TaxTMI Updates e-Newsletter
Apr 10,2015

Exclusion under section 10 versus exemption under section 11 - Income from property held for charitable purposes - Computation of total income and effect of prior exclusions - Accumulation and application under section 11(2) - remand unnecessary where factual materials are on record

Exclusion under section 10 versus exemption under section 11 - Income from property held for charitable purposes - Computation of total income and effect of prior exclusions - Whether dividend income and long-term capital gains claimed by the assessee-trust could be excluded under the provisions of Chapter III (section 10) or were required to be dealt with only under section 11 as income from property held for charitable purposes. - HELD THAT: - The Court held that the language of sections dealing with incomes not forming part of total income and income from property held for charitable or religious purposes is plain. Section 10 provides for certain incomes to be excluded from computation of total income; section 11 addresses income derived by a person from property held for charitable purposes and the extent of its exemption. Nothing in the statutory text requires that an income excluded under section 10 must nevertheless be treated as includible for the purpose of applying section 11. Accepting the Revenue's contention would amount to reading into the provisions a restriction which is not present. The Tribunal correctly set aside the concurrent findings of the Assessing Officer and the Commissioner that the assessee could not claim the benefit of section 10 and must instead claim under section 11; the Tribunal's interpretation was not perverse or vitiated by error of law. [Paras 8, 9, 11]

Tribunal's conclusion that the assessee could avail exclusions under section 10 and that such excluded incomes were not to be treated as governed exclusively by section 11 is upheld; no substantial question of law arises.

Accumulation and application under section 11(2) - remand unnecessary where factual materials are on record - Income from property held for charitable purposes - Whether the Tribunal erred in setting aside the Commissioner's direction to remit the matter to the Assessing Officer to verify utilisation of accumulated funds under section 11(2), or whether remand was unnecessary because facts were already on record. - HELD THAT: - The Court observed that the Tribunal found all factual material necessary for adjudication to have been placed before the Commissioner and the Tribunal, and that the Commissioner's direction for verification by the Assessing Officer was therefore unnecessary. The Tribunal's interference with the Commissioner's remand was upheld as it was based on the conclusion that the accumulated amount had been spent in the relevant period and there was no dispute on facts requiring further enquiry. This factual conclusion did not give rise to a substantial question of law. [Paras 6, 7, 10]

Tribunal correctly interfered with the Commissioner's direction for remand; no substantial question of law arises from that interference.

Final Conclusion: The Tribunal's order is upheld; the Revenue's appeal is dismissed and no substantial question of law is made out. No order as to costs.

Reopening of assessment - issuance of notice under Section 148 - sanction under proviso to Section 151(1) - reason to believe - Section 292B not a cure for lack of jurisdictional sanction

Sanction under proviso to Section 151(1) - issuance of notice under Section 148 - reopening of assessment - Section 292B not a cure for lack of jurisdictional sanction - Validity of reassessment proceedings where sanction for issuance of notice under the proviso to Section 151(1) was obtained from Joint Commissioner instead of the Commissioner/Chief Commissioner and whether such defect is curable under Section 292B of the Income tax Act. - HELD THAT: - The court examined the proviso to sub section (1) of Section 151 which, for notices issued beyond four years from the end of the relevant assessment year, mandates that the Commissioner or Chief Commissioner must be satisfied and record sanction before a notice under Section 148 may be issued. In the present case the sanction relied upon was granted by the Joint Commissioner. Earlier High Court decisions (including Reliable Finhold Ltd., H.M. Constructions and Dr. Shashi Kant Garg) and the principle articulated in CIT v. SPL's Siddhartha Limited were applied to hold that when a particular authority is designated to record satisfaction, that authority alone must apply independent mind; satisfaction cannot be borrowed or treated as an irregularity curable by Section 292B. The attempt by the assessing officer to rely on inadvertent oversight and to invoke Section 292B to validate the action was rejected because the lack of the prescribed jurisdictional sanction is a jurisdictional defect affecting the correctness of the notice itself and is not amenable to rectification under Section 292B.

Reassessment proceedings held invalid because sanction was not granted by the Commissioner/Chief Commissioner as required by the proviso to Section 151(1); defect is jurisdictional and not curable under Section 292B.

Issuance of notice under Section 148 - quashing of reassessment notice - Relief to be granted consequent to the invalidity of the notice and the order rejecting objections. - HELD THAT: - Having found the jurisdictional sanction absent and the consequent invalidity of proceedings under Section 148, the court considered the appropriate relief. In view of the defect going to the competence for issuing the notice, the court concluded that the impugned notice dated 27.03.2014 and the order rejecting objections dated 15.01.2015 could not stand and required quashing. No remand for fresh sanction was ordered; the proceedings themselves were set aside.

Impugned notice under Section 148 dated 27.03.2014 and the order dated 15.01.2015 rejecting objections are quashed and set aside.

Final Conclusion: Writ petition allowed; reassessment notice dated 27.03.2014 and the order dated 15.01.2015 are quashed because the mandatory sanction required by the proviso to Section 151(1) was not granted by the Commissioner/Chief Commissioner and the defect is not curable under Section 292B.

Genuineness of activities - registration under Section 12AA of the Income tax Act - withdrawal/cancellation of registration - accommodation entries / bogus purchases - satisfaction of the Commissioner before cancellation - application of receipts and expenditure test under Section 11(1) - mere apprehension insufficient to deny or withdraw registration - reliance on statements of third parties for cancelling registration

Genuineness of activities - registration under Section 12AA of the Income tax Act - accommodation entries / bogus purchases - reliance on statements of third parties for cancelling registration - Validity of the Commissioner's order withdrawing the assessee society's registration w.e.f. assessment year 2004 05 on the basis that funds were siphoned off by debiting bogus software purchases from a bogus supplier. - HELD THAT: - The Court accepted the Tribunal's finding that the assessee was running a large number of educational institutions and was carrying out its objects. The Commissioner's cancellation rested primarily on the statement attributed to the operator of the alleged bogus supplier and on the presence of bogus bills in books; the Court held that mere reliance on such material and apprehension of misuse, without displacing the concurrent findings about the assessee's genuine educational activities, did not justify cancelling a registration granted after enquiries. The Tribunal had noted substantial expenditure in furtherance of educational activities (expenditure percentage exceeding the statutory threshold) and absence of any finding that the institutions were not imparting education. On these facts the cancellation was held to be unwarranted and rightly set aside.

Order of the Tribunal setting aside the Commissioner's cancellation of registration w.e.f. AY 2004 05 is upheld; the Commissioner was not justified in withdrawing registration on the basis relied upon.

Satisfaction of the Commissioner before cancellation - application of receipts and expenditure test under Section 11(1) - mere apprehension insufficient to deny or withdraw registration - Whether the Commissioner was required to be satisfied not only about the objects and main activity but also about the genuineness of all activities of the institution before granting or withdrawing registration, and whether the assessee met the expenditure test. - HELD THAT: - The Court reiterated that Section 12AA requires the activities of the institution to be genuine and in consonance with its objects, but mere suspicion or apprehension of misuse of income is not a ground for refusing or withdrawing registration where activities are real and sincere. The Tribunal's finding that the assessee incurred a high percentage of its receipts on educational activities (exceeding the statutory benchmark) and that no finding was recorded that the institutions were not imparting education was material and determinative. Thus, the Commissioner's exercise under Section 12AA(3) could not be sustained on the record before him.

The Commissioner's cancellation was unsustainable; the assessee's activities were genuine and met the applicable expenditure test, so registration should not have been withdrawn.

Final Conclusion: Both income tax appeals by the Revenue are dismissed; the Tribunal's order setting aside the Commissioner's withdrawal of registration w.e.f. AY 2004 05 is affirmed, on the view that the assessee's educational activities were genuine and the cancellation was not justified on the material relied upon.

Reopening of assessment under Section 147 - reason to believe - change of opinion - tangible material to justify reopening - disclosure of material in return and assessment proceedings - assessing officer's consideration of material - transfer pricing officer's consideration

Disclosure of material in return and assessment proceedings - assessing officer's consideration of material - transfer pricing officer's consideration - Whether the payment of royalty and related particulars were disclosed to and taken into consideration by the Assessing Officer and the Transfer Pricing Officer in the assessment for AY 2006-07. - HELD THAT: - The Court found that the petitioner had expressly disclosed the royalty payment in the return and appended schedules (including Schedule 13 and Schedule 14) and had filed tax audit particulars, Form 3CEB and Enclosures detailing royalty and technical fees. The Transfer Pricing Officer's reference and order expressly noted the royalty transaction, and the Assessing Officer had issued a pre-assessment questionnaire seeking documentary proof of royalty and TDS particulars, to which the petitioner replied with the agreements and reconciliations. On this factual matrix the Court held that relevant facts were not only disclosed but were called for and considered at every stage by both the Assessing Officer and the Transfer Pricing Officer, distinguishing the case from authorities where non-disclosure or non-consideration was found. [Paras 9, 10, 11, 12, 16]

The Court held that the royalty payments and related particulars were disclosed and were considered by the Assessing Officer and the Transfer Pricing Officer in the assessment proceedings.

Reopening of assessment under Section 147 - reason to believe - change of opinion - tangible material to justify reopening - Whether the notice issued under Section 148 read with Section 147 reopening the assessment for AY 2006-07 was valid or amounted to an impermissible change of opinion. - HELD THAT: - Having found that the material regarding royalty was disclosed and considered during the original assessment, the Court concluded that the impugned reopening was based on nothing more than a change of opinion. The Court applied the principle that post-Amendment reopening under Section 147 requires 'reason to believe' supported by tangible material and a live link between reasons and the formation of belief, as articulated in the cited precedent relied upon by the Court. The Court distinguished the Division Bench decision invoked by respondents on its facts, observing that mere absence of a reference in the assessment order does not automatically imply non-consideration where the material was otherwise before the authorities. [Paras 13, 14, 17]

The Court held that the reopening notice and consequential order were founded on change of opinion and were therefore invalid; the notice and order were quashed.

Final Conclusion: The writ petition was allowed: the notice dated 23/24.3.2011 under Sections 147/148 and the order dated 9/12.12.2011 dismissing objections were quashed on the ground that the royalty payments had been disclosed and considered and the reopening amounted to an impermissible change of opinion; no order as to costs.

