TaxTMI Updates e-Newsletter
Apr 07,2023

Voluntary payment during search - refund of tax collected without authority of law - Section 74(5) of the CGST Act and FORM GST DRC-03 - Rule 142(2) of the CGST Rules - Articles 265 and 300A of the Constitution - refund with interest

Voluntary payment during search - Section 74(5) of the CGST Act and FORM GST DRC-03 - Articles 265 and 300A of the Constitution - refund with interest - Whether respondent No.1 is liable to refund the sum of Rs.1,99,90,000/- deposited by the petitioner during search proceedings, along with interest. - HELD THAT: - The department maintained that the impugned amount was deposited voluntarily and recorded in FORM GST DRC-03. The Court examined the statutory provision permitting pre-notice payment, i.e., Section 74(5) of the CGST Act read with the procedure under Rule 142(2), and observed that collection of tax must be by authority of law as mandated by Article 265 and that deprivation of property without authority infringes Article 300A. Reliance was placed on precedents holding that payments made during search/inspection may not be treated as valid recoveries if not in accordance with law and procedures and where no proper acknowledgement by the proper officer is given. The Court noted absence of a proper receipt/acknowledgement after acceptance of the amount and considered the protective principles laid down by High Courts concerning payments during search (including guidance that payments should not be accepted during search and, if made, should be recorded after officers have left). Applying these principles to the material before it, the Court concluded that the petitioner was deprived of the amount without requisite authority and procedure and that repayment was warranted; accordingly the department was directed to refund the impugned sum with interest at 6%.

Writ petition partly allowed; respondent No.1 directed to refund Rs.1,99,90,000/- to the petitioner with 6% interest.

Final Conclusion: The petition succeeds in part: the Court directed respondent No.1 to refund the sum of Rs.1,99,90,000/- deposited during the search proceedings, with 6% interest, on the ground that the collection was not sustained by lawful procedure and acknowledgement as required by the statutory scheme and constitutional mandates.

Violation of principles of natural justice - consideration of reply filed in response to show cause notice - quashing and remand for fresh consideration - direction to afford personal hearing - quashing of consequential bank attachment notice

Violation of principles of natural justice - consideration of reply filed in response to show cause notice - quashing and remand for fresh consideration - direction to afford personal hearing - Impugned order dated 05.04.2022 was passed without considering the petitioner's reply dated 25.02.2022 to the show cause notice, resulting in breach of the principles of natural justice and necessitating quashing and remand. - HELD THAT: - The Court found that the petitioner had filed Form GST DRC-06 dated 25.02.2022 in response to the show cause notice issued on 17.02.2022 and that the reply was received by the respondents. The impugned order dated 05.04.2022 contains no reference to or consideration of that reply. Because the respondents did not consider the petitioner's reply despite its receipt, the procedure adopted violated the principles of natural justice. The appropriate remedy identified by the Court was to quash the impugned order and remand the matter to the respondents for fresh consideration on merits and in accordance with law, directing that the respondents adhere to principles of natural justice and afford a personal hearing before passing final orders within twelve weeks from receipt of the judgment. [Paras 4, 5]

Impugned order dated 05.04.2022 quashed; matter remanded to respondents for fresh consideration with direction to afford personal hearing and pass final orders within twelve weeks.

Quashing of consequential bank attachment notice - Consequential bank attachment notice issued pursuant to the quashed order was also set aside. - HELD THAT: - In view of the quashing of the impugned order, the Court held that the consequential actions taken pursuant to that order, including the bank attachment notice issued to the third party bank, could not stand and must be quashed as an incident of the setting aside of the principal order. [Paras 6]

Consequential bank attachment notice quashed.

Final Conclusion: The writ petition succeeds: the order dated 05.04.2022 is quashed for failure to consider the petitioner's reply and remanded for fresh consideration in accordance with law with a direction to afford personal hearing within twelve weeks; the consequential bank attachment notice is also quashed; writ petition disposed of with no costs.

Supply - Consideration - Liquidated damages - Ancillary supply and principal supply - Taxability under GST - Classification under chapter head 9997 - Rate of tax at 18% (9% CGST + 9% SGST)

Supply - Consideration - Liquidated damages - Liquidated damages collected by the service receiver from the service provider for non-performance constitute supply under Section 7 of the GST Act. - HELD THAT: - The Authority examined whether amounts characterized as liquidated damages are consideration for a supply. A combined reading of contract law provisions on breach and compensation was noted, but the determinative test under GST is the definition of consideration which includes any payment made in respect of, in response to, or for the inducement of the supply of goods or services. The amounts claimed under a contract pursuant to a pre agreed formula and contingent events are not gratuitous; they are paid in response to contractual performance obligations and confer an economic consequence related to the underlying contractual relationship. Whether the payment is described as a penalty or as compensation for non performance is immaterial for GST purposes if it meets the statutory definition of consideration. Applying this test, the Authority held that liquidated damages paid by the defaulting party to the non defaulting party are consideration and therefore amount to a supply of service under Section 7.

Affirmative - such liquidated damages constitute supply taxable under GST.

Ancillary supply and principal supply - Classification under chapter head 9997 - Liquidated damages - The classification of such liquidated damages under GST is as 'Other Services' falling within chapter head 9997. - HELD THAT: - The Authority applied the principle that payments incidental to the principal contractual supply are to be treated in relation to that principal supply. Having concluded that liquidated damages are consideration for a supply, the Authority classified the activity into the appropriate residual category for services. On the facts and in absence of any specific taxable service heading, the activity was placed under chapter head 9997 ('Other Services'), as the ancillary nature and contractual character do not attract any specific heading.

Liquidated damages are classifiable as Other Services under chapter head 9997.

Taxability under GST - Rate of tax at 18% (9% CGST + 9% SGST) - The applicable rate of tax on the liquidated damages so classified is 18% (9% CGST and 9% SGST). - HELD THAT: - Having held that the liquidated damages constitute taxable supply of services and having classified them under chapter head 9997, the Authority applied the notified tax rate applicable to that classification. The Authority observed that such incidental payments, when the principal supply is taxable, are themselves taxable and accordingly stated the applicable combined rate of 18%, apportioned as 9% CGST and 9% SGST.

The liquidated damages are taxable at 18% (9% CGST + 9% SGST).

Final Conclusion: The Authority ruled that liquidated damages collected by APPDCL from the service provider for non performance are consideration constituting a supply under GST, are classifiable as Other Services under chapter head 9997, and are taxable at the rate of 18% (9% CGST and 9% SGST).

Pre-packaged and labelled commodities - pre-packaged commodity (Legal Metrology) - labelling declarations under the Legal Metrology Act, 2009 - institutional/industrial consumer exclusion under Legal Metrology rules - taxability under GST linked to Legal Metrology classification

Pre-packaged and labelled commodities - pre-packaged commodity (Legal Metrology) - taxability under GST linked to Legal Metrology classification - Supply of 1 kg packed red gram dal (with secondary packing in 50 kg bag) to AP State Civil Supplies Corporation Ltd., packed and labelled as per the corporation's design, attracts GST or not. - HELD THAT: - The Authority examined Notification No. 06/2022 (CT Rate) which makes GST applicable to "pre-packaged and labelled" commodities as defined by the Legal Metrology Act, 2009. A commodity qualifies as "pre-packaged" only if it is placed in a package without the purchaser being present and contains a pre-determined quantity, indicating packaging for any buyer rather than for a specific identified buyer. "Labelled" requires the package or label to bear declarations mandated by the Legal Metrology Act and rules. In the present case the applicant packed the 1 kg pouches and the secondary 50 kg bags strictly at the behest and pursuant to specific instructions of the purchasing corporation, including design, colour, transparency and required printed particulars. Because the packaging was undertaken specifically for a known buyer and not as packaging for an unspecified future purchaser, the prerequisite of being a "pre-packaged" commodity is not satisfied. The Authority therefore found that the supply does not fall within the class of "pre-packaged and labelled" commodities made taxable by the notification and consequently GST is not attracted. The Authority noted that questions about primary versus secondary packing or exemption under institutional supply rules of the Legal Metrology Act are peripheral once the pre-packaged requirement is not met, and hence those matters were rendered infructuous for the GST determination.

Supply is not a taxable "pre-packaged and labelled" commodity under the Notification; GST does not apply.

Final Conclusion: Advance ruling: Negative - the supply of 1 kg packed red gram dal (with secondary packing in 50 kg bag) made and labelled as per the specific instructions of AP State Civil Supplies Corporation Limited is not a "pre-packaged and labelled" commodity for purposes of the cited GST notification and therefore does not attract GST.

Supply made in the course or furtherance of business - services by an employee to the employer treated neither as supply - arranging services from a third party is not the employer's output - mandated welfare provision under the Factories Act not taxable as supply - perquisites provided to employees not subject to GST (GST Policy wing Circular 172/04/2022)

Supply made in the course or furtherance of business - arranging services from a third party is not the employer's output - mandated welfare provision under the Factories Act not taxable as supply - perquisites provided to employees not subject to GST (GST Policy wing Circular 172/04/2022) - GST liability on amounts recovered from employees for canteen facility provided through a third-party service provider - HELD THAT: - The Authority found that the applicant's principal business is manufacture of apparel and it is not in the business of providing canteen services; the canteen services are supplied by a third-party vendor to the applicant and are not the applicant's output. For a transaction to be a taxable supply made in the course or furtherance of business it must be made by the person as part of his business; the recovery of employees' share by the applicant merely channels the payment to the third-party and does not amount to supply by the applicant. Further, the canteen is provided pursuant to a statutory mandate under the Factories Act and, having regard to the GST Policy wing Circular 172/04/2022, such perquisites provided to employees in relation to employment are not subject to GST. Applying these principles, the Authority held that the recoveries from employees for canteen services are not taxable under the CGST/SGST Acts. [Paras 7]

Applicant is not liable to pay GST on recoveries from employees for canteen services provided through a third-party.

Supply made in the course or furtherance of business - arranging services from a third party is not the employer's output - services by an employee to the employer treated neither as supply - GST liability on amounts recovered from employees for transportation (bus) facility provided through a third-party service provider - HELD THAT: - The Authority observed that the transportation services are supplied by a third-party to the applicant and that the applicant's business is apparel manufacture, not transportation. The recoveries collected from employees represent part of the third-party charge and the applicant does not retain a profit margin; arranging transport for employees is not an activity in the course or furtherance of the applicant's business and therefore does not constitute a taxable supply made in the course or furtherance of business. Accordingly, the recoveries are not taxable under the CGST/SGST Acts. [Paras 7]

Applicant is not liable to pay GST on recoveries from employees for transportation services provided through a third-party.

Final Conclusion: Advance Ruling: GST is not leviable on amounts recovered from employees by the applicant for (i) canteen facility and (ii) transportation facility, where both services are provided by third-party vendors, the applicant is not the supplier, the recoveries do not constitute a supply in the course or furtherance of its business, and the canteen facility is a mandated welfare/perquisite not subject to GST.

Unblocking of bank account - alternate remedy - petition rendered infructuous - search conducted in assessee's office - summons issued and further steps to be ascertained

Unblocking of bank account - alternate remedy - petition rendered infructuous - Petition with respect to respondent No.2 rendered infructuous on account of subsequent unblocking of the account and availability of alternate remedy. - HELD THAT: - The Court recorded that the grievance against respondent No.2 no longer subsists because the previously blocked account has been unblocked after the lapse of about one year and consequential steps to address the demand have been taken. In view of the unblocking and the fact that an alternate remedy has been availed by the affected party, the challenge concerning respondent No.2 is treated as infructuous and the issue of unblocking is at an end.

The petition insofar as it concerns respondent No.2 is rendered infructuous and the issue of unblocking the account stands concluded.

Search conducted in assessee's office - summons issued and further steps to be ascertained - Proceedings relating to respondent No.1 are adjourned for further factual clarification and are not finally adjudicated. - HELD THAT: - The Court noted that a search was conducted on 14.01.2021 at the petitioner's office and that the Director was taken to the office of respondent No.1. The Court directed an adjournment to enable counsel for respondent No.1 to ascertain and place on record what further steps have been taken following issuance of the summons (Annexure P17). No substantive determination on the merits of the search or subsequent actions was made; the matter is retained for further inquiry.

Proceedings against respondent No.1 adjourned to 14.02.2023 for respondent No.1 to inform the Court of steps taken after issuing the summons; no final decision on that aspect.

Final Conclusion: The challenge against respondent No.2 is dismissed as infructuous in view of unblocking of the account and availability of alternate remedy; matters concerning respondent No.1 are adjourned for further factual clarification and not finally decided.

Transfer pricing adjustment - arm's length price - reliable and accurate adjustment - depreciation on intellectual property rights - provision for obsolescence of inventory - provision for warranty - finding of fact - recognised accounting standard AS-2 - lower of cost or net realizable value

Transfer pricing adjustment - arm's length price - reliable and accurate adjustment - Whether the Tribunal was justified in rejecting the transfer pricing addition and determining management support service payments at arm's length following earlier favourable orders. - HELD THAT: - The Court observed that the Tribunal followed its consistent decisions in the assessee's own cases for earlier assessment years which had become final. The revenue failed to point out any distinguishing feature warranting departure from those earlier findings. In consequence the Tribunal's conclusion in favour of the assessee on the transfer pricing adjustment was accepted and no substantial question of law was held to arise for interference.

Decided for the assessee; revenue's challenge rejected following the Tribunal's earlier, final decisions.

Depreciation on intellectual property rights - Whether depreciation on intellectual property rights was allowable as claimed by the assessee. - HELD THAT: - The Court noted that the Tribunal had followed its earlier decisions in the assessee's own cases for prior assessment years which had attained finality. No distinguishing circumstances were shown by the revenue to justify upsetting those conclusions. Accordingly the Tribunal's allowance of depreciation on the intellectual property assets was sustained.

Decided for the assessee; revenue's challenge rejected following earlier final orders.

Provision for obsolescence of inventory - recognised accounting standard AS-2 - lower of cost or net realizable value - finding of fact - Whether the provision for inventory obsolescence made by the assessee was unsustainable in absence of cogent material. - HELD THAT: - The Tribunal examined the assessee's working which identified item codes, descriptions, last transaction dates, quantities, unit rates, values and ageing periods, and found a scientific, commercially acceptable method of computation. The Tribunal also found valuation to be in accordance with AS-2 (lower of cost or net realizable value) recognised under the statute. As the matter involved evaluation of facts and the Tribunal returned a factual finding, the Court held that no substantial question of law arose warranting interference.

