TaxTMI Updates e-Newsletter
Apr 21,2021

Status quo - Service of notice - Production of evidence in administrative/investigative proceedings

Status quo - Status quo in favour of the petitioner was directed to be maintained pending further orders. - HELD THAT: - The Court directed that, in the meantime and until the next date of hearing, the existing position as obtaining on the date of the order shall remain unchanged in respect of the petitioner. This was an interim protective direction made while the petition is being considered and is confined to maintaining the current situation without adjudication on the substantive merits of the grievance raised about the investigatory procedure.

Interim status quo granted in favour of the petitioner.

Service of notice - Service of the writ petition was accepted on behalf of the respondents and notice issued. - HELD THAT: - The respondents' counsel accepted service on behalf of the respective respondents and the Court issued notice in the writ petition. The respondents were directed to file instructions and, if they intend to contest the petition, to file counter-affidavits before the next date of hearing.

Notice issued and service accepted; respondents to file instructions/counter-affidavit as appropriate.

Production of evidence in administrative/investigative proceedings - The Court recorded and raised for consideration the grievance that the procedure framed for anti-profiteering proceedings restricts noticees from placing additional oral or documentary evidence before the Authority. - HELD THAT: - The petition draws attention to clauses in the Procedure & Methodology under Rule 126 which provide that interested parties shall not be allowed to produce additional oral or documentary evidence before the Authority, and that parties are ordinarily required to file written submissions only. The Court noted this issue as one of general concern potentially affecting other matters and proceeded to issue notice; no adjudication on the legality or validity of the Procedure & Methodology or the permissibility of placing evidence before the DGAP/NAPA was undertaken in the order.

Grievance noted and issued notice for adjudication; no substantive determination made in the present order.

Final Conclusion: The interim application was allowed; notice was issued and service accepted by respondents; interim status quo was directed to be maintained pending further hearing, while the substantive contention regarding restriction on production of evidence in anti-profiteering proceedings was noted for consideration without decision.

Discrepancy between GSTR-1 and GSTR-3B - show-cause notice and reply - adjudicating authority's duty to consider representation - appellate authority's power to dismiss appeal for defective record supply - remand for fresh consideration - pre-deposit subject to subsequent adjudication

Discrepancy between GSTR-1 and GSTR-3B - show-cause notice and reply - adjudicating authority's duty to consider representation - Whether the adjudicating authority (Superintendent) could lawfully demand tax with penalty and interest without considering the petitioner's reply which explained the discrepancy between GSTR-1 and GSTR-3B and recorded subsequent rectification and tax payment. - HELD THAT: - The Court found that the Superintendent proceeded on the premise that the petitioner had failed to reply to the show-cause notice, whereas the petitioner had in fact filed a reply and the prescribed proforma explaining that the omission in GSTR-3B was inadvertent and was later rectified by declaration for March 2019 with payment of the tax due. The High Court observed that the Superintendent did not take into account this defence, although it accepted that interest for delayed payment had not been paid. In these circumstances the Court set aside the adjudicating order and directed that the proceedings be placed back before the Superintendent for fresh consideration of the petitioner's reply and for disposal in accordance with law.

Adjudicating order dated 4th October, 2019 set aside; matter remanded to the Superintendent for fresh consideration of the petitioner's reply and disposal in accordance with law.

Appellate authority's power to dismiss appeal for defective record supply - remand for fresh consideration - pre-deposit subject to subsequent adjudication - Whether the appellate authority was justified in dismissing the petitioner's appeal on the ground that a certified copy of the adjudicating order filed by the petitioner was defective in supply. - HELD THAT: - The Court accepted the petitioner's contention that a copy of the adjudicating order as supplied to him had been filed in the appeal and that any defect in the supply of the certified copy was not within the petitioner's control. The High Court held that dismissal of the appeal on that procedural ground was not appropriate in the circumstances and accordingly set aside the appellate order. Given the failure of the appellate authority to address the substantive defence that the petitioner had in fact replied to the show-cause notice and rectified the declaration by payment of tax, the matter was directed to be reconsidered afresh by the Superintendent. The Court further recorded that the amount of pre-deposit made by the petitioner to pursue the appeal shall remain subject to any further order the Superintendent may pass, without prejudice to the petitioner's right of further appeal.

Appellate order dated 01.02.2021 set aside; appeal proceedings restored and underlying matter remitted for fresh adjudication; pre-deposit to remain subject to final orders.

Final Conclusion: The orders of the Superintendent dated 4th October, 2019 and the appellate authority dated 01.02.2021 are set aside; the matter is remitted to the Superintendent for fresh consideration of the petitioner's reply (relating to the 2017-2018 disclosures) and disposal in accordance with law, with the petitioner's pre-deposit held subject to the outcome and without prejudice to further appeals.

Power to detain and seize goods and conveyance - provisional release on bond or security or payment of tax, interest and penalty - application of provisional release under Section 67(6) to detention under Section 129(2) - continuation of assessment proceedings while ordering provisional release

Power to detain and seize goods and conveyance - application of provisional release under Section 67(6) to detention under Section 129(2) - Whether the GST authorities have the power to detain or seize the conveyance and goods and whether the proviso for provisional release under Section 67(6) applies to detention under Section 129(2). - HELD THAT: - The Court recorded that under the statutory scheme the Inspecting Officer/ Superintendent has the power to inspect and to detain or seize goods and conveyance where contravention is found. The judgment notes that sub-section (6) of Section 67 permits provisional release of goods so seized on execution of a bond and furnishing of security or on payment of applicable tax, interest and penalty, and that sub-section (2) of Section 129 makes the provisions of Section 67(6) applicable to detention and seizure under Section 129 as well. On that basis the Court held that while the Superintendent is empowered to detain or seize, he is also empowered to grant provisional release on the conditions provided by the statute.

The statutory power to detain/seize exists, and the provisional release mechanism under Section 67(6) applies to detentions under Section 129(2).

Provisional release on bond or security or payment of tax, interest and penalty - continuation of assessment proceedings while ordering provisional release - Whether the vehicle and goods should remain detained pending assessment or be released provisionally and on what conditions. - HELD THAT: - Balancing the statutory powers with the equities of the case, the Court directed that proceedings for assessment may continue but that continued detention of the conveyance and goods pending assessment would not be appropriate. The Court exercised its supervisory jurisdiction to order provisional release conditioned on the petitioner furnishing a bond for payment of the full amount of tax and penalty computed by the Superintendent and either depositing 25% of that amount under protest (subject to final adjustment) or furnishing a bank guarantee for 25% of the principal tax and penalties. The Court also clarified that the Superintendent may proceed to pass an assessment order after hearing the petitioner and that the petitioner is at liberty to raise all legal contentions in that proceeding.

The vehicle and goods are to be released provisionally subject to (i) a bond for the full tax and penalty, and (ii) either a 25% deposit under protest or a bank guarantee for 25% of the principal tax and penalties, with assessment proceedings to continue.

Final Conclusion: Petition disposed of by directing provisional release of the detained vehicle and goods on the specified bond/deposit or bank guarantee conditions, while allowing the authorities to continue assessment proceedings and the petitioner to raise legal contentions.

Keyman Insurance premium - allowability as business expenditure under Section 37(1) - CBDT Circular No.762 dated 18.02.1998 on Keyman Insurance - restriction on sum assured and quantum of deduction - remand for fresh consideration by Commissioner of Income Tax (Appeals)

Keyman Insurance premium - allowability as business expenditure under Section 37(1) - restriction on sum assured and quantum of deduction - CBDT Circular No.762 dated 18.02.1998 on Keyman Insurance - remand for fresh consideration by Commissioner of Income Tax (Appeals) - Whether the question of allowability and quantum of deduction of premium paid on Keyman Insurance policy should be finally adjudicated or remitted for fresh consideration. - HELD THAT: - The High Court found that the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal accepted the assessee's claim treating a portion of the premium as allowable business expenditure but did so without adequately addressing the Revenue's contentions on restriction of sum assured, the quantum of premium attributable to the Keyman cover, and the absence of supporting documentary proof. Although the CBDT circular No.762/1998 and authorities were relied upon by the assessee and accepted below, the Court observed that the lower authorities did not give acceptable findings on the revenue's submissions and on evidentiary sufficiency. In these circumstances the Court concluded that the orders of the CIT(A) and the Tribunal could not stand and that the matter ought to be re examined on merits. The High Court therefore set aside the orders under challenge and directed a fresh decision by the CIT(A) after considering the case of the Revenue and the assessee, including issues of restriction on sum assured, attribution of premium, and production of documentary evidence, and to pass orders in accordance with law. [Paras 10, 11, 12, 13]

Orders of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal are set aside and the matter is remitted to the Commissioner of Income Tax (Appeals) for fresh consideration and decision on merits in accordance with law.

Final Conclusion: The Tax Case Appeal is allowed; the CIT(A)'s and Tribunal's orders are set aside and the matter remitted to the CIT(A) for fresh consideration of the allowability and quantum of Keyman Insurance premium, taking into account the Revenue's and assessee's contentions and the evidentiary material; no costs.

Reopening of assessment - Reasons to believe - Proviso to Section 147 - Change of opinion - Jurisdictional conditions for reopening

Reopening of assessment - Change of opinion - Reasons to believe - Jurisdictional conditions for reopening - Validity of the notice issued under Section 148/assessment reopened under Section 147 for Assessment Year 2011-2012 in light of earlier appellate disposal - HELD THAT: - The Court considered whether the reassessment initiated by notice under Section 148/Order under Section 147 was a mere change of opinion in respect of matters already adjudicated before the Assessing Officer and the ITAT, or whether the Assessing Officer had formed a fresh opinion based on a different foundation and new material. The Deputy Commissioner recorded that the original assessment addressed disallowance as a slump sale (addition of Rs.3 crores) whereas the reopening related to an under-assessed income item debited as "Administrative Expenses" (share of profit under an earlier MOU) amounting to Rs.82,49,045/-, which, on the respondent's case, had not been extinguished because the agreement did not fructify. The Court held that where the Assessing Officer forms an opinion that the issue for reopening is distinct from the matter adjudicated in the original assessment, the High Court should not embark on a roving enquiry into the sufficiency of reasons. The assessee remains entitled to contest the reassessment in the statutory proceedings and remedies. Applying these principles, the Court found the reasons recorded in the impugned order candid and convincing and not vitiated for want of jurisdictional conditions under Section 147/148. [Paras 23, 24, 25, 26, 27]

The reopening was held to be valid; the writ petition challenging the notice and consequential order is dismissed and the assessee may contest the matter in the reassessment proceedings.

Final Conclusion: Writ petition dismissed; the reassessment proceedings initiated under Section 148/147 for AY 2011-2012 were held to have been supported by reasons that the issue sought to be reopened was different from matters adjudicated earlier; petitioner is at liberty to participate and defend its case in the reassessment process; no order as to costs.

