TaxTMI Updates e-Newsletter
Apr 03,2021

Composite supply - Works contract treated as supply of service - Turnkey project as composite supply - Principal supply - Concessional rate under Notification No. 11/2017 - entry 3(vi) - Government entity - Schedule II paragraph treating works contract as service

Composite supply - Turnkey project as composite supply - Works contract treated as supply of service - Turnkey works contract executed by the applicant to construct IIT Bhubaneswar campus is a composite supply and, being a works contract, is to be treated as a supply of service. - HELD THAT: - The agreement awarded the entire project on a turnkey basis to the applicant, requiring handing over the buildings in ready-to-use condition and not providing for separate orders or separate invoicing for discrete works. Under the statutory definition, composite supply consists of two or more taxable supplies naturally bundled with one being the principal supply. Schedule II (para 6) treats works contracts as supply of service. Applying these principles to the turnkey contract, the Appellate Authority held that the several elements of the project are naturally bundled around the principal works-contract service and therefore constitute a composite supply which is to be treated as a service. The Authority disagreed with the earlier conclusion that the contract could not be termed a composite supply, finding that the AAR's observations granting concessional treatment to major parts of the project were inconsistent with its ultimate denial and that cogent reasons for such denial were absent.

The works entrusted to M/s. NBCC(India) Ltd. are a composite supply and, as a works contract, are to be treated as a supply of service.

Government entity - IIT Bhubaneswar is a government entity for the purposes of Notification No. 11/2017 (Rate). - HELD THAT: - The Appellate Authority recorded the AAR's finding that IIT Bhubaneswar falls within the definition of a governmental authority/government entity as set out in the explanation to the notification and treated IIT accordingly when considering entitlement to concessional rates.

IIT, Bhubaneswar is a government entity.

Concessional rate under Notification No. 11/2017 - entry 3(vi) - Principal supply - Faculty quarters, staff quarters and Director's bungalow constructed under the turnkey works contract are eligible for the concessional rate specified at entry 3(vi) of Notification No. 11/2017-C.T. (Rate) and the matching State tax notification. - HELD THAT: - Having determined that the project is a composite works-contract service and that the recipient is a government entity, the Authority applied the classification in entry 3 of the notification. The AAR had earlier observed that major parts of the project fall within sub-clause (b) of clause (vi) of entry 3 (heading 9954) and merit the concessional rate. The Appellate Authority reconciled the contractual nature (turnkey/works contract as service) with the notification's coverage and held that the construction of the faculty, staff quarters and Director's bungalow qualify for the concessional rate under Sl. No. 3(vi), with corresponding State tax notification applicability.

The Faculty Quarters, Staff Quarters and Director's Bungalow constructed under the contract are entitled to the concessional rate under Sl. No. 3(vi) of Notification No. 11/2017-C.T. (Rate) and the corresponding State notification.

Final Conclusion: The Appellate Authority set aside the AAR's conclusion that the contract could not be termed a composite supply, holding instead that the turnkey works contract is a composite works-contract service (treated as a service), that IIT Bhubaneswar is a government entity, and that the construction of faculty/staff quarters and Director's bungalow is eligible for the concessional rate under entry 3(vi) of Notification No. 11/2017-C.T. (Rate) and the matching State notification.

Classification of services as "Other services n.e.c." under SAC 9997 - Taxability of supervisory charges - Pure agent - Valuation of supply under Section 15 of the CGST Act, 2017 - Applicability of GST rate 18%

Pure agent - Taxability of supervisory charges - Whether the applicant acts as a pure agent of FCI in procuring H&T services and the legal consequence of that status for taxability of supervisory charges. - HELD THAT: - The Authority examined the contractual relationship and communications between the applicant and FCI and noted that the letter from FCI together with the manner of procurement and invoicing contained the factual elements of a contract. The applicant procures H&T services for and on behalf of FCI, raises invoices showing actual amounts paid to contractors separately and charges an additional supervisory percentage. Applying the explanation to Rule 33, the Authority found that the applicant neither intends to hold title to the services procured nor uses them for its own interest and recovers only actuals along with a separately stated supervisory charge. On these facts the applicant qualifies as a pure agent of the recipient for the supervision of handling and transportation of agricultural produce. [Paras 9]

The applicant is a pure agent of FCI in procuring H&T services for supervision of handling and transportation.

Classification of services as "Other services n.e.c." under SAC 9997 - Valuation of supply under Section 15 of the CGST Act, 2017 - Applicability of GST rate 18% - Whether the supervisory charges charged by the applicant are a taxable supply, the appropriate SAC classification and the applicable rate and value basis. - HELD THAT: - The Authority found that the applicant adds value only to the extent of the supervisory percentage (8%) over the actual amounts paid to H&T contractors and that the supervision service is not covered by the exemption entries relied upon for storage and warehousing. Applying the Explanatory Notes to the Scheme of Classification of Services, the supervisory activity falls within services "nowhere else classified" and is therefore covered by SAC 9997 (other services n.e.c.). Consequently, the supervisory charges are exigible to GST. The Authority directed that tax be levied at the rate specified for such services, on the value equivalent to the 8% markup (i.e., the portion representing the applicant's supply) computed in accordance with the valuation principles in Section 15 of the CGST Act, 2017. [Paras 9, 10]

Supervisory charges are taxable as services under SAC 9997 and exigible to GST at 18% on the value equivalent to the 8% supervisory markup over actual amounts paid to H&T contractors.

Final Conclusion: The Authority ruled that the applicant acts as a pure agent of FCI for procurement of H&T services and that its supervisory charges (the 8% markup) constitute a taxable supply classified under SAC 9997; such supervisory charges are taxable at 18% and are to be valued by reference to the 8% amount in accordance with Section 15 of the CGST Act, 2017.

Classification of supply as goods or services - computer software as goods (application software) - pre-developed/off the shelf software made available by encryption keys - temporary transfer or permitting the use of intellectual property (Schedule II) - concessional rate under the notifications for supplies to public funded research institutions - public funded research institution - certificate requirement and administrative control condition

Classification of supply as goods or services - pre-developed/off the shelf software made available by encryption keys - temporary transfer or permitting the use of intellectual property (Schedule II) - computer software as goods (application software) - Supply of licences for internet downloaded, pre developed software supplied with activation/encryption keys is a supply of goods and falls under tariff heading 8523 rather than being a service under Schedule II entry for temporary transfer of intellectual property. - HELD THAT: - The applicant conceded that supplying a licence to use software prima facie engages entry 5(c) of Schedule II which treats temporary transfer or permitting use of intellectual property as a service, and therefore had been classifying supplies under SAC 997331. The Authority examined the character of the software supplied and found it to be pre developed/pre designed, made available through encryption keys and requiring loading on a computer to be used. Those features satisfy the conditions to treat the item as tangible "computer software" for classification purposes. The Explanatory Notes to the Scheme of Classification of Services exclude limited end user licences supplied as part of packaged software from SAC 997331. On these grounds the Authority concluded that the applicant's supply is properly characterised as supply of goods, specifically application computer software classifiable under tariff heading 8523. [Paras 11, 13]

Supply of the internet downloadable, pre developed software licences in question is a supply of goods (application computer software) and not a service.

Concessional rate under the notifications for supplies to public funded research institutions - public funded research institution - certificate requirement and administrative control condition - computer software as goods (application software) - Notification No.45/2017 Central Tax (Rate) and Notification No.47/2017 Integrated Tax (Rate) dated 14.11.2017 apply to the applicant's supply of computer software to a qualifying public funded research institution, permitting the concessional rate, subject to fulfillment of the notification conditions. - HELD THAT: - The notifications grant concessional tax treatment for specified goods, including "computer software", when supplied to listed institutions that satisfy the conditions in column (4), notably being under administrative control of specified departments and production of the prescribed certificate at the time of supply. The applicant supplied the software to the National Institute of Science Education and Research, Bhubaneswar, which produced the Deputy Secretary level certificate and a Head of Institution certificate certifying use for research only, thereby meeting the notification conditions. Having held that the supply is of "computer software" (goods) and noting the produced certificates satisfy the conditions, the Authority held the notifications are applicable to the transaction. [Paras 10, 12, 14]

The concessional rate under Notification No.45/2017 Central Tax (Rate) and Notification No.47/2017 Integrated Tax (Rate) applies to the applicant's supply of the computer software to the qualifying public funded research institution, subject to the conditions in the notifications being met.

Final Conclusion: The Authority ruled that the applicant's supply of internet downloadable, pre developed software licences is a supply of goods (application software) classifiable under tariff heading 8523, and that the cited notifications granting concessional tax treatment to computer software supplied to qualifying public funded research institutions apply to the transaction where the prescribed certification and conditions are satisfied.

Composite supply - principal supply - accommodation services (SAC 996311) - renting of residential dwelling - exemption under Entry 12 of Notification 12/2017 - exemption under Entry 14 of Notification 12/2017 - rooming house vs residential dwelling distinction - transaction-wise taxability under GST

Composite supply - principal supply - accommodation services (SAC 996311) - rooming house vs residential dwelling distinction - Lease of property for use as residence together with basic amenities qualifies as accommodation services covered by SAC 996311 and, in the facts of this case, constitutes a composite supply under Section 2(30). - HELD THAT: - The Authority found that the applicant's business model-leasing a residential dwelling and letting out individual rooms with shared kitchen and sanitary facilities-falls within accommodation services (SAC 996311) rather than the renting of a residential dwelling as a whole. Applying the statutory tests for composite supply (multiple taxable supplies; naturally bundled; supplied in conjunction in ordinary course of business; one supply is principal), the Authority held that the component services (accommodation, security, maintenance, housekeeping) are interdependent, normally supplied together by providers of accommodation services and are ancillary to the accommodation. Accordingly the bundle qualifies as a composite supply with the accommodation service as the principal supply. [Paras 7, 8]

The impugned services are accommodation services falling under SAC 996311 and qualify as a composite supply under Section 2(30).

Renting of residential dwelling - exemption under Entry 12 of Notification 12/2017 - accommodation services (SAC 996311) - rooming house vs residential dwelling distinction - The applicant's renting activity is not covered by the exemption at Entry 12 of Notification 12/2017 because the service provided is classified as accommodation services under SAC 996311 rather than 'renting of residential dwelling' within Entry 12. - HELD THAT: - Entry 12 exempts services by way of renting of a residential dwelling for use as residence. The Authority examined the factual nature of the supply and the Explanatory Notes: where accommodation is provided as rooms/units with shared facilities (rooming house) the service is classifiable as accommodation services (SAC 996311) and excluded from the renting-of-residential-dwelling construct. Given that the applicant supplies room/unit accommodation (shared facilities) the exemption in Entry 12 is not attracted to their transactions. [Paras 7, 8]

Renting of property by the applicant is not covered under Entry 12 of Notification 12/2017 as the services fall under SAC 996311.

Exemption under Entry 14 of Notification 12/2017 - accommodation services (SAC 996311) - The exemption under Entry 14 of Notification 12/2017 is available to the applicant's transactions, subject to the condition regarding the value of supply per unit of accommodation. - HELD THAT: - Entry 14 exempts services by hotels, inns, guest houses, clubs or campsites (by whatever name called) for residential or lodging purposes where the value of a unit of accommodation is below or equal to the notified threshold. Having classified the applicant's activity as accommodation services under SAC 996311, the Authority held that the applicant's transactions fall within Entry 14 and the exemption applies provided the prescribed value condition is satisfied. [Paras 7, 8]

The applicant's accommodation transactions are eligible for exemption under Entry 14 of Notification 12/2017, subject to fulfillment of the value condition.

Transaction-wise taxability under GST - renting of residential dwelling - exemption under Entry 12 of Notification 12/2017 - Leasing of property to a business entity which further sublets for residential use is a separate transaction and is not eligible for exemption under Entry 12 in the leg between the applicant and the business entity; the downstream subletting transaction must be assessed on its own facts. - HELD THAT: - The Authority emphasised GST's transaction-based character and examined the two distinct transactions separately. The first transaction (applicant to business entity) is leasing the premises to the entity for commercial use in the course of its business and therefore not for 'use as residence' by that recipient; consequently Entry 12 does not apply to that leg. The second transaction (business entity to the ultimate tenant) may involve accommodation services classifiable under SAC 996311, but Entry 12 is not applicable to the applicant's upstream supply merely because the downstream user occupies the premises as a residence. [Paras 7, 8]

Leasing to a commercial entity that sublets for residential use is not covered by Entry 12 for the applicant's transaction; each transaction must be considered independently.

Final Conclusion: The Authority ruled that, on the facts, the applicant's provision of rooms with shared facilities constitutes accommodation services (SAC 996311) and amounts to a composite supply; such supply is not eligible for the Entry 12 exemption for renting of residential dwelling but may be exempt under Entry 14 subject to the value condition; leasing to a commercial entity that subsequently sublets for residential use is a separate transaction and is not covered by Entry 12 in the applicant's supply.

Provisional attachment of property including bank accounts under the MGST Act - requirement of pendency of proceedings under sections 62, 63, 64, 67, 73 or 74 as a precondition to provisional attachment - opinion of the Commissioner as a jurisdictional precondition for exercising power of provisional attachment - delegation of Commissioner's powers to subordinate officers - availability of alternative remedy under rule 159(5) and maintainability of writ jurisdiction

Requirement of pendency of proceedings under sections 62, 63, 64, 67, 73 or 74 as a precondition to provisional attachment - provisional attachment of property including bank accounts under the MGST Act - Validity of the provisional attachment in the absence of pendency of proceedings under section 67 against the petitioner. - HELD THAT: - Section 83 permits provisional attachment only while proceedings under sections 62, 63, 64, 67, 73 or 74 are pending and the attachment must relate to the taxable person whose property is sought to be attached. The record shows authorization and investigation under section 67 in respect of M/s. Prarush Impex and related entities; there is no authorization or proceeding under section 67 against the petitioner himself. The petitioner was summoned as a witness in proceedings relating to a different entity. Because no proceedings under section 67 (or the other listed sections) were pending against the petitioner, the statutory precondition for invoking section 83 was not satisfied and the provisional attachment could not be validly made against the petitioner's bank account. [Paras 16, 17, 23, 25, 26]

Provisional attachment is invalid and unsustainable because there were no proceedings under section 67 (or the other specified sections) pending against the petitioner when the attachment was made.

