on October 19, 2020 - HELD THAT: - The court, on preliminary consideration, held that the summons issued by the State GST on October 19, 2020 are prima facie in violation of the allocation of jurisdiction under Section 6(2)(b) of the WBGST Act where proceedings by Central authorities are already pending. Having formed this prima facie view after hearing counsel for the parties, the court directed a stay of the summons and of any proceedings thereunder pending further adjudication.

The summons dated October 19, 2020 and any proceedings thereunder are stayed.

Blocking of electronic credit ledger - Section 6(2)(b) of the WBGST Act - Lawfulness of the State authorities' blocking of the electronic credit ledger - HELD THAT: - The court recorded the State authorities' contention that the blocking of the electronic credit ledger was effected while acting as agent of the Central authorities and that such blocking is not a 'proceeding' within the meaning of Section 6(2)(b). The court did not finally decide the legal correctness of the blocking; instead, it directed the parties to file affidavits so that the vires of the challenged provisions and related factual/contentions may be considered. The question is therefore left for adjudication after exchange of affidavits.

Issue reserved for further consideration after exchange of affidavits; no final determination made in the present order.

Vires of Rule 86A of the CGST Rules - vires of Section 16(2)(c) of the CGST Act - Challenge to the constitutional and statutory validity of Rule 86A (CGST Rules/WBGST Rules) and Section 16(2)(c) (CGST Act/WBGST Act) - HELD THAT: - The petitioners challenged the vires of Rule 86A and Section 16(2)(c). The court directed exchange of affidavits on the challenge to these provisions, specifying timelines for filing affidavits-in-opposition and replies, thereby deferring substantive adjudication of the validity of these provisions until the factual and legal material is placed before it.

Adjudication on the vires of the challenged provisions deferred; parties to exchange affidavits within the time directed.

Jurisdictional conflict between Central and State GST authorities - Permissibility of Central GST authorities continuing proceedings - HELD THAT: - While granting the stay in respect of the State-issued summons, the court clarified that the order does not restrain the Central GST authorities from proceeding in accordance with law or from continuing any proceedings already initiated by them. This clarification preserves the Central authorities' ability to act notwithstanding the interim relief granted against the State action.

Central GST authorities are not precluded from proceeding in accordance with law or from continuing proceedings already initiated by them.

Final Conclusion: The court granted an interim stay of the State GST summons dated October 19, 2020 as prima facie violative of the territorial/authority allocation under Section 6(2)(b) of the WBGST Act, left the question of blocking of the electronic credit ledger and the vires of Rule 86A and Section 16(2)(c) for determination after exchange of affidavits, and clarified that Central GST authorities may continue proceedings already initiated.

Interest under Section 50 to be levied on net tax liability - invalidity of issuance of FORM GST DRC 01 for recovery of interest under Section 50 - recovery of unpaid interest under Section 75(12) to be effected under Section 79 - requirement of issuance of notice in FORM GST DRC 07 as summary order for recovery

Interest under Section 50 to be levied on net tax liability - Interest under Section 50 of the CGST Act is to be levied on the net tax liability and not on the gross tax liability. - HELD THAT: - Having regard to the amendment proposed in clause 103 of the Finance Bill, 2021 and the proviso to Section 50 read as a whole, the Court held that interest payable under Section 50 is leviable only on that portion of tax which is paid by debiting the electronic cash ledger - i.e., on the net tax liability - and not on the gross tax liability. Consequently, a demand calculated on gross tax liability is not in accordance with law. [Paras 6]

Demand for interest calculated on gross tax liability is unsustainable; interest is chargeable only on the net tax liability.

Invalidity of issuance of FORM GST DRC 01 for recovery of interest under Section 50 - recovery of unpaid interest under Section 75(12) to be effected under Section 79 - requirement of issuance of notice in FORM GST DRC 07 as summary order for recovery - Issuance of FORM GST DRC 01 for recovery of interest under Section 50 was without authority of law; notice for recovery of unpaid interest must be in FORM GST DRC 07 and recovery is to be under Section 79 pursuant to Section 75(12). - HELD THAT: - Rule 142(1)(a) authorises uploading a summary in FORM GST DRC 01 only along with notices issued under specified sections (e.g., Sections 52, 73, 74, 76, 122-130); Section 50 is not among those sections. Section 75(12) expressly provides that unpaid self assessed tax or unpaid interest on such tax shall be recovered under Section 79. Rule 142(5) directs that a summary of orders under specified sections including Section 75 shall be uploaded in FORM GST DRC 07 specifying tax, interest and penalty. In view of these provisions, the Court concluded that the proper form for issuing a recovery notice for unpaid interest is FORM GST DRC 07 and that issuance of FORM GST DRC 01 for the purpose was without authority of law. [Paras 13, 15, 16, 17, 18]

FORM GST DRC 01 issued for recovery of interest under Section 50 is unlawful; respondents may initiate fresh proceedings in accordance with law and using FORM GST DRC 07 as appropriate.

Final Conclusion: Writ petition allowed: the impugned FORM GST DRC 01 is quashed and set aside; respondents are at liberty to initiate fresh proceedings in accordance with law, observing that interest under Section 50 is leviable only on net tax liability and recovery of unpaid interest must follow Section 75(12)/Section 79 procedure with notice in FORM GST DRC 07.

Summary order. The writ petitions were disposed of on withdrawal with liberty to avail alternative remedy and liberty to independently challenge Section 16(2)(c) of the Central Goods and Services Tax Act, 2017; no order as to costs; pending miscellaneous applications closed.

Reimbursement of differential tax arising from transition from VAT to GST - treatment of works contract as composite supply under GST - determination of GST-inclusive work value for balance work - revised guidelines for works contract under GST issued by State Government - supplementary agreement to reflect revised GST-inclusive work value - stay of coercive action pending administrative reconsideration

Reimbursement of differential tax arising from transition from VAT to GST - revised guidelines for works contract under GST issued by State Government - determination of GST-inclusive work value for balance work - supplementary agreement to reflect revised GST-inclusive work value - stay of coercive action pending administrative reconsideration - Whether the petitioner's grievance regarding non-reimbursement of additional tax liability arising from changeover to GST is to be adjudicated by the competent authority in the light of the State's revised guidelines dated 10th December, 2018, and whether interim protection should be granted. - HELD THAT: - The Court noted that the petition raises the common difficulty faced by contractors when tenders invited before 1st July, 2017 were executed partly or wholly after the advent of GST and that the State has issued revised guidelines dated 10th December, 2018 prescribing the method to determine GST-exclusive and GST-inclusive values for balance works, the process for adjustment by application of tender premium/discount, and execution of a supplementary agreement where required. Rather than deciding the substantive entitlement on merits, the Court directed the petitioner to file a comprehensive representation within four weeks ventilating the grievance and required the competent authority to consider and dispose of the representation expeditiously and in the light of the revised guidelines. The Court also recorded that if the petitioner is aggrieved by the authority's decision, remedy by way of challenge remains open. As an interim protective measure, the Court prohibited coercive action against the petitioner until 26th March, 2021. [Paras 8, 9, 10, 11]

Petition disposed by directing fresh representation and administrative reconsideration in terms of the revised guidelines dated 10th December, 2018, with interim protection from coercive action until 26th March, 2021.

Final Conclusion: The writ petition was disposed of by directing the petitioner to make a comprehensive representation within four weeks and by obliging the competent authority to consider and decide the representation expeditiously in accordance with the State's revised guidelines dated 10th December, 2018; the petitioner was granted interim protection from coercive action until 26th March, 2021, and remains free to challenge the authority's decision.

Eligibility for input tax credit - condition precedent for entitlement to ITC - denial of ITC for supplier default - mismatch between GSTR-3B and GSTR-2A - interim stay of recovery proceedings - deposit for filing appeal under GST

Interim stay of recovery proceedings - deposit for filing appeal under GST - Whether interim relief in the form of stay of operation of assessment and recovery orders should be granted. - HELD THAT: - The Court considered the petitioners' prayer for interim relief against orders dated 16.11.2020 confirming assessment and directing payment of tax, interest and penalty. Petitioners relied on their having deposited a portion of the disputed tax and the statutory appeal mechanism which, subject to conditions, operates to stay recovery. The Court found no illegality warranting interim protection and observed that the conditions for grant of ITC under the statute had not been satisfied. In these circumstances, and having heard counsels for all parties, the Court concluded that no interim order should be granted. [Paras 10, 11, 12]

Applications for interim relief are dismissed and no stay of the impugned orders is granted.

Eligibility for input tax credit - condition precedent for entitlement to ITC - denial of ITC for supplier default - mismatch between GSTR-3B and GSTR-2A - Court's view on the statutory condition for claiming Input Tax Credit under the CGST Act and its application for interim relief. - HELD THAT: - The Court noted that Section 16(2)(c) of the CGST Act makes the amount claimed as ITC subject to the condition that it is actually paid to the Government (read with the specified Sections). It was acknowledged that the petitioners had paid tax but that the respondent had rejected ITC on account of mismatch between ITC claimed in Form GSTR-3B and ITC reflected in Form GSTR-2A, and on account of supplier default in paying tax. The Court treated the afore mentioned statutory condition as not fulfilled for the purposes of the interim application and relied on that conclusion in refusing interim relief. The constitutional challenge to Section 16(2)(c) and the validity of analogous VAT decisions were noted but were not adjudicated at the interim stage. [Paras 5, 7, 10, 11]

Observed that the condition precedent in Section 16(2)(c) for taking ITC was not fulfilled; constitutional challenge to the provision not decided on the interim application.

Final Conclusion: Interim applications for stay of the impugned assessment and recovery orders are dismissed; respondents to file counter affidavits and the matters are listed after three weeks for further proceedings.

Deductions/exclusions from export turnover to be excluded from total turnover - allowability of deduction under Section 10A for an existing business transferred to an STPI - order of computation - deduction under Section 10A/10B to be considered before set off of brought forward business loss and unabsorbed depreciation - deductions under Chapter IV to be applied at computation of gross total income and not after set off under subsequent computation stages

Deductions/exclusions from export turnover to be excluded from total turnover - Whether expenses excluded from export turnover must also be excluded from total turnover when computing deduction under Section 10A. - HELD THAT: - The Court held that expenses which are excluded from export turnover (such as freight, telecommunication, insurance and expenses in foreign exchange for providing technical services abroad) must, for the purpose of application of the formula under Section 10A, also be excluded from total turnover in the same proportion. The Court adopted the reasoning that allowing such deductions only from export turnover but not from total turnover would render the statutory formula unworkable and lead to absurd consequences, and therefore the same proportionate exclusion applies to total turnover as to export turnover. [Paras 7]

Expenses excluded from export turnover are to be excluded from total turnover in the same proportion when computing deduction under Section 10A.

Allowability of deduction under Section 10A for an existing business transferred to an STPI - Whether an assessee which has transferred the place of an existing business to an STPI (and not set up a new business) is eligible for deduction under Section 10A. - HELD THAT: - The Court accepted the conclusion that a mere transfer of place of business to a new location within an STPI, without formation of a new business by splitting up or reconstruction, does not disentitle the undertaking to deduction under Section 10A. The tribunal's finding that the assessee only shifted its business premises and thereafter obtained necessary approvals, and that retention of some plant and machinery charged to financial institutions does not contravene the prohibitions in the provision, was upheld. Consequently, the assessee is entitled to the deduction under Section 10A. [Paras 7]

A transfer of the place of an existing business to an STPI (not a setting up of a new business) does not preclude entitlement to deduction under Section 10A.

Order of computation - deduction under Section 10A/10B to be considered before set off of brought forward business loss and unabsorbed depreciation - deductions under Chapter IV to be applied at computation of gross total income and not after set off under subsequent computation stages - Whether brought forward business loss and unabsorbed depreciation should be set off prior to grant of deduction under Section 10A, or whether deduction under Section 10A is to be considered before such set offs. - HELD THAT: - The Court held that the proper method is to allow deductions under Chapter IV (including Section 10A/10B) in computing the gross total income of the eligible undertaking before application of set offs such as brought forward business losses and unabsorbed depreciation. The approach of first setting off carry forward depreciation and unabsorbed depreciation to reduce income to nil and thereby deprive the assessee of the Section 10A deduction was held to be contrary to the settled principle of computation and was rejected. [Paras 7]

Deductions under Section 10A/10B must be applied in computing the gross total income of the eligible undertaking before setting off brought forward business loss and unabsorbed depreciation.

Final Conclusion: Following earlier decisions of this Court and the Supreme Court, the questions of law were answered against the Revenue and in favour of the assessee; the Tax Case Appeal is dismissed.

Characterisation of receipts as capital or revenue - sale of carbon credits (CER) as capital receipt - treatment of capital receipts for computation of total income and deduction under Section 80IA - appellate authority/Tribunal power to decide questions of law and adjust tax liability irrespective of points pleaded - precedential effect of earlier judicial decisions on the existing legal position

Sale of carbon credits (CER) as capital receipt - characterisation of receipts as capital or revenue - treatment of capital receipts for computation of total income and deduction under Section 80IA - precedential effect of earlier judicial decisions on the existing legal position - Receipts from sale of carbon emission reduction credits are capital receipts and not taxable as business income; consequently such receipts do not enter gross total income for the purpose of deduction under Section 80IA. - HELD THAT: - The Court applied and followed earlier authorities which held that sale of carbon credits is not an offshoot of the assessee's business activity but arises from environmental measures and does not generate an asset in the course of business. Reliance was placed on the line of decisions (including the Andhra Pradesh High Court decision in My Home Power Ltd.) and principles distinguishing capital and revenue receipts: whether the receipt arises from an enduring asset or merely facilitates trading operations. The Court rejected the Revenue's contention that those precedents could not be relied upon because they post-dated the assessment, observing that judicial declarations interpret the statute as it always stood and are therefore applicable retrospectively to the legal position. On that basis the Court held that once the receipt is capital in nature it falls outside the definition of total income relevant to Section 80IA, so an asserted Section 80IA claim (or the absence thereof) is a non-issue for characterisation of the receipt. The Court also noted legislative clarification by later insertion of Section 115BBG (effective 01.04.2018) but accepted that prior uncertainty could not defeat the assessee's entitlement where judicial precedent established the capital nature of such receipts. [Paras 4, 6, 7, 38, 40]

Substantial question of law answered in favour of the assessee: sale of carbon credits is a capital receipt and not taxable as business income; accordingly it does not form part of gross total income for Section 80IA purposes.