Deduction under Section 10A: exclusion of expenses in foreign exchange from export and total turnover - Interpretation of turnover for computing deduction under Section 10A - Proportional exclusion of export-related expenses from total turnover - Application of binding precedent in tax interpretation

Deduction under Section 10A: exclusion of expenses in foreign exchange from export and total turnover - Proportional exclusion of export-related expenses from total turnover - Application of binding precedent in tax interpretation - Expenditure in foreign exchange is to be excluded from both export turnover and total turnover while computing eligible deduction under Section 10A of the Income Tax Act for the Assessment Year 2006-2007. - HELD THAT: - The Court accepted the Revenue's concession that the substantial question of law is covered by this Court's earlier decision in T.C.A. No.975 of 2010 and the Supreme Court's decision in Commissioner of Income-tax v. HCL Technologies Ltd., which hold that expenses incurred in foreign exchange (such as freight, telecommunication, insurance and technical services provided outside) attributable to export turnover must be excluded from export turnover and, correspondingly, from total turnover so that the formula for computing the Section 10A deduction remains coherent and workable. The Court followed these precedents and subsequent Division Bench decisions of this Court applying the same ratio, concluding that the Questions of Law are answered against the Revenue and in favour of the assessee. The tribunal's approach in the assessment under challenge is thereby upheld to the extent that exclusion in foreign exchange is to be treated proportionately in computing total turnover for the Section 10A deduction. [Paras 7]

Questions of Law decided against the Revenue and in favour of the assessee; the appeal is dismissed.

Final Conclusion: The Tax Case Appeal challenging the Tribunal's order for Assessment Year 2006-2007 is dismissed; the Court, following binding precedents, held that export-related expenses incurred in foreign exchange are to be excluded from both export turnover and total turnover for computing the Section 10A deduction.

Deductibility of entry tax under Income-tax Act - inapplicability of sales tax adjustment to income-tax deduction - allowability of expenditure charged to profit and loss account - binding effect of precedential Division Bench decision

Deductibility of entry tax under Income-tax Act - inapplicability of sales tax adjustment to income-tax deduction - Tribunal was right in upholding the deletion of disallowance of entry tax paid on raw materials and inputs brought into the assessee's factory at Bangalore. - HELD THAT: - The Division Bench decision in Commissioner of Income Tax, Chennai v. TVS Motors Ltd. was held to be dispositive. That decision established that where entry tax has been actually paid during the year, its payment is to be considered for deduction under the Income-tax statute and the fact that the entry tax may be adjusted under the Sales Tax law does not preclude allowance under the Income-tax Act. The Court applied that ratio and concluded that the Assessing Officer's disallowance was not sustainable and the deletion by the Tribunal and CIT(A) was correct.

Deletion of the addition disallowing entry tax upheld; appeal dismissed on this point.

Allowability of expenditure charged to profit and loss account - binding effect of precedential Division Bench decision - Finding that the assessee had debited entry tax as miscellaneous charges in the Profit and Loss account did not warrant disallowance where entry tax had been actually paid and is allowable. - HELD THAT: - Although the Assessing Officer queried the ledger treatment of entry tax as miscellaneous charges, the Court followed the precedential ratio that the correct enquiry is whether entry tax was actually paid in the year and thus deductible under the Income-tax law. The ledger description or head of account did not alter the legal conclusion on allowability when the payment had been made; accordingly the Tribunal's confirmation of CIT(A)'s order was sustained.

Assessment addition on account of entry tax debited to miscellaneous charges disallowed; appeal dismissed on this point.

Final Conclusion: Following the Division Bench decision in Commissioner of Income Tax, Chennai v. TVS Motors Ltd., the High Court dismissed the Revenue's appeal and upheld the Tribunal's and CIT(A)'s orders allowing deduction for entry tax actually paid; no costs.

Disallowance of expenditure relatable to exempt income - application of Rule 8D formula in absence of Assessing Officer's recorded dissatisfaction - presumption that investments are made out of capital and reserves (non interest bearing funds) - retrospective application of administrative circulars to earlier assessment years

Disallowance of expenditure relatable to exempt income - application of Rule 8D formula in absence of Assessing Officer's recorded dissatisfaction - presumption that investments are made out of capital and reserves (non interest bearing funds) - Deletion of disallowance under Section 14A read with Rule 8D(2)(ii) and Rule 8D(2)(iii) in respect of investments and exempt income. - HELD THAT: - The tribunal and the Commissioner (Appeals) found from the assessee's balance sheet that share capital and reserves substantially exceeded the investments, giving rise to a presumption that investments were made out of capital, reserves or other non interest bearing funds and not from borrowed funds. The Assessing Officer had not recorded any satisfaction or expressed dissatisfaction with the assessee's claim that no expenditure was incurred to earn exempt income as required under Rule 8D(1). In the absence of positive material to show expenditure incurred to earn exempt income and without the Assessing Officer's specific finding of dissatisfaction, the mechanical application of the Rule 8D formula was not justified. On these facts the tribunal correctly deleted the disallowance under Section 14A read with Rule 8D, including the amounts computed under Rule 8D(2)(ii) and 8D(2)(iii). [Paras 6, 7]

Disallowance under Section 14A read with Rule 8D(2)(ii) and 8D(2)(iii) deleted.

Retrospective application of administrative circulars to earlier assessment years - Applicability of CBDT Circular No.5/2014 to Assessment Year 2009-10. - HELD THAT: - The court observed that Circular No.5/2014, which emphasizes disallowance of expenditure relatable to exempt income irrespective of whether such income has been earned in the year, does not apply to the facts of this case because the assessment year in question is 2009-10. Consequently, the circular could not be invoked to justify the Assessing Officer's action for that assessment year. [Paras 7]

CBDT Circular No.5/2014 held not applicable to Assessment Year 2009-10.

Final Conclusion: The substantial question of law is answered against the revenue and in favour of the assessee; the appeals are dismissed and the disallowances under Section 14A read with Rule 8D were rightly deleted by the tribunal, with CBDT Circular No.5/2014 being inapplicable to AY 2009-10.

Academic appeal - relief under Section 154 of the Income Tax Act, 1961 - principles of natural justice - opportunity to be heard - admission of substantial question of law

Academic appeal - relief under Section 154 of the Income Tax Act, 1961 - principles of natural justice - opportunity to be heard - Whether the admitted substantial questions of law require adjudication after the assessee obtained relief under a Section 154 rectification order. - HELD THAT: - The Court noted that the Commissioner of Income Tax (Appeals) subsequently allowed the assessee's petition under Section 154 and granted relief. The tribunal had observed that the assessee had not placed any material before it despite opportunities and that the assessee's conduct had impeded proceedings. Given that rectification under Section 154 has been allowed and the relief thereby granted, the High Court held that it was unnecessary to adjudicate the substantial questions of law earlier admitted for consideration. The Court expressly confined its decision to the effect that the challenge had become academic and refrained from deciding the merits of the additions or the alleged violation of principles of natural justice and opportunity to be heard which had been argued before the lower authorities. [Paras 6]

The appeal is disposed of as rendered academic in view of the relief granted under Section 154; the Court declines to answer the substantial questions of law admitted earlier.

Final Conclusion: Since the Commissioner of Income Tax (Appeals) granted relief to the assessee by allowing the Section 154 petition, the High Court held the admitted substantial questions of law need not be decided and disposed of the appeal as academic, without prejudice to other proceedings.

Allocation of common overhead expenses - percentage of completion method - computation of turnover for deduction under Section 80IB - eligibility for deduction under Section 80IB(10) where project forms part of larger development - transfer by part performance and inclusion within transfer under Section 2(47)(v) - application of Section 53A, Transfer of Property Act, 1882 to taxability

Allocation of common overhead expenses - percentage of completion method - computation of turnover for deduction under Section 80IB - Whether common overheads must be allocated in proportion to turnover when the percentage of completion method is used for computing turnover for the purpose of deduction under Section 80IB. - HELD THAT: - The Tribunal found no definitive rule requiring allocation of common overheads on the basis of turnover merely because the percentage of completion method was adopted for recognising turnover. The High Court upheld the Tribunal's approach, observing that the case law relied upon by the Revenue was distinguishable and that Revenue failed to produce concrete documentary evidence to justify excluding the difference in allocable expenses. The Court accepted that the basis for allocation of common expenses depends on the nature and facts of the business and, on the record, exclusion of the difference in allocable expenses was unjustified. [Paras 20]

Tribunal's allowance of the assessee's method of allocating common expenses was upheld; no requirement to allocate such expenses strictly in proportion to turnover merely because percentage of completion method was used.

Eligibility for deduction under Section 80IB(10) where project forms part of larger development - computation of deduction under Section 80IB(10) - Whether deduction under Section 80IB(10) is barred because project 'Zircon' formed part of a larger project 'Ultima' where some flats exceeded prescribed area limits. - HELD THAT: - The Court applied its earlier decision in Commissioner of Income Tax, Bangalore v. Brigade Enterprises Ltd. and held that the second substantial question is answered against the Revenue and in favour of the assessee. The reasoning of the cited authority governs the issue, leading to the conclusion that the deduction was permissible despite the larger project context. [Paras 7]

Question answered against the Revenue; assessee entitled to deduction under Section 80IB(10) on the facts and precedent relied upon.

Transfer by part performance and inclusion within transfer under Section 2(47)(v) - application of Section 53A, Transfer of Property Act, 1882 to taxability - Whether profits on sale of land/undivided share are to be included for computing deduction under Section 80IB(10) when the land was held by a sister concern but possession was taken under an agreement of part performance. - HELD THAT: - Section 2(47)(v) treats transactions involving handing over possession in part performance (as contemplated by Section 53A of the Transfer of Property Act) as a 'transfer' for the purposes of the Income-tax Act. On the facts, the assessee took possession of the land pursuant to an agreement with its sister concern and paid consideration; it thereafter constructed apartments. Applying the principle in PCIT v. Green Associates and construing Section 2(47)(v) accordingly, the Court held that the land must be treated as transferred and the assessee is therefore entitled to claim deduction under Section 80IB. [Paras 8, 9]

Profits arising from the land/undivided share are to be treated as transfer by part performance under Section 2(47)(v) and included appropriately; assessee entitled to claim deduction under Section 80IB.

Final Conclusion: The Revenue's appeal is dismissed. The Tribunal's allowance of the assessee's allocation of common expenses stands; the assessee is entitled to deduction under Section 80IB(10) on the facts and precedent relied upon; and transactions involving part performance possession fall within Section 2(47)(v), entitling the assessee to the claimed deduction.

Deletion of disallowance under section 40(a)(ia) - retrospective operation of curative amendment - interpretation of Finance Act, 2010 amendment to section 40(a)(ia) - application of binding Supreme Court precedent

Deletion of disallowance under section 40(a)(ia) - interpretation of Finance Act, 2010 amendment to section 40(a)(ia) - Tribunal rightly deleted the disallowance made by the Assessing Officer under section 40(a)(ia). - HELD THAT: - The High Court applied the ratio of the Supreme Court in Commissioner of Income Tax, Kolkata v. Calcutta Export Company which held that the amendment effected by the Finance Act, 2010 to section 40(a)(ia) was curative and should be given retrospective operation so as to avoid unintended and deleterious consequences to bona fide taxpayers. Having regard to that binding precedent, and noting that the assessee had filed its return for the relevant year, the court concluded that the Tribunal was correct in deleting the disallowance under section 40(a)(ia). The Revenue produced no contrary authoritative decision to distinguish the Supreme Court's ruling, and therefore the Tribunal's deletion was upheld. [Paras 4, 6, 7]

Deletion of the disallowance under section 40(a)(ia) sustained in favour of the assessee.