Special computation under Section 44BB - Inclusion of amounts received outside India in computing income under Section 44BB - Scope of non-obstante clause in special computation provisions - Interaction between charging provisions and special computation provisions (Sections 4 and 5 vis-a -vis Section 44BB) - Right to elect regular assessment under sub-section (3) of Section 44BB by maintaining books and audit

Special computation under Section 44BB - Scope of non-obstante clause in special computation provisions - Construction of Section 44BB and whether its special scheme displaces the ordinary charging/assessment regime for the specified non-resident activities. - HELD THAT: - The Court held that Section 44BB is a special statutory mechanism for computing profits of a non-resident engaged in specified activities, operating by a non-obstante clause limited to sections 28 to 41 and 43 & 43A. The provision prescribes pre ordained criteria for computation and may be availed of by the non-resident in lieu of the regular assessment mechanism. The non obstante clause, though confined in terms, creates a distinct scheme for computation which the assessee may elect; alternatively the assessee may submit to ordinary provisions by complying with sub section (3) (books, audit and claim of lower profits). The Court rejected the contention that Sections 4 and 5 (charging provisions) prevent application of the special computation under Section 44BB, observing that the statute itself contemplates inclusion of specified amounts for computing income under Section 44BB. [Paras 7]

Section 44BB's special computation scheme applies as a statutory mechanism and its non obstante clause supports, not conflicts with, the special mode of computation for the non-resident activities specified therein.

Inclusion of amounts received outside India in computing income under Section 44BB - Interaction between charging provisions and special computation provisions (Sections 4 and 5 vis-a -vis Section 44BB) - Whether mobilization/demobilization fees received outside India must be included in the aggregate under sub section (2) of Section 44BB for computing the deemed 10% profits. - HELD THAT: - The Court examined sub section (2) of Section 44BB and concluded that the statutory text expressly requires inclusion of amounts received or payable 'whether in or out of India' (clause (a)) and amounts received or deemed to be received in India on account of provision of services outside India (clause (b)) when calculating the aggregate for the deemed profits. Consequently, mobilization advance received outside India falls within the amounts to be reckoned under Section 44BB. The Court further held that the territorial nexus requirements in Section 5(2) do not preclude application of Section 44BB's express inclusionary rules. [Paras 7]

The mobilization/demobilization fees received outside India are includible in the aggregate under sub section (2) of Section 44BB for computing the deemed profits.

Special computation under Section 44BB - Inclusion of amounts received outside India in computing income under Section 44BB - Whether the Tribunal's findings on the applicability of Section 44BB and inclusion of the mobilization advance were perverse. - HELD THAT: - Having construed Section 44BB to require inclusion of the specified amounts irrespective of receipt within India, and having rejected the contention that charging provisions in Section 4 or territorial tests in Section 5 bar such inclusion, the Court found no basis to characterise the Tribunal's conclusion as perverse. The statutory language and scheme support the conclusion reached by the authorities and the Tribunal. [Paras 8]

The Tribunal's findings are not perverse; there is no merit in the challenge to its conclusion.

Final Conclusion: The appeal is dismissed; the High Court affirms that Section 44BB constitutes a special computation scheme under which amounts received or payable (including mobilization advance outside India) are to be included for computing deemed profits, and the Tribunal's conclusions are upheld.

Territorial jurisdiction - situs of the Assessing Officer - jurisdiction to entertain appeals under Section 260A - effect of succession/merger on assessment liability under Section 170 - transfer of cases under Section 127 does not alter territorial jurisdiction - binding effect of a High Court's decision within its territorial limits

Territorial jurisdiction - situs of the Assessing Officer - jurisdiction to entertain appeals under Section 260A - Whether the Punjab & Haryana High Court has territorial jurisdiction to entertain the Revenue's appeal under Section 260A against the Tribunal's order in respect of an assessment made by the Assessing Officer at Bangalore. - HELD THAT: - The Court upheld the preliminary objection that it lacked territorial jurisdiction. It followed the reasoning in the Division Bench decision in Commissioner of Income Tax v. Motorola India Ltd., that the High Court which exercises territorial jurisdiction over the situs of the Assessing Officer is the competent forum to determine questions of law arising from that assessment, and that decisions of one High Court do not bind courts outside its territorial jurisdiction. The Court rejected the Revenue's contention that subsequent changes in the Assessing Officer or transfer of records could confer jurisdiction on this Court. It held that permitting the Revenue to invoke a different High Court would enable avoidance of inconvenient law laid down by the jurisdictional High Court and would produce anomalies.

Preliminary objection sustained; this Court has no territorial jurisdiction to entertain the appeal against an order arising from an assessment made by the Assessing Officer at Bangalore.

Effect of succession/merger on assessment liability under Section 170 - transfer of cases under Section 127 does not alter territorial jurisdiction - Whether the merger/succession of the original assessed company into the respondent and subsequent changes confer jurisdiction on this Court to continue the Revenue's appeal. - HELD THAT: - The Court applied Section 170 to hold that the predecessor (Motorola India Electronics Ltd.) remained liable for the income of the previous year up to the date of succession and that the assessment made on 27.03.2006 belonged to the predecessor whose Assessing Officer was at Bangalore. Consequently, the subsequent merger and any later change in the Assessing Officer did not confer jurisdiction on this Court to adjudicate the lis. The Court also observed that transfer provisions under Section 127, dealing with administrative transfer of cases, do not affect the territorial jurisdiction of High Courts to entertain appeals arising from assessments made at another situs.

The merger/succession did not vest jurisdiction in this Court; the jurisdiction remains with the High Court territorially competent over the situs of the Assessing Officer who made the assessment.

Final Conclusion: The appeal is dismissed as not maintainable for want of territorial jurisdiction; the matter is returned to the Revenue to be filed before the competent High Court having jurisdiction over the Assessing Officer at Bangalore in accordance with law.

Deduction under Section 10A of the Income Tax Act - tax holiday for profits from export of computer software - conversion of an existing unit into an STP/STPI unit - applicability of CBDT Circular No.1 of 2005 to Section 10A - commencement of tax holiday from the year in which exports begin

Deduction under Section 10A of the Income Tax Act - conversion of an existing unit into an STP/STPI unit - applicability of CBDT Circular No.1 of 2005 to Section 10A - commencement of tax holiday from the year in which exports begin - Whether the assessee was entitled to claim deduction under Section 10A for AY 2003-04 when an existing company converted its unit into an STP unit and exports commenced only after STP registration. - HELD THAT: - The Court accepted the factual finding that the STP unit was registered on 16.10.2002 and that no export of computer software occurred prior to that date, with invoices on record establishing commencement of exports only after registration. The purpose of the STP/STPI scheme to encourage exports and repatriation of foreign exchange permits conversion of an existing DTA unit into an STP unit, and that conversion must be recognised for tax purposes. CBDT Circular No.1 of 2005, though framed in the context of Section 10B, was held to furnish a ratio applicable equally to Section 10A; consequently the Tribunal and the Appellate Authority were justified in extending the benefit of Section 10A to the assessee. The Court further relied on this Court's earlier decision in Commissioner of Income Tax v. Expert Outsource (P) Ltd. upholding similar treatment. In view of these legal and factual findings, there was no illegality in the concurrent conclusions of the lower authorities that the assessee was entitled to the tax holiday under Section 10A for the period in question. [Paras 5, 6, 7]

The deduction under Section 10A was rightly allowed to the assessee; the Tribunal's order upholding the Appellate Authority is affirmed.

Final Conclusion: Appeal dismissed; no substantial question of law arises and the entitlement to deduction under Section 10A as held by the Appellate Authority and Tribunal is upheld.

Exemption/approval under Section 10(23C)(vi) of the Income Tax Act - fresh decision on merits on remand - reconsideration of limitation when earlier order set aside - accumulation exceeding 15% and five-year limitation on accumulation for educational institutions - approval subject to terms and conditions consistent with the Act - application of Supreme Court precedent in M/s Queen's Educational Society

Fresh decision on merits on remand - exemption/approval under Section 10(23C)(vi) of the Income Tax Act - Validity of the impugned CCIT order dated 11.11.2013 and requirement for fresh adjudication of the petitioner's application for exemption/approval under Section 10(23C)(vi). - HELD THAT: - The Court found that the impugned order largely reproduced an earlier order which had been set aside by the Division Bench on 29.01.2010 and did not constitute a fresh, independent consideration of the petitioner's application. Paragraph No.7 of the impugned order itself acknowledged that no discrete enquiry could be made in a short span, and subsequent grant of exemption for later years indicated inconsistency. In these circumstances the CCIT's order was held not to have complied with the Division Bench direction to decide afresh, and therefore could not stand. [Paras 6, 9]

Impugned order dated 11.11.2013 is set aside and the matter is remitted for fresh decision by the Commissioner of Income Tax (Exemption), Chandigarh in accordance with the Division Bench judgment dated 29.01.2010.

Reconsideration of limitation when earlier order set aside - application of Supreme Court precedent in M/s Queen's Educational Society - approval subject to terms and conditions consistent with the Act - accumulation exceeding 15% and five-year limitation on accumulation for educational institutions - Scope of matters to be considered on remand, including the question of limitation and application of principles regarding accumulation and conditions for grant of approval. - HELD THAT: - The Court held that because the earlier order (dated 23.03.2009) was set aside in its entirety, the question whether the limitation point was correctly decided cannot be treated as concluded; the CCIT (now the Commissioner (Exemption)) must examine all issues afresh, inclusive of limitation. The Commissioner is to decide the application keeping in view the Division Bench's directions (29.01.2010) concerning permissibility of accumulated income beyond 15% only subject to the five-year rule and that approvals may be granted subject to lawful terms and conditions, and also apply the principles laid down by the Supreme Court in M/s Queen's Educational Society as cited by this Court. [Paras 8, 9]

All issues, including limitation and the applicability of accumulation/approval principles, are to be re-examined and decided afresh by the Commissioner in accordance with the Division Bench judgment dated 29.01.2010 and the Supreme Court's guidance in M/s Queen's Educational Society.

Final Conclusion: The impugned CCIT order dated 11.11.2013 is set aside and the petition is disposed of by remitting the matter to the Commissioner of Income Tax (Exemption), Chandigarh to decide the petitioner's applications for exemption under Section 10(23C)(vi) afresh, including the question of limitation, in accordance with the Division Bench judgment of 29.01.2010 and the Supreme Court's decision in M/s Queen's Educational Society.