Appellate authority/Tribunal power to decide questions of law and adjust tax liability irrespective of points pleaded - precedential effect of earlier judicial decisions on the existing legal position - The Tribunal and appellate authorities are empowered and obliged to decide questions of law and adjust the taxpayer's liability even if the point was not earlier decided by the Assessing Officer or was not the precise ground advanced. - HELD THAT: - The Court reviewed authorities establishing that appellate tax authorities have broad powers to determine all questions of fact and law relevant to assessment and to adjust tax liabilities accordingly, and that they are not restricted to points specifically pleaded before lower authorities. Applying that principle, the Court held that the Tribunal ought to have applied the settled law on the capital nature of carbon credit receipts even if the Assessing Officer or CIT(A) did not decide that point; failure to do so amounted to a perverse conclusion. The Court emphasised that appellate bodies correct the assessment to accord with law and that the existence of a concurrent Section 80IA claim could not justify ignoring the determinative legal characterisation of the receipts. [Paras 32, 33, 34, 37, 38]

Tribunal was bound to apply the law and decide the question of characterisation of carbon credit receipts notwithstanding the way the claim was presented before the Assessing Officer; failure to do so warranted answering the substantial question in favour of the assessee.

Final Conclusion: Following earlier decisions, the Court dismissed the Revenue's appeal: receipts from sale of carbon credits for AY 2010-11 are capital receipts and not taxable as business income, and the Tribunal should have applied settled law to exclude such receipts from gross total income (and hence from Section 80IA computation). No costs.

Contempt jurisdiction - scope of contempt proceedings - power to issue directions beyond finding of contempt - compounding of offence under Section 279 of the Income Tax Act - applicability of subsequent administrative circulars in earlier proceedings

Contempt jurisdiction - scope of contempt proceedings - power to issue directions beyond finding of contempt - Whether the learned Contempt Court, after holding there was no contempt, could nonetheless issue directions to the Department to reconsider the compounding application. - HELD THAT: - The High Court applied the settled principle that a court exercising contempt jurisdiction cannot traverse beyond the order the subject-matter of contempt by testing its correctness or issuing fresh directions which amount to review or addition to the original order. Relying on the law that contempt proceedings are not a forum to reappraise or rewrite the underlying order, the Court held that issuing directions to reconsider the compounding application after finding no contempt exceeded the jurisdiction of the Contempt Court. Consequently, the impugned directions issued in paras 37 to 40 and the observations in paras 32 to 36 leading to those directions were set aside. [Paras 14, 17, 18]

Directions issued by the Contempt Court beyond the scope of contempt proceedings set aside; those observations and directions vacated.

Applicability of subsequent administrative circulars in earlier proceedings - compounding of offence under Section 279 of the Income Tax Act - Whether the Contempt Court could direct application of the CBDT circular dated 14.06.2019 to the respondent's compounding application when that circular post-dated the original proceedings and was not placed before the Writ Court. - HELD THAT: - The Court noted that the liberalised CBDT circular came into effect on 17.06.2019 and was not in force when the original order under challenge was passed; the circular was neither pleaded nor argued in the contempt proceedings and the Revenue had no opportunity to address its applicability. The Court held that the Contempt Court, having not framed proceedings on that question, could not validly direct application of the new circular while disposing of a contempt petition which found no breach. For these reasons the directions premised on the 14.06.2019 circular were held to be beyond the scope of the contempt adjudication and were accordingly set aside. [Paras 15, 16, 17]

Directions premised on application of the CBDT circular dated 14.06.2019 set aside as beyond the scope of the contempt proceedings.

Compounding of offence under Section 279 of the Income Tax Act - Disposition as to the respondent's remedy following vacation of the Contempt Court's directions. - HELD THAT: - While vacating the extra-judicial directions, the High Court recognised that the respondent should not be left remediless. The Court granted the respondent liberty to present a fresh compounding petition under Section 279 of the Income Tax Act within 30 days and directed that such petition be considered in accordance with law within a reasonable time, not later than 90 days from presentation in full form. This preserves the respondent's right to seek compounding but leaves the merits and applicability of any circular or guideline to be considered in the appropriate proceedings. [Paras 17, 18]

Liberty granted to file a fresh compounding petition; fresh petition to be considered in accordance with law within 90 days of presentation.

Final Conclusion: Writ appeal allowed; directions and observations of the Contempt Court in paras 32-40 (notably paras 37-40) set aside as beyond the scope of contempt jurisdiction; respondent granted liberty to file a fresh compounding petition under Section 279 of the Income Tax Act, to be considered in accordance with law within 90 days of presentation.

Genuineness of purchases - bogus purchases - burden of proof on the Revenue to rebut documentary and bank evidence - presumption from undisputed sales corresponding to purchases - appellate interference with concurrent findings of fact

Genuineness of purchases - bogus purchases - presumption from undisputed sales corresponding to purchases - Deletion of addition made by the Assessing Officer on account of alleged bogus purchases of Rs. 2,04,36,629/- was upheld. - HELD THAT: - The Tribunal sustained the CIT(A)'s factual conclusion that the purchases in question were genuine. The Assessing Officer had doubted purchases from three sellers on the basis of locked premises and familial relationships, but did not disturb the assessee's books, sales figures, or assert out-of-book transactions. The CIT(A) recorded that the sellers confirmed sales, the buyer confirmed purchases, payments were made by account-payee cheques, the sellers received cheques in their bank accounts, and evidence of dispatch and receipt of goods was produced. The Revenue failed to place cogent evidence to rebut these materials or to show that the sales recorded by the assessee were not genuine. In these circumstances the Tribunal found no ground to interfere with the appellate authority's acceptance of the documentary and bank evidence and therefore affirmed deletion of the addition. [Paras 7, 8, 9]

Revenue's addition for alleged bogus purchases deleted; appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s deletion of the disallowance of purchases, holding that the Assessing Officer's doubts were not supported by cogent evidence and that the documentary and bank evidence together with undisputed sales established the genuineness of the purchases for Assessment Year 2014-15.

Search and seizure - incriminating material - section 153A proceedings - abatement of pending reassessment proceedings - disallowance under section 14A - application of the ratio in Kabul Chawla

Section 153A proceedings - incriminating material - abatement of pending reassessment proceedings - disallowance under section 14A - application of the ratio in Kabul Chawla - Whether the disallowance made under section 14A in proceedings initiated under section 153A for AY 2009-10 was sustainable where no incriminating material relevant to the addition was found during the search and no assessment/reassessment proceedings were pending as on the date of the search. - HELD THAT: - The Tribunal applied the two-part test derived from the decision in Kabul Chawla: (a) absence of any incriminating material found during the search relevant to the addition, and (b) whether any assessment or reassessment proceedings were pending in the relevant assessment year on the date of the search. The Panchanama showed the search in question was conducted on 30/01/2013. The Assessing Officer's notice under section 148 was issued on 23/10/2013, i.e., after the date of search, and therefore no reassessment/assessment proceedings were pending on the date of search so as to abate under the proviso to section 153A. The assessment order contained no reference to any incriminating material forming the basis for the section 14A disallowance. Applying Kabul Chawla, the Tribunal held that in the absence of incriminating material and where no proceedings were pending on the date of search, an addition under section 14A made in section 153A proceedings could not be sustained. The Tribunal also noted consistent earlier treatment in the assessee's AY 2008-09 where identical disallowance was deleted on the same principles. [Paras 6]

The disallowance under section 14A made in proceedings under section 153A for AY 2009-10 is unsustainable and is deleted; the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s deletion of the section 14A addition for AY 2009-10, holding Kabul Chawla squarely applicable because no incriminating material was found and no assessment/reassessment proceedings were pending on the date of search; the Revenue's appeal is dismissed and the assessee's cross-objections are rendered infructuous and dismissed.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - reclassification of income from business loss to speculation loss - bona fide belief in tax treatment - distinctness of assessment and penalty proceedings - application of explanation to section 73 regarding speculation business

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - reclassification of income from business loss to speculation loss - bona fide belief in tax treatment - Whether penalty under section 271(1)(c) could be levied for the assessee's claim of business loss on sale of shares which was subsequently reclassified as speculative loss - HELD THAT: - The Tribunal held that mere reclassification of the head of income by the assessing officer from business loss to speculative loss does not automatically indicate concealment of particulars or furnishing of inaccurate particulars attracting section 271(1)(c). Assessment and penalty proceedings are distinct; findings in assessment are relevant but not conclusive in penalty proceedings. Where the assessee had a bona fide belief that the loss from share transactions was a business loss and had placed relevant material before the authorities contesting applicability of the explanation to section 73, the change of nature of the loss in assessment did not establish deliberate concealment or inaccurate particulars. Reliance on precedent (including the decision cited in CIT v. Aretic Investment Pvt. Ltd.) supports that a bona fide claim treated differently in assessment cannot, by itself, sustain penalty under section 271(1)(c). Applying these principles, the Tribunal found that the conditions for levy of penalty were not satisfied and deletion of the penalty was warranted. [Paras 7, 13, 14]

Penalty under section 271(1)(c) deleted as the assessee had a bona fide belief in treating the loss as business loss and mere reclassification to speculative loss did not amount to concealment or furnishing of inaccurate particulars.

Final Conclusion: The appeal is allowed; the penalty imposed under section 271(1)(c) is deleted because the Tribunal concluded that the assessee had a bona fide belief in its tax treatment and mere reclassification of the loss to speculation did not constitute concealment or inaccurate particulars.

Retrospective applicability of curative amendment to section 40(a)(i) - Deeming provision treating tax as deducted and paid on date of furnishing of payee's return - Relief under the proviso to section 201(1) where payee files return, accounts for sum and pays tax - Chargeability of income under Article 7 of the India Israel Double Taxation Avoidance Agreement - Disallowance under section 40(a)(i) for failure to deduct tax at source

Retrospective applicability of curative amendment to section 40(a)(i) - Deeming provision treating tax as deducted and paid on date of furnishing of payee's return - Amendment inserting the second proviso to section 40(a)(i) is retrospective and applicable to the assessments in issue. - HELD THAT: - The Tribunal examined the legislative purpose and the text of the second proviso to section 40(a)(i) (inserted w.e.f. 01.04.2020) which deems tax to have been deducted and paid on the date of furnishing of the return by the payee where the deductor is not an assessee in default under the first proviso to section 201(1). The Bench found the proviso to be pari materia with an earlier proviso to section 40(a)(ia) which High Courts (including Bombay and Delhi) have held to operate retrospectively from 01.04.2005 as a curative measure removing an anomaly. Viewing the amendment as remedial/curative and introduced to remove an anomaly similar to that addressed earlier, the Tribunal held that the amendment to section 40(a)(i) should likewise be given retrospective effect and applied it to the assessment year under consideration. [Paras 16, 17]

The amendment to section 40(a)(i) is applicable retrospectively and the deeming relief in the second proviso applies.

Relief under the proviso to section 201(1) where payee files return, accounts for sum and pays tax - Chargeability of income under Article 7 of the India Israel Double Taxation Avoidance Agreement - Disallowance under section 40(a)(i) for failure to deduct tax at source - Disallowance under section 40(a)(i) made by the Assessing Officer is not sustainable on the facts and is set aside. - HELD THAT: - On the record the payee (Celltick Israel) had furnished its return of income, taken the sums into account, produced computation/return and an accountant's certificate as required by the proviso to section 201(1). The Tribunal also took into account the coordinate-bench finding that the income of the payee was not chargeable to tax in India under Article 7 of the India Israel DTAA. Given that the payee had complied with the conditions of the proviso to section 201(1) and, on the material before the Tribunal, the income was not taxable in India, the assessee could not be regarded as an assessee in default and the disallowance under section 40(a)(i) could not stand. Consequently the assessment order under section 143(3) was set aside insofar as it sustained that disallowance. [Paras 15, 17, 18]

The disallowance under section 40(a)(i) is set aside as the payee complied with proviso to section 201(1) and the income was not chargeable to tax in India.

Final Conclusion: The appeal is partly allowed: the Tribunal held that the second proviso to section 40(a)(i) is retrospective and, on the facts (payee's return, accountant's certificate and non taxability under the India Israel DTAA), the assessee is not an assessee in default and the disallowance under section 40(a)(i) is set aside; the original substantive grounds were not pressed and are rendered infructuous.

Additions made on estimate basis - estimation of income - concealment of income - furnishing of inaccurate particulars of income - penalty under section 271(1)(c) of the Income tax Act - absence of mens rea for imposition of penalty under section 271(1)(c)

Additions made on estimate basis - concealment of income - furnishing of inaccurate particulars of income - penalty under section 271(1)(c) of the Income tax Act - Sustainability of penalty under section 271(1)(c) where additions are made on an estimated basis - HELD THAT: - The Tribunal found that the Assessing Officer levied penalty on estimation basis without concrete evidence of actual concealment. Under the statutory test, section 271(1)(c) applies only where the assessee has concealed particulars of income or furnished inaccurate particulars thereof. An enhancement of gross profit or an estimated addition by the AO, without proof of active concealment or furnishing of inaccurate particulars, cannot be equated to concealment or inaccurate particulars of income. The Tribunal noted and relied upon a series of High Court and Coordinate Bench decisions holding that penalties are not sustainable where additions are made on estimates. Applying these precedents to the facts, and on consideration of the totality of circumstances, the Tribunal concluded there was no active concealment by the assessee and that the estimation-based addition did not justify initiation or confirmation of penalty under section 271(1)(c). [Paras 6, 8, 9]

Penalty under section 271(1)(c) deleted as additions made on estimate basis do not constitute concealment or furnishing of inaccurate particulars

Final Conclusion: The appeal is allowed; the penalty imposed under section 271(1)(c) for AY 2009-10 is deleted and the grounds raised by the assessee are upheld.

Rectification of apparent mistakes under section 254(2) of the Income-tax Act - assessment under section 153A consequent to search under section 132 - additions in completed and non-abated assessments in absence of incriminating material - reliance on rough diary entries without independent corroboration - remand for limited verification of nexus and corroboration by the Assessing Officer - entertainability of miscellaneous applications within four years

Assessment under section 153A consequent to search under section 132 - additions in completed and non-abated assessments in absence of incriminating material - rectification of apparent mistakes under section 254(2) of the Income-tax Act - Whether additions made in AY 2003-04 to 2006-07 (assessments that stood completed/non-abated on date of search) could be sustained in absence of any incriminating material seized. - HELD THAT: - The Tribunal found that the specific ground contesting additions in respect of assessments which stood concluded on the date of search remained undecided and warranted rectification under section 254(2). The Bench recorded that settled precedent requires that additions in respect of concluded and non-abated years can be made only if incriminating material relating to those years is found during search. The factual material placed by the assessees showed that, except in the case of diary entries in one assessee, no incriminating material had been seized for AY 2003-04 to 2006-07. In the interest of justice and because the point had not been adjudicated, the matter was set aside to the Assessing Officer for limited examination: (a) whether any incriminating material connecting the seized material to the additions for AY 2003-04 to 2006-07 exists, and (b) whether those years were in fact concluded and non-abated. The AO is directed to afford reasonable opportunity of hearing and thereafter proceed in accordance with law; if no nexus or incriminating material is found, additions should not be sustained. [Paras 11, 12, 13, 14]

The issue is allowed for statistical purposes and set aside to the file of the Assessing Officer for limited verification and fresh action as indicated.

