TaxTMI Updates e-Newsletter
Apr 11,2020

Interim release of detained goods and conveyance on payment of tax and penalty and furnishing of undertaking - requirement of application of mind before invoking Section 130 confiscation at the threshold - distinction between detention under Section 129 and confiscation under Section 130 - necessity for material or recorded reasons to justify issuance of notice of confiscation - availability of judicial review under Article 226 of the Constitution

Interim release of detained goods and conveyance on payment of tax and penalty and furnishing of undertaking - distinction between detention under Section 129 and confiscation under Section 130 - Validity of the interim release ordered by the High Court and the consequence of the applicants availing that interim relief. - HELD THAT: - The Court recorded that by its earlier interim order the respondents were directed to release the detained goods and conveyance subject to payment of tax and penalty as computed by the authorities and subject to filing a solemn undertaking to make good any deficit liability. The writ applicants availed the interim relief and obtained release of the vehicle and goods on payment of the tax amount. The Court observed that the proceedings under the show cause notice issued in Form GST MOV-10 remain pending and shall proceed in accordance with law. The interim release accorded by the Court therefore stood implemented and did not preclude continuation of statutory proceedings. [Paras 4, 5]

Interim release on payment and undertaking upheld as implemented; release having been effected, consequential statutory proceedings to continue in accordance with law.

Requirement of application of mind before invoking Section 130 confiscation at the threshold - necessity for material or recorded reasons to justify issuance of notice of confiscation - availability of judicial review under Article 226 of the Constitution - Standards to be followed before issuing a notice of confiscation under Section 130 at the stage of detention/seizure and the effect of invoking the ratio of Synergy Fertichem Pvt. Ltd. - HELD THAT: - The Court referred to and permitted reliance on this Court's recent pronouncement in Synergy Fertichem Pvt. Ltd., which explains that authorities must examine the nature of the contravention and whether there is a conviction that the contravention was with an intent to evade tax before invoking confiscation at the threshold. Mere absence of one document or suspicion is generally insufficient; confiscation being penal in character requires material and a recorded basis for the belief. If challenged, the authority must disclose materials upon which its belief was formed so that a court can determine whether an honest and reasonable person could base a belief on those materials. The Court did not quash the show cause notice but left it open to the applicants to make good their case and to rely on the observations in paragraphs 99-104 of Synergy. [Paras 6, 7]

Applicants permitted to rely on the Synergy observations; requirement reiterated that invocation of confiscation at the threshold must be supported by material and recorded reasons; the validity of the particular show cause notice remains for adjudication in the pending proceedings.

Final Conclusion: Writ petition disposed: rule made absolute to the extent recorded - interim release already effected on payment and undertaking; applicants may rely on the High Court's observations in Synergy Fertichem (paras.99-104) and the pending show cause/ confiscation proceedings shall continue in accordance with law, allowing the applicants to challenge the notice on the stated standards.

Delay due to technical difficulty in filing appeal - limitation under Section 107(1) of the Tamil Nadu Goods and Service Tax Act, 2017 - quashing of order dismissing appeal as time-barred - remand for adjudication on merits

Delay due to technical difficulty in filing appeal - limitation under Section 107(1) of the Tamil Nadu Goods and Service Tax Act, 2017 - The petitioner's failure to file the appeal within the statutory period was attributable to unsuccessful attempts to upload the appeal memorandum on the respondent's website, and the impugned dismissal on the ground of limitation was not sustained. - HELD THAT: - The Court found that the delay in filing the appeal arose from the petitioner's attempt to upload the appeal memorandum through the Government website and consequent inability to do so, coupled with the petitioner's written representation about those difficulties. Taking these circumstances into account, the Court accepted the petitioner's contentions that the delay was caused by the technical/administrative difficulty in filing online and held that the Deputy Appellate Commissioner's dismissal of the appeal as time-barred under Section 107(1) was not justified. Having examined the records and submissions, the Court quashed the impugned order dated 9.7.2019 which had rejected the appeal on limitation grounds.

Impugned order dismissing the appeal as time-barred quashed.

Quashing of order dismissing appeal as time-barred - remand for adjudication on merits - The appeal is to be entertained and disposed of on merits by the Appellate Deputy Commissioner within a stipulated timeframe. - HELD THAT: - In consequence of quashing the order that dismissed the appeal as barred by limitation, the Court directed the Appellate Deputy Commissioner to take up the appeal filed by the petitioner and decide it on merits in accordance with law. The Court imposed a timeline for final disposal to ensure expeditious adjudication, mandating that the appellate authority pass its order within 45 days from receipt of the copy of the High Court's order. No separate order was considered necessary in the companion writ petition in view of this direction.

Appeal remanded to the Appellate Deputy Commissioner for adjudication on merits and to be disposed within 45 days.

Final Conclusion: The High Court quashed the appellate order dismissing the appeal as time-barred (the delay having resulted from the petitioner's unsuccessful attempt to upload the appeal memorandum) and directed the Appellate Deputy Commissioner to decide the appeal on merits within 45 days; both writ petitions disposed and connected miscellaneous petitions closed.

Detention of goods in transit under the CGST Act - show cause and adjudication under Section 129(3) of the CGST Act - scope of 'supply' under Section 7 of the CGST Act - permissibility of stock transfer and delivery challan under Rule 55 of the CGST Rules - release of detained goods on bank guarantee

Detention of goods in transit under the CGST Act - scope of 'supply' under Section 7 of the CGST Act - permissibility of stock transfer and delivery challan under Rule 55 of the CGST Rules - Validity of the detention order (Ext.P5) and the subsequent show cause notice (Ext.P7) - whether detention was without jurisdiction and whether the materials prima facie justified detention and issuance of notice demanding tax and penalty. - HELD THAT: - The Court examined the scheme of Sections 129 and 130 of the CGST Act and the record of reasons given in Ext.P5. A detention order under the proviso to Section 129(1) and a consequent notice under Section 129(3) are warranted where goods are being transported or stored in transit in contravention of the Act or Rules. Ext.P5 contained specific reasons concerning differing GSTINs of consignor and consignee and characterization of the movement as a stock transfer supported by delivery challan and e way bill. Whether those factual findings establish a contravention under the Act and Rules is a matter for adjudication by the detaining authority; on the material before the Court the detention could not be held to be without jurisdiction. The Court noted that the definition of 'supply' in Section 7 is not confined to sale and that contentions based on Rule 55 (regarding requirement of invoice for non supply movements) are matters to be raised and decided in the adjudication. Consequently, the correctness of the grounds for detention and the demand for tax and penalty must be determined by the 1st respondent in the statutory adjudication process rather than by interlocutory writ interference. [Paras 5, 6]

Detention and issuance of Ext.P7 could not be set aside as without jurisdiction; the question whether the transit contravened the Act/Rules is to be adjudicated by the competent authority on merits.

Show cause and adjudication under Section 129(3) of the CGST Act - release of detained goods on bank guarantee - Procedural relief and remand for fresh adjudication - release on bank guarantee upheld and the matter directed to be adjudicated afresh with opportunity to the appellant to file objections and be heard; limited protection in respect of encashment of the bank guarantee. - HELD THAT: - The Court directed that the earlier direction for release of the transit on furnishing a bank guarantee shall stand undisturbed. The appellant was afforded an opportunity to file objections to Ext.P7 and to appear for personal hearing before the 1st respondent, who must conduct an independent adjudication uninfluenced by observations in the writ proceedings and decide the tax/penalty demand after considering the appellant's objections. The authority was ordered to pass the adjudicatory order under Section 129(3) after taking into account those objections. As a protective measure, any bank guarantee furnished for release shall not be encashed until ten days after communication of the adjudication order to the appellant, thereby giving a short window for further remedies or compliance. [Paras 7, 8]

Matter remanded for fresh, independent adjudication by the 1st respondent with opportunity to the appellant to file objections and be heard; release on bank guarantee maintained and bank guarantee not to be encashed for ten days after communication of the adjudication order.

Final Conclusion: Writ appeal disposed: detention and show cause notice not quashed for want of jurisdiction; release of goods on bank guarantee left intact; matter remitted for fresh adjudication under Section 129(3) after giving the appellant opportunity to file objections and be heard, and bank guarantee protected from encashment for ten days after communication of the adjudication order.

Tax neutrality - deduction under section 80IA of the Act - prior period expenses and year of allowance - work-in-progress accounting

Tax neutrality - deduction under section 80IA of the Act - prior period expenses and year of allowance - work-in-progress accounting - Deletion of the addition of Rs. 4,10,06,609/- in respect of Project Facilities Expenses upheld as tax neutral and correctly deleted by the Tribunal. - HELD THAT: - The Assessing Officer disallowed the claimed expenditure on the sole ground that the amount related to an earlier year and therefore was not deductible in the assessment year. The assessee's case, supported before the Commissioner (Appeals), was that the expenditure had been incurred earlier and carried as work-in-progress (non-current asset) and was charged to profit and loss when the contractual obligation was completed, and that the entitlement to deduction under section 80IA of the Act was not disputed. The Commissioner (Appeals), relying on precedent, held that the dispute was tax neutral because any disallowance would enhance the eligible income for deduction under section 80IA and thereby not alter the total taxable income. The Tribunal concurred with that conclusion. The High Court found no legal infirmity in this approach: since the Assessing Officer did not contest the assessee's eligibility for section 80IA, a disallowance confined to shifting the year of expense would be offset by a corresponding increase in the section 80IA deduction, leaving total income unchanged. Accordingly, the Tribunal was justified in treating the issue as tax neutral and deleting the addition.

The deletion of the addition was upheld and the appeal dismissed.

Final Conclusion: The Tribunal's order deleting the addition of Rs. 4,10,06,609/- was affirmed as the dispute was tax neutral given the undisputed entitlement to deduction under section 80IA; the appeal is dismissed.

Unexplained cash deposits - onus of proof on assessee - exclusion of capital and non taxable receipts - benefit of cash withdrawals - estimation of income - Peak Credit Method - TCS/TDS credit verification

Unexplained cash deposits - onus of proof on assessee - exclusion of capital and non taxable receipts - benefit of cash withdrawals - estimation of income - Peak Credit Method - Whether the addition of deposits reflected in two undisclosed bank accounts should be sustained as unexplained investment or partially excluded/estimated. - HELD THAT: - The undisputed fact is that cash deposits were made in two bank accounts which were not disclosed in the financial statements; consequently the burden rested on the assessee to prove that the credits were not taxable income. The assessee's supporting documents claiming agricultural receipts and other non taxable receipts were found to contain material discrepancies and were not sufficient to discharge the onus. Equity required that genuinely non income items and capital or non taxable credits not be taxed. The Tribunal therefore excluded identified items (receipts from specified persons, pay order reversal, bank reversals and cash withdrawals re deposited) from the addition, and treated other bank receipts which could not be established as assessee's income by applying a reasonable estimation of profit at 10% to arrive at taxable amount. On that basis the addition was reduced and the balance addition confirmed. The Tribunal accepted the principle of excluding capital/non taxable receipts and allowing benefit for cash withdrawals, while applying estimation where receipts could not be satisfactorily traced to non taxable sources. [Paras 5, 6]

Addition confirmed in part; specified credits aggregating to Rs.13,07,756 and certain banking receipts treated by estimating profit @10% excluded from income calculation, with the balance addition of Rs.20,57,059 confirmed; ground partly allowed.

