TaxTMI Updates e-Newsletter
Apr 22,2020

Supply - business - aggregate turnover - charitable activities - exemption for services by an entity registered under section 12AA - preservation of environment - liability to registration under Section 23(1)(a)

Supply - business - aggregate turnover - liability to registration under Section 23(1)(a) - Whether the applicant is liable to registration under the GST Acts - HELD THAT: - The Authority found on the material in the memorandum of association and bye laws that the applicant is a charitable trust engaged in training, research and technical assistance for disaster prevention, mitigation and management and is registered under section 12AA of the Income tax Act. A prerequisite for inclusion in "aggregate turnover" is that transactions qualify as a "supply" made in the course or furtherance of "business"; where primary and dominant activity is not a business, incidental transactions do not ordinarily constitute business unless an independent intention to carry on business is established. Separately, Notification No.12/2017 Central Tax (Rate) (Entry No.1) exempts services by an entity registered under section 12AA by way of "charitable activities", and the exemption's definition of "charitable activities" expressly includes "preservation of environment including watershed, forests and wildlife". The Authority held that activities of disaster prevention, mitigation and management fall within "preservation of environment" and therefore qualify as "charitable activities" under the notification. Consequently, such services are nil rated/exempt under the GST regime and, being engaged exclusively in supplying exempt services, the applicant is not liable to registration by virtue of Section 23(1)(a) of the CGST Act. [Paras 31, 32, 33, 34]

The applicant is not liable to registration under the GST Acts insofar as it is exclusively supplying services that are exempt as "charitable activities" (including activities relating to preservation of environment) and thereby covered by Entry No.1 of Notification No.12/2017.

Final Conclusion: Advance ruling: the applicant, being a section 12AA registered charitable trust whose disaster related activities fall within "charitable activities" (including preservation of environment) and are exempt under the cited notification, is not required to obtain registration under the CGST/GGST Acts for those exempt services.

Value of supply - transmission of electricity - construction services - ancillary services - composite supply - exemption under Notification No.12/2017 - Section 15 of the Central Goods and Services Tax Act, 2017

Value of supply - transmission of electricity - Section 15 of the Central Goods and Services Tax Act, 2017 - Whether charges recovered by GETCO for construction/erection of bays, substations, overhead lines and underground cables form part of the value of the service of "Transmission of Electricity" under Section 15 of the CGST Act, 2017 and are therefore exempt under the Notification No.12/2017. - HELD THAT: - The Authority found that GETCO, a State Transmission Utility, facilitates construction/erection of infrastructure for consumers either by arranging contractors or permitting consumers to arrange the work themselves, and recovers actual cost of labour and material along with supervision charges. Although the constructed assets vest in GETCO, the facilitation/construction activity constitutes supply of construction services provided for consideration in the course of business. The exemption entry in Notification No.12/2017 covers the service of "transmission and distribution by an electricity transmission or distribution utility" only and does not extend to separate construction/erection/installation services. Consequently the amounts recovered for construction/erection do not form part of the value of the exempt transmission service and cannot be treated as exempt under Entry No.25 of Notification No.12/2017. [Paras 6, 8, 9, 11, 13]

Answered in the negative - the construction/erection charges recovered by GETCO do not form part of the value of the service of "Transmission of Electricity" under Section 15 and are not covered by the exemption in Notification No.12/2017.

Composite supply - construction services - ancillary services - Whether the construction/erection and supervision charges are a composite supply with transmission as principal supply and hence exempt as part of transmission. - HELD THAT: - The Authority observed that the construction services are optional, distinct, provided prior to supply of transmission and are not naturally bundled with transmission in the ordinary course of business. Consideration for the services is charged separately and the services are independent and not inter-dependent. On this basis the construction and supervision charges are not a "composite supply" with transmission as the principal supply under Section 2(30) and Section 8 of the CGST Act. [Paras 11]

The construction/erection and supervision charges do not qualify as a composite supply with transmission and therefore cannot be treated as exempt on that ground.

Construction services - HSN 9954/995423 - Classification and tax treatment of the construction/erection/commissioning/installation services supplied by GETCO in relation to extending electricity distribution network up to consumers' premises. - HELD THAT: - The Authority held that the activity of constructing dedicated transmission lines, bays, substations and related works constitutes construction services falling under Group 99542 - tariff code 995423 (general construction services for long distance electric power lines, transformer stations and related works). Such services are taxable under the construction services heading and attract GST at the rates prescribed for construction services in Notification No.11/2017-Central Tax (Rate) as amended. [Paras 12]

The construction/erection/commissioning/installation services are classifiable under HSN Code 9954/995423 and are taxable at the applicable GST rate (CGST 9% + SGST 9%).

Ancillary services - residual category - Whether other charges recovered by GETCO (pro-rata charges, proportionate line charges, registration fees, operation and maintenance charges) are exempt as part of transmission or taxable separately. - HELD THAT: - The Authority examined GERC regulations and analogous regulatory provisions and concluded these amounts are recovered to enable creation of future assets or provide specific facilities for supplying electricity to consumers. They are ancillary services to enable supply but are not covered by the exemption entry that exempts only transmission and distribution charges. Accordingly, such recoveries form separate taxable supplies and fall under the residual services category ("Other services n.e.c.") and are not exempted. [Paras 12]

Pro-rata charges, proportionate line charges, registration fees, operation and maintenance charges recovered by GETCO are taxable under the residual category (999799 - Other services n.e.c.) and attract GST at CGST 9% + SGST 9%.

Final Conclusion: The Authority ruled that amounts recovered by GETCO towards construction/erection/commissioning/installation (and supervision) of transmission assets do not form part of the exempted "transmission of electricity" service and are classifiable as construction services (HSN 9954/995423) taxable at CGST 9% + SGST 9%; further, other recoveries (pro-rata, proportionate line, registration, O&M charges) are taxable as residual services (999799) at CGST 9% + SGST 9%.

Exemption to services by an entity registered under section 12AA by way of charitable activities - charitable activities - services relating to admission to, or conduct of examination by, an educational institution - exemption under Notification No. 12/2017-Central Tax (Rate) read with Notification No. 02/2018 - liability to be registered under Section 22 of the Central Goods and Services Tax Act, 2017 - Section 23(a) exclusion from registration

Exemption to services by an entity registered under section 12AA by way of charitable activities - charitable activities - exemption under Notification No. 12/2017-Central Tax (Rate) read with Notification No. 02/2018 - Whether the applicant's activities qualify as exempt charitable activities under Notification No. 12/2017 (as amended) and thereby attract nil rate. - HELD THAT: - The Authority examined the scope of 'charitable activities' as defined in the notification and compared it with the nature of the State Examination Board's functions. Although Notification No. 12/2017 (as amended) provides exemption for services by an entity registered under section 12AA by way of charitable activities, the Board's activities of planning and conducting various public examinations do not fall within the definition of 'charitable activities' set out in the notification. Consequently, the exemption under the said notification is not available to the applicant. [Paras 8, 9]

The applicant's activities are not exempt as 'charitable activities' under Notification No. 12/2017 (as amended).

Services relating to admission to, or conduct of examination by, an educational institution - exemption under Notification No. 12/2017-Central Tax (Rate) read with Notification No. 02/2018 - Whether the services rendered by the State Examination Board qualify as services provided to an educational institution for exemption under entry 66(b)(iv) to Notification No. 12/2017. - HELD THAT: - Entry 66(b)(iv) exempts services provided to an educational institution by way of services relating to admission to, or conduct of examination by, such institution. The Authority found that the examinations in question are planned and conducted by the State Examination Board on its own accord and are not services provided to another educational institution. For this reason the Board's activities do not fall within the protective ambit of entry 66(b)(iv) and the related amendments, and hence the exemption is inapplicable. [Paras 4, 10]

The services of the State Examination Board are not services 'to an educational institution' under entry 66(b)(iv) and therefore are not exempt under that entry.

Liability to be registered under Section 22 of the Central Goods and Services Tax Act, 2017 - Section 23(a) exclusion from registration - Whether the State Examination Board is required to obtain registration under the CGST Act, 2017. - HELD THAT: - Having held that the Board's activities are not covered by the exemptions relied upon, the Authority considered the registration provisions. It observed that the applicant does not fall within the exclusion under Section 23(a) and therefore is liable for registration. The conclusion follows from the absence of an applicable exemption and the statutory requirement to register where supplies are taxable and the exclusionary conditions are not satisfied. [Paras 11, 12]

State Examination Board is liable to be registered under Section 22 of the CGST Act, 2017.

Determination of the liability to pay tax on services - Whether any tax liability arises from the work done by the State Examination Board. - HELD THAT: - Given the Authority's findings that the Board's activities are neither charitable activities exempt under Notification No. 12/2017 nor services to an educational institution under entry 66(b)(iv), the services fall within the taxable net. The Authority therefore concludes that tax liability arises from the Board's activities. [Paras 7, 12]

A tax liability arises from the work done by the State Examination Board.