Reliance on rough diary entries without independent corroboration - remand for limited verification of nexus and corroboration by the Assessing Officer - Whether additions based on rough jottings in seized diaries could be sustained in absence of independent corroborative evidence (including in AY 2004-05 and AY 2009-10 for the assessee Arun Sahlot). - HELD THAT: - The Tribunal recorded that the assessee consistently denied having made the alleged payments shown in the seized diaries and that no adequate independent corroboration was brought on record by the AO. The Bench reviewed the facts concerning the seized diaries, the assessee's affidavit and statements, and authorities establishing that additions cannot be based on mere surmise from rough jottings without nexus or corroboration. Given that the point had not been decided earlier, the Tribunal set aside the diary-based additions to the AO for fresh examination. The AO is directed to give reasonable opportunity of being heard and may make additions only if a proper nexus between diary entries and actual transactions is established by corroborative material; otherwise no addition should be made. [Paras 28, 29, 30, 31]

Grounds challenging diary-based additions are allowed for statistical purposes and remanded to the Assessing Officer for fresh examination limited to establishing nexus and corroboration.

Entertainability of miscellaneous applications within four years - rectification of apparent mistakes under section 254(2) of the Income-tax Act - Whether the Miscellaneous Applications filed under section 254(2) were within time and therefore maintainable. - HELD THAT: - The Tribunal accepted the assessee's submission supported by the jurisdictional High Court decision that the MAs were filed within the four-year period applicable at the relevant time. Documentary chart and affidavits established filing within the stipulated period. Consequently the MAs were entertained and held fit for adjudication on the merits. [Paras 2, 3]

The Miscellaneous Applications are held to be within time and are entertained for adjudication.

Final Conclusion: The Miscellaneous Applications under section 254(2) are entertained as within time. Two common issues (additions in concluded/non-abated years lacking incriminating material; additions based on diary jottings without independent corroboration) which remained undecided are allowed for statistical purposes and set aside to the Assessing Officer for limited fresh examination to verify nexus and corroboration; other findings of the Tribunal remain intact.

Retraction of disclosure made during search - onus on revenue after retraction supported by documentary evidence - acceptance of cash-in-hand in earlier assessment as estoppel - addition treating surrendered cash as undisclosed income

Retraction of disclosure made during search - onus on revenue after retraction supported by documentary evidence - acceptance of cash-in-hand in earlier assessment as estoppel - addition treating surrendered cash as undisclosed income - Whether the addition of Rs. 15,02,020/- on account of alleged undisclosed cash surrendered at the time of search was justified where the assessee retracted the earlier full surrender before completion of assessment and produced documentary evidence of cash-in-hand. - HELD THAT: - The Tribunal examined whether a partial retraction of the surrender made during search-manifested by offering a lower amount in the return filed under notice and supported by books/balance-sheet cash figures-should be accepted and whether the burden then shifts to the Department. The assessee filed returns in response to notice u/s 153A and produced scrutinized returns for AY 2016-17 showing aggregate cash-in-hand of Rs. 16,50,360/- in the firm and related individuals. The retraction was made before completion of assessment and was supported by documentary evidence of cash balances as on 31.03.2016. The Tribunal applied the principle that where a retraction is supported by prepared books and documentary material, the onus shifts to the revenue to cogently rebut that explanation. The Tribunal also observed that the Assessing Officer had earlier scrutinized and completed assessments for AY 2016-17 without making additions discrediting the asserted cash position; thus, in the absence of any contemporaneous action to challenge those cash figures, the Department is deemed to have accepted them. Applying these considerations, the Tribunal found that the documented cash-in-hand as on 01.04.2016 was sufficient to account for the difference of Rs. 15,02,020/- between the cash seized and the amount offered in the return, and therefore the addition was not justified. [Paras 11, 12, 13, 14]

The addition of Rs. 15,02,020/- is deleted; the finding of Ld. CIT(A) is set aside and Grounds Nos.1-4 are allowed.

Final Conclusion: Appeal allowed - the Tribunal deleted the addition of Rs. 15,02,020/- relating to undisclosed cash for Assessment Year 2017-18, holding that the assessee's retraction supported by documentary evidence shifted the onus to the revenue and that the accepted cash-in-hand position sufficed to explain the shortfall.

Remand for verification and reconsideration - failure to consider evidence - deduction denial under investment-linked incentive provision - disallowance as not pressed - allowance for statistical purposes

Remand for verification and reconsideration - failure to consider evidence - Discrepancies between income reported by the assessee and amounts reflected in Form 26AS, including alleged unreported receipts and loan receipts (Grounds 2 to 6). - HELD THAT: - The Tribunal found that the assessee had filed invoices, ledger accounts and related documents in the paper book which, according to the assessee, were previously placed before the AO and the CIT(A). The CIT(A) recorded that no fresh evidence was produced and did not seek a remand report from the AO. Given the record placed before the Tribunal and the CIT(A)'s failure to examine or obtain verification of that material, the Tribunal considered it appropriate to remit Grounds 2 to 6 to the Assessing Officer for verification and reconsideration in accordance with law. [Paras 10]

Grounds 2 to 6 are remitted to the file of the Assessing Officer for verification and reconsideration; remand allowed for statistical purposes.

Remand for verification and reconsideration - deduction denial under investment-linked incentive provision - failure to consider evidence - Allowability of deduction under section 80IC in respect of income from the trading unit and related interest income claimed as business-related (Grounds 8 and 9). - HELD THAT: - The Tribunal recorded that the assessee had submitted account details of the trading/head office and other documentary material in the paper book, which were not considered by the CIT(A) nor was a remand ordered to verify those documents. Because the CIT(A) confirmed the assessment without examining or obtaining verification of the evidence, the Tribunal deemed it fit to remit the issue for de novo consideration by the Assessing Officer in accordance with law. [Paras 11]

Grounds 8 and 9 are remitted to the file of the Assessing Officer for fresh consideration; remand allowed for statistical purposes.

Disallowance as not pressed - Disallowance brought under section 36(1)(va) in respect of employee contributions to provident fund and ESI (Ground No.7). - HELD THAT: - The assessee's counsel informed the Tribunal that Ground No.7 was not pressed in view of subsequent legislative amendment. The Tribunal therefore recorded that the ground is not pressed and rejected it accordingly. [Paras 8]

Ground No.7 is not pressed and is rejected.

Final Conclusion: The appeal is treated as allowed for statistical purposes; Grounds 2-6 and 8-9 are remitted to the Assessing Officer for verification and reconsideration in accordance with law, and Ground 7 is not pressed and rejected.

Condonation of delay - dismissal in limine for delay - revision under section 263 - remand for fresh adjudication - capital v. revenue nature of grants-in-aid - deduction under section 80P(2)(d) - interpretation of restrictive proviso excluding co-operative banks - beneficial construction of taxing provision in favour of assessee

Condonation of delay - dismissal in limine for delay - Application for condonation of 606 days' delay in filing appeal and admissibility of ITA No.43/VIZ/2020 - HELD THAT: - The Tribunal applied settled principles governing condonation of delay, emphasising that proof of 'sufficient cause' is a condition precedent to exercise discretion. It examined the assessee's application and supporting affidavit which asserted misunderstanding of the availability of appeal against the Pr.CIT's revision order and reliance on earlier counsel. The Tribunal found the explanation to be an afterthought prompted by observations in the CIT(A)'s order, and held that the assessee's conduct showed inaction and lack of diligence. On the totality of facts the averments failed to establish sufficient cause to justify condonation of 606 days' delay. Exercising its discretion, the Tribunal refused to condone the delay and dismissed the appeal in limine. [Paras 5, 6]

Application for condonation of delay rejected; ITA No.43/VIZ/2020 dismissed in limine.

Capital v. revenue nature of grants-in-aid - revision under section 263 - remand for fresh adjudication - Whether grants in aid received by the assessee are capital or revenue receipts and the proper forum to adjudicate that question - HELD THAT: - The Tribunal examined the Pr.CIT's revision order under section 263 and the consequential assessment order. It held that the Pr.CIT's direction set aside the assessment for redoing it after giving the assessee a reasonable opportunity, and did not expressly direct the AO to determine the issue in a particular manner or mandate a specific addition. Consequently the AO retained authority to determine the issue afresh. The Tribunal found that the CIT(A) had misconstrued the scope of the Pr.CIT's directions and erred in treating the matter as one which could not be examined before the CIT(A). In view of this, the Tribunal set aside the CIT(A)'s conclusion affirming the characterisation and remitted the grants in aid issue to the file of the CIT(A) for fresh decision in accordance with law, uninfluenced by observations in the Pr.CIT's order, and after affording proper opportunity to the assessee. [Paras 11]

Grants in aid issue remitted to the file of the CIT(A) for fresh adjudication in accordance with law.

Deduction under section 80P(2)(d) - interpretation of restrictive proviso excluding co-operative banks - beneficial construction of taxing provision in favour of assessee - Allowability of deduction under section 80P(2)(d) for interest earned by the co operative society from deposits with Krishna District Co operative Central Bank - HELD THAT: - The Tribunal considered competing authorities and statutory language, including the proviso introduced by section 80P(4). While lower authorities relied on decisions excluding co operative banks from section 80P benefits, the Tribunal followed the Karnataka High Court decision in Pr. CIT v. Totagars Co operative Sale Society (2017) 392 ITR 74 and subsequent appellate principles favouring a beneficiary construction of benevolent taxing provisions. The Tribunal observed that a co operative bank is a species of co operative society and, on the facts, interest was earned from a co operative society bank; moreover the revenue did not dispute that KDCCB is a co operative society. Applying the principle that ambiguous taxing provisions should be construed in favour of the assessee, the Tribunal set aside the disallowance and directed the AO to allow the deduction claimed under section 80P(2)(d). [Paras 13]

Deduction under section 80P(2)(d) of the Act allowed; AO directed to allow the claimed deduction of Rs. 97,88,434/-.

Final Conclusion: The Tribunal dismissed ITA No.43/VIZ/2020 in limine for want of sufficient cause to condone 606 days' delay. ITA No.42/VIZ/2020 was partly allowed: the grants in aid issue is remitted to the CIT(A) for fresh decision, while the disallowance under section 80P(2)(d) is set aside and the deduction is directed to be allowed.

Weighted deduction under section 35(2AB) - requirement of DSIR certification/Form No.3CL prior to 01.07.2016 - applicability of Rule 6(7A)(b) w.e.f. 01.07.2016 - deduction under section 35(1)(iv) as 100% alternative - precedential effect of assessee's own decisions

Weighted deduction under section 35(2AB) - requirement of DSIR certification/Form No.3CL prior to 01.07.2016 - applicability of Rule 6(7A)(b) w.e.f. 01.07.2016 - precedential effect of assessee's own decisions - Entitlement to weighted deduction under section 35(2AB) for expenditure on in-house R&D for AYs 2013-14 and 2014-15 despite absence of Form No.3CL at assessment, and whether Rule 6(7A)(b) required quantification/certification for those years. - HELD THAT: - The Tribunal held that Rule 6(7A)(b) (which mandates quantification/verification requirements) became effective only from 01.07.2016 and therefore is not applicable to assessment years 2013-14 and 2014-15. Relying on the assessee's earlier favourable decisions for AYs 2010-11, 2011-12 and 2012-13 and on the consistent view in similar decisions (including the Bangalore Bench in M/s. Mahindra Electric Mobility Ltd.), the Tribunal observed that prior to 01.07.2016 Form No.3CL/DSIR certification had no statutory sanctity to deny weighted deduction. The Assessing Officer's restriction of weighted deduction to the amount quantified in DSIR approval and allowance of the balance only as 100% deduction under section 35(1)(iv) was therefore not sustainable for the years before the Rule amendment. As the Revenue did not dispute the earlier Tribunal observations in the assessee's own cases, the Tribunal directed deletion of the disallowances and remittance of the claim to be allowed as weighted deduction accordingly. [Paras 10, 11, 12]

Assessee entitled to weighted deduction under section 35(2AB) for AYs 2013-14 and 2014-15; additions disallowing the claimed amounts deleted.

Final Conclusion: Both appeals are partly allowed: the Tribunal set aside the CIT(A)'s confirmation of disallowance and directed the Assessing Officer to delete the additions and allow the claimed weighted deduction for assessment years 2013-14 and 2014-15, following the view that Rule 6(7A)(b) (and Form No.3CL requirements) are not applicable to those years.

Charitable purpose - proviso excluding activities in nature of trade, commerce or business - application of proviso only to advancement of other object of general public utility (fourth limb) - dominant purpose test / genuineness of charitable objects - sponsorship not per se commercial activity - allowance of depreciation on assets acquired from application of income for charitable purposes

Charitable purpose - proviso excluding activities in nature of trade, commerce or business - application of proviso only to advancement of other object of general public utility (fourth limb) - dominant purpose test / genuineness of charitable objects - sponsorship not per se commercial activity - Whether the proviso to section 2(15) disentitles the assessee (Indian Olympic Association) from being treated as a charitable institution for assessment year 2013-14 - HELD THAT: - Having considered earlier findings in ITA No. 1130/Del/2016 and authorities referred to therein, the Tribunal applied the amended definition of "charitable purpose" and the CBDT clarification and concluded that the proviso to section 2(15) is directed only to the fourth limb (advancement of any other object of general public utility) and was intended to exclude entities carrying on trade or business from claiming charitable status. The Tribunal found on the facts that the assessee's fundamental and dominant activity is promotion of sports and representation of the country in international fora, and that acceptance of sponsorships is incidental and does not convert the association's activities into carrying on of trade, commerce or business with profit-making as the real object. Drawing support from legislative history and judicial precedents, the Tribunal held there was no material showing the assessee conducted its affairs solely on commercial lines or deviated from its longstanding objects, and therefore the proviso to section 2(15) was not attracted.

Proviso to section 2(15) does not apply; the assessee is a charitable institution and entitled to exemption under sections 11 and 12.