Opinion of the Commissioner as a jurisdictional precondition for exercising power of provisional attachment - delegation of Commissioner's powers to subordinate officers - availability of alternative remedy under rule 159(5) and maintainability of writ jurisdiction - Whether the Joint Commissioner could lawfully make the provisional attachment in the absence of an express opinion of the Commissioner or delegation, and whether alternative statutory remedy barred writ relief. - HELD THAT: - The term 'Commissioner' in the MGST Act denotes the Commissioner of State Tax (including Principal/Chef Commissioner). Section 83 contemplates the opinion of the Commissioner as the jurisdictional basis for provisional attachment. The attachment in this case was effected by the Joint Commissioner and the record contains no delegation or authorisation from the Commissioner nor any recorded opinion of the Commissioner justifying attachment. Section 5(3) permits delegation by the Commissioner subject to conditions, but no such delegation is shown. Attachment of bank accounts, even provisionally, is a serious intrusion and section 83 must be strictly construed. Given the absence of Commissioner's opinion or delegation, the Joint Commissioner lacked jurisdiction. Consequently, the existence of an alternative remedy under rule 159(5) does not preclude exercise of writ jurisdiction where the impugned action is without jurisdiction; moreover, it is doubtful the Joint Commissioner could decide a representation under rule 159(5) where the statutory competence lies with the Commissioner. [Paras 22, 27, 28]

Attachment made by the Joint Commissioner without any delegation or recorded opinion of the Commissioner was without jurisdiction and therefore liable to be quashed; availability of remedy under rule 159(5) did not bar the petition given the absence of jurisdiction.

Final Conclusion: The provisional attachment order dated 19.06.2020 is quashed as unsustainable: no proceedings under section 67 were pending against the petitioner and the order was made by a Joint Commissioner without any delegation or recorded opinion of the Commissioner; the bank account attachment is to be withdrawn forthwith and the writ petition is allowed.

Opportunity of hearing under Section 75(4) of the Central Goods and Services Tax Act, 2017 - personal hearing - audi alteram partem - quash and remit for fresh consideration

Opportunity of hearing under Section 75(4) of the Central Goods and Services Tax Act, 2017 - personal hearing - audi alteram partem - Validity of the impugned order in the absence of a personal hearing afforded to the petitioner - HELD THAT: - The Court found that the notice dated 29.10.2019 did not afford a personal hearing to the petitioner and the impugned order does not record that any such opportunity was granted. Reliance was placed on Section 75(4) of the Central Goods and Services Tax Act, 2017 which requires that an opportunity of hearing be granted where an adverse decision is contemplated against the person chargeable with tax or penalty. In the absence of any indication that the petitioner was heard, the principles of natural justice embodied in the requirement of a hearing were not complied with. The deficiency of procedure was held to be sufficient to vitiate the impugned order irrespective of other contentions raised by the parties. [Paras 5, 6]

Impugned order quashed for failure to afford personal hearing; order set aside on this ground.

Quash and remit for fresh consideration - Whether the matter should be remitted for fresh consideration after quashing the impugned order - HELD THAT: - Having quashed the impugned order on the sole ground of non-compliance with the requirement of personal hearing, the Court directed that the matter be remitted to the file of the third respondent for passing of fresh orders in accordance with law. The remand contemplates that the competent authority shall afford the petitioner the opportunity of hearing and decide the matter afresh while following statutory prescriptions and principles of natural justice. [Paras 7]

Matter remitted to the third respondent for fresh decision in accordance with law; writ petition allowed.

Final Conclusion: The writ petition is allowed: the impugned order is quashed for failure to afford a personal hearing as required under Section 75(4) of the CGST Act, 2017, and the matter is remitted to the third respondent to decide afresh in accordance with law.

Summary order. Notice issued; respondent to file counter-affidavit within three weeks; rejoinder, if any, to be filed before the next date; matter listed on 25.05.2021.

GST registration requirement for suppliers - registration liability under the OGST Act read with the criteria for taxable supplies - distinction between taxability of goods and supplier's registration obligation - validity of tender pre-qualification conditions

GST registration requirement for suppliers - registration liability under the OGST Act read with the criteria for taxable supplies - validity of tender pre-qualification conditions - Whether the condition in the notice inviting tender requiring bidders to furnish a valid GST registration certificate is non-essential and liable to be deleted because printed books may be exempt from GST. - HELD THAT: - The Court examined the terms and conditions of the NIT and found the requirement to furnish the GST registration certificate to be an explicit and mandatory pre-qualification condition of the tender. The petitioner's contention that printed books are not subject to GST does not negate the statutory obligation on suppliers to obtain registration where the statute requires registration for persons making taxable supplies; the obligation to be registered is conceptually distinct from whether a particular product is presently taxable. The Court accepted the respondents' submission that the registration requirement under the OGST Act (as read with its provisions dealing with registration of suppliers) can be mandatory even if certain goods are presently exempt, and noted the administrative prudence of maintaining the registration requirement since taxability of goods may change. The record showed that the petitioner failed to submit the GST certificate while another bidder did so, and that similar tenders issued by other institutions contained the same requirement. On these bases the Court was not persuaded to direct deletion of the GST-registration condition and concluded that the petitioner's challenge to that requirement must fail. [Paras 4, 7, 8, 9, 10]

The tender condition requiring submission of a valid GST registration certificate is a valid and essential pre-qualification requirement and the challenge to delete it is rejected; the writ petition is dismissed and the interim order is vacated.

Final Conclusion: The petition challenging rejection of the bid for non-submission of GST registration is dismissed; the mandatory GST-registration requirement in the NIT stands and the interim stay is vacated.

Intelligence based enforcement action - preclusion of State proceedings where Central authority is seized - overlapping tax periods between Central and State enquiries - quashing of show cause notice and consequential orders - stay on coercive action pending conclusion of Central proceedings

Intelligence based enforcement action - preclusion of State proceedings where Central authority is seized - quashing of show cause notice and consequential orders - stay on coercive action pending conclusion of Central proceedings - overlapping tax periods between Central and State enquiries - Whether the State GST authority could proceed with adjudication under the OGST Act for March, 2018 when the Central DGGSTI had earlier initiated intelligence-based proceedings covering the overlapping period and CBEC had circulated that the authority which initiates such intelligence action shall take the matter to its logical conclusion. - HELD THAT: - The Court examined the CBEC D.O. letter dated 5th October, 2018 which clarifies that officers of the authority initiating intelligence-based enforcement action are empowered to complete investigation, issuance of show cause notice, adjudication, recovery and appeals and would not transfer such cases to the counterpart State or Central authority. The State authority contended it was unaware of the Central authority's proceedings, but the record shows the petitioner had informed the State authority that DGGSTI was seized of the matter and the period investigated by the Central authority (July, 2017 to June, 2018) overlaps with the month for which the State issued the show cause notice (March, 2018). In these circumstances, the Court held that the CBEC circular precludes the State authority from proceeding while the Central authority remains seized of the matter. Applying that principle, the Court concluded that the show cause notice and the consequential orders passed by the State authority were unsustainable and warranted quashing, and that coercive action by the State authority should be restrained until the conclusion of the proceedings before the DGGSTI. [Paras 13, 14, 16, 18, 19]

The show cause notice dated 23rd July, 2019 and the orders dated 4th and 5th November, 2019 passed by the State GST authority are quashed; no coercive action shall be taken by the State authority till conclusion of the proceedings initiated by the DGGSTI.

Final Conclusion: Writ petition allowed; State proceedings (show cause notice and impugned orders) quashed and coercive action by the State authority stayed pending finalisation of the Central DGGSTI proceedings.

Income of non-resident commission agents not deemed to accrue or arise in India where services are rendered and paid outside India - TDS not deductible on commission remitted to foreign agents where no taxing event arises in India - application of the source rule in determining situs of income - non-allowability under Section 40(a)(1) where tax is deductible at source is inapplicable if income is not chargeable to tax in India

Income of non-resident commission agents not deemed to accrue or arise in India where services are rendered and paid outside India - application of the source rule in determining situs of income - non-allowability under Section 40(a)(1) where tax is deductible at source is inapplicable if income is not chargeable to tax in India - TDS not deductible on commission remitted to foreign agents where no taxing event arises in India - Disallowance under Section 40(a)(1) of the Act set aside because commission paid to foreign Associated Enterprises did not accrue or arise in India. - HELD THAT: - The Court held that the Associated Enterprises rendered the relevant services outside India (in placing orders with manufacturers abroad) and the commission was paid outside India; consequently no taxing event arose within India. Applying the source rule, income of the recipient is chargeable where the source (the payer) is located and where services are utilized; here the services were utilized outside India and were not rendered in India. The Court distinguished GVK Industries Ltd. on facts, noting that in that case consultancy services were held to constitute fees for technical services taxable in India, but the present facts showed services rendered and utilized outside India. Reliance on Toshoku Ltd. and GE India supported the proposition that where services are not rendered/utilized in India and payment is not chargeable to tax in India, no TDS under Section 195 is leviable and consequently disallowance under Section 40(a)(1) cannot be sustained. For these reasons the Tribunal was justified in allowing the assessee's appeal and setting aside the disallowance. [Paras 8, 10, 12, 13]

The Tribunal's order setting aside the disallowance under Section 40(a)(1) is upheld; the substantial question of law is answered in favour of the assessee.

Final Conclusion: The appeal is dismissed; the High Court affirms the Tribunal's finding that commission payable to foreign Associated Enterprises, for services rendered and utilized outside India and paid abroad, does not accrue or arise in India and therefore no TDS was deductible and Section 40(a)(1) disallowance could not be sustained.

Reopening assessment beyond four years on the basis of recorded reason to believe arising from fresh information - Failure to disclose fully and truly all material facts as basis for initiating proceedings under section 147 - Permissibility of reopening despite prior scrutiny when disclosures are found prima facie untrue - Borrowed satisfaction and requirement of independent application of mind by the Assessing Officer - Use of investigation/third party information as relevant material to form belief for reassessment - Application of section 68 in cases of accommodation entries / bogus credits

Reopening assessment beyond four years on the basis of recorded reason to believe arising from fresh information - Failure to disclose fully and truly all material facts as basis for initiating proceedings under section 147 - Validity of the notice under Section 148/147 for A.Y. 2012-13 based on the Assessing Officer's recorded reasons and fresh information - HELD THAT: - The Court examined the reasons recorded by the Assessing Officer which recited receipt of specific information from the investigation wing, bank statements, identification of the payee as a suspicious entry provider, and enquiries (including bank summons) that corroborated the information. The Assessing Officer reviewed the material, conducted independent enquiries and concluded that the assessee had made payments that were accommodation entries and thus that income had escaped assessment. The Court applied established principles that at the notice stage the test is whether there was relevant material on which a reasonable person could form the requisite belief, and not whether escapement is finally established. The Court held that discovery of tangible material after the original assessment which prima facie shows that disclosures were not fully and truly made justifies reopening beyond four years where the Assessing Officer forms a reason to believe after applying his mind. [Paras 11, 12, 14]

Notice for reopening was validly issued as there was prima facie tangible material and a bona fide reason to believe that income chargeable to tax had escaped assessment.

Permissibility of reopening despite prior scrutiny when disclosures are found prima facie untrue - Borrowed satisfaction and requirement of independent application of mind by the Assessing Officer - Use of investigation/third party information as relevant material to form belief for reassessment - Whether the reassessment was vitiated by change of opinion, being merely mechanical or based on borrowed satisfaction / third party information - HELD THAT: - The Court rejected the contention of mere change of opinion because the material relied upon post assessment (investigation reports, bank analysis, corroborative enquiries) was held to be fresh and to cast doubt on the truthfulness of prior disclosures. The Court also rejected the submission that the Assessing Officer acted mechanically or merely on borrowed satisfaction: the reasons show the officer perused the investigation material, verified bank details and formed an independent belief linking the gathered material to the alleged escapement. Reliance on investigative reports or departmental findings is permissible as relevant material provided the Assessing Officer applies his mind to them; the Court found such application of mind present here. [Paras 13, 15]

Reopening was not a mere change of opinion nor vitiated by borrowed satisfaction; independent application of mind to investigation material justified reassessment.

Application of section 68 in cases of accommodation entries / bogus credits - Appropriateness of treating payments as accommodation entries susceptible to tax consequences under provisions addressing unexplained credits - HELD THAT: - The Court noted that where transactions are shown to be accommodation entries or bogus, the statutory provisions dealing with unexplained credits (as exemplified by section 68 jurisprudence) can be invoked. The Court observed that the proviso introduced later (Finance Act 2012) does not alter the position that, if the facts recorded by the Assessing Officer are ultimately established, additions under the provision dealing with unexplained credits would be warranted. At the stage of the present challenge, it suffices that there was material to form the belief that the transactions were not genuine. [Paras 14]

Prima facie treatment of the transactions as accommodation entries was a permissible basis for reassessment and for invoking provisions relating to unexplained credits.