Decided for the assessee on facts; revenue's challenge rejected as raising no substantial question of law.

Provision for warranty - unascertained liability - finding of fact - Whether the provision for warranty (an unascertained liability) was allowable where the agreement referenced guarantee but not an express warranty clause. - HELD THAT: - The Tribunal construed the contract terms, particularly condition no.19(a) and (b), and found that a warranty obligation (replacement of defective meters within the stipulated period) was embodied within the guarantee clause, with an obligation to pay twice the cost if replacement did not occur. The Tribunal thus returned a factual finding that the terms contained an in-built warranty. The Court held that this was a factual determination and that no substantial question of law arose for interference.

Decided for the assessee on facts; revenue's challenge rejected as raising no substantial question of law.

Final Conclusion: The appeal is dismissed. The Tribunal's order for assessment year 2012-13 is sustained; the connected application for stay is closed.

Triggering of proceedings under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 - validity of a declaration under Section 59 of the 2015 Act - CBDT guidelines dated 23.01.2018 on time-limit for issuing notice under Section 10(1) - acquisition by the revenue of tangible information relating to undisclosed foreign assets - retrospective application of the 2015 Act

Interim relief restraining coercive measures - Grant of interim protection against coercive measures pending further hearing - HELD THAT: - The Court allowed the interlocutory application and directed that no coercive measures shall be taken against the petitioner until the next date of hearing. The order required the petitioner to file legible copies of annexures and directed service and filing of counter-affidavit and any rejoinder within prescribed time. The interim protection was granted while issuing notice and listing the matter for further consideration. [Paras 1, 21, 23]

Interim relief granted; no coercive measures to be taken against the petitioner till the next date of hearing and case listed for further consideration.

Acquisition by the revenue of tangible information relating to undisclosed foreign assets - CBDT guidelines dated 23.01.2018 on time-limit for issuing notice under Section 10(1) - Date on which the revenue acquired tangible information is to be determined for application of the CBDT guidelines and for timing of issuance of notice under Section 10(1) - HELD THAT: - The Court identified as a live mixed question of fact and law the precise date on which the revenue acquired tangible information that the petitioner held undisclosed foreign assets. That determination is material because the CBDT guidelines dated 23.01.2018 require issuance of a notice under Section 10(1) within thirty days of the end of the financial year in which such knowledge was acquired. The Court recorded competing contentions about when information was received and observed that this factual determination requires further examination; accordingly the issue is retained for adjudication on merits after party filings and evidence/pleadings. [Paras 17]

Remanded for fresh consideration and factual determination of when the revenue acquired tangible information, to govern application of the CBDT time-limit guidelines.

Retrospective application of the 2015 Act - application of the 2015 Act to assets acquired prior to 01.07.2015 - validity of a declaration under Section 59 of the 2015 Act - Whether the provisions of the 2015 Act apply to undisclosed assets acquired prior to 01.07.2015 and related consequence of rejection of the Section 59 declaration - HELD THAT: - The Court noted a contested legal question as to whether the 2015 Act applies to assets acquired before its coming into force on 01.07.2015 and observed that the petitioner relies on the CBDT circular and FAQs to contend that once his Section 59 declaration was held ineligible, proceedings under the 2015 Act could not be triggered. The respondents counter that the declaration was not bona fide and that information was available to them earlier. The Court found that this legal controversy, which implicates temporal scope and consequences of a rejected declaration, requires further consideration and framing in light of pleadings and authorities relied upon in related matters. [Paras 4, 9, 11, 17]

Remanded for fuller consideration of whether the 2015 Act applies to assets acquired before 01.07.2015 and of the legal effect of the rejection of the Section 59 declaration.

Final Conclusion: Notice issued; interlocutory relief granted restraining coercive measures until the next date; the matters of (i) the date on which the revenue acquired tangible information for triggering the CBDT time-limit for issuance of notice and (ii) whether the 2015 Act applies to assets acquired prior to 01.07.2015 (and the consequence of rejection of the Section 59 declaration) are directed to be examined afresh after filing of pleadings and listed for further hearing.

Admission of additional evidence before the Commissioner (Appeals) under Rule 46-A(1)(c) of the Income Tax Rules, 1962 - sufficient cause for non-production of evidence before the Assessing Officer - requirement to record reasons in writing for admission of additional evidence under Rule 46-A(2) - Assessing Officer to be afforded reasonable opportunity under Rule 46-A(3) - obstante clause empowering the Commissioner (Appeals) under Rule 46-A(4) to direct production of documents or examination of witnesses - effect of an exemption order issued by the Director General (Exemption) on liability under the first proviso to Section 4(a) of the Expenditure Tax Act

Admission of additional evidence before the Commissioner (Appeals) under Rule 46-A(1)(c) of the Income Tax Rules, 1962 - sufficient cause for non-production of evidence before the Assessing Officer - requirement to record reasons in writing for admission of additional evidence under Rule 46-A(2) - Assessing Officer to be afforded reasonable opportunity under Rule 46-A(3) - effect of an exemption order issued by the Director General (Exemption) on liability under the first proviso to Section 4(a) of the Expenditure Tax Act - Admissibility and effect of the exemption order produced before the Commissioner (Appeals) during the appeal and whether the Commissioner (Appeals) rightly admitted it as additional evidence under Rule 46-A. - HELD THAT: - The Court reviewed Rule 46-A and the exemption order dated 31.07.2001 issued by the Director General (Exemption), which was made after the Assessing Officer's assessment order and was produced for the first time before the Commissioner (Appeals) during the pendency of the appeal. The Commissioner (Appeals) admitted the exemption order under Rule 46-A(1)(c) on the ground that it went to the root of the grounds of appeal by removing the assessee from the mischief of Section 3 in view of the first proviso to Section 4(a) of the Expenditure Tax Act. The Tribunal confirmed that the exemption letter's validity was not disputed and that the Commissioner (Appeals) had given effect to the Director General's order. The Court held that Rule 46-A permits admission of additional evidence where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence relevant to a ground of appeal; here the exemption order was issued only after the assessment was made, satisfying the condition of sufficient cause. The Court further found no merit in the contention that reasons were not recorded in writing, observing that the Commissioner (Appeals) stated that the exemption order removed the assessee from chargeability under the relevant provision and thus provided the requisite rationale. The Court also noted that sub-rule (4)'s non obstante provision empowers the Commissioner (Appeals) to direct production of documents or examination of witnesses to dispose of the appeal, and that remanding the matter to the Assessing Officer would have been a formalistic step producing the same result. The Tribunal's concurrence with the Commissioner (Appeals) was therefore not perverse, and the procedural safeguards in Rule 46-A(3) (affording the Assessing Officer an opportunity) were considered addressed in the course of the appellate proceedings. [Paras 15, 16, 17, 18, 19]

The Commissioner (Appeals) was justified in admitting the exemption order as additional evidence under Rule 46-A(1)(c); the requirements of Rule 46-A(2) and the Rule read as a whole are satisfied, and the Tribunal correctly affirmed the admission and its consequence that the assessee is not liable to expenditure tax for the assessment years under appeal.

Final Conclusion: The concurrent findings of the Commissioner (Appeals) and the Tribunal upholding admission of the exemption order and its operation to negate liability under the Expenditure Tax Act are maintained; the departmental appeals are dismissed.

Reopening of assessment - Reason to believe - Live link between material and belief - Change of opinion not a ground for reassessment - Requirement to furnish reasons on request - Writ jurisdiction where jurisdictional foundation is absent - Alternate remedy doctrine and its exceptions

Reopening of assessment - Reason to believe - Live link between material and belief - Change of opinion not a ground for reassessment - Validity of the notice issued under Section 148/assessment order under Section 147 where no new tangible material or reasons were furnished to support the belief that income had escaped assessment. - HELD THAT: - The Court applied established precedents holding that the power to reopen is predicated on a 'reason to believe' supported by tangible material and a live link between that material and the belief. Absent any new material disclosed or a demonstrable nexus, the act of reopening amounts to a review or mere change of opinion, which does not furnish jurisdiction under Section 147. The A.O.'s recording of 'null' as reasons in the notice and the failure to furnish reasons upon request indicated absence of jurisdictional foundation. Consequently the notice and reassessment were held to be without jurisdiction and unsustainable. [Paras 11, 13, 15]

Notice under Section 148 and consequent assessment under Section 147/144B set aside for lack of jurisdictional foundation and absence of tangible material linking to a 'reason to believe'.

Requirement to furnish reasons on request - Reopening of assessment - Effect of the Assessing Officer's failure to furnish reasons for reopening after they were requested by the assessee, having regard to the mandate in GKN Driveshafts (India) Ltd. - HELD THAT: - The Court reiterated the mandate that where a notice under Section 148 is issued and the noticee requests reasons, the A.O. must furnish reasons within a reasonable time and permit the noticee to file objections which must be disposed of by a speaking order. In this case no reasons were furnished and the A.O. recorded 'null' as reasons in subsequent correspondence, undermining any claim to a valid formation of belief. Non-compliance with this procedural requirement vitiated the reassessment process and justified quashing of the proceedings. [Paras 11, 15]

Failure to furnish reasons as required rendered the reopening procedurally and jurisdictionally defective; proceedings set aside accordingly.

Writ jurisdiction where jurisdictional foundation is absent - Alternate remedy doctrine and its exceptions - Whether the High Court ought to exercise writ jurisdiction despite availability of alternate remedies under the Act. - HELD THAT: - While acknowledging the general principle that effective statutory remedies militate against exercise of writ jurisdiction, the Court observed that this is a discretionary, convenience-based principle subject to exceptions. Where the statutory authority has failed to act in accordance with the enactment, acted in defiance of fundamental procedural principles, or violated principles of natural justice, the High Court may entertain writ relief. Given the A.O.'s failure to satisfy jurisdictional conditions under Sections 147/148 and non-compliance with the GKN mandate, the Court found it appropriate to exercise its extraordinary jurisdiction and declined to relegated the petitioner to alternate remedies. [Paras 14, 15]

Writ petition entertained and allowed notwithstanding alternate remedies because of absence of jurisdictional foundation and procedural non-compliance by the revenue; petition disposed by setting aside impugned notices/orders.

Final Conclusion: The petition was allowed: the notice dated 31st March, 2021 under Section 148, the assessment order dated 28th March, 2022 (under Section 147 r/w Section 144B), the consequent notice of demand and the penalty notice were set aside for lack of jurisdictional foundation and failure to furnish reasons as mandated; no order as to costs.

Notice under Section 148 - Amalgamation and cessation of existence of the transferor company - Jurisdictional validity of reassessment notice to a non-existent assessee - Estoppel by participation not available against statutory cessation on amalgamation - Section 148A procedure (post-amendment)

Notice under Section 148 - Amalgamation and cessation of existence of the transferor company - Jurisdictional validity of reassessment notice to a non-existent assessee - Estoppel by participation not available against statutory cessation on amalgamation - Impugned notice issued under Section 148 to an assessee which had ceased to exist consequent to an NCLT-approved amalgamation is legally untenable and liable to be quashed. - HELD THAT: - By an order dated 09.12.2019 of the NCLT the transferor company stood merged into the petitioner, and the transferor thereby ceased to exist as a separate legal entity. The Principal Commissioner issued a jurisdictional transfer notification prior to the impugned notice. The Supreme Court's decision in Principal Commissioner of Income Tax v. Maruti Suzuki India Ltd. establishes that issuance of a reassessment notice to an amalgamating/merged entity which has ceased to exist is without jurisdiction. Participation by the transferor in proceedings cannot operate as an estoppel to validate a notice which is fundamentally at odds with the legal consequence of an approved scheme of amalgamation. A divergent decision in Sky Light Hospitality was noted to turn on its peculiar facts and does not alter the applicability of Maruti Suzuki to the present facts. Applying these principles, the notice dated 29.06.2021 issued under Section 148 to the non-existent assessee is void.

Impugned notice dated 29.06.2021 under Section 148 quashed and set aside; writ petition allowed; no order as to costs.

Final Conclusion: Following NCLT-approved amalgamation and the legal principle that a merged entity ceases to exist, a reassessment notice issued to the non-existent transferor is without jurisdiction and has been quashed; the petition is allowed.

Reopening of assessment under Section 148 read with Section 147 - rectification under Section 154 - change of opinion - reason to believe - requirement of tangible material / live link for reassessment

Reopening of assessment under Section 148 read with Section 147 - rectification under Section 154 - change of opinion - requirement of tangible material / live link for reassessment - Validity of reopening assessment where original assessment under Section 143(3) had accepted the assessee's treatment and proceedings under Section 154 were initiated and then dropped, but notice under Section 148 was thereafter issued within four years. - HELD THAT: - The Court held that the reassessment in the present case was occasioned by a mere change of opinion of the Assessing Officer. In the original scrutiny assessment under Section 143(3) the Assessing Officer accepted the appellant's treatment that the outstanding Rural Development Cess was a liability. The Assessing Officer thereafter initiated rectification proceedings under Section 154, but dropped them on objection; subsequently a notice under Section 148 was issued and reassessment completed under Section 147. Relying on the principle that reassessment must rest on a 'reason to believe' supported by tangible material and a live link to the formation of that belief (as explained in the authorities cited in the judgment), the Court concluded that reopening an assessment cannot be used as a device for reviewing or changing an earlier view when the original record already permits the view taken. Where the Assessing Officer himself had treated the matter as rectifiable under Section 154 and found no mistake apparent from record or where the difference is attributable to a permissible view, there must be some compelling additional material to justify invoking Section 147; absent such material, resort to reassessment is impermissible. Applying these principles to the facts, the Court found no such compelling material and held the reassessment to be founded on change of opinion and therefore invalid. [Paras 16, 17]

Reopening was impermissible being founded on change of opinion; reassessment under Section 147 read with Section 148 is invalid.

Final Conclusion: Appeal allowed; reopening and reassessment set aside as based on change of opinion. The secondary question on the taxability of the reimbursed cess is not decided.