Retrospective operation of curative amendment - application of binding Supreme Court precedent - The amendment made by Finance Act, 2010 to section 40(a)(ia) applies retrospectively to the date of insertion and benefits the assessee. - HELD THAT: - Relying on the Supreme Court's reasoning that the 2010 amendment was curative in nature and intended to remedy anomalies caused by the insertion of section 40(a)(ia), the High Court held that the amendment must be treated as having retrospective effect from the date the provision was originally inserted (so as to prevent unintended financial hardship to marginal and medium taxpayers). The court expressly followed the Supreme Court's view that retrospective operation is necessary to give effect to the object of the amendment and to avoid transferring or shifting expenses in a manner that would prejudice taxpayers beyond legislative intent. [Paras 3, 4, 6]

The Finance Act, 2010 amendment to section 40(a)(ia) is to be given retrospective effect and the assessee is entitled to its benefit.

Final Conclusion: Following and applying the binding Supreme Court precedent, the High Court dismissed the Revenue's appeal, upholding the Tribunal's deletion of the disallowance and holding that the Finance Act, 2010 amendment to section 40(a)(ia) operates retrospectively to benefit the assessee for the Assessment Year 2008-2009.

Disallowance of expenses paid in cash - verification of cash payments - acceptance of books of account and vouchers - burden of proof for business expenditure - addition for unverified job work charges

Disallowance of expenses paid in cash - verification of cash payments - acceptance of books of account and vouchers - Whether the disallowance on account of job work charges paid in cash was justified and whether the assessee is entitled to delete the balance addition sustained by the lower authority. - HELD THAT: - The Tribunal examined the assessment record and the submissions of the parties and noted that a substantial sum of job work charges was paid in cash and that the assessee did not furnish supporting vouchers before the Tribunal (the assessee contended vouchers had been produced before the AO). In the absence of complete supporting evidence enabling verification of the cash payments, the Assessing Officer was entitled to make an addition as the genuineness and quantum of cash payments could not be confirmed. The Tribunal observed that no fresh evidence or circumstance was placed before it to rebut the factual findings recorded below. On this basis the Tribunal declined to interfere with the findings recorded by the lower authorities regarding the disallowance in respect of unverified cash job work payments.

Assessee's appeal dismissed; the disallowance in respect of unverified cash job work charges as recorded by the authorities below is not disturbed.

Final Conclusion: The assessee's appeal against the limited disallowance of job work charges paid in cash for A.Y. 2014 15 is dismissed; the findings of the authorities below on lack of verification of cash payments are affirmed and no interference is made.

Application of Chapter X / transfer pricing determination vis-a -vis invocation of general provisions such as section 40A(2) - onus on the Assessing Officer to establish excessiveness of expenditure and to produce comparable evidence for section 40A(2) - allowability under section 37 as expenditure laid out wholly and exclusively for business - definition and scope of speculative transaction under section 43(5) - foreign exchange forward contracts entered as hedging - treated as revenue expenditure / bank charges

Application of Chapter X / transfer pricing determination vis-a -vis invocation of general provisions such as section 40A(2) - onus on the Assessing Officer to establish excessiveness of expenditure and to produce comparable evidence for section 40A(2) - allowability under section 37 as expenditure laid out wholly and exclusively for business - Deletion of disallowance of professional/consultancy fees paid to an associate enterprise which were treated as international transactions and held to be at arm's length by the TPO; related disallowance under section 37 also deleted. - HELD THAT: - The Tribunal recorded that the payments to the associate enterprise were declared as international transactions, referred to the TPO, and the TPO held that no adjustment to the arm's length price was required. Once the TP regime (Chapter X) and the TPO have determined that the transaction is at arm's length, the Assessing Officer cannot simultaneously invoke section 40A(2) to disallow the expenditure unless he proves excessiveness by adducing comparable evidence. The AO had not brought forward any fair market value comparison or comparable transactions to show that the payments were excessive or unreasonable. Further, the AO did not explain why the expenditure was not laid out wholly and exclusively for business so as to attract disallowance under section 37. The assessee produced the consultancy agreement and evidence of services (setting up and running stores), and the AO did not doubt genuineness, retention of services, or payment. Authorities and precedents were relied upon to the effect that the revenue cannot supplant commercial/business judgment once nexus with business purpose and factual expenditure are established. On these bases the Tribunal held the AO erred in invoking section 40A(2) and erred in disallowing under section 37 and therefore confirmed deletion of the additions. [Paras 4]

The disallowance of professional fees paid to the associate enterprise is deleted; grounds 2 and 3 of the Revenue's appeal are rejected.

Definition and scope of speculative transaction under section 43(5) - foreign exchange forward contracts entered as hedging - treated as revenue expenditure / bank charges - Deletion of disallowance of premium on forward cover treated by the AO as speculative loss under section 43(5); premium held to be revenue in nature and not a speculative transaction. - HELD THAT: - The Tribunal noted the forward contracts were entered to hedge import payments and working capital loan repayments in the ordinary course of the assessee's business. The premium charged by banks for forward contracts was characterized as bank charges and revenue expenditure incurred to protect the business from foreign exchange fluctuations. To qualify as a speculative transaction under section 43(5) all characteristics in the definition must be satisfied, including that the contract be for purchase or sale of shares, stock or a commodity. The Tribunal held foreign currency does not fall within the term "commodity" for the purpose of section 43(5), and therefore the statutory definition of speculative transaction was not attracted. In consequence, treating the premium as speculative and disallowing it was unsustainable and the CIT(A)'s deletion of the disallowance was upheld. [Paras 5]

The disallowance of premium on forward cover is deleted; the forward-contract premium is revenue in nature and not a speculative loss under section 43(5).

Final Conclusion: The Tribunal dismissed the Revenue's appeals and upheld the CIT(A)'s deletion of (i) the additions disallowing professional fees paid to an associate enterprise (assessments for AYs 2008-2009 and 2010-2011) and (ii) the disallowance of premium on forward covers, thereby allowing the assessee's claims for both assessment years. Cross-objections supporting the CIT(A)'s orders were dismissed.

Rectification under section 254(2) of the Income-tax Act - mistake apparent from record - review versus rectification - application of section 56(2)(vii)(c)(i) of the Income-tax Act - condonation of delay due to COVID-19

Condonation of delay due to COVID-19 - Whether the application for rectification filed beyond statutory time-limit was within limitation by reason of COVID-19 related exclusion of period of limitation - HELD THAT: - The Tribunal examined the delay in filing the miscellaneous application under section 254(2) and accepted the assessee's submission that the period falling within the COVID-19 lockdown should be excluded. Having regard to the Supreme Court direction excluding the period from 15.3.2020 to 14.3.2021 from limitation, the Tribunal held that the petition filed on 28.8.2020 fell within the prescribed period and therefore the delay was condoned. [Paras 2]

Delay condoned; application treated as within period of limitation.

Rectification under section 254(2) of the Income-tax Act - mistake apparent from record - review versus rectification - application of section 56(2)(vii)(c)(i) of the Income-tax Act - Whether the Tribunal could in exercise of power under section 254(2) rectify its earlier order on the question of taxability of amounts (including alleged TDS entry) under section 56(2)(vii)(c)(i) - HELD THAT: - The assessee sought rectification of the Tribunal's order on the ground of an alleged mistake apparent from record concerning taxability of amounts treated under section 56(2)(vii)(c)(i). The Tribunal observed that the grievances raised required reappreciation of evidence and review of its findings. Relying on established principle that the power under section 254(2) is confined to correcting mistakes apparent on the face of the record and does not permit review or rehearing of the merits, the Tribunal held that the application amounted to an impermissible review and therefore was not maintainable. Consequently, the request to modify the Tribunal's order on the taxability question could not be entertained in the present proceedings. [Paras 5, 6]

Application for rectification rejected as not maintainable; MA dismissed.

Final Conclusion: The Tribunal condoned the delay in filing the rectification application by excluding the COVID-19 period from limitation but dismissed the application on merits as impermissible review under section 254(2) and refused to rectify its earlier order; the miscellaneous application is dismissed.

International transaction - arm's length price - guarantee commission - transfer pricing - deduction of interest on borrowed funds for business purpose - tax credit under double taxation relief / section 90 - tax deduction at source obligations for fees for technical services - treatment of loss on foreign exchange derivative contracts as business expenditure - disallowance of expenditure attributable to exempt income under Section 14A - genuineness and allowability of long term capital loss on related party buyback - allowability of professional and consultancy expenses under business deduction

International transaction - guarantee commission - arm's length price - transfer pricing - ALP of corporate guarantee issued by the assessee on behalf of its associated enterprise - HELD THAT: - The Tribunal held that a corporate guarantee given by an entity on behalf of its associated enterprise falls within the definition of international transaction (finance Act, 2012 explanation to Section 92B) and that comparables drawn from commercial banks are not strictly comparable to corporate guarantees issued by a holding company for the benefit of its subsidiary. Following the reasoning of the Bombay High Court and the Tribunal precedents considered, the Tribunal found the rate earlier adopted by the Assessing Officer (1%) to be excessive on the facts and circumstances of the case and fixed the guarantee commission at 0.50% as the appropriate ALP for the Assessment Year 2015 - 2016. [Paras 5, 9, 10, 11]

Corporate guarantee commission fixed at 0.50%; Assessing Officer directed to adopt 0.50% commission on such guarantees.

Deduction of interest on borrowed funds for business purpose - deduction under Section 36(1)(iii) - consistency of treatment and remand for verification - Allowability of interest expenditure on borrowed funds advanced to wholly owned subsidiaries for acquisition/maintenance of controlling interest - HELD THAT: - The Tribunal noted competing authorities and the assessee's factual case that loans/funds advanced to wholly owned subsidiaries were for commercial expediency and to obtain/maintain control of subsidiaries engaged in the same line of business. Having regard to earlier decisions in the assessee's own case and the need to verify whether investments were made to acquire or maintain controlling interest (or to avoid dilution) and to examine mixed funding, the Tribunal did not decide the allowance on merits but remitted the matter to the Assessing Officer for fresh examination of factual records and verification in accordance with the Tribunal's prior directions. [Paras 23, 24]

Issue remitted to Assessing Officer for fresh consideration and verification; ground allowed for statistical purposes.

Tax deduction at source obligations for fees for technical services - income deemed to accrue or arise in India under Section 9(1)(vii) - remand for examination of rendering/utilisation of services and DTAA - Whether TDS was required on professional/consultancy payments claimed to be for services rendered and utilised outside India - HELD THAT: - The Tribunal followed the coordinate bench in the assessee's own case which stressed the twin criteria of rendering of services in India and utilisation of services in India for attraction of tax under the Explanation to Section 9. Noting that the question of situs of rendering and utilisation requires factual examination and treaty consideration, the Tribunal set aside the assessment and remitted the issue to the Assessing Officer to examine afresh in light of the DTAA and relevant findings of the coordinate bench. [Paras 31, 32]

Matter remitted to Assessing Officer for fresh decision after examination of facts and DTAA; ground allowed for statistical purposes.