Final Conclusion: Writ petition dismissed. The reopened assessment for A.Y. 2012-13 was held to be legally sustainable because the Assessing Officer, on receipt of specific investigative material and after independent enquiries, had a bona fide reason to believe that income chargeable to tax had escaped assessment; contentions of mere change of opinion or borrowed satisfaction were rejected.

Penalty under section 271(1)(b) - non-compliance of notice under section 142(1) - assessment completed under section 143(3) - reasonable cause - lenient approach where assessment finally completed under section 143(3)

Penalty under section 271(1)(b) - non-compliance of notice under section 142(1) - assessment completed under section 143(3) - lenient approach where assessment finally completed under section 143(3) - reasonable cause - Validity of penalty levied under section 271(1)(b) for alleged non-compliance with notice(s) under section 142(1) in assessment proceedings ultimately completed under section 143(3). - HELD THAT: - The Tribunal examined the AO's levy of penalty for alleged failure to comply with the notice dated 5/10/2018 (questionnaire dispatched 16/10/2018) and the CIT(A)'s confirmation of that penalty. It noted that although there was initial non-compliance, the assessee subsequently furnished details and the assessment was ultimately completed under section 143(3) (and not by invoking section 144) on the basis of materials filed during the proceedings. The Tribunal relied on the established view of coordinate benches that where the taxpayer ultimately complies and the assessing officer completes the assessment under section 143(3) (thereby enabling consideration of the submissions), the earlier defaults which led to temporary non-compliance may be treated leniently and do not automatically justify levy of penalty under section 271(1)(b) absent clear proof of deliberate conduct without reasonable cause. The Tribunal also placed weight on decisions of the coordinate bench in closely similar/group cases where penalties were deleted under identical factual matrix. Applying these principles to the facts - subsequent compliance resulting in completion under section 143(3), absence of persuasive material showing that the earlier defaults caused irremediable prejudice warranting penalty, and the availability of a lenient approach adopted by co-ordinate benches - the Tribunal concluded that penalty was not justified in the present case. [Paras 9, 12, 13]

Penalty under section 271(1)(b) confirmed by the CIT(A) is set aside and the AO is directed to cancel the penalty for the assessment years before the Tribunal; the appellant's grounds are allowed.

Final Conclusion: Both appeals are allowed; the Tribunal sets aside the CIT(A)'s confirmation of penalty under section 271(1)(b) and directs the AO to cancel the penalty for the assessment years before the Tribunal (2011-12 and 2012-13).

Penalty under section 271(1)(b) for failure to comply with notice under section 142(1) - Assessment completed under section 143(3) following subsequent compliance - Deliberate default and absence of reasonable cause - Precedent of Coordinate Benches treating subsequent compliance as curing earlier defaults

Penalty under section 271(1)(b) for failure to comply with notice under section 142(1) - Assessment completed under section 143(3) following subsequent compliance - Deliberate default and absence of reasonable cause - Precedent of Coordinate Benches treating subsequent compliance as curing earlier defaults - Whether penalty under section 271(1)(b) should be sustained where the assessee initially defaulted in complying with notice under section 142(1) but the assessment was ultimately completed under section 143(3) after subsequent compliance. - HELD THAT: - The AO imposed penalty for non-compliance with the notice dated 5/16.10.2018 (fixing hearing for 25.10.2018). The First Appellate Authority upheld the penalty on findings of habitual non-compliance and prejudice to investigation. The Tribunal examined that, although there was initial non-compliance, the assessee subsequently furnished details and the assessment was finally completed under section 143(3) (and not by invoking best judgment under section 144). Coordinate Benches have held that where later compliance leads to completion of assessment under section 143(3), earlier defaults may be treated as cured and leniency applied in respect of penalty under section 271(1)(b). Relying on those decisions (including the Tribunal's decisions in the related group members' cases), and considering the totality of facts and subsequent filing which enabled completion under section 143(3), the Tribunal concluded that it was not appropriate to sustain the penalty for the assessment years before it. The Tribunal therefore set aside the CIT(A)'s order and directed cancellation of the penalty for all six years. [Paras 11, 12]

Penalty under section 271(1)(b) set aside and the AO directed to cancel the penalty for assessment years 2011-12 to 2016-17.

Final Conclusion: The Tribunal allowed the appeals, set aside the order of the CIT(A) and directed the Assessing Officer to cancel the penalty imposed under section 271(1)(b) for assessment years 2011-12 to 2016-17, relying on the principle that subsequent compliance leading to completion under section 143(3) cures earlier defaults and merits deletion of penalty.

Reopening of assessment under Section 147/148 - reopening after four years - failure to disclose fully and truly material facts - mere change of opinion - claim of deduction under Section 80IB(10)

Reopening of assessment under Section 147/148 - reopening after four years - failure to disclose fully and truly material facts - mere change of opinion - claim of deduction under Section 80IB(10) - Validity of the notice dated 30.03.2019 reopening assessment for A.Y.2012-13 under Section 147/148 of the Income Tax Act. - HELD THAT: - The Court held that where reassessment is initiated after four years from the end of the relevant assessment year, the jurisdiction to reopen depends on two conditions: (i) the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment, and (ii) such escapement must be occasioned by failure to disclose fully and truly material facts necessary for assessment (para 11). The material on record shows that the assessee had claimed the deduction under Section 80IB(10) in the return, the claim was reflected in the tax audit report and Form 10CCB, and supporting approvals and layout plans were furnished and considered in the original scrutiny assessment which culminated in an order under Section 143(3) allowing the deduction (paras 12-13). The Court found that the then Assessing Officer had applied his mind and accepted the deduction on the basis of documents produced, and that the present initiation proceeds from the same set of materials without any new tangible material; consequently the reopening amounts to a mere change of opinion which does not confer jurisdiction (para 14). For the same reason, the Court held that the mandatory precondition of non-disclosure was not satisfied and the reasons recorded did not justify formation of a belief that income had escaped assessment (paras 15-16). [Paras 12, 13, 14, 15, 16]

The notice dated 30.03.2019 under Section 148 read with Section 147 is without jurisdiction as it impermissibly amounts to a change of opinion and the requirement of failure to disclose fully and truly material facts for reopening after four years is not satisfied; the notice is quashed.

Final Conclusion: Writ application allowed; impugned notice dated 30.03.2019 issued under Section 148/147 quashed and set aside; no order as to costs.

Reopening of assessment under Section 147 - Reasons recorded for reopening - Failure to disclose fully and truly all material facts - Borrowed satisfaction - Change of opinion - Addition under Section 68 - Scrutiny assessment and earlier adjudication

Reopening of assessment under Section 147 - Reasons recorded for reopening - Failure to disclose fully and truly all material facts - Borrowed satisfaction - Addition under Section 68 - Scrutiny assessment and earlier adjudication - Validity of reopening the assessment for A.Y. 2012-2013 by issuing notice dated 28.03.2019 - HELD THAT: - The Court examined the reasons recorded by the Assessing Officer, which relied primarily on information from the Investigation Wing, Surat that a transaction of Rs. 20,00,055/- with an entry provider was bogus and that income had escaped assessment. The record, however, showed that the case was earlier selected for scrutiny, assessment under Section 143(3) was framed on 31.03.2015 and various additions were made, including an addition of Rs. 5,28,00,000/- under Section 68 which expressly included the sum of Rs. 20,00,055/- received from the same person. The addition made at the original assessment stage was pending on appeal before the Tribunal. The Court held that where the identical underlying transaction had already been examined and added in the original scrutiny assessment, the Assessing Officer could not simply reopen the assessment based solely on information from the Investigation Wing without applying independent mind. The reasons recorded did not demonstrate independent satisfaction that income chargeable to tax had escaped assessment by reason of failure to disclose fully and truly all material facts; rather the formation of belief appeared to be based on borrowed satisfaction and irrelevant material, amounting to a mechanical exercise. The Court noted that this was not a case where the Investigating Wing's information related to a transaction distinct from what was earlier examined, and therefore there was no fresh tangible material justifying reassessment. Consequently the reopening was held to be without jurisdiction and unsustainable. [Paras 14, 15, 16, 17, 18]

The reassessment notice dated 28.03.2019 under Section 148 (reopening under Section 147) is without authority of law and is quashed.

Final Conclusion: Writ petition allowed; impugned notice dated 28.03.2019 issued under Section 148 is quashed and set aside.

Reopening of assessment - change of opinion - reasons recorded under Section 147/148 - escape of income by failure to disclose material facts - deduction under Section 80IB(10)

Reopening of assessment - change of opinion - reasons recorded under Section 147/148 - Validity of notices issued under Section 148/147 to reopen assessments on the grounds recorded by the assessing officer - HELD THAT: - The Court examined the reasons recorded for reopening and the material on record from the original scrutiny assessments. It noted that the assessee had been subjected to detailed inquiry under Section 142(1) and the assessing officer had considered the approvals, layout plans, BU permission and Form 10CCB reports and framed assessment under Section 143(3) without making disallowance on the claim under Section 80IB(10). The Court reiterated the settled legal principle that mere reappreciation of the same materials or a change of opinion does not furnish jurisdiction to reopen an assessment. Applying that principle to the facts, the Court found that the reasons recorded amounted to no more than a change of opinion and that no tangible fresh material had emerged after completion of the original assessments to justify formation of a belief that income had escaped assessment. The Court also observed that explanations about commission payments and cash deposits had been called for and complied with during original proceedings and, in at least one year, the assessing officer did not make any addition, which gave rise to a presumption of acceptance. In that factual backdrop, the recorded reasons could not support the requisite belief for reopening under Section 147/148. [Paras 12, 14, 15]

Notices issued under Section 148/147 were without jurisdiction and unsustainable; they are quashed.

Deduction under Section 80IB(10) - escape of income by failure to disclose material facts - Whether the assessee had failed to disclose material facts necessary for assessment so as to justify reopening - HELD THAT: - The Court considered the material disclosed during original assessment, including approvals and documents relied upon to claim deduction under Section 80IB(10). It found that the assessee had furnished the relevant permissions, layout approvals and bank/ledger particulars during assessment proceedings, and that the assessing officer had discussed and allowed the claim. The Court concluded there was no evidence of false or untrue declaration or of new material discovered after assessment that could reasonably lead to the conclusion that income had escaped assessment by reason of nondisclosure of material facts. [Paras 10, 11, 14]

No failure to disclose material facts was established; therefore reopening on that ground was unjustified.

Final Conclusion: All writ petitions are allowed; the notices dated 31.03.2018, 27.03.2019 and 28.03.2019 issued under Section 148 are quashed and set aside and there shall be no order as to costs.

Reopening of assessment - change of opinion - failure to disclose fully and truly all material facts - reasons to believe - reassessment under Section 147 of the Income Tax Act - notice under Section 148 of the Income Tax Act - depreciation under Section 32 of the Income Tax Act - Form 3CD omission by auditor

Reopening of assessment - change of opinion - failure to disclose fully and truly all material facts - depreciation under Section 32 of the Income Tax Act - Form 3CD omission by auditor - notice under Section 148 of the Income Tax Act - Whether the reopening of assessment by issuance of notice under Section 148 for A.Y. 2012-13 was justified on the ground of failure to disclose material facts or was impermissible as a change of opinion. - HELD THAT: - The Court examined the material on record and the reasons recorded for reopening. During the original scrutiny assessment the Assessing Officer had called for purchase invoices, evidence of dates of assets being put to use and clarifications (letter dated 28.11.2014), and the assessee furnished complete details, invoices, challans and explanations which were considered while framing assessment under Section 143(3) on 25.03.2015. The recorded reason for reopening relied on absence of dates in Form 3CD and inferred that assets were not put to use, disallowing depreciation. The Court held that the omission in Form 3CD was a technical lapse by the auditor, whereas the primary facts regarding date of put to use and additions had been disclosed and examined in the original assessment. Relying on authorities and principle that once primary facts are before the assessing authority it is for the AO to draw inferences, the Court concluded that the present action amounted to a reopening based on change of opinion because no new tangible material had emerged and the very matter was earlier examined by the AO. Consequently, the prerequisites in the proviso to Section 147 for reopening beyond four years-namely failure to disclose fully and truly all material facts-were not satisfied. The Court therefore found the notice under Section 148 and subsequent proceedings to be without jurisdiction and contrary to law. [Paras 14, 15, 19, 20, 21]

Reopening was impermissible as it amounted to change of opinion; there was no failure to disclose fully and truly all material facts, and the notice under Section 148 and consequent assessment proceedings are invalid.

Final Conclusion: Writ petition allowed; impugned notice dated 27.03.2019 under Section 148 quashed and set aside and the assessment order framed pursuant thereto is also quashed.

Doctrine of mutuality - commerciality - taxability of income earned from non-members - income from other sources - application of precedent

Doctrine of mutuality - income from other sources - taxability of income earned from non-members - Claim that the disputed receipts were exempt under the doctrine of mutuality was rejected and such receipts were held taxable. - HELD THAT: - The Court examined the nature of the receipts - pay and park charges, rents from telecom towers and interest on fixed deposits - and found that these amounts were earned from outsiders who were not members, contributors or participators in the association's funds. The doctrine of mutuality applies where receipts arise from transactions inter se among members and do not constitute income; it does not extend to amounts received from non-members or where the earning is not in the course of providing facilities to members. Applying these principles, and following the reasoning in Bangalore Club v. CIT as relied upon by the Tribunal, the Court held that the receipts in question cannot be treated as mutual receipts and are therefore taxable under the head Income from Other Sources. [Paras 8, 9, 10]

The plea of exemption on the basis of mutuality was negatived and the incomes were held not to be covered by the doctrine of mutuality.