Violation of principles of natural justice - failure to furnish adverse evidence and denial of opportunity to cross examine - reliance on extra judicial statements not produced to the assessee - weight to documentary evidence in tax proceedings (TDS certificates) - appellate review under Section 260A - limits on re opening findings of fact

Failure to furnish adverse evidence and denial of opportunity to cross examine - violation of principles of natural justice - Whether denial of an opportunity to the assessee to cross examine creditors whose adverse statements were relied upon vitiated the assessment and appellate orders. - HELD THAT: - The Court found that revenue authorities relied on adverse statements and a sworn statement recorded under Section 131 which were not furnished to the assessee, and that the assessee was thereby denied an opportunity to rebut those statements by cross examination. Reliance upon such evidence without producing it to the assessee and affording a chance to confront the deponents strikes at the root of the proceedings. The Court applied the principle that when an adjudicating authority bases its order on statements of third parties, it is incumbent on the authority to produce those statements to the affected party and permit cross examination so that the truth can be tested. The Court followed the Supreme Court precedents reproduced in the order and held that refusal to grant cross examination where adverse statements were used amounted to a breach of natural justice and vitiated the orders of the lower authorities. [Paras 20, 23, 24]

Findings of the revenue authorities based on adverse statements not produced to the assessee and without granting opportunity to cross examine were vitiated; question answered in favour of the assessee.

Weight to documentary evidence in tax proceedings (TDS certificates) - reliance on extra judicial statements not produced to the assessee - Whether the Tribunal and revenue could discredit documentary evidence (notably TDS certificates) and treat mere deposit of TDS as insufficient without properly confronting the assessee with adverse material. - HELD THAT: - The Court observed that while confirmation letters and vouchers were disputed, deposit of TDS was undisputed and a TDS certificate had been filed by the assessee to prima facie show the claimed credits. The assessing officer accepted deposit of TDS but asserted that mere deposit would not render a transaction genuine and noted absence of a TDS return. The Court held that disbelieving documentary material relied upon by the assessee, particularly when adverse oral statements were not produced to the assessee for confrontation, was unsustainable. In the factual matrix, the simultaneous reliance on undisclosed adverse statements and the discrediting of TDS certificates contributed to vitiation of the impugned additions. [Paras 17, 18, 23]

Discrediting of the TDS certificates and documentary evidence, in the context of reliance on undisclosed adverse statements, was unsustainable and vitiated the addition.

Final Conclusion: Appeal allowed; additions made by the revenue and sustained by the Tribunal were set aside for breach of natural justice and for improperly discrediting documentary evidence. No costs.

Lease equalisation charge - bifurcation of lease rental - accounting standards of ICAI - Guidance Note on Accounting for Leases - substance over form - calculation of real income for tax purposes - interaction of Section 145 of the Income tax Act and Section 211 of the Companies Act

Lease equalisation charge - bifurcation of lease rental - accounting standards of ICAI - calculation of real income for tax purposes - Entitlement of the assessee to claim lease equalisation charge by bifurcating lease rentals in accordance with ICAI accounting standards and Guidance Note for the purpose of computing taxable income. - HELD THAT: - The Court followed the reasoning in the cited Supreme Court decision which upheld that the method of accounting derived from the ICAI Guidance Note on Accounting for Leases is a valid method to capture real income from finance lease transactions. The rule of substance over form permits bifurcation of lease rentals into capital and revenue components so that only the revenue element is taxed. The Companies Act provision recognising ICAI standards until government prescription and the permissibility of applying accounting standards under Section 145 of the Income tax Act were held to support such bifurcation. There is no express bar in the Income tax Act to the application of the Guidance Note or accounting standards for arriving at real income; application of the prescribed method is a means to compute fair taxable income rather than a novel deduction. The Court therefore answered the substantial questions in favour of the assessee, rejecting Revenue's contention that lease equalisation charges cannot be recognised merely because no express statutory deduction exists. [Paras 7]

Appeal allowed; questions framed in favour of the assessee and against the Revenue; no order as to costs.

Final Conclusion: The appeal for assessment year 1998-99 is allowed: the assessee is entitled to bifurcate lease rentals and claim lease equalisation in accordance with ICAI accounting standards/Guidance Note for computing real taxable income; consequential additions are not sustained; no costs.

Benami transaction - substantive assessment in hands of real owner - evidentiary value of documents seized u/s. 132 and presumption under section 292C - statements of independent brokers as corroborative evidence - retraction of statements and their evidentiary worth - determination of quantum of capital gains - admissibility of additional evidence before appellate authority - exemption under section 54B

Benami transaction - substantive assessment in hands of real owner - evidentiary value of documents seized u/s. 132 and presumption under section 292C - statements of independent brokers as corroborative evidence - retraction of statements and their evidentiary worth - Whether the capital gains arising from sale of the subject contiguous land (276.87 cents part of larger plot) rightly assessable substantively in the hands of the assessee as the real/beneficial owner (benami) rather than in the names of the ostensible sellers. - HELD THAT: - On the material on record the Tribunal found that the Agreement dated 03/01/2007 seized during search is a valid transaction and attracts the statutory evidentiary weight under section 292C. The claimed cancellation of that agreement (and a purported subsequent agreement of 07/03/2007) was held to be unsupported by contemporaneous documentary evidence and inconsistent with surrounding facts. Independent statements of the three brokers recorded during search, corroborated by the buyer's statements and by the conduct of parties (single negotiation, single transaction, uniform sale date and large advance/commission in cash), were held to have higher evidentiary value than the belated retractions of the ostensible sellers. The ostensible sellers' lack of capacity, proximate relationship as employees/associates of the assessee, absence of a money trail showing receipt/utilisation of sale proceeds, and unexplained book entries weighed decisively. The Tribunal concluded that the four persons were, in substance, name-lenders/benamidars and that the assessee was the de facto owner; accordingly the substantive assessment in the assessee's hands was upheld and the CIT(A)'s deletion was vacated. [Paras 4, 6, 7, 8]

Assessee held to be the beneficial owner; substantive assessment in assessee's hands sustained and deletion by CIT(A) set aside.

Determination of quantum of capital gains - sale consideration established by seized agreement - statements of independent brokers as corroborative evidence - Whether the sale consideration alleged by the Revenue (as per the agreement at the higher rate) is established for computation of capital gains. - HELD THAT: - The Tribunal accepted the sale consideration recorded in the agreement of 03/01/2007 as established on the evidence. The brokers-independent third parties-consistently stated that negotiations and the agreed rate (higher rate) took place as a single transaction; the buyer corroborated the higher consideration and admitted restoration of the agreement. The plea of cancellation and downward revision was found to be an afterthought unsupported by contemporaneous documentary entries (no evidence of return of advance, inconsistent subsequent agreement executed between different parties on earlier stamp paper, absence of any notation reflecting cancellation). Given these factors and the missing money trail for the ostensible sellers, the Tribunal held the higher sale consideration to be established and accepted the AO's quantification of capital gains. [Paras 6, 7]

Sale consideration as recorded in the seized agreement accepted; quantum of capital gains as assessed by AO sustained.

Admissibility of additional evidence before appellate authority - retraction of statements and their evidentiary worth - Whether the CIT(A) was justified in deleting the addition based on retractions and additional evidences produced before him, and whether procedural requirements for admissibility were observed. - HELD THAT: - The Tribunal noted that the CIT(A) had allowed evidences and relied on retractions without expressly dealing with or confronting the AO's detailed findings, and without recording requisite satisfaction under the provisions applicable to reception of additional evidence (rule 46A being invoked in submissions). Nonetheless, on a full review of the entirety of material-including the original seized agreement, brokers' statements recorded during search, buyer's corroborative statements, lack of corroborative contemporaneous proof for cancellation, absence of money trail and the sellers' limited means-the Tribunal found the retractions to be unauthenticated and uncorroborated and of little evidentiary value. The Tribunal therefore treated the additional evidence as not assisting the assessee and reinstated the AO's conclusions on ownership and quantum. [Paras 6, 7]

CIT(A)'s reliance on retractions/additional evidence rejected as insufficient; AO's findings upheld despite procedural infirmities in admission of some materials.

Exemption under section 54B - Whether the assessee's claim of exemption under section 54B (relating to agricultural land/plantation purchase) is maintainable for the year under appeal. - HELD THAT: - The Tribunal observed that the AO denied the 54B claim on the ground that the agricultural land (rubber plantation) was purchased prior to the transfer of the subject land and that no material was placed on record showing use of the subject land for agricultural purposes in the two years preceding sale. The Tribunal further recorded that, were the claim otherwise tenable, exemption would fall to be examined for the correct year (with the Tribunal noting possible applicability to AY 2007-08 for the portion transferred earlier). The Tribunal found the asserted purchase of plantation to form part of the money trail supporting the AO's case, and held the factual and documentary basis of the 54B claim unproved on the materials before it. [Paras 7]

Claim under section 54B not accepted on the record before the Tribunal; factual merits to be examined by AO if pressed in appropriate proceedings (issue effectively left for fresh consideration on merits).

Final Conclusion: The Revenue's appeal is allowed: the Tribunal holds that the assessee was the beneficial owner of the subject contiguous land, that the seized agreement of 03/01/2007 and corroborative independent evidence establish the higher sale consideration, and accordingly vacates the CIT(A)'s deletion and restores the AO's assessment for AY 2008-09; the section 54B claim is not accepted on the record and its factual merit may be examined in appropriate proceedings.

Validity of search and seizure warrant - Authorization to search under Section 132 - Place of search and scope of warrant - Maintainability of proceedings under Section 153A - Remand for adjudication on merits

Validity of search and seizure warrant - Authorization to search under Section 132 - Place of search and scope of warrant - Maintainability of proceedings under Section 153A - Whether the CIT(A) was justified in holding the proceedings under Section 153A to be invalid on the ground that no search was conducted at the assessee's registered office and annulling the assessment. - HELD THAT: - The Tribunal examined the warrant of authorization (Warrant No. 4859) and the principles underlying issuance of warrants under Section 132 and Rule 112(1). A warrant may be issued in the name of an assessee authorising search of any premises where the issuing authority has reason to believe relevant documents, books of accounts or other evidences are kept, and it is not necessary that the search be limited to the registered office or corporate premises. The warrant in the present case named the assessee and authorised search of Plot No. 237-238, Udyog Vihar, Phase-I, Gurgaon on the issuing authority's satisfaction that evidences pertaining to the assessee were likely to be found there. The warrant was seen and signed by the director of the company and independent witnesses. For these reasons the Tribunal held that the CIT(A)'s conclusion that "no search was conducted" and consequent summary annulment of proceedings under Section 153A was unsustainable. [Paras 14]

CIT(A)'s finding that no search was conducted and annulment of proceedings under Section 153A is not sustainable; the Revenue's challenge is allowed on this ground.

Remand for adjudication on merits - Maintainability of proceedings under Section 153A - Whether the matter should be restored to the CIT(A) for adjudication of the substantive grounds on merits. - HELD THAT: - The Tribunal noted that because the CIT(A) had annulled the assessment as ex facie illegal and had not decided the other grounds on merit, those grounds remained undecided. Having held that annulment was not justified, the Tribunal directed restoration of the matter to the CIT(A) to adjudicate the grounds on merits in accordance with law. The Tribunal also recorded that the co-ordinate bench's reasoning in the assessee's A.Y. 2011-12 appeal supports this view and there was no distinguishing fact before it. The CIT(A) is to grant adequate opportunity of hearing and the assessee to furnish details as required. [Paras 14, 15]

Matter restored to the CIT(A) for adjudication of the grounds on merits; CIT(A) to grant opportunity and proceed in accordance with law.

Final Conclusion: Revenue appeal allowed to the extent that the CIT(A)'s annulment of proceedings under Section 153A was set aside; the assessment record is restored to the CIT(A) for fresh adjudication on merits. Cross-objection of the assessee is allowed to the extent of obtaining fresh consideration by the CIT(A).

Revision under section 263 - erroneous and prejudicial to the interest of revenue - exemption under section 54F - notional income under the head 'Income from House Property' - Explanation 2 to section 263 - order passed without making inquiries or verification

Exemption under section 54F - erroneous and prejudicial to the interest of revenue - revision under section 263 - Allowability of exemption under section 54F where ownership of more than one residential house on date of transfer was alleged. - HELD THAT: - The Tribunal examined documentary material and submissions and concluded that the assessee was owner of at least two residential houses on the date of transfer. Although the assessee contended that the Pune flat was owned by her mother in law, the Pune flat appeared in the assessee's balance sheet and the assessee failed to produce bank evidence to show that the investment was made by the mother in law. On this basis the Bench held that the AO's allowance of exemption under section 54F was erroneous and prejudicial to revenue and that the Principal Commissioner was justified in exercising revisionary jurisdiction under section 263. The Tribunal expressly recorded that its view on merits was prima facie and directed that the Assessing Officer decide the matter on merits afresh. [Paras 10, 11, 12]

Assessment order was erroneous in so far as it allowed exemption under section 54F; impugned revision under section 263 upheld and assessment set aside for de novo adjudication by the AO.

Notional income under the head 'Income from House Property' - erroneous and prejudicial to the interest of revenue - Explanation 2 to section 263 - order passed without making inquiries or verification - Whether failure to bring notional income from additional properties to tax amounted to under assessment and rendered the assessment order erroneous and prejudicial to revenue. - HELD THAT: - The Tribunal accepted the Principal Commissioner's view that, since the assessee was owner of more than one residential property, income from house property in respect of properties other than self occupied and actually let out ought to have been considered. The absence of inquiry or verification by the AO into the ownership and income implications was held to fall within Explanation 2 to section 263, justifying revision. The matter was remitted to the AO to examine and decide the notional income issue on merits. [Paras 5, 6, 11, 12]

Finding of under assessment for omission to declare notional income sustained; assessment set aside and remitted to AO for fresh decision.

Final Conclusion: The Tribunal upheld the Principal Commissioner's exercise of revisionary jurisdiction under section 263, concluding that the assessment was erroneous and prejudicial to revenue for allowing section 54F exemption and for omission to assess notional house property income; the assessment order is set aside and the matter is remitted to the Assessing Officer for de novo consideration, the Tribunal noting its view on merits is prima facie.

Transfer Pricing - Arm's Length Price (ALP) - Transactional Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) method - Comparability of comparables - Notional foreign exchange loss - accounting retranslation - Condonation of delay due to COVID-19

Transfer Pricing - Arm's Length Price (ALP) - Transactional Net Margin Method (TNMM) - Deletion of transfer pricing adjustment relating to commission for procurement and assignment of contract - HELD THAT: - The Tribunal upheld the view of the CIT(A) deleting the TP adjustment made by the TPO in respect of commission for procurement/assignment of contract. The Tribunal accepted the assessee's factual case that ONGC's tender documentation and the back-to-back arrangements with the AEs demonstrated that the assessee acted as intermediary/contracting entity without owning requisite assets or personnel and that ONGC had cognizance of the arrangement including guarantees by the AE. The Tribunal found the Revenue's reliance on contractual clauses unpersuasive in light of the tender documents and prior Tribunal decision in the assessee's own A.Y.2011-12, and consequently dismissed Revenue grounds challenging deletion of the adjustment.