Tax deduction at source obligations for fees for technical services - income deemed to accrue or arise in India under Section 9(1)(vii) - remand for examination of rendering/utilisation of services and DTAA - TDS obligation on payments for drilling services and management fees - HELD THAT: - Relying on the coordinate bench reasoning applied to similar payments, the Tribunal held that the question whether payments attract tax in India depends on where services were rendered and utilised and whether the payments fall within Section 9(1)(vii). The Tribunal found that factual and treaty issues required fresh consideration and therefore set aside the order and remitted the matter to the Assessing Officer to examine afresh in accordance with the coordinate-bench directions. [Paras 33, 39]

Issue remitted to Assessing Officer for fresh consideration; ground allowed for statistical purposes.

Tax credit under double taxation relief / section 90 - availability of foreign tax credit where foreign income is offered to tax in India - Claim for credit of foreign tax (Singapore withholding) under section 90 - HELD THAT: - The Tribunal recalled its coordinate bench decisions in the assessee's earlier matters which held that where income from a foreign country is offered to tax in India, corresponding tax credit for taxes paid in the source country is to be given. As the matter involves factual verification and to maintain consistency with prior tribunal directions, the Tribunal remitted the issue to the Assessing Officer to examine and give effect in accordance with those findings. [Paras 43, 44]

Matter remitted to Assessing Officer for fresh consideration in line with Tribunal's earlier directions; ground allowed for statistical purposes.

Treatment of loss on foreign exchange derivative contracts as business expenditure - speculative transaction vs. hedging for commercial exposure - Allowability of loss on cancelled forward contracts (forex derivatives) claimed as business loss - HELD THAT: - The Tribunal recognised that the assessee's core business generated foreign currency receipts and imports, and that use of forex derivatives can be a legitimate business hedging activity. Noting deficiencies in the record (lack of risk analysis, contract notes and evidence of underlying exposures), the Tribunal set aside the AO's disallowance and directed the AO to reconsider the claim after examining the requisite documents and relevant tribunal precedent, rather than adjudicating the matter finally. [Paras 56, 57]

Issue remitted to Assessing Officer for fresh consideration on production of exposure/risk documentation; ground allowed for statistical purposes.

Disallowance of expenditure attributable to exempt income under Section 14A - treatment under minimum alternate tax / Section 115JB - Disallowance under Section 14A and consequential impact on book profit under Section 115JB - HELD THAT: - The Tribunal observed that Section 14A is a statutory fiction and that issues regarding computation and any consequential adjustment under Section 115JB require careful application of legal precedents (including the Delhi Special Bench decision relied upon). Because the assessee had not satisfactorily established that borrowed funds were not used for investments and factual verification was necessary, the Tribunal remitted the matter to the Assessing Officer to re examine the claim in light of the cited authorities. [Paras 64, 67]

Matter remitted to Assessing Officer for fresh examination and decision; ground allowed for statistical purposes.

Genuineness and allowability of long term capital loss on related party buyback - related party transactions and evidentiary verification - Allowability of long term capital loss on sale/buyback of shares in wholly owned foreign subsidiary where shares were subsequently re acquired - HELD THAT: - The Tribunal noted divergent treatment in the immediately preceding year and the absence of certain evidentiary materials (minutes, detailed explanation of liquidity position, documentary proof of buyback rationale). Given the peculiar facts - sale followed shortly by substantial reinvestment - and the need for fresh factual scrutiny of genuineness and commercial rationale, the Tribunal set aside the DRP/AO orders and remitted the issue to the Assessing Officer for fresh adjudication with directions to verify materials and reasons for the transactions. [Paras 79, 82]

Issue remitted to Assessing Officer for fresh consideration; ground allowed for statistical purposes.

Allowability of professional and consultancy expenses under business deduction - evidentiary verification of services received and tax compliance - Allowability of professional/consultancy fee paid to Emkay Global Financial Services as business expenditure - HELD THAT: - The Tribunal accepted that engaging a consultant for business strategy/financial restructuring can be a bona fide business decision and noted that TDS and service tax compliance had been made. However, because the Assessing Officer had not examined whether the recipient had offered the amounts to tax or inspected details of services rendered, the Tribunal set aside the order and remitted the issue to the Assessing Officer to verify whether the recipient declared the income and to examine the service details before concluding on allowability. [Paras 92, 93]

Matter remitted to Assessing Officer for verification of service particulars and tax treatment by the recipient; ground allowed for statistical purposes.

Final Conclusion: For Assessment Year 2015 - 2016 the Tribunal fixed the ALP for corporate guarantee at 0.50% and directed the Assessing Officer to adopt that rate; all other grounds were not finally adjudicated on merits but were set aside and remitted to the Assessing Officer for fresh consideration/verification in accordance with the Tribunal's directions and applicable precedents, the appeals otherwise being allowed for statistical purposes.

Genuineness of business expenditure credited in books - onus under section 68-style reasoning (explanation for credits not satisfactory) - evaluation of attendant circumstances and human probabilities in testing apparent receipts - treatment of arranged or notional transactions and sham/contrived dealings - speculative transaction versus legitimate commercial compensation/hedging - requirements for qualifying hedging/insurance-like purchases for proviso to clause (a) to sub section (5) of sec.43

Genuineness of business expenditure credited in books - onus under section 68-style reasoning (explanation for credits not satisfactory) - treatment of arranged or notional transactions and sham/contrived dealings - evaluation of attendant circumstances and human probabilities in testing apparent receipts - Disallowance of commission payments of Rs. 2,45,40,000 was restored by the Tribunal. - HELD THAT: - The Tribunal examined the assessment officer's finding that commission recipients were related persons, gave stereotyped replies and could not explain services rendered; payments were credited only on 31/03/2009 and no contemporaneous agreements, service particulars, or consistent business records were produced. The Tribunal held that the CIT(A) erred in ignoring the AO's remand report based on statements and evidence collected during remand proceedings. Applying the principle that where credits in the books are inadequately explained the Department may treat them as income (as applied through the tests of surrounding circumstances and human probabilities), the Tribunal relied on precedents cited in the order (CIT Vs. Durga Prasad More and Sumathi Dayal Vs. CIT ) to conclude that the assessee failed to satisfactorily prove the genuineness and commercial basis of the commission payments and that the additions deserved restoration. The factual findings as to absence of agreements, timing of entries, and admissions in statements were treated as determinative. [Paras 5, 7, 10]

Addition of Rs. 2,45,40,000 on account of commission reinstated.

Speculative transaction versus legitimate commercial compensation/hedging - requirements for qualifying hedging/insurance-like purchases for proviso to clause (a) to sub section (5) of sec.43 - treatment of notional losses and corroboration by commercial conduct - Disallowance of compensation (claimed loss) of Rs. 3,05,10,500 was deleted and allowed to the assessee. - HELD THAT: - The Tribunal reviewed the correspondence, commercial context and the CIT(A)'s appreciation that the assessee entered into purchase orders which were later cancelled in a market slump, and that the decision to pay compensation was a commercial one taken to avoid legal consequences. Although the AO doubted specifications, actual manufacture and stock with suppliers and treated the payments as notional or arranged, the CIT(A) considered market volatility, size and commercial conduct of the assessee and suppliers, and the timing of payments and legal notices. On this basis the Tribunal found no infirmity in the CIT(A)'s conclusion that the compensatory payments were not an arranged or speculative transaction and fell within commercial liability deserving deduction; accordingly the CIT(A)'s direction to allow the compensation loss was upheld. [Paras 11, 13, 16]

Compensation payment of Rs. 3,05,10,500 allowed and the AO's disallowance deleted.

Final Conclusion: Revenue appeal partly allowed: the Tribunal restored the AO's disallowance of the commission payments (addition reinstated) but upheld the CIT(A)'s deletion of disallowance in respect of compensation payments and allowed that loss to the assessee; appeal otherwise dismissed.

Deduction under section 10B - Adjustment of losses of other units - Rectification under section 154 - Mistake apparent from record - Debatable issue doctrine - Precedent of the Supreme Court

Deduction under section 10B - Adjustment of losses of other units - Rectification under section 154 - Mistake apparent from record - Debatable issue doctrine - Precedent of the Supreme Court - Whether the Assessing Officer was entitled to pass an order under section 154 to re compute deduction under section 10B by adjusting losses of other units - HELD THAT: - The Tribunal accepted the CIT(A)'s conclusion that the question whether deduction under section 10B should be computed on a stand alone basis for the eligible unit or after adjusting losses of other units is a debatable question of law and fact. An order under section 154 is confined to correction of a mistake apparent from the record and cannot be used to decide a debatable issue on merits. The departmental representative did not controvert that on merits the matter was covered in favour of the assessee by the Supreme Court decision cited by the assessee. Accordingly the rectification made by the Assessing Officer could not be sustained as it went beyond the limited scope of section 154.

Rectification order passed under section 154 by re computing deduction under section 10B after adjusting losses of other units quashed; CIT(A)'s order allowing assessee's claim upheld.

Final Conclusion: The appeal by the Revenue is dismissed and the order of the CIT(A) dated 20.11.2018 restoring the deduction under section 10B (without adjustment of losses of other units) for A.Y. 2010-11 is upheld.

Deemed dividend under section 2(22)(e) - business of lending as a defence to deeming provision - taxability of deemed dividend in the hands of shareholder only - unexplained cash credit and burden to prove identity, genuineness and creditworthiness under Section 68 - assessing officer's satisfaction proviso to Section 68 not attracted for the year - inapplicability of post 2013 amendments regarding justification of share premium

Deemed dividend under section 2(22)(e) - business of lending as a defence to deeming provision - taxability of deemed dividend in the hands of shareholder only - Whether the loan of Rs. 1,18,00,000 received from M/s. Anyushka Investments Pvt. Ltd. is taxable as deemed dividend under section 2(22)(e) in the hands of the assessee. - HELD THAT: - The Tribunal accepted that the assessee was not a shareholder of the lending company and that the lending company was in the business of providing financial assistance. Applying the precedent of the Special Bench in ACIT v. Bhaumik Colour P. Ltd., deemed dividend under section 2(22)(e) is taxable in the hands of the shareholder and cannot be fastened on a non shareholder payee. Further, following the Bombay High Court in Impact Containers, where lending is in the normal course of the payer's business, advances cannot be treated as deemed dividend. On these bases the Tribunal found no infirmity in the CIT(A)'s deletion of the addition. [Paras 7, 8, 9]

Addition under section 2(22)(e) deleted; ground raised by Revenue dismissed.

Unexplained cash credit and burden to prove identity, genuineness and creditworthiness under Section 68 - assessing officer's satisfaction proviso to Section 68 not attracted for the year - inapplicability of post 2013 amendments regarding justification of share premium - Whether the share application money/share premium of Rs. 2,00,00,000 received from M/s. Anyushka Investments Pvt. Ltd. is an unexplained cash credit liable to be added under section 68. - HELD THAT: - The Tribunal noted that the assessee furnished documentary evidence - including bank statements, share application forms, allotment advices, audited financial statements and ROC filings - and that AIPL itself confirmed the investment in response to enquiry. The CIT(A) also relied on AIPL's balance sheet showing the investment and observed that AIPL had earlier advanced a loan to the assessee (not disputed by the AO), indicating capacity to invest. The Tribunal further observed that the statutory proviso requiring assessing officer's satisfaction (inserted by Finance Act, 2012) was not applicable to assessment year 2010 11, and that provisions regarding justification of share premium introduced later were also not applicable. Having regard to the material on record and consistent judicial precedents cited by the CIT(A), the Tribunal found the assessee discharged the onus under Section 68 and that the AO had not afforded adequate opportunity or justification to sustain the addition. [Paras 16, 17, 18, 19]

Addition under section 68 deleted; CIT(A)'s order upheld and Revenue's ground dismissed.