Final Conclusion: The Authority ruled that the State Examination Board's examination-conducting activities are not exempt under the cited notifications and therefore attract tax; the Board is liable for registration under Section 22 of the CGST Act, 2017, and tax liability arises from its activities.

Classification of amusement services - HSC 99969/999691 - GST rate for admission to amusement parks and joy rides - application of Notification No. 01/2018 amending Notification No. 11/2017

Classification of amusement services - HSC 99969/999691 - GST rate for admission to amusement parks and joy rides - application of Notification No. 01/2018 amending Notification No. 11/2017 - Classification of the applicant's supply of access to amusement facilities (including individual joy rides) and the rate of GST applicable thereto. - HELD THAT: - The Authority found that the applicant supplies services by way of access to amusement facilities including merry-go-rounds and other rides. Such services fall under the tariff grouping "99969 Other amusement and recreational services" and specifically "999691 Amusement park and similar attraction services", which covers admission to amusement parks and similar attractions. The GST rate initially notified under Notification No.11/2017 was subsequently reduced by the GST Council and effected by Notification No.01/2018. As a result, the applicable Central GST rate for these services is 9% and the corresponding State/Union Territory rate is 9%, making the integrated tax payable under the GST regime 18% on the impugned services. The Authority applied the amended notifications to both entry-based access and per-ride access, treating the supply as admission/access to amusement facilities.

Supply of access to amusement facilities including individual joy rides is classifiable under HSC 99969/999691 and is taxable at 18% GST (9% CGST + 9% GGST) in view of Notification No.01/2018 amending Notification No.11/2017.

Final Conclusion: The advance ruling declares that the applicant's services of providing access to amusement facilities (including individual joy rides) are classifiable under HSC 99969/999691 and are subject to 18% GST (9% CGST and 9% GGST) pursuant to the amendment made by Notification No.01/2018 to Notification No.11/2017.

Composite supply - supply of goods or supply of services - outdoor catering service - services provided in canteen and other similar establishments - tax rate applicability by notification amendment

Outdoor catering service - supply of goods or supply of services - composite supply - Classification and GST rate applicable to the applicant's canteen services up to 25.07.2018 - HELD THAT: - On the terms of the agreement the applicant was engaged to run the canteen on the recipient's premises, with menu decided by the recipient's canteen committee and meals supplied at fixed rates payable by the recipient. The service is provided at a place other than the applicant's premises and is contracted to the recipient; who actually consumes the food is immaterial to classification. The arrangement therefore falls within the concept of catering provided 'at a place other than that of the caterer' and is to be treated as outdoor catering rather than a restaurant/mess service covered by Serial No. 7(i). Having identified the service as 'outdoor catering', the supply falls under Serial No. 7(v) of the Table to Notification No. 11/2017-Central Tax (Rate) (as amended up to 25.07.2018) and attracts GST at the rate specified therein. [Paras 5]

Up to 25.07.2018 the supply is classifiable as outdoor catering under Sr. No. 7(v) of Notification No. 11/2017-Central Tax (Rate) and attracts GST @ 18% (CGST 9% + SGST 9%).

Tax rate applicability by notification amendment - services provided in canteen and other similar establishments - composite supply - Classification and GST rate applicable to the applicant's canteen services with effect from 26.07.2018 following amendment to the rate notification - HELD THAT: - Notification No.13/2018-Central Tax (Rate) dated 26.07.2018 inserted an Explanation clarifying that supplies at a canteen, mess, cafeteria or dining space of institutions (including offices and industrial units) by such institution or by any other person under contract, provided the supply is not event based or occasional, are included in Serial No. 7(i). That amendment restricted the scope of 7(v) to event-based or occasional outdoor catering and brought institutional canteen supplies within Serial No. 7(i). The applicant's contract supplies are institutional, ongoing and not event-based; consequently from 26.07.2018 the supplies fall under Sr. No. 7(i) and the reduced rate provided therein applies. [Paras 6]

W.e.f. 26.07.2018 the supply is covered by Sr. No. 7(i) of Notification No. 11/2017 (as amended) and attracts GST @ 5% (CGST 2.5% + SGST 2.5%).

Final Conclusion: The Authority rules that the applicant's contracted canteen services were taxable as outdoor catering at 18% up to 25.07.2018, and, following the notification amendment effective 26.07.2018, the same supplies are classifiable under the institutional canteen entry and taxable at 5%.

Declared tariff - determination of GST rate slab - composite supply versus separate supplies - treatment of restaurant services in hotel premises - application of Circular No.27/2018-TRU - taxability of passenger transport services - classification of other services n.e.c.

Declared tariff - composite supply versus separate supplies - determination of GST rate slab - Whether optional items charged separately (breakfast, airport pick up/drop, extra bed, laundry, meals, heritage walk) form part of the declared tariff for determining the GST rate slab for accommodation and related supplies. - HELD THAT: - The Authority found that the applicant's declared tariff represents charges for room stay plus service charges, while items such as breakfast, airport pick up/drop, extra bed, laundry, lunch/dinner and heritage walk are optional, separable services. These optional services are not naturally bundled with room accommodation and therefore do not constitute a composite supply with room accommodation. Declared or published tariff is relevant only for determination of the tax rate slab; the rate so determined is to be applied to the amount charged for the specific supply. Consequently, the GST rate for each distinct service must be determined according to the respective entries in the rate Notification applicable to that service. [Paras 8, 9, 11, 15]

Optional services separately charged do not form part of the declared tariff for room accommodation; GST rate slab is determined by declared tariff for accommodation, but each service's taxability is to be determined under its respective Notification entry.

Treatment of restaurant services in hotel premises - declared tariff - determination of GST rate slab - Whether restaurant services provided in the hotel premises attract 5% GST (without ITC) when the declared room tariff is less than Rs. 7,500 and whether this rate applies equally to outsiders dining at the restaurant. - HELD THAT: - Relying on the Notification entries and the Ministry's circular, the Authority held that the rate applicable to restaurant services located in hotel premises is determined by the declared room tariff. If the declared room tariff is less than Rs. 7,500 per unit per day, restaurant services in the hotel premises attract GST at 5% without input tax credit. This 5% rate applies both to guests staying at the hotel and to outsiders dining at the restaurant when the declared tariff threshold is below Rs. 7,500; if the declared tariff is Rs. 7,500 or above, restaurant services attract 18% with ITC. [Paras 9, 12, 15]

Restaurants in hotel premises attract 5% GST without ITC when declared room tariff is less than Rs. 7,500 per unit per day; the same rate applies to outsiders dining there; declared tariff of Rs. 7,500 and above attracts 18% with ITC.

Declared tariff - determination of GST rate slab - application of Circular No.27/2018-TRU - Where a package price is quoted as a single amount at booking but the invoice at checkout itemises separate values for room, meals, transport, etc., how is GST determined if the sum total exceeds Rs. 7,500? - HELD THAT: - The Authority reiterated that declared or published room tariff is the yardstick for determining the tax rate slab applicable to accommodation and to restaurant services in hotel premises. Even if a package is sold at a single consolidated price and later itemised on the invoice, the declared tariff of the unit of accommodation governs the rate applicable to room accommodation (including extra bed) and determines whether restaurant services charged separately to the guest attract 5% or 18%. Other services (passenger transport, laundry, heritage walk) are taxable under their respective headings as per the Notifications. [Paras 11, 12, 15]

Package pricing itemised on invoice does not alter the rule: declared room tariff governs the GST slab for accommodation (and influences restaurant rate in hotel premises); separately charged services are taxed under their respective Notification entries.

Treatment of restaurant services in hotel premises - declared tariff - If the package (when itemised) results in declared tariff being less than Rs. 7,500, whether restaurant services will attract 5% GST instead of 18%. - HELD THAT: - The Authority applied the same principle: where the declared room tariff is less than Rs. 7,500 per unit per day, restaurant services in hotel premises attract 5% GST without ITC. This applies regardless of whether the customer was quoted a consolidated package price initially, provided the declared tariff for the unit is below the threshold. [Paras 12, 15]

If the declared room tariff is below Rs. 7,500, restaurant services charged in the hotel premises attract 5% GST without ITC even when part of a package later itemised on invoice.

Declared tariff - determination of GST rate slab - application of Circular No.27/2018-TRU - Where different tariffs are declared for different seasons, whether the higher rate applies from inception or from the day the declared tariff for the season exceeds Rs. 7,500 and whether the rate reverts when tariff falls below Rs. 7,500. - HELD THAT: - Relying on the Circular, the Authority held that where different room tariffs are declared for different seasons or periods, the tariff declared for the season in which the service is provided shall apply. GST rate is determined according to the declared tariff for the period of supply; therefore the rate applicable to restaurant services is governed by the declared tariff applicable on the date/season of supply. The rate thus varies with the declared tariff for the season in which the service is supplied. [Paras 11, 15]

When seasonal tariffs are declared, the tariff for the season in which the service is provided applies; GST rates for restaurant services change with the declared tariff applicable for the period of supply.