Revenue grounds in relation to the TP adjustment for commission are dismissed and the deletion of the TP adjustment is sustained.

Comparability of comparables - Inclusion of Agricultural Finance Corporation Ltd. as a comparable - HELD THAT: - The Tribunal upheld the CIT(A)'s inclusion of Agricultural Finance Corporation Ltd. as a functionally comparable entity. Although the Revenue pointed to indicia of government ownership and reliance on a High Court precedent that government companies executing turnkey projects may be unsuitable comparables, the Tribunal noted that the TPO himself had included another government company (Apitco Ltd.) as a comparable and that, on the facts, Agricultural Finance Corporation Ltd. was functionally comparable. In those factual circumstances the Tribunal found no basis to exclude it and directed the AO/TPO to include it in the comparables list.

Inclusion of Agricultural Finance Corporation Ltd. as a comparable is upheld; AO/TPO directed to include it.

Comparability of comparables - Rejection of Office Care Services Ltd. as a comparable - HELD THAT: - The Tribunal agreed with the TPO/CIT(A) that Office Care Services Ltd. could not be accepted as a comparable because the annual report did not specify the nature of functions performed and the assessee had relied on a website screenshot which was insufficient evidentiary material. The assessee itself had relied on the annual report as the data source in its TPSR and did not produce independent credible evidence of the company's functions. The Tribunal held that website information alone was not acceptable to establish comparability.

Exclusion of Office Care Services Ltd. from comparables is justified and maintained.

Comparability of comparables - Rejection of Vatika Marketing Ltd. as a comparable - HELD THAT: - The assessee conceded that segmental details for Vatika Marketing Ltd. were not available and sought its exclusion; the Tribunal agreed with the assessee and held that Vatika Marketing Ltd. was rightly rejected from the final list of comparables for lack of requisite segmental/function information.

Exclusion of Vatika Marketing Ltd. from comparables is upheld.

Notional foreign exchange loss - accounting retranslation - Treatment of notional exchange loss for mark-up calculation - HELD THAT: - The Tribunal accepted the assessee's submission that the exchange loss recorded arose from retranslation of outstanding US$ liabilities as at the balance sheet date to comply with Accounting Standard-11 and was not an actual economic loss borne by the assessee because the underlying cash flows were pass-through and the exchange fluctuation risk was ultimately borne by the AE. Given the notional nature of the loss and that the assessee did not claim a 10% mark-up on it during the year (and actual exchange differences when settled were reimbursed), the Tribunal held that it was appropriate not to include a 10% mark-up on the notional exchange loss.

Assessee's exclusion of the notional exchange loss from the base for 10% mark-up is accepted.

Comparable Uncontrolled Price (CUP) method - ALP for reimbursement and recovery of expenses and applicability of CUP method - HELD THAT: - The Tribunal upheld the assessee's choice of CUP method for reimbursement/recovery of third-party costs and found that the disputed expenses had been included in the assessee's operating cost on which it had charged a 10% mark-up from the AE. The TPO's determination of ALP at nil for reimbursements/recoveries was rejected as without basis. Consequently, the TPO adjustments of Rs.19,94,336 (reimbursements) and Rs.8,11,989 (recovery) were deleted.

CUP method upheld; TPO's adjustments to disallow reimbursements/recovery are deleted.

Condonation of delay due to COVID-19 - Condonation of delay in filing cross objections - HELD THAT: - The Tribunal condoned a delay of 279 days in filing the assessee's cross objections, noting that the filing occurred during the COVID-19 period and that Supreme Court relaxations in light of the pandemic applied. The cross objections were therefore admitted for adjudication.

Delay in filing cross objections condoned and cross objections admitted for hearing.

Final Conclusion: The Revenue appeal is dismissed. The assessee's cross objections are partly allowed: the Tribunal condoned the delay in filing, upheld the deletion of the TP adjustment relating to commission, accepted the exclusion of specified comparables (Office Care Services Ltd., Vatika Marketing Ltd.) while directing inclusion of Agricultural Finance Corporation Ltd., allowed exclusion of notional exchange loss from the 10% mark-up base, and set aside the TPO's disallowance of reimbursements/recovery (deleting those adjustments).

Disallowance for non-deposit of employees' provident fund contribution - capitalisation of administrative/directors' office expenses to inventory/work-in-progress - disallowance under section 14A and computation under rule 8D - arm's-length pricing of corporate guarantee commission by interest savings approach - internal comparable uncontrolled price (internal CUP) for brokerage payments - mark up on reimbursements and characterization of reimbursements versus provision of services

Disallowance for non-deposit of employees' provident fund contribution - Validity of disallowance under section 36(1)(va) read with section 2(24)(x) for provident fund contributions deposited after statutory due date. - HELD THAT: - The Tribunal restored the assessing officer's disallowance. The CIT(A)'s deletion following earlier High Court authority was held unsustainable in view of the subsequent Supreme Court decision in Checkmate Services (cited at para 015 of the order) which treats non-deposit of employees' contribution beyond the prescribed due date as disallowable under the cited provisions. On that legal basis the Tribunal allowed the revenue's ground and restored the AO's order on this issue. [Paras 15]

Disallowance for late deposit of employees' provident fund contribution reinstated.

Capitalisation of administrative/directors' office expenses to inventory/work-in-progress - Whether directors' office salaries and related administrative/hand over facility expenses debited to profit and loss must be capitalised to work in progress (cost of project). - HELD THAT: - On identical facts, the Tribunal upheld the CIT(A)'s deletion of the AO's disallowance. The Tribunal relied on consistent coordinate bench precedents and accounting standards (AS 2 and related guidance) holding that general administrative expenses, including office/employee salaries and marketing/selling expenses which are not related to bringing inventory to its present location, are revenue in nature and should be allowed in the year incurred rather than capitalised to work in progress. Having considered the assessee's accounting policy and earlier tribunal decisions on sister concerns, the Tribunal found no infirmity in the CIT(A)'s conclusion and dismissed the revenue's appeal on this point. [Paras 16, 18]

Disallowance for capitalising directors' office and related administrative expenses deleted; CIT(A)'s order upheld.

Disallowance under section 14A and computation under rule 8D - Validity of disallowance under section 14A (and its reflection in book profit under section 115JB) where AO did not record satisfaction about correctness of assessee's claim, and correctness of AO's computation under rule 8D. - HELD THAT: - The Tribunal admitted the assessee's additional ground and examined the records. It held that the AO failed to record the mandatory satisfaction required by section 14A(2) before invoking the prescribed method, and therefore the disallowance of Rs. 331,070 was not sustainable. The CIT(A)'s direction to recompute disallowance by considering only investments yielding exempt income was noted, but on the legal principle from Maxopp and subsequent High Court authority the Tribunal directed deletion of the disallowance and consequential deletion of the addition to book profit under section 115JB. Other alternative additional grounds were held academic. [Paras 22, 23]

Disallowance under section 14A deleted; corresponding increase to book profit under section 115JB removed.

Arm's-length pricing of corporate guarantee commission by interest savings approach - Whether corporate guarantee provided for bonds constitutes an international transaction and whether the ALP of guarantee commission at 0.3523% (interest savings approach with sharing) determined by the CIT(A) is sustainable. - HELD THAT: - The Tribunal held that after insertion of explanation (c) to section 92B(1) by Finance Act, 2012 a corporate guarantee is an international transaction; thus the assessee's contention that it is a shareholder activity was rejected. On benchmarking, the Tribunal found that the CIT(A) correctly applied the interest saving approach: analysed creditworthiness, used an appropriate database to derive non guaranteed and guaranteed deal spreads, made tenor adjustments and computed the interest saving which was shared between issuer and guarantor (50:50) to arrive at 0.3523%. The revenue failed to demonstrate any infirmity in that methodology; earlier authorities applying similar low basis point rates were noted. Accordingly the Tribunal dismissed the revenue's grounds attacking the CIT(A)'s rate. [Paras 24, 26]

Guarantee commission ALP at 0.3523% upheld; guarantee treated as international transaction.

Internal comparable uncontrolled price (internal CUP) for brokerage payments - Whether the internal CUP adopted by the assessee for brokerage paid to its associated enterprise is admissible and whether the AO/TPO's benchmarking at 1% is justified. - HELD THAT: - The Tribunal accepted the CIT(A)'s conclusion that location of the payee is immaterial where the nature of the brokerage transaction is the same (sale of Indian property to NRIs) and that internal CUP comparables (brokerage paid to unrelated parties for similar transactions) are appropriate. The TPO's rejection based solely on geographic differences was not supported and the AO's adoption of a 1% rate lacked evidential backing. Accordingly, the Tribunal found no reason to disturb the CIT(A)'s deletion of the TPO/AO adjustment. [Paras 27, 29]

Internal CUP for brokerage accepted; adjustment based on 1% rejected and CIT(A)'s deletion upheld.

Mark up on reimbursements and characterization of reimbursements versus provision of services - Whether expenses incurred by the assessee on behalf of Lodha Developers UK Limited were mere reimbursements (no mark up) or constituted provision of services warranting a 10% mark up for transfer pricing purposes. - HELD THAT: - The Tribunal concurred with the TPO and CIT(A) that the payments were not shown to be authorised cost to cost reimbursements and that, in a third party scenario, an independent service provider would not continuously incur such expenses without charging a mark up. The documentation (bills raised as reimbursement at year end) did not establish a cost only arrangement; accordingly the application of a 10% mark up by the TPO/AO was held reasonable and the CIT(A)'s confirmation was sustained. [Paras 30, 33]

10% mark up on reimbursements affirmed; assessee's ground dismissed.

Final Conclusion: For Assessment Year 2016 17 the Tribunal partly allowed both appeals: it restored the AO's disallowance for late provident fund deposit; upheld imposition of 10% mark up on reimbursements; but upheld the CIT(A) in deleting capitalisation of directors' office and administrative expenses, deleting the section 14A disallowance (and related book profit addition), accepting the internal CUP for brokerage, and sustaining the CIT(A)'s ALP of 0.3523% for the guarantee commission.

Condonation of delay for institution of cross objection - restriction of disallowance under section 14A to the extent of exempt income - application of Rule 8D for computation of section 14A disallowance - pro rata allowance of deduction under section 80IB(10) - built up area for eligibility under section 80IB(10) (inclusion of balconies/projections) - burden of proof for deduction - documentary evidence for project management services - allowance under first proviso to section 40(a)(ia) where TDS subsequently deducted and paid - vitiation of penalty proceedings under section 271(1)(c) for defective notice under section 274

Condonation of delay for institution of cross objection - Whether the delay of 843 days in filing assessee's cross objection should be condoned - HELD THAT: - The Tribunal accepted the assessee's affidavit explaining the delay as arising from erroneous advice by its tax adviser and subsequent advice by its counsel to file the cross objection. Applying the principle that "sufficient cause" for condonation should enable adjudication on merits, the Tribunal found a bona fide explanation and exercised discretion to condone the delay so that the cross objection could be decided on its merits. [Paras 4]

Delay in filing the cross objection is condoned and the cross objection admitted for decision on merits.

Restriction of disallowance under section 14A to the extent of exempt income - application of Rule 8D for computation of section 14A disallowance - Extent of disallowance under section 14A where assessee made only a small suo motu disallowance but the Assessing Officer computed a larger disallowance under Rule 8D - HELD THAT: - It was an admitted fact that the assessee had itself made a nominal disallowance under section 14A and that the exempt income actually earned in the year was limited. Following the Supreme Court and High Court authorities cited, the Tribunal held that the disallowance under section 14A must be restricted to the extent of exempt income earned by the assessee. The Assessing Officer's wider computation, which arose after including revaluation effects and applying Rule 8D, could not justify a disallowance exceeding the exempt income actually earned by the assessee in the year. [Paras 6]

Disallowance under section 14A to be restricted to the amount of exempt income earned by the assessee; Revenue's ground dismissed and assessee's cross objection partly allowed.

Pro rata allowance of deduction under section 80IB(10) - built up area for eligibility under section 80IB(10) (inclusion of balconies/projections) - Whether deduction under section 80IB(10) is wholly disallowable where some residential units exceed prescribed built up area, or whether pro rata deduction for eligible units must be allowed - HELD THAT: - The Assessing Officer included balcony/projection areas in built up area and disallowed the section 80IB(10) deduction for the project. The Commissioner (Appeals) allowed pro rata deduction for units whose built up area (even after including balconies) was within the statutory limit. The Tribunal examined conflicting authorities and, following the jurisdictional High Court decision upholding pro rata allowance, accepted the Commissioner (Appeals)'s approach. The Tribunal held that pro rata deduction is permissible and the Assessing Officer must verify the computation for eligible units as directed by the lower authority. [Paras 9, 12, 13]

Deduction under section 80IB(10) to be allowed on a pro rata basis for eligible units; Revenue's grounds on this issue dismissed.

Burden of proof for deduction - documentary evidence for project management services - Allowability of claimed WIP/expenditure where assessee failed to produce documentary evidence of services from a third party consultant - HELD THAT: - The assessee claimed that portions of payments to a consultant were capitalised to WIP and others expensed. The assessee did not produce supporting documentary evidence to substantiate that the third party rendered project management consultancy services. The Tribunal noted that even during appellate proceedings no supporting evidence was furnished and that a co ordinate bench had upheld disallowance for lack of evidence. In absence of proof of services, the deduction could not be allowed. [Paras 19]

Claim for WIP related to payments to the consultant is disallowed for want of supporting evidence; assessee's ground dismissed.

Allowance under first proviso to section 40(a)(ia) where TDS subsequently deducted and paid - Whether an amount earlier disallowed under section 40(a)(ia) for non deduction/non payment of TDS in an earlier year can be allowed in the subsequent year after TDS is deducted and paid - HELD THAT: - The assessee explained that the amount had been disallowed in the earlier year's assessment but that TDS was later deducted and paid, and the claim was disclosed in the original return for the subsequent year though omitted in the revised return. Relying on the Supreme Court authority cited, the Tribunal restored the matter to the Assessing Officer to verify records and afford the assessee an opportunity of being heard, allowing the claim for statistical purposes. [Paras 23]

Issue restored to the Assessing Officer for verification and grant of relief if materials support it; assessee's ground allowed for statistical purpose.

