TaxTMI Updates e-Newsletter
Apr 16,2019

Principles of natural justice - opportunity of hearing - notice under section 130 of the Central Goods and Services Tax Act, 2017 - interim relief - service of process

Principles of natural justice - opportunity of hearing - notice under section 130 of the Central Goods and Services Tax Act, 2017 - Whether the petitioners were denied an opportunity of hearing and whether the court should issue interim relief and direct respondents to state when hearing was granted in respect of the notice under section 130 of the CGST Act. - HELD THAT: - The petitioners submitted that they filed a reply dated 4.4.2019 which was received by the authority on 5.4.2019, that the authority was not available on 5.4.2019 and that they were informed the hearing would take place on 8.4.2019, yet an impugned order was passed on 5.4.2019. Accepting that these facts raised a contention of breach of the principles of natural justice by denial of an opportunity of hearing in relation to the notice under section 130 of the Central Goods and Services Tax Act, 2017, the court issued notice and ordered interim relief, fixing a returnable date for respondents to state on what date an opportunity of hearing in connection with the notice was granted to the petitioners. The court also permitted direct service for the petitioners. The order does not adjudicate the merits of the underlying notice but seeks a response from the respondents on the factual question of when hearing was afforded.

Notice issued, interim relief granted; respondents directed to state on the returnable date the date on which an opportunity of hearing in respect of the section 130 notice was granted; direct service permitted.

Final Conclusion: The High Court issued notice and interim relief on the petitioners' allegation that an order dated 5.4.2019 was passed in breach of natural justice; respondents were directed to state when an opportunity of hearing was granted, and direct service was permitted, with the matter returnable on 15 April 2019.

Provisional attachment to protect Government revenue - exercise of powers under section 83 of the GGST/CGST Act - balancing revenue protection and a dealer's ability to continue business - repetition of identically worded attachment orders contrary to earlier judicial findings - production of departmental files for judicial perusal

Repetition of identically worded attachment orders contrary to earlier judicial findings - exercise of powers under section 83 of the GGST/CGST Act - Validity of the provisional attachment order dated 8.3.2019 which re-attached the petitioner's bank accounts in terms identical to an earlier order quashed by this Court. - HELD THAT: - The Court observed that the impugned order dated 8.3.2019 provisionally attaching the petitioner's bank accounts was identically worded to an earlier order which this Court had quashed. The officer concerned had not produced the file or complied with the principles and findings recorded by this Court in the earlier decision, and had passed the fresh order without apparent application of mind to those findings. Given the identical nature of the order and the absence of relevant file material or justification demonstrating why the earlier findings were not followed, the Court found it necessary to intervene and preserve the status quo. [Paras 5, 8]

The provisional attachment contained in the order dated 8.3.2019 cannot stand without scrutiny; intervention is justified.

Production of departmental files for judicial perusal - Requirement for production of the original file relating to the impugned order for the Court's perusal. - HELD THAT: - The Court directed that the original file pertaining to the impugned order be produced by the Joint Commissioner of Sales Tax, Bhavnagar so that the Court may examine the material relied upon and verify whether the requirements and principles laid down by the Court earlier were followed. The direction reflects the Court's need to inspect the departmental record before adjudicating the legality of the re-attachment in final terms. [Paras 9]

The original file must be produced before the Court on the specified date for perusal.

Provisional attachment to protect Government revenue - balancing revenue protection and a dealer's ability to continue business - Interim relief in respect of the 8.3.2019 attachment and immediate release of the attached bank accounts. - HELD THAT: - In view of the earlier judgment quashing the prior attachment and the absence of material justifying a fresh, identically worded attachment, the Court granted ad interim relief. The Court stayed the impugned order dated 8.3.2019 and ordered that the provisional attachment over the specified bank accounts be forthwith released, so as to preserve the petitioner's ability to carry on business while the matter is examined further. [Paras 10]

The 8.3.2019 provisional attachment is stayed and the attached bank accounts are to be released immediately.

Procedural amendment of parties and cause title - Prayer to delete a respondent from array and to amend cause title. - HELD THAT: - The Court allowed the petitioner's application for deletion of respondent No.3 from the array of respondents and granted leave to amend the cause title. This is a procedural direction recorded at the outset of the proceedings. [Paras 1]

Respondent No.3 is deleted from the array and leave is granted to amend the cause title.

Final Conclusion: Leave granted to delete respondent No.3 and to amend the cause title; the petitioner's challenge to the re-attachment of bank accounts resulted in an interim stay of the impugned 8.3.2019 order and immediate release of the attached accounts, with a direction to produce the original departmental file for the Court's perusal on the listed date.

Transitional provisions under the Constitution (One Hundred and First Amendment) Act, 2016 - Repeal and saving provisions in a fiscal enactment - Continuance and institution of proceedings despite repeal - Constitutional validity of statutory saving clauses - Territorial jurisdiction (liberty to challenge)

Transitional provisions under the Constitution (One Hundred and First Amendment) Act, 2016 - Repeal and saving provisions in a fiscal enactment - Constitutional validity of statutory saving clauses - Section 174 of the GST Law Manual is not ultra vires Section 19 of the Constitution (One Hundred and First Amendment) Act, 2016 and the Constitution as amended. - HELD THAT: - The Court examined Section 19 (transitional provisions) of the Amendment Act and the repeal and saving language of Section 174 of the GST Law Manual. Section 19 preserves pre existing tax laws inconsistent with the amended Constitution until amendment, repeal or expiry of one year, and Section 174 begins with the saving phrase "Save as otherwise provided in this Act." The Court found no inconsistency between the constitutional transitional provision and Section 174. The saving and non abrogative effects in Section 174 operate to preserve rights, liabilities and to allow proceedings related to the repealed or amended Acts to continue. On this basis the challenge to the constitutional validity of Section 174 was rejected. [Paras 6, 8]

Challenge to the vires of Section 174 was negatived; Section 174 is not inconsistent with Section 19 of the Amendment Act or the Constitution as amended.