Final Conclusion: Both grounds of the Revenue appeal were dismissed: the addition under section 2(22)(e) was deleted as the assessee was not a shareholder of the payer and the advance was in the normal course of the payer's business; the addition under section 68 was deleted on findings that the assessee had proved identity, genuineness and creditworthiness of the investor and that later amendments were not applicable to AY 2010 11. The revenue appeal is dismissed.

Show cause notice - stay of proceedings - entrustment of functions - exercise of powers under Section 6 of the Customs Act - validity of notification conferring powers - proper officer - invalid delegation by non existent statutory power

Show cause notice - stay of proceedings - invalid delegation by non existent statutory power - Interim protection in respect of proceedings pursuant to the Show Cause Notice dated 26th September, 2019. - HELD THAT: - The High Court, noting the decision of the Hon'ble Supreme Court in M/s Canon India Private Limited v. Commissioner of Customs (Civil Appeal No.1827/2018, decided 9 March 2021) which held that the conferral of customs functions on officers by a notification issued without statutory power was invalid, granted interim relief. In view of the Supreme Court's reasoning on the question of whether officers of the Directorate of Revenue Intelligence could be vested with functions of Customs officers without express statutory entrustment (including the necessity for exercise of powers under Section 6 of the Customs Act), the Court stayed the proceedings arising out of the Show Cause Notice dated 26th September, 2019 pending further hearing. The order was interlocutory and founded on the potential applicability of the Supreme Court's ruling to the present proceedings rather than a final adjudication on the merits of the Show Cause Notice.

Proceedings pursuant to the Show Cause Notice dated 26th September, 2019 are stayed until the next date of hearing.

Final Conclusion: Notice issued; respondent to file reply affidavit and petitioner to file rejoinder within prescribed time; interim stay granted on proceedings arising from the Show Cause Notice dated 26th September, 2019 until the next listed date (26th July, 2021).

Confiscation and redemption - restricted import under Foreign Trade Policy - requirement of DGFT licence - liability under Section 111(d) of the Customs Act - redemption fine under Section 125 - penalty under Section 112 - proportionality of fines and penalties to declared value

Restricted import under Foreign Trade Policy - requirement of DGFT licence - liability under Section 111(d) of the Customs Act - confiscation and redemption - The lawfulness of confiscation and grant of redemption where restricted goods were imported without DGFT licence. - HELD THAT: - The Tribunal found that the imported goods (Black matpe FAQ crop 2019, RITC 0713 3110) are restricted under the Foreign Trade Policy 2015-20 and subject to an annual quota. The importer admitted absence of a DGFT licence for the restricted goods. Importation without the requisite licence amounted to contravention of the statutory import policy and fell within the misdescription envisaged by Section 111(d) of the Customs Act, 1962. Consequently the goods were liable to confiscation; the Commissioner's order to allow redemption subject to payment of a redemption fine was therefore lawful. [Paras 2, 3]

Confiscation upheld and redemption subject to fine sustained as lawful.

Redemption fine under Section 125 - penalty under Section 112 - proportionality of fines and penalties to declared value - Whether the redemption fine and penalty imposed were excessive. - HELD THAT: - The Tribunal examined the quantum of the redemption fine and penalty in relation to the declared value of the goods. Having noted the declared value, the Tribunal concluded that the redemption fine under Section 125 and the penalty under Section 112 imposed by the Commissioner were not excessive or disproportionate in the facts of the case. No grounds were found to interfere with the amounts levied and the Tribunal accordingly upheld the impugned financial orders. [Paras 3]

Imposition of the redemption fine and penalty upheld as not excessive.

Final Conclusion: The appeal is dismissed. The confiscation (with redemption) of the restricted imported goods for lack of DGFT licence is sustained, and the redemption fine and penalty imposed by the Commissioner are upheld as not excessive.

Refund under Notification No.102/2007-Cus - limitation under Section 27 - provisional assessment vs final assessment - date of finalisation of bill of entry - Circular No.23/2010-Cus ultravires

Limitation under Section 27 - provisional assessment vs final assessment - date of finalisation of bill of entry - Whether the one year period for filing a refund claim under Notification No.102/2007-Cus is to be reckoned from the date of actual payment of SAD or from the date of finalisation of assessment of the bill of entry. - HELD THAT: - The Tribunal held that where duty is paid pursuant to a provisional assessment and the bill of entry is subsequently finalised, the limitation period of one year for a refund under the notification must be reckoned from the date of finalisation of the assessment (final adjudication) and not from the earlier provisional payment date. The conclusion follows the reasoning of the Hon'ble Delhi High Court in PIONEER INDIA ELECTRONICS (P) LTD. , which explained that until final adjudication the quantum of duty (and hence any refundable amount) remains uncertain and that Explanation II to Section 27 contemplates computation from final assessment. The Tribunal observed that Circular No.23/2010-Cus, insofar as it treated the date of provisional payment as determinative for the limitation period, was unsustainable in light of that reasoning and the requirement that notifications cannot curtail the statutory limitation under Section 27. Applying this interpretative principle, the date for commencing the one year period is the date of finalisation of the bill of entry. [Paras 3]

The one year limitation is to be reckoned from the date of finalisation of the bill of entry (final assessment) and not from the date of provisional payment.

Refund under Notification No.102/2007-Cus - date of finalisation of bill of entry - Circular No.23/2010-Cus ultravires - Whether the appellant's refund claim (filed after finalisation of the bill of entry) is time-barred. - HELD THAT: - Applying the legal principle that the one year period runs from finalisation of the bill of entry, the Tribunal found on the facts that the appellant's provisional payment was finalised on 07.01.2017 and the refund claim was filed on 18.01.2017. Consequently the claim was within one year of finalisation and therefore not time-barred. The Tribunal distinguished earlier decisions relied on by the Revenue as dealing with different facts and noted that some tribunal decisions had not considered the Delhi High Court authority. In view of the interpretation adopted, the impugned orders rejecting the refund on limitation grounds were unsustainable. [Paras 5, 6]

The refund claim was not time-barred; the impugned orders are set aside and the appeal is allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that for refunds under Notification No.102/2007-Cus the one year limitation under Section 27 is to be computed from the date of finalisation of the bill of entry; on the facts the appellant's claim was filed within that period, the impugned orders were set aside and consequential relief granted.

Dispensing with meetings of equity shareholders - dispensing with meetings of secured creditors - convening meetings of unsecured creditors - appointment of chairperson and scrutinizer for creditor meetings - compliance with Companies Act, 2013 and Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - filing of reports and subsequent company petition for sanction of scheme

Dispensing with meetings of equity shareholders - dispensing with meetings of secured creditors - Meeting of Equity Shareholders and meeting of Secured Creditors of both Applicant Companies dispensed with. - HELD THAT: - The Tribunal examined the application records, certificates from statutory accountants confirming the identities and consents of existing equity shareholders and secured creditors, statutory auditor certificates regarding accounting treatment, and the Board approvals. On the basis that material facts were disclosed, shareholders and secured creditors either consented or were identified and appropriate certifications were filed, the Tribunal was satisfied that convening of meetings of equity shareholders and secured creditors could be dispensed with and granted the relief sought. [Paras 5, 6]

Convening and holding of the meetings of the Equity Shareholders and of the Secured Creditors of the Applicant Companies is dispensed with.

Convening meetings of unsecured creditors - appointment of chairperson and scrutinizer for creditor meetings - quorum for unsecured creditors' meeting - notice and publication of meeting - Meetings of the Unsecured Creditors of both Transferor and Transferee Companies to be convened (by video conference) with specified Chairperson and Scrutinizer, quorum, and publication requirements. - HELD THAT: - Having dispensed with meetings of equity shareholders and secured creditors, the Tribunal ordered convening of separate meetings of Unsecured Creditors of the Transferor and Transferee Companies to consider the proposed Scheme of Amalgamation. The Tribunal specified date and time, mode (video conference), appointed a Chairperson and a Scrutinizer for each meeting, fixed their remuneration, prescribed a quorum (30% of total value of Unsecured Creditors for the meeting stage in view of the later three-fourth value requirement for consideration of the Scheme), and directed publication of the meeting notice in specified newspapers. These directions follow from the Tribunal's satisfaction with the material disclosures and requisite certifications filed by the applicants. [Paras 6]

Meetings of the Unsecured Creditors of the Transferor and Transferee Companies shall be convened on the dates and times directed, through video conference, with the appointed Chairperson and Scrutinizer, specified quorum and publication of notice.

Compliance with Companies Act, 2013 and Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - filing of reports and subsequent company petition for sanction of scheme - Applicants, Chairperson and Scrutinizer must follow statutory provisions in conducting meetings; Chairperson and Scrutinizer to file reports and applicants given time to file company petition for sanction. - HELD THAT: - The Tribunal directed that all extant provisions of the Companies Act, 2013 and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 be followed in convening and conducting the creditor meetings. It further required the Chairperson and Scrutinizer to file their respective reports with the Tribunal Registry within two weeks of conclusion of the meetings, after which the Applicant Companies are granted two weeks to file the company petition to seek sanction of the Scheme, subject to statutory compliances. These directions ensure procedural compliance and provide a timeline for post-meeting steps toward sanction. [Paras 6]

Meetings must comply with statutory provisions; Chairperson and Scrutinizer to file reports within two weeks of meeting conclusions and the Applicant Companies given two weeks thereafter to file the company petition for sanction.

Right to file interim application before Tribunal - Any person or entity aggrieved by the order may approach the Tribunal by filing interim application(s) seeking appropriate directions. - HELD THAT: - The Tribunal expressly preserved the right of aggrieved persons, companies or institutions to file interim applications before the Tribunal for appropriate directions in respect of the order. This procedural liberty was recorded as part of the order to allow stakeholders to seek corrective or protective relief if necessary. [Paras 6]

Aggrieved persons/companies/institutions may file interim application(s) before the Tribunal seeking appropriate directions.

Final Conclusion: The Company Application is allowed in part: meetings of equity shareholders and secured creditors are dispensed with; meetings of unsecured creditors of both companies are directed to be convened (with appointed Chairperson and Scrutinizer, specified quorum, publication and timelines); statutory compliances must be observed; Chairperson and Scrutinizer to file reports and the applicants to file the company petition for sanction within the prescribed timeline; and aggrieved parties retain the right to file interim applications.