Vitiation of penalty proceedings under section 271(1)(c) for defective notice under section 274 - Validity of penalty proceedings under section 271(1)(c) where the notice under section 274 did not specify whether penalty was initiated for concealment of income or for furnishing inaccurate particulars - HELD THAT: - The Tribunal examined the impugned notice and found that the Assessing Officer had not struck out the inapplicable limb of section 271(1)(c), thereby failing to indicate whether the penalty was for concealment or for furnishing inaccurate particulars. Following the jurisdictional High Court precedent and a co ordinate bench decision in the assessee's own case, the Tribunal held that such defect in the notice vitiates the penalty proceedings and directed deletion of the penalty without adjudicating the merits of the underlying additions. [Paras 31, 32, 33]

Penalty under section 271(1)(c) is quashed due to defective notice under section 274; Revenue's appeal dismissed and assessee's cross objection allowed.

Final Conclusion: The Tribunal admitted the delayed cross objection and decided the appeals on merits. Disallowance under section 14A is restricted to the exempt income actually earned; deduction under section 80IB(10) is allowable on a pro rata basis for eligible units; the claim for payments capitalised to WIP is disallowed for want of supporting evidence; the assessee's claim under the first proviso to section 40(a)(ia) is restored to the Assessing Officer for verification; and the penalty under section 271(1)(c) is quashed because the notice under section 274 failed to specify the statutory limb. Overall, the Revenue's appeals are dismissed, the assessee's appeals are partly allowed, and cross objections are partly or fully allowed as recorded.

Disallowance under Section 40(a)(i) for failure to deduct tax at source - tax exemption certificate issued by Central Government under clause relating to exemption from TDS - application of non-deduction certificate under Section 195/195(3) - treatment of rebate as not being interest for purposes of Section 194A and Section 40(a)(ia) - reimbursement of tax liability accounted on mercantile basis - admission of additional evidence under Rule 29 of ITAT Rules and remand to CIT(A) - disallowance under Section 14A read with Rule 8D - restrictibility to exempt income

Disallowance under Section 40(a)(i) for failure to deduct tax at source - tax exemption certificate issued by Central Government under clause relating to exemption from TDS - application of non-deduction certificate under Section 195/195(3) - Deletion of disallowance under Section 40(a)(i) for payments (interest and agency/management fees) made to foreign lenders including Bayerische Landesbank (BLB) - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee furnished copies of Central Government exemption letters and loan agreements showing matching terms and that the exemption certificate (though issued in the name of the arranger) corresponded with the loan arrangements and payments to BLB as lender. The Assessing Officer produced no evidence disproving the documents or showing the certificates were false; the absence of production of originals was not a valid basis to deny the exemption where the remand report and subsequent assessment years showed no adverse treatment. On that basis the disallowances for interest and agency fees in respect of BLB were deleted. The same reasoning was applied to similar payments to other entities where identical or corresponding non-deduction certificates/orders or Government certificates were produced and not controverted. [Paras 4, 15]

Disallowances under Section 40(a)(i) relating to payments to BLB deleted; Revenue grounds dismissed.

Disallowance under Section 40(a)(i) for failure to deduct tax at source - tax exemption certificate issued by Central Government under clause relating to exemption from TDS - Deletion of disallowance under Section 40(a)(i) for interest paid to Kreditanstalt fu r Wiederaufbau (KFW) - HELD THAT: - The Assessing Officer in the remand report accepted that the payment to KFW corresponded to a Central Government certificate dated 5 December 1994. The CIT(A) and the Tribunal found the Assessing Officer's objection about non-production of originals insufficient, noting that in subsequent years no disallowance was sustained. In absence of contrary evidence, the disallowance was correctly deleted. [Paras 5]

Disallowance under Section 40(a)(i) for payments to KFW deleted; Revenue ground dismissed.

Disallowance under Section 40(a)(i) for failure to deduct tax at source - application of non-deduction certificate under Section 195/195(3) - Deletion of disallowance under Section 40(a)(i) for interest paid to BNP Paribas on production of an order under Section 195(3) - HELD THAT: - The assessee produced a copy of an authorization under Section 195(3) dated 26.03.2008 permitting BNP Paribas Mumbai to receive payments without deduction of TDS. The Assessing Officer accepted the certificate in the remand report but objected to non-production of originals. The Tribunal held non-production of originals did not justify denial of the exemption when no contradictory material was placed on record and similar payments in later years were not disallowed, and therefore deleted the addition. [Paras 6]

Disallowance under Section 40(a)(i) for payments to BNP Paribas deleted; Revenue ground dismissed.

Disallowance under Section 40(a)(i) for failure to deduct tax at source - treatment of financial institutions under provisions exempting deduction of tax - Deletion of disallowance under Section 40(a)(i) for interest paid to IFCL Ltd. on finding it is a public financial institution covered by exemption - HELD THAT: - The assessee relied on Supreme Court authority and Government notification recognizing IFCI/IFCL as a public financial institution such that the TDS provisions did not apply. The Assessing Officer did not dispute this in the remand report and in later assessment years accepted the position. The CIT(A) deleted the disallowance and the Tribunal found no merit in the Assessing Officer's contrary view, directing deletion. [Paras 7]

Disallowance under Section 40(a)(i) for payments to IFCL deleted; Revenue ground dismissed.

Disallowance under Section 40(a)(i) for failure to deduct tax at source - taxability of technical/professional services under Article 12 of DTAA - Deletion of disallowance under Section 40(a)(i) for professional/legal fees paid to Solomon & Solomon on finding no taxable technical services rendered - HELD THAT: - The CIT(A), in adjudicating related proceedings under Sections 201/195, concluded that the payments to Solomon & Solomon did not involve the provision of technical knowledge, skill, experience, know how or processes within the meaning of the India US treaty and therefore were not taxable fees for technical services. The Tribunal observed that Revenue produced no contrary appellate order and, in absence of contrary evidence, upheld the deletion of the disallowance. [Paras 8]

Disallowance under Section 40(a)(i) for payments to Solomon & Solomon deleted; Revenue ground dismissed.

Reimbursement of tax liability accounted on mercantile basis - disallowance under Section 40(a)(i) for alleged unaccounted income - Deletion of addition treated as reimbursement of assessee's tax liability (amount claimed as recovered from GUVNL) where assessee had already made a higher provision in its accounts - HELD THAT: - The assessee had accounted in its audited accounts an estimated provision for reimbursement by GUVNL (higher than the final liability). The Assessing Officer nevertheless made an addition on the ground that a debit note and a CA certificate evidenced accrual. The CIT(A) found, and the Tribunal agreed, that the assessee had consistently and properly followed a mercantile policy and had already offered a larger provision in its accounts; the addition therefore resulted in double taxation and was deleted. The Tribunal noted that the Assessing Officer accepted the accounting practice in subsequent years. [Paras 9]

Addition on account of reimbursement of tax liability deleted; Revenue ground dismissed.

Treatment of rebate as not being interest for purposes of Section 194A and Section 40(a)(ia) - Deletion of disallowance for rebate given to GUVNL on the ground that rebate is a cash discount and not interest - HELD THAT: - Following an earlier decision of the Tribunal in the assessee's own case (AY 2006 07), the Tribunal held that rebate allowed to customers for prompt payment is a discount and cannot be equated with interest as defined under the Act. Accordingly, the provisions of Section 194A and disallowance under Section 40(a)(ia) do not apply; the Assessing Officer's contrary conclusion was set aside. The same ratio was applied to subsequent assessment years. [Paras 10, 16]

Disallowance under Section 40(a)(ia) for rebate to GUVNL deleted; Revenue ground dismissed.

Admission of additional evidence under Rule 29 of ITAT Rules and remand to CIT(A) - Admission of additional documents filed by the assessee for the first time before the Tribunal and remand to CIT(A) for fresh adjudication - HELD THAT: - The Tribunal applied Rule 29, noting the assessee's inability to produce certain documents earlier for reasons beyond its control. In the interests of justice the Tribunal admitted the additional evidence and remitted the matters to the CIT(A) for fresh adjudication on the newly filed documents, with direction that the assessee cooperate in producing evidence before the CIT(A). The Revenue's objection was noted but the Tribunal exercised its discretion to remit. [Paras 12, 13, 14]

Additional evidence admitted; matters remitted to CIT(A) for fresh adjudication.

Disallowance under Section 14A read with Rule 8D - restrictibility to exempt income - Reduction of disallowance under Section 14A read with Rule 8D to the extent of exempt dividend income - HELD THAT: - Relying on binding authority of the jurisdictional High Court and the dismissal of Revenue's SLP by the Supreme Court (including on merits), the Tribunal held that disallowance under Section 14A must be restricted to the amount of exempt income (dividend) earned by the assessee in the relevant year. The Tribunal accordingly modified the disallowance to the quantum of dividend income shown for each relevant assessment year (e.g., Rs. 50,000 for AY 2009 10) and applied the same ratio to AY 2010 11, 2011 12 and 2012 13. [Paras 22, 23, 24]

Disallowance under Section 14A/Rule 8D restricted to amount of exempt dividend income for the respective assessment years; Revenue grounds dismissed to that extent.

Final Conclusion: The Tribunal dismissed the Revenue's appeals and allowed the assessee's appeals in part: deletions of multiple additions made under Section 40(a)(i)/40(a)(ia) (payments to BLB, KFW, BNP Paribas, IFCL, Solomon & Solomon), deletion of the addition for reimbursement of tax liability and deletion of disallowance for rebates to GUVNL were upheld; additional evidence filed by the assessee was admitted and remitted to the CIT(A) for fresh adjudication; disallowances under Section 14A read with Rule 8D were restricted to the amount of exempt dividend income for the respective assessment years.

Confiscation of goods as smuggled goods - presumption of foreign origin and burden to prove Indian origin under Section 123 of the Customs Act - confiscation of currency as sale proceeds of smuggled goods - evidentiary value of retracted statements and statements made to Customs/DRI - requirement of independent corroboration for statements under Section 108/recorded during investigation - imposition of personal penalty under the Customs Act and need for proof of knowledge/abetment

Confiscation of goods as smuggled goods - presumption of foreign origin and burden to prove Indian origin under Section 123 of the Customs Act - Seized gold (11 gold bars, 9 gold coins and silver granules) not finally established to be of foreign origin or smuggled and therefore not liable to confiscation. - HELD THAT: - The Tribunal found that the gold lacked foreign markings and the chemical purity did not correspond to typical foreign-origin gold; the noticees explained the source as melted old jewellery purchased in cash and this explanation was not controverted by cogent evidence from Revenue. Reliance was placed on precedents where absence of foreign marking, non-standard weights/purities and lack of independent corroboration led to extending benefit of doubt to the possessor and setting aside confiscation. The Tribunal also noted that Revenue did not verify the explanation about procurement or produce documentary/corroborative proof to invoke the presumption under Section 123. Applying those principles, the Tribunal concluded the gold was not conclusively shown to be smuggled and ordered release. [Paras 18, 19, 20, 21, 26]

Seized gold is not liable for confiscation and is to be released.

Confiscation of currency as sale proceeds of smuggled goods - requirement to establish sale, seller, purchaser, quantity and knowledge to confiscate currency - Indian currency seized from the noticees was not established to be sale proceeds of smuggled goods and hence not liable to confiscation. - HELD THAT: - The Tribunal recalled the ingredients necessary to confiscate currency as sale proceeds (proof of sale of smuggled goods, identity of seller/purchaser/quantity, and knowledge) and held Revenue failed to adduce corroborative evidence to satisfy these elements. Reliance was placed on earlier decisions holding that mere seizure and suspicion do not suffice to prove currency as proceeds of smuggling. Given this absence of proof, the Tribunal directed release of the cash. [Paras 23, 26]

Seized currency is not liable for confiscation and is to be released.

Evidentiary value of retracted statements and statements made to Customs/DRI - requirement of independent corroboration for statements under Section 108/recorded during investigation - Retracted statements recorded during the investigation by Noticee Nos.1, 2 & 3 are not admissible as standalone corroborative evidence and cannot sustain penalties absent independent corroboration. - HELD THAT: - The Tribunal observed that the noticees retracted their statements and that statements recorded under threat/coercion or retracted on first opportunity lack evidentiary value without corroboration. It relied upon binding and precedential authorities and prior Tribunal decisions which require independent corroboration before relying on such statements for imposing penalties or confiscation. Applying these principles, the Tribunal rejected reliance on the retracted statements as basis for penalty or confiscation. [Paras 6, 22, 26]

Retracted statements do not furnish requisite corroboration; no penalties can be imposed on Noticee Nos.1, 2 & 3 on that basis.

Imposition of personal penalty under the Customs Act and need for proof of knowledge/abetment - evidentiary standard for imposing penalties - Penalties imposed on Noticee Nos.1, 2 & 3 are not sustainable; proceedings and penalties against Noticee Nos.5 & 6 were rightly dropped and that part of the appellate order is upheld. - HELD THAT: - The Tribunal found absence of acceptable legal evidence to prove knowledge, participation or abetment required to sustain personal penalties. It also noted that Noticee Nos.5 & 6 were implicated later, their statements were retracted on first available opportunity, and there was no corroboration; earlier Tribunal orders (Final Order No.75032-75033/2023) and case law were held to support dropping proceedings/penalties against them. Consequently, the Tribunal set aside penalties on Noticee Nos.1-3 and upheld the dropping of proceedings against Noticee Nos.5 & 6. [Paras 24, 25, 26]

No penalties are imposable on Noticee Nos.1, 2 & 3; the dropping of proceedings/penalties against Noticee Nos.5 & 6 is upheld.

Final Conclusion: Appeals by Noticee Nos.1, 2 & 3 allowed: adjudication order set aside to the extent of confiscation of gold and cash and imposition of penalties; appeals by Revenue against dropping of proceedings/penalties on Noticee Nos.5 & 6 dismissed and the appellate authority's decision in their favour is upheld.

Abuse of dominant position - effect analysis - relevant turnover - tying and bundling - denial of market access - anti-fragmentation obligations - supplementary obligations - remedies under Section 27 - doctrine of proportionality - principles of natural justice - inquisitorial role of the Director General - default/pre-installation and status quo bias - side-loading (sideloading) and warnings - essential facilities / API access

Effect analysis - abuse of dominant position - For proving abuse of dominance under Section 4, an effect analysis is required to determine whether the abusive conduct is anti-competitive. - HELD THAT: - The Tribunal held that although Sections 3 and 6 expressly use the AAEC (appreciable adverse effect on competition) standard, Section 4 must nonetheless be read in the statute's overall scheme (including Section 18 and the Preamble). The Commission is therefore required to analyse whether the conduct complained of is anti-competitive in effect; a per se finding without considering anti-competitive effect is not appropriate. The determinative test is whether the conduct is capable of harming competition or competitors (i.e. whether it is anti-competitive). [Paras 66]

Effect analysis is required under Section 4; the test is whether the abusive conduct is anti-competitive.