Continuance and institution of proceedings despite repeal - Repeal and saving provisions in a fiscal enactment - Territorial jurisdiction (liberty to challenge) - Section 174(e) permits both continuation of proceedings already instituted and institution of proceedings after commencement of the Act; the petitioner was permitted to withdraw the writ with liberty to challenge territorial jurisdiction. - HELD THAT: - The Court parsed subsection (e) of Section 174, noting it comprises preservative wording that (i) saves proceedings already instituted, continued or enforced and (ii) contemplates proceedings to be instituted thereafter. Consequently, there is no statutory prohibition on investigations or other proceedings being instituted post commencement. After this legal position was explained, the petitioner applied to withdraw the writ with liberty to raise territorial jurisdiction later; the Court granted permission and dismissed the petition as withdrawn without costs, while leaving territorial jurisdictional challenge open. [Paras 2, 3, 9]

Proceedings may be instituted or continued under Section 174(e); the writ petition was dismissed as withdrawn with liberty to challenge territorial jurisdiction.

Final Conclusion: The petition seeking a declaration that Section 174 is ultra vires Section 19 of the Amendment Act and the Constitution was rejected on the merits; the Court held Section 174 preserves and permits proceedings and is not inconsistent with the constitutional transitional provisions. The writ petition was dismissed as withdrawn with liberty to raise territorial jurisdiction.

Technical glitch on GST Portal - IT Grievance Redressal Mechanism - input tax credit on migration - filing of FORM GST TRAN-1 - facilitation by Nodal Officer - disregard of statutory timeframe where failure due to portal error

Technical glitch on GST Portal - filing of FORM GST TRAN-1 - facilitation by Nodal Officer - input tax credit on migration - Direction to permit a registered dealer who could not upload FORM GST TRAN-1 due to portal failure to apply to the Nodal Officer for facilitation and preservation of input tax credit. - HELD THAT: - The Court accepted that the petitioner and many others were prevented from uploading FORM GST TRAN-1 because of demonstrable technical glitches on the Common Portal and relied upon the Government of India circular establishing an IT Grievance Redressal Mechanism and the role of nodal officers to address such portal failures. Applying that framework, the Court granted relief by directing that the petitioner may apply to the Nodal Officer, who shall examine the application and facilitate uploading of FORM GST TRAN-1 without reference to the statutory timeframe. The Court imposed a practical timeline for processing (application within two weeks; nodal consideration within one week) but preserved substantive relief where uploading remains impossible for reasons not attributable to the petitioner, in which event the authority is directed to enable the petitioner to take credit of the input tax available at migration. [Paras 4]

Petitioner permitted to apply to the Nodal Officer for facilitation of TRAN-1 upload; Nodal Officer to process and enable uploading without regard to the timeframe, and if uploading is impossible for reasons not attributable to the petitioner, the authority shall enable availment of input tax credit.

Final Conclusion: Writ petition disposed by directing the petitioner to apply to the Nodal Officer for resolution under the IT Grievance Redressal Mechanism; the Nodal Officer to facilitate TRAN-1 upload disregarding the timeframe and, if upload cannot be effected for reasons beyond the petitioner's control, to enable the petitioner to claim the input tax credit available at migration.

TP adjustment - Disallowance of weighted deduction u/s.35(2AB) - addition u/s 14A - Admission of additional questions - HELD THAT:- A perusal of the order of the High Court [2018 (9) TMI 1818 - GUJARAT HIGH COURT] indicates that the High Court has considered only the two additional questions as noticed in para 3 of the impugned judgment. The petitioner submits that the other issues have not been touched. Learned counsel appearing for the assessee submits that the other issues are still under consideration before the High Court.

In view of the above, we see no reason to entertain the special leave petition.

Charitable activity - exemption u/s 11 - mandation to specify the object/purpose in Form No.10 for claiming accumulation u/s. 11(2) - High court [2018 (10) TMI 995 - GUJARAT HIGH COURT] held that the statement of purpose for which the income is being accumulated or set apart is one of the requirements which must be satisfied before the assessee can avail the benefit u/s 11(2). However, that by itself would not mean that any inaccuracy or lack of full declaration in the prescribed format by itself would be fatal to the claimant - HELD THAT:- SLP Dismissed

Disallowance u/s 14A - High court [2018 (8) TMI 1151 - DELHI HIGH COURT] upheld the holding of tribunal that disallowance is not permissible if the assessee had offered amounts as disallowance claiming them to be expenditure for tax exempt income and AO applied Rule 8D without adducing any reasons - held no substantial question of law arises - HELD THAT:- The special leave petition is dismissed on the ground of delay as well as on merits.

Disallowance u/s. 40A(2)(b) - excess remuneration to directors - disallowance u/s. 14A - valuation of closing stock - Addition on account of notional interest on delayed refund of security deposits -

High Court [2018 (8) TMI 760 - GUJARAT HIGH COURT] upholding the Tribunal, dismissed Revenue appeals insofar as they challenged deletion of disallowances under Section 40A(2)(b) for excess directors' remuneration, deletion under Section 14A r.w. Rule 8D, and deletion of notional interest on delayed refund of security deposit; certain discrete substantial questions of law were admitted for hearing concerning classification of profit on sale of shares (capital gain v. business income) and correctness of Tribunal orders deleting additions under Section 145A (CENVAT/taxes in closing stock)

HELD THAT:- We are not inclined to entertain this Special Leave Petition under Article 136 of the Constitution of India.

The Special Leave Petition is accordingly dismissed.

Computing deduction u/ss 80HHC and 80-I - whether deductions u/s 35(1)(iv) are not to be deducted ? - Allowable deduction on redemption premium payable on debenture - Disallowance of interest expenditure - Disallowance of interest on funds utilized for non-business advances - Deduction under section 80HHC computation - whether for computation of deduction under section 80HHC only net interest receipts should be excluded? - HELD THAT:- The special leave petition is dismissed on the ground of low tax effect.

Allowability of software expenditure - to be treated as a revenue expenditure OR capital expenditure - nature of the advantage in a commercial sense - HELD THAT:- SLP dismissed. HC order confirmed [2018 (9) TMI 1094 - MADRAS HIGH COURT]

Summary order. Special Leave Petition dismissed; delay condoned.