Allowance of depreciation on assets acquired from application of income for charitable purposes - Whether depreciation is allowable on assets acquired out of amounts treated as application of income for charitable purposes - HELD THAT: - Relying on the binding decision of the Hon'ble Supreme Court in CIT v. Rajasthan & Gujarat Charitable Foundation, the Tribunal held that even where capital expenditure has been treated as application of income for charitable purposes, depreciation on the assets so purchased is nevertheless allowable. The Tribunal treated the principle as settled law and applied it to dismiss the Revenue's contention on this point.

Depreciation is allowable on assets acquired even though the expenditure has been treated as application of income for charitable purposes; Revenue's grievance on this ground is dismissed.

Charitable purpose - proviso excluding activities in nature of trade, commerce or business - dominant purpose test / genuineness of charitable objects - Consequential relief concerning set-off/adjustment and grant of exemption under sections 11/12 in light of the finding that the proviso to section 2(15) is not attracted - HELD THAT: - The Tribunal recorded that Ground No.3 was consequential to Ground No.1. Having held that the proviso to section 2(15) did not apply and that the assessee is entitled to exemption under sections 11 and 12, the Tribunal directed the Assessing Officer to allow the benefit of exemption accordingly. The order follows the interconnected nature of the grievances and gives effect to the substantive finding on charitable status.

AO is directed to grant exemption under sections 11 and 12 in accordance with the Tribunal's finding that the assessee is a charitable institution.

Final Conclusion: Following earlier Tribunal and High Court decisions and applying the amended definition of "charitable purpose" and settled Supreme Court authority on depreciation, the Tribunal dismissed the Revenue's appeal: the Indian Olympic Association is a charitable institution for AY 2013-14, depreciation is allowable on assets acquired from applied income, and the AO is directed to grant exemptions under sections 11 and 12 accordingly.

Credit for tax deducted at source - Rule 37BA of Income Tax Rules - rectification under section 154 - entitlement of legal heir to tax credit where income assessed in their hands - allowance of TDS credit notwithstanding incorrect PAN in TDS certificate

Credit for tax deducted at source - Rule 37BA of Income Tax Rules - allowance of TDS credit notwithstanding incorrect PAN in TDS certificate - rectification under section 154 - entitlement of legal heir to tax credit where income assessed in their hands - Whether TDS credit claimed by the assessee could be allowed though the deductor deposited TDS in the PAN of the deceased husband, and whether rejection of the assessee's application under section 154 was justified - HELD THAT: - The Tribunal examined the admitted facts that the commission income subject to TDS was offered to tax and assessed in the assessee's hands as proprietrix of M/s Gupta Electric Works and that the deductor had, by mistake, deposited the TDS in the PAN of the deceased husband. Applying Rule 37BA (as amended) and following the reasoning of the Andhra Pradesh High Court in CIT v. Bhooratnam & Company and the co-ordinate Bench decision in Income Tax Officer v. T.G. Veerarabhvan, the Tribunal held that where the income shown in the TDS certificate is assessable in the hands of the assessee, credit for tax deducted at source must be given to that assessee notwithstanding that the TDS certificate bears another person's PAN. The amended scope of Rule 37BA permits credit to the person in whose hands the income is assessable and does not restrict the benefit to the deductee named in the certificate. The Tribunal found that all relevant documents (including death certificate and succession certificate) were on record and that denial of credit solely because the TDS was deposited under the deceased husband's PAN was unjustified. Consequently the order of the Assessing Officer rejecting the section 154 application and the order of the Commissioner (Appeals) upholding that rejection were set aside and the TDS credit was allowed. [Paras 5, 6, 7]

The denial of TDS credit was reversed; the Assessing Officer's order under section 154 and the CIT(A)'s order were set aside and the claimed TDS credit was allowed.

Final Conclusion: The appeal is allowed: TDS credit of Rs. 5,89,348/- claimed by the assessee is to be allowed since the income was assessed in her hands and Rule 37BA supports granting credit despite the TDS being deposited under the deceased husband's PAN; impugned orders under section 154 and the CIT(A) are set aside.

Penalty under Section 112(a) of the Customs Act - retracted statements of co-accused and reliance thereon - call detail records as corroborative evidence - final fact-finding power of the appellate tribunal - non-speaking or perfunctory order - scope of the show cause notice

Penalty under Section 112(a) of the Customs Act - Sustainability of the penalty imposed on the appellant under Section 112(a) of the Customs Act. - HELD THAT: - The Court examined whether the factual findings returned by the Adjudicating Authority and the first appellate authority justified imposition of penalty under Section 112(a). The authorities had recorded a factual matrix involving concealment of foreign-marked gold in an import consignment, statements of employees of the appellant's security agency, forensic reports and telephone call records which, on re-appreciation, the Tribunal found formed an interconnected chain of evidence implicating the appellant. The High Court held that the Tribunal, as final fact-finding authority, was entitled to concur with the findings of fact recorded below after re-appreciation of evidence and there was no demonstrable error in so doing. The Court found no substantial question of law warranting interference with the concurrent factual findings and sustained the imposition of penalty under Section 112(a). [Paras 27, 30, 32, 33, 36]

Penalty under Section 112(a) upheld; no interference with the Tribunal's concurrent factual findings.

Retracted statements of co-accused and reliance thereon - Reliability and admissibility of statements of co-accused which were alleged before the Judicial Magistrate to have been recorded under coercion. - HELD THAT: - The Court considered whether the authorities could rely upon statements which before the Judicial Magistrate were said to have been recorded under threat and coercion. It noted that, except for two witnesses who mentioned coercion to the Magistrate, there was no subsequent formal retraction by the witnesses; the statements recorded under Section 108 remained on record and were unassailed. The Tribunal examined these statements alongside corroborative material (call records, forensic data, panchanama) and concluded they remained reliable. The High Court found no error in the Tribunal's conclusion that the statements were not retracted for the purposes of the proceedings and that the authorities could rely on them when corroborated by other evidence. [Paras 31, 35]

Statements remained unretracted in the proceedings and could be relied upon when corroborated; no fault in the Tribunal's reliance on them.

Call detail records as corroborative evidence - scope of the show cause notice - Whether the Tribunal erred in relying upon call detail records (CDRs) and whether such reliance went beyond the scope of the show cause notice. - HELD THAT: - The Court reviewed the contention that call records relied upon by the Adjudicating Authority and accepted by the Tribunal were beyond the scope of the show cause notice or were fabricated/tampered. The record shows the Order-in-Original had discussed call details and included a pictorial matrix of mobile contacts; the Tribunal undertook a close scrutiny of CDRs and related factual material and found the calls formed part of the chain of events linking the appellant with other accused. The High Court observed that the Tribunal and lower authorities had re-appreciated the call records in relation to other evidence and that reliance on those records did not transgress the show cause notice; consequently the Court found no illegality in the use of CDRs as corroborative evidence. [Paras 7, 32, 33]

Tribunal permissibly relied on CDRs as corroborative evidence and did not act beyond the scope of the show cause notice.

Final fact-finding power of the appellate tribunal - non-speaking or perfunctory order - Whether the Tribunal's order was non-speaking/perfunctory and failed to discharge its duty as final fact-finding authority. - HELD THAT: - The appellant contended that the Tribunal gave only prima facie findings and did not delve into evidence or deal with written submissions, rendering its order non speaking. The Court reviewed the authorities, the Tribunal's order and the appellate record and found the Tribunal had engaged with the factual matrix, re appreciated evidence (including statements, panchanama and call data), addressed contentions such as denial of cross-examination and retraction of statements, and explained why it concurred with the findings below. On that basis the High Court concluded the impugned order was not perfunctory or devoid of reasons and did not warrant interference. [Paras 23, 24, 25, 34]

Tribunal's order held to be speaking and based on re-appreciation of evidence; no interference required.

Final Conclusion: The High Court found no substantial question of law and dismissed the appeal, upholding the concurrent factual findings of the authorities and the Tribunal's dismissal of the appellant's challenge to the penalty under Section 112(a); the impugned orders require no interference.

Limitation period for issuance of Show Cause Notice under CBLR, 2018 - due diligence and KYC obligations of customs brokers under CBLR, 2018 (Regulation 10(a)) - vitiation of proceedings for non compliance of mandatory regulatory time limits - forfeiture of security and imposition of penalty under CBLR, 2018 - Show Cause Notice under section 124 of the Customs Act as an offence report

Limitation period for issuance of Show Cause Notice under CBLR, 2018 - Show Cause Notice under section 124 of the Customs Act as an offence report - vitiation of proceedings for non compliance of mandatory regulatory time limits - Validity of proceedings for imposition of penalty and forfeiture where the Show Cause Notice under CBLR, 2018 was issued beyond the 90 day period prescribed from the date of the offence report. - HELD THAT: - The Tribunal treated the Show Cause Notice issued under section 124 of the Customs Act dated 27.2.2019 as constituting the offence report for the purposes of Regulation 17(1) of CBLR, 2018. Regulation 17(1) required issuance of the Show Cause Notice under CBLR within 90 days of receipt of the offence report. The departmental Show Cause Notice under CBLR was issued on 21.6.2019, which is beyond the 90 day period computed from 27.2.2019. The Tribunal followed the decisions of the jurisdictional High Court cited in the record holding the time limit in the Regulation to be mandatory and that non compliance vitiates the proceedings. On this ground the Tribunal found the impugned order unsustainable and set it aside. [Paras 7]

Proceedings were vitiated by non compliance with Regulation 17(1) of CBLR, 2018; the impugned order is set aside and the appeal is allowed.

Due diligence and KYC obligations of customs brokers under CBLR, 2018 (Regulation 10(a)) - forfeiture of security and imposition of penalty under CBLR, 2018 - Whether the appellant failed to perform the required verification of the exporter so as to justify penalty and forfeiture under Regulation 10(a) and related provisions. - HELD THAT: - The Tribunal noted the adjudicating authority's finding but observed that the appellant had obtained authorization and KYC documents, including IEC, Aadhaar, GST registration, PAN and other documents, and had verified IEC and GST registration from official websites and checked PAN and Aadhaar. On these facts the appellant had taken the precautions an ordinarily prudent customs broker would take. Although the adjudicating authority held a violation of Regulation 10(a), the Tribunal recorded that the appellant had performed the due diligence described above. The Tribunal's ultimate disposition, however, rested on the procedural defect of delay in issuing the CBLR Show Cause Notice rather than on a full merits adjudication of culpability. [Paras 7]

The appellant had undertaken the verifications ordinarily expected under Regulation 10(a); however the impugned penalty and forfeiture were set aside on the procedural ground of limitation.

Final Conclusion: The appeal is allowed; the adjudicating authority's order imposing penalty and forfeiting part of the security is set aside because the Show Cause Notice under CBLR, 2018 was issued beyond the mandatory 90 day period measured from the offence report (dated 27.2.2019). Consequential relief, if any, shall follow.

Reverse burden of proof under Section 123 of the Customs Act, 1962 - Seizure by police and transfer to Customs - Burden on Revenue to prove goods are of smuggled origin - Absolute confiscation versus option to pay fine for non prohibited goods - Limitation for issuance of show cause notice (reasonableness/maximum period) - Ownership claim and evidentiary burden

Seizure by police and transfer to Customs - Reverse burden of proof under Section 123 of the Customs Act, 1962 - Burden on Revenue to prove goods are of smuggled origin - Applicability of the presumption under Section 123 where the goods were initially seized by police and later handed over to Customs, and consequent onus of proof. - HELD THAT: - The Tribunal applied binding precedent and concluded that where goods are initially seized by police during a criminal investigation and thereafter handed over to Customs, the presumption under Section 123 does not apply and the reverse burden does not shift to the person from whose possession the goods were seized. In such circumstances the legal onus to show that the goods are of smuggled origin rests on the Customs/Revenue and not on the appellant. The Tribunal found that the Revenue failed to produce positive evidence to establish that the gold biscuits were smuggled, and that the adjudicating authority impermissibly relied on assumptions and presumptions to hold the goods as smuggled. [Paras 7, 8]

Section 123 is not attracted where initial seizure was by police and then handed to Customs; onus lay on Revenue to prove smuggled origin, which it failed to discharge, warranting setting aside of the confiscation.

Ownership claim and evidentiary burden - Absolute confiscation versus option to pay fine for non prohibited goods - Validity of absolute confiscation of the gold biscuits claimed to be owned by a third party and whether absolute confiscation was permissible for non prohibited goods. - HELD THAT: - The Tribunal examined the claim of ownership made by the appellant's mother supported by invoices and a seller's certificate and observed that, even on the record, the Revenue did not produce sufficient evidence to rebut that claim or to establish smuggled origin. The Tribunal further applied the principle that where goods are not prohibited, absolute confiscation is not the only remedy and the adjudicating authority must consider the statutory scheme permitting option to levy a fine in lieu of confiscation. Relying on precedent, the Tribunal held that absolute confiscation of non prohibited goods was not legally sustainable in the circumstances. [Paras 9]

Absolute confiscation of the non prohibited gold biscuits was unsustainable in law where Revenue failed to discharge its evidentiary burden and the goods could not be treated as rightly confiscated.

Limitation for issuance of show cause notice (reasonableness/maximum period) - Whether the show cause notice issued to initiate confiscation and penal proceedings was barred by limitation. - HELD THAT: - The Tribunal considered authorities addressing reasonable time for initiating proceedings and noted that, having regard to the chronology of seizure by police in 2007, proceedings before the Magistrate in 2011 and ultimate handing over and issuance of show cause notice years later, the show cause notice dated 07.03.2018 was issued after an inordinate delay. Applying the principle that actions must be taken within a reasonable period (and having regard to decisions treating a five year outer limit as untenable if exceeded), the Tribunal held that the proceedings were time barred. [Paras 10]

The show cause notice initiating confiscation and penal proceedings was barred by limitation and therefore unsustainable.

Final Conclusion: The appeal is allowed: the Tribunal set aside the adjudicating order of absolute confiscation and penalty, holding that Section 123 did not apply where police made the initial seizure and the Revenue failed to prove smuggled origin, that absolute confiscation of non prohibited gold was unsustainable, and that the show cause notice was time barred; consequential relief was granted.

Imposition of penalty beyond scope of appeal - jurisdiction of appellate authority - limitation under Section 155(2) of the Customs Act - evidentiary value of statements recorded under Section 108 of the Customs Act - burden of proof in respect of notified goods - benefit of doubt arising from proof of ownership

Imposition of penalty beyond scope of appeal - jurisdiction of appellate authority - Whether the penalty of Rs. 1,00,000/- imposed by the Commissioner (Appeals) on Smt. Usha Devi is sustainable. - HELD THAT: - The adjudicating authority had refrained from imposing any penalty on Smt. Usha Devi and no appeal was filed by Revenue against that adjudication. The Commissioner (Appeals) therefore exceeded the scope of the appeal by imposing a penalty afresh. In these circumstances the order of the Commissioner (Appeals) imposing penalty on Smt. Usha Devi is beyond his jurisdiction and cannot be sustained. [Paras 6]

Penalty imposed on Smt. Usha Devi is set aside and the appeal in her favour is allowed.