Confirmation bias - inquisitorial role of the Director General - The Commission's order is not vitiated by confirmation bias; the Commission considered the record and reached independent findings. - HELD THAT: - The Tribunal examined the sequence of events, the DG report and the final CCI order and found that the CCI considered the materials collected in the India-specific inquiry, delineated relevant markets and recorded independent findings. The mere fact of resemblance to the European Commission's findings did not amount to disqualifying confirmation bias where the Commission engaged with domestic evidence and reasoning. [Paras 69]

The submission of pervasive confirmation bias is rejected; the CCI conducted its own market-specific inquiry and recorded independent findings.

Pre-installation - supplementary obligations - imposition of unfair conditions - Pre-installation of the entire GMS suite and prominent placement under MADA amounts to imposition of unfair/supplementary obligations and is an abuse of dominance under Sections 4(2)(a)(i) and 4(2)(d). - HELD THAT: - After reviewing the MADA terms (including Clause 2.1 and placement requirements in Clause 4.4) and OEM evidence, the Tribunal agreed with the CCI that MADA's covenants operate as tying and supplementary obligations. The CCI found OEMs had limited negotiating power and that pre-installation plus placement foreclosed rivals and reduced user choice. The CCI also carried out the requisite anti-competitive effect analysis and concluded the conduct harmed competition. [Paras 98, 373, 614]

Pre-installation and prominent placement under MADA are unfair/supplementary obligations and contravene Sections 4(2)(a)(i) and 4(2)(d); the CCI considered the evidence and found anti-competitive effect.

Anti-fragmentation obligations - technical/scientific development - Conditioning GMS pre-installation on signing AFA/ACC reduced OEMs' ability and incentive to develop and sell Android forks, thereby limiting technical or scientific development in breach of Section 4(2)(b)(ii). - HELD THAT: - The Tribunal accepted the CCI's finding that AFA/ACC clauses (including broad, unclearly defined anti-fragmentation obligations and compatibility requirements) had the effect of disincentivising fork development. The CCI reviewed OEM and Amazon evidence, noted the practical difficulties fork developers faced, and concluded the anti-fragmentation framework was unreasonable and disproportionate in scope, with anti-competitive effects on fork development. [Paras 115, 548, 583]

Making GMS pre-installation contingent on AFA/ACC reduced incentives for Android forks and violated Section 4(2)(b)(ii); the CCI considered and relied on the evidence in reaching this conclusion.

Denial of market access - revenue sharing agreements - status quo bias - Google perpetuated its dominant position in online general search and denied market access to competing search apps in breach of Section 4(2)(c). - HELD THAT: - The Tribunal upheld the CCI's finding that the interplay of MADA, RSA and AFA/ACC (including revenue-share incentives and default/pre-installation) materially reduced OEM incentives to pre-install competing search services. The CCI found pre-installation is a significant distribution channel that creates status quo bias and that RSA payments were large relative to challengers' revenues, acting as an entry barrier and producing anti-competitive effects. [Paras 132, 411, 412]

Google's arrangements perpetuated dominance in general search and resulted in denial of market access to rivals, contrary to Section 4(2)(c).

Leveraging dominance - tying and bundling - Google leveraged its dominance in the Play Store to protect and strengthen its position in online general search, and tying Play Store with Chrome and YouTube also contravened Section 4(2)(e). - HELD THAT: - The Tribunal agreed with the CCI that pre-installation and placement via Play Store conferred significant distribution advantages to Google's search, Chrome and YouTube products. The CCI's analysis found those leveraging practices were capable of foreclosing competition and deterring innovation in the downstream markets; relevant evidence and market shares supported the conclusion. [Paras 143, 465, 614]

Google leveraged Play Store to protect its search position and tied Play Store with Chrome and YouTube in breach of Section 4(2)(e); the CCI's evidence-based findings are upheld.

Principles of natural justice - inquisitorial role of the Director General - The DG's investigation did not violate principles of natural justice and was not vitiated by the framing of 'leading' questions. - HELD THAT: - The Tribunal distinguished the DG's inquisitorial fact gathering role from an adjudicator or criminal prosecutorial process. Notices and questionnaires served to elicit information; OEMs responded and the CCI considered those responses. Although some questions were criticised as leading, the Tribunal found no record evidence that the DG had pre-judged the matter so as to render the investigation unfair. [Paras 156]

The DG's investigation complied with procedural fairness; allegations of natural justice breach or invalidation by leading questions are rejected.

Constitution of the Commission - vacancy not to invalidate - The CCI's order is not vitiated by the absence of a judicial member. - HELD THAT: - Relying on Section 15 (vacancy not to invalidate proceedings) and precedent, the Tribunal held that lack of a judicial member at the time did not render the CCI's proceedings invalid. The question of composition raised in interlocutory decisions is noted as pending at higher courts, but on these facts the impugned order stands. [Paras 162]

Absence of a judicial member did not vitiate the CCI's impugned order.

Remedies under Section 27 - proportionality of remedies - Most remedial directions in paragraph 617 were upheld, but four specific directions (paragraphs 617.3, 617.7, 617.9 and 617.10) were set aside as unsustainable or unnecessary. - HELD THAT: - The Tribunal reviewed each remedy: it upheld directions that were connected to findings of abuse (e.g., not forcing OEMs to pre-install full suite, prohibiting exclusivity incentives, permitting choice of default search). However, it struck down (i) the obligation to provide unrestricted access to proprietary Play Services APIs (617.3), (ii) the broad command to allow third party app stores to distribute via Play Store (617.9), (iii) the prohibition on warnings or measures relating to sideloading (617.10), and (iv) the blanket direction to prohibit uninstallation restrictions (617.7) on the ground that those remedy elements either lacked a proper factual/legal basis or were disproportionate to findings. [Paras 195, 220]

Directions in para 617 upheld generally, but 617.3, 617.7, 617.9 and 617.10 are set aside; remaining directions in para 617 are upheld.

Relevant turnover - doctrine of proportionality - The penalty imposed by the CCI (calculated on the basis of relevant turnover for FY 2018-19, 2019-20 and 2020-21) was upheld; CCI's methodology in using best available data and taking a conservative lower figure was sustained and the penalty is final (not provisional). - HELD THAT: - Applying Excel Crop Care, the Tribunal accepted that 'relevant turnover' may encompass revenues arising from the Android ecosystem as a whole given the multi sided, interconnected nature of the platform and the three inter related agreements (MADA, AFA/ACC, RSA). The CCI used available financial submissions, identified inadequacies, made reasonable best estimates, chose the lower of two reasonable aggregate figures, and applied 10% on the averaged turnover for the three financial years (2018 19 to 2020 21). The Tribunal deleted references to 'provisional' penalty and held the imposed penalty final. [Paras 216, 217, 220]

Penalty calculation and quantum upheld; relevant turnover determination (using FYs 2018-19, 2019-20, 2020-21) and CCI's conservative methodology sustained; penalty is final.

Relief - deposits and implementation timeline - Google's appeal was dismissed except that four remedial directions were set aside; Google was directed to deposit the penalty (adjusting prior deposit) and given time to implement upheld measures. - HELD THAT: - The Tribunal upheld the CCI order in substance, set aside the specified four directions, allowed Google 30 days to deposit the penalty (after adjusting the earlier 10% deposit) and 30 days to implement the sustained remedial measures. Parties to bear their own costs. [Paras 219, 220]

Appeal dismissed except for deletion of directions 617.3, 617.7, 617.9 and 617.10; penalty and other directions upheld with time for compliance.

Final Conclusion: The Tribunal upholds the Competition Commission's finding that Google abused its dominant position across identified Indian relevant markets (licensable smart mobile OS, Android app store, general web search, non OS specific browsers and OVHP) contrary to Sections 4(2)(a)(i), 4(2)(b)(ii), 4(2)(c), 4(2)(d) and 4(2)(e). The CCI's remedies are largely sustained, four specific directions (617.3, 617.7, 617.9, 617.10) are set aside as unreasonable or unsupported, and the monetary penalty computed using relevant turnover for FY 2018-19, 2019-20 and 2020-21 is affirmed and declared final; Google to deposit the balance within 30 days and implement the upheld measures within 30 days.

Provisional admission of claim subject to verification - power to revise admitted claims under Regulation 14(2) of CIRP Regulations, 2016 - relevance and finality of an arbitral award in fixing admitted claim amount - determination of voting rights based on verified claim amount

Provisional admission of claim subject to verification - power to revise admitted claims under Regulation 14(2) of CIRP Regulations, 2016 - Resolution Professional's power to reduce or revise an admitted claim after provisional admission and verification - HELD THAT: - The Appellate Tribunal accepted the factual position recorded by the IRP that the claim for a large sum was only provisionally admitted by email dated 18.03.2022 and expressly made subject to verification. The Tribunal applied the regulatory scheme to hold that where additional information or materials come to the RP's notice, the RP has the statutory competence to revise admitted claims. The Adjudicating Authority's reliance on the RP's exercise of that power was held to be legally correct and not vitiated by any error. [Paras 4]

No illegality in the Resolution Professional reducing the claim amount after provisional admission; the RP was entitled to revise the admitted claim.

Relevance and finality of an arbitral award in fixing admitted claim amount - determination of voting rights based on verified claim amount - Whether the arbitral award relied upon by the Resolution Professional was relevant and binding for computation of the appellant's claim and voting rights - HELD THAT: - The Tribunal noted that the appellant itself had initiated arbitration and placed the award on record. The award fixed the principal liability and interest and had not been challenged within the limitation period, thereby attaining finality for present purposes. The RP's calculation of the claim in accordance with the award was therefore found to be supported by the materials on record. Consequently, the Adjudicating Authority correctly held that the claim, as so calculated, could be used for determining voting percentage and that the RP did not commit any error in relying on the award. [Paras 3, 6]

The arbitral award was relevant and properly formed the basis for reducing and calculating the admitted claim for the purpose of determining voting rights.

Final Conclusion: Appeal dismissed; the Adjudicating Authority correctly upheld the Resolution Professional's revision of the provisionally admitted claim based on verification and on the unchallenged arbitral award, and no error was found in computing the claim for voting rights.

Look Out Circular (L.O.C.) - quashing of Look Out Circular - scheduled offences under the Prevention of Money Laundering Act, 2002 (P.M.L.A.) - non-cooperation with investigation - Ministry of Home Affairs guidelines on issuance of L.O.C. - absence of prosecutive action / no prosecution complaint - liberty to reissue L.O.C. upon fresh material - conditional permission to travel subject to advance intimation and undertaking

Look Out Circular (L.O.C.) - scheduled offences under the Prevention of Money Laundering Act, 2002 (P.M.L.A.) - absence of prosecutive action / no prosecution complaint - Validity of the L.O.C. issued against the petitioner where no prosecution complaint under P.M.L.A. was filed and the charge sheet did not invoke scheduled offences. - HELD THAT: - The Court found that the E.C.I.R. and the FIR identified several offences but only Sections 420 and 120-B of the I.P.C. are scheduled offences under the P.M.L.A., and ultimately no prosecution complaint under Section 45 of the P.M.L.A. was filed against the petitioner. The Crime Branch charge sheet pursued only offences under Sections 3 and 4 of the Goa, Daman and Diu Public Gambling Act, 1976, and did not press scheduled offences against the petitioner. In these circumstances, continuation of the L.O.C. against the petitioner was unsustainable. The absence of invocation of scheduled offences and the absence of prosecutive action against the petitioner were determinative factors leading to the quashing of the impugned L.O.C. [Paras 11, 12, 16, 28, 31]

Impugned L.O.C. quashed because no prosecution under the P.M.L.A. was initiated against the petitioner and the charge sheet did not allege scheduled offences.

Non-cooperation with investigation - Ministry of Home Affairs guidelines on issuance of L.O.C. - material to support issuance of L.O.C. - Whether the L.O.C. was justified in the absence of material showing non-cooperation or other facts warranting restriction, and whether MHA safeguards were complied with. - HELD THAT: - The respondent admitted issuance of the L.O.C. but did not specify the issuing authority, contents of the L.O.C., or the material basis for it. The affidavit did not allege any instance of non-cooperation by the petitioner; the petitioner had appeared when summoned, had been enlarged on bail, and had complied with court-ordered modifications permitting travel with conditions. The Court noted the MHA Office Memorandum requires reasons be recorded in a prescribed format and that L.O.C. in non-cognizable or non-scheduled matters should not result in detention. Given the lack of supporting material and absence of alleged non-cooperation, the safeguards and requisite material for continuing the L.O.C. were not satisfied. [Paras 18, 19, 20, 21, 28]

L.O.C. could not be sustained in the absence of material showing non-cooperation or other requisite particulars and without compliance with MHA safeguards.

Quashing of Look Out Circular - liberty to reissue L.O.C. upon fresh material - conditional permission to travel subject to advance intimation and undertaking - Relief to be granted on quashing the L.O.C., and whether conditions or liberty to reissue should be ordered. - HELD THAT: - While quashing the impugned L.O.C. for want of material and prosecutive basis, the Court accepted the respondent's submission that liberty to reissue the L.O.C. would remain if further investigation produced material necessitating it. To balance the respondent's investigative interests and the petitioner's liberty, the Court imposed reasonable conditions: the petitioner must intimate travel itinerary at least one week in advance, provide names and addresses of persons to be visited, file an undertaking to return by the specified date, and appear before investigating agencies upon return. These measures preserve the respondent's ability to act on fresh material while removing the existing L.O.C. that lacked current justification. [Paras 29, 30, 31]

Impugned L.O.C. quashed, subject to conditions requiring advance intimation, disclosure of visit details, undertaking to return and to appear before investigating agencies; liberty granted to reissue L.O.C. if new material emerges.

Final Conclusion: The Court allowed the petition and quashed the Look Out Circular dated 04.02.2022 issued against the petitioner for lack of prosecutive basis and supporting material, while permitting the respondent liberty to reissue an L.O.C. upon fresh material; the petitioner was directed to give advance travel intimation, disclose visit particulars, and file an undertaking to return and appear before investigating agencies.