Monetary limits for filing appeals under Section 268A - CBDT Circular dated 11.7.2018 - threshold of Rs. 50 Lakhs tax effect - protection against acquiescence and consistency under Section 268A(2) and (3) - composite order exception to monetary limits

Monetary limits for filing appeals under Section 268A - CBDT Circular dated 11.7.2018 - threshold of Rs. 50 Lakhs tax effect - composite order exception to monetary limits - Maintainability of the Revenue's appeal where the tax effect is below the monetary limit prescribed by the CBDT Circular dated 11.7.2018. - HELD THAT: - Section 268A empowers the Board to prescribe monetary limits for filing appeals and protects the Revenue against arguments of acquiescence or consistency. The CBDT Circular dated 11.7.2018 prescribes a tax-effect threshold of Rs. 50 Lakhs for filing appeals before the High Court. That Circular binds departmental authorities and contains a limited exception permitting appeals in relation to all assessment years where a composite Tribunal order involves multiple assessment years and the tax effect in at least one year exceeds the prescribed limit. The facts of the present case do not fall within that composite-order exception. The Revenue's contention that separate appeals arising from the Appellate Commissioner's order make the present appeal maintainable does not attract the exception in the Circular. Accordingly, in view of the low tax effect calculated in the appeal memo and the binding CBDT instruction, the appeal is not maintainable and must be dismissed. [Paras 2, 3, 4, 5, 6]

Appeal dismissed on the ground of low tax effect in view of the CBDT Circular dated 11.7.2018; composite-order exception not attracted.

Final Conclusion: The High Court dismissed the Revenue's appeal as not maintainable because the tax effect falls below the Rs. 50 Lakhs threshold prescribed by the CBDT Circular dated 11.7.2018 and no applicable exception applied.

Reopening of assessment - Reasons recorded for reopening - Failure to disclose fully and truly all material facts - Change of opinion - Proviso to section 147 of the Income Tax Act - four years limitation - Fishing inquiry

Reopening of assessment - Reasons recorded for reopening - Failure to disclose fully and truly all material facts - Fishing inquiry - Validity of reopening assessment under section 147/148 insofar as it relies on alleged undisclosed share premium and share allotment details - HELD THAT: - The Court found that the Assessing Officer's reasons alleging that Shri Dalal was allotted 25,75,000 shares (10,00,000 at par and 15,75,000 at premium) were contrary to the contemporaneous documents on record (Form-2/Form-5) which show only 15,75,000 shares allotted to Shri Dalal at premium and 52,50,000 shares allotted at par to other persons. The reasons recorded therefore were not based on any fresh material coming to the officer's notice after completion of the original assessment but were detached from the material on file and amounted to conjecture. Because the material relied upon by the assessee had been placed before the AO during scrutiny and considered at the time of assessment, there was no failure by the assessee to disclose fully and truly all material facts. The recording of reasons on the basis of such guesswork was characterised as a fishing inquiry, and could not sustain reopening of assessment. [Paras 11, 12]

Reasons for reopening insofar as founded on the alleged undisclosed share premium/allotment are invalid; reopening cannot be sustained on that ground.

Reopening of assessment - Pre-operative expenses - Change of opinion - Failure to disclose fully and truly all material facts - Validity of reopening assessment insofar as it seeks to disallow expenditure as pre-operative (treatment of expenses) which was considered during original scrutiny assessment - HELD THAT: - The Court observed that the status and treatment of pre-operative expenses were expressly dealt with in the notes to accounts and responses filed by the assessee during the scrutiny assessment proceedings, and the Assessing Officer had considered the issue while framing the assessment under section 143(3). The attempt to reopen assessment on the same issue therefore amounted to a mere change of opinion by the revenue, rather than being predicated on any new material establishing nondisclosure by the assessee. Reopening on grounds which were already ventilated and considered in the original assessment was impermissible. [Paras 9, 11, 12]

Reopening cannot be sustained as regards treatment of pre-operative expenses; the action amounts to change of opinion.

Final Conclusion: The notice dated 30.03.2018 under section 148 of the Income Tax Act for assessment year 2011-12 and all consequential action are quashed because the reasons recorded are not based on any new material and the matters were previously disclosed and considered in the scrutiny assessment; in absence of any failure to disclose fully and truly all material facts, the proviso to section 147 (four years limitation) applies.

Directory vs mandatory targets - prioritisation of appeals disposal - incentive for quality orders - reconsideration of performance norms

Directory vs mandatory targets - prioritisation of appeals disposal - Validity and legal character of CBDT-prescribed time-bound targets for disposal of specified categories of appeals by Commissioners (whether mandatory or directory) and permissibility of prioritising disposal. - HELD THAT: - The Court, prima facie, held that the time-limits and numerical targets set out in the CBDT action plan for disposal of appeals are directory and not mandatory. The Court observed that it may not be impermissible for the CBDT to prioritise disposal and to set goals for disposal of certain categories of appeals, and that such targets, viewed at this stage, do not necessarily render orders by Appellate Commissioners invalid. The finding is expressed as a prima facie view while the petitions remain pending. [Paras 4]

Prima facie view recorded that the CBDT targets are directory and that the CBDT may prioritise disposal of appeals; no final prohibition against setting such goals recorded.

Incentive for quality orders - reconsideration of performance norms - Legitimacy and utility of the CBDT provision granting additional credit for specified 'quality appellate orders' and its use in evaluating Commissioners' performance. - HELD THAT: - The Court found that the purpose and utility of the provision conferring additional credit for 'quality appellate orders' is not clear from the action plan. Given that the norms may be employed to evaluate the performance of CIT(A)s, the Court directed the CBDT to reconsider this portion of the action plan. The respondent was directed to inform the Court of the utility of these norms and the outcome of the CBDT's reconsideration on the next date of hearing. [Paras 5, 6]

Directed reconsideration by the CBDT of the incentive provision for quality orders and remitted the matter for the CBDT to state the utility and outcome of its deliberations.