Limitation under Section 155(2) of the Customs Act - evidentiary value of statements recorded under Section 108 of the Customs Act - burden of proof in respect of notified goods - benefit of doubt arising from proof of ownership - Whether the absolute confiscation of the seized gold and the vehicle and the penalty imposed on Sh. Vijender Singh are sustainable. - HELD THAT: - The Tribunal examined the notices and limitation under Section 155(2) and the evidence relied upon by Revenue, including statements under Section 108 and electronic records. The appellant's own statement and the statement of his wife claiming ownership, corroborated by documentary evidence (including bank locker operation and travel bookings), were found to have been disregarded by Revenue. Third party statements relied upon by Revenue expressly disclaimed ownership of the seized gold. On the material on record the appellant discharged the onus to show source and ownership of the seized gold. In view of the accepted ownership evidence and the absence of convincing, corroborative material to the contrary, the benefit of doubt favours the appellant. Consequently the confiscation of the gold and the vehicle and the penalty imposed cannot stand. [Paras 7, 9, 10, 11]

The confiscation of the gold and the car and the penalty imposed on Sh. Vijender Singh are set aside; the appeal is allowed with consequential relief.

Final Conclusion: The appeal is allowed in part: the penalty imposed on Smt. Usha Devi is set aside for being beyond the appellate authority's jurisdiction; the absolute confiscation of the gold and vehicle and the penalty imposed on Sh. Vijender Singh are quashed on merits and the appellant is given consequential relief.

Jurisdiction - service of show cause notice - remand for fresh consideration - authorization of G-card holder - knowledge of shipping bills through internal mechanism - licence revocation and penalty reduction

Jurisdiction - service of show cause notice - remand for fresh consideration - Whether the question of jurisdiction and service of the show cause notice has been decided and requires fresh adjudication. - HELD THAT: - The Tribunal records that in its earlier order it had expressly directed the adjudicating authority to decide the issue of jurisdiction because the show cause notice appeared never to have been served on the appellant. The impugned order, though addressing merits, remained silent on that specific direction and did not deal with the appellant's contention about non-service at the Secunderabad address despite the appellant having informed Customs and obtained acknowledgment. The Departmental representative conceded that the order under challenge is silent on the tribunal's earlier direction and raised no objection to remand on this count. Given these circumstances the adjudicating authority must address service and jurisdictional aspects on fresh consideration before finally deciding the merits. [Paras 6, 7, 8]

Remanded to the adjudicating authority for fresh decision on the issue of jurisdiction and service of the show cause notice.

Authorization of G-card holder - knowledge of shipping bills through internal mechanism - remand for fresh consideration - Whether the appellant had authorised the G-card holder and whether the appellant had knowledge of shipping bills through its internal mechanism - requiring document scrutiny. - HELD THAT: - The appellant alleged that it never authorised Shri Lalit Gupta to be the G-card holder and has lodged an FIR against him; it also contended that any document purportedly showing such authorisation should be subjected to strict scrutiny. The Commissioner (Appeals) made findings suggesting that the appellant had sufficient knowledge of shipping bills through internal mechanism, but those findings, and the contention about authorisation, have not been subjected to detailed scrutiny of relevant documents by the adjudicating authority. The Tribunal observed that these factual and documentary matters are material to the proper adjudication, particularly because the appellant, as CHA, contends it is aggrieved by the manager's misconduct. The adjudicating authority must call for and examine requisite documents and verify whether internal procedures rendered the appellant aware of the filed shipping bills or whether the G-card was fraudulently used without authorisation. [Paras 5, 7, 8]

Remanded to the adjudicating authority to call for and scrutinise relevant documents and re-adjudicate the question of authorisation of the G-card holder and whether the appellant had knowledge of the shipping bills.

Final Conclusion: The appeal is allowed by way of remand: the matter is set aside and returned to the adjudicating authority for fresh decision on jurisdiction/service of notice and for scrutiny of documents regarding authorisation of the G-card holder and the appellant's knowledge of shipping bills; other benefits already extended by the impugned order (setting aside revocation and reduction of penalty) are noted but the specified issues must be reconsidered.

Bail - maintainability of regular bail application - bar created under Section 212(6) of the Companies Act - interim protection to co-accused and parity - medical and humanitarian grounds for bail - gravity of offence, public interest and economic offences - merchanting trade and documentary evidence - guidelines in Y.S. Jaganmohan Reddy and P. Chidambaram for grant of bail

Maintainability of regular bail application - interim order of Apex Court in related proceedings - Whether the bail application filed directly before the High Court was maintainable in view of earlier proceedings before the Apex Court and functioning of the trial Court. - HELD THAT: - The Court examined the preliminary objection that the applicant ought to have approached the trial Court first. Having regard to the prayer made by the applicant before the Apex Court in Special Leave to Appeal (Criminal) No. 2393 of 2020 and the Apex Court's order dated 28.5.2020, the High Court treated the preliminary objection as without substance and proceeded to entertain the bail application. The court thus declined to dismiss the petition on maintainability grounds and decided the bail application on merits. [Paras 15]

The bail application is maintainable before this Court and the preliminary objection is overruled.

Bar created under Section 212(6) of the Companies Act - interim protection to co-accused and parity - Whether interim protection granted to co-accused by the Apex Court or the challenge to the constitutionality of Section 212(6) mandates grant of bail to the applicant. - HELD THAT: - The Court observed that even if the prohibition contained in Section 212(6) were declared unconstitutional, the merits of the prosecution would remain unchanged. The interim protection granted to co-accused by the Apex Court therefore could not be a ground to enlarge the applicant on bail. The court treated the question of the statutory bar as not determinative of the present bail application and rejected reliance upon co-accused' interim orders as a basis for parity release. [Paras 16]

Interim protection to co-accused or challenge to Section 212(6) does not entitle the applicant to bail.

Bail - medical and humanitarian grounds for bail - gravity of offence, public interest and economic offences - merchanting trade and documentary evidence - guidelines in Y.S. Jaganmohan Reddy and P. Chidambaram for grant of bail - Whether the applicant should be enlarged on bail on medical, humanitarian or other grounds after applying the guiding principles in the cited Supreme Court decisions. - HELD THAT: - Applying the criteria in Y.S. Jaganmohan Reddy and P. Chidambaram, the Court considered the role attributed to the applicant, the nature and gravity of the allegations, and the evidence on record. The prosecution's case alleges the applicant, as a director and signatory of financial statements, participated in falsification of accounts and manipulation of merchanting trade transactions which resulted in large NPAs to public sector banks. The Court noted that merchanting trade is a lawful activity but, on the material placed, the allegation is that the companies used merchanting trade to rotate funds, show fictitious trade receivables and camouflage interest income, thereby causing substantial public loss. The Court found these allegations serious, affecting public interest, and concluded that the medical condition of the applicant and familial hardships did not outweigh the gravity of the offence or mitigate the risk posed by the nature of the prosecution case. The Court therefore held that bail was not warranted and declined to express any opinion on the ultimate merits. [Paras 17, 18, 19]

The applicant has not made out a case for bail; the bail application is rejected.

Final Conclusion: The High Court overruled the maintainability objection, held that interim protection to co-accused or challenge to Section 212(6) does not entitle the applicant to bail, and, applying the guiding Supreme Court principles and on assessment of the gravity of allegations and evidence, rejected the bail application.

Rights issue - oppression and mismanagement - interim relief - stay and its vacation - remand for additional documents and fresh adjudication - restriction on renunciation and allotment of rights shares pending disposal - AGM convening and procedural compliance

Rights issue - interim relief - stay and its vacation - oppression and mismanagement - Whether the vacation of the interim stay on the company's rights issue by the NCLT could be interfered with by this Tribunal on penultimate appellate consideration - HELD THAT: - The Tribunal recorded that the learned NCLT had vacated the earlier stay on the further issue of rights after observing that a rights issue made for genuine corporate purpose is not illegal unless malafide by the majority is established (as noted in the impugned order at paras 23-24). The Appellant had, before this Tribunal, filed additional transactional material (Tally data and bank statements) which were not placed before the NCLT. Sitting in appeal, the Tribunal refrained from deciding the merits of alleged misuse of the rights issue or the charge of oppression and mismanagement because those factual and evidentiary controversies remain sub judice and were not gone into by the NCLT. Instead, the Tribunal afforded the Appellant liberty to place the additional documents before the NCLT so that the NCLT may consider them and adjudicate the Company Petition on merits. The Tribunal therefore did not disturb the NCLT's approach to the legal principle governing rights issues but remitted the matter for fresh consideration in light of the additional material to be filed. [Paras 23, 24, 28, 29, 30]

Matter remanded to the NCLT for adjudication on merits including consideration of additional documents filed by the Appellant; appellate Court will not decide the merits of the alleged misuse of the rights issue at this stage.

Restriction on renunciation and allotment of rights shares pending disposal - interim relief - stay and its vacation - Whether any interim restriction should be placed on renunciation or allotment of the rights shares pending disposal of the Company Petition - HELD THAT: - While remanding the matter for fresh consideration, the Tribunal imposed an interim operative direction to preserve the status quo regarding the rights shares. The respondents were directed that the shares offered to the Appellant by way of the rights issue shall not be renounced and shall not be allotted to other shareholders if not already renounced or allotted, and this direction is to remain in force until the NCLT disposes of the Company Petition. This constitutes an interlocutory protective measure to prevent any prejudice to the Appellant's position pending final adjudication. [Paras 31]

Directed that rights shares offered to the Appellant shall not be renounced or allotted to others pending disposal of the Company Petition.

AGM convening and procedural compliance - Whether the Tribunal's earlier order deferring the company's AGM should continue to operate - HELD THAT: - The Tribunal noted statutory requirements for convening corporate meetings and observed that its earlier interim order (dated 20.01.2021) which had deferred the AGM would be vacated. The company was placed at liberty to convene and conduct the AGM in accordance with law. The Tribunal nevertheless requested the learned NCLT to decide the Company Petition and any pending applications expeditiously. This direction resolves the procedural interlocutory issue concerning the AGM. [Paras 32]

Order dated 20.01.2021 deferring the AGM is vacated; the Company may convene and conduct the AGM in accordance with law.

Final Conclusion: The appeal is disposed by remanding the Company Petition to the NCLT for fresh adjudication on merits with liberty to the Appellant to place additional documents; an interim direction preserves the status quo by prohibiting renunciation or allotment of the Appellant's rights shares pending the NCLT's decision, and the Tribunal's prior order deferring the AGM is vacated permitting the Company to hold the AGM in accordance with law.

Judicial review of Committee of Creditors' commercial decisions - approval of resolution plan under Section 30 and Section 31 of the Insolvency and Bankruptcy Code - treatment of dissenting financial creditors and payment of liquidation value - status and voting of homebuyers as financial creditors and authorised representative mechanism - power and limits of adjudicating authority to modify an approved resolution plan - treatment of third party deposits in a CIRP - avoidance of preferential/undervalued transactions and effect on mortgages (Section 43/44 IBC) - interaction between the Insolvency and Bankruptcy Code and Real Estate (Regulation and Development) Act - exercise of powers under Article 142 for extension of CIRP timelines

Approval of resolution plan under Section 30 and Section 31 of the Insolvency and Bankruptcy Code - judicial review of Committee of Creditors' commercial decisions - Extent and limits of NCLT's jurisdiction in approving/modifying a resolution plan approved by the Committee of Creditors. - HELD THAT: - The Court held that the Adjudicating Authority's power is limited and circumscribed by Sections 30(2) and 31 IBC. It may apply judicial mind to ensure statutory requirements are met but must not substitute its view for the commercial decisions of the CoC. If a shortcoming is found in the plan vis-a -vis statutory parameters, the correct course is to remit the plan to the CoC for reconsideration rather than altering core commercial terms itself.

Adjudicating Authority cannot interfere with commercial decisions of CoC; if statutory non compliance is found it must send the plan back to CoC for reconsideration.

Simultaneous voting on more than one resolution plan - approval of resolution plan under Section 30 of the Insolvency and Bankruptcy Code - Whether simultaneous consideration and voting on two competing resolution plans by the CoC vitiated the approval of NBCC's plan. - HELD THAT: - The Court found no prohibition in IBC or the CIRP Regulations (as in force at the time) against placing more than one conforming plan to vote simultaneously; CoC acted within its commercial domain and the simultaneous voting did not vitiate the approval. The subsequent amendment to Regulation 39 (w.e.f. 07.08.2020) was of clarificatory nature.

Simultaneous voting by CoC over two conforming plans did not invalidate the approval of NBCC's plan.

Treatment of land providing authority rights under concession agreements - modification of contracts in a resolution plan and requirement of authority consent - Whether stipulations in the resolution plan dealing with YEIDA and transfer/alteration of Concession Agreement rights could be approved without YEIDA's consent. - HELD THAT: - The Court held that the Concession Agreement, though not a statutory contract, is a contract entered into by a statutory authority and any material alteration (including transfer of concessionaire's rights to SPVs, allocation of contingent land compensation to end users, or extinguishing liabilities/concession period) cannot be affected by a resolution plan without the authority's consent. Regulation 37 requires necessary approvals. The NCLT rightly declined many of the NBCC stipulations; where NBCC proposed to treat YEIDA's obligations/consents as deemed, that could not be approved and the plan should have been sent back to CoC.

Stipulations in the plan concerning YEIDA and material modification of the Concession Agreement without YEIDA's consent cannot be approved; plan must be reconsidered by CoC on these aspects.

Treatment of dissenting financial creditors and payment of liquidation value - interpretation of 'payment' under Section 30(2)(b) and Regulation 38(1) - Whether a dissenting financial creditor (ICICI Bank) could be paid in kind (land/equity) instead of payment in monetary terms as required by Section 30(2)(b) and Regulation 38(1). - HELD THAT: - After examining text, context and legislative amendments, the Court held that the statutory requirement to pay dissenting financial creditors an amount not less than liquidation value contemplates payment in monetary terms (or recovery by enforcement of a valid security interest), not a compelled in kind settlement by the resolution applicant. NCLT was right to disapprove NBCC's in kind proposal but wrong to itself substitute/modulate the commercial terms (it should have remitted to CoC).