Application of precedent - commerciality - taxability of income earned from non-members - Equating the association's income with that of clubs for taxability purposes was upheld and the lower authorities' reliance on Bangalore Club was held to be correct. - HELD THAT: - The Court considered the authorities relied upon by the assessee, including a Karnataka High Court decision cited to support mutuality, and contrasted their factual matrix with the present case. The Court agreed with the Tribunal's application of the Supreme Court's decision in Bangalore Club v. CIT, observing that in Bangalore Club interest from fixed deposits and other receipts from non-members were held not to attract mutuality exemption. Given that the present receipts were from non-members and not for providing member facilities, the Court found the lower authorities' comparison with club receipts and their reliance on Bangalore Club to be appropriate and not vitiated by commerciality arguments. [Paras 8, 9, 10]

The authorities were correct in applying Bangalore Club and in treating the association's disputed receipts as taxable; the contention equating the association's receipts to mutual receipts of clubs was rejected.

Final Conclusion: The substantial questions of law were answered in favour of the Revenue; the appeal is dismissed and the Tribunal's order upholding taxability of the disputed receipts for assessment year 2015-16 is affirmed.

Most Appropriate Method - Transfer pricing - benchmarking - Transactional Net Margin Method (TNMM) - Transfer pricing - other method (gross profit based profit approach) - Rule of consistency - Comparability - FAR analysis - Remand for fresh consideration with opportunity to be heard

Most Appropriate Method - Transfer pricing - other method (gross profit based profit approach) - Rule of consistency - Remand for fresh consideration with opportunity to be heard - Whether the "other method" (gross profit based profit approach) relied upon by the assessee is the Most Appropriate Method for benchmarking its international transactions qua manufacturing segment, as against TNMM applied by the TPO/DRP. - HELD THAT: - The Tribunal noted that the assessee adopted the gross margin based "other method" and that TPO applied TNMM resulting in an adjustment. The assessee produced uncontroverted orders for succeeding assessment years where the same "other method" had been accepted by the TPO/DRP. While recognising that each year must be examined independently, the Tribunal held that where there is no material change in the facts or business model, the rule of consistency applies and the revenue should follow prior consistent treatment to avoid multiplicity and uncertainty in litigation. In view of the absence of distinguishing features in the year under consideration, the Tribunal did not decide the MAM on merits but remitted the question to the TPO to determine afresh whether the "other method" is the MAM, directing that the assessee be afforded an opportunity of being heard. [Paras 11, 12]

Remitted to the TPO for fresh decision on whether the "other method" is the MAM, with direction to hear the assessee; grounds allowed for statistical purposes.

Comparability - FAR analysis - Most Appropriate Method - Remand for fresh consideration with opportunity to be heard - Whether the identification of Blue Star Limited as a comparable (taking into account differences in Function, Assets and Risks) was appropriate for benchmarking the assessee's manufacturing transactions. - HELD THAT: - The Tribunal observed that challenge to the selection of Blue Star rested on differences in FAR profile. Given that the broader question of the MAM and benchmarking approach was to be considered afresh under the rule of consistency, the Tribunal did not finally adjudicate comparability on merits. Instead, the matter was remitted to the TPO to re-examine comparability (including FAR differences) while determining the appropriate benchmarking method, and to provide the assessee an opportunity to be heard. [Paras 11, 12]

Comparability issue remitted to the TPO for fresh examination in the course of determining the MAM, with direction to hear the assessee; grounds allowed for statistical purposes.

Final Conclusion: The appeal is allowed to the extent that grounds concerning the appropriate benchmarking method and comparability are remitted to the TPO for fresh consideration (the assessee to be heard), the Tribunal applying the rule of consistency and treating the grounds as allowed for statistical purposes.

Disallowance under section 14A read with Rule 8D when no exempt income is earned - Permissibility of deduction for employees' contribution to PF and ESI where remittance is made on or before due date for furnishing return u/s.139(1) - Nature of loss on forward currency contracts entered for hedging in export transactions - not speculative under section 43(5) - Admissibility of expenditure where supporting evidence is filed despite non-appearance of contracting party to notice u/s.133(6) - Reliance on precedent decisions of the Hon'ble Madras High Court and the Hon'ble Supreme Court - Relevance of Board Circular No.22/2015 in permitting deduction for belated remittance of employees' contributions

Disallowance under section 14A read with Rule 8D when no exempt income is earned - Reliance on Jurisdictional High Court and Supreme Court precedents - Deletion of disallowance made under section 14A read with Rule 8D where the assessee earned no exempt income in the year. - HELD THAT: - The Assessing Officer disallowed expenditure under Rule 8D notwithstanding that the assessee had no exempt income. The Tribunal followed the concurrent view of the Hon'ble Madras High Court in Chettinad Logistics Pvt. Ltd. and Redington India Ltd., and noted that the Hon'ble Supreme Court dismissed SLP against the Madras High Court's decision. On that authoritative basis the Tribunal held that where no exempt income is earned in the relevant year, no disallowance under section 14A read with Rule 8D can be made. The Revenue did not place any contrary binding precedent on record to warrant interference with the CIT(A)'s findings. [Paras 5]

Uphold deletion of disallowance under section 14A read with Rule 8D; revenue ground rejected.

Permissibility of deduction for employees' contribution to PF and ESI where remittance is made on or before due date for furnishing return u/s.139(1) - Application of Board Circular No.22/2015 and Supreme Court decision in Alom Extrusions - Deletion of addition made under section 36(1)(va) read with section 2(24)(x) in respect of employees' contributions to PF and ESI remitted on or before the due date for filing return u/s.139(1), though after statutory due dates under respective Acts. - HELD THAT: - The Assessing Officer disallowed employees' contributions paid belatedly under the respective enactments. The Tribunal accepted the CIT(A)'s reliance on the Hon'ble Madras High Court and the Hon'ble Supreme Court in Alom Extrusions, and on Board Circular No.22/2015, holding that payments of employees' contributions made to employees' accounts on or before the due date for filing return u/s.139(1) are allowable as deduction notwithstanding delay beyond the statutory due date under the welfare enactments. In view of these authorities, the Tribunal found no error in the deletions made by the CIT(A). [Paras 7]

Uphold deletion of addition relating to belated PF and ESI remittances; revenue ground rejected.

Nature of loss on forward currency contracts entered for hedging in export transactions - not speculative under section 43(5) - Forward contracts with banks for hedging foreign-currency exposure - Deletion of disallowance of loss on forward currency contracts on the ground that such losses, where contracts are entered into with banks to hedge foreign-currency exposure arising from exports, are revenue in nature and not speculative under section 43(5). - HELD THAT: - The Assessing Officer treated the loss on forward currency contracts as speculative under section 43(5). The Tribunal accepted the CIT(A)'s finding, following the Gujarat High Court precedent in Friends & Friends Shipping Pvt. Ltd., that forward contracts entered with bankers to hedge foreign-currency fluctuation in the course of export business are not speculative transactions within the meaning of section 43(5). The assessee furnished evidence to show the hedging purpose and exports; accordingly the Tribunal found the deletion to be justified. [Paras 9]

Uphold deletion of disallowance of loss on forward contracts as not speculative; revenue ground rejected.

Admissibility of expenditure where supporting evidence is filed despite non-appearance of contracting party to notice u/s.133(6) - Proof of expenditure by documentary evidence and TDS records - Deletion of disallowance of stitching charges where the assessee had filed bills, bank payment evidence and TDS deduction, notwithstanding non-appearance of the service provider in response to notice u/s.133(6). - HELD THAT: - The Assessing Officer disallowed stitching charges because the contracting party did not appear for cross-examination on notice u/s.133(6). The Tribunal upheld the CIT(A)'s conclusion that mere non-appearance of the party is not a sufficient basis for disallowance when the assessee has placed on record supporting documentary evidence, payments through banking channels and TDS compliance. The revenue produced no material to challenge the factual findings recorded by the CIT(A), and therefore the deletion was sustained. [Paras 11]

Uphold deletion of disallowance of stitching charges; revenue ground rejected.

Final Conclusion: All additions deleted by the CIT(A) - relating to disallowance under section 14A/Rule 8D, belated employees' contributions to PF and ESI, loss on forward currency contracts, and stitching charges - are upheld by the Tribunal; the Revenue's appeal is dismissed.

Nexus between incriminating material found on search and escaped income in an unabated assessment - assessment under section 153C read with section 153A in respect of concluded (unabated) assessments - taxability of interest credited to capital account - receipt basis - distinction between income linked to disclosed loans and income traceable to undisclosed loan revealed by seized documents

Nexus between incriminating material found on search and escaped income in an unabated assessment - assessment under section 153C read with section 153A in respect of concluded (unabated) assessments - Whether additions can be made in an assessment which was unabated on the date of search in the absence of incriminating material found as a result of the search - HELD THAT: - The Tribunal applied the well settled principle that where an assessment for a relevant year is unabated or concluded on the date of search, no additions can be made pursuant to documents found during search unless those documents constitute incriminating material which indicate undisclosed income for that assessment year. The Tribunal found that the assessment for AY 2012 13 was unabated on the date of search (search on 16.10.2014; time limit for notice under section 143(2) expired on 30.09.2013). Accordingly, the Assessing Officer could not effect additions for the concluded year unless there was a live nexus between the seized material and the income sought to be brought to tax. Applying that test, the Tribunal examined the seized documents marked as annexure NRKRC/loose sheets/S/SNo.1 (pp.79-83) and held that only those portions of interest income traceable to the undisclosed Indus Ind Bank loan were supported by incriminating material found during the search. [Paras 9, 10]

Additions in a concluded assessment can be sustained only to the extent they are supported by incriminating material found during the search; this principle was applied to limit the additions in the present case.

Taxability of interest credited to capital account - receipt basis - Whether interest credited by the company to the assessee's capital account for multiple years is taxable in the impugned year on receipt basis - HELD THAT: - The Tribunal accepted the view that interest credited to the assessee's account is taxable on receipt basis irrespective of the period to which the interest pertains. The Assessing Officer assessed the interest received from the company in the assessment framed under section 153C read with section 153A on the ground that the interest was credited to the assessee's account in the relevant financial year and thus taxable on receipt. The CIT(A)'s reasoning that such interest is liable on receipt was noted; the ITAT concurred that receipt basis taxation applies but proceeded to test whether the credited interest, in whole or in part, was supported by incriminating material found during the search (and hence permissible in an unabated assessment). [Paras 6, 9]

Interest credited to the assessee's account is taxable on receipt basis; however, in an unabated assessment only that portion supported by incriminating seized material can be upheld.

Distinction between income linked to disclosed loans and income traceable to undisclosed loan revealed by seized documents - Whether the entire interest aggregated by the assessee could be added, or only the portion traceable to the undisclosed Indus Ind Bank loan evidenced in the seized documents - HELD THAT: - The Tribunal examined the breakup of interest credited (aggregate amount) and identified that a substantial portion pertained to an SBI loan which had been disclosed in the assessee's regular return, while a smaller portion related to funds advanced out of an undisclosed Indus Ind Bank loan. The seized documents specifically evidenced the undisclosed Indus Ind Bank loan and repayments. Applying the nexus principle, the Tribunal held that interest attributable to the disclosed SBI loan (not supported by incriminating seized material) could not be taxed by invoking the post search additions in an unabated assessment. Conversely, interest attributable to the Indus Ind Bank loan (amounting to the portion traceable to that undisclosed loan) had a direct nexus with the incriminating material discovered during the search and therefore could be sustained as income in AY 2012 13. [Paras 5, 10, 11]

Addition allowed only to the extent interest was traceable to the undisclosed Indus Ind Bank loan supported by seized material; interest attributable to the disclosed SBI loan was disallowed.

Final Conclusion: The appeal is partly allowed: additions relating to interest income attributable to the disclosed SBI loan are deleted, while the addition corresponding to interest traceable to the undisclosed Indus Ind Bank loan (supported by seized documents) is sustained for AY 2012 13.

Characterisation of consideration for sale of computer software as not being 'royalty' - No obligation to deduct tax at source under section 195 for payments pursuant to EULAs/distribution agreements - Inapplicability of the domestic royalty charging provisions to payments covered by DTAA definition of 'royalty' - Disallowance under section 40(a)(i) for failure to deduct TDS - Binding effect of the Supreme Court ruling in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT

Characterisation of consideration for sale of computer software as not being 'royalty' - No obligation to deduct tax at source under section 195 for payments pursuant to EULAs/distribution agreements - Disallowance under section 40(a)(i) for failure to deduct TDS - Binding effect of the Supreme Court ruling in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT - The disallowance under section 40(a)(i) in respect of payments made to a non-resident U.S. software supplier was not sustainable because the payments were not 'royalty' and there was no obligation to deduct tax at source. - HELD THAT: - The Tribunal applied the ratio of the Supreme Court in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT, which held that amounts paid by resident end-users/distributors to non-resident computer software manufacturers under EULAs/distribution agreements do not constitute payment of royalty for the use of copyright and therefore do not give rise to income taxable in India that would attract TDS under section 195. Following that binding precedent and the subsequent Karnataka High Court decision in the assessee's own case for a later year, the Tribunal concluded that the impugned payments fall within the scope of those cases and that the assessing authority's invocation of disallowance under section 40(a)(i) for non-deduction of TDS was not tenable. The Tribunal noted that the facts across the assessment years before it are identical and applied the Supreme Court ratio mutatis mutandis to delete the disallowance for all the assessment years in dispute.

The disallowance under section 40(a)(i) is deleted and the appeals for assessment years 2007-08 to 2010-11 are allowed.