TCS/TDS credit verification - Whether the assessee is entitled to credit of TCS of Rs.2,71,726 as reflected in Form 26AS. - HELD THAT: - The Tribunal admitted the additional ground seeking grant of TCS credit and directed the Assessing Officer to verify the entries reflected in Form 26AS and, if found correct in law, grant the appropriate credit. The direction is procedural and requires verification by the AO rather than an adjudication on the merits by the Tribunal. [Paras 7]

Additional ground allowed for statistical purposes and AO directed to verify and grant TCS credit as per law.

Final Conclusion: Appeal partly allowed: additions on account of unexplained bank credits sustained in part after excluding specified non income items and estimating profit on certain receipts; direction issued to the Assessing Officer to verify and grant TCS credit reflected in Form 26AS.

Application of section 40(a)(ia) to capitalized expenditure and depreciation - claim of deduction under section 10A where omission in return is inadvertent - eligibility for deduction under section 10A by a distinct unit versus expansion of existing unit - selection and exclusion of comparables in transfer pricing benchmarking - risk adjustment in transfer pricing comparability analysis - treatment of foreign currency and communication expenses for computation of deduction under section 10A

Application of section 40(a)(ia) to capitalized expenditure and depreciation - Disallowance of depreciation on capitalized computer software by invoking section 40(a)(ia). - HELD THAT: - Tribunal held that section 40(a)(ia) operates where an assessee claims an expenditure and tax is not deducted at source; it does not apply where the payment has been capitalized and the assessee claims depreciation rather than the payment as an immediate business expenditure. The Tribunal relied on the coordinate decision of the Bangalore ITAT in Kawasaki Microelectronics and noted that Revenue did not place any contrary binding authority to distinguish or overturn that view. Consequently the AO erred in disallowing depreciation by invoking section 40(a)(ia). [Paras 5]

Depreciation on capitalized software allowed; disallowance under section 40(a)(ia) set aside.

Claim of deduction under section 10A where omission in return is inadvertent - Allowability of deduction under section 10A for Unit I where the claim was omitted from the return but shown in computation (inadvertent omission). - HELD THAT: - Tribunal accepted the assessee's explanation of inadvertent omission because the working and details of the section 10A claim were placed on record (in computation). The Tribunal followed precedents of the Bombay High Court holding that appellate authorities are not fettered from entertaining claims not made before the AO, and observed that Revenue did not produce contrary binding authority. For these reasons the AO/DRP were held not justified in denying the 10A claim for Unit I, subject to compliance with other statutory conditions for deduction. [Paras 8]

Deduction under section 10A for Unit I allowed; AO/DRP direction to grant deduction subject to conditions.

Eligibility for deduction under section 10A by a distinct unit versus expansion of existing unit - Whether Unit II in Bangalore is a new and distinct unit eligible for deduction under section 10A (or an expansion of Unit I). - HELD THAT: - Tribunal followed its earlier coordinate-bench decision for the assessee in A.Y. 2009-10 which had examined STPI approvals, separate licenses, separate returns and employee composition and concluded Unit II was a separate and independent unit. Revenue did not point to any distinguishing facts or contrary binding decision. On identical facts, the Tribunal held there was no justification to deny section 10A deduction for Unit II and directed grant of the deduction. [Paras 12]

Unit II treated as a new and separate unit; deduction under section 10A allowed.

Selection and exclusion of comparables in transfer pricing benchmarking - Validity of DRP direction to exclude Infosys Ltd. (and certain other entities) from the set of comparables used to determine ALP. - HELD THAT: - DRP excluded Infosys as a comparable applying size/turnover filters and relevant precedent guidance (including the coordinate bench decision in the assessee's earlier year), observing that significant turnover disparity made Infosys non-comparable. The Tribunal found no infirmity in DRP's reasoning and noted absence of any contrary binding authority or demonstration that the earlier Tribunal decision had been set aside. Consequently the DRP direction excluding Infosys was upheld and Revenue's challenge rejected. [Paras 20]

DRP's exclusion of Infosys (and related comparable adjustments) upheld; Revenue's grounds dismissed.

Risk adjustment in transfer pricing comparability analysis - Appropriateness of DRP's direction to allow a percentage risk adjustment (guidance to TPO to decide percentage, with reference to 1% in precedent). - HELD THAT: - DRP directed the TPO to decide the percentage of risk adjustment after considering cited authorities (including the Hello Soft decision where 1% was allowed). Revenue failed to point to any contrary binding decision or error in DRP's approach. The Tribunal also observed that exclusion of Infosys from comparables (upheld above) would itself affect arms length conclusions. On this basis no interference with DRP's direction on risk adjustment was warranted. [Paras 23]

DRP's direction on risk adjustment sustained; Revenue's challenge dismissed.

Treatment of foreign currency and communication expenses for computation of deduction under section 10A - Whether expenditure in foreign currency and communication expenses should be excluded from both export turnover and total turnover for computing deduction under section 10A. - HELD THAT: - DRP followed the Karnataka High Court decision in Tata Elxsi and the Tribunal's earlier view in the assessee's own case (relying on Supreme Court authority in HCL Technologies) that such expenses must be excluded from both export turnover and total turnover when computing the section 10A deduction. Revenue did not place any contrary binding precedent; the Tribunal found no reason to interfere with DRP's direction to recompute deduction accordingly. [Paras 26]

DRP's direction to exclude specified expenses from both export and total turnover for section 10A computation upheld; Revenue's grounds dismissed.

Eligibility for deduction under section 10A by a distinct unit versus expansion of existing unit - For A.Y. 2011-12 whether Unit II is a new unit eligible for section 10A deduction (issue identical to AY 2010-11 decision). - HELD THAT: - Parties conceded the issue was identical to that decided for A.Y. 2010-11. Applying the same reasoning and the Tribunal's earlier findings, the Tribunal allowed the claim for Unit II for A.Y. 2011-12. [Paras 33]

Assessee's appeal allowed; Unit II treated as distinct unit for section 10A purposes for A.Y. 2011-12.

Selection and exclusion of comparables in transfer pricing benchmarking - DRP's directions in A.Y. 2011-12 to include Akshay Software Technologies Ltd. as comparable and to exclude ICRA Techno Analytics Ltd. and Infosys Ltd. as non-comparables. - HELD THAT: - DRP examined annual reports, segmental data issues and size/turnover disparities and directed inclusion/exclusion accordingly. The Tribunal found no fallacy in DRP's exercise, observed that Revenue did not identify any binding contrary authority or distinguishing facts, and therefore declined to interfere with DRP's directions. [Paras 41]

DRP's directions on inclusion/exclusion of comparables for A.Y. 2011-12 upheld; Revenue's appeal dismissed.

Final Conclusion: The Tribunal partly allowed the assessee's appeal for A.Y. 2010-11 (allowing depreciation on capitalized software and section 10A deductions for Unit I and Unit II), dismissed Revenue's appeal for A.Y. 2010-11 (upholding DRP's transfer-pricing directions including exclusion of certain comparables, allowance of risk adjustment guidance and method of computing section 10A deduction), allowed the assessee's appeal for A.Y. 2011-12 (Unit II eligible for section 10A) and dismissed Revenue's appeal for A.Y. 2011-12. Cross-objections were held academic and dismissed.

Disallowance under section 40A(3) - Rule 6DD - business exigency / business expediency - genuineness and identity of the payee - aggregation of cash payments

Disallowance under section 40A(3) - aggregation of cash payments - genuineness and identity of the payee - business exigency / business expediency - Rule 6DD - Whether the disallowance under section 40A(3) of the Act in respect of cash payments made to various lorry drivers (aggregated by the Revenue through transporters) was sustainable where the payments were shown to be genuine, payees identifiable and made due to business exigency. - HELD THAT: - The Tribunal observed that the payments were made to different lorry drivers against separate LR receipts and the identity of recipients and genuineness of payments were confirmed by the recipients in response to notices issued under section 133(6). Applying the ratio of the Supreme Court in Attar Singh Gurmukh Singh and the decisions of High Courts (including the jurisdictional Gujarat High Court in Anupam Tele Services), the Tribunal held that section 40A(3) is to be read along with Rule 6DD and does not operate as an absolute bar where business expediency, genuineness and identifiability of the payee are established. The Tribunal rejected the approach of aggregating separate cash payments to different drivers into a single sum payable to a transporter where the assessee demonstrated that payments were made on behalf of transporters to distinct drivers in the ordinary course of business delivery operations. Given the nature of the assessee's trading activity which necessitated on-the-spot cash payments to drivers for delivery, and the confirmations and ledger evidence obtained, the conditions for invoking the protective reading of section 40A(3) with Rule 6DD were satisfied and disallowance was not warranted. [Paras 8, 9, 13, 14]

Disallowance under section 40A(3) deleted and the grounds of appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for Assessment Year 2009-10, holding that where cash payments to identifiable payees are genuine and made due to business exigency, the rigours of section 40A(3) (read with Rule 6DD) do not mandate disallowance; accordingly the disallowance made by the revenue was deleted and the appeal was allowed.

Revision jurisdiction under section 263 - Applicability of section 115BBE - Set-off of business loss against income assessed under section 115BBE prior to AY 2017-18 - CBDT Circular No. 11/2019 on set-off against deemed income - Assessment order not erroneous or prejudicial to the interest of Revenue

Applicability of section 115BBE - Set-off of business loss against income assessed under section 115BBE prior to AY 2017-18 - CBDT Circular No. 11/2019 on set-off against deemed income - Whether the assessee was entitled to set off current year business loss against the surrendered income and whether the PCIT was justified in invoking section 263 to direct reassessment by disallowing such set-off. - HELD THAT: - The Tribunal examined the accounting and computation filed by the assessee and noted that the surrendered income of Rs. 95 lakhs was included in return after adjusting current year depreciation and resulting business loss. For the assessment year 2014-15 the amended restriction on set-off in section 115BBE(2) (prohibiting set-off of losses) was not in force (it became effective from 01.04.2017 for AY 2017-18 onwards). The CBDT Circular No. 11/2019 consistently clarifies that for assessment years prior to 2017-18 an assessee is entitled to claim set-off of losses against income referred to in sections 68-69D and that the legislative insertion of 'or set off of any loss' w.e.f. 01.04.2017 removed earlier ambiguity. Applying that clarification, the Tribunal held that for AY 2014-15 the assessee could legitimately set off the business loss against the surrendered income. The Tribunal further noted that the assessee (a company) had in any event discharged tax at the rate applicable to such income. Consequently, the Assessing Officer's order which allowed set-off was not erroneous or prejudicial to the revenue and there was no valid basis for the PCIT to exercise revisionary jurisdiction under section 263 to set aside the assessment. [Paras 8, 9, 10, 11]

PCIT wrongly exercised jurisdiction under section 263; the assessment order is not erroneous or prejudicial to the interest of Revenue and the revision order is quashed.

Final Conclusion: Both appeals are allowed; the orders passed by the Pr. Commissioner of Income Tax under section 263 are quashed and the assessment orders restored.