Declared tariff - treatment of restaurant services in hotel premises - classification of other services n.e.c. - taxability of passenger transport services - How are supplies such as extra bed, breakfast included in a low-category room package, airport pickup/drop, laundry and heritage walk to be taxed when declared tariffs of different rooms exist and sometimes the highest declared tariff exceeds Rs. 7,500? - HELD THAT: - The Authority held that the highest declared tariff among different declared tariffs shall be the declared tariff for levy of GST. Supply of room accommodation (including extra bed and service charges) is taxed according to the declared room tariff brackets (ranging NIL to 28% as applicable). Restaurant supplies (breakfast, lunch, dinner) in hotel premises are taxed according to the declared tariff threshold (5% without ITC if declared tariff < Rs. 7,500; 18% with ITC if Rs. 7,500). Passenger transport services (airport pickup/drop) fall under the passenger transport heading and attract 18% with ITC. Laundry and heritage walk fall under other services n.e.c. and attract 18% with ITC. [Paras 11, 13, 14, 15]

Highest declared tariff among different room categories is relevant; room accommodation (and included extra bed) is taxed per the room tariff bracket; restaurant services, passenger transport and other miscellaneous services are taxed under their respective Notification entries (restaurant rate depending on declared tariff threshold; passenger transport and other services at 18% with ITC).

Final Conclusion: The Authority ruled that declared (published) room tariff determines the GST rate slab for accommodation and influences the rate for restaurant services in hotel premises; optional services separately charged (breakfast, transport, extra bed, laundry, heritage walk) do not form part of the declared tariff and must be taxed under their respective Notification entries, with restaurant services attracting 5% without ITC when declared room tariff is below Rs. 7,500 and 18% with ITC when declared tariff is Rs. 7,500 or above; seasonal or multiple declared tariffs are governed by the declared tariff applicable to the season or, where multiple tariffs are declared, by the highest declared tariff for levy purposes.

Input tax credit blocked under Section 17(5)(h) of the CGST Act, 2017 (goods disposed of by way of gift or free samples) - Input tax credit on promotional supplies and non-monetary distributor incentives - Input tax credit treatment of free goods supplied with sale (bundled supplies and price factoring) - Input tax credit restriction under Section 17(5)(a) of the CGST Act, 2017 (motor vehicles and related services)

Input tax credit blocked under Section 17(5)(h) of the CGST Act, 2017 (goods disposed of by way of gift or free samples) - Input tax credit treatment of free goods supplied with sale (bundled supplies and price factoring) - Whether input tax credit is available on inputs used to manufacture dhoop or on purchase of dhoop supplied free with an agarbatti pack. - HELD THAT: - The Authority examined the applicant's submission that dhoop supplied with agarbatti is not a gift because its cost is factored into the price and it is supplied only to purchasers. The jurisdictional Commissionerate and the Authority applied Section 17(5)(h) of the CGST Act, 2017, which disallows input tax credit in respect of goods disposed of by way of gift or free samples. The Authority found that the statutory bar under Section 17(5)(h) governs credit on goods given free and, irrespective of commercial pricing or contractual allocation of cost, credit is not admissible for such disposed goods when they amount to gifts or free samples.

Input tax credit is not available on inputs used in manufacture of dhoop nor on dhoop purchased from a third party when supplied free with agarbatti.

Input tax credit on promotional supplies and non-monetary distributor incentives - Input tax credit blocked under Section 17(5)(h) of the CGST Act, 2017 (goods disposed of by way of gift or free samples) - Whether input tax credit is available on non-monetary incentives (e.g., household appliances) given to distributors as target-based promotional incentives and whether such transfers qualify as supply to the distributor. - HELD THAT: - The applicant characterised target-based non-monetary incentives as contractual obligations and not gifts, arguing they are not fresh supplies. The Authority, having considered the statutory prohibition in Section 17(5)(h) and the Commissionerate's comments, held that credit cannot be availed in respect of goods disposed of as gifts or free samples. The Authority did not accept that commercial arrangements or prior commitments convert such promotional transfers into admissible inputs for credit where they effectively operate as goods disposed in the course of promotion; consequently the statutory bar applies.

Input tax credit is not available on non-monetary promotional incentives given to distributors; such transfers do not permit credit.

Input tax credit blocked under Section 17(5)(h) of the CGST Act, 2017 (goods disposed of by way of gift or free samples) - Input tax credit treatment of free goods supplied with sale (bundled supplies and price factoring) - Whether input tax credit is admissible on agarbatti units given free on purchase of a carton box of agarbatti. - HELD THAT: - The applicant submitted that the free agarbatti is a commercial device, costed into the carton price, and not a gift. The Authority relied on Section 17(5)(h) and the Commissionerate's view that input tax credit is disallowed on goods disposed of by way of gift or free samples. Applying that provision, the Authority concluded that credit cannot be claimed on agarbatti supplied free even if the cost is factored into pricing or supplied as part of a sales promotion.

Input tax credit is not available on agarbatti units given free with a carton purchase.

Input tax credit restriction under Section 17(5)(a) of the CGST Act, 2017 (motor vehicles and related services) - Input tax credit on insurance and maintenance of motor vehicles - Whether input tax credit can be availed on insurance and maintenance of motor vehicles purchased for transport of director and employees. - HELD THAT: - The Authority examined Section 17(5)(a) and related sub-clauses which restrict input tax credit in respect of motor vehicles for transportation of persons (subject to specified exceptions) and prescribe conditions for credit on services of insurance and maintenance. The Commissionerate advised that credit is not available in the facts of the applicant's case. Applying the statutory provision and its exceptions, the Authority found that the motor vehicles in question and the related insurance and maintenance do not fall within the exceptions permitting credit and therefore the input tax credit is blocked.

Input tax credit is not available on insurance and maintenance of motor vehicles used for transport of the director and employees.

Final Conclusion: The Authority ruled negatively on all four questions: input tax credit is disallowed for dhoop supplied free with agarbatti (whether manufactured or purchased), for non monetary promotional incentives to distributors, for free agarbatti units supplied with carton purchases, and for insurance and maintenance of motor vehicles used to transport directors and employees, applying the prohibitions in Section 17(5)(h) and Section 17(5)(a) of the CGST Act, 2017.

Input Tax Credit - used in the course or furtherance of business - eligibility and conditions for taking input tax credit - apportionment of credit and blocked credits - common/employee residential facilities

Input Tax Credit - used in the course or furtherance of business - common/employee residential facilities - apportionment of credit and blocked credits - Entitlement to Input Tax Credit in respect of expenses incurred for employee-related facilities (medicines, movable medical equipment, AMC for maintenance of residential colony/hospital/school, telephones and mobiles at residences and hospitals, caretaking/housekeeping at guest house). - HELD THAT: - The Authority examined whether input tax charged on supplies used for providing and maintaining common facilities for employees of the port (including medicines purchased on contract, movable medical equipment, AMC for repair and maintenance of colony/hospital/school, telephone/mobile facilities at residences and hospitals, and caretaking/housekeeping at guest house) is eligible as credit. The decision applies the settled statutory test that input tax credit is available only where the goods or services are used or intended to be used in the course or furtherance of the taxpayer's business and, where goods or services are used partly for business and partly for other purposes, credit must be apportioned. The Authority found that the listed expenses are incurred for maintaining employees and providing residential/common facilities and are not for furtherance of the applicant's output service of providing port services. Consequently these supplies are not used in the course or furtherance of the applicant's business and credit is not admissible on them. The Authority adopts the view expressed by the jurisdictional commissionerate that such employee-centric/residential facility expenditures fall outside eligible business use and therefore attract the restrictions on credit. [Paras 5, 6]

Input Tax Credit in respect of the specified employee-related/common residential facilities is not available as these supplies are not used in the course or furtherance of the applicant's business.

Final Conclusion: The Authority ruled that the applicant is not entitled to claim input tax credit on the specified expenditures incurred for maintaining employees and for common residential facilities, the supplies not being used in the course or furtherance of its port service business.

Regular bail under Section 439 CrPC - grant of bail where co accused are on bail or have been denied bail - seriousness of allegations in bail adjudication - pre charge evidence stage - alleged GST input tax credit fraud - previous dismissal of bail by a co ordinate Bench

Regular bail under Section 439 CrPC - seriousness of allegations in bail adjudication - alleged GST input tax credit fraud - grant of bail where co accused are on bail or have been denied bail - Whether the petitioner is entitled to regular bail in the GST fraud prosecution. - HELD THAT: - Petitioner sought regular bail being in custody since 20.6.2018 while the matter is at the stage of pre charge evidence. The petitioner's counsel contended that the recorded witness statements do not make out a case and that the petitioner has been falsely implicated. The prosecution relied on allegations of a large scale GST input tax credit fraud involving fictitious firms and claimed tax credit in the order of Rs. 22 crores. The Court noted that bail applications of certain co accused were earlier dismissed by a co ordinate Bench and that the petitioner's own earlier bail petition had been dismissed by this Court by order dated 22.10.2018; some other co accused were granted bail under the statutory provision applicable to custody period. Having regard to the seriousness of the allegations and the earlier judicial treatment of co accused applications, the Court found no ground to enlarge the petitioner on bail. The determinative consideration was the gravity of the alleged offence and the prior orders refusing bail in related applications, outweighing the contention of alleged lack of incriminatory material in recorded statements to date.