Final Conclusion: Following the Supreme Court's ruling in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT and subsequent High Court authority, the Tribunal set aside the disallowance under section 40(a)(i) made for non-deduction of TDS on payments for packaged/software supplied under EULAs, and allowed the appeals for assessment years 2007-08 to 2010-11.

Assessment under section 153C of the Income-tax Act - natural justice - right to cross-examination of adverse witness - seized documents as dumb documents and evidentiary value - presumption under section 132(4A)/section 292C limited to the searched person - annulment of assessment framed under section 143(3) where section 153C is applicable - judicial consistency - following coordinate-bench precedents

Natural justice - right to cross-examination of adverse witness - seized documents as dumb documents and evidentiary value - presumption under section 132(4A)/section 292C limited to the searched person - judicial consistency - following coordinate-bench precedents - Validity of additions made on the basis of seized documents and the statement of Shri R.K. Miglani without granting opportunity to cross-examine him - HELD THAT: - The Tribunal found that the assessee had specifically requested opportunity to cross-examine Shri R.K. Miglani but was not permitted to do so, and the Assessing Officer made additions relying primarily on the statement of Shri R.K. Miglani and entries in seized loose sheets without independent verification against the assessee's books. Following coordinate-bench decisions in Lords Distillery Ltd. and Mohan Meakin Ltd., the Tribunal held that when seized notings are 'dumb documents' and the assessee is denied a reasonable opportunity to test the adverse statement, reliance on such material is a breach of principles of natural justice and the statement cannot bind the assessee. The Tribunal further noted that statutory presumptions in sections 132(4A)/292C apply to the searched person (from whose possession documents were seized) and not to other persons, and that no independent corroboration was produced to connect the seized entries to the assessee. In absence of new or additional material and applying rules of consistency with co-ordinate bench rulings, the additions sustained by the CIT(A) were held unsustainable and deleted. [Paras 6, 8]

Additions made on the basis of the statement of Shri R.K. Miglani and seized documents, without allowing cross-examination and without independent corroboration, are unsustainable and are deleted.

Assessment under section 153C of the Income-tax Act - annulment of assessment framed under section 143(3) where section 153C is applicable - Whether the assessment for assessment year 2006-07 framed under section 143(3) was legally maintainable when proceedings under section 153C were required - HELD THAT: - The Tribunal examined the block period applicable to the search and the satisfaction note and accepted the coordinate-bench view that AY 2006-07 fell within the block of years for which proceedings ought to have been initiated under section 153C read with section 153A. The assessment having been framed under section 143(3) instead of under section 153C (r.w.s. 153A) was therefore treated as unauthorized. Following the reasoning in Lords Distillery Ltd., the Tribunal held that the impugned assessment order for AY 2006-07 is bad in law and annulled it; the annulment also vitiates subsequent consequential actions. [Paras 12, 14]

Impugned assessment for AY 2006-07 framed under section 143(3) is annulled as proceedings should have been under section 153C read with section 153A.

Final Conclusion: All four appeals are allowed: the additions sustained by the authorities for AYs 2003-04, 2004-05 and 2005-06 are deleted for being based on inadmissible/unreliable seized material and an adverse statement without affording cross-examination; the assessment for AY 2006-07 framed under section 143(3) is annulled as proceedings ought to have been under section 153C read with section 153A.

Validity of reopening assessment when revised return under section 139(5) is pending - incompatibility of proceedings under section 143(2) and section 148 - onus under section 68 to prove genuineness of cash deposits - peak theory for estimating undisclosed income

Validity of reopening assessment when revised return under section 139(5) is pending - incompatibility of proceedings under section 143(2) and section 148 - Whether issuance of notice under section 148 was valid while the assessee's revised return filed under section 139(5) was pending and the period for issue of notice under section 143(2) had not expired - HELD THAT: - The Tribunal accepted that the assessee filed a revised return on 12/2/2013 within the time allowed under section 139(5) and that no one alleged the revised return to be non bona fide. The court held that section 143(2) may be invoked in respect of a valid return filed under section 139(5) and that the time for issuance of a notice under section 143(2) in respect of the revised return had not expired. Consequently, proceedings under section 143(2) were pending and the Assessing Officer could not simultaneously initiate proceedings under section 148. The Tribunal relied on authority and reasoning that where an assessment has not been framed and return is pending scrutiny, it cannot be said that income has escaped assessment and initiation under section 148 is inappropriate. Applying these principles to the facts, the Tribunal concluded that issuance of notice under section 148 on 15/4/2013 was impermissible while the revised return was pending for scrutiny. [Paras 14, 15, 17, 18, 19]

Notice under section 148 issued while the revised return under section 139(5) was pending scrutiny was not justified; reopening proceedings were invalid in that circumstance.

Onus under section 68 to prove genuineness of cash deposits - acceptance of revised return where bona fides not disputed - Whether the addition under section 68 of the entire cash deposits should be sustained where the assessee had revised its return offering commission income and the revenue failed to prove absence of the alleged business or source - HELD THAT: - On the merits the Tribunal upheld the CIT(A)'s findings that the assessee had offered additional commission income in the timely revised return and that investigation material and the director's statement supported that the assessee was engaged in trading of computer accessories and laptops. The CIT(A) noted that cash deposits were in many small amounts from various places and that subsequent cheque payments were made from the same account; further, returns of the 133(6) notices could not be taken as conclusive since some suppliers could not be traced. The Tribunal observed that income tax is on real income and not on turnover, and that the AO had not discharged the burden of negating the existence of the business or establishing the deposits as unexplained money. Since no one contended the revised return was not bona fide and the AO had failed to substantiate that the amounts were not genuine, the Tribunal found no infirmity in the CIT(A)'s deletion (and acceptance of the revised return) for assessment year 2011-12. [Paras 20]

Addition of entire cash deposits under section 68 was not justified; CIT(A)'s acceptance of the revised return for assessment year 2011-12 and deletion of the AO's additions upheld.

Peak theory for estimating undisclosed income - reduction of additions by allowing offered income in revised returns - Whether the CIT(A)'s application of peak theory and partial allowance (resulting in a peak based addition) for assessment year 2012-13 was sustainable - HELD THAT: - The CIT(A) treated transactions across the two years as integrated and applied the peak balance method, accepting a peak balance figure and directing a gross estimated addition for the subsequent year after reducing amounts already offered in the revised returns. The Tribunal noted that the CIT(A) sustained a peak theory based addition (net after allowing amounts offered in revised returns) and found no infirmity in that approach on the facts: the CIT(A) had considered bank statements, withdrawals by cheque, and allowed fairness adjustments by excluding commission amounts already offered. The revenue did not demonstrate error in the CIT(A)'s exercise of discretion in adopting peak theory and computing the net addition for assessment year 2012-13. [Paras 8, 20]

CIT(A)'s application of peak theory and resultant net addition for assessment year 2012-13 sustained; no further additions warranted.

Final Conclusion: The appeal filed by the Revenue is dismissed. The Tribunal sustained the CIT(A)'s order: the reopening under section 148 was improper while the timely revised return under section 139(5) awaited scrutiny; the AO's wholesale addition under section 68 was disallowed and the revised return accepted for assessment year 2011-12; the CIT(A)'s peak theory based net addition for assessment year 2012-13 was upheld.

Definition of 'Stock Lot' under DGFT Trade Notice No.8/2020-2021 - classification by 8-digit ITC(HS) tariff code - interpretation of tariff headings and description of goods - seizure and detention unlawful where an impermissible criterion is applied - provisional release of seized goods

Definition of 'Stock Lot' under DGFT Trade Notice No.8/2020-2021 - classification by 8-digit ITC(HS) tariff code - interpretation of tariff headings and description of goods - Imported paper consignments do not qualify as 'stock lot' where they are properly described and classified under a single 8-digit ITC(HS) code and have not been bundled as papers of different descriptions. - HELD THAT: - The Court accepted the DGFT Trade Notice's specialized meaning of 'stock lot' as (a) a consignment without description for each category of paper at the 8-digit level or (b) where papers of different descriptions are bundled together. Classification turns on the description embodied in the 8-digit ITC(HS) tariff entries. Chapter 48's structure shows increasing specificity from 4 to 8 digits; 4810 13 90 is an 'other' category for rolls and does not reference GSM. Thus GSM variations do not furnish a legitimate basis to treat consignments classified under 4810 13 90 as comprising different descriptions. The respondents relied impermissibly on GSM as a yardstick to reclassify the consignments as 'stock lots'. Because the petitioner declared and classified the consignments under the single 8-digit code 4810 13 90 and the variation in GSM does not amount to different tariff descriptions for that heading, the consignments cannot be termed 'stock lot' under the Trade Notice and related import policy. [Paras 10, 11, 12, 13, 14]

The goods imported by the petitioner are not 'stock lot' as per the DGFT Trade Notice and the respondents' characterization based on GSM variation is invalid.

Seizure and detention unlawful where an impermissible criterion is applied - provisional release of seized goods - Seizure and continued detention of the petitioner's goods is not warranted and the goods must be released; corresponding waiver and necessary certificates must be issued to the petitioner. - HELD THAT: - Having found that the consignments do not constitute 'stock lot' and that the respondents reached that conclusion by applying an impermissible criterion (GSM variation) inconsistent with the relevant tariff description, the detention and seizure lack justification. The Court directed release of the goods and held that the petitioner, not being at fault for the detention, is entitled to a corresponding waiver and issuance of required certificates. The Court earlier permitted verification in presence of the petitioner and considered the resulting mahazar in reaching its conclusion. [Paras 14, 15, 16]

Seizure and detention set aside; respondents directed to release the goods and grant corresponding waiver and necessary certificates.

Final Conclusion: Writ petitions allowed: the imported paper consignments are not 'stock lot' under DGFT Trade Notice No.8/2020-2021, the respondents' reliance on GSM variation to treat them as such was impermissible, the detention is set aside, and the goods must be released with corresponding waiver and certificates; connected petitions closed.

Confiscation - penalty - principles of natural justice - right to cross-examine co-noticees - statutory appeal - entertainment of appeal without reference to limitation

Principles of natural justice - right to cross-examine co-noticees - Whether the noticee is entitled to cross-examine co-noticees whose statements under Section 108 of the Customs Act are relied upon. - HELD THAT: - The High Court affirmed the view already taken in W.P.(MD)No.863 of 2018 that no right exists for a noticee to cross-examine co-noticees whose statements recorded under Section 108 of the Customs Act are relied upon. That earlier view was confirmed by the Division Bench in the connected appeal. On that basis the petitioner's principal contention alleging breach of natural justice for denial of cross-examination was rejected. [Paras 2]

The court held that the noticee has no right to cross-examine co-noticees and rejected the writ petition on that ground.

Confiscation - penalty - statutory appeal - entertainment of appeal without reference to limitation - Whether the petitioner should be afforded a remedy by way of appeal against the order of confiscation and penalty and whether delay in filing such appeal should be condoned. - HELD THAT: - Although the writ petition was liable to be dismissed on the natural justice ground, the court observed that the petitioner had not ventilated the merits. The impugned order being appealable, the court permitted filing of a statutory appeal and directed that if the appeal is filed within six weeks from receipt of the order, the appellate authority shall entertain it without reference to limitation. All other contentions (other than the denial of cross-examination) were left open for consideration in the appeal. [Paras 3]

Writ petition dismissed; petitioner permitted to file statutory appeal within six weeks and appellate authority directed to entertain it without reference to limitation, with all other contentions available to the petitioner.

Final Conclusion: Writ petition dismissed for lack of merit on the ground that no right exists to cross-examine co-noticees; petitioner granted liberty to file the statutory appeal within six weeks, which the appellate authority shall entertain without reference to limitation, leaving other contentions open for adjudication on appeal.

Just and equitable winding up - quasi-partnership and legitimate expectations - oppression and unfair prejudice - relief under Section 397 of the Companies Act, 1956

Relief under Section 397 of the Companies Act, 1956 - just and equitable winding up - oppression and unfair prejudice - quasi-partnership and legitimate expectations - Whether the Company Law Board was justified in directing transfer of shares under the statutory power invoked without establishing circumstances warranting winding up or satisfying the just and equitable requirement. - HELD THAT: - The Company Law Board found a long standing tacit arrangement between certain family members and applied principles of quasi-partnership and legitimate expectations, concluding that allotment of new shares was oppressive and directing restoration of parity by transfer of a portion of the newly allotted shares. The High Court held that invocation of the power under the statutory provision corresponding to winding up requires that the petitioner establish circumstances justifying winding up on 'just and equitable' grounds and that the court be satisfied that winding up would otherwise unfairly prejudice the members complaining. Reliance was placed on the authoritative statements that the just and equitable ground cannot be applied unless facts for winding up are made out; mere existence of a dispute or allegations of unfairness without adjudication that the company is in a situation for winding up is insufficient. As the Company Law Board did not adjudicate or record findings establishing circumstances amounting to just and equitable grounds for winding up, its direction for transfer of shares affecting shareholders' rights was beyond the scope of the power invoked and contrary to the principles laid down by the Apex Court. Accordingly the CLB order was held to be erroneous and liable to be set aside. [Paras 5, 7, 11, 12, 13]

The order of the Company Law Board directing transfer of shares was set aside as made without requisite findings that circumstances for winding up justifying such relief under the statutory provision existed.

Final Conclusion: The Company Law Board's order dated 12.02.2002 in C.P. No. 01 of 2001 is set aside for lack of findings establishing just and equitable grounds for winding up; the appeal is allowed and the connected application closed.