Rectification under section 154 of the Income tax Act - mistake apparent on the record - rectification not a forum for re argument on merits - finality of Tribunal's order - abuse of process

Rectification under section 154 of the Income tax Act - mistake apparent on the record - rectification not a forum for re argument on merits - finality of Tribunal's order - abuse of process - Whether the CIT(A) was justified in rejecting the assessee's application for rectification under section 154 on the ground that there was no mistake apparent on the record and the matter had attained finality after the Tribunal's order. - HELD THAT: - The Tribunal held that rectification under section 154 is confined to obvious and patent mistakes and cannot be invoked to re open questions which are debatable or require a long drawn process of reasoning. The CIT(A) had examined the submissions and the material on record and recorded reasons why the exemption claimed under section 54F was not allowable; those conclusions did not constitute a glaring or apparent mistake. Further, the issue had been effectively finally adjudicated when the appeals/cross objections were decided, and the assessee had an opportunity earlier to contest the matter by preferring an appeal or raising it in cross objections but did not do so. Permitting rectification at that stage would amount to a second effort to re argue the merits and would amount to an abuse of process. In view of these considerations, the rectification application was rightly rejected as not falling within the narrow scope of section 154. [Paras 7, 8, 9]

The CIT(A)'s rejection of the section 154 rectification application was correct and the assessee's appeal is dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s rejection of the rectification application under section 154, holding that no mistake apparent on the record was shown, the matter had attained finality after the Tribunal's earlier order, and the application constituted an impermissible re argument and abuse of process; the assessee's appeal is dismissed.

Extinguishment or relinquishment of rights as transfer - right to enforce specific performance as a capital asset - receipt of liquidated damages characterized as capital gains - long term capital gains determined by period of holding - claim of exemption under section 54F

Extinguishment or relinquishment of rights as transfer - right to enforce specific performance as a capital asset - receipt of liquidated damages characterized as capital gains - Liquidated damages received on cancellation of agreement of sale constitute capital gains arising from extinguishment/relinquishment of capital asset rights, and not income from other sources. - HELD THAT: - The Tribunal concurred with the first appellate authority that the assessee, having entered into an agreement for sale and paid advance, acquired a right to enforce specific performance which falls within the definition of 'capital asset'. On cancellation of the agreement and payment of liquidated damages, the assessee relinquished/extinguished those rights. The Tribunal followed the reasoning of the jurisdictional High Court in H Anil Kumar that relinquishment of the right of specific performance amounts to 'transfer' within the wide ambit of section 2(47) and that consideration received for giving up such right is assessable as capital gains. The assessment officer's view that the payment was merely damages for breach and therefore taxable as income from other sources was rejected: the cancellation agreement treated the sum as liquidated damages tied to extinguishment of the right, and the existence of contractual clauses (including clause for conversion and specific performance remedies) supported characterization as transfer of a capital asset. The Tribunal distinguished the Supreme Court decision in Balbir Singh Maini on facts, noting that that case involved an unregistered joint development agreement and resulting absence of enforceable rights; no similar legal infirmity was found in the present agreement. Consequently, the Tribunal held the receipt to be capital in nature. [Paras 10, 11, 12, 13, 14]

The liquidated damages are capital gains arising from relinquishment/extinguishment of the assessee's right to specific performance and not income from other sources.

Long term capital gains determined by period of holding - claim of exemption under section 54F - The gain arising on cancellation is long term in character and the assessee is entitled to claim exemption under section 54F, subject to statutory conditions. - HELD THAT: - The Tribunal accepted the appellate finding that the date for computing period of holding is governed by the agreement's completion date clause. Even if completion date as per the agreement (31/03/2006) is taken, the cancellation on 20/04/2009 was beyond 36 months; therefore the relinquishment resulted in long term capital gain. Having classified the receipt as long term capital gains, the Tribunal sustained the CIT(A)'s direction to allow the assessee to claim exemption under section 54F, without disturbing the entitlement on the facts before it. [Paras 12, 14]

The gain is long term and the assessee's claim for exemption under section 54F was upheld.

Final Conclusion: The revenue's appeal is dismissed; the CIT(A)'s order holding the liquidated damages to be long term capital gains arising from relinquishment/extinguishment of the assessee's right to specific performance and allowing deduction under section 54F is affirmed.

Section 10(23FB) - exemption to income of Venture Capital Fund from investment in a Venture Capital Undertaking - Venture Capital Fund Regulations - relevance of status at time of investment and permissible subsequent listing/amalgamation - pass through status / determinate trust - taxation in hands of beneficiaries under sections 61/63 - treatment of capital gains on amalgamation/listing - non split of capital gains on time basis - notional interest - accrual, computation and taxability - Section 10(38) - long term capital gain exemption held academic

Section 10(23FB) - exemption to income of Venture Capital Fund from investment in a Venture Capital Undertaking - Venture Capital Fund Regulations - relevance of status at time of investment and permissible subsequent listing/amalgamation - treatment of capital gains on amalgamation/listing - non split of capital gains on time basis - Whether the assessee is entitled to exemption under Section 10(23FB) in respect of capital gains arising on sale of shares received on amalgamation of an unlisted VCU into a listed company, and whether such capital gains can be split between pre and post amalgamation periods. - HELD THAT: - The Tribunal accepted that the assessee qualifies as a Venture Capital Fund under the Explanation to section 10(23FB) and that the VCF Regulations govern the nature of permissible investments at the time of investment. The Regulations envisage investment in unlisted VCUs and also contemplate situations where investments may later be listed (including IPO subscriptions and preferential allotments), and the deleted restrictive condition for exit within one year demonstrates that subsequent listing or amalgamation does not ipso facto violate the VCF Regulations. The CIT(A) had proposed splitting the capital gains into the portion accrued up to amalgamation and the portion after amalgamation; the Tribunal found that capital gains are not a period income amenable to temporal apportionment and that, once the fund qualifies under section 10(23FB), the entire income arising from the investment in the VCU is exempt. Consequently the question of splitting the capital gain on a time basis was rejected and the full capital gain was held exempt under section 10(23FB). [Paras 18, 19, 20]

The assessee's entire capital gain arising on sale of shares received on amalgamation is exempt under Section 10(23FB); splitting the capital gain into pre and post amalgamation portions is not permissible.

Pass through status / determinate trust - taxation in hands of beneficiaries under sections 61/63 - Whether the fund is a determinate (contributory/revocable) trust such that income taxed in hands of beneficiaries and the assessee should not be taxed on the same income. - HELD THAT: - The Tribunal noted the assessee's submissions and the CIT(A)'s finding that the trust deed and supporting material established that beneficiaries were identifiable and that beneficiaries had offered their shares of income in their returns. The Tribunal observed that the CIT(A) correctly relied on principles that a trust is determinate if beneficiaries and their shares are ascertainable (as reflected in relevant authority and Circular). Revenue did not challenge the CIT(A)'s conclusion that the assessee should not be taxed on income already offered by beneficiaries. On these facts the Tribunal upheld the pass through/determinate trust treatment and the consequent non taxability of the assessee on that same income. [Paras 21, 22, 23]

The fund is to be treated as a determinate/revocable trust with pass through status; income offered by beneficiaries need not be taxed again in the hands of the assessee.

Section 10(38) - long term capital gain exemption held academic - Whether the question of exemption under Section 10(38) required adjudication. - HELD THAT: - Having held that the assessee's income is exempt under Section 10(23FB), the Tribunal treated examination of exemption under Section 10(38) as unnecessary and academic. No adjudication on Section 10(38) was undertaken because the primary entitlement under Section 10(23FB) resolved the dispute. [Paras 12, 24]

The issue of exemption under Section 10(38) is academic and was not examined further.

Notional interest - accrual, computation and taxability - Section 10(23FB) - exemption to interest income from VCUs - Whether the notional interest computed by the Assessing Officer on the loan to Innovative B2B Logistics Solutions Ltd. is taxable in the hands of the assessee or exempt like interest from other VCUs. - HELD THAT: - The AO computed notional interest applying a notional rate and declined exemption on the ground that he could not tax the investors. The Tribunal held that the AO's approach was contrary to law: loan/interest treatment depends on contractual terms and on the consistent accounting policy followed by the assessee. As the AO had allowed exemption under Section 10(23FB) for interest actually earned from other VCUs, the notional interest computed on the disputed loan must receive the same treatment. Accordingly the notional interest so computed is to be exempt to the same extent as interest from other VCUs and not taxable in the assessee's hands. [Paras 10, 25]

The notional interest computed by the AO on the loan must be granted the same exemption treatment as interest from other VCUs and is not taxable in the hands of the assessee.

Appellate observations on taxation in hands of beneficiaries - non directional observation - Whether the CIT(A) exceeded jurisdiction by observing that taxability of capital gains and interest should be examined in the hands of ultimate beneficiaries. - HELD THAT: - The Tribunal noted that the CIT(A) made only observational remarks, without issuing directions, and those observations were implicitly supportive of the decision that the incomes were not taxable in the assessee. The Tribunal found no ground to interfere with such observations. [Paras 26]

No interference with the CIT(A)'s observations; they were not ultra vires or prejudicial and did not constitute a jurisdictional excess.

Final Conclusion: The Revenue's appeal is dismissed and the assessee's cross objection is treated as allowed: the Tribunal holds that (i) the assessee qualifies for exemption under Section 10(23FB) and the entire capital gain on sale of shares received on amalgamation is exempt for AY 2015 16, (ii) the fund is a determinate/pass through trust so income already offered by beneficiaries should not be taxed in the assessee's hands, (iii) the question under Section 10(38) is academic, and (iv) the notional interest computed by the AO on the disputed loan shall receive the same exemption treatment as interest from other VCUs.

Long-term capital gain vs short-term capital gain - Definition of short-term capital asset based on holding period - Right under Joint Development Agreement as a capital asset/right to obtain flats - Date of transfer under the definition of transfer - effect of agreement to sell coupled with part payment - Allowability of deduction under Section 54 - reckoning one-year period from date of transfer

Long-term capital gain vs short-term capital gain - Definition of short-term capital asset based on holding period - Right under Joint Development Agreement as a capital asset/right to obtain flats - Capital gain arising on sale of 23 flats is long-term capital gain and not short-term capital gain. - HELD THAT: - The Tribunal held that the assessee's interest was not the completed flats but the right to obtain flats under the Joint Development Agreement (JDA) dated 16.12.2010. That right accrued on execution of the JDA and remained with the assessee until the sale in F. Y. 2014-15; since it was held for more than thirty-six months immediately preceding the date of transfer, it does not fall within the definition of short-term capital asset. The Tribunal relied on the assessment record which records that the capital gain on transfer as per the JDA had been offered in A. Y. 2011-12 and that the assessee's right arose on 16.12.2010, and concluded there was no infirmity in the CIT(A)'s finding that the gain is LTCG. [Paras 4]

The capital gain is long-term in nature; the order of the CIT(A) on this point is upheld.