Final Conclusion: Petitions challenge CBDT's action plan: court recorded a prima facie view that the time-bound disposal targets are directory and permissible as prioritisation measures, and directed the CBDT to reconsider the provision granting additional credit for 'quality appellate orders'; matter stood over to the listed date for the respondent to report on the CBDT's reconsideration.

No substantial question of law - Concurrent findings of fact - Right to fair opportunity / cross-examination - Disallowance of long term capital gain - Suspicion arising from anomalous share value appreciation

Concurrent findings of fact - No substantial question of law - Right to fair opportunity / cross-examination - Disallowance of long term capital gain - Whether the appeal raises any substantial question of law against concurrent factual findings rejecting the assessee's claim of long term capital gain. - HELD THAT: - The Court noted that the assessment officer, the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal have rendered concurrent adverse findings rejecting the assessee's claim for long term capital gain in respect of shares of M/s Kappac Pharma Ltd. The assessee's grievance that it was denied the opportunity to cross-examine two individuals whose statements underlay the inquiry was considered against the factual matrix. The Court observed that the company had meagre resources, reported consistent losses, and that the extraordinary rise in the share price (followed by a direction for delisting) legitimately attracted the Revenue's suspicion. Given that the disputed findings are essentially findings of fact and are uniformly adverse across the fora below, the Court concluded that no substantial question of law arises warranting interference.

Appeal dismissed as raising no substantial question of law arising from concurrent factual findings rejecting the claimed long term capital gain.

Final Conclusion: The High Court dismissed the appeal, holding that the matter involved concurrent findings of fact regarding the disallowance of long term capital gain and did not raise any substantial question of law for interference.

Recognition under section 80G - registration under section 12AA - requirements for grant of 80G recognition - rejection of 80G application not grounded in statutory mandate - remand for fresh consideration in light of 12AA registration

Recognition under section 80G - requirements for grant of 80G recognition - rejection of 80G application not grounded in statutory mandate - Validity of CIT(Exemption)'s rejection of the assessee's application for recognition under section 80G on the ground that the trust did not furnish details of future renovation/improvement projects and hence 'necessity for donation does not arise'. - HELD THAT: - The Tribunal found that the grounds relied upon by the CIT(Exemption) - namely, absence of details regarding future projects of renovation/improvement or related objects and the conclusion that necessity for donations does not arise - are not requirements mandated by the Act for grant of recognition under section 80G. It is for the trust to decide the timing and nature of activities in furtherance of its objects and when donations are required. The Tribunal noted that grant of recognition under section 80G can legitimately be granted to encourage prospective donors and that the CIT(E)'s stated reason therefore could not constitute a valid basis for rejection. Consequently, the impugned order rejecting recognition under section 80G was held to be unsustainable and set aside. [Paras 4]

Impugned rejection of the application for recognition under section 80G on the stated ground was held to be improper and set aside.

Registration under section 12AA - remand for fresh consideration in light of 12AA registration - Direction to the CIT(Exemption) on further proceedings after setting aside the order rejecting 80G recognition, in view of the subsequent registration granted under section 12AA. - HELD THAT: - The Tribunal observed that the CIT(Exemption) had granted registration under section 12AA to the assessee on the day following the impugned 80G rejection, thereby having examined the trust's objects and establishment for charitable purposes. In consequence, the Tribunal restored the matter to the file of the CIT(Exemption) with a direction to examine the 80G application afresh in the light of the order granting registration under section 12AA and the observations made by the Tribunal. The CIT(Exemption) was directed to afford the assessee a reasonable opportunity of being heard and to consider any details or submissions the assessee may file before passing a fresh decision. [Paras 4]

Matter remanded to the CIT(Exemption) for fresh consideration of the 80G application in light of the 12AA registration, with an opportunity of being heard to the assessee.

Final Conclusion: The Tribunal set aside the CIT(Exemption)'s order rejecting recognition under section 80G as being founded on non-statutory requirements, and remitted the matter to the CIT(Exemption) to decide the 80G application afresh in light of the subsequent registration under section 12AA, after affording the assessee a reasonable opportunity of being heard; appeal allowed for statistical purposes.

Penalty under section 271(1)(c) - concealment of income / furnishing inaccurate particulars of income - surrender of claim of exemption during assessment proceedings - disclosure of income and subsequent adjustment during scrutiny assessment - precedent/ratio: surrender during assessment not amounting to furnishing inaccurate particulars

Penalty under section 271(1)(c) - surrender of claim of exemption during assessment proceedings - concealment of income / furnishing inaccurate particulars of income - Levy of penalty under section 271(1)(c) for alleged concealment/furnishing inaccurate particulars where assessee had disclosed income but surrendered claimed exemption during assessment - HELD THAT: - The Tribunal found that the assessee had disclosed the particulars of her income and that the dispute arose from the assessee surrendering a claim of exemption during scrutiny proceedings. Relying on the Tribunal's earlier decision in Deepti Aggarwal and Charu Aggarwal, the Court held that a voluntary surrender of an initially claimed exemption during the assessment process does not amount to furnishing inaccurate particulars of income or concealment for the purpose of invoking section 271(1)(c). The Tribunal applied that ratio to the facts of the present case, concluded that the two proceedings are factually identical in the determinative respect, and accordingly found no liability to penalty. [Paras 2, 7, 8]

Penalty levied under section 271(1)(c) deleted and appeal allowed.

Final Conclusion: Following the Tribunal's precedent that surrender of a claimed exemption during assessment does not constitute furnishing inaccurate particulars or concealment, the penalty under section 271(1)(c) was set aside and the assessee's appeal allowed.