Scheme of Amalgamation - Dispensation of meetings under Sections 230 and 232 of the Companies Act, 2013 - Convening and holding of meetings of shareholders and creditors - Certification by statutory auditors and chartered accountants - Appointment of chairperson and scrutinizer for members/creditors' meetings - Compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Filing of chairperson's and scrutinizer's reports and subsequent petition for sanction

Dispensation of meetings under Sections 230 and 232 of the Companies Act, 2013 - Certification by statutory auditors and chartered accountants - Convening and holding of meetings of shareholders and creditors - Dispense with convening and holding meetings of Equity Shareholders and Unsecured Creditors of Applicant Company No. 1 and Secured Creditors of Applicant Company No. 2. - HELD THAT: - The Tribunal examined the Company Application, the certifications by the Statutory Auditors and Chartered Accountants verifying the list and consents of shareholders and creditors, board approvals and related disclosures, and was satisfied that material facts and statutory compliances in support of dispensing with the specified meetings had been placed before it. On that basis the Tribunal found it appropriate to dispense with convening and holding the meetings of the Equity Shareholders and Unsecured Creditors of Applicant Company No. 1 and the Secured Creditors of Applicant Company No. 2. [Paras 5, 6]

Meetings of the Equity Shareholders and Unsecured Creditors of Applicant Company No. 1 and of the Secured Creditors of Applicant Company No. 2 are dispensed with.

Scheme of Amalgamation - Convening and holding of meetings of shareholders and creditors - Appointment of chairperson and scrutinizer for members/creditors' meetings - Convene meetings of Equity Shareholders and Unsecured Creditors of Applicant Company No. 2 and appoint Chairperson and Scrutinizer with directions on venue, time and quorum. - HELD THAT: - The Tribunal directed that the meeting of Equity Shareholders and the meeting of Unsecured Creditors of Applicant Company No. 2 be convened on specified dates and times for considering the proposed Scheme of Amalgamation. The Tribunal appointed a Chairperson and a Scrutinizer for both meetings, fixed the quorum and directed publication of notices in specified newspapers. These directions follow from the Tribunal's satisfaction with the procedural and substantive prerequisites for convening meetings in relation to the Scheme. [Paras 6]

Meetings of Equity Shareholders and Unsecured Creditors of Applicant Company No. 2 to be convened as directed, with the named Chairperson and Scrutinizer and prescribed quorum, venue and notice requirements.

Compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Filing of chairperson's and scrutinizer's reports and subsequent petition for sanction - Applicants and appointed officers to follow statutory rules in conducting meetings and to file reports and subsequent petition for sanction of the Scheme. - HELD THAT: - The Tribunal directed strict compliance with the Companies Act, 2013 and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 while convening and conducting the directed meetings. The Chairperson and Scrutinizer were ordered to file their reports with the Tribunal within two weeks of the conclusion of the meetings, after which the Applicant Companies were granted two weeks to file the petition seeking sanction of the Scheme, subject to all statutory compliances. The order preserves the right of aggrieved parties to approach the Tribunal by interim application. [Paras 6]

Meetings to be conducted in accordance with statutory rules; Chairperson and Scrutinizer to file reports within two weeks of meetings; applicants to file petition for sanction thereafter, subject to compliance; avenue for aggrieved persons preserved.

Final Conclusion: The Company Application is disposed of by dispensing with specified meetings of Applicant Company No. 1 and Secured Creditors of Applicant Company No. 2, directing convening of meetings of Equity Shareholders and Unsecured Creditors of Applicant Company No. 2 with appointed Chairperson and Scrutinizer and related procedural directions, and ordering compliance with statutory rules including filing of reports and a subsequent petition for sanction.

Scheme of Amalgamation - sanction under Section 232 of the Companies Act, 2013 - statutory compliance post sanction - continuation of liabilities - non interference with commercial wisdom - filing with Registrar of Companies

Scheme of Amalgamation - sanction under Section 232 of the Companies Act, 2013 - non interference with commercial wisdom - Whether the proposed Scheme of Amalgamation between M/s. Krackin Technologies Pvt. Ltd. and I Nurture Education Solutions Pvt. Ltd. is eligible to be sanctioned by the Tribunal. - HELD THAT: - The Tribunal examined the petition, auditors' certificates, statutory notices and reports filed by ROC and the Official Liquidator and found that the Scheme is framed in accordance with the statutory framework for compromise/arrangement and is, on a prima facie basis, comprehensive, fair and not contrary to public policy. The Court noted that it is not its function to re open every alleged statutory violation while considering sanction and that it will not ordinarily interfere with the commercial wisdom of companies unless the scheme is ex facie illegal or intended to defraud stakeholders. Having regard to compliance with procedural prerequisites, the auditors' certificates on accounting treatment, absence of pending investigations and receipt of no substantive objections, the Tribunal was satisfied to provisionally sanction the Scheme with effect from the appointed date, subject to the companies' compliance with statutory requirements and the undertakings/observations recorded by regulatory authorities. [Paras 11, 12, 13, 14]

Scheme provisionally sanctioned with effect from 1st April 2020, subject to compliance with extant statutory provisions and the undertakings/observations noted by authorities.

Continuation of liabilities - statutory compliance post sanction - Whether sanctioning the Scheme operates to waive past violations or extinguish liabilities of the companies involved. - HELD THAT: - The Tribunal reiterated the settled principle that sanction of a scheme does not absolve the companies of any statutory liability or prevent initiation of proceedings for alleged past violations. The Transferee company inherits the liabilities and responsibilities of the Transferor company and statutory authorities remain free to take appropriate action under law. The Tribunal allowed statutory authorities to approach it by misc. application for directions if necessary. [Paras 12, 14]

Sanction does not waive any prior violations or liabilities; statutory authorities are entitled to proceed in accordance with law.

Filing with Registrar of Companies - statutory compliance post sanction - What procedural step is required following sanction of the Scheme. - HELD THAT: - The Tribunal directed that within thirty days of receipt of the order the company shall deliver a certified copy of the Order along with the Scheme to the Registrar of Companies for registration in accordance with the relevant rules. The direction ensures compliance with statutory filing obligations consequent to sanction. [Paras 14]

Company to file certified copy of the Order and Scheme with the Registrar of Companies within thirty days for registration.

Final Conclusion: The Tribunal provisionally sanctioned the Scheme of Amalgamation effective 1 April 2020, subject to compliance with statutory provisions and the undertakings/observations by authorities; held that sanction does not extinguish past liabilities and directed filing of the order and scheme with the Registrar of Companies within thirty days.

Corporate Insolvency Resolution Process - admission under Section 7 of the I&B Code - moratorium - effect of settlement after admission - restoration of proceedings on failure of settlement - appointment of Interim Resolution Professional

Admission under Section 7 of the I&B Code - Corporate Insolvency Resolution Process - existence of debt and default - Application under Section 7 was liable to be admitted and CIRP ordered against the Corporate Debtor. - HELD THAT: - The Tribunal found that the Financial Creditor had reasonably evidenced the existence of a debt and default, including admissions by the Corporate Debtor and consent terms incorporated in an earlier order. Having already considered the Corporate Debtor's contentions at the stage of admission and finding the existence of debt and default established, the Tribunal held the only course was to admit the Section 7 application and initiate the Corporate Insolvency Resolution Process. The Tribunal also noted statutory provisions permitting withdrawal in limited stages but observed that settlement reached after admission did not automatically bar the Tribunal from admitting the matter where default persisted. [Paras 9, 10, 11]

Section 7 application admitted and CIRP ordered against the Corporate Debtor.

Effect of settlement after admission - restoration of proceedings on failure of settlement - power to recall or restore orders - Settlement filed after admission did not preclude restoration of the admitted proceeding when the Corporate Debtor failed to comply with settlement terms. - HELD THAT: - The Tribunal recorded that the parties had filed a Form FA and an earlier order disposed the petition on the basis of a settlement. When the Financial Creditor alleged non-compliance with the settlement terms and sought restoration, the Tribunal examined the conduct of the Corporate Debtor and held that a party cannot avoid its obligations under a settlement by raising technical objections after defaulting on agreed payments. The Tribunal accordingly allowed the application to restore the admitted petition to file and list it for further hearing, concluding that settlement after admission does not oust the Tribunal's jurisdiction to proceed where the settlement has not been honored. [Paras 4, 5, 6]

Earlier disposal on settlement was set aside for non-compliance; the admitted proceeding was restored for hearing.

Moratorium - appointment of Interim Resolution Professional - deposit for initiation of proceedings - Moratorium ordered effective from the date of the order; Interim Resolution Professional appointed; deposit by Financial Creditor directed. - HELD THAT: - On admitting the Section 7 application the Tribunal directed that the moratorium under the Code operate from the date of the order, prohibiting suits, disposals of assets, enforcement of security and recovery of property as specified. The Tribunal appointed an Interim Resolution Professional from the IBBI panel to carry out functions under the Code and directed the Financial Creditor to deposit a specified sum with the IRP for initiation of proceedings, subject to ratification by the Committee of Creditors. The IRP's fees and functions were to comply with IBBI regulations. [Paras 11, 14, 16]

Moratorium imposed; Mr. K. Parameswaran Nair appointed as Interim Resolution Professional; Financial Creditor directed to deposit the stipulated amount.

Final Conclusion: The Tribunal admitted the Section 7 application and initiated CIRP against the Corporate Debtor, restored the proceeding after finding non-compliance with a post-admission settlement, imposed the moratorium, appointed an Interim Resolution Professional from the IBBI panel and directed the Financial Creditor to deposit the prescribed amount with the IRP.

Approval of Resolution Plan under Section 31 - Compliance with Section 30(2) and Regulations 37 to 39 - Ineligibility under Section 29A - Priority of payment to CIRP costs and operational creditors over financial creditors - Limited judicial review of commercial decision of the Committee of Creditors - Clean slate principle - liabilities as specified in the approved Resolution Plan - Moratorium cessation on approval of Resolution Plan

Approval of Resolution Plan under Section 31 - Compliance with Section 30(2) and Regulations 37 to 39 - Limited judicial review of commercial decision of the Committee of Creditors - Whether the Resolution Plan submitted by P K Hospitality Services Private Limited meets the requirements of Section 30(2) of the Code and Regulations 37 to 39 and can be approved under Section 31. - HELD THAT: - The Tribunal found that the Resolution Plan, having been approved by the Committee of Creditors with 88.78% voting share, satisfies the requirements of Section 30(2) of the Code and Regulations 37 to 39. The Resolution Professional conducted the statutory compliance checks, submitted Form H under Regulation 39(4), and recorded that the SRA is not ineligible under Section 29A. The Tribunal applied the settled law that its role is limited to scrutiny under Section 30(2) and must not trespass upon the commercial wisdom of the CoC (as explained in K. Sashidhar and CoC of Essar Steel), concluding that there was no ground under Section 30(2) to reject or modify the Plan. Consequently the Plan was approved and directed to be made effective and binding as provided under Section 31. [Paras 23]

The Resolution Plan is approved as meeting the statutory requirements and shall become effective and binding in terms of Section 31.

Priority of payment to CIRP costs and operational creditors over financial creditors - Clean slate principle - liabilities as specified in the approved Resolution Plan - Whether the Plan provides for statutory priorities of payments and the extent of liabilities to be assumed by the Successful Resolution Applicant. - HELD THAT: - The Tribunal recorded that the Plan provides for payment of CIRP costs in priority and for payment to operational creditors and abstaining financial creditors of their liquidation value in accordance with Section 53 and Regulation 38. The Plan specifies the liabilities that the SRA will assume and the Tribunal reiterated the 'clean slate' principle as explained in Essar Steel - a successful resolution applicant takes over the corporate debtor with assets and liabilities as specified in the approved Plan. Accordingly, creditors cannot claim beyond the liabilities provided in the Plan. [Paras 14, 15, 20]

The Plan's payment priorities and specified allocation of liabilities conform to law; the SRA takes over liabilities only as provided in the Plan and other claims are not maintainable.

Ineligibility under Section 29A - Moratorium cessation on approval of Resolution Plan - Whether the Successful Resolution Applicant is eligible under Section 29A and the legal consequences on moratorium and other incidental reliefs. - HELD THAT: - The Tribunal recorded that the Resolution Professional verified and found that the SRA is not ineligible under Section 29A. The Tribunal also addressed ancillary reliefs sought by the SRA: it declined to grant statutory or regulatory waivers (including specific relief in respect of MAT) and directed the SRA to approach the competent authorities for such concessions. The Tribunal further ordered that the moratorium under Section 14 shall cease to have effect from the date of approval and issued directions for amendment of corporate documents, supervision of implementation by the RP and filing of records with the IBBI. [Paras 13, 16, 17, 18]

SRA declared eligible under Section 29A; specific waivers/concessions are not granted by the Tribunal and must be sought from appropriate authorities; the moratorium ceases on approval and consequential directions are issued.

Final Conclusion: The Tribunal approved the Resolution Plan of P K Hospitality Services Private Limited as meeting the statutory requirements under Section 30(2) and Regulations 37-39, found the SRA not ineligible under Section 29A, rejected the grant of ad hoc waivers (directing the SRA to approach competent authorities), declared that liabilities are limited to those specified in the Plan under the clean slate principle, and directed that the Plan be implemented with the moratorium ceasing from the date of approval.

Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - limitation under Article 137 of the Limitation Act, 1963 - acknowledgement of debt under Section 18 of the Limitation Act, 1963 - application of the Limitation Act to proceedings under the IBC - entries in balance sheets as acknowledgements of debt - admission of petition and initiation of CIRP

Acknowledgement of debt under Section 18 of the Limitation Act, 1963 - entries in balance sheets as acknowledgements of debt - limitation under Article 137 of the Limitation Act, 1963 - Whether acknowledgements in the corporate debtor's balance sheets and OTS proposals extended the period of limitation so that the Section 7 application was not time barred. - HELD THAT: - The Tribunal applied the settled principle that Section 18 of the Limitation Act operates to commence a fresh period of limitation when there is a written acknowledgement of present subsisting liability signed by the debtor, provided the acknowledgement is made before the original period of limitation expires. Relying on the Supreme Court's exposition that the provisions of the Limitation Act apply mutatis mutandis to IBC proceedings, the Tribunal accepted the Adjudicating Authority's finding that the corporate debtor's balance sheets and the OTS proposals contained acknowledgements of debt. Those acknowledgements therefore operated to extend limitation and rendered the Section 7 petition timely, insofar as the acknowledgements predated the expiry of the limitation period. [Paras 12, 13]

Acknowledgements in the balance sheets and OTS proposals extended limitation under Section 18, so the Section 7 application was not time barred.

Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - application of the Limitation Act to proceedings under the IBC - admission of petition and initiation of CIRP - Whether the Adjudicating Authority erred in admitting the Section 7 petition and ordering initiation of the CIRP against the corporate debtor. - HELD THAT: - The Tribunal examined the record placed before the Adjudicating Authority, including the corporate debtor's reply wherein the debtor admitted the outstanding principal in the accounts and the fact that various OTS/resolution proposals had been submitted. The Adjudicating Authority found that the petition was complete, default was established and exceeded the statutory threshold, and that limitation did not bar the claim in view of the acknowledgements. Having regard to the applicability of the Limitation Act and the Adjudicating Authority's assessment of the documentary material, the Tribunal found no error in admitting the petition and directing initiation of the CIRP. [Paras 11, 13, 14]

No infirmity in the admission of the Section 7 petition; the Adjudicating Authority rightly initiated the CIRP.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the Adjudicating Authority's conclusion that acknowledgements in the corporate debtor's balance sheets and OTS proposals operated to extend limitation, and found no error in admission of the Section 7 petition and initiation of the CIRP.

Corporate insolvency resolution process - debt and default - application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - appointment of interim resolution professional - moratorium - provisional eligibility of insolvency professional

Debt and default - application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - The Company Petition under Section 7 was maintainable and the existence of debt and default was established for the purpose of admitting CIRP. - HELD THAT: - The Adjudicating Authority found that the Financial Creditor had produced records including the loan agreement, hypothecation deed and a NeSL certificate recording the date of default. The Corporate Debtor did not dispute the claim of debt and default and, in its statement of objections, admitted inability to repay the loan and accepted the creditor-debtor relationship and the financial debt. On the material before it, the Authority concluded that the petition complied with the Code and that debt and default were not in dispute, warranting admission of the petition and initiation of CIRP under Section 7.

C.P.(IB) No.35/BB/2021 admitted and CIRP initiated against M/s. Manali Sugars Limited on the ground of established debt and default.

Appointment of interim resolution professional - provisional eligibility of insolvency professional - A proposed insolvency professional was appointed as Interim Resolution Professional (IRP) being provisionally eligible. - HELD THAT: - The petitioner nominated Shri Kondisetty Kumar Dushyantha and produced his written consent in Form 2, wherein he declared absence of pending disciplinary proceedings. The Authority noted his existing engagements (one CIRP as IRP and three liquidations as Liquidator) and, on that basis, considered him provisionally eligible under the Code and Rules to be appointed as IRP. Consequently, the Authority appointed him to carry out the CIRP and directed him to comply with statutory duties and reporting obligations.

Shri Kondisetty Kumar Dushyantha appointed as Interim Resolution Professional to conduct the CIRP subject to compliance with the IBC and IBBI rules.

Moratorium - prohibition on recovery and enforcement actions during CIRP - A moratorium was declared under the Code prohibiting specified suits, proceedings and enforcement actions against the Corporate Debtor for the duration of the CIRP. - HELD THAT: - Upon admission of the CIRP, the Authority exercised its powers to declare the statutory moratorium. The order prohibits institution or continuation of suits or proceedings including execution of judgments, transfer or disposal of the Corporate Debtor's assets, actions to enforce security interests (including proceedings under the SARFAESI Act), recovery of property from the Corporate Debtor's possession, and termination or interruption of supply of essential goods or services during the moratorium, subject to exceptions notified by the Central Government. The moratorium operates from the date of the order until completion of the CIRP.

Statutory moratorium declared with directions enumerating prohibited actions and its duration linked to the CIRP.

Final Conclusion: The Tribunal admitted the Section 7 petition, initiated CIRP against M/s. Manali Sugars Limited, appointed the nominated IRP as provisionally eligible to conduct the process, and declared the statutory moratorium with consequential directions to the IRP, the Board and the Registry.

Reasons for administrative/regulatory orders - arbitrariness in exercise of regulatory power - scope of Regulation 9(3) of FEMA ODI Regulations - role of pending investigation in grant of overseas direct investment approval - consultation with investigative agency not surrender of discretion - territorial jurisdiction for challenge to overseas remittance via authorised dealer - joinder/impleadment of Enforcement Directorate

Reasons for administrative/regulatory orders - arbitrariness in exercise of regulatory power - Validity of the Reserve Bank of India's rejection dated 30.12.2019 of the respondent's application to make additional overseas financial commitments - HELD THAT: - The Court held that the order dated 30.12.2019, insofar as it rejected the respondent's application, gave no adequate reasons. Even if the reasons in the contemporaneous e-mail of 30.12.2019 and the DOE letter of 03.12.2019 are read as the grounds for rejection, those reasons - being the existence of pending enquiries/investigations - were arbitrary and whimsical and did not align with the dominant purpose and scheme of FEMA. The Court noted that there was no case that past remittances had been misused and that substantial remittances had already been made pursuant to RBI permissions. Reliance upon precedents about supplementation of reasons became unnecessary once the Court examined and found the stated reasons inadequate and unsupportable under the FEMA scheme. [Paras 37, 38]

The rejection dated 30.12.2019 was quashed as lacking proper reasons and being arbitrary and whimsical.

Scope of Regulation 9(3) of FEMA ODI Regulations - role of pending investigation in grant of overseas direct investment approval - Interpretation and application of Regulation 9(3) of the FEMA ODI Regulations regarding factors for RBI's consideration and whether pending investigations justify denial of approval - HELD THAT: - The Court held that the factors listed in Regulation 9(3) must be read in the scheme and tenor of FEMA and that the Regulations do not contemplate a role for a third party or investigative agency to determine approval. The omission of reference to pending investigations in Regulation 9(3), contrasted with their explicit mention in Regulation 6(2)(iii), indicates that mere existence of pending enquiries or investigations by enforcement agencies cannot, by itself, be a ground for rejecting an application under Regulation 9. The Court observed that permissions granted by RBI carried caveats preserving investigative action but that the apprehensions expressed by the DOE did not furnish a lawful basis under Regulation 9(3) to deny approval. [Paras 37]

Denial of permission based on the apprehensions of the Enforcement Directorate was incorrect; Regulation 9(3) does not permit rejection solely on account of pending investigations.

Territorial jurisdiction for challenge to overseas remittance via authorised dealer - Maintainability of the writ petition in the Delhi High Court (territorial jurisdiction) against RBI's order refusing permission for overseas remittance - HELD THAT: - The Court found no infirmity in the Single Judge's exercise of jurisdiction. The authorised dealer bank through which the overseas direct investment was to be effected was the State Bank of India, overseas branch New Delhi, and RBI had directed the respondent to approach its New Delhi Regional Office. In those circumstances the writ petition filed in the Delhi High Court was properly entertained and the preliminary objection on territorial jurisdiction was not upheld. [Paras 37]

The Delhi High Court had territorial jurisdiction to entertain the writ petition challenging the RBI order.

Joinder/impleadment of Enforcement Directorate - Whether Enforcement Directorate (DOE) was a necessary or proper party to the writ proceedings and whether the DOE should be impleaded in the appeal - HELD THAT: - The Court held that the writ petition impugned an RBI order under the FEMA ODI Regulations and had to be tested against that regulatory scheme; no relief was sought against the DOE. Drawing on principles of necessary and proper parties, the Court concluded that the disputes could be effectively and completely adjudicated in the absence of the DOE and that the DOE was neither a necessary nor a proper party in these proceedings. The Court also noted the DOE's unexplained failure to seek impleadment in the original writ proceedings as relevant to its application in the appeal. [Paras 37, 39, 44, 45]

Application for impleadment of the Directorate of Enforcement was dismissed; the DOE is neither a necessary nor a proper party to the appeal.

Consultation with investigative agency not surrender of discretion - Whether RBI's seeking and taking into account the DOE's views amounted to surrender of its statutory discretion or justified the rejection under challenge - HELD THAT: - The Court accepted that consultation with another agency does not ipso facto constitute surrender of decision-making power. However, it found that in the present case the reasons communicated by RBI were premised on the DOE's reservations and that reliance on those reservations as the determinative ground for rejection was not permissible under the FEMA scheme. Therefore, while consultation is permissible, the ultimate exercise of regulatory discretion must itself be lawful and conform to the statutory/regulatory criteria; RBI's reliance on DOE apprehensions did not meet that standard. [Paras 37]

RBI's consultation with the DOE did not justify the rejection; consultation is not delegation, but reliance on DOE's reservations as the basis for denial was unlawful in the circumstances.

Preliminary objections: delay, laches and concealment - Whether the writ petition was barred by delay or laches, whether there was concealment of material facts, and whether these preliminary objections required dismissal - HELD THAT: - The Court held that the writ petition challenging the 30.12.2019 order was filed on 17.06.2020 and that the COVID-19 lockdown context negated any imputations of inordinate delay; no concealment of material facts was found on the record. Consequently these preliminary objections were not relevant or germane to the controversy and the Single Judge was justified in not adjudicating them as grounds for dismissal. [Paras 37]

Preliminary objections of delay, laches and concealment were rejected; they did not merit dismissal of the writ petition.

Final Conclusion: The High Court upheld the Single Judge's quashing of RBI's rejection dated 30.12.2019, ruling that the rejection lacked adequate reasons and that reliance on pending investigations by the Enforcement Directorate did not furnish a lawful basis under Regulation 9(3) of the FEMA ODI Regulations; preliminary objections were dismissed and the DOE's application for impleadment was refused. The appeal by RBI was dismissed.

Interim bail on medical grounds - veracity of medical certificate issued by jail medical officer - judicial reliance on medical reports of higher referral centre - judicial caution to medical officers issuing certificates - withdrawal of application for interim relief

Veracity of medical certificate issued by jail medical officer - judicial reliance on medical reports of higher referral centre - judicial caution to medical officers issuing certificates - Application by the Enforcement Directorate seeking inquiry into correctness/genuineness of the medical report dated 15.08.2020 of the Senior Medical Officer, Central Jail, Mandoli, Delhi, and direction to AIIMS to comment on that report. - HELD THAT: - The Court examined the medical report of the Senior Medical Officer dated 15.08.2020 (which had formed the basis for interim bail granted earlier) against the reports and affidavit filed by the Director, AIIMS, New Delhi (reports dated 23.12.2020 and 22.01.2021 and affidavit dated 14.02.2021). AIIMS recorded that the accused was examined in outpatient departments, was advised investigations and follow-up, and that no department had recommended urgent admission or immediate surgical intervention. AIIMS also recorded that the accused sought admission and later produced private investigation reports, but no urgency for admission was found. The Senior Medical Officer of the jail explained that his earlier report was based on the inmate's prior medical history and the orders then before the court. Having considered the materials, the Court found that the earlier jail report had opined urgency for surgery which was not reflected in AIIMS' clinical assessment; the Court therefore disposed of the Enforcement Directorate's application while recording these findings and cautioned the Senior Medical Officer to exercise greater care in future when issuing medical certificates for accused persons, because such certificates may be relied upon by accused to obtain favourable orders from courts. [Paras 17, 18, 19, 20]

The application of the Enforcement Directorate was disposed of; the Court recorded that AIIMS did not find urgency for admission/surgery and cautioned the Senior Medical Officer of the jail to be careful in issuing medical reports.

Interim bail on medical grounds - withdrawal of application for interim relief - Second application by the accused for interim bail on medical grounds filed after dismissal of the main bail petition. - HELD THAT: - Following receipt of AIIMS' reports and the Director's affidavit which indicated no departmental recommendation for urgent admission or surgery, the accused's counsel informed the Court that he would not press the second application for interim bail on medical grounds. In view of that concession and the material before the Court, the application was treated as not pressed. [Paras 21, 22, 23, 24, 25]

The second application for interim bail on medical grounds was dismissed as withdrawn.

Final Conclusion: The Enforcement Directorate's challenge to the jail medical report was disposed of after AIIMS' clinical findings were considered and the Senior Medical Officer of the jail was cautioned to be careful in issuing medical certificates; the subsequent interim-bail application filed by the accused was dismissed as withdrawn.