Allowability of deduction under Section 54 - reckoning one-year period from date of transfer - Date of transfer under the definition of transfer - effect of agreement to sell coupled with part payment - Deduction under Section 54 is allowable; the date of the agreement (date of transfer for relevant purposes) is to be considered for reckoning the one year period. - HELD THAT: - The Tribunal considered whether the period specified in Section 54 is to be counted from the date of sale deed or from the date of agreement/transfer. Noting the chart of agreements, possession/transfer and sale deeds prepared by the CIT(A) (with latest agreement/possession dated 27.11.2014) and no contrary pleading by the Revenue, the Tribunal followed the reasoning of the Apex Court in Sanjeev Lal & Smt. Shail Moti Lal that an agreement to sell coupled with part payment can extinguish rights of the vendor and create rights in the vendee so as to constitute transfer for the purposes of Section 54. Applying that principle, the acquisition of the new asset on 10.01.2014 falls within the permissible period and the CIT(A)'s allowance of deduction under Section 54 was sustained. [Paras 5, 6]

Deduction under Section 54 is allowable; the CIT(A)'s order on this point is affirmed.

Final Conclusion: Revenue's appeal is dismissed; the Tribunal affirms that the capital gain is long-term (LTCG) because the assessee's right under the JDA accrued on 16.12.2010 and was held for over thirty six months, and that deduction under Section 54 is allowable by treating the agreement/transfer date as the relevant date for computing the one year period.

Treatment of unearned revenue for tax purposes - deductibility of provision for liquidated damages as business expenditure - treatment of employer-paid school fees as perquisites and linkage to salary for tax assessment - verification of contra entries in foreign currency expenditure (technical training) - transfer pricing adjustments for marketing support, warranty support and technical support services - effect of an Advance Pricing Agreement on rollback years and choice of most appropriate method - allowability of write offs of TDS receivables and bad debts subject to prior recognition of income - allowability of utilisation from provisions for foreseeable losses where provisions were earlier added back - finality of DRP directions where Revenue did not appeal

Treatment of unearned revenue for tax purposes - Deletion of addition made by AO on account of unearned revenue. - HELD THAT: - The Tribunal found parity of facts with the coordinate bench decision in the assessee's earlier year and followed that finding. The earlier coordinate-bench conclusion was that where contractual terms and subsequent tax treatment in later years show the unearned revenue has been offered in subsequent years, the addition is not warranted. On that basis the Tribunal directed deletion of the addition in A.Y. 2011-12 and, applying the same reasoning, allowed the corresponding ground for A.Y. 2012-13. [Paras 13, 53]

Addition on account of unearned revenue deleted for the years under appeal.

Deductibility of provision for liquidated damages as business expenditure - Allowability of provision for liquidated damages claimed as business deduction. - HELD THAT: - Following the coordinate-bench reasoning applied in earlier years, the Tribunal accepted that liquidated-damages liability arose on breach and was ascertainable and regularly provided for in the assessee's books. Reliance was placed on the principle that a business liability which has definitely arisen in the accounting year is deductible even if quantification/discharge occurs later, and on factual findings that the assessee followed a consistent accounting practice and adjusted accounts when actual payments/remissions occurred. On parity of facts the additions made by the AO were directed to be deleted. [Paras 30]

Addition for provision for liquidated damages deleted.

Treatment of employer-paid school fees as perquisites and linkage to salary for tax assessment - Remand to AO to verify whether employer-paid school fees were treated as perquisites in employees' hands and decide the issue afresh. - HELD THAT: - The Tribunal held that if school fees paid by the employer are treated as perquisites, they assume the character of salary and must be examined as such. On finding factual parity with the earlier year, the Tribunal restored the matter to the AO to examine whether the school fees were treated as perquisites in the hands of employees and to decide after giving the assessee a reasonable opportunity. [Paras 32]

Issue restored to AO for verification; treated as allowed for statistical purposes.

Verification of contra entries in foreign currency expenditure (technical training) - Remand to AO to examine ledger accounts and verify whether the technical training expenditure entries are contra entries and delete addition if verified. - HELD THAT: - On review of the documentary material, including a chartered accountant's certificate showing certain amounts were contra entries, the Tribunal found that complete ledger accounts had not been examined below. In the interest of justice the matter was remitted to the AO to verify the ledger accounts and, if confirmed as contra entries, delete the addition after affording the assessee an opportunity to be heard. [Paras 34]

Issue restored to AO for verification; treated as allowed for statistical purposes.

Transfer pricing adjustments for marketing support, warranty support and technical support services - effect of an Advance Pricing Agreement on rollback years and choice of most appropriate method - Disallowance/TP adjustments in respect of marketing support services, warranty support services and technical/telecom support services deleted or remitted for computation consistent with coordinate-bench directions and the APA. - HELD THAT: - For marketing support services the Tribunal followed the coordinate-bench direction that the cost of the marketing team be bifurcated based on revenue attributable to AEs vis-a -vis the assessee and restored the issue to AO/TPO for fresh examination after the assessee submits India-specific P&L and supporting documents. For warranty and technical support services the Tribunal accepted the coordinate-bench view to aggregate the TSS segment with the main network division for bench-marking, and directed deletion of the TP adjustments where facts were identical. The Tribunal noted the existence of an Advance Pricing Agreement applicable to rollback years and relied on its terms (including TNMM and specified PLI) to render certain grievances infructuous and to guide benchmarking. [Paras 39, 41, 42, 48]

TP adjustments set aside/directed to be recomputed or deleted in accordance with coordinate-bench findings and APA; ground allowed.

Finality of DRP directions where Revenue did not appeal - Revenue appeal disallowed where DRP directions in an earlier year had attained finality and facts were identical. - HELD THAT: - The Tribunal observed that the DRP had directed deletion of certain disallowances in the immediately preceding year and the Revenue did not challenge those directions; consequently, the DRP findings had attained finality. Given identical facts and circumstances in the year under appeal, the Tribunal declined to interfere with the DRP's conclusions and dismissed the Revenue's grounds relating to moulds, tooling, project equipment/component write-offs and repair and maintenance disallowances. [Paras 44, 45]

Revenue's appeal on those disallowances dismissed.

Allowability of write offs of TDS receivables and bad debts subject to prior recognition of income - Remand to AO to verify whether the assessee had initially recognised the gross receipts and subsequently wrote off the TDS-related deficit, and allow deduction subject to verification. - HELD THAT: - Following a coordinate-bench remand in an earlier year, the Tribunal directed verification by the AO whether the assessee had offered the gross invoice amount as income when services were rendered or goods dispatched and subsequently written off the deficit attributable to TDS/nonreceipt of TDS certificates. The DRP's specific queries (whether income was offered gross, whether TDS credit was claimed earlier, and details of TDS deductors) were noted; upon compliance the AO was to allow the write-off where conditions were met. [Paras 58, 62]

Matter remitted to AO for verification and decision in accordance with earlier coordinate-bench directions; treated as allowed for statistical purposes.

Allowability of utilisation from provisions for foreseeable losses where provisions were earlier added back - Deletion of addition relating to disallowance of utilisation from provision for foreseeable losses; write-off allowed. - HELD THAT: - The Tribunal examined the assessee's accounting treatment and movement in provisions across years, noting that provisions for foreseeable loss on contracts had been created and earlier added back in computation of income, while actual utilisation/write-backs were subsequently claimed. Finding consistent accounting practice and that write backs had been accepted as income earlier, the Tribunal directed deletion of the addition and allowed the claim for utilisation from provisions. [Paras 74, 78]

Addition deleted; utilisation from provision for foreseeable losses allowed.

Effect of an Advance Pricing Agreement on rollback years and choice of most appropriate method - Challenges to exclusion of certain comparables rendered infructuous by the terms of the APA; revenue appeal on comparable selection dismissed. - HELD THAT: - The Tribunal noted the APA entered into by the assessee and CBDT, which applied to rollback years and specified TNMM with a specified PLI threshold for Category 2 transactions. In view of the APA's applicability and specified benchmarking approach, the Revenue's grievance regarding exclusion of comparables was held to have become infructuous and the Revenue's appeal dismissed. [Paras 47, 48, 49]

Revenue's appeal on exclusion of comparables dismissed as infructuous in light of the APA.

Final Conclusion: The Tribunal allowed the assessee's appeals in part and remitted certain factual matters to the Assessing Officer/TPO for verification in accordance with coordinate-bench directions and the terms of an applicable APA; specific additions for unearned revenue, provision for liquidated damages, certain TP adjustments and utilisation of provisions for foreseeable losses were deleted or directed to be recomputed/verified, while issues concerning employer paid school fees and technical training expenditure were restored to the AO for factual examination; the Revenue's appeal was dismissed where DRP directions had attained finality or the APA rendered grievances infructuous.

Disallowance under section 14A read with Rule 8D - no disallowance where no expenditure relatable to tax exempt income and no interest claimed - burden to prove creditworthiness and genuineness of credits under section 68 - advances against property substantiated by bank transactions, confirmations and summoned party replies - classification of land as agricultural/rural for long term capital gains - municipal limit (8 KMs) - precedence of Naib Tehsildar certificate/land revenue record over inspector's estimation

Disallowance under section 14A read with Rule 8D - no disallowance where no expenditure relatable to tax exempt income and no interest claimed - Deletion of disallowance computed under section 14A read with Rule 8D in respect of exempt dividend income. - HELD THAT: - The Assessing Officer made a notional disallowance under section 14A read with Rule 8D(2)(iii) on the basis of total investments despite the assessee having declared only exempt dividend of Rs. 51,988 and not claiming any interest expenditure. The assessee's actual claimed expenses (audit fee, legal fee, bank charges) were not shown to be related to earning of exempt income or to investment activity, and there were no fresh investments in the year. The Tribunal concurred with the CIT(A)'s finding that, in the absence of expenditure attributable to earning exempt income or any interest claim, the Rule 8D disallowance was not attracted and the AO's notional addition was unsustainable. [Paras 7]

Order of the CIT(A) deleting the Rule 8D disallowance is upheld.

Burden to prove creditworthiness and genuineness of credits under section 68 - advances against property substantiated by bank transactions, confirmations and summoned party replies - Deletion of addition under section 68 in respect of amounts shown as advances against property where confirmations, PANs, bank evidence and replies to summons were on record. - HELD THAT: - The AO added amounts as unexplained credits for want of written agreements and fuller proof of creditworthiness. The assessee produced confirmations with PANs, bank evidence showing payments by banking channels, and the AO had issued summons under section 131 to the payers who furnished ITRs, balance sheets and bank statements. The CIT(A) accepted that the onus under section 68 stood discharged by the combined evidence (confirmed ledger entries, bank transactions and documents produced by the payers) and that there was no material to show the amounts were for any other purpose. The Tribunal found no infirmity in the CIT(A)'s conclusion and upheld deletion of the addition. [Paras 10, 14]

Order of the CIT(A) deleting the additions under section 68 is upheld.

Classification of land as agricultural/rural for long term capital gains - municipal limit (8 KMs) - precedence of Naib Tehsildar certificate/land revenue record over inspector's estimation - Deletion of addition on account of long term capital gains by holding the sold land to be rural agricultural land located beyond 8 KMs of municipal limit. - HELD THAT: - The AO relied on an inspector's report which estimated the distance from municipal limit at 7.95 KMs. The CIT(A) relied on a certificate of the Naib Tehsildar containing Khasra numbers and record based verification certifying the land to be beyond 8 KMs, and treated the Tehsildar's report as more authentic than the inspector's estimation. The Tribunal agreed with the CIT(A) that the Naib Tehsildar's certificate based on land revenue records was preferable to the inspector's estimate and that the land therefore did not fall within the capital gains taxable definition; accordingly the addition was unsustainable. [Paras 15]

Order of the CIT(A) deleting the long term capital gains addition is upheld.