Invalidity of penalty notice for non-specification of limb - non-application of mind in penalty proceedings - distinction between concealment of particulars and furnishing inaccurate particulars - penalty u/s.271(1)(c) - requirement of clarity as to limb invoked - reliance on binding precedent for cancellation of penalty notice

Invalidity of penalty notice for non-specification of limb - non-application of mind in penalty proceedings - penalty u/s.271(1)(c) - requirement of clarity as to limb invoked - reliance on binding precedent for cancellation of penalty notice - Whether the penalty levied under section 271(1)(c) is sustainable where the penalty notice failed to specify whether proceedings were initiated for concealment of particulars of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal found that the penalty notice was issued in a stereotyped form without striking off the inapplicable limb, thereby failing to make clear to the assessee whether the charge was concealment or furnishing of inaccurate particulars. The two limbs of section 271(1)(c) carry different meanings and the notice must identify the specific limb so the assessee can meaningfully respond. The Tribunal applied the legal principle that omission to specify the limb and issuance of a pro forma notice indicates non-application of mind by the Assessing Officer. The decision relied on binding authority, including the judgment in M/s. SSA's Emerald Meadows, and precedents recognising that a standard proforma notice with irrelevant words intact renders penalty proceedings invalid for want of application of mind. On these grounds the Tribunal concluded that the notice was bad in law and the penalty could not be sustained. [Paras 12, 13, 14]

Penalty levied under section 271(1)(c) cancelled and the assessee's appeal allowed.

Final Conclusion: The Tribunal set aside the penalty order dated 26.09.2016 under section 271(1)(c), holding the penalty notice invalid for failing to specify which limb of section 271(1)(c) was invoked and for demonstrating non-application of mind; appeal allowed.

Curative and retrospective operation of second proviso to Section 40(a)(ia) - application of second proviso to Section 40(a)(ia) where recipient has furnished return, taken income into account and paid tax with accountant's certificate - deemed deduction upon recipient's return and accountant's certificate - remand to Assessing Officer for verification under Section 40(a)(ia) read with first proviso to Section 201(1) and Rule 31ACB

Curative and retrospective operation of second proviso to Section 40(a)(ia) - deemed deduction upon recipient's return and accountant's certificate - Second proviso to Section 40(a)(ia) has retrospective effect and is curative in nature. - HELD THAT: - The Tribunal, following precedents including the decision of the Delhi High Court in CIT v. Ansal Land Mark Township (P.) Ltd. and subsequent affirmations, held that the second proviso to Section 40(a)(ia) is declaratory/curative and operates retrospectively (from 01.04.2005 as indicated by the cited precedent). The proviso operates to deem that tax was deducted and paid on the date the resident payee furnished the return and satisfied the conditions (return filed, sum taken into account, tax paid) along with the prescribed certificate, thereby affecting the liability of the payer for disallowance under Section 40(a)(ia). The Tribunal confined its opinion on retrospectivity to this proviso alone and did not express any view on other provisions such as Section 201(1A) or Section 271C, which were not before it.

Second proviso to Section 40(a)(ia) is curative and retrospective; view taken in favour of the assessee.

Remand to Assessing Officer for verification under Section 40(a)(ia) read with first proviso to Section 201(1) and Rule 31ACB - The addition under Section 40(a)(ia) is remitted to the Assessing Officer for verification and fresh adjudication on whether conditions for benefit of the second proviso are satisfied. - HELD THAT: - Although the Tribunal held that the proviso is retrospective and curative, it directed remand to the AO for verification of factual compliance with the conditions necessary to avail the proviso's benefit (furnishing of return by the recipient, inclusion of the sum in recipient's return, payment of tax thereon, and production of the accountant's certificate) and for fresh order on the limited issue. The AO is to consider Section 40(a)(ia) read with the first proviso to Section 201(1) and Rule 31ACB, give the assessee opportunity to produce necessary material, and pass a fresh order accordingly.

Disputed addition under Section 40(a)(ia) remanded to the Assessing Officer for verification and fresh order after giving the assessee opportunity to furnish supporting material.

Final Conclusion: The Tribunal held that the second proviso to Section 40(a)(ia) is curative and retrospective (following binding precedents) and accordingly remitted the addition made under Section 40(a)(ia) to the Assessing Officer for verification of compliance with the proviso's conditions and for fresh adjudication after giving the assessee an opportunity to produce necessary materials; appeal allowed for statistical purposes.

Summary order. Delay condoned; exemption from filing certified copy of the impugned judgment allowed; notice issued in the civil appeal(s) and application(s) for stay, returnable in three weeks; Dasti permitted.

Conversion of public company into private company - Alteration of Articles of Association - Approval of Tribunal required for conversion - Compliance with Rule 68 of NCLT Rules, 2016 - Protection of creditors' rights on conversion - Registrar of Companies' report and no objection - Reserve Bank of India (RBI) position on NOC for NBFC conversion

Conversion of public company into private company - Alteration of Articles of Association - Approval of Tribunal required for conversion - Compliance with Rule 68 of NCLT Rules, 2016 - Registrar of Companies' report and no objection - Approval to convert the petitioner company from a Public Limited Company to a Private Limited Company was granted by the Tribunal. - HELD THAT: - The Tribunal examined whether statutory requirements for conversion under Section 14 of the Companies Act, 2013 and the procedural mandates of Rule 68 of the NCLT Rules, 2016 were complied with. The Board resolution dated 16.01.2018 and the Special Resolution passed at the EOGM on 08.02.2018, adoption of altered Articles applicable to a private company, filing of e-form MGT-14, service of the petition on statutory authorities, publication of requisite notices and the absence of any objections in response to publicity were noted. The Registrar of Companies, West Bengal filed a report without objection. The sole creditor identified as on 26.03.2018 conveyed no objection. On these materials the Tribunal found that all requisite statutory compliances had been fulfilled and that conversion would not cause prejudice to members or creditors, and accordingly approved the change of status subject to statutory filing with the RoC. [Paras 11, 12, 13, 14, 15]

Conversion from Public Limited to Private Limited approved and petition disposed of, subject to compliance with filing directions.

Protection of creditors' rights on conversion - Conversion would not prejudice the rights of creditors, and existing debts, liabilities and contracts would remain enforceable as before conversion. - HELD THAT: - The Tribunal recorded the petitioner's undertaking that conversion would not affect debts, liabilities, obligations or contracts incurred prior to conversion and noted that the lone creditor listed had given no objection. On the material placed before it, the Tribunal was satisfied that creditors' rights would not be prejudiced by the conversion and that liabilities could be enforced as if conversion had not occurred. [Paras 3, 14]

Conversion permitted without prejudice to creditors; existing obligations remain enforceable.