Dismissal for non-prosecution - power of appellate authority under Section 251 to dispose of appeals on merits - exercise of discretion to conclude lack of interest in prosecution - rehearing and adjudication on merits upon setting aside dismissal

Dismissal for non-prosecution - exercise of discretion to conclude lack of interest in prosecution - Validity of the appellate authority's order dismissing the appeal for non-prosecution - HELD THAT: - The appellate authority dismissed the appeal after multiple listings on 06.09.2012, 24.09.2012, 22.01.2013 and 20.08.2014 where there was no representation for the petitioner. Although Section 251 imposes an obligation on the appellate authority to decide appeals on merits, the Court held that dismissal for non-prosecution was not in conflict with that duty where the appeal was repeatedly not prosecuted and there was no appearance. The absence of the appellant on several hearing dates permitted the appellate authority to conclude that the appellant was not interested in prosecuting the appeal and to dismiss it for non-prosecution. The Court therefore found no infirmity in the first respondent's conclusion that the appeal could be dismissed on that ground. [Paras 2, 5]

The dismissal for non-prosecution was not in violation of the appellate authority's duty and was not interfered with on that basis.

Rehearing and adjudication on merits upon setting aside dismissal - power of appellate authority under Section 251 to dispose of appeals on merits - Whether the writ petition should be allowed to set aside the dismissal and permit a fresh hearing on merits - HELD THAT: - Noting that the petitioner thereby lacked any opportunity to challenge the assessment order dated 24.12.2010, and taking account of the interest of justice, the Court exercised its supervisory jurisdiction to set aside the order of dismissal and direct a further hearing. The Court directed the appellate authority to take up the appeal on a specified date, hear the petitioner and decide the appeal on merits and in accordance with law, while making clear that failure of the petitioner to appear on the directed date would automatically revive the dismissal order. [Paras 6]

Order dated 30.12.2014 is set aside and the appeal is remitted for fresh hearing on merits on the specified date, subject to automatic revival of the dismissal if the petitioner fails to appear.

Final Conclusion: Writ petition allowed in part: the appellate order dismissing the appeal for non-prosecution is set aside and the matter is remitted to the appellate authority for fresh hearing and decision on merits on the directed date; failure of the petitioner to appear on that date will automatically restore the dismissal.

Transfer within the meaning of section 2(47)(v) read with section 53A of the Transfer of Property Act - willingness to perform as an essential ingredient of part performance under section 53A - full value of consideration and failure of computation under section 48 - agricultural land not being a capital asset under section 2(14) - unexplained cash credit - burden of proof - identity and creditworthiness of creditor - theory of real income

Transfer within the meaning of section 2(47)(v) read with section 53A of the Transfer of Property Act - willingness to perform as an essential ingredient of part performance under section 53A - Whether execution of a development agreement and handing over possession effected a transfer of capital asset in the assessment year by virtue of section 2(47)(v) read with section 53A of the Transfer of Property Act - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the deeming provision in section 2(47)(v) applies only where the contract is of the nature referred to in section 53A and all its essential ingredients are satisfied. Those include a written contract for consideration, signature by the transferor, transfer of immovable property, the transferee having performed or being willing to perform its obligations, and the transferee taking possession. The mere handing over of possession and receipt of a refundable deposit did not suffice where the developer had not undertaken any development steps (no conversion, no plan sanction, no construction activity) and thus demonstrated unwillingness to perform. The existence of a civil suit for cancellation and absence of material to show any development activity supported the finding of unwillingness. Because the transferee was not willing to perform in the year under consideration, the transaction did not fall within section 53A and hence was not a deemed transfer under section 2(47)(v). The Tribunal also followed coordinate-bench precedents applying the same test of readiness and continuous willingness to perform. [Paras 6, 7, 8, 11, 13]

There was no transfer in the assessment year under section 2(47)(v) read with section 53A because the developer had not performed and was unwilling to perform its contractual obligations; revenue's additions on account of capital gains are deleted.

Full value of consideration and failure of computation under section 48 - theory of real income - Whether computation of capital gains under section 48 could be made by adopting a notional/full market value in the absence of an ascertainable full value of consideration - HELD THAT: - The Tribunal recorded the CIT(A)'s view that where the full value of consideration cannot be ascertained (being 'in the womb of the future'), the computation provision under section 48 fails and, following the principle that charging and computation sections form an integrated code, no charge can be sustained. However, the Tribunal observed that this question was not required to be finally adjudicated because it had already held there was no transfer in the assessment year; the point was therefore academic in the present appeals. [Paras 14]

The question of ascertainment of full value of consideration and computation under section 48 was not adjudicated as it became academic after the finding of no transfer.

Agricultural land not being a capital asset under section 2(14) - Whether the land in question was a capital asset within the meaning of section 2(14) - HELD THAT: - The CIT(A) had held that the land was agricultural and therefore not a capital asset under section 2(14). The Tribunal noted this finding remained unchallenged and uncontroverted by the Revenue and therefore endorsed it as an independent reason why the short-term capital gains computation could not be sustained. [Paras 13]

The land was agricultural and not a capital asset within section 2(14); consequently the capital gains computation could not be sustained.

Unexplained cash credit - burden of proof - identity and creditworthiness of creditor - Whether the addition made by the AO treating an unsecured loan as unexplained cash credit should be sustained - HELD THAT: - On the unexplained cash-credit addition, the Tribunal found that the assessee had disclosed the identity of the creditor, furnished confirmations and bank-transfer evidence and that similar loans from the same creditor had been accepted in earlier assessment years by the CIT(A). In these circumstances the Tribunal considered that the AO should not have disbelieved the loan without strong contrary evidence. The Tribunal therefore remitted the issue to the AO to examine afresh after considering all evidence and after affording the assessee a reasonable opportunity of being heard. [Paras 23]

The unexplained cash-credit addition is remitted to the Assessing Officer for fresh examination after verifying the evidence and affording the assessee an opportunity to be heard.

Final Conclusion: The Tribunal dismissed all revenue appeals holding there was no deemed transfer under section 2(47)(v) read with section 53A due to the developer's failure and unwillingness to perform (and because the land was agricultural and not a capital asset); the capital-gains additions were deleted. The assessee's appeal on unexplained cash credit was remitted to the Assessing Officer for fresh examination.

Deemed transfer under Section 2(47)(v) of the Income-tax Act - part performance and Section 53A of the Transfer of Property Act - accrual of consideration for capital gains under Section 48 - effect of refundable security deposit on receipt of consideration - readiness and willingness to perform the contract as condition for S.53A

Deemed transfer under Section 2(47)(v) of the Income-tax Act - part performance and Section 53A of the Transfer of Property Act - readiness and willingness to perform the contract as condition for S.53A - Whether the Development Agreement dated 12.08.2005 amounted to a deemed transfer in the assessment year and rendered the assessee liable to capital gains by invoking Section 2(47)(v) read with Section 53A. - HELD THAT: - The Tribunal examined whether the Development Agreement constituted a 'contract of the nature referred to in Section 53A' so as to attract deemed transfer under Section 2(47)(v). Applying the settled test, the Court emphasised that Section 53A requires, inter alia, that the transferee must have taken or continued possession and must have performed or be willing to perform its part of the contract. On the facts the developer had not obtained sanction for construction, had not commenced development, and had not demonstrated unqualified willingness or steps to perform obligations under the agreement during the year under appeal. Mere grant of a licence to enter for development and a refundable security deposit did not establish part performance or unconditional willingness to perform. Following precedents of coordinate benches which considered 'willingness to perform' as an essential ingredient, the Tribunal concluded that the conditions of Section 53A were not satisfied in the assessment year and hence Section 2(47)(v) could not be invoked to treat the transaction as a deemed transfer for A.Y. 2006-07. [Paras 12, 13, 15, 16]

The Development Agreement did not amount to a deemed transfer under Section 2(47)(v) read with Section 53A for A.Y. 2006-07; the condition of willingness to perform by the developer was not satisfied and the agreement could not be the basis for taxing capital gains in that year.

Accrual of consideration for capital gains under Section 48 - effect of refundable security deposit on receipt of consideration - Whether any consideration had accrued to the assessee in the assessment year (including by virtue of a refundable security deposit) so as to give rise to capital gains chargeable under Section 48. - HELD THAT: - The Tribunal noted that the assessee had not received any consideration in the form of constructed area or sale proceeds in the year under appeal; the only amount was an interest free refundable security deposit. The revenue produced no evidence of actual construction, conversion, or accrual of the right to receive sale consideration in the relevant year. Absent accrual of consideration as envisaged by Section 48, capital gains could not be brought to tax in that assessment year. The mere receipt of a refundable deposit, without performance or steps by the developer towards development, does not amount to accrual of consideration for taxing capital gains. [Paras 13, 15]

No consideration accrued to the assessee in A.Y. 2006-07; the refundable deposit did not constitute taxable consideration and therefore no capital gains arose in that year.

Final Conclusion: The appeal is dismissed. The Tribunal set aside the assessments to the extent they taxed alleged long term capital gains for A.Y. 2006-07, holding that the Development Agreement did not satisfy the conditions of Section 53A and Section 2(47)(v) and that no consideration accrued in the relevant year to attract capital gains tax.

Disallowance of guest house expenses under section 37(4) - depreciation on assets leased to third parties (lease to REPL) - special procedure for assessment of undisclosed income based on seized/search material under Chapter XIV-B requiring reference under section 158BD - depreciation claim on assets purchased from lessee and leased back (lease to AEL) - allowability of broken period interest as deduction - interest expenditure attributable to earning tax free income

Disallowance of guest house expenses under section 37(4) - Disallowance of guest house expenses - HELD THAT: - The assessee conceded that the issue is covered by the decision of the Hon'ble Supreme Court in Britannia Industries Ltd. Accordingly, the Tribunal dismissed the ground of appeal and affirmed the disallowance in light of the Supreme Court precedent. [Paras 2]

Ground dismissed; disallowance sustained following Britannia Industries Ltd.

Depreciation on assets leased to third parties (lease to REPL) - special procedure for assessment of undisclosed income based on seized/search material under Chapter XIV-B requiring reference under section 158BD - Claim of depreciation on assets allegedly leased to REPL and consequential addition made by AO on basis of search/investigation material - HELD THAT: - The AO disallowed depreciation after investigation into REPL group transactions and confirmation from GEDA that commissioning certificates did not exist. The Tribunal examined the coordinate bench decision in Kapil Dev and the statutory scheme under Chapter XIV B, concluding that where seized material indicates undisclosed income of another person the prescribed procedure under section 158BD is mandatory and additions should ordinarily be made under that scheme rather than by regular assessment under section 143(3). Applying that reasoning and finding no distinguishing facts, the Tribunal set aside the CIT(A)'s order and directed deletion of the addition of depreciation in the assessee's hands. [Paras 3]

Addition deleted; AO directed to delete disallowance of depreciation and proceed consistently with Chapter XIV B principles where applicable.