Final Conclusion: All three substantive additions made by the Assessing Officer - under section 14A/Rule 8D, under section 68, and for long term capital gains - were held by the Tribunal to have been rightly deleted by the CIT(A) for the reasons stated; the Revenue's appeal is dismissed.

Penalty under section 271(1)(c) of the Income-tax Act - concealment of particulars of income - furnishing inaccurate particulars of income - Explanation 1 to section 271(1)(c) - defective show cause notice - requirement to specify limb of penal provision - notice bad in law

Penalty under section 271(1)(c) of the Income-tax Act - defective show cause notice - requirement to specify limb of penal provision - Validity of levy of penalty when the show-cause notice and penalty order do not clearly specify whether proceedings are for concealment of particulars of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal found that the assessment order recorded initiation of penalty proceedings and the AO issued a show-cause notice alleging both concealment of particulars of income and furnishing of inaccurate particulars of income. The penalty order, however, proceeded under the concept contained in Explanation 1 to Section 271(1)(c) (which relates to concealment), while the show-cause notice alleged both limbs, leaving the precise charge indeterminate. Relying on the settled approach that a notice initiating penalty proceedings must clearly specify under which limb of Section 271(1)(c) proceedings are being initiated, the Tribunal observed that a notice which does not specify whether it is for concealment or for furnishing inaccurate particulars is bad in law. Having regard to the authorities referred to by the parties and the absence of a definite conclusion by the AO, the Tribunal held that the defective notice rendered the levy of penalty unjustified and warranted cancellation of the penalty. [Paras 6]

Penalty cancelled as the notice and penalty order failed to specify which limb of Section 271(1)(c) was invoked, rendering the proceedings bad in law.

Final Conclusion: The appeal is allowed; the penalty under Section 271(1)(c) is set aside because the show-cause notice and consequent penalty order failed to specify whether the proceedings were for concealment of particulars of income or for furnishing inaccurate particulars of income, rendering the notice bad in law.

Long-Term Capital Gains exemption under section 10(38) - Sham transaction / accommodation entry - Unexplained credit under section 68 - Unexplained investment/undisclosed income under section 69C - Admissibility of SEBI and departmental investigation findings as corroborative evidence - Natural justice - right to cross-examination and opportunity to rebut - Preponderance of probabilities - Confrontation of evidence

Long-Term Capital Gains exemption under section 10(38) - Sham transaction / accommodation entry - Admissibility of SEBI and departmental investigation findings as corroborative evidence - Preponderance of probabilities - LTCG exemption claimed under section 10(38) on sale of HPC Bio Sciences shares cannot be allowed where the sale is found to be a sham/accommodation entry and not a genuine capital gain. - HELD THAT: - The Tribunal examined the factual matrix: preferential allotment of shares at nominal cost, immediate bonus issue doubling holding, a meteoric and isolated rise in share price (circa 1800%) unsupported by the company's financials, and contemporaneous findings by SEBI and the departmental investigation indicating price manipulation and circulation of IPO funds within a funding group. The assessee's statement-admitting purchase on a tip, lack of knowledge about the company and its management, and absence of independent due diligence-coupled with corroborative broker statements and investigative reports, led the authorities to conclude that the transactions were colourable devices to create tax-free LTCG. Applying the test of preponderance of probabilities and having regard to the pattern of manipulation, the order to treat the LTCG as not genuine was sustained. The Tribunal accepted the use of SEBI and investigation findings as corroborative material in evaluating genuineness of transactions and rejected the contention that mere production of contract notes and demat entries conclusively established a genuine transaction.

Exemption under section 10(38) denied; LTCG treated as sham and not eligible for exemption.

Unexplained credit under section 68 - Confrontation of evidence - Sale proceeds recorded in the assessee's books were liable to be treated as unexplained credit under section 68 where the explanation offered was unsatisfactory in light of available evidence. - HELD THAT: - The AO invoked section 68 after finding the assessee's explanation inadequate to account for the sale proceeds, considering investigative material and statements. The CIT(A) examined whether the prerequisites of section 68 were met and upheld the AO's approach, noting that the assessee failed to satisfactorily establish the genuineness and source of the credited amount. The Tribunal, on review of facts and corroborative findings, found no error in applying section 68 in the circumstances of the case.

Addition under section 68 confirmed; sale proceeds treated as unexplained credit.

Unexplained investment/undisclosed income under section 69C - The addition of a commission component under section 69C (treating a percentage as attributable to accommodation/entry providers) was upheld. - HELD THAT: - The AO made an addition treating a portion as commission to accommodation entry brokers under section 69C. The CIT(A) considered the evidence including broker statements and investigative material and found that a portion of the consideration represented accommodation/entry services. Given the surrounding circumstances and corroborative material indicating orchestrated entries, the addition under section 69C was sustained by the appellate authorities and the Tribunal found no infirmity in that conclusion.

Addition under section 69C upheld.

Natural justice - right to cross-examination and opportunity to rebut - Confrontation of evidence - There was no violation of natural justice in the assessment proceedings; formal cross-examination of departmental witnesses was not mandatory where the assessee was confronted with the material and given adequate opportunity to rebut. - HELD THAT: - The assessee contended that absence of cross-examination of persons whose statements were relied upon rendered the assessment void. The CIT(A) and the Tribunal noted that the AO had issued show-cause notices, confronted the assessee with the information used against him, recorded the assessee's statement, and provided opportunities to respond. Reliance upon judicial principles showed that while cross-examination may be desirable, it is not invariably mandatory if the assessee has been afforded adequate chance to meet the case. On the facts, the appellate forum found no prejudice to the assessee or breach of natural justice.

Natural justice complaint rejected; no annulment of assessment on that ground.

Admissibility of SEBI and departmental investigation findings as corroborative evidence - Preponderance of probabilities - Findings and interim orders of SEBI and reports of the departmental investigation can be used as corroborative material to infer manipulation and lack of genuineness of transactions. - HELD THAT: - The authorities relied on SEBI's order and the investigation wing's report as part of the evidentiary matrix demonstrating a pattern of price rigging, circulation of IPO funds to funding group entities, and the role of exit/entry providers. The appellate order accepted that such regulatory and investigative findings, read with other contemporaneous evidence and the assessee's own statement, constitute persuasive corroboration to conclude that the transactions were sham. Accordingly, these materials were held to be admissible and relevant for the evaluation on balance of probabilities.

Regulatory and investigative findings may be relied upon as corroborative evidence; so relied upon here to sustain additions.

Final Conclusion: On the facts and in view of corroborative investigative and regulatory material, and applying the preponderance of probabilities, the Tribunal dismissed the assessee's appeal and upheld the disallowance of the claimed LTCG exemption, the additions under section 68 and section 69C, and rejected the natural justice challenge.

Validity of reassessment proceedings initiated under section 147/148 when based on incriminating material found during search of a third party - Applicability of section 153C and its non obstante effect vis a vis sections 147 and 148 - Addition under section 68 for unexplained share capital/share premium based on documents seized from a third party

Validity of reassessment proceedings initiated under section 147/148 when based on incriminating material found during search of a third party - Applicability of section 153C and its non obstante effect vis a vis sections 147 and 148 - Reopening of assessment under section 147/148 and framing of assessment under section 143(3) based on documents seized from a third party was invalid and required to be quashed; consequent additions founded on those proceedings were deleted. - HELD THAT: - The Tribunal examined the reasons recorded for reopening and the assessment order which expressly relied upon seized documents (annexures) from the Jain group and information received following a search. When incriminating material relating to the assessee was found during the search of a third party and those seized documents were used to initiate reassessment, the special procedure under section 153C ought to have been invoked. Section 153C, being a non obstante provision, excludes the applicability of sections 147 and 148 where assessment is to be made on the basis of seized material of a third party. The Tribunal followed its coordinate bench decisions which hold that notices under section 148 and assessments under section 147/143(3) are void ab initio if the procedure under section 153C is not followed. The Tribunal further noted that the investor company had furnished confirmations and bank records which were not disbelieved by the authorities below, but primarily the reopening itself was vitiated by incorrect procedure. In view of these conclusions, the Tribunal quashed the reopening and set aside the impugned assessments and additions without entering into the merits. [Paras 9, 10]

Reopening under section 147/148 and assessment under section 143(3) based on third party seized documents quashed; additions deleted.

Final Conclusion: The Tribunal allowed the appeal, quashed the reassessment proceedings initiated under sections 147/148 (and the consequent assessment under section 143(3)) because the case proceeded on documents seized from a third party without following the procedure under section 153C; accordingly, the additions made in the assessment were deleted.

Addition on possession of gold and silver - allowance under CBDT Instruction No.1916 for family jewellery - deletion of addition for purchase of motor vehicle after accounting for loan and bank funds - reopening of assessment and notice under section 147/148 - acceptance of additional evidence under rule 29 and remand for verification - remand to Assessing Officer for verification and fresh adjudication

Addition on possession of gold and silver - allowance under CBDT Instruction No.1916 for family jewellery - Whether the additions made by the AO on account of possession of gold (590 gms) and silver (13 kgs) are sustainable - HELD THAT: - The Tribunal examined the material on record including the assessee's Form No.87 (statement of movable property as on 15.01.1965) and the wealth-tax returns where possession of gold and silver was declared and noted that the assessee had shown 75 tolas (later 590 gms) of gold and 100 kgs (reduced to 13 kgs) of silver. The Tribunal applied CBDT Instruction No.1916 (11.05.1994) allowance norms for family jewellery and observed that the instruction was available to the department at the time of assessment. Relying on precedent cited by counsel (decisions of the Delhi High Court reproduced in the order) and on the factual finding that the declared quantities were consistent with earlier disclosures and customary accumulation over years, the Tribunal held that the addition in respect of gold (590 gms) and silver (13 kgs) was not sustainable. The Tribunal therefore directed deletion of the additions made on these accounts and noted the High Court's order in the confiscation proceedings as corroborative of non-sustainability of the additions. [Paras 13, 14, 15]

Additions on account of gold and silver deleted; ground allowing deletion of investment in gold and silver is allowed.

Deletion of addition for purchase of motor vehicle after accounting for loan and bank funds - Whether the addition made by the AO in respect of unexplained expenditure on purchase of car is sustainable - HELD THAT: - The Tribunal considered documentary proof placed in the paper book: sanction of loan from the assessee's office (certificate) and bank certificates showing closure of term deposits/savings from which the balance was paid. The AO had accepted assessee's bank balance but rejected the explanation; on perusal the Tribunal found the documents satisfactory to show that purchase of the vehicle was funded by sanctioned loan and bank funds. On that basis the Tribunal held the addition was not justified and directed deletion of the addition made in respect of the car. [Paras 16, 18]

Addition on account of purchase of car deleted; ground allowing deletion of car purchase addition is allowed.