Fraud - mis-statement - requirement of specific allegation and proof of fraud - right to reasonable opportunity of hearing before recording fraud - expunging a judicial finding - CENVAT credit admissibility contested on merits

Fraud - requirement of specific allegation and proof of fraud - right to reasonable opportunity of hearing before recording fraud - expunging a judicial finding - Validity of CESTAT's finding that the petitioner had practised fraud and propriety of refusing rectification of that finding - HELD THAT: - The Court held that a finding of fraud carries serious civil and criminal consequences and therefore requires a specific allegation, an enquiry, and proof of intent to deceive. CESTAT's finding that the petitioner had practised fraud rested on an objection raised by the department during hearing-that two invoices bore subsequently inserted words 'labour charges'-and on the CESTAT Member's inspection and comparison of handwriting. The High Court noted that the adjudicating authority and Commissioner (Appeals) had denied the CENVAT credit on merits and had not earlier alleged fabrication of invoices. The CESTAT did not put the petitioner on formal notice of a charge of fraud, did not afford an opportunity to lead evidence on that new allegation, and sought an immediate response from counsel in the course of hearing. Relying on settled law, the Court emphasised that fraud cannot be found on bald allegation or hurried inference; the accused must be given reasonable opportunity to meet the charge and evidence must be led to establish intent to deceive. Given CESTAT's procedure-acting on an off the cuff departmental remark, inspecting documents without a proper enquiry and without affording the petitioner an opportunity to lead evidence or make submissions-the Court concluded that fraud was not proved. The High Court therefore set aside the impugned order rejecting the rectification application and expunged the finding of fraud recorded by CESTAT. The Court confined its examination to the correctness of the fraud finding because the petitioner had settled its tax liability under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and had withdrawn the appeal against the substantive order. [Paras 26, 27, 28, 29, 30]

CESTAT's finding of fraud was unjustified; the impugned order dated 28.08.2019 is set aside and the finding of fraud recorded in the CESTAT order dated 27.09.2018 is expunged.

Final Conclusion: Writ petition allowed to the extent of setting aside CESTAT's order dated 28.08.2019 and expunging the finding of fraud recorded in the CESTAT order dated 27.09.2018; no order as to costs.

Input-output norms - standard norms as basis for assessment - actual manufacture or removal as basis of levy - deemed production - verification based on actual production/removal

Input-output norms - standard norms as basis for assessment - deemed production - Validity of applying the Coconut Development Board's input-output norms to compute output and levy excise duty in the absence of any allegation of clandestine removal - HELD THAT: - The Court held that levy of excise duty must be grounded on the product actually manufactured or removed from the factory and cannot rest solely on a formulaic computation of output where there is no charge of clandestine removal or diversion. Relying on the principle that calculations of output cannot be based on inferences involving assumption, and having regard to earlier authorities applying the same principle, the Court found that the impugned order which applied the Coconut Development Board's norms as the sole basis for determining output and duty is unsustainable when no allegation of clandestine removal is made against the petitioner. The respondents' invocation of the Board's norms does not relieve them of the requirement to base assessment on actual production/removal where no diversion is alleged. [Paras 6, 7, 8, 9]

Order based solely on the Coconut Development Board's norms to compute output and levy duty set aside; such norms cannot be the exclusive basis for assessment in the absence of an allegation of clandestine removal.

Verification based on actual production/removal - Scope and direction on remand for further action by the assessing authority - HELD THAT: - The Court remitted the matter to the first respondent for fresh consideration. The first respondent is directed to verify the records and revisit the issue, and, if duty is to be levied, to do so based on actual production or removal of the goods in question rather than on the disputed formulaic computation. The remand is for verification and reassessment in accordance with the principle that assessment should reflect actual manufacture/removal where no clandestine diversion is alleged. [Paras 9]

Matter remitted to the assessing authority to verify records and levy duty, if any, based on actual production/removal; impugned order set aside.

Final Conclusion: Writ petition allowed; the impugned order which computed output and levied duty by applying Coconut Development Board norms is set aside and the matter is remitted to the first respondent to verify records and, if appropriate, levy duty based on actual production/removal of the goods.

Inclusion of freight in sale price - deduction of freight separately charged in invoice - place of delivery as determinative of sale - interpretation of contract/tender clauses regarding delivery and price composition - uniform per-unit freight charge and its effect on taxable turnover - application of the definition of sale price under Section 2(h) of the CST Act - precedential application of Hindustan Sugar Mills and Bangalore Soft Drinks

Inclusion of freight in sale price - deduction of freight separately charged in invoice - place of delivery as determinative of sale - interpretation of contract/tender clauses regarding delivery and price composition - uniform per-unit freight charge and its effect on taxable turnover - application of the definition of sale price under Section 2(h) of the CST Act - Freight separately shown in the sales invoice is not includible in the sale price and is deductible from taxable turnover. - HELD THAT: - The Court examined the tender and purchase order clauses (notably Clauses 9.1-9.7 of the bid documents, Clause 6.1 of the General Conditions and Clause 4(a) of the PO) and held that the contract must be read to ascertain the stage at which sale and delivery were completed. Clause 4(a) of the PO deemed delivery to be completed when material was offered for inspection, which occurred at the petitioner's factory. Applying the definition of "sale price" in Section 2(h) of the CST Act, the Court reasoned that sums charged for freight or delivery separately are excluded from the sale price. The Court rejected the Tribunal's conclusion that composite unit price and uniform per-piece freight indicated inclusion of freight in sale price, observing that a uniform per-unit freight (charged for supply of 50,000 units) is a common trade practice and does not convert a separately stated freight into part of the sale consideration. The Court further held that the Tribunal erred by overlooking the contract clauses determining place of delivery and by misapprehending precedent; the decisions in Hindustan Sugar Mills and State of Karnataka v. Bangalore Soft Drinks were held applicable and supportive of the petitioner's entitlement to exclude separately charged freight from taxable turnover. Having found that the sale was complete at the factory (on inspection/earmarking) and that freight thereafter was not part of the sale consideration, the Court concluded that the petitioner was entitled to the deduction. [Paras 22, 23, 24, 28, 29]

The Tribunal was incorrect; freight shown separately in the sale bills is not part of the sale price and the petitioner is entitled to claim deduction of the freight from taxable turnover for 1999-2000.

Final Conclusion: The revision petition is allowed: the freight component, although shown as a uniform per-unit charge in the invoices, is not includible in the sale price under Section 2(h) of the CST Act where the sale was completed at the seller's factory on inspection; the petitioner may deduct the separately charged freight from taxable turnover.

Declaration in 'C' form - concessional rate of tax for inter State purchases - registration under the Central Sales Tax Act - continuing rights of purchasing dealers under Section 8(3)(b) - effect of amendment restricting definition of 'goods' on CST operation - freedom of trade under Article 301 read with Article 304(b)

Declaration in 'C' form - concessional rate of tax for inter State purchases - inter State purchase of High Speed Diesel - Entitlement of dealers to obtain 'C' forms and claim concessional rate of tax for purchases of High Speed Diesel made by inter State purchase from suppliers in other States. - HELD THAT: - The Court applied and followed the decision in M/s Ramco Cements Ltd. and the Division Bench reasoning thereon, holding that purchasing dealers are entitled to the concessional rate by filing Declaration in 'C' forms for inter State purchases of High Speed Diesel. The Division Bench reasoning, reproduced in the order, explains that the liability to pay tax under the CST Act is not confined to sellers alone and that Section 7(2) independently permits dealers to obtain registration. The subsequent amendments restricting the definition of 'goods' to six specified commodities did not abrogate the purchasers' right to claim concessional rate under Section 8(3)(b). The Court observed that denying 'C' forms to purchasing dealers would impede the freedom of trade and create arbitrary classifications, a consequence not intended by the legislature. The State's challenges to these conclusions were noted as having been dismissed: the Division Bench affirmed the Single Judge, and the Special Leave Petitions filed by the State were dismissed by the Supreme Court, leaving the applicable precedent intact. In these circumstances the writ petition was allowed and the authorities were directed to act in conformity with the Ramco line of decisions and to enable issuance/online downloading of 'C' forms to eligible dealers. [Paras 14, 15, 39, 40, 41]

Dealers purchasing High Speed Diesel inter State are entitled to obtain 'C' forms and claim the concessional rate of tax; departmental restriction on issuance/online access of 'C' forms set aside and authorities directed to permit issuance.

Registration under the Central Sales Tax Act - effect of amendment restricting definition of 'goods' on CST operation - continuing rights of purchasing dealers under Section 8(3)(b) - Whether amendments to the CST Act limiting the definition of 'goods' affect the right of purchasing dealers to obtain registration and claim concession under the CST regime. - HELD THAT: - Relying on the Division Bench exposition, the Court held that amendments narrowing the definition of 'goods' do not extinguish the operative scope of the CST Act for purchasers of the specified commodities nor their entitlement to registration. Section 7(2) was construed as conferring an independent right to registration on dealers (including purchasing dealers) irrespective of seller liability, and Section 8(3)(b) which permits concessional purchases against 'C' forms remained operative post amendment. The court rejected the Revenue's contention that registration or concessional entitlement could be withheld merely because a dealer is not a selling dealer of the specified items, noting that such a position would result in arbitrary classification and infringe Article 14 alongside affecting freedom of trade. [Paras 13, 14, 15, 39]

Amendment to the definition of 'goods' does not nullify the right of purchasing dealers to obtain registration under the CST Act or to claim concessional purchases against 'C' forms; the Revenue's contrary contention is rejected.

Institutional application of precedent - direction to departmental authorities - Whether the departmental authorities in Tamil Nadu must apply the Ramco Cements line of decisions generally and permit online downloading/issuance of 'C' forms to eligible dealers pending any stay or reversal. - HELD THAT: - The Court observed that until the Ramco decision is stayed or reversed, its rationale is binding within the State and must be applied to all pending assessments. The impugned departmental circular which restricted 'C' form use was quashed; assessing authorities were directed not to limit the benefit only to parties to that litigation and to enable online access to 'C' forms for all eligible dealers. The Court noted that the State's appeals against the Ramco decision had been dismissed by a Division Bench and the Special Leave Petitions filed by the State were dismissed by the Supreme Court, thereby reinforcing the requirement that departmental action conform to the settled position. [Paras 6, 41]

Departmental restriction on issuance and online access to 'C' forms is quashed; Assessing Authorities directed to apply the Ramco Cements rationale to all eligible dealers and to permit online downloading/issuance of 'C' forms until any stay or reversal.

Final Conclusion: The writ petition is allowed: the petitioners (and similarly placed dealers) are entitled to obtain 'C' forms and claim concessional tax for inter State purchase of High Speed Diesel; the departmental circular restricting issuance/online access to 'C' forms is quashed and authorities are directed to permit issuance/online downloading in conformity with the controlling decisions, the State's challenges having failed.

Entitlement to 'C' forms - inter state purchase of High Speed Diesel - concessional rate of tax for purchasing dealers - registration under the Central Sales Tax Act - rights of purchasing dealers under Section 8(3)(b) of the CST Act - applicability of precedent and binding effect of High Court and Supreme Court orders

Entitlement to 'C' forms - inter state purchase of High Speed Diesel - concessional rate of tax for purchasing dealers - applicability of precedent and binding effect of High Court and Supreme Court orders - Petitioner entitled to obtain 'C' forms for inter state purchase of High Speed Diesel and to avail concessional rate of tax; departmental restriction limited to parties to earlier writs is not permissible. - HELD THAT: - The Court applied and followed this Court's decision in M/s Ramco Cements Ltd. (and related decisions of other High Courts, one of which was affirmed by the Supreme Court) holding that dealers purchasing High Speed Diesel from other States are entitled to the benefit of concessional tax by furnishing 'C' forms. The State's contention that registration or entitlement can be withheld except for parties to the earlier decision was rejected; the earlier judgment is in rem and its rationale must be extended to all similarly situated dealers until stayed or reversed. Consequently, assessing authorities within the State are directed to implement the ratio of the precedent in pending assessments and not to block use or online downloading of 'C' forms. The Court recorded that the Special Leave Petitions filed by the State against the Ramco Cements decision were dismissed by the Supreme Court, reinforcing the binding effect of the precedent on the issue. [Paras 2, 3, 4]

Writ petition allowed; department directed to permit issuance and online downloading of 'C' forms and to apply the Ramco Cements rationale to all eligible dealers; no costs.

Final Conclusion: Writ petition allowed. The petitioner (and other similarly placed dealers) is entitled to obtain 'C' forms for inter state purchases of High Speed Diesel to avail concessional tax; the departmental restriction is quashed and authorities are directed to permit online downloading and to apply the cited precedent throughout the State. No costs.

Input tax credit - burden of proof - genuine transaction versus bogus transaction - disallowance of input tax credit - no liability of purchaser for non-remittance by seller - unaccounted stocks and penalty

Input tax credit - burden of proof - genuine transaction versus bogus transaction - no liability of purchaser for non-remittance by seller - Validity of disallowance of input tax credit and treatment of excess stock as taxable turnover in respect of purchases from M/s. Priya Traders. - HELD THAT: - The Court examined whether the assessee discharged the statutory burden to prove entitlement to input tax credit under the scheme of the KVAT Act. The assessee produced de-registration certificate copies of the supplier, ledger extracts, bank account extracts covering the period, and 37 tax invoices issued by the supplier bearing check-post seals evidencing transport from Kustagi to Bengaluru. On that material the Court concluded the transactions were not bogus or make-believe and that goods had in fact been transported. While Section 70 casts the burden of proof on the dealer claiming input credit, the Court found that burden satisfied by the documents produced. The Court further observed that if the supplier failed to remit tax, the remedy lies against the supplier and not by depriving the purchaser of input tax credit; there is no power under the Act to deny input credit to the purchaser on account of seller's non-remittance. Comparing the facts with precedents relied upon by the State, the Court noted factual distinctions (supplier was registered during the period and payments were effected through bank) which rendered those precedents inapplicable to the present case. For these reasons the disallowance by the AA and FAA was held to be without factual basis and the Tribunal's decision setting aside those disallowances was upheld. [Paras 16, 17, 18, 19]

The disallowance of input tax credit and classification of excess stock as taxable turnover were set aside; the assessee had discharged the burden of proof and the Tribunal's order in favour of the assessee was upheld.

Final Conclusion: Revision petition dismissed; the Karnataka Appellate Tribunal's order setting aside the disallowance of input tax credit is affirmed.