Depreciation claim on assets purchased from lessee and leased back (lease to AEL) - Allowability of depreciation on assets which were purchased from the lessee (AEL) and taken on lease - HELD THAT: - The AO disallowed depreciation treating the claimed ownership as nebulous and invoking an RBI circular. The Tribunal followed the Hon'ble Supreme Court decision in I.C.D.S. Ltd. v. CIT and subsequent Tribunal precedents of the Mumbai Bench, holding that on the facts and authority relied upon the depreciation claim is allowable. The Tribunal set aside the CIT(A)'s finding and directed the AO to allow depreciation on the leased assets to AEL. [Paras 5]

Claim of depreciation allowed; AO directed to permit depreciation on assets leased to AEL.

Allowability of broken period interest as deduction - Deletion of addition made by AO in respect of broken period interest - HELD THAT: - The Revenue's challenge to the Tribunal's deletion of broken period interest was considered in light of the Hon'ble Jurisdictional High Court's decision in the assessee's own case. The Tribunal respectfully followed that High Court ratio (which upheld the allowability as consistent with prior decisions) and dismissed the Revenue's ground. [Paras 6]

Revenue's ground dismissed; deletion of addition in respect of broken period interest upheld.

Interest expenditure attributable to earning tax free income - Disallowance of interest attributable to earning tax free income - HELD THAT: - Having regard to earlier Tribunal decisions in the assessee's own case for subsequent years where this issue was decided in the assessee's favour, the Tribunal found no reason to depart from those findings for the year under consideration. The Tribunal confirmed the CIT(A)'s order and dismissed the Revenue's appeal on this point. [Paras 11, 16]

Deletion sustained / disallowance rejected; interest attributable to tax free income not disallowed for the assessee.

Final Conclusion: For AYs 1996-97, 1997-98 and 1998-99: the Tribunal (i) dismissed the challenge to guest house expense disallowance following Britannia Industries Ltd.; (ii) deleted the depreciation disallowance relating to assets purportedly leased to REPL, directing the AO to proceed consistently with Chapter XIV B principles; (iii) allowed depreciation on assets leased to AEL following the Supreme Court in I.C.D.S. Ltd.; (iv) upheld deletion of broken period interest additions; and (v) rejected revenue's challenge on interest attributable to tax free income, confirming the assessee's position.

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - Deeming provision of Explanation 5 as to ownership of money, bullion, jewellery or other valuable article or thing - Presumption under section 292C in relation to books, documents or articles found in the possession or control of a person - Relevance of seized material and ownership for liability to penalty - Distinction between assessment proceedings and penalty proceedings; onus to rebut declared ownership

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - Deeming provision of Explanation 5 as to ownership of money, bullion, jewellery or other valuable article or thing - Relevance of seized material and ownership for liability to penalty - Onus on the Department to rebut a claim that seized documents belong to a third party - Whether penalty under section 271(1)(c), including application of Explanation 5, can be sustained where seized documents related to the assessee's father and the assessee offered additional income to buy peace of mind despite asserting no ownership or interest in the seized material - HELD THAT: - The Tribunal found that the seized documents and other material were recovered from the premises of the assessee's father and related to the proprietary concern of the father, in which the assessee had no interest. The assessee consistently stated in his sworn statement that the cash, jewellery and loose papers belonged to his father's concern and not to him, and the explanation offered during assessment reconciled the entries from the seized material. The Department did not produce any material to rebut the assessee's assertion of non-ownership or to show that the explanation was false. The Tribunal reiterated that penalty proceedings are distinct from assessment proceedings and that an assessee may rely on the same material and explanation to demonstrate absence of concealment or inaccurate particulars. Explanation 5 could not be invoked because it requires that the assessee be found to be the owner of the items; here the assessee was not found to be in possession or owner of the seized articles. In the absence of any rebuttal by the Department and given the unrebutted reconciliation and explanation, imposition of penalty under section 271(1)(c) was not justified. [Paras 7]

Penalty under section 271(1)(c), including reliance on Explanation 5, deleted for all the assessment years.

Final Conclusion: The Tribunal allowed the appeals, set aside the orders confirming penalty, and deleted the penalty levied under section 271(1)(c) for assessment years 2002-2003 to 2005-2006 on the ground that seized material belonged to the assessee's father, the assessee's explanation remained unrebutted, and Explanation 5 did not apply.

Disallowance under section 40(a)(ia) r.w.s. 194C - amount payable at end of the previous year - reimbursement of expenses versus receipts - estimation of income by applying a profit rate (8%) - remand for verification and re adjudication of expenditure

Disallowance under section 40(a)(ia) r.w.s. 194C - amount payable at end of the previous year - Whether disallowance under section 40(a)(ia) is attracted in respect of the transportation/contract payments which had been paid during the previous year. - HELD THAT: - The Tribunal followed the coordinate Bench decision which held that section 40(a)(ia) applies only to amounts that remain payable at the end of the previous year and is not attracted where the payments have been made. Having regard to the existence of a view favourable to the assessee and in the absence of a binding contrary decision placed before the Tribunal, the disallowance sustained by the CIT(A) was deleted. The Tribunal directed verification of the factual position by the AO where necessary but upheld the legal proposition that paid amounts are not chargeable under section 40(a)(ia). [Paras 6]

Disallowance under section 40(a)(ia) was deleted insofar as it related to amounts shown to have been paid by the assessee.

Reimbursement of expenses versus receipts - estimation of income by applying a profit rate (8%) - remand for verification and re adjudication of expenditure - Whether the addition of Rs.19,82,630 as unexplained receipts (reimbursement treated as receipts) was correctly replaced by an estimated income of 8% by the CIT(A), or whether further adjudication was required. - HELD THAT: - The Tribunal examined the vouchers filed by the assessee and found that, although items had been purchased, the assessee had not correlated those expenditures with the specific works or receipts asserted to be uncharged in the P&L account. While the CIT(A) had reduced the addition by applying an 8% profit rate in place of the full addition, the Tribunal considered that the factual connection between the receipts and corresponding expenditure required fresh adjudication. In the interest of justice the matter was set aside to the Assessing Officer for re adjudication after giving the assessee opportunity to place supporting material and justify that the expenditures relate to the uncharged receipts. [Paras 10, 11]

Order of the CIT(A) on this issue set aside and the matter remanded to the Assessing Officer for re adjudication and verification of expenditure with opportunity to the assessee.

Final Conclusion: Assessee's appeal is partly allowed (disallowance under section 40(a)(ia) deleted); Revenue's appeal is allowed for statistical purposes as the issue of unexplained receipts is remanded to the Assessing Officer for fresh adjudication.

Finality of Settlement Commission orders - immunity of co-noticees on settlement of importer's case - exclusive jurisdiction of the Settlement Commission - indivisible act/co-obligant principle for applicability of settlement immunity - preclusion of Revenue proceedings against co-noticees after settlement

Finality of Settlement Commission orders - immunity of co-noticees on settlement of importer's case - indivisible act/co-obligant principle for applicability of settlement immunity - Whether penalty imposed on the appellant could be sustained after the importer's case was settled before the Settlement Commission - HELD THAT: - The Tribunal examined the statutory scheme governing settlement and concluded that the Settlement Commission exercises exclusive jurisdiction and that its orders are conclusive in respect of the case so settled. The Additional Commissioner had treated Shri Sunil Lulla as the importer and did not challenge his deposit or settlement; hence the Commissioner's order recognizing the importer's settlement operates to preclude further proceedings by Revenue against co-noticees in respect of the same matter. Reliance of earlier Tribunal and Supreme Court precedents establishing that settlement in favour of the principal noticee affords immunity to co-noticees where the liability arises from an indivisible act was accepted. The High Court decision relied upon by Revenue was distinguished on the ground that immunity applies only when the liabilities of principal noticee and co-noticees flow from the same indivisible act; where separate and distinct causes of action exist, immunity will not apply. Applying that principle to the facts, the sale of the vehicle was an indivisible transaction effected through the appellant's involvement, so the Settlement Commission's decision in relation to the importer precluded continuing adjudication and penalty proceedings against the appellant. [Paras 6]

Impugned order imposing penalty on the appellant set aside and the appeal allowed.

Final Conclusion: The appeal is allowed: in view of the Settlement Commission's final order in respect of the importer and the indivisible nature of the transaction, Revenue cannot proceed against the co-noticee appellant; the penalty imposed on the appellant is quashed and the impugned order is set aside.

Continuing obligation under exemption notification - enforcement of customs duty for breach of post-importation conditions after rescission - undertaking/bond creating continuing liability in respect of imported goods - rectification of mistake apparent on record - re-appreciation of evidence not permissible in rectification application - binding precedents of the Apex Court and Larger Bench decisions

Continuing obligation under exemption notification - undertaking/bond creating continuing liability in respect of imported goods - enforcement of customs duty for breach of post-importation conditions after rescission - Whether the appellant remained liable for enforcement action and duty for breach of post importation conditions of Notification No. 64/88-Cus after the rescission of the notification. - HELD THAT: - The Tribunal held that the exemption certificate was granted subject to continuing conditions and that the appellant executed an undertaking and bond which attached to the goods and their period of use; the undertaking was not limited to the life of the notification. The appellant's non compliance as shown by IPD/OPD records for 1997-1999 justified confiscation under section 111(o) and the consequent demand and option for redemption under section 125, payment of duty being integral to the confiscation proceedings. This view was held to be in conformity with the Apex Court decisions in Mediwell Hospital and Jagdish Cancer, and with the Larger Bench decision in Bharat Diagnostic Centre, which recognise authority to enforce obligations and recover duty notwithstanding rescission of the notification when liability accrued or the undertaking remained unfulfilled. [Paras 4]

The appellant remained liable and the enforcement action and demand for duty for breach of conditions after rescission of Notification No. 64/88-Cus was upheld.

Rectification of mistake apparent on record - re-appreciation of evidence not permissible in rectification application - Whether the Tribunal's order dated 17-09-2014 contained an error apparent on the face of the record warranting rectification. - HELD THAT: - The application for rectification was examined against the standard that a mistake apparent on record must be obvious and not one requiring re appreciation or long argument. The Tribunal found that its impugned order was founded on binding Apex Court and Larger Bench rulings and that the applicant was essentially seeking re consideration of a debatable point of law and facts, which is impermissible in a rectification petition. Reliance was placed on the principle that re appreciation of evidence on a debatable point does not constitute a rectifiable mistake. [Paras 4]

The rectification application was not maintainable and was dismissed.

Final Conclusion: The application for rectification was dismissed: the Tribunal's earlier order upholding confiscation and duty demand for breach of post importation conditions was supported by the undertaking/bond and binding precedents, and the plea of an apparent error amounted to an impermissible request for re appreciation of evidence and law.