Acceptance of additional evidence under rule 29 and remand for verification - remand to Assessing Officer for verification and fresh adjudication - Whether additional evidence filed before the Tribunal/CIT(A) should be accepted and the related issues referred back to the AO for verification - HELD THAT: - The assessee applied under rule 29 for admission of additional evidence which the AO and CIT(A) had earlier not accepted as fresh evidence. The Tribunal, noting that the Revenue did not object to taking the additional evidence on record, allowed the application to take the documents on record. For just adjudication and with the consent of parties, the Tribunal remitted the issues relating to unexplained investments, interest, deposits, house property additions and similar contentions (as set out in the grounds) to the file of the AO. The AO was directed to verify the documents produced by the assessee, afford reasonable opportunity of hearing and decide the matters afresh; the assessee was directed to cooperate for early disposal. [Paras 19, 20, 21, 22]

Additional evidence accepted; issues relating to unexplained investments/deposits/interest/house property and similar additions remitted to the AO for verification and fresh adjudication after opportunity to the assessee.

Final Conclusion: The Tribunal deleted the additions in respect of gold and silver and the addition relating to purchase of the car, allowed those grounds accordingly, took the assessee's additional evidence on record and remitted the remaining contentious additions (interest, unexplained investments/deposits, house property and related grounds) to the Assessing Officer for verification and fresh adjudication; all four appeals are partly allowed for statistical purposes.

Prescribed time limit for adjudication - adjudication within a reasonable time - call book practice contrary to statutory mandate - revival of proceedings after long delay unlawful and arbitrary - delay vitiates adjudicatory proceedings

Prescribed time limit for adjudication - adjudication within a reasonable time - delay vitiates adjudicatory proceedings - Whether inordinate delay of many years in adjudicating the show cause notice vitiates the proceedings and warrants relief. - HELD THAT: - The Court applied the ratio in Siddhi Vinayak Syntex Pvt. Ltd. and observed that where the legislature prescribes a time frame for determination of duty, the adjudicating authority is required to decide the matter within that period 'as far as possible'. While exceptions may exist for genuine reasons (bulky record, witnesses, non-availability of officer, etc.), consigning a matter to the call book and keeping it in cold storage for many years indicates extraneous delay not attributable to such genuine difficulties. The practice of awaiting a decision in another case or retaining matters in call book for prolonged periods is not a permissible extension of the statutory time limit. Revival of proceedings after a long unexplained gap is arbitrary and vitiates the adjudication. On these bases the Court found the Department's explanation inadequate and proceeded in accordance with the cited precedent to grant relief. [Paras 10, 11, 12]

The petitions are allowed on the ground of inordinate and unexplained delay in adjudication; the proceedings revived after such long delay are unlawful and the petitions are disposed of accordingly.

Final Conclusion: Held that unexplained delay of many years in adjudicating the show cause notice - and the practice of consigning matters to the call book pending decision in other cases - is contrary to the statutory mandate and vitiates the proceedings; petitions allowed and disposed of.

Interest on delayed refunds under Section 27-A of the Customs Act, 1962 - Refund of Special Additional Duty (SAD) on imports - Entitlement to interest for delayed refund despite procedural lacunae in SEZ law - Obligation to revise refund orders and compute statutory interest

Interest on delayed refunds under Section 27-A of the Customs Act, 1962 - Refund of Special Additional Duty (SAD) on imports - Entitlement to interest for delayed refund despite procedural lacunae in SEZ law - Petitioners are entitled to statutory interest under Section 27 A on delayed refunds of 4% SAD paid on imports from an SEZ unit and respondents must revise orders to calculate and pay such interest. - HELD THAT: - The petitioners had filed refund applications for 4% SAD long before administrative clarifications and Circular No.11/2017. Section 27 A mandates payment of interest where a duty ordered to be refunded is not refunded within three months of the receipt of the application, at the rate notified by the Central Government (historically 6%). The Court found that delay in processing arose from an interdepartmental/procedural lacuna in SEZ law and its subsequent amendment, but such administrative or procedural uncertainty does not defeat the statutory right to interest. The respondents did not dispute entitlement to interest or the petitioners' calculations and there was no lawful ground to deny retrospective interest merely because the Customs House lacked empowering provisions earlier. Accordingly the orders sanctioning refunds were to be revised and modified to compute and pay statutory interest under Section 27 A, and the respondents were directed to effect payment within the time stipulated by the Court. [Paras 4, 8, 9]

Respondent No.2 must revise the refund orders, calculate statutory interest under Section 27 A (at the notified rate) on the delayed refunds and pay the same to the petitioners within four weeks of receipt of the certified copy of the order.

Final Conclusion: Writ petitions disposed directing the customs authority to revise the refund orders and pay the statutory interest on delayed SAD refunds under Section 27 A within four weeks; applicants may revive petitions if difficulty arises.

Claim for refund of duty - limitation under Section 27 - computation of limitation from date of judgment under Section 27(1B)(b) - alternative remedy / exhaustion of departmental appeal - discretion under Article 226 and doctrine of alternative remedy - remand for fresh consideration of limitation and merits

Alternative remedy / exhaustion of departmental appeal - discretion under Article 226 and doctrine of alternative remedy - Whether the High Court should entertain the writ petition instead of directing the petitioner to avail the statutory departmental appellate remedy. - HELD THAT: - The court held that where an efficacious alternative remedy exists under the statute, the petitioner must first exhaust that remedy before invoking writ jurisdiction. The court relied on the established limitation on exercise of writ jurisdiction-that it will not normally be exercised when an effective appellate remedy is available, absent any of the recognised exceptions such as breach of natural justice, enforcement of fundamental rights, or challenge to vires or jurisdiction. None of those exceptions was shown to be present. Consequently the petition was disposed of with directions to the petitioner to file the statutory appeal before the Commissioner of Customs (Appeals). [Paras 8, 9]

Petitioner directed to first file an appeal before the Commissioner of Customs (Appeals); writ petition disposed of accordingly.

Limitation under Section 27 - computation of limitation from date of judgment under Section 27(1B)(b) - Whether the appeal filed before the departmental appellate authority can be rejected on the ground of delay and how the period of limitation is to be computed in view of the pendency before the High Court. - HELD THAT: - The court directed that if the petitioner files an appeal, the appellate authority shall consider the appeal on merits and in accordance with law and shall not reject the appeal on the ground of delay. While computing any period of delay, the appellate authority must take into account the period during which the matter was pending before this court. The court emphasised that it has not gone into the merits and that the appellate authority must decide uninfluenced by the observations in this order. [Paras 9]

Appellate authority to consider the appeal on merits, not to reject for delay, and to account for the period the matter remained pending before the High Court when computing delay.

Claim for refund of duty - remand for fresh consideration of limitation and merits - Whether the merits of the refund claim and the question of limitation are to be adjudicated by this Court or remitted to the departmental appellate authority for fresh consideration. - HELD THAT: - The court expressly declined to enter into the merits of the refund claim or to determine the limitation issue itself. Instead, it remitted those questions to the Commissioner of Customs (Appeals) for fresh consideration. The petitioner was permitted to raise all contentions, including those on limitation, before the appellate authority, which is to decide the appeal on merits and in accordance with law without being influenced by the High Court's observations. [Paras 9]

Merits of the refund claim and limitation issue remitted to the departmental appellate authority for fresh consideration.

Final Conclusion: Writ petition dismissed by way of disposal with directions: petitioner to file appeal before the Commissioner of Customs (Appeals) within two weeks; appellate authority to decide the appeal on merits and in accordance with law, not to reject for delay and to account for period of pendency before this Court; merits and limitation issues remitted for fresh consideration.

Appropriation of amounts paid before issuance of show-cause notice - payment under Section 28 of the Customs Act, 1962 - penalty for short payment of duty - liability of managing director for penalty

Appropriation of amounts paid before issuance of show-cause notice - payment under Section 28 of the Customs Act, 1962 - penalty for short payment of duty - liability of managing director for penalty - Whether the penalty of 100% of duty and penalty on the Managing Director could be sustained when the assessee had paid the entire duty, interest and an amount treated as 25% penalty before issuance of the show-cause notice but there was an alleged shortfall in computation of the 25% amount. - HELD THAT: - The Tribunal found on the record that the appellants had paid the entire demand of duty, interest and an amount believed by them to be 25% of the penalty before initiation of adjudication. The authorities, instead of computing the correct amount of penalty at the stage of issuing the show-cause notice and calling for any shortfall, proceeded to treat the earlier payment as not in compliance with the provision and confirmed a larger demand. The Tribunal observed that the correct administrative course was to calculate the actual penalty payable and require payment of any shortfall then and there. Given that the full duty and interest and a 25% penalty amount had been paid before investigation, the Tribunal concluded that imposing 100% penalty and penalising the Managing Director was not sustainable. The Tribunal therefore set aside the impugned order and disposed of the appeals. [Paras 3, 4]

The penalty equal to 100% of duty and the penalty on the Managing Director were set aside; the impugned order is quashed and the appeals are disposed.

Final Conclusion: Appeals allowed. The Tribunal set aside the order imposing 100% penalty and penalty on the Managing Director, observing that the appellants had paid duty, interest and an amount treated as 25% penalty before issuance of the show-cause notice and that the authorities should have computed and required any shortfall at that stage; the impugned order is quashed and the appeals disposed.

Confiscation under section 111(d) - confiscation under section 111(m) - penalty under section 112(a) - import licence/authorisation under Foreign Trade Policy Para 2.17 - interpretation of policy amendment and non-retrospectivity - acceptance of enhanced assessed value and evidentiary effect

Import licence/authorisation under Foreign Trade Policy Para 2.17 - interpretation of policy amendment and non-retrospectivity - confiscation under section 111(d) - Whether second hand digital multi functional print/copying machines imported on 30.09.2009 required DGFT licence/authorisation and whether confiscation under section 111(d) was justified - HELD THAT: - The Tribunal found that during the relevant period (import on 30.09.2009) Para 2.17 of the Foreign Trade Policy restricted import of second hand photo copier machines but did not restrict multi functional digital print/copying machines; the specific restriction on multi functional digital machines was introduced only w.e.f. 28.02.2013. The departmental contention that the term 'photo copier machines' then necessarily included multi functional digital copiers was rejected. Reliance on the Madras High Court decision in City Office Equipment that the 28.02.2013 amendment cannot be given retrospective effect was accepted. Consequently, import of the machines in question on 30.09.2009 was not prohibited and confiscation under section 111(d) could not be sustained. [Paras 14]

Confiscation under section 111(d) set aside as the relevant policy did not prohibit import of the machines at the time of import.

Acceptance of enhanced assessed value and evidentiary effect - confiscation under section 111(m) - penalty under section 112(a) - Whether goods were liable to confiscation under section 111(m) for mis declaration of value and whether consequent fine and penalty were maintainable - HELD THAT: - The Tribunal noted that Customs obtained a Chartered Engineer's assessment, which increased the C&F value marginally from US$23,855 to US$30,030. The importer accepted the enhanced assessment and paid duty and did not challenge the valuation. The Tribunal held that mere acquiescence in the enhanced assessed value to expedite clearance, particularly where the enhancement was small, does not constitute evidence that the importer mis declared the value. There was no record establishing deliberate mis declaration by the importer. In consequence, confiscation under section 111(m) for mis declaration was unwarranted, and the attendant redemption fine and penalty under section 112(a) could not be sustained. [Paras 15]

Confiscation under section 111(m), the redemption fine and the penalty under section 112(a) set aside for lack of evidence of mis declaration.