Consideration as essential element of 'service' under Section 65B(44) of the Finance Act, 1994 - taxability under Section 66B of the Finance Act, 1994 requires existence of a provider and flow of consideration - distinction between 'consideration' (existence of service) and 'assessable value' (measure of levy) under Section 67 - issuance of corporate guarantee without consideration not a taxable service

Consideration as essential element of 'service' under Section 65B(44) of the Finance Act, 1994 - issuance of corporate guarantee without consideration not a taxable service - distinction between 'consideration' (existence of service) and 'assessable value' (measure of levy) under Section 67 - Whether issuance of corporate guarantees by the assessee to group companies, without any consideration, constitutes a taxable service. - HELD THAT: - The adjudicating authority found that the assessee did not receive any monetary or non monetary consideration for issuing corporate guarantees to its subsidiaries and that the department had not alleged or proved any benefit flowing to the assessee. The Tribunal upheld that, under the post negative list regime, a taxable service under the Finance Act, 1994 requires both a provider and a flow of consideration; in the absence of consideration, taxability under Section 66B cannot arise. The Tribunal further explained that non monetary benefits may be relevant for determining assessable value under Section 67 but cannot be used to establish the existence of a 'service' where consideration is absent. The Revenue made no effective attempt to rebut the concurrent factual finding of no consideration or to demonstrate that issuance of guarantees, in the factual matrix before the authorities, amounted to a service. Given these concurrent findings of fact and the legal distinction between existence of consideration and subsequent valuation, the Court found no basis to admit the appeal for reconsideration or to disturb the concurrent conclusions. [Paras 4, 5, 6, 7, 8]

Concurrent findings that no consideration was received for issuance of corporate guarantees were affirmed and, therefore, such guarantees, on the facts found, do not constitute a taxable service; the appeal is dismissed.

Final Conclusion: The Supreme Court declined to admit the appeal against concurrent findings in favour of the assessee that issuance of corporate guarantees without consideration was not a taxable service, upheld the Tribunal's reasoning distinguishing consideration from assessable value, and dismissed the civil appeal.

Extended period of limitation under proviso to section 73(1) - suppression of facts with intent to evade - invocation of extended limitation based on third party information - disclosure of value in ST-3 returns

Extended period of limitation under proviso to section 73(1) - suppression of facts with intent to evade - invocation of extended limitation based on third party information - disclosure of value in ST-3 returns - Extended period under proviso to section 73(1) is not invokable for recovery of service tax for the period 01.10.2010 to 30.06.2012. - HELD THAT: - The Tribunal found that the Department was already aware of the nature of the assessee's activities from an earlier show cause notice dated 05.04.2011 issued for an earlier period and related inquiries, and therefore possessed the requisite information to issue proceedings for the period 01.10.2010 to 30.06.2012 within the normal limitation period. The Commissioner relied on third party information and the assertion of non disclosure in ST 3 returns to invoke the proviso to section 73(1), treating non declaration as deliberate suppression. The Tribunal held that where the Department already had the material facts (as evidenced by the earlier show cause notice and related admissions), it could not subsequently shelter behind third party information to justify invoking the extended period. The Commissioner failed to appreciate that the prior knowledge rendered the reliance on third party information and a later inspection inadequate to establish the requisite concealment or that the Department was unaware of the facts. Consequently the invocation of the extended period was held unsustainable and set aside, making examination on merits unnecessary. [Paras 11, 12, 13]

Invocation of the extended period under the proviso to section 73(1) for the period 01.10.2010 to 30.06.2012 is set aside; the demand based on the extended period cannot be sustained.

Final Conclusion: The order dated 24.01.2017 confirming the demand by invoking the extended period of limitation is set aside and the appeal is allowed.

Section 73A - liability where collected service tax is retained - Passing on of tax collected on behalf of another - not retention - Broadcasting services - liability of the broadcaster - Prohibition on double recovery

Section 73A - liability where collected service tax is retained - Passing on of tax collected on behalf of another - not retention - Broadcasting services - liability of the broadcaster - Whether demand under Section 73A could be sustained against the appellant who collected from clients the service tax charged by broadcasters but passed the same to the broadcasters who deposited it with the Government. - HELD THAT: - The Tribunal found the material facts to be undisputed: broadcasters issued invoices to the appellant for broadcasting services and charged service tax; the appellant billed its clients reproducing those amounts and collected from clients the broadcasting charges along with the service tax component; the appellant did not retain the service tax amount but passed it on to the broadcasters. Section 73A is attracted where a person collects and retains an amount representing service tax and fails to pay it to the Central Government. Given that the broadcasters had discharged the service tax liability by depositing the collected amounts with the Government, the appellant had not retained any service tax amount and therefore the statutory provision could not be invoked against it. The Tribunal applied this reasoning to the present appeals, following its earlier order setting aside the originating adjudication, and held that re-imposing the same demand on the appellant would amount to double recovery. Consequently, the impugned orders confirming demand under Section 73A were held unsustainable and set aside. [Paras 5, 6]

Impugned orders confirming demand under Section 73A set aside; appeals allowed.

Final Conclusion: The Tribunal allowed the appeals, holding that Section 73A could not be invoked against the appellant because the service tax collected from clients was passed on to the broadcasters who had deposited it with the Government; the demands were therefore unsustainable and set aside.

Export of service - conditions for export of services under Rule 6A of the Service Tax Rules, 1994 - place of provision of services - Place of Provision of Services Rules, 2012 - Rule 4(a) - Place of Provision of Services Rules, 2012 - Rule 3 - convertible foreign exchange

Export of service - conditions for export of services under Rule 6A of the Service Tax Rules, 1994 - Services rendered by the assessee qualify as export of service under Rule 6A of the Service Tax Rules, 1994. - HELD THAT: - The Court accepted the finding that payments received by the assessee from foreign clients were in convertible foreign exchange and that the assessee satisfied the statutory conditions enumerated in Rule 6A for treating the services as export. The Tribunal's conclusion that the requisite conditions for export of service were fulfilled was upheld. Having found the conditions of Rule 6A met, the services could not be subjected to service tax as they qualified as export of service under the Service Tax Rules. [Paras 8, 10, 11]

Assessee's services are export of service under Rule 6A and are not chargeable to service tax.

Place of provision of services - Place of Provision of Services Rules, 2012 - Rule 4(a) - Place of Provision of Services Rules, 2012 - Rule 3 - Rule 4(a) of the Place of Provision of Services Rules, 2012 does not apply to the assessee's services; the Tribunal correctly treated Rule 3 as applicable for determining place of provision. - HELD THAT: - The Court found the Revenue's reliance on Rule 4(a) unsustainable because that provision requires goods to be made physically available to the provider by the recipient, a circumstance absent in this case. Consequently, the Tribunal's application of the Place of Provision of Services Rules (specifically Rule 3) to conclude that the place of provision lay outside India was correct. The absence of physical delivery of goods by the recipient to the provider was determinative in rejecting the applicability of Rule 4(a). [Paras 9]

Rule 4(a) is not attracted; place of provision is outside India as determined under the PoPS Rules.

Final Conclusion: Appeal dismissed; the CESTAT order dated April 01, 2022 is confirmed, holding the assessee's services to be export of service and not taxable under service tax.

Clean energy cess as duty of excise under Section 83 of the Finance Act, 2010 - Cenvat credit - distinction between tax, cess and fee - quid pro quo - Rule 3 of Cenvat Credit Rules, 2004 - proviso excluding utilisation of Cenvat credit for clean energy cess - application of Central Excise Act provisions to cess

Clean energy cess as duty of excise under Section 83 of the Finance Act, 2010 - Cenvat credit - distinction between tax, cess and fee - quid pro quo - Rule 3 of Cenvat Credit Rules, 2004 - proviso excluding utilisation of Cenvat credit for clean energy cess - Whether the appellant was entitled to Cenvat credit of the clean energy cess paid on coal. - HELD THAT: - The Tribunal applied the established distinction between a tax and a fee, including the requirement of a quid pro quo and the treatment of proceeds (earmarking versus credit to the Consolidated Fund), as discussed in binding precedents. Section 83 levies the Clean Energy Cess for financing and promoting clean energy initiatives and makes the proceeds available for specified purposes, not for general public revenue distribution; further, provisions of the Central Excise Act were made applicable to the cess with modifications. On that basis the earlier Division Bench decision held that notwithstanding the nomenclature, the clean energy cess was in substance a fee earmarked for a specific purpose and not an excise duty or tax entitling the assessee to Cenvat credit. The Tribunal also noted that Rule 3, CCR 2004, applies only where the payment is an excise duty and observed the specific proviso in the notification that Cenvat credit shall not be utilised for payment of clean energy cess. Following the co-ordinate Division Bench precedent, the Tribunal concluded there was no entitlement to Cenvat credit on the clean energy cess and no reason to take a different view. [Paras 5]

The appellant was not entitled to Cenvat credit of the clean energy cess paid; the appeal is dismissed.

Final Conclusion: Following the Tribunal's Division Bench precedential decision, the impugned order disallowing Cenvat credit of the clean energy cess is upheld and the appeal is dismissed.

Cenvat credit on foundation bolts - Capital goods versus inputs - Definition of "inputs" under Rule 2(k) of the Cenvat Credit Rules, 2004 - Supplier's classification and buyer's entitlement to credit - Limitation and suppression - ER-1 returns as disclosure

Cenvat credit on foundation bolts - Capital goods versus inputs - Definition of "inputs" under Rule 2(k) of the Cenvat Credit Rules, 2004 - Supplier's classification and buyer's entitlement to credit - Entitlement to Cenvat credit on foundation bolts used in the factory - HELD THAT: - The Tribunal found that the foundation bolts were received and used in the appellant's factory in the manufacture of dutiable goods. The vendor had classified the goods under CET 8455 and the appellant had treated them as capital goods, availing credit in two installments. Independently, the Tribunal relied on the definition of "inputs" in Rule 2(k) of the Cenvat Credit Rules, 2004 as it stood at the material time, which treats any item used in or in relation to manufacturing activity, directly or indirectly, as eligible for Cenvat credit. The Tribunal also followed its prior decision in CCE, BBSR-II Vs. A.C.C. Limited , which upheld eligibility of credit for foundation bolts, and noted reliance thereon upon Reliance Industry Vs. CCE . Applying these principles, the Tribunal concluded that the credit taken was permissible and set aside the order-in-appeal on merits. [Paras 6, 7]

The Cenvat credit taken on foundation bolts was allowable and the order denying credit was set aside on merits.

Limitation and suppression - ER-1 returns as disclosure - Extended period demand - Sustainability of the confirmed demand for the extended period in view of disclosure in ER-1 returns - HELD THAT: - The Tribunal recorded that the appellant had disclosed the Cenvat credit taken for the foundation bolts in their ER-1 returns for 2007 and 2008 and had produced RG-23C records reflecting the credit. Given these disclosures, the Department's allegation of suppression was held unsustainable. The Show Cause Notice issued on 27/04/2011 seeking recovery for credits taken in 2007 and 2008 could not be maintained for the extended period where there was no suppression, and therefore the confirmed demand for the extended period was held legally not sustainable. [Paras 8]

The demand for the extended period was unsustainable as there was no suppression; disclosure in ER-1 and records precluded invoking extended period.

Final Conclusion: The appeal is allowed: the denial of Cenvat credit on foundation bolts is set aside on merits, and the confirmed demand for the extended period is quashed because the credit was disclosed in ER-1 returns and there was no suppression; consequential relief follows.

Determination of taxable turnover in works contracts - computation of tax where dealer has not separately realised tax - application of Section 4(3) of the VAT Act vis-a -vis Rule 9 - deduction for goods brought into State under Rule 9(1)(e) - proviso to Rule 8(ix) and interplay with Rule 9

Computation of tax where dealer has not separately realised tax - application of Section 4(3) of the VAT Act vis-a -vis Rule 9 - proviso to Rule 8(ix) and interplay with Rule 9 - Whether tax on turnover must be computed under Section 4(3) of the VAT Act even where Rule 9 governs determination of taxable turnover in works contracts. - HELD THAT: - Section 4 is the charging provision and Sub section (3) prescribes the formula for computing tax where a dealer has not realised tax separately. Rule 8(ix) contains a similar formula but its proviso directs that turnover in works contracts shall be determined in the manner provided under Rules 9 and 10. Rule 9, however, is a provision to determine taxable turnover in works contracts and specifies deductions (including labour, services and inter state goods) from the gross amount received. The Tribunal's conclusion that Section 4(3) is inapplicable and that computation cannot be done under Section 4(3) is inconsistent with a harmonious reading of Section 4(3), Rule 8 and Rule 9. Rule 9 supplies deductions relevant to determining taxable turnover in works contracts but does not oust the charging or computation mechanism under Section 4(3). The Court therefore held that tax liability must be computed under Section 4(3) while applying the deductions permissible under Rule 9. [Paras 27, 28]

Tribunal's finding of non-applicability of Section 4(3) is set aside; tax on turnover must be computed as per Section 4(3) read with Rule 8 and having regard to deductions under Rule 9.

Determination of taxable turnover in works contracts - deduction for goods brought into State under Rule 9(1)(e) - Whether amounts representing the value of goods brought into the State and transferred in the execution of works contract as a result of sale in the course of inter State trade are deductible under Rule 9(1)(e). - HELD THAT: - Rule 9(1)(e) expressly permits deduction of amounts representing the value of goods in which property has been transferred in execution of a works contract as a result of sale in the course of inter State trade or commerce. Transactions of bringing goods from outside U.P. fall within the ambit of sections of the Central Sales Tax Act and, read with Rule 9(1)(e), such ex U.P. purchases are deductible from the gross amount received or receivable for the purposes of determining taxable turnover. The Tribunal correctly extended the benefit of Rule 9(1)(e) to the dealer; that benefit is to be preserved. [Paras 16, 22, 23]

Benefit under Rule 9(1)(e) for deduction of value of goods brought into the State and transferred in execution of works contract is available to the dealer and is to be allowed.

Computation of tax where dealer has not separately realised tax - determination of taxable turnover in works contracts - Remand for computation of tax component after declaring applicable legal principles. - HELD THAT: - Having held that tax is to be computed under Section 4(3) while allowing deductions under Rule 9(1)(e), the matter requires numerical computation of the tax component applying the Section 4(3) formula to the taxable turnover remaining after permitted deductions (including Rule 9(3) adjustments). The Court did not compute quantification itself but remitted the matter to the Tribunal for execution of this computation in light of the legal conclusions reached. [Paras 30]

Matter remitted to the Tribunal to compute the tax component as per Section 4(3) while giving the benefit under Rule 9(1)(e).

Final Conclusion: The Tribunal's conclusion that Section 4(3) of the VAT Act does not apply was set aside. The dealer is entitled to the deduction under Rule 9(1)(e) for goods brought into the State, but tax on turnover must be computed under Section 4(3) (with Rule 8's proviso and Rule 9's deductions applied). Revisions filed by the dealer are allowed to that extent; the revenue's revisions challenging the Rule 9(1)(e) benefit are dismissed. The case is remitted to the Tribunal for computation of tax in accordance with these determinations.