Classification of imported coal as bituminous coal versus steam coal - pre-deposit as condition for grant of interim relief before Tribunal - use of Parr formula to compute gross calorific value on moist, mineral-matter-free basis from air-dried GCV - distinguishing precedent on basis of differing moisture basis in GCV reports

Classification of imported coal as bituminous coal versus steam coal - pre-deposit as condition for grant of interim relief before Tribunal - distinguishing precedent on basis of differing moisture basis in GCV reports - Application to modify stay order by waiver of pre-deposit on basis of an interim order of another Bench was rejected. - HELD THAT: - The Tribunal recorded a prima facie view that the coal imported by the appellant merits classification as bituminous coal and not steam coal, removing entitlement to the duty exemption relied upon; the appellant sought rectification by invoking an interim order of the Chennai Bench granting waiver in a different matter. The Bench examined the Chennai decision and found it factually distinguishable because that decision treated GCV on an air-dried (ADB) basis differently (residual moisture versus inherent moisture) and had referred the matter to a Larger Bench. The Bench relied on precedents (including the Maheshwari Brothers and Coastal Energy discussions) which supported computation of GCV on a moist, mineral-matter-free basis using Parr formulae from ADB values, and noted other Benches and the High Court had not accepted the Chennai approach as binding in analogous cases. On these grounds the application for modification to waive pre-deposit was refused. [Paras 1, 2, 3]

Modification application to waive pre-deposit rejected.

Use of Parr formula to compute gross calorific value on moist, mineral-matter-free basis from air-dried GCV - distinguishing precedent on basis of differing moisture basis in GCV reports - Prima facie acceptance of the Parr formula methodology and use of ADB (air-dry basis) GCV to compute GCV on moist, mineral-matter-free basis was upheld. - HELD THAT: - After considering technical literature and prior Tribunal decisions, the Bench observed that moisture on ADB approximates inherent (equilibrium) moisture while ARB corresponds to total moisture; accordingly, deriving GCV on a moist, mineral-matter-free basis from ADB values via the Parr formula has logical and technical support. The appellant's contention that GCVmmmf should be calculated from ARB was found unconvincing at the interim stage, and the Bench thus found no sufficient reason to depart from the Revenue's computation or earlier Tribunal conclusions. [Paras 3]

Parr formula approach and computation from ADB GCV accepted as prima facie valid.

Pre-deposit as condition for grant of interim relief before Tribunal - Time for compliance with the pre-deposit direction was extended. - HELD THAT: - Although the modification was refused, the Tribunal in the interest of justice granted an extension of the time limit for making the directed pre-deposit, noting the presence of appellant's counsel in Court as constituting notice to the appellant. [Paras 4]

Time for compliance with pre-deposit extended up to 19/02/2015.

Final Conclusion: The rectification application was dismissed; the Tribunal upheld its prima facie classification and the Parr-formula-based GCV computation and refused waiver of pre-deposit, while granting a limited extension of time to make the required pre-deposit.

Sanction of scheme of arrangement under Sections 391-394 of the Companies Act, 1956 - Protection of transferred employees' terms and conditions of employment - Continuance of proceedings and liabilities by the transferee company - Application of Accounting Standard-14 and 'pooling of interests' treatment - Maintainability of objections by employees and unsecured creditors - Effect of contractual dispute resolution and assignment clauses on scheme approval - Competition Commission clearance and monitoring of divestment and pricing - Obligations to comply with statutory formalities and Registrar/Regional Director observations

Protection of transferred employees' terms and conditions of employment - Protection against reduction in base salary during the Relevant Period - Whether the apprehensions of Sales Promotion Employees regarding detriment to terms of employment and reduction of base salary are tenable - HELD THAT: - The Court examined Clause 13(a) and (b) of the Scheme which provides that permanent employees of the Transferor shall become employees of the Transferee on terms not less favourable than those existing and that for 12 months there shall be no decrease in base salary or base wage rate; additionally the Transferee filed an affidavit undertaking not to use Clause 13(b) to reduce base salary and that any variation thereafter shall be in accordance with employment terms and applicable law. The Court noted that transfer to subsidiaries was already contemplated in letters of appointment and that Clause 13 safeguards rights, including continuance of valid agreements/settlements with recognized unions. On these foundations the Court held the employees' apprehensions to be unfounded. [Paras 21, 22, 23, 24]

Employees' objections regarding detrimental change to terms and reduction of base salary are dismissed; Clause 13 and the affidavit undertaking adequately protect employees' rights.

Maintainability of objections by unsecured creditor - Effect of assignment clause and dispute resolution clause on scheme approval - Continuance of claims against transferee under the scheme - Whether Genepharm S.A.'s objection based on non-served notice, alleged assignment in breach of contract and claimed damages prevents sanction of the Scheme - HELD THAT: - The Court accepted the Transferor Company's position that the sums due to the objector as at the relevant date were paid (Euro 45,000) and therefore it ceased to be a creditor for that amount. The licence and supply agreement contains (i) a clause that the agreement remains binding despite change in management control and (ii) an arbitration clause providing dispute resolution (governed by English law, arbitration in London). Clause 5 of the Scheme ensures that suits, claims and proceedings pending or arising on or before the Effective Date shall be continued and enforced by or against the Transferee. In view of these contractual provisions and the undertaking in the Scheme, the Court found that prior consent was not a ground to withhold sanction and that any claim for damages is to be determined through the contractual dispute resolution mechanism or other competent forum. [Paras 27, 28, 29, 30, 31]

Objection by Genepharm S.A. is not tenable and is dismissed; the Scheme does not stand vitiated on account of the alleged non-consent or pending claim.

Application of Accounting Standard-14 ('pooling of interests') - Carry forward of accumulated losses and tax consequences - Role of Regional Director and Official Liquidator observations on public interest and revenue - Whether the Scheme, by providing for set off of carry forward losses and unabsorbed depreciation, is prejudicial to the revenue or public interest and whether accounting treatment is in accordance with AS-14 - HELD THAT: - The Regional Director noted that the Scheme treats the amalgamation as a merger and adopts AS-14 'pooling of interests' treatment; the Income Tax authority was consulted and furnished no observations. The Official Liquidator raised concerns that the Scheme is designed to set off carry forward losses and unabsorbed depreciation against profits of the Transferee thereby prejudicing revenue. The Transferor explained that the Scheme is prepared in accordance with AS-14 and undertook to comply with all legal requirements; the Court observed that entitlement to tax benefits depends on law and, if legally permissible, the Transferor/Transferee will be entitled to benefit. The Court also observed that other matters noted by the Official Liquidator (litigation, bans) are for the companies to consider and not for the Court to decide in this sanction proceeding. [Paras 38, 39, 40, 41, 42]

The accounting treatment under AS-14 and issues relating to tax carry forward shall be governed by applicable law; no ground established to hold the Scheme prejudicial to revenue or public interest such as to refuse sanction, subject to compliance with legal requirements.

Competition Commission compliance and divestment monitoring - Conditions imposed by Competition Commission of India - Whether the Competition Commission's findings and directions preclude sanction of the Scheme or require additional safeguards - HELD THAT: - The Court noted the Commission's detailed examination and that it found prima facie likelihood of appreciable adverse effect on competition and consequently issued directions and conditions to be complied with by the parties. The Court observed that the Commission has taken care of consumer interests and, as an additional safeguard, directed that during the divestment process the monitoring agency shall also monitor prices of drugs manufactured by the combined entity until divestment is complete. [Paras 43, 44, 45]

Compliance with Competition Commission directions is required; Court imposed an additional monitoring safeguard on pricing during the divestment process.

Sanction of scheme and consequential dissolution of transferor company - Binding effect of sanctioned scheme on shareholders, creditors and all concerned - Requirement to comply with procedural formalities including filing with Registrar - Whether the Scheme of Arrangement should be sanctioned under Sections 391-394 and what consequential orders should follow - HELD THAT: - Having considered the Scheme, the reports of the Regional Director and Official Liquidator, the replies of the Transferor, the objections (dismissed), and compliance with procedural requirements (publication, notices, shareholder approval), the Court found no legal impediment to sanctioning the Scheme. The Court directed dissolution of the Transferor without winding up, stated the Scheme shall be binding on parties, and ordered compliance with procedural steps including filing the certified copy with the Registrar within 30 days. The petitioner also offered a voluntary deposit in the Official Liquidator's Common Pool Fund which the Court accepted. [Paras 49, 50, 51, 52, 53]

Scheme sanctioned; Transferor to be dissolved without winding up; Scheme binding on all concerned; compliance with statutory and procedural formalities directed.

Final Conclusion: The High Court, having considered the Scheme, statutory requirements, reports and objections, dismissed the objections and sanctioned the Scheme of Arrangement between Ranbaxy Laboratories Limited and Sun Pharmaceutical Industries Limited; the Transferor is to be dissolved without winding up, the Scheme is binding on all concerned and parties are directed to comply with statutory and procedural formalities (including filing the certified order with the Registrar).

Group (Explanation (b) of Section 5) - abuse of dominant position under Section 4 of the Competition Act, 2002 - relevant product market - premium sports goods - relevant geographic market - market of premium sports goods in Noida - demand-side substitutability - discriminatory conditions and differential treatment - prima facie assessment of dominance

Group (Explanation (b) of Section 5) - All Opposite Parties constitute a 'group' for the purposes of Section 4 of the Act. - HELD THAT: - The Commission examined the corporate holdings and noted that Opposite Party No.1 acquired 100% equity in Opposite Party No.2 on 02.08.2005, and Opposite Party No.2, through its wholly-owned subsidiary, owns 93.15% equity in Opposite Party No.3. Applying Explanation (b) of Section 5, which defines 'group' by the ability to exercise specified voting rights or control management, the Commission concluded that the entities fall within the statutory definition of a group and thus can be considered together for assessing liability under Section 4. [Paras 12, 13]

The Opposite Parties are a 'group' within the meaning of the Act.

Relevant product market - premium sports goods - relevant geographic market - market of premium sports goods in Noida - demand-side substitutability - prima facie assessment of dominance - The relevant market is the market for premium sports goods and the relevant geographic market is Noida; on a prima facie basis the Adidas AG Group appears dominant in that market. - HELD THAT: - The Commission applied demand-side substitutability to delineate the product market, observing that premium branded sports goods have distinct end-uses and consumer groups from non-branded goods and thus constitute a separate relevant product market. For geographic delineation, the Commission relied on the statutory concept of homogenous conditions of competition and the practical consideration that consumers prefer accessible local locations, concluding that Noida constitutes the relevant geographic market for the franchise at issue. Although the Informant provided only all-India market share data, the Commission accepted prima facie that market shares in Noida would not be substantially different and, therefore, that the Adidas AG Group appears to hold a dominant position in the defined relevant market. [Paras 14, 16, 17, 18]

The relevant market is premium sports goods in Noida, and prima facie the Adidas AG Group is dominant in that market.