Reserve Bank of India (RBI) position on NOC for NBFC conversion - RBI does not issue NOC for conversion of NBFCs from public to private or vice versa; on receiving Tribunal's order RBI will take the change on record. - HELD THAT: - The Tribunal noted the communication recorded that, in similar cases, the Reserve Bank of India has informed that it does not issue a no-objection certificate for change of status of NBFCs between public and private company forms and that the RBI will take the information on record once the NCLT grants the change of status and the company apprises the RBI. The Tribunal observed that RBI raised no objection to the present petition in the time allowed for response. [Paras 12]

RBI's position noted; no NOC required and RBI to record the change on being intimated.

Final Conclusion: The Tribunal approved the petition for conversion of AKG Finvest Limited from a Public Limited Company to AKG Finvest Private Limited, having found that statutory and procedural requirements were complied with, that the Registrar of Companies raised no objection, that the sole creditor had no objection, and that the conversion would not prejudice creditors; the petitioner is directed to file a certified copy of the order and altered Articles with the RoC in the prescribed form within 15 days.

Compounding of offence - composition of offences under section 621A - offence for non-filing of cost audit report under section 233B - tribunal's power to compound offences despite pending prosecution - condition of payment of fine for compounding

Tribunal's power to compound offences despite pending prosecution - composition of offences under section 621A - This Tribunal has jurisdiction and power to compound the offence under the Companies Act, 1956 (section 233B) in exercise of composition provisions contained in section 621A, even though prosecution is pending. - HELD THAT: - The Tribunal considered the statutory scheme of composition in section 621A of the Companies Act, 1956 and the precedents cited, noting that the Supreme Court and the NCLAT have recognized the Tribunal's power to compound offences under the earlier law. The Tribunal observed that the offence relates to non-filing of the cost audit report under section 233B and that the Companies (Amendment) Act changes do not divest this Tribunal of power to compound offences committed under the Companies Act, 1956 prior to amendment. The Registrar's report showing that the default was remedied and that no inspection, investigation or complaints are pending was taken into account. On this basis the Tribunal held that the pendency of prosecution in the criminal court is not a bar to compounding under the circumstances and statutory provisions considered. [Paras 2, 7, 8, 9]

Jurisdictional power to compound the offence under section 233B (Companies Act, 1956) exists and may be exercised despite prosecution being pending, having regard to section 621A and precedents.

Offence for non-filing of cost audit report under section 233B - condition of payment of fine for compounding - The offence for the financial year 2013-14 is compounded on payment of the specified fines fixed by the Tribunal. - HELD THAT: - The Tribunal noted the penal consequences under section 233B(11) for the relevant period and the Registrar's report that the default had been made good. Applying the compounding principles and guided by judicial authorities, the Tribunal fixed an aggregate fine to be paid by the company and the named officers for the year 2013-14. The Tribunal directed that on remittance of the imposed fine within the stipulated time, the offence shall stand compounded and recorded that fines on directors are to be paid from their personal accounts. [Paras 3, 5, 6, 10, 11]

Fine fixed and payment directed; upon remittance within three weeks the offence for 2013-14 shall stand compounded.

Final Conclusion: The Tribunal exercised its power to compound the offence of non-filing of the cost audit report for the year 2013-14 under the Companies Act, 1956; specified fines are imposed on the company and named officers and, on payment within three weeks as directed, the offence shall stand compounded.

Corporate Insolvency Resolution Process under Section 7 - financial creditor and financial debt - existence of default - summary satisfaction standard for admission - dispute over quantum not a bar to admission - classification as Non-Performing Asset not determinative - appointment of Interim Resolution Professional - moratorium under Section 14

Financial creditor and financial debt - existence of default - summary satisfaction standard for admission - Whether the application under Section 7 by ICICI Bank as a financial creditor is maintainable and liable to be admitted on account of existence of debt and default. - HELD THAT: - The Tribunal found that the applicant bank had placed on record loan agreements, renewal letters, certificate of charge, statement of account and a bankers' book certificate showing disbursement of facilities and outstanding dues. The corporate debtor did not dispute execution of loan and security documents and failed to demonstrate absence of debt or default. The Code requires the Adjudicating Authority, in a Section 7 proceeding, to ascertain and record satisfaction as to occurrence of default in a summary manner; it is not a forum to decide contested money claims or to quantify disputed amounts. The Tribunal therefore applied the summary satisfaction standard and concluded that the applicant had proved debt and default sufficient to maintain the application. [Paras 24, 25, 35, 36, 50]

Application under Section 7 is maintainable and the Tribunal is satisfied that default has occurred and the application is complete.

Dispute over quantum not a bar to admission - classification as Non-Performing Asset not determinative - Whether disputes as to the quantum of debt, alleged excess interest charges, or the classification of the account as NPA prevent admission of the Section 7 application. - HELD THAT: - The Tribunal held that disputes over the quantum of debt or alleged excess charging of interest are matters for the Resolution Professional or for adjudication in appropriate proceedings and do not operate as a bar to admission under Section 7. Similarly, the fact that an account is classified as NPA under RBI guidelines is irrelevant to the maintainability of a Section 7 petition because NPA classification pertains to other statutory regimes and does not negate the existence of financial debt or default for the purposes of the Code. The adjudicating authority's role is limited to a summary satisfaction of default, not to resolving triable issues. [Paras 28, 30, 31, 32, 38]

Alleged disputes as to quantum, excess interest or NPA classification do not preclude admission of the Section 7 application.

Appointment of Interim Resolution Professional - Whether the proposed Interim Resolution Professional satisfies the statutory requirements for appointment. - HELD THAT: - The proposed person submitted Form 2, agreed to act, made required disclosures under IBBI regulations and declared that no disciplinary proceedings were pending against him. The Tribunal was satisfied that the proposed Interim Resolution Professional met the requirements of Section 7(3)(b) and that no disciplinary proceedings were pending which would disqualify him. [Paras 4, 50, 52]

Shri Vijender Sharma is fit for appointment and is appointed as Interim Resolution Professional.