Financial debt - collusion - effective service of demand notice - control over corporate affairs - malicious intent in filing insolvency petition - action under Sections 65, 72 and 75 of the I&B Code, 2016

Collusion - effective service of demand notice - control over corporate affairs - malicious intent in filing insolvency petition - Validity of the Adjudicating Authority's observations (paras 18 and 19) that the petitioners had engaged in unlawful collusion, had effected the service and reply of the demand notice among themselves, exercised effective control over the corporate debtor and filed the petition with malicious intent. - HELD THAT: - The Tribunal found that the Adjudicating Authority's conclusions of 'collusion' and 'misuse of position' were unsupported by concrete material and rested on relationship and suspicion rather than proof. The Adjudicating Authority erred in treating issuance and reply of a demand notice between family members as establishing unlawful collusion or lack of effective service; issuance of a demand notice under Section 7 is not a mandatory precondition, and suspicion, however strong, cannot substitute for evidence of a secret arrangement to obtain a judicial decision for a sinister purpose. Further, the conclusion of collusion was impermissible where the alleged co-conspirator was not impleaded and therefore condemned unheard. Consequently, the observations in paras 18 and 19 were unwarranted and liable to be expunged. [Paras 18, 19]

Observations in paras 18 and 19 of the impugned judgments are invalid and are expunged.

Financial debt - action under Sections 65, 72 and 75 of the I&B Code, 2016 - Whether proceedings should have been initiated against the petitioners under Sections 65, 72 and 75 of the Code or whether preconditions for those penal provisions were satisfied. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's substantive conclusion that the amounts advanced were contributions by promoters/shareholders forming part of the company's capital structure and did not qualify as 'financial debt' in the absence of any written or oral agreement or fixed tenure. Given that the petitions were dismissed on the ground that the claim did not amount to financial debt, there was no material to show that the petitions were filed for purposes other than seeking resolution; nor was there evidence of willful material omission or knowledge of false particulars in the Section 7 applications. The preconditions for invoking Sections 65, 72 or 75 were not satisfied on the record, and therefore no action under those provisions lay. [Paras 25, 26, 27, 28, 29]

Cross appeals seeking action under Sections 65, 72 and 75 are without merit and are dismissed.

Final Conclusion: Appeals by the petitioners are allowed to the limited extent of expunging paras 18 and 19 of the impugned orders; cross appeals seeking punitive action under Sections 65, 72 and 75 of the Code are dismissed. No order as to costs.

Non-interference with the commercial wisdom of the Committee of Creditors - Sanction of a resolution plan under section 30(2) of the I & B Code, 2016 - Power of the Adjudicating Authority to direct rebidding or to seek maximisation of value - Application of the Supreme Court precedent in Kalpraj Dharamshi to bar interference with CoC decisions

Non-interference with the commercial wisdom of the Committee of Creditors - Power of the Adjudicating Authority to direct rebidding or to seek maximisation of value - Application of the Supreme Court precedent in Kalpraj Dharamshi to bar interference with CoC decisions - Validity of the Adjudicating Authority's direction to the Committee of Creditors to invite fresh bids despite prior approval of a resolution plan by the CoC with 100% voting in favour of the successful resolution applicant - HELD THAT: - The Tribunal examined the impugned order which directed the CoC to take fresh bids on the premise that there was scope for improvement although the KALS Group's plan had been approved with 100% voting. Applying the Supreme Court's reasoning in Kalpraj Dharamshi, which emphasises that the commercial wisdom of the CoC is not to be interfered with except within the limited scope of the Code, the Tribunal found the direction for rebidding to be unsustainable. The impugned order amounted to interference with the CoC's commercial decision and contradicted the settled principle that an adjudicating authority should not usurp CoC's commercial judgment where the CoC has consciously approved a plan by requisite majority. In view of that precedent and the facts that the plan had secured the requisite approval and there was no finding that the plan failed the statutory tests under the Code, the direction for fresh bids exceeded the Adjudicating Authority's jurisdiction and was set aside. [Paras 3, 4, 19]

Direction to the CoC to take fresh bids was quashed; the impugned order directing rebidding set aside.

Sanction of a resolution plan under section 30(2) of the I & B Code, 2016 - Non-interference with the commercial wisdom of the Committee of Creditors - Obligation of the Adjudicating Authority to approve/sanction the resolution plan after certification of compliance and approval by the CoC - HELD THAT: - The Tribunal accepted the appellant's contention that the Resolution Professional had certified compliance with the requirements of the Code and that the CoC had approved the plan with unanimous voting. Absent any finding that the sanctioned plan failed to meet the statutory requirements under section 30(2), the Adjudicating Authority was not justified in refusing to proceed to sanction and instead ordering a rebid. Relying on the Supreme Court's decision in Kalpraj Dharamshi, the Tribunal held that where the CoC's commercial decision is valid and the statutory requirements are met, the Adjudicating Authority must not interfere and should approve the plan. Consequently, the Tribunal directed the Adjudicating Authority to approve the resolution plan endorsed by the CoC in favour of KALS Group. [Paras 19]

Adjudicating Authority ordered to approve/sanction the resolution plan approved by the CoC (KALS Group); appeal allowed and impugned order set aside.

Final Conclusion: The appeal is allowed; the National Company Law Tribunal's order directing rebidding is quashed and set aside, and the Adjudicating Authority is directed to approve the resolution plan that was approved by the Committee of Creditors in favour of KALS Group.

Financial debt - financial lease - disbursement against consideration for time value of money - pleadings in an application under Section 7 - admission of petition under Section 7 of the I&B Code

Financial lease - financial debt - Indian Accounting Standards - Whether the lease agreement dated 03.04.2017 qualifies as a financial lease and gives rise to a financial debt under Section 5(8) of the I&B Code read with relevant accounting standards. - HELD THAT: - The Tribunal examined the terms of the Lease Agreement, the structure of payments (repayment schedule by way of lease rentals over 36 months) and the contractual provision for purchase of the asset at the end of the lease at a residual value, together with the fact that the lessor had provided lease finance assistance. Applying the statutory definition of financial debt and the principles in the cited precedents, the Tribunal concluded that the transaction transferred substantially the economic consequences of providing finance and thus carried the essential elements of a disbursal against consideration for the time value of money. The Tribunal therefore held that the arrangement is a financial lease and the claim constitutes financial debt under Section 5(8). [Paras 52, 53, 58]

The lease is a financial lease and the claim constitutes financial debt under Section 5(8) of the I&B Code.

Disbursement against consideration for time value of money - disbursement to supplier - definition of disbursement - Whether the fact that the amounts were paid to the supplier/architects (M/s Interio and Architecture) rather than directly to the corporate debtor affects the requirement of 'disbursement' under the definition of financial debt. - HELD THAT: - The Tribunal noted that the Second Respondent recorded disbursements in Part IV of the application and actually paid specified sums for the acquisition of the assets, and that the contractual scheme envisaged lease finance with scheduled rentals and an option to purchase at a residual value. Considering the meaning of 'time value of money' and the commercial substance of the transactions, the Tribunal found that payment to the manufacturer/supplier in furtherance of the lease finance arrangement satisfied the requirement of disbursement against consideration for the time value of money and thus met the statutory requirement. [Paras 43, 46, 52]

Payment to the supplier in furtherance of the lease finance arrangement satisfies the 'disbursement' requirement for financial debt.

Pleadings in an application under Section 7 - form requirements of demand notice - admission of petition under Section 7 - Whether the Second Respondent's pleadings in the Section 7 application were inadequate (or whether new documents/evidence could be introduced at the appellate stage), and whether the absence of a demand notice in the prescribed form was fatal to admission. - HELD THAT: - The Tribunal held that the Section 7 application and Form-1 particulars sufficiently disclosed that lease finance assistance was provided and the amount of default, and that requisite averments for initiation of CIRP under Section 7 were furnished. The Tribunal reiterated that a party cannot introduce an entirely new case or new documents for the first time in appeal, but found that the applicant had not travelled beyond permissible particulars in Form-1. Although the demand notice was not issued in the exact prescribed form, the Tribunal observed that this defect did not preclude the application from being admitted where the substance of the lease finance claim and default were established and the adjudicating authority's satisfaction was not shown to be legally flawed. [Paras 53, 54, 57, 58]

The pleadings in the Section 7 application were sufficient; introduction of a new case at the appellate stage is impermissible, but the absence of the demand notice in the prescribed form did not render the admission under Section 7 invalid in the facts of this case.

Final Conclusion: The Tribunal dismissed the appeal and upheld the Adjudicating Authority's order admitting the Section 7 petition: the lease was held to be a financial lease giving rise to financial debt, the disbursements to the supplier satisfied the statutory disbursement requirement, the Section 7 pleadings were adequate, and the admission was free from legal flaw.

Locus standi - maintainability of appeal under Section 61(1) of the Insolvency and Bankruptcy Code, 2016 - aggrieved person - pre-existing dispute - initiation of Corporate Insolvency Resolution Process on admission of Section 9 application - operational debt

Locus standi - maintainability of appeal under Section 61(1) of the Insolvency and Bankruptcy Code, 2016 - aggrieved person - Whether the appellant has locus standi and the appeal is maintainable under Section 61(1) of the IBC. - HELD THAT: - The Tribunal examined the appellant's claim to be a shareholder of the corporate debtor and noted inconsistent averments in the appeal regarding the extent of shareholding (0.1% in one paragraph and 0.6% in another) and the absence of any documentary proof such as share certificates. The respondent had challenged the appellant's locus standi and pointed out that the corporate debtor's authorised representative, who had appeared before the Adjudicating Authority, did not file an appeal against the impugned order. Section 61(1) permits an appeal by a person aggrieved by an adjudicating authority's order; it was incumbent on the appellant to establish that she was an interested person aggrieved by the order. Having failed to produce evidence of shareholding or otherwise demonstrate how she was aggrieved by the impugned order, the appellant did not satisfy the statutory criterion for preferring the appeal. Consequently the Tribunal found the appeal not maintainable and held that other contentions raised became infructuous and need not be considered. [Paras 12, 13, 14, 15]

The appellant lacks locus standi; the appeal is not maintainable under Section 61(1) of the IBC and therefore dismissed at the threshold.

Final Conclusion: The impugned order admitting the Section 9 application and initiating CIRP is upheld. The appeal is dismissed for want of maintainability; no order as to costs.

Approval of resolution plan under Section 31 of the Insolvency and Bankruptcy Code - Compliance with the requirements of Section 30(2) of the Insolvency and Bankruptcy Code - Regulation 37 and Regulation 38 of the Insolvency and Bankruptcy Board of India (CIRP) Regulations, 2016 - Ineligibility under Section 29A of the Insolvency and Bankruptcy Code - Priority payment of CIRP costs and Operational Creditors - Effect of existing stay/execution orders on implementation of an approved resolution plan - Ceasing of moratorium on approval of resolution plan

Approval of resolution plan under Section 31 of the Insolvency and Bankruptcy Code - Compliance with the requirements of Section 30(2) of the Insolvency and Bankruptcy Code - Regulation 37 and Regulation 38 of the Insolvency and Bankruptcy Board of India (CIRP) Regulations, 2016 - Ineligibility under Section 29A of the Insolvency and Bankruptcy Code - The Resolution Plan submitted by M/s Majestic Auto Limited is approved as meeting the statutory requirements and is not in contravention of Section 29A. - HELD THAT: - The Tribunal examined the Resolution Plan and the record of the Committee of Creditors and concluded that the Plan meets the requirements of Section 30(2) of the Code, and Regulations 37 and 38 of the CIRP Regulations. The CoC had approved the Plan with 100% voting. The Resolution Applicant was found not to be ineligible under Section 29A. Having satisfied itself on these statutory and regulatory requirements, the Tribunal held that the Plan must be approved under Section 31 and made effective from the date of the order. [Paras 19]

Resolution Plan approved and declared effective; binding on the corporate debtor and all stakeholders.