Abuse of dominant position under Section 4 of the Competition Act, 2002 - discriminatory conditions and differential treatment - prima facie assessment of dominance - The allegations do not, on the material before the Commission, constitute an abuse of dominant position under Section 4 and the matter is to be closed under Section 26(2). - HELD THAT: - The Commission considered the Informant's claims of unfair and discriminatory terms in a 2003 franchise agreement and differential treatment vis-a -vis a 2006 franchise agreement with another franchisee. Two decisive factors weighed against finding abuse: (a) the impugned agreement was executed in 2003 before the formation of the alleged dominant group in 2005, and (b) the terms complained of were not shown to have been imposed post-formation of dominance or to have continued in a manner establishing discriminatory abuse. The Commission noted that commercial arrangements may evolve and a manufacturer need not adhere to a single template; the margin difference relied upon was not substantial and renewal/termination terms were mutually agreed. The allegation concerning failure to take back dead stock was held not to raise a competition concern, and the long gap between the last sale in 2009 and correspondence in 2014 undermined the claim that harm flowed from continuing anti-competitive effects. On the available record the Commission found the allegations baseless and not amounting to abuse under Section 4. [Paras 22, 23, 24, 25, 26]

Prima facie no contravention of Section 4 is made out; the case is closed under Section 26(2) of the Act.

Final Conclusion: The Commission found that (i) the Opposite Parties constitute a 'group' under the Act, (ii) the relevant market is the market for premium sports goods in Noida and the Adidas AG Group appears prima facie dominant therein, but (iii) the informant's allegations do not prima facie establish an abuse of dominance under Section 4, and accordingly the matter is closed under Section 26(2).

Condonation of delay in filing appeal under Section 85(3) of the Finance Act - appellate authority's lack of power to extend limitation beyond statutory proviso - exclusion of the Limitation Act where the special statute provides a complete code for time-limits

Condonation of delay in filing appeal under Section 85(3) of the Finance Act - appellate authority's lack of power to extend limitation beyond statutory proviso - exclusion of the Limitation Act where the special statute provides a complete code for time-limits - Validity of rejection of the appeal to the Commissioner (Appeals) as time-barred and whether the delay of 1085 days could be condoned - HELD THAT: - The Court recorded that the appeal against the order dated 27.1.2011 was filed with a delay of 1085 days and observed that Section 85(3) prescribes the period for filing an appeal (three months) and the proviso permits a further period (three months) where sufficient cause is shown. The Commissioner (Appeals) therefore has no power to condone an abnormal delay beyond the period permitted by the proviso. The Court relied on precedents interpreting parallel provisions in customs and excise law to hold that where the special statute supplies a complete code for limitation the provisions of the Limitation Act cannot be invoked to extend time; consequently delay beyond the statutory period cannot be condoned. Applying these principles, the Court refused to grant the relief sought in the writ petition. [Paras 4, 5, 6]

Writ petition dismissed; the appeal was rightly treated as time-barred and delay beyond the statutory period cannot be condoned.

Final Conclusion: The writ petition challenging the Order dated 27.1.2011 is dismissed on the ground that the appeal was filed after an inordinate delay which cannot be condoned under the statutory scheme; no relief granted.

Pre-deposit - stay of recovery - service tax on outstanding debtors/creditors - prospective operation of amendment to associated enterprise provisions - classification of services - Franchise Service - Information Technology Software Service - Management, Maintenance or Repair Service - Commercial Coaching or Training - Banking and Other Financial Services - reverse charge

Service tax on outstanding debtors/creditors - Explanation to Section 67 - prospective operation of amendment to associated enterprise provisions - Pre-deposit in respect of service tax demand confirmed on outstanding debtors/creditors waived and recovery stayed pending appeal. - HELD THAT: - The adjudicating authority did not specify which amounts in the outstanding debtors/creditors related to taxable services; there is no basis to presume that all such outstanding balances represent taxable services. The appellants raised specific categories (domestic creditors, royalties already taxed, provisions, export-related debtors, sale of goods subject to VAT, amounts already taxed) which require detailed examination. Further, the amendment relating to associated enterprises became effective prospectively from 10.05.2008 as held in the cited authority, supporting the appellants' contention that earlier periods cannot be retrospectively taxed. On these prima facie considerations the Tribunal found the appellants have made out a case for waiver of pre-deposit for this component and stayed recovery during the appeal. [Paras 3]

Waiver of pre-deposit and stay of recovery granted for the outstanding debtors/creditors component pending appeal.

Franchise Service - classification of services - Information Technology Software Service - reverse charge - Pre-deposit in respect of demand under Franchise Service waived and recovery stayed pending appeal. - HELD THAT: - Appellants relied on the Software Duplication, Reproduction and Distribution Agreement and contended the rights granted were not representational rights liable as Franchise Service but were in the nature of IT software/licensing. Reliance was placed on precedents where such transactions were treated as Information Technology Software Service and appellants had in any event paid service tax under the reverse charge mechanism from 16.05.2008. Having regard to the authorities and the fact that service tax was paid under the IT software head for the later period, the Tribunal found a prima facie case in favour of the appellants and allowed waiver of the pre-deposit for this component. [Paras 4]

Waiver of pre-deposit and stay of recovery granted for the Franchise Service component pending appeal.

Management, Maintenance or Repair Service - classification of services - Information Technology Software Service - Pre-deposit in respect of demand for management, maintenance or repair services waived and recovery stayed pending appeal. - HELD THAT: - The impugned demand concerned upgradation/enhancements of software. The Tribunal noted precedents distinguishing earlier decisions and treating software upgradation/enhancement as covered under Information Technology Software Service rather than Management, Maintenance or Repair Service. The appellants had begun paying service tax under the relevant category w.e.f. 01.10.2005. On a prima facie view, the appellants' contentions were not unacceptable and merit detailed consideration, justifying waiver of pre-deposit for this component. [Paras 5]

Waiver of pre-deposit and stay of recovery granted for the Management, Maintenance or Repair component pending appeal.

Commercial Coaching or Training - incidental services to sale of goods - VAT paid on software - Pre-deposit in respect of demand for commercial coaching or training waived and recovery stayed pending appeal. - HELD THAT: - The appellants provided advice and assistance incidental to sale of software and did not charge separately; they apportioned a portion of sale proceeds for accounting. The Tribunal found prima facie force in the contention that such assistance is incidental to the sale of software, especially as VAT had been paid on the entire value of the software, requiring detailed examination at final hearing. On this basis the appellants were granted waiver of pre-deposit for this component. [Paras 6]

Waiver of pre-deposit and stay of recovery granted for the Commercial Coaching or Training component pending appeal.

Banking and Other Financial Services - sharing of common infrastructure - allocation and reimbursement of common costs - Pre-deposit in respect of demand for banking and other financial services waived and recovery stayed pending appeal. - HELD THAT: - The claim concerned allocation and reimbursement of common global infrastructure costs by the group to the appellants. The appellants argued that mere utilization of infrastructure does not amount to sharing under the relevant sub-clause and produced sample agreements and debit notes. The point requires detailed examination, but on prima facie review the appellants have an arguable case that the supply does not fall within Banking & Financial Services; accordingly the Tribunal found it fair to waive the pre-deposit and stay recovery for this component pending appeal. [Paras 7]

Waiver of pre-deposit and stay of recovery granted for the Banking and Other Financial Services component pending appeal.

Pre-deposit - stay of recovery - Overall stay of recovery of the impugned liabilities during the pendency of the appeal ordered. - HELD THAT: - Having found prima facie merit in the appellants' contentions across the several challenged components and that detailed adjudication is required at final hearing, the Tribunal concluded that the appellants have made out a case for waiver of the pre-deposit. Consequently, recovery of the impugned demand is stayed for the duration of the appeal. [Paras 8]

Recovery of the impugned liabilities stayed and pre-deposit waived during pendency of the appeal.

Final Conclusion: The Tribunal, on prima facie consideration of the appellants' contentions across the challenged components (outstanding debtors/creditors, franchise service, management/maintenance/repair, commercial coaching/training, and banking/financial services), held that the appellants have made out a case and accordingly waived the pre-deposit and stayed recovery of the impugned liabilities during the pendency of the appeal.

Manufacture - job work manufacture - conversion of black bars into bright bars - Business Auxiliary Service - Cenvat Credit - exemption under Notification No. 202/88-CE

Manufacture - job work manufacture - Business Auxiliary Service - Cenvat Credit - exemption under Notification No. 202/88-CE - Whether the conversion of black bars into bright bars carried out by the assessee on job-work basis for the period 10/09/2004 to 28/02/2005 amounted to manufacture (chargeable to central excise) and not a taxable service under Business Auxiliary Service, and whether the benefit of Notification No. 202/88-CE applied. - HELD THAT: - The Tribunal accepted the first appellate authority's finding that the assessee had themselves undertaken the process of converting black bars into bright bars, had availed Cenvat credit on inputs and had cleared finished goods on payment of Central Excise duty; in those circumstances the same process could not be treated as non-manufacture merely because some operations were performed as job work. The Tribunal further upheld reliance on Notification No. 202/88-CE which grants exemption to specified final products made from specified inputs, noting that exemption under that notification is available only to a manufacturer. In view of these findings, the activity was held to be manufacture and not a taxable service under the Business Auxiliary Service category for the period in question. [Paras 6, 7]

The first appellate authority's order setting aside the adjudicating authority's demand was correct; the process constituted manufacture and the Revenue's appeal is rejected.

Final Conclusion: Appeal dismissed; the impugned order of the Commissioner (Appeals) was upheld holding the job-work conversion as manufacture (and eligible for treatment under Notification No. 202/88-CE) for the period 10/09/2004 to 28/02/2005.