Dissenting financial creditors are entitled to receive the liquidation value amount in monetary terms (or by enforcement of their valid security), and the NCLT erred in modifying commercial terms itself rather than remitting to CoC.

Claims submitted during CIRP and treatment of unclaimed/late claims - extinguishment of undisclosed/undecided claims post approval of plan - Whether NCLT could direct resolution applicant to provide for unpaid/unclaimed fixed deposit holders not admitted during CIRP. - HELD THAT: - The Court held that claims must be submitted within statutory timelines (Sections 13, 15 and Regulations 12-13) and resolved during CIRP so a resolution applicant is not obliged to make provision for creditors who failed to submit claims in time. NCLT's direction to cover unclaimed FD holders was contrary to Essar Steel reasoning and to the statutory claim submission regime; that direction was set aside.

Directions requiring NBCC to make provision for unclaimed fixed deposit holders who did not submit claims within time are annulled.

Treatment of assets of subsidiary in parent's resolution plan - limits of resolution plan over third party/ subsidiary creditors' rights - Whether the resolution plan could deal with assets of wholly owned subsidiary (Jaypee Healthcare Limited) and override rights of that subsidiary's lenders. - HELD THAT: - The Court declined to make a categorical adjudication but noted parties (YES Bank and NBCC) had indicated a workable mechanism and directed them to work out and implement the agreed process, leaving open the commercial modalities. It observed that resolution plan deals with shares held by the corporate debtor (an asset of JIL) and not directly with the subsidiary's separate CIRP; parties may approach NCLT for implementation.

No final ruling; parties to work out agreed mechanism for monetisation/disinvestment of subsidiary shares and seek NCLT directions if necessary.

Validity of termination/cancellation clauses affecting third party agreements - right of agreement/sub lessee holders to remedies - Whether clause reserving NBCC's right to cancel improper/ unpaid transfer agreements (Clause 21, Schedule 3) is unfair and vitiates agreement holders' rights. - HELD THAT: - NCLT observed that when an agreement is invalid or consideration unpaid no special clause is needed; however it preserved agreement holders' right to seek remedy in competent forums. The Supreme Court endorsed NCLT's approach: the clause does not unfairly oust remedies and NCLT's observations (paras 132-133) adequately protect agreement holders.

Clause 21 is not unfair per se; agreement holders retain right to remedy and NCLT's treatment is upheld.

Minority shareholders' rights under an approved resolution plan - deemed shareholder approval under Section 30(2)(e) - Whether minority shareholders can challenge the resolution plan or are entitled to an exit greater than that provided by the plan. - HELD THAT: - The Court held minority shareholders' objections fail: an approved resolution plan binds all stakeholders (Section 31) and Explanation to Section 30(2)(e) deems shareholder approvals satisfied when necessary. The CoC's commercial wisdom as to delisting/extinguishment and exit price is not subject to reappraisal by the Court.

Minority shareholders' objections rejected; plan's treatment of their interests is within CoC's commercial domain and binding once approved.

Status and voting of homebuyers as financial creditors and authorised representative mechanism - class voting and effect of majority instruction under Section 25A(3A) - Whether individual homebuyers or associations (who voted against or abstained) can challenge the plan once the homebuyers' class authorised representative voted in accordance with the majority of voting share who cast votes. - HELD THAT: - The Court applied Section 25A(3A) and Pioneer Urban: the authorised representative casts vote per the decision taken by >50% of the voting share of the financial creditors he represents who have cast votes; that decision binds the whole class (including dissenters and abstainers). Thus individual homebuyers/associations cannot be treated as dissenting financial creditors after class assent and cannot maintain separate challenges to the approved plan. Separate submissions on RERA and CIRP compliance were considered and rejected where incompatible with this statutory scheme.

Homebuyers' class assent through authorised representative binds individual homebuyers and associations; individual challenges dismissed.

Treatment of third party deposit placed pursuant to court directions - interplay of court ordered deposits and CIRP asset pool - Whether INR 750 crores deposited by JAL pursuant to Supreme Court directions (Chitra Sharma) became an asset of Jaypee Infratech Ltd. (JIL) and could be appropriated by the resolution applicant. - HELD THAT: - The Court held the deposit and accrued interest are property of JAL; the Supreme Court's orders in Chitra Sharma did not convert that deposit into JIL's asset. NCLT's placement of the amount in JIL's asset pool was unsustainable. Given intercompany transactions and admitted liabilities, the Court directed a limited remand: NCLT to appoint an independent accounting expert to reconcile accounts between JAL and JIL within strict timelines; amounts found due to JIL may be paid from the deposit and the balance returned to JAL; further distribution will be subject to orders in any proceedings concerning JAL.

INR 750 crores (plus interest) is JAL's property; NCLT to supervise account reconciliation and order appropriate apportionment before refunding balance to JAL.

Avoidance of preferential transactions under Section 43 IBC and effect on mortgages - treatment of remaining valid mortgage (Tappal 100 acres) - Whether Clause 23 of the resolution plan (extinguishing JAL lenders' mortgage over corporate debtor land) could be approved in view of this Court's earlier judgment (Anuj Jain) and status of the one mortgage not avoided. - HELD THAT: - The Court found NCLT erred in treating all mortgages as avoided; Anuj Jain set aside mortgages only as to 758 acres (avoidance), leaving 100 acres (Tappal) mortgaged to ICICI Bank unaffected. Clause 23 cannot extinguish valid, extant security without due process; the relief claimed could not be approved. Further, CoC and resolution applicant must make adequate provision for utilisation/valuation of the now unencumbered 758 acres in any fresh plan.

Clause 23 disapproved insofar as it seeks to extinguish extant security; the 100 acre mortgage remains valid and must be respected; plan must account for the released 758 acres.

Interim monitoring arrangements by appellate forum - limits on NCLAT to frame implementation mechanisms outside statutory scheme - Whether NCLAT was justified in constituting an 'Interim Monitoring Committee' (comprising resolution applicant and certain institutional creditors) for implementation during pendency of appeal. - HELD THAT: - The Court held NCLAT exceeded its jurisdiction by creating an implementation mechanism not envisaged by the Code and by doing so excluding major stakeholders (notably homebuyers with majority voting share). The interim order of NCLAT dated 22.04.2020 was set aside.

NCLAT's order constituting an Interim Monitoring Committee is set aside as outside the statutory framework.

Extension of time for completion of CIRP and exercise of Article 142 powers - remand to Committee of Creditors for reconsideration of plan - Final procedural disposition: whether the CIRP should be reopened, whether plans should be resubmitted, and timetable for completion. - HELD THAT: - Given substantial issues requiring reconsideration (YEIDA stipulations, dissenting creditor treatment, JAL deposit, treatment of released land), and exceptional factual background (multiple prior directions and involvement of large homebuyer class), the Court exercised Article 142 to extend time and remand the matter to CoC. Only the two shortlisted resolution applicants (NBCC and Suraksha) were permitted to submit modified/fresh plans within a short timetable; IRP to complete reprocessing and CoC to vote within an overall extended period of 45 days. NCLT (New Delhi Bench) to supervise and decide under Section 31 expeditiously thereafter. Reconciliation of JAL/JIL accounts to be conducted under NCLT appointed accounting expert within strict timelines.

Matter remitted to CoC; IRP to invite modified/fresh plans from NBCC and Suraksha within 2 weeks; entire CIRP process to conclude within 45 days (with reconciliation process running in parallel under NCLT supervision).

Final Conclusion: Some key stipulations in the NBCC plan were held non approvable (notably provisions altering YEIDA/Concession Agreement rights without consent, in kind treatment of dissenting financial creditor claims, extinguishment of extant mortgages and appropriation of JAL's Rs.750 crore deposit). NCLT's directions for unadmitted FD claims and NCLAT's interim monitoring committee were set aside. The INR 750 crores deposit is JAL's property; NCLT was directed to appoint an accounting expert and reconcile JAL-JIL accounts so amounts due to JIL may be paid and the balance returned to JAL. Because material commercial and statutory gaps remain, the Court - exercising Article 142 - remitted the matter to the CoC (Principal Bench, NCLT New Delhi) and permitted only NBCC and Suraksha to submit modified/fresh plans (on the information memorandum as amended by this judgment); IRP and CoC to complete reconsideration and voting and NCLT to decide under Section 31 within an overall extended period of 45 days, with the reconciliation process to run in parallel.

CIRP as a time bound process - submission of proof of claims and Regulation 12(2) - preparation and contents of Information Memorandum under Section 29 - rejection of belated claims by the Resolution Professional - role of the Resolution Professional and Committee of Creditors in formulation and submission of a resolution plan - approval of the resolution plan by the Adjudicating Authority

Submission of proof of claims and Regulation 12(2) - rejection of belated claims by the Resolution Professional - CIRP as a time bound process - Rejection of the State Tax Department's claim filed after the public announcement period and after the ninety day extended period under Regulation 12(2) was valid and the Adjudicating Authority rightly dismissed the appeal under Section 60(5). - HELD THAT: - The claim was filed on 20.12.2019, well after the public notice of 02.11.2018 and after the extended ninety day period under Regulation 12(2) had expired (31.01.2019). The Resolution Professional had already submitted the resolution plan, as approved by the Committee of Creditors, to the Adjudicating Authority before the belated claim was preferred. Allowing such a late claim at that advanced stage would have disrupted the time bound CIRP, required reopening of the process and risked indefinite delay contrary to the statutory objective of IBC. The Adjudicating Authority considered these facts and the relevant statutory scheme and cogently rejected the belated claim; there is no reason to interfere with that conclusion. [Paras 13, 14, 15, 20]

Belated claim rejected; Adjudicating Authority's dismissal of the appeal upheld.

Preparation and contents of Information Memorandum under Section 29 - role of the Resolution Professional and Committee of Creditors in formulation and submission of a resolution plan - Inclusion of creditors' details in the Information Memorandum under Section 29 and Regulation 36 does not permit reopening the CIRP once the resolution plan, based on the compiled claims, has been finalised and submitted for approval. - HELD THAT: - Section 29 and Regulation 36 require the information memorandum to contain a list of creditors and amounts claimed/admitted so that resolution applicants can formulate realistic plans. However, where claims were not submitted within the public notice period or the extended ninety days, and the resolution plan has been prepared and placed before the Committee of Creditors and submitted to the Adjudicating Authority, permitting late inclusion would undermine the integrity and timelines of the process. The statutory framework contemplates finality in the claims compilation stage to enable viable resolution plans. [Paras 12, 13, 15]

A mere contention about statutory dues appearing in books does not entitle a creditor to have a belated claim admitted once the plan process has advanced; Information Memorandum requirements do not override the time limits for claims.

Role of the Resolution Professional and Committee of Creditors in formulation and submission of a resolution plan - approval of the resolution plan by the Adjudicating Authority - Contentions regarding alleged unilateral modifications to the distribution under the resolution plan (as to amounts directed to Axis Bank) were not entertained because the Appellant did not raise that specific relief in the pleadings and is not an affected party entitled to relief on that ground. - HELD THAT: - The Appellant raised this matter only during oral arguments and did not make it a subject of the appeal. The Court examined the ratios of the cited precedents and found them inapposite to the facts. The Adjudicating Authority dealt with the plan approval and any alterations in accordance with the statute. Relief cannot be granted on a contention not pleaded or upon which the appellant is not a directly affected party. [Paras 17, 18]

Allegation of unilateral change in the approved plan not entertained; no relief on that ground.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority's rejection of the belated claim and its approval of the resolution plan are sustained, with no order as to costs.

Admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - establishment of operational debt and default - demand notice under Section 8 and compliance requirements - application of suspension under Section 10A and its temporal exception - declaration of moratorium under Section 14 of the Code - appointment of Interim Resolution Professional and statutory duties

Establishment of operational debt and default - demand notice under Section 8 and compliance requirements - The Operational Creditor proved existence of operational debt and default and complied with statutory pre-requisites to maintain a Section 9 petition. - HELD THAT: - The Tribunal found that invoices and ledger accounts were placed on record and a demand notice was served by hand on the Corporate Debtor. The Corporate Debtor neither established any pre-existing dispute nor produced evidence of any suit or arbitration pending prior to receipt of the demand notice, nor paid the entire claimed debt within the statutory timelines. On these findings the Bench concluded that default had occurred and the statutory conditions for filing under Section 9 were satisfied. [Paras 11, 12, 13, 14, 17]

Default established and prerequisites for Section 9 petition fulfilled; petition maintainable on this ground.

Application of suspension under Section 10A and its temporal exception - Section 10A did not bar filing of the petition because the defaults relied upon arose prior to 25.03.2020. - HELD THAT: - The Tribunal examined Section 10A, noting its suspension of filings only for defaults arising on or after 25.03.2020 and the explanation excluding earlier defaults. The last invoice in the present case was dated 23.01.2020; accordingly the debt claimed related to defaults occurring before 25.03.2020 and Section 10A was inapplicable to bar the petition. [Paras 17]

Section 10A does not operate to bar the present petition.

Admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - declaration of moratorium under Section 14 of the Code - The petition under Section 9 was admitted and the Corporate Insolvency Resolution Process (CIRP) was initiated with the moratorium declared. - HELD THAT: - Having concluded that the Operational Creditor had established default and that Section 10A did not apply, the Tribunal held that the petition met statutory requirements and admitted it under Section 9(5). Consequent to admission, a moratorium was declared under Section 14, with the enumerated prohibitions on institution or continuation of suits, transfer or disposal of assets, enforcement of security interests and recovery of leased property. [Paras 19, 20]

Petition admitted; CIRP initiated and moratorium declared.

Appointment of Interim Resolution Professional and statutory duties - An Interim Resolution Professional (IRP) was appointed and directed to perform statutory duties; the Operational Creditor was directed to deposit funds for immediate expenses. - HELD THAT: - The Tribunal appointed the IRP proposed by the Operational Creditor subject to disclosure and disciplinary-clearance conditions, and directed the IRP to take steps mandated under the Code (including Sections 15, 17, 18, 20 and 21). The Operational Creditor was directed to deposit an amount for immediate expenses, subject to adjustment by the Committee of Creditors as per the IRP's accounting. [Paras 21, 22, 23]

IRP appointed with directions to perform statutory functions; interim expenses to be deposited by Operational Creditor.

Final Conclusion: The Tribunal admitted the Section 9 petition: it found that default in payment of operational debt occurring before 25.03.2020 was established, held that Section 10A did not bar the petition, initiated CIRP with moratorium, appointed an IRP and directed deposit for interim expenses.