Final Conclusion: The appeal is allowed; the impugned order is set aside in entirety and consequential relief, if any, shall follow.

Nullity of corporate board resolution and registered sale deed - oppression and mismanagement jurisdiction under Section 241 - effect of fraud on limitation - Section 17(1) of the Limitation Act, 1963 - duty of purchaser to exercise due diligence before relying on certified board resolution - declaratory relief restoring title and cancellation of registered instrument -

Nullity of corporate board resolution and registered sale deed - declaratory relief restoring title and cancellation of registered instrument - The validity of the Board Resolution dated 01.08.2015 and Registered Sale Deed No.15747/2015 dated 04.09.2015 and the consequent cancellation/restoration directions. - HELD THAT: - The Tribunal found that there was no reliable evidence of a board meeting on 01.08.2015 and that the sale was effected solely on the basis of a certified copy of a board resolution which was not the original. The company's statutory filings and financial statements did not reflect any authorised sale; annual return and AGM records did not show the meeting. In these circumstances the Tribunal concluded that the impugned board resolution could not be relied upon and the sale deed executed pursuant thereto was void. The Tribunal therefore directed cancellation of the registered document and restoration of the property to the company. [Paras 1, 11]

The NCLT's holding that the board resolution and registered sale deed are null and void and that the registered instrument be cancelled and title restored to the company is upheld.

Effect of fraud on limitation - Section 17(1) of the Limitation Act, 1963 - oppression and mismanagement jurisdiction under Section 241 - Whether the petition alleging fraud and seeking relief under Section 241 was barred by limitation. - HELD THAT: - The Tribunal accepted that the board resolution was a fraudulent or fabricated document and that the other director discovered the transfer only when activity on the land became apparent. Under Section 17(1) of the Limitation Act the period of limitation runs from discovery of the fraud. Applying that principle, the Tribunal held the petition was filed within time and was not barred by limitation. The Tribunal thus proceeded to adjudicate the merits under the oppression and mismanagement jurisdiction. [Paras 9, 10, 11]

The petition was not barred by limitation; the Tribunal correctly applied Section 17(1) and proceeded to grant relief.

Duty of purchaser to exercise due diligence before relying on certified board resolution - Whether the purchaser (Appellant) can retain benefits of the transaction given its failure to verify the original board resolution. - HELD THAT: - The Tribunal noted that the purchaser relied on a certified copy without seeking the original and did not perform due diligence to verify the authenticity of the purported board meeting. The absence of any record of the meeting in annual returns and financial statements, and the control of the property by the director's mother, pointed to lack of proper authorization for the sale. On that basis the Tribunal refused to protect the purchaser as a bona fide transferee for value. [Paras 11]

The purchaser's failure of due diligence disentitles it from retaining the transfer; the Tribunal's decision refusing protection to the purchaser is affirmed.

Declaratory relief restoring title and cancellation of registered instrument - declaration of unfitness and bar on directorship for misconduct - Whether monetary restitution and director disqualification ordered by the Tribunal were justified. - HELD THAT: - The Tribunal directed return of monies received and interest, and declared the director unfit, imposing a five-year bar on holding directorship, together with directions to convene an EGM to give effect to its directions. Having found the transactions effected by the director were unauthorised and involved misuse of company property, the Tribunal's orders for restitution, interest, and temporary disqualification were held to be within its remedial powers under the Companies Act to address oppression and mismanagement and to restore the company's position. [Paras 1, 11]

The directions for restitution with interest and disqualification of the director for five years are affirmed as appropriate remedial measures.

Final Conclusion: The National Company Law Tribunal, Hyderabad's order dated 02.08.2019 is affirmed in all material respects: the board resolution and registered sale deed are declared void, the registered instrument is to be cancelled and title restored to the company, the petition was not barred by limitation, the purchaser's lack of due diligence disentitles it to protection, and the Tribunal's directions for restitution with interest and director disqualification are upheld. The Appeals are dismissed.

Impleadment as necessary or proper party in proceedings under Sections 241-242 - Scope of Tribunal's powers under Sections 241(2) and 242 read with Section 246 - Use of investigative reports (SFIO/RBI/ICAI) in proceedings under Sections 241-242 - Distinction between remedies against auditors and remedies under Sections 241-242 - Principles of natural justice and procedural powers of the Tribunal

Impleadment as necessary or proper party in proceedings under Sections 241-242 - Scope of Tribunal's powers under Sections 241(2) and 242 read with Section 246 - Use of investigative reports (SFIO/RBI/ICAI) in proceedings under Sections 241-242 - Principles of natural justice and procedural powers of the Tribunal - Validity of the Tribunal's order impleading the appellants as parties to the Company Petition under Sections 241-242 - HELD THAT: - The Appellate Tribunal examined whether the impugned orders of the Tribunal, which impleaded auditors, past directors, independent directors and employees as respondents in the petition under Sections 241-242, were legally infirm. It held that when the Central Government forms an opinion that the affairs of a company are being conducted in a manner prejudicial to the public interest the Tribunal has wide powers under Section 241(2) read with Section 242 and, by virtue of Section 246 and the provisions of Chapter XVI, may issue orders against persons beyond the company itself where necessary in the public interest. The Tribunal may, in the exercise of those wide powers, implead persons and pass appropriate interim orders to regulate the conduct of the company's affairs and to protect public interest, subject to observance of natural justice. Investigative and regulatory reports (including SFIO, RBI and ICAI reports) forming part of the material placed before the Tribunal can be taken into account for the purpose of forming a prima facie opinion and deciding impleadment and interim measures; the appellate court declined to adjudicate the substantive guilt or merits of allegations, which remain for further investigation or trial. The court refrained from expressing final views on separate statutory provisions (for example Section 140(5)) or on final reliefs against the appellants, noting such matters lie outside the limited challenge to impleadment and are to be considered if and when reliefs against them are claimed and adjudicated. The Appellate Tribunal therefore found no illegality in the Tribunal's exercise of power to implead the persons in question in the facts and circumstances of this case involving systemic public interest concerns. [Paras 81, 82, 86, 87, 90]

Appeals dismissed; no interference with the Tribunal's order impleading the appellants as party respondents; tribunal's wide powers to implead and to consider investigative reports in public interest proceedings under Sections 241-242 upheld.

Final Conclusion: The Appellate Tribunal dismissed the appeals and upheld the Tribunal's exercise of power to implead the appellants as party respondents in the Company Petition under Sections 241-242 read with the relevant provisions of Chapter XVI, observing that in proceedings involving matters of systemic public interest the Tribunal may, subject to natural justice, rely on investigative and regulatory reports and implead persons as necessary for effective interim regulation; the court did not decide merits of allegations against the appellants.

CENVAT Credit entitlement for inputs, input services and capital goods used in construction for provision of output service - nexus between inputs/input services and output service - utilisation of CENVAT Credit for payment of service tax on Renting of Immovable Property services - effect of amendment to definition of "input service" with effect from 01.04.2011 and applicability to services received before that date - CBEC clarification on availability of credit for services completed before 01.04.2011

CENVAT Credit entitlement for inputs, input services and capital goods used in construction for provision of output service - nexus between inputs/input services and output service - utilisation of CENVAT Credit for payment of service tax on Renting of Immovable Property services - CENVAT Credit availed on inputs, input services and capital goods used in construction of the Mall could not be denied where those inputs and services were ultimately used in relation to provision of the Renting of Immovable Property (RIP) service. - HELD THAT: - The Tribunal applied the settled principle that credit of duty or tax paid on inputs and input services is available where those inputs or input services are used in relation to providing an output service. Reliance on decisions of High Courts and the Tribunal established that construction-related inputs and input services which are ultimately used in enabling the provider to render RIP services are eligible for CENVAT Credit because without construction the renting service could not have been provided. The Commissioner's conclusion that construction activity is independent and therefore inputs used therein are ineligible was held contrary to the cited authorities and set aside. The Tribunal therefore held that the CENVAT Credit availed by the appellant on inputs, input services and capital goods used for construction of the Mall, which was ultimately let out, could not be denied. [Paras 20]

Findings of the Commissioner disallowing CENVAT Credit on inputs, input services and capital goods used in construction were set aside; credit was held to be admissible.

Effect of amendment to definition of "input service" with effect from 01.04.2011 and applicability to services received before that date - CBEC clarification on availability of credit for services completed before 01.04.2011 - The amendment to the definition of "input service" effective 01.04.2011 did not operate to deny credit where the input services in question had been received and their provision completed prior to 01.04.2011; the Commissioner failed to examine this aspect. - HELD THAT: - The Tribunal noted that the second show cause notice covered the period 1 April 2011 to 31 March 2012 but did not allege that the impugned input services were received after 01.04.2011. The appellant had specifically pleaded and produced entries from the CENVAT register showing that the services were received and completed before 01.04.2011 and relied upon the CBEC Circular dated 29.04.2011 which clarifies that credit on services shall be available if their provision was completed before 01.04.2011. The Commissioner had not examined this factual and legal aspect and had proceeded only on the basis of the amendment; on the material before the Tribunal, credit could not be denied on this ground. [Paras 21, 23, 24]

Amendment effective 01.04.2011 does not disentitle the appellant to credit in respect of input services provided and completed before that date; denial on this ground could not be sustained.

Final Conclusion: The impugned adjudication order dated 1 April 2014 disallowing CENVAT Credit and directing recovery (with interest and penalty) was set aside; the appeal was allowed, the credit upheld and the denial based on the 01.04.2011 amendment rejected on the facts and law before the Tribunal.

Levy of service tax on reimbursement of payroll costs for expatriate employees - Employer-employee relationship - Admissibility of CENVAT credit on business auxiliary services - Remand for factual ascertainment

Levy of service tax on reimbursement of payroll costs for expatriate employees - Employer-employee relationship - Remand for factual ascertainment - Demand for service tax on reimbursement of payroll cost of expatriate employees was remanded for factual determination of the employer-employee relationship. - HELD THAT: - The Tribunal observed that in the appellants' earlier matter it had remanded the question of employer-employee relationship to the adjudicating authority by order dated 20th September 2019 for factual ascertainment. Following that precedent, the Tribunal remanded the present appeals to the adjudicating authority to ascertain the factual position regarding whether an employer-employee relationship existed between the appellants and Deloitte & Touche Overseas Services LLC, USA, which is determinative of the question whether reimbursement of payroll costs attracts service tax. The remand requires the adjudicating authority to examine and decide the factual matrix afresh in light of the Tribunal's earlier direction.

Remanded to the adjudicating authority for factual ascertainment of employer-employee relationship; issue kept open.

Admissibility of CENVAT credit on business auxiliary services - Remand for factual ascertainment - Admissibility of CENVAT credit availed on business auxiliary services was remanded for fresh examination, including consideration of the relevant High Court decision. - HELD THAT: - The Tribunal noted that the subsequent order of the adjudicating authority allowing CENVAT credit had not taken note of the Andhra Pradesh High Court judgment in the appellants' own case, which had characterized the services as business auxiliary services. Because the appeals are being remanded on the payroll reimbursement issue, the Tribunal considered it appropriate to also remand the question of admissibility of CENVAT credit to the adjudicating commissioner. The adjudicating authority is directed to examine the admissibility of the credit from all aspects and in the light of the applicable principles of law, including any relevant High Court authority, before concluding on the claim.