Duty liability in a bonded 100% EOU arises on clearance to DTA - non-usage or writing-off of duty-free inputs does not itself trigger duty unless cleared to DTA - prima facie case for grant of stay and waiver of pre-deposit where no allegation of DTA clearance

Duty liability in a bonded 100% EOU arises on clearance to DTA - non-usage or writing-off of duty-free inputs does not itself trigger duty unless cleared to DTA - prima facie case for interim relief and waiver of pre-deposit - Whether the duty demand on inputs/raw materials written off by the 100% EOU is sustainable in absence of any allegation or evidence of clearance into DTA, and whether pre-deposit and recovery may be stayed pending appeal. - HELD THAT: - The Tribunal examined the departmental case that inputs/raw materials procured duty-free and shown as written off in the books during the years in dispute gave rise to duty liability. It held that a 100% EOU is a bonded area and that duty on goods stored in a bonded warehouse becomes exigible when goods are cleared into DTA or when the unit is debonded and converted into DTA. The show cause notice relied solely on the fact of book write-offs and did not allege or establish that the impugned inputs had been cleared into DTA. Consequently, mere non-use or scrapping of duty-free inputs, without DTA clearance, does not itself create a duty liability under the notifications relied upon. In these circumstances the Tribunal found that the appellants had a prima facie case and that the requirement of pre-deposit of the duty, interest and penalties could be waived for the purposes of hearing the appeals. The Tribunal therefore stayed recovery pending disposal of the appeals. [Paras 7, 8]

The appellants have a prima facie case; pre-deposit of duty, interest and penalty by the company and pre-deposit of penalty by the directors is waived for hearing of the appeals and recovery is stayed.

Final Conclusion: The Tribunal allowed the stay applications, holding that duty on duty-free inputs written off in the books is not exigible in absence of any allegation or evidence of clearance into DTA; pre-deposit and recovery were stayed pending adjudication of the appeals.

SSI exemption - aggregate value of clearances for home consumption - loan licensee as manufacturer - job work - clause 3(a) of the SSI exemption - definition of manufacturer under section 2(v) - treatment of manufacturer for duty liability

Loan licensee as manufacturer - job work - aggregate value of clearances for home consumption - clause 3(a) of the SSI exemption - Whether clearances of goods manufactured by the appellant in their factory for loan licensees (and cleared under the loan licensees' brand) are to be included in the appellant's aggregate clearances for determining SSI exemption. - HELD THAT: - The Tribunal found as a fact that the appellant manufactured medicines for loan licensees under job work agreements without the loan licensees hiring or leasing the factory or any shift, the raw material and manufacturing plan were supplied by the loan licensees and manufacture was under their supervision. Applying the tests laid down by the Gujarat High Court in Indica Laboratories, the condition of hiring a factory or shift was absent; therefore the appellant were performing job work and must be treated as manufacturer. Since the goods manufactured for loan licensees bore the loan licensees' brand and duty was discharged by the appellant at normal rates, clause 3(a) of the SSI exemption excludes such clearances to loan licensees from the aggregate value of clearances for home consumption of the appellant. The impugned demand on this ground was thus held incorrect. [Paras 4, 5]

Clearances of goods manufactured by the appellant for loan licensees are not includible in the appellant's aggregate clearances for SSI exemption; the demand on this basis is set aside.

Definition of manufacturer under section 2(v) - treatment of manufacturer for duty liability - aggregate value of clearances for home consumption - Whether the value of goods got manufactured by the appellant as a loan licensee through other manufacturers is to be included in the appellant's aggregate clearances for determining SSI exemption. - HELD THAT: - It was undisputed that when the appellant got goods manufactured through other manufacturers as a loan licensee, those manufacturers did not lease or hire the appellant's premises nor did the appellant hire any shift of theirs, and the duty in respect of those goods was discharged by the manufacturers. On this footing the Tribunal held that the other manufacturers must be treated as the manufacturers for the purpose of duty liability and, consequently, the clearances effected by those manufacturers cannot be included in the appellant's aggregate clearances for home consumption for SSI exemption. [Paras 4, 5]

Value of goods manufactured for the appellant by other manufacturers (when those manufacturers discharged duty) is not includible in the appellant's aggregate clearances for SSI exemption; the demand on this basis is set aside.

Final Conclusion: The appeal is allowed; the order confirming duty demand and penalty is set aside insofar as it included clearances to/from loan licensees in the appellant's aggregate clearances for SSI exemption for the period 01.04.2003 to 31.10.2003.

SSI exemption - manufacture versus sale of purchased goods - printing of brand name/logo and whether it amounts to manufacture - pre-deposit for stay of appeal - waiver of pre-deposit and stay of recovery - penalty under Section 11AC - penalty under Rule 26 of the Central Excise Rules, 2002 - time-bar / limitation

Pre-deposit for stay of appeal - waiver of pre-deposit and stay of recovery - Whether requirement of pre-deposit of duty, interest and penalty should be waived and recovery stayed for hearing of the appeals. - HELD THAT: - The Tribunal, on consideration of contentions and records, found a prima facie case in favour of the appellants and held that the orders of the lower authorities displayed no application of mind. In view of these conclusions the Tribunal exercised its discretionary power to waive the requirement of pre-deposit of the duty demand, interest and penalty by the appellant firm and the requirement of pre-deposit of penalty by the partner for the purpose of hearing the appeals, and ordered stay of recovery pending adjudication.

Requirement of pre-deposit waived for hearing of the appeals and recovery stayed.

Manufacture versus sale of purchased goods - printing of brand name/logo and whether it amounts to manufacture - Prima facie validity of the demand insofar as it treats goods purchased and sold from the shop as manufactured clearances by the appellant and attributes manufacture by reason of printing of third party brand/logo. - HELD THAT: - On the record the Tribunal noted that many of the goods listed in the show cause notice are not injection moulded plastic articles produced in the appellant's factory but goods procured from outside and sold from the Karol Bagh shop. The appellants had also pleaded that they lack in house facility to print buyers' names/logos and that such printing, where done, was outsourced. The Tribunal observed that these pleas were not considered by the lower authorities and, viewing the orders as made without application of mind, treated the appellants' contentions as giving rise to a strong prima facie case against the confirmation of demand on the stated basis.

Found a prima facie case that the demand treating purchased goods (and outsourced printing) as manufactured clearances was unsustainable; lower orders faulted for lack of application of mind.

Penalty under Section 11AC - penalty under Rule 26 of the Central Excise Rules, 2002 - Whether imposition of penalties should be kept in abeyance where the duty demand itself is contested as unsustainable. - HELD THAT: - The Tribunal accepted the appellants' submission that if the duty demand is not sustainable, there would be no basis for the imposition of penalties under the statutory provisions relied upon by the lower authorities. Given the prima facie view that the demand was not sustainable and the failure of the lower authorities to consider appellants' factual pleas, the Tribunal stayed recovery of the penalties and waived pre-deposit for hearing of the appeals.

Stay of recovery of penalties and waiver of pre-deposit granted pending disposal of the appeals.

Final Conclusion: The stay applications are allowed: pre-deposit of duty, interest and penalty by the appellant firm and pre-deposit of penalty by the partner are waived for hearing of the appeals, and recovery is stayed; the Tribunal found a strong prima facie case and recorded that the lower authorities had failed to consider the appellants' pleas that many items were purchased (not manufactured) and that printing was outsourced.

Refund claim under Section 11B of the Central Excise Act - proof of duty paid by production of original/duplicate manufacturer invoices (Section 12A) - pre-dated invoices and mismatch in description/code between manufacturer and exporter invoices - consignment note not constituting an excise invoice or substitute for Rule 11 CER 2002 invoice - procedural compliance with proviso to Section 11BC and conditions of Section 11B

Refund claim under Section 11B of the Central Excise Act - proof of duty paid by production of original/duplicate manufacturer invoices (Section 12A) - pre-dated invoices and mismatch in description/code between manufacturer and exporter invoices - consignment note not constituting an excise invoice or substitute for Rule 11 CER 2002 invoice - procedural compliance with proviso to Section 11BC and conditions of Section 11B - Whether the appellants' refund claim could be allowed in the absence of original/duplicate manufacturer invoices and in the presence of pre-dated invoices, mismatching descriptions/codes and reliance on consignment notes. - HELD THAT: - The Tribunal upheld the findings of the adjudicating and appellate authorities that the appellants failed to produce original or duplicate manufacturer invoices required to establish payment of excise duty; photocopies and pre-dated exporter documents could not substitute for such proof. The authorities found that in several instances the exporter's invoices, shipping bills and let export orders preceded the manufacturer's invoices and that descriptions and commodity codes did not tally between manufacturer and exporter documents. Removal of goods on the strength of consignment notes, without the delivery challans or invoices prepared under Rule 11 of CER 2002, could not support the refund claim. The Tribunal also relied on its earlier decision in the appellants' own case, which recorded failure to satisfy the substantive requirements of the proviso to Section 11BC and procedural conditions of Section 11B. Given these defects, the lower orders rejecting the refund claim were found to be legally correct and were therefore sustained. [Paras 3, 4]

The rejection of the refund claim was upheld and the appeal dismissed.

Final Conclusion: The impugned order rejecting the refund claim is sustained; the appeal is dismissed.

Simultaneous availment of Cenvat credit and depreciation - ineligibility for Cenvat credit upon claiming depreciation - remand for de novo adjudication - interpretation of Rule 4(4) of Cenvat Credit Rules - restoration of original order

Simultaneous availment of Cenvat credit and depreciation - interpretation of Rule 4(4) of Cenvat Credit Rules - remand for de novo adjudication - restoration of original order - Whether the Commissioner (Appeals) was justified in remanding the question of simultaneous availment of Cenvat (Modvat) credit and depreciation to the adjudicating authority, and whether an assessee who has claimed depreciation under the Income Tax Act can retain Cenvat credit in respect of the same capital goods. - HELD THAT: - The Tribunal found that the adjudicating authority had already recorded and considered the factual position, including filing of revised returns and the declaration under Rule 4(4) of the Cenvat Credit Rules that depreciation was not claimed on the portion representing duty on capital goods, and that these matters were expressly dealt with in the order (see para.15.4 of the adjudication). The Commissioner (Appeals) remanded the issue to the original authority without discussing new arguments or reaching an independent conclusion. Applying the principle affirmed by the Karnataka High Court in CCE & ST Bangalore v. Suprajit Engineering Ltd. and the Tribunal's decision in Gujarat Alkalies & Chemicals Ltd. v. CCE, where it was held that an assessee who claims depreciation under Section 32 of the Income Tax Act cannot also avail Cenvat/Modvat credit in respect of the same capital goods, the Tribunal held that remand was unnecessary and incorrect. Consequently, the Tribunal set aside the remand order of the Commissioner (Appeals) and restored the original adjudication rejecting simultaneous availment, thereby upholding the demand and related consequences as recorded in the original order.

The Commissioner (Appeals)'s remand on the issue of simultaneous availment is set aside; the original adjudication disallowing Cenvat credit where depreciation was claimed is restored and upheld.