Moratorium under Section 14 - Whether moratorium should be declared consequent to admission and what prohibitions flow therefrom. - HELD THAT: - Upon admission under Section 7(5)(a), the Tribunal declared the moratorium under Section 14 and enumerated its consequences, including prohibition on institution or continuation of suits, transfer or disposal of the corporate debtor's assets, actions to enforce security interests and recovery of property from the corporate debtor. The Tribunal also noted statutory exceptions, including government-notified transactions, supply of essential goods or services and the non-application of moratorium to sureties in certain guarantee contracts as per the Amendment Act, 2018. [Paras 51, 54, 55]

Moratorium is declared and its statutory prohibitions and exceptions are imposed.

Summary satisfaction standard for admission - Whether allegations of mala fide conduct and existence of triable issues by the corporate debtor warranted rejection or deferral of the Section 7 petition. - HELD THAT: - The Tribunal observed that allegations of mala fide conduct and claims for compensation based on conduct of the financial creditor raise triable issues that do not bear on the summary satisfaction required for admission under Section 7. In absence of a binding compromise or restructuring agreement or evidence showing absence of debt/default, such allegations cannot prevent admission. The Tribunal emphasized that time-bound initiation of CIRP is integral to the Code and that adjustments between parties can be addressed during the CIRP or in appropriate forums, not at the admission stage. [Paras 33, 34, 41, 42]

Allegations of mala fide conduct and triable disputes do not justify rejection or deferral of the Section 7 application.

Final Conclusion: The Tribunal admitted the Section 7 application filed by the financial creditor, appointed the proposed Interim Resolution Professional, directed immediate public announcement and declared the moratorium under Section 14, holding that the bank proved existence of financial debt and default and that disputes as to quantum, NPA classification or other triable issues do not prevent admission under the Code.

Voluntary Compliance Encouragement Scheme, 2013 - substantially false declaration - immunity under VCES - scope of tax dues - proviso to Section 106 - show cause under Section 111

Proviso to Section 106 - substantially false declaration - show cause under Section 111 - immunity under VCES - scope of tax dues - Whether the designated authority/Commissioner could treat the declaration under the 2013 Scheme as 'substantially false' for omission of a taxable service not declared while upholding immunity in respect of services actually declared and acknowledged - HELD THAT: - The Court held that the second proviso to Section 106 permits a declarant to make a declaration in respect of an issue not covered by a prior notice or order, and contemplates that declarations may be made in relation to some issues while other issues remain the subject of separate proceedings. The Circular dated 8 August 2013 (Serial No. 6) supports the view that a declarant may declare tax dues concerning an issue which is not part of an audit para, reinforcing that the Department cannot, by invoking Section 111, impugn a declaration in respect of a specific service on the ground that tax for a different, undeclared service should also have been included. The Form VCES-1 and the requirement to furnish separate calculation sheets when dues relate to more than one service only prescribe the manner of disclosure where multiple services are declared; they do not compel a declarant to disclose all taxable services to avail the Scheme. Consequently, omission to declare tax for a different service did not, by itself, render the declaration concerning the services actually declared 'substantially false' so as to defeat immunity under the Scheme; the Department remained free to initiate appropriate proceedings qua the undeclared service. The Principal Commissioner's conclusion that a declarant must disclose "all" service tax dues and that the declaration here was substantially false was therefore legally unsustainable. [Paras 16, 18, 21, 23, 24]

The order rejecting the appellant's declaration as 'substantially false' and denying immunity under the 2013 Scheme was set aside.

Final Conclusion: The appellate order dated 20 July 2015 is set aside: a declarant may lawfully make a declaration under the 2013 Scheme in respect of specified services without being required to disclose all taxable services, and omission to declare a different service does not automatically render the declared items 'substantially false' so as to defeat VCES immunity; the Department may pursue separate proceedings qua the undeclared service.

Supply of Tangible Goods service - right of possession and effective control - lease and transfer of possession - maintenance and handover obligations under hire/lease agreement

Supply of Tangible Goods service - right of possession and effective control - lease and transfer of possession - maintenance and handover obligations under hire/lease agreement - Whether fixtures, fittings and appliances leased out along with residential premises amounted to a taxable 'Supply of Tangible Goods service' or formed part of the lease transferring possession and control to the lessee. - HELD THAT: - The Tribunal examined the definition of Supply of Tangible Goods service which applies where goods (including machinery, equipment and appliances) are provided for use while the supplier retains the right of possession and effective control. The hire/lease agreement showed that the hired items were co-terminus with the lease of the residential apartment; the lessee was to have use and was required to hand back the items in reasonably good condition subject only to specified exceptions. The Commissioner (Appeals) had acknowledged that the hired items were to be provided by the lessor but had nonetheless treated them as retained in legal possession and control. A joint reading of the agreement clauses demonstrates that maintenance and the handover obligations effected transfer of possession and effective control to the lessee, and the fixtures and fittings formed part of the leased property. The Tribunal relied on the legal character of lease under the Transfer of Property Act, which effects transfer of possession of leased goods. Since the appellant did not retain the requisite right of possession and effective control, the transaction did not fall within the Supply of Tangible Goods service and therefore was not exigible to service tax on that basis. [Paras 6, 7, 8]

The transferred articles formed part of the lease with possession and effective control passing to the lessee and therefore did not constitute a taxable Supply of Tangible Goods service; the demand is unsustainable.

Final Conclusion: The demand of service tax and proportionate penalty upheld in the impugned order insofar as it related to supply of tangible goods is set aside; the appeal is allowed.