Bail petition dismissed; no ground made out for grant of regular bail.

Final Conclusion: The petition for regular bail is dismissed in view of the seriousness of the alleged GST input tax credit fraud and prior judicial orders in related bail applications; the petitioner shall remain in custody.

Regular bail - seriousness of allegations in economic/GST fraud - parity with co-accused in grant of bail - custodial detention and consideration of custody period - ongoing investigation and risk of further discovery - maximum sentence as a factor in bail consideration

Regular bail - seriousness of allegations in economic/GST fraud - parity with co-accused in grant of bail - custodial detention and consideration of custody period - ongoing investigation and risk of further discovery - maximum sentence as a factor in bail consideration - Whether bail should be granted to the petitioner in FIR No.15/2018 for offences relating to alleged creation of fake firms and evasion of GST input tax. - HELD THAT: - The court examined the prosecution case that the petitioner, along with co-accused, allegedly created numerous fake firms (said to be 555) and issued invoices resulting in evasion of GST input taxes to the tune of Rupees Seventy Four Crores, with additional discoveries during investigation including four fake firms identified in January 2020 involving further alleged fraud. Investigation was ongoing. The petitioner had been in custody for about one and a half years. The petitioner urged parity with a co-accused who had been granted bail by the Apex Court, but the High Court noted that the co-accused was released by the Apex Court referencing her status as a woman with a young child and the period of her custody, circumstances which distinguished her case from that of the petitioner. Having regard to the gravity and magnitude of the alleged offences, the ongoing nature of the investigation and the risk of further discovery, and notwithstanding the period of custody and the maximum sentence (up to five years), the court found no ground to relax custodial detention by granting bail to the petitioner.

Bail petition dismissed; no bail granted to the petitioner.

Final Conclusion: Bail under Section 439 CrPC refused in view of the serious allegations of large-scale GST fraud, ongoing investigation and distinguishing grounds from co-accused who obtained bail; petition dismissed.

Unutilized Input Tax Credit - migratory declaration in Form TRAN-I - entitlement to file TRAN-I after portal closure - alternative mechanism to claim credit in GST-3B

Unutilized Input Tax Credit - migratory declaration in Form TRAN-I - Petitioner entitled to avail benefit of unutilized input tax credit by filing Form TRAN-I in terms of the precedent Adfert Technologies judgment. - HELD THAT: - The Court accepted the petitioner's grievance that it was unable to upload details of unutilized ITC in electronically generated Form TRAN-I on the GST portal and found the matter squarely covered by this Court's earlier decision in CWP No.30949 of 2018 (Adfert Technologies). On concession by Revenue that the earlier judgment governs the present case, the petition was allowed permitting the petitioner to file the statutory Form TRAN-I in conformity with that precedent.

Petition allowed and petitioner permitted to file Form TRAN-I in terms of the Adfert Technologies decision.

Entitlement to file TRAN-I after portal closure - alternative mechanism to claim credit in GST-3B - Where the GST portal is not opened/available, petitioner permitted alternatively to claim the benefit of unutilized credit in GST-3B for January 2020 either electronically or manually. - HELD THAT: - The Court provided a practical modality to effectuate the substantive right recognised in the earlier decision: if the petitioner is impeded from availing the judgmentary relief due to non-opening of the portal by respondents, it shall be permitted to claim the unutilized credit through its GST-3B return for January 2020, filed electronically or manually. This direction ensures that the substantive entitlement to carry forward unutilized ITC is not frustrated by technical or administrative non-availability of the portal.

Alternative permission granted to claim the unutilized credit in GST-3B for January 2020 if the portal is not available.

Final Conclusion: Writ petition allowed in terms of the Court's earlier decision in Adfert Technologies; petitioner permitted to file Form TRAN-I by 31.12.2019 and, if prevented by non-availability of the portal, to claim the unutilized ITC in the GST-3B return for January 2020 (electronically or manually).

Disallowance under section 14A read with Rule 8D - Rule 8D not applicable where no exempt income is earned - disallowance under section 36(1)(iii) - interest to be capitalized - remand for fresh consideration by appellate authority - disallowance on account of difference in gross profit and ad hoc wage disallowance - once gross profit addition is estimated, related trading expenses are to be treated as allowed

Disallowance under section 14A read with Rule 8D - Rule 8D not applicable where no exempt income is earned - Deletion of disallowance computed under section 14A read with Rule 8D. - HELD THAT: - The AO made a disallowance under section 14A read with Rule 8D though the assessee did not earn any exempt income in the year. The CIT(A) deleted the disallowance. The Tribunal, noting that there was no exempt income, followed binding decisions of the High Courts relied on (Cheminvest Limited and Cortech Energy Private Limited) to hold that Rule 8D disallowance is not called for where no exempt income has arisen, and declined to interfere with the CIT(A)'s deletion. [Paras 7]

Deletion of the section 14A/Rule 8D disallowance upheld in favour of the assessee.

Disallowance under section 36(1)(iii) - interest to be capitalized - remand for fresh consideration by appellate authority - Deletion of addition alleged to be on account of interest (claimed to be capitalizable) restored to the CIT(A) for fresh decision. - HELD THAT: - The AO disallowed interest on advances made for construction, treating the funds as interest bearing and the assessee as not having proved that the asset had been put to use earlier; the CIT(A) deleted the addition but did so by referring to an irrelevant earlier finding. The Tribunal found the CIT(A)'s reasoning to be unrelated to the issue and, in the interest of justice, restored the matter to the files of the CIT(A) with a direction to decide the issue on its merits after affording the assessee a reasonable opportunity of being heard. [Paras 11, 12, 13]

Issue remanded to the CIT(A) for fresh adjudication after giving the assessee an opportunity of hearing.

Disallowance on account of difference in gross profit and ad hoc wage disallowance - once gross profit addition is estimated, related trading expenses are to be treated as allowed - Deletion of parts of additions made by the AO on account of differential valuation of raw material (EVA) and ad hoc wage disallowance. - HELD THAT: - The AO made additions comprising a differential in valuation of Ethylene Vinyl Acetate and an ad hoc disallowance from wages; the CIT(A) deleted both additions. The Tribunal analysed the assessment records and observed that the AO had already estimated a gross profit addition which, once sustained, operates to treat related trading expenses as allowed. On that basis the Tribunal directed the AO to delete the additions relating to EVA and wages, thereby modifying the CIT(A)'s order and resolving the matter adverse to the revenue on these heads. [Paras 16, 18]

Additions on account of differential EVA valuation and the ad hoc wage disallowance directed to be deleted; ground dismissed against the revenue on these heads.

Final Conclusion: The revenue appeal is partly allowed for statistical purposes: the deletion of the section 14A/Rule 8D disallowance is upheld; the question of interest capitalization under section 36(1)(iii) is remanded to the CIT(A) for fresh consideration after hearing the assessee; and the additions relating to differential EVA valuation and ad hoc wage disallowance are directed to be deleted.

Penalty under section 271(1)(c) - Notice under section 274 read with section 271(1)(c) - Concealment of particulars of income - Furnishing inaccurate particulars of income - Principles of natural justice - Requirement to specify the limb of clause (c) when initiating penalty proceedings

Notice under section 274 read with section 271(1)(c) - Requirement to specify the limb of clause (c) when initiating penalty proceedings - Principles of natural justice - Validity of the penalty under section 271(1)(c) where the notice under section 274 did not specify whether proceedings were initiated for concealment of particulars of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal examined whether the Assessing Officer validly assumed jurisdiction to levy penalty under section 271(1)(c) when the notice issued under section 274 read with section 271 did not specify which limb of clause (c) was invoked. The Tribunal relied on the reasoning in CIT v. Manjunatha Cotton & Ginning Factory and Commissioner of Income Tax v. SSA's Emerald Meadows , as affirmed by higher courts, which hold that initiation of penalty proceedings must specify the ground (concealment or furnishing inaccurate particulars) so that the assessee has a fair opportunity to meet the specific charge; imposing penalty on a ground other than that on which proceedings were initiated offends principles of natural justice. Noting that the notice in the present case was defective for not specifying the limb of clause (c), the Tribunal held that the defect vitiated the Assessing Officer's assumption of jurisdiction to impose the penalty. The Tribunal considered contrary reliance placed on Sundaram Finance Ltd. but found the statutory requirement and binding precedents on notice-defect determinative. Consequently, the penalty could not be sustained and was directed to be deleted. [Paras 6, 12]

The penalty imposed under section 271(1)(c) is invalid as the notice under section 274 did not specify the limb of clause (c); the penalty is deleted.