Priority payment of CIRP costs and Operational Creditors - Use of internal accruals to meet CIRP costs - The stipulation in the Plan that CIRP costs would be met from internal accruals and that no deduction would be made from amounts payable to unsecured financial creditors is accepted. - HELD THAT: - On specific judicial query, the Successful Resolution Applicant and the CoC filed a joint affidavit clarifying that CIRP costs would be paid from the corporate debtor's internal accruals and that no amounts earmarked for creditors would be reduced to meet CIRP costs or newly admitted claims post-approval. The Tribunal accepted this clarification and recorded that priority payment of CIRP costs in full and payment to Operational Creditors as provided in the Plan satisfied the relevant mandates of the Code and Regulations. [Paras 4]

Clarification accepted: CIRP costs to be met from internal accruals; no deduction from creditors' entitlements.

Effect of existing stay/execution orders on implementation of an approved resolution plan - Ceasing of moratorium on approval of resolution plan - Implementation of the approved Resolution Plan is subject to vacation or modification of existing stay orders; notwithstanding approval, the moratorium shall cease from the date of this order and implementation timelines are governed by the Plan. - HELD THAT: - The Tribunal recorded that stay orders passed by the High Court in separate proceedings operated as an impediment to implementation. The Plan's implementation was therefore documented as contingent upon vacation or modification of those orders; the Resolution Applicant undertook to commence implementation once such impediments were removed and to review the course of action if implementation did not commence within eighteen months. Concurrently, upon approval, the moratorium under Section 14 was held to cease from the date of this order and the Resolution Plan was made binding on stakeholders subject to the conditions noted.

Plan approved but its implementation contingent on vacating/modifying extant stay orders; moratorium ceases from the date of approval.

Final Conclusion: The Tribunal allowed the application and approved the Resolution Plan of M/s Majestic Auto Limited as meeting statutory and regulatory requirements, recorded clarifications regarding payment of CIRP costs and creditor entitlements, made the Plan effective immediately and binding on all stakeholders, and directed supervision of implementation while noting that actual implementation is subject to removal of extant stay orders.

Investigation into company affairs under Section 213 of the Companies Act - Limits on Adjudicating Authority directing investigation by the Serious Fraud Investigation Office - Central Government's power to appoint inspectors and follow procedural safeguards including principles of natural justice - Obligation of Resolution Professional regarding transmission and recall of investigation materials

Investigation into company affairs under Section 213 of the Companies Act - Limits on Adjudicating Authority directing investigation by the Serious Fraud Investigation Office - Central Government's power to appoint inspectors and follow procedural safeguards including principles of natural justice - Impugned direction of the Adjudicating Authority directing the Central Government to refer the matter to the SFIO was procedurally incorrect and required modification to conform to Section 213(b) of the Companies Act. - HELD THAT: - The Tribunal held that the Adjudicating Authority erred in directing the Central Government to refer the matter straightaway to the Serious Fraud Investigation Office. Section 213(b) envisages that the Tribunal may, after being satisfied of circumstances and after giving a reasonable opportunity of being heard, order that the affairs of the company be investigated by inspectors appointed by the Central Government; if actionable material emerges the Central Government may thereafter decide further steps including involving SFIO. Consequently, the Adjudicating Authority cannot bypass the statutory procedure and directly order a reference to SFIO. The impugned order was modified to direct the Central Government to adopt the procedure under Section 213(b) and, on the basis of the Review Report and after complying with procedural safeguards, get the affairs investigated by inspectors and take further steps as per law. [Paras 11, 12]

Modified impugned sub-para (2) of para 12 to require the Central Government to proceed under Section 213(b) and to get the affairs investigated by inspectors appointed by it, taking further steps as per law.

Obligation of Resolution Professional regarding transmission and recall of investigation materials - Principles of natural justice in Section 213 procedure - Resolution Professional had sent material directly to SFIO and was directed to recall the material; the matter must be processed through the Central Government under Section 213(b). - HELD THAT: - The Tribunal noted the Resolution Professional had, instead of forwarding materials to the Central Government for initiating the Section 213 procedure, forwarded them directly to SFIO. Given the correction of procedure ordered in respect of the Adjudicating Authority's direction, the Tribunal directed the Resolution Professional to call back the material sent to SFIO so that the Central Government may deal with the matter in accordance with Section 213(b) and with observance of principles of natural justice. [Paras 5, 12]

Resolution Professional directed to call back the matter/material sent to SFIO; appeal disposed accordingly.

Final Conclusion: Appeal allowed; impugned direction to refer matter to SFIO set aside and modified to require the Central Government to follow the procedure under Section 213(b) of the Companies Act and, accordingly, the Resolution Professional is directed to recall material sent to SFIO.

Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - pre existing dispute under Section 5(6) of the Insolvency and Bankruptcy Code, 2016 - date of default and limitation - jurisdiction of the Adjudicating Authority - appointment of Interim Resolution Professional - direction for security deposit to Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016

Pre existing dispute under Section 5(6) of the Insolvency and Bankruptcy Code, 2016 - admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether the dispute raised by the Corporate Debtor amounted to a pre existing dispute under Section 5(6) and whether the Section 9 application is maintainable and liable to be admitted. - HELD THAT: - The Tribunal examined the correspondence, the reply to the demand notice and materials on record and found that the corporate debtor's contentions of over invoicing and other alleged irregularities were not supported by documents predating the demand notice. The dispute was raised after issuance of the Section 8 demand notice and amounted to a belated, unsubstantiated contention. Applying the test of plausibility as articulated in Mobilox, the Tribunal held the alleged dispute to be a moonshine defence lacking evidentiary basis and not a pre existing dispute under Section 5(6). Given the admitted undisputed amount and absence of a genuine pre existing dispute, the application under Section 9 was complete and a default was established, warranting admission under Section 9(5). [Paras 16, 17, 20]

The Tribunal held that no pre existing dispute under Section 5(6) existed and admitted the Section 9 application.

Date of default and limitation - Whether the claim was time barred and whether the date of default supported the maintainability of the application. - HELD THAT: - The Tribunal noted the date of default as recorded in Form V and compared it with the date of filing of the application. The date of default is shown as 17.08.2018 and the application was filed on 18.10.2019. On this basis the Tribunal concluded that the operational debt claim was within the period of limitation and not time barred. [Paras 19]

The Tribunal held the claim was not time barred and the application was filed within limitation.

Jurisdiction of the Adjudicating Authority - Whether the Tribunal had jurisdiction to entertain the Section 9 application. - HELD THAT: - The Tribunal noted that the registered office of the corporate debtor is situated in Delhi and on that basis found that the Tribunal had territorial jurisdiction to entertain and try the application. [Paras 18]

The Tribunal held that it had jurisdiction to hear the application.

Appointment of Interim Resolution Professional - direction for security deposit to Interim Resolution Professional - Appointment of an Interim Resolution Professional and directions regarding security for IRP's costs. - HELD THAT: - Upon admission of the application, the Tribunal appointed the IRP nominated by the operational creditor subject to statutory conditions, disclosures and consent in the prescribed Form. The Tribunal directed the operational creditor to deposit a specified sum with the IRP within one week to meet expenses, subject to adjustment by the Committee of Creditors and refund as accounted for by the IRP. [Paras 21, 22]

The nominated IRP was appointed subject to compliance and the operational creditor was directed to deposit the directed sum with the IRP.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Consequences of admission-whether moratorium under Section 14 is attracted. - HELD THAT: - The Tribunal, having admitted the Section 9 application, directed that the moratorium under Section 14(1) would operate in relation to the corporate debtor and that the provisos and subsequent provisions of Section 14 would apply during the moratorium period, thereby prohibiting actions specified by the Code. [Paras 23]

On admission, the moratorium under Section 14 was declared to be in force in respect of the corporate debtor.

Final Conclusion: The Tribunal admitted the Section 9 application, holding that no pre existing dispute under Section 5(6) existed, the claim was within limitation, and the Tribunal had jurisdiction; it appointed the nominated IRP subject to statutory compliances, directed an interim deposit for IRP expenses, and declared the moratorium under Section 14 applicable.

Existence of financial debt - default under Insolvency and Bankruptcy Code - standing of Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016 - requirement of documentary proof for financial debt

Existence of financial debt - requirement of documentary proof for financial debt - standing of Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Whether the petitioner proved existence of a financial debt and qualified as a Financial Creditor entitled to initiate proceedings under Section 7 of the IB Code. - HELD THAT: - The Adjudicating Authority examined the documents placed on record by the petitioner and the contentions raised by the respondent. The petitioner relied primarily on bank account entries, audited balance sheets, and a demand notice, but did not produce an agreement, promissory note, acknowledgement, payment of interest records, 26AS or other contemporaneous documents that would establish the character of the claim as a financial debt. The respondent contested the claim, asserting that the receipts represented payment for sale of goods or sale of business and produced an agreement and police complaint suggesting the transaction was unrelated to a loan. The Authority held that proving a debt as a financial debt is a necessary precondition for classification as a Financial Creditor under the Code; in the absence of adequate documentary evidence to demonstrate the nature and terms of the alleged loan, the petitioner failed to establish that the debt claimed was a financial debt and therefore failed to demonstrate standing under Section 7. [Paras 18, 19]

Petition rejected for failure to prove existence of a financial debt and hence lack of qualification as a Financial Creditor under Section 7.

Final Conclusion: The Section 7 petition was dismissed for non-qualification of the petitioner as a Financial Creditor due to insufficient documentary proof of a financial debt; the order leaves open the petitioner's remedy before other fora.

Summary order. Respondents directed to place on record the communication dated 26.03.2019 and the show cause notice issued in September 2019; matter listed on 28.05.2021 for further hearing.

Adjudication of stale show cause notice - delay in adjudication and its legal consequences - admissibility of challenge based on passage of time - application of Civil Aviation Requirements in determining compliance with NSAT conditions - use of aircraft for ferrying employees as potential violation of NSAT approval - personal hearing through authorised representative - liberty to file supplementary reply - requirement of a speaking order - issuance of No Objection Certificate upon favourable adjudication

Adjudication of stale show cause notice - delay in adjudication and its legal consequences - liberty to file supplementary reply - admissibility of challenge based on passage of time - The show cause notice dated 18.09.2013 shall be adjudicated by the concerned statutory authority afresh. - HELD THAT: - The Court directed that the show cause notice which has remained undecided for over seven years must be adjudicated. The parties agreed that, in the absence of the petitioner's ability to furnish an unencumbered solvent security, the appropriate course was fresh adjudication rather than imposing conditions for sale. The petitioner is permitted to file a supplementary reply addressing, inter alia, the consequences of the delay in adjudication. The Court recorded that precedents concerning non-adjudication because of staleness were drawn to its attention but nevertheless ordered fresh adjudication by the authority. The authority is required to give written notice specifying date, time and venue for personal hearing (permitted to be through the petitioner's authorised representative), to hear the petitioner and to pass a speaking order. The exercise of adjudication is to be completed at the earliest and in any event within two weeks from receipt of a copy of the order. If the decision is adverse, the petitioner retains its legal remedies to challenge the same. [Paras 5, 6]

The statutory authority must adjudicate the show cause notice dated 18.09.2013 afresh, permitting a supplementary reply and personal hearing through an authorised representative, and must pass and furnish a speaking order within two weeks.