Taxability of commitment charges - Commitment charges as interest - Exclusion of interest from taxable value in banking and financial services - Procedural non-separation of interest in returns insufficient to deny benefit - Extended period of limitation - requirement of suppression or willful default

Taxability of commitment charges - Commitment charges as interest - Exclusion of interest from taxable value in banking and financial services - Procedural non-separation of interest in returns insufficient to deny benefit - Whether commitment charges received by the bank are liable to service tax under banking and other financial services - HELD THAT: - The Tribunal held that commitment charges are in the nature of interest on unutilised credit facilities, having regard to statutory and authoritative definitions and clarifications about the term "interest". The Income-tax definition and CBIT/Board clarifications treat service or commitment charges on unutilised credit as interest. The Department's inclusion of commitment charges in the taxable value merely on account of their appearance in ST-3 returns and a debit entry was impermissible; reliance on such entries did not override the legal character of the charges. The Commissioner himself had dropped the larger demand qua interest, and the Board's instruction excludes interest on loans from taxable value in banking and financial services. Earlier decisions treating commitment charges as liquidated damages were noted, and on this reasoning the confirmed demand on commitment charges was unsustainable. [Paras 6, 7, 8, 9, 11]

Demand of service tax on commitment charges quashed; commitment charges treated as interest and not includible in taxable value for banking and other financial services.

Extended period of limitation - requirement of suppression or willful default - Whether the show cause notice invoking the extended period of limitation was sustainable - HELD THAT: - The Tribunal found the show cause notice issued in 2011 (beyond the normal one-year period) could not sustain invocation of the extended five-year period because the Department did not prove suppression of facts or willful attempt to evade tax. The Commissioner had itself dropped the principal demand relating to interest, and no evidence demonstrated deliberate concealment by the appellant. In absence of such proof, the extended period could not be invoked and the notice was time-barred. [Paras 10, 11]

Invocation of the extended period held unjustified; show cause notice in respect of the demands is time-barred.

Final Conclusion: The appeal is allowed; the order under challenge is set aside and the confirmed demand (including that on commitment charges) is quashed as unsustainable on merits and as time-barred.

Cargo handling service - Goods Transport Agency - classification of taxable services - composite service - essential character - ancillary and intermediary services - abatement

Cargo handling service - Goods Transport Agency - composite service - essential character - ancillary and intermediary services - classification of taxable services - Whether the services rendered by the appellants fall under Goods Transport Agency or constitute cargo handling service for the period in dispute - HELD THAT: - The agreement between the parties (29/30 April 2005) covered hiring of pay-loader and tippers for loading and transporting coal for a distance of 10.5 kms, with transportation charges forming the dominant component. Applying the classification principles in Section 65A(2), a composite service is to be classified according to the service which gives it its essential character. The Tribunal accepted the view in the Government circular (para 3) that GTA is a single composite service which may include loading/unloading and other ancillary activities performed as means to effect transportation, and that such ancillary services, if included in the invoice of the transporter, form part of the GTA service. On the facts, loading and mechanical unloading were incidental to the predominant transportation activity; transportation at 10.5 kms and the per-unit transport charge demonstrate that the essential character of the contract was transport by road (GTA) rather than an independent cargo handling activity. The Tribunal also noted authority holding that transportation from pit-heads to railway sidings within a mining area is appropriately classifiable as transportation of goods by road. For these reasons the impugned findings classifying the activity as cargo handling service were displaced and the appeals allowed. [Paras 13, 14, 15, 16, 17]

The services rendered are classified as Goods Transport Agency service and not cargo handling service; the impugned orders are set aside and the appeals are allowed.

Final Conclusion: The Tribunal held that the essential character of the contract was transportation (GTA) with loading/unloading incidental thereto; accordingly the demand classifying the activity as cargo handling service was set aside and the appeals allowed for the period August, 2002 to March, 2009.

Maintainability of appeal - jurisdiction of High Court under Section 83 of the Finance Act, 1994 - appealability to the Supreme Court under Sections 35G(1) and 35L(1)(b) of the Central Excise Act, 1944 - entitlement to exemption under Notification No.4/2004-S.T. - valuation of services for Business Auxiliary Service

Maintainability of appeal - appealability to the Supreme Court under Sections 35G(1) and 35L(1)(b) of the Central Excise Act, 1944 - Whether the appeal was maintainable before the High Court in view of statutory appeal remedies to the Supreme Court. - HELD THAT: - The Court observed that the core controversies-entitlement to exemption under Notification No.4/2004-S.T. and valuation of services for Business Auxiliary Service-constitute matters which fall for determination in an appeal to the Supreme Court under the statutory scheme (Section 83 of the Finance Act, 1994 read with Sections 35G(1) and 35L(1)(b) of the Central Excise Act, 1944). Given that those issues were the subject matter of challenge and are properly the subject of an appeal to the Supreme Court, the High Court held that it did not have maintainable jurisdiction to entertain the present appeal on valuation and rate of duty.

Appeal not maintainable before the High Court and accordingly disposed of.

Final Conclusion: The High Court dismissed the appeal as not maintainable because the disputes on exemption and valuation are appealable to the Supreme Court under the statutory provisions; consequently the High Court declined to adjudicate those matters.

Rectification of clerical/mistake in order - jurisdictional designation of revenue respondent - temporal application of administrative reorganisation

Rectification of clerical/mistake in order - jurisdictional designation of revenue respondent - temporal application of administrative reorganisation - Whether the miscellaneous order dated 03/08/2018 contained a mistake in the case title by naming the respondent as "Commissioner of Central Excise, Jaipur - I" instead of "Central Excise & CGST Commissionerate, Alwar" and required correction. - HELD THAT: - The Tribunal examined the state of record and the temporal facts. The appeal was filed by M/s KEI Industries when the respondent's jurisdiction was within the Commissionerate of Central Excise, Jaipur-I, and the miscellaneous order dated 03/08/2018 correctly reflected that designation. The formation of the CGST Commissionerate occurred subsequently in 2017 and therefore post-dated the jurisdictional status at the time of the proceedings. Consequentially, the designation in the miscellaneous order was not a clerical or apparent mistake requiring rectification because it accurately recorded the respondent's title as applicable during the period of dispute. The application by Revenue seeking correction to reflect the later administrative reorganisation was therefore untenable.

Miscellaneous application by Revenue seeking correction of the respondent's designation in the miscellaneous order dated 03/08/2018 is dismissed.

Final Conclusion: The Tribunal found no mistake in the case title of the miscellaneous order dated 03/08/2018 and dismissed the Revenue's application for rectification.