Final Conclusion: The appeal is allowed and the penalty levied under section 271(1)(c) for AY 2012-13 is deleted because the notice under section 274 read with section 271 failed to specify whether proceedings were for concealment of income or for furnishing inaccurate particulars, thereby vitiating the jurisdiction to impose penalty.

Claim not made in income tax return but disclosed in profit and loss account - admission of omitted claim before appellate authority - officers' duty to assist taxpayer and not to take advantage of ignorance - supporting contemporaneous documentary disclosure - remand for fresh adjudication to assessing officer - booking cancellation charges

Claim not made in income tax return but disclosed in profit and loss account - admission of omitted claim before appellate authority - officers' duty to assist taxpayer and not to take advantage of ignorance - supporting contemporaneous documentary disclosure - booking cancellation charges - Whether deduction for booking cancellation charges not claimed in the income tax return could be entertained on appeal where the expenditure was disclosed in the profit and loss account and supporting documents were available before the authorities below. - HELD THAT: - The Tribunal found that the expenditure was shown in the profit and loss account and that supporting materials - list of payees, bank payment evidence and proposed site construction plans - were available before the authorities. Relying on the principle that revenue officers must not take advantage of a taxpayer's ignorance and should assist in securing legitimate relief (as reflected in the cited CBDT circular), and on the High Court's guidance against raising mere technical pleas when lawful rights are at stake, the Tribunal held that an omitted claim disclosed in financial statements may be admitted for adjudication. The Tribunal emphasised that the claim was not a wholly new contention but flowed from particulars already before the assessing and appellate authorities, and that refusal to entertain it solely because it was not incorporated in the return would be unduly technical. [Paras 22, 23, 25, 26, 27]

The omitted claim for booking cancellation charges, being disclosed in the profit and loss account with supporting documents available, was admitted for consideration.

Remand for fresh adjudication to assessing officer - admission of omitted claim before appellate authority - What relief should follow where an omitted but disclosed claim is admitted on appeal. - HELD THAT: - Having admitted the claim, the Tribunal concluded that the appropriate course was to set aside the matter to the file of the assessing officer for fresh adjudication in accordance with law. The Tribunal directed fresh consideration by the AO so that the claim could be examined on merits and in the light of the materials already on record. [Paras 27, 30, 31]

The matter was set aside to the assessing officer for fresh adjudication and the appeals were allowed for statistical purposes.

Final Conclusion: Both appeals (A.Y. 2008 09 and A.Y. 2009 10) were allowed for statistical purposes; the Tribunal admitted the booking cancellation charge claims (though not shown in the returns) because they were disclosed in the profit and loss account with supporting documents, and remitted the matters to the assessing officer for fresh adjudication in accordance with law.

Income from house property - income from business - deduction under section 24(a) - admission of additional evidence - remand for verification - depreciation - block of assets - standard deduction

Admission of additional evidence - Memorandum of Association - Additional evidence in the form of the assessee's Memorandum of Association admitted. - HELD THAT: - The assessee filed the Memorandum of Association (MOA) as additional evidence along with an application for its admission. The Revenue did not object to its admission. Given that the MOA is a document of the assessee itself and there was no objection, the Tribunal admitted the additional evidence. [Paras 7]

Additional evidence (MOA) admitted.

Income from house property - income from business - deduction under section 24(a) - depreciation - block of assets - remand for verification - Whether rent income should be treated as income from house property or as business income and whether deduction under section 24(a) is allowable - remitted to AO for verification with directions. - HELD THAT: - The Tribunal accepted the factual position that, due to change in Government policy, the assessee was compelled to let out its maritime training facility to a non profit sister concern and cannot in the near future resume the training business. On the legal characterisation, the Tribunal observed that by nature the transaction of letting the facility falls under the head income from house property. However, the tax authorities had a legitimate apprehension that the assessee might seek both depreciation (claimed in earlier years against the block of assets) and the benefit of the standard deduction under section 24(a) in the same year. The assessee had not satisfactorily produced details of assets given on rent and the depreciation history. In view of this, the Tribunal remitted the matter to the AO to ascertain and verify the details of the assets actually let out, and to obtain a declaration from the assessee that no duplicate depreciation will be claimed; if the assessee substantiates the claim, AO is directed to allow the deduction under section 24(a)

Matter remitted to the AO to verify assets and claim; if substantiated allow deduction under section 24(a), otherwise disallow depreciation of the relevant block of assets.

Income from house property - income from business - remand for verification - Identical grounds in the second appeal disposed of on the same basis and remitted for verification; appeals allowed for statistical purposes. - HELD THAT: - The Tribunal noted that the facts in the second appeal are similar to those in the first appeal. Applying the same reasoning and directions, the Tribunal allowed the grounds raised in the second appeal for statistical purposes and remitted the issue to the AO for verification in the manner directed in the first appeal. [Paras 13, 14]

Second appeal disposed on same terms; both appeals allowed for statistical purposes and remitted to the AO for verification as directed.

Final Conclusion: The Tribunal admitted the assessee's additional evidence (MOA), held that the letting of the maritime training facility is, by nature, income from house property but remitted the question to the AO to verify assets and depreciation claims; if the assessee substantiates, deduction under section 24(a) is to be allowed, otherwise the AO may disallow depreciation of the relevant block. Both appeals (AY 2009-10 and AY 2014-15) are allowed for statistical purposes.

Reopening of assessment - notice under section 148 - reason to believe - return filed after time treated as non est - bar on challenging jurisdiction for non compliance with notice - addition of unexplained bank deposits as income - estimation of business income under section 44AF - allowance of set off/telescoping against declared income

Reopening of assessment - notice under section 148 - return filed after time treated as non est - bar on challenging jurisdiction for non compliance with notice - Validity of reopening of assessment by issuance of notice under section 148 and the assessee's entitlement to challenge jurisdiction having filed return after the time specified in the notice. - HELD THAT: - The Tribunal examined the reasons recorded for reopening which disclosed cash deposits in the assessee's bank account not previously disclosed. The assessee did not respond to the initial letter and did not file a return within the 30 days specified in the notice under section 148. In that situation the return filed belatedly was treated as non est and, by operation of the statutory scheme and consistent authorities relied upon by the CIT(A), the assessee was precluded from challenging the jurisdiction of the AO at the appellate stage. Distinguishing the decisions relied on by the assessee, the Tribunal noted those cases turned on different facts (e.g., reasons recorded after notice or invalid use of section 133(6)) which are absent here. Applying the principle that failure to comply with the time limit in the section 148 notice disentitles the assessee from contesting jurisdiction, the Tribunal found no infirmity in the CIT(A)'s conclusion and upheld the reopening as valid. [Paras 7]

Reopening of assessment and issuance of notice under section 148 upheld; objection to jurisdiction waived by non compliance with the time limit and thus rejected.

Addition of unexplained bank deposits as income - estimation of business income under section 44AF - allowance of set off/telescoping against declared income - peak addition vs. assessment of net profit - Whether entire bank deposits could be added as unexplained income or income should be estimated as business income under section 44AF. - HELD THAT: - The Tribunal found that while the assessee's documentary proof was limited, the bank statements showed day to day deposits and withdrawals and some indication that deposits originated from outstation sales as claimed. Given the absence of books of account and non disclosure of the bank account in the return, the Tribunal held that it was inappropriate to treat the entire deposits as income. Following the principle in the cited precedent, where an assessee admits deposits relate to retail business but detailed evidence is lacking, net income should be estimated under section 44AF rather than taxing gross bank deposits. The Tribunal directed the AO to compute net profit at 5% of the total turnover represented by the deposits and to allow set off/telescoping of the Rs. 75,000 disclosed in the return against that assessed income. [Paras 13]

Addition of entire bank deposits set aside; AO directed to assess net profit at 5% under section 44AF on the deposits and allow set off of the declared income, resulting in a partly allowed appeal.

Final Conclusion: The Tribunal upheld the validity of reopening since the assessee failed to comply with the time limit in the section 148 notice and thus could not challenge jurisdiction; on merits the Tribunal reduced the impugned addition by directing assessment of net business profit at 5% under section 44AF on the bank deposits and ordered allowance of the Rs. 75,000 declared in the return, resulting in the appeal being partly allowed.