Financial debt - financial creditor - commercial effect of borrowing - disbursal and time value of money - transaction (transfer of assets) - Section 5(8)(f) as a residuary provision - notice under Section 7 not mandatory - non-joinder and privity of contract

Financial debt - disbursal and time value of money - commercial effect of borrowing - Section 5(8)(f) as a residuary provision - transaction (transfer of assets) - The amounts paid by the first Respondent to the lender on behalf of the corporate debtor fall within the definition of a "financial debt" under the IBC. - HELD THAT: - The Tribunal held that the payments made by the first Respondent to the lender were paid on behalf of the corporate debtor pursuant to the OTS and the Agreement to Sell, and a contractual right to repayment with interest (Clause 11/12) crystallised when the corporate debtor failed to obtain necessary permissions. Applying the test in Pioneer Urban Land (Section 5(8)(f)), the sub clause is residuary and captures amounts raised under transactions having the commercial effect of a borrowing. A combined reading of Sections 5(8), 3(33), 3(11) and 3(6) with the admitted facts showed the threefold criteria were satisfied: (a) disbursal (payment to lender on behalf of corporate debtor), (b) time value of money (contractual interest obligation on repayment), and (c) commercial effect of borrowing (transaction arose from OTS and transferred consideration to lender in lieu of assets). The Tribunal therefore applied Pioneer Urban Land and concluded the transaction constituted a financial debt. [Paras 16, 19]

The payment by the first Respondent to the lender on behalf of the corporate debtor is a financial debt under the Code.

Financial creditor - financial debt - commercial effect of borrowing - The first Respondent, though a purchaser under an Agreement to Sell executed pursuant to an OTS, qualifies as a "financial creditor" of the corporate debtor under the Code. - HELD THAT: - Distinguishing Anuj Jain (Jaypee) where creditors claimed status based on third party security, the Tribunal found facts here are different: the loan was originally to the corporate debtor, the first Respondent paid the lender on the corporate debtor's behalf pursuant to the OTS/Agreement to Sell, and the Agreement contemplated repayment with interest if transfer failed. The first Respondent was not a mere security holder; the disbursal and the commercial arrangement established that a right to payment existed, bringing the first Respondent within the definition of a financial creditor. [Paras 21, 22]

The first Respondent is a financial creditor of the corporate debtor.

Notice under Section 7 not mandatory - non-joinder and privity of contract - Failure to serve a prior notice before filing under Section 7 is not a ground for rejection, and non-joinder of a person who lacks privity of contract is not fatal. - HELD THAT: - The Tribunal observed that the Code does not mandate issuance of a demand notice prior to filing under Section 7 (consistent with Innoventive Industries). It noted the first Respondent did issue a notice in October 2018 and the appellant did not deny service. On non joinder, the Agreement of Sale was between the appellant and the first Respondent and there was no privity with the third person alleged to have contributed; therefore that person was not a necessary party and non joinder did not invalidate the petition. [Paras 14]

Absence of a pre filing notice did not render the Section 7 petition unsustainable, and non joinder of the third party was not fatal.

Final Conclusion: The Tribunal affirmed the Adjudicating Authority's admission of the Section 7 petition: the payment made by the purchaser to the lender on behalf of the corporate debtor constituted a financial debt and the purchaser qualified as a financial creditor; the appeal is dismissed.

Debit-freeze - provisional attachment and freezing under the Prevention of Money Laundering Act - reason to believe recorded in writing - formation of opinion in writing as prerequisite for exercise of powers - search, seizure and freezing powers under Section 17 - due process for attachment/seizure and reference to Adjudicating Authority - ancillary powers of investigation

Debit-freeze - formation of opinion in writing - due process for attachment/seizure and reference to Adjudicating Authority - Validity of the order dated 06.11.2020 directing debit-freeze of the petitioners' bank accounts - HELD THAT: - The Court held that the statutory scheme under the Prevention of Money Laundering Act contemplates formation of an opinion by a competent officer - a 'reason to believe' - recorded in writing before exercising powers of provisional attachment under Section 5 or freezing/seizure under Section 17. The power to freeze or attach is conditional on such recorded reasons and the consequential procedure of forwarding the order and material to the Adjudicating Authority. In the present case no finding or reasons in writing under Section 5 or Section 17 were placed before the Court nor was material shown to demonstrate that such a recorded opinion existed in the Enforcement Directorate's file. Reliance on the Supreme Court decision in OPTO Circuit India Ltd. v. Axis Bank was held to be applicable and there was no basis to treat the present case as distinguishable. The Court therefore concluded that the debit-freeze/stop operation orders issued on 06.11.2020 were without the requisite statutory foundation and could not be sustained. The Court set aside the impugned order and directed restoration of the petitioners' ability to operate the specified accounts, while leaving open the right of the Authority to initiate fresh proceedings in accordance with law. [Paras 19, 20, 24, 25, 26]

Order dated 06.11.2020 directing debit-freeze of the petitioners' bank accounts set aside; bank accounts to be unfrozen and operated by the petitioners, without prejudice to fresh action in accordance with law.

Final Conclusion: Writ petitions allowed; the Enforcement Directorate's debit-freeze order dated 06.11.2020 set aside for failure to record the requisite 'reason to believe' and to follow the statutory procedure; petitioners' bank accounts to be unfrozen, subject to the Authority's right to initiate fresh proceedings lawfully.

Refund of Cenvat credit - entitlement to take cenvat credit under reverse charge - finality of appellate order - remand for fresh adjudication - lack of jurisdiction to decide CGST issues

Refund of Cenvat credit - finality of appellate order - Whether the impugned order rejecting the appellant's refund claim of cenvat credit is sustainable - HELD THAT: - The Tribunal found that the earlier appellate order dated 30.09.2017 in favour of the appellant had attained finality and was accepted by both Revenue and the assessee. The adjudicating authority's later denial of refund on the premise that the appellant had not claimed cenvat credit was contrary to the record, which records the appellant's plea to take credit and the Commissioner (Appeals) had expressly recognised entitlement to cenvat credit in the context of reverse charge. Having regard to these findings, the impugned order rejecting the refund was held unsustainable and was set aside. [Paras 4]

Impugned order rejecting refund set aside as unsustainable in view of the final appellate order and recorded claim to take cenvat credit.

Remand for fresh adjudication - lack of jurisdiction to decide CGST issues - Procedural fate of the matter where the refund claim arises under the CGST Act and the Tribunal's competence to decide such issue - HELD THAT: - The Tribunal recorded that it could not decide issues arising under Section 142(6)(a) of the CGST Act, 2017. Consequently, having set aside the impugned order, the Tribunal remanded the matter to the adjudicating authority for a final decision in accordance with law after affording the appellant a reasonable opportunity, expressly directing the authority to keep in mind the Tribunal's observations regarding the earlier appellate order and the appellant's claim to cenvat credit. All contentions were left open for fresh adjudication by the proper authority. [Paras 4, 5]

Matter remanded to the adjudicating authority for final order in accordance with law; Tribunal declined to decide CGST issue.

Final Conclusion: The Tribunal set aside the impugned order rejecting the refund of cenvat credit, recorded that the earlier appellate order in favour of the appellant had attained finality and that the appellant had consistently claimed credit, and remanded the matter to the adjudicating authority for fresh decision in accordance with law while declining to decide the CGST issue itself.

Input Service - CENVAT credit eligibility - nexus with manufacture - consumable as input - Outdoor Catering excluded from Input Service w.e.f. 01.04.2011

Input Service - nexus with manufacture - CENVAT credit on Erection, Commissioning and Installation services (crane services) availed for movement of dies, moulds, machines within factory - HELD THAT: - The Tribunal found that the services relating to hiring of cranes were used in relation to manufacture and demonstrated sufficient nexus with the appellant's manufacturing activity because such movement of machines and goods within the factory is indispensable to the manufacturing process. The Department's characterization of the services as erection, commissioning and installation was rejected and the Tribunal relied on precedent holdings treating crane/hiring services in a manufacturing unit as input services to allow credit. [Paras 6, 7]

Credit allowed on crane services as Input Service

Input Service - advertisement and sales promotion - nexus with manufacture - CENVAT credit on Event Management services used for inaugural ceremony involving customers/dealers and promotional activities - HELD THAT: - The Tribunal held that the event management services were used in relation to business promotion and sales (including travel, boarding, lodging of management, advertisement, promotional video and related services) and that customers/dealers attended the event. These services were therefore held to fall within the inclusive ambit of Input Service under the rule and credit was allowed, consistent with earlier Tribunal decisions including the appellant's own earlier CESTAT decision. [Paras 6, 7]

Credit allowed on Event Management services as Input Service

Input Service - consumable as input - nexus with manufacture - CENVAT credit on Management, Maintenance and Repair service relating to DG sets, including service tax charged on running expenses (diesel) and maintenance - HELD THAT: - The Tribunal accepted that DG sets were hired and used to generate electricity essential for manufacturing. Having allowed hiring charges, the Tribunal held it necessary to allow credit of service tax paid on running expenses and maintenance (including diesel) because diesel was an input essential for functioning of the DG sets and therefore the related service falls within the definition of Input Service. [Paras 6, 7]

Credit allowed on Management, Maintenance and Repair services (including diesel-related running expenses) as Input Service

Input Service - nexus with manufacture - CENVAT credit on Auctioneer services engaged for auctioning scrap generated during manufacture - HELD THAT: - The Tribunal held that auctioneering services used to remove scrap generated in the manufacturing process are integral to manufacturing because clearance of dumped or unusable goods is necessary for storage of raw materials or finished goods. Relying on Division Bench authority, the Tribunal concluded such auction services qualify as Input Service and allowed credit. [Paras 6, 7]

Credit allowed on Auctioneer services as Input Service

Input Service - Outdoor Catering excluded from Input Service w.e.f. 01.04.2011 - CENVAT credit on Outdoor Catering services provided within manufacturing premises for guests, vendors and dealers - HELD THAT: - The Tribunal noted that outdoor catering services were excluded from the definition of Input Service with effect from 01.04.2011 and followed the Larger Bench decision in Wipro Ltd. which holds that CENVAT credit on outdoor catering is not available post-amendment. Applying that binding view, the Tribunal disallowed credit on outdoor catering. [Paras 6, 7]

Credit disallowed on Outdoor Catering service

Final Conclusion: Appeal partially allowed: CENVAT credit permitted on crane (erection/commissioning) services, event management services, management/maintenance/repair services (including diesel-related running expenses), and auctioneer services for the periods in dispute; credit on outdoor catering service disallowed in view of the exclusion effective 01.04.2011; recoverable credit subject to interest.

Cenvat credit on outward transportation - inclusion of freight in assessable value - separately charged freight - interpretation of Cenvat Credit Rules - extended period and limitation - penalty under rule 15(2) of Cenvat Credit Rules read with section 11AC - re-quantification of demand by adjudicating authority

Cenvat credit on outward transportation - inclusion of freight in assessable value - separately charged freight - Admissibility of Cenvat credit in respect of service tax paid on outward transportation where freight was separately invoiced and not included in the assessable value. - HELD THAT: - The Tribunal examined invoices, contract terms and CA certificate and found that the freight was separately charged to customers and was not included in the assessable value on which excise duty was paid. Prior decisions allowing credit relied on the factual position that freight formed part of the assessable value and excise duty had been paid thereon; those ratios were held inapplicable where freight is separately invoiced. On the facts of this case, the appellant was not entitled to avail Cenvat credit of service tax paid on outward transportation. [Paras 5]

Credit disallowed on merits because freight was separately charged and not included in assessable value.

Extended period and limitation - interpretation of Cenvat Credit Rules - Sustainability of demand for extended period (time-bar) in view of the nature of the dispute and the appellant's conduct. - HELD THAT: - The Tribunal noted that the matter involved interpretation of Cenvat Credit Rules and was the subject of substantial and unsettled litigation, including circular clarification. The appellant had declared the credit in returns and there was no evidence of suppression or mala fide intention to evade duty. Given the bona fide nature of the controversy and the unsettled state of law, demands for the extended period were held unsustainable. [Paras 5, 6]

Demand for the extended period set aside.

Penalty under rule 15(2) of Cenvat Credit Rules read with section 11AC - Liability for penalty where credit was availed in circumstances found not to involve suppression or mala fide intent. - HELD THAT: - Having concluded that the appellant had no intention to evade duty and there was no suppression or misstatement, the Tribunal held that the conditions for imposing penalty under rule 15(2) read with section 11AC were not attracted. Consequently, the penalty imposed in the adjudication was set aside. [Paras 6]

Penalty set aside.

Re-quantification of demand by adjudicating authority - Treatment of remaining demand after setting aside extended period demand and penalty. - HELD THAT: - While the Tribunal disallowed the credit on merits and set aside demands for the extended period and penalty, it directed that the remaining demand (quantum) be recalculated by the adjudicating authority in accordance with law. The Tribunal did not itself quantify the balance demand but remitted the matter for re-quantification and recovery consistent with its findings. [Paras 6]

Remaining demand remitted to the adjudicating authority for re-quantification and recovery in accordance with law.

Final Conclusion: Appeal partly allowed: Cenvat credit on outward transportation disallowed on merits because freight was separately charged and not included in assessable value; demands for the extended period and penalty set aside; remaining demand remitted to the adjudicating authority for re-quantification and recovery in accordance with law.

Pre-payment of entry tax by purchasing dealer - Manufacturer's duty to collect and deposit tax - Manufacturer's liability only for failure to deposit tax collected - Entry tax liability remains on the purchasing dealer - Consequences under Section 12(3) for default in deposit

Pre-payment of entry tax by purchasing dealer - Manufacturer's duty to collect and deposit tax - Manufacturer's liability only for failure to deposit tax collected - Consequences under Section 12(3) for default in deposit - Whether the Tribunal was justified in deleting the entry-tax demand raised against the manufacturer where the manufacturer did not recover entry tax from the purchaser - HELD THAT: - The Court held that Section 12 of the Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 establishes a mechanism for pre-payment of entry tax by the purchasing dealer and places on the manufacturer a procedural duty to receive and deposit tax so collected. Section 12(1) requires the purchasing dealer to pay the tax to the manufacturer at the time of taking delivery; Section 12(2) obliges the manufacturer to submit return and deposit the tax; Section 12(3) prescribes the consequence where the manufacturer fails to deposit tax received, making him liable to pay the tax with interest and penalty recoverable as arrears of land revenue. Section 12(6) deems any deposit made by the manufacturer to be for and on behalf of the purchasing dealer. Reading these provisions together, the statutory scheme does not shift the substantive incidence of entry tax from the purchasing dealer to the manufacturer; the manufacturer's liability arises only if he has collected the tax and thereafter fails to deposit it. Where the manufacturer did not recover the tax from the purchaser (for example, because the purchaser represented a different character of sale), Section 12(3) does not create an independent charge of tax on the manufacturer. The Tribunal therefore correctly deleted the demand against the manufacturer, and the revision filed by the revenue was without merit. [Paras 8, 9, 10, 11, 12]

The Tribunal's deletion of the entry-tax demand against the manufacturer is affirmed; Section 12 does not impose the tax liability on the manufacturer except as a consequence of failing to deposit tax actually collected.