Transfer of property in goods - works contract - jurisdictional fact - input tax credit - judicial review - alternate statutory remedy

Transfer of property in goods - works contract - jurisdictional fact - Whether the assessing authority validly treated the BOO agreement as a works contract by holding that there was transfer of property in the plant/goods and thereby taxed the supply at works contract rate. - HELD THAT: - The Court found that the agreement expressly contemplated that the Production Plant would remain the property of the BOO operator during the term and thereafter unless transferred in accordance with the contract, and that BPCL only had a right of first refusal on termination. The taxable event under the KVAT scheme is not merely execution of construction/installation activity but the transfer of property in the goods involved in such execution. The assessing authority and the intelligence officer wrongly equated recovery of investment through fixed monthly charges with a concealed transfer of the plant and thus assumed the jurisdictional fact necessary to invoke taxation as a works contract. Such an erroneous finding of a jurisdictional fact amounts to usurpation of jurisdiction and is amenable to writ review. The manner of pricing or recoupment of investment could not convert a contract for supply (with BOO ownership) into a works contract involving transfer of property. [Paras 16, 17]

The findings treating the transaction as a works contract were set aside; the assessment orders for 2015-16, 2016-17 and 2017-18 (save as to input tax credit issues) and the penalty orders for 2016-17 and 2017-18 were quashed.

Input tax credit - natural justice - Whether the denial of input tax credit on capital goods (in particular for assessment year 2017-18) was sustainable and whether that aspect required fresh consideration. - HELD THAT: - The Court observed that the order impugned in W.A.No.73/2022 denying input tax credit on capital goods was not free from infirmity and, in any event, the adjudicating authority must reconsider the claim in light of the Court's observations. The High Court set aside the portion of the assessment order that refused credit on the ground that ownership did not belong to the appellant and directed the adjudicating authority to decide the issue afresh. For the other assessment years, the appellant was permitted to pursue the input-credit issue before the statutory appellate forum.

Order denying input tax credit for AY 2017-18 set aside and the matter remitted to the adjudicating authority for fresh consideration in the light of this judgment; appellant permitted to agitate input-credit claims for other years before the appellate authority.

Judicial review - alternate statutory remedy - jurisdictional fact - Whether the High Court was justified in entertaining the writ petitions though alternate remedies under the KVAT Act were available. - HELD THAT: - The Court analysed the scope of writ jurisdiction and the distinction between cases that are not maintainable and cases which, though maintainable, are better left to specialised fora. It reiterated that where the decision under challenge rests on an erroneous finding of a jurisdictional fact (or involves violation of fundamental procedural norms), writ relief is permissible notwithstanding the existence of alternate remedies. Given that the assessing authority had assumed a jurisdictional fact it did not possess by treating the contract as one effecting transfer of property, the Court held it appropriate to exercise writ jurisdiction and set aside the impugned orders. [Paras 11, 12, 16]

The High Court properly exercised its discretion to entertain the writ petitions and intervened in the orders that were founded on an erroneous jurisdictional finding.

Procedural direction - show cause notice - Whether the appellant should be permitted to file a reply to the show cause notice issued for assessment year 2014-15 so that assessment may be completed in accordance with the Court's observations. - HELD THAT: - In view of the quashing of the impugned approach to treating the agreement as a works contract and the Court's directions to reconsider input-credit claims, the appellant was granted an opportunity to file a reply to the pending show cause notice, enabling the assessing authority to complete assessment for 2014-15 in accordance with the observations and directions in this judgment.

Appellant permitted to file reply to the show cause notice for AY 2014-15 and the assessing authority directed to complete assessment in light of this judgment.

Final Conclusion: Writ appeals allowed: the High Court judgments below set aside; assessment orders for 2015-16 to 2017-18 (except aspects relating to input tax credit) and penalty orders for 2016-17 and 2017-18 quashed; denial of input tax credit for AY 2017-18 set aside and remitted for fresh consideration; appellant permitted to pursue input-credit issues for other years before appellate authorities and to file reply to the show cause notice for 2014-15.

Principles of natural justice / fair opportunity to be heard - reassessment under the Karnataka Value Added Tax Act, 2003 - assessment based on third party information and entitlement to challenge such material - remand for fresh consideration with opportunity to file detailed response - request for cross examination of witnesses relied upon by assessing authority

Principles of natural justice / fair opportunity to be heard - reassessment under the Karnataka Value Added Tax Act, 2003 - remand for fresh consideration with opportunity to file detailed response - Validity of reassessment orders impugned as being passed without affording a fair and complete opportunity to the assessee. - HELD THAT: - The Court found on the undisputed facts that although the assessing authority had issued Call Notices and Proposition Notices and had allowed inspection and photocopying of voluminous third party documents on 17.02.2023, the petitioner sought further time to file detailed replies on 27.02.2023 and 28.02.2023. The request for extension was made before the expiry of the time allowed by the endorsement dated 17.02.2023 and the petitioner's representatives attended the office to file requests. In these circumstances, and having regard to the volume and third party nature of the material, the Court held that the request for further time should have been considered and that the reassessment orders dated 27.02.2023 were therefore framed in breach of the principles of natural justice. The Court interfered, quashed the impugned reassessments and restored the proceedings to the assessing authority for reconsideration, directing that the petitioner be permitted to file detailed responses and be afforded such further opportunity as may be permissible in law. [Paras 11, 12, 14]

Impugned reassessment orders dated 27.02.2023 quashed and corresponding proceedings restored for reconsideration with opportunity to file detailed response.

Assessment based on third party information and entitlement to challenge such material - request for cross examination of witnesses relied upon by assessing authority - remand for fresh consideration - Whether the petitioner's request to cross examine persons whose statements were relied upon should be considered on remand. - HELD THAT: - The Court acknowledged the petitioner's submission that when an assessment is anchored on information gathered from third parties, the assessee may be entitled to test such material, including by seeking cross examination of witnesses. Rather than determining the legal entitlement conclusively, the Court directed that on restoration the assessing authority shall consider the petitioner's request for cross examination and decide it in accordance with law. The matter of whether cross examination is permissible and, if so, to what extent, is left to the authority to examine during reconsideration. [Paras 8, 12, 14]

Request for cross examination to be considered afresh by the assessing authority in accordance with law upon restoration of proceedings.

Final Conclusion: Petitions allowed; reassessment orders dated 27.02.2023 for the specified tax periods quashed and proceedings restored to the respondent for reconsideration. The petitioner may appear and file detailed responses (and have its request for cross examination considered) as directed; other contentions including limitation are left open for determination by the authority on remand or in appropriate proceedings.

Validity of reassessment under Section 22(1) without a prior assessment under Section 21(1) - Disallowance of Input Tax Rebate where suppliers are alleged bogus dealers - Availability of statutory alternative remedy under Section 55 and maintainability of writ jurisdiction - Binding effect of Division Bench precedent

Validity of reassessment under Section 22(1) without a prior assessment under Section 21(1) - Re assessment initiated under Section 22(1) was invalid in the absence of any earlier assessment under Section 21(1). - HELD THAT: - The Court held that the Assistant Commissioner could not lawfully invoke re assessment powers under Section 22(1) where there was no assessment order passed earlier as required by the scheme of the Act. The deemed assessment relied upon by the petitioner could not be treated as an assessment order for purposes of invoking re assessment. The determinative legal basis for quashing the impugned orders was the absence of a prior assessment, rendering the re assessment proceedings and subsequent appellate and tribunal orders unsustainable. [Paras 6, 15, 16]

The reassessment order dated 26.03.2016, the appellate order dated 14.12.2017 and the Tribunal order dated 01.09.2021 were set aside because re assessment under Section 22(1) could not be validly initiated without an earlier assessment under Section 21(1).

Availability of statutory alternative remedy under Section 55 and maintainability of writ jurisdiction - Binding effect of Division Bench precedent - Writ petitions were maintainable despite the existence of a statutory remedy of reference under Section 55 and delay in preferring that remedy, having regard to binding Division Bench decisions on the same legal question. - HELD THAT: - Although the State pointed to the alternative remedy of reference under Section 55 and contended that the petitioner had not availed it within the prescribed period, the Court found that the legal issue raised by the petitioner was squarely covered by earlier Division Bench decisions (said decisions being under challenge in the Supreme Court but without any interim stay). In those circumstances the Court considered relegation to the statutory remedy inappropriate and exercised writ jurisdiction to decide the legal question. The Court therefore declined to refuse relief on the grounds of availability of an alternative remedy or delay. [Paras 9, 11, 12, 13, 14]

The writ petitions were entertained and allowed notwithstanding the existence of the statutory remedy of reference and the delay in invoking it, because the point was covered by binding Division Bench precedent.

Final Conclusion: Both writ petitions were allowed: the reassessment order, the appellate order and the Tribunal order were quashed on the ground that re assessment under Section 22(1) could not be initiated in the absence of a prior assessment under Section 21(1); the petitions were entertained despite the availability of a statutory reference remedy because the legal question was covered by Division Bench precedent.

Compounding of offence under the Negotiable Instruments Act - Section 147 NI Act and its non-obstante clause - Applicability of Section 320 CrPC to compounding - Quashing of conviction and acquittal upon compromise - Imposition and reduction of compounding fee

Compounding of offence under the Negotiable Instruments Act - Section 147 NI Act and its non-obstante clause - Quashing of conviction and acquittal upon compromise - Permission to compound the offence under Section 138 of the Negotiable Instruments Act and consequent quashing of conviction and sentence. - HELD THAT: - The Court accepted the joint application and recorded statements of the authorised representative of the complainant-Bank and the petitioner-accused that a compromise had been effected and that the bank had issued a No Objection Certificate. The Court applied the enabling provision of Section 147 of the Negotiable Instruments Act, recognising its non-obstante effect and its interaction with Section 320 Cr.P.C., and relied on the principles in Damodar S. Prabhu vs. Sayed Babalal H. and K. Subramanian vs. R. Rajathi to hold that compounding may be permitted even after recording of conviction where compromise has been effected. In view of the compromise and payment of the compensation, the Court found no impediment to exercise of its power under Section 147 to allow compounding and to set aside the conviction and sentence. [Paras 5, 6, 8, 9, 10]

The offence is compounded; the judgment of conviction dated 21.02.2019 and order of sentence dated 26.02.2019 and the appellate judgment dated 16.06.2022 are quashed and set aside and the petitioner is acquitted of the charge under Section 138 of the Act; bail bonds, if any, stand discharged.

Imposition and reduction of compounding fee - Guidelines for graded compounding costs - Imposition of compounding fee and reduction of the prescribed scale having regard to the financial condition of the accused. - HELD THAT: - The Court noted the graded scheme of costs indicated in K. Subramanian vs. R. Rajathi and observed that the competent court has discretion to reduce the compounding fee for specific facts and record reasons for variance. Taking into account the petitioner's stated poor financial condition and the Court's power to moderate costs, the Court directed payment of a token compounding fee as a condition of compounding and recorded that the fee should be deposited with the H.P. State Legal Services Authority. [Paras 11, 12, 13]

Petitioner directed to deposit a token compounding fee of Rs.5,000/- with the H.P. State Legal Services Authority within four weeks.

Release of deposit after compounding - Release of amounts deposited after conviction upon compounding of the offence. - HELD THAT: - The Court recorded that an amount had been deposited by the petitioner before the trial court after conviction. Since the matter has been compounded, the Court held that the deposited amount may be released to the petitioner upon making the appropriate prayer to the trial court and directed that the amount be released in accordance with that procedure. [Paras 14]

The deposited amount of Rs.78,000/- shall be released in favour of the petitioner by the learned Additional Chief Judicial Magistrate, Nalagarh, upon a prayer being made in that Court.

Final Conclusion: The High Court allowed the petition and, exercising powers under Section 147 of the Negotiable Instruments Act, permitted compounding of the offence upon compromise; the conviction and sentence were quashed and the petitioner acquitted, subject to payment of a token compounding fee and release of the deposited amount on application to the trial Court.

Public authority - third party information - Section 11 procedure - exemptions under Section 8 - information relating to a private body accessible to public authority

Public authority - information relating to a private body accessible to public authority - Whether a private unaided educational institution (the petitioner college) is a 'public authority' under the RTI Act. - HELD THAT: - The Court followed Supreme Court precedents holding that private unaided educational institutions do not, by virtue of being private or by mere regulatory supervision/recognition, ordinarily fall within the definition of 'public authority'. The expression 'controlled' in the statutory test requires substantial control over management and affairs and not mere regulatory supervision. Accordingly, private unaided institutions are generally not 'public authorities' under Section 2(h), although each case depends on the degree of ownership, control or substantial financing by the appropriate Government. The Court therefore treated the petitioner as not constituting a public authority while recognising the established caveat that information concerning private bodies may nevertheless be accessible to the public if it is held by or accessible to a public authority under law. [Paras 23, 24]

The petitioner college is not to be treated as a 'public authority' under the RTI Act on the facts and authorities discussed, subject to the caveat that information of a private body held by a public authority may be accessible under law.

Third party information - Section 11 procedure - exemptions under Section 8 - Whether the Central Information Commission's direction for inspection could stand where the procedure mandated by Section 11 (for disclosure of third party information) was not followed. - HELD THAT: - Section 11 governs disclosure of information relating to a third party (which includes private bodies) that is held by a public authority: the public information officer must give notice to the third party, invite submissions, and decide within the prescribed time, applying the exemptions under Section 8 where relevant. Precedents (including Poorna Prajna and subsequent decisions) confirm that even where a private institution is not a 'public authority', information in a public authority's possession or legally accessible to it may be disclosed only after compliance with Section 11 safeguards and consideration of Section 8 exemptions. In the present case the CIC disposed of the appeals without issuing the notice and without affording the procedural protections to the petitioner envisaged by Section 11; accordingly the order was procedurally flawed and could not be sustained. [Paras 32, 33, 34, 35, 36]

The impugned order was set aside because the disclosure/inspection direction was made without complying with the Section 11 procedure and without applying the Section 8 considerations; any renewed request must be dealt with in accordance with law and the safeguards of Section 11.

Final Conclusion: The writ petition is allowed: the CIC's order is set aside for failure to comply with the Section 11 procedure in respect of third party (private institution) information; the petitioner is not held to be a 'public authority' on the facts, and any future request must be processed by the public information officer in accordance with Section 11 and Section 8 of the RTI Act.