Deduction under section 36(1)(v) of the Income tax Act - approval of gratuity fund by Pr. CIT - retrospective effect of approval where delay is attributable to revenue - reasonableness of delay in administrative grant of approval - contribution to Group Gratuity Scheme held with LIC as contribution to gratuity fund

Deduction under section 36(1)(v) of the Income tax Act - approval of gratuity fund by Pr. CIT - retrospective effect of approval where delay is attributable to revenue - reasonableness of delay in administrative grant of approval - Whether deduction claimed for contribution to gratuity fund could be allowed for AY 2012-13 though formal approval by the Pr. CIT was granted only w.e.f. 06.03.2017, where the assessee had applied for approval on 14.08.2008 and the delay in granting approval was not attributable to the assessee. - HELD THAT: - The Tribunal found as an admitted fact that the assessee filed the application for approval of the gratuity fund on 14.08.2008 and that the Pr. CIT granted approval only on 06.03.2017. The Pr. CIT's order of approval was not shown to have been delayed for reasons attributable to the assessee - the application was not held to be incomplete, inadequate or otherwise defective. The Tribunal applied the principle that an assessee should not be made to suffer by administrative inaction of the revenue and that an unreasonable delay of almost nine years in deciding an approval application cannot be justified. In these circumstances the Tribunal held that denial of deduction under section 36(1)(v) on the ground that approval was granted only prospectively was not appropriate. The Tribunal further held that the appropriate remedy is to treat the approval as effective from the date of the assessee's application, or at least from 01.04.2009, reasoning that a period of six months would have been a reasonable time for consideration of the approval application. The Tribunal directed the Revenue to give effect to the benefit of approval for the assessment year under consideration. [Paras 4, 5]

Deduction under section 36(1)(v) allowed for AY 2012-13 by treating the approval as effective from the date of application (14.08.2008) or at least from 01.04.2009; Revenue directed to give effect.

Final Conclusion: Appeal allowed: where an assessee applied for approval of a gratuity fund and the delay in granting approval was attributable to the Pr. CIT, denial of deduction under section 36(1)(v) for the year in question was not justified; the Tribunal directed that approval be given retrospective effect (from application date or at least 01.04.2009) and the Revenue to give effect accordingly.

Maintenance charges as separate source - income from other sources versus income from house property - allowability of expenditure against maintenance receipts - set off and carry forward of business loss against other sources - non-application of section 14A in absence of exempt income - acceptance of revised return and computation by assessing officer

Maintenance charges as separate source - income from other sources versus income from house property - Maintenance charges collected by the assessee are to be treated as income from other sources and not as part of income from house property. - HELD THAT: - The Tribunal examined the nature and purpose of the charges levied for maintenance of common areas and related services and observed that such collections were for providing facilities and upkeep rather than being part of rent reflecting the assessee's primary intention to let out the property. The Tribunal found the claimed maintenance-related expenditure to be substantial and not merely a pretext to inflate rent; in these circumstances and having regard to authorities recognising service/maintenance charges as distinct from rent, the maintenance receipts were held to constitute a separate source of income. The Tribunal rejected the reliance on prior years' classification as determinative, holding that the lawful claim and its legal tenability govern classification. The Tribunal directed the assessing officer to accept the revised return and re-compute income under the heads income from house property and income from other sources accordingly. [Paras 10]

Allowed; maintenance charges to be taxed under income from other sources and AO directed to compute accordingly after accepting the revised return.

Allowability of expenditure against maintenance receipts - set off and carry forward of business loss against other sources - acceptance of revised return and computation by assessing officer - Expenditure attributable to maintenance receipts is allowable against those receipts; related business loss implications to be determined and given effect to in assessment computation. - HELD THAT: - The Tribunal held that insofar as maintenance charges constitute a separate source, the expenditure incurred for providing those maintenance services is deductible against the maintenance receipts. Where expenditure exceeds the maintenance receipts, the factual and legal entitlement to carry forward or set off such loss (including any business loss set off under applicable provisions) must be examined and given effect to by the assessing officer in computing the assessee's income. The Tribunal therefore remitted the matter to the AO for computation in accordance with law and the accepted classification in the revised return. [Paras 10, 13]

Allowed in principle; AO directed to allow expenditure against maintenance receipts and to compute/set off or carry forward losses as per law while completing assessment.

Non-application of section 14A in absence of exempt income - Disallowance under section 14A is not sustainable where the assessee has not earned any exempt income during the relevant year. - HELD THAT: - The Tribunal noted that the assessing officer recorded no exempt income for the year under consideration. Relying on authoritative precedent that section 14A disallowance applies only when there is actual receipt of exempt income in the relevant year, the Tribunal held that the AO could not invoke section 14A in the absence of exempt income. The Tribunal therefore allowed the assessee's ground challenging the section 14A disallowance. [Paras 11, 12]

Allowed; section 14A disallowance deleted as no exempt income was earned in the year.

Final Conclusion: All appeals are allowed: maintenance charges are to be treated as income from other sources (with related expenditure allowable against such receipts), the assessing officer is directed to accept the revised returns and recompute income accordingly (including any lawful set off or carry forward), and the section 14A disallowance is deleted for lack of exempt income.

Bogus purchases and suppression of profits - estimation of suppressed profit by adopting comparable gross profit rate - disallowance as percentage of disputed purchases - acceptance of turnover with limited disallowance of benefits

Bogus purchases and suppression of profits - estimation of suppressed profit by adopting comparable gross profit rate - disallowance as percentage of disputed purchases - acceptance of turnover with limited disallowance of benefits - Measure and extent of disallowance where purchases are alleged to be bogus but sales/turnover are accepted - HELD THAT: - The assessing officer treated the disputed purchases as wholly bogus and disallowed 100% of such purchases. The first appellate authority examined comparative gross profit rates across years and between sales effected through disputed (hawala) parties and regular parties, concluded that profits were suppressed, and estimated suppressed profit by adopting the gross profit rate of 5.73% (as sustained for AY 2010-11) for the hawala years, thereby sustaining disallowances only to the extent of suppressed gross profit and/or applying a percentage disallowance in part. The Tribunal noted that where turnover is accepted and only purchases are under dispute, the proper approach is to measure the benefit enjoyed by the assessee rather than disallowing entire purchases; judicial practice shows disallowance rates in such circumstances have varied (examples from benches range between 3% and 12.5%). On consideration of the account of fluctuations, acceptance of turnover, comparative profit analysis, and coordinate-bench practice, the Tribunal concluded that directing the assessing officer to disallow 12.5% of the value of disputed purchases is an appropriate and standard estimate in the facts of this case, and therefore declined to restore 100% disallowance. The Tribunal therefore dismissed the assessee's challenge to the partial disallowance and partly allowed the revenue's appeal to the extent of substituting a 12.5% disallowance of disputed purchases.

Disallowance to be computed at 12.5% of the purchases that are under dispute for the years in question; AO's 100% disallowance not restored and CIT(A)'s partial relief adjusted accordingly.

Final Conclusion: The assessee's appeal is dismissed; the revenue's appeal is partly allowed. The Tribunal directs the assessing officer to disallow 12.5% of the value of disputed purchases for AY 2010-11 and AY 2011-12 while deleting the balance disputed purchases disallowance.

Penalty under section 271(1)(c) - Penalty under section 271AAA - undisclosed income detected during search - requirement of recording satisfaction before initiating penalty - penalty on estimated additions

Requirement of recording satisfaction before initiating penalty - Penalty under section 271(1)(c) - Validity of initiation of penalty proceedings under section 271(1)(c) in the absence of recorded satisfaction - HELD THAT: - The Tribunal examined whether the Assessing Officer had recorded the requisite satisfaction before initiating penalty proceedings under section 271(1)(c). It found that the Assessing Officer had recorded clear satisfaction during the course of the assessment proceedings before initiating penalty proceedings. Consequently the contention that the show cause notice was void for want of striking out inapplicable parts and that the AO had not applied his mind was rejected. The Tribunal therefore held that the initiation of penalty proceedings was not vitiated for lack of recorded satisfaction. [Paras 10]

Assessee's challenge to initiation of penalty on ground of non-recording of satisfaction is rejected.

Penalty under section 271AAA - undisclosed income detected during search - Penalty under section 271(1)(c) - Whether penalty for additions arising out of search in a specified previous year is leviable only under section 271AAA and not under section 271(1)(c) - HELD THAT: - The Tribunal analysed the statutory scheme and factual matrix: search u/s 132 was conducted on 28/02/2009, bringing AY 2009-10 within the definition of 'specified previous year', and the additions in assessment were consequent to incriminating material found during the search. The Tribunal noted that section 271AAA applies to undisclosed income of the specified previous year detected during search and operates notwithstanding anything contained elsewhere in the Act. Applying these legal provisions and relevant precedents relied on in the order, the Tribunal concluded that where additions in assessment relate to undisclosed income unearthed during search of a specified previous year, penalty, if leviable, can be levied only under section 271AAA and not under section 271(1)(c). [Paras 10, 11]

Penalty levied under section 271(1)(c) in respect of undisclosed income detected during search for the specified previous year is unsustainable; penalty must be under section 271AAA and the AO's levy under section 271(1)(c) is to be deleted.

Penalty on estimated additions - Penalty under section 271(1)(c) - Whether penalty under section 271(1)(c) can be sustained when additions are made on estimation basis - HELD THAT: - The Tribunal considered the nature of the additions: the Assessing Officer's additions were substantially based on estimation using incriminating material found for part of the year and bank account credits; the ITAT later sustained only a much smaller estimated addition. The Tribunal observed that imposition of penalty under section 271(1)(c) on additions that are essentially estimated and not established as concealment of particulars of income is incorrect. Even if some estimated income was sustained by the appellate authorities, the Tribunal concluded that the AO had not made out a case of clear concealment or furnishing of inaccurate particulars warranting penalty under section 271(1)(c). [Paras 12]

Penalty under section 271(1)(c) cannot be sustained insofar as it is levied on assessment additions founded on estimation; such penalty is to be deleted.