Personal hearing through authorised representative - requirement of a speaking order - issuance of No Objection Certificate upon favourable adjudication - Procedure to be followed by the statutory authority during adjudication and the consequence of a favourable decision. - HELD THAT: - The Court mandated that the authority shall issue a written notice to the petitioner indicating date, time and venue for personal hearing, which may be attended by the petitioner's authorised representative. After hearing, the authority is to pass a speaking order and furnish it to the petitioner. If the adjudication results in a decision favourable to the petitioner, the authority must issue a No Objection Certificate promptly and in any event within two weeks of taking such a decision. The Court clarified that contention about earlier appeals pending in other courts would not prevent compliance with these directions where no stay of the relevant CESTAT judgment exists. [Paras 3, 4, 6]

The authority must provide a personal hearing through an authorised representative, pass a speaking order and, if the outcome is favourable to the petitioner, issue a No Objection Certificate within the stipulated timeframe.

Final Conclusion: Writ petition disposed of by directing fresh adjudication of the show cause notice dated 18.09.2013; petitioner may file a supplementary reply and have a personal hearing through an authorised representative; the authority must pass a speaking order and, if favourable, issue a No Objection Certificate, all to be completed within the time prescribed by the Court.

Refund under Rule 5 of the CENVAT Credit Rules, 2004 - condition 2(h) of Notification No.27/2012-CE(NT) - GST transition effect on CENVAT credit refunds - legitimate export incentive - safeguard against double benefit / non-enrichment principle - indemnity and accounting reversal as corroborative evidence

Refund under Rule 5 of the CENVAT Credit Rules, 2004 - condition 2(h) of Notification No.27/2012-CE(NT) - GST transition effect on CENVAT credit refunds - safeguard against double benefit / non-enrichment principle - Validity of rejection of refund claims for October 2016-December 2016 and January 2017-March 2017 on the ground that the refund amount was not debited in ST-3 in view of GST implementation - HELD THAT: - The Court held that the implementation of GST from 01.07.2017 created an extraordinary transition position in which a claimant could not simultaneously comply with condition 2(h) (debiting the refund in the ST-3 at the time of claim) and condition 2(g) (consequence relating to carry forward) of the impugned notification. The Court accepted the reasoning applied by the authority in allowing the April-June 2017 claim: where it is demonstrated that (i) the refund claim was filed within the prescribed time, (ii) the CENVAT balance was not carried forward into the GST Electronic Credit Ledger (TRAN-1), and (iii) the claimant has taken steps (accounting reversal and an indemnity) and provided professional certification to ensure absence of double benefit, the safeguards in the notification are satisfied and the claim cannot be denied merely because the ST-3 could not be debited owing to transition. The Court found that denying the refund would defeat the object of legitimate export incentives and that the petitioner had neither carried forward the disputed balance into GST nor obtained undue enrichment. On these grounds the rejection of the two earlier refund claims was unsustainable.

Rejection of the refund claims for October 2016-December 2016 and January 2017-March 2017 is set aside; the claims are to be allowed.

Indemnity and accounting reversal as corroborative evidence - GST transition effect on CENVAT credit refunds - safeguard against double benefit / non-enrichment principle - Applicability of the reasoning in Order in Original No.81/2018 (April-June 2017 claim) mutatis mutandis to the earlier refund claims - HELD THAT: - The Court accepted that the factual and legal position which led the authority to allow the April-June 2017 refund-namely the inability to debit ST 3 due to transitional closure, non carry forward in TRAN 1, reversal in books, indemnity bond and certificate from the chartered accountant-equally applies to the earlier refund claims. Given that those safeguards demonstrate the absence of double recovery and preserve the integrity of the refund scheme during transition to GST, the same reasoning was held to be applicable to the October-December 2016 and January-March 2017 claims. The Court therefore directed that the respondent refund the amounts due, applying the same principles adopted in Order in Original No.81/2018.

The reasoning in Order in Original No.81/2018 is adopted for the other refund claims and the respondent is directed to process and refund the amounts accordingly.

Final Conclusion: Writ petitions allowed; the respondent is directed to refund the entitled amounts to the petitioner in respect of the impugned refund claims within six weeks from receipt of a copy of this order. No costs.

Quashing of recovery notices for material errors - Requirement of factual accuracy in statutory notices - Issuance of a fresh notice to correct clerical and substantive particulars

Quashing of recovery notices for material errors - Requirement of factual accuracy in statutory notices - Impugned recovery notices dated 02.12.2019 and 07.10.2020 were quashed on account of material factual errors. - HELD THAT: - The impugned 'urgent' recovery notices contained glaring inaccuracies including incorrect identification of the enactment (TNGST cited whereas the substantial demand arose under CST), an erroneous assessment period, and incorrect amounts and categorisation. Having noted these material errors and on the respondent's application to rectify the defects, the Court recorded that a fresh notice dated 25.03.2021 had been issued setting out the correct enactments, assessment period and break-up of tax, surcharge, interest and penalty. In view of the defects in the earlier notices and the availability of a corrected notice, the impugned notices were quashed and the writ petitions were allowed. [Paras 3, 4]

Impugned notices quashed; writ petitions allowed and fresh notice dated 25.03.2021 taken on record.

Final Conclusion: The writ petitions were allowed; the urgent recovery notices of 02.12.2019 and 07.10.2020 were quashed for material factual errors and the corrected notice dated 25.03.2021 issued by the revenue was recorded.

Legally enforceable debt or liability - cheque issued for discharge of debt or liability - presumption under Section 139 of the Negotiable Instruments Act - rebuttal of presumption and burden of proof - dishonour of cheque and ingredients of Section 138 N.I. Act

Legally enforceable debt or liability - cheque issued for discharge of debt or liability - Existence of a legally enforceable debt or liability between the drawer and the payee on the date of issue and whether the cheque was issued to discharge such liability. - HELD THAT: - The Court examined the evidence as to whether a debt or liability existed when the cheque (Ext.1) was issued and whether the cheque was given in discharge of that liability. It was admitted that the accused issued the cheque and that it was dishonoured (paras 10, 11). However, the purported underlying contractual arrangement was contingent on performance by artists and relied on a written agreement which was not exhibited. The payee's authority to receive payment on behalf of the named enterprise was not established and the cheque had been issued without the payee's name (which the complainant later inserted). On reappraisal of oral and documentary evidence the Court found that the prosecution had not proved the existence of a legally enforceable debt against the accused on the date of issue of the cheque; the alleged entitlement depended on contingent performance and undocumented authorisation. In that factual backdrop the trial court's finding that no liability subsisted was not shown to be erroneous (paras 11-16). [Paras 10, 11, 16]

No legally enforceable debt or liability was proved against the accused on the date of issue and the cheque was not established to have been issued in discharge of such a debt.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of presumption and burden of proof - dishonour of cheque and ingredients of Section 138 N.I. Act - Whether the statutory presumption under Section 139 operated in favour of the complainant and, if so, whether it was rebutted so as to preclude conviction under Section 138 N.I. Act. - HELD THAT: - The Court recalled the ingredients of Section 138 and the statutory presumption under Section 139 that a cheque was issued for discharge of any debt or liability (para 9, 15). It observed that Section 139 creates a rebuttable presumption but does not itself prove existence of a debt; proof of debt on the date of issue remains a question of fact. Given the absence of the alleged agreement on record, non-examination or non-impleading of the enterprise for whom payment was allegedly due, the blank cheque filled in by the complainant, and the defence account of induction and conditional payment, the Court held that the presumption was effectively rebutted on the material on record. The High Court found no reason to disturb the trial court's conclusion of acquittal, since the prosecution failed to discharge its burden to establish the legally enforceable liability necessary for conviction under Section 138 (paras 15-16). [Paras 9, 15, 16]

The presumption under Section 139 did not avail the complainant on the material produced; the presumption stood rebutted and the ingredients of Section 138 were not proved, warranting affirmation of acquittal.

Final Conclusion: The High Court affirmed the trial court's finding of acquittal, holding that the prosecution failed to prove a legally enforceable debt and that the statutory presumption was rebutted on the evidence; the appeal against acquittal is dismissed.

Quashing of criminal proceedings under Section 482 of the Code of Criminal Procedure - prima facie case - cheating - criminal breach of trust - issuance of duplicate share certificates under the Companies Act, 2013 - registration and transfer of securities - abuse of process of court

Prima facie case - cheating - criminal breach of trust - abuse of process of court - Whether the complaint prima facie discloses offences under sections 420/406/120B of the Penal Code and therefore whether the proceedings should be quashed under Section 482 CrPC. - HELD THAT: - The complaint alleged that 27,000 equity shares had been issued to the complainant and that duplicate share certificates were not issued when the originals were said to be misplaced. The court examined the ingredients of cheating and criminal breach of trust and found no averment of initial fraudulent or dishonest inducement at the inception of the transaction; the shares were admittedly issued for consideration and any misplacement of certificates was a subsequent event. The record indicates that transfers of the shares occurred in 2016 and that petitioners who became directors in 2016 could not be held responsible for acts before their appointment. Even if later refusal to issue duplicate certificates is alleged, that would pertain to a remedy under company law and does not establish prima facie criminal intent at the time of issuance. Applying the principle that Section 482 must be used sparingly to prevent abuse of process, the court held that continuation of the complaint would amount to such abuse because no prima facie case under sections 420/406 was made out on the face of the complaint. Documentary material filed by petitioners need not be relied upon to reach this conclusion; a plain reading of the complaint suffices. [Paras 13, 16, 17, 18, 19]

No prima facie case under sections 420/406 (or section 120B founded thereon) is made out in the complaint; proceedings are quashed as an abuse of process.

Quashing of criminal proceedings under Section 482 of the Code of Criminal Procedure - registration and transfer of securities - issuance of duplicate share certificates under the Companies Act, 2013 - Whether procedural irregularity occurred in the initial cognizance and any direction is required to the trial court. - HELD THAT: - The Chief Metropolitan Magistrate initially recorded cognizance under provisions of the Negotiable Instruments Act which were unrelated to the complaint; after transfer and examination under section 200 CrPC, the learned Metropolitan Magistrate issued summons under sections 420/406/120B IPC. The High Court observed that the earlier cognizance under the Negotiable Instruments Act was erroneous and directed that the learned Chief Metropolitan Magistrate should avoid such errors in future. A copy of the judgment is to be sent to the trial court for information and necessary action. [Paras 6, 7, 22, 24]

Observation recorded regarding erroneous cognizance; direction that learned Chief Metropolitan Magistrate exercise care and that a copy of the judgment be sent to the trial court.

Final Conclusion: The High Court allowed the petition, quashed the complaint proceedings pending as C.S./21563 of 2019 under sections 406/420/120B IPC for want of any prima facie offence and recorded directions regarding the earlier procedural error in taking cognizance under unrelated provisions; no order as to costs.