Final Conclusion: The revision is dismissed; the question of law is answered in favour of the assessee and against the revenue, affirming that Section 12 provides for collection and deposit mechanics and does not transfer the substantive entry-tax liability from the purchasing dealer to the manufacturer except where the manufacturer has collected and failed to deposit the tax.

Export sale as 'sale' under Section 2(n) read with Explanation 3(a) - exclusion of applicability of Section 3(4) of the Act to export sales - concessional rate for inputs under Section 3(3) of the Act - constitutional embargo on taxation of exports (Article 286) and its effect on indirect taxation - Ejusdem Generis as a rule of statutory construction

Export sale as 'sale' under Section 2(n) read with Explanation 3(a) - exclusion of applicability of Section 3(4) of the Act to export sales - concessional rate for inputs under Section 3(3) of the Act - Whether Section 3(4) of the Act is attracted to export sales of goods manufactured after availing concessional rate under Section 3(3). - HELD THAT: - The Court applied the legal reasoning in the quoted Division Bench decision and concluded that an export sale falls within the definition of 'sale' as envisaged by Section 2(n) read with Explanation 3(a) when the conditions of Explanation 3(a) (goods within the State and ascertainment/appropriation at the relevant time) are satisfied. Where those conditions are met, the export transaction is deemed a sale for the purposes of the Act and thus the negative stipulation in Section 3(4) ('does not sell the goods so manufactured') cannot be invoked to fasten tax liability on the value of inputs purchased under the concessional rate scheme. The Court further noted the constitutional principle that taxation of export sales is constrained by the embargo under Article 286 and applied the ejusdem generis rule to the language of Section 3(4), holding that the phraseology does not cover export sales. Reliance on decisions interpreting different or non-analogous statutory provisions (including cases concerning purchase tax or other sections) was rejected where the statutory language and context differed. In consequence, the precedent reasoning led the Court to apply the same legal outcome to the present proceedings.

The Court, following the cited Division Bench authority, held that Section 3(4) does not apply to the export sales in question and, accordingly, dismissed the writ petition.

Final Conclusion: Following the reasoning of the cited Division Bench decision, the Court held that the export sales fall within the definition of 'sale' under the Act and that Section 3(4) is not attracted; the writ petition is dismissed. No costs.

Interim reliefs relating to periodic schemes - stay of administrative scheme pending adjudication - form versus substance of regulatory objection - anonymity of political donations and banking/KYC safeguards - judicial interim oversight through sealed disclosure to Election Commission - non-tradability of electoral instruments as anti misuse safeguard - restriction on foreign participation in electoral funding

Interim reliefs relating to periodic schemes - Repeated applications for the same interim relief each time the electoral bond sale window opens are not ordinarily permissible. - HELD THAT: - The Court observed that once an interim order has been passed concerning a periodical mechanism made available at recurring intervals under Clause 8(1) of the Scheme, applications seeking the same interim relief every time the purchase window is opened cannot be repeatedly made as a matter of routine. The Court nonetheless heard the present applications in view of the gravity of the issues raised, but underlined the normal procedural rule against repetition of identical interim applications merely because the contested activity recurs periodically. [Paras 10, 11]

Applications for the same interim relief each time the window opens are ordinarily not maintainable; the Court may still entertain them in exceptional circumstances.

Form versus substance of regulatory objection - The Reserve Bank of India's objections were to the form (scrip versus demat) of the Electoral Bond Scheme, not to the Scheme in principle. - HELD THAT: - The Court examined RBI correspondence and held that RBI's concerns related primarily to issuance in physical scrip form rather than to the conceptual foundations of the Scheme. RBI proposed safeguards (including dematerialisation and limiting tenor, KYC compliance, and use of banking channels) and stated that demat issuance with RBI as custodian would retain anonymity while ensuring bank channel transfers. Thus RBI's position did not amount to opposition in principle to the Scheme. [Paras 14, 15, 16]

RBI's reservations were directed at the modality of issuance; they did not constitute principled opposition to the Electoral Bond Scheme.

Anonymity of political donations and banking/KYC safeguards - judicial interim oversight through sealed disclosure to Election Commission - non-tradability of electoral instruments as anti misuse safeguard - restriction on foreign participation in electoral funding - Granting a stay of the Electoral Bond Scheme was not justified in light of the safeguards in the Scheme and the interim disclosure mechanism already ordered by the Court. - HELD THAT: - The Court analysed the Scheme's features - KYC requirements, issue and encashment strictly through authorised banking channels, validity period of bonds, prohibition on tradability, restriction to Indian persons/ entities for purchase, and tax/accounting treatment - and observed that these measures ensure transactions occur through banking channels and leave a trail accessible through authorised banks and statutory company filings. The Court also noted that its earlier interim order requiring political parties to furnish donor particulars in sealed covers to the Election Commission provided additional judicial oversight. The combination of these safeguards led the Court to conclude that anonymity under the Scheme is not absolute and that the balance of convenience and the need for an in depth hearing did not warrant stay of further issuance. [Paras 24, 25, 26, 27, 28]

Both applications for stay of the Electoral Bond Scheme are dismissed; the Scheme's safeguards and the Court's interim disclosure order render a stay unwarranted at this stage.

Final Conclusion: The applications for stay of the Electoral Bond Scheme were dismissed: the Court held that repetitive interim applications each time a periodic sale window opens are not ordinarily maintainable; that RBI's objections were to the form (scrip v. demat) and not to the Scheme's substance; and that, given the Scheme's banking/KYC safeguards, non tradability, restriction on foreign purchasers, and the Court's interim sealed cover disclosure to the Election Commission, a stay was not justified.

Compounding of offences under the Negotiable Instruments Act - compounding under Section 147 of the Negotiable Instruments Act - conviction under Section 138 of the Negotiable Instruments Act and its setting aside on compounding - payment of costs as condition for compounding (Damodar S. Prabhu guidelines) - exercise of discretion to close proceedings on payment of cheque amount with interest and costs - power under Article 142 of the Constitution to pass orders in compounding context

Compounding of offences under the Negotiable Instruments Act - compounding under Section 147 of the Negotiable Instruments Act - conviction under Section 138 of the Negotiable Instruments Act and its setting aside on compounding - exercise of discretion to close proceedings on payment of cheque amount with interest and costs - Whether the offence punishable under Section 138 of the Negotiable Instruments Act can be compounded after conviction and appellate confirmation, and the legal consequence of such compounding. - HELD THAT: - The Court applied settled precedent establishing that offences under Section 138 are compoundable and that, where parties validly compound under the statutory scheme, the conviction and sentence recorded under Section 138 are to be set aside. The judgment relies on earlier decisions which recognise Section 147 (inserted by amendment) as enabling compounding and, by analogy with Section 320 Cr.P.C.(8), permitting acquittal when compounding is allowed. The Court noted that compounding is permissible at any stage, including after appellate disposal, and that where the cheque amount with interest and costs has been paid and the complainant confirms receipt and disinclination to continue proceedings, the court can exercise its discretion to close proceedings and set aside conviction and sentence.

The offence is compoundable despite earlier conviction and appellate confirmation; on the parties' compromise and payment, the Court is prepared to set aside the judgment and sentence and acquit the revisionist subject to conditions.

Payment of costs as condition for compounding (Damodar S. Prabhu guidelines) - power under Article 142 of the Constitution to pass orders in compounding context - Whether, having allowed compounding at a late stage, the Court should impose the supervisory costs prescribed by Supreme Court guidelines and the consequence of compliance. - HELD THAT: - Applying the guidelines formulated in Damodar S. Prabhu, the Court recognised that compounding at a later stage may attract an obligation to pay a percentage of the cheque amount as costs. The revisionist had made the substantive payment to the complainant and executed a compromise deed, but had not taken early steps to compound. In exercise of its supervisory discretion and to give effect to the principles and proportions indicated by the Supreme Court for compounding at appellate stages, the Court directed payment of 15% of the cheque amount to the High Court Legal Services Committee within four weeks as a condition for setting aside the conviction and sentence. The order embodies the Court's discretion to impose such terms to advance justice and to follow established guidance on costs for late compounding.

Revision is allowed on condition that the revisionist deposits 15% of the cheque amount to the High Court Legal Services Committee within four weeks; upon such deposit the judgment and sentence of the courts below will be set aside.

Final Conclusion: The revision is allowed on the parties' compromise: the Court compounds the offence and will set aside the conviction and sentence recorded under Section 138 upon the revisionist's compliance with the condition to deposit 15% of the cheque amount to the High Court Legal Services Committee within four weeks; non-compliance will leave the conviction and sentence undisturbed.

Presumption under Section 139 - rebuttable presumption - burden of proof on accused to rebut presumption - negotiable instrument issued for discharge of debt or liability - blank cheque signed by drawer - conviction under Section 138 of the Negotiable Instruments Act - conversion of sentence to fine on compassionate grounds

Presumption under Section 139 - rebuttable presumption - burden of proof on accused to rebut presumption - negotiable instrument issued for discharge of debt or liability - blank cheque signed by drawer - Whether the complainant established the existence of a legally enforceable debt and whether the accused successfully rebutted the statutory presumption arising under Section 139 of the Negotiable Instruments Act - HELD THAT: - The complainant produced oral testimony and bank records demonstrating withdrawal of funds and payment to the accused, proof of issuance of the signed cheque and its dishonour, and the accused admitted issuance of the cheque while advancing inconsistent defences. The Court applied settled law that Section 139 raises a presumption that a cheque was issued for discharge of debt or liability, which is rebuttable only by cogent evidence showing non-existence of debt or a reasonable possibility of its non-existence. Mere denial or assertion that the cheque was a blank security, without corroborative evidence, is insufficient. Reliance on authorities establishing the principle that the accused must adduce probable and cogent evidence to shift the burden was affirmed, and the trial and appellate courts' concurrent finding that the accused failed to rebut the presumption was held not to be vitiated by perversity, error of law, or jurisdictional defect. [Paras 12, 13, 14, 15, 16]

The presumption under Section 139 stood unrebutted; the existence of a legally recoverable debt was established and the conviction under Section 138 was affirmed.

Conviction under Section 138 of the Negotiable Instruments Act - conversion of sentence to fine on compassionate grounds - Whether the sentence imposed should be modified having regard to the age and ill-health of the convicted accused and his undertaking to pay the cheque amount - HELD THAT: - Although the conviction was maintained, the Court considered the accused's age, health and offer to pay. Exercising discretion in sentencing, the Court converted the substantive sentence to a monetary penalty while preserving conviction. The modification was directed to be implemented by directing deposit of the fine within a stipulated period, failing which the default sentence would follow. [Paras 17, 18]

Conviction maintained; sentence modified by converting imprisonment to a fine with a default prison-term; payment to be made within the period directed by the Court.

Final Conclusion: The High Court dismissed the revision against the conviction under Section 138 NI Act, holding that the accused failed to rebut the presumption under Section 139; while maintaining conviction, the sentence was altered to a fine (depositable within the period fixed) with default imprisonment as ordered.

Offence under Section 138 of the Negotiable Instruments Act - presumption under Section 139 of the Negotiable Instruments Act - rebuttal of presumption under Section 139 (reverse onus) - dishonour of cheque due to insufficient funds - concurrent findings of fact and scope of revisional jurisdiction - modification of sentence and award of compensation under Section 357(3) Cr.P.C.

Offence under Section 138 of the Negotiable Instruments Act - dishonour of cheque due to insufficient funds - presumption under Section 139 of the Negotiable Instruments Act - Whether the accused was rightly convicted for the offence under Section 138 of the Negotiable Instruments Act on the evidence led and the presumption under Section 139. - HELD THAT: - The complainant proved issuance and presentation of the cheque (Ex.P1) and its dishonour with endorsement of insufficient funds (Ex.P2), and proved service of the statutory demand (Ex.P3, Ex.P4). The accused did not deny his signature on the cheque and relied on the defence that the cheque was given only as security for his brother's loan. The court applied the statutory presumption under Section 139 that, once issuance and signature are admitted, a legally enforceable debt is presumed and the burden shifts to the accused to rebut. The accused examined his brother (D.W.1) but the evidence did not succeed in rebutting the presumption; indeed the witness fortified that a house had been constructed. The High Court found no infirmity in the concurrent findings of fact by the courts below that the accused failed to rebut the presumption and was therefore guilty under Section 138. The conviction was accordingly upheld. [Paras 12, 13, 14, 15]

Conviction under Section 138 NI Act upheld as the presumption under Section 139 was not rebutted and the complainant's case was proved.

Concurrent findings of fact and scope of revisional jurisdiction - revisional jurisdiction and scope - Whether the High Court should disturb concurrent findings of fact recorded by the trial and appellate courts in revisional proceedings. - HELD THAT: - The Court reiterated the settled principle that a revisional court will not interfere with concurrent findings of fact in the absence of jurisdictional error or other exceptional circumstances. Citing precedent on the limits of revisional jurisdiction, the High Court applied that principle to the present record and found no jurisdictional defect or illegality in the concurrent factual conclusions of the courts below. Consequently, interference with those findings was not warranted. [Paras 11, 15]

Revisional jurisdiction cannot be exercised to reappraise concurrent findings of fact; no interference was justified.

Modification of sentence and award of compensation under Section 357(3) Cr.P.C. - Whether the appellate modification of sentence to six months' simple imprisonment and the award of compensation was vitiated or required interference. - HELD THAT: - The appellate court, while confirming conviction, modified the sentence to six months' simple imprisonment and reduced the compensation to an awarded amount under Section 357(3) Cr.P.C. The High Court examined the appellate order and found no illegality or infirmity in the exercise of discretion by the appellate court. Given absence of any challenge by the complainant to the modified compensation and no error in exercise of sentencing jurisdiction, the High Court directed that the modified sentence and compensation stand and ordered commitment to prison and payment as directed by the appellate court. [Paras 6, 7, 15, 16]

Appellate modification of sentence and compensation sustained; directions issued for commitment and payment as ordered by the appellate court.

Final Conclusion: Criminal revisions dismissed; concurrent conviction for the offence under Section 138 NI Act and the appellate modification of sentence and compensation affirmed. Bail bonds cancelled and the trial court directed to commit the accused to undergo the sentence and ensure payment of the compensation as ordered by the appellate court.