Final Conclusion: The assessee's appeal is allowed and the Assessing Officer's penalty order under section 271(1)(c) is deleted: the Tribunal holds that additions relating to undisclosed income unearthed by search in the specified previous year are subject to penalty, if any, under section 271AAA and that penalty under section 271(1)(c) is not sustainable, particularly where additions are based on estimation; the revenue's appeal is dismissed.

Section 69A unexplained cash - burden to explain source - acceptance of purchaser's explanation for source - deletion of additions where source explained by third party and accepted on appeal - remand to Assessing Officer for verification and fresh adjudication - directors' fees under India-UK DTAA Article 17 - reimbursement of expenses-requirement of substantiation - verification of tax credit/payment by Assessing Officer - interest under sections 234B and 234C consequential

Section 69A unexplained cash - burden to explain source - acceptance of purchaser's explanation for source - deletion of additions where source explained by third party and accepted on appeal - Deletion of addition of Rs. 82,14,500 made under Section 69A. - HELD THAT: - The assessee explained that the seized cash formed part of an advance (Rs.85,00,000) received on 23.06.2006 for sale of inherited house property at Gwalior to Shri Raghav Garg; the buyer confirmed payment and, in the buyer's appeals, the Tribunal accepted the genuineness of the buyer's sources and transactions and deleted corresponding additions in the buyer's case. FEMA closed its investigation against the assessee. The authorities below did not demonstrate that the agreement to sell or the transaction was bogus, nor did they rebut the purchaser's explanation. In these circumstances the Tribunal found that the assessee had satisfactorily explained the source of the seized cash and that the addition was not sustainable. [Paras 12]

The addition under Section 69A is deleted.

Reimbursement of expenses-requirement of substantiation - remand to Assessing Officer for verification and fresh adjudication - Claim of reimbursement of expenses of Rs. 5,32,562 remanded to AO for verification. - HELD THAT: - The Assessing Officer found that the assessee had failed to substantiate the reimbursement claim with supporting documents; the CIT(A) sustained the disallowance. The Tribunal observed that supporting documents are available in the paper book and directed that the issue be restored to the AO so that those documents may be examined and verified, with a reasonable opportunity of hearing to the assessee. [Paras 15]

Issue restored to the file of the AO for examination and verification of documents; allowed for statistical purposes.

Directors' fees under India-UK DTAA Article 17 - remand to Assessing Officer for verification and fresh adjudication - Taxability of directors' fees received from Vedanta Resources Plc (claim under Article 17 of Indo-UK DTAA) remitted to AO for fresh adjudication. - HELD THAT: - The assessee claimed that directors' fees received from a UK resident company are taxable only in the source state under Article 17 of the India-UK DTAA. The Tribunal noted that the issue requires further examination and that coordinate-bench decisions in the assessee's own earlier years had remitted similar issues to the AO. Following those precedents and in view of material on record, the Tribunal directed reconsideration by the AO with opportunity to verify documents and hear the assessee. [Paras 18]

Matter remitted to the AO for fresh adjudication after examination and verification of documents.

Interest under sections 234B and 234C consequential - remand to Assessing Officer for verification and fresh adjudication - Levy of interest under sections 234B and 234C treated as consequential and directed to be acted upon by the AO. - HELD THAT: - The Tribunal held that the issue is consequential upon the primary adjustments and therefore directed the AO to act consistently with the ultimate disposal of other grounds. [Paras 19]

Ground allowed for statistical purposes; AO directed to act accordingly.

Verification of tax credit/payment by Assessing Officer - remand to Assessing Officer for verification and fresh adjudication - Claim for credit of tax payment of Rs. 3,74,099 remanded to AO for verification and credit if payment is established. - HELD THAT: - The Tribunal directed the AO to verify records for payment of the tax claimed by the assessee. If the payment is found on record, the AO is to give due credit of the amount. [Paras 20]

AO directed to verify and grant tax credit if payment is established; allowed for statistical purposes.

Final Conclusion: The appeal is partly allowed: the addition under Section 69A (seized cash) is deleted; claims concerning reimbursement of expenses and directors' fees, and the tax-credit claim are remitted to the Assessing Officer for verification and fresh adjudication with opportunity to the assessee; interest issues are consequential and the AO is directed to act accordingly.

Unexplained cash credit - onus under Section 68 to explain cash receipts - preponderance of probabilities - sham transaction - CBDT Instruction No.1916 - benchmark for undisclosed jewellery - treatment of sale proceeds as capital gains versus income from other sources

Unexplained cash credit - onus under Section 68 to explain cash receipts - preponderance of probabilities - sham transaction - Addition of cash deposits to the assessee's income as unexplained cash credit - HELD THAT: - The Tribunal examined the facts that large cash deposits were made into the assessee's bank account, enquiries to alleged purchasers produced denials or no replies, some parties could not be located, and the assessee himself accepted part of the addition. The assessee, a salaried employee, failed to produce purchase bills, wealth tax returns or other contemporaneous evidence to establish the claimed sale of jewellery or the source of cash paid by the purchasers. Applying the standard of preponderance of probabilities and noting discrepancies in amounts and weights claimed, the Tribunal held the alleged sales to be an afterthought and sham. Where the primary onus under Section 68 to explain cash credits is not discharged, the receipts rightly constitute unexplained cash credit and are taxable as income from other sources. The AO and the CIT(A) were sustained in adding Rs. 9,49,200 as unexplained income after considering the enquiries and the assessee's admissions. [Paras 6, 7]

Confirmed that the impugned cash deposits are unexplained and liable to be added to the assessee's income as unexplained cash credit under Section 68.

CBDT Instruction No.1916 - benchmark for undisclosed jewellery - treatment of sale proceeds as capital gains versus income from other sources - Extent to which claimed sale of gold jewellery is accepted and directions for taxation and remand for computation - HELD THAT: - While rejecting the bulk of the claimed sales as sham, the Tribunal applied CBDT Instruction No.1916 to afford limited benefit for indiscriminate possession where no wealth tax return was filed. The Tribunal accepted that up to 100 grams of gold (per the CBDT benchmark for a male member) may be treated as explained and directed that capital gains on that 100 grams be brought to tax. The remaining sale consideration (claimed sale of 282.92 grams) was held to be unexplained and taxable as income from undisclosed sources. The Tribunal, however, did not compute capital gains itself and has remitted the matter to the AO to verify the assessee's computation of capital gains on 100 grams, to afford opportunity of hearing and to complete assessment in accordance with law. [Paras 6, 7]

Allowed limited benefit of CBDT Instruction for 100 gms of jewellery and directed AO to compute and assess capital gains on that 100 gms; the remainder of the claimed sale proceeds is held as unexplained income to be taxed accordingly and the matter is remanded to the AO for computation and verification.

Final Conclusion: The appeal is partly allowed: additions of Rs. 9,49,200 as unexplained cash credit are sustained; benefit is granted for 100 grams of gold under CBDT Instruction No.1916 and the AO is directed to compute capital gains on that portion after affording opportunity to the assessee, while the balance sale proceeds are held as unexplained income and taxable accordingly.

Computation of capital gains under section 50C - Binding effect of stamp duty valuation as full value of consideration - Reference to District Valuation Officer under section 55A - Pre-amendment position of section 55A requiring reference only when assessee's declared value is less - Effect of amendment to section 55A (w.e.f. 01-07-2012) on scope of reference

Computation of capital gains under section 50C - Binding effect of stamp duty valuation as full value of consideration - Whether the full value of consideration for determining capital gain should be restricted to the stamp duty valuation in the facts of the case. - HELD THAT: - The Tribunal examined the DVO and stamp duty valuations for similar neighbouring land and noted that the stamp duty valuation adopted in the assessee's case was lower than the fair market value adopted by the Tribunal in a comparable co-owner's case. In these circumstances the CIT(A)'s direction to restrict the full value of consideration to the stamp duty valuation was upheld. The Tribunal found no basis for further reduction of the full value of consideration below the stamp duty value as applied by the CIT(A). [Paras 3]

The addition under section 50C limiting full value of consideration to the stamp duty valuation is sustained; the ground challenging that restriction is dismissed.