Final Conclusion: Revenue's appeal allowed; the appellate remand is set aside and the original order disallowing Cenvat credit in respect of capital goods where depreciation was claimed is restored.

Input tax credit revocation where selling dealer fails to pay tax - Provisional nature of input tax credit under Section 19(16) of the TNVAT Act - Proof of payment to selling dealer as entitlement to input tax credit - Burden on department to proceed against selling dealer for recovery of tax

Proof of payment to selling dealer as entitlement to input tax credit - Input tax credit revocation where selling dealer fails to pay tax - Provisional nature of input tax credit under Section 19(16) of the TNVAT Act - Burden on department to proceed against selling dealer for recovery of tax - Whether the assessing authority can revoke or demand reversal of input tax credit from a purchasing dealer who produces proof of having paid tax to the selling dealer - HELD THAT: - The Court held that where the purchasing dealer establishes that tax on the purchase was paid to the selling dealer at the time of purchase, the claim for input tax credit falls within the proviso to the statutory provision and cannot be summarily revoked on the ground that the selling dealer later failed to deposit the collected tax. The provisional character of input tax credit under the statutory provision does not empower authorities to revoke credit merely because the selling dealer has not paid the tax; the department's remedy in such circumstances is to proceed against the selling dealer for recovery of the tax. The court relied on the reasoning that if the purchasing dealer has shown proof of payment, liability to recover from the collecting seller must be fastened on the seller and not the purchaser, and therefore the impugned action invoking the provisional-credit clause against the purchaser on admitted facts was incorrect. [Paras 5, 6]

Input tax credit cannot be revoked from a purchasing dealer who has produced proof of payment to the selling dealer; the department must proceed against the selling dealer for recovery.

Proof of payment to selling dealer as entitlement to input tax credit - Burden on department to proceed against selling dealer for recovery of tax - Whether the notice impugned must be treated as a show-cause and the matters verified afresh by the authorities - HELD THAT: - The Court directed that the petitioner must produce all relevant purchase documents for verification and treat the notice as a show-cause notice. If verification discloses that tax was not paid for any purchase, the authority may levy the tax on appropriate persons. The direction requires the department to consider the petitioner's explanation and the produced documents and to pass appropriate orders on merits in accordance with law, thereby remitting factual/verification aspects to the authority for fresh consideration. [Paras 7]

Petitioner to produce purchase documents; notice to be treated as show-cause; authorities to verify and pass orders on merits in accordance with law.

Final Conclusion: The writ petitions are disposed of by upholding the principle that a purchasing dealer who proves payment to the selling dealer cannot be mulcted with reversal of input tax credit; the petitioner is directed to produce purchase documents and the authorities are directed to treat the notice as a show-cause, verify the claims and pass fresh orders on merits in accordance with law.

Requirement to decide second appeals on merits - dismissal for non-payment of pre-deposit - pre-deposit under section 73(4) of the Gujarat Value Added Tax Act - mechanical order lacking reasons - requirement of a reasoned order - remand for fresh consideration - quash and set aside

Requirement to decide second appeals on merits - dismissal for non-payment of pre-deposit - mechanical order lacking reasons - requirement of a reasoned order - pre-deposit under section 73(4) of the Gujarat Value Added Tax Act - remand for fresh consideration - Validity of the Tribunal's common orders directing pre-deposit and dismissing the second appeals without deciding matters on merits - HELD THAT: - The learned Tribunal, by its common order dated 22.7.2014, directed the appellant to deposit specified amounts by way of pre-deposit and, on non-deposit, dismissed the second appeals by order dated 22.9.2014. The Court found that the learned Tribunal did not adjudicate the appeals on merits and made no observations on the legality or validity of the first appellate authority's orders which had directed pre-deposit and dismissed appeals for non-payment. Except for paragraph 3, the Tribunal assigned no reasons and thus mechanically affirmed the pre-deposit directions without addressing the substantive contentions. Given that the second appeals were against orders dismissing appeals for non-payment of pre-deposit, the Tribunal was required to consider the legality of those directions and to pass a reasoned order, including consideration of the statutory scheme and, in particular, section 73(4) of the Gujarat Value Added Tax Act. For these deficiencies the impugned orders could not be sustained and the matters required remand for fresh adjudication in accordance with law. [Paras 7, 8]

Common orders dated 22.7.2014 and 22.9.2014 are quashed and set aside and the matters are remanded to the learned Tribunal to decide the appeals afresh, with a reasoned decision including consideration of the pre-deposit issue and section 73(4) of the Gujarat Value Added Tax Act, to be completed within two months.

Final Conclusion: Appeals allowed in part; Tribunal's common orders quashed and set aside and matters remanded for fresh, reasoned consideration of the pre-deposit directions (including under section 73(4) of the Gujarat VAT Act) within two months; interim deposit of 10% to be retained by the department subject to final outcome.

Interpretation of 'does not sell the goods so manufactured' in Section 3(4) of the TNGST Act, 1959 - tax on export sales - Article 286 restriction on State taxation - deemed export under Section 5(3) of the Central Sales Tax Act - constitutional supremacy over inconsistent statutory provisions

Interpretation of 'does not sell the goods so manufactured' in Section 3(4) of the TNGST Act, 1959 - tax on export sales - Article 286 restriction on State taxation - deemed export under Section 5(3) of the Central Sales Tax Act - Whether Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959 can be invoked to levy tax on goods manufactured in the State which are sold by way of export. - HELD THAT: - The Court, following its earlier decision in M/s. Tube Investments of India Limited v. State of Tamil Nadu, held that applying Section 3(4) to export sales would conflict with the constitutional bar under Article 286 and with the scheme treating certain transactions as deemed exports under Section 5(3) of the Central Sales Tax Act. The Court reasoned that the State lacks competence to impose tax on export sales and that any indirect imposition of tax on inputs used for exported goods would nullify the constitutional restriction. Applying the hierarchy of norms, a statutory provision cannot be interpreted or applied so as to infringe the constitutional limitation; accordingly, Section 3(4) cannot be invoked in relation to export sales of manufactured goods. The Court found the Tribunal's interpretation, which excluded export sales from the charge under Section 3(4), to be consistent with this principle and binding precedent, leaving no substantial question of law for this revision. [Paras 6, 8, 9]

Section 3(4) of the TNGST Act cannot be applied to export sales of goods manufactured in the State; the revision is dismissed.

Final Conclusion: Following this Court's precedent, tax cannot be levied under Section 3(4) on exported manufactured goods as such levy would contravene Article 286; the Revenue's revision is dismissed.

Right to personal hearing - principles of natural justice - mandatory personal hearing under Section 22(4) of TNVAT Act - premature adjudication - quashing for breach of natural justice - document production and personal hearing not empty formalities

Mandatory personal hearing under Section 22(4) of TNVAT Act - principles of natural justice - document production and personal hearing not empty formalities - Whether the impugned orders passed without granting the petitioner a personal hearing and without awaiting the expiry of the time granted are vitiated for breach of natural justice and the mandatory requirement under Section 22(4) of the TNVAT Act. - HELD THAT: - The Court found that the department had on 25.11.2014 granted the petitioner one month's time to consider documents which were communicated on 19.11.2014, and that the petitioner on 01.12.2014 specifically sought a personal hearing. Nevertheless, the final orders were passed on 12.12.2014, before the one month period granted had expired on 24.12.2014 and without affording the personal hearing. The Court emphasised that under Section 22(4) of the Act a personal hearing is mandatory and, following the Division Bench precedent cited, production of documents and grant of personal hearing are not empty formalities. In these circumstances the impugned orders were held to be legally unsustainable for having been passed without observing the mandatory requirement of personal hearing and thereby violating the principles of natural justice. The Court therefore directed that the petitioner be given an opportunity of personal hearing and that the authority thereafter pass appropriate orders in accordance with law. [Paras 6, 7]

Impugned orders dated 12.12.2014 set aside; petitioner to appear for personal hearing on 25.02.2015 and authority directed to grant personal hearing and thereafter pass fresh orders in accordance with law.

Final Conclusion: Writ petitions disposed by quashing the orders dated 12.12.2014 for failure to grant a mandatory personal hearing; matter remitted to the authority to afford personal hearing on 25.02.2015 and to pass fresh orders in accordance with law.

Principles of natural justice - right to personal hearing - personal hearing under Section 22(4) of the Act - remand for fresh assessment - acceptance of part payment to lift bank attachment - decision on merits and in accordance with law

Principles of natural justice - right to personal hearing - personal hearing under Section 22(4) of the Act - remand for fresh assessment - decision on merits and in accordance with law - Assessment orders passed without giving the petitioner an opportunity of personal hearing were vitiated by breach of principles of natural justice and required remand for fresh consideration. - HELD THAT: - The Court found that after the death of the petitioner's father and the petitioner taking charge of the business, the assessing authority ought to have afforded the petitioner an opportunity to make submissions before passing the assessment orders. On this ground of violation of the principles of natural justice, the impugned assessment orders were set aside and the matters remitted to the respondent for fresh adjudication. The respondent was directed to afford a personal hearing to the petitioner as provided under Section 22(4) of the Act and thereafter decide the matter afresh on merits and in accordance with law. The petitioner agreed to appear for personal hearing on 04.05.2015; if the petitioner fails to avail that opportunity, the authority is empowered to pass fresh orders on merits based on the available records. [Paras 4, 7, 8]

Impugned assessment orders set aside for breach of natural justice; matters remitted for fresh hearing under Section 22(4) and fresh decision on merits.

Acceptance of part payment to lift bank attachment - remand for fresh assessment - Interim relief by provisional acceptance of part payment and lifting of bank attachment was directed to facilitate the remand and fresh hearing. - HELD THAT: - The petitioner agreed to pay 10% of the tax amount as determined in the impugned orders for each assessment year. The Court directed the respondent to accept the 10% payment offered and, upon receipt thereof, to de-freeze the petitioner's bank account to enable the petitioner to participate in the fresh proceedings. This direction was made without adjudicating the merits of the assessments, to ensure that the petitioner could effectively present his case during the remand proceedings. [Paras 5, 7, 8]

Respondent directed to accept 10% of the determined tax as offered and to de-freeze the petitioner's bank account on receipt, to enable fresh proceedings.

Final Conclusion: Impugned assessment orders were set aside for violation of the principles of natural justice and remitted for fresh hearing and decision under Section 22(4) of the Act; provisional acceptance of 10% payment was directed and the bank account to be de-frozen on payment to enable the petitioner to participate in the remand proceedings.