Remanded to the adjudicating authority to examine admissibility of CENVAT credit, including consideration of the Andhra Pradesh High Court decision; issue kept open.

Final Conclusion: The appeals are allowed by way of remand. Both the demand for service tax on payroll reimbursements and the question of admissibility of CENVAT credit are remitted to the adjudicating authority for fresh consideration; all issues are kept open and, as far as practical, to be decided within four months from communication of this order.

Availability of Cenvat credit under Rule 2(a)(A) of Cenvat Credit Rules, 2004 for inputs used in erection or fabrication of capital goods or structural support - Cenvat credit on fabricated structural items and technological structures, including cable trays and earthing strips, used in factory operations - requirement of proof of specific use for availing Cenvat credit - invalid reliance on verification report not furnished to the assessee - setting aside of penalty imposed consequent to disallowance of Cenvat credit

Availability of Cenvat credit under Rule 2(a)(A) of Cenvat Credit Rules, 2004 for inputs used in erection or fabrication of capital goods or structural support - Cenvat credit is admissible for iron and steel items such as Angles, Channels, Sheets and Plates used as structural support in the factory. - HELD THAT: - The Tribunal relied on precedent recognising that steel items used for erection of capital goods or for fabrication of structures necessary for machinery to be erected and to function constitute inputs eligible for credit under Rule 2(a)(A) of the Cenvat Credit Rules, 2004. Applying that principle, the Tribunal held that items like Angles, Channels, Sheets and Plates, when used as structural support in the appellant's plant, qualify for cenvat credit. The finding records that such items are integral to erection and functioning of plant and machinery, and therefore credit cannot be disallowed on the ground that they are structural supports. [Paras 7]

Cenvat credit allowed for iron and steel items used as structural support.

Cenvat credit on fabricated structural items and technological structures, including cable trays and earthing strips, used in factory operations - requirement of proof of specific use for availing Cenvat credit - invalid reliance on verification report not furnished to the assessee - Cenvat credit is admissible for fabricated structural/technological structures, cable trays and earthing strips where the assessee furnished supplier-wise details indicating specific use, and the Department relied on a verification report that was not provided to the assessee. - HELD THAT: - The Tribunal examined the material placed by the appellant - a chart and invoices from suppliers showing part numbers, invoice details, supplier names, material descriptions and the specific use of each item in particular machinery or plant areas - and accepted that these particulars were not shown to be untrue. The adjudicating authority had rejected the claim relying on a Superintendent's verification report dated 31.03.2017, a copy of which was not furnished to the appellant; the Tribunal held that no reliance could be placed on that report in the absence of its production to the assessee. In these circumstances, and given the supplied documentation linking the fabricated structures and cable trays/earthing strips to use in flotation cells, pumps and pressure filters, the Tribunal allowed the cenvat credit for the disputed amount disallowed on this ground. [Paras 8, 9]

Cenvat credit allowed for fabricated structural and technological items and for cable trays and earthing strips; disallowance based on an uncommunicated verification report rejected.

Setting aside of penalty imposed consequent to disallowance of Cenvat credit - The penalty imposed consequent to the disallowance of cenvat credit is set aside. - HELD THAT: - Since the Tribunal set aside the impugned disallowances of cenvat credit on the contested items, the penalties levied in consequence of those disallowances were also set aside. The order directs that the appellant is entitled to consequential benefits as per law. [Paras 10]

Penalty quashed and appellant entitled to consequential benefits.

Final Conclusion: The appeals are allowed: cenvat credit is held admissible for the iron and steel items used as structural support and for the fabricated technological structures, cable trays and earthing strips for which supplier-specific use particulars were furnished; reliance on a verification report not supplied to the assessee was rejected; the impugned disallowances and consequential penalties are set aside and consequential reliefs granted.

Remand for de novo consideration - inter-state sale versus domestic sale - verification of Form C declarations - effectiveness of personal hearing - requirement of a speaking order of assessment

Inter-state sale versus domestic sale - verification of Form C declarations - remand for de novo consideration - requirement of a speaking order of assessment - Impugned assessment order failed to examine transactions and Form 'C' declarations as directed by the first Appellate Authority and therefore could not sustain the conclusion that the sales were domestic rather than inter state. - HELD THAT: - The Appellate Authority had remitted the matter for careful verification of transactions and records. In the remand proceedings the Assessing Authority reproduced the petitioner's objections but nonetheless concluded the transactions were domestic sales despite delivery addresses outside the State and the filing of Form 'C' declarations. The petitioner had filed supporting documents said to be part of the assessment records (purchase invoices, challans and related papers), which required a minute examination to determine whether the supplies were direct inter state sales or intra state transactions between the petitioner and its vendor. The Assessing Authority did not undertake the detailed transactional inquiry mandated by the remand order and therefore the impugned conclusion is unsustainable. [Paras 8, 10]

Impugned order set aside; matter remitted to Assessing Authority to examine the transactions and Form 'C' declarations de novo and to pass a speaking order of assessment.

Effectiveness of personal hearing - remand for de novo consideration - requirement of a speaking order of assessment - Assessing Authority failed to grant an effective personal hearing by asking the petitioner to appear on any working day within a period, instead of fixing a specific date and time. - HELD THAT: - The remand required that the petitioner be afforded an opportunity to file documentary evidence and to be heard. The notice called for appearance on 'any working day at office hours within 15 days', which does not constitute a meaningful or mutually convenient appointment; an officer cannot be expected to be at his desk at all times to hear the party. For fairness and to enable a proper de novo assessment and speaking order, the personal hearing must be fixed by a specific date and time. [Paras 6, 9, 10]

Impugned order set aside for lack of effective hearing; personal hearing ordered to be fixed (and in this case specifically directed for 26 February 2020 at 10:30 a.m.) and assessment to be concluded thereafter.

Final Conclusion: The writ petition is allowed: the assessment order for 2006-07 is set aside for failure to examine transactions and Form 'C' declarations and for not granting an effective personal hearing; the matter is remitted to the Assessing Authority for de novo consideration, with a fixed personal hearing and a speaking order to be passed within four weeks of that hearing.

Deemed assessment under Section 12-C of the TNGST Act, 1959 - re-opening of assessment for escaped turnover - reliance on enforcement wing investigation - best judgment assessment - failure to issue corrigendum notice before passing order - remand for fresh adjudication

Deemed assessment under Section 12-C of the TNGST Act, 1959 - re-opening of assessment for escaped turnover - reliance on enforcement wing investigation - Validity of notice dated 19.01.2012 issued after inspection in 2004 and the power to re-open assessment for Assessment Year 2004-05 despite absence of a prior formal assessment order. - HELD THAT: - The Court held that Section 12 C of the TNGST Act required the assessing authority to pass a deemed assessment based on returns filed, but that the incorporation of Section 12 C was intended to prevent assessments remaining incomplete and did not preclude re-opening where materials justified it. The inspection and seized records of 17.08.2004 furnished sufficient material to re-open the assessment for escaped turnover for Assessment Year 2004 05. Consequently, issuing the notice dated 19.01.2012 relying on the enforcement wing's 2004 investigation was in order and valid for the purpose of re-opening the assessment. [Paras 11, 12, 13, 14]

Notice dated 19.01.2012 was legally permissible and the assessment could be re-opened on the basis of the seized materials and investigation.

Best judgment assessment - failure to issue corrigendum notice before passing order - remand for fresh adjudication - Whether the impugned order passed without a fresh opportunity and without issuance of a corrigendum to the show cause notice was sustainable, and consequent relief. - HELD THAT: - Although the petitioner failed to file a reply to the pre assessment notice, the Court found that before passing an order based on the best judgment method the assessing authority should have issued a corrigendum to the show cause notice to give the petitioner an adequate opportunity. That procedural defect vitiated the impugned order insofar as the disallowance of turnover claimed against C Forms and F Forms is concerned. In view of this deficiency the Court set aside the impugned order and remitted the matter to the respondent for fresh adjudication in accordance with law, directing the petitioner to file a reply within thirty days and the respondent to complete proceedings within the prescribed timeframes. [Paras 15, 16, 17]

Impugned order set aside; matter remitted for fresh decision after furnishing opportunity by corrigendum; directions issued for filing reply and completing proceedings within specified periods.

Final Conclusion: The Court upheld the authority to re-open the assessment for escaped turnover based on the 2004 enforcement records but set aside the impugned best judgment order for lack of a corrigendum opportunity; the matter is remitted to the respondent to decide afresh in accordance with law after the petitioner files its reply within the time ordered.

Failure to furnish return of net wealth as an offence under Section 35B - Effect of cancellation of penalty by appellate authority on criminal prosecution - Abuse of process of law - Applicability of precedent where appellate order relates to the same assessment year

Failure to furnish return of net wealth as an offence under Section 35B - Effect of cancellation of penalty by appellate authority on criminal prosecution - Whether criminal proceedings under Section 35B in respect of Assessment Year 1990-91 are liable to be quashed on the ground that penalty proceedings for earlier assessment years were set aside by the Tribunal. - HELD THAT: - The Court held that the Tribunal's order cancelling penalty related to A.Ys. 1984-85 to 1988-89 and does not determine liability for A.Y. 1990-91, which is the subject-matter of the criminal complaints before the Magistrate. The determinative offence under Section 35B is the willful failure to furnish the wealth-tax return required under Section 14(1) or by notice under Section 17(1); liability turns on non-filing in the relevant assessment year and not on the mere question whether a penalty for other years was justified. Since the appellate decision relied upon does not pertain to the A.Y. in issue, it cannot be said to extinguish the complaint or render the criminal proceedings an abuse of process in the present matter. [Paras 6, 8, 14]

Application to quash the criminal proceedings in respect of A.Y. 1990-91 dismissed; the Tribunal's order for different years does not attract or extinguish prosecution for A.Y. 1990-91.

Applicability of precedent where appellate order relates to the same assessment year - Abuse of process of law - Whether the ratio in K.C. Builders (that cancellation of penalty by the Tribunal may automatically lead to quashing of prosecution) applies to the present facts. - HELD THAT: - The Court examined K.C. Builders and acknowledged the principle that where the Appellate Tribunal conclusively finds no concealment for the same assessment year and the penalty is cancelled, the corresponding criminal prosecution may become unsustainable and amount to an abuse of process. However, the Court distinguished that authority on the ground that its operative finding and the cancellation of penalty related to the same assessment years as the criminal prosecution. In the present case the Tribunal's decision concerned earlier assessment years (1984-85 to 1988-89) while the complaint and alleged offence under Section 35B relate to A.Y. 1990-91; therefore the K.C. Builders principle is not attracted. [Paras 9, 12, 14]

K.C. Builders is not applicable to the facts of this case; its principle does not operate to quash prosecution in respect of A.Y. 1990-91.

Final Conclusion: The petition under Section 482 Cr.P.C. seeking quashing of Criminal Case Nos. 241/1994, 242/1994 and 243/1994 (relating to A.Y. 1990-91) is dismissed; the Tribunal's cancellation of penalty for A.Ys. 1984-85 to 1988-89 does not extinguish or automatically invalidate the prosecution for the different assessment year, and the precedent relied upon is distinguishable on that basis.