Reference to District Valuation Officer under section 55A - Pre-amendment position of section 55A requiring reference only when assessee's declared value is less - Effect of amendment to section 55A (w.e.f. 01-07-2012) on scope of reference - Whether the Assessing Officer could validly refer valuation of the asset as on 01-04-1981 to the DVO under section 55A for the assessment year 2004-05 when the assessee's declared value exceeded the DVO/AO's view of fair market value. - HELD THAT: - The Tribunal noted that the AO's reference to the DVO was made prior to the statutory amendment effective from 01-07-2012 and therefore the pre-amended statutory test governed. Under the pre-amended provision, and as interpreted by the jurisdictional High Court in Puja Prints, a reference to the DVO could only be made where the value adopted by the assessee was less than the fair market value in the AO's opinion. Here the assessee had declared a higher value as on 01-04-1981 than that determined by the DVO/AO; consequently, the reference to the DVO was not permissible under the pre-amendment law and the valuation produced by the DVO for 01-04-1981 could not be allowed to supplant the assessee's declared value. In view of this legal infirmity the Tribunal found the impugned valuation unsustainable and ordered fresh computation of capital gain by the AO with an opportunity of hearing to the assessee. [Paras 4, 5, 6]

The DVO reference and resultant valuation as on 01-04-1981 are held invalid under the pre-amendment law; the assessment order is set aside and the matter is remitted to the AO for fresh determination of capital gain in accordance with the ruling herein.

Final Conclusion: Both appeals are allowed for statistical purposes; the impugned orders are set aside and the matters remitted to the Assessing Officer for fresh computation of capital gain in conformity with the Tribunal's directions, with the assessee to be afforded a reasonable opportunity of hearing.

Retrospective applicability of the first proviso to Section 12A(2) - Beneficial/curative proviso doctrine - Entitlement to exemption under Section 11 upon registration granted during pendency of assessment proceedings - Registration under Section 12AA as condition for claim of exemption

Retrospective applicability of the first proviso to Section 12A(2) - Entitlement to exemption under Section 11 upon registration granted during pendency of assessment proceedings - Beneficial/curative proviso doctrine - Whether the first proviso to Section 12A(2) applies retrospectively and, consequently, whether the assessee was entitled to exemption under Section 11 for the assessment year 2013-14 where application for registration was filed before completion of assessment and registration under Section 12AA was granted after the assessment but during appellate proceedings. - HELD THAT: - The Tribunal examined the nature and object of the first proviso to Section 12A(2) as inserted by the Finance (No.2) Act, 2014 w.e.f. 01.10.2014 and concluded that the proviso is a beneficial, curative provision intended to remove hardships faced by charitable institutions that satisfied substantive conditions for exemption but were saddled with tax for technical reasons due to absence of registration. Relying on principles that procedural or curative provisos intended to mitigate hardship are to be construed retrospectively, and following coordinate-bench decisions (including St. Jude's Convent School, SNDP Yogam and others) the Tribunal accepted that the proviso must be given retrospective effect. Applying that principle to the facts, the Tribunal noted that the assessee had filed the application for registration under Section 12A on 03.03.2016, the assessment order was passed on 15.03.2016, and registration under Section 12AA was granted on 28.03.2016 and produced before the first appellate authority; the only ground for denial of exemption was absence of registration. Since the proviso operates to make Sections 11 and 12 applicable in respect of earlier assessment proceedings pending before the assessing officer on the date of registration where objects and activities remain the same, the Tribunal held that the assessee was entitled to the benefit of exemption for the assessment year in question. The Tribunal therefore set aside the CIT(A)'s order and deleted the addition sustaining taxation of the receipts. [Paras 9, 10, 11]

First proviso to Section 12A(2) is retrospective in operation; assessee entitled to exemption under Section 11 for AY 2013-14 as registration under Section 12AA was granted during the pendency of assessment proceedings and the objects and activities remained the same; addition deleted and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the first proviso to Section 12A(2) is retrospective and that the assessee, having applied for registration during assessment and obtained registration thereafter, is entitled to exemption under Section 11 for A.Y. 2013-14; the assessment addition was deleted.

Set-off of business losses and current year depreciation against income assessed as unexplained/unaccounted under the sections 68/69/69A/69B/69C/69D read with section 115BBE - retrospective application of the amendment inserting 'or set off of any loss' in subsection (2) of section 115BBE - administrative clarification by CBDT Circular No. 11/2019 regarding applicability of section 115BBE prior to AY 2017-18

Set-off of business losses and current year depreciation against income assessed as unexplained/unaccounted under the sections 68/69/69A/69B/69C/69D read with section 115BBE - administrative clarification by CBDT Circular No. 11/2019 - Assessee's entitlement to set off current year depreciation and business loss against the additional income assessed as deemed income under the provisions applicable prior to assessment year 2017-18. - HELD THAT: - The Assessing Officer disallowed set off of current year depreciation and business loss claimed against the additional income declared during survey, relying on the later-amended wording of subsection (2) of section 115BBE. The Commissioner (Appeals) confirmed that disallowance treating the amendment as clarificatory and retrospectively applicable. The Tribunal examined CBDT Circular No. 11/2019 which explains that the words 'or set off of any loss' were inserted by the Finance Act, 2016 with effect from 01.04.2017 and that prior to assessment year 2017-18 an assessee is entitled to claim set-off of losses against income determined under section 115BBE. Applying this administrative clarification to the facts, and noting that the assessment year in question is 2014-15 (i.e., prior to AY 2017-18), the Tribunal concluded that the assessee is entitled to set off the current year depreciation and business loss against the deemed income assessed during the survey. [Paras 4, 5]

Set off of current year depreciation and business loss against the deemed income for AY 2014-15 is allowed and the appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for Assessment Year 2014-15, holding that in view of CBDT Circular No. 11/2019 the assessee is entitled to set off current year depreciation and business losses against the deemed income assessed under the pre-2017-18 regime.

Characterisation of liquidated damages as capital receipt or business income - revisional jurisdiction under Section 263 - erroneous order prejudicial to the interest of revenue - application of mind by the Assessing Officer - distinction between lack of enquiry and inadequate enquiry - where two views are possible, AO's plausible view not to be displaced unless unsustainable in law

Revisional jurisdiction under Section 263 - erroneous order prejudicial to the interest of revenue - application of mind by the Assessing Officer - distinction between lack of enquiry and inadequate enquiry - where two views are possible, AO's plausible view not to be displaced unless unsustainable in law - Whether the Principal Commissioner of Income-tax was justified in revising the assessment under Section 263 on the ground that the Assessing Officer failed to enquire into the character of the liquidated damages receipt and thus passed an erroneous order prejudicial to the revenue. - HELD THAT: - The Tribunal applied the twin conditions from Malabar Industries - the AO's order must be erroneous and such error must be prejudicial to revenue - and examined whether the AO had failed to enquire or apply his mind. The AO had issued a specific notice under Section 142(1) calling for documents and explanation regarding the amount credited to capital reserve (see notice reproduced at para 11), the assessee furnished FA agreements, the arbitration award and legal opinion, and the AO recorded a detailed response to the audit memo explaining why the receipt was capital in nature (reproduced at para 14). The Tribunal distinguished mere desire for further inquiries by the Pr. CIT from a true absence of inquiry: where the AO has conducted enquiries and adopted one of the plausible views permissible in law, the Pr. CIT cannot invoke Section 263 simply because he would have preferred further investigation. Applying these principles to the facts, the Tribunal found that the AO had made due enquiries, applied his mind and taken a view that was not shown to be unsustainable in law; accordingly the jurisdictional facts for exercising revisional jurisdiction were absent and the Pr. CIT's action was held to be without jurisdiction (paras 11-15, with the governing test stated at para 9). [Paras 9, 11, 15]

The revision under Section 263 was unlawful: the AO had conducted enquiries and applied his mind, and the Principal CIT lacked jurisdiction to revise the assessment on the ground of alleged lack of enquiry.

Characterisation of liquidated damages as capital receipt or business income - loss of source of income doctrine - where two views are possible, AO's plausible view not to be displaced unless unsustainable in law - Whether the liquidated damages awarded to the assessee were to be treated as capital receipt or as business income for AY 2014-15, insofar as the Tribunal accepted the Assessing Officer's conclusion reached after enquiry. - HELD THAT: - The Tribunal noted the AO specifically considered the legal authorities on treatment of compensation for surrendering rights (citing Kettlewell Bullen, Karam Chand Thapar and Oberoi Hotel in the AO's reasoning reproduced at para 14) and concluded that the liquidated damages were capital in nature. The assessee had placed the agreement, arbitration award and a senior counsel's opinion on record; the AO recorded his rationale in response to the audit memo explaining why the receipt did not fall under Section 28 and should be regarded as a capital receipt. Because the AO's conclusion was one of the legally permissible views and was not shown to be unsustainable in law, the Tribunal upheld that conclusion by treating the AO's view as a plausible and acceptable determination of characterisation (paras 12, 14-15). [Paras 12, 14, 15]

The liquidated damages were accepted as a capital receipt by the Assessing Officer and, given that this was a plausible view properly reached after enquiry, that characterisation was sustained.

Final Conclusion: The appeal is allowed: the order of the Principal Commissioner under Section 263 is quashed as the Assessing Officer had made specific enquiries, applied his mind and adopted a tenable view that the liquidated damages were capital in nature; consequently the revisional exercise was without jurisdiction.